Docu=t of The World Bank FOR OFFIClAL USE ONLY Report No. 12636 PROJECT COMPLETION REPORT SENEGAL ENERGY SECTOR REHABILITATION PROJECT (CREDIT 1710-SE) DECEMBER 27, 1993 Industry and Energy Division Sahelian Department Africa Regional Office This document has a restricted distribution and mav be used bv recipients only in the performance of their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. C(URRENCY EQUIVALENTS Currency Unit = CFA Franc (CFAF) US $1.0 = 276.625 CFAF 1 million = US $3,615 SDR 1.0 - US $1.371 ABBREVIATIONS AND ACRONYMS ACCT Agence Culturelle et de Cooperation Technique AfDB African Development Bank BOAD Banque Ouest-Africaine de Developpement CCCE Caisse Centrale de Cooperation Economique CFD Caisse Francaise de D6veloppement CIDA Canadian International Development Agency DE Department of Energy EdF Electricite de France ESIE Ecole Superieure Interafricaine d'Electricite ESMAP Energy Sector Management Assistance Program FNE Fonds National de I'Energie GOS Government of Senegal MDIA Ministere du Developpment Industriel et de I'Artisanat PPF Project Preparation Facility SAL Structural Adjustment Loan SAR Soci&t6 Africaine de Raffinage SENELEC Societe Nationale d'Electricite TEP Tonne Equivalent Petrole UNDP United Nations Development Program FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A ffice of Director-General Operations Evaluation December 27, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Senegal Energy Sector Rehabilitation Proiect (Credit 1710-SE) Attached is the "Project Completion Report on Senegal - Energy Sector Rehabilitation Project (Credit 1710-SE)" prepared by the Africa Regional Office. It also reflects the comments and data contained in a detailed report which the Borrower submitted to IDA instead of Part II. Comments by the co-financiers were not sought by the Region or the Borrower. The Borrower's report provides details on the execution of the project components, its procurement and cost, but does not elaborate on the extent of achievement of project objectives. IDA financed about 22% and Societe Nationale d' Electricite 28% of the US$ 110 million project cost. Caisse Centrale de Cooperation Economique, the largest co-financier, financed 34Z of the project cost, and the African Development Bank and the Banque Ouest-Africaine de Developpement financed 10% and 6% respectively. The project had no cost overrun but its completion took one year longer than the five years estimated originally. The overall outcome of the project is rated as unsatisfactory. The physical investments were made and the studies and training components completed. However, the important project objectives of optimizing the use of energy resources, reducing the cost of power generation, improving power supply reliability and increasing power sales were not met and covenants were not complied with. Institutional development is rated as partial and the sustainability of benefits as unlikely because of the lack of comitment by the Government to make policy reforms in the energy sector. The Project Completion Report is comprehensive and contains a frank and informative account of the project implementation, its results and lessons. No audit is planned. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY PROJECT COMPLEIION REPORT SENEGAL ENERGY SECTOR REHABILITATION PROJECT (CREDIT 1710-SE) 1. PROJECT REVIEW FROM BANK'S PERSPECTIVE .................... 1 1. Project Description ..................................... 1 Project Identity .................................... 1 Background ....................................... 1 Project Objectives ................................... 2 Project Beneficiary Institutions ........................... 2 Project Components .................................. 3 Project Finances .................................... 6 2. Project Results ....................................... 8 Overall Summary ................................... 8 Evaluation of Results by Specific IDA Credit Components .... ...... 11 Generation Component ................................. 11 Distribution and Transport Component ...................... 12 Engineering Component ............................... 14 Technical Assistance Component .......................... 15 Training Component ................................. 17 Energy Conservation and Studies ......................... 17 3. Project Design and Implementation Review ...................... 22 Design of institutional arrangements ........................ 22 Environmental Aspects ................................ 22 Identification and evaluation of risks ....................... 23 Project Ownership ................................... 23 Project Sustainability ................................. 23 Time Table ........................................ 24 Disbursement ....... 24 Procurement ....... 26 Monitoring and Supervision ............................. 26 Conclusion: Summary of Lessons Learned .................... 26 II. PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE .... ....... 30 m. STATISTICAL INFORMATION ................................ 31 Related Bank Loan or Credits ................................ 31 Project Timetable . ........................................ 31 Credit Disbursement ............ .......................... 32 Project Results . ......................................... 33 Project Costs and Financing ................................. 34 Status of Covenants .............. ......................... 36 Use of Bank Resources .......... .......................... 39 Tis 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. - i - SENEGAL ENERGY SECTOR REHABILITATION PROJECT (CR. 1710-SE) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Energy Sector Rehabilitation project in Senegal, for which Credit 1710-SE in the amount of US$20.0 million was approved in June 1986. The credit was closed in December 1992, one and a half years behind schedule. The PCR was prepared by the Industry and Energy Division of the Africa Region (Preface, Parts I and III). On May 17, 1993, the Bank sent the Borrower Parts I and III for co ments. Later, the Borrower prepared a detailed completion report in French and submitted it to IDA. The report is kept in OED files. Preparation of this PCR is based, inter alia, on the supervision reports; correspondence between the Bank and the Borrower; and internal Bank memoranda. it is also based on the findings of additional studies carried out in the context of preparing a new operation in the sector. These studies identify shortcomings not apparent to supervision missions. - ii - SENEGAL ENERGY SECTOR REHABILITATION PROJECT (CR. 1710-SE) PROJECT CONIPLETION REPORT EVALUATION SUMMtARY 1. Obiectives. The Energy Sector Rehabilitation Project was designed to assist Senegal to: (i) optimnize its use of energy resources through the elimination of price distortions and through the implementation of energy conservation measures; (ii) reduce the cost of generation through the inprovement of the efficiency and reliability of existing plants, and through the construction of more fuel-efficient facilities; (iii) strengthen and expand the existing transmission and distribution system to improve reliabilitv, reduce losses and generate sales (mainly in the Dakar area); and (iv) strengthen SENELEC's management and restore its financial viability through a comprehensive rehabilitation program (para. 1.4). 2. Imnlementation expenence. Credit 1710-SE was essentially prepared by SENELEC and MDIA based on several donor funded studies and with assistance from IDA's Power Engineering Project (Credit S-26-SE) and Second Parapublic Project (Credit 1398). Negotiations took place in Januarv 1986. and the Credit was submitted for Board approval on May 20, 1986. The date of effectiveness originally scheduled for September 1986 was pushed back six months because of a delay in the effectiveness of cross-conditional financing agreements between GOS and the African Development Bank (AfDB) and GOS and the Caisse Centrale de Cooperation Economique, CCCE (now Caisse Francaise de Developpement) . In March 1987, IDA waived the pending cross- conditionalitv and Credit 1710-SE became effective. 3. A series of preparatory studies and works for the implementation of Credit 1710-SE were funded prior to March 1987 by the project preparation facility, whereby the negative impact of the delay in effectiveness was somewhat minimized. Actual implementation of the Credit began very slowly, all components were launched between one and two years behind schedule. Nonetheless. all investment components were satisfactorily completed by December 1990. Although the majority of the non-investment components of the Credit were completed by December 1991, two closing extensions were necessary for the borrower to complete outstanding studies and training activities. Project closing was originally expected by June 30, 1991. Actual project closing was first extended to June 30, 1992 and then to December 31, 1992 (para. 2.5 and 2.6). 4. Results. The evaluation of the achievements of the Energy Sector Rehabilitation Project and of Credit 1710-SE needs to be carried out at two separate levels. One, from the point of view of the development objectives the evaluation results are clearly less than satisfactory. At this point in time it is difficult to ascertain whether energy resource allocation in Senegal was improved. or to what extent power generation costs were effectively reduced. Power supply reliabilitv appears to have been only marginally improved and power losses, instead of decreasing, continued to be high at 16% in 1989 and compared to 8% in 1973. Power sales in the Dakar area, which at appraisal were expected to grow at 5 % per year, increased by only 2.4% per year. SENELEC's management still remains weak and in need of a comprehensive retorrn co%ering. in particular. overall management. financial management and accounting. accounts receivable. and deliverv of consumer services. The technical assistance component. bv far the xweakest of the project. was fullv implemented but was unable to secure the success ot SENELEC's rehabilitation program (para. 2.2 and 2.3). 5. On the other hand. the principal hardware investment elements of the Project. namely. the generaticn. transmission and the distribution components, were almost entirelv and satisfactonlv completed (the exception being the Low Voltage part of the Distribution Component). At the samne tinme. the specific investment components of the Credit (civil works. material and equipment for the generation. transmission and distribution components) were also mostly completed as planned. The engineering component of the Credit provided critical and timely technical assistance support for the implementation of the generation, transmission and distribution components of the overall Project. The energy conservation and studies component included the implemertation of a most successful industrial energy audits and conservation program and the completion of several key energy sector studies. Finally, on top of achieving its original training targets. tne MDIA training and studies component undertook a series of additional studies and support activities (para. 2.3). 6. Concerning both Credit 1710-SE and the overall Project, the principal factors responsible for their achievement shortcomings were the poor state of the economy and the lack of commitment of the borrower to undertake the institutional and policy reforms that were necessary for the success of the operation and the sustainable rehabilitation of the energy sector (para. 2.4). 7. Sustainabilitv. The sustainability of the investment components is fairly good. In spite of the demonstrated lack of commitment, it is expected that SENELEC has the technical expertise necessarv to guarantee the sustainability of the investment components through timelv and ^ffective maintenance. That notwidstanding, and unless it is promptly resolved, some hardware sustainabliity may be jeopardized by the existing fuel quality problem (para. 3. 10 and 3. 11). 8. The sustainability of the policy reform components of the Credit is at best fragile for two basic reasons. First, because the policy impact of the Credit was limited as neither the initially agreed policv reforms were implemented as proposed, nor the policy recommendations that resulted from the studies funded by the Credit have been implemented. Second, because there is verv little evidence at this point in time that the GOS or SENELEC are prepared to address the serious policy and institutional problems of the energy sector. 9. Lessons learned. The principal lessons learned from the evaluation of the project can be summarized as follows (para. 3.20): (i) more realistic implementation time schedules, and better implementation schedule management systems and corrective mechanisms need to be incorporated to projects in countries with weak institutional framework; (ii) special attention needs to be given to the inclusion of adequate operating standards and procedures within the implementation of investment components (hardware) in order to guarantee their efficient performance and avoid their premature deterioration: - iv - i iii) the implementation of projects with large procurement sub-components in countries with weak instirutional framework requires preparatory technical assistance and traininz in procurement issues in order to avoid costly delays and possible budget complications: I iv) supervision of project implementation bv IDA plays a critical role in the successful completion of project components in countries with weak institutional framework. Thus. supervision missions need to prepare better and more consistent project supe-vision reports in order to improve project implementation follow-up and evaluation. A standardized and more carefull use of the mandatory ratings is also required within the supervision of projects: (v) strict enforcement of agreed project implementation procedures (terms of reference. conditionalities. covenants. etc) is more conducive to borrower's performance discipline in countnes with weak institutional framework and lack of implementation commitment; (vi) unless there is a strong commitment of the borrower to accept the TA inputs and to implement proposed recommendations. there is little chance for TA components to succeed. (vii) the adoption of performance contracts between the central government and public utilities is not a satisfactory vehicle to promote utility performance discipline and efficiency unless there is a strong and verifiable commitment on the part of the government and the utility in complying with the contract; and. (viii) the execution of financial audits should be executed, in accordance to established procedures, through a certified independent auditor and not through alternative arrangements subject to potential interference such as a government appointed "Comniissaire aux Comptes". PROJECT COMPLETION REPORT SENEGAL ENERGY SECTOR REHABILITATION PROJECT (CREDIT 1710-SE') I. PROJECT REVIEW FROM BANK'S PERSPECTIVE 1. Project Description Project Identity Project Name Energy Sector Rehabilitation Project Credit No. 1710-SE Date of Board Approval 05/20/86 Date of Credit Effectiveness 04/24/87 Completion Date 06/30/93 Closing Date 12/31/92 Original Project Cost SDR 77.0 million (US$84.1 million equivalent) Foreign Exchange Component (Appraisal Estimate) SDR 55.8 million (US$61.0 million equivalent) IDA Credit SDR 18.3 million (US$20.0 million equivalent) IDA Credit, Total Disbursed SDR 17.0 million (US$18.6 million equivalent) IDA Credit, Total Canceled .... RVP Unit Africa Sector IE Subsector Energy Background 1.1 As of March 31, 1986, the Bank Group had approved 60 operations in Senegal for a total of US$ 642.8 million, consisting of 36 IDA credits, 11 Bank loans, five IFC operations, and eight mixed Bank-IDA and/or IFC operations. Physical execution of ongoing projects at the time was progressing well, although some operations were affected by shortages of counterpart funds due to Government of Senegal's (GOS) difficult public finance situation. Until the early 1980's the Bank Group's assistance strategy to Senegal was mostly project- oriented with a strong emphasis on diversification of the economy and improvement and expansion of physical infrastructure. On February 1986 the Board approved the first in a series of structural adjustment operations to promote economic policy reforms and improved economic management objectives over the medium-term. Complementary to the SAL 2 strategy, the Bank Group was to pursue project lending and sectorial operations oriented towards sectoral strategies, investment programs and institutional reforms. 1.2 At the time of Board Approval (May 1986), IDA's involvement in the energy sector in Senegal included the satisfactory completion of the Power Engineering and Technical Assistance Project (Credit S-26-SE), the Second Parapublic Technical Assistance Project (Credit 1398) and, the Industrial Energy Conservation Project (ESMAP, ACR No. 037/85). Credit S-26-SE assisted GOS to develop an overall energy plan and to reorganize the sector. Credit S-26-SE also included technical assistance to the Ministere du De'veloppement Industriel et de I'Arrisanat (MDIA) for power sector planning and funding for overseas training for Senegalese officials responsible for energy planning. Specific studies (e.g., generation and transmission master plan, tariffs) undertaken within that project identified the need for the institutional, technical and financial improvements envisaged by Credit 1710-SE. Among other things, the Second Parapublic Technical Assistance Project funded the execution of a diagnostic study of Societe Sene'galaise Narionale d'Electrcitce (SENELEC) and the preparation of the rehabilitation program for it. Credit 1710-SE was partly designed to assist SENELEC in the implementation of the proposed rehabilitation prograrn. 1.3 The rationale for IDA's involvement in the Energy Sector Rehabilitation Project was based on: (i) the need to support the SAL strategy with relevant sectorial operations; (ii) the urgent need to improve the efficiency and reliability of the existing generation plant at Cap des Biches power plant near Dakar; (iii) the need to improve the reliability of and reduce losses in the power transmission and distribution systems; and (iv) the lack of other technically feasible alternatives for the proposed rehabilitation components of the Project. Project Objectives 1.4 The Energy Sector Rehabilitation Project was designed to assist Senegal to: (i) optimize its use of energv resources through the elimination of price distortions and through the implementation of energy conservation measures; (ii) reduce the cost of generation through the improvement of the efficiency and reliability of existing plants, and through the construction of more fuel- efficient facilities; (iii) strengthen and expand the existing transmission and distribution system to improve reliability, reduce losses and generate sales (mainly in the Dakar area); and (iv) strengthen SENELEC's management and restore its financial viability through a comprehensive rehabilitation program. Project Beneficiary Institutions - Societt Nationale d'Electricite (SENELEC); - Ministere du Developpement Industriel et de l 'Artisanat (MDIA). 3 Project Components 1.5 At appraisal, the total cost estimated for the Project, including provision for physical and price contingencies but excluding interest during implementation, was of SDR 74 million (USS81 million equivalent). The foreign exchange cost of the project was estimated at SDR 55.8 million, equivalent to 75% of total project cost. IDA's total financing of 18.3 million SDR (USS20.0 million equivalent) was allocated among the following project components: generation (civil works for new diesel plant) SDR 3.2 million (19.0%); distribution (rehabilitation materials) SDR 7.9 million (42.5%); engineering SDR 1.44 million (8.0%); energy conservation SDR 1.8 million (9.5%); technical assistance SDR 1.1 million (7.0%); training SDR 0.6 million (4.0%); refunding of project preparation facility SDR 0.36 million; and unallocated SDR 1.9 million (10.0%). The principal activities and items that were supposed to be financed under the different components of the project are listed below, including a cost breakdown by component indicating IDA's participation (components & sub- components numbered in accordance to Legal Agreement Document): Part A: Generation 1. Installation of 2 x 20 MW of low (or medium) speed diesel units at Cap des Biches. 2. Completion of the rehabilitation (ongoing at the time) of the existing steam units at Cap des Biches (condenser retubing, sea water intake modification, and spare parts). Total cost: SDR 37.7 million (US$41.2 million) IDA financing: SDR 3.2 million IDA Credit category: (1) Civil works for diesel plant. Part B: Transmission 1. Rehabilitation of the existing 90 kV transmission line and substations, Bel Air/Hann and Bel Air/Cap des Biches. 2. Construction of a new 50 kin, 220 kV line, Cap des Biches/Thies (operated at 90 kV initially) and a 90 kV substation at Tobene. 3. Construction of a new 18 Kmn, 90 kV line, Hann/Cap des Biches. Total cost: SDR 11.5 million (US$12.6 million) IDA financing: no IDA investment component. IDA Credit category: see PartD (below). Part C: Distribution and Transport 1. Rehabilitation and strengthening of the Dakar network (75 km of 6.6 kV line and 34 substations). 2. Rehabilitation of about 100 km of 30 kV line outside Dakar and construction of 25 km of 30 kv line to connect 2 secondary centers to the main grid. 4 Total cost: SDR 18.4 million (US$20.1 million) IDA financing: SDR 7.9 million IDA Credit category: (2) materials and equipment under part C. I including installation. Part D: Engineering Consultant services for the generation (Part A), transmission (Part B) and distribution (Part C) components (135 man/months). Total cost: SDR 1.8 million (US$2.0 million) IDA financing: SDR 1.4 million IDA Credit category: (3) Engineering of the facilities included in Parts A, B and C (above) of the project. Part E: Energy Conservation and Studies 1. Consultant services, training and equipment for the Industrial Sector Energy Conservation Program (1986-88). 2. A study of petroleum products supply, refining and distribution arrangements. 3. A study to identify possible improvements in the organization and operation of the 'Fonds National de 1'Energie". 4. A study of household energy consumption and possible substitutes for fuelwood. Total cost: SDR 2.1 million (US$2.3 million) IDA financing: SDR 1.8 million IDA Credit category: (6) Energy conservation. ParlF: Technical Assistance 125 man/months of TA to SENELEC for the rehabilitation program. Total cost: SDR 1.55 million (US$1.7 million) IDA financing: SDR 1.1 million IDA Credit category: (4) TA and project audits. Part G: Training 1. Continuation of the program of scholarships to Ecole Superieure Interafricaine d' Electricitd (ESIE) of 7 students annually for the three-year period 1987-89. 2. Provision of about 40 man/month training for SENELEC staff in key rehabilitation program areas. Total cost: SDR 0.6 million (US$0.65 million) IDA financing: SDR 0.6 million 5 IDA Credit category: (5) Training cost under Parts G I and 2. 1.6 Table 1.1 presents a summary of Project objectives, strategies and instruments (components), indicating the national agencies responsible for their respective implementation. Table 1.1: CREDIT 1710-SE: Summary of Objectives, Strategies and Instruments OBJECTIVES PROPOSED STRATEGIES ||PRINCIPAL INSTRUMENTS AGENCY Optinuze use of elimination of price 1 implementation of new power tariff MDIA cnergy resources distortions on energy structure (condition of Credit (power, biomass & effectiveness) petrolcum fuels) implementation of forestry tax GOS incrcase study of petroleum supply, refuiing & MDIA distribution study on household energy consumption & MDIA fuelwood substitutes study on National Energy Fund l____________________ (NEF) irnprovements l implementation of energy execution of industrial energy use audits MDIA conservation measures (1986-88) l Reduce the cost improving efficiency and completion of rehabilitation of existing SENELEC of power availability of existing plants steam units at Cap des Biches (condenser, generation l retubing, sea water intake and spare part) construction of morm fuel- installation of 2x20 MW of low(or efficient facilities medium) speed diesel units at Cap des Biches Improve power strengthening/expansion of rehabilitation of existing 90 kV SENELEC supply transmission and transmission Line and substations (Bel reliability distribution systems Air/Hann & Bel Air/Cap des Biches) Reduce power construction of new 50 km, 220 kV line losses (Cap des Biches) & 90 kV substation (Tobene) Generate power Construction of new 18 km, 90 kV line sales (Dakar area (Hann/Cap des Biches) mainly) l rehabilitation/strengthening of Dakar network (75 km & 34 substations) rehabilitation of about 100 km of lines outside Dakar & construction of 45 km of lines to connect 2 secondary center to the main grid 135 man/month of consultant services for generation, transmission & distribution ____________ __ components 6 Table 1.1: CREDIT 1710-SE: Summary of Objectives, Strategies and Instruments (Continuation) |OBJECTIVES | PROPOSED STRATEGES PRINCIPAL INSTRUMENTS AGENCY Stmngthen implementation of 125 man/month of TA to SENELEC for SENELEC SENELEC's rehabilitation program implementation of rehabilitation program managemcnt Scholarships program to ESIE (7 students/3 years) & 40 man/month training for SENELEC staff Restore implementation of financial implementation of new tariff structure SENELEC SENELEC's rehabilitation progam l reduction of consumer receivables to 3 months billing execution of annual independent audits within a 6 months period from the end of each year (6 audit reports) implementation of improved fimancial management system TA for implementation of rehabilitation l________________ ____________________________ program l Project Finances 1.7 An advance of US$400,000 was made from the project preparation facility to accelerate the engineering and technical components of the project prior to its date of effectiveness. 1.8 In 1988, a subsidiary Trust Fund agreement for US$ 3.034 million was signed between the Canadian International Development Agency (CIDA), the Government of Senegal and IDA - - as the executing agency. This grant was earmarked for the funding of the energy conservation program, and was intended to replace the use of loan proceeds. ESMAP was assigned to coordinate the implementation of the energy conservation program on behalf of IDA. 1.9 Table 1.2 presents a break-down of the Project's financing plan by donor and project component. For the sake of simplicity all funds were converted to SDR. 7 TABLE 1.2: Project Financing Plan (SDR Equivalent) Project Components Jj IDA CCCE AfDB BOAD SENELEC TOTA.L A GeneraLion 3.2 25.6 1.1 7.0 36.9 B Tmrnsnrussion & Transport 5.9 2.6 3.0 11.5 C Distribution 7.9 1.4 0.9 7.4 17.6 D Engincenng 1.4 0.4 1.8 E Energy Conservation & Studies (1) 1.8 0.2 2.0 F Technical Assistance 1.1 0.2 1.3 G Trmining 0.6 0.6 Unarlocated (2) 2.3 2.3 IDC (3) 3.0 3.0 TOTAL (SDR| Jf 18.3 25.6 7.3 J 4.6 21.2 77.0 |TOTAL (SDR)l l lllll Notes: (1) includes SDR 0.2 under the SENELEC column that came from local industries. (2) includes SDR 0.4 for PPF refunding. (3) interest during construction. 8 2. Project Results Overall Summary 2.1 General Context. The Energy Sector Rehabilitation Project and Credit 1710-SE were prepared and approved in the mid-80's when Senegal's outlook called for a continued strengthening of the economy under the Barnk-supported structural adjustment programs (SAL 1,11,III and IV). Under the aegis of the various SALs the economy was expected to be substantially liberalized and revitalized through, inter alia, the removal of restrictions on internal and external trade, the restructuring and rehabilitation of the banking sector, and the implementation of an active program of civil service and public enterprise reforms. Within that context, the design of the project was based upon fairly optimistic economic and energy sector growth assumptions. That economic outlook, however, fell short during the second half of the 80's and early 90's as a result of the poor implementation of the structural adjustment programs and the continuation of the international economic recession. Economic performance was uneven and far lower than expected, most productive sectors became stagnant or declined, and fiscal and external balances remained fragile through-out the period. As a consequence of the poor economic performance and high energy costs and prices, the energy sector experienced a sharp growth decline. Electricitv consumption growth rates fell from 7% per year in 1973-80 to 3.2% in 1980-85 and 2.4% in 1985-89, and petroleum demand stabilized at the 1980's level of about 600,000 tons per year. 2.2 Evaluation of Achievements. The evaluation of the achievements of the Energy Sector Rehabilitation Project and of Credit 1710-SE needs to be carried out at two separate levels. One, in terms of the accomplishment of the intended overall developmental objectives, and the other, in terms of the achievement of their specific objectives and targets. From the point of view of the developmental objectives the evaluation is clearly less than satisfactory. At this point in time it is difficult to ascertain whether energy resource allocation in Senegal was improved, or to what extent power generation costs were effectively reduced. Power supply reliability appears to have been only marginally improved and power losses, instead of decreasing, continued to be high at 16% in 1989 and compared to 8% in 1973. Power sales in the Dakar area, which at appraisal were expected to grow at 5% per year, increased by only 2.4% per year. SENELEC's management still remains weak and in need of a comprehensive reform covering, in particular, overall management, financial management and accounting, accounts receivable, and delivery of consumer services. 2.3 On the other hand, the evaluation of the Project and of Credit 1710-SE indicates that a substantive part of their intended specific objectives and targets were satisfactorily achieved. The principal hardware investment elements of the Project, namely, the generation, transmission and the distribution components, were almost entirely and satisfactorily completed (the exception being the Low Voltage part of the Distribution Component). At the same time, the specific investment components of the Credit (civil works, material and equipment for the generation, transmission and distribution components) were also mostly completed as planned. The engineering component of the Credit provided critical and timely technical assistance support for the implementation of the generation, transmission and distribution components of the overall Project. The energy conservation and studies component included the implementation of a most successful industrial energy audits and conservation program and the completion of several key energy sector studies. The technical assistance component, by far the weakest of the project, was fully implemented but was unable to secure the success of SENELEC's rehabilitation program. 9 Finally, on top of achieving its original training targets, the MDIA training and studies component undertook a series of additional studies and support activities. 2.4 Concerning both Credit 1710-SE and the overall Project, the principal factors responsible for their achievement shortcomings were the poor state of the economy and the lack of commitment of the borrower to undertake the institutional and policy reforms that were necessary for the success of the operation and the sustainable rehabilitation of the energy sector. 2.5 Credit 1710-SE Implementation Process. Credit 1710-SE was essentially prepared by SENELEC and MDIA based on several donor funded studies and with assistance from IDA's Power Engineering Project (Credit S-26-SE) and Second Parapublic Project (Credit 1398). Negotiations took place in January 1986, and the Credit was submitted for Board approval on May 20, 1986. The date of effectiveness originally scheduled for September 1986 was pushed back six months because of a delay in the effectiveness of cross-conditional financing agreements between GOS and the African Development Bank (AfDB) and GOS and the Caisse Centrale de Cooperation Economique, CCCE (now Caisse Francaise de Dgveloppement) . In March 1987, IDA waived the pending cross-conditionality and Credit 1710-SE became effective. 2.6 A series of preparatory studies and works for the implementation of Credit 1710-SE were funded prior to March 1987 by the project preparation facility, whereby the negative impact of the delay in effectiveness was somewhat minimized. Actual implementation of the Credit began very slowly, all components were launched between one and two years behind schedule. Nonetheless, all investment components were satisfactorily completed by December 1990. Although the majority of the non-investment components of the Credit were completed by December 1991, two closing extensions were necessary for the borrower to complete outstanding studies and training activities. Project closing was originally expected by June 30, 1991. Actual project closing was first extended to June 30, 1992 and then to December 31, 1992. 2.7 The implementation process of Credit 1710-SE can also be considered as mostly satisfactory. But three significant implementation problems were observed: (i) the delay in credit effectiveness and the slow start-up of all Credit components; (ii) a slow and incomplete compliance with covenants on auditing and reporting requirements; and (iii) critical delays in the implementation of petroleum pricing reforms. 2.8 Budget Summary. Credit 1710-SE closed with a positive balance of SDR 1,267,100.80. On an individual basis several categories resulted on a cost overrun, namely civil works (55.2%), engineering (26.7%) and technical assistance (22.4%). The remainder categories closed with undisbursed funds, namely, distribution (10.7%), training (4.9%), energy conservation (61.5%) and PPF refund (26%). As of the date of closing, a total of SDR 311,165.03 disbursed remained to be allocated to specific disbursement categories. Table 2.1 presents a summary of the state of accounts of Credit 1710-SE as of February 9, 1993. 2.9 It is important to note that although the civil works, engineering and technical assistance components of Credit 1710-SE closed with significant cost overruns, the cost of the Energy Sector Rehabilitation Project as a whole suffered only marginal changes. 10 TABLE 2.1: Credit 1710-SE Budget Summary Statement (February 1993) Original Budget Disbursed Disbursed Balance Budget Category code (SDR) (SDR) p/Cart.(%) (SDR) Civil Works 1 3 200,000 4,965,727.80 155.2 -1,765,727.80 Diaribution 2 7,900,000 7,055,046.16 89.3 844,953.84 Engneer 3 1.440,000 1,824,704.88 126.7 -384,704.88 Technical Assistance 4 1,100,000 1,346,398.29 122.4 -246,398.29 Training 5 600,000 570,723.40 95.1 29,276.60 Energy Conservation 6 1,300,000 692,750.20 38.5 1,107,249.80 PPF Refunding 7 360,000 266,383.44 74.0 93,616.56 UnaLLocaLed a 1,900,000 0 0.0 1,900.,00.00 FUND (1) 1-5 0 311,165.03 -311,165.03 Totals/Balanoc | 18,300,000 | 17,032,899.20 93.1 1,267,100.80 l Note: (I) Disbursemenns pending allocarion by category. 2.10 Credit Follow-up. Since 1988, the need to follow-up the Energy Sector Rehabilitation Project with a second multi-donor sectorial rehabilitation operation was identified and proposed. In that context, several additional studies were commissioned under the financing of the Credit 1710-SE and other donor programs for the preparation of such follow-up operation. It is these studies that identified shortcomings not apparent to supervision missions. However, the serious problems and shortcomings experienced ir the first project as a result of the borrower's lack of commitnent to undertake the necessary institutional and policy reforms in the energy sector, the Bank has decided to delay the proposed second operation until GOS provides the necessary further and tangible proof of its commitment to reform. 11 Evaluation of Results by Specific IDA Credit Components 2.11 This section presents a brief evaluation of the results of each of the IDA financed sub- components of the Project. For the sake of simplicity all budget figures (donor and GOS) were converted to SDR and US$ equivalents. Generation Component 2.12 From the total cost at appraisal of the generation component (SDR 36.9 millionfUS$ 41.2 million) the French Caisse Centrale de Coope&rarion Economique (CCCE) provided SDR 25.6 million (USS28 million), IDA, SDR 3.2 million (US$4.4 million), SENELEC, SDR 7 million (US$7.6 million), and the Banque Ouest-Africaine de D&veloppement (BOAD), SDR I . I million (US$1.2 million). Within this component. which included the installation ot 2 x 20 MW of low/medium speed diesel units at Cap des Biches and the completion of the rehabilitation of the existing steam units at Cap des Biches, IDA only financed civil works for the installation of the diesel units. The principal generation component contract (diesel generation groups) was awarded to ALSTHOM (France). The IDA financed civil works sub-component was primarily awarded to SAGECOMI (Senegal). 2.13 Implementation. The implementation of the two generation components was initiated with a delay of close to one year because of the delay of the GOS and SENELEC in complying with credit effectiveness conditionalities and slow processing of bidding documents. After the slow start the diesel units component was implemented mostly on schedule, having faced only minor problems due to an unexpected period of strong rain and a malfunction in one of the turbines (Group 1) in March 1991. IDA's civil works sub-component was satisfactorily completed on time and the construction and testing of the diesel units was completed by December 1991. 2.14 Conversely, the steam units rehabilitation component (non-IDA) suffered serious implementation problems which, compounded by incorrect operating practices and insufficient maintenance, resulted in the rapid and premature deterioration of the units. The hasic problem here was that at the request of the borrower, the technical supervision of the rehabilitation operations of this component was assigned to SENELEC, Ahich lacked the necessary technical and management implementation expertise. 2.15 Results. The implementation of IDA's civil works sub-component was satisfactorily completed within the revised time schedule but with a cost overrun of SDR 1,765,727.8 (55.2%) with respect to the original budget. Although this is a large cost overrun with respect t) the specific IDA component, it is actually a minor amount vis-a-vis the cost of the overall generation component. The basic reasons for the IDA component overrun were price changes between the time the project was budgeted and the time procurement took place, small technical design changes that became necessary, and with Bank approval, expansion of the civil works component to include the preparation of the foundations of a proposed future third generation unit at Caps des Biches. 2.16 An important technical issue that remains to he addressed by SENELEC related to the generation component is the state of the water channel for the cooling of the Cap des Biches plants. The flow capacity of the water channel that feeds into the Cap des Biches plants cooling system (3 steam plants of CII and 2 diesel generators of CIV) has been significantly reduced and 12 is already limiting the operation of the plants. The reduction in the flow capacity of the channel has resulted from inadequate maintenance in the intake segment of the channel, premature sedimentation from a sand bank in the channel's feeding area and excessive pollution of the waters (excessive solid debris). The recent channel rehabilitation work done by SENELEC did not include the channel's water intake segment. At this point in time the actions required include: (i) the completion of the previously initiated rehabilitation works; (ii) the design and implementation of routine maintenance procedures; and (iii) the re-evaluation of the cooling water capacity of the existing channel vis-a-vis the increased requirements that resulted from the expansion of the Cap des Biches complex. Depending on the findings of that re-evaluation it is possible that a second channel might need to be built in the near future. 2.17 Another serious technical issue that needs to be addressed rapidly is the change of the fuel being used for the steam generators. The fuel being delivered to SENELEC by the SociNtF Africaine de Raffinage (SAR) does not meet the generators standards. In October 1991, SENELEC conducted a study P, which concluded that an undue and significant degradation (clogging and sedimentation of the burners and valves due to sulfur vitrification) had taken place between 1984 and 1991 because of low quality of the fuel being burned. Apparently, the generators were designed with the fuel specifications provided by SAR, whereby SENIELEC expects SAR to comply with its product delivery agreements. A recent study has identified a number of technical interventions that should be implemented while the issue of fuel specification is fully resolved. 2.18 Lessons learned. Within the implementation of the IDA financed civil works sub- components there are three lessons that need to be drawn: (i) either more realistic implementation time schedules or better implementation schedule management systems and corrective mechanisms need to be built-in to energy sector projects in Senegal; and (ii) when projects include the purchase and/or rehabilitation of large hardware components, special attention has to be given to designing and implementing adequate operating standards and procedures in order to avoid their premature deterioration. 2.19 The implementation of the non-IDA funded steam units rehabilitation component underscores the need to better assess trade-offs between technical supervision by the implementing agency versus by an engineering external firm, as well as the need to reduce risks in all critical implementation areas. Distribution and Transport Component 2.20 The design of the distribution and transport component of the project was mostly based on the findings of a power sector review done by Shawinigan Inc., consulting firm, with Canadian International Development Agency (CIDA) funding in 1984. From the total cost at appraisal of the distribution component (SDR '17.6 millionIUS$20. 1 million), IDA provided SDR 7.9 million (US$9.5 million), SENELEC SDR 7.4 million (US$8.1 million), the AfDB, SDR 1.4 million (US$1.5 million), and the BOAD, SDR 0.9 million (US$1.0 million). The distribution component included: (1) rehabilitation and strengthening of the Dakar network (75 km of 6.6 kV line and 34 substations); and (2) rehabilitation of about 100 km of 30 kV line outside Dakar and 1/ SENELEC. "Examen des Problimes de Combustion a la Centrale IIX de Cap des Biches', Dakar 1991. 13 construction of 25 km of 30 kv line to connect 2 secondary centers to the main grid. Within the distribution component IDA onlv financed materials and equipment for the rehabilitation and strengthening of the Dakar network. 2.21 The IDA financed materials and equipment sub-component was awarded to TREFICABLE PIRELLI (France), CGE SENEGAL (Senegal), and FRANCE TRANSFO (France). The construction works were awarded to eight (8) local electric contractor firms (E.C.B., E.E.R.I., Senegalaise, SOCERE, COSELEC, HERLICO, C.S.E., and C.D.E.). 2.22 Implementation. The engineering works for the implementation of the distribution component were initiated before the date of effectiveness with IDA PPF funding and support from Credit S-26-SE. The actual implementation of the distribution component, however, was delayed for several months because of SENELEC's slowness in opening the necessary letters of credit for the procurement of materials and equipment. All procurement was satisfactorily completed by June 1990. 2.23 According to the original procurement plan 350 transformers were to be purchased with IDA funding within this component. These transformers were to be used for low voltage conversion in Dakar area. However, because of other operational demands, not all of them were used for this purpose. 2.24 As of December 1992, total IDA disbursements and commitments against this component had reached SDR 7.05 million, equivalent to 89.3% of the original budget of SDR 7.9 million. 2.25 Results. The objective of strengthening the Dakar network, however, was only partially met. While the proposed medium tension works were undertaken, the low tension sub-component was not fully implemented. The voltage conversion was only carried out in two sectors (Pikine and Rufisque) because of the lack of the necessary inventory on low-tension connections and other related technical data for the other sectors, and because of excessive costs increases. 2.26 An original plan to install two new transformers at the Thiaroye sub-station was canceled in consultation with IDA because the output requirements in that sector dropped far below the already existing capacity after the closure of several industries operating in the area. 2.27 A review of the Dakar network recently carried out in the context of the preparation of a new operation indicated that the high and medium tension systems were sufficiently reinforced and up-dated to attend demand requirements until the year 2005, but that much work remained to be done in the low tension system. While some part of that situation can be attributed to shortcomings in the execution of the low tension sub-component of Credit 1710-SE, it is important to note that incremental works became necessary between the time the scope of the low tension activities was originally identified (1984) and their actual implementation through Credit 1710-SE. 2.28 Lessons learned. The principal lesson to be derived from this IDA sub-component is that the implementation of projects with large procurement sub-components in the energy sector in Senegal require preparatory technical assistance and training in procurement issues in order to avoid costly delays and possible budget complications. Additionally, an observation needs to be made as to the need for Task Mlanagers and/or Supervision Missions to provide full and more consistent reporting through out the project cycle. This would not only improve the effectiveness 14 of periodic project follow-up and reduce the emergence of implementation problems, but would as well facilitate project evaluation. 2.29 Anuther issue with a potential lesson for future project design is SENELEC's bias towards the large investment and operation components. As it turns out, while the generation, transmission, and the high and mediium tension distribution sub-components of the project were satisfactorily implemented, the low tension sub-component was not. The importance of this cannot he overlooked because of its impact on consumer service, and thereto, on actual revenues. In designing future projects, this bias -- which has also been observed in other utilities in other countries -- needs to be taken into conisideratiorn in order to ensure that low voltage sub- components are also properly implemented. 2.30 Finally, the outcome of the low tension sub-component suggests that there was a critical gap between the technical requirements and pricing information produced in 1984 and the situation that existed in 1986 (project appraisal) and beyond. At this point in time, it is impossible to determine if that situation resulted from shortcomings in the 1984 study, from inLsufficient Credit pre-appraisaliappraisal work -- in view of the long period that had transpired between the original study and appraisal -- or tr m a combination of these aggravated by a rapid and unanticipated deterioration of the low voltage network. Engineerinig Conmponeiit 2.31 From the total cost at appraisal uf the engineering component (SDR 1.81 million/US$2.0 million) IDA provided SDR 1.44 million (US$1.6 million) and SENELEC SDR 0.37 million (US$0.4 million). Within this comnponent IDA financed 135 man/months of engineering consultant services for the generation (Part A), transmission (Part B) and distribution (Part C) components of the Project. 2 .32 The engineering .onsultant services contracts were awarded to EDF International (France) tor the implementationi of the generation component and to Shawinigan Inc., (Canada) for the transmission and distribution components. 2.33 Implementation. No major problems were reported within the IDA financed engineering component of the project. All engineering studies and works that were commissioned constituted supporting technical inputs to the investment components of the project and were satisfactorily completed with some delays but within the project's revised implementation schedule. The full implementation of the engineering component resulted on a cost overrun of close to SDR 384,700 (26.7 %). This cost overrun was mostly due to price changes that accrued over the one year of delays in initiating the lProject's implementation, and to the extensions of the consultant contracts tu complete the supervision of delayed activities. 2.34 Results. The actual results of the engineering component were the different technical assistance inputs -- implementation management and supervision and specialized 'on-the-job' training - for the generation, transmission and distribution components of the project. 15 2.35 Lesson learned. The principal lesson that emerged from this component was that the original project design should have included a technical assistance for the non-IDA steam plant rehabilitation sub-component (generation component - see para. 2.14). Technical Assistance (T.A.) Component 2.36 A diagnostic study financed under the Second Parapublic Technical Assistance Project identified major weaknesses in SENELEC's organization, management and staffing, the principal of which were: an unsuitable internal structure; poor financial, customer, accounting and collection standards and practices; lack of adequate management information procedures and systems; poor internal communication between staff and management; archaic methods of work and decision making; resistance to change; over staffing; and chaotic recruitment practices. 2.37 Based on that study a comprehensive institutional rehabilitation program proposal was prepared for SENELEC by Electricite de France (EdF). In the context of the Energy Sector Rehabilitation Project, SENELEC agreed to implement the proposed rehabilitation program over a period of four years (1986-89), and to prepare and implement an IDA approved performance contract (contrat plan). The TA component of the Credit was designed to assist SENELEC in the implementation of the rehabilitation program and the monitoring of the performance contract. 2.38 From the total cost at appraisal of the TA component (SDR 1.28 million/US$ 1.7 million) IDA provided SDR 1.1 million (US$1.5 million) and SENELEC, SDR 0.18 million (USS0.2 million). Within this component IDA financed 125 man/months of TA to SENELEC for the implementation of its rehabilitation programn. 2.39 Implementation. The implementation of the TA component was based on the deployment of resident expatriates experts at SENELEC, including a financial expert, an operations expert and a costumer management expert. 2.40 The operations and consumers management experts were well received and were able to carry out their respective terms of reference satisfactorily. The financial expert however, was recalled by his firm in 1988 at the request of SENELEC. Since then, the format of the financial sector TA was changed to cover short-term in-country visits by experts rather than the original resident arrangement. The financial specialist was recalled because of SENELEC's apparent dissatisfaction with his performance. It is not clear to what degree the issue was one of performance or rather one of conflict of interests because of the lack of commitment on the part of SENELEC's management to undertake the financial reforms being proposed by the expert. 2.41 As of December 1991, total disbursements and commitments against this IDA financed component reached SDR 1.346 million, totalling a SDR 246,398 overrun (22.4%) of the original budget of SDR 1.1 million. The overrun in this component was due to the extension of the project's implementation time-table. 2.42 Results. In spite of the completion of all proposed TA activities and the achievement of some improvements, the evaluation of the TA component indicates that the borrower did not implement all the recommendations of the technical assistance and, as a result, both the rehabilitation program and the Performance Contract had marginal results. 16 2.43 On the positive side, procurement, settlement of accounts payable were improved. In addition, SENELEC's cash flow position was improved with the implementation of tariff adjustments, and the various settlements of cross-debts between GOS and SENELEC that were undertaken, have reduced the large backlog of receivables. The last such operation covered obligations until mid-1991. 2.44 On the negative side, SENELEC's overall and financial management remain weak and ineffective, and more seriously, conspicuously engaged in covering the existing problems and irregularities rather than trying to correct them. The operation of power system facilities remains deficient; power losses continue to be high at 16% in 1989 compared to 8% in 1973; consumer services management is almost non-existent. No permanent solution has been found to prevent a new accumulation of receivables, and political pressures still interfere on a daily basis with SENELEC's management and personnel matters. 2.45 In addition to that, reports for FY90 and FY91 from the special external audit that was commissioned during 1992, which resulted in a "disclaimer of opinion", and other audits confirm the poor state of SENELEC's accounting and financial management, and that its overall management is seriously deficient and deteriorating. 2.46 Lessons learned. The TA component proved to be the least successful of the Project and as such has some important lessons to be observed: (i) lack of GOS/SENELEC commitment: Unless there is a solid commitment of the recipient institution/government to accept the TA inputs and to implement proposed recommendations there is little probability of success. The existence of lack of commitment of the Government should be a key factor for IDA participation. (ii) Performance contract: SENELEC provides one more example of what has been the experience elsewhere with the adoption of performance contracts between the central goverrrnent and public utilities, namely, that these contracts have proven to be a less than satisfactory vehicle to promote utility performance discipline and efficiency. At the time of the project appraisal, this was a quite novel instrument for power sector regulation, but it turned out not to be very effective. This is so because of the dynamics of that relationship, and the lack of discipline by Government in respecting the necessary operational autonomy of the utility. Unless the government and the utility are committed to the full implementation of a performance contract, and can arrive at an adequate balance between external supervision and operational autonomy, the usefulness of such contracts is limited to their preparation process, which, hopefully, serves to increase government and utility officials awareness of the existing problems and their potential solutions. (iii) project supervision oversights: The information provided in most project supervision reports reveals that the institutional and financial state of SENELEC was always critical. Since 1990, the progress of the TA activities was rated as 2 in the supervision reports (prior to 1990 that rating was not requested). In spite of that, only four reports indicate problems with the TA component or call for the need to re-design any of its elements. (iv) lack of enforcement of project conditionalities/covenants: In accordance to the legal agreement between the Republic of Senegal and IDA, GOS was comnmitted inter alia to: (a) provide all necessary conditions to SENELEC for the adequate implementation of the 17 proposed rehabilitation program, including provision of funds, facilities, services and other resources; and (b) pay SENELEC all public power bills within a maximum of three months. In accordance to the agreement between IDA and SENELEC, the latter was obliged inter alia to: (a) carry out the "contrat plan" and the rehabilitation program in a manner and in accordance with a timetable acceptable to the association; and (b) maintain and provide to IDA adequate separate records and accounts of SENELEC's accounts and financial statements (balance sheets, statements of income and expenses, fund flow statements and related statements) and the special account for each fiscal year, and audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the IDA. 2.47 The issues listed above are just some examples of the conditions that GOS and SENELEC were supposed to meet yet consistently failed to comply with. If project implementation flexibility is required it should be built into the project's design and not provided for by covenants default. Training Component 2.48 From the total cost at appraisal of the training component (SDR 600,000/US$ 900,000 million) IDA provided all the funding. Within this component IDA financed the continuation of the program of scholarships to Ecole Superieure Interafricaine d'ElectriciM (ESIE) of 7 students annually for the three-year period 1987-89, and provision of about 40 person/month training for SENELEC staff in key rehabilitation program areas. 2.49 The training proposed under the two sub-components did take place but a one year delay with respect to the original calendar. 2.50 As of December 1992, total training component disbursements reached SDR 570,723.4, equivalent to 95. 1% of the original budget of SDR 600,000. EneraY Conservation and Studies 2.51 A 1982 study funded by the Canadian International Development Agency (CIDA) identified substantial potential for savings through energy conservation in the industrial sector. An Office of Energy Conservation was established at the Department of Energy (DE) of the Minis?re du D&veloppement Industriel er de I'Artisanat (MDIA), and in 1985, ESMAP t' defined an approach to energy conservation consisting of energy audits of major industrial energy users. At the time of appraisal of the Energy Sector Rehabilitation Project, UNDP agreed to fund the first three years of the program and CIDA was considering financing part of the energy audits. From the total cost at appraisal of the energy conservation and studies component (SDR 1.98 millionlUS$2.3 million) IDA provided SDR 1.8 million (US$2.1 million) and local industry provided SDR 0.18 million (USS0.2 million). Within this component IDA was to finance consultant services, training and equipment for a second three-year stage of the industrial sector enerzv conservation program (1986-88), and the execution of three specific studies: 2/ ESMAP. Senegal: [ndustnal Energy Conservation Project, Washington D.C., June 1985, (Activity Completion Report No. 037'S5) 18 a study of petroleum products supply, refining and distribution arrangements. a study to identify possible improvements in the organization and operation of the "Fonds National de l'Energie". - a study of household energy consumption and possible substitutes for fuelwood. 2.52 At the request of GOS, and in the context of the preparation of the proposed Second Energy Sector Rehabilitation Project, the following activities and studies were added to this component after 1988: technical assistance to the MDIA for the preparation of an energy sector donors meeting on December 1992 (US$300,000). a study to up-date the distribution master plan of Dakar. a study of the rehabilitation and reinforcement of SENELEC's plants. a study on possible new institutional and management arrangements for SENELEC (not financed by IDA). - a complete audit of SENELEC (FY90 and 1st. semester FY91). 2.53 Implementation. The energy conservation and studies component of the Project was implemented by the Ministere du Developpement Industriel et de I'Arnisanat (MDIA). 2.54 The largest portion of this component was destined to the implementation of the Energy Conservation program (SDR 1.5 million). However, in 1988, the original arrangements for this sub-component were changed in order to utilize a US$ 3.034 million grant (Trust Fund) from CIDA (NMarch 14,1988) instead of the original loan proceeds. Within that context, ESMAP was assigned to coordinate the implementation of the energy conservation program on behalf of IDA. The energy conservation program was fully and satisfactorily implemented under the new arrangements. 2.55 In contrast to the success of the energy conservation program, the studies and training activities included in this project component suffered from persistent delays in execution. In effect the two project's closing extensions were primarily granted in order to be able to complete - and initiate in some cases - studies and training activities. In addition to these delays, a particular problem occurred with the execution of the study of the rehabilitation and reinforcement of SENELEC's plants. Because of the non-compliance with IDA's approved terms of reference and the complete disregard to IDA's efforts to find an acceptable working compromise, IDA could not finance the study of the rehabilitation and reinforcement of SENELEC's plants. 2.56 As of December 1992, total disbursements and commitments against this IDA financed component had only reached SDR 653,500 from the originally budgeted SDR 1.8 million. 2.57 The two most significant implementation issues of this component were: (i) IDA's impossibility to finance the study of the rehabilitation and reinforcement of SENELEC's plants because of the non-compliance with IDA's approved terms of reference and the complete 19 disregard to IDA's efforts to find and acceptable working compromise; and (ii) the consistent delay in the execution of programmed studies and, particularly, the delay in the completion and forwarding to IDA of the full report on the study on petroleum products pricing, the last version of which was received only in March 1993 and is still missing the comments from the borrower. Because of its potentiai impact in terms of the rationalization of energy prices and costs of power generation this later study should play a critical role in the re-orientation of the energy sector and in the implementation of sound sectorial planning and policy making. 2.58 Results. The evaluation of results of this comnponent is mixed. On the one hand the energy conservation program, the study of household energy consumption and possible fuelwood substitutes, and the assistance to MDIA for the preparation of the energy sector donors meeting (December 1992) were satisfactorily completed. The Dakar distribution master plan up-date study was completed but was not considered by IDA as fully satisfactory. The remaining studies and activities were either not completed, their recommendations were only partially or not implemented, or there is no clear information available as to their outcome. 2.59 Energy conservation program: A total of 47 industrial enterprises were audited as part of the energy conservation program. These enterprises were only 10% of the industrial enterprises of Senegal but accounted for more than 70%, of the sector's total energy consumption. A total of 24,380 TEP (Tonne Equivalent Petrole) of savings were identified through the program, corresponding to close to 15 % of the total initial energy consumption. Out of this total, actual implemented energy savings investments totaling FCFA 2,426 million (US$ 9.7 million) had resulted by early 1993 in annual total cost savings of FCFA 1,927 million (US$7.7 million). Audited enterprises were primarily distributed among the following industrial sub-sectors: agro- industry, fisheries, textiles, chemicals, construction, paper, and mining. A separate Activity Completion Report produced by ESMAP in November 1992 fully documents the implementation of the energy conservation program. 3' 2.60 Petroleum products supply. refining and distribution arrangements studv: This study was timely executed and completed in May 1988. In spite of this, and that the implementation of its recommendations was made a conditionality of SAL IV in 1989, little action was taken by the borrower. By late 1989 an additional study on ex-refinery petroleum fuels pricing was carried out to provide an up-dated basis upon which to take action on the sector, and subsequently, yet another study was commissioned on distribution margins. The ex-refinery petroleum pricing study was completed with a delay of more than a year, and a draft report on the distribution margins study was only forwarded to IDA by the borrower on February 1993. As of the date of closing of Credit 1710-SE, the approval of that report by the borrower was still pending, none of its recommendations had been adopted, and IDA had no information as to the borrower's view on the report nor on it pricing policy outlook. 2.61 Organization and operation of the "Fonds National de l'Energie" (FNE) study: The purpose of this study was to review the state of the FNE and to propose improvements in its organization and operation. 2.62 The FNE was created in December 1989 with the dual purpose of providing a mechanism for stabilizing internal petroleum product prices and for financing priority studies and 3/ ESMAP. Senegal: Programme dEconomies d'Energie Dans l'Industrie, (Industrial Energy Efficiency Program) Washington D.C. February 1993 (GC). 20 undertakings in the enerny sector. Until January 1990, the funding for FNE's came from the surplus of the Societe Africaine de Raffinage (SAR) and the balance from the petroleum prices stabilization. After January 1990, the funding system was changed to the sole use of the stabilization funds. From the analysis of the financial flows between the government and the energy sector, the study concluded that net transfers to the energy sector totalled some FCFA 176 billion between 1988 and 1990. In essence, such large net transferences have resulted from the growing spread between the fixed internal prices and the gradually falling international prices for petroleum products. While the availability of FNE moneys has been of use to the energy sector, the down side is that internal prices have remained too high, inter alia, reducing the competitiveness of the industrial sector, increasing transportation and power generation costs, and limiting energy demand growth. The principal conclusion of the study in this regard was that the reduction of the stabilization fund mark-up in price formation would result in lower consumer petroleum prices, would boost industrial and transport activities, would reduce power generation costs and, in doing so, would not have an adverse effect on government revenues and investment resources. While direct revenues to the government from the stabilization fund would be reduced, revenues from export and sales taxes and increased activity through out the economy would more than compensate for it. As of the date of closing of Credit 1710-SE, there was no clear indication as to the position of the government on this issue. 2.63 Household ener2v consumption and fuelwood substitutes study: An Urban Household Energy Strategy study was completed by ESMAP in 1989. Originally this study was called for within Credit 1710-SE and funding for it was included in the loan proceeds. However, like in the case of the energy conservation program, ESMAP obtained funding from the Government of Norway for its execution and the work proceeded independently from Credit 1710-SE. The findings from that study are documented in a separate report produced by ESMAP on March 1989.4' 2.64 Technical assistance to the MDIA for the preparation of an energy sector donors' meeting on July 1992: In 1990/91 the GOS proposed to the donor community the realization of a second energy sector project, and requested IDA to assist in the organization of an energy donors' meeting on July 1992. In that context, ESMAP was requested to provide technical assistance to MDIA for preparing a series of technical documents for the proposed donors' meeting. The actual preparation of the technical documents for the meeting was done under ESMAP's supervisionf'. The donors' meeting took place in Dakar on July 1992. 2.65 Dakar distribution master plan up-date study: This study was initiated with a minor delay of 6 months. The first phase was completed on September 1992. The findings of the study are now being reviewed by the borrower and IDA. The principal conclusion of the study was that as the growth in electricitv demand during the period 1985-91 was lower than expected, part of the investments undertaken in the high and medium voltage network should have been postponed, and that more attention should have been given to the execution of the low voltage network improvements that were included in the project. In that context, and because of the implications in terms of quality of service to consumers, the study recommended that SENELEC should continue to pursue the originally proposed improvements in the low tension network. 4/ ESMAP. Senegal: Urban Household Energy Strategy, Washington D.C., March 1989 (Activity Completion Report No.096/89). 5/ MDIA. Docwnent Priparazoire a la Riunion Sectorielle Sur I'Energie (Energy Sector Meeting Working Document). October 1991, Dakar, Senegal. 21 2.66 SENELEC's plant rehabilitation and reinforcement study: The purpose of this study was to review the state of the existing power plants and propose alternative least-cost scenarios for the rehabilitation of existing facilities and/or the commissioning of new facilities. As stated above. the way in which this study was executed was not acceptable to IDA, and a consequence, IDA did not finance it. From IDA's point of view, the study deliberately avoided focussing on one of the principal issues that had to be addressed, which was the identification of the optimal investment mix comprising rehabilitation of old units and investment in new plants. 2.67 SENELEC institutional and manazement arrangements study: This study concluded that the failure of SENELEC's rehabilitation program and of the performance contract was due to the organizational and managerial weaknesses of SENELEC, and that those weaknesses are structural and cannot be addressed unless there is a solid commitment on the part of the GOS and SENELEC to reform the sectoral institutional framework. 2.68 Audit of SENELEC (FY90 and 1st. semester FY91): Within the context of Credit 1710-SE SENELEC had to have its financial statements audited every year by an external independent auditor. For reasons that are not clear, we accepted the audit made by the GOS appointed 'Commissaire aux Comptes' as fulfilling this condition. The experience proved that this was not a good solution. A partial audit of FY89 accounts, customer management. and information systems prepared by an audit firm, identified the existence of severe financial reporting problems and resulted in a disclaimer of opinion. Moreover for FY90/91, a third audit was carried out to review the financial situation and management of SENELEC in FY90 and first half of FY91. Based on this auditors report two conclusions are to be drawn: (i) the auditors disclaim to give any opinion due to the large number of uncertainties and missing documentation; (ii) the Commissaire aux Comptes report's reliabiiity, which gave an unqualified opinion for the same fiscal year financial statements, is questionable. 2.69 On the side of the training activities, the lack of a manpower development and/or training master plan at MDIA and the little information that is available on the subject within the Project files makes it very difficult to assess both the rationale for the training activities that were undertaken and their respective outcomes. 2.70 Lessons learned. The revision of the implementation of this component provides two principal lessons. Firstly, although the situation with the study on the rehabilitation and reinforcement of SENELEC's plants seems to carry a lesson more readily applicable to the borrower, IDA needs to observe from that experience that a pattern of undue leniency in the enforcement of proj ect implementation procedures (terms of reference, conditionalities, covenants, etc) does not necessarily produce an environment conducive to borrower's performance discipline. Evidence suggests that this problem affected not only the rehabilitation and reinforcement study but also other components of the Project, such as SENELEC's rehabilitation program (see Technical Assistance Component. below). 2.71 Secondly, and most importantly, a mistake was done in accepting to utilize a GOS appointed "Commissaire aux Comptes" to review and report on SENELEC's financial statements. Although at this point in time it can not be fully proved, it is reasonable to assume that the early identification of financial management problems at SENELEC could have substantially and positively altered the outcome of the project. This is a lesson that cannot be overlooked by IDA in future project design in Senegal. 22 3. Project Design and Implementation Review 3.1 The third part of this report briefly reviews the key design and implementation issues that determined the final outcome of Credit 1710-SE, and summarizes the principal lessons learned. Design of institutional arrangements 3.2 The institutional arrangements of the Credit were limited to SENELEC and MDIA, which were the only local executing agencies. As SENELEC was known to suffer from considerable internal organizational and managerial weaknesses and, among others, a precarious financial position, the institutional aspects related to SENELEC were considered critical to the Credit's implementation and success. At the time of appraisal, the risk of having institutional problem within SENELEC were expected to be reduced by requiring SENELEC to prepare and implement an TIJA approved "conrrat plan" (which theoretically included performance parameters and supervision and monitoring procedures and mechanisms) and by including continued technical assistance. 3.3 Potential institutional problems with MDIA were assumed to be limited to its responsibility for the implementation of the energy conservation and studies component of the Credit, and as such no specific provision measures were adopted to reduce institutional failure risks other than the provision of technical assistance resources. The critical role of MDIA with respect to the proposed energy sector policy reforms was clearly overlooked. 3.4 As it turns out, the design of the institutional arrangements did not correctly sized the existing institutional problems and barriers. The lack of commitment and of institutional response capabilities at SENELEC and MDIA were indeed the principal reasons for the Credit - as well as the overall project -- shortcomings. As Credit implementation proceeded and institutional problems continued to surface it became clear that the problems with the institutional arrangements were not limited to their original design but were extended to the lack of flexibility to introduce mid-stream support and/or corrective measures, such as additional technical assistance. training, supervision, and/or monitoring. Environmental Aspects 3.5 At the time of appraisal no major adverse environmental effects were identified. As per the original plan, the diesel 2x20 MW plant was constructed adjacent to the Cap des Biches power plant, more than 20 km away from Dakar, and its design incorporated adequate noise and pollution mitigation measures and devices. By Credit closing no particular problems had been identified with respect to noise or pollution resulting from the new generation units. Further, provided that the units are properly run and maintained, no particular environmental problems are expected to surface. 3.6 In 1989, an unanticipated problem appeared in the new Caps des Biches - Tobene power transport corridor, where an illegal settlement of low income sub-urban housing started developing directly underneath the power lines. As soon as the problem was detected SENELEC and the local government agencies were supposed to work with the community of settlers to prepare an action plan to relocate them. However, as of Credit closing date, nothing had been done. From a technical point of view, the proximity of the high voltage lines constitutes a 23 potential health hazard to the community. Additionally, the proximity of the settlers to the lines and towers poses a maintenance and security risk to SENELEC. Although the settlers have no rights to the land, which was attributed to SENELEC in full compliance with the law, the human, economic, and political problems (environmental conflict) remain unchanged. Identification and evaluation of risks 3.7 The main risk factor identified at appraisal was the pace of implementation of SENELEC's recovery program due to the considerable political and managerial will that would be necessary to resolve the existing problems. As discussed above, this risk proved to be more substantial than expected and resulted in the partial failure of the proposed rehabilitation program. 3.8 At the time of appraisal, the project was believed to present no unusual technical risks. Financial risks were considered minor as it was anticipated that the cost of the principal project component (new diesel generation plant comprising about 50% of the total project cost) could be lower that estimated. As it turns out, the steam plants rehabilitation sub-component (generation) run into serious technical problems as a result of poor component implementation and supervision management. Project Ownership 3.9 In complex projects like this, with many participants, obtaining project ownership (i.e. a high level of identification between projects and the recipient country) is a difficult and challenging task. This is so, in part because of the difference in perspectives between donors and recipients. The degree of participation by donors and borrowers in project design and implementation is normally the most tangible way of measuring project ownership. While limited borrower participation in project design and implementation management often results in a lack of commitment and cooperation on the part of the national counterpart agencies, lack of donor design and implementation supervision can result in serious technical and financial problems. As evidenced bv the outcome of SENELEC's rehabilitation program and of the steam plants rehabilitation sub-component (generation), and the problems with SENELEC's financial audits, the design of Credit 1710-SE failed to strike an adequate balance between project ownership and necessary donor project management and supervision. Project Sustainability 3.10 The sustainability of the investment components is fairly good. In spite of the demonstrated lack of commitment, it is expected that SENELEC has the technical expertise necessary to guarantee the sustainability of the investment components through timely and effective maintenance. That notwidstanding, and unless it is promptly resolved, some hardware sustainability may be jeopardized by the existing fuel quality problem. 3.11 The sustainability of the TA and studies components of the Credit (including, technical assistance, studies, training and SENELEC's rehabilitation program) is very limited. This is so because the will and the capability of the borrower to absorb the non-investment components is not strong enough. Until that situation is redressed, neither the non-investment components of 24 Credit 1710-SE nor those of any subsequent projects will have much room for success or sustainability beyond the short-term interests of the direct counterpart agencies (scholarships, computers, vehicles, temporary additional budget, office supplies, etc.). 3.12 The sustainability of the policy reform components of the Credit is at best fragile for two basic reasons. First, because the policy impact of the Credit was limited as neither the initially agreed policy reforms were implemented as proposed, nor the policy recommendations that resulted from the studies funded by the Credit have been implemented. Second, because there is very little evidence at this point in time that the GOS or SENELEC are prepared to address the serious policy and institutional problems of the energy sector. Time Table 3.13 The implementation of Credit 1710-SE was supposed to take a total of 51 months, from September 1986 to December 1990. Actual implementation and completion took a total of 69 months, from March 1987 (Credit Effectiveness) to December 1992 (Closing). Figure 3.1 presents a comparison betveen the original and actual implementation time table of Credit 1710- SE. The implementation of the principal investment components had a slow start due to delay of almost a year in the preparation and processing of bids and initiation of procurement. Once activities got underway, works progressed relatively well within the revised schedule, and all the investment components were completed within the original closing date of the project. On the other hand the implementation of some of the non-investment components of the Credit, was delayed by nearly two years, and the financial commitment and initiation of some studies and training activities required the granting of two closing date extensions, from December 1991 to June 1992, and then to December 1992. 3.14 As depicted in Figure 3.1, the Credit suffered an across-the-board delay in the initiation of activities, and a consistent delay in the completion of all the non-investment components. This outcome is not surprising, as the successful implementation and completion of investment components is more frequent than that of policy and TA components. Disbursement 3.15 Completion of disbursements was delayed from late 1990 (expected) to December 1992. In spite of that, no major disbursement problems occurred during the implementation of the Credit, other than a consistent delay on the part of SENELEC to make payments to local suppliers. That situation lasted until 1990 when SENELEC finally acted under pressure from IDA to expedite the processing of payment of its outstanding accounts through the effective utilization of the Credit's Special Account. 25 FIGURE 3.1: CREDIT 1710-SE -IMPLEMENTATION TIMETABLE REVIEW Implementation Horizon CREDIT COMPONENTS 1986 1987 1 1988 j1989 1 1990 1991 1992 1993 Generation Civil Works diesel plant (0) 0 0000 (A) AAA AAA Distribution Mat.& equip. Dakar Network O) 0 0000 0000 00 o (A) A AAM AA _ Engineering Consult. Serv. Generation () 0 0000 0000o _ (A) - A SAA Consult. Serv. Transmission (A) AAA AAAA AA (A) Consult. Serv. Distribution (O) 0 0000 0 0 0 0 (A) MA AA AAA Energy Conser. Studies Energy Conserv.Program (O) 0000 0000 oo_- (A) AAM AAA AAAA AAA Petroleum Prod.Supply Study (O) 0000 (A) AA FNE Study (O) 0000 ooo (A) Household Energy Consump. (O) 0000o o Additional Studies (2) (A) AAA 0000 0000o (A) AAAA AAA A AA Technical Assistance Rehab. Program TA g 0 0000 0000 0000_ _ (A) AAA AAAA AA AA Training ESIE Scholarships (O) 0000 0000 0000 (A): (A). AAAM AAAM AAMA_ SENELEC training (O) 00 0000 00oo (A) AA, AAI AAAA Notes: (1) measured in quarters (three months periods). (2) See the review of the Energy Conservation and Studies component. (0) Original time table. (A) Actual implementation. 26 3.16 Although the actual disbursement profile was different to that originally expected, the disbursement of Credit 1710-SE remained within acceptable profile limits. Figures 3.2 and 3.3 present summaries of the Credit's disbursement profiles. As it can be seen from these figures there was a considerable disbursement lag during the first 9 implementation quarters. Between quarters 9 and 17 Credit disbursement started to accelerate but still remained slightly behind schedule. As of quarter 18 actual disbursements surpassed the amounts in the original disbursement schedule until the closing of the Credit. 25% of Credit disbursement had been planned for the second implementation quarter; however, it was only achieved one and a half years later: in quarter 8. 50% percent disbursement was to have taken place by quarter 7 but was delayed by a year, until implementation quarter 12. 75% disbursement originally schedule for quarter 8 was only achieved in quarter 13. Procurement 3.17 The Credit's initial implementation delay came from delays in SENELEC's procurement process. In spite of a long standing experience in dealing with IDA and Donors' assistance, SENELEC and GOS proved unable to process procurement documents in an effective and efficient manner. An important part of the delay was caused by the reversal of the GOS on its agreement not to tax SENELEC's imported Project equipment and inputs. Monitoring and Supervision 3.18 Project monitoring and supervision issues were discussed with SENELEC during appraisal and were finalized at negotiations. SENELEC established a Project Unit satisfactory to IDA to monitor project execution, and agreed to a series of measures that included quarterly reports on its activities (project, investment program and financial position). 3.19 Table 3.1 presents a summary of the supervision missions that were conducted during the implementation of Credit 1710-SE, indicating the number of specialists that participated, the length of time spent in the field, the fields of expertise represented in the supervision team, the range of mandatory rating indicators, and the principal problems that were encountered during each particular supervision mission. Conclusion: Summary of Lessons Learned 3.20 The principal lessons learned from the evaluation of Credit 1710-SE which are relevant to the preparation and implementation of IDA projects in the Africa region - and potentially other Regions - are listed below in a summarized form: (i) more realistic implementation time schedules, and better implementation schedule management systems and corrective mechanisms need to be incorporated to projects in countries with weak institutional framework; (ii) special attention needs to be given to the inclusion of adequate operating standards and procedures within the implementation of investment components (hardware) in order to guarantee their efficient performance and avoid their premature deterioration; ' 27 FIGURE 3.2 SENG,AL: PCR i71O-SE CI~SLR.\AENr PRZ'_-CRi-t 215 24 22F F 0~ ~ 2 814 c 12 o 1 1 I 5 17 13 171 21 la2 7 4 6 S '5 18 2Z IMPLCAA_NTA7,CN ClA-i'&T.S ~ Crigir.:I Rvised m /7 ActucI a. Undistursed - : :. - , FIGURE 3 .3 S EN EGAL: 1 710-S E 0153 RSM.5T PROi-L- R
Группа Всемирного банка · Project Completion Report
Senegal - Energy Sector Rehabilitation Project
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