Document of The World Bank FOR OFFICIAL USE ONLY Report No. 13211 PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GH) AND NORTHERN GRID EXTENSION PROJECT (CREDIT 1759-GH) JUNE 29, 1994 Operations Evaluation Department 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. CURRENCY EQUIVALENTS (annual averages) Currency Units = Cedi (C) 1986 US$1 = 152 1987 US$1 = 176 1988 US$1 = 230 1989 US$1 = 303 1990 US$1 = 345 1991 US$1 = 390 1992 US$1 = 442 ABBREVIATIONS AND ACRONYMS AfDB - African Development Bank CIDA - Canadian International Development Agency CDC - Commonwealth Development Corporation ECG - Electric Corporation of Ghana EIB - European Investment Bank Japan X-M - Export-Import Bank of Japan LRMC - Long run marginal cost ODA - Overseas Development Administration VALCO - Volta Aluminum Company VRA - Volta River Authority FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation June 29, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Ghana Power System Rehabilitation (Credit 1628-GH) and Northern Grid Extension Project (Credit 1759-GH) Attached is the "Performance Audit Report on Ghana Power System Rehabilitation Project (Credit 1628-GH) and Northern Grid Extension Project (Credit 1759-GH)," prepared by the Operations Evaluation Department. The Borrower and the cofinanciers did not submit comments. Credit 1628-GH principally financed the successful rehabilitation of the distribution system of the Electricity Corporation of Ghana (ECG) and intensive technical assistance which was most effective in project implementation, less effective in institutional building, and least effective with regard to sector organization and finance. Credit 1759-GH financed the successful reinforcement of the Volta River Authority (VRA) transmission grid in the south, the extension of the grid to the northern part of the country, and the strengthening of the ECG distribution system in this part of the country. The technical assistance component of this credit was very effective in restructuring ECG by bringing in consultants in management positions, but weak in solving the sector finance issues reflected in insufficient cost recovery and mounting receivables and arrears. Since the physical achievements of both projects were significant, the audit rates their outcome as satisfactory. The institutional development impact is rated as modest because despite the institutional building effort deployed over a period of 7 years, ECG still has several weak points which should be corrected. The sustainability of the projects is rated as likely if progress can be made in resolving the sector's persistent financial difficulties. High priority and strong project ownerhsip by the Borrower compounded with an active Bank role and good coordination of cofinancing by the Bank and VRA contributed to a smooth implementation of the physical components of both projects. These good results contrast with the weak Bank performance in promoting the necessary strengthening of sector finances as regard the major issues of tariffs, receivables and arrears. Experience with the audited projects is positive in respect to importation of services since two important elements of the projects --distribution works and training--were for all practical purposes, contracted out to consultants. Both project completion reports contain a very good presentation of the physical results of the projects but they are less informative on the institutional building experience, the effectiveness of the technical assistance provided to ECG, and ownership of the projects by the Borrower and its dialogue with IDA. Robert Picciotto by H. Eberhard K6pp 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 PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GHl) AND NORTHERN GRID EXTENSION PROJECT (CREDIT 1759-GH) TABLE OF CONTENTS Page No. P R E F A C E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i BASIC DATA SH EET ........................................... ii EVALUATION SUMMARY .. . vi 1. INTRODUCTION .......................................... Country and Sector Context ........ ...................................1 The Projects.................................................... 2 T he A ud its . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 2 2. OBJECTIVES AND PRIORITIES ..... 3 O bjectives ......................... 3 Sector and Country Priorities ................................... 4 Bank Policies .... .......................................... 5 3. PHYSICAL ACCOMPLISHMENTS ..... . 5 P roject C osts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 R esu lts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Performance Factors . . 10 4. INSTITUTION BUILDING EXPERIENCE ...................... 10 Approaches Taken . . .. .............. 11 Achievements .......................... 12 Organizational Restructuring .................................... 12 5. FINANCIAL STRENGTHENING .............................. 15 Earnings .. ................................................ 16 Tariffs .. .................................................. 17 ECG Receivables .. ......................................... ...... 19 VRA Arrears .................................................... 20 This report was prepared by Alvaro Covarrubias, Task Manager and Richard Dosik, Consultant with secretarial assistance from Mrs. Lorna Sibblies. 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. TABLE OF CONTENTS (contd.) Page No. 6. TECHNICAL ASSISTANCE EFFECTIVENESS .................. 21 Project Implementation ...................................... 21 Institution Building ......................................... 21 Sector Issues .... .......................................... 22 7. COFINANCING ............................................ 23 Cofinancing Contribution .................................... 23 Mobilizing Cofinancing ....................................... 23 Impact on the Project. ........................................ 24 8. BANK AND BORROWER PERFORMANCE .................... 24 Bank Performance ........................... 25 Borrower Performance ....................................... 26 9. LESSONS OF EXPERIENCE ................................. 27 Power Lending in Africa .... ........................... . . .... 27 New Bank Sector Policies ....... ................................ 28 Annexes: 1: Project Costs and Financing (Credit 1628-GH) ....................... .... .29 2: Project Costs and Financing (Credit 1759-GH) ...................... 30 3: Comments from the African Development Bank ...................... 31 1 PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GH) AND NORTHERN GRID EXTENSION PROJECT (CREDIT 1759-GH) PREFACE This report presents the results of a performance audit (PAR) of the Power System Rehabilitation Project, and the Northern Grid Extension Project for which, respectively, Credit 1828-GH of US$48.8 million and Credit 1759-GH of US$130.5 million were made to the Government of Ghana in 1985 and 1986. The beneficiaries of the credits were Electricity Corporation of Ghana (ECG) for the Power System Rehabilitation Project, and the Volta River Authority (VRA) for the Northern Grid Extension Project. The credits were closed in 1991 and 1992. The audit is based on the SARs, the MOPs, the Development Agreements, the PCRs of the projects, the project files, discussions held with project officers still with IDA, and interviews with officials of the Government of Ghana and officers of ECG and VRA during an audit mission in January 1994. Both projects were multi-dimensional, pursuing a range of physical, institutional and financial objectives. The audit focussed on and examined in greater detail the institutional building experience, the financial strengthening of ECG, the effectiveness of the technical assistance provided to ECG, coordination of co-financing from five donors, dialogue between IDA and the Borrower and ownership of the projects by the latter. The PCR emphasized the very good physical accomplishments of the projects but covered to a much lesser extent the important topics analyzed in depth by this PAR. Following OED procedures, copies of the PAR draft were sent to the Government of Ghana, ECG and VRA and the co-financiers. Only AfDB submitted comments. ii PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GII) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as % of Item Expectation Current Estimate Appraisal Estimate Total Project Costs (US$ million) 48.8 35.7(*) 75 Loan Amount (US$ million) 28.0 28.0 Date Physical Components Completed 12/90 12/90 Proportion completed by that date 100% 100% Economic Rate of Return 30.0 33.5 (*) PCR Estimate LOAN DISBURSEMENTS CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ million) Estimated Actual Actual as % Fiscal Year Amount Amount of Estimate ----- Cumulative----- Estimate 1986 3.9 1.6 41% 1987 12.1 12.2 101% 1988 19.4 22.0 113% 1989 24.5 31.0 127% 1990 27.2 34.1 125% 1991 28.0 34.9 125% PROJECT DATES Item Date Planned Date Actual Identification 09/80 Preparation 03/81, 04/83 Appraisal Mission 06/81 05/83, 11/84 Credit Negotiations 12/81 08/85 Board Approval 02/82 09/85 *Signature of Development Credit Agreement 10/85 with Republic of Ghana Credit Effectiveness 02/86 Credit Closing 06/91 Credit Completion 12/90 III STAFF INPUTS (Staff weeks) FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY94 Total Preappraisal 12.8 11.8 9.8 34.4 Appraisal 5.5 12.1 11 4 23.6 30.3 5.1 88.1 Negotiation 5.9 5.9 Supervision 10 5 22.2 19 1 3.6 2.3 3.6 14.7 0.3 76.3 Other 0.9 3.3 1.7 1.1 3.1 4.4 14.7 Total 19.3 15.4 24.9 34 6 335 25.9 22.2 19.1 3.6 2.3 3.6 14.7 0.3 2193 MISSION DATA Stage of Days in Specializations Project Month/Year No. of staff Field Represented Ratings Through Appraisal 09/80 2 6 PE, ES 03/81 1 3 LO 03/81 3 29 FA, PE 09/82 3 12 FA, PE, EC 02/83 2 24 FA, PE Appraisal through 06/81 3 14 FA. PE Board 11/81 1 5 FA 05/83 3 25 FA, PE, ED 10/84 1 11/84 4 24 FA, PE, EC, DC Board through 10/85 3 21 EC, PE Effectiveness 02/86 Supervision 04/86 6 24 FA, PE, EC, OA 2 07/86 3 9 FA, PE, EC 10/86 1 5 EC 12/86 2 22 FA, EC 2 03/87 1 5 FA 2 03/87 1 7 ED 04/87 2 6 FA, EC 2 07/87 2 22 FA, EC 1 09/87 I 6 ES 11/87 3 20 FA, EC, EG 1 02/88 2 4 FA, PE 1 08/89 1 2 FA I 06/90 1 5 PE 11/90 2 4 FA, EC 1 I/ Exact number of days uncertain as supervision/preparation for other projects took place at this time Specialization: DC-Division Chief, EC-Economist, ED-Training Specialist, ES-Energy Specialist, FA-Financial Analyst, GE-Geologist, LO-Loan Officer, OA-Operations Assistant, PE-Petroleum Engineer, PS-Petroleum Specialist. Rating ]-No significant problems. 2-Moderate problems iv PERFORMANCE AUDIT REPORT GHANA NORTHERN GRID EXTENSION PROJECT (CREDIT 1759-GH) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as % of Item Expectation Current Estimate Appraisal Estimate Total Project Costs (US$ million) 130.5 135.1 104 Loan Amount (US$ million) 6.3 6.3 100 Date Physical Components Completed 6/92 6/92 Proportion completed by that date 100% 100% Economic Rate of Return 14% 14% LOAN DISBURSEMENTS CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ million) Estimated Actual Actual as % Fiscal Year Amount Amount of Estimate ----- Cumulative----- Estimate 1987 0.16 0.19 119% 1988 1.32 2.73 206% 1989 3.53 5.81 165% 1990 5.45 6.37 117% 1991 6.24 6.51 104% 1992 6.30 6.51 103% 1993 6.30 6.72 106% PROJECT DATES Item Date Planned Date Actual Identification 07/85 Preparation 03/--/86 Appraisal Mission 04/86 04/24/86 Credit Negotiations -- 10/08/86 Board Approval 02/17/87 10/08/86 *Signature of Development Credit Agreement 04/13/87 02/17/87 with Republic of Ghana Signature of Project Agreement with VRA 04/13/87 04/13/87 Credit Effectiveness 05/28/87 04/13/87 Credit Closing Date 06/30/92 05/28/87 Credit Completion 06/30/92 06/30/92 V STAFF INPUTS (Staff weeks) FY80 FY81 FY82 FY84 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 Total Preappraisal 2.4 6.7 1.3 .1 22.4 33.0 Appraisal - 36.5 12.4 49.0 Negotiation 13.1 13.1 Supervision 4.5 12.3 6.9 4.5 4.4 1.0 4.4 381 Other 2.0 .2 1.3 5.8 9.3 Total 2.4 8.7 1.5 .1 60.3 35.8 12.3 6.9 4.5 4.4 1.0 4.4 142.5 MISSION DATA Stage of Days in Specializations Project Month/Year No. of staff Field Represented Ratings Identification 03/86 1 1 OPE Appraisal 04/86 5 20 2 OPE, ENG, FIN, ECO Post Appraisal 06/86 2 1 2 Economists N.A. Post Appraisal 07/86 2 4 OPE, ECO N.A. Post Appraisal 12/86 1 1 OPE N.A Board Approval Through Effectiveness Supervision I 05/87 2 5 OPE, ECO 1 Supervision 2 07/87 2 5 OPE, ECO I Supervision 3 11/87 2 20 ECO, CONS I Supervision 4 11/88 1 3 OPE, ENG I Supervision 5 07/89 1 12 OPE N.A. FIN N.A. Supervision 6 12/89 1 5 ENG N.A. Supervision 7 07/90 1 5 ENG 1 Supervision 8 07/91 3 5 ENG, OPE N.A. Supervision 9 02/92 1 1 ENG at Specialization Acronyms: OPE-Operations Officer, ENG-Engineer, ECO-Economist, FIN-Financial Analyst, CONS-Consultant b/ Rating Key: 1-Project Status Satisfactory vi PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GI) AND NORTHERN GRID EXTENSION PROJECT (CREDIT 1759-GH) EVALUATION SUMMARY Introduction 1. The Bank has been deeply involved found to be very much in line with their in the development of the power sector in physical goals; Credit 1628 succeeded in Ghana. For more than thirty years, it has reversing the deterioration in the distribution not only been the principal source of system and improving the quality of service external finance for the sector's development while, as a result of Credit 1759, the but also served as its mentor and guide. northern region was provided for the first The two projects under audit came at a time with access to reliable grid-supplied critical point in this relationship, when the electricity. However, in the case of Credit Bank was seeking to help Ghana to rebuild 1628, the good physical results were not its economy and the sector, after years of matched on the institution building side. mismanagement and decay and when, as part of the adjustment process, it was placing Objectives and Priorities increasing emphasis on the need for institutional reform in the sector. 3. Both projects were multi- dimensional, pursuing a range of physical, 2. Credit 1628 provided some $28 institutional and financial objectives. Credit million for the nearly $49 million Power 1628 sought top-to-bottom change in ECG, System Rehabilitation Project which including organizational restructuring, new principally financed the rehabilitation of the management practices and operational distribution system of the Electricity procedures, and improvements in the areas Corporation of Ghana (ECG) and intensive of recruitment, personnel and training technical assistance from a developed designed to reduce overstaffing while country utility. The $148 million Northern upgrading skills at all levels. Its financial Grid Extension Project, for which Credit objectives were two-fold: to improve and 1759 provided $6.3 million, financed the stabilize sector finances by establishing a reinforcement of the Volta River Authority's rational and systematic basis for tariff (VRA) existing 161kV transmission grid in adjustment, and to improve ECG's financial the south, but its main focus was on the management and performance. Credit extension of the grid to the northern part of 1759's institutional objective was to transfer the country, then served (when served) by responsibility for distribution in the north to isolated diesel generators, and the VRA, which previously had no experience strengthening of the distribution system in in this area. Its financial objective was to this part of the country. Project results were protect VRA against the actual and potential vii threats to its continued financial stability -- a sustained impact on the quality and the rise in receivables reflecting unpaid bills efficiency of the distribution system. for power delivered to ECG, and the fear that the government was casting covetous 6. The expeditious implementation of eyes on VRA's foreign exchange earnings. the project works probably owes most to a combination of project factors. Credit 1628 4. The objectives of Credit 1628 involved straightforward distribution works correctly mirrored sector priorities as shared familiar to ECG and the project was well by the government and the Bank. Given the designed to compensate for ECG's dismal quality of the power supply and the shortcomings by providing that: (i) decrepit condition of the distribution system, implementation be in the hands of a project rehabilitation was clearly the first order of unit that would, in effect, be a self- business. The extension of the grid under governing enclave; (ii) there be ample Credit 1759 responded more to country than technical assistance and ample authority for to sector priorities since the northern area, the consultants; and (iii) wherever feasible, while developing, is sparsely settled and the work be done under turn-key type contracts load is light. The projects' goals were fully with the suppliers responsible for in tune with Bank sector lending objectives installation. at the time particularly in that, in Credit 1628, it was recognized that institution Institution Building Experience building and financial reform were no less important than infrastructure building to the 7. Institutionally, the most striking future of the power sector. feature of the power sector in the mid- eighties was the sharp dichotomy between Physical Accomplishments VRA, which functioned as a model utility, autonomous and efficient, and ECG, which 5. Although the projects were was the perennial weak sister. Institution- completed on-time and total costs were close building experience under the project can be to the original estimates, the costs of the divided into three phases: (i) an initial phase distribution components of both projects far in which the focus was on an abortive effort exceeded the SAR estimates owing to a to merge ECG into VRA; (ii) a second combination of original under-estimates of phase in which the management of ECG was the cost of the planned distribution works effectively handed over to the consultants; and the undertaking of additional works as and (iii) a final phase when the effort to additional resources became available for rehabilitate ECG took more normal forms, distribution. All agree that rehabilitation has with the consultants playing a largely dramatically improved the quality of ECG's advisory role. service but that there seems to be a good way to go still before it can be considered 8. Looked at in terms of specific really satisfactory. However, the impact of achievements in the project period, the the project in improving the efficiency of results of the institution building effort were ECG seems to have been virtually nil, none too impressive. While limited progress judging by the persistently high level of was made in the areas of organizational losses in the system. Ironically, it was the improvement, accounting, staffing and initial success of the project in improving training, in other areas, and particularly the reliability that, by unleashing suppressed critical one of commercial operations, the demand, prevented the project from having results were distinctly disappointing. However, from today's vantage point Credit viii 1628 can be seen as the first stage in a to enforce the covenants). Indeed, while continuing institution building process, some progress has been made on all fronts carried on through subsequent projects, that subsequent to the projects, tariffs, has worked a considerable transformation in receivables and arrears remain today at the ECG. Most observers in Ghana and in the heart of Bank's concerns about sector Bank who have viewed the process over the finances. long run agree that ECG today "bears no resemblance" to ECG as it was when the Technical Assistance Effectiveness project began. While it still has its weak points, it is now a much better organized, 11. Technical assistance was an managed and performing institution that is important element in both projects, but providing improved service to many more played a particularly critical role in Credit customers with a much reduced staff. 1628. Broadly speaking, it was most effective in project implementation, less Financial Strengthening effective in institution building, and least effective with regard to sector organization 9. It was recognized from the outset and finance. Technical assistance deserves that strengthening the financial much of the credit for what was underpinnings of the sector was at least as accomplished under Credit 1628 in the areas urgent as restructuring its organization and of organizational restructuring, financial management. Credit 1628, while management, reduction of overstaffing and maintaining an element of the old reliance training. The consultants were able to on rate of return, directly targeted with function so effectively largely because they covenants the three areas most critical to the had the necessary authority, capability and sector's financial health --tariffs and ECG's back-up. The project unit was located in its growing customer receivables and mounting own quarters, had its own staff, and was arrears to VRA. managed, de facto, by a consultant serving as Project Director. In the area of 10. Unfortunately, performance fell well commercial operations, where technical short of the financial targets set and assistance had the least institution building agreements reached. None of the covenants impact, the reasons seem to have been a in the three critical areas was complied with compound of lack of resources and fully or promptly, with the result that the insufficient conviction on the part of both financial projections on which the project ECG and the consultants. was based soon proved optimistic, ECG's financial situation continued to worsen and Cofinancing new solutions and new targets had to be worked out in the context of later projects. 12. Cofinancing was a significant This disappointing experience seems to element in the financing plan for Credit stem, in part, from a reliance on covenants 1628, and of overwhelming importance to that set targets without adequate modus the financing of Credit 1759, where five operandi for their achievement. However, donors, (AfDB, EIB, CDC, CIDA and it also reflects the depth and intricacy of the Japan X-M) were expected to provide some sector's financial problems and the lack of $88 million, or more than 85% of foreign sufficient will on all sides to deal with them exchange requirements. These expectations (on the part of the government, to keep were exceeded during implementation when putting up tariffs; on ECG's, to maintain more cofinancing became available from pressure on collections; and on the Bank's, more donors than originally anticipated. ix VRA's institutional credibility and financial 15. Bank performance in promoting the creditworthiness, the presence of the Bank, necessary strengthening of sector finances, and Ghana's strenuous structural adjustment particularly as regards the major issues of efforts, probably in that order, seem to have tariffs, receivables and arrears, was been the main factors behind the exceptional considerably weaker. Its most useful interest of cofinanciers in Credit 1759. contribution was probably in maintaining pressure for adequate tariffs, although the 13. The Bank and VRA did much to Bank remained wedded to the traditional realize Credit 1759's cofinancing potential. approach of earnings covenants and tariff The Bank role was most important in studies through the course of these projects providing comfort to the cofinanciers, and in and well beyond the point at which it should coordinating the assembly of the cofinancing have been evident that tariff policy was not package, while VRA deserves most of the being changed but only made a function of credit for lining up the major donors. While the next Bank loan. Similarly, borrower the cofinancing of Credit 1759 was costly in performance on the financial side left much terms of Bank staff time, it seems to have to be desired. been virtually cost-free otherwise. VRA reports that having to deal with the differing Overall Results requirements of a variety of cofinanciers did significantly complicate project 16. Since the physical achievements of administration, but that it quickly learned both projects were significant, the audit rates how to satisfy the cofinanciers and keep the their outcome as satisfactory. The project moving on schedule. institutional development impact, is rated as modest because, despite the institution Bank and Borrower Performance building effort displayed over a period of 7 years, ECG still has several weak points 14. Both the Bank and the borrowers which should be corrected. The project performed well in these projects. The Bank benefits are likely to prove sustainable if role was very active and, for the most part, progress can be made in resolving the very productive. The Bank contribution to sector's persistent financial difficulties. the physical success of the projects was most visible in their initial quality and in the Lessons of Experience intensity of supervision. That ECG and VRA did so well in project management was 17. Certain aspects of the experience a product of the high priority they attached with these projects seem particularly worth to these projects; of their ability to make reviewing because of their relevance to the good use of technical assistance; and of the prospects for improving the effectiveness of technical and managerial competence of power lending in Africa and implementing VRA in implementing Credit 1759. On the the Bank's new power sector policies there. institutional side, the Bank recognized that Extracting strong project performance from shock therapy was necessary to begin the a weak institution is no mean trick but restructuring of ECG and it seems likely that Credit 1628 demonstrates that it can be done its views weighed heavily in the where the right sort of project is brought government's decision to remove ECG's together with the right type of technical existing management and put the consultants assistance in the right circumstances. Where in charge. Ghanaian ownership was also of an institution has deteriorated to the point critical importance to the institution building that ECG had in 1985, little is likely to be accomplishments of Credit 1628. accomplished by incrementalism. Rather, x what is called for is a comprehensive, power sector lending policies--support for across-the-board approach that will produce the importation of services and transparent a complete overhaul of the institution. regulation. Credit 1628 provides good Those who were involved with the precedents for the successful importation of restructuring of ECG are unanimous in services, since two important elements of the believing that the most important thing that project, the distribution works and training happened in the institution was the creation were, for all practical purposes, contracted of a new atmosphere in which change was out to the consultants. Experience under the seen to be possible, and that the sudden projects also lends powerful support to the dismissal of the old management and the thesis that utilities are unlikely to achieve the bringing in of the consultants was the critical financial autonomy they need if they are to element in this. operate commercially and be free from government interference unless a transparent 18. Experience with the audited projects regulatory process can be substituted for the also appears positive with respect to the case prevailing political one. for two of the pillars of the Bank's new PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GH) AND NORTHERN GRID EXTENSION PROJECT (CREDIT 1759-GH) 1. INTRODUCTION Country and Sector Context 1.1 The Bank has been as deeply involved in the development of the power sector in Ghana as it has anywhere in Africa, or elsewhere in the developing world. For more than thirty years, it has not only been the principal source of external finance for the sector's development but also served as its mentor, guide, minder and conscience. The Bank was present at the creation in 1961 when it agreed to help finance the Akosombo dam and the creation of the Volta River Authority (VRA), the first elements in the development of a modern generation/transmission system. Similarly, in 1968 it provided launch aid for the Electricity Corporation of Ghana (ECG) shortly after its establishment as the country's distribution utility. All told, the Bank has made eleven power loans totaling U$280 million for generation, transmission and distribution projects. It continues today to be as closely involved with all aspects of sector development--policy, financial and institutional, as well as physical--as it ever was. 1.2 The two projects under audit came at a critical point in this relationship, when the Bank was seeking to help Ghana to rebuild its economy, and the sector, after years of mismanagement and decay and when, as part of the adjustment process, it was placing increasing emphasis on the need for institutional reform in the sector. By the early eighties, the Ghanaian economy had come as close to self- destructing as makes little difference. The demands of a sprawling and inefficient public sector had led to spiraling budget deficits, runaway inflation, a massively over-valued currency and the virtual disappearance of foreign exchange reserves. The nation's infrastructure began to deteriorate rapidly as imported spare parts and equipment necessary for operation and maintenance became unavailable, while even the most essential consumer goods disappeared from the market. This all too familiar story was compounded by factors beyond Ghana's control--the oil crises, declining export prices, the return of Ghanaians working in Nigeria and one of the most severe droughts in the country's history. However, the opportunity for change came in December 1981 when a government took power that proved willing to cooperate with the Bank and the Fund in developing a structural adjustment program. 1.3 The power sector suffered along with the rest of the economy during the lean years, with ECG bearing the brunt of the damage. As long delayed and inadequate tariff adjustments deprived ECG of funds for repair and replacement (not to speak of investment), service began to crumble to the point where long outages and lengthy periods of voltage reduction were more the rule than the exception on the grid, while service for those supplied by isolated diesel systems became virtually non-existent. This was accompanied by a growing institutional paralysis as staff morale declined, absenteeism rose, vacancies for skilled workers and top managers alike went long unfilled, billing and collection were no longer taken seriously and accounts were no longer audited. VRA, by contrast, suffered relatively little. 2 Although its earnings were sharply reduced by the drought and the failure of ECG and the government to pay promptly for the power it delivered to them, the fact that VRA retained the foreign exchange from its export sales gave it the resources to maintain its generating plant and transmission lines in good order, to pay its foreign debts, and to keep its organization together. The Projects 1.4 Both projects aimed to support the physical rebuilding and strengthening of the sector and to promote institutional change. Credit 1628 provided some U$28 million for a nearly U$49 million project which principally financed the rehabilitation of ECG's distribution system; spare parts, vehicles and other operating supplies; and intensive technical assistance from a developed country utility. It also included the rehabilitation of some ECG and VRA generating plant, and VRA transmission substations. Cofinancing was expected for the latter part of the project. (See Annex 1 for cost and financing.) 1.5 Credit 1759 was cast in a somewhat different mold. While the U$135 million project it financed provided for the reinforcement of the existing 161 kV transmission grid in the south, its main focus was on the extension of the grid to the northern part of the country, then served (when served) by isolated diesel generators, and the strengthening of the distribution system in this part of the country. Responsibility for distribution in the north was transferred to VRA from ECG, which had heretofore had an exclusive franchise for distribution throughout the country. IDA contributed only U$6.3 million to the financing plan while some U$88 million was expected to come from various cofinanciers (see Annex 2 for cost and financing). 1.6 Implementation of both projects went remarkably well. As detailed in the respective PCRs', in both cases the project works were carried out on schedule and at or close to the estimated cost. Project results were found to be very much in line with their physical goals; Credit 1628 succeeded in reversing the deterioration in the distribution system and improving the quality of service while, as a result of Credit 1759, the northern region was provided for the first time with access to reliable grid supplied electricity. Recalculated rates of return were put at a higher than originally estimated 33.5% for Credit 1628, and at a lower than expected but still quite satisfactory 14% for Credit 1759. But while praise for Credit 1759 was virtually unqualified, the PCR for Credit 1628 notes that the physical work was carried out more successfully than the technical assistance for institution building, and called attention to ECG's continuing "weaknesses in management, operational and financial areas"2. Indeed, project performance in the financial area can only be deemed unsatisfactory since, although this is not readily apparent from the PCR, the most critical financial covenants were not complied with. The Audits 1.7 While the expeditious fashion in which the projects were implemented on the physical side is rare in African power projects, the shortcomings on the institution building and financial sides are, unfortunately, all too common. The audit will examine in depth the principal performance factors at Power System Rehabilitation Project, Report No. I1498, December 28, 1992 and Northern Grid Extension Project, Report No. 12414, October 19, 1993. 2 Ibid, Report No. 11498, para. 6.5. 3 work on both sides. As regards physical implementation, the focus will be on assessing the "quality at entry" of the projects and the roles played by the Bank, the borrower and the consultants in carrying them out. In the case of Credit 1628, the longer term ramifications of the service improvement resulting from the project, and their sustainability, will also be examined. The role of the Bank and the borrower in mobilizing cofinancing, and the impact of cofinancing on project implementation will be given special attention in the case of Credit 1759. Insofar as institution building and sector finances are concerned, the audit will concentrate on two areas: the effort to strengthen ECG's management and operations, with special emphasis on the effectiveness of technical assistance; and the measures taken to improve ECG's, and the sector's, financial performance, with special emphasis on the approaches taken to the collections, receivables, and tariff questions. 2. OBJECTIVES AND PRIORITIES 2.1 The projects' objectives are worth reviewing in somewhat greater detail not only to establish benchmarks for judging project accomplishments but also because they provide the clearest insight into how responsive the projects were to the priority needs of the sector and how well they reflected the Bank's own sector policies. Objectives 2.2 Both projects were multi-dimensional, pursuing a range of physical, institutional and financial objectives. Credit 1628's overall physical objective was clearly and concisely stated in the SAR--"to provide reliable service by 1990"3. To this end it sought to enable ECG to substantially renew its distribution system by replacing or repairing much of the equipment that was out of service or whose performance had deteriorated badly, to upgrade its operations and maintenance by providing much needed spares and vehicles, and to rehabilitate its largest diesel plant. The VRA component likewise sought to attend to the most urgent needs of the generation and transmission system, substation rehabilitation and repairing of the Akosombo hydro plant. 2.3 As important as these physical objectives were, they could be regarded as pretty standard stuff alongside Credit 1628's sweeping institutional objectives. The project provided for ECG's consultants to study the reorganization of the sector, with particular emphasis on "the merits of merging ECG and VRA"; to review legislation governing the sector; and to prepare a top-to-bottom "institutional rehabilitation plan" for ECG4. The latter would include organizational restructuring, changes in management practices and operational procedures and improvements in the areas of recruitment, personnel and training designed to reduce overstaffing while upgrading skills at all levels. 2.4 Credit 1628's financial objectives were two-fold: to improve and stabilize sector finances by establishing a rational and systematic basis for tariff adjustment, and to improve ECG's financial SAR, Power System Rehabilitation Project, Report No. 4932-GH, para. 3.01. 4 Ibid, para. 3.02. 4 management and performance. The former was to be accomplished through a tariff study on the basis of which the government and the Bank would agree on sector financial objectives and on future earnings requirements for the utilities. The latter objective was to be achieved by technical assistance to help restore order to ECG's accounts, establish internal financial controls, and improve billing and collections, and by the commitment by the government, VRA and ECG to bring their payments to each other up to date. 2.5 Credit 1759's physical objectives, to strengthen the existing high voltage grid in the south, to extend it to the north, and to upgrade and expand the distribution system in the north so as to provide expanded access and a more reliable and efficient electricity supply--gave rise to its institutional objective. This was to transfer responsibility for the building, operation and maintenance of the northern distribution system to VRA. Although VRA had never been involved in distribution on a significant scale, this was considered a better bet than entrusting distribution to ECG, whose existing operations in the region were badly run and whose institutional rehabilitation had barely begun. The project's financial objective was to protect VRA against the actual and potential threats to its continued financial stability--the rise in receivables reflecting unpaid bills for power delivered to ECG, and the fear that the government was casting covetous eyes on VRA's foreign exchange earnings. Sector and Country Priorities 2.6 There can be no question that the objectives of Credit 1628 correctly mirrored sector priorities. Given the dismal quality of the power supply and the decrepit condition of the distribution system, rehabilitation was clearly the first order of business in restoring the health of the sector and enabling it to contribute to national economic recovery. However, the benefits of physical rehabilitation would have been quickly dissipated with ECG as it was and drastic action to bring about institutional reform and shore up sector finances was as clearly called for. Such action was, moreover, fully in accord with the overall effort to rationalize the public sector and ameliorate the fiscal burden being undertaken under the structural adjustment program. 2.7 Physical rehabilitation was also first among the government's sector priorities and it fully recognized the need for sweeping institutional reform. As events were soon to show, the government did not share the view that merger with VRA was the best solution to ECG's problems, but this was a difference about strategy, not goals. Indeed, it is only on the financial side that the government's commitment to the project's objectives can be questioned. While agreeing in principle that the companies needed adequate earnings and adequate tariffs, and that the public sector should pay its electricity bills, the government's enthusiasm for the necessary action was constrained in practice by the unpopularity of tariff increases and by budgetary stringency for which the non-payment of electricity bills seemed to provide needed relief. 2.8 The strengthening of the transmission grid in the south under Credit 1759 also met a high priority sector infrastructure requirement. The existing grid was becoming overloaded and its reinforcement would not only make it possible to improve reliability and reduce losses but also increase Ghana's capacity to export power to neighboring countries. The extension of the grid to the north and the distribution works there, which accounted for the bulk of the project, responded more to country than to sector priorities. The northern region is large but contains only about 15% of the country's population. Most of the inhabitants live in sparsely populated rural areas and could not expect to be economically connected to the grid in the foreseeable future. However, the principal towns have been growing rapidly, the area is rich in timber and agricultural resources and the lack of a reliable electricity 5 supply was proving a major obstacle to various development projects. Thus, the government pressed for the extension of the grid as part of its efforts to spread the benefits of economic recovery throughout the country. For the same reason, it supported the transfer of responsibility for distribution to VRA as the best means of ensuring that the electricity supplied was efficiently delivered to consumers. Bank Policies 2.9 From the foregoing, it can be seen that the projects' goals were fully in tune with Bank lending objectives in the sector. As set out in OMS 3.72, these were to: (i) provide basic infrastructure in accordance with least cost programs; (ii) strengthen institutions and increase efficiency in the sector; (iii) improve local resource mobilization and catalyze cofinancing; and (iv) improve access to electricity by disadvantaged population groups. There can be no doubt that rehabilitation of the distribution system was the least-cost way of providing basic infrastructure in Ghana at the time of Credit 1628, and the grid extension under Credit 1759 had been identified in consultant and Bank system expansion studies as the least-cost way of bringing reliable service to the north. In Credit 1628, the Bank recognized that institution building and financial reform were no less important than infrastructure building to the future of the power sector. Few, if any, power projects can have achieved as much cofinancing leverage as Credit 1759 in which the cofinanciers contribution was nearly fifteen times greater than IDA's. Finally, Credit 1759 aimed to improve access to electricity for a portion of the population that was certainly disadvantaged in terms both of incomes and the availability of public services. 3. PHYSICAL ACCOMPLISHMENTS 3.1 Although the projects were completed on-time and total costs were close to the original estimates, the costs of the distribution components of both projects far exceeded the SAR estimates. After examining the reasons for the distribution cost overruns, this section will assess the extent to which the projects accomplished their physical objectives and seek to identify the principal factors affecting project performance on the physical side. Project Costs 3.2 According to data presented in the PCR and summarized in Table 1, the completed cost of Credit 1628 was actually only about 75% of what was estimated at appraisal. However, there is less to this than meets the eye, since the costs as shown in the PCR omit two of the original components of the project, the rehabilitation of VRA substations (originally estimated to cost U$11.2 million) and of ECG's large diesel plant at Tema (U$2.8 million), which was to be carried out by VRAs. The work was done, although reportedly at substantially higher cost than expected at the time of appraisal, indicating that the actual cost of the project as originally described may have been a good deal higher than estimated at appraisal. The reasons for the apparent dropping of these components from the project in the PCR are not known. The intended Italian cofinancing for the VRA substations was reportedly forthcoming, and ODA provided an unexpected $2.5 million grant for the Tema rehabilitation. The audit was unable to ascertain the actual cost of these components. 6 TABLE 1. CREDIT 1628 ESTIMATED AND ACTUAL PROJECT COSTS (U$ million) Appraisal Estimate Actual Cost ECG Generation 2.8 0.0 Distribution 10.5 21.7 Vehicles and spares 4.7 4.0 Technical Assistance 3.1 6.0 Miscl. 1.0 0.8 VRA Generation 1.8 2.4 Substations 11.2 0.1 Other 0.5 0.7 Contingencies 13.2 0.0 Total 48.8 35.7 Source. PCR, p. 23; (*) See para. 3.2 above. 3.3 Credit 1628 thus became essentially a project that financed the rehabilitation of ECG's distribution system and, as Table I shows, the final cost of this work was actually more than double the appraisal estimate for distribution. In this respect, VRA's experience under Credit 1759 was somewhat similar. Although the total project cost was only about 4% more than estimated at appraisal, the actual cost of the distribution component was nearly three times the appraisal estimate according to revised cost data obtained by the audit mission and summarized in Table 26. Table 2. CREDIT 1759 ESTIMATED AND ACTUAL PROJECT COSTS (US$ million) Appraisal Estimate Actual Cost Transmission 75.7 78.3 Distribution 12.4 34.9 Engineering 7.0 10.2 Miscl. 5.1 0.6 Contingencies 30.3 11.1 Total 130.5 135.1 Source: Revised VRA data. 6 The revised data supplied by ECG put the actual cost of the distribution component and the total project cost at $13 million less than shown in Table 2 of the PCR (Report No.12414). 7 3.4 The apparent cost overruns appear to stem mainly from a combination of original under- estimates of the cost of the planned distribution works and the undertaking of additional works as additional resources became available for distribution. Given the rapid rate of decay in the ECG network prior to the project, on the one hand, and the fact the project cost estimates were based on a 1980 consultant study as updated by the Bank in 1982 and 1983, on the other, it is not surprising that they were out-dated by the time Credit 1628 was appraised. In addition, since distribution rehabilitation is intrinsically something of an open-ended proposition, it was not difficult to find good use for the additional funds that became available when cofinancing was found for the Tema diesel station, or from the amounts set aside for contingencies. 3.5 In the case of Credit 1759, it is also likely that costs were originally underestimated owing to the lack of current information on the status of ECG's distribution system in the north. However, the main factor increasing costs, according to VRA officials, was the expansion of the distribution network to meet the "unexpected" demand for electricity service from localities for which grid connections were not originally contemplated. VRA reports that the existing distribution systems were rehabilitated and expanded in twelve towns (rather than the ten specified in the SAR) and that, in addition, new systems were established in twenty-three towns not previously supplied with electricity. It appears that the same economic criteria, based on cost savings compared with the diesel alternative, were used to justify the additional work. The additional distribution work was possible, it seems, largely owing to the availability of additional funds totaling more than U$16 million from cofinanciers not originally included in the financing plan. Results 3.6 As already discussed, the physical objectives of Credit 1628 were to restore reliable electricity service and improve the efficiency of ECG's distribution network. On the former score, all agree that rehabilitation has dramatically improved the quality of service but that there seems to be a good way to go still before it can be considered really satisfactory. According to both ECG management and a smattering of commercial and residential consumers interviewed by the audit mission, outages are now much less frequent and of shorter duration than they were in the mid '80s, and voltage is much more reliable. However, ECG admits that such lapses still occur all too frequently, and consumers report they still must rely on voltage regulating transformers and other devices in their homes to protect their appliances from damaging fluctuations. 3.7 Unfortunately, the evidence of system reliability has heretofore been almost entirely anecdotal, since no before and after system for monitoring service quality was established under the project. ECG has recently begun to systematically collect statistics on outages and, while the data appear to be incomplete and inconsistent in some respects, they tend to portray a none too happy picture, as can be seen from the 1993 results for Accra, summarized in Table 3. The statistics include planned (for maintenance, etc.) as well as unplanned outages, but even allowing for this (the bulk of the outages are said to be unplanned), the fact that number of hours lost per consumer per month ranges from two, which is probably acceptable in Ghana, to ten hours, which is clearly excessive, seems to confirm the general impression that much more needs to be done to raise reliability. 8 Table 3. OUTAGES IN ACCRA REGION - 1993 (quarterly averages) No. Consumers Hours Lost Per No. Outages Affected Consumer per Month January - March 587 259,213 2.18 April - June 638 135,691 4.59 July - September 687 231,880 2.71 October - December 549 394,530 9.66 Source: ECG. 3.8 The evidence for the impact of the project in improving the efficiency of ECG's operations is much more clear cut. It seems to have been virtually nil, judging by the persistently high level of losses in the system. As Table 4 shows, after declining somewhat in 1988-89, total losses returned to the 20% level, near which they remain today. While about half of the system losses are reported to be of the non- technical variety, on which physical system rehabilitation could have little, if any, impact, the fact that there is as yet no sign of any significant reduction in technical losses indicates that the project did not succeed in accomplishing even the modicum of improvement in efficiency that might have been expected. Table 4. DISTRIBUTION SYSTEM LOSSES (bulk supply purchases minus retail sales) GWh Per Cent 1987 272 21.5 1988 223 16.9 1989 256 17.5 1990 314 20.1 1991 351 20.0 1992 388 19.2 1993 433 18.9 Source: ECG. 3.9 The principal factors inhibiting the impact of the project on system reliability and efficiency appears to have been very rapid load growth. During 1986-93, ECG's sales rose at an average annual 9 rate of some 10% per year as the result of an increase of more than 50% in the number of customers connected to the system and a 20% increase in sales per customer. The growth of the load, which was so much more rapid than foreseen at the time of appraisal, meant that the completion of rehabilitation works provided only a short respite, if any, before the system became over-loaded once again. Thus, 1988-89, when the project works were being completed but before accelerating load growth put the system under pressure again, are said to be the years when system reliability was better than at any time before or since, and the loss data show these to have been the years in which efficiency was most improved. Ironically, it was the initial success of the project in improving reliability that, by unleashing suppressed demand, prevented the project from having a sustained impact on the quality and efficiency of the distribution system. 3.10 Credit 1759 met its objectives of providing the north with a reliable connection to the grid and of upgrading and expanding the distribution network in the region so as to provide increased access and more efficient operation. The transmission extension has operated efficiently without any of the stability problems feared in a long, lightly loaded line. The load in the north today is nearly eight times larger than it was in 1987, and approximately in line with appraisal forecasts, as Table 5 shows. During the same period the number of customers rose from less than 18, 000 to more than 41, 000. There is no comparison between the part-time, unreliable service in the region when it had to depend on diesels and the quality of service available today. While VRA apparently collects no data on outages or voltage reductions in the north, it advised the mission that the frequency of outages was "low" and that voltage regulation is "good". Moreover, VRA seems to be succeeding in improving efficiency in the northern system, where it reports having reduced losses to about 14% by 1994. 3.11 The only flaw in the picture is that its distribution operations in the north are a financial burden on VRA since, owing to the maintenance of a uniform national tariff, revenues do not cover the cost of its operations there. However, VRA has succeeded in steadily reducing its losses in the north to the point where they do not appear to threaten the sustainability of its operations there. Table 5. NORTHERN ELECTRICITY DEPARTMENT Total Loan (GWh) SAR Actual Customers 1987 18 13 17,940 1990 73 66 24,314 1991 115 93 28, 112 1992 125 131 33,282 1993 136 143 41,548 Source: SAR; VRA for actual data. 10 Performance Factors 3.12 The expeditious implementation of the project works, and the results achieved, could not have been anticipated with any confidence given the negatives involved--a sector in disarray, a disorganized and demoralized distribution company and a first class generation and transmission utility assigned to tackle a difficult distribution task for the first time. On the other hand, underlying country and sector factors were favorable, as the high priority accorded both projects by the government as well as the utilities made for firm Ghanaian ownership. However, the success of the projects probably owes most to a combination of project factors. 3.13 Credit 1628 involved straightforward distribution works familiar to ECG and which it had the basic competence to carry out given the necessary resources, direction and technical support. The project was well designed to compensate for ECG's shortcomings by providing that: (i) implementation be in the hands of a project unit that would, in effect, be a self-governing enclave; (ii) there be ample technical assistance and ample authority for the consultants; and (iii) wherever feasible, work be done under turn- key type contracts with the suppliers responsible for installation. Credit 1759 had the advantage of being well designed and thoroughly engineered in the preparation stage, so that work could begin quickly and move ahead expeditiously when funds were ready to flow. Implementation plans also called for vesting responsibility in a project unit in which consultants would play a major role. Moreover, VRA 's cadre of competent engineers and technicians and tradition of independent management enabled it to take over the operation of the northern distribution system from ECG quickly and with a strong hand, and to introduce much needed changes in operational and commercial procedures and practices. 4. INSTITUTION BUILDING EXPERIENCE 4.1 Institutionally, the most striking feature of the power sector in the mid-eighties was the sharp dichotomy between VRA, which functioned as a model utility, autonomous and efficient, and ECG, which was anything but. While VRA was well organized, tightly managed, efficiently operated and in good financial condition, ECG was poorly organized, weakly led, had an over-sized and under-qualified staff, and was frequently unable to afford even gasoline for its maintenance vehicles. This dichotomy is often traced to VRA's privileged origins and existence, and there is much to this. VRA has always enjoyed a special place in the national psyche and power structure because of its origins, not long after Ghana achieved independence, as implementing agency for the country's most important project, the development of the Volta River basin. This special position was reinforced by VRA's association with foreign investors and utilities and with the World Bank, associations which also gave it a strong commercial orientation, and a degree of autonomy, from the beginning. Moreover, while VRA may not have been born with a silver spoon in its mouth, it certainly has had a very valuable aluminum one. In enclave fashion, it retains the foreign exchange it earns from its exports of power to the VALCO aluminum smelter (and to neighboring countries), and nothing has done more to bolster VRA's autonomy than the control it has thus had over the resources needed for its development. 4.2 ECG had much more humble origins as the government's electricity department, and has had difficulty becoming much more. It long tended to regard its task more as a government service than a commercial undertaking and it suffered from much the same bloat and inefficiency as the rest of the public sector. Moreover, while VRA, as a bulk supplier, has had to sell chiefly to a handful of large, prompt-paying export customers, ECG has had the much more challenging task of delivering electricity 11 efficiently to a large and diverse domestic market and of earning sufficient revenue thereby to maintain and develop its facilities. Be this as it may, ECG was the perennial weak sister of the two and its weakness has been the sector's major institutional problem. 4.3 This section will examine the various approaches taken to dealing with "the ECG problem" under Credit 1628, the results achieved and their sustainability. Approaches Taken 4.4 Institution-building experience under the project can be divided into three phases: (i) an initial phase in which the focus was on "sector organization"; (ii) a second, brief phase in which the management of ECG was effectively handed over to the consultants; and (iii) a final phase when the effort to rehabilitate ECG took more normal forms. 4.5 Concern with "Sector organization" was mainly a euphemism for the idea of merging ECG into VRA. Such a merger had long been sought by Bank' on the grounds that a takeover of ECG by VRA would result in its being made over in VRA's image and, as already noted, the consultants were specifically enjoined to study the merits of the merger. In July, 1985 they submitted a report duly recommending the merger. It described ECG as a ".company whose problems have become too much for it..." , and underscored the advantages to the sector of having ECG and VRA pool their human and material resources and of utilizing VRA's proven management strengths'. It soon became evident, however, that no one, not even the Bank, was prepared to support the consultant's recommendation. ECG naturally wished to maintain its independence and argued that its problems mainly stemmed from lack of resources. However, the stiffest opposition came from VRA, which feared that ECG's operational, financial and staffing problems might prove too much for it, and VRA views strongly influenced the attitudes of the Bank and the government. Bank staff who had promoted the merger were gone from the scene and those currently responsible came to share VRA's fear that ECG might prove indigestible. The government took a similar view and, when it declared that it would not pursue the merger as an immediate objective, the Bank concurred. 4.6 Even with the advantage of hindsight, it is difficult to say whether this episode represents a disaster averted or an opportunity foregone. The merger idea reflected the Bank's policy in the seventies and early eighties of promoting the establishment of integrated utilities so that fuller advantage could be taken of the limited resources available to the sector in the smaller African countries. However, the case the consultant's made out for following this course in Ghana was not a compelling one, and they made little effort to examine other institutional options for dealing with the ECG problem. On balance, it is probably best to accept the judgment of those on the ground in Ghana that the risks of the proposed merger outweighed the likely benefits. 4.7 The period of consultant management of ECG came about as the result of the government's decision, following its rejection of the merger approach, to take drastic action to provide ECG with competent management and to begin the process of institutional restructuring. In November 1986, it removed ECG's top management and put members of the consultant team into the key executive positions In the earliest documents in the project file, dating from 1981, such a merger is treated as a primary project objective. ESB, Study of Power Sector Organization and Management in Ghana, July, 1985. 12 of Acting Managing Director and Director of Operations until suitable Ghanaian replacements could be found. It also took the important corollary action of appointing a strong Board of Directors (ECG previously had none) to oversee and work with the consultants. During this period, order was restored to the day-to-day management of the company, and long-term programs were begun to resolve its organizational, operating, and staffing problems. This phase ended in December, 1987 when a Ghanaian Managing Director was appointed. 4.8 While no executive role for the consultants had been contemplated in the project, growing government and Bank concern about ECG, and especially about its continued financial deterioration, led to the decision to put them in charge. It was apparently foreshadowed by discussions at the consultant home office in mid-1986, when their diagnostic findings and main reform recommendations were being reviewed, which produced an informal consensus between the government, the consultants and the Bank on the action necessary to meet ECG's most urgent needs and to clear the way for reform. Be this as it may, the government's decision to put the consultants in charge supplied a critically needed initial boost to the institution building effort. It not only provided ECG with new and competent leadership devoted to reform in the only way this could quickly be done, but served to signal the beginning of a new order to the company's staff, and to the public. 4.9 The final phase, which lasted for about three years, saw institution building back on the more normal track foreseen in the project, with the results discussed below. Achievements 4.10 Looked at in terms of specific achievements in the project period, the results of the institution building effort were none too impressive. While limited progress was made in the areas of organizational improvement, accounting, staffing and training, in other areas, and particularly the critical one of commercial operations, the results were distinctly disappointing. Thus, in July, 1989 the SAR for the next credit to ECG, for the Power V project, used much the same language as that for Credit 1628 in describing the institution as one that".... has suffered from ineffective management and has failed to establish itself as an autonomous and effective utility"'. While this was a fair enough judgment at the time, from today's vantage point Credit 1628 can be seen as the first stage in a continuing institution building process, carried on through Power V and more recent projects, that has worked a considerable transformation in ECG. Most observers in Ghana and in the Bank who have viewed the process over the long run agree that ECG today "bears no resemblance" to ECG as it was when the project began. While it still has its weak points, it is now a much better organized, managed and performing institution that is providing improved service to many more customers with a much reduced staff. 4.11 Organizational restructuring was given early priority because ECG's over-centralized and cumbersome structure posed a major obstacle to effective management and to the introduction of reforms in other areas. Seventeen top managers, including the directors of the ten operating regions, reported directly to the Managing Director, who held a virtual monopoly on decision making. The new organization plan, which was put in place beginning in 1987, aimed to decentralize the organization, disperse decision making authority and effectively regionalize day-to-day operations. The number of directors reporting to the Managing Director was reduced to six, mainly through the creation of the new 9 SAR, Power V, para. 1.06. 13 post of Operations Director with responsibility for oversight of the regions. Procedures were introduced that gave greater authority to the department directors and their subordinates, and to the regions. The number of regions was cut to seven and their organization, practices and procedures were streamlined in a process that, largely owing to the scarcity of qualified staff, proved to be the most difficult and time consuming aspect of the reorganization. 4.12 After the initial teething problems were overcome, the new organization began to function much more smoothly and efficiently than the old and to prove its worth in facilitating decision-making and making possible more effective management at all levels. Indeed, the basic organization structure introduced under Credit 1628 remained virtually unchanged until the creation, in early 1994, of a Customer Service Directorate responsible for all commercial and related operations. 4.13 ECG's accounts and financial practices and procedures also received early attention since in the absence of current and credible accounts no progress could be made in improving budgetary and other financial controls. New accounting systems were introduced, qualified accountants recruited and training in the new systems provided for all concerned staff. A new, independent Audit Directorate was established under the reorganization and staffed and made effective in relatively short order. The result was that, for the first time in many years, ECG was able to prepare its 1987 accounts promptly and publish them without extensive qualification by its external auditors. The accounting improvements also made it possible for ECG to prepare in 1988 something else it had long lacked and badly needed, a realistic annual budget. With its accounts in order, ECG was also able in 1988 to prepare a medium-term corporate plan, its first and the first acceptable corporate plan submitted under the public enterprise reform program launched as part of the structural adjustment effort. 4.14 ECG's principal staffing problems were the not unusual ones of substantial over-staffing in the unskilled ranks and a shortage of skilled staff with adequate qualifications. The overstaffing problem was dealt with primarily by not replacing staff leaving for reasons of normal attrition; by offering early retirement, improved severance pay and other benefits to induce additional staff to leave, and through an effort to identify and show the door to poor performers. A staff reduction program with annual targets was adopted as part of the 1988 Corporate Plan and has been adhered to quite closely, as Table 5 shows. By the end of 1990 total staff had been cut by some 19% and a further 8.5% reduction was made by 1993. Since the number of customers connected to the ECG system also rose sharply during this period, the customer/staff ratio more than doubled by 1993 to 134 customers for each staff member, a level which seems reasonable in Ghana's circumstances. 14 Table 6. ECG - PLANNED AND ACTUAL STAFF REDUCTION Plan Actual Customer/Staff 1987 3812 3812 64 1988 3660 3639 75 1989 3210 3190 90 1990 3040 3105 98 1991 2940 2845 114 1992 2860 2887 124 1993 2880 2845 134 Source: ECG. 4.15 The skills problem was approached through intensified recruiting and a major overhaul and expansion of ECG's training program. The recruitment effort initially focused on finding high quality candidates for Managing Director and for the directors of Finance and Audit. This process, in which the Bank and the consultants assisted, proved more difficult and time consuming than had been hoped but the three key positions were eventually filled with experienced managers from outside the corporation who proved both highly capable and fully supportive of the reform program. ECG's efforts to recruit first class candidates for entry and mid-level technician and professional positions also proceeded slowly but began to bear fruit as its image changed from that of a dying organization to one that was on the way back and offered attractive opportunities. Today, ECG's managers report that they have no difficulty attracting well qualified recruits in all areas, with the possible exception of finance. 4.16 Prior to the project, training was available to ECG's professional staff only on an ad hoc, hit or miss basis; training programs for technician level staff appear to have been virtually abandoned; and work on the construction of a new training college at Tema had ground to a halt. Under the project, training needs were identified, the Tema facility was completed and equipped, an experienced expatriate was hired to direct the college for two years and develop its program, trainers were trained, and expatriate experts brought in on a short-term basis to teach special subjects. This provided ECG with a modern training facility at which technician skills were upgraded to meet project requirements and which has since functioned well in providing new recruits with technical training and in providing advanced training to more experienced technicians. 4.17 The project appears to have been less successful with respect to the training of professional staff. This was mainly pursued by sending the new directors and other top managers and high level professionals to the consultant's home office where they participated in the utility's regular executive training courses or in special courses designed to meet their particular needs. Participants agree that this 15 provided valuable exposure to modern utility practice but opinions differ on how relevant the experience proved to be in the very different circumstances they faced in Ghana. 4.18 One of ECG's most serious institutional weakness lay in the management of commercial operations. Metering, billing and collection were all pretty much of a shambles. Many connections were unmetered either because they were informal or illegal or because of broken meters; bills were routinely at least six months late and frequently wildly incorrect, thus undermining customer confidence in the credibility of the system; and, partly for this reason, payment of electricity bills had come to be regarded as something not to be taken seriously, especially by ECG's residential and public sector customers. Under the project, a large number of new meters were installed and measures were taken to strengthen the supervision of meter readers, to expedite billing and increase its accuracy and to mount a "disconnection campaign" to enforce collections. Much of the effort was focused on the regions, where task forces were established to coordinate action. 4.19 Progress was painfully slow. Monthly billings rose slowly but collections continued to lag, falling well short of agreed targets. As a result, ECG's receivables continued to rise until 1990 (except when large amounts were written off as "uncollectible"), by which time collections had finally begun to improve sufficiently to stabilize and then reduce the level of receivables. However, most of the improvement seems to have come from prompter payment by ECG's relatively few, large customers; its residential customers and other small consumers are still some 10 months in arrears, indicating that ECG still has a long way to go in improving collections. 4.20 The project's shortcomings in improving ECG's commercial operations stem in large part from a failure to get to the heart of the billing problem, to political sensitivities, and to inadequacies in the collection effort that blunted its impact on consumer psychology. The approach taken to billing under the project was to optimize the performance of ECG's existing computerized billing system through various upgrades, adjustments and fine tuning measures. While this probably seemed the only way to get quick results and the wisest course at the time, working within the confines of the existing system limited the pace and extent of what could be accomplished and served to delay until recently the decision to install a new, modern billing system. Insofar as collections were concerned, ECG did not have full power to wield the ultimate sanction of disconnection, or did not know or particularly care to find out what power it did have. Public agencies providing essential services (e.g., water supply, medical care, telecommunications) were clearly off limits, while in the few instances in which ECG sought to disconnect commercial customers in the public sector, the relevant ministries usually made their displeasure abundantly clear. Disconnecting the homes and shops of small consumers is always a sensitive subject and, while ECG gradually stepped up the campaign, its efforts in particular regions tended to take on a stop and go character coinciding with the presence or absence of task force activity. The combination of continued late and faulty billing and only intermittent pressure of disconnection made ECG's collection effort less effective than it should have been in convincing customers that the corporation meant business. 5. FINANCIAL STRENGTHENING 5.1 It was recognized from the outset that strengthening the financial underpinnings of the sector was at least as urgent as restructuring its organization and management. Here, too, ECG was the prime cause for concern. While looked at in terms of the rate of return and other of the usual financial 16 indicators, ECG might have seemed to be managing to get by in the early eighties, its receivables were rising rapidly as billing and collection deteriorated, it had been forced to drastically reduce its maintenance and investment expenditures, was falling farther and farther behind on its payments to VRA and was increasingly looking to the government to cover its debt repayments. VRA's finances were intrinsically stronger but it had suffered badly during the drought, which had drastically cut into its export sales, and was struggling to deal with the loss of domestic revenue resulting from ECG's growing payment arrears. Credit 1628 recognized the need for urgent action and, while maintaining an element of the old reliance on rate of return, directly targeted with covenants the three areas most critical to the sector's financial health--tariffs and ECG's growing customer receivables and mounting arrears to VRA. 5.2 Unfortunately, performance fell well short of the financial targets set and agreements reached. None of the covenants in the three critical areas was complied with fully or promptly, with the result that the financial projections on which the project was based soon proved optimistic, ECG's financial situation continued to worsen and new solutions and new targets had to be worked out in the context of later projects. This disappointing experience seems to stem, in part, from a reliance on covenants that set targets without adequate modus operandi for their achievement. However, it also reflects the depth and intricacy of the sector's financial problems and the lack of sufficient will on all sides to deal with them (on the part of the government, to keep putting up tariffs; on ECG's, to maintain pressure on collections and on the Bank's, to enforce the covenants). Indeed, while some progress has been made on all fronts subsequent to the projects, tariffs, receivables and arrears remain today at the heart of Bank's concerns about sector finances. Earnings 5.3 Prior to Credit 1628, the Bank had used the traditional rate of return covenant to set the standard for earnings performance. VRA had been required to earn 7.3% but in 1984 its rate of return fell to 3.0% and, while in that year ECG was estimated to have earned well in excess of its required 6.2% return, this was not very meaningful since ECG's accounts were highly suspect and its assets had not been properly revalued for some time. Pending the revaluation of assets under the forthcoming tariff study (see below), it was agreed that the rate of return covenant would be replaced by one requiring that VRA's and ECG's tariffs be maintained at the level agreed for January 1986, or be sufficient to enable the utilities to finance internally 25% of their investment requirements, whichever was higher. While adopted as a stopgap measure, this was the covenant that effectively set the earnings test that ECG was supposed to meet for the next three years. 5.4 ECG appears to have met the test in 1986, when the tariff increase gave it a positive cash flow and investment expenditures were still very low"o. In 1987, however, ECG's investment rose sharply as project implementation began in earnest while its internal earnings turned negative, with the result that it was unable to comply with the covenant. A substantial tariff increase made possible a return to compliance in 1988. Since this record indicated that the earnings covenant in its contribution-to- investment form was ineffectual (or at least effective only in good years), and ECG 's assets had by then been revalued, a standard rate of return covenant, requiring ECG to progressively raise its return to 8% by 1991 was reinstated under Power V in 1989. As Table 7 indicates, this has proved no more effective than its predecessor, since ECG achieved the stipulated rate of return only in the first year and failed to do so in 1990-92. 10 This subject is not dealt with in the PCR and the audit mission was unable to obtain historical data from ECG. 17 5.5 The Credit 1628 earnings covenant was never really relevant for VRA, which had always been able to make a very large contribution to meeting its investment requirements. In any case, it was applicable for only one year, being replaced under Credit 1759 in 1987 with a standard 8% rate of return covenant with which VRA was able to comply until 1992, when tariffs were not increased in real terms. Table 7. REQUIRED AND ACTUAL RATES OF RETURN ECG VRA Required Actual Required Actual 1984 6.2 22.1 7.3 3.0 1985 6.2 NA 7.3 5.8 1986 NA NA NA 6.6 1987 NA -39.2 8.0 6.7 1988 NA 6.6 8.0 9.1 1989 6.0 9.5 8.0 11.2 1990 7.0 0.7 8.0 9.9 1991 8.0 5,7 8.0 8.3 1992 8.0 6.lest. 8.0 6.7 Source: Bank documents. Tariffs 5.6 Tariffs were a much more central concern of Credit 1628. The SAR called attention to the fact that VRA's bulk tariff appeared to be far below LRMC and that ECG charged its customers much less than was paid for electricity in any of the neighboring countries, and emphasized the need to rationalize the tariff structure and adjustment mechanism. To this end, agreement was reached that: -- a tariff study would be carried out; and -- after completion of the study, but no later than June 30, 1986, agreement would be reached with IDA on: (i) financial objectives and earnings requirements for ECG and VRA; and (ii) criteria and a schedule for adjusting tariffs. 5.7 This schedule was not adhered to and the substantive provisions were not fully carried out. Launching of the study was delayed by the need, presumably owing to the political sensitivity of the subject, to obtain approval at the highest level of the government for the selection of the consultants and for the actual beginning of work. This was not granted until September, 1986, with the result that meaningful agreement on financial objectives and tariffs had to be put off correspondingly since, the provisions of the covenant notwithstanding, there was no way such agreement could be reached absent 18 the study's findings. However, the consultants worked quickly and completed the final draft of their report by March, 1987. It confirmed that tariffs were well below LRMC; found that restoring ECG to financial health would, inter alia, require that it meet demanding rate of return and cash flow goals; and recommended sweeping changes in the tariff structure, as well as a series of stiff tariff increases over the next several years to reach LRMC. 5.8 In May, 1987, nearly a year after the covenant deadline, the government announced its agreement to a set of financial objectives that embodied, in principle, much of what was recommended in the study. It declared that it would accept LRMC as the goal of tariff policy, make the recommended changes in the tariff structure and begin in 1988 to phase in tariff increases that would enable ECG and VRA to earn an 8% rate of return on revalued assets. While large tariff increase were, in fact, granted in 1988, the government soon made clear that it was less than enthusiastic about continuing along the course laid out in the tariff study. It indicated that it continued to be troubled by some technical questions and began to press for another tariff study (eventually undertaken with CIDA financing). More important, as Table 8 shows, tariff increases lagged again after 1988 with the result that, by 1990, ECG's average revenue per kWh, in real terms, was actually lower than in 1985, and this remained the case until 1992, when another large tariff increase was granted. Moreover, the large gap between tariffs and LRMC persists. It is estimated that in 1991 most tariffs were equivalent to only 20-33% of LRMC and while this gap was narrowed somewhat by the substantial tariff increases granted in 1992-93, it remains very large indeed''. Table 8. TARIFFS - AVERAGE REVENUE/KWH VRA ECG current cedi 1985 cedi current cedi 1985 cedi 1985 1.1 1.1 2.5 2.5 1986 2.0 1.6 4.2 3.3 1987 2.7 1.5 5.3 3.0 1988 4.4 1.9 7.2 3.1 1990 7.1 1.8 8.6 2.2 1991 8.3 1.8 10.1 2.2 1992 9.2 1.8 17.1 3.3 Source: Bank documents. 5.9 Tariff policy has thus continued to be conducted on very much of a stop/go basis, with the government granting significant increases in "good years" in response to the urgings of the Bank or the financial plight of the utilities, but slacking off in other years when it has felt less pressed and/or when 1 Energy Sector Review, December, 1993, Tables 2.2 and 2.2a. 19 other considerations have been paramount. As a result, tariffs are still inadequate to provide the utilities with the earnings they need, or to provide consumers with correct signals about the economic cost of the electricity they consume. ECG Receivables 5.10 Tariffs were not the only factor retarding ECG's earnings. As already discussed, it had serious metering, billing and collection problems resulting in a high and rising level of receivables. As can be seen from Table 9, by the end of 1985 receivables had risen to a level equivalent to 14 months' billings, and billings were lagging badly. Large public sector accounts were overdue, but an estimated 70-75% of ECG's receivables were owed by private customers. To deal with the problem, Credit 1628 contained covenants requiring that: -- ECG reduce its receivables to no more than 4 months' billings by December 31, 1986 and to 3 months' billings by December 31, 1987; and -- overdue public sector bills for services rendered by ECG be settled by December 31, 1986. Table 9. ECG RECEIVABLES (months' billings) Required Actual 1984 NA 13.0 1985 NA 14.1 1986 4.0 15.5 1987 3.0 8.0 1988 3.0 9.9 1989 4.8 5.1 1990 4.2 5.2 1991 3.4 4.7 1992 2.6 3.7 Source: Bank documents. 5.11 These covenants, too, were not complied with. ECG's receivables actually continued to mount rapidly in 1986, reaching by the end of the year the equivalent of nearly 16 months' billings, or almost four times the agreed level. While this was primarily the result of ECG's loss of control over billings and collections under its old management, it also reflected the fact that customers were reacting 20 to being asked to pay sharply higher tariffs for still deteriorating service by further delaying their payments--i.e., that the efforts under the project to increase tariffs and to improve collections were working at cross purposes. In 1987, with ECG under new management, only modest tariff increases, and the help of a partial write-off, receivables were sharply reduced. Receivables were, however, still well above the target level agreed in the covenant and began to rise again in 1988. Thus, the receivables problem had to be passed on to Power V, where it was dealt with by the establishment of a new mechanism for settling intra-governmental debts, by a major write-off, and by establishing revised targets which, while higher than under Credit 1628, called for the progressive reduction of receivables to less than 3 months' billings by 1992. While receivables have continued to come down, this target was not reached. VRA Arrears 5.12 ECG reacted to not being promptly paid by its customers by going into arrears on the payments due its supplier, VRA, and the government, its creditor under subsidiary loan agreements. By 1985 arrears to VRA had risen to the equivalent of 6 months' billings, and were threatening to undermine its finances. Credit 1628 sought to deal with this problem through a covenant requiring that overdue bills for services to ECG be settled by December 31, 1986. However, the worsening of ECG's financial performance during 1986 meant there was no way it could comply with the covenant and this became a major obstacle to Bank approval of Credit 1759. The Bank's management made the settlement of the arrears a condition of board presentation, a condition the region satisfied by securing government agreement to a plan under which ECG would pay off the arrears by June 30, 1987. Unfortunately, the plan was based on the assumption that ECG 's collections could be improved dramatically during the first half of 1987. Whatever their views may have been earlier on, both ECG and the government wrote to the Bank early in the year expressing grave doubts about the realism of the plan, and their skepticism proved well founded. Collections never approached the target level during the plan period, or for some time thereafter, and the new deadline for settling the arrears proved no more meaningful than the former one. 5.13 The arrears problem also had to be passed on to Power V, but by that time it was realized that it could be resolved only in the context of a broad restructuring of ECG's capital and the creation of a mechanism to settle intra-governmental debts in the power sector. As part of the restructuring, the government's overdue payments to ECG were written off against a portion of the government's claims (totaling some U$65 million) on ECG for non-payment of debt service, the bulk of which were converted to equity. VRA also had to bear some of the burden of restoring ECG's finances. It had to relinquish its claims on ECG for half of the arrears (about U$8 million) and accept repayment of the balance over ten years. To prevent a recurrence of the problems of arrears at VRA and of public sector receivables at ECG, a clearing house mechanism was established under which ECG's, VRA's and the government's current claims on each other for electricity supplies and debt service would be offset and the net balances settled on a monthly basis. This mechanism worked well until the end of 1992 when the government was unable to meet its obligations to the clearing house, which were substantially increased during the year by the very large tariff increase granted ECG. This left VRA, always a net creditor in the clearing house, holding the bag. While some progress was made in 1993 in settling outstanding obligations, as required under the National Electrification Project, VRA was still owed a substantial sum as of January, 199412 12 ECG seems to have kept current through the clearing house on its debt service obligations to the government under subsidiary loan agreements, except that it did not begin repayments under Credit 1628 in 1992-93 as scheduled. ECG reports that the government agreed to extend the original grace period from five to ten years, in apparent violation of the Project Agreement. 21 6. TECHNICAL ASSISTANCE EFFECTIVENESS 6.1 Technical assistance was an important element in both projects, but played a particularly critical role in Credit 1628. Broadly speaking it was most effective in project implementation, less effective in institution building, and least effective with regard to sector organization and finance. This section examines the principal factors contributing to the effectiveness of technical assistance in each of these areas. Project Implementation 6.2 That ECG, a weak institution in the throes of restructuring for much of the time, was able to implement the physical components of Credit 1628 so well is testimony to the exceptional effectiveness of the technical assistance provided for this purpose. The consultants were able to function so effectively largely because they had the necessary authority, capability and back-up. While the project unit was responsible, de jure, to ECG's Director of Engineering, it was located in its own quarters, had its own staff, and was managed, de facto, by a consultant serving as Project Director who had another consultant engineer as his second in command for much of the time. They were primarily responsible for the preparation of bid documents, for tender awards and for the supervision of construction. The consultants' effectiveness in these roles was enhanced by the appointment of a Project Director who was not only an experienced engineer, and a good manager, but already thoroughly familiar with the distribution system as the result of his participation in the initial survey the consultants had carried out to update information on the condition of the system. Finally, the fact that, for the first year, the consultants were not only managing the project, but ECG as well, ensured that the project unit had the full backing of the rest of the organization. 6.3 The consultants played a much less up-front, but nonetheless important, role in the implementation of Credit 1759. For one thing, VRA's technical and managerial capabilities were much greater than ECG's and the project unit functioned much more as a line unit in its organization than as a separate entity. For another, the principal consultants were able to function effectively without being in the driver's seat because they had a long and successful relationship with VRA as a result of which their advice was given and received with respect and understanding. The consultants were thus able to provide essential managerial as well as technical support for project implementation. VRA's experience in selecting and working with consultants also enabled it to make good use of technical assistance in designing and supervising of the distribution work in the north where, in view of its own lack of experience, it retained specialist consultants. Institution Building 6.4 Technical assistance deserves much of the credit for what was accomplished under Credit 1628 in the areas of organizational restructuring, financial management, reduction of overstaffing and training. That technical assistance was as effective as it was in these areas owes much both to the unique opportunity that was opened up when the consultants were put in charge of ECG in 1987, and to the deft manner in which this opportunity was handled. All who were involved in this experience agree that giving the consultants management authority was the critical factor that enabled them to quickly arrest the deterioration in ECG and launch the reform process. However, this was an opportunity that had to be carefully managed, especially if the consultants were not to be perceived as working for themselves, or working alone. The appointment of a board of directors with a strong and politically well-connected chairman was thus important in establishing accountability and in providing a channel of communication with the government. The Acting Managing Director developed a close working relationship not only 22 with the board chairman, but also with the leader of the ECG workers' union. The latter relationship helped to provide additional internal support and political cover for the overall reform program, and was particularly important in smoothing the way for the implementation of the program to reduce overstaffing. 6.5 While the consultants' own efforts were commendable, the active involvement of the borrower and the Bank was instrumental in shaping the restructuring process. The consultants' diagnosis of ECG's ills and principal recommendations were intensively reviewed in joint meetings that helped to prioritize their findings and translate them into concrete action plans. For example, while the principles underlying the consultants proposals for reorganizing ECG were followed, their specific suggestions were extensively reworked with the result that the new organization scheme adopted bore little resemblance to the consultants' original plan. 6.6 In the area of commercial operations, where technical assistance had the least institution building impact, the reasons seem to have been a compound of lack of resources and insufficient conviction. Assistance in billing and collections was provided largely on a trouble-shooting basis by consultants on short-term assignment and, even when the need became evident, ECG was reportedly reluctant to expand the ESB contract to include another long-term consultancy which would have made possible the same continuous, full-time attention to commercial operations that was provided for project implementation, operations and the managing directorship. That ECG, which traditionally accorded low priority to commercial matters, would take such an attitude is less surprising than that the consultants, too, tended to accord it insufficient priority. They seemed to feel that ECG's financial problems stemmed mainly from having to pay an "excessive", bulk tariff and that increased collections would mainly benefit VRA. Sector Issues 6.7 Technical assistance in dealing with sector issues came in the form of the Sector Organization and Tariff studies already discussed. The sector organization study had no impact because it was, for all practical purposes, dead on arrival. Even if the study had been received with open minds, it probably would have proved unproductive since it failed to make a cogent case for the merger of VRA and ECG. Also, it may have solidified the status quo as the only alternative by failing to examine the options to an all out merger. However, it is unlikely that even the best of studies could have softened the views of VRA, whose opposition doomed any ideas of sector reorganization. 6.8 The Tariff Study was, in the short run, a much more productive exercise because, although it dealt with a difficult and sensitive subject, the subject was one on which the government recognized the need for action and which the Bank was determined to pursue. The quality of the analysis also helped. The application of LRMC principles to the situation in Ghana at a time when no need for additional capacity was foreseen for many years, posed difficult technical issues, and the consultant's approach raised many questions. However, careful review vindicated their approach on most analytical points although certain of the initial policy recommendations (e.g., for a 12% rate of return) had to be substantially revised. The Tariff Study not only provided a good basis for the immediate decisions that had to be taken on financial objectives and tariff adjustments, but also contributed to the sector dialogue by recommending other measures that were soon adopted--to restructure ECG's capital and reschedule its debts and for the formulation of a medium-term corporate plan that would contain financial and other performance targets agreed with the government. 23 7. COFINANCING Cofinancing Contribution 7.1 Cofinancing was a significant element in the financing plan for Credit 1628, and of overwhelming importance to the financing of Credit 1759. In the former project, one donor, (Italy) was expected to provide U$10 million, or about one-quarter of the total foreign exchange cost; in the latter one, five donors, (AfDB, EIB, CDC, CIDA and Japan X-M) were to provide some U$88 million, or more than 85% of foreign exchange requirements. These expectations were exceeded during implementation when more cofinancing became available from more donors than originally anticipated. ODA provided a grant to finance one of the original components of Credit 1628, and the Saudi and Kuwait funds joined the other financiers of Credit 1759 providing, together, some U$16 million in additional funding. While there was nothing special about the cofinancing for Credit 1628, reflecting as it did the interest of Italian suppliers in one of the original VRA components and ODA's traditional involvement in Ghana, the cofinancing of Credit 1759 was exceptional in its amount and diversity. 7.2 VRA's institutional credibility and financial creditworthiness, the presence of the Bank, and Ghana's strenuous structural adjustment efforts, probably in that order, seem to have been the main factors behind the exceptional interest of cofinanciers in Credit 1759. In addition to its reputation as a model utility, VRA had developed strong ties with AfDB and other cofinanciers who had participated in previous projects and were closely involved in the preparation of this one. Moreover, VRA was regarded as a prime borrower because of its export earnings and the semi-enclave status which enabled it to retain them to meet its debt service and other foreign exchange requirements. This was a major consideration for many cofinanciers who, although wishing to support Ghana's structural adjustment efforts, were very much concerned about the country's creditworthiness. 7.3 So much cofinancing was raised that only minimal IDA financing was required and this mainly to maintain the Bank's presence, rather than to complete the financing plan. In view of the attractions of the project and the sums involved, it is likely that the cofinancing of Credit 1759 attracted funds that would not otherwise have been available to Ghana. The case for additionality seems clearest, but is by no means limited to, the contributions of the Saudi and Kuwait funds, for which the attraction of supporting rural electrification in the north were strong enough to overcome a general reluctance to lend for power. It also seems likely that the successful experience under Credit 1759 helped to catalyze cofinancing for later VRA and ECG projects, all of which have benefitted from significant contributions by a variety of cofinanciers. Mobilizing Cofinancing 7.4 The Bank and VRA did much to realize Credit 1759's cofinancing potential. The Bank played a more important role in providing comfort to the cofinanciers, and in coordinating the assembly of the Cofinancing package, than in enlisting new donors. While Bank staff did visit potential cofinanciers, and were apparently instrumental in bringing the Saudi and Kuwait funds into the fold, the major cofinanciers were already on board when the Bank became active on the scene. However, the presence of the Bank did serve importantly to firm up the cofinanciers' commitment to the project by bolstering their confidence both in the technical and economic soundness of the project and that the sector was in good hands. The SAR played a critical role in this regard, serving as it did as the basic documentation underpinning most cofinanciers' participation in the project. The Bank also made a signal contribution through the diligent efforts of staff to help insure that each donor's special information and 24 other needs were recognized and responded to; that their various legal and other requirements were harmonized insofar as possible; and that all were kept fully informed of the progress of the project. The presence of most of the cofinanciers at negotiations as observers was a particularly useful vehicle for coordination. 7.5 VRA deserves most of the credit for lining up the major donors. It sent missions to make initial soundings of donor interest and followed up with additional documentation and/or further visits where such interest was found. In addition to doing most of the initial leg work, VRA also advanced the mobilization process through its ability to respond quickly to requests for technical and economic data, procurement arrangements, legal opinions, etc. Thus, it is not surprising that VRA managers regard cofinancing as something "they" did and think of the Bank as the cofinancier "that contributed least and demanded most". While not an accurate appreciation of the Bank's role, this can be taken as a compliment to its leverage. Impact on the Project 7.6 The down side of such extensive cofinancing is that it can substantially increase the Bank's loan processing costs and, by increasing project complexity, also lead to costly delays and/or lapses in project implementation. While the cofinancing of Credit 1759 was, indeed, costly in terms of staff time, it seems to have been virtually cost-free otherwise. The cofinancing process did require major additional inputs on the part not only of the project and country officers mainly involved, but of legal and disbursements personnel, and the resident mission. However, given the large sums secured for the project, the rate of return on their efforts must have been truly impressive. 7.7 VRA also deserves much credit for averting any adverse impact on project implementation. VRA reports that having to deal with the differing requirements of a variety of cofinanciers did significantly complicate project administration, especially as regards procurement and disbursement, and greatly increase the volume and complexity of the paper work involved. However, after some initial delays, it found that it could, with some additional management and staff time, and some extra assistance from its consultants, manage to satisfy the cofinanciers and keep the project moving on schedule. 8. BANK AND BORROWER PERFORMANCE 8.1 As is apparent from the foregoing, both the Bank and the borrowers performed well in these projects. The Bank role was very active and, for the most part, very productive. Its performance was a major factor in their successful physical implementation and also contributed importantly to the good start that was made in the institutional rebuilding of ECG. However, while the Bank devoted much time and effort to the strengthening of sector finances, its methods and the results achieved were a good deal less impressive. Similarly, while borrower project management was outstanding, and the government and ECG participated fully in the institution building effort, their performance on the financial side left much to be desired. 8.2 Before reviewing Bank performance in these areas, note should be taken of the apparent absence of any direct links between project performance and what was going on in the macro-economic sphere. While the progress Ghana was making in structural adjustment and the efforts being made in the power sector were, in the main, mutually supportive, the project files contain almost no reference to macro economic developments and virtually no mention of this was made by the Bank and borrower staff 25 interviewed for this audit. Indeed, in the one area where there was apparently some linkage, it appears to have been negative--i.e., a covenant was added to Credit 1759 requiring VRA to build up a debt service contingency fund partly in response to the fear, on project grounds, that support for consolidating the country's foreign exchange on macro economic grounds, could imperil VRA's control over its export sales revenue. Bank Performance 8.3 The Bank contribution to the physical success of the projects was most visible in their initial quality and in the intensity of supervision. Both projects were designed to respond to high priority sector needs, as perceived by both the Bank and the borrowers, and were as well prepared as was possible in the circumstances. The Bank deserves particular credit for its role in shaping Credit 1759, where it was instrumental in expanding the scope of the project to include, in addition to the reinforcement of VRA's existing transmission system, the extension of the grid to the north and the distribution works necessary to realize the benefits of this extension. The Bank's influence was also important in having responsibility for the construction and operation of the distribution works transferred to VRA, since it is doubtful that ECG as it then was could have efficiently implemented this component. Although preparation of the distribution components of both projects was less complete than would have been ideal, as reflected in the need for more extensive and costly work than anticipated, it was probably as good as could have been expected given the disarray in ECG and the lack of reliable information on the status of its distribution system. 8.4 Because of ECG's weakness, close supervision was particularly important to the effective implementation of Credit 1628. It was provided not only through frequent supervision missions in the critical early years, but through regular informal communication at the working level between Bank and borrower staff between missions. Both ECG and VRA managers speak highly of the project staff, and their accessibility and helpfulness, as do the consultants, whose work also benefitted from the close working relationships that were developed. 8.5 After first sending the institution building effort under Credit 1628 up the blind alley of a VRA/ ECG merger, the Bank found the right road and played a very effective role vis-a-vis the government, the borrower, and the consultants. The Bank quickly turned its focus to restructuring ECG and recognized that shock therapy was necessary to begin the process; it seems likely that its views weighed heavily in the government's decision to remove ECG's existing management and put the consultants in charge. The Bank also was consulted about, and assisted in, the recruitment ECG's new Ghanaian managers and was thus able to help ensure that they were well qualified and capable of providing the leadership required in the restructuring process. In addition, the Bank contributed in a major way to the effectiveness of technical assistance through its inputs to the review of the consultants' findings and recommendations, particularly concerning the new organization structure and training program, and its role in formulating concrete action plans in these areas. 8.6 Bank performance in promoting the necessary strengthening of sector finances, particularly as regards the major issues of tariffs, receivables and arrears, was considerably weaker. Its most useful coptribution was probably in maintaining pressure for adequate tariffs, although the Bank remained wedded to the traditional approach of earnings covenants and tariff studies through the course of these projects and well beyond the point at which it should have been evident that tariff policy was not being changed but only made a function of the next Bank loan. Concerning ECG's receivables and arrears to VRA, the targets and deadline established under Credit 1628 were quickly proved as unrealistic as the financial projections on which they were based. However, instead of taking advantage of Credit 1759 26 to develop a more meaningful approach, under apparent lending program pressure the region reacted to the non-compliance with financial covenants by simply shifting the deadline for the settlement of arrears forward to a date that would prove similarly unrealistic. Moreover, the act of shifting deadlines and passing the buck to the next project was regarded in supervision reports as tantamount to satisfaction of the covenant, a practice which tends to deprive supervision reports of the needed cogency and transparency. Borrower Performance 8.7 That ECG and VRA did so well in project management was a product of the high priority they attached to these projects; of their ability to make good use of technical assistance, which was especially important in Credit 1628; and of the technical and managerial competence of VRA in implementing Credit 1759. Success in carrying out Credit 1628 was clearly critical to ECG's survival and VRA regarded Credit 1759 as not only indispensable for the strengthening of its transmission system but as a means of demonstrating its ability to serve Ghana's more remote regions. Thus, project ownership by the utilities was high, and their best efforts were assured. While the consultants played the leading role in managing Credit 1628, they initially had the full backing of ECG's chairman and board of directors and, later, also of the new Ghanaian management. VRA's hand was on the helm in the management of Credit 1759, but it made good use of consultants not only for project implementation but also in developing innovative solutions to technical problems. With its engineering advisor, VRA developed schemes for using variable shunt reactors to counter the stability problems inherent in a long, lightly loaded transmission line such as that involved in the northern grid extension, and for using the transmission line shield wire to deliver electricity to small localities located adjacent to the line. 8.8 Ghanaian ownership, by the government as well as ECG, was even more important in making possible the institutional accomplishments of Credit 1628. The government's willingness to see radical surgery performed on an institution providing an essential public service, and particularly to put it under expatriate management for a time, was a critical element in arresting the deterioration in ECG and beginning the turnaround. Government support was also important in facilitating some of the specific reforms needed in ECG, and particularly for the effort to reduce overstaffing, where it used its influence to facilitate agreement between ECG's management and the union on an effective yet affordable redundancy program. Conversely, lack of full government support helps to explain some of the project's institutional shortcomings. While the Ministry of Fuel and Power appears to have backed ECG all the way in improving collections, other ministries interfered with its efforts to disconnect state enterprises and other agencies that had not paid their bills. 8.9 Borrower performance was weakest on the financial side. As already noted, the final covenants in Credit 1759 with respect to tariffs, receivables and arrears were not complied with, and there was little progress in addressing these issues in the context of the projects. The government recognized the need to administer the tariff medicine to maintain the financial health of the sector but found it politically hard to take on a regular basis both politically and with respect to its budgetary impact. The same factors, politics and the budget, put off meaningful measures to deal with receivables and arrears until Power V, and then worked to undermine these measures in 1992, when an overly late and overly large tariff increase produced electricity bills for the government that it could not pay. 27 9. LESSONS OF EXPERIENCE 9.1 The experience with Credit 1628 and Credit 1759 contains valid and useful lessons concerning borrower ownership, project preparation, supervision, cofinancing, compliance with covenants and a wide variety of other subjects. Many of these lessons are familiar. However, certain aspects of the experience with these projects are worth reviewing at the conclusion of this audit in view of their relevance to the prospects for improving the effectiveness of power lending in Africa. Power Lending in Africa 9.2 These were successful projects and they contain basically hopeful lessons about the prospects for power lending in Africa. In particular, they suggest that: -- weak institutions can produce strong project performance; -- even hard core institutional basket cases can be turned around; and -- strong and independent utilities do exist and are replicable. 9.3 Extracting strong project performance from a weak institution is no mean trick but Credit 1628 demonstrates that it can be done where the right sort of project is brought together with the right type of technical assistance in the right circumstances. The required "best effort" is likely to be forthcoming from a weak institution only where the project, like Credit 1628, is one that, while not too demanding technically or managerially, is clearly of the highest priority for the future of the institution as well as the sector. Technical assistance must be ample and it must assist in covering all of the institution's relevant needs, however humble--i.e., technical assistance must be available for training cable-splicers as well in preparing bid documents. To be effective, such technical assistance must be channeled through a project unit that has full implementation responsibility and in which the consultants have more than advisory authority. Such arrangements may be the only resort where an implementing institution is in extremis, and expeditious implementation is of the highest priority. 9.4 The benefits of such an approach are, of course, likely to be short lived unless it is pursued in parallel with a serious effort to rebuild the institution. Where an institution has deteriorated to the point that ECG had in 1985, little is likely to be accomplished by incrementalism--i.e., a reorganization study here, some accounting changes there, and a smattering of training elsewhere. Rather, what is called for is a comprehensive, across-the-board approach that will produce a complete overhaul of the institution. The experience with Credit 1628 indicates that the initial launch period is critical to the success of such an effort and, in particular, that it must include action to signal a complete break with the past and to provide the institution with new leadership with a firm commitment to change. Those who were involved with the restructuring of ECG are unanimous in believing that the most important thing that happened in the institution was the creation of a new atmosphere in which change was seen to be possible, and that the sudden dismissal of the old management and the bringing in of the consultants was the critical element in this. But while beginning institution building with a bang can help to bring about the all-important initial turnaround in thought and action, Credit 1628 also teaches that it is unrealistic to expect more than slow progress thereafter. 9.5 VRA's success as an institution may, as already discussed, be attributed to a variety of historical and other advantages. Most cannot be emulated in other institutions, but two of the basic 28 ingredients of VRA's institutional strength--its autonomy and strong leadership--can, with difficulty, be replicated. VRA's ability to manage itself and its operations in its best commercial interests rests on its financial autonomy. While few other institutions can be endowed with export earnings and enclave status, most can be provided with a reasonable facsimile in the form of adequate, assured earnings. This cannot be done through earnings covenants, but will require institutional changes such as those contemplated in the Bank's new sector policies (see para. 9.7). 9.6 Strong leadership is likely to prove even harder to come by than autonomy, but VRA's experience provides an indication that three of the most important characteristics to look for are continuity, an affinity for responsibility and political adroitness. VRA has benefitted greatly from the continuity of leadership; it has had only four Chief Executives in its thirty year history while ECG has had many Managing Directors. Secondly, most of VRA's Chief Executives have been strong-minded individuals who have been more than willing to take full responsibility for the company and who have given more guidance to the government than they have got from it. Finally, these Chief Executives have been persons who have realized that the maintenance of good relations with the government and political worlds is a major part of their job, and who have proved adept at swimming in troubled political waters. New Bank Sector Policies 9.7 Experience with the audited projects also appears positive with respect to the case for two of the pillars of the Bank's new power sector lending policies--support for the importation of services and transparent regulation. 9.8 Credit 1628 provides good precedents for the successful importation of services since two important elements of the project, the distribution works and training, were, for all practical purposes, contracted out to the consultants. The achievements in each of these areas, and the fact that ECG cooperated closely in the process, augers well for the Bank's efforts to encourage similar arrangements in Ghana and other countries where institutions are unable to effectively provide services on their own. However, two caveats are in order. One is that the services contracted out under Credit 1628 were not central, line operations of ECG; the other is that the atmosphere in ECG at the time toward the devolution of responsibility to outsiders was exceptionally propitious. It seems doubtful that core operations not as easily hived off from the rest of the organization could have been as successfully contracted out at the time, given the prevailing disarray in ECG. Whether such operations can be successfully contracted out today is about to be tested under the National Electrification Project in which ECG agreed to hire a foreign utility to manage a newly established customer service directorate responsible for all commercial operations. 9.9 Experience under the projects also lends powerful support to the thesis that utilities are unlikely to achieve the financial autonomy they need if they are to operate commercially and be free from government interference unless a transparent regulatory process can be substituted for the prevailing political one. As has been shown, agreed rates of return were not met, and covenanted financial deadlines proved futile, largely as the result of the political sensitivity of tariff adjustments. It is, thus, difficult to be sanguine about the prospects for taking tariffs out of politics. Unless a regulatory process sufficiently "transparent" to accomplish this can be established, the Bank will have to continue pursuing the same financial goals that it pursued in vain under Credit 1628 and Credit 1759. However, more systematic efforts towards nurturing of borrower ownership and consensus building will be necessary to enhance public support for sector policy reform and institutional development. 29 Annex 1 PERFORMANCE AUDIT REPORT GHANA POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GH) PROJECT COSTS AND FINANCING A. Project Cost (US$m) Appraisal Estimatue A_______ tnal__________ Local Foreign Total Local Foreign Total Costs Costs Costs Costs Costs Costs ECG Rehabilitation Generation a/ 0.3 2.5 2.8 0.0 0.0 0.0 Distribution 2.4 8.1 10.5 0.7 21.0 21.7 Vehicles and spares 0.0 4.7 4.7 0.0 4.0 4.0 Technical assistance & training 0.5 2.6 3.1 0.0 6.0 6.0 Office equipment 0.0 0.3 0.3 0.0 0.7 0.7 Housing 0.5 0.2 0.7 0.0 0.1 0.1 VRA Rehabilitation Generation 0.3 1.5 1.8 0.0 2.4 2.4 Substations 1.5 9.7 11.2 0.1 0.0 0.1 Physical contingencies 0.6 3.0 3.6 0.0 0.0 0.0 Price contingencies 1.5 8.1 9.6 0.0 0.0 0.0 Ministry of Fuel and Power Vehicles and Spares Studies Total Cost 7.6 41.2 48.8 0.8 34.9 35.7 B. Financing Appraisal Estimate Actual Local Foreign Total Local FoEEj2 Total IDA 0.0 28.0 28.0 0.0 34.9 34.9 Italy 0.0 10.0 10.0 0.0 0.0 0.0 VRA 2.7 3.2 5.9 0.1 0.0 0.0 ECG 4.9 0.0 4.9 0.7 0.0 0.7 Total 7.6 41.2 48.8 0.8 34.9 35.7 30 Annex 2 PERFORMANCE AUDIT REPORT GHANA NORTHERN GRID EXTENSION PROJECT (CR 1759-GH) PROJECT COSTS AND FINANCING (US$ million) A. Project Costs Appraisal Estimate Actual Transmission 75.7 78.3 Distribution 12.4 34.9 Engineering 7.0 10.2 Miscel. 5.1 0.6 Contingencies 30.3 11.1 Total 130.5 135.1 B. Project Financing Foreign Exchange Plan at Appraisal Actual IDA 6.3 6.9 AfDB 38.3 38.3 CDC/EIB 36.7 37.6 CIDA 7.5 9.8 Japan Ex-Im 5.0 Saudi Fund 4.7 Kuwait Fund 11.6 VRA 7.7 13.0 Sub-total 101.5 121.9 Local Currency VRA 29.0 25.2 Total 130.5 148.1 31 ANNEX 3 Page 1 of 2 BANQUE AFRICAINE DE DEVELOPPEMENT AFRICAN DEVELOPMENT BANK TELEPHONE (+225) 20 44 44 01 B.P. 1387 - ABIDJAN 01 COTE 0IVOIRE TELEX 23717 2220Z 23263 atIew,i~ DATE FAX NO (code 225) ,une 29, 199 a County Programmes North 32 63 73 Infrastructure & Industy Not 48 86 Disbursement Dept. 3262 62 FAX NO. 202-522-3125 TO: MR. YVES ALBOUY FROM: G.YIRGA-HALL CHIEF, INFRASTRUCTURE CHIEF, PUBLIC LUITIES AND ENERGY DIVISION INFRASTRUCTURE AND OPERATIONS EVALUATION INDUSTRY DEPARTMENT DEPARTMENT NORTH REGION SUBJECT: POWER SYSTEM REHABILITATION PROJECT (CREDIT 1628-GHD NORTHERN GRID EXTNSION PROJEC (CREDIT 1759-GH DRAFT PERFORMANCE AUDIT REPORT Reference to your letter dated June 15, 1994 along which you forwarded the above report for our comments. We have examined the above report and found the contents very comprehensive, informative and useful for drawing the lessons learnt in project implementation. We have the following general comments to make: 1. It Is noted that the role played by your institution and the borrower have been covered in the report. It would also be useful if, as much as possible, to include the role played by the different parties - the co-financiers, the consultants, the contractors, etc. as this would help to draw lessons from each others performance. We expect that these aspects would have been treated already in your institution's PCR report. 2. We have noted with satisfaction the intensity of the supervision missions carried out by your Institution. The lesson to be learnt from this Is that co-financiers' efforts should be shared whenever possible or reports of such missions exchanged to benefit from the results. Thus, for projects co-financed, it is essential, as much as practicable, to programme missions to optimize the use of manpower and systematically exchange reports. 3. As clearly Indicated in the document, technical assistance programme, though an important element in project's success, usually fail to give the desired results particularly in institutional building. A good lesson to be learnt in this regard is the necessity to reorient the present 32 ANNEX 3 Page 2 of 2 approach of providing such assistance. There is a need to organize as a matter of priority several workshops at systematic interval in each country of intervention. The participants of such workshops should include not only executing agencies but policy makers, supervising bodles/ministries, major consumers, etc. This approach would help to inculcate awareness on the parties concerned on the importance of institutional building, which in the present time is becoming more and more important that the physical investment made in a particular sector. Co- financiers such as the World Bank and the African Development Bank should coordinate their efforts and resources to sponsor such workshops to help develop sufficient conviction in the parties concerned. 4. The positive lessons learnt as documented in the report are a result of several factors which were unique at the time. As mentioned in the report the success of this project is attributable to the nature of the project, the sector, the institutions involved In particular VRA and the country's improved economic environment in general. To replicate these positive lessons for utilities in other countries, though not impossible, does require first of all creating a conducive environment. As stated earlier, a strong conviction by all parties is a prerequisite to launching any institutional building programme in order to make it a success. The experience of the World Bank as well as the African Development Bank in financing technical assistance component for institutional building in many countries has demonstrated in most part to be less effective. It is high time that the current piece-meal approach of institutional building (i.e. project by project) need to be re- examined. Although some measures are been taken, co-financiers should more and more coordinate their efforts for a global sectorial approach to have a far reaching impact on the utilities when such programmes are implemented. The new World Bank Sector policies discussed in the report, if pursued along with adequate workshop programmes to create awareness and convictions in the parties involved, could address to the aforementioned concern. We would very much appreciate it if you could send us the final version of the Audit Report and the PCR Report on this project. Thank you for your cooperation. G. irga-Hall Di ion Chief
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Ghana - The Seventh and Eighth Power Projects
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