Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15479 IMPLEMENTATION COMPLETION REPORT PHILIPPINES BACON MANITO GEOTHERMAL POWER PROJECT (LOAN 29690-PH & LOAN 29691-PH) February 27, 1996 Infrastructure Operations Division Country Department I East Asia and Pacific Region 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 Currency Unit = Philippine Pesos (P) At Appraisal: P20.50 = US$1 At Completion: P27.12 = US$1 (December 1993) P25.70 = US$1 (December 1995) FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BOI Board of Investments BOT build-operate-transfer DENR Department of Energy and Natural Resources ECC Environmental Clearance Certificate ERB Energy Regulatory Board ERR economic rate of return FRR financial rate of return ICB international competitive bidding ICG internal cash generation ICR Implementation Completion Report ID institutional development GOP Government of the Philippines KfW Kreditstantalt fur Wiederaufbau km kilometers kV kilovolt kWh kilowatt-hours LOLP loss of load probability LRMC long-run marginal cost MERALCO Manila Electric Company MIS management information system MMBOE million barrels oil equivalent MOE Ministry of Energy MW megawatts MWh megawatt-hours NPC National Power Corporation OISF Oil Industry Special Fund PD Presidential Decree PEP Productivity Enhancement Program PNOC Philippine National Oil Company PNOC-EDC PNOC Energy Development Corporation PNPP Philippine Nuclear Power Plant REC Rural Electric Cooperative ROR rate of return ROW right-of-way SAR Staff Appraisal Report SGS steam gathering system FOR OFFICIAL USE ONLY Table of Contents Preface .........................................................i Evaluation Summary ........................................................ ii Bacon Manito Geothermal Power Project Implementation Assessment A. Statement/Evaluation of Objectives ..........................................................1 B. Achievement of Objectives ......................................................... 2' C. Major Factors Affecting the Project ..........................................................5 D. Project Sustainability ..........................................................6 E. Bank Performance ..........................................................7 F. Borrower Performance ..........................................................8 G. Assessment of Outcome ..........................................................9 H. Future Operation ..........................................................9 I. Key Lessons Learned ......................................................... 10 Annexes Annex A: Statistical Tables Table 1: Summary of Assessments .1 Table 2: Related Bank Loans .12 Table 3: Project Timetable .12 Table 4: Loan Disbursements: Cumulative Estimated and Actual .13 Table 5: Key Indicators for Project Implementation .13 Table 6A: Key Indicators for Project Operation - PNOC & PNOC-EDC ..................................... 14 Table 6B: Key Indicators for Project Operation - NPC ........................................................ 15 Table 7: Studies Included in Project ........................................................ 16 Table 8A: Project Costs ........................................................ 17 Table 8B: Project Financing ........................................................ 17 Table 9A: Financial Costs and Benefits ........................................................ 18 Table 9B: Economic Costs and Benefits ........................................................ 19 Table 10: Status of Legal Covenants ........................................................ 20 Table 11: Compliance with Operational Manual Statements ........................................................ 22 Table 12: Bank Resources: Staff Inputs ........................................................ 22 Table 13: Bank Resources: Missions ........................................................ 23 Annex B: Sector Specific Data Table 1: Energy Production and Consumption 1984-2000 ........................................................ 24 Table 2: Geothermn al Sector Highlights 1993-2010 ........................................................ 25 Table 3: Cumulative Installed Generating Capacity 1993-2010 ................................................... 25 Table 4: Phases of Power Sector Restructuring and Privatization ................................................ 26 Annex C: Completion Mission's Aide Memoire ........................................................ 27. Annex D: PNOC-EDC's Contribution to the ICR (excluding appendices) ................................................ 28 Annex E: NPC's Contribution to the ICR (excluding appendices) ........................................................ 39 Maps IBRD 20275 - Grid Map of National Power Corporation IBRD 20278 - Existing Geothermal Power Projects in Operation 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. IMPLEMENTATION COMPLETION REPORT PHILIPPINES BACON MANITO GEOTHERMAL POWER PROJECT (Ln. 2969-0-PH and Ln. 2969-1-PH) Preface This is the Implementation Completion Report (ICR) for the Bacon Manito Geothermal Power Project in the Philippines, for which Loan 29690-PH in the amount of US$41 million equivalent and Loan 29691-PH in the amount of US$59 million equivalent were approved on June 23, 1988 and made effective on December 12, 1988. Loan 29690-PH to the Philippine National Oil Company (PNOC) was closed on December 31, 1993, as planned. It was fully disbursed, and the last disbursement took place on December 1, 1993. Loan 29691-PH to the National Power Corporation (NPC) was closed on December 31, 1995, after two extensions of the original closing date of December 31, 1993. The first extension was to December 31, 1994. Final disbursement will take place on March 31, 1996, at which time a balance of US$3.9 million equivalent will be canceled. A protocol soft loan of US$74.7 million for the power plant component of the project was provided by the Government of Italy. The ICR was prepared by Jose R. Escay, Consultant, under the supervision of John Irving, Senior Power Engineer in the Infrastructure Operations Division of Country Department 1, East Asia and Pacific Region, and reviewed by Jayasankar Shivakumar, Chief, Infrastructure Operations Division, and Walter Schwermer, Project Adviser. The borrowers provided comments that are included as Annexes D and E to the ICR. Preparation of this ICR, based on material in the project file, was begun in October 1995 prior to the Bank's completion mission in February 1996. Comments were received from Anil Malhotra and P. Venugopal, who also participated in the appraisal mission. The Borrowers contributed to preparation of the ICR by contributing views reflected in the mission's aide-memoire and preparing their own evaluation of the project's execution. I ii IMPLEMENTATION COMPLETION REPORT PHILIPPINES BACON MANITO GEOTHERMAL POWER PROJECT (Ln. 2969-0-PH and Ln. 2969-1-PH) Evaluation Summary Introduction i. Large scale geothermal power production in the Philippines began in 1979 with a joint venture between the National Power Corporation (NPC) and a US-based company. The Government of the Philippines (GOP) perceived vast scope for geothermal resource identification and development, and sought the Bank's assistance. Following an identification mission by the Bank in 1979, and an energy assessment study (1980) carried out jointly by the Bank and the Asian Development Bank (ADB), a US$36 million Geothermal Exploration Project (Loan 2203-PH) was approved in 1982, which comprised a 25-well exploration program in the highly prospective Bacon Manito and Palinpinon areas. ii. In 1984-86, several Bank missions, in conjunction with NPC, Philippine National Oil Company (PNOC) and PNOC Energy Development Corporation (PNOC-EDC), reviewed the development of the power and geothermal sectors. At that time, no new generating plant was under construction in the Philippines, despite a projected increase in power demand, and a decrease in installed capacity due to the unexpected retiring of the geothermal units at Tiwi and the mothballing of the 620 MW Philippine Nuclear Power Plant (PNPP) in 1986. Furthermore, it was anticipated that system reliability would fall sharply as the loss of load probability (LOLP) was expected to increase from a level of two days/year in 1987 to more than 30 days/year in 1991. iii. An examination of NPC's least cost power development program in 1987 indicated that the development of a 110 megawatt (MW) power plant at Bacon Manito in southern Luzon should be NPC's next development priority. Further, to optimize the investments in generation, there was a need to upgrade and expand the facilities of NPC's transmission system. However, the deteriorating condition of NPC's finances posed a significant constraint to addressing these needs, and was further aggravated by serious accounts receivable problems. Thus, the Bank and NPC agreed to implement financial recovery efforts and relieve NPC's cash constraints within a comprehensive and consolidated framework. Project Objectives iv. The main objectives of the project were to: (a) support the delineation and assessment of geothermal resources for use in Luzon, and thereby reduce the need to rely on imported fuel for power generation; (b) develop an existing geothermal steam field at Bacon Manito I and an associated 110 MW base load power plant that would provide a new source to meet demand growth in the Luzon grid; (c) support measures for upgrading and expanding NPC's system facilities; and (d) support institution- building and financial recovery efforts at NPC. v. In 1988, achieving these project objectives was critical to ensuring the country's economic recovery. The statement of objectives was clear and their achievement realistic, except for the institutional development (ID) objective, which was not explicitly supported by any project component iii and for which there were neither implementation schedules nor milestones. The loose integration of ID components within an infrastructure project is not uncommon, particularly when there are obvious requirements for ID at the project's inception and the specific scope and magnitude are not known during project preparation. The major drawback of such a design is that it provides too much flexibility and vulnerability to commitment during project implementation. vi. NPC's financial weakness posed a risk to securing counterpart funds and, thereby, to keeping to the project implementation schedule. Moreover, an effective remedy of this situation would require considerable effort since the root of the problem was not confined within NPC, but stemmed from the chain of inter-company arrears in the energy sector which included Manila Electric Company (MERALCO), the Rural Electric Cooperatives (RECs), PNOC and other fuel suppliers. Hence, the financial recovery of NPC required action on a broader, sectoral context. This increased the project's complexity and imposed high demands on Bank and NPC staff during implementation. vii. By contrast, PNOC-EDC was in a stronger position due to the support it could draw on from its holding company, namely PNOC, which was in good financial health. PNOC-EDC itself had capable technical and professional staff who had gained extensive experience in geothermal technology from the Philippine experience, training extended through bilateral agreements and an ongoing technical collaboration with a reputed company from New Zealand. Results and Bank/Borrower Performance viii. The overall outcome of the project was satisfactory. The project has achieved most of its major objectives and is likely to maintain satisfactory results despite completion delays of more than two years for the NPC component and a 32% increase in project costs, for a new total of $289.5 million. For the PNOC-EDC component, the project is expected to achieve a 7.0% Financial Rate of Return (FRR) against the 7.1% estimated at appraisal. Overall, the project has a satisfactory 13.7% Economic Rate of Return (ERR), despite cost overruns which prevented realization of the estimated 19% at appraisal. The project proved instrumental in fostering the development of geothermal resources in the Philippines. It also served as an important catalyst in improving the sustainability of the overall power sector through its success in facilitating the financial recovery of NPC. It must be emphasized that such recovery is genuine, in that it included electricity tariff increases with automatic adjustment mechanisms, rather than relying on significant and distorting subsidies, and direct budgetary transfers from the Govemment. ix. Notably, the specific project components from which the above-mentioned rates of return were computed are the ones which encountered significant cost overruns and delays. They included the steam gathering system (SGS) with a 160% cost overrun and 18-month delay, power plant (54% and 31 months) and associated transmission (32 months). The causes for completion delays and cost overruns include: (a) delays in construction activities of the SGS due to the inability of the contractor to meet the schedule which resulted in a contract takeover by PNOC-EDC; (b) a 22-month delay in Italian cofinancing for the power plant, which became effective on October 5, 1990; (c) additional wells and requirements for civil works, project administration, geoscientific, and well development activities in Bacon Manito I; (d) difficulties in obtaining ROWs for transmission lines, failure of supplied materials quality test requirements, and rebidding some equipment because of the conflict in the former Yugoslav Republic; and (e) slow procurement procedures by NPC and a lack of corporate interest in implementing ID components. x. Bank performance during preparation was satisfactory. Appraisal of the technical, financial, economic and environmental aspects of the project was tight and straightforward, while the institutional iv component remained less defined (para. v). Its performance during supervision was highly satisfactory particularly due to its exemplary efforts in assisting NPC with its financial recovery. Implementation progress was adequately assessed and reported, and sufficient attention was given not only to the project's development impact, but also to the overall development of the power sector. Further, loan covenants were enforced, although the Bank initially waived the 8% rate of return covenant due to the political instability which prevented GOP from approving sudden increases in electricity tariffs, and the drought increased NPC's fuel expenses. xi. PNOC-EDC's performance during preparation and implementation was highly satisfactory. The technical, financial, institutional and environmental requirements of the project were adequately assessed, and the drilling program and list of studies were laid-out at the onset. Problems in procurement were corrected in the early stages of project implementation. xii. NPC's performance during preparation and implementation was satisfactory. While technical and financial requirements were adequately evaluated, there were deficiencies in identifying its institutional constraints and requirements prior to implementation. Despite a two year completion delay, the major components of the project were successfully completed, and compliance with loan covenants and financial recovery of NPC were effected in 1992. Sustainability, Future Operations and Lessons Learned xiii. The economic benefits of the project, combined with the facts that geothermal energy is both indigenous to the country and is environmentally attractive, support, if not reinforce, the likelihood that the project will be sustainable during its operational phase. The project has also allowed the Bank to serve as a catalyst in geothermal-based power generation in the Philippines, and was instrumental in facilitating a geothermal pricing arrangement between NPC and PNOC. The Energy Sector Project, which included a significant geothermal component, was approved in 1990, and the Leyte-Cebu and Leyte-Luzon Geothermal Projects were both approved in 1994. Further, GOP support and policies have helped to ensure the country's future geothermal program. In December 1995, the Board of Investments (BOI) approved income tax breaks, among other incentives, for two PNOC-EDC geothermal power projects (120 MW in Mount Labo and 40 MW in Negros). xiv. For the SGS component, a drilling program should be maintained to ensure the availability of contracted capacity with the power plant over the life of the project. Further, PNOC-EDC should provide sufficient funds for the adequate management and maintenance of the SGS. For the power plant, performance targets are laid-out during the first quarter of each year and good performnance is rewarded in the form of bonuses granted by NPC's Board. xv. The most important lesson to be learned from this project underscores the fundamental difference between development banking and commercial banking. Whereas commercial banking looks into the financial outcome of a project, development banking, as exemplified by these loans (particularly to NPC), focuses, in addition to the financial outcome, on using projects to develop and improve institutions with the hope that such action will have favorable spillover effects on the sector and the country's economy. Other lessons include the following: * There is a need to incorporate flexibility in geothermal and other natural resource projects. * An integrated approach should be followed when both fuel supply infrastructure and generation plant are constructed in concert. v * ID components of a project should be given equal, if not higher, priority to the levels accorded to other project components. * During project preparation, the Bank should strictly assess the capacity of the borrower's project management team and the effectiveness of its procurement procedures. * The Bank should obtain sufficient assurances to ensure the availability and timeliness of cofinancing funds prior to implementation. * Despite the satisfactory position of NPC's finances at present, close monitoring should be continued by the Bank. IMPLEMENTATION COMPLETION REPORT PHILIPPINES BACON MANITO GEOTHERMAL POWER PROJECT (Ln. 2969-0-PH and Ln. 2969-1-PH) A. Statement/Evaluation of Objectives 1. Project Background. Large scale geothermal power production in the Philippines began in 1979 with a joint venture between the National Power Corporation (NPC) and a US-based company. In order to realize the full potential of the country's geothermal resources, the Government of the Philippines (GOP) requested Bank assistance in resource identification and development. Following an identification mission by the Bank in 1979, and an energy assessment study (1980) carried out jointly by the Bank and the Asian Development Bank (ADB), a US$36 million Geothermal Exploration Project (Loan 2203-PH) was approved in 1982, which comprised a 25-well exploration program in the highly prospective Bacon Manito and Palinpinon areas. 2. In 1984-86, several Bank missions, in conjunction with NPC, Philippine National Oil Company (PNOC) and PNOC Energy Development Corporation (PNOC-EDC), reviewed the development of the power and geothermal sectors. At that time, no new generating plant was under construction in the Philippines, despite a projected increase in power demand, and a decrease in installed capacity due to the unexpected retiring of the geothermal units at Tiwi and the mothballing of the 620 MW Philippine Nuclear Power Plant (PNPP) in 1986. Furthernore, it was anticipated that system reliability would fall sharply as the loss of load probability (LOLP) was expected to increase from a level of two days/year in 1987 to seven days/year in 1989, and to more than 30 days/year in 1991. 3. An examination of NPC's least cost power development program in 1987 indicated that the development of a 110 MW power plant at Bacon Manito in southern Luzon should be NPC's next development priority. At that time, PNOC had already invested US$51.5 million in developing the Bacon Manito geothermal steam field to sustain a production level of 70 MW, and which needed an incremental investment of about US$24 million to upgrade the field to 110 MW. Furthermore, to optimize the investments in generation, there was a need to upgrade and expand the facilities of NPC's transmission system. 4. NPC's financial performance, however, was rapidly deteriorating and the Corporation had serious accounts receivable problems. In response, NPC stretched its accounts payable beyond reasonable limits to meet some of its working capital requirements. Further, NPC was undercapitalized and could not raise Peso- denominated long-term loans. With GOP support, NPC began to implement measures to relieve its cash constraints. Nevertheless, the Bank and NPC agreed to implement financial recovery measures and relieve NPC's cash constraints within a comprehensive and consolidated framework. Further, these organizations approached the Bank to conduct a sector study to address medium- and long-term energy issues. s. Project Objectives. The main objectives of the project were to: (a) support the delineation and assessment of geothermal resources for use in Luzon, and thereby reduce the need to rely on imported fuel for power generation; (b) develop an existing geothermal steam field at Bacon Manito I and an associated 110 MW base load power plant that would provide a new source to meet demand growth in the Luzon grid; (c) support measures for upgrading and expanding NPC's system facilities; and 2 (d) support institution-building and financial recovery efforts at NPC during this critical stage of the economic recovery period. 6. Evaluation of Objectives. In 1988, achieving these project objectives was critical for the country due to: (a) the expected deterioration of power system reliability; (b) a policy focus on developing geothermal energy resources; (c) confirmation by NPC's least cost development program and the Bank's Energy Sector Review (1988) that geothermal energy from Bacon Manito I was the least cost option; and (d) the financial deterioration of NPC. The statement of objectives was clear and their achievement realistic, except for the institutional development (ID) objective, which was not explicitly supported by any project component and for which there were neither implementation schedules nor milestones. The loose integration of ID components within an infrastructure project is not uncommon, particularly when there are obvious requirements for ID at the project's inception and the specific scope and magnitude are not known during project preparation. The major drawback of this design is that it provides too much flexibility and vulnerability to commitment during project implementation. 7. NPC's financial weakness posed a risk to securing counterpart funds and, thereby, to keeping to the project implementation schedule. Moreover, an effective remedy of this situation would require considerable effort since the root of the problem was not confined within NPC, but stemmed from the chain of inter- company arrears in the energy sector which included Manila Electric Company (MERALCO), the Rural Electric Cooperatives (RECs), PNOC and other fuel suppliers. Hence, the financial recovery of NPC required action on a broader, sectoral context. This increased the project's complexity and imposed high demands on Bank and NPC staff during implementation. 8. By contrast, PNOC-EDC was in a stronger position due to the support it could draw on from its holding company, namely PNOC, which was in good financial health. PNOC-EDC itself had capable technical and professional staff who had gained extensive experience in geothermal technology from the Philippine experience, training extended through bilateral agreements and an ongoing technical collaboration with a reputed company from New Zealand. B. Achievement of Objectives 9. Overall, the project substantially achieved its objectives (para. 5). The first three are physical objectives, and the fourth is a combination of ID and financial objectives. The Financial Rate of Retum (FRR) and Economic Rate of Return (ERR) are also discussed below. 10. Objective: Delineation and appraisal of geothermal resources for use in Luzon. This objective, which included drilling 18 delineation/appraisal wells, was partially achieved. Five prospects were drilled with a total of only 12 wells. One of these areas is the Bacon Manito field, where 3 wells were completed for the supply of a second power plant, Bacon Manito II. The drilling of the 4 remaining Luzon prospects yielded disappointing results. Nine wells were drilled, with 2 in Pinatubo, 2 in Natib, 2 in Cagua and 3 in Labo. Due to the strongly acidic and corrosive steam in Pinatubo, poor permeability and waning heat in Natib, and limited thermal zone and mix of volcanic fluids in Cagua, these prospects were deemed non-commercial and abandoned. In Labo, wells produced either acidic fluids or mediocre flows, and appraisal drilling was to continue under the Energy Sector Project (Ln. 3164) for final evaluation. The balance of 6 wells was not drilled due to this record of disappointing results and to environmental considerations. As a result, actual costs for this component were only $38.7 million, 28% lower than the $53.4 million estimated at appraisal. 11. Objective: Development of Bacon Manito I steam field. and associated power plant and transmission. This objective was substantially achieved despite considerable delays and cost overruns. Regarding the steam gathering system (SGS) component, Units I and 2 were commissioned in October 1992, with delays from SAR estimates of 18 and 15 months, respectively. As of end-1993, steam generation was adequate to sustain power 3 generation of 90 MW only, against the project target of 110 MW. The target capacity was attained during 1994 after three wells were drilled in addition to the number scheduled originally. Despite delays in NPC's construction of the complementary power plant and transmission lines, the revenues of PNOC-EDC were not affected. On the other hand, investment cost overruns of the Bacon Manito I field development component were high. The final costs were $70.3 million compared to $27.3 million as initially estimated, or an overrun of about 1.6 times. The main reasons were: (a) delays in construction activities of the SGS due to the inability of the contractor to meet the schedule, which resulted to contract takeover by PNOC-EDC in November 1990; (b) an increase in the number of wells drilled in Bacon Manito I; and (c) additional requirements for civil works, project administration, geoscientific, and well development activities. 12. The 2x55 MW associated Bacon Manito I power plant was commissioned in July 1993 (Unit 1) and February 1994 (Unit 2), representing delays of 27 months and 31 months, respectively. Total costs for the power plant reached $107.9 million, 54% higher than the appraisal estimate of $70.2 million. These were primarily caused by the 22-month delay in Italian cofinancing, which became effective on October 5, 1990 and slow procurement procedures of NPC. The length of the associated 230 kV transmission line was increased from 32 km to 43.7 km since the line needed rerouting because of right-of-way (ROW) problems, which delayed completion until August 1993, 32 months from the timetable schedule. 13. Obiective: Uperading and expansion of NPC system facilities. This objective was partially achieved (in terms of completion) and implementation was far from satisfactory, with delays caused by difficulties in obtaining ROWs for transmission lines, deficient quality test requirements for supplied materials, the need to rebid some items of equipment because of the conflict in the former Yugoslav Republic, and overall inefficiencies in NPC's existing organization structure. Delays for some subcomponents lasted up to 36 months. Construction of a 115 kV transmission line and substation is expected to be completed by June 1996, a delay of 4.5 years. The enhancement of NPC's management information system (MIS), which was planned to be completed by June 1991, is still ongoing and contributed to NPC's request for a second extension of the loan closing date to December 31, 1995. These delays have forced NPC to expend 24% more than the $47.6 million originally planned for this component. 14. Objective: Institution building and financial recovery of NPC. The objective of supporting the financial recovery of NPC was not only substantially achieved but was, in fact, exemplary, due to the commendable efforts of the Bank, NPC and GOP. This success was all the more laudable, given that there were neither specific project components nor measurable milestones (mentioned earlier) to support this objective. Moreover, the economy was still recovering and the political climate was tenuous following several coup attempts; and tariff increases, which are inherently politically sensitive, were successfully implemented - and during election season. An ambitious Reform Program was supported by GOP which, besides other measures, allowed NPC to raise tariffs and meet loan covenants of international financial institutions, and to implement automatic fuel and exchange rate cost adjustments. As a result, NPC's finances significantly improved relative to its crisis situation in 1991, as shown in Figure I below (see Annex 1, Table 6B for details). These achievements greatly facilitated NPC's present efforts at privatization. 4 Figure 1: NPC Financial Ratios, 1991 & 1994 Current Ratio * 1994 Operating Ratio * 1991 Debt/Debt Plus Equity Debt Service Coverage Self-Financing Ratio Rate of Retumr -0.2 0 0.2 0.4 0.6 0.8 1 1.2 1.4 15. Other ID subcomponents can be characterized as being substantially achieved even though there were no specific evaluation criteria for them. However, significant delays have occurred in their implementation, resulting in the need for a closing date extension, and indicating a lack of corporate interest in these important institutional functions. These included, besides the MIS component (para. 13), the Training Center building project wherein 50% of civil works costs were funded by the loan and the Integrated Training Program for NPC's Engineering and Operations group. The Training Center is not yet complete, but NPC expects to commission the Center before the end of 1996. Regarding the training program, the Engineering Modules have just been completed and NPC has decided to transfer funding of the Maintenance Modules to Kreditstantalt fur Wiederaufbau (KfW), which is also funding the Operation Modules. Further, while the ARTEMIS program for project management has been completed for some time now, it has not been utilized fully by the project directors due to the lack of logistics coordination, which is currently being addressed by the new management. At present, the software is used for reports generation rather than its intended purpose as an interactive project management tool. 16. It should also be noted that the training components of the project made significant contributions to the institutional strengthening of PNOC, the scale and scope of which allowed that entity to weather more effectively the changes and adversities associated with changing presidents five times and having many key personnel resign. 17. Financial Rate of Return (FRR) to PNOC-EDC. Despite slippage in project completion and significant cost overruns, the contracted steam price of $0.0382/kWh allowed PNOC-EDC to generate a rate of return of 7.0% under existing fiscal regulations (PD 1442), which compares with 7.1% in the SAR. If the proposed Geothermal Bill (HB 2354) is approved, which includes additional incentives through tax and royalty holidays, the FRR would reach 9.6%. 18. Economic Rate of Return (ERR) of Power Supply. The project has a satisfactory 13.7% ERR, despite cost overruns which prevented realization of the 19.5% return estimated at appraisal. The ERR was recalculated based on prevailing tariffs and on actual investments in geothermal resource development, power plant and associated transmission at Bacon Manito I. Consumer surplus, as exists, was not taken into reckoning. 5 C. Major Factors Affecting the Project 19. Total project costs are expected to reach $289.5 million, 34% higher than the SAR estimate of $216.3 million. This represents the combined effects of a 37% increase in the project costs of the PNOC-EDC component and a 32% increase in NPC's. While the loan closing date for NPC was extended by two years, some components will not yet be completed by this date. Table I below highlights some of the cost increases and completion delays. Major factors affecting the project follow. Table 1: Cost Increases and Completion Delays Cost Increase( Completion Dela Steam gathering system 160% 18 months Power plant 54% 31 months Associated transmission 32 months NPC upgrading 36 months for some of which: transmission more than 4 years* MIS more than 4.5 years* * Not completed as of loan closing date. 20. Factors Not Generally Subject to Government Control. Factors that are not generally subject to government control affected the project's implementation and accelerated NPC's financial deterioration. Those that significantly affected project implementation included the 22-month cofinancing delay for the power plant; the substandard performance of PNOC-EDC's contractor in constructing the SGS, which prompted the takeover by PNOC-EDC; the replacement of materials sourced from the former Yugoslav Republic due to the conflict in that country; poor supply of some materials for the NPC transmission upgrading component; and disappointing results of the delineation component since the wells revealed acidic fluids and mediocre source properties. 21. Factors that accelerated NPC's financial deterioration included the substantial devaluation of the Philippine Peso against the US Dollar (as much as 25%) and other currencies due to GOP's economic reform efforts in 1990; low power demand growth for NPC; droughts in Mindanao; and the sudden increase in international oil prices caused by the Gulf War. 22. Factors Generally Subject to Government Control. In general, GOP has been responsive to ensuring the smooth implementation of major project components. GOP assistance could have been very helpful in expediting the Environmental Clearance Certificates (ECCs) for PNOC-EDC (as the Department of Energy and Natural Resources [DENR] conducted protracted public hearings), and for reducing the delays in obtaining Rights of Way (ROWs) for NPC. 23. GOP's reluctance, however, in allowing NPC to increase tariffs was a substantial factor leading to NPC's financial crisis in 1991. Other factors outside NPC's control which contributed to its poor financial .situation were the foreign exchange rate devaluation, high local inflation, fuel cost increases and the elimination of NPC tax subsidies. While GOP may have played a significant role in rectifying these problems, its options were not clear due to the existing delicate political situation and GOP's efforts at economic reform. Nevertheless, GOP made substantial efforts to support NPC's Reform Program. 24. Factors Generally Subject to PNOC-EDC Control. There were no major factors which could have been averted under PNOC-EDC's control. Apart from delays caused by external factors mentioned above, there were implementation delays caused by problems in road construction, but these were minor in nature and eventually rectified. 25. Factors Generally Subject to NPC Control. Apart from implementation delays caused by outside forces, the NPC component of the project was beset with procurement and disbursement delays at the onset. The average time between bid opening and contract awarding was 200 days. These delays were caused by poor 6 coordination among the various NPC officers and the departments involved; weak project management; cumbersome procurement procedures; and repeated and protracted bid evaluations by technical and non- technical groups, and at the board level. While significant progress has been made in areas that involve top management (such as implementation of NPC's Reform Program), action at project management levels has been lacking, given a general lack of corporate interest. 26. NPC was responsible for a number of factors which contributed to its financial distress in 1991. These included poor integration of financial, planning and treasury functions; lack of accountability; significant overhead; and weak accounting management, particularly of its foreign debt. Moreover, while NPC had revalued its assets in 1987, it did not conduct another revaluation until 1990, making it difficult for NPC to obtain approvals for tariff increases from the Energy Regulatory Board (ERB) based on the 10% rate of return cap mandated by law. In addition to the burden of politically sensitive tariff increases, NPC's credibility was tarnished by a major financial scandal in 1991. To date, however, NPC's assets have been revalued since 1993, and a thorough Reform Program is ongoing. D. Project Sustainability 27. Prospects for project sustainability are good. The economic benefits of the project, combined with the facts that geothermal energy is indigenous to the country and is environmentally attractive, support, if not reinforce, the likelihood that the project will be sustainable during its operational phase. Moreover, the project allowed the Bank to serve as a catalyst in geothermal-based power generation in the Philippines. This was particularly true regarding its role in facilitating a geothermal pricing arrangement between NPC and PNOC, a development which was not only critical to the formulation of this project, but also paved the way for future geothermal developments. The Energy Sector Project (approved in 1990) included further development of the Bacon Manito field, appraisal of other geothermal resources in Luzon and the Visayas, and a time-slice investment program in power generation which included an additional five geothermal power plants totaling 320 MW. The Leyte-Cebu and Leyte-Luzon Geothermal Projects (both approved in 1994) included development of 185 MW and 440 MW geothermal energy fields, respectively. In line with NPC's Reforn Program, private sector participation in the power plants was conducted under Build-Operate-Transfer (BOT) arrangements. 28. Governmental support and policy actions also favor the sustainability of the project and the country's future geothermal program. Due to significant delays and cost overruns, GOP allowed adjustment of the steam price to enable PNOC-EDC to achieve its planned rate of return. Electricity tariffs were increased, which allowed achievement of a satisfactory ERR, despite significant cost overruns incurred by NPC in the power plant component. The Geothermal Bill (para. 17) was refiled in the Lower House under the Tenth Congress as HB 2354 and is now with the House Ways and Means Committee following its approval in late 1995 by the House Committee on Energy. In December 1995, the Board of Investments (BOI) approved income tax breaks, among other incentives, for two PNOC-EDC geothermal power projects (120 MW in Mount Labo and 40 MW in Negros). 29. However, the long-term sustainability of the project and of the country's overall geothermal program is not immune from future disruptions. First, NPC has tended to treat ID issues (including project and operations management) as a low priority. In 1992, brownouts of 3-4 hours per day in Luzon due to unexpected outages of Sucat 1-4 (450 MW) and Manila (200 MW) provide evidence of NPC's neglect of proper maintenance procedures, despite language in NPC's contribution to the ICR (Annex E) which explicitly states that the project's sustainability "...depends primarily on NPC's provision of adequate maintenance funds and on personnel at the geothermal facilities..." While NPC's Reform Program contains a significant ID focus, its benefits will be realized based on the commitment of top management to ID, and a corresponding commitmnent by lower levels of management to enforce ID. 7 30. Second, besides hydro, geothermal steam was the country's sole indigenous commercial energy resource until 1993, when the Camago-Malampaya natural gas field was declared commercially viable with a capacity of more than 3,000 MW. While this discovery does not yet pose an outright threat to geothermal energy as a priority energy resource, this may change over time. Gas development will certainly attract many BOT developers. But, more importantly, as the power sector transforms to accommodate competition, particularly in generation, sustainability of further geothermal energy expansion will depend on a new set of factors, e.g. competitive pricing. E. Bank Performance 31. Bank performance in the project was satisfactory. Despite the diligent efforts by the Bank to reform NPC, shortcomings during preparation and implementation delays during supervision cannot substantiate a higher rating. 32. Identification and Preparation. Bank performance in project identification was highly satisfactory. While the project's scope could no longer be considered innovative at that time, project identification was crucial since it involved concerted/coordinated efforts between separate implementing agencies from the hydrocarbon and power subsectors. Further, the project clearly meshed with GOP's energy policy to develop geothermal energy and the Bank's strategy to utilize geothermal energy resources from Bacon Manito I as the least cost option. 33. Bank assistance to PNOC-EDC and NPC in project preparation was satisfactory. Significant effort was undertaken through missions with the requisite skills mix to evaluate and ascertain the technical, financial and economic soundness of the project. An Environmental Impact Statement was also issued. However, Bank assistance in evaluating the institutional requirements of the project and of the implementing agencies was deficient, and Bank missions never included an institutional development/human resources specialist. Further, considering the precarious financial situation of NPC, the Bank should have obtained formal or more concrete assurances on the availability of cofinancing from the Government of Italy (para. 7). 34. Appraisal. Bank performance during the appraisal phase was satisfactory. As expected, based on project preparation, appraisal of the technical, financial, economic and environmental aspects of the project was tight and straightforward, while the institutional component remained less defined. Up to the appraisal stage, $49 million was earmarked for distribution system improvements of MERALCO. However, since MERALCO was a hybrid government entity whose ownership was not clear-cut, and both the Bank and GOP could not agree on an approach for channeling the loan to MERALCO, this component was eventually dropped from the project. It was subsequently included in the Manila Power Distribution Project (Ln. 3084) in 1989. 35. Supervision. Bank performance during supervision was highly satisfactory. Its efforts in facilitating the financial recovery of NPC were exemplary, and greatly enhanced the long-term viability of the nation's largest utility. Bank supervision also covered (a) the use of Bank specialists to improve borrower performance; (b) project flexibility in response to drilling results and changing field situations; (c) the use of new techniques such as directional drilling; and (d) the design of coordination mechanisms for the two agencies. Implementation progress was adequately assessed and reported, and sufficient attention was accorded not only to the project's development impact, but also to the overall development of the power sector. 36. While the Bank did not have an explicit mandate under the project to restore the financial viability of NPC, it nevertheless used the rate of return (ROR) covenant to achieve this goal - to great effect. Initially, in September 1990, the Bank waived the covenanted 8% ROR due to the political instability which prevented GOP from approving electricity tariff increases and the drought which caused higher fuel expenses for NPC. By end-1990, however, NPC's financial situation deteriorated substantially due to the cumulative effects of local inflation, a currency devaluation, previous debt rescheduling, increased fuel costs, postponed tariff 8 increases, the elimination of previous tax subsidies, and weak accounting management (of foreign debt). In response, the Bank aggressively promoted the financial recovery of NPC. Persistent reminders were made about suspending disbursements under both the Bacon Manito and Energy Sector Loans, and appraisal of the Leyte-Luzon Geothermal Project was postponed. ADB lent further support, as did bilateral donors. The GOP also threw considerable weight into this effort. In 1991, it provided a $280 million bailout for NPC and, in September, it agreed to a comprehensive Reform Program, which eventually allowed NPC to reach the covenanted 8% ROR in 1992. 37. It is unclear what additional efforts the Bank could have undertaken to reduce project delays and cost overruns. For the SGS component, the selection of the contractor was transparent and cleared with the Bank, and an independent consultant was hired to ascertain its capabilities. For the power plant, the delay in securing Italian cofinancing was caused by diligent adherence to processes mandated by Bank directives: (a) NPC had to establish that the Italian manufacturer (GIE) was the only vendor through ICB; (b) this caused a delay increasing the contract price by $5 million; (c) the contract was amended; (d) the financing arrangements were finalized; and (e) negotiations were pursued between GOP and the Italian Government that were outside the control of both NPC and the Bank. Aspects relating to procurement and institution building at NPC received inadequate attention due to the following: (a) there was a lack of coordination between NPC's departments to begin with; (b) NPC was embarking on a massive reorganization; (c) NPC began implementing a comprehensive Reform Program; and (d) there was an overwhelming focus in pursuing NPC's financial recovery. F. Borrower Performance 38. Preparafion. PNOC-EDC's performance during project preparation was highly satisfactory, particularly in its assessment of the technical, financial, institutional and environmental requirements of the project. The drilling program and list of studies were laid-out at the onset. Further, its commitment to the project cannot be underestimated since it had already invested $51.5 million in the Bacon Manito field. While it became evident during project implementation that securing the necessary ECCs required greater lead-time, it is unclear if this fact could have been ascertained earlier. 39. NPC's overall performance was satisfactory in project preparation. Technical and financial requirements were adequately evaluated. However, there were deficiencies in identifying NPC's institutional constraints and requirements prior to implementation. These included: (a) identifying ID requirements of the Corporation for the purpose of including specific project components and milestones; (b) identifying training needs and streamlining requirements for its procurement procedures, which largely contributed to project delays and cost overruns during implementation; and (c) failing to desegregate the NPC system strengthening component from the rest of the Bacon Manito Project and to appoint a group to oversee their separate implementation, a shortcoming which eventually resulted in extending the closing date. However, it should be noted that after the changeover to a democratic form of government in 1986, there were substantial staff changes in NPC, particularly at the upper management levels, and that there had been no Bank loans to NPC for more than 10 years prior to this project. 40. Implmentatin. The overall performance of PNOC-EDC during project implementation was highly satisfactory. Problems in procurement were identified in the first year of implementation and were corrected accordingly. implementation was delayed by more than one year by PNOC-EDC's decision to take over the construction of the SGS from its contractor, and project costs subsequently doubled. However, PNOC-EDC's management was fully justified in making this decision given the nonperformance of the original contractor and considering the range of alternatives available to PNOC-EDC's management -- findings which were echoed in a report examining this situation by an independent third party. 9 41. On the other hand, NPC's performance during implementation appeared deficient. The transmission system strengthening component was appraised on the basis that technical preparations were well advanced, but NPC did little work after appraisal on the constituents of this component, delaying its implementation by 14 months. This development, combined with corporate lack of interest in implementing ID components, caused the NPC loan closing date to be extended twice. Further, there is no explicit evidence that procurement problems were eventually corrected upon loan closing. However, it should be noted that (a) the major components of the project were successfully completed, and (b) compliance with loan covenants and financial recovery of NPC was eventually reached beginning 1992. Thus, the overall performance of NPC in project implementation warrants a satisfactory rating. G. Assessment of Outcome 42. The overall outcome of the project was satisfactory. The project has achieved most of its major objectives and is likely to maintain satisfactory results, with only a few minor shortcomings, as mentioned above. The PNOC-EDC component is expected to achieve a 7.0% FRR against the 7.1% estimated at appraisal. Overall, a 13.7% ERR is expected, despite significant cost overruns. Further, with the continued support of the GOP, as evidenced by measures designed to promote geothermal development, the project's sustainability is favorable. 43. The project proved instrumental in fostering the development of geothermal resources in the Philippines. It also served as an important catalyst in improving the sustainability of the overall power sector through its successful efforts in effecting the financial recovery of NPC. More so, it must be emphasized that such recovery is genuine in that it included electricity tariff increases with automatic adjustment mechanisms, rather than relying on significant and distorting subsidies or direct budgetary transfers from the govemment. H. Future Operation 44. In 1994, generation from the Bacon Manito I Power Plant totaled 479,797 MWh. For the next 24 years, it is expected to produce at least around 2,000 MWh per day. Since the inception of this project, the Bank has extended two loans for geothermal-based power generation totaling almost 700 MW. The GOP continues to accord geothermal power a high priority as the country diversifies its energy mix. Growing at a rate of 16% per year, geothermal energy's share of the country's total indigenous energy production is expected to increase from 7% in 1994 to 12% in the year 2000. 45. For the SGS component, a drilling program should be maintained to ensure the availability of contracted capacity with the power plant over the life of the project. Further, PNOC-EDC should provide sufficient funds for the adequate management and maintenance of the SGS. 46. For the power plant, NPC has adopted a Productivity Enhancement Program (PEP), which is an incentive mechanism for rewarding staff for good performance. Within the first quarter of each year, the Corporation sets annual performance targets from the corporate to the power plant levels by progress in the following areas: (a) energy sales, (b) gross and net generation, (c) station use, (d) conversion loss, and (e) outage duration. Evaluations are conducted every six months, and NPC's Board grants bonuses for good performance based on results at the end of each year. 47. At present, it is difficult to pinpoint the optimum timing of a future impact evaluation by OED due to the ongoing restructuring and privatization in both the hydrocarbon and power sectors. Ideally, such evaluation should be undertaken two years subsequent to the completion of these changes. Since reforms in the power sector should be completed in the year 2004, OED should conduct its evaluation around 10 years following the date of this ICR. 10 I. Key Lessons Learned 48. The most important lesson to be learned from this project underscores the fundamental difference between development banking and commercial banking. Whereas commercial banking looks into the financial outcome of a project, development banking, as exemplified by these loans (particularly to NPC), focuses, in addition to the financial outcome, on using projects to develop and improve institutions with the hope that such action will have favorable spillover effects on the sector and the country's economy. Other lessons include the following: * There is a need to incorporate a degree of flexibility in geothermal and other natural resource projects since exploration during implementation can lead to changes in project design (e.g., location and number of wells). * An integrated approach should be followed in projects where the fuel supply infrastructure would need to be constructed in concert with the generation plant. This is important since such infrastructure would vary depending on the type of fuel utilized, such as steam or gas. Moreover, this approach should encompass project design and institutional design in implementation. * During ID components of a project should be given equal, if not higher, priority to the levels accorded to other project components. NPC's lack of interest in implementing ID components is a common institutional reaction of state-owned utilities in many countries, and becomes more pronounced as these institAtions attempt to maximize infrastructure investments within their financial constraints. However, Bank cxperience shows that neglect of such areas as manpower development and training severely affects the sustainability of projects. Thus, it is critical that ID requirements be sufficiently evaluated during project preparation and adequately specified as project components in the SAR, with explicit time schedules and milestones for project implementation. To ensure commitment and enforce implementation, such requirements may be specified in the loan covenants. * During project preparation, the Bank should strictly assess the capacity of the borrower's project management team and the effectiveness of its procurement procedures. Deficiencies in project management and cumbersome procurement procedures are common causes for delays and cost overruns. The Bank should pay close attention to the staffing of the project management team, particularly with regard to its capabilities, authority over the various departments involved in implementing the project, and, if possible, commitment to expedite its completion. Furthermore, if the effectiveness of existing procurement procedures cannot be ascertained, alternative back-up procurement procedures should be agreed prior to project implementation. * The Bank should obtain sufficient assurances to ensure the availability and timeliness of cofinancing funds prior to implementation. Financial weakness on the part of a borrower already poses a significant risk when undertaking expensive infrastructure investments. The possibility of slippages in cofinancing adds further to that risk. Although a significant proportion of cofinancing agreements are through bilateral arrangements, the Bank should exert its influence as a major contributor to the project. * Despite the satisfactory position of NPC's finances at present, the Bank should continue monitoring the situation closely. Particularly given the rapid pace of reform in the power sector, it is critical that NPC maintain adequate cash generation to sufficiently finance the timely implementation of its investment program. To do so, NPC must ensure that tariff levels are broadly in line with long-run marginal costs (LRMC). 11 AnexA Page 1 of 13 ANNEX A: STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of Objectives .____________ Substantial Partial Negligible appNlictble Macro policies VI' Sector policies V . Financial obiectives V Institutional development V l _ _ _ Phvsical obiectives V - Poverty reduction / Gender Issues _ Other social obiectives . Environmental obiectives . Public sector management _ Private sector management _ Other (Financial Recovery) V B. Project Sustainability Likely____ ikelv____ erta _ I Likely Unlikely I Uncertain Proiect sustainabili V C. Bank Performance Highly satisfactory Satisfactory Deficient Identification V Preparation assistance _ Appraisal _V Supervision V D. (a) Borrower Performance (PNOC-EDC) Highly satisfactorv Satisfactory Deficient Preparation V Implementation V Covenant compliance V _ _______ Operation (if applicable) V__ (b) Borrower Performance (NPC) Highly I ~~~~~~~~satisfactory Satisfactory Deficient Preparation V/ Implementation VI' Covenant compliance / V Operation (if applicable) VI E. Assessment of Outcome HlgRblY i Highsy satisfactory Satisfactory I Unsatistactory unsatistactorv Assessment of outcome V 12 Annex A Page 2 of 13 Table 2: Related Bank Loans Year of Loan/credit title ur Pose approval Status Preceding operations 1. Petroleum Exploration Aeromagnetic and offshore seismic surveys, and regional 1982 Closed Promotion Project basin evaluations over 15 areas integrating the newly Ln. 2201-PH & 2202-PH acquired data 2. Geothermal Exploration Geoscientific studies and drilling of 25 geothermal 1982 Closed Project Ln. 2203-PH exploration wells. Following operations 1. Manila Power Distribution Construction and upgrading of subtransmission lines, 1989 Closed Project Ln. 3084 substations, distribution networks, radio-multiplex facilities, and equipment and vehicles. 2. Energy Sector Project Time slice of energy sector investments for 1989-1993 1990 Closed Ln. 3163-PH, 3164-PH comprising geothermal fields development, power plant & 3165-PH construction, transmission & distribution, rural electrification, institutional development, TA & studies. 3. Power Transmission & Plant rehabilitation and transmission expansion and 1993 Ongoing Rehabilitation Project reinforcement in Bataan and Batangas, TA to prepare Ln. 3626 master plan for the 500 kV EHV system, and improving NPC's institutional systems. 4. Leyte Cebu Geothermal Develop 185 MW geothermal energy field & enter into 1994 Ongoing Project BOT for the 185 MW power plant, Leyte & Cebu Ln. 3700-PH & 3702-PH transmission lines, submarine transmission line linking Ieyte-Cebu lines & TA for design. 5. Leyte Luzon Geothernal D)evelop 440 MW geothermal energy field & enter in to 1994 Ongoing Project BOT for 440 MW power plant, SGS, 2 HVDC converter Ln. 3746-PH & 3747-PH stations & substations at Ormoc & Naga, submarine transmission line linking ILeyte-Luzon lines, HVDC lines for Ormoc-Matnog & Cabacungan-Naga, transmnission rehab, design of Casecnan hydroelectric project. Table 3: Project Timetable l Date actual/ Steps in project cycle | Date planned latest etimate Identification (Executive Project Summary) 4/27/87 Preparation 5/8/87 Appraisal 8/17/87 Negotiations 3/15/88 5/24/88 Board presentation 5/3/88 6/23/88 Signing 9/1/88 Effectiveness 10/88 12/12/88 Project completion - PNOC-EDC 12/91 10/92 - NPC 12/91 12/96 Loan closing - PNOC-EDC 12/31/93 12/31/93 -NPC 12/31/93 12/31/95 13 Annex A Page 3 of 13 Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ millions) 1988 1 1989 1 1990 1 19911 19921 19931 19941 1995 1996] PNOC-EDC Appraisal estimate 5.50 32.90 39.30 41.00 Actual 8.77 23.75 34.71 40.35 41.00 Actual as % of estimate 0% 27% 60% 85% 98% 100% NPC Appraisal estimate 5.30 18.20 32.20 43.50 51.60 59.00 Actual 0.68 3.54 8.65 21.41 39.30 50.64 53.61 53.61 Actualas%ofestimate 13% 19% 27% 49% 76% 86% 91% 91% TOTAL Appraisal estimate 5.50 38.20 57.50 73.20 84.50 92.60 100.00 Actual 9.45 27.29 43.36 61.76 80.30 91.64 94.61 94.61 Actual as % of estimate 0% 25% 47% 59% 73% 87% 92% 95% 95% Date of final disbursement: December 1993 (PNOC-EDC); March 1996 (NPC). Note: Data for 1996 is provisional. Table 5: Key Indicators for Project Implementation ..-Estimated I Actual Completion Completion Key implementation activities in SAR IDate Date A. Steamfield Development 1. Detailed engineering, bid preparation & invitation of bids 8/31/88 12/88 2. Completion of bid evaluation and approval by Bank 1/31/89 1/16/90 3. Drilling of production wells commencement 5/30/89 3/28/89 4. Steam-gathering system completion 10/30/90 8/92 5. Steam blow line flushing and testing 4/1/91 12/91 6. Commissioning of Unit 1 4/1/91 10/92 7. Commissioning of Unit 2 7/1/91 10/92 B. Power Plant 1. Invitation of turnkey bids 12/1/87 11/29/88 2. Completion of bid evaluation and approval by Bank 6/1/87 3/14/89 3. Signing of contract 8/30/88 3/21/89 4. Start of civil works at site 12/1/88 9/13/90 5. Commencement of delivery of turbine generators and condensers - Unit 1 10/1/89 6/27/92 - Unit 2 12/1/89 8/10/92 6. Start of plant erection - Unit 1 4/1/90 9/15/92 - Unit 2 6/1/90 10/27/92 7. Start of trial operation - Unit 1 3/1/91 9/4/93 - Unit 2 5/1/91 8/15/93 Table 6A: Key Indicators for Project Operation PNOC (Consolidated) & PNOC-EDC Financial Indicators estimated ~~~~~~Actual Ke- overai:0f hdcators 92 in0 SAR 1987 1 988 199190 191t 1.992 1i98 1988 1989 19:190 191 1992 PNOC (Consolidated) Physical Assumpions Petroleum Product Sales (MM Bbl) 23.0 23.A 24.7 25.8 27.2 27.2 28.0 32.1 36.3 40.4 40.3 46.2 Coal Sales (MM Tons) 590 331 284 255 316 350 532 781 578 726 853 575 Geothermal Sales (GWh) 723 1,131 1,139 1,264 1,700 2,405 722 738 1,486 1,487 1,498 1,493 Financial Data (P Million) Revenues 16,439 20,688 22,794 25,103 27,601 29,177 18,312 20,544 21,329 33,742 46,777 43,218 Net Earnings 719 850 978 897 1,061 1,318 749 1,276 1,583 1,714 2,035 2,497 Net Working Capital 4,074 4,259 4,400 4,516 4,624 5,171 3,261 5,725 6,871 7,953 10,107 10,949 Property, Plant & Equipment 6,005 6,490 6,858 7,297 7,902 8,028 6,163 5,992 6,268 8,236 7,912 7,616 Long TermDebt 6,415 7,138 7,821 8,114 8,541 8,668 6,035 6,139 6,071 7,509 8,206 7,337 Stockholder's Equity 7,220 8,070 9,048 9,945 11,006 12,324 7,785 9,357 10,774 12,488 14,360 16,647 Total Assets 26A172 27.960 31.222 34.003 37.005 39.275 279627.73 34.041 43.052 4097 42.227 Current Ratio 1.35 1.36 1.32 1.30 1.27 1.29 1.48 1.74 1.52 1.37 1.60 1.62 Long Term Debt/Equity 46:54 45:55 44:56 43:57 41:59 39:61 47:53 40:60 36:64 38:62 36:64 31:69 Capital Expenditures 1,110 1,503 1,532 1,131 1,837 1,394 335 468 1,086 1,353 1,315 1,498 InternalCashGeneration(netof debtservice) 770 952 969 700 881 1,218 1,171 1,254 2,371 3,209 3,668 4,359 PNOC-EDC Financial Data (P Million) Revenues 458 800 870 1,040 1,503 2,286 462 544 1,041 1,211 1,367 1,500 Net Earnings 121 268 297 176 259 668 107 114 276 386 395 421 NetWorking Capital 458 309 196 47 114 86 401 360 860 425 614 16 Property, Plant & Equipment 398 381 636 964 1,656 1,881 394 383 596 821 1,395 5,070 Exploration & Development Costs 6,465 7,432 8,672 9,541 10,581 11,585 4,268 4,930 5,567 6,574 7,349 7,426 Long Term Debt - Foreign 2,618 3,031 3,758 4,269 5,044 5,488 2,875 2,848 2,837 4,043 4,859 5,084 - LocalfromPNOC 2,331 2,184 2,114 2,176 2,928 3,017 3,030 3,490 3.649 2,848 3,231 2,078 Stockholder's Equity 2,370 2,907 3,632 4,107 4,380 5,047 1,678 1,792 2,656 3,654 4,009 6,388 Current Ratio 5.70 3.10 1.80 1.10 1.30 1.20 2.64 2.31 3.54 1.77 1.58 1.02 DeWt/Equity Ratio 64:36 62:38 61:39 65:35 63:37 56:44 78:22 78:22 71:29 65:35 67:33 53:47 Debt Service Coverage 3.30 4.00 2.60 1.20 1.50 2.30 NA 2.31 5.87 3.70 2.77 2.73 a ______________________________~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~ f ____ ___ ___ ___ ____ ___ ___ ___ ___ o Table 6B: Key Indicators for Project Operation - NPC Financial Indicators Key operatiDg indicators in SAR 1987 | 1988 | 1989 1990 1 1991 | 1992 1 1993 f 1994 | 1995 Estimated Power Sold (MlWh) 18,359 18,837 20,024 21,191 22,382 24,414 25,909 27,515 29,194 Average Revenue (Ctvs./kWh) 99.50 116.24 121.31 128.84 139.69 143.00 145.91 149.04 154.10 Operating Revenue (P Million) 18,268 21,713 24,126 27,232 30,778 33,714 36,535 39,765 43,195 Net Operating Income (PMillion) 4,914 6,794 7,431 7,991 8,228 8,769 9,591 10,224 11,765 Net Income (P Million) 1,084 3,208 3,030 3,371 4,011 5,099 5,276 5,126 5,718 Rate Base (P Million) 63,312 66,159 72,318 77,612 79,497 84,598 92,609 98,648 113,865 Rate of Return - Revalued Assets 8% 10% 10% 10% 10% 10% 10% 10% 10% Self-Financing Ratio 90% 39% 34% 45% 36% 34% 21% 21% 35% Debt Service Coverage 1.8 1.6 1.6 1.6 1.7 1.9 1.6 1.4 1.4 Debt/Debt Plus Equity 67% 65% 62% 60% 59% 59% 60% * 60% 58% Operating Ratio 73% 69% 69% 71% 73% 74% 74% 74% 73% Current Ratio 141% 116% 86% 91% 98% 90% 92% 98% 104% Accounts Receivable (Months) 2.6 2.5 2.6 2.6 2.6 2.7 2.7 2.8 2.8 Accounts Payable (Months) 2.5 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7 Actual* Power Sold (MkWh) 19337 21,180 21,971 22,889 23,191 23,958 24,897 28,743 30,682 AverageRevenue(Ctvs.IkWh) 90.38 93.54 93.81 112.63 139.55 157.13 162.63 175.80 178.39 Operating Revenue (P Million) 17,475 19,810 20,609 25,778 32,363 37,645 40,490 50,530 54,733 Net Operating Income (P Million) 4,696 5,585 5,298 4,118 2,577 7,078 6,665 12,088 9,843 Netlncome(PMillion) 975 1,671 1,661 (65) (2,930) 4,118 1,365 7,561 2,992 Rate Base (P Million) 66,090 70,792 66,901 68,409 75,236 88,279 106,927 144,829 155,489 Rate of Retum - Revalued Assets 7.11% 7.89% 7.92% 6.02% 3.43% 8.0% 6.2% 8.3% 6.3% Self-Financing Ratio 0.99% (0.75%) 0.0% 0.0% 13.9% 4.8% Debt Service Coverage 0.87 0.91 0.85 0.89 0.54 0.80 0.90 1.26 1.08 Debt/Debt Plus Equity 73% 75% 74% 79% 78% 84% 86% 78% 81% Operating Ratio 73% 72% 74% 84% 92% 81% 84% 76% 82% Current Ratio 0.61 0.96 1.13 0.71 0.70 0.91 1.25 1.14 1.00 Accounts Receivable (Months) 2.4 1.4 1.4 1.5 1.4 1.3 1.3 1.2 1.1 Accounts Payable (Months) 5.1 1.3 4.0 3.6 3.3 3.4 3.4 3.5 3.6 * Source: For 1987-1991, NPC; for 1992 and thereafter, Transmission Grid Reinforcement Project SAR; 1995 data are estimates. 16 AnnexA Page 6 of 13 Table 7: Studies Included in the Project Purpose as defined at Study appraisal/redefined Status Impact of study., 1. Feasibility of To determine the feasibility of Completed An HVDC transmission link transmitting power from transmitting 500-1200 MW blocks was considered feasible and Leyte to Luzon of power from the Tongonan the least cost option. Geotherrnal Project in Leyte to the Results eventually led to the Luzon grid over a distance of 460 Leyte-Luzon Geothermal km (23 kn submarine). Project (Ln.3747-PH) which became effective on 3/12/95. 2. Tongonan Geothernal To determine the least cost Canceled Power Plant siting & technically feasible alternative for development siting, sizing and interconnection of power plants in the vast geothermnal steam complex at Tongonan. 3. Feasibility of To determine the feasibility of Completed Formulated long range transmission transmitting electricity from the transmission master plan for interconnections to the mainland grids to these nearby inter-island grid. NPC islands of Masbate, islands, thus mitigating the need for discussed results with ADB Mindoro, Marinduque, expensive local diesel power for the possibility of Romblon, Catanduanes generation on the islands. financing. and Basilan 4. Cost estimating To establish techniques for Completed Prepared a Cost Estimating techniques for power estimating the cost of major power Manual outlining procedures system components and system components such as thermal for preparation of estimates a computerized database power plants, hydroelectric power at various levels of design. plants, transmission lines, Developed and implemented a substations and civil works. To database system for preparing prepare a computerized database and cost estimates. a cost estimated manual to assist NPC in major planning exercises for power system development. 5. Norms for cost of power To establish norms for the Canceled supply outages determination of cost of power supply outages in various grids to assist NPC in developing its future generation expansion plans. 6. Feasibility of the latest To detennine the applicability of Completed Used as basis in establishing techniques in the latest dam construction in the future courses of action for construction of country with particular reference to dam projects. hydroelectric dams the application of Roller Compacted Concrete. 17 Annex A Page 7 of 13 Table 8A: Project Costs (US$ million) Appraisal estimate* Actual/latest estimate Item Local Foreign Total Local Foreign Total PNOC-EDC Development of Bacon Manito 1 5.6 27.1 27.3 38.6 31.7 70.3 Delineation-Cum-Appraisal 34.1 19.3 53.4 30.3 8.4 38.7 Other** - - - - 1.2 1.2 Total PNOC-EDC 39.7 41.0 80.7 68.9 41.3 110.2 Bacon Manito Thermal Power Plant 15.0 55.2 70.2 28.3 79.6 107.9 Bacon Manito Transmission System 3.4 9.9 13.3 5.1 3.4 8.5 NPC System Upgrading & Expansion 9.7 37.9 47.6 11.8 47.0 58.8 Consultancy Services 1.0 3.5 4.5 0.3 3.8 4.1 Total N!PC 29.1 106.5 135.6 45 5 133.8 179.3 Total 68.8 147.5 216.3 114.4 175.1 289.5 * For comparison with actuals, contingencies are prorated in appraisal estimates. ** Procurement of heavy equipment which was supposedly charged against Ln 3164 (Energy Sector Loan) but was erroneously charged against Ln 2969. Table 8B: Project Financing (US$ million) ApPraisal estimate Actual/latest estimate Source Local I Foreign I Total Local I Foreign I Total IBRD/IDA 7.7 92.3 100.0 2.5 93.6 96.1 Cofinancing Institutions (Italy) 4.8 55.2 60.0 - 74.7 74.7 Other external sources (USTDA) - - - - 0.3 0.3 Domestic Contribution - PNOC-EDC 39.7 3.0 42.7 68.9 - 68.9 - NPC 16.6 7.7 24.3 43.0 6.5 49.5 Total 68.8 158.2 227.0 114.4 175.1 289.5 18 Annex A Page 8 of 13 Table 9A: Financial Costs and Benefits (US$ million) CInvest. ;000Gross O&M Govt.. Net Cash O&M Govt. Net Cash 00Xi1Year Revenu 4Costs0 Take* :Fow* Co ts* Take"* Flow** 1987 52.00 -52.00 -52.00 1988 1.01 -1.07 -1.07 1989 11.87 -11.87 -11.87 1990 5.90 -5.90 -5.90 1991 19.77 -19.77 -19.77 1992 22.54 -22.54 -22.54 1993 5.52 26.20 4.50 1.57 14.61 5.18 0.79 14.71 1994 27.59 5.40 1.66 20.53 6.12 0.83 20.64 1995 27.59 5.40 1.66 20.53 6.12 0.83 20.64 1996 27.59 5.40 1.66 20.53 6.12 0.83 20.64 1997 27.59 5.40 11.22 10.97 6.12 0.83 20.64 1998 27.59 5.41 13.15 9.03 6.72 2.77 18.10 1999 27.59 5.41 13.15 9.03 6.72 4.41 16.46 2000 27.59 5.41 13.15 9.03 6.72 4.41 16.46 2001 27.59 5.41 13.15 9.03 6.72 4.41 16.46 2002 27.59 5.41 13.15 9.03 6.72 4.41 16.46 2003 27.59 5.51 13.22 8.86 6.88 4.45 16.26 2004 27.59 5.54 13.23 8.82 6.92 4.45 16.22 2005 27.59 5.54 13.23 8.82 6.92 4.45 16.22 2006 27.59 5.54 13.23 8.82 6.92 4.45 16.22 2007 27.59 5.54 13.23 8.82 6.92 4.45 16.22 2008 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2009 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2010 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2011 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2012 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2013 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2014 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2015 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2016 27.59 5.54 13.23 8.82 6.91 12.41 8.27 2017 27.59 5.54 13.23 8.82 6.91 12.41 8.27 FRR 6.98% 9.58% Notes: * Under existing PD 1440 ** Under proposed Geothermal Bill 19 AmnneA Page 9 of 13 Table 9B: Economic Costs and Benerits (US$ million) Geothermal Field Power Plant T Trans, Sales Sales Net Yeat Investment O&M Investment O&M GWh Revenues Benefit 1988 1.01 -1.01 1989 11.87 2.77 -14.64 1990 5.90 22.45 -28.35 1991 19.77 7.01 -26.78 1992 22.54 21.87 -44.41 1993 5.52 4.50 67.37 -77.39 1994 5.40 3.59 2.35 446.04 31.03 19.69 1995 5.40 2.96 557.70 38.80 30.43 1996 5.40 3.50 657.66 45.75 36.86 1997 5.40 3.50 657.66 45.75 36.86 1998 5.41 3.50 657.66 45.75 36.85 1999 5.41 3.50 657.66 45.75 36.85 2000 5.41 3.50 657.66 45.75 36.85 2001 5.41 3.50 657.66 45.75 36.85 2002 5.41 3.50 657.66 45.75 36.85 2003 5.51 3.50 657.66 45.75 36.85 2004 5.54 3.50 657.66 45.75 36.72 2005 5.54 3.50 657.66 45.75 36.72 2006 5.54 3.50 657.66 45.75 36.72 2007 5.54 3.50 657.66 45.75 36.72 2008 5.54 3.50 657.66 45.75 36.72 2009 5.54 3.50 657.66 45.75 36.72 2010 5.54 3.50 657.66 45.75 36.72 2011 5.54 3.50 657.66 45.75 36.72 2012 5.54 3.50 657.66 45.75 36.72 2013 5.54 3.50 657.66 45.75 36.72 2014 5.54 3.50 657.66 45.75 36.72 ERR 13.70% 20 Annex A Page 10 of 13 Table 10: Status of Legal Covenants Philippines Bacon Manito Geothermal Project (Ln. 2969) Loan No. Original Revised Agreement Covenant Present fulfillment fulfillment Description of Section type Status date date covenant Comments. 2969-0-PH 5 C PNOC to maintain Satisfactory. Loan insurance against 4.03 risks and in amounts consistent with appropriate practice. 2969-0-PH 1 CD 7/1/89 & PNOC to furnish Delayed by C.OA. Loan annually audited financial 5.01 (b) thereafter statements for the year concluded, with the report of an acceptable auditor. 2969-0-PH I CD PNOC to ensure that Delayed by COA. Loan records of 5.01 (c) disbursements are audited together with annual financial statements. 2969-0-PH 3 C PNOC to do all it Satisfactory. Loan can, including 5.02 increasing PNOC- EDC's share capital, to enable PNOC- EDC to execute its obligations under the Project Agreement. 2969-0-PH 2 C PNOC-EDC to Completed. Loan conclude its steam 5.03 supply contract with NPC for the project. 2969-0-PH 4 CD 12/31/88 The Italian loan to Effectiveness on Loan finance Bacon 10/5/90. 6.01 (g) Manito I will become effective. 2969-0-PH 12 C Annually PNOC-EDC to None. Project furnish the Bank for 2.01 review and comment its exploration program for the coming year. 2969-0-PH 5 C PNOC to maintain Satisfactory. Project insurance against 3.03 risks and in amounts consistent with appropriate prctice. 2969-0-PH I CD 7/1/89 & PNOC to furnish Delayed by COA. Project annually audited financial 4.01 (b) thereafter statements for the year concluded, with the report of an acceptable auditor. 21 Amnex A Page II of 13 Loan No. Original Revised Agreement Covenant Present fulfillment fulfillment Description of Section type Status date . date covenant Comments 2969-0-PH 2 C Annually PNOC-EDC to Satisfactory. Project eaintain a current 4.02 ratio of not less than 2969-0-PH 2 C AeUariY PNOC-EDC not to Satisfactory. Project exceed a debt/equity 4.03 ratio of 70J30. 2969-0-PH 2 C Period of PNOC-EDC not to Satisfactory. Project loan incur any debt unless 4.04 it can maintain a debt service ratio of at least 1.2. 2969-1-PH 2 C NPC to implement a Satisfactory. NPC Loan program to maintain has been 3.01 (b) receivables and disconnecting some payables at levels defaulting consistent with cooperatives. AR sound commercial reduced from 52 to practices. 38 days (1990-94). AP reduced from 276 to 108 in same period. 2969-1-PH 1 C 12/1/88 & NPC to furnish the Satisfactory. Loan annually next year's budget Projections being 3.01 (b) thereafter and projections for updated quarterly. the next 5 years to the Bank for review and comment. 2969-1-PH 2 C NPC to conclude a Completed. Loan steam supply Contract was signed 3.03 contract with PNOC- in 11/88. Steam EDC on a timely price was increased basis. to compensate for proiect delay. 2969-1-PH 12 C Annually NPC to fumish its Power Development Loan investment program Program has been 4.04 to the Bank for provided annually to review and comment. the Bank. 2969-1-PH 1 CD 7/1/89 & NPC to fumish Satisfactory. Loan annually audited financial Delays were minor. 5.01 (b) thereafter statements to the year concluded, with the report of an acceptable auditor. 2969-1-PH I CD NPC to ensure that Satisfactory. Some Loan records of delays. 5.01 (c) disbursements are audited together with annual financial statements. 22 Annex A Page 12 of 13 Loan No. Original Revised Agreement Covenant Present fulfillment fulfillment Description of Section type Status date date covenant Comments 2969-1-PH 2 CD 1989 & NPC to earn a rate of Complied with Loan annually return of at least 8% beginning in 1992. 5.02 thereafter on revalued assets. Previously, this was waived by the Bank down to 6%. 2969-1-PH 2 CD Period of NPC not to incur Higher than 1.3 Loan loan any debt unless a only since 1992 5.03 reasonable forecast after rescheduling of affirns that it will loan payments under maintain a debt Paris Club service ratio of at agreements. least 1.3. 2969-1-PH 4 CD 12/31/88 The Italian loan to Effectiveness on Loan finance Bacon 10/5/90. 6.01 (c) Manito I will become effective. Covenant types: I = Accounts/audits 2 = Financial performance/revenue generation from beneficiaries 3 = Flow and utilization of project funds 4 = Counterpart funding 5 = Management aspects of the project or executing agency 12 = Sectoral or cross-sectoral policy/regulatory/institutional action Present status: C = Covenant complied with CD = Complied with after delay Table 11: Compliance with Operational Manual Statements Statement number and title Description and comment on lack of compliance None No significant lack of compliance with an applicable Bank manual statement. Table 12: Bank Resources: Staff Inputs Actual* Stage of project cycle Weeks US (000) Through appraisal 10.7 20.5 Appraisal-Board 46.2 92.6 Board-effectiveness Supervision 100.5 218.8 Completion 5.4 9.1 TOTAL 162.8 341.0 * As of 1/5/96. 23 Annex A Page 13 of 13 Table 13: Bank Resources: Missions Performance rating (i 0i Stage of Number Davs Snectalized staff Imvlemen Develon- Tvves of vroiect Monthl of in fld skills -tation ment problems cycle year Persons .(i) represented (ii) status obecive (iv) Through 3/79 1 7 11 _ _ appraisal 2/84 4 14/3 18,20,21,26 - - - 8-9/84 6 14/2 7,14,17,18,20,26 - - 12 11/84 3 16 4,7,29 - - - 5/85 3 14/3 18,20,26 - - 2,11,12 5/86 2 12/2 20,26 - - 2,11,12 3/87 7 25 1,2,10,13,19,28,29 - - - Appraisal 8-9/87 7 19 1,3,8,13,19,25,26 - - _ - Board 1/88 4 28/4 1,5,15,19 - - _ Super- 11-12/88 4 20 1,19,23,26 S S 2,4,5,12 vision 6/89 4 13 1,9,23,26 S S 3,4,5 11-12/89 3 19 1,9,26 S S 3,5,12,13 3/91 3 12/4 6,9,13 S U 2,3,5,12 5-6/91 1 15 1 na na 12,14 6/91 1 14/3 6 na ria 1,2,5,9,12 9/91 1 10/3 6 na na 2,5,12 11/91 4 11 1,6,9,24 S U 1,2,3,9 7/92 3 8/6 6,26,27 S U 2,3,5,11,12 11/92 2 14/2 6,12 na na na 8/93 2 14/2 6,27 S S 3 6/94 3 25/10 16,22,26 S S 3,15,16 6/95 - - update by J. Irving S S 3 Comple- I tion L Notes: (i) Days in Field: (xly), x = total number of days of mission, y = number of projects. (ii) 1= A. Malhotra (Energy Specialist); 2= A. Ramadan (Loan Officer); 3= A. Rozali (Consultant); 4= B.K. Thomas (Financial Analyst); 5= C. Berge (Geothermal Specialist); 6= C. Fernandez (Financial Analyst); 7= D. Lumb (System Planner); 8= D. Mehta (Power Engineer); 9= E. Linard (Engineer); 10= E. McCarthy (Division Chief); 11= E.S. Daffern (Financial Analyst); 12= H. Morsli (Petroleum Engineer); 13= H. Razavi (Energy Economist); 14= H. Wheeler (Drilling Engineer); 15= J-P. Pinard (Operations Officer); 16= J. Irving (Power Engineer); 17= J. McHugh- Bodyiski (Petroleum Consultant); 18= J. McNitt (Geothermal Specialist); 19= J. Sopher (Financial Amialyst); 20= J.A. Koch (Economist); 21= M. Ashraf (Consultant); 22= M. Hassan (Energy/Reservoir Engineer); 23= M. Mitra (Engineer); 24= P. Auffret (YP); 25= P. Dyson (Coal Specialist); 26= P. Venugopal (Financial Analyst); 27= S. Chatterjee (Engineer); 28= V. Nayyar (Division Chief); 29% W. Cao (Power Engineer). (iii) S [under Implementation Progress]= (Satisfactory) most components are in substantial compliance with original SAR or revised implementation plan except for a few that are subject to remedial action; S [under Development Objectivesl= (Satisfactory) project is expected to achieve most of its major development objectives and to yield satisfactory development benefits without major shortcomings; U= (Unsatisfactory) use of this classification varies from definition in the Guidelines for the Enhanced Form 590-although most of the objectives were being met, NPC's financial situation was substantially deteriorating due mostly to external factors that if not corrected would jeopardize the completion/effective operation of the project; na= Not applicable, no Form 590 was issued. (iv) I= Accounts/audits; 2= Financial performance/revenue generation from beiieficiaries; 3= Flow and utilization of project funds; 4= Counterpart funding; 5= Management aspects of the project or executing agency; 9= Monitoring, review and reporting; 11= Sectoral or cross-sectoral budgetary or other resource allocation; 12= Sectoral or cross- sectoral policy/regulatory/institutonal action; 13= Local unrest; 14= Nonperformance of contractor; 15= Supply delays due to war in Yugoslavia (supplier); 16= Loan extended due to TA components for lack of corporate interest; na= BTOR only from H. Morsli for PNOC component which was running smoothly, no BTOR for NPC component. ANNEX B: SECTOR SPECIFIC DATA Table 1: Energy Production and Consumption 1984-2000 Philippines Energy Statists Hitorical Data DOE Fonceal Growth Rates (MMN ) 194 98 1986 19 7 1 t 1 199 1991 | 19 92 1993 1 1994 199 1996 1997 1 1998 1 1999 | 2000 1984-94 1 1994-00 Indigineous Energy 39.4 41.6 41.3 38.2 40.3 41.8 41.3 40.4 38.0 40.2 41.1 48.1 55.6 59.3 78.7 87.5 101.6 -0.2% 16.4% % Total 42% 45% 44% 38% 37% 36% 33% 33% 31% 31% 29% 33% 36% 35% 42% 43% 46% Conventional 24.4 25.1 25.1 22.8 25.8 26.3 25.2 24.8 23.0 25.7 27.9 34.5 41.5 44.5 63.3 71.4 84.8 0.1% 20.5% Oil 3.5 2.6 2.9 1.8 1.9 1.7 1.5 1.1 0.5 1.2 1.9 3.4 6.1 7.3 17.8 24.3 35.0 -14.7% 63.1% Coal 4.1 4.5 4.0 4.3 4.8 4.2 3.8 5.2 5.0 6.0 5.4 6.4 9.4 9.5 10.5 11.9 12.7 3.2% 15.0% Hydro 9.0 9.5 10.4 9.0 10.8 11.2 10.5 8.6 7.7 8.7 10.1 9.8 9.9 10.2 10.3 10.4 10.5 -1.4% 1.0% Hydroas%Total 10% 10% 11% 9% 10% 10% 8% 7% 6% 7% 7% 7% 6% 6% 5% 5% 5% Geothemal 7.8 8.5 7.9 7.8 8.4 9.2 9.4 9.9 9.8 9.8 10.4 14.9 16.1 17.6 24.7 24.8 26.5 3.0% 16.4% Geothermalas%Total 8% 9% 8% 8% 8% 8% 8% 8% 8% 7% 7% 10% 10% 10% 13% 12% 12% Non Conventional 15.0 16.5 16.2 15.4 14.4 15.5 16.1 15.6 15.0 14.5 13.3 13.6 14.2 14.8 15.4 16.1 16.9 -0.6% 4.2% Bagasses 6.6 4.4 4.1 3.5 4.6 6.1 5.4 6.2 5.1 5.1 5.2 5.2 5.5 5.7 6.0 6.3 6.6 1.5% 4.5% Agrwaste 8.2 12.0 11.7 11.2 9.3 9.1 10.4 9.1 9.5 8.9 7.6 7.9 8.1 8.4 8.7 9.0 9.3 -1.5% 3.4% Others 0.2 0.2 0.5 0.6 0.5 0.3 0.3 0.4 0.5 0.5 0.5 0.5 0.6 0.7 0.7 0.8 1.0 6.3% 11.0% Imported Energy 54.3 50.9 51.9 62.1 67.9 75.5 82.3 81.8 86.6 90.9 100.6 99.8 100.5 111.8 110.2 117.7 119.3 7.3% 3.4% 011 52.7 47.0 49.8 59.6 64.1 72.5 79.2 78.5 83.9 88.2 97.8 96.5 90.3 101.6 94.9 93.9 96.3 7.5% -0.2% Coal 1.6 4.0 2.2 2.5 3.7 3.0 3.1 3.3 2.7 2.8 2.8 3.4 10.1 10.3 15.3 23.8 22.9 2.8% 46.5% 1% Total Energy Consumption 93.7 92.6 93.3 100.3 108.2 117.3 123.6 122.1 124.6 131.1 141.7 147.9 156.1 171.1 188.9 205.2 220.9 4.4% 8.1% PowerUse 36.5 39.3 37.6 39.0 42.3 44.1 45.4 44.5 44.6 45.8 52.0 55.0 39.2 69.4 79.3 89.9 96. 2.6% 13.5% Oil Share in Power ise 16.3 13.7 13.0 17.7 18.1 21.4 22.0 23.1 24.0 53.9 28.4 25.9 31.9 26.0 21.5 19.8 14.0 11.8% -10.3% Population (million) 53.4 54.7 56.0 57.4 59.1 60.8 61.5 63.4 64.3 65.7 67.1 68.5 69.9 71.3 72.8 74.2 75.6 2.4% 2.0% GDP (Billion Peso) 616.9 571.8 591.4 616.9 658.5 699.4 718.0 716.5 718.9 734.3 765.7 805.5 849.8 896.6 945.9 997.9 1052.8 2.9% 5.5% GDPlncrease% -7.3% 3.4% 4.3% 6.7% 6.2% 2.7% -0.2% 0.3% 2.1% 4.3% 5.2% 5.5% 5.5% 5.5% 5.5% 5.5% Electrication Towns 1,415 1,418 1,419 1,430 135 1,443 1,452 1,464 1,446 Barangays 18,783 19,226 19,680 20,155 20,602 20,951 21,314 21,868 22,847 23,001 23,155 24,913 25,813 26,488 27,028 26.168 29,308 2.3% 3.1% Households 8,223 8,417 8,616 8,717 8,800 8,864 9,180 9,307 9,584 9,790 9,995 10,151 10,307 10,463 10.619 10,776 10,933 1.9% 1 5% Electrified Househols 4,929 5,045 5,164 5,404 5,607 5,825 6,254 6,475 5,785 6,095 6,404 6,938 7,165 7,356 7,537 7,739 7,942 2.4% 3.3% %electrified 57% 59% 60% 62% 64% 66% 68% 70% 60% 62% 64% 68% 70% 70% 71% 72% 73% 0.5% 1.8% Power Generation (GWh) Hydro 5,278 5,553 6,017 5,247 6,264 6,485 6,062 6,145 4,440 5,030 6,081 5,869 5,923 6.095 6,167 6,266 6,321 -0.9% 1.0% Coal 1,083 3,347 2,643 2,246 2,582 2,413 1,934 1,942 1,791 2,015 1,81 2,682 9,474 9,401 13,661 20.845 20,46 -0.5% 52.1% Geothermal 4,532 4,929 4,576 4,532 4,844 5,316 5,466 5,757 5,700 5,667 6,220 8,945 9,647 10,550 14,836 14,900 15,891 3.0% 16.5% Diesel/Oil 9,460 7,947 7,565 10,242 10,471 10,966 12,434 12,810 11,238 9,415 11,304 11,276 7,607 11,163 9,133 7,717 5,210 3.5% -9.8% Gas Turbine 2,701 4.452 5.756 4,240 101 4,417 3,764 4.182 3,206 6.8% Non Conventional 827 990 996 374 377 393 432 Total 21,180 22,766 21,797 22,641 24,538 25,573 26,328 26,654 25,870 26,579 31,175 33,012 32.752 41,626 47,561 53,910 51,092 2.7% 10.7% % Increase 7.5% -4.3% 3.9% 8.4% 4.2% 3.0% 1.2% -2.9% 2.7% 17.3% 5.9% -0.8% 27.1% 14.3% 13.3% -5.2% Elasticity -1.0 -1.2 0.9 1.2 0.7 1.1 -5.9 -8.8 1.3 4.0 1.1 -0.1 4.9 2.6 2.4 -1.0 I Source: Philippine Energy Plan, Department of Energy 1. For 1984-1993 statistics, see PEP 1993-2000 2. For 1993-94 statistics and forecast to 2000, see PEP 1994-2000 i,L Table 2: Geothermal Sector Highlights 1993-2010 Adcal DOE Forecast Steanm Producdon & Power Genertlon 1g93 1994 1995 19961 1997| 1991 1999 20001 200 2002 20031 204 200. 2006 200 2108 2009 2010 FIELD NumberofWellsDrilled 37 42 40 21 13 15 15 14 111 11 11 10 10 10 10 10 10 II Steam Availability (Cum. MW) 1,589 1,791 1,943 2,021 2,049 2,087 2,108 2,125 2,121 2,118 2,114 2,105 2,096 2,086 2,076 2,066 2,063 2,065 POWER Installed Generating Capacity (Cum. MW) 1,018 1,094 1,211 1,431 1,471 1,991 1,991 2,111 2,111 2,111 2,111 2,111 2,151 2,151 2,151 1,926 1,926 1,926 Equiv. Fuel Oil Displacement (MMBOENYR) 9.77 10.37 14.91 16.08 17.58 24.73 24.83 26.49 26.73 26.70 26.66 26.72 27.31 27.52 27.41 24.40 24.54 24.56 Source: Philippine Energy Plan 1994-2000, Department of Energy. Table 3: Cumulative Installed Generating Capacity 1993-2010 C Megawatts (MW) Adunl DOE Forecast TYp 1993 1994 1995 1 99 1997 1998 19991 2000 1 20011 20021 20031 20041 2005 V 2 20071 20018 20091 2010 Hydro 2,259 2,323 2,325 2,332 2,360 2,374 2,390 2,397 2,700 3,089 3,246 3,553 4,456 4,919 4,927 4,930 4,933 4,989 Coal 441 441 1,441 1,441 1,441 2,041 3,241 3,541 3,841 3,991 5,236 6,236 6,736 7,236 9,236 12,036 15,436 18,036 Geothermal 1,018 1,094 1.211 1431 1,471 1,991 1,991 2,111 2,111 2,111 2,111 2,111 2,151 2,151 2,151 1,926 1,926 1,926 Oil-Tbermal 1,985 1,985 1,985 1,685 1,685 1,485 1,135 285 285 60 60 60 60 60 60 60 60 60 Diesel 1,016 1,967 1,967 2,001 2,089 2,171 2,165 2,122 2,103 2,103 2,103 2,103 2,103 2,103 2,103 2,103 2,103 2,103 Combined-Cycle (CC) - 180 180 180 180 180 330 330 330 330 330 330 330 330 330 330 330 330 Gas Turbine 1,295 1,295 1,295 1,325 1,385 1,385 1,385 1,985 2,135 2,135 2,135 2,435 2,735 3,785 4,235 4,535 4,535 4,985 Gas Combined-Cycle - - - - - - - 1,350 1,800 2,700 3,150 3,150 3,150 3,150 3,150 3,150 3,150 3,150 Nonconventional - - - - - - - 25 25 50 50 75 75 100 100 125 125 125 TOTAL 8,014 9,285 10,404 10,395 10,611 11,627 12,637 14,146 15,330 16,569 18,421 20,053 21,796 23,834 26,292 29,195 32,598 35,704 Source: Philippine Energy Plan 1994-2000, Department of Energy. r Cs Table 4: Phases of Power Sector Restructuring and Privatization Phase I: Strengthen and restructure industry. Phase 2: Evaluate results, implement further Phase 3: Move into final structures and restructuring and privatize. competitive environments. Time Frame: 1994-1998 (4-5 years) Time Frame: 1998-199 (2 yeafs, Time Frame: 1999-2004 (4-5 years) Objectives: Strengthen all sectors and participants in Objectives: Evaluate results and industry Objectives: .Achieve full restructuring and the industry; restructure generation and transmission; performance; set final restructuring goals; adopt decentralized planning; establish fully effective establish coordination and arrangements and prepare policies that accelerate participants' growth into competition in generation, retail sales and industry for increased competition, privatization and new structure and responsibilities; privatize resource planning; monitor competitiveness and decentralization. generation. industry performance. Major Activities: Major Activities: Major Activities: * UJnbundle generation horizontally and vertically * Conduct key evaluation (e.g., competitive * Implement programs determined by assessing * UJnbundle transmission conditions; success of utility IRP, coordination development of the industry under the * Unbundle hydroelectric to Hydro Authority arrangements and regulatory programs restructuring and privatization initiatives * Decentralizc planning responsibility and adopt all * Make structural goal adjustments; re-visit * Extend practices such as retail wheeling and retail source IRP workability of "English" model in Luzon; improve sales competition * Establish operations coordination afrangements coordination arrangements * Adopt incentive regulatory schemes proven to be * Rationalize pricing * Privatize Generation: sell Mindanao and Visayas effective * Strengthen distribution sector subsidiaries; select and implement final Luzon * Monitor competitiveness, market behavior and * Promote private participation in generation (IPP generation privatization plan the potential for market dominance bidding, ROMs, etc.) * Expand retail wheeling * Strengthen regulatory and policy agencies * Implement policies to accelerate utilities' adoption * Streamline NPC through additional subsidiaries; to new structure rationalize staffing levels Major Results: Major Results: Major Results: * NPC power supply subsidiaries in Mindanao, Visayas * Adjustments to structural and ownership goals * Full functioning of all utilities under decentralized and Luzon * Adjustments to regulatory oversight and policy decision making * NPC national transmission subsidiary responsible for programs * Competitive generation markets transmission, dispatch and operations coordination * Improved IRP and coordinated utility planning * Competitive retail sales markets of planning from national perspective * Enhanced operations coordination; full economic * Widely practiced, state of the art IRP * RP Hydro Development Authority dispatch on all grids * Innovative regulatory incentive programs * Integrated resource planning by all utilities * Privatized generation * Efficient inter- and intra-grid coordinated * Coordination arrangements to achieve efficient * Increased competition: generation, retail sales, operations operations and planning supply side vs. Demand side resources * Transparent, unbundled prices e Improvements in structure and performance of
Группа Всемирного банка · Implementation Completion and Results Report
Philippines - Bacon Manito Geothermal Power Project
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