Independent Evaluation - Home > Search

Implementation Completion Report (ICR) Review - Private Sector Electricity Project


  
1. Project Data:   
ICR Review Date Posted:
10/18/2005   
PROJ ID:
P001184
Appraisal
Actual
Project Name:
Private Sector Electricity Project
Project Costs(US $M)
 86.3  71.1
Country:
Cote d'Ivoire
Loan/Credit (US $M)
 79.7  65.7
Sector, Major Sect.:
Central government administration, Power,
Law and justice and public administration; Energy and mining
Cofinancing (US $M)
   
L/C Number:
C2754      
   
Board Approval (FY)
  95
Partners involved
 
Closing Date
12/31/1999 09/30/2004
         
Evaluator: Panel Reviewer: Group Manager: Group:  
Richard L. Berney
George T. K. Pitman Alain A. Barbu OEDSG

2. Project Objectives and Components:

a. Objectives
1. To continue the restructuring of power sector institutions begun under the ESAL, particularly with respect to establishing an appropriate regulatory framework and strengthening institutional capacities, to enable the development of competitive and expanded private sector participation;

2. To improve power supply reliability, reduce environmental impacts and reduce the cost of electricity by supporting new investments in efficient gas-fired capacity using indigenous natural gas developed under a private sector BOOT arrangement; and
3. To enhance operational reliability and efficiency through reinforcement and improvement of the transmission system.

b. Components (or Key Conditions in the case of Adjustment Loans):
A. Institutional Development Studies(Appraisal $8.3 million; Actual $9.4 million)

  1. Power Sector Management Study
  2. Power System Investment, Operations and Pricing Study
  3. Preparation of measures to Encourage Further Sector Privatization, including: (i) Creating Standard IPP bid document;and (ii) Evaluating the feasibility of offering Vridi thermal power plant for private rehabilitation and operation.
  4. Hydrocarbon Sector Studies, including: (i) A hydrocarbon production and distribution system planning study; and (ii) A butane utilization study;
B. Generation Expansion (Appraisal: $50.0 million; Actual 37.9 million)
  1. Building one or two gas turbine power systems
C. Power System Reinforcement (Appraisal $21.0 million; Actual $23.8 million)
  1. Extension of 90-kV substation to accommodate generation expansion component; reinforcement of transmission system around Abidjan; rebuilding the Treichville 90/15-kV substation; and replacement of some 60 km of 15-kV paper-insulated cables.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The project closing date was extended five times, for a total of 4 years and nine months. The delay in project implementation was in large part due to the aftermath of the coup d'etat of December 1999. This political turmoil led to significant problems in servicing previous Bank loans, which caused the Bank to suspend disbursements twice, the first time for 15 months (October 2000 to January 2002) and the second from June 2004 to the present. When funds were not available to pay the contractors, construction activities were suspended, greatly slowing project implementation. The actual cost of the gas turbine power generation plant was $8.9 million less than estimated at appraisal. The Government wanted to use these funds to extend the project component for upgrading the transmission system. But when it was unable to put together a bidding package for this work in a timely fashion, the project was closed, this part of the loan was cancelled, and the country lost the opportunity to use this $10 million dollars of IDA funding.


3. Relevance of Objectives & Design:

The basic focus of the project, which was to help the Government establish an institutional framework that would facilitate the efficient and sustainable development of the energy sector by expanding private sector participation, was highly relevant.
  • The implied objective, of expanding generation capacity by supporting private sector generation projects was also highly relevant. However, the IDA loan that the Government onlent to the private sector to finance the phase II CIPREL (a private sector Build, Own, and Operate power plant), appears to have funded the entire power plant, so that the private sector did not have to make any significant equity contribution. This may not be an optimum way to encourage private sector investment in the country.
  • The second objective, improving power sector supply and reliability, was also highly relevant, and the use of the private sector to support this objective was consistent with good project design.
  • However, the choice of the design for the power generation project is highly questionable. The appraisal report did not test the combined cycle plant as a alternative design, possibly because at the cost of natural gas used in the evaluation (equivalent to $5.20 per barrel oil) it would not have been economical. But this choice for the price of petroleum appears to have been extremely low, even for 1995, when the project was appraised - there does not appear to have been any consideration of the alternative of building a combined cycle plant instead of a single cycle plant. Since it was never an evaluated alternative, it was not considered even when the bidding process revealed that the capital cost of the single cycle plant was far lower than originally estimated, and there were, as a result,, a significant amount of funds (about $10 million) available for this added investment.
  • The third objective of enhancing operational reliability was also highly relevant, and the design of the component, which included strengthening the transmission system was appropriate

4. Achievement of Objectives (Efficacy) :

A. The objective of establishing an appropriate regulatory framework and strengthening institutional capacities to support an the expansion of private sector participation was modestly achieved. Restructuring of the power sector and the newly established tariff regulations contributed to the successful undertaking of a new private sector owned 300 MW power generation project. EECI, the State Power utility, was superceded by three new institutions, SOGEPE, managing the power sector assets, SOPIE, to plan, organize, and implement major electricity sector investments, and ANARE, the power sector regulatory agency. However, ANARE never acted as an independent body. More importantly the sector was never unbundled into truly independent generation, transmission and distribution entities.
B. The objective of expanding electric power supply through the construction of new gas turbine generation facilities was substantially achieved with some shortcomings. The plant has been operating well, under full capacity, and with a high availability factor since its commissioning. The shift from heavy fuel oil to natural gas as a primary energy source achieved the subsidiary objective of reducing the environmental impact of power generation. This objective can be considered as only partially achieved in that the environmental impact could have been substantially greater if designers had chosen the more energy efficient combined cycle pant instead of the single cycle plant. Cost reduction was also achieved, but here again, in light of the current high cost of natural gas (which is tied to the international petroleum prices), costs could be considerably reduced if the combined cycle plant had been chosen.

C. The objective of enhancing power reliability was substantially achieved, although with considerable delay, caused both by the need to revise several elements in the structure of the transmission system as well as by the unrest in the country after the 1999 coup and the subsequent 15 month suspension of disbursements

5. Efficiency:

The CIPREL II gas fired generation plant was implemented at below appraisal cost and with only a short time overrun from the SAR timetable. The two new turbines had a 50% higher capacity, and a 21% lower capital cost, and were 15 percent more efficient that expected in the SAR evaluation. The lower cost of electricity production has led to a reduction of 15% in the contract price of electricity.
  • The lower than expected costs were reflected in the projects higher ex-post economic rate of return. The appraisal report projected a 34 percent ERR, wile the ICR reported an ex-post ERR of 48%, despite the 500 percent higher gas costs.
  • The new gas turbine generating plant allowed the government to close down the old, inefficient and environmentally unsound coal fired power generation units at Vridi, without reducing the system’s overall reliability.
  • Efficiency would, however, have been considerably higher if a combined cycle power plant had been installed.
6. M&E Design, Implementation, & Utilization:

The logframe puts a lot of emphasis on outcomes/results, including significant reductions in price of energy, and reduction in the number of network interruptions. However, the indicator for institutional outcomes [putting in place recommendations of institutional framework study] is much less rigorous, especially since there are three sub-components to the institutional development component, with, in total, eight further sub-sub-components. The first of these sector studies, in institutional reform, was discussed with the Bank, and then implemented, Still the results were unsatisfactory, in that the unbundling was ineffective in creating independent entities. Better definition of the desired outcomes, with the studies focused on how to reach these desired outcomes, would have been useful.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

The breakup of the monolithic and unresponsive state power organization (EECI), which had become a state within a state, does not appear to have substantially improved the situation for the private operators in the sector. Although the new institutions are more responsive to their needs, the overlapping functions and lack of clear lines of responsibility cause significant difficulties.
The Regulatory Authority can only make tariff recommendations to the Government. The final decision is still in the hands of the government. In addition it lacks enforcement authority for its non-tariff decisions.

8. Ratings:
ICR
OED Review
Reason for Disagreement/Comments
Outcome: 
SatisfactorySatisfactory
Institutional Dev.: 
ModestModest
Sustainability: 
UnlikelyUnlikely
Bank Perf.: 
SatisfactorySatisfactory
Borrower Perf.: 
SatisfactoryUnsatisfactoryThe Government failed to meet its financial commitments, which resulted in a significant period of suspension of disbursements.The PIU, which was a politically established unit, was relatively inefficient. It was also unable to work effectively to put together bid packages for utilization of the $10 million saved on the construction of the power plant. Much of the unsatisfactory performance must be attributed to the revision of sector policy implemented by the government that took over in 1999.
Quality of ICR: 
Satisfactory

NOTES:
- When insufficient information is provided by the Bank for OED to arrive at a clear rating, OED will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

A full time PIU is likely to be more effective in getting a project implemented than is a part-time government committee made up of members of several ministries, whose members do not have primary responsibility for project outcome, even if the members of the committee are of high technical caliber.
  • Better definition of the desired outcomes for the various studies implemented under the project,, with the studies focused on how to reach these desired outcomes, would have been useful.
  • Public-private partnerships are often critical for encouraging infrastructure investments in countries where the perception of risk is high. Care should, however, be taken the ensure that the private sector shoulders some of the investment costs and associated risks.
  • Business risk, as perceived by the private sector, can be reduced by establishing an independent private sector management group (in this case CIE the private electricity company) that has an irrevocable mandate from the government to collect revenue and make payments to private sector suppliers of power.
  • Government's continued acceptance and fulfillment of its financial commitments greatly mitigates private sector risk perception.
  • The Bank's ICB process greatly reduced the cost of the power plant from the original projections, and had a large positive effect on project efficiency.

10. Assessment Recommended?  No

          Why?  

11. Comments on Quality of ICR:

This is a good ICR, with a thoughtful contribution by the borrower.
  • The ICR could have been further strengthened by a greater focus on lessons learned -- relegating some of the detailed information about individual contracts in an annex.
  • More sector background information might have been useful for understanding the project context. For instance, it is not clear what relationship the Azito project, with its 300 MW of new capacity, had to the gas turbine generator project component. Nor is it clear why the transmission component had to be redesigned to take into account changes in power generation activities that should have been studied and fully understood well in advance.
  • There is very little discussion of the institutional arrangements under which the Government onlent Bank funds for a private sector IPP power plant. This is a very important project element, the implications of which for future Bank lending should have been discussed at some length.
  • The ICR would have been improved if it had included a discussion about the extremely low petroleum price used in the SAR economic evaluation, and the fact that the most efficient alternative technologies was not considered during appraisal (or at least not mentioned in the SAR).
  • Some judgements, such as "problematic" for the evaluation of the performance of a consultant, are not easy to interpret. A little more concise terminology for evaluating results would have been useful.

  • (ES-Rev4-Jul/05)
    © 2012 The World Bank Group, All Rights Reserved. Terms and Conditions