|1. Project Data:
ICR Review Date Posted:
|Energy 2 Project
Project Costs(US $M)
Loan/Credit (US $M)
|Energy and Mining
Cofinancing (US $M)
Board Approval Date
|Power (70%), Central government administration (10%), Energy efficiency in power sector (10%), Health (5%), General education sector (5%)|
|Urban services and housing for the poor (25% - P)
Infrastructure services for private sector development (25% - P)
Regulation and competition policy (24% - P)
Pollution management and environmental health (13% - S)
Climate change (13% - S)|
||ICR Review Coordinator:
|Richard L. Berney
|2. Project Objectives and Components:|
a. Objectives:The Project Development Objectives in the Development Credit Agreement (page 13) are to:
(a) improve the security and reliability of the electricity transmission system and the wholesale electricity supply and facilitate unimpeded commercial operation of the power system; and
(b) improve the availability, quality, and efficiency of heating in selected buildings.
b. Were the project objectives/key associated outcome targets revised during implementation?
c. Components:Component A: Electricity system upgrade (Appraisal US$24.5 million, Actual US$36.8 million). This component includes the following subcomponents:
- Improvement of metering in the electricity transmission network. Installation of energy meters at all interconnecting points of the 110-400-kV transmission network, which would enable metering and recording of active and reactive electricity flows in the wholesale electricity market. The meters would record at 15-minute intervals, be able to transmit information to the National Dispatch Center, and have remote and on-site data downloading and reading capabilities.
- Rehabilitation and upgrade of power system dispatch. Installation of the necessary hardware and software to enable real time acquisition of operational information from the main facilities (power stations and transmission system substations), analysis and monitoring of the system status at the National Dispatch Center, and control and dispatch of the power plants, load centers, and the transmission system, to maintain a reliable, secure and economic operation, and facilitate financial settlements in the wholesale electricity market. The main elements of the system include Remote Terminal Units (RTU) and the corresponding local data acquisition equipment at the power plants and transmission substations, the System Control and Data Acquisition (SCADA) system, and the Energy Management System (EMS).
- Rehabilitation and upgrade of system telecommunications. Installation of the necessary communications equipment (fiber optics, power line carrier systems and radio systems), which would serve the communication needs of metering and dispatch.
- Priority rehabilitation of the transmission network, including environmental upgrades. Replacement and repair of high voltage transmission line pylons and the most urgently needed rehabilitation measures in selected high-voltage substations (station batteries for 11 substations, 330-kV equipment for the Chisinau, Straseni and Balti substations and a number of 110-kV circuit breakers for various substations). Depending on the outcome of the PCB follow-up study (see below under Component C), this component could include physical mitigation measures for appropriate protection of PCB containing condenser batteries, and for their disposal to be implemented when replacement of the batteries is required.
Component B: Heating Supply and Efficiency Improvement (Appraisal US$9.2 million, Additional Financing US$ 9.8 million, Actual US$21.91 million). This component includes improvements in supply and distribution of heat and demand side measures for heat and hot water consumption in selected public buildings (schools, hospitals, and residential buildings for disabled and other vulnerable groups). About 20 subprojects, comprising the first investment batch, have been identified and technically appraised. An indicative list of additional buildings has been prepared, and includes about 95 objects in 8 municipalities. The list includes approximately 50 schools and kindergartens with more than 15,000 pupils and 25 hospitals and clinics with more than 4,000 beds.
Component C: Technical Assistance for Project Implementation and Energy Sector Reforms (Appraisal US$1.60 million, Actual US$4.74 million). This includes technical assistance for the following activities;
- Project implementation consultant services for procurement and project management for the electricity and heating components, and audit of the project and Moldelectrica's financial statements;
- PCB follow-up study: The environmental assessment carried out in the context of project preparation indicated that no appreciable adverse environmental impacts would result from the implementation of the proposed electricity system upgrades. However, in order to strengthen its capacity to deal with the potential problem of condenser batteries containing PCBs located at substations throughout the country, the Government has requested the inclusion in the technical assistance to carry out a follow-up study on this issue, including the development of recommendations for appropriate protection of the sites and disposal of old PCB-containing condenser batteries, to be implemented when replacement of the batteries is required. Actual removal of the capacitors or renewal of old ones is not foreseen under the project. The study was financed by GEF Grant for Sustainable Persistent Organic Pollutants Stockpiles Management Program (the POPs project). POPs also financed the disposal of the old PCB containing condenser batteries and capacitors.
- Consulting services to support improving institutional and regulatory framework in the energy sector, energy trading, privatization, and debt restructuring.
Component D: Project Management and Administration (Appraisal US$1.38 million, Actual US$1.63 million). This component included the incremental costs associated with the establishment and operation of a Project Implementation Unit created by the project beneficiaries specifically for implementation of this project.
d. Comments on Project Cost, Financing, Borrower Contribution, and Dates Cost: Total project cost increased from US$40 million at Appraisal to US$65.1 million at completion. The IDA contribution SDR25.7 million was equivalent to US$35 million, but its average value (in terms of US$) increased substantially, from approximately US$1.36 per SDR at appraisal, to an average of SDR1.54 over the lifetime of the project. This increased the availability of US$ by approximately US$4.5 million over the project's life(of which US$0.4 million was cancelled at project closing). The US$ value of Swedish Kronen also increased from US$1.6 million equivalent to US$1.86 million over the project life.
Financing: The original project financing was SDR25.7 million (US$35 million equivalent). The Government requested an Additional Financing Credit to extend the project’s work on rehabilitating central heating companies. An additional credit (CR4541) for SDR6.7 million (US$10 million equivalent) was approved by the Board of Directors on January 29, 2009 for this activity. SIDA contributed US$0.6 million equivalent for the initial project and added another US$1.0 million equivalent for the Additional Financing project. Due to the appreciation of the Swedish Krona relate to the dollar over the life of the project, SIDA's total actual contribution was US$1.86 million. GEF provided US$2.0 million for disposal of PCB from the POPs Project, which was not included in the original appraisal cost estimate.
Borrower Contribution: At appraisal, the contribution of Moldelectrica, the National Electricity company was estimated at US$4.3 million. Its actual contribution was US$10.8 million. Municipalities contributed US$1.0 million and the Government contributed US$0.1 million, none of which were anticipated at appraisal.
Dates: The closing date was extended 21 months, from April 30, 2008 to December 31, 2009 to allow completion of the SCADA contract. The closing date was extended again by two more years, to December 31, 2011 at the time of the approval of the additional credit, to harmonize the closing dates of these two credits and ensure that the additional funds would be fully utilized. The additional credit was closed on its original closing date of December 31, 2011. The original Credit was extended a third time, by three months, until April 30, 2012 to allow for final testing and operational acceptance of the SCADA system.
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:High: The project was consistent with the objectives of the 2002 Country Assistance Strategy. It promoted macroeconomic sustainability by (i) helping stem the accumulation of new public debt related to electricity sector enterprises, (ii) promoting economic growth by improving the reliability of electricity supply to the economy, and (iii) supporting the restructuring of the energy sector’s outstanding debt. It also supported the specific objectives of two of the three pillars of the 2008 CAS: improving the competitiveness of Moldova’s enterprise sector by increasing the reliability of energy supply, and supporting the promotion of social inclusion by increasing the quality of and access to education and health services.To ensure that the objective to facilitate unimpeded commercial operation of the power system, the loan agreement included a specific covenant that “The Borrower shall maintain a legal, regulatory, policy and institutional framework for the energy sector conducive to efficient commercial operation, attracting private investments and ensuring reliable and affordable energy services.”
b. Relevance of Design: Substantial: The project was designed to support the following activities:
All of these components were directly relevant to the project’s development objectives, with clear indicators related to the targets of each component.
- Upgrade the country's electricity transmission and dispatch networks in order to improve its reliability;
- Upgrading of the heating systems of public buildings in order to improve the availability, quality, and efficiency of heating.
- Strengthen electricity sector reforms, including sector regulation in order to facilitate unimpeded commercial operation of the power system.
|4. Achievement of Objectives (Efficacy) :|
1. Improving the security and reliability of the electricity transmission system and the wholesale electricity supply. Substantial
- The target of installing 400 meters plus one Metering Management System was exceeded. Installation of the Metering Management System and 580 meters was completed by June 2010.
- The target of replacing 53 obsolete and failure prone high-voltage circuit breakers was achieved by June 2010. Forty seven were procured under the project. Moldelectrica had already installed the other circuit breakers using its own funds.
- SCADA and telecommunications systems for improved power system dispatch and control was installed and working by project closing.
All Development targets of this component were met or exceeded.
2. Facilitating the unimpeded commercial operation of the power system. Substantial
- target 1 was to reduce outage rates of transmission lines and substations by 35% In 2011, outages were reduced by 59% from baseline level.
- target 2 was to reduce non-technical losses in transmission and distribution by 75%: As a result of the installation of meters at all substations, non-technical losses went from 11% in 2002 to zero in 2011.
- target 3 was to reduce unserved energy by 200 MWh per year: Unserved energy declined from about 400 MWh in 2002 to about 100 MWh in 2011.
- target 4 was to reduce Moldelectrica’s technical losses by 5%. Technical losses were reduced by 5.7% reduction, from 139 GWh losses in 2002 to 131 GWh in 2011.
Technical Assistance was provided for improving institutional and regulatory framework in the energy sector which resulted in:
- Specification for the Market Rules for the Electricity Market were developed.
- A system for bench marking of Moldova’s Energy Sector for Compliance with the European Energy Community’s requirements was established
- A metering code was established for the commercial metering system;
- Balancing and Settlement Regulations were established for Moldova’s Electricity Market.
- Following intensive sector dialogue, a new Energy Law was approved in December 2009,
- An action plan for legal and regulatory compliance of Moldova’s electricity markets with the ECSEE Treaty was developed and adopted, including legal Audits and Benchmarking in compliance with Energy Community Requirements.
- The metering system provided reliable measurements of energy flows between generating plants and imports and distribution companies, exports and eligible consumers, which provided the basis for commercial transactions to be properly accounted and supported;
- The SCADA system provides real time data from substations, facilitating safe, reliable and economic operation of the power transmission network, and ensuring that dispatch is consistent with commercial contracts. This improvement in the security and reliability of the electricity transmission system and wholesale electricity supply facilitate unimpeded commercial operation of the power system, both domestically and internationally;
- These achievements in efficiency, regulation, and commercial operation of Moldova’s electricity system has enabled it to become a full member of the Energy Community Treaty in 2010.
- In order to ensure that the Project Development Objective of facilitating the unimpeded commercial operation of the power system, the legal agreement included the covenant that: "The Borrower shall maintain a legal, regulatory, policy and institutional framework for the energy sector conducive to efficient commercial operation, attracting private investments and ensuring reliable and affordable energy services.” The ICR states that by the latter stages of the project the Borrower was in full compliance with this covenant. However, it must be noted that while the Government complied with the covenant in most of its actions, it has not fully complied with it on the setting of tariffs. Although the Government's official policy is to set tariffs at cost-recovery levels, for the past several years the National Energy Regulating Agency has restricted Moldelectrica from fully adjusting the value of its assets for inflation. As a result, Moldelectrica’s financial position has deteriorated.
3. Improving the availability, quality, and efficiency of heating in selected building: High
- A Project Preparation Fund (PPF) was used to implement a successful pilot heating upgrade system in the municipality of Ungheni. It included construction of modern block boiler plants for heat supply to both public institutions and residential buildings.
- The initial target was for 80 buildings to be provided with 120 days of winter heating. With the Additional Financing IDA Credit, the target was increased to 170 buildings. At project completion, 252 buildings, including schools, hospital, kindergartens and orphanages and 43 residential buildings were being provided with 120 of winter heating.
- Following the completion of the four PPF financed boiler plants at Ungheni, the municipality used their own funds to built ten additional boiler plants to cover the requirements of most of the municipality’s public institutions and residential consumers.
- The target of improving heating system efficiency by at least 30%, exemplified by a lower specific heat consumption (W/m3) in the design conditions was met.
- In schools and kindergartens 27 thousand students and teachers benefited from heated facilities throughout the winter season, while in medical buildings 1.3 million inpatients, medical staff and outpatients benefited from heat facilities throughout the winter season.
High: The ICR estimates the economic rate of return for the entire electricity rehabilitation component to be 39.8 percent, slightly higher than the ERR estimate of the PAD. The new metering system has increased the level of payments received by Moldelectrica from 30% in 1999, the last year when the old equipment was operated, to 90% by mid 2012.
For the new heating systems, the ICR attempted to analyze cost effectiveness but instead discussed the costs of obtaining equivalent amounts of heat under the old and the new systems. The new boiler systems demonstrated energy savings ranging from between 39 percent and 67 percent, with an average of 58 percent (reduction in specific energy demand ranging from 126-905 kWh/m2 – with an average of 352 kWh/m2, to a range of between 63 and 333 kWh/m2, with an average of 150 kWh/m2). As a result, for the residential areas where new boiler systems were financed under the project, the cost of heating during the 2002-2003 heating season declined from an average of Moldovan Leu (MDL) 6.53/m2, compared to MDL 12-14/m2 under the old systems that were supplied by the older, oversized Mazut boiler plants.
According to the ICR, an efficient, effective and adequately staffed PIU was maintained throughout the project implementation period.
Although the completion of the SCADA system took considerably longer than was estimated at the time of appraisal, and necessitated twice extending the project closing date, the other electricity rehabilitation activities were implemented on schedule.
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated