ASIAN DEVELOPMENT BANK

Transcription

1 ASIAN DEVELOPMENT BANK PCR: INO PROJECT COMPLETION REPORT ON THE SUMATRA POWER TRANSMISSION PROJECT (Loan 1320-INO) IN INDONESIA December 2003

2 CURRENCY EQUIVALENTS Currency Unit Rupiah (Rp) At Appraisal At Project Completion April 1994 July 2003 Rp1.00 = $ $ $1.00 = Rp2,110 Rp8,525 ABBREVIATIONS ADB Asian Development Bank FIRR financial internal rate of return PLN Perusahaan Listrik Negara (national power company) TA technical assistance WEIGHTS AND MEASURES km (kilometer) 1,000 meters kv (kilovolt) 1,000 volts kwh (kilowatt hour) 1,000 watt hours MW (megawatt) 1 million watts NOTE In this report, "$" refers to US dollars.

3 CONTENTS BASIC DATA MAP Page i vii I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 6 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 9 III. Evaluation of Performance A. Relevance 9 B. Efficacy in Achievement of Purpose 9 C. Efficiency in Achievement of Outputs and Purpose 10 D. Preliminary Assessment of Sustainability 11 E. Environmental, Sociocultural, and Other Impacts 11 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 12 B. Lessons Learned 12 C. Recommendations 12 APPENDIXES 1. Chronology of Events 2. Project Outputs at Appraisal and Actual 3. Line Work: Appraised, Actual, and Status 4. Cost Estimate and Schedule for Remaining Work 5. Appraised and Actual Project Costs 6. Actual Disbursements, Contracts Transferred to Power Development and Efficiency Enhancement Project 8. Implementation Schedule Compliance with Covenants 10. Summary of Contracts Financed by the Asian Development Bank 11. Financial Analysis

4 BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number Indonesia 1320-INO Sumatra Power Transmission Republic of Indonesia Perusahaan Listrik Negara $272 million PCR:INO 787 B. Loan Data 1. Appraisal Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness In Loan Agreement Actual Number of Extensions 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) 8. Terms of Relending Interest Rate Maturity (number of years) Grace Period (number of years) 16 May June August September September November February April April June Variable 20 4 Loan rate plus 0.5% 20 4

5 ii 9. Disbursements a. Dates Initial Disbursement 29 October 1996 Effective Date 27 April 1995 b. Amount ($ million) Final Disbursement 14 May 2001 Original Closing Date 30 April 1999 Time Interval 55 months Time Interval 48 months Original Allocation Last Revised Allocation Net Amount Available Category or Subloan Amount Canceled Transmission Lines (59.39) Substation (21.58) Live Line Maintenance (4.00) 0 Construction Supervision (8.70) 4.34 Consulting Service for Kusan 3 Hydropower Project (1.06) 2.34 Consulting Services for Iralalaro Hydropower Project (3.50) 0 Consulting Services for Live Line Maintenance Project (1.00) 0 Unallocated (32.44) 0 Total (131.66) Amount Disbursed Local Costs (Financed) Amount ($) 19,385,519 Percent of Local Costs Percent of Total Cost 6.97

6 iii C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost Total Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower-Financed ADB-Financed Subtotal IDC Costs Borrower-Financed Total ADB = Asian Development Bank, IDC = interest during construction. 3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual Part A: Southern Sumatra Part B: Northern Sumatra Part C: Central Sumatra Part D: Central and Southern Sumatra Interconnector Part E: Construction Supervision Part F: Engineering Design for Kusan 3 Hydropower Project Part G: Engineering Design for Iralalaro Hydropower Project 5.00 Canceled Part H: Live Line Maintenance 6.00 Canceled Contingencies Canceled IDC on ADB Loan Total ADB = Asian Development Bank, IDC = interest during construction.

7 iv 4. Project Schedule Item Appraisal Estimate Actual Part A Tendering July 1994 July June 28 Nov 1995 Bid Evaluation/Contract Aug 1995 Apr June 16 Dec 1996 Negotiations Manufacture and Supply May 1996 Oct Nov Apr 1998 Erection and Commission Dec 1996 May Mar Apr 2001 Part B Tendering July 1994 May June Nov 1995 Bid Evaluation/Contract June 1995 Mar Aug Jan 1997 Negotiations Manufacture and Supply Jan 1996 Oct Novr February 1998 Erection and Commission Nov 1995 Nov Aug 1997 June 1999 Part C Tendering July 1994 May June 28 Nov 1995 Bid Evaluation/Contract Negotiations June 1995 Mar Aug 16 Dec 1996 Manufacture and Supply Jan 1996 Oct Nov Oct 1998 Erection and Commission June 1996 Nov Oct 1998 Nov 2000 Part D Tendering Apr 1995 Feb July Dec 1996 Bid Evaluation/Contract Negotiations Mar 1995 Dec Oct Nov 1997 Manufacture and Supply Oct 1996 July Nov July 2000 Erection and Commission Aug 1996 Aug Dec June 2001 Part E Construction Supervision for Parts A D Part A Contract Signed Mar Mar 1997 (terminated Mar 1999) Part B Contract Signed Mar June 1997 (terminated Mar 1999) Part C Contract Signed Mar June 1997 (terminated Mar 1999) Part D Contract Signed Mar Sep 1997 (terminated Mar 1999) Part F Engineering Design for Kusan 3 Hydropower Project Contract Signed Nov Sep 1997 Part G Engineering Design for Iralalaro Hydropower Project Part H Live Line Maintenance Canceled Canceled 5. Project Performance Report Ratings Ratings Implementation Period Development Objectives Implementation Progress (i) From 1 Dec Jan 1999 S PS (ii) From 1 Feb June 2000 PS PS (iii) From 1 July 30 Nov 2000 PS S (iv) From 1 Dec May 2001 S S PS = partly satisfactory, S = satisfactory.

8 v D. Data on Asian Development Bank Missions No. of Persons No. of Person-Days a Specialization of Members b Name of Mission Date Fact-Finding 27 Jan a, b, d, i,,j, k 16 Feb 1994 Appraisal 16 May 1 June a, b, d Review Oct a Review Nov a Review Aug c, i Review Dec c Review Apr a, e, i Review 6 28 Oct 11 Nov c, i Review Feb a, i Review Apr a, i Review July a, i Review Nov 5 Dec a, i Review June a Review July f, h Project Completion Review c 4 8 Aug g, l, k a b c Most of these missions were undertaken in conjunction with reviews of other projects. a = project engineer, b = senior program officer, c = energy specialist, d = senior economist, e = social development specialist, f = power sector specialist, g = project economist, h = sector specialist, i = senior project economist/financial analyst, j = environment specialist, k = staff consultant, l = associate project analyst. The project completion report was prepared by S. Gupta, project economist (energy), Southeast Asia Infrastructure Division and E. Festejo, associate project analyst, Southeast Asia Infrastructure Division.

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10 I. PROJECT DESCRIPTION 1. Until 1993, the demand for electricity in Indonesia had been increasing at 15% per year for more than two decades. Large regional disparities in the power system between Java and elsewhere in the country in 1992/93 were reflected in the high share of electricity consumption in Java (79.6% of national electricity consumption), higher transmission and distribution losses outside Java, and the low electrification ratio outside Java (64.5% in Java compared with 37.2% outside Java). The Sumatra Power Transmission Project aimed to support the Government's objective of achieving geographically balanced development in the power sector by reinforcing transmission networks in Sumatra and improving supply efficiency through system interconnection. The Project's main objectives were to (i) transmit power generated from power plants and permit an economic interchange of power and sharing of reserve margins between the central and southern Sumatra grids; (ii) promote the development of hydropower potential in South Kalimantan and East Timor, now Timor-Leste, a separate country since 20 May 2002; and (iii) improve transmission system availability through live line maintenance, that is, repairing power lines while they are energized and conducting electricity. 2. As anticipated during appraisal, the following were the main components of the Project: (i) Part A: Southern Sumatra Transmission: construction of 116 kilometers (km) of 275-kilovolts (kv) line (for initial operation at 150 kv), 45 km of 150 kv line, and a 150 kv substation at Lubuk Linggau and expansion of 150 kv substations at Bukit Asam, Curup, and Lahat; (ii) Part B: Northern Sumatra Transmission: construction of 485 km of 150 kv lines and 150 kv substations at Banda Aceh, Bireuen, Idie, Lhok Seumawe, and Sigli and expansion of 150 kv substations at Binjai, Langsa, and Pankalan Brandan; (iii) Part C: Central Sumatra Transmission: construction of 525 km of 150 kv lines and 150 kv substations at Bagan Siapi Api, Dumai, Duri, New Pekanbaru, Rengat, and Teluk Kuantan and expansion of 150 kv substation at Pekanbaru and gas insulated substation at Ombilin; (iv) Part D: central southern Sumatra interconnection: construction of 429 km of 275 kv lines (for initial operation at 150 kv), 220 km of 150 kv lines, and 150 kv substations at Bangko, Jambi, Kiliran Jao, and Muara Bungo and expansion of gas insulated substation at Ombilin; (v) Part E: consulting services: for construction supervision for parts A through D; (vi) Part F: engineering design: for the Kusan 3 hydropower plant in South Kalimantan; (vii) Part G: engineering design: for the Iralalaro hydropower plant in the former East Timor; and (viii) Part H: live line maintenance: transfer of technology, establishment of a training center at Semarang, and provision of tools and equipment. 3. The Project supported the Government's objective of reducing disparity between levels of development of the power transmission systems of Sumatra and Java, and diversified the generation mix away from oil (scattered diesel power plants) by extending the existing 150 and 275 kv transmission lines in Sumatra and connecting nonoil-based power plants to load centers. 4. In 1998 and 1999, in view of Indonesia s severe economic and financial crisis, the Government and the Asian Development Bank (ADB) undertook comprehensive portfolio reviews of on-going ADB projects. These resulted in a revision of the loan amount and a major change in the Project s scope. The main objectives of the Project, that is, to develop power

11 2 transmission systems in Sumatra and improve the reliability of the power supply by diversifying the generation mix through better interconnection of small grids in Sumatra, were not, however, substantially affected. 5. The Project (i) contributed to the development of a power system on the island of Sumatra that interconnects the regional power grids of central and southern Sumatra, thereby allowing the interchange of power and reducing standby capacity requirements; (ii) allowed the removal of existing diesel power plants from various load centers, connected to more efficient generation facilities, in northern, central, and southern Sumatra; and (iii) allowed the further expansion of power supply in the regions involved. II. EVALUATION OF DESIGN AND IMPLEMENTATION 6. The chronology of major events in the processing and implementation of the Project is given in Appendix 1. A. Relevance of Design and Formulation 7. The transmission components for the Project were identified based on least-cost transmission planning studies for a long-term generation expansion program for Sumatra. Based on these studies, at appraisal Perusahaan Listrik Negara (PLN), the national power company, had already undertaken the required detailed system studies for the Sumatra transmission systems. ADB reviewed these and confirmed that the transmission components identified under the Project were justified and represented the least-cost solution. 8. PLN s Engineering Services Center prepared the project design. The selection of the network elements namely, transmission lines and associated substations to be developed or extended under the Project was in line with PLN s least-cost, long-term ( ) transmission development program for Sumatra. Lines were designed mainly to connect new generation capacities to load centers, to expand the area supplied by power, and to interconnect regional grids. The Project s objectives are consistent with ADB s country strategy and program for Indonesia for , which provides for the continuation of public sector investment to remove power transmission bottlenecks. The design of the interconnectors provides for the construction of 275 kv lines that are initially operated at 150 kv. The design voltage of 275 kv was selected to allow economic transmission of bulk electric power over long distances in the future, while the initial operation of these lines at 150 kv serves subtransmission purposes. 9. Minor changes in network design took place dictated by the review of priorities during project implementation. Certain line sections were replaced by other sections that became more important because of the development of new load centers and generating capacity. These changes were part of the updated least-cost planning exercise. As a result, the 150 kv Dumai Bagan Siapiapi transmission line (90 km, first circuit) was replaced by the Duri Bagan Batu transmission line (110 km, first circuit) and the 150 kv Teluk Kuantan Rengat transmission line (130 km, first circuit) was replaced by the Garuda Sakti Teluk Lembu transmission line (22 km, double circuit). These changes were justified because the lines to Bagan Batu approach the border with North Sumatra Province, thereby allowing interconnections with that grid, and the lines to Teluk Lembu enabled the connection to a gas turbine power plant under construction at that location.

12 3 10. The design of the Kusan hydropower plant included all phases from the review of previous studies, site investigations and testing, basic and detailed design, and preparation of tender documents. B. Project Outputs 11. The expected outputs of the Project as envisaged after revision of its scope have been mostly achieved. The Project had a prolonged implementation period that spanned a period of radical changes in the economy and subsequent changes in priorities to satisfy load demand. PLN responded rapidly to the changing conditions by slightly modifying the initially envisaged extension of the network. These measures improved the Project s benefits, because they took the latest load conditions in the network into account. 12. Appendix 2 shows the achievement of project outputs. Even though work on some segments of the Project has yet to be completed, most parts of the Project are operational 13. Appendix 3 details line length and segments at appraisal and as actually implemented. Major changes and remaining work are as follows: (i) Part A: All components were completed, and 25 km of additional transmission lines had to be constructed because of the mountainous terrain. (ii) Part B: On the Bireuen Sigli (90 km) and Sigli Banda Aceh (75 km) line sections, stringing was delayed because of a lack of security (mainly sabotage and theft) in Aceh Province. Portions of the transmission line already erected were destroyed and materials worth approximately $4 million were stolen. The associated substations Bireuen, Sigli, and Banda Aceh are complete, but cannot be finally commissioned because of the missing lines. (iii) Part C: The Teluk Kuantan Rengat line (130 km, first circuit) was canceled and replaced by a higher priority line from Garuda Sakti to Teluk Lembu (22 km, second circuit), where a 2 x 20 megawatt (MW) gas turbine power plant was being installed. The Dumai Bagan Siapiapi (90 km, first circuit) line was canceled and replaced by the Duri Bagan Batu (110 km, first circuit) line to set up a second interconnection path between the provinces of Riau and North Sumatra (via Rantau Prapat). However, this line could not be completed because of the theft of tower components. Other changes were dictated by demand in the region and consisted of replacing double circuit stringing with single circuit stringing on the Kiliran Jao Teluk Kuantan line (52 km). However, stringing has not been completed on 41 km of this line because of right-of-way uncertainties. All associated 150 kv substations have been completed, but the unfinished lines have prevented final commissioning of the line bays. (iv) Part D: 55 km of the 195 km Lubuk Linggau Bangko line and 28 km of the Muara Bungo Jambi line (now the Muara Bungo Aur Duri line) could not be completed because of right-of-way uncertainties and land acquisition disputes. (v) Part E: Because of the 1997 Asian financial crisis and the resulting shortage of counterpart funding, the scope of consulting services for supervising construction under parts B and C was reduced considerably. This was made possible because PLN could mobilize sufficient experience and capacity within its own staff to supervise construction of the 150 kv lines. (vi) Part F: Basic and detailed design, social and environmental impact analysis, cost estimates, and production of tender documents were completed by the consultants and handed over to PLN.

13 4 (vii) Parts G and H were canceled because of the lack of counterpart funds and the reduced priority given to the engineering design studies In all cases, towers have been erected and conductor stringing can start in the unfinished sections as soon as the security situation has improved and right-of-way problems have been settled. PLN has taken over the contractors outstanding work and has decided to procure the materials required to complete the components through its own budget allocation. Right-of-way settlements will be achieved using PLN's budget, and PLN has given this issue priority by engaging all concerned stakeholders. Given PLN's corrective action, it is envisaged that the Project will be completed and all project objectives will be fully achieved by mid Appendix 4 presents the cost of and schedule for completing the remaining work. C. Project Costs 15. At appraisal, the Project cost was estimated at $414 million equivalent, consisting of $300 million in foreign exchange costs (72.5%) and $114 million equivalent in local currency costs (27.5%). The actual Project cost was $ million equivalent, consisting of $ million in foreign exchange costs (54.1%) and $ (45.9%) million equivalent in local currency costs (Appendix 5). 16. The actual foreign exchange costs were lower than estimated at appraisal, even without considering the canceled components, because of substantial variations in the rupiah-dollar exchange rate during project implementation. Except for part D, whose scope was reduced significantly, local currency costs exceeded appraisal estimates partly because of a higher than anticipated inflation rate. The local currency costs of part C almost tripled, partly due to inflation, but also because of right-of-way and land acquisition problems. Higher amounts of compensation had to be paid and significant delays resulted in higher overheads. 17. In 1998, the Government and ADB undertook a comprehensive portfolio review of all ongoing ADB projects because of the severe economic and financial constraints Indonesia had been facing since the 1997 financial crisis. The first review resulted in a major change in project scope and the cancellation of $79.3 million of the loan amount resulting from (i) the cancellation of the construction supervision contracts for the 150 kv transmission lines and the direct supervision by PLN engineers instead, (ii) the cancellation of the live line maintenance equipment and associated consultancy services (part H), (iii) the termination of the engineering design studies for the Iraralalo hydropower project (part G), and (iv) the substantial cost underruns due to lower contract prices than those estimated at appraisal. A second review in 1999 resulted in the cancellation of a further $33.9 million, mainly through a reduction in scope for the transmission lines and consulting services for engineering studies and the elimination of contingencies that would not be used. D. Disbursements 18. Total disbursements were $ million, compared with the original approved amount of $272 million. Appendix 6 shows the annual disbursements under the loan. To limit expenses in the aftermath of the Asian financial crisis, the Government and PLN took corrective action and canceled some components of the Project. Moreover, as some components had not been completed by the extended loan closing date, PLN asked ADB not to extend the loan closing date further, but to transfer the undisbursed balance of $8.1 million as an additional amount to the 1 ADB Report on the 1998 Comprehensive Portfolio Review. IN December Manila.

14 5 Power Development and Efficiency Enhancement Project. 2 ADB agreed to the request. Appendix 7 lists the contracts that were started under the Project and then transferred to the Power Development and Efficiency Enhancement Project. E. Project Schedule 19. According to the original implementation schedule, the Project was scheduled to be completed in The actual implementation schedule (Appendix 8) shows delays of two years for part A and more than four years for some line sections of parts B, C, and D. The Asian financial crisis and the resulting shortage of counterpart funding affected the execution of parts of the Project, as did such project-specific problems as right-of-way issues and the theft of materials. 20. Part A was behind schedule because of delays in the tendering process and the late approval of bid evaluation results. 21. Delays in part B were caused mainly by continuing hostilities between rebel forces and the military in the province of Nangroe Aceh Darussalam and the related security issues, (para. 13), which affected 330 circuit-km of 150 kv lines (Bireuen Sigli and Sigli Banda Aceh). Plans are in place to complete these line sections by April PLN intends to use primarily local contractors and local PLN personnel to avoid possible animosity and confrontations on the construction site. PLN will fund the remaining works out of its budget allocations. 22. For the Duri Bagan Batu (part C) 150 kv line that could not be completed because of stolen materials, PLN plans to complete the line section by June 2004 using its own budget allocations. The Kiliran Jao Teluk Kuantan 150 kv line was delayed because of right-of-way issues and land acquisition disputes. This section is expected to be completed by January In part D, the 275 kv (for initial operation at 150 kv) line section, about 55 km of the Lubuk Linggau Bangko segment, and about 28 km of the Muara Bungo Aur Duri segment, cannot be strung because of the pending settlement of right-of-way issues. These sections are expected to be completed by January Right-of-way negotiations are extremely slow and difficult because of the following reasons: (i) Landowners are claiming exaggerated amounts compared with settlements already reached where right-of-way issues must be urgently settled to complete the work. (ii) Landowners who already received compensation at reasonable rates will claim higher compensation if PLN provides the remaining landowners with significantly higher amounts of compensation. (iii) Landowners and PLN differ about how to calculate the compensation amounts. PLN uses the opportunity cost of land to determine compensation, but many landowners want a higher lump sum settlement that is not related to opportunity cost. (iv) Landowners have refused to clear vegetation under lines. (v) Many landowners are involved, e.g., according to PLN, more than 1,000 owners are involved in the 55 km uncompleted portion of the Lubuk Linggau Bangko line section. 2 The original loan amount approved was $272 million, with cancellations of $79.3 million in 1999 and $33.9 million in In June 2001 at loan closing, $18.46 million were undisbursed, of which $8.1 million were transferred to the Power Development and Efficiency Enhancement Project.

15 6 (vi) (vii) Many landowners live in remote areas and are difficult to reach. In some cases ownership is unclear and duplicate claims arise. 25. PLN has made several attempts to settle the disputes. Since June 2002 three different teams involving local police, local administration, and the military were established in an attempt to resolve the issues. PLN has held periodic dialogue with these teams and pertinent landowners to resolve the right-of-way problems. 26. PLN engaged in processes to improve public relations using printed and electronic mass media, public hearings, and group and individual explanations. PLN and local governments attempt to give local communities a better understanding of the benefits of the Project, while providing reasonable compensation to affected landowners to facilitate the settlement of right-ofway problems. ADB expects that the remaining work will be completed given PLN's commitment to the Project. F. Implementation Arrangements 27. PLN was the executing agency for the Project and PLN s head office was responsible for project implementation. PLN s Engineering Services Center and Directorate of Construction handled the engineering and procurement and designed the 275 kv lines, while local PLN project organizations were responsible for day-to-day construction coordination and supervision. Both PLN s head office and its local project organizations received assistance from international consultants financed by ADB. 28. The technical arrangements were familiar to PLN, and the Project could be started and implemented without major hindrances. Problems arose when local funding was considerably reduced as a result of the economic crisis and the parity of the rupiah against the dollar started to fluctuate. 29. In 1994, PLN underwent significant changes that had implications for project reporting. The corporatization of PLN in 1994 was followed by a continuous restructuring process to establish new branches and decentralize its operations. The reorganization and the reduction in the number of employees at the head office, the merger and reorganization of regional project offices and the resulting shifts of responsibilities, and the unavailability of consultants for project management for the remaining parts of the Project (para. 13) made obtaining information about the progress of implementation difficult. G. Conditions and Covenants 30. PLN generally complied with the Project s covenants. The submission of audited project accounts and financial statements could have been more timely. Significant delays in meeting some of the loan conditions occurred because of disputes during the land acquisition and rightof-way negotiations, which prevented the timely completion of some line sections. 31. Appendix 9 shows the status of compliance with conditions and covenants. The covenants were realistic and those initially laid down in the Loan Agreement have not been modified, suspended, or waived.

16 7 H. Related Technical Assistance 32. ADB provided technical assistance (TA) to help the Government with its energy sector initiatives aimed at promoting efficient and environmentally sustainable development, and energy conservation. 3 The TA had three components as follows: (i) A study of total energy management of urban buildings with decentralized cogeneration. The study evaluated the technical, financial, and economic feasibility of a combined natural gas-based cooling and power generation system with analysis of the environmental considerations. The executing agency was the Directorate General of Electricity and Energy Utilization. (ii) The development of an energy efficiency labeling program for electrical appliances, the selection of appliances, and the development of proposals for the institutional framework and the legislation for implementation. The executing agency was the Directorate General of Electricity and Energy Utilization. (iii) The provision of assistance to enhance PLN s in-house technical capabilities in environmental impact assessments of transmission lines. The executing agency was PLN. 33. The TA was rated as partly successful. 4 The TA addressed two broad areas: the incorporation of environmental considerations into transmission system expansion and energy conservation. Component (iii) directly contributed to the goal of the Project by enhancing PLN's capacity for conducting environmental impact assessments of transmission lines. The other components had indirect positive implications for transmission systems. For component (i), the TA report recommended that cogeneration systems for urban buildings based on absorption chillers and power generation were viable in shopping malls and hotels, whereas for hospitals and office buildings, such systems were uneconomical. Component (ii) identified the residential sector as the second largest consumer of electricity and the largest contributor to peak load. Establishing an appliance labeling program for air conditioners and refrigerators would result in 9 million kilowatt hours (kwh) of energy savings from refrigerators and 80 peak MW in air conditioner energy use. An instructors guide was developed under component (iii) and a training course entitled Environmental Impact Assessment of Transmission Lines was conducted for PLN staff. The financial crisis prevented the TA s recommendations from being fully implemented, especially for components (i) and (ii). Recommendations in relation to component (iii) helped PLN undertake environmental impact assessments of transmission lines and incorporate environmental concerns into the system expansion process. The TA s findings are still relevant, but will need to be updated as part of ADB's policy dialogue with PLN and the Directorate General of Electricity and Energy Utilization in relation to future loans. I. Consultant Recruitment and Procurement 34. Consulting services were required under part E of the Project to supervise construction of the transmission components for parts A through D and under part F for the engineering design of the Kusan 3 hydropower plant. Consultancy services under part G were canceled (para. 13). ADB reviewed and approved the terms of reference for the consulting firms. PLN carried out separate recruitment for each component following ADB s Guidelines on the Use of Consultants by ADB and its Borrowers. 3 ADB Loan and Technical Assistance for the Sumatra Power Transmission Project. Manila (TA No INO, for $416,000, approved on 27 September 1994 with the project loan). 4 ADB Environment and Energy Efficiency. TA Completion Report. (TA 2171-INO, for $416,000). Manila.

17 8 35. As envisaged in the report and recommendation of the President, the line survey, site selection, and land acquisition for the substations started in All ADB-financed supplies and services were procured using international competitive bidding in accordance with ADB's Guidelines for Procurement. For preparatory work, civil work, erection, and construction, procurement used local competitive bidding procedures, which ADB reviewed and found acceptable. ADB did not finance any local competitive bidding contracts. Four 275 (150) kv line sections have been tendered as turnkey contracts. For the other line sections and substations (all 150 kv), separate tenders for material supply, civil works, erection, and construction were issued. Advance procurement action was not used for the Project. Appendix 10 summarizes all contracts financed by ADB. 36. The procurement of goods and services was a laborious undertaking because of the many contracts to be awarded. A total of 165 contractors was engaged (18 for part A, 65 for part B, 54 for part C, and 28 for part D), which made tendering for construction supervision, project administration, and monitoring a time-consuming process. Preparing and handling tender documents and bid evaluations, coordinating packages, and carrying out contract negotiations, for so many, sometimes small, project components required a high level of effort. 37. The process of awarding contracts suffered from delays beyond PLN s control. Delays in the award process occurred after evaluation. The time between the invitation to bid and the award of contracts was lengthy because approval was required from many departments. To avoid these delays, contracts were divided into smaller lots requiring fewer approvals; however, the invoicing of extremely small amounts unnecessarily burdened the Project s administrative staff. J. Performance of Consultants, Contractors, and Suppliers 38. The performance of the international consultants and their domestic associates was satisfactory; however, in the case of part B, PLN had expected the consultants to transfer knowledge pertinent to project management and administration to PLN project engineers more effectively and to involve them more in the day-to-day work. 39. The Project was executed by a large number of contractors who generally performed well, but in the case of part D, the performance of some of the contractors was reported to be below expectations. Complaints included inadequate materials storage and handling, significant construction problems caused by the incompatibility of the equipment supplied by multiple vendors, and careless handling of drawing revisions by the contractors. K. Performance of the Borrower and the Executing Agency 40. The Borrower and PLN were responsible for providing all funds not provided by ADB. They did so in a timely manner until the onset of the Asian economic crisis, which caused shortages of local counterpart funds and had a serious impact on project implementation. 41. PLN attempted to cope with the situation and took the initiative to participate directly in the erection work through its regional project units with the aim of reducing costs to the lowest possible level. The assessment of PLN s capabilities at appraisal was reasonably accurate. The delegation of authority from the head office to the regional units was implemented progressively during the course of the Project. The Project was a challenge for the two PLN regional project units as PLN head office s involvement was gradually reduced and an increasing share of responsibility was transferred to them. The head office no longer performed operational

18 9 activities, but was responsible only for policy and strategic matters. The Directorate for Construction and Construction Administration in PLN s head office was dissolved and the regional project units undertook project administration and construction supervision up to commissioning. 42. To facilitate the transition to an unbundled power sector, the focus is now on the decentralization and empowerment of operational units of PLN by making them strategic business units. The corporate office, which previously made all decisions about operational and investment-related matters, is now transforming itself into a holding company, with strategic business units as "virtual" subsidiaries. During the past 2 years, many corporate staff have been relocated to the strategic business units, and their general managers now exercise full responsibility for energy sales, including the expansion of the distribution network. The larger generation and transmission projects are implemented under the direct control of the corporate office; however, during the next phase of decentralization, managers of strategic business units will share the responsibility for procurement and be fully responsible for implementing all projects in their respective regions. This will result in more effective project management, taking into account the considerably shortened decision-making process. 43. PLN continues to develop its organization by broadening the delegation of authority from its head office to its regional units and implementing a market mechanism to mesh with the liberalization of the energy market. Given the difficult economic circumstances with which it had to contend, the performance of the borrower and PLN is rated as satisfactory. L. Performance of the Asian Development Bank 44. ADB responded in a timely and adequate manner to the Project s requirements. Reviews of tender documents and subsequent bid evaluation reports were processed appropriately. Project progress was reviewed at least twice a year, and withdrawal applications were processed promptly. ADB also helped PLN manage the loan through the comprehensive reviews of ongoing projects after the 1997 financial crisis. ADB's performance is rated as satisfactory. III. EVALUATION OF PERFORMANCE A. Relevance 45. The design of the Project was satisfactory and met the main project rationale of supporting the Government's objective of achieving geographically balanced development for power transmission systems. The Project supported diversifying the generation mix away from oil-based generation and expanding the power supply in Sumatra. Changes made at midterm were intended to improve the Project s design relevance in line with economic developments in the region and to achieve the Project s goals more effectively. The Project is considered to be highly relevant. B. Efficacy in Achievement of Purpose 46. During appraisal the Project was anticipated to contribute to the reinforcement of PLN s power network in Sumatra by constructing additional 275 kv and 150 kv transmission lines. This purpose was achieved with the exception of a few line sections that could not be completed for reasons discussed earlier (para. 13). The Project is partially functional because of the incomplete sections, but has improved the power transmission network in Sumatra. The cost of

19 10 the works to be completed by PLN is estimated to be less than 3.3% of the total project cost. According to PLN s schedule, these line sections will be completed between December 2003 and June The purpose of transmitting power from the generating plants to load centers was achieved, and municipalities connected by 150 kv transmission lines are fed from the network and their diesel generating units can be relocated to remote areas. The economic interchange of power between central and southern Sumatra will be achieved step by step, initially, by a short distance (subtransmission) interchange of power at 150 kv, then followed by a supraregional interchange at 275 kv when the uprating takes place. The objective of preparing the engineering design, technical specifications, and final tender documents for the Kusan 3 hydropower plant in South Kalimantan was achieved. 48. The Project contributed to the wider development goal of reducing the geographic disparity between the Sumatra and Java electrical networks by providing a more efficient transmission system in Sumatra. Transmission losses decreased from 4.08% in 1997 to 3.32% in 2001 in northern Sumatra and from 2.84% to 2.70% in southern Sumatra during the same period. Overall, the purpose of the Project as formally modified during implementation was achieved less than efficaciously. C. Efficiency in Achievement of Outputs and Purpose 49. The Project's efficiency was affected by implementation delays. Because it was not feasible to isolate and quantify the benefits of the Project from those attributable to the entire power network, a time-slice method was used at Project appraisal to estimate the economic internal rate of return and the financial internal rate of return. However, the use of time-slice analysis for the economic internal rate of return calculations does not seem appropriate in this instance, and it was decided, in consultation with the ADB Economics and Research Department, not to conduct a similar analysis for the economic reappraisal. The Project is part of the least-cost development plan for power system generation and transmission and is considered to be economically viable. 50. In recalculating the financial internal rate of return, the time-slice method was used as in the report and recommendation of the President because no better alternative is available. Appendix 11 provides details of the calculations. The recalculated financial internal rate of return is 1.7% compared with the analysis at appraisal of 10.8% (base case) and a weighted average cost of capital of 4.15% for PLN in The deviation from the appraisal results is due mainly to the lower than expected growth in demand, a higher than expected increase in the cost of electricity supply because of the depreciation of the rupiah and the high share of foreign exchange costs, and the inability of PLN to increase tariffs in line with the increase in costs because of the economic crisis. 51. As the transmission facilities provided under this Project made the dismantling of diesel power plants possible, this demonstrates the efficiency of the investment. The Project resulted in the substitution of high-cost, oil-based generation by relatively low-cost generation based on natural gas, coal, and geothermal and hydroelectric sources. The Project made possible the relocation of oil-based diesel power units totaling an installed capacity of 156 MW from the area affected by the Project to other (remote) areas of Indonesia. At the same time, the Project averted investments in about 126 MW of additional diesel generating capacity in the area. Given the implementation delays and the low financial return, the Project is rated as less than efficient.

20 11 D. Preliminary Assessment of Sustainability 52. Energy losses in Indonesia in 2001 were 13.52% (station own use not included), which was higher than the 12.33% in 1995, but still below the covenant value of 15%. This was due to the increase in distribution losses from 9.47% in 1995 to 11.14% in Transmission losses decreased from 2.86% to 2.38% during the same period, thereby indicating an improvement in the transmission network. The rural electrification ratio improved considerably from 61.75% in 1995 to 82.39% in The rural electrification ratio in the project area in 2001 ranged from 69.49% in southern Sumatra to 94.92% in Aceh. The Project contributes to a sustainable power transmission system by providing a more efficient transmission system with lower losses. Nevertheless, the level of rural electrification still needs further improvement in southern Sumatra. 53. Electricity tariffs charged to consumers were too low to ensure the sector s economic sustainability, and tariffs had to be increased to a level adequate to ensure not only financial survival, but also the capacity to repay loans needed to fund new capital investment. PLN has made good progress in increasing tariffs since Average revenues from electricity sales increased from Rp211 per kwh ($0.024 per kwh) in 1999 to Rp557 per kwh ($0.065 per kwh) in July Consumers have accepted the tariff increases, but tariffs are still slightly below the economic cost of power generation and supply, which is currently estimated at $0.07 per kwh. Expectations are that they will reach the required level in PLN's financial strategy is based on strict budget control over strategic business units and operational units, stringent cash flow norms to maintain a reasonable level of power supply within the financial constraints, Government approval for gradual increases in tariff levels, determination of the subsidy necessary to offset the partial recovery from small consumers, low levels of energy losses, and efficient energy billing and bill collection. 54. Continuation of the reform program by the Government is expected to ensure the sector s sustainability and the optimization of Project-related benefits. The 2002 Electricity Law provides for a gradual transition to a fully competitive electricity market and is an important milestone in the reform program. The blueprint for the development of the national electricity industry recognizes the need for making high-quality and reliable electricity services available and for developing transmission and distribution facilities to meet regional electricity demand. The Government s programs to develop the electricity industry that will lead to the optimization of benefits from the Project include designating national grids that in the long-term are consistent with the development plan for the Association of Southeast Asian Nation s grid, increasing supply capacity by addressing transmission bottlenecks and improving the capacity of the transmission network capacity, and including the preparation of a grid code to facilitate competitive electricity markets among the duties of the electricity supervisory board. Given the initiatives taken by the borrower and PLN, the Project is likely to be sustainable. E. Environmental, Sociocultural, and Other Impacts 55. At appraisal, the Project was classified B. PLN carried out the initial environmental assessment and submitted it to ADB. During the route selection for the transmission lines, efforts were made to reduce environmental, sociocultural, and other impacts to a minimum. This was achieved by preventing ecological damage and conserving biodiversity and ecosystems in the design of the Project. 56. In certain line sections, land acquisition and right-of-way issues were a more serious sociocultural problem than had been anticipated at appraisal. PLN has taken steps to address

21 12 these problems by establishing committees of stakeholders and local authorities to facilitate settlement of the disputes (paras. 25, 26). Overall, the Project is considered to have moderately positive impacts. IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 57. The Project is considered successful based on a review of its relevance, efficacy, efficiency, sustainability, and other impacts. The Project was implemented as conceived and only minor remedial measures were taken. B. Lessons Learned 58. Land acquisition and right-of-way disputes of the type experienced by the Project are likely to be encountered more frequently as members of the community become more aware of their rights and become involved in prolonged negotiations. This serious issue, which has arisen elsewhere, not just in Indonesia, may affect other projects in the future and should be taken into consideration when preparing upcoming projects (paras. 70, 71). 59. Numerous tender packages and contracts result in additional administrative work and coordination problems (para. 36). Future contracting procedures should ensure adequate time for processing contracts (paras. 37, 67) and optimize the number of tenders and contracts (para. 68). 60. Given the termination of the construction supervision consultancy because of financial constraints, the lack of project progress reporting up to the expiry of the consultant's contract resulted in significant delays and difficulties in subsequent supervision and administrative services (para. 69). C. Recommendations 61. The following paragraphs describe specific and general recommendations that may affect projects or may be generally applicable to ADB practices in the future. 1. Project Related 62. To ensure the Project s operational efficiency, an assessment of the loading of each individual transmission line and of the step-down transformers in the associated substations is required. This can be done by using substation reading records at various characteristic load conditions (low load, peak load, and so on) and periodic control of the quality of maintenance of transmission lines and substations built under the Project. 63. The covenants in the loan and project agreements should be maintained in their existing form. Although it is too late at this stage to change it, the covenant on land acquisition and rights-of-way could have been strengthened (para. 71). 64. Actions are necessary to settle the land acquisition and right-of-way disputes as soon as possible to permit completion of the line sections affected and conclude local currency disbursements. This is important to achieve the Project s full benefits.

22 No additional assistance is needed to substantially improve the Project's performance and sustainability. 66. The Project has greatly benefited Sumatra s transmission and generation network; however, its full benefits will only be realized when it is completely implemented. As a few components of the Project were transferred to the Power Development and Efficiency Enhancement Project and stringing work remains to be done in three sections of the Project, the Project Performance Audit Review should be carried out in 2005 following full completion of the Project, which is expected in General 67. The scheduling of project implementation should allow more time for the approval process of tender evaluation results as well as for right-of-way negotiations. 68. In future, tender packages should be optimized in such a way as to reduce the number of contracts to a minimum without prejudicing competition or price. 69. The terms of reference for future consultancies should include the provision of a final report in case of premature termination of contracts. 70. Executing agencies should develop better formulated and transparent rules and regulations for calculating prices for land acquisition, compensation for the costs of crops and other outputs, to make them acceptable to landowners and for timely settlement of right-of-way issues. Awareness programs should also be developed to obtain more public support for efficient resolution of right-of-way problems and to enable the delivery of efficient and reliable energy. 71. ADB covenants concerning land acquisition and compensation should be strengthened by including requirements that land acquisition or rights-of-way should be obtained prior to the construction of any physical infrastructure. Early settlement would ensure that all affected people are compensated, and would also prevent landowners from taking advantage of the urgency to negotiate and to claim exaggerated prices as compensation.

23 14 Appendix 1 CHRONOLOGY OF EVENTS A. Project Processing 27 Jan 16 Feb 1994 Fact Finding Mission 16 1 June 1994 Appraisal Mission 29 Aug 1 Sep 1994 Loan Negotiation 27 Sep 1994 Loan Approval 27 Apr 1995 Loan Signing B. Procurement 1. General June ADB receives draft bid documents for northern Sumatra (lots 2C1, C2, and C3 for 150 kv transmission line equipment and lot 3C for 150 kv substation equipment), southern Sumatra (lots 2B1, B2, and B3 for 150 kv transmission line equipment and lot 3B for 150 kv substation equipment), and central Sumatra (lots 2A1, A2, and A3 for 150 kv transmission line equipment and lot 3A for 150 kv substation equipment). 11 July Bid documents published in the United Nations Development Business. 31 July ADB comments on draft bid documents sent to PLN. August Bid documents published in the ADB-Business Opportunities 3 August PLN responds to ADB s comment on draft bid documents provided. 10 August Bid documents published in local newspapers. 14 August Bid documents issued. 5 September ADB comments on PLN s reply to draft bid documents. 18 October PLN responds to ADB s fax of 5 September regarding comments on draft bid documents. 25 October Original closing date for bid submissions. 14 November ADB receives original bid documents and the corresponding addenda issued to prospective bidders.

24 Appendix November Actual bid closing date for bid submissions. 2. Category 1A: Equipment (Transmission Line) 1996 a. Part A: Southern Sumatra Transmission 28 May ADB receives BER for lots 2A1, 2A2, and 2A3. 19 June ADB approves BER for lots 2A1, 2A2, and 2A3. 23 August ADB receives signed contract for lots 2A2 and 2A February ADB receives signed contracts for lots 2A1, 2A2, 2A3, and 3A. 13 October ADB receives a copy of amendment no. A.01/97 for lot 2A1 covering change of the company name of SAE (India), Ltd. to RPB Transmission Ltd. 23 October ADB approves amendment no. A.01/97 for lot 2A December ADB receives a copy of amendment no. A.03/98 for lot 2A1 covering extension of completion delivery time from 28 March 1998 to 22 October January ADB approves amendment no. A.03/98 for lot 2A October ADB receives a copy of amendment no.a.03/2000 for lot 3A covering 26 October ADB approves amendment no. A.03/2000 for lot 3A 1996 b. Part B: Northern Sumatra Transmission 30 August ADB receives BER for lots 2C1, 2C2, and 2C3. 9 October ADB approves BER for lot 2C2.

25 16 Appendix 1 25 October 26 November ADB approves BER for lot 2C1. ADB approves BER for lot 2C February ADB receives signed contracts for lots 2C1, 2C2, 2C3, and 3C April 27 April 22 October ADB receives copy of amendment no. A.O1/97 for lot 2C1 covering changes of quantity based on actual requirements at site and extension of delivery time. ADB approves amendment no. A.O1/97. ADB receives copy of amendment no. A.O2J98 for lot 2C1 covering deduction of the scope of work based on actual requirements at site. 3 November 2000 ADB approves no. A.O2/ March 2 April 16 May 23 May c August 4 October 18 October February PartC: ADB receives a copy of amendment no. A.O3/2000 for lot 2C1 covering adjustment of contract price. ADB approves amendment no. A.O3/2000 ADB receives a copy of amendment no. A.O2/2000 for lot 2C2 covering adjustment of contract price in line with Government guidelines. ADB approves amendment no. A.O2/2000 for lot 2C2. Central Sumatra 150 kv ADB receives BER for lots 2B1, 2B2, and 2B3. ADB approves BER for lots 2B1 and 2B2. ADB approves BER for lot 2B3. AD8 receives signed contracts for lots 281, 282, 283, and 38.

26 Appendix April ADB receives copy of amendment no.a.02/98 for lot 2B3 covering changes of quantity based on actual requirements at site and extension of delivery time. 27 April ADB approves amendment for lot 2B3. 17 June ADB receives copy of amendment no. A.01/98 for lot 2B1 covering changes of quantity based on actual requirements at site and supply the shortage tower materials under the previous contract, i.e., lot 2D: 150kV Transmission Lines for Loan 1032-INO June ADB approves amendment no. A.01/98 sent to PLN. 10 July ADB receives copy of amendment no. A.01/98 for lot 2B2 covering addition or reduction of quantity of conductors based on actual requirements at site, supply the shortage conductor materials under the previous contract, i.e., lot 2D for the Power XX Project and extension of delivery time. 31 August ADB receives copy of amendment no. A.02/98 for lot 2B1 covering extension completion time up to 31 October September Bank approves amendment no. A.02/98 for lots 2B1, 3A, 3B, and 1AA April ADB approves amendment no.02/2000 for lot 2B d. Part D: Central and Southern Sumatra Interconnection 21 November ADB receives draft bid document for lot 3D turnkey project. 14 December ADB comments on draft bid documents April ADB receives bid documents for lot 1AA1. 30 April Opening of bid for lot 3D. 1 Lot 2B1 is Supply and Delivery of Tower Materials (150 kv Transmission Lines Central Sumatra). Lot D2 is Contract for 150 kv Transmission Lines under Power XX Project.

27 18 Appendix 1 14 May 29 May 19 June 12 July 16 July 30 July 19 August 16 September 6 October 19 November Bid documents for lots 1 M4-1, 1 M4-2, and 1 M4-3 issued ADB receives draft bid documents for lots 1M4-1, 1M4-2, 1AA4-3, and 3E. ADB comments on draft bid documents for lot 3E. PLN Informed ADB that contents 1 AA2, 1 AA3, and 1 BB were the documents issued. of bid documents for lots same as for lot 1 AA 1 and Published in the ADB-Business Opportunities and United Nations Development Business Opening of bids for lots 1 AA4-1 and 1 AA4-2. ADB approves bid documents for lots 1 AA 1, 1 AA2, 1 AA3, and 1 BB. ADB receives revised bid documents and corresponding addenda as issued for lots 3D, 1AA4-1, 1AA4-2, and 1AA4-3. Opening of bids for lot 1AA4-3. ADB receives copy of BER for lot 3D February 21 March 1 July 15 August 6 October 24 October 6 November ADB approves BER for lot 3D. ADB receives copy of signed contract for lot 3D. ADB receives BER for lot 3E. ADB approves BER for lot 3E. ADB receives copy of BER for lots 1 AA 1, 1 AA2, 1 AA3, and 1 BB for 275 kv transmission lines. ADB approves BER for lots 1AA1, 1AA2, 1AA3, and 1 BB. ADB receives copy of signed contract for lot 3E February ADB receives copies of signed contracts for lots 1 M 1, 1M3, and 1 BB. 1M2, 3 March ADS receives guarantee. amendment no. 1 for lot 1 AA2 for performance

28 Appendix March ADB receives amendment no. 1 for lots 1AA1, 1AA3, and 1BB for performance guarantee. 24 November ADB declares no objection to amendment no. 1 for lots 1AA1, 1AA2, 1AA3, and 1BB. 4 December ADB receives a copy of amendment no. A.01/98 for lot 3E covering change in shunt reactor manufacturer from overseas to local. 10 December ADB approves amendment no. A.01/98 for lot 3E. 23 December ADB receives a copy of amendment no. 01/98 for lot 3D covering extension of completion from 20 September 1998 to 20 December January ADB approves amendment no. 01/98 for lot 3D. 26 February ADB receives a copy of amendment A.02/98 for lot 3D covering extension of completion time up to 20 January March ADB receives a copy of amendment no. A. 02/99 for lots 1AA1, 1AA2, 1AA3, and 1BB covering London Metal Exchange price adjustment and additional manufacturers for towers and fittings. 5 March ADB approves amendment no. A.02/98 for lot 3D. 8 March ADB approves amendment no. A.02/99 for lots 1AA1, 1AA2, 1AA3, and 1BB. 26 May PLN s advised on reallocation of contract amounts for lots 1AA2 and 1AA3 under Sumatra Power Transmission Project and Loan May ADB approves reallocation of contract amounts for lots 1AA2 and 1AA3. 18 October ADB receives a copy of amendment no. 03/1999 for lot 3D covering reduction of erection and commissioning due to the unavailability of Kiliran Jao Substation and the Ombilin-Kiliran Jao transmission line. 25 October ADB approves amendment no. 03/1999 for lot 3D. 2 Contracts include both the 1 st and 2 nd circuit of 275 kv transmission lines funded the Project and Power Development and Efficiency Enhancement Project, respectively. Procurement of 1 st and 2 nd circuits was combined into a single contract package for each section of the transmission line.

29 20 Appendix 1 28 December ADB receives a copy of amendment no. 03/99 for lots 1 AA 1 and 1 BB covering adjustment of contract price in line with Government guidelines January AD8 approves amendment no. 03/99 for lots 1 AA 1 and 13 March 20 March 27 March 30 March 25 April 2 May 16 May 23 May 6 September 7 September ADB receives a copy of amendment no. A.O4/00 for lots 1M2 and 1M3 covering effective contract date and extension of completion time. ADB approves amendment no. A.O4/00 for lots 1M2 and 1M3. ADB receives a copy of amendment no. 04/2000 for lot 3D covering price escalation of French Franc portion for erection and commissioning works. ADB approves amendment no. 04/2000 for lot 3D. ADB receives a copy of amendment no. OS/2000 for lot 3D covering adjustment of contract price in line with Government guidelines. ADB approves amendment no. OS/2000 for lot 3D. ADB receives a copy of amendment no. 03/2000 for lot s1aa2 and 1M3 covering adjustment of contract price in line with Government guidelines. ADB declares no objection to amendment no. 03/2000. ADB receives a copy of amendment no. OS/2000 for lots 1M1, 1AA2, and 1M3 covering adjustment of the contract price. ADB requests PLN to revise contract amendment no. OS/2000 for lots 1 AA 1, 1 AA2, and 1 AA3 to separate and indicate the specific amounts under the two loans (Loan 1320 and Loan1397). 21 September ADB receives copies of amendment 1AA1, 1AA2, and 1AA3. no. OS/2000 for lots 26 September 26 September ADB receives PLN's response to its fax of 7 September ADB approves amendment no. OS/2000 for lots 1 AA 1, 1 AA2, and 1 AA3.

30 Appendix October ADB receives a copy of amendment no. A.05/2000 for lot 1BB covering adjustment of contract price in line with Government guidelines. 26 October ADB approves amendment no. A.05/2000 for lot IBB. 31 October ADB receives a copy of amendment no. A.03/00 for lot 3E covering price adjustment. 8 November ADB approves amendment A.03/00 for lot 3E. 17 November ADB requests PLN to submit draft amendment of contracts for lots 1AA1, 1AA2, 1AA3, and 1B to shift outstanding payments from Loan 1320 to Loan December ADB receives copies of amendment no. 08/2000 for lots 1AA1 and 1AA3, and amendment no. 07/2000 for lot 1AA2. 13 December ADB comments on amendment no. 08/2000 for lots 1AA1 and 1AA3 and amendment no. 07/2000 for lot 1AA2. 19 December PLN responds to ADB comments of 13 December February ADB receives a copy of amendment no. A.04/2000 for lot 3E covering correction to amendment no. A.03/00. 8 February ADB approves amendment no. A.04/2000 for lot 3E. 12 March ADB receives a copy of amendment no. 07/2000 for lot 1BB covering adjustment of contract price in line with Government guidelines. 12 March ADB receives copies of amendment no. A.09/2000 for lot 1AA1, amendment no. A.08/2000 for lot 1AA2, and amendment no. A.09/2000 for lot 1AA3. 3. Category 1B: Equipment (Substations) kv Substations for Lots 3A, 3B, and 3C 30 August ADB receives evaluation report. September ADB reviews the evaluation report. 8 October ADB approves the evaluation report.

31 22 Appendix January 19 March AD8 receives signed copy of contract for lot 3A. AD8 receives signed copy of contract for lot August 26 August ADB receives amendment no. A.O1/98 for lot 3A covering extension of completion time. ADB receives no. A.O1/98 for lot 3B covering extension of completion time. 2 September ADB's declares no objection to amendment lots 3A and 3B. no. A.O1/98 for 3 September 8 September ADB receives amendment no. A.O1/98 for lot 3C due to change in quantity based on actual requirements at site. ADB's declares no objection to amendment no. A.O1 for lot 3C January 29 June ADB receives amendment no. 03/2000 for lot 3C covering adjustment of contract price in line with Government guidelines. ADB receives amendment no. A.03/2000 for lot 3B covering adjustment of contract price in line with Government guidelines. 29 June ADB' declares no lot 3B. objection to amendment no. A.O3/2000 for 26 October ADB receives amendment price adjustment. no. A.O3/2000 for lot 3A covering c. 26 October Consultant Services 1. General March ADB declares no objection to amendment no. A.O3/2000 for lot 3A. ADB receives the shortlist of consultants and TOR for Part A (Southern Sumatra Transmission), Part B (Northern Sumatra Transmission), Part C (Central Sumatra Transmission), Part

32 Appendix 1 23 D (Central-Southern Sumatra Interconnection), Part F (Engineering Design for the Kusan 3 Hydropower Project in South Kalimantan), and Part H (Live Line Maintenance Facilities). 5 April ADB requests PLN to submit proposed invitation letter, criteria to be used for selecting consultants, and confirmation that ADB guidelines will be used to select consultants. 11 May ADB receives the proposed documents (draft invitation letter and criteria to be used for selecting consultants for each project) for parts A to H. June July ADB reviews documents. 31 August ADB receives TOR, narrative evaluation criteria, letter of invitation, shortlist of firms, and sample contract document. 6 September Consultant selection committee meeting convened ADB to review shortlists, invitation documents, and evaluation criteria. 12 September ADB approves the TOR, shortlists, evaluation criteria, invitation letter, and draft contract document. 2. Category 2A: Construction Supervision 1996 a. Part A 275 kv Southern Sumatra Transmission 26 August ADB receives evaluation report for engineering services for Part A. 3 September ADB approves evaluation report for Part A. 27 December ADB receives draft contract for engineering services for Part A January ADB approves the draft contract for Part A. 7 May ADB receives a copy of signed agreement for engineering services for Part A December ADB receives a copy of memorandum no.1 to engineering services to cover the extension of services from September 1999 to July 2000 for completion of the work.

33 24 Appendix 1 17 December ADB approves the issuance of memorandum no September 13 September ADB receives a copy of memorandum no. 2 to cover the extension of duration of the services until November 2000 for completion of the work. ADB approves the issuance of memorandum no. 2. b. Part B: 150 kv Greater Northern Part of Sumatra Grid July 7 August ADS receives for Part B. ADB approves the evaluation report for Part B March ADB approves draft consulting services contract for Part B. 19 June ADB receives a copy of signed agreement services for Part B. for engineering c. Part C: 150 kv Central Sumatra July 7 August ADB receives for Part C. evaluation report for the engineering services ADB approves the evaluation report for Part C May ADB receives draft agreement for PartG. engineering services for 28 May 29 June ADB approves draft for Part C. agreement ADB receives a copy of the signed agreement for Part C February 7 March ADB receives a copy of memorandum no. 1 for Part C to cover the reduction in the period of services due to the early termination of the services. ADB sends fax requesting clarification on memorandum no.1

34 Appendix April ADB receives PLN s clarification on memorandum no d. Part D: 275 kv for Interconnection of Central and South Sumatra 2 August ADB receives a copy of the evaluation of technical proposals for Part D. 13 August ADB approves the evaluation of technical proposals for Part D August ADB receives draft agreement for Part D. 6 August ADB approves draft agreement for Part D. 6 October ADB receives a copy of agreement for Part D October ADB receives a copy of contract memorandum no. 1 covering the optimization and extension of time to complete the construction supervision of the work. 31 October ADB declares no objection to issuance of memorandum no March ADB receives a copy of contract memorandum no. 2 covering additional cost due to extension of duration of the services. 16 March ADB declares no objection to issuance of memorandum no Category 2B: Kusan 3 Hydropower Project 1996 Part F: Engineering Design for the Kusan 3 HydropowerProject in South Kalimantan 18 October ADB receives the result of evaluation of consultants. 24 October ADB approves the result of evaluation of consultants.

35 26 Appendix August 14 August 16 October ADB receives draft agreement. ADB approves the draft agreement. ADB receives signed agreement for engineering services December ADB receives memorandum no. 1, which covered the extension of consultant services, and memorandum no. 2, which covered the price adjustment of domestic currency costs January 10 January ADB reviews memorandums 1 and 2. ADB declares no objection to the issuance of memorandums 1 and 2. Category 2C: Iralalaro Hydropower Project Part G: Engineering Design Services for Iralalaro Hydropower Project February 20 February ADS receives proposed list of consultants to be short-listed, draft TOR, letter of invitation, and evaluation criteria. ADS requests PLN to submit report for Iralalaro and Kusan 3 before approving the issuance of the invitation letter to the short-listed consultants. 27 November ADS receives draft final social acceptance report for Iralalaro hydropower plant. Category 2D: Live Line Maintenance Part H: Consulting Services for Live Line Maintenance November 11 November ADS receives result of evaluation of consultants. ADS's declares no objection to the result of the evaluation of consultants.

36 Appendix June ADB receives draft agreement for consulting services. 26 June ADB reviews the draft agreement. 18 July ADB declares no objection to the draft agreement. 4 September ADB receives signed copy of the agreement. ADB = Asian Development Bank, BER = bid evaluation report, kv = kilovolt, PLN = Perusahaan Listrik Negara, TOR = terms of reference. Source: ADB Files.

37 28 Appendix 2 Project Outputs at Appraisal and Actual Appraisal Actual Part A: Southern Sumatra Transmission 116 km of 275 kv line (for initial operation at 150 kv) 45 km of 150 kv line new 150 kv substation at Lubuk Linggau expansion of 150 kv substations at Bukit Asam, Lahat and Curup Completed as appraised 70 km of 150 kv line Completed as appraised Completed as appraised Part B: Northern Sumatra Transmission 485 km of 150 kv lines new 150 kv substations at Banda Aceh, Bireuen, Idie, Lhok Seumawe, and Sigli expansion of 150 kv substations at Binjai, Langsa and Pankalan Brandan; Part C: Central Sumatra Transmission 525 km of 150 kv lines new 150 kv substations at Bagan Siapi Api, Dumai, Duri, New Pekanbaru, Rengat, and Teluk Kuantan expansion of 150 kv substation at Pekanbaru and at Ombilin gas insulated substation Only 320 km of 150 kv lines completed Completed as appraised Completed as appraised Only 283 km of 150 kv lines completed Completed as appraised Completed as appraised Part D: Central Southern Sumatra Interconnection 429 km of 275 kv line (for initial operation at 150 kv) 225 km of 150 kv line new 150 kv substations at Bangko, Muara Bungo, Kiliran Jao and Jambi expansion of Ombilin gas insulated substation; Only 335 km of 275 kv line completed Only 167 km of 150 kv line completed Completed as appraised Completed as appraised Part E: Consulting Services for Construction Supervision of Parts A Through D Part F: Engineering Design for the Kusan 3 Hydropower Project in South Kalimantan Part G: Engineering Design for the Iralalaro Hydropower Project in the Former East Timor Part H: Live Line Maintenance technology transfer establishment of training center at Semarang provision of tools and equipment km = kilometer, kv = kilovolt, PLN = Perusahaan Listrik Negara. Consulting services reduced to the design phase and the construction supervision of 150 kv substations and 275 kv transmission lines with the balance of consulting services required provided by PLN Completed as appraised Canceled Canceled Source: appraisal data: Report and Recommendation of the President Sumatra Power Transmission Project. September 1994, Manila, and PLN.

38 LINE WORK: APPRAISED, ACTUAL, AND STATUS Part A 275 kv 150 kv New Names/ 275 kv 150 kv 275 kv 150 kv km cct cctkm cctkm Alternative Section km cct cctkm cctkm km cct cctkm cctkm Lahat-Lubuk Linggau, 1st cct Curup-Lubuk Linggau, 2cct Part B Subtotal Binjai-P. Brandan, 2nd cct P. Brandan-Langsa, 2nd cct Langsa-Idie, 2 cct Idie-Lhokseumawe, 2 cct Lhokseumawe-Bireun, 2cct Bireun-Sigli, 2 cct Sigli-Banda Aceh, 2 cct Part C Subtotal Pekanbaru-New Pekanbaru,2 cct Garuda Sakti 1) - Rumbai 1) New Pekanbaru-duri, 2 cct Rumbai 1) -Duri Duri-Dumai, 1st cct Dumai-Bagan Siapiapi, 1st cct Duri-Bagan Batu 2) Kiliran Jao-Teluk Kauntan, 1st cct Teluk Kuantan-Rengat, 1st cct Garuda Sakti-Teluk Lembu Ombilin-Kiliran Jao, 2 cct Part D Transmission Lines At Appraisal Subtotal Lubuk Linggau-Bangko, 1st cct Bangko-Muara Bungo, 1st cct Muara Bungo-Kiliran Jao, 2 cct Muara Bungo-Kiliran Jao, Muara Bungo-Jambi, 2 cct Muara Bungo-Aur Duri Subtotal , , ,315 cct = circuit, cctkm = circuit kilometer, kv = kilovolt 1) New names of Pekanbaru=>Garuda Sakti, New Pekanbaru=>Rumbai, Jambi=>Aur Duri. 2) Alternative line section. Plan for Implementation Source: appraisal data - Report and Recommendation of the President - Sumatra Power Transmission Project and PLN. Current Status plan vs. appraised 72% 88% completed vs. plan 89% 71% Appendix 3 29

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