AFRICAN DEVELOPMENT FUND TOGO/BENIN COMPLETION REPORT ELECTRIC ENERGY PRODUCTION DISPATCHING AND TRANSMISSION OF THE BENIN ELECTRICITY COMMUNITY

Transcription

1 AFRICAN DEVELOPMENT FUND TOGO/BENIN COMPLETION REPORT ELECTRIC ENERGY PRODUCTION DISPATCHING AND TRANSMISSION OF THE BENIN ELECTRICITY COMMUNITY COUNTRY DEPARTMENT WEST REGION AUGUST 1999 SCCD : N D.G.

2 TABLE OF CONTENTS EQUIVALENTS, ACRONYMS AND ABBREVIATIONS ABSTRACT BASIC PROJECT DATA PROJECT MATRIX Page i-ii 1. INTRODUCTION 1 2. PROJECT OBJECTIVE AND DESIGN Sector Objective Project Objectives Project Design 3. PROJECT IMPLEMENTATION Fulfilment of loan conditions Procurement of goods, works and services Implementation Schedule Repors Achievements Modifications Project Cost Financing Sources and Disbursement Performance of Contracting Firms, the Consulting Engineer and Executing Agency 7 4. PROJECT PERFORMANCE Operational Performance Institutional Performance Financial Performance 9 5. SOCIAL AND ENVIRONMENTAL IMPACT PROJECT SUSTAINABILITY PERFORMANCE OF THE BANK AND BORROWER Bank s Performance Borrower s Performance GENERAL PERFORMANCE AND RATING CONCLUSIONS, LESSONS AND RECOMMENDATIONS Conclusions Lessons Recommendations 14 This completion report was prepared by Messrs. HEMCHAND RAI HEEROO, Electrical Engineer and RENE KPOMALEGNI, Consulting Financial Analyst, following their mission to Togo and Benin from 5 to 17 December The Division Chief responsible is Mr. HABID KAMOUN, OCDW.6 (Extension 4115).

3 LIST OF ANNEXES Number of pages 1 Map of Benin and of Togo 1 2 Loan Conditions 1 3 Project components 1 4 Project Implementation Schedule 1 5 Project Costs 1 6 CEB Organization Chart 1 7 CEB Structure and Staffing 1 8 Trend of CEB Debts 1 9 General Operating Account of CEB 1 10 Calculation of Economic Rate of Return 2 11 PERFORMANCE RATING 4 12 Matrix of Recommendations and Follow-up 1 13 List of Documents Consulted for this Completion Report 1

4 EQUIVALENTS, ACRONYMS AND ABBREVIATIONS CURRENCY EQUIVALENTS Currency Appraisal (2nd quarter 1987) Completion (December 1998) 1 UA = 357,2325 CFAF 803,499 CFAF UNITS OF MEASURES 1 GW = Gigawatt = 1000 MW 1 GWh = Gigawatt-hour = 1000 MWh 1 kv = Kilovolt = 1000 volts (V) 1 kva = Kilovolt-Ampere = 1000 VA 1 KW = Kilowatt = 1000 watts (W) 1 kwh = Kilowatt-hour = 1000 Wh 1 MVA = Mega-volt ampere = 1000 KVA 1 MW = Megawatt = 1000Kw 1 MWh = Megawatt hour = 1000 kwh 1 TEP = Ton of Oil Equivalent = 0,427 TJ ACRONYMS AND ABBREVIATIONS ADB ADF CEB CEET CFO CIMAO CTL GDP HV IRR LC LV MV OTP SBEE SCO TO VRA African Development Bank African Development Fund Communauté Electrique du Bénin (Benin Electricity Community) Compagnie d Energie Electrique du Togo (Electric Energy Firm of Togo) Cash Flow from Operations Cimenteries de l Afrique de l Ouest (West Africa Cement Works) Centrale Thermique de Lomé (Lome Central Thermal Station) Produit Intérieur Brut (Gross Domestic Product) High Voltage Internal Rate of Return Local Currency Low Voltage Medium Voltage Office Togolais des Phosphates (Togolese Phosphate Authority) Société Béninoise d Electricité et d Eau (Benin Electricity and Water Auth.) Société de Cimenterie d Onigbolo (Onigbolo Cement Co.) Turnover Volta River Authority FINANCIAL YEAR 1st January - 31 December

5 ABSTRACT 1. The electric energy production dispatching and transmission project was designed to manage the transmission network and means of production of the Communauté Electrique du Bénin (CEB), an inter-state structure belonging to the Republics of Benin and Togo. Its achievements include a load dispatching centre with a central computer system, its software and device menus, 7 computer feedback systems installed in the various substations, a stronger communication system and staff trained to operate and maintain the new facilities. 2. The project was implemented in 9 years starting from the signature of the loan agreement to provisional acceptance of the installations in December 1996, although October 1990 was the date scheduled for commissioning in the appraisal report. Both Governments took four years to meet the loan effectiveness conditions. The contracting enterprise fell behind the initial implementation schedule by two and a half years. 3. Total project cost net of taxes and custom duties was estimated at UA 8.3 million at appraisal but was UA 8.64 by completion, i.e. an increase of 4.10%. The ADF loan of UA 6.77 million was used to finance part of the foreign exchange cost originally estimated at UA 7.46 million making an implementation rate of 90.75%. The local currency portion covered by the CEB registered an overrun of more than 122% (UA 1.87 million against UA 0.84 million) from additional services by the consulting engineer, from the delay in project implementation and from the devaluation of the CFAF during the period. 4. On the whole, the project performed satisfactorily. The main objectives set at appraisal were met: coordination and management of the electricity production units in Benin and Togo, safer and better services of the electricity supply networks in both countries, establishment in real time of the accounts and tariffs for the various energy flows (energy produced, imported, exported or transmitted),in particular. The economic rate of return was 16% on completion against 14.4% at appraisal.

6 BASIC PROJECT DATA 1. Number of loan : F/CEB/BN/TOG/EL/87/1 2. Borrowers : Government of the Republic of Benin Government of the Republic of Togo 3. Beneficiary : Communauté Electrique du Bénin (CEB) 4. Executing Agency : CEB 5. Loan Estimate at Appraisal Actual 5.1 Amount (in UA million) Commission on disbursed amounts but 0.75% 0.75% undisbursed 5.3 Interest rate 1% from the eleventh to the twentieth year and 3 % per annum thereafter annum thereafter 5.4 Grace period including the 10 year grace period 5.5 Date of loan negotiation : 7 August Date of loan approval : 19 August Date of loan signature : 26 February Date of entry into force : 2 January 1992 % from the eleventh to the twentieth year and 3% per 40 years 40 years 6. Total cost (in UA million) Estimate at Appraisal Actual Variation Variation Variation in % Foreign exchange Local currency Total Financing Plan (in UA million) Sources Estimate at appraisal Actual Variation Variation Variation in % F.E. L.C. Total F.E. L.C. Total ADB CEB Total Actual date of first disbursement : 26 May Actual date of last disbursement : 9 June Start-up of project activities : 1 March Completion date of project implementation activities : 4 February Performance indicators 1. Cost increase : 4.10 % 2. Slippage from schedule : 74 months instead of Status : Completed 4. Institutional performance : partially satisfactory 5. Performance of the consulting eng. : partially satisfactory 6. Performance of the enterprises hardly satisfactory 7. Performance of the Executing agency: unsatisfactory Evaluation PCR 8. Internal rate of return : 14.4 % 16 % 13. Missions

7 ii Period Number of people Composition Man weeks Appraisal April Electrical engineer 4 1 Financial Analyst Supervision to Electrical engineer to Electrical engineer to Electrical engineer 1 Audit to Auditors 4 Completion to Electrical engineer 2 1 Financial Analyst Total Project disbursement schedule (in UA thousand) Source of Finance YEARS TOTAL Projected at appraisal ADF CEB TOTAL % Actual ADF CEB TOTAL % Entrepreneurs/Suppliers - Name : SIEMENS - Responsibility : Supply and installation of equipment - Date of signature of contract: 27 January Duration of contract : 27 months - Amount of contract : DEM DEM and CFAF Amendment to initial contract - Date of signature : 24 July Amount : DEM and CFAF Consultant - Name : TRASYS -Responsibility: Control and approval of engineering designs, acceptance of equipment, works inspection and supervision, acceptance of structures, etc. - Date of signature of contract: 27 January Amount of contract : BEF BEF and CFAF Amendment to initial contract - Date of signature : 24 July Amount : BEF BEF and CFAF

8 PROJECT MATRIX ON COMPLETION Hierarchy of Objectives (HO) Objectively Verifiable Indicators (OVI) Means of Verification (MOV) Major Assumptions and Risks 1.Sector objective Develop methods for operating the electricity system for optimum use of electric energy resources % annual increase in the electric energy consumption. 1.1 Activity reports of he ministries responsible for energy Impact on major objective: 2. Project objective: 2.1 coordinate and manage the stock of electricity production. 2.2 improve the safety and quality of electricity supply. 2.3 enable the establishment, in real time of the accounts and tariffs of the various energy flows 2.1 Reduction in the probability of energy supply failure by 5%. 2.2 Reduction by a factor of 5 the time to restore electricity supply after a breakdown. 2.3 Data on the quantity and cost of imported energy produced by each station and consumed by each customer updated in less than ten minutes. CEB annual reports Impact on the sector objective: Power production stations. Transmission network in good working order. Good run-off. 3. Achievements: 3.1 a load dispatching centre. 3.2 Control rooms remotely controlled from the load dispatching centre. 3.3 Strengthening means of communication to cover dispatching. 3.4 Staff training in dispatching. 4. Activities: 4.1 Competitive bidding 4.2 Engineering designs 4.3 Factory manufactured equipment 4.4 Fitting of equipment on site 4.5 Works inspection and supervision. 4.6 Running trials 4.7 Industrial market a load dispatching centre operational starting February seven control rooms remotely controlled from the load dispatching centre seven telephone switches and concentrators and 25 hand sets a telex connection between CEB and VRA six fax machines installed twelve communication links installed two engineers, 8 senior technicians and 10 technicians trained Resources (in UA million) Projected ADF 7.46 CEB 0,84 Total 7,46 Actual 3.1 Activity report of the consulting engineer. 3.2 Project completion report. 4.1 Activity report of the consulting engineer. 4.2 Bank completion report. Impact on the project objective: 3.1 Sustainability of project achievements. 3.2 Matching of the project capacity with CEB s means of production and transmission of electric energy Impact on achievements: Implementation, commissioning and acceptance of all project installations. ADF 6.77 CEB 1,87 Total 8,64

9 1. INTRODUCTION 1.1 Located in West Africa, Togo and Benin are two neighbours with a common northbound border, with Togo on Benin s west side. They are bounded on the south by the Golf of Benin. With an area of km2, Togo is bounded on the west by Ghana and on the north by Burkina Faso. With an area of km2, Benin s neighbours are Nigeria to the east and Niger and Burkina Faso to the North. 1.2 Togo has a population of 4.3 million inhabitants and its GDP comprises agriculture 41%, industry 22 % and services 37 %. The country s lead exports are phosphate, coffee and cotton. Benin for its part has a population of 4.86 million and its GDP is based on agriculture 34%, industry 14 % and services 52 %. Benin exports cotton and oil and is a transit country for goods bound for Nigeria. 1.3 Togo consumed 470 thousand TOE of energy in 1997 in the form of biomass (60%), oil (34%) and electricity (6%). During that same year, Benin used up 1.57 million TOE of biomass-derived energy (87%), oil (11%) and electricity (1%). 85% of the electricity requirements of both countries in 1997 were imported from Ghana and transmitted to Distribution Authorities and large consumers, by the Communauté Electrique du Bénin (CEB), an institution belonging to both states. Both countries have always wanted to reduce this dependence on a single source of electricity and accordingly, CEB set itself the mission of producing electricity. 1.4 Since the start of its operations in Togo in 1972, the Bank has financed the Lome area electrification project for UA 2.7 million. It started its operations in Benin in that same year and has since financed 4 electricity projects for a total of UA 16.8 million. These projects enabled the electrification of the coastal area, a cement factory and 9 district capitals. In addition, the Bank has contributed UA 15.3 million for two multinational electricity projects for both countries. Particular mention must be made of the Nangbeto hydroelectric project of an installed capacity of 64 MW and the CEB electric energy production dispatching and transmission project. 1.5 In March 1987, the CEB applied to the ADF for funds for the dispatching project appraised in April Loan negotiations took place on 7 August 1987 and the ADF approved the loan on 19 August The project that this report deals with was prepared using data and documents found in the Bank as well as documents from CEB and from the project executing agency during the mission to Togo and Benin in December 1998.

10 2 2. PROJECT OBJECTIVES AND DESIGN 2.1 Sector Objective In the context of the policy defined by Benin and Togo, the sector objective of the project is to develop methods of operating the electricity system for an optimum use of the electric resources through the Central Dispatching Centre to plan production in both countries and manage the production stock economically. 2.2 Project Objectives The project aims to: (i) (ii) (iii) coordinate and economically manage electricity production units in Benin and Togo; improve safety and quality of the electricity supplied by the networks of Benin and Togo; and enable the establishment in real time, of the accounts and tariffs of various energy flows (energy produced, imported or exported or energy distributed). 2.3 Project Design In 1985, CEB bought electric energy from the Volta River Authority (VRA), the electricity company of Ghana, and sold it to the distribution companies and large consumers of Togo and Benin. To meet its requirements, CEB operated two 161 kv transmission lines from Ghana which linked in a chain the Lome, Mome Hagou and Cotonou sub-stations. All three stations transformed energy into lower voltages before delivery to customers To meet an ever-growing demand, CEB added other transmission lines and substations to its network. In addition, in order to develop its own means of production, it undertook to build the Nangbeto hydroelectric station which was commissioned in It was in this complex operating context that the need was felt to set up a dispatching centre (the only centralised decision and load dispatching centre). Without a centre to oversee the production stock and associated network it would have been difficult to coordinate the various components of the system centre Following CEB s application to the Bank, the latter obtained the funds required to conduct the studies for the dispatching project from the Belgian authorities. The studies were entrusted to the consulting engineers TRASYS selected from a short list. The Bank approved the findings of these studies on 12 February TRASYS pointed out the technical and economic advantages of a dispatching system for CEB and defined its functions. Generally, it suggested the establishment at the CEB headquarters, of a load-dispatching centre with a central computer system and the extension of the existing communication network between two stations to include the load-dispatching centre. Each station was to be equipped with an inbuilt computer system linked to the main computer system by means of the communication network. 3. PROJECT IMPLEMENTATION

11 3 3.1 Fulfilment of Loan Conditions The conditions precedent to the loan detailed in Annex 2 delayed the project following its approval by the Bank s Board of Directors in August The loan agreement signed six months later on 26 February 1988, became effective only on 02/01/92, four years later Precedent conditions 5 and 6 concerning the presentation to the ADF by the Benin Government of a recovery plan for arrears owed by SBEE to CEB and representing electricity consumed by the Onigbolo cement factory, and the presentation to the ADF by the Togolese Government of a recovery plan for arrears owed to CEB by the West Africa Cement Works (CIMAO), were difficulties the Borrower encountered. The Government of Benin took time to fulfil condition 5 whereas condition 6 had to be modified to an undertaking by the Government of Togo to submit to the ADF, the report of the Officer assessing CIMAO s assets and proposals on how to distribute them. The results of these two conditions are described in paragraphs 4.3.2, and below As to the other conditions listed in Annex 2, the Borrowers could not comply with that concerning modifications to the CEB Agreement. The CEB legal adviser had made a proposal on vesting of property in the event of CEB s liquidation and it is being reviewed. He proposed that the other modifications to the Agreement, in particular that concerning the contribution to CEB s capital and priority purchase of its production by SBEE and CEET, be reviewed in the general light of the on-going changes to the electricity sector in Benin and Togo. 3.2 Procurement of Goods, Works and Services The appraisal report pointed out that the implementation of the dispatching centre could not accommodate diverse responsibilities for supplies and works because dispatching has both a structural and functional specificity that depends primarily on a computerised system. Consequently, during competitive bidding, the various project components detailed in Annex 3, were grouped into two bid packages: (i) comprising supplies for and works on all equipment-related components (components A, B, C, D, E, F and G); (ii) comprising of engineering and works supervision or the services expected of the consulting engineer or component H Goods and services for the first package were procured by competitive bidding in compliance with ADF rules of procedure. Bids were launched on 25 April 1988 and analysed on 28 February Inconsistencies in the application of the bid evaluation methodology prompted the ADF to reject the bid evaluation report. On the basis of further information provided by CEB and the Borrowers, the report recommending that the Company SIEMENS provide and install the dispatching system, was approved by the Bank on 15 June 1990 more than two years behind the initial schedule The consulting engineers TRASYS who had conducted the pre-investment studies and prepared the bidding documents were selected as suggested in the appraisal report, to monitor the engineering studies and supervise works (component H).

12 Additional works, gains and losses from adjustments to the design of the system and modifications to works and supplies were the subject of an amendment to the SIEMENS contract. The amendment was 1.5% of the value of the initial contract in local currency and 1% in foreign exchange. The services of the consulting engineer were also amended leading to additional fees and site deductions incurred or provided for by TRASYS between May 1995 and the date of final acceptance of the installations scheduled for February The amendment was 42% of the foreign exchange costs and 53% of the cost in CFAF as compared with the initial contract. 3.3 Implementation Schedule The problems described in paragraph delayed the start-up of works. The initial schedule and the actual dates of implementation are shown in the graph of Annex The SIEMENS contract became effective at the end of March 1992, 27 months after provisional acceptance which had been scheduled for end June Provisional acceptance occurred on 2 December 1996 or 29 months late, because SIEMENS was not able to monitor the initial schedule of some assignments particularly the engineering designs critically overlapping other project activities and the industrial run The engineering designs were delayed by 20 months. According to SIEMENS and TRASYS, this was due to the socio-political unrest of 1992/1993 in Togo. However, this excuse does not make sense since the engineering designs were being prepared in Europe at the time SIEMENS was able to catch up on 4 months of the delay pending the industrial run, a period preceding provisional acceptance when the contractor must show that the installations meet the demands of the specifications. However, this exercise was a failure and a second industrial run was needed, hence a further delay of 13 months Accordingly, TRASYS contract was extended through an amendment that meant additional costs (cf. paragraph 3.2.4). 3.4 Reports The consulting engineer regularly submitted progress reports to the Bank. A total of 15 reports all of good quality were submitted. However, he did not prepare a report at the end of works The executing agency did not prepare the quarterly progress reports or its project completion report.

13 5 3.5 Achievements The main achievements were: (i) a load dispatching centre at the CEB headquarters equipped with a network of 11 computers and a central computerised system connected by radio transmitters to 7 inbuilt power assisted computer systems to the Lome-Port, Cotonou-Akpakpa, Nangbeto, Lome Aflao, Mome-Hagou, Cotonou-Vedoko and Onigbolo stations; (ii) (iii) (iv) a quick reference chart at the load dispatching centre, the device menu of the central computer system which gives an overall picture of CEB s means of production and transmission in real time; 12 screens, 8 keyboards and 8 mice to interact with the central computer system; software in non-real time on the central computer system to enable cost projections, optimum management of the hydroelectric stations, the establishment of optimised production plans and the calculation of cost breakdown; (v) 7 telephone switches and concentrators installed in the load dispatching centre and 6 stations (excluding Onigbolo) as well as 25 telephone hand sets to improve communication between the various installations and the CEB management; (vi) (vii) (viii) fax machines installed in the following places: the load dispatching centre (2), the Lome Aflao, Cotonou Vedoko and Mome Hagou sub-stations and the Nangbeto power station ; a telex link between the CEB load dispatching centre and that of the Volta River Authority in Tema, Ghana; 12 communication links including 6 by microwave beam, 5 by power line carrier (PLC) and one by cable, installed. These links will strengthen a network that already exists between the sub-stations and which was adapted under the project for the communication of: (a) data between the central computer system and the interlocked computer systems; (b) telephone conversations between the various sub-stations and stations and the load dispatching centre; and (c) messages between the fax machines listed in (iv) above. 3.6 Modifications Under the project, provision was made for a central computer system comprising two computers (one active, the other as a back up). On implementation, the system set up comprised a network of computers using the latest technology, with the advantage of: greater reliability, less maintenance cost, using the mice as peripheral and of upgrading the system for additional functions. Furthermore, the full-graphic monitors supplied produce images the quality of which surpasses the semi-graphic monitors planned for under the studies. 3.7 Project Cost

14 During appraisal, project cost, excluding taxes, was estimated at UA 7.46 million in foreign exchange and UA 0.84 in local currency, amounting to UA 8.30 million. A comparison of the project cost at appraisal and completion is shown in Annex 5. Compared with the cost at appraisal, total project cost increased by UA 0.34 million (4.10%), mostly in connection with the local currency cost. The foreign exchange cost remained within the projected level and amounted to UA 6.77 million (-9.25%) The increase in the local currency cost is attributable firstly to the 1994 devaluation of he CFA Franc which led to the reappraisal of the contracts of the consulting engineer and contracting firm both of which were quoted in CFA Francs, and secondly to additional services provided by the consulting engineer following delays in project implementation. 3.8 Sources of Finance and Disbursement Sources of Finance The ADF (with a UA 7.46 million loan), Benin s National Executive Council and the Government of Togo through the executing agency, CEB, financed the project. The ADF funded the total foreign exchange cost, while the executing agency covered the local currency cost. On completion, the financing plan, compared with the plan at appraisal, stood as follows (in UA million) : Sources Appraisal Estimate Actual Gap Gap in For. Local Total For. Local Total % Exc. Currency Exc. Currency ADF CEB Total This table indicates that 90.75% of the foreign exchange portion was covered, compared with the local currency provision which increased by more than 122% for reasons mentioned in paragraph Disbursement Schedule The disbursement schedule at appraisal was too optimistic since it did not take into account the timeframe needed by the two countries to mount financing and render it effective. The delay recorded at the start-up phase was worsened by difficulties encountered in selecting the contracting firm and time overrun during the implementation phase. The comparative disbursement schedule is as follows (in UA thousand) :

15 7 Source of Finance YEARS TOTAL Appraisal Estimate ADF CEB TOTAL % Actual ADF CEB TOTAL % During appraisal, disbursements were scheduled over a four-year period, i.e. from 1988 to end The first disbursement (mobilization advance) was made on 26 May 1992, four years behind schedule. 3.9 Performance of the Contracting Firms, the Consulting Engineer and the Executing Agency The contracting firm s (SIEMENS) performance is hardly satisfactory. Although it actually delivered equipment of a higher quality than specified, it did not respect the timeframe stipulated in its contract The consulting engineer, TRASYS, performed partly satisfactorily since it reacted timidly to the delays accumulated by SIEMENS. However, it set up a good organization to monitor and supervise project works and management. Moreover, it regularly forwarded works progress reports to the Bank (a total of fifteen half-yearly reports over the implementation period) The performance of the executing agency is hardly satisfactory. Indeed, it shares responsibility with the borrower for the delay in fulfilling conditions for loan effectiveness. Moreover, the CEB revealed weaknesses with regard to holding separate project accounts, did not forward quarterly reports to the Bank or prepare its completion report. However, its technical staff adequately followed up project implementation and thoroughly masters installation operations. 4. PROJECT PERFORMANCE 4.1 Operational Performance The dispatching facility has been subjected to intensive use and has met the key set objectives since 2 December 1996 when it was provisionally handed over. Following corrections by SIEMENS of certain technical lapses noted during the provisional hand-over, the final hand-over was done on 4 February The load dispatching centre constantly monitors the consumer demand trend on the synoptic table and computer monitors, and decides on the effective means of meeting that demand. In that regard, it can at all times contact the VRA, its key supplier, and its two gas turbines through the installed communications network. Moreover, it can solicit the Nangbeto hydro-electric station by remotely controlling the operation of the station s two turbines. Coordination between electricity importation and the generation stations would be

16 8 impossible without the dispatching facility. While acting on the supply and the demand, dispatching also ensures that frequency (an indicator of the electricity quality) is maintained at international standards The 7 stations equipped with computer systems are supervised by the load dispatching centre. Hence, dangerous developments in the transport network can be pre-empted and preventive measures set in motion. Without dispatching, the stations were managed with data obtained on the spot; now, management of the stations has improved, thanks to data centralized at the load dispatching centre Prior to dispatching, the restoration of normalcy after electricity blackout in Togo and Benin took at least one and a half hours, compared to now when that can be done in fifteen minutes. This is attributable to the coordination of energy supply resources as described in paragraph 4.1.2, and improved station management as indicated in the previous paragraph The engineers use data archived by the central computer system during incidents to analyze the behaviour of production and transport equipment. Deffered time software which should enable the CEB to better optimize its hydro-electric production, improve the planning of future energy needs and enhance the efficiency of electricity production and transport has not yet been put to use Dispatching takes stock of the energy imported, production from the Nangbeto station, energy transmission in the network and energy delivered to customers. These data are archived and can be reproduced in table or graphic form. Such data are used by the software mentioned in paragraph Institutional Performance Project Management The CEB played its contracting authority role during the project implementation phase through an implementation unit comprising the head of the studies and supervision unit (in charge), head of the engineering department and of the department of administration and finance. Under the direction of the implementation unit, a technical unit of 14 workers supervised by an engineer monitored works on the sites The organization of project management involving the implementation unit, the contracting firm and the consulting engineer was not effective. Moreover, the implementation unit did not set up a financial section, resulting in an unsatisfactory follow-up of finances in contrast with the good technical follow-up Since appraisal, the CEB organization chart has been comprehensively reviewed to take into account changes in its operations. Thus, the technical departments have been transformed into directorates (four). The dispatching department was added to the directorate of operations which initially comprised the production and transmission departments (see Annex 6). The new department has been successfully integrated into the current CEB structure. Staff and Training

17 During appraisal on 31 December 1988, the CEB had 277 staff broken down as follows : 15 managers (5%) ; 77 supervisory officers (28%) and 185 operations staff (54%) (see Annex 7). Against the 1988 figures, the number of staff increased by 49 over ten years, i.e. an annual average growth of nearly 5 workers, compared with an average yearly 14% increase in turnover Under the project, the CEB recruited one computer engineer and six senior technicians, of which four in telecommunications and two in information technology. The new recruits and 13 additional staff assigned to the project were trained either at the supplier s facilities in Europe or at the project site. Thanks to the training programme, dispatching operations were handed over to staff drawn from both countries, as shown in the following table : Category Number Volume in Man/Days Supplier Project Sites Engineer Senior Technician Technician Total Generally, CEB staff received technical, administrative and financial training locally and/or abroad. Benin has a vocational training centre. In terms of project management and follow-up, staff of the finance directorate should endeavour to master the financial management of donor-funded projects. 4.3 Financial Performance CEB s financial situation deteriorated considerably over the implementation period. The tariff provisions set out in the Daho-Togo electricity code are not always respected. Indeed, according to the code, tariff should be automatically reviewed every three years. During the project implementation phase, the CEB did not undertake the tariff study requested during the appraisal, the aim of which was to decide on a possible tariff increase to completely offset the declining fixed asset return rates The recovery policy that the CEB put in place contributed significantly to the cashflow problems that it encountered. The schedule for the reimbursement of arrears by Benin s SCO and Togo s CIMAO were not respected. In addition, the CEET also recorded high arrears from Its highest commitments amounted to FCFA 16.8 billion in The proportion of outstanding customer payments in CEB s turnover increased from 54% in 1990 to 182% in The customer deadline which should have been an average of two billing months varied considerably to stand at twenty-two (22) months in 1997 (see Annex 8 on the debt trend) Since CIMAO s liquidation in 1989, arrears payments have remained frozen. The CIMAO assets liquidation report and proposals for their breakdown were only presented in The debt repayment plan took off with payment of FCFA 300 million out of a balance of FCFA 821 million as at the time of the liquidation. The latest product from asset transfer to the repurchaser, WACEM, will help reduce the residual balance and close the dossier before the end of 1999.

18 The second cement manufacturing company, SCO, CEB s debtor, also encountered enormous operating difficulties. It could not withstand Benin s 1998 energy crisis and had to suspend production. A lease management contract is being negotiated by the Ministry of Industries and SMEs with the consortium "Laffarge - Société du Ciment du Bénin" with a view to resumption of operations. The rent to be paid by the consortium will be used in repaying the CEB and SCO s outstanding bills of FCFA million (as at 9/12/98) The recovery situation was expected to improve in Indeed, following the Cotonou agreements of 21 and 22 January 1997 on settlement of CEET s short and mediumterm debt, an arrangement was made between the CEB, the Togolese authorities and CEET s interim managers under which Togo s Ministry of Finance accepted to pay CEB s debt to the ADB on its behalf (underwritten by the Togolese Government), in compensation for CEET s debt. Regarding recurrent consumption, CEET s interim management undertook to honour all its recurrent consumption. The outstanding arrears amounted to FCFA as at 9/12/98. Operations Although the net income remained positive over the period, the situation deteriorated between 1993 and 1997 with cumulative losses, to stand at FCFA billion in 1997, even though a net profit of FCFA 3.9 million was recorded in 1996 following renewed provisions. Self-financing followed the same trend as the net income. It reached FCFA 6.7 billion in 1991 before deteriorating from 1993 to 1997 (FCFA 8.9 billion in 1996) The growth in GWh energy sales was inadequate over the period. Apart from a 27.2% increase in sales in 1995/1994, the amount of GWh sold for other years stagnated and actually declined in some cases owing to a series of energy crises recorded over the period, especially in connection with the fall in the level of the Volta river in Ghana (most of CEB s energy comes from the Akosombo dam). The amount of GWh sold was not determined, contrary to statutory provisions. The GWh tariff was only increased once, from FCFA 23/kWh between 1990 and 1993 to FCFA 38 in The 1998 results will not be any better since the dam was again affected by drought (February to end of May 1998), calling into question all electricity production estimates. Both countries (Benin and Togo), beneficiaries of CEB s electricity supplies, suffered heavy economic losses in the wake of the fall in electricity production. The operating income was adversely affected by the situation described and the tariff freeze, resulting in operating losses over the 1993 to 1997 period (see Annex 9) Energy procurement also recorded the same trend in view of the fact that the amount of GWh sold accounted for an average 50% of total expenditures from 1990 to 1992 prior to payment of financial charges, amortization and provisions which represented 45% and 10% of the charges, respectively. Staff expenses have remained stable over the past three years, accounting for only 5% of operating expenses. The high financial charges confirm CEB s high debt level from the 1993 financial year. Financial Structure A review of the balance sheets in Annex 7 shows that the total fixed asset remained stable from 1990 to 1995, before increasing by 47% from 1995 following asset re-evaluation in the wake of the CFA Franc devaluation. Long and medium-term debt increased in the

19 11 same proportion as fixed assets from 1995, and weighed heavily on the period s net income through the financial charges. Return The dispatching facility has contributed to improved service quality. Since it has no impact on production, the financial and economic aspects overlap. Given the non-existence of real financial flows, only the IRR is used as an indicator. Based on information from the executing agency and various companies in charge of energy distribution in Benin and Togo, the IRR stood at 16% with the dispatching project. During appraisal, the figure was 14.4%. Annex 10 shows on what assumptions the calculation is based. 5. SOCIAL AND ENVIRONMENTAL IMPACT 5.1 When fully operational, the dispatching will permanently do the work of three teams of three persons in each of the seven stations. The CEB has begun the process of orientating workers who would have become redundant. 5.2 During appraisal, gender issues were not taken into account. It was noted that at the end of the project, the 20 staff that the project trained were all men. Moreover, no woman participated in the implementation phase. 5.3 Reliable electricity supply which the project improved brought social benefits to the people by improving their standard of living and the level of services in health centres and schools. 5.4 The project had no adverse impact on the environment. 6. PROJECT SUSTAINABILITY 6.1 To ensure project sustainability, the executing agency s budget regularly makes provision for covering the recurrent expenses for maintaining the dispatching centre. The charges (FCFA 250 million) represented 0.9% of CEB s income in 1997, which its future operations can cope with. 6.2 Facilities set up within the project framework are adequately maintained. Spare parts are available for necessary repairs. Twenty engineers and technicians trained by the equipment supplier and on-the-job during the installation process are in charge of operations and maintenance. These staff have thorough knowledge of the facilities and adequately accomplish their mission. Moreover, according to a contract between CEB and SIEMENS, the latter will provide dispatching maintenance services for 15 years from 4 February 1999, date of the final hand-over. 6.3 The dispatching centre was designed to cater for production and transmission resources of up to 27 stations, and set up for the 7 stations that the CEB had at the start of the implementation phase. In the mean time, the CEB built three new stations without linking them to the dispatching facility. In order to reap the full benefits of the project, the CEB should enhance dispatching hardware and software to take new stations into account. Furthermore, all new station installation projects should be subject to budget allocation with a

20 12 view to matching the dispatching capacity with electricity production and transmission resources. 7. PERFORMANCE OF THE BANK AND OF THE BORROWER 7.1 Bank s Performance The Bank speedily conducted the project studies and appraisal. During consideration of the contracting firm s book of specifications, it insisted that a maintenance contract be included with a view to guaranteeing project sustainability However, it showed some weaknesses during the implementation phase. Indeed, the Bank was slow in approving the bid appraisal report for selecting the contracting firm. Moreover, apart from an audit mission carried out in 1995, it effected only three supervision missions in 1995, 1997 and 1998 without the support of a financial analyst, despite problems encountered in connection with financial follow-up. No mission was planned in 1994 following the socio-political problems that Togo witnessed in 1993 and 1994, and despite repeated delays in project implementation. The disbursement timeframes were at times long and the non-transmission of disbursement information to the CEB did not permit the latter to keep precise project accounts. In the light of the foregoing, the Bank s performance is considered partly satisfactory. 7.2 Borrower s Performance The involvement of two borrowers in the project concerned the fulfillment of conditions for loan effectiveness, especially the reimbursement of SCO and CIMAO arrears. The conditions for effectiveness were not fulfilled and had to be modified to take into account the trend of CIMAO s institutional framework (undergoing liquidation) and of the SCO whose activities had been suspended. These all contributed to the financial difficulties facing the CEB The borrower could not implement one of the other conditions in connection with the statutory modifications, despite several reminders by the Bank. Moreover, the Togolese Government delayed implementation of the plan to reimburse CEET s considerable arrears to the CEB from Hence, the borrowers performance was hardly satisfactory.

21 13 8. GENERAL PERFORMANCE AND RATING 8.1 The detailed project performance ratings tables are given in Annex The implementation performance was poor despite good cost control, proper supervision and attainment of the project s key set objectives. The performance was highly hampered by the long delay in implementation and the non-respect of all loan conditions. 8.3 The Bank received a satisfactory rating despite the inadequate level of supervision. The rating reflects the good performance in other project cycles especially identification, preparation and evaluation. 8.4 Project impact on development is satisfactory. Indeed, the project attained its objectives and contributed to the institutional development of the CEB. Furthermore, project sustainability is guaranteed by the good quality of technical staff and the beneficial impact on the CEB technical management. 9. CONCLUSIONS, LESSONS AND RECOMMENDATIONS 9.1 Conclusions The project produced mixed results. Indeed, it was not properly implemented since, in the first instance, works start-up and continuation recorded considerable delays and, subsequently, the borrowers did not fulfill all the loan conditions. However, all project installations were successfully set up and the costs contained within the projected limits Other satisfactory factors included the attainment of project objectives and benefits. The attainment of project objectives since its provisional hand-over, allowed the CEB to better manage its technical installations and reap the expected benefits as projected during the appraisal. These benefits, quantified in IRR terms, are estimated at 16% on project completion and compare favourably with the 14.4% appraisal estimate. 9.2 Lessons The following lessons are drawn from the project implementation : (i) (ii) appraisal missions should thoroughly weigh the applicability of conditions precedent to loan effectiveness. In the case of the project under review, the difficulties that the borrowers encountered to fulfill two of these conditions delayed project start-up. One of the conditions was fulfilled after a long delay, while the other had to be modified to render it easier to fulfill ; the composition of the team of experts appointed to supervise a project should take into account the problems related to the project implementation. Indeed, the project was only supervised by electrical engineers even though it faced serious financial follow-up problems.

22 Recommendations To the Governments: The Governments of Benin and Togo should consult in order to harmonize the institutional changes undertaken in the electricity sector to better define the role of the CEB within the new context. They should ensure that these changes are rapidly carried out in order to maintain CEB returns and investment development. To the CEB: Oversee deliberations of the committee that will be set up to manage SCO leases, with a view to being classified among the privileged debtors ; Contact the Amortization Fund (Caisse Autonome d Amortissement) to study other possibilities for making the borrower (the Government of Benin) to compensate SCO debt and CEB maturities, similar to the CEET s experience with the Togo Ministry of Finance; Expand dispatching hardware and software to take new infrastructure into account. Therefore, budgetary allocation will be given to all new station installation projects to match the dispatching capacity with the electricity production and transmission resources. To the Bank: In future, regularly forward disbursement information to loan beneficiaries to enable them to update their accounts.

23 Map of Benin and Togo Annex 1 This map has been drawn by the African Development Bank for the exclusive use of the readers of the report to which it is attached. The names used and the borders shown do not imply on the part of the Bank and its members any judgement concerning the legal status of a territory nor any approval or acceptance of these borders.

24 Annex 2 CONDITIONS PRECEDENT TO FIRST DISBURSEMENT AND OTHER CONDITIONS A. Conditions Precedent to First Disbursement The executive council of Benin and the Government of Togo shall: 1. Undertake to regularly include in the budget allocations for financing the costs for which they are responsible in accordance with the financing plan; 2. Undertake to find additional sources of finance in the event of cost overruns; 3. Show proof that the loan was on-lent to the CEB for a rate not above 5% yearly repayable over a twenty- (20) year period, including a four- (4) year grace period. The draft on-lending agreement will be submitted beforehand to the Fund for approval; 4. Undertake not to use the lending project to pay various duties and taxes with regard to goods and services used for project implementation. Moreover, precedent to the first disbursement: 5. The National Executive Council of the People s Republic of Benin shall present to the ADF a recovery plan for SBEE s arrears to the CEB for consumption by the Onigbolo cement factory; 6. The Government of the Republic of Togo shall present to the ADF a plan to recover CIMAO arrears to the CEB. B. Other Conditions Moreover, Benin s National Executive Council and the Government of Togo shall: 1. Undertake statutory modifications within six (6) months, with a view to: a) Clearly stating that the CEB is the proprietor of the infrastructure it sets up, on the one hand, and the fate of CEB property in the event of its folding up, on the other hand; b) Obliging the two national electricity companies (CEET and SBEE) to buy CEB production in priority; c) Providing the CEB with equity capital or equity resources through nonreimbursable contributions by member states; 2. Show proof of opening an account funded with CEB reimbursement, the product (investment interest) of which will be used in covering the exchange risks and procuring new equipment (see precedent condition 3); 3. Undertake a tariff study with a view to deciding eventual tariff increases and ending the fall in the asset return rate recorded since 1991.

25 Annex 3 Project Components Computer system (hardware and software) Transmission support equipment Telephone and telex equipment Remote control equipment Adaptation of HT station lines Equipping of the transmission centre premises Training of operating and maintenance staff Engineering and works control

26 Annex 4 Project Implementation Schedule (by component) Component Computer system (hardware and software) Transmission support equipment Telephone and telex equipment Remote control equipment Adaptation of HT station lines Equipping of transmission centre premises Training of operating and maintenance staff * Industrial operation Guarantee period Date stated in the CEB/SIEMENS contract Actual dates * SIEMENS finalized this component with training sessions held in August and September 1997, and in January and September 1998.