Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-52541) ON A GRANT. IN THE AMOUNT OF US$ 7.

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-52541) Sustainable Development Energy Unit South Asia Region ON A GRANT IN THE AMOUNT OF US$ million TO THE Islamic Republic of Afghanistan FOR A Improvement of Power Supply to Kabul Project September 28, 2009

2 CURRENCY EQUIVALENTS (Exchange Rate Effective March 31, 2009) Currency Unit = Afghani US$ 1.00 = Afghani FISCAL YEAR March 21 - March 20 ABBREVIATIONS AND ACRONYMS ADB ARTF DABM DABS DECON EUR HPP KfW kv LI MEW MoF MW SDU SMEC USD Asian Development Bank Afghanistan Reconstruction Trust Fund Da Afghanistan Breshna Moassessa Da Afghanistan Breshna Sherkat Deutsche Energie-Consult Ingenieurgesellschaft mbh Euro Hydropower plant Kredit fuer Wiederaufbau Kilovolt Lahmeyer International Ministry of Energy and Water Ministry of Finance Megawatt Special Disbursement Unit Snowy Mountains Engineering Corporation United States Dollars Vice President: Isabel M. Guerrero Country Director: Marco Scuriatti Sector Manager: Salman Zaheer Project Team Leader: Sunil Kumar Khosla ICR Team Leader: Katherine Steel

3 Afghanistan Improvement of Power Supply to Kabul CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Grantee/Implementing Agencies/Donors... 8 Comments from KfW were integrated into the document Annex 1. Project Costs and Financing... 9 Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Grant Preparation and Implementation Support/Supervision Processes MAP

4 A. Basic Information Country: Afghanistan Project Name: Improvement of Power Supply to kabul Project ID: P L/C/TF Number(s): TF ICR Date: 09/29/2009 ICR Type: Core ICR Lending Instrument: TAL Grantee: Original Total Commitment: Revised Amount: USD 7.4M Environmental Category: C Implementing Agencies: Ministry of Energy and Water (MEW) Cofinanciers and Other External Partners: KfW GOVERNMENT OF AFGHANISTAN USD 7.4M Disbursed Amount: USD 7.4M B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 07/07/2003 Effectiveness: Appraisal: Restructuring(s): Approval: 12/10/2003 Mid-term Review: Closing: 06/30/ /31/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Grantee Performance: Moderately Satisfactory High Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Moderately Satisfactory Performance: Performance: Moderately Satisfactory i

5 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Moderately Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Power Theme Code (as % of total Bank financing) Conflict prevention and post-conflict reconstruction E. Bank Staff Positions At ICR At Approval Vice President: Isabel M. Guerrero Praful C. Patel Country Director: Marco Scuriatti Alastair J. McKechnie Sector Manager: Salman Zaheer Penelope J. Brook Project Team Leader: Sunil Kumar Khosla Pedro Sanchez ICR Team Leader: ICR Primary Author: Sunil Kumar Khosla Katherine Deaton Steel F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project#s objective is to improve power supply for Kabul in order to improve the living conditions and security situation and support the economic recovery. Revised Project Development Objectives (as approved by original approving authority) ii

6 (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Additional power supply capacity available for Kabul during the winter. Value quantitative or Qualitative) 10 MW 44 MW 48 MW Date achieved 06/30/ /30/ /30/2009 Comments (incl. % achievement) (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Value (quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Rehabilitation of two units (Unit 3 and Unit 2) of 22 MW each at the Mahipar power station. Unit Three : Non Unit Three : 22 operational MW Operational All 3 Units: 16 MW Unit Two: 10 MW Unit Two : each (partially available) 22MW Operational Date achieved 06/30/ /30/ /30/2009 Comments (incl. % achievement) Indicator 2 : Co-financing the rehabilitation of the nonfunctional transmission line 110 kv (65.7 km) between Sarobi and Breshna Kot sub-station Value (quantitative or Qualitative) Line non operational Line Operational Line Operational Date achieved 06/30/ /31/ /01/2005 Comments (incl. % achievement) Indicator 3 : Co-financing the rehabilitation of the main public lighting system in Kabul Value (quantitative or Qualitative) Public lighting : Non operational. Public Lighting rehabilitated : 116 km Public Lighting rehabilitated Date achieved 06/30/ /31/ /01/2006 Comments (incl. % iii

7 achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 06/19/2008 Moderately Satisfactory Moderately Satisfactory /16/2008 Moderately Satisfactory Moderately Satisfactory 6.84 H. Restructuring (if any) Not Applicable I. Disbursement Profile iv

8 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal At the time of appraisal the power sector was one of the least developed sectors in Afghanistan. Its inadequate status was preventing the development of the country, in addition to being a source of annoyance for the population and a constant drain on Government s scarce resources. The access ratio was one of the lowest in the world at 6%, with only 234,000 households connected to the public power system of which 70,000 were in the Kabul area. The other provinces had even less access with rural areas being virtually un-served. The existing facilities provided an unreliable service, and in most places for only a few hours each day. Of the 450 MW of installed generating capacity, only about 271 MW were available, and most of the units required overhaul or replacement. Distribution systems in the country were dilapidated or virtually nonexistent due to insufficient investment, lack of maintenance, and outright theft of materials over the previous 25 years. The substations and low voltage distribution networks in Kabul and in other cities, where electricity systems existed, were totally inadequate, overloaded and mostly outdated. The World Bank and other donors started a broad program of projects to support the reconstruction and development of the Afghanistan power sector. Responding to Government s request for the Bank to take the lead role in the power sector, a Power Sector Investment Program for the next five years was prepared. The Program was designed to help achieve the Government s goals regarding power sector development, sector restructuring, and institutional and policy reforms. The required investment was estimated to be in excess of US$ 600 million. The Afghanistan Reconstruction Trust Fund provided financing to meet some of this need. 1.2 Original Project Development Objectives (PDO) and Key Indicators This project s objective is to improve power supply for Kabul in order to improve the living conditions and security situation and support the economic recovery. The outcome indicator for the improvement to power supply is the successful completion and commissioning of the construction or repairs for each component. The improvement to living conditions and economic recovery is measured through the added power supply capacity and the number of new connections for residential and commercial/industrial consumers. 1.3 Main Beneficiaries, The primary beneficiaries are the residents and businesses of Kabul. As a result of the project they will have increased power availability allowing for more electricity connections and reduced load shedding. The end users will also benefit from reduced electricity costs because a greater share of the load will be met through hydropower instead of diesel-based power supply. 1

9 1.4 Original Components The Project was part of a larger program to rehabilitate the power supply for Kabul. ARTF was the co-financier on three components: Component 1: Rehabilitation of two (out of three) units of 22 MW each at the Mahipur power station (Mahipur HPP). Component 2: The 110 kv transmission line from the hydropower stations to Kabul was dilapidated and overloaded, and the Breshna Kot substation to which it is connected was destroyed during the war. The component funded by ARTF consisted of co-financing the rehabilitation of the nonfunctional transmission line between Sarobi and Breshna Kot substation. Component 3: This component consisted of co-financing the rehabilitation of the main public lighting system in Kabul by providing new equipment and installations. 1.5 Other significant changes The transmission line and street lighting components were implemented as planned, according to the project design, with some delay. The rehabilitation of Mahipur HPP had significant changes to the scope, schedule, and funding arrangements. Most of these changes were based on the limited a priori information regarding the security of the site, the degree of damage to the power equipment and the later revised decision to keep all three units running (see details at 2.2 below). All these factors expanded the quantity and quality of works completed. Details are provided in the implementation review. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry The project was prepared immediately after Afghanistan emerged from decades of conflict. At the time of preparation, it was assumed that the security situation would continue to improve and the project design did not account for additional costs and delays due to security concerns. While this factor did significantly impact implementation, it could not have been predicted. 2.2 Implementation There were significant changes to the rehabilitation of Mahipur HPP project component. These changes were a reflection of the larger repairs required and the deteriorating security situation. Technical: The technical scope of the Mahipur HPP rehabilitation component shifted away from the original plan of cannibalizing one of the three existing units at the Mahipar HPP to rehabilitate Unit 2. At the time this decision was taken, the rehabilitation of Unit 2 was still ongoing. Cannibalizing Unit 1 would have left the MEW with only one unit operating and would have forced MEW to increase power production of the expensive diesel power station in Kabul. Instead, all three units were kept running and new parts were brought in to complete the repairs. This decision allows MEW to be able 2

10 to operate all three units during the period when there is sufficient water and to have at least one backup unit for the remaining period. The downside of this course of action was that the manufacturing and sourcing of additional parts for Unit 2 delayed the completion of the repairs. The scope also grew to include additional repairs at the HPP site, which were found to be necessary during the rehabilitation process. Schedule: The initial completion date for the rehabilitation of Mahipur HPP was in 2005 and actual commissioning was the end of April This long delay was a combination of expanded work program, security concerns, seasonal delays, and coordination problems between MEW and the contractors. Funding: The expanded repairs, additional security requirements, and cost of delays created a significant funding gap. The additional project costs were met largely by the German government, who increased its financial contribution from EUR 15 million to EUR 25.5 million. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Monitoring and evaluation was managed by the implementing agent, KfW. 2.4 Safeguard and Fiduciary Compliance Records of the project's funds receipts and disbursements from inception until closure were maintained at the Ministry of Finance (MoF), Special Disbursement Unit (SDU) and SMEC/MEW (for transactions after June 2006). Records under this project, like other emergency projects in Afghanistan, were maintained manually at the SDU from inception until March 2005 when the SDU started using the Afghanistan Financial Management Information System (AFMIS) for all projects and line ministries financial transactions. Supporting documents were maintained satisfactorily for most payments. However, for transactions relating to the early years of the project copies of supporting documents were not maintained at MEW but were maintained only at MoF. Funds flow to all implementing agencies was controlled centrally by the MoF (SDU). An assessment of the process reveals that this has been managed appropriately since the project began. Financial reporting was poor initially: monthly and quarterly financial reports including the mandatory financial monitoring reports (FMRs) to be submitted quarterly to the Bank were not prepared regularly and also did not contain all required information. However financial reporting improved considerably over time. The FMRs were prepared and submitted regularly in the last three years. Annual audited financial statements were submitted regularly, though later than the mandated submission deadline. The audit opinion of the Control and Audit Office of Afghanistan was qualified with an exception for SY1384 and SY1385. The SY1386 audit report was submitted on June 30, 2009; the audit opinion was unqualified. Given that there were no financial management systems in place when the project became effective, one could conclude that FM capacity has been built steadily over the life of the project. However, FM capacity remains weak within MEW and much strengthening remains to be done. 3

11 A financial management supervision mission took place in April 2009 and there were no key issues from that review. The major procurement actions for rehabilitation of the Mahipur HPP and transmission line were contracted following Direct Contracting procedures. However, this method did not mitigate against implementation delays. 2.5 Post-completion Operation/Next Phase There are no current follow-up projects planned, however, the team recommends initiating a project to complete additional repairs needed at the Mahipur HPP including rehabilitation of the 110 kv switchyard. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Improved power supply is critical both to the economic development and security situation of Afghanistan. Electricity supply in Kabul is a necessity for operation of businesses and for improving living conditions; it also helps to provide a sense of security and stability to residents in Kabul. This perception has become even more important as the security situation in Afghanistan has deteriorated in recent years. These objectives also fit within the Bank s sector strategy of expanding both generation capacity and access to electricity. 3.2 Achievement of Project Development Objectives The stated development objectives cannot be fully evaluated because they are so broadly defined. The principal goal of improving power supply for Kabul has been achieved. However, it is not possible to make a direct causal linkage between the project s outcome and the living conditions, security situation and economic recovery in Kabul. In the years since the project began the security situation in Kabul has greatly deteriorated, due to many other factors. Power supply in Kabul has improved and, according to estimates by KfW, the repairs under the project have increased the share of hydropower to about 30% of installed generation capacity. There were roughly 213,000 new electricity connections and of these, 197,000 were private households and 13,100 were small and medium enterprises. Data provided by power utility DABM show that from alone, there were over 80,000 new connections in the Kabul network and more than 75,000 of these were residential connections. Based on these figures, it can be assumed that the additional and more stable power generation and transmission capacity has positively contributed to quality of life and economic development. In terms of the completion of works, both the street lighting and transmission rehabilitation were completed as specified. The Mahipur HPP rehabilitation in some ways was better than expected because more repairs were done and the overall generation capacity that was salvaged is greater than expected. However, there is still a need for 4

12 further repairs and training. The repairs to the hydropower station are particularly important because it currently meets capacity demand that would otherwise be met by diesel generators, which are both expensive and harmful to the environment. It is estimated that the annual energy produced from one unit at Mahipur replaces 12 million liters of fuel, which would cost about US$ 8 million. 3.3 Efficiency In general, the street lighting and transmission lines components were efficiently executed. Both components were delayed due to work stoppage in the months surrounding the October 2004 elections. During this period most foreign companies left the country due to threats of violence and expected riots. The overhead transmission line was also delayed due to de-mining of the line route, harsh weather during the winter months, and sabotage of one of the new 110 kv towers. The street lighting component was completed within the budget allocation. The cost of the transmission lines component was increased from roughly US$ million to US$ million due to currency fluctuations. The rehabilitation of the Mahipur HPP has only been recently completed (April 2009) so it is too soon to know the financial and economic returns from the increased power generation. In total there were 13 variation orders issued for this component and the overall scope and schedule was revised twice. The cost of the component has more than doubled, but this has included significantly greater repairs than initially estimated and a much larger security budget. The German government was able to fund the shortfall, providing EUR 5.5 million in 2006 and EUR 5 million in Justification of Overall Outcome Rating The project met all of its objectives; however there were significant delays in execution and substantially more funds were needed in order to complete the work. Rating: Moderately Satisfactory 3.5 Overarching Themes, Other Outcomes and Impacts The activities funded under the project have highlighted many of the challenges facing infrastructure projects in Afghanistan. Although the best practices were not implemented from the beginning of this project, the lessons learned will be important moving forward with other energy projects. Most notably, the project identified the need for contingency financing for unexpected factors (level of security, excess damage to equipment to be rehabilitated than initially estimated, etc.) and the importance of contracting firms with a local/regional presence. 4. Assessment of Risk to Development Outcome The overall risk to development outcomes is rated High. The principal source of risk is the tenuous security situation in Afghanistan. There is significant likelihood that project funded basic infrastructure could be targeted by insurgent groups. MEW/DABS, under ADB funding is procuring light weight towers, which are easy to assemble for fast repair 5

13 of any damaged power line segments. This would significantly reduce the down time for any mishap/damage to towers. The Mahipur HPP rehabilitation has an added risk of technical failure due to the age of the equipment, the lack of adequate spare parts, and the need for repairs on ancillary systems. There is a significant risk that due to a lack of proper operation and maintenance the units would deteriorate faster than expected. In addition budget constraints might limit possibilities to employ qualified staff to maintain the system. Most importantly, Lahmeyer International (LI) and KfW have identified a list of known problems (such as cavitation and switchyard capacity) and additional repairs. These problems should be addressed as soon as possible to help prolong the life of the Mahipur HPP. Rating: High Risk 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance The World Bank performance rating is Moderately Satisfactory. The Bank s direct role was limited since KfW was the main financier of the project. The Bank could have assisted more with coordination issues and definition of roles given its supervisory role. The invoice payment process also seemed inefficient as each one went through KfW, to the MEW, to the MoF, to ARTF in Kabul, and then to Washington. Rating: Moderately Satisfactory 5.2 Grantee Performance The government s performance is rated Moderately Satisfactory since the project works were completed albeit with significant delays and cost overruns. In other settings the rating might be lower, but the fact that the works were completed at all is impressive given the security situation in Afghanistan. Rating: Moderately Satisfactory 6. Lessons Learned The lessons learned are generalized for the entire project, although most refer to experiences with the rehabilitation of Mahipur HPP. The primary lessons learned fall into two broad categories of managing (1) uncertainty and (2) stakeholder dynamics. When the project was initiated, very little was known about the extent of the damage to the infrastructure or the status and trajectory of the security situation. This uncertainty was the principal driver of both the cost overruns and the project delays. The costs increased because more repairs than expected were needed to rehabilitate the hydropower facility and because there was significant added security cost. Some of the security factors should have been considered up front, such as the cost of demining and certification, but others were unexpected. For example, originally the consulting contract 6

14 did not foresee a permanent presence at the site. The initial understanding was that the security situation would continually improve so there was never an agreement about how to manage or pay for security. By the time things got worse and provision of security was necessary, KfW had to meet Voith Siemens demands, with little room for negotiation since there was no reference price or competitive bidding process. At that point, the only options were to reach a common understanding regarding the cost or not complete the project. Lesson learned: Build options into up front planning so there are contingency plans for financing and project completion. This project had a relatively long list of stakeholders since MEW used KfW as an implementation partner and the work was contracted to Voith Siemens, DECON, and LI. Voith Siemens was selected on a sole source basis due to their experience with Mahipur power station (they had installed the original equipment). Although they had technical expertise, their willingness to work in the hostile environment of Afghanistan seems to have suffered towards the end of the implementation. There were also communication challenges between the stakeholders and issues with role definition and responsibility. Lesson learned: Spend more time up front defining roles and responsibilities and consider local experience more heavily in procurement process. A final lesson learned from this project is the need for more clearly measurable indicators, even in post-conflict situations. Recommendations Flexibility and options financing In an environment with so much uncertainty it is necessary to build more flexibility into the project design. This could include adding contingency plans for unexpected events, as well as financing options for cost overruns due to broad changes in the Afghan environment 1. By definition, these events cannot be anticipated so the project design has to include flexibility, not simply a larger cushion of unallocated funds. Local presence and experience Coordination of stakeholders will be an issue in any project that includes government and inter/national partners. In Afghanistan it is essential that all stakeholders understand the on-the-ground challenges and the implications of working in an unstable area. For this reason, local presence and/or extensive experience in Afghanistan should be adequately factored into the procurement process and decision-making. 1 The project agreement did include a provision for force majeur but this was limited to natural events. Although work had to be stopped for one month for the elections in 2004, the election was not considered to be in this category. 7

15 7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors Comments from KfW were integrated into the document. 8

16 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate (USD millions) Actual/Latest Estimate (USD millions) Rehabilitation of Mahipar power station Rehabilitation of 110 kv transmission line Rehabilitation of public lighting in Kabul Percentage of Appraisal (%) Management fee Total Financing Required Category Category Description Amount (USD millions) 1 Goods Works Consultants services and audits Nil 4 Management Fee.340 Total Disbursed Cancellation as on August 4, Total Grant Amount (b) Financing Source of Funds Afghanistan Reconstruction Trust Fund Type of Cofinancing Appraisal Estimate (USD millions) Actual/Late st Estimate (USD millions) Percentage of Appraisal 9

17 Annex 2. Outputs by Component Component Completion date Output Rehabilitation of Mahipar power station Rehabilitation of 110 kv transmission line Rehabilitation of public lighting in Kabul April 2009 April 2005 February MW hydropower capacity available (current peak output is 48 MW) Completed, more consistent supply of electricity to Kabul Completed, co-financed 116 km of street lighting 10

18 Annex 3. Economic and Financial Analysis As an emergency operation a full economic and financial analysis was not done during project preparation. At the time of evaluation there is still limited data on the Afghan power system. According to the consultant s report (DECON) on the rehabilitation of the transmission line and street lighting project there was insufficient data to conduct an economic and financial evaluation: Unfortunately, no information about statistics on the Kabul power supply system could be obtained for this report, like load characteristics, peak load/minimum load, generating capacity, major outages and their reason, the number of new customers connected split up for households, workshops, small enterprises, government enterprises, ministries, education facilities etc. Although there is insufficient data to analyze the full impact of the rehabilitation of Mahipar hydropower plant, there are significant benefits in terms of the offset diesel power. Even with conservative assumptions (shown below), the EIRR for the project is good. Assumptions Operating hours hours/year 8760 Outage time HPP % 70% Load factor HPP % 50% Price per unit HPP USD/kWh 0.15 Price per unit diesel USD/kWh 0.5 Years of HPP operation Years 20 Generation/year MWh/year Cost of rehabilitation USD million 18 Cost of maintenance (3%) USD million 0.45 The initial case assumes that one unit was in operation during the rehabilitation so the additional savings only come from the remaining 32 MW (peak capacity is currently 48 MW). For this scenario the EIRR is 37%. The second case assumes that the output is further cut due to maintenance problems and the real gain in hydropower output is 16 MW (one unit rehabilitated). Even in this case the EIRR is 22%. Should the power station cease to function after 10 years due to security issues or poor maintenance, the EIRR is 31% (32 MW) and 13% (16 MW). 11

19 Annex 4. Grant Preparation and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending/Grant Preparation Pedro Sanchez Senior Energy Specialist TTL SASDE Julie Fraser Senior Energy Specialist TTL SASDE Responsibility/ Specialty Supervision/ICR Sunil Kumar Khosla Senior Energy Specialist TTL SASDE Kenneth O. Okpara Sr Financial Management Specia SARFM Deepal Fernando Senior Procurement Specialist SARPS Mohammed Edreess Sahak Team Assistant SACAF (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands No. of staff weeks (including travel and consultant costs) Lending FY FY FY FY FY Total: Supervision/ICR FY Total:

20 1