RESTRICTEDPCR:SAM 17085

ASIAN DEVELOPMENT BANKThis Report has been prepared forthe exclusive use of the Bank.

PROJECT COMPLETION REPORT

OF ThE

AFULILO HYDROELECTRIC PROJECT(Loans 813-SAM(SF] and 1228-SAM(SF]

WESTERN SAMOA

December 1994

AIDABECEDFEIAEIBEISEPCIDAIDCTRE

CURRENCY EQUIVALENTS

Currency Unit - Tala (WS$)

At Appraisal(September 1986)

WS$1 .00 = US$0.4445US$1.00 = WS$2.2496

At Reappraisal(September 1992)

WS$1 .00 = US$0.3921WS$1 .00 = US$2.5504

At Completion(August 1994)

WS$1 .00 = US$0.4048US$1.00 = WS$2.4704

ABBREVIATIONS

Australian International Development Assistance BureauCommission of the European CommunitiesEnergy Development FundEnvironmental Impact AssessmentEuropean Investment BankEnvironmental Impact StudyElectric Power CompanyInternational Development AssociationInterest During ConstructionTechnical Review Expert

NOTES

(I)

In this Report, "US$" refers to US dollars and "WS$" to Western Samoa Tala, and"A$" to Australian dollars.

(ii) Commencing July 1991, the fiscal year of the Government was changed from acalendar year to a year ending June 30. The period January 1991 to June 1991was a transition period.

PCR:SAM 322

PROJECT COMPLETION REPORT

OF THE

AFULILO HYDROELECTRIC PROJECTLoans 813-SAM(SF) and 1228-SAM(SF)

WESTERN SAMOA

December 1994

Note: This Report was prepared by a Bank Mission composed of RN. Fernando, Senior EnergySpecialist (Mission Leader), M. Gatti, Young Professional and P. 1. Canlas, Sr. Assistant(Project Administration)

TABLE OF CONTENTS

Page

MAPS

1. Western Samoa- Upolu Island2. Afulilo Hydroelectric Project - General Layout

BASIC DATA

iii - ix

I. PROJECT DESCRIPTION

A. Objectives, Rationale and Scope 1

II. EVALUATION OF IMPLEMENTATION

A. Project Components 1B. Implementation Arrangements 1C. Project Costs 1D. Project Schedule 4E. Engagement of Consultants and

5

Procurement of Goods and ServicesF. Performance of Consultants, 5

Contractors and SuppliersG. Conditions and Covenants 6H. Disbursements 6I. Environmental Impact

7

J. Project Benefits 7K. Performance of Borrower and Executing Agency 8L. Performance of the Bank

9

III. CONCLUSIONS AND RECOMMENDATIONS

A. Conclusions 9B. Recommendations 9

APPENDIXES 11

Up9rading to 66kV

t ) WSa)ani

Future Planned 66kV

Pacific Ocean

171°30W

1 72°OOW

171

WESTERN SAMOA

UPOLU ISLANDAFULILO HYDROELECTRIC PROJECT

-13°55S

Mulianuaw,

r7tuiiaiiva

/ Wuu

1 ' ;__ /

/1) Aliamalu A

Mt. Framoa tt

Samasoni

Valara

FagaliE

P-I-i CaleOleFeeAlaoa

Under Construction22kV (poles 66kV)

Updrading to 33 kV

luuSalualala Luliluti

iat4

Lalomauga

)

13°55S-

Ta'elefaga Power House

PROJECT AREA

AFUL ItO BASIN

-14°OOS

10

Kilometers

LEGEND;

o Town

•

Nydro Power Station

Diesel Power Station

_______ Main Road

-'_-.cC River

Existing 22KV Transmission Line(unless otherwise stated)

Future Planned Construction

- Constructed under Project

172°0OW

(ii) Map2

28 October 1986

Not necessary29 October 1986

Not necessary

04 December 1986

22 April 1993

24 December 1986

03 May 1993

24 March 1987

02 August 199322 May 1987

30 June 1994

31 December 1991w

30 June 199415 November 1993

Not yet closed'

(iii)

BASIC DATA

Loan No. 813-SAM(SF) Loa, No. 18-S,AM(SF)

A. Loan Identification

1. Country2. Project Title3. Borrower4. Executing Agency5. Amount of Loan

B. Loan Data

1. Appraisal/Reappraisal- 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

6. Closing Dates- In Loan Agreement- Actual

Western SamoaAfulilo Hydroelectric Project

Independent State of Western SamoaElectric Power Company (EPC)

$5.4 million !I $2.0 million '

08 September 1986

07 September 199219 September 1986

18 September 1992

The equivalent in various currencies of SDR 4.428 million from the Bank's Special Fundsresources. The loan amount at appraisal was US$5.4 million equivalent.

The equivalent in various currencies of SDR 1.457 million from the Bank's Special Fundsresources. The loan amount at re-appraisal was US$2.0 million equivalent.

Loan effectiveness date was extended to 25 May 1987.

Loan effectiveness date was extended to 30 June 1994.

Loan closing date was extended to 30 June 1994.

Loan is expected to be closed by 31 December 1994 at the latest.

(iv)

7. Terms of Loan- Interest Rate- Maturity (in years)- Grace Period (in years)

8. Disbursements

1 percent per annum40 years10 years

1 per cent per annum40 years10 years

Loan No. 81 3-SAM(SF)

(a) Dates

Initial Final Time Interval28 Aug 1987 15 Nov 1993 6 yrs. 2-1/2 months

Effective Date Original Closing Date Time Interval22 May 1987 31 Dec 1991 4 yrs. 7 months

(b) Amount (US$'OOO)

NetOriginal Last Revised Amount Amount Undisbursed

Item Category Loan-i' Allocations' Availabl&' Disbursed' Balance'

Equipment and Materials I 3,122 3697 3,765 3,765 0

Consultants' Services II 1,183 2,351 2,132 2,132 0

Interests & Other Charges III 127 150 143 143 0

Prior TA Costs IV 127 150 136 136 0

Unallocated V 841 46 0 0 0

Total _Q

' Amount converted from SDR to US$ equivalent using exchange rate at the time of appraisal (September1986) of 0.820000.Revised amount based on 11 September 1992 exchange rate of 0.692444.Based on the actual exchange rates used during disbursements.

' As of 15 November 1993.

(v)

Loan No. 1 228-SAM(SF)

(a) Dates

Initial28 September 1994

Effective Date30 June 1994

FinalOngoing

Original Closing Date30 June 1994

Time Interval

Time IntervalNone

(b) Amount (US$'oOo)

Net

Supplemen- Amount Amount UndisbursedItem Category tary Loan!' Available' Disbursed Balance

Equipment and Materials 1380 1,476 0 1 ,476'

Consultants' Services

620 663 445 21&'

Total

Amount converted from SOR to USS equivalent using exchange rate at the time of Reappraisal (September1992) of 0.728500.

' These figures are based on the actual figures as of 16 October 1994.' EPC estimates that amount allocated will be fully utilized.

9. Local Costs Financed: No local costs were financed under the Loan.

Actual

27.035.43

32.47

Appraisal Reappraisal

Estimate Estimate

13.59 28.39

3.61 4.81

17.20 33.20

Foreign Exchange CostLocal Cost

Total Cost

C. Project Data

1. Project Cost (US$ million)

2. Financing Plan (US$'OOO)

(I) Implementation Costs

(a) Borrower Financed(b) ADB Financed(c) EC Financed(d) EIB Financed(e) IDA Financed( AIDAB Financed

Total

(ii) IDC Costs, Taxes and Duties

(a) Borrower Financed(b) ADB Financed(c) EC Financed(d) EIB Financed(e) IDA Financed(f) AIDAB Financed

Total

(iii) TA Recovery

Total

pprl__ Reappraisal Actual

Foreign Local Total Foreign Local Total -Foreign

0 315 315 792 2,718 3,510 0 3,984 3,984

5,200 0 5,200 7,476 0 7,476 8,057 0 8,057

5,190 555 5,745 12,327 0 12,327 11,394 0 11,394

0 1,540 1,540 3,152 0 3,152 3377 0 3,377

3,000 0 3,000 4,124 0 4,124 3,667 0 3,667

0 0 0 229 0 229 228 0 228

13,390 100 718 30,818 26,723 30,707

0 1,200 1,200

0

2,093 2,093 0

1,448 1,448

100 0 100

136

0 136 155

0 155

0 0 0

0

0 0 0

0 0

0 0 0

0

0 0 0

0 0

0 0 0

0

0 0 0

0 0

0 0 0

0

0 0 0

0 0

ip

136

2.093

L44 1Q

100 0 100

151

0 151 155

0 155

10 610 17,200

32.465

1,185 110

1,295

50 0

50

0 0

0

0 0

0

115 0

115

1,350 110

1.460

1,205 575

1,780

100 0

100

0 1,200

1,200

100 1,200

1,300

100 0

100

0 0

0

13,590 3,610 17,200

2,691 595

209 0

840 5

0 35

0 0

3.740 635

0 0

155 0

0 1,448

155 1,448

317 0

84 545

27,033 5,433

3,285209845

350

4,374

0

1551,448

1,603

317

629

32,485

(vi)

3. Cost Brealdown by Pro$ct Cornpcnsrit (US$'OOO)

Appraisal Estimate ActualForeign Local Total Fonegn Local Total

A. Prepaatory Work

1.Land Acqumition SIzvey 0 40 40 65 u 0 652. Land Comp.nsaticn 0 50 50 0 407 4073. Reservor Investigetiori 190 30 220 953/ 0 954. Access Road 0 85 85 68 50 118

Sub-Total A 190 205 395 228 450 684

B. Main CMI Contract

1. Mobiltration 500 0 5002. ASulito Dam 2,530 570 3,1003. Tunnel at Afulilo 200 30 2304. Ppeline & sxge Chamber 1.250 200 1.4505. Powerhouse and Tailrace 400 90 4906. Perman.nt Housing 70 30 100 0 122 1227. Physical Conting.ncies 20% 980 180 1,160

Sub -Total B 5,930 1,100 7,030 14,938 1,093 16,031 V

C. Mechanical and Electrical Works

1 PeIine (Sply only), Pes & Valves 1,050 25 1,075 2,079 0 2,0796/2. Generating Equment 875 25 9003. SpilIway Gates 210 10 220 0 04. El.cfrical and Communication Equment 1,185 70 1.2555. Physical Contingencies 10% 340 10 350

Sub-Total C 3,660 140 3,800 4,850 0

D. Transmission Lines

1. Mobiksation & Equment2. Transmission Lines Erection3. Physical Contingencies

Sub-Total D

E. Consulting Services

1. Engineering and Construction2. Technical Review Expert3. Project Engineer4. Transmission Engineer5. Contingency

Sit-Total E

F. Escalation

G. IDC and Other Charges

1. Financed by ADS2. Financed by EPC

Sub-Total G

H.Recovery of Prior TA Costs

I.Miscellaneous Costs

TOTAL PROJECT COST

200 0 200

760 255 1,015

95 25 120

1,055 280 1,335 2,720 1,256 3,9779/

Representing A$85,000 antfrcm AJDAB.2/ This corresponds toan estimatefor WS$1 milon. As yet, no compensation has been paid." Representing A$1 25,000 want from AJDAB.' Representing a ASa0,000 gsant from AIDAB.' AJI items except permanent housing are under one clvii works contrect (AC1).

6/ Under one contractfor P.s and Hydraulic Steel Sfructtres (AM2).Design altered to exclude spiliway getes.In addition to the contract for P,ea & Hydraulic Steel Structi.zes (AM2) this includes t*'o contracts:

AM3 - Tisbines and Mechanical Equpment (US$775,202)AE4 - Generators and Electrical Eqtepment (US$1,917,749)

" All items under tI'wee contracts.AE5 - Transmission lines and line materiel (US$3,398,303)AE6 - Transmission line and construction equçment (US$91,274)AE7 - EPC line erection (US$375,394)

'° Includes training (US$82.1 06), reseroi clearing (US$410,894) and school in Taaletaga (US$118545).

(viii)

4. Project Schedule

(a) Date of Contract with Consultants• Engineering-TRE

(b) Commencement of Services- Engineering- TRE

(c) Completion of Services- Engineering- TRE

(d) Completion of EngineeringDesigns

(e) Civil Works Contract- Date of Award- Completion of Work

(f) Equipment and Supplies Dates- First Procurement- Last Procurement- Completion of Equipment

Installation

(g) Start of Operations- Completion of Tests and

Commissioning- Commercial Operations

AppraisalEstimate

Apr 1987July 1988

Apr 1987Jul 1988

Oct 1990Mar 1991!'

Jul 1988Oct 1990w

Dec 1987Sep 1988

Jun 1990

Oct 1990

Actual

26 June 198730 Aug 1988

July 1987Sep 1988

Dec 1993Ongoing

Jun 1989

26 Jul 199025 Jun 1993

12 Sep 199029 Nov 1991

15 Jun 1993

Jun 1993Nov 1993

!I No date is mentioned in the Appraisal Report. This date was specified in a Memorandum ofUnderstanding of 30 August 1988 between EPC and the IRE and was extended to December1994 by Amendment No. 1 of January 6, 1994 to the MOU.

' The date of completion of work was extended to 30 June 1993 by Amendment to PrincipalLoan Agreement (see Supplementary Loan Agreement, Section 5.02).

Fact FindingAppraisalReviewnceptionReview

5

2

2

2

84555

125

12820

4-18 May 19868-19 Sep 198631 Jan-5 Feb 198725 Nov-i Dec 198731 Jan-5 Feb 198918-24 Aug 198921-29 Jan 19913-12 Feb 1992

a, b, c, d, e, fa, d, e, f, ghe, hhf, h

d,

(ix)

D. Data on Bank Missions

No. of No. of SpecializationType of Mission Date Pecsons Staff-days of Members

Development Partners'Meeting

17 July 1992Reappraisal

7-18 Sep 1992

20

a,dReview

14-24 June 1993

ii

dPCR

8-19 Aug 1994

27

k,l,m

1/ a - Sr. Financial Analyst/Economist, b - Sr. Country Economist, c - Sr. Environmental Specialist, d - ProjectEngineer, e - Financial Analyst, f - Staff Consultant, g - Counsel, h - Sr. Project Engineer, I - ProjectEconomist, j - Technical Assistant, k - Senior Energy Specialist, I - Young Professional, m - Sr. Assistant(Project Administration)

I. PROJECT DESCRIPTION

Objectives, Rationale and Scope

1. A principal objective of the long-term energy policy of the Government ofWestern Samoa has been to reduce the country's dependence on imported fuels throughdevelopment of indigenous renewable energy sources. The Afulilo Hydroelectric Project wasformulated in line with this policy to assist the country develop its hydroelectric resources andthereby displace diesel-electric power generation and also supplement electricity generationfrom run-of-river hydropower stations. The Project, executed by the Electric Power Company(EPC), provided the first storage hydroelectric plant in Western Samoa with 4 MW of installedcapacity.

II. EVALUATION OF IMPLEMENTATION

A. Project Components

2. The Project, based on conventional hydropower plant design, provided for thefollowing components: (I) a concrete dam with two ungated spillways on either side of a centralcolumn including sluice and intake, (ii) a headrace running through two tunnels (0.5 km and0.4 km long, respectively), (iii) a surge chamber and a high-pressure penstock, (iv) apowerhouse with provision for three 2-MW turbogenerator sets and three transformer bays; (iv)two 2-MW turbine-generators, auxiliary equipment, step-up transformers and switchgear; (v)power transmission lines; (v) consulting services; and (vi) the services of a technical reviewexpert (TRE).

B. Implementation Arrangements

3. As envisaged during appraisal, EPC established a Project Office to supervise theday-to-day implementation of the Project. This Project Office was jointly headed by a full-timelocal Project Coordinator and an expatriate Project Engineer. Both of them reported directlyto EPC's General Manager. EPC also employed an expatriate Project Distribution Engineer ona one-year contract to assist with the transmission reinforcement included in the Project.

C. Project Costs

4. At the time of Project appraisal in September 1986 the total cost of the Projectwas estimated at US$17.2 million (exclusive of import duties and taxes), comprising US$13.6million (about 80 per cent) in foreign currency costs and US$3.6 million equivalent (about 20per cent) in local currency costs. The appraisal cost estimate was made in 1986 prices andwas based on an EPC-financed feasibility study . !' It included provisions for physicalcontingencies and price escalation.

!' Afulilo Hydro-Electric Project, Partial Development, Feasibility Study Report, January1986.

5. Financing for the Project was originally provided by the Bank, the World Bank,the European Community (EC), the European Investment Bank (EIB) and the Govemment/EPC.The Bank made a loan of US$5.4 million from its Special Funds resources to finance part of theforeign exchange cost, including US$100,000 for service charge on the Bank loan duringconstruction (IDC) and US$100,000 for cost recovery of the prior TA.!' The World Bank,through the International Development Association (IDA), agreed to co-finance the Project byproviding a credit amounting to US$3.0 million. The EC, through its Energy Development Fund(EDF) facility, provided a grant of ECU 5.8 million (US$5.7 million equivalent) under the LomeIll Convention, including US$0.6 million equivalent to finance part of the local currency cost ofthe Project, and a TA grant of up to ECU 1.0 million (US$1.0 million equivalent) for consultingand training services in engineering to EPC. EIB extended a loan amounting to US$1.5 millionequivalent to co-finance a part of the local currency cost of the Project. The Government/EPCfinanced the remaining part of the local currency cost of the Project amounting to US$1 .5million equivalent.

6. Design and construction supervision consultants were recruited in June 1987.Following a review of the report produced by the feasibility consultant, design changes werefound to be necessary. In particular, the following alterations were adopted: (I) integration ofa diversion culvert and a discharge sluice at the dam, thereby avoiding a gated overflowspillway; (ii) realignment and shortening of the headrace by having two tunnels (instead of one)with a buried pipeline connecting them; (iii) construction of an underground surge tank; (iv)redesign of transmission lines to account for higher wind speeds; and (v) enlargement of powerhouse and penstocks to accommodate a third 2 MW turbine generator in the future. Thesemodifications would have been considered at Project appraisal if the engineering design hadbeen finalized at that time instead of being included in the engineering consultant's terms ofreference.

7. After opening the bids for civil works in June 1989, the appraisal estimates werefound to be inadequate partly as a result of the changes referred to above in the scope of workenvisaged at appraisal. A reassessment of the Project's viability was carried out in September1989 based on revised cost estimates which increased the Project cost by 55 per cent toUS$25.1 million. However, this reassessment confirmed that the Project remained the least-costgeneration alternative. A revised financing plan was finalized in July 1990 to cover a totalProject cost of US$26.6 million. The increase by US$1.5 million over the September 1989estimate was due mainly to increased consulting services envisaged. The bulk of the additionalfinancing required above that arranged at appraisal was provided by EC, the share of whichin the Project financing increased from US$5.7 million to US$10.7 million equivalent. EIB'scontribution increased from US$1 .5 million to US$3.2 million while the Government's/EPC'sshare increased from US$1.5 million to US$3.6 million equivalent. An amount of US$0.23million was provided by Australian International Development Assistance Bureau (AIDAB).

8. In July 1992, a Development Partners' Meeting was held between representatives of theGovernment/EPC and the five co-financiers in Western Samoa to review the Project. TheGovernment and the EPC reported that the cost of the Project had increased from the July 1990estimate mainly because of currency fluctuations, damage and suspension of work caused by

TA No. 350-SAM: Feasibility Study of Fagaloa/Afulilo Hydropower Scheme, forUS$348,000, approved on 22 April 1980.

3

Cyclone Val in December 1991, need to further strengthen transmission lines to withstand windspeeds up to 200 km/hr, increased piling efforts to meet weak geological conditions at thepowerhouse site and the extended period of engineering consulting services required. A BankReappraisal Mission visfted Western Samoa in September 1992 and estimated the Project costas US$33.2 million equivalent, consisting of a foreign currency cost of US$28.4 million and alocal currency cost of US$4.8 million equivalent. This represented an increase of US$16.0million, or 93 per cent, over the appraisal estimate, and US$6.6 million over the July 1990 costestimates. Details of the Project costs and financing plans at Project appraisal, (September1986), revised estimates (July 1990) and at reappraisal (September 1992) are shown in Table1 and Table 2, respectively.

Table 1. Com parison of Total Costs(US$'OOO)

Item

Civil Works

Electrical andMechanical Equip

Transmission Lines

Consultant'sServices

Interest andOther Charges

TA Recovery

Appraisal(September 1986)

8,406

4,221

1535

1638

1,300

100

Revised Estimates'(July 1990)

13,633

5,174

2,212

4,047

1376

136

Reappraisals(September 1992)

17,170

5,632

3,425

4,342

2,476

151

Total 17,200 26,576 33,198

' Includes contingenciesBased on disbursements and foreign exchange rates as of 31 July 1990.Based on disbursements as of 31 July 1992 and foreign exchange rates as of 31 July 1990.

9. On April 22, 1993 the supplementary loan of US$2.0 million from Special Funds resourceswas approved by the Board.!' This increased the Bank's financing of the Project cost in dollarterms to US$7.7 million but in relative terms, the Bank's share in the total Project cost decreasedfrom 31.4 per cent to 23.2 per cent. The balance of the cost overrun was covered bysupplementary financing of US$1.6 million from EC, US$1.0 million from IDA and US$2.0 millionfrom the Government/EPC. The Government and EPC were granted retroactive financing in viewof the fact that proceeds of the first loan were expected to run out prior to the proposedsupplementary loan becoming effective. The purpose of retroactive financing was to enable theGovernment and EPC to continue payments under the two existing Bank-financed contracts(consulting services for construction supervision and construction of civil works), thereby

!1 Loan No. 1 228-SAM(SF): Afulilo Hydroelectric Power (Supplementary).

4

avoiding their suspension. Retroactive financing, was estimated at 40-50 per cent of theproposed loan amount of US$2 million.

Table 2. Financing Plans(US$'OOO)

Item Appraisal Revised Estimates ReappraisalS'

(September 1986) (July 1990) (September 1992)

ADB 5,4O0' 5,763' 7,763

IDA 3,000' 3,124S' 4,124

EC 5,745 10.727 12,137

EIB 1,540 3,152 3,152

AIDAB

229 229

GovernmentlEPC 1,515 3,583 5,603

Total 17200 26,578 33,198

S' Includes contingenciesS' Based on disbursements and foreign exchange rates as of 31 July 1990.

Based on disbursements as of 31 July 1992 and foreign exchange rates as of31 July 1990.

10. The actual Project cost!' including IDC is US$32.47 million with US$27.03 millionin foreign exchange and US$5.43 million in local currency. It has exceeded the appraisalestimate of US$17.2 million by US$1 5.3 million or 89 per cent, but is lower than thesupplementary loan processing estimate of US$33.2 million by US$0.7 million or 2 per cent. Thecommissioning of major equipment under the Project was completed by mid-June 1993 whentrial operations commenced.

D. Project Schedule

11. Key Project events are listed in Appendix 1 and a comparison of projected andactual implementation is presented in Appendix 2. Commercial operations began in November1993, more than three years behind the appraisal schedule. The delays incurred during Projectimplementation are primarily due to: (i) delays in procurement and (ii) delays in construction.The actual time taken for procurement was three years against the appraisal estimate of one anda half years. One year was lost between the time of bid opening in June 1989 and thecommencement of contracting for civil works due to the need to have a revised financing plan.The delays in construction were due mainly to: (i) increased scope of work above thatenvisaged at appraisal, including expansion of the powerhouse to accommodate a third turbine-

See pages (iv) and (v) - Project data.

5

generator set; (ii) damage caused by Cyclone Val which made a temporary suspension of worknecessary; (iii) poor condition of public roads to the site; (iv) change in the regulations governingthe storage of explosives which slowed tunneling work considerably; (v) the sinking of two shipsin October 1991 bearing cement and other construction materials; (vi) breakdown of the cablecrane used for penstock installation; (vii) land disputes which halted work on the Taalefaga-Lalomauga transmission line and delayed construction of the new 33 kV line to Tanugamanono;and (ix) the need to clear the reservoir of trees and other vegetation.

E. Engagement of Consultants and Procurement of Goods and Services

1. Engagement of Consultants

12. A consortium of engineering consultants assisted EPC in implementing the Project.The services provided by the consultants included the preparation of detailed design, technicalspecifications and tender documents, as well as tender evaluation and construction supervision.An independent expert specialized in the design and construction of hydropower schemes of thisnature was engaged as the Technical Review Expert (IRE) to review and advise EPC and theBank periodically on matters concerning Project design and implementation. Both theconsultants and the TRE were engaged by EPC following the Bank's Guidelines on the Use ofConsultants.

2. Procurement of Goods and Services

13. Procurement of goods and services to be financed jointly by the Bank, IDA, andEIB was undertaken on an international competitive bidding basis in accordance with the Bank'sGuidelines for Procurement. Procurement of goods and services under the EC grant followedprocedures set out by EC, which were found satisfactory to the Bank. The various contractpackages and their financing are shown in Appendix 3.

F. Performance of Consultants, Contractors and Suppliers

14. The engineering consultants on the whole performed satisfactorily though broaderexperience with small-scale hydro plants on their part would have been of further benefit to theProject. The Technical Review Expert (TRE) advised the consultants on project design aspectsprior to production of tender documents, and also made periodic site visits throughout theconstruction stage. The TRE gave useful advice to the consultants concerning project designaspects. The TRE was critical of the standard of workmanship during his third and fourth sitevisits in July and October 1992, but noted a marked improvement in quality during his fifth andsixth visits in January and June 1993. The civil contractor, though experienced, was unable tokeep to the Project schedule partly due to weak site management, the poor state of repair ofplant and understaffing. Several external factors, including two cyclones in February 1990 andDecember 1991 and a change in the Government's regulations governing the storage ofexplosives, also impeded progress.

15. All the suppliers performed satisfactorily with the exception of the mechanicalcontractor for the provision of the emergency gates, the delivery of which was delayed;considerable site rectification work and replacement of incorrect parts was also necessary.

6

G. Conditions and Covenants

16. Appendix 4 gives details of the status of compliance with loan covenants. EPChas generally failed to comply or only marginally complied with most of the covenants in theProject and Loan Agreements. One of the covenants that EPC has not fully complied with is thatconcerning land acquisition, which required all land for the Project to be acquired and madeavailable to EPC prior to the award of the civil works contract.!f Acquisition of land wasimpeded by the complicated system of ownership in Western Samoa, according to which landdoes not belong to specific individuals but rather to community entities. EPC has also yet totake appropriate action over soil conservation and watershed management as outlined in theLoan Agreement. Furthermore, EPC failed to renew insurance coverage for its power plantand distribution systems prior to its lapsing in August 1992 and only obtained appropriatecoverage in July 1994 (as a condition of effectivity of the Supplementary Loan)Y

17. In respect of financial performance (see Appendix 5), EPC has not been meetingits rate of return covenant with the Bank (5 per cent rate of return on revalued assets). EPC'srate of return performance in FY1993 (actual) and FY1994 (provisional) were 2.7 and 3.4 percent, respectively, while the projected figure for FYi 995 is 1 .0 per cent. EPC, has also not beencomplying with the covenants on debt-service ratio (less than 1 .3 times the estimated maximumdebt-service requirement) 1 and on self-financing ratio (20 per cent of capital expenditures).'EPC's five-year average self-financing ratios for FYi 991 and FYi 992 were 21.9 and 6.4respectively. Also, EPC has not been furnishing the Bank, on a regular basis, with its unauditedfinancial statements within six months and audited financial statements within nine months of theclose of the fiscal year to which they relate, its approved budget for the following fiscal year andits updated five-year financial projections (including a tariff review) by 30 June of each year, asrequired under the Project Agreement. Another significant element in EPC's financialperformance is its delayed payment to the Government of the interest on Bank loans and IDAloans and the annual 2 per cent foreign exchange risk charge on all outstanding foreign loans.

H. Disbursements

18. A comparison between projected and actual disbursements is presented inAppendix 6. The first disbursement for the original loan (SAM-813) was made in August 1987;however, due to delays in Project implementation, the last disbursement was in November 1993.Disbursement of funds under the supplementary loan were held up due to delayed effectivenessof the loan. The supplementary loan approved on 22 April 1993 was declared effective only on

Loan Agreement, Schedule 6, para. 2 (a).Loan Agreement, Schedule 6, para 5.Project Agreement, Section 2.05.Loan Agreement, Section 7.01 (c).Project Agreement, Section 2.16.Project Agreement, Section 2.17.Project Agreement, Section 2.18.Section 2.09 (I) and (ii). At the time of PCR Mission, the Bank had still not receivedaudited financial statements for 1993 and approved budget for 1995 (unauditedstatements and a preliminary budget were however made available).

7

30 June 1994. Arrangements have been made for the loan account to remain open for a furthersix months until all disbursements under the supplementary loan have been effected.

Environmental Impact

19. An environmental impact study was included in the initial feasibility report.!' Thisstudy was judged to be less than adequate by the Bank's OENV. A more detailed environmentalimpact assessment (EIA) was carried out in 1987 as part of the Project design and, together withtechnical studies, formed the basis of the Bank's decision to proceed with Projectimplementation. In view of the relative size and cost of the Project, the South Pacific RegionalEnvironment Programme commissioned a further EIA, which was carried out by the New ZealandDepartment of Conservation in December 1991. This assessment noted that a significantenvironmental effect of creating the Afulilo storage reservoir was the submergence of thePunataemo'o swamp forest, an important highland swamp forest in Western Samoa upstreamof the Afulilo dam. However, in respect of downstream effects, it gave an assurance that thereduced waterf low from the Afulilo Basin was unlikely to have any senous hydrological effect onthe Vaipu swamp, which lies immediately downstream of the dam. Given that the Vaipu swampwould be the only remaining highland swamp in Western Samoa, the report stressed that anyfuture expansions of the Project should be preceded by a detailed EIA.

20. There was no need to relocate any persons as a result of the Project. Land usealteration was negligible except for the uninhabited Punataemo'o swamp. Extensive clearing ofvegetation in the Afulilo Basin was, however, necessary before impounding of the reservoir couldcommence. Residents living near the water discharge from the powerhouse (in the vicinity ofFagaloa Bay) have complained of increased mosquito infestation, foul smell and reduced fishcatch in the Fagaloa Bay. It is suggested that these and other possible environmental concernsbe addressed by a post-commissioning environmental report, as recommended in the December1991 ETA.

J. Project Benefits

21. The major objective of the Project was to displace costly electricity supply fromdiesel generating plants. The Project accomplished that objective through the addition of 4 MWof storage-based hydropower generating capacity to the existing run-of-river hydropowergenerating capacity of 6.3 MW. A review of the Project performance indicates that 18 GWh ofelectricity was produced over the 12 months ending on 30 June 1994 (at 51 per cent plantfactor). The Project's electricity output during this period was restricted by inflow needs forreservoir fill-up (particularly in July and August 1993) and to some extent by the rate at whichpower distribution facilities could be expanded to supply suppressed demand. It can bereasonably expected that the Project output will gradually increase to the appraisal estimate of24 Gwh a year (68 per cent plant factor) with the easing of operational constraints and bettercoordinated operation of the Project with EPC's other hydropower plant as well as with thethermal power plant.

Afulilo Hydroelectric Project, Partial Development, Feasibility Study, January 1986.A Bank-financed ADTA to assist such improved coordination is programmed for 1995.

8

22. The Project will save foreign exchange by limiting the need to import equipment,diesel oil and spare parts for diesel power plants. In terms of diesel oil use displaced, theProject will save the country about US$1.6 million per annum in foreign exchange. Beneficiariesinclude about 8,000 families and about 1,200 businesses and other establishments on UpoluIsland. The Project has provided greater access to electricity as well as greater security ofelectricity supply with hydro generating plant which is more reliable than diesel generating plant.During the construction period, the Project provided much-needed employment for local labor,estimated at 3,000 staff-months. After commissioning in June 1993, the Project resulted in 20permanent jobs for operating and maintaining the power plant.

23. A re-evaluation of the FIRR and EIRR was undertaken based on actual Projectcosts and other data available at Project completion (Appendix 7). The FIRR was determinedto be 7.4 per cent and the EIRR to be 9.7 per cent. The EIRR and FIRR expected at Projectappraisal were 11.0 per cent and 11.7 per cent respectively. The re-evaluated FIRR and EIRRare not as low as would have been expected, given the substantial Project cost overrun, duemainly to an increase in the average tariff from 28 sene/kWh at appraisal to 43 sene/kWh atpresent.

K. Performance of Borrower and Executing Agency

24. The performance of the Borrower (the Government) was satisfactory while that ofthe executing agency (EPC) was less than satisfactory. Continuing institutional weaknesses atEPC, including prolonged vacancies in its key engineering and financial positions, resulted inweak administration of EPC and the Project.

25. EPC's has failed to comply or only partially complied with a number of the loancovenants in both the original loan and the supplementary loan.!' EPC's difficulties in attractingand retaining experienced and qualified staff contributed to the delay in filling the vacantFinancial Controller's position, as well as delays in the submittal of various financial reports,including financial accounts, approved budgets and five-year plans. The appointment of newstaff for the position of Government Controller and Chief Auditor in the Government also held upthe release of audited accounts.

26. Despite three separate increases in the electricity tariff since the time ofappraisal, EPC's financial performance has been unsatisfactory (see para. 17). This isattributable to high operating costs resulting mainly from high levels of outage at EPC's run-of-river hydro generating plant and weak operations and maintenance capabilities. Further tariffincreases will, however, be required particularly in view of the increasing level of debt that EPChas to meet.

See paragraphs 16 - 17.At the time of appraisal, tariff was set at 28.1 sene/kWh and was thereafter increased to32 sene/kWh in August 1990, 40 sene/kWh in December 1990 and 43 sene/kWh inDecember 1992.

9

L. Performance of the Bank

27. The performance of the Bank was generally satisfactory. At the time of Appraisal,the Bank accepted the cost estimates as the most appropriate based on the feasibility study.Some of the cost and time overrun difficulties may have been avoided if the Bank had proceededto Project approval with a detailed Project design in hand. However, the steps taken by Bankstaff to reassess the Project in September 1989, revise the financing arrangements in July 1990,reappraise the Project in September 1992, and provide supplementary financing in April 1993to expedite the Project, are noteworthy. There was good cooperation between the Bank, theExecuting Agency and the co-financiers, although the involvement of five separate donoragencies added an unnecessary level of complexity to the Project. The Bank acted asadministrator of the IDA credit and, in so doing, provided an efficient arrangement that servedto reduce some of the reporting burden on EPC. Bank staff carried out periodic Review Missionssometimes in collaboration with other donor agencies. These Review Missions assessed theprogress of the Project and were useful in resolving Project implementation problems.

Ill. CONCLUSIONS AND RECOMMENDATIONS

A. Conclusions

28. The Project has been successful, It met the major objective of displacing dieselelectricity based power generation by adding 4 MW of storage-based hydro power generationand thereby helped the Government to develop its indigenous energy sources and reduce itsreliance on imported diesel oil. Despite the cost and time overruns encountered inimplementation, the Project is still economically and financially viable with re-evaluated EIRR andFIRR at 9.7 per cent and 7.4 per cent respectively.

B. Recommendations

Project Related

(i) Future Extensions

29. In its power expansion plan for Upolu Island, EPC stated that it plans to install athird generator-turbine unit in the Taalefaga power house as soon as possible. It isrecommended that further operating information and analysis should be carried out by EPCbefore taking a firm position regarding the addition of the third unit.

(ii) Environment

30. It is recommended that the Government undertakes to: (I) prepare a post-commissioning environmental report, as recommended in the December 1991 EnvironmentalImpact Assessment made by the Department of Conservation of New Zealand; (ii) carefullyrecord rainfall and inflow data and establish a Catchment Committee to manage the watershedof the Afulilo Basin; and (iii) draw up a timetable for completing the payment of approved landcompensation claims.

10

(iii) Financial Aspects

31. An assessment of EPC's financial performance indicates that the company isexperiencing severe difficulties (see para. 23). To redress the situation, it is recommended thatEPC improve its plant and staff operating efficiency, minimize its thermal power generation andobtain government approval for continued tariff increases. 1' In addition, it is recommended thatEPC pursue measures such as the payment of performance bonuses and the introduction ofbonding arrangements to attract and retain specially trained staff. It is essential that EPC ensurepayment of interest on Bank and IDA loans in accordance with the agreed re-lendingarrangements between EPC and the Government.

(iv) Institutional Aspects

32. The piggy-backed technical assistance of US$200,000 provided with the originalloan for the Project had as its objective the strengthening of EPC's financial management andaccounting and auditing systems. The assistance was satisfactorily carried out, although EPChas found it difficult to sustain the systems and procedures introduced due to rapid staffturnover. EPC has, however, established systems to: (I) prepare its financial statements andprojections; and (ii) input its billing, inventory and accounting information for batch processingon a bureau-managed computer. It is recommended that EPC examine the cost-effectivenessof having its own minicomputer, as recommended by the technical assistance consultant.

General

33. The Government and EPC stressed the difficulty of coordinating loans from severaldonor agencies. In particular, the negotiations for supplementary financing were complicatedby the need to meet the requirements of five separate co-financiers. It is recommended that theBank, when determining the number of co-financiers of projects in small DMCs, take into accountthe terms of financing, the financing gap and the documentation requirements of the co-financiers. It is essential that the executing agency concerned be fully capable of coordinatingand fulfilling the obligations to the financiers.

34. The Project commenced commercial operations in November 1993. A missionfor the Project Performance Audit Report (PPAR) could be scheduled towards the end of 1995.

!I An appropriate ADTA from the Bank to assist in improving EPC's institutionalperformance is programmed for 1995.

11

APPENDICES

No. Page

1 Project Events 12

2 Implementation Schedule 14

3 Procurement of Goods and Services Through InternationalCompetitive Bidding 15

4 Status of Compliance with Loan Covenants 16

5 Financial Performance of EPC 18

6 Projected and Actual Loan Disbursements 19

7 Financial and Economic Re-evaluation 20

12

Appendix 1Page 1

PROJECT EVENTS

PROCESSING

Original Loan

04-18 May 1986

Fact-Finding Mission08-19 Sept 1986

Project Appraisal28-29 Oct 1986

Loan Negotiations04 December 1986

Loan Approval24 December 1986

Signing of Loan Documents22 May 1987

Loan Effectivity

Supplementary Loan

07-18 Sept 1992

Reappraisal Mission22 April 1993

Loan Approval03 May 1993

Signing of Loan Documents30 June 1994

Loan Effectivity

IMPLEMENTATION

Consulting Services

Technical Review Expert

15 October 198722 January 198828 January 198830 August 1988September 1988November 198804-07 November 199107-16 July 199220-29 October 199219-30 January 199305-17 June 199307-15 December 199308-17 March 1994

Bank approves shortlist of consultantsBank receives evaluation reportBank approves EPC's evaluationDate of contractConsultant commences servicesFirst Review MissionSecond Review MissionThird Review MissionFourth Review MissionFifth Review MissionSixth Review MissionSeventh Review MissionEighth Review Mission

(Reference in text: page 4, para. 11)

13

Appendix 1Page 2 of 2

Engineering Consultants

05 December 198612 December 198617 December 198626 February 198713 May 198729 May 198726 June 198726 July 198731 Dec 1993 (tentative)

Civil Works

Bank receives shortlist of consulting firmsBank approves shortlist of consulting firmsEPC sends invitations to shortlisted firmsDeadline for submission of proposalsBank receives evaluation reportBank approves EPC's evaluationEPC executes contractConsultants commence servicesConsultants complete services

13 January 1988 Bank receives draft prequalification documents28 January 1988 Bank approves draft prequalification documents03 March 1988 Invitation for prequalification issued31 May 1988 Opening of proposals for prequalification18 July 1988 EPC submits reports on prequalification to Bank19 August 1988 Bank approves EPC's recommendation of prequalification05 September 1988 Draft tender documents sent to Bank10 October 1988 Draft tender documents approved by Bank12 June 1989 Bid opening08 June 1990 Agreement on revised financing plan26 July 1990 Date of contract for civil works12 September 1990 Start of the construction work28 February 1991 Bulk excavation of dam commenced14 August 1991 Tunnelling commenced03 July 1992 Excavation completed18 May 1993 Impounding of the reservoir commenced05 June 1993 Penstock installation completed08 June 1993 Start of wet commissioning15 June 1993 22 kV main transmission line completed15 June 1993 Taelefaga power house commissioned15 June 1993 Start of trial operations09 July 1993 Official opening15 November 1993 Commercial operation

14

App.ndx 2

IMPLEMENTATION SCMEC(LE - APPRMSPIL AND ACTUAL

ACIIVITi'

CONS&LflNO SERVICES

Engtn.ering/Supervision .r

TechnicalRewExpertl/ . . :,

IMPLEMENTATION

Civil Works T T T T T

- Mobisation

-AfulubDam I I

—Af1.JlI1UuuneI

-Ptpelre

- Powerhouse and Tajirace

PipsSupp T TT M

Spllway Gates T I T M S I E

Generating Equipment I T I M E C

Electica1 Equipment I T I M S SE C

Transmission Lines:

-Supplycor*acts T

-Erectioni

_______________ I ____ ______ ______

F - Field Visit I AppralalI - Tender Period ______M - Manu.rfauring ___________ ActualS - ShippingE - Erection/IretaflationC - Commissionmg

1 / Memorandum of Und.rstanclng of 30 August 1988 between EPC arid Consultant allowed for an estimated 5 field visits lasting a total of two man- months withservices to be completed before 31 March 1991. Subsequently, by Amendment No. 1 to the MOU the termination date was extended to December 1994. The TREmade eight separat. field visits to W. Samoa (marked by F).

(Reference in text: page 4, paragraph 11)

CONTRACT

DATE

26JUL90

26JUN87

25OCT90

12SEP90

27JUN91

07MAR91

Ui

PROCUREMENT OF GOODS THROUGH INTERNATIONAL COMPETITIVE BIDDING

LOT DESCRIP11ON

AC1 CIVILWORKS(LOTAC1) b

CONSULTING SERVICES b

AM2 PIPES & HYDRAULIC EQUIPMENT

AM3 TURBINES & HYDRAULIC MACHINERY

AE4 GENERATORS& ELECTRICAL EQPT

AE5 TRANSMISSION LINE EQPT.

COUNTRY OF

PROCURE-

MENT

GER I NZL

AUS/GER

NET

FRA

ITA

UK

I I SUBMISSION

CONTRACT [ _____T E N D E OF BANK

VALUE aJ ISSI[PENED LEVALUATION APPROVAL

39,130,371 22FEB69 12JUN89 04AUG89 21FEB90

8080,899 26NOV86 27FEB87 21APR87 02JUN87

5.114,017 22FEB89 20JUN89 C C

1,961,783 22[EB89 20JUN89 C C

4.853,200 22FEB89 20JUN89 C C

8.600,000 22FEB89 20JUN89 C C

a All contracts were denominated in Western Samoa Tala but disbursed in different currencies.b These two contracts were co— financed by the Bank and other donors.C These contracts were financed by other donors, hence were not submitted to Bank for approval of evaluation.

Ii1ename: 823Fzoewkt

(D

H-

16

Appendix 4Page 1

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Loan Covenants Status of Coattiance

Take out and maintain insurance against such 1. Not copplied with between August 1992 and June

risks and in such amounts as shall be consistent 1994.

with sound practice. PA 813, Sec. 2.05(a).

2. Insure the goods to be irlEorted/financed out of 2. Conlied with.

the proceeds of the Loan. PA, 813, Sec. 2.05(b).

3. Maintain records and accounts, goods and services 3. Conlied with.

financed out of the Loan, to disclose the usethereof in the Project, to record the progress ofthe Project and to reflect, in accordance with

consistently maintained sound accounting

principles, its operations and financial

condition. PA, 813, Sec. 2.06.

4. Furnish to the Bank quarterly reports on theexecution of the Project and on the operation andmanagement of the Project facilities. PA, 813,

Sec. 2.08 (b).

5. Maintain separate accounts for the Project andfor its overall operations. PA, 813, Sec. 2.09

(a)i.

6. Furnish to the Bank not Later than 9 months afterthe close of the fiscal year to which theyrelate, audited accounts and financialstatements. PA, 813, Sec. 2.09 (a)iii.

7. Furrnsh to the Bank not later than six monthsafter the end of each fiscal year, unauditedannual financial statements on its operations forsuch fiscal year. PA, 813, Sec. 2.09 (b)i.

8. Furnish to the Bank by 31 Decener of each year,approved budget for the following fiscal year and

updated five-year financial projections. PA,813, Sec. 2.09 (b)ii.

9. Maintain its tariff rates at levels sufficient tocover all operating expenses, interest and debtamortization and to finance a reasonable portion(20%) of EPC's capital expenditures effectiveFY1979. PA, 813, Sec. 2.16(c).

10. Maintain its net revenues at least 1.3 times themaximun debt service requirement. PA, 813, Sec.

2.17(a).

ill Maintain its rates for the sale of electricity togenerate revenues sufficient to achieve a miniriun

annual ROR of 5%. PA, 813, Sec. 2.18(a).

12 Borrower (GoWS) to take action in the course of1987 for training, studies and other measuresrequired to strengthen the long-term internalcapability and management of EPC including

4. Partially copplied with. Sunittal ofreport was frequently delayed at start ofProject. In February 1989 more frequentmonthly progress resunes were requested,however, these did not arrive regularlyuntil May 1991.

Delayed coppliance.

Not copplied with.

Not co41lied with.

Not copplied with.

Not coalied with (EPC's SFR for 12 monthsending June 1992 was 6.4 per cent). '

Not conlied with; 1992 DSR was 1.1 times.

Not copplied with; 1992 ROR was negative or

minus 4.3 per cent.'

Partially coalied with. Asset RevaluationStudy was carried out under EC financing. TheFinal Report was received by EPC in Noveaber

1990

5.

6.

7.

8.

9.

10.

11.

12.

alThe audited accounts for 1992 were received in August 1994.The unaudi ted accounts for 1993 were received in August 1994.

ClApproved budget 1995 not yet received.Based on 1992 audited accounts.

(Reference in text: page 6, para. 14)

13 Not collELied with.

15

Not coaplied with. Land acquisition matterswere still being resoLved at the time ofawarding of the civil works contract.

16. Coalied with. The work on the road wasfinanced in part by a grant from AIDAB.

17

Appendix 4Page 2

STATUS OF C4PLIANCE WITH LOAN COVENANTS

Status of ConlianceLoan Covenants

revaLuation of EPC's assets and preparation ofguidelines for revaLuation and depreciationmethods to be used, and propose a tariffstructure and levels appropriate for conditionsin Western Samoa. LA, 813, Sch. 6, para 3(a).

13 Borrower (GoWS) to permit EPC to inV(ement therecomendations of a tariff study financed by ECgrant. LA, 813, Sch. 6, pare 4.

14. EPC shall monitor water run-off and sedimentLoading of the watershed; assess the severity ofsoiL erosion; and take appropriate remedialaction for soil conservation and watershedmanagement. LA, 813, Sch. 6, para. 5.

15. No civil works contracts under the Project shall.be awarded unless evidence satisfactory to theBank shaU have been submitted to the Bankshowing that alt the land and rights over landrequired for the Project shall have beenacquired. LA, 813, Sch. 4, para. 7.

16. The access road to the dam site will beconstructed by the Goverrvnent/EPC from their ownresources and the work will be coapteted on atimely basis in accordance with the Projectiaplementation schedule. LA, 813, Sch. 6, para.

2(b).

14. Not coppLied with.

17. The Borrower shall ensure that EPC shall conduct 17. Not coaplied with.

an annual overall review of its tariff levels andshall submit a copy of a report thereon to theBank for conments by 30 June of each year. Suchreport shall also contain EPC's proposals fortaking any corrective measure as may be necessaryto ensure the financial health of EPC. LA , 1228,Sec. 4.03.

18. EPC shall have secured appropriate insurance 18. Delayed coapliance. Effectivity of

coverage for EPC's generating power plant against supplementary loan deLayed 10 months because

such risk and in such amount consistent with non-coa'ptiance.

sound power utility practices. LA, 1228, Sec.7.01(c).

18Appendix 5

ELECTRIC POWER CORPORATIONACTUAL AND PROJECTED FINANCIAL PERFORMANCE

(WS$'OOO)

Year Ending 31 December Year Ending 30 June1988 1980 1990 FY1991 a FY1992 FV1993 FY1994 FY1995

Item -------AUDITED-----AUDITED--- UNAUD. EST. 5UDG.OPERATION

Energy Generation (GWh) 42.13 42.83 41.00 23.46 44.95 52.38 60.87 63.95Systems Losses (%) 12.00 11.50 10.00 13.80 11.20 11.60 16.00 14.00Energy Sales (Gwh) 37.08 37.90 38.90 20.22 39.92 46.30 51.13 55.00

PROFITABILITYAverage Revenue (Sene/KWh Sold) 27.00 26.91 29.84 39.41 38.01 40.32 41.67 41.28Increase in Average Revenue (%) -0.3 10.9 32.1 -3.6 6.1 3.4 -0.9REVENUES

Electricity Sales 10010 10,199 11,013 7,969 15,171 18,669 21,308 22,703Others 211 828 1031 664 1,186 612 290 243

Total Revenues 10,221 11,027 12,044 8,633 16,358 19,280 21,598 22,946OPERATING EXPENSES

Fuel and Oil 2,674 3,725 4,919 4,023 6,958 7,905 4,220 4,336

Purchased Power 14 87 113Management and General Expenses 3,080 3,180 4,298 2,585 4,469 4,817 8,309 9,316Depreciation 3,742 4,525 4,306 2,045 4,079 4,752 6,854 6,854

Total Operating Expenses 9,497 11,429 13,523 8,653 15,505 17.489 17,470 20,618

OPERATING INCOME 725 (403) (1,470) (20) 851 1,791 4.128 2.328

INTEREST AND OTHER EXPENSESInterestOther

Total Interest and Other Expenses

NET INCOME (LOSS)

LIQUIDITYNet income Before InterestAdd: Depreciation

Other Non-Cash items

Internal FundsLess: Debt Service (Principal & Interest)

Changes in Working Capital

Net Internal Funds

Capital Expenditures

767 844 807 353 689 745 3,545 4,867(561) 2,570 2,844 2,886 4.696 (626) 232 725

206 3,415 3,651 3,238 5.385 118 3,777 5.592

518 (3.817) (5.129) (3.258) (4,534) 1,673 352 (3,264)

1,285 (2,973) (4,323) (2,905) (3,845) 2,418 3,897 1,6033.742 4,525 4,306 2,045 4,079 4,752 8,854 6,854

(317) 540 1,052 (1,117) 1,269 (694)

4,711 2,091 1,036 (1,977) 1,503 6.476 10,751 8,45711,901 1,942 2,006 409 1,386 1,449 6,505 6,427

(7,102) (23,666) 4,153 4,563 811 (5,262) (3,763) 2,410

(88) 23.816 (5.123) (6,949) (694) 10,259 8,008 (380)

10,530 27,548 12.145 11.283 9.712 36,858 17,000 7,964

RATIOSOperating Ratio (%) 92.9 103.7 112.3 100.2 94.8 90.7 80.9 89.9Rate of Return on Revalued Met Fixed Assets (%) b/ 1.8 -3.9 -4.9 -6.3 -4.3 2.7 3.4 1.0Debt-Service Ratio (Times) c/ 0.4 1.1 0.5 -4.8 1.1 4.5 1.7 1.3Self-Financing Ratio - Five Year Moving Average (%) d/ 37.0 19.0 15.4 21.9 6.4 12.4 29.6 34.1

a/ For six - month penod, January to June. EPC changed its financial year in 1991, from January - December to July - June.b/ Operating income divided by one-half the sum of the revalued net fixed assets in operation at the beginnrig and at the end of the

respective year.c/Internal Funds divided by debt service (principal and interest)d/ Net internal funds divided by capital expenditures. Five year moving average calculated using average of the amount of the two fiscal

years preceding, two fiscal years subsequent and the respective fiscal year.Revalued Rate Base 70328. 83293. 93567. 90839. 86198. 92028. 139687 178359

(Reference in text: page 6, para. 17)

Year

1987

1988

1989

1990

1991

1992

1993

Total

Note: AboveActuaPrior -Conve

19Appendix 6

PROJECTED AND ACFIJAL LOAN DISBURSEMENTS(US$ million)

PROJECTED ACTUALDisb. Cumulative % Disb. Cumulative %

IIIIII 0.156 0.156 3.01 0.269 0.269IV 0.008 0.164 3.17 0.001 0.270

I 0.158 0.322 6.22 0.257 0.527II 0.062 0.384 7.42 0.002 0.529III 0.062 0.446 8.62 0.193 0.721IV 0.062 0.508 9.81 0.115 0.836

I 0.191 0.699 13.50 0.000 0.836II 0.427 1.126 21.75 0.004 0.840III 0.427 1.553 30.00 0.019 0.859IV 0.427 1.980 38.25 0.102 0.961

I 0.427 2.407 46.50 0.000 0.961II 0.427 2.834 54.75 0.089 1.050III 0.427 3.261 63.00 0.024 1.074IV 0.427 3.688 71.25 1.360 2.434

I 0.427 4.115 79.50 0.757 3.191II 0.306 4.421 85.41 0.389 3.580III 0.300 4.721 91.21 0.193 3.773IV 0.455 5.176 100.00 0.288 4.06 1

I 0.150 4.211II 0.133 4.344III 0.091 4.435IV 1.175 5.610

I 0.518 6.128II 0.027 6.155III 0.000 6.155IV 0.0 19 6.174

5.176 100.00 6.174 1

projected disbursement of $5.176 million is the equivalent of SDR 4.324 million.Loan amount is SDR 4.428 million. The difference of SDR 104,000 is allocated to

Eechnical Assistance cost (see Schedule 3, Loan Agreement).rsion rate used was 1 SDR = 1.197 US$.

4.364.37

8.538.56

11.6813.54

13.5413.6113.9115.57

15.5717.0117.3939.42

51.6857.9861.1165.77

68.2070.3571.8390.86

99.2599.6999.69.00.00

.00.00

(Reference in text: page 6, para. 18)

20

Appendix 7Page 1

FINANCIAL AND ECONOMIC ANALYSES

A. FIRR and EIRR

The life of the Project is conservatively assumed to be 30 years.

2. Energy generation in 1993 is actual. From 1994, generation is expected togradually build up to the appraisal estimate of 24 GWh.

3. Throughout the Project life, station use and losses are assumed at 13 per cent oftotal generation output. (The actual five-year average was 12.5 per cent.)

4. Operation and maintenance cost is assumed at 2 per cent of capital cost.

5. Average revenue is estimated at 43.31 sene/kWh or US$01714/kWh based on:(i) the tariff of WS$0.43IkWh and the minimum charge of WS$1 0 per month; (ii)16,746 consumers (1992); and (iii) annual sales of 61.65 GWh (estimated 1992sales).

6. Consumer surplus for domestic consumers has been calculated based on: (i) akerosene price of 67.9 sene/liter; (ii) a kerosene equivalence factor of 1 .7; and (iii)a consumer surplus (curvature correction) factor of 35 per cent.

7. Consumer surplus for other consumers (industrial, commercial, etc.) has beencalculated based on the use of a 2.5-kW diesel generator set as alternative toelectricity from EPC. This set is assumed to have an economic life of 10 years,an annual usage of 1,800 hours, a fuel consumption of 0.4 liter/kWh and a capitalcost of WS$7,900. The diesel price is assumed to be 84 sene/liter and theconsumer surplus (curvature correction) factor at 35 per cent.

8. The exchange rate is assumed at US$1.00 to WS$2.5259.

9. The standard conversion factor used to convert market price to border price is0.9.

(Reference in text: page 8, para. 23)

7.321.022.023.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.0

6.418.319.120.020.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.9

H

LQ(D(D

Ii

AFULILO - CALCULATION OF FINANCIAL RATE OF RETURN ('000$)

CAPITAL COST

O&M

TOTAL GE NE RAT

SALES

REVENUE

NETFX LC TOTAL

COST

COST (GWh)

(GWh)

0.1714

BENEFIT

198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022

(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)

(874)(571)(468)

(2,199)(7,075)(5,154)(5,347)(5,458)

00

(128)(227)(933)

(1,053)(1,388)(1,306)

(874)(571)(597)

(2,426)(8,008)(6,206)(6,735)(6,764)

(874)(571)(597)

(2,426)(8,008)(6,206)(6,735)(7,408)

(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)(644)

1,1023,1323,2813,4313,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,5803,580

(874)(571)(597)

(2,426)(8,008)(6,206)(5,632)(4,275)2,6382,7872,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,9362,936

7.321.022.023.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.024.0

6.318.319.120.020.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.920.9

1,2913,7283,9054,0834,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,2604,260

L')L'J

(DCD

L.JçLI-,.

AFULILO - CALCULATION OF ECONOMIC RATE OF RETURN (000$)

CAPITAL COST

O&M

TOTAL GE NE RAT

SALES

REVENUE

NETFX LC TOTAL

COST

COST (GWh)

(GWh)

0.2267

BENEFIT

198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020212022

(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)

(874)(571)(468)

(2,199)(7,075)(5,154)(5,347)(5,458)

00

(115)(204)(840)(947)

(1,249)(1,175)

(874)(571)(584)

(2,403)(7,915)(6,101)(6,596)(6,634)

(874)(571)(584)

(2,403)(7,915)(6,101)(6,596)(7,267)

(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)(634)

(874)(571)(584)

(2,403)(7,915)(6,101)(5,305)(3,539)3,2723,4493,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,6273,627

EIRR = 9.7%