Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14627 IMPI.EMENTATION COMPLETION REPORT' COLOMBIA BOGOTA POWER DISTRIBUTION II PROJECT (LOAN 2634-CO) JUNE 19, 1995 Infrastructure and Operations Division Department III Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents maw not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit Colombian Peso (Col.$) US$1.00 Col.$101.19 (mid-1984) US$1.00 Col.$502.2 (1990 average) US$1.00 Col.$863.7 (1993 average) UNITS AND MEASURES meter (m) 3.28 feet kilometer (km) 0.62 miles square km (sqkm) 0.39 square miles ABBREVIATIONS AND ACRONYMS CONPES = Consejo Nacional de Politica Econ6inica y Social (National Council of Economics and Social Policies) CORELCA = Corporacion E1lctrica de la Costa Atlantica (Electric Corporation of la Costa Atlantica) EEB = Empresa de Energia de Bogota (Energy Company of Bogota) EPM = Empresas Publicas de Medellin (Public Company of Medellin) CRE = Energy Regulatory Commission CVC = Corporaci6n Aut6noma Regional del Valle del Rio Cauca (Regional Corporation of Valle del Rio Cauca) DNP = Departamento Nacional de Planeaci6n (National Department Planning) FEN = Financiera Energetica Nacional (National Financing Energy Corporation) ICEL = Instituto Colombiano de Energia Electrica (Colombian Institute of Electric Energy) ISA = Interconexi6n El6ctrica S.A. (Electric Interconection S.A.) IADB = Inter-American Development Bank MME = Ministry of Mines and Energy MOF = Ministry of Finance JNT = Junta Nacional de Tarifas (National Tariff Comission) FISCAL YEAR January 1" to December 3 15 FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT BOGOTA POWER DISTRIBUTION H PROJECT (LOAN 2634-CO) Table of Contents PREFACE ........................................................i EVALUATION SUMMARY ......................................................... ii PART I. PROJECT IMPLEMENTATION ASSESSMENT .............................................1 Background .. . ......................................................1 Project Objectives and Description .........................................................2 Achievement of Objectives .........................................................3 Implementation Record and Major Factors Affecting Implementation . ......................... 6 Project Sustainability .........................................................8 Bank Performance .........................................................8 Borrower Performance ........................................................9 Assessment of Outcome ........................................................ 10 Key Lessons Learned ........................................................ 10 PART II. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE ........................ 11 A. Executive Summary 1......................................................... 1 PART III. STATISTICAL ANNEXES ........................................................ 15 Table 1: Summary of Assessment ......................................................... 15 Table 2: Related Bank Loans ......................................................... 16 Table 3: Project Timetable ......................................................... 16 Table 4: Loan Disbursements: Cumulative Estimated and Actual .................................. 17 Table 5: Key Indicators for Project Implementation ..................................................... 17 Table 6: Key Indicators for Project Operation ........................................................ 18 Table 7: Studies Included in Project ........................................................ 18 Table 8A: Comparative Poject Costs ............................................ 19 Table 8B: Project Financing .................................................. 19 Table 9: Economic Costs and Benefits ......................... ............................... 20 Table 10: Status of Legal Covenants ....................... .. ............................... 21 Table 1 1: Bank Resources; Staff Inputs ......................................... 23 Table 12: Bank Resources; Missions ......................... ................................ 23 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. l IMPLEMENTATION COMPLETION REPORT COLOMBIA BOGOTA POWER DISTRIBUTION II PROJECT (LOAN 2634-CO) PREFACE The Implementation Completion Report (ICR) for the Bogota Power Distribution II Project in Colombia was prepared by Alfonso Posada (Consultant) and Jayme Porto Carreiro (LA3IN), and reviewed by Peter Ludwig (Division Chief, Infrastructure Operations) and Robert Crown, Project Adviser. The Infrastructure Operations Division, Country Department EI, Latin America and the Caribbean Regional Office, prepared the ICR based, among other sources, on the Issues/Decisions Paper, the Staff Appraisal Report, the Loan and Guarantee Agreements, project files, and interviews with Borrower's Staff in Bogota. Preparation of the ICR was begun during the Bank's final supervision/completion mission in August 1994, during which a field review of all the physical facilities included in the Project's scope was carried out. The Borrower's contribution to the ICR is reflected in the Borroweres own evaluation of the project's implementation and results, which is included as Part II of the report. - ii - EVALUATION SUMMARY The Bogota Power Distribution II Project was financed through a loan to Empresa de Energia de Bogota (EEB) which amounted to US$171 million; it was approved in November, 1985 and made effective in September, 1987. The closing date was December, 1993, a year later than originally planned. US$56.7 million of the loan proceeds were canceled. The balance of the loan was fully disbursed; the last disbursement took place in January, 1994. Background. (i) The electricity industry provides service to around 5.2 million users; energy consumption in 1993 amounted to 36.7TWh which were generated with an installed capacity of 9660MW. The borrower, EEB, is the largest municipal utility in the country; it operates as a vertically integrated corporation with an installed capacity of 2300MW; it provides electricity service in the metropolitan region of Bogota (pop. 6.5 million) and smaller adjacent communities. It currently serves 1.1 million customers with a peak demand of 1800MW. (ii) Until recently, the sector was characterized by powerful vertically-integrated monopolies together with a large number of government-controlled distribution companies. It experienced major difficulties during the 1980s: it underwent a lengthy period of financial crisis due to overbuilding of generating facilities and low tariff levels, followed in the early 90s by an unprecedented drought which caused country-wide rationing. These crises provided the impetus for embarking on radical institutional reforms. (iii) The sector was reorganized, with Bank support, during the 1991-94 period. The process incorporated efficiency, accountability and financial responsibility incentives into sector corporations and was complemented with tariff increases together with a financial restructuring whereby the Government injected massive resources into the sector to set it on a sound financial footing. The results of these efforts were asserted with the approval of a Public Services Law and an Electricity Law which emphasize the introduction of competitive incentives and provide for the regulation of non- competitive supplies. (iv) The sector's restructuring has been successful: an Energy Regulatory Commission has been operating since 1993, a competitive market for bulk supplies is being set up, the major generation and transmission enterprise (ISA) has been split up into a generation company and a transmission/dispatch corporation, and private generators are supplying part of the system's needs. Project Objectives and Description. (v) The project was conceived for the purpose of supporting EEB in order to expand the distribution of electricity in the Bogota area, extend electricity service to low-income areas of the city, reduce energy losses and theft, and improve the effectiveness and efficiency of EEB's operations. - iii - (vi) The project consisted of a physical component and an institutional component. The physical component included 230/115kV substation equipment and lines, primary and secondary distribution equipment together with new lines, line improvements and street lighting extensions, the installation of 300,000 meters and operations and maintenance equipment. The institutional component included studies for controlling energy losses, reducing theft and improving distribution reliability and planning, technical assistance for training EEB staff, and the implementation of a loss reduction program. Achievement of Objectives. (vii) Reevaluating the objectives in hindsight, it becomes apparent that the physical components, which consisted of standard distribution investments, could reasonably be implemented. In contrast, the institutional components, including loss reduction targets and financial goals, appear to be unrealistic given the overall organization of the power sector at the time, and EEB in particular which lacked autonomy vis a vis municipal authorities, was subject to political meddling from the City Council and faced no accountability constraints. (viii) The physical objectives of the project were met with the exception of primary distribution lines and secondary distribution line improvements. The 230kV and 115kV components, although delayed, will be completed by December, 1996. The extension of service to low income customers and the public lighting goals were achieved and benefited an estimated 650,000 people. (ix) Loss reduction objectives were not achieved at all: the level of losses in 1993 was only marginally lower to that of 1987 (22% vs. 24%). Covenanted financial goals did not materialize either: the rate of return for the enterprise decreased instead of reaching the 12% target; the self financing ratio was only achieved twice during the seven-year execution period and accounts receivable (as a percentage of sales) increased to 43% instead of decreasing to 17%. (x) A rough ex-post rate of return calculation for EEB's investment program yields a value of 9%, significantly below the ex-ante rate, estimated at 12% in the SAR. The reason for the shortfall can be traced to the cost overruns of the Guavio generation plant, rather than to failures of the distribution project itself (SAR demand projections were remarkably accurate). However, the institution building components of the project, had they been implemented, should have helped EEB to overcome many of its management weaknesses which ultimately led to an unsatisfactory performance. Implementation Record and Major Factors Affecting Implementation. (xi) The major factors which affected implementation were (a) unrealistic objectives in regard to the institutional components of the project; (b) procurement delays; (c) a weakly staffed Project Management Unit; and (d) a lack of stable management policies in EEB. (xii) Procurement delays originated due to lengthy Government approval procedures and conflicts between Bank procedures and those required by the Bogota municipality. Misprocurements caused the cancellation of US$1.69 million of the loan proceeds. The Project Management Unit, which according to Bank experience is a critical component in the implementation process, lacked authority to coordinate the activities of different EEB groups involved in the project. Throughout project - iv - implementation the Bank lacked an effective counterpart within EEB to account for the project's performance due to frequent staff turnover and the instability of the borrower's top management. (xiii) The monitoring indicators of the project were uniformly unsatisfactory throughout its execution; additionally, EEB did not comply with numerous covenanted conditions. The decision to partially cancel the loan was taken in 1992 when 78% of the project had been completed and when it became evident that EEB's record would not improve. The loss reduction components were kept as a means of alleviating the power rationing which was taking place and which would last until 1993. Disbursements continued through 1993 and reached 88% of their scheduled amount. Project Sustainability. (xiv) The physical investments of the project are likely to be operated and maintained successfully. The sustainability of components such as the loss reduction program, which require strong management support, appears to be unlikely until institutional reform of EEB (following the directives contained in the Public Services Law) is implemented. Bank Performance. (xv) During appraisal and negotiation, the Bank overestimated EEB's capability of implementing institutional reforms. It failed to recognize the procurement issue which would have required agreement with the Government and the Municipality reaffirming the precedence of Bank procedures to be applied to projects financed by the Bank and it did not exert sufficient pressure on EEB to overcome the weakness of the Implementation Unit. (xvi) The Bank's supervision reports reflect a continued preoccupation with EEB's institutional strengthening which ultimately helped to recognize the need for the overall power sector reorganization which proved successful. The Bank's support contributed to its success and continued help is being provided at present through the Energy Sector Technical Assistance Loan. Regarding implementation obstacles, the Bank has commissioned a Country Procurement Assessment Report for Colombia that will serve as a guide for future operations. Borrower Performance. (xvii) EEB's overall performance was unsatisfactory: it failed to find constructive solutions to procurement impediments and higher management did not respond to the project's problems. Strong management support was lacking in critical areas such as the loss reduction component. This is reflected in the low rating given the project in all of the supervision missions. On the financial front EEB's situation was hampered by the Guavio project's major problems as well as unrealistic pricing policies which were beyond its control. The blame for the latter lies squarely on the Government's macroeconomic policies which it pursued to the detriment of the power sector in general throughout the 80s; much-needed pricing reforms only materialized in 1991-92 as part of the power sector restructuring program. v - Assessment of Outcome. (xviii) Despite implementation delays, those physical elements of the project which were undertaken were put in place and are operating to satisfaction. The institution building component of the project was not successful and the loss reduction programs were ineffective. The physical component accounted for 96% of investment, and therefore the final assessment would show that the project was economical even under the assumption that all of the project's institutional component had been wasted. Key Lessons Learned. (xix) Experience gained from the Bogota distribution project applicable to future operations includes: * the need to undertake a realistic appraisal of the underlying institutional framework of the sector and the Borrower, and to include institution-building components in a project only if there is a commitment and a policy to implement required reforms; * the requisite to carry out and to monitor the project by putting in place a Project Implementation Unit with sufficient authority and autonomy to solve execution obstacles; and * the requirement to assess procurement procedures and to obtain explicit agreement with the Borrower and/or the Government concerning (a) following Bank contracting guidelines and (b) waiving procedures that may delay implementation. IMPLEMENTATION COMPLETION REPORT COLOMBIA BOGOTA POWER DISTRIBUTION II PROJECT LOAN 2634-CO PART L PROJECT IMPLEMENTATION ASSESSMENT The Bogota Power Distribution II Project in Colombia was financed through Loan 2634- CO in the amount of US$171 million which was approved on November 26, 1985 and made effective on September 30, 1987. The Borrower was the Empresa de Energia de Bogota (EEB), formerly Empresa de Energia Electrica de Bogota (EEEB). The closing date was December 31, 1993, one year later than originally foreseen. US$56.7 million of the loan proceeds were canceled. The balance of the loan has been fully disbursed. The last disbursement was made on January 10, 1994. Background 1. Between 1970 and 1994, the Bank supported the development of Colombia's power sector with 15 loans for over US$1.9 billion'. The fourteenth Bank loan to the power sector since 1970 went to EEB and helped finance the Bogota Power Distribution II Project. It was the seventh loan to EEB since 19602. 2. Until the early 90s the power subsector was nominally under the supervision of the Ministry of Mines and Energy (MME). However, in practice it operated with little control regarding its investment plans which were prepared by ISA, a generation and transmission enterprise owned by the two principal municipal utilities and a number of Government-affiliated companies. 3. The power subsector experienced major problems during the last decade. In the 80s it became the source of considerable financial difficulties due to overbuilding of generation plants which confronted the Government with major macroeconomic problems. Paradoxically, because of the hydro predominance in the system, it became increasingly vulnerable to weather changes and faced a supply crisis due to an unprecedented drought in the early 90s, which aggravated sectorial problems caused by inadequate planning, low efficiency, and poor maintenance. These crises provided the impetus for embarking on radical institutional reforms. 4. A number of the problems that the sector faces have institutional origins. In the 60s and 70s the state increasingly became the major owner in energy enterprises, with a consequent 'The Inter-Ameican Development Bank (IDB) contributed a sinilar amount in 22 loans. 2Before 1985 the Bank had made 6 loans, totalling USS613.2 million, to EEB for electric power generation, transmission and distribution (225-CO in 1960, 313-CO in 1962, 537-CO in 1968, 1628-CO in 1978,1807-CO in 1980 and2008-CO in 1981). - 2 - slackening of efficiency incentives and the virtual disappearance of accountability. The symptoms of serious problems in the energy sector became alarming in the mid-80s with the power sector's financial crisis; it then became evident that energy policy should be given a cohesive nature in order to address the issues of excessive investment in electricity generation and the underdevelopment of the gas subsector. In 1990 an OED study3, developed during a two year period with the participation of Colombian experts, identified many of the weaknesses of the power subsector and recommended its restructuring through the introduction of adequate regulation and private sector participation. 5. Since 1991 the Bank has supported the reshaping of the power sector in order to introduce market forces by promoting competition and private sector participation. This process culminated in 1994 with the approval of the Public Services Law and the Electricity Law whose implementation is expected to remedy many of the sector's weaknesses. 6. The Borrower. EEB is a municipal utility attached to the Bogota Municipality since 1951. It operates as a vertically integrated corporation, with an installed generating capacity of 2300MW; its service area encompasses the metropolitan area of Bogota (population 6.5 million) as well as a number of smaller towns in adjacent regions. It currently serves 1.1 million customers with a peak demand of 1800MW. 7. When the project was appraised, EEB had an installed capacity of 1288MW, 700,000 customers and a peak demand of 1000MW. The SAR forecast a peak demand of 1466MW in 1990; actual demand was slightly higher (1496MW); energy demand was forecast to grow at an average 5.4 percent per annum, and in fact it increased by an average 5.7 percent. In any case, the SAR projections were very accurate. 8. EEB's management is appointed by the mayor of Bogota whose tenure lasts three years; the company has experienced a high turnaround of upper management (three CEOs during the last three years). It has been widely accepted that the company has suffered from outside intervention by the City Council. It currently has around 4100 employees. Project Objectives and Description 9. The objectives of the project consisted of expanding the distribution of electricity in the Bogota metropolitan area, extending electricity service to low-income areas of the city, reducing technical energy losses and energy theft, and improving the effectiveness and efficiency of EEB's operations. 10. The Project consisted of: (i) Subtransmission: Installation of 1100 MVA of substation capacity at 230/115 kV and around 10 km of 230 kV lines and 75 km of 115 kV lines; 3OED, Colombia-The Power Sector and the World Bank. 1970-1987, Report No. 8893 (June 28, 1990). (ii) Distribution: * Installation of 350 MVA of distribution substation capacity at 115/11.4 kV, 115/34.5 kV and 230/11.4 kV; * Installation of 750 km and improvement of 1600 km of primary distribution lines at 11.4 kV and 34.5 kV; * Installation of 650 km and improvement of 900 km of secondary circuits; * Installation of 10 MVA of voltage regulators and 60 MVAR of capacitors; * Installation of 300,000 meters; and * Installation of street lighting. (iii) Operation and Maintenance: Acquisition of equipment for hot line maintenance of substations and lines, and low, medium and high voltage testing equipment; (iv) Studies: (a) an evaluation of types and locations of illegal customers; (b) studies on: reliability of EEB's distribution system, planning and operation of EEB's subtransmission system, and systematization of energy losses control; (v) Training and Technical Assistance: Provision of technical assistance and training for EEB's staff to improve their management, strategic planning and technical skills; and (vi) An Energy Loss Reduction Program. 11. The estimated project cost at appraisal was US$348.6 million before interest during construction (IDC); including IDC, the expected cost increased to US$389.6 million. The project was expected to be executed over a period of 5.5 years. The programmed completion date was June 30, 1991. The Bank's U$171 million loan was designed to cover 90% of foreign currency costs, including US$41 million of IDC. Achievement of Objectives 12. Re-evaluating the project's objectives in hindsight, it becomes apparent that the physical objectives could reasonably be met given (a) that they are standard elements of distribution systems with no technological risk and (b) that they could be executed through experienced contractors with little risk of delays. By contrast, the institutional objectives appear to be unrealistic given the overall organization of the power subsector in general and of EEB in particular: the enterprise did not operate as a business, there were no accountability constraints, negligible financial autonomy (EEB's budget is subject to approval by the City Council which thereby exerts a stranglehold on the enterprise) and there was little management control due to frequent changes at the executive level (EEB had eight general managers between 1985 and - 4 - 1994). Furthermore, EEB's management focus was overwhelmed by the construction of the 1OOOMW Guavio hydroelectric project which had created major financial difficulties by incurring over US$1 billion in cost overruns due to delays and physical contingencies. Under these conditions, which were evident at the time of appraisal, the achievement of institutional goals appears unrealistic; furthermore, the strains in management would subsequently imperil the achievement of the physical objectives of the project. 13. The SAR's proposed targets for loss reduction were also overly optimistic, particularly given the level of losses - 23 percent in 1983 -. It appears unreasonable to expect that by 1990 losses could be reduced to 13 percent in a city as large as Bogota with numerous slums. Theft control in particular requires a firm management approach in order to confront social unrest and political pressures associated with the required actions. Under the circumstances, EEB's weak management could not be expected to accomplish this goal. According to EEB this unrealistic target was proposed by the Bank and accepted with reluctance by the Colombian negotiating team. 14. Pliysical Objectives. Early in 1989 it became apparent that the physical objectives of the Project could not be achieved within the agreed time-frame, because of delays in the contracting processes due mainly to the lengthy and cumbersome contract-processing procedures to which EEB is subject by Colombia's and Bogota's legislation, as well as the difficulties in making them compatible with the Bank's procurement guidelines. The project's achievements are summarized in the following table: Comparison of Planned and Achieved Physical Objectives Planned Installed (a) Subtransmission 230/1 15kV substations 1 100MVA 930MVA 230kV, 115kV Lines 85km 23km (b) Primary Distribution 115/11.4kV substations 350MVA 438MVA New lines 750km 485km Line improvements 1600km 304km (c) Secondary Distribution New lines 650km 630km Line improvements 900km 416km 15. The project's 230kV components, albeit delayed, will be completed with Borrower's resources, together with the 115kV components. The latest project completion date is December 1996, although 88% of the project was completed as of December, 1994. The delays forced a re- evaluation of the project's physical objectives and total investment in the project was reduced from US$389.6 million at appraisal to US$220.4 million when it became evident that the implementation milestones would not be achieved. 16. Extension of Service to Low Income Customers: in this area the project fully achieved its social objective. Practically all extensions of primary and secondary distribution done with project funds are in the low-income city sections of Bogota. Altogether the socially worthwhile aim of supplying reliable electric service to the poorest areas of the city has been successfully attained through the Project. An estimated 650,000 low income people benefited from the project. The public lighting objectives were achieved: main thoroughfares were illuminated, and the programmed replacement of incandescent bulbs by mercury vapor ones was executed; lighting controls were installed thereby reducing losses. 17. Loss Reduction Objectives. The objectives regarding loss reduction were not achieved. On one hand, they appear to be unrealistic and, on the other, loss indicators which were on the order of 24% in 1987, were only reduced to 22% in 1993 (they were down to 18% in 1992 due principally to the energy rationing that took place and cut off supplies to mainly residential sectors where a large portion of the commercial losses is concentrated). In December 1991 EEB entered into a performance contract with Financiera Energetica Nacional (FEN), which among other indentures required EEB to reduce energy losses to percentages which are higher than those stipulated in the Bank's Loan Agreement. All the same, EEB has not been able to meet these new targets; EEB performance in this regard is summarized in the following table: Percentage of Energy Losses 1987 1988 1989 1990 1991 1992 1993 According to: Loan Agreement 21.0 18.0 16.0 14.0 13.0 13.0 13.0 Contract with FEN 19.3 18.0 Actually Achieved 24.6 24.8 22.4 22.9 20.1 18.5 22.0 18. Not much confidence can be placed on the achieved figures since a large part of consumption is not metered and computed on the basis of connected loads which are seldom verified. In other words, actual losses could be lower than stated above if legally connected but unmetered consumers consume more energy than EEB's estimates. 19. Institutional Objectives. Regarding the institutional objectives of the project, their unrealistic scope given the situation of EEB led to a foreseeable failure regarding their achievement. It should be noted that there have been some improvements in management quality -albeit unrelated to the project- associated with the independence of the Board of Directors (following directives contained in the 1991 Constitution) whose members are no longer subject to the direct influence of the City Council. However, the enterprise continues to lack autonomy vis a vis municipal politics and will therefore continue to depend on the quality of short-lived staff appointments rather than on its strength as a business enterprise. This situation is expected to change with the implementation of the Public Services Law which requires greater autonomy for enterprises engaged in providing energy, water, telephone and natural gas services. - 6 - 20. Covenanted Financial Objectives. These were not achieved either, and have tended to worsen during the last three years: EEB's Comparative Financial and Operational Performance 1987 1988 1989 1990 1991 1992 1993 Rate of Retum (/o): As per Loan Agreement 12.0 12.0 12.0 12.0 12.0 12.0 12.0 Actually Achieved 10.5 8.1 8.6 12.0 6.6 6.0 7.7 Self-Financing Ratio (°/O) As per Loan Agreement 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Actually Achieved 27.0 59.0 31.0 26.0 23.0 36.0 16.0 Accounts Receivable as Percent of Sales: As per Loan Agreeinent 17.0 17.0 17.0 17.0 17.0 17.0 17.0 Actually Achieved 38.0 68.0 44.0 36.0 35.0 47.0 43.0 Debt Service Coverage: As per Loan Agreement 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Actually Achieved 1.5 1.5 1.0 1.0 1.0 0.6 1.4 21. Return on Investment: The SAR evaluated the return on investment as the discount rate equalizing the present values of the stream of benefits and costs associated with EEB's 1985-90 development program of which the Project is a part and cannot be reasonably segregated. In computing the revised economic rate of return a similar methodology was used. The cost streams comprise the capital cost of the program and the incremental operational and maintenance cost related to the incremental sales of electricity associated with the 1988-93 program which was the time-frame when the Project was developed. As a proxy for benefits, revenues from sales of power were used, derived from incremental sales associated with the program. This exercise was extended for 30 years after end of 1993, which is considered to be the average life-time of EEB's facilities included in the 1987-93 investment program. On this basis the recomputed rate of return is 9% compared to 12% in the SAR. This recomputed rate of return reflects principally the very large costs associated with the construction of the Guavio Hydroelectric Project. It should be pointed out that the recomputed rate of return cannot be compared in a strict sense with the SAR's computed rate of return, since the actual time-frame for EEB's investment program was shifted from 1985-90 to 1987-93 in the later computation. Implementation Record and Major Factors Affecting Implementation. 22. Delays in project implementation led to the decision to partially cancel the loan. The Bank realized, towards the end of 1991, that EEB was far from achieving the institutional objectives of the Project and decided to suspend loan disbursements arguing non-compliance with several loan covenants (October 25, 1991). In February 1992, at the request of EEB, a Bank mission visited the utility to discuss EEB's proposal to lift the suspension of disbursements. During this mission EEB informed the Bank of actions taken and plans to improve project implementation. Although the mission acknowledged EEB's progress and improvements, it considered that the current structural problems (i.e. lack of sufficient autonomy) of EEB would not allow a substantial and sustainable improvement in efficiency and, consequently, that continuing the Bank's financial support for the project could not be justified on economic grounds. The mission discussed with EEB the following solution: (i) reduction of the project scope and consequent cancellation of the loan for the amounts related to expansion of the distribution system beyond certain on-going activities approved by the Bank before the suspension of disbursements; and (ii) lifting the suspension of disbursements to finance the loss reduction program, which was economically justified and which would alleviate the power rationing being experienced by the utility, and (iii) financing of interest during construction due in 1992, so as not further worsen EEB's already precarious financial situation. Upon acceptance by EEB of this proposal the Bank decided in March 1992 to lift the loan disbursement suspension. 23. The decision to cancel part of the loan was taken in 1992 when 78% of the project had been completed and when it became evident that its timely implementation was hopeless. As the cancellation was partial, disbursements continued throughout 1993, reaching 88% of the scheduled amount with the last disbursement in January, 1994. 24. Unrealistic Objectives: Expectations that EEB could be turned around from a politically- controlled utility into an efficient and fully autonomous public enterprise within the project's time- frame, were clearly unrealistic given the relatively weak leverage the Bank had on Government policies and actions and the unlikelihood that EEB's management would try to push for this objective given its political commitments. Only lately has there been any action by Government and EEB's management along this line. The targets set for the reduction of energy losses were also clearly unrealistic. In this context the Bank certainly was unreasonable in setting unattainable goals. 25. Procurement Delays: To a large extent, project implementation was seriously affected by procurement delays caused by the Government approval procedures to which EEB is subjected. This oversight contributed to project delays. Misprocurements caused the cancellation of US$1.69 million of the loan proceeds. The Project, which was supposed to be completed by June 30, 1991, was only completed towards the end of 1994 even in its reduced scope. 26. Project Management Unit: Experience throughout the Bank's operations has shown that successful implementation of projects requires a dedicated Project Management Unit, with full authority to coordinate the tasks of all the Borrower's resources involved in the Project. Before effectiveness, an administrative unit in charge of this task, with powers and responsibilities satisfactory to the Bank, was required by the Loan Agreement (Section 3.03a.); EEB put in place a Project Management Unit with no authority and which barely kept up with the administrative paperwork. Although it was noted that one of the main causes for delays in the first Distribution Project (Loan 1807-CO) had been the lack of coordination between EEB's units, the Bank accepted the setting up of a project management unit without sufficient authority to perform its task in a satisfactory manner. 27. Lack of Stable Management Policies: Undoubtedly the main factor directly affecting the Project's implementation and EEB's overall performance has been the lack of continuity in management policies. This in turn has been caused by the rapid turn-over in EEB's top management both at the Chief Executive and department levels. 28. Macroeconomic Policies: Implementation of EEB's investment program was affected by changing Government public investment targets set up by DNP (Departamento Nacional de Planeacion) which required EEB to revise its investment budgets according to instructions issued by Government. Project Sustainability 29. The power sector has been hampered by an unrealistic tariff level which has led to massive subsidization. This problem impacted on EEB during the last decade and only recently have measures been taken to adjust tariffs to the level of electricity costs. These measures should allow the enterprise to be strengthened financially, therefore generating funds to maintain the physical components of the project (the latter should provide service during their lifetime, as their maintenance requirements are relatively modest). This covers both investments in network elements and those oriented towards the reduction of technical losses (e.g. line rehabilitation). The component of the project oriented towards the reduction of commercial losses and theft is principally a management function which requires continued attention; given the institutional situation of EEB, the sustainability of this component appears unlikely, at least before the full implementation of the Public Services Law and the Electricity Law which will incorporate commercial incentives within the enterprise. Bank Performance 30. Although the Bank's decision to support the Project was based on optimistic assessments as to the degree of reform that could be achieved in EEB during the Project's implementation, it is also true that the Bank played a constructive role in assisting EEB to carry out the Project. Throughout the supervision mission reports the Bank's preoccupation with the strengthening of EEB can be detected. The Bank's efforts are finally paying out in the current strengthening program of EEB. Bank's participation in the Project was fully consistent with the policy of the Government to undertake major infrastructure improvements, particularly in the power sector, within a framework of achieving efficiency in the performance of the utilities in charge of operating the facilities. Nevertheless, the setbacks that arose during project implementation, particularly in meeting the loan covenants, should have been foreseen by the Bank given EEB's track record during implementation of the first Distribution Project. 31. The delays associated with the project could have been avoided by agreeing with both the municipality and the Government on a streamlined procurement procedure. The Bank neglected to take into account this factor at the assessment stage. Furthermore, project supervision concentrated on the physical objectives of the project, rather than the institutional ones. The Bank also neglected to pressure EEB for setting up a project implementation unit to carry out the project on time, despite having recognized that this element was a major factor in the delays experienced during the implementation of the EEB First Distribution Project. - 9 - 32. However, regarding the overall institutional problem in the power sector, the Bank recognized the issue and took steps to support the Government in the process of power sector institutional reform since 1991. The Bank has helped to shape and to define a new vision for the energy sector by: (a) supporting analyses of the sector's problems and identifying the issues; (b) exploring the options for addressing them; (c) fostering constructive debate concerning past conceptual and systemic deficiencies attributable to inadequate institutions; (d) designing a reform program starting with the power subsector; and (e) by supporting the implementation of this program. 33. The Bank's role regarding the electric power sector was formulated in detail in a 1993 Policy Paper4 which provides guiding principles for Bank support of power sector restructuring programs. The recommendations consist of: (a) transparent regulation requiring countries to separate their government's role as operator and owner of utilities from its policy formulation role, through independent regulatory bodies; (b) importation of services which the Bank would assist in financing for improving efficiency; (c) commercialization and corporatization whereby the Bank will aggressively support power sector strategies designed to reorganize the operation of utilities as commercial concerns; (d) commitment lending focused on countries clearly engaged in improving sector performance in line with the preceding principles; and (e) encouraging private sector investment. 34. In Colombia, the Bank has implemented this policy by promoting institutional reform in the Power Sector; and by continuing this support through two complementary approaches: (a) technical assistance oriented towards institutional strengthening and (b) support for specific projects and investments which will promote the effective operation of the proposed institutions. Technical assistance is being provided through the Energy Sector Technical Assistance Project approved by the Board in December 1994. The Power Market Development Project, an operation to be submitted to the Board in the second semester of 1995, will support the development of infrastructure for a competitive bulk-supply market. Borrower Performance 35. EEB's performance regarding the project was unsatisfactory: upper management did not support it in regard to finding solutions to the implementation obstacles that were encountered and did not structure an adequate Implementation Unit. The Borrower was hampered by the lack of continuity in management policy which inevitably impacted on the project. Although the physical aspects of the Project were well designed, the preparation for its implementation were generally sketchy. This resulted in delays and finally in a sharp reduction in project scope. Altogether EEB's performance during project implementation can be considered poor and this is reflected in the low rating given it in all the supervision mission reports. A specially negative aspect of project implementation has been the inability of EEB to deal with the major management issue of non-technical losses. 4 The World Bank's Role in the Electric Power Sector , The World Bank, 1993 - 10- Assessment of Outcome 36. Despite implementation delays, those physical elements of the project which were undertaken were put in place and are operating to satisfaction. The institution building component of the project was not successful and the loss reduction programs were ineffective. Despite these setbacks, over 95% of the project's investments are providing service and have served their primary purpose of reinforcing EEB's distribution network. Key Lessons Learned 37. The main lessons learned from the Bogota Distribution II Project are: * At the project preparation stage a realistic appraisal of the institutional framework of the Borrower and the sector should be undertaken; in particular, institution-building components should be included in a project only if there is a sector-wide institutional framework in place thereby ensuring that they have a reasonable chance of being implemented (as opposed to paying lip service to Bank guidelines by setting unrealistic objectives); * A commitment to project implementation should be assured prior to project execution, both on the part of the Government and the Borrower; this commitment should translate into putting in place a project execution unit endowed with sufficient power to obtain executive decisions necessary for successful implementation; and * A realistic evaluation of procurement procedures at the preparation stage should be followed at the negotiations stage with an explicit agreement to by-pass local procedures (e.g. import licenses and municipal contracting codes) that may delay the implementation and a commitment to follow Bank contracting guidelines (In 1987 the Bank made an attempt that has partially overcome these discrepancies by negotiating with the Government the use of model bidding documents. However, this arrangement was only put in effect after the signature of this loan. The Bank is currently preparing a Country Procurement Assessment Report for Colombia that will serve as a guide for future operations). - 11 - PART I. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE5 EMPRESA DE ENERGIA DE BOGOTA BOGOTA POWER DISTRIBUTION II PROJECT LOAN 2634-CO IMPLEMENTATION COMPLETION REPORT A. Executive Summary Objectives * The main objectives of the Project were to expand EEB's urban subtransmission and distribution capacities to meet demand up until 1993, reduce energy losses and thereby improve the Empresa's economic and financial situation, and improve the effectiveness and efficiency of its operations. 2. Principal Aspects of the Project: We give below the principal aspects that are either related to the project or else affected it in some way during implementation. * The project was submitted to the World Bank in 1984. It followed on from the first Bogota Power Distribution Project, Loan 1807-CO, and was implemented over the period 1987-1993. IBRD loan 2634-CO for US$171.0 million was approved by the Bank in December 1986; following negotiations in Bogota in May 1987 it became effective in September of that year. * The total project cost, originally estimated in the Appraisal Report at US$389.6 million (US$189.6 million in foreign exchange and US$200.0 million equivalent in local currency) was revised twice. The final cost of the completed project was US$220.53 million (US$13 1.1 million in foreign exchange and US$89.43 million equivalent in local currency). * On October 25, 1991 the Bank temporarily suspended disbursements because EEB was not complying with its financial or commercial conmmitments under the Loan Agreement or meeting its energy loss targets. * At the end of 1990, the Bank canceled US$1.69 million of loan amount because EEB had awarded a contract without fully observing the Bank's procurement guidelines. * In February 1992, EEB followed the Bank's recommendation and requested cancellation of US$38.2 million of loan amount because it could not feasibly be used by the original project completion date of December 31, 1992. S Full ICR from Borrower available in LAC Files - 12 - * This brought the final loan amount to US$131,109,841.00. * The final loan disbursement figure, including financial charges up to November 1992 (US$19,517,508.80) and disbursements authorized by the Bank up to January 1994, was US$114,431,899.33. * Colombia imposed an energy rationing program between March 2, 1992 and April 2, 1993, affecting up to 25% of overall energy demand, to cope with the decrease in water resources caused by the climatic disturbances experienced throughout the country. * The five generating units for the El Guavio Hydroelectric Project were completed and placed in operation between December 1992 and July 1993; this contributed decisively to the termination of the rationing program. 3. Achievements: The project's achievements may be summarized as follows: * Execution of the planned works in the areas of subtransmission, transformer and distribution capacity, and procurement and installation of ancillary equipment and materials, thereby assuring a ready supply of energy to handle increased demand. * Expansion of service coverage and remodeling of distribution networks within an extensive area inhabited by low-income groups (I and 2 especially); this made a very important contribution toward improving their socioeconomic situation. * Energy losses were reduced from 25.7% in 1987 to 18.5% in 1992, but rose back up to 22% in December 1993; however, the percentage was affected by the rationing program because it was calculated for a full year. There are now signs that, thanks to the actions taken, it is regaining its downward momentum, and it is to be hoped that this trend will continue. * EEB was restructured in accordance with the recommendations of the institutional study carried out under the Project. It has switched over from an operations-based administrative organization to a process-based system in which the various work areas are organized to reflect the ultimate objectives of the different processes, their goals and responsibilities now being more clearly defined. * In December 1991, a performance contract was signed with Financiera Energetica Nacional (FEN), under which EEB, supported by the district and central governments, agreed to take immediate steps toward making the necessary structural changes and to set and achieve targets for improving its business performance and hence its financial results. FEN, for its part, will provide the financial support needed by EEB to improve its debt service capacity, and is virtually guaranteeing the funds required for completion of the El Guavio Hydroelectric Project. - 13 - * Under Decree #1421 of 1993, establishing the Organic Statute of the Capital District [Estatuto Organico del Distrito Capital], the composition of the Board of Directors was amended, and EEB was granted administrative and budgetary autonomy, while now being designated a State industrial and commercial enterprise [empresa industrial y comercial del Estado]. * The Electricity Law and Residential Public Services Law were finally enacted in 1994, ratifying EEB's autonomy and its status as a State industrial and commercial enterprise. * Law #80 was enacted in October 1993, establishing the General Government Procurement Statute [Estatuto General de Contrataci6n de la Administraci6n Publica], which considerably simplifies contracting procedures and revokes the rules formerly governing EEB (Decree #222 and the District Tax Code). * It is also pointed out that during the project execution period substantial changes were made to the institutional structure of Colombia's electricity sector, basically through the introduction of competency criteria for service delivery and private sector participation. Sector planning will now come under the Ministry of Mines and Energy. * In 1990 the corporation changed its name to Empresa de Energia de Bogota, with a view to extending its field of action to other energy sources. Acting along these lines, it decided to take out a 40% participation in Compafiia de Gas Natural S.A., with a view to ensuring orderly management of the use of natural gas, a fuel that partially replaces the electricity used by certain population groups for cooking and heating water. * The economic analysis gives an annual rate of return of 8.9%, measured in constant dollars. Although this rate of return is lower than the appraisal estimate, it cannot be called low, since present financial market conditions are not the same as when the appraisal was carried out. At that time the return on public capital in Colombia was calculated at 12%, whereas it is currently estimated as being no higher than 1 00/o. 4. Difficulties: Project implementation was affected by the following difficulties: * At the very outset, the loss targets set were overly optimistic, virtually impossible to achieve with EEB's available resources and within the agreed time frame. * The investment ceilings set by the Government. * The priority assigned to completion of the El Guavio Hydroelectric Project; combined with the fixed investment ceiling, this restricted resource availability for the present Project. * Lack of real and effective project management with sufficient autonomy and authority to carry out the Project. - 14- * Frequent changes in the management, organization and staff of the various areas. * Conflicts between the Bank's procurement guidelines and Colombian contracting legislation. 5. Works in progress * Work is progressing on the substations and lines that were not completed within the project execution period, and the study of planning and operation of the subtransmission system is nearing completion. * To ensure the program's continuity, and in response to the requirements imposed by the new free market regulations, the present Government has introduced a Business Strengthening Plan, focusing mainly on a strengthening of the electricity system and of customer service. * The purpose of these plans is to reduce vulnerability, ensure reliable, high-quality, stable, continuous and efficient service delivery, and promote optimum customer relations. - 15 - PART m STATISTICAL ANNEXES Table 1: Summary of Assessment Achievement of Substantial Partial Negligible Not Applicable objectives Macroeconomic policies X Sector policies X Institutional development X Physical objectives X Poverty reduction X Gender concerns X Other social objectives X Public sector management X Private sector X development x Other Project Sustainability Likely Unlikely Uncertain l _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ X _ _ _ _ Bank Performance Highly Satisfactory Deficient Satisfactory Identification X Preparation assistance X Appraisal X Supervision x Borrower Performance Preparation X Implementation X Covenant compliance X Operation X Assessment of Highly Satisfactory Unsatisfactory Highly Outcome Satisfactory Unsatisfactory x -16- Table 2: Related Bank Loans Loan Title Purpose Year of Approval -Status Preeedhg Operatins 575-CO National Interconnection 1968 Completed 681-CO Chivor Hydro 1970 Completed 1582-CO San Carlos Hydro 1978 Completed 1583-CO 500 kV Interconnection to Northern Coast 1978 Completed 1628-CO Mesitas Hydro 1978 Completed 1725-CO San Carlos II Hydro 1979 Completed 1807-CO Bogota Distribution I 1980 Completed 2008-CO Guavio Hydro 1981 Completed 2401-CO Energy Financing Corporation 1984 Completed 2889-CO Electric Sector Adjustment 1987 _Completed Foilowig Operatin 3278-CO Public Sector Reform 1990 Ongoing Table 3: Project Timetable Steps in Project Cycle Date Planned Latest Estimate Identification 1984 1984 Preparation 1984 1984 Appraisal 11/84 11/84 Negotiations 05/85 10/85 Board Presentation 06/85 11/85 Signing 12/85 12/86 Effectiveness 03/86 09/87 Project Completion 06/91 12/96 Loan Closing 12/92 12/93 Note: The Project was substantially completed on 12/94 - 17 - Table 4: Loan Disbursements: Cumulative Estimated and Actual (in USSMiUion) Bank FY 86 87 88 89 90 91 92 93 94 Appraisal Estimate, 15.9 40.2 66.9 93.0 114.7 130.0 - - Actual -- - 3.7 29.6 63.6 77.9 101.4 108.9 114.3 Actual %of estiniate 0 6 32 55 60 78 84 88 Date of Final Disbursement January 10, 1994 ___ Table 5: Key Indicators for Project Implementation EEB's Comparative Financial and Operational Performances 1987 1988 1989 1990 1991 1992 1993 Rate of Return (%): As per Loan Agreement 12.0 12.0 12.0 12.0 12.0 12.0 12.0 Actually Achieved 10.5 8.1 8.6 12.0 6.6 6.0 7.7 Self-Financing Ratio (%): As per Loan Agreement 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Actually Achieved 27.0 59.0 31.0 26.0 23.0 36.0 16.0 Account Receivables as Percent of Sales: As per Loan Agreement 17.0 17.0 17.0 17.0 17.0 17.0 17.0 Actually Achieved 38.0 68.0 44.0 36.0 35.0 47.0 43.0 Debt Service Coverage: As per Loan Agreement 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Actually Achieved 1.5 1.5 1.0 1.0 1.0 0.6 1.4 'Loan amnount was for US$171 million, US$41.0 million was from interest during construction. - 18 - Percentage of Enerr Losses 1987 1988 1989 1990 1991 1992 1993 According to: Loan Agreement 21.0 18.0 16.0 14.0 13.0 13.0 13.0 Contract with FEN 19.3 18.0 Actually Achieved 24.6 24.8 22.4 22.9 20.1 18.5 22.0 Table 6: Key Indicators for Project Operation (Same as above) Table 7: Studies Included in Project Purpose as defined Impact of Study at appraisal/redefined Status Study Illegal Consumers Location of Illegal Consumers Completed Satisfactory Reliability and Losses Distribution System Reliability and Losses Completed Satisfactory Evaluation Planning and Operation Reliability of Subtransmission System and Completed Satisfactory its Planning Computer Aided Planning of Planning of Distribution Completed Satisfactory Distribution Control Center Supervision Supervision during Implementation of Completed Satisfactory Control Center Distribution System Mapping Overall Mapping of Distribution Completed Satisfactory Institutional Study EEB's Organizational Structure Completed Satisfactory - 19 - Table 8A: Comparative Poject Costs (in US$ Million) Appraisal Estimate Actual Local Foreign Total Local Foreign Total Subtransmission 5.9 12.5 18.4 14.0 17.3 31.3 Distribution 141.2 80.3 221.5 52.3 52.3 104.6 Maintenance Equipment and Lab. 0.3 15.1 15.4 1.9 7.2 9.1 Training 2.0 2.0 1.0 2.8 3.8 Studies 0.8 0.8 4.0 2.0 6.0 Losses Reduction 1.0 1.0 2.0 10.7 20.0 30.7 engineering and Administration 13.0 13.0 3.3 3.3 Total Base - Line Cost 162.2 110.9 273.1 87.2 101.6 188.8 Physical Contingencies 16.2 11.1 27.3 2.2 3.4 5.6 Price Contingencies 21.6 26.6 48.2 0.0 Total Project Cost 200.0 348.6 348.6 89.4 105.0 194.4 Interest during construction 41.0 41.0 26.0 26.0 Total Cost After IDC 200.0 189.6 389.6 89.4 131.0 220.4 Table SB: Project Financing (in US$ Million) Source Appraisal_Estimate Actual Local Foreign Total Local Foreign Total IBDR Loan 130.0 130.0 114.4 114.4 Supplies Credit 18.6 18.6 0.0 EEB 200.0 200.0 89.4 16.6 106.0 Total Financing 200.0 148.6 348.6 89.4 131.0 220.4 - 20 - Table 9: Economic Costs and Benerits Flow of Funds for the Program (in tconstant 1984 US '000) Costs Benefits Purchase Sales Others Net Years Invest- Function of Total of Oper Total Flow ments Energy Energy 1987 161,932 0 0 161,932 (161,932) 1988 137,704 12,075 17,134 166,913 15,033 50,707 65,740, (101,173) 1989 143,657 10,524 23,457 177,637 35,374 22,151 57,525 (120,113) 1990 192,062 15,230 28,619 235,911 41,841 20,172 62,019 (173,892) 1991 153,989 37,384 33,741 225,114 55,765 113,041 168,806 (56,309) 1992 110,365 28,453 89,631 228,449 39,966 13,306 53,272 (175.177) 1993 70,695 39,309 478 110,482 86,218 101,968 188,186 77,704 1994 59,976 (2,844) 57,131 140,968 8,384 149,352 92,221 1995 59,976 (2,844) 57,131 153,490 153,490 96,359 1996 59,976 (2,844) 57,131 153,490 153,490 96,359 1997 59,976 (2,844) 57,131 153,490 153,490 96,359 1998 59,976 (2,844) 57,131 153,490 153,490 96,359 1999 59,976 (2,844) 57,131 153,490 153,490 96,359 2000 59,976 (2,844) 57,131 153,490 153,490 96,359 2001 59,976 (2,844) 57,131 153,490 153,490 96,359 2002 59,976 (2,844) 57,131 153,490 153,490 96,359 2003 59,976 (2,844) 57,131 153,490 153,490 96,359 2004 59,976 (2,844) 57,131 153,490 153,490 96,359 2005 59,976 (2,844) 57,131 153,490 153,490 96,359 2006 59,976 (2,844) 57,131 153,490 153,490 96,359 2007 59,976 (2,844) 57,131 153,490 153,490 96,359 2008 59,976 (2,844) 57,131 153,490 153,490 96,359 2009 59,976 (2,844) 57,131 153,490 153,490 96,359 2010 59,976 (2,844) 57,131 153,490 153,490 96,359 2011 59,976 (2,844) 57,131 153,490 153,490 96,359 2012 59,976 (2,844) 57,131 153,490 153,490 96,359 2013 59,976 (2,844) 57,131 153,490 153,490 96,359 2014 59,976 (2,844) 57,131 153,490 153,490 96,359 2015 59,976 (2,844) 57,131 153,490 153,490 96,359 2016 59,976 (2,844) 57,131 153,490 153,490 96,359 2017 59,976 (2,844) 57,131 153,490 153,490 96,359 2018 59.976 (2,844) 57,131 153,490 153,490 96,359 2019 59.976 (2,844) 57,131 153,490 153,490 96,359 2020 59,976 (2,844) 57,131 153,490 153,490 96,359 2021 59,976 (2,844) 57,131 153,490 153,490 96,359 2022 59,976 (2,844) 57,131 153,490 153,490 96,359 2023 59,976 (2,844) 57,131 153,490 153,490 96,359 Total 970,404 1,942.243 107,733 3,020,381 4,866,38 329,730 5,196,112 2,175,731 3 VP 84 694,319 377,865 109,363 1,181,547 905.677 206.264 1,111,942 (69,606) 10.00 B/C 0.94 TIR 8.9% B/C Rates 3.00% 1.43 of 6.00% 1.18 discount 9.00% 0.99 12.00% 0.85 - 21 - Table 10: Status of Legal Covenants Empresa De Energia De Bogota Compliance With The Contractual Agreements Loan 2634-CO Original Revised Agreement Section Covenant Present fulfillment fulfillment Description of covenant Comments l_____ type status date date 2634-CO 3.03 5 C Jan. 1987 --- Establish, and thereafter maintain: (i) a project coordination unit, and (ii) a unit for purposes of planning and implementing Part F of I_____ the Project in respect of the energy losses. 2634-CO 3.04 5 NC Dec. 1990 --- Take all measures as shall be required to reduce the losses occurring in its distribution systems so that such losses in respect of its total energy generation shall not exceed 14% in 1990; 13% in l________ fiscal vear 1991, 13% in 1992 and in the fiscal years thereafter. 2634-CO 4.01 13 Jan. 1987 Carry on its operations and conduct its affairs in accordance with Partially sound administrative, financial engineering and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. 2634-CO 5.02 2 NC Dec. 1987 Produce, for each of its fiscal year, after its fiscal year ending on December 31, 1986, funds from internal sources equivalent to not less than 35% of the annual average of the Borrower's capital expenditures, incurred for that year, the previous fiscal year and the next fiscal year. 2634-CO 5.04 2 NC Dec. 1987 Reduce its accounts receivable for electricity sales so that such accounts receivable, as a percentage of Borrower's total electricity sale for each such fiscal year, shall not exceed seventeen percent (17%) in fiscal year 1987; and at all times thereafter, maintain such accounts receivable at a level not exceeding seventeen percent (17%) of its total electricity sales. Earn, for each of its fiscal year, an annual return of not less than 12% of the average current net value of the Borrower's fixed assets in operation - 22 - Onginal Revised Agreement Section Covenant Present fulfillment fulfillment Description of covenant Comments _ type status date date 2634-CO 5.06 2 NC Jan. 1987 Not incur any debt unless a reasonable forecast of the revenues and expenditures of the Borrower shows that the estimated net revenues of the Borrower for each fiscal year during the term of the debt to be incurred shall be at least 1.5 times the estimated debt services requirements of the Borrower in such year on all debt of the Borrower including the debt to be incurred. 2634-CO 5.08 2 NC Dec. 1987 Make its best efforts to pay not later than December 31, 1987 and in accordance with a schedule satisfactory to the Bank, all outstanding amounts (including any arrears) owed by it to Interconexi6n Electrica S.A. and to its contractors and pay all such amounts not later than December 31, 1988. Covenant types: Present status: I = Accounts/ Audits C = covenant complied with 2 = Financial performance/revenue CD = complied with after delay generation from beneficiaries CP = complied with partially 3 = Flow and utilization of project funds NC = not complied with 4 = Counterpart Funding 5 = Management aspects of the project or executing agency 6 = Environmental Covenants 7 = Involuntary resettlement 8 = Indigenous people 9 = Monitoring, review, and reporting 10 = Project implementation not covered by categories 1-9 11 Sectoral or cross-sectoral budgetary or other resource allocation 12 = Sectoral or cross-sectoral policy/regulatory/institutional action 13 = Other - 23 - Table 11: Bank Resources; Staff Inputs Stage of Planned Revised Actual Project Cycle Weeks US$ Weeks US$ Weeks US$ Through Appraisal 53.3 Appraisal-Board 7.7 Supervision 99.6 Completion 4 Total _ 164.6 1 Table 12: Bank Resources; Missions Performance Stage of Specialized Staff Rating Project Month Number Days in Skills Implementation Cycle /Year Persons Field Represented Status Tpes of Problems LENP 82 1 6 EGR LENP 83 1 9 EGR LENP 84 1 12 EGR LENA 11/84 2 30 EGR-FNA SPN 9/87 4 7 EGR-FNA-IAV 1 SPN 4/88 3 7 EGR-FNA-IAV 2 P.Mg.-Av. Fund SPN 10/88 3 12 EGR-FNA-IAV 2 P.Mg.-Av.Fund SPN 4/89 2 5 EGR 3 L.Conv-P.Mg.-Av.Fund SPN 6/90 2 18 EGR-FNA 3 L.Conv-P.Mg. -Av.Fund SPN 7/91 3 10 EGR-ES-CONS 3 L.Conv-P.Mg. -Av.Fund SPN 2/92 2 11 ES-EGR 4 L.Conv-P.Mg.-Av.Fund- P.Dev.Objetives COM 8/94 1 20 EGR 2 L. Cov l M A - i t; i l Report No: 14t '27 Type: ICE