Power rehabilitation project
Report No: ; Type: Report/Evaluation Memorandum ; Country: Bolivia; Region: Latin America And Caribbean; Sector: Distribution & Transmission;
                                      Major Sector: Electric Power & Other Energy; ProjectID: P006163


 Bolivia: Power Sector Rehabilitation Project (Credit 1818-BO)

 The Implementation Completion Report (ICR) on the Power Sector Rehabilitation project (Credit 1818-BO
 approved in FY87), prepared by the Latin America and the Caribbean Regional Office, was reviewed by the
 Operations Evaluation Department (OED). The Borrower contributed with a detailed self-evaluation report, a
 summary of which is included as part of Appendix II. The credit, in the amount of SDR5.3 million, was closed on
 December 31, 1994, as originally planned, at which time SDR0.2 million was canceled.

 The project objectives were to rehabilitate the generating units of the state-owned power company Empresa
 Nacional de Electricidad (ENDE), strengthen its transmission system, improve its operational efficiency, and
 develop a power expansion plan. This program was needed because the power supply system worsened over the
 period 1981-1986 as a result of deteriorating national economic conditions. The project comprised: (a) the
 rehabilitation of ENDE's generating units; (b) the improvement of ENDE's transmission system by adding and/or
 relocating power transformers; and (c) the improvement of ENDE's operational efficiency by strengthening its
 management and financial information systems, and by developing a least-cost power expansion plan for the sector.

 The project met its physical objectives. The works were completed as planned, in some instances ahead of
 schedule, and ENDE's efficiency was enhanced. The credit helped ENDE carry out the 1987-1989 overhaul and
 subsequent maintenance of generating units. Two new 25 MVA transformer substations expanded the power
 system distribution capacity, and the reliability and carrier capacity of the high voltage interconnected system was
 also increased. Higher than estimated local costs caused a project cost overrun of 23 percent, but the recalculated
 project economic rate of return (12.3 percent) is satisfactory although lower than the appraisal estimate (13.5
 percent).

 Institutional objectives, explicitly covenanted, were mostly achieved. A modern management information system
 was implemented to help ENDE carry out its administrative and financial functions effectively. A master power
 expansion plan identified the least-cost generation expansion for the period 1990-2001 (it was based on an energy
 strategy study done by the ESMAP program). ENDE's fixed assets were revalued and a methodology developed to
 update their value. Although the rate of return (ROR) on ENDE's assets climbed steadily from 1.6 percent in 1988
 to 5 percent in 1994, it was always below the covenanted values and did not meet the target of 7 percent for 1994.
 The Bank waived this non-compliance because of the positive trend, the good self financing ratio (average 46
 percent in the period 1990-1994), the good debt service coverage (average 2.5 in the period 1990-1994), and the
 greatly improved record of billing and collection.

 In view of the above, OED rates the project outcome as satisfactory and its institutional development impact as
 substantial. OED rates project sustainability as likely because the privatization of the power sector is expected to
 further improve the performance of the power entities which were strengthened by the credit. These ratings are
 consistent with those indicated in the ICR.

 Bank performance is rated as satisfactory: there was a good dialogue with the Government and with ENDE during
 project execution. Moreover, Bank support-under a follow up projectfor private sector participation and limitation
 of governmental involvement by establishing an appropriate policy and regulatory framework (including full cost
 recovery pricing), was a key factor in the successful reform and subsequent privatization of the Bolivian power
 sector.
The quality of the ICR is satisfactory. It presents a concise, yet complete, account of project implementation and
results, describes a plan for future project operation and evaluation, and includes an appropriate set of key indicators
agreed with the Borrower to monitor future project performance. It draws, among others, two important lessons: (i)
early identification and timely resolution of environmental issues related to transmission lines and substations is
critical to avoid subsequent construction delays and/or operational problems; and (ii) improvements in the
management information systems of power utilities like ENDE, besides contributing to more effective operational
management, also provides the reliable database required for their eventual privatization.

The project may be audited together with other power projects in Bolivia.