Document of The World Bank Report No: ICR00003577 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-42890 TF-57818) ON AN INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT IN THE AMOUNT OF SDR 82.5 MILLION (US$124 MILLION EQUIVALENT) AND AN IRAQ TRUST FUND GRANT IN THE AMOUNT OF US$6.0 MILLION TO THE REPUBLIC OF IRAQ FOR AN EMERGENCY ELECTRICITY RECONSTRUCTION PROJECT May 29, 2016 Energy and Extractives Global Practice Middle East and North Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective as of June 30, 2015) Currency Unit = Iraqi Dinar IQD 1.00 = US$0.000862 US$1.00 = IQD 1,160 FISCAL YEAR January 01 – December 31 ABBREVIATIONS AND ACRONYMS CCGT Combined Cycle Gas Turbine DCS Distributed Control System EERP Emergency Electricity Reconstruction Project ELC ELC Electroconsult S.p.A. EMP Environmental Management Plan ESIA Environment and Social Impact Analysis ESMP Environment and Social Management Plan GoI Government of Iraq HFO Heavy Fuel Oil ICB International Competitive Bidding ICR Implementation Completion and Results Report ITF Iraq Trust Fund LC Letter of Credit M&E Monitoring and Evaluation MoE Ministry of Electricity O&M Operations and Maintenance OFFP Oil for Food Program PDO Project Development Objective PMT Project Management Team TPE Technopromexport Senior Global Practice Director: Anita Marangoly George Practice Manager: Charles Joseph Cormier Project Team Leader: Mohammed Wafaa Al-Ani ICR Team Leader: Mikul Bhatia     REPUBLIC OF IRAQ Emergency Electricity Reconstruction Project CONTENTS Data Sheet A. Basic Information ................................................................................................................................ i B. Key Dates ............................................................................................................................................. i C. Ratings Summary ................................................................................................................................ i D. Sector and Theme Codes ................................................................................................................... ii E. Bank Staff............................................................................................................................................ ii F. Results Framework Analysis ............................................................................................................. ii G. Ratings of Project Performance in ISRs ....................................................................................... viii H. Restructuring (if any) ....................................................................................................................... ix I. Disbursement Profile ......................................................................................................................... ix 1. Project Context, Development Objectives and Design ........................................................................ 1 2. Key Factors Affecting Implementation and Outcomes ....................................................................... 8 3. Assessment of Outcomes....................................................................................................................... 20 4. Assessment of Risk to Development Outcome .................................................................................... 24 5. Assessment of Bank and Borrower Performance .............................................................................. 25 6. Lessons Learned .................................................................................................................................... 27 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ................................. 29 Annex 1. Project Costs and Financing .................................................................................................... 30 Annex 2. Outputs by Component ............................................................................................................ 31 Annex 3. Economic and Financial Analysis ............................................................................................ 36 Annex 4. Bank Lending and Implementation Support/Supervision Processes ................................... 39 Annex 5. Summary of Completion Report by Owner’s Engineer ........................................................ 41 Annex 6. Summary of Borrower’s Comments on Draft ICR................................................................ 46 Annex 7. List of Supporting Documents ................................................................................................. 47 MAP ........................................................................................................................................................... 52     DATA SHEET REPUBLIC OF IRAQ Emergency Electricity Reconstruction Project A. Basic Information IQ - Emergency Electricity Country: Republic of Iraq Project Name: Reconstruction Project (EERP) Project ID: P087734 L/C/TF Number(s): IDA-42890,TF-57818 ICR Date: 04/03/2016 ICR Type: Core ICR Lending Instrument: ERL Borrower: REPUBLIC OF IRAQ Original Total Commitment: US$124.00 million Disbursed Amount: US$63.71 million Revised Amount: US$124.00 million Environmental Category: A Implementing Agencies: Ministry of Electricity (MoE) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 04/27/2005 Effectiveness: 12/17/2007 12/17/2007 08/24/2010 06/28/2012 02/22/2014 Appraisal: — Restructuring(s): — 06/27/2014 10/15/2014 05/26/2015 Approval: 03/29/2007 Midterm Review: 08/30/2013 12/05/2014 Closing: 06/30/2011 06/30/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Unsatisfactory Risk to Development Outcome: High Bank Performance: Unsatisfactory Borrower Performance: Moderately Unsatisfactory i  C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Unsatisfactory Government: Unsatisfactory Moderately Implementing Moderately Quality of Supervision: Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Overall Borrower Moderately Unsatisfactory Performance: Performance: Unsatisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project at Quality at Entry Yes None any time (Yes/No): (QEA): Problem Project at any time Quality of Supervision Yes None (Yes/No): (QSA): DO rating before Moderately Closing/Inactive status: Unsatisfactory D. Sector and Theme Codes Original Actual Sector Code (as percent of total Bank financing) Central government administration 14 7 Thermal Power Generation 86 93 Theme Code (as percent of total Bank financing) Conflict prevention and post-conflict reconstruction 100 100 E. Bank Staff Positions At ICR At Approval Vice President: Hafez M. H. Ghanem Daniela Gressani Country Director: Ferid Belhaj Joseph P. Saba Practice Manager/Manager: Charles Joseph Cormier Jonathan D. Walters Project Team Leader: Mohammed Wafaa Al-Ani Tjaarda P. Storm Van Leeuwen ICR Team Leader: Mikul Bhatia ICR Primary Author: Mikul Bhatia F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objectives of the project are to (i) alleviate the current power supply shortfall by restoring the base load generation capacity of the Hartha power station units 2 and 3 to 400 MW and (ii) lay the groundwork for improved power system planning and fuel supply by providing the tools and other support necessary to enhance in-house capability to prepare, implement, and operate current and future projects. ii  Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Actual Value Achieved at Original Target Formally Revised Indicator Baseline Value Completion or Target Values Target Values Years Indicator 1: Restore original capacity of units 2 and 3 to about 400 MW Value (quantitative 0 400 400 0 or qualitative) Date achieved 03/06/2007 12/31/2010 06/30/2015 06/30/2015 This is an original indicator, which was last revised upon restructuring in September Comments 2014. At close of the project, rehabilitation of both units was incomplete (due to (including % difficulties with the main contractor). About 70% completion (76% equipment received achievement) and 30% installation completed). Shortfall in electricity supply alleviated—demand/supply gap reduced and Hartha power Indicator 2: station contributing (MW) Value (quantitative 6,000 – 4,000 7,000 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 This is a new indicator added in the June 2014 restructuring to better reflect the project Comments development objective (PDO). At the close of the project, Hartha rehabilitation had not (including % been completed, even as average power supply in Iraq is less than eight hours per day achievement) from the grid. Development of local capacity through consultancy support and regional and overseas Indicator 3: technical training for staff in operations, maintenance, planning, and project management as well as in financial, legal, and general management aspects of power utilities Value No program Implementation (quantitative – – available is complete. or qualitative) Date achieved 03/06/2007 12/31/2011 – – This indicator was dropped in the June 2014 restructuring and replaced with 5 separate Comments indicators on (1) improved safeguards management, (2) technical and contractual (including % documentation, (3) project planning, (4) standard safeguards approach, and (5) project achievement) and contract management. Capacity building – improvement of environmental and social safeguards management Indicator 4: during ongoing operations (Yes/No) Value quantitative or No – Yes Yes qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the June 2014 restructuring to reflect specific capacity- (including % building measures. Operations management at Hartha strengthened by adoption of an achievement) Environmental Management Plan (EMP). Also disseminated to other project sites. Capacity development – improved technical and contractual documentation adopted and Indicator 5: being used as standard for generation and transmission projects (Yes/No) iii  Value quantitative or No – Yes Yes qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This is a new indicator added in the June 2014 restructuring to reflect specific capacity- (including % building measures. Improved standardized technical specifications, procurement, and achievement) contract documentation are now available for large generation and transmission projects. Indicator 6: Capacity development – project planning software being utilized (Percentage) Value quantitative or 0 – 100 100 qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 This is a new indicator added in the June 2014 restructuring to reflect specific capacity- Comments building measures. Training has been provided. Project planning software and improved (including % technical and contractual documentation have been accepted and are now being used by achievement) the MoE. Environmental and Social Management Approach adopted and under implementation for Indicator 7: the EERP and disseminated to other projects within the MoE management (Percentage) Value quantitative or 0 – 100 95 qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 This is a new indicator added in the June 2014 restructuring. Training is delivered and the Comments EMP is being implemented at Hartha. The EMP implementation is still under way as (including % Hartha rehabilitation works are not completed yet. Hartha EMP shared with other achievement) projects. Capacity building—training in project management and contract management delivered Indicator 8: and project and contract management practice on the Hartha project improved (Percentage) Value quantitative or 0 – 100 85 qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 This is a new indicator added in the June 2014 restructuring. The World Bank workshop Comments was held. On-the-job training was given. Significant improvement observed in the (including % capacity of the project management team (PMT) to hold contractor accountable for achievement) responsibilities. However, further improvements in the PMT capacity are needed. (b) Intermediate Outcome Indicator(s) Actual Value Achieved at Original Target Formally Revised Indicator Baseline Value Completion or Target Values Target Values Years Hartha power station units 2 and 3 are completed and operational with a capacity of 400 Indicator 1: MW (Text) Rehabilitation Value complete. Units 2 Units 2 and 3 not (quantitative and 3 producing – – operational. or qualitative) about 200 MW each. iv  Date achieved 03/06/2007 12/31/2010 – – Comments This indicator was deleted in the May 2012 restructuring and replaced with new (including % indicators, which reflect greater detail on rehabilitation works related to the boilers, achievement) turbines, and final commissioning of units 2 and 3 of Hartha power station, respectively. Indicator 2: Qualified contractor appointed and rehabilitation works completed (Text) Value Contractor appointed Contractor appointed and No contractor (quantitative – and rehabilitation rehabilitation works under appointed or qualitative) works completed. implementation. Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the May 2012 restructuring to better reflect works related to (including % the rehabilitation of Hartha power station. Contractors were appointed in October 2010. achievement) Rehabilitation works not completed at the end of the project. Indicator 3: Unit 2 boiler erection (Percentage) Value (quantitative 0 – 100 80 or qualitative) Date achieved 03/06/2007 – 30/06/2015 30/06/2015 Comments This indicator was added in the May 2012 restructuring to better reflect works related to (including % rehabilitation of boiler of unit 2 of Hartha power station. achievement) Indicator 4: Unit 3 boiler erection (Percentage) Value (quantitative 0 – 100 40 or qualitative) Date achieved 03/06/2007 – 30/06/2015 30/06/2015 Comments This indicator was added in the May 2012 restructuring to better reflect works related to (including % rehabilitation of boiler of unit 3 of Hartha power station. achievement) Indicator 5: Unit 2 turbine erection (Percentage) Value (quantitative 0 – 100 – or qualitative) Date achieved 03/06/2007 – 30/06/2014 – This indicator was added in the May 2012 restructuring to better reflect works related to Comments rehabilitation of turbine of unit 2 of Hartha power station. This indicator was deleted in (including % the June 2014 restructuring when a more detailed approach to tracking of rehabilitation achievement) works was adopted. Indicator 6: Unit 3 turbine erection (Percentage) Value (quantitative 0 – 100 – or qualitative) Date achieved 03/06/2007 – 30/06/2014 – This indicator was added in the May 2012 restructuring to better reflect works related to Comments rehabilitation of turbine of unit 3 of Hartha power station. This indicator was deleted in (including % the June 2014 restructuring when a more detailed approach to tracking of rehabilitation achievement) works was adopted. Indicator 7: Commissioning unit 2 (Percentage) Value 0 – 100 – v  (quantitative or qualitative) Date achieved 03/06/2007 – 30/06/2014 – This indicator was added in the May 2012 restructuring to better reflect works related to Comments rehabilitation of unit 2 of Hartha power station. This indicator was deleted in the June (including % 2014 restructuring when a more detailed approach to tracking of rehabilitation works was achievement) adopted. Indicator 8: Commissioning unit 3 (Percentage) Value (quantitative 0 – 100 – or qualitative) Date achieved 03/06/2007 – 30/06/2014 – This indicator was added in the May 2012 restructuring to better reflect works related to Comments rehabilitation of unit 3 of Hartha power station. This indicator was deleted in the June (including % 2014 restructuring when a more detailed approach to tracking of rehabilitation works was achievement) adopted. Indicator 9: Supply of goods and equipment completion rate (Percentage) Value (quantitative 0 – 100 76 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the June 2014 restructuring to assess progress in supply of (including % goods and equipment for the rehabilitation of Hartha power station units 2 and 3. An achievement) estimated 92% of the goods have been manufactured but only 76% supplied and invoiced. Indicator 10: Refurbishment works completion rate (Percentage) Value (quantitative 0 – 100 30 or qualitative) Date achieved 03/06/2007 – 09/30/2014 06/30/2015 Comments This indicator was added in the June 2014 restructuring to assess progress in works (including % related to rehabilitation of Hartha power station units 2 and 3. achievement) Indicator 11: Procurement and installation of DCS (Percentage) Value Procurement: 80; (quantitative 0 – 100 Installation: 0 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 This indicator was added in the June 2014 restructuring to assess progress in works Comments related to installation of a Distributed Control System (DCS) for Hartha power station (including % units 2 and 3. All hardware has been received, but software is not received yet. achievement) Installation of DCS also not done. Indicator 12: Erection, testing, and commissioning of mechanical works for two units (Percentage) Value (quantitative 0 – 100 87 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the June 2014 restructuring to assess progress in works (including % related to completion of mechanical works for Hartha power station units 2 and 3. vi  achievement) Indicator 13: Civil works completion rate (Percentage) Value (quantitative 0 – 100 30 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the June 2014 restructuring to assess progress in civil works (including % related to Hartha power station units 2 and 3. achievement) Indicator 14: Electrical system installation completion rate (Percentage) Value (quantitative 0 – 100 10.5 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the June 2014 restructuring to assess progress in electrical (including % system installation related to Hartha power station units 2 and 3. achievement) Indicator 15: Fuel oil tanks erection (Percentage) Value (quantitative 0 – 100 92 or qualitative) Date achieved 03/06/2007 – 06/30/2015 06/30/2015 Comments This indicator was added in the June 2014 restructuring to assess progress in works (including % related to fuel tanks for Hartha power station units 2 and 3. achievement) Consulting contracts to provide support in project planning, documentation, Indicator 16: implementation, and operations (Percentage) Value (quantitative 0 – 100 100 or qualitative) Date achieved 08/01/2011 – 06/30/2015 06/30/2015 Comments This indicator was added in the May 2012 restructuring to reflect specific tasks under the (including % technical assistance component. Consulting support provided through five individual achievement) consultants is now complete. Indicator 17: Supervision consultant hired and supervision activities undertaken (Percentage) Value (quantitative 0 – 100 100 or qualitative) Date achieved 01/01/2010 – 06/30/2015 06/30/2015 This indicator was added in the May 2012 restructuring to reflect on specific task under Comments the technical assistance component. Consultancy contract was extended to match the (including % extension of the main contract. Consultants submitted a final Monthly Progress Report achievement) (No. 33) up to June 2015. Development of local capacity at the Hartha power station in operations, maintenance, Indicator 18: and project management Value No program Implementation (quantitative – – available complete or qualitative) vii  Date achieved 03/06/2007 12/31/2010 – – This 'intermediate outcome' indicator was deleted in May 2012 and replaced in June 2014 Comments with three new 'outcome indicators' to reflect capacity building for (a) safeguards (including % management, (b) Standard Safeguards Approach, and (c) project and contract achievement) management. Development of in-house capacity to implement the MoE’s Power Master Plan Indicator 19: comprising the preparation of feasibility studies, environment impact assessments, and bid documents for high-priority projects. Value October 2006 Agreed number (quantitative Power Master Plan of studies – – or qualitative) is available. completed Date achieved 03/06/2007 12/31/2011 – – Comments This 'intermediate outcome' indicator was deleted in May 2012 and replaced in June 2014 (including % with two new 'outcome indicators' to reflect capacity building for (a) improved technical achievement) and contractual documentation and (b) project planning software. Development of in-house capacity for power system planning and staffing resulting in an Indicator 20: updated Power Master Plan Value An updated Limited staff (quantitative Power Master – – training provided or qualitative) Plan Date achieved 03/06/2007 12/31/2009 – – Comments This ‘intermediate outcome’ indicator was discontinued after the restructuring in May (including % 2012. The project did not take up capacity building on power system planning. achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. IP Disbursements Archived DO (US$ millions) 1 04/16/2007 Satisfactory Satisfactory 0.00 2 10/16/2007 Moderately Unsatisfactory Moderately Unsatisfactory 0.00 3 01/07/2008 Moderately Satisfactory Moderately Satisfactory 0.00 4 07/03/2008 Moderately Satisfactory Moderately Satisfactory 0.00 5 12/03/2008 Unsatisfactory Unsatisfactory 0.00 6 06/18/2009 Unsatisfactory Moderately Unsatisfactory 0.00 7 12/11/2009 Unsatisfactory Moderately Unsatisfactory 0.00 8 04/27/2010 Moderately Unsatisfactory Moderately Unsatisfactory 6.39 9 09/23/2010 Moderately Unsatisfactory Moderately Unsatisfactory 6.68 10 01/03/2011 Moderately Unsatisfactory Moderately Unsatisfactory 6.68 11 11/06/2011 Moderately Unsatisfactory Moderately Unsatisfactory 6.70 12 06/13/2012 Moderately Unsatisfactory Moderately Unsatisfactory 7.52 13 12/24/2012 Moderately Unsatisfactory Moderately Unsatisfactory 18.20 14 08/28/2013 Moderately Unsatisfactory Moderately Unsatisfactory 35.61 15 03/03/2014 Moderately Satisfactory Moderately Unsatisfactory 42.23 16 09/24/2014 Moderately Satisfactory Moderately Unsatisfactory 58.82 17 06/02/2015 Moderately Unsatisfactory Moderately Unsatisfactory 62.17 viii  H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Approved Reason for Restructuring & Key Restructuring Date(s) PDO Changes Made DO IP in US$, Change millions Closing date for Credit No. 42890-IQ changed from June 30, 2011 to June 30, 2014; 08/24/2010 N MU MU 6.68 Closing date for Trust Fund Grant No. TF057818-IQ changed from June 30, 2010 to June 30, 2013. Reallocation of funds across categories; 06/28/2012 N MU MU 7.52 Modifications to the results indicators. 02/22/2014 N MU MU 38.53 Reallocation of funds across categories. Closing date for Credit No. 42890-IQ changed from June 30, 2014 to 06/27/2014 N MS MU 58.27 September 30, 2014; Modifications to the results indicators. Closing Date for Credit No.42890-IQ 10/15/2014 N MS MU 58.99 changed from Sep 30, 2014 to June 30.2015. 5/26/2015 N MS MU 62.17 Reallocation of funds across categories. I. Disbursement Profile ix  1. Project Context, Development Objectives and Design 1. The Iraq: Emergency Electricity Reconstruction Project (EERP) (P087734) was aimed at alleviating power supply shortfalls by rehabilitating the Hartha power station units 2 and 3 to 400 MW and laying the groundwork for improved power system planning and fuel supply by providing tools and other support necessary to enhance in-house capability to prepare, implement, and operate current and future projects. Funded through an IDA Credit of US$124 million (IDA- 42890) and an Iraq Trust Fund (ITF) Grant of US$6 million (TF-57818), the project was approved on March 29, 2007, and became effective on December 17, 2007. The original closing date, June 30, 2011, was extended thrice – first to June 30, 2014; then to September 30, 2014; and finally, to June 30, 2015 – to accommodate delays in the rehabilitation of the Hartha power station units 2 and 3. 2. The project was implemented in a fragile and conflict country context, which posed significant issues of security (and consequential low bidder interest), weak project management capacity, and different overriding priorities of the government in the face of war and political instability. The project supported the rehabilitation of the Hartha power station units 2 and 3, which had been earlier initiated under the Oil for Food Program (OFFP), and the equipment for an estimated US$120 million had been already delivered to the site. The main contract for the remaining supply of goods and equipment as well as execution of rehabilitation works faced significant difficulties during procurement, contract finalization, and implementation. The contract became effective only in October 2010. It faced significant delays during implementation and remained incomplete at the close of the World Bank project on June 30, 2015. The project also supported technical assistance for capacity building in the areas of improved project planning, project and contract management, technical and contractual documentation, and safeguards management at Hartha as well as in other projects of the Ministry of Electricity (MoE). The technical assistance component was substantially completed at the close of the Bank project. 1.1 Context at Appraisal Country Background 3. Access to essential basic services was crippled. Large oil reserves and abundant natural and human resources enabled Iraq to attain the status of a middle-income country in the 1970s. Income per capita rose to over US$3,600 in the early 1980s. However, by the turn of the century, Iraq’s human development indicators were among the lowest in the region. Per capita income dropped to about US$770–1,020 by 2001. The 2005 income per capita of US$1,200 was about one-third of what the Iraqis enjoyed 25 years earlier. Most Iraqis had limited access to essential basic services, including electricity, water supply, sanitation, and refuse collection. Electricity supply, upon which many other essential services rely, remained unreliable. A combination of wars, sanctions, looting, and vandalism had severely affected the entire power system infrastructure in Iraq. During the 1991 Gulf War and the subsequent Gulf War, the electricity system suffered severe damage—several transmission lines were put out of service, substations were damaged, and power generation equipment was the most severely affected. 4. Reconstruction efforts were hampered by security concerns. The reconstruction of Iraq was hampered by a number of hurdles, including government bureaucracy, corruption, and security 1  concerns. More than three years after the Iraq war, the Iraqi people still complained of lack of electricity. Many projects of the MoE funded by the Iraq Relief and Reconstruction Fund were still incomplete due to a number of factors including project delays, cost overruns due to increased security cost, and constant risk of insurgent attacks, which diverted reconstruction resources to pay for security. Sector Background 5. Significant power shortages caused frequent load shedding. In 1990, before the Gulf War, the total installed generating capacity was 9,295 MW with a peak demand of about 5,100 MW. Approximately 87 percent of the population had access to electricity. After the Gulf War and subsequently, the Iraq war, the electricity sector was severely damaged. In 2006, the available generating capacity was in the range of 3,600 to 4,500 MW, against a peak demand of 9,600 MW during summer. Only about 80 percent of the population had grid electricity connection, and the reliability of supply was poor. As a result, power supply remained unreliable with frequent load shedding and unplanned power outages. 6. Sector had been restructured and de-corporatized. Iraq separated the electricity sector from the Ministry of Industry, and the Commission of Electricity was established on June 21, 1999. In 2003, the MoE was created to replace the Commission of Electricity. The MoE was made responsible for both policymaking and electricity supply throughout the country. The operational functions (power generation, transmission, and load dispatch and distribution), which were autonomous corporatized entities earlier, were reorganized into 18 geographically based directorates within the MoE. 7. New Master Plan to address sector challenges had been prepared. In November 2006, the MoE presented a new Master Plan for the sector for the years 2006–2015. The new Master Plan was aimed at (a) expansion of the power generation capacity to cover incremental power demand, (b) efficient maintenance and effective rehabilitation of generation facilities, (c) expansion of transmission and distribution systems, (d) transmission interconnections with neighboring countries, (e) providing best possible service to consumers, (f) developing human resources, and (g) increasing per capita consumption from 1,100 kWh per year to 3,700 kWh per year by 2009. Key Issues in the Electricity Sector 8. Deteriorated power and fuel infrastructure. Many existing power generation units needed refurbishment or even replacement. Some new generating units (mainly gas turbines) were installed, but these often could not be operated because of fuel supply problems. The transmission and distribution networks had suffered substantial damage during war and conflicts. As a result, some networks were heavily loaded and were subject to repeated interruptions in addition to load shedding due to the lack of available generating capacity. Natural gas—which is the most efficient fuel type for most generation plants in Iraq—was often not readily available, and there were concerns about the security gas pipelines. 9. Weakened capacity. The Iraqi staff working in the power sector had good skills in operation, repair, and maintenance. This enabled continued operation of power plants despite 2  shortage of standard spare parts and incomplete commissioning by contractors who had to evacuate when war broke out. However, there was a need to expose the staff to the latest technological developments and best practices in operation, maintenance, planning, design, and contract management to ensure efficient and sustainable operation of the power system. 10. Uncertainty in availability of funds and cumbersome bureaucratic procedures. Uncertainty in availability of funds from budgetary allocations and donor funding, as well as cumbersome bureaucratic procedures had been important factors in infructuous rehabilitation efforts till date. Available funding from all sources was unlikely to be sufficient to fully implement the needs-based electricity sector Master Plan. An additional issue was the need to improve planning, project preparation, procurement, project management, and implementation. The Master Plan could also be further optimized to reduce the shortfall in financing. 11. Inadequate tariffs, low cost recovery, and increased cost of doing business. Prices of petroleum products, fuel, and electricity did not reflect production costs or international market prices. Although billing for electricity had been partially reinstated, collection remained difficult because of the prevailing security situation. This problem was further exacerbated by the high cost of doing business due to high security costs. In the long term, adjustment of electricity prices to improve cost recovery and ensure rational economic investment choices was a key element in improving the financial viability of the electricity sector. 12. Institutional structure, regulatory reform, and corporatization. The prevailing centralized structure of the MoE was seen as being inadequate for the future of Iraq’s electricity sector. Possible reforms could start with reverting to the autonomous arrangements that were in place in 1999. However, modernization of the prevalent Legal and Regulatory Framework was also required in view of the decision by the MoE to open the electricity sector to private investment. The Bank was providing assistance in formulating sound electricity policy and a clear Regulatory Framework for creating a favorable investment climate. This assistance was being provided through the Public Private Infrastructure Advisory Facility. Rationale for Bank Assistance 13. In response to the tremendous need to rehabilitate and restore basic infrastructure facilities and services throughout Iraq, initial donor support was primarily directed to financing priority investments in the power and water sectors, as well as to improving key social services. Despite the relatively large resources channeled by the United States and Japan for the reconstruction and rehabilitation of the electricity sector, the power supply in 2006 met only about 50 percent of the demand. 14. The project was consistent with the Bank’s Interim Strategy Note for Iraq, which was prepared in consultation with the government of Iraq (GoI) and submitted to the Bank’s Board of Directors in September 2005. The Interim Strategy Note, guided by Iraq’s National Development Strategy of July 2005, emphasized the need for rapid rehabilitation of critical infrastructure services and institutional support as prerequisites for long-term sustainable recovery. 15. The GoI selected the Hartha power plant based on a Rapid Result Approach. The combination of rehabilitation and technical assistance was expected to ensure an increase in 3  generation capacity and stabilization of the national grid. The project was expected to have the potential to add urgently needed capacity in a relatively short period and at an economical cost because (a) most of the equipment had already been procured under the OFFP, (b) technical expertise was available on-site, and (c) the security conditions had been relatively stable in the southern region. The Bank’s experience with infrastructure reconstruction projects and institution building in conflict zones was expected to help in completing the project successfully. 16. In addition, the Bank’s experience in capacity building and project preparation was expected to help ensure effective future rehabilitation and sustainable performance of the plants. Assistance to improve planning, project preparation, and implementation, including fuel supply, was to be provided as part of this project. The Bank was also to provide advisory services through other economic and sector work that would assist in reforming the sector to ensure commercial operation and sustainable development. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 17. PDO. The objectives of the project were to (i) alleviate the current power supply shortfall by restoring the base load generation capacity of the Hartha power station units 2 and 3 to 400 MW; and (ii) lay the groundwork for improved power system planning and fuel supply by providing the tools and other support necessary to enhance in-house capability to prepare, implement, and operate current and future projects. 18. Key indicators were as follows:  Restore original capacity of units 2 and 3 of the Hartha power station to about 400 MW  Development of local capacity through consultancy support and regional and overseas technical training for staff in operations, maintenance, planning, and project management as well as in financial, legal, and general management aspects of power utilities 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 19. Revised PDO. The PDO for the project was not revised. 20. Revised key indicators. The key indicators were revised through restructurings in May 2012, June 2014, and finally, in September 2014 to reflect the revised timelines, progress on specific rehabilitation works, as well as specific capacity-building activities. These changes to the key indicators were ‘corrective’ in revising target dates to reflect delays in project implementation due to contractual difficulties and in better reflecting the specific capacity-building activities. Changes introduced in June 2014 in particular, enabled better tracking of specific activities in the rehabilitation of units 2 and 3 of the Hartha power plant. These changes did not materially alter the project or the results framework but only served to refine the indicators. 4  21. The final set of key indicators (PDO level indicators) were as follows: Table 1. PDO Level Indicators Original Revised Indicator Baseline Comment Target Target Restore original capacity of units 2 0 400 400 Original and 3 to about 400 MW (Megawatt) (June 06, 2007) (December 31, 2010) (June 30, 2015) Original target date was revised to reflect delays in implementation. Shortfall in electricity supply 6,000 – 4,000 Added alleviated—demand/supply gap (June 06, 2007) (June 30, 2015) New indicator was added reduced and Hartha power station in June 2014 to better contributing (Megawatt) reflect the PDO. Development of local capacity No program Implementation of an – Dropped through consultancy support and available. agreed capacity- This original indicator regional and overseas technical (June 06, 2007) building program was replaced with five training for staff in operations, complete new indicators in June maintenance, planning, and project (December 31, 2014 to better reflect the management as well as in financial, 2011) specific capacity- legal, and general management building activities. aspects of power utilities. Capacity building—improvement of No – Yes Added environmental and social safeguards These five new indicators management during ongoing replaced the original operations (Yes/No) indicator on capacity Capacity development—improved No – Yes building. The new technical and contractual indicators reflect specific documentation adopted and being capacity-building used as standard for generation and activities separately. transmission projects (Yes/No) Capacity development—project 0 – 100 planning software being utilized (Percentage) Environment and Social 0 – 100 Management Approach adopted and under implementation for the EERP, and disseminated to other projects within the MoE management (Percentage) Capacity building—training in 0 – 100 project management and contact management delivered and project and contract management practice on the Hartha project improved (Percentage) 22. Reasons/justification. The revised key indicators are only a refinement of the original indicators. The original indicator for capacity building did not reflect the details on the specific aspects, which have been included in the revised indicators. 5  1.4 Main Beneficiaries 23. The direct beneficiary of the project is the MoE of the GoI, which will benefit from augmentation of power generation capacity at Hartha power station, as well as institutional capacity to plan, prepare, procure, implement, operate, and maintain projects. Indirect beneficiaries include all consumers of electricity as the project will provide 400 MW of additional power generation in Iraq. These consumers include households, commercial establishments, industries, agriculture, public service institutions (such as schools, health centers, and so on), and government offices. 24. The main beneficiaries of the project remained unchanged during the course of the project. 1.5 Original Components (as approved) Component 1: Rehabilitation of Hartha Power Station Units 2 and 3 (US$144 million) 25. Subcomponent 1.1. Hartha power plant (800 MW), which is located at the Shatt Al-Arab River, about 33 km from Basra and 25 km from the Iranian border, was commissioned in 1979. Units 1 and 4 have been running most of the time since then, but units 2 and 3 have been mostly out of operation since the first Gulf War. Rehabilitation of units 2 and 3 was initiated with assistance under the OFFP and equipment for an estimated US$120 million has been delivered to the site. The proposed project will consist of completing supply of materials, rehabilitation, and commissioning of units 2 and 3 of the Hartha power plant to restore to, as close as possible, their original capacity of 400 MW and thereby, ensure an additional operational life of 20 years. The tender document will take account of the equipment and materials already supplied under the OFFP. The main components comprise the boilers, condensers, turbines, governors, generators, transformers, and control equipment. The bidders will be encouraged to form joint ventures with local contractors, which will reduce the project cost and create local employment. Most equipment will be replaced rather than repaired. 26. Subcomponent 1.2. Support in bid evaluation, construction supervision, and further support to the MoE up to the end of the defects liability period. 27. Subcomponent 1.3. Implementation of the agreed recommendations of the Environmental and Social Management Plan (ESMP). 28. Subcomponent 1.4. Incremental operational cost of the project management team (PMT) such as office equipment, travel, and per diem but excluding salaries of the Iraqi PMT staff. Component 2: Support Services (US$6 million) 29. Subcomponent 2.1. Consultancy support and training to the Iraqi MoE staff in the preparation of least cost reconstruction and expansion plans, feasibility studies, and advisory services for future projects, including projects related to securing fuel supply and reducing gas flaring. Priority will be given to assisting the MoE with completing a Feasibility Study and related consulting services for the Mansuria project (development of a gas field and the construction of a 2x123 MW simple cycle plant with possible expansion to a combined cycle project) and other possible oil and gas field developments, in close cooperation with the Ministry of Oil. Support for 6  least cost planning will complement the development of planning tools already provided or to be provided through alternative financing. Such tools will include software and measuring instruments for all stages of power system planning. 30. Subcomponent 2.2. Regional and overseas training for staff in the technical areas of operations, maintenance, planning, environment, and general project management as well as in financial, legal, and general management aspects of power utilities. 31. Subcomponent 2.3. Independent audits for the project. 32. Subcomponent 2.4. Office equipment for the PMT in Baghdad and at Hartha such as office equipment and operational costs for travel and per diem but excluding salaries and benefits of the Iraqi PMT staff. 33. Subcomponent 2.5. Miscellaneous short-term consulting services that may be required for the Hartha project, such as an independent review of project implementation and other advisory services for the power sector that may be required by the MoE. 1.6 Revised Components 34. The project components have not been revised. 1.7 Other Significant Changes 35. There were no significant changes in design, scope, scale, or implementation arrangements of the project. However, the project was restructured on six occasions. The closing date for the IDA Credit was extended on three occasions, from the original date of June 30, 2011 to June 30 2014, then to September 30, 2014, and finally, to June 30, 2015. Alongside, the closing date for the ITF grant was extended from September 30, 2010 to June 30, 2013. Further details of the six restructurings are provided in the table. Table 2. Project Restructurings Reallocation of Funds Restructuring Date Extension of Closing Date Revision of Indicators Across Categories July 16, 2010 Closing date for IDA Credit – – First Restructuring extended from June 30, 2011 to June 30, 2014, to match the duration of the main Hartha rehabilitation contract. May 29, 2012 – Reallocation to provide Indicators revised to reflect Second funds for consultancy details on works related to Restructuring activities in view of ITF boilers, turbines, and final grant funds having been commissioning of units 2 fully committed and 3, respectively. February 22, 2014 – Reallocation to provide – Third Restructuring funds for consultancy activities and price adjustments in main Hartha contract 7  June 27, 2014 Closing date for IDA Credit – A more detailed approach Fourth Restructuring extended from June 30, 2014 to adopted to reflect specific September 30, 2014, in capacity building measures anticipation of a further extension and to track specific contingent on agreement between rehabilitation works. the GoI and TPE on outstanding variation orders. September 30, 2014 Closing date for IDA Credit – Targets for indicators revised Fifth Restructuring extended from September 30, in line with the extension of 2014 to June 30, 2015, project closing date. subsequent to signing of final agreement between the GoI and TPE for additional goods, equipment, and works. May 19, 2015 – Reallocation to provide – Sixth Restructuring funds for external auditor and owner’s engineer Note: TPE = Technopromexport 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry (a) Soundness of Background Analysis 36. Urgent need to fix critical power infrastructure correctly identified, but Rapid Results Approach was over-optimistic. The background analysis correctly identified the need to rehabilitate Iraq’s critical power infrastructure. The decision to support generation rehabilitation as against transmission and distribution rehabilitation remained open till a very late stage in project preparation. The GoI’s decision to avail Bank support for Hartha rehabilitation based on a Rapid Results Approach was driven by the fact that a large part of the equipment had already been procured and received under the OFFP. Therefore, it was assumed that works could be executed quickly—especially as the security environment in the south was also relatively stable. This premise seems to have overrated the Rapid Results Approach by ignoring possible issues with the adequacy of technical design of these components, the condition of these components after years of lying around, the ability of a wide cross-section of bidders to use them, as well as the constraints imposed on design flexibilities for bidders. A detailed study of the design and condition of components already procured under the OFFP and a thorough examination of merits/demerits of taking up an incomplete rehabilitation effort may have pointed to other approaches. 37. Many lessons from earlier projects were reflected. The project design drew upon several lessons from earlier projects in fragile and conflict countries. Only one investment contract was funded by the Bank project to keep the project structure simple with limited number of components and a small number of contracts. Procurement was initiated early on and proposals under International Competitive Bidding (ICB) had already been invited by the time of submission to the Board of Directors. Supervision travel was to be optimized in the face of a difficult security situation, including by conducting missions in Jordan and Lebanon. A PMT was put in place and capacity-building measures were incorporated into the project design. All of these measures were derived from the lessons learned from earlier experiences. 8  (b) Assessment of the Project Design 38. Project selection was influenced by past decisions. With regard to technical design, there were multiple options to consider. The augmentation of generation availability could be achieved through either the rehabilitation of Hartha units 2 and 3 or setting up a new Combined Cycle Gas Turbine (CCGT) plant of a similar capacity. A third option would have been to add the gas turbine stage to units 2 and 3 subsequently and convert them into CCGT plants, thus delivering nearly double the electricity. Another related consideration was the approaching end of designed life of units 1 and 4—which would need to be replaced at a later stage. However, the decision to rehabilitate Hartha units 2 and 3 to the original design (or incrementally better) specifications had been taken by the GoI much earlier and equipment worth US$120 million had been procured under the OFFP. Thus, adequate assessment of the option to rehabilitate Hartha in relation to other options to augment power supply was not done. 39. Economic analysis overlooked the complexities inherent in rehabilitation projects. The economic analysis in the project appraisal document compares the rehabilitation project with installing a new 390 MW CCGT. The analysis shows that the average cost of electricity from the rehabilitation project would be marginally lower than that from a new CCGT (both being operated using heavy fuel oil [HFO])—US$0.0492 per kWh versus US$0.0507 per kWh. However, the analysis does not reflect the complexities inherent in a rehabilitation project compared to a green- field CCGT project. Such complexities usually arise from additional scope of works that may be discovered upon opening the machines, longer than anticipated time in rehabilitation even under normal political and security conditions, and the need to reverse engineer and retrofit parts to match the design of the original unit. These inherent risks were not reflected in the economic analysis, upon which the decision to rehabilitate the unit may have been questionable. 40. Complex nature of project and contract design at entry. The MoE had already received a very large set of goods and equipment under the OFFP and the contractor had to takeover and use this existing equipment supply. This large volume of equipment (potentially covering several football fields) had been lying around for several years and posed issues of compatibility as well as usability of parts. As a result, a turnkey contract where the contractor could take the entire responsibility for design, procurement, and implementation of works was not an option. This also limited the number of bidders and was a constant source of dispute with the contractor during implementation. The implementation risk arising from this complexity was not understood well enough at the design stage. Given the difficult country context, a better appreciation of the contractual complexity may have pushed the Bank team toward other project design options (such as a green-field plant, a different power plant, or a different contracting structure). (c) Adequacy of Government’s Commitment 41. Significant time lapse in parliamentary ratification and budgetary allocations. Although the project’s financing plan had been proposed by the Bank as early as November 2005 and it included cofinancing by the GoI, there was a significant time lapse in the budgetary allocation of US$20 million by the GoI.1 Ratification of the IDA Credit Agreement by the                                                              1 These funds were eventually contributed by the GoI toward the advance payment to the main Hartha rehabilitation contractor in March 2010. 9  parliament and obtaining the legal opinion also took nearly eight months. However, these delays were symptomatic of competing demands on resources from more compelling security and political concerns, as well as bureaucratic delays, rather than a lack of ownership of the project by the GoI. Subsequently, the government’s high commitment to the project is again reflected when it stepped forward to shoulder nearly US$19 million toward security costs of the main contractor for rehabilitation of the Hartha power station units 2 and 3. (d) Assessment of Risks 42. Identification of project risks and mitigation measures. Many key risks faced by the project were already anticipated at the project preparation stage, and suitable mitigation measures were identified. Many of these risks were observed during the procurement and implementation of contracts and despite mitigation measures taken, resulted in substantial delays. A summary of the key risks identified ex ante, the mitigation steps planned, and the experience during project implementation are presented below: Table 3. Risks and Mitigation Measures Assessment during Preparation Effectiveness of Mitigation Measures Key Risks Rating Mitigation Plan Inability of High Use of local Bank conducted missions at Beirut (5), Basra (1), international Bank consultants Baghdad (4), and Amman (3). Consultants were hired staff to supervise contracted to assist by the MoE as owner’s engineers. Bimonthly the project in the in supervision coordination meetings between the owner, owner’s field through physical engineer, contractor, and the Bank were organized to inspection of address any outstanding issues. The owner’s engineer projects conducted more than 32 coordination meetings and 11 factory tests/inspections. They provided periodic reports on the project progress. Supervision for the project is seen to be adequate. Lack of experience High Training and support Bank procurement specialists provided close support in using the Bank’s will be provided to to the client, especially in the course of difficult Procurement the PMT on Bank’s negotiations with the single bidder, which required Guidelines and Procurement review and ‘no-objection’ to multiple versions of draft sound international Guidelines, bidding contract. Procurement training was given to the PMT procurement document staff. However, some of the contractual difficulties are practices preparation, and bid attributable to lack of clarity in the contract on the evaluation. contractor’s scope of responsibility. Hence, contact management risk was only partially mitigated. Counterpart High Ensuring that the There was a significant time lapse in budgetary financing and the counterpart funds are allocation of counterpart funds of US$20 million by possibility of delay allocated in the the GoI. These funds were eventually contributed by in budget allocations related years budgets the GoI toward the advance payment to the main thus affecting project Hartha rehabilitation contractor in March 2010. implementation Hence, the risk was only partially mitigated. 10  Assessment during Preparation Effectiveness of Mitigation Measures Key Risks Rating Mitigation Plan Possibility of high High Price and physical The original main contract (US$133.69 million) prices due to security contingencies have already cost beyond the planned contingencies conditions in Iraq been provided in the (US$110 million base cost and US$22 million cost estimates. contingencies). Two subsequent amendments added US$2.20 million and US$35.13 million, respectively. This excludes price adjustment, which is yet to be negotiated between the GoI and the contractor. In addition, the GoI also funded the security contract, which amounted to about US$19 million. The risk of high prices was correctly identified but adequate contingency provisions were not made in the project. Security conditions High A clause in the Although security conditions deteriorated due to the deteriorate, making bidding document arrival of ISIS, their influence largely did not reach the access by requests the areas around Hartha. contractors/suppliers methodology for to sites and accessing the site for supervision difficult. installation, testing, and commissioning. 43. Fuel availability assessment indicated the use of HFO and crude oil over the medium term. A fueling appraisal study was conducted to assess the availability of HFO, crude oil, and natural gas over the life of the project. Scenarios that examined the continued availability of HFO, priorities of the GoI for use of available natural gas for various uses, and the possibility of using crude oil were prepared. The GoI indicated that it was unlikely that natural gas would be made available for Hartha units 2 and 3 as CCGT plants would be accorded a higher priority to the scarce resource. The study also recommended considering conversion of these units to CCGTs in the future by adding gas turbines and using the waste heat to run the boilers. Despite these studies, no concrete steps are in evidence for conversion of these units into CCGTs in the future or for arranging natural gas to ensure power generation at the lowest cost and minimal environmental impact. This remained an important risk for economically efficient future operation of the plant. 2.2 Implementation (a) Implementation of Hartha Power Station Rehabilitation 44. The contract for rehabilitation of units 2 and 3 of Hartha power station was signed with Technopromexport (TPE) of Russia in April 2009—over two years after the bidding process was started. However, the contract became effective only in October 2010. The period of the contract ran to June 20, 2014. In July 2010, the closing date of the Bank project was extended from June 30, 2011 to June 30, 2014, to match the period of the contract. Subsequently, with further delays in implementation of the TPE contract, the closing date of the Bank project was extended to September 2014 and then, to June 30, 2015. 45. A security contract amounting to US$19 million was added to the project in November 2009. The main contract for supply and installation of plant and equipment for rehabilitation of 11  units 2 and 3 was supplemented with two new contracts with the same firm for supply of additional equipment and materials, together amounting to US$37 million. The first of these new contracts— for supply of spare parts for boilers (US$2 million)—was signed in August 2011, while the second—for additional equipment and services (US$35 million)—was signed in September 2014. Thus, the overall cost of the project increased by US$56 million. However, the additional funding requirements were shouldered entirely by the GoI and the Bank funding remained unaffected. 46. The activities related to rehabilitation of Hartha power station units 2 and 3 encompassed the supply of goods and equipment as well as installation services. At the close of the Bank project, the supply of goods and equipment has been completed to the extent of an estimated 76 percent. However, installation services are lagging far behind. Only an estimated 30 percent of the installation works have been completed. On an aggregated basis, about 70 percent of the activities (including equipment supply and installation services) have been completed.2 With the closing of the Bank project, the contractor has withdrawn its personnel form the site and the rehabilitation works have practically stopped. The issues that affected the timely implementation of the Hartha rehabilitation work are described in the following paragraphs. Difficulties emanating from the design of the project 47. Rehabilitation of units 2 and 3 of Hartha power station first began in 1999 when the MoE placed orders under the OFFP for supply of missing and damaged equipment worth nearly US$120 million. However, the rehabilitation work had to be stopped because of the second Gulf War. The Bank-funded project was designed to resume and complete the rehabilitation works originally started under the OFFP by using available components and equipment. This may have restricted bid participation to only those bidders who were familiar with the underlying design and technology of the components already supplied under the OFFP. Once the bid selection was completed, the mandate to use these components also added complexities to the contract design, which was vulnerable to disputes and loss of accountability. Challenges emanating from a fragile and conflict country context 48. The fragile and conflict country context in Iraq constrained effective participation from bidders, contractors, subcontractors, and consultants and also imposed higher security costs. This is evidenced by the following instances among others: (a) Limited participation by bidders due to the prevailing security environment in Iraq. Although six firms expressed interest in the main contract for rehabilitation of Hartha units 2 and 3 at the expression of interest stage under a prequalification process, only one of them could prequalify. Subsequently, proposals were invited under an open ICB process but again, only one proposal was found to be responsive, even though six firms purchased the bid documents and two submitted proposals. (b) Difficulty in finding suitable consultants. Implementation of works under the Hartha rehabilitation contract could be started only after undertaking public                                                              2 Estimates of work completion are based on Monthly Progress Report for July 2015 by the owner’s engineer (ELC Electroconsult S.p.A [ELC]). Summary of works completed, under way at close of the Bank project, and those still to be done is provided in annex 2. 12  consultation and disclosure of the Environment and Social Impact Analysis (ESIA). However, the ESIA consultants faced difficulty in finding cost-effective local consultants for carrying out air quality and noise measurements and hence, the completion of the ESIA was delayed. (c) Additional expense for security. The sole qualified bidder demanded extra compensation for security expenses. After protracted negotiations, the GoI agreed to bear the additional amount outside of the main contract. This additional expense reached an estimated US$19 million up to October 2015. Difficulties in finalizing and managing the main contract for Hartha rehabilitation (a) Protracted negotiations with the sole qualified bidder. The contract with TPE for rehabilitation of units 2 and 3 of the Hartha power plant was ready for signing as early as December 2007 but was signed only in April 2009 and became effective in October 2010. The sole remaining bidder (TPE) held protracted negotiations with the MoE, seeking increase in contract value to compensate for exchange rate variations and a provisional sum to cover unforeseen items and future price adjustments. Because of continued negotiations, the draft contract agreement had to be revised across multiple iterations. The Bank procurement team (including the regional procurement manager and Operational Procurement Review Committee) monitored the situation closely, providing guidance and ‘no-objection’ certifications on multiple iterations of the draft contract. During the period between 2008 and 2009, the Bank team and management considered cancelling the IDA credit at least twice due to lack of progress. The contract was eventually signed in April 2009 when the MoE was considering the option of cancelling the negotiations and initiating a fresh ICB process and had obtained the Bank’s ‘no-objection’ for the same. (b) Delay in contract effectiveness. The contract with TPE was signed in April 2009 but became effective only in October 2010. There were differences over performance guarantees. Security arrangements could be resolved only by end 2009 through the signing of two addendums to the contract. Advance payments to the contractors were not completed till March 2010. The contractor was not agreeable to making the contract effective till the Bank’s Special Commitment was extended for the duration of the whole contract. The contract finally became effective in October 2010 when all these issues were resolved. (c) Wasted efforts in assembling turbine spare parts. The MoE signed a separate contract with Franco Tosi Mecchanica S.p.A. of Italy for supply of turbine parts, which were to be provided to the main contractor (TPE) for the rehabilitation of units 2 and 3. These parts were to be replicated through reverse engineering. Some parts remained stuck for several months at the customs at Basrah due to loss of shipment documentation. TPE started reassembling the turbines using the original parts instead of these unavailable new parts. However, the parts manufactured by Franco Tosi were not fully compatible with the original ones made by Mitsubishi. When the incompatibility was discovered, this caused dispute over compensation for TPE’s wasted efforts. 13  Factors generally under the control of the GoI (a) Bureaucratic delays. The project faced some delays in decision-making processes and official actions at the GoI, such as the following: (i) Delay in recruitment of consultants for pre-award services. The process of consultant selection was started in October 2006, but the final award of consultancy contract could be made only in August 2007,3 even though the bids for the main contract had been received in April 2007. With this delay in selection of consultants, validity of bids for the main contract required an extension. However, of the two bidders, one declined to extend the bid validity, and only one bidder remained in the race. (ii) Difficulties in obtaining visas for TPE staff constrained such staff from moving to the site. This delayed mobilization by TPE. Appropriate visas (six-month multiple entry) were not being provided to the contractor or the consultant on time or for an adequate period. TPE and ELC were requested to send a consolidated list of visa requirements to the MoE for urgent follow-up. This problem persisted at least till May 2012. (iii) Letter of Credit (LC) amendment. During 2011–2012, the contractor requested an amendment to the LC under which goods and equipment would be supplied to the project. Although an amendment was processed by the MoE, in conjunction with the Trade Bank of Iraq, this was not processed correctly. A correct amendment to the LC was required to add Egypt and Syria to the list of countries from which goods and equipment could be supplied. (b) Weak project and contract management capacity within the MoE. Poor project management capacity within the MoE, especially during the early part of implementation, resulted in direct obstruction and interference with subcontractors, causing delays in works and execution of subcontract packages. The MoE also did not fully appreciate the role of the owner’s engineer (ELC) and initially did not rely on its advise. Intensive supervision and intervention by the Bank team was undertaken to address this situation. Individual consultants were appointed under the capacity- building component of the project to strengthen the PMT on project and contract management aspects. (b) Implementation of Capacity Building and Implementation Support Components 49. The ITF component of the project closed on June 30, 2013. This component was designed to provide the PMT and the MoE with support services for the preparation and supervision of the rehabilitation contract and other capacity-building activities. The following assistance was provided under this component:  Pre-award support consultancy. The contract for pre-award support consultancy (for support in bid evaluation of the main contract) was awarded in August 2007 to                                                              3 Parsons Brickerhoff International Inc. of United Arab Emirates was selected as the consultant. 14  Parsons Brinkerhoff. This consultancy work was completed successfully with the selection of TPE as the main contractor for the rehabilitation of Hartha power station.  Supervision of Hartha rehabilitation contract. The consultancy for construction supervision (owner’s engineer) was awarded to ELC of Italy. The IDA-funded project was initially funded from the ITF grant, but later it was extended beyond the closing date of the ITF Grant. Therefore, the contract with ELC was funded with the IDA Credit after the closing of the ITF Grant. The consultants provided regular supervision reports to the MoE—the last such report (Monthly Progress Report No. 33) being submitted in June 2015 at the close of the Bank project. Although the rehabilitation of Hartha units 2 and 3 has not yet been completed, the consultancy contract for construction supervision has now been closed.  Environmental and Social Management Plan. The consultancy contract for implementation of the ESMP was awarded to Dome International. Trainings on various aspects of the ESMP were delivered and the plan was implemented in the course of the rehabilitation of Hartha power station. The Hartha Environmental Management Plan (EMP) has been shared with other projects and interest in more widespread development of sound environmental and social practices was reported.  Individual technical specialists. Five individual technical specialists were contracted under the ITF component to provide support and capacity development to the MoE in the areas of generation, transmission, and distribution sector project development. These specialists provided support in the development of technical specifications and bid documentation for consulting firms, contractors, and other service providers required for implementing the ministry’s Master Plan. The MoE reported that these specialists provided invaluable assistance in improving the quality of bid and contract documentation being used by the MoE and in the management of ongoing contracts. These contracts were closed on June 30, 2013.  Independent audits. These audits were regularly carried out for the project. The contract for independent auditors was initially funded from the ITF Grant. With the extension of the project closing date, the audit contract was also extended for three years from 2012 to 2014 and was funded from the IDA component of the project from June 30, 2013 onwards. (c) Project at Risk Status and Actions Taken 50. The project has faced significant challenges throughout and actions were taken to remedy situations as they arose. Owing to delays and implementation challenges, the project was restructured on six occasions. The closing date for the IDA Credit was extended on three occasions and the closing date for the ITF Grant was extended once. The project timeline can be divided into three periods based on the nature of risks encountered and the approach taken by the Bank to resolve them: 51. Period-1 – Before signing of the main rehabilitation contract: The sole bidder for the main rehabilitation contract held protracted negotiations with the MoE, seeking increase in 15  contract value to compensate for exchange rate variations and a provisional sum to cover unforeseen items and future price adjustments. In the face of persistent delays in concluding contract negotiations, the client seriously considered the possibility of cancelling the contract negotiations process. However, each of the outstanding issues was meticulously resolved. Because of continued negotiations, the draft contract agreement had to be revised across multiple iterations. The Bank procurement team (including the regional procurement manager and Operational Procurement Review Committee) monitored the situation closely, providing guidance and ‘no- objections’ on each occasions. The contract was eventually signed in April 2009 and became effective in October 2010. The Bank team again worked closely with the client to resolve each of the outstanding issues affecting contact effectiveness. 52. Period-2 – Between 2011 and 2014: After the main contract became effective in 2010, implementation difficulties persisted, even as some momentum was gained. The project closing date was extended from June 2011 to June 2014. However, when granting this extension, the outstanding contractual issues were not resolved. This was an important lost opportunity. As a result many of the implementation difficulties persisted and momentum was lost again. 53. Options considered at the time of project restructuring in June 2012. The project remained in ‘problem project’ status for the most part and options for alleviating this status were explored each time the project was put up for restructuring. Some of the key options that were considered in June 2012 were the following: (a) Suspension or cancelation of the IDA Credit. The Bank had entered into a Special Commitment for US$86 million to underwrite supply of goods and equipment to the project. Any suspension or cancellation would not apply to funds that are subject to the Special Commitment, and only the balance funds could have been cancelled. The Bank could be released from this Special Commitment (to be able to realistically consider cancellation or suspension) only at the closing date of the project or upon termination of the MoE’s contract with TPE. However, there were no clear grounds for termination of the TPE contract because part of the blame for delays was attributable to the contractor as well as to the MoE. (b) Curtailment of project scope (level-1 restructuring). With a single main contract (for Hartha rehabilitation), the project could not have undergone a level-1 restructuring (change in PDOs or the scope of the project). The Bank team considered revision of the PDOs to reflect possible completion of works on unit 2 (200 MW of capacity commissioned) and the supply of equipment as well as partial completion of works for unit 3. However, regardless of the change on the PDO, this restructuring would not have alleviated the situation in any way, nor resulted in part cancellation of available funds. (c) Intensified supervision. Given the difficulties in suspension or cancellation of the project, the Bank team adopted a combination of intensified supervision and intervention with senior Iraqi officials as the approach for regaining momentum in project implementation. This included efforts to address specific roadblocks as well as extend the closing date to allow more implementation time. 16  54. The Bank project team and Bank management concluded that option-c was the only feasible way-ahead. During the project restructuring in June 2012, IDA Credit funds were reallocated to consulting services to cover the higher-than-expected costs of environment management consultancy. For the trust fund component, additional funds were allocated to consulting services that covered support for planning and implementation of power system expansion, feasibility study for conversion of Single Cycle Gas Turbine plants into CCGT plants, and the contract for the supervision consultant for the Hartha rehabilitation contract. The Monitoring and Evaluation (M&E) Framework was modified to better align with the revised tenure of the project and also to correspond to the changes in consulting services mentioned above. 55. Period-3 – Beyond 2014: Since the contractual disputes between GoI and the contractor were the bane of proper implementation of works, Bank encouraged them to find approaches for resolving the contractual disputes. Based on tangible progress in resolving contractual difficulties, with GoI and the main contractor signing a supplementary contract for additional works in 2014, the Bank again provided an extension of the project closing date. However, GoI was unable to provide the required funds and the implementation work remained slow. Thus, another opportunity to achieve implementation completion of the rehabilitation works was lost due to difficult financial position of the Government, and its unwillingness to consider the additional works as a variation order within the allowed 15% variation under the Bank funded contract. 56. Funds allocations across categories were again revised in February 2014 and May 2015, primarily to cover the costs of supervision consultants for the Hartha rehabilitation. The Monitoring and Results Framework was again revised in June 2014 to better reflect the capacity- building activities under the project. 2.3 Monitoring and Evaluation Design, Implementation, and Utilization Rating: Substantial 57. M&E design. The design of the Results Framework was initially kept simple and was not fully reflective of the detailed aspects of the project. However, the M&E design was revised in May 2012, June 2014, and September 2014 to reflect more detailed indicators on implementation of rehabilitation as well as various capacity-building activities. 58. M&E implementation. Implementation of the M&E was initially slow as there were delays in selection of the main rehabilitation contractor and finalization and effectiveness of contract. Subsequently, M&E was implemented based on data provided by the MoE to reflect the progress achieved in various components. 59. M&E utilization. The Results Framework was used particularly well during the last few years to assess the progress in project implementation using data provided by the owner’s engineer and served as a very useful tool in assessing the status of implementation progress as well as approaches for expediting further implementation. 2.4 Safeguard and Fiduciary Compliance Safeguard Compliance 17  60. The project involves fossil fuel combustion in a power plant, and therefore, it required a comprehensive assessment of environmental impacts—particularly with regard to emissions and air quality in the surrounding areas. With the introduction of more efficient technologies, the rehabilitated units were expected to produce less emissions than the original design, while displacing distributed generation from diesel which has a higher negative environmental impact. Although the plant was designed to use natural gas as the primary fuel, use of HFO and crude oil was likely in the face of constrained natural gas availability and the priority for its use to run gas turbines. The project was categorized as safeguards category ‘A’. 61. Rapid assessment of atmospheric dispersion of stack emissions. As a first step, a Rapid Risk Assessment of potential exposure from stack emissions was conducted. Emissions were simulated for a complete meteorological year considering various scenarios (before/after rehabilitation; type of fuel used such as crude oil, HFO, and natural gas; and emission control measures) to assess potential near-field exposure to sulphur dioxide and particulate matter at short/near-field distances or within plant vicinity (up to 1.5 km) and at far field or long distances reaching the Kuwaiti and Iranian borders. A Fueling Appraisal Note was prepared to bring out the availability of different fuels going forward. 62. The Rapid Risk Assessment provided a basis for further simulation and sensitivity analysis for particulate matter and sulphur dioxide as well as other indicators of concern, whereby, site- specific data, stack emission characterization, background air quality monitoring, and meteorological conditions were obtained to better define potential exposure and ascertain simulated results. 63. Delay in preparation of the ESIA. The ESIA was originally funded from the Professional Human Resource Development grant and was due by April 2007. Indeed, implementation of works for the rehabilitation project could only be commenced after the ESIA had been disclosed and public consultations held. However, the ESIA consultants faced difficulty in finding cost-effective local consultants for carrying out air quality and noise measurements. The final draft of the ESIA could only be completed by December 2009. 64. Implementation of the ESMP. The environmental and social management plan for rehabilitation as well as subsequent operation of Hartha power station was prepared as a part of the ESIA. The consultancy contract for implementation and supervision of the ESMP was awarded in July 2012 to a consultant who conducted the environmental audit, based on which the rehabilitation contractor committed to address the following issues of noncompliance in December 2013: (a) preparation of a Waste Management Plan; (b) dust suppression on a daily basis; (c) use of personal protective equipment; (d) enforcing no-smoking policy; and (e) preparing a Traffic Route Plan. Quarterly reports from the consultant were used to monitor compliance on the ESMP by the contractor and to address issues such as those mentioned above. Trainings on various aspects of the ESMP were delivered and the plan was applied in the course of the rehabilitation of Hartha power station. However, the implementation of the EMP will be completed only with the completion of the rehabilitation works. The Hartha EMP has been shared with other projects at MoE and interest in more widespread development of sound environmental and social practices was reported. 18  65. Social safeguards. The project did not involve any direct adverse social impacts and there was no requirement for land acquisition. Financial Management 66. The project comprised an IDA Credit for US$124 million and an ITF Grant for US$6 million. Financial management and disbursement arrangements for the project were adequate, including a qualified financial officer, smooth funds flow without major interruptions, and sound internal controls. The Interim Unaudited Financial Reports were regularly submitted to the Bank. The audited reports with audited financial statements were submitted to the Bank on time. Disbursement categories were reallocated on three occasions during the project to better reflect the funding needs across categories. The project experienced low disbursement rates throughout due to slow physical progress of equipment supply and implementation works on the ground. Procurement 67. Lack of an independent market study. The main contract for rehabilitation of units 2 and 3 of Hartha power station was mainly to complete the work started under the oil for food program where $120 million were supplied to the site in 1999. The approach to go for open pre-qualification that resulted in one qualified applicant then ICB process resulted again in only one qualified contractor. The procurement decision to go for open competition and turnkey contract was not based on an independent market study. Given the complexity of the contract and country’s situation, the project could have prevented the protracted and lengthy procurement and negotiation process by carrying out a market study and soliciting information from potential suppliers. The market study could have helped in determining the interest and availability of suppliers/contractor, their technical capability and financial capacity, and recommend a procurement/contracting strategy. 68. Advance actions in anticipation of difficulties. Given the difficult security situation in Iraq, challenges in the procurement process were already anticipated during the project preparation stage. The GoI engaged consultants early on for preparing bid documents for the main Hartha rehabilitation contract, and the draft bid documents were substantially completed by December 2005. Given the lack of familiarity of the MoE staff with Bank procurement procedures, a firm of consultants was hired to assist with pre-contract award services. Despite these efforts, the project faced significant procurement and contract management difficulties. 69. Difficulties in bidding, effectiveness, and management of the main contract. Despite efforts at early initiation of procurement, significant difficulties were encountered in the bid process, negotiation with single bidder, and contract effectiveness. The procurement process was initiated in August 2006 with the request for prequalification of bidders, but the main contract became effective only in October 2010. The key challenges faced during the bidding, contract finalization, contract effectiveness, and contract management are discussed in section 2.2. 70. Persistent efforts by the client and the Bank. The project demonstrates persistent efforts at addressing what seems to be an uninterrupted volley of procurement challenges, encompassing difficult bidding process, contract negotiations, delays in effectiveness, and a trying contract management. 19  2.5 Post-completion Operation/Next Phase 71. Completion of remaining works of unit 2 and 3 rehabilitation at Hartha. With only about 30 percent of installation works completed and about 76 percent of equipment received, the rehabilitation works for units 2 and 3 of Hartha power station are yet far from commissioning despite eight years of implementation. If all outstanding contractual issues are resolved, adequate funding is made available, and if concerted efforts are put by the contractor, subcontractors, owner’s engineer, and the MoE, the rehabilitation works for at least one unit can be completed within about a year. However, contractual issues have proven difficult to resolve despite persistent efforts by the World Bank team over the last several years. Therefore, these pre-conditions to success are difficult to achieve in the prevailing situation and the rehabilitation works may take much longer, or may not be completed at all. Under these circumstances, the World Bank has decided to cut-down losses and close the project. With the closing of the Bank project, the contractor has withdrawn from the site, and meanwhile, the owner’s engineer has completed its contract. 72. Options for completing the remaining works: With a sunk cost of over US$200 million already expended (across funding from the Bank, GoI, and OFFP), a further funding requirement of nearly US$100 million, and continued difficulties with the main contractor, the approach for completion of works needs to be revisited. Meanwhile, the GoI is contemplating a greater role for independent power producers in augmenting generation capacity in Iraq. Therefore, options going forward include: (a) termination of contract and completion of the balance works by a new contractor under a new funding arrangement; and (b) a 20-year concession to a private sector firm (through a competitive bidding process) to complete the balance rehabilitation works and maintain and operate all four units, including an option/obligation to add new capacity (possibly through CCGT technology). However, each of these options would require significant additional preparatory work to structure the new arrangements. Also, baggage of past contractual disputes, half-completed technical works (with associated difficulties in pinning responsibility), and the difficult security situation in Iraq, would make it extremely difficult to find suitable contractors or concessionaires to take up this project. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Overall rating: Modest 73. The relevance of objectives is rated High. The project is expected to augment power generation by 400 MW through rehabilitation of units 2 and 3 of Hartha power station. The objectives of the project remain relevant as the country continues to reel under power supply deficit of more than 5,000 MW even in 2015. 74. The project is consistent with Country Partnership Strategy. The Performance and Learning Review (PLR) of the Country Partnership Strategy for Iraq from May 2015 mentions that increasing electricity production remains a priority for the government, which has invested significantly in new generation capacity. The Performance and Learning Review also mentions the rehabilitation of Hartha power station as contributing toward the milestone of 920 MW of 20  increased generation capacity in power plants supported by the World Bank Group (including from rehabilitation of power plants at Dokan and Derbandikhan). 75. The project is consistent with the INES. The Iraq National Energy Strategy 2013–2030 (INES) lays down a target of augmenting generation capacity by as much as 22 GW by 2016. It highlights the severe deficiency in power supply from the grid as follows: “The absence of reliable power supply from the grid has led to the widespread installation of private diesel generators, whose constant operation imposes high generation costs, creates noise, pollutes the air, and emits large quantities of carbon into the atmosphere. It is estimated that the total cost to the Iraqi economy attributable to power shortages exceeds US$40 billion annually.” 76. The project is consistent with the bank’s twin goals. The project objectives also remain consistent with the Bank’s twin goals of poverty elimination and shared prosperity. Therefore, the relevance of the project objectives is rated High. 77. The relevance of design is rated Poor. The project was designed to rehabilitate 400 MW capacity in an existing power plant by using available infrastructure as well as equipment already procured and delivered under the OFFP. Under this project design, the main contractor was constrained to build on existing technical design and use the available equipment brought more than a decade earlier (as well as turbine components procured separately from a different firm), leading to inherent difficulties in contract design and management, as well as project implementation. This also entails a higher risk in smooth O&M of the facility once the works are completed as performance guarantees may not fully cover the infrastructure and equipment available before the contract or delivered by other firms. 78. The project was restructured on six occasions to reflect changes in timelines, allocations across categories (mainly to support the technical assistance activities), and the results indicators, even as the basic design approach remained unchanged. At the close of the Bank project, the question remains whether the current design approach will be effective in taking the rehabilitation works to completion. In view of the continued concerns with the project design and contractual arrangements, the relevance is rated as Modest. 79. The relevance of implementation is rated Modest. At the close of the Bank project, the continued relevance of implementation depends on early resolution of contractual difficulties, as well as the relative merit of rehabilitation in relation to investments in green-field capacity by the public or private sector. At this stage, the resolution of contractual difficulties seems difficult. Although the urgent need for increasing power availability is still there, green-field capacity expansion projects entail lower implementation risk than the rehabilitation of Hartha power plant. Therefore, the continued relevance of implementation us rated Modest. 3.2 Achievement of Project Development Objectives Overall rating: Negligible PDO-1: Alleviate the current power supply shortfall by restoring the base load generation capacity of the Hartha power station units 2 and 3 to 400 MW Rating: Negligible 21  80. This project objective has not been achieved as the rehabilitation works at Hartha have not yet been completed. Supply of goods has been completed to the extent of an estimated 76 percent as of June 30, 2015 (at the close of Bank project). However, installation services are lagging behind. An estimated 30 percent of the installation works have been completed. On an aggregated basis, about 70 percent of the activities (including equipment supply and installation services) have been completed. The remaining works may yet require funding of an estimated US$98.97 million. Activities on unit 2 are in an advanced state and when upon resumption of works, the unit may be commissioned in about 6-8 months with concerted efforts. PDO-2: Lay the groundwork for improved power system planning and fuel supply by providing the tools and other support necessary to enhance in-house capability to prepare, implement, and operate current and future projects. Rating: Modest 81. The capacity-building activities under the project have been largely completed. The enhanced capacity in project and contract management as well as safeguards management at the PMT were observed by the Bank team during the latter part of the project. However, some of the technical assistance activities originally envisaged were not taken up. This includes a study to assess the feasibility of applying CCGT technology to Hartha power station and another activity that aimed at strengthening the planning process at the MoE. 3.3 Efficiency Overall Rating: Negligible 82. The cost of rehabilitation of Hartha units 2 and 3 escalated from an original estimate of US$132 million to the latest estimate of US$171.02 million at project closing. Implementation has been delayed by nearly eight years. A revised economic analysis based on latest cost estimates and revised schedule of implementation of works is presented in annex 3. The summary results are as follows: Table 4. Cost of Power Generation from the Project Average Generation Cost (US Cents / kWh) Case-1 Hartha Units 2 and 3 (400MW) Ex-Ante Assessment at appraisal. 4.91 Case-2 Hartha Units 2 and 3 (400MW) Ex-Post Assessment at closing. 16.03 Case-3 Hartha Units 2 and 3 (400MW) Ex-Post Assessment (10% Lower 16.63 Capacity, 10% Higher Maintenance and 10% Poorer Heat Rate) Case-4 Frame 9F CCGT with HFO 5.07 Case-5 Frame 9F CCGT with NG 4.76 Note: HFO – Heavy Fuel Oil; NG – Natural Gas. 83. The original economic assessment at the time of project preparation estimated the cost of generation from rehabilitation of Hartha units 2 and 3 at 4.91 US cents per kWh, which was lower than that from an equivalent green-field CCGT plant at 5.07 US cents per kWh. 22  84. At the close of the Bank project, due to significant implementation delays, the benefits from the project have not been available to the country for close to a decade. As a result, the country has had to rely more and more on local diesel based generation, which is much more expensive. Taking into account, the cost of this back-up power, the economic cost of generation from the project is now found to be US cents 16.03 per kWh. While the rehabilitation works are still incomplete, this calculation assumes the contractual difficulties would be sorted out and works completed by 2018. It is likely that even when completed, the rehabilitated units may not achieve the targeted technical parameters (such as capacity and heat rate) may not be achieved. This is reflected in Case-3. Also, the alternative of CCGT could have benefitted from the availability of natural gas, whereas the single cycle units at Hartha are unlikely to receive natural gas supplies from the government, which is prioritizing the natural gas supply for CCGTs. 85. In summary, the rehabilitation project has lost its competitive edge over a green-field CCGT power plant due to delays and cost escalation, and the economic efficiency of the project is negligible. 3.4 Justification of Overall Outcome Rating Rating: Unsatisfactory 86. Justification. The project remains highly relevant to the Iraq context. However, project implementation could not be completed even in a span of eight years. Thus, the developmental objectives have not been met and overall outcome rating is Unsatisfactory due to shortcomings in the achievement of project objectives, efficiency, and relevance in a challenging fragile and conflict-affected context, which diminished the opportunity to achieve the desired results within the project implementation period of eight years. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 87. The project is expected to augment power generation by 400 MW through rehabilitation of units 2 and 3 of Hartha power station. Although access to electricity in Iraq is almost universal (98 percent), households receive an average of 14.6 hours of electricity per day in 2015, of which, only 7.6 hours per day is from the public network. Only 3 percent of households in Baghdad and around a tenth of households in the center and the south of Iraq receive power for more than 12 hours per day from the grid. The absence of reliable power supply from the grid has led to the widespread installation of private diesel generators. Reduced consumption of diesel for distributed power generation will benefit households as well as the broader economy and the fiscal balance of the country, which is reeling under a heavy diesel subsidy burden. 88. Power cuts sparked massive public protests during the summer of 2015 (and in earlier years). Increased availability of electricity will provide an impetus not only to economic as well as social development, but will also contribute to improvement in political and security environment by alleviating an important grievance of the citizens. 23  (b) Institutional Change/Strengthening 89. The project contributed to development of institutional capacities in the areas of electricity master plan, safeguards practices, O&M practices at power plants, and preparation of new projects. 90. Five individual technical specialists were contracted under the ITF component to provide support and capacity development to the MoE in the areas of generation, transmission, and distribution sector project development. These specialists provided support in the development of technical specifications and bid documentation for consulting firms, contractors, and other service providers required for implementing of the ministry’s master plan. The MoE reported that these specialists provided invaluable assistance in improving the quality of bid and contract documentation being used by the MoE and in the management of ongoing contracts. These contracts were closed on June 30, 2013. 91. Because of these trainings and technical assistance support, project planning software and improved technical and contractual documentation is now being used by the MoE. The EMP for the Hartha plant is being implemented on an ongoing basis. The Hartha EMP has been shared with other projects and interest in more widespread development of sound environmental and social practice has been reported. A workshop on project and contract management was conducted in view of persistent problems with the Hartha rehabilitation contract. Standard technical specifications and procurement and contract documentation have been developed under the project and will be used for large generation and transmission projects. The capacities at the PMT have also significantly improved over the course of the project—particularly over the last three years of the project. (c) Other Unintended Outcomes and Impacts (positive or negative) 92. No unintended outcomes of the project could be identified. 4. Assessment of Risk to Development Outcome Overall Rating: High 93. Implementation completion risk remains High. Due to noncompletion of rehabilitation works of Hartha power station units 2 and 3 under Component 1 of the project, the major outcomes expected from the project have not been realized. Thus, the foremost risk to development outcome is the completion risk and subsequently the risk of inadequate O&M of the power station. The rehabilitation works can be completed within one year if concerted effort is put by the contractor, subcontractors, and the MoE. However, an estimated US$100 million is still needed to complete the remaining works, and the government has not been able to allocate budgetary resources due to a severe fiscal constraint. In the absence of clear availability of funds, the main contractor has withdrawn bulk of its staff from the project site. Thus, completion risk exhibits a high probability as well as a high impact on the developmental outcomes. 94. Operation and Maintenance Risk is Moderate. With regard to the O&M of the facility for regular generation of electricity over the 20-year long expected life of the assets, the MoE staff have exhibited the technical capacity for plant operation in the past, and indeed the same staff are operating units 1 and 4 of the Hartha power station. Also, economically efficient and environmentally sustainable use of the generation assets is premised on the availability of natural 24  gas. Gas availability is expected to improve over the medium term with the government’s efforts at gas-flaring reduction and gas-to-power conversion (supported by the Bank under the Development Policy Financing project). Till that happens, the additional power generation capacity at Hartha power station will be run using expensive HFO only. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Unsatisfactory 95. Bank performance in ensuring quality at entry is rated as Unsatisfactory. The selection of rehabilitation of units 2 and 3 of Hartha power station for augmenting power availability was premised on a Rapid Results Approach that anticipated urgent implementation using equipment and components that had already been procured under the OFFP and delivered. However, the selection of Hartha rehabilitation in relation to other options for augmenting generation capacity underestimated the risks and complexities inherent in rehabilitation projects. Detailed technical studies (such as residual life assessment or rehabilitation design study) were conducted at the time of project preparation and appraisal. The PAD did not account for surprises, technical complexities and challenges of engineering design of a rehab project specially in a conflict country context. While the economic analysis at appraisal indicates that costs of power from rehabilitation will be marginally lower than a green-field CCGT plant, it does not reflect the much higher completion risk inherent in rehabilitation projects. The requirement of using components already procured under the OFFP is likely to have deterred bidders who were not familiar with this technical design or were unsure of their condition and quality. The mandate to use these components also led to a complex contract design, which was vulnerable to disputes and loss of accountability. Thus, the project design was inherently flawed and quality at entry was inadequate. (b) Quality of Supervision Rating: Moderately Unsatisfactory 96. Despite a difficult security environment, the Bank team managed close supervision throughout the course of the project and assisted the client in resolving some difficult issues. These issues encompassed limited bidder interest in procurement, prolonged negotiations with a single bidder, contractual difficulties during implementation, and so on. At least at three points during the project life, the decision to cancel the project seemed imminent, yet the Bank team supported the client in resolving the issues and the project continued. The project was restructured on six occasions and closing date was extended thrice in anticipation of implementation progress. However, the basic project design flaws and contractual difficulties continued to plague implementation, and the Bank team was unable to rectify them during supervision. 97. The main rehabilitation contract could not be made effective for a long time. With the resolution of the contract effectiveness issues in July 2010, the Bank agreed to extend the project closing date from June 2011 to June 2014. Significant momentum was build in project implementation at that stage. However, by June 2012, it was becoming increasingly clear that the project would not be completed successfully, and the Bank team wanted to close the project. 25  However, the special commitment provided by the Bank to contractor prevented the Bank from closing the project, and the only feasible course of action was to assist the client in resolving the outstanding issues. Subsequently, based on tangible progress in resolving contractual difficulties with GoI and the main contractor signing a supplementary contract for additional works in 2014, the Bank again provided an extension of the project closing date. However, GoI was unable to provide the required funds and the implementation work remained slow and could not be completed by the project closing date. (c) Justification of Rating for Overall Bank Performance Rating: Unsatisfactory 98. Preparation and supervision of this project were challenging owing to the fragile country situation which, on the one hand, reduced avenues for close engagement with the clients (due to travel restrictions, missions were often organized in neighboring countries), while on the other, imposed greater demands on the need for preparation and supervision (weak governance coupled with limited interest from contractors and consultants). 5.2 Borrower Performance (a) Government Performance (MoE) Rating: Moderately Unsatisfactory 99. The project faced some delays in decision-making processes and official actions by GoI. Delays were experienced in securing ratification of the IDA credit agreement by the Parliament and budgetary allocation for the co-financing commitment by GoI. The contractors and consultants reported significant difficulties in obtaining visas on account of the time taken as well as the duration of the visas. These delays were symptomatic of competing demands on resources and attention from more compelling security and political concerns. On the positive side, the GoI stepped forward to resolve the impasse over high security costs by offering to shoulder the cost of security arrangements for the main rehabilitation contractor. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory 100. The project had to be implemented in an unstable political and security environment, which imposed difficulties for the contractors, consultants, and the MoE. Poor project management capacity within the MoE, especially during the early part of implementation, resulted in direct obstruction and interference with subcontractors, causing delays in works and execution of subcontract packages. The MoE also did not fully appreciate the role of the owner’s engineer (ELC) and initially did not rely on its advise. Intensive supervision and intervention by the Bank team was undertaken to address this situation. Individual consultants were appointed under the capacity-building component of the project to strengthen the PMT on project and contract management aspects. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory 101. In view of the shortfalls in performance by GoI as well as MoE as explained above, the overall borrower performance is rated as Moderately Satisfactory. 26  6. Lessons Learned 102. Although the rehabilitation of Hartha power station could not be completed by the closing of the Bank project, the challenges addressed in the course of implementation provide important learning for future projects in fragile and conflict countries. (a) Keep project design simple. Large infrastructure projects in fragile state environments may often require going for ‘simpler’ new-build (green-fields) projects than rehabilitation or partial reconstruction works. The EERP faced the complexity of taking over partially completed works and partially completed supply of equipment, providing a lump sum price to complete a package of works that had not progressed for over five years. (b) Through Upfront Technical Studies are Important. Lack of detailed technical assessments for reconstruction and rehabilitation projects in fragile and post-conflict countries can lead to significant implementation difficulties. This is particularly important for emergency operations that tend to side-step thorough technical studies to save time during preparation but may end-up with delays due to inadequate technical preparation. Also, good technical studies can reduce risks for the bidders potentially leading to greater participation as well as lower costs. (c) Recognize capacity constraints. Fragile and conflict countries usually have significant capacity constraints as well as overwhelming demands on the government, including fiscal pressures, conflict concerns, and political stability concerns. These capacity constraints can be addressed by greater Bank engagement in the procurement process and project implementation through handholding, supported by appropriate training of the PMT and hiring consultants. (d) Maintain proactive communications and meet regularly with client as well as contractors and consultants. Regular communications and meetings are essential to ensure that issues affecting progress are quickly identified and resolved. Extend relationships to include owner’s engineers and contractors. Direct informal contact with contractors and owner’s engineers/consultants (with appropriate sensitivity to procurement, contractual, and other fiduciary risk) can facilitate early identification and resolution of issues affecting implementation progress. (e) Turnkey contract versus ‘goods and works’ contract. This project was prepared as a ‘goods and works’ contract where the rehabilitation requirements were assessed ex ante and separate contractors were appointed for different requirements, with TPE as the main contractor. Some parts had already been procured under an earlier funding under the OFFP. Turbine spare parts were ordered from Franco Tosi—to be manufactured through reverse engineering and replication. Under this arrangement, the owner (MoE) and the contractor (TPE) had constant conflicts over responsibilities for delays, scope of work, cost escalations, and various contractual provisions. A turnkey contract may have shifted many of the project risks to the contractor, possibly resulting in higher price discovery but a higher probability of project completion. 27  (f) Early procurement and contract signing can reduce financing difficulties. This project faced significant difficulties in procurement, contract signing, and effectiveness. Many of these difficulties were linked to mismatch between available and required funding, absence of an identified funding source for security costs, mismatch between durations of funding and contract, and delay in budgetary allocations. Many of these difficulties could have been avoided if the procurement process had been completed and the contract awarded (or ready for award and signing) ahead of the Board approval to the project. (g) Special Commitment can prevent early project closing despite visible indications of implementation failure. The use of special commitments from the World Bank to provide comfort to the contractor should incorporate provisions for withdrawal of the World Bank from the project in face of visible indications of implementation failure. At the same time, such provisions should be structured to provide adequate protection to the contractor to cover costs that have already been incurred. (h) Allocate separate funds for security costs. In case of projects in conflict countries, a separate allocation should be made for security costs for contractors as well as consultants. In the case of the main Hartha rehabilitation contract, the GoI funded a separate contract for providing security to TPE, amounting to nearly US$19 million. This amounts to a security premium of nearly 17–18 percent on the base cost. A separate assessment of security needs can be done during the project design phase and funds allocated. (i) Ex ante arrangements for security may relieve bidder anxiety. There was a limited interest in the bid process for the project. At a later stage in the process, bidder anxiety about security arrangements (and costs) were apparent. Ex ante arrangements for security may relieve bidder anxiety and foster greater bidder participation. (j) Allocate significantly higher price and physical contingencies. The price premium for projects in conflict countries may be significantly higher than in nonconflict countries. Therefore, cost estimates must reflect recent local prices for similar projects. This project had kept physical and price contingencies at 20 percent. However, the bid price discovery was already higher than the physical and price contingency margins, leaving no scope for any further price increase (due to delays and inflation) or increase in scope of work (due to unforeseen works). Anticipate higher cost of living for the expats and even capable local staff who may be employed by the contractors (beyond the security premium). Currency fluctuations can also add to the need for price contingencies. (k) Anticipate difficulties in movement of men and materials in and out of the country. In conflict countries, procedures for obtaining visas and for moving materials through customs are usually less streamlined and may involve delays. In the Hartha rehabilitation, the contractors and consultants reported significant difficulties in the time taken to obtain visas as well as in the duration of stay allowed. An ex ante assessment of likely difficulties in this regard and arrangements for securing quick and longer-term visas should be discussed during project preparation. Language 28  barriers and need for translators and interpreters is another important facet of engaging with multiple contractors and consultants from different countries. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 103. The MoE of GoI in its comments on the ICR has pointed to contractual as well as operational difficulties with the main contractor for the project. The delay in start of implementation work by the contractor even after contract effectiveness, lack of a detailed implementation schedule, frequent change of site manager, and a greater focus on equipment supply rather than installation works – all these observations reflect difficulties in contract management. The comments also bring-out inadequate delegation of authority on financial and technical matters to the site manager and consequential delays in decision-making across the contractor’s teams at site and at headquarters. These observations also reiterate the difficulties in contract management, which may have arisen due to inadequate professionalism of the contractor as well as low contract management capacity at MoE – especially in face of a difficult contractor. The MoE comments have confirmed the Bank’s observation that the project remains attractive for contributing 400MW of additional power to Iraq, provided it can be completed within a short time without any further cost escalations. (b) Cofinanciers Not applicable. (c) Other partners and stakeholders Not applicable. 29  Annex 1. Project Costs and Financing (a) Project Cost by Component (in US$, millions equivalent) Appraisal Estimate Actual/Latest (US$, millions) % of Components Estimate Without With Appraisal (US$, millions)  Contingencies Contingencies Component 1:  Rehabilitation of Hartha Power Station 110.00 132.00 171.02* 129.6 Units 2 and 3  Engineering services 6.00 7.00 7.00 100.0  Partial implementation of environmental 4.00 5.00 5.00 100.0 mitigation measures and PMT support Component 2: Support Services 5.00 6.00 4.60 76.7 Total Baseline Cost 125.00 150.00 187.62 – Physical and Price Contingencies 25.00 – – – Total Project Costs 150.00 150.00 187.62 125.1 Project Preparation Fund 0.00 0.00 0.00 – Front-end fee IBRD 0.00 0.00 0.00 – Total Financing Required 150.00 150.00 187.62 125.1 Note: The original contract value was US$133.69 million. Two subsequent amendments added US$2.195 million and US$35.13 million, respectively. This does not include price adjustment, which is yet to be negotiated between the GoI and the contractor. This also excludes nearly US$19 million provided by the GoI toward the security costs for contractors. (b) Financing Appraisal Estimate Actual/Latest Estimate Percentage of Source of Funds (US$, millions) (US$, millions) Appraisal IDA 124.00 63.71 51.4 World Bank ITF 6.00 4.60 76.7 GoI 20.00 20.34 101.7 Total Financing Availed 150.00 88.65 59.1 Total Financing Required 150.00 187.62 123.5 Financing Gap at Project Closing – 98.97 – Note: The project would require an estimated US$98.97 million in financing for completion. This does not include price adjustment, which is yet to be negotiated between the GoI and the contractor. (c) Balance of Works and Financing Needs (as indicated by the client) Actual Remaining Work Time Cost Estimate Sl. No. Task Progress (%) (%) Needed (US$, millions) 1 Mechanical 50 50 25 2 Electrical 25 75 15 3 DCS – 100 18 months 10 4 Common System 25 75 for all items 20 5 Civil 40 60 10 6 Unforeseen – – 20 Total 100 Note: DCS = Distributed Control System. 30  Annex 2. Outputs by Component 1. The EERP was primarily aimed at restoration of capacity of units 2 and 3 at the Hartha power plant to improve the MoE capacity to plan and develop new power projects. A large part of project activities remain incomplete at the close of the project due to a fragile country environment and contractual difficulties. This annex describes the progress achieved under different components of the project. Component 1: Rehabilitation of Hartha Power Station Units 2 and 3 2. Subcomponent 1.1: Rehabilitation of Hartha Power Station Units 2 and 3. The activities related to rehabilitation of Hartha power station units 2 and 3 encompass supply of equipment and installation services. Supply of goods has been completed to the extent of an estimated 92 percent whereas invoices have been raised for 76 percent of the amount as of June 30, 2015 (close of Bank project). Thus, bulk of the supply of goods has been completed. However, installation services are lagging behind. An estimated 30 percent of the installation works have been completed, whereas about 22 percent have been invoiced. On an aggregated basis, about 77 percent of the activities (including equipment supply and installation services) have been completed, whereas about 63 percent have been invoiced. 3. A summary of the progress achieved and remaining works is presented in Table 2.1. Table 2.1. Progress Achieved and Remaining Works Completed Underway To be Done Boiler 2 Structure, boiler Gas/air path, auxiliary steam Hydraulic test, insulation, drum, heating system, water/steam instrumentation, fire-fighting surfaces, piping, connections, fuel circuits, system, soot blowing system, headers, burners, and electric system, make-up sampling system, boiler electrical switchyard. system, drainage and blow lift, commissioning, and covers and down system, and chemical finishing frames treatment system Boiler 3 Structure Boiler drum, heating Piping, headers, auxiliary steam surfaces, gas/air path, and system, water/steam connections, burners hydraulic test, insulation, fuel circuits, electric system, instrumentation, fire-fighting system, make-up system, soot blowing system, drainage and blow down system, chemical treatment system, sampling system, boiler electrical lift, commissioning, and covers and finishing frames Turbine – Civil works, crane – house Turbine 2 Turbine Drainage system Crossover, insulation, electric and rehabilitation, control systems, H2 gas and oil reassembling, inlet generator sealing system, and valves, condenser, testing (ready) condensate pumps, turbine auxiliaries, 31  Completed Underway To be Done feedwater heaters, and feedwater pumps Turbine 3 Inlet valves, Turbine rehabilitation Crossover, insulation, condensate condenser, turbine (incompatibility between pumps, electric and control systems, auxiliaries Mitsubishi and Franco Tosi drainage system, H2 gas and oil parts, work to be done on generator sealing system, feedwater most pumps and valves, heaters, and testing generator stator and rotor, some pipelines connections, some turbine parts, deaerator, lube oil and main oil tank system and some supports and hangers); Reassembling and feedwater pumps Cooling water Circulating water Water gates (leakages from Bonna pipes intake pumps units 1 and 4), and gantry crane Fuel tanks Tank C erection, tank Tank D coating, piping tank Hydraulic test tank C D erection, tank C C, piping tank D coating, hydraulic testing of tank C Evaporation Erection, hydraulic – – basin test Water – Civil works, equipment Piping, electric system, I&C, testing pretreatment erection building Water – Civil works Equipment erection, piping, electric treatment system, I&C, testing plan Reverse – Civil works, equipment Piping, electric system, I&C, testing osmosis erection Main chiller – Civil works Equipment erection (compressors building available at site), piping, electric system, I&C, testing DCS – Hardware installation Software installation, testing Note: I&C = Instrumentation and control; DCS = Distributed Control System. 32  Figure 2.1. Work Progress of the Rehabilitation of Units 2 and 3 of Hartha Power station Source: Monthly Progress Report from ELC (July 2015). 4. Subcomponent 1.2: Support in bid evaluation, construction supervision, and further support to the MoE up to the end of the defects liability period.  Pre-award support consultancy. The contract for pre-award support consultancy (for support in bid evaluation of main contract) was awarded in August 2007 to Parsons Brinkerhoff. This consultancy work was completed successfully with the selection of TPE as the main contractor for the rehabilitation of Hartha power station.  Supervision of Hartha rehabilitation contract. The consultancy for construction supervision (owner’s engineer) was awarded to ELC of Italy. The IDA-funded project was initially funded from the ITF grant, but later it was extended beyond the closing date of the ITF grant. Therefore, the contract with ELC was funded with the IDA Credit after the closing of the ITF Grant. The consultants provided regular supervision reports to the MoE—the last such report (Monthly Progress Report No. 33) being submitted in June 2015 at the close of the Bank project. Although the rehabilitation of Hartha units 2 and 3 has not yet been completed, the consultancy contract for construction supervision has now been closed.  Support up to end of defects liability period. The implementation of Hartha rehabilitation has not progressed sufficiently to allow the opportunity for further support to the MoE up to the end of the defects liability period. 33  5. Subcomponent 1.3: Implementation of the agreed recommendations of the Environmental and Social Management Plan. The consultancy contract for implementation and supervision of the ESMP was awarded to Dome International. The organization conducted an environmental audit based on which TPE committed to address the following issues of noncompliance: (a) preparation of a Waste Management Plan; (b) dust suppression on a daily basis; (c) use of personal protective equipment; (d) enforcing no-smoking policy; and (e) preparing a Traffic Route Plan. Quarterly reports from Dome were used to monitor compliance on the ESMP by TPE and to address issues such as those mentioned already. Trainings on various aspects of the ESMP were delivered and the plan was implemented in course of the rehabilitation of Hartha power station. The Hartha EMP has been shared with other projects and interest in more widespread development of enhanced environmental and social practices was reported by MoE. 6. Subcomponent 1.4: Incremental operational cost of the PMT such as office equipment, travel, and per diem but excluding salaries of Iraqi PMT staff. This component was broadly fully implemented. Component 2: Support Services (US$6 million) 7. The ITF component of the project closed on June 30, 2013. This component was designed to provide the PMT and the MoE with support services for the preparation and supervision of the rehabilitation contract and other capacity-building activities. The following assistance was provided under this component. 8. Subcomponent 2.1: Consultancy support and training to the Iraqi MoE staff in the preparation of least cost reconstruction and expansion plans, feasibility studies, and advisory services for future projects, including projects related to securing fuel supply and reducing gas flaring. 9. Five individual technical specialists were contracted under the ITF component to provide support and capacity development to the MoE in the areas of generation, transmission, and distribution sector project development. These specialists provided support in the development of technical specifications and bid documentation for consulting firms, contractors, and other service providers required for implementing of the ministry’s Master Plan. The MoE reported that these specialists provided invaluable assistance in improving the quality of bid and contract documentation being used by the MoE and in the management of ongoing contracts. These contracts were closed on June 30, 2013. 10. Project planning software and improved technical and contractual documentation were accepted and are now being used by the MoE. 11. The Bank conducted a workshop on project and contract management while on-the-job training on the project and contract management was also provided. This enabled significant improvement in the functioning of the PMT in understanding its contractual responsibilities and executing them, as well as in holding the contractor accountable for its responsibilities. 12. Subcomponent 2.2: Regional and overseas training for staff in the technical areas of operations, maintenance, planning, environment, and general project management, as well as in financial, legal, and general management aspects of power utilities. 34  13. See individual technical specialists under Subcomponent 2.1 in this annex. 14. Subcomponent 2.3: Independent audits for the project. Independent audits were regularly carried out for the project. The contract for independent auditors was initially funded from the ITF grant. With the extension of the project closing date, the audit contract was also extended for three years from 2012 to 2014 and was funded from the IDA component of the project from June 30, 2013 onwards. 15. Subcomponent 2.4: Office equipment for the PMT in Baghdad and at Hartha such as office equipment and operational costs such as travel and per diem but excluding salaries and benefits of Iraqi PMT staff. This component was broadly fully implemented. 16. Subcomponent 2.5: Miscellaneous short-term consulting services that may be required for the Hartha project such as an independent review of project implementation, as well as other advisory services for the power sector that may be required by the MoE. See individual technical specialists under Subcomponent 2.1 in this annex. . 35  Annex 3. Economic Analysis The economic analysis at the project preparation stage demonstrated that under the conditions of timely and within-budget rehabilitation of the Hartha units 2 and 3, the project offered a cheaper option for augmenting power availability than a green-field combined cycle gas turbine power plant of a similar size. The economic analysis did not reflect the greater difficulties inherent in implanting rehabilitation projects as against green-field projects. However, at the close of the Bank project: 1. The implementation of rehabilitation is still not completed despite delays, 2. There is a significant cost-overrun, 3. There is uncertainty about whether the targeted capacity would be actually achieved, 4. There is uncertainty about whether the performance parameters of the rehabilitated units – especially with regard to heat rate – would be actually achieved, 5. It is likely that the rehabilitated units may require higher maintenance than the green-field units, 6. The availability of natural gas remains unlikely in view of prioritizing the supply of natural gas to combined cycle units. Although there are significant contractual difficulties that need to be addressed before the rehabilitation works can be completed, for the purpose of this economic analysis, it is assumed that the rehabilitated units would start generation by 2018. To assess the economic efficiency of the project, five different cases are examined: 1. Case-1: The actual rehabilitation project, assuming that it can be completed by 2018 and it would achieve the desired technical performance parameters. 2. Case-2: The originally envisaged rehabilitation of units 2 and 3, which assumed that the works will be completed within three years and generation would start in the second year. All technical parameters are assumed to be achieved. 3. Case-3: The actual rehabilitation project, assuming that it can be completed by 2018. However, it is assumed that the desired technical performance parameters are not achieved. While capacity achieved is lower by 10%, the heat rate is poorer by 10% and the maintenance shutdown requirements are greater by 10%. 4. Case-4: A new 428MW CCGT is deployed, which generates the same amount of electricity as the rehabilitated units 2 and 3 at Hartha (Case-2). The plant new plant is assumed to run on HFO. 5. Case-5: A new 428MW CCGT is deployed, which generates the same amount of electricity as the rehabilitated units 2 and 3 at Hartha (Case-2). The plant new plant is assumed to run on Natural Gas. Other important assumptions used in the analysis are as follows: 6. The cost of the project was originally estimated as US$132 million, and the actual costs have escalated to US$171 million. This does not include price adjustment, which is still being negotiated between the GoI and the contractor. 36  Table 3.1: Economic Efficiency of Rehabilitation of Units 2 and 3 of Hartha Power Station Adjus ted   Pl a nned   O&M‐ Cos t  of  Pri va te   Pri ce  of   Ca pa ci ty Ma i ntena nce Forced   Hea t  Ra te O&M‐ Va ri a bl e Fi xed Di es el   Fuel Di s count  (MW) (weeks   per a nnum) Outa ges MBTU/kWh US$/kWh US$/kW Genera ti on   $/MMBTU Ra te Fra me   9F  CCGT (390MW) 428 10 10% 7800 0.004 5 (USD/kWh) HFO 3.7 Ha rtha  Uni ts  2,  3 (400MW) 400 7 10% 10400 0.004 5 0.2 NG 3.3 12% Yea r 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 NPV Hartha  Units 2  and  3 (400MW)  Ex ‐ Ante  Assessment Ca pex 39 78 13 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Genera ti on   from  Project 0 1365 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 18031 Fuel   Cos t 0 53 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 105 O&M ‐ Va ri a bl e 0 5 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 O&M ‐ Fi xed 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Tota l   Cos t  from  Project 39 138 131 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 118 $886 Pri va te  Di es el  Genera ti on 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 Cos t of  Di es el  Genera ti on 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 Us c/kWh 4.91 Hartha  Units 2  and  3 (400MW)  Ex ‐ Post  Assessment Ca pex 0 0 0 27 0 11 17 24 23 12 20 38 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Genera ti on   from  Project 0 0 0 0 0 0 0 0 0 0 0 1365 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 4995 Fuel   Cos t 0 0 0 0 0 0 0 0 0 0 0 53 105 105 105 105 105 105 105 105 105 105 105 105 105 105 O&M ‐ Va ri a bl e 0 0 0 0 0 0 0 0 0 0 0 5 11 11 11 11 11 11 11 11 11 11 11 11 11 11 O&M ‐ Fi xed 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Tota l   Cos t  from  Project 0 0 0 27 0 11 17 24 23 12 20 98 118 118 118 118 118 118 118 118 118 118 118 118 118 118 $283 Pri va te  Di es el  Genera ti on 0 1365 2730 2730 2730 2730 2730 2730 2730 2730 2730 1365 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13036 Cos t of  Di es el  Genera ti on 0 273 546 546 546 546 546 546 546 546 546 273 0 0 0 0 0 0 0 0 0 0 0 0 0 0 $2,607 Us c/kWh 16.03 Hartha  Units 2  and  3 (400MW)  Ex ‐ Post  Assessment (10% Lower Capacity,  10%  Higher  Maintenance  and  10%  Poorer Heat Rate) Ca pex 0 0 0 27 0 11 17 24 23 12 20 38 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Genera ti on   from  Project 0 0 0 0 0 0 0 0 0 0 0 1210 2419 2419 2419 2419 2419 2419 2419 2419 2419 2419 2419 2419 2419 2419 4426 Fuel   Cos t 0 0 0 0 0 0 0 0 0 0 0 51 102 102 102 102 102 102 102 102 102 102 102 102 102 102 O&M ‐ Va ri a bl e 0 0 0 0 0 0 0 0 0 0 0 5 11 11 11 11 11 11 11 11 11 11 11 11 11 11 O&M ‐ Fi xed 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Tota l   Cos t  from  Project 0 0 0 27 0 11 17 24 23 12 20 97 115 115 115 115 115 115 115 115 115 115 115 115 115 115 $278 Pri va te  Di es el  Genera ti on 0 1365 2730 2730 2730 2730 2730 2730 2730 2730 2730 1521 311 311 311 311 311 311 311 311 311 311 311 311 311 311 13605 Cos t of  Di es el  Genera ti on 0 273 546 546 546 546 546 546 546 546 546 304 62 62 62 62 62 62 62 62 62 62 62 62 62 62 $2,721 Us c/kWh 16.63 37  Adjus ted   Pl a nned   O&M‐ Cos t of  Pri va te   Pri ce  of   Ca pa ci ty Ma i ntena nce Forced   O&M‐Va ri a bl e Hea t Ra te Fi xed Di es el   Fuel Di s count  (MW) (weeks  per a nnum) Outa ges MBTU/kWh US$/kWh US$/kW Genera ti on   $/MMBTU Ra te Fra me  9F  CCGT (390MW) 428 10 10% 7800 0.004 5 (USD/kWh) HFO 3.7 Ha rtha  Uni ts  2, 3 (400MW) 400 7 10% 10400 0.004 5 0.2 NG 3.3 12% Yea r 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 NPV Frame 9F  CCGT with HFO Ca pex 115 135 135 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Genera ti on  by Project 0 1365 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 18028 Fuel  Cos t 0 39 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 79 O&M ‐  Va ri a bl e 0 5 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 O&M ‐  Fi xed 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Tota l  Genera ti on  Cos t 115 182 226 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 92 $913 Pri va te  Di es el  Genera ti on 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 3 Cos t of  Di es el  Genera ti on 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 $1 Us c/kWh 5.07 Frame 9F  CCGT with NG Ca pex 115 135 135 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Genera ti on  by Project 0 1365 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 2730 $18,028 Fuel  Cos t 0 35 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 O&M ‐  Va ri a bl e 0 5 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 11 O&M ‐  Fi xed 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Tota l  Genera ti on  Cos t 115 177 218 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 83 $857 Pri va te  Di es el  Genera ti on 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 3 Cos t of  Di es el  Genera ti on 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 $1 Us c/kWh 4.76 Summary results: Average Generation Cost (US Cents / kWh) Case-1 Hartha Units 2 and 3 (400MW) Ex-Ante Assessment 4.91 Case-2 Hartha Units 2 and 3 (400MW) Ex-Post Assessment 16.03 Case-3 Hartha Units 2 and 3 (400MW) Ex-Post Assessment (10% Lower Capacity, 10% Higher Maintenance and 10% Poorer Heat Rate) 16.63 Case-4 Frame 9F CCGT with HFO 5.07 Case-5 Frame 9F CCGT with NG 4.76 38  Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility Lending A. Amir Al-Khafaji Lead Operations Specialist PA9SS – Reynold Duncan Operations Adviser SACPK – Karim Jacques Sehnaoui Junior Professional Associate MNSIF–HIS – Imelda F. Sevilla Resource Management Analyst BPSGR – Tjaarda P. Storm Van Leeuwen Adviser AFTG1–HIS – Supervision/ICR Hayat Taleb Al-Harazi Program Officer MNARS – A. Amir Al-Khafaji Lead Operations Specialist PA9SS – Nazaneen Ismail Ali Senior Procurement Specialist GGODR – Soran Hama Tahir Ali Operations Officer GTIDR – Armando Ribeiro Araujo Consultant GGODR – Husam Mohamed Beides Program Leader MNC02 – Reynold Duncan Operations Adviser SACPK – Mona El-Chami Senior Financial Management Specialist GGODR – Mutasem El-Fadel HQ Consultant ST GEN05 – Sepehr Fotovat Ahmadi Senior Procurement Specialist GGODR – Fowzia Hassan Energy Specialist GEEDR – Nafie Mohammed Mofid Water Supply Specialist GWADR – Simon Stolp Lead Energy Specialist GEEDR – Mohammed Wafaa Al-Ani Operations Officer GEEDR TTL ICR TTL and Mikul Bhatia Senior Energy Specialist GEEDR Author Note: ICR = Implementation Completion and Results Report; TTL = Task Team Leader. (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No. of Staff US$, thousands (including travel Weeks and consultant costs) Lending FY2005 15.22 60,389.55 FY2006 26.66 98,726.10 FY2007 26.80 115,691.85 Total: 68.68 274,807.50 Supervision/ICR FY2007 0.60 3,835.20 FY2008 15.07 65,996.95 39  Staff Time and Cost (Bank Budget Only) Stage of Project Cycle No. of Staff US$, thousands (including travel Weeks and consultant costs) FY2009 11.28 48,522.13 FY2010 22.93 99,004.66 FY2011 21.97 90,449.49 FY2012 28.63 98,430.48 FY2013 33.14 134,241.88 FY2014 13.17 52,313.38 FY2015 13.24 21,783.69 FY2016 8.91 29,367.28 Total: 168.94 643,945.14 40  Annex 5. Summary of Completion Report by Owner’s Engineer Background 1. Hartha power station is located on the bank of the Shat Al-Arab River, approximately 33 km north of the city of Basra and about 25 km from the Iranian border. The station consists of 4x200 MW units fueled with natural gas, HFO, or crude oil. Construction began in the 1970s and the station was commissioned in 1979. The station was designed, manufactured, and constructed by the Japanese Company Mitsubishi Heavy Industries. During the Gulf War in 1991, all four units suffered serious damage. Following repairs, unit 1 recommenced operation in 1996 and unit 4 in 1993; they have basically continued to run until the present day. On the contrary, units 2 and 3 have not been operating since 1991. Some of the equipment on units 2 and 3 has been used to maintain operation of the other two units. 2. To rehabilitate units 2 and 3, the MoE placed orders in 1999 and 2000 under the OFFP for the supply of the missing and damaged equipment. The ministry planned to implement the work in-house with some supervision from suppliers. A substantial amount of the equipment ordered for the rehabilitation was delivered. The work commenced but stopped soon because of the second Gulf War. An estimated 25 percent has been implemented. In 2005, the MoE decided to recommence the rehabilitation project for units 2 and 3. 3. In March 2007, the Bank approved a project to restore the base load generating capacity of units 2 and 3 of Hartha power station to 400 MW. Results Achieved 4. Although the rehabilitation of units 2 and 3 has not yet been completed, the consultant is inclined to express a positive judgment of the investment. The starting conditions were really challenging—most of materials were supplied in 1999; erection works were started by the MoE shortly after; and then in 2003, the second Gulf War stopped all activities, so material and works remained abandoned for years. Once the new contract with TPE could restart, rehabilitation works, security constraints, and bureaucracy heavily interfered with smooth progress of the project. 5. Despite that, the costs of the project remained substantially under control. Moreover, the erection of almost all material available at site since 1999 or 2003 has been practically completed. Boiler 2 is ready for the hydraulic test. Steel structures of boiler 3, as well as its heating surfaces, are assembled. Heavy works requiring considerable experience and significant coordination skills have been carried out. At this stage, the MoE may decide to take over the role of ‘main contractor,’ either taking care directly of some works or awarding limited contracts for specific works. This is not recommended but technically feasible; the achievement of this result represents a partial success of the project. 6. In the last days of June 2015, the employer seemed inclined to extend the contract till the end of 2015, with the hope that rehabilitation may be completed within that date at a cost which is substantially the same as that envisaged since 2007. This would be a further confirmation that all past efforts were not in vain. Reasons which Impeded the Full Success of the Project (a) Lack of Adequate Planning and Management by the Contractor 41  7. No Program of Performance document has been attached to the contract. The first one, including only 79 generic macro-items, was submitted in July 2011 and became the reference Program of Performance for calculating the price adjustment. 8. After repeated requests from the employer and the consultant in all monthly meetings and a consultant’s journey to Moscow, from 2013, TPE started submitting some detailed work schedules; however, in most cases they were unrealistic and obsolete even at the time of the submission. Only in the second half of 2014, a more detailed and reliable work schedule has been submitted but limited to single units. 9. These are reasons for this situation:  The employer rejected all plans, envisaging a completion date beyond the contractual one. Therefore, when the compliance with the contractual deadline became unrealistic, it became practically impossible for TPE to prepare a reliable schedule.  TPE planners were based in Moscow. They used to visit the site occasionally, but it was very difficult for them to take note of the actual needs and difficulties of the site team. Consequently, all their plans were superseded shortly after their preparation.  The local TPE staff, especially in the first period, seemed unfamiliar with common software for planning. Neither Primavera nor Microsoft Project were available at site. The attempts to prepare a Program of Performance were always done using Microsoft Excel, without any correlation between activities.  Price breakdowns have been prepared (and approved by the employer) very late, so that they could not be used as a reference for the definition of the items in the Program of Performance, which could not be weighted. Therefore, it has been practically impossible to accurately determine the actual work progress and monitor delays during work execution. 10. Only in the second half of 2014, TPE appointed a planner at site and some improvement was observed. However, it was too late to recover full control of the erection activities, especially when subcontractors stopped their activities while waiting for payment. 11. TPE has considerable experience in designing and building thermal power plants. Single experts involved in the project, especially at site, have been showing good skills and experience. However, it seemed that TPE was completely unable to organize a collaborative working team. Too often, designers and managers in Moscow appeared unaware of technical problems and difficulties encountered at site, so their reaction was slow and often inadequate. Once again, the improvement observed in the last months arrived too late. (b) Cash Flow Difficulties 12. Starting from November 2013, the contractor declared having great difficulties in managing the cash flow. Actually, TPE’s financial offer probably overestimated the equipment value and underestimated the cost of erection. Possibly, the contractor’s plan was to exploit this ‘unbalance’ to improve their cash flow. Instead, the contractor appeared unable to exploit this advantage. Moreover, at a certain time it seemed that the contractor decided to renegotiate the equipment supply subcontracts, without obtaining better conditions. So, the contractor found himself short of resources to complete the project. The situation became so critical that even the 42  contract extension with additional resources were no longer sufficient to compensate the initial management errors. 13. The situation was further complicated by some bureaucratic issues, which caused delays in opening or extending the LC. Consequently, some payments could not be released for several months. (c) Poor Performance of Subcontractors 14. The poor performance of subcontractors, observed especially in 2013 and 2014, is deemed to derive from two main reasons: weak supervision, which allowed poor quality work and the attempt of TPE to renegotiate some payments and financial conditions, which provoked reaction from some subcontractors and resulted in halting their activities. Most works restarted only in May 2015. 15. To reduce the impact of this issue, it is suggested that the MoE should support and help TPE in supervising subcontractors’ activities and help them in preventing deviations and errors. At the same time, the MoE should focus its attention on important aspects, without creating obstacles for minor matters. (d) Management of Subcontracts 16. In some cases, the subcontractors could not carry out or complete their work because they did not receive adequate information. For instance, in the case of Siemens, they have not received all the required data concerning common systems yet, so that they could not complete the Distributed Control System (DCS) software in compliance with the employer’s requirements. In this situation, there is also the suspicion that subcontractors may exploit this confusion to their advantage, taking more time than needed for any action. 17. To overcome this impasse, the MoE tried to provide Siemens with at least some of the required information. Nevertheless, the MoE could not replace TPE in covering its coordination and designer role. (e) Distance between Designers and Site Engineers 18. The immediate consequence of the lack of coordination of the contractor’s teams was the fact that the designer could not react promptly to any issue arising at site. Unless completely solvable by the site team, deviations or technical problems caused huge delays due to the time required to transfer the issue from the site to the designer. The issue of the piles (calculation of bearing capacities, acceptance of deviations, and definition of remedies) is a clear example of this difficulty. 19. In general, the consultant had the feeling that TPE Moscow wanted to manage and control any circulation of data and information, without having the capability to address them properly. Only in the last month, the TPE site manager was entrusted with more power to take independent decisions without waiting for responses from Moscow. (f) Insufficient Presence of TPE Staff 20. Very often the site team of the contractor showed sufficient skills to overcome technical challenges arising at site. However, due to the insufficient number of TPE staff, they were probably 43  overloaded with work and could not perform careful supervision of ongoing activities. This may be one of the reasons for several deviations and incompliances observed during erection. In the last month, other specialists arrived from Russia; however, the increased presence of Russian experts at site has not achieved expected values yet. (g) Turbine Spare Parts 21. The employer delivered to Franco Tosi a number of turbine parts for reverse engineering and replication. However, the parts manufactured by Franco Tosi are not fully compatible with the original ones made by Mitsubishi. This would not have been a problem if a homogeneous set of parts was used to reassemble the turbine. Instead, the parts from Franco Tosi remained stuck for several months at the customs in Basrah because some original shipping documents were lost. Therefore, TPE started the reassembling using part of the original pieces. When the incompatibility was encountered, TPE stopped the work and claimed for extra work. The discussion is still ongoing and the subcontractor is asking for extra payment as a condition to resume works. (h) Cooling Water System 22. Works on the water intake are ongoing with some difficulties due to a large leakage through valves interconnecting the pipelines to the units under rehabilitation and in operation. To overcome the main obstacles, TPE requested for the collaboration of the MoE. The contract clearly states that TPE’s scope of work includes the rehabilitation of the water intake and the cooling water circuit in the turbine building. It does not state anything about the pipelines from the water intake to the turbine, which are damaged. It is not clear whether the contractor could assess the damage at the time of inspection before preparing the offer; therefore, discussion concerning the responsibility of the rehabilitation has not been finalized yet. 23. In any case, a solution for the rehabilitation has been proposed by TPE. In principle, the MoE accepted it, asking for some more details. At the end of June 2015, the matter was not finalized yet. (i) Distributed Control System 24. Siemens developed a DCS, which does not allow fully automatic operation. This does not comply with the contract specifications. However, the development of new software will take several months; therefore, the consultant advised accepting the installation of the DCS as it is, applying an economic compensation for the incompliance. 25. Several months ago, Siemens expressed their availability to start with the installation of the DCS, provided that they received a certificate stating that the working area is free of asbestos. The employer requested such a certificate from the University of Basrah and the Ministry of Environment. This has not yet been submitted. At the same time, TPE expressed their readiness to perform Siemens’ scope of works under online supervision by Siemens to accelerate the work progress. Owner’s Engineer’s Recommendations 26. Considering that the employer is going to decide (or has already decided) to extend the contract with TPE till the end of 2015, we would like to leave some recommendations, aimed to 44  exploit these remaining months of erection in the best possible way. It is known that the employer cannot intervene in the contractor’s organization, which is currently one of the major causes of the bad performance. Similarly, the employer cannot solve the financial issues of the contractor unless the whole contract is renegotiated. 27. Nevertheless, the consultant deems that the employer may support the contractor’s efforts mainly in the following four ways:  Focus comments and remarks on critical aspects which may jeopardize the plant performance, reliability, operability, maintainability, and duration, allowing the contractor choosing the most convenient solutions  Improve attention in the supervision of works to prevent faults and deviations.  Document approvals should be released quickly. In general, the employer should provide the contractor with quick replies and approvals to his inquiries. Too many aspects in the hands of the MoE still need a solution. In particular, the issue of the turbine spare parts from Franco Tosi requires an urgent solution.  Pay specific attention to invoices, price breakdowns, check requests, and so on, and promptly advise in case of errors and discrepancies which would cause delays in the process. 45  Annex 6. Summary of Borrower’s Comments on Draft ICR \Through our experience and our observations with the performance of the main contractor, we note the following points which led to the delays in completion of the project:  Lack of seriousness of the main contractor in implementation of the works. The installation works of two boilers for units 2 and 3 were delayed directly because of time taken in contract finalization and effectiveness. Although the contract became effective on October 13, 2010, and the contractor began installation works in the second half of 2011 at a slow pace regardless of the time already lost. The main contractor did not provide clear time schedule in the beginning. Even later, the time schedule submitted was poor and not detailed, despite MoE requesting repeatedly for such a schedule.  Frequent change of site managers over short periods of time (as many as 6 site managers during the project), caused confusion in close monitoring because proper handing over procedures from one manager to the next were not followed.  The main contractor did not take advantage of the available subcontractors, and did not manage them in order to achieve the highest achievement which shows that the administration did not have a clear vision in project management.  The main contractor focused on the supplying of materials because it represented 75% of the total amount of the contract and neglected the implementation work which is the main objective of the project.  The site manager for the main contractor did not have much financial or administrative powers. Most of the powers were with senior managements in Moscow. This implied that the site managers and staff did not have the ability to develop appropriate and quick solutions to the problems that were observed on the site and it took a long period of time (6 – 9 months) to resolve any issue. This shows the lack of coordination between the senior management (Moscow) and location administration of the project, where we noticed through correspondence there is a large gap between them in the follow–up to the work site where we have noticed recently when attending to the site project authorized director with authority that lead to percentage of work performance good in a short period.  It is noted that the contract for the main contractor funded by the World Bank omits some of the things that caused the difference in interpretations between the parties and were one of the reasons delaying the achievement where we think the contract should be (Turnkey Job) a clear features and details does not need interpretations of each party separately.  We believe in economic terms that the project, if completed in exactly time would be a gain to us to get 400 MW at a cost not to exceed 300 million dollar, since that the current percentage of the project completion is 70%, despite problems we have listed. 46  Annex 7. List of Supporting Documents 1. Aide Memoire - Appraisal Mission, November 2005 (Beirut) 2. Hartha Power Plant Fueling Appraisal Note, February 2006 3. Rapid Assessment of Atmospheric Dispersion of Stack Emissions, February 2006 4. Aide Memoire - Follow-up Appraisal Mission, September 2006 (Amman) 5. Aide Memoire - Implementation Support Mission, December 2007 (Amman) 6. Aide Memoire - Implementation Support Mission, June 2008 (Amman) 7. Restructuring Paper, July 2010 8. Aide Memoire - Implementation Support Mission, October 2010 (Beirut) 9. Aide Memoire - Implementation Support Mission, February 2011 (Baghdad) 10. Aide Memoire - Implementation Support Mission, October 2011 (Baghdad) 11. Aide Memoire - Implementation Support Mission, April 2012 (Beirut) 12. Restructuring Paper, May 2012 13. Aide Memoire - Implementation Support Mission, June 2012 (Basrah) 14. Aide Memoire - Implementation Support Mission, March 2013 (Beirut) 15. Aide Memoire - Implementation Support Mission, December 2013 (Beirut) 16. Restructuring Paper, February 2014 17. Aide Memoire - Implementation Support Mission, March 2014 (Baghdad) 18. Restructuring Paper, June 2014 19. Restructuring Paper, September 2014 20. Monthly Progress Report No. 31 by ELC, December 2014 21. Aide Memoire - Implementation Support Mission, February 2015 (Bahgdad) 22. Restructuring Paper, May 2015 23. Monthly Progress Repot No. 33 by ELC, July 2015 (Final Report as of June 2015) 47  Annex 8. Photographs of Hartha Rehabilitation Project (April 2015) Unit 2. Metal structure, furnace walls, tube bundles, and external piping are already installed. Insulation was still missing. The red and blue sheets cover working areas around the burners and air ducts. A small truck is parked between two foundations of the boiler auxiliaries (fans, regenerative heat exchanger, and so on). The problem of pile bearing capacity caused a delay in the works in this area. The tower crane in front of unit 3. Unit 2 is partially visible on the right. A large part of the metal structure of boiler 3 was completed. The roof was still missing. Furnace sidewalls were already in place. However, works were focused on unit 2; therefore, very few workers are visible around unit 3. 48  Piping in the lowest part of boiler 2. Pipe assembling and welding was not completed. Despite that, very few workers were present in the area. Emission stacks. Stacks of the four units, taken from the evaporation basin area. Far on the right- hand side, the water treatment area is visible. Emission from stack of unit 4 was abnormal, probably due to a transient condition. The owner’s engineer reported that unit 4 had to be extensively rehabilitated. Works were planned to start after completion of units 2 and 3. 49  Units 2 and 3. A view of units 2 (on the right) and 3 (on the left). Tube bundles in front of the stack are to be installed in unit 3. The pipe trestle passing between the stacks is new, erected in place of the trestle that has been removed because of interference with the new structures. Water treatment area. The metal building on the left is the chemical storage area. In front of it, two tanks have to be erected. The stairs are for climbing such tanks. On the right, a foundation of a column of the pipe trestle has just been completed. In the background is the water treatment building. Inside the water treatment building. Civil works are not completed yet. Roof covers only half of the building. The metal building and structures in the background are the chemical storage area. At the time of the visit, works were stopped due to payment delays. The quality of the completed works was found acceptable, as reported by the owner’s engineer. 50  See description for the previous picture. In the front is the water pretreatment building. On the right, the water treatment building is the nearest, then there is the chemical storage area and the reverse osmosis building. All works were stopped at the time of the visit in April 2015. This picture shows the water pretreatment building with the four units in the background. Only unit 1 is in operation. The yellow metal structures close to the building and on the left will allow climbing on top of 2+2 tanks, which have not been installed yet. This is one of the buildings of the water treatment system (pretreatment, reverse osmosis, and wastewater treatment). They were still empty boxes. 51  IBRD 35243 IRAQ EMERGENCY ELECTRICITY RECONSTRUCTION PROJECT PROJECT FACILITY POWER PLANTS: SELECTED CITIES AND TOWNS NATIONAL CONTROL CENTER DIESEL GOVERNORATE CAPITALS MAJOR TRANSFORMER STATIONS GAS TURBINE NATIONAL CAPITAL TRANSMISSION LINES: THERMAL RIVERS 400 kV HYDRO-ELECTRIC INTERNATIONAL BOUNDARIES 132 kV 40°E 42°E 44°E 46°E 48°E TU R K EY Cizre - - Zakhu 0 50 100 150 Kilometers - DAHUK Tig - ris R. Dahuk 'Aqrah 0 50 100 Miles Ayn Zalah - - Rayat Regulating Dam Mosul -Shaqlawa - Sinjar Tall Khalakh ARBIL - Arbil Afar 36°N Euphr ates - Al Bahamdan Dokan 36°N R. N I N AW Á Dam Al Qayyarah Dibs IPC 1 As - - ISLA MI C Mullah Abdallah Sulaymaniyah Ash Sharqat - - - REPUBLI C S Y RIAN IPC 2 AT Kirkuk SULAYMANIYAH AS Arbat Tazah ARA B - TA'MIM Derbandikhan Salam Pirak O F IRAN Ajaji - Dam Bayji RE P. - Tikrit Uzaym Qusaybah Dam (u.c.) Abu Kamal Rawah - SALAH AD - Al Qa'im Khanaqin Tharthar DIN- Samarra' Samarra - - Jalanda Lake 34°N Barrage 34°N - Mukarayin Al Hadithah Hamrin - - Al Arbar - - (u.c.) - Ba'qubah 'Akashat Hit - - - Ar Ramadi Habbaniyah DIYALÁ Ramadi Barrage - - BAGHDAD Habbaniyah Dawrah Ar Rutbah Lake Rasheed Control Center BAGHDAD - South Salman Pak Baurah AL ANBAR JORDAN As Suwayrah Razzaza - Al Aziziyah Trebil WA S I T Lake Al Musayyib - Hindiyah An Numaniyah - Karbala BABIL Babil - Al Kut Ali al Gharbi - Al Hillah KARBALA' - - - Ad Diwaniyah Al Hayy 32°N Tig sR 32°N ri Nukhayb An Najaf Al Fajr - Al 'Amarah . - - AL QADISIYAH Ar Rifa’i - ph MAYSANQalat Salih Eu ra tes R. Al 'Uzayr AN NAJAF As Samawah - - - DHI QAR - - Al Qurnah Hartha Power An Nasiriyah Station Al Basrah - As Salman Abadan AL Rumayla Az Zubayr AL MUTHANNÁ BASRAH 30°N 30°N Safwan Umm Qasr Al Faw IRAQ KUWA IT S A UDI A RA BIA This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 28°N 40°E 42°E 44°E 46°E 48°E JANUARY 2007