Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15657 IPLEMENTATION COMPLETION REPORT PHILIPPINES ENERGY SECTOR PROJECT (LOAN NOS. 3163-PH, 3164-PH, 3165-PH) May 23, 1996 Infrastructure Operations Division Country Department I East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit Philippine Peso (P) P1.00 100 Centavos (ctv.) (end-July 1989) = US$ 1.00 = P 21.5 (end-Dec 1995) US$1.00 = P 26.2 WEIGHTS AND MEASURES kV = Kilovolt (1,000 volts) kW = Kilowatt (1,000 watts) kWh = Kilowatt-hour (1,000 watt-hours) MW = Megawatt (1,000 kilowatts) MWh Megawatt-hour (1,000 kilowatt-hours) GW Gigawatt (million kilowatts) GWh = Gigawatt-hours (million kilowatt-hours) FISCAL YEAR Republic of the Philippines January I - December 31 ABBREVIATIONS AND ACRONYMS BOT - Built-Own-Transfer BOOT - Build Own-Operate-Transfer DENR - Department of Environment and Natural Resources DOE - Department of Energy ECC - Energy Coordinating Council EMB - Environmental Management Bureau ERB - Energy Regulatory Board ERR - Economic Rate of Return GOP - Government of the Philippines JEximbank - Export Import Bank of Japan ICB - International Competitive Bidding IPP - Independent Power Producer NEA - National Electrification Administration NPC - National Power Corporation OEA - Office of Energy Affairs PNOC - Philippine National Oil Company PNOC-EDC - PNOC-Energy Development Corporation ROM - Rehabilitate-Operate-Maintain FOR OFFICIAL USE ONLY Table of Contents Preface ....................................................i Evaluation Summary ................................................... ii PART I: IMPLEMENTATION ASSESSMENT A. Statement/Evaluation of Objectives. B. Achievement of Objectives .3 C. Major Factors Affecting the Project .6 D. Project Sustainability .8 E. Bank Performance .8 F. Borrower Performance .9 G. Assessment of Outcome .10 H. Future Operations .10 1. Key Lessons Learned .10 PART II: STATISTICAL ANNEXES ANNEX A: STATISTICAL TABLES ........................... 12 1 . Summary of Assessment .12 2. Related Bank Loans .15 3. Project Timetable .16 4. Loan Disbursements: Cumulative Estimated and Actual .16 5. Key Indicators for Project Implementation .18 6. Key Indicators for Project Operation .20 7. Studies Included in Project .22 8A. Project Costs .24 8B. Project Financing .25 9. Economic Costs and Benefits .26 10. Status of Legal Covenants .27 11. Compliance with Operational Manual Statements .30 12. Bank Resources: Staff Inputs .30 13. Bank Resources: Missions .31 ANNEX B: SECTOR SPECIFIC DATA .................................................. 33 1. Cumulative Actual and Planned Generating Capacity ......................................... 33 2. Phases of Power Sector Restructuring and Privatization ..................................... 34 APPENDICES A. Mission's Aide-Memoire .................................................. 35 B. Borrowers' Contributions to the ICR .................................................. 36 MAPS IBRD No. 21900: Energy Resources IBRD No. 21901: National Power Corporation Grid This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization. IMPLEMENTATION COMPLETION REPORT PHILIPPINES ENERGY SECTOR PROJECT (Loan nos. 3163-PH, 3164-PH, 3165-PH) Preface This is the Implementation Completion Report (ICR) for the Energy Sector Project (the Project) in the Republic of Philippines, for which US$390 million equivalent, was approved on February 1, 1990 and made effective on June 12, 1990. The Project provided for three Bank loans for: (a) the National Power Corporation (NPC) for US$200 million (Loan no. 3163-PH); (b) the Philippine National Oil Company (PNOC) for US$150 million (Loan no. 3164-PH); and (c) the Government of the Philippines (the Government) for US$40 million (Loan no. 3165-PH). Loan 3163-PH to the National Power Corporation closed on June 30, 1995 compared to the original closing date of December 31, 1994. The Loan is fully disbursed and final transaction took place on February 23, 1995. Loan 3164-PH to the Philippines National Oil Company was closed on December 31, 1995, compared to the original closing date of December 31, 1994. Apart from partial cancellation of some US$10.7 million equivalent, being earmarked for on-lending to Petron, the loan was fully disbursed and final transaction took place on April 15, 1996. Loan 3165-PH to the Republic of the Philippines was closed on April 30, 1996, compared to the original closing date of December 31, 1994. Some US$8.7 million equivalent was canceled and final transaction took place on February 3, 1996. The ICR was prepared by Ephrem Asebe, Consultant, EA31N, under the supervision of John Irving, Senior Power Engineer, Infrastructure Operations Division of the East Asia & Pacific Region, Country Department 1. It was reviewed by Mr. J. Shivakumar, Chief, Infrastructure Operations Division, and Mr. Walter Schwermer, Project Adviser. Preparation of this ICR was begun in October 1995 followed by an ICR mission in February 1996. It is based on material in the project file as well as data provided by the Borrower. The Borrowers contributed to the preparation of the ICR by stating their views as reflected in the mission's Aide-Memoire (Appendix A), and by preparing their own evaluation of the Project's execution (Appendix B). The Borrower agencies have also commented on this ICR, and their comments were taken into consideration when finalizing it. IMPLEMENTATION COMPLETION REPORT PHILIPPINES ENERGY SECTOR PROJECT (Loan nos. 3163-PH, 3164-PH, 3165-PH) Evaluation Summary Introduction i. Bank involvement in the Philippine energy sector dates back to 1957. Bank lending in the sector was limited until 1981, at which time the Bank began lending to support various energy subsectors, including geothermal. In 1988, the Bank conducted a comprehensive Energy Sector Study in an effort to identify how the Government and the Bank could jointly work to address weaknesses in that sector, and The Energy Sector Project (1989) was conceived to support this effort. The Project involved eight beneficiaries and included three Bank loans totaling US$390 million to the National Power Corporation (NPC), the Philippine National Oil Corporation (PNOC), and four separate entities in the Government. Repayment will be over 20 years, including a five year grace period, at the Bank's variable interest rate. (paras. 1-3) Project Objectives ii. The Project had two distinct but complementary objectives. The first objective concerned the implementation of the energy sector development program, which had a number of facets: increasing sector coordination, adopting a least-cost development strategy, strengthening the pricing regime, encouraging private sector participation, improving environmental standards, and enhancing institutional development. The second objective was to finance a time-slice of the energy sector investment program for the period 1989-93. (paras. 4-6) iii. The objectives of the Project were extensive as their scope was sector-wide; however, they had been carefully thought out and were directly relevant to the Bank's Country Assistance Strategy. They were also responsive to the desire of the Government to explore alternative ways to manage the sector. The Project was demanding on all parties involved. (paras. 7- 10) Implementation Experience and Results iv The Project substantially achieved its objectives, despite initial problems reconciling the least-cost development objectives with increased private sector participation (particularly regarding NPC) and reshaping the geothermal drilling program. The time-slice of the 1989-93 investment program had to undergo some revisions to induce the Independent Power Producers (IPPs) to participate in the fast-track generation program in 1991-93. This development, while costly to the sector, proved critical to ending the power crisis and, in so doing, restored the economic health of the economy as a whole. Moreover, as the number of IPPs increased and the power crisis eased, NPC was able to negotiate more favorable contract terms. Encouraged by such results, the Government accelerated the program for the privatization of NPC's various operations in its 1992 Energy Section Action Plan (ESAP). The role of NPC was thus redefined. Its role would no longer be as a generator of power, but as a purchaser of power (mainly on a take-or-pay basis) and as an operator of the transmission system. (paras. 11 - 13) iii v. PNOC benefited from a small technical assistance component to facilitate privatization of its subsidiaries. PNOC-EDC (PNOC-Energy Development Corporation) received a substantial amount of the loan proceeds to conduct geothermal exploration. After disappointing results in Luzon, PNOC-EDC shifted its focus to Leyte, and with the support of two subsequent Bank loans, is successfully exploiting Leyte's geothermal resources. Petron successfully upgraded two facilities at its refi.nery under the Project. (paras. 13, 18 and 19) vi. The management of the country's energy sector changed significantly under the Project. In 1992, the defunct Department of Energy (DOE) was restored to give the energy sector cabinet-level representation. Further changes saw the folding of Office of Energy Affairs (OEA) into DOE and a substantial reorganization of DOE itself. While these institutional changes did not in themselves result in the improvements in sector-wide coordination as envisioned under the Project; nevertheless, the power crisis served as a catalyst in bringing the Philippine entities together to solve the problem. The Project also enhanced the efficiency and capabilities of entities in the sector by funding several topical studies in the sector, by upgrading hardware and software, and by providing additional staff training. The Energy Regulatory Board (ERB) acquired new capabilities to discharge its responsibilities with respect to inspecting and enforcing conformity to standards of metering equipment, petroleum products, etc. ERB also acquired computer hardware and software under the Project. The Environmental Management Bureau (EMB) also enhanced the skills and tools it needed to monitor the environmental impact of energy projects. The Project also succeeded in providing stop-gap technical assistance to National Electrification Administration (NEA) and the rural electrical cooperatives, in advance of a subsequent Bank project. (paras. 13 and 20) vii. Project sustainability. Project sustainability appears likely. The country's power crisis has been resolved, the macro situation has stabilized, and the energy sector looks set to enjoy orderly energy growth with cost optimization. Moreover, a number reforms in the pipeline will act to carry forward the process of orderly energy growth. (paras. 30-33) viii. Project costs and financing. Due to NPC's decision to enter into BOT arrangements with IPPs to increase generating capacity, and because of PNOC-EDC's poor results in prospecting for geothermal developments in Luzon, total project costs were only about US$2.6 billion, or 80% of the original planned. The Bank disbursed US$373 million through its three loans, or 96% of the full amount. The original closing dates of these loans were extended by 6 to 16 months (see Preface, Annex A: Tables lb, 4a-c, 8A and 8B). JEximbank, which was providing parallel financing, is expected to disburse about US$62 million by end-1996, against US$150 million which was made available. (para. 14) ix. Factors affecting project objectives. The major factors affecting the achievement of Project objectives were mainly those subject to the control of the Government or the implementing agencies, and the risks associated with exploration. At the Government level, the main factors affecting the achievement of Project objectives included tradeoffs between the pursuit of a least-cost or a fast-track strategy, the politicization of tariff adjustments, the weak financial position of NPC, and delayed budgetary allocations to ERB and EMB. NPC's failure to revalue its assets also contributed to its financial problems, and its organizational weakness compounded them. PNOC- EDC tended to be overly optimistic, both in planning for the number of wells to be drilled at geothermal sites in Luzon and in estimating the power capacity from the geothermal steam these were to provide. The original program had to be revised drastically downwards mid-way through the project cycle and the geographical focus had to be shifted to Leyte, a move which helped utilize the loan allocation. (paras. 22-29) iv x. Bank and Borrower performance. Bank performance through all stages of the project cycle was satisfactory. This performance was particularly noteworthy regarding the design of the Project, the assistance rendered to NPC during its financial crisis, and the close working relationship with PNOC-EDC. Overall, the Borrowers also performed satisfactorily. However, NPC's failure to deal with its financial weaknesses and its absorption in pursuing private investment, led to problems and delays, especially at the on-set. PNOC-EDC's optimism over geothermal potential also impacted Project performance. (paras. 34-38) xi. Project outcogm. Overall, the Project outcome was satisfactory. The matrix in Annex A, Table IB outlines the core factors and justifies this assessment. (para. 39) Summary of Findings, Future Operations and Lessons Learned xii. Findings: (a) The Philippines provides an example of how, under the right conditions, private investment in power generation can be forthcoming and how market forces help secure contracts with fair terms for both sides. In due time, most of the commercial risks should be borne by private investors, and the power development program should suitable accommodate independent power production. Such programs will be useful to investors, and further benefit would be derived by periodic market surveys of energy demand and growth. (paras. 32 and 43) (b) A focal point is necessary within a government to conduct energy policy. It should be the center for planning, guidance, monitoring, coordination and strategy development. (para. 13) (c) Those institutions which manage the environmental and regulatory aspects of the energy sector would gain a better appreciation of their tasks and discharge them more effectively with greater exposure to external developments and expertise. (para. 13) (d) Until petroleum prices and power tariffs are deregulated and operate in a competitive climate, their determination and adjustment should be a transparent process. (paras. 13 and 25) xii. Future operatin. DOE has mapped out a comprehensive restructuring of the energy sector, to consolidate the gains made so far regarding institutional strengthening, generation and transmission, coordination, and to prepare for an eventually restructured and competitive environment. (para. 40) xiii. Key lessons learned. To the lessons inherent in the findings above, the following should be added: (a) Effective supervision is critical to project success, and projects could benefit from more innovative approaches. Supervision could be made into a more proactive exercise, for instance, by considering supervision as part of an ICR exercise and trying to apply any lessons learned during the course of the project, where they would be of immediate use. (para. 45) (b) For the Bank, a feature of a sector loan as distinguished from a subsector individual project loan is the dialogue at the macro policy and central level, which is important too. A judicious and overlapping mix of both types is desirable. IMPLEMENTATION COMPLETION REPORT PHILIPPINES ENERGY SECTOR PROJECT (Loan nos. 3163-PH, 3164-PH, 3165-PH) PART 1: IMPLEMENTATION ASSESSMENT A. Statement/Evaluation of Objectives 1. Background. Bank involvement in the Philippine energy sector dates back to 1957. Bank lending in the sector was limited until 1981, at which time the Bank began lending to support various energy subsectors, including geothermal. In 1988, the Bank conducted a comprehensive Energy Sector Study in an effort to identify how the Government and the Bank could jointly work to address weaknesses in that sector. The findings of the Study proved very useful in assisting the Government in devising its Statement of Energy Policy (1989) and in formulating an agreed strategy for a five-year, least-cost development program for the sector. 2. The Energy Sector Project (1989) was conceived to support this development program, and also drew heavily on the work of the Energy Sector Study. The Project provided for three Bank loans totaling US$390 million for: (a) the National Power Corporation (NPC) for US$200 million (Loan no. 3163-PH); (b) the Philippine National Oil Company (PNOC) for US$150 million (Loan no. 3164-PH); and (c) the Government of the Philippines (the Government) for US$40 million (Loan no. 3165-PH). There were four beneficiary agencies in the Government: the Energy Regulatory Board (ERB); the Environmental Management Bureau (EMB) within the Department of Environmental and Natural Resources (DENR); the National Electrification Administration (NEA); and the Office of Energy Affairs (OEA), which was later subsumed into the Department of Energy (DOE) in 1992. 3. Repayment will be over 20 years, including a five year grace period, at the Bank's variable interest rate. The Government passed on US$17.8 million of the proceeds of its loan to EMB, ERB, and OEA as budgetary contributions, and made US$22.2 million available to NEA as an equity contribution. PNOC on-lent US$147.0 million to PNOC-EDC and Petron on the same terms as the Bank loan, with PNOC-EDC and Petron bearing the foreign exchange risk. 4. Project Objectives. The Project had two distinct but complementary objectives. The first objective concerned the implementation of the energy sector development program. This program aimed at (a) developing a sector-wide capability to increase energy resources and coordinate policy implementation; (b) adopting a least-cost development strategy for energy development; (c) strengthening regulatory activities for rational consumer energy pricing and improving product and service standards; (d) encouraging private sector participation through joint ventures and other schemes; (e) improving environmental standards and monitoring in areas of high energy use or resource development; and (f) enhancing the technical capabilities of sector institutions. 5. The second objective was to finance a time-slice of the energy sector investment program, for which each of the beneficiary institutions prepared its respective five-year investment program. Of the planned total of investments of US$3,509.2 million during the period 1989-93, the proposed expenditure of NPC was the highest (77.6%), followed by PNOC (21.1%), NEA (0.8%), 2 EMB (0.3%), DOE (0.1%) and ERB (0.1%). Bank loans under the Project were to provide 11.1% of the total investment. Loans from JEximbank were to finance a further 4.2%, and would be disbursed under a parallel financing arrangement with the Bank. The balance of 84.7% was to be financed through internal cash generation and from additional borrowings. 6. Project Components. The Project was to finance, inter alia, imported equipment and materials required for geothermal field development, power plant construction, power transmission and distribution, rural electrification, modernization of office and laboratory equipment of sector institutions, training, technical assistance, and a number of studies. In terms of physical work, the Project was to finance the development of 610 MW of geothermal resources, 1,650 MW of power generation capacity, and substantial expansion in transmission and distribution systems. In terms of policy and institutional reform, the Project was designed to redirect the country's energy development strategy. 7. Evaluation of Objectives. The objectives of the Project were the result of extensive dialogue between the Government and the Bank on issues raised by the Energy Sector Study. They were conceived subsequent to the election of a new Government in 1986, which was seeking alternative ways to manage the sector, and which abolished the Ministry of Energy in an effort to avoid concentrating too much power in the hands of a single Minister. The objectives were manifest in the Government's Statement of Energy Policy, which recognized that projects in the energy sector had intricate linkages with each other and with the sector as a whole and, further, that such linkages had implications to the overall health of the country. The sector institutions involved in the Project recognized that for their components to be viable, the sector program as a whole would have to succeed. 8. The Project was by nature complex, demanding and optimistic. It encompassed a wide range of policy and institutional issues, and included three IBRD loans and one JEximbank loan involving eight separate beneficiaries. Moreover, the implementation capabilities of these institutions were not initially known, as most of them had no recent experience handling sizable investment projects. In addition, the availability of additional sources of financing for the entire sector investment program was uncertain (para. 5). The BOT arrangements which came into vogue subsequent to the approval of the Project added to its complexity. In practical terms, NPC had little control over the choice and siting of BOT plants, and had to react quickly to accommodate changes to such plans. Also, because BOT financing arrangements incorporated new risk considerations, it was difficult to assess the long-term economic viability of this privatization policy. These factors could alone or together impact on the timely implementation and disbursement of the Bank loans, and were outside of Bank control. 9. The objectives of the Project were in line with the Bank's Country Assistance Strategy (CAS). The CAS aimed to revitalize economic growth, improve the efficiency of public corporations, and accelerate privatization. The Project stands as an example of how the Bank was able to influence the direction of a sector far exceeding its relative financial contribution. 10. The Project was responsive to changes in the Government's priorities regarding macroeconomic strategy and sector policy reforms. The design of the Project afforded flexibility in financing components of the energy sector development program. Uncertainty with regard to the availability of other external sources of financing, especially the unsecured part, was recognized at the outset, and financing arrangements were so designed to allow the beneficiaries options in shifting around timings for World Bank/JEximbank financing, depending upon procurement policy 3 considerations. Accordingly, the loan agreements for PNOC and NPC prepared annual rolling investment and financing plans. B. Achievement of Objectives 11. Overall. The Project has substantially achieved its objectives, despite initial problems faced by (a) two sub-objectives with regard to introducing a least-cost power development strategy in the energy sector and encouraging greater private sector participation (especially with regard to NPC); and (b) the reshaping of the PNOC-EDC geothermal drilling program. 12. Macroeconomic policies. The Project contributed to the revitalization of the energy sector and improved the efficiency and capabilities of key sectoral entities (particularly NPC), all of which benefited the economic recovery of the country. These were important objectives of the Philippine CAS. 13. Sectoral and institutional policy objectives. The Project achieved its primary sectoral and institutional policy objectives, albeit, after initial delays. An examination of the separate sectoral and institutional policy components of the objectives follows: (a) Developing a sector-wide capability to increase energy resources and coordinate policy implementation. The Project sought to assist OEA in playing a coordinating role in policy planning. Until 1992, sector coordination was poor and important legislation often lagged. In that year, the defunct DOE was restored to give the energy sector cabinet-level representation. This development allowed the Secretary of Energy to replace the President's Executive Council Secretary as chairman of the Energy Coordination Council (ECC), which exercised broad powers in the sector. A further development saw the OEA attached to the ECC and later transformed into DOE. DOE was reorganized into four bureaus to better deal with (a) monitoring and assisting with demand management, conservation and efficient use of energy resources; (b) formulating policies and helping develop energy resources; (c) regulating financial and fiscal policies related to energy supply entities; (d) developing and monitoring energy plans and demand forecasts; and (e) incorporating national environmental goals into energy programs. In order to handle these functions successfully, DOE needed to undertake a number of studies, provide additional training to staff, and purchase modem computers and other equipment. The Project provided financing to allow DOE to undertake these activities; however, due to substitutions of some studies and with the transformation of OEA to DOE, only about 72% of the funds allocated for these purposes under the Project were utilized. While these institutional changes did not in themselves result in the improvements in sector-wide coordination as envisioned under the Project, nevertheless, the power crisis served as a catalyst in bringing the Philippine entities together to solve the problem. (b) Adopting a least-cost development strategy for energy development. The Government chose to defer a least-cost development strategy while the country faced a power crisis in 1991-93, and while NPC was in financial distress. To alleviate the power crisis, the Government opted for a fast-track program to attract IPPs as mentioned above. Although these projects were not necessarily least-cost options from a sectoral viewpoint, they were justified by longer-term strategic considerations in the energy sector and by the immediate benefits they brought to the economy as a whole. Only after the crisis eased did it pursue policies driven by least-cost considerations. (c) Strengthening regulatory activities for rational consumer energy pricing and improving product and service standards. Tariff reform was to be accomplished by adopting price 4 adjustment mechanisms (fuel price, foreign exchange and power purchase) and by incorporating demand charges. However, such reform was initially delayed by international oil price increases caused by the Gulf War and by the power crisis, and later by NPC's financial difficulties. The tariff structure eventually adopted was revenue-neutral for NPC and was implemented in January 1995. Through an array of adjustments, it promoted energy efficiency by reducing peak power demand and by promoting the more uniform use of electricity during daylight hours. (d) Encouraging private sector participation through joint ventures and other schemes. The role of private firms in the energy sector increased dramatically during the course of the Project, especially with regard to generation. However, this achievement was not without cost. In order to induce the Independent Power Producers (IPPs) to participate in the fast-track generation program in 1991-93, the time-slice of the least-cost development program had to undergo substantial revision. Nevertheless, the execution of the modified strategy created more favorable conditions for attracting sufficient numbers of IPPs, which proved critical to ending the power crisis -- a development that greatly facilitated the economic well-being of the country. Moreover, NPC was able to secure better terms from the IPPs as it gained greater experience in negotiating with IPPs and, with the easing of the power crisis, as it was increasingly guided by market considerations and less by crisis management. Encouraged by such results, the Government accelerated the program for the privatization of NPC's various operations in its 1992 Energy Section Action Plan (ESAP). The role of NPC was thus redefined. Its role would no longer be as a generator of power, but as a purchaser of power (mainly on a take-or-pay basis) and as an operator of the transmission system. As of end- June 1994, NPC was involved in 15 private generation projects (BOT, ROM, etc.), with some 18 more in the pipeline. The aggregate capacity of 20 projects for which data are available is about 4,000 MW, with private sector investment estimated at about US$4.2 billion. These figures surpassed the expectations at appraisal of both the Bank and the Government. The further privatization of NPC appears on track. Over the medium- to long-term, NPC will transfer its generation assets to a holding company which will spin off each individual generating plant to the private sector. The transmission function alone will remain with NPC. Privatization efforts at PNOC-Petron have also progressed. While the Government owns 40% of the shares of the company and Saudi Aramco holds another 40%, the remaining 20% is owned by about half a million Filipino stockholders. Petron has sought the Bank's consent to prepay the entire loan proceeds of US$20 million, which it had utilized for upgrading two facilities. PNOC-EDC also sought greater private sector participation by attracting IPPs into BOTs to convert over 600 MW of steam to electricity from fields in Leyte. This steam resource was partly identified by the current Project, and is being exploited by the Bank-financed Leyte-Luzon Geothermal Project (Loan no. 3747-PH) and the Leyte- Cebu Geothermal Project (Loan no. 3702-PH). The Project also advanced privatization efforts at PNOC, which utilized a small technical assistance component to facilitate privatization of its subsidiaries. (e) Improving environmental standards and monitoring in areas of high energy use or resource development. This involved the modernization of environmental monitoring facilities and capabilities in response to energy developments. The Project succeeded by and large in enhancing the quality and competence of the EMB. It is now better equipped, and its personnel better trained with consultant assistance, to carry out its various functions. However, EMB was only able to utilize 75% of its allocation, as delays at the Department of Budget prevented the timely release of funds under the Project. (f) Enhancing the technical capabilities of sector institutions. The Project improved the technical capabilities of ERB staff by financing their participation in various local and foreign 5 training courses, conferences and seminars, and by supporting technical assistance in regulatory procedures, price and tariff determination, and related subjects. ERB acquired new capabilities to discharge its responsibilities with respect to inspecting and enforcing conformity to standards of metering equipment, petroleum products, etc. ERB also acquired computer hardware and software under the Project. The Project financed technical training for staff at NEA, as well as at the Rural Electrical Cooperatives (RECs) which NEA oversees. Such training allowed the RECs to upgrade and rehabilitate critical transformer/substations and distribution equipment. It also laid the groundwork for a broader development agenda for the RECs, which was addressed under the subsequent Rural Electrification Revitalization Project (Loan no. 3439-PH). 14. Financing objective. The total investment program under the Project was to be financed from four sources: (a) World Bank loans (with JEximbank parallel financing); (b) other committed loans (including from bilateral sources); (c) other uncommitted loans; and (d) internal cash generation. While adequate financial mobilization from external sources was largely realized (primarily due to interventions by IPPs under BOT contracts), counterpart financing for the Bank component from internal cash generation was found wanting, particularly with regard to NPC. This development was not anticipated by the Bank in its appraisal in 1989, at which time the Philippine economy and the energy sector were both growing by 5% annually. Howeve'r, this situation changed dramatically as a series of events unfolded which impacted the sector in general and NPC in particular: the lack of a replacement for the Bataan nuclear power plant and the breakdowns of badly maintained thermal plants, combined with the effects of the drought, which precipitated a period of extended brown-outs; the Gulf War, the increase in international oil prices, and Peso devaluation, which impacted on both NPC's costs and revenues; and NPC's asset undervaluation and the political unpopularity regarding tariff increases, which further compounded NPC's abilities to increase revenues. As a result, NPC became in technical default of its loan covenants and was unable to attend adequately to its investment program. All of this coincided with (and contributed to) the country's power crisis. These problems caused a delay in the effectiveness of the JEximbank loan until October 23, 1992, and the extension of its closing date until December 31, 1996. While the Bank has been able to disburse 95% of its loan to NPC, JEximbank disbursements have been slow, but Jeximbank is expected to disburse about US$62 million by end-1996, against US$150 million which was made available. 15. Physical objectives. The overall physical objectives of the Project were substantially achieved. The physical objectives of the sector program in geothermal exploration, power generation and transmission were substantially achieved, albeit, with an increased focus on fossil fuel-based generation. 16. NPC. The construction of the Palimpinon II (2x2OMW) four modular geothermal power plant commenced on May 13, 1992. All four units became operational between February 1994 and May 1995. While the cost of Palimpinon 11 was originally estimated at US$80.2 million, the eventual cost totaled US$105.1 million, reflecting increases associated with implementation delays and exchange rate losses. The procurement of 69kV transmission line materials for Luzon, Visayas, Mindanao, and the Small Island grid have been completed, and some transmission lines in Luzon and Visayas have already been erected and energized. The US$200 million Bank loan for these purposes has been fully disbursed. The remaining transmission system construction will be financed by JEximbank (70%) and by NPC's internal cash generation (30%). 17. The contract for the rehabilitation of the Ambuklao hydroelectric plant was terminated effective November 1, 1991 to encourage private financing. The rehabilitation is now 6 being effected under an ROL agreement by a consortium including MERALCO Industrial Engineering Services Corporation, Morrison-Knudsen Corporation, Mindanao Shipbuilding Corporation, and J.G.S. International Corporation. 18. PNOC-Petron. PNOC-Petron successfully upgraded two facilities at its refinery under the Project. The Gas Oil Desulfurizer Unit (GODU) was commissioned on April 23, 1995 and the LPG treating facilities were completed on February 25, 1995. During the performance test-run, the GODU operated with a sulfur product of 0.12 wt % based on a 1.33 % feed sulfur content. The LPG produced yield has increased by 13%, equivalent to a 400 barrels per day increase in LPG production, but this was below 1990 projections. 19. PNOC-EDC. PNOC-EDC drilled 38 of the 76 geothermal exploration wells in Luzon, but the results were disappointing, as large geothermal reserves in commercial quantities were not discovered. Priorities then shifted to Leyte, where 28 of the wells had been drilled. The target commission dates were postponed, while completion of resource assessment and development strategy targets were met between one and two years later than scheduled. Despite these delays and the lack of commercially viable geothermal resources in Luzon, PNOC-EDC has continued exploiting geothermal resources in Leyte under two subsequent Bank-funded projects, and in new BOT ventures. 20. NEA. The Project provided for the rehabilitation of 12 RECs and financed an additional eight substations and 21 power transformers and substation packages. 21. Economic Rate of Return. The economic rate of return for the project has been computed at 13.5%. This computation did not follow the methodology used in the SAR. The earlier methodology did not make allowance for the role of independent power production, which has become very prominent in the interim, and therefore would likely overestimate the value of the project's benefits. Because of this new phenomenon, NPC's investment streams have focused on lower return rehabilitation/retrofitting of old plants and transmission networks, and not on new generation capacity. The 13.5% ERR assumes that the economic value of a kWh of electricity sold to the distributors at high voltage terminals, after transmission in the main grids, is US7cents/kWh (in 1994 terms). This, in fact is approximately the amount currently being realized through existing tariffs. This ERR of 13.5%, without having to bring into reckoning "consumer surplus," is indeed satisfactory. While it is somewhat lower than the 17% computed at appraisal, a value comparable to the appraisal estimate would have been likely had the original methodology been followed. C. Major Factors Affecting the Project 22. The major factors affecting the achievement of Project objectives were mainly those subject to the control of the Government or the implementing agencies, and the risks associated with exploration. 23. Factors generally subject to Government control. The main factors affecting the achievement of Project objectives at this level included tradeoffs between the pursuit of a least-cost or a fast-track strategy, the politicization of tariff adjustments, the weak financial position of NPC, and delayed budgetary allocations to ERB and EMB. 24. In its drive to end the power crisis (power outages and brown-outs of the late 80s and early 90s), the Government was anxious to attract private interest in fast-track power generation, 7 even assuming some commercial risks itself. It accomplished this by supplying fuel at its own cost to IPPs, by providing counter-guarantees on NPC guarantees for take-or-pay contracts, and by offering incentives for power production above contracted quantities. At first, the IPPs installed mostly gas turbines. These were favored because of their low gestation time and relatively lower capital costs; however, their operational costs were relatively high as typifies peaking facilities used for base load generation. Relieved from the pressures of the power crisis, NPC was able to introduce competition in the selection of IPPs and choose lower generation cost through longer lead-time projects, thus achieving much lower generation costs. 25. The politicization of tariff reform brought to the forefront a controversy concerning NPC's exemption from fuel taxes. These taxes were assessed and collected at P2,950 million in 1992, but not refunded (as was the normal practice) in view of the controversy. The Supreme Court eventually ruled in favor of the exemption, greatly facilitating NPC's financial recovery. 26. By 1991, NPC's financial situation had deteriorated to the extent that its rate of return was just 3% against the covenanted 8%, and the debt service ratio dropped to 0.9, the lowest level since 1985. As a result, NPC was in technical default of loan covenants as stipulated by the Energy Sector Project and the Bacon-Manito Geothermal Project (Loan nos. 29690-PH and 29691- PH). NPC's situation was, in part, precipitated by factors beyond its control, including the devaluation of the Philippine Peso in 1990, the catastrophic droughts in Mindanao, and the upsurge in oil prices caused by the Gulf War. However, NPC contributed to its travails by its failure to disclose its true financial condition during 1987-90, when it resorted to a limited revaluation of its assets and depressed its rate base. Had it carried out a full revaluation -- as was done subsequently with consultants in 1992-93 -- the drastic remedies administered through a reform program in 1992 might not have been necessary. At present, NPC's financial condition is satisfactory; however, to maintain its financial health, NPC must remain vigilant. NPC, in its own evaluation of the Project, states this as a key lesson learned. 27. Factors under the control of the implementing agencies. Factors relating to NPC were partially addressed in the previous paragraph, as they interrelated with Government actions, but other factors exclusive to NPC affected the achievement of Project objectives. For one, NPC's organizational weakness led to its fighting "brush fires" under exigencies of power outages and brown-outs, diluting its attention from construction and expansion projects. Implementation delays (in procurement, engineering design, and right-of-way acquisitions) in the course of the Project became endemic with NPC, a feature from which it is now recovering. 28. While other implementing agencies did not face this range of problems, the encountered delays in start-up and implementation, owing to their unfamiliarity with Bank procurement procedures and with .he preparation and evaluation of bid documents. 29. PNOC-EDC tended to be overly optimistic, both in planning for the number of delineation/development wells to be drilled at geothermal sites in Luzon and in estimating the power capacity from the geothermal steam these were to provide. The original program had to be revised drastically downwards mid-way through the project cycle and the geographical focus had to be shifted to Leyte (which proved a fruitful move). It seems advisable, in planning for delineation/development of uncertain prospects and providing for funds, that probability assessment techniques be used (e.g., Monte Carlo). 8 D. Project Sustainability 30. Project sustainability appears likely. At the macro level, the economy has been recovering. The country has resolved the power crisis and appears to have learned from this experience. This resolution also allowed Project objectives to come back into play. The energy sector looks set to enjoy orderly energy growth with cost optimization. The DOE, since its restoration in 1992, and with renewed authority over the various entities in the energy sector, has been framing pragmatic energy policies and medium- to long-term plans. The Medium-Term Energy Plan (1993-2000) was initiated in 1993 and was updated as the Philippine Energy Plan (1994-2010) in 1994. DOE is also cognizant of emerging issues, such as demand side management and energy conservation. It is also mindful of the financial implications and timing of new capacity additions by IPPs. Such prudence is important, as a mismatch between guaranteed purchases of power and NPC's forecasts of sales growth or readiness to receive supplies could be financially costly, but power outages must be avoided in the end. 31. A number of reforms in the pipeline would carry forward the process of orderly energy growth, including: (a) restructuring NPC and privatizing its various generation plants; (b) developing an independent transmission company (NPC may be wholly assuming this function) which will provide IPPs with open access to the power market and thus introduce competition among power suppliers; (c) deregulating energy pricing (targeted for end- 1996); (d) strengthening the capabilities of NPC's BOT Center to ensure competitive private investments; and (e) developing adequate projects suitable for private participation. NPC's latest effort to reward and promote good performance, its Productivity Enhancement Program, should also contribute to sustainability. 32. Further, the allocation of risks between the Government and its entities on the one hand, and the private sector on the other, is being studied. This analysis will focus in particular on policies guiding guarantees and pricing. Limits on the overall use of guarantees, consistent with a realistic evaluation of the country's fiscal capacity and macroeconomic priorities, will be part of this initiative. 33. Finally, the Bank's CAS will support the strengthening of infrastructure to ensure that new generation capacity will benefit the public at large. The Bank's continued participation in the energy sector (as detailed above) is expected to reinforce the prospective policy thrusts that the Government is currently contemplating. E. Bank Performance 34. Preparation. Bank performnance with regard to Project preparation was satisfactory. Project identification was carried out in conjunction with the beneficiary institutions, and flowed from previous work with the same parties during the preparation of the Energy Sector Study. While the objectives of the Project were clear, the Project was necessarily complex, owing to the participation of eight separate beneficiaries, and its sector-wide scope. This complexity allowed for a degree of innovation with regard to Project design, and called for a great deal of effort on the part of Bank staff. Since the Project was financing only a time-slice of the investment program (of which there were many sub-projects), suitable sub-projects were selected from a rolling list which was prepared annually. The Project afforded additional flexibility by allowing the beneficiary institutions to seek alternative financing arrangements using Bank funds as a backstop. Since it was anticipated that some sub-projects would involve BOTs, an innovative mechanism for financing procurement was worked out for such cases, though never used, apparently due to the perceived burden of 9 complying with Bank procurement procedures. With regard to environmental considerations, the Bank reserved the right to review the Environmental Impact Assessment, and stipulated that it must be satisfied before the Bank could approve the use of loan proceeds for particular sub-projects. The geothermal development around Mt. Apo was excluded from the 1989-93 time-slice until an environmental assessment could be completed, but given the continuous protests by NGOs regarding the environmental impact of such development, it was subsequently dropped from consideration for Bank financing. 35. Appraisal. Bank performance with regard to appraisal was satisfactory, especially given the complexity of the Project. In fact, one Executive Director commented that the Project was a "well designed operation which is central to the Bank's Assistance to the Philippines." However, it should be pointed out that, between the first appraisal mission in July 1989 and the first supervision in June 1990, when Bank staff were concentrating on the loan approval process, the financial situation of NPC quickly deteriorated. While the Bank had recognized that NPC's finances were weak from the on-set, it had not fully appreciated the severity of its financial position, nor anticipated how vulnerable NPC was to the exogenous factors which quickly brought about its financial crisis (para. 14). However, the Bank was quick to adapt its supervision priorities and respond to NPC's financial crisis by providing strong support during the crisis that followed. 36. Supervision. Bank supervision was satisfactory. Given the complexity of the Project and the fact that there were eight Philippine entities involved (para. 8), supervision efforts focused on a few, key issues. With regard to NPC, the aim was on alleviating its financial problems, compliance with legal covenants, improving its efficiency, and encouraging private participation in generation and privatization. With regard to PNOC-EDC, supervision was more hands-on, with Bank staff involved in implementing sub-projects and in guiding the steps for BOT power generation. The DOE entities did not require much supervision given the relatively simple scope of their participation. F. Borrower Performance 37. Preparation. Overall project preparation by the Borrowers was satisfactory. Such preparation was in large part a follow-up on the Bank's Energy Sector Study (1988) and to the Government's Statement of Energy Policy, as the sector reforms embodied in the Project (e.g., privatization, least-cost development, economic prices, etc.) were set out in these earlier works. In such a framework, NPC, OEA and PNOC drew up action plans and investment programs which could be coordinated, yielding economies of scale and scope. However, NPC made overly optimistic assumptions about its internal cash generating capabilities, and this error, in combination with a number of exogenous factors, contributed to its financial distress -- and to subsequent problems with implementation and performance. 38. Implementation. The overall implementation performance of DOE, EMB, ERB, NEA and PNOC was satisfactory. In the case of NPC, Project implementation was unsatisfactory in the early years, due to its absorption in the pursuit of private investment, but improved with the easing of the power crisis and its own financial recovery. Project implementation problems included slow disbursement, procurement complications, delays in the availability of counterpart funding, and delays in acquiring rights-of-way. There was further a deferment in the effectiveness date of parallel financing by JEximbank, resulting in a delay in the implementation of the subproject, which is not expected to be completed until 1996. 10 G. Assessment of Outcome 39. The outcome of the Project was satisfactory. The Project substantially achieved its major objectives, given the changed environment, and is likely to achieve satisfactory development results with only a few shortcomings. Annex A Table lb provides a breakdown of the extent to which estimates in the SAR were realized. H. Future Operations 40. At the sectoral level, future operation would be greatly advanced by undertaking appropriate measures to improve the private business environment, strengthen policy formulation, and ensure efficient project implementation. The Bank has succeeded in shaping a favorable investment climate, despite its relatively minor resource commitment. Further, the Bank will continue its on-going dialogue with the Borrowers in the course of follow-on projects, further improving the operating environment. In addition, DOE has mapped out a comprehensive restructuring of the energy sector to be accomplished in three phases (Annex B, Table 2). Phase one (1994-98) is directed at strengthening all sectors and participants in the industry, restructuring generation and transmission, facilitating coordination, and preparing the industry for increased competition, privatization and decentralization. Phase two (1998-99) will focus on evaluating results and further restructuring and privatization. Phase three (1999-04) envisions moving into a completed restructured and competitive environment. With respected to the operating units of NEA, NPC and PNOC financed under the Project during Phase I, the associated measures should help guarantee proper maintenance of their respective operations. I. Key Lessons Learned 41. It would be trite to state that any commercial institution must maintain a continuous vigil over its financial position. However, considering the experience of NPC, this lesson bears restatement. Financial and commercial policies must be adopted with due consideration of their ultimate consequences. Exigencies of operation must not result in onerous financial conditions, as it could have long-term repercussions. It would be desirable that NPC study the implications of the several IPP contracts it has signed with take-or-pay clauses and high plant factors. While contract conditions must be honored, NPC should have a clear idea of the problems which may arise from such obligations, including the problems associated with coordination of the IPPs. 42. Privatization can succeed if implementing agencies are committed to the new policy paradigm, take bold but flexible steps, and institutions provide incentives for prospective participants (such as IPPs). In the design of future energy sector projects, policymakers and managers need to recognize how and when to modify (or abandon) conventional assumptions, and to apply a strategy that will introduce innovative solutions in a fast-changing global economic environment. For example, to resolve the power crisis, it was necessary drop the belief/paradigm that NPC should/could have a monopoly on the energy supply in the Philippines. This paradigm shift made private funding possible. 43. Private investment must be secured under competitive conditions to ensure that market forces help achieve least-cost solutions. Investors must be expected to bear all commercial risks. Where exigencies of circumstances, such as the pressing need for external capital/new technology, obliges governments or their agencies to assume some of the commercial risks, there 11 should be a thorough analysis of the long-term implications with objective, expert assistance, and then the terms of such offers should be negotiated on fair terms for both sides. 44. Bank guidelines for procurement have uniformly been appreciated by the Borrowers for their transparency and integrity of the processes involved, yet developing a mastery of these guidelines seems to be a protracted undertaking. Apart from the Bank educating concerned personnel of the Borrowers (even during appraisal), it may be worthwhile to require borrowers to maintain continuity of key personnel to handle procurement from loan to loan. 45. Given the complexity of the Project and the critical nature of the work which needed to be carried out during supervision, particularly regarding NPC's financial situation and implementation problems, the Bank could have undertaken more initiatives to make such supervision more effective. One approach would be to consider some of the topics during supervision that are normally considered during an ICR exercise (Borrower performance, Bank performance, Lessons Learned, etc.) so that supervision would become more of a proactive exercise and any lessons could be applied during the course of the Project, when they would be most useful. Moreover, a more judicious allocation of responsibilities among professional staff may be called for in order to cover as much ground as possible, with the possibility of rotating Task Managers. I 12 IMPLEMENTATION COMPLETION REPORT PHILIPPINES ENERGY SECTOR PROJECT (Loan nos. 3163-PH, 3164-PH, 3165-PH) PART II: STATISTICAL ANNEXES ANNEX A: STATISTICAL TABLES Table 1: Summary of Assessment A. Achievement of objectives Substantial PiNegligible hk appllicable Macroeconomic policies 0 00 0 Sector policies 0 0 0 0 Financial objectives 0 0 0 0 Institutional development 0 0 0 0 Physical objectives 0 0 0 0 Poverty reduction O 2 O 0 Gender concems 0 O O 0 Other social objectives 0 O 0 Environmental objectives o 0 0 0 Public sector management O 0 0 0 Private sector development 0 0 0 0 Economic benefits Ql O B. Proiect Sustainabilitv Likely Unlikel Uncertain 1/ (V (/ (/ 0 0 0 C. Bank Perfofmance Hi2hlv Satsifactory SatisfactoQ Deficient (/) (/) (/) Identification 0 0 0 Preparation assistance 0 0 0 Appraisal 0 0 0 Supervision 0 0 0 D. Borrower Performance Hi1hly Sfifc Satsatr Deficient (/3 (/3 (/ NPC (Loan 3163-PH) Preparation O0 0 Implementation 0 0 0 Covenant compliance 0 0 0 Operation (if applicable) E 0 0 PNOC (Loan 3164-PH) Preparation 0 0 Implementation 0 G Covenant compliance 0 0 0 Operation (if applicable) 0 0 0 13 D. BorrowerPerformance Higly Safisfctory Satisfactory Deficient (I) (' (0 PNOC-EDC (Loan 31 64-PH) Preparation 0 0 0 Implementation 0 0 0 Covenant compliance 0 o Operation (if applicable) 0 Q O PNOC -PETRON(Loan 3164-PH) Preparation 0 0 0 Implementation 0 0 0 Covenant compliance 0 0 0 Operation (if applicable) 0 Q O DOE (Loan 3165-PH) (/) () (0 Preparation 0 Implementation 0 0 0 Covenant compliance 0 0 0 Operation (if applicable) 0 0 O ERB (Loan 3165-PH) (I) (I (/) Preparation 0 0 0 lmplementarion 0 0 0 Covenant compliance 0 Operation (if applicable) n 0 O NEA(Loan3165-PH) (/) (0 (I) Preparation 0 0 o Implementation 0 0 Covenant compliance Q 0 0 Operation (if applicable) o 0 0 EMB (Loan 3165-PH) (/) (I) (/) Preparation 0 0 0 Implementation 0 0 0 Covenant compliance Q 0 0 Operation (if applicable) 0 0 0 E. Assessment of Outcome Higly Satisfactory Satisfactory Deficient (0 (0 (0 0 0 0 14 Table lb: Summary of Assessment (Overview: Expectudons and Performance) SAR Actual Bank Bank estimates of project loan loan project costs costs amount utilized Beneficiary 1989-1993 1990-1995 Brower agency Core goals of ESP Results achieved SM $ 5M S M SM GOP OEA/DOE Lead & coordinate DOE under a full time Secretary in L3163- sector activities; Charge of Energy affairs created; PH 4.3 3.1 4.3 3.1 Carry out studies with Done, and findings used for policy expert help. ERB Raise professional Done, more remains to be done competence to regulate energy prices/inspection. 3.0 3.5 3.0 3.5 EMB Raise professional Done, but more remains to be done competence to safeguard the environment implementing energy projects 12.2 7.8 10.1 7.8 NEA Boost rural First-aid type assistance provided. electrification, where Revitalization of project is ongoing moribund pending a comprehensive revitalization project 26.5 i& 22.6 ,& Subtotal 440 f27 40 ,-7 NPC Adopt a least cost Energy crisis and financial woes of NPC L3163- development program in 1990-91 upset the program; but this PH) NPC over 1989-93 and accelerated private investments in power optimize generation - initial fast track projects investments/returns; were not cost effective, but subsequent invoke private ones were, mainly due to market participation, etc. competition and enormous interest in the Philippines. If NPC had been more alert in 1990, the financial crisis would have been mitigated and drastic steps of the Recovery program enforced by IMF with Bank support obviated 2722.0 2292.0 200.0 200.0 PNOC- PNOC-EDC Develop Steam Luzon did not keep its promises, so L314- Delivery in Luzon/ PNOC-EDC diverted attention to Leyte PH Visayas & Provide a where there has been success; and BOTs local economic will convert steam to electricity. resources for power generation, seek private, participation 466.0 265.0 133.0 118.0 Petron Upgrade quality of Done in all respects diesel oil/ increase LPG production/ privatize 29.0 37.0 14.0 20 PNOC Re-orient towards Largely done; PNOC-EDC will also be privatization of almost privatized in the coming two years. all its subsidiaries UQ U33 L Subtotal 498.0 303.3 150.0 139.3 Total Project Loan Disbursement 3266.0 2628.0 390.0 372.0 % actual to Planned Disbursements 100% 80% 100% 95% Overall Economic Rate of Retum 17.0% 13.5% .Includes costs financed from Energy Sector Project loan. For breakdown of total cost and financing- see table 8A & 8B 15 Table 2: Related Bank Loans Loan/credit title Purpose Year of Status approval Preceding operations Loan 2201-PH & 2202-PH Promote private oil companies in petroleum 1982 Closed Petroleum Exploration Promotion exploration and strengthen the expoloration Project capabilites of Bureau of Energy and PNOC. Loan 2203-PH Improve national strategy for geothermal 1982 Closed eothermal Exploration Project exploration, govemment geothermal development policy and institutions; facilitate private involvement in geothermal exploration etc. Loan 2969-PH Support the least cost source incremental 1988 Closing Bacon-Manito Geothermal Power capacity for Luzon grid; and strengthen Project institutional capabilities and financial viability Loan 3084-PH Improve MERALCO's sub- transmission and 1989 Active Manila Power Distribution distribution system and its institutional capacity Following operations .EXIM NPC- JEXIM component First phase of a least-cost energy sector 1992 Active of Loan 3163-PH development program Loan 3439-PH Rural Enhance National Electrification Administration's 1992 Active Electrification Revitalization effectiveness, REC's Investment Program for Project 1992-95 L3626-PH NPC-Power Alleviate power shortage in Luzon 1993 Active Transmission & Rehabilitation Project Loan 3700-PH/Loan 3702-PH Develop geothermal resources for power 1994 Active NPC-Leyte-Cebu Geothermal generation, strengthen institutions and their Project financial viability. Loan 3746-PH/Loan 3747-PH Develop geothermal resources for power 1994 Active NPC-Leyte-Luzon Geothermal generation, strengthen institutions and their Project financial viability Loan -PH Power Transmission Support the Government's plan to restructure the 1996 Appraisal stage & Rehabilitation National Power Corporation and power sector privatization 16 Table 3: ProJect Timetable Steps In project cycle Date planned Date actual/latest esdmate Identification October 1988 October 1988 Preparation May 1989 May 1989 Appraisal June 1989 June 1989 Negotiations October 1989 October 1989 Board presentation January 1990 February 1, 1990 Signing March 1990 March 16, 1990 Effectiveness May 1990 June 12, 1990 Project completion December 31, 1994 December 31, 1995 Loan closing (Loan 3163-PH)) December 31, 1994 June 30, 1995 Loan dosing (Loan 3164-PH, 3165-PH) December 31, 1994 December 31, 1995 Table 4: Loan Disbursements: Cumulative Estimated and Actual (USS million) Bank FY FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 15.00 70.00 160.00 280.00 372.00 390.00 Actual 15.00 82.53 155.90 234.18 315.01 368.96 370.77 Actual as % of estimate 100 115 93 83 82 94 9 a) Loan 3163-PH: National Power Corporation Bank FY FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 6.00 26.00 62.00 127.00 189.or 200.00 Actual !5.00 53.32 100.04 159.00 188.18 200.00 Actual as % of estimate 250 211 161 124 96.0 100% b) Loan 3164-PH: Philippines National Oll Company |Bank FY FY 90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 6.0 28.0 64.0 112.0 142.0 150.0 |Actual 0.0 19.82 36.97 54.61 105.05 139.21 139.31 |Actual as % of estimate 0 7168 58 49 105.05 93 93 bi) Loan 3164-PH: PNOC-EDC Bank FY FY 90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal/revised estimate 2.5 33.3 65.5 122.1 133.0 133.0 Actual 0.0 19.0 33.7 49.6 84.3 117.9 118 1Actual as % of estimate 0 57 51 40 63 89 89 Revised appraisal estimate not consistent with appraisal disbursement for the loan as a whole. 17 b2) Loan 3164-PH: Petron Corporation (Part A (2) of Loan Agreement) Bank FY FY 90 FY91 FY92 FY93 FY94 FY95 FY96j6 Appraisal estimate Actual 0.0 0.52 2.94 4.36 19.97 19.97 ctual as % of estimate *Planned disbursement for part A(2) of loan agreement not available in appraisal document. Figure only for total loan. c) Loan 3165-PH: Republic of the Philippines Bank FY FY 90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 3.0 16.0 33.3 40.0 Actual 0.00 6.50 14.88 22.16 25.83 28.61 32.70 ctual as % of estimate 0 41 44 55 64 72 80 ci) Loan 3165-PH: Department of Energy (DOElformerfy OEA) ank FY FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 0.50 2.50 4.30 Actual 0.34 0.53 0.68 1.26 1.91 2.53 3.11 Adual as % of estimate 68 21 16 29 44 59 72 c2) Loan 3165-PH: Energy Regulatory Board (ERB) |Bank FY FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 0.50 2.50 3.00 Actual 0.00 0.08 1.21 1.97 2.39 3.45 3.45 Actual as % of estimate 0 3 40 66 80 115 c3) Loan 3165-PH: National Electrification Administration (NEA) Bank FY FY 90 FY91 FY92 FY93 FY94 FY95 FY96 ppraisal estimate 1.00 7.00 16.60 22.30 ctual 0.00 8.78 16.87 16.87 16.87 18.33 18.33 ctual as % of estimate 0 87 90 80 80 81 c4) Loan 3165-PH: Environmental Management Bureau (EMB) IBank FY FY 90 FY91 FY92 FY93 FY94 FY95 FY96 |Appraisal estimate 1.00 4.00 9.40 10.40 IActual 0.13 0.47 0.61 5.44 7.80 Actual as % of estimate 1 5 6 52 75 Loan 3163-PH final transaction on February 23, 1995. Loan 3164-PH final transaction on April 15, 1996. Loan 3165-PH final transaction on May 3, 1996. 18 Table 5: Key Indicators for Project Implementation a) Loan 3163-PH: NPC (As_of June_30,1996) Appraisal estimates Actual or latest estimates Components Location Capacity Completion Total Capacity Completio Total (MWIKy) year cost (MW) n year cost Geothernnal Visayas 4X20MW 1992 80.20 4X20MW 2J1194 109.11 Palimpinon II Rehabilitation-Thermal Luzon 400 MW 1991 114.9 400 MW 12131194? 2.28 (Sucat 2&3 (advance procurement) 69KV transmission lines and Luzon, 670 km 1993 51.5 634km continued 21.91 New Island Grd transmission Visayas & 747.5 km 199.9km under Lines Mindanao 400 km 484.2km JEXIM 1818.5km 1318.1km Table 6: Key Indicators for Project Implementation b) Loan 3163-PH: NPC's Generating Capacity from Independent Power Producers(IPPs) by Source of Energy (MW) Private Capacity Source of Energy Oil Coal Geothermal Hydroelectric Total Year 1993 Benguet Hydro 22 22 Sucat Land Base 30 30 Subic-Zambales 28 28 Gas Turbin Barges 150 150 Subic-Zambales 108 108 Novatas GT 100 100 Limay CC GT 210 210 MacbanBinary Geothermal 16 16 Clark Base Diesel 50 50 Pinamucan Batangas 150 150 Binga Hydro 100 100 Maibara Geo 13 13 Calaca Batangas 90 90 Limay, Bataan CC 210 210 Tomen Diesel 40 40 NSC Diesel 50 50 lligan Diesel 98 98 Year 1994 Bataan EPZA Diesel 58 58 North Harbor Barge 90 90 Cavite EPZA Diesel 63 63 Bacman Geothermal 16 16 Malya Skid Mounted 50 50 Engg Island Barge 100 100 Novatas Diesel Barge 120 120 Limay CC Cycle B 90 90 Limay CC Cycle B 90 90 Bauang, La Union 215 215 Ambuklao 75 75 Mindanao Barges 200 200 Year 1995 Pagbilao, Quezon 1 350 350 Year 1996 Pagbilao, Quezon 11 350 350 Leyte-Cebu Geothermal 200 200 Year1997 Leyte-Luzon Geothermal 440 440 Year1998 Mindanao Geothermal 240 240 Year 199 Sual Pangasinan 1000 1000 Torcental 12= 195 .~~~~~~~l . l. . 19 Table 5: Key Indicators for Project Implementation c) Loan 3164-PH: PNOC-EDC - Resource Assessment & Development Strategy SAR estimates Actual Capacity Target Completion of Completion of Capacity Date Completion Completion of of Subprojects MW Commissio Resource Development MW Commissioned Resource Development ning Assessment Strategy Assessme Strategy nt Bacman l&ll 40 1992 Dec. 1988 Apr. 1989 40 1993 Dec. 1988 Apr. 198 Pinatubo 60 1993 Dec. 1989 Apr. 1990 - abandoned Apr. 1990 Natib 60 1993 Dec. 1989 Apr. 1990 - abandoned Jan. 1990 Bulusan 60 1994 Dec. 1990 Apr. 1991 - need further N/A N/A evaluation Labo/de 120 1994 Jul. 1990 Oct. 1990 120 1997 Apr. 1993 3rd. Q. 1995 Gallego Cagua 40 1994 Jun. 1990 Oct. 1990 - - Aug. 1991 N/A o. Negros 40 1994 Jun. 1991 Oct. 1991 40 1997 Mar. 1995 Jun. 1995 Po I 120 1993 Dec. 1988 Jun. 1989 120 1994/96 Dec. 1988 Jun. 1989 Upper Mahiao 110 1995 Jun. 1990 Dec. 1990 130 1996 Jun. 1990 May 1992 Maltibog 110 1995 Jun. 1990 Dec. 1990 240 1996/97 Jun. 1990 May 1992 Mahanagdong 110 1995 Feb. 1991 Nov. 1991 165 1997 Feb. 1991 May 1992 Ato Peak 80 1997 Feb. 1993 N/A Table 5: Key Indicators for Project Implementation d) Loan 3164-PH: PNOC-EDC- Drilling Program Implementation Appraisal Targets Actual/latest outlook 1989 1990 1991 1992 1993 Total 1990 1991 1992 1993 1994 1995 Total Bacman II 3 4 7 2 1 3 5 5 10 0 Natib I 4 5 5 15 0 Labo I 5 s5 9 20 2 1 3 Bulusan I 1 5 5 2 14 0 Cagua 1 3 5 1 10 0 N.Negros 0 3 1 4 Leyte 0 3 4 6 6 9 28 Total 4 11 24 25 12 76 5 5 6 6 14 2 38 20 Table 5: Key Indicators for Project Implementation c) Loan 3164-PH: PNOC-Petron Item Per Approved Actual Variance Schedule I Contract negotiationtfinalization of basic design consultancy I month 2 6n months 3 In months 2. Approvals (PNOCABIRD) & signing letter of I month 3 months 2 months intent 3. Slack from signing of LOI to start of design 0 month I month I month worksl 4. Basic design 3 months 6 months 3 months S. ITB package third party review 0 month 2 months 2 months 6. Solicitation of additional bids 0 month 7 months 7 months 7. Award approval (PNOC/IBRD) I mon 2 months I mon Total 6 months 23 1/2 months 17 1/2 months Table 6: Key Indicators for Project Operation a) Loan 3163-PH: National Power CorporatIon FY ended 1986 1988 1989 1993 1989 1990 1991 1992 1993 1994 1995 .... Actual .... ..... Projected ..... ................. Actual or latest estimates. Key operating indicators In SAR Physical: Energy sales ('000 gwh) 17.6 21.2 22.9 31.8 22.2 22.9 23.6 24.0 24.9 28.7 30.7 Financial:~ Operating revenue (P billion) 17.5 19.8 22 48.9 20.6 25.8 32.3 37.6 40.5 50.5 54.7 Average net revenue (ctvlkwh) 96.8 93.5 96.3 155.2 93 112 140 158 164 177 181 Net operating Income (P billion) 0.7 5.6 5.5 9.6 2.4 1.0 -3.7 7.1 6.8 12.1 9.8 NPC nnvestments FY 1989 1990 1991 1992 1993 1989 1990 1991 1992 1993 1994 1995 Capital expenditures 13.3 15 16.8 19.4 23.4 6.6 11.2 9.7 14.7 28.6 36.6 37.1 Intemal cash generation 4.6 6.9 10.7 10.3 9.5 -0.2 2.2 -4.9 11.6 10.0 23.2 24.9 Shortfall (financing 8.7 8.1 6.1 9.1 13.8 6.8 8.9 14.6 3.1 18.6 13.5 12.2 requirement) Financing Local component 5.0 4.9 5.7 7.4 8.5 0.3 0.6 2.5 4.5 9.5 11.9 15.5 Foreign component 8.3 10.1 11.1 12.1 14.9 8.49 10.2 10.7 10.2 19.0 24.8 21.6 21 Table 6: Key Indicator for Project Operation b) Loan 3184-PH: Philippines National Oil Company FYended 1986 1988 1989 1993 1989 1990 1991 1992 1993 1994 1995 Actual ............ . ......... Actual or latest estimates. Key Operating Indicators In SAR Physical: Petroleum product sales 21 32.1 33.3 46.5 36.3 40.4 40.3 46.2 51.5 54.2 54.3 (million barrels) Coal sales ('000 tons) 4.19 874 1061 1103 578 726 853 575 648 746 906.8 Geothermal sales (Gwh) 605 738 990 3664 1486 1487 1498 1493 1912 2240 2201 iFinancial: Revenues (P billion) 15.7 20.4 21.5 41.8 21.3 33.7 46.7 43.2 47.8 25.2 4.3 Net earnings (P billion) 0.4 1.3 1.2 3.5 1.6 1.7 2.0 2.5 3.5 19.2 2.4 Return on capital employed (%) 9.6 9.8 10.4 10.4 10.8 10.8 9.7 10.3 11.7 45.5 7.1 Table 6: Key Indicators for Project Operation c) Loan 3164-PH: Phileppines National Oil Company-EnerW Development Corporation FYYended 1986 1988 1989 1993 1989 1990 1991 1992 1993 1994 1995 Actual. r Projected .... ...... . Actual or latest estimates. Key Operating Indicators In SAR Financial: Revenues (P million) 391 544 681 3,240 .1041 1211 1367 1500 1970 2285 2275 Net eamings (P million) , 38 114 144 1,632 276 387 395 422 607 1207 730 Return on capital employed (%) 2.2 2.4 3.2 8.5 8.6 11.2 11.2 16.6 10.2 11.0 7.4 ' Unaudited Table 6: Key Indicators for Project Operation d) Loan 3164-PH: PhilIppines National Oil Company-Petron Corporation FY ended 1986 1988 1989 1993 1989 1990 1991 1992 1993 1994 1995 l | Actual Projected ................. Actual or latest estimates. Key Operating Indicators In SAR Financial: Revenues (P million) 391 544 681 3,240 19103 30995 43495 40712 44938 45943 44641 Net earnings (P million) 38 11414 1,632 859 868 1153 1472 2777 3736 4020 Return on capital employed (%) 2.2 2.4 3.2 8.5 9 7 10 10 14 15 18 22 Table 7: Studies Included in Project Purpose as defined Study/tfchnical assistance at appraisactredefined Status Impact of study |O/EA/ Loan 3165-PH |. Environmental Impacts Study sites producing Completed in Aug. 1995 pField Application of Reverse Osmosis of Accelerated Geothermal geothermal steam and examine instead of the planned System in the Treatment of Geothe1mal Energy Development the envrumetcntal situation, date of Mar. 1993 Wastewater BrineM was initiated. current and in the future; train Provided framework for DOE to OEA staff to discharge their discharge its enhanced responsibility for functions satisfactorily. the energy sector under the Republic Act 7638 fo. Coal Preparation Establish mobile coal testing The drum coal preparation Identity potential for upgrading for Testing Station Facility facility; replace non-power Plant was commissioned Philippine coal industry. and Pilot Research application of geo-thermal in 2nd quarter of 1994 eSg Luents - ense study in Mak- Ban D. InsFutionalization of Draw up-to-date local plans and Completed in 1993. Developed a frame work for Integrated ethods and Procedures capability for the increase and Developed the a Frame Energy Panning of sustainable for Local Non- widespread use of non- work for Integrated Energy Development(dREP). Conventional Energy conventional energy systems Planning of sustainable DOE to pilot test i p Planning at Regional and and then integrate these into a Developmento (IREP). All lSub-Regional Levels national energy system. components were completed. ID. Fuel Contingency Plan Define rolesdfunctions of Fuel contingency plan was Served as input in the Contingency various government agencies undertaken ahead of Planning Commitee chaired by NEDA, and the oil industry under schedule because of the created to forrnulate a national plan for contingencies and suggest Gulf-War and continued which the national contingency plan was policy guidelines on : being updated to conform the focal point administration, control, with current situation. domestic production, refining, (Financing was from other inventory control, allocation, sources.) distribution and security. E. Cost Structure and Operating, financing, & No- longer pursued under |Transfer Pricing in investment costs) of the oil the WB-ESL. USAID has Petroleum component. Produce agreed to finance the computerized database, study software and purchase recommended hardware and train OEA staff EMB (Loan 3165-PH) Manuals for Air and Reevaluate the requirements Manuals for air and water Applied water quality monitoring for satisfactory Environmental monitoring were Impact Assessments(EIASs) completed PNOC (Loan 3164-PH) Bacman ll For each site, prepare a Completed in-house. TDP Commissioned in 1993 resource assessment and Consultants' final report development strategy study to was presented to PNOC- form the basis for geothermal EDC in Aug. 90 power development investments. 23 Table 7: Studies Included In Project (continued) Purpose as defined Study/technical assistance at appraisal/redefined Status Impact of study PNOC (Loan 3164-PH) Natib Difto Completed in house. Final No development strategy has been report was submifted to programmed as area is considered less PNOC EDC in Dec. 90. promising/low priority Low priority based on the results of two wells results of two wells drilled. Pinatubo DiKto Completed in-house. TDP Project was abandoned consultant's final report was submifted to PNOC- EDC in Sept. 1990. Cagua Ditto Completed in-house. TDP Project was abandoned. consultant's final report was submitted to PNOC- EDC in July 1992. Report of Mesquite was completed in Oct. 1992. Labo Difto Preliminary in-house- Completed March 1995. resource assessment using discharge results of LB1 D and LB3D was completed in April 1993. Bulusan Ditto Need further evaluation No definite schedule yet. |Leyte Areas (upper Ditto Review of in-house Included in Leyte A Project. Mahiao, Malitbog, studies was presented to Mahanagdong) PNOC-EDC and WB in Mar 91. Resource Optimization for Upper Mahiao and Malitbog which was completed in Aug. 1992 was confirmed in Oct. 1992. Aito Peak Difto Final resource Final report based on results of AP9D is assessment report expected to be completed by December completed in June 1993. 1995 Mahagnao Difto Consultant's report Low priority - not included in the first 600 completed during second MW in Leyte A. quarter of 1992. A Study of Power Tariffs, Restructure energy pricing and conducted It is now possible to make monthly petroleum product pricing, use. Long run marginal pricing correction after separate adjustments and coal pricing scheme formula for fuel oil, diesel, coal and geothermal steam is designed. Study on Privatization Define independent conducted. Saw its first application in the form of Options for the Philippines (depoliticized) regulatory basic rates, fuel cost adjustment and lPower Sector system which: a) establishes currency exchange rate adjustment. fair and stable conditions for all NPC now able to cover its volatile costs. potential participants; b) implements an economically rational, financially viable, power tariff system that promotes efficient use of capital and energy. 24 Table 8A: Project Costs SAR Estimates Local Foreign Total Local Foreign Tota ency/Item Pesos million USS million Loan 3163-PH: NPC Base Cost 11001.6 41252.1 52253.7 511.7 1918.7 2430.4 Contingencies 2305.7 4685.8 6991.5 95 196.6 291.6 Subtotal 13307.3 45937.9 59245.2 606.7 2115.3 2722 Loan 3614-PH: PNOC Base Cost 7698.5 5326 13024.5 358.1 247.7 605.8 Contingencies 2263.6 1566 3829.6 80 55.4 135.4 Subtotal 9962.1 6892 16854.1 438.1 303.1 741.2 Loan 3165-PH: GOP OEADOE 46.2 47.4 93.6 2.1 2.2 4.3 ERB 47.3 17.2 64.5 2.2 0.8 3 EMB 6.4 255.8 262.2 0.3 11.9 12.2 NEA 92.5 478.5 571 4.3 22.2 26.5 Subtotal 192.4 798.9 991.3 8.9 37.1 4 otal Investment 23461.8 53628.8 77090.6 1053.7 2455.5 3509.2 Actual or latest estimates Local Foreign Total Local Foreign Total AgoncyJltem Pesos million USS million Loan 3163-PH: NPC Subtotal 9081.8 50505.0 59586.8 349.3 1942.5 2291. Loan 3614-PH: PNOC Subtotal 9764.8 5891.6 1565.4 376.0 229.6 602.9 Loan 3165-PH: GOP1/ OEA/DOE 36.4 44.2 80.6 1.4 1.7 3.1 ERB 24.2 66.1 90.3 0.9 2.5 3.4 EMB 6.5 157.8 164.3 0.3 6.3 6.6 NEA 114.4 475.8 590.2 4.4 18.3 22.7 Subtotal 181.5 743.9 925.4 7.0 28.8 35.8 otal Investment 19028.1 57140.5 76188.6 732.7 2200.3 2932.9 25 Table 8B: Project Financing Appraisal Estimate (USS M) Actual/ Latest Estimate (US$ M) Agency/Source Local Foreign Total Local Foreign Total Loan 3163-PH: NPC Committed Loan (OECF, Eximbank) ADB, World Bank, Italian, French) 110.5 794.5 905.0 65.2 996.1 10613.0 Loan under negotiation/negotiated 22.0 143.0 165.0 11.7 74.2 85.9 World Bank Sector Project 50.0 150.0 200.0 31.1 168.9 200.0 Eximbank Loan 50.0 100.0 150.0 32.5 117.5 150.0 Internal & Other financing 374.2 927.8 1,302.0 208.8 585.8 794.6 Subtotal 6067 2.115.3 2.722.0 349 1942.5 2291t Loan 3614-PH: PNOC OECF,ADB,WorldBank/a 100.0 100.0 211.4 124.1 335. World Bank Sector Project 150.0 150.0 - 139.3 139.3 Internal cash & other financing 438.1 53.1 491.2 133.7 - 133.7 Subtotal 438. 303.1 741.2 345.1 26A Loan 3165-PH: GPR OEA/DOE orld Bank Sector Project 21 2.2 43 1.4 1.7 3.1 ERB World Bank Sector Project 2 . 0.9 2.5 3.4 EMB World Bank Sector Project .3 10.1 10.4 0.3 6.3 6.6 Grant funds - 1.8 1.8 - - Subtotal .3 1 t9 12 2 0.3 6.3 6.6 NEA World Bank Sector Project - 22.2 22.2 - 18.3 18.3 Local Financing 4.3 - 4.3 4.4 - 4.4 Subtotal 4.3 2 4.4 18.3 22.7 Total 1,053.7 2,455.5 3,509.2 701.4 2234.7 2936.1 Of which: Committed loans from foreign sources 132.5 1,037.5 1,170.0 288.2 1194.4 1482.6 World Bank Sector Project 55.2 334.8 390.0 33.8 337.0 370.8 Eximbank Loan 50.0 100.0 150.0 32.5 117.5 150.0 Intemal cash & other financing 816.0 983.2 1,799.2 346.9 585.8 932.7 la US 41 million from Bank Loan No. 2969-PH. lb US 59 million from Bank Loan No. 2969-PH. Table 9: Economic Cost and Benefits IPP Generation/Transmission NPC's own Generation & Transmission from 1989 Purchased Assumed Incremental Purchased Fuel Transmission Total costs NPC Sales NPC Capex Fuel Transmission Total Costs Economic Net power Installed MW MW power cost Appropriatio Apportioned SM of own Generation Apportioned Apportioned $M Benefits Economic GWH @70% PF $M=Million n cost M Cost M power GWH 1994 SM Cost M Cost M Valued per Benefit S kWh 0.07 M 1989 0 0.00 0.00 0.00 21180 1591.36 612.49 323.65 2527.51 1482.60 (1,044.91) 1990 87 14.2 14.2 0.63 3.62 1.19 5.44 22828 327.46 790.31 311.89 1429.66 1604.05 168.96 1991 614 100.1 85.9 23.84 28.49 4.60 56.92 22984 256.70 883.83 172.07 1312.60 1651.86 282.34 1992 1142 186.2 86.1 48.74 45.65 5.41 99.80 22816 545.05 752.46 108.05 1405.56 1677.06 171.7 1993 4322 704.8 518.6 135.78 135.73 40.55 312.07 20483 916.51 513.44 192.19 1622.14 1736.35 (197.86) 1994 8866 1445.9 741.0 357.12 270.62 62.59 690.34 19880 1144.30 460.57 140.35 1745.22 2012.22 (423.34) 1995 12288 2003.9 558.1 402.97 290.85 154.13 847.95 18068 376.07 307.90 226.62 910.60 2124.92 366.38 1996 13305 2169.8 165.9 622.98 359.24 310.88 1293.10 20105 1181.22 461.41 469.77 2112.41 2338.70 (1,066.81 1997 18605 3034.1 864.3 859.45 502.34 407.42 1769.20 17912 1259.62 411.08 392.24 2062.94 2556.19 (1,275.95) 1998 24427 3983.5 949.4 814.42 659.53 314.64 1788.59 16103 910.91 369.56 207.42 1487.90 2837.10 (439.39) 1999 28532 4653.0 669.4 1112.99 770.36 281.87 2165.22 14208 774.03 326.07 140.36 1240.46 2991.80 (413.88) 2000 32534 5305.6 652.6 1055.95 878.42 161.64 2096.01 13713 419.50 314.71 68.13 802.35 3237.29 338.9 2001 33956 5537.5 231.9 1068.29 916.81 177.47 2162.58 15117 410.11 346.94 79.01 836.05 3435.11 436.4 2002 37841 6171.1 633.6 1214.33 1021.71 92.23 2328.27 15871 308.60 364.24 38.68 711.52 3759.84 720. 2003 42524 6934.8 763.7 1337.40 1148.15 143.38 2628.93 15435 391.52 354.23 52.04 797.79 4057.13 630.41 2004 46077 7514.2 579.4 1382.39 1244.08 128.73 2755.20 16373 395.07 375.76 45.74 816.58 4371.50 799.72 2005 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 389.19 488.05 33.02 910.26 4714.01 959. 2006 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 o 2007 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2008 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2009 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2010 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2011 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2012 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2013 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2014 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2015 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.13 2016 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.13 2017 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.13 2018 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2019 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.13 2020 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.13 2021 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2022 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2023 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 2024 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.13 2025 46077 7514.2 1528.20 1244.08 71.54 2843.81 21266 488.05 33.02 521.07 4714.01 1,349.1 NPV 185923.3 3253.0 7003.3 5048.5 1009.8 12425.0 192661.0 5988.6 5153.0 1723.9 12865.5 @10% Costs/US 3.77 2.72 0.54 6.68 3.11 2.68 0.90 6.68 ERR. 13.5% cents/kWh Table 10: Status of Legal Covenants a) Loan 3163-PH: National Power Corporation Original Revised Covenant Present Fulfillment Fulfillment greement Section type status Date Date Description of Covenant Comments LA 3.03 2 C Conclude agreement with PNOC for steam price Completed LA 4.04 3,12 CD Each NPC shall furnish its investment plan annually to the Bank for Project development program has been provided November review and comment. annually to the Bank LA 4.05 2. 12 NC 12/31/90 09/30/94 NCI shall implement first phase of plan. Agreed with the Bank, to Demand charges could not be introduced under 6 to 8 introduce LRMC - based tariffs by correcting the mis-allocation. hours power outages. .A proposal for a new demand charges in Luzon was prepared to ERB in June 1993 to be implemented in September 1994. Proposal for Visayas and Mindanao was followed LA 4.06 5,9 CD 06/30/90 NPC shall prepare and implement training program for its staff and A satisfactory training program was prepared and furnish results to the Bank for review and comment. implemented under loan 2969-1 (since this loan has been fully committed) LA 5.01 (b) 1 CD July 1 By July 1 of each year. NPC will furnish an audit report from an Audit reports were submitted after due date. & (c) auditor acceptable to the Bank for its financial statements, Special Account and SOE. LA 5.02 (a) 2, 9 CD Annual NPC shall earn for Its fiscal years, after its fiscal year ending on RORs in 1991(3.3%); 1992 (8.0%); 1993 (6.2%); and Dec. 31, 1990, an annual return of not less than 8% of the average 1994 (8.3%) current net value of the Borrower's fixed assets in operation. LA 5.02 (b) 1,9 Annual NPC shall (before Dec. 1 in each fiscal year), on the basis of Defaulted. Assets not revalued since 12187. ROR prepared forecasts and satisfactory to the Bank, review if it would estimates below 8% for 1989-91. NPC approved a meet the requirements set forth. tariff increase in 3/91 but was blocked by Supreme court and ERB. LA 5.03 (a) 2, 4 CD Annual NPC shall not incur any debt unless a reasonable forecast of its Debt service ratio for 1991 (0.5); 1992 (0.8); 1993 revenues for each fiscal year during the term of the debt to be (0.9); and 1993 (1.3). Deficient cash situation in 1992 incurred shall be at least 1.3 times its estimated debt service even after tariff increase, require measures (including requirements in such year on all its debt including the debt to be authorization of tariff adjustment with oil prices and incurred. exchange rates) LA 6.01 (b) 4 CD 12/31190 06/25/92 JEXIMBANK loan shall become effective by Dec. 31, 1990. JEXIM loan signed June 25. 1992. signing of loan agreement delayed due to NPC's financial situation. Initially implementation was very slow. (coiiiiucutd) Table 10: Status of Legal Covenants b) Loan 3164-PH: Philippines National Oil Corporation Original Revised Covenant Present Fulfillment Fulfillment reement Section Type Status Date Date Description of Covenant LA 3.01 (b) 3 C PNOC shall relend $ 147, 000, 000 out of the proceeds of the Loan toPNOC- Satisfactory. EDC and PETRON under two separate subsidiary loan agreements to be entered into between PNOC and PNOC-EDC, and PNOC and PETRON, respectively, under terms and conditions which shall have been approved by the Bank. LA 4.03 5 C Maintain insurance Satisfactory. LA 4.04 12 C. November PNOC shall, by November 15 of each year, prepare its investment plan, for Satisfactory. 15 geothermal and refinery bottlenecking activities, for the forthcoming year and for the following four years and fumish such plan to the Bank for its review and comment. LA 4.05 5 C 6/30/90 PNOC shall, by June 30, 1990, prepare and thereafter implement a training Several training programs were program for its staff in engineering operations, maintenance and management implemented. However, and fumish the results to the Bank for review and comment. Govemment required grant financing for foreign trainings. Satisfactory. LA 5.01 (b) 1 CD July 1 By July 1 of each year, PNOC shall fumish audited financial statements and Satisfactory; delayed by COA & (c) the records and accounts for the Special Account and statement of expenditures for the year just conduded, along with the report of an acceptabie auditor. cc LA 5.02 2 C PNOC shall take all measures required on its part to increase PNOC-EDC's PNOC increased PNOC-EDC's and PETRON's share capital, inter-company loans and other means for raising equity in 1989. funds to enabie PNOC-EDC and PETRON to carry out their obligations pursuant to the Project Agreement. LA 5.03 2,3 C PNOC shall, or shall cause PNOC-EDC to take all actions which may be Completed. required on its part to ensure the timely conclusion of the agreement between PNOC-EDC and NPC for the supply of the steam needed for the Project. PA 3.04 11 CP Annual PNOC-EDC and PETRON shall, by November 15 of each year, prepare Satisfactory investment plans for the forthcoming year and for the following four years and fumish such plan to the Bank for its review and comment. PA 4.01 (b) 1 CD July 1 By July 1 of each year PNOC-EDC and PETRON will fumish audited financial Delayed by COA statements for the year just concluded, along with the report of an acceptabie auditor. PA 4.02 2 C Annual PNOC-EDC & PETRON shall maintain a ratio of current assets to current Satisfactory liabilities of not less than 1.0. PA 4.03 2 C Annual PNOC-EDC & PETRON shall not incur any debt, if after the insurance of such Satisfactory debt, the debt to equity ratio shall exceed 70/30. PA 4.04 2,3 C Annual For the period of the loan, PNOC-EDC shall not incur debt unless a reasonable Satisfactory forecast affirms that it will maintain a debt service ration of at ieast 1/2. (continued) Table 10: Status of Legal Covenants c) Loan 3165-PH: Govemment of the Philippines Original Revised Covenant Present fulfillment fulfillment greement Section type status date date Description of covenant Comments LA 3.01 5 CD Dec. 31, Dec 31, Strengthening of EMB's Operational capabilities; establishment of 1993 1995 baseline sampling stations; strengthening of regional offices; and technical assistance. Quarterly coordination meetings were conducted and reports were submitted quarterly. LA 3.03 5 C A Project Implementation Committee with memberships, powers and Committee under the chairmanship of OEA functions acceptable to the Bank was constituted for monitoring and was established until DOE was re- coordination of all activities under the Project. established. LA 4.01 1 CD By July 1 of each year, the Govemment will fumish audited reports No expenditure in 1990 was allowed. regarding the records and accounts for the Special Account and Congress limited the annual budget for statements of expenditures. In addition, by July 1 of each year NEA some components, particularly for EMB will fumish audited financial statements for the year just concluded and DOE. along with the report of an acceptable auditor. LA 4.02 4 CD The Govemment shall make an equity contribution to NEA in an amount of US $22,200,000. Minutes of Negotiations Para. 3. 10 CD annual Implement the Energy Policy Framework The plan was satisfactory implemented but %O with some delays. The revised and updated version was incorporated in an Energy Sector Plan approved by Cabinet on January 1, 1993 and was being monitored. Status: C = Covenant complied wih Covenant type: CD = Complied with after delay 1 = AccountVAudits CP = Complied with partially 2 = Financial performance/revenue generation from beneficaries NC = Not complied with 3 = Flow and utilization of project funds 4 = Counterpart funding 5 = Management aspects of project or executing agency 6 = Environmental covenants 7 = Involuntary resettlement 8 = Indigenous people 9 = Monitoring, review, and reporting Io = Project implementation not covered by categories 1-9 I I = Sectoral or cross-sectoral budgetary or other resource allocation 12 = Sectoral or cross-sectoral policy/regulatoryfinsttutional action 13 = Other 30 Table 11: Compliance wlth Operation Manual Statements |Statement number and tftle Description and comment on lack of compliance None No significant lack of compliance with applicable Bank manual statements Table 12: Bank Resources: Staff Inputs Stages of Staffweek Amount project cycle Actual US$('ooo) hrough Appraisal 98.8 180.9 ppraisal-effectiveness 47.0 98.8 upervision 169.5 373.0 Completion 12 22.5 rOTALplanned/ 327.3 6674.3 Table 13: Bank Resources: Missions Specialized Performance rating Stages of Month/ Number of SW in staff skills Implement Develop. Types of project cycle Year persons\1 field: represented status impact problems Through appraisal Nov/Dec 9 N/A EEc, ES, FA(2), . PrS, PE, Ree, SC EM June/July 11 N/A ES(2), PE, PE, 1989 PrS, PE, L, FA, EM, L. Nov. 1989 5 11/19189 PE(2), ES,FA advance NPC to reduce procurement of 20MW Geothermal Modular steam turbine generators to ten; procurement to to Constant., procure- proceed in two stages, first submission of technical bids, and following their evaluation, price bids and 12/8/89 ments financial proposals to be invited in second stage. NPC's revaluation of assets and increase in fuel prices may require significant changes in price to meet the 8% Rate of Retum. upervision I June 1990 2 6/11890 EE, PE 1 1 Difficufties in ICB Procurement e.g. 20 MW geothermal modular units, transmission line, equipment and to materials 6/30/90 Supervision If Mar 1991 4 3/11/91 EEc, FA, PE, 1 '1 Disbursement progressing as scheduled for NPC, PNOC. No disbursement for NEA due to delays on-lending to PS arrangements between the Government and NEA. Delays in budget appropriation may affect procurement of 3/22/91 OEA, ERB. Request for 100% Bank financing. Bank agreed to amend the Loan agreement as requested, except 95% for works on 7/23/91. Delays in implementation of long-run marginal cost pricing. Implementation to be made by end Sept. 1991. Co-financing with JEximbank not finalized Supervision lla June 1991 1 6/24/91 FA NPC financial performance in 1990 was unsatisfactory. Govermment bail out of US$280 million and tariff to increase from Jan. 1992 of about 0.27 kWh required. 7/04/91 Supervision lla June 1991 1 5/30/91 ES _ _ PNOC needs to sign a steam price contract with NPC, as agreed in the case of all Luzon. NPC in financial (limited to crisis & delays in tariff increase based on revalued assets. supervision) 6113/91 Geothermal projects commercially not feasible at Natib and Pinatubo; delays in obtaining environmental clearance at Bulusan. Supervision llb Sept.-Oc 1 9/23/91 FA _ _ 1990 financial performance unsatisfactory and could deteriorate further. Require Gov. bail-out of about (limited mission) 1991 to10/2/9 USS280 million. Financial irregularities & inefficiencies in financial management observed New conditions: 6% 1 ROR on revalued assets; satisfactory cash position with out additional Gov. contributions; potential difficultles for all NPC loans. Supervision lic 1 8110/91 PE Reviewed issues related to small hydro-power development e.g. avoided cost, implementation options, etc., (limited mission) to 16/10/91 Supervision III Nov. 1991 4 11/18/91 FA (2), PE, ES 2 1 Financial crisis likely to delay projects like Leyte Geothermal, and Japanese Loan of US$150 million not likely tol 1/28/ to be approved NPC's & PNOC's loans are being executed satisfactorily Sector coordination and other 91 legislation lagging. Difficufties in confirming BOT/BTO and/or because of delays of environmental decisions. Potential energy crisis. Bank mission recommended loan suspension. Disbursement slow for loan 3165-PH due to counter part funding. Delays in approving bills to establish DOE. Delays in approving ECC for Bulusan for three years. EE - Energy Economist. ES - Encrgy Specialist; FA - Financial Analyst; PE - Power Enginecr; PS - Pctrlcum Specialist Table 13: Bank Resources: Missions (continued) Specialized Performance rating Stages of Month/ Number of SW in staff skills Implement Develop. Types of project cycle Year persons\1 field: represenled status impact problems Supervision IV June/July 4 06/17/92 FA (2), PE,ES NPC: defaulted on financial covenants (ROR %) below 8%. Required Gov. bail out partly due to delays on 1992 to P0.17/kwh increase approved by the Board in Feb 1991. Under the agreed Reform Program of Sept. '91 Bank 07/3/92 waved the 8% ROR for 92 , if NPC achieve 6%, and not require cash contribution from GOP. Restructuring of NPC tariffs, a revenue-neutral way designed to introduce demand charges equivalent to 30% of present billings delayed(expected implementation by Sept. 1992). Sucat plant had four blackouts after being rehabilitated at cost of US$130 million. Delays in training program Implementation and in sending audit reports for SOE and special account. PNOC-EDC: Pinatubo (acid wells), Natib & Cagua areas due to lack of commercially viability of the steam reserves. Bulusan awaiting environmental clearance of DENR. Utilization of loan uncertain due to uncertainty over drilling of wells at Labo & Bulusan. PNOC-Petron: implementation behind time. Cost of project US$27.3 m compare to S65.5m at appraisal. OEA's Energy Policy Frame: satisfactory: but DENR has yet to release the ECC for Masinloc & Pagbilao Plants. Similar delays (Calaca II coal & Bulusan geothermal) has stopped for more than three years Delays in elimination of the 8 years royalties to give incentive for geothermal development Restructuring relationship between petroleum prices require the completion of energy pricing. Out of US$4.4 million only US$0.52million disbursed. NEA: audit report for SOE was overdue; Need to set a Steering Committee(ERB, OEA, NPC, PNOC. NEA) to review the energy pricing study, so that its conclusions can be applied EMB: only 2% of US$10.4 million loan disbursed due to Gov. budgetary appropriation. Supervision lvb Nov. 1992 1 11/2/92 PS _ Problems associated with drilling low pressure volcanic rocks under the extremely high temperature to characterized most of PNOC-EDC geothermal fields resulting in hole drilling fluid loses, stuck drilling strings 11/6/92 and inadequate casing cementing. PNOC-EDC coping well. But need to contract out intemational experience and improve its drilling capacity. Supervision V Aug. 1993 3 N/A to FA, EE, ES 2 1 NPC: Audit report not received as of Sept. 1993. Disbursement were to stop if audit not received by October (supervision done 8/30/93 30, 1993. Tariff approval needed to ensure ROR 8%. PNOC: legislative change on royalty and provision of with evaluation of other incentive needed for privatization Loan 3165-PH: loan disbursement substantially delayed for DOE & the Sector EMB. EMB suffers from reduced budgetary appropriation Structure) Supervision VI June 1994 2 6/6/94 to PE, FA S S NPC: extension of loan requested to complete civil works & foundation works at Palinpinon Geothermal 6/30/94 stations due to unexpected ground condition found during construction. Implementation of JExim component delayed due to the prolonged brownout and transfer some components to loan 3163-PH. PNOC: Contracts for refinery awarded in March 1994 after delays in award. Extension of loan required. Loan 3165-PH: Delays in disbursement, loan extension required. Supervision Via Jan. 1995 1 _ to E _ _ Reviewed the status oc EMB. agreed on use of the remaining fund under loan. Availability of counterpart (limited 1/26/95 funding was still an issue. supervision) Completion Feb./Mar 1 2/25/95 FA _ ICR mission. 1996 to 03/95 I-E - Encrgy Economist; ES - Energy Specialist; FA - Financial Analyst; PE - Power Engineer; PS - Petroleum Specialist ANNEX B: SECTOR SPECIFIC DATA Table 1: Cumulative Actual and Planned Installed Generating Capacity 1993-2010 Megawatts (MW) Actual Department of Energy Forecast Type 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Hydro 2259 2323 2325 2332 2360 2374 2390 2397 2700 3089 3246 3553 4456 4910 4927 4930 4933 4989 coal 441 441 1441 1441 1441 2041 3241 3541 3991 5236 6236 6736 6736 7236 9236 12036 15436 18036 Geothermal 11018 1094 1211 1431 1471 1991 1991 2111 211 2111 2111 2111 2151 2151 2151 1926 1926 1926 Oil-Thermal 1985 1985 1985 1685 1685 1485 1135 285 285 60 60 60 60 60 60 60 60 60 Diesel 1016 1967 1967 2001 2089 2171 2165 2122 2103 2103 2103 2103 2103 2103 2103 2103 2103 2103 Combined-Cycle - 180 180 180 180 180 330 330 330 330 330 330 330 330 330 330 330 330 (CC) Gas Twbine - - - - - - 1350 1800 2700 3150 3150 3150 3150 3150 3150 3150 3150 Gas Combined- - - - - - - - 25 25 50 50 75 75 100 100 125 125 125 Cycle Total 8014 9285 10404 10395 10611 11627 12637 14146 15330 16569 18421 20053 21796 23834 26292 29195 32598 35704 Table 2: Phases Of Power Sector Restructuring and Privatization Phase L: Strengthen and Restructure Industry Phase 2: Evaluate results, implement further Phase 3: Move into final structure and competetive restructuring and privatize environments Time Frame: 1994-1998 (4-5 years) Time Frame: 1998-1999 (2 years) Time Frame: 1999-2004 (4-5) years) Objectives: Stregthen all sectors and participants in the Objectives: Evaluate results and industry performance; set Objectives: Achieve full restructuring and decentralized industry; restructure generation and transmission; establish final restructuring goals; adopt policies that accelerate planning: establish fully effective competetion in generatio, coordination and arrangements and prepare industry fr participants' growth into new structure and responsibilities: retail sales and resouce planning: monitor competiveness and increased completio, privatization aand decentralization. privatize generation industry performance. Major Activities: Major Activities: Major Activities: * Unbundle generation horizontally and vertically * Conduct key evaluation ( e.g. competetive conditions; * Implement programs determined by assessing * Unbundle transmission success of utility IRP, coordination arrangements and development of the industry under the restructuring and * Unbundle hydroelectric to hydro authority regulatory programs. privatization intiatives * Decentralize planning responsbility and adopt all source * Make structural goal adjustments; re-visit workability of * Extend practces such as retail whelling and retail sales IRP "English" model in Luzon; improve coordination competition * Establish opreations coordination arrangemens aggangements * Adopt incentive regulatory schemes proven to be * Rationalize pricing . privatize Generation: sell Mindanao and Visayas effective * Stregthen disbursment sector subsidiaries; select aand implement final Luzon * Monitor cometitiveness, market behavior and the * Promote private particpation in generation (IPP bidding. generation privatization plan potential for market dominance ROM, etc) . Expand retail wheeling * Stregthen regulatory and policy agencies * Implement policies to achieve utilitie' adoption to new * Stremline NPC threogh additional susbsidaries; structure rationalize staffing levels Major Results: Major Results: Major Results: * NPC power supply susbsidaries in Mindano, Visayas, & * Full functioning of all utilities under decentralized Luzon * Adjustments to structural and ownwership goals decion making * NPC national transmission subsidary responsible for . Adjustments to regulartory oversight and policy * Comptetive generation markets transmission, dispatch and opreations coordination of programs * Competetive retail sails markets planning from national perspective * Improved IRP and coordinated utility planning . Widely practiced, state of the art IRP * RP Hydro Development Authority * Enhanced opretions coordinations; full economic * Innovative regulatory incentive programs * Integrate resouce planning by all utilities dispatch on all grids * Effcient inter- andintra-grid coordinated operations. * Coordination arrangements to achieve effcient * Privatized generation operations and planning * Increased competition: generation, retail sales, supply * Transperent, unbundled prices side vs. demand side resouces * Increased private partiepation in generation * Imptpvements in structure and performance of * Regulatory programs that improve distribution distribution sector performance and rationalize structure * Improved regulatory and policy capabilities * Streamline NPC Ano-x- A 35 I'a|gc I of I Bacon Nlanito Geothermal Power Project (Loans 29690-PH and 29691-PH) Energy Sector Project (Loans 3163-PH, 3164-PH and 3165-PH) February 1996 ICR Completion Mlission AI DE-M EN101 RE 1. A World Bank Completion Mission comprising Messrs. John Irving (Scnior Powecr Engincer - Task Managcr), Josc R. Escay (Consultant) and P. Vcnugopal (Consultant) visited Manila, with overlapping stays, during the period February 12-27, 1996, to hold discussions with the following cntities, and (a) complcte the ICR of the Bacon Manito Geothermal Power Projcct and (b) collect the balance ol' data and borrowers' evaluation reports for the ICR of the Energy Sector Projcct: (a) Departmcnt of Energy (DOE) - Loan 3165-PH - Office of the DOE - National Electrification Administration (NEA) - Energy Rcgulatory Board (ERB) - Environmental Management Bureau (EMB) (b) National Power Corporation (NPC) - Loans 29691-PH and 3163-PH (c) Philippinc National Oil Company (PNOC) - Loans 29690-PH and 3164-PH - PNOC Holding Company - PNOC-Energy Development Corporation (PNOC-EDC) - PETRON Corporation (PETRON) 2. The mission wishes to cxpress its deep appreciation for the cooperation and hospitality extended to it by the above cntities. The list of ofrficials met by the mission is given in Annex 1. This Aide-Mcmoirc summarizcs the findings and conclusions of the mission, that arc subject to confirmation by Bank management. Bacon Manito Geothermal Power Project 3. NPC and PNOC-EDC, on behalf of PNOC (borrower), prcsented the mission with abbreviated versions of their rcspective evaluation reports, that will form part of the ICR. The ICR, finalized in the field, was given to NPC and PNOC-EDC for review. Lctters havc been received from them accepting the ICR (Annex 2). Energy Sector Project 4. For Loan 3165-PH, DOE prepared a combined borrower's evaluation report covering its own subprojects with those of NEA and ERB. A separate evaluation rcport was provided by ERB. For Loan 3164-PH, PNOC-EDC and'PETRON provided their individual evaluation reports to the mission. For Loan 3163-PH, NPC prepared a l'inal evaluation report. 5. For calculation of the Economic Rate of Retum (ERR), the mission obtained from PNOC- EDC and NPC the required data rclating to energy sector investments during the project timc-slicc. Both cntitics have agreed to funmish the Bank with any other information and data that may be required for this purpose. 6. Prior to finalization of the ICR in Washington, draft copies wvill bc sent to the borrowers for their rcvicw and comments. Appendix B 36 BORROWER'S IMPLEMENTATION COMPLETION REPORT FOR WORLD BANK LOAN 3163-PH ENER 'OROJCT NATIONAL POWER CORPORATION February 21, 1996 37 A. STATEMlENT/EVALUATION OF PROJECT' OBJECT IVES Discussions of thie completed Energy Sector Study resulted in thie agreement: between tlhe CGoveriinmenit anid the Blank oni the (levelopmenit strategy to be puisueid in thle eniergy sector. The componienits of tihaL strategy are: (a) development ot a sector-wide capability to plan for energy resource and to coordinate policy implemilenitationi in the sector; (b) adoption of the least-cost developmienit strategies for the various energy subsectors; (c) strengthening othile regulatory activities, witlh thle initentionis of niationializinig conisuLmler energy prices and imnprovinig procluct stanidards and quality of service; (di) encouragemilenit of private sector throughi joinit venitures and oclher schemiies; (e) improvement of elivironimenical stand(lards and moniitoring0 in areas of hiighi energy use or resource developmilent: and (t) enihiancemilenit of tli techinical capabilities of sector institutionis, particularly OEA, ERB all(n EMt3. 'I'lle proposed project thius hias two coimplemiienitary but distinlct objectives: tile first is to assist the Governmelit to imiplemilenit the agreed strategy, and tihe seconid is to hielp tile Government to finanice a time-slice of its investimienit program) for tile period 1989-93. The projects will be co-finianiced by the World Bank and( Japan Eximbaiik. The Banlk will review togethier will tile Government and tihe conicernietl entiiies, tile appproved projects and finialized tlhe list ot coimponienits to be funde(d by ilhe World Banlk and(l Japiani Eximilbanik loans. Thle list of projects eligible for finianicinig are listed in Aninlex 3-4 of the Staft Appraisal Report. B. ACHIEVENIENT OF PROJECT OBJECTIVES Uncder thle generationi expanision, the constructioni of Palinpinon 11 Modular Geothermal llower P1lant comminilciced on May 13, 1992. 'I'lTe lirst uniit located in Nasuiji was synchronized to the gri(d oni Decemiiber 13, 1993 and started its commercial operation oni February 1. 1994. Trhe seconl(d unit located in Okoy was synchronized to tlhe grid on November 28, 1994 anid started its commercial operation oii l)ecember 22, 1994. 'I'lTe i iir(l atd 11 tourtli units )oth located in Sooonoon were synichironiized ont JanLuary 28, 1995 and April 22, 1995 respectively. wiliie the comimiiercial operation of boti uniits static(l on F ebruitry 18, 1995 and Mlay 5, 1995 respectively. For tile generation plant rehabilitation, ilhe contract for tlhe Rehabilitationi of A niuklao Hlydroeleciric Plant was teriniieatedl effective November 1, 1(i1. 'I'le l)rojcct %%as iIistea(lS impleented undir the Rehahil iate:-Operete -l .easehack ( CR ( )la.) L'Oi racst I);C ' 1) ct mist)1itrll ll lheadle(d between Ml LC('O hIdustrial Lnglineening Services ( orpol ion NII .S((o) . Morrisoni--K iid(iscin Corporation. Mi ndanao Sh ipbuild(ng orptwalion and I1.G(..S. n11i l.nat n mal (Corporation. Te'lc project is still onigoing and exl)pected (t be comiipleted by F hriaiary 1997. The procure metll ol 69 KV transminission Ii tie materialIs tOr L.uzon , Visayas, Mindanito and tlhe SinI I Islaind (Grid were comI)lete(l. 'Ilte constructltio/Icect ion will be fi miaincetd hy Japan LIximnhank (70%) and NPC''s linterinll Cash G eierat ion (I('(;) (30%). Soni1c of lhle tranisimiissioni linies especially in Luzoni and Visayas were ailready(i , erecte(d anI ceiergiLed. - i'age i or 6 - 38 The iiicreimenital workiing capital wilichl is consist of spare parts and initial iliveniories of fuel for newly installe(d power plants were procurel in accor(lanlce witil tlic Bank's guidelines. C. MAJOR FACTORS AFFECTING THE PROJECT Problems/Causes of Delny: 1. In Procuring Goods and Works a. Complex and cumbersome procuremleiit procedures. b. Rigid government procurement procedures. c. Rigid governmenit procurement regulations/rules. d. Lack of counterpart funds for local procureiment or delay in release of such funds. e. Failure of supplier to comply withi thie provisionis of contract. f. Cost overruns. 2. .In Constructioni Managemenit a. Delay in provi(ding enginieering designis. b. Chaniges in work specificationis/coiuract con(litionts. c. Poor quality of contractors work. d. Finianicial problems on the part of contractor. e. Riglit-of-way problems. 3. In Organizinig anid Staffing of Project Office a. Weak or inappropriate organizational structure b. Staff appointe(l for project implementation niot being inivolvcd in the preparationl or appraisal of the project. 4. In Makinig the Loani Effective - Page 2 or 6 - 39 a. Delay in obtaining approval froim lihe ratifyinig agenicy. b. Delay in complyinig witlh special coniditionis lor loan effectiveness suclh as organizationi of a project office, appointment of a Project Manager, anid acquisitioni of lanid riglhts-of-way. Solution to the Problem: 1. In the procuremenit of spare parts, the list of iteins (o be finianced slhould be prepared witlh somie mneclhaiiism for tlexibility, in order to avoid freqluellt Banlk approvals for clhanges iliade in tile list. 2. In the conistructioni, the qualification and finanicial capability of the contractors shiould be carefully evaluated so thiat the project will niot suffer a (lelay due to Lile contractors inefficienicy. 3. The right-of-way shiould be cleared first before a project could start the conistructioni. D. PROJECT SUSTAINABILITY I'lie project generated beenefits inistantly as the niewly operationi ot' 80 MW Palinpiion 11 and tile conistructed tranisimiissionl line circuits were energize(l. Significati savings were ach ievedl in ftuel usedl byl diesel plants, gas turbines aniid mobile power barges along thle Visayas Grid, which were nio longer recquired to op)erate (lurinig peakl load perio(ds. Thle 1'roject's sus mai nabi lity appears to be assured, althiotughi it (lependcls oni the realizatdion of aIssuImlptioIns used( iI thile econloIllic re-evalunat ion, inclu(idilg: I) coIltliniued roItline ima;lilintenince by NPC of all gri(d nietwor-k components fromil tile geotlierimall fields in Negros Occidenmal to ilte Nl'C disiribut ion l'acililies in Luiz.oii, Visayas, Mindanao and the i inall Island Grid( transimission lilles atilnL substations (wli icli slo(u I he inspecte(l 1'roii timine io hiuiie), and 2) the ability ot tile geoltielrimall falcilities at Palinpinon 11 to cominue generating electricity. Tllis depends primarily oni N l'('s provision of adequale in iencii hillinc s ind l(a on pr)esohmiliel at thec geotlicimal;l t.sicili, iuntLiiil tlie ciend ot' tlc lrojct'.s i' . Nl'( is aware of1 its c..lilili t a1deq(ILately lla littlill tile 'dllinp inon ftacilities and it is curr-eli ly iiivolved( in I'urteil r ldevelop)i i' thle geotlhermiial resources. Spa;'r paris and initial inventories of F'utel loi- eLvly imisiallcd l)owvr pla)laits p-rocred hialve contriblted to thec i mproveient ot' aintluenanc ol' Nl'(I s power fIacilities iII 1AIL0, n Visayas anid Mindanao. - Iag. .1 of 6 - 40 E. BANK PERFOR.MANCE The Bank's performanice in adminiisterinig tie imnplemiienitationi of the lProject was generally satisfactory. NPC's reqiuest for clianges in allocations, extensions ot loan closing dates were created withl tlexibility. However, it is niote(d that the Banik liad lililite(d review mission. F. BORROWER PERFORIANCE The performance ot the Borrower/Executing Agency (NPC), waIs genierally sauisfactory. I-lowever, N13C was inot able to ensure timely acquisition of land(s and rigiht-of- way, caLisi ng delays in erection/conistructioni works. Also, ti ie-consu ini ig procurement procedures of NPC and( the Governimlenit were aimonig the miajor causes for delays in implememitatioii. Furilter, prequalificationi proce(lures of NPC were niot effective enouighi Lo eliiminate contraccors/suppl iers with finianicial problemils. G. ASSESSMENT OF OUTCOME TIhe Project is consi(lered generally successftul on (ie basis of its satisfactory Econiomilic Interinal Rate of Returin (EIRR) anld Finaniciial Internal Rate of lReturii (FlRR) results, and because it lias fully achiieved its objectives. I1. FUTURE OPERATION Nl'C Management, in its effort to direct the overall emiployee efforts towards tile achlieven'ment of ithe corporate imissioni ot- provi(linig etficienit, reliaible and economic to tlhe con nitr', developed and adopted in April 1995 thle Pro(diuctivity E1ifliancemen Proagramn (P1ll'), a mecihaniisimi to reward goocl perforillances. Thle program comiponlenits andl brietf description of the procedures follows: 1. Performianice Targets Witihin tile first quarter of every year, tlie corporaie sets tlhe amimiLal (:orporate p:l)rolill.lice tifgctS wIlichl shoutil(d resutilt 6-01ro con1sUIltat1ion and dLisCLsionl wiltl all the funlctionial groups. h'lle targets are imia(le in tihe lOlowing, plerlOrmillaice facltOrs or key indlicators: 199.95 T'argets a. Capacity -Adclition2 - genieraitioni capacity in imiegaiwaitts = 1.,28 MW - transmi ission lines in circuilt kilomiieters = 705 ck in - substation capacity in mnilliont volt-ampere = I 00(( NI VA - tIage 4 of 6 - 41 b. System Efficienicy = 96.92 c. Reliability Indicator = 0.31 d. Operating Ratio = 0.80 e. Collection Efficiency = 39 days f. Otliers Eaclh work group (i.e. fulictionial group/regional centier, department anid dlivision) sliall prepare its perforiniice targets anid worki programii in support of' ilte corporate target. Suclh Eargets andl stanidards shiall he agree(d uppoin by both ilhe lhea(d of the work group and hiis/lher immediate superior, and coinfirmiiedl by thle next hiighier supervisor. 2. Performance Standards Pert'ormanice indlicators are inidicators of desirability anidl acceptability in relation co targets estaiblishied. The targets are expressed in terims of average or norilial expectation or as an i(leal expectation. To enisure commiiiioni understanding in (le perforilianice standards and to forestall confusion in the assessment ot' actual performance, tle standards for tlie ratinogs of Ouistaniding. Very Satisfactory, anld satisfactory shall be established in eachi performanice ftactor at tlhe timle of target setting. 3. Performance Evaluation and Appraisal Every six (6) montls, an evaluation of pertormanlice will be coniducted an(d thie accomiiplishlimlenits will be appraisedl vis-ia-vis targets and standards. The corporate pert'orimaniice shall be apprailsed by the Management Coimiimilttee and reviewed by ttie Nil Board and, at thie national goverinimlenit, the Goveriiinent Corporationis Monitoring and Coordiniatinig Commoiittee. In assessing ach ievemuent level of performanlce targets, thle actual performiianlce shall be comiipared( against stanldard set. 4. Pertormiianice Iicenitive Bolnus The actual pertormiance levels on tile corporate and group targets slal (Ileterminile tlle actual allmouL 1 of bolnus to be granltedt. 'I'lTe overall COIQ)orate l)erlormanc for tlie period January-November 1 995 reaclhetd a SATIS FACTORY'V level. Based o1 ili.s satisfactory pertormaalice and eollais Stet Willi [lie pertinlen or-ders fromil e nIa tioLal governimieat (24 Mvarlcli 1 9)4 Memiorandumn (OIrder No. 1'98 of MvI.alacaiiatig) tie Nl' Board approved the grant of' two (2) moith perfiormance bonis to all qualified NPC officials anid eimployees. - P1age :5 of 6 - 42 It is worthy to talke niote thac thlis PEIP is to a great exIent assures Elie corporaltion ron 1 its emuployees a conrtinuous effort to Si-INc fo )e go)od perflOrinance (iie it) dlic iMncimii bolLtis component ot tile program. Fromii tile utility op)eraions' poiLit of view tihis effOrt tor *ood performiiance is imaniiteste(d by mainutaininlog thle reliability and(c elticienicy of Nl C gelicrati ig ullits. I. KEY LESSONS LEARNED For NPC to maintain stifficienit cash flows to service satisfactorily future borrowin.gs. iL m1ust conftilnue to enisure tinat tariff levels are broa(lly in linie witih tile Long-lu i Marginal Cost (LRVMC) ot generation and traiismiiission) and thlat all user groups are charged a taritf rtiat matches thie average LIZMC ot generation and tr.anisimiissioni. Nl'C imiust coniiie to desigi power projects whiere tihe finianicial anid econiomlic benefits are transparent and whiere subsidies fromii thle Governnent are niot reqIuired for aniy developmental works. Wlheni procurement conitraicts contiaiii coistruclcioni naterials tihat experienice a sudden, unexpected increase in price oni WorldI markers, concerted efloris shiould be undertaken by thIe executilng agelIcy anld hlie Banik to minimiize tlie timie of hid processing anud evalualion anid to award thie conitract withiout delay. As tor the financing of spare parts, the list of iteims to be flianice(d should be prepared with sonie meclhaniisim Ior flexibility. in or(ler io avoid frequjent Batik approvals for cihaniiges in the list. Also, procurciiiemie ot spaire parts could be simplified by groupinig similar type ot iteims illto the saime package. - e 6 or 6 - 43 EVALUATION REPORT PHILIPPINE NATIONAL OIL COMPANY WORLD BANK LOAN NO. 3164 44 IBRD ENERGY SECTOR LOAN NO. 3164 PH PART I - GEOTHERMAL INVESTMENTS PROGRAM (EDC) A. STATEMENT/EVALUATION OF OBJECTIVES The objective of the Energy Sector Project (ESP) is to orient the development strategy for the Philippine energy sector toward minimizing the cost of energy supply. This objective which came out as a result of the Energy Sector Study in 1988 consists of various components undertaken by various Govemment agencies. One of these agencies is PNOC-EDC, whose share of the Energy Sector Loan was intended to support part of the costs for the 1) completion of delineation drilling on prospective sites in Luzon and the Visayas; 2) engineering, procurement, fabrication, installation and commissioning of Fluid Collection and Disposal System (FCDS) at various sites for about 380 MW; 3) drlling of additional production and reinjection wells; and 4) technical assistance for geothermal resource assessment and engineering The above activities are sequels to previous geothermal exploration and development activities under the earlier projects funded by the World Bank namely: 1) the Geothermal Exploration Project wherein geoscientific and drilling activities and technical assistance were financed under Loan 2203 (Oct.'87-Dec.'88) and 2) the Bacon-Manito Geothermal Project wherein drilling of additional production and reinjection wells and the delineation/appraisal of geothermal sites for future power supply to the Luzon grid were financed under Loan 2969 (June'88-Dec'93) World Bank Loan 3164 to PNOC amounting to USS150.0 million (of which US$133.0 million was originally allocated to PNOC-EDC) was approved by the World Bank Board on Feb. 1, 1990, loan agreement was signed on March 20, 1990 and was declared effective on June 12, 1990. Financing was retroactive for eligible expenditures in an aggregate amount not exceeding the equivalent of US$8.0 million beginning April 30, 1989. B. ACHIEVEMENT OF OBJECTIVES 1. Physical a. Geothermal Exploration and Development Drilling The geothermal development component of the Energy Sector Loan (ESL) originally covers, among others, the drilling of a total of 76 wells (Please refer to Annex I for Well Drilling Appraisal Target). However, due to unfavorable geothermal resource assessment in areas such as Labo, Pinatubo, Natib and Cagua, coupled with the delay in securing environmental pennit for Bulusan, the drilling program was altered and priority was shifted to Leyte A. The decision to shift was backed by Mesquite's, (a third party consultant), resource assessment of the Upper Mahiao and Malitbog sectors of Leyte A in 1991 which confirmed PNOC-EDC's resource estimate availability in these areas. The move to focus on Leyte A aimed to support the project's objective of completing the delineation drilling in the Visayas. Thus, out of the total 38 wells actually drilled under the project, 28 were located in various areas in Leyte A. (Please refer to Annex I Well Drilling Data) 45 In Bacon Mvfanito II, three wells were drilled under the project in addition to wells earlier drilled to supply the required steam to the power plant. b. Fluid Collection and Disposal System An independent resource assessment of Bacon Manito II was carried out by the Mesquite group, commissioned by PNOC EDC under a grant from USTDP. A resource of 40 MW was confirmed and development of 2 x 20 MW modular units was undertaken in two sectors: Botong and Cawayan. The following are the milestones of the FCDS activities in Botong and Cawayan Sectors: DATE EVENTS CAWAYAN BOTONG 1. FCDS Pipeline Flushing Dec 1992 Dec 1992 2. Pressurization Jan 1993 Jan 1993 3. FCDS Inauguation Jul 1993 Jul 1993 4. FCDS Testing/Comnmissioning Aug 1993 Apr 1994 5. NPC Steam Admission Aug 1993 Apr 1997 (owd) 6. Synchronization to the Grid Mar 1994 May 1997 (kw) 7. Perfonnance Test Mar 1994 May 1997 (O"d) The commissioning of Bacman I FCDS brings PNOC EDC's total MW capacity to 461 as folows: STEAMFIELD MW CAPACITY Tongonan I 112.5 Palinpinon I 112.5 Palinpinon Pilot 6 Palinpinon 11 80 Bacman I 110 Bacman 11 40 As a consequence of the curtailment of drling activities in the Luzon areas no other FCDS activities were undertaken under the project other than those in Bacman II. FCDS activities in Leyte A are currently on-going but are funded by subsequent World Bank Loans, 3702 (for Leyte-Cebu) and 3747 (for Leyte Luzon) and Japan Exiinbank. c. Technical Assistance Kingston, Reynolds, Thom and Allardyce (KRTA) has been retained by PNOC as its third party consultant in the field of geosciences, well drilling, production and systems engineering. Its engagement under the project was embodied under its extended contract with PNOC EDC, covering the period 1990 to 1995. Engagement and extension of KRTA contract was approved by the Bank. d. Environmental Impact and Safety The Environmental Management Division (EMD) of PNOC EDC enforces and oversees the prescribed environmental standards. The Environmental Management Bureau of the Government reviews environmental impact assessments prepared by EMD prior to implementation of projects and issues compliance certificates. 46 Significant activies were undertaken by PNOC EDC 4m complimce to vaious environmental equirements as follows: DATE OF PROJECT EIS Complellon ECC AcquisItion Bacman I & 11 1985 Aug 1987, Amended Nov 1995 Labo (exploration) Nov 1989 Feb 1990 Cagua Aug 1989 Jan 1990 Natib Aug 1988 Sept 1988 Pinatubo 1990 (baseline data) exempted NortheemNegros (exploraton) Jun 1993 Dec 1993 Leyte A May 1991 May 1992 Alto Peak July 1990 Sept1990 Upper Mahiao/Malitbog Mar 1991 Sept 1991 Mahanagdong Aug 1991 May 1992 EIS means Emvlonmeotal Impact Statement (A report) ECC means Environmental Clearance Certfcate (A permtt) Special stdies on the "Effect of Geootiemal Effluents on Rice and Soil in Bacman Area" and the "Botong Silica Removal and Disposal" were also conducted in 1989 and 1992 respectively. The latter is stil on-going. 2. Financial The original arnount relent by PNOC to PNOC EDC is USS133.0 miion intended to finance the portion of the cost for the development of 380 MW in Luzon and Visayas. This relendmg was supported by a subsidiay loan agreement between the said two parties. Ile fint application for withdrawal was made on July 5, 1990 and was debited against the loan account on July 24,1990. Special Dollar Account (SDA) amounting to USS10.0 million was applied on August 19, 1990 and was disbursed on August 22, 1990. (Please refer to Annex 2 for the Actual Loan Disbursement Schedule). In the earty part of 1993, however, PNOC, PNOC EDC and Petron discussed the possibility of reallocating the US$150.0 million loan amount among them. The main objective of the reallocation is to finance the increased cost of Petron's debottlenecldng projecL In view of the reduced driling and FCDS activities, PNOC EDC presented to the Bank during its mission in April 1993 its intention to reallocate USS15.0 million, thereby reducing its loan allocation to USS118.0 million. A formal request for reallocation was sent to the Bank through PNOC on December 14, 1993. A request for extension of the loan closing date from December 31, 1994 to December 31, 1995 was also made and approved by the Bank. As of December 31, 1995 PNOC EDC has withdrawn a total of USS118.6 million including the unrecovered portion of the SDA of USS0.6 million. The Bank has started its recovery of the SDA in March 1995. Final disbursement in the form of recover of the remaining SDA is expected to be made during the first semester of 1996. 47 C. MAJOR FACTORS AFFECTING THE PROJECT In Mt. Pinatubo, the three wells drilled under the other two earlier World Bank loans showed poor quality of geothermal resource. PNOC EDC, nevertheless attenpted to furtier explore the area and planned to eventually develop it. Ten wells were programmed under the project. Subsequent unfavorable drillng results prompted PNOC EDC to abandon the area. Then, the eruption of Mt. Pinatubo in July 1991, forced PNOC EDC to eventualy phase out Mt. Pinatubo from among its prospective geothermal areas. Favorable resource assessment of the Leyte A project as mentioned earlier, made management set aside exploration activities in Luzon and focus its priority to the former. PNOC EDC as a borrower was subjected to the Bank's guidelines with regard to its procurement. Procurement arrangements for the project followed the Bank's prescribed procedures. Goods and services financed by the Loan were procured under ICB. All contracts for goods and services involving Bank financing, costing USS1.0 million and above were subjected to the Bank's prior review and approval. This is a lengthy exercise which required a lot of communications between the Bank and PNOC EDC and as the Bank would say in its draft Implementation Completion Rcport, resulted to time losses. D. PROJECT SUSTAINABILITY The project is expected to sustain the bcnefits which the Energy Sector study aimed for. The commiissioning of 40 MW Bacman II project emerged as a significant outcome of the project and is a valuable contribution to the Philippine energy sector. While the other Luzon areas did not warrant further investments, Leyte A project proved to be very encouraging and enticed further development. Thus, to further sustain the contribution of PNOC EDC to the country's energy sector, exploration activities under the project were extended to a more promising area, Leyte A. PNOC EDC, thus prepared for the development of Leyte A in two phases, first, the 200 MW Leyte Cebu Geothernal Project; and second, the 440 MW Leyte-Luzon Geothermal Project. The Bank has extended financing to PNOC EDC for the two projects. E. BANK PERFORMANCE The Energy Sector Review carried out by the Bank in early 1988 has examined the place of geothermal energy in the power development program. Through this and the earlier projects (as previously mentioned), the vital importance of the geothermal resource in the economy had been adequately established. The Bank's efforts to have the steam pricing issue resolved resulted to the determination of a fair price for steam from the Bacon-Manito. The Bank had been suppordve throughout the implementation of the project. During its supervision missions, the Bank rpresentatives played a key role in identifying and resolving various problems and issues encountered by PNOC EDC in the course of its 48 procurement and disbursement from which key implementors of the Energy Sector Project were amply benefited. The Bank had been realistic and flexible enough in granting the request for reallocation of the Loan among PNOC, PNOC EDC and Petron and the extension of the loan closing date from December 31, 1994 to December 31, 1995. F. BORROWER PERFORMANCE Substantial preparation on the part of PNOC EDC had been made to undertake the energy sector project. In Bacman, both exploration and development activities of Bacman I and the drilling of exploratory and other production wells in Bacman II are prelude to the development of the 40 MW Bacman II geothermal project under the ESL. Likewise in other prospective areas geoscientific studies had been undertaken prior to the execution of the energy sector project. The project was undertaken by PNOC EDC for a period of 66 months under the Loan starting from the effectivity of the Loan on June 12, 1990 until the closing date on December 31, 1995. But prior to that groundwork had already been established by PNOC EDC in preparation for the ESP. Throughout the inplementation however, PNOC EDC was bound by the requirements, covenants and procedures prescribed by the Bank. PNOC EDC substantially complied with the Bank's proper monitoring requirement through submission of the quarterly progress report and fumish the Bank required data as requested especially during the supervision missions. In compliance to the Bank's requirement of the Audit of the Statement of Expenditures and the SDA, PNOC EDC comnuissioned the Philippine Conunission on Audit to conduct such examination. Timely submission of audit reports was fulfilled. PNOC EDC was able to comply with financial covenants imposed by the Bank which include among others maintaining a debt to equity ratio of not more than 70:30 and current ratio of at least 1. As beneficiay of the loan through the subsidiary agreement, PNOC EDC carried out its geothermal exploration, development and other related activities in accordance with the terms and conditions set in the loan agreement. PNOC EDC was able to utilize fully its USS118.0 million revised loan allocation. G. ASSESSMENT OF OUTCOME PNOC EDC has been successful in its exploration activities under the project, such that it was able to develop geothermal resource in the case of Bacman II and identify potential geothermal resource for future use in the case of Leyte A, Labo, and Northem Negros. Development of the latter two areas are to be financed by the OECF of Japan. 49 potential geothermal resource for future use in the case of Leyte A, Labo, and Northern Negros. Development of the latter two areas are to be financed by the OECF of Japan. H. FUTURE OPERATION The 20 MW Cawayan module of Bacman II has currently 3 production wells hooked- up to the power plant . One more production well, CN 5D is currently being hooked- up. Steam generation for 1994 reached 95,629 MWH and for 1995 it increased to 95,690 MWH. For the other 20 MW in Botong area, 6 production wells are expected to be hooked-up to the power plant. Admission of steam by NPC power plant is expected to start in April 1997. The steamfield is expected to provide steam to NPC power plant for 25 years. I. KEY LESSONS LEARNED Several lessons can be drawn out of PNOC EDC'S implementation of the ESP. Despite significant accomplishments of the project, PNOC EDC, however experienced cost oven-uns and delays in the project's implementation. The Bank, in cooperation with PNOC EDC took an active role in the reassessment of the physical and financial targets of PNOC EDC. This provided both parties a rationale for modifying the targets by which the project was implemented in terms of time frame and funding. The bank's concem on the efficient administration of the project provided PNOC EDC the opportunity to acquire useful knowledge in procurement and disbursement aspects. Appropriate training program could actually be incorporated by the Bank in future projects to enhance implemetation skills of project implementors and is most welcomed by PNOC EDC. Finally, harmonious working relationship between the Bank and the Borrower is a significant factor for the successful adminstration of the project. Note: 1. The Banlk as used here in this report means the World Bank. 2. The Loan means World Bank Loan 3164-0-PH (for the Energy Sector Proect-PNOC EDC portion). 3. The Borrower means PNOC EDC. 50 IBRD ENERGY SECTOR LOAN NO. 3164 PH PART II - PETROLEUM REFINING (PETRON) The funded projects of the Petroleum Refining portion of Petron Corp. consisted of a) an 18,000 BPSD Gas Oil Desulfurization Unit (GODU) for the purpose of providing sufficient diesel oil desulfurizarion capacity to meet Petron's current LSD demand in the domestic market including the postulated diesel supply shortfall in the oil industry, and b) an upgrade of the LPG Treating Facilities covering the revamp of caustic facilities to increase production capacity from 3.1 MBSD to 5.0 MBSD including the installation of a new Spent Caustic Treating Facility, the replacement of a TCCU Wet Gas Compressor and revernp of TCCU Light-End Towers, all intended to meet the increasing demands for LPG. Petron Corp. engaged the services of Exxon Research & Engineering Co. for the preparation of Schedule A package for the GODU and Merichern for the Spent Caustic Treater. Stanley Associates Engineering Ltd. (Canada)/RTM Engineering was also commissioned for the comprehensive review of the entire engineering package prior to the release to EPC contractors for bidding. Most of the basic engineering portion of LPG Facilities Upgrade project were undertaken by Petron's own technical personnel. The Engineering Procurement & Construction (EPC) of the projects were awarded and undertaken by the consortium of Daelinm-Mitsui Engineering Companies. Onshore construction and fabrication works were subcontracted to EEI Corporation, a locally registered company. The LPG Treating Facilities upgrade project was successfully commissioned last February 25, 1995 producing good results both in terms of increasing LPG production and treating capacity. The GODU on the other hand, was put on-stream last April 23, 1995 and had produced products more than the design quality specifications simce then. Total project cost was USS37.73 million. Total amount drawn from the bank was only USS19.968 million out of the allocated USS29.0 million. The remaining finding requirement to complete the project was internally generated by Petron. Petron Corporation is very positive that the benefits generated by the projects will be sustained. In addition to meeting the oil industry's shortfall on both LPG and diesel products, the projects, specifically GODU, enabled Petron to comply with the government's move to reduce air pollution especially in the urban centers by way of lowering specification for sulfur content of diesel to 0.5 wt % effective this year. The government is planning to further lower the sulfur content limit in diesel to 0.2 wt % by the year 2000 and the GODU can very well this requirement. During its performance test run, GODU attained 91% desulfurization efficiency (1% higher than its 90% design efficiency) with a sulfur content of .12 wt % on the product based on 1.33 wt % feed sulfur content. 51 The installation of a spent caustic treating facility will also enable Petron to comply with the stnngent pollution abatement requirements to be enforced by the Environmental Management Bureau (EMB) in the near term. The 1.9 MBSD inrease in LPG production will be fully availed of as LPG demand is projected to increase by an average 15% per year for the next five (5) year. At present, the three (3) oil refineries in the country are importing LPG to satisfy consumer demand. The projects' benefits are expected to be fuUly utilized for the entire operating design life of the units which is twenty (20) years and beyond under normal preventive maintenance and corrosion control measures practiced in the refinery. The completion of the above projects positions Petron as an industry pacesetter that can very wel adjust to current and upcoming government statutes directly linked to pollution control and economic interest of this country. The project was hailed by President Fidel V. Ramos as a big boost to the attainment of Philippines 2000 status and cited for its significance in relation to govrnment efforts towards a cleaner and greener environment. 52 IBRD ENERGY SECTOR LOAN NO. 3164 PH PART III - INSTITUTIONAL STRENGTHENING The institutional development component was aimed at strengthening and enhancing the technical capabilities of the PNOC staff in systems planning project monitoring and management. Employees who were deployed to attend various trainings and seminars in these fields from 1991 to 1995 were mainly from the Company's petroleum refinery and geothermal business units, i.e., now Petron and EDC, respectively. The component was orginally allocated USS3.0 Million in 1990 but has since been reduced to USS2.088 after requests for cancellation was forwarded to the Bank in mid 1995. As of December 31, 1995 total drawdowns on this component amounted to PHP1.337 Million or 64% of the revised loan amount. Of this total availment, Petron utilized USS.694 Million while EDC's share was USS.643 Million. (Schedule A) Petron's drawdowns consisted mainly of payments for professional services rendered by the Arthur D. Little International Inc. (85%) for studies on petroleum demand and supply and for trainings/seminars (15%) in refinery operations and management, financial and human resource management. The Arthur D. Little studies served as basis for preparing the Corporation's refimery expansion/upgrading plans. EDC's drawdowns were mainly used to send its staff to various technical and management competency trainings and seminars abroad and the conduct of in-house trainings. A Management Development Program commissioned with the Asian Institute of Management acounted for over 34 of the availment. Other trainings attended were in the specialized fields of geochemistry, environrnental economics, oil & gas accounting/management and water quality management. In addition to meeting the objectives of the component, the Company was able to derive other benefits such as the establishment of an information network with other agencies and counterparts and raising the technical credibility of our staff to standards comparable with other ASEAN countries. 53 EXECUTIVE SUMMARY World Bank - Energy Sector Loan 3165-PH (Second Draft) On March 16, 1990, the Republic of the Philippines availed of a US $390 M loan from the World Bank through Energy Sector Loan. Envisioned as a means of strengthening the role of the then Office of Energy Affairs (OEA) as the coordinating agency for the sector's policy planning, the loan provided for the upgrading of institutional capabilities as well as technical assistance projects. Of the total loan amount, US$ 40 million or 10.7% was allocated to the government comprising of the following energy agencies as beneficiaries: (a) Department of Energy/Office of Energy Affairs (US$4.34 million); (b) National Electrification Administration (US$ 22.24 million); (c) Environmental Management Bureau of the DENR (US$ 10.48 million); and the (d) Energy Regulatory Board (US$ 3.00 million). The Philippine National Oil Company (PNOC) was allocated US$ 150 million while the remaining portion amounting to US$ 200 million was appropriated to the National Power Corporation (NPC). The government portion of the loan or WB-ESL No. 3165-PH was officially terminated last 31 December 1995 after having been extended for one year. This was in view of the delayed implementation of some project components caused primarily by the late releases of funds as well as periodic manpower and technical problems. As Administrator of the government portion of the loan, the Department prepared in consultation with the beneficiary agencies, a consolidated contribution/inputs to the Implementation Completion Report which is part of the loan requirements. Prior to the termination of the loan, government loan utilization amounted to US$ 31.46 Million or 78.47% of the total allocation. DEPARTMENT OF ENERGY The DOE portion of the WB-ESL has three (3) major components, namely: Technical Studies (US$ 0.74 M), Institutional Capability Building (US$ 0.91 M), and Building Expansion (US$ 1.06 M). Under the Technical Studies component, three projects were completed, namely: a) the Environmental Impacts of Accelerated Geothermal Energy Development which aimed to identify the impacts of accelerated geothermal energy development and institute measures to mitigate the same, b) Institutionalization of Methods and Procedures for Local Non-conventional Energy Planning at the Regional and Sub-regional Levels Study with significant outputs to wit: "Framework for Integrated Energy Planning of Sustainable Development which prescribes the integration of energy planning mechanisms into the national development planning process, the Census of New and Renewable Energy Sources Systems Installations at the National Capital Region, and the conduct of series of seminar on Long-iange Energy Alternatives Program (LEAP) Software. However, three of the technical projects were not implemented per the loan agreement because of the following reasons: (a) The Non-Power in Geothermal Study was replaced by the establishment of coal testing facility due to existence of similar study undertaken by the PNOC; (b) The project " Cost Structure and Transfer Pricing Study" was financed by the USAID through its Technical Resource Project and was completed in 1993; (c) only the capital outlay of the project "Fuel Contingency Plan" was drawn as it was pre-empted by the 1991 Gulf crisis. 54 The Institutional Strengthening component of the loan provided technical assistance, training, supplies and equipment for two completed projects, namely : Establishment of the Energy Database and Power Systems Planning. The Regional Energy Demand Forecasting which is part of this component was pursued under a USAID grant. On the other hand, 50 percent of its total allocation was utilized from the Manpower Training component. The completion of the DOE Annex Building which was inaugurated on September 28, 1995 by President Fidel V. Ramos is a fitting landmark of the BankL's support to the country's energy sector. The following are the plans of DOE after the completion of various components of the WB-ESL projects: A. Environmental Impacts of Accelerated Geothermal Energy Development Republic Act 7638 vests upon the DOE the authority over energy projects. This will ease the way for DOE to institute measures to safeguard the environment while pursuing its mandate to ensure adequate supply of energy for the country. This authority, in joint coordination with the EMB-DENR mandates the DOE to be the central coordinator of all agencies involved in geothermal regulatory proceedings in consonance with the one-stop-shop concept. DOE shall facilitate timely actions on environmental applications/requests by investors related to geothermal development. In order to efficiently carry this out, it was recommnended that a Memorandum of Understanding (MOU) be drawn to define the role and responsibility of each agency involved in geothermal permitting. B. Nonconventional Energy The DOE will pilot test the "Framework for Integrated Energy Planning of Sustainable Development" in one province. There will be two-tiered consultation meetings at provincial and regional levels to validate the drafted framework. Locally-funded projects will be conducted to develop mechanisms for monitoring NRES and to assess their contributions to the national energy mix. Strategies developed by DOE-ANECs and the NCR Census will be integrated into a single methodology capable of both monitoring the status of NRES installations and their contributions to the energy mix. C. Coal Testing Facility The plant will be made available to researchers from the academe, the coal industry and students on coal beneficiation processes to demonstrate the technology for a broader understanding and appreciation of its environmnental merits. 55 D. Power Systems Planning Transfer of technology plan will be strategized by the proponent division of DOE at the regional level possibly under a different funding source. Bank Performance Records showed that the Bank's performance was satisfactory in terms of lending assistance during project preparation and implementation. ENVIRONMENTAL MANAGEM[ENT BUREAU Department of Environment and Natural Resources The DENR-EMB component of the Energy Sector Project is entitled "Modernization of Environmental Monitoring Facilities and Capabilities in Response to Energy Developments". It was included in the Philippine Energy Sector Project in view of the expected environmental impact of the rapid energy sector expansion. Corollary to this, there is a need to properly equip the agency in terms of facilities and institutional capacities. The general objective of the project is to assess the impact of energy projects on air and water quality and specifically to intensify air and water quality monitoring and surveillance activities, control and prevent pollution from stationary sources, enhance environmental impact assessments, modernize laboratory and monitoring facilities. The components of the EM Energy Sector Project consisted of the following: 1. Air and Water Quality Monitoring 2. Pollution Prevention and Control 3. Environmental Impact Assessments (EIAs) 4. Modernization of laboratory and monitoring facilities 5. Manpower training and development The project has successfully met its objectives with the purchase and installation of the following equipment: (a) portable monitoring facility for the use of EMB and the regional offices of DENR (b) establishment of nine (9) air quality monitoring stations and acquisition of three (3) module air quality monitoring van. Consultants were commissioned to advise EMB on the purchase of these equipment and accessories as well as to set up programs for data collection, analysis, quality assurance and staff training. 56 Implementation Experience and Results The EMB with a total allocation of Ten Million Four Hundred Thousand US Dollar (US$10.4 M) has satisfactorily implemented the project in its entire duration. From the year 1992, the project has achieved its annual disbursement target. Since the physical and price contingencies were deducted from the total loan amount of US$ 10.4 M by the DBM, accordingly, US$ 8.56 M became the total based cost of the project funds. Of this, only US$ 7.797 M was disbursed by the EMB Energy Sector Project indicating an 84.26 percent utilization rate. The project on "Modemization of Environmental Monitoring Facilities and Capabilities in Response to Energy Developments" which was given a one-year extension was completed in 1995. The loan disbursements were slow during the first year of implementation due to the delays in the bidding and procurement processes as well as the untimely release of funds from the Department of Budget and Management (DBM). These problems consistently surfaced until the last year of implementation. Key Lessons Learned, Future Operation and Sustainability With an expanded database and knowledge acquired from the project implementation, the DENR will have a sound and sufficiently drawn basis to formnulate appropriate policies regarding air and water pollution from power plants, rules and regulations for stationary sources and enhance criteria for the environmental impact assessments of energy projects. While substantial gains have been made from the WB-ESL assisted project, it would be significant to the EMB to acquire further external funding and support for the installation of more air quality monitoring stations in other parts of the country where power projects/stations are in operation. This will ensure the development of a countrywide database profile to expand DENR's framework for its policy and program planning and implementation. The sustainability of the project is guaranteed in view of the following: (1) the acquired equipment are accuracy and durability proof considering the reputable standing of its manufacturers in the field of environment, (2) equipment are provided with a five-year supply of accessories and spare parts, (3) training of technical personnel in the operation and maintenance of equipment; and "after sales service" of the suppliers are satisfactory. Performance of the Bank The bank facilitated the equipment procurement processes through its immediate response to EMB queries, fast-tracked evaluation and approval of the required documents. 57 ENERGY REGULATORY BOARD A portion of the government loan for ERB was basically envisioned as a means of strengthening the agency by way of upgrading its institutional capability as well as provision for technical assistance projects. Of the total loan amount, the ERB got a slice amnounting to US$ 3.0 M. In 1995, the Board got an additional loan amounting to US$ 0.38 M which was withdrawn form EMB's surplus. The ERB spent a total US$ 3.45 M. The ERB's portion of the WB-ESL has four (4) major components, narnely: 1. Human Resource Training and Development. 2. Technical Assistance on: a. Power Tariff Consultancy b. Petroleum Product Pricing c. Coal Pricing d. Management Information System e. Purchase Power Study f. Technical Assistance on the Institutional Dev't. Project g. ERB's Physical Resource Development h. Legal Aspects of the Study on the Regulation of Transmission and Sub- transmission charges i. Regulatory Cost and Finance Analysis and Training j. Electric Utility Rates Analysis k. An Analysis of the Philippine Antitrust Laws 3. Physical Resource Development. 4. Strengthening of ERB's Infornation and Production unit. Implementation Experience and Results Under the Human Resource Training and Development, the ERB personnel have participated in various local and foreign training/conferences Nvhich broadened their perspective in terms of appreciating the implications of regulatory policies and decisions. Under the Technical and Management Assistance component, joint undertakings of the hired consultants with the ERB counterpart ensured transfer of technology such as in the use of software or on the adoption of the applicable rate setting methodology in the Philippines, and the like. To compliment its growing tasks and responsibilities and to ensure its mobility and accessibility, the physical resources of ERB were upgraded with the acquisition of vehicles, 58 communications and information equipment such as fax machines, two-way radio system and cell phone. The ERB likewise acquired testing facilities , procured books and subscribed to energy periodicals. With regard to the strengthening of its information and production units, the ERB acquired necessary equipment, computer hardware, software and other accessories. Networking and document imaging were also put in place. These were also transfers of technologies in practically all the applicable tasks of the projects. Problems and Maior Factors Affecting the Project There were some administrative problems that affected the project implementation, like the delay in the 1991 budget allotment, late approval of the General Appropriation Act, lack of government counterpart for the 70%-30% loan utilization, no budgetary allocations approved for ERB in 1994 and technical issues with DBM in the disbursement of funds allotted for consultancy services in view of E. 0. 205 dated January 3, 1991. Bank Performance The Bank's performance was satisfactory in terms of its extending the necessary lending assistance from the preparatory stage up to the project implementation. Borrower's Performance To ensure that the project objectives are complied, the ERB assigned a Project Director and an Alternate to oversee the implementation. A Technical Committee was also created whose members came from the different units of the agency. It was tasked to screen prospective consultants for the Technical Assistance component. Correspondingly, a secretariat arm was designated to coordinate with the project consultants. Overall Outcome The objectives were satisfactorily met within the five-year (1991-1995) period of project implementation. 59 Kev Lessons Learned Several lessons were learned in the course of project implementation. First, there should be closer coordination between the agency's technical and financial groups. Second, the Board should create a Project Review Committee to assess the status of the projects and how they contribute in meeting the objectives. Third, is the regular and constant communication with DBM, Bureau of Treasury, BSP and the administrative agency (like DOE). Lastly, the Board suggests that a more systematic administration of the financial aspect of the loan be ensured by the concerned agency or better yet a loan/grant should be given directly to ERB. Plans for the Future ERB faces an even greater challenge with the passage of several bills such as the RA. 7832, the Omnibus Bill (An act to ordain reform on the power sector to ensure the optimal electrification of the Philippines), the Energy Competition Bill (An anti-monopoly bill), Senate Bill No. 886, to narne some adding powers and functions to the Board. This scenario call for more technical assistance, e. g., appraisal of assets, impact of DSM to rates, consolidation and merger, load forecasting, and other reforms in the distribution sector particularly the 120 electric cooperatives nationwide. If the ERB has to meet these critical tasks, it needs to house a great number of employees, hence it is more beneficial if it can build its own office than renting a roughly 2,460 square meters at its present address. It is hoped that the Bank can extend assistance in this regard. NATIONAL ELECTRIFICATION ADMINISTRATION I. Improving NEA's Institutional Capabilities This component of the loan, includes the provision of computers, professional and office equipment, communication equipment, vehicles and warehouse equipment for NEA. All of these items were purchased except for the proposed procurement of two (2) shuttle busses for NEA employees which was not pushed through as the requested approval from the Office of the President was turned down. Delivery of computers ana. engineering software and other testing equipment under IFB 62 was not completed before the loan closing date. However, the Bank agreed to finance this procurement under the Rural Electrification Revitalization Project (Loan 3449-Ph). The acquisition of these items, increased NEA's mobility in project implementation and make effective communication link between NEA and the Electric Cooperatives (ECs). It enhanced NEA's capabilities to handle and deliver materials to the ECs. 2. Improving NEA's Functional Capacity This component of the loan aims to establish and provide operational and maintenance equipment for its regional operation offices and zonal repair and maintenance facilities. A total of seven (7) units of Test Vans including laboratory equipment were procured for this purpose, six (6) were allocated for use in the regional offices who operate and maintain these equipment 60 while one (1) unit is being used at the ceni.ral office in Manila. 3. Upgrading and Repair of Distribution System This component of the loan provides for the rehabilitation of the distribution system of twelve (12) ECs. Electrical materials and equipment including maintenance trucks to support the rehabilitation and upgrading project were procured and issued to eighteen (18) beneficiary ECs. These rehabilitation and upgrading projects eventually contributed in the improvement of the quality of electric service being provided by the recipient ECs. 4. Installation of Additional Substation Aside from financing the necessary rehabilitation equipment and materials requirement of ECs under the No. 4 component, the loan also finances the procurement of additional eight (8) substations intended to be installed in eight (8) ECs. A total of twenty one (21) Power Transformer and Substation Packages were procured to sustain the availability of power supply in recipient ECs. Installation of these equipment were already completed except for the remaining five units expected to be installed in 1996. 5. Training and Technical Assistance There were two major consultancy projects for this component: one is the Banking Consultancy Contract with the Private Development Corporation of the Philippines (PDCP); and the Technical Assistance on Materials and Handling conducted by the National Rural Electric Cooperatives Association (NRECA). The Banking Consultancy Contract with PDCP was intended to assist NEA; (i) to implement its revised lending program, together with the rescheduling of existing debt obligations of the ECs and for the appraisal and origination of new investment loans; and (ii) to develop and institutionalize a loan appraisal and administration function within NEA by organizing a core lending group which shall undergo on-the-job training. The training component of the consultancy contract was accomplished. However, the overall performance of the contractor was not satisfactory as it failed to complete the reconciliation of loan accounts and the restructuring of accounts. NEA is receiving significant donor support for the funding of specific rehabilitation and expansion projects of the ECs and as the central procurement agency for the ECs, NEA is procuring significant amount of distribution material and equipment in support of the construction of the identified projects. Because of these services of the NRECA was engaged for the following: (i) development of a strategy for the efficient procurement, staging and delivery of materials and equipment to recipient ECs; (ii) development of a detailed workplan for the implementation of the strategy that is developed; and assessment of the ECs capability to timely construct the identified projects. This technical assistance on materials handling consists of two parts, the Phase-I which is the study phase, was completed 1993 and the Phase-ll, which is the implementation phase is on-going and is being financed under the existing Rural Electrification Revitalization Project. The study phase was able to identify likely bottlenecks to the smooth 116' 120 124 128' P H I L I P P I N E S 220 ENERGY SECTOR PROJECT ENERGY RESOURCES CUj A Geotermal appraisal / delineation l6cotions ( 9 S ? * Geothermal sites under exploration ^ - - .* Existing geothermal power projects in operation I - y ) ? Coal development and production Cogua ?' Coal explorotion : I I) :1 Hydra-electric plonts Future hydro-electric plant j I LUZON --Faults AmukloMg / - - N - International boundaries 16' i 1 | )Pantu,4'an KiI ,ts I T0 200 300 16 &-qMpCswoy MAibs ~02 Balungo t- 0 %2 200 Mt. Pinohbox t Mobile Zone (3 Angat , Morlvele tbYa oyaan ; \ iOl \Doi>iC ?eaari' MonEelogo > tpovMnito Geothermal Power Project 1\ ~~~~~~~~~~lBcn- Monlto 1I M?NDOI4O ~s/8bx, 'AA 74 \< >Zr \ (H1ttllusan r - PHILIPPINF SEfl 12- / y SAMAR7 12- ,,7 1 K -\- .(!1 1 { /..s, . ,f o 4 0 )t %PANA Y , *onnn (A ~ ~ ~ ~ ~ -, 5?'u -16 NI i-S f ouo. 'V !AtAWAIV t ~ >> PoNlnpinon I-I f/; j7 { \ \ V ~~~~~~ ~ ~~~~~~~~~~~Agusan X -8e (3f -r 2_.-')\ nr\. \- CHINA Pula L ul n i l. s.~~~~ - . . . . ," / -.!\ 1 -' \ VIET NAM I utolv IiN'i4t\l I 'Va 'SArAS. PAiAWAN A Its,n.,rvel A Si BRUNEI 'ANAO K f Z f /1; S . i . MALAYS1A - Agusa a' ,i-- C) - Th. d~k- - A NA = 11 N' D W VO [~~~~~~~~~~~~~~~~~~~~~~n - ft er '. Th. r `bir~ 8MI *0-~~ . CHNA IN D F Na t I A I,...o............ -n.I .- o o .-H \n7Xz S .................... 120- . 120 A~~~~T '120 I2? 14 i2 PHILIPPINES * Cl> u ENERGY SECTOR PROJECT GRID MAP OF NATIONAL POWER CORPORATION 18E CCONO I O POWER PLANTS. *~~ ElITI U~~~~~ Hydso HC * \ DGI *IGI OUrONGI,_ S S ~ T~O mid mcIAC I CooI Thm-.I J ll 0 7 oi Oil TIl*l D.5.. S o ut1 h 4 2 [H~ - I 5z / *(DI TAR;NSMISSION LINES. IRAINi 500 kV CH | BS B04-?|H} / ' ~~~~~~~~~~~~~~~~~~~~~230 &I China i . - -3069 . \Sznl ) 0230 kV Sea ' t U :; | .,IH)S @ * * 0 115-138kV ( DI o I IOIOCotoototisooI Fo-slitin to bt Upgrodd b _ hond. I EtingiS kydo po.w - IM.O Ewhitng 230 kV t.o6t-U I ERiting 1151 3B kV .otioh A{H ) D / D Ei.ling 69 kV .b f.o. (oLy pNpd sokolot..S or. ,) Philippine Sea, MINDORO MA"SBTE -12 5AMAR 2 . ~ ~ ~ ~ ~ ~ ~ il -c - ' "\; 1, ' '*. PANAY l j-( (ToC- u 5,ut v x -. I o IA0ilo N PALA WAN :. 5'0 ' ;EE L k ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~ '','M 48RE IU 'r E..T-Ei-,o ; , '; 'I , KR | IGF 'O.. tPb-4\F 0bd.'o..IOI - ...d~ io 4. . . -- a , '. ' 'w, '8-! I ~ ~ ~ ~ ~ ~ ~ ~ 4 UP M-0 Gm0dI .,.,PHILIPPEINE)S . LH)WD - It. _ 0~~~~ W- - '- _~~~~~~~~~~~~~~~~, S , 'n) \ r 2 -r t~ tO__ S..O UH s k I Nl.lA N A O 8 , ,,1 ,, , i ., Wrl~~- IttHk2 o, NUT G,o IpIttarelUsE'lMl '' - ol (OMiOO P0H0iLIP00INES I IMyN-s H) go c lar. , I Mor iuf "'lE ' -<.u*A9,YSI*i''i'_.(^ 8~~~~~ ' H ''z-N - .._ jO . b ,, , 4,l Cs , ~~~~~~~~I J/'-C _ Indon oceon sDoNTSIA < lrr wvr It4 _ M~~~~~~~~~~ IMAGING Report No: 15657 Type: ICR