Document of The World Bank FOR OFCIAL USE ONLY Rrwt No. 5415 PROJECT COMPLETION REPORT ROMNIA CINPULUNG-MUSCEL POLYESTER PROJECT (LOAN NO. 1448-RO) January 28, 1985 Industry Department This document bas a restrcted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed witbout World Bsnk autheriation. FOR OMCIL USE ONLY ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT (LOAN 1448-RO) PROJECT COMPLETION REPORT TABLE OF CONTENTS Page No. PREFACE ..............,,,.i PROJECT DATA . ,,,,,,,,,,,,,,,,,,,,,,,... MISSION DATA ............,.,,, .. ..............,.,,..... COUNTRY EXCHANGE RATES ....................... ...... iv PRINCIPAL ABBREVIATIONS AND ACRONYMS ....................... iv HIGHLIGHTS ........... ..................................... v I. INTRODIUCTION .............o........1 II. PROJECT BACKGROUND. ........ ....... ............... 1 A. Project Preparation, Appraisal and Loan Approval. 1 B. Project Description and Objectives...................... 2 III. PROJECT IMPLEMENTATION AND MANAGEMENT............ 3 A. Achievement of Project Objectives . . 3 B. Project Scope Changess........ ............. 3 C. Project Management .. 3 D. Employment and Training a i n i ng............... .. 4 E. Use and Performance of Engineering Firms and Consuntants.. . 5 F. Procurement and Performance of Supplpers 5 G. Implementation Schedule .. 5 H. Ecooy........................... 6 I. Capital Cost, Financing and Loan Disbursement........ 6 IV. OPERATING PERFORMANCE.... .......... 9 A. Production Build-up i l d -p....... 9 B. Market Development... . . 9 V. FINANCIAL PERFORMANCE ..................................... . . 10 A. Value of Sales and Production Costs ..................... 10 B. Financial Analysis ..................... tO VI. ECONOMIC PERFORMANCE .......................................... 10 VII. BANK ROLE AND LESSONS LEARNED ............................... 11 A. Bank Role ...................................... 11 B. Lessons Learned ...................................... 12 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS (Continued) ANNEXES 3-1 Procurement of Bank-financed Goods and Services by Country of origin 3-2 Construction Schedule 3-3 Capital Cost and Financing RequI.red 3-4 Annual Capital Expenditures a 3-5 Estimated and Actual Disbursement Schedules 4-1 Estimated and Actual Production 4-2 Actual and Estimated Sales Revenues 5-1 Estimated and Actual Production, Prices and Unit Costs of Materials and Utilities 5-2 Annual Full Capacity Costs 5-3 Financial Projections 5-4 Cost and Benefit Streams for Financial Rate of Return Calculations 6-1 Annual Economic Benefits and Costs 6-2 Cost and Benefit Stream for Economic Rate of Return Calculations ATTACHMENT Comments received from the Borrower RONANIA - CIMPULUNG-MHTSCEL POLYESTER PROJECT (LOAN 1448-RO) PROJECT COMPLETION REPORT PREFACE Loan 1448-RO for the Cimpulung-Muscel Polyester Project, for US$50.0 million was signed in June 1977 and was closed in March 1982, the full amount of the Loan having been disbursed. The main objective of the Loan was to finance the construction of a new polyester plant, introducing new technology and making use of existing plants producing the materials required for the manufacture of polyester. This plaat helps Lo meet domestically the growing demand of the Romanian textile industry. The Project Complecion Report has been prepared by the Industry Department based on a draft Drepared by the Borrower and the findings of Industry Department missions to Romania in August 1982 and July 1983. Comments recejved from the Borrower, which are included as an attachment, have been incorporated into the text. This project has not been audited by the Operations Evaluation Department. - ii- ROMANIA - CINPULUNG MUSCEL POLYESTER PROJECT (LOAN 1448-RO) PROJECT COMPLETION REPORT PROJECT DATA (USS million) As of 10/31/84 Original Disbursed Cancelled Repaid Outstanding Loan Amount $50.0 $50.0 - $16.7 $32.3 Cumulative Loan Disbursement 1977 1978 1979 1980 1981 1982 Planned 10.0 32.5 46.2 50.0 50.0 - Actual 1.5 23.5 35.2 40.3 46.1 50.0 % Planned 15 72 76 81 93 100 Original Actual Date Date Start of Implementation - 12/75 Appraisal Date - 9/76 Board Approval - 06/07/77 Loan Signing - 06/15/77 Effectiveness - 10/03/77 Loan Closing 03/31/81 03/31/82 Date of Physical Completion 01/80 03/31/82 a/ Completion Time (in months) 49 75 Time Overrun, months - 26 Date of Start-up of Operations Polymerization 01/80 06/81 Line I 01/8C 03/82 Line II 01/80 03/82 Line III 01/80 12/82 Fixed Cost b/ (US$ Million) 121.9 116.1 Cost Underrun () - 5 Total Financing Required (US$Million) 136.1 137.6 Financial Rate of Return (x) 4.7 6.8 Economic Rate of Return (X) 15.6 14.1 a/ The Project comprises a polymerization plant and three spinning lines in addition to the off-sites. The implementation schedule is discussed in para 3.13. The polymerization plant was physically completed by March 1981 and the first spinning line by March 1982. The other two lines were completed in August and December 1982. b/ Excluding working capital and interest during construction. - iii - ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT (LOAN 1448-RO) PROJECT COMPLETION REPORT MISSION DATA Month No. of No. of Report Missions Year Days a/ Persons Date Identification 4/76 5 3 6/4/76 Preappraisal 7/76 10 3 9/17/76 Appraisal 9/76 10 4 10/27/76 Appraisal Follow-up 11/76 7 2 12/1/76 Supervision I 3/78 4 2 4/24/78 Supervision II 10/78 3 1 12/28/78 Supervision III 11/80 5 1 12/17/80 Supervision IV 9/81 5 1 9/22/81 Supervision V 8/82 5 3 9/27/82 Completion 12/82 5 3 - Completion 7/83 5 1 a/ In most cases, missions were combined with other work in Romania, so the number of days is approximate in regard to the Cimpulung Project. - iv - ROMANIA - CIMPULUNG POLYESTER PROJECT (LOAN 1448-RO) PROJECT COMPLETION REPORT COUNTRY EXCHANGE RATES Appraisal Year US$1 - Lei 20 Investment Period US$1 - Lei 20-15 Completion Year US$1 - Lei 15 PRINCIPAL ABBREVIATIONS AND ACRONYMS Government - Government of Romania the Enterprise - The Cimpulung-Muscel Polyester Fiber Enterprise the Central - The Savinesti Industrial Central under the Ministry of Chemical - Industry IITPIC - The Technological Engineering and Design Institute for the Chemical Industry Industrial Ex Im - Industrialexportimport Foreign Trade Enterprise IB - The Investment Bank MW - Megawatt MWh - Megawatt-hour tpy - metric tons per year -v - ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT (LOAN 1448-RO) PROJECT COMPLETION REPORT HIGHLIGHTS The project is part of the overall Romanian strategy for the development of the chemical and petrochemical industry which encourages projects that produce more complex, higher value-added downstream chemicals * (para 2.04). The plant's polyester fiber output is intended mainly for the domestic market in the textile and clothing industries, while only small quantities may be exported in the first years of operation. The production of polyester chips is entirely destined to the domestic market. However, a substantial portion of the fiber output is subsequently exported in the form of fabrics, garments and other finished textile products (para 2.05). The project which is located at Cimpulung Muscel is based on a modern, continuous production process to reduce operating costs and to ensure uniform product quality. The project includes a continuous polyester polymerization plant of an annual capacity of 47,200 tons, a polyester line to produce 15,000 tons per year of chips for filament yarn and three spinning and drawing lines with capacities of approximately 10,500 tons per year for the production of cotton-type polyester staple, wool-type tow and tops and flax-type polyester staple (paras 2.06 and 2.08). The project was commissioned over an 18-month period starting June 1981 and it was completed with 26 months' delay (para 3.13). The delay was mainly due to delays in (i) delivery of local equipment, in part as a result of the fact that specialized equipment was manufactured locally for the first time based on documentation and specifications supplied by licensor and technology suppliers; and (ii) design and engineering work caused by differences between the systems of standards used by the different suppliers and licensor. Considering the high level of technology transfer achieved, the project implementation is, however, considered reasonable. Capacity utilization was 40X in 1982 and it is expected to reach 90% in 1983 and full operation in 1984. The project cost amounted to USS124.8 million, 3.2% below appraisal estimate. Because of revaluation of the Lei during implementation, the cost expressed in Lei is significantly different and is 18.4% lower than the estimate at appraisal. The savings were registered in most cost categories of expenditures: civil works, licenses and engineering, technological tests and are mainly due to favorable price developments and efficient implementation (paras 3.17 and 3.18). The FRR for the project was calculated at 5.6% as compared to 4.7% estimated at appraisal. The increase in product prices has more than compensated for the higher unit cost of inputs and the delays in project - vi - completion (para 5.03). The ERR was calculated at 14.2% as compared to 15.6% estimated at appraisal. The slightly lower return is due to the completion delay and the current depressed economic price for polyester (para 6.03). Early supervision proved beneficial in completing all arrangements for the proper engineering and technology acquisition, and in developing adequate procurement procedures. However, a long time war required to negotiate the supply of the main technology package with suppliers to obtain a price consistent with estimated costs, obtain information on technology and to minimize the foreign content of the package. While much of the implementation delay was due to local manufacture of equipment based on a new technology, overall transfer of technology achieved in this project is deemed successful but at the cost of delayed start-up (paras 7.04 and 7.05). ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT I. INTRODUCTION 1.01 The rapid development of chemical industries has been one of the salient features of the long-term policies of the Government of Romania. This policy has been largely designed to increase the value added to the country's petroleum and natural gas resources through the vertical * integration of its basic petrochemical industries and the production of finished consumer goods. 1.02 In the pursuance of this policy, the Government has established second-tier petrochemical plants to make intermediate products such as dimethyl terephtalate (DMT) and ethylene glycol (EG), and production of synthetic fibers was started in 1960 to supply the country's expanding textile industry. Consumption of synthetic fibers In Romania increased very rapidly (more than ten fold) between 1965 and 1975 and continued growing through 1982 at an average rate of 8.3Z annually. 1.03 The Cimpulung-Muscel Polyester Project (the "Cimpulung Project- or the 'Project") is part of the Government's effort described above to integrate the production of the petrochemical and the textile industries. The responsibility for the local manufacture of synthetic fibers is vested in the Savinesti Industrial Central (the "Savinesti Central' or the "Central") under the Ministry of Chemical Industry. II. PROJECT BACKGROUND A. Project Preparation, Appraisal and Loan Approval 2.01 Following a request from the Government, a Project Identification Mission visited Romania in April 1976. One of the three projects identified as suitable for Bank financing in the chemical sector was the Cimpulung Project, the scope of which had been determined by the Government in its 1976-80 Five-Year Plan. 2.02 The Project was pre-appraised in July 1976 and appraised in September 1976 on the basis of a draft techno-economic study prepared by the Savinesti Central and the Technological Engineering and Design Institute for Chemical Industry (IITPIC). The main process and engineering features of the Project were discussed with the Bank during appraisal as well as in the early stage of the Project's implementation. Although there was already one polyester plant operating in Romania in 1970, its capacity was insufficient to meet demand and the batch technology used was more - 2 - expensive to operate and did not ensure the same degree of product uniformity obtainable by using the modern continuous polymerization process. The appraisal ulsuion had detalled discusmions on the Project's estimated capital cost, export possibillties and procurement procedures and, during appraisal, visited the Government agencies dealing with the marketing and utilization of the Project's expected output as well as the enterprises having the capability to manufacture equipment for the Project. 2.03 In March 1977, negotiations between the Romanian authorities and the Bank took place and on June 7, 1977, the Bank's Executive Directors approved a loan of USSSO.O million to the Investment Bank (IB or the 'Borrower") at an interest rate of R.22 to be on-lent to an enterprise to be formed for the execution and operation of the Project. The Loan's term was for 15 years including three years of grace. IB on-lent proceeds of the Loan to the enterprise at the same 8.22 Interest rate as charged by the lank. The Loan became effective on October 3, 1977. B. Project Description and ObJectives 2.04 As mentioned above, the Cimpulung plant In part of the overall Romanian strategy for the development of the chemical and petrochemical industry, placing decreased emphasis on the production of basic chemicals and encouraging projects that produce more complex, higher value-added downstream chemicals-. 2.05 The plant's polyester fiber output is destined mainly for the domestic market In the textile and clothing industries; only small quantities may be exported during the first years of operation. The production of polyester chips is entirely destined to the domestic market. However, a substantial proportion of the Romanian synthetic fiber output is subsequently exported in the form of fabrics, garments and other finished textile products. 2.06 The Cimpulung Project comprises: (a) A 47,20n tpy continuous polyester polymerizatlon plant (originally planned for 46.700 tpy). (b) A 15.2no tpy polyester line to produce chips for filament yarn. (c) Three spinning and drawing lines with capacities of approximately ln,5nn tpy each for the production of cotton-type polyester staple, wool-type tow and tops, and flax-type polyester staple. (d) Infrastructure and utilities, including two 4MW steam turbines, boilers w'th total capacity of 150 tons/hour, water supply svstem, etc. (e) Pollution control and waste recoverv installations. (f) Laboratorv and naintenance equipment. 2.07 The Project is located at Cimpulung Muscel, in the Arges judet, about 50 km north of Pitesti and 160 km northwest of Ploiesti, the two major petrochemical centers in Romania, which supply feedstocks to the Project. The site is connected to the national rail and road necwork, which facilitates supplying the Project with raw materials and access to markets. The Project is based on a modern, continuous production process, that results in low operating costs and ensures uniform product quality. 2.08 Raw materials required to manufacture polyester are ethylene glycol (EG) and dimethylterephtalate (DMT) or pure terephtallc acid (PTA). The latter is the preferred feedstock at present because of lower costs but at the time the project was designed, there was already one plant in operation and one under construction in the Pitesti and Ploiesti petrochemical complexes, where EG was also being produced. Thus, the choice of technology for this project Is considered correct. Utilities required for the plant are ensured as follows: (i) electric power (120,310 MWh/yr) supplied from the captive power plant (72,500 MWh) and the national grid (47,R10 MWh); (ii) process steam frem its own power plant, using fuel oil as energy source; and (iii) water supplied from the nearby Tirgu river. I1I. PROJECT IMPLEMENTATION AND MANAGEMENT A. Achievement of Project Objectives 3.01 The Project was commissioned over a period of 18 months starting in June 1981. Capacity utilization was 40% in 1982 and, in 1983, it Is expected to reach 90Z. The IB had repaid 252 of the loan on schedule by June 19R3. As shown in para 5.03, starting in 1983, debt service is covered by the Project's cash-flow generation. h. Project Scope Changes 3.02 There has been no Important change In the overall Project scope: onlv two minor changes in the Project scope have taken place: (1) an increase in capacity from 46,7nO tpy to 47,200 tpy attained without change in equipment design, and (ii) a higher use of electric power generated in the Project's power plant. There is also the likelihood that, because of some variations in actual demand, the proportion of final products - cotton, wool and flax-tvpe fiber - will depart from the values assumed at the time of appraisal. The equipment has been designed to ensure product mix flexibility. C. Project Management I.fil The Project was implemented under the general management of the Cimpulting-Muscel Polyester Fiber Enterprise (the Enterprise) established in June 1977 within the Savinesti Industrial Central under the Ministry of Chemical Industrv. The Central has the general responsibility for chemical fiber production and supplv in Romania, at the same time is providing technical assistance to its enterprises. Project implementation followed -4- normal practice in Romania. The Enterprise served as the overall project coordinator and was thus responsible for Project implementation and completion. However, taking into account the complexity of the Project and the specific works required, several areas of project execution were delegated to other specialized organizations, according to the terms of contracts concluded with them. The main participating agencies are described in the following paragraph. 3.04 IITFIC, the engiaeering and design institute under the Ministry of Chemical Industry, was responsible for the general design of the Project, technical selection of any foreign technology and equipment, overall site layout of the Project, construction design and detailed ^ engineering (based on the information provided by the main technology/ equipment and license supplier). Responsibility for all foreign procurement (including technology, equipment and know-how) originally rested with the Import Agency for Chemical Equipment and Technology (ROMCHIM). This function has now been merged with the responsibility for exporting chemical industry goods and services through a larger agency: the Industrialexporcimport Foreign Trade Enterprise (Industrial Ex Im), with IITPIC acting as technical advisor. 3.05 Local procurement was handled by the Enterprise itself. Civil works and construction work were executed by the Pitesti Industrial Construction Trust, a specialized enterprise under the Ministry of Industrial Construction. The works execution has been done under the supervision of and using IITPIC's technical assistance and has been coordinated by the Enterprise. Staff from the companies selected for supplying the licenses and general engineering have participated closely with Romanian counterparts in all aspects of detailed engineering, training, equipment manufacturing, control and erection, and start-up of the Project. D. Employment and Training 3.06 The Enterprise currently employs 1,861 staff,-of which 1,688 are workers (1,652 skilled) and 173 are management personnel, compared to a total of 2,150 estimated during appraisal. Availability of labor was ensured through the Enterprise's training program. Thirty technicians from the Enterprise were given special training abroad by the license suppliers. 3.07 The total work force of the Enterprise is formed as follows: (a) 421 constituting the core of staff and skilled labor required were transferred from existing chemical and fiber plants in the Central; (b) 724 were trained in other existing factories in Romania; (c) 680 were graduates from vocational schools; (d) 36 were unskilled labor. - 5 - E. Use and Performance of Engineering Firms and Consultants 3.08 As previously mentioned, IITPIC and the Enterprise had overall responsibility for design and supervision of execution of the Project. During Project implementation, staff from licensors and engineering suppliers provided the Enterprise, the general project designer and the construction enterprise with technical assistance. Staff from Mitsubishi, Toray and Cheitex (para. 3.11) should be particularly mentioned, as having provided satisfactory technical assistance for equipment erection, testing and training. F. Procurement and Performance of Suppliers 3.09 Procurement took place under the general coordination of the Enterprise with the responsibility for technical aspects being assumed by IITPIC. Foreign procurement was done under the responsibility of Indus- trial Ex Im. Goods and services required for the Project Lnd financed out of the Loan proceeds were procured following the Bank's Procurement Guide- lines. Out of the total Loan amount of US$50 million, contracts amounting to US$48.2 million were awarded based on international competitive bidding (ICB) and the remaining US$1.8 million were contracts for small items awarded through limited international shopping, with 3 or 4 foreign compa- nies participating in each tender. In spite of the large number (304) of packages financed out of the Loan proceeds there were no procurement prob- lems pointing to the good cooperation between the Bank, the Borrower, the foreign suppliers and the Enterprise. 3.10 The main package project supplier - Mitsubishi Company (Japan), together with Chemtex (US) and Toray (Japan), furnished and ensured the Project's technology, licenses, engineering and main equipment and provided the Project with technical assistance for the commissioning of the plant and adequate guarantees for the equipment, in spite of the delay in commis- sioning that extended beyond the contracted guarantee period. 3.11 In the Appraisal Report, it was anticipated that 46.7% of the equipment and 90.8% of the licensing and engineering costs would be payable in foreign exchange. The actual cost of imported equipment and supplies (US$30.5 million) and technology (US$7.9 million) amounted, respectively, to 44% and 68% of the total for these categories. Romanian enterprise supplied, through ICB, 23.22 of the Bank financed goods and services. Among foreign suppliers, the most important ones were Japan, the Federal Republic of Germany (FRG) and the US (Annex 3-1). G. Implementation Schedule 3.12 Estimated and actual implementation schedules for the Project are shown in Annex 3-2. Commissioning was scheduled for January 1980 at the time of appraisal. Actual commissioning was spread out between June 1981 and December 1982. The Project's start-up has been assumed to have taken place in March 1982, when the full capacity of polyester polymer making was attained and the first and most of the second spinning lines were mechanically completed. -6- 3.13 The Project completion delay was 26 months. The main reasons were: (a) design and engineering delays caused by differences between the metric system used by Toray and Mitsubishi and the US standards used by Chemtex and Romanian agencies; (b) repeated alterations made by the technology suppliers in the technical documentation required to manufacture locally a part of the equipment and technical installations; (c) delays in contracting some locally manufactured and foreign equipment due to tardiness in finalizing the technical documentation; and (d) the fact that some local factories were manufacturing, for the first time domestically, specialized equipment based on the technical documentation provided by the licensor and technology suppliers. Given the high level of technology transfer achieved, the project implementation schedule is, however, considered reasonable. H. Ecology 3.14 The plant does not cause environmental problems since gas and liquid effluent levels are kept low. Liquid effluents resulting from the production process (i.e. organic substances, slurry, sulphates and petroleum products) are treated in a biological and chemical treatment plant before being discharged into the river. The cost of this plant is included in the Project costs. The plant installations are also provided with ventilation systems that maintain suspended particles within internationally accepted standards. I. Capital Cost, Financing and Loan Disbursement 3.15 Capital cost estimates at the time of appraisal and actual figures are shown ir. Annex 3-3, summarized in the following table: -7- Capital Cost and Financing Required (US$ million equivalent)a/ Appraisal Estimate Actual Foreign Foreign Exchange Local Total Exchange Local Total IL Total Fixed Cost 50.2 71.7 121.9 50.0 66.1 116.1 Working Capital 0.2 6.8 7.0 - 8.7 8.7 Total Project Cost 50.4 78.5 128.9 50.0 74.8 124.8 Interest during Construction 6.0 1.2 7.2 12.2 0.6 12.8 Total Financing Requiredb/ 56.4 79.7 136.1 62.2 75.4 137.6 a/ Calculated at the official rates in force each year during construction 5/ Nominal interest paid by the Enterprise to the Investment Bank through the end of 1982. 3.16 Total financing required for the Project expressed in US$ equivalent was slightly higher than the 1977 estimate due to delay in commissioning but the actual project cost, at US$124.8 million, is 3.2% lower than the appraisal estimate. 3.17 Because of revaluation of the Lei which took place on March 6, 1978 (from Lei 20 to Lei 18 to the US$) and on December 31, 1980 (from Lei 18 to Lei 15 to the US$), the Project cost expressed in Lei are significantly different from those expressed in US$. Thus, total financing required for the Project (excluding interest during construction) amounted to Lei 2,316 million, a reduction of 14.9% when compared to the appraisal estimate of Lei 2,722 million and the Project cost (Lei 2,104 million) is 18.4% lower than the estimate at the time of the appraisal (Lei 2,578 million). 3.18 In implementing the project, savings were registered in most cost categories of expenditures: equipment, civil works, licenses & engineering, technological tests. This is mainly due to favorable price developments and efficient implementation, that compensated for some additional costs due to delays in commissioning the plant on time. The actual cost of direct imports (US$38.4 million) was 3.6% lower than the 1977 estimate. As has been found in other Bank-financed projects, there was a significant (20.1X) underrun in the local currency cost of the Cimpulung Project. This is mainly due to conservative cost estimates used in the techo-economic studies and the good coordination in the project preparation by the several agencies involved. In spite of the revaluation of the Lei mentioned above, the cost of local expenditures expressed in USS has also decreased but by only 4.7% from US$78.5 to US$74.8 million (Annex 3-3). -8- 3.19 Annual capital cost expenditures are shown in Annex 3-4. Initially, the closing date of the Bank Loan was March 31, 1981. As a result of the delays in Project implementation (para 3.13), the Bank agreed to a one-year extension of the closing date through March 31, 1982. The actual schedule of Loan disbursements has therefore significantly departed from that estimated at the time of appraisal. Compared to the appraisal estimates (Annex 3-5), disbursements were as follows: Project Cumulative Disbursements (US$ million) Year Appraisal Estimates Actual 1977 5.0 1.5 1978 32.5 23.5 1979 46.2 30.9 1980 50.0 40.1 1981 50.0 46.1 1982 (1st quarter) 50.0 50.0 3.20 To meet the shortfall in some categories, especially for the main package, proceeds of the Loan were reallocated on January 28, 1981, and actual disbursements as compared to the appraisal estimates were as follows: Allocation of Loan Proceeds - US$ Million Original Reallocated Disbursed (Appraisal (Approved (Actual) Report) 01/28/81) Category I - Imported technology, and engineering for the Plant, and equip- ment and spare parts and training - 100% of foreign expenditures 23.6 29.0 27.6 Category II - Stainless steel, special materials and intermediate products - 100% of foreign expenditures 10.9 6.8 7.5 Category III - Specialized equipment - 100% of foreign expenditures 5.3 3.0 3.3 Category IV - Equipment for power plant, recovery systems for raw materials and by-products and other equipment agreed between the Bank and the Borrower 100% of foreign or ex-factory local expenditures 10.2 11.2 11.6 Total 50.0 50.0 50.0 -9- IV. OPERATING PERFORMANCE A. Production Build-up 4.01 Although the Project should have been fully completed by January 1980, the actual commissioning dates were the following Project Commissioning Schedule Polyester chips June 1981 First line polyester fiber March 1982 Second line polyester fiber Aug. 1982 Third line polyester fiber Dec. 1982 As a result of the above, production has also lagged behind schedule, having reached 40% capacity uti'lization in 19B2. Full capacity operation is expected by 1984. (Actual and projected oztput of the Enterprise is shown in Annex 4-1). 4.02 Most of the Projects' output will be sold to other Romanian enterprises. Polyester chips will be sold to the Vaslui Polyester Enter- prise to produce filament yarn. Polyester cotton-type staple and other types of fiber are to be sold to spinning enterprises and further down- stream to weaving mills and knitting mills under the same Ministry. B. Market Development 4.03 Polyester production and consumption are coordinated at a central level. Overall programs are approved by the Council of Ministers. The attainment of the approved levels of production are the responsibility of the Central, which establishes and issues annual quantitative shares for each producer and consumer. Actual figures for the country's production and consumption of synthetic fibers in 1980 - 1982 and present projections for 1985 are shown below and compared with the figures planned in 1977, at the time of appraisal. ROMANIA - Synthetic Fiber Production and Consumption Actual Figures and Appraisal Estimates New Projections 1980 1985 1980 1981 1982 1985 Production 164.3 181.7 141.0 146.4 159.7 227.8 Exports 24.1 - 25.7 17.7 17.7 44.7 Imports - 49.5 3.1 4.2 - 0.5 Apparent Mill Consumption 140.2 231.2 118.4 132.9 142.0 183.6 - 10 - The actual figures for 1980 are significantly (14.2Z) lower than originally expected because of the commissioning delay; but 1985 production is projected to be higher. V. FINANCIAL PERFORMANCE A. Value of Sales and Production Costs 5.01 Present Romanian prices for the Project products and unit costs of the main inputs are shown in Annex 5-1. The average price of polyester in 1982 was 41.8% higher than at the time of appraisal in 1977 and the cost of the two main raw materials - DMT and EG - increased by 47.7% and 37.5% respectively. The cost of fuel increased in the same period by 280% while that of power increased by only 7%. Overall operating costs increased by 40.7%. 5.02 Unit consumption of the main raw materials has met the specifications of the suppliers of technology and process equipment and therefore departs little from the figures used at the time of appraisal. Operating costs of full capacity are shown in Annex 5-2. B. Financial Analysis 5.03 Financial results and projections are shown in Annex 5-3. They are based on actual volume and value of sales through the end of 19B2; projections are based on the present prices applied to the forecast volume of production and sales. 5.04 The internal financial rate of return calculated on the basis of the above analysis is 5.6% (Annex 5-4), compared to 4.7% estimated at the time of appraisal. The increase in product prices has more than compensated for the higher unit cost of inputs and the delays in project completion (para. 5.01). VI. ECONOMIC PERFORMANCE 6.01 The international market for polyester is at present (September 1983) in an unbalanced situation, with export prices as low as US$0.52/lb being offered by East Asian countries, while the prevailing prices in Japan and the US are US$0.72-0.7311b. In Western Europe, polyester prices aver- age US$0.67 and this price (less freight) has been assumed for years 1983 and 1984, since the Romanian synthetic fiber is geared for competition in the European market. Because of the existing world-wide recession present polyester prices are below cost plus a reasonable return on invested funds. A balanced supply/demand market is expected to result in a price of not less than US$0.80/lb by the late 1980s. 6.02 For the calculation of trie economic rate of return, polyester prices have been assumed to build up from present levels to the equilibrium value mentioned above over a period of four years. The prices for DMT and EG have also been adjusted and those for electric power and fuel have been changed from their 1982 domestic levels of Lei 415.8 (US$27.72) per MWh and Lei (US$121.67) per ton to Lei 450 (US$30)/HWh and Lei 2,250 (US$150)/MT respectively. The other costs have been maintained at the same level as those used in the financial analysis. 6.03 The economic rate of return calculated on the basis of the above is 14.2% (Annex 6-2) as compared to 15.6% estimated during appraisal. The slightly lower return is due to the completion delay and the current depressed economic price for polyester. VII. BANK ROLE AND LESSONS LEARNED A. Bank Role 7.01 During the mid-1970s, the project formed part of a broad-based effort on the part of the Bank to assist Romania in improving the performance of its industrial sector. Other projects selected include those in the fertilizer, steel, chemicals, fibers, and mechanical subsectors. This Project was selected bec3use it included the acquisition of modern technology (introducing continuous polyester polymerization and spinning) and was based on the substitution of imports of a key industrial intermediate: polyester fiber for the textile and tire industries. 7.02 The Bank actively supported the Romanian agencies in defining the main technology and equipment package and in the preparation for competitive bidding for that package, including satisfactory performance guarantees. The Bank also assisted the Enterprise in the procurement of other equipment and supplies thus helping in lowering the total project cost. The Project has included a substantial transfer of modern technology developed by a consortium of three international firms, among the best qualified in the field of polyester technology. This transfer was directed not only to the Project itself but also, through the collaboration for the supply of some specialized equipment domestically, to the machinery building industries. Finally, the Bank assisted the Romanian agencies in developing more realistic projections for textile fibers supply and demand and determining priority for development of natural and man-made fiber supply. 7.03 Overall, the Bank has helped the Romanian agencies to develop a better understanding of economic criteria in project evaluation. This Project is one example of this continuing process. Also, the Project created nearly 2,000 new jobs and tapped a pool of women workers in a rural area where male employment was predominant. - 12 - B. Lessons Learned 7.04 The experience gained in this Project confirms lessons learned in previous Romanian projects. Project implementation was reasonably successful despite a 26 month delay. Early supervision proved beneficial in completing all arrangements for proper engineering and technology acquisition, and in developing adequate procurement procedures. Guidance provided to the project sponsor in the early stages was critical in this instance, and led to a better understanding of the Bank's procedures and thus to more efficient project implementation. This point has been confirmed in a number of other projects in Romania. 7.05 A long time was required to negotiate the supply of the main technology package with the international consortium mentioned above. The purpose of the extended negotiations was to obtain a price consistent with estimated costs, obtain maximum information on technology and to minimize the foreign content of the package. Overall the transfer of technology achieved in this project is deemed successful but at the cost of a delayed start-up. - 13 - ANNEX 3-1 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT CONPLETION REPORT Procurement of Bank-Financed Goods and Services By Country of Origin Amount Percentage (US$ Million) Japan 28.0 56.0 Romania 11.6 23.2 F.R. of Germany 3.2 6.4 USA 2.2 4.4 Austria 1.6 3.2 Italy 1.3 2.6 United Kingdom 0.8 1.6 Switzerland 0.5 1.0 France 0.5 1.0 Belgium 0.1 0.2 Netherland 0.1 0.2 Sweden 0.1 0.2 50.0 100.0 Industry Department October 1983 -14- ANNX 3-2 ROMANIA CIMPULUNG MUSCEL POLYESTER PROJECT Construction Schedule YEAR 1977 197J 1979 190 1911 1912 QUARTER 3 A I 2 J 4 j1 |2 31 1 T2 3 4 1 21 2 31 1. Slnotwe of MaConot AST 2 flotiEng. - ., *. *.. . - Ecm*xmnwt .a 3. Deti Eng. -a---- - EgUOnt . * , . . ... A EQugxsn? Oe41WN" - Cipsore - FLocAl. - FberC . . ,1...- ... 7. Me : ct- l Testif Rui *~~~~~~I . . I !'l-" -bRw A --t 0 4 - Chbe B * = . -CFiber Ai - st w9 Ij Fiber A -Chvs -Fiber A ; A_I C? JI * AtC Industry Department October 1983 ROMANIA - CIHPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Capital Cost and Financing Required (in millions) Appraisal Estimates a/ Actual b/ Local Foreign Total Local Foreign Total Lei $ Lei $ lal $ Lei $ Lei $ Lel US$ Equipment, Supplies 6 Spares 422 21.1 611 30.5 1,033 51.6 425 25.0 591 34.7 1,016 59.7 Civil Works, Erection and Supervision 660 33.0 68 3.4 728 36.4 478 28.1 125 7.4 603 35.5 Licenses & Engineering 32 1.6 174 8.7 206 10.3 44 2.6 134 7.9 178 10.5 Pre-Operating Costs 46 2.3 - - 46 2.3 39 2.3 - - 39 2.3 Training 14 0.7 3 0.2 17 0.9 53 3.1 - - 53 3.1 Others 84 4.2 6 0.3 90 4.5 84 5.0 - _ 84 5.0 Total Base Cost (BCE) 1,258 62.9 862 4T3T 2,120 106.) 1,123 66.1 850 50.0 1,973 116.1 Physical Contingencies (PC) 151 7.6 68 3.4 219 11.0 - - - - - - Price Escalation 25 1.2 74 3.7 99 4.9 - - - - - - Total Fixed Cost 1,434 71.7 1,004 50.2 2,438 121.9 1,123 66.1 850 50.0 1,973 116.1 > Working Capital 136 6.8 4 0.2 140 7.0 131 8.7 - _ 131c/ 8.7 Total Project Cost 1,570 78.5 1,008 50.4 2,578 128.9 1,254 74.8 850 50.0 2,104 124.8 Interest During Construction 24 1.2 120 6.0 144 7.2 10 0.6 202 12.2e/ 212 12.8 Total Financing Required 1,594 79.7 1,128 56.4 2,722 136.1 1,264 75.4 1,052 62.2 2,316 137.6 a xange Rate:Let2O/USS1. b/ Exchange Rate: Lei 20/US$l until Harch 5, 1978; Lei 18/USSI between March 6, 1978 and December 31, 1981, and Lei 15/US$1 in 1981 and 1982. c/ As of December 31, 1982. Z/ Actual paid as of December 31, 1982. e/ Actual paid in US$ at the exchange rate in each payment day. I Industry Department w October 1983 w - 16 - ARNEM 3-4 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Annual Capital Expenditures (1977-82) In Lel Million 1977 1978 1979 1980 1981 1982 Total Total Fixed Cost 141.9 527.8 254.8 350.2 357.2 341.1 1,973.0 (of which foreign) (1.5) (22-0) (7.4) (9.2) (6.0) (3.9) (50.0) Working Capital - - - - 77.0 54.0 131.0 Interest and Financial Charges During Construction - Local - 0.5 2.1 3.1 3.0 1.3 10.0 - Foreign (IBRD Loan) 2.2 18.0 40.1 50.3 48.3 43.1 202.0 Total 144.1 546.3 297.0 403.6 485.5 439.5 2,316.0 (In USS millions equivalent) L977 1978 1979 1980 1981 1982 Total Total Fixed Cost 7.09 28.76 14.15 19.46 23.81 22.75 116.02 Working Capital - - - - 5.13 3.60 8.73 Subtotal 7.09 28.76 14.15 19.46 28.94 26.35 124.75 Interest (local funds) - 0.03 0.12 0.17 0.20 0.09 0.61 Interest (Bank Loan) 0.11 0.98 2.23 2.80 3.22 2.87 12.21 Total 7.20 29.77 16.50 22.43 32.36 29.31 137.57 Exchange Rates: Before March 5, 1978 - Lei 20/USS1 From March 6, 1978 through December 31, 1980 - Lei 18/USS1 From January 1, 1981 through December 31, 1982 - Lei 15/USS1 Industry Department October 1983 - 17 - ANNE 3-5 ROMANIA - CIW ULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Estimated and Actual Disbursement Schedules (U3$ Million)13 Calender Appraisal Report Actual Year Quarter Quarter Cumulative Quarter Cumulative 1977 III 5.0 5.0 - IV 5.0 10.0 1.5 1.5 1978 I 5.0 15.0 2.6 4.1 II 5.0 20.0 5.0 9.1 ItI 6.0 26.0 6.5 15.6 IV 6.5 32.5 7.9 23.5 1979 I 4.5 37.0 3.1 26.6 II 4.0 41.0 2.1 28.7 III 3.0 44.0 0.9 29.6 IV 2.2 46.2 1.3 30.9 1980 I 1.8 48.0 4.3 35.2 II 2.0 50.0 4.0 39.2 IIT - 50.0 0.5 39.7 IV - 50.0 0.6 40.3 1981 I - 50.0 1.1 41.4 II - 50.0 1.5 42.9 III - 50.0 1.1 44.0 IV - 50.0 2.1 46.1 1982 I - 50.0 3.6 49.7 II - 50.0 0.3 50.0 Industry Department October 1983 - 18 - AN*l 4-1 IA -CEM n PFE3C Estimted and Actual Production (000 tons) 1980 1981 1982 1983 1984-93 Appraksal Appraiwl Apprail Appraisal NepNe Volume Estimates Actual Estimtes Actual Estimates Actual Ftlmates Estimtes Estimltes 00.0 - ooo 0.0 00.0 00.0 00.0 00.0 00.0 Chips 9.1 - 12.2 5.6 15.2 10.6 15.2 14.5 15.7 CDttLO-Type Staple 6.3 - 8.4 - 10.5 5.6 10.5 17.1 10.5 Wool-Type Staple 0.5 - 0.6 - 0.8 0.2 0.8 - 0.8 TAol-Type TIw 3.1 - 4.2 - 5.2 1.7 5.2 7.8 5.2 Iixl-Type Tops 3.0 - 4.0 - 5.0 0.5 5.0 2.6 5.0 Flax-Wype Staple 6.0 - 8.0 - 10.0 - 10.0 - 10.0 Subtotal Polyester 28.0 - 37.4 5.6 46.7 18.6 46.7 42.0 47.2 - == = Metbaiol (Recovered) 10.8 - 14.4 2.1 18.0 7.1 18.0 13.0 13.0 Wste Fibers (Recovered) - - - - - - - 2.1 Industry Departnt October 1983 - 19 - ANNEX 4-2 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT IL Actual and Estimated Sales Revenues (Lei million) 1981 1982 1983 1984-94 Capacity Utilization - % 12 40 90 100 Sales Volume (000 tons) PES Chips 5.6 10.6 14.5 15.7 PES Cotton-Type Staple - 5.6 17.1 10.5 PES Wool-Type Staple - .2 - .8 PES Wool-Type Tow - 1.7 7.8 5.2 PES Woo'-Type Tops - .5 2.6 5.0 "ES Flax-Type Staple - - - 10.0 Sub-total Pes 5.6 18.6 42.0 47.2 Methanol (Recovered) 2.1 7.1 13.0 14.3 Waste Fibers (Recovered) - - - 2.1 Sales Revenues (Lei Million) PES Chips 88.4 230.5 391.5 423.9 PES Cotton-type Staple - 142.3 547.2 336.0 PES Wool-type Staple - 5.9 - 24.3 PES Wool-type Tow - 38.6 237.9 158.6 PES Wool-type Tops - 15.0 84.7 162.5 PES Flax-type Staple - 329.0 Sub-Total PES 88.4 432.3 1,261.3 1,434.3 Methanol (Recovered) 1.8 9.9 23.5 25.8 Waste Fibers (Recovered) - - - 10.5 Total Sales Revenues 90.2 442.2 1,284.8 1,470.6 Industry Department October 1983 - 20 - ANNEX 5-1 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Estimated and Actual Production, Prices and Unit Cost of Materials and Utilities Quantities at Full Capacity Operation Prices and Unit Costs Appraisal Appraisal z Estimates Actual Estimates Actuala/ Increase (tons/year) (Lei/ton) Production Profile PES Chips 15,200 15,700 17,200 27,000 57.0 PES Staple: Cotton-Type Staple 10,500 10,500 23,500 32,000 36.2 Wool-Type Staple 803 800 22,350 30,400 36.0 Wool-Type Tow 5,200 5,200 22,350 30,500 36.5 Wool-Type Tops 5,000 5,000 23,900 32,500 36.0 Flax-Type Staple 10,000 10,000 24,200 32,900 36.0 Sub-total 46,700 47,200 133,500 185,300 38.8 Methanol (Recovered) 18,000 14,309 850 1,800 111.8 Waste Fibers - 2,100 - 5,000 - Raw Materials D1tT D 48,518 49,600 8,800 13,000 47.7 Ethylene Glycol c/ 18,232 19,545 8,000 11,000 37.5 Utilities Power Purchased from Grid (MWh) 40,000 27,000 388 415.8 7.2 Fuel - tons 40,000 46,825 480 1,825 280.2 Water (000 m3) 764 1,070 40.0 a/ 1982 prices per physical unit. b/ Approximately 1.05 tons of DMT per ton of PES (the 1.072 estimate in the Appraisal Report was gross of DMT recoveries; the net value was 1.04 tons of DMT per ton of PES). c/ Approximately 0.414 tons of EG per ton of PES (0.390 appraisal estimate). Industry Department October 1983 - 21 - ANNEX 5-2 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Annual Full Capacity Costs (Lei Millions) Appraisal Estimates Actual Raw Materials DMT 427.0 644.8 Ethylene Glycol 145.8 215.0 Auxiliary Materials 23.8 22.3 Others (Catalysts, Packings) - 26.4 Sub-Total 596.6 908.5 Utilities Power, Grid Purchases 15.5 11.3 Fuel 19.2 85.5 Others 5.2 23.1 Sub-Total 39.9 119.9 Labor Wages and Salariea 48.8 62.4 Social Tax 11.2 23.8 Sub-Total 60.0 86.2 Other Costs - Operating Expenses Depreciation 113.6 81.3 Plant Overhead, Maintenance and Repairs 63.0 45.8 Sub-Total 176.6 127.1 Total Costs 873.1 1,241.7 V Annual Sales Revenues 1,019.1 1,470.6 Benefits (Before Interest on IBRD Loan) 146.0 228.9 Industry Department October 1983 - 22 - ANNEX 5-3 ROMANIA - CINPULUNG-LUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Financial Projections (in million Lei a/) 1981 1982 1983 1984 1985-96 ) - --- - - (in million Lef)- Sales (Annex 4-2) 90.2 442.2 1,284.8 1,470.6 1,470.6 Costs - Cost of Goods 108.8 453.3 1,092.4 1,160.4 1,160.4 - Depreciation 24.0 59.6 75.6 81.3 81.3 - Total Cost 132.8 512.9 1,168.0 1,241.7 1,241.7 Net Profits (42.6) (70.7) 116.8 228.9 228.9 Cash Flow - Net Profits (42.6) (70.7) 116.8 228.9 228.9 - Depreciation 24.0 59.6 75.6 81.3 81.3 Total Cash Flow (18.6) (11.1) 142.4 310.2 310.2 Service on IBRD Loan 105.3b_ 107.4b/ 113.8C/ 115.3c/ 109.6d/ Cash Surplus (Deficit) (123.9) (118.5) 78.6 194.9 200.6 (in US$ equivalent) Sales 5.3 26.0 75.6 86.5 86.5 Operating Costs 6.4 26.7 64.2 68.2 68.2 Operating Benefits (excluding depreciation, interest & taxes) (1.1) (0.7) 11.4 18.3 18.3 a/ Actual data for 1981-1983 and estimates for 1984 and thereafter. b/ Exchange rate: US$1 = Lei 15 cJ Exchange rate: US$1 = Lei 16.5 dI Same exchange rate as in 1983 but diminishing interest payments after 1985. e/ Margin increasing in years follo-Ang 1985. Industry Department October 1983 - 23 - ANNEX 5-4 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Cost and Benefit Streams for Financial Rate of Return Calculations (In constant 1382 US$ millions) Total Capital Operating Net Costs a/ Benefits b/ Benefits 1977 10.6 - (10.6) 1978 36.5 - (36.5) 1979 16.0 - (16.0) 1980 20.0 - (20.0) 1981 31.2 (1.1) (32.3) 1982 26.3 (0.7) (27.0) 1983 - 11.4 11.4 1984 - 18.3 18.3 1985 - 18.3 18.3 1986 - 18.3 18.3 1987 - 18.3 18.3 1988 - 18.3 18.3 1989 - 18.3 18.3 1990 - 18.3 18.3 1991 - 18.3 18.3 1992 - 18.3 18.3 1993 - 18.3 18.3 1994 (21.9)C/ 18.3 40.2 (RATE OF RETURN: 5.6%) 4 a/ From Annex 3-4 Figures deflated by following indices: (1982) 1982=100, 1977=66.6, 1978=78.8, 1979=88.2, 1980=97.1, 1981=92.6. b/ From Annex 5-3. c/ Recovery of US$8.7 million in working capital and 10% of fixed investment of US$131.9 million. Industry Department October 1983 - 24 - ANNEX 6-1 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Annual Economic Benefits and Costs 1987- 1981 1982 1983 1984 1985 1986 94 Sales Polyester Volume 000 MT 5.6 18.6 42.0 47.2 47.2 47.2 47.2 Unit Price a/ US$/MT 1,632 1,632 1,452 1,540 1,630 1,720 1,760 Polyester Sales US$ Million 9.14 30.36 60.98 72.69 76.94 81.18 83.07 other Sales USS Million 0.26 0.97 2.18 2.42 2.66 2.82 3.05 Total Sales Revenue US$ Million 9.40 31.33 63.16 75.11 79.60 84.00 86.12 Inputs DMT 000 MT 5.9 19.5 44.1 49.5 49.5 49.5 49.5 EG 000 MT 2.3 7.7 17.4 19.5 19.5 19.5 19.5 Electric Energy 000 MWh 3.2 10.6 24.0 27.0 27.0 27.0 27.0 Fuel 000 MT 5.5 18.4 41.7 46.8 46.8 46.8 46.8 Unit Prices DMT V/ 528 528 528 528 528 550 572 EG CT 462 462 462 462 462 484 506 Costs DMT US$ Million 3.1 10.3 23.3 26.1 26.1 27.2 28.3 EG USS Million 1.1 3.5 8.0 9.0 9.0 9.4 9.8 Electric Energy d/ US$ Million 0.1 0.3 0.7 0.8 0.8 0.8 0.9 Fuel e/ US$ Million 0.9 1.1 2.5 2.9 2.9 2.9 3.0 Other US$ Million 4.9 5.8 7.2 8.4 8.8 8.8 9.0 Total Cost US$ Million 10.1 21.0 41.7 47.2 47.6 49.1 51.0 a/ Historical prices for 1981 and 1982. The low depressed price of US$0.66 in 1983 is assumed to increase over a 4-year period to a minimum balanced economic price of US$ 0.80/lb. b/ Price expected to increase from US$0.24 to 0.26/lb. c/ Priced at US$0.21-0.23/lb. d/ At US$30/KWh. eI At US$165/MT. Industry Department October 1983 - 25 - ANNEX 6-2 ROMANIA - CIMPULUNG-MUSCEL POLYESTER PROJECT PROJECT COMPLETION REPORT Cost and Benefit Streams for Economic Rate of Return Calculations Fixed Total Net Capital Working Capital Operating Sales Operating Net Cost Capital Costs Costs Revenues Benefits Flow 1977 10.6 - 10.6 - - - (10.6) 1978 36.5 - 36.5 - - - (36.5) 1979 16.0 - 16.0 - - - (16.0) t980 20.n - 20.0 - - - (20.0) 1981 25.7 2.7 28.4 10.1 9.4 (0.7) (29.1) 1982 22.7 1.8 24.5 21.0 31.3 10.3 (14.2) 1983 - - - 41.7 63.2 21.5 21.5 1984 - - - 47.2 75.1 27.9 27.9 1985 - - - 47.6 79.6 32.0 32.0 1986 - - - 49.1 84.0 34.9 34.9 1987 - - - 51.0 86.1 35.1 35.1 1988 - - - 51.0 86.1 35.1 35.1 1989 - - - 51.0 86.1 35.1 35.1 1990 - - - 51.0 86.1 35.1 35.1 1991 - - - 51.0 86.1 35.1 35.1 1992 - - - 51.0 86.1 35.1 35.1 1993 - - - 51.0 86.1 35.1 35.1 1994 (13.1) (4.5) (17.6) 5;.0 86.1 35.1 52.7 (RATE OF RETURN: 14.22) Industry Department October 1983 ATTACHHENT COMMENTS RECEIVED FROM THE BORROWER - 26 - Page 1 of 3 BANCA DE INVESTITII Buchare at - £LMIllaflIf, y aM Foreign, Rlations (A - MwO Zn rSaP. dv. December 4, 1984 No. 15252 Mr. Yukinori Watanabe Acting Director-General Operations Evaluation World Bank Dear ML-. Watanabe, Re. Project Completion Report Cimpulung muscel Polyester Project - Loan 1448 HO We thank you for your letter of October 17, 1984, and we inform you on our agreement on the attached draft of the completion report, but we have the following views and coments that we would like to be included in the final report and to eliminate any unclearness from the present draft, as follow i. pDra 2.o3 of the draft is mentioning that n IB Text was commited to charge a nominal interest rate of lo % on the Loan amended to proceeds used in the Project ". This remark is not according to the incorporate case, because the Investment Bank on-lented to the enterprise the comments Loan proceeds at the same interest rate as those of IBRD - 8.2 %. This is why, we do propose a rewording of the respective phrase as follow : IB on-lent the Loan proceeds to the enterprise at the same interest rate as these applied by IBRD - 8.2 %. Text ii. pars 3.13 regarding the reasons for Project amended to completion delay, we do propose to be revew and to be presented incorporate according to the situations generating them and as have been comments mentioned in the draft prepared by the Investment Bank, respectively: (a) design and engineering delays caused by differences between the metric system used by Toray and Mitsubishi and the US standards used by Chemtex and Romanian agencies; (b) repeated alterations done by the technology suppliere in the technical documentation required to manufacture locally a part of the equipment and technological installations; 1. P. -HlOI11r"I 0)rM212 III - * 1k...! 379 UK FOMe. a - 27 - ATTACHIENT Page 2 of 3 December 4, 1984 (c) delays in contracting some locally manufactured and foreign equipment, caused by delays in ensuring the technical documentation; (d) delays in the delivery of same local equipment & manufactured for the first time domesticaly, based on the technical documentation supplied by the licence and engineering supplier. We do sustain the above mentioned taking account that, most of the delays in contracting some locally manufactured and foreign equipment and in the delivery of some locally ms;aufactured equipment were caused by delays in design and engineering and in contracting the supply of the main ter-unology packame. iii. para 3.18 is mzentioning tbket " Also, the Text amended Romanian pricing system which includes low domestic inflation to inicor- porate rates.." * Related to this, we would like to mention that the couments Romanian pricing system is characterized by the existence of " stable prices " , that could not vary in function of the changes in individual production and supply condition, ensuring, in the same time, maintenance of the prices level in accordance with the social expenditures, by changing the prices according to the change. of the element took into consideration on the ocasion of the establishement of the respective prices. Accordingly, the draft wording does not correspond to the Romanian pricing system and we do propose to be eliminate from the report. Text: iv. pars 7.05 is mentioning that " Much of the amended to implementation delay was caused by the inexperience of Romanian firmi incorporate in supplying engineering services and equipment based on a new comments technology. This mention is making an unrealistic generalisation on the lomanian firms activity. Some dificulties encountered to this project due to the fact that same equipment have been manufactured domesticaly for the first time, these could not be considered as beeing generaly and to be applied to the whole activity of Romanian firms in supplying engineering services and equipment based on a new technology, done and for other projects by the Romanian firms. Because we do consider the respective mention as beeing - 28 - ATTACEMENT Page 3 of 3 December 4, 1984 not according to the reality, we would like to be eliminated. Otherwise, the reasons for the delay were presaeted in detail, in pare 3.13 of the draft. £ With these views and comments, that we would like to be included in the final report, we do agreed to the project completion report submitted. Thanking for your cooperation, we remain, Sincerely, Alexandasi/Olterau Direj tor g ,~~~~~~~~~~~~~~