Document of The Woirid Bank ]FO]R OIMCIRAL USIE ONLY /57Z 1Zeport No. P-MtEGH REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ELECTRICITY CORPORATION OF GHANA AND A PROPOSED CREDIT TO THE REPUBLIC OF GHANA FOR A THIRD POWER PROJECT March 8, 1977 iMis icnmmemn ezs nresedI (i§flsbuwirm ncI sny be d by reetpteszr oamy in lbe pseonmance of theisr oakiall d1nfes. llts eoDenmrs smay mno o2bemase be disLlcw16 inont W'rowll I1EDE aotnboridmon. CURRENCY EQUIVALENTS US$1 = Cedi (i) 115 Cedi (U) 1 uS$0o869 Cedi (˘) 1 Pesewas (P) 100 Cedi (˘) 1 US$869,565 WEIGHTS AND MEASURES 1 Kilometer (km) = 0.621 mile (ml) 1 meter (m) = 3.281 feet (ft) 1 square kilometer (km2) = 0.386 square mile (mi2) 1 kilogram 2.205 pounds (lb) 1 ton = 1102 short ton (sh-ton) 0.984 long ton (lg ton) I barrel (bbl; 0.159 m3) - 42 US gallons (gal) 1 kilowatt = 1,000 Watts (W) 1 Megawatt = 1,000 kW 1 Gigawatt 1,000,000 kW = 1,000 MW (=106kW) 1 kilowatthour = 1,000 Watthours (Wh) 1 Gigawatthour 1,000,000 kWh = 1,000 MWh (=lo6kWh) 1 kilovolt 1,000 Volts (V) 1 kilovolt ampere = 1,000 volt amperes (1 kVA) 1 Megavolt ampere = 1,00 kVA GLOSSARY OF ABBREVIATIONS GDP = Gross Domestic Product KfW = Kreditanstalt fur Wiederaufbau VALCO = Volta Aluminum Company VRA = Volta River Authority ECG = Electricity Corporation of Ghana CEB = Communaute Electrique du Benin EECI = Energie Electrique de Cote d'Ivoire SWEB = South West Electricity Board ECG FINANCIAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ELECTRICITY CORPORATION OF GHANA AND A PROPOSED CREDIT TO THE REPUBLIC OF GHANA FOR A THIRD POWER PROJECT 1. I submit the following report and recommendation on a proposed development credit for the equivalent of US$9.0 million to the Republic of Ghana and a proposed loan for the equivalent of US$9.0 million to the Electricity Corporation of Ghana to help finance a power project. The loan would have a term of 20 years, including 4-1/2 years of grace, with interest at 8.5 percent per annum and the development credit would be on standard IDA terms. Of the proceeds of the credit, US$5.2 million would be relent to ECG for 20 years, including 4-1/2 years of grace, with interest at 8.5 percent per annum, US$3.7 million would be made available to ECG as a grant for a rural electrification scheme and US$100,000 would be retained by the Government for a power sector study. PART I - THE ECONOMY 2. An economic report entitled "Fiscal and Balance of Payments Aspects of Ghana's Development" (638a-GH) dated May 19, 1975, was distributed to the Executive Directors in June 1975. A special economic report on export promo- tion and financial intermediation will be distributed shortly. Basic data are summarized in Annex 1. Basic Economic Characteristics 3. Compared with most other West African nations, Ghana enjoys a fairly high standard of living; its annual per capita GNP, according to World Bank estimates, was about US$460 in 1975, but this is almost certainly over- stated because of the existing exchange rate. Over the past decade and a half GDP growth averaged about 2.5 percent per annum and failed to keep pace with the growth of population. There was virtually no growth in the volume of exports, which depended almost entirely on a few traditional export commodi- ties -- cocoa (of which Ghana is the world's largest producer), gold, and timber. In addition to contributing 60 percent of the country's export earnings, cocoa provides around 30 percent of government revenue and employs upwards of 20 percent of the labor force. Although the development strategy of the early 1960s broadened the industrial base, industries remained heavily dependent on imported inputs. This strategy resulted in recurrent balance of payments crises and an accumulation of external debt. 4. Economic and social policies of the early 1960s emphasized extensive government involvement in a wide range of social services, in setting up a large number of state enterprises and in allocating resources through an exten- sive system of physical and financial controls. Since the mid-1960s, there This document has a restricted distribution and may be used by recipients only in the performance of their ofllcial duties. Its contents may not otherwise be disclosed without World Bank authorization. -2- has been a growing imbalance in public finances due to rapid growth of budget current expenditures, slow growth in current revenue and uneconomic operations of several government enterprises. The imbalance has depressed government development expenditures to an inadequate level and has also been a persistent source of inflationary pressure. 5. After cocoa and timber, Ghana's principal traditional exports are gold, manganese, diamonds and bauxite. Production of most of these minerals is stagnating, mainly because of depletion of the ore reserves. However, a proposal is being considered that would open a new mine to produce bauxite for local reduction to alumina to supply the existing aluminum smelter. Ghana imports its entire petroleum requirements, mostly in the form of crude oil which is refined domestically and used chiefly as a source of fuel for the transport sector. Hydroelectric power meets most of Ghana's energy re- quirements. 6. Despite the economic problems of the 1960s, Ghana has devoted con- siderable effort to development of its human resources. The education system is well established, elementary education has been free and universal since 1962, public health facilities are fairly widespread and further expansion favors rural areas. It is the declared policy of the Government to achieve a more equitable income distribution by increasing productive investments in the rural areas, by expanding low cost rural housing and water supply, and by improving feeder roads. Recent Developments 7. The military government that took office in early 1972 inherited a critical balance of payments position. Large medium- and short-term debts had been incurred and foreign exchange reserves were virtually exhausted, largely as a result of a liberal import policy and a decline in cocoa produc- tion and prices. In an endeavour to redress the situation, the previous Government, in December 1971, introduced a 44 percent devaluation of the Cedi in terms of the US Dollar. The new Government, shortly after taking over, revalued the Cedi, reducing the previous devaluation to about 20 percent. In addition, the Government enacted an import retrenchment program which hit the industrial and distributive sectors hard, causing GDP to fall by 3.7 percent in 1972. A recovery followed in the next two years (growth rates of 4.6 and 4.9 percent) encouraged by a greater availability of imports, but in 1975 there was virtually no rise in GDP. 8. A strong improvement in the balance of payments in 1972 and 1973, brought about by import controls and favorable price developments for cocoa, gold and timber, ended abruptly in 1974 when the impact of higher oil prices and a breakdown of the import licensing system caused an acute foreign ex- change crisis. The situation was reversed in 1975 - at the-end of which exchange reserves had increased to $150 million (about two months imports) - following a re-enforcement of import controls and a drawing on the IMF Oil Facility. At the end of December 1976, exchange reserves amounted to US$104 - 3 - million, equivalent to about six weeks imports. Recently, the world cocoa price has risen sharply, partly in response to an expected poor harvest in West Africa. Higher export earnings for cocoa, in spite of a lower volume, should therefore ease the foreign exchange position in the near future. Advantage should be taken of this situation to correct some of the presently severe distortions in the domestic price/incentive structure which is heavily biased against exports, enables large profits to be made by importers and is resulting in a serious misallocation of domestic resources. Public Finance 9. The steep rise in cocoa prices and efforts by government to expand non-cocoa revenue have substantially increased revenue collections. Current expenditure, however, has risen even more rapidly, resulting in extensive borrowing from the Bank of Ghana to finance development expenditure. This has been a major factor contributing to the high rate of increase in domestic prices, which has been aggravated by imported inflation, the inhibiting effects of import controls on domestic industrial production and the effects on domestic food and agricultural availability of two years of low rainfall. The cost of living rose by 30 percent in 1975, and increased to a rate of 50 percent per annum during 1976; there are now widespread shortages of many types of consumer goods. Revenue and expenditure measures announced in the 1976/77 budget are intended to produce a smaller deficit than in the previous year. On the revenue side the major changes include higher excise duties and the introduction of a uniform 10 percent import license levy. The currently high cocoa price should temporarily improve revenues, but much more stringent controls will have to be imposed on public expenditures if inflation is to be checked. Prospects 10. A Five-Year Development Plan, covering the period 1976-1980, shows a target rate of GDP growth of 5.5 percent per annum. However, sharp fluc- tuations in revenue and export earnings will continue to hamper an effective development policy in Ghana, since diversification away from cocoa can proceed only gradually. Recent measures on the balance of payments and the budget reflect an awareness of needed policy directions, but the severe external resource constraint and the rate of inflation require difficult policy deci- sions in the near future to restore external and domestic equilibrium. 11. Ghana's growth prospects over the next five to ten years will depend to a considerable extent on the effective implementation of appropriate policies to deal with the problems outlined above. Key policy measures should aim at: (a) correcting the imbalance on external account through a more realistic structure of prices and costs; (b) reducing the strong inflationary tendencies associated with large public sector deficits; (c) promoting an expansion of domestic production through more appropriate price incentives, more assured supplies of necessary inputs and greater productivity of invest- ment. It is difficult at present to assess the likelihood of the Government taking all the economic policy measures necessary to restore equilibrium on 4- the external account and provide a more secure basis for accelerated growth in the domestic economy. Some important policy actions have already been taken. Fertilizer subsidies are being phased out, cocoa producer prices have been increased, as well as public utility rates and agricultural interest rates, and recent budgets have attempted to limit the growth of current expenditures. While these measures represent important steps the pace of implementation is still too gradual given the severity of Ghana's economic problems, and a considerably reinforced effort will be required over the next few years to achieve correction of the economy's structural imbalances. External Debt and Creditworthiness 12. An agreement on a long-term rescheduling of Ghana's medium-term external debt was concluded in March 1974. Under this agreement, all pay- ments due after February 1, 1972, in respect of pre-1966 debt obligations, will be paid over a period of 28 years, including a grace period of 10 years, with an interest rate of 2-1/2 percent per annum. Pre-1972 trade credit arrears are gradually being cleared. At the end of February 1976, these amounted to US$61 million, compared to US$188 million at the end of 1972. Remittance of profit and dividends is still restricted. The current external debt service ratio is only about 3.5 percent and is expected to drop to about 3.0 percent by the end of the decade and then rise, when the grace period on the rescheduled debt expires in 1982, to around 7.0 percent in the late 1980s. The Bank Group's share of Ghana's total ex- ternal debt service in 1975 is estimated at about 18%; this is expected to rise to about one-third by the end of 1980 and gradually decline thereafter as a result of the terms of the debt rescheduling agreement. Ghana is rely- ing on official sources for the bulk of the external capital required to support its development program, and relatively little of its medium and long-term borrowing will be on commercial terms. The March 1974 agreement with creditors on rescheduling helped provide the foundation for a resumption of assistance. Canada, Germany, the United States, the Arab Funds, the U.K. and the European Economic Community have indicated a willingness to commit substantial capital assistance, most of which will be provided on soft terms. Bank Group Lending, as a proportion of total external public debt, is expected to increase from about 14 percent in 1975 to about 25% by the end of the decade. In view of the very low present and prospective debt service ratio, Ghana can be considered creditworthy for additional Bank lending. However, the country's vulnerability to fluctuations in the prices of cocoa and other primary products makes it desirable that future debt service obli- gations should be kept as low as possible. Continued assistance on the basis of a blend of Bank/IDA financing would appear to be justified, given the country's relatively low per capita income. - 5 - PART II - BANK GROUP OPERATIONS IN GHANA 13. Since 1962, when the Bank Group financed its first operation in Ghana, the Bank has made eight loans totaling US$142.5 million -- two for the Volta dam and associated infrastructure works for electricity generation, one for telecommunications, one for highways, one for cocoa development, one for the National Investment Bank, one on Third Window terms for agricultural development, and one for a regional clinker plant, financed as part of the three nation (Togo, Ghana, Ivory Coast) CIMAO industrial development project; IDA has extended 12 credits totaling US$96.3 million -- five for agriculture (including livestock, cocoa and fisheries), two for water supply and sewerage, two for power distribution and three for highways. Annex II contains a summary statement of loans and credits as of January 31, 1977, with notes on the execution of ongoing projects. There are no IFC investments. 14. The principal objectives of Bank Group assistance to Ghana are: (a) to encourage Government to adopt economic policies designed to strengthen the balance of payments and improve domestic demand management, (b) to help rehabilitate and expand production of cocoa, the country's main foreign exchange earner, (c) to promote agricultural and industrial diversification, particularly for export promotion and import substitution, and (d) to improve the country's essential infrastructure so as to relieve constraints upon economic growth. At the same time, the Bank Group's lending program will give emphasis to projects which would raise the living standards of the poorer groups of the population; particular attention would also be given, in the context of individual projects, to specific policy action (e.g. on pricing, tariffs and subsidies) designed to improve output and productivity in the economy and improve the performance of public enterprises. 15. The two power projects currently under consideration are complemen- tary undertakings designed to meet essential power requirements for future economic growth. In line with the country's development priorities, future Bank Group lending will place increasing emphasis on the agricultural and industrial sectors. In agriculture, it is expected that a second sugar project will be prepared to help increase output of the on-going Bank-financed operation and reduce the country's dependence on imports. A second rural development project is under preparation aimed at increasing agricultural output and the incomes of small farmers in the Volta Region in Ghana. In addition further assistance is contemplated for increased cocoa output, which would strengthen Ghana's foreign exchange earnings. In industry a small scale industries project is being prepared and a second loan to the National Invest- ment Bank will be considered in due course; both these projects should help diversify industrial production and provide wider employment opportunities. Funds from the Project Preparation Facility have been approved to help finance preparation work on the proposed Kibi bauxite/alumina project. In the social sectors, the Government has requested assistance in designing and implementing projects to improve urban development. A possible project is being prepared, with financial assistance from the Project Preparation Facility, for upgrading several low income settlements and developing sites and services in a number of urban areas; an employment component is planned to provide work opportuni- ties in the informal sector. - 6 - PART III - THE POWER SECTOR Bank Financing in the Sector 16. The Bank has made four previous loans to the power sector in Ghana totaling US$70.1 million. Two loans, for US$47 million in 1962 and US$6 million in 1969, assisted the Volta River Authority (VRA) in building and expanding its power generating and transmission facilities, the major com- ponent of which was the Akosombo power plant on the Volta River, about 100 km northeast of Accra (see map). This six unit hydroelectric facility, with a total installed capacity of 912 MW, presently provides more than 90 percent of the country's electric power requirements. Two credits, for US$10 million in 1968 and US$7.1 million in 1971, assisted the Government in financing ECG's program to improve and expand its distribution systems to meet growing demand for power, particularly for industrial use. The physical execution of the projects has been satisfactory. A project performance audit report (No. 1363 of Nov. 23, 1976) of the second loan to VRA concluded that the project was implemented successfully, presented no unusual problems and that proposals for rationalizing the structure of the electric supply industry were considered but no action was taken. Audit reports on the two projects involving ECG are being prepared. Sector Objectives 17. The principal sector objectives are to: (a) increase firm generating capacity in order to be able to supply the demand growth beyond 1978; (b) carry out feasibility studies for the required generating and transmission line facilities for the years 1983/84 onwards; (c) extend hydropower supply to areas where costly diesel generat- ing plants are now in operation and to new rural areas; (d) extend and reinforce transmission and distribution systems in order to take care of the load growth and to improve the quality of service; and (e) Rationalize the tariff structure. In addition to these sector objectives, ECG intends to improve its organiza- tion, management and accounting. The proposed project and an associated loan that will help finance the proposed Kpong hydroelectric facility, are designed to help further these objectives. Institutional Structure 18. Two organizations, the Volta River Authority (VRA) and the Electri- city Corporation of Ghana (ECG), are responsible for providing public power - 7 - supplies in Ghana. VRA, created under a special act in 1961 to construct and operate the Akosombo hydroplant, supplies bulk power to the Volta Aluminum Company's smelter at Tema, to the ECG, to the gold, diamond, and bauxite mines, to the Communaute Electrique du Benin, which in turn supplies power to Togo and Benin, and to the Akosombo township. ECG is responsible for the distribution of power throughout Ghana and the generation of public power supply in areas that cannot be economically connected to the VRA system. Both VRA and ECG have been making separate plans for the sub-sector; VRA for hydrogeneration and transmission lines, and ECG for subtransmission lines and distribution. VRA is currently conducting a feasibility study to determine the long-term development of the Ghanaian high voltage grid. The feasibility of merging ECG and VRA has been considered off and on since the mid-60s. As ECG and VRA have developed into relatively mature organizations with distinctly different functions, a merger is not expected to bring about major benefits. 19. ECG supplies electricity to all consumers requring up to 30 MVA at a voltage not exceeding 34.5 kV. As of December 31, 1974, ECG had 138,000 consumers and sold a total of 774 GWh, of which industrial consumers accounted for about 54 percent, residential consumers 27 percent, commercial users 17 percent and losses and self-consumption the remainder. ECG's present facilities consist of: (a) 33 and 11 kV lines and related substations which receive the power from either VRA's system or ECG's own diesel plants and distribute it to consumers; and (b) 28 diesel generating stations with a total installed capac- ity in 1975 of 81 MW. The main diesel plants are those of Tema (33 MW in- stalled) and Accra (15 MW installed but of low dependability). Electricity Coverage 20. About 100 towns in Ghana receive public power supply. Except for the township of Akosombo, which receives its supply from VRA, all the towns are served by ECG. Thus about 2.25 million people in urban areas, or 25 percent of the total population, benefit from public power supply and nearly half live in a household with a power connection. In the rural areas, communi- ties with about 263,000 people receive power, representing about 4 percent of the total rural population. Only about 10 percent of these have a connection. 21. The proposed project has been designed to meet ECG's short to medium- term needs. In addition ECG itself proposes to complete some relatively minor reinforcements and small extensions to existing schemes. Although there is no long-term program of rural electrification for the country, the Government does favor gradual extension of public power supplies to rural areas and periodi- cally asks ECG to implement this effort. These electrification requests have been carried out by ECG without informing Government about the financial and economic viability of the investments. During negotiations, the Government agreed to consult ECG on the economic/financial evaluation of proposed rural electrification projects (Section 3.02, Guarantee Agreement). Tariffs 22. Existing tariffs in Ghana reflect the low cost of hydropower supplied by VRA from the Akosombo plant. ECG's tariffs are based on the VRA bulk supply tariff plus the costs of distribution and operation. The small residential, - 8 - commercial, and industrial consumers pay a simple kWh charge in a declining block tariff. Large consumers pay a monthly maximum demand charge and an energy charge per kWh which decreases with kWh consumption per KVA of maximum demand. Surplus hydro energy at a zero marginal cost in the short run will be available until 1985 given the present commissioning date of Kpong and the present load forecast. While this surplus hydro energy exists it should be made available to industrial consumers for steam generation on an interrup- tible basis. On the other hand existing special low tariffs for firm power to industrial consumers should be eliminated because they lead to uneconomic utilization of electricity. During negotiations ECG agreed that as from January 1, 1978 all power supplied by it to its customers for steam produc- tion will be supplied on an interruptible basis (Section 4.04, Loan Agree- ment); ECG also agreed to eliminate the special low tariffs for firm power to industrial consumers and replace them by the normal industrial tariff at the expiration dates of the present contracts (Section 5.08, Loan Agreement). 23. Tariff restructuring and increases in level are needed to reflect the incremental costs of power in Ghana. To reflect such costs, the present ECG tariffs would need to be increased by an average of 70 percent in real terms. In view of this extremely large tariff increase, it would not be feasible to implement marginal cost pricing in the short-run. Furthermore, in order to establish a sound tariff policy, the marginal cost of electricity supplied at different locations, distribution voltage levels and types of load of the ECG system should be determined. During negotiations Government agreed to undertake a study of these costs as part of an overall power sector study to establish a framework for future tariff policy (Section 3.01, Credit Agreement). The study, which would be presented for review by the Bank by June 30, 1978, would determine the appropriate levels of tariffs which should be charged to the various categories of ECG and VRA customers, to reflect economic costs, taking into account social and wider economic considera- tions. PART IV - THE PROJECT 24. The project was appraised by a Bank mission which visited Ghana in November/December 1975. A report, entitled "Electricity Corporation of Ghana: Appraisal of the Third Power Project" No. 1196-GH, dated March 1, 1977, is being distributed separately to the Executive Directors. A credit, loan and project summary is presented in Annex III. Negotiations took place in Washing- ton from December 6 to December 10, 1976. The Government/ECG delegations were headed by Dr. S.K.B. Asante and Mr. K.A. Duker respectively. Project Components 25. The main objectives of the proposed project are to help finance a further phase of ECG's development program, consisting mainly of expansion of subtransmission and distribution facilities, and to improve the Corporation's operations and management. The project includes the following components: - 9 - (a) Sub-transmission and Distribution Lines: About 230 circuit km of overhead and about 20 km of underground 33 kV lines; about 6 circuit km of 11 kV overhead lines with about 11 MVA of dis- tribution transformers. About 32 km of low tension distribu- tion lines. (b) Substations: 11 new substations with about 150 MVA of trans- former capacity; expansion of about 6 existing substations with about 60 MVA of additional transformer capacity. (c) Materials and Vehicles: Equipment and material for rehabili- tating the existing sub-transmission and distribution system; heavy, medium and light weight vehicles to replace and/or expand the existing fleet; (d) Consultants Services: About 105 man-months of engineering services at US$4,400 per man-month to help execute the project and two man-years of assistance to help prepare a power sector study, at an estimated cost of US$100,000. Project Cost and Financing 26. Project costs are estimated at US$26.7 million (net of identifiable taxes and duties but including contingencies) with a foreign exchange component of US$18.0 million, representing about two-thirds of the total. Since project components are well defined, a 5 percent allowance for physical contingencies seems justified. Price contingencies have been calculated separately for for- eign and local components. The following table summarizes project costs, which are detailed in Annex III: Estimated Cost (US$ million) Component Foreign Local % of Total Sub-transmision and Distribution Lines 6.7 3.8 39 Substations 3.6 1.3 19 Vehicles and Equipment 4.1 - 15 Consultants' Services 0.3 0.2 2 Contingencies 3.3 3.4 25 TOTAL 18.0 8.7 100 27. The proposed loan and credit of US$9.0 million each would finance the foreign exchange component. Local costs of US$8.7 million equivalent would be financed by internally generated funds. The proposed loan would be - 10 - made directly to ECG with the Government as Guarantor; part (US$5.2 million) of the Credit would be relent to ECG by the Government on the same terms as the Bank loan, the portion (US$3.7 million) related to a rural scheme (Kumawu) will be granted to ECG and the remaining US$100,000 will be retained by Government for a power sector study. Project Execution 28. As part of the project, ECG has hired the South Western Electricity Board, UK, (SWEB) as consultants in accordance with terms of reference acceptable to the Bank and IDA, for the design, procurement and supervision of project execution. Construction of sub-transmission lines and substations will be executed by the contractors; low tension facilities will be installed by ECG's own work force. Contracts have been awarded; supplies would be delivered during 1977 and 1978, and construction would start late in 1977 to early 1978 with phased completion from 1978 to the end of 1979. Procurement 29. Equipment, supplies, erection and related services to be financed out of the proceeds of the proposed loan/credit would be procured under in- ternational competitive bidding in accordance with the Bank/IDA Guidelines, except for about US$500,000 equivalent of sub-transmission and distribution equipment and materials which for standardization reasons would be procured from the suppliers of similar equipment and materials under the previous projects. Retroactive financing of up to US$1.5 million is recommended to cover foreign exchange payments after January 1, 1976, for consulting services, and cash down payments for equipment contracts placed in accordance with the Bank Group's procurement guidelines. Disbursement 30. The proposed loan/credit would be disbursed to cover 100 percent of the CIF cost of equipment and materials and the foreign exchange component of erection of lines and substations and consultants services. 31. There is a close inter-relationship between the proposed ECG project and the proposed Kpong project regarding extension of electricity service to the Sefwi-Wiawso-Bibiani area in southwestern Ghana. As part of the proposed Kpong project an 80 km, 161 kV transmission line and related substation would connect the area with VRA's main grid at Dunkwa while distribution lines would be provided under the proposed ECG project. It is therefore proposed as a condition of disbursement for expenditures for the related parts of the proposed project that a letter of intent shall have been issued by VRA to a contractor for the construction of the 161 kV transmission line (Schedule 1, para. 4 (a), Loan Agreement). The Borrower 32. The Electricity Corporation of Ghana was established in 1967 as a Government-owned public utility with power to conduct its business according to commercial principles. The Ministry of Works and Housing supervises ECG, which is directed by a board of seven members, including ECG's and VRA's managing directors and representatives of the Ministries of Finance and Works and Housing. 33. The Corporation's top management team has performed moderately well. The position of Engineering Department Manager has been vacant since 1971. Technical assistance from the United Kingdom is being sought to fill the position; during negotiations ECG confirmed that the post will be filled by July 1, 1977, under this arrangement or an alternate one acceptable to the Bank. In addition, two key positions in the accounting department need to be filled, and during negotiations ECG confirmed that it would fill them by July 1 1977. (Section 4.01 (b), Loan Agreement). So far as general personnel is concerned, ECG would appear to be overstaffed at lower levels. The present employee/customer ratio is 1 to 27 and more acceptable ratios of 1 to 50 are found in neighboring countries, e.g. Nigeria, Senegal, Ivory Coast. ECG gave assurances during negotiations that it will (a) formulate, with the assistance of experts, a staff development plan by January 1, 1978, and (b) carry out by July 1, 1977, a survey of staff training requirements and appoint a senior staff member in charge of training. (Sections 4.01 (c) and (d) Loan Agreement). 34. ECG's operations require improvement in a number of areas, especially maintenance. Weaknesses include lack of proper maintenance resulting in frequent breakdowns, power failures and unsatisfactory voltage regulation. Main reasons for these deficiencies can be traced to problems such as absence of an engineering department manager and lack of a good fleet of service vehicles which this proposed project should help to alleviate. ECG's Finances 35. In the first year after its formation, ECG's financial performance was excellent, with a sound financial position and rates of return well above 8 percent stipulated in the previous Development Credit Agreement. However, since 1972 the performance has steadily deteriorated and profitability has shown a serious decline. Rates of return on partially revalued assets fell to 2.6 percent in 1974 and 3.3 percent in 1975 due to a slowing down in energy sales, increased wage costs and abrupt increases in fuel oil costs. ECG's liquidity was reduced to such levels that it was unable to meet its debt service obligations to the Government in 1974 and 1975 in respect of relent IDA and KfW credits (IDA Credits 118 and 256-GH). The total amount unpaid at the end of 1975 was about US$6.2 million. However, Government has agreed with ECG to a rescheduling formula under which maturities on IDA-II (256-GH) and KfW-II have been extended from 1977 to 1982 and 1984 respectively, and repay- ment of all unpaid maturities for IDA-I (118-GH) and KfW-I are to be paid by the end of 1977. - 12 - 36. Financial management, particularly in general accounting, financial planning and control, asset valuation, billing and receivables require improve- ment, and the recruitment of additional professional staff should help correct these deficiencies. In addition, ECG agreed during negotiations (a) to reduce the level of its accounts receivable by December 31, 1977, to a sum not exceed- ing three months' billing revenues, and (b) to undertake a revaluation of in- ventories and a review of the inventory management valuation system by December 31, 1977, and, after consultations with the Bank, to implement appro- priate improvements (Sections 5.07 and 5.10 respectively, Loan Agreement). 37. The Government has just approved tariff increases for ECG averaging about 29 percent, effective October 1976. This action was taken in parallel with a 60 percent increase in VRA's bulk tariff to ECG, effective September 1, 1976. The new ECG tariff, plus further tariff increases of 3 to 15 percent per annum as from 1978, are expected to restore ECG's liquidity and enable it to meet by 1977 its rate of return obligation of 8 percent on the revalued rate base as stipulated under the previous Credit Agreement (256-GH) and retained for this project. Furthermore ECG will take fully compensating tariff action within three months of an event which would cause ECG's operating expenses (excluding purchased power but including debt service) to increase more than an estimated 10 percent. ECG's assets have not been revalued since 1967. During negotiations ECG agreed to revalue its assets as of December 31, 1976, by June 30, 1977, and maintain its asset valuation on a current basis there- after. Revaluation will be carried out by applying indices for local and international inflation. Should the actual revaluation yield a value differ- ent from the estimated Cedis 69 million as at December 31, 1976, the rate of return standard would be adjusted proportionately (Sections 5.04 and 5.05 Loan Agreement) so as to insure sufficient cash generation to meet ECG's investment requirements. 38. ECG's difficult financial situation has been aggravated by the fact that the Government had failed to meet its obligations under Credit 256-GH to reimburse ECG for operating loses incurred in connection with rural electrifica- tion schemes, which ECG has executed and operated on Government's behalf. As of the end of December 1975, the Government owed an estimated US$2.4 million on this account. The Government has now agreed to reimburse ECG for all past amounts due for rural operating losses in three equal semi-annual installments between December 1976 and 1977. Benefits, Justification and Risk 39. The proposed project, the third Bank Group lending operation to assist ECG, would help to improve and extend the distribution of public electricity supplies in Ghana and, thereby, serve the wider goal of improved economic development. Specifically, the project would: (a) reinforce the distribution network of areas already served so as to meet increased demand; (b) replace diesel generated power by cheaper hydro power through integration of isolated areas formerly serviced either by ECG itself or, in the case of some industries, by individually owned generating units; and (c) provide for improved management of ECG itself. The project is thus closely related to the proposed Kpong project. - 13 - 40. The forecast of total ECG load is based on extrapolation of the past trends for each type of consumer and on the expected new consumer developments not included in the overall trend, such as specific industrial projects. The average annual growth rate for total ECG consumption is forecast at 11 percent for the period 1975-80 and 8 percent thereafter. The proposed subprojects constitute the least-cost solution to deliver the forecast load for a period of 15 years when compared with reasonable alternatives, taking into account the standardization of voltages adopted in Ghana and other local conditions such as requirements for underground installations in some congested areas. So far as project risks are concerned, from a technical standpoint they are no greater than those normal for projects of this type, and the managerial/ financial risks should be minimized as a result of the agreements entered into during negotications and referred to in paragraphs 32 to 38. 41. The rate of return calculations show rates of return ranging from 0.1 percent in the case of the proposed distribution in Tema (mainly because of the high proportion of energy sold at very low price for industrial loads under special contracts (see para. 22)) to 21.4 percent in the case of the Accra-Weija scheme, with an overall rate, using current tariffs and other measures as proxies for benefits, of 10 percent. If benefits were assumed to be valued at marginal cost, that is 70 percent higher than existing tariff levels, the rate of return on the Tema component would be 13.9 percent and the overall rate of return would be 14.2 percent, although this still would be an inadequate measure of the actual economic benefits. PART V - LEGAL INSTRUMENTS AND AUTHORITY 42. The draft Loan Agreement between the Bank and the Electricity Corporation of Ghana, the draft Guarantee Agreement between the Republic of Ghana and the Bank, the draft Development Credit Agreement between the Republic of Ghana and the Association, the Report of the Committee provided for in Article III, Section 4 (iii) and Article V, Section 9 (d) of the Articles of Agreement of the Bank, the Recommendation of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement of the Association and the text of two draft Resolutions approving, respectively, the proposed loan and development credit are being distributed to the Executive Directors separately. 43. Special conditions of the project are listed in Section III of Annex IV. 44. I am satisfied that the proposed loan and development credit would comply with the Articles of Agreement of the Bank and with the Articles of Agreement of the Association respectively. - 14 - PART VI - RECOMMENDATION 45. I recommend that the Executive Directors approve the proposed loan and the proposed development credit. Robert S. McNamara President Attachment March 8, 1977 TABLE 3A SW4ANMI $0 SIAL INDICATORS OATA SEECI LIND AREA (THOU RMZ2)- .-;;;;L ------- ~~~~~GHNAOI %CT EENEFERENCE COUNTRIES (19703 AGR1. . R0 19TO ESTIM4ATE ROZAMSIQuE ECUJADOR MALAYSIA ** OPPER CAP!IlA (U'St) 20.0 ki@o 16. 300 300 '40.0 POPULATION AkD VITAL STATISTICS PDPOLATIO,4 (MID-YR-.;'IL11W '.7 8.6 9.9 7.7 6.1 10.4 POPU1LTION DENSITY PCR 5IUARE RK. t0.0 36.0 I4I.0 10.0 21.0 32.0 PCR SQ. (N. A;RICULTURAL LA.4O . 63.0 ..16.0 .. 291.0 VITAL STATISTICS CRUOE JIRI RAT PER THOUSAND 50.8 4.9.8 L8.8 4I.3. 4.0 42.2 ERODE DEAHRITE PER THOUSAND) 21.0 24.4 21.9 21.b 12.0 12.9 iidfANT RORTALY RILTE C/THOU) 151 .0 156. *.93.0 77.0 La AD0. LIEx EETANCY AT eIRTH RYRS 36.5 41.5' I3.5 6110 57.2 6' GROSS REPRODUC IOGN RAVE .3. 2 3.2 2.8 332.6 ( POPULATION GRUhWTa RATE (1) TOTAL 2.2 2.16 2.7 1.9 3.4 Z.6 UR)A'4 8.2 L.5 5.7 6.0 5.0 3.6 URBAN POPULAIT ON (I OF TOTAL) 23.1 26.Ia 31.11 . 38.0a 27.8 A6E STAIIJEIURE (PERCENT) 0 TO 1I YEARS 44.5 4 6.9 ..45.3 48.0 la 44.r4sAA 15 III l.a YEA.RS S1.3 49.5 .. 5.7 49.0 $?:I5A. 6.5 TIARS AN0 OVER 3.2 3. 6 .. .0 3.0 a 3.2 (a AGE DIPENOECIC RATIO 0.9 1.0 ..0.9 1.0 0.:9 ECC40HIC DEPENDENCY RATIo 1.2 1.4. ..1 16 (a 16 FAMILY PLI'.NING ACCEPTORS (CU4ULATIVE. THOU) .. o.9 1281.0 .. 4.2 222.2 ( USERS (I OF MARRIED WOMEN) ..2.0 ... . .0t TTAL LAS(r oRCE (THOUJSAND) 2700.0 3100.0 ..2900.0 1900.0 2900.0 ( LABOR FORCE IN AGRICULTURE (I) 51.0O 54.0 .. 7.0 54.0 43.0 ( JI4MPLOYED (I OF L1140R roRCE) i.0 3.0 A . . 6.0 INCDIE DISTRIl0111s I0' PIV..T " 1GRECIDC* AT- HIGHEST 3or OFaOUSEHOLOS .. .. 43.0 (a 28.3 HIGHEST 201 OF HOUSEHOLDS ?.... ?.O ( 56.0 L31E;T 2G% OF HOUSEHOLDS ... .. .9 5/ .5 LOWEST 460O OF NOJUSEMOLOS . .. .2 11.2 01IS TRRIU t 10J OF LAND O4.STRSHJP I ORINE) iTT SMALLtST I0X OIlERS ... .. MAL:IT. AND 'aUtRITION POPUJLATION PER P'HYSICIAN .. 12950.0( 82390.0 IR I18a?B.0 ?930.0 DOPJI.ATIOY PER NJStNO PERSON 27100 A b I 0T0O 1050.0 1a780.0 9A 30. 1000 TI PIPUIAT10 PER mmS~ TO BEO 1050:0 760.0 F0. 61".0 .340 10. - PER CA'IIA SUPPLY oF CALOYTE% (I oF RCOUIREAIENTS) 89.0 96.0 101.0 /c 911.0 6 9. 0 93S. 0/a" PICTE IN (GRAMS PER OAY) 45.0 '.6. 0 49.0 ZE: 1j.0 49.0 49. -Dp W(HICH ANIMAL AND PULSL .. 0.0(a . 12.0( ZZ.O 20.0 4 DEATH RATE W/HOU) A3E$ 1-4 . .. 13.0 5.5 FO0J 1 TI O4 AD'JUSTED CNROLLM4ENT RATID PRIMARY SCHOOL 39.0 50 a 56.0 /g55.0Ab 95.0 8. SE'CONOARY SCHOOL 1.0 LaC 9.0, (a . .0 7; 26.0 6394. 0 YEARS OF SCHDOL1NG PROTVIDED (frIST AND SECOND LEVEL$ 15.0 851.0 15.0 10.0 12.0 13.0 ( VOL'.tlOHAL ENNULLMENT (1 oF S'CONOIAAYI 11.0 (a 23.0 15.0 &IfaO.0 29.0 I.0 / ADULT LITERACY RATE (XI . 25.0 ..68.0 r770 HOJS ORG P`ERSONS PER IDOlP (AVERAGE) ......... OCCUPIED DaAELLINGS WIIMOUT PIPE) WATER (11 ... . . .5.0 ACCESS TO ELECTRICITY CtOr 0ALL DWELLINGS) ......S. .3.0 RURAL OWELLINGS CONNECTED TO ELECTRICITY Ct) ... .. .30.0 ColSm"PTION R.IO ECEIVERS (PER THOU Pop) 87.0 M8. 85.0 a1. Z90 '10 PASSENSER CARS (PER THOU POP) 3.0 5.0 4.0( 10.0 4.0 23.0 ELECt RECdlY AlKAH/YR PER CAP) $5.0 138. 7. 8086.0 362.0 NEWSPRINT (KG/YR PER CAP) 0.1 0.'.1 0.6 0..0 2S.3 4.0 .-~~~~~~~~~~~......... ............................ SE NOES AN EAIINSO EE lItin. tl.eoin oted, doe, fo- 1960 onfno to any yrn- bnn.-oo 19,9 nod 1961, for 1970 betwen 1968 nod 1970, nod for Hun t ....nt R.ti.at. knt~e,. 19g;an 19)5S. s.Ieloyt , en Soo eioo no Onbj-ctl- -contry -e th, hosJ, tht Cot 't St'iving Co -hieve 3-4d p-rc-z lee -nn Iner.... in Gt? por -pita .o4n .do6,-t leve .1 noolnl -anf are -d pril. -tliltty wIlh th. oen t -y truofo ohongno Lothnne.-y chiclh Otipi ..n ..r.... fully ne-cepI.Iotd I. tho -,.ton pont. .CHeNA 1960 In1962: /b .14ielig idio. nod ...... .iLl, tcd.1ffory qu.(tfftcntl-:n /c 12-19 y-n. Of agrj _d Pb1ht, od-tonto only. L970 1± AetI&otorod -1cy. IS Riogi.Inrnd, SOt nil pcnnntoL,n L. the -tnocy; Ic 1966-68, Id 6-15 ..d 16-21 y..ln ofnn hiftL RicTKl ETIO4ATE /. Oo9jt-trd, -ct oil p... tIil.e in the -cotry; lie 1971: /c 1969-71 -verg.. /4 1972: In 6-15 y.rom ef 0., * if fbi.hl ed...ti-o c.,,y. nltLt7 T le 1970 Icc 1664-69; /l. t7d6, 6-10l- no1 -15 y..,. Of nR. -rpocrtiny. fL.CI 0.eO1 Ri9'L b cF- Iud ing -nod J lodL On trlI her. /h Rntto of pepeolotion -ed-r 15 -d 6 enod ovr to to1 Iebor to-er Lj inome rot pul-tr, Indliduclle wh. r-.el- Iccy of ony kind, teled r..tne r ocne- eod .-cI.l 0.coriry henfio.. 60102710 ~~1914 /A W-nt X.1oni., lb k,6c.-aiod applicanot f.r -ok, In .--roct only. /d 191.0-66 In 2i-I year. of gte: Tr 1947, I", Ieic only. R6t, A.font II, 1976 La-d Area (thee i.2) j0l O*F fL9O'O1*ir*e-n - populatione divided by raber of practtim- Total - Totl- ornc ar. oplI.ntg totd or.. and Inland Setate. IDl SI E5i F.~1 Sadnt Mors.., LrOiondO mW -Cartifled" snus". neoL,. - -tIn t--ret ontlaant of *a otrl noo .ned cneoporoly Or nee ausillary prv,,nonanl sIth tranlineg nor n rpernn. -eOn.n,tiy for -rop., ponture., mahkt a. kitfho od.. nodos to It. fnilee. rek~i~l,.±fi2n r 6101 had - POpt.tion dildeck by ..-.beer of hospital bo S onicE i pubIcF end Wi-toot general and epocleli..d hospital (;NP p, -pl-t (115ll - GNPl per onpit. S.Ian t current merhet prices, and r.habilltation contenI eanlodAsnutersing homes. nd eetAbll.heents calcuated by smao eOvareion methd as World Bw% Atl. (1973-75 beels)l for nutodlal and Pcrno....sU ro-n. 1960, 1970 and 1975 dota. e to. eofl. af relert,, (6 Or roncelroannts) - Ccect.ed froo,e energy eqioet. et.food supplino &.ailable in n otntry per capita pear Pneeei.llo0 nod nlt.l ncaeine ion ~~~days avoil.ble upqpli.e -oqpri.n dateetin peOe.tion, lteorts leas Potcioict (nd-r "!1111"e) f uy iOt f o nolanhn aepert., avi chnitges In etook; oat Supplies nm1ldn anisel teed, od, -vtoA. of ronedy. oniao:19160, 9970 nn 1975 a. quantlties used in food pnoc.a.Ig~ and lone.. in distribeution; 0- qntrasn.ee. worn a.ttl.etd hy YA0 based On ptibtol.gica) Oned. for Poo,clllnn dcel Iv- pot necnrokm - 14id-y.or poplto "0 e4uare klo- norotaI arl,ivity and health mctceoleing enjrorm,,e-t.l taqoomature, n,t ,ce) 1- nrn of t.to I rto, body weighte, agoe and novt dilntr:t.Ltons or popolotion. and allowin 7~etnlm~ c..- ~~eO~1ro le nO n la. md C-opntned as obo. for 1'fl for S..t.e St hu.enhol1l 1-1e. ceerlrult.cro) toed noly. ~~~~~~~~~~PoreiA ,pel fprcI (c'en P., o dty( - Proten rontont Or par cap'qi neFnPpl'y of -odpr daY; not .'4.ply Or food to dof IvOd a. tIc,) t7~~~~~~~~ Itt ion atc~~~~~~~~~ov.i req.irvcmnt. fr- nil cl-Llas establisheed by USOk. Fconoeair Cr-d. h iri nrctiecel-Anne.l Iv 1 hlbrthco p.r thousand of mid-.verhSrln ncvd o )loe lo.oao 0gomo oa YtrotP" Gteciol.c o-re o -itreti a mo -odlg In 1960 nod 1970, 7ertLtt,ie per day, end .0o gr-ct of enIra -fl pulse protein, -e ne,i-A I0 (I f .r.r, ..... OnIn Ic. 1975 foe t-t roe,conlnt.Or. ohocld bo 401mal n-eLo:theo Udardlos v.r Iowr tU.. thee, Cruct.htefr h--e.ai A-uAnea d.arh. p-e ilhounnd Of nid-y-n of 75 gr.re of total po-ooi er.d 27 grn- Of' anial protoicen. an S o roy-Int et:00.00 rith-to t ..n roonfe Ce-dint In 1960) and 1970. and age for the. vrld, pr.Oje,o .i b,rfAO in th2. Thtr. World Food rvy Ilt-vo .'c ndcI.,ic 1971 f.r -ee recet, P.,n e f o copit. Drotein etcyr,c,c.-,lo tl. Pr Oteir, supply of food lt cOec'icy o.-e (,tI.1-tn de.th. '01 LIn.Lnn orgno doe-Iceffe-nocec7 cIplcat r.e to: clay.Y -pot 1 t.--dc 11- b1, ch. Det t hulaa-1- - A.c-,.1 do,-),3 Per tlco,isnd in geg group tte.o )coco 1'ol)r~ - eo-r.gn -utl- rf y.are 01 hIff - mniin I1Lyarn,tc Lcb,ildrecc in th1-1 a.go.;nfnf IOteggnt.d on on I-diiator n- bicccc, --no, fltio-y- ..rnendIng J. 11160, 1910 Sod 1975 for of oenln.trlttoe.. C, c er.oo o .e Aoor... g. .-cot of lIN, d-eghtr.r . woan mill Ed,,rttion Ser ic herIcue I-rpcluto pnnie ..nc Dleloon~Atetdnrlnoc.rtt rttrc*'-o lrolL-nt of oil ag"ans nIcoC1l t ecl Pe,no;.nlpfo-ornenn nig ni6.protg fpirr rco-r pop.Ation; Ur.lodon childoce aged 1970 eod Iq75 cor d,o-IOp1nooe-ccocrin,. 6-11 yerar hut Ocjunted for deffrenot leceWthn of primary dcucation, j2cecj' lo.g.ttnh rc ~j oa - to.p-.cd actntrttht rnte of .id- for countries eie.h unci-ee1 rdcacetio., mero,llan,t mey enced 100% V-e ;cpcvin oo16-9 9070, .nd 1970-75. omen. cin. peIcOl or. hel. or .icoo th. ,ffI&IaI sch-ol nge. fopclteco tvuc rein(~) orcc~r -C ,ptod Ilk. gr-cth .koto or toa 13-o,o occ]tnt rnh2lc - es-nAsry e.hoel - Coopmtod no abonl see- pcepcetco I dffernt dflolionoof rban aeon'. aff~ t Oondrery edeeneti-t -eqoiro St 1et four yrear of approve.d primary 1-1112, cc)' jet,. c.c.-.oY f ect0.crifr. iectrwationi provide. general, -ontlotcal or teacher training ieeatrec- lc')n- coo ol'tL")- nec n tc erlc t,o ttl.] u.t- d tint. for pupils of 22 to 17 yearn of age; correspondenuce c.orsos are to- orTL7-cr6, f7' atfte.) p pr.c,b1tieof dafa generally exolcludd. foro'.). doC.e~1oto~Tin,e cr00, .ty nrfn-Itoqonrabiliy of dejAYo-r of 9choollcc orvidd! (frsit end ro.nod ltj)-Totnl years of 6ev tne. 'e'n -tot - Child,,., (7.7, yon-c). ccrcone(5Lyerar), Oethcolingl at e6. odo lon,ocoetical Instrcotion my be portially end oe o'f~Z c at trt eeeer OspOoenctso ci od-ye- ncltnt or roelatoly excluded. - ii.elr of eepole Ion ede-r 1 f~5 nd ~.r o hlortloi ... I l cet ( of -nr. ryto) - Vovetional i.stit.otiont inclod6 I heco o e,'oTS Rctee ofpuhLl..d 1n 6 n I- . tsrhnical, ind..strial or otheor jeeroln cahtOk operate indvpwdendtly fe-vt sole- de-r..enepeee-v roe It - p,e of ~~~ ~ ~ ~ ~ ~' nod o- or a. depr.A.cd.ptrta ofo of ondcrndar otit.tlw .io. to 'to leor fret In Pre e'rOcc cc ec/) yo-tn. .~I.65Jend o-uzA-rc -{~.-Littrato adalts (able to read and write) as F-Inly p-,nj,t, - r0ee,(c.ocnlv.lAe -Cer.laio oecrofprcnag f oa aduit poutlatione aged 15 yrer end war,. --vptor- of l-Ire f-cot.o 6-toc,- urdIr Ounpi,. rn nof tienal racily plse.clnh preron-100 INcopt-lo.o mria ParoO,c por roo, (evn',rgo) - Avergag ncumbr of persons pier reow in 0- Fool] Pae c-IuN r "'of 'Earl enon) - iotctaooferndcopied noetoc..dwellings in rban arema. daell.ngn tclende nol- _ctOn 0) CSpdtrot .( o il-i.) .rn) I'll 10- trthe-control do- 0J000 to .il ocrri.d -on..i n"am age group. permanenot stru,trteos and canoccoplod pat!. ~cotndtloflleosthitout picidlo() - Gortepied tonventiona.1 Sn eeec dad) i.,cga I~~~~~~~~~r orben an I'n t'eoe o t mod. or outside piped r,~I r -fcc (thceeed) - EcchoontaIIy -etj- p-rgono, including water facilitilo- an percantofe0of all Ocnqe.pd thealllnga. c. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~ke.t l-rcit 6o l 0nlr~)-Conenmt.inmol dwellings nreI oc !orJcdtcpoydSctnrlelgbute stu,Stdoo,*d Oiwt. lntili nts,g lar,r 0 eretoftca sellg dnflcli.ono n velocecoeotrio are not cote-crnS]. "IISt 11rly IIl~ T labor fcc,-o in agrle-otlcer 4 A,irirclturn] 1alcor forMo (io faig ic uorbn ,A e-Arl oresa. feo.ty, Sceeelcc~ nd fehin) Onporcnt.og of oto labor force. thaln dtoa~rct ()- CoWuetod as above for Ott)~~l6f]eoc cv't - lnepoytd re- o.cea]ly diefined So personreeoallei.gnco. nIv0ca~ ed olfin rto teko aJ.ob, not Orf 0 .1, o-e a g1loct d.C3n.pi reccenl.rd cout of a job, end oe-king work for .a ocimfied milieno. dinattrtoneoe cohe )-Al~o o .aor o aebed peio etnondlng on. eaneki maoy cot Ito ro'e9-e'bl. bcete.eu toOut. ou tloon-Ae1odp of repol eroo , for rudos brel d- tr.9. d-e.mn different. deffinitiono of u-t1ply.d and sowte of' data, cots etd revo alvn puIn pernt.ronand onfa. et ppugAion ratIude w rak o,g., SctVely-ent Otffiece ottietine, .ample su,-oya, conpoleory uvi.0 c.iaon.d r ofvr ton eatarfos rtendt yn-ears Whnet ngepatei. or radi soot. ountrifen abolished lintocolng, Iotto. dLtrrlleonIo - Pr-entag. of polonco I_l,ccn (beth In .,h anod ktd) baoon.- careot (per thocu rcO) - P-s-eger car. toeprion motor oerm eamt.- roolodb rtch;.t i, richest 2ilt poorcet 2COt, and Pree60% ofInv,1:9theneteight personol e.oludna.buinlarncen, hearmn.eand sAli- hcoeneheld.. tory at,lesrn. ~~ - Acccce.ak ul consumption of indeatcrial, cno. Oletelrutlon of 2nocI ISOLA...-of lend eu,8b o1. eii71I1i)pIa lecctrictiiy in kilowatt bourn per capital oe. c1. errtae.gerl a Odno prodcUOtn data, setht.leo111l.ttwnce for Uses$e -in i..t. 1)19 old poordet e~oe 'nOd Ownorn, grId. but, alloing for inqporte and wspurts of alactrloity. Heal th ec~d Kw eetrc ioLeenro-f7..eroe Per capSIna enimia cmone etono ine kilogram ~g5]j~1e~pp>plr-ntIen - Popuelation dIvided tx0a=ier of practicing no.t.Ae.dfomAteatt prodcmtlon pilup nbot Imports of nowepTlit. pl'lcs. qulfed from a ml11001 arhool at Wtorwcveitc level. EONOMTOMVRIOPNDITMTA ~~~~~~~Page 3 of 4 Pagea Actual Projected 1970- 1973- 1975 - 1980 - 1973 1974 1975 Ai.u 22i7- 19 75' 1976 19 80 19 85 1973 1975 1980 18 NATIONAL ACCOUNTS3-Year- Ave2rage at 2129 7 -1969 P2r2ices &Excnange Rates Average An rowth Rates As Percent of GOY Gross Domestic Product 219 233 28 28 2659 3146 2.1 3.( 3.3 3.4 102.0 100.5 98.4 Gains from Terms of Trade (*) -41 -11 36 52 -60 -114 -2.0 __.Z_L _I 6.L Gross Domestic Income 211 TM1 =12 23W 213 1.1 4..b 2.5 3.1 100.0 IOG.0 100.0 Import (incl. NF5) 317 407 413 405 477 529 -7.1 14.3 2.9 2.1 15.2 18.3 18.0 Exports "(import capacity) -396 -329 -392 -440 -426 -485 -0.4 -u.5 i.6 2.7 -19.0 -14.8 -17.1 Resource Gap -80 78 21 -Ts -5r -4 717 7s 27 Consumption Kxpenditures 1798 1987 2062 2077 2323 2759 0.6 7.1 2.4 3.5 86.1 89.4 89.9 Investment 1 (incl. stocks) 211 314 254 2 21 32 7 317 -8.0 9.8 5 .2 -0.6 10.1 14.1 11.1 Domestic Savinigs 290 236 232 255 276 273 4.2 -10.5 3.5 -0.2 13.9 10.6 10.1 National Savings 288 232 235 249 268 255 7.9 -9.6 2.6 -1.0 13.8 10.4 10.2 MERCHANDISE TRADE Annual Data at Current Prices As Percent of Total Imports Capital goods 92 179 188 173 336 . 22 22 25 Intermediate goods (w"Lfuels) 141 257 217 233 372 . 33 31 29 Fuels and related materials 41 136 126 138 216 to 1 17 17 of which: Petroleum (41) (136) (126) (138) (216) .. Uo (17) (17) Consupin goods 150 245 225 238 325 . 35 30 30 Exports primary products (gxcl. fuels) 544 631 738 885 1109 . 93 93 94 F'uels and related materials 12 14 8 9 12 . 2 2 1 of which: Petroleum (12) (14) (8) (9) (12) . (2) (2) (1) Nlasufactored goods 29 34 39 47 84 . 5~ 5 5 Toa e .Exports (fob) 385 6i78 785 941 1172050 10 0 Tourism and Border, Trade Merchandise Trade Indices Average 1967, 69' 100 Export Price index 148 220 255 279 291 379 Import Price Index 163 227 243 259 350 494 Terms of Trade Index 91 97 105 108 83 77 Exports Volume Index - VALUJE ADDED BY SECTOR Annual Data at 19 6 7 69 Prices and Exchange Rates Average Annual Growth Rates As Percent of Total Agriculture 891 9 5 9 45 954 10588 1258 3.0 2.9 2.9 45 46 45 Industry and Mining 4 -T 457 462 466 5 63 702 3.0 4.2 4.3 22 22 22 Service 653 665 693 700 819 966 3.0 3.3 3.4 33 32 33 Total 1980 20O77 32100 =2o2 2473 11076 3.0 3.3 3.4 TUO --O TO PULBLIC FINANCE 1972/73 1973/74 1974/75L/ 1975/76 i 1976/77 1972/73- 1975/76- As Percent of GOP (C'entral Government) l9Zth7L 1976/77 Current Receipts 397 583 818 853 1084 44.0 27.0 15 i6 16 Current Expenditures 440 569 875 965 1104 41.o 14.6 16 17 17 Buclgetary Savings -43 14 -57 -110 -20- - - - - Other Pablic Sector -- -- -- -- -- -- -- -- -- -- Public Sector Investment 84 158 211 338 360 60.0 6.5 4 4 5 US $ million CU'RRET RPENDITURE DETInLSd Actual Prelim. Lot. Proj. DETAIL ON At end 19 Pand ER As % Total Current Expend.) ~~19 72/ 73 1973 /74 19 74 /75 19 19 PUBLIC SECTOR First Plan - of Total Eduction 17.9 TT. 4 17.1 .. . INVESTMI2NT PROGRAM (1 -1 Other Social Services 7.0 12.2 11.0 .. . Social1 Sectors Agriculture 6.5 4.0 4.8 .. . Agriculture..- Other Economic Services 6.3 6.0 6.6 .. . Industry and Mining Administration and Defense 30.2 31.4 26.8 .. . Power Other 32.2 29.0 32.7 .. . Transport and communications Total1 Current Expenditures 100.0 100.0 100.0 .. . Other _________________________________________________________________ Total Expenditures SELECTED INDICATORS 196 s- 19 73- 197 5- 19 80- FINANCING (Calculated from 3-year averaged data) 1973 1975 1980 1985 Average ICOR .. T% 77 Public .-otor Savings Import Elasticity.- 4.52 .87 .62 Program aid counterpart Ytrginal Domestic Savings Nate -. . . . Foreigs Project Aid Marginal National Savings Rate . -0.47 0.08 -0.03 Total Financing LABOR FORCE AND Total Labor Force Value Added Per Worke (967 - 69 Prices& Exc. Rates) OUTPUT PER WORKER In Millions % of Total 19 60 -70 In U.S.Dollar~s Percent of Aventge 1960 - 70 19 60- 19 70 19 60 19 70 Growth Rate 190 97 169 90 Growth Rate Agriculture 1.59 1.78 62 57 1.2 476 439 80 7 5 -0.8 Industry .38 .50 15 16 2.8 558 758 94 130 3.1 Service .59 .85 23 2 7 3.8 923 776 155 133 -1.7 Total 2736 = =11 T.O 7W0m. 2ZU- -2r 38I2 iW- Cr" - not applicable - nil or negligible j/l.rovialsnal Accountri-ng~ not available - less than half the 2,/Reviaed Estimate smallest unit shown 2/estimate Page 4 so 4 pWe BANSE 07 PADt T r AL ASSISrnACS AND DM (auants ain lliose of 3.S. dolars at sirs-st price.) Aeg. Annl Actual 8etir ted Projected (louth Rate 1.911 1912 L U2~ i~& ha ta 1s9. i9n i9 1971 -197S SM1ARY 81A.NCE OF PAYMCDTS ev,ort (inol. NFS) 390 443 647 748 859 1023 1100 1118 1210 1339 2143 22.0 Imports (tool. NFS) 500 325 517 925 905 943 1140 1304 1358 1500 2335 16.0 Rejourne b lacos (X-M) -111 -rr= IJU 7r7 -4r - r -= - r1r8 _1r4 -16r1 -gI Itest (net) -20 -10 -1 -8 _ 17 -3 6 6 -5 -12 -57 eroG -o t netOno -17 -12 -15 -18 - 20 -20 -37 -54 -52 -49 -47 Worker,' Rwiittanoe - - - --- Gui-i-t Transfers MG) -- 13 13 17 42 14 16 19 21 25 4-3 Salance no Cui--sot Accounts -147 109 127 -187 - 42 71 -55 214 184 -9 -246 private Direct -nvestMeot 31 12 14 10 65 12 23 45 50 50 60 Official Capital -nto - - - - - - - - - - - fublIc StT Loans risbus-saesnts 37 41 33 13 35 59 86 118 135 183 271 -Repayllemts -13 7 -9 -18 -18 18 -18 -13 -11 -68 Net Dib-.sseostl 24 34 27 4 17 41 68 101 122 168 204 Other MkLT Loana NletDiibirseieeoo- -- -- Capital 7r aasactlns n.e.U . 49 -4 -22 -25 70 1 1973 1973 1974 1975 Change to Net R-on-rio 13 -55 -68 160 -139 lEBT AND DErT SERVICS Public Debt Out. & Disbursed 531.0 556.9 612.7 606.4 590.0 8RANT A17D 108.I CO'0wTMR5ST Off-inl Grants h Orant-like .0 18.5 -0 .0 .0 1Iti-flt os Public Debt 14.8 6.9 7.9 0.8 18.9 RcpaYe.ents 2/ Public Debt 12.7 7.3 6.1 8.7 10.2 'abl-c M1T iou,- Total uPb1lo Dbt Sor-ioe 27. 5 14.2 14.0 17.5 29.1 -3D - -_ - - 65.0 OCthr Debt Se-oaI- (set) .. .. .. . TD 7.1 .0 28.6 12.4 23.6 Total Debt Sbs-iea (-t) .. Ottar - - - - - Ot-er Maitaluorul - - - - Eli-don 00 8port a-ige (7S) fb-vernnenta 44.9 1.6 1.5 27.7 41.8 Supplo.rs 9.0 - - _ _ Publio Debt Service 7.1 3.2 2.2 2.3 3.4 F na-ucoal TOoatattivna _ _ _ - _ Total Debt Se-rice ..- On1tsarda - - - TDSgDirsot Dn-t. Inc. 11.5 6.0 4.5 4.7 S.7 Pbilac L.aan a .e.i. _ _ . _ .1 ToIaS Pabhc 5iLT loans 07.0 1.6 33.1 40.1 130.5 A-re-go Tercs of PubLie Debt .. .. .. . World kActual Debt Ootai ig onFercen31,0 Arort, as S Prior Tens IDO&D 028 1.2 1.3 1.4 3.1 ERTDi815AL 5487 Dtsb'rsedOrly Porceco~~~~~~~~~~~~~~~_ An-t. an Psi-a Tsa D80.D 2.4 1.4 1.0 1.5 1.7 World Bank, -3,7--7 TDA 43.5 7 I8RD Debt 0ot. & Diebus-ed 43.9 44.3 43.6 41.7 39.7 Other Iltalatc..al - - .S 7 Public Debt 0&D 8.3 7.9 7.1 6.9 6.7 irnoravme2ts 740.7 41 as Public Debt Ss-slos 15.5 30.9 32.5 26.8 16.2 onS, r i-rn 7266.1 45 Fin n-tal Institutns - - 011 aDbt Out. & DtDb-ed 14.0 21.7 24.3 33 6 43.5 hon,da - - 5 s Public Debt SeD 7.6 7.9 4.3 1.4 7.4 Public Dbbts n.e.i _a 9 Publia Debt Sersias .6 2.4 2.7 2.5 2.1 Totl Pubic M814T Debt 59117 Othar M< Debts Short-tGer Debt (disb. os3y) . ot applicable e staff estlento cnt anti7able - il or negligibls .ct -ailable sepus-atoy - Ices tbh- half ths but occluded 11 total se1aest u-it hbsun iEteicaica ANNEX II Page 1 of 6 pages THE STATUS OF BANK GROUP OPERATIONS IN GHANA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of January 31, 1977) Loan or US$ million: Amount (less cancel Credit Fiscal lation, termination & refundings) Number Year Borrower Purpose Bank IDA 2/ Undisbursed Two loans and four credits fully disbursed 53.0 21.9 163-GH 1969 Republic of Fisheries 1.3 0.5 Ghana 205-GH 1970 Republic of Cocoa Rehabilitation 8.5 2.3 Ghana 354-GH 1972 Republic of Sugar Rehabilitation 15.6 4.0 Ghana 438-GH 1973 Republic of First Highway 13.0 8.0 Ghana 499-GH 1974 Republic of Second Water Supply 10.4 5.6 Ghana 500-GH 1974 Republic of Livestock Development 2.0 1.6 Ghana 531-GH 1975 Republic of Oil Palm 13.6 12.7 Ghana 594-GH 1975 Republic of Second Highway 10.0 7.2 Ghana 1122-GH 1975 Posts & Tele- Telecommunications 23.0 22.7 communications Corporation 1180-GH 1975 Republic of National Invest- 10.0 9.5 Ghana ment Bank 1181-GH 1975 Republic of Ashanti Cocoa 14.0 13.5 Ghana 1182-GH 1975 Republic of Second Highway 18.0 18.0 Ghana 1291-T-GH 1/ 1976 Republic of Agricultural 21.0 3/ 21.0 Ghana Development 1298-GH 1/ 1976 Republic of CIMAO 3.5 3.5 Ghana Total of 142.5 96.3 130.1 which has been repaid 15.5 1.0 Total now outstanding 127.0 95.3 Amount sold 0.4 of which has been repaid 0.2 0.2 Total now held by Bank & IDA 2/ 126.8 95.3 Total undisbursed 88.2 41.9 130.1 I/ Not yet effective 2/ Prior to exchange adjustments 3/ Interest subsidy fund (Third Window) ANNEX II Page 2 of 6 pages B. PROJECTS IN EXECUTION I/ Cr. No. 163 - Fisheries Project: US$1.3 million Credit of September 25, 1969 Effective Date: January 21, 1970 Closing Date: June 30, 1977 This project originally provided for: (a) the construction of forty purse seiners; (b) credits to fishermen for purchasing such vessels; (c) fishing harbor improvement and expansion studies, and (d) the improve- ment of the Ghana Industrial Holding Corporation's Boatyard Division. Following protracted problems over design and price, the number of boats was reduced from the original 40 to 10, and delivery of the boats has been completed. A combination of mechanical problems and poor catches by purse seine methods have resulted in lower income for sub-borrowers. In order to improve the trawling capacity reliability and reduce time spent under re- pair, measures are now being discussed to increase the engine power of the boats and the maintenance facilities of the GIHOC Boatyard, utilizing about US$500,000 left in the project account. The original Closing Date of December 31, 1972 has been extended to June 30, 1977 to allow for consultant advice on the procurement of engines and boatyard equipment. Cr. No. 205 - Cocoa Rehabilitation Project: US$8.5 million Credit of June 26, 1970 Effective Date: March 12, 1971 Closing Date: December 31, 1977 The project, principally involving the rehabilitation of 51,000 acres and replanting of 36,000 acres of cocoa experienced delays mainly due to poor weather conditions, poor farmer participation, limited availability of labor, and shortages of insecticides. Project performance last year was unsatisfactory with only 24 percent of the planting targets (7,000 acres) and 22 percent of the rehabilitation targets (10,000 acres) achieved. Only 62 percent of the original planting target and 35 percent of rehabilitation target have been achieved to date. The closing date has been extended to December 31, 1977. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 3 of 6 pages Cr. No. 354 - Sugar Rehabilitation Project; US$15.6 million Credit of January 29, 1973 Effective Date: May 31, 1973 Closing Date: March 31, 1979 Although 1975-76 sugar production (12,100 tons) was lower than appraisal estimates, rehabilitation of factories and expansion of cane acreage at Asutsuare progressed steadily despite procurement difficulties. Estimated sugar production for 1976-77 is about 17,150 tons. Appraisal production estimates have been revised to take account of implementation delays and it is now expected that full development sugar output of 42,000 tons will be realized in 1980, two years behind schedule. Cr. No. 438 - First Highway Project; US$13 million Credit of November 21, 1973 Effective Date: January 22, 1974 Closing Date: December 31, 1977 The project provides for the rehabilitation of 138 miles of trunk roads, preparation of a road maintenance program and feasibility studies to determine future road work requirements and procurement of traffic control and pavement survey equipment. Due to considerable difficulties in getting the major item, road rehabilitation, underway, the number of roads were reduced from the original project provision of 345 miles to the present 138 miles. Recent actions by the Government and its executing agency, the Ghana Highway Authority (GHA) have resulted in improvement in the overall progress of the work. The Government has agreed to cover all additional costs which were caused partly by higher standards of improvement and partly by inflation. Studies have been satisfactorily completed, a maintenance program is being implemented under the Second Highway project, and equipment acquisition is still in progress. It is likely that there will be a delay of two years in project completion over the appraisal estimate of June 1977. Cr. No. 499 - Second Water Supply Project; US$10.4 million Credit of July 26, 1974 Effective Date: January 7, 1975 Closing Date: June 30, 1980 This project is a follow-up on the first Water Supply project financed under Credit 160-GH and consists of the construction of an earth dam at Weija; extension of the distribution system in the Accra/Tema area; extension of rural water supplies near Accra; and technical assistance and training. A delay in Credit Effectiveness was due mainly to the delayed conclusion of a loan agreement between the Government and CIDA which financed pumping stations and treatment work. The work is substantially behind schedule due to delays in procurement. For example, the procurement of ADB- financed large diameter pipes has been delayed more than a year, although it is now expected that the contract will be shortly awarded. The construction of the Weija dam is about 80 percent complete but some remaining critical ANNEX II Page 4 of 6 pages components may present difficult problems; there are presently under discus- sion with the Corporation. It is expected that the project will be completed in June 1980, one year after the appraisal estimate, and that there will be a substantial cost overrun. Cr. No. 500 - Livestock Development Project; US$2.0 million Credit of July 26, 1974 Effective Date: May 14, 1975 Closing Date: June 30. 1981 Project management has been improved following the appointment of a permanent Managing Director of the Ghana Livestock Company, the approval of new ranch development plans and the best use of existing finance under the project. Because of unanticipated difficulties in acquiring necessary land, and cost overruns resulting from higher cattle prices due mainly to the Sahalian drought, the Executive Directors approved a revised project descrip- tion in August 1976. The project now includes: (i) development of two com- mercial ranches for 4,000 head of cattle, (ii) credit for 20 private live- stock producers, (iii) the preparation of a follow-up project, and training for ranch managers. Project costs are estimated at US$2.3 million. Govern- ment has agreed to provide any additional foreign exchange, above and beyond that available in the Credit, to help complete the project. The market prospects for beef are very good and permit the project to be commercially viable on a substantially smaller scale than at appraisal. Cr. No. 531 - Oil Palm Project; US$13.6 million Credit of March 5. 1975 Effective Date: June 30, 1976 Closing Date: December 31, 1983 The project became effective on June 30, 1976 after a two-year delay. Approximately 35,000 seedlings would be ready to plant 500 acres in May 1977. Land will be cleared mechanically to accelerate the planting program for completion by 1980; land-clearing machinery and initial vehicle and equipment have been ordered. The managing director, project manager, and financial controller have been dppointed. Nursery and headquarters building sites have been cleared and a 2-1/2 mile road, which leads to the site, has been bulldozed and graded. Cost overruns are expected on buildings, oil mill civil works and equipment because of the long delay in implementa- tion. Ln. No. 1122 - Telecomirunications Project; US$23 million Loan of June 10, 1975 Effective Date: January 23. 1976 Closing Date: December 31, 1979 Project components include the rehabilitation and expansion of telephone exchange equipment, improvement and expansion of long distance telephone facilities and expansion of telex services. Engineering consult- ants have been appointed and bids for equipment are being evaluated. Project is progressing according to schedule. ANNEX II Page 5 of 6 pages Ln. No. 1180 - National Investment Bank Project; US$10 million Loan of December 23, 1975 Effective Date: March 2, 1976 Closing Date: December 31, 1981 The project provides for a US$10 million loan to the National Investment Bank to help finance industrial, tourism and agro-industrial development projects and to support small and medium scale private enter- prises. Despite the high inflation and slow economic growth, NIB was able to maintain its operations at the 1974 level, i.e., total approvals of 021.3 million. Ninety loans were approved for V16 million in the industrial sector. Recovery of arrears is the major problem but the senior management is continuing its efforts to reduce the portfolio exposure to less than 40 percent. Cr. No. 1181 - Ashanti Region Cocoa Project; US$14 million Loan of December 23, 1975 Effective Date: February 23, 1976 Closing Date: December 31, 1978 Project consists of replanting and maintaining during the three year project period 42,500 acres of hybrid cocoa in the Ashanti region. Credit and training will be provided to farmers; other project components are the provision of feeder road equipment, consultancy services for de- signing a survey of the cocoa sector and evaluating seed garden produc- tion. Field progress is on schedule though some difficulties have been experienced in finding active farmers. Project performance during 1975-76 was very satisfactory with 96 percent of the 6,000 acres planting targets achieved. Progress in designing the cocoa sector survey, appointing a seed garden consultant, completing a farmer input study, and formulating a cocoa pricing policy has been slow. The Government has obtained additional financ- ing of US$5.0 million from BADEA for this project. Cr. No. 594 - Second Highway Project: US$10 million Credit US$18 million Loan of December 23, 1975 Ln No. 1182 - Effective Date: March 30, 1976 Closing Date: December 31, 1980 The Loan/Credit became effective March 30, 1976, postponed from February 23, 1976, due to delay in Government's submission of Legal Opinion and Subsidiary Loan Agreement. The project is in support of the first 4- year phase of an 8-year road maintenance program plus rehabilitation of a short section of trunk road. The main elements are the procurement of road maintenance equipment and spare parts; assistance to the Ghana Highway Authority (GHA) in the management and planning of the maintenance program; and an onlending operation through the Ghana Bank of Housing and Construction (BHC), with related technical assistance to provide domestic contractors with foreign exchange to enable them to procure equipment and spare parts to carry ANNEX II Page 6 of 6 pages out Ghana Highway Authority maintenance projects; and funds for the rehabili- tation of the Accra-Nsawam trunk road section. Orders have been placed for equipment and spare parts, part of the equipment has been received, and the contract for the Accra-Nsawam road has been awarded, following international competitive bidding. Screening of domestic contracts for sub-loans from BHC is under way. Ln. No. 1291-T - Upper Region Agricultural Development Project; US$21 million Loan of June 28, 1976 Effective Date: Not yet effective Closing Date: December 31, 1982 The project, the first Bank operation for integrated agricultural development in Ghana, would provide most of the 125,000 farm families living in the Upper Region with improved support services, farm inputs and physical infrastructure. Two principal objectives are to increase farm incomes via increase in agricultural production and to establish permanent farm support services. The investment period will be spread over five years, 1976/77 to 1980/81. Date of effectiveness has been extended to March 31, 1977 to allow time for recruitment of key personnel and the establishment of the Farmers Services Company. Ln. No. 1298 - CIMAO - Regional Clinker Project; US$3.5 million Loan of June 28, 1976 Effective Date: Not yet effective Closing Date: December 31, 1980 This is the first Bank regional operation involving the Republic of Ghana, the Republic of Togo, and the Republic of Ivory Coast. The main project consists of a clinker plant, with an annual production capacity of 1.2 million tons, to be located in Togo. The Bank has approved a loan of US$60 million, of which US$3.5 million is loaned to the Government of Ghana to acquire preferred shares in Ciments de l'Afrique de l'ouest (CIMAO), an entity which will own and operate the above project. Loans of US$3.5 mil- lion each have been given to the Governments of Togo and Ivory Coast for the same purpose. Procurement of the industrial complex is proceeding satisfactorily. The main mechanical contract was signed in October 1976. Recruitment efforts have started. Date of effectiveness has been extended to May 31, 1977. ANNEX III Page 1 of 3 pages GHANA ELECTRICITY CORPORATION OF GHANA (ECG) THIRD EXPANSION PHASE CREDIT, LOAN, AND PROJECT SUMMARY Borrower: Republic of Ghana for the Credit and Electricity Corporation of Ghana for the Loan Beneficiary: Electricity Corporation of Ghana Amount: Loan US$9.0 million Credit US$9.0 million Terms: Loan: Payable over 20 years, including 4-1/2 years of grace, at an interest rate of 8.5 percent per annum, to the ECG. Credit: Standard IDA terms to the Government. Relending Terms: Part of the credit (US$5.2 million) would be relent to ECG for 20 years, including 4-1/2 years of grace, at an interest rate of 8.5 percent per annum; the portion (US$3.7 million) related to the rural scheme (Kumawu) will be paid to ECG as a grant and US$100,000 will be retained by Government for a power sector study. Project Description: The main objectives of the proposed project are to help finance a further phase of ECG's development program, consisting mainly of expansion of sub- transmission and distribution facilities, and to improve the Corporation's operations and manage- ment. The project includes the following components: (a) Sub-transmission and Distribution Lines: About 230 circuit km of overhead and about 20 km of underground 33 kV lines; about 6 circuit km of 11 kV overhead lines with about 11 MVA of distri- bution transformers. About 32 km of low tension distribution lines. (b) Substations: 11 new substations with about 150 MVA of transformer capacity; expansion of about 6 existing substations with about 60 MVA of additional transformer capacity. (c) Materials and Vehicles: Equipment and material for rehabilitating the existing sub-transmission and distribution system; heavy, medium and light weight vehicles to replace and/or expand the existing fleet; ANNEX III Page 2 of 3 pages (d) Consultants Services: About 105 man-months of engineering services at US$4,400 per man-month to help execute the project and two man-years of assistance to help prepare a power sector study, at an estimated cost of US$100,000. Estimated Cost Foreign Local Total % of -----in millions US$----- Total 1. 33 kV, 11 kV, and LV lines 6.7 3.8 10.5 39.6 2. 33/11 kV and distribution substations 3.6 1.3 4.9 18.6 3. Supply of materials 2.5 - 2.6 9.8 4. Supply of service vehicles 1.5 - 1.5 5.6 5. Engineering services .3 .2 .5 1.7 6. Total Base Line Cost (in late 1975 prices) 14.7 5.3 20.0 75.3 7. Physical contingencies .6 .2 .8 2.7 8. Price contingencies 2.7 3.2 5.9 22.0 9. Total Project Cost 18.0 8.7 26.7 100.0 Financing Plan: Foreign Local Total -----in million US$------ Loan 9.0 IBRD - 18.0 Credit 9.0 ECG - 8.7 8.7 Total 18.0 8.7 26.7 Estimated Disbursement: … ------------…US$ millions-------------- Year Annual Accumulated FY77 6.1 6.1 FY78 7.0 13.1 FY79 3.5 16.6 FY80 1.4 18.0 ANNEX III Page 3 of 3 pages Procurement Arrangements: Retroactive financing totalling about US$1.5 million (from Janaury, 1976) for foreign exchange costs of contract expenditures and engineering consultant's services is recommended. Equipment, erection and supplies to be financed out of the proceeds of the proposed loan would be procured under international competitive bidding in accordance with the Bank's Guidelines, except for about US$500,000 equivalent of sub-transmision and disribution equipment and materials which for standardization reasons would be procured from the suppliers of the equipment under the previous program, provided that the prices are reasonably in line with those obtained for similar items under international competitive bidding. Consultant's Services: About 105 man-months of engineering services to assist ECG in preparation and analysis of bids, to supervise project execution and two man years to conduct a power sector study. The personnel cost of the engineering assistance is valued at about US$464,000 at US$4,400 per man-month, and about US$100,000 for the power sector study. Rate of Return: The weighted average rate of return, using tariffs increased by 70 percent to reflect the estimated marginal cost of power in Ghana, is 14.2 percent. Appraisal Report: Report No. 1196-GH Map: Map No. IBRD 12230 ANNEX IV Page 1 of 2 pages SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: 15 months (June 1974 - August 1975) (b) Agency which prepared project: ECG (c) Project first presented to Bank/IDA: November 1974 (d) First Bank mission to review project: February 1975 (e) Departure of Appraisal Mission: November 17, 1975 (f) Completion of Negotiations: Negotiations:December 6 - 10, 1976. (g) Planned date of effectiveness: June 15, 1977. Section II: Special Bank Implementation Actions A mission was scheduled in January, 1977 to assist in initiating key implementation steps. The Bank resident mission in Ghana is also monitoring the implementation. Section III: Special Conditions (a) Government to consult ECG on the economic/financial evaluation of any rural electrification projects (para. 21). (b) ECG to make surplus hydro power available to its industrial customers for steam production on an interruptible basis (para. 22). (c) ECG to eliminate special low tariffs for firm power to industrial users (para. 22). (d) Government to undertake a power sector study to establish a frame- work for future tariff policy. Results of the study to be presented for review by the Bank by June 30, 1978 (para. 23). (e) For expenditure by ECG on the Sefwi-Wiawso-Bibiani line, VRA should have issued a letter of intent for the construction of the 161 kV transmission line (para. 31). (f) ECG to appoint Engineering Department Manager and fill the two key positions in the accounting department by July 1, 1977 (para. 33). ANNEX IV Page 2 of 2 pages (g) ECG to formulate a staff development plan by Janaury 1, 1977 and carry out a survey of staff training requirements and appoint a senior staff member in charge of training by July 1, 1977 (para. 33). (h) ECG to revalue its assets as of December 31, 1976 by June 30, 1977 and maintain them on a current basis thereafter (para. 37). (i) ECG to earn at least 8 percent annual rate of return on its revalued assets (para. 37). I B R 0 3060R F ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~MAY 1976 U P P E R V O L T A i -_ GHANA */ NA)VRONGOV;/ )> ,? MAIN ELECTRICITY FACILITIES BOLGATANGA , 0 VRA new station related to the prolet A ____( 33 KV1lme o beconste.cted indertine project 33--16 KV Io to Ut -nntoto 0I pV9 ) -369 KV wme to be oonsetoteo by VRA PWALAGU \ ' Goyernmenr rural e-eorrrt,caoon pro9ram ) 36136 t<'-'2 * VRA s"bso 1613 KV VRA tr-n-s-on tostoll 0 sowc- -------- 33/11 KV ECG transotiseon lmne in seI II -10- 4 *WjA CII " , CenIers setVd b diesel 10 ':i ~~~~~~~~~~~~~~~~~~~~~~~~ ~ ~~~~~~~~~~~0 Center sewd by hydro IO0- (I iee .. taIr-abysato r Postiblt thydro projects dOlt / PONG-TAMALE 26/11 26r MW InstIh / 13 MW fI- N. 87 YENOI *TAMALE * NI°0 20 4M0 60 b ) 0 20. 40 608 0.. KILOMETERS -' I~~~~U ) ( X > s P EVE . (. t (OMUFO < 2 ˘ E8/17 ASAMANKESE ADEISOT X ( o D A W~~~~~~~~AIKAN ~~~~~~~~~~~~~~~~~~~~~~~~~~~L§2o Ls TOd//fSEDRU AHMThLEF boosdoetoaste. atn tha mcap do EaV <~~~~~~~~~~~ ~~ ~~~~~~ s -rstc ( 6a/, stBRDl223l Wtd&tnkadiesaLe6ittot >FX HA:VOSO > 8 HEAIANC / /18. ASB D6t9 eo1RDlO QZD SNG '< )MAL|v NIG E R ESUASO1 5/26 - APA - ~ f 4J PPER\ l ** *<, ' L <:_f, , ; G v /f o f Gvs n e o , LlsERtS-ERR iX\ 900tGOV < 0 MAMF'ONG ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~'.~AM90 KONONGO ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~OG< - .AS TA DAm r EQ GINEA _M_ , . . 5 OCiAM V