asian developivient banik i been prepared for i

RESTRICTED

PCR:SOL 19181

ASIAN DEVELOPIVIENT BANIK I This Report has been prepared for Ithe exclusive use of the Bank.

PROJECT COMPLETION REPORT

OF THE

SECOND HONJARA PORT PROJECT

(Loan No. 832-SOL(SF))

ij

SOLOMON ISLANDS

I

June 1992

CURRENCY EQUIVALENTSCurrency Unit - Solomon Islands Dollar (SI$)

Appraisal Reprt (March l987

SI $l.00 - US$O.5040US$ 1.00 - SI$l.9841

[1

Project Completion Report (September 199fl

SI$ l.00 - US$O.3638US$ 1 . 00 - SI$2.7488

The exchange rate of the SI$ is determined on the basis of aweighted basket of currencies of the country's major trading partners.

ABBREVIATIONS

EIRR

Economic Internal Rate of ReturnEA

Executing AgencyFIRR

Financial Internal Rate of ReturnICB

International Competitive BiddingRT

Revenue TonsPPAR

Project Performance Audit ReportSI PA

Solomon Islands Ports AuthorityTA

Technical AssistanceTEI.I

Twenty-Foot Equivalent Unit

NOTE

The fiscal year of the Government ends on 31 December and that ofSIPA on 30 September.

4'

PCR:SOL 169

PROJECT COMPLETION REPORT

OF THE

SECOND HONIARA PORT PROJECT(Loan No. 832-SOL(SF))

IN

SOLOMON ISLANDS

NOTE: This Report was prepared by a Bank Mission comprising Mr. P.Hanton (Senior Financial Analyst/Mission Leader) and N. Patel(Technical Assistant). The Mission visited the Solomon Islandsfrom 23 to 27 September 1991.

Page

(ii)(iii)

(iv)

1

11

2

2234

5566678

9

99

10

TABLE OF CONTENTS

Map 1 Location of HoniaraMap 2 : Layout of Project Facilities

BASIC DATA

I

PROJECT DESCRIPTION

A. Objectives and RationaleB. Scope

II. EVALUATION OF IMPLEMENTATION

A. Project ComponentsB. Implementation ArrangementsC. Project CostsD. Project ScheduleE. Engagement of Consultants and Procurement of

Goods and ServicesF. Performance of Consultants, Contractors and

SuppliersC. Conditions and CovenantsH. DisbursementsI. Environmental ImpactJ. Project BenefitsK. Performance of Borrower and Executing AgencyL. Performance of the Bank

III. CONCLUSIONS AND RECOMMENDATIONS

A. ConclusionsB. Recommendations

APPENDIXES

IIISIIALIA

555 itSIAlI't\ •

C

onDu1 Is.

Reef I

Ngersde Is.SANTA CRUZ ISLANDS

I Utupue I,.

Verukolo Is,Peou

Anurs Is,

Fuieke It,12°5

- 0TIkopla Is.

56°E 1GE

SOLOMON ISLANDSSECOND HONIARA PORT PROJECT

PROJECT LOCATION

k SOLOMON I -•-

ISLANDS ._..•

.. s_.c_.

*I

c.020406080100

Kilometers

LEGEND;Roncador Reef

® Nation& Capital

MALAITA DISTRICT 0 Citieu/Townt\HOISEUL • ottte Towns

Ditrt Boundary

Shortland Is. . - International Boundary

Q Treasury is. o ST)BEEL (not necettanly euthoritetiee}

VeU Lavelit Kolombanarals.( P A C I F I C 0 C E A N

NEW GEORGIATema

Sikant Is.,

Rendous Fanda Auks MAIAITA IS.

WESTERN PROVINCERussell ,1 \ F •--------------

GLJADALCANAt IS.So(omon Sea 0UiIs.

Kra kcrCENTRAL ISLES

PROVINCE'MAKIRA IS.

SAN CRISTOBAL

BeIIona in.

EASTERN DISTRICT

Rennell Is,

156°E

Ramp..-\ Kingfisher Jetty

(iii)

SOLOMON ISLANDSSECOND HONIARA PORT PROJECT

Layout of Port Facilities

Pornt Cru

Is'I

Bocana Bay4Pafir1

iti7Foxwood Shed

TanksPavedArea

SIPL

/1/ cAWae;use

New Mooring

IiDolphin

c::7'

oe

1 150

Meters0 a Note See Inset diagram

____ ___Projt Area

Jy

Road

lii 00

(iv)

BASIC DATAA. LOAN IDENTIFICATION

1. Country - Solomon Islands2. Loan Number - 832-SOL(SF)3. Project Title - Second Honiara Port Project4. Borrower - Solomon Islands5. Executing Agency - Solomon Islands Port Authority (SIPA)6. Amount of Loan - $4.03 million 1/

B. LOAN DATA

1. Appraisal- Date Started - 22 January 1987- Date Completed - 5 February 1987

2. Loan Negotiations- Date Started - 15 April 1987- Date Completed - 30 April 1987

3. Date of Board Approval - 4 June 1987

4. Date of Loan Agreement - 7 September 1987

5. Date of Loan Effectiveness- In Loan Agreement - 6 December 1987- Actual - 2 November 1987- Number of Extensions - None

6. Closing Date- in Loan Agreement - 30 June 1991- Actual - 15 May 1991- Number of Extensions - None

7. Terms of Loan- Interest Rate - 1% per annum- Maturity - 40 years- Grace Period - 10 years

8. Terms of Relending- Interest Rate - 7.36% per annum- Maturity - 23 years- Grace Period - 3 years

• 9. Disbursements

a) DatesInitial Disbursement Final Disbursement Time Interval13 November 1987 2/ 5 April 1991 3 yrs. 5 mos.

Effective Date Original Closing Date Time Interval2 November 1987 30 June 1991 3 yrs. 8 mos.

1/ The equivalent in various currencies of SDR 3,087,000 from the Bank's Special Funds resources.The Appraisal amount was US$4.0 million equivalent.

2/ Advance payment for consultant for detailed engineering.

(v)

b) Amounts (US$1

Lact Nat

Category Original Reviced Amount Amount Undl$buraed

Allocation Ailocatlor Reallocated Diabureed Balance

01 $ 3,582,880 3,613.377 $ 30,697 3.613,377 0

02 363.734 363,248 (486) 363,248 0

03 62122 57,420 4,702 57,420 0

04 25,476 0 25,476 0 0

Total 4,034.012 4.034,045 (33) 4,034,045 0

Appraisal Actual

10. Local Costs - Bank Financed If Nil Nil

C. PROJECT DATA

AppraIsalEstimate

($ million)Prolect Cost

(a) Foreign Exchange Cost

4.14(b) Local Cost

1.38(c) Total Cost

5.52

ActualCost

($ million)

4.031.535.56

2. Financln Plan 21

Appraisal Estimate Actual Cost

_______ ($ mlUion _______ (S million) ___________________________________ Local Foreign I_Total Local Foreign Total

Implementation Costs

(a) Borrower Financed 1.380 0.140 1.520 1.532 0.000 1.532(b) Bank Financed - 4.000 4.000 - 4.034 4.034(c) Total 1.380 4.000 4.000 1.532 4.034 5.566

1/ Financed solely by the Government.2/ Excludes IDC which Is financed solely by the Government.

(vi)

3. Cost Breakdown by Project Components (US$'OOO)

AppraisalEstimate a/ _______ Actual Cost_______________________________ Local Foreign Total Local I_Foreign Total

(I) Bank and Government Financing

(a) CivilWorks 810 3,605 4,415 615 3,614 4,229(b) Consultant Services 70 335 405 25 363 388(c) Service Charge & IDC 360 60 420 354 57 411

Total 1,240 4,000 5,240 994 4,034 5,028

(ii) Government FinancinQ only

(a) Civil Works 140 140 280 538 0 538

Total 140.. 140 280 538 0 538GRAND TOTAL (i + ii) 1,380 4,140 5,520 1,532 4,034 5,566

a! Includes physical and price contingencies allocated In proportion to base cost.

4. Proiect Schedule

(a) Date of contract with Consultants

(b) Completion of detailed design

(C) CMI Works Contract (Wharf Upgrading)

- Date of Award- Completion of Work

AppraisalEstimate

Oct 1987

Apr 1987

Jan 1989Jun 1990

Actual

Nov 1987

Jun 1988

Dec 1988Aug 1990

(vii)

D. DATA ON BANK MISSIONS

SpecializationName of Each Mission Date Persons Mandays of Members If

Fact-Finding 20 Oct-30 Oct 86 3 30 a, b, dAppraisal 22 Jan-4 Feb 87 5 70 a, b, c, d 2/ ,eLoan Inception 29 Feb-7 Mar 87 1 8 aReview 21 May-25 May 89 1 5 aReview 02 Oct-13 Oct 89 1 12 aReview 21 May-25 May 90 2 10 f, gPCR 23Sept-27 Sept91 2 10 b,g

1/ - a-Engineer; b-Financial Analyst; c-Counsel; d-Economist; e-Programs Officer;f-p roject-Implementation Officer; g-Technical Assistant

2/ From 22 Jan to 1 Feb 87.

I. PROJECT DESCRIPTION

A. Objectives and Rationale

1. The main objective of the Project was to enable Honiara Port tohandle traffic more efficiently and economically by rehabilitating partof the overseas wharf and improving container-handling facilities. TheProject was preceded by a feasibility study which was financed by a small-scale Technical Assistance grant from the Bank.V

B. Scope

2. The major components of the Project were as follows:

(i) Rehabilitation and upgrading of the original 72 metersection of the overseas wharf;

(ii) Paving of the front of the container yard;

(iii) Paving of the rear of the container yard; and

(iv) Consultant services for detailed design and associatedsurveys.

1/ TA No. 761-SQL for US$75,000, approved 6 May 1986.V See AR para. 54 for more details.

2

II. EVALUATION OF IMPLEMENTATION

A. Project Components

3. The main events in the Project's history are listed inAppendix 1, The Project was constructed generally in accordance with theappraised scope except for: (1) re-erection of a bulk cargo shed; (ii)additional concrete paving; (iii) construction of an inter-island cargoshed; and (iv) lengthening of the inter-island jetty. These changes wereconsidered to be minor and were approved by the Bank to improve theefficiency of port operations.

4. The bulk cargo shed with a floor area of 1700 square meters infront of the container yard was demolished as appraised. However, theshed was reconstructed outside the container yard and the area reduced to920 sq m because the bulk palm oil kernel storage facility, which had beenplanned prior to appraisal was not constructed, and an alternative baggedstorage facility was required. The Bank's Inception Mission supported theExecuting Agency's request to re-erect the shed, and the Bank approved theassociated change in scope.

5. The Bank also approved the inclusion in the scope of the Projectof paving and drainage between the storage sheds and other port buildings.This additional work was necessary to avoid flooding and to enableefficient vehicle movement during the wet season. The Bank financed thepaving adjoining the container storage area and the Executing Agencyfinanced the rest of the additional paving and drainage.

6. The extension of the inter-island jetty by 12 m and constructionof an adjacent inter-island cargo shed were also approved by the Bank forinclusion under the scope of the Project to improve the efficiency ofinter-island cargo movements. This work increased the berthing capacityof the wharf and enabled the collection of small consignments of cargounder cover.

7. The above minor changes to the Project scope substantiallyincreased the cargo handling capacity and efficiency of the Port at anadditional cost equivalent to about 25 per cent of the appraised Projectcost. Careful scheduling ensured that most of the additional work wascarried out in parallel with the original scope, thus minimizingimplementation delays.

B. Implementation Arrangements

8. As envisaged at appraisal, the Executing Agency for the Projectwas the Solomon Islands Ports Authority (SIPA). SIPA established asuitably staffed Project Management Office, as required under the LoanAgreement, headed by an internationally recruited Chief Engineer,supported by an experienced and qualified Port Engineer. The ProjectOffice carried out its duties satisfactorily.

3

9. Initially, construction supervision was provided by the SIPAChief Engineer and Port Engineer. The Chief Engineer was designated theEngineer's Representative for the purposes of the civil works contract.However, because the Chief Engineer was provided on a short term basisthrough bilateral assistance, the Chief Engineer changed on threeoccasions and there were periods when the Chief Engineer's position wasvacant. SIPA appointed a consulting engineer to undertake the ChiefEngineer's duties during those periods, including the last six months ofProject implementation. This arrangement caused some loss of continuityof supervision, but was the best solution to the unavoidable absences ofa Chief Engineer.

C. Project Costs

10. The actual cost of the Project is about US$5.566 millioncompared with the estimated cost of US$5.52 million at appraisal. Thesmall overall cost overrun of US$0,046 million resulted from a costoverrun for the front container yard paving because of the additionalpaving included in the Project scope, a cost overrun for the rearcontainer yard paving due to inclusion of costs of work outside theProject scope, but which are difficult to separate, and offsettingsavings in the upgrading of the wharf and consultant services. It wasestimated at appraisal that paving of 5,100 sq m of the front portion ofthe container yard and 7,300 sq m of the rear portion would be required.The actual paving was about 7,650 sq m in the front portion of the yardand 7,800 sq m in the rear portion, overall a 25 per cent increase in thearea paved. The cost overruns for the container yard paving, which weremet from SIPA's own funds, were partly the result of the additional pavingundertaken on the basis of an erroneous calculation that savings would beavailable under the civil works contract. See Table 1 for a comparativesummary of appraised and actual Project costs, and Appendix 2 for details.In estimating the dollar equivalent of costs incurred in local and othercurrencies, the average exchange rates prevailing during the year ofdisbursement have been used for the currency conversions.

Table 1: Summary of Proect Cost as AlDraised and Actual(Current Prices: US $'OOO)

AoDraIsar' ActuaI

Foreign Local Foreign LocalComoonent Exchange Currency Total Exchanae Currency Total

I. Wharf Upgrading

3,290

480

3770

3,122

246

3,368II. Container Yard

Pavement - Front

315

330

645

492

369

861

Ill. Container YardPavement - Rear

140

140

280

0

538

538IV. Consultant Services

335

70

405

363

25

388V. Service Charge and

Interest During Const. 60

360

420

57

354

411

Total 4,140 1,380 5,520 4,034 1,532 5,566

a! Costs include physical and price contingencies allocated In proportion to base costs./ Based on average exchange rates prevailing In year of disbursements.

4

11. The factors that contributed to the cost underrun on the wharfupgrading include the competitive bids for the works and expeditiousconstruction. The main reason for the cost overrun for the container yardpavement was the increased in the area included in the Project scope. Whilethere was a small cost underrun for consultant services, the cost of thiscomponent was relatively high compared with other Bank-financed physicalinfrastructure projects. The reason was the need for additionalinvestigations and detailed design work to take account of the difficultcoralline subgrade at the foundation of the wharf structure and the badcondition of the existing wharf.

D. Project Schedule

12. The appraisal estimated that the Project would take three years andwould be completed in June 1990. Physical completion was achieved in mid-September 1990, representing a minor delay of two and half months (see Table2 and Appendix 3). The delay was mainly due to the late mobilization of thecivil works contractor and the breakdown of the contractor's equipment.

Table 2: Projected and Actual Completion Dates

Component Appraisal Actual Main Reason for Delay

1

Wharf Upgrading 30 June 1990 12 Sept 1990 (I) late mobilization ofcontractor

(ii) equipment breakdown

2. Container Yard

31 December 1989 12 Sept 1990

(I) completion wasPavement (Front)

contingenton completion of wharfupgrading

Container Yard

31 December 1989 30 June 1989Pavement (Rear)

4. Detailed Design 30 April 1988 02 June 1988 (I) Additional designwork associated with the stub Jetty

E. Engagement of Consultants and Procurement of Goods and Services

1. Engagement of Consultants

13. The selection and engagement of consultants for the detaileddesign and the associated surveys were carried out expeditiously by theExecuting Agency in accordance with the Bank's Guidelines on the Use ofConsultants. The consulting firm engaged was selected from five shortlistedfirms that were invited to bid for the services.

5

2. Procurement of Goods and Services

14. The procurement of goods and services for the civil works financedby the Bank was carried out under International Competitive Bidding (ICB)procedures in accordance with the Bank's Guidelines for Procurement. Asenvisaged at appraisal, the wharf upgrading and the paving of the front andthe rear of the container yard was covered under a single civil workscontract. Eight firms were prequalified to bid for the civil works contract,which was awarded to a joint venture of an international and a localcontractor.

P. Performance of Consu1tants, Contractors and Supnliers

1. Consultants

15. The performance of the international engineering Consultants wasfully satisfactory. They completed the detailed design of the wharf on timeand carried out their other tasks adequately. However, the design workcarried out by a local consulting firm for the paving of the container yard,while of a generally acceptable standard, was deficient in the design onpaving joints and drainage covers.

16. The construction supervision was mainly provided by SIPA.However, during the absence of a Chief Engineer from the beginning ofDecember 1989 until the end of February 1990 and from July 1990 until Projectcompletion, SIPA had to contract the construction supervision duties to alocally based consulting firm. The performance of the consulting firm wasdifficult to measure because of the intermittent nature of the services.

3. Contractors and Supliers

17. The performance of the contractor for civil works was not fullysatisfactory. The contractor had difficulty in providing a suitablyqualified Project Manager. The contractor's performance was marred by theneed to provide three different Project Managers during the life of theProject. While the wharf upgrading, the major component of Project, wasconstructed to a satisfactory standard, the construction of the pavement ofthe container yard was not fully satisfactory, which resulted in somesubstandard sections being rectified during the maintenance guarantee period.

G. Conditions and Covenants

18. The Loan and Project Agreements became effective on schedulewithin three months after loan signing.

19. Most of the loan covenants have been complied with (seeAppendix 4). The only significant non-compliance has been that the porttariffs were not adjusted sufficiently to achieve an annual rate of returnon revalued net fixed assets in operation (ROR) of at least 5 per cent inVY1988 and FY1991. Nevertheless, SIPA has maintained a sound financialposition up to FY1991, and is taking appropriate measures to increase

6

revenues and reduce operating costs to enable it to meet the ROR covenant inFY1992.

H. Disbursements

20. The first disbursement of the loan proceeds was made on 13November 1987 in accordance with the appraisal projection. The finaldisbursement was made on 5 April [991 and the loan closed on 15 May 1991 (seeAppendixes 5, 6 and 7).

I. Environmental Impact

21. No significant adverse effects were caused by the Project on thelocal environmental or ecological systems. The pile driving did not causeany environmental disturbance at the construction site. The paving of thecontainer yard was restricted to the existing port boundary and resulted inconsiderable savings in energy consumption of port handling equipment. Theimproved drainage and service facilities for utilities contributed to asafer working environment.

J, Prolect Benefits

1. Initial Operations

22. There is no clear-cut date that defines the initial operations ofthe Project facilities, because the operation of the existing wharf, cargosheds and container yard continued almost unhindered, while the Projectrehabilitation work was carried out. The major quantifiable economicbenefits are:

(i) savings from a reduction in ship waiting time resulting from theincreased capacity of the upgraded single berth because of thehigher berth occupancy achieved through the avoidance ofperiodical major repairs that would be required without theProject;

(ii) savings from a reduction in ships' service time while alongsidethe berth resulting from increased container handling ratesbecause of the improved layout of the facilities, which enables(a)heavy container-handling equipment to go right up to shipside,thus eliminating the need to double-handle containers and(b) speedier transfer of containers to and from the wharf as aresult of the opening up of the area between the wharf and thecontainer yard; and

(iii) savings in recurrent and periodical costs for the repair andmaintenance of the old substandard wharf;

(iv) savings in the recurrent costs of maintaining the container yardand container-handling equipment as a result of the improvedsurface of the yard.

7

23. In addition to the above, other benefits, which are more difficultto quantify, include reduction in damage to containers and cargo as a resultof the elimination of the old arbilift system period.V

2. Traffic

24. The actual overseas general cargo traffic (excluding bulk liquidssuch as petroleum and palm oil) through Honiara Port grew at an averageannual rate of 3.9 per cent between 1982 and 1991, and the total of 131,800revenue tons in 1991 exceeded the appraisal estimate by 5 per cent (seeAppendix 8). The growth in container traffic in terms of Twenty-FootEquivalent Units (TEUs), however, has been lower than the appraisal forecastand the 5530 TEUs handled in 1991 was only 66 per cent of the forecast (seeAppendix 9). The main reason that actual TEUs are lower than the forecastis that the rate of containerization for both imports and exports has beenlower than forecast. SIPA forecasts a large increase in TEUs through thePort during the next two years, which will enable the appraisal forecast tobe achieved.

3. Financial Performance

25. The financial performance of SIPA has been adequate during mostof the period from 1986 to 1991 (see Appendix 10). SIPA was unable to meetfor 1988 and 1991 the covenant requiring it to earn an annual rate of returnon average net revalued fixed assets in operation (ROR) of at least 5 percent, mainly because the increases in tariffs were insufficient to compensatefor the large increase in revalued fixed assets. SIPA also met the financialcovenant requiring a minimum debt service ratio of 1.3, and the averageself-financing ratios of more than 40 per cent from 1987 to 1991 aresatisfactory during the period of high capital expenditure to implement theProject. SIPA and the Government are taking steps to implement increases inport tariffs during 1992; these increase when implemented are expected toenable SIPA to again meet the ROR covenant.

4. Economic and Financial Re-evaluation

26. On the basis of quantified Project benefits and actual costs, theMission re-calculated the Economic Internal Rate of Return (EIRR) of theProject at 14.7 per cent compared with the appraisal estimate of 15.7 percent, and the Financial Internal Rate of Return (FIRR) of the Project at 6.1per cent compared with the appraisal estimate of 6.2 per cent (seeAppendix 11 for the EIRR calculations and assumptions, and Appendix 12 forthe FIRR calculations and assumptions). While the re-estimated EIRR and FIRRare slightly lower than the appraised estimates, these rates of returnindicate that the Project is economically and financially viable.

K. Performance of Borrower and Executina Aaencv

27. The performance of the Borrower (the Government) and the ExecutingAgency (SIPA) has been satisfactory. The Project was implemented with onlya minor delay and close to the appraisal cost estimate. While the lack of

An arbilift is a light piece of equipment with wheels, which enablesa container to be towed by a small forklift.

a SIPA Chief Engineer at various times during Project construction weakenedconstruction supervision (see para. 9), SIPA's appointment of a consultantengineer partly rectified this deficiency. Prior to any further expansionor major rehabilitation of port facilities, SIPA should ensure that the ChiefEngineer position is filled.

28. SIPA's capabilities in training operational staff and incomputerized data processing have been strengthened as a result of the ADTAaccompanying the loan.

L. Performance of the Bank

29. During Project implementation, the Bank acted promptly inapproving contracts and arranging loan disbursements. The responsibility forthe administration of the Project and the associated ADTA was transferredfrom the Bank's Headquarters to the Bank's South Pacific Regional Office(SPRO), effective 31 March 1989. This transfer was carried out smoothly andenabled the Bank to send review missions more frequently and to more closelymonitor progress of the Project and ADTA. The Bank's initiative inrecommending to the Government and to SIPA that a currency adjustment factorbe applied to billings for overseas ships, and the Bank's assistance in theimplementation of the additional charge is particularly noteworthy. Thisinitiative has enabled SIPA to maintain adequate earnings during the lastseveral years, despite inflation in operating costs, and increases ininterest costs and fixed asset depreciation resulting from a 25 per centdevaluation of the SI dollar against the US dollar during the Projectimplementation.

J TA No. 879-SAM: Second Honiara Port Advisory Services, in the amountof US$225 , 000 , approved 4 June 1987.

9

III. CONCLUSIONS AND RECOMMENDATIONS

A. Conclusions

30. The Project met its main objective of rehabilitating the overseaswharf and improving container-handling facilities. As a result of theProject interruptions in port operations for regular major repairs at theoverseas wharf have been avoided, the efficiency of container handlingoperations and storage has been substantially improved, and the port capacityto meet forecast foreign trade traffic up to the year 2000 has beenincreased.

B. Recommendations

1. Project-related

31. Future monitoring and covenants. SIPA should continue to submitto the Bank the audited annual financial statements. This will enable theBank to ascertain whether port tariffs are sufficient and costs arecontrolled so that SIPA continues to meet the debt service ratio covenantand to improve the ROR so it can meet the ROR covenant again.

32. Follow-uD action and additional assistance. Because not allcomputer applications needed by SIPA were developed under the ADTA, anadditional small-scale ADTA is recommended to upgrade and expand thecomputerized accounting and port statistics systems. The required ADTAshould be considered for inclusion in future Bank assistance for the portssector in the Solomon Islands.

33. Since sufficient operational data are available, the preparationof the PPAR may begin immediately.

2. Ceneral

34. As exemplified by the Project, during the project processingstage, a project engineer should carefully assess the need for technicalsurveys to ensure that unusual or difficult physical conditions in theproject area are adequately covered in the detailed designs. This wouldavoid cost overruns and delays caused by inadequate detailed design.

35. During Project implementation, the scope was changed to provideadditional container yard paving. The decision to expand the area to bepaved was made with the expectation that the additional cost would becovered by savings under the civil works contract. Because of amiscalculation of the effects of the changes in exchange rates, the costsunder the civil works contract were underestimated and a cost overrun wasincurred because of the additional paving work. In future projects, theBank and the executing agency should be more careful in estimating potentialloan savings before agreeing to increase the scope of the project.

10

APPENDIXES

Page

I

Chronology of Main Events in ProjectPreparation/Implementation

11

2

Comparison of Appraisal Estimates andActual Project Costs

17

3

Project Implementation Schedule

19

4

Compliance with Major Loan Covenants

20

5

Disbursement of Loan Proceeds

21

6

Appraised and Actual Loan Disbursements

22

7

Disbursements for Bank-financed Contracts

23

8

Honiara Port Overseas Cargo Traffic

24

9

Container Traffic Through Honiara Port

27

10

SIPA Financial Statements

28

11

Re-estimated Economic Internal Rate of Return

31

12

Re-estimated Financial Internal Rate of Return

34

07 Mar 1986

23 Jun 1986

End Sept 1986

11

CHRONOLOGY OF MAIN EVENTS

IN PROJECT PREPARATION/IMPLEMENTATION

DATE

EVENTS

Aendix 1Page 1

Nov 1985 The Government and SIPA requested the CountryProgramming Mission to Solomon Islands to advancePPTA programmed for 1988 because the existing olddeepwater wharf was deteriorating, which was notcovered under the first ADB Loan (Loan 323-SOL). Thewharf was suffering from corrosion of reinforcingsteel bars and of steel piles. Foundation werecorroding.

11-14 Mar 1986 - TA Fact-Finding Mission fielded.

Jun-Sept 1986 TA No. 761-SOL: Feasibility Study of Honiara Portwas undertaken by a Transport Economist and ProjectEngineer to (i) develop cargo and passenger trafficforecasts for Honiara Port for the period 1986-2001; and (ii) determine least cost method ofrehabilitating and upgrading the old wharf,replacing the mooring dolphin with berthing dolphinand expanding paved area for container handling. Itwas considered urgent because of the continuousincrease in traffic demand and faster than expectedrate of structural deterioration of some importantport facilities.

- Concept clearance was approved by Management.

- Consultants commenced work in the field.

- Final Report of Feasibility study submitted to theBank.

12 Dec 1986

- Management Review Meeting to discuss Project Briefwas convened.

20-30 Oct 1986 - Fact-Finding Mission fielded to discuss with BAdraft TOR feasibility study for rehabilitation ofold wharf.

22 Jan-5 Feb 1987- Appraisal Mission fielded.

(Reference in text: page 2, para. 3)

09 Apr 1987

30 Apr 1987

13 May 1987

19 May 1987

04 June 1987

04 Aug 1987

07 Sept 1987

12

Jan 1987 -

Appendix 1Page 2

Bank approved prequalification (PQ) documents forcivil works contract.

05 Feb 1987 - Notice of Prequalification for civil works contractpublished in local newspaper.

29 Feb-7 Mar 1987- Inception Mission fielded. EA requested Mission toinclude shed erection as an additional scope,Reallocation of contract packages submitted. Thecompletion of detailed design and project costingresulted in revised contract packaging.No additional funds was required.

09 Mar 1987 - Bank received shortlist of consulting firms,evaluation criteria and invitation documents fordetailed engineering design.

17 Mar 1987 - 51W meeting held.

25 Mar 1987 - Publication in the Solomon Islands Gazette of therevised tariffs including currency adjustment factorper Legal Notice No. 22 (Levy of Rates and DuesRules) approved by Minister of MOF.

- Bank advised EA of its approval of five shortlistedfirms for detailed engineering design.

- MOF advised the Bank of the Govt's acceptance of theLoan and Project Agreements. Loan negotiations bytelex have been concluded.

- Evaluation Report on PQ of contractors for civilworks contract received by the Bank.

- Bank conveyed to EA its approval of tender documentsfor civil works.

- Accompanying TA grant in the amount of US$225,00 wasapproved by the Bank.

- Subsidiary Loan Agreement was signed and ProjectManagement Office (PMO) established.

- Loan was signed. Consultant's contract forManagement Information System (MIS), component (i)of the accompanying TA, was signed.

14 Sept 1987 - CSC (Consultants' Selection Committee) meeting toreview EA's evaluation and ranking of consultants'proposals for detailed engineering design wasconvened.

15 Sept 1987

09 Oct 1987

03 Mar 1988 -

01 Apr 1988 -

28 Apr 1988

13

02 Nov 1987

ADpendix 1Page 3

- Bank advised EA to commence contract negotiationswith the first-ranked consultant.

- Contract negotiations for detailed engineeringdesign concluded.

- Loan was declared effective. Consultants fordetailed engineering design was given notice toproceed by EA.

End Dec 1987 - Cargo handling analysis and recommendations forcontainer slot locations completed. Pile load testsand preliminary design recommendations were alsocompleted.

20 Dec 1987 - Civil works contract awarded.

4 Jan 1988 - Bank received Consultants' interim report togetherwith draft notice of prequalification for civilworks contract. The interim report recommended awharf structure of steel pipe pile bulkhead typerather than an open type structure envisaged atappraisal due to poor soil conditions than expectedand cost advantage. Site investigations for thedesign have been completed. Design work on the wharfhas also been completed.

29 Feb-7 Mar 1988- Loan Inception Mission was fielded. EA informed theMission that, subject to finalization of detailedcost estimate, it might wish to include shederection as an additional scope of the Project. EAindicated also that it might undertake front pavingunder force account for Project economy andefficiency.

Bank conveyed to EA its approval of draft evaluationcriteria to prequalify for civil works contract.

Ten firms submitted prequalification documents forcivil works contract.

Draft final tender documents for civil workscontract received by the Bank. The diameter of mainpiles was changed from 1000 mm to 1219.6 mm whichinvolved change of design and cost estimates. Bankreceived also (i) report on SIPA undertaking thedemolition of No. 1 Bulk Cargo Shed;(ii) contingency plan for shed space allocationduring relocation of bulk cargo Shed No. 1;(iii) justification for erection of new sheds; and(iv) contract packaging proposals (including finalcontract estimates).

12 Hay 1988

18 May 1988

19 May 1988

20 May 1988

24 May 1988

02 June 1988

01 July 1988

02 Sept 1988

14

Atpendix 1Page 4

CSC meeting to discuss ranking of shorlistedcandidates for component (i) Management InformationSystem (MIS) of the accompanying TA 879-SaLconvened.

Bank advised BA of its approval of the proposedcontract packaging and related implementationarrangements.

Bank received EA's concurrence to the first-rankedMIS consultant (Mr. James Aiken).

Bank received prequalification report for civilworks contract.

Bank approved prequalification of 8 civil workscontractors.

Detailed engineering design was completed.

Consultant commenced Phase I of the MIS.

Tender opening date of civil works contract.

02-13 Oct 1988 - SIPA requested the Review Mission to seek the Banksapproval for 100 per cent financing of civil workscontract since a sizable portion of the Loan wouldnot be utilized. A reallocation of loan proceedsprovided to the Mission.

11 Nov 1988 -

02 Dec 1988 -

16 Dec 1988

Bank received tender evaluation report for civilworks contract.

Bank conveyed to BA its approval of award of civilworks contract (wharf upgrading) to the lowestevaluated bidder.

BA requested the Bank for 100 per cent financing ofthe first 8 contract payments to assist in theircash flow problem brought about by: (i) delayedimplementation of revised port tariffs by almost ayear resulting in revenue loss of SI$700,000; (ii)rear container paving was accelerated; (iii)foreshore reclamation was undertaken at the costof SI$l00,000 to provide civil works contractorwith working area outside port area.

20 Dec 1988 - Civil works contract signed.

01 Dec 1988

03 Jan 1989

20 Mar 1989

23 Mar 1989

31 Mar 1989

16 Apr 1989

10 Aug 1989 -

02-13 Oct 1989 -

30 Oct 1989 -

15

ApDendix 1Page 5

- Completion of tour of duty of Chief Engineer whoheads PHO office and acts as Project Manager.

- Notice to proceed was issued to civil workscontractor.

Bank approved financing of 100 per cent of the first8 monthly payments due to wharf upgrading contractorto ease temporary cash flow problem of EA.

EA requested the Bank to finance 93.4 per cent ofthe foreign component of the wharf upgradingcontract.

Bank advised EA that responsibility of projectadministration has been transferred to SPRO. Transitshed demolition completed.

Phase II of MIS commenced.

21-25 May 1989 - Review Mission was given revised allocation of Loanproceeds. SIPA requested for 99.65 per centfinancing of civil works because of loan savingswhich will be used for additional paving of about3800 m2 amounting to SI$400,000.

29 May 1989 -

30 May 1989 -

Bank approved reallocation of Loan proceeds tofinanced 93.4 per cent of the foreign exchange costagainst 82 per cent approved by the Bank.

Bank conveyed to EA its approval of additionalpaving works.

Phase II of the MIS completed.

Review Mission fielded by SPRO.

Bank shortlisted individual consultants for ChiefEngineer.

21-25 May 1990 - Review Mission fielded by SPRO. EA has requestedapproval of utilization of funds from Loan savingsfor additional paving of about 3800 m2 amounting to

1000.

31 July 1990 - CSC meeting convened to discuss ranking ofshortlisted candidates for component (ii) of the TA(Training for Container Handling Operators).

30 Sept 1990

04 Nov 1990

14 Dec 1990

28 Feb 1991

18 Mar 1991

28 Apr 1991

15 May 1991

16

Appendix 1Page 6

Preliminary phase of training for container handlingoperators commenced.

Phase I of training for container handling operatorscommenced.

Completion of Phase I for container handlingoperators

Physical completion

Bank received final withdrawal application forrelease of retention money.

Phase II of the training for container handlingoperators commenced.

Loan was closed.

17

Appendix 2Page 1

COMPARISON OF APPR4ÔJSAL ESTIMATES AND ACTUAL PROJECT COSTS(Current Prices; US $'OOO)

Apçxaisal Act

Component Foreign Local Foreign Local___________________________ Exchange CurrencyTotal Exchencie CurrencyTotal

SUMMARY

I.Wharf Upgrading 3,290 480 3,770 3,122 248 3,368II.Container Yard Pavement - Front 315 330 645 492 369 861III.Container Yard Pavement - Rear 140 140 280 0 538 538IV.Consultent Services 335 70 405 363 25 388V.Service Charge end Interest

During Constniction 60 360 420 57 354 411TOTAL 4,140 1380 5,520 4,034 1,532 5,566


18

Appendix 2Page 2

COMPARISON OF APPRAISAL ESTIMATES AND ACTUAL PROJECT COSTS(Current Prices; US $'OOO)

Appraisal Actual

Component Foreign Local Foreign LocalExchange Currency Total Exchange Currency Total

DETAILS OF ACTUAL COSTS

I. Wharf UpgradingWharf 2,455 16 2,471Shed No.1 Demolition 0 19 19Shed No.1 Re-erection 215 3 218Interisland Shed 285 28 313Island Jetty Extension 153 1 154Riggers Shed 14 0 14Seawall Protection 0 40 40Reclamation Working Area 0 67 67Yard Lights 0 16 16New Gatehouse and Car Parks _______________________ 0 56 56

Subtotal 3,290 480 3,770 3,122 246 3,368II. Container Yard Pavement - Front

Original Area 437 2 439AdditionalArea ________________________ 55 367 422

Subtotal 315 330 645 492 369 861IlL Container Yard Pavement - Rear 140 140 280 0 538 538IV. Consultant Services

Local Consultants 0 12 12ForeignConsultants ________________________ 363 13 376

Subtotal 335 70 405 363 25 388V. Service Charge and Interest

During Construction 60 360 420 57 354 411TOTAL 4,140 1,380 5,520 4,034 1,532 5,566

CD

CD

CD

CD

I.

CD

II.I.

rg

PROJECT IMPLEMENTATION ScHEDULEAPPRAISAL ESTiMATE AND ACTUAL

11111U..

iThI1iT

• II -I.................

• IlIlIllIlIlliiiiiiiiiiiiiiiiuiiuuiiiuiiiiiiiiiiillllll

Appralaai Actual

I-

PA Section 2.02

Complied with.

PA Section 2.08(b)

Complied with.

PA Section 2.08(c). Complied withexcept fordelayed sub-mission.

PA Section 2.09(a)

Complied with,except for delaysin audit.

PA Section 2.16

PA Section 2.17

Partly compliedwith. The mininum5% rate of returnwas exceeded for1989 and 1990,but not met for1988 and 1991.SIPA is takingappropriatemeasures tosatisfy thiscovenant in 1992.

Complied with.

20

Appendix 4

COMPLIANCE WITH MAJOR LOAN COVENANTS

Reference inCovenants Legal Docunients Compliance

1. Prior to the effective-ness of the Loan, SIPAshall establish aProject Management Office.

2. SIPA shall make availablethe resources required forthe operation and maintenanceof the Project facilities.

3. SIPA shall furnish to theBank quarterly reports onthe progress of the Project.

4. SIPA shall furnish to theBank, within three monthsof the physical completionof the Project, a reporton the execution andinitial operation of theProject.

5. SIPA shall furnish itsaudited annual financialstatements and the auditreport to the Bank withinsix months of the end ofeach fiscal year.

6. SJPA shall earn,commencing FY 1988, anannual financialstatements and the auditreport to the Bank withinsix months of the endof each fiscal year.

7. SIPA shall maintain adebt-service ratio ofnot less than 1.3.

LA Schedule 6, Complied with.para. 2

LA - Loan AgreementPA - Project Agreement


21

Appendix 5

DISBURSEMENT OF LOAN PROCEEDS- (US$000)

Appraisal Estimate __________ ActualYear Quarter Amount Cumulative Amount Cumulative1987 IV 60 60 140 1401988 I 210 270 42 182

_____________ II 220 490 91 273____________ III 220 710 60 333____________ IV 220 930 1 334

1989 1 448 1,378 24 358____________ II 448 1,826 315 673____________ III 448 2,274 1,552 2,225____________ IV 448 2,722 395 2,620

1990 ___________I 320 3,042 160 2,780____________ II 320 3,362 363 3,143_____________ III 320 3,682 312 3,455____________ IV 318 4,000 485 3,940

1991 ___________I 0 4,000 28 3,968____________ II 0 4,000 66 4,034

GRAND TOTAL 4,000 4,034 4,034


0HHH

z

Cr1

Cl)

Cl)

H

Ii

.Il

H

0

2.0

1.0

22

Aypendix 6

APPRAISED AND ACTUAL LOAN DISBURSEMENTS

LI Appraisal Actual

(Reference in text: page 6. para. 20)

23

Appendix 7

DISBURSEMENTS FOR BANK-FINANCED CONTRACTS

Lo&u Contracl/ F Contract Amount DisbursementCal PCSS NO. iA Description/Country of Supplier Original IUS$Equivalent Original 1US$ Equivalent

01 0002 Fletcher-Kwaimani JNT SI$7,905,125 3,650,370 SI$7,825,012 3,613,377Venture, Solomon IS.

02 0001 Consulting Services for detailed US$ 372,394 372,394 US$ 362,964 362,964Engineering Services etc, JAPAN.

GRAND TOTAL US$3,976,301

11 Baik's Procurement Contract Summary Sheet.

Reference in text: page 6, para. 20)

24

Appendix SPage 1

HONIARA PORT OVERSEAS CARGO TRAFFiC aJ('OOOrt)

_______ Actual & Forecast b/ ________Appraisal

Year Exports Imports Tranship- Total Estimate________ ________ ________ ment ________ ____________

1981 33.4 70.2 103.61982 31.2 62.1 0.3 93.61983 35.1 65.4 1.0 101.51984 35.0 82.3 4.9 122.21985 31.0 101.7 2.5 135.21986 32.1 91.0 3.5 126.61987 23.3 77.8 0.5 101.6 117.91988 24.9 100.7 0.3 125.9 119.11989 29.4 100.0 0.1 129.5 119.71990 38.1 100.0 1.9 140.0 122.61991 37.8 93.2 0.8 131.8 124.61992 38.9 113.7 1.0 153.6 126.51993 39.6 112.3 7.0 158.9 128.51994 40.7 117.8 7.4 165.9 130.61995 41.9 123.3 7.8 173.0 134.11996 43.0 129.1 8.2 180.3 137.81997 44.2 135.4 8.6 188.2 141.71998 45.0 141.9 9.0 195.9 146.31999 47.0 148.7 9.4 205.1 151.02000 49.0 156.4 9.9 215.3 155.9

a! Excludes bulk liquids such as petroleum and palm oil.b/ Actual 1981 to 1991; forecast by SIPA 1992 to 2000.

(Reference in text: page 7, para 24)

25

Appendix 8Page 2

EXPORT TRAIflC ThROUGH HONIARA PORT

Actual and Forecaat Traffic ('RT)

Total Total

Palm Canned Sa Stock ELPalm RoundedYear Copra Palm Oil Kernel Rice Flab Timber Cocoa Sbell Othera Feed Oil ('000 RT)

1981 17,344 16,411 3,107 3,528 1,492 5,361 290 254 2,017 33,393 33,41982 12,918 17,236 3,107 3,110 1,489 7,901 421 538 1,729 31,213 31.21983 13,203 21,245 4,360 831 1,806 12,394 654 431 1,453 35,132 35.11984 18,920 18,752 3,910 1,237 1,561 6,080 896 490 1,858 34,952 35.01985 19,387 18,439 3,610 360 1,504 2,676 1,241 513 1,661 30,952 31.01986 17,137 15,650 3,905 239 2,183 4,049 1,966 632 1,994 32,105 32.11987 3,730 12,358 2,400 0 2,210 4,296 2,427 507 2,771 23,341 23.31988 10,196 12,729 3,030 0 2,294 3,923 2,496 519 2,437 24,895 24.91989 12,948 17,190 3,810 0 1,407 3,102 3,172 498 3,397 1,097 29,431 29.41990 19,852 23,803 4,670 18 0 4,578 3,157 393 3,868 1,595 38,131 38.11991 16,606 21,448 5,339 117 66 4,154 4,151 380 5,570 1,415 37,798 37.81992 17,000 22,000 5,500 0 0 5,000 4,500 400 5,000 1,500 38,900 38.9

1993 16,900 20,000 4,000 0 0 9,800 5,000 900 3,000 0 39,600 39.61994 17,600 20,000 4,000 0 0 9,900 5,200 900 3,100 0 40,700 40.7

1995 18,300 20,000 4,000 0 0 10,000 5,400 900 3,300 0 41,900 41.91996 19,000 20,000 4,000 0 0 10,000 5,600 900 3,500 0 43,000 43.01997 19,800 20,000 4,000 0 0 10,000 5,800 900 3,700 0 44,200 44.21998 20,000 20,000 4,000 0 0 10,000 6,000 1,000 4,000 0 45,000 45.01999 21,500 20,000 4,000 0 0 10,000 6,200 1,000 4,300 0 47,000 47.0

2000 22,900 20,000 4,000 0 0 10,000 6,400 1,000 4,700 0 49,000 49.0

26

Appendix 8Page 3

IMPORT TRAFFIC THROUGI-! HONIARA PORT a/

Actual and Forecast Traffic ('WI) bI

General Foodstuff Motor Fuel in Bulk Total

Year Cargo Cement Fertilizer Tobacco bagged Vehicles Druma Rice Total Rounded

_____ ________ ______ ______ ______ ______ ______ ______ ______ ______ ('000 RD_

1981 39,593 8,364 4,591 239 6,647 7,071 3,674 0 70,179 70.2

1982 37,503 6,554 3,236 225 7,943 5,407 1,261 0 62,129 62.1

1983 40,009 4,996 3,054 201 9,259 5,782 2,117 0 65,418 65.4

1984 47,984 6,591 5,020 102 12,832 6,965 2,816 0 82,310 82.3

1985 60,506 6,518 2,975 214 18,032 12,009 1,460 0 101,714 101.7

1986 51,598 9,367 1,295 1,066 20,380 5,893 1,428 0 91,027 91.0

1987 43,886 7,430 2,338 194 20,522 2,522 954 0 77,846 77.8

1988 55,413 9,665 2,495 92 20,651 6,542 2,857 2,950 100,665 100.7

1989 51,674 7,053 4,782 177 14,456 8,132 2,415 11,298 99,987 100.0

1990 52,771 7,621 2,572 196 10,851 5,112 2,391 18,504 100,018 100.0

1991 46,675 8,562 3,123 135 11,885 5,116 3,127 14,620 93,243 93.2

1992 48,000 9,000 3,000 200 20,000 7,000 2,500 24,000 113,700 113.7

1993 62,000 10,400 4,000 300 23,500 10,100 2,000 0 112,300 112.3

1994 65,200 10,700 4,300 300 24,600 10,650 2,000 0 117,750 117.8

1995 68,400 11,000 4,600 300 25,900 11,100 2,000 0 123,300 123.3

1996 71,800 11,300 4,900 400 27,100 11,600 2,000 0 129,100 129.1

1991 75,400 11,700 5,200 400 28,500 12,200 2,000 0 135,400 135.4

1998 79,200 12,000 5,500 400 30,000 12,800 2,000 0 141,900 141.9

1999 83,200 12,400 5,800 400 31,400 13,500 2,000 0 148,700 148.7

2000 87,300 12,800 6,100 400 33,000 14,800 2,000 0 156,400 156.4

aJ Excludes bulk liquids such as petroleum and palm oil.

b/ Actual 1981 to 1991; forecast bySIPA 1992 to 2000.

27

Appendix 9

CONTAINER TRAFFIC THROUGH HONIARA PORT ACTUAL AND FORECASTTWENTY-FOOT EQUIVALENT UNIT (TrEU) ii!

Imports Exports Transshipment GRAND AppraieatTOTAL Estimate

Year Laden Empty1 Laden Emptyi Laden_Empty ________

1981 2070 260 890 1390 n.e. n.a 46101982 2020 520 1190 1480 n.e. n.a 52101983 2140 190 1110 1270 n.e. n.a 47101984 2050 360 1250 1660 n.e. n.a 53201985 3250 300 920 2460 n.e. n.e 69301986 3000 500 750 2840 230 70 73901987 2940 90 610 2830 50 890 7410 70401988 3390 20 730 2810 30 210 7190 71501989 3010 70 1030 1910 10 0 6030 77401990 2900 70 1190 1890 110 0 6160 80401991 2660 120 950 1740 60 0 5530 84301992 3150 100 1150 2000 40 0 6440 88301993 4290 370 1350 3310 450 110 9880 92001994 4540 370 1370 3340 480 120 10220 94001995 4800 380 1430 3830 500 120 11060 101501996 5100 400 1450 4050 530 120 11650 106001997 5300 420 1470 4250 550 120 12110 110301998 5600 450 1510 4540 580 120 12800 115701999 5840 470 1550 4760 610 120 13350 120402000 6100 490 1590 5000 640 130 13950 12530

aJ Actual 1981 to 1991;forecaet by SIPA 1992 to 2000.TransshIpped TEUS are counted twice for in and out movement.

(Reference in text: page 7, pare. 24)

28

ppen.dix 10Page 1

SOLOMON ISLANDS PORTS AUTHORITYINCOME STATEMENT

Year Ended 30 September(Sl$'OOO)

____ ACTUAL _____ _______________________________ 1986 1987J 1988 1989 1990 1991

Operating RevenueRevenue from Port Operations 3,556 3,027 3,856 4,993 5,711 6,151Revenue from Government Grants 0 0 0 0 0 0Total Operating Revenue 3,556 3,027 3,856 4,993 5,711 6,151

Operating ExpensesRecurrent Operating Expenses 2,298 2,050 2,518 2905 3,249 3,826Depreciation 557 670 1,249 1,149 1,250 1,509Total Operating Expenses 2,855 2,720 3,767 4,054 4,499 5,335

Operating Income 701 307 89 939 1,212 816Non-operating Income 322 316 323 310 354 326Interest Expense 140 133 156 259 566 864Other Non-operating Expenses 1 3 7 368 0 0

Net Income 882 487 249 622 1,000 278Operating Ratio 80% 90% 98% 81 % 79% 87%Return on Reval Net Fixed Assets 8.4% 3.5% 0.7% 6.2% 7.9% 2.8%


29

Appendix 10Page 2

SOLOMON ISLANDS PORTS AUThORITYBALANCE SHEET

As At 30 September(SI$'000

ACTUAL___________________________ 19861 1987' 19881 19891 19901 1991

ASSETSCurrent Assets

Cash and Deposits 2,085 2,198 2,735 2,816 3,076 2,821Accounts Receivable 520 489 529 704 796 1,294Inventories 8 10 9 8 21 96Other 4 26 8 5 7 24

Total Current Assets 2,617 2,723 3,281 3,533 3,900 4,235Fixed Assets

In Operation 10,789 11,594 17,129 17,888 19,474 45,323Less Accumulated Depreciation 2,015 2,646 2,228 2,740 3,990 2,374Net Fixed Assets in Operation 8,774 8,948 14,901 15,148 15,484 42,949Capital Work in Progress 0 0 778 5,332 8,669 0Total Fixed Assets 8,774 8,948 15,679 20,480 24,153 42,949TOTALASSETS 11,391 11,671 18,960 24.013 28,053 47,184

LiABILITIESCurrent Liabilities

Accounts Payable and Accruals 362 282 458 501 627 927Long Term Debt - Current Maturity 58 62 70 67 62 633

Total Current Liabilities 420 344 528 568 689 1,560Long-Term Debt 1,565 1,502 2,112 6,503 9,422 12,032Deferred Income 0 0 0 0 0 7,785Equity

Government Contribution 403 403 403 403 403 403Revenue Reserves 5,526 6,013 6,262 6,884 7,884 8,162Asset Revaluation Reserve 3,477 3,409 9,655 9,655 9,655 17,242Total Equity 9406 9,825 16,320 16,942 17,942 25,807

TOTAL LIABILITIES AND EQUITY 11,391 j1,671 18,960 24,013 28,053 47,184Current Ratio 6.2 7.9 6.2 6.2 5.7 2.7Accounts Rec.-Days Outstanding 53 59 50 51 51 77

30

Appendix 10Page 3

SOLOMON ISLANDS PORTS AUTHORIIYSOURCES & APPUCATIONS OF FUNDS STATEMENT

Year Ended 30 September(SI$'OOO)

____ ____ ACTUAL ____ ________________________________ 1986 1987 1988 1989 1990 1991

SOURCES OF FUNDSNet Income 882 487 249 622 1,000 278Add Interest on Long-term Debt 140 133 156 259 566 864Net Income before Interest 1,022 620 405 881 1566 1,142Add Depreciation 557 670 1,249 1,149 1250 1,509Add Provision for Doubtful Debts 0 0 50 0 0 0Less Transfer Deferred Income 0 0 0 0 0 0Total Internal Sources 1,579 1,290 1,704 2,030 2,816 2,651Government Grant for Noro Port 0 0 0 0 0 7,785Long-term Borrowings 0 4 618 4,431 2,919 3,245

TOTAL SOURCES 1,579 1,294 2,322 6,461 5,735 13,681APPUCATIONS OF FUNDS

Capital Expenditure 1,520 912 1 ,m 5,950 4,923 4,933Acquisition of Noro Port 0 0 0 0 0 7,785Increase(Decr) Working Capital (23 73 (105 128 (19 290Debt Service-interest 140 133 156 259 566 864Debt Service-Loan Repayments 53 63 0 43 5 64

TOTALAPPUCATIONS 1.690 1,181 1,785 6,380 5,475 13,936INCREASE(DECREASE) iN CASH (111 113 537 81 260 (255CASH AND DEPOSITS AT YEAR END 2,085 2,198 2,735 2,816 3,076 2,821Debt Service Ratio 8.2 6.6 10.9 6.7 4.9 2.9Self-Financing Ratio 93% 11 2% 95% 27% 46% 187%

31

Appendix 11Page 1

RE-ESTiMATED ECONOMIC INTERNAL RATE OF RETURI4

UNDERLYING ASSUMPTIONS

A. GENERAL

The EIRR was re-estimated using a methodology similar to thatin the appraisal report viz, a comparison of the economic costs andbenefits streams with and without the Project.

All components of the EIRR calculations are expressed inconstant 1991 prices.

B. ECONOMIC COSTS

Project economic capital costs have been derived from thefinancial costs by removing taxes and duties. Costs include all actualcapital expenditures (except for SIPA sunk costs for paving rear portionof container yard) for the Project components, but exclude IDC. Provisionhas been made for the residual value of the Project assets.

Estimated savings in repairs and maintenance costs, in economicterms, have been derived from the incremental financial costs by removingtaxes and duties.

C, ECONOMIC BENEFITS

1. Savings in ShiD Turnaround Time

Savings in ship turnaround time are made in the "with" theProject case as a result of (i) savings from a reduction in ship waitingtime; and (ii) savings from a reduction in ship service time.

Without the Project, in accordance with the Appraisalassumptions, substantial disruptive port rehabilitation works would beneeded in 1991, 1995 and 1996, and lesser repair works would be needed inother years. This would result in an increase in berth occupancies andIncreases in ship waiting times. The value of the saving in ships' timealongside the berth in the "with" case has been estimated on the basis ofthe average time saved multiplied by the estimated average daily ship costof US$10,000.

Because of the increase in the productivity of containerhandling resulting from the improved port layout under the Project, it isestimated that the container handling rate in the "with" case is about 25per cent faster than could be achieved in the "without" case. Todetermine the ships' service time, (ii) the berth occupancy ratios (which


32

ApDendjx 1.1Page 2

range from 48 per cent to 59 per cent in the "without" case and from 46per cent to 55 per cent in the "with case"); and (iii) waiting/servicetime ratios on the basis of the appropriate semi-scheduled queuingmodels. The following parameters were estimated for the "with" and"without" the Project cases: (i) the cargo handling rates for generalcargo and container traffic (see Table 1);

Table 1: Cargo Handling Rates With and Without Project

Handling Rates Handling RatesCargo Type Without Project With roiect

Bulk Copra 65 rt/hour

65 rt/hourMotor Vehicles 320 rt/hour

320 rt/hourBreak Bulk General 24 rt/bour

24 rt/hourContainerized 1.2 TEIJ/hour

12 TEU/hour

To estimate the value of the service time saved, the estimated savings inship service time in the "with" case were multiplied by the estimatedaverage daily ship cost of $10,000.

2. Other Cost Savings

The appraisal estimated that without the Project, high berthoccupancies would result in long ship waiting times midway through theProject life resulting in lighterage costs. The appraisal also estimatedsavings in capital tied up in cargo and savings in container rentals.These savings and the benefits of avoided lighterage were considered tobe insignificant by the PCR Mission and were therefore excluded from there-calculated EIRR.

33ppendix 11

Page 3

RE-ESTIMATED ECONOMIC INTERNAL RATE OF RETURN(US$'OOO)

Savings in Saved ShipProject Repairs & Maint. Turnround Net

Year Costs Costs Time Benefits

1987 168 0 0 (168:1988 353 23 0 (3301989 2,452 47 0 (2,405)1990 1,355 69 0 (1,286)1991 497 613 300 4161992 0 135 200 3351993 0 135 200 3351994 0 135 200 3351995 0 1,179 840W 2,0191996 0 1,179 at 900 a! 2,0791997 0 135 370 5051998 0 135 320 4551999 0 135 380 5152000 0 135 550 6852001 0 135 590 7252002 0 135 620 7552003 0 135 610 7452004 0 135 560 6952005 0 135 560 6952006 0 140 560 7002007 0 140 560 7002008 0 140 560 7002009 0 140 560 7002010 0 140 560 7002011 (2,413)/ 140 560 3,113

EIRR= 14.7%

at Additional major repairs and consequent ship waiting assumedin the without Project case.

b/ Residual value of Project facilities.

34

Appendix 12Page 1

RE-ESTIMATED FINANCIAL INTERNAL RATE OF RETURN

UNDERLYING ASSUMPTIONS

The FIRR was re-estimated using a methodology similar to thatin the appraisal report viz, a comparison of the financial costs andbenefits streams with and without the Project. The major assumptions are:

1. All components of the FIRR calculations are expressed inconstant late 1991 prices.

2. Project expenditures include all actual capital expenditures(adjusted to 1991 prices) for the Project components, but exclude IDC.

3. Incremental revenue estimates for the Project are based on theforecasts of future incremental traffic which the Project facilities canhandle and include additional storage revenue generated as a result of theimproved storage facilities constructed under the Project.

4. Estimated avoided incremental repair and maintenance costs arebased on the appraisal estimates of the costs of replacing I-beams,additional piling and the higher routine maintenance in the "without"case. Cost savings, in line with the appraisal estimate, related toavoided equipment repairs and lower fuel costs have also been taken intoaccount.

5. Provision has been made for the residual value of the Projectassets.


35

Appendix 12Page 2

RE-ESTIMATED FINANCIAL INTERNAL RATE OF RETURN(US$'OOO)

AvoidedIncremental Incremental Net Cash

Project Repair & Maint. Cash InflowYear Expenditure Costs Revenue (Outflow)

1987 177 0 0 (177:

1988 372 24 23 (325

1989 2,581 49 24 (2,508

1990 1,426 73 25 (1,328

1991 523 645 26 148

1992 0 142 27 169

1993 0 142 28 170

1994 0 142 29 171

1995 0 1,241 30 1,271

1996 0 1,241 32 1,273

1997 0 142 34 176

1998 0 142 37 179

1999 0 142 41 183

2000 0 142 45 187

2001 0 142 50 192

2002 0 142 55 197

2003 0 142 61 203

2004 0 142 67 209

2005 0 142 74 216

2006 0 147 81 228

2007 0 147 89 236

2008 0 147 98 245

2009 0 147 108 255

2010 0 147 119 266

2011 (2,540) 147 131 2,818

FIRR= 6.1%

Residual value of Project facilities.

asian developivient banik i been prepared for i

Documents