AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMENT FUND

ETHIOPIA

NORTHERN ETHIOPIA POWER TRANSMISSION PROJECT

PROJECT COMPLETION REPORT

COUNTRY DEPARTMENT OCDEEAST REGION FEBRUARY 2000

TABLE OF CONTENTSPage

EQUIVALENTS AND ABBREVIATIONS iLIST OF ANNEXES iiEXECUTIVE SUMMARY iii-vBASIC PROJECT DATA vi-viiiMPDE MATRIX ix-xi

1. INTRODUCTION 1

2. PROJECT OBJECTIVES AND FORMULATION 1

2.1 Sector Goal 12.2 Project Objectives 12.3 Project Formulation 22.4 Preparation, Appraisal, Negotiation and Approval 22.5 Project Description 2

3. PROJECT EXECUTION 3

3.1 Effectiveness and Start-up 33.2 Modifications 33.3 Implementation Schedule 43.4 Reporting 53.5 Procurement 53.6 Financing Sources & Disbursements 5

3.6.1 Project Costs 53.6.2 Source of Financing 53.6.3 Project Disbursements 6

3.7 Performance of the Contractors, Suppliers and Consultant 6

4. PROJECT PERFORMANCE AND RESULT 6

4.1 Overall Assessment 64.2 Operating Results 64.3 Management and Organisational Effectiveness 74.4 Project Management Unit 74.5 Staff Recruitment, Training and Development 74.6 Past Financial Performance 84.7 Tariffs, Billing and Collection 84.8 Fulfilment of Loan Conditions 94.9 Financial Viability 94.10 Economic Viability 10

TABLE OF CONTENTS (cont’d)

Page

5. ENVIRONMENTAL AND SOCIAL SUSTAINABILITY 10

6. PROJECT SUSTAINABILITY 11

7. PERFORMANCE OF THE BANK AND THE BORROWER, 12

7.1 Performance of the Bank/Fund 127.2 Performance of the Borrower 127.3 Performance of the Executing Agency 13

8. OVERALL PERFORMANCE RATING 13

9. CONCLUSIONS, LESSONS LEARNT AND RECOMMENDTIONS 13

9.1 Conclusions 139.2 Lessons Learnt 149.3 Recommendations 15

___________________________________________________________________________

This report was prepared following a Project Completion Mission by Mr. Babu Ram(Principal Power Engineer) and Mr. Hussein Yusuf Iman (Principal Financial Analyst) toEthiopia during October 1-15, 1999. Any enquiry relating to this report may be referred toeither the authors or Messers: G.Mbesherubusa, Manager OCDE.4 (Extension 4131) andA.D. Mtegha, Director, OCDE (Extension 4056).

i

EQUIVALENTS AND ABBREVIATIONSCurrency Equivalents

PCR Appraisal

1 UA = US$ 1.38072 1.472841 UA = Birr 11.0760 7.155851 US$ = UA 0.72426 0.755351 US$ = Birr 8.00005.000001 Birr = UA 0.0.0929 0.13975

WEIGHTS AND MEASURES

1 Km = Kiliometer = 1000 meters1 kV = Kilovolt = 1000 volts1 KVA = Kilowatt = 1000 watts1 KVA = Kilovolt ampere = 1000 volt ampere1 MW = Megawatt = 1000 KW1 GW = Gigawatt = 1000 MW1 MVA = Megavolt = 1000 kVA1 KWh = Kilowatt hour = 1000 watt hour1 MWh = Megawatt hour = 1000 kWh

FISCAL YEARJuly 8th – July 7th

ABBREVIATIONS

ADB = African Development BankADF = African Development FundNEPTP= Northern Ethiopia Power Transmission ProjectEELPA = Ethiopian Electric Light & Power AuthorityEEPCO = Ethiopian Electric Power CorporationERESA = Ethiopian Airlines EnterpriseEIRR = Economic Internal Rate of ReturnFIRR = Financial Internal Rate of ReturnGOE = Government of EthiopiaICS = Interconnected SystemSCS = Self Contained SystemMEDAC = Ministry of Economic Development and Co-operationLRMCS = Long Run Marginal Cost of SupplyUA = Unit of AccountIDA = International Development AssociationSMI = Small & Medium IndustriesQPR = Quarterly Progress Report

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LIST OF ANNEXES

AnnexNo. No. Pages

1. Map of Ethiopia 1

2. Actual Implementation Schedule 2

3. Past Financial Performance 2

4. Financial Projections 2

5. Categories of Expenditure 1

6. Projected and Actual Funds Disbursed by Source of Finance 1

7. Performance of contracts and consultant 5

8. EEPCO PMU Chart 1

9. Loan Conditions 2

10. Assumptions for Recalculation of FIRR and EIRR 3

11. Calculation of Financial and Economic Rate of Return 2

12. Overall Performance Rating 4

13. Matrix of Recommendation 5

14. Sources of Information 1

15. Borrower's PCR

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ETHIOPIANORTHERN ETHIOPIA POWER TRANSMISSION PROJECT

EXECUTIVE SUMMARY

1. The Northern Ethiopia Power Project (NEPTP) was conceived by the TransitionGovernment of Ethiopia (GOE) in March 1992 in order to supply cheap and reliablehydroelectric power to the Northern Region (Project Area). Within three years of itscompletion and commissioning, the project would i) cater to an industrial demand of 40 MWand ii) supply electricity to 30,000 new residential consumers.

2. The design of the project was reviewed and optimised by the consultant, and thebidding documents for procurement of the goods were prepared on the basis of the reviseddesign. The revised design has certainly enhanced the technical soundness and sustainabilityof the project. It has also led to an appreciable cost reduction.

3. The Project Components given in the Appraisal Report are the construction of 230kV,132kV, 66kV transmission lines, 15kV distribution line, distribution networks, substationsfor the 230, 132, and 66kV lines, logistics and consultancy services. The Bank approved thechanged scope of works, revision of goods and services, and allocated UA 10.25 Million tothe distribution component because the executing agency maintained that the originalallocation of UA 2.29 million was inadequate.

4. The project was commissioned on June 6, 1998 and the completion was 28 month latebehind the scheduled date given in the appraisal (end of December 1995). The project hasregistered a time overrun of 183%. The major causes of delay were (a) ineffectiveness of theloan, (b) delayed selection of consultant, (c) inefficient evaluation of bids and submission ofrecommendations to the Bank and (d) the late completion of the contracts.

5. The quality of the commissioned project is generally acceptable.

6. The cost of the completed project is UA 70.26 Million (FE UA 46.65 Million andLocal Costs UA 23.61 Million), which is 97.74 % of the appraisal estimates. The project wascompleted within the cost approved by the Bank and therefore did not register any cost over-runs.

7. The beneficiary and the executing agency of the project was the Ethiopian ElectricLight and Power Authority (EELPA); re-established since June 1997 as the Ethiopian ElectricPower Corporation (EEPCO) with the purpose of engaging in the business of producing,transmitting, distributing and selling electricity. The re-structuring enabled EEPCO to operateas an autonomous commercial organisation with the ability to design its own tariffs,organisational structure, personnel management, finances and procurements.

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8. The NEPTP project has been completed with 85% (17 towns out of twenty) of theproject towns connected to the grid. The three towns still awaiting access to electricity areAdi Shohu, Adi Godum, and Bizet, which should be connected to the grid by June 2000. Nosignificant technical risk was anticipated at Appraisal. The implementation of the project, ingeneral, followed the guidelines given in the Appraisal.

9. The executing agency complied with sixty percent (six out ten) of the loan conditions.However, four significant financial covenants relating to re-valuation of fixed assets,reduction of the high level of receivables, reduction of arrears owed to EEPCO, andimplementation of tariff based on 5% minimum rate of return on re-valued assets, have notbeen complied fully and require to be fulfilled.

10. The overall financial performance and capital structure is solid and shows positivetrend. The financial performance of EEPCO for (1993-1998) has improved as measured by a)return of fixed assets, b) net profit margin, c) operating ratios, and d) liquidity ratios. The rateof return on fixed assets improved from a negative of 4% to a positive of 12% in 1998. Forthe same period, net profit margin improved from a negative 39% to positive 49%. EEPCO'sdebt to equity ratio averaged 56.3% indicating the institution is conservatively capitalised.This improved financial performance has enabled the corporation to meet its operationalcosts, service its debt, and finance part of its capital expenditure. Further, improvement infinancial performance is expected provided that it complements its cost reduction efforts witha gradual tariff increase, customer service improvement and increased sale of electricity.

11. The recalculated financial rate of return of the project is 11.42% as compared to theforecasted FIRR of 11.5% at appraisal. The recalculated FIRR of 11.42% comparesfavourably with the estimated rate of return of 11.5% at appraisal and is well above the 10%average cost of capital required by EEPCO for new projects. The revised Economic InternalRate of return (EIRR) of the project is 17.75%. This is well above the long-term lending rate,in Ethiopia, estimated at 11%.

12. The Project’s overall negative impact on the environment was negligible. To thecontrary, it had a significant positive impact on the environment. This was a result ofutilisation of cheap and renewable hydroelectricity, which displaced the use of imported oilused for running diesel generators and traditional cooking firewood. The industrial activity inthe Northern Region has increased and has created new opportunities for employment andgrowth and has, therefore, improved the income and quality of life in the project area.

13. The continued sustainability of the project will depend on EEPCO’s ability to i)reduce costs and increase tariffs, ii) maintain effectiveness in carrying out its operations, iii)pay its debt, and iv) finance part of its expansion program.

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Issues that require to be addressed

1. EEPCO needs to be monitored to ensure that it fulfils the remaining financialcovenants namely i) revaluation of the fixed assets, ii) settlement of arrears owed to EEPCOiii) reduction of receivables, and iv) implementing a tariff rate that is linked to achieving a5% minimum rate of return of re-valued fixed assets.

2. The 40-MW potential system demand envisaged at appraisal, which was to beachieved by third year of operation, is going to be surpassed. Presently the maximum demandrecorded at the region is 12.5 MW. In addition, another 18 MW is to be added to the system,when a new cement factory with electricity requirements of 18MW commences operations bythe end of November 1999. Currently, about 30 small and medium sized industrial customers(with a potential demand for electricity of MW 11.07) and 1000 domestic customers areawaiting connection to the power system. However, the executing agency is unable to satisfytheir potential demand for the supply of electricity in the region, due to shortage of materials.

3. Goods financed from the loan concerning Distribution Hardware and Accessory(valued at DEM 172,020) and Medium and Low Voltage Switchgears (valued at US$1,107,187.40) were said to have been impounded at the port of Assab (Eriteria) in May 1998,while on transit. The GOE and the executing agency have to trace these goods and report tothe Bank the status of the on-going investigations.

Annex.13 presents a matrix of recommendation.

viBASIC PROJECT DATA

1. Loan Number F/ETH/POW/92/35B/ETH/POW/92/11

2. Borrower Ethiopia3. Guarantor The Government of the Federal Democratic Republic of

Ethiopia (GOE)4. Beneficiary Ethiopian Electric Power Corporation5. Executing Agency Ethiopian Electric Power Corporation (originally

Ethiopian Electric Light and Power Authority)A.

LOAN APPRAISAL ACTUALESTIMATE

a) ADB Loan

1. Amount (UA/Million) 24.39 20.122. Interest Rate Variable Variable3. Repayment Period 15 Years 15 Years4. Grace Period 5 Years 5 Years5. Loan Negotiation Date 10.11.19926. Loan approval date 14.12.1992 14.12.19927. Loan signature Date 14.04.19938. Date of Entry into Force 23.11.19939. Commitment fee 1%

b) ADF Loan

10. Amount (UA/Million) 27.64 26.5311. Interest Rate - -12. Repayment Period 40 years 40 years13. Grace Period 10 years 10 years14. Loan Negotiation Date 10.11.199215. Loan approval date 15.12.1992 15.12.199216. Loan signature Date 14.04.1993

Date of Entry into Force 23.11.199317. Service Charge 0.75%

B. PROJECT DATA

1. Total Cost( UA/Million) Appraisal Estimate Actual

2. Financing Plan(UA/Million) FC LC FC LC

ADB 24.39 0.00 20.12 0.00ADF 27.64 0.00 26.53 0.00GOVERNMENT 0.00 19.86 0.00 23.63

52.03 19.86 46.65 23.63

viiADB & ADF Loans

3. Effective Date of First Disbursement 31.08.1993 05.05.19944. Effective Date of Last disbursement 31.12.1997 31.12. 19985. Commencement of project implementation activities 11 January 19946. Date of Completion of project implementation activities June 6, 1998

C. PERFORMANCE INDICATORS Appraisal Est. Actual %

1. Cost underrun 1.63 mln 2.26 %2. Time overrun 28 (months) 183.33 %

-Slippage on effectiveness %- Slippage of Completion Date 28 183.33%- Slippage on Last Disbursements 12 107.69%- Number of Extensions of Last Disbursement ONE- Completion Date 31.12.1995 06.06.1998

3. Project Implementation Status: Completed4. List of verifiable indicators and level of achievement (expressed as % of planned levels).

Verifiable indicator Level of achievement Variance/explanation

20 towns will beenergised.

The availability ofPower to Northernregion is increased by40 MW

The consumption ofelectricity by domesticusers is expected togrow to 26 millionunits by replacingfirewood operated Injiracookers by electric onesat the third year ofcommissioning

230 kV transmissionline is constructed.

132 kV transmissionlines are constructed.

66 kV transmissionlines are constructed.

15 kV distribution linesare constructed.

Low voltagedistribution lines areconstructed.

3 units of 230 kVsubstations are

17 towns are energised.

Power is madeavailable to Northernregion as 40 MWdemand is expected tobe surpassed in threeyears.

Consumption ofelectricity by domesticusers has grown to 41million units byreplacing firewoodoperated Injira cookersby electric ones by thefirst year

100%

100%

100%

79%

94.3%

100%

100%

100%

(-)15%-Three townsremain to beelectrified.

nil

(+) 15 Million units

nil

nil

nil

(-)21%

(-)5.7%

nil

nil

nil

nil

nil

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constructed. 2 units of 132 kV

substations areconstructed.

4 units of 66 kVsubstations areconstructed.

123 units of distributiontransformers areinstalled.

Logistics wereacquired.

Consultancy servicesare provided.

100%

100%

100%

100%

100%

nil

nil

nil

1. Institutional performance: Less than satisfactory in terms of provision of services tocustomers. 11.07 MW potential energy demand is not consumed because of resourceconstraints faced by EEPCO.

2. Contractors' Performance: Generally satisfactory

3. Consultant Performance: SatisfactoryAPPRAISAL PCR

1. EIRR (%) 16.75 17.75%2. FIRR (%) 11.55 11.42%

ixETHIOPIA-NORTHERN ETHIOPIA POWER TRANSMISSION PROJECT MATRIX

Narrative Summary (NS) Verifiable Indicators(OVI)

Means ofVerification (MOV)

Important Assumptions

Goal: (Goal to Supergoal):

1 To develop country'shydro-electric potentialand transmit power fromthe generating stations(main grid) to differentregions of the countryfor economicdevelopment andgrowth.

1. Generating capacity

2. Transmissioncapacity

3. growth in GDP

4. Growth in electricityconsumption

1.1 Ministry ofEnergy/EEPCOstatistics.

The additional supply ofpower will also be utilised toincrease the level ofeconomic activity in thenorthern areas of thecountry . This will reducepoverty and regionalimbalance in the country.

Project Objectives: (Project Object.to Goal):

1. To provide reliableelectric power to theinhabitants of thenorthern regions so thattheir energy requirementfor domestic andindustrial applicationscould be met.

2. To halt environmentaldegradation byproviding people withthe cheap and renewablehydro-electric energywhich will replace fuelwood.

1. The availability ofPower to Northernregions is increasedby 40 MW.

2. The consumption ofelectricity bydomestic users isexpected to grow to26 million kwhthrough replacingfirewood operatedInjira cookers byelectric ones by thethird year ofcommissioning.

3 20 towns will beenergised.

4. 460 newly licensedindustries will commenceoperation at the thirdyear of commissioning ofthe project.

5. 30,000 newhousehold will beconnected to grid at thethird year and another30,000 will receiveelectricity by the tenthyear.

1.1 EEPCO’sstatistical reportsand bulletins.

1. The construction ofpower transmission anddistribution network willestablish links betweenhuman settlements,industrial centres and electricpower sources, leading toincrease in productivity andimproved standard of living.

2.Electricity Tariff will berationalised to reflect thecost of supply.

3.Effectiveness of Billingand Collection

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Narrative Summary (NS) Verifiable Indicators(OVI)

Means ofVerification (MOV)

Important Assumptions

Outputs: Appraisal Actual (Output to Project Obj.):

1. 230 kV Bahardar-Alamata-Mekele line isconstructed.

2. 132 kV Mekele-Adigratand Mekele-Adwa linesare constructed.

3. 66 kV lines (i) Alamata-lalibela (ii)Alamata-Sokota (iii) Alamata-Maychew and Adwa-Inda Silasi areconstructed.

4. 15 kV distribution linesare constructed.

5. Low Voltagedistribution lines areconstructed.

6. Low voltagesubstations areconstructed.

7. 230 kV, 132 kV and 66kV substations areconstructed.

8. Logistics are acquired.

9. Consultant is recruited.

1. 500 km 489 km

2. 240 km 202 km

3. 367 km 320 km

4.327 km 257 km

5.140 km 132 km

6. 123 units 123 units

7(a) 3 units 3 units

7(b)2 units 2 units

7(c ) 4 units 4 units

8. two heavy dutytrucks, four lighttrucks, ten doublecabin pick ups & onepick up withtelescope ladder, 4station wagons,personal computers,survey equipmentand heavy dutyphotocopier areprocured.

9. consultant wasrecruited.

1. EEPCO’squarterlyprogress report.

2. EEPCO’s PCRat completion ofworks.

3. SupervisionMission’s Reports

1 Adequate flow ofinternally generated cashfrom EEPCO to financethe Local costcomponent of theproject.

Activities: (Activity to Output):

1.Procurement, constructionand installation of 230 kVBahirdar-Almata-Mekeleline-

2.Procurement, constructionand installation of 132 kVlines.

3. Procurement of materialfor 66 kV lines andconstruction andinstallation.

4. Procurement ofmaterials for 15 kVline and construction

1 Total estimated andactual costs ofproject are:

(MUA)

Appraisal Actual

Cost 71.89 70.28

ADB 24.39 20.12

ADF 27.64 26.53GOE 19.86 23.63

1.1 Approval ofbiddingdocument, bidevaluationreports.Submission ofReports.Disbursement offunds.Audit ofAccounts.

1 Following the Bank’sapproval, the P I U andConsultant are mobilisedto implement theproject.

2. Performance of PIU andConsultant.

3. Performance of theContractors.

4. Implementation of theproject follows theimplementationschedule.

5. Adherence to LoanConditions &

xi

Narrative Summary (NS) Verifiable Indicators(OVI)

Means ofVerification (MOV)

Important Assumptions

and installation.

5. Procurement of materialfor low voltage lines andconstruction andinstallation.

6. Procurement ofmaterials for low voltagesubstations and streetlights and installation.

7. Procurement,construction andinstallation of 230 kVSubstations, 132 kVsubstations and 66 kVsubstations.

8. Logistics

9. Consultancy services

Procurement Rules

1

1. INTRODUCTION

1.1 Ethiopia is situated in the horn of Africa. It is bounded in the west by Sudan, in theeast by Somalia and Djibouti, in the south by Kenya and in the north by Eritrea. With theformal separation of Eritrea in 1993, Ethiopia became land-locked.

1.2 In Ethiopia, the Bank made five interventions in the Power Sector, in addition to fifty-eight interventions that were made in other economic sectors. The power sector interventionsinclude the completed rural electrification project, Electricity-I project, Northern EthiopiaPower Transmission project (NEPTP), pre-feasibility study for Chemoga-Yeda hydropowerproject, the Aleltu hydropower feasibility study, and the on-going Beles, Chemoga-Yeda andHalele-Werebesa hydropower feasibility study. The World Bank is another major activedonor in the Energy Sector. While the Energy-I project financed by the World Bank has beencompleted, the Energy-II project involving the Construction of Gil Gelgibe hydropowerproject will be completed by 2003.

1.3 The NEPTP was conceived by the Transition Government of Ethiopia (GOE) inMarch 1992 in order to supply cheap and reliable hydroelectric power to the northern region(Project Area). The project area, which includes the north & south Wello, Tigray and southGonder administrative regions, have experienced, in the past a number of droughts that havedestroyed the forest reserves. Further, only a few towns were fortunate to receive theelectricity supplied by expensive and obsolete diesel generators. The Project planned was animportant component of the Ethiopian National Emergency Recovery and Reconstructionprogram financed by IDA, ADF and other donors, and was expected to contribute to theregion’s economic development by extending the supply of electricity and reducing itsdependence on the firewood.

2. PROJECT OBJECTIVES AND FORMULATION

2.1 Sector Goal

Ethiopia is endowed with an indigenous hydroelectric potential to produce 230 billionkwh, of which only a fraction of the potential (almost negligible) has been utilised so far. Alot needs to be done for the utilisation of the hydroelectric potential of the country. Thus,development of the least cost indigenous energy resources is the goal of the Ethiopian powersector. With the provision of the matching transmission system, hydroelectricity will betransmitted to several regions of Ethiopia. The supply of electricity will increase economicactivity in the regions, thereby reducing poverty and improving the quality of life. Theconsumption and cost for import of the petroleum products will also be reduced by theenhanced availability of hydroelectricity.

2.2 Project Objectives

2.2.1 The northern region of the country is amongst the least developed regions. The dieselgenerators with limited supply of fuel were the only source of distributing electricity in fewtowns. Further, it was not possible to feed the region by a more dependable source of supplysuch as the Interconnected System (ICS), in the absence of a transmission system linkbetween the ICS and the northern region.

2

2.2.2 The NEPTP project was conceived basically to remove the bottlenecks in transmittingelectricity from the ICS (fed by hydroelectric plants) to the northern region for providingcheap and reliable electricity to the residents of the region in order to meet their requirementsfor household, commercial, and small and medium scale industrial activities. The other aimwas to replace the fuel wood consumption by the provision of relatively cheap and renewablehydroelectric energy, and thereby helping the region to arrest the environmental degradation.

2.3 Project Formulation

The initial project scope was based on the design studies that were conducted by theexecuting agency for determining the most feasible option of transporting electricity fromICS to the northern region. As it was initially designed, the project included the constructionof a 230 kV main trunk transmission line as the least cost option for transferring power fromBahardar to Mekele via Dilb. The project also included the construction of three 132 kVlines: first from Dilb to the city of Aska in the Gonder region, second from Mekele toAdigrat, and the third to city of Adwa from Mekele via Abiy Adi. Subsequently, the designof the project was revisited by the executing agency. Due to limited resources available onsoft terms, it was proposed to implement the planned project with the lengths of 66 kV, 15kV and low voltage lines reduced from 377 Km, 578 Km and 207 Km to 367 Km, 327 Kmand 140 Km respectively. The substation at Abiy Adi was deferred and the location of theswitching station was shifted from Dilb to Alamata.

2.4 Preparation, Appraisal, Negotiation and Approval

2.4.1 In April 1992, the Government requested the Bank to finance the NEPTP. A copy ofthe Project feasibility study was later submitted to the Bank in May 1992. In June 1992, theBank accepted and included the project in the 1992-lending program for Ethiopia.Accordingly, a two man Preparation Mission was undertaken between 27 June to 9 July 1992,for gathering additional information required to further process the Project. Subsequently, anAppraisal Mission was undertaken between 7 to 19 September 1992. The Mission discussedand defined the scope of works, cost estimates, procurement, and implementation of theproject and the loan conditions. During loan negotiations held on 10 November 1992, theGovernment delegation accepted all loan conditions precedent to the entry into force of theloans and pledged to comply with other loan conditions during project implementation. It wasdecided that 31 December 1997 would be the date for closing the loan. A separate meetingwas held with the Disbursement Department in which it was agreed that the disbursement ofADF portion of the loan would receive priority over the disbursement of the ADBcomponent.

2.4.2 The Bank's Board approved the NEPTP on 14 December 1992. The loan was signedon 14 April 1993. Subsequently, with the execution of a subsidiary loan agreement betweenthe Borrower and the executing agency and the appointment of the Project Co-ordinator, theBank declared the loans effective on 23 November 1993.

2.5 Project Description

2.5.1 The Project, at appraisal, consisted of 230 kV lines (500 km), 132 kV lines (240 km),66 kV lines (367 km), 15 kV lines (327 km), low voltage distribution lines (140 km),installation of 123 units of distribution transformers, 3 units of 230 kV substations, 2 units of132 kV substations and 4 units of 66 kV substations, logistics and consultancy services.

3

2.5.2 Further, it was targeted that the project, on completion, would cater to an industrialdemand of 40 MW and would supply electricity to 30,000 new residential consumers after apassage of three years following the commissioning of the Project.

3. PROJECT EXECUTION

3.1 Effectiveness and Start-up

3.1.1 The Bank’s Board approved the loans in December 1992. The project did notcommence as envisaged at Appraisal. The first milestone to be achieved was the selection ofthe Consultant. It was targeted that the Consultant be placed within three months (bybeginning of April 1993) of the approval of the loans. The conditions precedent to loans'effectiveness were:

(i) Executing the subsidiary loan agreement between the executing agency andthe borrower; and

(ii) Transmission of Curriculum Vitae of the Project Co-ordinator to the Bank forapproval

3.1.2 The loan agreement was executed between the Bank and the Borrower on April 14,1993 (4 months after the loan approval). However, the loans were not declared effective, asthe Borrower did not fulfil some of the above conditions within the specified time. The maindelay was due to non-submission of the subsidiary loan agreement. The loan agreementincorporating the comments of the Bank was submitted on 28 October 1993. The Bankdeclared the loans effective on 23 November 1993. It took about 11 months for the loans tobecome effective. The delay in loans’ effectiveness was the major cause of latecommencement of the project.

3.2 Modifications

Technical

3.2.1 The Consultant, in accordance with the Terms of Reference, reviewed the projectdesign between 12 January and 15 April 1994 and proposed several modifications to it. Thedesign of the project, as done by the executing agency, was not the least cost one. TheConsultant optimised the design by considering various conductor and tower structureconfigurations to arrive at the least cost solution. The optimised design was utilised in thepreparation of the bidding documents. The Bank’s participation in design scrutiny andoptimisation was insignificant. However, the Bank indirectly, approved the design byapproving the bidding documents.

3.2.2 The Bank approved the revised scope of works and goods and services, and allocatedUA 10.25 Million towards procurement of the distribution materials as the original allocationof UA 2.29 Million was substantially below the amount needed for ordering the tendereddistribution materials.

4

3.3 Implementation Schedule

3.3.1 The Bank envisaged that the project would be completed within 24 months aftercontracts were awarded. However, the project experienced start-up delays due toineffectiveness of the loans. The activities and the works that were completed by the plannedcommissioning date -31 December 1995 are: (i) the loans were declared effective (ii) contractfor consultancy services came into force (iii) the survey of 230 kV line was completed (iv)substation sites were selected (v) contract was awarded for the supply of logistics (motorvehicles) and (vi) the recommendation for awards of A,B,C, D1 & D2 contracts wereapproved by the Bank. The actual implementation schedule is shown in the Annex 2.

3.3.2 The major delays that derailed the implementation schedule of the project were:

(a) Loan effectiveness - 11 months;

(b) Selection of consultant-9 months;

(c) Review of design of the Project by the consultant -1 month;

(d) Start of the bidding process for the supply and installation contracts (230 kV lines,132 kV and, 66 kV transmission lines and 230/132/66 kV substations)-11 months;

(e) Evaluation of bids and submission of recommendation to the Bank for award ofsupply and installation contracts-6 months (except contract B which was late byabout 10 months); and

(f) Contractors’ delay -3.5-6 months.

3.3.3 The reasons for late loans' effectiveness are described in para 3.1. The selection of theconsultant took nine additional months due to a procedure which required the executingagency to evaluate the technical and financial proposals and obtain the Bank's approval intwo separate rounds. The time involved, due to complexity of the procedure, was notaccounted in fixing the date for placement of the consultant. Further, the key milestones,namely the dates of loan signature and effectiveness were not clearly spelt out. As a result,the time span between the Board approval and the selection of the consultant wasconsiderably inadequate to achieve the (i) signature of the loan (ii) effectiveness of the loanand (iii) selection of the consultant. Another major cause of delay was the delayed biddingprocess for the supply and installation contracts for construction and commissioning of 230kV, 132 kV, and 66 kV transmission lines and substations. The bidding process for the abovecontracts was started in May 1994- 11 months later than the Appraisal date-June 1993.Further, the time consumed by the executing agency in evaluating the received bids andsubmitting the contract award recommendations for the Bank's approval was 4 months off theplanned date. The delays attributable to the contractors are described in the paragraph 3.7.The nature of the delays indicate that they were within the control of the borrower /executingagency and were avoidable. In conclusion, the implementation schedule agreed at Appraisalwas a bit tight. Yet, it was achievable, had the Government and the executing agency takensteps concertedly to stick to the schedule in a planned manner.

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3.4 Reporting

3.4.1 The first Quarterly Progress Report covering the period between June to August 1995was issued on 22 September 1995. The last and 12th QPR for the period (March –May 1998)was issued on 12 June 1998. The Bank received the QPRs regularly and reviewed them, andrecommended the inclusion of the 15 kV distribution works in the QPR. The Consultant alsoproduced monthly reports for attention of EEPCO's management.

3.4.2 The NEPTP project audit reports and EEPCO audited accounts were received for theperiod 1994 to 1997. However, only draft audit accounts were received for 1997/98.

3.4.3 The borrower's PCR in the Bank's format was received within six months of theproject completion and is attached as Annex 15.

3.5 Procurement

The executing agency, in general, followed the Bank’s Rules of Procedure forprocurement of goods and works. The exception is the supply of iron wares (lot-8). Thesupply of iron wares was not completed as it was intended to be done at Appraisal becausethe executing agency did not open and evaluate the only submitted bid. The submitted bidwas returned against the Bank’s Rules, which require an evaluation of a lone bid too, by theexecuting agency. Further, the executing agency did not launch the bidding process for re-tendering iron wares supplies, despite the Bank’s advice to do so.

3.6 Financing Sources and Disbursement

Project Costs

3.6.1 The cost of the completed project is UA 70.28 Million (FE UA 46.65 Million andLocal Costs UA 23.61 Million), which is 97.74 % of the appraisal estimates. Annex 5provides details of financing the cost of the project by categories of expenditure.

Source of Financing:

3.6.2 The ADF, ADB, and GOE financed the Northern Ethiopia Power TransmissionProject in the order of 37.75%, 28.64%, and 33.60 %. As per the financing plan at appraisal,the Bank was to finance 100 percent of the foreign exchange component, while the GOE wasto finance the entire local cost. The financing plan agreed upon at appraisal and actual plansare shown in Table 1 Below.

Table 1Financing Plan (UA Millions)

Comparison of Appraisal VS Actual

Appraisal Estimate Actual(UA Million ) (UA Million)

Source L.C. F.E TOTAL % L.C. F.E TOTAL %ADB 0.00 24.39 24.39 33.9 0.00 20.12 20.12 28.64ADF 0.00 27.64 27.64 38.4 0.00 26.53 26.53 37.76GOE 19.86 0.00 19.86 27.6 22.89 0.00 22.88 33.60Total 19.86 52.03 71.89 100 23.62 46.65 70.26 100

6

Project Disbursements

3.6.3 Annex 6 provides total projected disbursements and the actual funds disbursed by thesource of finance. Project start up and implementation delays contributed to variances in thedisbursement schedules. Disbursements under the project had been expected to commence in1993 with a completion date of 1996. However, disbursements commenced in late 1994 andcontinued until 1999. This has led to a variance of thirty months between the disbursementschedule envisaged at appraisal and the actual disbursements. The project disbursementdeadline was extended once from 31 December, 1997 to 31 December 3,1 1998.

3.7 Performance of the Contractors, Suppliers and Consultant

All contracts executed to commission the NEPTP project are listed in Annex 7 (a) and(b). The performance of major contracts and consultants is given in Annex 7 (c).

4. PROJECT PERFORMANCE AND RESULT

4.1 Overall Assessment

4.1.1 The Project, as completed, comprised of 230 kV lines (489 km), 132 kV lines (202km), 66 kV lines (320 km), 15 kV lines (257 km), low voltage distribution lines (132 km),123 units of distribution transformers, 3 units of 230 kV substations, 2 units of 132 kVsubstations and 4 units of 66 kV substations, logistics and consultancy services.

4.1.2 The actual 230 kV, 132 kV, and 66 kV transmission lines’ lengths differ from theestimates at Appraisal due to check surveys conducted by contractors. The targets for the 15kV distribution and Low Voltage lines have not been achieved as only 85% of the projectconcerned towns were electrified. The unavailability of wooden poles and the loss of some ofconsignments of the distribution materials (Contract E3-Distribution Hardware andAccessory –value DEM 172,020 & Contract-E5-Medium and Low Voltage Switch gears-value US$ 1,107,187.40) at Assab port were stated to be the impediments in electrifyingtowns and delivering project benefits to the concerned people. Nevertheless, the remainingdistribution works and electrification of the remaining un-electrified towns are planned forcompletion by June 2000 by the executing agency.

4.2 Operating Results:

4.2.1 The Project was commissioned on 6 June 1998 and has accomplished its objectives tocreate sufficient capacity for transferring power from the Interconnected System to theNorthern Region, in order to meet the needs of population of that region. The Project cansafely deliver over 150 MW of power to the northern region and has been operatingsatisfactorily for more than a year.

4.2.2 However, the actual maximum system demand registered on the system is 12.5 MW.EEPCO has made 2162 new connections to domestic consumers since the commissioningdate of the project. The newly released connections correspond to the 7% of target set to beachieved in three years following commissioning of the project. The 40 MW potential systemdemand envisaged, at appraisal, is expected to be surpassed. Yet, the creation of the demandand development of the load remains a major task that underpins the utilisation of capacity ofthe Northern Ethiopia Power Transmission system. Unless special efforts are made, it will bedifficult to connect over 27,000 new consumers to the grid by July 2001 and achieve theproject's target of connecting 30000 new consumers to the grid.

7

4.2.3 Furthermore, EEPCO lacks proper communication and on-line monitoring andcontrol systems that are considered essential for enhancing the sustainability of the NorthernEthiopia Power Transmission system. The Government is encouraged to approach theMultilateral Development Banks and submit a request for financing the system.

INSTITUTIONAL PERFORMANCE

4.3 Management and Organisation Effectiveness

4.3.1 The beneficiary and the executing agency of the project was the Ethiopian ElectricLight and Power Authority (EELPA). EELPA has been re-established since June 1997 as theEthiopian Electric Power Corporation (EEPCO) with the purpose of engaging in the businessof producing, transmitting, distributing and selling electricity.

4.3.2 The Organisational Structure that was in place at appraisal has been changed. As perthe present Organisational Structure, a General Manager who is assisted by four DeputyGeneral Managers heads the EEPCO. The four Deputy General Managers, in turn, headOperations, Engineering, Human Resources and Finance. The number of departments in theorganisation was reduced from 13 to 9. The re-structuring of EELPA and the managementchanges made by EEPCO are in compliance with the loan agreements and are expected toenable it to operate as an autonomous commercial organisation. This will give the companythe ability to design its own tariffs, organisational structure, personnel management, financesand procurement. EEPCO is no longer dependent on subsidies from the GOE’s Treasury.However, the institution has also been without a General Manager for a year and a half and67% of the members of the Board of Management are Ministers appointed by theGovernment, which could influence EEPCO’s independence.

4.4 Project Management Unit:

4.4.1 As per the appraisal report, a Project Management Unit was set up to supervise andcontrol all aspects of the project implementation. Annex 8 shows the Organisational Chart forthe Project Management Unit. A project co-ordinator was recruited for the purpose of co-ordinating the activities of the project and liasing with the contractors and EEPCO. EEPCOappointed a new project co-ordinator on January 25, 1996 to replace the previous co-ordinator who resigned in June 1995.

4.4.2 Thus, the NEPTP has been without a regular project co-ordinator for about sixmonths during which contractors were reported to have faced difficulties in obtainingclearances from several Government departments. The new project co-ordinator proved to bevery efficient and diligent in handling contractors’ problems as well as handlingadministrative matters. Furthermore, the executing agency’s other counterpart staff wasinadequately assigned.

4.5 Staff Recruitment, Training and Development

4.5.1 The staff position of EEPCO as on September 1992 (at appraisal) was 7861 while ason 30 June 1997 it stood at 8213, of which 7023 were male and 1190 were women. Theoverall staff level is adequate. However, the customer/staff ratio was 90 on October 1999 (thePCR preparation date) versus 50 at appraisal. In recent years, EEPCO has been losing

8

qualified engineers, accountants and lawyers to the private sector due to unattractive workingconditions (low wages, lack of internal training and very little promotional chances, lowmoral and motivation within the organisation). Lack of qualified manpower is particularlyacute in the regional offices. A comprehensive training program and execution plan wassubmitted to the Bank for improving the performance and productivity of all categories of theEEPCO staff.

4.5.2 A Manpower Planning and Development Division was created within the organisationto improve the productivity and performance of employees. In light of the new structure,EEPCO has prepared a new staff development plan and submitted it to its board for review.

Financial Performance

4.6 Past Financial Performance:

4.6.1 The financial statements of EEPCO have been prepared and audited annually by theAudit Service Corporation (ASC). For the year-ended July 1998, only a draft copy of theaccounts was available, as EEPCO had just forwarded the draft accounts to ASC for auditing.The Bank received audit reports from the executing agency. Our review of the auditedfinancial statements for the years ended July 1994 to July, 1997 revealed a number ofqualifications relating to fixed assets, goods in transit, provisions for doubtful debts, andcontingencies which have not been resolved yet.

4.6.2 Furthermore, the audit reports revealed that extraordinary items (equipment)amounting to Birr 5, 331,470, representing consignments of the distribution materials weresaid to have been impounded at the port of Assab in May, 1998 while on transit. Theesedistribution materials were reported to be related to contract E3-Distribution Hardware andAccessory –value DEM 172,020 and Contract-E5-Medium and Low Voltage Switch gears-value US$ 1,107,187.40. EEPCO Management still has to take necessary actions to resolvethese qualifications. NEPTP accounts were also separately prepared and audited.

4.6.3 EEPCO’s financial performance for the period (1993-1998) has improved and this hasenabled it to meet its operational costs, service its debt, and finance part of its capitalexpenditure. Details of the key ratios are provided in Annex 3 (a) and 3 (b). The corporationhas maintained its operational costs and financial charges at a reasonable level, asdemonstrated by its operational and financial ratios, which are in line with most of thefinancial ratio targets set at project appraisal.

4.6.4 However, EEPCO has not been able to meet the rate of return covenant agreed withthe Bank. The condition required the corporation to carry out a tariff study for the purpose ofbringing tariffs to a level ensuring a minimum rate of return of 5% on the re-valued fixedassets in operation. As the re-valuation of fixed assets carried out before 1993 was notadopted and a new one was not put in place, it was not possible to compute the 5 percentrequired by the covenant. Details of financial ratios for the Planned Investment Program arecontained in Annex 4 (a) and 4(b).

4.7 Tariffs, Billing and Collections

4.7.1 Traditionally, EEPCO has had a high level of account receivables, due to itscentralised billing and collection system that existed at appraisal. Between 1993 and 1995,

9

“days receivables” averaged 178 days. Since appraisal, it has improved its billing andcollection system by moving to a computer based, decentralised system. As a result, “daysreceivables” declined from 178 days in 1993 to 106 days in 1998. Efforts are being made toensure a collection target of current bills at 45 days while account receivables are expected tobe reduced to 90 days in 1999/2000.

4.7.2 In addition, EEPCO has established twenty-four collection centres in Addis Ababaand adopted a strict disconnection policy.

4.7.3 It is noted that EEPCO was not able to reduce the high level of account receivablesdespite submitting an action programme to the Bank specifying measures it had proposed totake for reducing the level of accounts receivables to three months of annual sales by June 30,1995.

4.7.4 Between 1995-98, EEPCO has increased tariff by over 30%. The present tariff (US$0.6 per kwh) is adequate to generate sufficient revenues that would meet the required self-financing ratio up to 2000/01. However, it will not be able to meet its self-financing ratiobeyond 2000/01 due to the heavy costs of its expansion program. Therefore, to improve itsfinancial performance, the corporation is expected to complement its cost reduction effortswith a gradual tariff increase, customer service improvement and increased sales ofelectricity.

4.8 Fulfilment of Loan Conditions

Annex 9 provides the financial conditions/covenants that were attached to the loan.The government in accordance with the Loan agreement with the exception of the followingfour fulfilled most of the conditions.

a) Revaluation of Fixed Assets

b) Reduction of Receivables

c) Settlement of Arrears

d) Base Tariff on 5% Percent Minimum Rate of Return

4.9 Financial Viability

4.9.1 The financial Internal Rate of Return (FIRR) of the project at appraisal was estimatedat 11.5% and was computed on the basis of incremental revenues and costs resulting fromthe implementation of the project. The recalculated financial and economic rate of returns ofthe project are based on the actual costs of the project, the energy consumption in the projectarea for 1998, the forecasted demand levels of energy, the average tariff level for electricitysupply, and operations and maintenance costs as confirmed during the PCR. The analysisuses i) actual costs and actual benefits for 1998, (the only year for which data is available)and ii) newly expected benefits for the remaining useful life of the project.

4.9.2 The recalculated financial rate of return of the project is 11.42% as compared to theforecasted 11.5% at appraisal. The recalculated FIRR compares favourably with the

10

estimated rate at appraisal and is well above the 10% average weighted cost of capitalrequired by EEPCO for similar projects.

4.9.3 The sensitivity analyses were undertaken to test the sensitivity of the tariff and energycosts to the viability of the project. The results suggest that the project is very sensitive toincreases in operating costs and tariffs. Although EEPCO has increased tariff over 30% in1995, 1997 and 1998, an effort is still needed to gradually increase the tariff rates and reducecosts.

4.10 Economic Viability

4.10.1 The economic benefits of the project were determined on the basis of its economicdevelopmental contribution to the national economy.

4.10.2 For the calculation of the EIRR, a conversion factor of 1.11 currently applied inEthiopia for investment projects, was used in comparison to the 1.375 conversion factor thatwas used at appraisal. All foreign exchange costs of the project have been converted intoeconomic costs by using this conversion factor. For local costs such as local materials,transportation, and labour, various conversion factors were used. The benefits have beencalculated for all consumers with and without the project as expressed by the willingness topay.

4.10.3 The revised Economic Internal Rate of return (EIRR) of the project is 17.75% and iswell above the opportunity cost of capital in Ethiopia estimated at 11% and the EIRRestimated at Appraisal- 16.56%. Annex 10 provides the assumptions used to recalculate theFIRR and EIRR and Annex 11 presents the calculations of the FIRR and EIRR.

5. ENVIRONMENTAL AND SOCIAL SUSTAINABILITY

5.1 The Northern Ethiopia Power Transmission Project was classified as category III. All230 kV, 132 kV and 66 kV transmission lines and substations were designed and constructedalong the existing routes and roads by following the environmental guidelines given in theAppraisal Report. The executing agency reported that lines did not pass through the tropicalrain forests and natural conservation areas. The substations were constructed on the landsallocated for industrial development, and did not result in uprooting of the population. Thetransformers were equipped with less hazardous oil, resting on the foundations designed topreclude the possibility of oil leaking from the transformer into the ground. Consequently, theProject’s overall negative impacts on the environment were negligible. On the other hand, theproject had a significant positive impact on the environment. These occurred as a result of theutilisation of cheap and renewable hydroelectricity, which displaced the use of imported oilfor running diesel generators, and traditional firewood energy for cooking.

5.2 The use of the electricity-operated Injira (Ethiopian dish) cookers displacing thefirewood-operated cookers has picked up. There are several artisans who are manufacturingthe Injira cookers and the price of cookers has declined from 400 Birr per piece to 300 Birrper piece due to a competitive situation. Yet, the problem constraining the use the cookers isthe lack of high capacity energy meters needed to be installed in houses in place of lowcapacity meters to promote the use of electric cookers. Over 30,000 energy meters have to beinstalled over the next three years, in order to realise the project’s overall positive impact onthe environment

11

5.3 The women are greatly benefiting from the use of electricity-operated cookers andwill have additional time to put it into productive use. Further, the project has had beneficialeffect on the development of education and health facilities in the region.

5.4 The industrial activity in the project area has increased creating new opportunities foremployment and growth and thus, improving the income (reducing poverty) and quality oflife in the project area. Since the commencement of the project in 1994, the number of smalland medium sized industries increased from 351 to 706 in 1999 (over 100 % increase)indicating the substantial contribution of the project to the economic development of theregion.

5.5 Yet, it has been difficult for the PCR team to estimate and collect a data for thequantity of firewood replaced by the electricity, additional time available for the womenthrough the use of electricity operated Injira cookers, and the rise in income of the people asan index to measure a decline in poverty. Nevertheless, these issues need to be addressedafter June 2001 when the overall impact of the project on the society will be displayedcompletely.

6. PROJECT SUSTAINABILITY

6.1 The Project, as completed, is technically and financially sustainable.

6.2 The operation of the project does not involve any technical risk of significant nature.The executing agency is unlikely to face any difficulty in operating the NEPTP project sincethey have experience in operating similar facilities (For Example- the Bank financed 230 KVKoka-Diredawa lines and substations). Further, the necessary spare parts for operation andmaintenance of the substations and lines have been planned and procured.

6.3 EEPCO has a regional office at Mekele that is supported by a number of sub-divisional offices, which are staffed with employees having the necessary technical,accounting and clerical skills for operating the substations and collecting the debts. Thetechnicians in the substations work in two shifts and maintain the lines and substations. Thekey system variables are recorded in the logbook. The substations are well guarded by thesecurity staff.

6.4 The financial sustainability of the project is hinged on the EEPCO‘s ability to reduceand recover its costs and increase tariffs. In other words, effective cost recovery systems arenecessary to be put in place in order to maintain effectiveness in carrying out its operations,paying its debt and financing part of its expansion program. The SMI contribute in generatingforeign exchange as most of the projects are export oriented and should be connected to thegrid. If the above steps are taken, the benefits will continue over the 35-year life of theproject under the normal operating conditions.

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7. PERFORMANCE OF THE BANK AND THE BORROWER

7.1 Bank

7.1.1 The Bank responded to the request of the Transition Government of Ethiopia quicklyand included the project in the 1992-lending program for Ethiopia. The undertaking of thepreparation and appraisal mission, loan negotiations and approval of the project within 9months after the submission of the Government’s request reflects on the Bank’s part, a highlevel of client focus and commitment to the welfare of the people and the Government of theFederal Democratic Republic of Ethiopia.

7.1.2 Yet, it is felt that in discharging its responsibility and obligations to the client, theBank should have launched the preparation and appraisal missions with proper duration andcomposition. In this particular case, the duration of the preparation and appraisal missionswas 12 days each including the time for travel. The missions were composed of a financialanalyst and a power engineer. No public utilities economist was involved in the missions.

7.1.3 During the implementation of the project, the Bank launched five supervisionmissions. The Bank's supervision missions contributed in solving the problems encounteredby the project.

7.1.4 Except for the problems reported below, the disbursement of loans was satisfactory:

The executing agency experienced difficulties in obtaining from the Bank theloan summary ledgers and disbursement vouchers for their record keeping andauditing of the project accounts on time.

The executing agency pointed out to the PCR Mission the delay in thedisbursement of the Advance Payment by the Bank to the Contractorimplementing the Contract-A.

Review of Audit Reports:

7.1.5 The Bank received both the audited accounts of EEPCO and the NEPTP. However,the reports were not reviewed and Bank comments were not communicated to the Borrower.The review of audit reports are important for i) monitoring the activities of projects, ii)highlighting strengths and weaknesses of the internal control systems of the corporation, andiii) for taking timely corrective action.

7.2 Borrower

7.2.1 The borrower took about 4 months for signing the loan agreement after the approvalof the loan by the Bank’s Board on 14 December 1992. The borrower, further, took 11months for complying with the loan conditions precedent to loan effectiveness. The timetaken by the borrower was inordinately long compared to the conditions being fulfilled. Theconditions to be fulfilled were (i) execution of a subsidiary loan agreement between theexecuting agency and the borrower and (ii) the selection of the project co-ordinator. Thedelays on account of the borrower contributed significantly to the project start-up delays.

13

7.2.2 The Government of the Ethiopia extended all possible help and co-operation to theBank’s Missions.

7.3 Executing Agency

Given the expediency to rebuild the war devastated region, the executing agencymade two slips in conceptualising the project: (i) implementation schedule was tight and (ii)the design of the project was not the least cost efficient. The implementation schedule ofthirty-six months was derailed due to the start up delays and problems reported in paragraph3.3. The project was completed behind schedule by 28 months. The Bank, having sensed theproblem with the design, included the review of the design by the project consultant in theTerms of Reference for consultancy services. The project design was optimised by the projectconsultant. Apart from the above, EEPCO's performance was commendable especially inrespect of installing and commissioning the 66 kV lines.

8. OVERALL PERFORMANCE RATING

8.1 The project was rated satisfactory with the major findings shown below. The detailsare given in Annex 12.

Indicator Rating RemarkImplementationPerformance

2.75 satisfactory

Bank's Performance 3.0 satisfactoryProject Outcome 3.45 satisfactory

8.2 The implementation performance is rated 2.75 because the executing agency did notadhere to the implementation schedule and the project was commissioned behind scheduleby 28 months.

9. CONCLUSION, LESSONS LEARNT AND RECOMMENDATIONS

9.1 Conclusions:

9.1.1 To conclude, the NEPTP project has been completed within the approved costestimates due to savings in cost. 17 of the 20 towns or 85% of the project concerned townshave been electrified. The three towns awaiting access to electricity are: Adi Shohu, AdiGodum, and Bizet, which will be electrified by June 2000. Further, the quality of thecompleted project is, in general, acceptable Since its commissioning on 6 June 1998, theproject has been operating successfully, barring one accident that resulted in the failure of a20 MVA transformer at Adigrat, the replacement of which is being addressed by the supplier.

9.1.2 The project has succeeded in delivering cheap and reliable electricity supply to theNorthern Region. EEPCO, however, still has to fulfil its part of connecting customers to theICS. There are more than 1000 domestic customers and a number of small and medium scaleindustries (11 MW potential demand) that have been reported to have paid connection servicefees, but remain unconnected to the grid. It is anticipated that the potential system demand(40MW) surpasses the appraisal’s estimated demand. Nevertheless, action still needs to betaken by EEPCO with respect to the following:

14

(i) Release connections to the small & medium industrial consumers (with 11 MWdemand) and 1000 domestic users who are waiting to be connected to the system.

(ii) Extend 15 kV distribution lines to Adi Shohu, Adi Godum, and Bizet

9.1.3 The recalculated financial rate of return of the project is 11.42% as compared to theforecasted FIRR of 11.5% at appraisal and is well above the 10% average cost of capitalrequired by EEPCO for new projects. The revised Economic Internal Rate of return (EIRR)of the project is 17.75%. This is well above the long-term lending rate, in Ethiopia, estimatedat 11%.

9.1.4 The overall institutional performance of the executing agency has improvedsince appraisal because of restructuring of EELPA- the executing agency.

9.2 Lessons Learnt

Bank

Implementation Schedule

1. The project implementation schedule should specifically include the separatemilestones for achieving loan signature and effectiveness. The Follow-up mission should belaunched even before the loan becoming effective to mobilise the borrower to fulfil the loanconditions precedent to its effectiveness. This will reduce start-up delays.

Review of Design

2. The design of the project done by EEPCO was not the least cost efficient and wasoptimised by the consultant in accordance with the Terms of Reference.

3. Further, the number of consumers receiving benefits from the project was estimated atAppraisal. However, the project design did not address the issue of removing the barriers(such as low per capita income) that hinder consumers in getting connected to the grid. In theface of monetary barriers on the part of consumers and constraints on EEPCO's part, it isbecoming difficult for the project to deliver full benefits to the consumers.

4. The plant substation contract experienced several problems due to detachment ofcivil works from it. The civil works were executed by a local contractor. Where the design ofthe civil works is dependent on the plant and equipment, such civil works should beintegrated in the plant contract in order to avoid the problem of non-co-ordination betweenthe contractors and bad quality of work.

5. The Bank should pay special attention to review the design of the project beforelaunching an Appraisal Mission.

Procurement of Goods & Services

6. The procurement of goods and services was carried out in accordance with FIDIC,1965 conditions of contract. The International contractors are more familiar with the FIDICprocedures than the executing agencies in the continent. The use of FIDIC conditions of

15

contract encourages contractors to lodge several claims. The Bank should considerdeveloping its own conditions of contracts for the supply and installation contracts.

Disbursement

7. The Bank should minimise delays in sending the Loan Summary Ledgers and LoanDisbursement Vouchers to the Borrowers and executing agency on a quarterly basis to assistthem in their record keeping and auditing of the project accounts in time. The irregularprovision of these reports by the Bank to the executing agency could lead to late submissionof the project audit accounts by the executing agency.

Loan Conditions

8. The executing agency was required to comply with eight loan conditions during theimplementation of project. However, very little technical assistance was provided to enablethe executing agency to implement some of the loan conditions. In fact, the executing agencyneeded technical assistance for revaluation of the fixed assets (that was one of the loanconditions) and it was later provided by the World Bank under Energy II project. Therefore,the Bank should consider including the loan covenants and, if necessary, technical assistanceto enable the executing agency to implement the conditions.

9. There is a need for the Bank to closely monitor and follow up the executing agency’sfulfilment of loan conditions.

Borrower

10. In future projects, the Borrower-GOE should reduce the time taken to comply with theloan conditions precedent to entry into force.

Executing Agency

Contract Negotiations

11. The executing agency, before agreeing to the contractors' claims, extension of timeand money, should consult the Bank and obtain its approval.

9.3 Recommendations

To sum up, Annex 13 presents a matrix of recommendations and follow-up. Themajor sources of information are described in Annex.14.

AdigratAksum

Mek’ele

TIGRAY

Maych’ew

Himora

Gonder

GONDER

DebreTabor

Weldiya

Dese

WELOBahir Dar

DebreMark’os

GOJAM

Asosa

Nek’emte

WELEGA

DebreBirhan

AddisAbaba

Nazret

SHEWA

DireDawa

JijigaHarer

Degeh Bur

Werder

KebriDehar

Gode

Imi

HARERGE

Asela

ARSI

Goba

BALE

DoloOdo

Awasa

KibreMengist

Negele

SIDAMO

Moyale

ArbaMinch

Kelem

GAMOGOFA

Gambela Gore

ILUBABOR Jima

KEFA

ERITREA

SUDANDJIBOUTI

KENYA

SOMALIA

This map has been drawn by the African Development Bank Group exclusively for the use of the readers of the report to which it is attached. The names used andthe borders shown do not imply on the part of the Bank and its members any judgement concerning the legal status of a territory nor any approval or acceptance ofthese borders.

IndicativeProject area

ANNEX 1

Annex 2Page 1 of 2

Annex 2Page 2 of 2

ANNEX3 A

ETHIOPIA

NORTHRENETHIOPIAPOWERTRANSMISSIONPROJECT

ETHIOPIAELLECTRICPOWERCORPORATION

PASTFINANCIALPERFORMANCE

Past Balance Sheets

As at 30 June 1993- 1998

1992/93 1993/94 1994/95 1995/96 1996/97 1997/98

1985 1986 1987 1988 1989 1990

Actual Actual Actual Actual Actual Under audit

ASSETS EMPOYED

FixedAssets(gross) - - - 3556951 4079074 4590128

Less : Accumuateddepreciation - - - 1321924 1400274 1472154

Net FixedAsset 2101202 2173597 2304246 2356597 2678800 3117974

Investment in Securities 174 175 1175 1175 1175 1175

Long terminvestment (E.A.L) - - - - 908212 664980

Deferredrevenue expenditure 536939 726085 714462 616114 411129 351260

Advance payment tocontractors - - - - 334230 361424

Total 2638315 2899857 3019883 2973886 4333546 4496813

Current Assets

stock 123394 160489 176235 204162 202253 372601

Goods inTransit 146220 143270 198881 169685 192356 215974

Trade Debtors 171330 139951 153969 139411 103840 159880

Other Debtors 113690 93004 117339 265307 92939 280040

long terminvestment current portion - - - - - -

TreasuryBills &Long terminvestments - - - 173137 448360 725780

Cash at the Bank/Hand 76134 186363 280237 372493 899635 672636

Total current assets 630768 723077 926661 1324195 1939383 2426911

Total current assets excluding cash 554634 536714 646424 951702 1039748 1754275

Total assets 3269083 3622934 3946544 4298081 6272929 6923724

CURRENTLIABILITIES

Capital charges payable 268498 290706 278390 278390 278390 278390

Creditors 339516 184177 541746 335598 44820 64465

Interest payable - - - - 356673 376194

long termloan-cur. Mat. Portion - 93386 92403 476839 496285 554762

Sundarycreditors - - - - - -

Taxes payable - - - - -14594 44263

Residual surplus payable 28088 28088 28088 43153 43153 43153

Dividendpayable - - - - - -

Total current liabilities 636102 596357 940627 1133980 1204727 1361227

Net current assets -5334 126720 -13966 190215 734656 1065684

ANNEX 3 B

ETHIOPIA

NORTHREN ETHIOPIA POWER TRANSMISSION PROJECT

ETHIOPIA ELECTRIC POWER CORPORATION

PASTFINANCIALPERFORMANCE

Past income Statement

1992/93 1993/94 1994/95 1995/96 1996/97 1997/98

1985 1986 1987 1988 1989 1990

Actual Actual Actual Actual Actual Under audit

Sale (GWH) 1333 1385 1576 1863 2190 2848

Average Tariff (birr/kwh) 0.4236 0.4242 0.45 0.4242 0.4242 0.4242

Average Tariff (US$/kwh) 0.0563 0.0564 0.0598 0.0564 0.0564 0.0564

REVENUE

Sales of Electricity 205210 214433 274104 319123 360533 521510

Connection fees 5112 5685 6327 20856 22016 27759

meter service charge 1183 10500 1682 3039 2942 3279

miscellenous revenue 5484 15204 19182 14924 5214 44531

interest income - - - 4890 34106 53741

Operatin Revenue 211505 230618 282113 343018 385491 552548

Total Revenue 216989 245822 301295 362832 424811 650820

OPERATINGEXPENSES

Salaries & wages 38872 42000 39844 41943 47361 53479

personnel costs 2721 9726 3479 2598 4705 13392

material & supply 7704 23185 13260 7792 5190 18221

Production & Distribution 95784 81355 111514 139493 165105 139915

others 13767 7691 12375 13464 17812 19905

158848 163957 180472 205290 240173 244912

Depreciation 8420 5650 3255 3646 5266 7605

Total Operating Expenses 167268 170559 183727 208936 245439 252517

Gross Profit (loss) 49721 75263 117568 153896 179372 398303

NON OPERATINGEXPENSES

Capital charges 53362 53362 - - - -

interest expenses 27277 44078 48409 55962 51460 48189

Amortization Deferredcharges 69289 30588 50919 46917 51510 58154

Gain or loss in exchange rate difference -15796 4074 - - - 5697

other expenses 891 488 2106 1059 2021 1696

Total nonoperating expenses 135023 132590 101434 103938 104991 113736

Total expenses 302291 303149 285161 312874 350430 366253

ETHIOPIA

PROJECT COMPLETION REPORT

NORTHREN ETHIOPIA POWER TRANSMISSION PROJECT

ETHIOPIA ELECTRIC POWER CORPORATION

FUTURE FINANCIAL PERFORMANCE

Projected Balance Sheet for Planned Investment Programme

As at 30 June 1999- 2004

1998/99 1999/00 2000/01 2001/02 2002/2003 2003/04

1991 1992 1993 1994 1995 1996

Est/actual Budgeted Projected Projected Projected Projected

Asset employed

Fixed Assets(gross) 5796358 6702411 8961202 11902423 14412941 14792941

Less : Accumuated depreciation 1557942 1647942 1759402 1909214 2122157 2406616

Net Fixed Asset 4238416 5054469 7201800 9993209 12290784 12386325

Investment in Securities 1175 1175 1175 1175 1175 1175

Long term investment (E.A.L) 543364 421748 300132 178516 56900 -64716

Deferred revenue expenditure 297873 320205 342205 364253 386194 408135

Advance payment to contractors - - - - - -

Total 5080828 5797597 7845312 10537153 12735053 12730919

Current Assets

stock 391231 410793 431332 452899 475544 499321

Goods in Transit 226773 238111 250017 262518 275644 289426

Trade Debtors 150296 103496 123294 137315 160619 206944

Other Debtors 210115 157586 118190 88642 66482 49861

long term investment current portion 121616 121616 121616 121616 121616 121616

Treasury Bills - - - - - -

Cash at the Bank/Hand 1479036 1508346 755846 20000 20000 714473

Total current assets 2579067 2539948 1800295 1082990 1119905 1881641

Total current assets excluding cash 1100031 1031602 1044449 1062990 1099905 1167168

Total assets 7659895 8337545 9645607 11620143 13854958 14612560

CURRENT LIABILITIES

Capital charges payable - - - - - -

Creditors 61242 58180 55271 52507 49882 47388

Interest payable - - - - - -

long term loan-cur. Mat. Portion 158127 156435 154594 154744 150955 157454

Sundary creditors - - - - - -

Taxes payable 84495 90980 17764 Status of Disbursements:

Residual surplus payable - - -

Dividend payable - 30096 31340 Effective Date

Total current liabilities 303864 335691 258969 Initial Disbursement Deadline: 31/12/87

Net current assets 2275203 2204257 1541326 Last Disbursement Deadline: 31/12/99

Disbursed Amount

Annex 4 (a)

ETHIOPIA ANNEX4B

PROJECTCOMPLETIONREPORT

NORTHRENETHIOPIAPOWERTRANSMISSIONPROJECT

ETHIOPIAELECTRICPOWERCORPORATION

FUTUREFINANCIALPERFORMANCE

Projectedincome Statement

1998/99 1999/00 2000/01 2001/02 2002/20032003/04

1991 1992 1993 1994 1995 1996

Est/actual Budgeted Projected Projected Projected Projected

Sale (GWH) 1333 1385 1576 1863 2190 2848

Average Tariff (birr/kwh) 0.4236 0.4242 0.45 0.4242 0.4242 0.4242

Average Tariff (US$/kwh) 0.0563 0.0564 0.0598 0.0564 0.0564 0.0564

REVENUE

Sales of Electricity 564659 587517 709200 790285 928998 1208122

Connection fees 41895 42500 46762 53977 62039 76359

meter service charge 42045 42801 41000 45000 48000 51000

miscellenous revenue 6992 41482 47963 57119 70065 88523

interest income 57497 48186 23262 17414 11565 5728

Total Revenue 713088 762486 868187 963795 1120667 1429732

OPERATINGEXPENSES

Fuel andLubricants 15310 19010 21980 26170 32109 40568

Salaries andwages 82271 83819 92201 101421 111563 122719

personeel costs 14015 10397 11437 12580 13838 15222

material & supply 53103 65170 76152 88649 97998 99290

others 22027 22510 26074 31052 38090 48124

186726 200906 227844 259872 293598 325923

depreciation 85788 90000 111460 149812 212943 284459

Total Operating Expenses 272514 290906 339304 409684 506541 610382

Gross Profit (loss) 440574 471580 528883 554111 614126 819350

NONOPERATINGEXPENSES

Capital charges

interest expenses 30792 27286 23461 19603 15693 33874

Devaluation loss amortization 37814 - - - - -

Gain or loss in exchange rate difference 10000 - - - - -

other financial charges 2077 2380 2752 3277 4020 5079

Total nonoperating expenses 80683 29666 26213 22880 19713 38953

Total expenses 353197 320572 365517 432564 526254 649335

Annex 5

NORTHERN ETHIOPIA POWER TRANSMISSION PROJECTAPPRAISAL ESTIMATES VS ACTUAL EXPENDITURES BY

CATEGORY OF ADB AND ADF LOANS

CATEGORY ESTIMATES AT APPRAISAL ACTUAL CATEGORY EXPENDITURES

CATEGORY DESCRIPTION ADB ADF TOTAL ADB ADF TOTAL

LC001/GE26 230 kV LINE 6,640,000.00 7,730,906.88 14,370,906.88 6,640,000.00 7,730,906.88 14,370,906.88

LC002/GE26 132 kV LINE 310,000.00 5,270,000.00 5,580,000.00 - 5,233,406.53 5,233,406.53

LC003/GE26 66 kV LINE 1,701,446.35 4,513,000.00 6,214,446.35 1,603,243.24 4,490,903.87 6,094,147.11

LCOO4/GE27 15 kV LINE 1,620,000.00 558,999.99 2,178,999.99 1,619,078.63 551,884.38 2,170,963.01

LC005/GE27Z DISTRIBUTION NE 795,000.00 0.01 795,000.01 710,629.34 - 710,629.34

LC007/0 230/132/66 kV S 7,550,000.00 5,470,717.05 13,020,717.05 7,210,345.92 4,951,647.09 12,161,993.01

LC008/SC LOGISTICS 200,000.00 602,837.07 802,837.07 90,430.13 413,467.81 503,897.94

LC009/U1 CONSULTANCYSER 500,000.00 10,000.00 510,000.00 478,041.28 - 478,041.28

LC011/GE27Z TRANSFORMERS 2,380,000.00 3,473,000.00 5,853,000.00 1,949,026.89 3,308,185.93 5,257,212.82LC009/U1 PHYSICAL

CONTIN 77,254.00 1,010.00 78,264.00 - - -

LC010/U2 PRICE CONTING 222,771.00 1,089.00 223,860.00 - - -

21,996,471.35 27,631,560.00 49,628,031.35 20,300,795.43 26,680,402.49 46,981,197.92

Annex 6

NORTHERN ETHIOPIA POWER TRANSMISSION PROJECTPROJECT COMPLETION REPORT

DISBURSEMENT BY SOURCE OF FINANCE

----APPRAISAL-- -----ACTUAL------

ADB ADF GOE ADB ADF GOE

1993 3.66 4.51 2.98 - - -1994 8.54 9.52 6.95 - 0.41 0.51

1995 9.76 10.88 7.95 2.55 12.83 0.62

1996 2.44 2.72 1.99 0.91 5.00 2.94

1997 - - - 11.61 4.28 11.67

1998 - - - 3.25 3.64 6.96

1999 - - - 1.79 0.92 0.92

TOTAL 24.39 27.64 19.86 20.11 27.08 23.62

Annex 7 (a)Northern Ethiopia Power Transmission Project

Contracts and Final Schedule of Prices

Component Original Contract PriceAmount Certified by the

EngineerC/y Amount

A. 230 kV Line FRF 34,780,306.00USD 14,594,696.00ETB 23,079,409.00

FRFUSDETB

36,370,875.4914,791,979.3516,934,470.93

B. 132 kV Line USD 4,869,843.56ETB 16,630,962.24

USDETB

5,139,177.1612,237,295.88

C. 66 kV Line (Supply only) 0USD 5,622,892.95 USD 5,620,155.25

D&E 15 kV Distribution Line and NetworkE1 – Distribution TransformersE2 – Distribution ConductorsE3 – Distribution Hardware & Access.E4A – Energy MetersE4B – Energy MetersE5 - Distribution M & LV switchgearsE6 - Disk Insulators & AccessoriesE7 - Distribution M & LV InsulatorsE8 - RejectedE9 - Street Light MaterialsE10 - Chemicals for Preservation of Wood Poles

USD 1,005,619.60USD 2,009,824.60DEM 2,441,125.50SWF 1,914,425.00USD 2,232,176.00USD 3,627,701.00USD 623,369.00USD 495,602.00

LIT 667,785,000.00GBP 335,975.90

USDUSDDEMSWF/CHFUSDUSDUSDUSD

LITGBP

1,002,619.602,009,824.602,441,125.501,914,425.002,232,176.003,627,701.00

623,369.00495,602.00

667,785,000.00335,975.90

F - 230, 132 & 66 kV SubstationsD1 – 230 kV Substations

D2 – 132 kV Substations

– Transformers

- Reactors

DEM 11,300,422.51ETB 695,173.41DEM 7,787,829.63ETB 606,860.94DEM 7,773,305.00ETB 1,066,597.00DEM 3,520,568.02ETB 157,363.05

DEMETBDEMETBDEMETBDEMETB

11,471,347.63646,109.90

7,977,301.10668,272.62

7,494,871.001,015,809.003,297,696.76

132,031.75

G – LogisticsG1 – Heavy Duty TrucksG2 – Light Duty TrucksG3 – Double Cabin PickupsG4 – TOYOTA Station WagonsG5 – (Rejected)G6 - MITAC ComputersG7 & G8 (Rejected)G9 - Distribution M & LV Insulators

LIT 269,215,000.00YEN 13,492,734.00YEN 19,936,150.00YEN 10,418,860.00

USD 44,603.50.00

DKK 74,222.00

LITYENYENYEN

USD

DKK

269,215,000.0013,492,734.0019,936,150.0010,418,860.00

44,603.50

74,222.00

H – Consultancy Services(Local Payment – 342,041.00 GBP at theexchange rate prevailing at the time ofsubmission of invoice)

GBP 1,382,898.00

GBP 342,041.00

GBP

ETB

1,580,360.00

2,851,199.61

Annex 7 (b)

Civil Contracts & 66 kV Line Construction by EEPCO (Local Cost)

ComponentAmount Certified by the Engineer

C/y AmountF1 Staff Residence, Melke Worku ETB 3,601,856.27F6 – S/S Civil Works Mekele, Adwa, Adigrat & Ende Silassie ETB 12,757,528.33F7 S/S Civil Works Alamata, Lalibela, Maychew, Sekota &

Bahir Dar Ext. Awetahegn KirosETB 13,461,082.86

66 kV Line construction by EEPCO ETB 14,645,425.87Total (ETB) – Local Contractors 44,465,893.33Total (ETB) – International Contractors 34,223,418.19GRAND TOTAL (ETB) 78,689,311.52

Source: Borrower's PCR

Annex 7 (c)Page 1 of 3

Performance of Contracts and Consultant

Contract –A-230 kV Transmission line

1. The contract for a 500 km of lines between Bahirdar - Alamata and Alamata - Mekele was awardedto Spie Enertrans/Sade Vigesa (France and Brazil consortium) for a value of US$14,594,696, FF 34,780,306and Birr 23,079,409 and signed on 31 May 1995. The performance of the contractor was not entirelysatisfactory due to 1) start-up delays, 2) financial difficulties of the Sade Vigesa, 3) lack of adequate staff atthe initial stage, and 4) quality of workmanship (tower foundations) initially. The final costs, which werecertified by the Engineer were US$14,791,797.35 (over contract by $197,283.35) FF36, 370,875.49 (overcontract by FF 1,590,569.49) and Birr 16,934,470 (under contract by Birr 6,144,938.07). The ExecutingAgency settled the Contractor’s US$ 4.5 million claims in US$ 1,500,708 and Birr 1,035,261, by waivingthe liquidating damages against the Contractor (due to late completion of the contract). The Bank declined topay the claims to the contractor and informed the government and the executing agency about it. Thecontract was completed approximately 5 months behind schedule with handing of Bahirdar - Alamatasection on 7 April 1998 and Alamata -Melele segment on 20 May 1998. The relevant training was arrangedand provided by another sources.

Contract-B-132 kV Transmission line

2. The contracts for the Mekele–Adwa (117km) and Mekele–Adigrat (90km) lines were awarded toKEC International, India for US$4,869,843.56 and Birr 16,630,962.24 on 16 October 1995. The contractsuffered delays due to late submission of the tower design (at one point during the contract he was late up tosix month), prototype, and manufacture of towers. At EEPCO’s instructions, the contractor produced towersbased on the preliminary 132 kV transmission lines surveys. Later, the check surveys done by the contractorrevealed the towers produced by the contractor were far greater than the required for construction of lines.Utilising some of the extra towers produced by the contractor, EEPCO constructed an additional line fromMekele-Massobo (5 km) to supply power (up to 20 MW) to a cement factory using their own funds. Thecontract was completed on 31 March 1998. The contractor's site management was poor, which he laterimproved after increasing the work force and completed the contract with a delay of approximately 3.5months. The final contract cost certified by the Engineer was US$5,139,177.16 (US$269,334 over thecontract) and Birr 12,237,295 (Birr 4,393,667 under the contract). The Bank approved the addendum toContract-B for USD 268,946.30 for the supply of extra towers.

66 kV head lines

3. The contract for supply of the materials for Alamata - Lalibela (105km), Alamata-Sekota(80km), Alamata-Maychew (48km), and Adwa – Endeselassie (67 km) was awarded to M/S Jyoti Structuresof India with a contract price of US$ 5,622.892 on 25 May 1995. Design modification in the number andtower span length were agreed with a slight reduction in contract price (Birr 305,500). Delays wereexperienced with the supplier from inception. Some of the delays were due to late submission/delivery of (i)project programme (ii) designs of towers (iii) vehicles, foundation reinforcements, & templates and (iv)Delivery of some of steel, insulators, conductors & fittings. The take over certificates was issued on 19November 1996. The final cost certified by the Engineer was US$5,570, 479 (US$52,413 below the contractamount). The Executing Agency deducted $62,786.31 from the Final Certificate for Liquidating Damages.The contractor has a claim pending in the amount of US$ 49,675.99. Using the materials supplied by JyotiStructures

Annex 7 (c)Page 2 of 3

EEPCO constructed the lines from their own resources. The construction phase started in April 1996 andthe four 66 kV lines were completed in January 1998. EEPCO's performance was commendable.

230,132 and 66 kV Substations

4. The contracts for the 230 kV substations Alamata, Mekele, Bahirdar, (contract D1), and the 132 &66 kV substations at Adwa, Adigrat, Endeselassie, Maychew, Labilela, and Sekota (contract D2) in theamount of DM 19,088,252.16 and Birr 1,302,034.35 were signed with M/s AEG, Germany on 25 May 1995.The Contractor delayed in submitting design. The design had several deficiencies, which were pointed outby the Consultant. AEG’s interpretation of the design and alteration of specifications with their ownstandards, were the cause of the deviations and delays. In addition, the contractor failed to fill the position of“Commercial Assistant to Site Project Manager” at Addis Ababa, which caused substantial delays inshipment of materials and processing of payments. Inefficient cargo clearance and delivery of equipment tothe site compounded the late shipment. The failure of the contractor to take corrective action on theproblems brought to their attention in official correspondence by the Consultants, and difficulties incommissioning of all of the substations, due to a lack of trained technical staff & equipment, had renderedall substations commissioned with many defects. The executing agency reported that the defects have beenrectified. However, the PCR Mission noted some energy meters non-functioning during the visit to thesubstations. In total, the contract was delayed by about six months. The Executing Agency’s final take overdate was 6 June 1998. The final costs, which were certified by the Engineer were DM19,448,648.73(DM360,396.57 over contract) and Birr 1,314,382.52 (Birr 13,348.17 over contract). The contractor madecertain claims, which were resolved by the Executing Agency, by waiving the liquidating damages andaccepting additional cost of DM 606,815 on both the contracts. However, the Bank did not agree to theabove settlement. The training component was provided by another source.

Transformers

5. The contract, in the amount of DM7,773,305 and Birr 1,066,597, was signed with EFACEC ofPortugal on 25 May 1995. The contractor and the executing agency agreed the minor variations without anysignificant cost. A 20 MVA transformer failed while it was being re-enrgised and its failure was an accident.The final cost certified by the Engineer was DM7,494,871 (DM478,434 under the contract) and Birr1,015,809 (Birr50,786 under the contract). The transformer is being replaced by the contractor at hisexpense. The contractor’s performance security has been extended to June 2000 to ensure the replacement of20 MVA transformer by that date.

Reactors

6. The Contract, in the amount of DM 3,520,568.02 and Birr 157,363.05, was signed with AEGSchorch on 25 May 1994. The Contractor did not manufacture the reactors to the specifications. Testing ofone of 15MVAr reactors indicated failure to conform to the design specifications concerning maximumlosses. The losses during the test exceeded the limit defined in the contract. The reactors did not perform on–10% tap. The contractor was penalised and a reduction in payment to the contractor was made for itsreduced performance . The executing agency and the consultant considered the reactor as acceptable tothem. The final contract cost certified by the Engineer was DM 3,297,696.76 (DM 222,871.26 belowcontract) and Birr 132,031.75 (Birr 25331.30 below contract).

Annex 7 (c)Page 3 of 3

Contract- Distribution-D&E Component

7. The supply of 50/100/315 KVA distribution transformers, conductors, distribution hardware &accessories, energy meters, low & medium voltage switchgear, disk insulators & accessories, street lightsand the chemical for treating wood poles were provided by a number of vendors. All contracts were awardedon 21March 1997. Some of the contracts (E1, E3, E4A, E6 and E9) suffered delays using the Bank’s letterof credit procedure. The executing agency reported that due to above delay, three consignments remaineduncleared at Assab port (Eriteria). The mode of payment by the letter of credit requires a lengthy process,which delayed the supply of materials and the completion of the project. Further, according to the Bank’sregulation, the minimum possible amount for opening a letter of credit is UA 200,000. The executing agencyfaced difficulties in effecting payment to the contractor for the supply of street light materials because theamount to be paid was less than UA 200,000.

Civil Works

8. The substation civil works contract was divided into two parts: F6-Mekele, Adigrat, Adwa &Endelassie and F 7-Bahirdar, Alamata, Sekota, Lalibela and Maychew. The Contracts F6 & F7 wererespectively awarded to M/s Samuel Teklay for Birr 9,424,776.30 and to M/s Awetahgne Kiros for Birr11,259,55.00. Both Civil contractors finished late and with quality that was below international standards.The problems due to a lack of co-ordination and design consistency were reported between the civilcontractors and the plant contractor-M/s AEG. This would have been avoided, had the executing agencyintegrated civil works in the substation contract. The Contract-F1 was for the construction of the staffhousing at Alamata, Mekele, Adigrat, and Adwa. The F1 contractor failed to complete dwellings due to lackof resources. Consequently, the contractor was expelled from the site on April 29, 1998. The EEPCO willhave to complete the unfinished works.

Logistics

9. Operational Vehicles for transportation of wood poles, construction materials, construction teamsand EEPCO’s staff to the sites were procured in July and in November 1994. Personal computers andphotocopy machines were procured in February 1995.

Consultancy Contract

10. The consultancy contract was awarded to M/s Kennedy and Donkins on 11 January 1994 for anamount of GBP 1,382,898 and ETH Birr 342,041. The scope of the Consultancy works included the reviewof the designs and tender documents, approval of contracts, drawings & documents, supervision of alltransmission lines and substations and approval of the payment certificates. The Bank approved anaddendum to the consultancy contract for an amount of GBP 197,461. The consultants performedsatisfactorily. However, their review of the contractor’s claims and acceptance of reactors with a lowperformance, were unsatisfactory.

Annex-8

NORTHERN ETHIOPIA POWER TRANSMISSION PROJECTORGANIZATION CHART OF THE PROJECT MANAGEMENT UNIT

GeneralAdministrator

230kV, 132kV LineSupervisor

Distribution NetworkSupervisor

230kV, 132 kV & 66 kVSubsatation: Electrical& Electromechanical

Supervisor

Civil Works &Sub-stationSupervisor

Deputy Site Manger

PROJECT SITE MANAGER

PROJECT COORDINATOR

Annex 9Page 1 of 2

PROJECT COMPLETION REPORTNORTHERN ETHIOPIA POER TRANSMISSION PROJECT

CONDITIONS/COVENANTS OF THE ADB AND ADF LOANS

The loans will be subjected to the following conditions :

A. Conditions Precedent to the Effectiveness of the Loan Agreements

Prior to the effectiveness of the loan agreements, the Borrower shall:

i) Conclude subsidiary loan agreements with EELPA for on-lending the entireproceeds of the loans on the same terms and conditions on which it has receivedfrom the Bank Group (4.0.1);

ii) Cause EELPA to submit to the Bank for approval curriculum vitae of the Project Co-ordinator (3.8.1).

B. Other Conditions

Furthermore, the Borrower shall :

i) Revise, not later than 31 December 1994, EELPA's Establishment Charter whichwill be aimed at defining the mandate of the Authority granting it autonomy in itsoperations particularly in the design of its organisational structures, tariffsdetermination, personnel management, finance and procurement matters (4.1.3);

ii) a) Settle by 31 December 1994 all arrears owed to EELPA and furnish to the Bankdocumentary evidence thereof (4.7.5);

b) Cause EELPA to submit to the Bank by 30 June 1993 an action programmespecifying measures it proposes to take to reduce the level of the accountsreceivable to three months of annual sales by 30th June 1995 (4.7.5);

iii) Cause EELPA to submit to the Bank, not later than 31 December 1993 acomprehensive training programme and an execution plan for all categories ofEELPA's staff aiming at the improvement of their performance and productivity(4.3.4);

iv) Cause EELPA to carry out a tariff study by 30 June 1994 which will be aimed atbringing tariffs to a level ensuring a minimum rate of return of 5% on the re-valuedfixed assets in operation and, in consultation with the Bank, implement the findingsof such a study by June 1995 (4.6.2);

Annex 9Page 2 of 2

v) Approve the revaluation of fixed assets already undertaken by 30 June 1993 andsubmit to the Bank evidence that the outcome of such revaluation has beenimplemented by EELPA by :1 December 1993 (4.4.1);

vi) a) Appoint, in consultation with the Bank, a reputable accounting firm to be chargedwith auditing on annual basis the utilisation of proposed loan proceeds and submitto the Bank the audited financial statements not later than three months after theend of the financial year and (4.4.3);

b) Cause EELPA to submit to the Bank, not later than 30 June 1993, auditedfinancial statements for 1991 and 1992 and subsequent statements not later thansix months after the end of fiscal year.

Annex 10Page 1 of 3

ETHIOPIANORTHERN ETHIOPIA POWER TRANSMISSION PROJECT

ASSUMPTIONS FOR THE RECALCULATION OF FINANCIAL INTERNAL RATE OFRETURN

Cost Estimates

1. The Initial investment cost is based on actual cost of the project which is taken from theannual reports and the foreign and local expenditures are provided below.

Grid Operating and Maintenance Costs

2. Annual operation and maintenance costs, including interim replacement is taken at 2%per annum of the initial investment costs, out of which foreign exchange part is 85%.

Grid Energy Cost

3. The cost of energy supplied from the grid is based on the long run marginal cost ofelectricity supply which incorporates both the cost of energy and capacity. Estimates oflong run Marginal cost (LRMC) of grid energy differs in various studies within the rangeof 35 to 70 cents per Kwh. The Tariff study report of EEPCO (1998) estimated it to be35 cents per Kwh. Even though there is a need for further review of EEPCO LRMCestimate the report has adopted the estimate of 1998.

4. Grid energy cost and distribution costs are estimated at 35% of generated MWH.

Economic Life

5. Transmission lines and substations are assumed to have an economic life of 35 years.

Tariffs

6. The Tariff used is estimated at (US$ 0.12) 0.96 Ethiopian Birr per Kwh.

Data Sources

7. The first year generation is taken from the actual data source and is almost equal to theload forecast made at appraisal and the load forecast done at feasibility study. Therefore,the use of the load forecast for the calculation is justified.

8. Revenues are calculated on the basis of actual load forecast for 1998 year and loadforecast for other years.

9. A discount rate of 10% which is the current average borrowing rate of capital in thecountry is applied. The current exchange rate is 1 USD = 8 Birr is applied in the report.

Annex 10Page 2 of 3

The financial benefits are based on the revenue that is attributable to the project. Thetariff adopted is similar to the appraisal report and is (US$0.12) 0.96 cents per Kwh.

Deflation

The constant pricing methodology has been used, with 1993 as a base year for investment costs.The investment costs for 1993 to 1999 have been deflated by the Consumer Price Index toreflect 1993 prices. Operating and Maintenance costs and Grid Energy costs have also beenadjusted by the Consumer Price Index to reflect 1993 prices. Using of constant pricing wouldallow uniform comparison between FIRR at appraisal and the actual FIRR at completion.

The following are CPI’s

Years CPI’s1993 849.001994 858.901995 973.601996 982.601997 919.501998 915.65*1999 915.65**

Investment Costs at 1993 constant prices and at current prices

The investment costs as per actual disbursement schedule as follows:(Birrr)

Years Investment costs Investment costs(current prices ’millions) (1993 constant prices ‘ millions)

1993 0 01994 8.10 8.011995 149.83 130.651996 80.12 69.221997 256.08 236.531998 135.96 126.061999 39.18 36.38

Annex 10Page 3 of 3

NORTHERN ETHIOPIA POWER TRANSMISSION PROJECTASSUMPTIONS FOR THE RECALCULATION OF ECONOMIC INTERNAL RATE

OF RETURN

Conversion Factors

1 In calculating the economic internal rate of return (EIRR), all financial costs areconverted into economic costs by using the following appropriate conversion factors

Foreign ConversionComponent Factor

1. Initial investment cots 85% 0.9322. O& M costs 30% 0.9763. Grid Energy Cost 30% 0.9764. Benefits - 1.60

2 Foreign exchange

About 85% percent of Initial investment costs is in foreign exchange. The foreign exchange financial costs are converted into economic costs using a

conversion factor for foreign exchange of 1.11 which was calculated and given by theEthiopian Authorities.

3. Local costs

Various breakdowns and conversion factors assumed for local costs such as localmaterials, transport costs, labor costs, operating and maintenance costs, and distributioncosts were provided by the Government of Ethiopia.

4. Benefits

The main benefits of the project were assessed on the basis of consumer surplus with andwithout the project. These were derived from the costs of power per Kwh from presentsource available in the area. These costs were converted to economic costs. The averagecost of alternative source of energy in the area and the present tariff were applied for thepurpose of consumer surplus. The consumer surplus was found to be approximately 60%above the present tariff rate.

Annex 11 (a)NORTHERN ETHIOPIA POWER TRANSMISSION PROJECT

FINANCIAL ANALYSIS

Capital 0per. & Grid Total PV

Total Net

NOYear Gen. Inves. Maint. Energy Cost C

ost

Benefit Benefit

(MWh)(Birr) (Birr) (Birr) (Birr) (

Birr)

(Birr) (Birr)

0 1994 8.01 8.01 -8.011 1995 130.65 130.65 -130.652 1996 69.24 69.24 -69.243 1997 236.53 236.53 -236.534 1998 126.06 126.06 -126.065 1999 45.42 36.38 12.14 14.74 63.26 36.09 -43.116 2000 85.66 12.14 27.80 39.94 68.08 28.147 2001 103.68 12.14 33.65 45.78 82.40 36.628 2002 122.10 12.14 39.62 51.76 97.04 45.289 2003 129.27 12.14 41.95 54.09 102.73 48.65

10 2004 136.90 12.14 44.43 56.56 108.80 52.2311 2005 147.51 12.14 47.87 60.01 117.23 57.2212 2006 158.94 12.14 51.58 63.72 126.31 62.6013 2007 171.25 12.14 55.58 67.71 136.10 68.3914 2008 184.53 12.14 59.88 72.02 146.65 74.6315 2009 198.83 12.14 64.52 76.66 158.02 81.3616 2010 214.24 12.14 69.52 81.66 170.26 88.6017 2011 230.84 12.14 74.91 87.05 183.46 96.4118 2012 248.73 12.14 80.72 92.86 197.68 104.8219 2013 268.01 12.14 86.97 99.11 213.00 113.8920 2014 288.78 12.14 93.71 105.85 229.50 123.6521 2015 311.16 12.14 100.98 113.11 247.29 134.1822 2016 335.27 12.14 108.80 120.94 266.46 145.5223 2017 361.26 12.14 117.23 129.37 287.11 157.7324 2018 389.25 12.14 126.32 138.46 309.36 170.9025 2019 419.42 12.14 136.11 148.25 333.33 185.0826 2020 451.93 12.14 146.66 158.80 359.16 200.3727 2021 486.95 12.14 158.03 170.16 387.00 216.8428 2022 524.69 12.14 170.27 182.41 416.99 234.5829 2023 565.35 12.14 183.47 195.61 449.31 253.7030 2024 609.17 12.14 197.69 209.82 484.13 274.3131 2025 656.38 12.14 213.01 225.14 521.65 296.5132 2026 707.25 12.14 229.52 241.65 562.08 320.4333 2027 762.06 12.14 247.30 259.44 605.64 346.2034 2028 821.12 12.14 266.47 278.61 652.58 373.9735 2029 884.75 12.14 287.12 299.26 703.15 403.8936 2030 953.32 12.14 309.37 321.51 757.65 436.1437 2031 1027.21 12.14 333.35 345.49 816.36 470.8838 2032 1106.81 12.14 359.18 371.32 879.63 508.3139 2033 1192.59 12.14 387.02 399.16 947.80 548.6540 2034 1285.02 12.14 417.01 429.15 1021.26 592.11

11.42%

Internal Rate of Return ---------------------------------- 11.4%Birr/kWh

-All costs and benefits are in million Birr

Annex 11(b)

NORTHERN ETHIOPIA POWER TRANSMISSION PROJECT

Economic AnalysisPV

Capital 0per. & Grid Total PV Net Net

NOYear Gen. Inves. Maint. Energy Cost C

ost

Benefit Benefit Benefit

(MWh)(Birr) (Birr) (Birr) (Birr) (

Birr)

(Birr) (Birr) (Birr)

0 1994 7.47 7.47 -7.47 -7.471 1995 121.77 121.77 -121.77 -110.702 1996 64.53 64.53 -64.53 -53.333 1997 220.45 220.45 -220.45 -165.624 1998 117.49 117.49 -117.49 -80.255 1999 45 33.91 11.85 14.38 60.14 32.23 -27.90 -17.336 2000 86 11.85 27.13 38.98 108.92 69.95 39.487 2001 104 11.85 32.84 44.69 131.84 87.16 44.738 2002 122 11.85 38.67 50.52 155.26 104.74 48.869 2003 129 11.85 40.94 52.79 164.38 111.59 47.32

10 2004 137 11.85 43.36 55.21 174.08 118.87 45.8311 2005 148 11.85 46.72 58.57 187.57 129.00 45.2112 2006 159 11.85 50.34 62.19 202.10 139.92 44.5813 2007 171 11.85 54.24 66.09 217.77 151.68 43.9414 2008 185 11.85 58.45 70.29 234.64 164.35 43.2815 2009 199 11.85 62.98 74.82 252.83 178.01 42.6116 2010 214 11.85 67.86 79.70 272.42 192.72 41.9417 2011 231 11.85 73.11 84.96 293.53 208.57 41.2718 2012 249 11.85 78.78 90.63 316.28 225.66 40.5919 2013 268 11.85 84.89 96.73 340.79 244.06 39.9120 2014 289 11.85 91.46 103.31 367.21 263.90 39.2321 2015 311 11.85 98.55 110.40 395.66 285.27 38.5522 2016 335 11.85 106.19 118.04 426.33 308.29 37.8723 2017 361 11.85 114.42 126.27 459.37 333.10 37.2024 2018 389 11.85 123.29 135.13 494.97 359.84 36.5325 2019 419 11.85 132.84 144.69 533.33 388.64 35.8726 2020 452 11.85 143.14 154.99 574.66 419.68 35.2127 2021 487 11.85 154.23 166.08 619.20 453.12 34.5628 2022 525 11.85 166.19 178.03 667.19 489.16 33.9229 2023 565 11.85 179.06 190.91 718.90 527.98 33.2830 2024 609 11.85 192.94 204.79 774.61 569.82 32.6631 2025 656 11.85 207.90 219.74 834.64 614.90 32.0432 2026 707 11.85 224.01 235.85 899.33 663.47 31.42

33 2027 762 11.85 241.37 253.21 969.02 715.81 30.8234 2028 821 11.85 260.07 271.92 1044.12 772.20 30.2335 2029 885 11.85 280.23 292.08 1125.04 832.97 29.6436 2030 953 11.85 301.95 313.79 1212.23 898.44 29.0637 2031 1027 11.85 325.35 337.19 1306.18 968.99 28.5038 2032 1107 11.85 350.56 362.41 1407.41 1045.00 27.9439 2033 1193 11.85 377.73 389.58 1516.49 1126.91 27.3940 2034 1285 11.85 407.01 418.85 1634.01 1215.16 26.85

Internal Rate of Return ------------------------------- 17.75%

-All costs and benefits are in million Birr

Annex-12Page 1 of 3

FORM IP 1IMPLEMENTATION PERFORMANCE

Component Indicators Score(1 to 4)

Remarks

1. Adherence to Time Schedule 1 28 month Time overrun

2. Adherence to Cost Schedule 4

3. Compliance with Covenants 3

4. Adequacy of Monitoring & Evaluation and Reporting 3

5. Satisfactory Operations (if applicable) -

TOTAL 11

Overall Assessment of Implementation Performance 2.75

FORM BP 1BANK PERFORMANCE

Component Indicators Score(1 to 4)

Remarks

1. At Identification -

2. At Preparation of Project 3

3. At appraisal 3

4. At Supervision 3

Overall Assessment of BankPerformance

3

Annex 12Page 2 of 3

FORM PO 1PROJECT OUTCOME

No. Component Indicators Score(1 to 4)

REMARKS

1 Relevance and Achievementof Objectives*

i) Macro-economic Policy 4

ii) Sector Policy 4

iii) Physical (incl. production) 4

iv) Financial 3

v) Poverty Alleviation & Social &Gender

4

vi) Environment 4

vii) Private sector development4

viii) Other (Specify) -

2 Institutional Development(ID)

i) Institutional Framework incl.Restructuring 3

ii) Financial and ManagementInformation Systems includingAudit Systems

3

iii) Transfer of Technology 3

iv) Staffing by qualified persons(incl. Turnover), training &counter-part staff

3

Annex 12Page 3 of 3

3 Sustainability ***

i) Continued BorrowerCommitment

3

ii) Environmental Policy 4

iii) Institutional Framework 3

iv) Technical Viability and Staffing 3

v) financial Viability including costrecovery systems

3

vi) Economic Viability 3

vii) Environmental Viability 3

viii) O&M facilitation (availability ofrecurrent funding, foreignexchange, spare parts,workshop facilities etc.)

2

4 Economic Internal Rate ofReturn

4

TOTAL 69

Overall Assessment ofOutcome

3.45

Annex 13Page 1 of 2

RECOMMENDATION AND FOLLOW-UP MATRIX

MAIN FINDINGSAND

CONCLUSIONS

LESSONS LEARNED/RECOMMENDATION

FOLLOW UP ACTIONS RESPONSIBILITY

Formulation and ProjectRationale

1.The project design was not the least cost and wasoptimised by the project consultant. Further, the projectdesign did not address the issue of removing the barriers(such as low per capita income) that hinder consumers inconnecting with the grid. In the face of monetary barrierson the part of consumers and constraints on EEPCO'spart, it is becoming difficult for the project to deliver fullbenefits to the consumers.

2.If the design of the civil works is dependent on the plantand equipment, such civil works should be integrated intoplant contract package in order to avoid the problem ofnon-coordination and bad quality of work.

1.The detailed design andengineering of the projectshould be carefully reviewedby the Bank before launchingan Appraisal Mission.

2. The bidding document forthe supply and installation ofplant and equipment shouldbe intensively reviewed.

Bank

Project Implementation 1.The Project implementation should specifically includethe separate milestones for achieving loan signature andeffectiveness.

2.The Follow up mission should be launched before theloan becoming effective for mobilising the borrower tofulfil the loan conditions, which will result in thereduction of start-up delays.

3.The irregular provision of loan summary ledger by theBank to the executing agency leads to late submission ofthe project audit accounts by the executing agency to theBank.

4.The use of FIDIC conditions of contract for the supplyand installation of the plant encourages the contractors tolodge several claims.

5.The executing agency reached settlement with thecontractors (A& D contracts) on their claims without aprior approval of the Bank. Due to several reasons, theBank declined to pay the claims.

6.To extend the 15 kV distribution line to the remainingthree towns.

7.To connect 1000 domestic consumers and small andmedium sized customers to the grid to satisfy the pendingenergy demand of over 11 MW.

1.The Appraisal Missionshould carefully prepare theschedule for implementationof the project.

2.The Bank should considerlaunching follow upmissions after the approval ofthe project by the Board.

3.The Bank should minimisedelays in sending the loansummary ledgers anddisbursement vouchers to theborrower and executingagency on quarterly basis andassist them in their recordkeeping and auditing of theproject accounts on time.

4.The Bank should considerdeveloping its ownconditions of the contract inthe case of the supply andinstallation of the plant andequipment.

5 EEPCO, before agreeing tocontractors' claims thatinvolve the extension of timeand money, should a prioriconsult the Bank and obtainits approval, before finalisingthe settlement.

6.EEPCO should extend the15 kV distribution lines to thethree remaining towns (Bizet,Adi Shohu, and Adi Godum)and energise them before June2000.

7.EEPCO should allocatesufficient resources tofacilitate electricityconnection to awaitingcustomers in the project area.

Bank

Bank

Bank

Bank

EEPCO

EEPCO

EEPCO

Annex 13Page 2 of 2

Compliance with LoanConditions & Covenants

1.To minimise the number of conditions precedent toeffectiveness of the loan, and other conditions thatsignificantly impact achievement of project objectivesthat the Borrower is required to fulfil following loansignature.

2.To fulfil the remaining covenants of the loanagreements namely: Revaluation of fixed assets Settle all arrears owed to EEPCO Reduce accounts receivables Base Tariff on 5% minimum rate of return on the re-

valued assets.

1.Assist the Borrower to fulfilconditions critical to theachievement of projectobjectives before thesignature of the loan.

2.Follow-up the fulfilment ofthe remaining loan conditionsand request EEPCO to:

Expedite the revaluationof fixed assets it iscarrying out.

Approve the actionprogramme proposed bymanagement to write-offmost of non-collectibles;

Ensure to base its nexttariff revision on the 5%minimum rate of returnon re-valued fixed assets

Reduce accounts receivablesto 3 months of annual sales bycontinuing thedecentralisation of billingsand improvement ofcollections.

Bank

Bank

Performance Evaluation& Outcome

1.Although the project performance and outcome havebeen rated as satisfactory, the project was commissionedlate by 28 months. The reasons were delays thatoccurred due to a long time taken by the borrower to fulfilthe conditions precedent to loan effectiveness, lateinitiation of procurement action by the executing agencyfor the procurement of goods and works and latecompletion of works by the contractors.

2.The overall impact of the project on the society will bedisplayed after June 2001 by which it will be possible toestimate the quantity of the firewood replaced byelectricity, additional time available for the womenthrough the use of the electricity- operated cookers andrise in income of people as an index to measure a declinein poverty.

1(a) The Borrower shouldminimise delays in fulfillingthe loan conditions precedentto entry into force and reduce,thereby, the start-up delays.

1(b) EEPCO should improveits overall procurementmanagement with a view toavoid delays in future.

2.The Bank should considercarrying out an overall impactassessment of the project afterJune 2001.

GOE

EEPCO

Bank

Sustainability The project is technically sustainable. However, thefinancial sustainability is hinged on EEPCO's ability toreduce and recover operating costs and increase tariffs.

EEPCO should take actions inorder to comply with theremaining loan covenants.

EEPCO

ANNEXE 14Annex 14

Sources of Information

1. Borrower's PCR

2. Appraisal Report

3. Consultant's Review of Design

4. EEPCO's audited and un-audited Financial Statements

5. Miscellaneous Data

6. Quarterly Progress Reports

7. Tariff Studies

8. Project Audit Accounts

9. Tigray National Regional State-Industry, Trade and Transport Bureau-Statistical Bulletin 2-December 1998 .

10. EEPCO's Planned Investment Program

11. EEPCO's Financial Statements 1992/93-1997/98