Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 15411

IMPLEMENTATION COMPLETION REPORT

PAKI STAN

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT(LOAN 2792-PAK)

MARCH 6, 1996

Energy and Project Finance DivisionCountry Department ISouth Asia Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EOUIVALENTS

Currency Unit = Pakistan Rupee (Rs)Appraisal Year 1985 = US$ 1.0 = Rs. 17.0Intervening Year 1990 = US$ 1.0 = Rs. 22.0Completion Year 1994 = US$ 1.0 = Rs. 31.0

GOP AND WAPDA'S FISCAL YEAR (FY)

July I - June 30

MEASURES AND EOUIVALENTS

I kilometer (km) 0.6214 miles (mi)I ton = 1000 kilograms (kg)

= 2200 pounds (Ibs)I kilovolt (kv) = 1000 volts (V)I megawatt (MW) 1000 kilowatts (kW)1 megavolt-ampere (MVA) = 1000 kilovolt-amperes (kVA)1 kilowatt hour (kWh) 1000 watt-hours (Wh)I gigawatt hour (GWh) 1 million kilowatt hours (kWh)

ACRONYMS AND ABBREVIATIONS

ESL-II Second Energy Sector Loan (Ln. 3107-PAK)GOP Government of PakistanICG Internal Cash GenerationICR Implementation Completion ReportERR Economic Rate of ReturnJEXIM Export-Import Bank (Japan)MMS Maintenance Management SystemMWP Ministry of Water and PowerODA Overseas Development Administration (United Kingdom)SAR Staff Appraisal ReportUSAID United States Agency for International DevelopmentWAPDA Water and Power Development Authority

IMPLEMENTATION COM(PLETION REPORT FOR OFFICIAL USE ONLY

PAKISTAN

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT(Loan 2792-PAK)

Table of Contents

Page No.

PREFACE

EVALUATION SUMMARY

PART I - PROJECT IMPLEMENTATION ASSESSMENT ............................................... 1

Project Identity and Background ............................................... 1A. Evaluation of Objectives. 1B. Achievement of Objectives. 2C. Financial Performance .5D. Major Factors Affecting the Project. 7E. Project Sustainability. 8F. Performance of Bank and Cofinanciers. 9G. Borrower Performance. 9H. Assessment of Outcome .101. Future Operation .10J. Key Lessons Learned .11

PART II - STATISTICAL TABLES ........................... 13

Table I Summary of Assessment .13Table 2 Related Bank Loans .14Table 3 Project Timetable .17Table 4 Cumulative, Estimated and Actual Disbursement .18Table 5 Key Indicators for Project Implementation .19Table 6 Key Indicators for Project Operation .21Table 7 Studies Included in Project .22Table 8A Project Costs ........................................... 22Table 8B Project Financing ........................................... 22Table 9 Economic Costs and Benefits ........................................... 23Table 10 Status of Legal Covenants ........................................... 25Table 11 Compliance with Operation Manual Statements ........................................... 25Table 12 Bank Resources: Staff Inputs ........................................... 25Table 13 Bank Resources: Missions ........................................... 26

APPENDICES

A. Mission's Aide-Memoire (with Operation Plan) .27B. Borrower's Evaluation .33C. Lead Contractor Comments .52

Harbin Power Engineering Company Limited (China) .53Cockerill Mechanical Industries (Belgium) .61

MAP IBRD No. 26851

This document has a restricted distribution and may be used by recipients only in the performance of theirI official duties. Its contents may not otherwise be disclosed without World Bank authorization. l

IMPLEMENTATION COMPLETION REPORT

PAKISTAN

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT(Loan 2792-PAK)

Preface

This is the Implementation Completion Report (ICR) for the Power Plant Efficiency ImprovementProject, for which Loan 2792-PAK in the amount of US$70 million was approved on April 7, 1987, and declaredeffective on November 18, 1987. The loan was closed on June 30, 1994, after two extensions. Finaldisbursement took place on December 23, 1994, at which time a balance of US$552,595 was cancelled.

The ICR was prepared by Messrs. M. Manrai of the Energy and Project Finance Division (now retired)and R. Aziz of Pakistan Resident Mission as Task Managers and Waqar Haider (Consultant). It has been reviewedby Mr. Per Ljung (Chief) and Ms. Zoubeida Ladhibi-Belk, Principal Power Engineer from the Energy andProject Finance Division, and Mr. F. Ahmed, Project Adviser, Country Department I, South Asia RegionalOffice.

Preparation of this ICR began during the Bank's final supervision mission during May 1994.1 It is basedon material in the project file. The Borrower contributed to the preparation of the ICR through views reflected inthe mission's aide-memoire (Appendix A), preparing its own evaluation of the project's execution (Appendix B)completion, and by commenting on the draft ICR. The generous assistance to the mission provided by officials ofWater and Power Development Authority is gratefully acknowledged.

The project benefitted from cofinancing provided by the United States Agency for InternationalDevelopment, the Export-Import Bank of Japan, and the Overseas Development Administration (ODA, UnitedKingdom). Although the cofinanciers declined the offer to prepare a separate evaluation, ODA's valuablecomments were considered while finalizing the report.

Included as Appendix C are comments from two contractors associated with project implementation whowere invited to respond to an evaluation of their services by the Bank and the Borrower.

IA completion mission was undertaken in December 1994 to continue this activity.

IlPLEMENTATION COMPLETION REPORT

PAKISTAN

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT(Loan 2792-PAK)

Evaluation SummaryIntroduction

Thermal power plants are a major consumer of hydrocarbons, but generally their consumptionefficiencies are low. Because of severe capacity constraints, the Water and Power Development Authority(WAPDA) also uses some of its relatively inefficient combustion turbines more extensively than the normal peak-load operations. Thermal plants constitute about 50% of WAPDA's total generating capacity. Their efficientperformance is crucial to WAPDA's operations. Therefore, a project was developed to rehabilitate some of the oldthermal plants with low operating efficiencies, and to convert two combustion turbines to combined cycleoperation. The Bank appraised the project in 1985, and a loan of US$70 million was approved in 1987.

Project Objectives

The objectives of the project were to: (a) improve the efficiency with which hydrocarbons were used byWAPDA in power generation; (b) provide about 120 MW of additional generating capacity throughrehabilitation, and another 80 MW through the conversion of combustion turbines to combined cycle operation;and (c) continue the institution building efforts by strengthening WAPDA's capability in the operation andmaintenance of thermal power stations and spare parts management. The objectives were clear, realistic andconsistent with the Bank's and GOP's strategy for the power sector.

Implementation Experience and Results

The project achieved its sectoral, physical, and financial objectives substantially (paras 3.2, 3.10 and4.3). The achievement of institutional objectives was however only partial (paras 4.6 and 4.7). The start-up ofthe project was late, and its actual implementation was about three years behind schedule. Based on theconsultants' detailed design, the scope of the rehabilitation component was enhanced during projectimplementation, from 120 to 283 MW, including the re-commissioning of two units of 130 MW of the MultanPower Station. Recommissioning of Multan Power Station involved mainly refurbishing and repair of generatorsand turbines, cleaning of condensors and repair of air seals. These routine maintenance activities did not requirethe purchase or installation of any major equipment items but, added substantial (130 MW) capacity to the grid.Most of the project activities relating to rehabilitation component have been completed, resulting in the restorationof 256 MW of generation capacity by June 30, 1995. WAPDA is arranging funds for the restoration of theremaining 27 MW (para 3.5). The Kotri and Faisalabad combined cycle components (88 MW each) weresignificantly delayed, but were completed in November 1994, after which they underwent trial run before beingtaken over by WAPDA during December 1995 (para 3.6). With the gradual implementation of MaintenanceManagement Systems, the forced outage rates have also been reduced. However, other efficiency indicators,notably reduction in fuel use per kWh of electricity generated, do not appear to indicate any significantimprovements (para 3.8 and 3.9). The factors which affected the achievement of physical objectives were frequentchanges in design (para 11.2) and poor management by the combined cycle contractor' (para 5.4). Theperformance of the Bank and WAPDA during project implementation was satisfactory (paras 7.4 and 8.6).

The disbursement schedule was seriously affected because of substantial delays, and actual disbursementswere only about 25% of that originally envisaged (US$30 million) during the first two years. A substantialportion of the Bank loan (about 65% or US$45 million) was disbursed during FY91 to FY93, when majoractivities on the project were undertaken (para 5.11). The total cost of the project, as implemented, was aboutUS$176 million; this indicates an increase of 8.0% relative to the appraisal estimate with a decrease in therehabilitation component and a substantial increase in the combined cycle component (para 5.8).

Reference Appendix C.

-ii-

Sustainability and Proiect Outcome

The main achievement of the project has been the restoration of 256 MW of generating capacity at arelatively low cost (para 5.8); in addition, the increased generation from combined cycle units involves noadditional fuel costs. WAPDA has agreed under the Operation Plan to review the performance of the plant everyquarter. The project is sustainable and its outcome clearly satisfactory (paras 6.1 and 9.1).

Summarv of Findings

Through the Project, WAPDA was able to restore/recover additional capacity of 256 MW at a cost muchsmaller than the estimated cost for building new capacity. It has also gained additional capacity of 88 MWthrough the conversion of combustion turbines to combined cycle operation at Faisalabad and Kotri. It has,however, not been able to improve the fuel consumption efficiencies at most of the rehabilitated plants. Duringimplementation of the project, a team of WAPDA professionals gained valuable experience; however, thereremains a need for enhancing their contracts and procurement management, implementation scheduling andcontract supervision skills. WAPDA has successfully installed a sophisticated Maintenance Management Systemat Guddu, and it is being extended to other stations (para 3.7). The training and transfer of technologycomponent relating to the refurbishment of gas turbine blades at the Central Repair Workshop, Faisalabad weredelayed and therefore, could not be completed under the project (para 3.5).

Future Operation of the Project

In order to sustain the operation of the project, the following measures must be undertaken: (a)agreement on a satisfactory set of performance indicators for rehabilitated plants (e.g., gross heat rate or fuel useper kWh; forced outage hours; energy generated, plant and load factors; outage hours due to spare partsshortages; and total inventory costs per year); (b) regular monitoring and comparison of performance indicators ofrehabilitated plants with other plants; (c) development of planned maintenance programs; (d) a comparativeanalysis of the performance of Kotri and Faisalabad combined cycle plants with other similar plants in the system;and (e) development of a comprehensive project proposal for starting efficiency improvement schemes at otherplants. As part of project's Operation Plan, WAPDA has agreed to review the performance of plant quarterly(para 10.5). The Bank will monitor the plant performance quarterly through supervision of WAPDA's ongoingPower Sector Development Project (Ln. 3764-PAK), and during the preparation of the proposed EnergyEfficiency and Conservation Project.

Key Lessons Learned

Closer Supervision by WAPDA. WAPDA should strengthen its systems for supervision of all its on-going projects to get timely feedback for taking remedial actions. In this regard, it should ensure greater liaisonbetween its project managers, engineers and the consultants engaged in assisting it in supervising a project. Inorder to avoid delays and cost over-runs, it is proposed that all ongoing projects be reviewed in sufficient detail,at least each quarter, by the top WAPDA management. This should be in addition to day-to-day coordination(para 11. 1). These reviews should include meetings with the project staff and consultants, site visits,identification of implementation problems and remedies, and timeframes for executing the remedial actions.

Design Modifications During Implementation. The feasibility study in October 1985 had identifiedcapacity recovery and efficiency improvement schemes, preliminary lists of equipment to be installed, and costsfor different thermal plants. For some of the project components, these equipment lists were modified on thebasis of detailed designs prepared by the project consultants. While some modifications based upon detailedanalysis are inevitable, one of the key lessons of the project is that substantial changes in the original design makeit difficult to evaluate the project outcome compared to the appraisal estimates, both in terms of project costs aswell as the specific benefits to be achieved (capacity recovery, efficiency improvements, etc.). It is necessary

-iii-

that in projects of this nature in addition to design criteria, detailed design and the bidding documents areprepared and agreed during appraisal as recommended in Bank guidelines (para 11.2)

Institution-Buildinn Components. Institution building was a major objective. The project provided fortraining of WAPDA's engineering staff in design, maintenance and repair including spare parts managementsystem of conventional and combined cycle thermal plants with a utility of proven track record. Although theloan was extended twice, WAPDA could only procure equipment and machinery required for repairs etc., butcould not implement the training component. For procuring training of such a complex nature, detailed scope andterms of reference should have been agreed at appraisal and a competent consultant engaged to evaluate theproposals. WAPDA is now planning to finance the training and transfer of technology program through JEXIMfinancing (para 4.7).

Future Projects in the Subsector

The Bank has underlined the necessity of reforms in the power utilities of the public sector and has alsostressed the importance of involvement of private sector for the development of power. To assist in this regard,two loans are currently ongoing which provide a fund for financing eligible private sector subprojects: the PrivateSector Energy Development Project, Ln. 2982-PAK, was approved in 1988 and was used solely for theconstruction of the Hub Power Project. The fund was replenished in 1994 with the approval of Ln. 3812-PAK tocontinue financing of the Hub Power Project, and to finance other eligible power projects. The first project toreach financial closure under the second loan is expected during FY96 with the approval of the Uch Power Projectin parallel with a Bank Guarantee operation.

The Bank approved in June 1994 US$230 million for the Power Sector Development Project (Ln. 3764-PAK) to finance, inter alia, the restructuring and privatization of WAPDA. A loan of US$350 million for theGhazi-Barotha Hydropower Project (Ln. 3965-PAK) was approved in December 1995, to finance not only theconstruction of the hydropower plant, but also to consolidate the power sector reform program begun underprevious Bank loans.

Another important area is the conservation of energy through efficiency and demand side management.In this regard, the Energy Efficiency and Conservation Project is included in the FY97 lending program. Thus,the Bank has begun to shift available funding from the public sector power utilities for development of itsgeneration, transmission and distribution facilities, to an increased role for the private sector and to theconservation of energy through efficiency in end use.

IMPLEMENTATION COMPLETION REPORT

PAKISTAN

Power Plant Efficiency Imnrovement Proiect(Loan 2792-PAK)

PART I - Project Implementation Assessment

Proiect Identity

Project Name: Power Plant Efficiency Improvement ProjectLoan No.: 2792-PAKRVP Unit: South Asia RegionCountry: PakistanSector/Sub-sector: Energy/Power

Background

1.1 The Water and Power Development Authority (WAPDA), was established as a semi-autonomous bodyin 1959 to coordinate the development of Pakistan's water and power resources. It is responsible for thegeneration, transmission and distribution of electricity throughout the country, except the greater Karachi area,which is served by Karachi Electric Supply Corporation. WAPDA is organized into two largely independentWings, one for water and the other for power generation, transmission and distribution activities. WAPDA, asused in this report, refers exclusively to the planning, construction and operation of power facilities.

1.2 In June 1986, WAPDA's total installed capacity was 4,949 MW, comprising 2,897 MW (59%) of hydroand 2,052 MW (41 %) of thermal units. The maximum potential output of hydro stations amounted to about 3,100MW, when all the reservoirs were full, and to about 1,000 MW during the dry seasons. The large fluctuation inthe potential hydro capacity between high and low-water months, and other capacity constraints, necessitated amore extensive use of thermal capacity (especially the more expensive combustion turbines meant for peak load).

1.3 The project, whose main objective was to rehabilitate some of the existing thermal plants with lowefficiency, was appraised in September 1985, and approved by the Bank's Board on April 7, 1987. The Loan andGuarantee Agreements were signed on April 22, 1987, and the loan was declared effective on November 18, 1987(after two extensions in the target date for effectiveness). The original Closing Date for the loan was June 30,1992; following two extensions of one year each, the loan was officially closed on June 30, 1994.

A. Evaluation of Obiectives

2. Proiect Obiectives and Description

2.1 The objectives of the project were to: (a) improve the efficiency with which hydrocarbons were used byWAPDA in power generation; (b) provide about 120 MW of additional generating capacity through rehabilitationof existing thermal units, and about 80 MW through the conversion of combustion turbines to combined cycleoperation; and (c) continue the institution building efforts initiated under Bank Group's earlier lending operationsby strengthening WAPDA's capability in the operation and maintenance of thermal power stations and spare partsmanagement.

2.2 The project provided for:

(a) equipment, spares, tools and other materials required for the rehabilitation of steam units andcombustion turbines at Sukkur, Guddu, Faisalabad, Quetta, Multan, Kotri and Shadra;

(b) equipment, materials, civil works and services for conversion of eight combustion turbines tocombined cycle operation at the Kotri and Faisalabad power stations;

-2-

(c) consultancy services for detailed engineering, preparation of bidding documents, supervision ofimplementation and development of systems for maintenance and spare parts management; and

(d) training of WAPDA's staff in the design, operation and maintenance of thermal plants.

2.3 The project was prepared on the basis of a feasibility study conducted by WAPDA in October 1985 withthe assistance of consultants funded by USAID2 (para 11.2). The consultants assessed the operational status andmaintenance requirements of WAPDA's thermal generating units, and formulated a work program andinvestments required to improve the thermal efficiency of each unit, and the time schedule for its implementation.In view of WAPDA's limited experience in the design and engineering of steam and combined cycle power plants,consultants were recruited to assist WAPDA's staff in the detailed design, preparation of bidding documents andimplementation schedules, and to supervise implementation of the project. These consultants, financed by ODA3

and later by the Bank, also assisted in the development and implementation of maintenance and spare partsmanagement systems, as well as the training of WAPDA's staff in their use.

2.4 The project was to be implemented concurrently at seven different locations, and involved procurementof a large variety of equipment and materials financed by a number of donor agencies. Because WAPDA'sexperience with the coordination of such activities was limited, WAPDA also agreed to establish under theGeneral Manager (Thermal) a Plant Efficiency Improvement Group whose responsibilities were to (a) coordinatethe implementation of the project; (b) liaise with the consultants; and (c) form the counterpart staff withinWAPDA to be trained in the development and implementation of modern systems for maintenance and spare partsmanagement.

B. Achievement of Obiectives

3.1 Macroeconomic Policies. There were no macroeconomic policies in the project. However, the projectenvisaged satisfactory resource mobilization by WAPDA.

3.2 Sectoral Obiectives. In late 1980, the Government of Pakistan (GOP) launched a major program toaccelerate the development of the energy sector by formulating a long-term strategy. Apart from enhancing therole of the private sector, the above strategy aimed at improving the operational efficiency of its main publicenergy sector entities, which included WAPDA. By end 1994, WAPDA's installed generating capacity was10,675 MW of which about 5,850 MW was thermal. Due to hydrology constraints, WAPDA is forced to usethermal plants extensively. These thermal power plants are a major consumer of primary energy (oil, gas, coal),but the efficiency with which fuels are consumed to generate electricity is relatively low. The deterioration in theefficiency of steam plants has been largely due to postponement of scheduled maintenance, inspections andoverhauls necessitated by system capacity constraints, and shortage of spare parts. The overall capacityconstraints in the power system force WAPDA to use some of its relatively inefficient combustion turbines moreextensively rather than restrict their use to the normal peak-load operations. To determine whether the efficiencyof such thermal plants could be improved significantly in a short period of time with comparatively small capitalinvestments (e.g., by rehabilitating and retrofitting steam units and converting suitable combustion turbines tocombined cycle operations), WAPDA carried out a feasibility study in October 1985 with the assistance ofconsultants, financed by USAID, which confirmed the viability of efficiency improvement program. This studyformed the basis of the project, partly funded by the World Bank. The sectoral objectives, which were to developan efficient thermal generation system in the public sector and to enhance the role of the private sector, were metsubstantially through the design and the execution of the project.

3.3 Physical Objectives. While the feasibility study had identified about 120 MW of capacity additionswhich would be possible through the rehabilitation of existing units, the detailed analysis carried out by the designconsultants identified an additional 163 MW of capacity which could be restored, primarily through the re-comnmissioning of the Multan power station (150 MW). The scope of the rehabilitation component was thusrevised by WAPDA to involve the recovery and restoration of about 283 MW of capacity; a number of specific

2United States Agency for International Development.

3Overseas Development Administration, United Kingdom.

-3-

schemes were developed and lists of equipment/major works were suitably modified. The conversion to combinedcycle at the Kotri and Faisalabad stations was anticipated to add about 80 MW of generating capacity, which wasincreased to 88 MW on the basis of the bids submitted by the contractors.

3.4 Project Start-up and Implementation Schedule. The project consisted of three distinct components: (a)the rehabilitation of steam and combustion turbine power plants at seven locations mentioned in para 2.2(a); (b)conversion of combustion turbines to combined cycle operation at the Kotri and Faisalabad power stations; (c)development and implementation of the Maintenance Management System.

3.5 Work on the rehabilitation component of the project was initiated in February 1987 with the help ofODA financed consultants. This resulted in restoration of 256 MW of generation capacity by June 30, 1995.WAPDA is arranging funds for the remaining 27 MW. Activities relating to technology transfer and training forrepair and maintenance of thermal plants at the Central Repair Workshop, Faisalabad were delayed and could notbe completed under the project. WAPDA is trying to arrange funds from JEXIM4 or other possible sources tofinance this technology transfer and training program.

3.6 The implementation of the Kotri and Faisalabad combined cycle components was significantly delayed,but was completed in November 1994. These units were put on trial run on October 16, 1995 and September 12,1995 respectively, and were taken over by WAPDA during December 1995.

3.7 With the assistance of its consultants, work on the Maintenance Management System (MMS) componentprogressed according to the plan. The main objectives of MMS were to reduce unplanned outages at thermalplants by introducing comprehensive and integrated management systems, improving operational efficiency andproviding improved managerial control. The initial design, development and implementation of MMS wascompleted at Guddu (steam power plant, gas turbines and combined cycle units) by October 1994, and was indifferent stages in planning and implementation at Muzaffargarh and Jamshoro. MMS also provided for thesetting up of Power Plant Maintenance Group at WAPDA's Head Office. Similarly, systems for strategicplanning for scheduled outages and maintenance programs, and for thermal efficiency monitoring and control,were also developed under this program. Training in Non-Destructive Testing and Environmental Monitoringand Control components were added to MMS when the closing date was extended in 1994, and are currentlybeing implemented. The MMS component of the project has assisted WAPDA in preparing detailed outage planfor 1995-96.

3.8 Physical Achievements. To date, the rehabilitation program has successfully recovered 256 MW ofcapacity at a fairly low cost (relative to capital cost for new plants) at the Guddu, Faisalabad, Quetta, Shahdra andMultan power stations. However, evidence regarding efficiency improvements at the existing stations does notindicate any major gains. For reasons explained below for example, the heat rate (or alternatively fuel use perunit electricity generated) appears to have deteriorated for a majority of the plants (see Table I below, and Table6, Part II).

Export Import Bank of Japan

-4-

Table 1: Physical Achievements of the Project

Plant/Unit SAR Revised Achieved Target Heat Actual HeatTarget Target Rate Rate(MW) (MW) (MW) (BTU/kWh) (BTU/kWh)

SAR FY94

|Sukkur Steam 6.9 10.0 0.0 12081 NAGuddu Steam 53.4 45.0 37.0 8902 NAFaisalabad Steam 4.0 19.0 19.0 9568 12075Quetta Steam 10.4 7.0 4.0 11426 20857Multan Steam 6.7 152.0 152.0 9683 12641Kotri Gas Turbine 12.4 3.0 3.0 15027 16151Faisalabad Gas Turbine 8.5 12.0 6.0 14366 18305Shahdra Gas Turbine 6.6 24.0 24.0 13671 22330Guddu Gas Turbine 9.0 0.0 0.0 17000 NAQuetta Gas Turbine 1.4 10.9 10.9 14323 NASub-Total 119.3 282.9 255.9

Conversion to combined cycle 80.0 88.0 88.0

Grand Total 199.3 370.9 343.9

3.9 Because of severe capacity constraints, WAPDA has been unable to take plants out of service (e.g., forcarrying out efficiency tests) to ascertain operational performance prior to, and after the completion of therehabilitation program. During the preparation of this Implementation Completion Report (ICR), a comparison ofperformance data for all the plants rehabilitated under the project was carried out by WAPDA to determine thefactors that have accounted for the increased fuel consumption per unit of generation. A copy of the explanatorynote prepared by WAPDA following this review is attached, along with the Borrower's Evaluation in AppendixB. On the basis of this review, a number of factors (which are specific to each plant) have accounted for theapparent deterioration in performance. In particular, these are as follows:

(a) Most of the units are designed to use natural gas as the primary fuel; however, theavailability of natural gas for the power sector has been increasingly constrained sincethe early 1990s, necessitating the use of fuel oil, which has led to reductions inoperational efficiency;

(b) Some of the units do not appear to have been run at the economic loading capacity, inpart due to the requirements for system stability. In such instances, the operation of theplant is not primarily for generating electricity, but for other objectives e.g.,maintaining voltage stability, etc. The operation of these plants at sub-optimal loadingalso appears to have contributed to increased fuel consumption;

(c) Again, primarily for the purposes of system stability, some units have been loaded atminimal capacity, or kept on hot standby basis for extended periods by the NationalPower Control Centre. The idle running of units at such times utilized fuel, but did notgenerate electricity; and

(d) Finally, it needs to be acknowledged that rehabilitation is an ongoing activity, and therehabilitation of some components enhances the need for replacement of othercomponents (which may not have been foreseen earlier), delays in which can lead toreduced efficiencies. While discussing the Operational Plan, agreement was reachedwith WAPDA on a program for regularly reviewing on a continuous basis theoperational performance of the various plants, and for identifying and implementingrehabilitation programs.

-5-

3.10 The rehabilitated plants and the combined cycle plants are all under operation. The operational data forthermal plants for the last three years is presented in Table 6, Part-II. It can be observed that forced outage forthe first two quarters of 1994 are 25,500 hours, compared to 30,000 hours for year 1993, showing a downwardtrend. Energy generation (GWh) and plant availability factors for these thermal units during the last few years,also indicate performance improvement. In conclusion, the physical objectives have been substantially met.

C. Financial Performance

Financial Obiectives

4.1 To ensure that adequate funds were available for the implementation of WAPDA's investmentprogram, WAPDA has agreed under ongoing operations with the Bank on an internal cash generation covenant,which requires WAPDA to generate annually from internal sources at least 40% of its capital expenditures,averaged over the previous, current and ensuing year, taking into account changes in working capital. WAPDA isalso required to consult with the Bank before incurring new debt should it be unable to maintain a debt servicecoverage of at least 1.5 times. WAPDA's tariffs are set to ensure that these two financial objectives are met. Byand large, WAPDA has achieved these financial performance targets satisfactorily since FY85.

4.2 Past and Present Financial Performance. Part II, Table 9 provides a comparison betweenappraisal estimates and actual performance for selected financial indicators during FY86-93, while Table 1 belowprovides a summary of WAPDA's financial performance during FY90-95:

Table 1: WAPDA'S FINANCIAL RESULTS, FY90 FY95

KEY FINANCIAL INDICATORS FY90 FY91 FY92 FY93 FY94 FY95UNAUD.

kWh Generated (Millions) 31427 34345 38067 40791 42396 45917

kWh Sold (Millions) 24121 26584 29267 31272 32131 35081

Average Revenue/kWh Sold (R.) 1.06 1.16 1.27 1.26 1.41 1.75

Increase in Average Revenue (%) 11.9 10.2 11.9 5.0 12.4 13.9

Operating Revenue (R./kWh Sold) 1.09 1.19 1.33 1.39 1.55 1.77

Operating Expenses (R./kWh Sold) .61 .70 .82 .92 1.08 1.14

Net Operating Income (R./kWh Sold) .48 .51 .53 .51 .50 .63

Investment Program (R. Million) 16764 16030 24804 22310 25591 26395

Internal Cash Gen. (%) 3 Yr. Avg. 40.7 47.3 50.0 44.0 28.0 39.9

Rate of return on Avg. Net Fixed 20.8 19.0 19.2 18.6 16.4 19.0Assets (%) aI

Debt Service Coverage Ratio 1.8 1.5 1.6 1.4 0.9 1.5

Debt Equity Ratio 58:42 57:43 56:44 57:43 56:44 57:43

{On historical cost basis.

4.3 WAPDA's overall financial performance during the period has been satisfactory. Its self-financingperformance has been sufficient (exceeding 40%) in all the years, except in FY94 due mainly to WAPDA'sretirement of its second bond issue of Rs 5.6 billion which it was unable to roll-over because of unfavorablemarket conditions. A substantial tariff increase in November 1994 (averaging 24%) led to an improvement ofWAPDA's financial performance, enabling it to meet the financial covenants during FY95. Thus, WAPDA isexpected to earn a satisfactory rate of return on net fixed assets during FY95 of about 19.0%. Average revenuehas steadily increased from Rs 1.06/kWh in FY90 to Rs 1.75/kWh in FY95. Operating revenues increased from

-6-

Rs 1.09/kWh in FY90 to Rs 1.77/kWh in FY95 representing an average annual increase of 10.8%, whileoperating costs increased at an average rate of 13.3% during the same period. The faster increase in operatingexpenses is due to a lower recovery of fuel costs in FY94 and FY95 and higher fuel costs resulting from anincrease in thermal generation to compensate for the low hydro generation during these two years. With averageinflation rates running a about 10 - 12% during the period, WAPDA has been achieving rates of return well aboveinflation, based on assets valued at historical book values, the normal practice of public sector agencies inPakistan.

4.4 While WAPDA's debt-equity ratio has been satisfactory at about 57:43, WAPDA has had to resortto substantial short-term borrowings in recent years, in part due to its high levels of receivables, especially fromgovernment agencies and departments, and the difficulty in mobilizing long-term financing due to the generaltightness in credit markets. WAPDA also faced increasing difficulties in its bond issues due to the removal ofGOP guarantees. In future, there is a need to monitor WAPDA's debt-servicing capacity in order to avoidexpensive short-term borrowing.

4.5 Accounts Receivable. The level of WAPDA's overall accounts receivable has been increasing overthe past three years, from 22% of sales in FY92 to 26% in FY95. As of February 1995, total receivablesamounted to Rs 14.8 billion representing about 3.8 months average sales. While receivables from private sectorconsumers, amounting to about Rs 9.7 billion, represent 2.6 months sales, those from Government departmentsand agencies, amounting to Rs 5.1 billion were equivalent of 6.3 months sales. Under the ongoing Bank loans,GOP agreed to ensure that all Federal and Provincial Government departments and agencies would settle all billsfor the supply of electricity within three months. To ensure this, the Cabinet has taken several importantdecisions providing for: (a) recovery of arrears through budgetary releases and deductions at source; (b)withholding of payments due by WAPDA to those Government agencies in arrears; (c) disconnection ofdefaulters; and (d) monthly reporting of status of arrears to the Economic Coordination Commnittee. Thesedecisions are now being implemented by WAPDA. As a result, the Government adjusted about Rs 3.0 billion ofreceivables from Government departments and agencies against amounts payable by WAPDA to the Governmentin FY95. Thus, Government receivables are now about 2.6 months of billing.

Institutional Obiectives

4.6 Management, Professionals and Other Staff. WAPDA's managerial and professional staff is wellqualified and competent, particularly in operating and carrying out rehabilitation work at thermal power plants. Itwas therefore able to undertake the project in a systematic and professional manner. However, the specificproject-related expertise, specially in the areas of contracts management, procurement, activities monitoring andproject cost control systems, has been somewhat deficient, resulting in implementation delays.

4.7 One of the main components of the project was to provide training to WAPDA's engineering staffin the design, maintenance and repair including spare parts management system of conventional and combinedcycle thermal plants. It was planned to train the engineers in an international utility with a proven track record.The procurement of sophisticated workshop machinery especially for repair and testing of hot gas pathcomponents of the thermal units was included in the project. The loan was extended twice to enable WAPDA tocomplete the implementation of this component. Although necessary machinery for repairs was procured,WAPDA could not arrange for the training. WAPDA is now trying to arrange funds from JEXIM Bank or otherpossible sources. Because of failure to acquire the needed training under the project, the institutional objectiveswere met only partially.

4.8 Economic Rate of Return (ERR). In order to determine the economic benefit of the project,operating data for the rehabilitated plants has been collected. Actual investments (less taxes and duties) have beenestimated and expressed in constant 1994 Rupees; operating costs and revenues have also been estimated basedupon assumptions on load factor, operating losses and historical split between generation andtransmission/distribution. The project yields an ERR of 24.35%, based upon WAPDA's average revenue,economic cost of input fuel and current level of operating expenses, excluding depreciation and interest charges.This compares favorably with 16% estimated during appraisal. This ERR does not take into account benefitsrelating to greater reliability of supplies, and for the consumer surplus, based on consumers' willingness to payfor electricity.

-7-

D. Maior Factors Affecting the Proiect

Combined Cycle Component

5.1 Factors Not Subiect to Governmental Control. In view of the higher cost of bids received for thiscomponent, the project was faced with a financing shortfall amounting to almost 40% of the total foreign currencyrequirement. While the financing gap was subsequently covered through JEXIM Bank cofinancing within the1994 Second Energy Sector Loan (ESL II, Ln. 3107-PAK), the large gap between the bids received and estimatedcosts indicates that the cost estimates prepared by the consultants were under-estimated.

5.2 Disbursements under the JEXIM loan were delayed by about 12 months in the followingcircumstances. Following a decision in late 1991 by the Islamic courts in Pakistan regarding interest paymentsunder Islamic Law, JEXIM sought clarifications from the government regarding the possible implications of thisdecision on its loan. Following the receipt of these clarifications, disbursements under the Loan were permitted byJEXIM.

5.3 Factors Subiect to Implementing Agency Control. The bids received for the combined cyclecomponents were substantially higher than estimated. As a result, considerable time elapsed between the receiptof bids and WAPDA's decision on contract award, while WAPDA re-evaluated the merits of the component onthe basis of these higher costs. The selected bidder subsequently refused to accept the award, and the componentswere re-tendered. Implementation of this component was thus initiated about three years later than the appraisaltimetable. Had WAPDA acted quickly, this delay could have been avoided.

5.4 The implementation of the combined cycle units at Kotri and Faisalabad was not entirelysatisfactory, and these units were completed about three and a half years after contract signing; the contractualperiod for installing these units was approximately 18 months. In its evaluation of the project (Appendix B),WAPDA has attributed these delays to weaknesses in the lead contractor's effective control over sub-contractors,and the coordination of shipment and erection of equipment, and civil works. WAPDA's concerns over thesedelays were conveyed to the contractors on a number of occasions (e.g., during the regular project reviewmeetings, meetings with the Chief Executives of the contractors, and through formal letters in August andNovember 1993). In their response to these observations (Appendix C), the lead contractors have acknowledgedthat the project involved coordinating the activities of a number of suppliers and manufacturers; however, they areof the view that effective coordination of these activities was ensured. They also refer to delays in payments byWAPDA, largely because of the delay in disbursements under the JEXIM loan (para 5.2).

Rehabilitation Component

5.5 Factors Not Subiect to Governmental Control. This component of the project suffered delaysprimarily because of the severe power crisis in the country, with the result that the plants could not be taken offfrom the system for the planned periods for rehabilitation work. As a result, the project schedule could not beadhered to, and work was undertaken only when the plant had to be shut-down for other reasons.

5.6 Factors Subiect to Implementing Agency Control. The project consultants were appointed inFebruary 1988, instead of the planned June 1987. Similarly, WAPDA counterpart staff was posted only by April1988, after a delay of about nine months. This delay meant that actual work plans for the rehabilitation componentwere also finalized by the consultants/WAPDA staff later than planned.

5.7 Plant equipment and components were delivered late by some contractors/suppliers, resulting inimplementation delays. Some delays also took place because of delayed clearances at the port, and non-paymentof the necessary levies by WAPDA. The civil works contractor completed the new workshop building atFaisalabad late due to contractual problems with WAPDA, which delayed setting up of the new workshopfacilities.

-8-

Proiect Costs

5.8 The total cost of the project as implemented, was about US$176 million with an increase of 8.0%relative to the appraisal estimate of US$163 million. The above cost included a marginal reduction in therehabilitation component (US$59 million versus the appraisal estimate of US$75 million), while the cost of thecombined cycle component was substantially higher than estimated (US$117 million versus US$87.8 million).The actual finances provided by various donors are: Bank - US$69.4 million, USAID - US$13.8 million, andODA - US$9.9 million. The increased cost of the combined cycle component was covered through JEXIM Bankcofinancing (US$31.2 million) under ESL-II. Table 8 of Part-II presents a detailed breakdown of project costs andthe financing plan.

Extension of Closing Date

5.9 The loan account was originally scheduled to be closed on June 30, 1992. However, because ofconsiderable delays in starting and implementation of the project, especially the combined cycle components,successive Bank supervision missions had reported on these delays, and recommended that the Bank managementagree to an extension in the closing date. The date was first extended to June 30, 1993, and subsequently to June30, 1994. While a few activities relating to the full commissioning of combined cycle units at Faisalabad/Kotriand technology transfer were ongoing, no further extension in the loan closing date was considered essential, andthe loan was closed on June 30, 1994.

Procurement

5.10 Because the actual efficiency improvement schemes were developed by the project consultant on thebasis of which specific equipment and components were ordered, there was a major difference in the list of itemsprocured for the rehabilitation component, as well as the overall cost (US$15 million instead of US$41 million asapproved). On the other hand, equipment for conversion of combustion turbines to combined cycle operation wasprocured according to the envisaged scheme, even though the cost estimates turned out to be highly under-estimated. There were 122 contracts (covering both goods and civil works) on the rehabilitation component. Theequipment and materials financed under the project were generally procured under international competitivebidding procedure, in accordance with the Bank guidelines.

5.11 Disbursements. The disbursement schedule was seriously affected because of substantial delays inthe start-up of the project. During the first two years, actual disbursements were only about 25% of thatoriginally envisaged (US$30 million). A substantial portion of the Bank loan (about 65% or US$45 rnillion) wasdisbursed during FY91 to FY93, when major activities on the project were undertaken. Total disbursements up toDecember 1994 amounted to US$69.447 million, and an amount of US$552,595 was cancelled on December 23,1994, the date of the last disbursement under the loan (Part II, Table 4).

5.12 Environmental Aspects. Because of waste heat recoveries and use of fuel gases for increased powergeneration, the project has contributed towards safeguarding environment by reduction in air pollution, anddecreased water contamination, but no quantitative assessment has been made.

E. Proiect Sustainability

6.1 The project has been successful in recovering capacities with a modest investment, and all therehabilitated plants are generating more electricity than before the project was initiated. With the commissioningof combined cycle units at Faisalabad and Kotri (converted from combustion turbine to combined cycleoperation), these plants are likely to contribute significantly in bridging the supply-demand gap. Since marginal orno additional fuel supplies were needed (waste heat is being recovered and used), this has meant additionalelectricity at a relatively low cost. The project is, therefore, sustainable and viable because of its very essence;however, a number of steps must be undertaken to ensure the continued sustainability of the project benefits overthe economic life of the assets (para 10.6).

-9-

F. Performance of Bank and Cofinanciers

World Bank Performance

7.1 The initial proposal for rehabilitation of thermal units and improvement of efficiency levels wasdeveloped by WAPDA on the basis of study carried by USAID sponsored consultant. The Bank appraised theproposal and agreed with WAPDA on baseline fuel consumption levels for different units, and the targets to beachieved through the implementation of the project. The Staff Appraisal Report (SAR), proposed generalizedefficiency schemes, and conversion of combustion turbines to combined cycle operation at Faisalabad and Kotri.The SAR was based upon sound energy efficiency and conservation principles, and the Bank provided a goodoverall framework for undertaking this project. In retrospect, the project would have benefitted from preparationof detailed designs and tender documents as recommended in Bank Guidelines. However, only design criteria wasagreed as a basis for project preparation and appraisal. Overall, however, the Bank's performance duringidentification, preparation and appraisal was satisfactory.

7.2 The Bank's performance during the course of the project showed that a close but friendly controlwas being kept over progress, costs and allocation of funds. The Bank allowed WAPDA to use available funds forproject components if they met the project objectives, and it also allowed an extension of time beyond thatinitially agreed.

7.3 The Bank carried out eight supervision missions, almost one each the year and with a reasonablecontinuity in staff drawn from headquarters and Resident Mission (Part II, Table 13). The frequency of thesupervision missions is deemed adequate, keeping in view the cost involved in assembling and bringing a multi-disciplinary team to the field. However, the supervision teams always had a large agenda, in addition tosupervising this project, and had to carry out supervision, planning, preparation and appraisal of other projects aswell during their missions. This left limited time for the missions to carry out a detailed review of the progresson the Power Plant Efficiency Improvement Project, for site visits and meeting the implementation staff, and forproviding support and assistance in resolving implementation problems.

7.4 Bank supervision was largely concentrated on overall financial matters, contractual issues andimplementation schedules. Performance deficiencies were highlighted by different supervision missions, andWAPDA was asked to carry out remedial actions. Primary responsibility for the achievement of projectobjectives rested with WAPDA and its consultants; nevertheless, it is felt in hindsight that there may have beenopportunities for more intensive Bank supervision (e.g., site visits and closer interaction with the consultants andcontractors) through which the Bank could have reinforced WAPDA's supervision of the project. Despite this,the Bank's overall performance during supervision is considered satisfactory.

Cofinanciers' Performance

7.5 The project was unique in that a number of cofinanciers (USAID, ODA and JEXIM) also providedthe required financing, with the Bank being the major contributor. There were delays in the payment of funds dueto the contractor from the JEXIM loan. This caused considerable problems to the contractor, and was a majorcause of delays (para 5.2).

7.6 ODA was the provider of consultancy services for the project (para 2.3). ODA staff alsomaintained a close but friendly watch over all aspects of the project. Unfortunately, the combined cyclecomponent extended beyond the limit of their allocated funds, and WAPDA was obliged to arrange consultancyfunding from the World Bank. USAID funding, in the form of grant money, was made available as per plans(para 2.3), and no problems were experienced.

G. Borrower Performance

8.1 The project was identified and prepared jointly by WAPDA and the World Bank based on a USAIDsponsored consultant's study and recommendation. WAPDA's performance during identification and preparationwas satisfactory.

-10-

8.2 WAPDA undertook the project with the full commitment and seriousness, for the obvious gains ithad to offer; however, WAPDA's performance in implementing this project suffered because of a variety ofcontrollable and uncontrollable factors, which resulted in implementation delays.

8.3 The rehabilitation component was highly dependent upon the strict adherence to the program ofplanned outage, and completion of all the preceding activities (e.g., detailed design, manufacturing andfabrication, procurement, and deliveries of the necessary material and manpower at site. WAPDA, therefore,needed a specialist project implementation group with the requisite expertise and skills. Instead of a separategroup, WAPDA's field teams of engineers were under the control of a Project Director both for rehabilitation andcombined cycle components supported by the head office staff, and this delayed implementation.

8.4 Because of the severe capacity constraints, WAPDA was not in a position to take plants out of thesystem according to the planned schedule for the purpose of rehabilitation. In some instances, a two-monthplanned outage of a plant/unit would have meant significant capacity gains much earlier than actually realized.

8.5 WAPDA's teams included engineers of all types of disciplines. This enabled WAPDA's engineersto become familiar with tasks such as design criteria plant performance monitoring, specification of replacementparts, their procurement, putting into service and commissioning of different units, and measurements ofefficiency improvements. Similarly, teams allocated to combined cycle projects participated with the consultant indrawing up the specifications, bid receipt and analysis, award of contract, progress monitoring and sitesupervision, up to commissioning and subsequent take-over of the plants. WAPDA teams were also extensivelyinvolved in the setting up of the Maintenance Management System at Guddu power plant, and other thermal unitsin the country.

8.6 Although the project was completed with a delay of almost three years, WAPDA benefitted throughthe professional experience gained during implementation. Given the constraints under which the project wasimplemented, WAPDA's performance during project implementation was satisfactory.

H. Assessment of Outcome

9.1 Among the project gains are the following: (a) recovery of about 256 MW of capacity throughrehabilitation; (b) addition of 88 MW capacity through waste-heat recovery, by converting combustion turbines tocombined cycle operation; (c) installation of a Maintenance Management System, resulting in greater plantavailabilities, reduction in forced outage hours, and hence greater generation; and (d) development of certain in-house capability for perpetuating similar activities in the future. Areas where the project outcome has been lessthan satisfactory are: (a) fuel consumption of the plants or the heat rate; (b) contracts and procurementmanagement, and implementation of scheduling and supervision, and (c) institutional strengthening throughtraining and transfer of technology. On balance, the overall assessment of outcome can be termed clearlysatisfactory because the project was implemented at a particularly difficult time by WAPDA, and a number offactors (planned outage, availability of donor's funds, etc.) were beyond WAPDA's operational control.

1. Future Operation

10.1 Operational Plan. In order to sustain the benefits of efficiency improvements at the thermalpower plants, an Operational Plan covering the technical, commercial, financial and institutional aspects has beenagreed with WAPDA. This plan identifies the staffing and other resource requirements, defines the specificperformance indicators, and describes the understanding reached with the borrower on follow-up actions byWAPDA and the Bank. The Operation Plan is included as part of Appendix A.

10.2 Technical Aspects. The Maintenance Management System should be installed at rehabilitatedplants, to monitor plant performance, in accordance with the indicators specified (para 10.5). Systems forcollecting and analyzing operating data should be reviewed and strengthened, and preferably computerizeddatabases developed. The information so generated should be the basis for developing planned maintenanceschedules/programs which would enable maintenance activities to be carried out in a timely manner. Combinedcycle plants at Faisalabad and Kotri would benefit from computerized control systems, rigorous monitoring and

-11-

operational controls, modem workshop facilities, spare parts and testing equipment, and trained staff foroperations. The performance of these two plants vis-A-vis similar plants in the system needs to be evaluated.

10.3 Financial Aspects. WAPDA needs to ensure adequate budgetary allocations for meeting operationsand maintenance requirements for the rehabilitated units, so that financial constraints do not impede the requiredmaintenance activities or the operational performance. Also, it needs to generate adequate resources for fundingits investment program, including rehabilitation, which has been found to be very cost effective. Agreementswith the Bank under ongoing projects require WAPDA to contribute through internal cash generation at least 40%of the funds required for financing its future capital expenditures.

10.4 Institutional Aspects. WAPDA has acquired valuable experience in rehabilitating and improvingefficiency of its thermal plants through undertaking this project. This experience should be institutionalized bycreating a project group under the General Manager Thermal (Operations), which should be suitably funded, andshould carry out rehabilitation and maintenance work on a continuous basis. A system of regular training shouldbe institutionalized so as to continually upgrade the capabilities of this group.

10.5 Performance Indicators. A formal program for monitoring the performance (relative to designstandards and specified operating conditions) of the rehabilitated plants as well as the combined cycle units needsto be put in place. In this regard, selected performance indicators that were discussed by the completion missionwith WAPDA include: (a) gross heat rate (BTU/kWh), or fuel use per kWh; (b) forced outage hours during aperiod; (c) energy generated (GWh/year); (d) plant and capacity factors; (e) outage hours due spare partsshortages; and (f) total inventory costs. As part of the Operational Plan agreed during the completion mnission,this review of plant performance would be carried out by the General Manager, and Chief Engineer (Operations)every quarter, and reviewed by Member (Power) every six months, after which decisions on remedial measureswould be taken and implemented during the following period.

10.6 Follow-up by the Bank. Under follow-up operations with WAPDA (and in particular during thepreparation of the proposed Energy Efficiency and Conservation Project), Bank should review and monitorprogress on selected technical, financial and institutional aspects. These are as follows: (a) institution of a regularmonitoring system, with specified performance indicators, and reviewing the performance ofrehabilitated/combined-cycle plants; (b) establishment of a project group in WAPDA, with suitable budgetaryallocations to carry out a rehabilitation program at other plants; and (c) ensuring that the MaintenanceManagement System has been installed at thermal power plants, planned outage program is being adhered to, andsuitable allocations made for overhaul and maintenance work. It is recommended that the Bank's OperationEvaluation Department review and evaluate the impact of the project.

J. Key Lessons Learned

11.1 Closer Supervision by WAPDA. WAPDA should strengthen its systems for supervision of all itsongoing projects to avoid delays and get timely feedback for taking remedial actions. In this regard, it shouldensure greater liaison between its project managers, engineers and the consultants engaged in supervising theprojects. In order to avoid delays and cost over-runs, it is proposed that all ongoing projects be reviewed insufficient detail, at least each quarter, by the top WAPDA management in addition to day-to-day coordination.These reviews should include meetings with the project staff and consultants, site visits, identification ofimplementation problems and remedies, and timeframes for executing the remedial actions. The system of projectsupervision should be institutionalized by creating/strengthening a specialist group to prepare periodical reviews,and to keep WAPDA management informed of the status and factors accounting for delays in ongoing projects.In this regard, the quarterly progress reports required by the Bank should be used more as a management toolrather than a product just to satisfy Bank's requirements.

11.2 Design Modifications During Implementation. The 1985 feasibility study (para 2.3) had identifiedcapacity recovery and efficiency improvement schemes, preliminary lists of equipment to be installed, and costsfor different thermal plants. For some of the project components, these equipment lists were modified on thebasis of detailed designs prepared by the project consultants. While such modifications based upon detailedanalysis are inevitable, one of the key lessons of the project is that changes in original design make it difficult toevaluate the project outcome compared to the appraisal estimates, both in terms of costs as well as the specific

-12-

benefits (capacity recovery, efficiency improvements, etc.) to be achieved. This situation can be avoided ifdetailed design and bidding documents are prepared and agreed during appraisal which is recommended in Bankguidelines.

11.3 Institution-Building Components. Institution building was a major program objective, andprovisions were made for training of staff and transfer of technology. Through this project, WAPDA engineershave acquired the capability to undertake efficiency improvement projects in future; systematic MaintenanceManagement System are also being implemented at different thermal plants. WAPDA should, however, ensure infuture projects that progress on institution-building activities takes place along with physical work, and anydeficiency or delays on this count should be taken up with senior management at an early stage.

-13-

IMPLEMENTATION COMPLETION REPORT

PAKISTAN

Power Plant Efficiency Improvement Proiect(Loan 2792-PAK)

Part n - Statistical Tables

Table 1: Summary of Assessments

A. Achievement of Objectives Substantial Partial Neeligible Not Applicable

Macroeconomic Policies 0 0 O (1)

Sector Policies (,) O O 0

Financial Objectives (V) O 0 0

Institutional Development 0 (/) 0 0

Physical Objectives (3) 0 0 0

Poverty Reduction 0 0 0 (v)

Gender Concerns 0 0 0 (V)

Other Social Objectives 0 0 0 ()

Environmental Objectives 0 0 0 (/)

Public Sector Management 0 (/) 0 0

Private Sector Development O 0 0 (V')

Other (specify) 0 0 0 (/)

B. Project Sustainability Likelv Unlikely Uncertain

(H) 0 0

C. Bank Performance SaEisaNorv Satisfactory Deficient

Identification 0 (/) Q

Preparation Assistance 0 (3) oAppraisal 0 (I) 0

Supervision 0 (1) 0

HighlyD. Borrower Performance Satistactory Satisfactory Deficient

Preparation 0 (1) 0

Implementation 0 (/) Q

Covenant Compliance (V) 0 0

Operation (if applicable) 0 (') 0

E. Assessment of Outcome SaPis anorv Satisfactory Unsatisfactory Unsaicorv

0 (1) O 0

-14-

IMPLEMENTATION COMPLETION REPORT

PAKISTAN

Power Plant Efficiency Improvement Proiect(Loan 2792-PAK)

Table 2 - Related Bank Loans and Credits

Cr./Ln. No. | 1 Yr. ofand Title | Purpose | Apprv. Status Comments

A. Precedin2 Onerations

Cr. 213-PAK WAPDA Upgrading capacity of Transmission 1970 Closed Completed with delay ofPower Project Network (12/31/78) five yrs.(WAPDA l)

Ln. 1208-PAK Second Finance part of 500-kV Trans. System. 1976 Closed Successfully completed,WAPDA Power Project connecting hydro in north and thermal (9/30/82) with 1 year delay.(WAPDA II) gen. in south

Cr. 968-PAK Third Finance 4-year tranche of program for 1979 Closed Successfully completed butWAPDA Power Project dev. of secondary transmission (12/31/85) with 3 year delay.(WAPDA III) l

Ln. 2499-PAK Finance 4-year tranche of program for 1985 Closed Successfully completed, butFourth WAPDA Power development of secondary (12/31192) with 3 year delay. PCRProject (WAPDA IV) transmission. dated 6/21/95.

Ln. 2556-PAK Fifth Assist WAPDA in reinforcement of 1985 Closed Completed but with a delayWAPDA Power Project EHV power transmission network (12/31/93) of 3 years. Guddu-Jamshoro(WAPDA V) reducing transmission losses section completed in August

1995.

Ln. 2698-PAK Kot Addu Installation of 200 MW additional 1986 Closed Completed with two yearsCombined Cycle Power generating capacity at Kot Addu Power (6/30/93) delay. PCR dated 11/27/95.Project (WAPDA VI) Station.

Ln. 2792-PAK Power Finance program for rehabilitation of 7 1987 Closed Subject of this ICR.Plant Efficiency power plants and addition of combined (6/30/94) Completed with two yearsImprovement Project cycle generation at 2 power plants. delay.(WAPDA VII)

B. Following Operations

Ln. 3147-PAK Installation of 2 single circuit 500-kV 1989 Ongoing Original Closing date 12/95;Transmission Extension transmission lines between Hub Power extended to 12/96.and Reinforcement Complex and Jamshoro; installation ofProject (WAPDA VIII) a third single circuit 500-kV line

between Guddu and Multan and asecond single-circuit 500-kV linebetween Multan and Lahore via Gatti;extension and reinforcement of existing500-kV substations at Lahore, Gatti,Multan and Guddu.

-15-

Cr./Ln. No. Purpose Yr. Status Comments

and Title ofApprv.

Ln. 3148/Cr. 2078-PAK Extending the supply of electricity to 1989 Ongoing after Original Closing Date 12/95;Rural Electrification new villages and settlements; substantial extended to 6/97.Project (WAPDA IX) connecting to the grid settlements of delays in start-

electrified villages; expanding up.consumer connections; reinforcing andrehabilitating existing distributionnetwork; extending electricity supply totubewells; mapping of all villages andsettlements; and installing loadmanagement schemes.

Ln. 3764-PAK Power Restructuring and privatization 1994 Ongoing Closing Date 6/99Sector Development component to implement a StrategicProject (WAPDA X) Plan including reorganization and

corporatization of WAPDA; investmentcomponent to implement a timeslice(1995-1998) of WAPDA's investmentprogram.

Ln. 3965-PAK Ghazi Assist GOP in its efforts to: (a) 1995 Project Not yet effective.Barotha Hydropower develop domestic energy resources and approvedProject (WAPDA Xl) reduce load-shedding in a cost effective 12/19/95

and environmentally sustainablemanner; (b) reinforce and complementthe reform program for the powersector; (c) strengthen WAPDA'scapability to address environmental andresettlement issues related tohydropower projects; and (d) furtherr ationalize the use of electricity.

C. Related Loans

Ln. 2552-PAK Energy Finance GOP's program for policy 1985 Closed Successfully completed.Sector Loan reform and inst. development during (12/31/88)

Sixth Five Yr. Plan (FY83-88).

Ln. 3107-PAK Second Finance GOP's program for policy 1989 & Closed ICR under preparationEnergy Sector Loan reform and inst. development during 1991 (12/31/94)

Seventh Five Yr. Plan (FY89-93) .

Ln. 2842-PAK Refinery To improve operational efficiency at 1987 Ongoing The balancing andEnergy Conservation and NRL by reducing energy consumption, modernization componentsModernization Project increasing crude processing capacity, have been completed; Closing

and modifying the output mix to better date extended to June 30,match product demand. 1996 to allow for completion

of captive power plantutilizing exhaust gases

Ln. 3252-PAK Corporate Finance program for restr./privatization 1990 & Ongoing Being ImplementedRestructuring and System of SNGPL, and expansion of its 1991Expansion Project transmission and distribution network

capacity by about 50%. Under theproject, SNGPL constructed a pipelinebetween Multan and Kot-Addu forsupplying natural gas to the powerstation

-16-

Cr/Ln. No. Yr.

and Title Purpose of Status Comments

Apprv. l

Ln. 3500-PAK Domestic Accelerate development of 1992 Ongoing Being ImplementedEnergy Resources hydrocarbons by PS resources, deliveryDevelopment Project to consumers, enhancing commercial

orientation of public-sector entities, andGOP regulation/policy-making

Ln. 2982-PAK Private Assist GOP in mobilizing private sector 1988 Ongoing Implementation of privateSector Energy financing for energy investments and sector projects wasDevelopment Project develop institutional framework for substantially delayed during(PSEDP I) sustaining private sector FY90-93; construction of Hub

investment/operations in the sector Power Project is nowproceeding satisfactorily.Closing Date extended to Dec.31, 1999 (to correspond withPSEDP-II)

Ln. 3812-PAK Second To replenish the PSEDF established 1994 Ongoing Being implementedPrivate Sector Energy under Ln. 2982-PAK for financingDevelopment Project private sector investments in energy(PSEDP-II) and infrastructure projects.

-17-

Table - 3: Project TimetablePOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-Pak)

Steps in project cycle Date planned * Date actual/latest estimate

1. Identification October 1985

2. Pre-appraisal

3. Appraisal Mission September 20, 1985

4. Negotiations December 18-23, 1986

5. Letter of dev. policy Not Applicable Not Applicable

6. Board presentation March 1987 April 7, 1987

7. Signing of the loan April 7, 1987 April 22, 1987

8. Loan Effectiveness July 6, 1987 November 18, 1987

9. First tranche release Not Applicable Not Applicable(if applicable)

10. Mid-term review - None

11. Project completion March 31, 1990 December 1994

12. Loan closing June 30, 1992 June 30, 1994

* As given in the Staff Appraisal Report, March 7, 1987, and Memorandum of the President tothe Executive Directors, March 19, 1987

-18-

Table - 4: Cumulative Estimated and Actual DisbursementsPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-Pak)

(US$ thousands)

Financial Year/ Appraisal Actual CumulativeSemester Estimate Appraisal Actual

FY1988:Jul-Dec 5000 0 5000 0Jan-Jun 1000 5040 6000 5040

FY1989:Jul-Dec 10000 0 16000 5040Jan-Jun 14000 2590 30000 7630

FY1990:Jul-Dec 15000 1490 45000 9120Jan-Jun 12000 610 57000 9730

FY1991:Jul-Dec 7000 1670 64000 11400Jan-Jun 5000 13610 69000 25010

FY1992:Jul-Dec 1000 6030 70000 31040Jan-Jun - 5400 70000 36440

FY1993:Jul-Dec - 9590 70000 46030Jan-Jun - 10060 70000 56090

FY1994:Jul-Dec - 7430 70000 63520Jan-Jun - 1110 70000 64630

FY1995:Jul-Dec - 4817 70000 69447

Total 70000 69447

Amount Cancelled: US$552,595Date of last disbursement: December 23, 1994

-19-

Table - 5A: Key Indicators for Project ImplementationPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-PAK)

Key hnplementation Planned ActualIndicators/Plant Name Date Date

I. CONTRACTUAL ACTIVITIES:A. REHABILITATION PROJECT:Guddu:Engineering and design, contract award, and equipment delivery Jun 88 June 91Rebuild and test Dec 89 June 92Multan:Engineering and design, contract award, and equipment delivery Jun 88 June 91Rebuild and test Nov 89 June 92Shahdra:Engineering and design, contract award, and equipment delivery Apr 88 June 91Rebuild and test Nov 89 June 92Quetta:Engineering and design, contract award, and equipment delivery Mar 88 June 91Rebuild and test Dec 89 June 92Kotri:Engineering and design, contract award, and equipment delivery Jun 88 June 91Rebuild and test Dec 89 June 92Faisalabad:Engineering and design, contract award, and equipment delivery Jul 88 June 91Rebuild and test Dec 89 June 92Sukkur:Engineering and design, contract award, and equipment delivery Oct 88 June 91Rebuild and test Dec 89 June 92

B. COMBINED CYCLE AT FAISALABAD:Prep of specs, issue of tenderDocuments receipt, bid evaluationAward of contract May 88 Jan 91Main residential civil works Jul 90 Dec 93Circulating Water System works Mar 90 Mar 94Manufacture of eqpt, inspection, shipment, delivery at site Dec 89 Aug 94Installation of plant and equipment Mar 90 Aug 94Testing and commissioning Jun 90 Dec 94

C. COMBINED CYCLE AT KOTRI:Prep of specs, issue of tender Mar 90Documents receipt, bid evaluation Jul 90Award of contract May 88 Jan 91Main residential civil works Jul 90 Aug 94Circulating Water System works Mar 90 Feb 94Manufacture of eqpt, inspection, shipment, delivery at site Dec 89 Aug 94Installation of plant and equipment Mar 90 Dec 94Testing and commissioning Jun 90 Dec 94

D. MAINTENANCE MANAGEMENT SYSTEMS:Establishment of the Group/Team at Lahore & Guddu Oct 92 Oct 92Refurbishment of office and recruitments May 92 May 92Installation of computer and software Jun 92 Jul 92Training, and start of operation at Guddu Dec 92 Dec 92Preparation of PRA code, plant assets register Jan 93 Apr 93Identification of requirements, and preparation of work list Dec 92 Jun 93Preparation of work bank Dec 93 Dec 94Implementation of MMS Dec 93 Cont

-20-

Table - 5B: Key Indicators for Project ImplementationPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (LOAN 2792-PAK)

Key Implementation Planned ActualIndicators/Plant Name Date Date

II. PHYSICAL WORK:

A. Multan Steam:Generator/Turbine refurbishment I & 2 1990-91 1991-92Steam chest replaced Unit 1 & 2 1990-91 1991-92Acid cleaning condenser Unit 3 1990-91 1991-92Repair air htr seal Unit 3 1990-91 1991-92Acid cleaning condenser Unit 4 1990-91 1991-92Rewinding of generator Unit 4 1990-91 1991-92

B. Guddu Steam:Condenser cleaning, bumers repair, 1990-91 1991-92replacement of servo unit/CW pumps for Unit 1 1990-91 1991-92New LP rotor, Condenser cleaning, burners repair, 1990-91 1991-92replacement of servo unit/CW pumps for Unit 2 1990-91 1991-92

C. Faisalabad Gas Turbine:Replacement of Filters, Unit I to 8 1990-91 1991-92

D. Faisalabad Steam:Acid clean condenser/boiler, overhaul of rotor #1 1990-91 1991-92Acid clean condenser/boiler, NDT replace tubes #2 1990-91 1991-92

E. Kotri Gas Turbine:Replacement of Filter, cleaning of compressors 1&2 1990-91 1991-92

F. Ouetta Steam:Refurbishment of dry-type cooling towers Unit I & 2 1990-91 1991-92Improved O&M procedures, Unit 1 & 2 1990-91 1991-92Compressor refurbished Unit 3 1990-91 1991-92Generator winding cleaned Unit 4 1990-91 1991-92Generator rotor cleaned Unit 5 1990-91 1991-92

G. Shahdra:Oil coolers cleaned, fans adjusted Unit 3-6 1990-91 1991-92

H. Sukkur Steam:Replacement of instrument/boiler control system 1-4 1990-91 1991-92

-21-

Table - 6: Key Indicators fbr Project OperationPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-PAK)

A. Capacity Recovery (MW):Plant/Unit SAR Revised Actual Achievement

Target Target Achieved Remaining

Sukkur Steam 6.9 10.0 0.0 10.0Guddu Steam 53.4 45.0 37.0 8.0Faisalabad Steam 4.0 19.0 19.0 0.0Quetta Steam 10.4 7.0 4.0 3.0Multan Steam 6.7 152.0 152.0 0.0Kotri Gas Turbine 12.4 3.0 3.0 0.0Faisalabad Gas Turbine 8.5 12.0 6.0 6.0Shahdra Gas Turbine 6.6 24.0 24.0 0.0Guddu Gas Turbine 9.0 0.0 0.0 0.0Quetta Gas Turbine 1.4 10.9 10.9 0.0Total (Re-hab) 119.3 282.9 255.9 27.0

Combined cycle operation:Faisalabad 40.0 44.0 44.05 0.0Kotri 40.0 44.0 44.0 0.0

Grand Total 199.3 370.9 343.9 27.0

B. Heat Rate (BTU/kWh):Plant/Unit SAR Actual Achievement

Target FY1987 FY1991 FY1994

Sukkur Steam 12081 13563 19100 NAGuddu Steam 8902 10129 10366 NAFaisalabad Steam 9568 9898 12332 12075Quetta Steam 11426 12866 22654 20857Multan Steam 9683 10006 12392 12641Kotri Gas Turbine 15027 15428 17059 16151Faisalabad Gas Turbine 14366 14706 17838 18305Shahdra Gas Turbine 13671 14471 21217 22330Guddu Gas Turbine 17000 17000 NA NAQuetta Gas Turbine 14323 14657 17228 NA

Note: Heat rates were specified unit-wise in the SAR; simple averages for the plant have been used for this Report

C. Other Parameters:Parameter Units Actual Achievement Remarks

FY1991 FY1992 FY1993 FY1994

Forced Outage Hours NA NA 30000 25500 Only for the first two quartersEnergy Generated GWh 17950 18400 19500 25400 FY1994 figures are prorated on the first

two quartersPlant Availability NA 84.4% 80.0% 92.8% FY1994 figures are average for the first

two quarters

D. Details of work still to be done:

1. Technology transfer and training to be launched at Central Repair Workshop, Faisalabad2. Erection, commissioning and training on specialized equipment3. Implementation of Maintenance Management Systems at remaining thermal plants4. Refurbishment of cooling towers of Units I&2 at SPS Faisalabad

5 Combined cycle plants at Kotri and Faisalabad were commissioned and taken over by WAPDA in December 1994.

-22-

Table - 7: Studies Included in the ProjectPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-PAK)

Name of the study Purpose as defined at Status Impact of theappraisal/redefined study

There were no studies under the project

Table - 8A: Project CostsPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-PAK)

(US$ million)

Investment Costs * APPRAISAL ESTIMATE * * ACTUAL/LATEST ESTIMATE *Local Foreign Total Local Foreign TotalCost Exchange Cost Cost Exchange Cost

I. Civil Works 7.2 0.5 7.7 3.0 6.5 9.52. Main Plant Rehabilitation 11.2 29.6 40.8 0.0 15.1 15.13. Conversion to CC 11.2 27.0 38.2 4.7 72.3 77.04. Fuel Handling System 0.5 0.9 1.4 0.0 0.0 0.05. Substation Equipment 1.9 4.4 6.3 0.0 13.8 13.86. Workshop Equipment 1.8 4.4 6.2 0.0 5.0 5.07. Township 0.9 0.0 0.9 0.8 0.0 0.88. Consultancy & Training 0.6 6.2 6.8 1.2 10.7 11.99. Admniistration 4.0 0.0 4.0 3.6 0.0 3.69A. WAPDA Overheads 0.0 0.0 0.0 40.0 0.0 40.0

BASE COSTS 39.3 73.0 112.3 53.3 123.4 176.7

Physical Contingencies 4.7 8.7 13.4 - - 0.0Price Contingencies 8.1 13.1 21.2 - 0.0Interest during construction 1.7 14.2 15.9 - - 0.0

TOTAL COSTS 53.8 109.0 162.8 53.3 123.4 176.7

Note: WAPDA Overheads include interest charges,$5.715 million for balance work during FY1995,etc

Table - 8B: Project FinancingPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-PAK)

(US$ million)

**** APPRAISAL ESTIMATE **** *** ACTUAL/LATEST ESTIMATE ***Local Foreign Total Local Foreign TotalCost Exchange Cost Cost Exchange Cost

1. IBRD (Loan 2792-Pak) 0.0 70.0 70.0 1.5 67.9 69.4(Loan 3107-Pak) 0.0 0.0 0.0 0.0 0.6 0.6

2. USAID 0.0 15.0 15.0 0.0 13.8 13.83. JEXIM (through Loan 3107-PAK) 0.0 0.0 0.0 0.0 31.2 31.24. ODA 0.0 5.3 5.3 0.0 9.9 9.95. WAPDA 53.8 0.0 53.8 51.8 0.0 51.86. GOP 0.0 18.7 18.7 0.0 0.0 0.0TOTAL 53.8 109.0 162.8 53.3 123.4 176.7

Note: Conversion rate used for Rs/$ equivalent is:FY1988 17.56; FY1989 19.18; FY1990 21.39; FY1991 22.37; FY1992 24.78; FY1993 25.95; FY1994 30.16

-23-

Table - 9: Economic Costs & Benefits6

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-Pak)

I. FINANCIAL RESULTS:FY1986 FY1989 FY1991 FY1993Actual Estimated Actual Estimated Actual Estimated Actual

kWh Generated (Millions) 21055 28403 28898 34672 34345 41614 40791kWh Sold (Millions) 15504 21870 21982 26697 26584 32043 31272kWh sold/kWh generated (%) 73.64% 77.00% 76.07% 77.00% 83.23% 77.00% 76.66%Average Revenue/kWh (Paisa) 74.39 108.44 94.40 129.66 116.50 146.07 26.20

Operating Revenue, Costs & Income (Million Rs):Total Operating Revenue 11760 24082 1587 5059 1605 7340 3515Total Operating Expenses:Fuel Cost 3200 6616 6228 10591 9150 16123 11771Other Operating Costs 4616 7392 6805 10818 9434 15526 16955Total 7816 14008 13033 21409 18584 31649 28726Net Income Available 3944 10074 8554 3650 13021 15691 14789

I. PROJECT RESULTS (DIRECT BENEFITS):% Increase

FY86 FY88 FY89 FY90 FY91 FY92 FY93 FY86-FY93

Installed Capacity (MW) 4040 5549 5949 6409 7053 7493 8152 101.78%Maximum Demand (MW) 3933 5031 5440 5680 6090 6532 7522 91.25%Maximum Load Shed (MW) 1643 1126 1830 1666 879 1393 1456 -12.84%

Generation (GWh) 21055 27451 28898 31427 34345 38066 40791 93.74%Energy Sale (GWh) 15504 20702 21982 24121 26584 29267 31272 101.70%Losses incl Auxil. (%) 26.36% 24.59% 23.93% 23.25% 22.80% 23.12% 23.34% -12.94%Transmission Line (Km) 20607 21730 22167 22729 23533 23794 24647 19.60%Grid Stations (No.) 488 527 546 556 573 584 593 21.52%Transformer Capacity(MVA) 15277 19481 21203 22273 23740 25564 28175 84.43%Consumers (000):Residential 3780.0 4530.0 5080.0 5468.0 5805.0 6220.0 6623.0 75.21%Commercial 830.0 960.0 1040.0 1089.0 1135.0 1186.0 1221.0 47.11%Industrial 130.0 147.0 150.0 159.0 163.0 169.0 172.0 32.31%Bulk Supply 1.6 1.9 2.1 2.2 2.3 2.4 2.5 56.25%Others 135.4 137.1 146.9 152.8 155.7 158.6 157.5 16.32%Total 4877.0 5776.0 6419.0 6871.0 7261.0 7736.0 8176.0 67.64%Villages Electrified 2577 2440 2301 3096 4047 3649 4824 87.19%Consumption (GWh):Residential 4514 1054 1068 1106 1152 1192 1303 48.91%Industrial 5894 7236 7579 8360 9114 10213 10912 85.14%Bulk Supply 1215 1571 1877 1818 1895 2091 2020 66.26%Others 3006 4551 4519 5190 5806 6080 5817 93.51%Total 15504 20702 21982 24121 26585 29267 31272 101.70%

Per Capita Consump. (kWh) 169 212 220 234 250 267 276 63.31%

6 Based on comparisons with appraisal estimates.

B. Econornic rate of return

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT

Year --------- PROJECT COST ---------- Energy ----------------- PROJECT BENEFITS ------------------ Discounted Discounted NetCapital Fuel 0 & M Total Gene- Energy Sale Benefits Benefits Fuel Total Cost Benefits Benefits

Cost Cost Cost Cost rated Sold Price From Attrib to Cost Benefits 10% 12% 10% 12%Sale Project Recovery

---------- Million Rs. ---------- MkWh MkWh Ps7/kWh ---------- Million Rs. ----------- --------------- Million Rs. ---------------

1988 164.49 0.00 0.00 164.49 0.00 0.00 85.00 0.00 0.00 0.00 0.00 149.53 146.B6 0.00 0.00 -164.491989 62.41 0.00 0.00 62.41 0.00 0.00 85.00 0.00 0.00 0.00 0.00 51.58 49.75 0.00 0.00 -62.411990 173.62 0.00 0.00 173.62 0.00 0.00 85.00 0.00 0.00 0.00 0.00 130.44 123.58 0.00 0.00 -173.621991 518.27 0.00 0.00 518.27 0.00 0.00 85.00 0.00 0.00 0.00 0.00 353.98 329.37 0.00 0.00 -518.271992 77.55 0.00 0.00 77.55 0.00 0.00 85.00 0.00 0.00 0.00 0.00 48.15 44.00 0.00 0.00 -77.551993 138.95 0.00 0.00 138.95 0.00 0.00 85.00 0.00 0.00 0.00 0.00 78.43 70.39 0.00 0.00 -138.951994 3.38 1075.35 112.35 1191.08 1605.00 1235.85 85.00 1050.47 598.77 1075.35 1674.12 611.21 538.79 859.09 757.29 483.041995 0.00 1075.35 112.35 1187.70 1605.00 1267.95 85.00 1077.76 614.32 1075.35 1689.67 554.07 479.69 788.24 682.43 501.971996 0.00 1075.35 112.35 1187.70 1605.00 1284.00 85.00 1091.40 622.10 1075.35 1697.45 503.70 428.30 719.88 612.12 509.751997 0.00 1075.35 112.35 1187.70 1605.00 1300.05 85.00 1105.04 629.87 1075.35 1705.22 457.91 382.41 657.44 549.04 517.521998 0.00 1075.35 112.35 1187.70 1605.00 1308.07 95.00 1111.86 633.76 1075.35 1709.11 416.28 341.44 599.03 491.33 521.411999 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 378.44 304.85 544.58 438.69 521.412000 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 344.03 272.19 495.07 391.68 521.412001 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 312.76 243.03 450.06 349.72 521.412002 0.00 1075.35 112.35 1187.70 1605.00 1306.07 85.00 1111.96 633.76 1075.35 1709.11 284.33 216.99 409.15 312.25 521.412003 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 258.48 193.74 371.95 278.79 521.412004 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 234.98 172.98 338.14 248.92 521.412005 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 213.62 154.45 307.40 222.25 521.412006 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 194.20 137.90 279.45 196.44 521.41 NJ2007 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 176.54 123.13 254.05 177.18 521.412008 0.00 1075.35 112.35 1187.70 1605.00 1308.07 85.00 1111.86 633.76 1075.35 1709.11 160.49 109.93 230.95 158.19 521.41Total 1138.66 5913.17 4863.76 7304.49 5868.32 6612.54

Benefit-Cost Ratio 1.24 1.21Net Present Value 1391.32 1004.56Economic Rate of Return (ERR) 24.35%

Assumptions:1. The year-wise phasing of the project cost excludes interest during construction, and duties, etc.; all costs and benefits are expressed in constant

1994 prices; costs are expressed in border price equivalent using SCF of 0.85 (same as used in Ghazi-Barotha Feasibility Study)2. The revenue attributable to the project is calculated from annual energy generation and sales attributed to rehabilitated units. This energy is valued

9 57% of the final (average) sale price. The balance is attributable to transmission/distribution costs. This breakdown is estimated by WAPDA based onweighted 5-years FY88-FY93 average of operational cost, and net return/kWh accrued in the respective facility.

3. The amount of fuel cost has also been included in the income/benefit stream as it is recovered from the consumers through the levy of FAS

Source: IOPDA and mission estimates

7 Ps = Pakistan Paisa.

-25-

Table - 10: Status of Legal CovenantsPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-PAK)

Agreement Section Covenant Present Original Revised Description of the CommentsType Status fulfillment fulfillment covenant

date date

Loan 5.01 1 C June 30 WAPDA to have its accounts and Complied2792-PAK Ibl (i) each year financial statements and Special

Account audited by independentauditors.

5.01 1 CD Dec 31 Submission by IaPDA certified Complied(b) (ii) for each FY copies of its financial (May 15, 1994)

statements, as so audited.

5.01 1 CD WAPDA to keep separate account Complied(c) of its Statements of Expendit- (February 1994)

ures (SOE), to be included inannual audit report.

5.02 2 C June 30 Maintain self-financing ratio Complied with for(c) each year of 40%.Review compliance prior FY93; For FY94,ICG was

to end of FY, and promptly take 28%, and 39.9% fornecessary measures, if FY95 based on unauditedcovenant would not be met. results.

5.03 2 CP June 30 WAPDA not to incur debt unless Debt service coverage(c) each year net revenue shall be at least for FY1994 was 0.9 times,

1.5% of estimated debt service and 1.5 times for FY95,requirements. based on unaudited results.

Key:

Covenant type: Status:I = Accounts/audits complied with C -Covenant complied with2 = Fin performance/rev gen from beneficiaries CD Complied with after delay3 = Flow & util. of project funds CP = Conplied with partially4 = Counterpart funding NC Not complied with5 = Mgmt aspects of proj/executing agency6 = Envirornmental covenants7 = Involuntary resettjement8 = Indigenous people9 = Monitoring, review and reporting10 = Proj implementation not covered by 1-911 = Sectoral/cross-sectoral budget/allocs12 = Sectoral/cross-sectoral policy regulatory/institutional action13 = Other

Table - 11: Compliance with Operational Manual StatementsPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-Pak)

All Bank Policies complied with.

Table - 12: Bank Resources: Staff InputsPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-Pak)

Stage of Project ActualCycle Weeks

1. Through Appraisal 25.02. Appraisal - Board 6.9

Table - 13: Bank Resources: MissionsPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT (Loan 2792-Pak)

Project Stage Month/Year No. of persons Days in field Staff skills Ratings Types of ProblemsI Through Status Status

Appraisal Mar-87 NA NA (1) Power EngineerFin. Analyst Not Applicable

2. Appraisal toBoard Approval Apr-87 NA NA (2) Power Engineer

Fin. Analyst Not Applicable3. Supervision

Supervision 1 Oct-87 2 4 Power Engineer I IFin. Analyst

Supervision 2 Jul-88 4 4 Task Manager 1 1 */refers to project management ratingPower Engr.Fin. Analyst

Supervision 3 Mar-89 4 10 Task Mgr 2* 1 */refers to project management ratingPower Engr.Fin. Analyst

Supervision 4 Jul-90 2 7 Power Engineer 2* 1 */refers to project management ratingConsultant

upervision 5 May-91 3 5 Sr. Power Engr. 2 1 Proj. 15 mths behind schedule against SAR time-tableFin. Analyst Closing date extension recommended, 06/30/92 to 06/30/93

Supervision 6 Jun-92 3 3 Sr. Power Engr. 2 1 Combined cycle conversion at Faisalabad and Kotri behind scheduleFin. AnalystConsulting Engr.

Supervision 7 Mar-93 2 4 Prin. Pow. Engr. 2 2 Conversion to combined cycle more than 20 mths behind scheduleConsulting Econ. 2nd Extension considered for closing date of 06/30/93

Development impact downgraded due to serious delaysin combined cycle conversion

Supervision 8 May-94 2 3 Sr. Power Engr. 2 2 Further delays in combined cycle retrofitting at FaisalabadPrin. Pow. Engr.

4. Completion Dec-94 2 4 Prin. Power Engr.Consulting Engr. 2 2

-27-

Appendix A

PAKISTANPower Plant Efficiency Improvement Project

(Loan 2792-PAK)

Implementation Completion ReportAide-Memoire

Introduction

A World Bank mission comprising Rashid Aziz (Bank Staff) and Waqar Haider (Consultant) visited WAPDAfrom September 13 to 26, 1994, to prepare the Implementation Completion Report (ICR) for the Power Plant EfficiencyImprovement Project (Loan 2792-PAK). The Bank loan for this Project was closed on June 30, 1994. This aide memoirepresents the mission's findings and recommendations, which would be confirmed through a post mission letter from theBank's management. The mission would like to record its appreciation for the courtesies and cooperation extended byWAPDA during the mission.

A. Proiect Appraisal

1. Proiect Obiectives. The objectives of the Project were to: (a) improve the efficiency with whichhydrocarbons were used by WAPDA in power generation, (b) provide about 120 MW of additional generating capacitythrough rehabilitation of existing thermal units, and about 80 MW through the conversion of combustion turbines tocombined cycle operation; and (c) continue the institution building efforts initiated under Bank Group's earlier lendingoperations by strengthening WAPDA's capability in the operation and maintenance of thermal power stations and spareparts management.

2. Proiect Description. The Project provided for:

(i) equipment, spares, tools and other materials required for the rehabilitation of steam units and combustion turbinesat Sukkur, Guddu, SPS Faisalabad and GTPS Faisalabad, Quetta, Multan, Kotri and Shadra;

(ii) equipment, materials, civil works and services for conversion of eight combustion turbines to combined cycleoperation at the Kotri and Faisalabad power stations;

(iii) consultancy services for detailed engineering, preparation of bidding documents, supervision of implementationand development of systems for maintenance and spare parts management; and

(iv) training of WAPDA's staff in operation and maintenance.

The Project was appraised in March 1987, and approved by the Bank's Board on April 7, 1987. The Loan andGuarantee Agreements were signed on April 22, 1987, and the Loan was declared effective on November 18, 1987 (aftertwo extensions in the target date for effectiveness. The (original) Closing Date for the Bank Loan was June 30, 1992.

3. Proiect Cost and Financing. The total cost, including taxes and duties, price and physical contingencies, wasestimated at about US$ 147 million. The total financing required, including interest during construction of US$ 16million, was about US$ 163 million, of which US$ 109 million was in foreign exchange. The Bank Loan of US$ 70million was expected to cover 64% of the foreign exchange requirement; the foreign exchange requirement was to bepartly covered through cofmancing by USAID (US$ 15 million) and the Overseas Development Association (ODA) of UK(US$ 5.3 million equivalent). In addition the Government was to provide about US$ 18.7 million to cover the balance of

-28-

the foreign exchange requirement, while WAPDA was expected to contribute US$ 53.8 million equivalent towards fundingthe local cost component of the Project.

4. Project Preparation. The Project was prepared on the basis of a study conducted by WAPDA with the assistanceof consultants (M/S Stone & Webster) funded by USAID. The consultants assessed the operational status and maintenancerequirements of WAPDA's thermal generating units, and formulated a work program and investments required to improvethe thermal efficiency of each unit, and the time schedule for its implementation. In view of WAPDA's limited experiencein the design and engineering of steam and combined cycle power plants, it was agreed that WAPDA would recruitconsultants to assist WAPDA in the detailed design, preparation of bidding documents and implementation schedules, andsupervision of implementation. In addition, WAPDA agreed to recruit consultants to assist in the development andimplementation of maintenance and spare parts management systems, as well as for the training of WAPDA's staff in theiruse.

5. Implementation Arrangements. The Project was to be implemented concurrently at seven different locations, andinvolved procurement of a large variety of equipment and materials financed by a number of donor agencies. SinceWAPDA's experience with the coordination of such activities was limited, for this Project WAPDA agreed to establishunder the (then) General Manager (Thermal) a plant improvement group whose responsibilities were to (a) coordinate theimplementation of the Project; (b) liase with the consultants; and (c) form the counterpart staff within WAPDA to betrained in the development and implementation of modem systems for maintenance and spare parts management.

B. Project Implementation Experience

1. The Project has been implemented by WAPDA on the basis of the following four components:

i. The rehabilitation of steam and combustion turbine power plants at seven locations;

ii. Conversion of combustion turbines to combined cycle operation at the Kotri power station;

iii. Conversion of combustion turbines to combined cycle operation at the Faisalabad power station;and

iv. Development and implementation of a Maintenance Management System MS)

1. The rehabilitation component of the Project has almost been completed with the exception of one technologytransfer program to be launched at Central Gas Turbine Workshop Faisalabad, and refurbishment of cooling towers units1&2 at Faisalabad. The works for the refurbishment of cooling towers at Multan power station are in progress. Also somemiscellaneous jobs are under progress at different locations. The rehabilitated units are in operation. Work on thiscomponent was initiated in February 1987, with the help of consultants M/S EWBank (EPL), and completed in about 37months, in January 1991. While the feasibility study had identified about 120 MW of capacity additions which would bepossible through the rehabilitation of existing units, the detailed design work carried out by EPL identified an additional163 MW of capacity which would be restored, primarily through the re-commissioning of the Multan power station (130MW). The scope of the rehabilitation component was thus revised by WAPDA to involve the recovery and restoration ofabout 283 MW of capacity. To date, almost 253 MW of capacity has been restored at the Guddu, SPS Faisalabad, GTPSFaisalabad, Kotri, Quetta, Shahdra and Multan power stations. Table 6 of Annexure II provides details of the capacitiesrestored at different stations, along with MW restoration. The balance capacities yet to be recovered are also shown. Thetechnology transfer and training for repair and maintenance of thermal plants is yet to be launched at the Central RepairWorkshop, Faisalabad. Contracts already awarded for installation services of different machinery to be installed in newlyconstructed building at Faisalabad are yet to be carried out. The left-over works including electrification of new Workshopare expected to be completed in the next 9 - 10 months.

-29-

3. As regards the Kotri and Faisalabad Combined Cycle components, these have been significantly delayed, and arenow expected to be completed by end-December 1994. Significant among the factors accounting for the delays in theimplementation of these components were the following:

(i) The bids received for these components were substantially higher than estimated; as a result, considerabletime elapsed between the receipt of bids and WAPDA's decision on contract award, while WAPDA re-evaluated the merits of the component on the basis of these higher costs. The selected biddersubsequently refused to accept the award, and the components were re-tendered. Implementation of thiscomponent was thus initiated about three years later than the appraisal timetable.

(ii) In view of the higher cost of bids received for this component, the Project was faced with a financingshortfall amounting to almost 40% of the total foreign currency requirement. While the financing gapwas subsequently covered through funding through JEXIM Bank cofinancing for the Second EnergySector Loan, the sharp divergence between the bids received and estimated costs indicates that the costestimates prepared by the consultants were a substantial under-estimate.

(iii) While the financing gap was covered through the JEXIM Loan, disbursements under that loan were alsodelayed by about 12 months, on account of the decision by the Islamic courts (in late 1991) regardinginterest payments under Islamic laws.

(iv) The performance of the contractor/supplier for the combined cycle units at Kotri and Faisalabad has alsonot been entirely satisfactory, as evidenced by the fact that the installation of these units has not yet beencompleted almost three and a half years after the signing of the contract; the contractual period for theinstallation of these units was approximately 22 months.

4. The MMS has been successfully installed at one power station (Guddu), and is currently being installed atJamshoro. With the assistance of consultants funded by ODA, systems and software for the implementation of the MMShas been developed, including timetables for planned outages and maintenance work, and inventory control procedures.Thermal efficiency monitoring and control work is underway, according to the plan but with some minor delays. Thiscomponent is expected to be completed by December 1994.

5. Project Results. While the information provided to the mission indicates that the rehab program has successfullyrecovered about 253 MW of capacity at a fairly low cost (relative to capital cost for new capacity), the evidence inparticular regarding efficiency improvement at the existing stations does not indicate sufficient gains. For example, theheat rate (or alternatively fuel use per unit electricity generated) appears to have deteriorated for a majority of the plants(details are provided in Annexure II, Table 6). According to WAPDA, in view of the constraints on the power generatingsystem, the utility has to date not been able to take the units out of service for performing efficiency tests (as have beenrecommended on a number of occasions by Bank supervision missions) to determine the extent of performancedegradation, and take suitable remedial measures. Also, WAPDA does not appear to have instituted a mechanism forregular monitoring of operational performance by senior management, and identification and implementation of remedialsteps. It is essential that, in order to derive the full benefits expected from the Project, formal procedures for suchmonitoring and follow-up actions be introduced as soon as possible.

6. Proiect Costs and Financing. The total cost of the Project, as implemented, is about US$ 176 million; thisindicates, an increase of 8.0% relative to the appraisal estimate. The above cost included a marginal reduction in therehabilitation component (US$ 59 million versus the appraisal estimate of US$ 75 million) while the cost of the CCcomponent is substantially higher than estimated (US$ 117 million versus US$ 87.8 million). As indicated in para 9 above,the increased cost of the CC component was covered through JEXIM Bank cofinancing for the Second Energy SectorLoan. Annexure II, Table 8 presents a detailed breakdown of Project costs and the financing plan.

-30-

7. Disbursements. The actual disbursements on the project up to end-September 1994 is $ 67.015 million(Annexure II, Table 4). It is estimated that there would be additional payments of $ 1.5 million for the work that hasalready been completed or equipment supplied, and the remainder (approximately $ 1.485 million) would be cancelled asnon-utilized.

8. Compliance with Covenants. The major covenants agreed under the Project relate to the financialperformance of WAPDA; in particular, WAPDA had agreed to finance 40% of its average capital investment programthrough internal cash generation. In addition, WAPDA has agreed not to incur additional debt unless its net revenues areat least equal to 1.5 times its debt service requirements. During the period of implementation of this Project WAPDA hassuccessfully complied with these covenants - the level of internal cash generation has been in line with the agreed targets,while its debt service coverage ratio has also been adequate (with the exception of FY94 when the ratio fell to 1.4 times).

9. Operational Plan. The mission also discussed with WAPDA officials a Plan for the operation of thecomponents installed and/or rehabilitated under the Project, with a view towards sustaining the benefits of the Project forthe expected life of these assets. The operational plan covers, inter alia, the technical and institutional arrangementsrequired for effective operation of these assets, indicators or targets that could be used for measuring the achievement ofProject objectives, the resources (technical and financial) which WAPDA would need to allocate annually towards theoperation and maintenance of these assets, and an indicative timetables for monitoring the continued achievement of theperformance indicators by both WAPDA and the Bank. A draft of the Operational Plan that was discussed with WAPDAis attached in Annex 1.

10 Client Evaluation. As per the Bank guidelines, WAPDA would submit its own evaluation of the Projectwhich would be appended to the ICR. It has been agreed that it would submit its evaluation by November 15, 1994.

C. Conclusions

1. While significant delays were experienced in the implementation of the Project, and the Closing Date wasextended by two years, the overall outcome of the Project appears to be satisfactory. In particular, an investment of onlyabout US$ 60 million has enabled WAPDA to recover about 250 MW of generating capacity (which represents about 5%of total thermal capacity). A life extension of 10 to 15 years operation of the rehabilitated power plants in particular atNGPS Multan carried out under Power Plant Efficiency Improvement Project is envisaged. The latest machinery andequipment for repair and maintenance of Hot Gas Path Components has been procured for installation at Central RepairWorkshop, Faisalabad. This would carry out overall maintenance and repair jobs of the Hot Gas Path components andmachinery of all Power stations of WAPDA. The technology transfer program is part of the Rehabilitation Project whichwould enable repairing and maintenance of Hot Gas Path components at Central Repair Workshop Faisalabad by WAPDAstaff itself. WAPDA should consider to continue similar Rehabilitation Program to its other thermal power plants tofurther improve the efficiency and strengthening the power generation system. It may hire local/foreign consultants forsupport.

2. In addition, the conversion to CC operations at Kotri and Faisalabad would provide an additional 88 MW ofcapacity, with no additional fuel costs. However, benefits in the form of efficiency gains (e.g. through reductions in fuelcost per unit of electricity generated) do not appear to have been realized. Finally, the introduction of formal and morerigorous Maintenance Management Systems has resulted in improved plant availability factors, reduction in forcedoutages, and thereby increased thermal generation.

3. In order to sustain the benefits of the Project over the life of the assets, WAPDA needs to:

(i) ensure that the maintenance requirements (financial and staff) are adequately catered for in the annualbudgets;

-31-

(ii) institute more rigorous and timely mechanisms for performance monitoring and for conducting efficiencytests, including periodic review by WAPDA management;

(iii) evaluate the effectiveness of the maintenance and stores management systems developed under theProject, and extend these to all its generating facilities as soon as possible; and endeavor to enhance on acontinuous basis the capability of its operating staff and managers through training and exposure tomodem techniques, for which resources must be identified and allocated as part of the annual budgets.

Attachment

Operation Plan

PAKISTAN - POWER PLANT EFFICIENCY IMPROVEMENT PROJECTWAPDA VTl (LOAN 2792-PAK)

OPERATION PLAN

ITEM PRESENT STATUS AND FUTURE PLANS PERFORMANCE INDICATORS TARGET DATE

Project Constructioti The pcrfortnance tests are due its ar 9d 5 and otri are now u dsr trial runt The plants were completed after delay. WAPDA should ensure that all WAPDA to closely monitorCompletion The penaovce by Are contractual tests are perfornied by the contractor before taking over the contractor performance to ensure

plants. timely completion.

Project Operaton I. WAPDA needs to ensure adequate budgetary allocations for ulsecting operations and Adequate budgetary allocations Annually during budget preparation andInstituttutal maintenance (O&M) requirentents for the rehabilitated units, approvalArrangements

2 WAPDA needs to generate adequatc resources for fmding isivcstroent program, includingrehabilitation, which has been found to be very cost effective. Self financing of 40% of average capitat expeniditures Annual reviews and monitoring by

WAPDA - overall WAPDA and the Bank3. WAPDA should complete the tranisfer technology and traininig program earlier included inthis project. Project proposal to be prepared by June 30,

WAPDA would develop a Project proposal with possible financing from JEXIM 1995

Project Operation 1. The Project has contributed to enhancing WAPDA's capabilities for plant operation and Contparison of performance indicators of rehabilitated plants with other plants lo be By June 30, 1995Instituional maintenance: the benefits of the Project need to be cvaluated. undertaken, to establish the extent of efficiency gains.Arrangements tS

2. Maintenance Management Systems insLtaied (or being installed) at rehabditated plants, to Selected performance indicators for rehabditated plants, to be monitored periodically byProject specific monitor plant performance; systems for collecting and analyzing operating data are being WAPDA: Monitoring by General Manager/Chief

strengthened; planned maintenattce programs are being developed. Engineer (Operations) every quarter;a: Gross heat rate (BTUl/kWh), or fuel use per kWh; review by Member (Power) every sixb: Forced outage hours per year; months.c: Energy generated (GWhtyear);d: Plant and Load Factors;e: Outage hours due to spare parts shortages;f: Total inventory costs/year.

3. Faisatabad and Kotri CC plants would benefit from computerized control systems, rigorousmotitoring and operational controls, modem workshop, spare parts and testing facdities, andtrained operations staff. WAPDA to make a comparative analysis of performance of Kotri and Faisaiabad CC plants by June 30, 1995

with other similar plants in the system.

- 33 - APPENDIX BPage 1 of 19

IMPLEMENTATION COMPLETION REPORT

PAKISTAN

POWER PLANT EFFICIENCY IMPROVEMENT PROJECT(Loan 2792-PAK)

BORROWER'S EVALUATION

PAKISTAN iWATER AND POWER DEVELOPMENT AUTHORITY

Office of theGeneral Manager (Thermal)

WAPDA: Wapda House, Lahhore.

No. 2.Z9 4 /LM T./PP T B/W.B. Dated J7 __ _ 94

The World Ban',LResident Mission in Pakistan,

P.O.Box 1025,

Islamabad. 2 0 NOV 134t ECEIVEDv

Attention MR RASHID AZIZ

Subject : POWER PLANT EFFICIENCY IMPROVEMENT PROJECT

(LOAN 2792-PAK) IMPLEMENTATIION COMPLETION

REPORT (ICR)

Dear Sir,

Further to this office letter No. 11555/IGMTHIPD/IRHW.B. dated

15.11.1994 alongwith Draft BorrowserS Evaluation, please find

enclosed herewith "final Borrowers Evaluation," as desired.

Thanks.

Yours faithfully

,~HN~D N,,S ,44 t7A1R) , ,/ £ 'Deputy Director (Rehb.)

fort- General tlanaget- (Therrmal)

This section has been prepared by the Borrower, and its contents are not attributable to the World Bank. Thesection consists of several parts, i.e., the initial evaluation (Letter No. 26634 dated November 17, 1994), and atthe Bank's request, a follow-up evaluation of the efficiency/heat rates observed in selected plants followingtheir rehabilitation (Letter No. 28408 dated December 12, 1994). Only the text of the Borrower's contributionis attached with this report; additional details, tables and a matrix of actions taken and planned, are filed in theWorld Bank's Asia Region Information Center.

APPENDIX B~ 34 - Page 2 of 19

WATER AND POWER DEVELOPMENT AUTHORITYPOWER PLANT EFFICIENCY IMPROVEMENT PROJECT

(IBRD - LOAN NO. 2792 PAK)

BORROWERS EVALUATIONINTRODUCTION

1. GENERAL

1.1 On the request of Government of Pakistan, USAID arrangedservices of M/5. Stone & Webster Engineering Corporation ofUSA to carry out a study of existing thermal plants inrespect of their rehabilitation and efficiency improvement.They made detailed recommendations in the form of a Reportsubmitted in October 1985. On the basis of these recommenda-tions, the PC-I proforma was prepared and submitted toGovernment which was approved by ECNEC in its meeting heldon 29.10.1987. The scheme incorporated the rehabilitation ofexisting steam and gas turbine power stations at Sukkur,Guddu, Multan, Quetta, Faisalabad, Kotri and Shahdara re-storing 241 MW (Part-I). The scheme was revised by theConsultants EPL to identify the total recoverable potentialof 283 MW restoration. In addition setting up of 44 MWCombined Cycle at Kotri and 44 MW Combined Cycle at Faisala-bad (Part-II) and (Part-III) thus providing a total increaseof 371 MW.

1.2 The Power Plant Efficiency Improvement Project involvedRehabilitation of the existing WAPDA Power Generation facil-itie5 in Pakistan, and the retrofitting of Combined CycleSteam Generating Plant and Equipment to four of the GasTurbine Generators at both Faisalabad and Kotri.

It was intended that this project be financed by a combina-tion of funding from the World Bank, USAID, ODA and CDC(UK), WAPDA and Government of Pakistan. The consultingservices were financed by the ODA upto a fixed limit. Inaccordance with the ODA s recuirements, Ewbank Preece Ltd(EPL) have been associated with British Electricity Interna-tional (BEI) and National Enqineering Services Pakistan(Private) Limited (NESPAK) to provide the necessary consult-ing expertise. EPL have been the Lead Consultants and havebeen directly involved in the Combined Cycle part of theProject. BEI are responsible for the rehabilitation work.National Engineering Services of Pakistan (NESPAK) are toprovide input to EPL in Civil Engineering, Switchyard andvarious technical and local expertise matters includingcertain sections of the Specification.

After award of the Combined Cycle Contracts the Project wasto be run from the Lahore Office and staff from UK secondedto that office. The objective was to facilitate technologytransfer from UK to Pakistan by the -engineers from bothcountries working in close collaboration during the engi-neering phase of the Project. However this was changed andthe engineering work was carried out by EPL - UK.

35 - APPENDIX BPage 3 of 19

2. SCOPE OF WORK

Following initial agreement with the ODA, EPL wasAuthorized to proceed with the Project in May 1987, and workhas proceeded on this basis.

A further proposal dated July 1988 incorporating the latestproject requirements at that time was accepted and formedthe basis of the Contract with ODA which was concluded inMay 1989.

2.1 Rehabilitation Project

The objective of the Rehabilitation was to renovate existingplant with a view to restoring or improving on originalperformance. It is a requirement that this enhanced condi-tion be sustained over a period of 15 years and the appro-priate Management Systems be developed to support this. Thisinvolves training, provision of Technical Data, EfficiencyMonitoring Support Systems, Work Control and MaintenancePlanning, Workshop Development and Spares Inventory System.

The Rehabilitation was achieved by a logical sequence ofactions. Firstly Plant condition is established by holding aPlant status review at each Site and determining the causesof reduced availability and efficiency. A plan for remedialaction is then developed and a work list produced so thatresource requirements can be established.

Sources of funds are identified and approval sought whileorganizations with an appropriate capability are invited tobid for and carry out the work against Technical Specifica-tions provided by the CONSULTANTS in consultation with WAPDARehabilitation Team.

The procurement of resources and materials was timed tocoincide with Plant outages and the Site work standards andprogress checked by the Rehabilitation Engineers, North andSouth.

Throughout the Project, the resident staff in Pakistan werereinforced by visiting specialists and by the use ofsophisticated services from laboratories and engineeringdepartments. The efficiency specialist monitored Plantimprovements during the Projects.

The Consultants part in the Rehabilitation was completed atthe end of December 1990.

The Rehabilitation exercise ranged over all aspects ofThermal Plant including efficiency monitoring. Some 270major task were undertaken which included a MMS pilotscheme. The 37 month programme extended from May 1987 toJune 1991.

- 36 - APPENDIX BPage 4 of 19

The Rehabilitation teatn was formed under the direction ofthe Director Rehabilitation who reported directly to theGeneral Manager (Thermal). The training and ManagementSystems were introduced by providing examples of CentralElectricity Generating Board (CEGB) methods and establishingtheir relevance to the Pakistan environment. This was aniterative process demanding commitment from WAPDA at highermanagement levels to agree and set up the policy for adop-tion followed on by an active involvement and commitment ofthe staff at the stations.

The overall resultant gain to the system was 253 MW whichdoes not include the Combined Cycle target of 88 MW. Recordsshow that the achievements have been maintained. The currentODA project with National Power International (NPI) settingup Maintenance Management Systems at all major plants willensure retention of maximum efficiency.

A numbers of items were left outstanding which included theCooling Towers at Multan & Faisalabad, Technology Transferfor Gas Turbine repair and the Faisalabad Workshop.

The details of major jobs accomplished under the Rehabili-tation Programme are recorded in Annexure-III.

LATEST STATUS AND ACHIEVEMENTS OF REHABILITATION PROJECT

This Project commenced work in February 1987 with the helpof Consultants M/s. EPL and completed its tenure of 37months in January 1991. Most of the works were completedduring this period. WAPDA staff would supervise and completethe remaining works which remains under execution at sites.Uptill now almost 253 MW capacity restoration have beenachieved at GTPS Shahdara, TPS Guddu, SPS Faisalabad, GTPSFaisalabad, TPS Quetta and NGPS Multan while an estimated 30MW capacity restoration at different Power Stations isexpected in due course. The Graphic representation of MWrestoration is attached for reference (Annex-I).

IMPORTANT LEFTOVER JOBS UNDER REHABILITATION PROJECT

In addition to some miscellaneous jobs, an important projectof Technology Transfer and Training to be launched at Cen-tral Repair Workshop, Faisalabad for repair and maintenanceof Thermal Power Plants has been initiated. The contract forrefurbishment of cooling towers at Multan has beer awardedand is in progress by Hamon, France. Also tender documentsregarding refurbishment of coolirnc towers at SPS Faisalabadhave been revised under World Banr: guidelines and are yet tobe floated.

_ 37 _ APPENDIX BPage 5 of 19

The services of expatriates are required to complete theerection, commissioning and training at WAPDA workshop,Faisalabad for the specialised equipment, i.e. Heavy DutyLathe, Vacuum Furnace, Electro Discharge Machine, VerticalTurning Lathes, Special Grinding Machines, Horizontal Boring& Milling Machine & Plasma Spray equipment, etc. The con-tracts for these services are being amended for completionupon installation of power supply system to the new workshopbuilding at Faisalabad Central Turbine Workshops.

The contract for 2 Nos. Overhead Travelling Cranes have beenawarded and installation is likely to be completed withinnext six months.

The contract for installation of power supply equipment atFaisalabad workshop has been awarded and supplier isexpected to commence the work shortly.

The Chinese team for erection of 80 Ton O/H Travelling Cranehas installed the crane but it is still not operative due topending commissioning of same. The Chinese team has beenreinvited to commission the crane.

The detail of leftover jobs and its funding under ESL-II-3107 is placed at Annexure-II.

REASON OF DELAY FOR REHABILITATION PROJECT

The actual work on this project commenced from February1988. The overall Rehabilitation Project ran about 30 monthsbehind the original time schedule as stipulated in PC-I i.e.30.6.1990 due to following reasons:-

a) The Project posts of officers/officials could beordered in April/May 1988.

b) The British consultants M/s. Ewbank Preece Ltd wereappointed and started working on this project inFebruary 1988 instead of June 1987.

c) The late preparation of Rehabilitation works plan andits services by the Consultants and under-estimation ofworks.

d) Overall power crisis and load shedding in the countryprevented plant shutdowns, thus delayed theimplementation of Rehabilitation project.

f) Late completion of civil works by the contractor fornew workshop building at Faisalabad-.

- 38 - APPENDIX BPage 6 of 19

2.2 Combined Cycle Plant

The retrofitting of Steam Cycle Equipment comprises of theaddition of four Heat Recovery Steam Generators (HRSG) ateach of the Faisalabad and Kotri sites (one HRSG for eachGas Turbine to be retrofitted), and single condensing SteamTurbine at each site, complete with Cooling Towers, Build-ings, Electrical Switch and Distribution Equipment and allPipework, Fittings Controls and Ancillary Equipment.

The first set of tenders for Faisalabad and Kotri werereceived and adjudicated in 1988 when it was agreed thatboth contracts be awarded to Toyo Engineering Corporation ofJapan.

Pre-contract negotiations with the recommended Tender howev-er were ultimately unsuccessful and Toyo subsequently with-drew their offer. In view of this WAPDA called in the BidSecurity Bond.

Following these unsuccessful negotiations WAPDA decided notto proceed with the Combined Cycle Conversion plan; howeverthe Pakistan Government insisted that the project should goahead and additional tenders be sought.

Prior to re-tendering WAPDA requested that the scope of workand equipment supply be amended to reduce the cost. The bidSpecifications and associated drawings were therefore amend-ed by EPL and NESPAK in accordance with WAPDA requirements.The balance of plant was then specified and procured throughUSAID and WAPDA resources.

The revised Bid Specification was issued and tenders re-ceived and adjudicated in 1990. The Contracts for Faisalabadand Kotri were awarded on 1st January 1991 to the HPEEC/CMIConsortium in the total sum of US$ 84 million.

The Contractor has not managed the project well. Theprogrammed completion date was 31st October 1992 when bothplants were to be available for commercial service, after aguaranteed construction period of 670 days.

The work has been subject to numerous delays and followingmeetings held in Kotri in 12 and 13 June 1994 and atFaisalabad on 14 June 1994, HPEEC issued their latestprogrammes for the completion of both projects. Theprogrammes indicate 30 day reliability run commencing lateSeptember 1994 for Faisalabad and early October 1994 forKotri.

Reasons for delays

a/ acceptable delays - eg floods both China & Site, latepayments & custom clearance.

- 39 - APPENDIX BPage 7 of 19

2/b/ Unaccepable delays - Lack of Management skills.

- Lead contractor admits that he isunable to control main Sub-contractori.e. HEPEC & NEPDI.

- Planning procedures and are notunderstood therefore co-ordinationbecomes ineffective.

- Working hours of all Chinese staff havealways been unacceptable. 3-3'4 hourlunch break are insisted upon by allChinese.

- Uncoordinated shipment of materials &equipment.

- Uncoordinated Civil & Erection Work.

Steps taken by WAPDA/Consultant to correct the situationfrom the outset of the Contract were Design Review & Con-tract meetings, which have been held to guide the Contractorwhile Weekly & Monthly Progress Meeting are held at sitewhen again guidance on progress and procedures are offered.

WAPDA have brought to the notice of the Contractor's Presi-dent, their deep concern at progress and quality.

3. PROJECT FINANCING

The financing resources of the Project were as under:-

i) IBRD Loan No. 2792-PAK amounting US $ 70.00 million wasallocated for this Project.

ii) Co-financing to the tune of $ 15.0 million was arrangedby USAID as a loan.

iii) JEXIM Bank Loan amounting US $ 36.00 million was ar-ranged to partly cover Kotri Combined Cycle ProjectFunding.

iv) Consultancy charges of UK £ 6.0 million aid as foreigncomponent for the consultants were arranged by M/s.ODA. UK.

v) Local Rupee component was borne by WAPDA from its ownresources for the taxec & duties for import ofequipment and materials, civil works, interest as wellas the local cost of the consultants as per contractbetween M/s. Ewbank Preece Ltd and-WAPDA.

2/ Reference Appenclix C.

- 40 - APPENDIX BPage 8 of 19

4. EVALUATION OF WAPDA'S PERFORMANCE DURING PROJECT

During implementation of both the Rehabilitation exerciseand that of the Combined Cycle plant, WAPDA had teams ofengineers in the field under the control of a Project Direc-tor. All engineering disciplines associated with the partic-ular work in hand were represented on the teams. By this,WAPDA engineer became familiar with such Rehabilitationtasks as plant performance monitoring, the Specification ofreplacement parts, their procurement, putting into serviceand commissioning and finally the measuring of efficiencyimprovements. Similarly the teams allocated to the CombinedCycle Projects joined the Consultant in drawing up theSpecifications, bid receipt and analysis, award of contract,progress monitoring and Site supervision up to commissioningand subsequent takeover of the plant.

The principal lesson learned during the project is the needfor firm control over contractors to ensure that programmesare met, targets are within the Contractors resources andSenior Staff's Planning and coordination meet the targets.

At the time of writing NPI, under an ODA funded project areactualy setting up a Maintenance Management Systems with aWAPDA group. This is taking place at Guddu Power Plant andit is programmed to be extended to all other Thermal Plantsin the future.

4.1 EVALUATION OF IBRD JEXIM BANK AND ODA PERFORMANCE DURINGCOURSE OF THE PROJECT

The Bank's performance durinq the course of the Projectshowed that a close but friendly control was being kept overprogress, costs and the allocation of funds. Considerabletolerance was shown by the Bank in allowing WAPDA to drawon the available funds and also it allowed extension of timebeyond that initally agreed.

Difficulties arose in the payments of funds due to theContractor from the Jexim Loan. This caused considerableproblems to the Contractor and was possibly a major causefor some of the delays. WAPDA was obliged to step into toassist the Contractors at one point.

ODA was the provider of the Consultancy Services for theProject. They also maintained a close but friendly watchover all aspects of the Project. Unfortunately the CombinedCycle portion of the Project extended beyond the limit oftheir allocated funds and WAPDA was. obliged to arrangeConsultancy funding from the World Bank. This source hasagain ended with the final commissioning still to becompleted before the end of this year.

APPENDIX B- 41 - Page 9 of 19

ANNEXURE-IPAGE - 1/4

HU RESTOATIOI &V R"9lLITATIOt

MEGAWATT PPEIP PZUECT hWDA

166~~~~~~~~~~~~4

15e

140

129

lie

90

79

60

56

40 37

3 l 24

i s ||12 311 FSD GA FSD STM G K7R MTNH Xl sU ax

iMIl RESTORED 253 EMi TO BE RESTORED 31

WAPDA THERMAL POWER STATIONS ESTIMATED ACHIVEABLE

WHERE REHABILITATION CARRIED MEGWATT = 283

OUT

APPENDIX B-42 - Page 10 of 19

ANNEXURE-IPAGE - 2/4

WPDA POkR PLANI EFFICIeCY IFIr(WET PROJECTSTATIOIAIISE W FECOVERY AI4D AIJR N F CARIED WI

POER OUTT MW YET TO E TTit MWTD ME MJORSTATION RESTORATION RESTOED RESTORD FESTORED i 0 R K S

FAISkLAAD GT

Unit-I Dirty Rotors 0.75 Replaced filters

Oil Cooling Problems 0.75 To Replace oil coolers

Unit-2 Dirty Rotors 0.75Oil Colinp Problems 0.75 -do-

Unit-. Dirty Rotors 0.75Oil Cooling Problems 0.75

Unit-4 Dirty Potors 0.75Oil Cooling Probleas 0.75 -do-

Unit-5 Dirty Rotors 0.75Oil Cooling Problems 0.75 -do-

L4nit-6 Dirty Rotors 0.75Oil Cooling Problems 0.75 -do-

Unit-7 Dirty Rotors 0.75Oil Cooling Problems 0.75 -do-

Dhit-S Dirty Rotors 0.75Oil Coolinq Problems 0.75 !. r-

FAISALABAD ST

Unit-I Poor corndenser 5 il kid cleaninq Condenserkid Cleaning Boiler

Vacuum PoorBoiler Per,. LP Rotor Blades 5 MN Overhaul Rotor

Urnit-2 Poor Condenser Vacuus 5 W Acid Clean Condenser

Poor Boiler Perf. BoilerLeakage 4 m !9 M Acid Clear, Boiler

NDT Replace Thin Tube

APPENDIX B-43 - Page 11 of 19

ANNE XURE-IPAGE - 3/4

PM J OlTUT Sw MW YET TO BE TiOTg L TO BE 1JORSTATION RESTORATION RESTORED RESTOEU RFSTI:rD N 0 R K 5

6UWll TPS

Unit-I Poor Con,denser 5 N Condenser CleanedVacu.. Damiaged S M Burners RepairedBurners. Worn 2 M Replace servo unitTurbinecontrol valves,Leakirna Tee Pcs 2 th Replacemnt Tee PiecesWorn : Pumps 6 1W Replace CW Pumps

Ur,it-2 LP Rotor Blades 5 NW New Rotor FittedmissingPoor ccndaenser 5 NW Condenser CleanedVacuum Damaged 5 5 Surners repairedBurners Worn 2 MN Replace Servo UnitsTurbine ControlValves Leaking 2 fW Replace Tee PcsTee Pcs. WornCN Puw 65 PM 451 4 Replace Cl Pups

KOTRI GTPS

Unit-. Poor ST Air Coolirng 1.5 6T Air Filters &Compressor cleaned

Ortit-4 Poor ET Air Cooling 15 Qo-

NWMS NLTAN

IMt-I 6Heerator out of Service 6; Generator & TurbineRefurbished

Steam ctest cracked Steam Chest Replaced

it-2 Cr-di- 65 -do-

Unit-, Poor Cornenser 6.5 kid Clean Ccondeservacuum poor Repair Air Rtr SealBoiler Draught 7

LkAit-4 Pocr Condenser 6. 5 kid Ciear, CondenserVaccum Generator Remind Gen,eratorDamaaed 6

APPENDIX BPage 12 of 19

ANNE XURE-IPAGE - 4/4

PER OUTPUT * YETo TOEE 7T"L NI TO PE MJORSTATION RESTORATION FUSTORB RSTORED FE STOED N O R KI S

WJETA TF2

Unit-I Poor Vacuua 2 uild new Cooling Towers

Unit-2 Poor 'Yacuu 2-do-

tkrit-1&2 Poor Operating & 3 Improve OperatinQ &Maintenance Procedures Mainteriance Procedures

Unit-3 Peplace Coapressor 0.85 Compressor refurbishedBlades

L,nit-4 Dirti 6er, WlriOinQ 8 1G 6en. Windinq Cleanedunit-5 Dirty Ber. Rotor 2 ern. Rotor Cleaned

SHAHDmAr TPFS

Ur,it-i Load Lestricted 6 Oil CooIers Cleaneddue to Hiqh Lube & Fans Adjusted toOil Tep Ikprove Cooler

PerforeanceUnit-4 Do- O-

Lhit-5 -do- 6 -do-

Unit-6 -do- 6 24 -dO-

UrLit-I Poor Boler 2.' Replace BoilerCor,tr;l Control

ir,it-2 -dc- 2.5 -do-

Ur,it-. -do- 2.5 -d-

lir,it-4 --do- 2.5 *.1

25. S 3C1 4: W_ = = = _ _ =_== ===== = = ==----- - -= = = = =

APPENDIX B-45 - Page 13 of 19

ANNEXURE-IIPAGE - 1/1

DETAILS OF LEFT OVER JOBS AND ITSFUNDING UNDER ESL-II-3107

P.O. NO. DATE DESCRIPTION AMOUNTNAME OF FIRM

37/GMT. 22.7.90 Installation Supervision of $ 15,750Masinexportimport, Vertical Turbine LatheRomania.

36/GMT. 22.7.90 -do- $ 23,250Masinexportimport,Romania.

34/GMT. 4.8.90 Installation supervision of $ 30,450Masinexportimport, Plasma Coating Mfachine.Romania.

71/GMT. 6.1.91 Installation supervision of $ 7,965Miller Thermal, Plasma Coating MachineUSA.

35/GMT. 20.6.90 Installation supervision of $ 153,978China National, Heavy Duty Lathe & ExtendedChina. Services for 90 days.

104/GMT. 31.8.91 Installation supervision of $ 12,000Peabody UK Burner Management System

110/GMT. 26.12.92 Local goods for cooling $ 165,166.00ADK, Lahore towers Units 3&4 at NGPS Rs 5,037,580

Multan & erectioninstallation.

100/GMT. 22.5.91 Installation of 80 Ton Crane $ 48,450Taiyuan China

109/GMT. 1.11.92 Cement Lining NGPS Multan Rs 3,091,000ECL Karachi = $ 102,000

08/GMT. 6.11.92 Extended services for £ 25,600Efco, UK installation of Vacuum = $ 41,000

Furnace (40 days)

Services of Layout Planning & Services $ 50,000Expatriate coordination for inspectionconsultant & installation of machineryMr Mike Clare as well as training of WAPDA

staff.

APPENDIX B-46- Page 14 of 19

ANNEXURE-IIIPAGE - 1/1

DETAILS OF MAJOR JOBS ACCOMPALISHEDUNDER REHABILITATION. PROGRAMME

NGPS MULTAN - Rewinding of Generator 1, 2, 3, 4.

- Refurbishment of Steam Turbine Units 1,2,3,4.

TPS GUDDU - Replacement of 132KV SF6 Circuit Breakers.

- Replacement of C.W. Pumps.

- Replacement of valves.

- Replacement of Burners.

GTPS FAISALABAD - Exhaust stack extension units I to 8.

- Improvement of lube oil coolers.

- Replacement of Air filteration system units Ito e.

SPS FAISALABAD - Reblading of Steam units I & 2.

- Boiler insulation.

- Burner Management System.

TPS SUKKUR - Installation of new air ventilation system.

TPS QUETTA - Dry cooling towers new installation andrefurbishment.

- Silencers on 25 MW Gas Turbine.

GTPS KOTRI - Replacement of Air filteration system units 3

& 4.GAS TURBINECENTRAL WORKSHOPFAISALABAD - Extension of building

- Installation of new equipment and sophistica-ted machinery for refurbishment of steam &gas turbine blades & components.

GENERAL - Modernisation of control and instrumentationof steam units.

- Remote Drum Level indication system.

- Equipping chemical laboratories and workshopsof Thermal Power Plants.

- Combustion monitoring system.

- 47- ~~~~~APPENDIX 13Page 15 of 19

__ Pakistan Water And Power Development Authority

Office of theTeieDhones f

Telegrams General Manager(D&D)Thermi

WAPDA:WAPDA House, Lahore.

No.'~ 84/GMT/PD/RH/. B. Date /2/1 2/1994

The World Bank,Resident Mission in Pakistan,P.O.Box 1025,Islamabad.

Atten: Mr. Rashid Aziz

Subject: POWER PLANT EFFICIENCY IMPROVEMENT PROJECT(LOAS 2792-PAK) IMPLEMENTATION COMPLETIONREPORT (ICR)

Dear Sir,

Reference meetings with Mr. Manrai and Mr. Rashid Azizregarding factors and technical reasons which resulted in highaverage values of Heat Rate BTU/KWH at respective Power Plants.

The SAR target achievements for heat rate as tabulated(B) for Faisalabad Steam, Multan and Shahdara Gas Turbine aredifferent from those advised by the manufacturers designed/actualat full load.

In this regard please find herewith final version ofTable (B) Heat Rate (BTU/KWH) corrected upto date. Moreover, thefactors and technical reasons resulting in high average valuesfor Heat Rate BTU/KWH have been consolidated and summarized onpcwer station basis as per attached statement. This informationhas been compiled from the data received from the respectivepower stations.

If deemed necessary these pages may be included in thefinal Implementation Completion Report. We have also put up thecase to Member (Power) for his kind information through internalnoting.

Encl/As above. Yours faithfully

(SYED ABID ALI3CHIEF ENGINEER(D&D) THERMAL

for GENERAL MANAGER (THERMAL)

APPENDIX B- 48 - Page 16of19

FACTORS AND TECHNICAL REASONS RESULTING IN HIGHAVERAGE VALUES FOR HEAT RATE BTU/KWH :

GUDDU STEAM

1) Units No. 3 & 4 were commissioned in 1980 and CombinedCyle Plant to these units was added in 1986/87 at TPSGuddu. It is natural to increase the consumption ofsteam with addition of CCP. The steam units are basicIl-designed for natural gas firing but instead mixed gasfiring is being adopted which has calorific value lessthan the natural gas, as such the heat rate values showhigher figures.

2) The air preheater tubes are damaged/bloclced causingdrop in boiler efficiency as a result 80% load is beingutilized resulting in higher heat rate. Also some steamis being used for heating purposes to the oil c1-tstionsand its related accessories which causes more conGumptLionof fuel.

3) Formerly-the generation of Guddu was based on utilizinggas as a main fuel. Now a days 75% oil is being used onsteam units 3&4.

QUETTA STEAM

The load on steam units is kept at 4 MW instead ofdesigned 7.5 MW to avoid boiler tube leakings andboiler choking thereby giving high heat rate value.

MULTAN STEAM

1) The boilers are basically designed for gas firing butsince 1986 there is almost 100% oil firing therebyresulting in decreased efficiency of the boilers givinggradual increase in the heat rate values.

2) The air preheater choking resulted in shortage of.combustion air due to inefficient soot blowing systemwhich badly effected the efficiency of boilers andresulted in higher heat rate values.

FAISALABAD GAS TURBINE

1) The compressor blades havre not been replaced on anyunit since commissioning uptill now with continuousservice of more than 20 years thereby resulting inreduced compressor discharge due to its fouling/sharpness at the edges of blades causing higher heatrate average values.

2) The hot gaa path components of any unit were notreplaced and the old ones are in use after repeatedrepairs from WAPDA workshops.

contd...

APPENDIX B-49 - Page 17 of 19

SHAHDARA GAS TURBINE

1) Combust8r temperature restricted to 750 0C insteadof 800 C by the manufacturer Fiat thereby reducingthe loading capacity to 75% of design load. Result-antly average heat rate values increased.

2) Frequent number of starts also resulted in higherheat rate values as during the starting/shutdownperiod fuel is consumed without any out-put.

3) 25 years elapsed since commissioning. Deteriorationsof the significant components of machines with thepassage of time results in higher heat rate values.

4) Further more, quite often machines are kept atminimum load cf 07 MW by National Power ControlCentre as per system demand. Operating the Unit atminimum load certainly increases average heat ratevalue.

5) Cleaning of lube oil coolers of Fiat machines werecarried out by station staff as per rehabilitationprogramme. This resulted in improvement of availabilityfactor of the machine especially,in summer seasonbut did not contribute towards decrease of heat rate.

QUETTA GAS TURBINE

1) Load on gas turbines during the summer season isto be reduced to 40% due to high lube oil temperatureand excessive vibration problems, thereby resultingin higher heat rate values.

2) During the winter the load has to be reduced dueto low gas pressure and many abortive starts arerequired towards realizing of each successful startof the units resulting in uneconomical operationgiving higher heat rate values.

FAISALABAD STEAM

The steam Units 1&2 were commissioned in 1966/67.There is slight increase in heat rate during thecourse 1991 to 1994 due to the following reasons :

- Load is restricted to avoid tube leakages.

- The cooling towers efficiency is degraded with thepassage of time.

contd...

APPENDIX B-50 - Page 18 of 19

KOTRI GAS TURBINES

1) The running of the Gas Turbine on partial loadsas per demand of the NCC/RCC.

2) The high ambient temperatures forced the GasTurbine Units 1,2,3 & 4 to operate at minimumloads during summer, which renders a comparativelyhigher heat rate of Gas/HSD oil per KWH in summer.

3) During start-up sequence of CEM Gas Turbines Units1&2 which are used for peak load sharing andstart/stop daily, the gas is discharged into theatmosphere till the pilot gas is ignited, whichadds to the wastage and causds higher heat rate.

FINAL VERSI0O OF r"".:-LE (B) HEAT RATE (2TU/KwH)

Power Plant SAR Target ALctual/Designed 1987 1991 1994=-s per ICR at full load

Sukkul' 12081 12081. 13563 19100 20036

Guddu Steam 8902 8902 10129 10366 10363

Faisalabad S3team 9568 11286 11825 11927 12076

Quetta Steam 11426 '11426 16384 22654 20857

14ultan Steam 9683 10342 10006 123O2 12641

Kotri Gas Turbine 15027 15027 17771 16538 16480

Faisalabad Gas Turbi,e 14366 14 566 147-6 17838 18305

Guddu Gas Turbine. 17000 17000 17000 - -

Quetta Gas Turbine. 14323 14323 14657 17228 15823

Shahdzrra Gas Turbine. 13671 14955 19390 21251 22330

C>_ %

-52- A2pendix C

Page I of 11

IMPLEMENTATION COMPLETION REPORT

PAKISTAN

Power Plant Efficiency Improvement Project(Loan 2792-PAK)

LEAD CONTRACTOR COMMENTS

The Harbin Power Engineering Company Limited (China) and the Cockerell Mechanical Industries (Belgium) wereinvited to respond to an evaluation of their services by the Bank and Borrower.

Each company responded, and their comments are included in this appendix.

-53-ADpendix C

Page 2 of 11

HARBIN POWER ENGINEERINO COMPANY LIMlTED

.s.hk: *,8;at=en s ~ Add: No.45 Xusheng.St. DongU Dist. Harbin China

Tel:(0451) 2682171 Telex: 87192 HPEEC CNFax(0451) 2682279 Post Code :150046

Ref No:Date: c.6 30, / ?95

Mr. Per Ljung FAX NO. 001 202 4776391Chief PAGE: 8 ( Including the attachments)Energy and Project Finance DivisionCountry Department ISouth Asia RegionThe World Bank

SUB: PAKISTAN - Power Plant Efficiency Improvement ProjectLoan 2792-PAKImplementation Completion Report

Dear Sir,

I'm very pleased to receive the captioned document -- Implementation CompletionReport ( ICR ) for the Project of Power Plant Efficiency in Pakistan on Oct.16,1995. I scrutinized the ICR prepared by your staff as well as the Borrower'sEvaluation prepared by the Borrower. From the above-mentioned document, I canperceive that the ICR was earnestly and systematically prepared by your staff. Thedescription in the ICR, including the relevant evaluation and statistics are significantand valuable to us. As the contractor, I express my sincere thanks on your work. Asfar as the combined cycle component is concerned, in a sense, we agree with theoverall evaluation, i.e., "not entirely satisfactory" . We admit that someimprovements should be made in some respects . However, we can not accept theevaluation stated in Paragraph 5.4 (P8) of ICR and Paragraph 2.2 (P7) of AppendixB. For the sake of clearer understanding by you of the true situation of the projectimplementation, it is necessary for us to make some explanations as follows:

-54-Appendix C

Page 3 of 11

The Contract of Kotri & Faisalabad Combined Cycle Project was signed betweenWAPDA and HPEEC/CMI in Pakistan on Ist January, 1991. We have substantiallyachieved the project objectives. The following table is the milestones of the project

MILESTONES OFKOTRI AND FAISALABAD COMBINED CYCLE POWER PLANTS

CONTRACT NO. 70002KOTRI FAISALABAD

SYNCHRONIZING OCTOBER 1994 SEPTEMBER 1994RTR TEST DECEMBER 11, 1994 DECEMBER 8,1994

PERFORMANCE TEST MARCH 28, 1995 APRIL 26,1995POWER GENERATION 118,700,000 KWH 77,400,000 KWH(UP TO SEP.18, 1995)TAKING OVER CERTIFICATE SEPTEMBER 16,1995 SEPTEMBER 16,1995OPERATION SITUATION PROMISING PROMISING

All the foregoing achievements are made by overcoming great difficulties. It is wellknown that we encountered a series of problems since the outset of the project.Some of which are beyond of our control, such as the late project payment & interimpayment, Bankruptcy of BCCI, Flood disaster in China and Rainstorms in Pakistanetc. It caused considerable problems to us and consequently resulted in the delay ofproject progress. Concerning the reasons of delay, I have written many letters toPakistan Water and Power Development Authority (WAPDA) and the BritishConsultant (EPL) over the past few years. Included as attachment I is a summary ofthe reasons of delay. Among of above reasons, the late payment is the key one of theconstruction delay. Enclosed is a separate brief description on it (Attachment 2).

I would like to, inter alia, make the following clarification corresponding to the"unacceptable delays" (Para 2.b of P7) listed in Appendix B in the way of item byitem.

* Lack of Management Skills

The Project of Kotri & Faisalabad Combined Cycle Plants is a complicatedinternational one. The feature of the project is difficult in technology, high instandard, tight in construction period and complicated in management &coordination. Only as far as the project team is concerned, it consists of the staff(experts and workers) from China, Belgium, Pakistan, U.K., Ireland and Japan etc.From the outset of the Project, we paid great attention to the composition of the

2

-55-Appendix C

Page 4 of 11

project team, including the Chinese staff and cooperation partners from othercountries. In particular, most of the Chinese staff involved in the project have everworked for Guddu or Jamshoro power stations in Pakistan for more than I year andenjoyed rich experiences in the field of power plant construction in Pakistan. Justbenefited from the rich experiences enjoyed by the Project team, although weencountered a series of difficulties from the beginning of the Project, as the leadcontractor, we are capable of giving proper instructions to our sub-contractors andcooperating & coordinating with our partners in an effective way further to achievethe project objectives with our utmost efforts. The table of milestones shown abovecan prove that HPE is competent and qualified in terms of management.

* Lead contractor admits that he is unable to control main sub-contractor. i.e..HEPF.C & NFPDT

First of all, I must clarify that we have never admitted that we are not able to controlHEPEC & NEPDI. On the contrary, I'd like to hereby reiterate that we have fullcapability of controlling our subcontractor including HEPEC & NEPDI. During theimplementation of the project, indeed, HPE had different opinions with oursubcontractors in solving some problems, however, through earnest discussions, wecan always reach agreements eventually and our subcontractors fully carried out thefinal decisions made by HPE. With the project progressing, we have beenstrengthening and improving our control over the subcontractors in the effective wayincluding by the means of finance and personnel adjustment.

e Working hours of all Chinese staff have always been unacceptable. 3-3.5 hourlunch break are insisted upon by all Chinese.

It's well-known that Pakistan is one of the hottest countries in Asia. During theperiod of May to August per year, the highest temperature at noon is normallyaround 50 OC at sites. At the time of non-urgent schedule, we allowed the workersto have a 2- hour lunch break (including the lunch time) so as to guarantee thequality of construction. In the meantime, what I'd like to emphatically point outis, at the time of urgent schedule e.g. commissioning, RTR. etc., the workersoften worked overtime (more than 10 hours per day). The average working hoursof Chinese staff is 8 hours per day. Generally speaking, most of the Chinese staffare diligent and hard-working. It's unfair and non-objective to draw the aboveunderlined conclusion of "Working hours of all Chinese staff have always beenunacceptable, 3-3.5 hour lunch break are insisted upon by all Chinese."

3

-56-

Appendix CPage 5 of 11

* Uncoordinated arrangement in-respects of planning procedures. civil & erectionwork and shipment of materials & equipment.

Early back to the end of 1990, before the implementation of the project, inaccordance with the requirement of the tender document, we worked out a well-conceived schedule of the project based on the normal circumstance including theprogram of all key links, such as civil & erection work, shipment of material &equipment, etc. However, due to the continuos occurrence of uncontrollable events,e.g., late payment, late custom clearance, flood disaster in China & rainstorm inPakistan and bankruptcy of BCCI etc. It caused considerable problems to us. In thiscase, the original schedule did not apply to the changed situation and had to bemodified. Thereupon, we instantly adjusted the original schedule based on the actualcircumstance so as to guarantee the progress into full play. In addition, the hiddenprojects and altemation of drawings also forced us to modify our schedule whichhad been approved by the consultant.

.1 hope that the aforementioned explanation will be helpful for you to have a fiurtherrealization about the implementation of the project. There is an old saying in China"Saying is Believing" . We are confident that you will draw a conclusion that BPEis a competent and responsible contractor with rich experiences if you can pay a visitto the sites. In the meantime, as the contractor, we will do our best to improve ourwork to achieve the project objectives in strict accordance with the ContractDocuments.

I transmit this document (one letter of clarification and two attachments) to you byfax first, the original one will be mailed to you by EMS soon afterwards.

Yours Sincerely,

ZHAO JIE

PROJECT GENERAL MANAGER OFCOMBINED CYCLE PROJECT

4

-57-ADnendix C

Page 6 of 11

A1TACHMENT I

THE SUMMARY OF THE REASONS OF DELAY

1. Delay of Contract Payment

The delay of Contract Payment caused a chain reaction, that is, a series of delay. Onone hand , the delay of advance payment caused the time-losing, for instance, thesub-contract of geological prospecting; on the other hand, the delay of interimpayment ( non-effectiveness of JEXIM Bank Loan for Kotri Plant) nearly resulted inthe situation of standstill at Kotri Site.

2. The Late Payment of Custom Duty by WAPDA

Due to the non-payment of Custom Duty by WAPDA in time at Karachi port,consequently it caused the late delivery of required equipment at both sites, such asthe structural steel work of turbine house. Moreover, it seriously delayed theprogress of structural steelworks erection for Turbine Generator House at FaisalabadSite.

3. Approval and Alteration of Drawings

3.1 The Shuttle Time of the Approval of Drawings

The approvals of drawings were prolonged. This is in contradiction with thetime requirements of equipment manufacture and construction at sites.

3.2 The Alternation of Drawings

As for the intake water project from canal and air filters fitted with the gasturbine at Kotri site, we had to alter the drawings.

4. The Hidden Projects

The hidden projects such as original foundation of gas turbine and canal side work atKotri site caused the delay for submitting the design drawings and the constructionprogress.

-58-Appendix CPage 7 of 11

2

5. Force Majeure

5.1 The flood disaster in China

5.2 The Rainstorm Disaster at Kotri site in 1992 and 1994

5.3 The Bankruptcy of BCCI

-59-Appendix C

Page 8 of 11

ATTACHMFNT 2

THE BRIEF DESCRIPTION ABOUT THE INCURRED

CONSEQUENCES DUE TO THE LATE PAYMENT

As far as the combined cycle component is concerned, the payment situation wasunsatisfactory from the outset. It caused a chain reaction, i.e., a series of delay. Firstof all, the advance payment (90%) was delayed by more than one month, the balanceof advance payment (10%) was delayed by more than half a year. The delay ofadvance payment caused the time-losing of subcontract, e.g., the subcontract ofgeological prospecting, the procurement of some equipment, etc. Following the lateadvance payment, almost the verification of all the progress payment invoices weredelayed. The delayed time varied from several days to several months. It arousemany difficulties in terms of the arrangement of work at both sites.

In comparison with the above difficulties, inter alia, what I'd like to point out is theserious incurred consequences due to the non-effectiveness of JEXIM Bank Loan.It's known to us that the disbursement under the JEXIM Bank Loan were delayedby more than 12 months from the February of 1992. It nearly resulted in thesituation of standstill at Kotri site. As the lead contractor, we had two options at thattime: One was to suspend the project till the final settlement of the delayed payment;the other was to maintain the slow progress at both sites with very limited fund. Inview of the Sino-Pakistan friendship and the good reputation of China Harbin PowerEngineering Co.Ltd (HPE in short, formerly known as HPEEC before the end of1994) in Pakistan as evidenced by the fact that HIE successfully completed theconstruction of Unit 4 at Guddu power station and Unit 2,3 & 4 at Jamshoro powerstation on the turn-key basis in 1986 and 1992 with good quality and quickconstruction. Having made the frank and eamest discussion with the customer, wechose the latter. In other words, we didn't choose the easy way to us, i.e., to extricateourselves from the trouble situation due to the late payment which beyond ourcontrol. As a matter of fact, in this case, it is reasonable, understood and blamelessfor a contractor to do so. However, on the contrary, as a contractor with goodreputation, in order to take responsibility for the customer, we had the courage tochoose the hard way at the risk of our fame and finance. Taking the procurement ofequipment and the arrangement of personnel for instance only, on one hand,

-60-ApDendix C

Page 9 of 11

2

because we could not make payment to the supplier in time, most of the supplierssuspended even stopped the production of the ordered equipment. It tookconsiderable time for them to re-start the production; on the other hand, in order tomaintain the progress at sites, we could not recall our experts and workers back toChina. On average, their duration in Pakistan were prolonged by another one to twoyears. Only as far as the staff expenditure ( salary & allowance ) during theprolonged period is concemed, we made the extra payment amounting to millions ofUS Dollars. In a word, it is hard to have a complete description about the incurredconsequences due to the late payment in a few sentences. It is by overcoming theunimaginable and immeasurable difficulties that we achieved the project objectives.I sincerely request your deep understanding on the foregoing description.

-61--Anvendix C

Page 10 of 11

3IZ j I I ICOCKERILL Seraing, November 17, 1995

MECHANICALINDUSTRIES

O/Ref: 911/PS/BD/95/7580 The World BankE/01/14.301 1818 H Street N.W.E/01/14.325 Washington, D.C. 20433

U.S.A.

To the attention of Mr. PER LJUNGChief Energy and Project Finance DivisionCountry Department I, South Asia Region

CopV oer fax to nr 00/1/202,477.8598

Dear Mr LJUNG,

*Subiect : PAKISTAN - Power Plant Efficiency Improvement ProjectLoan 2792-PAKImplementation Completion Report

We are sorry to answer so late to your October 2, 1995 letter by sending you

our remarks concerning the draft of the Implementation Completion Report.

we would appreciate if you could precise in this report that, in theHPEEC/CMI Consortium, the responsibilities were shared as follows :

HPEEC is the leader of the Consortium and is responsible for the Power Plant

completion on both sites.CMI is responsible for the basic engineering and the performances of theCombined Cycles.

rt is important for CMI to point out that they have no responsibilities in

the important postponement of the completion dates.On an other hand, we would like to send you, in annex, a copy of the EwbankPreece letter ref LEH022/WFK/70002/FO1 dated August 17, 1995 confirming thegood guarantee performance tests on KOTRI and on FAISALABAD sites.

Thank you in advance, Dear Mr. LJUNG, to complete your report accordingly.

Sincerely,

Phrrg SMALSenior Pr*a Maar

Pl bl MEUNMW of Makd n and 8ale

CMI S A Tel: .32 41 .3021 11 Siege Social: SERAING . BELGIOUE CCP: 00011415591-791. avenue Greiner Fax: .32 41 - 30 21 13 RCLg: 140 259 GS :24040007229-558- 4100 SERAING - BELGIOUE Telex: 41093 CMI 8 T.V.A.: BE 422362 447 09.2713 88L :340-0000134-75

-62-Avpendix C

Page 11 of 11

29.U8.1995*00462 1

Opt Rip. Co?P. Rgs

AchY. EWBANK PREECE

RPEEC A.0.HPEEC Site Office -

GTPSFaialabad PS 17 August 1995

Adw Mr Thao Jie ____

GeneralProject lMwage -_ I N

DeW Sir

Water and Power Development AuthorityFasalabad and Kotri Combined Cycle Power PlantsContrct 70002Guaraatee Performance Tests

W' o emowledge receipt of single copies of performance test reports for the FPaah a KotXri Combined CyclbPlnts. which were forwarded to um by your Site Offices in early June 1995. The repotts have been reviewed and weam pleased to confurm that the outputs of each plnt comply with the puaranteed valuae in the respective Contracts.

We would also coifrtm tht the output of the water tratment plant at Kotri complies with the Coract guarntees.

W. wish to congratulte HPEEC and CMI on successfully proving the outputs of the respective pla and tnst thatwvery effort will now he made to complete the significnt amount of outstanding work and to clear sufficient mtnberof ddefecs to allow the Taking Over Certificates for the plans to be issued in the very near future.

In accortice with HPEEC Site Office lener reference LSES33/WJCr7000YK dated 8 June 1995 we have arrangedfot the original performane teat records to be returned to you, and these can be collected at your carliest conveniencefrom EPL Lahor Office.

Your faithfuy,

W F Kiddfor Ewbank Preece Lmitad

cc: Wapda laore OfficeWapda - Fisaluhd OfficeWupda - Kotn SiteEPL Lahore OfficeNespakcw<

L.b-Bk h L..d

.U _ T uK 117Jo, .44 tOt 127) in lio

hi.b. NW ,, F,,,,, s.nut te 2 tta

MAP SECTION

LAHORE RING TURKMENIT CHI_

Mvngio D LLLRo,) Are oL+ { r '*'. / dsn

Go, < \ , K S K JR/ZAVI A FGH 8NISTAN IV1.' t*o

RUND W PAKISTAN J

LAHOREMullo , k 'I ND IA- Tal INDIA TApj-6ion

NEW KOT...AKHPAT A,.b-o S- tADJ. ......

3/Dmo No/Ai

FAISALABAD RING A _ - PESHARD iNL/dewoI TOmbT_,bo. AND

N t KS K ) / \ BUNIV , KASHMIRKSKA

GAUL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L

GATTI CHASHAA DAUD

OADA NWAA NUCLEAR / KHEL

NISHATARAD * _ /, 59 A / - /z;i8 ROAD

S D 0%! LtD AL ,\- AAROAD M/IM,WP,~oo90 I A up ~ t

>. _._ //OZ~~~~~~~HOB t lYOUSAH WAL A 30

/ * OQUETTA mu

( \ \ _ / ~~~~~~~~ ~~BAHAWAWR JR

- m < ^ ~~~~~~~~R Y. KHANS

SHIKAPUR o/-. / PAKISTANOKHUZDAR PUR / ,-- POWER PLANT EFFICIENCY

, /<.-,/ j -'IMPROVEMENT PROJECTMAIN POWER STATIONS AND HIGH VOLTAGEe, / , ~~~~~~~~TRANSMISSION LINES

DADU /jPROPOSE0 OR

// I.,MURON '\~~m CONSTRUCTIION TRANSMISSION LINES

-26' 50 k0 \ soo Lv 26 -

| tAMSHORO vSUBSTATIONS

)HALA ROAD 5 `v' RHUB

2 /K

0?O 00 Lv

HYDERABAD *

-OWER SATILONS

KARACHI NUCLEAR . IC,F I.CPOWER PLANT A A IbLklMAI0 BADIN NJCtA

A r b io AjOR CITIES

p /'--J 0 50 100 150 200 -'~ IE.IERNATIONAI HOUNDTARIES I I IS 20

_ 66 2 KILOMETERS 746&1

IMAGING

Report No: 15411Type: ICR