Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 17258

IMPLEMENTATION COMPLETION REPORT

ALGERIA

THIRD POWER PROJECT

(Loan 2981-ALG)

December 23, 1997

Infrastructure Development GroupMiddle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit: Algerian Dinar (DA)

End of PeriodDinars/US Dollar

1988 6.731989 8.031990 12.191991 21.391992 21.841993 23.341994 35.061995 47.661996 54.681997 (June) 56.95

FISCAL YEAR: January I to December 31

WEIGHTS AND MEASURES

kVA = kiloVolt AmperekW = kiloWattkWh = kiloWatthourGWh (GigaWatthour) = 1,000,000 kWhkV (kiloVolt) = 1,000 VoltMW (MegaWatt) = 1,000 kW

ABBREVIATIONS AND ACRONYMS

EPE Entreprise Publique EconomiqueEPIC Entreprise Publique a caract&re Industriel et CommercialeICR Implementation Completion ReportLRMC Long-Run Marginal CostMEM Ministry of Energy and MinesSONELGAZ Societe Nationale d'Electricit6 et de GazSAL Structural Adjustment Loan

Vice President: Kemal DervisCountry Director: Christian DelvoieSector Director: Jean-Claude VilliardAuthors: Rene Mendonca and Ahmed El-Hamri

FOR OFFICIAL USE ONLY

TABLE OF CONTENTS

Pae

PrefaceEvaluation Summary

PART I: IMPLEMENTATION ASSESSMENT

A. Statement and Evaluation of Objectives 1B. Achievement of Objectives 2C. Major Factors Affecting the Project 8D. Bank Performance 9E. Borrower Performance 9F. Assessment of Program Outcome and Sustainability 9G. Future Operation 10H. Key Lessons Learned 10

PART II: STATISTICAL TABLES

1. Summary of Assessment 122. Related Bank Loans 133. Project Timetable 144. 4 Loan Disbursements: Cumulated Estimated and Actual 155. 5 Key Indicators for Project Operation 166. Studies Included in the Project 187. Project Costs 198. Project Financing 209. Economic Costs and Benefits 2110. Status of Legal Covenants 2211. Bank Resources: Staff Input 2412. Bank Resources: Staff Missions 25

APPENDICES

A. ICR Mission Aide-MemoireB. Borrower's Contribution

and Comments to the ICR

Map

IBRD No 19926R

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

I

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

PREFACE

This is the Implementation Completion Report (ICR) for the Third Power Project,funded by Loan No. 2981 in the amount of US$160 million (revised amount US$159.43 million).The loan was approved by the Board on June 29, 1988, was signed on November 13, 1989, andbecame effective on March 29, 1990. The original closing date of December 31, 1995 wasextended twice, and the loan closed on June 30, 1997. The last disbursement of US$0.57 millionwas made on September 3, 1997, and the undisbursed balance of US$23.20 million wascanceled. Cofinancing of US$ 86.5 million was provided by the Eximbank of Japan and theundisbursed amount of US$11.8 million was canceled.

This ICR was prepared by Messrs. Ren6. Mendonca, Sr. Power Engineer and Ahmed El-Hamri, Economist of the Infrastructure Development Group, Middle East and North AfricaRegion (MNSID). The report was edited by Ms. Deborah Davis and reviewed by Jean-ClaudeVilliard, Director, MNSID; Zoubeida Lahdibi-Belk, Sector Leader; and Amir Al-Khafaji, LeadOperations Specialist, MNSID.

Preparation of the ICR began during a mission carried out by Messrs. Rene Mendoncaand Ahmed El Hamri in July 1997 (see Appendix A: ICR mission Aide-Memoire). It is based onmaterial in the project files and on the completion report provided by the Borrower. TheEximbank of Japan was invited to comment on the draft ICR but no comments were received todate. The Borrower submitted its own evaluation of project's implementation as well ascomments on the draft ICR (see appendix B).

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

EVALUATION SUMMARY

Introduction

i. The Third Power Project (Loan 2981) was approved by the Board on June 29, 1988. Theloan, to assist in the financial strengthening and institutional restructuring of the public powerutility, SONELGAZ, was part of the Bank's strategy to support Algeria's far-reaching programof public enterprise reform, to improve the efficiency and viability of these corporations. Theproject was designed to increase SONELGAZ' capacity to implement the major investmentsneeded to meet increasing demand by optimizing energy production and improving the quality ofsupply. The longer-term goal was to use the reform of SONELGAZ as a model for the reform ofthe country's other public enterprises.

Project Objectives and Description

ii. The main objectives of the project were to:(a) restructure and strengthen the financial position of SONELGAZ,(b) gradually increase SONELGAZ' autonomy,(c) help implement major investments that would help optimize the productivity of the

overall power system, and(d) improve the quality of the power supply.(e) improve SONELGAZ's' management, planning and engineering capabilities.

iii. Project components included:

(a) about 475 km of 220 kV transmission lines to interconnect the new Jijel power station tothe bulk supply system:

(b) the con-struction/extension of seven 220 kV transformer substations;(c) supply of specialized equipment and vehicles to improve SONELGAZ' efficiency;(d) studies on power system loss reduction, manpower development, financial management,

and options for power generation, including the combined-cycle technology;(e) a training program.

iv. Evaluation of objectives. The objectives of the project were relevant and has beenproperly identified to deal with SONELGAZ reform efforts. However, these objectives wereundermined by the risks inherent to the environment in which SONELGAZ operated.SONELGAZ's delays in implementing financial restructuring were linked to delays in increasingtariffs. Other factors, such as the devaluation of the local currency and SONELGAZ's debtburden, weighed against the complete effectiveness of the project. However, considering theachievement of the physical components, the partial completion of the studies, the institutionalstrengthening undertaken by SONELGAZ, the project can be rated satisfactory (see para. 5 and6).

ii

Achievement of Objectives

v. Physical objectives. Overall the project has achieved its physical objectivessatisfactorily, albeit with some delays due mainly to the security situation. Some of the physicalcomponents in the transmission lines and substations works underwent some modifications. Alltransmission lines are well on their way to being completed by the end of this year. Allsubstations necessary to strengthen the transmission network have been completed and are inoperation, except the Ramdane-Djamel substation. These; physical components will improve thereliability of the transmission network as well as the quality of service to the consumers and helpoptimize productivity in Algeria's power system. The supply of specialized equipment andvehicles to improve SONELGAZ's operational efficiency have been completed and are inservice. The installation of computer hardware and software has improved the planning andoperation of the gas and electricity distribution networks (see paras. 7-9)

vi. Studies. Most of the studies have been completed. These studies have allowedSONELGAZ to streamline and increase the efficiency of its operational activities. Moreover, theLoss Reduction Study to recommend measures to reduce system losses and the Combined-CycleStudy to define optimal generation option, including combined-cycle alternative, werecompleted. The Central Cash Management Study and the Management Information SystemStudies are being completed using SONELGAZ's own funds. These studies should result in acomprehensive and efficient reorganization of the accounting and financial management functionof SONELGAZ (see para. 10)

vii. Financial objectives. Financial objectives were partially met. SONELGAZ's financialperformance should improve in the medium to long run but only after full completion of itsrestructuring plan, which was not fully achieved under the project. SONELGAZ's revenuegeneration is still problematic at best. Important problems still exist with respect to collection ofreceivables from public sector enterprises and administrative institutions. Furthermore,efficiency is still not optimal. SONELGAZ costly operations have undermined its ability togenerate adequate surplus (see para. 11-14).

viii. The level of the tariffs prevailing during the period 1988-1996 were not appropriate torecover cost based on economic principles nor were they sufficient to meet.the self-financingratio in every year. These increases were not sufficient to improve SONELGAZ's. financialsituation, since they were being eroded by inflation and currency devaluations (see para. 12).

ix. Institutional objectives. Achievement of institutional objectives is consideredsatisfactory in view of SONELGAZ's efforts to provide technical and financial training toreinforce its human resources base. Moreover, the autonomy of SONELGAZ was strengthenedthrough the enactment of its revised statutes approved in 1995. Training conducted under theproject will provide long-term benefits through improved personnel efficiency. Completion ofthe Central Cash Management and Management information System Studies should result inimproving the managerial and financial capability of SONELGAZ (see paras. 15-16).

x. Project costs and financing. The project's estimated cost at appraisal was US$391.2million, including contingencies, duties and taxes and excluding interest during construction. Oncompletion in October 31, 1997, the total cost of the project, as revised, is now estimated to be

iii

US$314 million, which is about 20 percent lower than appraisal estimate. Of this, the foreigncost is now US$136.2 million (out of US$160 million of the Bank loan) and US$74.7 million(out of US$86.5 million of the Eximbank loan). Savings generated were primarily due to: (a)appreciation of foreign currencies vis-a-vis the local currency; and (b) lower bid prices thanappraised estimates (see para. 17).

xi. Project economic performance. The recalculated EIRR is now estimated at 9 percent,which is higher than the appraisal estimate of 6.3 percent. These estimates were based on keyfinancial data for the period of 1989-97. This might reflects a relative tariff increase, in additionto incremental revenues resulting from increased genera,tion and improved transmissionefficiency (i.e., reduced technical losses). The EIRR was recalculated using the methodologydescribed in the SAR (see para. 18 and Part II, table 9).

Major Factors Affecting the Project

xii. The project was negatively affected by the security situation, which underminedimplementation, supervision and technical assistance. Project effectiveness was delayed by 18months at the beginning and further delayed by SONELGAZ's unfamiliarity with the Bank'sprocurement guidelines. Inflation and local currency devaluation eroded tariff adjustments andthe debt service of SONELGAZ. These factors have negatively impacted SONELGAZ' effortstoward financial restructuring (see para. 19).

Bank Performance

xiii. Overall, the performance of the Bank cmn be rated as satisfactory. During projectpreparation of the project, the Bank responded in a timely manner to the Govermment's requestfor urgent help. During supervision, the project was supervised on a regular basis, about every 6months, in spite of the difficult security situation in Algeria. Bank missions gave SONELGAZsubstantial assistance in planning its financial performance and obtaining tariff adjustments.Visits to construction sites were not possible during the last two years of project implementation(see para. 20).

Borrower Performance

xiv. Overall, the performance of SONELGAZ can be rated satisfactory. The implementationof the physical works by SONELGAZ's technical personnel was efficient. The implementationof policy issues, and the performance of the Ministry of Energy and SONELGAZ were ingeneral satisfactory except for delays in implementing tariff adjustments, the Contrat-Plan (notyet approved by the Government), and SONELGAZ's revised statutes (approved in September1995) (see para. 21).

Project Sustainability

xv. The project is likely to be sustainable in the long term given the benefits of itscomponents. The full benefit of the project will be achieved where most of the transmission andsubstations works have been completed and put into service. These works will improve thereliability of the power system and the quality of service to the consumers. The capacity of thetransmission system will be maintained and most likely extended. Regarding SONELGAZ'sfinancial position, sustainability of the improvements would be much easier in a low-inflation

iv

environment and small devaluations. Moreover, SONELGAZ, financial performance will beimproved in view of its measures contained in its financial restructuring plan and will startgenerating net resources for each year, starting in 1998, which should be consistent with standardcovenanted ratios (see para. 22-23).

Summary of Findings, Future Operation and Key Lessons Learned

xvi. Project outcome. Overall project assessment is satisfactory and the project is expectedto achieve a reliable, efficient, and well-integrated transmission network in the long term. Theproject's recalculated EIRR is satisfactory and reflects increased output, decreased system lossesand tariff increases (see para. 24).

xvii. Future project operation. Bank's strategy for the sector for further assistance toAlgeria will be targeted towards facilitating restructuring of the sector and developing anenabling environment for entry of the private sector in power generation. To this end, as part ofits Economic Development Program in the Energy Sector, the Government has declared itsintention to introduce private operators in electricity generation in order to alleviate the largeinvestment requirement needed in the generation expansion program (see para. 25).

xviii. This project should be continuously monitored in order to ascertain that SONELGAZfinancial performance is in line with covenanted targets. SONELGAZ has agreed to monitor theproject its financial and operational performance as through performance indicators as outlinedin para. 27 and Part II, Table 5.

xix. Key lessons learned. The main lessons learned are: (a) stronger financial restructuringmeasures might have been appropriate during preparation, before Board approval; therefore,further financial reengineering of the enterprise is still needed so that it will be able to generatesufficient internal cash to finance its own expansion plan, and to bring its operational andfinancial performance in line with that of comparable international utilities; (b) cash generationas defined under the project showed extreme volatility over the years. A rate-of-return covenantmight have been more appropriate and understandable by all stakeholders, in spite of localinflation; (c) the Bank might consider providing procurement training before projecteffectiveness; (d) the Bank should ensure that follow-up project operation is monitored properlyand that performance indicators are established at the beginning to facilitate evaluation of projectsustainability; (e) project objectives should be linked to overall macroeconomic restructuringobjectives so that sectoral reforms do not represent barriers to industrial enterprises that haveembarked upon a strategy of change; and (f) the Bank's strategy for the sector should focus onfacilitating restructuring of the sector and developing an enabling environment for entry of theprivate sector. (see para. 28).

IMPLEMENTATION COMPLETION REPORT

ALGERIA

ALGERIA POWER PROJECT(Loan 2981-ALG)

PART I - PROJECT IMPLEMENTATION ASSESSMENT

A. Statement and Evaluation of Objectives

Introduction/Background

1. There had been two previous power loans since independence. Preparation for a thirdloan was suspended in 1982 when the Government failed to take action to address SONELGAZ'sdeteriorating financial situation, and there was a lull in contacts until 1985 when preparation ofthis project began. The project has focused in particular on the successful implementation ofSONELGAZ's Government-approved financial restructuring program, optimization of electricityuse at power stations and in the transmission network, optimization of investment programs, andstrengthening of SONELGAZ' management and accounting systems.

2. The Bank loan of US$160 million (revised amount US$159.43 million) was cofmanced -as a joint financing arrangement - by the Japanese Eximbank with a loan of US$86.5 millionequivalent, with the Bank administering the Japanese loan together with its own financing. Theforeign cost of most components was financed 65 percent by the Bank and 35 percent withEximbank of Japan funds.

Project Objectives and Components

3. At appraisal. The Third Power Project at appraisal had four main objectives: (a) torestore and strengthen SONELGAZ's financial position through a gradual shift to greaterfinancial and managerial autonomy; (b) continue implementation of some major investments thatwould help to optimize productivity in Algeria's power system; and (c) assist SONELGAZ in itsefforts to improve its management, planning and engineering capabilities and thereby improvethe quality of supply. The proposed project was also expected to (d) provide a vehicle fordialogue with SONELGAZ and the Government on rationalizing the company's overallprocurement procedures.

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4. The project was designed as part of SONELGAZ's least-cost development program forthe period 1988-1995. It involved:

(a) construction of about 475 km of 220 kV transmission lines to interconnect the powerstation under construction at Jijel to SONELGAZ's bulk supply system;

(b) construction and/or extension of six 220/60kV substations and one 220/90/30 kVtransformer substation, with total installed capacity of about 2180 MVA;

(c) the supply of specialized equipment and vehicles;

(d) training and supply of devices such as computer software and hardware to strengthenSONELGAZ's capabilities in network engineering, planning and financial management; and

(e) consulting services to assist SONELGAZ in carrying out various studies for powersystem loss reduction, manpower development and financial management systems, and a studyto determine the opportunity for introducing the combined-cycle alternative in SONELGAZ'sfuture power generation system.

Evaluation of Objectives

5. Objectives were clearly stated and agreed to by all stakeholders. Compared to later Bankprojects in power sectors of various countries, the objectives of this project may appear to have alimited scope; however, this project restarted a difficult dialogue after several years ofinterruption. The stated objectives appear to be what were acceptable for both parties at thetime. Regarding SONELGAZ' financial performance, the objective/covenant of 15 percent self-financing appears rather modest, but again, at the time SONELGAZ was in a desperate financialsituation, and even this low target stipulated a demanding change of direction with the tariffrestructuring necessary to reach that objective coming at a high political and economic cost.Given the high inflation, there was no financial rate-of-return target for SONELGAZ' operations.Since the early 1980s, the Government has been implementing economic reforms, includingcentral planning reforms, development of a more autonomous financial system, private sectorpromotion and improved mobilization and allocation of resources via pricing reforms. It iswithin this context that this project should be evaluated.

6. Although the financial objectives were relevant, they were beyond SONELGAZ'scapabilities. The gradual approach adopted by the Algerian Government focused on macrorather than microeconomic reforms. Algerian industry was unproductive (apart from the oil andgas industry) and needed a complete overhaul, which depended on fundamental institutional andeconomic reforms being carried out (which was not the case at the time of project effectiveness).Access to foreign exchange was constrained and limited, inflation rates were high and publicenterprises (such as SONELGAZ) were structurally inefficient. Industrial structure was notconducive to growth and institutional behavior (sluggish actions by the Government on the tariffissue in the case of SONELGAZ) led to poor financial results.

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B. Achievement of Objectives

Physical Objectives

7. The main physical objectives of the project were achieved as shown in the followingtable:

Tablel: Comparison of Planned and Achieved Physical Objectives

A: Transmission LinesNames-Description Planned Percent Achieved

Ramdane Djamel - El-Hadjar 220 kV- single circuit. 80 km 100% in serviceJijel - Bellara, 220 kV 25 km by Dec. 97Skikda- Bellara, 220 kV - single circuit,twin bundle (2x411 mm2 ACSR) 70 km 100% in service by Dec. 97Zahana - Terga - Ghazaouet, 220 kV - single circuit 150 km 100% in service by Dec. 97Ouled Fayed - Beni Mered, 220 kV - single circuit 32 km 100% in service by Dec. 97El-Mansouriah-El Kseur, 220 kV - single circuit,twin bundle (2x411 mm2 ACSR) 70 Ian 100% in service by Dec. 97El-Mansouriah-Jijel, 220 kV - single circuit,twin bundle (2x411 mm2 ACSR 60 km 100% in service by Mar. 98Miscellaneous and connection of the substationsincluded in the project. 220 kV - single circuit 25 km 100% in service

B: SubstationsNames-Description Planned Number of bays Percent Achieved

Transformer LinesEast Region:Randane-Jamel: 220/60kV, 3x120 MVA 3 9x120kV 2 100% in service by Mar. 98Ain Beida: 220/60 kV, 2x120 MVA 6x220 kV 100% - in serviceTebessa: 220/90 kV, and 90/30 kV, lx120 + 2x40 3 10x90 kV 100% - in serviceMVA +l4x30kVCentral Region:Beni-Mered: 220kV, 3x120 MVA 3 4x220 kV 100% - in service

4x60 kVKherba: 220kv, 60/30kV, 2x120 + 2x30 MVA 4 7x220 kV 100% - in service

+7x60 kVGhelghoum Laid: 220/60 kV, 3x120 MVA 3 6x120 kV Canceled

+6x60 kVOuled Fayet: 220/60 kV, 3x120 MVA 1 6x220kV 100% in service

Oued Athmania, 220/60 kV, 3x120 MVA (NEW) 1 220/60kV 100% - in service

8. Overall the project has achieved its physical objectives satisfactorily, albeit with somedelays due mainly to security reasons. It is noteworthy to mention that both the Bank andEximbank of Japan financed components that underwent some modifications. Khemis-Oued Sly(220 kV, single circuit, 110 km) and Jijel-Ain M'Lila (220 kV, single circuit, 120 km) lines weredeleted and Ramdane Djamel-EI-Hadjar, Zahana-Terga-Ghazaouet and Ouled-Fayed-BeniMered lines (total: 262 km) as indicated above were added to the project, which reflected anincrease of 32 km of line. With regards to substation work, Ghelghoum Laid substation wasdeleted and replaced by the Oued Athmania substation. These modifications were due mainly toprevailing security reasons, and alternate works were needed to meet the growing demand; Thesemodifications were agreed with the Bank. All transmission lines are well on their way to beingcompleted by the end of this year, except for the El-Mansouriah-Jijel line, which is proceedingvery slowly due to the existing security situation in that location and is expected to be completed

4

by March 1998. All substations necessary to strengthen the transmission network in order toimprove the evacuation of energy have been completed and are in operation, except with theRamdan-Djamel substation expected to be commissioned in the first quarter of 1998. This delaywas due because of ground stability problem in the substation, which has been resolved. Theproject's rehabilitation/expansion work of the transmission network including substations willimprove the reliability of the transmission network as well as the quality of service to theconsumers and help optimize productivity in Algeria's power system.

9. The supply of specialized equipment and vehicles to improve SONELGAZ's operationalefficiency have been completed and are in operation. This has contributed in improvingefficiency of SONELGAZ's operation activities as well as the quality of service to theconsumers. Supply of computer hardware and software to strengthen SONELGAZ's capabilitiesin network engineering and planning management was completed, and resulted in improving theplanning and operation of the gas and electricity distribution networks.

Studies

10. Most of the technical studies that SONELGAZ undertook have been (or are being)completed (see Part II, Table 6). These studies have allowed SONELGAZ to streamline andincrease the efficiency of its operational activities. The Loss reduction Study was completed andis assisting SONELGAZ in implementing an action plan to reduce power system losses, whichwill increase system efficiency. The Combined-Cycle Study was completed and will assistSONELGAZ in revising its investment program and defining optimal generation option,including the combined-cycle alternative. As a result of this study, SONELGAZ hasincorporated combined-cycle power plants in its generation expansion plan and the first one isplanned to be built in Alger-West. The Central Cash Management Study as well as theManagement Information System (MIS) Study to improve the financial and accounting systemsof SONELGAZ are ongoing, albeit with delays. They are being completed using SONELGAZ'sown funds. These studies should result in a comprehensive and efficient reorganization of theaccounting and financial management function of SONELGAZ (a major objective of theproject). SONELGAZ has also benefited from many audits that have helped put in place a viablefinancial management system. However, SONELGAZ needs to complete the ManpowerDevelopment Study, which has been delayed due to security reasons, in order to be able toupgrade its managerial capabilities.

Financial Objectives

11. The financial objectives were partially achieved. This project was designed to restoreand strengthen SONELGAZ' financial position and improve its operational efficiency with agradual shift to greater financial and managerial autonomy. The Bank and the Borrower hadagreed on a comprehensive set of actions that were to be carried out in a timely manner. Theseactions specifically included: (a) a gradual increase in the self-financing capability to reach 15percent by 1993; (b) payments of all arrears due to SONELGAZ by public sector enterprises andinstitutions; (c) systematic audits of SONELGAZ' accounts; (d) completion and implementationof the recommendations of a management and accounting systems study. These actions wereconditional on the Borrower's implementation of a phased and gradual tariff increase, which wasnecessary for the project to reach its financial objectives.

5

Tariffs

12. SONELGAZ had to set up a tariff adjustment policy concurrent with the project'sfinancial objectives. However, its status as an EPIC (enterprise publique a caractere industrielet commercial) did not allow it to act independently from the public institutions that oversaw andcontrolled its operations and management. Within the context of Algeria, tariffs reflectsocioeconomic policies and decisions, and covenanted tariff increases could not be implementedoutside this framework. In effect, project effectiveness was delayed by 18 months because ofGovernment delays on the 10 percent tariff increase, which seriously affected projectimplementation and SONELGAZ's fnancial performance'. A lifeline tariff (5O0kWh/year) wasintroduced by SONELGAZ at the suggestion of the Bank in order to protect the low-incomeconsumers. The first tariff increase of about 10 percent was implemented in March 1991 and didnot much improve SONELGAZ's financial situation. The macroeconomic context was notconducive to successive increases and the Government was not ready for larger increasesbecause of the sociopolitical climate that prevailed in Algeria starting in the second half of 1991.Other increases were enacted in 1992 and 19932 but were not sufficient to improveSONELGAZ's financial situation, since they were being eroded by inflation and currencydevaluation3. The Bank did, however, request further financial restructuring and tariff measuresfrom the GOA to improve SONELGAZ's internal cash generation ratios for the period 1994-964.Overall tariffs are progressing toward their economic levels. High voltage tariffs are already attheir economic level (107 percent in 1997), while medium voltage and low voltage tariffs willreach their economic levels by 1998 and 2000 respectively.

Table 2: SONELGAZ: Evolution of RetailElectricity Tariffs, 1989-1997 (in cDA/kWh)

Electricity 1989 1990 1991 1992 1993 1994 1995 1996* 1997*

High Voltage 16.77 17.60 25.60 55.48 69.57 77.61 90.66 105.28 124.57

Medium Voltage 26.26 26.79 33.83 56.91 67.30 79.54 112.61 151.83 183.30

Low Voltage 41.09 43.28 48.38 61.37 75.60 70.13 99.23 130.17 162.32

High Voltage -Tariff/Economic Cost N/A N/A N/A N/A N/A 92.2 % 93.1 % 95.2% 107.7%

MedVoltage-Tariff/Economic Cost N/A N/A N/A N/A N/A 58.7% 71.1 % 83.7% 95.3%

LowVoltage- Tariff/Economic Cost N/A N/A N/A N/A N/A 27.1% 32.5% 37.1% 43.2%

lAvg Economic Cost,USc/Kwb ....J.... ...... /. . .... 5.743 5.164 4.269 4.085 3.816

2.Avg Sale Price- USc/Kwh 3.763 3.363 2.201 2.678 3.079 2.343 2.452 2.768 2.475

12 in percent 53.61 45.37 57.44 67.76 64.86

* Preliminary figures for 1996 and 1997.

This mediocre financial performance (in 1989) was due mainly to a one year delay in tariff increase.SONELGAZ also incurred substantial foreign exchange losses on debt service. Furthermore, there was alack of significant improvement in accounts receivable and in the agreed-upon cost reduction program.

2 Tariff increases of 55 percent for 1992 were decided in April, of which 2 steps of 15-18 percent(depending on voltage levels) and were implemented as planned in April and June. Similar adjustmentsfollowed in September 1992.

3 Average tariffs were still below targets and were offset by inflation rates (which were higher thanestimated).

4 New tariffs were promulgated in September 1994 to take effect during the second half of 1994 and withautomatic adjustments for 1995.

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13. Overall financial performance. SONELGAZTs revenue generation is still problematicat best. Important problems still exist with respect to collection of receivables from public sectorenterprises and administrative institutions. Billing collection, for the period 1989-97, was notconsistent with the 2-month covenanted target of the project agreement (see table 4).Furthermore, efficiency is still not optimal. In effect, excessive expenditures, representing anaverage of 90 percent of total sales (for 1989-97) have undermined SONELGAZ's ability togenerate adequate surplus. In spite of costly debt conversion and restructuring, debtmanagement needs to be improved. The debt service ratio has not reached the agreed-uponobjective (1.3 times). In spite of financial adjustment measures, internal cash generationremains below the covenanted 15 percent. However, this ratio did improve from negative 5percent in 1986) to 7.7 percent in 1996. This financial performance is due to SONELGAZ'sinability to mobilize adequate revenues (its cash flow is negative) to reach the agreed-upontargets.

14. As of 1995 SONELGAZ's financial situation was improving (see table 3) but not to theextent of achieving project objectives. All corrective measures have to be perceived within aconstraining internal (managerial) and external (regulatory and economic) environment that

5SONELGAZ had to contend with. In spite of debt buy-back operations , at about DA 11.4billion in 1992, DA 8 billion in 1995 and DA 8,5 billion in 1996, and the conversion of BAD(Banque Algerienne de Developpement) debt6, its ratio of equity over net assets remained verylow (0.23 in 1995). Furthermore, SONELGAZ embarked upon a strategy of settling accountswith its public sector consumers. Given that tariffs were lagging behind revenue requirements, itwas difficult for SONELGAZ to secure enough internal cash to finance its own operations. Itsactivities were highly leveraged and debt levels were excessive (representing 75 percent ofliabilities in 1995). External debt represented 45 percent of total debt and 33 percent of totalcapital. Total debt service represented 72.6 percent of income from total sales, however debtservice ratio did improve considerably (from -0.19 in 1989 to 1.21 in 1996). Receivables havealso improved from 3.9 months of billing in 1989 to 2.6 in 1996. Cash flow management is alsoimproving as measures to collect arrears due to SONELGAZ are producing positive results.Financial performance indicators for 1996 show that SONELGAZ is pursuing a cautious strategywhich will ultimately pay off in the period 1998-2001. However, investment financing remains aproblem for the period after 2001, when considerable capital outlays will be needed, in particularfor the renovation and expansion of generation capacity.

SONELGAZ had to readjust its capital and financial structure because of debt absorption requirements.

6 In 1996, delivering on its commitments to financial restructuring, SONELGAZ converted DA 38.9billion in debt owed to the Algerian Development Bank (BAD).

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Table 3: SONELGAZ, Key Financial& Operational Indicators; 1989-97

Categories 1989 1990 1991 1992 1993 1994 1995 1996* 1997*

I.Total Electricity Generation in GWh 14589 15442 16756 17677 18959 19488 19361 20212 21507

2.Users (Households and Public Inst) in million 2.9 3.16 3.36 3.48 3.63 3.77 3.90 4.01 4.32

2.Number of Employees 22396 23516 24905 24936 24805 25635 25591 25548 26099

4.Total Electricity Sales (in GWh) 12271 12994 13123 14478 14831 15108 15699 16211 17205

5.Increases in Percent 5.89 0.99 10.33 2.44 1.87 3.91 3.26 6.13

6.Electricity (DA million) 3351 4015 5695 8872 11285 13882 19034 25443 27506

7.Natural gas (DA million) 517 564 870 1689 2352 2464 3584 4497 5803

8.Total income (6+7+ Other) 4197 5024 7033 11361 14657 17484 24516 28322 36751

9.Total expenditures (DA million) 3988 4930 6632 10393 14635 16590 18860 24664 32094

10.Net income (DA million) (1295) (1803) (2890) (3651) (4408) (3021) (9024) (4124) (3297)

I I.Net intemal cash generation (DA million) 5632 (70) (576) (3457) (2078) (1345) (7634) (4389) 572

12.Annual investment-incl rural.(DA million) 3667 3780 6528 7511 9750 11517 12770 14570 22974

Ratios

Operating ratio 0.95 0.98 0.64 0.91 1.00 0.95 0.77 0.87 0.87

Net internal cash generation ratio % N/A 5.2 -76.8 -109 -19.0 N/A 9.2 7.7 5.2

Debt service coverage ratio -0.19 0.92 0.83 0.31 0.63 1.02 0.5 1.21 1.02

LT debtlLT debt +equity 0.62 0.60 0.57 0.66 0.42 0.42 0.18 0.19 0.22

Public Sector Receivables 1989 1990 1991 1992 1993 1994 1995 1996* 1997*

Electricity and Gas Consumption

Current billings receivable (DA million) 1352 1514 2292 3864 4117 5984 5278 10500 N/A

Arrears in months 3.9 3.6 3.9 4.1 3.4 4.1 2.8 2.6 2.4

* Preliminary figures for 1996 and 1997.

Institutional Objectives

15. Achievement of institutional objectives is considered satisfactory in view ofSONELGAZ's efforts to provide technical and financial training to reinforce its human resourcesbase. Furthermore, SONELGAZ's revised status in 1995 has increased its autonomy particularlyin terms of decision making vis-a-vis the Ministry of Energy regarding its investment expansionprogram, its internal structural reorganization and appointment of its high level management.Annual programs of trainees, mostly engineers, were sent to foreign school to be trained mainlyin the operation of power plants and telecommunications. This training program was approvedby the Bank and lasted for a period of 5 years, and resulted in improving SONELGAZ'soperational activities.

16. Over several years, the annual audits of SONELGAZ's accounts and systems by anassociation of a foreign and an Algerian audit firm were successful in improving andstrengthening SONELGAZ's systems. Unfortunately, these missions have come to a haltbecause of the security situation. Completion of the Central Cash Management and theManagement and Information System Studies should result in improving the managerial andfinancial capability of SONELGAZ.

8

Project Costs and Financing

17. Based on 1987 prices, the project's estimated cost at appraisal was US$391.2 million,including contingencies, duties and taxes and excluding interest during construction. Of this, theforeign cost was estimated at US$245.3 million, with financing from the Bank (US$160 million)and the Eximbank of Japan (US$86.5 million), excluding the Govenmnent's contribution. Oncompletion in October 31, 1997, the total cost of the project, as revised, is now estimated to beUS$314 million, which is about 20 percent lower than appraisal estimate. Of this, the foreigncost is now US$136.2 million (out of US$160 million of the Bank loan) and US$74.7 million(out of US$86.5 million of Eximbank of Japan loan). However, it should be noted that appraisaland current estimates are not comparable as some physical components have been changed asexplained above (para. 8). Furthermore, appraisal estimates did not include SONELGAZadministration and local engineering expenses. Savings generated were primarily due to: (a)appreciation of foreign currencies vis-a-vis the local currency; and (b) lower bid prices thanappraised estimates. Original and final project costs are shown in Part II, Table 7 and 8.

Project Economic Performance

18. The project was part of SONELGAZ's least-cost expansion program, and duringappraisal the economic rate of return (EIRR) on SONELGAZ's investment program forgeneration, transmission and distribution for the period 1988-1995 was estimated at 6.3 percentWith actual data for the period 1989-1996, the EIRR is now estimated at 9 percent, which issomewhat higher than the appraisal estimate. These estimations are based on preliminary(unaudited) accounting and financial figures. (see Part I, Table 9). EIRR recalculations, forproject such as this one, are somewhat subjective. The relatively higher EIRR takes into accountSonelgaz's overall performance during the period 1989-97 and should only be interpreted withinthat context..

C. Major Factors Affecting the Project

19. The following factors affected the project: (a) The security situation in Algeria had animpact on physical implementation of certain high-voltage lines, and on the implementation ofseveral studies and technical assistance (i.e., the annual audits were substantially reduced inscope, as were the technical assistance to improve SONELGAZ's accounting and financialsystems and the Central Cash Management Study); (b)Project effectiveness was delayed by 18months, resulting in delay of project implementation; (c)Delays were experienced at the start ofthe project by SONELGAZ due to unfamiliarity with the Bank's procurement guidelines; (d)Tariffs were eroded by inflation and therefore needed to be much higher in order to achieveincreases in real terms. Local successive currency devaluations have undermined the ability ofSONELGAZ to carryout its financial restructuring. Most of all, debt service and exchange lossesrelated to the sizable foreign currency debt have affected SONELGAZ in a way not anticipatedduring project preparation.

D. Bank Performance

20. Overall, the performance of the Bank can be rated as satisfactory. During projectpreparation of the project, the Bank responded in a timely manner to the government's requestfor urgent assistance. During supervision, the project was supervised on a regular basis, about

9

every 6 months, in spite of the difficult security situation in Algeria. Bank missions gaveSONELGAZ substantial assistance in planning its financial performance and obtaining tariffadjustments. Visits to construction sites were not possible during the last two years of projectimplementation because of security situation. The overall procurement process was satisfactory,except for US$600,000 canceled for misprocurement, because of disagreement on a contractaward.

E. Borrower Performance

21. Overall, the performance of SONELGAZ can be rated satisfactory. The implementationof the physical works by SONELGAZ's technical personnel was efficient, as was theperformance of the financial department. Furthermore, concerning the implementation of policyissues, the performance of the Ministry of Energy and SONELGAZ is in general satisfactory,except for delays in tariff adjustments, the Contrat-plan (not yet approved by the Government),and SONELGAZ's revised statutes (approved in September 1995). However, it should be notedthat some procurement problems were experienced at the start of the project due toSONELGAZ's unfamiliarity with Bank procurement guidelines.

F. Assessment of Project Outcome and Sustainability

Project Sustainability

22. The project is likely to be sustainable in the long run given the benefits of itscomponents. In fact, some benefit of the project has been achieved in the case of thetransmission and substations works that have been completed and put into service during the last2 years. Performance of the physical components should not be a problem. A higher rate ofevacuation of energy was achieved where transmission lines and transformers are in operation.The capacity of the transmission system will be maintained and most likely extended.

23. Regarding SONELGAZ's financial position, sustainability of the improvements wouldbe much easier in a low-inflation environment and with only a few small devaluations, becausefewer tariff adjustments would be needed. Furthermore, SONELGAZ's financial position will beimproved because of the current implementation of its financial restructuring program.SONELGAZ will start generating net resources for each year, starting 1998, that should beconsistent with the covenanted cash generation ratio and adequate to service its debt.

Project Outcome

24. Overall project outcome can be considered satisfactory. Implementation has beensatisfactory and it is more than likely that the project will, in the long run, achieve a wellintegrated transmission network, resulting in reduced technical losses, increased systemreliability and operational efficiency. Training conducted under the project will also providelong-term benefits through improved personnel efficiency. The recalculated EIRR of 9 percentreflects a higher tariff increase than anticipated, as well as incremental revenues resulting fromincreased generation and improved transmission efficiency (i.e., reduced technical losses).

10

G. Future Project Operation

25. Bank's strategy for the sector for further assistance to Algeria will be targeted towardsfacilitating restructuring of the sector and developing an enabling environment for entry of theprivate sector in power generation. Several measures to be taken by the government andSONELGAZ in the areas of sector reforms, commercialization/corporatization of SONELGAZ(including further financial restructuring, spin-off and divestiture of its external activities,increased managerial and operational efficiency) and sector monitoring and evaluation mayreflect a satisfactory plan for proposed Power IV Project. On sector reforn and under theMinistry of Energy and SONELGAZ supervision, a Study on the restructuring of the powersector is being prepared by an International Consultant. The recommendations of this study willlay-down the policy framework for the proposed Power IV Project. The preliminaryrecommendations of the study is expected to be completed by December 1997.

26. As part of the Government's Economic Development Program in the Energy Sector, theGovernment has declared its intention to introduce private operators in electricity generation inorder to alleviate the large investment requirement needed in the generation expansion program,and to that effect, intends to revise its electricity law.

27. The Bank should continue monitoring SONELGAZ's financial performance until its inline with international standards. SONELGAZ's main indicators of success for its futureoperation remain the same as its current ones: minimization of losses, achieving high level ofreliability, and more efficient management of its accounts receivable. SONELGAZ has agreed tomonitor the project, its financial and operational performance through performance indicators asoutlined in Part II, Table 5. Future operation will rely on SONELGAZ ability to carry out andcomplete the Government sector reform and strategy program.

H. Key Lessons Learned

28. Major project delays were probably unavoidable given the prevailing security situation.The main lessons learned are:

(a) Cash generation as defined under the project showed extreme volatility over theyears. A rate-of-return covenant might have been more objective and understandable by allstakeholders, in spite of local inflation.

(b) Stronger financial restructuring measures might have been appropriate duringpreparation, before Board approval. It is necessary to have a financial management structureconducive to efficient resource allocation and financial planning before project implementation.SONELGAZ had no hedging capability to deal with excessive foreign exchange losses.

(c) Training to the Borrower on Bank procurement guidelines should have beenprovided in order to improve the procurement process.

(d) If adequate, tariff levels commensurate with inflation, and structure or sectorpolicy reforms are necessary. They should be implemented before loan effectiveness, given thedifficulties of achieving such adjustments subsequently.

11

(e) In order to ensure monitoring of project sustainability, the Bank should offerassistance to the Borrower to implement a system of key performance indicators (forimplementation and development objectives) to follow-up on project operation.

(f) Complete ownership of the project by the implementing agencies should beassured from the outset in order to achieve better project performance. SONELGAZ's statutes(EPIC) does not permit actions to be taken independently from Government stakeholders.

(g) A strategy of pursuing sector reforms, including corporatization of SONELGAZ,the establishment of independent regulation and the pursuit pf private sector investors, perhapsinitially for electricity generation to alleviate large investment requirement, would likely havehad far more success.

12

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

PART II - STATISTICAL ANNEXES

Table 1: Summary Assessments

A. Achievement of Objectives Substantial Partial Negligible Not ApplicableMacroeconomic v

Sector policies __

Financial objectives . IInstitutional development /Physical objectives _

Poverty reductionGender concernsOther social objectivesEnvironmental objectives .Public sector management I _

Private sector development /Otier (indicate) .

Likely Unlikely UncertainB. Project Sustainability It

C. Bank Performance Highly Satisfactory Satisfactory DeficientIdentification /Preparation IAppraisal /Supervision _ .

Highly Satisfactory Satisfactory DeficientD. Borrower PerformancePreparation _

Implementation /Compliance with covenants IOperation: Trans/Distr Tech. losses I

Highly Satisfactory Satisfactory UnsatisfactoryE. Assessment of Outcome _

13

IMPLEMENTATION COMPLEIION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

Table 2: Other Bank Loans/Credits

Loan/Credit Objectives Date of StatusApproval

Preceding Operations

First Power Project As part of the 1973-78 power expansion program, 1974 Project completed(Loan 997-AL, US$38.5m) help finance construction of gas turbine plants, 1981; fully disbursed

substations, and dispatch system. by March 31, 1980.

Improve the organization and management of theelectric power sector, especially its financial aspects.

Second Power Project As part of 1976-80 power expansion program, help 1976 Project completed(Loan 1293-AL, US$57.5m) finance the erection of 3,400 km of transmission 1981; disbursement

lines. completed March 28,1981; undisbursed

Improve SONELGAZ' organization and balance (US$1.5m)development, canceled Oct. 5,

1981.

Subsequent Operations

Fourth Power Project Assist the Government in issuing policies for the In preparation.power sector and prepare the legal and regulatoryframework.

Assist SONELGAZ in (a) increasing generatingcapacity; and (b) improving sector efficiency byreducing system losses, establishing financialviability and corporate autonomy, and mobilizingresources through the introduction of IPPs.

14

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

Table 3: Schedule

Stage of Project Cycle Planned Date Actual Date/EstimateIdentification March 1986 March 1986Preparation June 1986 June 1986Appraisal March 1987 Oct. 1987Negotiation Sept. 1987 May 1988Board presentation Dec. 1987 June 29, 1988Signing Dec. 1987 Nov. 13, 1989*Effectiveness Nov. 1988 March 29, 1990Loan closing Dec. 31, 1995 June 30, 1997*Delay in signing due to Borrower's decision to postpone signature until Government (a) decided on 10percent tariff increase, and (b) fnalized agreements with the cofmancing agency, the Exim Bank of Japan.

Implementation Completion ReportAlgeria-Power I1l(Loan 2981-AL)

Table 4: Loan Disbursements-Cumulative Actual (in US S millions)

Fiscal Year 1989 1990 1991 1992 1993 1994 1995 1996 1997Appraisal Estimate-aniual 3.20 24.00 35.20 35.20 28.80 19.20 14.40 0.00 0.00Appraisal Estimnate-ciiumitilative 3.20 27.20 62.40 97.60 126.40 145.60 160.00 160.00 160.00Actual annual 1.47 16.76 19.75 11.91 28.27 38.36 10.76 7.33 1.62Actual cumulative 1.47 18.23 37.98 49.90 78.16 116.52 127.28 134.61 136.23Actual as % of Estimate 0.46 0.67 0.61 0.51 0.62 0.80 0.80 0.84 0.85Actual % disbursed 0.01 0.11 0.24 0.31 0:49 0.73 0.80 0.84 0.85Date of Finial Disbursement 31-Oct-97IBRD Loan was UIS $ 159.4 million: US $ 600,000.00 was canceled because of inisprocuremnent.

Graph: Loan 2981-Disbursements | Appraisal Estimate-cumulative

-* Actual cumulative

160.00

140.00 ....... ... .....

120.000

100.00 -

0.00 _1989 1990 1991 1992 199" 1994 1995 1996 1997

Fiscal Year

16

Table 5: Key Indicators for Project Operation

l__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _Y earIndicators for SONELGAZ Unit 1997- 1998- 1999 -2000-2001 and beyond

1. MarkdElectricity coverage percentCustomers at year's end (breakdown by category) thousandAnnual electricity production, total: GWh-- Hydroelectric GWh-- Oil-fired plant: GWh-- Gas turbine: GWhAnnual sales GWhAnnual load factor percentAverage tariff of electricity sold DA/kWhAverage tariff of electricity purchased DA/kWh ___

Fuel-oil price DA/tonGas price2. EfficiencyEmployees numberEmployees per thousand customers numberWaiting time for a new customer to be connected daysAverage duration of outages hours/custFrequency of outages times/yearSales per employee MWhEnergy losses percent X

Fuel consumption, fuel oil, gr./kWhFuel consumption, coal, kCal/kWhProduction cost, total DA/kWh-- Fuel cost DA/kWh--Energy purchased DA/kWh-- Salaries DA/kWh-- Operation and maintenance DA/kWh-- Depreciation charge DA/kWhAvailability of thermal plants percent3. FinancialRate of return on assets in operation percentCash operating margin percentSelf financing percentDebt service coverage ratio numberDebt/Equity ratio numberAccounts receivable days of billingArrears, total days of-- Govemment billing

17

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

Table 6: Studies Included in the Project

Study Purpose Status ImpactIncrease system efficiency

Loss Reduction Study (50 Assist SONELGAZ in Done.man-months, US$0.70m) reducing power system

losses

Improve SONELGAZ'Management Information Assist SONELGAZ in Due Dec. 31, 1997. managerial Capabilities.System Study (130 man- improving its organizationmonths, US$2.0m) and accounting system;

study implemented bySONELGAZ with assistanceof consultant

Development of aCombined-Cycle Study Assist SONELGAZ in Done. technological framework(20 man-months, revising its investment for production capacityUS$0.15m) program and defining alternatives.

optimal power generationoption, including thecombined-cycle alternative;study implemented bySONELGAZ with assistanceof consultant

Manpower Development Assist SONELGAZ in Not completed due toStudy (30 man-months, defining training needs security reasons.US$0.50m)

Sources: SAR and project monitoring reports.

18

Table 7: Project Costs

(in US $ millions)

Appraisal estimate Actual Vanance in %Local I Foreign I Total Local Foreign Total

A: 220-kv Transmission lines 49.63 95.07 144.70 11.80 66.79 78.59 0.54

B: Substations 60.89 141.73 202.62 41.15 149.97 191.13 0.94

C: Others:Equipment-Informationsystems-T.A and Training 23.63 20.25 43.88 15.49 27.10 42.59 0.97

Total 134.15 || 257.05 391.20 68.44 245.28 1 313.73 0.80

Above table exclude IDC estimates

Table 8: Project Financing(in US $ millions)

Appraisal estimate ActualSources of Financing Local Foreign Total Local Foreign -Total

Sonelgaz cash Generation 26.83 0.00 26.83 13.70 0.00 13.70

Government 107.32 10.55 117.87 54.75 0.00 54.75

|BRD Loan 0.00 160.00 160.00 0.00 136.20 136.20

Other Sources/Japan Eximbank 0.00 86.50 86.50 0.00 74.70 74.70

Total I 134.15 257.05 391.20 68.44 210.90 279.35_|

* Above table exclude IDC estimates

1 9

Table 9: Economic Analysi (in DA millions at 1997 prices)

Years Investment Inc. Fuel Inc. Total Inc Net

Cost 0 & M Inc. Costs Revenue Benefits

1989 2,267 -22671990 2,340 107 684 3,131 664 -2,4671991 4,182 255 1445 5,882 1680 -4,2021992 4,893 551 3467 8,911 3177 -5,7341993 6,107 897 654 7,658 2413 -5,2451994 6,779 395 863 8,037 2597 -5,4401995 7,670 1083 2005 10,758 5152 -5,6061996 8,770 803 786 10,359 6409 -3,9501997 803 786 1,589 6409 4,8201998 803 786 1589 6409 4,8201999 803 786 1589 6409 4,8202000 803 786 1589 6409 4,8202001 803 786 1589 6409 4,8202002 803 786 1589 6409 4,8202003 803 786 1589 6409 4,8202004 803 786 1589 6409 4,8202005 803 786 1589 6409 4,8202006 803 786 1589 6409 4,8202007 803 786 1589 6409 4,8202008 803 786 1589 6409 4,8202009 803 786 1589 6409 4,8202010 2144 803 786 1589 6409 2,6762011 803 786 1589 6409 4,8202012 803 786 1589 6409 4,8202013 803 786 1589 6409 4,8202014 803 786 1589 6409 4,8202015 803 786 1589 6409 4,8202016 803 786 1589 6409 4,8202017 803 786 1589 6409 4,8202018 803 786 1589 6409 4,8202019 803 786 1589 6409 4,8202020 -1548 803 786 1589 6409 6,638

ERR= 9

20

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

Table 10: Status of Legal Covenants

Loan Ref. Covenant type Present Fulfillment Description CommentsStatus Date*

2981- 3.01 Sectoral/cross- C 8/4/94 Guarantor to ensure that all its entities Done.AL sectoral resource pay SONELGAZ all amounts due by

allocation 12/31/87.

3.01 Sectoral/cross- NC Guarantor to ensure that all its agencies Average delay is three to(B) sectoral resources pay SZ within 30 days of receipt of bills. four months.

allocation3.01 Sectoral/cross- NC Guarantor to ensure that on December Average delay is three to(C) sectoral resource 31 of each year, amounts due to SZ shall four months.

allocation not exceed an amount equal to theaverage of two months'billings.

2.02 Flow and C 1/21/91 SZ to open and maintain in dollars a Done.utilization of Special Account at the central bank.project funds _

3.03 Implementation C 1/21/91 SZ to employ consultants to carry out Most studies were carried(A) studies on loss reduction, manpower out; MIS study is being

management, management information implemented and shouldsystems, and the use of combined cycle. result in improving the

managerial and financialcapability of SONELGAZ.

3.04 Implementation C 4/30/90 SZ to furnish to the Bank a detailed staff Training being implementedtraining program with an after review by the Bank.implementation schedule, and to take allactions necessary to implement it.

5.01 Accounts/audit C 8/4/94 SZ to have its financial statements, Audits by SNC are up toproject cost SSAs and SOEs audited by date. Opinions on financialindependent auditors, and to furnish statements qualified.audit reports to the Bank. Improvement and

accounting trainingprograms underway.Corrective actions are to betaken by SONEGAZ asrequested by the Bank.

5.02 Financial CP SZ to generate internal funds to cover See sideletter covenants,(A) performance/ debt service and to contribute to its below.

generate revenue capital expenditures.from beneficiaries

5.02 Accounts/audits C 7/19/91 SZ to prepare financial forecasts to 1994-2000 financial(B) review compliance with cash generation projections prepared during

targets. November 96 supervision.

21

Sideletter CovenantsIA(A) Financial NC SZ to generate internal funds of at least Tariff increases for 96 and

performance 3% in 1990, 7% in 1991, 13% in 1992, 97 approved by GOA andand 15% thereafter, of 3-year capital effective March 96. Theexpenditures, after debt service. SFR was 9.2% for 95 and

7.7% for 96 and 5.2% for97 as compared to the 15%covenanted.

IA(B) Financial NC Debt service coverage: net revenues to The debt service coverageperformance cover debt service and contribute to ratio (0.5 compared with

capital expenditures as stupulated in 1.3 covenanted) and theA(A). self-financing ratio (9.27%

compared with 15%covenanted) were in defaultin 1995.

IB(A) Financial NC SZ to reduce inventories to 12 months Inventories have beenperformance consumption by end 1990, to 10 months reduced through online

by end 1991, 8 months by end 1992, and stock information system,6 months by end 1993. but still exceed target by 11

months.

I Financial NC SZ to reduce its receivables to 4 months At the end of 1995,performance of billings in 1990, 3 months in 1991, receivables are at 2.8

and 2 months by end 1992. months. Efforts towardfurther reduction continue.

Financial CP 4/3/90 SZ to select types of financing whose Terms have been graduallyperformance repayment periods approach the lengthened.

depreciation periods of the worksfinanced.

Accounts/audit CP 12/19/95 SZ to adjust the depreciation of fixed Underway; auditorsassets to realistic useful lives. presently working on new

guidelines and accountingsystem for fixed assets.

Financial CD 4/3/90 SZ to implement tariff increase of June 1989 increase implemented,performance 30, 1989 as well as future tariff increases. as well as later increases

approved by GOA (1996and 1997 to date).

Financial C 4/3/90 SZ to review on a continuous basis the Need is reviewedperformance ned to adjust tariffs to meet financial periodically, in relation to

objectives. economic cost and financialviability. Serious attentionto projected exchange ratefluctuations and inflation isneeded.

Financial C 8/4/94 SZ to reschedule in 1989 its internal debt Debt restructuringperformance incurred between 1980 and 1985. completed

Financial C 8/4/94 SZ to cause, by 12/31/89, its former Done.performance subsidiaries to pay all their debts due as

of 12/31/86.

22

*Date of Form 590 in which compliance first noted.

Covenant Class:1. Account/audit2. Financial performance3. Management aspects of the project4. Special conditions relating to the implementation of strategics, critcria, and procedures5. General and institutional conditionsStatus:C = Complied withCD = Compliance after delayCP = Complied with partiallyNC = Not complied with

23

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

Table 11: Bank Resources -Staff

Stage of Project Cycle Planned Actual Planned Actual(staff weeks) (staff weeks) (US$000) (US$000)

Preparation n.a. 117 n.a. $259Appraisal n.a. 42 n.a. $110Negotiation through Board Approval n.a. 21 n.a. $55Supervision n.a. 158 n.a. $498Completion/Closing 8 6 $28 $14

TOTAL 8 344 $28 $934

24

IMPLEMENTATION COMPLETION REPORTDEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA

THIRD POWER PROJECT(LOAN 2981-AL)

Table 12: Bank Resources -- Missions

Performance RatingStage of Month/ No. of Staff- Specialized Staff Implementation Development Type of ProblemProject Cycle Year Persons Weeks in Skills status objectives

Field Represented

Through March 3 6 Power Engineer n.a. n.a. Appraise and designAppraisal 1986 Financial Analyst project.

Economist

June 1986 3 8 Power Engineer n.a. n.a. Prepare project;Financial Analyst discusses needed studies;Economist discuss financial

restructuring ofSONELGAZ.

Appraisal Oct 1987 3 9 Power Engineer n.a. n.a. Revise scope of projectthrough Financial Analyst based on review ofBoard Economist proposed components;Approval discuss fnancing plan,

environmental impacts,financial restructuring ofSONELGAZ.

Feb-March 3 5 Financial Analyst n.a. n.a. Discuss Bank's1988 Loan Officer disbursement procedures;

Senior Country conduct disbursementOfficer workshop.

Supervision June 1989 1 1 Power Engineer 2 2 Urge SONELGAZ tospeed up loan signingand effectiveness (delaydue to Borrower'sdecision to postponesignature until Govt (a)decides on 10% increase,and (b) finalizescofmancing agreementswith Japan Exim Bank).

Jan-Feb Power Engineer Monitor progress of1990 3 4.5 Financial Analyst 2 2 procurement and urge

Economist Borrower to comply withfinancial covenants.

25

Nov 1990 1 1 Power Engineer 2 2 Monitor implementationprogress, issuance ofbidding documents fortransmission lineconstruction and requestsfor proposals for studies.

May-June 2 4 Financial Analyst 2 2 Monitor implementation1991 Power Engineer progress and lack of

improvement ofSONELGAZ' financialstatus; discuss possibleFourth Power Project ondistribution of electricityand natural gas.

Nov-Dec 2 4.5 Financial Anslyst 2 2 Monitor implementation1991 Power Engineer progress and identify

Fourth Power Project;discuss making fourthproject conditional onimprovement ofSONELGAZ' financialperformance.

May 1993 2 2 Financial Analyst 2 2 Monitor implementationPower Engineer progress; do detailed

financial assessment ofSONELGAZ.; discussextending closing datesof Bank and Exim loansto Dec 31, 1996 (done).

Dec 1995 2 1 Financial Analyst I I Monitor implementationPower Engineer progress; discuss

SONELGAZ' renewedrequest for Fourth PowerProject.

Completion/ June 1997 2 3 Power Engineer I I Prepare ImplementationClosing* Financial Analyst Completion Report;

discuss Fourth PowerProject.

*Delay in completion due to security situation in Algeria.Performance Ratings: I- Satisfactory. 2--Moderate problems. 3--Major problems. U--Unsatisfactory.

26

APPENDIX A: AIDE MEMOIRE OF THE ICR MISSION

27

ALGERIE

Troisieme Projet d'Electricite (pret No.2981-Alg) - Mission d'AchevementQuatrieme Projet d'Electricite - Mission de Pr6parationAssistance Technique - Projet Solaire PV (FEM) et don IDF

DU 13 AU 26 JUIN 1997

AIDE-MEMOIRE

1. Une mission de la Banque Mondiale composee de Messrs. ReneMendon,a et Ahmed El-Hamri a eu des reunions avec les representants de la Sonelgaz du13 au 26 juin 1997 a la residence El-Mithak - Alger pour superviser et preparer le rapportd'achevement du troisieme projet d'electricite dans le cadre de la cl6ture du pret et suivrela preparation du quatrieme projet d'electricite et du projet solaire photovoltaique (Fondde 1'environnement Mondiale - FEM). En outre les possibilites d'utiliser des dons IDFont ete enumrn&es. En ce qui concerne le cofinancement (financement conjoint:65%/35%) assure par l'Eximbank du Japon, celui-ci sera cl6tur6 selon les accords enOctobre 1997.

2. La mission tient a remercier vivement les representants de la Sonelgazpour leur chaleureux accueil et leur collaboration efficace. Le present aide-memoireresume les principaux sujets discutes et les accords conclus lors de cette mission que laBanque confirmera par lettre officielle, une fois la mission rentree a Washington. La listede personnes rencontrees est presentee en Annexe 1.

A. Achevement du Troisieme Projet d'Electricite:

Introduction

3. La mission a confirme aux representants de la Sonelgaz que, dans le cadredes directives et accords des prets de la Banque Mondiale, les "agences" beneficiant desemprunts, ont la responsabilite de preparer, apres une cl6ture du pret, un rapportd'achevement du projet conjointement avec la Banque. Le rapport de l'emprunteurconstitue la dernire etape du suivi du troisieme projet d'electricite. I1 devrait etrepr6pare par 1'entreprise et soumis a la Banque dans un delai de six mois apres la cl6turedu pret, c'est a dire, le 31 d6cembre 1997. La mission a recommande a Sonelgaz de saisirl'opportunite pour faire une evaluation retrospective du projet qui vient de s'achever etpresenter son point de vue dans le but de determiner l'impact du projet sur la performancedes activites de Sonelgaz et de preciser dans quelle mesure le projet a atteint ses objectifsainsi que de s'exprimer librement sur la qualite de l'action de la Banque. La Banque deson cote, preparera un rapport d'achevement du projet dans lequel seront inclus cescommentaires. II sera tenu compte dans ce rapport des commentaires de 1'emprunteur qui

28

seront annexes dans le rapport final d'achevement. Le rapport sera transmis auxmembres du Conseil d'Administration de la Banque.

4. La Sonelgaz s'est engagee A preparer un rapport preliminaired'ach&vement et de le transmettre A la Banque avant la fin juillet 1997. Le rapportd'achevement definitif sera transmis par Sonelgaz A la Banque avant la fin Septembre1997. Ce rapport devrait contenir une partie analytique d'environ 10 pages ainsi que desannexes detaillees se rapportant aux objectifs realis6s. La mission a suggere a laSonelgaz que ce rapport contienne en outre l'analyse retrospective du projet, le point surles realisations physiques, des problemes rencontres dans la passation des marches ainsique sur les decaissements du pret par rapport aux objectifs envisages initialement (tel quepresentes en Annexe 2). A cet effet, la Banque a remis A Sonelgaz un prototype derapport d'achevement fait par d'autres emprunteurs.

Point de situation du Projet

5. Obiectifs du projet. Les objectifs du projet tels qu'ils ont ete defini par le rapportd'evaluation initiale sont les suivants:a). assainir et renforcer la situation financiere de la Sonelgaz A travers un plan deredressementb). permettre A l'entreprise de continuer l'execution des investissements cles del'entreprise dont l'impact serait de renforcer et d'ameliorer le systeme energetique dupays, et d'optimiser la productivite des investissements courants dans le secteurdlectricite.

c). ameliorer et renforcer la qualite du service de l'offre d'energie et sa fiabilite.

Ces objectifs representent, pour la Sonelgaz, un aspect important de son plan dedeveloppement. A l'effet de concretiser ces objectifs, les composantes retenues sontdecrites dans ce qui suit:

6. Description du projet.a). Construction de 487 km de lignes de transport de 220 kVb). Construction et/ou extension de sept (07) poste de transformation (220/60 kV; 2180MVA)c). Acquisition d'equipement et de vehicules specialises pour ameliorer l'efficaciteoperationnelle de la Sonelgaz.d). Formation et acquisition de materiel informatique et de logicielse). Etablissement de services-conseil ingenierie, pour des etudes sur la reduction despertes, sur le developpement des ressources humaines, sur la mise en place des systemesinformatique et financier, et sur l'analyse optimale technico-economique des diff6rentstypes de production de l'energie electrique.

7. Obiectifs phvsigues. La realisation des objectifs physiques du projet sera achevee entotalite a l'exception des deux lignes de transport (Jijel/Mansouriah/El-Kseur) et de lafourniture des postes int6rieurs. Sur un total de US$245,3 millions (prets Banque/Exim

29

bank), A fin Mai 1997, il resterait en solde sur tous les contrats, US$31,5 millions. Sur cetotal, US$14,6 millions sont prevus pour etre decaisses avant le 31 Octobre 1997, US$9,5millions sont A resilier pour fin de contrat et US$7,4 millions concemant le contratd'acquisition des equipements pour postes interieurs seront A decaisser en dehors de lacouverture financiere de Banque/Exim bank du Japon pour parachever le Projet.

8. Objectifs financiers. L'actualisation des donnees du modele financier de l'entreprisen'etant pas completee, cette evaluation prends en consideration les chiffres comptablesr6els pour 1994-95 et preliminaires pour 1996. De ce fait, les tendances financieres dumodele ne seront verifiables qu'apres l'audit des comptes de 1996. Donc, cette evaluationtient compte de deux situations. Une evaluation qui est representative des donnees dumodele d'analyse financiere (base sur les tendances du modele financier de l'entreprise),et la seconde qui est basee sur les donnees comptables reelles telles qu'elles figurent dansles comptes audites de 1995 et 96. Par rapport A l'objectif d'autofinancement de 15%,Sonelgaz a atteint une capacite de fmancement de 22% compte non tenu de lardevaluation des immobilisations et de celle de la dette devise. Le ratio de couverture duservice de la dette a atteint, A fin 1996, 1.2 sur un objectif de 1.3. Le recouvrement descreances clients s'est sensiblement ameliore, et a atteint 2.6 mois du chiffre d'affaires surun objectif de 2 mois. Dans ce contexte, la situation financiere de Sonelgaz s'estamnelioree au vu de sa performance etalee sur les annees 1994-96. Au vu du plan deredressement, cette amelioration continuera dans les moyen et long termes.

9. Indicateurs cls de perfonnance du prolet. La Sonelgaz utilise un ensembled'indicateurs techniques et de gestion qui permettent d'evaluer sa performance. A titreindicatif, les indicateurs cles de performance presentes dans l'Annexe 3 seront etudies,completes eventuellement et utilises par la Sonelgaz pour faire le suivi de performancefutur des activites de la Sonelgaz.

10. Renseignements et donnees com=ldmentaires. Les renseignements et les donneesstatistiques de la Sonelgaz qui n'ont pas ete delivres A la mission seront envoyes A laBanque Mondiale par courrier au plus tard A la fm juillet 1997 conformement A l'Annexe2. Neanmoins, quelque documents et donnees ont ete dejA remis a la mission.

B. Preparation du Ouatrieme Projet d'Electricite.

11. Un expose sur le 4eme projet a ete fait par la Sonelgaz. I1 a permis d'actualiserles aspects techniques et financiers lies au reseau de transport et des BCC. Les autresvolets du projet demeurant inchanges. iA est entendu que les moyens d'exploitation et lesaspects formation/etudes seront definis ulterieurement.La consistance physique du projet se presente comme suit:

- Reseau HT: 951 kms et 18 postes HT- Reseau Distribution: 9400 kms MT/BT et 4800 postes plusequipements TST.

- (02) BCC A Oran et Constantine

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Le cofit du projet s'etablit A 623 millions de dollars dont 290 millions de dollars endevises et 332 millions de dollars en monnaie locale pour une parit6 de I $US=60 DA.Ce cofit de base inclue une provision pour imprevus physique et financier.

12. Etude Institutionnelle. La Banque a rappele la saisine du Ministere de l'Energieet des Mines dans sa correspondance du 28 mai 1997 et la reponse qu'elle y a apporte.Elle confirme que les resultats et les recommnandations de cette etude permettront entreautre de proposer et de definir une politique strategique A court terme du secteur ainsi queles parametres institutionnels sur lesquels sera adosse le Quatrieme Projet d'Electricite.Selon les informations dont dispose la Banque, la phase une "Recommandations desoptions institutionnelles du secteur electrique" serait probablement finalisee a finseptembre 1997. En attendant les resultats de l'etude et la strategie qui sera definie, laBanque en liaison avec la Sonelgaz, continuera A finaliser les contours du QuatriemeProjet d'Electricite en vu de l'evaluer si possible avant la fin de l'annee 1997. Ellesouhaite A cet effet, recevoir l'etude technico-economique definitive de Sonelgaz avant lafin Septembre 1997.

C. Activit6s - Assistance Technique.

13. Projet Solaire PhotovoltaYque - FEM. Le dossier relatif au projet solaire PV a eterevu avec le Directeur Recherche et Developpement de Sonelgaz. Il a ete prevu deremanier le document du projet pour tenir compte des remarques et eclaircissements quiont eu lieu durant la reuni on. Les documents (PDF Block A et le document deconception du projet) seront transmis par Sonelgaz a la Banque a la mi-juillet 1997.

14. Don sur le dveloppement institutionnelle (IDF grant). Un expose sur lapossibilite de disposer du don IDF a et6 fait par la mission. Ce don porte sur ledeveloppement institutionnel et pourrait etre utilise pour l'amelioration des economiesd'energie, l'externalisation et/ou l'essaimage, et les aspects de dossiers d'appels d'offrestouchant a la production independante privee.Les enveloppes par projet sont au maximum US$500.000 par activite A mobiliser au plussur deux annees, sur la base de fiche de projet (requ8te) a proposer par le beneficiaire A laBanque.

A ce titre, la Sonelgaz transmettra une requete a la Banque relative A l'amelioration de sescapacites de management (formation, organisation, etc..)

II est mentionne que ces projets pourraient etre finances par des dons car non rentables.

Alger, le 25 Juin 1997.Pour la Banque Mondiale:

Rend Mendonca

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ANNEXE 1

LISTE DES PERSONNES RENCONTREES

NOM FONCTION

MM. Benghanem A. Directeur GeneralHalimi A. Sous Directeur des financesAbrous C. Chef de division tresorerie centraleBouferguene A. Chef de division investissementsMitiche R. Chef de projetKaci M. Ingenieur d'etudesBenkhalfallah Chef de dept. engineering - postesKichou Chef de dept. engineering - lignesOubraham H. Chef de projet - etude de tresorerieDerrar N. Directeur recherche et dvt.Guezam S. Chef de projet recherche et dvt.Benmiloud F. Ingenieur recherche et devt.Fatnasse L. Ingenieur recherche et devt.

Mne. Belkahfa F. Sous Directeur de la formation

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ANNEXE 2

Le raMport d'achevement de la Sonelgaz devrait analyser/contenir les sugets suivants:

Evaluation retrospective

Op6ration future du projet

Indicateur de performance technique et gestion

Contrat-Plan Sonelgaz/Gouvernement

Realisation physiques du projet

Passation des marches et decaissement du pret

Etudes: reduction des pertes, dvt. ressource humaine, systeme informatique et financiere,optimisation des different type de centrale de production)

Crdances et arrieres statistiques 1988-1997

Baremes des tarifs 1988-1997

Formation du personnel

Assistance technique - consultants

Echeancier d'investissement projet 1988-1997

Taux de rentabilite economique interne du projet actualise

Echeancier d'investissement total: 1988-1997

Finances: statistiques 1988-1996 et previsions

Inflation et valeur du dollar: statistiques 1988-1997

Prix du fioul et du gaz naturel

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ANNEXE 3Indicatewrs clis de performance pour la Soneigaz (uniti).

1. Efficacitk:Employes (nombre)Employes pour mille clients (nombre)Temps d'attente pour un nouveau raccordement (ours)Duree moyenne des pannes (bres/coupures)Frequence des pannes (nbre de fois/an)Ventes par employe (MWh)Pertes d'energie (pourcentage)Consommation combustible, foul (gr/kWh)Consommation combustible, gaz (gr/kWh)Coiit de production, total (DA/kWh)- Couit carburant (DA/kWh)- Energie achetee (DA/kWh)- Salaires (DA/kWh)- Exploitation et entretien (DA/kWh)- Couit d'amortissement (DA/kWh)Disponibilit6 des centrales thermiques (pourcentage)

2. Marchi.Couverture service electrique (pourcentage)Clients en fin d'annee --ventilation par categorie (milliers)Production electrique annuelle, total (GWh)- Hydro6lectrique (GWh)- Centrales alimentees au foul (GWh)- Centrales alimentees au gaz (GWh)Achats annuels d'electricite (GWh)Ventes annuelles (GWh)Facteur annuel de charge (pourcentage)Tarifmoyen de l'electricite vendue (DA/kWh)Tarif moyen de l'electrice achetee (DA/kWh)Prix du fioul aux centrales (DA/tonne)Prix du gaz aux centrales (DA/tonne)

3. Financier.Rentabilite des actifs en exploitation (pourcentage)Marge d'exploitation liquide (pourcentage)Autofinancement des investissements (pourcentage)Ratio de couverture du service de la dette (nombre)Ratio d'endettement (nombre)Comptes crediteurs (jours de facturation)Arrieres, total (ours de facturation)

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APPENDIX B: BORROWER'S CONTRIBUTIONAND COMMENTS TO THE ICR

35

Etabkissement Publ2c carac_*re Industriel et Commercial

RAPPORT D'ACHEVEMENT

(RAPORT PRrLIMINAI)

ALGE REB

TROISXEME PROJET D'ELECTRICITE

PRET No 2981 - AL

Novembre 1997

DIRECTION DES FINANCES ET BUDGETSOUS DIRECON FINANCEsDIVISION ENGENIERIE FINANCIERE

36

TAUX DE CHIANGE(m%x d mois de noveembre de chaque annde)

Unil6 moT6tak = Dinar algdricn

1989:1 USD = 8.2 DA1990:1 USD * 10,9 DA1991: 1 USD = 22,3 DA1992: 1 USD = 22,6 DA1993:1 USD = 24,1 DA1994: 1 USD 42,4 DA1995: 1 USD = 51.1 DA1996: 1 USD = 55.5 DA1997:1 USD = .56,7 DA

X tRCrCE BUDGETAIRE: 1 Janyier au 31 Dt5cembrc.

POlDS ET MESURES

kVA = kdlo VoIL Amp6ekW = kilo.WaukWh = kilo Watt heureGh 1.000.000 kWhkV = 1.000 VoltMW L .00 I-W

37

TABLE DES MATMIRES

Prffacc...

PARTIE I: EVALLUATION DE L'EXECUT1ON DU PROJET

A. Expos6 des Objectits

- Principaux objecti±s- Composanes du projet

B. Exp4rience et R(sultat de lT'exetlon

- Lcs objecifs maidiels- Les objectifs instiuionnels (financiers)- Taris de I'6lectricit- CoOlt de fiancement du prjet

C. Risum6 des Conclusions, Operatlons Futures et Principales Leqons Tir6es

- Principaux Facteurs Affeccant le Projet- Passauion des march&s de fournitures et services- Rythme du decaissement du pret

D. Performance de la Banque

- L'identification du projeL- Aprts I'approbation du pret

E. Performance de I'EmprunturF. P&rennti du projetG. R6sultats du projetH- Exploitaion Future du projetI. Princdpales Legons TirEes

PARTIE 1T: TABLEAUX STATISTIQUES

1. Rdsume de I'EvaluaLion2. Prfs apparentds i la Banque3. Caendrier du Prot4. Dicaissemen dcs ptts : Cumul6ds Estims et Rels

38

RAPPORT D'ACHBVEMENT

ALGF,RIE

TROISEEME PROJET D'ELECTRICITE(PR-4ET N° 2981 AL)

PREFACE

L'objet du present rapport est d'exposer les conclusions de l'dvaluationr6trospective du projet Electricit6 m.U finance par les pr8ts de la BIRD pour unmontant de 159,4 millions de USD et de 'EXIM Bank pour un montant de 85,85millions de USD. Le pret a ete signe le 13/11/1989 et cntrC en vigueur le29/03/1990. Le dEcaissement au titre des prts a 6f achev6 le 30 octobre 1997;soit un an et 10 mois aprts la date initiale de cl8ture (d6cembre 1995), il resteraitsur les prets un reliquat global de 35 nillions de USD compose de 23,2 millionsde USD sur le pret BIRD et 1 1,8 millions de USD sur le pret EXIM.

Le prt de la Banque Mondiale a sera a financer une partie du programmd'investissement de Sonelgaz durant la pCriode 90-95. Ces investissements, ontpermis notamment le renforcement du reseau interconnecte par la reaIisation denouvelles lignes et postes, le renouvellement chi parc auto de I'6tablissemnent, lelancement d'6tudes relatives i I'activit6 de Sonelgaz, 1'acquisition d'6quipementsinfornatiques et de logiciels et enfin la concr6tisadon d'un programme deformadon ayant b6n6flcier a une centaine d'ingdnieurs sur une p6riode de 5 ans.

39

RAPPORT D'ACEVVEbENT

ALGER1E

PRoJE ESLECTRiCiT lin

Pr.t No 2981 -AL

PARTIE I: EVALUATION DE L'EXECUTTON DU PROJET

(RESUME DE L'EVALUATION)

A. Expos des objectl6; du projet

i. Les ricinaua obiecdifs du WrOj tels qu'ils ont dte defini dans lo rapport d'6dvaluaon initIsont:

(a) penncme A I'enrepnise dc continuer 1'ex6cuLiton dos invaestssements clds do 1'entrcPrisedont 1' impact serait de renforcer et d'am6liorer Ic sys*me dnerg6tique du pays, etd'optumiser la producivir6 des iavestissoments courants dans le sectour de I'Electzicit6

(b1 am6liorer et renforccr la qualit6 du service de l'offre d'dnergie et sa fiabiIit6.Cc) assainir et renforcer la situation financWe de 1'enriseiL t iravers un plan de redmssement

Les objectifs & long torume du projet sont:

(a) maintenir le ddveloppement des dchanges d'Energie entre lAlg6iic et loIs pays VOising

Crunisie - Mawc).(b) aisser ltentepiise dans ss efforts do rctnicniraon imstitudonnel en amdlioanr sos

capacit&s de managment, do planificaLion et d'enginc:ring.

2. Pou ,alLr iwitg, le projet compnwai t les composanzes suivantes:

(a) installation de 475 kms de lignes de uansmissiozn 220 KV pour F'inteconneion du size deproduction en cours do rEalisadon de rjd au sysamc interconnect de Sonelgaz

(b) la construction el/ou l'cxlension l'extnsion de six sous stations de tmasformadon de220160 KY et 220/90130 KY ayant une capacit6 instnLMe de 2180 MVA.

(c) I'acquisition d'engins spdcialiss et de vdhicules pour 1'cxploitaion et la maintenance desrEscaux Elecniques.

(d) formadion ct acquisition de matdriel ae d logicids info=nadques.Ce) scrvices de consultant pour la rdalisaion d'6rudes pour 1'am6lioradlon de l'organisation eL

de la gestion technique dos rdsaux

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B. Exprience et r6sultat de IIex4cution

3. RDalisaLion- des ohieti: Les objeclifs matriels sont achev6s en roUra1 i r1xcccpton de laligne (Jijel-Mansouriah) et dc la fouirure dcs postms indrieurs ; I'acquisidon des engins etvdhicules a W realisee & 100 %, I'achat d'6quipements infonratiques et de logicicldgalement a 100 %, les 6tudes ont 6td rilis6s et le programme de formation finls & 100

4. LUs obiectifs instittionneJ (firciers) : Ics rcsultats du projet onE penmis d'andliorerI'atonomie financiere et dc gestion de Sonelgaz. Danm ce sens, il y a licu dc noter lepassage de Sonelgaz I l'autonomic en tant qu'Etablisscment Public A caracLere Indusriel etCommerciaL

L'autofinancement net pour 1'ann6e 1996 (LtnanL compte des fonds de roulement) est de7.7 %, ce qui est inf6rieur par rapport a l'objectif financier (1 5 %) du rapport initiald'6valuation. Pour l'annee 1997, le chiffre d'affaires privisionnel st det 35,5 Millions de DA,et le rdsulmt net scrait encorr nc5gatif ( - 2,1 miliards de DA). L'auLorinancement est 6vaIu6 5,2 % (ratio d'autofinancement prdvu de 15 %). T.a situation des cr6ances clients: & la fin1996, les crdances exigibles sonE passees A. 10,5 milliards de DA, eL le total des cr6ances la 1mliards, cc qui repr6sente. 2,6 mois du chiffrc d'affaircs (en neue progression vets l'objectifde 2 mois).

S. Tarifs de l1ectricit6: Pendant la periode dii pre, Sonelgaz a procdcd I un importantajustementr taifair I travcrs diffdrants augmentations au cours des anndes 1990,1991,

1994, 1995, 1996 et 1997. II a & introduit 6gralement pour la basse tnsion une tranche &tarif social a destination des faibles m6nages. L'auginenmton cffcctive du tarif moyen pour1'6lecticit6 a 6td de 34 % pour I'anndc 1996, ct cc par rappon . 1995 (ce prix moyenreprdsente actuellement 67,8 % du COu'L dcnomique qui est de 231,63 cDA/KWH). LA,tarifs de haut: tension ont atteint le couir 6conoomiqui de 115 cDA/KWH, Landis que le tarifde moyenne tension n'atteindra son coit 6conomique qu'en 1998. Les coats .conomiquesde la basse tension ne seront atEeints qu'apr&s I'an 2000.

6. CoOt dc financemcnt du proict: le projer a 6eL achevy I un cout de 313,73 millions de USD,soit 20 % en dessous de l'esrmadon de 391,20 millions de U SD etablic au moment del'evaluation. Cette baisse par rapport au montant initial s'explique par:

I. Pour la partie devises (pr6vu: 246,5 millions de USD, r6d: 245,28 milons de USD):- l la proceduie suivi pour la passation des marchfs par voie d'appel d'offres

intemrnational qui a pennis d'obtenir des prix cornoptitfs.- Suppssion dc ccrrains rubriqucs prdvues initialemen. dans les contats de tbumitrms

tel que la supervision .J. Pour la parie locale (prdvu: 144,70 millions de USI), rleI: 68,44 millions de USD):

aux procddums dc passation des macchds efficace cc i une mcfileurs. ma'iuise des cofitsde r6alisation.

41

C. Risum des Condusions, Op6ratlons Futures et Principales Le%ons Tir6e,

7. Les R,icioanx facteurs affectaat la risation des objietifs du progmme: Au niveaude lPavancement physique du projet ii y a lieu de noter que les chantiers pour laconstrucdon et l'installation ouverts vcrs la fin de l'annde 1992, onL connus un ccrtainrecard du notamment aux prmvdures administatives, A l'indisponibi1itd des mat6Iiaux deconstruction sur le marehd national or au retuard de finalisation des dmdrs d'exdcution. Uy a licu de citer dgalcment les retards due 0. des imprdvus d'ordre Lechnique el que le casdu poste 220) KV de Ramdanc Djamcl dont la naLure du terrain n6cessita des emdes ettravaux supplmen aires.

I1 y a lieu de signaler dgalemcnt les rmtards enregistr6s. dans la rdalisation des travauxnotanmment sur les chantiers lignes et postes en raison de la conjoncwre sdcuritaircdefavorable d'une part eE Ics dirricult6s d'acces fI cerrains teaiIns d'autre part.

8. La passation des Mnarch& de roumiLures ct serviccs : Les explications et ddfmiicons desdiff6rents lots et la presentaton de la prooddure de passation des march6s pour chaque lotont permis aux agents de Sonelgaz de bien g£rer cette operation dds lc debur sachantdgaleement que Ic cahier des charges type a dit etab1i selon le mod6le de la Banque lors dc1'evaluacion du projcL Dans ce cadre, le programmc d'achat des Equipements et mWz6riels'est bien ddrould ainsi quc Ie choix des entrepreneurs pour la rtalisadon des ouvrages e lechoix des consultants pour les dtudes.

9. Rvftbme d6caisscmern du TAt: La misc en placc d'un compte sp6cial en devises auprbsde la Banque NaLionale d'Algdiie a conLribud a activcr lies paiements de l'entrprlseinduisant par la m8mc le dEhoursement du prct sans problmres majems.

Le d6caissement du prft (BIRD/EXIM) sur la pdriodc etudide est le suivant:

1990: 10 millions de USD1991: 29 million.s dc USD1992: 29 millionss de USD1993: 28 millions dc USD1994: 64 millions de USD1995: 25 millions de USD1996: i6millionsde USD1997: llmiflionsde USD

Total: 212 mill ions de USD

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MD. Performaes de la Banque

n0. L'identircadon du DMiet: s'est faie dumnt I'annde 1986. Le projet a ri bien identd&,achant que la plupar de ses composantes ont er mainrnues lors de l'6valuarion finale duprojet Une mission de pr6 6valuation a 60 efrectLue en avril 1987 et une missiond'dvahuation 6 mois apr*s. La signature des aceords s'est faito presque deux ans plus urrd cnnovembre 1989 et l'ente ea vigueur en mars 1990.

11. Apr&s l'apprMbadon du pr: plusieurs missions dc suivi OnL 6 effectu6es par la cadresde la Banque deux fois par an en moyenn. Cs& missions ont pennis aux reprfsentants de laBanque de constater 3 chaque fois l'drat de suivi physique et financier du projel et de

dre conna des dvenLuels problemes renconares. n y a Liu de noter dgalemenr losmpports de suivi trimestriels 6Iabor6s par Sonclgaz selon le mod&le de la Banque at quit ontpermis do micvcr en temps r6el les dirriculLds rencontrdes lors de la rnaisadon du projct etde co fait anticiper sur les solutios proposables pour 6v!er tout rcard d'exdcution.

E. Performances de I'emprunteur

12. La prparation du projet par l'emprunteur: Elle a t saeisfaisante sachant que les ddaisent la .signatre des accords, l'entrde en vigucur des preLs et la mise en place des prcmieconras sont minimes. L'excution des comnuras s'esL faite en de bonnes conditions.

F. Pfrennift du projet

13. Les perspectives de viabilitu du proct sonjt IiMes & 1'accroisscmexn des actsviis6conomiques qui constucnrt une demande suppl6menraire en tncergi el par voie deconsdquec, permeulrons une mneilleure rentabi3Mf du projeL

Los ouvragcs rdalis&s permenrons par ailleurs une meilleurc aimentation en 6nergie desr6gions connectes et renforemat la sdcuritd du rdsa u (stabiIi).Enfln, fasainissement,fiancier dont a b6ndficid Sonelgaz contribuera daas une large mesure & une mcilleure viabilitfdu projet a travems la diminution du ddticit budg6Wire et l'am}ioration du recouvrement descreances7

G. Rdsultats du projet

14. Les risultats du projet sont satisfaisants du fait que les rtalisations mat6rielles ont 6fttotales, la situation financi6re en ncc adlioration, une millure quaiir6 de scrvice et unep&rcnitd du projet renforcie.

43

H. Exploitation future du projet

15. Les futures reformes artenducs de l'dtude institutionnelle ne peuvent aller quc dans le sensd'une meilleure exploitation du projeL r6alis4 dans la mesure ou les activitds de productLionet de transport seront renrorcdes.

1= Principales lesons tdr6es

16. A travers la pr6paration et la rdaIisalion du projet plusieurs legons ont di tirdes et quenous citons ci-apr6s:

* - Une meilleure coordinaiion doit 6tre 6tabli cntrc les diff6rentes unites concemres par lar6alisation ct 1'cxdcution du projet A wavers la constliution d'unc cclule de suivi du Projelpilote par un chef de projet et compos6e d'un rcprisentanT de chaque unite et qui aurapour mission le suivi de tous lcs aspects du proje, la proposiLion de solutnos adequates Itout probl2me dventuel et la r6daccion d' un rapport priodique de suivi du projet pour lesbesoins de 1'6dabLissement et des bailleurs de fonds.

* - L'approche projet dcvrait &tre maintenue dans la recherche des financemients duprogrammc d'investissement de P6rablissement en prenantsoiLs d'identifier un projetcoh6lnt et ddgageant une rentabilite sufflsante par rappont au cost de 1'emprunL

44

RAPPORT D'ACHEVEMENT

ALGERIE

TROISIEME PROJET 'ELECTRICTTE

(Pret N" 2981 - AL)

PARTlE 11 - TABLEAUX STATISTiQUES

Tableau 1: PrCts apparents de la Banque

N0V Pret Titre ____ Montant, Date approbation Stamut997 AL Premier projet 38,5 miilions S 10/06/1974 Achevd

d'Et:cncir ._ _

1293 AL Deuxiime projet 57,5 millions $ 08/07/1976 Acheydd'Electricit _

2981 AL Troisiamc projet 159,4 millioris $ 13/11/ 1989 En coursd'lecrici6 _chv t d'hv ent

ToWal (millions$) 255,4 millions S _

Tableau 2: CaledrIer du projet

r=a;cledeieL Dam ir&= Dare r6deleldeniification sans obieL annee 1988Pre-6vaiuation sans obiet 21 mars au 16 aviwl 1997Eva on sans obct 11 au 29 octobrm 1987NaociaLion sans obijt 23 au 27 mai 1988Signatuse _ sans obiet 13 novembre 1989En Lr£e gii vipeur san objet 29 mars 1990Ainendement I sans objet 18 juin 1992 (modification du

Imontant du pre)

Amendement 2 sans objet extension daLe de clomureAchbvemr=t projet sans obiet 13 au 26 iuin 1997

Tableau 3 : Dcafissemeut dui prit(en millions de dollar am&ricain)

AF 90 AF91 AF 92 AF 93 AF 94 AF 95 AF 96 AF 97Evaluat. 27,2 35.2 35.2 28.8 19,2 14.4RP.ds 6.5 148.5 18.85 18.2 41.6 16,25 11)4 7.15% c'valua _____ .

Date du ddcis30nt0/a7

IBRD 19926R

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