EVALUATION NOTE
Mozambique: Project Completion Report on Electricity II Project
1. The Project
1.1 Electricity II Project is the second power project in the energy sector in Mozambique, which is initiated as a follow-up to Electricity I Project. A loan of UA16,64 million was approved in December 1996 to finance Electricity II project The total project cost was estimated at UA19.68 million with EDM financing the balance of UA3.04 million. The basic data on the LOC is provided in Annex 1.
1.2 The sector goal was to enhance availability of sufficient energy at economic costs through promoting efficient use/conservation of energy. The objective of the project is to provide least cost and reliable hydropower supply to new rural centers in order to improve the quality of life of the population as well as the reliability of supply in some existing supply centers for purpose of enhancing economic activities in the areas served. The project aim to meet the demand in the Southern provinces of Maputo and Gaza that have significant agriculture, mining and tourism potential. The expected physical outputs of the project were the following:
A 64 km of 66 kV sub-station line installed;
A unit of 110/33 kV, 10 MVA sub-station constructed;
4 units of 66/33kV, 10 MVA sub-station constructed;
360 km of 33 kV medium voltage line installed;
105 km of low voltage lines installed;
Consultancy services and audit services utilized.
2. PCR Conclusions and Performance Ratings 2.1 Principle Conclusions
2.1.1 The PCR concluded that on the whole the project achieved the envisaged outputs at appraisal and was able to connect 4,600 new customers. Start-up delays were registered due to the longer time it took to meet conditions prior to entry into force (16 months delay from loan approval date). The overall implementation delay was 38 months. Thus, last disbursement was extended from 2000 to 2003 resulting in an overall delay of three years. At completion of the project, the total cost was reduced to UA17.31 million registering a total saving of UA2.37 million. The savings were mainly due to low
2.1.2 The PCR further concluded that all the conditions except the condition relating to reduction of Account Receivable collection period, were fulfilled but with some delays. Overall, the project has delivered more than the envisaged outputs contributing to higher returns compared to appraisal estimates. The facilities provided under the project are reported to be operational contributing to the improvement of electricity supply services in the areas served. A total of 4600 new customers (which is 50% more than envisaged at appraisal) are connected and reliability of supply has been assured in 10 towns through reduction of power outages and transmission and distribution losses.
2.2 Performance Rating
2.2.1 Overall Assessment: The overall objectives of the project have been achieved successfully with cost savings but some implementation delays. The additional and reliable supply of electricity has contributed towards creating increased economic activities in the rural and peri-urban centers of Maputo and Gaza provinces. Moreover, the project has facilitated the resettlement of the displaced population during the Civil War and the 2000/01 flood. Because the areas are tourist attraction, there are now many guest lodges contributing to the booming of tourism industry and the flourishing of small businesses.
Women are also benefiting from this project since they are the primary ones engaged in the preparation and sale of dried fish (which is now done through using electrical appliances rather than charcoal or fuel wood burners). Appropriate environmental impact assessment (EIA) study was carried and the project was designed avoiding any negative impact particularly regarding the right of way for the distribution lines, which necessitated rerouting the lines outside the Maputo Elephant Reserve (MER) site. This requirement was addressed expeditiously with the involvement of the Bank and other stakeholders during implementation when concerns were expressed about the manner the contractors were clearing the right off ways for the construction of the medium and low voltage lines.
2.2.2 The project has also positive outcome to EDM as it is self-sustained with higher returns than envisaged at appraisal. EDM is technically competent to operate and maintain the facilities. Since 1996, the electricity sub-sector has been reformed to encourage private sector participation and set up a regulatory body. The reform has helped EDM to observe corporate norms and the current tariff policy in the country allows for improved full cost recovery with inbuilt allowance for life line rates. Account Receivable collections in the areas served is reported to be over 95% enabling EDM to cover O&M costs and recover capital investments. Thus, the sustainability of the project is assured. However, overall financial performance of EDM is not very bright. EDM is very much indebted in foreign loans and servicing of the loans is becoming a problem due to depreciation of the local currency against major convertible currencies. There is a need to increase the capital base of EDM through conversion of Government loans into equity or injection of new equity investments from the Government or other sources.
2.2.3 The PCR provided ratings on Implementation Performance, Bank Performance, and Project Outcome. Each is rated to be satisfactory. There were no major issues except implementation delays and the need to carry out environmental audit.
3 Lessons Learnt and Recommendations
3.1 Major lessons learnt from this project (rephrased for clarity) included the following:
The sustained training of Bank’s procurement and disbursement rules to PIUs is necessary for successful implementation of project;
Close monitoring could help address issues on time as was the case relating to the environmental issues manifested during implementation of the project.
3.2 One major recommendation of the PCR was the urgent need to commission an Environmental Audit to evaluate the impact of the project on the environment.
4. BORROWER'S PCR AND INPUTS TO BANK STAFF PCR
The PCR has indicated that the borrower had submitted its PCR. The Bank's PCR mission was launched in September 2004 and the report was distributed to the Board in September 2005.
5. PCR QUALITY RATINGS
The PCR is rated Satisfactory (Annex 2). The PCR formant was followed. There is adequate information and analysis in the report. However, the presentation of lessons learnt was not concise and clear. In order to better understand the contribution of the project towards meeting development outcomes and major cross cutting objectives and impact (in particular relating to environmental safeguards) there is a need to undertake Project Performance Evaluation. The PCR strongly recommended the urgent need to commission an Environmental Audit to evaluate the impact of the project on the environment. There is need to recruit an environment expert for this purpose.
Given the overall financial performance and high indebtedness of EdM, the is a need to validate the financial rate of return calculation since it is expected that since the project supply to rural areas, the expected rate of return may not be realized as projected in the appraisal report.
6. PRIORITY (PERFORMANCE EVALUATION REPORT, IMPACT EVALUATION, COUNTRY/SECTOR REVIEWS OR THEMATIC EVALUATION STUDIES)
effectiveness, institutional development outcome and sustainability of the project as well as validate the rate of return calculations;
To evaluate the contribution of the project towards meeting cross cutting objectives such as poverty reduction, gender balance, and in particular environmental sustainability (assess the outcome of environmental audit –if carried out as recommended in the PCR if not, carry out environmental evaluation through the service of an environment expert );
To draw lessons of experience (in a more concise and clear manner) in order to guide future Bank’s interventions in the sector.
ANNEX 1
BASIC PROJECT DATA
1. Loan Number 2100150000717
2. Borrower The Government of Mozambique (GoM)
3. Guarantor The Government of Mozambique (GoM)
4. Beneficiary Electricidade De Mozambique (EdM)
5. Executing Agency Electricidade De Mozambique (EdM)
6. Date of Appraisal June 1996
A. LOAN APPRAISAL ACTUAL
ESTIMATE
1 Amount (UA/Million) 16,650,000 14,750,267.52
2 Interest Rate - -
Service Charge 0.75% 0.75%
3 Repayment Period 40 years 40 years
4 Grace Period 10 years 10 years
5 Appraisal Date June 1996 June 1996
6 Loan Negotiation Date October 1996 October 1996 7 Loan approval date December 1996 12/12/1996 8 Loan signature Date February 1997 16/04/1997
9 Date of Entry into Force June 1997 30/04/1998 B. PROJECT DATA APPRAISAL
ESTIMATE ACTUAL
1. Total Cost (UA/Million) 19.68 17.31
2. Financing Plan (UA/Million)
S
Source
Appraisal Estimate Actual
FC LC Total % FC LC Total %
ADF 16.64 16.64 85 14.75 14.75 85.2
EdM 3.04 3.04 15 0.22 2.34 2.56 14.8
Total 16.64 3.04 19.68 100 14.97 2.34 17.31 100
3. Effective Date of First
Disbursement January 1998 30/04/1998
4. Effective Date of Last
disbursement 31/12/2001 31/12/2003
5. Commencement of project
implementation activities November 1997 30/07/1998
6. Date of Completion of project
Implementation activities October 2000 31/12/2003
C. PERFORMANCE INDICATORS
APPRAISAL
ESTIMATE ACTUAL
1. Cost savings - UA 2.37 million
2. Time overrun - 38 months
-Slippage on effectiveness 10 months -Slippage of completion date 38 months -Slippage on last disburs. 24 months -Number of Extensions of
last disbursement 2
-Completion Date 30.10.2000 31/12/2003
3. Project Implementation Status Completed
4. Institutional performance Satisfactory
5. Contractors' Performance Satisfactory
6. Consultant Performance Unsatisfactory
APPRAISAL PCR
7. FIRR (%) 11.26% 10.1%
8. EIRR (%) 13.79% 14.0%
D. MISSION
Mission Composition Man/days
Appraisal (March 1994) Power Eng. + Fin. Anal. 20 Re-appraisal (June 1996) Power Eng. + Fin. Anal. 20
Supervision (1997) Power Eng. 7
Supervision (April 1998) Power Eng. + Fin. Anal. 10 Supervision (January 1999) Power Eng. + Fin. Anal. 10 Supervision (December 1999) Power Eng. + Fin. Anal. 14 Supervision (March 1999) Power Eng. + Fin. Anal. 14 Supervision (December 1999) Power Eng. + Fin. Anal. 14 Supervision (March 2000) Power Eng. + Fin. Anal. 14 Supervision (December 2000) Power Eng. + Fin. Anal. 14 Supervision (April 2000) Power Eng. + Fin. Anal. 14 Supervision (April 2001) Power Eng. + Fin. Anal.+Environ 21 Supervision (October 2001) Power Eng. + Fin. Anal. 14 Supervision (January 2002) Power Eng. + Fin. Anal. 14 Supervision (October 2002) Power Eng. + Fin. Anal. 14 Supervision (July 2003) Power Eng. + Fin. Anal. 14 Supervision (December 2003) Power Eng. + Fin. Anal. 14 PCR (September 2004) Power Eng. + Fin. Anal.+Pub. Econ.+
Environ.
24
E. DISBURSEMENT OF ADF LOAN
ANNEX 2 PCR RATING
Project Loan No. 2100150000717 Title: Electricity II Project Country: Mozambique Sector: Energy Sector
Borrower/Guarantor: The Government of Mozambique (GoM) Beneficiary: Electricidade de Mozambique (EDM) Executing Agency: Electricidade de Mozambique (EDM)
PCR CHAPTER RATING (4-
point scale)
REMARKS 1. Adequacy of analysis of Project goals,
objectives and Formulation including the verifiable indicators, consistency with appraisal and subsequent revisions
3.5 Highly satisfactorily covered with MPDE matrix
2. Adequacy of analysis of Project execution, including procurement issues, disbursements, Borrower's reporting and assessment of monitoring and evaluation achievements
3.5 Satisfactory; meets all the requirements of the PCR format
3. Soundness of judgements on Project Performance and Results including operating results, economic and financial and related conditions/covenants and their fulfillment, institutional, performance of consultants, contractors, suppliers and other parties
2.5 There is need to validate the rate of return calculations
4. Adequacy of analysis of social and environmental impacts
3 Satisfactorily covered and Environment Audit was recommended
5. Soundness of judgements on project sustainability, plan for future project operation's phase and maintenance
3 Satisfactorily covered
6. Soundness of judgement on Performance of the Bank, Borrower and Cofinanciers
3 Satisfactorily covered 7. Consistency of Overall rating with
individual rating components
3 Consistent 8. Adequacy of analysis and clarity of
conclusions, lessons learned and recommendations
2.5 Important lessons are provided and environmental audit
recommended; but the lessons and recommendations need to be concise and clear
9. Other (specify)
Overall Rating 3.0 The quality of the PCR is
satisfactory
OPEV and Country Department agree/disagree on Project Performance Rating:
OPEV agrees on overall assessment of the project and the Performance Ratings of ONIN.
Borrower's PCR and inputs to Bank Staff PCR (quality of Borrower's PCR, reviews of project implementation issues, future operation plan, Borrower's comments on PCR):
The quality of the Borrower PCR is satisfactory. Borrower's comments on the Bank's PCR was not included in the Bank's PCR
Conclusion:
There is need to carry out PPER as part of fulfilling OPEV’s core mandate and to better underscore the development outcomes of the intervention and its sustainability as well as evaluate the project’s contribution towards meeting major cross cutting objectives such as poverty reduction, gender balance, and environmental sustainability. Validation is needed with respect to rate of return calculation given the overall financial performance of EdM. An environment expert will be recruited to critically examine the environmental impact of the project and come up with appropriate lessons and recommendations. The evaluation will aim to draw additional lessons regarding implementation performance and environmental safeguards in a more concise and clear manner.
