Document of

The World Bank

FOR OFFlCLAL USE ONLY

Report No. 13767

PROJECT COMPLETION REPORT

SUDAN

POWER IV PROJECT(CREDIT 1788-SU)

DECEMBER 6, 1994

Energy and Infrastructure DivisionCountry Department IIAfrica Regional Office

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

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LIST OF ACRONYMS AND ABBREVIATIONS

AfDB African Development BankERR Economic Rate of ReturnFY Fiscal YearIDA International Development AssociationkW Kilo WattkV Kilo VoltMW Mega WattMWh Mega Watt HourNEA National Energy AdministrationNEC National Electricity CorporationSDR Standard Drawing RightsSAR Staff Appraisal ReportUN The United NationsUSAID United States Agency for International

Development

FISCAL YEARJuly 1 - June 30

EXCHANGE RATES

Pounds (LS) per US$

Appraisal Estimate: 2.50

Actual (yearly average)1987: 2.811988-1990: 4.501991: 5.431992: 69.441993: 161.29

Pounds per SDR (end of year)

1987: 6.391988: 6.061989: 5.911990: 6.401991: 21.461992: 185.191993: 303.03

US$ per SDR (yearly average)

1987: 1.29311989: 1.28181991: 1.36821993: 1.3963

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation

December 6, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on SudanPower IV Proiect (Credit 1788-SU)

Attached is the Project Completion Report on Sudan - Power IV Project (Credit 1788-SU) prepared by the Africa Region. The Borrower did not contribute to the PCR.

The project objectives were to meet the increase in demand for electricity, to strengthenthe National Electricity Corporation, NEC, in the areas of management, finance and planning, and tohelp the National Energy Administration, NEA, to improve energy planning and policy formulation.

The physical objectives were met (albeit with a two-year delay) by installing 120 MWof oil-fuelled generating capacity at the Khartoum North power station. The project's rate of return wasnot calculated but the generation cost appears acceptable although on the high side. However, theproject did not succeed in improving the management and financial performance of NEC. Governmentinterference delayed electricity tariff adjustments and those were quickly eroded by cost increases dueto high inflation and devaluation of the Sudanese currency. Arrears amounting to one year of NEC'sbilliig remains a chronic problem. The ratio of NEC's customers to employees continues to be verylow. Training and studies made little impact on NEC and NEA performance.

The project cost estimated at US$105 million was financed by IDA (40 percent), theAfrican Development Bank (52 percent), and the Borrower (8 percent). The appreciation of the SDRrelative to the US dollar during project implementation helped to finance part of the 18 percent costoverrun. The credit was fully disbursed and closed in June 1993.

The project outcome is rated as marginally satisfactory mainly by virtue of its physicalaccomplishment. Its institutional development impact is rated as negligible and its sustainability asuncertaini as long as Government interference impedes NEC cost recovery and autonomy.

The PCR contains a satisfactory account of project implementation and results.

No audit is planned.

Attachment

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

FOR OFFICIAL USE ONLY

SUDAN

POWER IV PROJECT

Cr. 1788-SU

TABLE OF CONTENTS

PREFACE .............................................. i

EVALUATION SUMMARY i..

PART I. PROJECT REVIEW FROM THE BANK'S PERSPECTIVE ..

1 Project Identity .12 Project Background ....................................... 13 Project Design and Organization ............. 2

4 Project Objectives and Description ............... 35 Project Implementation ............. 46 Project Results ............... 67 Project Sustainability ............... 88 Association Performance ............... 89 Beneficiary's Performance ............... 810 Project Relationship ............. 911 Consulting Services' and Contractors' Performance ............ ... 912 Procurement ............. 913 Disbursement ........... .............................. 1014 Audits . ............................................. 1015 Project Documentation and Data .............................. 1016 Findings and Lessons Learned ............................... 10

PART II. PROJECT EVALUATION FROM THE BORROWER'S PERSPECTIVE 11

PART III. STATISTICAL AND OTHER PROJECT INFORMATION ... ...... 12

1 Related Bank Group Loans/Credits ............................. 122 Project Timetable .................. 123 Credit Disbursements ..................................... 134 Project Cost and Financing .................................. 145 Use of the Association Resources .............................. 156 Project Implementation Schedule .............................. 177 Status of Compliance with Major Covenants ....................... 188 Comparative Balance Sheets (FY87 - FY92) ....................... 219 Comparative Income Statements (FY87 - FY92) ..................... 2210 Comparison of NEC's Selected Performance Indicators (FY87 - FY92) ..... 2311 Major Contracts Signed ................................... 23

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

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SUDAN

POWER IV PROJECTCr. 1788-SU

PROJECT COMPLETION REPORT

PREFACE

This is the Project Completion Report (PCR) for the Power IV Project (Cr. 1788-SU) inthe Sudan. Total credit amount was SDR 30.1 million. The Credit was approved on May 5,1987, became effective on March 7, 1988, and was closed on June 30, 1993, after allowing for aone year extension. Disbursements continued until November 2, 1993, when the balance of SDR48.17 was cancelled.

Parts I and mI of this PCR were prepared by staff from the Energy and InfrastructureOperations Division of the Eastern Africa Department. During the final supervision mission inNovember 1992, the Borrower was requested to prepare Part II and submit final project costestimates to IDA. As of May 1994, IDA had not received the Borrower's contribution.

This PCR is based, inter alia, on information available in the Staff Appraisal Report(SAR), the Memorandum of the President, the Development Credit and Project Agreements,supervision reports, correspondence between the Bank and the Borrower, and internal Bankmemoranda.

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SUDAN

POWER IV PROJECT (Cr. 1788-SU)

PROJECT COMPLETION REPORT

EVALUATION SUMMARY

Background

1. The original Power IV project, which included the major power sub-sector relatedinvestments in the period 1985-1990, was appraised in July 1983. Due to the difficult economicsituation in Sudan and particularly arrears problems with key donors, it was difficult to obtain therequired concessional financing for the large project. The original Power IV Project wastherefore split into two in 1984: (i) the Power Rehabilitation Project; and (ii) the reduced PowerIV Project. The Power Rehabilitation Project (Cr. 1624-SU) was processed as an interimoperation to assist in financing the most urgent needs such as the rehabilitation of existinggeneration, transmission and distribution facilities and commissioning of urgently needed newgeneration capacity. The reduced Power IV Project financed most of the remaining items of theNational Electricity Corporation's (NEC) investment program not included in the PowerRehabilitation Project. A separate PCR is issued for the Power Rehabilitation Project.

Objectives

1. The three main objectives of the project were to: (i) provide generation capacity to meetprojected demand in the interconnected Blue Nile and Eastern Grid areas by 1991; (ii) strengthenthe National Electricity Corporation (NEC) in attaining sustained institutional improvementsthereby meeting its corporate objectives, particularly in the areas of management, finance andpower expansion planning; and (iii) to help the Government, through the National EnergyAdministration (NEA), to improve energy planning and policy formulation.

Implementation Experience

2. The physical components of the project, which consisted of the installation of two oil-fulled steam generating units at the Khartoum North power station, were implemented by NECthrough a Project Implementation Unit headed by a Project Manager reporting directly to theGeneral Manager. International consulting engineers were appointed to assist NEC to preparebidding documents, evaluate bids, prepare contracts, and to carry out site supervision at theKhartoum North power station. The consultants selected had previously helped NEC toimplement a similar power plant under the Power 11 Project and were thus familiar with thesituation in Sudan. The presence of the consulting engineers increased NEC's projectimplementation capacity. Nevertheless, the commissioning of the physical components wasdelayed by about two years. The main reason was the delayed supply of electrical equipment bythe Serbian (formerly Yugoslavian) contractor. Due to the civil war in Yugoslavia, the contractorhad been forced to postpone the manufacture of the electrical cables. Since this component wasfinanced by the African Development Bank (AfDB), the problem was further exacerbated byAfDB's inability to facilitate disbursements due to the UN sanctions on Yugoslavia. Because theelectrical cables were a critical element for further construction, both the civil works, and thecommissioning of boilers and turbines had to be postponed. Additional reasons for delays were

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late payment by NEC of contractors' claims resulting in cash-flow problems, and the difficultiesthe contractors encountered in getting equipment released at Port Sudan.

3. The implementation of the institutional strengthening components comprising technicalassistance for improving NEC's management, financial and billing functions and staffdevelopment was carried out by engaging consultants and providing overseas training for NECstaff. The consultants selected to assist NEC had developed a program for improving theinstitutional and manpower performance of NEC under a contract financed from the Power IIIProject. The consultants worked with NEC to develop a management information system, andbetter and more accurate reporting methods. Originally it was also planned to hire aninternational professional accountant to assist NEC, but this plan was abandoned when it becameclear that it would not be possible to recruit a suitable individual. Instead, it was decided to usethe consultants already working with NEC to provide the required support. The institutionalstrengthening also included training of plant operators by the contractors both in Europe and atsite. Although this training enhanced the capabilities of the staff, it was felt that the participantswere generally too junior on their jobs to benefit substantially from it.

4. Due to shortage of funds, the two planning studies, namely the Environmental Study toreview the present and planned thermal generation in the Khartoum area, and the Study of LoadCharacteristics and Patterns of Consumption by consumer category and analysis of technical andnon-technical losses were not carried out. Instead, in agreement with IDA, NEC commissioned astudy on the feasibility of installing an additional generating unit at the Khartoum North powerstation, including an assessment of possible environmental consequences.

5. Under the technical assistance component international consultants assisted NEA tostrengthen its capabilities in carrying out national energy planning activities, particularly in theareas of updating the national energy plan, demand forecasting, energy conservation in thetransport sector, and review of development alternatives in the renewable, petroleum and powersub-sectors. NEA staff also attended international training courses. Due to some initial delaysand a brief interruption caused by the Gulf War, the scope of the technical assistance componentwas reduced slightly.

6. IDA made generally one to two supervision missions per year except in 1991 when nomissions took place due to the reduction of IDA resources for project supervision in Sudan. Theproject was implemented over six years as against the appraisal estimate of five years.

Results

7. Tchnical. The project achieved its technical objective which was to increase the installedsteam generating capacity at the Khartoum North power station by 120 MW. The commissioningof the two 60 MW generating units was however delayed by two years.

8. Institutional. The institutional and financial objectives of the Project were not fullyachieved. NEC's financial performance remained weak and it did not comply with the rate ofreturn covenant or the accounts receivable covenant. Although NEC managed to reverse the veryunsatisfactory financial performance in FY89, it was not able to meet the objectives agreed duringnegotiations. NEC achieved partial success in improving its financial performance through tariffincreases. The implementation of the tariff increases was, however, delayed due to theGovernment's unwillingness to raise tariffs, and as a result, the adjustments came too late tosubstantially improve NEC's financial position. Furthermore, the tariff increases did not keep

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pace with cost increases due to high inflation and the devaluation of the Sudanese currency. Thevery unsatisfactory accounts receivable position weakened NEC's financial situation further.Although NEC was able to improve its accounting and reporting practices and bring about a moreaccurate system for the issuance and collection of new bills, it did not manage to substantiallyreduce its long over-due accounts.

9. Technical Assistance. The technical assistance was completed satisfactorily, but it has notbeen possible to assess its longer term impact at this stage. Five National Energy Administration(NEA) staff members attended international training courses in energy sector planning, andseveral others received on-the job training while working with the international consultants. Thetechnical assistance also included the development of computerized planning models for the use ofNEA.

Sustainability

10. The main benefit of the project is the availability of additional generating capacity in theBlue Nile Grid, which supplies electricity to most of the productive sectors of the economy. Thisbenefit will endure for the investment's useful life of about 25 years provided NEC operates andmaintains the plant adequately. In this respect the Project benefitted from the Training Center forthe training of operations and maintenance staff, established under the Power III and PowerRehabilitation Projects, and also from the staff training provided by the contractors. Thesustainabiity of the project results is however, to a major extent, dependent on NEC's ability tocharge adequate tariffs and collect revenue to provide funds to cover operation and maintenanceexpenditure. Management commitment to and encouragement of good performance are otheressential conditions for long-term sustainabiity. To achieve that NEC should be allowed tooperate on a commercial basis. At the completion of the Project NEC was still attached to theGovernment administration in a way that substantially curtailed efficiency.

Findings and Lessons Learned

11. The main findings from this operation are the following:

(a) The Bank should have been more decisive in exercising its remedies for non-compliance with credit covenants;

(b) The Project has shown that sustained institutional and financial improvements aredifficult to obtain without major changes in the way the power sub-sector isoperated and managed. The project should have addressed NEC's institutionalweaknesses in a more comprehensive manner, including increased autonomy; and

(c) Future lending to the Sudan power sub-sector (assuming of course resumption ofBank lending to Sudan) should be contingent on the Government agreeing tomajor power sub-sector reforms, including the commercialization of NEC and theencouragement of private sector participation in the financing and management ofpower facilities, as discussed in the Bank's Power Sub-Sector Policy Paper,approved by the Board in October 1992.

SUDAN

POWER IV PROJECT (Cr. 1788-SU)

PROJECT COMPLEHION REPORT

PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE

1. Project Identity

Project Title: Power IV projectCredit Number: 1788-SURegion: AFRICA, Country Department IICountry: SUDANSector: ENERGYSubsector: ELECTRIC POWERClosing Date: June 30, 1993

2. Project Background

2.1 The preparation of the Power IV Project started in 1982, and was originally appraised inJuly 1983. The Project was designed to assist in the financing of the major components ofSudan's Power Development program for 1986-1990. The implementation of the investmentsrequired about US$230 million in foreign exchange. This necessitated complex co-financingarrangements and a long time for their finalization due to the difficult economic situation in Sudanand particularly arrears problems with key donors. As the required US$180 million in co-financing was not obtained, IDA suspended the processing at the Green Cover stage and theproject was split into two smaller projects: (i) the Power Rehabilitation Project; and (ii) thereduced Power IV project. Following a post-appraisal mission in mid 1984, the PowerRehabilitation Project was formulated to assist in financing of the most urgent needs whichincluded the rehabilitation of the existing facilities and urgently needed new capacity. Thereduced Power IV Project was designed to finance most of the remaining items of NEC'sinvestment program not included in the Power Rehabilitation Project. An updated Initial ProjectBrief was prepared on November 27, 1985.

2.2 Discussions between IDA, NEC and the Government of Sudan led to the definition of theleast-cost expansion program for generation and NEC's investment program during thepreparation and appraisal of the originally proposed Power IV project in August 1983, as well asin the context of the Power III project and the Power Rehabilitation project. As a next step afeasibility study for the Khartoum North power plant expansion was funded under the PowerRehabilitation project, including an optimization of the unit size, in view that such expansion wasthe next project in the least-cost generation capacity sequence. The study also reviewed the loadforecast and other generation options and concluded that the expansion of Khartoum North withtwo units of between 45 MW and 60 MW each was still the least-cost solution for increasing thegeneration capacity. During project appraisal in November 1986, the least-cost programs wererevised to take account of recent adjustment in load forecast, investment costs, fuel prices, andforeign exchange constraints. IDA's analysis confirmed that the expansion of the Khartoum Northpower plant was the least-cost generation expansion program.

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2.3 The Power IV project was designed to provide additional capacity to avoid continuedrationing. The poor power supply situation, had started to improve after the commissioning ofnew facilities and rehabilitation of existing ones under the Power Im Project. Although the supplywas expected to further improve once the components of the Power Rehabilitation Project werecompleted, it was not sufficient to cope with the past suppressed demand and moderate demandgrowth. This moderate growth was expected to continued even under the difficult economicconditions and the civil war in the South at the time of appraisal.

2.4 By the time of Board presentation, project activities were proceeding satisfactorily. NEC

had completed a tariff study with the assistance of USAID, and a computer adviser, also financed

by USAID, was assisting NEC in improving its billing system. The consultants to assist in theimplementation of the Khartoum North power plant expansion with financing provided under thePower Rehabilitation Project, and those to support NEC's Finance Directorate were appointed.NEC had established a project Implementation Unit and appointed a qualified engineer as ProjectManager.

3. Project Design and Organization

3.1 Desiz. The Project was prepared to follow-up and complement the development ofSudan's power sub-sector which IDA had supported under three previous projects. The projectdesign was based on several detailed power sector studies: NEC's least-cost power sectordevelopment program up to FY90, prepared by consultants in 1982; the 1983 feasibility study forthe original Power IV; and the 1986 feasibility study for the Khartoum North Extension carriedout under the Power Rehabilitation Project. The project concept was justified within the context

of the sub-sector's least-cost development plan, which IDA confirmed during appraisal. From the

technical point of view the project was well designed.

3.2 The institutional and technical assistance components were based on results of consultancystudies under the Power III Project and those carried out by bilateral donors, especially USAID.They would also build on the work already carried out under the ongoing Power RehabilitationProject. The selected approach focused on improving NEC's efficiency through technicalassistance, provision of computer hardware and software, and staff training within the existinginstitutional framework. In hindsight, the IDA should have selected a more comprehensiveapproach, including increased autonomy.

3.3 In 1990, the project design was modified as a result of cost increases due to the extendedimplementation period. The two studies (the environmental study and the study on load

characteristics) were dropped and instead the project provided for consultancy services to evaluate

the feasibility of adding a fifth generating unit at the Khartoum North power station.

3.4 Risk. The risks related to the project were considered small in the SAR, since NEC hadsuccessfully implemented a similar plant under the Power III Project. The SAR pointed out that

selecting the same consultants who had assisted NEC in implementing similar projects wouldreduce project risks. The SAR also stressed that NEC's changes to achieve sustained financialviability and institutional improvement may be affected by political pressures to constrain futureprice increases and NEC's managerial weakness. These risks were however considered to be

within acceptable limits as NEC had a record of satisfactory performance under other projects andthe project included measures to strengthen and support NEC's financial and managerialperformance. As it turned out, NEC did not gain sustained autonomy from the Government, in

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fact it probably became more dependent under the new Government, and was not able to improveits financial situation significantly during Project implementation.

3.5 Organization. The implementation responsibility of the project components was clearlydivided between NEC, who was in charge of the power components, and the NEA, who was incharge of the technical assistance to energy planning component. Main responsibility forimplementation of the power components was assigned to NEC's Project Implementation Unitwhich was reported to have performed relatively well. NEC was also assisted by an internationalconsulting firm in all aspects of project management, engineering, design, procurement, contractpreparation, and site supervision. To facilitate know-how transfer, NEC staff members wereassigned to work alongside with the consultants.

4. Project Objectives and Description

4.1 Objectives. The project had three main objectives:

(a) provide generation capacity to meet projected demand in the interconnected BlueNile and Eastern grid areas by 1991, (to relieve a heavy constraint on productionincreases in agriculture and manufacturing in the early 90's);

(b) strengthen the National Electricity Corporation (NEC) in attaining sustainedinstitutional improvements thereby meeting its corporate objectives, particularly inthe areas of management, finance and power expansion planning; and

(c) help the Government, through the National Energy Administration (NEA), toimprove energy planning and policy formulation.

4.2 Description. The project consisted of the following five components:

(a) provision and installation of two oil-fueled steam thermal generating units ofbetween 45 MW and 60 MW each, at the existing Khartoum North power plant;

(b) technical assistance, training and equipment and materials for NEC'sorganizational and staff development;

(c) provision of consulting services for an Environmental Study to review the impactof present and planned thermal generation on the Khartoum area;

(d) provision of consulting services for a study of load characteristics and patterns ofconsumption by consumer category and analysis of technical and non-technicallosses; and

(e) technical assistance for the National Energy Administration (NEA) for energyplanning, studies and for institutional development.

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5. Project Implementation

5.1 NEC established a Project Implementation Unit and assigned an engineer to head it. Thesite works at Khartoum North Power Station were supervised by 10 site engineers of which fourwere from NEC, one from a local consulting firm and the rest were the staff of the consultingengineer. The implementation of the Khartoum North Power Station was not without problems,resulting in delayed commissioning by two years and higher than planned costs. In the beginning,the construction of the houses for site personnel, which was the responsibility of NEC, wasdelayed and resulted in additional costs for temporary housing. The civil works weresubstantially delayed. Reasons quoted for these delays were: coup d'etat in Sudan; mis-fabrication of structural steel members; miscommunication between the civil works contractor,their subcontractor and the consulting engineers; cash-flow problems due to late payment byNEC; and difficulties in releasing materials at Port Sudan. The completion of the civil works aswell as the installation of boilers were further postponed due to delay in the delivery of theelectrical equipment and cables as a result of the unexpected civil war in the contractor's homecountry, the former Yugoslavia, which hindered the manufacture of the equipment. Additionally,the AfDB, who financed this component, was not able to make the required disbursements in theplanned fashion due to the UN sanctions to Yugoslavia. At NEC's request, the Serbian contractoragreed to assign the contract to a cable supplier from the U.K and a confirmed transferrable letterof credit was established in Switzerland. The cables were finally delivered and the constructioncould be completed.

5.2 Despite the assistance by consultants to the Finance Directorate, NEC was not able toachieve the institutional objectives of the project and its financial performance remaineddisappointing. A contributing reason for the difficulty in improving NEC's performance was thedifficult political and economic situation which had decreased the morale of the NEC staff. Thedevaluation of the Sudanese pound had eroded gains achieved through increased salaries andbenefits, and in the initial project years there were signs that an increasing number of middle levelstaff were taking advantage of leave without pay to work in the Gulf. The Government alsoimplemented several changes in NEC's top management which caused some disruption in thecontinuity of NEC's operations.

5.3 Towards the end of the project some progress was made with respect to the institutionalcomponents. The Government agreed to the implementation of a new tariff structure and to tariffincreases in FY90, FY91 and FY92. As a result NEC's financial position improved but due tothe severely strained starting position, the improvement was not sufficient. A major cause forNEC's weak financial situation was also its poor revenue collection performance. NEC initiatedvarious programs to improve billing and collection, for instance, it established a senior directoratesolely responsible for managing and undertaking collection initiatives, opened additional collectioncenters, and engaged private collection agents. As a result, average cash collections increased toabout 83 percent of total billing in FY92. Nevertheless, outstanding receivables in FY92 wereequivalent to about 12 months of sales. The reason was that NEC was not able to significantlyreduce arrears which were more than one year old. It is estimated that the bulk of these arrearspertain to residential consumers.

5.4 As a result of the consulting services to NEC's Finance Directorate and the computersprovided under the project, NEC's accounting and reporting systems improved. Nevertheless,during its final supervision mission, the Association recommended NEC to install additionalcomputers to further enhance its management information systems. Due to the reduction of the

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Sudan portfolio, IDA was not able to follow-up on this recommendation. The original projectdesign included the provision of a professional Accountant for a period of three years to assistNEC, but inspite of NEC's attempts it was not possible to recruit a suitable person. It wastherefore agreed between NEC and the Association to drop this requirement, and use theconsultants already on board to provide the necessary assistance.

5.5 NEC's consultants completed a manpower inventory and action plan to improveproductivity in October 1987. Despite several reminders from the Association, the plan was notsuccessfully implemented and the number of staff increased from some 10,000 in FY87 to morethan 11,000 in FY92. NEC's consumer to staff ratio improved nevertheless due to faster thanexpected increase in consumers.

5.6 For the technical Assistance component, NEA signed contract with a Dutch consultingfirm in September 1989. This assistance was provided in two phases. Phase I covered: (1)energy use in the transport sector. NEA adopted a transport model to allocate national trafficflows to specific modes and routes on the basis of least energy consumption; data collection,review of energy demand forecasting methodology and the development of the LEAP model togenerate energy demand scenarios; (3) review of short and medium term expansion plans of NEC;(4) establishment of a Renewable Energy Committee. The second phase had to be reduced fromthe original scope in order for it to be completed on time, due to an initial delay and the briefinterruption caused by the Gulf Crisis. The reduced phase II included, iter alia: (1)operationalization of the transport model; preparation of energy demand scenarios; (3) evaluationof energy conservation measures; evaluation of renewable energy options; and development ofregional energy demand forecast. NEA staff received on-the job training when working with theconsultants. Additionally, five staff attended international courses on energy sector planning.

5.7 Co. Since the Borrower has not made the final project costs available to IDA, the costshave been estimated based on original contract values and information in the latest availableprogress report, dated October 1992. The estimated final cost of the project is US$105 millioncompared to the SAR estimate of US$89 million. Comparison of the estimated final costs and theSAR estimates shows that there was a major cost over-run in the civil works component. Thedelay in project implementation was likely a contributing factor. The estimated final cost of thesteam generating units was also higher than the SAR estimate. The reason for this increase waslargely that the cost estimate in the SAR was based on two oil-fueled steam generating units ofbetween 45 MW and 60 MW, 45 MW being the miniimum capacity required. It was furtherassumed that due to temporary market conditions for the supply of steam plants in this capacityrange, two 60 MW units could be purchased at the price of two 45 MW units. The actuallyconstructed 60 MW steam units were however more expensive than the 45 MW units. Inagreeing to 60 MW units, the Association highlighted the need for arranging additional financing,and at that time there appeared to be good prospects for filling the financing gap from Austria,since an Austrian firm was awarded contract for supply of boilers. Despite repeated remindersfrom the side of IDA, no action was taken by the Borrower to approach the Government ofAustria or other donors for this purpose. The additional cost was reportedly covered by theGovermnent of Sudan.

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6. Project Results

6.1 Technical. The project achieved its technical objective, which was to provide additionalgeneration capacity in the Blue Nile Grid. However, instead of the planned commissioning in1991, the two generating units were commissioned in 1993.

6.2 Institutional and Financial. The institutional and financial objectives of the Project werenot fully achieved. NEC achieved partial success in improving its financial performance throughtariff increases. The implementation of the increases was, however, delayed, and they were notenough to compensate for high domestic inflation and the depreciation of the Sudanese currency.NEC's weak financial situation was also a result of its inability to collect revenue. AlthoughNEC was able to improve its billing and accounting systems, and improve the collection of newrevenue, it did not manage to substantially reduce its long over-due accounts. As a result of allthis, NEC was not in compliance with the financial covenants of the Credit. For instance its rateof return on revalued net fixed assets was negative in FY89 instead of the covenanted 10 percent,and its accounts receivable were more than 458 days of sales instead of the covenanted 90 days ofsales. NEC was also not able to follow through with the agreements made during negotiationsthat NEC would reduce its workforce. Although the consumer to staff ratio improved duringproject implementation due to an increase in the number of customers, the number of staffincreased. This compounded with salary increases to compensate for domestic inflation fromFY89 and onwards increased NEC's operating expenses. Another factor which reduced NEC'smanagerial effectiveness was the several changes in its top management positions.

6.3 NEC's consultants developed a computerized asset register which was introduced in early1989 to assist in determining the true replacement value of NEC's fixed assets. NEC's efforts tooperate the register were hampered by lack of computer literate staff and qualified accountants,and its assets were revalued only in FY92.

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6.4 NEC's annual rate of return on fixed assets and account receivable during projectimplementation are shown in Table 1. below.

Table 1. Rate of return on average revalued net fLxed assets in operation and AccountsReceivable FY87-92. 1/:

Fiscal year Rate of Return on Average Account ReceivabkRevalued net Fixed Assets in Days of Sals

Operation

1987 4.0% 350

1988 0.5% 355

1989 -0.6% 458

1990 2.3% 334

1991 1.5% 361

1992 0.7% 345

Source: NECs financial stements and information contined in the projectfle. FY92 data ispreimnary.

6.5 Technical Assistance. The objectives for the technical assistance to NEA were achieved,although it has not been possible to assess its sustainability. Five NEA staff members attendedinternational training courses and several others received on-the job training. As a result of theproject the NEA staff was trained in data collection, state-of-the art energy sector planningmethodologies and computerized planning models. Given NEA's limited capabilities to carry outenergy planning, the project provided well needed assistance.

6.6 Economic Rate of Return. In the SAR the economic rate of return (ERR) for the BlueNile expansion program, of which the project was a component, was calculated at about 20percent using the increasing annual average tariff yield for each project year as a measure of thevalue of benefits. To re-calculate the ERR we would need to have the investment costs, not onlyfor the Power IV Project, but for all other projects NEC has implemented or is planning toimplement to meet the demand for electricity in the period 1987-2001, which was the time slice ofthe investment program used in the SAR calculation of the ERR. In addition, we would need theoperation and maintenance costs for the same period, and an estimate of the consumers'willingness-to-pay for electricity. Because IDA does not currently have an active dialogue withthe Government of Sudan, IDA has not obtained the required data. Hence, the ERR has not beenrecalculated. It is estimated, however, that when using the same methodology as was used in theSAR, the re-calculated ERR would be lower. The main reasons for the assumed lower ERR arethe loss of benefits in the initial years due to some delays, higher than expected project cost, andlower that forecast tariffs in many years. Nevertheless, as pointed out in the SAR, the averagetariff yield may underestimate the consumers' willingness-to-pay.

1/ T7he rate of return covenant was uicreased from 9 percent in te Power Rehabiltation Project to 10 percent inthe Power IV Projectfrom FY89 and onwards.

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7. Project Sustainability

7.1 The steam generating units will provide electricity supply for the next 25 years, providedthat they are adequately operated and maintained. In this respect the Project benefitted from theTraining Center for the training of operations and maintenance staff, established under the PowerIII and Power Rehabilitation Projects, and the operator training provided by the contractors andconsultants. The sustainability of the project results is however to a major extent dependent onNEC's ability to charge adequate tariffs and collect revenue to provide funds to cover operationand maintenance expenditure. Management commitment for and encouragement of goodperformance are other essential conditions for long-term sustainability. This would require NECto operate autonomously and on a commercial basis, which it did not do at the completion of theProject. The Project should have put much more emphasis on increasing NEC's autonomy andimproving its commercial operations.

8. Association Performance

8.1 The rationale for IDA involvement in this project was to support key infrastructureessential to production and public enterprise reform, in accordance with IDA's Country AssistanceStrategy. Although the Country Assistance Strategy emphasized rehabilitation, the generationexpansion project was seen justified since there were no further investments in rehabilitationwhich would substantially reduce the need for new generating capacity, and additional capacitywas necessary to achieve production increases in both agro-processing and industrial sectors.Additionally, in the absence of other donors, IDA support was considered crucial to ensurecontinuation of NEC's institutional reform.

8.2 Despite of IDA's important role in Project Supervision, it should have made moreenergetic representations regarding the financial and institutional aspects of the Project and usedits remedies for non-compliance with the Credit covenants. During nine supervision missions,IDA monitored closely the implementation of the physical components and NEC's financialsituation. IDA repeatedly, but unsuccessfully, advised the Borrower to solicit donor funds toclose the project financing gap. IDA also recommended several actions to put NEC's financesback on track, but NEC generally failed to implement the recommendations.

8.3 The effectiveness of IDA's supervision efforts was reduced due to the cut down in theSudan Portfolio. For instance in 1991, IDA did not carry out field supervision of the project.

9. Beneficiary's Performance

9.1 The performance of NEC improved towards the end of the project period. Throughoutthe project, however, NEC's performance was better in the implementation of the physicalcomponents than on the institutional or financial side. For instance NEC responded very quicklyto minimize costs by demobilizing the main contractors until the delayed electrical cables andcable trays were received. However, late payment of the contractors' and consultants' claims byNEC and the Borrower resulted in delays. Lack of autonomy, changes in top management andNEC's inability to attract competent middle level management affected its institutionalperformance. The difficult economic climate in Sudan further made it more difficult to theGovernment to implement staff reduction programs and tariff increases. Since the Governmentdid not approve NEC's tariff increases, NEC was many a time unable to finance the local

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components of the project, which delayed implementation. Neither the Borrower nor NECcomplied fully with the credit covenants.

10. Project Relationship

10.1 The Association maintained good working relationship with the NEA and NEC, and theonly co-financier, the African Development Bank during project preparation and supervision. AllBank disbursements to Sudan were suspended on September 13, 1993, due to arrears problems.

11. Consulting Services' and Contractors' Performance

11.1 Consulting Services. The performance of the consultants was satisfactory. Theconsulting engineers, which assisted NEC in implementing the Khartoum power plant extension,were experienced and had worked with NEC already in a similar project under the Power Improject. The consultants which helped NEC in financial and accounting matters had alsopreviously worked with NEC and had prepared the productivity improvement plans. The DutchConsultants, which provided technical assistance to the NEA completed their assignment asagreed.

11.2 Contractors. The performance of the contractors was generally satisfactory and theencountered delays were primarily due to factors which were out of the control of the contractorsthemselves. The civil works contractor experienced problems due to late payments by NECwhich affected the contractor's cash flow and slowed down work space, shortages of fuel andother goods at site, strike by local employees due to non-payment of social insurance paymentsand a claim for extra bonus, and the delayed delivery of electrical equipment due to the civil warin the former Yugoslavia.

12. Procurement

12.1 The procurement method was as follows:

(a) International Competitive Bidding for the procurement for the civil works for theKhartoum North power plant expansion and for the boilers and water treatmentequipment, and vehicles;

(b) Procurement guidelines of the co-financier (African Development Bank) for theprocurement of turbine-generators, electrical equipment and control andinstrumentation equipment; and

(c) Association guidelines for the selection and use of Consultants by borrowers forthe procurement of consulting services.

12.2 For the civil works NEC received 17 bids which were opened on April 9, 1988. Thecontract was awarded to a contractor from Poland. The civil works contract was delayed by 4.5months due to the long time it took to process the bids. For the boilers and water treatmentequipment NEC received 12 bids on the bid closing date on 21, November 1987. The contractwas awarded to a the lowest evaluated bid from an Austrian contractor. The contracts forvehicles were awarded to two Japanese firms.

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13. Disbursements

13.1 A total of US$41.02 was disbursed compared to the SAR estimate of US$38 million. Thedifference in the amounts is a result of the appreciation of the SDR during the implementationperiod. Disbursements were slower than expected due to implementation delays. Disbursementswere completed over a period of five and a half years as compared to the appraisal estimate offour and a half years.

14. Audits

14.1 As of May 1994, the following three audits were not received by IDA: NEC's FY92 andFY93 financial statements, and the NEC revolving fund.

15. Project Documentation and Data

15.1 Project documentation in the SAR and project files were adequate to prepare this PCR.NEC and the consulting engineers submitted to the Association quarterly progress reports but thesubmission of audited financial statements was delayed. NEC's quarterly progress reportssufficiently described progress related to the physical components, but were not adequatelydetailed about the institutional and financial components of the project. The technical assistanceto NEA component was documented in separate progress reports prepared by the consultant. TheAssociation's supervision reports described the implementation adequately, pointed out problemsand deviations, and recommended improvements.

16. Findings and Lessons Learned

16.1 The main findings from this operation are the following:

(a) The Bank should have been more decisive in exercising its remedies for non-compliance with the credit covenants;

(b) The Project has shown that sustained institutional and financial improvements aredifficult to obtain without major changes in the way the power sub-sector isoperated. The project should have addressed NEC's institutional weaknesses in amore comprehensive manner, including increased autonomy; and

(c) Future lending to the Sudan power sub-sector (assuming of course resumption ofBank lending to Sudan) should be contingent on the Government agreeing tomajor power sub-sector reforms including the commercialization of NEC and theencouragement of private sector participation in the financing and management ofpower facilities, as discussed in the Bank's Power Sub-Sector Policy Paper,approved by the Board in October 1992.

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SUDAN

POWER IV PROJECT

PROJECT COMPLETION REPORT

PART II. PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE

No comments were received from the Borrower.

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SUDAN

POWER IV PROJECT

PROJECT COMPLETION REPORT

PART III. STATISTICAL AND OTHER PROJECT INFORMATION

1. Related Bank Group Loans/Credits

Loan/Credit X)t.k A:tunt Board &atm_____I__j j4PPt;f; 0wd0t U $ __

Loan 522-SU (Power I) 24 Provide new generation and transmission 1968 Closedcapacity and consulting services to assistin the improvement of the organization_and management of the Borrower.

Credit 564-SU (Power II) 23 Meet the need for additional generating 1975 Closedcapacity in the Blue Nile Grid andprovide assistance for institutional andoperational improvements.

Credit 1006-SU (Power EI) 65 Help in meeting Sudan's power 1980 Closedrequirements up to the end of 1986 andprovide for staff training.

Credit 1624-SU (Power 30 Rehabilitate existing generation capacity, 1985 ClosedRehabilitation Project) provide urgently needed new capacity,promote institutional development, andreform power tariffs.

2. Project TImetable

P4amaed D)ate AcrmvaJDate

Identification _ r 1982Preparation | June 23, 1986Appraisal Mission November 14, 1986 December, 1986Credit Negotiation February 2, 1987 April 2, 1987Board Approval March 31. 1987 May 5, 1987Credit Signing November 9, 1987Credit Effectiveness September 1987 March 7, 1988Proiect Completion December 31, 1991 December 31, 1992Credit Closing June 30, 1992 June 30, 1993

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3. Credit Disbursements

IDA Fiscal Year and CI latie CI nuxiw Dlsbumsmen. Actual as PerecntSemester Disbursemetug s ActwaL US$ EQ Of Appraisal 21

Appraia EstimateivUS__ EO -

FY88 December 31, 1987 0 0 0June 30, 1988 2.28 0 0

FY89 December 31, 1988 6.84 5.95 87%June 30, 1989 13.3 8.52 64%

FY90 December 31, 1989 20.52 9.17 45%June 30, 1990 26.98 16.50 61%

FY91 December 31, 1990 31.92 23.95 75%June 30, 1991 34.96 33.98 97%

FY92 December 31, 1991 37.24 37.56 101%June 30, 1992 38.00 39.64 104%

FY93 December 31, 1992 0 40.28 106%June 30, 1993 0 40.34 106%

FY94 December 31, 1993 0 41.02 108%

2/ The USS equwlvant amowws exceed the appraisal etimanes because of the appreciation of the SDR. Zhe SDRto the USS exchange rate was quoted at 1.26 in th MOP of April 20, 1987, whilk it was abou 1.4 at Creditclosing in June 1993.

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4. Project Cost and Financing

4.1. Comparison of SAR and Actual Project Costs(US$ million)

Project Como:nent SJ8Af : & :ate stimated Aacual Costs1

Locall Foregn Total Local j Forein Tota

Power house & other works 3.0 10.3 13.3 0.3 24.5 24.9Boilers & water treatment 3.2 16.5 19.7 0.5 24.0 24.5Turbine-Generator sets and cooling 1.8 21.7 23.5 0 24.4 24.4Electrical equipment 1.4 6.1 7.6 0 12.9 12.9Control & instrumentation 0.4 4.3 4.7 0.3 7.8 8.0Engineering 0.5 5.1 5.6 1.9

NEC institutional development 0.5 1.4 1.9 n/a 7.8 9.7Power sub-sector studies 0.5 0.7 1.2 n/aSupport to NEA 0.5 0.5 1.0 n/a 0.6 0.6

Total Base Cost 11.9 66.6 78.4 3.0 102.0 105.0Physical contingencies 1.3 4.8 6.1Price escalation provision 0.7 3.5 4.2

Total Project Cost 13.9 74.8 88.7 3.0 102.0 105.0Interest during construction 14.3 T 1 14.3 n/a n/a n/a

Total Financing Required 28.21 74.8 103 n/a n/a n/a

(1) Estimates are based on original contract wvlue and information in the October 1992 progressreport.

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4.2. Project Financing(US$ million)

Source 1Estimate in SAR I Actual Difference %

IDA 38.0 41.0 + 8 %

IDA under Credit 0.9 0.9 0 %1624-SU

Co-Financiers 35.9 55.4 (1) + 54 %

Utility/Government 28.2 8.3 (2) - 70 %

Total Project Cost 103.0 105.6 + 3 %

(1) The AJDB credit amounted to US$S55.4 million, of which US$53,000 was undisbursed at projectclosing. Acoording to AJDB, withdrawal applications submitted to the AJDB exceed theundisbursed amount.

(2) Estimated.

Notes: Additional funding was obtained from France as a grant of 6 million French Francs (US$1milUion) to co-finance the Control and Instrumentation contract. The Japanese Govwrnmentprovided a grant of 2147 million Yen (US$17 million)for the purchase of locomotives for the use inthe transportation offuel oil to the Khartown North Power Station.

5. Use of the Association Resources

5.1 Staff Inputs

Task inputs (Staff Wee4)

Preparation 22.4

Appraisal 27.4

Negotiations 13.9

Supervision 64.8

Total 128.5

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5. Miuon Data

ThroughAppraisal

Pre-appraisal Jul 1986 5 PE-PE-FNA-OA-Con IMission was unable toobtain reliable financialinformation from NBDC

Appraisal Dec 1986 3 PE-PE-FNA

Supervision

Oct 1987 3 PE-PE-Con 1 NEC institutionaldevelopment plan: 6month delay

Doc 1987 2 FNA-OA Accountant notappointed; accountreceivable position

Nov 1988 2 FNA-PE 2 In default of financialcovenants

Jul 1989 2 FNA-OA 2 In default with financialcovenants; management

_ _ _ _ _ _ _ __ ___ __ ___ ____ ___ ___ _ _ ___ ___ ___ of N E C

Mar 1990 2 FNA-OA 2 In default with financial. covenants; cost overrun

Sep 1990 3 FNA-OA-PE 2 In default with financialcovenants, cost overrun;financing gap not closed

Nov 1992 3 FNA-PE-FA 2 In default with financialI I ._ covenants.

OveraU performace rating. 1 = Probltmfree or minor problem2 - Moderate problems3 = Major problemu

Specialization: FNA=,Fiancial Aalyst; FA Fmancuia Asistant; OA = Operanos A nalyst, PE= PowerEngineer; Con- Cors -att.

The Power IV Project war s4pervised together wih the Power Rehabilitation Project.

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6. Project Implementation Schedule

-1 -- : ;'. 'D : io,i D.-ss-

lProiect Compont $AR Target Datesa D-A |

1. Khartoum North Power PlantExpansion l

Unit no. 3 Feb 1991 May 1993

Unit No. 4 Apr 1991 May 1993

2. NEC Institutional Development Doc 1989 1992

3. Power Sub-Sector Studies Jun 1989 end 1992/eady 1993

4. Support to NEA Dec 1990 Jan 1993

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7. Status of Compliance with Major Covenants

Description of Covenantm Status of gCompiance

1. Borrower shall cause NEA to maintain recordsand accounts adequate to reflect in accordancewith sound accounting practices the operations andfinancial condition of NEA. (DCA 4.01 a)

2. Borrower shall cause NEA to have its records, Delayed compliance.accounts and financial statements and the recordsand accounts for the NEA Special Account foreach fiscal year audited, in accordance withappropriate auditing principles consistently appliedby independent auditors acceptable to theAssociation. (DCA 4.01 b)

3. Borrower shall cause NEA to furnish to the Delayed compliance.Association as soon as available but in any casenot later than six months after the end of eachsuch year: (A) certified copies of its financialstatements for such year as so audited; (B) thereport of such audit by said auditors of such scopeand in such detail as the Association shall havereasonably requested; and (C) such otherinformation concerming such records, accounts,financial statements and the audit thereof as theAssociation shall from time to time reasonablyrequest. (DCA 4.01 b)

4. Borrower shall: (i) in order to enable NEC to A new tariff structure was implemented onmeet the requirements of Sections 4.03 and 4.04 October 1, 1989. The tariffs were increased inof the project Agreement, review NEC's tariffs August 1991, January 1992, July 1992.and take appropriate action thereon; and (ii) takeall measures required on its part to enable NEC toimplement tariff structure pursuant to section 4.06of the Project Agreement. (DCA 4.02)

5. Borrower will revise fuel oil prices to reflect NEC is being subsidized with respect tothe cost of production, transportation and transportation costs.marketing. (DCA 4.03)

6. Borrower will prepare and furnish to IDA by NEC obtained locomotives for the supply of fuelDecember 31, 1988, a program, including to the Khartoum North power station in 1988.timetable, outlining actions to ensure a reliable Fuel is currently said to be supplied mostly byfuel supply for generation to the Khartoum area road.prior to the commissioning the generation facilitiesunder the project. (DCA 4.06)

7. Borrower will by December 31, 1987: (i) (i) The Government has made NEC responsibletransfer to the regional power supply entities the for atl power supply arrangements in Sudan.assets, and financing liabilities associated (ii) Not in compliance.therewith, which are included in NEC's accountsbut relate to operations outside the national grids;and (ii) finalize on-lending arrangement for allforeign grants and loans passed on to NEC. (DCA4.07)8. Borrower will (i) settle by September 30, 1987 Government accounts up to June 1985 were settledthe outstanding electricity bills of its departments in end 1986.and non-revenue earning agencies to a level (i) Not in compliance.representing no more than 90 days of their (ii) Not in compliance.respective consumption over the last 12 months;(ii) undertake quarterly reviews and settlements of NEC maintains a debit/credit arangement with thethe outstanding electricity bills. (DCA 4.04) Ministry of Finance.

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9. NEC will prepare by December 31, 1987: (i) a (i) a program was prepared.personnel management and supervision program (ii) a plan was prepared.designed to improve staff efficiency; (ii) an action (iii) the plan was not implemented but theplan, based on the findings of the manpower estimated consumer to staff ratio improved to 36mventory study to be completed by September 30, in FY92 from the FY88 ratio of 28.1987, designed to inprove productivity of NECmeasured in terms of numbers of electricityconnections per employee and containing annualtargets acceptable to IDA; and (iii) thereafterimplement the action plan taking into accountIDA's comments. (PA 3.04)

10. NEC will adjust its insurance coverage Not discussed in supervision reports.following preparation of an asset register andevaluation of its assets.

11. NEC will (i) complete by March 31, 1988, a (i) Computerized asset register in place incomputerized asset register, including current September 1990.replacement value of existing assets; and (ii) (ii) Fixed assets were revalued in FY92.revalue its assets yearly according to amethodology to be agreed on by NEC ad IDAprior to March 31, 1988. (PA 4.07)

12. NEC will by June 30, 1992, settle with Not in compliance.Government all amounts outstanding whichGovernment has advanced to NEC's creditors onbehalf of NEC. (PA 4.09)

13. NEC will not incur any long-term debt NEC did not take on any new debt, but itswithout IDA's consent, unless a reasonably estimated revenue was less than 1.5 times debtforecast shows that NEC's net revenues for each service requirements.FY are at least 1.5 times the maximum debtservice. (PA 4.02)

14. NEC will prepare quarterly consolidated Not in compliance. NEC was not able to get up-accounts, statements and management reports to-date quarterly reports from area offices.starting July 1, 1988. (PA 4.01)

15. NEC will submit to IDA certified copies of Delayed compliance. NEC was often not able toits accounts audited b independent auditors and close its books in time. Govermment Auditorsthe report of such a uit by said auditors within were not able to come in time.eight months after end FY87 and within six IDA proposed hiring of private auditors butmonths after end of subsequent fiscal years. (PA Government did not agree.4.01)

16. NEC will: (i) generate internally sufficient (i) Not in compliance.finds to finance 20 % of its capital investments for (ii) Not in compliance.FY88; (ii) earn a rate of return on revalued (iii) Not in compliance.average net fixed assets of no less than 10% for (iv) Partial compliance. See 14 below.FY89 and thereafter; (iii) review yearly with IDAwhether the internal cash covenant or rate ofreturn covenant will be met; and (iv) review semi-annually the adequacy of its tariffs and makerecommendations for tariff adjustments to theGovernment based on such review. (PA 4.03,4.04, 4.05)

17. NEC will: (i) reduce its total accounts (i) NEC's accounts receivable as of June 30, 1992receivable to no more than 90 days of sales by were equivalent to about 12 months of sales.June 30, 1988, to 75 days of sales by June 30, (ii) Not in compliance.1990, and to 60 days of sales by June 30, 1992,and keep them at such level thereafter; and (ii)prepare and submit to IDA every three months,starting December 1987, a report summarizing itsoutstanding accounts and state what actions itproposes to take. (PA 4.08)

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18. NEC will implement, not later than January A new tariff structure was implemented on1, 1988, a new tariff structure based on the October 1989. The tariffs were increased inrecommendations of the tariff study and taling August 1991, January 1992, July 1992.into account the Association's comments. (PA4.06)

19. NEC will: (i) review its investment program (i) Not in compliance.with the Govermnent and IDA at least once a year (ii) In compliance.by March 31, 1987 and revise it by agreementamong NEC, the Government and IDA; and (ii)not undertake any project not included in theinvestment program, in excess of US$10 millionor 1.5% of NEC's gross revalued assets inoperation, unless NEC has furnished evidencesatisfactory to IDA that such project iseconomically and technically justified. (PA 4.10 &4.11) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

20. NEC will staff PMU with appropriate In comptiance.numbers of qualified professionals. A 2.01_

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8. Comparative Balance Sheets (FY87 - FY92)

Year endig Jw : J 1988 19P 19W 9Ij£ft Cfldd &4: Acail S.4R Arnad "dR AMnss JA &a d SAXciuu

_~~~ . I _ ,Ame

Fixed Asset

Plba in Operation 1699.7 1439.3 3495.7 2398.6 4891.7 2986., 6155.2 3391.5 7945.6 3434.6 10320.6 80054.3Depreciation 470.3 461.8 1021.6 965.9 1447.3 1107.0 1968.9 1221.8 2571.5 1330.5 3212.3 31016.3Net Plant 1228.9 977.5 2474.1 1441.6 3443.9 1879. 4186.3 2169.7 5374.1 2104.C 7108.3 49038.0Works in progres 170.0 190.5 360.0 342.6 618.3 897.0 1461.6 796.2 2022.3 1120.1 1965.0 1852.4Accounu 205.0 165.0 100 50.0 0 0

Cwrrent Asse

Cash & Banks 14.6 17.7 17.7 13.0 27.0 27.1 30.4 33.5 35.8 66.0 39.2 225.2Accounts receivable 126.2 258.8 102.8 265.9 178.5 290.7 195.5 486.2 240.2 1045.8 246.1 1937.3Inventory 42.8 49. 51.0 60.1 104.9 35. 146.7 96.3 184.7 157.3 238.4 383.6Other 4.1 10.9 4.6 11.7 5.2 84.4 5.8 140.5 6.5 24.8 7.3 134.7

Totl 187.7 336.6 176.1 350.8 315.5 437. 378.5 757.0 467.2 1293.9 531.1 2680.8Totol Asse 1791.6 1504.6 3175.2 21350.0 4477.7 3213. 6076.3 3722.5 7863.6 4518.1 9604.4 53571.2Equity & l iiim

Equity

Capital 11.2 11.2 11.2 11.2 11.2 11. 11.2 11.2 11.2 11.2 11.2 11.2Reuined EAninps 67.2 164.5 137.0 120.8 323.0 -46.9 518.3 13.7 764.5 604.4 1041.5 1574.9Grns: 11.1 155.9 155.9 557. 155.9 592.9 155.9 672.6 155.9 788.7Exchange Fluct. -179 -510 -1046 -369.9 -1506 -401.8 -2079 -401.8 -2658 -524.6Revaluation Res. 742.4 287.3 1880.9 787. 2538.1 1317.3 3282.4 1317.3 4024.4 1317.3 4708.5 48072.9

Totl| 752.9 463. 1674.8 919.2 1982.7 1469. 2461.6 1533.3 2876.6 2203.7 3259.0 49896.1Long-TermDeo 596.9 913.6 1093.9 864.1 2041.0 1301.9 3103.5 1468.3 4453.9 1276.9 5837.5 1680.8Deferred payments 330.3 257.3 223.0 208.8 164.7 10.6

Current Ushdlitis_____

Accounts pyable 15.2 127.6 21.6 351.3 38.5 442.1 52.4 721.1 64.3 1037.5 83.4 1994.3Interet on capitd 7.0 0 9.5 15.2 ( 24.5 34.3 0 46.6Other 89.3 0 118.1 177.3 225.5 269.9 367.2

Total 111.5 127.6 149.2 351.3 231.0 442.1 302.5 721.1 368.5 1037.5 497.3 1994.3Total Liabilities 1791.6 1504.6 3175.2 2135.0 4477.7 3213.6 6076.3 3722.7 7863.6 458.1 9604.4 53571.2Current Ratio 1.7 2.6 1.2 1.0 1.4 1.0 1.3 1.1 1.3 1.3 1.1 1.3DdWtEqity Ratio 44:56 66:34 40:60 48:52 51:49 47:53 56:44 49:51 61:39 37:63 64:36 3:97Recevabls (days) 167 350 90 355 90 458 75 334 75 361 60 345

Source: SAR ecna are bado Powr IV SAR prepared i 198Z AcWambare aCd a NEC', C na aema.

3/ FY92 data based on NEC's anaudadfianci sWaements. NEC'sfixed assets were revalcd in FY92.

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9. Comparative Income Statements (FY87 - FY92)

Yarc ending Jn 3 987 1 10 1 I 1 99:. SAR AcSual SAP Actual A Acugal S Acuw SP Actual S Actua

Sales (GWh) 1174 1217 1326 1096 1463 970 1618 1240 1739 1259 1960 1705

Average Tariff 0.232 0.22 0.31 0.2 0.488 0.2 0.58 0.4 0.663 0.8 0.754 1.2(Lsd/kWh)

Average tariff 0.093 0.082 0.849 0.082 0.079 0.079(USS/kWh)

Revenues

Salca Revenues 272.4 267.2 411.1 271.1 713.9 223.8 938.4 520.8 1153. 1034.5 1476.9 2004.90

Other Revenuc 5.2 2.7 6.4 2.3 7.5 8.1 8.3 9.8 8.7 22.2 9.1 44.9

Total Revenucs 277.6 269.9 417.4 273.4 721.4 232.0 946.7 530.5 1161. 1056.7 1485.9 2049.97

Expenses

Salaries& Wages 32.1 39.4 35.7 47.5 38.8 111.4 41.0 122.5 43.1 170.9 44.6 368.1

Fuel & Power 65.0 70.0 86.9 88.2 158.3 85.5 218.9 97.2 269.7 197.0 356.9 694.7

Rcpairs& 12.0 25.6 25.5 35.4 52.4 41.6 73.4 50.1 92.3 65.6 119.2 138.8Maintenance

Other 14.2 23.8 17.4 25.5 20.4 41.9 22.6 72.9 23.8 101.5 24.7 192.0

Provision for bad debt 37.0 8.8 0 14.5 0 0.9 0 9.9 0 0 0 85.4

Depreciation 47.7 51.8 114.6 51.8 154.8 107.5 208.2 114.8 253.6 108.7 313.5 118.5

Total Expenses 208.0 219.4 280.0 262.9 424.8 388.8 564.1 467.4 682.5 643.7 858.8 1597.5

Operating Income 69.7 50.5 137.4 10.5 296.6 -156.8 382.7 63.1 479.2 413.0 627.1 452.4

Interest on Loans 36.7 36.7 58.1 43.7 95.4 43.7 162.9 53.0 198.7 46.4 303.5 24.1

Interest on Capital 7.0 11.1 9.5 7.0 15.2 0 24.5 7.0 34.3 0 46.6 0

Nct Income 26.0 2.7 69.8 -40.2 186.0 -200.5 195.3 3.1 246.2 366.6 277.0 428.3

Rate of retur (%) 7 4 7 0.5 10 -0.6 10 2.3 10 1.5 10 0.7

Source: SAPR esoimates are based on Power IV SAR.Actuals are based on NEC sfinanc statements. FY92 data is unaudted.

Notes: Sales (GWh) for FY91 and FY92 are estumates.

Rate of Return: In SAR based on estimated replacement cost values.FY87-FY91 actul are based on hisorical coss, while FY92 actal reflects asset revaluation.

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10. Comparison of NEC's Selected Performance Indicators (FY87-FY92)

*S?1 IS8 198 l 9 1M 192

___ AC" S_ _- A_ _ U__R __c___j Aa |A Act SAN A cad AR EJ d

Installed Capacity (MW) 484 484 467 544 474 544 513 634 541 694 584

Peak Demand (MW) 306 230 330 238 353 270 373 268 396 276 423 n/a

Generation (GWh) 1479 1379 1637 1379 1768 1263 133 1482 1948 1575 2179 n/a

Sales (GWh) 1125 1217 1271 1096 1402 970 15522 1240 1634 1259 1844 n/a

Technical Loses % of net gen. 16.0 7.0 16.0 16.0 16 18.0 14.5 12. 13.5 15.0 13.0 n/s

Non-Technical Losce % of net gen. 7.0 5.0 6.3 5.0 4.7 5.0 3.4 5.1 2.7 5.0 2.4 n/a

Fuel Consunption

Heavy Fuel Oil '000 tons 108 n/a 130 154 150 95 151 128 201 128 235 123

Gas Oil '000 tons 7 n/a 17 18 32 43 45 32 9 53 1 46

No. of Consumner '000 276 n/a 282 284 28S 332 294 341 300 349 305 409

No. of Emnployees '000 10.1 n/a 9.1 10.1 8.1 10.5 7.1 10.5 6.1 11.4 6.1 11.4

Ratio Consurnerc/Employee 28 nra | 31 28 36 32 41 32 50 31 51 36

Source: Power IV Projea SAR wud hfonaaor in he projeacfi.

11. Major Contracts Signed

1. Supply & Construction of Turbine Generators & Associated plant Extension of Kharoun NorthPower Station, Phase 2: 1987-10-18 (U.K)

2. Civil Works-Khartoum North Power plant: 1990-02-27 (Poland)

3. Control and Instrumentation Equipment-Khartoum North: 1989 (France)

4. Boilers and associated Plant: 1988 (Austria)

5. Electrical Plant & Equipment-Khartoum North: 1989-01-1 (Serbia)

6. Turbine generators & Associaed Plane 1988 (Germany)

7. Vehicles: 1989-08-30 (Japan, two firms)

8. Reinforcement of 220/110 kV Substation at Kilo X: 1988 (Germany)

9. Consultancy Services for Eastem Grid Substation Rehabilitation: 1987-10-14. (Finland)

10. NEC Consulting Services: (Ireland)

11. Technical assistance for Sudan Power IV Project: 1989. (The Netherlands)

12. Consulting Services for installation & preventive maintenance of the NEC power plant trainingsimulator: 1990-12-08 (Ireland)

13. Consulting Services for study of Khartoum North Power Station Unit 5: 1990-10-01 (U.K)