Document of The World Bank FOR OFFICIAL USE ONLY Report No. 18704 IMPLEMENTATION COMPLETION REPORT JAMAICA GENERATION RECOVERY AND IMPROVEMENT PROJECT (LOAN 3944-JM) December 16, 1998 Finance, Private Sector and Infrastructure Development Country Management Unit 3 Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Jamaican Dollar (J$) US$1.00 = J$33.29$1 (1994 average) US$1.00 = J$35.34$1 (1995 average) US$1.00 = J$37.24$1 (1996 average) US$1.00 = J$35.50$1 (1997 average) US$1.00 = J$36.35$1 (1998 average) FISCAL YEAR (FY) (April 1 to March 31) UNITS AND MEASURES 1 kilovolt (kV) = 1,000 Volts (v) 1 kilowatt-hour = 1,000 watt-hours 1 megawatt = 1,000 kilo-watts (kW) I billion (bn)= 1,000 million (mn) ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy ESDPP Energy Sector Deregulation and Privatization Project EMS Energy Management System GE General Electric Co. (U.S.A.) GRIP Generation Recovery and Inprovement Project ICR Implementation Completion Report IDB Inter-American Development Bank JPS Jamaica Public Service Co. Ltd. LRMC Long-run Marginal Cost MIS Management Information System NIBJ National Investment Bank of Jamaica NRCA Natural Resource Conservation Authority SAR Staff Appraisal Report Vice President: Shahid Javed Burki Country Manager/Director: Orsalia Kalantzopoulos Sector Manager/Director: Danny Leipziger Task Team Leader: Joerg-Uwe Richter FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT JAMAICA GENERATION REHABILITATION AND IMPROVEMENT PROJECT (LOAN 3944-JM) TABLE OF CONTENTS PREFACE ........................................................ 1 EVALUATION SUMMARY ......................................................... 2 PART I: PROJECT IMPLEMENTATION ASSESSMENT Background ......................................................... 6 Project Objectives and Scope . ........................................................ 7 Achievement of Project Objectives ........................................................ 8 Restoration of Electricity Service; Reduction in Generating Costs ...a..........8 Improvement of Generation Security; Enhancing System Reliability ..........9 Reform of the Electricity Tariff System ............................................9..........9 Improving Environmental Management ............................................9..........9 Other Objectives ......................................................... 0 JPS and Project Finances ........................................................ 10 Project Cost and Financing .......................... ........................... . . 11 Return on Investment ........................................................ II Implementation Record and Major Factors Affecting the Project ..............1........ I11 Project Costs and Financing ............. ............................ . . 11 Project Economic Rate of Return ................. ....................... . .. II Project Risk Evaluation ............................................ 12 Project Sustainability ............................................ 12 Bank Performance ............................................ 12 Borrower Performance ............................................ 13 Assessment of Outcome ........................................ . .. 13 Future Operations ............................................ 14 Project Operational Plan ............................................ 14 Key Lessons Learned ............................................ 14 PART II: STATISTICAL TABLES 1. Summary of Assessments ............. ................................. . . 16 2. Related Bank Loans - Preceding Loans ........................................... ...... 17 3. Project Timetable ................................................. 18 4. Loan Disbursements: Cumulative, Estimated and Actual ....................... ........ 18 5. Key Indicators for Project Implementation ............................................ ..... 19 6. Key Indicators for Project Operation ................................................. 20 7. Studies Included in the Project ................ ............................. . .. 20 8a. Project Costs ................................................. 21 8b. Project Financing ................................................. 22 9. Economic Costs and Benefits ............... ............................... . . 23 10. Status of Legal Covenants ............. ................................. . . 27 11. Compliance with Operational Manual Statements .................................... 30 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. 12. Bank Resources: Staff Inputs ........................ . 30 13. Bank Resources: Staff Missions .31 APPENDICES A. Summary of Loan Objectives and Achievements .32 B. ICR Mission Aide-Mmoire .33 C. Borrower's Contribution and Comments on the ICR .37 D. Proposed Operational Plan for Jamaica: Generation Recovery and Improvement Project .50 Map IBRD No. 26604 - Generation Recovery and Improvement Project World Bank User C:\TEMP\richtbLcont.doc 12/21/98 1:39PM IMPLEMENTATION COMPLETION REPORT JAMAICA GENERATION RECOVERY AND IMPROVEMENT PROJECT (LOAN NO. 3944-JM) PREFACE 1. This Implementation Completion Report (ICR) deals with the Generation Recovery and Improvement Project (GRIP). Loan No. 3944-JM for US$21.0 million equivalent was approved for this Project on September 28, 1995; made effective on March 28, 1'996; and was closed on June 30, 1998. Final disbursement took place on August 24, 1998, at which time a balance of US$5.2million was canceled. The Borrower was the Government of Jamaica and the implementing agency, the Jamaica Public Service Co. (JPS). The Report was prepared by Messrs. J.U. Richter of the Finance, Private Sector, and Infrastructure Department of the Latin America and Caribbean Regional OfiFice (LCSFP) and M. Mitchell (Consultant), and was reviewed by Messrs. L. Vaca-Soto, Th. Persaud (LCSFP), M. Pulgar-Vidal, and S. Goswami (LCC3C). The Report is based, inter alia, on the Staff Appraisal Report (SAR); the Loan and Project Agreements; supervision reports; correspondence between the Bank and the Borrower and the Implementing Agency; internal memoranda; JPS' progress reports; and discussions with JPS and Bank staff. Preparation of the ICR began during the Bank's project completion mission in September 1998. The Implementing Agency contributed to this ICR by preparing an evaluation of the Project's implementation and results (Appendix C) and by commenting on the Bank's draft ICR. The Resident Office of the Inter-American Development Bank in Jamaica reviewed and agreed with this report. 2 EVALUATION SUMMARY Background 2. Jamaica Public Service Co. (JPS), the government-owned utility responsible for generation, transmission, and distribution of electricity throughout the Island, received Bank loans since 1966, which have contributed to improving and expanding JPS' operations. Following an explosion at the Old Harbour generating plant in June 1994 which destroyed 22% of generating capacity on the system, JPS requested Bank financing to deal with this emergency and to strengthen the system, so as to avoid the recurrence of such incidents. The Bank approved the US$21 mn Loan No. 3944-JM on September 28, 1995. The Bank's project was primarily a response to an emergency program to restore electricity service, and was initiated in the context of reform initiatives in the sector aimed at deregulation and wider participation of private enterprise. Project Objectives and Description 3. The objectives were to (a) restore electricity service to normal conditions; (b) reduce generating costs and improve generation security; (c) enhance electricity system reliability by improving telecommunications and energy control systems and reinforcing the transmission network; (c) improve economic resource allocation through tariff reform; and (d) reduce and control environmental impacts associated with power system facilities. The Project comprised (a) restoration, life extension, and upgrading of generation units and associated facilities at the Old Harbor plant; (b) transmission system and substation reinforcements; (c) improvement of JPS' telecommunications and energy management systems; (d) construction and expansion of transmission lines and substation facilities; and (e) development and implementation of environmental mitigation measures at Old Harbour. In addition, studies including a cost of service and tariff reform study were to be carried out. The project objectives were justified by the priority requirements in JPS and the electricity sector at large, and were consistent with the Bank's emphasis in the 1993 CAS on infrastructure improvement. Project design was adequate in regard to the rehabilitation components but less so in regard to the tariff and environmental components. At the time of project appraisal, both JPS and the Government were strongly committed to the Project and JPS' implementation capacity was deemed adequate. Achievement of Objectives 4. At loan closure, the Project's physical objectives of capacity rehabilitation, life extension, and upgrading have been met. But system improvement through transmission reinforcement and the EMS upgrade was not completed; tariff reform objectives were not met as the tariff study was delayed by two years and most of the recommendations have yet to be implemented; and important environmental components of the Project, notably S02 emission control obligating JPS to meet Bank emission standards by end-1999 and NRCA standards by end-2000, were not initiated. Institution-building requirements were 3 addressed in a narrow manner through training in tariff analysis and load research as well as in EMS and telecommunications system operation. Implementation Record and Major Factors Affecting the Project 5. Initially, there was rapid progress in rehabilitating and upgrading the generation capacity. But from end-1996 onward, implementation of the remaining components fell behind, coinciding with the Government's decision to discontinue the privatization of JPS and to cause JPS to enter into a performance contract with the National Investment Bank of Jamaica (NIBJ), which may have diverted JPS' attention from project implementation. JPS was successful in improving critical operational performance targets set in the Contract, but was unable to attain significant reductions in technical/administrative losses and accounts receivable. JPS' financial position weakened considerably, largely because of the absence of a tariff increase since 1991 and its commitment under the performance contract not to raise tariffs before 2000. JPS in FY 1997/8 sustained losses of J$396mn (US$ 11 mn equivalent) and its rate of return on revalued assets fell below 1%, compared to a stipulated return of 8%. There was an improvement from mid-1998 onward but it seems unlikely that this improvement can be sustained without a tariff increase. 6. Project performance was rated "Unsatisfactory" in May 1998 because of lack of tariff action, non-compliance with major covenants (including financial reporting) and delays in implementing the environmental components. At the time of loan closure, completion overall of the scaled-down (to US$66.2mn) project was about 90% but was much less for the transmission reinforcement and environmental components. There has been little follow-up to the cost of service and tariff reform study. While a number of technical problems impacting on project implementation were beyond the Government's and JPS' control, impacts related to macro-economic and sectoral policies were related to the Government's stance. Delays in preparing an operational plan and a plan to implement the recommendations of the tariff study, as well as the lack of follow-up on emission control options identified in its 1996 Environmental Plan were subject to JPS' control. Project Risk Evaluation 7. The SAR's risk evaluation was incomplete as it did not include the risk of attaining tariff reform and meeting environmental objectives. While JPS managed the generation rehabilitation components of the Project adequately and succeeded in reducing line losses, the Government since 1996 has deemphasized energy sector privatization. JPS' capacity to settle its insurance claim was over-estimated as this claim is as yet only partially resolved. Project Sustainability 8. In the course of project implementation, JPS benefited from technical assistance in tariff, load research, EMS, telecommunications, and environmental analysis, which ought to strengthen its future institutional capacity. But project sustainability is uncertain unless JPS prepares a detailed operational plan addressing physical as well as sector 4 policy (especially tariff and environmental) objectives and JPS' management commits itself firmly to implementing this plan. Bank Performance 9. Bank performance is rated "Satisfactory" for project identification and preparation and "Unsatisfactory" for appraisal and supervision. The Bank responded expeditiously to an emergency but did not incorporate into the project design safeguards in form of a commitment by the Borrower to implement the tariff-related recommendations within a clearly defined period and to comply with the S02-related emission standards prior to loan closure. Initially, the Bank and JPS had a cooperative relationship but the decision by the Government to discontinue the privatization of JPS and to cause JPS to enter into a performance contract instead weakened this relationship and eventually, supervision. There were fiequent changes in task managership and a paucity of supervision missions in 1997-98 which hampered communications. No mid-term review of the Project took place. While communications intensified again toward the end of the loan period, no agreements on necessary actions were reached, particularly on tariff adjustments. Consultations with the Inter-American Development Bank took place throughout project implementation, particularly prior to and following loan closure. Borrower/ Implementing Agency Performance 10. Borrower! implementing agency performance is rated "Satisfactory" for project preparation and implementation of the rehabilitation components and "Unsatisfactory" for the implementation of the tariff-related and environmental components and for compliance with reporting requirements. At project initiation, the Borrower was committed to completing the rehabilitation of generation as fast as possible, but later, implementation of the other components was adversely affected by the Government's and JPS' shift in priorities, financial weaknesses, and occasional difficulties in procurement. JPS has not submitted financial statements since FY1995/6 and did not make the documentation on its perfornance contract with NIBJ available to the Bank. Following loan closure, JPS decided to reduce the scope of some of the environmental components, especially emission control. Assessment of Outcome 11. Project outcome is rated "Unsatisfactory" in view of non-completion of major components and uncertainty about the sustainability of project results, the successful rehabilitation of generation facilities and the associated reduction in costs and forced outages notwithstanding. The Project's main components consisted of physical facilities. Technical assistance was relatively minor and except for the tariff study, was related to the Project's fixed investment components. Generation rehabilitation was instrumental in bringing electricity supplies back to pre-breakdown levels, and technical assistance related to EMS/telecommunications and environmental management ought to benefit these activities. On the other hand, implementation of the tariff study's recommendations hinges on the Government's decision to allow tariff setting consistent with the sector's requirements for economic and financial viability. 5 Future Operations 12. Beyond two ongoing operations, no new operations are being considered by the Bank. The activation of a PHRD grant to evaluate the site for the next privately owned generation scheme is contingent upon the Government's communication, by December 31, 1998, reconfirmir.g its commitment to maximum feasible participation by private enterprise in electricity sector development. Project Operational Plan 13. JPS has yet to submit a specific plan for future operation of the facilities rehabilitated and created under the Project. Such plan should address physical as well as sector policy (especially tariff and environmental) objectives and should include the following measures: (a) completion of the project components by June 1999; (b) compliance with S02 emission standards by end- 1999 and end-2000, respectively; (c) pursuit of the operational targets set in the JPS-NIBJ performance contract; (d) reform of the tariff system to enhance efficient electricity use; and (e) strengthening of JPS' environmental management. Key Lessons Learned 14. In the interest of clarity about project goals and the priority of individual project components, and of effective implementation, the following lessons are relevant: (a) At project preparation: Project objectives should reflect a clear priority ranking. For emergency operations that also pursue institutional and policy objectives, well-defined and covenanted conditionality should be focused at the latter objectives. Borrower commitment to sector and project objectives should be ensured prior to loan approval, e.g., through tariff adjustments and adequate allocation of resources to the project. Project design and concept should adequately support the project objectives, reflecting experience with ongoing and previous projects, and should be firmly defined to avoid delays and confusion during implementation. Care should be taken that project components and covenants are enforceable; (b) During project implementation: In situations of emergencies under financial constraints, sole-source procurement arrangements may be justified. Regular supervision including appropriately timed mid-term reviews are essential and should engage the borrower's and implementing agency most senior officials. Bank staff permanency during supervision should be ensured. In situations of protracted non-compliance with major loan and project covenants, the Bank should timely exercise its remedies, including loan suspension and cancellation, based on an assessment of the impact of both non- compliance and the Bank's actions on project implementation and sustainability. 6 PART I: PROJECT IMPLEMENTATION ASSESSMENT Background 1. Jamaica Public Service Company Ltd. (JPS), a government-owned integrated utility with annual sales of J$10.4bn (US$290mn equivalent) and a staff of approximately 2,100 in 1997, is responsible for generation, transmission, and distribution of electricity throughout Jamaica. Installed generating capacity in 1997 amounted to 653MW, up from 552MW in 1990, and its number of customers, 423,800 (305,800 in 1990). Peak demand on the system is approximately 488MW, up from 323MW in 1990. Two independent power producers, Jamaica Energy Partners (72MW installed capacity) and Jamaica Private Power Company (62.5MW installed capacity), in operation since 1995-96, contribute about 31% of generation. 2. The Government in 1996 discontinued plans to privatize JPS, as it deemed two bidders' offers insufficient. JPS in early 1997 entered into a performance contract with NIBJ, as the Government's financial representative, for the 1997-2000 period, which committed JPS to achieving certain efficiency targets, with tariff levels virtually unchanged, in exchange for enhanced managerial autonomy. By mid-1998, JPS' efficiency drive began to show positive results as plant availability was raised and generation heat rates and labor costs were reduced. But technical and administrative losses have remained high at more than 17% of gross generation. 3. A boiler explosion in June 1994 at JPS' Old Harbour generating plant, the largest on the system, destroyed 123MW or 22% of generation capacity and resulted in severe electricity rationing for almost one year. The Government requested financing from the Bank and IDB to restore generation capacity, strengthen transmission and the telecommunications/ energy management systems to avoid the recurrence of similar events, and improve environmental management and monitoring of JPS' operations. 4. Following four Bank loans to JPS during 1966-87 and a US$0.5million Project Preparation Facility in November 1994, the Bank approved the single-currency, fixed- interest Loan No. 3944-JM amounting to US$2 1mn in November 1995 in support of the Generation Recovery and Improvement Project (GRIP). The Loan became effective in March 1996 once JPS had submitted an Environmental Mitigation Plan for the Old Harbour plant. While primarily a response to the Government's emergency program to restore public electricity service, the Project also was to address JPS' high system losses and the adverse impact of lost generation capacity on JPS' financial position. Project initiation coincided with reform initiatives in the sector aimed at deregulation and broader participation of private enterprise, which were supported by a US$60mn Bank loan for the Energy Deregulation and Privatization Project (ESDPP; Loan No. 3502-JM). The Bank gave high priority to both projects because of its support to private development and infrastructure improvement, as emphasized in the 1993 CAS on Jamaica. 5. Because of the Borrower's non-compliance with major loan and project covenants during the latter half of the Project and the resulting "Unsatisfactory" rating of project implementation in May 1998, the Bank declined the Government's request to extend the 7 Loan's closing date by one year, to June 30, 1999. The Loan was closed on June 30, 1998 with a balance of US$5.2million undisbursed. Project Objectives and Scope 6. The Government has considered continued improvements in electricity supply at lowest-feasible economic and environmental costs as critical to economic development, especially for manufacturing and tourism. As part of this over-arching objective, the Project's specific technical, institutional, and environmental objectives were to (i) restore electricity service to normal conditions as early as possible, thus eliminating supply shortages; (ii) reduce generation costs through lower-cost plants and upgrading of existing facilities; safeguard the system against breakdown of installations, thus improving generation security; (iii) enhance system reliability to reduce the likelihood of recurrence of plant incidents, by improving the telecommunications and energy control systems and reinforcing the transmission network; (iv) improve economic resource allocation through reform of the electricity tariff system, and (v) reduce and control environmental impacts associated with power system facilities. 7. The Project comprised the following components: (i) restoration of Old Harbour Unit 3; (ii) restoration of Old Harbour Unit 4 boiler; (iii) life extension of Old Harbour Unit 4 turbine generator, to defer the unit's retirement from 2002 to 2017; (iv) gas turbine units 3, 4, 5 restoration and life extension, to improve generating efficiency, increase reliability, and extend their technical life units by about ten years; (v) improvement of JPS' telecommunications and energy management systems (EMS) from 1 970s vintage to state-of-the-art technology, to enable the systems to manage load shedding under emergency situations; (vi) construction and expansion of transmission lines and substation facilities (48km of 138kV lines; two substations) to ensure reliable transmission from Old Harbour and accommodate additional (private) generating capacity; (vii) development and implementation of environmental mitigation measures at Old Harbour, including (a) reduction in S02 and NOx emissions, (b) waste-water treatment, (c) oil spill containment and prevention, (d) training, (e) rebuilding and upgrading of the Old Harbour environmental laboratory, (f) surveys and management plans for asbestos and polychloro bi-phenol (PCB) removal; and (viii) consulting services for (a) implementation, management, and supervision of the generating system components, (b) engineering and project management for the environmental mitigation components, and (c) cost-of-service and tariff reform study. 8 8. The project objectives were justified by the priority requirements in JPS and the electricity sector at large, and were consistent with the Bank's emphasis in the 1993 CAS on infrastructure improvement. The design of the Project's physical components was adequate but was less so in regard to the tariff and environmental components. At the time of project appraisal, both JPS and the Government were strongly committed to the Project and JPS' implementation capacity was deemed adequate. Achievement of Project Objectives 9. The P'roject's physical objective of generation capacity rehabilitation has been met. JPS' 1'993 least-cost expansion plan formed the basis for generation rehabilitation and transmission system reinforcement. But the Project did not contribute as expected to system improvement aimed at providing security against future breakdowns. There have been significant shortfalls in reforming the electricity tariff system, improving EMS and telecommunications systems, and strengthening JPS' environmental management. Comparison of Planned and Achieved Project Components - Implementation Milestones Project Component S.A.R. Actual ._________________ Schedule Schedule Contract Start Completion Contract Start Completion Award Award Restoration O.H. 3 June '94 June '94 Dec. '94 June '94 June '94 Dec. '94 Restoration O.H. 4 Dec. '94 Jan. '95 July '95 Nov. '94 March '95 Jan. '96 Life Extension O.H. 4 Dec. '94 March '95 July '95 Nov. '94 March '95 Jan. '96 Upgrade GT 3,4;5 Dec. '94 Febr. '95 Aug. '95 Dec. '94 Febr. '95 June '96 EMS/ Telecoms July '95 Aug. '95 Sept. '97 Dec. '95 Dec. '95 March '99 Transmission April '95 May '95 Dec. '97 Oct. '96 Oct. '96 March '99 Reinforcements Environmental July '95 Aug. '95 Aug. '96 Oct. '95 Oct. '95 June '99 Mitigation Consulting Services Jan. '95 Febr. '95 Dec. '97 Oct. '95 Dec. '95 June '99 Studies & Technical March Apr. '95 Dec. '96 Nov. '95 Nov. '95 March '98 Assistance '95 Restoration of Generating Capacity and of Electricity Service; Reduction in Generating Costs 10. Restoration of Old Harbour Unit 3 (boiler and turbine rehabilitation) was completed on schedule by December 1994, with US$7.6mn IDB financing. Restoration of Old Harbour Unit 4 boiler, completed by January 1996, was financed by insurance payments and a credit from the original equipment supplier. Life extension of Old Harbour Unit 4 generation turbine, of which US$5.9mn was financed by the Bank, was carried out by the original equipment supplier, General Electric (GE), without bidding and also was completed by January 1996. However, the unit experienced technical problems in 1997-98, reducing its overall availability below 80%. The upgrade of gas turbine units 3, 4, and 5, self-financed by JPS, also was undertaken by GE during 1995- 96 on an emergency basis, after which the units returned to peaking service. 9 Improvement of Generation Security; Enhancing System Reliability 11. The transmission system and substation reinforcement whose foreign cost is IDB- financed, was about 64% conipleted by mid-1998 and is planned to be fully completed by March 1999. The EMS/telecommunications Upgrade, largely financed by the Bank, incurred considerable delays and was only 57% completed at the time of loan closure. JPS expects this component to be completed by March 1999. Reform of the Electricity Tariff System 12. The Cost of Services and Tariff Reform Study responded to the need to determine the long-run marginal cost (LRMC) of electricity supplies based on detailed load research. The Loan Agreement envisaged that a long-run marginal cost and tariff study be carried out by early 1996, and that JPS prepare an implementation plan and proceed toward implementing the study's recommendations aimed at rationalizing the tariff structure. (The preceding Power IV project had already contained a covenant on tariff action.) The study was completed in March 1998. Its recommendations are directed toward establishing a tariff system based on LRMC and meeting requirements for energy efficiency, equity, revenue adequacy, and administrative simplicity. Implementation of the study's recommendations was largely preempted by the Govermment's decision - as part of the JPS-NIBJ performance contract - not to increase tariffs until early 2000. However, as astep toward reforming the tariff structure, JPS introduced in November 1998 an economic development incentive rate for industrial consumers that shift at least 10% of their load to off-peak, which will reflect more closely the relative cost of supplies to consumers. JPS considers to eventually pursue other recommended measures, to the extent that these are compatible with JPS' commitment under the performance contract not to raise average tariffs. The measures relate to (i) compression of peak consumption (in particular, combination of fuel and energy charges, time-of-day rates including for large-volume residential customers), (ii) high-voltage discounts, (iii) modified residential block rates, (iv) modification of energy and demand charges and realignment of customer charges to improve cost recovery, and (v) cogeneration deferral rates and stand-by rates for customers of cogeneration plants. 13. There is little government commitment to apply the recommendations of the tariff study, especially the reduction of large-scale cross-subsidization between industrial/ commercial and residential consumers. While JPS' average tariffs are close to LRMC, they are too low to adequately cover JPS financial charges as well. Improving Environmental Management 14. The environmental components were aimed at abating air, soil, and water pollution from Old Harbour and other JPS facilities. Implementation was based on JPS' 1996 Environmental Plan, whose preparation the Bank had made a condition of loan effectiveness. Several components were later added on (i.e., PCB removal; waste water management; stores reorganization) which made a reallocation of funds necessary. At loan closure, the Project's environmental components were about 60% completed and most are scheduled for full completion by June 1999. Mainly surveys and studies were financed involving few capital works, reflecting relatively low priority given by the 10 Borrower to these components. Asbestos and PCB surveys were undertaken and PCB removal was completed by June 1998. Amelioration of petroleum spillage and of other soil contamination (by means of soil removal and bundwall construction) was about 75% completed. G'roundwater quality monitoring was carried out in 1996 and monitoring wells were constructed. Wastewater was analyzed but a treatment plant has yet to be constructed, planned for 1999. (Requests for proposals are currently being reviewed.) For S02 emission abatement, JPS' Plan aims at meeting the Bank's (1988) guidelines for point and regional emissions by end-1999 and NRCA standards by 2000. Emissions testing is planned for early 1999 but mitigatory investment required to meet the specified emission standards has not yet been defined nor funded, so it is uncertain whether the investment will be done on time to comply with the relevant commitments. Noise tests were carried out in 1996-97. Meteorological equipment for air quality monitoring has been installed and related investigations are being prepared. Laboratory and chemicals storage facilities destroyed during the plant accident have been reconstructed. Other Objectives 15. Institution-building objectives were directed at improving the operation of EMS and telecommunications systems, environmental mitigation, and rationalizing the tariff system, to be achieved through studies and training by consultants. A total of 230 staff- weeks were allocated to training. The LRMC and tariff reform study contributed to reinforcing JPS' load and tariff research program and relevant analytical capabilities. 16. Improvements in JPS System Operating Efficiency. The JPS-NIBJ contract established targets for the principal operational parameters including heat rates, fuel and labor cost, and technical and administrative losses, to demonstrate that efficiency improvements expected from privatization are also attainable under conditions of public ownership and management. By the time of loan closure, JPS has managed to raise operational performance, by increasing availability to over 90%; reducing the heat rate (fuel cost) of generation by 4%; and reducing overtime-related labor costs by 39%. This was largely achieved through technical improvements (e.g., upgrading of gas turbines and rehabilitation of auxiliary equipment). The installation of modem EMS and telecommunications systems while still to be completed has already contributed to more efficient load dispatch. However, technical and administrative losses declined only slightly and still exceed 17% vs. 14.5% envisaged in the performance contract. JPS and Project Finances 17. Largely because of unchanged tariffs since 1991 - in the face of inflation and exchange rate devaluation totaling 662% and 292%, respectively, during this period -JPS' financial position weakened considerably, aggravated by increased borrowing needs after 1995: its rate of return on revalued assets was just about 1% in FYs96-97 instead of 8% as covenanted under ESDPP. JPS sustained losses of J$396mn (US$1 lmn equivalent) in FY 1997/98. Substantial external borrowing was required, largely short-term (US$55mn in FY97; US$108 mn planned in FY98). JPS was unable to finance more than 60% of capital expenditure and additions to working capital from internal cash generation. There was an improvement in mid-1998 when the rate of return increased but it is uncertain if this improvement can be maintained without a tariff increase. 11 Implementation Record and Major Factors Affecting the Project 18. At project initiation, JPS implemented the generation rehabilitation components at a rapid pace. Subsequently, delays occurred in implementing the remaining components, especially the tariff-related and environmental components. The negotiation of the performance contract with NIBJ may have diverted JPS' attention from project implementation. Difficulties arose in selecting the contractor for the SCADA component, leading to additional delays. The tariff study was delayed by nearly two years and a new tariff structure, which had been already a condition of the Power IV project, was not implemented. The SAR envisaged project completion by December 31, 1997 but the Government requested a one-year extension of the closing date. The Project was rated "Unsatisfactory" in May 1998 because of non-compliance with major loan covenants such as reporting and delays in implementing major project components, especially on tariff measures and environmental management.. 19. The project implementation schedule was probably unrealistic: 81 % of the Loan was to be disbursed by June 1996 and 100% by June 1997. Implementation indicators as stated in the SAR were not fully met, with shortfalls occurring primarily in regard to the financial targets. By loan closure, the Project (which had been reduced from US$76.5mn to US$66.2mn) was about 90% completed (100% of generation rehabilitation; 64% of transmission and substations financed by IDB; 57% of EMS/SCADA components; 60% of environmental components; 68% of technical assistance). 20. Factors Impacting on Project Implementation. While several factors were beyond the Borrower's and JPS' control (e.g., technical problems with operating the rehabilitated units; problems with contractors), several critical factors were subject to the Borrower's control such as the macro-economic and sector policy framework. Factors subject to JPS' control include delays in preparing an operational plan and a plan to implement the recommendations of the tariff study, and the lack of follow-up to the options to reduce S02 emissions identified in its 1995 Environmental Plan. Project Costs and Financing 21. By loan closure, US$59.4mn of project funds had been spent, i.e., 90% of the - reduced - project costs of US$66.2mn (the original estimate was US$76.5mn). Reductions in project costs were attributable to cost savings for rehabilitation and life extension of the Old Harbour plant, gas turbines, and consulting services but also the reduction in scope of several environmental components after loan closure. For the July 1998-June 1999 period, JPS foresees expenditure on the outstanding project components of approximately US$7. lmn, i.e., for transmission, US$3.9mn; EMS, US$2mn; and environmental works, (US$lmn. Project expenditure through June 30, 1998 was financed by the Bank, US$15.7mn; 1DB, US$16.2mn; and JPS' own funds, US$27.5rnn. Project Economic Rate of Return 22. The ERR was estimated on Old Harbour-4 rehabilitation and EMS modernization, in line with the SAR. Costs comprise those of investment in generation, transmission, 12 and distribution, telecommunications, EMS, and environmental mitigation; attendant technical assistance; and incremental operating and maintenance costs. Benefits include incremental sales and reduced forced outage rates. The project accounted for about 30% of JPS' FY95-98 investment. The EER estimate on Old Harbour-4 rehabilitation is 27% compared to the SAR's 31%, despite lower investment (US$26.7mn vs US$31 mn in the SAR), primarily because the ICR does not include the increase in insurance value due to equipment rehabilitation. The EER on the EMS is tentative as significant expenditures have yet to be undertaken and benefits will accrue later than envisaged in the SAR. Based on available information, the EER has been re-estimated at 35% vs. the SAR's 20%, due to an apparent under-estimation of project benefits in the SAR. Project Risk Evaluation 23. At project appraisal, the main risks identified were considered to be well under control. They related to (i) continued government commitment to privatization in the energy sector, (ii) JPS' ability to reduce system losses, (iii) collection on insurance payments, and (iv) JPS' capacity to manage project implementation. The SAR's risk evaluation failed to include the risk of attaining tariff reform and meeting the environmental objectives. In regard to the identified risks, while JPS managed the generation rehabilitation components adequately and was able to reduce line losses, JPS was not able to fully collect insurance payments despite strong legal backing. The Government since late 1996 has deemphasized energy sector privatization, and its continued commitment to privatization of JPS is uncertain. Project Sustainability 24. In the course of project implementation, JPS benefited from technical assistance in electricity tariff analysis and load research, and in EMS, telecommunications, and environmental management. This support ought to provide the basis for improving operational (including environmental) management. But the Project's sustainability is uncertain unless JPS prepares a detailed operational plan addressing physical as well as sector policy (tariff and environmental) objectives, along the lines developed in this ICR (Appendix D), and JPS management takes the decisions necessary to implement this plan. Bank Performance 25. Bank performance is rated "Satisfactory" for project identification and preparation and "Unsatisfactory" for appraisal and supervision. In preparing the Project, the Bank had responded to an emergency. But the Bank did not incorporate into the project design safeguards through an appropriate commitment by the Borrower to implement the policy- related components within a clearly defined period, especially the recommendations of the tariff study, considering the Borrower's weak commitment in the past, and to comply with the environmental (S02 emissions) commitments prior to loan closure, which has made it difficult to enforce the necessary actions. The Bank's relationship with JPS initially was very cooperative. The Government's decision to discontinue the privatization of JPS weakened this relationship and eventually, Bank performance as well, aggravating problems arising from project implementation delays. Supervision was hampered by frequent changes in task managership, the last change occurring four 13 months prior to loan closure. No mid-term review on the Project took place. There was a one-year hiatus in supervision missions in 1997-98 when supervision was essentially handled by the Bank's resident office with little sector backup. The Bank did not communicate in time to the Borrower that an extension of the loan was not feasible without major improvements in project implementation and tariff policies. 26. During the last three months of the loan period, communications intensified again when the Bank attempted - before and after the closing date - to cause JPS and the Government to agree to measures to comply with loan conditionality, as a prerequisite for loan extension. However, no agreement on necessary actions was reached. 27. Coordination with IDB. The Bank coordinated with IDB throughout project implementation, particularly immediately before and after loan closure. An understanding was reached with IDB on the Bank's position and course of action. Borrower Performance 28. Borrower performance is rated "Satisfactory" for preparation and implementation of the technical components of the Project and "Unsatisfactory" for implementation of the tariff-related and environmental components and for compliance with reporting requirements. At project initiation, the Government and JPS were strongly committed to completing the rehabilitation works at the shortest time possible. But in the following, implementation weakened. At loan closure, the transmission/substation, EMS, and environmental components were not completed. The LRMC and tariff reform study, to be completed by early 1996, was delayed by two years, and its recommendations were not implemented save for establishing a preferential industrial tariff for off-peak consumption. Difficulties in procurement arose around the time when the privatization of JPS was discontinued and the performance contract with NIBJ was negotiated, which may have diverted JPS' attention from project implementation. The Borrower did not make the documentation on the JPS-NIBJ performance contract available despite requests by the Bank since early 1997, nor did JPS provide specific information needed to assess the revaluation of fixed assets and its consistency with the Project Agreement. JPS has not submitted audited financial statements since FY96 and audited project accounts since FY97. Following loan closure, JPS decided to reduce the scope of several environmental components, particularly the installation of emission controls. Assessment of Project Outcome 29. The outcome is rated "Unsatisfactory" in view of non-completion of major components and uncertainty about project sustainability, the successful completion of generation rehabilitation and some of the environmental components notwithstanding. Funds were mainly allocated to fixed investment in generation, transmission, and telecommunications, and to environmental clean-up. Technical assistance was relatively minor and except for the tariff study, was in support of fixed investment components. Generation rehabilitation was instrumental in reestablishing capacity at pre-accident levels as well as enhancing efficiency, reliability, and security of generation, thus contributing to lower operations and maintenance costs and lower forced outages. However, at loan closure, Old Harbour Unit 4 was not yet operating at full capacity, and 14 due to delays in modernizing EMS, system security was not yet fully established. Technical assistance related to the environmental and EMS/telecommunications components ought to contribute to strengthening these activities. The tariff study did not have the envisaged impact of improving the tariff system but contributed to strengthening JPS' analytical capabilities. JPS' capacity to timely prepare financial statements and project accoumts has deteriorated during the period of project implementation, with the submission of audited financial statements to the Bank 15 months behind schedule. Future Ope;rations 30. Beyond two ongoing Bank operations, i.e. ESDPP (closing date December 3 1, 1999) and the Energy Demand Side Management Demonstration Project (GET Grant No. 05 28695-JM; closing date June 30, 1999), no operations are firmly scheduled. The activation of a PHRD grant to identify and evaluate the site for the next privately owned electricity generation scheme is contingent upon a communication by the Government, by December 31, 1998, reconfirming its commitment to maximum feasible participation by private enterprise in electricity sector development. Project Operational Plan 31. JPS has yet to submit a specific plan for operating the facilities created or rehabilitated under the Project that meet the Project's original objectives, although JPS' 1997-2007 Corporate Business Strategy provides a basis for such plan. In order to ensure that the project achievements are maintained, the following measures are required: (a) Completion of the Project's technical and environmental components by June 30, 1999. Compliance with S02 emission standards by end-1999 and end-2000, respectively, as stipulated in JPS' 1996 Environmental Plan; (b) Pursuit of the operational targets defined in the SAR and the JPS-NIBJ performance contract, especially those that thus far have not been achieved, e.g., reduction in technical and administrative losses and in accounts receivable; (c) Reform of the tariff system to provide consumers with price signals conducive to efficient electricity use, and ensure JPS' long-term financial viability; and (d) Strengthening of JPS' environmental management, through updating JPS' 1996 Environmental Plan including dated implementation targets. Key Lessons Learned 31. To ensure clarity of project goals, appropriate priority ranking of individual components, and effectiveness of implementation, the following lessons are relevant: At Project Preparation: (i) Project objectives should reflect a clear priority ranking. For emergency operations that also pursue institutional and policy objectives, conditionality should be 15 focused at the latter objectives. In that, institutional and policy objectives should be given the same priority as investment-related objectives and a link should be established between time-bound achievements of institutional and policy objectives and related disbursements; (ii) Borrower commitment to sector and project objectives should be ensured prior to loan approval, to be demonstrated among others through (a) electricity tariff reforms to improve allocation of economic resources and financial viability of the electricity supplier(s), given the difficulty to implement these measures after loan approval; (b) allocation of adequate resources to the project entity, and (c) active involvement of senior management in project matters; (iii) The project concept and design should adequately support the objectives and should reflect experience with ongoing projects as well as lessons learned from past projects. The project should be designed as firmly as feasible at appraisal, the need for flexibility notwithstanding, to avoid posterior delays in implementation. Care should be taken that the project components and covenants are enforceable; During Project Implementation: (iv) In emergency situations under financial constraints, arrangements for sole- source procurement may be justified, to accelerate implementation and reduce economic and financial losses resulting from electricity rationing; (v) Project supervision should be strengthened through staff permanency, and at least two supervision missions per year should be scheduled. Aide memoires should be negotiated with the Borrower's highest-ranking decision maker. The Government should ensure that the Cabinet Minister responsible for the policy area impacting on the project is available for discussions with the supervision mission; (vi) A mid-term review should be carried out at an appropriate time to determine the status of the project and implementation problems and to formalize agreements with the Government on adjustments to the project including amendments to the Loan Agreement as appropriate; and (vii) In situations of protracted non-compliance with major loan and project covenants, the Bank should timely exercise its remedies including loan suspension and partial or full loan cancellation, based on an assessment of the impact on project implementation and sustainability. 16 Part II Statistical Tables Table 1: Summary of Assessments A. Achievement of Project Objectives Assessiment Substantial Partial Negligible Not Applicable Categories . _ Macroeconomic Policies X Sector Policies X Financial Objectives X X Institutional development X Physical objectives X Gender concerns X Other social objectives X Environmental objectives X Public sector management X Private sector development X Other _ X B. Project Sustainability ,ikely | Uncertain Unlikely x C. Bank Performance Stage of Project Cycle Highly Satisfactory Satisfactory Unsatisfactory LIdentification __X Preparation _ Appraisal X Supervision X D. Borrower Performance Stage of Project Cycle Highly satisfactory Satisfactory Unsatisfactory Preparation X _ Implementation X Covenant Compliance _ X E. Assessment of Outcome Highly Highly Satisfactory Satisfactory Unsatisfactory Unsatisfactory _~~~~~~~~~ 17 Table 2: Related Bank Loans - Preceding Loans Title First Power Project Loan Number 454-JM Year of Approval 1966 Amount US$22 million Objective Help to finance the cost of two generation plants and associated transmission and distribution facilities. Status Completed. Title Second Power Project Loan Number 1516-JM Year of Approval 1978 Amount US$ 22.0 million Objective Help to finance the cost of the transmission and distribution system in urban centers along with technical assistance for improved operations and ma anc Status Completed. Title Third Power Project Loan Number 2188-JM Year of Approval 1982 Amount US$30.5 million Objective Rehabilitation of JPS' generation units, to reduce outages and improve heat rate Status Completed. Title Fourth Power Project Loan Number 2689-JM Year of Approval 1987 Amount US$ 18.0 million Objective Increase and improve the utilization of the generating system by expanding and upgrading the transmission network to improve system reliability; prepare future projects; and strengthen JPS management and engineering capabilities. Status Completed. Title Petroleum Exploration Loan Number 2017-JM Year of Approval 1981 Amount USS7.5 million Status Completed. Title Energy Sector Deregulation and Privatization Project Credit number 3502-JM Year of Approval 1992 Amount USS 60 million Objective Provide needed power generation capacity; create enabling environment for attracting private investments in the sector, including the regulatory framework; _____________________ support the Govemment's deregulation program in the energy sector. Status Completed. Source: Project Files, World Bank 18 Table 3: Project Timetable Steps in Project Cycle Planned Date Actual/estimated Date Identification June 1994 June 1994 Preparation June 1994 June 1994 Appraisal November 1994 November 1994 Negotiations June 1995 Board presentation May 1995 September 28, 1995 1/ Signing X November 13, 1995 Effectiveness October 1995 March 28, 1996 Project completionr December 1997 June 30, 1999 Loan Closing June 1998 June 1998 Notes 1/ Effectiveness delay was due to a delay in meeting two of the project's conditions of effectiveness, i.e. (i) the preparation of the Environmental Mitigation Plan, which was forwarded to the Bank by JPS in December 1995 anrd reviewed and approved by the Bank in February 1996; and (ii) a legal opinion concerning project, documents, which was delivered to the Bank on March 25, 1996. Source: Project Files and Bank Staff Estimates Table 4: Loan Disbursements: Cumulative, Estimated and Actual (US$ millions equivalent) Key Indicators FY FY 96 FY 97 FY 98 1 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 19 95 _ _ _ _ _ _ _ _ _ Appraisal estimate 11.5 17.0 21.0 Actual - 5.8 10.6 15.8 Actual as % of estimate L 34.1 50.5 75.2 Source: Project Files and Staff Estimates, World Bank 19 Table 5: Key Indicators for Project Implementation Key implementation Estimated Actual Starting Estimated Actual Completion indicators Starting Date Date Completion Date Date Restoration of OH3 Unit June 1994 June 1994 December 1994 December 1994 Restoration of OH4 boiler January 1995 March 1995 July 1995 January 1996 Life Extension of OH 4 March 1995 March 1995 July 1995 January 1996 Telecommunications/ August 1995 December 1995 September 1997 March 1999 Energy Management Systems Transmission May 1995 February 1997 December 1997 September 1998 Reinforcement at (lines) March 1999 (substations) Environmental Mitigation August 1995 October 1995 August 1996 June 1999 Consulting Services February December 1995 December 1997 June 1999 1995 Studies and Technical April 1995 November 1995 December 1996 March 1998 Assistance a/About 65 percent of the work was completed by September 1998. Source: Project Files, JPS and Staff Estimates, World Bank 20 Table 6 Key Indicators for Project Operation Indicator FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 _ SAR ICR SAR ICR SAR ICR SAR ICR SAR ICR Rate of Returin 6.0 8.0 8.0 8.0 8.0 on Assets (%) Average 4.9 4.82 5.54 4.63 5.84 4.63 6.16 4.63 7.36 4.63 Revenue (J$/kWh) Average 33.5 37.0 35.18 36.0 36.93 36i 35 38.78 37.0 40.72 37.0 Exchange Rate (J$/USS) _ _ _ _ _ _ _ _ _ Purchased 16 20.0 37 26.7 40 31 48 25.6 66 27.0 Power (%) System Losses 17.6 16.9 17.0 16.9 16.5 17.4 16 14.8 15.5 12.8 Note: This table compares SAR-projected indicators to actual and estimated figures at the time of ICR preparation. ICR figures for FYs 1996-97 are actuals. Figures for FYs 1999-2000 are based on most recent JPS projections. General Performing Indicators Measurement Unit Annual electricity production GWh Annual electricity purchased GWh Peak load MW Power system reserve margin Percent of peak load Electricity losses Percent of generation Annual average service interruption per customer Hours/customer Numbers of employees Number Employee efficiency Customers/employees Sales per employee MWh Generation per employee GWh Average electricity tariff J$/kWh Accounts receivable Days of billing Cash operating margin Percent Self-financing ratio Percent of investment and addition to working capital Debt service coverage ratio Number (operating profit plus provisions/ debt payments) Debt-equity ratio Number Source: Project Files nd Staff Estimates, JPS and World Bank Table 7: Studies Included in the Project Study Purpose Status .Impact Long-Run Marginal Provide the Government Completed in March Negligible impact at the Cost and Tariff Study of Jamaica and JPS with 1998. time of loan closure. an efficiency pricing No implementation plan system and rate structure submitted to the Bank. for all categories of consumers. 21 Table 8A: Project Costs (in US$ million equivalent) Item Appraisal Estimate Actuallatest estimate Local Foreign costs Total Local Foreign Total costs costs costs costs Costs Restoration of 3.0 7.0 10.0 1.01 6.62 7.63 OH Unit 3 Restoration of OH Unit 4 2.1 18.9 21.0 0.00 20.87 20.87 Life extension of 0.0 8.6 8.6 0.00 5.91 5.91 OH Unit 4 _ _ _ Gas Turbines 3,4, and 5 0.0 6.7 6.7 0.00 6.10 6.10 Upgrade . Tclecommunications and Energy Management System 0.1 7.6 7.7 0.00 8.02 8.02 Transmission Reinforcements 2.4 10° __ 12.4 1.47 7.06 8.53 Environmental Mitigation Measures _ 1.0 0.8 1.8 0.00 1.52 1.52 Consulting Services 0.0 1.3 1.3 0.00 0.86 0.86 Base Cost 8.6 60.9 69.5 2.48- 56.96 59.44 Physical Contingencies 0.6__ _ 2.4 ._-_-- Price Contingencies 0.0 0.4 0.4 .. - Total Project Cost before 9.2 63.1 72.3 2.48 56.96 59.44 Interest During Construction Estimated Intcest During 0.5 3.7 4.2 0.5 6.3 6.8 Construction I_ III_ _ Total Project Cost 9.7 66.8 76.5 2.98 63.26 66.24 a/ al JPS is planning an additional expenditure of US$ 7.0 million allocated as follows: transmission and substations (USS 3.9 million); energy management system ( US$2 million); bundwall and other enviromnental projects (USSI.Omillion). This would bring the total cost of the project to US$ 66. 4 million. The difference between this figure and the total project cost estimated at project appraisal, without including interest during construction (US$ 72.3 million) is USS 5.9 million which JPS attributes to cost savings in the life extension of Old Harbour-4, gas turbine upgrading, and use of consultant services. Source: Project Files and Staff Estimates, JPS and World Bank 22 Table 8B: Project Financing (US$ millions equivalent) Financing Source/Item Appraisal Estimate ActuaULatest Estimate Local Foreign costs Total Local Foreign Total costs costs costs costs Costs World Bank Life Extension OH4 0.0 9.9 9.0 0.0 5.91 5.91 Telecommunications and 0.2 8.3 8.5 0.0 8.02 8.02 Energy Management System (EMS) Environmental 1.0 1.0 2.0 0.0 1.02 1.02 Mitigation _ Consulting Services 0.0 1.5 1.5 0.0 0.86 0.86 Subtotal 1.2 19.8 21.0 0.0 15.81 15.8 I Inter-American Development Bank _ Restoration of OH3 3.0 7.0 10.0 1.01 6.62 7.63 Trans. Reinforcement 2.9 10.4 13.3 1.47 7.06 8.53 Subtotal 5.9 17.4 23.3 2.48 13.68 16.16 JPS _= _ X Restoration of OH 4 2.1 18.9 21.0 0.0 20.87 20.87 Gas Turbine Upgrade 0.0 7.0 7.0 0.0 6.10 6.10 Env. Mitigation 0.0 0.0 0.0 0.0 0.50 0.50 Int. During Construction 0.5 3.7 4.2 0.0 0.0 0.0 Subtotal 2.6 29.6 32.2 0.0 27.47 27.47 Total Project Cost 9.7 66.8 76.5 2.48 56.96 59.44 b/ b/ See footnote a/, Table 8A. JPS will finance the additional US$7.0 million as noted. Source: Project Files and Staff Estimates, World Bank 23 Table 9: Economic Costs and Benefits A. Internal Economic Rate of Return (IERR) on the Rehabilitation of OH Unit 4 SAR ICR Methodology IERR on the incremental net Same as the SAR. benefits of investing in the rehabilitation of OH steam unit relative to generating power from higher cost gas turbine units to meet demand during the period 1995-2013. Costs Investment Costs of rehabilitating Same as in the SAR. the OH 4 Unit Benefits 1. Net increase in the insurance 1. The SAR has omitted this book value of the OH4 Unit. benefit because it is really an 2. Net savings in operation and accounting value and not maintenance costs (including applicable to the economic fuel costs) by using steam analysis. units powered by fuel oil 2. The ICR has used the same instead of higher cost gas approach to fuel cost savings turbine units powered by as in the SAR. diesel oil. 3. The ICR has taken the 3. Savings resulting from a incremental increase in lower level of unserved power available consumers energy due to forced outage due to the lower forced in the system , valued at outage rate of steam ulnits $1.50 per kWh. compared to gas turbine units and valued this incremental increase in the availability of power to meet demand at an average tariff of US 12.5 cents per kWh. IERR 31 % 25 % Comments: The difference between the IERR in the SAR and the ICR results from eliminating the book value of the rehabilitated unit as a benefit and valuing the incremental power available to meet demand at the average tariff. See Table 9A2 for a summary of the EIRR calculation. Notes to Tables 9AI and 9A2: l. Anl costs and benefits were valued in 1995 constant US dollars. 2. It is assumed that both scenarios are meeting the same level of demand. 3. The investment costs include rehabilitation and life extension. 4. The data for the ICR calculation is in fiscal years. It is assumed that the comparable data in the SAR is in fiscal years as well (though not stated explicitly) because JPS apparently provided both sets of data and keeps such data on a fiscal year basis. 5.For operation and maintenance costs without the project, the ICR used the scenario in the SAR adjusted for an apparent error in the way the calculations were presented in Annex 54 of the SAR. These figures apparently were in hundred US dollars instead of thousand US dollars. 4. In calculating the incremental output available to meet demand the ICR applied the difference in forced outage rates using gas turbines and steam turbines to the unit output data provided by JPS. . S. The ICR calculation of costs and benefits is based on the supply of the following data by JPS: investment costs in rehabilitation ; operation and maintenance costs; and the forced outage rates; and unit output. Values for FY 1997 and 1998 are actual figures and that for FY 1999-2013 are projected. 24 Table 9: Economic Costs and Benefits (Continued) B1. IERR on the Energy Management System SAR ICR Methodology Calculate the IERR on the net Same. benefits of investing in an energy management system that would result in fuel savings and a lower level of unserved energy in the system. Costs Investment costs in energy Same. management equipment. Benefits Savings of 10 percent of annual Same. fuel costs and 2 percent of the cost of unserved energy. IERR 20% 35 % Comments: The difference between the IERR in the SAR and the ICR results from correcting an apparent error in the SAR, which valued only the unserved energy in OH Unit 4 instead of all the units involved in the energy management system. See Table 9B2 for a summary of the EIRR calculation. Notes to Tables Bl and B2: 1. All figures are in constant 1995 US dollars. 2. The Energy Management System (EMS) was not completed and operating when the Loan was closed in June 1998.. The ICR assumes the same investment as in the SAR but with a delay, since the EMS is not expected to be completed until 1999. It has also assumed that benefits will not begin to accrue until one year after the installation of the system (2000). 3. The ICR uses the same percentage estimates for estimating fuel and unserved energy savings as in the SAR since actual data on fuel savings is not available. 4. The ICR analysis is based on data provided by JPS on fuel costs, output of units involved in the system, and forced outage rates. 25 Table 9A2: Economic Evaluation of Old Harbour (OH) Unit 4 Increm. Value of Net Savings in Icrem. O&M cost Total Savings Unserved Unserved Total Net Invest. without the O&M in O& M Energy Energy Benefits Benefits Costs project Cost Costs with Savings Constant of Proj. Thousand Thousand Thousand Thousand Project Thousand Thousand Thousand USD USD USD USD MWH USD USD USD 1995 13627 13627 0 0 0 0 0 1996 26012.63 15087 14628.5 431.5 0 0 0 -25554.1 1997 15999 17459.8 -1614.804 0 0 458.5396 -1460.8 1998 15389 13868.3 1322.7 0 0 -1460.804 1520.7 1999 16720 17280.7 -952.7 41578.8 10394.697 1520.7 9834.0 2000 17104 14114.1 2788.9 36600.0 9150 9834.0 12139.9 2001 18174 15704.9 2089.1 40094.4 10023.596 12139.9 12492.7 2002 16033 15916.9 -10.9 39380.7 9845.2 12492.7 9961.3 2003 17024 15663.6 1315.4 36111.4 9027.8 9961.3 10388.2 2004 18142 16081.0 1848.0 36861.7 9215.4 10388.2 11276.4 2005 18112 14938.6 3023.4 33825.7 8456.4 11276.4 11629.9 2006 19390 15435.7 3624.3 34773.7 8693.4 11629.9 12647.7 2007 20612 14009.9 6184.1 31347.0 7836.7 12647.7 14438.8 2008 20598 14760.3 5632.7 32909.8 8227.5 14438.8 14065.1 2009 22167 14165.7 7597.3 31490.6 7872.7 14065.1 15874.0 2010 22861 16348.4 6142.6 36432.4 9108.1 15874.0 15620.7 2011 23038 16465.6 6444.4 36446.1 9111.5 15620.7 15683.9 2012 24559 12456.6 11820.4 27027.3 6756.8 15683.9 18859.2 2013 25797 12456.6 13055.4 27027.3 6756.8 18859.2 20097.2 Total 26012.63 360433 285382.3 70741.7 521906.8 130476.7 185430.2 179514.7871 IERR 27% 26 - Economic Evaluation of the Energy Management System Inv. Costs i in 000 Annual Annual Savings at Annual Cost of Un- Annual Savings at Annual Net Benefits USD Fuel Cost in 000 USD 2% of Annual Fuel Served Energy w/ 10% of Annual in 000 USD Cost Project Unserved Energy in 000 USD in 000 USD Cost in 000 USD SAR ICR SAR ICR SAR ICR SAR ICR SAR ICR SAR ICR 1995 54265 0 147 0 0 1996 4000 47288 0 31 0 -4000 1997 4100 49821 996.4 99 9.9 -3093.7 1998 59495 1189.9 88 8.8 1198.7 1999 64815 1296.3 343 34.3 1330.6 2000 66837 1336.7 130 13.0 1349.7 2001 72860 1457.2 547 54.7 1511.9 2002 71345 1426.9 164 16.4 1443.3 2003 76012 1520.2 3255 325.5 1845.7 2004 80779 1615.6 4578 457.8 2073.4 2005 82681 1653.6 4889 488.9 2142.5 2006 88758 1775.2 5354 535.4 2310.6 2007 95070 1901.4 4990 499.0 2400.4 2008 98526 1970.5 4817 481.7 2452.2 2009 106625 2132.5 5450 545.0 2677.5 2010 112708 2254.2 6303 630.3 2884.5 2011 116332 2326.6 6206 620.6 2947.2 2012 124219 2484.4 6718 671.8 3156.2 2013 130320 2606.4 7254 725.4 3331.8 IERR 20% 27 Table 10: Status of Project Covenants Original Revised Coven- Fulfillment Fulfillment Agreement/ ant Status Date Date Covenant Description and Comments1 Section Type LA/ 2.02 ADM C Borrower to open and maintain a special deposit account in the Bank of Jamaica, for the purpose of the Project. Comments: Borrower opened the account at the National Commercial Bank a the request of the Ministry of Finance. LA/ 2.06 ADM C Interest and other charges payable in arrears on May 5 and November 15 of each year. LA! 3.01 EXEC CP Borrower declares commitment to the objectives of the Project as set forth in Schedule 2 of the Agreement; enable JPS to perform according to the provisions of the Project Agreement; and not take any action thiat would interfere with such performance. Comment: Borrower's initial strong commitment was not sustained during the project implementation period. LA/4.01 FIN C Borrower to maintain separate accounting records for the (a)(i-iii) project and allow the Bank to examine the records LA/4.01 (b) FIN CD Borrower to have project accounts and records audited (i-iii) annually; submit the audit to the Bank within six months at the end of the audit year; and fumish any other information that the Bank may reasonably request. Comments: 15 months 'delay in submitting FY 1996/97 audit to Bank LA/6.01 EFF C Borrower to execute a Subsidiary Loan Agreement; and provide the Bank with findings and recommendations on alternatives to meet the Bank's standards for emissions of sulfur dioxide, pursuant to the action plan noted in section 2.07 of the Project Agreement. Comments: JPS at end-1995 submitted environmental action plan to the Bank as condition of loan effectiveness. LA/6.02 EFF C Project Agreement to be duly authorized or ratified by JPS and the Subsidiary Loan Agreement be duly authorized and ratified by the Borrower and JPS. PA/ 2.01 EXEC CP JPS declares commitment to objectives as defined in Schedule 2 of the Loan Agreement and shall inmplement the project with due diligence and in conformity with appropriate administrative, financial, engineering, power generation, public utility, and environmental practices. Comments: Diligence in implementation declined during the implementation period PA/2.05 EXEC CP JPS shall exchange views with the Bank on the progress of the project. and promptly inform the Bank of any condition that interferes or threatens the project's progress or the achievement of its objectives. Comments: JPS did not submit to the Bank the required documentation on its performance contract with NIBJ. 'Key covenants goveming the project. Descriptions summarized from legal agreements. 28 PA/2.06 (a) EXEC CD 03/31/96 03/97 JPS to carry out not later than March 31, 1996, a study on its long-run marginal costs, under terms of reference satisfactory to the Bank;. Comment: Report was prepared with two years delay. JPS accepted thefindings of the study and submitted the report to the Bank. The Bank does not consider implementation, by JPS, of the study's recommendations to befully satisfactory. PA/2.06 (b) EXEC C JPS to provide the study to the Bank for review and comment shortly after its completion. Comment: JPS provided the study to the Bank by end-March 1998. Joint review was undertaken in September 1998. PA/2.06(c) EXEC NC 60 days Based on the recommendations of the study and the Bank's after Bank comments on the study, JPS is to prepare an action plan, comments satisfactory to the Bank, aiming at restructuring its energy tariffs. Comment: JPS has accepted thefindings of the study but has not yet prepared a plan. PA/2.06(d) EXEC NC JPS to carry out such plan of action to restructure energy tariffs in a manner and under a time-table satisfactory to the Bank. Comment: JPS-NIBJperformance contract severely circumscribes scope for tariff action. PA/2.07 EXEC CP JPS to prepare and furnish to the Bank an action plan satisfactory to the Bank and NRCA to implement Part G of the Project including measures for reducing sulfur dioxide emission levels at the Old Harbour power plant, in order to comply, by December 31, 1999 with Bank environmental standards and by December 31, 2000 with NRCA standards. Comment: JPS provided an environmental mitigation plan to the Bank but has not initiated specific measures required to meet sulfur dioxide reduction targets by 1999-2000. PA/2.08 OP NYD JPS to furnish the Bank, within six months after the closing date of the project, a plan for the project's future operation. Comment: Plan has not yet been submitted PA13.01 MO NC JPS to carry out operations in accordance with sound administrative, financial and power generation, public utilities and environmental practices, under the supervision of qualified and experienced management. Comment: The operational efficiency andfinancial position of JPS have stagnated or deteriorated during much of the project implementation period. PA/ 3.02 MO CP - JPS to operate its plants and other facilities in accordance with sound engineering, financial, power generation, and public utility practices. Comment: JPS has not completed the energy management system, considered an important component for ensuring safe, efficient power plant Ioperations. PA/3.03 MO JPS to take out insurance satisfactory to the Bank against such risks and in such amounts consistent with appropriate practice and satisfactory to the Bank. 29 PA/4.01(a) FIN C JPS to maintain records and accounts adequate to reflect, in accordance with sound accounting practices, its operations and financial condition, including separate accounts for the Project. Comments: LCOAA requested improvements in project accounts. PA/4.Ol(b)(i-iii) FIN CP JPS to have its records, and accounts audited by independent auditors acceptable to the Bank, at the end of each fiscal year; furnish to the Bank certified copies of audited financial statements no later than six months after the end of each fiscal year; and provide the Bank with any other information concerning records that the Bank may reasonably request. J____________ Comment: Not complied with since FY 196/97. Abbreviation used in Table 10: Agreements: LA Loan Agreement; PA=Project Agreement; Status: C=Complied; CD = Complied with delay; CP =Complied Partially; CPD = Complied Partially with Delay; and NC = Did not Comply. Types of covenants: ADM = administration; EFF = Effectiveness; EXEC = Execution; FIN= Financial; MO = Management and Operations; and OP =Operational Plan Source: Project Files and Staff Estimates, World Bank 30 Table 11: Compliance with Operational Manual Statements (Not applicable to this project) Table 12: Bank Resources: Staff Inputs Stage of Project Cycle Planned a/ Actual Staffweeks 000 US$ Staffweeks 000 US$ Through -- 61.1 191.9 appraisal Negotiations through Board approval l 9.1 34.8 Supervision 102.9 345.2 Completion 6.0 19.0 Total 179.1 590.9 a/ Not reported in data received from the Bank MIS. Source: MIS Data and StaffEstimates, World Bank 31 Table 13: Bank Resources: Missions Stage of Month and Days Numbe Staffing Rating Key Areas of Project Cycle Year in r of Concern/Problems Field persons ______ l Identification September! 22 5 1 OP Not Physical plant condition; and October I PE applicable. procurement; and Preparation 1994 3 CON studies a! Appraisal November/ 31 10 lOP, Not Financial condition; and December I PE, applicable. legal framework b/ 1994 8 CON Supervision 1 April/May 5 2 IPE S Physical progress; studies; 1996 IOP and ftnance c/ Su~pervision 2 May 1997 12 f/ 3 1 PE S Environmental component lop ____ _ _ _ _ ~~~IRM Supervision 3 May 1998 10 d/ 3 lEC U Closing date/completion; lop and financial condition ei ITL and fiaca c in Completion October 6 f/ I lEC Not ICR timing and 1998 _ applicable. infornation retrieval gl Notes: / The project responded to major damage to OH 4 Unit, the resulting capacity shortfall, and the need for emergency rehabilitation work. External consultant needed to support JPS staff in procurement for equipment. bI Requiremnent for 8Bpercent rate of return not viewed by the mission as valid due to the lack of expected JPS investments in new generating capacity. Need for modification of the tariff structure to support privatization initiatives. Establishment of the Office of Utility Regulation to be a condition of effectiveness . c/ OH 4 rehabilitation completed. Plant re-commissioned in January 1996. Moderate problems in studies progress and financial performance. Non-compliance with covenant on completion of the long-run marginal cost study and consequent delay on improved financial performance. d/ Total duration of the mission; however, time in the field differed among team members: EC (9 days); OP (6 days); and TL (3 days). e/ MEF requested the extension of the closing date by one year, until June 30, 1999. The mission informed the Government and JPS that extension would be considered only with action on the recommended tariff increase. It also explained that without extension, the Bank would not be obliged to finance goods and services even if "no objection" given for contracts. The Bank found electricity tariffs insufficient to meet financial objectives and determined that an increase of at least 8 percent would be necessary. f Mission also supervised the Energy Sector Deregulation and Privatization Project (Ln. No. 3502-JM) and the Energy Demand Side Management Demonstration Project ( GET Grant No 05-28695-JM) . gl The mission received some of the information required to prepare the ICR and agreed with JPS on the timing for the ICR, the receipt of additional information required, and the coordination of ICR inputs by the Director of Corporate Services. Skill codes: EC - Economist; CON=Consultants; OP - Operations Officer; PE - Power Engineer, RM = Resident Mission Staff; and TL -Task Team Leader, Rating Codes: 2-moderate problems; S=Satisfactory; U- Unsatisfactory Source: Project Files and Staff Estimates, World Bank 32 Appendix A SIJMMARY OF LOAN OBJECTIVES AND ACHIEVEMENTS Loan Objectives Loan Conditionality Achievement by Loan Closing Restore electricity service to Parts A;B;C, Schedule 3 of Restoration of Old Harbour normal conditions as early as Loan Agreement units 3 and 4 and life possible, thus eliminating extension of Old Harbour unit supply shortages _ 4 completed by January 1996. Reduce generation costs Part D, Schedule 3 of Loan Upgrade of gas turbines 3, 4, through lower-cost plants and Agreement and 5 completed by June upgrading of existing 1996, 10 months behind facilities; safeguard the system schedule. against breakdown of installations, thus improving generation security Enhance system reliability to Part F, Schedule 3 of Loan Transmission system and reduce the likelihood of Agreement substation reinforcement was recurrence of plant incidents, 64% completed by June 1998 by improving the and is scheduled for telecommunications and completion by March 1999, 15 energy control systems and months behind schedule. reinforcing the transmission network Improve economric resource Section 2.06 of Project The cost of services and tariff allocation through reform of Agreement reform study was completed in the electricity tai-iff system March 1998, 24 months behind schedule, and was jointly reviewed by JPS and the Bank. Except for a rebate scheme to shift load from peak to off-peak, the study recommendations have not been implemented. Reduce and control Part G, Schedule 3 of Loan JPS prepared an environmental impacts Agreement environmental action plan in associated with power system Section 2.07 of Project early 1996, as a condition for facilities Agreement loan effectiveness but by June 1998, overall completion was only about 60%. S02 emission tests are due to start in early 1999. Emissions are envisaged to be reduced through repowering of generation units only. 33 Appendix B Page 1 of 4 JAMAICA Generationi Recovery & Improvement Project ("GRIP" - Loan No. 3944-JM) - Supervision and Project Completion Mission Energy Sector Deregulation & Privatization Project ("ESDPP" - Loan No. 3502- JM) - Supervision Mission Energy Demand Side Management Demonstration Project ("DSM" - GET Grant No. 05-28695-JM -Supervision Mission Aide memoire Introduction and Summary 1. A World Bank project completion/ supervision mission on the aforementioned projects (Mr. J.U. Richter, task manager) visited Jamaica during September 28 - October 3, 1998 to take stock of the current position and issues related to these projects and agree with the authorities on steps to advance project implementation. The mission metwith the Permanent Secretary at the Ministry of Mining and Energy, Mr. G. W. Perins; the Chairman ofthe Jamaica Public Service Co., Prof. 0. Shirley; the President of the National Investment Bank of Jamaica, Dr. G.M. Chen; the Director at the Planning Institute of Jamaica, Ms. L. Palmer; the Director General of the Office of Utility zegulation (OUR), Mr. W. Hay; and executives and senior staff of these institutions. The mission would like to express its appreciation for the cooperation and courtesies received. 2. The mission leamed that JPS in the course of this year has succeeded in strengthening operational performance, as evidenced by improvements in the principal technical parameters (e.g., availability of on-line capacity; generation heat rate; reduction in overtime). Assisted by the decline in fuel prices, JPS managed to attain positive net income during July-August. However, the mission did not yet get a clear picture how these improvements are to be maintained. Also, lack of progress in reducing technical and administrative losses and the renewed deterioration in accounts receivable since March pose problems which the mission suggests that JPS management give high priority. 3. The Govenmuent expressed its continued commitment to private-enterprise based development of the energy sector. The mission recommends that the scope, modalities, and timetable for enhanced private participation be developed as a matter of priority, and that legislation be amended to give OUR proper authority in the electricity sector. The Bank is ready to cooperate with the Government in this endeavor. GRIP 4. Loan No. 3944-JM was closed on June 30 and the undisbursed balance of US$5.2mn was cancelled. (The original loan amount was US$21mn.) The telecommunications/EMS, environmental management, and transmission components (the latter IDB-financed) of the Project have yet to be completed. The mission was informed that project completion is envisaged for June 1999. Appendix B 314 Page2 of 4 5. The mission discussed with JPS' tariff specialists the results and recommendations of the lons-run maginal cost and tariff study. While JPS' decision to introduce an economic incentive tariff for industrial consumers- aimed at moving loads to off-peak - is a step into the right direction, the mission recommends that the study's other recommendations will also be applied, especially adjustments in the tariff structure in line with the corresponding structure of LRMC, based on improved load research. 6. GRIP Implementation Completion Report. JPS management and the mission agreed on the importance of a timely preparation of the Implementation Completion Report (ICR), due to be submitted to the Bank's Board of Executive Directors by mid- December 1998. For implementing future projects and for managing JPS overall, it is important to identify the lessons learned from the implementation of this Project anid to prepare an operational plan to ensure that the Project's achievements are maintained. 7. The mission stressed that the preparation of the ICR will be ajoint effort between JPS and the Bank. There was agreement that Mr. H. Heron, Director, Corporate Services Division, will coordinate the preparation of inputs by JPS for the ICR. The mission received a significant amount of information although further information required for preaig the ICR is still pending, especially for undertaking the economic analysis of the principal project components. The mission requests that this information be submitted by October 15. ESDPP S. The mission discussed with the authorities the prospects for reactivating the privatization program in electricity, within the constraints of the performance contract between JPS and the National Investment Bank of Jamaica (NIBJ). The mission recogized the recent improvements in JPS' operations but indicated its concern about the sustainability of these improvements, and JPS' ability to secure financing for expansion, in the prevailing situation of national and international financial markets. The mission also stressed that in view of the necessary lead-time for preparing a well- designed privatization program, steps ought to be taken already prior to expiry of the JPS-NIBJ agreement, so as not to delay this process further. The mission pointed out that a minority participation by small-scale local investors as considered by JPS management would help to develop the domestic capital market, but securing direct foreign investment would be critical for transfer of modem technologies and management techniques and long-term capital, as DFI in the current intemational financial context has proven to be steadier than other private capital flows. 9. OUR, supported by the Ministry of Mining and Energy, has requested financing through ESDPP for evaluations of the current legalregulatory framework and of options for electricity tariff regulation. These evaluations would provide the groundwork for future sector reform. The Bank will give its no-objection to this evaluation once detailed terms of reference and a short list of suitable consultants are prepared. 10. Hunts Bay 32.5MW Combustion Turbine Unit. The ESDPP Project Agreement envisages the transfer of this unit to private sector operation, which has not yet occurred. Te mission recommends appropriate action. Appendix B 35 Page 3 of 4 11. Undisbursed Loan Balance and Take-out Option for Private Investor. There has been very little activity on this Project over the past two years or so. The current undisbursed balance of US$42.5mn is largely due to the preservation of a take-out option for the private investor to refinance CARIFA bonds maturing at end-i 999. The mission reiterated the Bank's proposal to discuss with the investor the possibility of waiving this option, which would result in savings of commitment fees of approximately USSO.lmn/year. The remaining loan balance would be available for funding activities related to the preparation of legal/regulatory reform and privatization in the energy sector (para 6). Energy Demand Side Management Pilot Project 12. The mission reviewed ongoing activities, in particular the solar water heating program and paiticipation of DSM Unit staff in intemnational conferences and seminars. A US$0.6mn no-objection request to initiate a solar water heating program for hotels is currently being processed by the Bank. In view of the Grant's closing date of December 31, 1998, the Government has requested an extension of this closing date until June 30, 1999. (The undisbursed balance on the grant amounts to US$2.05mn.) The mission supports this request, given that activity implementation has improved; major acivity components critical to the success of the Project have yet to be completed; and that without availability of the entire GET funds, supplementary funding and the sustainability of the Activity itself would be adversely affected. 13. The mission requested additional information required for the preparation of the annual status report on the Project, in addition to the monthly regular information. PERD Grant fDr Electricity Generation Expansion 14. This USS0.75mn grant was extended in 1997 to finance studies for evaluating possible sites for the next electricity generation scheme (needed by 2002), provided that this scheme would be built, owned, and operated by a private investor. In order to activate the Grant - which has been inactive for nearly two years -, the mission reiterates the Bank's request that the Govemrnment conununicate to the Bank, by November 30, (i) its confirmation that economic and sector policies will be directed toward a primary role for private enterprise in electricity sector development and (ii) its assurance that the next electricity generating scheme (the one to be studied under the PHRD grant) will be offered to the private sector, under acceptable conditions. Should this communication not be forthcoming, the mission would recommend to the Bank the cancellation of the Grant. Audits 15. Ihe mission was informed that the JPS financial statements and project audits for FYs 1996n and 1997/8 were not ready by September 30, as JPS had originally indicated. The mission requests that the financial statements, project audits, and updated infonnation on JPS' corporate business plan be submitted to the Bank not later than November 15, 1998. Appendix B 26 Page 4 of 4 FOlOW-Up 16. The next project implementation completion/ project supervision mission is planned for end-November/early December. 17. The conclusions and recommendations of this aide memoire are subject to confirmation by World Bank management. Kingston, October 2, 1998 J -Uwe Richter Task Manager 37 Appendix C Page I o L Pae . kiv 111998 %4 ;m &?4. Public Service Company, Ltd. 6 KNUTSFORD BOULEVARD, P.O. BOX 54, KINGSTON, JAMAICA TELEPHONE: (876) 926-3190. TELEX: 2180. CABLE: JAMSERV, TELEFAX (876) 926-6710 November 6, 1998 The World BEank ISIS Streci. N.W. Washilngton, D.C. 20433 U.S.A Attention: Mr. Jorg-Uwe Richter Dear Mr. Richter Re: Project Review from Borrower's Perspective Fulrtler to otur letter of October 16, 199S transmitting informationi for the Implementation Coompletioni Repor-t (ICR) please finld enclosed. .JPSC o's "Project Revie\\ fi-olml the Borrower's Perspective" of the recently conicluided Generation Recovery and Improvemenit Program (GRIP) Loan 3944-JM. For further infonnation and/or clarification please contact the undersigned. Yours truly, Jamnaica Public Service Co., Ltd. Hopetoni Heroni Dirccior. Corporatc Services HH*jmf DIRECTORS: PROF. GORDON SHIRLEY (Chairman), DERRICK DYER (Managing Director). PAUL E. AFFLICK, GRACE A. ASHLEY. DR. THE HON. CARLTON DAVIS. BEVON R. FRANCIS. BASIL NELSON. DERRICK WEBB Appendix C 38 Page 2 of 13 PROJECT REVIEW FROM BORROWER'S PERSPECTIVE JAMAICA PUBLIC SERVICE COMPANY LIMITED Generation Recovery and Improvement Project - Loan No. 3944-JM Executive Summary The Generation Recovery and Improvement Project, was signed November 3, 1995, and made effective on March 28,1996. The Project was convened in response to an incident at the Old Harbour Power Plant on June 3, 1994, that erased 123 MW of the Company's base load capacity (22% of installed capacity and 34% of base load capacity). This resulted in reduced reserved margins critical for reliable system operation and dependence on more expensive, inefficient peaking plants and island-wide forced outages. The Bank terminated the Project as scheduled on June 30, 1998. At that point, the project was 75% complete with 100% completion scheduled for June 1999. The total cost of the Project was US $76.5 million with US $21 million provided by the World Bank, US $23.3 million by the IDB and US $32.2 million by the Company. The foreign component of the Bank's contribution was estimated as US $19.8 million and US $1.2 million in local costs. Total disbursement at closure was US $16.31 million. A balance of US $4.69 million was, subsequently, cancelled by the Bank. Project Objectives The objectives of the Project were primarily to (a) restore normal electricity service by replacing lost generating capacity; (b) reduce generation costs by upgrading facilities; (c) enhance system reliability by improving the energy control system and by reinforcing the transmission network to reduce the likelihood of future recunence of generating plant incidents; (d) improve resource allocation through electricity tariff reforms; and (e) reduce and control environmental impacts at power facilities. Project Implementation Record Below is an analysis of the factors that have affected the Project's intended outcomes. The Project was made effective March 28, 1996, 21 months after the Old Harbour incident. Contributing to this was the delay period between signing of the loan in November 1995 and when it was made effective and the lengthy bureaucratic negotiation and approval process. All the generation projects and some of the other subprojects 39 'Appendix C Page 3 of 13 commenced well before the loan became effective and thus limited the impact of the delay. Owing to the urgency created by the shortfall in generation, shortcuts were taken to procure contract services through direct negotiations with recognized vendors. This approach reduced implementation time and resulted in the completion of all generation subprojects by June 1996. All these contracts were completed well within the Staff Appraisal Report (S.A.R.) cost estimates. The Life Extension OH 4 project, directly financed by the Bank, was completed at 52% below S.A.R. estimates. The Long Run Marginal Cost Study, aimed at Cost of Service and Tariff Reform, was completed in March 1998. The terms of reference for this study was expanded, based on the recommendation of the Bank's representatives, and this delayed completion of the Study. Adhievement of Project Objectives Generation Restoration of Old Harbour Unit 3 - This project consisted of the repair of damages to Unit No. 3 boiler caused by the incident on June 3, 1994. This project also includes rehabilitation work done on the boiler and turbine. At the time of the incident, material was on site to carry out a rehabilitation of unit #4 under the IDB programme. Some of this material was subsequently utilized to expedite the repair of the unit #3. Restoration was completed and the unit (MCR rating 55MW) retumed to service in December 1994. Restoration of Old Harbour Unit 4 - This sub-project included the supply of equipment and services for the full restoration of the Unit as well as the control building, chemical laboratories and stores. The project also included the installation of a new boiler unit. This unit (MCR rating 68.5MW) was successfully restored to the system in January 1996. Life Extension of Old Harbour Unir 4 generation turbine - This became feasible with the June 1994 explosion at the Old Harbour Power Station, and subsequent static screening analysis conducted, showing that the Life Extension Programme had a great investment cost advantage over other possible options in terms of the least cost generation expansion plan. The contract implemented under the loan programme comprised the supply and installation of equipment for the rehabilitation of the unit and life extension for the turbine-generating facilities and associated systems. The remaining useful life of the unit after completion of the Life Extension work is estimated to be fifteen years. 2 40 Appendix C Page 4 Of 13 Gas Turbine Units 3, 4 and 5 Upgrade - This sub-project comprises rehabilitation and life extension of the three frame 5 General Electric gas turbines. The project included the implementation of a high technology upgrade programme. The gas turbine units involved are the Hunts Bay Units 4 and 5 and Bogue Unit 3. These units were scheduled to be decommissioned by 1997/8, however, under the upgrade their technical lifetime was extended by ten years. The upgrading of GT # 5 was completed and the unit returned to the system on January 23, 1996, when the unit was re-synchronized to the JPSCo system. GT # 4 was completed on June 11, 1996, when it was re-synchronized to the system. Work on GT # 3 was completed in 1995. Telecommunication and Energy Management System (EMS) Analysis of the existing Telecomnmunication and EMS systems showed that they were over 10 years old and could no longer meet JPSCo's current and near future needs as well as the Company's optimal operational requirements. TWo contracts were completed. The first contract included supply of a telecommunication system consisting of a digital microwave backbone radio, fractional rate UHF digital radios and the necessary multiplex and auxiliary equipment. The second contract provided for the acquisition of a modern Energy Management System based on open system architecture. The telecommunication system was completed in June 1998. Implementation of the EMS project is ongoing and will be completed in March 1999. Transmission System Reinforcements The additional transmission facilities will enable reliable transmission of power frorm the Old Harbour Power Plant. Construction of 32 kn of 138 kV line between Parnassus and Spur Tree and 16 km of 138 kV line between Spur Tree and Kendal has been completed and awaits interconnection to their associated substations. The three (3) associated substations are under construction and scheduled for commissioning in December 1998. The Old Harbour switchyard expansion was completed in 1995, in time to accommodate the Wartsila/JEP 72 MW barge on the JPS system. Environmental Mitigation Measures This component includes several development and implementation measures for Power Plant facilities, especially the Old Harbour facility. A "Old Harbour Power Station Environmental Mitigation Measures - Implementation Plan" was submitted and approved by the Bank. 3 41 Appendix C Page 5 of 13 Activities cormpleted under the Plan thus far include development of Oil Spill Prevention and Countermeasures Plan, Chemical Management Plan and a Wastewater Management Plan. Aspects of these plans are now being implemented including procurement of oil spill equipment, construction of a wastewater treatment plant, stack platforms for emissions monitoring, installation of meteorological stations to monitor ambient air quality at power plants and construction of permanent bundwalls at fuel storage tanks. Equipment at the Company's plants was screened to deterrnine PCB levels and contaminated equipment removed. A total of five hundred and eighty (580) metric tons of PCB waste was exported for incineration. Noise levels were monitored at generating facilities and their immediate environs and noise levels found to be well within accepted standards. As part of groundwater management, an assessment was done on possible impacts of plant activities on groundwater. Impacts were found to be negligible. Asbestos Surveys were carried out at the plant facilities and all asbestos was removed. Several plant personnel were trained in asbestos management and abatement procedures. Upgrading of analytical laboratories at the two major plants was undertaken and included the procurement of improved equipment for advanced testing and analysis of oil, water and fuel being utilized by the generating units to ensure safe and economical performance of the plant. Training of lab personnel was also undertaken. Consulting Services Several consultants were appointed to provide technical support, management, advisory, and enginee;ring services under the project. A generation specialist was appointed and provided technical and project management assistance for the generation components of the project. Bailey Network, a specialist firm in telecommunication and energy management systems, was contracted to provide project management and engineering services. This contractor was supported by a second consultant, who provided specialized local assistance and support in implementation of the Telecommunication/EMS Improvement project. Hagler Bailly was also contracted to develop long run marginal costs (LRMC), specifically in respect of cost of service and to make specific recommendations for tariff reforns. A final report has been submitted and its recommendations are noted and will be implemented in due course. 4 42 Appendix C Page 6 of 13 Difficulties The major deterrents encountered in implementing this project were as follows. There were initial delays between Bank approval on November 3, 1995 and the effective date of the loan - March 28, 1996. The delays were due to the difficulties in completion of the conditions precedent. The impact, of the delay in effectiveness, on project activities were minimized as the critical generation components were implemented utilizing IDB, JPSCo and insurance proceeds. Up to the end of June 1998, the Company has not received full reimbursement from its insurers as they are still entangled in US legal courts in an attempt to determine liability among them. There is a total of US $10 mnillion still to be received from JPSCo's claim. Lengthy evaluations and approvals influenced the pace of project implementation, especially with respect to the transmission and telecomrnunication/EMS subprojects. The process was further complicated by requirements for Intemational Competitive Bidding and pre-qualification which tends to require many more review and approval steps in the procurement Project Sustainability The Bank did not extend the loan programme in June 1998, when the loan was scheduled to end. At that point, all generation projects had been completed and the Company was in the process of implementing the telecommunication/EMS and environmental subprojects. With the termination of funding, the Company has continued these ongoing activities, to which it was committed, from alternative internal resources. In the first quarter of 1997, the management of the Company signed an agreement with the National Investment Bank of Jamaica (NBJ) to operate the Company as a "virtual private sector company" for a period of five years. The agreement requires management to introduce efficiencies, improve quality, reliability of service, and profitability. Targets were established for several key performance indicators. In support, a number of projects are being implemented: o Computerization/automation of meter reading, collections, fleet management, and management information. 3 Power system reliability improvement activities. a Fuel management rationalization. O System loss reduction The Company, at the end of 1997, employed 2,102 persons inclusive of 119 time-bound employees and had a customer base of 423,788. This yields an index of 202 customers/employee (5 employees per 1000 accounts) and compares favorable with an 5 43 Appendix C Page 7 of 13 index of 158 in 1994, 167 in 1992/93 and international standards. The current complement is 2,088 employees with a resultant index of 215. Operation and maintenance costs, which are normally high, are being controlled through a number of initiatives, including keeping wage increases within inflation levels, maintaining staff complement at existing levels and instituting staff development programmes. The LRMC study, conducted under the Project, indicates that the average tariff of 12.5 US cents per kWh is in line with the true economic cost. The study indicates, however, that there is a misalignment of the various rate categories with commercial and industrial groups subsidizing residential rates. In order to promote long-term national industrial growth, the Company will realign rates, over time, by way of a lower real average tariff benefiting the commercial/industrial sector without increasing residential rates. The Company is in the process of offering incentives to large industrial customers to shift their consumption to off peaks for rates at up to 8 '/2 % discounts. The Company is also in negotiation with a large industrial customer, not currently on the grid, to provide service at rates below the existing rates for such customers. In the medium term there is a requirement for additional capacity of 100 - 120 MW of base-load generation. The implementation mechanism for this addition will be in keeping with the Government's policy for the addition of capacity in the electrical sector. Bank Performance The Bank was very responsive to requests for disbursements and approvals, which assisted in expediting project activities, up to Project termination. The unprecedented action of the Bank, in terminating the Project despite a justified request for extension, resulted in obfuscation and delays in reimbursement requests submitted in the month prior to termnination. The Bank gives its reasons as changes in its own administration requiring stricter adherence to the closure deadlines and the Company's non-compliance with requirements for an adjustment to its tariff structure. The Bank's insistence on these issues without considering extenuating factors and the progress made with other project requirements is puzzling. Borrower Performance Tlhe Company continues to be hindered by inordinate delays in project implementation especially in comparison to the S.A.R. schedule. S.A.R. estimates for procurement activities tend not to reflect the realities of the actual bureaucratic impediments and the implications for timely review and approvals. The Company was able to control costs on the subprojects and where costs were increased, it was due to expansion of project scope to reflect the perceived changes 6 44 Appendix C Page 8 of 13 occurring in the Company. This was true for the Telecommunication/EMS, PCB Disposal and the Cost of Service study. Despite all the delays and the Bank's action, the Company was able to achieve many of the objectives and those subprojects that are outstanding will be completed within one year of the loan's closure. Assessment of Outcome The main objective of the Project, of restoring generation to normality, has been achieved. The ancillary benefits of reduced generation costs, to be accrued by lowering plant-running costs and upgrading existing facilities, has largely occurred. Plant reliability and security has also improved, through the implementation of several projects external to the loan programme but in line with the Company's new mandate. Reliability and security will improve further with the completion of the outstanding subprojects within the next twelve months. The Company is now realigning its tariffs to eliminate the subsidy to residential customers at the expense of large customers in line with the LRMC Study and the loan conditions. Since the June 1994 incident, two major BOO generation projects has been implemented. These BOO projects represent private generation and comprise 23% of installed generating capacity. A number of environmental mitigation measures, including development of management plans, disposal of PCBs, asbestos surveys, laboratory upgrading and groundwater assessments, have been implemented at generating facilities. These and other measures that are now being implemented, will significantly reduced the impact of the Company's facilities on the environment. 7 45 Appendix C Page 9-of 13 9w&z< Public Service Company, Ltd. 6 KNUTSFORD BOULEVARD. P.O. BOX 5S, KINGSTON. JAMAICA TELEPHONE; (876) 926-3190, TELEX. 2180. CABLE: JAMSERV, TELEFAX (876) 926-6710 Dccember 15. 1998 Tle World Banik- 1818 H Street. N. W W'ashington D.C. 20433 USA Attention: M,lr. Jora-Uwe Richter Dear Mr. Richter Rc: GRIP/IBank Draft Implementation Completion Report- Request for Comments We ackn.owlcdge receipt of the draft ICR for the GRIP loan anid your request for cominierits. Accordingly, pleasc find attached our comments on the draft document for your consideration. Yours sincerely 1-lopeton Heron DIRECTOR, CORPORATr. SERVICES DIVISION AtLch. DIRECTORS: PROF. GORDON SHIRLEY (Chairman). DERRICK DYER (Managing Direcor), PAUL E. AFFLICK, GRACE A ASHLEY. DR. THE HON. CARLTON DAVIS. BEVON R. FRANCIS. BASIL NELSON. DERRICKIWEBB 46 Appendix C Page 10 of 13 GRIP/Bank Draft Implementation Completion Report JPS Review It is noted that the ICR sent us for rcview is incomplete and therefore JPS ask that the Bank provide the opportmity for JPS to review the ICR in its entirety (inclusivc of aUl analyses, tables, figures and annexes), prior to publication. Below is commcntary, by paragraph, on the draft ICR sent us: Evaluation Summary Para.4 The statement by the World Bank ICR that the LRJMC was completed two years behind schedule must be viewed against the background that: The study was divided into tiree phases: 1) The first phase was completed in November 1996 on schedule, i.e. the derivation of long run marginal costs for JPSCo power system. 2) The sccond phase involved an analysis of the effects of competition and economic regulation on elcctricity prices and financial performancc of a theoretical transmission and distribution company in Jamaica. This phase was completed in May 1997 on schedule. However, the World Bank's mission in May 1997 reviewed the study and at their insistence changed the scope to include a third phase to recommend economic efficient rates in the Jamaican context. This phase had to take the new lPS Business Plan and the Performance Contract with NIBJ into consideration. New data had to be gathered to support the ensuing analysis. This phase looked at a levelized tariff for the next ihree years. The revised and extended scope explains the late finish to the LRMC study. Para, 5 The Bank's assessment, of "improvement unsustainable without a tariff increase', is not justified by any supporting evidence in the ICR The improvements in such areas as heat rate, generation availability and reduction in ovcrtime expenditures are not dependent on increases in tariffs. P-ara 6 The estimate of overall project completion at 84% in June 1998 conflicts with para. 19, of Assessment section, which states 90/o. 47 Appendix C Page 11 of 13 Para. 10 The Bank's assessiment of "Unsatisfactory" for project implcmentation does not agree with their estimatc of 84-90% project completion. If the project was 90% complete at termination it scems unreasonable to argue that implcmentation was unsatisfactory, especially after a rcasonable request for loan extcnsion was denied with only 10% remaining. Para. 11 It is also unreasonable to argue that projcct outcomes were "unsatisfactory", as the bank's intended outcomes were all substantially achieved, or o0 their way to being achieved. Even in the case of the tariff reform, this is being done through the EDI programme and other initiatives. Part I - Project Implementation Assessment Para 4 The comnent that the projcct implementation is 'unsatisfactory' must be viewed against the background that the Loan was made cffcctive March 1996 and the SAR projected completion by December 31, 1997. The Bank also delayed the start of the project considerably. The EMS is a three-ycar project and the fact that the Bank approved it led us to believe that the project would have becn extended. Also there wcre delays caused by the lowest evaluated bidder, Siemens Energy who refused to sign the contract. They unilaterally decided to increase the contract sum and the Bank asked us to be patient with them before going to the next lowest evaluated bidder. This lead to further delays. This project represents 25% of the total project loanL The Bank's changes in supervisory personnel also aggravated this situation resulling in long delays to approve projects and important changes to contracts. The Bank asked for a change to the scope of the LRMC study and this lead to time and cost increases. Para, 8. 13 The Bank's insistence that JPS has not met the objective of reducing SO2 emissions to mcet WB and NRCA levels seems unreasonable. JPS has undertaken combustion optimization on the Old Harbour Unit #3 & 4 and has rctired the very inefficient "A" station. These measures have significantly reduced emissions. JPS is now developing the mechanisms to verify the actual emissions. There seems to bc an overemphasis on the S0z emissions with less emphasis on the other nine activities listed in the Bank's SAR. 48 Appendix C Page 12 of 13 Thesc activities and their status are as follows: 1. Oil Spill Prevention Plan - Completed 2 Oil Spill Containment (bundwall) - Completed Nov'98 3. Laboratory Upgrading - Completed 4. Training of personnel - Completed 5. Asbestos Surveys and Mgt Plans - Completed 6. PCB Surveys and Mgt Plans - Completed 7. SO2 Mitigatory Measures - Met station installed and is to be commissioned. Bids had to be re-tendered for construction of Stack Platforms. 8. Provision of Waste Water Treatment Plant - RFP prepared and to be tendcred 9. Oil Spill Countermeasures - Conlract to purchase equipment about to be awarded It is clear from the list above, that it would be unfair to highlight one item to attribute to the failure of all the othcr activities. To state that "....mainly surveys and studies wcre financed involving few capital work}s..-" is clearly mislcading. The programme required four(4) capital projects and the two major ones havc bccn undertaken with some progress made on the others and these could have been completed within the year extension requested. A fifth capital project which provided for the construction of a PCB processing facility was affected by delays caused by the Bank, who lost the cvaluation report submittcd on September 16, 1997, and had to be sent another copy. When the approval came on March 23, 1998, it was already too late, to pursue this project, as the Bank was then threatening termination of the loan programme. The Bank's own assessment state that the environmental mitigation programme was 60% complete, but the ICR fails to indicate that all the budgeted fimds (US$2 million) for the mitigation had becn disbursed. Between the construction of Bundwails (US$920,000), Laboratory Upgrading and PCB Programmes (US $1.1 million), more than US $2 million has been spent on the Old Harbour Mitigation Programme. Para. 1 8 JPS need to review and comment on the Barn's ROI calculations. This section is incomplete. Para. 19 Quoted figure of 90% should be reconciled with the 84% stated earlier for consistency. 49 Appendix C Page 13 of 13 Para. 20 This section implics that JPS did not tak-e all necessary actions to recover all the insurance proceeds. This is an unfair assessment as the Company has pursued all means available to reco--er the insurance proceeds. The Bank should notc that further to the Bankl's last mission, JPS received a further US$t I million in November 1998 in addition to thc sum already received. Out of a total claim of US$72 million, the Company has received USS67 million in total. This should be rcflccted in the Report. The Ban;k should note that the Audited Financial Statements were delayed due to the lengthy process of revaluing the Company's assets. At the insistence of the Company's auditors, an independent firm was employed to undertakc the revaluation- This revaluation took somc time to complete and delayed publication of the statements PROPOSED OPERATIONAL PLAN FOR JAMAICA: GENERATION RECOVERY AND IMPROVEMENT PROJECT (LOAN 39443M) (PART I) Objectives to Sustain Achievements and Key Issues in Recommended Actions Sustainability Physical Objectives * Old Harbour Units 3 and 4 have been * Provide for adequate maintenance of the units and closely restored to normal service. The gas monitor the governor and burner management system of Old * Restore electricity service to turbines of Units 3, 4, and 5 have been Harbour-4 to ensure its full operationability. Ensure normal conditions and eliminate upgraded. However, Unit 4 has been availability of adequate funds for operations and maintenance power cuts experiencing intermittent problems with through improved tariff policies and reduction of non-technical the governor and burner management losses. * Safeguard the system against system, resulting in a 20 percent reduction breakdowns due to extended use in availability. * Complete the energy management and telecommunication systems by December 1998. • Improve generation security and * The energy management system (EMS) enhance system reliability/ control and SCADA systems are scheduled for * Address the remaining activities for the EMS/SCADA systems, systems to reduce the likelihood completion by end-December 1998. i.e., software development, documentation, and training n of generating plant incidents Completion of these components is courses to be held locally and abroad. o essential for sustaining the operational integrity of the JPS system. * For the teleconmuunication system upgrading, (a) determine the site and complete the buildings to house telecommunications * IPS has not yet met all efficiency targets of equipment; (b) prepare on-site acceptance tests plan for radio the JPS-NIBJ performance plan. "hops"; (c) prepare power system cut-over plan for implementation; and (d) monitor implementation activities to ensure timely completion. * Pursue efficiency improvement targets set out in the JPS-NIBJ performance plan (i.e., power system reliability improvement; fuel management rationalization; system loss reduction) through computerization/automation of meter reading, collections, fleet management, and MIS upgrade. OQ ua o0X oxm PROPOSED OPERATIONAL PLAN FOR JAMAICA: GENERATION RECOVERY AND IMPROVEMENT PROJECT (LOAN 3944-JM) (PART II) Objectives to Sustain 1Achievements and Key Issues in Recommended Actions Sustainability ElectricJy Sector Policy Objecttves * The long-run marginal cost and tariff study * Prepare a pian for iniplementing the recomm.endations of th.e has been completed and JPS has accepted long-run marginal cost and tariff study. This plan should Improve resource allocation its findings. Average tariffs are close to the include refining tariffs under the existing structure that will through electricity tariff reform and long-run marginal cost determined by the prevail during the period of the JPS-NIBJ performance insure the loss of base load study but are too low to cover JPS' contract; and changing the structure once the performance generating capacity does not financial charges and to ensure adequate contract is completed. adversely affect the environment returns. for increasing private sector * Govemrnment should address the tariff issue in the context of participation in the sector * JPS has yet to prepare a plan to implement plans for improving sector performance, including the study's recommendations, notably restructuring to increase private sector participation. changes in the tariff structure, to eliminate Determine whether the conditions of the JPS-NIBJ large-scale cross-subsidization between performance contract are appropriate in light of JPS' financial industrialcommercial and residential condition, the recommendations of the tariff study, and overall consumers. These changes are important electricity system development objectives. to meet the objective of the tariff study, i.e., to establish an efficient pricing system and rate structure for all categories of customers. * The Government has not yet resolved institutional issues in the sector which affect JPS' capability to apply the recommendations of the tariff study and thus threaten the attainment and sustainability of tariff objectives as agreed under the Project. Fd m o-i o x PROPOSED OPERATIONAL PLAN FOR JAMAICA: GENERATION RECOVERY AND IMPROVEMENT PROJECT (LOAN 3944-M (PART 3) Key Objectives to Sustain Achievements and Key Issues in Sustainability Recommended and Planned Actions Environmental Objectives * Prepare and implement a plan to complete the Project's * Reduce and control the * JPS prepared an Environmental Action Plan. By environmental components by end-1999. This plan should environmental impact loan closure, environmental components related to include: continued removal of contaminated soil; associated with power this plan were only partially completed. construction of a wastewater treatment plant; control of system facilities. stack emissions; and air quality monitoring. * Completed Mitigation Activities: fuel and chemical waste management; noise abatement, asbestos * In order to meet Bank standards for sulfur dioxide abatement; PCB removal; and mitigation of soil emissions, JPS should re-assess and apply the options contamination. identified in its 1995 Environmental Mitigation Plan, in particular, (a) flue gas cleaning; (b) conversion to fuel with * Mitigation activities scheduledfor completion in a lower sulfur content (i.e., 2.2% instead of 2.8%); (c) 1999 with funds identified: oil spill contingency increase the stack height of Old Harbour Unit 4; and (d) measures; completion of meteorological station. monitor sulfur dioxide emissions. * Mitigation activities scheduledfor completion in * Identify schedule and funding to implement pending 1999 with nofunds yet identif ed: wastewater environmental components, especially those associated with management; soil contamination/remediation; stack meeting World Bank Guidelines for sulfur dioxide emissions testing. emissions. These activities require an estimated US$1mn of which the mitigation measures for sulfur dioxide * Mitigation activities not yet scheduled and no emissions are estimated to cost US$0.5mn. JPS has completion date offunding identified: sulfur dioxide indicated that it will be spending an additional US$0.45mn emissions reduction; surface run-off abatement; plant on these activities, or less than half of the required amount. effluent monitoring, ambient air quality monitoring; JPS should identify the source and use of funds to complete monitoring/supervision plan. the remaining environmental components of the Project. * Failure to complete mitigation measures for sulfur dioxide emissions and to comply with JPS and NIBJguidelines would impair the sustainability of the Project's environmental achievements and would cause excess emissions at Old Harbour Bay. ____ o x 78.000 77°30' JAMAICA 77°00' UNDER 76030' PROPOSED CONSTRUCTiON GENERATION RECOVERY PROJPECT (IDB) EXISTING AND IMPROVEMENT PROJECT 69kV TRANSMISSION iNES GREENWOOD -18°30' QUEENS DRIVE N CARDIFF HILL 0 SUBSTATIONS 18°30'- BOUVE * MARTHA BRA_ ROARING POWER PLANTS: / > _ / \~~~~~~~~~~~~N LAUGHIADS E- OCHO LOWER HYDRO ORANGE BAY - ---- GREAT RIVER - V __,PPRACABESSA DIESEL HAITI~~~~~~~~~~~~~~~~~~ REP.~~~~~IE WIE IE JAMAICA> / -tM-ELLEVUE \ * STEAM \ / he ndre ,CAVE HIGHG ANNOTTO BAY 0 Negril RIVERRADISE RIVER00e Lt \ rBLAC~~~ ~ ~ ~~~~~~~~~~~~~~~~KSTONE \ MAGGOTTY onWARTON ti snap d notONIO ~~~ ;;)@ t~~~~~~~~~ENA SUNNYSIDE (>\WASHINGTON BLVD\ ,KENDAL ~~~~~~~MICHELTON\/ W. KINGS HOUSE RD\ \ )\ICAAUA TheWodIARIGUANABO MI Rio CONSTANT Z SVAOanTdMANt ago L01 STEEL MILL T R 0 20RMINeG - states of any torritEoINsy, BLU COS0A PARNAMS-- EAD or anyHendretP SUNT FN I / gRHYMESp ~~~~~~~~~~~~~~~~~~~OLD GNWH. B10' TH BAHLSE 20LL HARBOUR RD 90 THE BAHAh^AS 20- \ J ~~~~~~~~~~~~~~~~BAY CUBA DOMININYMU HAITI RE.MOY -20 MFXICO ,JAMAICA Tebudre oo j' -BELIZE Th.oiahn and,- -1-, UTALA HODUA lbe on- 0hsmpd 10 20 30 Kilometers E NICARAGUA Th. \Vord B-nk Group,_ Z SALVADOR ! ° ttso n 0rtr 0Mlsi RICA PANAMA VENEZUELA or acceptce of such 0' '0 90 81° t' COLOMBIAi --s0 boundanes 77030' 77'00' 76°30' O' 1 1 1~~~~~ P COLOMBIA ''7,5p hosdois