Document of The World Bank FOR OFFICIAL USE ONLY Report No: 22742 IMPLEMENTATION COMPLETION REPORT (CPL-37610; SCL-3761A; SCPD-3761S) ONA LOAN/CREDIT/GRANT IN THE AMOUNT OF US$ 260.5 MILLION TO THE GOVERNMENT OF INDONESIA FOR THE SUMATERA AND KALIMANTAN POWER PROJECT December 7, 2001 Energy and Mining Sector Unit East Asia and Pacific 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 (Exchange Rate Effective ICR Mission - October 2001) Currency Unit = Indonesia Rupiah (Rp) Rp. 10,000 = US$ 1.01 US$ 1 = 9,900 At the Appraisal - January 1994 Rp. 10,000 = US$ 4.75 US$ I = Rp. 2,105 FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMS BAPPENAS - National Development Planning Agency DGEED - Directorate-General of Electricity and Energy Development DSM - Demand-Side Management EIA - Environmental Impact Assessment EIRR - Economic Internal Rate of Return ESP - Electrostatic Precipitator ETAM - Electricity Tariff Adjustment Mechanism GOI - Government of Indonesia LRAIC - Long-Run Average Incremental Costs IPP - Independent Power Producer HPP - Hydropower Plant LRMC - Lon-run Marginal Cost MIS - Management Information System MME - Ministry of Mines and Energy (now Ministry of Energy and Mineral Resources) NERC - North-American Reliability Council NGO - Nongovernmental Organization PAP - Project Affected Persons PERTAMINA - National Oil and Gas Company PLN - State Electricity Corporation PPA - Power Purchase Agreement PPE - Engineering Services Center of PLN QAG - Quality Advisory Group RE - Rural Electrification SAR - Staff Appraisal Report SOP - Standard Operating Procedures SPP - Steam Power Plant TA - Technical Assistance TOR - Terns of Reference Vice President: Jemal-ud-din Kassum Country Manager/Director: Mark Baird, EACIF Sector Manager/Director: Mohammad Farhandi, EASEG Task Team Leader/Task Manager: Kurt Schenk, EASEG Banjarmasin Coal-fired Thermal Power Plant (2x65 MW) 'w~~~~~~~~~~~~' ' 1./IPI+.'JEe ~~~~~~~~~~~~~~~~~~~~~~~n Besai Hydropower Plant (2x45 MW) GEOUNG PEMBANGKIT en e Da PIA BESAIJ All'~' 30 MW Barge-mounted Gas Turbine L M-'mmbz - w 10 MW Barge-mounted Diesel ->A_s Ns,, j FOR OFFICIAL USE ONLY INDONESIA SUMATERA & KALIMANTAN POWER PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome I 1 6. Sustainability 12 7. Bank and Borrower Performance 13 8. Lessons Learned 15 9. Partner Comments 16 10. Additional Information 16 Annex 1. Key Perfornance Indicators/Log Frame Matrix 20 Annex 2. Project Costs and Financing 23 Annex 3. Economic Costs and Benefits 25 Annex 4. Bank Inputs 31 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 33 Annex 6. Ratings of Bank and Borrower Performance 34 Annex 7. List of Supporting Documents 35 Maps: IBRD No. 22506R1, 25507R1, 22508R1 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. Project ID: P003910 Project Name: SUMATERA AND KALIMANTAN POWER Team Leader: Kurt F. Schenk TL Unit: EASEG ICR Type: Core ICR Report Date: December 14, 2001 1. Project Data Name: SUMATERA AND KALIMANTAN POWER L/C/TF Number: CPL-37610; SCL-3761 A; SCPD-3761 S Country/Department: INDONESIA Region: East Asia and Pacific Region Sector/s ubsector: PT - Thermal KEY DATES Original Revised/Actual PCD: 01/15/1993 Effective: 11/23/1994 Appraisal: 10/01/1993 MTR: Approval: 06/21/1994 Closing: 12/31/2000 06/30/2001 Borrower/lImplementing Agency: GOI/PLN Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum M. Haug (Acting VP) Country Manager: Mark Baird M. Haug Sector Manager: M. Farhandi P. Scherer Team Leader at ICR: K.Schenk S. Bhatnagar ICR Primary Author: K. Schenk; Y. Zhou; T. Walton; M. Ogawa 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: U Sustainability: UN Institutional Development Impact: M Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: U Project at Risk at Any Time: 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The objectives of the Project as stated in the Staff Appraisal Report dated May 27, 1994 were to support the first phase of the Government's long-term policy agenda for the power sector aimed at efforts to: (a) increase private sector participation in building generating capacity and upgrade sector operating standards and practices; (b) restructure PLN to improve its operating performance and service efficiency; (c) formulate and implement regulations to promote efficiency in sector operations; (d) introduce a formula-based periodic tariff adjustment mechanism to recover costs. In addition, the project was to (e) help finance environmentally sustainable expansion of PLN's generation and transmission capacity in Sumatera and Kalimantan with more economical central grid systems; and (f) provide technical assistance to GOI and PLN on environmental management, efficiency improvement and demand management. The sectoral objectives were overly ambitious regarding power sector restructuring and regulatory reform. They were nevertheless clearly defined and reflected Indonesia's as well as the Bank's priorities for power sector development. In particular, GOI's policy at the time included inter alia the restructuring of energy institutions and regulations to ensure efficient and reliable supply of electricity at least cost; promoting increased private sector participation and independent power generation projects as well as energy conservation measures, and fostering regionally balanced development to ensure that the majority of the people could afford the basic services provided by electricity to improve their standard of living. The objectives had clear links to the Bank's prevailing Country Assistance strategy (CAS) as well as the on-going lending operations prevailing at the time of project preparation/loan approval (1993-1994), which aimed at assisting the country meet its critical demand for electricity in an efficient and environmentally sustainable way. The CAS supported energy development and highlighted: (a) achieving poverty reduction through increased funding for regional development, and a shift towards smaller and regionally oriented projects targeted at the reducing urban-rural disparities in the quality of life; and (b) striking the appropriate balance between public and private roles in energy distribution. 3.2 Revised Objective: The above objectives were not revised during project implementation. 3.3 Original Components: The original design of the Project included the following components: Policy Component. including: (a) establishing a policy framework for private sector participation; (b) restructuring PLN and establishing commercial operations as a Persero (limited liability company); (c) implementing a framework for regulatory oversight of the private sector and PLN, and (d) introducing formula-based periodic adjustment of tariff, as well as bulk power purchase and supply tariffs. Physical Component, including: (a) Construction of a dam and a 2x45 MW Hydropower Plant at Besai; (b) Construction of a 2x65 MW Banjarmasin Thermal Power Plant at Asam-Asam; (c) Construction of a 10 MW Diesel and a 30 MW Gas Turbine barge-mounted power plants. Technical Assistance Component, including technical assistance for (a) engineering and construction supervision of Besai Hydroelectric and Banjarmasin thermal power plants; (b) strengthening PLN's environmental management capability through the establishment of a specialized environmental unit within PLN; (c) conducting an evaluation of altemative demand management program options including technologies, delivery mechanism and promotional framework; (d) carrying out pilot projects in PLN's - 2- regions IV and VI involving decentralization aimed at efficiency improvement of PLN's operations; (e) strengthening the MME environmental management in the coal mining sector through the improvement of its environmental policy and regulatory framework and its environmental regulation enforcement capacity in coal mining. While the policy, physical and institutional project components were linked to the project development objectives, the policy components and objectives (a)-(d) were not directly supported by resources provided under the loan. Rather, the loan included covenants relating to the first three of the four project objectives, but the technical assistance components needed to support objectives (a), (b) and (c) were provided under the Infrastructure TA, Suralaya, and Cirata II projects, respectively. One TA component under the project-the efficiency pilot projects in Regions IV and VI-was directed toward supporting objective (c); however, the scope of that component was not commensurate with that of the related objective. Moreover, apart from the power tariff adjustment objective-which the project did not support either through covenants or resources-no component was included in the project to directly address PLN's financial management capacity. This should have been a crucial aspect of ensuring the achievement of objective (b), given that-at the time-PLN's Outer Islands operations were unprofitable. While PLN's improved future financial performance was covenanted under the loan, and an objective of related projects at the time (i.e., Suralaya and Cirata II) was to strengthen PLN's financial situation, none of these projects included resources to directly improve PLN's financial position. Components Estimated Cost at Appraisal (US$ Million equivalent) Besai Hydroelectric Power Plant 164.7 Banjarmasin Thermal Power Plant 311.2 Barge-Mounted Power Plants 34.0 Engineering and Construction Supervision Besai 22.6 Engineering and Construction Supervision Banjarmasin 12.4 PLN Environmental Management 1.8 MME Environmental Management 3.5 Demand Management 2.5 Pilot Projects, Wilayah IV and VI 3.0 Compensation and Resettlement 9.9 Administration 12.8 Total 578.4 3.4 Revised Components: The above components were not revised during project implementation, except that the technical assistance activity for the demand management program was cancelled upon request of PLN. 3.5 Quality at Entrv: Overall, quality at entry is rated unsatisfactory, given the disconnect between project resources and objectives, (as outlined in 3.3 above). Nevertheless, the quality at entry of other aspects of project preparation were satisfactory, based on the strength of the (a) consistency of objectives with the priorities of the Government and the Bank's Country Assistance Strategy; (b) project design based on lessons learned from prior Bank operations in Indonesia; (c) comprehensive environmental impact and resettlement considerations and socioeconomic studies included in project design; (d) extensive consultation with NGOs during project preparation assisted in relieving the concerns of the PAPs, and subsequently, during project implementation, in having the framework for resolving outstanding issues; (e) comprehensive feasibility studies carried out by qualified personnel and reviewed by technical experts and the Bank. The - 3 - methodology used to justify both plants was based on the time-tested selection of the least cost alternatives to supply peaking capacity in south Sumatera and base load capacity in south Kalimantan; and (f) high ownership of PLN and GOI on the project. Project risks and associated assessments were included in the SAR. While the assessments and risk ratings appear to be reasonable, the actual situation turned out to differ in particular related to implementation schedules: (a) the technical and project management risks including potential implementation delays were rated as low. Though the physical components were completed successfully, substantial delays (by about 21 months) have been encountered; (b) the risk of underatilization of the power plants was rated low, which proved to be the case; (c) risk associated with failure by GOI to implement the power sector policy agenda, which was described in SAR the major potential risk associated with the project, was also rated as low. Although GOI commitment to power sector reform was renewed in the launching of a power sector policy paper in August 1998, substantial delays have occurred. 4. Achievement of Objective and Outputs 4.1 Outcome/achievenment of objective. Overall, the achievement of project objectives can be rated unsatisfactory, primarily because the key policy objectives under the project have not yet been achieved, and were in fact unlikely to have been achieved under the design of the project (3.3 and 3.5 above). While progress has been made toward meeting the project's policy objectives, much of this progress cannot be attributed to the project itself (as described in 4.2 below). Since the project was prepared, the nature and depth of the policy objectives in question has changed. For instance, with respect the objective to increase private sector participation, the experience with Indonesia's independent power producer (IPP) program has highlighted the pitfalls of unsolicited generation proposals, an approach which was proposed in the project's SAR. More importantly however, the regional crisis actually provided the opportunity for the intended scope of the power sector reforms to be broadened and deepened, and the Government's Power Sector Restructuring Policy of August 1998 outlines a much more market-oriented vision of power sector operation than did the Government's statement of Goals and Policies for the Development of the Electric Power Sub-Sector, as presented in the SAR. On the physical side, despite delays, all the physical facilities - the hydropower plant, the thermal power plant and the barge-mounted power plants - have been completed successfully according to the original designs. They have been under normal operation since their completion. 4.2 Outputs by components: Policy Components Establishment of a policy framework for private sector participation. The achievement of this component is rated unsatisfactorv. The project itself only contained a covenant relating to the increased private sector participation objective/component. The first part of this covenant related to the completion of TA-funded under another project-for preparing the groundwork to draft rules governing private sector participation in the power sector. While the TA was successfully completed, the second part of the covenant-which required implementing those rules-was not met. And while the Government was successful in signing 26 power purchase agreements (PPAs) with various IPPs for a total of 11,000 MW of new capacity, the majority of these were unsolicited proposals not in line with either PLN's power development plans nor the national electricity general plan (RUPTL). In the years preceding the regional - 4 - crisis, the Bank drew the attention of the Government to its concern regarding the manner in which the IPP program was being managed through a variety of channels, including Country Economic Memoranda and covenants in a follow up loan (i.e., the Second Power Transmission and Distribution Project). When this was unsuccessful, at the end of 1997 the Bank informed the Government that the processing of new power sector loans was suspended. Finally, while the 1998 Policy (4.1) does establish a sound policy framework for future private sector participation, realistically, significant levels of new private sector investment in the sector will not be possible until the fallout from the impact of the regional crisis on the existing IPP program is fully resolved. Reforming regulatory and sectoral development functions. The achievement of this component is rated unsatisfactory. Similarly, this objective/component had a covenant which required the completion of relevant TA funded under another project, and while this TA was completed, its recommendations were not implemented. The establishment of an appropriate legislative and regulatory framework still remains a major sectoral issue. A draft electricity law has been pending enactment since 1998. The new law will replace the Electricity Law No. 15 of 1985. The legislative and regulatory framework as well as the government regulations relating to tariff structure and levels (i.e. Tariff Code), transmission grid operation and generation dispatch (i.e. Grid Code); distribution connection and operation (i.e. Distribution Code) and planning and competitive tendering (Planning and Tendering Code), are being covered by ADB's assistance program and are the responsibility of the Governnent under the MME. Corporatizing and restructuring of PLN to improve the efficiency of its operations. The achievement of this component is rated unsatisfactory. While the covenant associated with this objective/component was partially met-since PLN was successfully corporatized into a limited liability company, and two generation subsidiaries were established in Java-Bali-the restructuring did not have a fundamental impact on PLN's operations. Most business units within PLN were neither successfully functionally and geographically unbundled nor transformed into profit centers. The 1998 Policy calls for even more far reaching far-reaching changes in the power sector, including the unbundling of PLN, and thus create a sector which is able to grow rapidly, provide high quality and efficient power supply, and be financially independent. The Policy provides for a new direction of the sector along four interlinked strands, namely: (a) restoration of financial viability of the sector; and bring about (b) competition; (c) more transparency; and (d) more efficient private sector participation. To support the Government's restructuring policy, the ADB provided a program loan in March 1999 towards reforms at the government and sector level in the areas of legislation, regulation, power market and so on, while the corporate and financial restructuring of PLN is being undertaken through consulting services under the Bank financed Second Power Transmission and Distribution Project (Ln 3978). The Bank and the ADB as well as other players have been in close coordination toward power sector reform and PLN restructuring. Introduction of formula-based periodic tariff adjustment. The achievement of this component is rated unsatisfactory. The project contained no resources or covenants to ensure the attainment of this objective. An Electricity Tariff Automatic Adjustment Mechanism (ETAM) was introduced by Presidential Decree (Keppres 68/94) in October 1994. PLN's base tariff was increased by Presidential Decree at the same time. The formula-based adjustment mechanism, which was designed to maintain the real value of PLN's charges between changes to the base tariff, empowered the MME to make quarterly adjustments on the basis of the weighted average of changes in the prices of fuels, prices of power purchases, local inflation, and the US$-Rupiah exchange rate. While the implementation of the adopted mechanism did result in increases in PLN's tariffs, these were not sufficient to enable PLN meet its ROR target during the period prior to the crisis in 1997 for three main reasons: (a) the October 1994 increase in the base tariff was too low as a result of 1995 sales having been significantly overestimated; (b) the mechanism was designed to enable the pass-through only of those changes in costs that outside PLN's control; (c) there were some - 5- deficiencies in its implementation, including significant lags in applying increases and adjustments made to base figures. The use of the mechanism was suspended following the onset of the crisis when it became apparent that the rapid depreciation of the Rupiah would trigger very large across-the-board tariff increases, with the understanding that consideration may need to be given to introducing an improved mechanism once the base tariff has been restored to a commercial viable level. However, this has not happened. Physical Components Construction of 2x65MW coal-fired units at Asam Asatn in South Kalimantan. The achievement of this component is rated satisfactor . Banjarmasin Units 1 and 2, comprising 2x65 MW of base-loaded capacity, are located near the village of Asam Asam, 123 km by public road southeast of Banjarmasin. The mine-mouth power station will be developed in stages with an ultimate capacity of 660 MW. It receives lignite from the adjacent mine in Asam Asam, located approximately 8 km north of the power plant. The lignite is delivered in crushed form by truck along a dedicated haulage road. Coal reserves at both Central and East Asam Asam deposits are estimated in excess of 50 million tons, sufficient for use by the plant over its lifetime. Both base-loaded units are now in commercial operation, and meeting the growing demand in Wilayah VI. Load forecasts indicate that the average annual demand growth rate is expected to be in the 3-5% range in the short to medium term. Although this is a reduction from historical 9-10 % growth levels, both units are now loaded to full capacity as base loaded units, after the small hydro units, since they generate electricity cheaper than existing diesel units. 228 km of 150 kV transmission lines connected Banjarmasin to the major substations; these were financed through an Australian Loan. Load factors during the first year of operation were as expected in the 70% range and increased to the 80% range in the second year (i.e. 2001). However, a failure of the cooling water pump in 2001 in Unit I reduced the output of Unit 1 by 50% till repairs were made, thus reducing the plant load factor for 2001 to about 68%. The plant has operated safely since commissioning, with both boiler efficiencies and ESP efficiencies close to the design values. Project delays occurred mainly due to (i) late signing of contracts -from 9-13 months delays, (ii) change in scope of the Turbine Generator and Auxiliaries package, (iii) the implementation of a two-stage bidding process for the Instrumentation and Control package, as well as for coal and ash handling equipment, and (iv) change of financing from JBIC (formerly OEFC) to IBRD, due to a shortfall in Japanese financing of about US$ 12.7 million caused by foreign exchange variations between the US$ and the Japanese Yen. The SAR established the commercial operation dates of Units 1&2 as December 1998 and March 1999, respectively; commercial operation for Units 1&2 occurred on November and December 2000, respectively. An acceleration program introduced in late 1998, assisted in improving coordination and in averting further delays in the implementation of the Project. Therefore, the total delay for the commercial operation of Units 1&2 was about 21 months. There is no doubt that the economic crisis disturbances in Jakarta during early part of 1998, the late final placement of the coal and Ash Contract, late hand-over of civil foundation to various contractors, late delivery of contractors' equipment, all contributed to a lesser or greater degree to delays in Project implementation. Construction of 2x45MW hydropower units in Besai in South Sumatra. The achievement of this component is rated satisfactory. Besai HEPP is a run-of-river hydropower plant with a daily regulating storage capacity, harnessing 95% of - 6 - dependable firm discharge of 8.3 cumecs and a head of 245 m. Besai energy production is about 402 GWh, consisting of 144 GWh of primary energy and 258 GWh of secondary energy, with an installed capacity of 90 MW used principally to meet peak demand in Wilayah IV. The Power House comprises a main building installed with two 45 MW generating units, and two 46.4 MW vertical shaft Francis turbines. A 16 km, 150 kV transmission line was also built to connect Besai to the power Grid of Wilayah IV. The implementation of the Project was on schedule till the wet testing of Unit I in December 1999. Commercial operation was expected in April 2000, with only a three month delay. However, during the wet testing, two unrelated incidences occurred: (a) failure of the headrace tunnel; and (b) flooding of the power house. An investigation report commissioned by PLN stated that the failure of the tunnel concrete was due in part by the nonexistence of extemal hydraulic pressure surrounding the tunnel (due to permeable/fractured rock formation) and the leak of tunnel water under high pressure through construction joints and unfilled grout holes. As a countermeasure and after an investigation of various options, the Bank agreed with PLN and the Consultant that installation of a steel-lining in the affected parts of the tunnel would be appropriate (i.e. where unusual rock formation with no surrounding ground water pressure exists). Installation of the steel liner was completed in December 2000. The Consultant has taken full responsibility for the integrity of the functioning of the headrace tunnel, after completion of the remedial works. Units 1 and 2 were placed in cormmercial operation in June 2001, a delay of about 14 months. Cleaning and repair work to the Power House due to flooding of the turbine building was completed in April 2000. The flooding was caused by sliding to the tailrace spoil pile. Although no mechanical damage was identified, cleaning and drying of equipment lasted for about 4 months. The units are now operating successfully. Construction of two barge-mounted power plants: 10 MW diesel and 30 MW Gas Turbine. The achievement of this component is rated satisfactory. The 30 MW barge-mounted gas turbine is now anchored at Lampung in Wilayah IV after meeting the demand for a time at Madura following the severing of the undersea cable serving the island. Since its commissioning on schedule in March 1998, the 30 MW GT supplied the south Kalimantan area till the commercial operation of the two units at Banjarmasin (Asam-Asam) in December 2000. The 10 MW barge-mounted diesel plant has been operating since its commissioning in April 1997 at Pontianak, Kalimantan. As designed during project conception as mobile power plants, both of these barge-mounted units have been assisting to meet the load demand during the periodic shortages in the region. Technical Assistance ComDonents Strengthening the Capacity of GOI for Environmental Management in the Coal Mining Sector. The output of this component is rated highly satisfactorv. This TA, completed in August 1999, was carried out by Consultants on behalf of the Bureau of Environment and Technology of the Ministry of Mines and Energy. The Ministry has implemented many of the recommendations made by the Project Management Team. These changes amount to a change in the organizational culture of MME. It has: * supported the accomplishment of significant regulatory development and environmental protection of the Ministry; * significantly upgraded the enforcement capabilities of the Ministry for mine inspection. It has done so by training a cadre of inspectors in a full suite of training experiences which have improved their ability to inspect mines and enforce environmental requirements; - 7 - * added to the Ministry's analytical capability. It has brought in state of the art analytical equipment and provided training thereof, and has improved the data used in environmental decision making; * established new regulatory standards in key areas such as bonding and sedimentary pond construction and design standards. Strengthening PLN's Environmental Management Capabilities. The work was completed on December 21, 1998. As the TOR for the consultancy services was prepared prior to the establishment of PLN's Environmental Division, with Bank's approval, the TOR was modified to "to assist PLN in strengthening the capabilities of existing Environmental Division". The main output of this work was in the preparation of guidelines, namely: Guidelines for occupational and health safety audits; Guidelines for environmental audits; Guidelines for a monitoring data transfer system, exchange of experience on atmospheric dispersion model; Guideline for minimizing flue gas emissions and optimizing generation of thermal power plants; Guideline for minimizing effluents and reducing water consumption of thermal power plants. One issue that remains is the definition of role and responsibility of DIVLING (the organization created to oversea the Environmental Management in PLN) during the ongoing restructuring process. This will be taken up during the Financial and Corporate Restructuring work underway. The output of this component is rated satisfactory. Pilot Project to Strengthen Business Processes and Competencies in Wilayah IV and VI. The output of this component is rated satisfactory. It was completed in November 1997 and has assisted to (a) improve the respective Wilayah overall management capabilities; (b) secure efficiency improvement through the adoption of commercial management practices; and (c) prepare both Wilayah for greater financial and operational independence as a foundation of establishing business units and possible corporatization. Major outputs of this component included: * Developing regional business plans in both Wilayah; X Making investment decisions taking into account first the regional needs and not decided on an ad hoc basis by PLN Pusat. * Making staffing decisions based on a skills assessment methodology developed by the region to make the Wilayah more autonomous and commercial; * Developing a performance management system based on profitability considerations; * Making environmental issues more visible and assign responsibility to Head/Deputy of the Planning Department. Demand Management. In view of the financial crisis in the sector and at PLN in particular, PLN decided, with Bank concurrence, against the continuing with this technical assistance. This component was cancelled in December 1998. 4.3 Net Present Value/Economic rate of retuirn: The SAR assessed the economic viability of the Besai and Banjarmasin power plant on the basis of the costs and benefits associated with the project. The plants' capital costs were measured as (a) the plant and related equipment including associated transmission lines from the generation facility to the interconnected grid; these costs include physical contingencies but exclude taxes; and (b) the incremental transmission and distribution costs arising from the use of the network to supply the customers with electricity generated by the plants. The benefits were estimated by the revenue from the incremental electricity sales on the basis of the current average electricity tariff for Regions IV and VI, and supplemented by the consumer surplus. In the case of industrial, commercial and public consumers, their willingness to pay was estimated by the cost of self -generation from captive diesel plants. - 8 - Ex-post calculations of EIRR were carried out in line with the same methodology. The results show Banjarmasin with an EIRR of 8.9%, excluding consumer surplus, and 14.4% including consumer surplus. As Banjarmasin was fully loaded since commissioning, there were no incremental T&D investments included in the evaluation. For Besai the EIRR has been re-evaluated as 10.8%, excluding consumer surplus, and 14.2% including surplus, for a 50 year economic life. For a 25 years economic life, the EIRRs Besai are slightly reduced, namely: 9.9% (without consumer surplus) and 13.8% (with consumer surplus). The appraisal values were calculated with consumer surplus as 15% for Banjarmasin and 14% for Besai (for a 25 year economic life). The economic returns for Banjarmasin and Besai depend strongly on the assumptions made on the tariffs increases. In both cases the tariff is assumed to increase to a level of 7 c/kWh by 2006, based on PLN's expected tariff increases for full cost recovery in 2005-2006. However, because of the unfavorable exchange rate, the gap between the existing and required average tariff is large and the tariff increase has to be gradual and with continuous effort in building acceptance. The Government expects to implement the needed tariff increase over the next five years, thereby arriving at the appropriate level by mid 2005, as assumed in this ICR. To further gauge the economic benefits of Besai HPP, a comparison was made with the next best alternative for peaking capacity. This produced an equalizing discount rate of 15%, indicating a preference for Besai, and supporting the conclusion reached above. 4.4 Financial rate of return: Not applicable. 4.5 Institutional development impact: Overall, the institutional development impact is rated as modest, and this in spite of the fact that the technical assistance components, except for one that was cancelled, were implemented satisfactorily. All proposed training of PLN and MME staff has been satisfactorily carried out. Despite the financial crisis in the region, and implementation delays in the physical components of the Project, PLN demonstrated its competence and flexibility in decision making, by the satisfactory completion of the project. The Project also provided the framework for greater decentralization of management, and the creation of autonomous business units, as well a human resource development and planning. The policy reforms did help to open the sector to private investors and restructuring of PLN, and for regulatory oversight. The environmental management capabilities of both PLN and MME were enhanced, and both Wilayah IV and VI have been introduced to sound commercial management practices which are serving them well in PLN and Government plush to decentralization of functions to the regions. However, the restructuring of PLN and the creation of a regulatory framework, are still underway, and the high cost of power purchased from IPPs, coupled with low tariffs, have affected adversely PLN's financial situation. 4.6 Environmental Impacts: The environmental assessments for both power plants accurately predicted the likely impacts of construction and operation. Design features recommended to minimize or avoid adverse impacts were indeed constructed, and measures to mitigate impacts of plant operation have also been properly implemented. In the case of Banjarmasin, where air quality degradation is the most serious potential impact, the air pollution control equipment and procedures are proving to be particularly robust; although the coal used at commissioning had twice the sulfur content (0.99% versus 0.5%) suggested as the limit to assure compliance with emission and ambient standards, the plant did not violate either during its Performance Test or the first round of normal operation monitoring. The plant was also in compliance with ambient noise standards offsite, although it exceeds the limit for industrial facilities at the source (below -9- stack). Violations of ambient water quality standards for dissolved oxygen and ammonia in the Asam Asam River are attributable to upstream sources of organic pollution and not to the wastewater from the power plant. Routine monitoring conducted since confirms the plant's ability to comply consistently with standards. At Besai, periodic drying up of 7 km of the Besai River was accepted as an unavoidable adverse impact when the project was approved. High sediment loads in the river caused by poor land management and resulting erosion in the catchment are a continuing concern and point to the need for intensified catchment management efforts, including continuing encouragement of community-based forest management. The environmental impacts for the transmission lines for both Banjarmasin (228 km, 150 kV) and Besai (16 kIn, 150 kV 2cct) were not significant, as the transmission lines did not pass through environmentally sensitive areas. 4.7 Resettlement and Land Acquisition: The land acquisition. resettlement and rehabilitation conducted at Asam Asam are nearly textbook examples of good practice. PLN acquired a total of 187 ha for the plant site, the access road, the resettlement community and a PLN staff housing colony. All but 5 ha were already in government ownership; however, besides purchasing those 5 ha from the owners, PLN compensated at a lower unit value the 8 families that were occupying government land and also provided compensation for trees and crops on the land taken. Total compensation paid was Rp. 122 million, and all compensation was paid prior to land taking. The resettlement community was ready for occupancy before the 36 families (144 persons) were relocated. They were moved in 1995 from wood houses with nipa grass roofs to concrete houses (36 sq m floor area) on 40 x 35 m lots, with slow titling process -- certificates were issued in 2001 -- is the only aspect of resettlement that could have been improved, but it was beyond the control of PLN.) Community development assistance given prior to and after resettlement, through contracts with a local university and an NGO, included training in livestock raising, agribusiness management, fish culture, and food and beverage production. Several of the training programs were designed for and directed to women's groups. Sources of income/employment became more diverse, including employment of five household heads at the plant, and 64 % of the families reported an increase in income since resettlement. At Besai, 205.5 ha of land were acquired from 129 families -- 88 in the inundated area and 41 in the construction area. Nearly all of the land inundated was in private ownership. Owners were offered replacement land or cash compensation, and all opted for the latter. Nearly all of the land in the construction sites was officially forest land being used by local residents for coffee and other crops. Users of the forest land were offered an opportunity to participate in the Government's transmigration program and were compensated for lost crops. Total compensation paid was Rp. 4.2 billion (US$ 1.8 million at the 1994 exchange rate). To assist communities in restoriug or improving on their previous condition, PLN financed the Development Program for Besai Community, implemented by Watala, an NGO, with supervision and technical assistance from the University of Lampung. Nine community self-help groups were established, with total membership that peaked at 213 persons. The groups functioned as savings and loan associations and channels for PLN's financial assistance to the communities. Groups received training in organizational management, but venturing into investment in enterprises was limited by uncertain economic conditions. Other groups were set up to distribute plants and manage land in the greenbelt area. Community satisfaction with the development program is high, except in the area of forestry for watershed management. That component has not achieved its objectives primarily because of long-standing, unresolved conflict between the local residents the Forestry Department over ownership of the forest land. During the implementation of Besai's RAP, the issue of Dwikora village came up regarding compensation - 10 - for land and crops as well as formation of community groups. Its connection with Besai was limited as only a few trees were directly affected by the construction of Besai. Actions initiated by the provincial forestry service (Dinas Kehutanan), and supported by the provincial and district administrations, completely disrupted the lives and livelihood of the people of Dwikora village. The claim was made that the area was under forestry status and consequently no human settlement was allowed in the area. The claim was strengthened with the Govemor of Lampung Decision No. 39 in 1996 to eradicate the village status of this area. The matter was finally resolved with the concerted effort from the Bank, the NGO, and by constant pressure from the local people, wherein the Govemor's decision was nullified. In October 1999 the Government of Lampung issued Decision No. 99/1999 which reclaimed this area into its original status (described in more detail in Section 10). 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The economic crisis that affected the country in 1997 has impacted substantially the financial situation of PLN. The sharp depreciation of the Rupiah greatly increased the cost to PLN of its US$-denominated long-term payment obligations. These include debt services payments on foreign loans on-lend by GOI, take-or-pay fuel supply agreements for gas and geothermal steam, and take-or-pay power purchase agreements with IPPs. As a result, PLN has been unable to fully service its debt and to meet its payment obligations to IPPs. The crisis has affected the availability of the local counterpart funds. To this end, the Bank took proactive actions and amended the loan agreement to increase the disbursement percentages to 100% for a certain period of time to cover GOI/PLN cost (excluding VAT). The crisis has also affected the contractors ability to make progress. Some contractors were forced to cut back on operations to reduce costs, while other contractors barred overtime and delayed start of work. 5.2 Factors generally subject to government control: Strong Government support and commitment to the Project as well as to PLN, were instrumental in bringing the physical components of the Project to closure, with only a six month extension of the Bank loan, despite the substantial devaluation of the Rupiah and the financial collapse of PLN. However, the pace of sector reform has proceeded at a much lower pace than anticipated. Nevertheless, the Govermment and PLN have shown their commitment and willingness to reform with the aim of increasing the efficiency of the sector, by launching in August 1998 a Power Sector Restructuring Policy, which provided the underpinning for PLN's Corporate and Financial Restructuring which is presently underway. 5.3 Factors generally subject to implementing agency control: Effective project management by the Consultants, which was exemplarv at Banjarmasin in particular, strong action by the PMUs. and extensive supervision by PLN and the Bank, were necessary to get this Project through, despite the many difficulties encountered during implementation. PLN's insistence that the Civil Works contractor at Banjarmasin change the Project Manager, which was causing major difficulties among other contractors was in the end successful, albeit causing extensive delays in the Project, despite an acceleration program which commenced in December 1998. Proactive action by PLN. Consultants, and the Bank were also needed to undertake the repair work at Besai HPP in record time. Very proactive and forceful NGO participation at both Banjarmasin SPP and Besai HPP, were essential for fostering excellent community relations between the community of PAPs and PLN and to discuss problems (i.e. water supply to the resettled community and maintenance of road and drainage ditches, at Banjarmasin; status of Dwikora village at Besai), before they could cause major difficulties later. 5.4 Costs and financing: As a result of the cost savings, the Bank loan was underutilized. To this end and as part of a broader restructuring of the Bank portfolio for Indonesia in response to the crisis, three partial loan proceeds - 11 - cancellations totaling US$56 million were made respectively in August 1998, December 1999 and December 2000. The Bank loan size was thus reduced to $204.5 million. Of which, US$ 188.8 million, or 92% of the revised loan amount, has been disbursed, and the balance of $15.7 million will be cancelled upon closure of the loan account. Details of the project costs and financing are available in Annex 2. 6. Sustainability 6.1 Rationale Jor sust'ainability rating: Overall, the prospects for project sustainability are uncertain, mainly based on the financial viability of PLN, which is required to ensure an effective and efficient power sector. Nevertheless, this must be counterbalanced by the following: First, PLN's Corporate and Financial restructuring is underway, a technical assistance financed by the Bank (Ln 3978-IND), to turn around the critical financial viability of the sector, including PLN's. This is expected to result in the establishment of all PLN successor companies as legally distinct functional and financially viable entities. The unbundling of PLN is planned to occur along functional and geographic lines. It is expected that PLN's outside Java-Bali operations will remain in government hands once PLN has been unbundled, but cooperation with the private sector companies will be encouraged on an open and transparent basis. Second, the demand for electricity in Wilayah IV and VI has remained reasonably robust, despite the economic crisis in the country, which has major impact on Java but little on outside Java in terms of electricity demand. The most recent forecasts are for electricity sales to increase at an average annual average growth rate of in the 9-11 % range in Wilayah IV and 4-5 % range in Wilayah IV. Both regions have a deficit of capacity and both Besai and Banjarmasin, are meeting part of the demand requirements. Third, both Besai HPP and Banjarmasin SPP are of good quality and have operated at high availability since commissioning. Fourth, PLN's Efficiency Drive Program is underway, with the aim of reducing inefficiencies in operational and capital expenditures, which are an essential part of improving the efficiency of the sector, improve the financial viability of PLN; each of PLN business units has it own cost reduction targets which are monitored on a monthly basis by PLN. Fifth, the GOI has recently approved measures to reduce PLN's future interest expenditures an the electricity tariffs have been raised to increase PLN's revenue - the foreign exchange movement has also been encouraging. In addition to the above, the ADB has supported the power sector reform effort with technical assistance for the establishment of a competitive electricity market. Enactment of the Electricity Law is expected in the near future and is a condition for release of ADB's funds. 6.2 Transition arrangement to regular operations: Both power plants have been transferred upon their commissioning to PLN's regional offices -- Wilayah IV and VI respectively. Both Wilayah are at present vertically integrated regional branches of PLN, encompassing generation, transmission and distribution. On a technical level, PLN's technical and institutional capacities remain intact today despite the financial crisis; both of the Electricity Units in Wilayah IV and VI units are capable of operating and maintaining these two Projects. Besai HPP is now part of Wilayah IV electrical system which maintains and operates the plant. Similarly, Banjarmasin SPP is now operated within the Wilayah VI electrical system, and operation and maintenance is undertaken by the Electricity Unit of Wilayah VI. Bank missions have confirmed the availability of properly trained operators at these plants together with comprehensive O&M manuals and procedures. In particular at Banjarmasin, which is a highly automated plant, there is on-site technical assistance by suppliers and operators receive continuing training in plant operation. - 12- Management Contracts have been introduced between the Wilayah and PLN Pusat (Headquarters) for a number of years and they have proved to be effective in meeting mutually agreed performance criteria. In addition, PLN's Efficiency Drive Program, is making solid improvement in plant heat rates and other parameters. Furthermore, decentralization efforts are providing more autonomy to the Electricity Units in planning in a coordinated fashion their vertically integrated systems. Finally, the operation of both Besai HPP and Banjarmasin SPP, as well as the two barge mounted power plants, will be monitored through performance indicators at regular intervals (Annex I provides details on performance indicators). 7. Bank and Borrower Performance Bank 7.1 Lending: Although Bank performance at entry in designing the project as regards development objectives was flawed (see paras 3.3 and 3.5), identification of project components and techno-economic and, in particular, environmental assessments were satisfactorily conducted in a participatory manner, for the power plants and the required 150 kV transmission lines. Active participation and commitment of all stakeholders during project identification and appraisal was instrumental in seeing the Project through to completion. The project team, comprising appropriate skill mix, built on the successful relationship developed between the Bank, GOI and PLN during the implementation of previous projects in Indonesia. Project objectives were consistent with Bank CAS and GOI development objectives, particularly in assisting to meet the electricity demand in the two regions. Preparation and appraisal for the physical side of the project were satisfactory and complete. On the policy side, the objectives were not supported explicitly, although an implicit cross support was assumed from other concurrent loans. Lessons leamed from previous projects, particularly Paiton (Ln 3089-IND) and Cirata (Ln 3602-IND), were incorporated into the design of the project, particularly in allowing for close field supervision, comprehensive environmental assessment and resettlement plans. The loan amount was overestimated at appraisal and delays occurred for reasons that were not anticipated. These delays were controllable and immediate action was taken by all parties concemed. 7.2 Supervision: Supervision is rated highly satisfactory. Although the team that prepared the project could not remain the same till project completion (with different task managers throughout Project implementation), the impact on the continuity of project supervision has been very minor. The Bank project team comprised adequate skills and maintained good rapport and continuing cooperation with PLN. A total of 14 supervision missions (including the ICR mission) were fielded during the project implementation. All supervision missions were carried out in combination with missions for other projects. The frequency, timing, duration and skill mix of the supervision missions are considered adequate. The supervision aide memories were well prepared with very detailed findings and recommendations recorded. Follow-up letters were sent to the borrowers on a timely basis. Project Status Reports (PSR) were updated on a timely basis following each supervision mission with adequate details on project status and related ratings. The IP (Implementation Progress) was either rated "Highly Satisfactory" or "Satisfactory", while the DO (Development Objective) rating was downgraded to "Unsatisfactory" in June 1998 due to the financial crisis that began in mid-1997. A Management decision was taken in June 2001 to upgrade the Indonesia portfolio based on PLN proceeding with the TA on Corporate and Financial Restructuring, with the result that the DO ratings of Indonesia energy projects were changed to "Satisfactory". This ICR has reviewed this decision and decided to maintain an "Unsatisfactory" DO rating based on unsatisfactory Quality at Entry. - 13 - The Bank took proactive actions to broaden and deepen the scope of power sector reforns given the opportunity presented in the crisis, and this directly resulted (with support from ADB and USAID) in the GOI's Power Sector Restructuring Policy. Further, when it became apparent that GOI was not responding to the Bank's concern regarding the IPP program, the Bank suspended processing of new lending (para 4.2). The Bank also responded quickly on loan proceeds cancellations once loan savings were identified, and to PLN's deteriorated financial situation by restructuring the Project and amending the Loan Agreement to allow increase of the Bank loan disbursement percentage for local expenditure (excluding payment of taxes) to 100% from July 1998 onwards, which relieved considerably the pressure on PLN to pay the contractors. In addition, following a request from GOI in November 1997 regarding a shortfall of Japanese financing of about US$12.7 million due to the exchange variation between the Yen and the US$, the Bank agreed to cover the shortfall which allowed the completion of the Steam Generator & Auxiliaries and the Coal & Ash Handling components without undue delay. 7.3 Overall Bank performance: Bank performance is rated satisfactory overall. Borrower 7.4 Preparation: PLN's performance is deemed satisfactory; it was involved in all aspects of the project concept and design. The implementation arrangements and preparation of resettlement and rehabilitation action plans, as well as environmental assessments and social-economic/cultural studies (for Besai HEPP) were undertaken in a timely, comprehensive and professional manner. The Project fit well into PLN's priority investment program in the two Wilayah and was in line with the Government's overall sector strategy. 7.5 Government implementation performance: The Government's performance is rated as satisfactory, although marginally so. Although counterparts funds were made available in a timely manner except after the financial crisis when PLN financial performance was deteriorating rapidly with the resulting additional demands on Government support for PLN, GOI did not approve the tariff increase as required due to political sensitivity which substantially affected PLN's financial situation; in addition, GOI was not proactive in addressing the issues of under-capitalization of PLN or the Bank's concerns with regard to the IPP program (para 4.2). Nevertheless, GOI reacted promptly to the requests for the cancellations of loan amounts, as well as for the required amendments to the Loan Agreements to allow an increase of the Bank loan disbursement percentages (para 7.2) and for loan extensions. Furthermore, although progress has been slow, the GOI's Power Sector Restructuring Policy provides a sound framework for future power sector reform including the eventual financial viability of the sector. 7.6 Implementing Agency: The performance of PLN is deemed satisfactory with effective project coordination with consultants, suppliers, contractors, and subcontractors. It reacted promptly and took charge of the situation during the headrace tunnel collapse at Besai. It demanded a change of Manager of Civil Works at Banjarmasin which was disrupting the Project's Master Schedule unduly. The Project Management Units (PMUs) within PLN for the various components of the Project were identified and established at appraisal. Prior to negotiations the Borrower had developed a detailed project implementation plan. The quality of the Borrower's commitment and contribution to the project preparation were commendable. - 14 - The Project Agreement included the following covenants on overall PLN's financial performance: (a) a minimum of 8% rate of return (ROR) on revalued net fixed assets; and (b) a minimum debt service coverage ratio (DSCR) of 1.5 times. PLN financial position deteriorated dramatically during the tenure of the Project. Particularly since the financial crisis in 1997, PLN's profitability, liquidity, and capital structure weakened rapidly: PLN reported an operating loss of Rp.4.7 trillion, and its net loss amounted to Rp.24.6 trillion (or US$2.6 billion) in 2000, though mainly due to factors beyond its control (including the financial crisis, high cost of IPPs, and GOI's unwillingness to approve required tariff increase -7 US cents/kWh in 1996 to 3.6 US cents/kWh in 2001). As a result, PLN was unable at any time during the Project period to fully comply with the financial covenants established for it under the Project. PLN's morale also suffered during the latter stages of the Project. Finally, PLN is fully committed to the implementation of the Power Sector Restructuring Policy including the financial and corporate restructuring of its operations (para 4.2). 7.7 Overall Borrower performance: Overall Borrower performance can be considered satisfactory. 8. Lessons Learned A few relevant lessons can be drawn from the Project: * Quick action to respond to the financial crisis in the latter stages of the Project including flexibility by both the Bank and PLN/GOI, as well as active participation and commitment of all stakeholders during preparation and implementation, contributed to the success of the physical components of the Project. * The handling of invoices must be streamlined to avoid excessive delays in paying to contractors. Slow invoicing by contractors was responsible for delays in disbursements which caused a discrepancy between the status of the project works and actual disbursements. * Maintaining continuity of funding of the NGOs attached to the project to ensure that problems in the communities of affected peoples are taken care of, is very important for maintaining good community relations. NGOs must maintain an active role throughout project implementation, and be invited to the field meetings where resettlement and land acquisition issued are discussed. They should also participate in discussions about the project. * The establishment of PMUs in both projects was essential in taking timely and corrective action when it was needed, and in coordinating the project. However centralized project management was effective in monitoring/coordinating progress but less effective in directing change when it was required. * Quick response by PLN and team Bank during the incident with the headrace tunnel at Besai was instrumental in identifying the cause of the problem, and suitable mitigation measures as well as implementation of the remedial works in record time. * The use of "rate of return on revalued assets" covenant to measure financial performance is not appropriate for a company like PLN with a very large and lumpy investment program. * A programmatic approach to lending (i.e. Adaptable Program Lending) in the Energy Sector in Indonesia would appear to be more suitable for support of longer-term policy objectives and institution building, than the traditional approach to investment lending exemplified by this Project and the parallel projects at the time. More specific lessons leamed include: (i) foreign contractors must maintain capable design offices in the country of project execution. Delays were produced when design information was sent to offshore home - 15 - offices. This resulted in delay of design coordination and transmission of data between contractors; (ii) the appointment of the project manager by PLN should take place prior to the issuing of bidding documents, to provide early focus of the strategic intent of the Project. Concurrently an experience PLN's Sektor representative should be permanently appointed by the Project team; (iii) to enhance the transfer of maintenance of operation skills from the Contractor to PLN Sektor, power station personnel should be appointed and seconded to Contractors at the beginning of erection and precommissioning of the plant, and (iv) in remote sites, such as this Project, it is important for PLN to have an incentive scheme to attract, retain and motivate high caliber operations and maintenance personnel, to maximize the benefits of the Project. 9. Partner Comments (a) Borrower/implementing agency: The Bank's performance is rated satisfactory throughout all the phases of the project, from preparation to completion. It is also noted that the Bank regularly fielded supervision missions during implementation, playing a leading role in assisting PLN to complete the project. (b) Cofinanciers: (c) Other partners (NGOs/private sector): 10. Additional Information Demand Forecasts for Wilayah IV and VI Demand forecast in Wilayah IV [most likely scenario (11 % growth rate)] Year Required Energy (GWh) Peak Load Required Capacity Year Required Energy (GWh)(MW) 2001 4831.6 552 704 2002 11,007 1,257 1,444 2003 12,218 1,395 1,582 2004 13,588 1,551 1,739 2005 15,170 1,732 1,919 Demand forecast in Wilayah IV [most likely scenario (5 % growth rate)]. Year Required Energy (GWh) Peak Load | Required Capacity ________ _ __________ _____(Ml_) (M W ) 2001 5,044 463 683 2002 5,254 516 712 2003 5406 570 733 2004 5,753 628 767 2005 6,854 695 861 Sample Emission Data from Banjarmasin - 16 - Indonesia Standard Banjarmasin (new plant) (week of 28/9/ 2001) Max Avg Particulates, mg/Nm3 150 125 40 So2, mg/Nm3 750 227 107 NoX, mg/Nm3 850 123 94 Expenditures for Land Acquisition, Resettlement, Community Assistance BanjarmasinThermal Power Plant: Cate2orv Expenditure Land acquired - 187 ha total (5 ha privately owned, 182 ha owned by 112,576,193 government. Crops and other assets acquired 9,641,000 Construction of resettlement community relocation and community 179,912,000 development program Monitoring, evaluation, other implementation activities 45,000,000 Banjarmasin subtotal 234,553,000 Besai Hydroelectric Power Project: Catei!ory Expenditure Land acquired-205 ha total (102 ha privately owned, 103 ha owned by 4,151,814,604 government). Development Program for Besai Community 135,000,000 Monitoring, evaluation, other implementation activities 50,000,000 Besai subtotal 4,336,814,604 Total 4,571,367,604 Note: The exchange rate at the time was 2,200 Rp/US$. - 17- Dwikora's Village Saga. Dwikora village was home to 474 families or about 2,000 people, and was established since 1959. In 1965, the inhabitants received a perrnit from the Forestry Department to live in this area. The village had public facilities such as two primary schools, village office and government, two mosques and a market. Acting without any consultation with the people of Dwikora - which had up to that time been a legally recognized village (desa) - or informing PLN (in Jakarta or at the local project office) - officers from the district forestry service cut down many of the tree crops (coffee, pepper, cloves, bananas, etc.) farmed by the community and forcibly demolished houses and huts located within the plantation/forest area. Fortunately, most of the trees cut down were close to the main road, while the majority of the productive trees were located further from the main road. This initial assault, occurred on February 2, 1995, as part of an operation by Dinas Kehutanan called "Jagawana" (forest protection). The stated rationale for this action was based on the fact that Dwikora village was located within a protected forest (hutan lindung) area; to facilitate construction of Besai HPP and to assist in protecting the catchment (e.g. by reducing soil erosion and sedimentation) for Besai HPP. The latter two reasons are patently false, as the village and its agricultural areas are well separated from the project site (except for the need to construct an access road to the power house) and are sited downstream of the pondage and dam site. However, despite the claims for legitimate and long-term occupancy of the village area and agricultural land by the members of the community and their assertion that this land was granted to them by President Sukarno in 1952-53 (supported by some documentation and oral history), their formal legal status has remained moot as a result of the 1982 decision by the national government that resulted in the wholesale realignment of forest boundaries throughout Indonesia. On February 19, 1995 the conmmunity was informed by a circular from the head of the district (Bupati Lampung Utara) that they would be required to vacate the area and migrate to another part of Lampung Province, and subject to fines and/or imprisonment if they failed to cooperate. Not surprisingly, the people refused to vacate their homes and land. This was followed in early 1996 by other circulars ordering them to demolish their houses, closing the two primary schools in the village and disconnecting them from the public water supply. Approximately 2,000 people were directly affected by these actions. The Bank was informed by Watala of what was occurring in 1995 and conducted a basic investigation, including holding discussions with members of the community, PLN and Watala. The Bank and PLN made (informal) representations to the local government and forestry service, both to inform them that the presence of the Dwikora community and their agricultural activities was not adversely affecting the Besai HPP and help them understand that their actions were severely disrupting ongoing community support programs, especially those involving people from Dwikora. In addition, PLN Jakarta made contact, again informally, with the Department of Forestry and BAPPENAS, asking them to assist by persuading the provincial/district forestry service to end their actions, and the local planning agency (BAPPEDA) to play an active coordination and conciliation role. At that time compensation activities were still in progress, and there was no suggestion that farmers from Dwikora would not receive compensation for lost crops growing on land that was (now) officially 'protection forest'. In this respect their status and the basis for the compensation they would receive was identical to that being negotiated with people from the other two communities: Sukapura and Way Petai. The Bank's (and PLN's) concem, at that time, was ensuring that the support activities being conducted by Watala would be able to continue. However, the negative social and psychological effects of the actions by the forestry service on the people in Dwikora were such that they decided to withdraw from the programs being conducted by Watala. - 18 - Thanks to the Bank and NGO actions, as well as constant pressure from local people - particularly Ms. Nonha Sartika, in October 6, 1999, the Government of Lampung, issued decision No.99/1999 reclaiming this areas into its original status. This decision has brought social stability for the community, and can be considered a success story for the local community, PLN and the Bank. - 19- Annex 1. Key Performance Indicators/Log Frame Matrix Key Indicators of Development Outcome/Impact Key Indicators of Development Outcome/impact (retroactive) Project Objectives Performance Indicator Actual/Agreed Target A. Increase private sector participation in (i) No. of Private Plants in PLN's System. PLN signed 26 contracts for about 11,000 MW of IPP building generating capacity and upgrade capacity. On December 22, 1998 PLN initiated its sector operating standards and practices. rationalization of its IPP program. (ii) System Losses Less than 12% in 2000 in Java-Bali (iii) Performance Contracts between Performance contracting introduced in 1998. Gencos and Plant Managers B. Restructure PLN to improve its (i) PLN to become a Persero PLN became a Persero in 1994. operating performance and service efficiency (ii) PLN to restructure and unbundle > PLN's Java-Bali generation assets were separated and two generating subsidiaries were established to own and operate the J-B system in 1995. > In August 1998 GOI launched its Power Sector Restructuring Policy. > In 1999 PLN launched it Efficiency Drive Programn (EDP). > In 2001 PLN initiated its Corporate and Financial Restructuring. C. Formulate and implement of (i) Creation of a Directorate of Regulation A Directorate of Electricity Business Supervision regulations to promote efficiency in power (DEBS) to carry the regulatory function was created in sector operations 1997. (ii) Implementation of regulations for > Draft of New Electricity Law in Parliament (to private power replace prevailing Electricity Law No. 15 of 1985. > Regulation on private power participation (i.e. closing the window for unsolicited proposals) introduced in 1998. D. Introduce a formula-based periodic (i) Establishing ETAM (Electricity Tariff Presidential Decree introduced ETAM in October tariff adjustment mechanism to recover Automatic Adjustment Mechanism) 1994. costs. E. Other Objectives El. Assist in financing environmental (i) Commissioning of 2x65 MW coal-fired Commissioning in September and December 2000. sustainable expansion in Sumatera and power plants in Banjarmasin in December Kalimantan. 1998 and March 1999. (ii) Commissioning of 2x45MW Commissioning in June 2001. hydropower plants in Besai in January 2000. (iii) Commissioning of 10 MW and3O Commissioning in April 1997 and march 1998. MW Barge Mounted Power Plants in April 1997 and March 1998 E2. Assist GOI and PLN in the areas of (i) Establishing a specialized (i) Done environmental management, efficiency Environmental Unit within PLN (ii) Done improvement and demand management (ii) Promote environmental protection and (iii) DSM component cancelled upgrade enforcement capabilities of mine inspection at MME (iii) Promote Demand Management at PLN - 20 - Key Perfomance Indicators during operation. PERFORMANCE INDICATORS BESAI HPP NO DESCRIPTION DESIGN 2001* UNIT 1 UNIT 2 UNIT 1 UNIT 2 1 Capacity Factor (CF %) 50.1 50.1 48.9 46.5 2 Average Availability Factor (AF %) 100 100 95.9 95.9 3 Annual Energy Output (GWh) 201 201 82.7 78.8 4 Continuous Safe Operation (Days) 365 365 216 218 5 Station Services as a % of Generation (PS) 0.55 0.55 0.2 0.2 6 Dam safety Evaluation (Yearly) 5 5 0 0 7 Plant Labor Force (M MW 15 /45 15/45 11/45 11/45 Note: *) Monitoring period: March 2001 to 30 October 2001. - Unit # 2 Commissioning: March 7, 2001 - Unit # I Commissioning: March 15, 2001 - Modification by pass inlet Turbine Unit # 1: May 13 to 28, 2001 (16 days) - Modification by pass inlet Turbine Unit # 2: May I to 12 and May 17 to 18, 2001 (14 days) - 21 - PERFORMANCE INDICATORS BANJARMASIN SPP Tar t 2000 2001 No. Unit I Unit 2 Unit I Unit 2 Unit I Unit 2 _ Capacity Factor [CF %I 67 67 69.2 43.4 83.6 2 Equivalent Availability Factor [EAF %] 86.8 86.8 63 76.3 55.6 83.3 3 Weighted Boiler Efficiency [%j 91.3 91.3 92.2 92.4 91.8 92.4 4 Standard Coal Consumption [g/kWhl _ 646* 626* 638 608 5 Continuous Safe Operation [daysl 312 312 123** 148** 6 Plant Heat Rates [KJ/kWhl 11715 11229.9 12355.4 11782.1 7 Plant Head Rates [Kcal/kWh_ 2800 2684 2953 2816 8 Plant labor force [man/MWI 0.92 106/130 = 0.81 120/130 - 0.92 9 ESP Efficiency [%] 96.7 l 99.5 944 99 5 Note: Up to August 15, 2001. * The standard coal consumption is calculated with the available coal. [HV = 19.2 [MJ/t] coal = 37.6 [t/h] Caloric value HHV = 4625 [kcal/kg] Fuel heat input at 63.88 [MW] = 200.5 [MW] TG HK = 9580 [kJ/kWh] ** The database present only a short period of commercial operation "t** This database are based on the available performance test result (in column 2000) and final performance test result (in column 2001). PERFORMANCE INDICATORS BARGE MOUNTED POWER PLANTS Taret 2000 2001 No 10 MW 30 MW 10 MW 30 MW 10 MW 30 MW _ ~~~ITEM ______ __ 1 Hours of Operation per year [h] 6,000 6,500 8,784* 11,742* 2,257 2,352 2 Annual Energy Generation [GWh] 60 195 19.3** 305.1** 3,070 29.3 3 Average fuel consumption [liter/kWh] 0.25 0.29 0.25 0.27 0.24 0.3 * Total Cumulative Operating hours up to March 12, 2000 ** Total Energy Generation up to March 12, 2001 (PLN Sektor Barito) ***' Unit out of service during Jan-April 2001 for repair **** Unit operation at Tarahan Site in Lampung since December 12, 2000 (PLN Sektor BD Lampung - 22 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal ActuallLatest Percentage of Estimate Estimate Appraisal Project Cost By Component US$ million US$ million Besai HPP and related transmission 143.50 123.83 86.3 Banjarmasin SPP and related transmission 261.70 238.81 91.3 Barge-Mounted Power Plants 30.90 24.65 79.8 Engineering Service for Besai HPP 21.80 17.91 82.2 Engineering Service for Banjannasin SPP HPP 13.20 15.15 114.7 TA for Environmental Management (GOI) 3.10 0.09 2.8 TA for Demand Management 2.20 0.00 0 TA for PLN's Environmental Group 1.60 1.60 100 TA for Pilot Project (PLNs Region IV and VI) 2.70 2.65 98.1 Total Baseline Cost 480.70 424.69 Physical Contingencies 55.80 Price Contingencies 48.60 Total Project Costs 585.10 424.69 Interest during construction 103.80 Total Financing Required 688.90 424.69 Note: The actual IDC is not available. Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) Procurement Method Expenditure Category ICB NCB Other N.BF. Totl'os 1. Works 137.80 0.00 0.00 42.90 180.70 (89.00) (0.00) (0.00) (0.00) (89.00) 2. Goods 165.30 0.00 0.00 164.00 329.30 (137.50) (0.00) (0.00) (0.00) (137.50) 3. Services 0.00 0.00 45.80 0.00 45.80 (0.00) (0.00) (34.00) (0.00) (34.00) 4. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 22.70 22.70 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 303.10 0.00 45.80 229.60 578.50 (226.50) (0.00) (34.00) (0.00) (260.50) Note: There is a discrepancy between the total project costs in the above two tables. According to SAR, the first table included the expenditures for preliminary engineering and design financed under Bank loans 3602-IND for Besai and 250 1-IND for Banjarmnasin, while the second table excluded such expenditures. - 23 - Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) : Procurement Method expe;0nditure Category t: : ICB NCB 0t2 N.B.F. Total Cost 1. Works 125.51 0.00 0.00 21.47 146.98 (63.47) (0.00) (0.00) (0.00) (63.47) 2. Goods 130.23 0.00 0.00 95.64 225.87 (98.27) (0.00) (0.00) (0.00) (98.27) 3. Services 0.00 0.00 37.40 0.00 37.40 (0.00) (0.00) (27.08) (0.00) (27.08) 4. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 0.00 14.44 14.44 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 255.74 0.00 37.40 131.55 424.69 (161.74) (0.00) (27.08) (0.00) (188.82) Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. Project Financing By Component (US$ million) Project A praisal Estimate Actual/Latest Estimate Component IBRD JBIC Exp. Cr. GOVPLN Total IBRD JBIC Exp.Cr GOIMPLN Total Besai Hydro Power _ ___ 44.29 38.69 40.85 123.83 Banjarmnasin Thenmal Power l r 93.79 56.94 88.08 238.81 Barge Mounted Plants 23.67 0.98 24.65 TA 127.07 10.32 37.40 Total 266.8 23.7 92.0 306.4 688.9 188.82 56.94 38.69 140.24 424.69 Note: IBRD amount at appraisal included $6.3 m from previous Bank loans. - 24 - Annex 3. Economic Costs and Benefits Sumaters and Kalimantan Power Project Calculation of EiRR for the Banjarmasin Thermal Power Plant ( 1994- 2001) (US$: Million) Year Operational Plant T&D Total O&M Fuel Tota Inerernental Totai Tariff C Total Benefits - Costs Year Cost Cost Capital Cost Cost Cost Generation Sales Revenue Surplus Benefit Net Cost GWh (GWh) Benefit a b a+b c d a+b+e+d e e f e+f 1994 -6 0.66 0.00 0.66 0.66 0.00 -0.663 1995 -5 2.78 0.00 2.78 2.78 0.00 -2.782 1996 -4 3.90 0.00 3.90 3.90 0.00 -3.899 1997 -3 14.75 0.00 14.75 14.75 0.00 -14.75 1998 -2 104.80 8.93 113.73 113.73 0.00 -113.728 1999 -I 74.90 17.57 92.47 92.47 0.00 -92.471 2000 0 52.16 52.16 1.17 53.33 117.00 97.11 2.91 2.54 5.46 -47.874 2001 1 5.08 7.84 12.92 784.42 651.07 19.53 17.06 36.59 23.667 2002 2 5.08 7.84 12.92 784.42 651.07 26.04 17.06 43.10 30.178 2003 3 5.08 10.19 15.27 1,019.20 845.94 42.30 22.16 64.46 49.1 2004 4 5.08 10.19 15.27 1,019.20 845.94 50.76 22.16 72.92 57.649 2005 5 5.08 10.19 15.27 1,019.20 845.94 59.22 22.16 81.38 66.108 2006 6 5.08 10.40 15.48 1,019.20 845.94 59.22 22.16 81.38 65.904 2007 7 5.08 10.60 15.68 1,019.20 845.94 59.22 22.16 81.38 65.69 2008 8 5.08 10.82 15.90 1,019.20 845.94 59.22 22.16 81.38 65.484 2009 9 5.08 11.03 16.11 1,019.20 845.94 59.22 22.16 81.38 65.268 2010 10 5.08 11.25 16.33 1,019.20 845.94 59.22 22.16 81.38 65.047 2011 11 5.08 9.61 14.69 853.71 708.58 49.60 18.56 68.17 53.472 2012 12 5.08 9.80 14.88 853.71 708.58 49.60 18.56 68.17 53.282 2013 13 5.08 10.00 15.08 853.71 708.58 49.60 18.56 68.17 53.083 2014 14 5.08 10.20 15.28 853.71 708.58 49.60 18.56 68.17 52.883 2015 15 5.08 10.41 15.49 853.71 708.58 49.60 18.56 68.17 52.679 2016 16 5.08 10.62 15.69 853.71 708.58 49.60 18.56 68.17 52.471 2017 17 5.08 10.83 15.91 853.71 708.58 49.60 18.56 68.17 52.259 2018 18 5.08 11.04 16.12 853.71 708.58 49.60 18.56 68.17 52.042 2019 19 5.08 11.27 16.34 853.71 708.58 49.60 18.56 68.17 51.821 2020 20 5.08 11.49 16.57 853.71 708.58 49.60 18.56 68.17 51.596 2021 21 5.08 8.74 13.82 636.81 528.55 37.00 13.85 50.85 37.026 2022 22 5.08 8.92 14.00 636.81 528.55 37.00 13.85 50.85 36.851 2023 23 5.08 9.10 14.17 636.81 528.55 37.00 13.85 50.85 36.673 2024 24 5.08 9.28 14.36 636.81 528.55 37.0 13.85 50.85 36.491 2025 25 5.08 9.46 14.54 636.81 528.55 37.0 13.85 50.85 36.30 Salvage Value 33.6 33.59 EliRR witb consumer surplus .14.4% - 25 - _ tX s o i ri o si000 0 000.~m wt0 r.e ONterlCe x' m~~~~~m .;do CD ~ ~ ~ ~ 0 0000 0000 C u u 9 8 8 29 e u 3 N o W N N N N N N N N N N 0000000000 fi ff~i Q_NtemmVo t*+w+tMtttmooo = B O g o a ~~~~~~00000000 ue X Xe XXXo oB * 4-u f NN 00E en 3e 0000 C_ _N N _O '__ X ~ ~ ~ ~ ~ ~~--000 cN -0 ('0000(D0 00 a~ o'0>---Ot- cn~~~~~~~~~~~~~ 0 N en _0 00 00 N 00 Ce 0 - L n i ; u U; s . t _ 9 2~~~N C' N N N > fiOs> >Ohx# o 0 0 00000 00 000000 0 ~ 000 0 i8 > Assumptions for Banjannasin EIRR Year S/kWh 1. Expected Tanffs: 2000 0.03 2001 0.03 2002 0.04 2003 0.05 2005 0.06 2006- 0.07 2. O&M costs: 2% of the plants' capital costs 3. Fuel costs: S 0.01/kWh and escalated 2% after 2005 4. Total Losses 17% 5. Salvage Value 33.6 million (Land, buildings, other assets, etc.) 6. IDC 3.5% Years 7. Annual Energy Production: Load % 1-2 3-10 11-20 21-25 100 5730 7640 6367 4457 50 608 400 400 883 0 701 480 480 544 Yearly Inspection 0 1721 240 1513 2887 Outage 8. Fuel Costs 95.7 Rp/kWh 0.01 $/kWh 9. Example for fuel cost evaluation (Sept 2001) Total Production 50,981,500 kWh Total Fuel Cost Rp 4.800,431,269 or $ 508,378.26 10. Consumer surplus evaluated on the basis of 196.5 Rp/kWh or 2.62 USc/kWh - 27 - Sumatera and Kalimantan Power Project Calculation of EIRR for the Besai Hydro Power Plant ( 1993- 2001) (US$: thousand) Year Operational Plant O&M Total Incremental Total Taniff Consumer Total Benefits-Costs Year Cost Cost Cost Generation Sales Revenue Surplus Benefit Net GWh (GWh) Benefit a b a+b e f e+f 1993 -7 3,467 3,467 -3,467 1994 -6 9,434 9,434 -9,434 1995 -5 9,805 9,805 -9,805 1996 -4 15,087 15,087 -15,087 1997 -3 11,206 11,206 -11,206 1998 -2 35,886 35,886 -35,886 1999 -l 20,196 20,196 -20,196 2000 0 22,151 709 22,860 -22,860 2001 1 14,508 709 15,217 402 349.74 10,492 9,164 19,656 4,439 2002 2 709 709 402 349.74 10,492 9,164 19,656 18,947 2003 3 709 709 402 349.74 13,990 9,164 23,154 22,445 2004 4 709 709 402 349.74 17,487 9,164 26,651 25,942 2005 5 709 709 402 349274 20,984 9,164 30,148 29,439 2006 6 709 709 402 349.74 24,482 9,164 33,646 32,937 2007 7 709 709 402 349.74 24,482 9,164 33,646 32,937 2008 8 709 709 402 349.24 24,482 9,164 33,646 32,937 2009 9 709 709 402 349.74 24,482 9,164 33,646 32,937 2010 10 709 709 402 349.74 24,482 9,164 33,646 32,937 2011 11 709 709 402 349.74 24,482 9,164 33,646 32,937 2012 12 709 709 402 349274 24,482 9,164 33,646 32,937 2013 13 709 709 402 349.74 24,482 9,164 33,646 32,937 2014 14 709 709 402 349.74 24,482 9,164 33,646 32,937 2015 15 709 709 402 349.74 24,482 9,164 33,646 32,937 2016 16 709 709 402 349.74 24,482 9,164 33,646 32,937 2017 17 709 709 402 349.74 24,482 9,164 33,646 32,937 2018 18 709 709 402 349.74 24,482 9,164 33,646 32,937 2019 19 709 709 402 349.74 24,482 9,164 33,646 32,937 2020 20 709 709 402 349.74 24,482 9,164 33,646 32,937 2021 21 709 709 402 349.74 24,482 9,164 33,646 32,937 2022 22 709 709 402 349.74 24,482 9,164 33,646 32,937 2023 23 709 709 402 349.74 24,482 9,164 33,646 32,937 2024 24 709 709 402 349.74 24,482 9,164 33,646 32,937 2025 25 709 709 402 349.74 24,482 9,164 33,646 32,937 2026 26 709 709 402 349.74 24,482 9,164 33,646 32,937 EIRR with consumer surplus 13.8% - 28 - Sumatera and Kalimantan Power Project Calculation of EIRR for the Besai Hydro Power Plant ( 1993- 2001) (US$: thousand) Year Operational Plant O&M Total Incremental Total Tariff Consumer Total Benefits - Costs Year Cost Cost Cost Generation Sales Revenue Surplus Benefit Net GWh (GWh) Benefit a b a+b e f e+f 1993 -7 3,467 3,467 -3,467 1994 -6 9,434 9,434 -9,434 1995 -5 9,805 9,805 -9,805 1996 -4 15,087 15,087 -15,087 1997 -3 11,206 11,206 -11,206 1998 -2 35,886 35,886 -35,886 1999 -1 20,196 20,196 -20,196 2000 0 22,151 709 22,860 -22,860 2001 1 14,508 709 15,217 402 349.74 10,492 10,492 -4,725 2002 2 709 709 402 349.74 10,492 10,492 9,783 2003 3 709 709 402 349.74 13,990 13,990 13,281 2004 4 709 709 402 349.74 17,487 17,487 16,778 2005 5 709 709 402 349.74 20,984 20,984 20,275 2006 6 709 709 402 349.74 24,482 24,482 23,773 2007 7 709 709 402 349.74 24,482 24,482 23,773 2008 8 709 709 402 349.74 24,482 24,482 23,773 2009 9 709 709 402 349.74 24,482 24,482 23,773 2010 10 709 709 402 349.74 24,482 24,482 23,773 2011 11 709 709 402 349.74 24,482 24,482 23,773 2012 12 709 709 402 349.74 24,482 24,482 23,773 2013 13 709 709 402 349.74 24,482 24,482 23,773 2014 14 709 709 402 349.74 24,482 24,482 23,773 2015 15 709 709 402 349.74 24,482 24,482 23,773 2016 16 709 709 402 349.74 24,482 24,482 23,773 2017 17 709 709 402 349.74 24,482 24,482 23,773 2018 18 709 709 402 349.74 24,482 24,482 23,773 2019 19 709 709 402 349.74 24,482 24,482 23,773 2020 20 709 709 402 349.74 24,482 24,482 23,773 2021 21 709 709 402 349.74 24,482 24,482 23,773 2022 22 709 709 402 349.74 24,482 24,482 23,773 2023 23 709 709 402 349.74 24,482 24,482 23,773 2024 24 709 709 402 349.74 24,482 24,482 23,773 2025 25 709 709 402 349.74 24,482 24,482 23,773 2026 26 709 709 402 349.74 24,482 24,482 23,773 EIRR without consumer surplus 9.9% - 29 - Assumptions for Besai EIRR 1. Construction costs includes transmission and distribution costs 2. Transmission and distribution losses about to 13% 3. O&M costs are assuned to en equal to 0.5% of total construction costs 4. Consumer surplus is assumed to be about 2.62 USc/kWh 5. Tariffincrease from 0.03 $/kWh in 2001 to 0.07 $/kWh in 2006. 6. Price for kerosene is 600 Rp/liter with a expected usage of 72.7 liter/month/household equivalent or 14.4 kWh - 30 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, I FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 4/92 3 Engineers 3 Financial Analyst I Operations Officer I Environmental Specialist Appraisal/Negotiation 10/93 2 Engineers 2 Consultants I Financial Analyst I Resettlement Speicalist Supervision 3/95 1 Engineer HS HS I Resettlement Specialist 9/95 1 Engineer S S 3/96 2 Engineer S S 11/96 2 Engineers S S 4/97 1 Engineer S S 7/97 1 Engineer S S 11/97 1 Engineer S S I Procurement Specialist I Resettlement Specialist I Sector Coordinator/Advisor I Economist 7/98 1 Engineer S S I Hydro/Resettlement Specialist I Procurement Specialist 12/98 1 Engineer S U I Procurement Specialist I Financial Specialist 4/99 1 Implementation Specialist S U I Engineer I Financial Analyst I Operations Officer 9/99 1 Sr. Project Specialist S U 2/00 1 Project Implementation and S U Procurement Specialist I Engineer 1/01 I Engineer S U I Operations Officer I Financial Analyst ICR S U - 31 - (b) Staff: Stage of Project Cycle [ Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 185.7 767.1 Appraisal/Negotiation 55.5 221.9 Supervision 110.9 495.1 ICR 11.6 47.0 Total 363.7 1,484.1 - 32 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating OMacro policies O H OSUOM O N * NA OSector Policies O H OSUOM O N O NA N Physical OH *SUOM ON ONA F Financial O H OSUOM * N O NA X Institutional Development 0 H O SU *M 0 N 0 NA Environmental O H *SUOM O N O NA Social Z Poverty Reduction O H OSU*M O N O NA D Gender O H OSUOM O N O NA OI Other (Please specify) O H OSUOM O N O NA X Private sector development 0 H O SU 0 M 0 N 0 NA El Public sector management 0 H O SU O M 0 N 0 NA EL Other (Please specify) 0 H O SU O M 0 N 0 NA - 33 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating • Lending OHS*S OU OHU • Supervision *HSOS O u O HU M Overall OHS OS OU O HU 6.2 Borrowerperformance Rating Z Preparation OHS OS OU O HU • Government implementation performance O HS OS 0 U 0 HU F Implementation agency performance O HS OS 0 U 0 HU X Overall OHS OS OU O HU - 34 - Annex 7. List of Supporting Documents 1. Memorandum and Recommendation of the President of IBRD to Executive Directors 2. Staff Appraisal Report (SAR). 3. Project Aide-Memoires. 4. Consultants Completion Reports for Besai HPP (Nippon Koei) and Banjarmasin SPP (Electrowatt Engineering Services) 5. PLN Audited Financial Statements (1994-2001) 6. Final Executive Summary, Consulting Services for the Constitution of Electricity Units in Region TV and VI, Coopers and Lybrand, November 1997 7. Final Report of the Joint Office of Surface Mining (US-OSM)/Bureau of Environment and Technology (Ministry of Mines and Energy), Consulting Service for Mining Environmental Policy in Indonesia, OSM, November 1999. 8. Final Executive Summary, Consulting Services for Strengthening PLN's Environmental Management Capabilities, Lahmeyer International and PT Jaya CM Manggala Pratama, December 1998. 9. Environmental Impact Assessment of Banjarmasin Mine Mouth Coal Steam Power Plant, PLN, April 1994. 10. Resettlement Plan of Banjarmasin Mine Mouth Coal Steam Power Plant, PLN, November 1993. 11. Resettlement Plan of Besai Hydroelectric Power Project, PLN, May 1994. 12. Environmental Impact Assessment of Besai Hydroelectric Power Project, PLN, 1994. 13. Social-Economic/Cultural Study, Besai HEPP, July 1993. 14. Initial Environmental Examination of 150 kV Transmission line from Banjarmasin SPP to Cempaka Substation and Trisakti Substation, PLN, May 1993. 15. Summary of Activities, Community Development Project for Besai Community, Research Institute of University of Lampung (Lembaga Penelitian Universitas Lampung), June 1998. 16. Borrower's Completion Reports for Besai, Banjarmasin, and Barge Mounted Power Plants. 17. Bank's ICR Aide-Memoire - 35 - MAP SECTION IBRD 25506R1 INDONESIA MYANMAR PLN REGIONS ~~~ VI~~~~~~~TNEAtA ~~~~~~~~~~~PA CIFIC Ml PL' AA NUMBERS Gulf of . - i - . . : . ., PHILIPPINES - WILAYAH BOUNDARIES Thailand , >, '- . . . . C E A N' PROVINCE HEADC QUARTERS THAILAND >-- . -. i -; : o : : :: - - - Suluh . : * NATIONAL CAPITAL ,T.H.AIL-A-:N.-D- .. : . _ ^hsl^eose0O¢RI Sea INTERNATIONAL BOUNDARIES r~~~~~ - - ' 7 - I:tj l-,.t,.- / ~~~ 1A~~Y & ~ BRUNEI7 Modon / ~~~~~~~~~ (~~~'~~~ ~~ Ce~elebes Tku NJ ; 2 t 5e(7 > 3 ti ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~13Y Nieuu -K e / , . i- ME rVt4 v KALI ANTAN od 1 ,:/ ;ec o Siber ,t J o ' sbi VI ViI P 0ii 3o WMATERA/Q ---,t' s PaIngaro SU Sus. P * Mtisol Yapen < S o | * @I Palen , -t ;PeY t /l Vil Ce Xp r Uum--. P#swrPfoet 0Koudori ~~~~PAPUA ;engwIv g sric s " ".......io I . Buru 0n o- (I RIAN JAYA1 I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -X f r 0 N / r DO1, N fE S 1 KtI A s eo' ; -4@ 5-AWA JAWA Wefur Bobar - , oimb r L' - ;' -~~ - -t t . . , - _ EAST TIMOR S.osbo r :imor Arafura Seo IND1 O E AN Gulf Of Carpentoark O <~~~~~~~~~~~~~~~~~~~~~Wo EppoSo SHMa -nL~ pRr aR. W'nrlnaas. .-ii : . .:,~~~~dor' .aIi .:ro T. ,r IdA0teakoxw.ssttaS hloj af mR. e h rHl=yar.rnrer , -. * A U S T R A L I A DECEMEER 2001 IBRD 25507R1 Im THAIIL NGON! LSEU E DIE . : W-- ~~~~P. UNDANJ ss)NXilr6 °/ tMALAYSIA (-Do hn Sout China Si~~~~~~~~~e HPP~~~~~~~~~~~~~~~~~~EA P A~~SMTR AN KALIMATA tPADANGKANAR '\WW -- -3 TRANSMNSSION L_ES N e , ,~~~~~~~~~~~~~~~~~~~~. K-UAM )I W ' < BUKIT KEMUfAt"NMCW S - a - THNERMA POWER ST E R 4 *SX'''',,\:;.',,;-',,: ;-, . H.'YDRNOPOWERROPOSED P - - - . - A . - --TS -:A_GK PIN W A BOSIOWES M=p Desin Uit :f -e Wo- d - nk. g42~~~~~- . -NENfOA BOUN-DAHRtIbOES tIANs m: -f n- :~y :n .b po- of0: ,. ir 6 +nr, r ,, ¢ f .~~~~~~ :0 20 3 , 40 M( STA. o h World Ban ru,an ugetk !-<~~~~~~~~~~~~~~~~~~~~~~~~~~~o t' lel gIAYP stor., f nyterioE, DECEMBER 2001 IBRD 25508R1 IlNDONESIA SUMATERA AND KAIIMANTAN PROJECT PLN REGIONS V AND VI MAIN TRANM N ONl- PROPSED EXISTING GOING FUIURE PROJEa. TRANSMISSION LINES A A ~~~~~~~SUBSTATIONS - - ~~~~~~~THERMAL POWER PLANTS * Ss * HYORO POWER PLANT BRU, PIN WILAYAH BOUNDARIES - - INTERNATIONAL BOUNDARIES South China Sea MALAYSIA '~~~ I ...i t J'BAS ' ' / SINGKAWANG PAM BARU V SLANTAN SI RAYA I KILOMETERS~~~~~~~~~~~~~~~~T 1 10~~~~~ 115~P. GK BMASIN~~~~~~~~~~ECMER20