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TNt WORLD SANK , O3 QFXIAL USE ONLYTH1 WORLD GANKt.O wOtweihmgton. D.C. 20431

USA

O~. ,6 OsmvG.

June 1, 1990

MEMORANUM HTO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on IndonesiaEleventh Power Project (Loan 2056-IND)

Attached, for information, is a copy of a report entitlei "Project

Completion Report on Indonesia - Eleventh Power Project (Loan 2056-IND)" prepared

by the Asia Regional Office. No audit of this project has been made by the

Operations Evaluation Departmen at this time.

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Attachment

This dawfst ts a uaWi d dWibtu ad may be used by pIs ae in thof thaw oMciu dusu is. Eu enten may no ediefwise be hsedw without Wor an auoimid

FOR OFFICIAL USE ONLYINDONESIA

ELEVENTH POWER PROJECT (LOAN 2056-IND)

PROJECT COMPLETION REPORT

TABLE OF CONTENTS

Page No.

PREFACE .*......... ..... ................. **...... i

BASIC ')ATA SHEET ..............*..........* ...................... * ii

HIGHLIGHTS . ... ..................... iv

I. BACKGROUND.....*..**-ooo ........ .. o**. ............ ...... 1

The Bank's Earlier Operations............. ...... ..... 1Sector Organization andObjectives......................... 1

II* THE PROJECT 2.. ... 2

Project Formulation and Preparation........................ 2Project Objectives ........ ................................. 2Project Descriptions c r i p t l on.. .... .................. 3Project Design and Organization ............... .......... , 3Covenants of the Loan Agreement............................ 4

111. PROJECT IMPLEMNTATION AND COSTS......................... 4

Preparation, Appraisal and Effectiveness . ............. 4Procurement, and Construction andErection of the Workso..................................... 4

Engineering and Design for Paiton Power Plantand EHV Transmission ......... ... O*.. ................... 7

Management Consultancy ................................. 7Implementation Riss..................... 7Environmental Impact of the Project....................... 8Bank Project Supervision ................ .......... .. 8Performance of Consultants and Contractors ................. 8Project Documentation and Data.... ............ ........ 8Borrower Performance .......... 8.......................... 8Project Costs and Financing ............................... 9Loan Alloaioo.... c a.............on*..0 .. 9Disbursements........ ........... 0*..** 9

IV. PROJECT RESULTS ....... ............. ............ . ..... 9

Project Obj ectives .. .9.......... .............. 9Physical Resit ........ ... O. ......... s 10Economic Rate of Return ............................... ..... 10Project Sustainability .. ......... .......... ..................... . ; 10

.This document has a restricted distributiob and may be used by recipieEts only in the performancof their offcial duties. Its contents may not othe"ws be disclosed without Woftd Bak authorization.

TABLE OF CONTESTS (Cont! )

Page No.

V. FINANCIAL V9RF0RWC. .**. ... ... .

e ' ~~Financial Objectives* ...........---. -*- 11Per'formance esls......... .......................... 11

Tariffs.. * . * * * * * * * * * *,* . . . * . . . . . ............ 12Financial Management. .-. -X . . -.. .. 12Auditing .. .... .. ..... . ..... ,......... 14

VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT.. ... .. 14

Management ....... .. ... ...... ...... ... *14 \Planning, Design and Research ...... ......... 15Manpower and Training ............ ......... 1Accounting and Budgeting ...................... . ., . 16

= ~~~~Procurement ...... ... . -*...... 17

Overall Fe ............. ...... .. ...... 17

VII. CONCLUSIONS AND LESSONS LEARNED............. ......... . . 18

Project Relationship ........................ is - ..

ANNEXES

1. Related Bank Loans.....192. Appraisal Indicator .................. , ,* 223. Status of-Covenants ... ................ 23;4. Milestone Schedu;e for Jabotabek troject.................... 265. Proj'pct Costs at Financing ...... .276. Withdrawal of the Proceeds of the Loan.'.................... 287. Loan 2056-IND DisbursementsW....... ... . ...................... 298. Estimate of the Internal Economic Rate of Return ........... 309. PLN Financial :tatements. Actuals for 1981/82 to 1986187 ... 3110. PLN Financial St4tements. Actuals for 1987188 to 1988189

and Estimate for 1989190.............................. .... 35

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. ' ~~~INDONESIA

ELEVENTH tOWER PROJECT (LOAN 2056-IND)

This is the Project Completion Report' (PCR) for the Eleventh PowerProject in Indonesia, for which Loan 2056-IND in the amount of US$170.0 mil-lion was approved on November 10, 1981. The loan was cXosed on June 30, 1988,two years behind schedule. Disbursement under paid loan was US$167.0 millionwith the cancellation of the undisbursed balance of about US$3.0 million. Thelast disbursement was on January 4, 1989. The borrower was the RepublicofIndonesia which onlent the proceeds of the loan to PLY.

The PCR was jointli prepared by the Industry and Energy OperationsDi7ision, Country Department V, and the Energy.Division of the TechnicalDep#rtment, both of the Asia Regional Office.

Preparation of this PCR by the Bank is based on the Staff Appraisal-Report; the Loan and Project Agreements; Bank supervision reports; internalBank memoranda; correspondence between the Bank and the Borrdwer and PLN; PLNProject progress reports; aud missions to Indokesia in October 1989 andFebruary/March 1990.

This PCR was read by the Operations Evaluation Department (OED). Thedraft PCR was sent to the Borrower on April 6,.1990, for.#omments by May 21, 41990, but none were receive4.

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. ~~INDONESA''

ELEVENTH PORER PROJECT (LOAN 2056-IND)

BASIC DATA SHEET

KEY PROJECT DATA

Item -Apraisal PCR

Total Project Cost (US$ million) 319.4 (1981182). 256.0 (currkt)265.3 (1981/02)

Loan Amount (US$ million). 170.0 167.0Disbursed 170.0 167.0.e Cancelled 0.0 3.0

Date Physical Components Com4pleted December 1985 April 1989Proportion Cczupleted by tbove Date (1) 100 100+Proportion of Time Overrun (C) - 60Economic Rate of Return (2) 181 12Financial Performance Satisfactory SatisfactoryInstitutional Performance Satosfactory Satisfactory

CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENT(Amounts in US$ million)

FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89

Appraisal EstimatedCumulative 5.0 33.0k 143.0 170.0 - - -

Actual Cumulative - 11.1 55.8 101.1 135.7 152.3 161.4 167.'Actual Cumulativte as I of

Original Loan Amount - 6.5 32.8 59.5 79.8 89.6 95.0 98.2

V ~~~~~PROJECT T WTABLE

Item Date Date Date.. \ - Planned Revised I Actual

I4entification January 1980Preparation May 1980Appraisal Mission a March 1981'Loan Negotiations September 1981B4ard Approval November 10, 1981Loan Signature November 16, 1981Loan.Effectiveness February 16, 1982 April 16, 1982 April 15, 1982Project Completion December 31,1985 March 31, 1988 November 30, 1988Loan Closing June 30, 1986 4une 30, 1988 June 30, 1988tast Disbursement June 30, 1985 J"nuary 4, 1989

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-0E* PROJECT DATA

Borrower Republic of TndonesiaExecuting Agency Perusahaan Umum Listrik Negara (PLN)Fiscal Year of GOI and PLN April 1 to March 31

Related Bank Loans See Antiex 1

CURRENCY'EQUIVALENTS

At Time of Appraisal At Time of ProjectAppraisal Completion Report

US$ 1 Rp 625 \. \ US$ 1 = Rp 180041p 00 ,U$ 0.16 Q 100 = US$0.056Rp 1 million \- US$ 1,600 Rp 1 million - US$555.56,

VEzGNTS AND MEASURES

1 kilometer (km) . 0.6215 miles Cmi)I kilovolt (kV) * V 1,000 volts (V)1 megavolt-ampere (MVA) - 1,000 kilovolt-amperes (kVA)1 megswatt (KW) a 14000 kilowatts (kW)1 gigawatt hour (Glh) 1 milifon kilowatt hours (kWh)

k , ABBREVIATIONS -

DOEP - Directorate General of Electric Power and New Energy,Ministry of M as and Energy

D3I - Daerah Khusus Ibukota (Jakarta Municipal Corporation)EHV - Extra High Voltage . IGOI - Government of IndonesiaIERR - Internal Economic Rate of ReturnLRMC V - Long Run Marginal CostMIS - Management Information SystemMME - Ministry of2 ines and Energ-PLN - Perusahaan Umi Listrik Negara (State Electricity

Corporation)m - Engineering Services Center of PLN101 - Rate of ReturnTA - Technical Assistance

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i ~~~~~\;PROJECT COMPLETION BEPOT;

ON1ESIA

ELEVENTO POWER PROJECT (LOAN 2056-ID)`

HIGHLIGHTS

The main objectives of the project were to increase PLNIs transmis-sion and distribution capacities, to enable grid extensions to rural areas,and to provide consultancy services for schemes to enhance the use of coal,develop an effective grid system and continue PLNs institutional growth.These objectives were met, although with some delay, by constructing and'commissioning transmission facilities, substations and distribution facilitiesin .the Jabotabek area in West Java.and by carrying out th.e engineering of thePaiton coal-fired thermal power plant in West Java XI and the.500 kVtransmission system linking Central and East Java,2t and the managoment,consultancy for further improveiisnts in PLI's financial planning. aid controlsystems.

The implementation of the project took about three years longer thanenvl*aged in the SAR. The main factors that affected implementation were thelater than planned start of procurement of equipment and materials, the longprocurement cycle from the invitation of tenders to the signing of contracts,including Government approval, the protracted perio4 for the establishment ofletters of creaits to contractors,Adelays in delivery of equipmei and;mate~ials, use of inexperienced an; financially unsound local contract6r for.construction and etections of the distribution works, problems of right-of-wayand acquisition of land, and Ehe 4ddition in 1983, with Bank agreement, of-new150 kV Jabotabek transmission works. The distribution and transmission coipao-nents are operating satisfactorily. The training of and transfer of techno-logy in traismission (150 kV) to PLN staff, by engineering consultants, wasacsomplished.

Apart from the delayed completion of the prpject and despite thedifficulties encountered with local contractors, the project has been tcompleted in a satisfactory manner. Through this and subsequent projects, theBank "as pursued with the Government of Indonesia, measures necessary toincre*se the overall efficiency of.PLN, and to improve its projet implementa-tion capacity.

The project cost in current prices, excluding financial chargesdurivr construction, was about US$256.6 million (US$265.3 in constant 1982pricus) as compared with the appraisa; estimate of US$319.4 million, or about172 less. This is attributed mainly t'b the devaluation of the local currencyand lower than forecasted price escalation rates,

1/ Financed through Loan 3098-;ND, approved June 21, 1989.

2- 21Jnazced through -G&rmaMt-ssistance.

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The ex-post economic rate of return has been estimated to,be 12Z forthe Jabotabek distribution and transai"sion versus 18Z in the SAR. Therevallated rate is lower mainly because of lower tariff levels prevailing inIndonesia, compared to the SAR projections. Since 'the calculations excludethe consumer surplus as in the SAR, the actual economic benefit fo the powerwould be greater than that reflected by the IERR of 12 percent. With properdevelopment of the distribution and transmission systems, the quality ofservice-to the consumers has improved and better utilization of generationcapacity was obtained. This project was important in contributing to thedevelopment of the Jabotabek area.

The jproject is likely to maintain an acceptable level of benefits.The project components have been maintained in good operating condition by PLNsince its commissioning. PLN is expected to continue to apply appropriateoperation and mainte#ance procedures.' No adverse environmental impact tookplace and the project did not involve resettlement.

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INDONESIA

ELEVENTH POWR PROJECT (LOAN 2056-IND)

I. BCKGROUND

The Bank's Earlier Oyerations

1.1 Since 1969, the Bank group has provided about US$3.0 billion forpower generation, transmission and distribution facilities through 17 separate,projects. Six transmission and distribution projects (Gredits 165-DND and334-IND,, and Loans 1259-1ND, 2056-0IND, 2443-ID "ud 2778-U1D) rehabilitatedand e 4anded the distributii-n tacilities in Java. Ten power projectb (Credit399IND and Loans 1127-IND, -136,-IND, 1513-DND, 1708-IND, 1872-.ND, 1950-IND,2214-lED, 2300-I3D and 2443-IND)\'absisted PLN to expand electricity generationcapacity in Java, to provide a strong all-Java S00 kV grid, to extend distri-butUon facilities, to re;uce system transmission and distribution losses, andto introduce a pilot program of mini-hydro developma*t in Sumatra. In addi-tion, three recently approved projects (Loans 3097-IND, 3098-IND and the R ralalectirfication Project) expect to continue to asiist in the expansion of tiesysteii tapability and institutional capacity. Project Performance AuditReports and Project Completion Reports on the first ten projects (Credits165-IND, 334-IND, 339-IND and Loans 11;7-IND, 1259-IND, 1365-IND and 1513-IND,1708-IND. 1872-tED, 1950-IND and 1950-1-IND) have bwen issued. They concludethat these projects achieved the objectives set out at the tin. of theappraisal and were implemented within the budget. The relate4-iank loans tothe Eleventh Power Project are give In iAnnex 1. Taken together, theseproJects have enhanced PLNs institutional capabilities.

Sector Organization aud Objectives

1.2 The principal agency responsible for implementation of the GOIpolicies in the energy sector is the Ministry of Mines and Energy (MEE). ThisMinistry coordinates all activitiei in the energy sector and controls thes-tate enterprises responsible for the execution of GOI policies in the energysubsectors, which comprises PLN for electricity. Other ministries andagencies are also involved in the sector. The electricity subsector isregu-lated by MME through the Directotate, General of Electric tower and New Energy(DGEP).

1.3 The general sector objectives, at the time the Eleventh-Power Projectwas foimlated, may be summarized as followsi

(a) 'diversification of primary energy iorzrcs, with particular-- emphasis on renewable resources;

(b) improving the efficiency of energy conversion and'~ utilization; and -

Ic) strengthening institutional c4pabilities in the sector.

\~~~~~~~~~~~~~~~~~~~- . *

1.2t -2 1.4 Within these objectives it is essential to diversify energy usagd\, inparticular through the development of the coal, hydropower and geothermalpotential. This will require massive investments and continued development ofinstitutional capabilities.

1.5 The PLN development program for 1981-90 covered the requirements forgeneration, transmission, disttibution and other facilities. It wasformulated on the basis of the following objectives.

(a) optimize domestic resource utilization by substituting use of oil bycoal, hydro and-geothermal resources for power generation and byreducing the use of fuel-inefficient installations;

(bk realize economies of scale through large-sized instaUlations;

tc) ac#ieve-operatiihal economy by coordinating the utilization of plantsthrough intercotnected operations; and

Cd) achieve and maintain acceptable standards of reliability of supply.

1.6 Thpl-Prc ect formed part of the transmission and distribution compo-nents of tha1 development program and comprised investments to meet urgentneeds.

1.7 The above objectives as well as the major priorlties associated withthem have been ;nyppor'td by the Bank through its involvement with the e ectri-city subsector '&Ad have enabwed PLN rapidly to exoand its supply facilitlesand, coupled with efforts to qvolve integrAted grids, particularly in Java, toexploit advanced techziologies to reduce supply cbsts.

II. THE PROJECT

Prolect Formulation and'Preparation

2.1 The project formulated by the Bank was substantially in accordancewith the Governmente's ahd PLN*s efforts to increase PLN's transmiss*on anddistribution capacities"and electric grid extensions in the rural areas in theregencies of Jakartt, Sogor, Tangerang and Bekasi (Jabotabek) in West Java.The project was a patt of PLN's expansion plan.' The Bank financed the upreparation of the project by funds provided-in previous loans.

Vroject Objectives

2.2 The main objectives of the project were to increase PLN's trsamis- \ sion and distribution capacities, enable.grid extensions, to be made to rural.areas, and provide conoultancy services for schemes.whichjwould enhance theuse of coal, develop an-effective grid system and continue PLN's institutionalgrowth.

. )~ ~~~~~(

Project Description

2.3 The project comprisedt.

(a) a distribution system for Jakarta akd the regencies of Bogor,Tangerang and Beka6l. (Jabotabek) in West Java, involving about 450 kmof 20 kV cables, 760 km of 20 kV overhead lines, 1,336 subatationsand 86d pole-mounted transformers, about 5,300 km of new low voltage «lines and some 320,060 service conaections (See Annex 2),

(b) a 150 kY voltage tsystem, complementary to (a) above, involving f4;¢enew sy'-stations in Jakarta, 46 km of underground double-circuit 150kV cables and 980 MVA of transformers (See Annex 2);-

(c) engineering of the next ba4e-ldit coal or multiple-fired thermalpower units in Jsva;

(d) engineerinLj of the Extra Nigh Voltage (EH) Central-East 4ava trans-mission line; and

'e) \management consultancy for further improvements in PLN's- inancialplanning and control systems.

-Proiect Desian and Organization -

2.4 The distribution componept of the Project extended electricity supplyto both urban and&rural areas of-jabotabek and represented•-a continuation ofthe Bank's development efforts in- important area.of PLN's operations,accunting for about 30 percXxt of its electricity salesY In 1979, SOPRELEC\'of grance, the consulting-firm associated sinoae 1970 with the rehabilitatlon-and epansion program of the distribution, system for Jakarta and Jabotabak. ,

prepared the feasIbility study of the requirements of the-region during thepeilod 1982-1990. The distribution expansion component was based on theSOPRELEC report completed early in 1980. The detailed engineering of thedistribution, ccveriig preparat4on of bid aocuinents, evaluation of bids andsupe vision of construction was carried out by PLN., At the tine of projectappraisal, the LotI (of t*o) bid documents for equipment and materials forthis ptt of the project had been prpared by PLN and reviewed by the Bank..

\ \

2.5 The 150 kV transmission component was based dn detailed systemstudies carried out by PIN and covered in its March 1981 'Report onReinforcement of the Jabotabek RV system during 1982-85'. PLUNcontracted theservices of Preece Cardew & 4ider (PCR) consultants +f the UK; in associationwit PT Yodya Rarya for engi_eering design, preparation of tender documents,~incitding drawings aid specifications, preparation of constructions drawi-"s,engineering and supervision\during fabrication and construction, and traxilnga*4 transfer of technology..

-I 2 6 %The agreement for carrying out the detailed en lneerig 9f•he nextNC- base-ioaa-thermal power plant, Stage I, 800 MW,1/ was sigaed on Niy 9, 1983

between PLN and Sargent & Lundy Engineers (UAA) and PT Citaconas (Indonesia).

1/ Financing of the constructio1 of thePaiton Thermal Power Plant wasapproved under the Bank Loan .3098-IND ii June-1989. ;

-4-

2.7 -The proposed Bank financing for the engineering for the Env C-entral-East Java transmission line was replaced by German bilateral assistance, whoalso provided funds for the conistruction of the facilities.

2.8 The terms of reference for the management consulting study wereagreed between PLN-and the Bank. (

2.9'. The Project was well developed. The enginseering criteria and stan-dards, as well as met-hodology used are. well known for its various component.

* The Project sequence withln -PLN developmnt plan was appropriate. The commis-sioning of the works,. even with three" years' delay, has added transmission anddistri-bution capacity to enable PLN to meet the growth of demand in the area-of influence of the Projeit

2oveants'. of the Loan Agreement

2.10 Annex 3 includet the main covenants of the Loan and Project-'

Agreements. The GOI and PLAN comp;.ied with their respective major coiO#Aants.

III.- PROJECT IR4PLEMENATION AND COSTS

Preparation Appraisal and Negotiation

3 -2.7 The project was identified in fanuahy 1980 and the prepHrationEast -wCs carried out in rey 1980. A Bank mission visited .Indoneoia inMarc 1981 to appraise the Xleventh Power Project.' Loan negotiations tookplace in Washington, I~.C, in September 1981. The\loan was approved by-theExecutive Directors on rNovember 10, 1981.', The loan anm project agreementsvere signed on tovember 16, 1981, aid the 'loan became eftict$ve In Ap2il 15,1982.

(a) Procurement. and Conotruction and Erection,of the Works

(i) Jabcitabek Disiribution~

The procurement for distributinn equipment and materials, whichwas done by international competitive bidding (ICB), was divided

* into two lots ae-planned. Each lot\ended up with 25 contracts.Thirty-seven contracts were awarded to foreign manufacturers andsuppliers and 13 to Indonesian compganies. tn addition, concretepoles\contracts were awarded to Indonesian manufacturers andsuppll"'re selected by local competitive bidding CLCB.

Procurement of equipment and mat\erials.took longer than planned.As shown in the\ milestone schedu'le for Jabotabek distribution,(Annex 43.0 the migning of contracts was delayed byP threefive GIonths for tpe first and lash t contracts ofmLot 1. However,for Lot II the slutodstroae to such *n extenti that thef!a;st and last contracts that'were planned to lie signed inAugust 1983 were actually signed in June 1984- and.February 1986vith delays of ten and thirty'sonths.

N

PLN divided into many contracts,the constru4tion and erection~ ofthe distribution works In adhereoic4 to Govertment ot Indonesia"epolicy designed to promote the'development of local contracting.capabilities. Consequently, these contracts contained-lowvolume-of physical Vorlq: and value, to-attr'act small localcontractors. M4ost of those:~contractors we-re- inexperierveed. andfinancially w4eak. They causbd delay in work eixecution. A'few-contractors stopped work,several times, for protracted periods -due,to financial priessures. In one'particular case it took FLUone year to terminate the contract and app~int a new-contraictor.*re excessive number of contracts oCerloaded FLU vith supervis-

t~~~~~h exes; nu ve2 ''>~

'ingand coordination tasks.

the distr*butionvworks were plde'ted and energized progres- 'ivolly over the 'periodmot8e to sid-l987 witho a delay of one and

a half years ever the sthedulte comletiontdrte of-Pecember-1985.-

( vi) 150 kV Jabot4bek sTransmission-

cotaformalized the contract with the consulting firm of P'eeceCarden & Rider of the UK, In association rith FTcYodya Katya,from Indonesia in 1983.s H0ever- PLm had begun to mobilize therequired services' from hese firms aheadof that date to work onthe engineering and design,tand asupervsion and contra tomanage-.ment of the transmission component.

\Thenderdocuments were prepared for 4witohgear, tjransformaes,cables and crresponding auxiliary equipmentj ad for construc-tion and erection of underground trantsmission lines and gasinsulated- substations. All equipment and materials contracts-for switchgear vere signed between December a982 and January1983? with about six months delay. Csblespnidtransformers were signed in December 1982 '-and February 19R3 withfive and seven months deL4ys as shown in mflestoge s0~eduls forJabotabek Transmission, (Annex 4). 'A totalof eleven- contratswere signed, with six foreign compa*iesf

The effectiveness of stes contracts was delayT ddue to theextended time in9 took PLN to establish the letters of credit.The openingi of the letters of credit relating to the swtchgoariontriais tbok tsnree months., but it required six and eightmonths .for the cables and transformer contracts. Copsiderabledelayr-dalso occurred in obtaining the letterof credit, for the1list amendmient to ond of the contri6ts.' In the ,above 'case ofthe cables it delayed manufacture and the equipznent was receivedAt the beginninig of 1988.. Because of the intereiationship ofthe different ohases of work for the substations, the latedelivery affected the whole sequience of installatiou. cThesedelayswiplaced Pwer in a disadvantageous position beforethe 'contractors with'regard to meetinm s1'hedules Pgreed in the':contract. o c

exteded ime t tok PN toestAlishtheletAers f crdlt

The ~ ~ ~ ~ , Ioeigo h etr fcel rltn otesicga

())

-It, ln spite of the assusrfice given by the Government of Indonesiato the Bat*, rights ot way problems also arose during execution.PLN had purchased alU sites for the substations in 1,81/1982.In September 1981, DKI Jakarta gave PLY the right of way for thecable gputes-. Although the cable routes had been agreed withDKI Jakarta, PLN reports that one of the most serious causes ofdelays was thv procedures for obtaining permits from DKI to lay,the undergrbund;i5O kV cables. PLN also needed a longer timethan pltiied to reach c,ompensation agreements with private landowners along the route of the lines. The effect of all theT ctors mentioned'above,was to lengthen the time required forpreparing, executing ,pd,completing the project by PLN.

De ~ys in deliveries of equipmentland materials also occurred.Fabtory reprogramming of the manufacture of the 150 kV oil-,,filled cable as well as damage \tocables that occurred duringshipp)na and instvillatioui al8o coitributed,to further delays.

Each substation construction\was subdivided into separatec4ntracts, and these were in turu broken down into contracts for£ccess, dad, piling, main superstructure, air conditionAng,-external ser*ice.,and landscaping. The use of inexperi6aced-qlal contractors placed the substation civil worki behind anaxte¢4y iate schedule., Some contractors defaulted and new oneshad to be hiied, essentially the same initial tenderingprocedureKs.

The SAR schedule showed the transmission component to be incommercial operation over a period from December 1983 toFebruary 1985 for the first and last site, esch site consisting'of transmission link and gas insulated switchgear substation,respectively. All five sites included in the original scopewere.completed and energized progressively from January 1985 toFebruary 1987. resulting in an overall delay of two years. ThePulogadung-Tosanprima double circuit link and gas insulated

witchgear substations which were a4ditional to the dFiginalscope, have been completed and tested, but the connectionbetween existing transformers and gas insulated switchgear aswell as to customers remains to be made, outside the scope ofthe project.

(iii). Operation and Maintenance of Jabotabek Projects

.o significant techni4al problems were encountered on any of theelectrical plants d4trng.installation and site tests. PLN\Ihasissued final acceptance certificates for all contracts in accor-dance with contract stipulations. All works are in.goodoperating conditions. -

-.Y 7-

(b) Engineering and Design for Paston Thermal Power Plant *nd EHVTransmission

(i) Engineering of the Paiton Thermal Power Plant

'The contract between PLN and con *iltants was done under Loan2056-IND. A part of the financing of the engineering work wasassigned to a previous Loan 1872-IND. \The construction of thispower plaEt is being financed by Loan iO98-I1ND approved in June1989.

(ii) Eugineering of the ;00 kV Central-East Java Transmission

This component was withdrawn from the funding from this loan andwas financed and completed through technical assistance from theFederal Republic of Germany, which also financed the,construction of the traismission lines and substations.

(c) Waizagent Consultnc!M

D.L. Pamintori, from Indonesia, in association vith Coopers &Lybra,d of Australia, carried out thke management consultancy fortthe st4dy, design and implementatiop of an integratedaccountig, bu4geting and management informatAon system. Thiswork 1aa compluted in August 1985. The recomWendations-of thestudy and their implementation are discussed in para. 6.8.

Implementation Risks

3.2 The SAR atated tiat there' wre no risks of any significance a " o-ciated with the-,Project. However, the Bank was aware of the risks or issuesinvolved in the execution of'projects,izi Indonesia. and the consequent delaysin their implementation, such as protracted procurement procedur s andproblems in land and right of way acquis.tion. Consequently, the Bank helddiscussion with the Government and PLN on both issues to address theparticular questions and procedures related to procurement. There wereexpectations that the situlation would improve. On the matteF of land andright-of-way, the'Bank req ired from th.e Government of Indonelia, as acondition of the loan presentation to the Ezxecutive Directors, assursnce thatPLN woild be given approval for the acquisition of land for, substations andright-of-way for cable routes. Thts condition was met and, therefore, noproblems were anticipated on this tatter. Subsequently, however, the approvalprocedures of Jakarta municipal corporation (DXI) proved to be very cumbersomeand resulted in delays in the ppoject implementation.

3.3 The SM was prepared on thi basis of and expactation that experiencedcontractors would supply equipment and materials and construct s~nd erect'theworks. This was achieved to a high degree in the procurement of equipment andmaterials, although there were delays in the delivery of goods,'ibut not in theconstruction'and erection of worAs because of the'high numbqr of inexperiencedlocal contractors hired for\that purpose, in acqordance witfi GO! procedures.The social cons,equences of tWA. Govwrnment poliy may have been'beneficial butthe costs in terms of project delays were high.

&-

Environmental Impact of the Proilct

3.4 No environmental problems arose in connection with the project. Incongested areas the 150 kV and the medium-voltage lines were locatedunderground. The 150 kV substations are tf the compact gas-insulatedswitch$ear type, which is appropriate for urban locations. In less congestedareas both the medium-voltage and low-voltage systems are overground. Nores"ttlemest was required as a result of the project.

Bank Proiect Supervision

3'.5 The Bank carried out about eight supervision missions to Indonesiafox Bank-financed power projects from 1984 to 1988. No supervision missionsdeem to have taken place in 1982 and 1983. Each mission discussed the imple-mentat,ion problems associated with the Vroject. However, the Bank seems notto have pa14d appropriate attention to the Jabotabek distribution and tranonis-sion compoient of the Project, especially in the earlier part of the projectimplementation. A total of 23.6 staff weeks was expended for the supervisionof this project between 1982 and 1989.

Performance of Consultants and Contractors

3 .6 PLN carried out the engineering and design, preparation of tenoerdocuments, including teohnical specifications, bidding, preparation ofconstruction drawings, and supervision of construction of the distribution \component of the project. The 150 kV Jabotabek transmission project includessuch components as oil filled transmission cables and gas insulated switchgearwhich are relatively new in Tndonesia. Therefore, PLN contracted consultingfirms t\o render the above mentioned tasks for the transmission. These consul-tants a4so trained PLN staff and transferted technology in the requiredtechnicsi areas. PLN reports that the consultants rendered satisfactoryeervice. The financial consultants completed their work $in August 1985.

__ ProjectDocumentaticn and Dati

3.7 \ ' The legal agreement between the Governmeni of Indonesi, PLN and theBank provided a framework for project execution such as Schedul, I and biddingprocedures.

3.8 PLN's 9ystems of account did not provide a good base for,projectaccounts in such areas as engineering and design, supervision and administra-tion by PLN staff. Therefore, the final costs of these items for the projectwore estimated in agreement with PLN by using their percent relationship tothe construction as derived from the SAR (Annex 4). Otherwsse, most basicdata wete available to prepare the_roje;t completion report-

Borrower Performance

3.9 PLN hired consultants to prepare the distribution and transmissionfeasibility studies an4 development plans that wezje used in the preparationand appraisal of the ptoject by the Bank. The Government if Indonesia as wellas PLN provided the support needed in the appraisal phase, At projectappraisal, PLI hadt already completed Lot I, tender documents for distributionequipment and ,aterials. This enibled PLN to call\for bids within areasonable time after loan approval. The bid documents for transmission were

Y~~~~~~~~~~~~~~~~~~

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completed at the beginning of 1982, close to schedule. This advanced prepara-tion and early procurement action helped to speed up 'implementation. As inprevious Bank financed Trojects, PLN fsced the same problems in projectimplementation, in partydue to the regulations and.directives established bythe Government of Indonesia for public sector institutions like PLN. Toalleviate this situation, the Bank has already suggested that GOI grant morea toAmy to PLN. Some progress in this regard has been made (para 6.9)

Proiect Costs and Financing

3.10 The project cost, in current prices, excluding finqncial chargeiduring construction, was about US$256.6 million (Annex 5. Project Costs andFinancing) and USS265.3 in constant 1982 prices, as compared with an appraisalestimate of US$319.4 million, or about 17 percent less. During the period ofproject execution the Rupiah was devalued from Rp 625=US$1.00 in 1982 to Rp1740=US$l.O0 at the end of 1988. This contributed to. lower local cost in USSterms. The lower foreign cost was largely due to lower price escalation ratesthan those tsed to estimate price contingency in the SAR.

3.11 The sourqes of financing include Loan 2056-IND totalling US$167.02m$llion, and GOI/PLN participation of US$89.6 eillion equivalent as given inAnnexS.

k i 'C

Loan Allocationi

3.12 The allocstior of loan proceeds as originally planned was tctuallyfollowed and the comparison between the anticipated and final figures areshown in Annex 6, Disbursement and Withdrawal of the Proceeds of the Loan.

Disbursements

3.13 Disbursements were'behind, the SAR estimates throughout the executionperiod as shown in Annex 7, Loan 2056-IND Disbursements. This was th* resultof a slow beginning on procurement contracts for equipment `and material} andconstruction and erection of works and the slower rate of implementation thanthat had been assumed in the SAR. Because of this the loan closing took placeon June 30, 1988.

IV. PROJECT RESULTS

4.1 (a) Project Obie±tives

The main objectives and the physicai' trgets of the project have beenuibstantially ach 4eved as shown in Annex 2. Th; 150 kV Jibotabektransmission project was augmented bT a short transmission line and agas-insulated switchgear substation to increase supply to industrialconsimers . . |,

Even with the belated commissioning of the project, total energysales in tbe Jabotabek area have grown at'an average annual rate of12 percent and the number of total consumers increased froml.0million to 1.3 million from 1986 to 1989. The increased sales in kWhhave contributed to improve PLN sales revenues. The training and

., \ , - ~~~~~~~10-V

transfer of technology in medium voltage (150 kV) transmission shouldimprove PLN's performance in the engineering and design of this typeof project.

(b) Physical Results

The physical targets of the Jabotabek distributioz and transmissioncompon=nts were substantially achieved in most cas'es. The engineer-in8 and design of the Paiton thermal power plant and the 500 kVtransmission system between Central qnd East Java (Annex 2) werecarried out.

(c) Economic Rate of Return

The internal economic rate of return of the Jabotabek distributionand transmission components of the project calculated in the SAR wasabout 18 percent. It was calculated on the cost of the componentsexpressed in constant prices of 1981 after allowing for foreignexchange and local currency shadow prices, and ion the cost ofoperation and maintenancp and generation related to the Jabotabekproject. The Jabot#bek 4rea incremental sales revenues were used asa proxy for benefits and consumer surpluses were not included. The*ex-po#t economic rate of return has been estimated to be 12 percentfor the project as-built, using the sime methodology as was used-iithe SAR (Annex 8). The main reason why the ex-post estimate of the

-rate of return is lower, even though the cost of She projectdecreased, is basically because the average revenue per kWh did notincrease as assumed for the economic analysis in the SAR. Therefore,the nqt benefits in terms of 1981 prices are nearly 85 percent lowerthan those used in the SAR, although tho incremental'sales are about7 percent higher than those estimated fUr the first year of operationof whole project. It should be mentioned that the cost of theproject n'ed to calculate the rate of return 9s expressed t constantprices oi 1981 as in the SAR. Therefore,lthe\.cost stream for theeconomic analysis excludes financial charges during construction asit is customary. The lowrer-rate of return is an indication of thelower than expected level of tariff which alio reflected on thefinancial performance of PLN in the project *plementation period.However, since the calculated lERR of 12 pereent excludes consumersurplus, the actual economic benefits of the project would be muchgreater than the IERR figure of 12 percent reflects. With the properdevelopment of the distribution and transmission systems, the qualityof service to the consumers should improve and better utilizat1on ofgeneration capacity will be obtained. This project contributed to thedevelopment' of the Jabotabek area.

Project Sust 4lnability -

4.2 The Jabotabek distribution and transmission projects will most likelymaintain an acceptable level of benefits throughout its econ{mic-life. PLNsales in the Jabotabek area Opreseht about 30 percent of its total sales withan average annual growth of 12 percent in the five years up to PLN's fiscalyear 1988/89.\ PLN is expected to use adequate operation and maintenanceprocedures of project facilities to enstire their reliable operation.

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V. FIVIAI PERFOMNIE

Financial Objectives

5.1 Under the Seventh Power Project (Loan 1513-IND), a self-financingratio (SFR) covenant was adopted for the first time, with the objective offiiancing, out of internal cash gene'Iation, a reasonable pfoportion of PLNI'sinvestment program. The agreed SFR was 0 percent by 198S86, with Interimtargets for the intervening years. The ;irst such interim target was 17percent for the period 1976177 to 1977/79. This figure was achieved duringthe three-year period ending 1977178.

5.2 The quantification of SFR interim targets had been revised in 1979under the Eighth Power Project (Loan 1708-IND), somewhat modified in 1960under the Ninth Power Project (Loan 187a-IND), and subsequently revised in1982 under the Twelfth Power Project (Loan 2214-IND),.to take into accountsignificant\changes in PLN's capital expenditures and fuel costs,. The SPRtarget for 1985/86 and onwards was reduced at the same time to adjust theminimum Indicative targets inversely with any significant changes in PLN'scapital expev 4tures and fuel costs.

Performance Results

5.3 PLN's financial performance in tarms of net internal cash generationislshown in the table below:

PLN - SELF-PWANCING RATIO la

*Y/81i82 FY82183 FY83/84 FY84/85 FY85186 FY86187

Target

\Loan 1513 21 25 25 .25 30 30Loan 1178 18 18 . 25. 25 30 30sLoan 1878, 12. 20 20 25 30 30 kLoan 2214 - 10 10 10 20 20

tActual 30 30 24 . 18 13 16

La he percentage of PLN's capital Jxpenditures for the target year plus twopreceding years covered by its not revenue plus depreciation retentionsand consumers' contributions, less debt service and adjustments for

Y changes in working cap tal for the same three years.

5.4 PLN was able to aeet the revised interim SPR targets until 1984185SIt fell short of the target for 1985/86 and 1986/87. The total capital expen-diture over the period 1981/82 to 1986187 was Rp 6,212 billioqn compared to theappraisal projection of Rp 7,351 billidn, and corresponding values of net Linternal cash generation were Rp 1,219 billion (actual) t rsus Rp 2,291 bfl-:-lion (appraisal).,

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5.5 K Actual e6ergy revenues increased over the period 1&81182 through1986187, at 32 percent p.a., compared to the projected 35 percent p.a.--Asregards PLN sales,in GWh, the actual results were close to the projected salesuntil 1982/83. However,during the period 1983184 through 1986/87 actualmnlual average sales growth was only about 13 percent, compared to 19.5percent projected for the same period. -In 1983184 and 1984/85 actu41 annasla4es growth was only 10 percent, mainly due tot (a) delays in someconsumers connection program due to budgetary constraints, and (b) theeconomic slowdown leading to lower consumption from existing customers.However, during l9@5/86 and 1986/87 actual sales increased at an average

.,annual rate of,about 16 percent, with industrial consumers contributing to aAlarge part 'of t)ae increase. The SAR provided fitancial projections for fiscalyears 1981182 to 1986187. A comparison of the projected and actual financialresults is summarized in Annex 9, Table 1. Detailed comparative financialstatements are given in Annex 9, Tables 2 to 4.

Tariffs

5.6 Fuel price increases following GOI's policy of removing domestic oil.-subsidies significantly increased PLN's operating expenses. The average fuelprice paid by PLN, which was about Rp 50 liter in 1980/81, *nWreased by 20percent in 1982/83 and about 60 percent p.a. in 1983/84 and 1984/85. The fuelcost as a percentage of total operating expenses rose from 35 percent in1982183 to 54.3 percent in 1986/87.

5.7 While fuel prices increased significantly, tariff adjustments during1980181 to 1982/83 merely offset the fuel cost increases and in additionlagged behind the fuel price adjustments. Consequently, PLN's tariffs werenot sufficient to cover the'full increases in its operating expenses, result-* ng in operating losses in fiscal years 1981/82 thr4ugh 1985186.

5.8. In May 1980, PLY introduced basic rate schedules to structure itselectricity tariff according.ta Long Run Marginal Cost (LRMC) principles, asagreed with the Bank under the 'Seventh Power project (Loan 1513-IND). Bow-ever, from 1980 to 1983, all tariff increases were effected entirely throughchanges in the energy charges. The failure to adjust the demand charges thusreintroduced distortions in the tariff structure which had been largely recti-fied in the tariff revision of May 1980. -

5.9 In 1983, and again in 1987,' the Bank assisted PLN in its studies ofcosts and tariff structure. Based on the results of these,studies, PLN rovisedits tariff structure to reflect better the LRUC of electricity supply. TheBank's continued involvement in the powwr'ifttor and ita sWpport in tariffstddles has been an importaix contributing factor in,motivating PLN towardseconomic efficiency pricing. In March 1984, PLN introduced at increase ofabout 24 percent in the demand as well as energy charges. The next tariff:adjustment became effective April 1,-1989,'when the demand charge was raisedby '50 percent for all citegories of consumers, and energy charges were raiseQsignificantly for both peak and,off-peak use, resulting in an average increaieof aboutC25 percent in the electricity rates.

Financial Management

5.10 The necessity to build In adjustments, o modify the SFR targetp a d-the fact that SP t was able to meet the SFR covenant while its vper ation had

J \ /.

K -13t- L- ,

been incurring los3es indicated that heYSfl type of measure with the covenan-ted levels was less thala appropriate,from,the view point of financialviability. Under the PFurteenth Power PrOject (Loan Z443-IND, 1984), GOI/PLNagreed to a rate of return (ROR) covenant of at least 8 perdent fro4 1986187onwards, with a minimum target of 6 percent in 1985/86. The SFR was retainedas one of'the performance 'indicators to be monitored regularly to ensure PLN'spelf-financing capability. While PLN was able to meet-the indicative SFRarget for 1984/85, It fell short of both the SFR aid ROR targets for 1985/86.In 198f, ilt became increasingly apparent that PLN will be dnable to satisfythe requirements of the ,ROR covenant adopted under Loan 2443-IND. TheGovernment, PLN and the Bank then concluded that an ROR covenant for PLN'soperatipns as a whole was inappropriatekin view of the largely socially-oriented' and fragmented nature of PLN's operations outside Java, and therevenue covenant was modified. Under the modifl.ed-revenue covenant, PLN wasrequired to achieve:, (a) for its operations in Java, a ROR of not \ess than 8percent no later than' 1988189 and to maintain it at or above that level for,fiscal years thereafter, and (b) for its operations outside Java, a break-evensituation no later than 1990-91. A covenant,under Loan 2778-IND also requiredPLN to carry out an action plan for eff4ciency improvements fot all itsoperations, in a manner to ensure tht the requirements of the revenuecovenant for its operations ou-tside Java are adhieved.

5.11 'Due to several factors,,\including (a) the devaluation of theIndonesiap currency in September 1986; (b) inflation; and (c) substantialincreaseosin the proportion of oil-based generation in 198?188 compared to1986187, mainly due to the drought of 1987, PLNs- financial performance showeda substantial deterioratiqn in 1987188 compared to 1986187. This trend con-tiniod in 1988189. Howevek, the Government approved kn average tariffincrease of about 25 percent in the electricity rates effectire April l, 1989,which has restored PLN's profitability. In view of the abov4ei under the-PowerSector Efficiency -and Paiton Thermal Power projects (Loans 3097-^IN and3098-nID, 1989), the test years for the financial performance targets An therevenue covenant were revised, with PLI's operations in Java expected toachieve annual ROR of not less than 8 percent in 1989190 and fiscal yearsthereafter, and tht operations outside Java to achieve a break-even situation'beginning with 1992193. PLN's actual financial performance for 1987/88 - _

1988189 and the estimate for 1989190, -and related incode-4atements for itsJava and non-Java operations 'are provided in Annex,10, Tables 1 to 5.

'5.12 Under the Fifth Power Project (Loan 1259-1ND), two covenants were'intiroduced to ensure PLN's prudent debt managements (a) ajinimum future debtservice coverage of 1.0;'and (b) setilement of all its debts within one-motth_wben due. Tbpse covenants (which also applied for the Sixth Power Project,Loan 1365-lID) were replaced under-the Seventh Power Project (Loan 1513-IND)bys ,(i) minimum future debt service coverage of 1.3 times; and (ii) a debt/equity ratio of 60140; These -c*enants were,continued under the Eighth,Ninth, Tenth and.V1sventh Power'Proje'cts (Loans 1708-IND, 1872-IND, 1950-_NDand 2056-IND). The Thirteenth Power Project (Loan 2300-INW, 1983) adoptedonly one debt management covenant which required a minimum of 1,5 ti*mscoverage of future debt service each year out of the forecast internal fundsfor that year; this requirement replaced all earlier debt limitation cove-nants. This change reflected the gr6wth of P1nM, and at the same time, madeallowance for' the added,future earning power. PLN has been complying-withthis covea _ except in 1987/88 when the A-bt coverage had declined td 1.1times.

; 14-

5.13 PLNVs collection performance has been generally satisfactory. Theaccounts receivable position of customers other than government users has beenimproved to under t;sv months of bi'lling. PLN's sales to government usersaccount-,for about' 10 percent of its total sales; but collections from somegovernment users have not been promptly settled when due.

5.14 The Govetnment has taken various measures to imprive the paymentperformance by government users. Outstanding government accounts receivablewerbzreduced from over one year in 1981/82 to about five months of billing in1983/84. An action plan was agreed under the Fourte&nth Power project (Loan2443-IND) to reduce the arTears further. It was also agreed under the -Foutteenth Power Project 't modify the earlier covenant, which required eachgovernment user to pay its bilU promptly, to a covenant that required theamounts owed by all government users in aggregat to be kept to lees than-twomonths of total billings for such users. PLU is also required under the newcovezvant to keep collection data for government users adequately disaggregatedso that the source of any overdue paymnet problemp could be identified. As aresult of continued efforts by concerned ministriis and PLN, the overduegovernment accounts receivable were redcuced considerably during 1984/85198586. They were equivalent to less than two months of annual killings atthe end of FY 1986 87, and currently remain so.

&uditLn

5.15 PLN's accounts are required by its charter to be audited byOovernmeut auditors. The audit ieports are apceptable to the Bank, but havebeen subject to long delays. Since 1983, PLN has made special efforts toexpedite the closing of accounts and has succeeded in completing them usuallywithin six months after the close of the fiscal year as stipuXated byGoverment for all public c4rporations. This is a significant improvement.Government audit Iormally takes two to three months. To be more realistic and Kaloo in line with PLN' a charter requirement nd Government's regulations, thelankIs audit submissi n covenant was amended nder the Fourteenth PowerProject (Loan 2443-IND) to require PLN to submit tv the Bank its unauditedaccounts no later than six months, and'\the audited financial. statements indthe report of: mAch audit zi. later than nine month&-a*te*-the clone of thefiscal year. While the unaudited accounts have generally been received by theBank In time, there are still some delays in receiving the audited accounts

-=-and report. -

VI. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT

6.1 it the beginnig o4 the 1980s, PLN had begun to emerge and wascontinuing to develop bito a well-organized power utility. Th project underreview contributed to its further institutional development through cpntinuousreview of financial performance and organizationai developmenta .-PLN' 1ihstitutional development and the Bank's-involvement in this process isbriefly narrated below. --

Nana nt f ~- K.6.2 PLN's management systeme have in general been well designed; however-there are still certain weaknesses, niotably in the division of responsibility

\, ' 7 '~~~~~~~~

/ . i~~~~~i

and accountability bet4yeen the regions on the on6 hand and the central ftpart-"ments on the other. -The process of decentralization of responsibility to theregions was,initiated by PLN in Decemberi 1987, as part \pf a reorganizatiof%vithin its centrxl.departments and regional offices to' streamline planning,>programming,- budget$ng, and operat-iona-l wad eva,4ation activities. The,regional managers ha've been assigned a larger rolo in the preparation of 'theirannual programs ond budget' and greater responsibllity and accountability forcarrying out their operational functions. These organizational chanAev are astep in the right direction and are expected to help improve'the overalleffi4lency and effectiveness of P1.N. In viewi of the expected substantial'growth in',PLN's9 operations, the need for a review of P1.3's institutional a

development was recognized. Toward this end, a review of the adVquacy of theinstitutional framework in the power sector, including the 'role of P1.N aind its -vrelationship with the dovernment, was undertaken by the Bank in Pebru"ry/March1989. The results of this roview were prrsented to the Government in December1989 and provide a basis for future dialogue with the Governmentron the reformof the regulatory framework-for the powef sector in ndonfesia.

6.3 A managementauditwas coimmissioned byy PPL in D98Oieml and was untior-taken by a local firiA working in 'association with internationial manatgement'coisultants. Their recopsrnendations for establishment of a more comprehlnnivecorporate plannig process, improvement in coordination between the variousheadquarters departments and between headquarters aldn the regions, adoption ofcaommn design standards and prtcurement methodology and improvements inaccounting, computing, inventory control and personnelimanagement were areviewed by an In-house committee and several recomhenldations were implemen-ted. The ank hae financed four mPNagement studiesv Project ManageimetAdvisoiy Services (under Loan 1708-tNo), Accounting, Butgeting and ManagementInformation System (und-r Loan 2056-IND), 'Management Information Systems forP1LY (under Loan 2S00-I), and Improvement of Genteral Accounting (Loan309789ID). Sustained oftor4s at implementatsta are expected to strengthen and.-streamline PLova management cspabilitles. wn

Planning, Desiga and Research

6.4 3 PL. has acquired adequate expertise in generati*n trandmissin aAnddistribution planning. Steps towards greater regional involvement in plranningwere taken in 1981, and a series ofvementagemerdevelopment courses have beeninstituted for regional and branct mana es. Several Bank-financed studieshave been devised for enhatcing Pcnts planning capabilities notably the PowerMarket Study (under Loan 1950-lND) and thee ryro riotential Studies (under Loan1365-T).h Towards strng'thening Pfaes engineering and design captbilitiesntin 1985, P1.N established an Engineering Services Cudter as agreed under Loan2443-nfm. To support the development of this center, a I rovision for consul-taVNcy assistance was incl and in Loan 2778- . Witho aGll these eff(Lrta P1*'s,dependence on engineering consultants is expected to continue'to fastletenr the1Trears. Pc

6.5 With generation nnd transmissionoplanning functions now wel established in PlN and functieping smoothly, gthe emphasi now rests on improvingthe planning, operation, maintenance and'management \ofpdistribution fhacili-ties, for which responsibility is largely dispersed in Pvl.s regional offices.Technical assistance for the strengthenins g p f Pann n distributiono mana ementfunctionsiu provided under the Power Sectohe \fficiencty ProSject (Louans36S-IND). AowAs, tostrengthen the corporate pianning function, Pcap has setup, as irt of the 1988 reorganizationo planning units in then fnctionle-

dit~etoT~tes and the regional offtces, with the corporate planning division iuthe plarn4ag 'directorate hiaving the responsibility for the overall.coordinat*on othplanning activities.* Thchnical ashistac' poie nethe Ftwer 'Sactor Efficiency project (Loan 3097-IND) will help -4evelop furtherrLN's corporate planning as well .as financial planning functions.

M?po,r and Training

6.6 PLN expends considerable effort in the training of staff not onlywithiln the organixation,i'but also through student scholarship and foretgntraining. These efforts have been largely successful. In 1908189, abo'ut7,000 staff received training of various durations, including about 200 stafftrained overseas. The Bank has been supporting P~.Nls training activities and

() human resources development offorts, including the establi esment of severaltraining c enters. The lightih and NiatI4,Power Projecta (Loans 1708-IND and1872-InM) provide4 for training in operation of large thermal generating unitsand supply of a siulator for such traininsg at the Suralaya Theral PowerPlant. The Tenth Power,Project (Loan ~950-IN) provided for on-the-jobtraining in the country, in selected fields such as civil works contractadministration. The Twelfth Power Project (Loan 2214-IN w) ilhlpudes a largetraining conponent of US$20.0 millibp to (i) reorganize and enlarge the entiremanpower development, training and personnel management functions for middleand lower kevel staff, lzroving job performance evaluatioln systems and intro-duci'g in-house management training; (ii) settingrup new traoinin centers, fortheial power plants, tranasmission lines and middle-level mandgel; and (iii) aprogram for the training of senior- and middle-level personoel out2sideIndonesia in toe ical and financial areas. Progress undera\thee activitiesbes been satisfactory. In\addition, under the Paiton Themal Power and PowerSector Efficienc Projects (Loan 3097-1N and 3098-oeD), s(pecific training isprovide4 in the areas of die el thermal plant operations, diettibution manage-ment, corporate and fria planning, general acc ounting and cae Pmanagement.

Accounting an t udtring s f s

6.7 Pcopn accounting system, installed in the early 1970s, followsgeoerally accepted accounting principles , and normal utislity practices, botiit needs upgrading to keep pace with the growing complexity and volume-ofaccounting transactions, .~Ther'e is need fo"r improvement with respect to thecompleteness and accuracy of fixed asset accounting, depreciwtion, inventoryaccounting and accounts receivables. The accounting system neqsds to producemore, accurate information .in a timely manmr for decision-making purposes.Also, PLtNs internal procedures for preparing budgets and monitoring actualexpenditures need to be atrengthened through better coordination among and participaton by the vrrious functional directohratestand regional offices inthe proces* to enan o e bugen value a aa S8ND)emen tool.'

6.8 Under the presqnt project, funds were provided for management consul-mtancy for developing an-integrated system for budgeting, accounting, andfinancial,:reporting. The study prop;sed a now finanpial managen~ent informa-

ction systm based on a new general ledger, identified improvemen't s in PLNvsexia\iug accountng subGsystemS (eg.invsntory,\billing, payroll, capitaleXnerallyre) pcep saed modifications ic ,udgeting control procedures, andrecouendid ccmputerizationos f the general' ledger. The recoumendations of the

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study are being implemented by PLN through various activiti"s. PLN hasengaged or is engaging consultants to,improve fixed assets accounting, costaccounting, and inventory management. A major constraint to PLN's accountinghas been a lack of trained senior accountants and iniformn accounting proce-dures. Since 1987, PLN is implementing an action plan to improve its account-ing practices and functions by (i) establishing a uniform accounting system,(Ui) improving related support systems, (iii) sensitizing concerned nonfinan-cial managers and staff to the importance of timely and accurate accounting.(iv) upgrading the skills of the accounting staff through in,house andexternal training courses, and (v) computerizing the accounting prbcess.through its recent reorganization, PLN is also gttempting to improve coordina-tion between its departments and its regional offices in the areas of budgetpreparation, and-monitoring and evaluation of performarce as discussied inpara. 6.2. The Power Sector Efficiency Project (Loan 3097-IND) provides tech-nical assistance to i rove further.the accounting system.

i .

Procurement

6.9 Procurement of goods and services has a major influence on PLIN'soverall performance in project implementation.z Procedures.introduced byGovernment in 1980 for external control' of pro8urem6nt of both consultants' services, andsof goods and services had reduced PLN's autonomy in procurement.The gains in timely preparatory work on selection of-consultants ah# biddingon power projects were all.but-lost, partly because of delays in approval of.contract qwarzs by authori~ies outside PLN ado also because of delays inopeniig lekters of \redit. In other case, PLN's internal evaluation systemc^uld also have been responsib e. The organization of procurement wasreviewed (inter alia) by consultants In the con.e*t of the project manaSementstudy as a component of the Eighth tower project (Loan 1708$IND). After thedevelopment of the Engineering Services Center (para. 6.4), the procure*entfunction for all major projects is now centralized 'in PL. The Governmentprocedures for external control of ;rocurement were simplified in 1988,resulting in expanded autonomy for PLN in the area of materials prqcurementand contract administration. However. further stren4thening and >simplification of these \procedures is desirable to avoid costly impIementation

K delays.

Overall Performance

6.10 PLN's overall performance from the time of project apprais i1981-till L988/89 has been impressive. Its sales increased annually by an averageof ab=ut 15 percent and performance indicatorl such as the number of consumersper employee increased from 83 to 181 (i.e., by 118 percert). Its \ambitious

Vcustomer-connection programs 'ere fulfilled year-after year. Stendards of N

reliability-of supply were improved. The rate of grqwth of uneconbmic captiveplants in tIe country declined after 1977. Improvemnuts in the speed of'implementation of projects were.erode'd by slippages of over a year inconstruction of major thermal projects like Muara Karang, Semarani ahdSuralaya. The main problems have now shifted to complex procurement\,procedurzs and'resoxtrc constaints. PLNls drive to reduce transmission anddistribution losses . which appetted to have run out-of momentum in 19821 U3.fss revived, ;nd an intensive loss-reduct on effbrt has been initiated."<Transmission and distribution losses, *hIch ;eawhed 20.8 percent An 1983184were lowered to 19.6 percent in 1986187, and were 16.9 percent in 1988/89.

S J

_ 18-

VIT. CONCLUSION AND RECOMMENDATIONS

7.1 The main-factors responsible for the delay in completing thedistribution and transmission projects weres (i) the later-than-planned startof procurement of equipment and materials, (ii) in the long procurement cyclefrom the invitation of bids to the signing of the contracts, including theperiod required by Government approvals, (iii) in the protracted period forthe establishment of letters of credit, (iv) delays in delivery of equipment,(v) a high number of contracts for construction and erection of thedistribution work, inexperidtced local contractors, lengthy right-of-wayacquisition procedures and the addition in 1983 of a new 150 kV substation.which was completed in April 1989. Budgetary constraints, particularly in1984/85,. Ind,l98SI86, also conttibuted to the implementjtion delays.

-7}.2 Some of the problems mentioned were Wncountered in-earlier projects.There is a need to reduce implementation delays by adopting speedier proce-dures and decision-making and adequate organization and staffing and betterconstructi,n planning. GOI and PLN are aware of these situations and areaddressing 'thl at the nati-nal and institutional levels. The Bank shouldcodtinue to support these acttons that once implemented, would minimize theproblems.-that continue to impact adversely on project\ implementstion. Theissue of increased autonomy for PLN is being discussed by the Bank with theG9vernment of Indonesia . I

-Project Roatitonship

7.3 The eviden*- shows that the. Goverpment of Indonesia4 PLN and the Bankhave votved v closely In thewIndonesian electric power subsector. the Bankhas become very kowledgabie about' this subsector, and this has enabled theBank to prrvide-valuable,advice on institutional, tinaacial and.technical.matters. This projeEt li one of a series of projects supported'by the BankWhich has\ resulted in the healthy growth of the sector and instiiutionaldevelopment ofPLIN.

' ' . ' " , '

,,,u , .' \,

~~~~~~~~~~~m ;

- 19 - NE Page 1 of 3

\INDONESIA

PERUSAHAAN UHUM LISTRIK NEGDRA (PLNIELEVENTH POvER PROJECT

LOAN 2.056-IND

Related Bank Loans

YearLoun ofNuiber Purpose Approval Status 1/

1259 Fifth Power Pro3ect 1976 Completed in 1981In the Jakarta area and WestJava, the project providesvoltage standarization-Pfmedium voltage system to 20 KVand of low.voltage system to2201330 volts. andconstruction of 150120 KV and70120 KY substations.

1365 Sixth Power Project 1977 Completed in 1984In addition to construction ofthermal power units, andenginetring aRmd design foranothez steamwelectricstation, it coverst systemengineering and engineeringfor the first phase of Javaisland-wide high voltageinter- connection.

1872 Ninth tower Project 1980 Completed in 1986The project callS for theinstallation of a second400-MW thermal generating unitat Suralaya; transmissionlines of 500 KV from Suralayato Serang with same voltagesubstations at Suralaya,Jakarta. Bandung andSemarang; system controlcenter for Java at Jakarta-and training of operating

-personnel.

1/ As of December 31, 1989.

-20- ANNEX IPage 2 of 3

YearI&,an ofNumber Purpose Approval Status 11

2300 Thirteenth Power Project 1983 ImplementationComprises the cdnstruction of underway. Closingthe Cirata hydro- electric date 12131/90power station with-an initial ,installed capacity of 500 MU.It provides walso for an energysector support program tititincludes studies,, P2>4ge T-for the Paiton coail-fired "

thermal station; andfeasibility studies fortFansmission and distribution

2443 tourteenth Power Project 1984 ImplementationThe project supports the underway. Clos1niexpansion of powoP supply date 9130190facilities through theconstruction of 2 a 400 MVcoal-fired units I and 4 atSairalaya in West Java. Italso includes expansion of thedistribution facilities inEast and Ceutr4l Java\and inthe Jabetabek (Jakarta, Bogor,Tangerang sAd Bekasi) area.

2778 Power TransmLssion and 1987 ImplemehtgtionDlstribution Project underway. ClosingTo Improve the'economic and date,6/30/92technical efficiency of energysupply and use. Among theprotect comp tents is theextension of distributionfacilities in the JakartaBogor, Tangerang and Bekasi(Jabotabek) areas.

)1I As of December 31, 1989.

.~~~~~~~~~~~~~I

ANNEX I-21 Page 3 of 3

N \ YearLoan ofNumber Purpose Approval Status 1/

*3097 Power Sector Efficiency 1989 Effec,tive date:Foject October 6, 1989

'To improve the ecoAomictechnical and institutionalefficiency of the electricitysubsecsor. The project,comprises several componentsin'cluding the extension ofdistribution' facilitie,s inJava, includin4 Jakarta. Italso provides for technicalassistance to improvedistribution management inJava.

3098 Paiton Thermal Power Project 1989 Effective date:Provides for th, construction October 6, 1989ofthes.'Paiton coal-fired power plantwithin initial capacity of 800MW and ulti4ate capacity pf4,000 KW in Java; aosociated*500 kV and 150 KV transmi sion .,system; and technicalassistance to strengthen,capability of Ministry of.Mines and Energy inenvironmental tters and .train PLN persoel in powerplant technology.

1/ As of December 31, 1989.

.,~~~~~~~~N

w ~~ ~ ~~~~~~~~~~~~ i

-22 2AMNX 2

. ~~INDOfNESIA !.

PERUSAHAAN UMUM LISTRIK NEGDRA (PLNi -

ELEVENTH POWER PWOJIECT (LOAN 2058-IND)


SAR l,Appraisal No. 8488-IND Actual (orIndicator Estimate PCR Estimate)

(a) Jakarto distribution system

20 kV cables 4SO km 49220 kV overhed lines 780 km 882Substations 1,836 units 1,247Pole-mounted transfotore M00 units 420tNew Iow-volttge lines 5,800 km 7,198Sorvice connectionm 320,000 units, 281,6-1

* Voltge changeover 18,220 units 59-ndustrial consumers 1 .0 180

(b) High voltog4 (HV) system,'

New oubstations in JokortA 6,Double-circult 150 kV cobles 48 km 49Transformers 980 WVA 1,040

(a) Engincering of steam power Patton steam Palton steamplant in Java power plant power plant

(d) Engineoring of extra high Included Exeluded (financedvtltage (EHV) Centrel-East by other sources).Jive tranemislson line

(8) Management consultancy of Included Includedfurther improvements inPLN's financial planningand control systems

(f) Studies

Dofined at m"pact ofStudies Appraisel Status Study

1. Engineering of the Detailed engineering Completed Tfie Cank has beenbase-lood coal r and tender documents closely involved inmultiple,fired f for the Palton coal- the preparation ofthermal power units fired thermal plant. the project. ItIn Java. (Part C. finances its executionof Projtet). through Loan 8098-IND

approved In June 1989.

2. Engineering of the Extension of the 600 Completed Bank financing was re-Extra-High Voltage kV grid through a placed by German bi-(51W) Contr.l-East 800 kmnline and lateral sesistence.Java transmIssion substations. Constructlon of tranemis-line (Port D of elon completid In AugustPioJect). 198. t

S. Mnagement conoultency Jcs Completed Snsed on the recommends-for further improvomnts tlons of the study, PLNIn PLN's financial plan- has taken or Is taking

. ning and budgot coitrol i . varIous step to Improvesystems (Part E of Project). Iti accountin and buget.

con rol proclures andpracti cs.

- 23 AN 3Page I of3 \

PERUSAHIAA Ul LISTRIK NE10DRA (PLN)

ELEVENTH POWE PROJECT (LOAN 206-IND)')


Status of Covenants

SectionApplicable Descr1ptton of Covenants Compliance and Remarks

Loan Agreementwith Republicof Indonesia

8.02 (e) Rlend tho proceeds of the Loon to PWN under Compiled with Februarya subsidiary agreeent ebntered betwen 001 1 1S, 1982and PUI usd.q tners and conditions pprovesd

, . i ... ~~by ti1 Sank. :.

8108 (o) Tske a11 Such actlon necessary to onsure at ) Superoodid h Section.oll time that amounts owed to PUG for ) 4.02(o) of Loin Agre.met

tservices and electricity provided by PUH to ) 2778-IM, which requiresany department or agency of tho Borrower are ) that mounts owed to PUG2 prowptly paid en due. -) by all users will not bepromptly paid when ) overdue in aggregato by

l 8.08 (b) T,'le all necossary steps to ensure that by m more than two months ofMlrch 81, 1982, or such other dato as the ) totaf blUings to suchBorroser and the Bonk shol oagree, the total users. This requiremontof the amounts reforrod to In Section 8.08 ) ia being comflied with.(a) of the AgreeXmnt shll not exceed thebiliIng of PUG for th proceeding two monthsto oll departments and agencies of the borrower.)

8.04 - Ensure that the position of President Diractor Implementedof Pa shall at all times be filled by qualifiedsnd Oxpsetweneod person.

8.08 Toke all necessary teps as shall be nocossary Compiled with agreedto adhere to the eonstruction schedule for the revised constructionPro.ct. schedule.

8.06 Take all such steps as necessary to: (1) identify, In compliance. 0ukitnot later than June 30, 1982, sources of coal Assa mining projectfor the next Java thermal poer unitp; and undertaken.(ii) erranle foy the mining and transport ofadequate amounts of sueh coal before the comica-sioning of said power units.

\~~~~~~~~~\

-24- ANEX 3Page 2 of 31

SecttonAppitelable Doscription of Covonants Compliance end Remarks

4.02 (a) Through PLN annual review with the Bank, before Bolng implementedthe approval of PLN's budget by 00G, potentialchanges In the load growth of electric power ofJava and the variations ef PLN is developmentprogram for Java that are required as a resultof such changes and take necessary stops to Im-pleent such developTnt program.

4.021 (b) Review annually with the Bank and PLI, PLN*u Being implementedinvoeeteott budget for the next fiscal year beforeIts final 4pproval by the Borrower.

4.02 (c) Review annually with the Bank end PLN, PUN s BDing Imledmented-development plan and financial forecast andfinancial plan, and take appropriate measures tof clittate the access of PLN to all possiblesurces of required finance.

4.0Q Take neceqsary action to aosist PUN in improving CompiledIts mark*- -rv X eyby provIding PUN (1) guidelineson natvo- ''gt pollcy, (ii) f r1 date on timery-oanrg aos37.._ flty, and (II) onmrgy USage endpricis0 polieles.

4.04 Ensure that the construction of the Extra High CompiledVoltage (EHV) transamlesion line from Control toEast JovU is completod not later than December 81.

a.01 Subsidiary loan agreement has boon executei on Coepl ledbeihalf of the Borrower and PUN.

witth PJ L

8.06 Prepro and furolsb to the Bank annually, for Ito Cowpiiodlreview, the PLN custoer connection program foreach fiscal, year and Implement the programthereafter.

8.08 Take neessary steps to ensure that the \ Compiledconstruction of the EW tranamioslon line fromCentral to East Java is compoletsd not later thanDecember II, 1989.

4.02 (1) HNvo Its accounte and financial tatemnts for Compliedend fIscal year audited In eccordance withappropriateoluditing principles consistentlyapplied, by indepondent auditors osceptable tothe Bank.

,~ ~~~~~~~~~~~~~~~~~~ k

I .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i

25 ANNAX 3Page 3 of 3

Appil stble Description of Covenants Cemplionc! and Remarks

4.02 (li) Furnish (a) Wortifled copies of Its oudited Compliedfinancial statements;- (b) the report of suchaudit by the auditors; and

4.04 T7ke all such measures as required to produces Suporoeded by Sectionduring consecutive three-year periods from tts 4.06(a) of Project Agree-fiscal years 1980/81 through 1984485, funds from ment for Loan 3097-11),

91 Ito Internal oources as contributfen to the which requlres Pih tocapital expenditures at such levIls agreed with achieve (a) for Ite Javathe Bank, and for periods from fiscal year 1986/ operations annual rates8B and theteafter at not less than 80W level of of return of not less thanIto capital expenditures. OX on not revalued assets

by no later than ItsaFY1989/90 and FYs thereafter,aned (b) for Its non-Javaoperations o 'break-even'situation by no later thanIts FY1992/93.

4.05 uaintein a debt/equity ratio of not more then ) Suporceded by Soction60:40 -) 4.04 of Project Agrement

f for Loan 2778-IND. whikh) requltre that PLN may n4t) Incur dny additlonal debtj unless a reasonable fore-

cost of Its not revenuesafter expenditures for eachyear during the term of the

t debt to be incurred shall) bi at least 1.6 times Its

4.08 (a) Not revenues neo loss than 1.8 times the ) projected debt servicemaximum debt service roquirtm.nt. ) requirements.

4.07 As part of its annual planning procedure: Compl\ed

(1) Institute a 10-year financial forecastbased on Ito proposoe development plan;

(II) test each development plan forfinancial feasibility;

(111) develop a financlel plan -or thefirst 5 years of the forecast end specifythe amount of external funding and theappropriate mix of equity and debt, andIdentify potential financial sources;(Iv) ensure that Is recommended developmentplan and associated fiqvnclia forecastand financing plan are jointly reviewed andadopted by its Board and that ouch plans andforecasts are furnished and discussod with theBorr wr and the Bank.

'I~~~~~~~~~

.- I -.

INDONESIAPERSAHAAN IIIIR NEWRA (PLN)

-'ELElfENTH POWER PROJECT :k "~~~~~~~~~~~~LA 20C5IN-11W

Mi lestone Schedulo For Jabotabeb Project

L-OT I LOT V Ulluone PI4fL L Actual PIa-A M A AcIual

Contract,signing 01 Mar. 92 i 26 Jun. 62 (No. 8w2M92 01 Ag. 68 Is Jun. 84 8o.08429 Au. 92 (NXo. iiZ/ftj so Joul. es No. l;2t8

22 Fob. 8S.lo. 002/86)

ISOJ70 1kV Tanmilssion

SwitchdeMr Tronaformrs Cables1ilestone PlVnned A 1 Ct l Pl nnod p2 Atual Planned t2 ActuT

Town for -bid ot 1, 11 Early Oct, 1961 0ct 1, 1981 so-rly act, 1981 Oct 1, 1961 End Oct, 1981 Mid. op"Mino Jaon 7, 1982 Feb 4, 192 .- Jan 7, 1962 Fob 4, 112 Jan 7, 1881 Fob 4, 1982

Latest dto evaluation complete Map S, 1982 Apr 23, 1982 I Mar 0, 1962 Apr 20, 1962 War 8, 1982 Apr 20, 1682Latst 4date-ovornmset (3E0M1G)

approval VW p-, 1982 Spt 22, 1962 may 6, 12 Sept 22, 1982 May 6, 1962 End Sopt, 1982Latest date of l_ s IIR approval Jun 5, 1962 nd Dc, 1992 Jun 5, 1s9 End Oct, 1982 Jun 6, 1682 End Oct, 1982-a ltdato of sseo ltter of

intentto netstee Jun 12, 1962 No, 198 Jon12, 192 Emd Oct, 1982 Jun 12, 192 End 0ct, 1982Letest dat conteat awrd July 17, 1962 Doe 29, 1962 (060/82) Jul 17, 1962 Fb 2, 1988 July 17, 1982 Doc 31, 1982

Jan 28, 16S (044/62)

1!*to letter of credit opened Sept 17, 1982 Jul 7, 1988(660/6k) Sopt 17, 1982 May 6, 1983 Sept 17, 1982 sar 21, 198- Sept 25, 19,8(044/-2)

start;ng dae begin ship_et (FOB) Sept 17, 1988 Mar 1994 July 17, 193 Nov 1994 Jun 17, 1983 Mar 1984Cemplote shipmenh (at tteo) Ot e1, 1904 Sept 1984 Oct 81, 1964 Mar 1989 Jun 29, 1984 Aug 1984o1gn Inetllotion Oct 01, 198 Aug 1984 Oct 01, 1988 Nov 1964 Mar 01, 1968 Apr 1984

Cmocoial opration-fist itte Dee 61, 1968 Jan 31, 1986 DMc 81, 1963 Jan 81, 1965 DM 81, 1988 Jan 81 O. 45Catrclal opmrstIon-last slte Feb 24, 1996 Dec 4, 1917 Feb 26, 196i Oc 4, 1967 Feb 28, 19S6 DOc 4, 1967

~ Polagadung-Toven Prima Apri 1 1989 Apr;l 199;, Apr)l 1992

SAReport No. W468-IN. Annx 5 (II).7AR lt. No 46-TN. Anne. 6 (IV).

-'27 -

DWtHESIA

PEtJUSAHIAAW UMW LISRIK NEGDRA (PLN )

ELEVENTH POWER PROJECT (LOAN 2056-IN)

PROJECT CO0PLETION REPORT

Project Costs ond Financtn

Project Costsmt l I llion)

Aepraisol Eimates 1/ - Actual 2/item Loeal Xr total Local oroign Total

Jabotabek distribution 81.PO 99.47 161.08 r88.8 168.2 262.0JAbotboek high voltage 24.21 64.81 89.02 :syte

--- Engineering of nemenraI power "its 0.50 8.70 4.20 0.? a.5 4.2

Engineering of Centrale-sat Java HVW Extenlon 0.20 0.60 1.00 - - -

Maiagoment Consuitnscy 0.20 0.60 0.80 0.1 0.8 0.4

Total lase Coat T 1098.86 266.08

Contingencies -Physical 4.28 8.20 12.46Price 22.46 28.42 50.67

Total Project Cost 118.40 200.00 819.40 68.6 167.0 260.6

Project Financing(US1 mlIon I Ihm

PlanneSource - SAR 8460 IN Actual

Loan 2056-III 170.0 107.0Government sources ) 149.4 82.9P ) B6.?

otal k I '819.4 260.6

17 USN1.Mrp 62g5

2/ c8ased on annual expenditures In different currencies from 1982 to 199.The annual dlcbvrsements in local currency were converted to USS usingaverage annual rates of Rupiah to US$ as fllo *ws:

192/803 USSI.00 sRpj 00.4219-8/84 912.851984/85 1,060.561986/81 1 118.9 j

IM/97 I: $~1,01. 7w1887/88 1,647.071988/89 1,705.001 O9/90 1,7 0.07 (estimate)

K ~~~~ ~~~~~ .. = .

1l-:,.-.

.- ' (! :1 !

IWD , SIA

PERU$AHAAM 1 4STRIK NEOOR (PUMb

--- ELVENTh PO ROJECT (LOAN 206B-1O)

-- PROJECt COMi'LEOWN REPORTWithdrzawal tho PreceeOi Of thP Lon

(in USI eillionpe va;wt Ct) Z ,

<.- Lean Aon £. Sdlo 1 1I Neovesber- Act"l - Ln A lo}T T I SB ..Ioon o .f 1/ Mi I.Jon Xdof Expenditure___ v_l_n_ t______ FInancd Equivalent Financed

-(1) EI pt ant d 1at2al 132.0 i142.0 149.17(sxECpt polO) l ,

(a) directly i4orted 100X of foreign I 100o of foreign 100% foreign.X.oeditures expenditures xpendltures'b) locally wanwfactutod ,-' 1005 of teal 1005 of Il 'o 1005 of localrxpenditKi1ro expenditure expenditures

1, . f f (ox-factory) (ox-fac15ory) (ox-fectory) i (c) io* 65 topreur locally t.

(2) Poles 6.0 s0o 6.0 IboS 7.4 80ox, (a) Ionsultent's.s.rvices 9.0 1001 11.5 ;005 10.38 100I

(4) .0l8lbcato 216fir0 .6 0.00

Total - 1i0i10 170.0 1;7.01 ,.

Th. proceed. of, the loan were rei loated in atovaber 165 taking into acunt MhAi virtually atI cootsacto hkd been wardednt that time ad the total for Categories 1,2 and S wore hglhr then originally estimated. Threfore, Category4, sinI loc ted was reduced by tratsers to the others.

~~~~~ ~~~~ ' il . ! t~~~~~~~~~~~~~~1I, ->

-29- :,, , ~ANNE.X 7

INONSIA

PERIJSAIA W6JM LISrRIt( NEWDRA (PLN)

ELEV fN W POWER PROJECT (LN2qO6-IpD)

PROJECT COlPLETION REPORT

Loen 2050-IND Dlsbur!Mente

- ~~~~~~~~~~~~~Dlebutre.ients(In US2 miltIon equivalent)

BeAk Flstcal Year stietled AcStulI Actual cumulative as X ofand Quarter guaortCi CutTUtivo SRurtor cumulave Origllnl Loan Amount

199 1 -2 6.0 6.0 - -a -8s -7.0 12.0 2.18 2.8 1.84 4.6 18.6 8C92 11.10 6.6

1184 1 0.8 17.8 11.97 28.07 18.62 15.7 ,8.0 9.70 82.8 19.8a 27.0 60.0 10.14 42.89 2544 82.4 92-.4 12.88 - 6t ,82.0

1956 1 21.8 114.0 7.18 62.96 $7.02 29.0 148.0 10.05 78.00 12.9a 7.0 160.0 12.89 86.09 60.54 10.0 180.0 15.25 101.14 59.6

1980 1 5.0 105.0 12.59 118.78 60.92 5.0 170.0 11.28 124.86 78.68 5.62 180.68 76.84 6.09 186.07 79.0

1887 1 8.68' 189.58 82.12 7.89 1 6.92 88.48 ;2.88 14,9.80 87.64 8.01 152.81 89.0

1989 1 .76 1- 8.06 98.02 ~1.22 168.28 98.1a 1.51 160.79 94.04 0.85 161.44 95.0

ses 1 0.81 lel.is 95.21V9 2 5.00 168.7A 98.1

a 0.27 168.02 98.2

k K

K~ ~ ~ . A

K K.t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~x , K

I ~ ~~~~~~ .- ' . ,

fi / E~~~~~~~~~~~~~~~IDNSIA ',~ ~ ~ ~~~~~~EISHA '1A LB.|S iSTRIKNEGDRA (UI)

VE PO ROJECTJADOTABEIC DU UTION AMD TRMISSN

EStIMATE OF THE ECONOMIC RATE OF REIURN /

PLN-_ Incremental Cost (U tI,lli on,) Net Benefits

Fiscol itor flvOstt (S olion) esntration TotIl Cost Ilcritetatl /0 (Revenue, minus costEading @ Shaa6i /b and (SS iliIton) Soles - Revenues (US8 lmlIion)

March 31. Forotgn Local 0M /c Transmission /d (6) (9U4) (USS milion)

(1 t) (2) (8) (4) >- r(54) (2).(3).(4).(6) (7) r-~ (8) (8) - (8)

1982 , -0.18 0.168 0.16

1903 2.27 0.25 2.2 - 2.52

1984 42.40 14649-8.60 $9.69

1985 4S.06 17.84 63.000 - 83.00

1986 46.66 21.29 68.17 - 68.17

198? 18.45 16.92 8.22 80.06 68.65 64.2 37.84 - 81.01fSrY8 11.48 1.66 3.81 8t.90 79.74 1,280.7 69.6S 10.09

1989 0.5340 8.69 109.67 120.49 2,234.9 121.7n 1*22

A1O9O 0.09 3.98 186.62 170.69 3,211.5 219.80 49.21>

1 A991 3.98 168.52 170.50 3,211.5 219.60 49.30

* 2012< 3- r.98 166.52 170.60 8,211.5 49.30

ESTIAATED INTERNAL EtCMIC RAE OF ROT = 12.71

-W I cost at 1981/82 price leel, based on PLN fixed assets revalution leors to, the period up to 1989/90.

Shed, price fatoro are based on SAR No. 771-DI0, Paton Thermal Po..r Plant Annex 16, Table l.

Shidw price factor for foreign currency is 1.09-Shadow prieo facor for l0etl Is estlmated to ,bo 0.8125.

*, 4- Operation and maintenance costs are estimated St 1.51 of tho Cumulative lvestment.

Genraton and transmission cost are based on PLN actual results for Java system for fiscal years 1981/82 to

1988/1999 and estimate for 1999/90. -LO InecomAtl -sibes correspond 'to PL1 actual figures In the Jabotabe& amea for tflcal- years 18/87 to 1988/89'Sd

estimato for 1989/90. The rovenues per kWh usd In calculating total revenwu are th1o for the Java island system .I

g . ~for the same "ars. .

-~~~~~~~~~~~~~~~~~~~~~ U

ELEVD6IH POUR PRJECT (LOWN 2=W-III

PROJECT C9EPLETt(W RPRT'r

PUA - S_mre of KX, Finaneial lodieatore

Fiscal tpes 8831/2 1962183 1838141 14_61188AW Actuol AWpr. Actal Appr. Actual Appr. Actusl Appr. Actual Appr. Actual

fto4sting r,ato (a) 67.1 105.8 ,7.6 106.7 72.4 101.7 ' 77.4 100.7 73.8 100.8 73.1 -

Ret. ofreturn ea aft sol'fig"d I" a oI rostlio (3) (14.0) (1.9) 17.1 (8.0) 12.1 (0.9) 8.1 (0.4) B.5 (0.S) 8.8 3.4 w

.1~~e Ilterot s>oI g.ooo trbe fr -

so 8 of capital exposditeros:<_I-Am # - f a18.9 256.6 26.6 80.6 .29.1 16.2 84.6 11.4 34.5 10.6 38.2 23.0

81-pot eswla avore 17.9 29.9 20.1 80.8 24.1 28.0 80.2 18.3 32.9 12.9 85.0 16.9feb o- ' of.3.1

97 $Uobt us ofE ldebt pluo eqwitp j& 19.2 14.1 21.9 17.8 28.L 27.4 24.2 82.8 24.4 36.1 23.7 89.9

. . bt* cerw cecowo abt). . .(tis) La 4.6 10.8 7.9 6.8 7.1- 8.*, 8. 2.4 4.5 1.7 3.6 2.6

Curret tlo (ti) , 8. 3.4 8.9 2.4 4.1 2.2 4.1 2.6 4.8 2.1 4.2 1.3

- c l c _aoisc' co.2tibu*ioum.A Corre pls tw dg p .L Exclud o " csib .

., ~ - -;§1

JISOESIA ,

-- . ELEVBNTh POW PROJECT (l0ld 2068-1D)

- PRO*JECT C0WL£f(II Je) RT

,: -- ~~~~~~~~~~~~~~PUS - Inceess Stemo- (N~~~~~~~~~~{p bT l l ls)

_> : Fiocal yea _ 8112t932t 1 IS@3A 1984/861 8 8wAppr. Actu A:W. Ag-a I Appe. A.-XcT Apg>r. Actulal Apr.l6aI ipi. AcXsel

Emerewy oi C (GM) . 71042 7,14i 9,670 9,101 11,720 10,000 14,060 1I,e1 186,730 12,760 19,7M0 14,?7SS6ne IecrOeO (1) 21.02 20.27 28.81 10.01 21.20 M.68 19." 10.89 10.0? 16.10 19.05 16.39A,Wrmse Pce -. (p/bWh) 42.05 48.86 00.10 W.52 66.04 75.08 6.76 97.62 71.01 08.61 76.01 93.47

gratin am ouroe-mwo fe" 8 8 sag 514 781 760 936 1,030 1,188 1,227 1,518 1,302

othe re"oso t 10 2 21 2 27 2 81 a 3$ 4 43

Totot Ogorotine Revosues W 185 567 585 788 787 90 1¶111 1.191 13.2I6 1? 1402:

Ontta*ing Ez_ ' ' W-realo/balk oII$ 118 147 8 26 280 477 298 712 85 778 460 720- ' --r Opeationa las 10a . ISO 148 201 166 242 208 282 237 839 2610.pr.clotloo 09 121 101 146 140 15@ 203 204 282 281 333 821

TotoI Or.tioo _ex-8 7 .-- 405 C11 5 800 Nfl 1.I1 898 1.273 1.132 1.292

. 6rotiiiuInc I 10), l82 1#6 206 (l19 202 M 293 (10) U6 MA

- N.orotlng.coasCa V) 8 1 10 - 14 _ 19 (14) 26 (21) 31 (9)

N2t locom l. t*ers 10 Su 102 220 I. 221 "22( 18 (3A) 410 124

TotolI wt.reot$2 29 69 83 94 03 123 144 164 110 1l7 164L.£s: I"latteaj 6,;m c e 22 27 40 go 64 44 94 120 62 8B n 77

_- X erestCharged O to 10 2 28 C 30 19 29 24 72 24 115 87

Net R... X0 £1Q _ 19 £ 41) 190 t8 2 192 t4 6 240 (58) 801 87- M i.t. it. 8.noc.

v - o tx

INDOESIA

ErEVENTH POR OJECT (LOAN 2M-II0)

-- ~~ ~ PROJECT CO nLETIa EPO2T ,,

- -- / PuL - fund Fle Siteasata_. (Rp billion)

Fiscal e 1 _LS4 1 4/6 19 8C}su loe 5 - ., . ~~~~~~~~~~~~pr. ACSO Ajpr. Actgs Appr. Actual AW. Actu1 I pj. ACiuaT Appr. Ietuar

ltdarmel SourcoO @t Fu' daNot 1..o before latereat sad

tax 10 (16) 102 (J0) 220 (18) 221 (22) 318 (31) 418 124* SapreeIatl.* 69 1a1 lot 146 146 156 203 204 282 261 333 821Comaro* coattibhtl-eo eekorthr aste o4 0 71 45, so Is7 102 71 119 89 131 tOo

otal Interol Fun4s 126 IU El4 164 464 812 526 263 699 319 280 563

__ 1O (5) 94 (41) 49 98 85 71 55 19 66 (107)aIt.rceotchared eporatione. 10 2 28 -- '5 80 19 29 24 72 24 115 977 o b x rZ0 14 11 21 21 21 52 58 136 91 87

Total User. tleeu a 27 6 101 ,5 1QD . a 147 183 176 262 67JaefOlQud ,,. Sable for-

* lavooteost -- t9 126 263 179 854 1T7 441 100 510 141 616 486,

* __ 'fetal o.setauctlOO 70m 46 0765 657? 1,1 937 1,176 910 1,414 1,822 1,546 1,035la"rt durling constructio 22 27 -4 64 44 94 120 82 86 72 77Total Casital lavestesat 780 490 L.021 56 2 I 1.269 A.03 1.498 1.40J 1.617 1.712

Dale., eto be 1)easced "1 866 7m8 409 6 02 628 924 9S0 1,267 1,000 1,220

Fine b 16 182 295 158 38 469 868 488 -2 702 407 896-~ -E I 460 279 485 811 662 280 462 425 596 558 634 442

Total Ca,lt.al 5marees J 2l 811 30f 464 680 707 840 9183 l,OU 1.2J 1,041 1.81WCash iusreeso/(dssreeub) (4) 43 (26) 66 25 (i) 12 (11) a (7) 41 92 g CasW ~t belmali ot year 100 '18 98 179 9 237-- 93 142 106 131 141 124

h at yor-aad 96 179 so 237 9a 142 106 1 141 124 182 218

ItIDOESIA

%LEVL POUR PROJECT (AN 205-ItII

- PRJET CWPIETIW REPORT

- m- a nShetu-- bJlIion)----

Fiscal j.1r 1_ 2 11 1l§/L4 .J 1984J2S 1ffI680 __OL87_ Appr. ~~~~~~~~~~~ ~~Actuasl AWpr A I-D ppe. AC*tUD I r- ACtUDt 0ppr. Actual AWp. Actua

ASSETS - -

FD~ Aset i <tE Plea l" oo,vis. 1,251 1,71 2,060 2.124 5,184 2,771 4,62 8,710 0,014 6,002 7,783 - 0.38

-Lose: A.cault.d dspeciltloa 174 270 298 486 464 614 701 042 10-16 1,136 1,423 1,664

O_0o.rstigmo Pleat 1.07o 1.442 1.762 1 689 2L! 2.167 Z8Da1 2.6LO 4.9j3 3U 6249

.ork ia prerogrs 1,689 1,067 1,941 1,870 2,246 1,879 2,849 2,146 2,666 2,603 2,992 8,192

Current Ass .C 6 179 s 237 98 142 106 1I1 141 124 182 216 ,

Ilavtrias 11 go 97 122 122 171 1S6 213 1to 260 210 146Receivables a2 s6 105 108 141. 1 169 l 16 211 208 246 226Otbecearrea somte 26 28 82 80 86 44 44 44 52 45 61 29

lotel eCurret Assets 26 3f 802 497 394 . 456 574 n- 667 701 617-

0 iaeresoets - - - 1 - 1 - 16 - 18 20 O

TOTAL ASSETS-. 2_29413- _4000 8.557 5.810 4.69 5605 ,§ 2 710.01 9.127 -

soon -pl 1,91 1,46 2, 1,"9 2,608 2,017 8,80 2,442- 8,968 3,000 4,620 8,422Re1eiet |esrolgsb 0 (38) 169 (69) 859 (97) 661 (148) 797 (198) 1,066 (162)

viia to re o 1 7 274 840 892 974 656 I,11 796 1,289 1,109 '1,904

Total fealty 2.106 2.71 2.799 2.660 8.069 .2.9 4.497 -81 6.76N 4.096 8.827 6.174

Debt due _ I 27a 768 417 1,096 666 1,485 1,802 1,799 1,S 66 2,116 2,636

Curreat LiebiIltits 27 11 1 6 6eayobles 6-112 17 206 96 2"8 110 227 184 812 167 465

Tet Caat Lisbilitim5 06 112 n7 2068 06 110 227 134 312 161 465 IOTotal __ - __L _b_ -i -20

Coauaamts coet*ibutriio 245 P19 341 876 466 476 694 562 767 826 944 755

Otr eliabilitios - 6 - -1467 1. - 1

-OTAL EQUITY AD LIABILITIES 2.021. 2.688 4,000 3ASS7 6 .10 4.S66S8 5.60 6e6 7.046 lO ,OS3 S2 7

ANNEX 10.35 -TabliIX

INDONESIA

ELEVENTH POWER PROJECT (LOAN 2056-IN))

PR2JECT COMPLETION REPORT

PLO - Indonesia Operations

Income Statements(Rp billion)

Actual EstimateFiscal year 1987/88 1988189/a 1989190

Energy sales (GWh) 17.077 20,027 22.697Sales increase (Z) 15.5 17.3 13.3

Average revenue (Rp/kWh) 92.60 91.87 116.32Average revenue increase (t) (0.9) (0.8) 26.6

Operating RevenuesEnergy revenue 1,581 1,840 2,640other operating revenue 48 59 63

Total Revenue 1,629 1,899 2,703

Operating ExpensesFuel and lubricating oil 870 995 1,158Power purchased 11 12 12Personnel expense 149 172 215Repair/maintenance 1 116 133 134Depreciation 438 521 661Other expenses 55 72 89

Total Expenses 1,639 1,905 2,Z69

Operating Income (10) (6) 434

Nonoperating income 25 31 13Nonoperating expense 33 31 34

Other Income (Net)

Net Income Before Interest (6) 413

Interest charged to operations 118 136 157

Net Income (136) (142) 257

Rate base (revalued) 5,100 6,923 8,976Rate of return (t) (0.2) (0.1) 4.8

Operating ratio (X) 101 )i00 84

La rtnsitdited. -fTn,dI. tj

N 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,

l~~~~~~~~~~~~~~~~~~~~~~ttE i n

-36- Table 2

INDONESIA

G.VENTH POWER PROJECT (LOAN :056-IND)


PLN - Java Operations

Income Statements(Rp billion).

Actual Estimate

Fiscal year 1987188 1988/89/a 1989190

Energy sales (GlWh) 13,398 15,692 17,754Sales increase (2) 15.7 17.1 13.1

Average revenue (RplkWh) 90.99 90.49 113.85Average revenue increase (2) (0.8) (0.8) 25.$

Operatint RevenuesEnergy revenue 1,219 1,420 2.021Other operating revenue 36 44 45

Total Revenues 1,255 1,464 2,066

Operating ExgensesFuel and lubricating oil 595 674 805Power purchased 10 11 11Personnel expense 92 107 130Repair/maintenance 73 88 87Depreciation 299 354 443Other expenses 33 45 63

Total Exvehseos 1,12 1.2t9 1 419

Operating Incomo 153 185 528

Nonoperating income 7 21 7NonoperatAng expense 26 16 18

other Income (Ne; (11)

Net Income Before Interest 13' 190 517


Net Ihcome 36 74 407

Rate base (revalued) 3,680 5,030 6,693Rate of return Iy2) 4.4 3.7 7.9

Operating ratio (2) 88 87

Vjnaudlted. .

ANNEX 10Table .3

INDONESIA



PLN - Non-Java Operations

Income Statements(tRp billion)

Actual EstimateFiscal year 1987/88 1988189ia 1989190

Energy sales (GWh) 3,679 4,335 4.943Sales increase (I) 14.6 17.8 14.0

Average revenue (Rp/kWh) 98.47 96.99 125.20Average revenue increase (Y) (1.4) (1.5) 29.1

Operatin- RevenuesEnergy revenue 362 420 619Other operating revenue 12 15 18

Total Revenues 374 435 637

Operating ExpensesFuel and lubricating oil 275 321 353Power purchased 1 1 1Personnel expense 57 65 85Repair/maintenance 43 45 47Depreciation 139 167 218Other expenses 22 27 26

Total Exgenses 537 626 730

Operating Income (163) (191) (94)

Nonoperating income 18 10 6Nonoperating exp nse 7 15 16

Other Income (Net) 11 (5) (10)

Net Income Befpre Interest (152) (196) (104)


Net Income (172) (216) (150)

Rate base (revalued) 1,420, 1,893 2,283Rate of return (2) (11.5) (10.1) (4.1)

Operating ratio (2) 144 144 115

la ffnxt8dirpd. .\.

ANNEX 1038- Table 4

INDONESIA



PLN - Indonesia Operations

Funds Flow Statements(Rp billion)

Actual EstimateFiscal year IYIJ at$ 1939187ral T787rgu-

SOURCES OF FUNDSmtsrnal bourcesNe income veore interest (8) (6) 413Depreciation 438 521 661Consumers' contributions 67 76 70Other 48 54 60

Total Internal Sources 535 645 1,204

Debt Serviceinterest.charted operations 118 136 157Debt repaymen 269 117' 281

Total Debt Service 387 253 438

Net Internal Sources 148 392 766

Borrowings 932 713 939

Governmentiequity 860 960 1,375

TQTAL SOURCES 1,940 2,065 3.080

APPLICATIONS OF FUNDSCapital Expenditure

ostructon expenditure 1,830 1,843 2,617Interest dt Ing construction 96 136 96

Total Capital Expenditure 9251,979 2,713

Changes in working capitaland other 15 86 367

TOTAL APPLICATIONS 1,940 2,065 3,080

Increase (Decrease) in Cash 23 56 i

Cash at beginning of year 216 239 295Cash at end of yoar 239 295 290

Annuall debt setvice coverageratio (times) 1.1 2.0 1 2.5

Self-Financing Ratio (2)uinnuai 6.9 15.5 14.73-year moving average

-(current + 2 pastiyears) 13.4 14.8 12.7

la Unaudited.. ' . l J .

_ 39 _ ANNEX 10TableS5

INDONESIA

ELEVENTH POWER PROJECT (LOAN 2D56-IND)


PLN - Indonesia Operations

Balance Sheets(Kp DlSllOTll

Actual EstimateFiscal year . yuu-18lYa T1V9/7

ASSETSeaxed Assets

ilant i service 8.779 12,064 14.764Less: Accum. depreciation 2,179 2,882 3,760

Operating plant 6,600 9,182 11,004

Work in progress 4.112 3.874 5,061

Total Fixed Assets 10,712 13,056 16,065

Current Assetsrasn ana DanK 239 295 290Accounts receivable 204 227- 304Inventories 210 244 247Other current assets 86 98 103

Total Current Assets 739 864 944

Other assets 143 175 230

TOTAL ASSETS 11,594 14,095 17,239

EQUITY AND LIABILITIES

z-aM-in capital 4.282 5,242 6.617Retained earnings (288) (430) (173)Revaluation surplus 2,912 3,799 4,761

Total Equity 6,906 8,611 11,205

Long-term debt (LTD) 3,458 4,042 5,543Less: Current portion 318 559 303

Net long-term debt 3,140 3,483 4,141

Current LiabilitiesCurrent portion of LTD 318 559 303Accounts payable 316 404 424Other current liabilities 61 56 59

Total Current Liabilitis 695 1,019 786

Consumers' contributions 606 682 752

Other liabilities L 247 300 355

TOTAL EQUITY & LIABILZTIES 11,594 .4,095 17,239

Current ratio (times) 1.1 0.9 1.2Debt as 2 debt plus equity /c 40.5 38.8 36.5Accounts receivable (days) 47 45 42

/a Unaudited.TU Including consumets' deposits.7T Including consumers' contributions, but excluding revaluation surplus.

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