The Republic of Bosnia and Herzegovina Emergency Electric
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Official The Republic of Bosnia and Herzegovina Use Only Emergency Electric Power Improvement Project External Evaluator: Hajime Sonoda (Global Group 21 Japan, Inc.) Field Survey: October 2008 1. Project Profile and Japan’s ODA Loan Yug osla via Bosnia and Herzegovina Kakani Croatia Sarajevo The Adriatic Serbia and Sea Montenegro Map of project area(● shows project sites) Kakanj Thermal Power Plant 1.1 Background Bosnia and Herzegovina is a country on the northwest Balkan Peninsula. Bosnia and Herzegovina declared its independence from Yugoslavia in 1992, but immediately after this event, the three-and half-year-long Bosnian War broke out. It was started by the Serbs, an ethnic minority calling for sovereignty against the Bosniak and the Croats. In December 1995, the Dayton Agreement (General Framework Agreement for Peace in Bosnia and Herzegovina) brought a cease-fire, establishing the country’s present-day structure. The country is now comprised of two governing entities, the Federation of Bosnia and Herzegovina and the Republic of Srpska.1 Before the war, Bosnia and Herzegovina was capable of supplying sufficient electricity with coal-fired thermal power and hydro power plants while selling approximately 15% of its total electricity to nearby countries. However, after suffering from the devastation of war and a lack of proper maintenance, the post-war production of electricity has dropped to one tenth of its original volume. After the war, the World Bank launched a reconstruction and development project for Bosnia and Herzegovina, which included the Emergency Electric Power Improvement Project, to immediately revitalize power generation, transmission and distribution systems. Further, to restore pre-war power levels and a stable electric power supply, the World Bank presented the Second Electric Power Reconstruction Project, known as the “Electric Power Reconstruction 2 Project”. In December 1998, the ODA loan agreement for this project (the Emergency Electric Power Improvement Project) was signed as part of the World Bank’s plan and conducted in a coordinated manner with Japan (Grant Aid2, ODA loan), the US, UK, EU, and others. 1.2 Objective The purpose of the project is to increase the supply of electricity by revitalizing the Kakanj thermal power plant and four coal mines adjacent to thermal power plants (including the Kakanj plant), thereby contributing to post-war economic reconstruction as well as an improved and stable livelihood for the country’s people. 1 The existence of the District Brčko was revealed in 2000, which belongs to neither of the two governing entities. 2 Rehabilitation project for major transmission lines (1998, 3.1 billion yen) 1 1.3 Borrower/Executing Agency Borrower: Government of the Republic of Bosnia and Herzegovina Executing agency: <The Federation of Bosnia and Herzegovina> Elektroprivreda Bosne i Hercegovine (EPBiH), Brown Coal Mine Kakanj (BCBK), Brown Coal Mine Breza (BCBR), Coal Mines Kreka-Durdvik (CKMD), Brown Coal Mines Banovici (BCBA). <Republic of Srpska> Elektroprivreda Republike Srpske (EPRS) 1.4 Outline of Loan Agreement Loan Amount/Loan Disbursed Amount 4,110 million yen/4,102 million yen Exchange of Notes/Loan Agreement September 1998/December 1998 Terms and Conditions Interest rate: 0.75%, repayment period (Grace Period): 40 years (10 years), General untied Final Disbursement Date August 2006 (Amended LA and extended repayment deadline) Main Contractors (with 10 hundred million Steinmuller-Instandsetzung Kraftwerke, GMBH (Germany) yen or above) Consultant Services (with 1 hundred million No service exceeded 1 hundred million yen yen or above) Feasibility Study (F/S), etc. Coal mine refurbishment F/S by USAID (1997) Project formulation by the World Bank “Electric Power Reconstruction 2 Project” (1998) 2. Evaluation Results (Rating: B) 2.1 Relevance (Rating: a) 2.1.1 Relevance at the time of appraisal After the war ended, the central government of the Republic of Bosnia and Herzegovina gave overriding priority on reconstruction of the electricity sector to foster recovery from war devastation and resumption of economic activities as well as an improved and stable livelihood for the country’s people. To achieve a stable power supply, Sarajevo sought persistent equipment investment even after the emergent measures of the First Electric Power Reconstruction Project by the World Bank. Previously, about two-thirds of Bosnia’s entire power generation was delivered from four domestic coal-fired thermal power plants. However, in 1997, the yield of coal products faltered to only 26% of its pre-war level in the Federation of Bosnia and Herzegovina. In the Republic of Srpska, the yield was as low as 60% of its previous level. Given this situation, the revitalization of coal mines to supply coal to power plants as well as the refurbishment of the power generation system was urgently needed. 2.1.2 Relevance at the time of ex-post evaluation Given the large deposits of coal in Bosnia and Herzegovina, the energy sector is prioritized by both governing entities from the perspective of energy security, industrial promotion, and acquisition of foreign currencies by selling electricity.3 Thanks to a series of aid projects (including projects by the World Bank), Bosnia’s power generation, transmission and distribution systems were restored and domestic power consumption recovered to its pre-war level in 2005. In the future, annual growth in power demand is estimated at 4% for the Federation and 2% for the Republic of Srpska. This is in addition to the growing demand in neighboring countries for Bosnia’s electricity.4 As described above, restoration of the power generation system no longer requires an urgent response. However, coal mines still suffer from limited production capacity. To respond to expected future growth in 3 This is according to hearings from both governing entities. After each entity determines their respective energy strategies, the central government of the Republic of Bosnia and Herzegovina will institute a national energy strategy. 4 Bosnia and Herzegovina was an energy base that supplied coal and electricity to the entire former Yugoslavia. Even after the war, electricity has continued to be exported, and the country is considered to be an energy exporter of southern Europe. 2 power demand, tireless reinforcement of power generation and coal supply capacity is indispensable. In conclusion, this project is crucial to provide emergency aid for Bosnia and Herzegovina’s prioritized electricity sector. Therefore, this project has been highly relevant with the Republic’s national policies and development needs at the time of both appraisal and ex-post evaluation. Dump truck (left) and hydraulic excavator (right) procured at Gacko Coal Mines 2.2 Efficiency (Rating: b) 2.2.1 Output This project conducted partial refurbishment of Units #5 and #7 of the Kakanj Thermal Power Plant, while rehabilitating and procuring coal mining and transportation equipment for six coal mines. The output achieved for each power plant and coal mine is shown below. Further, consulting services were provided by Japanese consultants to give various aid in the form of detailed designs, procurement, supervision of works, and technical guidance. Table 1: Project Outline and Output Target Project (Output) Cost The Federation of Bosnia and Herzegovina Kakanj Thermal Power Rehabilitation of Unit #5 (monitor and control equipment) 11.0 hundred Plant and Unit #7 (boiler) million yen Kakanj Coal Mines Maintenance of railway road between coal mines and (open-pit) power plant (bridges and rails), repair of 3 large 7.7 hundred excavators, procurement of 1 hydraulic excavator and 1 million yen rock drill, refurbishment of maintenance and other related facilities Breza Coal Mines Repair of 1 underground excavator, procurement of 1 4.6 hundred (underground) underground face conveyor, 1 main tunnel belt conveyor, million yen underground brace, electric parts, etc. Kreka Coal Mines Procurement of 1 bulldozer, 1 hydraulic excavator, 22km 7.5 hundred (open-pit) of belts for belt conveyor, and spare parts for various million yen equipment Banovici Coal Mines Procurement of spare parts for dump truck, excavator, etc. 3.2 hundred (open-pit) million yen Republic of Srpska Gacko Coal Mines Procurement of 3 dump trucks, 1 hydraulic excavator, and (open-pit) other related machines and equipment 6.6 hundred Ugljevik Coal Mines Procurement of 4 dump trucks, 3 bulldozers, 1 hydraulic million yen (open-pit) excavator, and other related machines and equipment (Source: created from project completion reports and questionnaires of each executing agency.) 3 Rock drill (left) and dump truck (right) procured by Kakanj Coal Mines Originally, this project was designed to furnish urgently needed equipment for power plants and coal mines. However, as stated below, the effectuation of the loan agreement has been delayed more than one year, so that almost the entire original project scope was Republic of Srpska Ugljevik Thermal Power Plant implemented through other funds for all subprojects Ugljevik Coal Mines except Kakanj Coal Mines and Breza Coal Mines. This Crlva Coal Mines Tuzla Thermal Power resulted in a major change in output generated by these Plant Banovići Coal Mines subprojects in comparison to the original plan at the 5 Kakanj Thermal time of appraisal. Kakanj Coal Mines Power Plant Although output has changed drastically, the project Breza Coal Mines can be considered reasonable in terms of effectiveness The Federation of Sarajevo Bosnia and Herzegovina and utilization of equipment (described in detail in section 2.3 Effectiveness). Gacko Thermal Power Plant 2.2.2 Project period Gacko Coal Mines At the time of appraisal, the project was designed to be conducted over a period of 33 months between October 1998 and July 2001. However, it was actually executed over a period of 63 months between June 2001 and September 2006, which means an extension of Fig 1 Coal mines and thermal power plants under almost five years beyond the planned completion date project and beneficially thermal plant (191% of the planned period).