World Bank Document · 2016. 7. 11. · Cairo, Arab Republic of Egypt Tel: (+20-2) 391-2815...
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Document of The World Bank FOR OFFICIAL USE ONLY Report No: 46695-EG PROJECT APPRAISAL DOCUMENT ON A PROPOSED L O A N IN THE AMOUNT OF US$600 MILLION TO THE ARAB REPUBLIC OF EGYPT FOR AN AIN SOKHNA POWER PROJECT January 8,2009 Sustainable Development Department Middle East and North Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript of World Bank Document · 2016. 7. 11. · Cairo, Arab Republic of Egypt Tel: (+20-2) 391-2815...
Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 46695-EG
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$600 MILLION
TO THE
ARAB REPUBLIC OF EGYPT
FOR AN
AIN SOKHNA POWER PROJECT
January 8,2009
Sustainable Development Department Midd le East and N o r t h Afr ica Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS (Exchange Rate Effective October 20, 2008)
AfDB BOT CAS CASPR cc CCGT CEPC CTF EEHC EETC EEUCPRA EGEAS ERR ESIA EIB EPC ESMAP FDI FMU FY GDP GEF GWh GOE IPP KfW kWh MMBTU sc Tcf TOR USAID US$
Currency Unit = Egyptian Pound (LE) LE5.5 = US$l
US$0.179 = LE 1
FISCAL YEAR July 1 - June 30
ABBREVIATIONS AND ACRONYMS
African Development Bank Build Operate Transfer Country Assistance Strategy Country Assistance Strategy Progress Report Combined Cycle Combined Cycle Gas Turbine Cairo Electricity Production Company Clean Technology Fund Egyptian Electricity Holding Company Egyptian Electricity Transmission Company Egyptian Electric Utilities and Consumer Protection Authority Electric Generation Expansion Analysis System Economic Rate o f Return Environmental and Social Impact Assessment European Investment Bank Engineering, Procurement, and Construction Energy Sector Management Assistance Program Foreign Direct Investment Financial Management Unit Fiscal Year Gross Domestic Product Global Environmental Facility Gigawatt hour Government o f Egypt Independent Power Producer German Agency for Development Assistance Kilowatt hour Million British Thermal Units Steam Cycle Trillion Cubic Feet Terms of Reference United States Agency for International Development US cents
Vice President: Daniela Gressani Country Director: Emmanuel Mbi
Sector Director Laszlo Lovei
Task Team Leader: Anna Bjerde Sector Manager: Jonathan Walters
FOR OFFICIAL USE ONLY
Development Total:
EGYPT, ARAB REPUBLIC OF
702.30 1,487.50 2,189.80
AIN SOKHNA POWER PROJECT
PROJECT APPRAISAL DOCUMENT
MIDDLE EAST AND NORTH AFRICA
MNSSD
Date: January 8,2009 Country Director: Emmanuel Mbi Sector Manager/Director: Jonathan D. Walters
Project ID: P100047
Lending Instrument: Specific Investment Loan
[XI Loan [ ] Credit [ 3 Grant [ ] Guarantee [ ] Other:
Team Leader: Anna Maria Bjerde Sectors: Power (1 00%) Themes: Access to urban services and housing (PI Environmental screening category: Category A (Full Assessment)
For Loans/Credits/Others: Total Bank financing (US$m.): 600.00
Borrower: Ministry o f International Cooperation 8 Adly Street Cairo, Arab Republic o f Egypt Tel: (+20-2) 391-2815
Responsible Agency: Egyptian Electricity Holding Company Ramsis Street Extension Abbassia Cairo, Arab Republic o f Egypt - 1 15 17 Tel: (+20-2) 401-2368 kvassin@,moee.gov.eq / www.egelec.com
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
Project implementation period: Start May 3 1,2009 End: June 30,201 5 Expected effectiveness date: May 3 1,2009 Expected closing date: December 3 1,20 15 Does the project depart from the CAS in content or other significant respects? Ref: PAD I.C. Does the project require any exceptions from Bank policies? Ref: PAD I K G .
I s approval for any policy exception sought from the Board? Does the project include any critical r isks rated “substantial” or “high”? Ref: PAD IILE. Does the project meet the Regional criteria for readiness for implementation? Ref: PAD I K G . Project development objective Ref: PAD ILC., Technical Annex 3 The project development objectives are to (i) ensure continuous electricity supply to meet demand in a sustainable manner through investment in new generation capacity; and (ii) improve the sector’s financial sustainability by providing assistance to the Egyptian Electricity Holding Company (EEHC) to support sector revenue improvements.
[ ]Yes [XINO
[ ]Yes [XINO
[ ]Yes [XINO
[ ]Yes [XINO
[XIYes [ ] N o
Have these been approved by Bank management? [ ]Yes [ IN0
Project description [one-sentence summary of each component] Ref: PAD II.D., Technical Annex 4 The proposed project i s a 1,300 M W supercritical steam turbine power plant comprising two 650 MW steam turbines using natural gas as the main fue l (and mazout as the back-up fuel). The plant will be under the management o f the East Delta Production Company (EDPC), one o f EEHC’s subsidiaries.
A technical assistance component i s aimed at further enhancing the on-going energy sector policy dialogue with GOE. The assistance will mainly comprise o f studies and policy support including rapid response support to EEHC in the implementation o f the time-of-use tariff and further tariff adjustment recommendations from the on-going Energy Pricing Strategy work.
Which safeguard policies are triggered, if any? Re$ PAD IV. F., Technical Annex 10 Environmental Assessment (OP/BP 4.0 1) - Given the project’s environmental classification, in accordance with Operation Policy (OP) 4.0 1 on Environmental Assessment, a full Environmental and Social Impact Assessment (ESIA) report was prepared for the project.
Involuntary Resettlement (OP/BP 4.12) - Associated with the Ain Sokhna power plant, there are about 130 kilometers o f proposed new transmission lines. Most o f the routing pathways are located in uninhabited, desert land which i s state owned. However, the Operational Policy on Involuntary Resettlement (OP/BP 4.12) i s triggered, because the exact location o f all the sections o f the transmission l ine i s not yet known. The areas in question are largely uninhabited public land; however, in order to handle any potential future changes, a Resettlement Policy Framework (RPF) was prepared.
Significant, non-standard conditions, if any, for: Re$ PAD III. F. Board presentation: There are no conditions o f Board presentation.
Loadcredit effectiveness: Subsidiary Loan Agreement signed between Ministry o f International Cooperation and the Egyptian Electricity Holding Company (EEHC).
Covenants applicable to project implementation: Contractual Agreement signed between EEHC and EDEPC no later than one month after the effectiveness date. Establishment o f the PMU, with qualified staff and in adequate numbers no later than two months after the effectiveness date. Adoption o f the Implementation Manual (including procurement and financial management) no later than two months after the date o f signature o f the contractual agreement between EEHC and EDEPC.
EGYPT. ARAB REPUBLIC OF Ain Sokhna Power Project
CONTENTS
Page
I . STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 A . B . C .
I 1 . A . B . C . D . E .
I11 . A . B . C . D . E . F .
I V . A . B . C . D . E . F .
Country and sector issues .................................................................................................... 1 Rationale for Bank involvement .......................................................................................... 8 Higher level objectives to which the project contributes .................................................... 9
Lending instrument ........................................................................................................... -10
Project development objective and key indicators ............................................................ 10 Project components ............................................................................................................ 11
Lessons learned and reflected in the project design .......................................................... 12
Alternatives considered and reasons for rejection ............................................................. 12
Partnership arrangements (if applicable) .......................................................................... -14
Institutional and implementation arrangements ................................................................ 15
Monitoring and evaluation o f outcomeshesults ................................................................ 17
Sustainability .................................................................................................................... -17
Critical risks and possible controversial aspects ............................................................... 17 Loan conditions and covenants .......................................................................................... 19
APPRAISAL SUMMARY .............................................................................................. 20 Economic and financial analyses ....................................................................................... 20 Technical ........................................................................................................................... 23
Fiduciary. ........................................................................................................................... 25
Social ................................................................................................................................. 27
Environment ...................................................................................................................... 27 Policy Exceptions and Readiness ...................................................................................... 32
PROJECT DESCRIPTION ............................................................................................ 10
IMPLEMENTATION ..................................................................................................... 14
. .
Annex 1: Country and Sector o r Program Background .......................................................... 33
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .................. 37
Annex 3: Results Framework and Monitoring ......................................................................... 38
Annex 4: Detailed Project Description ...................................................................................... 40
Annex 5: Project Costs ................................................................................................................ 45
Annex 6: Implementation Arrangements .................................................................................. 46
Annex 7: Financial Management and Disbursement Arrangements ..................................... 48
Annex 8: Procurement Arrangements ....................................................................................... 57
Annex 9: Economic and Financial Analysis .............................................................................. 64
Annex 10: Safeguard Policy Issues ............................................................................................. 80
Annex 11: Project Preparation and Supervision .................................................................... 116
Annex 12: Documents in the Project Fi le ................................................................................ 117
Annex 13: Statement of Loans and Credits ............................................................................. 118
Annex 14: Country at a Glance ................................................................................................ 120
Annex 15: Maps ......................................................................................................................... 122
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and sector issues
Country Issues
1. As a result o f a comprehensive reform program launched in 2004 aimed at trade liberalization, reduced and improved administration o f taxes, consolidation and privatization o f the banking sector and overall improvement in the business environment, Egypt’s economic growth has remained high and broad-based. Indeed, Gross Domestic Product (GDP) increased 7.2% in 2007/08, up from 7.1% in 2006/07. The reforms are also focusing on stepping up public-private partnerships (PPPs), reducing energy subsidies and reforming the social sector, including safety net mechanisms to support the reduction o f energy - and other - subsidies. As a result o f increased economic growth, unemployment declined from 9.4% in 2006/07 to 8.8% in 2007/08’.
2. The reform program was largely formulated to address Egypt’s rising fiscal deficit, which rose from 3.9% in 1999/00 to 9.2% 2005/06 as well as to stimulate growth and reduce poverty through structural reform. The reforms have shown positive results with the deficit as a percentage o f gross domestic product (GDP) dropping to 7.5% in 2006/07, and 7.3% in 2007/08. The GOE plans to reduce the deficit further by 1 % per year until 201 1. Furthermore, total investment as a percentage o f GDP has increased from an average o f 17.1% over 2001- 2004 to 22.3% in 2006/07.2 Egypt ranked among “top reformers” in Doing Business 2008 reflecting the friendlier investment climate and the associated positive private sector response. It needs to be noted that the reform program was formulated to be implemented gradually, and with careful monitoring o f economic impact as well as overall acceptance by the population. Indeed, reforms in Egypt tend to be undertaken gradually and cautiously.
3. The positive indicators o f Egypt’s reform success have recently come under pressure, with the economy slowing down in the fourth quarter o f 2007/08 when growth dropped to 6.8% (compared to 7.6% for the same quarter the year before). This i s primarily due to the impact o f higher inflation had in slowing down consumer spending. The sharp increase in inflation was due to rising food and energy prices. Inflation rose from about 7% at the end o f 2007 to over 25% in August 2008; a drop to about 21.5% has been reported for September as commodity prices have fallen. Public spending i s also on the rise, mainly due to increases in food and energy subsidies which increased to 1.8% and 6.7% o f GDP, respectively in 2007/08. Inflation remains a serious challenge facing the Government o f Egypt
4. To alleviate the social impacts o f higher prices, President Mubarak, in early May 2008, announced a 30% increase in salaries for civil servants (estimated at about 30% o f the total workforce) and also called on the private sector to raise wages by the same percentage for i t s workers. In his announcement, President Mubarak stressed the Government’s continued commitment to the on-going economic liberalization program but stressed the need for stepping
Source: Egypt, Economic Monitoring Report, September 2008, the World Bank, Middle East and North Africa
Source: Egypt Country Assistance Strategy Progress Report, July 17,2008.
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Region. 2
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up the expansion o f social security (the food ration card scheme has been extended to more low-income families) and restructuring o f subsidy-agencies.
5 . Going forward, although in the short-term real GDP growth in Egypt i s expected to remain high; there will be a slowdown as a consequence o f the global financial crisis and recession in developed countries. Talks are underway in the Government on the appropriate combination o f policies to mitigate the external shock, including stepping up public investment plans and a temporary freeze on some o f the energy price increases recently announced (see below). The challenge, therefore, will be to maintain the appropriate balance between the short-term stabilization objective o f stimulating aggregate demand and the long-term growth requirement o f sound fiscal accounts and predictable future policies essential to business- friendly environments.
6. A series o f energy price increases was started a few years ago, in light o f the growing subsidy burden o f the sector. As mentioned above, energy subsidies reached 6.7% o f GDP in 2007/08, mostly due to subsidized gasoline in the transport sector and liquefied petroleum gas (LPG) widely used for cooking. In early 2000, gasoline price increases were introduced to bring the prices closer to their market values. Further in 2004, annual increases to the electricity tariffs were approved, and in June 2008, the Government announced that the price o f natural gas for energy-intensive industrial users would be increased from US$1.25/mmbtu to US$3/mmbtu with immediate effect. Likewise, the electricity price for energy-intensive industrial users was increased in one-step to US$6.3/kWhY US$4.6/kWh and US$3.8/kWh for medium, high voltage and ultra high voltage, respectively (see more o n energy prices in paragraphs 17- 18 below). The energy price adjustments in recent years constitute a significant step by the Government towards reduction o f energy subsidies, and the acceleration o f some price increases recently demonstrates the strong commitment to price reform. There i s however a risk that concerns about declining growth will slow down the planned phase-out o f subsidies as well as the overall planned divestitures (especially in the labor-intensive manufacturing sector).
7. As described in the Country Assistance Strategy Progress Report (CASPR), Bank support to the energy sector i s a key element in the cooperation between the Government o f Egypt and the World Bank, and the assistance provided by the World Bank in the energy sector to date has made substantial progress towards the goals that were articulated in the CAS discussed by the Board on June 15, 2005.3 Indeed, Bank support to the energy sector, including the proposed project has and continues to play a key role in achieving the CAS goal o f enhancing the provision of public goods through modernized infiastructure services to achieve higher growth.
Sector issues and Government strategy
8. The Egyptian electricity sector i s going through substantial change and i s evolving fast with the GOE seeking alternative and more efficient means to meet demand and secure energy. Sector reforms are starting to yield results laying the groundwork for market liberalization and re-entry o f the private sector.
Report Nr. 32190-EG.
2
9. Reform o f the electricity sector in Egypt began in the mid-1990s with the unbundling o f the electric utility and the decision to introduce private sector financing through Build Own Transfer (BOT) arrangements (see Box 1 for a timeline and summary o f the electricity sector reforms).
10. The most significant reforms to date include (i) the unbundling o f the sector and setting the stage for future competition and privatization; (ii) the creation o f the regulator and i t s work
Box 1 - Timeline of Electricity Sector Reforms in Egypt
1893 1962 1998
2000
2000
2002
2002
2002 2003 2003
2004
2007
2007
2008
Electricity was introduced in Egypt (privately owned). The sector was nationalized. Seven vertically integrated electricity companies were formed and geographically organized. The seven companies were placed under a Joint Stock Holding Company. Egypt’s Electric Utility and Consumer Protection Regulatory Agency was created by Presidential Decree. The sector was unbundled to form 14 companies 100% owned by EEHC; and the National Control Center (NCC) was created. Creation of the cost-based power pool with bilateral agreements among power companies (Gencos with the Transco and the Transco with the Discos) under the holding structure. Two IPPs operational (Sidi Krir and Port Said). Third IPP operational (Suez). Introduction of Performance Based Budgeting for all subsidiaries with performance targets. Implementation of the first electricity price increase in 12 years (8%, followed by 5% annual increases for following five years). Delta Production Company breaks into two (East and West Delta) due to size. Further price increases for large industrial users implemented. (a) Formulation of a new Electricity Sector Law endorsed by the Cabinet and to be submitted to Parliament. (b) In June, the GOE increased electricity and gas prices to energy intensive industrial consumers. (c) The GOE issues an RfP for engineering and design for its first nuclear power plant. (d) The GOE announces a target of 20% of installed capacity for renewables.
to date on performance benchmarking and the drafting o f the new Electricity Law (see Box 2 for the main features o f the proposed law); (iii) the introduction o f BOT projects; and (iv) price increases.
11. After the currency devaluation in 2003, the GOE put a hold on additional B O T transactions. In essence, years o f l ow consumer tariffs had not prepared the electricity sector to absorb sudden increases in tariffs to IPPs consequent on the currency devaluation. The Government i s now considering PPP in the sector that does not rely on the single-buyer model. Combined with the tari f f increases, moving away from the single buyer model i s expected to introduce a more sustainable form o f risk-sharing with the private sector. The Government has taken initial steps towards this with the stipulation in the draft law that no new licenses wil l be issued to supply electricity from the national grid to new energy-intensive industries. These consumers will now build their own power generating facilities. In cases where the national grid will be used to transport the energy, a license for using the network and a charge to the transmission company will applye4 Technical
The wheeling charge w i l l be as follows: US$0.35/kWh for 500/220 KV voltage level; US$O.SS/kWh for 66KV voltage level and US$l.O3/kWh for Medium KV voltage (22, 1 1 or 6.6 KV.)
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assistance on exploring new PPP approaches as well as on the overall allocation o f risks between the public and private sector i s included in the programmatic technical assistance provided to the Government by the World Bank (see more under paragraph 29).
12. In addition to the re-entry o f the private sector in financing new power plants, privatization o f existing assets i s also part o f the future sector plans. In conjunction with the unbundling o f the sector and the creation o f the EEHC in 2002, it was envisaged that up to 40% o f generation and distribution assets would be up for privatization. According to the legislation governing the sector, the commercial companies’ law #159, 100% o f the assets could be privatized. This strategy i s currently under review as part o f the Technical Assistance on exploring new PPP approaches.
13. In terms o f timeline for private sector re-engagement, new entrants in the generation segment can be licensed at any time, and the regulator has experience o f issuing licenses to private generating companies. The new law will greatly enhance the number o f new generation companies through the stipulation that no new licenses will be issued to supply electricity from the national grid to new energy-intensive industries. These consumers will now build their own power generating facilities or purchase on bilateral basis from existing generating companies. In terms o f privatization o f existing assets, the forthcoming review o f new PPP approaches will inform the Government o f options and a proposed implementation time-table. The pace o f re- engagement o f the private sector i s closely linked to continued tari f f and subsidy reform to enable the development o f a bilateral trading market with private financing.
14. Overall, the impact o f the reforms i s positive but significant further work s t i l l remains. O n the one hand, access to electricity i s very high throughout Egypt (at 99%), the technical performance o f the sector i s also good and at par with international standards, the reliability o f service and timely implementation o f infrastructure additions and reinforcement i s very solid and sector management i s efficient. O n the other hand, the long period o f constant electricity tariffs, concurrent with significant investment needs, has le f t the sector with serious financial problems. This will take time to correct, and will require both continued tariff adjustment as well as rationalization o f investment to curb and/or shift electricity demand. The World Bank i s assisting the GOE with these and other important sector measures (see Paragraph 29).
15. More broadly and over the past few years, the energy sector has gained increasing attention in the overall development agenda o f the Government. This i s driven by several factors: (i) the high international o i l prices, which have increased the fiscal impact o f energy subsidies; (ii) concerns about future energy security, notably natural gas; and (iii) the need for continued improvement o f sector long-term financial sustainability.
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16. E n e r n subsidies: Energy subsidies play an important role in Egypt’s political economy. Overall direct energy subsidies reached about LE 43 bi l l ion in 2006/07 (about US$8 bi l l ion eq~iva lent ) .~ The estimated amount for 2007/08 i s over LE 70 bi l l ion (US$12.7 billion), representing close to 6.7% o f GDP. The largest shares o f the subsidies are for gasoline (39%), LPG (21%), natural gas (14%) and diesel (14%). The electricity sector accounts for about 16% o f the subsidies (LE 7 billion) with the largest share going to the transport sector at 43% (LE 18 billion). It i s important to note that the subsidies to the electricity sector are primarily o f an implici t nature, in that they are closely linked to the issue o f gas pricing, which in turn i s dependent on the level o f gas reserves and export potential. Therefore, while the subsidy i s large, the direct fiscal impact due to electricity pricing i s not that large.
17. The Government has adopted a plan for gradual elimination o f the energy subsidies, in - Box 2 - T h e draft Electricity L a w
A new Electricity Law has recently been endorsed by the Cabinet and i s scheduled to be presented to Parliament for ratification during the 2008/09 Parliamentary session. The new Law i s expected to pave the way for significant changes in how the sector i s financed and electricity supplied to consumers, including a much greater emphasis on development of renewable resources. Key elements of the Law include:
A mandate to the Regulatory Agency to promote private investment in generation and distribution activities within the context of a competitive market and with due regard to consumer interests. Establishment of the Regulatory Agency as the entity for tariff approvals.
Creation of a two-tiered electricity market, with a competitive market for eligible customers (extra high voltage and high voltage customers free to choose among electricity suppliers on a bilateral contract basis) and a regulated market for ineligible customers (low voltage customers who are not free to choose among suppliers). Separation o f the Egyptian Electricity Transmission Company (EETC) into a Transmission System Operator which grants third party access to the network. Establishment of a feed-in tariff for renewable energy to encourage private sector participation.
-.
parallel to the design and implementation o f mechanisms to protect vulnerable consumers, in order to mitigate the considerable social and political risks (see Box 3 for the main features o f the pricing reform). The price adjustments started in 2004, when the electricity tariffs were adjusted for the first time since 1992 (from an average o f US$2.2/kWh to US$2.4/kWh, today they average US$3/kWh). The increase was 8% in October 2004 and has been followed by Cabinet endorsed annual increases o f 5% since,6 with greater increases to the industrial users introduced in 2007 and again in 2008. In June, 2008 the Government announced that, with immediate effect, the natural gas price to energy-intensive industry would be US$3/mmbtu and the electricity price to industrial users was further increased to
“Energy and Development”; prepared by the Government o f Egypt, 2007. Egypt imports a substantial amount o f energy (in particular f u e l o i l and liquefied petroleum gas - LPG) and i s increasingly purchasing fue l from foreign gartners active in oi l and gas production in Egypt.
year was obtained bringing the total annual increase since 2006 to 7.5%. After approval o f the annual 5% increase, further Cabinet approval o f and additional tariff increase o f 2.5% per
5
US$6.3/kWhY US$4.6/kWh and US$$3,8/kWh for medium, high voltage and ultra high voltage, respectively. These new prices are more closely aligned with the economic cost o f serving these consumers, and are forecast to have a significant conservation impact on consumption’.
18. In terms o f petroleum products, there have been consistent increases in prices, with the exception o f Octane 80, mazout and LPG (the current prices are US$O. 16/liter, US$185/ton and just below US$0.50/12.5 kg cylinder, respectively). The prices o f these fuels have not changed for a long time as these are fuels commonly consumed by low-income consumers. However, these products are included in the comprehensive Energy Pricing Strategy currently under formulation. The pricing options being developed will be under-pinned by’ targeted social protection measures to mitigate adverse impacts o n consumers. The price levels for remaining products’ are as follows: Heavy fuel o i l (HFO) US$170/ton, Octane 90 US$0.32/literY Octane
Box 3 -The Government’s plans for energy pricing reforms
At the National Democratic Party Conference in 2007, President Mubarak announced that the Government would implement a comprehensive reform of energy prices. The strategy for price reforms has the following key features:
Increases in the natural gas price, initially targeting energy- intensive industries, to encourage more investment in exploration and production. Enhance the transparency of the level o f subsidies in order to facilitate decision-making with regard to utilization o f energy products, fiscal resources and support a new system of targeted subsidies to safeguard vulnerable and low-income groups. Gradually implement price adjustments, initially to cover production and supply cost and eventually to cover the opportunity cost. Adjustments to cover all energy products. Implementation of the price adjustments should also be accompanied by the implementation of a re-designed targeted subsidy system for poor, possibly based on the conditional ash- transfer mechanism.
The detailed level o f prices and the proposed phased implementation, along with the fiscal, macro-economic and social impacts are being analyzed under the comprehensive energy pricing strategy that the Government i s undertaking with the help o f international consultants, funded by the World Bank.
92 US$0.34/liter and Octane 95 US$O.SO/liter. O f the 8.5 mi l l ion tons o f HFO consumed per year, the electricity sector consumes 35%.
19. Fuel security: Egypt’s crude o i l and natural gas reserves meet about 95% o f i t s overall energy needs.* In addition, Egypt i s endowed with very significant potential for renewable energy both in terms o f wind and solar, and it has successfully developed large scale hydro resources to account for close to 12% o f installed generation capacity. Electricity demand i s growing at 7-8% per year, which implies an increase o f new capacity in the order o f 1,500 MW per year (current installed capacity i s close to 22,000 MW) to keep up with demand. The Government’s power generation expansion plan i s
primarily based on natural-gas fired combined and steam-cycle technology. About 60% o f the domestic natural gas production i s utilized by the power sector.
20. The availability o f sufficient natural gas i s becoming an issue as the demand for natural gas i s increasing in sectors o f the economy beyond the power sector, and Egypt has also increased i t s exports o f natural gas (through pipelines and LNG terminals) in recent years.g
The draft final report on “Development o f a Load Management Program and Design o f Time o f Use/Seasonal 7
Pricing” prepared by Economic Consultants Associates (ECA) forecasts a reduction in industrial demand during the reak period o f close to 300 MW due to the increase in the electricity prices to these users.
“Energy and Development”; prepared by the Government o f Egypt, 2007. Egypt i s connected via the Arab Gas Pipeline with Jordan, Syria and Lebanon and by pipeline to Israel. 9
6
This i s driven by the Government's aim to reduce the use o f fue l oil, gasoline and LPG in the domestic market, to position i tse l f as an exporter o f LNG, and to foster regional integration through the interconnection o f natural gas pipelines. Furthermore, the foreign partners engaged under production-sharing agreements (PSAs) in Egypt are increasingly demanding to be able to export their share o f the natural gas produced rather than selling it into the domestic market due to the higher prices and (to some extent) better credit-worthiness that exports bring.
21. To address the multiple demands on Egypt's natural gas, the Ministry o f Electricity and Energy (MoEE), with endorsement from the Cabinet, adopted a strategy comprising the followin : (i) increased use o f efficient power production technologies (CCGT and supercritical boiler); (ii) large scale development o f Egypt's renewable resources with the goal o f having 20% o f i t s installed generation capacity in the form o f renewables by 2020;" and (iii) stepping up efforts for more efficient consumption o f electricity. l2
*$
Table I: Egypt 's Electricity Generation Expansion Plan
I Capacity Current I Current % I 2008-2017 I % 2008-2017 I 2018-2027 I % 201E2027 I Total In MW I Total % I
22. As shown in the table above, the Government o f Egypt plans to transform Egypt's electricity generation capacity mix through large-scale development o f wind resources (estimated to reach 10% by 2027), as well as development o f nuclear energy (estimated at 6.5% by 2027). Further development o f i t s solar resource i s also envisaged and wi l l be pursued based on experiences learnt from the first solar-thermal project under implementation, and supported by the GEF. Based on a series o f discussions between the Government o f Egypt and the World Bank, Egypt has agreed to champion the development o f renewable energy in the region. Already, Egypt has taken significant leadership in this regard through the creation o f a regional Renewable Energy and Energy Efficiency Center, supported by KfW and Danida. Furthermore, Egypt has installed 225 M W o f wind-energy capacity under power purchase agreements with the Egyptian Electricity Transmission Company (EETC). This capacity i s performing very well with capacity factors in the range o f 4550%.
lo During 2002-2007, a fast-track program comprising 4,500 MW of CCGT was commissioned in Egypt. The medium-term program (2207-2012) comprises 6,925 M W of steam and combined cycle turbines. The share o f CCGT in the Egyptian generation system i s now about 30% up from 14% in 2000. By the end of 2012, the share i s expected to be 35%.
12% o f this i s hydro-power but the remainder would need to come from wind and solar resources which currently comprise just over 1 YO o f installed capacity.
This wil l be achieved through the following key measures: expansion o f the utilization o f efficient light bulbs, load-shifting at peak periods, adoption o f standard specifications for energy-intensive equipment and appliances and legislation for energy efficient building codes.
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23. To develop Egypt’s large-scale wind resources, the Government requested Bank assistance to prepare a framework that relies increasingly on commercial principles and private financing/operation. The first phase o f the work i s close to completion (preparation o f a wind development plan and bidding parameters) and the second phase (bidder workshop and finalization o f bidding documents as well as pre-development) has started. Both phases are supported by the Bank. A proposal i s at advanced stages o f how this large-scale program can be supported by the Clean Technology Fund (CTF). The Government and the Bank project team plans to submit this to the CTF Trust Fund Committee as soon as it calls for proposals.
24. Electricity sector -finances: In electricity, under-pricing s t i l l i s a major contributor to the high growth in consumption, with consequently heavy capital expenditure demands, and a constrained financial position o f the sector. With the tari f f increases that have been implemented over the past few years in the electricity sector, the Egyptian Electricity Holding Company (EEHC) - responsible for generation, transmission and distribution o f electricity through 15 subsidiary companies - covers operating costs (with subsidies on the fuel). The tari f f increase has also helped reduce the cross-subsidies in the sector with the ultra-high voltage and high voltage consumers being charged at cost-reflective prices now (the tari f f schedule for the sector i s attached to Annex 1). However, cash f low o f the sector remains a significant problem as a result o f a deterioration o f cash reserves from the lack o f tariff adjustments between 1992 and 2004; as well as the large annual investment program, substantial associated debt service and delays in payment for electricity consumption, primarily by the public sector.
25. Managing the cash f low is therefore the key challenge in the sector. To reduce the cash constraints, measures are being taken at several levels: (i) continuously increasing retail tariffs commensurate with what the market seems able to bear; (ii) further adjusting the tari f f structure to introduce time o f useheasonal pricing in order to shift demand from peak to non peak periods and therefore reduce the need for investment in new generation capacity to meet (peak) demand; and (iii) ensuring that prices remain cost reflective among large users to enable the envisaged liberalization o f the market to take place.
26. The latter would enable new entrants (e.g., IPPs) to enter into viable contracts directly with large consumers and not through the single buyer model that was the arrangement with the previous BOTS in the electricity market. This i s in l ine with the Government’s aim to support the development o f a competitive market and also reduce the risk o f the public sector as a party to private sector contracts.
B. Rationale for Bank involvement
27. The World Bank has become an increasingly important development partner in the electricity sector in Egypt following the El-Tebbin Power Project that was approved by the World Bank Board in February 2006.13 This project constituted a re-engagement by the Bank in the Egyptian electricity sector following a long period o f no dialogue due largely to the Government’s view that the Bank was too dogmatic on issues related to energy pol icy reform and pricing. Since then, the Bank has assisted the Government in the preparation o f i t s f i rst
l3 The project i s a 700 MW power generation project, with US$259 million o f Bank financing.
8
solar-thermal power project (150 MW o f which 20 M W solar) which includes a grant from the GEF in the amount o f US$49.8 million, and represents Egypt’s first concentrated solar power plant. A World Bank loan was also approved in January, 2008 to assist in the expansion o f natural gas infrastructure to sup ort the Government’s fue l switching strategy away from petroleum products for natural gas . P4
28. In parallel to providing financing, the Bank has been active in providing quick-response technical assistance in the sector, including a series o f workshops on demand-side management, generation planning and mix15 and analytical work on the economic value o f natural gas. Between 2001-2004, the Bank also provided support through the GEF to identify institutional and technical barrier removal possibilities to larger scale deployment o f wind energy in Egypt.
29. The Bank’s engagement at the policy level has become substantial partly as a result o f i t s investment support. In addition to an active policy dialogue across the Ministries o f Finance, Energy and Electricity, Petroleum, Investment, Industry and Trade as well as Social Solidarity on energy matters, the Bank i s assisting the Government with three very important policy activities: (i) Energy Pricing Strategy which will recommend a pricing path for each energy product consumed in the domestic market, along with social safety net for vulnerable consumers and fiscal accounting framework for social support/subsidies; (ii) Commercial Framework for Large-Scale Wind Development to assist the Government in achieving i t s ambitious plans for installed renewable energy capacity by 2020 based on competitive bidding and private financing with government support on a performance-based approach; and (iii) Development o f a Framework and Risk Allocation Mechanism for re-engaging with the Private Sector in l ine with the envisaged market and private financing o f the sector laid out in the new Electricity Law which i s at advanced stages o f consideration in the Cabinet. All three activities are closely related in that the largest barrier to both large scale development o f renewables as well as private sector participation has been under-pricing and subsidies in the energy sector.
30. The proposed project i s the next step in deepening the strong partnership between the GOE and the World Bank that has developed in the sector. It i s an efficient component o f the Government’s least cost expansion plan to meet energy demand and ensure energy security in Egypt, and i s being prepared on the basis o f advancing fundamental reforms related to sector efficiency, clean energy and improved sector financial performance - all prerequisites for continued high economic growth in Egypt as well as progress on i t s social inclusion agenda.
C. Higher level objectives to which the project contributes
31. Access to reliable and affordable electricity services i s critical to achieve the sustainable growth and economic and social development goals articulated by the GOE in their five-year National Development Plan (2007/08-2011/12). Given the strong growth in demand, investment in new generation capacity o f around 1,500 MW per year i s estimated to continue to
l4 “The Natural Gas Connections Project” comprises a World Bank loan in the amount o f US$75 million and will expand the low pressure network supporting the replacement o f LPG among residential and commercial consumers and petrol for CNG in the transport sector. l5 Workshop on operational flexibility and O&M o f large scale CCGT, together with AfDB and EIB.
9
meet these objectives, and the Ain Sokhna Power Project will make a substantial contribution towards this capacity requirement. In particular, the proposed project which will be the first power plant based on the supercritical technology in Egypt which will contribute to cleaner technology deployment which i s part o f the GOE’s energy strategy and the overall strategy to reduce emissions (see more under Section IV-B).
32. As described in the forthcoming Country Assistance Strategy Progress Report (CASPR), the assistance provided by the World Bank in the energy sector to date has made substantial progress towards the goals that were articulated in the CAS discussed by the Board on June 15, 2005.16 The most notable goal for the energy sector being to enhance the provision ofpublic goods through, inter alia, modernized infiastructure services to achieve higher growth. The CAS outcome indicators are rated as “likely to be reached”. The CASPR furthermore describes the assistance to the energy sector as one o f four models that support reforms by underpinning sectoral reform through “brick-and-mortar” operations. As such, the proposed project i s expected to contribute to continued trust-based sector dialogue and i s included under the CASPR for support going forward. Planned lending activities for the FY09 to FY11 period covered in the CASPR have a total indicative amount o f $3.2 billion.
11. PROJECT DESCRIPTION
A. Lending instrument
33. The proposed operation i s a Sector Investment Loan. Within that context, the Borrower has requested it to be a Fixed Spread Loan (FSL) with a 2 1 -year maturity, including a six year grace period. The Loan will be denominated in US Dollars.
34. As the sector continues to improve financially and risk-sharing models become more appropriate, it is envisaged that the Partial Risk Guarantees (PRGs) will be deployed to enhance the credit-worthiness o f the sector and to assure investors against potential regulatory risks. Similarly, this will provide opportunities for IFC and MIGA support to the sector.
B. Project development objective and key indicators
35. The project development objectives are to (i) ensure continuous electricity supply to meet demand in a sustainable manner through investment in new generation capacity; and (ii) improve the sector’s financial sustainability by providing technical assistance to EEHC to support sector revenue improvements. Key performance indicators are listed in Annex 3.
l6 Report Nr. 32190-EG.
10
C. Project components
The Ain Sokhna Power Plant
36. The proposed project i s a 1,300 M W supercritical steam turbine power plant using natural gas as the main fue l (and mazout as the back-up fuel). The plant will be owned, operated and managed by the East Delta Electricity Production Company (EDEPC), one o f EEHC’s subsidiaries responsible for electricity production in the geographical territory o f the proposed power plant site.
37. EDEPC has retained a firm (PEGESCo) that will provide assistance in engineering, preparation o f the detailed designs, procurement as well as construction management and supervision. This firm has worked on several power projects in Egypt in the past and i s partly owned by Bechtel. This contract will be financed with EDEPC’s own resources. The proposed site o f the new plant i s an empty land area right next to an existing power plant that was commissioned about 5 years ago. The land in question i s public (belongs to EEHC) and lays in an unproductive sandy area without any structures.
38. The proposed project includes the following: (i) two 650 M W steam turbine generators; (ii) two steam generators (once-through supercritical boilers); (iii) electrical equipment including transformers and switchyard; (iv) auxiliary mechanical equipment including pumps and drives, heat exchangers and de-aerators, critical piping and piping valves; (v) water and wastewater treatment systems and desalination plant; (vi) the implementation o f the Environmental and Social Management Plan (ESMP), including environmental monitoring equipment; (vii) distributed control systems and instrumentation; (viii) engineering and project management services including design, procurement and construction supervision as well as commissioning, testing and start-up; (ix) civil works, yard tanks as well as medium and low voltage switchgear; (x) substations and transmission l ines to interconnect to the national power grid; and (xi) insurance.
TechnicalAssistance
39. The technical assistance component i s aimed at further enhancing the on-going energy sector policy dialogue with GOE. The assistance will mainly comprise o f studies and policy support including rapid response support to EEHC in the implementation o f the time-of-use tari f f and further tari f f adjustment recommendations from the on-going Energy Pricing Strategy work. Based on the successful TA implemented in the electricity, renewable energy and natural gas sectors since 2004, an annual programmatic Bank budget o f US$250,000 a year for the next three years has been allocated to enable continued rapid-response assistance and support based on the trust and cooperation established in the sector. In addition, substantial trust fund resources from the Energy Sector Management Assistance Program (ESMAP) and the Public- Private Infrastructure Advisory Facility (PPIAF) have been mobilized.
40. More specifically, the TA under the proposed project will focus on implementation advice to incorporate the time-of-use tariff options into the overall and ongoing electricity adjustment effort.
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41. In addition and in parallel to the implementation o f the project, the following key activities funded under trust funds and the programmatic bank budget mentioned above will be carried out: (i) finalization o f the comprehensive Energy Pricing Strategy (US$SOO,OOO); (ii) implementation o f the Pricing Strategy, including training (US$ 1 00,000); (iii) development o f a commercial framework for wind energy and assistance to the tendering process (estimated at US$500,000); (iv) development o f a national energy conservation plan and implementation o f energy-efficient lighting through the distribution companies (US$200,000); and (v) formulation o f a plan for re-engagement with the private sector (US$75,000).
D. Lessons learned and reflected in the project design
42. The experience in the preparation and implementation o f the Tebbin Power Project recognized the need for reforms in the power sector in Egypt, assuming that the reforms and the pace at which they are implemented are Government owned. The policy and sector reform dialogue developed in parallel to the preparation o f the Tebbin Power Project and the proposed investment operation demonstrated that it i s effective to underpin sectoral reform through investment lending for large-scale operations.
43. The preparation o f the Tebbin Power Project has helped restore confidence between GOE and the Bank, which in turn has greatly facilitated the policy dialogue. This approach has generated Government requests for Bank involvement on key policy issues, including energy pricing and subsidy reform, public-private sector risk allocation schemes, large-scale deployment o f wind resources under a commercial framework and demand-side management measures.
E. Alternatives considered and reasons for rejection
44. Several options have been considered as alternatives to the proposed project to meet the need for the additional electricity generation capacity. These include having the private sector undertake the investment; renewables; and regional integration and importing electricity.
45. Private financing o f the proposed plant: In the late 1990s, the GOE implemented three BOT projects (650 M W each); two o f which were supported by IFC. These B O T projects are considered highly successful and, when procured, achieved among the lowest PPA pricelkwh in the world (in large extent due to subsidized natural gas). However, the B O T program was put on hold when the Egyptian pound was devalued in 2003 and the price/kWh increased by 34%, in spite o f government holding constant the price o f fuel (most o f the costs under the PPA are US$-denominated).
46. The l o w final tar i f fs in the sector, combined with political constraints on increasing them and budget constraints on providing major injections o f liquidity into the sector, made the Government unwilling to assume the high level o f foreign currency risk implici t in the PPAs, particularly under the prevailing single-buyer model. This caused a loss o f confidence in private participation, and a reversion to a combination o f local financing and to foreign borrowing through Government channels.
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47. The GOE i s now keen to re-engage with the private sector under new models o f risk- sharing. Indeed, capacity expansion needs are so large that they can be financed only through a mix o f public and private sources. To do so, the new Electricity Law (expected to be passed in 2008/09) allows for private entry into most activities o f the sector (generation, sales, and distribution). On the generation side, the new law requires developers to secure consumers through bilateral contracts, based on commercial arrangements. The Bank i s providing assistance to the Regulatory Agency to review and recommend optimal risk allocation and risk sharing between the private and public sector in support o f the new Law.
48. The potential for re-engagement o f the private sector in the power sector has improved in Egypt in l ine with the continuous increases in the electricity tariff. However, a large increase in private interest in power generation in Egypt wi l l take place only when tariffhubsidy reform i s even further advanced and regulatory frameworks and institutional capacities are strengthened. This i s expected to take some time; and the Bank i s assisting the Government in this regard through the work under the Energy Pricing Strategy (see Paragraph 25 above) and technical assistance to the electricity regulator.
49. Renewables play a key role in the Egyptian electricity expansion plan. Around 1% o f installed capacity (225 MW) o f wind i s operating at a high capacity factor and Egypt has gained useful operational experience in managing wind power plants. In April 2007, the GOE announced that it would seek to have 20% o f installed capacity in the form o f renewables by 2020, most o f which would come from wind energy (an addition o f 7,200 MW). To date, most of the wind energy projects have been developed with substantial soft financing and grant support from Denmark, Germany, Spain and Japan.
50. Recently, the GOE requested Bank assistance to develop a commercial framework under which the planned large-scale wind program would be implemented under a public-private partnership and on a competitive tendering basis. The development plan and key bidding parameters have been finalized and work i s now underway on preparing the bidding documents, including holding a bidder’s conference to raise awareness o f the program, investment opportunity and gauge market interest. Consultations have also been held with the GOE on the possible inclusion o f this large-scale program under the forthcoming Clean Technology Fund (CTF) which i s in the process o f being established.
5 1. As illustrated in the expansion plan table on page 5, in addition to the significant planned additions o f wind capacity, conventional power capacity i s forecast to triple and Egypt i s planning to launch the implementation o f nuclear power plants. The issue i s not whether to install renewable or conventional power plants; both are necessary to meet demand and ensure energy security. The cost o f wind power plants remains higher than o f conventional (around US$2,200/KW for recent bids compared with US$1,520KW estimated for the proposed project). The GOE i s therefore looking to funding such as the CTF to off-set the higher cost in order to implement large-scale wind projects.
52. In addition to wind, the GOE i s implementing i t s f i rst solar thermal power plant. Provided the operational track-record i s satisfactory and costs fal l further, the GOE i s interested in additional large-scale solar projects (the current plant i s costing about US$2,500/KW). This may provide a basis for regional expansion o f solar energy, since the Southern Mediterranean
13
countries have excellent insolation and proximity to the EU market in which renewable energy demand i s increasing rapidly.
53. Other conventional technologies: As illustrated in Table 1, the least-cost expansion plan for electricity generation projects in Egypt comprises a diverse set o f technologies including renewable, nuclear, combined cycle and thermal. The proposed project’s technology has been identified as the preferred candidate in the least-cost expansion plan based on i t s load-following capabilities and fuel-flexibility. Furthermore, the proposed technology also has substantial environmental benefits compared to the thermal generation technologies used to date including higher energy to power ratio and increased fue l efficiency (by 10%) and overall reduction in C 0 2 and other emissions.
54. Egypt i s interconnected to Libya and Jordan, and i s exporting electricity to both countries as well as a small amount to Gaza. The interconnections with Libya and Jordan have been established at voltage levels o f 220KV and 400KV, respectively and are part o f the Arab Mashreq network which includes Egypt, Jordan, Syria, Libya, Lebanon, Iraq and Turkey. Around 120 GWh are exported to Libya and 700-800 GWh to Jordan (although the exports to Jordan dropped in recent years due to high demand in the Egyptian market). Egypt, in turn, imported 91 GWh from Libya in 2005/06 and 77 GWh from Jordan the same year. An interconnection with Saudi Arabia i s also under consideration. Recently, Egypt also announced that it would export 200-400 MW to Lebanon (during off-peak hours).
Regional integration and electricity imports:
55. Libya and Jordan are currently paying around 7-8 US$/kWh for the Egyptian power supply. As they are net importers, there i s currently not much scope for large-scale electricity imports by Egypt through the interconnected networks; especially also considering the fast pace at which the domestic demand i s growing in all three countries. In addition, the cost o f electricity generation in both countries i s much higher than in Egypt. There i s currently no south border connection to Sudan, although there i s an ongoing discussion in the context o f the N i l e Basin Initiative whereby Egypt could potentially import hydroelectric power starting in 2014-2015, provided a reasonable price and water right issues related to the N i l e are agreed to.
111. IMPLEMENTATION
A. Partnership arrangements (if applicable)
56. Several donors are active in supporting policy reforms and financing projects in the power sector in Egypt, and the GOE i s actively seeking financing to complete i t s sector expansion plans. The most prominent donors besides the World Bank are the African Development Bank (AfDB), the European Investment Bank (EIB), the Arab Fund for Economic Development, the Kuwaiti Fund for Economic Development and Islamic Development Bank. OPEC also provides financing, and the European Commission and KfW provide technical assistance. KfW has also funded wind development in the Zafarana area in Egypt.
57. The Bank’s team is in constant contact with donors active in the sector to ensure that there i s a common understanding and agreement as to the measures that are needed to improve the sustainability o f the sector. There have been joint workshops, such as the one on
14
operational flexibility and operation and maintenance (O&M) o f large scale CCGT, in April 2007, supported by the World Bank along with AfDB and EIB. More recently - and following consultations held in Egypt on the CTF in April 2008 - the World Bank and AfDB have partnered to design support from the CTF towards large-scale development o f Egypt’s wind resources. This support i s likely to come through three types o f interventions: (i) capitalization o f the recently created Renewable Energy Fund to offset higher cost o f wind energy technology; (ii) contribution to the financing o f specific wind projects: and (iii) support to develop the transmission infrastructure required to evacuate the wind energy to load centers.
58. The proposed project is envisaged to be financed by the World Bank, AfDB, Arab Funds as well as local banks. There i s a strong recognition among the donors that the engagement on sector policy that the Bank sought through the El-Tebbin Power Project has indeed been solidified, and as such the World Bank i s regarded as a key development partner in the sector.
B. Institutional and implementation arrangements
59. The proposed project will be implemented between 2009 and 2013 and the implementation arrangements will be very similar to those under the El-Tebbin Project (which has a solid track record and performance). The project will be implemented by the East Delta Electricity Production Company (EDEPC), an affiliate o f EEHC. EEHC will be responsible for the implementation o f the time-of use pricing mechanism. The monitoring o f improved sector financial performance will also be at the level of EEHC, given i t s role in overall financial management o f the sector.
60. The implementation arrangements reflect the structure o f the sector in Egypt, where EEHC, as the holding company, plays a large role in planning and designing projects, but the operational affiliates (generation, transmission and distribution companies) have the main responsibility when it comes to implementation and supervision o f proj ects.
61. The Cairo Electricity Production Company (CEPC), EDEPC and CEPC are electricity production companies closely supervised by EEHC and have the same procedures and guidelines established by the holding company (EEHC). Both companies have implemented several power generating projects and have similar managerial capacity. As with other power plant projects in Egypt (including the Bank-financed El Tebbin project), the affiliate companies are responsible for implementation and are assisted in this effort by a strong consulting firm acting as a Management Contractor. The role o f the Management Contractor i s to (i) design the installations; (ii) define the number o f packages for procurement under supply and install (single responsibility) contracts for the different parts o f the plant; (iii) carry out all procurement actions (with the implementing affiliate - EDEPC in this case - signing the contracts); (iv) integrate and coordinate the different contractors working in the project site; and (v) overall project management on behalf o f the implementing affiliate.
62. For the proposed project the Management Contractor, Power Generation Engineering and Services Company (PGESCO)’~, has been hired by EDEPC financed by its resources. PGESCO
” PGESCO was established and registered in Egypt in 1993 and i s 40% owned by Bechtel International, 40% by Ministry o f Electricity & Energy and 20% by a local Egyptian bank. PGESCO services since then covered Sidi Krir
15
i s a much respected consulting firm owned by Bechtel and the Government o f Egypt and has already performed this role in several power plants in Egypt similar to Ain Sokhna. The Bank has had experience o f working with PGESCo in the El Tebbin Power Project where PGESCo has had the same role. Their performance has been o f excellent standard.
63. There will be a Loan Agreement between the Government o f Egypt (Ministry of International Cooperation) and the Bank and a Project Agreement between EEHC and the Bank. By virtue o f a Subsidiary Loan Agreement between the GOE and EEHC, the GOE will on-lend the Bank loan proceeds to EEHC (which manages cash-flow o f the sector, as the affiliates charge uniform prices which don’t always recover their specific costs).
64. To establish and clarify the role o f EDEPC in project implementation, a Contractual Agreement will be in place between EEHC and EDEPC. This Agreement, whose terms and conditions will need to be satisfactory to the Bank, will detail al l o f the implementation activities under the project (including procurement, compliance with ESIA, financial management, audits, payment processes, etc).
65. EDEPC will establish a Project Management Unit (PMU) at the project site. The P M U will be assisted in engineering, procurement, construction and project management by the engineering consultant funded by EDEPC (PGESCo). The P M U will have a project manager, 2-3 engineers, a procurement coordinator and an environmental specialist. The P M U will issue monthly progress reports to the Bank, and quarterly reports on the implementation o f the ESIA.
66. In addition, within the PMU, a Financial Management Unit (FMU) will be established located at EDEPC’s main office to better integrate with the financial departments in EDEPC, such as investment audit, treasury, etc. The FMU will have overall responsibility for the project’s financial recording, budgeting, reporting requirements, and handling the loan disbursement arrangements, including supporting documentation. The FMU will comprise an FMU Manager, three Accountants and a Project Accountant, who will be located at the project site and will ensure smooth coordination between the remainder o f the P M U and the FMU. Annex 6 provides more details on the overall implementation arrangements, while Annex 7 details the FMU responsibilities. In the meantime, the technical and finance departments o f EDEPC have already contacted the P M U and FMU for the El-Tebbin Project to improve their understanding o f the World Bank project implementation and financial management requirements.
67. Annex 6 and 8 outline in detail the implementation and procurement, including assessment o f capabilities, aspects o f the proposed project.
Units I & I1 (650 MW), Sidi Krir Units 3 & 4 (BOOT 660 MW), Ayoun Moussa Units I & I1 (650 MW), Cairo North Combined Cycle I (750 MW) and I1 (750 MW), Nubaria Combined Cycle (1 500 MW) and New Talkha Combined Cycle (750 MW), Kureimat Combined Cycle (750 MW), El Tebbin (2x 350MW), Nubaria I11 (750 MW), Kureimat 111 (750 MW), Cairo West (2 X 350 MW), Sidi Krir (750 MW), El Atf (750 MW) and Abu Qir (2 X 650 MW).
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C. Monitoring and evaluation of outcomes/results
68. EECH and EDEPC will monitor the progress against the agreed performance indicators listed in Annex 3. Data and statistics on actual project output and outcomes will be gathered, analyzed, and included in progress reports to be submitted to the World Bank.
69. A professional engineering firm will supervise the project’s physical implementation; however, EDEPC, through the PMU, will monitor overall project progress, including contractors’ performance in accordance with the signed contracts. EEHC’s environmental department will monitor and ensure adherence to the Environmental Management Plan (EMP), in close coordination with the PMU.
70. Based on the review o f progress reports by EEHC, EDEPC and World Bank, measures will be taken to ensure the project i s completed without delay and achieves i t s planned outcomes.
D. Sustainability
71. Client commitment to the project and i t s objectives i s strong, as evidenced by the speed in which project preparation documents were prepared, including the feasibility study and the forthcoming Environmental and Social Impact Assessment (ESIA).
72. The World Bank i s engaged with the Government to enhance the overall sector policy framework and advance reforms aimed at improving sector sustainability. The annual tariff increases implemented since October 2004 represent the Government’s strong commitment to a financially sustainable sector in the long-term. Further measures to improve the sector’s financial performance are discussed in detail under Section D Appraisal Summary.
E. Critical r i s k s and possible controversial aspects
73. Several o f the identified risks for the El-Tebbin Project do not apply to the proposed project since El-Tebbin comprised a re-engagement and the implementation track record o f the sector and EEHC were not known to the Bank. Today, El-Tebbin i s one o f the best performing projects in the Egypt portfolio, and the implementation track-record o f EEHC has been proven. Indeed, a year after the loan was approved by the World Bank Board o f Executive Directors, al l Bank-financed contracts had been signed, All fiduciary aspects have been implemented smoothly and compliance with safeguards was rated Highly Satisfactory in the last ISR. The Independent Procurement Review (IPR) completed in the summer o f 2008, found full compliance with the World Bank procurement guidelines and procedures.
74. Furthermore, the Government’s appetite for reform has substantially increased. This i s evidenced by the numerous price changes that have taken place, the articulation o f i t s renewable energy ambition and i t s willingness to engage with the Bank and others on policy dialogue and reforms on issues such as subsidies, social safety nets and Government incentives to enable the implementation o f low-carbon energy solutions. Nevertheless, some risks to the project and to the sector remain and are summarized below. Furthermore, given the current
17
volatile global financial condition, there are macro-economic risks that may impact the project through reduced demand and/or slowed down reforms.
Risk 1 Risk Rating I Risk Mitigation Measure Achievement of Pro'ect Develo ment Ob'ective Reduced domestic demand as a result o f slowdown in domestic economic growth , following the global downward trend.
Limited ability to continue electricity price increases in light o f price increases in other commodities, notably food and overall impact from slowdown in domestic economic growth.
H
The Government i s seeking to attract foreign investors from the Gulf countries to compensate for the decline in investment from US and Europe. The government also plans to increase infrastructure spending, as well as promoting PPP. This i s a key risk, and already discussions are underway on a potential slow-down in the price increases to energy-intensive industrial customers. In terms o f the price increases to residential consumers, the main mitigation measure i s through ensuring that any price increases that adversely impact vulnerable consumers are mitigated through targeted social safety nets. The World Bank i s assisting the Government in this regard, both through the Energy Pricing Strategy work underway but also more broadly through the re-design of subsidies and social safety nets.
Achievement of Component Results
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Risk Achievement of Project Development Obje Insufficient volumes or delays in gas supply to fuel the proposed power plant
Difficult bidding and availability o f plant equipment
Overall Risk Rating
Risk Rating I Risk Mitigation Measure ve
M
M
M
There i s already a gas pipeline to the nearby power plant, which wil l be extended to enable gas supply to the proposed plant. Closer to the commissioning of the plants, gas supply agreements wil l be entered into. Should gas supply be interrupted the proposed plant wil l be equipped to switch to using HFO, but this wi l l need to be carefully monitored in light o f environmental impacts. Furthermore, with modifications, the proposed plant could also operate on coal. Due to overall high demand for power supply equipment, EEHC has noted a reduction in the number and variety o f bidders for i t s expansions. As with the El-Tebbin Project, the procurement process has been advanced as much as possible during project preparation, and the first few bid documents are expected to be issued to the market in the month o f November, 2008. Furthermore, given that the proposed technology (supercritical boiler) wil l be procured for the first time to Egypt and that there has been very high demand for this technology world-wide in recent years, there i s a concern that the market appetite for the proposed bid opportunity may be limited. To mitigate this, a workshop with potential bidders was held on August 27,2008 to present the proposed project and its bidding opportunities. There was significant interest expressed by the 70 workshop participants in the project. Also, the current global financial turmoil may result in a larger supplier market than anticipated in August and may be favorable in terms o f number of interested bidders.
F. Loan conditions and covenants
75. Conditions o f Effectiveness:
0 Subsidiary Loan Agreement signed between Ministry o f International Cooperation and EEHC.
Standard Covenants:
0 Standard annual auditing requirements.
Dated Covenants: 0 Contractual Agreement signed between EEHC and EDEPC no later than one month after the
effectiveness date.
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0
0
IV.
A.
Present values discounted at 10%
costs US$2,719 million
Benefits US$4,468 million
Establishment o f the PMU, with qualified staff and in adequate numbers no later than two months after the effectiveness date. Adoption o f the Implementation Manual (including procurement and financial management) no later than two months after the date o f signature o f the contractual agreement between EEHC and EDEPC.
Sensitivity - ERR=lO% if:
Gas price increase beyond US$8.05 per mmbtu
Increase o f about 49% in the total project cost
APPRAISAL SUMMARY
Net Present Value
ERR
Economic and financial analyses
US$1,749 million
23.6%
Consumer’s willingness to pay reduces to 7.3 UStikWh
Economic Analysis
76. yielding an economic rate o f return (ERR) o f about 22%.
At a 10% discount rate, the project’s net present value (NPV) i s US$1,598 million,
77. As can be seen in the summary results below, the economic rate o f return i s sensitive to changes in a number o f ke variables, including: (i) a increase by 2.5 times on the gas price to close to US$8 per mmbtu, (ii) an increase o f 44% in total project costs (reflecting the current high demand for SC technology including supercritical and the current volatile inflationary environment), (iii) commissioning delays due to high worldwide demand for power equipment, causing delays in delivery o f equipment to Egypt, and (iv) a consumer willingness to pay below 7.5 US6lkWh.
K
Plant’s full commissioning delayed by 6 years (to 2019120 for full operation)
78. Given the relatively small size o f the plant compared to the overall Egyptian electricity system,” the project has been assessed on an individual basis, comparing i t s costs to i t s benefits. The costs comprise those required to commission a 1,300 MW steam turbine plant, estimated to be US$2,006.8 mi l l ion (including contingencies but excluding customs charges), and to operate and maintain the plant. The Ain Sokhna plant i s expected to sell an average o f 6 GWh annually over a 25-year period. No salvage value was included, as costs o f dismantling the plant at the end o f the 25 years are deemed higher than the benefits o f selling the aging equipment. The quantified benefits consist o f retail sales o f additional electricity to the grid
As a point o f reference the October 2008 average Henry-Hub price for Natural Gas was US$6.78 per mmbtu. The Ain Sokhna power plant represents 6% o f the total installed capacity in Egypt. 19
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valued at willingness to pay less transmission and distribution losses. Willingness to pay o f 12 US#/kWh was estimated on the basis o f the weighted average cost o f diesel-fuelled electricity located at consumers’ premises, with the weights being the average demand share by industrial and other users. Calculations were undertaken in 2008 prices.
Financial Benefits Revenue generated by Sokhna
79. The analysis did not take into account possible external effects o f job creation. Although there may be positive effects, their impact on the project have been considered limited. The construction o f the plant would provide jobs for 3,000 persons for thirty six months. Operation o f the plant wi l l yield net job creations o f 1,000 and wi l l improve the ski l ls o f EDEPC’s operational staff.
PV 8 1 0% $2,565,661 $2,565,66 1
80. The analysis assessed the sensitivity o f demand resulting from setting electricity prices at a higher level and implications upon the timing for building the Ain Sokhna plant. At higher prices, demand would be somewhat lower than the initial forecast used in EGEAS, deferring but not eliminating the need o f additional investments in power supply capacity, particularly given a possible capacity constraint in 2010/2011, This i s therefore not considered as a major risk for the Ain Sokhna plant, as it would only defer the plant’s construction for a short period.
81. The analysis also studied the impact o f a decrease in residential consumers’ demand through a lower willingness to pay. The willingness to pay would have to drop from 12 US$IkWh to 7.3 US$IkWh for the ERR to drop to 10%.
Financial Analysis
82. The project wi l l generate financial benefits to EEHC in the form o f revenues stemming from the sale o f the electricity generated by the new Ain Sokhna Power Plant, given current and planned tariff increases as well as the costs o f building and operating the power plant. The analysis has been conducted in current terms based on net cash flows generated by the project over a 25-year period, and it shows that the project’s financial rate o f return i s 12%. The detailed analysis i s presented in Annex 9.
Net Financial Benefit $320,480 Financial Rate of Return 12%
Financial Assessment of the Emptian Electricity Holding Company (EEHC)
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Past and Current Performance o f EEHC
83. EEHC’s revenues stem from the sale o f electricity generated by i ts subsidiaries, the sales o f electricity purchased from IPPs and the New and Renewable Energy Authority. Based on audited accounts for the past three years, the company has been profitable, mainly due to regular annual increases in electricity tar i f fs that resumed in 2004, after a 12-year period in which the retail price o f electricity remained unchanged. EEHC’s revenues are estimated to increase by 18% in 2007/08; this growth i s mainly attributed to the increases in the tariff (7.8% per year on average - higher than the originally planned 5% increase) and in the GWh o f electricity sold due to increase in demand.
84. The rapid growing demand for electricity required large investments over the past few decades. These investments have been largely funded by borrowings. The company continues to face challenges in meeting i t s payables and debt obligations. I t s collection performance has slightly deteriorated in 2007/08 to 86% (a 4% decrease) as a result o f increases in several commodities such as utility bills, food and fuel. The company continues to make improvements in the collection o f arrears from public entities, which i s the consumer category that tends to have the highest outstanding payments.20
85. As a result o f high investment needs, EEHC’s long-term debt i s estimated to reach LE 43.9 billion (about US$8 billion) in 2007/08, o f which the current portion reached LE 6.24 billion (US$1.1 billion). In addition, a large portion o f the company’s current liabilities comprise o f past due loan and interest payments owed to the Government and local banks. All together, current liabilities are estimated to reach LE 40.77 billion (US$7.4 billion) in 2007/08 against current assets o f LE 25.24 billion (US$4.6 billion), resulting in a current ratio o f 0.60 (Le., current assets measured as a portion o f current liabilities) and a debt service coverage ratio o f 1.48.
Future Financial Performance o f EEHC
86. Projections to assess EEHC’s future financial position and performance have been carried out for the period 2008/09 - 2019/20. Assumptions are presented in Annex 9 with further details recorded in the project fi les.
87. following key assumptions:
In the base scenario, projections for future financial performance are based on the
a. The natural gas price increases to 18.8 Pt/m3 in 2009 and subsequent annual increases o f 9% are applied.21
According to EEHC, the collection rate o f public entities increased from 15% in 2005/06 to 70% in the first three quarters o f the 2007/08 fmancial year.
There i s an agreement between EEHC and E-Gas on annual increases o f 9% to the cost o f natural gas. In addition, for the electricity generated for industrial consumers, there i s a pass-through arrangement in place, in which EEHC collects the equivalent natural gas price o f US$3 per mmbtu for the gas used to generate electricity to these consumers, and passes on the payment to E-Gas.
20
21
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b. Annual increases to the electricity tari f f o f 7.5% on average for consumers as agreed by the Cabinet to improve financial performance.
c. Restructuring o f local debt into equity.
d. Continued improvement in collection performance, reaching 95% by 201 1 /20 12.
88. The implementation o f the above ensures positive cash f low and a net profit for EEHC, enables the company to meet i t s current operating expenses and debt obligations, as well as for a gradual reduction in the levels o f accounts payables. The company will also be able to finance up to 20% o f i t s local investment needs from i t s own resources.
89. Introduction o f energy conservation measures and a pi lot on time-of-use tariffs, measures which are currently under discussion would further enhance EEHC's financial performance, reducing the overall annual increases in demand, which in turn would defer additional investment needs. In addition, potential settlements with the government o f public arrears in the payment o f energy charges and past due loan payments could accelerate the reduction in the level o f accounts receivables and payables, further strengthening EEHC's balance sheet.
90. The end-of-project financial performance targets set for the El-Tebbin Power Project have been regularly monitored by the project team during supervision and are adequate for this proposed operation. These indicators are: (i) achieving a current ratio higher than or equal to 1 ; and (ii) maintaining a debt service coverage ratio higher than or equivalent to 1.4 by the end o f the project.
B. Technical
91. The proposed Ain Sokhna power plant consists o f two identical steam turbine units with a net rated capacity o f 650MW per unit that are designed to generate rated capacity on either natural gas (primary fuel) or HFO (back-up fuel). A supercritical boiler will generate steam at 25 mega pascal (MPa) pressure and 565 degrees centigrade ("C) temperature and a re-heater will reheat the steam to 565°C. The advantage o f supercritical technology i s the higher temperature and pressure inside the boiler allowing for more energy to be converted into power, in turn increasing the overall efficiency o f the power plant. The supercritical technology will help in: (i) increasing the plant's thermal efficiency by 2-3 %; (ii) saving 10% fuel; and (iii) reducing C02, S02, NO, and particulate emissions bylo%. While Egypt has decades o f experience with the steam cycle using sub-critical technology, this plant will be the first to use a supercritical technology in Egypt (and in the region).22
92. This new technology requires large steam turbine units than the previously implemented 350 M W sized units in Egypt. As the first supercritical plant in the country, EEHC may be able to claim carbon credits for the Ain Sokhna Project and increase revenues by selling these credits in the market. It also can claim the plant as "CCS ready" (relying on the COz storage
22. The World Bank and IFC have supported supercritical technology in a number o f countries, including the Waogaoqiao Project in China, and the Tata Mundra Project in India.
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capacity o f depleted off-shore o i l fields), since C02 can be captured more cost-effectively by supercritical plants than by combined cycle gas turbine and subcritical plants.
93. following reasons:
The steam cycle technology with a super-critical boiler i s being considered for the
(a) Energy Security. When a power grid relies on a single technology (i.e., CCGTs) and a single fuel (Le., natural gas), the risk o f power disruption increases. EEHC’s experience i s that maintaining a balanced mix o f technologies in generation facilitates operational flexibility and O&M cost control. EEHC tends to use combined cycle gas turbines (CCGT) as base load units,23 given that in their experience, steam cycle (SC) has a superior record o f cycling operation to follow the load curve. In addition, CCGT i s more sensitive to ambient air temperature, Le., when ambient air temperatures reach a higher level, the output o f the CCGT plants i s reduced - which i s a concern in Egypt where the reserve margin i s already under pressure and the peak demand occurs in the very warm summer months.
SC units can use multiple fuels, such as gas, o i l and coal with modification o f boiler combustion systems, fue l and waste handling systems. Particularly in the current volatile o i l market, many countries try to introduce internationally-traded coal as a back-up fuel. While coal can be used as a fue l in SC plants, in CCGT plants coal can only be used after i t i s gasified and forms an integrated coal gasification combined cycle plant. The integrated coal gasification combined cycle i s s t i l l in its early stages o f commercialization, while the supercritical technology has been proven in European, Japanese and U S markets for decades. Finally, while CCGT and SC O&M costs are similar, the O&M cost o f CCGTs increases significantly when a CCGT plant i s used to fol low the load (as opposed to serving base-load).
In the event that there would be a reduced supply o f natural gas to the proposed power plant, it i s most likely that in the short-term, it would have to operate on HFO. In order to assess the cost to EEHC and the environment, an analysis was carried out and shows that a 100% switch to HFO would incur a 20% increase in fuel cost, an increase o f US$5 mi l l ion every 5 years in O&M costs, and a 50% increase in C02 emissions. Furthermore, by using HFO, SO2 emissions would be in the order o f 17,000 kg/hour, whereas there are very limited SO2 emissions when natural gas i s used. However, this scenario i s unlikely given that Egypt has strict environmental regulation that limits the use o f HFO.
(b) Equipment Cost reduction trend through increasing competition in the international market. China i s building many SC supercritical and ultra-supercritical coal-fired power plants, adding more than fifty supercritical units in 2007. As such, China has been able to develop a local manufacturing capacity o f steam turbines and boilers, often through partnerships with Japanese and European suppliers o f this technology. When the Chinese domestic demand slows down, which i s expected now following increased demand associated with the 2008 Olympic Games, local Chinese manufacturers are likely to venture out o f the Chinese market. They are already bidding for projects in India and Indonesia, and their participation i s likely to result in a cool down o f the heated market for supply o f energy equipment. Given that the gas turbine market (especially large state-of-the-art gas turbine) i s
23 The share o f CCGT u n i t s in EEHC’s generation mix i s 33.6%.
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dominated by GE, Siemens, Mitsubishi and Alstom, i t may take several more years for Chinese manufacturers to get into the state-of-the-art gas turbine market. Consequently, price reduction possibility o f SC supercritical plants through the participation o f Chinese manufacturers i s higher than that o f CCGT plants.
(c) Potential for making use of carbon capture and storage (CCS) technology. CCS technology i s not currently used unless there i s a good economic return from the sales o f C02 for o i l recovery; for example, the Weyburn project in Canada, where C02 from a coal gasification plant in North Dakota i s purchased to enhance o i l recovery in Canada. While CCS technology has been developed both for both gasification and once-through systems, C02 capture from exhaust natural gas o f a CCGT plant i s estimated to cost more, due to lower C02 concentrations in the exhaust gas. It i s the Bank’s strategy to make sure that projects which could use the CCS technology are designed so that it could potentially be accommodated in the future. This means that (i) there i s additional land around the plant which i s deemed adequate to situate a capture installation; (ii) there i s a reservoir or depleted gas field for storage within a 100 km radius or so; and (iii) there will be a right o f passage to put the pipeline from the plant to the reservoidgas field. Ain Sokhna i s considered as a CCS- ready plant for the future (when the CCS technology has been commercialized).
C. Fiduciary
94. Financial Management. A financial management (FM) assessment was carried out in the course o f the preparation o f the Ain Sokhna Power Plant Project. For that purpose, meetings with staff at EDEPC, the implementing entity, were held to obtain an understanding o f the current applicable FM systems and to discuss and agree on the FM arrangements to be in place during project implementation. The findings o f the FM assessment concluded that the current applicable FM systems can support the proposed project needs, although minor interventions will be required in order to enable the FM systems to adapt to the project needs. The overall FM risk was assessed as “Moderate” provided that the mitigating measures outlined in Annex 7 are carried out successfully.
95. Although EDEPC has experience in the operation and maintenance o f existing power plants, the Ain Sokhna plant will be the first power plant to be constructed by EDEPC since i t s detachment from Middle Delta Electricity Company in April 2006. Therefore, arrangements have taken place, including visits during appraisal, for knowledge transfer to take place between the Cairo Electricity Production Company (CEPC) financial management staff, which are successfully supporting the El-Tebbin Power Project, and the EDEPC FM staff that will be in charge the Ain Sokhna project FM aspects. This included sharing information on the distribution o f roles and responsibilities, the accounting system in place, as well as generated financial monitoring reports.
96. Within the PMU, a FMU will be established in order to undertake the FM responsibilities related to the project. The FMU will comprise o f staff from the foreign exchange department, as well as staff from other financial departments in order to support the project (and future expansion projects).
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97. With respect to accounting and reporting, EDEPC follows the Egyptian “unified accounting system” in preparing i t s financial statements and accordingly i t s systems are not designed to accommodate special purpose financial statements required for a Bank financed project. However, a simple automated accounting system that was internally developed i s used to support the budgeting and reporting needs o f EDEPC which may be adapted for this purpose. Agreements were reached with EDEPC to separately record and report on the project transactions using the existing automated accounting system. Periodic reporting on the project wi l l be handled by the FMU. EDEPC wi l l submit to the Bank semi-annual project financial statements, as well as annual financial statements audited by a private external auditor. In addition EEHC and EDEPC wi l l submit to the Bank their respective annual financial statements audited by Egypt’s Central Auditing Organization given the local statutory requirements.
98. Procurement. Procurement o f all contracts financed by the Loan will follow the Bank Procurement Guidelines. The procurement wi l l be done using the Bank’s Standard Bidding Documents (SBD) for all ICB including the agreed modifications to accommodate the sequential opening o f the technical and commercial envelopes. All packages financed by the Bank are subject to prior review. The packages not financed by the Bank wi l l be procured in accordance with the guidelines o f the corresponding financial institution (IFI) or the Egyptian law (for packages financed by the EDEPC own resources).
99. The EDEPC wi l l be the Implementing Agency o f the Project. A consulting firm wi l l be acting as Management Contractor with the role of: (i) designing the installations; (ii) defining the number o f packages for procurement under supply and install (single responsibility) contracts for the different parts o f the plant; (iii) carrying out all procurement actions (with EDEPC signing the contracts); (iv) integrating and coordinating the different contractors working in the project site; and (v) overall project management on behalf o f EDEPC. The Power Generation Engineering and Services Company (PGESCo) has been hired by EDEPC as Management Contractor for this project, financed by i t s own resources. PGESCo i s a much respected consulting firm and has already performed this role in several power plants in Egypt.24 The Bank has had experience o f working with PGESCO in the Tebbin Power Project where PGESCo has this same role.
100. An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project was carried out by the Bank on June 9,2008, updated in September 2008 and was finalized during appraisal. The assessment has reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the relevant unit for administration and finance.
101. EDEPC’s Project Implementation Unit wi l l have one staff in charge o f coordination, follow-up and reporting to the Bank on procurement actions; however, al l procurement actions wi l l be carried out by PGESCo. PGESCo has a procurement unit with twenty qualified
24 PGESCO was established and registered in Egypt in 1993 and i s 40% owned by Bechtel International, 40% by Ministry o f Electricity & Energy and 20% by a local bank. PGESCO services covered Sidi Krir Units I & I1 (650 MW), Sidi Krir Units 3 & 4 (BOOT 660 MW), Ayoun Moussa Units I & I1 (650 MW), Cairo North Combined Cycle I (750 MW) and I1 (750 MW), Nubaria Combined Cycle (1500 MW) and New Talkha Combined Cycle (750 MW),Kureimat Combined Cycle (750 MW) and E l Tebbin (2x 350MW).
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Procurement Specialists with strong knowledge o f internationalrnank procurement, of which five will work full time for this project. The excellent performance o f PGESCo in carrying out procurement actions for the El-Tebbin project i s a recent confirmation o f the quality and experience o f this procurement team.
102. Today, the El-Tebbin Power Project i s one o f the best performing projects in the Egypt portfolio, and the implementation track-record o f EEHC (with PGESCo’s support) has been proven. The overall project risk for procurement is assessed as Average.
D. Social
103. The proposed project falls under the World Bank environmental category A classification due to i t s size, location and potential environmental and social impacts. As such, an Environmental and Social Impact Assessment (ESIA) has been carried out. In the process o f preparing the ESIA, extensive consultations with a variety o f stakeholders were organized during March - August 2008. This included a scoping session convened on July 2, 2008, with 173 participants. This helped to define the scope o f work, and focus on the most relevant environmental and social issues. A second consultation meeting with 105 participants was convened on August 6, 2008, announced in daily newspapers well in advance, along with invitations sent to all relevant stakeholders. Those consulted in the sessions expect the project to have significant positive social impacts as considerable additional local employment will be created. A more detailed description o f these meetings as well as other consultation activities i s presented Annexes A-D o f the ESIA.
104. The Ain Sokhna power plant will be constructed on a site belonging to EEHC. The area in question is very dry with l i t t le or no vegetation. The site i s located in an industrial zone and there are no existing residents or any economic activity taking place. All construction related activities will take place on this land. A labor camp will not be needed as the workers will be recruited locally and will commute by bus on a daily basis.
105. With regard to local livelihoods, the number o f fishermen utilizing the waters near the proposed plant i s estimated to be very few. Experience from other power plants along the Mediterranean indicates that the overall impacts on fisheries o f slightly warmer water actually are positive. Consultations held with the fishermen also indicate that the catches in these areas have increased rather than decreased.
E. Environment
Project Environmental Classijkation
106. The project i s classified as Category A, according to the World Bank’s Operation Policy on Environmental Assessment (OP 4.01). Therefore, a full Environmental and Social Impact Assessment (ESIA) report was prepared for the project by an independent Egyptian consulting firm (Engineering Consulting Group, ECG), following a Terms o f Reference cleared by the World Bank. The ESIA includes an environmental and social management plan (ESMP), detailing institutional settings, mitigation measures, and monitoring plan for the potential impacts expected from the plant during the construction and operation phases.
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Public Consultation and Disclosure of ESIA and RPF
107. To ensure that the views and interests o f al l project stakeholders are taken into account, public consultations were carried out according to the guidelines o f the World Bank and the Egyptian Environmental Affairs Agency (EEAA). Major initiatives for stakeholder consultations included press advertisement describing the project and inviting interested parties to attend the public meetings and review the Draft Final ESIA and RPF Reports (published in Al-Ahram Newspaper -in Arabic- on Thursday 3 1'' July 2008); and distribution o f an invitation and Arabic copy o f the N o n Technical Summary describing the context o f the power plant, the technology employed, the impact on the environment, the mitigation measures and the ESMP. Two consultation meetings were held during the process o f ESIARPF preparation. This included a scoping session on July 2, 2008, with 173 participants; and a second consultation meeting with 105 participants o n August 6, 2008. A detailed description o f these meetings as well as other consultation activities i s presented Annexes A-D o f the ESIA.
108. The ESIA and RPF were disclosed at the World Bank's Infoshop on September 11, 2008. In-country disclosure o f both documents took place on September 14, 2008 in easily accessible places to the public, including EEAA, EEHC's Public Relations Department and EDEPC Public Relations Department.
Potential Environmental Impacts and their Mitigation
109. It i s expected that the construction and operation activities o f the power plant will have certain environmental impacts. During the construction phase, impacts are expected in the form o f increased dust, noise, and vibration, etc. on land, along with the impact on the Gulf o f Suez from construction o f the intake and discharge structures on physical aquagraphy, water quality, and aquatic habitats. Furthermore, traffic impact may be expected to occur during a short period at peak construction in the form o f increased congestion on the main roads to the power plant. All o f these impacts are expected to be localized, short lived, and reversible. Mitigation measures are included in detail in the tables in Annex 10 o f this document. All the mitigation, monitoring and management measures proposed will be adopted by the EDEPC and imposed as conditions o f contract on the contractor and any sub-contractors employed to build or operate any part o f the power plant.
1 10. During the operation phase, the main impacts can be summarized as follows:
Air aualitv from stack emission. The power plant wil l burn natural gas as i t s primary fuel. As a result, the principle pollutant during normal operation will be NO,. During emergency operation (and for no more than 2% o f operating time), the burning o f light fuel o i l will result in emissions o f particulate matter and SO2 along with trace amounts o f other pollutants. Emissions from the plant will meet both Egyptian and World Bank Guidelines. Air quality dispersion modeling indicates that cumulative ground level concentration, taking into account surrounding industries, are within the World Bank and Egyptian standards. The ESMP recommended that an air quality monitoring system composed o f 2 or 3 monitoring stations be utilized during operation.
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0 Aquatic impact fiom cooling water withdrawal and discharge. Cooling water will be extracted at the rate o f 36 m3/sec from the Gulf o f Suez, and the heated plume will be then returned to the Gulf. The temperature o f the returned cooling water at the point o f discharge conforms to the Egyptian Standard, and the discharge as modeled satisfies the World Bank standard o f a maximum increase o f 3OC above ambient at the edge o f the mixing zone (1 00 m from the point o f discharge). In addition, the area affected by the highest temperature increases and therefore where aquatic ecology i s l ikely to be most affected i s localized. The aquatic habitats in this area have been found to already be relatively impoverished. Outside this area, more marginal increases in the Suez Gulf water temperature are l ikely to create new or improved habitats for flora and fauna.
0 Noise impact fiom the plant oDeration. The potential noise emissions from the plant during operation have been modeled to provide noise contours in the area around the site. The predicted operational noise levels at the site boundary and at al l receptors are below the Egyptian and World Bank guidelines during both daytime and night-time.
0 The main potential impacts from the transmission lines include avian and aircraft hazards; induced effects from electromagnetic fields; vegetation damage, habitat loss, and invasion by exotic species along the R O W and access roads and around substation sites; and chemical contamination from chemical maintenance techniques. Proposed environmental mitigation measures include selecting the right o f way (ROW) to'avoid important bird habitats, flight routes, and human activities; installing deflectors on lines in areas with potential for bird collisions; utilizing mechanical clearing techniques, grazing and/or selective chemical applications; selecting herbicides with minimal undesired effects; and maintaining naturally low-growing vegetation along ROW.
Environmental and Social Management Plan
1 1 1. Detailed tables summarizing the ESMP are included in Annex 10 on Safeguards Policy Issues. Institutionally, the ESMP delineates the roles and responsibilities for implementing the ESMP during construction and operation. Suitably qualified and experienced contractors will be responsible for the detailed design and construction o f the power plant. Construction workers will be required to demonstrate appropriate skills, qualifications and/or experience prior to employment. During construction, the Project Management Unit/Environmental Management Staff (will include 3-4 staff members, with Bachelor o f Science degrees and/or 5 years high technical education) and the Assistant Plant Manager in collaboration with the Site Manager will ensure that al l contracts with Contractors and sub-contractors stipulate al l construction management measures (as given in the ESMP), operational design criteria and environment, health and safety standards which must be implemented at the project site. Implementation o f these measures will be enforced by PMU/EMS and the Assistant Plant Manager and supervised by the Assistant Plant Manager, supported by EDEPC Project Manager in collaboration with the Site Manager, who will have direct responsibility for the Environment, Safety and Quality Assurance program on site during construction and operation. The Assistant Plant Manager i s responsible for ensuring that construction works comply with the requirements o f the ESMP and al l environmental permits.
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1 12. During operation, direct responsibility for environmental compliance and the implementation o f the mitigation, management and monitoring measures wil l continue to be with the Plant Environmental Staff under direct supervision o f the Assistant Plant Manager. This position will report directly to the ChairmadGeneral Manager o f EDEPC. The Assistant Plant Manager will be based at the site and will be responsible for recruiting, training and managing his staff. S h e will be responsible for implementing the mitigation and management measures described above and for monitoring and record keeping o f key environmental issues. In this role, the Assistant Plant Manager will also be responsible for maintaining any pollution control equipment and for developing and implementing procedures for safe handling and storage o f any hazardous materials used on site.
113. The Assistant Plant Manager will also be responsible for maintaining a written Environmental Register with respect to environmental impacts as required under Egyptian guidelines. The written records will identify the characteristics o f discharges and emissions, details o f periodic testing including results, procedures for follow-up environmental safety actions and the persons in charge o f this follow-up. Should any prescribed standards be breached, the PMU/EMS , through the Assistant Plant Manager, will immediately inform the EEAA and disclose the procedures being taken to rectify non-conformity.
114. In addition, the project company must keep a record o f any significant environmental incidents occurring at the plant including accidents and occupational illnesses, spills, fires and other emergencies. The Assistant Plant Manager will be responsible for ensuing that these records are maintained up to date and are available on site. The Assistant Plant Manager will supervise and lead the Environmental Department (ED) and the Environmental Management Staff (EMS) directed by the ED.
Cost of ESMP Implementation
115. The cost o f ESMP implementation i s estimated at US$1.85 million, which covers mitigation measures during the construction and operational phases, institutional aspects and training, and the monitoring program. The source o f the ESMP implementation budget i s EDEPC own resources, with possible contribution from the Arab Funds for the pre- commissioning monitoring equipment, as shown in the following table.
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No.
1
- 2
Cost in US$ '000 Measures Monitoring
Source o f Funding
Construction Phase 120 EDEPC
Phase of Implementation
Pre-commissioning Monitoring (ambient air quality monitoring equipment)
All others
1,325
138
EDEPC (with possible
support from the Arab Funds)
EDEPC Training
Operation Phase Training
155 EDEPC 70 20 EDEPC
20 EDEPC
Environmental Capacity Building
Sub.Tota1 I 190
116. The Project Company wi l l ensure that the power plant i s manned 24 hours a day, 7 days per week. All staff employed at the plant will be trained in the following areas: general operation o f the power plant; specific job roles and procedures; occupational health and safety; and contingency plans and emergency procedures. Training wi l l include induction training on appointment; specialist training (as required for their prescribed job role); and refresher training as required.
1,658 I
117. In addition to this environmental training for all staff employed at the plant, special environmental training wi l l be given to the environmental staff. They wi l l receive training in the day-to-day monitoring activities; monitoring the stack emissions; collection and analysis of air quality data; monitoring the water effluents; collection and analysis o f water quality information; use o f monitoring equipment, operation and maintenance; industrial hygiene; occupational health and safety; and emergency and contingency procedures.
Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.0 1) [J I [ I Natural Habitats (OP/BP 4.04) [I E41 Pest Management (OP 4.09) [I [ J I Physical Cultural Resources (OP/BP 4.1 1) [I [J I Involuntary Resettlement (OP/BP 4.12) [J I [I Indigenous Peoples (OP/BP 4.10) [I [J I Forests (OP/BP 4.36) El [J I Safety o f Dams (OP/BP 4.37) [I 141 Projects in Disputed Areas (OP/BP 7.60)* [I [ J I Projects on International Waterways (OP/BP 7.50) [I [ J I
' By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas
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1 18. Involuntary Resettlement (OP/BP 4.12). Associated with the Ain Sokhna power plant, there are about 130 kilometers o f proposed new transmission lines. Most o f the routing pathways are located in uninhabited, desert land which i s state owned. However, the Operational Policy on Involuntary Resettlement (OP/BP 4.12) i s triggered, because the exact location o f all the sections o f the transmission line i s not yet known. The areas in question are largely uninhabited public land; however, in order to handle any potential future changes, a Resettlement Policy Framework (RPF) was prepared.
119. The key purpose o f the RPF i s to establish resettlement objectives and principles as well as organizational arrangements and funding mechanisms for any resettlement operation that may be necessary during the implementation o f the project. If during implementation any land acquisition becomes necessary, a Resettlement Action Plan (RAP) or abbreviated RAP - depending on the scale and severity o f impacts - will be prepared. The resettlementkind acquisition process should be completed prior to the start o f physical works.
120. In the event the RPF needs to be applied: all project-affected people wi l l be compensated for their losses at replacement cost with a view to improving or at least maintaining pre-project living standards and income earning capacity. The funding for the compensation, if any i s needed, wil l be financed by the EEHC and their concerned affiliate companies.
F. Policy Exceptions and Readiness
12 1. Not applicable.
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Annex 1: Country and Sector o r Program Background EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Country Issues:
1. Egypt’s economy i s continuing i t s positive growth trend, with a GDP growth o f 7.7% in the first half o f FY06/07.25 The growth i s the result o f the Government’s efforts started in 2004 to stimulate foreign and domestic investment. This effort resulted in an increase in FDI to US$3.9 billion in 2004/05, US$l1.1 billion in FY05/06 and has reached US$7.8 billion in the f i rst half o f 2007/08.26 Large-scale development and export o f i t s natural gas resources, including construction o f liquefied natural gas (LNG) facilities as well as high international oi l prices, have contributed significantly to economic growth in Egypt.
Energy Sector Issues:
2. Egypt began exports o f LNG in January 2005, and soon after that commenced exports o f piped natural gas, through the Arab Gas Pipeline, initially to Jordan. Recently, Egyptian piped natural gas also started flowing to Syria, via Jordan. Despite the large increase in hydrocarbon and other energy resource prices, cost o f energy products in Egypt continues to be largely subsidized, this subsidy has reached 43 Billion LE (US$8.1 billion) in FY06/07 (or 6.4% o f GDP).
3. The energy base o f Egypt has more than doubled since the early 1980s to reach 73.3 million tons o f oi l equivalent (MToE) in FY06/07 o f which local consumption has reached 54.7 MToE (75%). This expansion i s expected to continue. Egypt i s aggressively shifting to natural gas in thermal electricity generation (80% o f power produced uses natural gas), industry and for domestic consumption, as a result o f major gas discoveries in recent years. Energy and water are two o f the most vital issues in this country.
4. As a result o f declines in o i l production, Egypt has become an oi l importer.
Oil and Natural Gas in Egypt Natural Gas
I
34
Source. International knergy Agencq (2005)
5. The transportation sector i s the largest energy consumer with 27.1% followed by the industrial and electricity sectors with 20.7% and 15.7% respectively. Egypt’s gas production in
25 Source: Egypt: Briefing on the recent wages and subsidies increase and offsetting budgetary measures, June, 2008, MoF 26 Source: www.investment.gov.edMO1 Portal.
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FY06/07 was 41 million tons o f oi l equivalent, up from 23 million tons in FY01/02. Domestic gas consumption rose from 19 million tons/year in fiscal FYO1/02 to 26.6 million tondyear in fiscal FY06/07, with the electric power sector accounting for 63% o f the total.
Energy institutional structure and pricing:
6. Egypt’s energy sector falls under the responsibility o f two Ministries, namely (i) the Ministry o f Petroleum (MOP), and, (ii) the Ministry o f Electricity and Energy (MOEE). The MOP i s responsible for exploration, production, refining, transportation and marketing o f oil and natural gas. The MOEE i s responsible for electricity generation, transmission and distribution through 6 generation companies, one transmission company and 9 distribution companies organized under a holding company structure and company (the Egyptian Electricity Holding Company, see more below). In addition to these two ministries, the Transportation, Water Resources and Irrigation, Trade and Industry and Environmental Affairs (MOSEA) ministries are also involved in setting policies for the sector. Furthermore, the Egyptian Electric Ut i l i t ies and Consumer Protection Regulatory Agency (EEUCPRA) regulates activities in the electricity sub- sector and the Egyptian Environmental Affairs Agency (EEAA) handles issues related to environmental protection, including issuing permits to construct power plant and associated infrastructure based on environmental impact assessments (Law 4/1994). Finally, in 2006, the Prime Minister issued Decree No. 1395 for the formation o f the Supreme Council for Energy to oversee the various policies and strategies o f the sector.
7. In August 2007, the Egyptian government announced a 3 year plan to remove subsidies from Gas and electricity tariffs for energy-intensive industries (targeting specifically the steel, cement, aluminum and fertilizer companies). The in June 2008, this plan was accelerated for the increases to be implemented with immediate effect at the following prices: 20.2 Pt/kWh (3.8US$/kWh), 24.5 Pt/kWh (4.6US$/kWh) and 33.4 Pt/kWh (6.3US$/kWh) for UH, HV and medium voltage respectively. For other industrial consumers (e.g., engineering, food, textile and pharmaceutical sectors), the energy prices wi l l increase to 17.8 Pt/kWh (3.35US$/kWh), 21.6 Pt/kWh (4.08US$/kWh) and 29 Pt/kWh(S,47US$/kWh) for the UHV, HV and medium voltage respectively over a three year period.
8. while for other industries the increase wi l l be US$2.65/mmbtu.
For natural gas, the price to the energy-intensive f i r m s wi l l increase to US$3/mmbtu,
Electricity sector structure:
9. In early 2000, the Egyptian Electricity Authority (EEA) was transformed into the Egyptian Electricity Holding Company (EEHC) under the ownership o f the Ministry o f finance. EEHC was restructured into 16 affiliated companies, including 6 generation, one transmission and 9 distribution companies and s t i l l operating within a single buyer model. All companies remain state owned under EEHC, although the forthcoming law envisages and allows for a sale o f up to 49%. Indeed, the new law aims at encouraging the private sector to invest in generation and distribution projects. It wi l l also establish the regulatory agency as the entity for tariff approvals and monitoring the performance o f service providers. The law furthermore paves the way for the creation o f a competitive electricity market, development o f renewable energy, and encouraging the private sector’s involvement in renewable energy through competitive bids and feed-in tariffs. The law wi l l also re-enforce the use o f the renewable energy fund and provide
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mechanisms to encourage co-generation and other EE measures. The electricity sector i s under discussion in the Cabinet and aims to be presented to the Parliament for ratification during i t s next session (from November 2008 to June 2009).
10. EEHC plays a strong role in coordinating the plans and investments in the sector, and also manages the sectoral finances. To manage overall cash-flow, EEHC relies on cross- subsidies between the affiliated companies to achieve a levelized return on equity. Each company operates as a commercial entity with a management team, board, and a balance sheet. The EEHC board selects senior management for the affiliated companies. Therefore, to date several levels o f unbundling has taken place with the exception o f ownership unbundling.
11. The EEUCPRA approves regulations under which the companies operate as well as issues and renews licenses. To date, given that the scope o f sector regulation activities i s limited, it also monitors the companies' performance through financial and technical benchmarking.
Electricity sector issues and strategies:
12. The electricity sector i s facing a number o f challenges and constraints in securing the electricity demand for Egypt in the coming decade. The most pressing issues include the having sufficient base and peak load capacity, ensuring the availability o f natural gas for power production (at price levels that can be absorbed by the retail electricity tariff), succeeding with the ambitious renewable energy, as well as other energy efficiency measures and continuing the path o f tari f f and subsidy reform.
13. In response to the rapid electricity demand, EEHC has developed a least-cost generation expansion plan. This plan has two phases: a fast track phase (2002-07) and medium-term phase (2007-12), during which 4,500 MW and 7,375 M W o f capacity have been and are being installed respectively. Financing for the medium-term phase i s completed. The Ain-Sokhna power plant i s part o f the 20 12- 17 planning cycle.
14. To complement the implementation o f conventional power projects, Egypt i s working very hard to develop i t s renewable energy (RE) resources, including hydro, wind and solar. Hydro-electric power capacity has been almost fully explored with an installed capacity o f 2,780 MW and annual energy production o f about 12,650 GWh. Wind and solar energy are in the early stages o f exploration and utilization. In April 2007, the Supreme Council for Energy adopted an ambitious plan which aims at having 20% o f the country's installed capacity in the form o f RE by 2020. Notably, over 10% o f this i s expected to come from wind energy, which translates into about 7,200 mega watts (MW) o f grid- connected wind farms. The development o f this at such a large-scale i s being designed based, on a private-sector led strategy, o f which the World Bank i s providing technical assistance.
15. The New and Renewable Energy Authority (NREA), established in 1983, i s the main agency for promoting RE technologies. At present, wind and solar energy projects are at the core o f NREA's current and future plans. A Wind Atlas for the entire country was issued in 2005 indicating about 20,000MW o f wind potential in the Gulf o f Suez area. A series o f large-scale wind energy projects were constructed with a current operational capacity o f 225 M W connected to the national grid. Egypt i s also implementing i t s f i rst solar thermal power plant o f 140MW (solar share o f 20MW) south o f Cairo, planned to be operational by 2010.
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16. In 2007, the President o f Egypt announced that nuclear power wi l l become an integrated part o f the local energy production system, with multiple new nuclear plants to be built. The first being 1,000 M W by 2017, and another comprising 4,000 M W by 2027. The nuclear plants are envisaged to be constructed using local expertise in cooperation with foreign partners. Legislative and structural modifications to the sector structure are also envisaged to implement the nuclear generation plan. A Supreme Council for peaceful uses o f Nuclear Energy was given an additional role in setting policies and approving nuclear energy projects by a presidential decree. An RFP was issued by the Nuclear Power Plant Authority (NPPA) in early 2008 for consultants to review and update previous data prepared 25 years ago for the Dabaa site and to prepare the tender for the f i rst plant.
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Sector Issues Project
Private Sector Power Port Said and Suez East (IFC)
PDO Rating
Kureimat Power Project (World Bank I 1992)
Power Development
U
El Kureimat Power Project (AfDB)
Walidia Thermal Power Station (JBIC)
Abou-Zaabal Substation (JBIC)
Sidi Krir Transmission and Substation Project (JBIC)
Power Generation
Solar-Thermal Power Project (GEF)
KfW-sponsored Wind Farm
Danida-sponsored Wind Farm
JBIC-sponsored Wind Farm
Clean Energy Development
El-Tebbin Power Project (World Bank 12005)
S
I Spanish-sponsored Wind Farm
Gas Sector I Gas Investment Project (World Bank 1992) I S
Natural Gas Connections Project (World Bank 2008) S
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Annex 3: Results Framework and Monitoring EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Results Framework
PDO
Support GOE in ensuring continuous energy supply to meet demand in a sustainable manner
Improve the sector’s financial sustainability.
Int utcom
Investment in new generation capacity.
Technical assistance to improve the sector’s financial sustainability
Project Outcome Indicators
Annual increase o f 6 GWh on average in the electricity sold to consumers (Le., additional 1,300 M W of generation capacity) with the construction o f the Ain Sokhna Power Plant
Electricity tariff structure i s adjusted to reflect prices that are better aligned with its long-run- marginal-cost and aim at reducing demand in peak periods.
Intermediate Outcome Indicators
Construction o f Ain Sokhna Power Plant i s completed.
EEHC improves current and debt-service coverage ratios.
A pilot on Time o f use tariffs (ToU) i s implemented.
Use of Intermediate Outcome Monitoring
Further reviews of actual EEHC financial statements during project implementation will highlight areas in need o f further improvement
Lessons learned from the pilot on ToU tariffs are incorporated in a larger ToU program.
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1 - 1 I
I I I
a s
Annex 4: Detailed Project Description EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
The Ain Sokhna Power Plant
1. each with a net rated capacity o f 650MW, fired by natural gas as main fuel and residual o i l (mazout) as emergency fuel. Each unit has one steam generator, one turbo-set, one condensing plant with condensate pumps, condensate treatment plant and storage tank as well as one feed- water heating system. The following components are part o f the new power plant:
The proposed Ain Sokhna steam power plant will be comprised o f two identical units,
2. flow, single reheat turbine generator, designed to operate at 3000 rpm. The unit nominal rating is based on steam conditions o f 250 bar and 565°C at the turbine inlet and 565°C at the reheat inlet, exhausting at 0.07 bar. Expected unit output is approximately 650MW.
Two units of 650A4Wsteam turbine generators - Each unit has a tandem compound, four
3. pressure and in the end, at two low pressure stages. Included with the turbine-generator are the gland steam sealing, lubricating oil, lubricating o i l conditioning and the electro-hydraulic fluid systems. The generator hydrogen seal o i l unit, stator cooling system, voltage regulation system and generator leads cooler are also included. The generator output i s 3 phase 50 Hz, 20kV, 0.85 power factor lag. The turbine system will comprise o f a condenser, condenser vacuum systems, feed-water heaters, lubricating o i l tanks.
The turbines will operate at three stages, one high pressure stage, one intermediate
4. Two units of supercritical steam generators (boilers) - The steam generator will be supercritical type, base load unit where primary fuel i s natural gas, with mazout as a back up fuel. The supercritical boiler i s designed to generate steam at 250 bar and 565°C at the super- heater outlet and the re-heater will reheat steam to 565°C. The steam f low rate will be 550kg/sec. The dual fuel boiler i s natural or forced circulation, pressurized furnace design and i s arranged to be fired with either natural or mazout (residual oil). Natural gas or solar i s used for ignition. Steam soot-blowing will be utilized for back pass cleaning. A furnace flue gas recirculation system i s provided with each unit to control the heat absorption pattern o f the boiler under varying conditions. The boiler system includes air heaters, forced draft fans, mazout tanks, gas and o i l burners and ducts.
5. Electrical eauiument including transformers and switchyard. - The main generation system will generate power from the turbine generator and transmit the power through an isolated phase bus and a main step-up transformer to the switchyard.
6. Auxiliary mechanical equipment - This includes the auxiliary boiler, condensate treatment as well as the cooling water system. A single, common auxiliary boiler will be provided to supply steam for startup o f the plant. I t will also provide steam for fuel tank heating system when steam i s unavailable from the main boilers. The auxiliary boiler will be sized to provide approximately 45,000 kg/hr o f steam at 12-15 bar and 250°C.
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7. The condensate treatment plant removes suspended matter from the turbine condensate to prevent the formation o f deposits in the boiler system, to prevent corrosion. This plant will consist o f a condensate cleaning system and a polishing system.
8. The circulating water system for each unit provides cooling water for the removal o f heat from the main condenser and rejection o f the heat to a heat s ink under conditions o f power plant loading. The quantity o f cooling water for each unit i s 23m3/sec. The system will be designed to limit the temperature rise across the main condenser to 8°C by supplying sufficient cooling water for the heat rejected by the turbine cycle at 5% overpressure operation.
9. Water and wastewater treatment and desalination - The water supply system will include service water system, make-up water system, auxiliary systems and laboratory equipment. For the water intake o f circulating water, significant scale o f c iv i l work i s expected due to the shallow water at the Ain Sokhna site.
10. The wastewater treatment system consists o f (a) lined equalization ponds, (b) an oillwater separator for removal o f floating oi l from floor and equipment drainage prior to the equalization pond, (c) chemical feed systems including acid, caustic and polymer, (d) a sludge dewatering system for concentrating the underflow from the clarifier system and (e) a clarifier system for precipitation o f the suspended solids and metal hydroxides from the equalization pond discharge.
11. mineralized feedwater will be distillate upstream o f the re-mineralization plant.
The plant makeup water will be provided from the desalination plant such that the de-
12. Implementation of the Environmental and Social Management Plan - The environmental and social management plan will include institutional, mitigation and monitoring arrangements as well as the monitoring equipment. The environmental monitoring equipment will measure all required environmental conditions, such as the ambient air, water and noise level at specific monitoring stations.
13. Distributed control svstems and instrumentation - The two-unit station arrangement includes a completely enclosed control room complex and turbine building and open door boiler. There will be one emergency diesel generator, approximately 750kW capacity, located in a building adjacent to the control building to provide the plant with emergency power. This power i s provided for safe shutdown and communications, emergency lighting, circuit breaker controls, battery and chargers and shutdown cooling equipment.
14. Engineering and project management services - This includes the preparation o f the detailed designs, bidding documents, bid evaluation, preparation o f contracts, coordination and interfacing between contractors, supervision and construction o f works, commissioning, start-up and the taking over o f the plant.
15. Civil works, vard tanks and switchgear - This includes mazout (heavy fue l o i l or residual oil) tanks and pumps, hydrogen, nitrogen and bulk C02 storage, f ire water pump house and tanks, natural gas metering and pressure reducing station, maintenance shop tools and equipment, commissioning and operating o f spare parts, as well as guardhouse and site boundary wall. The main fuel o i l unloading and storage system consists o f (a) two unloading pumps, (b) two fuel o i l storage tanks, and (c) bottom heaters for storage tanks.
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16. Substations and transmission lines - For evacuation o f the power generated, the following scope o f work i s tentatively included in the project to interconnect the power plant to the 500-220kW network by constructing new El-Sokhna, although it i s s t i l l to be finalized:
a. 500kV - Opening the existing single circuit 500kV 0. H. T. L Abu ZableISuez 500 and extending it with a length o f about 2x 50km id out o f Sokhna Power station. Replacement o f the existing 220kV double circuit OHTL Suez Gulf Power Station - Extsadia and Suez Gulf - EZZ Steel by 4x 220kV double circuits under ground cables and connect them to the switching station proposed near the site o f Ektsadia 220 substation, in order to find right o f way to the 500kV OHTL required to evacuate the new generated power o f Ain Sokhna power station to the 500/220kV national grid.
b. 220kV - Construction o f new switching station near the site o f Ektsadia 220 substation. Construction o f four circuits under ground cables (XLPE1 X 1200 mm2) with length o f about 2 km from Sokhna to the switch station. Opening the existing double circuit OHTL KatamiaKement Masria and extending it with a length o f about 2x 40 km in/out o f the switch station.
17. Insurance - Includes wrap-up insurance during construction, start-up, testing and commissioning phases.
Technical Assistance to the Energy Sector in Egypt
18. The Bank’s engagement at the policy level has become substantial partly as a result o f i t s investment support. In addition to an active policy dialogue across the Ministries o f Finance, Energy and Electricity, Petroleum, Investment, Industry and Trade as well as Social Solidarity on energy matters, the Bank i s assisting the Government with the following important activities:
19. Enerav Pricing (US$900,000 funded by ESA4AP and BB) - This ESMAP-funded study which has been fully contracted to a consulting firrn and the funds fully committed wi l l recommend an energy pricing strategy that ensures price levels are not only reflective o f the underlying economic costs, but also consider financial, equity and fiscal implications. The study wi l l also recommend measures to carefully and effectively manage the potential negative impacts o f subsidy removal on the economy as a whole, and on vulnerable consumers in particular. This includes training and dissemination.
20. f iom PPIAF) - Under this task, assistance i s being provided to the regulatory agency in:
Framework and Risk Allocation Mechanism for Private Sector Engagement (US$75,000
a. Providing an assessment o f what has worked well and not so well in recent international experience in PPP in the power sector with case studies on their impact and lesson learned;
b. Reviewing the Government’s current expansion plan in the power sector as well as the current and future market design plan and identify how PPP could fit into this plan;
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c. Preparing an appropriate risk allocation matrix for the public and private sectors across the sector segments and key risks; and
d. Assisting in dissemination o f recommendations in two Roundtables (see below) with key stakeholders.
2 1. Development of a Commercial Wind Framework (US$500, 000; of which a grant in the amount of US$75,000 has already been used to hire two consultants and another US$425,000 is currently being sought from PPIAF to further advance the development plans and bidding documents) - Under this activity, assistance i s being provided to the Government to:
a. Review the current wind development plans and assess i t s technical feasibility, including impact on the national grid. Recommend additional studies necessary (e.g., additional investments in the power generation system, transmission).
b. Become familiar with the proposed approach that the GoE wants to take in terms o f implementation o f a commercial wind framework involving the private sector. Review the draft electricity law and any other relevant laws (e.g., investment law, PPP law under preparation) to identify whether any adjustments need to be made to support the Government’s plan
c. Understand the current pricing practice in Egypt, and assess the level o f competitiveness, or lack thereof, for wind projects. Identify the key factors that would make wind projects least-cost.
d. Develop a financing plan for the wind development program and targets. e. Develop a commercial bidding framework, including a f i rst set o f bidding documents that
can be used to attract the private sector. f. Identify and recommend measures and actions to strengthen enhance and expand local
manufacturing for wind generation components to increase local contribution to wind development plan.
g. Identify and recommend necessary government incentives that can facilitate and be necessary to realize the plans.
22. During the implementation o f the proposed project, technical assistance support i s envisaged for continued studies and policy support, including rapid response support to EEHC in the: (i) implementation o f a pi lot time-of-use tari f f program,28 (ii) further tari f f adjustment and recommendations from the above-mentioned energy pricing strategy work, and (iii) development o f a national energy conservation plan and implementation o f energy-efficient lighting through the distribution companies (US$200,000). Based on the successful technical assistance implemented in the electricity renewable energy and natural gas sectors since 2004, an annual programmatic Bank budget o f US$250,000 a year for the next three years has been allocated to enable continued rapid-response assistance and support.
This work follows the recently completed ESMAP-funded study: “Egypt - Development o f a Load Management 28
Program and Design o f Time o f Use/Seasonal Pricing” - undertaken by Economic Consulting Associates Ltd.
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Annex 5: Project Costs EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Local Foreign Total US $million US $million US $million Project Cost By Component and/or Activity
Power Plant Environmental Management Plan
664.90 1,472.50 2,137.60 1 .oo 1 .oo 2.00
Total Baseline Cost 665.90 1,473.50 2,139.60 Physical Contingencies 23.20 10.70 33.90 Price Contingencies 13.00 3.50 16.30
Total Project Costs’29 702.10 1,487.70 2,189.80 Total Financing Required 1,487.70 1,487.70
In addition, programmatic technical assistance for the energy sector wi l l be made available to EEHC and the Ministry o f Energy to assist them with implementation o f planned reforms.
Identifiable taxes and duties are US$l83 million, and the total project cost, net o f taxes, i s US$2,006 million. 29
Therefore, the share o f project cost net o f taxes i s 91.6%.
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Annex 6: Implementation Arrangements EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
1. The project will be implemented between May 31, 2009 and June 30, 2015. December 3 1 , 201 5 i s the Loan’s scheduled closing date. EDEPC, an affiliate o f EEHC, will be responsible for implementing the project.
2. In terms o f lending arrangements and flow o f funds, there will be a Loan Agreement between the Bank and the GOE (Ministry o f Foreign Affairs), and a Project Agreement between the Bank and EEHC. By virtue o f a Subsidiary Loan Agreement between the GOE and the EEHC, the GOE will on-lend the Bank Loan proceeds funds to EEHC.
3. To clarify the respective roles and responsibilities o f EEHC and EDEPC in project implementation, a Contractual Agreement (CA) will be entered into by EEHC and EDEPC. This CA, which should be reviewed and accepted by the Bank, will detail procurement and payment processes and other responsibilities for implementing the project’s different activities. This will allow EDEPC to sign contracts with the winning bidders. Also, the CA will allow EDEPC to issue withdrawal applications to the Bank and make direct payments to the contractors on behalf o f EEHC, who will be holding the funds.
4. As with all other projects o f this nature implemented by generation affiliates in EEHC, a Project Management Unit (PMU) will be established at the Ain Sokhna project site to supervise, coordinate and monitor overall implementation o f the project. The composition o f the PMU staffing will include a qualified Project Manager, who will head the unit, 2-3 Engineers, a Procurement Coordinator, and an Environmental Specialist. The PMU will be assisted by an engineering firm, which will assist in the design, engineering and procurement process, as well as in the construction supervision.
5. In addition, within the PMU, a Financial Management Unit (FMU) will be established at EDEPC’s main office to better integrate with the other departments in EDEPC’s financial sector such as investment audit, planning, treasury, etc. The key functions o f the FMU will be to have overall responsibility for the project’s financial recording, budgeting, reporting requirements, and handling the loan disbursement arrangements including relevant supporting documentation. The FMU will comprise an FMU Manager, three Accountants and a Project Accountant, who will be located at the project site and will ensure smooth coordination between the remainder o f the PMU and the FMU. In accordance with the aforementioned CA between EEHC and EDEPC, the PMU will coordinate and supervise project implementation to carry out the project’s components.
6. Weekly meetings will be held in EDEPC’s main office, chaired by EDEPC’s chairman, with Project Managers o f al l on-going projects in EDEPC to review progress and identify any issues and potential problems. In addition, each Project Manager will report progress and address day-to-day issues as needed to the Sector head dealing with projects in EDEPC. The project’s mid-term review i s planned for September 15,2013.
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Annex 7: Financial Management and Disbursement Arrangements EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Executive Summarv and Conclusions:
1. A financial management (FM) assessment was carried out in the course o f the preparation o f the Ain Sokhna Power Plant Project. For that purpose, meetings with staff at EDEPC, the implementing entity, were held to obtain an understanding o f the current applicable FM systems and to discuss and agree on the FM arrangements to be in place during project implementation. The findings o f the FM assessment concluded that the current applicable FM systems can support the proposed project needs, although minor interventions will be required in order to enable the FM systems to adapt to the project needs. The overall FM risk was assessed as “Moderate” provided that the mitigating measures outlined in Annex 7 are carried out successfully.
2. Although EDEPC has experience in the operation and maintenance o f existing power plants, the Ain Sokhna plant will be the f i rst power plant to be constructed by EDEPC since i t s detachment from Middle Delta Electricity Company in April 2006. Therefore, arrangements have taken place for knowledge transfer to take place between the Cairo Electricity Production Company (CEPC) financial management staff, which are successfully supporting the El-Tebbin Power Project, and the EDEPC FM staff that will be in charge the Ain Sokhna project FM aspects. This included sharing information on the distribution o f roles and responsibilities, the accounting system in place, as wel l as generated financial monitoring reports.
3. Within the PMU, a FMU will be established in order to undertake the FM responsibilities related to the project. The FMU will comprise o f staff from the foreign exchange department, as well as staff from other financial departments in order to support the project (and future expansion projects).
4. With respect to accounting and reporting, EDEPC follows the Egyptian “unified accounting system” in preparing i t s financial statements and accordingly i t s systems are not designed to accommodate special purpose financial statements required for a Bank financed project. However, a simple automated accounting system that was internally developed i s used to support the budgeting and reporting needs o f EDEPC which may be adapted for this purpose. Agreements were reached with EDEPC to separately record and report on the project transactions using the existing automated accounting system. Periodic reporting on the project will be handled by the FMU. EDEPC will submit to the Bank semi-annual project financial statements, as well as annual financial statements audited by a private external auditor. In addition EEHC and EDEPC will submit to the Bank their respective annual financial statements audited by Egypt’s Central Auditing Organization given the local statutory requirements.
5. Finally the high investment cost required for the establishment o f the power plan poses a risk o f delayed implementation caused by insufficient readily available financing. For that purpose, EDEPC has prepared detailed investment budgets for the project with identified multiple sources o f financing and a clear timeline. The realization o f such plan i s definitely crucial for the timely and successful implementation o f the project.
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Risk Assessment Summarv
2006 requiring al l companies, including SOEs to adopt the new Egyptian Accounting Standards which are aligned with IFRS with few exceptions. - The Bank will communicate its audit policy and guidelines to the Central Auditing Organization (CAO) prior to the audit of the first fiscal period o f the
I moiect.
Inherent Risks:
1 with estimated costs and implementation timeiine. -Agreements with several financing sources are being pursued to provide sufficient flexibility. The Project FM unit under establishment at the foreign exchange department wi l l be entrusted with managing the project FM functions and generating timely reports.
I Country level: I I I I
Substantial
Moderate
I I I - A ministerial decree was issued in July I Lack o f compliance with IFRS and ISA when preparing and auditing the financial statements of state owned enterprises (EEHC and EDEPC).
Entity level:
Substantial
Limited experience with fill power plants construction projects can result in implementation bottlenecks.
I Project level I
Substantial
EDEPC FM staff was introduced to the El-Tebbin Project financial management unit to allow for knowledge transfer in preparation for the project. During appraisal, additional visits were conducted between the EDEPC FM team and the Tebbin FM team to transfer knowledge.
Moderate
Moderate
1 I I G plWJGC.1 lllldl
i s not readily separaoie 1 the Egyptian Unified Ac
"--?cia1 information
:counting
I TI.---,.:-,.+
" ':hrough Substantial
The separate reporting on the project related financial information was discussed and reporting formats were agreed with EDEPC financial affairs
Moderate
Control Risks:
Timely availability of project - - - financing can be an issue given the huge investment cost and the potential price increases. The current structure of the FA sector does not provide a focal point to oversee the overall project financials and to liaise with the financiers.
High
Substantial
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Risk before Risk
The lack o f documented FM policies and procedures can result in unclear roles and Substantial responsibilities that may delay the project implementation.
Availability o f timely and
financial and accounting policies and procedures to provide guidance on al l project FM issues (accounting treatments, eligibility o f expenditures, foreign exchange valuation, authorization and payments system, etc).
Moderate
- Interim arrangements exist through the internally developed accounting information system. - An integrated software solution i s also under implementation.
Oversight and Accountability:
6. project FM responsibilities. The FA sector i s comprised o f the following departments:
The “financial affairs” (FA) sector o f EDEPC will have the ultimate responsibility for the
- Audit. - Accounting and Budget. - Costing and Warehouses Accounts. - Financing and Foreign Currency (FX).
7. As agreed during the Bank preparation mission in April 2008, representatives from the FA sector have visited the financial management unit (FMU) at Cairo Electricity Production Company (CEPC) which i s in charge o f the FM implementation o f Tebbin Power Plant Project financed by the Bank. They got acquainted with the procedures followed in the preparation o f Tebbin project and the implemented systems at the FMU and have obtained samples o f the reports generated by the FMU for Tebbin Project.
8. Given the mandate and scope o f each o f the four departments comprising the FA sector, it was agreed that the project FM functions will be placed within a financial management unit (FMU) to be created within the foreign exchange department. Nevertheless, the roles o f the other departments will continue as i s with respect to the project transactions as part o f the company’s overall operations. The FMU within the foreign exchange department will also liaise with staff at the other departments in handling project documents and processing related payments.
9. The establishment o f financial management unit within the foreign exchange department i s envisaged to support EDEPC’s future plans and not just a World Bank financed project. I t i s envisaged to handle another planned power plant in Newibaa as well as any other major construction operations in the future. The staffing o f the department will depend on existing EDEPC staff selected from within the foreign exchange department, other departments as well as
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some o f the company’s sites. The staffing o f this unit i s envisaged to include FMU manager, 3 accountants located at EDEPC premises (in charge o f recording, reporting and loan disbursements and treasury) in addition to an accountant at the project site (entrusted with reviewing documentation at the project site and liaising with the other PMU staff at the project site).
10. EDEPC i s already working towards the identification and designation o f the FMU staff with clear and detailed terms o f reference and job descriptions (which will be within the PMU structure). Once identified and selected, the Bank will provide the FMU staff with a two-day training workshop on the Bank guidelines and requirements. In addition, the staff will liaise with the Tebbin FMU staff at CEPC on a periodic basis (more intensively at the early project stage) to ensure that knowledge transfer i s flowing smoothly to the newly established FMU.
11. The following chart shows in details the structure o f the FM functions and the relationship among the different departments entrusted with these functions.
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Head o f Financial, Admin and HR Sectors
Head o f Admin & HR
Affairs Sector
Sector Head o f Financial
Affairs Sector
Head o f Financial
Planning & Studies Sector
Financing Costing and & Foreign Warehouses
Department Department
Accounts &
Department
I I
52
Flow of Information and Documents:
12. with few adjustments to be as follows:
The f low o f information and documents i s expected to replicate the current procedures
a.
b.
C. d.
e.
f.
g.
h.
1.
The foreign exchange department maintains a separate f i l e for each contract and opens LCs where needed. Suppliers and contractors submit claims and invoices to the sector head o f the power
The engineering consultant reviews and approves the submitted claims. The field accountant reviews and the site manager review and approve the claims and forward to the audit and foreign exchange departments for review and payment processing. The audit department reviews the invoices against the contracts to ensure eligibility for payment. For local currency invoices, the audit department issues payment vouchers and checks, retains original invoices and forwards copies to the foreign exchange department. For foreign currency payments, it retains copies and forwards the original invoices to the foreign exchange department. The foreign exchange department reviews foreign currency invoices and maintains records for al l transactions under contracts, LCs and loans under the project. To process payments from the loan proceeds, it will prepare withdrawal applications and attach the required documentation. The foreign exchange department issues monthly and quarterly reports to present and summarize the project status and the loans status. The quarterly reports will be also submitted to the World Bank and will include comparisons to budgets, forecasted disbursements and physical progress.
plant.
Flow o f Funds:
13. Disbursement Procedures: The project is envisaged to fol low transaction based disbursements. Based on the nature o f the project contracts and the size o f payments, direct payments are expected to be used mainly. Minor payments will be made through the designated account when direct payments cannot be justified.
14. Availability o f Project Funds: With the high investment costs required, there i s a risk in the timely availability o f project financing. EDEPC i s actively seeking alternative sources o f financing in accordance with i t s detailed budget and timeline as, described in the “Budgeting” section o f this annex.
15. The World Bank Loan proceeds will be allocated to finance Works procured under this project and will only include packages o f supply and install turn-key type contracts for: (i) steam generator; and (ii) Switchyard, and (iii) Water and waste water treatment and desalination plant.
Allocation o f Loan Proceeds:
53
Funds and Documents Flowchart:
Invoices submitted to power plant sector head
Engineering consultants and
site manager review and
approve invoices
Audit Department reviews the
invoices/claims package
-r- +
Local currency invoices
Audit Department
retains original invoice and
issue payment voucher
Foreign currency invoices
I Audit
Department retains copy and
forwards original to FX
denartm ent
prepares WIAs for advances or direct payments
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Budgeting:
16. Annual investment plans are prepared in March for the following year o f July to June and i s subject to the approval o f EEHC to ensure aligned plans and rational decisions across the sector. The proposed Ain Sokhna Power Project was included in EDEPC construction budget. The timeline for the power plant implementation sets the project preparation to be completed in FY 2008/2009. For the purpose o f the project the total investment cost was estimated and the foreign and local cost components were detailed for the f i rst fiscal year o f the project. The financing sources were also estimated including sel f financing, local loans and foreign loans. The investment plan incorporated other rehabilitation, renovation and completion activities.
Internal Controls:
17. operations.
Multiple channels o f control are embedded at different stages o f the company’s
18. Power plant procurement needs are subject to the review o f the Central purchase committee or the higher committee for purchases depending on the set thresholds for review and approval authorities.
19. Invoices and claims are subject to reviews at the project site, and then by the audit department and the foreign exchange department. The FM manual (which will form part o f the project implementation manual) will describe in details the policies and procedures. It wil l cover, inter alia, the budget preparation and presentation, the chart o f accounts to be used, the project accounting procedures (data entry, posting, reconciliation and period end closing), fixed assets and foreign exchange valuation, and the reporting and auditing arrangements. Coordination in this regard with CEPC FMU implementing Tebbin Project i s in place. EDEPC i s currently in the process o f preparing the financial management manual.
20. A quality control sector within EDEPC i s entrusted with internal technical and financial audits. At the financial audit level, it reviews the systems applied within the different financial departments resembling the functions o f a modern internal audit department. It reviews the applicable procedures in payroll, warehouses, etc. and suggests revisions to the procedures and process as needed. It reports directly to EDEPC chairman.
Accounting System and Reporting:
2 1, EDEPC prepares monthly financial position and performance evaluation within f i f teen days after the month end for submission to EDEPC management as well as to EEHC. It basically follows the Egyptian “unified accounting system” in preparing i t s financial statements. Accordingly i t s systems are not designed to accommodate special purpose financial statements required for a Bank financed project.
22. EDEPC has signed an IT automation contract with the “Electricity Systems Company” that i s fully owned by the different companies in electricity sector. The contract i s currently under implementation. The system i s expected to integrate different departments within EDEPC. Meanwhile and as interim arrangements, there i s an IT department within the FA sector which
55
uses a financial information system that was developed internally and runs on an “Access” database. It records the company’s financial transactions, produces financial reports, and reconciles i t s accounts periodically with the manual records maintained by the general accounts, the costing and foreign exchange departments.
23. Agreements were reached with EDEPC to separately record and report on the project transactions using the existing automated accounting system. Formats o f required reports were discussed with EDEPC to ensure meeting the Bank’s requirements. In addition, examples o f reports generated by Tebbin Project were shared with EDEPC. The reports will include a statement o f sources and uses o f funds, cash projections, a statement o f designated account, and a physical progress report.
Attestation Arranpements:
24. The Bank will require two types o f audits under the project in addition to the review o f the project’s interim (semiannual) financial statements (IFS). The annual project financial statements (PFS) will be subject to an audit by an independent private external auditor who will also review the project semiannual IFS. In addition, the audits o f the entity financial statements (EFS) for the Egyptian Electricity Holding Company (EEHC) and EDEPC carried out by the Central Auditing Organization (CAO) will also be presented to the Bank. EEHC and EDEPC are already subject to annual audits by the C A O in accordance with the statutory requirement for companies with more than 25% government ownership (1 00% in cases o f EEHC and EDEPC).
25. project as follows:
The following table summarizes the reporting and attestation arrangements under the
Supervision Plan:
26. Based on the assessed moderate risk level, the Bank-accredited FMS will conduct two supervision missions for the project annually in addition to fol low up visits if deemed necessary. Except for the first year o f implementation, the project i s not envisaged to entail extensive scope and resources for FM supervision. The semiannual IFSs for the Project and the financial audit reports will be reviewed on a regular basis by the Bank FMS and the results or issues will be followed up during the supervision missions and the fol low up visits. During the Bank’s supervision missions, the Project’s financial management and disbursement arrangements (including a review o f a sample o f SOEs if applicable) will be reviewed to ensure compliance with the Bank’s requirements and to develop the financial management rating to the Implementation Status Report (ISR).
27. In addition, i t has been agreed that the Tebbin financial team will provide support to the Ain Sokhna financial team as deemed necessary, and that the FM responsibilities entrusted with EDEPC will be listed in the contractual agreement between EEHC and EDEPC, and will fol low the project agreement between EEHC and the World Bank.
’
56
Annex 8: Procurement Arrangements EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
A. General
1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 1, 2006 and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
2. Procurement o f Works: Works procured under this project will only include packages o f supply and install turn-key type contracts for: (i) steam generator; and (ii) Switchyard, and (iii) Water and waste water treatment and desalination plant. The procurement for contracts funded by Loan proceeds will be carried out using the Bank's SBD for I C B as modified and successfully used under the El Tebbin Project (Loan 7359-EG) including the agreed modifications to accommodate the sequential opening o f the technical and commercial envelopes as well as other agreed modifications to cover new clauses included in recent version (April 2008) o f the Bank standard bidding documents. The packages not financed by the Bank will be procured in accordance with the guidelines o f the corresponding International Financial Institution (IFI), or the Egyptian law for the packages financed by East Delta Electricity Production Company (EDEPC) own resources. The procurement plan identifies the different packages that will be financed by different sources. Each package will fol low the procurement procedures o f the concerned financial institution indicated in the plan.
3. Procurement o f Goods: Goods procured under this project would not be financed by the Bank, being funded by parallel financing from other IFIs and will be procured in accordance with the guidelines o f the corresponding financial institution (IFI) or the Egyptian law for the packages financed by EDEPC own resources.
4. Advanced Procurement: Due to overall high demand for power supply equipment, EEHC has noted a reduction in the number and variety o f bidders to implement i t s expansion plans. As such, it will be important to factor this into both the project implementation time schedule as well as the timely preparation and approval o f the financing package o f this project to ensure that availability o f funds do not slow down the procurement process and therefore increase cost and/or cause delays in the delivery o f plant equipment. As with the El Tebbin Project, the procurement process has been advanced as much as possible during project preparation.
5. Selection o f Consultants: This loan will not finance Consultants contracts. However, in addition to the power plant component described above, the proposed project will support, through i ts on-going parallel technical assistance and in-depth policy dialogue, the
57
implementation o f design changes currently under formulation to the electricity tariff to apply ToU pricing in order to shift the peak load. A programmatic technical assistance program o f US$250,000 for the next three years has been agreed with the Government for, inter alia, this specific purpose. The activities implemented under this program wi l l be executed by the World Bank and will follow World Bank Consultant Guidelines.
B. Assessment o f the agency’s capacity to implement procurement
6. The East Delta Electricity Production Company (EDEPC) wi l l be the Implementing Agency o f the Project. EPDC i s a subsidiary o f EEHC and has similar role in i t s area o f responsibility as the utility which i s responsible for implementation o f the ongoing El Tebbin project, the Cairo Electricity Production Company (CEPC) in the Cairo area. EDEPC and CEPC are electricity production companies closely supervised by EEHC having the same procedures and guidelines established by the holding company (EEHC). Both companies have implemented several power generating projects and have similar managerial capacity.
7. As i s usual in the Power Sector in Egypt, the Thermal Power Plants are implemented having a strong Consulting firm acting as Management Contractor with the role of: (i) designing the installations; (ii) defining the number o f packages for procurement under supply and install (single responsibility) contracts for the different parts o f the plant; (iii) carrying out all procurement actions (with EDEPC signing the contracts); (iv) integrating and coordinating the different contractors working in the project site; and (v) overall project management on behalf o f EDEPC. The Power Generation Engineering and Services Company (PGESCo) has been hired by EDEPC as Management Contractor for this project, financed by i t s own resources. PGESCo i s a much respected consulting firm owned by Bechtel and the Government o f E pt and has already performed this role in several power plants in Egypt similar to Ain Sokhna!’ The Bank has had experience o f working with PGESCo in the Tebbin Power Project where PGESCo i s having this same role.
8. An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project was carried out by Armando Araujo on June 9, 2008, updated in September 2008 and finalized during appraisal. The assessment has reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the relevant unit for administration and finance. Similarly to what has been happening in the El Tebbin project, all procurement actions for the project wi l l be carried out by PGESCO. Consequently, the Capacity Assessment, although covering East Delta Electricity Production Company has concentrated more on PGESCO, since it wi l l be responsible for the procurement actions o f the Loan that wi l l finance the Project. EDEPC’s Project Implementation Unit wi l l have one staff in charge o f coordination, follow-up and reporting to the Bank on procurement actions, however, all procurement actions wi l l be carried out by PGESCO. PGESCO has a procurement unit with twenty qualified Procurement Specialists with strong
PGESCO was established and registered in Egypt in 1993 and i s 40% owned by Bechtel International, 40% by Ministry of Electricity & Energy and 20% by a local bank. PGESCO services since then covered Sidi Krir Units I & I1 (650 MW), Sidi Krir Units 3 & 4 (BOOT 660 MW), Ayoun Moussa Units I & I1 (650 MW), Cairo North Combined Cycle I (750 MW) and I1 (750 MW), Nubaria Combined Cycle (1500 MW) and New Talkha Combined Cycle (750 MW), Kureimat Combined Cycle (750 MW), El Tebbin (2x 350MW), Nubaria 111 (750 MW), Kureimat 111 (750 MW), Cairo West (2 X 350 MW), Sidi Krir (750 MW), E l Atf (750 MW) and Abu Qir (2 X 650 MW).
30
58
knowledge o f international procurement and wel l acquainted with Bank procurement, o f which five will work full time for this project. The excellent performance o f PGESCO in carrying out procurement actions for the Tebbin project i s a recent confirmation o f the quality and experience o f this procurement team.
9. Several o f the implementation risks identified for the Tebbin Project do not apply to the proposed project since Tebbin comprised a Bank re-engagement in the Egyptian power sector and the implementation track record o f the sector and EEHC were not known to the Bank. Today, El-Tebbin i s one o f the best performing projects in the Egypt portfolio, and the implementation track-record o f EEHC (with PGESCO support) has been proven. Indeed, a year after the loan was approved by the World Bank Board o f Executive Directors, all Bank-financed contracts had been signed, and to date, all contracts under the projects are signed and under very satisfactory progress o f implementation. All fiduciary aspects have been implemented smoothly and compliance with safeguards was rated Highly Satisfactory in the Implementation Supervision Reports for al l supervision missions visiting the project (ISR).
10. The overall project risk for procurement i s AVERAGE.
C. Procurement Plan
1 1. The Borrower, at pre-appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan was finalized during appraisal, and the final version will be available in the project’s f i l e and in the Bank’s external website. The Procurement Plan will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency o f Procurement Supervision
12. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended two supervision missions on the first year o f project implementation and one mission annually to fol low up on implementation issues visiting the field to carry out review o f procurement actions.
E. Details o f the Procurement Arrangements Involving International Competition
1. Procurement Strategy
13. Before defining the different packages to carry out the procurement o f this project, the mission discussed with PGESCO and with EDEPC the procurement strategy to be followed in view o f the lessons learned from El Tebbin. The El Tebbin project i s being implemented and the procurement has been very successful. However, the prices offered by the winning bidders were substantially higher than the estimated prices at appraisal o f that project. Under this circumstance, three issues were discussed:
a. The option of having a single EPC contract versus the use of several packages - these are two strategies for implementation o f a thermal power plant, both have advantages and disadvantages. The single contract option has as i t s biggest advantage to have the
59
design, procurement, construction and final commissioning o f the plant able to provide the desired output (and corresponding outcomes) under the single responsibility o f one contractor. This however, implies in fewer number o f qualified contractors able to take this technical and financial responsibility and the high risk involved. Consequently, this solution results in higher costs for the overall power plant. The solution o f slicing the power plant in several packages (each one contracted under a turn-key contract limited to a major supply for which exists several suppliers in the world), reduces the risks to the suppliers since they wil l have their responsibility limited to the contract under their supply, an area where they have full expertise. O f course, this solution brings additional coordination work to the owner o f the plant and the responsibility for the overall design and coordination - role performed by PGESCO in this project and in previous projects in Egypt. However, this solution i s much more cost-effective, reason why EEHC has been using it in Egypt with great success and intends to continue doing so including in the Ain Sokhna project.
b. Market prices-for power generation equipment - during the last three years the cost of power generation equipment (especially for steam thermal power) has suffered dramatic increases. In general terms prices are now around 50% (or more) higher than 3 to 4 years ago. This price increase has been verified world-wide and i s hard to identify one single cause for it. I t i s true that these price increases reflect the increase in cost o f some components (like steel, aluminum and copper) and mainly reflects o i l price increases (from US$30 to nearly US$140 a barrel). On the other hand, the demand for this type o f equipment has been on a very high side, especially for China. All this combined has pushed the prices to values that are much higher than before. This explains the difference between the realized prices and the estimated prices for the El Tebbin project. As a result, the estimated cost o f this proposed project have taken this new trend into consideration, but no modification on the procurement strategy i s required since this was not the cause for the price differences. In addition, in order to increase competition, EEHC and the Bank have agreed to promote a public workshop which was held in Cairo on August 27, 2008 aiming at providing information about the Ain Sokhna project to potential bidders and to get information from bidders on the latest technology o f Supercritical and Ultra-Supercritical units. At the end o f the procurement assessment I attach a summary o f this workshop and i t s conclusions.
c. The use of fixed prices versus adjustable prices - in previous projects, EEHC has asked bidders to offer fixed prices. I t i s well known that this practice results in bidders including a premium in their prices to have an insurance against price increases during the execution o f their contracts. I t i s also o f intense debate among procurement specialists the time length (1 2, 18 or 24 months) when a contract should be for fixed or adjustable pricing - the Bank uses 18 months as a recommendation. On the other hand the use o f adjustable prices creates additional burdens to the owner o f the plant - like (a) the need to find additional funding for price increases; (b) the need for contract amendments to adjust the final contract price; and (c) the need (in the case o f public entities like EEHC) to have additional budget authorizations for contract price increases. And, the use o f price adjustment contracts, although resulting in initial lower contract prices, are not a guarantee o f lower final contract value (since the owner
assumes the price increase risks). For all those considerations i t i s EEHC decision to continue using f ix prices in their bids.
2. Goods, Works, and Non Consulting Services
14. The procurement methods to be used are: I C B (for Bank financed packages) and I C B and N C B for other packages. The Bank Loan will finance only three ICBs included in the project. The procurement for contracts funded by Loan proceeds will be carried out using the Bank’s SBD for I C B as modified and successfully used under the El Tebbin Project (Loan 7359-EG) including the agreed modifications to accommodate the sequential opening o f the technical and commercial envelopes as well as other agreed modifications to cover new clauses included in recent version (April 2008) o f the Bank standard bidding documents. The bidding processes will be advertised in the Development Business o f United Nations and in dg-Market as required by the Bank’s Guidelines as well as in the National Gazette o f Egypt (El Ahram) as required by local procedures.
15. For project implementation the same procurement arrangements used under the El Tebbin Power Project (Loan 7359-EG) are proposed. As such, the following special provisions will be used in project implementation:
a. Bidding shall be open to al l potential and qualified bidders and not exclusively to manufacturers. However, a bid from a non-manufacturer would require a commitment letter from the manufacturer.
b. In addition to clear technical specifications, the bidding documents shall include detailed and clear technical evaluation criteria.
c. During the technical evaluation, no meeting with the bidders shall take place; clarifications with bidders shall take place in writing only and can neither result in modifications o f the bids (i.e., withdrawal o f deviations) nor in changes to the bid price.
d. The bidding documents shall include a l i s t o f deviations which are considered as major. The l i s t may not be comprehensive but in any event, bids with major deviations will be considered substantially non-responsive and will be eliminated. Minor deviations and omissions may be accepted and may be quantified in monetary terms only for the purpose o f evaluation and as per detailed method spelled out in the bidding documents. This will neither affect the bid price, nor the contract price.
e. For contracts where technical deviations may, with due justification, bring additional competition to the bidding process, the bidding documents may allow bids to include a l i s t o f deviations from terms and conditions or technical specifications, and, in such event, the bidders shall provide additional price o f withdrawal o f deviations (pricing o f the withdrawal o f the deviations would be part o f the commercial bids). Minor deviations or omissions will be quantified for evaluation purposes only, by using the quotation given by the bidder, or, if not quoted, the deviation may be quantified for evaluation purposes based on pricing information available to the owner according to the specifications in the bidding documents in other similar and recent bidding.
f. If bidders are allowed to offer deviations, and in accordance with Bank guidelines, when the owner awards the contract to the successful bidder, the owner may request the bidder to withdraw any o f the deviations listed in the winning bid, at the price shown by the bidder for the deviation in attachments to the bid.
g. The bid validity period shall be sufficiently long (180 days) to cover the entire evaluation process to avoid having to request bid validity period extensions given that prices are fixed.
h. After opening the technical envelopes, the commercial envelopes shall be kept unopened and in a safe place.
i. The review process o f the technical evaluation shall be as follows: (i) preparation o f the Technical Evaluation report and recommendations by the Borrower, to be sent to the Bank; (ii) review by the Bank and, if needed, clarifications to be sought by the Bank from the Borrower; and (iii) Borrower to then receive no-objection from the Bank. Borrower will then inform the bidders o f the outcome o f the technical evaluation. For those bidders rejected due to being substantially non -responsive, the Borrower shall provide clear reasons for the rejection to these bidders who request.
Prior to the opening o f the commercial envelopes for bidders deemed responsive, adequate time (a minimum o f 5 business days) has to be provided to allow opportunity for bidders deemed non-responsive to complain, if they wish. The agreed bidding documents will establish clearly this period o f five business days for bidders to complain. Any complaint letter or communications and responses provided by the Borrower need to be sent to the Bank for information. The Bank, in consultation with the Borrower, will examine these complaints. If additional data i s required to complete this process, they will be obtained from the Borrower. If additional information or clarification i s required from the bidder, the Bank will ask the Borrower to obtain it and comment or incorporate it, as appropriate, in a revised version o f the Technical Bid Evaluation report. The Bank’s review will not be completed until any complaint submitted i s fully examined and considered.
k. Commercial bids o f substantially responsive technical bids shall be opened in public and bid prices read out. Bids o f non-responsive bidders should be kept until contract signing.
1. When the full evaluation i s completed, the Bid Evaluation Report and contract award recommendation are prepared by the Borrower and sent to the Bank for review.
m. The Bank shall, if it determines that the intended award would be inconsistent with the Loan Agreement and/or the Procurement Plan, promptly inform the Borrower and state the reasons for such determination. Otherwise, the Bank shall provide i t s no objection to the recommendation for contract award. The Borrower shall award the contract only after receiving the “no objection” from the Bank.
n. If after publication o f the results o f evaluation, the Borrower receives protests or complaints from bidders, a copy o f the complaint and a copy o f the Borrower’s response shall be sent to the Bank for information.
0. If as result o f analysis o f a protest the borrower changes i t s contract award recommendation, the reasons for such decision and a revised evaluation report shall
j.
62
be submitted to the Bank for no objection. The Borrower shall provide a republication o f the contract award in the format o f paragraph 2.60 o f these Guidelines.
p. The terms and conditions o f a contract shall not, without the Bank’s prior approval, materially differ from those on which bids were asked or prequalification o f Contractors, if any, was invited.
16. L i s t o f contract packages to be procured following I C B comprises only three contracts for: (i) steam generator; (ii) switchyard; and (iii) water, wastewater treatment and desalination plant.
1
Ref. No.
CP-104 CP- 105
l1
2
Contract (Description)
Switchyard Steam Generator Water and wastewater treatment and desalination plant
3
Procurement Method
ICB ICB
ICB
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4 5 6 7 8
P-Q Domestic Review Expected Comments Preference by Bank Bid-
Date (yedno) (Prior / Post) Opening
No N o Prior 26-Mar-09 No No Prior 10-Feb-09
No No Prior 2 1 -May-09
Annex 9: Economic and Financial Analysis EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Economic Analysis
1. The Ain Sokhna power plant i s part o f the least cost expansion plan o f EEHC, which has been assessed using the EGEAS model. Alternatives such as electricity imports or additional equivalent capacity built using renewable sources for electricity production have been rejected as their unit cost for electricity production i s above the long run marginal cost o f power (LRMC) which EEHC uses in i t s calculations. N o additional options for the rehabilitation o f existing plant could be identified for inclusion in the least cost expansion plan to add 1,300 M W o f new capacity required to match growing electricity demand.
2. Given the relatively small size o f the plant compared to the overall Egyptian electricity ~ystern,~' the project has been assessed on an individual basis, comparing i t s costs to i t s benefits. The costs comprise those required to commission a 1,300 M W steam turbine plant, estimated to be US$2,006.8 million (including contingencies but excluding customs charges), and to operate and maintain the plant. The Ain Sokhna plant i s expected to sell an average o f 6 GWh annually over a 25-year period. No salvage value was included, as costs o f dismantling the plant at the end o f the 25 years are deemed higher than the benefits o f selling the aging equipment. The quantified benefits o f the project consist o f retail sales o f additional electricity to the grid valued at willingness to pay less transmission and distribution losses. The willingness to pay was calculated based on the assumption that consumers would switch to diesel-based generators should electricity not be available from the grid. Calculations were undertaken in 2008 prices.
3. The justification for the methodology used in calculating the willingness to pay and hence the economic rate o f return, i s that in recent years as EEHC's reserve margin has deteriorated and supply shortages have become more frequent. Customers, notably industrial, have secured back-up generation in the form o f diesel-fuelled generators to ensure continuous and reliable supply. The cost (i.e., willingness to pay) o f these diesel generators in economic terms i s the estimated 12 US$/kWh, on the basis o f the weighted average cost o f diesel-fuelled electricity located at consumers' premises, with the weights being the average demand share by industrial and other users. As the sensitivity analysis shows, the willingness to pay would have to drop to 7.3 US$/kWh for the economic rate o f return to drop below 10%.
4. The calculated willingness to pay as well as the outcome o f the sensitive analysis are above the current subsidized tariff levels (3 US$/kWh). However, i t i s not assumed that this i s the willingness to pay for the entire system but rather the value o f the energy being supplied from this particular power plant (as mentioned in paragraph 2 above, the economic analysis was undertaken for this particular plant and not the system as a whole). In addition, the customer base comprises a mix o f residential, commercial and industrial consumers with the current tariff ranging from 3 US$/kWh to 6.3 US$/kWh. Finally based on the financial forecast for EEHC, future tari f f increases wi l l place the average tariff at 7.5 US$/kWh in the next 5 to 10 years, depending on whether the government can accelerate the increases as has been the trend in the past years.
3 ' The Ain Sokhna power plant represents 6% o f the total installed capacity in Egypt.
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5. This annex presents (i) a table o f electricity demand projections used in the calculation o f weights to estimate the willingness to pay; (ii) the assumptions used to calculate the willingness to pay used in assessing the benefits from additional electricity sales from Ain Sokhna; (iii) detailed assumptions to calculate the costs o f operating the Ain Sokhna plant; (iv) a table with the detailed annual costs used in calculating the cash flow o f the plant; (v) a table presenting assumptions for calculating the benefits o f the plant; and (vi) results o f a sensitivity analysis.
Electricity demand projections
Table 1: Sectoral direct price elasticity of electricity consumption in Egypt
SECTOR DIRECT PRICE ELASTICITY
Industrial
Residential
Commercial
-0.10
-0.28
-0.25
Source: EEHC
65
Assumptions used to calculate the willingness to pay
Table 3: Cost of electricity auto-production
Industrial Consumers Other Consumers unit capacity kW 1000 250 unit cost $/kW 1200 1200 capacity factor % 50 35 unit efficiency % 42 36 fuel cost $/I 0.25 0.25 heat rate converted to kg/kWh 0.2381 0.2778
capacity cost $/kWh 0.0217 0.0362 O&M cost $/kWh 0.01 0.01 1 fuel cost $/kWh 0.071 0.082 . ,total cost $/kWh 0.1023 0.1295 Source: World Bank
Demand growth shares 2006-2015 Industry 37% Agriculture 4% Public utilities 12% Commercial and others 7% Residential 35% Government 5% Others 1% Total sales 100% Source: EEHC
WTP 0.120 $/kWh Source: World Bank
Assumptions used to calculate Ain Sokhna’s costs
6. Cost o f fue l i s assessed using a shadow price for natural gas equal to US$3.00 per MBtu. This i s the calculated LRMC o f gas supply to electricity o f f take points including transmission and d i~ t r i bu t i on .~~ For Operations and Maintenance (O&M), material expenses are assumed to be constant at US$1.4 per MWh. This includes the additional O&M costs for evacuating the electricity produced by the plant through the grid. An overhaul maintenance with a value o f 75 USgYMWh i s executed every 6 years. The value o f the total fixed operation and maintenance expenses (US$20 million per year) i s divided into 60% for skilled labor, 30% for unskilled labor and 10% for administration. The plant i s assumed to be commissioned gradually from 201 2 and onwards. Overhaul every 6 years reduces the availability o f the plant accordingly.
32 Source: EEHC. In line with the government’s plan for gradual elimination o f subsidies the current gas price EEHC i s charged for the portion o f the gas it uses to generate electricity for the industrial sector i s equivalent to the estimated long-run marginal cost o f gas (US$3/mmbtu).
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7. the project l i f e t ime.
The exchange rate used i s US$1 = LE 5.50 and i s considered to b e constant throughout
Table 4: Assumptions to Calculate Ain Sokhna’s Costs Discount Rate 10% Electricity Price ($/kWh) 0.121 Plant Load Factor Auxiliary Consumption T&D Losses O&M Material Cost
75% 4.0%
12.0% 1.40 US$/MWh
Overhaul 0.75 US$lMWh every 6 years Fixed O&M 20.0 US$ million per year
Year % Availability BtulkWh Heat Rate 2009 0% 0 201 0 0% 0 201 1 0% 0 201 2 5% 7738 201 3 55% 7792 2014 95% 7808 201 5 95% 7823 2016 95% 7838 201 7 95% 7784 201 8 95% 7800 201 9 75% 781 5 2020 92% 7831 2021 92% 7847 2022 92% 7862 2023 92% 7793 2024 92% 7809 2025 75% 7825 2026 90% 7840 2027 90% 7857 2028 90% 7872 2029 90% 7803 2030 90% 7819 2031 75% 7834 2032 90% 7849 2033 90% 7866
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Table 5: Annual Costs
I9 17.13 3.00 17.1 201 0 369.45 3.00 369.4 201 1 380.50 3.00 380.5 201 2 530.66 3.00 9.9 1 .o 0.6 542.2 2013 542.16 3.00 109.8 11.0 6.6 669.5 2014 366.90 3.00 190.1 19.0 11.3 587.3 2015 3.00 190.4 19.0 11.3 220.7 2016 3.00 190.8 19.0 11.3 221.1 2017 3.00 189.5 19.0 11.3 219.8 2018 3.00 189.9 19.0 11.3 220.2 2019 3.00 150.2 15.0 13.7 178.9 2020 3.00 184.6 18.4 11.0 214.0 2021 3.00 185.0 18.4 11.0 214.3 2022 3.00 185.3 18.4 11.0 214.7 2023 3.00 183.7 18.4 11.0 213.1 2024 3.00 184.1 18.4 11.0 213.4 2025 3.00 150.4 15.0 13.7 179.1 2026 3.00 180.8 18.0 10.7 209.5 2027 3.00 181.2 18.0 10.7 209.9 2028 3.00 181.5 18.0 10.7 210.3 2029 3.00 179.9 18.0 10.7 208.7 2030 3.00 180.3 18.0 10.7 209.0 2031 3.00 150.5 15.0 13.7 179.3 2032 3.00 181.0 18.0 10.7 209.7 2033 3.00 181.4 18.0 10.7 210.1
Table 6: Annual Benefits
GWh GWh GWh GWh M$ Gross Generation Net Generation T&D Losses Net Sales Total Benefits Year
2009 2010 201 1 2012 427.1 410.0 49.2 360.8 43.1 2013 4,697.6 4,509.6 541.2 3,968.5 474.5 2014 8,114.0 7,789.4 934.7 6,854.7 819.7 2015 8,114.0 7,789.4 934.7 6,854.7 819.7 201 6 8,114.0 7,789.4 934.7 6,854.7 819.7 2017 8,114.0 7,789.4 934.7 6,854.7 819.7 201 8 8,114.0 7,789.4 934.7 6,854.7 819.7 2019 6,405.8 6,149.5 737.9 5,411.6 647.1 2020 7,857.7 7,543.4 905.2 6,638.2 793.8 2021 7,857.7 7,543.4 905.2 6,638.2 793.8 2022 7,857.7 7,543'4 905.2 6,638.2 793.8 2023 7,857.7 7,543.4 905.2 6,638.2 793.8 2024 7,857.7 7,543.4 905.2 6,638.2 793.8 2025 6,405.8 6,149.5 737.9 5,411.6 647.1 2026 7,686.9 7,379.4 885.5 6,493.9 776.5 2027 7,686.9 7,379.4 885.5 6,493.9 776.5 2028 7,686.9 7,379.4 885.5 6,493.9 776.5 2029 7,686.9 7,379.4 885.5 6,493.9 776.5 2030 7,686.9 7,379.4 885.5 6,493.9 776.5 2031 6,405.8 6,149.5 737.9 5,411.6 647.1 2032 7,686.9 7,379.4 885.5 6,493.9 776.5 2033 7,686.9 7,379.4 885.5 6,493.9 776.5
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Table 7: Cost-Benefit Results (US$ million discounted at 10%)
Year Total Costs Total Benefits Net Benefits 2009 17.1 (1 7.1 3) 201 0 201 1 201 2 201 3 2014 201 5 201 6 2017 201 8 201 9 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
369.4 380.5 542.2 669.5 587.3 220.7 221.1 219.8 220.2 178.9 214.0 214.3 214.7 213.1 21 3.4 179.1 209.5 209.9 210.3 208.7 209.0 179.3 209.7
43.1 474.5 819.7 819.7 819.7 819.7 819.7 647.1 793.8 793.8 793.8 793.8 793.8 647.1 776.5 776.5 776.5 776.5 776.5 647.1 776.5
(369.45) (380.50) (499.03) (194.98) 232.38 598.92 598.55 599.87 599.48 468.18 579.82 579.44 579.08 580.71 580.33 467.99 567.00 566.61 566.27 567.86 567.49 467.81 566.80
2033 210.1 776.5 566.40 NPV M$ $1,748.97
ERR 23.6%
Sensitivity Analysis
8. project to fal l to the opportunity cost o f capital, estimated to be lo%, are:
Switching values o f critical items that would cause the economic rate o f return on the
e. As gas price increase to US$S.OS per mmbtu.
f, An increase o f about 49% in the total project cost.
g. A delay in plant commissioning o f 6 years (2019/20 for full operation).
h. A lower average willingness to pay equivalent to 7.3 US$/kWh.
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Financial Assessment o f the Egyptian Electricity Holding Company (EEHC)
Past and Current Performance of EEHC
12. EEHC’s revenues stem from the sale o f electricity generated by i t s subsidiaries, the sales o f electricity purchased from IPPs and the New and Renewable Energy Authority. Based on audited accounts for the past three years, the company has been profitable, mainly due to regular annual increases in electricity tariffs that resumed in 2004, after a 12-year period in which the retail price o f electricity remained unchanged. EEHC’s revenues i s estimated to increase by 18% in 2007/08; this growth i s mainly attributed to the increases in the tariff (7.8% per year on average - higher than the originally planned 5% increase) and in the GWh o f electricity sold due to increase in demand.
13. The rapid growing demand for electricity required large investments over the past few decades. These investments have been largely funded by borrowings. The company continues to face challenges in meeting i t s payables and debt obligations. I t s collection performance has slightly deteriorated in 2007/08 to 86% (a 4% decrease) as a result o f increases in several commodities such as utility bills, food and fuel. The company continues to make improvements in the collection o f arrears from public entities, which i s the consumer category that tends to have the highest outstanding payments.33
14. As a result o f high investment needs, EEHC’s long-term debt i s estimated to reach LE 43.9 bi l l ion (about US$8 billion) in 2007/08, o f which the current portion reached LE 6.24 bi l l ion (US$1.1 billion). In addition, a large portion o f the company’s current liabilities comprise o f past due loan and interest payments owed to the Government and local banks. All together, current liabilities are estimated to reach LE 40.77 bi l l ion (US$7.4 billion) in 2007/08 against current assets o f LE 25.24 bi l l ion (US$4.6 billion), resulting in a current ratio o f 0.60 (Le., current assets measured as a portion o f current liabilities) and a debt service coverage ratio o f 1.48.
Future Financial Performance of EEHC
15. out for the period 2008/09 - 2019/20. Further details are recorded in the project fi les.
Projections to assess EEHC’s future financial position and performance have been carried
16. following key assumptions:
In the base scenario, projections for future financial performance are based on the
a. The natural gas price increases to 18.8 Pt/m3 in 2009 and subsequent annual increases o f 9% are applied.34
According to EEHC, the collection rate o f public entities increased f rom 15% in 2005/06 to 70% in the first three 33
quarters o f the 2007108 financial year. 34 There i s an agreement between EEHC and E-Gas on annual increases o f 9% to the cost o f natural gas. In addition, for the electricity generated for industrial consumers, there i s a pass-through arrangement in place, in which EEHC collects the equivalent natural gas price o f US$3 per mmbtu for the gas used to generate electricity to these consumers, and passes on the payment to E-Gas.
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b. Annual increases to the electricity tari f f o f 7.5% on average for consumers as agreed by the Cabinet to improve financial performance.
c. Restructuring o f local debt into equity.
d. Continued improvement in collection performance, reaching 95% by 20 1 1 /20 12.
17. The implementation o f the above ensures positive cash f low and a net profit for EEHC, enables the company to meet i t s current operating expenses and debt obligations, and allows for a gradual reduction in the levels o f accounts payables. The company will also be able to finance up to 20% o f i t s local investment needs from i t s own resources.
18. Introduction o f energy conservation measures and a pilot on time-of-use tariffs, measures which are currently under discussion would further enhance EEHC’s financial performance, reducing the overall annual increases in demand, which in turn would defer additional investment needs. In addition, potential settlements with the government o f public arrears in the payment o f energy charges and past due loan payments could accelerate the reduction in the level o f accounts receivables and payables, further strengthening EEHC’s balance sheet.
19. The end-of-project financial performance targets set for the El-Tebbin Power Project have been regularly monitored by project team during supervision and are adequate for this proposed operation. These indicators are: (i) achieving a current ratio higher than or equal to 1; and (ii) maintaining a debt service coverage ratio higher than or equivalent to 1.4 by the end o f the project.
Assumptions for projections offinancial performance of EEHC
20. company estimates for 2007/08. The projections cover the years 2009/10-2019/20.
The analysis i s based on actual audited results for the years 2003/04-2006/07 and
Key Assumptions for financial statements
Electricity demand i s assumed to be increasing according to the plan received from EEHC with an average annual rate o f increase o f 6% (Source: EEHC).
Electricity losses include technical and non-technical distribution, transmission and generation losses. Distribution losses were 10.2% in 2006/07. These losses are expected to remain constant in 2007/08, and are estimated to be gradually reduced to 9% by the end o f the project implementation (Le., 2013/14). Transmission losses stood at 4.2 in 2006/07, and are expected to be gradually reduced to 3% by 2013/14; while generation losses are estimated at 4% by the end o f the project (Source: EEHC).
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Electricity resources
Electricity Supply
Fuel
Inflation
Income Statement
Revenues
Fuel Cost
Purchased electricity
Salaries
Materials and Services
as o f 2006/07, 87% o f the gross electricity supplied i s assumed to be generated from EEHC generation companies, and 13% are purchased from the BOTs, the New and Renewable Energy Authority and Industries (Source: EEHC).
comprises electricity requirements to meet demand plus losses.
the fuels used by EEHC are natural gas, heavy and light fuel oil. The demand for these fuels i s adjusted according to the requirements o f the implementation o f EEHC’ s expansion plan (Source: EEHC).
domestic inflation i s assumed to be 10% per year as o f 2007/08, while the foreign inflation i s assumed to be 2.5% per year as o f 2007/08.
are mainly derived from electricity sales, other revenues comprise o f minor charges, such as maintenance for substations owned by others, etc.
represents the cost for natural gas and other fuels i s assumed to gradually increases on an annual basis according to projections given by EEHC.
represents the cost for electricity purchased from BOTs, the New and Renewable Energy Authority and Industries and sold by distribution companies. This cost for the New and Renewable Energy Authority and Industries i s assumed to increase at the rate o f local inflation. The calculation o f the BOTs’ cost i s divided into two components, according to the terms in the BOT contracts: half o f the BOT average price i s increased at the rate o f foreign inflation, while the other half i s increased by the annual rate o f increase in the fuel price. (Source: EEHC).
are assumed to increase with at the rate o f 15% per year (Source: EEHC).
assumed as a percentage o f gross fixed assets and assumed to increase gradually towards 3% o f gross fixed assets by 2013/14 (Source: industry practice).
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Other Operating Expenses costs include rental o f buildings, utility services for administration, vehicles, etc., and it i s assumed to increase annually at the rate o f local inflation (Source: EEHC).
Depreciation
Financial charge
the current charge i s based on the straight l ine methodology and assumed to continue as such. To this charge, the project assets are added which are assumed to depreciate over 30 years on average, Le., 3% per year (Source: EEHC).
comprises interest payments on borrowings.
For the Foreign Loans, an average interest rate o f 4.5% has been assumed in the projections based on a 10-year forecast o f LIBOR.
Sources and Applications of Funds
Internal sources
External sources
Capital investments
Debt service
Working capital
Balance Sheet
Gross fixed assets
Work in progress
Ne t Account receivables
Inventory
comprise net operating income before financial charges with the depreciation charge added back.
comprise o f borrowings.
comprise the total o f capital investments undertaken by the company including the Project (Source: EEHC).
comprises interest charges and repayments on borrowings.
i s the annual change in currents assets (less cash) and current liabilities.
represent the previous year’s gross fixed assets plus the work in progress as it i s completed.
represents the ongoing investments under implementation.
represents previous year’s receivables and the portion o f current years billings not collected less the provision for doubtful revenue (from arrears and current billings). During project preparation the project team will discuss with EEHC their current plans for reducing the high levels o f accounts receivables.
represents fuel and materials. It i s assumed that inventory will be kept at a level representing 6 months o f supply o f fue l and materials (Source: EEHC).
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Account Payables represents previous years payables for suppliers (e.g., fue l and material) and other operating expenses.
Past due loan payments represent past due loan payments that have been serviced by the Ministry of Finance, or past due loans and from the National Investment Bank (NIB). The past due loans owed to NIB are converted into equity in 2008/09. The portion owed to the Ministry o f Finance i s reduced to through settlements reached with the government, public ut i l i t ies and holding companies owned by the government. (Source: EEHC)
Interest on past due loans represent past due interest charges owed by EEHC to the government and to the NIB. The charges owed to NIB are converted into equity in 2008/09.
Retained earnings/losses represent accumulated earnings/losses incurred by the company.
Long-term debt current long-term debt represents current and future loans taken by EEHC to finance i t s capital investment program. All o f the company’s future capital investment financing needs and will be financed by loans (Source: EEHC).
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I I I
2
Annex 10: Safeguard Policy Issues EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
1. The proposed project falls under the World Bank environmental category A classification. According to the World Bank’s Operation Policy 4.0 1 on Environmental Assessment, a full Environmental and Social Impact Assessment (ESIA) was carried out by an Egyptian independent consulting firm, Engineering Consulting Group (ECG), according to the Terms o f Reference approved by the World Bank.
2. The proposed project falls under the World Bank environmental category A classification. This i s due to the project scope and magnitude (refer to the Appraisal Summary - Technical section for project description). According to the World Bank’s Operation Policy 4.01 on Environmental Assessment, a full Environmental and Social Impact Assessment (ESIA) was carried out by an Egyptian independent consulting firm, Engineering Consulting Group (ECG), according to the Terms o f Reference approved by the World Bank.
3. During the ESIA preparation, the borrower carried out a thorough public consultation process, as explained in Section D.4 o f this Project Appraisal Document on Social Assessment. Part o f the ESIA i s an environmental and social management plan (ESMP) which lays out the necessary institutional arrangements, and develops the mitigation measures to reduce environmental impacts, and the related monitoring plan to ensure that these impacts are properly managed.
4. An analysis o f alternatives was carried out during the ESIA preparation. The no action alternative to the proposed power plant would result in the demand for electricity exceeding supply, with an increasing deficit as demand increases in the future. As a result, the “no action” option was not considered to be a viable or acceptable alternative to the proposed project. Alternative electricity supply options such as importing electricity, renewable energy, rehabilitation o f existing power plants, transmission and distribution investments, and BOOT/IPPs were also considered, but it was determined that a new gas-fired plant at A in Sokhna site was the preferred alternative. Alternative technology and fuel were also considered, and it was determined that the optimal option was gas oil-fired steam units, on the basis o f primarily operational flexibility and grid stability. Finally, the site o f the plant was compared to other sites, and it was determined that the proposed site has many economic and non-economic advantages, including the fact that the site area was allocated to the Egyptian Electricity Authority (EEA) (today, EEHC) by the Government o f Egypt (Presidential Decree no. 299 of the year 1999, issued on 21 September 1999) and EEHC has given rights o f use o f the site to EDEPC.
5. The plant design incorporated various aspects to minimize environmental impacts. These include a stack height o f 150 meters, to maximize buoyancy and dispersion o f emission, low NOx, burners in the steam generators to minimize emissions o f NOx, which i s the key pollutant associated with combustion o f natural gas, and open system cooling, to maximize generating efficiency, while minimizing cost, visual impact, noise emissions and the potential for visible vapor plumes or ground fogging.
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6. The potential impacts o f the construction and operation phases o f the Ain Sokhna power plant are summarized below. The complete analysis o f impacts and mitigation i s found in the ESIA prepared for the project.
7. Air Quality. Demolition and Construction Dust. Demolition and construction activities will result in locally high levels o f dust. This may affect residential receptors or sensitive environments which l ie in the immediate boundaries o f the power plant. Existing concentrations o f airborne dust are already high in this urban industrial area. Careful management and the implementation o f mitigation measures to reduce dust generation will significantly reduce potential impacts from dust emissions on site.
8. Stack Emissions and Background Air Quality. The power plant will bum natural gas as i t s primary fuel, while mazout (heavy fuel) will only be used in emergency situations and for less than 2% o f the time. As a result, the principle pollutant during normal operation will be NOx, During emergency operation, the burning o f fue l o i l will result in emissions o f particulate matter and SO2 along with trace amounts o f other pollutants. Emissions from the plant will meet Egyptian and World Bank Guidelines. To analyze the potential impacts o f the plant’s emissions during normal operation (firing gas) on ambient air quality in the project area, dispersion modeling has been undertaken.
9. The assessment indicates that the highest concentrations for each o f the averaging periods under consideration (hourly, daily, and annual) are found to the north-north-west, north-west, and south-south-west o f the site, respectively. This i s because the winds are exposed to the atmospheric prevailing conditions, although they are overwhelmingly from the north and northwest for most o f the time. Maximum annual concentration o f NOx emissions in the ambient atmosphere due to operation o f both o f the Ain Sokhna power plant and the Suez Gulf BOOT power plant will not exceed 44.8 pg/m3 (highest annual maximum i s 44.8 pg/m3 at the location [-141.5mY -658.8mI from the plant and the maximum daily reaches 130 pg/m3 at a distance o f 271.2 m north-west the origin point intermediating the stacks. Also, Maximum “One hour Average” concentration o f N O x emissions in the ambient atmosphere reaches 322.1 yglm3 at the location [-141.5mY 461.2mI. The ESMP recommended that an air quality monitoring system composed o f 2 or 3 monitoring stations will be utilized. The monitoring station equipped with meteorological monitoring system will be located near to, or within, the power plant site, the other one or two stations will be located one down wind within the designated area o f maximum predicted pollutant concentration and the other (if any) upwind.
10. Aquatic Environment. Cooling water and process water for power plant operation will be drawn from the Suez Gulf via an intake structure. The quantity o f the cooling water that will be returned back to the Suez Gulf i s about 46 m3/second. Process water that will be abstracted from the Suez Gulf i s about 0.07% o f this quantity. Potable water will be supplied to the power plant via Suez potable water system. Cooling water will be returned to the Suez Gulf via a discharge structure whilst waste process water will be disposed o f after treatment via discharge system, which includes two pathways: plantation irrigation network and Circulating Water Discharge System (CWDS). Sanitary waste water will be disposed o f -after treatment- via plantation irrigation network. N o ground water or other surface water wil l be used during power plant construction and operation. The Contractors will be responsible for relevant watedtoilet
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facilities during construction and the need to provide appropriate services will be specified in their contracts.
11. During construction o f the power plant dredging and construction o f the intake and discharge structures could lead to potential impacts on physical aquagraphy, water quality and aquatic habitats, flora and fauna. Given that the area o f impact i s very localized, losses are in many cases temporary and field survey data available do not indicate significant or sensitive habitats, the impacts o f power plant construction on the aquatic environment are not considered to be significant. In addition, good site management and engineering practices during construction will ensure that any residual impacts are reduced to a minimum. Power plant operation will result in a heated plume o f waste cooling water being discharged into the Suez Gulf. Process water will be disposed o f to the discharge system (identified above). All discharges o f process water will be treated prior to discharge to ensure that the Egyptian and World Bank waste water quality guidelines are met. Treatment includes neutralization, o i l separation, flocculation and filtration.
12. The temperature o f the returned cooling water at the point o f discharge conforms to the Egyptian Standard, and the discharge as modeled satisfies the World Bank standard o f a maximum increase o f 3oC above ambient at the edge o f the mixing zone (1 00 m from the point o f discharge). In addition, the area affected by the highest temperature increases and therefore where aquatic ecology i s likely to be most affected, i s localized and the aquatic habitats in this area have been found to already be relatively impoverished. Outside this area, more marginal increases in the Suez Gulf water temperature are l ikely to create new or improved habitats for flora and fauna.
13. Noise. The construction o f the power plant i s expected to generate a maximum noise level o f 59 dB(A) during the day at the fence o f the power plant and 57 dB(A) at night. These worst-case construction noise levels are both within Egyptian and World Bank guidelines, and for most o f the construction periods, the noise levels will be lower than these values. There are no residential receptors within 1000 m o f the plant. Construction traffic on local roads will also generate additional noise, however noise levels on local roads predicted for peak construction activity (during 2010-2012) i s expected to be only 0.3dB(A) above ambient levels. This magnitude o f increase i s generally not perceptible to the human ear, consequently no construction traffic impacts are predicted. The potential noise emissions from the plant during operation have been modeled to provide noise contours in the area around the site. The predicted operational noise levels at the site boundary and at al l receptors are below the Egyptian and World Bank guidelines during daytime and nigh-time.
14. Flora and Fauna. N o areas protected for their conservation value are located on, or in the vicinity of, the project area. The proposed site i t se l f and the surrounding land i s poorly vegetated with much o f the area having been dominated by sands and sabkha. Given that the potential impacts o f construction and operation on power plant area likely to be localized and good site management practices will be implemented, no significant effects are predicted.
15. Land Use, Landscape and Visual Impacts. The land use at the project site i s industrial land. There i s no loss o f this land to the power plant development, as this land i s dedicated for a power generation activity since 1999, therefore there i s not significant land use impacts due to
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the power project. The surrounding land use i s generally industrial. As the land i s highly industrialized with almost no vegetation, a l l existing views will be insignificantly influenced by the power plant and given the surrounding industrial context, particularly the existing Suez Gulf power plant and industrial facilities o f Al-Sokhna port, the visual intrusion o f the power plant will be minimal. Visual impacts o f the power plant from the residential (tourist) areas to the north and south are also not expected to be significant given the long distance o f their locations from the site and orientation o f the facilities. The potential landscape and visual impacts o f the project are therefore expected to be minor and not significant.
16. Soils, Geology and Hydrology. Due to the characteristics o f the soils and geology o f the site, in particular the lack o f any sensitive features, and the mitigation measures proposed as part o f the construction and operation o f the power plant, no significant impacts are predicted to occur. In addition, preliminary land surface investigations confirmed the site as being uncontaminated.
17. Traffic. The assessment o f traffic and transport covers the changes in traffic conditions in terms o f delay and congestion during construction and operation. The greatest potential for traffic impacts to occur arises during a short period at peak construction. There i s some potential for increased congestion on the main roads to the power plant; however the impacts will only occur during the peak construction phase and during peak hours. The overall impact i s therefore predicted to be insignificant. Mitigation measures will be put in place to reduce the potential for impacts to arise. During operation, a small number o f workers and HGVs are associated with operating the power plant and no impacts are predicted to occur.
18. Archaeology, Historic and Cultural Heritage. N o available information was found which identified any archaeological, historic or cultural remains on the site or in the surrounding area. Consequently, no impact i s predicted to occur on any known archaeological, historic or cultural resources. EDEPC has incorporated mitigation measures into the construction program to ensure that any potential finds o f significance are recorded and are accorded the required protection in consultation with Supreme Council for Antiquities.
19. Natural Disaster Risks. An assessment o f the risks to the power plant from seismic activity has concluded that given the engineering measures incorporated into the design o f the power plant, the potential environmental impacts o f a seismic event during power plant operation are not anticipated to be significant. Furthermore the power plant will be designed to conform to the Uniform Building Code Zone 2 seismic criteria, according to U S regulations for earthquake. These design criteria are therefore considered sufficient to withstand the level o f seismic activity experienced in the area. The risks o f flooding during power plant construction and operation were also examined. However, site drainage will be constructed to minimize any risks o f contaminated water reaching the surroundings and to properly drain the site, no significant flood risk impacts are anticipated.
20. Major Accident Hazards. Given the wider land surrounding the power plant and the measures incorporated into the design o f the plant to minimize the risk from f i re and explosion, the plant i s not anticipated to pose a potential risk o f any significance to any third party facilities.
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21. Solid and Hazardous Waste Management. The management o f wastes during construction and operation o f the power plant will include mitigation measures to collect and store waste on-site, record all consignments o f solid or contaminated waste for disposal and periodically audit waste contractors and disposal sites to ensure that disposal i s undertaken in a safe and environmentally acceptable manner according to the rules set by Law 4/1994 and the Governorate o f Suez. Private sector contractor will be assigned via general bidding process and the contract will include detailed environmental procedures, according to Law 4,4994 and Governorate o f Suez regulations, for disposing debris materials. The contract covers all fees required. 102. During construction and operation, all wastes including debris waste, general waste, packaging waste, commercial wastes, raw-water pretreatment sludge, tank sludge and interceptor sludge will be disposed o f by licensed waste contractors according to the rules set by Law 4/1994 and the Governorate o f Suez. Solid and hazardous waste management i s not predicted to cause any significant impacts.
22. Occupational Health and Safety. With the provision o f a high standard o f health and safety management on site, construction and operation o f the power plant in accordance with good industry practice, the occupational health and safety r isks associated with construction and operation o f the power plant will be minimized and are not significant.
23. Associated Infrastructure. Connections to existing gas and electrical facilities will be the responsibility o f “City Gas”, EETC and the EDEPC respectively. In regard to the gas connection with the gas reducing station o f the site and o i l pipeline to the o i l tanks on the site no environmental or social impacts are anticipated. EEHC has already submitted a request to City Gas for their needs for the new plant which will necessitate a bigger diameter pipeline, or an additional pipeline, which will fol low the same existing pipeline.
24. The electricity generated by the proposed power plant will be exported via the 500 and 220 kV electricity transmission system. The power plant will be connected to the 500 kV switchyard via step-up transformers. The electricity generated by the proposed Al-Ain Al- Sokhna power plant will be exported by the EETC electricity network, v ia two transmission systems, double circuit 220 kV and 500 kV lines. The first will be connected to the unified network upward direction towards Suez city with approximately 40 km length, while the second will be extended to the west direction, approximately 90 km until i t meets the 500 kV transmission l ine connecting El- Kureimat and El-Tebbin 500 kV substations. Construction and operation o f this infrastructure will be the responsibility o f the EETC. The final routing i s not yet defined. Mitigation measures for this component are provided in the ESMP. EETC and EDEPC will submit Screening Form B to EEAA concerning this interconnection.
25. The min potential impacts from the transmission lines include avian and aircraft hazards; induced effects from electromagnetic fields; vegetation damage, habitat loss, and invasion by exotic species along the R O W and access roads and around substation sites; and chemical contamination from chemical maintenance techniques. Proposed environmental mitigation measures include selecting the right o f way (ROW) to avoid important bird habitats, flight routes, and human activities; installing deflectors on l ines in areas with potential for bird collisions; utilizing mechanical clearing techniques, grazing and/or selective chemical applications; selecting herbicides with minimal undesired effects; and maintaining naturally low- growing vegetation along ROW. It i s not expected that the impacts will be significant.
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Environmental and Social Management Plan (ESMP)
Table No.
10.1
10.2
10.3
26. An Environmental and Social Management Plan (ESMP) i s provided in details in the project’s Environmental and Social Impact Assessment (ESIA) report. The ESMP presents the institutional arrangements necessary for environmental management, environmental mitigation measures during construction and operation, and monitoring plans to ensure the impacts are managed. The cost o f ESMP implementation i s estimated to be $1.848 million, paid for by EDEPC with possible contribution from the Arab Funds.
Contents
Institutional Arrangements for the ESMP Implementation
Construction Impact Mitigation, Monitoring and Management Measures
Operation 1 Impact Mitigation, Monitoring and Management
27. The following pages include tables summarizing the main impacts, mitigation, and monitoring requirement for the construction and operation o f the project components. The tables also include detailed institutional arrangement for ESMP implementation, and breakdown o f the ESMP implementation cost. A summary o f the Table numbers and contents i s as follows:
10.4
10.5
Transmission System Impact Mitigation, Monitoring and Management
Monitoring Program for Ambient Air Quality, Noise and Vibration
10.7
I 10.6 I Monitoring o f the Aquatic Environment During Operation I Summary o f Implementation Cost o f the ESMP
85
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W 53
Table 10.5 Monitoring Program for Ambient Air Quality, Noise and Vibration
Item I Indicative
Sampling Monitoring cost
(US$) Locations Estimate Monitoring Parameters Frequency
at nearest residences
Dust emissions caused by construction activities, construction vehicle movements, and transport of friable construction materials.
~ ~ ~ ~ ~ ~ : 3 k )
NOz, SO2, CO, TSP and PMio.
6-10 sites at nearest receptors and fence around the piant
NOISE I Decibels (dB) A
Noise audit US$ 10-20K (included in operation cost)
Third party (e.9. NRC) Measuring instruments and equipment.
I
Operation Phase
A I R QUALITY
Emissions from stack are not expected to exceed standards.
Ambient air quality affected by emissions from the power plant.
NOISE
Automatic monitoring of stack emissions for NOx, SOZ, particulate matter and carbon monoxide (CO) via test ports installed in the main stack.
In addition, conduct surrogate performance monitoring.
Install (at least) two continuous
monitoring stations to monitor short- term concentrations in the area predicted to have the highest impacts on humans (as there are sensitive environments). The analyzer station near or within the site boundaries will include a continuous monitor of meteorological conditions (temperature, wind speed, wind direction and mixing heights).
NOX, SOz, CO, PMio & TSP
Quarterly during most of the construction period.
Continuous monitoring during 6 months ahead of commissioning.
Quarterly
Continuous and/or 24 hour average Continuous and/or passive samples every 2/4 weeks
The analyzer stations will be electronically connected to the plant controlling room and EDEPC Chairman's office.
Bi-annually to annually
On site of the project and its surroundings.
2 locations minimum: at maximum predicted pollution concentration and downwind. Third location, if any, will be 1 km upwind.
Measurement cost: US$70K
Approx. US$ 1000-1500K
2 locations minimum: at maximum predicted pollution concentration and downwind. Third location, if any, will be 1 km upwind.
Included in the plant operation
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Table 10.6 Monitoring of the Aquatic Environment During Operation
Cost in US$ ‘000 Measures Monitoring
120 1,325
138
155
70 20 20
190 1,658 1.848
Issue
Source of Funding
EDEPC EDEPC
(with possible support from the Arab Funds)
EDEPC
EDEPC
EDEPC EDEPC
Water Quality
Ambient Water Quality
Flora & Fauna (’)
Entrainment (*)
Parameter
Temperature & pH of all discharged water
COD, TSS, Oil & Grease, residual chlorine of effluent
Heavy metals & other pollutants of effluent
Temperature, pH, COD, BOD, TOC, DO, TSS, oil & grease, residual chlorine, heavy metals & other pollutants
Benthic flora & fauna
Fish entrainment on screens
Method
Continuous automatic monitor in discharge structure
Sample taken from water in discharge structure and submitted for lab. Analysis
As above
Grab sampling and analysis within the area predicted to be affected by the discharge plume
Notes: (1) To be undertaken for the first 3 years of plant operation (2) To be undertaken for the first year of plant operation.
Abbreviations: COD: Chemical Oxygen Demand BOD: Biological Oxygen Demand TOC: Total Organic Carbon DO: Dissolved Oxygen TSS: Total SusDended Solids
Transect sampling (following same method as in baseline monitoring) within a 2 km radius of the discharge point
Removal and analysis of any debris caught in intake screens
Frequency of measurements
Continuous
Daily
Monthly
3-monthly
Annual
Weekly
- No.
1 -
- 2
-
Table IO. 7 Summary of Implementation Cost of the ESMP ~ ~~ ~~ ~~
Phase of Implementation
Construction Phase
Pre-commissioning Monitoring (ambient air quality monitoring equipment)
All others
Training
Operation Phase Training
Sub. Total Grand Total
108
Resettlement Policy Framework
Context
28. I t i s a widely accepted fact that if left unmitigated, involuntary resettlement under development projects may give rise to economic, social and environmental risks. The purpose o f the RPF i s to establish the principles for social impact mitigation and to clarify the organizational arrangements that may be needed during preparation and implementation. This includes compensating al l project-affected persons (PAPs) for the loss o f lands, properties and livelihoods resulting from resettlement and land acquisition as well as assisting PAPs in relocation and rehabilitation. The RPF shall be particularly sensitive to the impacts which displacement may have on vulnerable and marginalized groups, including the poor, landless, women or people with mental or physical disabilities.
29. Since some o f the project’s physical components may result in involuntary resettlementhind acquisition, OP 4.12 on Involuntary Resettlement i s triggered, and a Resettlement Policy Framework (RPF) has been prepared. An RPF i s the instrument used, because the nature and extent o f land acquisitionhesettlement o f the various sub-components are not known at appraisal. In the context o f this project, this applies e.g., to the construction o f associated infrastructure, in particular the planned 130 kilometers o f transmission lines which may entail some degree o f land acquisition and/or resettlement.
30. The key purpose o f the RPF is to establish resettlement objectives, principles, organizational arrangements and funding mechanisms for any resettlement operation that may be necessary. When during implementation the exact extent o f land acquisition becomes known, a Resettlement Action Plan (RAP) or abbreviated R A P - depending on the scale and severity o f impacts - will be prepared. The resettlement process should be completed prior to the start o f physical works.
Principles and objectives governing resettlement
31. The RPF discusses legal and institutional aspects o f expropriation and in some areas Egyptian law and Bank rules and regulations differ, although actual practice might not differ as much as indicated in the law.
32. Minimization of resettlement: The expropriation o f land and resettlement i s minimized according to Egyptian law, and within the framework o f the Constitution, the Civ i l Code in Article 805 states that “No one may be deprived o f his property except in cases prescribed by law and this would take place with an equitable compensation”. Although squatters and tenants are not covered by the law, these groups are rarely resettled without some form o f compensation. If involuntary resettlement i s unavoidable, resettlement activities should be implemented as sustainable development programs where sufficient resources are provided to give the PAPs an opportunity to share in project benefits. PAPs shall be meaningfully consulted and given opportunities to participate in planning and implementing resettlement plans. PAPs should through compensation be able to improve their livelihoods and standard o f living, or at least restore them to pre-displacement levels.
109
33, Legal process is obligatory: All ex ropriations and activities related to resettlement must be carried out according to Egyptian law.39 Any occupant subjected to resettlement has the right to complain within 15 days o f receiving the notification to a specialized committee established by the appropriate authority. The committee should reach i t s decision concerning the complaint within a maximum o f one month.
34. Compensation and eligibility principles: Compensation for lessees and squatters i s not explicitly addressed in Egyptian law. However, although the government, legally speaking could dispose o f e.g., squatter land without compensation, in reality this right i s almost never exercised.
Procedures for preparing and approving RAPS
a.
b.
C.
d.
e.
f.
g.
h.
Expropriation procedures start with a declaration o f public interest pursuant to a Presidential Decree accompanied with a memorandum on the required project and a complete plan for the project.
Based on the above, Egyptian General Authority for Land Survey (ESA)36 submits request to the President or the Prime Minister including proposed compensation level to be offered to the Concerned property owners.
If approved, the President would issue the required decree declaring the property in question appropriated in the public interest.
ESA conducts necessary technical and survey operations to obtain information on the property.
A committee composed o f a representative o f ESA, a representative o f the local government unit within which jurisdiction the project i s located and the treasurer o f the local area in question i s established. The committee shall declare i t s activities to the public 15 days prior to the commencement o f i t s work.
ESA shall inspect the property o f the project in question and estimate compensation to be considered by the Compensation Estimation Committee.
L i s t s of al l real properties and facilities being identified shall be prepared, their areas, location, description, names o f their owners, and holders o f property rights therein, their addresses, and the compensation determined by the Compensation Estimation Committee.
ESA shall thereafter officially notify the property owners and other concerned parties. L i s t s with detailed information will be posted for a period o f 1 month in the offices o f
35 Articles 29 and 34 on property rights of the 1971 Constitution, Civil Code, Art icles 802-805 (on private property). To reflect this constitutional mandate, Law 10 o f 1990 concerning the Expropriation of Ownership for Public Interest was issued. In addition, expropriation o f property i s further regulated by Law 59 o f 1979 (Establishment of New Urban communities and Law 3 of 1982 concerning Urban Planning. 36 Egyptian Survey Authority
110
the concerned local government unit and shall also be published in the Official Gazette and in two widely read daily newspapers.
i. Owners and concerned parties shall be officially notified with an evacuation request within a period not to exceed 5 months from the date o f their notification.
Estimated population displacement and/or land acquisition
35. Cannot be determined prior to implementation.
Categories of project affected people
36. Project affected people may include owners, tenants and people without formal tenure. The marginalized and vulnerable sections o f the population will as indicated above, require specific attention.
Gaps between Egyptian laws and World Bank policies
37. There may be gaps in several areas which may require conciliation including: the definition o f resettlement, methods to calculate compensation, legal status o f squatters, and support during the transitional period, as well as level o f attention given to vulnerable groups. A table comparing Egyptian regulations with World Bank policies (OP 4.12) has been included in the RPF.
Methods for evaluating assets
38. Compensation o f Lands and Structures: Determination o f the compensation to be given to expropriated property owners and holders o f rights therein i s made at two separate levels. The f i rst i s made by the Expropriating Entity in order to meet the requirement that the estimated compensation amount i s deposited with ESA prior to proceeding with the remaining formalities. The second level i s a review o f the estimated compensation by the Compensation Estimation Committee within ESA.
39. Compensation i s determined pursuant to prevailing prices at the time the expropriation decree i s issued and the estimated compensation amount shall be deposited with ESA within one month from the date o f such decree. I t i s possible, if approved by the property owners or right holders to obtain in-kind compensation either in full or in part.
40. Valuation and compensation o f structures: The value o f structures to be demolished will be assessed by professional evaluators, either from the ESA, or from private offices certified by ESA.
41. Valuation of losses of income for businesses: Estimate o f net monthly profit o f the business, based on records if any, on operator’s statements, cross-checked by an assessment o f visible stocks and activity.
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Resettlement and compensation planning
42. Following the identification o f components that may necessitate involuntary resettlement, the next step would be to prepare a socio-economic study in which baseline data within the target area i s collected. This information i s used in determining the appropriate compensation and assistance for each affected individual/household. In this process stakeholders will be fully engaged, resettlement preferences o f the PAPs identified and any concerns or worries that the PAPs may have will be fully documented. The subsequent Resettlement Action Plan (RAP) will assess the number o f PAPs involved and identify anticipated impacts. The process will be participatory and all the elements o f the resettlement process will be spelt out in detail. Organizational responsibilities, implementation schedule, a detailed budget as well as monitoring and evaluation procedures will be established.
Grievance redress mechanisms
43. As outlined in the RPF, grievance redress mechanisms include both a proactive approach (widespread disclosure o f project, clarification o f eligibility criteria, etc.) and a reactive approach (settling disputes amicably at the local level, involving project management, the courts). All concerned parties have the right to object to the compensation determined. Grievances resulting from misunderstandings o f policy or neighbor conflicts are often solved through mediation. The first instance o f dispute handling will be set up with the aim o f settling disputes amicably. The concerned owners have the right, within 30 days from the date o f posting the l ists and information o f the expropriated properties, to object (to the ESA) to the information contained in such l ists. In case o f disputes between several individuals, each party must present al l relevant evidence within 90 days from submitting the memorandum o f objectiordgrievance. The ruling o f ESA can be appealed to the Court and must be done within 60 days. Court cases are known to require long periods o f time before settlements can be reached.
44. Mechanisms for consultation with and participation o f affected persons in planning, implementation and monitoring displaced persons are provided timely and relevant information, but are not, according to Egyptian law, consulted on resettlement options and do not participate in planning, implementation and monitoring o f the resettlement process.
Vulnerable groups
45. Egyptian legislation does not specifically state any privileges for vulnerable groups. However, the World Bank’s OP 4.12 emphasizes the need to give special attention to the rights o f vulnerable groups to make sure that they are not excluded from any adopted measures within the overall resettlement actions.
Disclosure requirements
46. The Bank puts major emphasis on both the participation o f PAPS and public disclosure o f relevant resettlement documents. The PAPs should be fully consulted and should participate in both planning and implementation o f resettlement programs. With regard to RPF/RAP disclosure OP 4.12 requires that the project discloses information as a condition o f appraisal o f projects involving resettlement. The borrower provides the Bank with the relevant draft resettlement instrument which conforms to this policy, and makes it available at a place accessible to
112
displaced persons and local NGOs, in a form, manner, and language that are understandable to them. The draft RPF should be circulated to al l relevant institutions (e.g., concerned ministry, governorate, relevant land agencies, and others as appropriate). Comments should be incorporated into the final RPF together with WB comments.
47. Consultation on the RPF i s to be organized by the appropriate government agency through the project. Information and consultation are proposed to be implemented in the course o f the preparation o f subsequent RAPS. The sharing o f information should coincide with the cut- o f f date (information should not be delivered in advance o f the cut-off date to avoid encroachment o f new arrivals), information will be provided to potential PAPs on the project including resettlement and compensation principles as they are outlined in the RPF. With regard to RAP consultation: once these are available in draft form, they should be discussed with local authorities (e.g., District executive and elected Councils) and affected communities, whose comments will be incorporated into final documents.
Budget and sources of funding
48. OP 4.12 states that the full costs o f resettlement necessary to achieve the objectives o f the project should be included in the total costs o f the project. However, in this project where the exact location o f associated infrastructure will not be known at appraisal, a site-specific Resettlement Plan should present the details on costs and financing sources. These should include al l costs related to the resettlement process, including compensation and administrative costs as well specific sources o f funding, and the EEHC and their concerned affiliate companies will be fully responsible for any compensation for resettlement and/or land acquisition.
Monitoring of implementation
49. In each case when any type o f land acquisition and compensation i s involved, all actions should be documented, including responsible agencies, expected completion date, and if delayed, the reasons should be specified as well as the new expected completion date. Internal monitoring will be done every two months and will cover compensation standards, resettlement progress, delivery o f compensation and transitional assistance to PAPs, especially to vulnerable groups and will assess how grievance issues are handled. In addition an independent agency will be required to carry out external resettlement monitoring and evaluation. This will include an assessment o f consultation and public disclosure. The competence o f EEHC staff, adequacy o f compensation, ability to reach the most vulnerable PAPs and effectiveness o f grievance redress mechanisms will also be evaluated. As part o f the reporting to the World Bank, quarterly monitoring reports will include monitoring and reporting o f any resettlement and/or land acquisition activities.
Public consultation and Disclosure
50. In order to ensure that the views and interests o f all project stakeholders are taken into account, public consultation has been carried out according to the Egyptian guidelines, which require coordination with other government agencies involved in the ESIA as well as obtaining views o f local people and affected groups. This consultation has been undertaken as part o f the
113
ESIA process. The adopted methodology for the public consultation, which conforms to Egyptian guidelines and World Bank requirements, comprises four elements, namely:
discussions with local stakeholders and interested parties during preparation o f the environmental documents for local permitting requirements;
0 discussions with local stakeholders during the scoping meeting organized in the Suez Governorate, and preparation o f this ESIA-Report;
the organization o f a Public Meeting in the Suez Governorate, and
0 on-going consultation through an “open-door” policy during construction andoperation o f the power plant.
51. A variety o f environmental and socio-economic issues have been covered in these consultations. A full methodology for consultation and disclosure i s presented in the project’s Public Consultation and Disclosure Activities (PCDA), given in Annex D o f the ESIA.
52. A scoping session for this ESIA, undertaken by ECG in collaboration with the EEHC and EDEPC, took place on June 2, 2008 during which a wide selection o f personnel from different orientations contributed actively to i t s activities (1 73 participants). The key objectives o f this consultation were to identify primary and secondary stakeholders, ensure that they had received sufficient information about the project during earlier ECG/EEHC/EDEPC consultation activities and to identify their immediate concerns.
53. A second consultation meeting with 105 participants was convened on August 6, 2008. This consultation was announced in daily newspapers well in advance, along with invitations sent to al l relevant stakeholders. Those consulted in these sessions expect the project to have significant positive long-term impacts, and in the short te rm considerable additional local employment will be created. A more detailed description o f these meetings as well as other consultation activities i s presented in the project’s Public Consultation and Disclosure Activities. (Annexes A-D o f the ESIA).
54. interested parties about the Al-Sokhna Power project include the following:
As far as public disclosure i s concerned, major initiatives to inform the public and
press advertisement describing the project and inviting interested parties to attend the public meeting and review the Draft Final ESIA Report;
0 distribution o f an invitation and Arabic copy o f the N o n Technical Summary describing the context o f the power plant, the technology employed, the impact on the environment, the mitigation measures and the ESMP; and
disclosure of the Draft Final ESIA Report and the Executive Summary, including ESMP locally and via the Infoshop.
55. The ESIA report was disclosed at the World Bank’s Infoshop on September 11, 2008. In-country disclosure took place at the same time in easily accessible places to the public,
114
including EEAA, EEHC’s Public Relations Department, and EDEPC’s Public Relations Department.
115
Annex 11: Project Preparation and Supervision EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Planned Actual PCN review April 3,2008 Apri l 3, 2008 Initial PID to PIC Apri l 7, 2008 Initial ISDS to PIC Apri l 9, 2008 Appraisal October 8, 2008 October 12,2008 Negotiations December 2,2008 December 2,2008 BoardRVP approval January 29,2009 January 29,2009 Planned date o f effectiveness Planned date o f mid-term review Planned closing date
June 30,2009 September 15,2013 December 3 1,20 15
Key institutions responsible for preparation o f the project:
Egyptian Electricity Holding Company East Delta Electricity Production Company
Bank staff and consultants who worked on the project included:
Name Title Unit Akram El-Shorbagi Senior Financial Management Specialist MNAFM Anna Bjerde Armando Araujo Khalid Boukantar Knut Opsal Laila Mohamed Kotb Lizmara Kirchner Maged Hamed Masaki Takahashi Mohab Hallouda Mohamed Yehia Abd El Karim Waleed Saleh Alsuraih
Lead Energy Specialist, TTL Procurement Adviser Program Assistant Senior Social Scientist Program Assistant Infrastructure Specialist Senior Environmental Specialist Senior Power Engineer Senior Energy Specialist Financial Management Specialist Energy Specialist
Bank funds expended to date on project preparation: 1. Bank resources: $270,000 2. Trust funds: $0 3. Total: $270,000
M N S S D MNAPR MNSSD M N S S D MNC03 MNSSD M N S S D M N S S D M N S S D M N A F M M N S S D
Estimated Approval and Supervision costs: 17. Remaining costs to approval: 18. Estimated annual supervision cost:
$1 12,000 $100,000
116
Annex 12: Documents in the Project File EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
1. Environmental and Social Impact Assessment 2. Resettlement Policy Framework 3. Feasibility Study o f the Ain Sokhna Power Project 4. Procurement Capacity Assessment, June 2008 5 . Detailed Financial Analysis o f EEHC and detailed assumptions 6. Terms o f Reference for Environmental and Social Assessment, February 2008 7. Report on Development o f a Load Management Program and Design o f Time o f
Use/Seasonal Pricing - by Economic Consulting Associates Ltd. 8. Terms o f reference for the PPP consultant 9. Terms o f reference and report on wind market development under a commercial framework.
117
Annex 13: Statement of Loans and Credits EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Difference between expected and actual
disbursements Original Amount in US$ Millions
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
PO95392 PO943 1 1
2008 2008
EG-NATURAL GAS CONNECTIONS EG INTEGRATED SANITATION & SEWERAGE INFR EG-MORTGAGE FINANCE West Delta Water Conserv. & Irrig. Rehab EG-EL T E B B N POWER Second Pollution Abatement Project
& MGT EG-Early Childhood Education Enhancement
PROJECT
EG-INTEGRATED IRRIGATION IMPR.
EG-AIRPORTS DEVELOPMENT
EG-SKILLS DEVELOPMENT EG-HIGHER EDUCATION ENHANCEMENT PROG EG-NATIONAL DRAINAGE I1 EG Secondary Education Enhancement Proj EG East Delta Ag. Sew. EG-HEALTH SECTOR
75.00 120.00
0.00 0.00 0.00 0.00
0.00
0.00 0.00 0.00
75.00 120.00
0.00 0.00 0.00 0.00
PO93470 PO87970 PO91945 PO90073 PO73977
2007 2007 2006 2006 2005
37.10 145.00 259.60 20.00
120.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
37.53 145.00 216.67
18.00 114.99
11.69 0.00 20.00 0.00 23.80 0.00 2.67 0.00
22.49 0.33
PO82952 2005 9.96 0.00 20.00 0.00 0.00 0.00 0.00 17.94
PO82914 2004 335.00 0.00 0.00 0.00 0.00 92.04 43.71 -3.23
PO49702 PO56236
2004 2002
5.50 50.00
0.00 0.00 0.00 0.00
0.00
0.00 0.00 0.00
3.12 3.20
3.12 -0.23 3.20 -0.46
PO45499 PO50484
2000 1999
50.00 0.00
0.00 0.00 50.00 0.00
0.00 0.00
0.00 0.00
2.43 25.08
2.43 0.52 19.87 18.21
PO491 66 PO45 175
1998 1998
0.00 0.00
15.00 0.00 90.00 0.00
0.00 0.00
0.62 0.00
4.86 2.87
3.51 3.24 -5.87 -7.36
Total: 1,237.20 155.00 0.00 0.00 0.62 878.73 160.58 11.02
EGYPT, ARAB REPUBLIC OF STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions o f US Dollars
Committed Disbursed
IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
1996 ANSDK 1.33 0.00 0.00 0.00 0.56 0.00 0.00 0.00 2004 Alexandria Fiber 8.00 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2001 Amreya 4.69 0.00 0.00 0.00 4.69 0.00 0.00 0.00 2006 CIB LLC 0.00 0.72 0.00 0.00 0.00 0.48 0.00 0.00 1999 CIL 0.00 0.74 0.00 0.00 0.00 0.74 0.00 0.00 2004 CIL 0.00 0.15 0.00 0.00 0.00 0.15 0.00 0.00 1992 Carbon Black-EGT 0.00 1.48 0.00 0.00 0.00 1.48 0.00 0.00 1997 Carbon Black-EGT 0.00 1.48 0.00 0.00 0.00 1.48 0.00 0.00 1998 Carbon Black-EGT 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00 2000 Carbon Black-EGT 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
118
Committed Disbursed
IFC IFC
Loan Equity Quasi Partic. Loan Equity Quasi Partic FY Approval Company
2002 2006 2006 2004 2005 2006 2001 2004 1986 1988 1992 2005 2002 1992
1996 2001 200 1 2002 2006 2004 200 1 1997 200 1 2005
Ceramica AI-Amir Cmrcl Intl Bank EFG Hermes EHF Egypt Factors Gippsland IT Wont Lecico Egypt Meleiha Oil Meleiha Oil Meleiha Oil Merlon Egypt Metro Misr Compressor Orix Leasing EGT Orix Leasing EGT Orix Leasing EGT Port Said S E E M SONUT SPDC SUEZ GULF UNl UNI Wadi Group
3.33 0.00 20.00 0.00 0.00 0.00 0.00 8.94 0.00 0.00 0.00 1.00 10.50 9.70 4.00 0.00 1.09 41.07 4.18 10.00 18.40 40.40 2.05 2.06 15.00
0.00 23.28 0.00 1.70 3.00 4.61 2.00 0.00 8.62 9.20
13.00 0.00 0.00 0.00 0.00 0.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
132.53 0.00 0.00 0.00
129.07 0.00 0.00 0.00
3.33 0.00 0.00 0.00 0.00 0.00 0.00 8.94 0.00 0.00 0.00 0.00
10.50 9.70 0.00 0.00
1.09 41.07
4.18 0.00
18.40 40.40
2.05 2.06 7.50
0.00 23.03
0.00
1.70 0.00 2.03 2.00 0.00 0.00 0.00 0.94
0.00 0.00 0.00 0.00
0.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
132.53 0.00 0.00 0.00
129.07 0.00 0.00 0.00
Total portfolio: 214.74 70.51 4.00 261.60 165.47 34.56 0.00 261.60
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
2004 ACB Acrylic 0.00 0.00 0.00 0.00 2004 Merlon Egypt 0.00 0.00 0.00 0.02 2000 ACB Expansn I11 0.00 0.00 0.00 0.00
2006 Rally Energy 0.01 0.00 0.00 0.00
Total pending commitment: 0.01 0.00 0.00 0.02
119
Annex 14: Country at a Glance EGYPT, ARAB REPUBLIC OF: Ain Sokhna Power Project
Egypt, Arab Rep. at a glance 17106
2007 148.1 21.9 3t .a 14.0 24.3
2.1 '-
law- annurrlqh) GDP 4.1 4.5 GDP per oaplpite 2.0 2.6 Exparts of weds and services 6.3 9.5
E c o n d c ratlor"
Trade
Domesdc Capital savhgs formation
IndeWness
75.5 31 3 1,580 2,794 119.4 em
lW7 2096 20*7 (76 of GDPl Agricult m 20.5 170 14 1 130 Induetiy 27 1 31 2 38.4 355
Mmufacturinq lB.5 176 16.6 15 6 Servims 62.4 51.8 475 51.5 Household final consumption expondituro 69.9 7 7 2 70.6 748 Gonod gov? final misumption oxpditure 14.3 11.3 123 t t 2 lfnports of g o d s and services 22.8 249 31 6 39.2
1.8 1.8 2.8 3.6
Grwth of capital and GDP (Qa)
a,
0
-a0
CF -CDP .
43 67 71 To 29 34
98 89 71 73
105 106 107 108 102 103
5
1993 aooB
78.4 107.6 17.6 18.7 18.8 29.9 11.5 17 1 17.3 22.0 0.2 1.6 1 .0 0.6
384 27.3 10.0 5.4
.. 24.0 .. 63.1
Lite expectancy 3,437 1,881 6,486 T
1 .l 1.5
42 69 41 25 88 88
11 1
GNI Gross per capita enrollment
1 Access to impwad water source
a006 2007 2ow-11 I 6,8 7.1 6.8 4.9 5.2 6.7
21.3 14,2 19.6
.- 0.- .-" II" MI* LA*-
120
PRICES and 00VERNMENT FINANCE
mmrtic prices (% claoI7Qd Consumer prices hplicit GDP deflator Govarnmt a n * w (0x1 c4 GDP, mdudm current gmb) Current rwmue Currenl budget b l a m e Overall surplwddeficit
T W E
(Us$ rnalionsl Tdral e m (fob)
cotton Other a,&ulture Manufactures
Total imprts (cif) Food Fuel and energy Capital goods
Exp~Ft price index 1,2004 f0.3 Import pnw index (ZOO& faol Terms of trade (&X&tOOl
BAWJCE of PAYMENTS
(Us$ mP/b.w.l Exports of gooads and sewices ImpDrts of pods and senices Resource balance Net income Net currmt transfers
Current account balance Financing items (not) Changes in net resews
Aiknnc: Reserves iwluding qold {US$ m'l&m] Conversion rate (DEG /mal/uS$I
EXTERNAL DEBT and RESOURCE FLOWS
{Us$ mrllionsl Total debt outstanding and disbutsed
IBRO IDA
Total de& sewice IBRD IDA
Official grants Official creditors Private cruditom Foreign direct investment [net inflows) P&io equity (net inflows)
World Bmkprogmm Ccrmmitmente Diskmoments Principl repaymen@ Net flows Interest prtylnonts Net transfers
Composition of net resau~e flows
W87
31 .1
20 3 20.3 26.2
'1987
2,264 458 343 685
7,323 2,338
884 1.764
87 86
101
1987
5.667 9,468
-3,801
-480 3.356
-924
1 06 619
1.3
1987
44,147 1.703
892
1,661 244
I O
560 753 574 948
0
0 183 125 3%
129 -91
1997
8.2 9 9
22 8 22.8 24 3
1W
5.345 2,578
107 1,302
15,565 2,885 1,909 4,114
126 116 108
1m
14,534 19,528 -4,994
967 4,145
119
1'793 -1,912
3 4
'1w
30,102 869
1,206
1,985 297 24
1,028 -10 -37 89 1 5 15
75 260 24 1
19 80
-6 1
2006
4.2 7 4
27.3 27.4 28.5
2006
18,455 10,407
146 5,172
30,441 1.921 5,443 7.888
150 135 I t 1
2006
33,891 38,217 -4,326
53 1 5'547
1 ,?52
1.502 -3,253
26,660 5.7
2006
29,339 544
1,481
2,201 93 53
639 - 1 .a40
-250 10,043
502
817 164 108 56 39 18
2007
10.4 10 5
25.3 0.3
-8.3
2007
21,336 1 1,038
182 5,947
37,469 2,159 5,928
12,030
157 138 113
2007
40,008 50,121
-10,114
940 11 $91 5
2,741
3,940 -6,681
33,320 5 7
2007
I "I 02 m os 06 06
OF dofistor e C P I
Export and Impon k v d a (US$ m1M
40,WO
30,wo
20,mo
10,wo
0 01 02 CU 04 06 06 07
Erportb Imports
Composition of 2006 debt (US$ mill.)
A544 B. lA81
E, PD,OOs.
A - iBRD B IDA D ~ Omer muMaarnl F - Ptiwate G - IMF
E . Rllate ral
G - 6 hon-porn
~~~
Note: This tableworkduced tom the k v e l o ~ ~ fconwnicg LDB database. 91 17/08
121
W e s t e r nW e s t e r n
D e s e r tD e s e r t
L i b y a n P l a t e a uL i b y a n P l a t e a u
Li
by
an
D
es
er
t
QattaraQattaraDepressionDepression
Ea
st
er
n
D
es
er
t A L WA D IA L WA D I
A L J A D I DA L J A D I D
MARSA MATRUHMARSA MATRUH
ASWANASWAN
QENAQENA
SOHAGSOHAG
ASSIUTASSIUT
SOUTHERNSOUTHERNSINAISINAI
NORTHERNNORTHERNSINAISINAI
SUEZSUEZEL FAYOUMEL FAYOUM
BENI SUEFBENI SUEF
AL MINYAAL MINYA
AL BAHRAL BAHR
AL AHMARAL AHMAR
LuxorLuxor
Kom OmboKom Ombo
HalaibHalaib
SiwaSiwa
QaraQara
MutMut.
Ras GharibRas Gharib
TabaTaba
Abu ZenimaAbu Zenima
QenaQena
SuezSuez
AswanAswan
SohagSohag
AssiutAssiut
BenhaBenha
TantaTanta
DamiettaDamietta
El TurEl Tur
ZagizigZagizig
Al MinyaAl Minya
IsmailiaIsmailia
DamanhurDamanhur
El-KhargaEl-Kharga
Beni SuefBeni Suef
El FayoumEl Fayoum
El MansuraEl Mansura
Shibin el KomShibin el Kom
Kafr elKafr elSheikhSheikh
CAIROCAIRO
LakeLakeNasserNasser
NileNile
RiverRiver
G I Z AG I Z A
GizaGiza
1
89
10101111
1212
2
3
4
5
6 7
Luxor
Kom Ombo
Halaib
Marsa 'Alam
Salum
Siwa
Qara
Mut.
Quseir.
Bir Seiyala
Ras Gharib
Taba
Abu Zenima
Giza
Marsa Matruh
Qena
Suez
Aswan
Sohag
Assiut
Benha
Tanta
Damietta
El Tur
Zagizig
Al Minya
Ismailia
Damanhur
El'Arish
El-Kharga
Beni Suef
El Fayoum
Port SaidEl Mansura
Alexandria
Al Ghurdaqah
Shibin el Kom
Kafr elSheikh
CAIRO
A L WA D IA L J A D I D
MARSA MATRUH
ASWAN
QENA
SOUTHERNSINAI
NORTHERNSINAI
SUEZ
G I Z A
AL BAHR
AL AHMARASSIUT
EL FAYOUM
BENI SUEF
AL MINYA
SOHAG
1
89
1011
12
2
3
4
5
6 7
S U D A N
SAUDIARABIA
JORDANISRAEL
LIBYA
WEST BANKAND GAZA
Aswan Dam
Nile
River
LakeNasser
Gulf of Suez
Gul
f of
A
qaba
Red
Sea
M e d i t e r r a n e a n S e a To Tel Aviv
To Port SudanTo
BerberTo
Dongola
To Jalu
To Darnah
W e s t e r n
D e s e r t
L i b y a n P l a t e a u
Li
by
an
D
es
er
t
QattaraDepression
Ea
st
er
n
D
es
er
t
25°E 30°E
30°N
25°N
20°N
30°N
25°N
20°N
35°E
25°E 30°E 35°E
ARAB REPUBLICOF EGYPT
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
0 50 100 150
0 50 100 150 Miles
200 Kilometers
IBRD 36676
DECEMBER 2008
ARAB REPUBLIC OF EGYPT
AIN SOKHNA POWER PROJECT
MAIN ROADS
RAILROADS
GOVERNORATE BOUNDARIES
INTERNATIONAL BOUNDARIES
SELECTED CITIES AND TOWNS
GOVERNORATE CAPITALS
NATIONAL CAPITAL
RIVERS
AIN SOKHNA POWER PLANT
AIN SOKHNA POWER PLANT
GOVERNORATES IN NILE DELTA:123456
KAFR EL SHEIKHDAMIETTAPORT SAIDALEXANDRIABEHEIRAGHARBIYA
DAGAHLIYAMENOUFIYASHARGIYAHQALIUBIYAISMAILIACAIRO
789
101112
