Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Power Recovery Project (P144029) EUROPE AND CENTRAL ASIA | Albania | Energy & Extractives Global Practice | IBRD/IDA | Investment Project Financing | FY 2015 | Seq No: 6 | ARCHIVED on 29-Jun-2018 | ISR33395 | Implementing Agencies: Ministry of Infrastructure and Energy, Republic of Albania Key Dates Key Project Dates Bank Approval Date:29-Sep-2014 Effectiveness Date:30-Jan-2015 Planned Mid Term Review Date:07-May-2018 Actual Mid-Term Review Date:07-May-2018 Original Closing Date:30-Nov-2019 Revised Closing Date:30-Nov-2019 Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objective is to improve reliability of power supply and financial viability of the power sector. Has the Project Development Objective been changed since Board Approval of the Project Objective? No PHRPDODEL Components Name Short Term Complementary Power Import Support:(Cost $30.00 M) Upgrading Distribution Infrastructure:(Cost $93.00 M) Transmission Meter/Data Center Upgrade:(Cost $20.00 M) Supporting Power Sector Reforms and Project Implementation:(Cost $7.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO  Moderately Satisfactory  Moderately Satisfactory Overall Implementation Progress (IP)  Moderately Unsatisfactory  Moderately Unsatisfactory Overall Risk Rating  High  High 6/29/2018 Page 1 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Implementation Status and Key Decisions 1. Three out of four project components are now progressing satisfactorily. There are no major issues on environmental and social safeguards compliance. However, the largest component “Upgrading Distribution Infrastructure” has experienced significant delays and will not meet the envisaged targets by the November 2019 project closing date. As such, the project implementation progress is rated as moderately unsatisfactory. Different measures have been agreed with OSHEE to address implementation shortfalls, starting with the urgent launching of installation works on equipment procured and currently in storage and launching of the new billing system. These will help expedite implementation and allow for rating upgrades. The timely implementation of a metering system to medium voltage grid (MV feeders), low voltage grid (LV level in distribution cabins) and to the end- users as well, will also reinforce the loss reduction and revenue protection program. To achieve a successful launch of the new billing system this year requires completion of customers’ database cleaning by October. Accurate customers’ database and an effective billing system will help reduce commercial losses effectively at a low cost. 2. Financial viability of the power sector. While progress has been made over the last three years, placing KESH and OST on a relatively sound financial framework, OSHEE continues to face a financial gap. An updated Financial Recovery Plan, scheduled for the Council of Ministers’ approval by July 2018, will provide guidance on the key financial drivers to help improve OSHEE financial condition, in particular, a distribution loss reduction trajectory for 2018–2021, and a prioritized investment designated for loss reduction, quality improvement, and grid expansion. 6/29/2018 Page 2 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) 6/29/2018 Page 3 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance  --  Substantial  Substantial Macroeconomic  --  Moderate  Moderate Sector Strategies and Policies  --  Moderate  Moderate Technical Design of Project or Program  --  High  High 6/29/2018 Page 4 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Institutional Capacity for Implementation and Sustainability  --  High  High Fiduciary  --  High  High Environment and Social  --  Low  Low Stakeholders  --  High  High Other  --  --  -- Overall  --  High  High Results Project Development Objective Indicators PHINDPDOTBL  Electricity losses per year in the project area (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 45.00 28.00 26.00 14.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDPDOTBL  Total net injected generation (Megawatt hour(MWh), Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 7,145,000.00 6,400,000.00 6,498,515.00 7,850,000.00 PHINDPDOTBL  Electricity losses per year in the project area- Technical (Percentage, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 15.30 15.00 17.30 12.60 PHINDPDOTBL  Electricity losses per year in the project area- Non-Technical (Percentage, Custom Supplement) 6/29/2018 Page 5 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Baseline Actual (Previous) Actual (Current) End Target Value 29.80 13.00 8.70 1.40 PHINDPDOTBL  Collection rate of distribution company (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 78.00 93.00 104.00 93.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDPDOTBL  Reliability of MV level at Tirana area (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 100.00 95.00 95.00 70.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDPDOTBL  Total amount of intercompany arrears (Days, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 1,200.00 600.00 600.00 550.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 Overall Comments In 2017 the total distribution losses reached 26.4% and the collection tare 95% (the target was 22%) Distribution losses for Jan-May 2018 are 26% and collection rate is 104%. The yearly target are revised and for 2018 the distribution losses will less than 24.5%. The value of total injection in distribution is kept the same with that in the end of 2017 (6,498,515.00 MWh) The current intercompany arrears are almost zero since OSHEE is paying KESh and OST 100% on time. KESh and OSHEE have concluded an agreement for payment of ALL 57 bln arrears accumulated during last 10 years. 6/29/2018 Page 6 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Intermediate Results Indicators PHINDIRITBL  Number of medium voltage customers in deregulated market (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 65.00 96.00 5,000.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDIRITBL  Power sector reforms implemented (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The new Power Law is The new Power Law is approved and it is approved and it is under under implementation implementation since since May 2015. May 2015. Regulatory Regulatory Entity Entity (ERE) is preparing (ERE) is preparing the the Bylaws (Rules and Bylaws (Rules and Regulations). GoA Regulations). GoA approved the new approved the new Albanian Market Model Albanian Market Model on Jul 7, 2016. The on Jul 7, 2016. The Wholesale supply was Wholesale supply was abrogated and KESh is abrogated and KESh is a generation company a generation company only. GoA approved the only. GoA approved Public Service the Public Service Obligation act on March The cost Obligation act on 31, 2016. recovery tariff March 31, 2016. The process was mechanism is The consultant delayed because of the implemented. Value No (NordPool) supported general election on June New market is by the Bank and 28, 2017. The Power functioning and Vienna Energy Law was amended on 40% of market Secretariat, is working Feb 2018; the is deregulated together with Ministry amendment facilitates of Energy to establish the establishment of the proposed power Market Operator as exchange in Albania by independent company the end of 2017. The with state and private Bank (IBRD and IFC) is ownership supporting financially The consultant the establishment of (NordPool) supported by Albanian Market the Bank and Vienna Operator and Albanian Energy Secretariat, is Balancing Market. The working together with distribution company is Ministry of Energy to prepared to unbundle establish the proposed the wires from retail power exchange in supply. The plan for Albania by the end of 6/29/2018 Page 7 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) deregulation of MV 2018. The Bank (IBRD customers and IPP is and IFC) is supporting under implementation. financially the The process is going to establishment of be delayed because of Albanian Market the general election on Operator and Albanian June 18, 2017. The Balancing Market. The Power Law needs to be distribution company is amended to facilitate prepared to unbundle the establishment of the wires from retail Market Operator as supply. The plan for independent company deregulation of MV with state and private customers and IPP is ownership. under implementation. Since Jan 1st 2018, all customers (96 customers) connected in 35 kV distribution network are equipped with new metering system and are deregulated. Four from 96 are fully supplied by qualified suppliers; the others 92 are actually supplied by OSHEE. In 2017 only 11% of the total demand was deregulated; those are 10 HV customers connected in transmission network. The same market share is reported for the first quarter 2018. . Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDIRITBL  Implementation of a new billing and collection management system (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The Billing System The Billing System package is contracted package is contracted (Jul14, 2016) and is (Jul14, 2016) and is under implementation. under implementation. The hardware The hardware installation is completed The new Billing installation is and the contractor is and The risk management Value completed and the working for software Management mechanism is not in place contractor is working customization. The System in for software rollout of the Billing Operation customization. The full System has experienced system is expected to delay in customers' be in operation by the database clean up. end of 2018. However, the full system is still expected to be in 6/29/2018 Page 8 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) operation by the end of 2018 if customers' database clean up is done by October 2018. Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDIRITBL  Implemented Risk management mechanism for weather related power imports (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target The ToR is prepared The ToR will be and will be cleared and submitted for Bank approved. Since July review in July 2018. 2026, the electricity Since July 2016, the market model is electricity market model changed. The has changed. The hydrology risk is hydrology risk is transferred from KESH transferred from KESH The Risk (wholesale is (wholesale is abrogated) Mitigation abrogated) to OSHEE to OSHEE (the Mechanisms Value No (the distribution distribution company is are established company is responsible responsible for end- and for end-users security users security of implemented. of supply). The new supply). The new market market place (Alb place (Alb Power Power exchange) to be exchange) was planned established by the end to be established by the of 2017, will end of 2017, but is not accommodate also the yet established by May hydrology risk in 2018. Albania. Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDIRITBL  Share of meters installed by OST (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 5.00 100.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 6/29/2018 Page 9 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) PHINDIRITBL  Debt-to-Capitalization Ratio of OShEE (shown), KESh and OST (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 300.00 220.00 151.00 60.00 Date 03-Jul-2014 31-Mar-2017 31-Dec-2016 30-Jun-2019 PHINDIRITBL  Debt to Equity Ratio of OShEE (shown), KESh and OST (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.10 0.23 -0.30 1.60 Date 03-Jul-2014 31-Mar-2017 31-Dec-2016 30-Jun-2019 PHINDIRITBL  OShEE monthly revenues used to pay for energy purchases to KESh and transmission fees to OST (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 40.00 100.00 100.00 100.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 PHINDIRITBL  Direct project beneficiaries (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 20,000.00 200,000.00 Date 03-Jul-2014 31-Mar-2017 31-May-2018 30-Jun-2019 6/29/2018 Page 10 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) PHINDIRITBL  Female beneficiaries (Percentage, Custom Supplement) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 50.00 52.00 Overall Comments Number of medium voltage customers in deregulated market - 96 customers connected in 35 kV distributing network Power sector reforms implemented - The process was delayed because of the general election on June 28, 2017. The Power Law was amended on Feb 2018; the amendment facilitates the establishment of Market Operator as independent company with state and private ownership Implementation of a new billing and collection management system – The new Billing System has experienced delay in customers' database clean up. However, the full system is still expected to be in operation by the end of 2018 if customers' database cleanup is done by October 2018. Implemented Risk management mechanism for weather related power imports - The ToR will be submitted for Bank review in July 2018. Since July 2016, the electricity market model has changed. The hydrology risk is transferred from KESH (wholesale is abrogated) to OSHEE (the distribution company is responsible for end-user’s security of supply). Share of meters installed by OST - 5% (only 96 customers connected in 35 kV distribution network are equipped with new metering system). Financial indicators 2016: KESH: DSCR = 2.5; D/E = 1.2; Debt-to-capitalization = 55.1% OST: DSCR = 1.8; D/E = 1.2; Debt-to-capitalization = 53.7% OSHEE: DSCR = 1.1; D/E = -3.0; Debt-to-capitalization = 151.2% Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P144029 IBRD-84290 Effective USD 150.00 150.00 0.00 64.74 75.25 46% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P144029 IBRD-84290 Effective 29-Sep-2014 03-Nov-2014 30-Jan-2015 30-Nov-2019 30-Nov-2019 Cumulative Disbursements 6/29/2018 Page 11 of 12 Public Disclosure Copy Public Disclosure Copy The World Bank Implementation Status & Results Report Power Recovery Project (P144029) Restructuring History There has been no restructuring to date. Related Project(s) There are no related projects. 6/29/2018 Page 12 of 12 Public Disclosure Copy