Public Disclosure Authorized

Document of
The World Bank
Public Disclosure Authorized

Report No: 25646

IMPLEMENTATION COMPLETION REPORT

(IDA-28260)

ON A

CREDIT

IN THE AMOUNT OF US$29.5 MILLION

Public Disclosure Authorized

TO

ALBANIA

FOR A

POWER TRANSMISSION AND DISTRIBUTION PROJECT

July 21, 2003

Public Disclosure Authorized

Infrastructure and Energy Sector Unit

South East Europe Country Unit
Europe and Central Asia Region
 CURRENCY EQUIVALENTS
(Exchange Rate Effective January 31, 2003)
Currency Unit = Lek
Lek 1.00 = US$ 0.0077
US$ 1.00 = Lek 129.7

FISCAL YEAR
January 1 December 31

ABBREVIATIONS AND ACRONYMS

EBRD European Bank for Reconstruction and Development

ECSPS Europe and Central Asia Operations Policies and Services Sector Unit
EIB European Investment Bank
ENEL Italian Power Company
ERE Electricity Regulatory Agency
EU European Union
KESH Albanian Power Corporation
ICB International Competitive Bidding
ICR Implementation Completion Report
JBIC Japan Bank for International Cooperation
LIB Limited International Bidding
MME Ministry of Mineral and Energy Resources
PMU Project Management Unit
QAG Quality Assurance Group
SECO State Secretariat for Economic Affairs (Swiss Government)
UNDP United Nations Development Program
USAID United States Agency for International Development

Vice President: Johannes F. Linn

Country Director: Orsalia Kalantzopoulos
Sector Manager: Henk Busz
Task Team Leader: Iftikhar Khalil
 ALBANIA
POWER TRANSMISSION AND DISTRIBUTION PROJECT

CONTENTS

Page No.
1. Project Data 1
2. Principal Performance Ratings 1
3. Assessment of Development Objective and Design, and of Quality at Entry 2
4. Achievement of Objective and Outputs 8
5. Major Factors Affecting Implementation and Outcome 15
6. Sustainability 17
7. Bank and Borrower Performance 18
8. Lessons Learned 21
9. Partner Comments 21
10. Additional Information 23
Annex 1. Key Performance Indicators/Log Frame Matrix 24
Annex 2. Project Costs and Financing 26
Annex 3. Economic Costs and Benefits 28
Annex 4. Bank Inputs 29
Annex 5. Ratings for Achievement of Objectives/Outputs of Components 32
Annex 6. Ratings of Bank and Borrower Performance 33
Annex 7. List of Supporting Documents 34

Map - IBRD 27100

Project ID: P034491 Project Name: Power Transmission & Distribution
Team Leader: Iftikhar Khalil TL Unit: ECSIE
ICR Type: Core ICR Report Date: July 21, 2003

1. Project Data
Name: Power Transmission & Distribution L/C/TF Number: IDA-28260
Country/Department: ALBANIA Region: Europe and Central Asia
Region
Sector/subsector: Power (93%); Central government administration (7%)
Theme: Access to urban services for the poor (P); Infrastructure services for
private sector development (P); Rural services and infrastructure (S);
State enterprise/bank restructuring and privatization (S); Regulation
and competition policy (S)

KEY DATES
Original Revised/Actual
PCD: 10/12/1994 Effective: 06/24/1996 06/24/1996
Appraisal: 07/04/1995 MTR:
Approval: 03/05/1996 Closing: 06/30/2001 01/31/2003

Borrower/Implementing Agency: REPUBLIC OF ALBANIA/ALBANIAN POWER CORPORATION (KESH);

POWER CORPORATIONS OF ELBASAN; SHKODER & VLORE
Other Partners: European Bank for Reconstruction and Development, Government of Italy,
Government of Switzerland, Japan Bank for International Cooperation

STAFF Current At Appraisal

Vice President:
Country Director:
Sector Manager:
Team Leader at ICR:
ICR Primary Author:
Johannes F. Linn Johannes F. Linn
Orsalia Kalantzopoulos Kemal Dervis
Henk Busz Hans Apitz
Iftikhar Khalil Richard Hamilton
Iftikhar Khalil; Sati Achath;
Richard Hamilton

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly
Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: U
Sustainability: L
Institutional Development Impact: M
Bank Performance: S
Borrower Performance: S

QAG (if available) ICR

Quality at Entry: S
Project at Risk at Any Time: Yes
3. Assessment of Development Objective and Design, and of Quality at Entry
3.1 Original Objective:

The original objectives of the US$116.6 million project (IDA Credit US$29.5 million) were to: (i) improve
the overall standard, reliability and efficiency of electric power supply and enhance the efficiency of
electricity interchanges with neighboring countries; (ii) reduce unbilled electricity consumption; (iii)
establish a regulatory framework for the power sector; (iv) begin the process of privatizing the Albanian
Power Corporation (KESH) in an efficient and nondisruptive way; (v) ensure the financial viability and
institutional strength of KESH and the pilot power companies of Elbasan, Shkoder and Vlore; and (vi)
encourage energy conservation and efficiency in electric appliances and buildings.
The objectives were clear and important to the countrys economic development. The investments were
timely and appropriate to the needs of the Borrower for two reasons: (i) the transmission and distribution
systems were badly run down because of previous neglect of maintenance; and (ii) the distribution system
and some transmission facilities were overloaded causing frequent outages. The emphasis on reducing
unpaid consumption was justified both in order to improve financial performance of the sector and, just as
importantly, to reduce and eventually eliminate the uneconomic demand for electricity resulting from
households and commercial enterprises being able to get electricity for free by stealing it or by not paying
for it. The objectives to establish a regulatory framework and begin the process of privatization were
desirable in order to improve efficiency in the power sector and find new sources of finance to initially
augment and eventually substitute for donor assistance.
As detailed in Section 5, the achievement of these objectives was greatly influenced by a series of adverse
developments, which could not have been predicted and which were largely outside the control of the
Government. These included the collapse of the financial pyramid schemes that culminated in a major
upheaval and armed civil strife in early 1997, and the Kosovo crisis in 1999 that resulted in the influx of a
large number of refugees into Albania. These two major crises had a dual impact on power sector
performance. The first was the direct impact: widespread damage to the electricity infrastructure during
the civil strife in 1997 and an upsurge in unpaid for electricity consumption as a consequence of both
crises. The second impact was indirect, but possibly even greater. The preoccupation of successive
Governments in dealing with these crises, and their aftermath, during the period from 1996 to 1999
precluded their devoting adequate attention to the deteriorating situation in the power sector. Political
instability, partly a consequence of these crises, resulted in frequent Government changes as well as rapid
changes in the top management of KESH, and these changes in turn again adversely affected sector
performance during this period.
To achieve the project objectives, a number of covenants had been agreed to with the Government and
KESH. A QAG review of supervision of the project carried out in 2002 suggested that the original targets
for the financial covenants might have been too optimistic in light of the instability of country conditions.
Although a review of subsequent performance would seem to justify this comment for the numerical power
loss reduction and financial receivables targets, it is worth noting that the ambitious targets were set in an
attempt to avoid the very crisis that was faced subsequently. Furthermore, these targets were based on the
performance improvements already recorded during the project preparation period and before the crisis
related to the financial pyramid schemes.
Distribution losses had fallen from 49% of electricity entering the distribution network during the months of
June to November 1994 to 44% during the same period in 1995. At the time of project appraisal, it was
therefore reasonable to fix targets of 42% for 1996 and 34% for 1997 on the basis of the data for late 1995
and the measures being taken under the detailed action plan being implemented under the Power Loss
Reduction Project (Credit No. 2677-ALB), which became effective in June 1995. In actual fact, losses

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rose to 56% in 1998. However, it is to be noted that, after KESH and the Government took decisive
measures to deal with the problem in 2001, the losses fell within two years to less than 36%.
In retrospect, the financial target of limiting receivables to two months of billings was probably unrealistic.
Among the considerations taken into account when it was set were that: (i) the arrears to KESH for
electricity bills of Government budgetary and non-budgetary entities had been cancelled along with KESH's
arrears to the Government with respect to taxes; and (ii) households and other private consumers were
paying their electricity bills fairly promptly. In addition, such a covenant was quite common in Bank
power projects in other countries at that time and setting a less ambitious target for Albania would have
encountered stiff resistance within the Bank. However, such a target required maintaining a near 100%
rate of collection and a target of 90% might have been more appropriate.
The 40% self-financing covenant and the debt-service coverage ratio covenant (2.0 times the annual debt
service) were realistic given that KESH's operating expenses were very low as nearly all its electricity
generation was from hydropower plants having low operating costs, and debt service for loans for previous
investments was negligible. The corresponding covenants for the pilot companies were also reasonable
since they received electricity from KESH at a sufficiently low cost to allow them to have a satisfactory
financial performance unless they fell far short of meeting the loss reduction targets and the receivables
covenant.
Though ambitious, the power sector restructuring objectives may be viewed as realistic on the basis of the
information available at the time of project preparation, considering that, prior to Board presentation and as
part of project preparation, an Electricity Law and a Regulatory Law had been adopted, KESH and the
three pilot companies had been incorporated, and 30% of the shares in the pilots had been sold under a
mass privatization program. The serious civil unrest which occurred in 1997 following the collapse of
several large pyramid schemes adversely affected the investment climate in Albania. This led to the
Government deciding, with the Bank's agreement, to defer attempts to sell majority shares in the pilot
companies and the rest of the distribution sector to strategic investors, and instead to opt for a management
contract for the whole of KESH for an interim period of at least three years.
The project was consistent with the Bank's strategy for Albania. This strategy placed large emphasis on
overcoming infrastructure constraints. In addition, the project fitted into the Governments mass
privatization program being initiated with Bank support at the same time, since 30% of the shares of the
pilots were sold for vouchers.
The Banks involvement in the project was important because of:
(i) its experience with other projects in the power sector in Albania since 1992;
(ii) its experience with similar power sector issues in other countries;
(iii) the technical advice it could provide in areas such as investment planning, project management,
procurement and financial management; and
(iv) continuation of its leadership role among the other donors.

3.2 Revised Objective:

There was no formal revision of the development objective although this was given serious consideration
when suspension was lifted in June 2001 (see Section 4).

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3.3 Original Components:

The project consisted of the following three components:

(a) power sector regulatory reform and actions leading to privatization and institutional strengthening;
(b) technical assistance; and
(c) investments.
The proposed financing by IDA, OECF (now JBIC), EBRD, Italy and Switzerland of about US$ 87
million equivalent was to finance the following components:
IDA
(i) rehabilitation of the Shkoder, Durres, Elbasan, Vlore, Fieri, Berati, Lac and Saranda distribution
networks;
(ii) technical assistance for environmental management and to strengthen KESH's finance department,
including training; and
(iii) technical assistance to the Ministry of Mineral and Energy Resources for privatization, and staff
training for the Regulatory Agency.
EBRD
(i) Elbasan-Cerrik-Korce and Elbasan 1 - Elbasan 2 transmission lines;
(ii) Tirana-Selite-Traktori ring connection;
(iii) engineering services for transmission facilities design; and
(iv) spare parts.
Italy
(i) system control facilities (including a national dispatch center and remote terminal units); and
(ii) engineering services for system control facilities and supervision of construction.
JBIC
(i) Tirana distribution network rehabilitation;
(ii) expansion of transformer capacity for existing major primary substations; and
(iii) replacement of obsolete switchgear and line protection for existing major primary substations.
Switzerland
(i) Durres substation;
(ii) engineering services for the Durres substation design and supervision of construction; and
(iii) consultant services for project management, including training.
The components were related to achieving the projects objectives and were chosen on the basis of a
detailed feasibility study carried out by consultants financed by an Italian Trust Fund managed by the
Bank. The benefits envisaged were as follows:

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Institutional Components
(i) reduction in nontechnical losses resulting in increased electricity revenue and reduced uneconomic
electricity use;
(ii) improved electricity bill collection;
(iii) improved financial performance of KESH and the pilot distribution companies;
(iv) a regulatory framework that would provide a welcoming environment for private investors and
operators; and
(v) energy conservation and efficiency improvements in electrical appliances and buildings.
Physical Components
(i) reduction in technical transmission and distribution losses;
(ii) enhanced reliability through reduction in power outages and improvement in voltage stability;
(iii) increase in capacity to transmit and distribute electricity;
(iv) improved assurance of safe transfers of energy through the Albania-Greece interconnection;
(v) reduction in operating costs and maintenance because of reduced need to repair damaged
equipment; and
(vi) environmental benefits resulting from a reduced need for power produced by existing thermal
plants using high-sulfur heavy fuel oil.

3.4 Revised Components:

After effectiveness, at the request of the Borrower, there were two sets of reallocation of IDA financing of
distribution investments, the first for meters and accessories and the second for emergency repairs of
damages to pilot company distribution facilities caused during the breakdown of public order in 1997.
These reallocation did not require changes to the project description in the Development Credit Agreement
since the new uses came under the existing heading of "rehabilitation and upgrading" of distribution
systems. The reallocation of US$ 1.6 million to finance meters and accessories was made as a result of a
decision taken by KESH at about the time the project became effective to put meters for apartments in
locked collective boxes at the entrances to the apartment buildings, and to connect meters for detached
dwelling units to the grid using tamper-resistant coaxial cable. The decision to adopt collective boxes and
coaxial cable was taken in order to reduce illegal use of electricity, and IDA accepted KESH's justification
for this approach along with KESH's rationale for requesting additional meters. A portion of the Credit was
therefore reallocated to finance new meters and accessories. IDA also reallocated US$ 0.9 million to repair
damages caused by the 1997 civil unrest. An amount of US$ 0.02 million was allocated from within the
technical assistance category to evaluate the risk of power system interruptions attributable to possible
computer problems occurring at the start of calendar year 2000 (Y2K issues).
As explained in Section 4.1, disbursement under the project were suspended on November 24, 1998.
However, following the successful initial implementation by the Government and KESH of an Action Plan
to tackle the critical issues of the sector, the suspension was lifted as of June 13, 2001. Funds under the
project were reallocated to permit partial utilization of the balance in the Credit for financing the following
two essential inputs:
Meters: US$ 8.7 million for the purchase of meters and related accessories. Reallocation of the

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 amount to meters and accessories was justified by the urgent need to reduce nontechnical electricity
losses and improve revenue collection, and thereby reduce electricity demand and electricity
imports. The financing was based on an assessment of the essential needs for meters that could be
procured and installed in the period before the next operation became effective. It covered the
provision of 3,300 collective boxes (with an average of 14 meters per box) and 30,000 individual
boxes with meters.
Technical Assistance: US$1.8 for a comprehensive study to define future investment needs and
future reforms of the energy sector in Albania. The technical assistance was justified by the need
to formulate new optimal investment programs in the sector. The study included preparation of: (i)
electricity demand projections to 2015; (ii) a least-cost power generation investment program
covering the same period; (iii) a power transmission master plan; (iv) a plan for reduction of
technical and nontechnical power losses in transmission and distribution; (v) a power dispatch
plan; (vi) a power distribution master plan; (vii) an evaluation of the best means to supply energy
for space heating, water heating, and cooking; (viii) an evaluation of the technical and economic
feasibility of importing natural gas; (ix) a petroleum strategy; (x) an overall energy sector
investment plan, including a review of possible financing options; (xi) electricity tariff reform
taking into account long run marginal cost estimates, ensuring satisfactory financial performance,
and protection of vulnerable household consumers; and (xii) recommendations for energy sector
restructuring.
During the project implementation period, the following reallocation were made to investments financed by
the cofinanciers:
European Bank for Reconstruction and Development (EBRD): The Elbasan-Cerrik-Korce transmission
line and the Tirana-Selite-Traktori ring connection were replaced by: (a) bus bar differential protection at
the 400/220 kV Elbasan 2 sub-station; and (b) supply and installation of the 400/110 kV Zemblak
sub-station and the 110 kV Zemblak-Korce transmission line. The financing for technical assistance was
extended to cover preparation of an environmental action plan for KESH.
Italy: Following preparation of a detailed feasibility study of a new dispatch center and remote terminal
units by the consultants financed by the Italian Trust Fund managed by the Bank, it was decided through
mutual agreement between KESH and Italy to construct larger and more extensive system control facilities.
These are expected to be consistent with the dispatching system recommendations of the Energy Sector
Study and to be financed by Italy.
European Investment Bank (EIB): EIB is providing financing of US$15.74 million equivalent for a set
of complementary investments, although it joined the project too late to be formally included as a
cofinancier. Its components were as follows: (a) 110 kV Elbasan 1- Cerrik transmission line with two 110
kV line bays; (b) reinforcement of the 110/20 kV Vlore sub-station; (c) Elbasan and Shkoder MV/LV -
underground power cables and accessories, 20/0.4 kV transformation stations; (d) electricity meters and
LV concentric cables; and (e) Vlore - MV/LV underground power cables and accessories, and 20/0.4 kV
transmission points.

3.5 Quality at Entry:

There was no official assessment of quality at entry by the Quality Assurance Group (QAG).
Nevertheless, the quality at entry is considered to have been largely satisfactory and the project to have
been well conceived. As mentioned in Section 3.1, the project objectives were consistent with the Banks
activities in Albania, and most of the objectives were considered realistic at the time of project preparation
given the improvement already achieved in sector performance, although the covenant concerning financial

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receivables was probably too ambitious. The project closely followed and reinforced the objectives of the
Power Loss Reduction Project. The design of the investment components was based on a detailed
feasibility study, and it was generally adequate to meet the projects objectives.
The experiment with partially privatizing three urban distribution enterprises of Elbasan, Shkoder and
Vlore in advance of majority privatization of the whole distribution system (one of the objectives of which
was to see whether this would have an impact on reducing distribution losses) carried some risks since
these enterprises were probably too small to be of interest to foreign strategic investors (although at least
one foreign investor expressed interest at the time) and the minority private shareholders were unlikely to
have much influence over the operation of these enterprises. However, provision was made under the
project for studying alternative options for privatization of the distribution system, including an option to
absorb the three pilots back into the rest of the distribution system and to divide the system into a small
number of relatively larger enterprises in preparation for their privatization.
During preparation of the project, other appropriate major risk factors were also considered and measures
to address them were incorporated into the project design. These factors included:
Delays in project implementation that could arise due to inadequate availability of counterpart
funds when needed. This risk was addressed through abolition of the excise tax, adherence to
agreed financial covenants, and also the establishment of an escrow account for payment of taxes
and import duties, debt service, and local costs of investments.
Delays or changes in project scope which could result from failure to mobilize the expected
cofinancing on time, or to obtain on time the rights-of-way for three transmission lines. These risks
were addressed through provision for resort to the Banks remedies, but even with delays, the
project investments were expected to be viable. In addition, since the cofinancing was parallel
financing, delay in parallel-financed components did not affect the timing or viability of
Bank-financed components.
Continued increase of unpaid electricity consumption that could jeopardize the project. This risk
was to be reduced by implementation of the Power Loss Reduction Project, by strengthened law
enforcement and by privatization.
Problems arising from delays during the transition from public to private ownership. These were to
be minimized by joint procurement of equipment items by KESH.
The project design was also in compliance with all environmental policies and procedures of the Bank and
the Borrower. The Banks resettlement policy was triggered by resettlement issues related to the Swiss and
EBRD project components (the need for acquisition of a small amount of land for the Durres substation
and for towers of transmission lines, and resettlement of one family from the substation site). There was
close coordination among the cofinanciers during project preparation. Extensive stakeholder consultations
during project preparation substantially contributed to the quality and readiness at entry. The Government
showed its commitment by undertaking a number of significant institutional and sector reforms before
Board presentation (See Section 3.1).
KESH had a satisfactory capacity for implementation of the investments but, due to steady outflow of its
key managers, it lacked administrative capacity. KESHs financial management capacity was also weak.
The Project Management Unit (PMU), which had already been established for the under-implementation
Power Loss Reduction Project (Credit No. 2677-ALB), had adequate capacity and had performed well.

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4. Achievement of Objective and Outputs
4.1 Outcome/achievement of objective:

A major development during the implementation of the project was the suspension of the Credit from
November 1998 to June 2001, which had a significant impact on the achievement of the project objectives
and outputs. The background to the suspension is provided hereunder.
From project effectiveness to 1998, the performance of KESH in reducing losses, increasing collections and
improving the financial performance was unsatisfactory. Distribution losses increased from 49% in 1996 to
56% in 1998, against targets of 42% for 1996 and 34% for 1997. Collections fell from 75% in 1996 to
64% in 1998, with accounts receivables increasing to 14 months in 1998 against a target of 2 months. The
performance of the three pilot companies of Elbasan, Shkoder and Vlore during this period was also very
poor, with distribution losses varying between 52% and 63%.
Through intensive supervision missions, dialogue, and correspondence, the Bank repeatedly drew the
attention of the Government, KESH and the three pilot companies to these deficiencies and to the failure to
comply with a number of the provisions of the Credit and Project Agreements. In early 1998, the Bank
informed the Government, KESH and the three pilot companies that it would have no option but to suspend
the Credit for the project if specified targets related to power distribution losses and to collection of billed
amounts for the period up to August 1998 were not achieved by KESH. During the Banks supervision
mission to Albania in October 1998, it was found that the target related to power distribution losses had
been achieved (47.2% against the target of 48%), but that the collection target had not been met (83% of
the amount billed against a target of 105%).
In view of the above, and pursuant to Section 5.01 of the Development Credit Agreement, together with
Section 6.02 of the General Conditions applicable to Credit Agreements, the Credit for the project was
suspended with effect from November 24, 1998. However, the suspension did not apply to a technical
assistance contract covering the establishment of a new financial and accounting system. Other
cofinanciers of the project also suspended their disbursements, either formally or informally.
Conditions in the power sector continued to deteriorate and a severe electricity shortage started in the
summer of 2000. The crisis was the result of excessive demand caused largely by the chronic failure to
curb illegal use and nonpayment, and the impact of a less-favorable hydrology in 2000 than in the two
previous years on the largely hydropower-based system. The excessive demand necessitated increasing
imports of electricity, but these were partly constrained by limitations of the transmission network, thereby
necessitating extensive load shedding. Recognizing the magnitude of the crisis in this important sector and
its significant macroeconomic impact, the Government developed a two-year Action Plan at the end of 2000
to reduce electricity losses, improve collections and reduce demand, as well as other wide-ranging measures
to urgently improve the performance of the sector. Specific targets for each quarter were defined.
Concurrently, a management assistance contract was awarded to ENEL, the main Italian power utility, to
provide advice to senior KESH management on a day-to-day basis. The scope of the contract was jointly
developed by the Bank and EBRD, and the contract was awarded after a competitive process with
financing from an Italian Trust Fund administered by EBRD. It included an incentive mechanism linked to
reduction in electricity losses and improvement in collection in bills. ENEL commenced work in September
2000 and has continued to provide assistance thereafter.
By May 2001, as a result of increased efforts by the Government and KESH, significant progress had been
made in the implementation of the Action Plan, with values for both the losses and collection performances

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exceeding the targets for the first quarter of 2001.
Progress on other major targets was as follows:
Disconnections of illegal connections and conversions to legal connections both exceeded the first
quarter targets. There were about 15,400 disconnections of which about 2,800 were converted to
legal connections, compared to the respective targets of 7,500 and 2,500.
Recommendations on revising the flat-rate bill for consumers without meters to reflect the seasonal
variation in household electricity consumption were approved for the 2001 summer.
An action plan for improving the performance of the power companies of Elbasan, Shkoder and
Vlore, including a decision on their future status as separate entities, was prepared.
Revisions were made in the criminal code to include stiff penalties (up to two years of
imprisonment) for theft of electricity.
These achievements were the result of a wide range of actions undertaken by the Government and KESH,
including:
Establishment of an inter-ministerial coordination committee, headed by the Prime Minister, which
convened weekly to deal with electricity sector problems;
Appointment of a new General Director of KESH, initiation of a major reorganization of KESH,
including grouping of the 38 distribution enterprises into regional distribution profit centers, and
improving various internal procedures and controls;
Undertaking an aggressive media campaign to inform the public of the extent of the crisis, its
causes, its potential repercussions, and the need for the measures being taken;
Initiating the installation of more than 100,000 meters purchased with financing from Japan and
Norway;
Implementation of a pilot computerized billing system, which is being extended to the whole
country;
Establishment of new procedures for bill collection in villages, making use of local institutions
such as Communes and Post Offices;
Institutionalization of relations between KESH and the electrical police and ensuring that the
electrical police carry out specified numbers of verifications of connections, disconnections of
illegal electricity connections, and impositions of penalties;
Prosecution of delinquent debtors through the courts making use of a government decision to treat
electricity bills as executive title (which makes possible seizure of property in the event of default)
and establishment of procedures through the Ministry of Justice to facilitate and motivate the
courts to deal promptly with delinquent debtors; in the first quarter of 2001, more than 2,200 cases
were sent to the courts, 566 were judged, 268 paid their debts and the property of 26 bad debtors
was seized;
Linkage of duration and frequency of load-shedding in each area to the level of illegal usage and
nonpayment in that area;
Instructions from the Ministry of Finance to budgetary institutions to pay KESH bills prior to
undertaking other expenditures;
Encouraging the use of alternative fuels particularly for space heating;

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 Establishment of an incentive scheme for KESH employees linked to achievement of the targets of
the action plan;
Firing of staff, with about 250 people fired from the company for violations of rules and practices
as well as poor performance; the main department directors in the central administration and many
local distribution directors were removed from their positions.
Considering the above actions and achievements, the suspension was lifted on June 13, 2001.
Prior to lifting suspension, the option of a formal restructuring of the project, including modifying the
project objectives, was explicitly considered but not adopted. It was assessed that this would have involved
a major effort, including not only changes in objectives, components, conditionalities and monitoring
indicators, but also in the beneficiaries. The Europe and Central Asia Operations Policies and Services
Unit (ECSPS) opined that this was likely to be even more time-consuming and difficult than starting a new
project from scratch. Moreover, given that the existing closing date was June 30, 2001, there would have
been relatively little time to implement the restructured project, even if the closing date was extended by up
to two years. After a thorough discussion among the Country Unit, the Sector Unit and ECSPS, a
consensus emerged to opt for a partial reallocation of funds together with lifting of suspension, so that
funding could be immediately made available for priority needs, and concurrently start preparation of a
new operation. The downside was that the existing project would continue to be rated unsatisfactory in
terms of its development objective. The upside was that the Bank would be able to strongly demonstrate its
support for the efforts to address the crisis in the sector, and to provide encouragement to the Government
to sustain these efforts.
As stated in Section 3.4, funds under the project were reallocated to permit partial utilization of the balance
in the Credit for financing two essential inputs. The closing date of the IDA component of the project was
extended from June 30, 2001 to September 30, 2002 to provide adequate time to complete the proposed
new expenditures. Subsequently, the closing date was extended to January 31, 2003 to take into account
delays in the award of the contract for the energy sector study and to provide more time for discussion of
the recommendations of the study with stakeholders prior to finalization of the study.
KESH continued to meet the electricity losses and collection targets through the rest of 2001. Electricity
losses were reduced from 43.4% in year 2000 to 38.2% in 2001. The billed collections were increased from
61.5% in year 2000 to 84.5% in 2001. During 2002, despite some variation in performance during the third
quarter, the entire year losses for KESH were 35.3% compared to the target of 35.5% and collections were
89.5%, equal to the target. Compared to 2000, losses for KESH were reduced by 8 percentage points and
collected revenue more than doubled from Lek 8.0 billion (about US$ 59 million) to Lek 16.8 billion (about
US$ 124 million).
The loss percentages given above for the years 2000, 2001 and 2002 are for distribution plus transmission
losses as a percent of transmitted electricity. The covenanted targets in KESH's Project Agreement were
defined in terms of distribution losses as a percentage of electricity entering KESH's distribution system.
Using this measure, it is noteworthy that in 2002 KESH's distribution losses were less than 36%, compared
with the actual level of 56% in 1998 and the covenanted target of 34% for 1997.
The performance of the pilots has also improved as far as reduction of electricity losses are concerned.
Elbasan's losses reduced from 58% in 1998 to 37% in 2002; Shkoder's from 56% to 45%; and Vlore's from
63% to 39%. Elbasan's performance in collections is also good but collections remain very poor for
Shkoder and Vlore. In 2002, Elbasan collected 93%, Shkoder 24% and Vlore 35%.
The suspension of the project by IDA and the cofinanciers postponed the implementation of the
investments. Most of the cofinanced components are still to be completed. In addition, IDA's own
contribution to distribution system strengthening both before and after suspension was much less than

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anticipated at the time of appraisal because of reallocation of much of the Credit to emergency damage
repairs, meters and technical assistance. Some of the distribution investments to have been financed by
IDA are now being financed by the European Investment Bank. For these reasons, achievement of the first
development objective (to improve the overall standard, reliability and efficiency of electricity supply) has
been delayed. The eventual contribution is likely to be substantial since the power transmission and
distribution systems still need major rehabilitation and strengthening, but, since the cofinanced investments
are still to be completed, the rating for achievement of the project's physical objectives is shown as
"modest" in Annex 5. The number and duration of transmission and distribution system interruptions has
already been reduced significantly since 1995 (Annex 1), but the current situation is still unsatisfactory.
The reduction achieved up to now is largely the result of improved maintenance by KESH and investments
outside the project by KESH and other donors.
As stated above, there was a long delay in making progress with respect to the key second development
objective (to reduce unbilled and unpaid electricity consumption). These shortcomings led to the
suspension of the project, and suspension was lifted only after successful initial implementation of an
Action Plan by KESH and the Government focusing on reducing losses and improving collections.
Improvements continued steadily through project closing, meeting the targets agreed with IDA and the other
cofinanciers at the time of and after waiving of the suspension. However, these targets were somewhat
below the original targets for 1997 and were achieved several years after 1997. The Association
recognized and accepted at the time the suspension was lifted that the project would receive an
unsatisfactory rating with respect to the loss reduction and bill collection objective. Nevertheless, it is
noteworthy that performance after lifting of suspension met expectations.
These shortcomings contributed directly to financial difficulties for KESH and the pilot companies, as well
as indirectly by increasing the growth in demand for electricity. The difficulties were not serious in the
early years of the project because domestic electricity production was high due to the impact of a wet
hydrological cycle on the predominantly hydropower system, KESH's operating costs were low since the
hydroelectric plants had very low operating costs, and KESH had negligible debt service obligations. They
became serious from 2000 onwards when KESH had to incur large costs for imported electricity, partly
due to the increase in demand and partly due to the impact of a dry hydrological cycle. The extra import
costs were so significant that KESH required an operating subsidy from the Government. Nevertheless,
KESH's financial performance was improving consistently during 2001 and 2002 as a result of the
reduction in losses, improvement in collections and tariff adjustments. KESH has succeeded in more than
doubling collected electricity revenue from 2000 to 2002. Efforts to control costs continue, with significant
reductions in staff strength. Under normal hydrological conditions, and with continued progress in
reducing distribution losses and improving collections, KESH is expected to be able to do without the
import subsidy from 2005 onwards and also show a profit. Therefore, the rating for financial achievement
is given as "Substantial" in Annex 5.
The project met the objective of establishing a regulatory framework, although, because of limited
resources, the Electricity Regulatory Authority (ERE) was ineffectual until 2002-2003. At that time its
staff was raised to 20, it received a large amount of technical assistance from USAID, and legislation was
approved by Parliament increasing its powers and eliminating the right of the Government to fix a ceiling
on electricity prices.
The process of privatizing KESH was started to the extent that 30% of the shares of the three pilot
companies (Elbasan, Shkoder, and Vlore) were sold under the mass privatization program. As stated
earlier, the civil disturbances in 1997 adversely affected the investment climate in Albania. This led to the
Government deciding, with the Bank's agreement, to defer attempts to sell majority shares in the pilot
companies and the rest of the distribution sector to strategic investors. It then turned its attention to the
competitive selection of a foreign utility to take over temporary management of KESH through a

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management contract. However, this initiative did not gain the support of all the donors. Eventually it was
agreed to have a more limited management assistance contract and this contract was awarded to ENEL, the
main Italian power utility, in 2001. Because of poor financial performance by two of the three pilot
companies, the Government transferred its 70% shares in all three pilots to KESH, and KESH began a
process of taking over the distribution activities of the pilots. This process is time-consuming as it involves
assessing the value of the distribution business in order to provide a basis for compensating the private
shareholders, and is expected to be completed in 2003, thereby ending the pilot privatization experiment. In
April 2002, the Government adopted a detailed policy statement that provides for a resumption of power
sector restructuring leading to a competitive electricity market consistent with European Union (EU)
guidelines and eventual privatization. The reforms envisaged in this Policy Statement are being
implemented. The rating for private sector development is given in Annex 5 as "Negligible", but the rating
for institutional development is "Modest" and that for sector policies is "Substantial".
The energy conservation and efficiency objective depended on carrying out UNDP-financed studies on
appliance efficiency and energy conservation in buildings and on implementation of the recommendations of
those studies. The study on energy conservation in buildings was completed and a law was passed in early
2002 to prescribe insulation standards in buildings. The study on appliance efficiency was not done.
There was no explicit environmental objective under the project. The environmental category was "B" and
the environmental aspects of the project were confined to ensuring that the Bank's guidelines were adhered
to. For these reasons, the environmental rating in Annex 5 is given as "Negligible".

4.2 Outputs by components:

Before the project was suspended, an amount of US$ 7.2 million was disbursed from the IDA Credit to
finance: meters; emergency repairs of distribution facilities; distribution system strengthening; technical
assistance for a financial management system, preparation of a management contract for KESH, and a
study to determine whether PCBs were present; and training for the Project Management Unit (PMU) and
ERE personnel (the financial breakdown is given in Section 5.4).
Meters (June 2001 reallocation): As of February 2003, KESH had installed all of the 3,300 collective
meter boxes and 30,000 individual meter boxes financed by the IDA Credit.
Energy sector study: The study was successfully completed, a widely-attended workshop was held to
present and discuss its findings, and its recommendations are expected to be incorporated into the Energy
Strategy being prepared by the Ministry of Energy, with approval by the Government being expected in
July 2003.
Status of Cofinanced Components:
EBRD. The 220 kV Elbasan 1 - Elbasan 2 transmission line was put into operation on August 25, 2002.
The contract for the 400/110 kV Zemblak substation and the 110 kV Zemblak - Korca transmission line
became effective on June 5, 2002, and construction started on October 15, 2002.
EIB. Contracts have been awarded for the MV/LV underground power cables and accessories and the
20/0.4 kV transformation points for the Elbasan, Shkoder and Vlore distribution systems; and for
electricity meters and LV concentric cables. The bidding documents for the 110 kV Elbasan-Cerrik
transmission line and for the reinforcement of the Vlore substation were issued in April 2003. The bids
were received on June 16, 2003.
Italy. The Italian Government is having a feasibility study prepared for the system control facilities to be
cofinanced by it under the Project. The study is covered by the current financing of Euro 42.5 million for

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the power sector, most of it for the transmission and distribution networks.
JBIC. The contracts for the MV/LV underground power cables and accessories, the 20/0.4 kV
transformation points as well as for the substation reinforcement have been awarded.
Switzerland. The contract for the Durres substation became effective on July 1, 2002, and site works
started on October 25, 2002.

4.3 Net Present Value/Economic rate of return:

The SAR gave an estimate of 24% for the internal economic rate of return for the project. The measured
benefits were: (i) reductions in technical transmission losses attributable to the project valued at the
long-run marginal cost of generation; (ii) reductions in technical distribution losses attributable to the
project valued at the long-run marginal cost of generation plus transmission; and (iii) reductions in outages
attributable to the project valued at the cost of unserved energy, which was estimated to be US$ 0.25 per
kWh. Since nearly all of the investments for strengthening of the transmission and distribution networks
under the project remain to be completed by the cofinanciers, it was not possible to do an ex-post estimate
of the rate of return for the ICR. After the investments are completed, it is likely that the rate of return will
be high since both the technical losses and the outages of the unstrengthened networks are very large.

4.4 Financial rate of return:

See Section 4.3.

4.5 Institutional development impact:

Modest. The project resulted in a modest institutional development impact as demonstrated by the following
developments:
Electricity Regulatory Authority (ERE). See Section 4.1.
Tariff Reform. In early 1996, the average price of electricity was US$ 0.047. In 2002, it was
US$ 0.038. The fall is due to a decline in the exchange rate from Lek 90 per dollar in 1996 to Lek
140 in 2002 combined with relatively small tariff increases. The Bank did not recommend
substantial increases largely out of a concern that higher prices would increase incentives to steal
electricity and avoid paying bills and partly because only modest price increases were needed to
ensure a satisfactory financial performance of KESH and the pilots, provided losses and collections
improved as projected. The Action Plan for 2003 projects that KESH and the pilot companies will
have a significant positive net income after taxes by the year 2005 with tariff increases of 10% per
year for household customers and 5% for non-household customers, assuming normal hydrological
conditions. KESH would have no further need for a Government subsidy. In 1996, the household
tariff rate was Lek 4.5 per kWh (US$ 0.05 per kWh), having been raised to that level on April 1,
1994, at which time the Government implemented a scheme to compensate households for an
estimated 75% of the price increase by means of increases in wages, pensions, unemployment
benefits and welfare payments. The tariff structure was distorted with respect to economic costs,
with the main distortion being lower prices for government budgetary and non-budgetary entities
than for private commercial and industrial customers. There was a covenant under the project to
adjust tariffs in line with recommendations of an Electricity Tariff Study carried out by consultants
with EBRD financing. By the time the project closed, the price gap between Government and
private commercial and industrial consumers had been largely closed. The household tariff rate in
Lek was still at about the 1994 level, for the first 300 kWh of consumption per month, while the

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 rate doubled on all additional consumption. The higher rate for the second block was introduced
on January 1, 2002 in order to encourage consumers to shift from electricity to LPG for space
heating. New measures to alleviate the burden of electricity costs on vulnerable households are to
be adopted under the Power Sector Rehabilitation and Restructuring Project based on
recommendations made by the Energy Sector Study.
Corporatization of KESH. KESH was converted to a corporation before Board presentation, but
it has continued to be subject to day-to-day controls by its parent ministry. An internal
reorganization has been carried out with assistance from ENEL. The headquarters has been
reorganized into a finance department, a personnel department, a generation and transmission
department, a distribution department, an investment department (which incorporates the
previously independent Energy Institute) and dispatching center. The peripheral units have been
reorganized into eight generation zones, eight transmission zones, and eight distribution entities
(down from 38 entities before), including the distribution systems previously under the pilots, but
excluding the Bistrica region where a separate supply and distribution system is being established
with assistance from KfW (Germany). The Bistrica region will become the ninth distribution entity.
Management Assistance Contract. KESH is also being assisted by a team of officials from
ENEL, through a management assistance contract. The consultant is providing advice on measures
to reduce power losses and improve collections, with part of its compensation being linked to
success in achieving improvements in these areas. It is also assisting KESH to design and
implement improvements in internal organization.
Financial Performance. Despite high power distribution losses and poor collection rates, KESH
was able to avoid serious financial difficulties from 1996 though 1999, and was able to finance the
local costs of investments under the project. The company's operating costs were low since nearly
all electricity supply came from hydropower, and it had negligible debt service. However, in the
crisis years 2000, 2001 and 2002, KESH incurred costs for imported electricity of Lek 4.6 billion,
Lek 8.0 billion and Lek 10.7 billion respectively, compared to total revenues of Lek 11.7 billion,
Lek 14.0 billion and Lek 16.5 billion respectively. The import costs were only partially offset by
import subsidies provided by the Government of Lek 3.5 billion, Lek 4.1 billion and Lek 3.2 billion
respectively. KESH's after-tax profit was only Lek 0.04 billion in 2000, and the company had
losses of Lek 0.02 billion in 2001 and Lek 1.05 billion in 2002. Nevertheless, KESH had a
self-financing ratio of 56% in 2001 and 42% in 2002. KESH met both the self-financing and debt
service coverage covenants in those years. The receivables to revenue ratio declined from 6.1
months in 2000 to 6.0 months in 2001 and 5.6 months in 2002, compared to the original
covenanted level of 2.0 months. The three pilot companies incurred a loss after tax of Lek 0.1
billion in 2001, but realized a profit after tax of Lek 0.2 billion (preliminary estimate) in 2002.
Financial Management System. A computerized financial management system was installed in
KESH and the pilot companies, financial data have been transferred to the new system, and it will
soon become fully operational.
Creation of the Pilots and their subsequent return to KESH. In October 1995, the municipal
power distribution enterprises of Elbasan, Shkoder and Vlore were separated from KESH and
converted to joint stock companies in accordance with the Law on the Transformation of State
Enterprises into Joint-Stock Companies (effective May 15, 1995). The objective was to privatize
these companies quickly as a pilot experiment and then to privatize the rest of distribution.
However, the process for privatization was suspended in 1997 following large-scale civil
disturbances triggered by the collapse of several pyramid schemes, and subsequently, a
management assistance contract was awarded to ENEL. In 2000, ownership of the Government's

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 shares in the pilot power companies was transferred to KESH as the first step towards reabsorbing
the pilots into KESH. Their re-incorporation into KESH is expected to be completed in 2003.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

Pyramid Schemes. There was widespread civil unrest in Albania in early 1997 resulting from the collapse
of several pyramid schemes. The resulting damages from vandalism to the transmission and distribution
facilities of KESH and the pilot companies amounted to about US$ 5 million. Vlore had its head office
destroyed and records were lost. Both Shkoder and Vlore had great difficulty restoring billing and
collections, partly because of unsafe conditions for meter readers and managers, which continued for
several years after the start of the unrest. Some meter readers were threatened with guns and, even
recently, a manager at Vlore was physically manhandled.
Kosovo Crisis. There was an influx of a large number of refugees as a consequence of the Kosovo crisis
in 1999. This resulted in an upsurge in unpaid bills for electricity consumption. However, since most of
the refugees left Albania after a relatively brief stay, there were no significant long-term consequences for
the power sector.
Disagreement among the Donors on a Management Contract. Although there was close coordination
among the donors throughout the project implementation period, a serious disagreement developed
unexpectedly in mid-1998 between the bilateral and multilateral donors to the project over the desirability
of having a management contract or any other form of early privatization for KESH. The issue was
eventually resolved after about two years through an agreement to have a management assistance contract,
which started in September 2000.
Adverse Hydrological Conditions. Because of adverse hydrological conditions caused by drought
beginning in the second half of 2000, there was a substantial decrease in hydropower generation.
Hydropower production was 3,547 GWh in 2001 and 3,070 GWh in 2002, both of which were much lower
than the 4,600 GWh generated in 2000 and the 5,000 to 5,300 GWh generated in 1998 and 1999.
Consequently, KESH had to import over 40% of its electricity. There was also frequent and prolonged
load shedding. KESH experienced financial difficulties and required subsidies from the Government. The
crisis threatened Albania's macroeconomic performance. However, by doing so it led the Government and
KESH, with the active support of the donors, to develop an Action Plan and implement it successfully.

5.2 Factors generally subject to government control:

Governments Lack of Adequate Appreciation of the Seriousness of the Energy Problem Prior to 2000.
One of the major contributing factors which adversely affected project implementation was the lack of
adequate appreciation on the part of successive Governments of the seriousness of the problems facing the
electricity sector, despite the warnings repeatedly conveyed by the Bank and other donors and the
evidence provided to them. This stemmed partly from their preoccupation with other crises, but partly also
from the fact that Albania had a relatively abundant supply of cheap hydropower. Thus, even with the
excessive demand growth, Albania was a net exporter of electricity until 1997 and KESH was not facing
significant financial difficulties despite the high electricity losses and low collections. Had the
Governments been more committed, they would have provided more assistance to KESH to reduce
nontechnical losses and improve collections, as they subsequently did.
Shortfalls in Payment of Electricity Bills by Government Budgetary and Non-budgetary Entities. Public
sector consumers had difficulty paying their electricity bills. The water supply companies paid for very

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little of their electricity consumption, since water prices do not cover costs and these companies have poor
collection rates. Several large state-owned industrial companies also had difficulties paying KESH because
of their own poor commercial performance. Prior to 2001, the Government did not provide specific
funding to budgetary and non-budgetary entities to pay their electricity bills.
Frequent Changes in Government. During the implementation period, the Prime Minister changed five
times and the Director General of KESH changed six times. These frequent changes adversely affected the
pace of implementation.

5.3 Factors generally subject to implementing agency control:

Unbilled Consumption of Electricity and Nonpayment of Bills. Unbilled consumption of electricity (illegal
use due to tampering with meters or bypassing them, and consumption by customers without meters in
excess of billed levels) and nonpayment of electricity bills grew rapidly during the 1990s through the year
2000. During 2000, KESH's power transmission and distribution losses were 43.4% of electricity supplied
to the grid, of which about 20 percentage points were estimated to be "nontechnical losses," and collections
were 61.5% of billings. The excessive demand caused largely by the chronic failure to curb illegal use and
nonpayment necessitated increasing import of electricity and caused overloading of the transmission and
distribution systems. The amount of electricity that could be imported was constrained by limitations of the
transmission network, thereby necessitating extensive load shedding. The unbilled consumption and
nonpayment of electricity bills caused financial difficulties for KESH and the pilots. The latter themselves
were delinquent in their payments to KESH for electricity purchases. In 2001, Elbasan paid 81% of the
amount billed to it by KESH, Shkoder only 2% and Vlore 25%.
Computerized Financial Management System for KESH. Progress on the installation and operation of an
entity-wide financial management system was seriously delayed due to problems in launching the tenders
for hardware and software, difficulties in customization of the selected software, frequent changes in key
staff, and insufficient involvement by KESH management.
Procurement. The contract for the energy sector study was awarded with some delays due to prolonged bid
evaluation processes. This necessitated an extension of the closing date.

5.4 Costs and financing:

The total expected cost of the project is US$ 92.4 million. Out of this cost, the IDA Credit financed US$
17.7 million, and the expected cost of the activities to be completed with the assistance from the
cofinanciers (including the financing from EIB) is US$ 74.7 million. The distribution of the IDA Credit
among the executing agencies was as follows: KESH - US$ 14.2 million; the Government - US$ 0.1
million; Elbasan - US$ 1.0 million; Shkoder - US$ 1.2 million; and Vlore - US$ 1.2 million. The IDA
Credit financed various categories of investment as follows: distribution system strengthening - US$ 1.8
million; repairs of damages caused during the civil unrest in 1997 - US$ 0.9 million; meters and
accessories - US$ 10.3 million; financial management system - US$ 2.7 million; energy sector study - US$
1.8 million; and other technical assistance and training - US$ 0.2 million.
Before the project was suspended, an amount of US$ 7.2 million was used from the IDA Credit to finance
meters and accessories, emergency repairs in Elbasan, Shkoder and Vlore's distribution facilities,
distribution system strengthening, and technical assistance. After the lifting of suspension on June 13,
2001, US$ 10.5 million under the project was reallocated to permit partial utilization of the balance in the
Credit for financing the purchase of meters and related accessories; and for a comprehensive study to define
future investment needs of the energy sector in Albania.

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An amount of US$ 4.5 million was cancelled at the time of lifting suspension for two reasons: (a) the desire
to see further progress in implementation of the power sector action plan before committing additional
resources beyond the US$ 10.5 million reallocated for meters and the energy sector study; and (b) the need
to base further funding (through a new operation) on priority requirements identified by a new study. On
completion of the project, a further amount of US$ 4.0 million that was unutilized was also cancelled.

6. Sustainability
6.1 Rationale for sustainability rating:

Likely. The projects sustainability is likely, considering the following factors:

The Government has realized that failure to address and resolve the root causes of the energy crisis
would have unacceptable political, economic and social repercussions.
The Government has approved an update of the Action Plan prepared by KESH that covers the
period 2003-2004. The updated Plan contains enhanced targets for tariff increases, and revenue
and collection performance. The Plan also includes payments by the Government to: (i) compensate
KESH for the difference between the cost of electricity imports and the average tariff; and (ii)
cover the arrears from state and budgetary entities. The target is to complete payment of all their
arrears by 2005.
An inter-ministerial committee headed by the Prime Minister meets frequently to oversee
implementation of the Action Plan. A Power Sector Policy Statement that sets out the main
elements of the power sector reform program was adopted by the Government in May 2002.
The power sector reform law has been approved by the Parliament. Draft regulations have been
prepared by ERE, with the assistance of USAID-financed consultants, covering rules of practice
and procedure, rules to govern rate filing and processing, consumer complaint procedures and
customer service standards. Work is on-going on the preparation of draft regulations relating to
licensing and approval of investments in small indigenous hydropower plants and cogeneration
thermal power plants, and to a uniform system of regulatory accounting and reporting for the
electricity sector.
The National Power Strategy was approved by the Government on June 26, 2003. The Strategy
incorporates the findings and recommendations of the Energy Sector Study, and include a
comprehensive energy conservation plan.
As a result of an extensive media campaign, there is widespread public awareness about the extent
of the crisis, its causes and it simplifications,. This has resulted in a greater acceptance of the need
for the tough measures that have been initiated by the Government and KESH, and this in turn has
made the task of implementing these measures easier.
There is a coordinated donor approach to the energy sector, and the donors have repeatedly stated
that future donor assistance would be jeopardized if there are slippages in meeting the agreed
performance targets.
Sustained reductions in losses and improved collections would improve KESH's financial
performance, making it easier for the company to make necessary expenditures to reduce, and
eventually, overcome the electricity shortage. Improved financial performance would also enhance
the attractiveness of the power sector to foreign investors and improve the prospects for successful
sector restructuring and eventual privatization.

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6.2 Transition arrangement to regular operations:

The cofinanced parts of the project are still being completed. The Action Plan is revised at the end of each
year to cover the following two years. The Power Sector Rehabilitation and Restructuring Project
currently under implementation and the proposed Power Sector Generation and Restructuring Project
would ensure continuity of the achievements of the project. Processing of each of these projects has been
dependent on continued success in meeting the quarterly targets of the Action Plan. Both of these projects
are also linked to implementation of the detailed Power Sector Policy Statement adopted in 2002.

7. Bank and Borrower Performance

Bank
7.1 Lending:

Satisfactory. The Bank's performance in the identification, preparation and appraisal of the project was
satisfactory. At an early stage, the Bank arranged for preparation of the feasibility study on which the
project investments were based, with financing from the Italian Trust Fund managed by the Bank. The
identification of institutional requirements, especially the need for a new financial system for KESH and the
pilots, focused on recommendations of an Energy Strategy for Albania prepared by the Bank itself, a Power
Sector Organization Study prepared by Swiss Consultants with financing from the Swiss Trust Fund
managed by the Bank, and on the work done during preparation of the Power Loss Reduction Project and
the earlier Critical Imports Project. The project design ensured the consistency of its objectives with the
Governments reform priorities and the Bank's country strategy, especially with respect to the mass
privatization program. With a well-coordinated team having a good skill mix, the Bank was able to bring
appropriate expertise into project design, providing flexibility and responsiveness to local needs. The Bank
provided legal assistance to the Borrower to prepare the electricity and regulatory laws, the initial licenses,
and the contracts between the pilots and KESH. It contacted potential donors in order to raise the needed
amount for cofinancing, and it took the lead in coordinating the activities of donors. In addition, the Bank
assessed the project's risks and benefits. The Bank had a consistently good working relationship with the
Borrower and implementing agencies during identification, preparation and appraisal.

7.2 Supervision:

Satisfactory. The Bank's performance during the implementation of the project was satisfactory.
Sufficient budget and staff resources were allocated, and the project was adequately supervised and closely
monitored. Over the five years of project implementation, there were 20 supervision missions, with an
average of about four missions per year. The Banks client relationship was very cordial and productive.
Review teams included energy specialists, power engineers, an energy economist, financial analysts, and
specialists in procurement and disbursement.
At an early stage of project implementation, Bank missions alerted the Borrower and implementing
agencies to the possibility that the distribution loss and financial receivables targets would not be met and
made various suggestions for improvements. The Bank also requested KESH and the Government to
prepare their own action plan to remedy the situation. In addition, the Bank helped the Government to
resolve a dispute between the newly established Ministry of Economy and Privatization and the Ministry of
Energy and Mineral Resources over their relative responsibilities for privatizing KESH, since this dispute
was causing a delay in concluding a contract with the consultants selected to assist in privatizing the
distribution companies. The Bank showed flexibility in responding to a request by KESH to reallocate a
portion of the IDA Credit to finance meters in support of a new KESH initiative. The Bank also showed

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flexibility during 1997 by accepting that KESH would not be able to meet the loss and receivables targets
temporarily because of the civic unrest and the resulting changes in Government, by agreeing to reallocate
part of the IDA Credit to finance damages to electricity facilities caused during the unrest, and by agreeing
with the Government to postpone further privatization of the distribution entities and instead to arrange for
a management contract for KESH. In 1998, when performance in reducing losses and improving bill
collection showed insufficient improvement over the poor 1997 results, the Bank gave warning well in
advance that it would be constrained to suspend the project if performance did not sufficiently improve by
enough to meet carefully specified and realistic targets. After disagreement among the cofinanciers over
the proposed management contract emerged at a cofinanciers' meeting in May 1998 to consider the draft
contract, the Bank made concerted efforts to try to resolve the problem. The Bank subsequently
coordinated with EBRD and the other donors on arrangements for a management assistance contract, which
was awarded to ENEL after a competitive process. Prior to resuming implementation after the lengthy
suspension, the Bank arranged for technical assistance to assess how the transmission and distribution
investment program should be changed to cope with intervening developments, including the impact of the
large numbers of refugees that had entered Albania as a consequence of the Kosovo conflict. The resulting
study recommended several amendments to the overall transmission and distribution program to reflect
changes in the growth and spatial allocation of electricity demand since the project was prepared. These
changes were subsequently accommodated by the project cofinanciers, by donors outside the project and by
KESH itself. During 2000, the Bank played a key role by recommending the preparation of an Action Plan
by the Government and KESH to address the sector's most critical problems, and in reviewing various
drafts of the Action Plan. Successful initial implementation of this Action Plan provided the basis for
lifting the suspension of the project.
The QAG evaluation of supervision during 2001 and 2002 considered the projects focus on development
effectiveness and supervision inputs and processes as best practice and rated them as "Highly
Satisfactory"; it considered the supervision of fiduciary/safeguards as "Satisfactory", but found the realism
of project performance ratings to be "Marginal". The QAG team found it confusing to carry the project to
closing with an unsatisfactory development outcome rating, as opposed to having a formal restructuring of
the project, while at the same time providing new lending to the same borrower under revised
conditionality. This approach led to what it called "incomplete and confusing reporting in the PSR."
Justification for not having a formal restructuring of the project has been provided in Section 4.1. The
QAG review noted that the appropriate and effective supervision efforts included: "(i) coordinated action by
donors; (ii) launch of management assistance inputs to help KESH develop and implement its own Action
Plan with carefully designed implementation arrangements to provide appropriate incentives to both those
offering and those receiving the advice: (iii) suspension lifted only after the Albanian authorities themselves
put together (and began implementing) an acceptable Action Plan to restore financial viability to KESH."
The review also noted the Bank's close coordination with IMF concerning power sector issues.
Aide-Memoires throughout the supervision period were regularly prepared and transmitted, flagging
outstanding issues and underscoring benchmarks for actions. These alerted the Government and the
implementing agency to problems with project execution and facilitated remedies in a timely manner, in
conformity with Bank procedures. Whenever delays in implementation occurred, the Bank task team was
able to define concrete steps and timetable for putting the project back on track and pace.
The Bank paid sufficient attention to the projects likely development impact. The quality of advice, and
the follow-up on agreed actions were adequate. Loan covenants and remedies were enforced effectively.
The Bank also took initiative in holding several donors meetings during implementation to develop a
coordinated approach to the problems facing the Albania power sector.

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7.3 Overall Bank performance:

Satisfactory. Overall, as explained above, the Bank performance was satisfactory during project
preparation, appraisal and implementation. The role played by the Bank in assisting the Government and
KESH in dealing with the electricity crisis has been appreciated by the Government, KESH and the other
donors.

Borrower
7.4 Preparation:

Satisfactory. The Borrower's performance in the preparation of the project was satisfactory. The
Borrower displayed the required level of commitment to the objectives of the project and covered the
adequacy of design and all major aspects, such as technical, financial, economic, institutional,
environmental and sociological factors, including stakeholder commitment. For example, as mentioned in
Section 3.1, even before Board presentation, the Borrower passed an Electricity Law, a Regulatory Law,
incorporated KESH and the pilots, and canceled KESH's tax arrears to the Government as well as the
financial arrears of budgetary and non-budgetary entities with respect to electricity purchases. In addition,
as part of its privatization program, the Government sold 30% of the shares of the pilots for vouchers.
Officials of the Government and KESH worked closely with the Bank's project team on a continual basis
throughout the project life.

7.5 Government implementation performance:

Satisfactory. Overall, the Government's implementation performance is considered satisfactory. It was

unsatisfactory during the initial phases, and this led to the project being suspended. The main shortcomings
consisted of: (i) inadequate support to KESH to reduce nontechnical power distribution losses; (ii) failure
to ensure that budgetary and non-budgetary entities paid their electricity bills; (iii) failure to ensure that the
ERE had adequate staffing and other resources to become effective; and (iv) failure to grant early approval
of rights of way for transmission lines to be constructed under the project.
From the end of 2000, the Government performance improved significantly and this led to the lifting of
suspension. Realizing the full significance of the power crisis, the Government made a determined effort to
reverse deterioration in the performance of the electricity sector. This was evident from the wide range of
measures adopted in the Action Plan, and in the progress made in its implementation.

7.6 Implementing Agency:

Satisfactory. As in the case of the Government, the performance of KESH was unsatisfactory before
project suspension. The shortcomings were mainly failures to: (i) deal effectively with the nontechnical
power distribution losses; and (ii) prevent deterioration in bill collection from households and improve
collection from budgetary and non-budgetary entities; and (iii) give adequate attention to financial
performance and organization. However, KESH worked in a very difficult (and sometimes dangerous)
environment. It deserves credit for initiating and implementing a program to install apartment meters in
collective boxes and connect meters in detached dwellings to the grid using coaxial cable. Its performance
improved significantly after lifting of suspension through successful implementation of its components of
the Action Plan, and thus the overall performance is considered satisfactory.

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The performance of the Shkoder and Vlore companies prior to suspension was unsatisfactory because of
their failure to: (i) prevent deterioration in nontechnical losses; (ii) prevent deterioration in bill collection;
and (iii) pay more than small proportions of their bills to KESH for purchased electricity. After lifting of
suspension, their performance improved but still fell below that of KESH. Elbasan's performance was
significantly better than that of the other two pilots and about the same as that of KESH throughout the
project implementation period.
The performance of the PMU was generally good. The PMU was well organized and effective in dealing
with procurement for KESH and the pilot companies, disbursement, progress reports, and in maintaining
proper records of the project. It was responsive to Bank advice, and collaborated fully towards meeting
demanding benchmarks and deadlines.

7.7 Overall Borrower performance:

Satisfactory . The overall performance of the Borrower, KESH and Elbasan was satisfactory. While the
overall performance of Shkoder and Vlore was not satisfactory, it is recognized that these companies
operated in more difficult and often unsafe conditions.

8. Lessons Learned
The following are the main lessons learned:

In order to deal with the problems of nontechnical losses and collection, a strong level of sustained
Government commitment and support is critical.

It is often much more effective to insist that Borrowers work their own way through to solutions
(with appropriate assistance and guidance), rather than imposing them from the outside. This
approach has been successful in this project, as also noted by the QAG supervision review.

A well-coordinated stand by the donors on important issues can have a significant impact on a
projects success.

Implementing sector reforms is a slow process and it is unrealistic to expect rapid progress.
Furthermore, privatization requires careful preparation taking into account the country-specific
requirements and establishing in advance the appropriate legislative basis and an effectively
functioning regulatory framework. Flexibility has to be adopted in choosing an appropriate form
of privatization (sale of assets, concessions, management contracts) depending on internal and
external factors.

9. Partner Comments
(a) Borrower/implementing agency:

Ministry of Finance
We have carefully reviewed the draft Implementation Completion Report (ICR), which we found extremely
exhaustive and accurate in depicting the project data, objectives and achievements.
With regards to the Bank and Borrower performance, we fully agree with the report, although it should be
said that the supervision of the Bank during project implementation was more than satisfactory. In fact,
achievements by the Government and KESH were the result of a wide range of actions for which the Bank

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supervision played a key role with their competence, flexibility and comprehensive understanding of the
country's problems.
Moreover, the full understanding of the Bank of the project implementation context in Albania, which
would play an important role in the country's future development, is revealed in the section on lessons
learned during this project's implementation.
Ministry of Industry and Energy
In this report, the World Bank provides a detailed analysis of the implementation of the Power
Transmission & Distribution Project, putting it in the real social and economic background that Albania
and KESH have gone through during the implementation of this project.
We thank the World Bank for its continuous support for the restructuring and development of the power
sector, and consider the report very realistic and encouraging.
Note: 1. The comments from KESH were similar to those from the Ministry of Finance.
2. Other comments from the Ministry of Finance, Ministry of Industry and Energy and KESH have been
incorporated into the text of the ICR.
(b) Cofinanciers:

Japan Bank for International Cooperation (JBIC)

In general terms, JBIC shares the views expressed in the report on the performance of the Power
Transmission and Distribution Project, though the Project was delayed for a certain time period and the
portion which we have been financing is still in the early stage of procurement procedure. We would
especially like to comment that we are in general satisfied with the performance of KESH PIU after the
restart of the Project.
JBIC agrees to the fact that the project has faced unforeseen difficulties in the past, i.e. pyramid schemes,
Kosovo crisis, disagreement between the donors on a management contract and adverse hydrological
conditions, etc. JBIC recognizes that the delay of the project was caused by these issues which were out of
control of KESH, the line Ministry and the donors.
We have no doubt of the effect of the suspension which has significantly improved the situation of the
project. Nevertheless, JBIC - we did not suspend our financing at any stage of the Project - regretfully
recognizes that the delayed time period could have been shortened, or perhaps might have been avoided if
all the donors tried to sustain their financing for the Project, though each donor may have had its
institutional difficulties to do so.
Government of Switzerland
This ICR is a very comprehensive report; we fully agree with the description/analysis of the project and the
lessons learnt.
The support from the World Bank's side was highly professional, and the cooperation between the World
Bank and other donors/lenders generally smooth and efficient; in particular, we appreciated very much the
World Bank's leading role in the sector policy dialogue and its proactive attitude regarding donors
coordination; the periodical energy sector meetings (organized by the World Bank) between the donor
community and the Government/KESH were extremely useful for maintaining pressure on the Government
for achievement of project goals.
The difficult time through which Albania and KESH were going from 1997-2001 probably underlines the
need for grant financing, as offered by the Swiss Government (total 13 million CHF in PTDP); therefore,

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the World Bank's role for poor countries can also be mobilizing such grant financing, as it was the case
here.
The difficult process of privatization respectively choosing the right privatization option must go on for
KESH; we hope to continue work with the World Bank group in this field in Albania.
European Bank for Reconstruction and Development (EBRD)
EBRD is in agreement with the content and findings of the ICR. We would particularly support Section 5 -
Major Factors Affecting Implementation and Outcome. EBRD suspended its two operations with KESH in
April 1997 on the following grounds:
(i) weaknesses of the project implementation teams,
(ii) weaknesses of KESH management, and
(iii) KESH financial situation, which was put under threat by the "pyramid scheme" crisis, the
increasing level of power theft and low collection. The prerequisite for lifting suspension was,
in-line with the ICR, agreement with the Albanian Authorities on the need for the Government to
take urgent action for reducing losses, increasing collection and as part of these measures to have a
management assistance contract.
EBRD restructured its two operations and signed a new loan in December 1999.

(c) Other partners (NGOs/private sector):

None.

10. Additional Information

A. The Banks ICR Team consisted of the following members:
Iftikhar Khalil (Task Team Leader)
Sati Achath (Consultant)
Richard Hamilton (Consultant)
Yolanda Gedse (Team Assistant)
B. List of Task Team Leaders of the project in chronological order:
Richard Hamilton
Iftikhar Khalil

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Annex 1. Key Performance Indicators/Log Frame Matrix
Outcome / Impact Indicators:
1
Indicator/Matrix Projected in last PSR Actual/Latest Estimate
NOTE: At the time of preparation of the DATA AT PROJECT PREPARATION. DATA FOR 2002.
SAR, there was no log frame matrix. A large
number of proposed performance indicators
were given but there was no direct linkage
between these indicators and anticipated
outcomes. Selected indicators are given
below to indicate how performance has
evolved. Consequently, the data given in the
second column relates to performance at the
time of project preparation (1994/1995) and
that in the third column relates to 2002.

Ratio of nontechnical electricity distribution 28.2% 17.1%

losses to electricity entering distribution
network for KESH and three pilot companies
re-incorporated.

Ratios of technical electricity distribution 14.0% 19.3%

losses to electricity entering the distribution
network for KESH and the three pilot
companies re-incorporated.

Ratio of accounts receivable to annual

electricity bills for KESH and the three pilot
companies separately:
KESH 6.6 months 4.6 months
Elbasan 11.8 months 12.4 months
Vlore 16.3 months 33.3 months
Shkoder 11.3 months 42.0 months

Self-financing ratio. KESH: -24% KESH: 42%

Number of interruptions per 100 circuit km. MV Line LV Line MV Line LV Line

Distribution Line 595 512 375 290

KESH 590 580 390 295
Elbasan 610 545 435 406
Vlore 603 567 405 432
Shkoder

Transmission Line
400kV 3.3 3.3
220kV 8.1 12.4
110kV 16.6 11.7
35kV 6.7 3.7

Average duration of distribution line

interruptions (hours) MV Line LV Line MV Line LV Line
KESH 3.2 1.9 1.9 1.2
Elbasan 3.2 2.3 2.0 1.3
Vlore 3.4 2.0 2.5 1.7
Shkoder 3.4 2.2 2.5 1.7

Ratio of transmission losses to net 11.6% 10.9%

generation, with pilots re-incorporated.

Establishment of effective regulatory agency. ERE was established in 1996 but was not an ERE greatly strengthened in 2003.
effective organization.
Degree of privatization of power distribution 30% of the shares of Elbasan, Shkoder and Distribution activities of pilots being taken
companies. Vlore. over fully by KESH.

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Output Indicators:
1
Indicator/Matrix Projected in last PSR Actual/Latest Estimate
The distinction between output and outcome
was not made in the SAR.

1
End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)

Appraisal Actual/Latest Percentage of
Estimate Estimate Appraisal
Component US$ million US$ million
Civil works 2.20 0.00
Transmission facilities 46.30 42.00 90.7
Distribution facilities 55.60 43.50 78.2
Spare parts 2.40 0.00 0
Project management 5.20 2.20 42.3
Technical assistance 4.90 4.70 95.9
Total Baseline Cost 116.60 92.40
Total Project Costs 116.60 92.40
Total Financing Required 116.60 92.40

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

1
Procurement Method
Expenditure Category ICB 2 N.B.F. Total Cost
NCB Other
1. Works 0.00 0.00 0.00 2.20 2.20
(0.00) (0.00) (0.00) (0.00) (0.00)
2. Goods 21.10 0.00 3.50 79.70 104.30
(0.00) (0.00) (0.00) (0.00) (0.00)
3. Services 0.00 0.00 4.90 5.20 10.10
(0.00) (0.00) (0.00) (0.00) (0.00)
Total 21.10 0.00 8.40 87.10 116.60
(0.00) (0.00) (0.00) (0.00) (0.00)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

1
Procurement Method
Expenditure Category ICB 2 N.B.F. Total Cost
NCB Other
1. Works 0.00 0.00 0.00 0.00 0.00
(0.00) (0.00) (0.00) (0.00) (0.00)
2. Goods 11.90 0.00 1.20 72.34 85.44
() (0.00) () (0.00) (0.00)
3. Services 0.00 0.00 4.67 2.29 6.96
(0.00) (0.00) () (0.00) (0.00)
Total 11.90 0.00 5.87 74.63 92.40
(0.00) (0.00) (0.00) (0.00) (0.00)

1/
Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.
2/
Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

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 of the project management office, training, technical assistance services, and incremental operating costs related to (i)
managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Percentage of Appraisal
Component Appraisal Estimate Actual/Latest Estimate
Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.
Civil works 2.20 0.0
Transmission facilities* 46.30 42.00 90.7
Distribution facilities 24.60 31.00 13.00 30.50 52.8 98.4
Spare parts 2.40 0.0
Project management 5.20 2.20 42.3
Technical assistance 4.90 4.70 95.9
* Transmission facilities financed by co-financiers includes TA.

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Annex 3. Economic Costs and Benefits
As mentioned in Section 4.3, this section is not applicable.

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Annex 4. Bank Inputs
(a) Missions:
Stage of Project Cycle No. of Persons and Specialty Performance Rating
(e.g. 2 Economists, 1 FMS, etc.) Implementation Development
Month/Year Count Specialty Progress Objective
Identification/Preparation
1/12/1994 4 ENERGY ECONOMIST (I);
POWER ENGINEER (1);
ENVIRONMENTAL
ECONOMIST (1);
CONSULTANT (1)
09/04/1994 4 ENERGY ECONOMIST (I);
POWER ENGINEER (1);
ENVIRONMENTAL
ECONOMIST (1);
CONSULTANT (1)
1/29/1995 6 ENERGY ECONOMIST (I);
POWER ENGINEER (1);
ENVIRONMENTAL
ECONOMIST (1); FINANCIAL
ANALYST (I) CONSULTANTS
(2)

Appraisal/Negotiation
04/19/1995 8 APPRAISAL MISSION
LEADER (I); TASK
MANAGER - ENERGY
ECONOMIST (I); POWER
ENGINEER (1);
ENVIRONMENTAL
ECONOMIST (1);
FINANCIAL ANALYST (I);
PRIVATE SECTOR
SPECIALIST (I);
CONSULTANTS (2)
07/23/1995 2 ENERGY ECONOMIST (I);
CONSULTANT (1)
09/20/1995 2 POWER ENGINEER (1);
CONSULTANTS (1)
12/12/1995 3 POWER ENGINEER (1);
CONSULTANTS (2)
Supervision
06/19/1996 2 ENERGY ECONOMIST (1); S S
PROJECT OFFICER (1)
09/06/1996 3 DIVISION CHIEF (1); ENERGY
ECONOMIST (1); PROJECT
OFFICER (1)
11/05/1996 3 ENERGY ECONOMIST (1); U U
POWER ENGINEER (1);
PROJECT OFFICER (1)
05/17/1997 3 ACTING DIVISION CHIEF (1);

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 ENERGY ECONOMIST (1);
POWER ENGINEER (1)
09/05/1997 2 ENERGY ECONOMIST (1);
POWER ENGINEER (1)
10/10/1997 1 FINANCIAL ANALYST (1)
12/20/1997 2 ENERGY ECONOMIST (1); U U
PROJECT OFFICER (1)
03/31/1998 2 ENERGY ECONOMIST (1); U U
PROJECT OFFICER (1)
06/05/1998 4 ENERGY ECONOMIST (1); U U
PROJECT OFFICER (1);
FINANCIAL ANALYST (1);
POWER ENGINEER (1)
10/12/1998 4 ENERGY SPECIALIST (1); U HU
PROJECT OFFICER (1);
INFRASTRUCTURE
SPECIALIST (1); ENERGY
ECONOMIST (1)
01/28/1999 2 ENERGY SPECIALIST (1); U HU
PROJECT OFFICER (1);
06/05/1999 2 ENERGY SPECIALIST (1); U HU
PROJECT OFFICER (1);
10/11/1999 2 ENERGY SPECIALIST (1);
PROJECT OFFICER (1);
08/21/2000 2 ENERGY SPECIALIST (1); U HU
PROJECT OFFICER (1)
04/22/2001 3 ENERGY SPECIALIST (1);
PROJECT OFFICER (1)
08/13/2001 3 ENERGY SPECIALIST (1); S U
PROJECT OFFICER (1);
ENERGY SPECIALIST (1)
12/03/2001 4 ENERGY SPECIALIST (1); S U
PROCUREMENT ANALYST
(1); FINANCIAL ANALYST
(1); ENERGY ECONOMIST (1)
02/26/2002 3 ENERGY SPECIALIST (1); S U
FINANCIAL ANALYST (1);
ENERGY ECONOMIST (1)
08/13/2002 3 ENERGY SPECIALIST (1); S U
PROJECT OFFICER (1);
ENERGY ECONOMIST (1)
10/17/2002 2 ENERGY SPECIALIST (1); S U
PROJECT OFFICER (1);
ICR
03/10/2003 4 ENERGY SPECIALIST (1);
PROJECT OFFICER (1);
FINANCIAL ANALYST
(1); ENERGY
ECONOMIST (1)

- 30 -
(b) Staff:

Stage of Project Cycle Actual/Latest Estimate

No. Staff weeks US$ ('000)
Identification/Preparation 30.3 121.2
Appraisal/Negotiation 97.5 390.0
Supervision 215.2 861.5
ICR 9.0 27.5
Total 342.0 1400.2

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components
(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)
Rating
Macro policies H SU M N NA
Sector Policies H SU M N NA
Physical H SU M N NA
Financial H SU M N NA
Institutional Development H SU M N NA
Environmental H SU M N NA

Social
Poverty Reduction H SU M N NA
Gender H SU M N NA
Other (Please specify) H SU M N NA
Private sector development H SU M N NA
Public sector management H SU M N NA
Other (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance
(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HU
Supervision HS S U HU
Overall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HU
Government implementation performance HS S U HU
Implementation agency performance HS S U HU
Overall HS S U HU

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Annex 7. List of Supporting Documents

1. Aide-Memoires, Back-to-Office Reports, and Project Status Reports.

2. Project Progress Reports.

3. Staff Appraisal Report for the Albania Power Transmission and Distribution Project,
January 17, 1996 (Report No. 14532-ALB).

4. QAG, Quality of Supervision Assessment (QSA5) of the Albania Power Transmission and
Distribution Project, December 10, 2002.

5. Deloitte Touche Tohmatsu Emerging Markets, "Situation Review, Verification of

Management Contract Approach", December 8, 1997.

6. Deloitte Touche Tohmatsu Emerging Markets, "Management Contract for Operation of

KESH, Draft Bid Package", July 20, 1998.

7. EDF, "Technical Review of the Albanian Electricity Networks - Final Report", July 16,
1999.

9. KPMG, EDF, "Financial Management of KESH - Final Report", June 21, 2002.

10. Decon, EDF, LDK, Lahmeyer International and GEI - ENERGY, "Albania Energy Sector
Study", January 2003.

11. KESH, Power Sector Action Plan 2001-2003.

12. KESH, Second Power Sector Action Plan 2002-2004.

13. KESH, Third Power Sector Action Plan 2003-2005.

14. "Power Sector Policy Statement of Government of Albania", April 2002.

15. Government of Albania, "National Strategy of Energy", June 2003.

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