1. Documentof
The WorldBank
FOR OFFICIALUSE ONLY
MICROFICHE COPY
Report No. :10990 PO Type: (PCR)
Title: COAL HAN)DLING PRUJECT LN 2521- ReportNo.10990
Author: DE WEIL,LFh 0
Ext.:31708 Room:T9102 Dept.,:OEDD3
PROJECT COMPLETION REPORT
PORTUGAL
COAL HANDLING PORT PROJECT
(LOAN 2521-PO)
August 7, 1992
Infrastructure Operations Division
Country Department I
Europe and Central Asia Region
This documenthasa restricted distribution and may beused by rcipients only in the performance of
their ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.
I~ ..
PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorized

2. EXCHANGERATES
Appraisal Year Average 1984 USD 1 = 135 escudos
Intervening Year Average 1985-87 USD 1 = 150 escudos
Completion Year Average 1988 USD 1 = 150 escudos
WEIGHTS AND MEASURES
Metric System British/US System
1 centimeter (cm) = 0.39 inches (inch)
1 meter (m) = 3.28 feet (ft)
1 kilometer (km) = 0.62 miles (mi)
1 square meter (m2
) = 10.76 square feet (sq. ft)
1 square kilometer (kM2
) = 0.38 square mile (sq. mi)
1 metric ton (m/ton) = 0.98 long ton (1g. ton)
1 liter (L) - 0.26 gallon (G)
GLOSSARY
APS = Sines Port Authority
(Administragao do Porto do Sines)
DGP = General Directorate of Ports (Direcgao Geral dos Portos)
DGTT = General Directorate of Land Transport
(Direcqao Geral Transportos Terrestres)
EDP = Electric Company of Portugal
(Electricidade de Portgual)
GAS = Sines Regional Council
(Gabinete da Area de Sines)
GEP = Council on Studies and Planning
(Gabinete de Estudos et Planeamento)
JAE = Highway Department
(Junta Aut6noma de Estradas)
MIEE = Ministry of Industry, Energy and Exports
MPWTC = Ministry of Public Works, Transport and Communications
MS = Ministry of the Sea
PORTUGAL - FISCAL YA
January 1 - December 31
_ ___~

3. FOROMCIL USEONLYTHEWORLD BANK
Washington,D.C.20433
U.S.A.
Officeof Oirectv.Ceral
OpefatinmEvaluatimn
August 7, 1992
MEMORANDUMTO THE EXECUTIVEDIRECTORSAND THE PRESIDENT
SUBJECT: Project CompletionReport on PortugalCoal Handling Port
Proiect (Loan 2521-PO)
Attached, for information, is a copy of a report entitled "Project
CompletionReport on Portugal Coal Handling Port Project (Loan 2521-PO)"
preparedby the Europe and CentralAsia RegionalOffice with Part II of the
reportcontributedby the Borrower. No audit of this project has been made
by the OperationsEvaluationDepartmentat this time.
Attachment
'2
rThisdocumenthasa retricted distributionandmaybe usedbyrecipientsonlyin theperformance|
of theirofficial duties. Its contents may not otherwise be disclosed withoutWorld Ban,kauthorization.

4. FOROFCIAL USEONLY
PROJECT COMLETIONREORT
PORTUGAL
COALHANDLINGPORT PROJECT
(LOAN 2521 -PO)
* TABLEOF CONTNS
PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EVALUATION SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . ,
PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE . . .. . . . . . . . 1
Project Identity . . . . . . . . .. . . . 1
Project Background . . . . . . . . . . . . .. . . . . . . . 1
Project Objectives and Description . . . . . . . . . . . . . . . 2
Project Design andOrganization ..... . . 3
Project Implementation.. .. 4
Results. .. . . . ........ . . . 6
Sustainability . . . . . . . . . . . . . . . . . . . . . . . . 9
Bank's Performance . . . . . . . .. . . . . . . . . .. . 9
Borrower's Performance . . . . . . . . . . . . . . . . . . . . 9
Bank-Borrower Relations ............ . 10
Consultants' Services . . . . . . . . . . . . . .. . . . . . . 10
Project Documentation and Data ..... . . . ....... . 10
PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE . . . . . . . . . 11
PART III: STATISTICAL INFORMATION
Table 1: Related Bank Loans . . . . . . . . . . . . . . . . . . . . 12
Table 2: Project Timetable . .. .. ..... . ... .. . .. . 13
Table 3: Cumulative Loan Disbursements . . . . . . . . . . . . . . . 14
Table 4: Project Costs . . .. .. . . . ... . ... .. . . . . 15
* Table 5s: Project Financing .................... 16
Table 6: Status of Covenants . . . . . . . . . . . . . . . . . . . . 17
Table 7: Missions . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table 8s Staf£ Inputs . . .*.... 0 20
MAP: IBRD 18446R - Portugalt Port of Sines and Power Station
rThisdocument has a restricted distribution and may be used by recipients only in the performance
of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.

5. PROJECT COMPLETION REPORT
PORTUGAL
COAL HANDLING PORT PROJECT
(LOAN 2521-PO)
PREFACE
This Project Completion Report describes the preparation, appraisal,
and implementation of a Coal Handling Port Project in Portugal, for which Loan
2521-PO in the amount of USD 66 million was signed on October 3, 1985. The loan
became effective on July 1, 1986, following two deferrals of the effectiveness
deadline to allow time for the Government to clarify the overall structure and
management of port operations. Ultimately, USD 62.3 million were disbursed and
USD 3.7 million cancelled. The loan was prepaid on December 1, 1989, 13 months
before the original loan closing date.
The Preface, Evaluation Summary, Parts I and III of the PCR were
prepared by the Infrastructure Operations Division of Country Department I,
Middle East and North Africa Regional Office, and the Infrastructure Operations
Division of the Technical Department for Europe and Central Asia, and Middle
East and North Africa Regional Offices, on behalf of the Infrastructure
Operations Division of the Europe and Central Asia Regional Office, which was
assigned portfolio management responsibility beginning December 1, 1991. In
place of Part II, the Sines Port Authority (APS), implementing agency and
project beneficiary, has submitted a letter verifying the adequacy and accuracy
of Parts I and III. The Dank's contribution to the report was prepared on the
basis of, inter alia, the Staff Appraisal Report, the Loan Agreement,
supervision reports, correspondence between the Bank and the Portuguese
authorities, internal Bank memoranda, and consultation with APS officials and
staff, and former project officers, and additional information furnished by APS.

6. - ii -
PROJECT COMPLETION REPORT
PORTUGAL
COAL HANDLING PORT PROJECT
(LOAN 2521-PO)
EVALUATION SUMMARY
Proiect Obiectives and Imolementation Experience
i. The main objective of the project was to construct a port facility for
the importation of coal for a new power plant situated in the port area at Sines
(para. 3.01). Tenders for the coal terminal infrastructure works were received
in January 1984 from six prequalified consortia of contractors representing 24
firms from eight countries (para. 5.03). The Government awarded the contract to
a foreign firm in joint venture with a Portuguese firm, which had presented the
lowest evaluated bid and proposed an alternate quay design. Construction
started in Ar-gust 1984, and the marine works, along with the coal storage area,
were completed in December 1987 with only minor delays.
ii. To unload and transport the coal to the power plant, situated in the
port area. coal handling equipment was to have been procured with supplier
financing (para. 5.04). Bids from three consortia were received in February
1987, about one and one-half years behind schedule, for the financing and
installation of equipment and operation of the terminal on a concession basis.
An inter-agency evaluation committee recommended that negotiations be undertaken
with the lowest bidder to finalize a concession agreement. But the Government
unexpectedly rejected all proposals, deciding instead to use the new terminal to
cater to general cargo in addition to coal for local power plants and coal
transhipment.
iii. In 1988, when the Sines Regional Council (Gabinete da Area de Sines -
GAS), responsible for project implementation, transferred all port assets to the
Sines Port Authority (Administragao do Porto de Sines - APS), the Government
decided that the latter would own and operate its own coal handling equipment.
APS engaged consultants to assist in preparing technical specifications for coal
handling equipment. In late 1989, after considerable delays attributable to
Government decision making, APS tendered for coal handling equipment and in
April 1990, entered into a contract with a concessionaire comprising five local
firms, which would own and operate the equipment. Procurement is proceeding
well, as the first items are presently being delivered and installed, and
operators are being trained.
iv. The project also provided financing for three studies. The first was
a port management study, which was not undertaken (para. 5.05). The Portuguese
authorities took the position that the study was unnecessary since the legal and
organizational structure for APS had already been decreed and measures were
underway to improve APS's staffing, port operations, and financial structure.
The second study dealt with the repair to the west breakwater (para. 5.06). The
study was completed in May 1987, about nine months behind schedule.

7. - iii -
Rehabilitation worku are being executed outside the project scope. The third
study, completed in December 1988, identified and evaluated coal transportation
opt'one to serve the future expansion of Electricidade de Portugal (EDP), the
national electric utillty company (para. 5.07).
Results
V. The p.x-jectis being completed at a final estimated cost of USD 164.4
million, compared with the original estimate of USD 163.2 million (para. 6.01).
The first phase of coal port operations is scheduled to begin by mid-1992 (para.
6.02) and full operation to coincide with the commissioning and first-phase
operation of the Pego power plant in mid-1993. The project facilities have been
adapted to accommodate general cargo, container, and grain traffic.
SustainabilitY
vi. The coal terminal at the Port of Sines is an essential part of the
National Energy Program (para. 7.01). It represents the least-cost solution for
supplying coal to operate the Sines power plant. The terminal has the capacity
to meet the needs of the coal-fired power plant under construction at Pego.
Moreover, the project facilities are being used for coal transhipment, general
cargo, containerization, and grain. The port of Sines can be further developed
according to a master plan that provides for phased expansion in a feasible way.
The sustainability of the project's viability would depend on adequate financial
management of the port, including periodic and timely increases in tariffs.
FindinRs and Lessons
vii. The project raises some serious questions concerning the nature and
scope of Bank involvement in countries at advanced stages of development and
with ready access to other sources of external financing, which can undercut the
Bank's leverage in negotiating and ensuring compliance with key loan
conditionalities and in influencing investment decisions. The Coal Handling
Port Project illustrates the difficulty the Bank experienced in seeking
compliance with loan covenants intended to ensure the managerial and financial
viability of the main project beneficiary, APS. Furthermore, at the onset of
project implementation, the Government reassigned implementation
responsibilities from GAS to APS sooner than stipulated in the project
agreements and without consulting the Bank. The Bank was not even party to
subsequent decisions on future port use.
viii. The Bank discussed the above issues with the authorities on a number
of occasions. The Borrower's continual contravention of legal agreements to
adjust tariffs to meet cost recovery objectives and to launch and carry out a
port management study led the Bank to consider euspending the loan (see Part
III, Table 6). However, the Bank concluded that such action would not secure
the desired results; by then the physical components had been completed and most
disbursements made. The substantial delays in reaching an agreement on the
acquisition of coal handling equipment resulted in delays in achieving the
physical functioning of the port as intended. On the financial and managerial
side, it was clear at an early stage that the original objectives of full cost
recovery and transparency of Port/Government relationships would not be

8. - iv -
achieved. In retrospect,a "4" rating for the project may have more accurately
reflectedthe implementationstatus (see Part III, Table 7). The lesson learned
is that the Bank shouldbe more selectivein supportingproject. in countrieson
the verge of graduatingand limit such eupport to projectswhere there is a
clear and unequivocal"valueadded" to Bank-financingand full Government
commitmentto the project'sobjectives.

9. PROJECT COMPLETIONREPORT
PORTUGAL
COAL HANDLING PORT PROJECT
(LOAN 2521-PO)
PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE
1. Proiect Id-ntitr
Namn : Coal HandlingPort Project
Loan Number X 2521-PO
Loan Amount i USD 66 mill±on
RVP Unit : Europe and Central Asia
Country t Portugal
Sector s Transportatiou
Subsector : Ports
Projiot Background
2.01 Economic developmentin Portugalhas been well served by the
country'stransport system. ContinentalPortugalhas a diverse and extensive
land transportnetwork that connects,through Spain, with the rest of Europe.
The highway network, includingmunicipalroads, comprisessome 54,000 km, and
the basic rail network some 3,500 km. Althoughtotal land traffic expanded
rapidly in the 1960c and early 1970.,the transportnetwork remainedvirtually
unchanged. Few additionswere made to the basic rail network in the last
decade, and the nationalhighway network has also remainedessentiallythe
same. Much of the highway infrastructureand equipuent is overdue for renewal
or modernization. The relativeshare of the roads for both freight and
passengertraffic has increasedand some railway lines now carry little
traffic.
2.02 The ports of Lisbon, Leixoes,and Sines account for about 90% of the
country'stotal maritime traffic,with the remainderscatteredamong seven
other mainland ports and facilitieson the Azores and Madeira. Lisbon and
Leixoes are multi-purposeports, whereas,until the late 1980., facilitiesat
Sines have catered exclusivelyto oil traffic and petrochemicalproducts.
Sines is the first national port in tonnage. In 1990, total tonnage handled

10. -2-
reached 22.6 million metric tons, of which 82.7% consistedof oil products,
-15.2% coal, and 2.1% petrochemicalproducts.
2.03 In recent years the administrativestructureof the transport sectc,r
has undergonea number of changes. Responsibilityfor the sector lies with
the Ministry of Public Works, Transportand Communications(MPWTC)for land
transportand Ministry of the Sea (MS) for ports. Within the MPWTC, two
secretariats-- one for infrastructure,the other for public enterprises
providingtransport services-- oversee transportinvestmentsand operations.
The Council on Studies and Planning (Gabinetede Estudos e Planeamento- GEP)
has overall responsibilityfor the formulationof sector strategies,which are
then taken up by the modal agencies. The General Directorateof Land
Transport (Direcgao-Geralde TransportesTerrestres- DGTT) is responsiblefor
policy formulationrelated to land transport,under the overall supervision
and coordinationof GEP. The planning of main inter-cityroads and their
access to the metropolitanareas of Lisbon and Porto is in the hands of the
Highway Authority (JuntaAutonomade Estradas- JAE). Aviation has its own
planningunit within MPWTC. The three major port authoritiesreport directly
to MS, the remainingport authoritiesreport to the General Directorateof
Ports (DirecgaoGeral dos Portos - DGP). Administrationof the ports on the
Azores and Madeira are the responsibilityof the respectiveregional
governments.
3. Prolect Obiectivesand Description
3.01 Proiect Obiectives. Designedto cover the first stage of a port
master plan, the project would:
(a) ensure that the port of Sines be developedto meet the needs of the
energy and industrialsectors, and specificallyto provide
facilitiesurgentlyneeded for the first phase operationof Sines
power station,which was being constructedunder the Bank-assisted
Portugal Power VII Project (Loan 2240-PO);
(b) assist in the developmentof the country'sonly port capable of
receivinglarge vessels;
(c) improve Sines port operations,by assietingin the financingof a
port managementstudy and setting up an effectiveport management
organizationand training program based on that study; and
(d) provide a basis for consultationbetween the Bank and the Government
on the future developmentof coal import facilitiesand the port
subsector.

11. -3
3.02 Proiect DescriDtion. The principalcomponentsof the project weres
(a) Coal UnloadingFacilities
A coal unloadingber%h 345 m long with a minimum depth of 18 m at
low water capable of acceptingvessels up to 150,000 dwt within the
shelter of a breakwaterapproximately1,100 m in length.
(b) Coal SBtrage Area
(i) area ashore for storageof about 250,000 metric tons of
coal;
(ii) port buildingsincludingadministrativeoffices, fire and
ambulancestation,workshops,and stores; and
(iii) utilitiesincludinga water supply and sewerage system,
firefightingfacilities,electricalsubstations,and
communicationsystem.
(c) Coal HandlingEouipment
(i) two unloadersat the berth, each with a grab of about 40
metric tons and a nominal rated capacity of about 2,000
metric tons per hour;
(ii) two combinedstacker/reclaimerseach of about 4,000 metric
tons per hour stackingand 2,000 metric tons per hour
reclaimingcapacityat stockpiles;
(iii) a belt conveyor system completewith transfer and weigh
stationsconnectingtha ship unloadersto the port
stockpiles,and also to the EDP conveyor system; and
(iv) miscellaneousmobile equipmentfor terminal operation.
(d) EngineeringServices and Trainina
(i) constructionsupervision;
(ii) studies for repairs to the west breakwater,managementof
the port of Sines, and coal import facilitiesto serve
EDP's future power stations;and
(iii) training in the operationof coal handling equipment.
4. Prolect Design and Oraanization
4.01 In 1981, the Sines RegionalCouncil (Gabineteda Area de Sines -
GAS) entrustedthe master plan for the developmentof the port of Sines to a
foreign consultingfirm in joint-venturewith several local ones. A

12. -4-
concurrentstudy of the main ports of southernPortugal was commissionedby
the Port Authoritiesof Sines and Lisbon, and by DGP, for which another
foreign consultingfirm was engaged. Both firms regarded Sines as a suitable
center for petroleumand coal traffic carried by large vessels, especially
coal traffic for Sines Power Station,scheduledfor commissioningin 1985.
4.02 The project was designed to meet long-termforecastcoal traffic for
Sines power station and for coal traffic transhippedto another ZDP power
station still in the planning stages. It was also designed in such a way that
project facilitiescould be readily adapted tn accommodatethe needs of
additionalEDP power plants as well as chang .LL patternsof maritime traffic.
GAS, EDP, and their consultantscollaboratedthroughoutthe planning of the
port to ensure that port facilitieswere well linked to those being
constructedfor the power station. Designs and tender documents for civil
works and technicalspec4.ficationsfor equipmentwere completedprior to Board
presentation.
5. Proiect Implementation
5.01 Loan Effectiveness. The effectivenessdeadline was deferred on two
occasionsto allow time for the Governmentto clarify the overall structure
and managementof port operationsat Sines (para.5.02). In addition,the
loan documentsstipulatedthat port revenuesmust be increasedby 50% before
the loan could be declared effective. This percentageof increasewould be
needed if APS were, eventually,to be held accountablefor financingall port
investmentsat Sines, includingthe storm-damagedwest breakwater. As it was
decided not to rehabilitatethe outer berth and a considerablepart of the
breakwaterbecause sf obsolescence,the Governmentapproved a partial tariff
increaseand persuadedthe Bank that the correspondingloan covenantwas no
longerrelevant (para. 5.06).
5.02 ProiectManacement. In 1986, the Governmentinformedthe Bank it
had appointeda commissionto dissolveGAS and reassignproject implementation
responsibilityto APS. The Bank initiallysought to discuss the prospective
proposalsfor dissolutionof GAS with the commissionso that the loan
documentsmight be modified and the loan, if declaredeffective,prevented
from immediatelygoing into default. When it became clear that the commission
would not disclose its proposalsbefore their review by the Council of
Ministers,the Bank acknowledgedthat project implementationresponsibilities,
as set forth in the loan documents,would be attributedto competententities
and would not be significantlyaffectedby the dissolutionof GAS. In August
1987, GAS turned over executionof port works, which were nearing completion,
and contractingof servicesto APS. In January 1988, GAS was legally
dissolved.
5.03 Constructionof Coal TerminalFacilities. Tenders for the coal
terminal infrastructureworks were receivedin January 1984 from six
prequalifiedconsortiaof contractorsrepresenting24 firms from eight
countries. The Governmentawardedthe contractto a foreign firm in joint
venture with a Portuguesefirm, which had presentedthe lowest evaluatedbid
and proposed an alternatequay design, which the Bank approved. Construction

13. -5-
started up in August 1984, and the -.iarineworks, along with the coal storage
area, were completed in December 1987. All other civil works and buildings,
which were financed by the Government, were restricted to Portuguese firms
under local competitive bidding as agreed in the legal documents. The
Government then decided to develop the terminal into a multi-purpose facility
and directed APS to launch a conceptual engineering study. In the meantime,
construction of a temporary coal import berth and related provisioi.1
unloading equipment took place as scheduled and operations began in early
1987.
5.04 Procurement of Coal Handling Eauipment. Bids from three consortia
were recEived in February 1987 for the financing and installation of equipment
and operation of the terminal on a concession basis. An evaluation was
undertaken by a committee consisting of representatives from GAS, APS, EDP,
and the Treasury. The committee issued an evaluation report in July 1987
recommending that negotiations be undertaken with the lowest evaluated bidder.
EDP, the principal user of the coal terminal, fully supported the committee's
recommandations, but the Government rescinded the recommendation and
authorized APS to conduct a further review. One of the main reasons the
Government decided not to award a contract was the inadequate inclusion of
guarantees for transhipment for other EDP uses. The Bank considered this
action inappropriate since the Sines coal terminal project had been found
feasible on the basis of the needs of the existing EDP power plant. The
volumes transhipped to the future plant at Pego would enhance its viability
but in no way was transhipment a prerequisite for it. In 1988, when GAS
transferred all port assets to APS, the Government also decided that APS would
own and operate its own coal handl ng equipment instead of seeking a
concessionaire. APS engaged consultants to assist in preparing technical
specifications for coal handling equipment. Finally, in late 1989, almost two
years after the coal terminal facilities had been completed, APS tendered for
coal handling equipment, and in April 1990, entered into a contract with a
concessionaire comprising five local firms, which would own and operate the
equipment. Procurement is proceeding well, as the first items are presently
being delivered and installed, and operators are boing trained. Since Bank
funds were not involved, the Bank did not oversee the procurement process.
5.05 The port management study was not carried out. APS indicated that
the main objectives of the study had already been reached through statutes
covering the organization and staffing of the port authorities in Portugal and
Decree/Law 305/87, which provided APS with its charter. On reviewing the law,
the Jank was satisfied that the legal and organizational structures were in
line with existing regulations for public enterprises and other Government
authorities. However, Bank staff judged measures pertaining to staffing, port
operations, and financial structure to be inadequate.
5.06 The study of west breakwater repairs was completed in May 1987,
about nine months behind schedule. It concluded that rehabilitation of a
length of 300 meters woald provide the highest return on investment. The
outer berth on the west breakwater, which had been designed to cater to very
large oil carriers taking the route around the Cape of Good Hope instead of
through the Suez Canal, was no longer needed nor was a considerable part of

14. - 6 -
the breakwater. The recommended rehabilitation is underway, with completion
expected in 1992 at an estimated cost of about USD 60 million. Rehabilitation
works are being executed and financed outside the project scope.
5.07 The coal transport study, completed in December 1988, identified and
evaluated coal transportation options to serve the future expansion of the
national electric utility company (Electricidade de Portugal - EDP).
6. ResMlts
6.01 Proiect Costs. The project is being completed at a final estimated
cost of USD 164.4 million, compared with the original estimate of USD 163.2
million (See Part III, Table 4). There were, however, variations among
different project items. Temporary facilities cost USD 10.48 million instead
of the estimated USD 5.72 million, and coal handling equipment USD 61.16
million instead of USD 50.11. The 22% cost increase for the latter was mainly
due to inflationary price escalations as procurement, delivery, and
installation were delayed by nearly four years. These increases were offset
by savings in the installation of mechanical and electrical utilities by
USD 8 million as well as savings in civil works by USD 6.5 million.
6.02 Disbursements. Construction of the marine civil works for the coal
handling port started up in August 1984. By loan effectiveness in July 1986,
there was a substantial backlog of disbursement requests, estimated to be
about USD 22 million, or one-third of the Bank loan amount. The Bank also
provided USD 7.7 million in retroactive financing. Within a year of
effectiveness, cumulative disbursements reached 92% of appraisal estimates and
maintained the originally projected pace. The loan was fully disbursed on
September 14, 1989, more than a year ahead of the original loan closing date
of December 31, 1990.
6.03 Achievement of Proiect Obiectives. The first phase of coal port
operations is expected to begin by mid-1992 and full operation is expected to
coincide with the commissioning of the Pego power plant in mid-1993.
Unfortunately, technical assistance in port enterprise management was never
provided; the outcome of measures taken independently towards meeting
institutional objectives has not been assessed by the Bank.
6.04 Achievement of Physical Taraets. In 1989, the temporary terminal
handled 2.5 million tons of imported coal, compared with 2.4 million estimated
at appraisal. With the installation of equipment and commissioning of the new
terminal in May 1992, throughputs are expected to rise to 3.1 million by
year's end. Of the 4.5 million tons originally forecast for 1992, some 2
million tons were to have been for the Pego plant, which is still under
construction. Therefore, the 3.1 million tons expected in 1992 represents
700,000 tons p.a. above the original target for the Sines power plant.
6.05 Economic Justification. The installation of coal handling
facilities at the port of Sines represented the least-cost solution for the
import of coal via large non-geared ships to the Sines coal-fired thermal

15. -7-
plant, which was at an advanced stage of constructionat the time of
appraisal. An additionalconsiderationfavoringthe projectwas the possible
expansionof the port to handle other commoditiesemanatingfrom local
industrialplants and additionalcoal traffic for a possible future EDP power
plant. As the developmentof this latter traffic was unclear, the analysis of
the project viabilitywas based solely on the importneeds of the Sines plant,
estimatedat about 2.6 million tons p.a., which could not be handled by an
existing facilityin Portugal. After reviewinga number of alternatives,
includingdifferentdesigns at the Sines site as well as dischargesand
transhipmentvia other ports, it was concludedthat the Sines coal handling
port facilityprovided the least-costsolution and that the cost of this
solutionwas well within the limits needed to maintainthe overall viability
of the thermal plant.
6.06 There was no standardrate of return calculationfor this project,
as there was no realistic"withoutproject"alternative. The risks for the
economicviabilityof the coal handlingfacilitywere consideredminimal. The
justificationof the project was based solely on the minimum expected usage of
the facility,which representedonly about 10% of the investmentin the
thermal plant. It was concludedthat an increasein constructioncosts, even
by as much as 100%, would have a negligibleimpact on the determinationof the
least-costsolution.
6.07 FinancialPerformance. The project'smain financialobjectiveswere
to provide for full cost recovery on the use of all port assets and contribute
to the capital costs of expandingthe port of Sines. Towards ensuringthe
adequacyof tariffs needed to achieve these objectives,the Bank and Borrower
agreed on the followingseries of specificprovisionsfor the debt/equity
structureof the oil port and the settingof tariffs to cover debt service
(see Part III, Table 5):
(a) as a conditionof loan effectiveness,port tariffs would be
increasedby 50% (Section6.02 of the Loan Agreement);
(b) beginningin June 1986, APS port tariffs and charges would be
establishedand adjustedto enable APS to contribute10% of the coal
handlingport investmentcosts after coveringoperatingexpenses,
includingdebt service but excludingdepreciation (Section3.05 (c)
of the Loan Agreementand Section 4.03 (a) of the APS Project
Agreement);
(c) a separateuser charge for oil traffic would be establishedno later
than December31, 1986 and maintainedthereafterat a level to cover
at least the debt service related to the oil port assets (Section
3.05 (b) of the Loan Agreement);and
(d) beginning in June 1989, when the coal handling facilitywould be
completedand in full operation,and all other port assets and their
related debt assignedto APS, the charges for the use of all port
assets would be set to ensure a rate of return to APS of not less
than 7.5% on the coal port assets separately,as well as for all APS

16. assets at the port of Sines (Section4.02 of the Loan Agreementand
Section 4.03 of the APS Project Agreement).
6.08 Loan effectivenesswas delayed because tariffs were only partially
increasedand did not satisfy the covenant. The Governmentproposed
postponingthe tariff increasedesignatedto servicethe oil port debt until
the breakwaterwas revaluedas a net usable port asset. Calculationsbased on
certain assumptionsregardingoil port assets demonstratedthat partial
compliancewith the tariff increaserequirementwould not significantlyalter
APS's overall financialpositionsince APS did not assume the liabilities
relatingto the port assets. The financialcovenantunder these circumstances
was, therefore,no longer technicallyappropriate. However, it would have
been preferableto ensure transparentfinancialrelationsbetween entities by
includingfull depreciationof port assets and the servicingof all
liabilitiesrelating to these assets, in the APS accounts.
6.09 In May 1988, when the Governmenttransferredthe fixed assets of the
Port of Sines from GAS to APS, the Governmentassumed responsibilityfor all
long-termdebts related to investmentsin the port of Sines. Since these
assets have not yet been entered into APS's accountsand APS was relievedof
its debt service obligations,a comparisonof projectedand actual financial
ratios, at this stage,would be meaningless. One observationcan be made on
comparingactual to projectednet income. Actual net income, excludina
depreciationand interestexoensesrelated to Port assets, was Esc. 1.5
billion in 1989 (approximatelyUSD 9.5 million) and Esc. 1.8 billion
(approximatelyUSD 12.8 million) in 1990. However, at appraisal,a net income
of Esc. 1.7 billion in 1989 and Esc. 1.5 billion in 1990 were projected,
includingdepreciationand interestexpenses related to cort assets. Without
taking into account depreciationcharges on other port assets or interest
payments,which were unrelatedto the project'scapital investmentof over
$160 million (seePart III, Table 4), the port's net income would have been
negative. It is clear that the objectiveof "full cost recovery"was not
achieved.
6.10 EnvironmentalImpact. The project had minimal impact on the
environment. The conveyorsystem and coal handlingequipmentwere designed to
achieve high standardsof pollutionavoidance. The conveyorsin the port area
are screened and a water sprinklersystemhas been installedto dampen the
coal stockpiles. Any spillageat transferpoints is automaticallyreturned to
the main conveyors. The power plant and coal port are over 5 km away from the
town of Sines.
6.11 EmolovmentGeneration. The project provided employment
opportunitiesfor about 800 local inhabitantsduring the first implementation
phase. Once the coal port is fully operational,about 200 new jobs will be
created for concessionairestaff.

17. -9-
7. SustainAbilit
7.01 The coal terminal at the Port of Sines is an essentialpart of the
National Energy Program. It representsthe least-costsolution for supplying
coal to operate the 600-megawattSines power plant, which serves a growing
industrialcomplex. The terminal is also intended and has the capacity to
meet the needs of the newer 300-megawatt,coal-firedpower plant under
constructionat Pego. Moreover,althoughthis was not foreseen in the
project, the project facilityis being used for coal transhipment,general
cargo, containerization,and grain. The port of Sines can be developedin the
future in accordancewith a master plan that makes phased expansionfeasible.
The sustainabilityof the project'sviabilitywould depend on adequate
financialmanagement of the port, includingperiodic and timely increasesin
tariffs.
8. Bank's Performance
8.01 The Bank contributedsignificantlyto the timely executionof the
main civil works component. During the project preparationphase, three
special procurementmissions visited Portugalto review prequalificationand
bid evaluationprocedures,which preventedforeseeableirregularitiesand
ensured that retenderingwould be conductedfairly and in accordancewith Bank
guidelines. During implementation,Bank supervisionmissions continually
pressed for Government action in setting a reasonablevalue on fixed assets,
adjustingtariffs, and restructuringAPS's financialmanagement. After the
Governmentstalled on efforts to procure and install equipmentand begin
operations,the Bank pointed out repeatedlythat having expensivefacilities
lying idle for so long meant a substantialeconomic loss to the Portuguese
economy.
9. Borrower'sPerformance
9.01 The Governmentwas clearly committedto buildinga coal terminal at
the port of Sines. However, it seemed to place less emphasison the
facility'stimely operationand on agreed actions intendedto ensure cost
recovery,promote APS's managerialautonomy,and improve its financial
position. Target dates for most loan covenantshad to be revised. Thus, non-
compliancewith loan covenants,beginningwith conditionsof loan
effectiveness,became a serious issue at an early implementationstage and
eventually could have been cause for suspendingthe loan. One of the most
importantelements of the project was the provisionof technicalassistancein
the managementof a port enterprise. Not only was the agreed port management
study abandonedbut Decree/Law305/87,which set forth the general foundation
and principlesfor APS's charter,introducedfew innovationsto deal with
deficiencies generally encountered in the operation of Portuguese public
enterprises. Experience,notably with the procurementof coal handling
equipment, indicated that Government involvement in the day-to-day operation
of the port was increasing rather than being phased out.

18. - 10 -
10. Bank-Borrower Relations
10.01 The project raises some serious questions concerning the nature and
scope of Bank involvement in countries at advanced stages of development and
with ready access to other sources of external financing, which can undercut
the Bank's leverage in negotiating and ensuring compliance with key loan
conditionalities and in influencing investment decisions. The Coal Handling
Port Project illustrates the difficulty the Bank experienced in seeking
compliance with loan covenants intended to ensure the managerial and financial
viability of the main project beneficiary, APS. Furthermore, at the onset of
project implementation, the Government reassigned implementation
responsibilities from GAS to APS sooner than stipulated in the project
agreements and without consulting the Bank. The Bank was not even party to
subsequent decisions on future port use.
10.02 The Bank discussed the above issues with the authorities on a number
of occasions. The Borrower's continual contravention of legal agreements to
adjust tariffs to meet cost recovery objectives and to launch and carry out a
port management study led the Bank to consider suspending the loan (see Part
III, Table 6). However, the Bank concluded that such action would not secure
the desired results; by then the physical components had been completed and
most disbursements made. The substantial delays in reaching an agreement on
the acquisition of coal handling equipment resulted in delays in achieving the
physical functioning of the port as intended. On the financial and managerial
side, it was clear at an early stage that the original objectives of full cost
recovery and transparency of Port/Government relationships would not be
achieved. In retrospect, a "4" rating for the project may have more
accurately reflected the implementation status (see Part III, Table 7). The
lesson learned is that the Bank should be more selective in supporting
projects in countries on the verge of graduating and limit such support to
projects where there is a clear and unequivocal "value added" to Bank-
financing and full Government commitment to the project's objectives.
11. Consultants' Services
11.01 Consultants implemented the studies of the west breakwater repair
and coal transportation options and supervised the construction of the coal
terminal. In each instance, performance was fully satisfactory.
12. Prolect Documentation and Data
12.01 Documentation and data were generally good before the impasse in
implementing the last remaining project component, the coal handling
equipment, which was not being financed from the loan proceeds. Since there
was little the Bank could do over the past three years to resolve this
impasse, a lapse in communication occurred. This was exacerbated by an
internal shifting of portfolio management responsibility within the Bank.
Consequently, missing information requested of the Borrower but not received
includes documentation on port management and operations, audits of APS's
financial statements and project accounts for the period 1988-90, and
information regarding the acquisition and delivery of non-Bank-financed,
albeit project-related, equipment.

19. - 11 -
PROJECT COMPLETION REPORT
PORTUGAL
COAL HANDLING PORT PROJECT
(LOAN 2521-PO)
PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE
By letter of May 13, 1992, the Sines Port Authority (AF3) verified
the adequacy and accuracy of Parts I and III, averring that because the Sines
Regional Authority, original implementing agency, was dissolved and APS did
not have a relevant role in the loan process, it could not add to what had
been stated in Part I. The President of APS expressed his high regard for
the support from Bank staff characterizing APS's relationship with the Bank as
one that took place "in an atmosphere of mutual collaboration."

20. - 12 -
PROJECT COMPLETIONREPORT
PORTUGAL
COALHANDLINGPORT PROJECT
(LOAN 2521-PO)
PART III: STATISTICAL INFORMTION
Table 1: Related Bank Loans
LoanNumberand Title Purpose FY Status
Loan 1334-PO Rehabilitationof 500 km of roadsin the Lisbon 77 Completed
First Highway Project area;equipmentfor road maintenanceand PPAR#2882
workshopsin the Lisbonarea; consultancyand 3/11/80
technical assistanceto improve transport
planning,project preparationand evaluation,and
operationalprocedures.
Loan 1700-PO Continuation, nationwide,of the rehabilitationand 79 Completed;
SecondHighway modernizationworks and road maintenance PCR# 5652
Project programinitiated underthe first project. 5/16/85
Loan2240-PO P1rovisionof electricalpower to meetthe forecast 83 Completed;
SeventhPower Project growth in demandat least cost while maintaining PCR# 8472
the requiredreliability of the system. The project 3/28/90
consistedof a three-yeartime slice of EDP's
developmentprogramincludingconstruction of
the Sinespower station.
Loan2840-PO Roadimprovementworks comprisingthe 87 Completed;
Third Highway Project rehabilitationof 2,500 km, periodicmaintenance PCRunder
and strengtheningof another 3,000 km, and the preparation.
construction of 100 km by-passes;routine
maintenance;implementationof a road safety
program;enforcementof axle-loadlegislation;
technical assistanceincludingstudies on freight
transport productivity, the North-Southcorridor,
road usercharges,and energymanagement
policy; and training.

21. - 13 -
Table 2: Project Timetable
Planned Revised Actual
Identification 4/82
PreparationBeginning 1/83
PreparationEnd 4/83 6/83 1/84
10/83
Appraisal Mission 9/83 10/83 5/84
LoanNegotiations 1/85 2/15 to
3/01/85
BoardApproval 12/14/84 4/23/85
LoanSignature 12/31/85 5/85 10/03/85
Loan Effectiveness 1/03/86 1/31/86 7/01/86
LoanClosing 12/31/90
ProjectCompletiona/ 12/89 12/88
1/ Bank-financedComponentsonly.

22. - 14 _
Table 3: Cumulative Loan Disbursements
(USDmillions)
Actual
Original vs.
.Quarter Estimate Actual Estimated
-Y-86
Sep.1985 7.5
Dec.1985. 11.0
Mar. 1986 15.0
Jun. 1986 19.0
Sep. 1986k' 23.0 0.43 2%
Dec. 1986 30.0 0.43 1%
Mar. 1987 34.0 9.28 27%
Jun. 1987 40.0 36.88 92%
i | i-w~~~~~FY88
Sep. 1987 43.0 37.11 86%
Dec. 1987 48.0 43.56 77%
Mar. 1988 52.0 50.67 97%
Jun. 1988 56.0 52.67 91%
FY 89
Sep. 1988 59.0 52.67 89%
Dec. 1988 61.5 54.79 89%
Mar. 1989 63.0 54.79 87%
Jun. 1989 64.0 59.23 93%
Sep. 1989 64.5 62.273' 979%
Dec. 1989 65.0
Mar. 1990 65.5
Jun. 1990w 66.0
1/ Effectiveness Date: July 1, 1986
2/ Closing Date: December 31, 1990
a/ Ultimately, USD 62.3 million were disbursed and USD 3.7 million cancelled.

23. Table 4: Erdiect Costs
(USDmillion)
l_______________ lAPPRAISAL | ACTUAL _ _i__
___________ Lcl Foegn Tta Local' 0WFoeg Total. ............Variation.... ..
MarineCivilWorks. 34.05 46.58 80.63 20.09 51.60 71.69 (8.94) 89%
Civilshoreworks,buildingsand
utilities11 3.93 5.89 9.82 4.90 7.35 12.25 2.43 125%
MechanicalUtilities 1.51 6.06 7.57 0.39 1.58 1.97 15.60) 26%
ElectricalUtilities 1.51 6.04 7.55 0.97 3.90 4.87 (2.68) 65%
CoalHandlingEquipment 10.02 40.09 50.11 12.23 48.93 61.16 11.05 122%
Ul
StudiesandTraining 0.41 1.38 1.79 0.46 1.53 1.99 0.20 111%
TemporaryFacilities 1.57 4.15 5.72 2.88 7.60 10.48 4.76 183%
TOTAL 0 10.19 2163.1 1.49 164.41 1.22 191%
I/ Constructionsupervisioncostshavenot beendisaggregated.

24. Table 5: Project Financing
(USDmillion)
ORIGINAL ACTUAL
i~~~~~~~~~~~~~~Gvm Loc Coc= oen
MarineCivilWorks 43.67 16.32 20.64 51.60 20.09
Civilshoreworks,
buildingsandutilities 9.82 4.21 2.11 5.93
MechanicalUtilities 7.57 0.68 0.34 0.95
ElectricalUtilities 7.55 1.67 0.84 2.36
CoalHandlingEquipment 50.11 21.03 10.51 29.62
StudiesandTraining 1.38 0.41 1.99 a
TemporaryFacilities 3.61 2.11 10.48
TOTAL 45 1. a.S 5. 27.59 1 .87 30.5..
jJ EIB:EuropeanInvestmentBank

25. Table 6: Status of CompIlance WithCovenants
Page 1of 2
Lan/Pir,ject
Agreement Desuiption StatusofCompliane
Reference
LA 3.02/PA2.02 Subsidiaryagreementtransferringoil portassets anddebts ByDecreeLawM . 182188of May21, 1988,theGovemment
fromGASto APS,by December31, 1986;transferof transferredthe fied assetsof the Portof SinesfromGASto APS.
project-assistedport facilitiesfromGAS to APS,by June 30, Insted of transfering the loan forthis investment,the Governmmt
1989. alssm responsibilityforall debtsand auhorized the Misr of
Finnce to establisha surchargeon crude oiland coaltaffic to be
payableto theTeasury.
LA 3.03 (b) Completionof a studyto identifyand evaluatecoal Compliedwithon December17,1988:
transportationoptionsto serveEDP's futureexpansion
programs,by December31, 1986.
LA 3.05(a) Establishmentof tariffsfor the temporarycoalfacility,by APS'scoaltariff, establishedin December1987,providesfor a charge
March31, 1986,and adjustthemannuallyduringthe project of USD0.75per metric[on. Thiswasjudged to be adequatein lightof
iwplementationperiodon the basisof recommendationsof the limitedservicesprovidedby APSand thedelayincunedby APSin
theport maagement study. makingthe newport facilitiesavailableto EDP. The PortM _gement
Studywasnotcompletedandsubsequenttariffadjustmentsdid notmeet
projectcostrecoveryobjectives.
LA 3.05 (b) Establishmentof a user chargeon oil traffic at the Portof SincetheGovernmentassumedresponsibilityfor the loans,APShas no
Sines,by December31, 1986,and annualadjustmentsduring debtsorviceobligation.Nonetheiess,the currenttriff sticture would
the rmainder of the projectimplementaionperiod,to such be inadequateif APSwere responsibleforinterest ehargesand loan
levelsas to producerevenuessufficientto enableAPS to repayment.
servicethedebt toGASrelatedto the oil portassets.
LA 3.05(c) Establishmntof tariffssufficientto contribute10%of the SeeLA 3.05(a) and (b)above.
coalport investment,by June 30, 1986.
LA6.01 Increaseinall porttariffsby 50% as a conditionof loan TheGovernmentapproveda paRialtariffincrase, and the Bank
effectiveness. determinedthatthe underlyingprojectobjectivescouldbe sstained
withoutrecoursetoall of thetariffincrases originaly foresee.

26. Table 6: Status of Compliance with Covenants
Page2 of 2
Loanlject
Agrment Description Status of Complianee
Reference
PA/GAS2.02 (b) Completionof a studyon repairsto the vrcstbreakwater,by Thestudyon repairsof the westbreakwater,includingtimetabl and
September30, 1986;submissionof a timetableand financing financingplan,wascompletedin May 1987. Theport managemint
planforimplemeatingrepairs tothe west breakwater,by study, forwhichresponsbilitywastransferredfrim GASto APS,was
December31, 19W;and startupof the studyon the not undertaken.In a letterto the Bank,datedAugust1987,APS
rmnagementof the Pert of Sines,by June 30, 1986,and explainedthecurrentpnsitionof its orgaizationl development,
completion,byJun) 30 1987. indicatingthatmostof theareasto havebeencoveredby the studyhad
alreadybeeadealt with. Moreover,tileGovemmnt coordinateda
study,whichdraftedstatutescoveringtheorgaization andstaffingof al
port authoritiesinPortugal. A reviewof DecreeLawNo. 305/87
establishingAPSshoweda legalstnrcturegeneraly in liae withexisting
regulationsforpublicenterprises.It didnot addressimportant
operationaldeficienciesor inadequateaccoutig sems and financil
stnwcture.
PA/GAS2.03(b) Setdementof accountspayableand receivableon accountof Seutementwasimplementedby Decreelaw No. 182188of May21,
GASportoperatiots, by March31, 1987. 1988,at thetimeof the ttansferof fixed ssets fromGASto APSin
compliance with LA 3.02 and PA/GAS 2.02 above.
PA/GAS4.02 Submissionof auditedprojectaccountand auditedfinancial Anauditof projectaccountscoveringthe period 198547wassubmitted
statments, byJune 30, 1987. inJuly 1989. Auditsfor 1988and 1989are iQdefault.
PA/APS2.04 Adoptionof productivitytargetsand a timeschedulefor the Compliedwithin 1991.
operationof tIe coal handlingfacilitiesunderthe project,by
December31, 1987.
PAIAPS4.02 Submissionof auditedfinancialstements sixmont after Auditedfinancialstatemets for 1986were submitedin August1987
each fiscalyearduringprojectimplementation. and for 1987inJune 1988. Auditrepors for 1988and 1989ar in
default. Annualreportsfw 1989and 1990contning financial
staments weregivento the November1991Bankmmission
PA/APS4.06 Collectionand preparatinonof dataon port productivityand Compliedwithin 1987.
porttraffic,by June 30, 1986.

27. - 19 -
Table 7: MTssions
Identification 3/82 2 11 Economist
Trasport Engineer
Prepuadon 1/83 2 14 Economist
Port Engineer
3/83 1 9 ProcurementEngineer
9/83 1 4 ProcurementEngineer
11/83 1 4 Procurenent Engineer
PrAppaisl 1/84 3 21 Economist
FinanoialAnalyst
Port Engineer
Appaisa 5/84 3 21 Economist
FmancialAnalyst
Port Engineer
Supervision 11/8S 1 13 Port Engineer 2 Fmancial
Managerial
7/86 2 12 FmancialAnalyst 2 Manageial
Port Engineer
1/87 2 21 Economist 2 DevelopmentImpact
Port Engineer
10/87 S 7 Economist 3 ProjectManagement
FinancialAnalysts(2) Devolopmentbnpact
Port Engineers(2)
4/88 2 10 Economist 3 Prs.At Management
TmansportEngineer DevoiopmentImpact
9/88 3 10 Economist 3 P.eacLManagement
FinancialAnalyst Dew'dpmentImpact
Port Engineer
3/89 1 9 TrnusportEngineer 3 Projec. Management
DevekpmentImpact
Completion 11/91 2 1 TransportEngineer
Oprtons Analyst
Total numberof days in field = 167
J| I - Problemfre, orminorproblem.
2 - Moderatproblens.
3 -Major problem;whih arebeingaddressd.
4 - MaJorproblems;whicharenotbeingaddraesd.

28. - 20 -
Table 8: Saff Inpu1s
(Staff Weeks)
P p.8 ,.,n", N,.,. . .... - ''....I...p ''orion 'PC:''' .. ' '"'
Preparation Appraisa ego ati oessng P Tot
FY82 I
FY83 23.5 0.8 24.3
FY84 49.4 21.3 1.9 72.6
FY85 16.6 8.3 9.5 3.4 3,.°
FY86 2.5 18.5 21.0
FY87 1.0 11.4 12.4
FY88 11.5 11.5
FY89 16.0 16.0
FY90 0.3 0.3
FY91
FY92 4.9 4.9
TOTAL V.9 8. 15. s1. 4.9 80

29. IBRD1844
PORTUGAL
COALHANDLINGPORTPROJECT
PORTOFSINESANDPOWERSTATION
Main Roads
Other Roads and streets
------ Railways
SI NES ~~~~~~~~~~~~~~~~~~~~~~~~~~Corridor
Urban Area
...... Port Umits
,-''>Natural Park
4' ProjectPort
F shing ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PROJECTCOMPONENTS APPEAR IN RED
-420 1042'
MUII-KAUCWPORT~~~~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ OTUA
z I.. b.-g=d ~ ~PAI N
ojnod.nondofc 3h.380-
#. b-d- h.'-'
4
I nes
j ~~~ATLANITIC OCEAN 0 200400 600 800 1000 METE-R- E.O.P. POWERSTATION: coy elzm'o'o 70
JUNE1992