Mid-Term Review Report of Japanese ODA Loan Project for FY2012
External Evaluator: Hiroshi Oita (OPMAC Corporation)
Field Study: October, 2012
Project Name: Indonesia “PLN Operation Improvement System Project for Supporting Generation Facilities” (L/A No. IP-537)[Project Description]
Loan Amount / Disbursed Amount: 4,498 Million Japanese Yen / 184 Million Japanese Yen (as of July 31, 2012)
Loan Agreement Signing Date
: March 2007
Original Date of Project Completion: September 2013
Project Completion Date after review: April 2015
Loan Expiry Date
: January 2018
Executing Agency: Perusahaan Listrik Negara (Persero) (PLN)
Operation and Maintenance Organization:(1) Enterprise Asset Management System Component: GENCO Shared Service Center (GSSC) to be established in the Project.
(2) Transformation Component: P3B Java-Bali in PLN (This component is under consideration by PLN and JICA for implementation with PLN’s own
funds.)[Project Objectives]
The objectives of PLN Generation Operation Improvement System Project for Supporting Generation Facilities (hereinafter referred to as “the Project”) is toestablish an accurate data collection system for electricity generation facilities for PLN and its generation subsidiaries, to execute the training for personnel incharge of operation and maintenance in power plants, and to replace equipments in substations; thus optimize the efficient utilization of existing generation
facilities in the whole system of Indonesia and improve reliability in Java-Bali system, thereby contributing to economic development through the
improvement of investment climate.
Consultant
Contractor1: Nippon Koei Co., Ltd.
: not yet decided

1

The names and nationalities of consultants and contractors are entered only when they have been made public in JICA’s annual statistical report “List of Names of Major Companies
and their Contract Amount of Japanese ODA Loan” (these are names for which the contract amount is not less than 1 billion Japanese Yen for contractors and not less than 100 million
Japanese Yen for consultants). Where names have not been entered in JICA’s annual statistical report, they are described only as “local contractors/consultants” or “Japanesecontractors/consultants”. These names can be provided by JICA.

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Item
Relevance

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)(1) Relevance to development policy
According to the National Electricity General Plan (RUKN)
produced by the Ministry of Energy and Mineral Resources in June
2006 and covers the period between 2006 and 2026, peak demand is
expected to grow at an annual average of about 6.9%. Therefore,
alleviating the demand for power, which will become acute, is apressing issue for Indonesia.
In addition, RUKN recognizes that structural reforms based on thefundamental principle of improving efficiency, transparency andcompetitiveness, are necessary to establish the efficient andautonomous power sector.
The Government of Indonesia announced a reorganization policy
for the power sector in 1998 and initiated reforms for the
introduction of a market mechanism and the participation of theprivate sector in order to establish a competitive power market and to
improve the efficiency of the power sector. Although the new powerlaws have not been established, PLN has promoted the developmentof new power sources together with reductions in fuel costs for ageneration.

(1) Relevance to development policy
PLN is the entity responsible for power supply in accordance with
Law No.30/2009.
Referring to the National Electricity General Plan (RUKN), PLN
has produced the “PLN Company Plan to Supply Electric Power”(RUPTL) as a guide for power development for the next 10 years.
PLN also has produced the “Long Term Corporate Plan” (RJPP)
which shows the annual investment plans in detail. The most recent
RUPTL covers 2011 to 2020 and RJPP covers from 2011 to 2015.
(The 2012-2016 RJPP will be issued soon.)
To date, this Project is recognized as one of the major projects
under RJPP and this status will remain unchanged. Similarly, this canapply to the Enterprise Resource Planning (ERP) Project financed by
the World Bank.
PLN has advocated in RUPTL one of the targets for the saving ofproduction costs by a more appropriate energy mix; it will reduce theratio of power generation using fuel oil from 21% in 2011 to 1% in2020 out of the total power generation. This target is consistent withthe purpose of the Project which aims at the reduction of generation
costs through an optimum composition of energy consumption. Thus,
importance of the Project has been attached to the Project.

(2) Relevance to development needs
PLN is organized into 32 business units nationwide, inclusive of
power generation, transmission, transformation and distribution
units. In 1955 the assets and operation, maintenance andmanagement of the Java-Bali System were divided and transferred
into two generation subsidiaries, Java-Bali Power Co., (PJB) andIndonesia Power Co., (IP), to promote efficiency in the power sector
and related operations.

(2) Relevance to development needs
Major issues that face PLN are coping with the eastern andwestern areas where the power supply is insufficient, changing thepowerhouses that use fuel oil to those with non-oil fuel, and toelectrify rural areas where there is no power supply. In addition, it
has been a long standing organizational issue that PLN should
strengthen its financial position independent of subsidies from thegovernment.

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Ex-Ante Evaluation (2007)

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

At present, however, information on the operation andmaintenance of the various power plants, which would serve as basic
data for responding to issues such as cost cutting of power generationand the improvement of operation ratios, is poor in reliability, anddata collection is inadequate. Therefore, the establishment of aframework for accurate data collection and analysis and the efficientmanagement of existing generating facilities through staff training
are required.
In addition, in the transmission and transformer sector, significant
forced outages occur due to malfunctions of equipment in substationsin the Java-Bali System. To improve the reliability of the system, thereplacement of equipment in these substations is required.

Efficient operation through fuel management and other measuresfor existing power facilities based on accurate data and theimprovement of reliability through the replacement of transformationequipment under the Project will meet the future power demand andcontribute to the improvement of the financial management setup of
PLN through the improvements in the shortages of power supply andcost reduction by efficient management.
Particularly, the Java-Bali Power Co., (PJB) and Indonesia Power
Co., (IP) which are included in this Project, account for about 70% of
the total power facilities in the Java and Bali islands. The efficient
operation of powerhouses using fuel oil, therefore, is the mostimportant issue for those companies.

(1) Quantitative Effects
Operation and Effect Indicators(1) Quantitative Effects
Operation and Effect Indicators

Item

EffectivenessIndicator

Baseline(2006)

Enterprise Asset Management (EAM) component
No. of power plant sites collecting accurate
data
No. of trained employees who responsible
for generation operation
Maintenance material cost (%)
Forced outage hours (%)
Additional energy sales (million yen/year)
Reduction of fuel cost (million yen/year)
Reliability Improvement Component
Forced outage caused by malfunction of
circuit breaker (No. of times/year)

Target (2018)
5 years after
completion－

Indicator

19*－ All staff involved inoperation andmaintenance*
2.5
－
7.5
－
61.5
－
122.8
－
2

0*

3

Baseline(2006)

Enterprise Asset Management (EAM) component
No. of power plant sites collecting
accurate data
No. of trained employees who responsible
for generation operations－

Target (2018)
5 years after
completion
19*－ All staff involved inoperation andmaintenance*
Maintenance material cost (%)
2.5－
Forced outage hours (%)
7.5－
Additional energy sales (million yen/year)
61.5－
Reduction in fuel cost (million yen/year)
122.8－
Note: *Target values are expected to be reached two years after completion of
the project.

Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)
Forced outage caused by malfunction of
20*protection relay (No. of times/year)
Note 1: *Target values are expected to be reached two years after completion of
the project.
Note 2: After commencement of EAM system operation, there are plans to reset
the baseline and target, once accurate data collection and management become
possible.

Reliability Improvement Component
The reliability improvement component was excluded from the
mid-term review because PLN is considering implementing thisportion with its own fund.
(2) Qualitative Effects
1) Human resource development and capacity enhancement in the
power generation sector
2) Improvement of efficiency in business and optimum selection of
power resources through the integrated management ofgeneration data
3) Efficient operation of systems by using accurate generation data
4) Improvement of reliability of facilities in the Java-Bali System
and improvement of the investment climate(2) Qualitative Effects
Qualitative effect assumed at the ex-ante evaluation andmentioned in the left column will be expected to be achieved as PLN
can collect reliable and correct data through the EAM system. This
leads to acceleration in making management decisions.

(3) Impact(3) Impact
Same as Qualitative Effect.

(4) Other items influencing effectiveness1) Project implementation structure, technical and financial aspectof the Executing Agency<<EAM system component>>
At the procurement stage, a special team is to be formed, the staff of(4) Other items influencing effectiveness1) Project implementation structure, technical and financial aspectof the Executing Agency<<EAM system component>>
At this time the procurement team consists of the head of the

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Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)
which come from three departments of PLN (generation and primaryenergy, commerce and customer service and finance).
At the implementation stage, a project execution team, which
consists of staff from PLN and GENCO (IP and PJB), has
responsibility.
This team takes the same form as the one under the ERP pilot
project of the World Bank.

Java-Bali generation sector, who is responsible for overallprocurement, and the staff from PJB and IP as support members.
Since procurement procedures have not yet started, neither has theimplementation system been set up. PLN can, however, utilize
experience of the World Bank project. From now on the consultant
hired for the Project will give PLN technical support in procurement
and implementation up to the completion of the Project. At theimplementation stage there is no financial problems as PLN has total
responsibility on it.

<<Transformation component>>
The project implementation unit (PIU) is to be established in PLN
and is responsible for implementation. The transmission,transformation and distribution section (P3B Java-Bali) advises on
the implementation of the project.

<<Transformation component>>
With regard to relays and circuit breakers to be procured as soon
as possible in order to avoid outages, PLN is considering using its
own fund for procurement. In this case there will be no problem
which might affect the effectiveness of the Project from the point ofview of the implementation system and the technical and financial
aspects.

2) Cooperation with NGO, universities etc.
There is nothing to mention.

2) Cooperation with NGO, universities etc.
There is nothing to mention.

3) Cooperation with Japanese grant aid and/or technicalcooperation
There is nothing to mention.

3) Cooperation with Japanese grant aid and/or technicalcooperation
There is nothing to mention.

4) Cooperation with other donors
Under the “Java-Bali Power Sector Restructuring andStrengthening Project” financed by the World Bank, the Enterprise
Resource Planning (ERP) system has been introduced as a pilot
project for strengthening the finance and personnel sections of the4) Cooperation with other donors
PLN has strengthened the finance and personnel sections of thetransmission sector through the introduction of ERP under the“Java-Bali Power Sector Restructuring and Strengthening Project”
financed by the World Bank. ERP has been developed from its pilot

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Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)transmission sector in PLN.
There will be synergy between ERP system and EAM system.

stage to a fully-fledged operation in Sumatra and Sulawesi islands.
With regard to cooperation between EAM system and ERP, EAM
system improves the technical aspects, whereas ERP focuses on
efficient management. Therefore the relation between the two iscomplementary.
From the point of view of human resource development,
strengthening management personnel under ERP and technicalpersonnel under EAM system will lead to an upgrade of the total
capacity of PLN.

5) Effect on the natural environment5) Effect on the natural environment
Category C in accordance with JBIC Guidelines for Confirmation
There is nothing to mention.
of Environmental and Social Considerations (2003)
6) Land Acquisition
There is nothing to mention.

6) Land Acquisition
There is nothing to mention.

7) Operation and maintenance structure and the technical andfinancial aspects of the executing agency<<EAM component>>
Genco Shared Service Center (GSCC) to be established by thisproject will operate and maintain the EAM system. GSCC is
expected to be established by 2013.

7) Operation and maintenance structure and the technical andfinancial aspects of the executing agency<<EAM component>>
A clear-cut decision has not been made on the EAM operation andmaintenance structure, including the set-up of GSCC, because theissue is still under consideration internally in PLN.

<<Transformation component>><<Transformation component>>
P3B Java-Bali of PLN will maintain the transformation
Use of PLN’s own fund for this portion is under consideration.
component.
Operation and maintenance will be carried out by P3B.

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Item
Efficiency

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)(1) Project Outputs(a) Equipment(1) Project Outputs(a) Equipment
At the time of the mid-term review, the pre-qualification (PQ)
documents on the following component were in the stage offinalization.

<<EAM system component>>
1) Introduction of EAM system
2) Installation and upgrading of monitoring devices
3) Establishment of GSSC
4) Reinforcement of the network capacity
5) Capacity building to improve power plant operations andmaintenance<<EAM system component>>
1) Introduction of EAM system
2) Installation and upgrading of monitoring devices
3) Establishment of GSSC
4) Reinforcement of the network capacity
5) Capacity building to improve power plant operations andmaintenance<<Transformation component>>
1) Replacement of equipment in substation<<Transformation component>>
1) Replacement of equipment in substation
As stated above, PLN is considering using its own fund.

(b) Consulting Service
1) Concept design2) Assistance in bidding(b) Consulting Service
1) Concept design: Completed2) Assistance in bidding
Consultants will support procurement procedures such as the
preparation of PQ documents, PQ and bidding procedures until thesigning of contracts.
As counterparts of the consultants PLN has assigned two staff
members under the supervision of the person responsible for
procurement. They are supervised by the board of directors.

3) Implementation supervision

3) Implementation supervision
Supervision works start after the selected contractor starts its

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Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)

business.
(2) Project Inputs
1) Project Cost (Million yen)

Item
EAM system component
Transformation component
Price escalation
Physical contingency
Consulting service
General administration cost
Taxes
Total

(2) Project Inputs
1) Project Cost (Million yen)In the Japanese ODA Loan column “consulting service” shows theactual contract amount. The other costs of the items are original
estimates because procurement has not yet started.
Total Cost
3,241
897
413
228
485
218
526
6,008

Yen Loan
2,648
897
276
192
485
0
0
4,498

Item
EAM system component
Transformation component
Price escalation
Physical contingency
Consulting service
General administration cost
Taxes
Unused balance
Total

Total Cost
3,241
897
413
228
485
218
526
6,008

Japanese ODA Loan
2,648
0
276
192
485
0
0
897
4,498

2) Implementation Schedule2) Implementation Schedule
After the signing of the Loan Agreement in March 2007, theBoard of Commissioners approved the Project in January 2008 andthe Ministry of State Owned Enterprises and the Ministry of Financeapproved the Sub-Loan Agreement with PLN in November andDecember respectively. This resulted in the concurrence of the shortlists of consulting firms by JICA in February 2009.

a) Selection of consultant
From January 2007 to September 2007 (9 months)a) Selection of consultant
From March 2009 to May 2010 (15 months)
JICA concurred with the result of the evaluation of proposals in
September 2009. Since only one consulting firm submitted a
proposal, it took some time for the negotiation of a contract with

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Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)

regard to unit cost and man- months. A change of the president
director at PLN and a reorganization which took place early in 2010
delayed the decision making on PLN and the conclusion of thecontract was in May 2010.
As a result, the selection of consultant was delayed by 2 years and8 months compared to the original estimate. Of this delay, 2 years
and 2 months were caused by the procedures before the selection of
consultant and 6 months can be attributed to the selection process.
b) Consulting service
From October 2007 to September 2013 (72 months)b) Consulting service
From July 2010 to June 2016 (schedule) (72 months)
EAM System will be completed in May 2015. Supervisory
services for improvement of the system will end in June 2016. If the
Project is implemented in accordance with this schedule, theconsulting services will be completed with a 2 years and 9 months
delay from the original schedule.

c) Procurement period
From August 2007 to July 2009 (24 months)c) Procurement period
From December 2012 to September 2013 (schedule) (10 months)
The PQ announcement was delayed because it took about 1 year to
scrutinize the PQ documents. Due to the fact that there are little
precedent of IT system developments in Japanese ODA loan
projects, it took a long time to confirm and set the criteria for theparticipation of IT firms in bidding, which needed to be reflected in
PQ documents.
It is expected that PQ will be conducted from December 2012 toJanuary 2013 and bidding will be carried out from March to June
2013.
Based on this schedule the delay from the original schedule is 4
years and 2 months at the end of procurement period.

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Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)d) Installation of EAM system
From August 2009 to September 2013 (50 months)d) Installation of EAM system
From October 2013 to May 2015 (schedule) (20 months)
1 year and 8 months delay from the schedule set at the ex-anteevaluation.

e) Replacement of equipment in substations
From December 2008 to April 2010 (17 months)e) Replacement of equipment in substations
PLN is considering using its own fund.

f) Training for staff
From August 2009 to September 2013 (50 months)f) Training for staff
From November 2013 to May 2015 (schedule) (19months)
1 year and 8 months delay from the schedule set at the ex-anteevaluation.

(3) Internal Rate of Return(3) Internal Rate of Return
FIRR: 12.4%
This is excluded from the mid-term review because no data is
Cost: Project cost, Operation and maintenance expenses
available for calculation at this time.
Benefit: Increase in income from electricity charges, saving ofcosts for maintenance materials and equipment, saving ofadditional investment cost for IT, decrease in fuel oil
costs
Project life: 30 years
EIRR: 13.4%
Cost: Project cost (excluding taxes), operation and maintenanceexpenses
Benefit: Increase in income from electricity charges, saving ofmaintenance equipment cost, saving of incremental
investment cost for IT, increase in oil export income
Project life: 30 years

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Item

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)
Replacement of equipment in substations is not included in theanalysis of the above internal rate of return because of difficulties ofquantitative evaluation.

Lessons learned to JICA
 To enrich Terms of Reference (TOR) for consulting services at the time of the selection procedure:
Recommendations
In Japan, EAM system is used at CHUBU Electric Power Co., Inc. but not common among other power companies.
If the information of TOR included in the Request for Proposal should not be enough, consulting firms face constraints to prepare a
proposal. In the case of procurement like the EAM system which needs technical details, attention should be paid to the procurement system
including support of a procurement expert hired by JICA to the executing agency before they will prepare TOR.
Lessons
learned and To strengthen the appraisal of procurement and its support for the IT project:
In this Project the two envelop procurement method was adopted on the assumption that the same procurement method as ordinary
infrastructure projects can be applied.
In the case of the ERP project under the World Bank financing in which the IT system was introduced prior to the EAM system and the loan
agreement was signed in June 2003, the two stage bidding method*) was applied. Since technological advances in IT are fast, it seems to be
more efficient and effective if bidding is invited after the executing agency decides on the final specification based on proposals made by thebidders at the first stage.
In the case of such a project as the introduction of an IT system, it is important that JICA and the executing agency study and discuss the
procurement method fully in order to apply the appropriate procurement method with due consideration of its technological advances.
*) Under this procedure, bidders will first be invited to submit technical proposals without prices on the basis of the minimum operating and performancerequirements. After technical and commercial clarifications and adjustments, followed by amended bidding documents, the bidders will be invited to submit final
technical bids and financial bids in the second stage.

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Item
Indicators for
the Ex-post
Evaluation

Mid-Term Review results and Ex-Post Evaluation results
estimated at the time of Mid-Term Review (2012)

Ex-Ante Evaluation (2007)

Indicators at the time of Ex-Ante Evaluation
Regarding the transformation component, PLN is considering using(1) The number of power plant sites collecting accurate data
its own fund. PLN has no objection to using the indicators set for the(2) The number of trained employees who responsible forother components at the ex-post evaluation.
generation operation(3) Maintenance material cost (%)(4) Forced outage hours (%)(5) Additional energy sales (million yen / year)(6) Reduction of fuel cost (million yen / year)(7) Forced outage caused by malfunction of circuit breaker(No. of times / year)(8) No. of forced outage caused by malfunctions of protection relay(No. of times / year)(9) Internal rate of return (%)

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