Summary
The group project was designed to investigate the internal and external macro issues in the project; in this case the selected project for analysis was the ‘Turkish electricity transmission company project’ for the constriction of a national transmission grid project (World Bank, 2008). The growth in the demand of electricity has been increasing and this project was aimed at strengthening and increasing the transmission capacity thus resulting to growth to the other sectors in the economy (World Bank, 2008). The objectives of the project were all achievable and the overall efficiency of the project was also highly rated (World Bank, 2008).
The expectation of this project analysis is to identify and analyse the objectives of the project and their relationship with the implications, the success and failure factors, project management best practices and finally recommend the issues that would have been done differently in the terms of design and the implementation.
Introduction
Projects are ideas which are put into application after some analysis of their viability and are deigned to create a new product, service or result. In this project it was designed to generate electricity in Turkey (World Bank, 2008). The main aim of project management is to increase the efficiency in the human resources, coordination, control, organisation and other managerial functions involved in the project. In project management the managers are faced with the main challenges of scope determination, time allocations, cost administration and quality provision, in this project of transmission grid these guided them in the formulation (Project Management Institute, 2010).
The project analysis considered the impact on the economy at large; the main goal of this project is to fuel the economic growth, the government acted as the guarantor for the electricity company for the funding of the project (World Bank, 2008). The project was highly beneficial to the Turkish people since it relevant and it addressed their problems. The growth in the demand has been increasing and this project has strengthened the transmission capacity thus resulting to growth to the other sectors of the economy (Microsoft, 2003).
Objectives Vs Real Implications of the Project
This part deals with the observation of the stated objectives Vs the real implications of the project and the recommendations on what should be done differently in terms of project design and implementation. The project in the original format had several objectives and after the world banks review some additional objectives and the review of the existing objectives was formulated. All the objectives were rated satisfactory and achievable by the parties involved, they included (World Bank, 2008);
To develop an adequate transmission grid capacity
This was the main objective of the project; the capacity of the transmission had to be increased to be able to sufficiently transmit 128 tWh per year. The demand of electricity had been growing at an annual rate of 8% and the transmission grid had to be expanded to meet the growing demand in the future (World Bank, 2008). Energy is the ingredient for urbanisation and industrialisation and thus the investors much look at the ability of an economy to sustain its energy needs, in this case the energy crisis which could have occurred was well seen before it happened and the necessary measures taken into account (Gerard and Steven, 2003, 27).
It major implication to the current situation was that the project fuelled the economic growth of Turkey; this was seen in the urbanisation trends in the areas where the population benefited from the project. This increased the eradication of poverty as seen in the fall in the poverty levels from 27% to 17.8% and an increase in the GDP from US$3310 to US$7214 during this period (World Bank, 2008). There was also an increase in the provision of social amenities e.g. street lighting projects etc this led to the public administration to change amend its regulatory procedures(World Bank, 2008).
The establishment of an independent transmission grid operator
The second objective was the creation of an independent transmission owner and operator which would also have the roles of a market operator. The government spitted the existing TEAS into three autonomous companies i.e. Turkish electricity transmission company (TEIAS), Turkish electricity trading and contracting company (TETAS) and electricity generation company (EUAS) in 2001 before the loan was disbursed for the project and the TEIAS was the independent operator (World Bank, 2008). The implication of this move was the following;
- The legal and the regulatory environment were well managed thus reducing the impact of the losses.
- The company was given the necessary regulatory background for any future borrowing and debts for any projects in this sector.
- The electricity law regarding the buying and selling of electricity and price determination was handed to the private sector; the governments’ direct influence on the electricity market was reduced by the split of TEAS into three entities i.e. Turkish electricity transmission company (TEIAS), Turkish electricity trading and contracting company (TETAS) and electricity generation company (EUAS).
The creation of a state institution whose objective will be maintaining a viable and credible transmission grid
TEIAS was to maintain credible and reliable records of the activities and the progress of the project, the project was to be audited frequently. The financial targets which the institution had to achieve were (World Bank, 2008);
- Self financing ratio
- Current ratio
- Debt service coverage
- Accounts receivable
In the audit conducted in TIEAS had been able to maintain the required target in terms of financial soundness. The retail sector had the most debts in and this accounted for the high accounts receivable amounts in the companies balance sheet, due to this problem the company and the public administration are working on the legislation of way forward on the retail sector especially the street lighting programs(World Bank, 2008).
This measure enabled the emergence of the strengthening of the institutional management perspective in the organisations concerned with the provision of electricity. These were an establishment of an independent regulatory authority whose aim was to support the project and the other forms of financing e.g. grants. The government modified its regulatory procedures to accommodate the increasing number of players in this sector (World Bank, 2008).
Assisting in the implementation of the electricity market law
This is one of the objectives which were added after the restructuring of the project, it established a competitive market with multiple buyers and sellers. Some separate entities were licensed to sell and buy electricity from this market; this was basically a strategy to meet the fast growing demand for electricity in Turkey (World Bank, 2008). This will increase the supply since there will be private sellers of electricity from generation and the setting of the market prices and volumes will be done by the big firms in this sector (World Bank, 2008). This process of implementation of the electricity law was designed to eliminate any hurdles in the future as well implementing the best practices in the sector, the implications of the move are as follows;
- There would be a fair market in terms of competition and pricing in the electricity market, this will enhance the efficiency and the sustainability of the sector.
- An enabling environment for more players will be set; this would mean that more investment from the private sectors will be witnessed in the future.
- The preparedness of the economy to natural disasters will be high as the regulatory framework will be conducive for faster action in cases of such events in the future.
- High degree of accountability and responsibility will be seen, the private and public sector competition will keep the supply high and the prices low for the retail consumers.
The establishment of TEIAS as an efficient and low cost operator
This was also added after the restructuring and it posed the main challenge to fulfil the projected target of 2.5% loss (World Bank, 2008). The reduction of the losses would however been minimized by the installation of new meters, location changes of meters, changes of the measurement procedures and the change in the TEIAS responsible for the measurement of the electricity (Bolles, 2002, p. 102). This objective had the following implications;
- The competitive environment was improved by the addition of new buyers and sellers in the market thus enabling it function efficiently (World Bank, 2008).
- The projects success proved the capability of Turkey to handle such cases and thus increased their sources of funds in the international lending arena. This was due to the success achieved by both the government and the borrower (World Bank, 2008).
Recommendations
The recommendation is based on the objectives and the test of the achievement of the intended goals is what counts most. The applicable recommendations are as follows;
To develop an adequate transmission grid capacity
The development of an efficient and reliable grid will enable the country meet its growing energy needs in the future and thus enabling the economy meet their development objectives. I recommend that the success met by the project should be maintained and the necessary improvements made to the grid to ensure the benefits are increased (World Bank, 2008).
The establishment of an independent transmission grid operator
The newly established independent transmitter and operator would be concerned with the pricing system in the sector (Project management institute, 2010). This role will require frequent adjustments in the operations and the pricing mechanism. The best operational measure to take will be maintain the highest level of efficiency in their oversight of the sector to ensure that maximum benefits are achieved from the project (World Bank, 2008).
The creation of a state institution whose objective will be maintaining a viable and credible transmission grid
This is an important ingredient of the future success of the project. The TEIAS future will be determined by the manner in which it handles its financial operations and records (World Bank, 2008). The performance indicators should be strictly followed in the implementation and the strategies designed to maintain the efficiency and the benefit of the project.
Assisting in the implementation of the electricity market law
The establishment of a competitive market in the electricity industry will attract the privatisation of production and distribution chain. The recommendation in this area is that a regulatory environment for fair play in the market should be formulated with the necessary laws (World Bank, 2008). The restructuring of the power sector would also assist in ensuring that the project is a success.
The establishment of TEIAS as an efficient and low cost operator
The economic, social and strategic viability of the project are analysed to ensure that the optimal benefit of the project is felt by the market i.e. consumers (CML Group, 2010). TEIAS has to find ways to reduce the losses it incurs every year, this will only be possible if the organisation will be able to increase its efficiency in the operation and the fitting of efficient systems (Project management, 2003). These measures if implemented will lead to reduced losses to the company thus enabling it channel those funds to other developmental sectors of the organisation (Kerzner, 2004, p. 33).
References
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