Bolivia - Third ENDE Power Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2733 PROJECT PERFORMANCE AUDIT REPORT BOLIVIA: ENDE - THIRD POWER PROJECT (CREDIT 433-BO) November 6, 1979 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT BOLIVIA: ENDE - THIRD POWER PROJECT (CREDIT 433-BO) Table of Contents Page No. Preface (i) Project Performance Basic Data Sheet (ii) Highlights (iii) Attachment: Project Completion Report I. Introduction and Background 1 II. Original Project Description 1 III. Project Implementation 2 IV. Operating and Financial Performance 6 V. Institutional Performance 10 VI. Project Justification 10 VII. Association Performance 11 VIII. Conclusions 12 Annexes: 1. Comparison of Cost Estimates 13 2. Original and Actual Project Cost in Constant and Current Prices 14 3. Inflation Rates 1972-1977 15 4. Accumulated Disbursements from the Loan Account in 16 Thousands of US$ Equivalent 5. Disbursements and Costs by Project Item 17 6. List of Main Contracts 18 7. Allocation of Proceeds of Credit (in US$ equivalent) 19 8. Actual and Forecast Sales and Tariffs 20 9. Actual and Estimated Financial Ratios 1973-1977 22 10. Income Statements 1973-1977 23 11. Actual and Estimated Balance Sheets 1973-1977 24 12. Actual and Estimated Sources and Applications of Funds 1973-1977 25 13. Main Undertakings in Credit Documents 26 14. Economic Evaluation - Santa Cruz Gas Plant 27 15. Assumptions used in Least Cost Analysis 31 Map This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  (i) PROJECT PERFORMANCE AUDIT REPORT BOLIVIA: ENDE - THIRD POWER PROJECT (CREDIT 433-BO) Preface This report presents the results of a performance audit on Bolivia: ENDE - Third Power Project for which Credit 433--BO of US$6.0 million was made in October 197:3. The credit was fully dis- bursed and closed in April 1978. The report consists of Highlights prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) pre- pared by the Latin America and the Caribbean Regional OfEice. Following its abbreviated procedure, OED has reviewed the Appraisal and the President's Reports, the credit documents, the minutes of the Board -discussions and the PCR. On the basis of this limited review, OED finds no reason to disagree with the analysis and the conclusions of the PCR. Following normal OED procedures, a draft copy of this report was sent to the Government and the Utility for their comments. However, none were received.  (11) PROJECT PERFORMANCE AUDIT BASIC DATA SHEET BOLIVIA: ENDE - THIRD POWER PROJECT (CREDIT 433-BO KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 7,3 9.7 1, Overrun (%) 33. 1/ Loan/Credit Amount (US$ million) 6.0 Disbursed -- 6.0 Cancelled - Repaid to 11/30/78 --- Outstanding to 11/30/78 -- 6.0 Date Physical Components Completed 12/75 12/7t, 2/ Proportion Completed by Appraisal Target Datel%) 100 n.a. Proportion of Time Overrun (%) -- 33 Incremental Financial Rate of Return (%) 9.0; 29.0 23 3, Financial Performance. fair Satisfactory Institutional Performance good good Cumulative Estimated and Actual Disbursements (US$ million) FY 1974 1975 i976 1977 1978 (i) Appraisal E.t2mate 3,987 5,405 5,962 6,000 6,000 (ii) Actual 545 3,251 5,790 5,799 6,000 (1i) as Z of (i) 14 60 97 97 100 OTHER PROJECT DATA Original Item Plan Revisions Actual First Mention in Files or Timetable -- / 3/72 Government's Application -- -- / 3/72 Negotiations 7/ 1/73 7/19/73 Board Approval 8/14/73 8/29/73 Loan/Credit Agreement Date 10/17/73 Effectiveness Date 12/11/73 Closing Date 12/31/76 12/31/77 4/14/78 Borrower Bolivia Executing Agency ENDE/DINE Fiscal Year of Borrower Calendar Follow-on Project Name ENDE IV Loan/Credit Number 1238-80 Amount (US$ million) 25.0 Loan/Credit Agreement Date 6/2/76 MISSION DATA Month/ No. of No. of Date of Item Year Weeks Persons Manweeks Report Identification Preparation -- -- -- Appraisal 6/73 5 2 10 7/72 Post-appraisal 12/73 2 2 4 8/73 4/ Total 14 Supervision I 6/74 1 1 1 6/74 Supervision II 4/75 1.5 2 3 5/75 Supervision III 5/ 10/75 4 2 8 3/76 Supervision IV 6/76 2 1 2 6/76 Supervision V 4/77 1 1 1 4/77 Supervision VI 6/ 12/77 1 2 2 12/77 Supervision VII 7/ 8/78 1 1 1 8/78 Completion - - - - Total 18 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Bolivian peso ($b) Year: Appraisal Year Average Exchange rate: U ] Intervening Years Average Excang rae =09 20,0 Completion Year Average US$1 - 20.0 1/ In constant (i.e. 1972) prices the total project cost is US$5.7 million which represents 16% cost underrun. 2/ Excludes office building (a minor component of the project). 3/ See paras. 6.04-6.06. 4/ Appraisal report. S/ Appraisal of ENDE IV. 6/ Carried out simultaneously with Energy Sector Mission. 7/ Used to get additional information for PCR.  (iii) PROJECT PERFORMANCE AUDIT REPORT BOLIVIA: ENDE - THIRD POWER PROJECT (CREDIT 433--BO) Highlights The project achieved the intended objective of providing the generating capacity to meet the growth in energy demand. It had a cost overrun of 33% in current US dollars but an underrun of 16% in constant (1972) US dollars (PCR para. 3.07). The generation component was modified (one 22 MW gas turbine unit was installed instead of two 8 MW units) and implemented seven months behind schedule. The transmission component was implemented about 12 months behind schedule. By installing a 22 MW unit in a relatively small power system, the utility accepted an unusually high level of risk to system security in the event of an unscheduled outage of the unit. However, it was the only practical solution to meet the envisaged high growth in energy demand, since the installation of the other feasible alternative means of power generation would have taken muchlonger and would have resulted in shortage of capacity in the system. In the event, the system had no problems due to the outstanding performance of the unit (PCR para. 3.04). The utility's overall financial performance was satisfactory over the project period 1973-77. The net internal cash generation exceeded the appraisal estimate by 75% and contributed about 36% (compared with 29% estimated at appraisal) of the construction expenditure which itself was 42% higher than that planned at the time of appraisal. The position of accounts receivable, however, is unsatisfactory and has deteriorated during 1975-77, compared with the improvement made in the two preceeding years 1/. The recalculated incremental financial rate of return on the project (i.e. the generation component and a nominal investment in trans- mission) is 23%, compared with 9% and 29% estimated at the time of appraisal on the generation and transmission components respectively (PCR paras. 6.04-6.06). The following additional points may be of special interest: - poor response to the original invitation for bids on the gas turbine units compelled the utility to install a larger size unit (PCR para. 3.04); - commitment from the Government is needed in order to effect improvements in the utility's accounts receivable (PCR paras. 4.06, 8.02(i)); and - problems in the procurement of the gas turbine and modifications to the transmission system caused implementation delays (PCR paras. 3.01-3.03). 1/ See OED's Project Performance Audit Report No. 1496 on Bolivia: Second ENDE Power Project (Credit 148-BO).  - 1 - Attachment BOLIVIA: ENDE - THIRD POWER PROJECT (CREDIT 433-BO) Project Completion Report I. INTRODUCTION AND BACKGROUND 1.01 Credit 433-BO was the fourth of a total of five Bank Group lending operations made so far with the Bolivian power sector; the first two IDA credits (61-BO and 62-BO) were made simultaneously in 1964 for a total of US$15 million, of which US$10 million was received by the newly-established ENDE for the construction of the Corani dam and associated facilities, and US$5 million by the Canadian-owned Bolivian Power Co. (BPC) for the construc- tion of the Chururaqui dam and associated lines. The third IDA credit (148-BO) was signed in 1968 for US$7.4 million to be used by ENDE for the construction of the Santa Isabel plant and associated facilities. All three projects were completed without major problems (see Performance Audit Report No. 1496). Following Credit 433-BO, made in 1973, which is the object of this report, a Bank loan (1238-BO) was made to ENDE in 1976 to finance the expansion of the Santa Isabel plant, a gas tubine in Santa Cruz and various transmission facil- ities; this project is progressing satisfactorily. 1.02 Following an early 1972 field review of investment requirements in the power sector, two projects - one for BPC and one for ENDE - were prepared and appraised during three visits to Bolivia in June, September and December 1972. However, due to the serious deterioration in BPC's finances which fol- lowed the 67% devaluation of the peso in October 1972, the Bank decided to process a credit to ENDE only, based on the urgency of this company's invest- ments and its sounder financial situation. Processing of the proposed credit was made contingent.on the Government taking action to strengthen BPC's finances in the short-term by raising tariffs in the La Paz area; delays in the resolution of that issue contributed to retard somewhat the finalization of the Credit, which was finally made effective on December 11, 1973. 1.03 The ENDE III Project was intended to supply energy to satisfy the rapidly rising demand in Santa Cruz through. the construction of two gas turbines, and to strengthen and expand the transmission systems in the Santa Cruz and Cochabamba-Oruro area. The Association also intended to continue to support the dominant role of this institution, which it: had helped to create, in the development of the sector and to assist DINE, the regulatory department of the Ministry of Energy and Hydrocarbons, in undertaking sector studies (para. 2.02). II. ORIGINAL PROJECT DESCRIPTION 2.01 The original ENDE Third Power Project included the following items: (i) Two 8 MW gas turbine units to be installed al: the Santa Cruz power plant; (ii) extention of the 66 kV transmission line frota Warnes to Montero (22 km) and substation expansions in the Santa Cruz area; -2- (iii) a 40 km single-circuit 115 kV transmission line between the Santa Isabel hydro power plant and the Sacaba substation and expansion of substations in the central system; (iv) a 45 km single-circuit 66 kV transmission line between Miguillas substation and Viloco mines, in the central system; (v) construction of an office building in Cochabamba; and (vi) consulting services for the interconnection study of the central and Northern systems, engineering studies for the expansion of Corani hydro power plant, feasibility studies for new generation, and management consultant services. 2.02 The original DINE part of the Project consisted of: (i) studies of the present and future availability, prices and consumption of energy by sources; (ii) studies of the present and future organization of the power sector; and (iii) the improvement of DINE's administrative and regulatory procedures and practices. III. PROJECT IMPLEMENTATION Changes to the project 3.01 In general, the scope of the project remained as envisaged at appraisal. The most important change was the installation of one 22.8 MW gas turbine in Santa Cruz instead of two 8 MW units, due to the market limitations to procure 8 MW units, a fact unknown at the time of bidding (para. 3.04). In addition, the following minor changes were introduced 1/: (i) The expansion of the Catavi substation and the installation of the shunt compensation at several substations were excluded from the project. According to studies made by MECO after the credit was approved the shunt compensation turned out not to be necessary and the Catavi expansion could be delayed; (ii) The original 66 kV line with single pole structures between Warnes and Montero was built instead with 115 kV insulation and H type concrete structures. At Santa Cruz, an 11.3/15 MVA transformer was installed instead of the 5/7.5 MVA originally budgeted; (iii) at the Santa Isabel substation one additional 115 kV circuit breaker and one transformer bay were installed; and 1/ Studies on the Interconnettion of the Northern and Central Systems and on the expansion of the Corani hydro power plant were dropped from the original project. - 3 - (iv) the new Atoloma substation was added between Huaynacota and Viloco. Project execution and implementation 3.02 All the project items were completed late as shown in the table below: Completion dates Project Item Original Actual Delay (months) Santa Cruz gas turbines 11/1/74 6/1/75 7 Transmission lines 12/31/75 12/31/76 12 Office building 12/31/74 2/ still under N/A construction Total project 1/ 12/31/75 12/31/76 1/ 12 1/ Excluding the office building. 2/ Not specifically defined in the appraisal report. 3.03 Late completion of the gas turbine was due primarily to problems in its procurment (para. 3.04) and scarcity of some construction materials. Even though the bid invitation for the gas turbines was issued as early as May 1973 (the loan was signed in October 1973), the contract was not awarded until May 1974. Late completion of transmission lines was due to modifications carried out to this component which, in turn, delayed preparation of bidding documents and invitation for bids. The main contracts for the transmission items of the project were awarded between August 1974 and March 1975. Procurement 3.04 However, the bid invitation for the two 8''MW gas turbine units attracted only two bidders. ENDE decided, to which the Bank did not object, that the two bids were unresponsive 1/. Informal contacts at this stage with gas turbine manufacturers gave a clear indication that larger gas turbine units could be obtained and installed within shorter delivery dates and also at lower units1costs. A new bid invitation for units of around 20 MW was thereforelissued* Clearly a 20 MW unit, in a system whose total installed capacity until then was only 13 MW, is undesirable be- cause of the high risk to system security in the event of an unscheduled outage of the unit. On the other hand, installation of the 20 MW unit was the only practical solution to meet the estimated high growth in energy demand, since the delivery dates were much higher on the other feasible alternatives (i.e. smaller gas turbines and diesel units), with the consequent shortage of capacity in the system. (In the event, the system had no problems due to the outstanding performance of the gas turbine - see para. 3.10). 3.05 The main contracts awarded are listed below. A complete list of the contracts is included in Annex 6. 1/ The conditions imposed by and the delivery date of one bidder were unaccept- able while the price of the other bidder was too high. -4- Main Contracts (about US$0.02 million) Approximate Amount 1/ Contract No. and Description Contractor Contractor's US $ Thousand Country of equivalent Origin 1054/31P Gas turbine package plant AEG-KANIS West Germany 3.350 1085/38P Switchgear equipment COGELEX France 0.217 1131/38P Design, supply and installation of substation ICE Ingenieros Panama 1.846 1160/38P Aluminum Conductor Mitsubishi Japan 0.309 1168/38P Design, supply and erection of trans- mission lines ICE Ingenieros Panama 1.920 1289/40P Flat Ceiling 2/ Companhia Vidriavia Santa Maria Brasil 0.022 1308/40P Structural Steel DERENASA 0.033 1405/40P Telephone system 2/ Mitsubishi Japan 0.040 1427/40P Glass windows 2/ CIVESA 0.023 1/ In current prices 2/ For ENDE's office building Project Costs 3.06 A detailed breakdown of the estimated and actual costs in current prices and constant prices is shown in Annexes 1 and 2 respectively. The price deflator indices are shown in Annex 3. A summary of the project costs is shown in the table below. -5- Project cost (US$ thousand equivalent in current prices) appraisal actual Base cost (constant 1972 prices) 6,475 5,756 Physical Contingencies 367 - Subtotal 6,843 5,756 Price Contingencies 448 3.931 Total Cost 7,291 9,687 Cost overrun % 33% 3.07 The project cost in current terms shows a cost overrun of about US$2.3 million or 33% of the original estimate. In constant 1972 prices the project shows a decrease of 16%, which, considering that the changes to the project involved a net addition of items, would indicate that the cost estimated at appraisal was too high. Disbursement of the Association Credit 3.08 About 88% and 97% of the credit had been disbursed by December 1975 and December 1976, the original project completion date and credit closing date, respectively. In order to allow ENDE to disburse the total amount of the credit, the Association agreed to extend the closing date to June 30, 1978. 3.09 A summary of the forecasted and actual disbursement of the Association credit and of the total project disbursements is shown in Annexes 4 and 5 respectively. A comparison of the original and final allocation of proceeds to the credit categories is shown in Annex 7. Project Operation 3.10 The project items have operated satisfactorily since their re- spective commissioning dates. According to ENDE, the Santa Cruz gas turbine has had an outstanding performance since its commissioning in 1975. This fact is attributed to the rather low plant-factor operation (ENDE has subsequently installed two additional units similar to the one included in the project, one financed by ENDE and one financed by the Bank), and to the excellent quality of gas in Santa Cruz. Performance of Consultants and Contractors 3.11 For the execution of the third power project ENDE was assisted by: (i) various engineers of ENDESA, Chile in preparing a study on expansion of the Central System; - 6 - (ii) Harza Engineering of the US is preparing a study of the Santa Cruz system expansion; (iii) Ing. Silvio Uboti of Argentina in engineering and evaluating bids fc the Santa Cruz gas turbines; (iv) MECO, of Canada, in the preparation of the feasibility study for the capacity and transmission expansion needs up to 1984; (v) Arthur Young and Marco Asociados, of Bolivia in studying the administrative improvements required. 3.12 Ing. Leonardo Bitran from ENDESA, Chile assisted DINE in the study of marginal-cost tariffs for the Santa Cruz system. 3.13 All of the consultants and consulting firms performed satisfac- torily. 3.14 During the design, supervision and construction of the project items ENDE was assisted by several contractors (Annex 6). Their performance was satisfactory. Performance of the Borrower 3.15 During the execution of the project, ENDE showed some difficulties to handle simultaneously several projects involving a large number of contracts for project items located far away from each other. Nevertheless, in general, ENDE was able to execute the project, except for a minor item: the office building in Cochabamba. The building is still under construction and is expected to be completed by mid-1979. 3.16 DINE used only a small portion of the amount allocated in the credit for the execution of studies, which did not adversely affect the exe- cution of the project. The main cause was apparently the delays in discussing and implementing the recommendations of previous studies financed by Credit 148-BO. The part of the loan originally allocated to DINE was used by ENDE to finance distribution studies. VI. OPERATING AND FINANCIAL PERFORMANCE Actual and Forecast Market 4.01 The annual and total actual sales per region in the period 1973- 77 were lower for the Central and Southern Systems and higher for the Oriental System than from those estimated at appraisal, as shown in detail in Annex 8. A summary of the estimated and actual sales is shown in the following table. - 7 - Sales (GWH) Central Southern Oriental System Total System System 1/ (Santa Cruz) GWH (%) Estimated 160 54 214 100 1973 N.A. Actual 137 50 187 87 Estimated 180 35 66 281 100 1974 Actual 151 16 62 229 81 Estimated 200 41 78 319 100 1975 Actual 170 27 77 274 86 Estimated 215 46 91 352 100 1976 Actual 201 38 94 333 92 Estimated 234 51 103 388 100 1977 Actual 269 51 116 436 112 Estimated 989 173 392 1,554 100 Total Actual 928 132 399 1,459 94 1973 1977 1/ Not included in the appraisal report. Operating results 4.02 During the period 1973-1976, ENDE's sales grew at an average annual rate slightly lower than anticipated (18% vs 20% forecast), mainly due to delays in the connection of some large consumers to the system; the unusually high sales growth of 1977 (31%) is due to the abnormally low level of ELFEC's own supply to the Central System because of a dry spell in that region. However, ENDE's operating revenues grew faster than expected due to higher than expected tariff increases: ENDE's average revenue per -8 - kWh increased from b 22.2 in 1972 to J b52.8 in 1977 (vs. J b 32.0 forecast). 1/ 4.03 Although ENDE's costs rose faster than its revenues between 1973-1975, with an operating ratio increasing from 40% in 1972 to AR% in 1975, the trend was reversed in 1976 when the Government allowed sub- stantial tariff increases 2/; in 1977 ENDE's operating ratio was back to 41%. Correspondingly ENDE's average rate of return during 1973-1975 reached only 6.6%, lower than the 8.7% forecast and the 9% provided by the Electricity Code and included in a covenant to the Credit (Annex B); but ENDE's rate of return (on revalued assets) improved significantly to 8.4% in 1976 and 10.6% in 1977. Other major financial ratios are shown in Annex 9. Financial Plan 4.04 A comparison between the actual and estimated financing plans for the period 1973-1977, is shown below: SOURCE OF FUNDS Appr. Est. Actual $b106 % $b106 % Gross internal cash generation: 403.8 56 537.3 52 less: debt service (198.2) 27 (179.8) 17 Net internal cash generation: 205.6 29 357.9 35 Borrowings 438.8 61 603.0 58 Equity contributions 41.0 6 34.8 3 Other sources 32.8 4 38.3 4 TOTAL SOURCES 718.2 100 1,034.1 100 APPLICATION OF FUNDS Investment expendit. (excl. IDC) 704.2 98 1,002.1 97 Increase (dec.) in working capital (1.4) - 26.3 3 Other applications 15.4 2 5.7 - TOTAL APPLICATIONS 718.2 100 1,034.1 100 1/ US$1.00 = $b20 2/ Following the revaluation of ENDE's assets, as recommended by the Bank during the course of the appraisal of the Fourth Power Project (Loan 1238-BO). - 9 - 4.05 ENDE's total investment expenditures during the period were 43% higher than forecast mainly due to: (a) higher than anticipated foreign and local inflation; (b) changes in ENDE's investment program (e.g., installation of additional capacity at Santa Cruz and Corani plants, con- struction of the South-Central Interconnection, and of addi- tional transmission facilities in the Central System). ENDE's average internal contribution to its expansion during the period reached 35% (29% forecast), which is satisfactory; corresponding equity contri- butions and borrowings were slightly lower than forecast (3% vs 6% and 58% vs 61% respectively). ENDE's annual debt service coverage ratio stayed within a comfortable range during the whole period (between 2.3 in 1973 and 3.6 in 1977). 4.06 ENDE's performance was far less satisfactory in regards to its overdue accounts receivable (mainly from public enterprises). At the time of appraisal it was expected that ENDE's receivable would decrease to two months of billings by the end of the third quarter of 1973, from four months in average during 1972, but no covenant to that effect was included in Credit 433-BO. No significant improvement was made, however, during 1973-1974 and a covenant was included in Loan 1238-BO (Section 5.09) by which ENDE agreed to reduce the level of its receivables to three months of billings by January 1, 1977 and two months by January 1, 1978 and thereafter. ENDE, however, has been unable to comply with its obligations so far 1/, in spite of repeated Bank requests, mainly due to the absence of strong intervention from some of the branches of Government involved (mainly the Ministries of Energy and Mines). Forecast financial performance 4.07 ENDE has been able to obtain rates of return on revalued assets above 9% both in 1977 (10.6%) and 1978 (9.2% estimated) iin spite of the absence of tariff increase during those two years 2/. However, substantial tariff in- creases in real terms are expected to be required in 1979, for ENDE to earn a 9% return. Additional sector: resources are also likely to be needed in view of the fact that ENDE may experience difficulties in obtaining foreign loans in the next few years, which in any case would be made on harder terms than in the past; in light of this, the Bank has recommended, and the Government is seriously considering, the implementation of a national tariff surcharge, the proceeds of which would help finance ENDE's future investments. ENDE's finan- cial prospects will become clearer once it has defined its expansion program for 1982-1988, tentatively planned by April 1979. 1/ As of October 31, 1978, ENDE had about 4.1 months of billings out- standing. 2/ Taking into account local inflation, ENDE's tariffs, have in fact decreased in real terms (by an estimated 25%). - 10 - V. INSTITUTIONAL PERFORMANCE Organization and Management 5.01 ENDE, established in 1965 as a limited liability company, owned almost entirely by the Government, has been able to adapt successfully to a rapid growth of its activities. Necessary administrative changes were handled satisfactorily with the assistance of ENDE's management consultants (Arthur Young & Marco Asociados), whose services were partially financed by Credit 433-BO (para 3.11). ENDE's staff is generally competent and now counts 340 employees; installed capacity per employee is about 460 kW, which is satisfactory for this type of company. 5.02 However, ENDE seems to have attained the limit of its project executing capability with its current organization and staffing; at the same time, ENDE has not been able to attract highly qualified personnel because of its low salaries. The Bank has thus strongly recommended to the Govern- ment that ENDE's higher-level salaries be increased so as to avoid staffing problems and their potential negative impact on ENDE's ambitious expansion program. Auditors 5.03 ENDE's accounts have been audited by external auditors satisfactory to the Bank (Arthur Young & Co. in 1973 and 1976-1977; Coopers & Lybrand in 1974-1975). Compliance with Main Covenants 5.04 Annex 13 lists the major covenants included in Credit 433-BO. ENDE and the Government have complied with all their undertakings with the exception of the 9% rate of return covenant (para 4.03). As ENDE's maximum future debt service ratio as calculated under the debt service covenant is presently below, and is expected to continue to be below the 1.5 covenant limit, it will have to submit to the Bank for its agreement any future loan contract it is intending to sign. VI. PROJECT JUSTIFICATION Least-cost analysis 6.01 The appraisal report contains a cost comparison for two capacity- expansion alternatives in Santa Cruz (gas turbines and medium-speed diesel engines) and for two voltages of the Warnes-Montero transmission line; both items are included in the Santa Cruz System. No least-cost analy- sis or cost comparison with other alternatives is included in the appraisal report for the transmission lines and substations in the Central System. - 11 - 6.02 An ex-post cost comparison between the gas turbine and diesel engines, similar to the one in the appraisal report is included in Annexes 14 and 15. This analysis shows that the 22.8 MW gas turbine has a lower cost than 3 x 7.6 MW medium-speed diesels for discount rates lower than 20% (It was 58% at appraisal). For an 11% discount rate, estimated to represent the opportunity cost of capital in Bolivia, the gas turbine has a total cost of US$17.6 million (January 1973) on a present value basis, which is lower than the cost of the alternative with diesel engines, now estimated at US$17.9 million on the same basis. 6.03 An updated cost comparison for the Warnes-Montero transmission line was not carried out due to insufficient information for both the appraisal and actual project. Internal rate of return 6.04 The appraisal report includes separate estimates for the internal rate-of-return (IER) of both the Santa Cruz gas turbine and the Warnes- Montero transmission line. 6.05 An ex-post estimate has been carried out for the IER of the gas turbine 1/ (Annex 14). On the basis of lower investment cost and higher sales than estimated at appraisal, this IER is now estimated at 23.5% against 9% and 29% estimated at appraisal for gas turbine and transmission line res- pectively. 6.06 An updated estimate for the IER of the Warnes-Montero transmission line was not carried out since the available metering data covers the aggre- gate sales to the whole Santa Cruz area, including Warnes and Montero, and therefore does not provide separate data on the benefits of the Warnes- Montero line. VII. ASSOCIATION PERFORMANCE 7.01 Working relations between the Association and ENDE and the Power Sector Authorities have been excellent. Following three previous lending operations to the sector (Credits 61-BO, 62-BO and 148--BO), Credit 433-BO, as well as Loan 1238-BO later on, have contributed to secure the sound development of the Bolivian power sector. Examples include: (i) develop- ment of the latest expansion plan according to economic criteria, (ii) re- inforcement of DINE's role in the overall coordination of sector entities, (iii) mandatory annual revaluation of assets for tariff-setting purposes. 7.02 A less satisfactory area of performance was failing to obtain a resolution of ENDE's long- lasting problems with respect to overdue accounts receivables from other public entities. 1/ Also includes the capital and operating costs of the relevant portion of the transmission line needed to absorb the full output from the gas turbine. - 12 - VIII. CONCLUSIONS 8.01 Lessons to be learnt There are no important lessons to be learnt from this project which was carried out with only minor problems, the latter being due mainly to the higher than anticipated worldwide inflation. 8.02 Recommendations for Future Operations Some aspects which could have helped in improving the borrower's performance during the project execution and which should be emphasized in the future are: (i) obtaining of a formal commitment from the Government itself (rather than from ENDE only) with respect to ENDE's account receivables (since most of the overdue receivables originate in public entities); and (ii) need to strengthen ENDE's organization and staffing in view of its heavy future investments. Latin America and the Caribbean Regional Office March 1979 - 13 - BOLIVIA Annex 1 EMPRESA NACIONAL DE ELECTRICIDAD S.A. (ENDE) CREDIT 433-BO COMPARISON OF COST ESTIMATES (in thousands of US$) APPRAISAL ESTIMATE Y CURRENT ESTIMATE 2/ LC FC Total LC FC Total 1. Santa Cruz Gas Turbine Units a. Mechanical and elect. equip. 72.9 2,589.9 2,662.8 302.1 2,841.0 3,143.1 b. Civil works and erection 127.2 195.0 322.2 0.3 206.2 206.5 c. Engineering and administ. 52.5 210.0 262.5 214.0 19.7 233.7 Sub-total 252.6 2,994.9 3,247.5 516.4 3,066.9 3,583.3 2. Santa Cruz Transmission a. Line and substation equip. 10.5 344.0 354.5 75.2 1.229.8 1,305.0 b. Civil works and erection 54.6 44.8 99.4 159.8 135.1 294.9 c. Engineering and administ. 22.1 40.2 62.3 19.6 -- 19.6 Sub-total 87.2 429.0 516.2 254.6 1,364.9 1,619.5 3. Central System a. 115 kV line Sta. Isabel-Sacaba 10.3 300.8 311.1 15.3 729.1 744.4 b. Civil works and erection 88.7 36.6 125.3 170.7 109.8 280.5 c. Catavi substation (S.E.) 5.7 237.2 242.9 -- -- --3/ d. Sta. Isabel and Sacaba S.E. 2.0 80.4 82.4 28.8 363.3 392.1 e. Shunt compensation 2.0 86.4 88.4 -- - -- 3/ f. 66 kV Viloco line and S.E. 40.0 206.5 246.5 92.4 998.7 1,091.1 g. Civil works and erection 97.4 -.63.2 160.6 295.7 142.8 438.5 h. Engineering and Administ. 98.5 90.5 189.0 226.0 -- 226.0 Sub-total 344.6 1,101.6 1,446.2 828.9 2,343.7 3,172.6 4. Office Building a. Civil works 120.9 130.0 250.9 506.3 263.0 769.2 b. Engineering and Administ. 20.9 -- 20.9 99.9 -- 99.9 Sub-total 141.8 130.0 271.8 606.2 263.0 869.2 5. Contingencies a. Physical 6.5% 58.2 309.0 367.2 -- -- -- b. Price: 7.5% Local;8% Foreign 63.3 385.0 448.3 -- -- -- Sub-total 121.5 694.0 815.5 -- -- -- 6. Studies (ENDE) a. Intercon. North-Central system 144.3 295.5 439.8 -- -- -- 3/ b. Additional gen. cap. at Corani 19.5 50.0 69.5 -- -- -- 3/ c. New generation feasibility 140.4 153.0 293.4 -- 390.3 390.3 Management consultant 39.0 72.0 111.0 -- 43.8 43.8 Sub-total 343.2 570.5 913.7 -- 434.1 434.1 7. Studies (DINE) Sub-total -- 80 80 -- 8.7 8.7 TOTAL PROJECT COST 1,290.9 6,000.0 7,290.9 2,206.1 7,481.3 9,687.4 COST OVERRUN 95.2 T,W8 2,3965 % OVERRUN 71% 25% 33% 1/ Base cost in 1973 prices 2/ In current prices 3/ Item: eliminated from the project March 1979 Annex 2 - 14 - BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S. A. (ENDE) CREDIT 433-BO COMPLETION REPORT ORIGINAL AND ACTUAL PROJECT COST IN CONSTANT AND CURRENT PRICES Project cost (US$ thousand) Cost increase in current prices In constant (%) Original Actual 1977 Prices 2-1 100 2 (1) (2) (3) (4) 1. Base Cost Santa Cruz Gas turbine 3,247.5 2,438 6,757.6 Santa Cruz transmission 516.2 905 1,703.7 Central system transmission 1,446.2 1,743 3,409.0 Office building 271.8 389 877.6 Studies 993.7 280 579.3 Sub-Total 6,475.4 5,756 13,327.2 2. Physical Contingencies Sub-Total 367.2 * * 3. Total Cost in Constant 1972 Prices 6,842.6 5,756 * (16) 4. Price Contingencies Sub-Total 448.3 3,934 * 5. Total Project Cost 7,290.9 9,687.4 13,327.2 33 * Not applicable January 1978 - 15 - Annex 3 BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S.A. (ENDE) CREDIT 433-B0 COMPLETION REPORT INFLATION RATES 1972-1977 LOCAL 1/ FOREIGN 2/ Inflation Inflation rate % Deflator rate % Deflator 1972 - 1,000 - 1,000 1973 30.9 1,155 20.6 1,103 1974 62.8 1,720 25.1 1,357 1975 8.0 2,216 15.3 1,624 1976 4.4 2,352 1.0 1,748 1977 8.2 2,501 9.7 1,842 1/ Bolivia. Retail Price Index (November 1978) 2/ Index of International Inflation (September 1978) January 1979 -16 - Annex 4 BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S.A. (ENDE) CREDIT 433-B0 ACCUMULATED DISBURSEMENTS FROM THE LOAN ACCOUNT IN THOUSANDS OF US$ EQUIVALENT IDA Actual disbursements Fiscal Year Actual Total Appraisal as a percentage of and Semester Disbursements Estimate appr. estimate Dec. 73 0 1,233 0 June 74 545 3,987 14 Dec. 74 2,461 5,133 48 June 75 3,251 5,405 60 Dec. 75 5,212 5,928 88 June 76 5,790 5,962 97 Dec. 76 5,799 6,000 97 June 77 5,799 6,000 97 Dec. 77 5,989 6,000 100 June 78 6,000 6,000 100 January 1979 - 17 - BOLIVIA Annex 5 EMPRESA NACIONAL DE ELECTRICIDAD S.A. (ENDE) CREDIT 433-BO COMPLETION REPORT DISBURSEMENTS AND COSTS BY PROJECT ITEM 1973 1974 1975 1976 1977 TOTAL 1. Santa Cruz Gas turbine LC) 186.7 222.4 - 107.3 516.4 FC) 1/ 2,460.9 606.0 - - 3,066.9 T) 2,647.6 828.4 - 107.3 3,583.3 TC) 2,647.6 3,476.0 3,476.0 3,583.3 3,583.3 2. Santa Cruz Transmission LC 10.0 75.9 144.1 24.6 254.6 FC - 399.9 815.1 149.9 1,364.9 T 10.0 475.8 959.2 174.5 1,619.5 TC 10.0 485.8 1,445.0 1,619.5 1,619.5 3. Central System LC 41.9 217.8 378.1 191.1 828.9 FC - 1,174.9 878.5 290.3 2,343.7 T 41.9 1,392.7 1,256.6 481.4 3,172.6 TC 41.9 1,434.6 2,691.2 3,172.6 3,172.6 4. Office Building LC 11.9 0.9 42.7 550.7 606.2 FC - - - 263.0 263.0 T 11.9 0.9 42.7 813.7 869.2 TC 11.9 12.8 55.5 869.2 869.2 5. Studies LC - - - - - FC 72.8 361.3 - 8.7 442.8 T 72.8 361.3 - 8.7 442.8 TC 72.8 434.1. 434.1 442.8 442.8 6. Total Annual Disbursements LC 250.5 517.0 564.9 873.7 2,206.1 FC 2,533.7 2,542.1 1,693.6 711.9 7,481.3 T 2,784.2 3,059,1 2,258.5 1,586.6 9,687.4 7. Total Cummulative Disbursements LC 250.5 767.5 1,332.4 2,206.1 2,206.1 FC 2,533.7 5,075.8 6,769.4 7,481.3 7,481.3 T 2,784.2 5,843.3 8,101.8 9,687.4 9,687.4 1/ LC: Local Currency FC: Foreign Currency T: Total Annual Disbursements TC: Total Cummulative Disbursements January 1979 BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S.A. (ENDE) CREDIT 433-Ba COMPLETION REPORT List of Main Contracts PURCHASE ORDER E 0 U I P M E N T NAME OF SUPPLIER AND CONTRACTORS ORIGINAL PRICE FINAL TOTAL PRICE PAYMENT IN No US S US s 1054 /31P GAS TURBINE POWER PLANT AEG- KANIS 3 194 134 38 3 349 600 - OM AND Sb 1058/31P SCALES FOR EXISTING METERS CANADIAN GENERAL ELECTRIC 598 04 628 55 S CAN 1060/31P CURRENT TRANSFORMERS POWER ELECTRICAL MFG, CO I 974.- I 974.- US S 1084/38P PROTECTIVE AND METERING EQUIPMENT FOR SANTA ISABEL SUBSTATION EXTENSION BROWN BOVERI 13 637 35 13 973 14 DM 1085/38P SUBSTATION EQUIPMENT FOR SANTA ISABEL EXTENSION COGELEX 145 393.45 216 611 .82 F F 1131/38 P DESIGN, SUPPLY AND INSTALLATION OF THE SUBSTATIONS SACABA, SANTA CRUZ, WARNES, MONTERO, HUAYNACOTA, ATOROMA AND VILOCO ICE - INGENIEROS I 846 318.66 * 1.846.318.66 US S AND Sb 1160/38P ALUMINIUM CONDUCTORS MITSUBISHI 303 284.12 308.681. 13 YENS 1168/38P DESIGN, SUPPLY AND ERECTION OF THE TRANSMISSION LINES SANTA ISABEL - SACABA, WARNES - MONTERO, HUAYNACOTA - VILOCO ICE - INGENIEROS I 943 262 60 I 919 701 04 US S AND Sb 1195/38 P WITNESS TESTS FOR OIL CIRCUIT BREAKERS SOCIETE GENERAL DU SURVEILLENCE 600 - 600.- S F 1200/38P WITNESS TESTS FOR POWER TRANSFORMERS CONSOLIDATED ENERGY SERVICES INC 3 149 - 3 149 - US S 1289/40P FLAT CEILING COMPANHIA VIORARIA"SANTA MARIA" 28.028.- 22 282.46 US S 1294/40 P CUPULE CONSTELA RODRIGUEZ 4 020 - 4. 190 - US S 1308/40P STRUCTURAL STEEL DERENA S A 26 867.25 32.932.68 US S 1310/40P LIGHTING FIXTURES PETERCO S A 20 647 40 21 122 38 US 5 - 19 - Annex 7 BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S. A. (ENDE) CREDIT 433 BO Allocation of Proceeds of Credit (in US$ equivalent) Category Original Final I Material, equipment and 2,785,000 3,046,053 Installation for Part I.A of the Project (Santa Cruz Gas Turbines) II Part I.B of the Project (Transmission lines and Substations) (a) Material and equipment 1,290,000 2,264,539 (b) Installation 110,000 56,272 III Material and equipment for Part I.C of the Project (ENDE's office building) 130,000 170,225 IV Consultant's services for ENDE (a) for Parts I.A and I.B of Project 340,000 19,694 (b) for Parts I.D and I.E of Project 570,000 434,494 (Interconnection and Manage- ment Improvement Studies) V Consultants services for DINE 80,000 8,723 VI Unallocated 695,000 - TOTAL 6,000,000 6,000,000 March 1979 BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S. A. (ENDE) CREDIT 433 BO COMPLETION REPORT Actual and Forecast Sales and Tarffs 9713 9 74 (975 7 977 9 7 3 1977 YEAR ENDING DECEMBER 31 7-9-7I 71 7 7_7 ESTIMATED ACTUAL ESTIMATED ACTUAL ESTIMATED ACTUAL ESTIMATED ACTUAL ESTIMATED ACTUAL ESTIMATED ACTUAL ENERGY SALES - GWh. CENTRAL ZONE COMIBOL 78,0 56.9 84,0 67,3 90,0 78.8 98.0 83,' 109.0 11,1 459.0 397.1 ELFEC (COCHABAMBA) 55,0 52,1 61.0 50,3 67.0 53,6 72,0 63,9 78,0 85,7 335.0 305,6 OTHER CONSUMERS 27,0 07,8 5,0 33,6 42,5 38,1 45,0 53,2 47,0 72,4 196,5 225,1 ENERGY SOL'D 160,0 136.7 ISO,0 I151.2 .99.5 170,5 2,5,0 200,2 234,.0 269,2 988,5 927,13 SOUTHERN ZONE COMrBOL 6,0 0,7 9,0 4,9 11,0 9,r r3,0 14.4 39,0 29,1 SUCRE . 17.0 7,9 18,O 11,2 19,0 16,1 20.0 15,4 74,0 50,6 POTOSI 9,0 7.,1 0,0 10.5 1.0 11,5 (2,0 12.5 42,0 41,6 OTHER CONSUMERS 3,0 - 4,0 - 5,0 1,5 6,0 8, 8,0 10,1 ENERGY SOLD 35,0 15,7 41,0 26,6 46,0 38,2 51,0 50.9 173,0 i1T:T1 SANTA CRUZ ZONE ENERGY SOLD 54,0 50,6 66,0 61.9 78,0 76,9 91 .0 94,2 03,0 116.3 392,0 399,9 TOTAL ENERGY SOLD 214.0 )87,3 281,0 228,8 318,5 274,0 352,0 332,6 388,0 436.4 1553.5 1459, SALES RATES CTS Sb./KWh. CENTRAL ZONE COMISOL 36,6 42,9 36,6 45,2 36,6 44.2 35,6 52.7 36,6 51,5 36,6 47,3 ELFEC 22.0 21,6 22,0 23,0 22,0 27,1 22,0 39,4 22,0 53,1 22,0 32,6 OTHER CONSUMERS 34,6 36,9 34,6 40,6 35,1 45,5 35,1 59,1 35,0 50,0 35,0 46,6 SOUTHERN ZONE 45,0 42,4 45,0 52,1 45,0 55s,9 45,0 61.2 45,0 52,9 SANTA CRUZ ZONE 27,0 27,0 27,0 28,a 27,0 33.3 27,0 48,4 27,0 51,3 27,0 37,6 AVERAGE RATES 30,2 31,8 31,6 35,0 32.1 38,7 32,0 50,3 32,0 52,8 31,7 41,7 Y973 1974 1975 1976 1977 TOTAL YEAR ENDING DECEMBER 31 _______173 .977 ESTIMATED ACTUAL ESTIMATED ACTUAL ESTIMATED ACTUAL ESTIMATED A CTUAL ESTIMATED ACTUAL ESTIMATED ACTUAL REVENUES FROM SALES - 1.000 Sb CENTRAL ZONE COMIBOL 28546- 24386 30 744. 30417. 32940. 34792. 3566- 45786- 59694- 57211.- 167-944. 190592. ELFEC 12 100- 11.250. 12420. 11Sel. 14740- 14530- 15 40- 25204- 17160. 45.542- 72260- 100.112.. OTHER CONSUMERS 9532- 10280. 12102. 13657. 14938- 17323- 15802- 31 433- 16 466- 3611. 68940- 109.504- REVENUES CENTRAL ZONE 49980. 45916. 55286. 55660- 62616. 66645- 67510- 100423- 75520- 139564- 500.894. 408208. SOUTHERN ZONE 15750. 6650. 1e450. 13639. 20700. 21356. 22950- 31146- 77850- 72991- SANTA CRUZZONE 14560- 13650. 17020- 17798. 21060- 25574- 24570- 45577- 27610- 59665- 105640- 162.84, " TOTAL REVENUES - I 000 Sb 64 560. 595 s6- so 36 . o 10- 102 128- 06 0s. 112 780- 167 356. 124 20.- 2307s- 492S84- 64343- BOLIVIA Credit 433-B0 EMPRESA NACIONAL DE ELECTRICIDAD (ENDE) ACTUAL AND ESTIMATED FINANCIAL RATIOS 1973-1977 Year Ending December 31 1973 1974 1975 1976 1977 Appr. Appr. Appr. Appr. Appr. Estimate Actual Estimate Actual Estimate Actual Estimate Actual Estimate Actual Tariff Base (In millions of Bolivian pesos) 417.4 410.2 592.6 589.5 685.2 959.6 731.1 1,186.3 741.0 1,282.9 Net Operating Income (In millions of Bolivian pesos) 40.1 33.9 50.2 39.8 57.4 54.9 64.6 99.2 71.6 135.8 Rate ol Return (%) 9.6 8.3 8.5 6.8 8.4 5.7 8.8 8.4 9.7 10.6 Internal Cash Generation 'In millions of Bolivian pesos) 54.7 54.9 72.2 64.5 83.9 79.8 92.0 t48.0 '01.0 1O. I Debt Service (In millions of Bolivian pesos) 22.8 23.5 31.0 26.5 38.7 34.7 47.4 41.5 58.4 43.1 Timbe Debt Service Covered by Internal Cash Generation 2.4 2.3 2.3 2.4 2.2 2.3 1.9 3.6 1.7 3.6 Long-Term Debt (Net) (In millions of Bolivian pesos) 429.5 336.9 498.5 426.2 514.2 522.4 606.2 538.0 662.4 771.0 Equity (In millions of Bolivian pesos) 361.8 417.5 402.7 448.8 444.8 497.0 492.1 920.7 543.4 1,111.4 Debt'Equity Ratio 54/56 45/55 55/45 49/51 54/46 51/49 55/45 37/63 55/45 41/59 M x 10 March 1979 IDA CREDIT 433-60 ENDE THIRD POWER PROJECT - BOLIVIA INCOME STATEMENTS 1973- 1977 (IN THOUSANDS O BOLIVIAN PESO0) D13 197. 175 1976 1977 ESTIMATE ACTUAL ESTIMATE ACTUAL ESTIMATE ACTUAL ESTIMATE ACTUAL ESTIMATE ACTUAL SALES OF ELECTRICITY (IN MILLON ICWh) 214 -0 2 201- 220 0 30 9 273 9 3523- 33 6 60 - 436 3 AVERAGE REVENUE PER KWh (IN BOLIVIAN CENTAVOS) 30 2 31 31 6 35 01 32 I 30 Ti 32- 50 32 32- 52 0 OPERATING REVENUE SALES OF ELECTRICITY 64 560 - 59566- 56 036 - 60 019 - 102 126 - '06 041 - 112 700 - 167 356- 124 280 - 230 375 - OT 641- 2A9 I4- 09- 213.- 17 - 234. - 6 - 257- - 65 201.- 59 855 89 030- 80 109. 102 341 - 106 Os- 113 01- 167 524 - 12. 537 - 230.375 - OPERATING EXPENSES. GENERAL AND ADMINISTRATIVE 2 141 - 4 778- 2 338- 6 502- 2 593- 0 584- 3 219 - 10 30- 3 298 - 1S 210.- OPERATING AND MAINTENANCE 6 626 - 5 49- 9 644 10 498 - .0 601- 10 816 - 12 043- 12 121 - 19 525 18.386- FUEL 3025- 2 66 - 6 020- 3 73 - 6 067 - 7 096 - 6 691- a 968 - 529 - 10 779 - DEPRECIATION 12 727- 12 330 - 20 119 - IS 763- 24 122 - 21 626 25 673 35 a8 - 22 264- 50.282 - TAXES 57 724 667- 073- 733- 990- 76- 1 219 844- 1634- 25 140- 25 997- 38 704 40 334 - 44 922 - SI 120 - 40 414 68.326- 52 956 - 94.291 - NET OPERATING INCOME 40053- 33 858- 50 246 39775- 57 419- 64 958- 64600- 99 190 - . se.- .35.784 OTHER INCOME 1 910 - 6 200- 1 848- 6 360- 1 '0- - 59 717 16 381 - 1 6S3- 6 902 - OTHER DEDUCTIONS (WRITE OFFS) 9 I 608- 2 784 - I 600 2 093- 600- 4 744 - 2 084 - 4 852 2 064. 3 181 - INCOME BEFORE INTEREST CHARGES 40 355- 32 224 - 90 466- 44 042- 57 592 - 57 593 - 64 233 - 110 227 - 71 150- 39 505- INTEREST TOTAL INTEREST PAYABLE 16 9?22- .5I 10 21 694 - .9 492 - 23 220 - 27689 -30 013 -30 290O- 36091,- 4001 - L ES S I NTEREST CAPITALIZED 6 216 9 362- 4 629- 52760-M 2 94T w 10 214 - 6000 9 29- 10 206- 9 934.- INTEREST CHARGED TO OPERATIONS 0 756 5 803 - 17 069- 13 692- 22023- 17 425- 23 005 20966- 26206- 30 147 - INTEREST OWN FUNDS I 486 NET IVCOME 31 599 31 4?1 - 33 4 - 30343- 34 769- 39 82- 40 220 89 761- 44 364- 110.844 - INCLUE00 AMORTIZATION OF STUDIES FOR PROJECTS A8ANDONED IDA CREDIT 433-BO ENDE THIRD POWER PROJECT - BOLIVIA ACTUAL AND ETIMATED BALANVE SHEETS 1973-1977 ( IN THOUSANDS OF 90L.VIAN PESOSI YEARENDINGOECEMBER 31 973 .974 1975 19 6 1977 ESTIMATE ACTUAL ESTiMA'E ACTUAL ESTiMI ACTUAL ESTIMTE ACTUAL ESTATE ACTUAL ASSETS FIXED ASSETS IN OPERATION 580 132- S6 70 - 692 859- 700 541 - 8 008- 785 26. - 829 722 - I 321 065 - 70 667 - 1 464 936- LESS DEPRECIATION 5 Ol - 6 297 - 77 567 7 792 - 102 233- 101 1R4 127 906 - T6 323.- 155 670 - 217 857- NET FIXED ASSETS TN OPERATION 521 97, - SO 41 - 615 292- 620 749- 699 575 - 604 O77 - TOT Al6 - I -S 742 - 714 997- T 267 879- WORK IN PROGRESS 033 579- 104 804 117 557- 82 203- 80 247 - t67 253 - 227 995 - T37 056- 321 553 - 47B 720- TOTAL NET FIXED ASSETS 65 550- 605 21 4- 732 849 703 03 779 822 - 851 330 - 929 81- I 296 798 - 036 550- I 746 599 - INVESTMENTS (1) 76 364 - T0 085- 80 497 65 885- 85 T00 65 036- 88 I72 - 64 572- 91 20 - 63 492- CURRENT ASSETS CAS AND BANKS 33 456- S 8O1. SI 554- 59 726 - 53 883- 81 233- 36 073- 89 025- 24 782- T00 725 - ACOEUNTS S DEUEIABLE 20 TOT - 24 066- 25 546- 29 81I- 28 202- 45 719 - 30 197 - 64 66 -33 072- 109 427- MATERIALS D SUPPLIES a HAT- A 594 - 12 44 8 257- 14 695- 13 170- 16 052- 14 292 .6 736- 1 557- OTHER 250- 2 ITO 250- 6 320- 250- 10 252- 250- 9 663- 250- - 62 713- 88 579- 89 834 - 104 116- 97 030 150 377- 82 572- 177 616- 74 40- 278 709- OTHER ASSETS 2' 427- 20 577 - 38 07D- 49 186 42 522- 36 686- 54 T19 - 24 239 - 69797- 41 196- TOTAL ASSETS 822 oN- 7805 255 - 941 250- 922 179- 1 004 474 - I 103 429- I 154 674- I 563 225- 272.397 - 2.129 996- CAPITAL AND LIABILITIES CAPITAL AND RESERVES 36 783- 4.7 549- 402 668- 448 827- 444 759- 497 038- 492 138- 920 674- 543 449-- I I IT 4 - CONTRIBUTIONS (U NI 4 000- - 8 000- - T2 000 - 6 00- - 20000- - LONG - TE*k DEBT IDA CREDITS AND IBRD LOAN 179.986 - 111.088 - 4 ..9ot.- 167.-73.- 263.603.- 225.0o6.- 23.Q3.- I 35.163. 21 657.- 39699 - OTHER LOANS 260.035 - 235.o66.- 257.723.- 273.742.- 269.254.- 315-563.- 75.8664. 327.848.- 413.662.- 413.287.- TOTAL L-T DEBT 40.021.- 346.154.- 512.717.- 441.215.- 532.857 - 540 569 - 628.917 - 563.011.- 685.319 - 810.283.- LNSS CURRENT PORTION OF L-T (10.493 -) 9 235 -) (14.176.-) (15.ot -) ( 18.671.-) 18.186.-) (22 689.-) (25 000 - 2294.-) (39.333.-) TT L-T DEBT 489526- me STe- 49854 426 TO 514 TOG. 522 389- **E - 534 OAT - 888375.- 7746e.- CURRENT LiASILITIES ACCOUNTS AND NOTES PAYABLE 3 781- 3 502 - 4 583- 2 229 5 404 - 20 50- 6 335- 6 117 - OI- 109.298 - CURRENT PORTION OF LONG -TERM 10 493- 9 235 - 14 76 - -5 034T O 67,- .8 184 - 22 689- 25 000 - 22 944- 39 333 - OTHER CURRENT LIABILITIES I 960 - 6 658- 2 555- 26 508- 3 039 39 1- 3 540- 54 698- 4 514 - a. 612 - 16 234- 29 395- 2T 314 - 4 771- 27 144 - 7S610 - 92 M4, 67 815.- 35270,- 230 245.- OTHER LIABILITIES 100- I 392 1727 - 1 400- 6 385 - 5 396- 7744 - 16 725- 11 03- 17 392 - TOTAL CAPITAL AND LIABILITIES 822054 783255 AOl 250- NTT IT9 DDA04 - 103 429 I 154 674 I SUS - 272397 2 129996 (1) INVESTMENTS N ASSOCIATED DISTRIBUTION COMPANIES (2) BEFORE REVALUATION OF ABSETS AL OF .ESEma-D ?3, 1971 -TNrCTRAETD DURTR; 197T AND NCLUDED IN THE 1976 IALA.TC .90F=) BOLIVIA CREDIT 433 - BO EfDE THIRD POWER PROJECT AC1AL AND ESTIMATED SOURCES AND APPLICATIONS OF FUNDS 1973-1977 (In Thousands of BoLivian Pesos) 1OTAL 1973 1974 1975 1976 1977 1973 - 1977 YEAR ENDING DECEMBER 31 MPR. APPR. AA. PPR. APPR APPR. ATTIARTE ACTJAL TIMATE RI. ED ACTUAL ESTIMATE ACTUAL ESTIMATE ACTUAL EIATE ACTUAL SOURCES INTERNAL CASH GENERATION: INCOME BEFORE INTEREST CHARGES 40.355 37.274 50.486 44.o2 57.592 57.353 64.233 110.728 71.150 139.506 283.816 388.903 DEPRECIATION AND OTHER NIN-CASH EXPENSES 14.335 17.662 21.723 20.499 26.336 22.418 27 757 37.225 29.848 50.582 119.999 148.386 GROBB INBET.FL CASH GENERATION: 54.690 54.936 72.209 64.541 E3.928 79.771 91.990 147.953 100.998 190.08B 403.815 537-29 BORROWINGS: IDA CREDIT (433-80) 24.657 - 77.608 50.154 15.502 56.074 648 11.773 - - 118.415 118.001 O 1HER /12.860 - 77.016 5.581 53.616 18.814 80.154 11.083 23.114 79.091 251.098 320.429 485.028 17.517 77.016 83.189 103.770 34.316 136.228 114.731 34.917 79.091 251.098 438.866 603.029 TOrT. BORROWING8: GOVERNMENT (iQIT)2 8.201 5.543 8.201 790 8.201 11.788 8.201 8.101 8.201 8 593 41.005 34.815 OTHER (U.N. 4.000 - 4.000 - 4 000 - 4.000 - 4.00 - 20.000 - 12.201 5.543 12.201 790 12.201 1.788 12.201 8.101 12 201 8.593 61 005 34.815 TOTAL CONTRIBUTIONS: OTHER SOURCES 1.506 10.983 1 737 4.791 1.531 6.467 2.903 14.663 5.118 1.427 12 795 38 331 TOTAL SOURCES 195.914 148.478 169.336 173 892 131.976 234 254 221 825 205.63. 197.408 451.216 916.459 1.213.464 APPLICATIONS INVESTMENTS* THIRD IDA PROJECT 31.328 - 91.L65 55.680 20.430 61.180 1.010 45.180 - 31 740 144 233 193.740 OTHER INVESTMENTES 141.594 103 340 20 247 82.435 61.767 114.764 188.219 99 648 147.964 407.168 559 991 808.395 TOTAL INVESTMENTS 172.922 104.340 111.912 138.115 82.197 75.94L 189 229 14L.828 147.964 438-908 700.224 1.002.135 DEBT SERVICE INTEREST 16.972 15.170 a.69" o9.457 05.770 27.689 30.013 30 260 36.992 4081 131.41 132.657 AMORTIZATION 5.806 8.357 9.273 7.059 2.928 7.059 17.393 11.24' 21.380 13.029 66.780 46.751 TOTAL DEBT SERVICE 22.778 23.527 30 967 26.516 38.698 34.748 47.405 l1.507 58.372 53.110 198.221 179.408 OTHER APPLICATIONS- 7.113 59L 733 75L 5 221 1 120 1 050 1.365 1.251 1 830 15 371 5 663 ADDITIONS TO WORKING CAPITAL OTHER SHAN CASH 7 385 11 972 7.626 2,901 3 531 595 1 950 10 1-2 1 109 10L '42 21 601 i76 729) CASH (14.28L) 80 5 L8 098 3 603 2 320 21.47 ,17 910) 7.702 11 291) 61 'o (22 958) 102.987 TOTAL APPLICATIONS 95.911 10 476 169.336 173 092 31 076 23L. 251. 221 825 205 63- 197 Lo LQ1 220 9L6 9L 0 i 213 64 !'INCLUDING OTHER IIA AND IBRD LOANS BPC DEBT SERVICE PAY04NTS UNDER CREDIT 62-0 WHICH O TO ENDE AS GOVERNMENT CONTR1BUTIONS 'UNDP GRANT OF US$ 1 MILLION FOR S7DIES - 26 - ANNEX 13 BOLIVIA ENDE - THIRD POWER PROJECT Credit 433-BO Main Undertakings in Credit Documents Project Agreement 1. Section 2.07 provides that ENDE shall employ engineering and manage- ment consultants acceptable to the Association. 2. Section 3.04 provides that ENDE shall consult with the Association before appointment of a new General Manager. 3. Section 4.02 provides that ENDE shall have its accounts audited annually by independent auditors and sent to the Association not later than 5 months after the end of each year. 4. Section 4.03 (a) provides that ENDE shall take all necessary steps to obtain and maintain tariffs designed to produce revenues sufficient to provide it with a 9% rate of return in accordance with the provision of the Electricity Code. 5. Section 4.03 (b) provides that ENDE shall revalue its assets in accordance with methods satisfactory to the Association and DINE, if the book value of its assets becomes unrealistic because of future currency devaluations, changes in prices or other factors. 6. Section 4.04 provides that ENDE shall not incur any debt, without the Association's prior agreement, if it cannot meet the standard debt service coverage test of 1.5 times. 7. Section 4.06 provides that except as the Association shall otherwise agree, and until completion of Part I of the Project, ENDE shall retain all internally generated funds for investment and shall not distribute any cash dividends. Development Credit Agreement 8. Section 3.07 provides that the Government shall allow ENDE sufficient tariff increases so as to enable it to earn a 9% rate of return in accordance with the provisions of the Electricity Code. 9. Section 6.02 (d) provides that ENDE's General Manager shall be ap- pointed in accordance with the provisions of ENDE's statutes. March 1979 ECONOMIC EVALUATION - SANTA CRUZ GAS PLANT O&M Expenses Sales Gross Generation Capital Costs Fuel Cost Fuel Cost Fixed Variable Benefits Net Benefits Year (GWH) (GWH) (US$1,000) US$ / 1o6BTU US$!MWH Fuel Expenses (US$1,000) (U($1,000) USS1,000) (US$1,000) 3, 4/ 1/ 2/ 5/ 1973 - 1974 5,720.00 - - - - - - -5,720.00 1975 6/ 38.45 39.50 1,240.00 0.44 6.1 243.32 114.00 7.90 988.17 - 617.06 1976 94.20 96.70 546.00 0.47 6.53 636.29 228.00 19.34 2,420.94 991.31 1977 116.30 119.00 205.00 0.50 7.00 833.00 228.00 23.80 2,988.91 1,699.11 1978 140.00 143.30 0.00 0.53 7.42 1,063.29 228.00 28.66 3,598.00 2,278.05 1979 160.00 163.70 0.00 0.57 7.98 1,306.33 228.00 32.74 4,112.00 2,544.93 1980 160.00 163.70 0.00 0.60 8.40 1,375.08 228.0 32.74 4,112.00 2,476.18 1981 160.00 -163.70 0.00 0.65 9.10 1,489.67 228.00 32.74 4,112.00 2,361.59 1982 160.00 163.70 0.00 0.69 9.66 1,581.34 228.00 32.74 4,112.00 2,269.92 1983 160.00 163.70 0.00 0.75 10.50 1,718.85 228.00 32.74 4,112.00 2,132.41 1984 160.00 163.70 0.00 0.80 11.20 1,833.44 228.00 32.74 4,112.00 2,017.82 1985 160.00 163.70 0.00 0.87 12.18 1,993.87 228.00 32.74 4,112.00 1,857.39 1986 160.00 163.70 0.00 0.93 13.02 2,131.37 228.00 32.74 4,112.00 1,719.89 1987 160.00 163.70 0.00 1.02 14.28 2,337.64 228.00 32.74 4,112.00 1,513.62 1988 160.00 163.70 0.00 1.10 15.40 2,520.98 228.00 32.74 4,112.00 1,330.28 1989 160.00 163.70 0.00 1.20 16.80 2,750.16 228.00 32.74 4,112.00 1,101.10 1990 160.00 163.70 0.00 1.31 18.34 3,002.26 228.00 32.74 4,112.00 849.00 1991 160.00 163.70 0.00 1.43 20.02 3,277.27 228.00 32.74 4,112.00 573.99 1992 160.00 163.70 0.00 1.56 21.84 3,575.21 228.00 32.74 4,112.00 276.05 1993 160.00 163.70 0.00 1.70 23.80 3,896.06 228.00 32.74 4,112.00 - 44.80 1994 160.00 163.70 0.00 1.87 26.18 4,285.67 228.00 32.74 4,112.00 - 434.41 1995 6/ 80.00 81.85 0.00 2.05 28.70 2,349.10 114.00 16.37 2,056.00 - 423.47 Internal rate of return 23.5% Net present worth for 11% = US$(1000) 4,577 Equalizing discount = 20% 7/ 1/ 10 US$/kW - year 2/ 0.2 US$/MWH 3/ See Attachment 4/ Based on 14000 BTU/KWH average 5/ Based on 2.57 US4/KWH average 6/ Six months of operation only 7/ When compared to Alternative with diesel groups (see Attachment 1) March 1979 BOLIVIA DIESEL ENGINES - DATA FOR ECONOMIC EVALUATION FUEL PRICES US$/106 BTU Generation Natural Diesel Lube Oil Cost 0 & M Expenses Total Fuel and Lub Oil Costs Year (GWH) Gas Oil US$ / MWi Fixed Variable (US$ 1000) Capital Costs Total Costs 1973 52.90 951.00 951.00 1974 64.00 -- - - - 3,890.00 3,890.00 1975 39.50 0.44 2.79 1.62 114.00 16.00 298.99 479.00 907.99 1976 96.70 0.47 2.86 1.66 228.00 39.00 766.54 532.00 1,565.54 1977 119.00 0.50 2.93 1.70 228.00 48.00 985.86 862.00 2,123.86 1978 143.30 0.53 3.00 1.74 228.00 57.00 1,238.42 266.00 1,789.42 1979 163.70 0.57 3.07 1.78 342.00 65.00 1,487.79 0.00 1,894.79 1980 163.70 0.60 3.14 1.82 342.00 65.00 1,546.33 0.00 1,953.33 1981 163.70 0.65 3.22 1.87 342.00 65.00 1,636.76 0.00 2,043.76 1982 163.70 0.69 3.30 1.91 342.00 65.00 1,711.03 0.00 2,118.03 1983 163.70 0.75 3.38 1.96 342.00 65.00 1,816.01 0.00 2,223.01 1984 163.70 0.80 3.47 2.01 342.00 65.00 1,907.64 0.00 2,314.64 1985 163.70 0.87 3.55 2.06 342.00 65.00 2,027.15 0.00 2,434.15 1986 163.70 0.93 3.64 2.11 342.00 65.00 2,133.32 0.00 2,540.32 1987 163.70 1.02 3.74 2.17 342.00 65.00 2,285.92 0.00 2,692.92 1988 163.70 1.10 3.83 2.22 342.00 65.00 2,421.16 0.00 2,828.16 1989 163.70 1.20 3.92 2.27 342.00 65.00 2,585.46 0.00 2,992.46 1990 163.70 1.31 4.03 2.34 342.00 65.00 2,769.97 0.00 3,176.97 1991 163.70 1.43 4.13 2.40 342.00 65.00 2,966.17 0.00 3,373.17 1992 163.70 1.56 4.24 2.46 342.00 65.00 3,178.11 0.00 3,585.11 1993 163.70 1.70 4.34 2.52 342.00 65.00 3,403.38 0.00 3,810.38 1994 163.70 1.87 4.46 2.59 342.00 65.00 3,676.28 0.00 4,083.28 1995 81.85 2.05 4.57 2.65 171.00 31.50 1,980.44 0.00 2,182.94 Internal Rate of Return 24% a- Net present worth for 11% = US$(1000) 4,577 Equalizing discount = 20% (see footnote 7 in Annex 14) March 1979 - 29 - BOLIVIA ANNEX 14 Attachment 2 EMPRESA NACIONAL DE ELECTRICIDAD S. A. (ENDE) Page 1 of 2 CREDIT 433-BO YEAR PRICE OF GAS (US$/1000 cu. ft.) At Well Head -At Power Plant 2/ Alt. A 1/ Alt. B 1/ 1975 .39 .13 0.44 1976 .43 .14 0.47 1977 .48 .15 0.50 1978 .53 .16 0.53 1979 .59 .18 0.57 1980 .65 .19 0.60 1981 .72 .21 0.65 1982 .79 .23 0.69 1983 .88 .25 0.75 1984 .97 .27 0.80 1985 1.07 .30 0.87 1986 1.18 .32 0.93 1987 1.31 .36 1.02 1988 1.45 .39 1.10 1989 1.60 .43 1.20 1990 1.78 .47 1.31 1991 1.97 .52 1.43 1992 2.18 .57 1.56 1993 2.41 .63 1.70 1994 2.67 .70 1.87 1995 2.96 .77 2.05 I1 This is the estimated opportunity cost of gas. For details see Bank's Energy Sector Memorundum for Bolivia (page 89) dated 12/29/78. 2/ Average of A and B plus 0.8 US$/1000 cu. ft. for extraction and transportation. -30- ANNEX 14 Attachment 2 Page 2 of 2 PRICE OF DIESEL OIL-1/ PRICE OF US$/10 BTU LUBE OIL At Refinery At Power Plant US$/MWH YEAR - 3/ 4/ Alt. A 2/ Alt. B 2/ 1975 2.64 2.94 2.79 1.62 1976 2.74 2.98 2.86 1.66 1977 2.83 3.02 2.93 1.70 1978 2.93 3.01 3.00 1.74 1979 3.04 3.10 3.07 1.78 1980 3.14 3.14 3.14 1.82 1981 3.25 3.19 3.22 1.87 1982 3.37 3.23 3.30 1.91 1983 3.49 3.27 3.38 1.96 1984 3.61 3.32 3.47 2.01 1985 3.74 3.36 3.55 2.06 1986 3.87 3.41 3.64 2.11 1987 4.01 3.46 3.74 2.17 1988 4.15 3.50 3.83 2.22 1989 4.29 3.55 3.92 2.27 1990 4.45 3.60 4.03 2.34 1991 4.60 3.65 4.13 2.40 1992 4.77 3.70 4.24 2.46 1993 4.93 3.75 4.34 2.52 1994 5.11 3.80 4.46 2.59 1995 5.29 3.85 4.57 2.65 2000 6.29 - 2010 4.72 - 1/ Estimated at 20% over crude oil prices. Crude oil reference price 2.62 US$/106BTU in 1980. 2/ Estimated at 20% over crude oil prices. Crude oil reference price 2.62 US$/106BTU in 1980. 3/ Average of Alt. A and B. 4/ 58% of diesel oil price. - 31 - ANNEX 15 Page 1 of 2 BOLIVIA EMPRESA NACIONAL DE ELECTRICIDAD S. A. (ENDE) CREDIT 433-BO Completion Report Assumptions for Santa Cruz Poer Plant Least-Cost Analysis I Fuel Prices (in constant 1977 prices) Natural gas Variable from 0.44 US$10 BTU in 1975 to 2.05 US$/106 BTU in 1975 2/ Diesel oil Variable from 2.70 US$106 BTU in 1975 to 4.57 US$106 BTU in 1995 2/ Lube oil Variable from 1.62 US$/MWH in 1975 to 2.65 US$/106 BTU in 1995 2/ II Heat Rate BTU/KWH Gas Turbine (Average) D.F. Diesel 1/ Load (%) 100 14,000 9,300 75 14,000 2/ 9,500 50 14,000 2/ 10,400 III Operating and Maintenance Cost Fixed 0 & M cost, US$/KW-year 10.00 15.00 Variable Maintenance cost, US$/MWH 0.20 0.40 IV Useful Life Years 20 20 V Fuel Cost US$/MWH Load (%) 100 4.9 5.88 75 4.9 6.39 50 4.9 7.37 Average 6.41 1/ Includes Lube oil. 2/ These (seemingly optimistic) figures were provided by ENDE. - ANNEX 15 Page 2 of 2 VI D.F. Diesel-Engine Fuel Consumption and Generation Schedule Load (%) % BTU per KWH % Time Gas Diesel per group 100 94.2 5.8 35 75 92.2 7.8 45 50 89.9 10.1 20 VII Investment Cost in US$/KW Gas Turbine Units: 340.4 1/ D.F. Diesel Units: 350 1/ Actual values March 1979 斗