Colombia - Playas Hydropower Project

Document of The World Bank FILE C 0PY FOR OFFICIAL USE ONLY Report No. 3240b-CO STAFF APPRAISAL REPORT COLOMBIA PLAYAS HYDRO POWER PROJECT February 9, 1981 Projects Department Latin America and the Caribbean Regional Office 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.  CURRENCY EQUIVALENTS Currency Unit = Colombian Peso (Col$) Col$l - 100 Centavos (ctv) Col$ 47.30(1980 appraisal assumption of average) = US$1 Col$1,000 = US$21.14 (1980 average) Col$1,000,000 (MCol$) = US$21,142' (1980 average) MUS$1 = US$1,000,000 WEIGHTS AND MEASURES 1 .'neter (m) 2 3.281 feet (ft) 2 1 square kilometer (km ) = 0.386 square mile (mi ) 1.cubic meter (m3) = 35.315 cubic feet (ft3) = 264.2 gallons (gal) = 6.290 barrels (bbl) 1 kilogram (kg) - 2.206 pounds (lb) 1 ton (t;metric;1,000 kg) = 1.100 short tons (sh. t) 1 kilowatt (kW) = 1,000 Watts (103 W) 1 Megawatt (MW) = 1,000 kW (10 kW = 106 W) 1 Gigawatt (GW) = 1,000 MW (106 kW = 109 W) 1 kilowatt-hour (kWh) = 1,000 Watt-hours (103 Wh) = 830.3 kilocalories (kcal) 1 Gigawatt-hour (GWh) = 1,000,000 kWh (106 kWh) 1 Terawatt-hour (TWh) = 1,000 GWh (109 kWh) 1 kilovolt (kV) = 1,000 Volts (V) 1 kilovolt ampere (kVA) = 1,000 Volt amperes (103 VA) 1 Megavolt ampere (MVA) = 1,000 kVA (100 VA) 1 Megavolt ampere re- 1 Megavolt ampere reactive active (MVAr) power (cos 0 = 00) 1 kilocalorie (kcal) = 3.968 British thermal units (Btu) 1 Hertz (Hz) = 1 cycle/second ...per... ; ...per second /... ... /s .;per hour; ... per day; = . ./h; . /d ...per month; ... per year .../m;-/a GLOSSARY OF ABBREVIATIONS IDB = Inter-American Development Bank KfW = Kreditanstalt fur Wiederafbau FDE = Fondo de Desarrollo Electrico EPM = Empresas Publicas de MedellTn ISA = Interconexion Electrica S. A. EEEB = Empresa de Energla Electrica de Bogota EMCALI = Empresas Municipales de Cali CHEC = Central Hidroelectrica de Caldas CHIDRAL = Central Hidroelectrica del Rlo Anchicaya S. A. CORELCA = Corporacion Electrica de la Costa Atlantica CVW Corporacion Aut6noma Regional en el Valle del Rlo Cauca ICEL = Instituto Colombiano de Energla Electrica NPD = National Planning Department JNT Junta Nacional de Tarifas FONADE Fondo Nacional de Desarrollo Fiscal Year Calendar,Year  FOR OFFICIAL USE ONLY COLONBIA EMPRESAS PUBLICAS DE MEDELLIN PLAYAS HYDRO POWER PROJECT TABLE OF CONTENTS Page No. 1. THE SECTOR .......... .. ................ . . 1 Energy Resources .1.... . . .......... . .. Power Sector Organization. . . . ......... 4 Regulation, Planning and Coordination ............................ 5 Present Developments . .......... . . .......... 7 World Bank Participation in the Sector. . 9 Power Market and Supply ....... .10 Interconnected System Forecasts . . .12 Demand and Energy .................. ... ................ 12 Supply ......................... .. 13 Rural Electrification.... . .... 13 Sector Investment Program and Studies . . .14 Finances and Tariffs .. ........ . .14 Constraints on Sector'"Development .. . ..16 2. THE BORROWER ..............18 General ................o.............. 18 Previous Bank Lending. . ......... 18 Organization ....18 Personnel .......19 Tlraining ............................. 20 Accounting and Auditing ....20 Billing and Collections ....20 Insurance........ .............21 Tariffs and Rates. . . .... 21 3. EPM's MARKET ........... ... 23 Supply Area, Access to Electricity ... . 23 Market Development ......... .... 23 Historic .....23 Captive Plant ..... ......... .......... 24 Forecasts ......24 This report is based on the findings of a joint IDB-IBRD appraisal mission, which visited Colombia during September/October 1980, comprising for IDB Messrs. A. Val, E. Ramirez, P. Guerrero, C. Ferdinand and Ms. C. Lombard, and for IBRD Mr. J. Gorrio. 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.  Table of Contents (Continued) Page No. 4. THE PROGRAM AND THE PROJECT ........ . .. ............................. ....... 27 The Program ........ ........ ............................................. 27 The Project ...... ........................................ ............ 27 Background ................................................................. 27 Objectives ................................................. 28 Description .............................................. .. 28 Transmission ................................................................ 29 Project Cost ................................................ 30 Financing ............. .................................................... 31 Engineering, Studies, Training ............. ...................... 31 Playas Engineering ........ . . . ........- ... *.. .... . . . . ................... . 31 Studies ........... ....................................................... 33 Training ............. ................................................. 0... 34 Execution ................................................ ................. .. 34 Implementation Schedule ................... .................. . 34 Procurement ................................................................ 34 Disbursements ............................................................... 34 Retroactive Financing .......... ........................... .......... 34 Environmental Aspects . ............................ .. ....... 34 Project Risks . .................. ............... ......... ... 35 Project File ................................................................ 35 5. FINANCES ...................... .... ....... 36 Summary ..................................................................... 36 Historical Financial Analysis ................. .............. 36 Earning History ......... ................................................... *.... 37 Rate Base .................................................................... 38 Tariff Structure ....... ......................................... ...... 38 Financial Structure ............... ...................... . ....... 38 Investment and Financing Plan ..... . . .. . . . . . . . . ........... ................. 39 Tariff Program ....... .................. ..... .................... 42 Other Loan Conditions ................ .................... ...... . 43 6. ECONOMIC ANALYSIS ......... .. . ...................................... .. ........ 45 Least-Cost Solution ............................................. 45 Return on Investment ........................................ ........... 45 7. AGREEMENTS TO BE RFACHED AND RECOMMENDATION ..................... 47 Condition of Effectiveness .. 48 Recommendation .. 48  Table of Contents (Continued) Page No. ANNEXES 1.1 IBRD and IDB Power Loans ............... .. .................. 49 1.2 The National Generation Development Program 1980-1985 ...... 51 2.1 EPM-Organizational Chart ................................... 52 3.1 Consumption and Supply Data 1975-1988 ...................... 53 4.1 1980-1988 Investment Program Cost Estimate .... ............. 54 4.2 Hydro Developments on the Nare, Guatape and Samana Rivers .. 55 4.3 Project Cost Estimate ...................................... 56 4.4 Project Implementation Schedule ............................ 57 4.5 Loan Disbursement Schedule ................................. 58 4.6 Contents of Project File ................................... 59 5.1 Historic Financial Statements .............................. 62 5.2 Summary of Projected Financial Performance 1980-1984 of Telephone, and Water and Sewerage Departments .... .......... 63 5.3 Schedule of Existing and Proposed Debt ..... ................ 64 5.4 Historic and Forecast Income Statements .................... 65 5.5 Sources and Applications of Funds ........................... 66 5.6 Historic and Forecast Balance Sheets ....................... 67 5.7 Historic and Forecast Performance and Financial Indicators . 68 5.8 Forecast Loans Disbursement Statement ...... ................ 69 5.9 Forecast Debt Amortization Statement ....................... 70 5.10 Forecast Interest Charges .................................. 71 6.1 Rate of Return on Development Program ...................... 72 MAPS Colombia - Electric Power System IBRD 15460 Main Generation and Transmission System EPM IBRD 15461  I  COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN PLAYAS HYDRO POWER PROJECT 1. THE SECTOR Energy Resources 1.01 Colombia's main indigenous commercial energy resources are hydro- power, coal, gas and oil. Potential hydropower appears to be the most promising at some 93 GW of capacity and 400 TWh of annual energy capabil- ity 1/. Colombia is also endowed with large coal and gas deposits. Since 1970 oil production has declined at an average annual rate of 6%. Over the same period, consumption of petroleum products increased on average 5.4% annually until 1975 and declined to 3.5% since then. As a result, Colombia has been a net importer of crude oil since 1976, with petroleum having become the country's largest single import. Prospects are for oil imports to rise sharply in the early 1980s unless additional reserves are discovered and developed rapidly. Measures are being taken to deal with this problem and to develop alternative energy sources. In the case of coal, there have been various obstacles to more adequate utilization of the existing potential: the competition of lower priced petroleum, fragmentation of production among a large number of small mines with low output and productivity levels, and lack of efficient transport infrastructure. However, the Govern- ment has been taking action to address these problems (1.03). 1.02 Production of primary energy during 1965-78 (see table next page) has not kept pace with overall economic expansion. It increased only 3.9%/a during 1965-70, when it reached its peak at 661 x 1012 Btu in 1970, and then declined to 582 x 1012 Btu by 1978, mainly due to falling crude oil output. In contrast to the declining energy output, final energy consumption grew by 10.9%/a during 1965-70, and 8.5%/a during 1971-73, when economic growth was high and energy prices declined sharply in real terms. During 1974-78, the economic downturn and increase in real energy prices had a dampening effect on consumption, which now has settled at a growth of about 4.5%/a compared with a real GDP growth of 5%/a in 1979-80. 1.03 The Government's development strategy is aimed at achieving a more favorable balance between domestic energy supply and use through increased utilization of domestic sources which are in abundant supply, i.e., hydropower, natural gas and coal and by developing high-value energy resources for export to reduce the growing energy trade deficit. Toward this end, the Government is planning a large-scale development of high grade coal deposits for export 1/ Source: Electric Energy Sector Study (ESEE) prepared jointly by the National Planning Department (NPD) and ISA with the full time assistance of GTZ. (Deutsche Gesellschaft fur Technische Zusammenarbeit GmbH - Federal Republic of Germany) completed in 1979.  COLOMBIA Energy Output and Consumption ------------------------------Primary Energy Output 1/; 2/------------------------------ 1965 1970 1978 1979 Heat Heat Heat Heat Equiva- Equiva- Equiva- Equiva- lent 3/ lent 3/ lent 3/ lent 3/ Unit Quantity 10 Btu Quantity 10 Btu Quantity 10 Btu Quantity 102 Btu Hydro power lO6kWh 3,649 12.0 6,212 20.5 11,981 39.5 2,999 42.9 Crude oil 106bbl 73.2 410.0 80.1 448.3 47.8 267.1 46.0 257.6 Natural gas 109ft3 65.7 65.7 105.0 105.0 146.6 146.6 n.a. 4/ Coal 106t 2,230 58.4 3,317 86.9 4,930 129.2 n.a. 4/ n.a. Total: 546.1 660.7 582.4 -----------------------------Final Energy Consumption 1/; 2/