Turkey - Third and Fourth Cukurova Power Projects

CIRCULATING COPY Document of Il BE RETURNED TO REPORTS DESK The World Bank FOR OFFICIAL USE ONLY Report No. 1372 PROJECT PERFORMANCE AUDIT REPORT TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (LOANS 623-TU and 775-TU) November 30, 1976 FIL COPY 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 TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (Loans 623-TU and 775-TU) TABLE OF CONTENTS Page No. Preface zroj!ect Performance Audit Basic Data Sheet Highlights Project Performance Audit Memorandum 1 - 3 Attachment: Project Completion Report 1-14. Basic Information A.1 15. Project Description (Original) A.2 16. Project Description (Actual) A.3 17. Objective and Justification of the Project A.3 18. Construction Schedule and Problems Encountered A.4 19. Cost of Project A.7 20. Consultants A.8 21. Organization and Management A.9 22. Financing A.9 23. Covenants A.12 24. Supervision A.13 25. Auditors A 13 26. Lessons Learned A.13 Annexes 1. Growth of Electricity Supply Capacity (1965-1974) 2. Forecast Power Generation and Demand (1975-1984) 3. Original and Actual Allocation of the Loans' Proceeds 4. Kadincik II Hydroelectric Plant Construction Costs 5. Transmission Lines and Substation Construction Costs 6. Project Construction Costs 7. CEAS Organization Scheme 8. Number of Personnel 9. Forecast and Actual Operating Statements 10. Sources and Application of Funds 11. Appraisal TU-775 and Actual Balance Sheets Fiscal Year: CEAS's Fiscal Year ends December 31. Currency Equivalents (Turkish Lira) Consumer Price Index 1969: US$1 = LT 9.04 1969 = 100 1970: US$1 = LT 14.93 1970 = 107 1971: US$1 = LT 14.15 1971 = 124 1972: US$1 = LT 14.15 1972 - 138 1973: US$1 = LT 14.15 1973 = 159 1971: US$1 = LT 13.99 197L = 185 MAP This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (Loans 623-TU and 775-TU) PREFACE This report presents the results of a performance audit on the projects supported by Loans b23-TU and 775-TU of 1969 and 1971, respectively, made to the Government of Turkey and relent to Cukurova Electric A.S. (CEAS). It is based upon the corresponding Project Completion Report (PCR) herewith attached, on Bank files, on discussions with Bank staff and with the staff of the beneficiary. The valuable assistance provided by CEAS is gratefully acknowledged.  PROJECT PERFORMANCE AUDIT BASIC DATA SHEET TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (LOANS 623-TU and 775-TU) (Amounts in US$ m1n) As of 4/30/76 Original Disbursed Cancelled Repaid Outstanding Loan 623-TU 11.5 11.5 0 .8 10.7 Loan 775-TU 7.0 7.0 0 .3 6.81/ 18.5 18.5 0 1.1 17.5 Project Data Original Actual or Plan Revisions Est. Actual Conception in Bank: Loan 623-TU 1964 Loan 775-TU 5/692/ Board Approval: Loan 623-TU 6/69 6/24/69 Loan 775-TU 6/71 6/29/71 Loan Agreement: Loan 623-TU 6/27/69 Loan 775-TU - 6/30/71 Effectiveness: Loan 623-TU 10/69 12/11/69 Loan 775-TU 9/71 10/14/71 Physical Completion: Loan 623-TU 12/72 12/73 2/74 Loan 775-TU3/ 9/74 9/74 % of original project actually completed: Loan 623-TU 807. 100% Loan 775-TU3/ 100% 100% Loan Closing: Loan 623-TU 9/15/73 9/28/73 Loan 775-TUJ 3/31/75 5/07/75 PROJECT PERFORMANCE AUDIT BASIC DATA SHEET TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (LOANS 623-TU and 775-TU) Project Data Original Actual or Plan Revisions Est. Actual Total Costs (US$ m1n): Loan 623-TU 17.15A 22.05 27.61 Loan 775-TU3/ 7.09 10.29 Financial Return on incremental investment: Loan 623-TU 15.3% 19.7% Loan 775-TIU- 14.5% 15.6% Mission Data Month, No. of No. of Date of Year Weeks Persons Manweeks Report Identification: Loan 623-TU 3/68 Loan 775-TU 6/70 - - - Appraisal: Loan 623-TU 11/68 3 2 7 6/69 Loan 775-TU 3/71 1 2 2 6/71 Subtotal: Supervision IR2 6/70 1 2 3 8/70 Supervision II 9/71 11 2 3 10/71 Supervision III 5/73 1 1 1 6/73 Supervision IV 6/74 - 1 7/74 Supervision VZ' 6/75 2 2 4 8/75 Subtotal: 6 11 1/ Exchange adjustment. 2/ Only for the transmission. The conception in the Bank of the cost overrun on Kadincik II was realized in June 1970. 3/ Transmission work only. 4/ The appraisal estimate is based on the exchange rate of US$1 = LT9. 5/ Includes Kadincik II (Loan 623-TU) as well as the transmission work. '6 Loan 623-TU and Second Cukurova Project (Cr. 59-TU). The other supervision missions are for both Loan 623-TU and Loan 775-TU. 7/ Completion report mission. PROJECT PERFORMANCE AUDIT REPORT TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (Loans 623-TU and 775-TU) HIGHLIGHTS Two credits and two loans, both loans presently audited, have been extended to the Government of Turkey, with Cukurova Electric A.S. (CEAS) as the beneficiary. Loan 623-TU was to help finance the installation of a 50 MW hydrostation, and loan 775-TU was to finance the cost overrun the hydrostation had incurred and some transmission lines. Both loans included financing for the training of the Company's officials, both abroad and within the country. The construction of the hydrostation and the transmission lines posed no unusual problems, The Company has developed an effective internal training program; training abroad was therefore not found necessary. The project, as completed, met its objectives. The following points may be of particular interest: Improving cost estimates by more detailed analysis of feasibility report (PCR para. 26). Successful project despite time delay (PCR para. 26).  PROJECT PERFORMANCE AUDIT MEMORANDUM TURKEY: THIRD AND FOURTH CUKUROVA POWER PROJECTS (Loans 623-TU and 775-TU) 1. The Bank has been associated with the Turkish power sector since 1952 when a Loan (63-TU) was made to help finance the multipurpose hydro- electric Seyhan project in Adana. CEAS was formed in 1953 to purchase and operate the powerhouse of the Seyhan 54MW hydroelectric facility. CEAS is responsible for electricity generation and sells wholesale energy in the Cukurova area in the southeast of Turkey (Adana, Icel and Hatay provinces), and transmits energy outside the boundaries of this area. Energy is sold to municipalities for distribution and directly to industries. Over 90% of the electricity sales in Turkey are supplied from the interconnected system of the Turkish Electricity Authority (TEK), which basically serves western and central Turkey. The CEAS system was connected to this larger system in early 1970 by a tie line, but more interconnection is planned between the two systems in the immediate future. CEAS' structure is that of a corporation with the majority of its stock privately held and a 25.5% government holding through TEK. The supervising authority for the electric- ity sector is the Ministry of Energy and Natural Resources under which TEK is responsible for the development planning of the whole sector. 2. An IDA Credit (34-TU) was extended to the Government in 1963 and a second IDA Credit (59-TU) in 1964. Both were relent on commercial terms to CEAS to assist finance a) a third 18 MW generating unit at Seyhan and b) the Kadincik I hydroelectric plant (70 MW), respectively. Loan 623-TU, presently audited, was for the installation of a 50 MW unit at the Kadincik II hydroelectric plant (a short distance downstream of the Kadincik I plant) and a small training program for the personnel of the company. Loan 775-TU, also presently audited, was to cover the cost overrun on Kadincik II; trans- mission facilities, which consisted of three principal lines with related substations; centralized control facilities; and the training program which was not implemented under the previous loan. The projects associated with Loans 623-TU and 775-TU cost 30% more in money terms than originally envisaged and only about 2% in real terms, mainly because of increased material and labor costs, a prolonged construction period and currency fluctuations. The Kadincik II hydroelectric station (Loans 623-TU and part of Loan 775-TU) was implemented largely as planned but with a time delay of more than one year. The main reason for the time delay was late delivery of materials and electrical equipment, together with having to await the awarding of major contracts until the consultants could verify the economic justification for the project at the increased cost (covered under Loan 775-TU). Some electrical and mechanical problems related to the operation of the hydrostation also contributed to this - 2 - delay. These problems have all been solved. The transmission work was comple- ted on schedule, but it deviated slightly from the original plan mainly because of new industrial customers, which were not foreseen at the time of appraisal. This deviation did not have any adverse effect on the project. The program to train staff members abroad was not implemented under Loan 775-TU either. However, this was quite a small part of the Loan (about $100,000) and proved not to be necessary as originally thought because CEAS has been quite success- ful in training its personnel within the country. 3. Actual sales of energy during the 1970-74 period increased on the average by 20% annually compared to the 19% estimated at the time of the appraisal (Loan 623-TU) of Kadincik II. Actual maximum demand was also quite close to the estimate, so that, in retrospect, the timing of the hydro- plant was about right. At the appraisal in 1969 of the project assisted by Loan 623-TU, the Kadincik II hydroelectric station, at an estimated cost of US$343 per KW installed (1969 price level), was compared to a thermal power station, and was found to be the least cost solution to meeting the additional electricity requirements in the Cukurova area for the period 1973 onwards. When Kadincik II was reappraised in 1971 because of the cost overrun it had incurred (Loan 775-TU), TEK was considering building a 380 KV Keban-Osmanyie- Seydishir transmission interconnected system which was expected to be completed by 1976. This affected the justification of the hydrostation, Whereas during the first appraisal, Kadincik II had been considered only in the con- text of load development within the CEAS system, it would, after completion of the 380 KV line, become a generating source for the interconnected system. The principle justification for completing Kadincik II was, at the time of the reappraisal, that it was part of TEK's development plan, then currently being designed as the least cost alternative for meting the forecast load growth of the interconnected system as a whole. In retrospect, this justi- fication has not changed, and the construction of Kadincik II rather than a thermal station was a worthwhile investment. The world-wide increase in fuel prices has reinforced this fact. The actual cost of Kadincik II in current value at $490 per Kw installed (only about $353 at 1969 price level) is now expected to yield a rate of return of 19.7% * on its incremental investment compared to 15.3% at appraisal (Loan 623-TU) mainly because the increase in tariffs and the increase in the hydro power capacity (50 MW at appraisal com- pared to an actual of 56 MW) more than offset the increase in the actual capital cost. 46 The construction'of the Seyhan-Osmanyie-Payas 154 KV transmission line assisted by Loan 775-TU was needed to strengthen the system in that area, and to supply a new steel mill at Payas. Although the steel mill is now expected to take less power from CEAS than originally envisaged (and therefore the installed capacity of the Payas substation was reduced from the original four 23 4VA transformers to one at 40 MVA), the completion of this line has improved the reliability of the power supply in the Cukurova area. The construction of the Silifke and Antakya transmission lines, which also were assisted by Loan 775-TU, were at appraisal compared to additional thermal generation, and found to be the least cost solution for meeting the increase in demand for electricity in these areas. With the actual sales of energy being close to their appraisal estimates, and the transmission lines being completed close to their original cost estimate, this justification has The 1975 average sales price of Krs 38.7/KWh was used in calculating the rate of return. -3- not changed. 5. The financial performance of CEAS during the 1971-74 period was consistent with the project agreement. Although the actual rate of return on average net fixed assets decreased from 14.1% in 1971 to 8.6% in 1974 because of the higher than expected fuel cost (1972 through 1974 were dry years for Cukurova so more than expected energy was generated from its thermal units), the actual rate of return for 1975 was about 20% mainly due to a better than normal year of rainfall. CEAS financed 26% of its construction program during the 1971-74 period from its own net cash generation compared to the 16% estimated at appraisal. 6. Supervision missions, averaging about one per year, were adequate when taking into consideration the high competence of the company. The Bank contributed positively toward these projects, particularly in helping to finance the cost overrun of the hydroelectric station, which, in retrospect, represented the least cost solution for meeting the energy requirements in the Cukurova area and in the Turkish power system as a whole. The objectives of the projects have been met.  TURKEY Loans 623-TU and 775-TU Completion Report Third and Fourth Cukurova Power Projects 1. Borrower -Republic of Turkey 2. Beneficiary -Cukurova Elektrik A.S. (CEAS) Loan No. 623-TU Loan No. 775-TU 3. Amount of Loan -US$ 11,500,000 -US$ 7,000,000 4. Date Loan Signed -June 27, 1969 -June 30, 1971 5. Effective Date -December 11, 1969 -October 14, 1971 6. Closing Date -September 15, 1973 -June 30, 1975 7. Period of Grace -4 years -3k years 8. Terms of Loan -25 years -23 years 9. Interest Rate -6L% -71% 10. Comittment Charge -3/4% -3/4% 11. Fiscal Year Ends December 31 12. Exchange Rate Original -LT9 = US$1 -LT15 = US$1 Present -LT14 = US$1 -LT14 = US$1 13. Appraisal Report No. -PU-13a -PU-74 and Date -June 2, 1969 -June 15, 1971 14. Amortization -Paid semi-annually -Paid semi-annually commencing September 15, commencing April 1, 1975 1973 and ending September and ending October 1, 1994. 15, 1994. The final repayments are substantially coincident for both loans since a part of the Fourth Cukurova Power Project is to meet cost overruns on the Third Cukurova Power Project (Kadincik II Power Plant). A2 15. Project Description (Original) (1) Third Cukurova Power Project (Loan No.623-TU) consists of: I. Construction of the second Kadincik Hydroelectric Power Plant (Kadincik II) Kadincik II comprises; a concrete diversion dam about 15 meters high containing two radial gates and situated on the Kadincik River about 200 meters downstream from the existing Kadincik plant (Kadincik I); an intake, immediately upstream from the dam, leading to a concrete- lines tunnel about 6,100 meters long; a steel pile exten- ding about 1,400 meters to a surge tank and valve chamber; a steel penstock sloping to a powerhouse containing a 50 MW turbo generator unit to be located on the banks of the Tarsus River just below the mouth of the Kadincik River; a travelling crane, switchyard, and other powerhouse equip- ment. II. Engineering Services The procurement of consulting engineering services to prepare detailed plans for Kadincik II and to supervise its construction. III. Training The provision of a training program for the personnel of the Company, consisting of training visits outside Turkey and the employment in the Company's offices of experts to teach modern techniques in electrical systems operations and public utility financial planning, including accounting. (2) Fourth Cukurova Power Project (Loan No. 775-TU) consists of: I. Construction and installation of the following power system works: (a) a 154-KV transmission line from Seyhan to Osmaniye and Payas. (b) a 154-KV transmission line from Iskenderun to Antakya. (c) substations at Tarsus, Payas and Antakya with an aggregate capacity of about 180 MVA. (d) a sub-transmission line from Tarsus to Mersin and Silifke. (e) centralized control, telemetering and communications equipment. II. Construction of the Second Kadincik Hydroelectric Power Plant (Kadincik II) (see (1)). A3 III. Training A training program for the personnel of the Company, consisting of training visits outside Turkey and the employment of experts to assist and train personnel in modern techniques of electric systems engineering and operations and public utility financial planning, including accounting. 16. Project Description (Actual) (1) The Third Cukurova Power Project (Kadincik II Hydroelectric Power Plant) was carried out broadly in accordance with the original project descrip- tion. The Kadincik II Hydroelectric Power Plant Project actually con- sists of a 28 m high concrete dam, 6,100 m long power tunnel, 1,345 m long steel conduit, 66 m high surge tank and a 56 MW turbo-generator. This power plant controlled from the upstream Kadincik I Hydroelectric Power Plant through a remote control system is expected to produce 307 GWh energy in an average water year. (2) The Fourth Cukurova Power Project (Transmission Network and completion of the Kadincik II Hydroelectric Project) was, to a certain extent, changed from the original plan, particularly transformer substations. Installed capacity of the Payas substation was reduced from the original 4 x 23 MVA to 1 x 40 MVA. The Tarsus substation capacity was increased from the original 2 x 16 MVA to 2 x 40 MVA because of the emergence of new non-ex- pected industrial customers (textile industry, food and fruit processing plants etc.). The actual installed capacity of the Antakya substation is 40 MVA instead of 2 x 16 MVA as originally planned. Also, the existing 154 KV substations Seyhan, Osmaniye and Iskenderun were expanded in order to provide better energy supply. The changes and transformer unit reallo- cation in the transmission network resulted mostly from the decision to supply the new Iron and Steel Mill, being erected at Payas, directly from 154 KV transmission system. The Iron and Steel Mill will install its own step-down transformers. The Incirlik substation was extended in order to transfer energy from the 154 KV system to the present 66 MW system and to supply energy to the industries between Adana and Incirlik. Consequently, 40 MVA in transformer capacity was transferred from the 154-KV system to the 66 KV system. All of these changes were consistent with the flexible description allowed for the Project. 17, Objective and Justification of the Project New additional generating capacity was needed to meet the rapidly in- creasing demand of the Cukurova Region consisting of Adana, Hatay and Icel provinces (with a population of about 2.5 million). The annual increases varied from 15 to 28% in both energy and peak power requirements. Although A4 most of the developments in this region were agricultural, in recent years, large industrial installations were also built such as a fertilizer plant and Iron and Steel Mill. In spite of the fact that the largest industrial customer, and new Iron and Steel Mill at Payas, has not yet entered into operation the total electric energy sales in the period 1971-1974 exceeded the Appraisal Report estimates by 10%. The growth of electricity supply capacity (1965-1974) is given in Annex 1, and the forecast of future power generation and demand (1975-1984) in Annex 2. A study made by CEAS' con- sultants (Syndibel, Belgium) to determine the least cost generation develop- ment concluded that the Kadincik II Hydroelectric Plant with a capacity of 50 MW was the least cost method of meeting expected power needs in the near future. The selection of the transmission lines and stations in relation to Kadincik II Hydroelectric Plant was considered appropriate for enforcing the CEAS transmission network and the interconnection with the TEK grid. TEK's development plan derived by determining the least-cost alternative power system development program to meet the forecast load growth for Turkey as a whole included the construction of Kadincik II Hydroelectric Plant and trans- mission lines and substations in the Cukurova Region. With the construction of the Kadincik II Hydroelectric Plant and related power transmission network the main objectives of the Project have been achieved. 18. Construction Schedule and Problems Encountered (a) Kadincik II Hydroelectric Power Plant - The General Contract for civil works was awarded to the Senzai Turkes-Peysi Akkaya (STPA) Istanbul, Turkey and the official starting date was October 26, 1970. The con- tractor has occupied the job site area as from the end of October 1970 and started the erection site installations immediately thereafter. At the end of December 1970, the driving of the power tunnel had been started and the contractor was ready to start the excavation in the powerhouse area. The main equipment began to arrive to the sites in February 1971. At the end of March the batching plants and the excava- tors were available but not yet erected. However, the auxiliary equip- ment for the tunnel (locomotives, rails and wagons) as well as struc- tural steel were not yet delivered. The late delivery in April and May 1971 affected the excavation works in the powerhouse area and tunnels (power and diversion). The only troubles during the diversion tunnel excavation were due to water inflows through the transverse faults connecting the tunnel with the very close gorge of the river and due to difficulties en- countered by the contractor to get on time the necessary explosives and fuses due to Government regulations. Following construction of the cofferdams water was diverted, through the diversion tunnel on November 8, 1971. The civil works contractor used a tunnel-boring machire ("mole") to excavate the major portion of the power tunnel; he also used con- ventional excavation methods from the upstream face of the tunnel. Neither, the availability of the machine nor the driving speed were good, mainly because of the necessity to transport the mucking material by trucks. A5 At the end of June 1971 it became evident that in order to complete the tunnel driving works on time, it was necessary to resume using the con- ventional method from the upstream end of the tunnel. The power tunnel boring came to an end on September 10, 1972. The machine boring had been 4,090 m in 16 months. Slow progress in tunnel concrete lining was attri- buted to insufficient concrete supply as well as the contractor's lack of experience in the use of the telescopic form of shutters for the execution of the concrete lining. The concrete lining work for the entire tunnel was completed in October 1973. The dam execution works began in Oc ober 1971 and the end of February 1972, a total volume of about 12,000 m had been excavated in the dam area. On September 2, 1973 the river was diverted through the dam, and in November 1973 the initial filling of the reservoir was started. The placement of the sills of the 3 radial gates and their stop logs was completed at the end of January 1973 and the provisional acceptance of the equipment was pronounced in January 1974. Other civil works were successfully executed. Aside from the above mentioned difficulties encountered during construction including a shortage of certain materials, the main civil works contractor performed well, completing the work only 1 months after his contractual obligation. The hydroelectric power plant went into test operation on February 18, 1974,i.e. about 13 months later than planned at the time of the first appraisal in 1968. The contractor for the Tunnel Intake Gate and Dam Gates B.V.S., France, completed the works on time and performed quite well. The contractor for Penstock, Steel Conduits, Surge Tank and Butterfly Valves was Vevey, Switzerland. Some problems were encountered on this contract. Mainly, overspeed devices of the butterfly valves give closing command when the power plant operates over 53 MW and the butterfly valves close. Experimen- tal means are being employed to overcome the faulty overspeed tripping, and loading to 56 MW is possible. The Vevey firm claims that the fault is due to air entering into the tunnel from the intake and does not assume responsi- bility for this. However, systematic study leading to an acceptable solution is being undertaken by the consultants. The contractor for the turbine was Escher Wyss, Switzerland. The per- formance in operation of delivered equipment has not been fully satisfactory. The turbine governor does not function properly; load fluctuations of about 2 MW are experienced. Modifications to be made on the draft tube to stop load fluctuations are in hand. The limit alarm switches are not suitable and should be replaced. The contractor for the generator Technomashio Italiana Brown Boveri (TIBB), Italy was late in the shipment of material and, as a consequence, the erection works were delayed. According to the contract the shipment was supposed to be completed by April 20, 1972, however, it was delayed to November 29, 1973. This caused a delay in the erection works from March 20, 1973 to December 31, 1973. Total shipment delay was 580 days and total A6 erection works delay was 280 days. TIBB claimed that the delay was due to strikes, which lasted 199 days. Nonetheless, since civil works were com- pleted in January 1974, this delay had not caused any loss in power genera- tion. The contractor for the electrical equipment BBC, Federal Republic of Germany, was also very late in the delivery of the electrical equipment. According to the Contract the equipment was to be delivered by October 30, 1972, but it was not delivered until July 24, 1973 and even then, some spare parts were not included. The contractor claims that this delay was due to late approval of the design drawings and changes made on some designs. BBC had not started the training program for the delivered electrical equipment; all drawings and documentations were not yet submitted to CEAS; several BBC indicators and recorders are not functioning properly and they were not replaced. Particularly many problems were encountered on BBC remote control system which has since been put into operation, and personnel trained. After evaluation of delay, the contractual penalty clause was applied. The contractors for the main transformer (Secheron, Switzerland) and the Powerhouse Travelling Bridge (Mague-Portugal) performed satisfactorily. At the time of the completion inspection (July 1975) in addition to the above mentioned problems the following works were still outstanding: (i) completion of remote control system to enable operation of Kadincik II Hydroelectric Plant from Kadincik I; (ii) replacement of defective parts for Tunnel Intake Gates and Dam Gates; (iii) amelioration and adjustment of turbine speed governor to operate stably and respond properly; (iv) repair of closing solenoid of the butterfly valve receiving closing signal; (v) one of the air valves in the butterfly valve is jammed and does not open. The contractor is supposed to complete re- maining works and to repair valve; (vi) final acceptance of Main Civil Works, Intake Gate and Dam Gates, Main Transformer and Power Crane. By September 1976, these outstanding matters had been corrected. (b) Transmission Lines and Substations The contractor for Civil Works and Erection were local firms Elta, Rebii; Gurun and Ozkik, Turkey. They completed their tasks satisfactorily and on time. A7 The contractors for equipment and materials were as follows: Equipment Contractor Electrical equipment BBC, W. Germany Transformers and lightning arresters J. Schneider, France Galvanized steel structures SAE, Italy ACSR conductors and ground wire Echevarria, Spain Insulators and hardware Sumitomo, Japan Load dispatching center BBC, Switzerland All equipment has been delivered except for the Load Dispatching Center, which is expected to be delivered by September 1975. The power transmission lines and substations are completed and commissioned into normal operation. Some delay was encountered in completion of substations because of steel shortage. Occasional problems and disputes with the equipment suppliers did not affect transmission network construction schedule. The completion of the Load Dispatching Center was delayed further because of lack of effort on the part of the contractor. The contractor did not pay much attention to this because for him this was a rather small contract. From the operational standpoint of view, the delay has not caused dif- ficulties or loss in generation. Outstanding matters were completed by September 1976. 19. Cost of Project Details of the original allocations of proceeds and the allocation of expenditures as finally disbursed are shown in Annex 3. The construction costs estimated in the Appraisal Report and actual costs are shown in Annex 4 for the Kadincik II Hydroelectric Power Plant and in Annex 5 for the transmission lines and substations. The original estimate of costs compared with the actual costs for both the Kadincik II and the trans- mission lines and stations are summarized in Annex 6. The total Project cost was LT121.2 million (US$8.75 million) higher than the LT403.7 million) estimated in the Appraisal Reports of 623-TU and 775-TU (see Annex 6). The 30% overrun was made up of 16% in actual construction cost, 3% interest during construction due to the longer con- struction time of Kadincik II and the remaining 11% increase was due to fluctuations in the US dollar parity of exchange. A summary of the overrun is: A8 OVERRUN LT MILLION US$ MILLION % OF APPRAISAL ESTIMATE Foreign Local Total Foreign Local Total Foreign Local Total Kadincik II 3.5 16.7 20.2 0.24 1.21 1.45 1.3 11.3 5.0 Trans. Lines &c S/Stns. 15.9 28.2 44.1 1.15 2.04 3.19 6.2 19.1 11.0 Subtotal construction 19.4 44.9 64.3 1.39 3.25 4.64 7.5 30.4 16.0 Training ( 3.1) ( 0.2)( 2.9) (0.19) (0.01)(0.20) (1.0) ( 0.1) ( - ) Interest ( 6.7) 19.8 13.1 (0.49) 1.43 0.94 (2.7) (13.4) 3.0 $/LT Fluctuations - 46.7 46.7 - 3.37 3.37 - 3.8 11.0 TOTAL 10.0 111.2 121.2 0.71 8.04 8.75 3.8 75.4 30.0 Kadincik II was reappraised in 1971 for Loan 775-TU and the estimated overrun of foreign exchange of LT36.6 million (US$2.44 million) needed to com- plete that Project was included in Loan 775-TU. This additional foreign costs of Kadincik II were due mainly to underestimation of the civil works costs and the unexpected worldwide price increases for equipment. This amount includ- ed US$68,000 additional loan interest for 623-TU due to the extended construc- tion period. In 1971 local costs were also increased by LT61.6 million (US$4.4 million). The main reasons for the construction cost changes were rapid material and labor cost increases in past several years, prolongation of the con- struction period and occurrence of some unexpected conditions during the construction as indicated under Paragraph 18. (Construction Schedule and Problems Encountered). The originally calculated economic rate of return of the development program (Kadincik II and transmission) was 14.5%, valuing sales at the tariff rate of 23 Krs/kWh. The recalculated project rate of return using actual construction and operating costs and estimated benefits is 15.6% (average tariff rate 39 Krs/kWh). 20. Consultants The Project was designed and supervised by the consulting firm Syndibel, Belgium. The main services rendered by the consultants were: preliminary investigations, general reports, preparation of bidding documents, evalua- tions of bids, detailed engineering designing, contraction and erection works supervision, inspection, testing and acceptance of the equipment and hydrolic model test. The performance of the consultant has been satisfactory and site supervision has been good. In general, the consultants could have been more successful if they had fully recognized and utilized the capa- bilities of the local contractor and their staff. The consultants' presen- tation of results was very good except for their application drawings which CEAS found not descriptive enough and difficult to understand. Assessing the progress at the end of May 1974 performance tests execution and works finalizing, the activity of Syndibel superintendence at the site was ceased early in June 1974. The consultants are still currently involved in clari- fication of unsolved problems and disputes with equipment contractors. A9 Arthur Young & Co.,USA accounting consultants, were carrying out a major assignment with TEK. Under an agreement with CEAS, the TEK consultants have been periodically required to visit CEAS (from TEK) to advise and assist CEAS in changing over to standard American Federal Power Commission (FPC) categories of account. So far eight consulting days have been spent at CEAS and the changeover to FPC categories has been successfully completed. 21. Organization and Managment The Cukurova Elektrik A.S. (CEAS) is a private sector limited liability company formed in 1953 initially to operate the power portion of the multi- purpose Seyhan Dam and Power Plant, which was built with the help of Bank Loan 63-TU. The stock is about 25.5% Government owned. Under its 1953 con- cession, which expires in 2013 when all fixed assets revert free to the Government, CEAS is responsible for generation and wholesale transmission within the Cukurova Region (Adana, Icel and Hatay provinces). The Board of seven directors comprise, a chairman and three directors representing the private stockholders and three directors representing TEK, the Government power entity. The Cukurova Elektrik A.S. is, generally speaking, well managed and its operations are in accordance with sound public utility practice. The senior and professional staff have relevant experience in the electric power industry and are fully capable of operating the project efficiently. Furthermore, CEAS is the only electric power company in Turkey with competent management and adequate professional staffing. The organiza- tional scheme is given in Annex 7, and necessary data on personnel are shown in Annex 8. CEAS' salaries are competitive with salaries offered by other similar employers; therefore while unlike other power organizations in Turkey CEAS is in a position to attract and retain highly qualified profes- sional staff as well as skilled workers. CEAS has a permanent training program for new and younger personnel. The chairman of the CEAS Board of Directors is a prominent figure in Turkey and has excellent managerial ability, and his management style has contributed to CEAS' success. 22. Financing (a) Operating Statements During the 4 years since the 725-TU appraisal, CEAS sales have exceeded the forecast growth rate of 13% annually and have in fact achieved an average of 16.6% despite the delay of the coming into operation of the Payas steel mill, scheduled for 1973 and now unlikely to be in full operation before 1976. Both general sales and sales to TEK increased, and in 1974 totalled 1,186.6 GWh (1,103 GWh forecast) of which 1,176 GWh were to general consumers (1,023 forecast) and 107 GWh to TEK for export to other regions in Turkey (80 forecast). Over the 4 years however, sales to TEK at the lower average tariff of Krs/Kh 18.51 (as compared to Krs/KWh 28.14 for general sales) provided 13% of total sales (8% in the forecast) and thus CEAS' over- all average tariff price only increased 22.6% from Krs/KWh 21.7 in 1971 and to Krs/KWh 37.0 in 1974. A major tariff increase for 1974 re- flecting increased oil prices was the main reason for the average price for the 4 years 1971/1974 reaching Krs/KWh 26.9 as against the forecast Krs/KVh 23.1 over the same period. A10 The higher volume and higher average sales price resulted in CEAS' gross sales revenue for the 4 years of LT1,094 million (US$78 mil- lion) exceeding the forecasts by 30%. However, its operating surplus of LT270 million (US$19 million) was 25% lower, mainly because of the smaller proportion of hydro generation due to lack of rain in 1973 and the delay of Kadincik II generation until 1974. The adverse effect of the additional thermal (and purchased) energy on CEAS' operating results was intensified because of the steep rise in the price of fuel oil. By 1974 the overall average fuel oil cost to CEAS had increased from 9.5 in 1971 to 35.1 Krs/KWh generated as against the forecast 12.5 Krs/Wh. Labor costs for the 4 years also increased by 10% over the forecast, which had assumed an annual overall rise of 17% from 1970, whereas in fact labor costs rose by 28% annually. Detailed information in the Forecast and Actual Operating Statements 1971-1975 are given at Annex 9. 1975 has been particularly wet and, with Kadincik II in full operation CEAS has been able to increase its hydro generation substanti- ally to an expected 978 GWh for 1975. This would be 58% of production as compared with 33% in 1973 and 43% in 1974. CEAS is therefore forecasting an operating surplus of LT144 million for 1975; more than double 1974 and almost 3 times that of 1973. (b) Construction Financing CEAS financed 26% of its 1971/1974 construction program from its own net cash generation, issue of new equity and consumers contribution and 74% from long term borrowing. The details of the appraisal forecast and actual sources and application of funds are given in Annex 10 and can be summarized as follows: All Appraisal % Actual % Deviation LT Million LT Mill. of of Sources: Item Total Net cash generation 527.9 468.3 (-11%) (Less) Debt service (282.4) (289.5) +2% Increase in worling capital (110.9) ( 46.9) (-57%) Subtotal 134.6 34% 131.9 21% (- 2%) Dividends in shareholders (96.9) (120.7) +25% Outside investments {1.) ( 0.3) (-98%) Cash generation for construction 22.2 6% 10.9 2% (--51%) (- 3%) Issues of additional equity 7.3 2% 95.4 15% +1207% +22% Consumer contributions 33.1 8% 56.8 9% + 72% + 6% Subtotal local resources 62.6 16% 163.1 26% + 161% +25% Longterm Borrowing: Credit 59-TU 38.7 10% 36.1 5% (- 1%) Loan 623-TU 1/ 156.7 39% 146.3 23 (- 3%) Loan 775-TU 1/ 105.0 26% 86.0 14% (- 4%) Parity rate increases to Bank group debts 2/ 3.6 1% 115.7 18% +28% Deferred local payments and duties 3/ 34.0 8% 87.3 14% +13% Subtotal longterm borrowing 338.0 84% 471.4 74% + 40% +33% Total construction financing sources 400.6 100% 634.5 100% +58% Construction Program Applications Construction Project 623-TU, 775-TU 295.1 74% 402.0 63% + 36% +26% Project from 39-TU 3.6 1% 3.5 1% - - Other construction 98.3 25% 113.3 18% + 15% + 4% Total construction 397.0 518.8 Parity increase in asset values 3.6 115.7 18% +321% +28% Total construction 400.6 100% 634.5 100% +58% 1/ US$1.05 million of Loan 623-TU had been drawn down at appraisal, and US$1 million of 775-TU was not drawn down until 1975. 2/ Due to changes in US$ parity rates during the period. 3/ In 1973 and 1974 CEAS temporarily defaulted in their local debt repayment to DSI and the government which, however, have been fully repaid in 1975. Al2 CEAS' financing plan in 1971 has required to be increased by LT234 million (58%) to meet the additional actual cost of construc- tion in 1971/1974. CEAS had asked whether the Bank would be prepared to increase its loan by US$1 million to meet the additional con- struction costs arising from the reduced US dollar parity value, but this request was not accepted by the Bank. CEAS accordingly resolved its financing problem by raising LT95 million (US$6.8 million) in new equity capital; and increasing its short term advances from local banks by LT33 million (US$2.3 million) in 1973; and in 1973 and 1974 by temporarily defaulting on its repayments to DSI and to the government of debts rescheduled at the time of the 775-TU Loan. Full payment of the default amounts have since been made in 1975 and no sums are presently overdue to DSI or to the government. Excessive short term advances from the local banks have also been repaid, and such advances now stand at their customary level of about LT20 million. (c) Appraisal and Actual Balance Sheets The balance sheets as appraised for 1974 (Loan 775-TU) and actual ones for 1970 and 1974 are shown in Annex 11. These balance sheets also include forecast for 1975. 23. Covenants Section 4.01 of the Loan Agreement 775-TU required the Borrower shall not abrogate, terminate, amend or waive the concession granted to CEAS, except as the Bank shall otherwise agree. In 1968, CEAS' concession was redrafted and, with the concurrence of the Bank, was submitted to the government for passing into law in substitution of the original agreement. The new draft's differences of substance included giving to CEAS the specific right to distribute in Hatay as well as Icel and Adana, and to generate in Adana and Icel provinces. During the governmental processes, the legal department of the Supreme Council of Turkey modified the text which had been agreed by the Bank. The tariff clause was originally unmodified and included the requirement to provide CEAS with a "reasonable profit" after deduction of all the usual expenses, depreciation, taxes, duties, etc., and capital amortization reserve. The legal department of the Supreme Council of Turkey changed this unspecific "reasonable profit" to a specific definition which can 'be paraphrased as meaning "a profit not exceeding 12% of the total paid in capital plus all extraordinary reserves (i.e.,reserves in excess of the legal reserve) and including capital amortization reserve." The Bank reconsidered that under certain conditions this 12% could become inadequate and informed the government of this opinio-n during negotiations of 775-TU in 1971. The decree setting up the revised concession was taken through all its governmental stages and signed by the President of the Republic of Turkey. However, publication in the official gazette was delayed by the government until March 25, 1976 when it came into full force. A13 CEAS has now decided that it is prepared to accept the "12%" revision of the tariff clause and does not consider that this clause would be detri- mental to its interest. Other particular covenants of substance have been fulfilled. The performance of the beneficiary (CEAS) has been very satisfactory. The formal provisions of the Project Agreement and the targets established in the Appraisal Report have been met. 24. Supervision Since the Project is performing satisfactorily there is no need for further supervision. One exception may be a periodical supervision to compare operation results and performance with other power entities in Turkey (TED, IETT) not performing satisfactorily, in order to draw necessary conclusions for the improvement in the whole power sector in the country. 25. Auditors Under the terms of the concession, CEAS is subject to Government audit, and as a condition of Credit 59-TU which has been maintained, has agreed to an independent audit. Since 1975, CEAS' accounts have been audited by Newberry & Co.,an experienced Istanbul firm which also performs a useful advisory function. CEAS' accounting records are well maintained and financial reports are prepared promptly. 26. Lessons Learned It is instructive to note that despite more than one year of the Project delay, the Kadincik II Hydroelectric Power Plant as well as the transmission lines and substations were successfully constructed and are completely fulfilling the expectations of their planners. This outcome was largely brought about by the ability shown by the project management. The capable project management and well organized power company are essential features for the success of the Project and obtaining full Project benefits. It is probably true that the more detailed analysis of the feasibility report and design specification might have resulted in the better Project cost estimates and avoidance of the Kadincik II reappraisal. It is also worthwhile to realize very favorable influences of the additional hydropower capacity on the improvement of the financial situation of the beneficiary and to learn that it is still possible to build not large hydroelectric power plant (56 MW capacity and 305 GWh annual generation) for less than 500$/KW installed, having in mind all benefits and conveniences offered by hydroelectric power plants. EMENA Regional Office August 1975  TURKEY CUKUROVA ELETRIK A.S. (CEAS) Loans 623-TU and 775-TU Completion Report List of Annexes 1. Growth of Electricity Supply Capacity (1965-1974) 2. Forecast Power Generation and Demand (1975-1984) 3. Original and Actual Allocation of the Loans Proceeds 4. Kadincik II Hydroelectric Plant Construction Costs 5. Transmission Lines and Substation Construction Costs 6. Project Construction Costs 7. CEAS Organization Scheme 8. Number of Personnel 9. Forecast and Actual Operating Statements 10. Sources and Application of Funds 11. Appraisal TU-775 and Actual Balance Sheets  ANNEX 1 CUKUROVA ELEKTRIK A.S. (CAS) Loans 623-TU and 775-TU Completion Report Growth of Electricity Supply Capacity, Transmission System, Customers and Sales, 1965-74 1965 1966 1967 1968 1969 1970 l7 1972 1973 1974 GENERATING CAPACITY (W) Hydropower Plants Seyhan 60 60 60 60 60 60 60 60 60 60 KadincikI - - - - - - 70 70 70 70 Kadincik TI - - - - - - - - - 56 Yuregir - - - - - - - 6 6 6 Sub-total Hydro 60 60 60 60 60 60 130 136 136 192 Thermal Power Plant Mersin - 53 53 53 106 106 106 106 106 106 Total Installed Capacity 60 113 113 113 166 166 236 242 242 298 TRANSMISSION NETWORK Substation Ca?acity (MVA) 15 kttions 26 26 26 46 46 46 72 72 72 292 66 kV Stations 90 90 100 107.5 117.5 147.5 217.5 217.5 227.5 250 Transmission Lines (km) 157 kV Lines 117.6 117.6 117.6 134.6 134.6 220.2 220.2 220.2 259 430 66 kV Lines 98.8 98.8 103,3 103.3 103.3 103.3 118 118 121 121.7 30 kV Lines - - 32.2 77.5 107.5 282.5 350 425 504.6 661.1 NUMBER OF CUSTOMERS 61 64 86 105 139 175 281 363 486 591 TOTAL SALES (GWh) 241.3 311.3 363.8 421.5 483.7 678.5 766.8 997.3 1058.3 1182.6 GROSS GENERATION (GWh) 251.3 322.4 379.4 439.4 514.2 716.5 815.8 1055.7 1139.7 1272.4 PEAK DEMAND (MW) 51.8 66 77 90 107 140 203.6 204 226 270 SALES Distribution 87.5 113.4 132.7 169.8 218.8 261.C 311.9 397.8 452.2 499.4 Industrial 153.8 197.9 230.8 251.1 264.1 287.7 273.2 356.9 461.8 524.6 TEK - - - - - 1.1 141.2 197.5 92.5 106.8 Others - - 0.3 0.6 0.8 678.5 4o.5 45.1 51.8 51.8 TOTAL (GWh) 241.3 311.3 363.8 421.5 483.7 678.5 766.8 997.3 1058.3 1182.6 GENERATION CEAS 251.3 322.4 379.4 439.4 514.2 716.5 815.8 1048.7 1081.8 1167.3 Purchased from TEK - - - 7.0 57.9 105.1 TOTAL (GWh) 251.3 322.4 379.4 439.4 514.2 716.5 815.8 1055.7 1139.7 1272.4 Plant Service & Losses (GWh) 10.0 11.1 15.6 17.9 30.5 38.0 49.0 58.4 81.4 89.8 as T of total generation (4.0) (3.4) (4.1) (4.1) (5.9) (5.3) (6.0) (5.5) (7.1) (7.1) System Peak Load (MW) 51.8 66 77 90 107 140 203.6 204 226 270 Annual Load Factor (%) (55) (56) (56) (56) (55) (58) (46) (59) (58) (54) August 1975 ANNEX 2 TURIEY CUKUROVA EIEKEIK A.S. (CEAS) Loan 623-TU and 775-TU Completion Report Forecast Power Generation and Demand 1975 1976 1977 1978 1979 1980 1981 1982 1 1986 P)WER GENERATION (Average water year) CFAS 1,610.0 1,500.0 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 Purchased from TEK 73.5 16o.o - - - Total (GWh) 1,683.5 1,660.0 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 GENERATION (GWh) 1,360.0 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 Dry water year) SALE General 1,254.8 1,350.0 1,498 1,662 1,878 2,140 2,439 2,761 3,058 3,430 TEK 333.9 204.0 - - - - . . Total (GWh) 1,588.7 1,554.0 1,498 1,662 1,878 2,140 2,439 2,761 3,058 3,430 PLANT SERVICE AND LOSSES (GWh) 94.8 106.0 120, 133 150 170 195 220 245 270 TOTAL ENERGY DE"AND (GWh) 1,683.5 1,660.0 1,618 1,795 2,028 2,310 2,634 2,981 3,303 3,700 Rate of Inctease (%) 1/ (17) (8) (1) (11) (13) (14) (14) (13) (11) (12) Required New Generation (GWh) - - U8 295 528 810 1,134 1,481 1,803 2,200 (Average water year) Required New Generation (GWh) 300 418 595 828 1,110 1,434 1,781 2,103 2,500 (Dry water year) System Peak Load (MW) 216 277 308 341 386 439 501 567 628 7o4 Rate of Increase (%) (14) (28) (11) (11) (13) (14) (14) (13) (11) (12) New Peak Load Requirements (MW) 6 67 98 131 176 229 291 357 418 494 1/ Without sale to TEK August 1975 ANEX 3 TURKEY CUKUROVA ELETRIK A.S. (CEAS) Loans 62-TU and 775-TU Copletion Report Original and Actual Allocation of the Proceeds of the Loans Category Amount Expressed in US$ Equivalent 623-TU Original Actual I. Civil Works 4,870,000 5,876,000 II. Electrical and Mechanical Equipment 3,670,000 5,470,000 III. Engineering and Supervision 600,000 142,000 IV. Training 100,000 12,000 V. Interest 1,050,000 --- VI. Unallocated 1 210 000 --- TOTAL 1 5, TT 755-TU I. Equipment, materials, special vehicles and associated services for Part I of the Project 3,10,000 ,h58,564 II. Part II of the Project 2,440,000 2,333,898 III. Training 100,000 --- IV. Interest and other charges 600,000 107,538 V. Unallocated 350,000 --- TOTAL 7,000,000 7,000,000 August 1975 ANNEX 4 TURKEY CUKUROVA ELEKTRIK A.S. (CEAS) Loans 623-TU and 775-TT Completion Report Hydroelectric Power Plant Kadincik II Construction Costs (LT 13.t5 - US$1) APPRAISAL REPFORT A CT U AL ---- LT Million ------------ US$ Million -----------LT Million ------------ US$ Million-- Local Forein Total local Fore ig Total Local Foreir Total Local Foreig Total Civil Works: Dam 10.5 114.3 214.8 0.76 1.03 1.79 8.5 7.2 15.7 0.61 0.52 1.13 Intake 2.2 2.8 5.0 0.6 0.20 0.36 0.8 1.3 2.1 0.06 0.09 0.15 Tunnel 43.4 52.1 95.5 3.13 3.76 6.89 37.8 30.1 67.9 2.74 2.17 4.91 Surge Tank 1.2 1.5 2.7 0.09 0.11 0.20 0.4 0.7 1.1 0.03 0.05 0.08 Penstock 3.7 5.3 9.0 o.27 0.38 0.65 2.3 2.6 4.9 0.17 0.19 0.36 Powerhouse 5.6 7.3 12.9 b-40 0.53 0.93 5.3 3.9 9.2 0.38 0.29 0.67 Switchyard 0.3 0.1 0.4 0.02 0.01 0.03 0.6 0.7 1.3 o.o4 0.05 0.09 Contingencies 14.5 1.5 16.0 1.05 0.11 1.16 -8.9 1/ 8.9 - -o.64 o.64 - Subtotal 2 3 = T- 339 47 5 Camp and Preliminary Works 11.9 11.9 0.86 0.86 22.3 19.1 41.4 1.61 1.38 2.99 A. TOTAL CIVIL 1ORS 93.3 W9 M7 F74 FZ Ir" ET 7 IU 7 W Equipment: Gates and Screens 0.9 13.3 14.2 0.06 0.96 1.02 1.4 15.0 16.4 0.10 1.08 1.18 Penstock and Valves 0.5 26.3 26.8 0.04 1.90 1.94 7.9 32.4 40.3 0.57 2.34 2.91 Powerhouse and Switchyard -2.3 41.5 43.8 0.17 3.00 3.17 2.4 52.1 54.5 0.18 3.76 3.94 Contingencies 0.2 4.2 4.4 0.01 0.30 0.31 - - B. TOTAL EQUIPMENT 3.9 B7.1 =9 -0 M ZM. 7 M7 "07 = 7 7M B-. Other Expensess Land 1.2 - .1.2 0.09 - 0.09 14.1 - 14.1 1.02 - 1.02 Administration 12.2 - 12.2 0.88 - 0.88 31.0 - 31.0 2.24 - 2.24 Engineering 0.3 6.2 6.5 0.02 0.45 0.47 3.0 6.6 9.6 0.21 0.47 0.68 Contingencies 1.3 0.7 2.0 0.09 0.05 0.14 - - - - - C. TO TAL OTHER 6.9 2179 77 0.50 5 78 WT 3" 7 77 TV T9T SUBTOTAL (A + B + C) 112.2 117.1 289.3 8.10 12.79 20.89 128.9 180.6 309.5 9.32 13.03 22.35 LT FLUCTUATION IN $ EXCHANGE - - - - - - 46.7 - 46.7 3.37 - 3.37 TOTAL CONSTRUCTION CST 112.2 177.1 289.3 8.10 12.79 20.89 175.6 180.6 356.2 12.69 13.03 25.72 Training 0.2 1.14 1.6 0.0 0.10 0.11 - 0.1 0.1 - 0.01 0.01 Interest during Construction - 14.5 14.5 - 1.05 1.05 11.4 14.7 26.1 0.82 1.06 1.88 TOTAL PROJECT COST 112.4 193.0 305.14 8.11 13.94 22.05 187.0 195.4 382.4 13-.51 14.10 27.61 1/ 12% of civil works contract value as foreign August 1975 TURIEY CUKUROVA EIEJTRIX A.S. (QEAS) Loans 623-TU and 775-TU Completion Report Transmission Lines and Stations Construction Costs (LT 13.5 - US$ 1) APPRAISAL REPORT ACTUAL LT Millions ------- --- US$ Milliona-------- ---LT Milliona------- ----US$ Millions- Local Foreign Total Local Foreigm Total Local Foreign Total Local Foreign Total A. TRANSMISSION LINES: 154 kV Seyhan-Osmaniye 1.7 10.1 11.8 0.12 0.73 0.85 10.67 7.20 17.87 0.77 0.52 1.29 154 kV Osmaniye-Payas 1.9 8.3 10.2 0.14 0.60 0.74 9.56 4.57 14.13 0.69 0.33 1.02 154 kV Iskenderun-Antakya 1.1 5.7 6.8 0.08 0.41 2.49 7 06 3.74 10.80 0.51 0.27 0.78 30 kV Mersin-Silifke 6.0 3.5 9.5 0.43 0.25 0.68 7.76 1.52 9.28 0.56 0.11 0.67 30 kV Tarsus-ACS 4.3 1.1 5.4 0.31 0.08 0.39 2.77 1.52 4.29 0.20 0.11 0.31 Subtotal (A) T7" -577 5rur ~~ 7.2 ~ W~ ~ -7 B. SUBSTAYIONS: Telemetering and Communication 3.9 5.1 9.0 0.28 0.37 0.65 0.56 5.40 5.96 0.oA 0.39 0.43 Seyhan Substation - - - - - - 4.16 1.80 5.96 o*30 0.13 0.43 Osmaniye Substation - - - - - - 1.24 3.19 4.43 0.09 0.23 0.32 Payas Substations 5.9 8.2 14.1 0.43 0.59 1.02 9.43 11.75 21.19 0.68 0.85 1.53 Iskenderun Substation - - - - - 0.84 2.90 3.94 0.06 0.21 0.27 Antakya Substation 2.9 2.6 5.5 0.20 0.19 0.39 4.72 2.62 7.34 0.34 0.19 0.53 Tarsus Substation 2.3 1.3 3.6 0.17 0.09 0.26 4.58 6.08 10.66 0.33 0.44 0.77 Subtotal (B) 1" W17 37-- -T-. T57r3 77N ~ 4-.F~TE -i1 Land and Rights 2/ 1.2 - 1.2 0.09 - 0.09 - - - - - - Engineering 2F 1.4 2.8 4.2 0.10 0.20 0.30 - - . . - TOTAL 32. YE -U -3 7 -.5 T M7. U.'r 5rn 11M7 -7 -T7UM Price Contingencies 2.5 4.8 7.3 0.1 0.35 0.53 - 17.10 1/ 17.10 - 1.23 1.23 TOTAL LINES AND SUB- STATIONS 35.1 53.5 88.6 2.53 3.86 6.39 63.35 69.4 132.75 4.57 5.01 9.58 TRAINING - 1.4 1.4 - 0.10 0.10 - - - - - - Interest during Construction on Loan (IDC) - 8.3 8.3 - 0.60 0.60 8.4 1.4 9.8 0.61 0.10 0.71 TOTAL PROJECT 00ST 35.1 63.2 98.3 2.53 4.56 7.09 71.75 70.80 142.55 5.18 5.11 10.29 1/ Inventories attributed to transaission lines and stations 2/ Land Rights (0.54 million TL) and Engineering (1.47 ad.llion TL) included in actual construction costs. August 1975 TURKEY AmEx 6 CUKUROVA ELEKTRIK A.S. (CEAS) Loans 623-TU and 775-TU Completion Report Construction Costs (LT 13.85 = US$ 1) ----- Appraisal Reports---- Actual Overrun Actual 623-TU 775-TU Total % LT Million - Us$ RITn -------- Item Foreign Cost - US$ million Kadincik II 1/ 10.35 2.4 12.79 13.03 0.24 2 180.6 Lines and S/Stitions 2/ - 3.86 3.86 5.01 1.15 30 69.4 Subtotal Construction F71 7r Training 3/ 0.10 0.10 0.20 0.01 (0.19) (95) 0.1 Interest included in loans 4/ 1.05 0.60 1.65 1.16 (014) (30) 16.1 Total Foreign Cost-US$ million 11.50 7.00 18.50 19.21 0.71 4 Total Foreign Cost- LT million 1" 2 2 2710 .0 76C- Total Local Cost-LT Million " NG" 4 """""" -"""""" .- Kadincik II 50.6 61.6 112.2 128.9 16.7 15 Lines and S/Stations - 35.1 35.1 63.3 28.2 Subtotal Construction 7 1 Training 0.2 - 0.2 - ( 0.2) (100) Interest during Construction 4/ --- 19.8 19.8 S%Project Total Local Cost 50.8 96.7 147.5 212.0 64.5 44 Total Cost - LT Million Kadincik II 193.9 95.4 289.3 309.5 20.2 7 5 Lines and S/Stations - 88.6 88.6 132.7 44.1 50 11 LT fluctuations in $ exchange rates 5/ - - - 46.7 46.7 - 11 Subtotal construction 1979 1W0 1771U 29 -7 Training 1.6 1.4 3.0 0.1 ( 2.9) (97) - Interest during construction 14.5 8.3 22.8 35.9 13.1 57 3 Total LT Cost of Project 210.0 193.7 403.7 524.9 121.2 30 30 Notes: 1/ US$ 255,000 was additionally paid for preliminary engineering out of Credit 59-TU. The actual is $83,700 less than that shown in the Bank records due to a misallocation of 2 payments by the Bank which should be Category 2. 2/ The actual includes US$1.23 million carried in inventory in the Balance Sheet. 3/ Apart from US$12,000 paid to Arthur Young to standardize and improve accounting, training was virtually deleted from the ultimate Project with the concurrence of the Bank. 4/ Except for US$110,000 already disbursed, CEAS paid interest on Loan 775-TU itself (included in Local Cost). The US$490,000 remaining in the category was reallocated to construction (Bank letter 7/18/73). US$680,000 of additional interest on Loan 623-TU arising from the delay in completion of Kadincik II was transferred to that category and included in the Kadincik II category of 775-TU. 5/ Accounting action taken to adjust asset value to the current LT/US$ parity rates. August 1975 ANNEX 7 TURKEY CUKUROVA ELEKTRIK A.S. (CEAS Loans 623-TU and 775-TU Completion Report CEAS Organization Scheme SHAREHOLDERS GENERAL ASSEMBLY THE ADTR THE BOARD OF -DIRECTORS GENERAL MANAGER TECHNICAL ADVISOR FINANCIAL ADVISOR SECRETARY LEGAL ADVISOR t Co NTRCLLERS ASSISTANT GEN. MANG ASSISTANT GEN.MANG ASSISTANTGEN. MANG ASSISTANT GEN MANG. DESIGN AND INSTAL. OPERATIONS FINANCE ADMINISTRATION PLANNING AND DESIGN MANG. LOAD DISPATCH MAN ACCOUNTS MANAGER PF%ONNEL MANG. ISTALLATIONS SYORGAN!ZATION AND MANAGERSEYHAN PLANT MAN PURCHASE MANAGE METHOD CHIEF MERSN PLANT MAN L SERVICES CHIEF L EXPROPRIATION KADINCJKPLANT MAN CHIEF NETWORK OPERATION MANG R ELAYS AND METERING MAN. EDUCATION CHIEF MACHINE SHOP CHIEF ANNEX 8 TURKEY CUKUROVA ELEKTRIK A.S. (CEAS) Loans 623-TU and 775-TU Completion Report Nurber of Personnel 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 Generation Capacity Installed (MW) 60 113 113 113 166 166 236 242 242 298 Number of Employees in Power Plant Mersin Thermal Power Plant (106 MW) - 119 93 92 124 122 133 130 138 136 Seyhan Hydro Power Plant (60 MW) 50 51 43 43 42 42 48 41 41 42 Kadincik I Hydro Power Plant (70 MW) - - - - - - 41 46 71 87 Kadincik II Hydro Power Plant (56 MW) - - - - - - - - - 17 Turegir Power Hydro Plant (6 MW) 8 11 11 Sub-total 7n Number of Employees per MW installed 0.23 1.60 1.20 1.19 1.00 0.99 0.94 0.93 1.08 0.98 Number of - n TransmissiOn Network 53 65 81 85 87 100 101 111 127 135 General Services General Administration 1/ 103 107 137 145 161 154 155 159 165 166 Construction 83 31 91 155 205 137 102 117 106 46 Sub-total 186 138 228 300 366 291 257 276 271 212 Total Numbr of Emplo yees289 373 445 520 619 555 580 612 659 640 Structure Graduate Engineers 12 12 14 15 17 24 24 32 29 28 University Educated 6 6 7 7 7 9 12 15 21 23 Others 133 237 260 300 369 336 399 402 457 417 Laborers 138 118 164 198 266 186 1145 163 152 172 Skilled (50) (48) (50) (58) (67) (59) (47) (53) (53) (59) Unskilled (88) (70) (114) (140) (159) (127) (98) (110) (99) (113) 1/ Includes General Management, Expropriation, Education, Organization, Shops, Accounting, Purchases and Personnel Services. August 1975 TURKEY CUKUROVA ELEKTRIK A.S, (CEAS) Forecast and Actual OperatinT Statemhnts 1971-1975 LT (Million) LT14 - US$l1 Increase (Decrease) 1975 --- Estimates of 1971 Appraisal Report 775-TU------- ------------------------ Actual -------------------------from Present 1971 1972 1973 1974 1971/1974 % 1971 1972 1973 1974 i9;i/;974 % Appraisal Estimate 13WH Generated Thermal 318 323 423 210 1,274 33% 423.6 417.9 704.0 623.1 2,168.6 51% 632.0 Hydro 387 595 657 944 2,583 67% 392.2 630.8 377.8 544.2 1,945.0 45% 978.0 Purchased - - --- - 7.0 57.9 105.1 170.0 4% 73.5 Total 705 918 8 1_154 1__ 815.8 1,055.7 1 72. 4,283.6 10% 1,683.5 GWH Sold General 632 767 920 1,023 3,342 92% 625.6 799.8 965.8 1,075.8 3,467.0 87% 1,254.8 TEX 30 100 100 80 310 8% 141.2 197.5 92.5 106.8 538.0 13% 333.9 Total 6115 766.8 97.3 1 8 1 -82.6 7-005.0 100% 1,588.7 Average price of sale Kra/kWh General 23.34 24.09 24.14 24.06 23.91 -/ 23.38 24.61 25.84 38.75 24.14 39.80 TEX 11.36 14.50 14.50 14.50 13.71 Y/ 14.23 14.61 15.76 28.43 18.51 1,34.40 Overall 22.80 22.98 23.08 23.37 23.06 -1 21.70 22.69 24.96 37.00 26.59 38.66 Operating Revenue - Sale of Electricity 150.9 199.3 235.4 257.7 843.3 166.4 226.2 264.1 437.6 1,094.3 614.3 Operating Expenses Salaries and Wages 14.5 15.1 16.7 19.3 65.6 11.6 15.7 20.8 25.4 73.5 Bonus at year end 1.2 1.4 1.5 1.6 5.7 1.4 2.8 2.9 4.2 11.3 5.2 Maintenance and Materials 4.6 4.8 5.0 5.2 19.6 5.7 8.7 11.0 14.9 40.3 17.5 Water costs - Seyhan 4.5 4.8 4.8 4.5 18.6 4.4 5.1 3.5 3.3 16.3 6.2 Fuel Oil 31.3 40.4 52.9 26.2 150.8 40.2 55.6 115.6 218.8 429.7 246.5 Purchased Power 0.8 0.8 0.8 0.8 3.2 - 1.5 10.4 31.6 43.5 23.7 Insurance and Taxes 3.3 7.2 9.0 11.2 30.7 2.7 2.4 2.8 3.8 11.7 4.8 Corporate Tax - 11.3 12.4 22.1 45.8 3.9 16.3 8.8 10.7 39.7 63.0 Depreciation 31.3 31.9 35.1 44.5 142.8 31.3 33.7 37.2 56.1 158.3 57.3 Total Operating Expenses 91.5 117.7 138.2 135.4 482.8 101. 141.8 12.5 368.8 824.3 469.7 Operating Surplus 59.4 81.6 97.2 122.3 360.5 65.2 84.4 51.6 68.8 270.0 144.6 Other Income 5.5 5.7 6.7 6.7 24.6 4.9 8.8 7.8 18.5 40.0 19.1 Total Surplus 64.9 87.3 103.9 129.0 385.1 70.1 93.2 59.4 87.3 310.0 163.7 Interest 30.0 37.3 9.1 40.6 147.0 25.4 32.8 43.4 47.0 148.6 47.9 (Less) Interest during construction (9.5) (13.0) (15.6) - (38.1) (7.2) (8.3) (15.2) (7.5) (38.2) Net Interest 20.5 24.3 23.5 40.6 108.9 18.2 24.5 28.2 39.5 110.4 47.9 Net Surplus 44.4 63.0 80.4 88.4 276.2 51.9 68.7 31.2 47.8 199.6 115.8 Appropriation of Surplus Capital Amortization 16.8 16.4 24.9 24.8 82.9 - - - 8.5 8.5 8.6 Legal Reserve 3.0 6.5 8.1 11.6 29.2 5.4 8.2 4.2 5.9 23.7 13.9 Transfer to/(from) Extraordinary Reserve (1.6) 13.9 21.2 25.8 59.3 14.0 16.7 0.6 (2.3) 29.0 43.4 Cash Dividend 26.2 26.2 26.2 26.2 Iwo-. 32.5 43.8 26.4 35.7 138.4 49.9 Total Appropriation a4.4 6 3. 0 80.4 8. 4 276.2 51.9 -68.7 31.2 47.8 199.6 115.8 Average Net Fixed Assets in Operation 476.5 591.4 767.4 926.8 463.2 567.3 563.3 801.1 1,021.5 Rate of Return 12.57 13.87 12.7% 13.2% 14.1 14.9 9.2 8.6 14.2 1/ Average sales price Krs/kcWh for 1971/1974 August 1975 CUXUROVA RLIRIK S.A. (ME) oure and Anplicatie of Funds Ccerrison of tal 19274 with AppraIsal Eztiate LT killion Exachaege Rate 41 L34 (1975), UT15 (Apraisal - 1970) 725-TU 1971/74 AppraIsal Variation from Estiate -o------------------- Atual ------------------ Foreoast 725-TU Appraloal 1971/74 u 1972 19'3 1974 1971/74 _l, Estimate Rerk. SOURCES Net Surplus 385.1 70.1 93.2 59.4 87.3 310.0 r 163.6 (75.1) Depreciation 142,.8 3., _3 .7 37.25 6.1 1 8. _ 73 19.2 Dealuatio Net Cash Generatione 527.9 1 -16.945 1. 168 .3 22.9 (755) Rue Oil (Increase)/Deoreae in Working Capital .f (56.5) (22.7) 1.7 (50.4) 12.5 (58.9) (46.5) ( 6.1) Increase in Equity Capital 7.3 7.3 - 45.0 43.1 95.4 1.9 88.1 Customers contributions 2/ .1 17.8 18.8 24.0 3.8) 6.8 .2 3.7 Subtotal 7urrency7rates adjustme: Credit. 34-TU 59-TU 3.6 - 30.7 42.6 (4.3) 69.0 4.2 65.4 Loa. 623-TU 775-TU - - - - 46.7 46.7 3.2 46.7 Borrowing: 59-TU 38.7 31.2 4.9 - - 36.1 - (2.6) 623-TU 156.7 69.8 41.7 34.8 - 146.3 - (10.4) 75-105.0 - 7.1 50.7 28.2 86.0 14.3 (19.0) Deferred custons duty 5.6 - - 1 6 13.6 - 8.0 Totol Lonerm Borroving 3 01 r 3.l 77 06 397,7 ST" W ä4' Short-term borrowing: Decrease) in local bank loans (7.8) (1.7) (1.1) 32.8 (12.9) 17.1 (4.8) 24,9 Contratual defrt of: Debt-~ervice 34TU - 59TU - - - 188 - 18.8 18.8 D.S.I. debte 28.4 28.4 - - - 28.4 - Unofficial deferent of: D.S.I. debts _ - - 6.2 20.3 26.5 - 26.5 TOTAL SOURCES 842.0 2 207 314.7 2732 151 202.4 208.1 APPLICATIONS Construction: Project 59-TU 3.6 3.5 - - - 3.5 - Projeets 623-T ~d 775-TU 295.1 105.8 87.0 121.2 87.9 401.9 Other 9 44.8 2 . 6. 10.8 j2 - Su,btotal 39. 5. 079 159.1 9.7 5 02121.8 Currency rate adjustsent to aseet alues .6 - 42.6 42.4 77.4 n1 Total Construction -1 23" 5" In Ments 6/ -- 5. 02) Debt Serice AUrtitlon eferred debt service re: Credits 34-TU 29.3 - - 1.5 3.0 4.5 1.7 - 59-TU - - - 1.4 30.0 41.4 13.2 - L-on 623-TU 5.9 - - 2.1 3.7 5.8 4.8 . 775-TU - - - - - - 2.8 - Sbtotal World Bank Group d r d 11" " 37 22.3 165 D.S.I. Protool ted Contractn. defered dbs 64.9 22.1 9.9 10.1 12.1 54.2 5.2 (10.7) Govenet Deferred: Interest 34-TU, 59-TU 18.9 9.9 1.6 1.6 1.6 14.7 1.6 (4.2) Cust. duty 16.3 3.9 7.5 1.5 1.1 14.0 13.7 (2.3) Unofficial deferred D.S.I. Debt - - - - 6.2 6.2 20. 62 Total Aortieatoo nn 7 1m 9H 5.B Interest T e t re: Credits 34-TU 1.1 1.2 1.3 1.4 1.4 5.3 1.3 - 59-TU 80.3 17.7 20.3 22.3 21.2 81.5 20.8 - Loon- 623-TU 38,2 3.5 7.3 11.2 12.3 34.3 12.1 - 775-TU 13.5 - 0.8 l. .6 88.. Subtotal World Bank Group 133.1 322.4 . . (3.7) D.S.I. 9.4 2.7 2.5 2.3 2.0 9.5 1.8 0.1 Interest om deferred custom duty - - - 1,9 - 1,9 - 1.9 Short tem financing 4,6 0 0.6 4 Total Intae6t 47. Total Debt Service 28.r 61 . 7. 14.7 ii.H7. 282. 614 51.8 71 i:7.1 Dividend paid to Shareholdere96.9 .2 264 35.7 M33 Caital increased Invested C-pital AWorti-tion 10.0 - ap Subtotal (9.0 Dec, March, Nov. Chne6nCah6 _2J) 7.5 (1.3) 1. 5.1 10.8 (15 TOTAL APPLIEATIS 0 312 0 42 0 Cash at start of period 16.1 7/ 16.4 3/ 14.1 21.6 20.3 16.4 2.5 Cash at end of perkod 62.7 14.1 - 21.6 20.3 21.5 21.5 32.3 - - 0 o- o ributiong are "net" recived 1.e. less 10% of contributlons received for completed work, which i transferred annually to revenue and Included under "Other Incoe". During 1971 through 1974 TL 11.0 Mlion ha been so transferred (0.8, 1.1, 2.2, 6.9). on 8/16/73 the Governent agreed to an additional deferal of IET6 reymet of debt serice om Credits 34-TU and 59-TU. In 1971 DSI ageed to deter exi.ting overdue debts for atr charges and under the 1961 protocol ( LT Milli~ns 10.7 and 17.7 respectively). SAlthogh intended am short ter borrowing the deferment of Governet and D8T dets were In fot coerted into loger term boroowiog by CEAS non paent in 1973 änd 1974. All these outetanding debts have been pald In 1975. In 1973 ond 1974 net rep~yents of matured government boond eceded inoestent in cuch bondo. All invetent ehon are net of mturitie. In the Appraimal report the 1970 account. vere still only preliminary and the final account contained minor ohanges. August 1975 TURKEY CUKUROVA ELEKTRIK S.A. (CEAS) ANNEX 11 Appraisal TU-775 and Actual Balance Sheets 1970 and 1974 - Forecast 1975 LT Million LT1 = US$14 1974 1970 Appraisal 1974 1975 Actual 775-TU Actual Forecast NET ASSETS Fixed Assets Gross fixed assets in operation 464.5 1,189.6 1,366.2 1,393.6 Less Depreciation reserve (89.9) (236.3) (254.4) (311.6) Net fixed assets in operation 374.6 953.3 1,111.8 1,082.0 Work-in-progress 257.1 - 11.4 21.6 Subtotal 631.7 953.3 1,123.2 1,103.6 Investments 17.5 22.2 17.8 24.9 Total Fixed Assets 649.2 975.5 1,141.0 1,128.5 Net Current Assets Current Assets Cash 16.4 62.8 21.5 32.3 Less Temporary local bank advances (_7.8) - ( 24.8) (20.0) Net cash resources 8.6 62.8 ( 3.3) 12.3 Accounts receivable - consumers 21.4 46.4 106.2 173.7 Notes receivable - consumers 6.8 20.6 21.6 30.5 Inventories 21.0 24.9 66.8 62.3 Other receivables & prepayments 18.5 12.8 12.7 14.8 Total Current Assets 76.3 167.5 204.0 293.6 Current Liabilities Accounts payable, DSI for water (16.1) ( 4.5) (10.8) ( 6.3) : Other ( 3.3) (12.2) (29.9) (82.7) Current portion of longterm debt (27.6) (28.5) (63.2) (31.1) Other provisions and advances (12.4) (21.5) (90.2) (69.4) Total Current Liabilities (59.4) (66.7) 194.1 (189.5) Net Current Assets 16.9 100.8 9.9 104.1 TOTAL NET ASSETS 666.1 1,076.3 .11150.9 11232-6 EQUITY AND LONGTERM DEBT Equity Paid in share capital 168.3 175.0 248.6 250.0 Paid in share premium 14.4 15.0 29.6 30.0 Reserves & undistributed surplus 23.5 69.7 68.1 71.7 Surplus for year 14.7 88.4 47.8 115.8 Capital amortization reserve - 48.1 - 8.5 Consumers contributions 14.6 47.6 70.8 80.0 Total Equity 235.5 443.8 464.9 556.0 LongTerm Debt Credits: 34-TU 22.6 22.4 22.4 20.8 59-TU 319.5 319.0 363.4 353.1 Loans: 623-TU 15.6 162.4 180.8 177.7 775-TU - 102.4 99.8 112.5 Subtotal Bank Group 357.7 606.2 666.4 664.1 DSI 29.7 10.0 10.0 4.6 Government: Debt Service 34-TU, 59-TU 32.9 14.1 9.6 7.9 : Deferred customs duty 10.3 2.2 - - Total Longterm Debt 430.6 632.5 686.0 676.6 TOTAL EQUITY AND LONGTERM DEBT 666.1 1,6. 1 150 9 1 232.6 August 1975  T U R K E Y CUKUROVA POWER SYSTEM EXISTING OR UNDER PROPOSED CONSTRUCTION PROJECT 0 20 40 60 80 100KM HIYDRO PLANTS OIL-FIRED STEAM PLANTS 154KV TRANSMISSION LINES 66KV TRANSMISSION LINES 33KV TRANSMISSION LINES RL CK 5 E i ToAvanos ADANA PROVINCE -(TEK) q üf'1¯. stabo uKozan IUJ- - Kadirli .. -!....Bah9e T U R K E Y . OSTED T Gaziantep --SYS TEM AREA G (TEK) - C.r.. -' \- 'S Y KADINGI -r Incrlik Ceyhan ..-.- - .. ry~~s- "XK ADINCKI.Zn é usE.- 4 KA/DINC/K H W,'', ADAw - 4ý 4 os Dortyol MERS/N .' ATAY YUR?EGI ...-----'CP( - - [ - ' Nrf ~RSINPROVNCE l C E L P R O V Ni C E - Iskendeyun -- , K r a .K rikhan - APRIL~~~ AmikBD 53R ORehånli ADTAKYA Kqraçay t 0 Alti özli Izam ndGH ar biyel M4 E D irTE RR A N EA N SE A DEFNEj APRIL 1971 IBRID - 253lR3