Ceylon - Aberdeen-Laksapana Hydroelectric Project

P 69 RESTRICTED This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS of the PRESIDENT to the EXECUTIVE DIRECTORS concerning A PROPOSED LOAN to the GOVERNMENT OF CEYLON June 7, 1954 Department of Operations Asia and Middle East  REPORT AND RECOIMENDIATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS CONCERNING A PROPOSED LOAN TO THE GOVERNMENT OF CEYLON 1. I submit the following report and recommendations with respect to the proposed loan to the Government of Ceylon in various currencies amounting to the,equivalent of U.S. $19.11 million. PART I - HISTORICAL 2. The Government of Ceylon had reached the conclusion before the war that the most economical way of meeting the growing power requirements of the South- west of Ceylon would be to develop the power potential of two rivers in this area. The entire development will supply 150,000 kilowatts, but the work is being carried out in stages. Owing to the war, work on the first stage was not completed until 1951. This work included the construction of a diversion dam, a tunnel through the hills from one river valley to the other, a power station with an installed capacity of 25,000 kw., and a transmission line to Colombo. The next stage, which the proposed loan would help to finance, calls for the construction of a dam which will regulate the flow of water to the existing dam, additional penstocks, an enlargement of the power station which will increase installed capacity by another 25,000 kw., and additional trans- mission lines and distribution facilities. The power system thus being built up is, and will be, operated by the Electrical Undertakings Department, which is a department of the Government under the Mlinistry of Transport and Works. 3. In June 1953 the Gcvernmont of Ceylon asked the Bank to consider this project fcr a loan. A Bank mission visited Ceylon in !ugust 1953 to review the economic and financial situation, and was followed in September by a Bank engineer who examined the technical aspects of the project. Further discus- sions were held in Washington in December during a visit of the Finance Minister, and again in February 1954 when a Bank mission went to Ceylon to examine the administration and organization of the Electrical Undertakings Department. 4. Negotiations for the proposed loan began in Washington on May 20, 1954 with representatives of the Government and agreement has been reached in the form of the Loan Agreement, the draft of rhich I now present. The Loan Agree- ment would be signed by the Governor General of Ceylon.  -" 2 -. PART II - DESCRIPTION OF PROPOSED LOAN Borrower 5. The borrower would be the Government of Ceylon. This would be the first loan made to Ceylon by the Bank. Amount 4. The amount would be the equivalent in various ourrencies of U.S. $19.11 million. Purpose 7. The proceeds of the loan will be used for the purchase of imported material and equipment needed for the cerrying out of the project, and for certain engineering services. The total cost of the project is estimated at the equivalent of U.S.