Papua New Guinea - Upper Ramu Hydroelectric Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2687 PROJECT PERFORMANCE AUDIT REPORT PAPUA NEW GUINEA: UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT (LOAN 737-PNG) October 5, 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 PAPUA NEW GUINEA: UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT (LOAN 737-PNG) Table of Contents Page No. Preface (i) Project Performance Audit Basic Data Sheet (ii) Highlights (iii) Appendix - Comment from the Ministry of Finance (iv) Attachment: Project Completion Report I. Introduction 1 II. Project Preparation and Appraisal 2 III. Implementation 4 IV. Operating Performance 9 V. Financial Performance 11 VI. Institutional Performance 13 VII. Project Justification 14 VIII. Bank Performance 14 IX. Conclusions 15 Annexes 1 - Data on Major Contracts 17 2 - Design and Construction Schedule 18 3 - Actual Disbursement vs. Appraisal Estimate 19 4 - Incremental Financial Rate of Return 20 5 - Actual and Estimated Income Statements 21 6 - Actual and Estimated Balance Sheet 22 7 - Sources and Application of Funds Statements 23 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 PAPUA NEW GUINEA: UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT (LOAN 737-PNG) Preface This report presents the results of a performance audit of the Upper Ramu Hydroelectric Development Project for which Loan 737-PNG of US$23.2 million was made in May 1971. The loan was fully disbursed and closed in November 1975. The report consists of Highlights prepared by the Opera- tions Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the East Asia and Pacific Regional Office. Follow- ing its abbreviated procedure, OED has reviewed the Appraisal and the President's Reports, the loan documents, the minutes of the Board discussions and the PCR. On the basis of this limited review, OD finds no reason to disagree with the analysis and the conclusions of the PCR. Following normal OED procedures, a copy of this Project Performance Audit Report was sent for comments to the Governnent anc the Borrower. Those comments which were received are reproducez as an Appendix to the Audit Memorandum.  (ii) PROJECT PERFORMANCE AUDIT BASIC DATA SHEET PAPUA NEW GUINEA: UPPER BAMU HYDROELECTRIC DEVELOPMENT PROJECT (LOAN 737-PNG) KEY PROJECT DATA Appraisal Item Expectation Actual Total Project Cost (US$ million) 33.9 43.7 Overrun (%) - 29 Loan Amount (US$ million) 23.2 23.2 Disbursed ) 23.2 Cancelled )_May 31, 1979_ _ Repaid to ) .1.75 Outstanding to ) 21.45 a/ Date Physical Components Completed 12/75 9/76 Proportion Completed by above Date (2) 90 100 Proportion of Time Overrun (2) - 15 Incremental Financial Rate of Return (T) 17.5 13.5 Financial Performance Satisfactory Remains favorable after tariff increases Institutional Performance Satisfactory Satisfactory CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ Fillion) as of June 30: 1972 1973 1974 1975 1976 (i) Appraisal Estimate 1.1 5.0 14.6 21.9 23.2 (ii) Actual .9 4.4 12.0 22.1 23.2 (ii) as % of (i) 82% 88% 82% 101% 100% OTHER PROJECT DATA Original Item Plan Revisions Actual First Mention in Files or Timetable - 04/20/67 Negotiations 06/ /70 - 03/15/71 Board Approval 09 /70 - 04/15/71 Loan Agreement Date 10 /70 - 05/26/71 Effectiveness Date 01//71 - 07/30/71 Closing Date 09/30/76 - 11/20/75 Borrower AdminisLration of the territory of PNG Executing Agency Papua New Guinea Electricity Commission Fiscal Year of Borrower July I - June 30 Follow-on Project Name Second Power Project Loan Number Loan 999-PNG Amount (US$ million) 10.8 Loan Agreement Date 06/12/74 MISSION DATA Sent No. of No. of Date of Item Month, Year Weeks Persons Man-weeks Report Preappraisal 07/69 3 3 9 NA Appraisal 10/70 2 3 6 26/71 Total 5 15 Supervision I 10/72 2 1 2 11/14/72 Supervision 110/7I -1 NA Supervision III 12/74 1.5 1 1.5 02 15 75 Supervision IV 1 2 2 09/08/75 Supervision VI -1 1 1 -10/20/7 7 Total 8 -9.5 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) S/ Kina ( K Year: Appraisal Year Average 1970 Exchange Rate: U **1 - K 0,890 Completion Year Average 1~ ~ussi - -K-o.757 a/ Excluding exchange adjustment of US$0.91 million. k/ Combined with the appraisal mission of the Second Power Project. S/ Prior to 1975, the currency used was the Australian dollar (AS) 1975: lA$ * lK 1976: LA - 1.13K 1977: lA$ - 1.16K  (iii) PROJECT PERFORMANCE AUDIT REPORT PAPUA NEW GUINEA: UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT (LOAN 737-PNG) Highlights Loan 737-PNG for US$23.2 million was to finance the foreign exchange cost of the first phase of the Upper Ramu No. 1 underground hydroelectric development and transmission work. The project was to supply six load centers in New Guinea not previously interconnected. Implementation of the physical aspects of the project generally followed the original project description (PCR para. 3.04), but was delayed by about 9 months (PCR paras. 3.05-3.08) although about 90% of the work was done by the original completion date. The delay did not seriously affect the economy of Papua New Guinea as the power market did not expand as rapidly as forecast. The only loss was a larger use of the less efficient diesel units than expected. In terms of US dollars, the cost of the project increased by about 29% largely because of currency fluctuations. When expres- sed in local currency, the cost increase was only about 9%. The over- run in foreign exchange was financed by the Bank under the Second Power Project (Loan 999-PNG) while the increase in local expenditures was financed by the utility (PCR paras. 3.12-3.13 and 3.16). There were no major difficulties in procurement (PCR paras. 3.10-3.11). The utility's management and staff are competent, and the utility has been able to reduce the proportion of expatriates on its staff from 42% at the time of appraisal to 6% in 1976/77. Financial results were generally lower than originally envisaged due mainly to increases in operating costs not fully cover- ed by tariff increases (PCR paras. 5.01-5.04 and Annexes 5-7). Actual sales of energy and maximum demand lagged behind the apprai- sal estimate by about three years. However, the project is providing capacity as well as energy and has replaced less efficient diesel units (PCR paras. 4.01-4.04 and 7.01-7.02). The incremental finan- cial rate of return on the project is now estimated at 13.5% compared to 17.5% at appraisal (PCR para. 5.05 and Annex 4). The following additional points may be of special interest: - detailed project preparation, particularly extensive exploratory drilling, contributing toward success- ful implementation of the project (PCR paras. 2.01- 2.03 and 8.01-8.02); - training programs as a means to cope with the policy of employing national staff (PCR paras. 1.04, 3.18, 6.01 and 6.05-6.06).  (iv) Appendix ZCZC 248424 RC008 PDCO275 RmD6088 SDU990 LAA242 T198 URWT CO NEXX 050 PORT;ORES9Y TL: VIA LAE 52/54 4 1603 TL:44009 1 00R L D B A NK UASHINGTON DC USA S S KAPUR DIRECTOR OPERATIONS EVALUATION DEPARTMIENT IORLD RANK UASHINGTON DC USA RE URLETTER OF 30 JULY 1979 ON PROJECTOR PERFORMANC E AUDIT REPORT-ON UPER RAMU HYROELECTRIC DEVELOPMENT PROJECT (LOAN 737 PIG). DRAFT REPORT AS TRANSMITTED WITH YOUR LETTER SATISFACTORY FRO71 &CVERWmENT'S VIEtPOINT. REGARDS E TOBOLTON FOR MINISTER FOR FINANCE COL S S TLX440093 DC DC 30 1979 (LOAM 737-PI!G). E  1 Attachment PAPUA NEW GUINEA: UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT (LOAN 737-PNG) PROJECT COMPLETION REPORT I. INTRODUCTION The Sector 1.01 Virtually all power facilities were destroyed during World War II. The Commonwealth Department of Works (COMWORKS) was made responsible for reconstruction. In 1957 the Government took over this responsibility by creating the Electrical Undertaking Branch. On July 1, 1963 the Electricity Commission of Papua New Guinea (ELCOM) was established and assumed full responsibility for nine centers. It also operates the power facilities owned by the Government at 124 other centers. 1.02 The nine centers served by ELCOM were: Port Morseby, Lae, Rabaul, Wewak, Madang, Goroka, Samarai, Kavieng and Kakopo. As of June 30, 1970 installed capacity and generation in the country were as follows: Annual Installed capacity (MW) Generation % of Hydro Diesel Total Gwh Total ELCOM 35.9 18.0 53.9 134.7 67.3 Government-owned - 6.1 6.1 19.0 9.5 Placer Development Ltd. 5.5 - 5.5 35.8 18.0 Other Private - 3.5 3.5 10.5 5.2 Total 41.4 27.6 69.0 200.0 100.0 The Beneficiary 1.03 The Borrower was the Administration of the Territory of Papua New Guinea, the Guarantor the Commonwealth of Australia, and the Beneficiary ELCOM. ELCOM is governed by a Commissioner (full-time) and four Associate Commissioners (part time). The Commissioner is the chairman of the Commission and also ELCOM's general manager. He has three assistant general managers responsible for finance and administration, marketing and engineering respec- tively. Officers of the Commission are appointed by the Commissioners and their terms and conditions are determined by the Minister. - 2 - 1.04 As of June 30, 1977, ELCOM's personnel totalled 1,913, of which 1,790 were nationals and 123 expatriates. Under the Government's policy of employing national staff, most of the experienced expatriate top-management staff left the service. Only some of the key positions in the technical field are still being managed by expatriates. 1.05 Of the nine centers, Rabaul, Kavieng and Kokopo are located on the off-shore islands; Wewak and Samarai are located on the mainland but far away from the central areas. The Port Moresby area is served by four hydro stations: Rouna No. 1 (5.5 MW), Rouna No. 2 (30 MW), Rouna No. 3 (12 MW) and Rouna No. 4 (9 MW), all located on the Laloki river. The Ramu area was served by one small hydro station at Goroka (0.4 MW) and 3 isolated diesel stations (totally 10.6 MW) at Lae, Madang and Goroka. There was no interconnection between centers in 1970. 1.06 This was the Bank's first power loan to the country. II. PROJECT PREPARATION AND APPRAISAL 2.01 COMWORK's first reports on the Upper Ramu and a report on hydrology prepared by the Snowy Mountains Authority (SMA) were submitted to the Bank early in 1967. The Bank recommended further geological and economic investi- gations since the potential of the Upper Ramu river could be developed in one stage of 276 MW or in two stages, Ramu No. 1 and Ramu No. 2, of 75 MW and 180 MW respectively. A geological report prepared by the Bureau of Mineral Resources, Geology and Geophysics of the Commonwealth Department of National Development preceded further reports prepared by COMWORKS in March 1968 and by SMA in June 1968. Extensive exploratory drilling was carried out to locate the principal structures of the scheme. 2.02 A final report prepared by COMWORKS in July 1969 reviewed economic aspects. It concluded that a two-stage development was economically more attractive in terms of total costs on a present-worth basis and that the smaller scheme should be built first, given the power market to be served which could not be enlarged to include other areas because of the distances involved. 2.03 A preappraisal was carried out in July 1969, but appraisal of the project was deferred because disbursements would not be required until early 1971. In the interim period tender documents and specifications were prepared in accordance with the Bank's Guidelines and appraisal was carried out in October 1970. Project Description 2.04 The project consisted of: (a) the construction of a diversion dam with intake and spillway on the Ramu River, with an initial installed capacity of 3 x 15 MW, a surface control building and a step-up substation; - 3- (b) the installation of 90 miles of 132 kV and 230 miles of 66kV transmission lines and 4 step-down transformer substations at Lae, Madang, Goroka and Mt. Hagen; (c) the expansion of the Kaisantu and Kundiawa substations; and (d) the provision of consulting services. Project's Role in the Long-term Plan 2.05 The project was designed to meet the expected steep increase in electricity demand (which had averaged 25% annually from FY 1964-70) in an area comprising the highlands and the two ports serving them, Lae and Madang. The highlands contain almost half of the total population of the country and are well suited to cash crop production, such as coffee, tea and forest products. The area has a great potential for economic development. 2.06 It is a part of the ultimate development plan of the Upper Ramu river. An interconnection line is planned to link the Ramu area with the Port Moresby area in the future. Covenants 2.07 The covenants contained in the Project Agreement are as follows: (a) Sec. 2.08. ELCOM must take all steps necessary to acquire all land and water rights required for the construction and operation of the project. (b) Sec. 3.01(d) Requires ELCOM to consult with Bank prior to making new appointments to the positions of General Manager, Assistant General Manager (Finance and Administration) and Assistant General Manager (Engineering). (c) Sec. 4.03(a) Existing level of tariffs may not be reduced prior to June 30, 1976 and all necessary steps must be taken to achieve an annual rate of return of not less than 9% for the fiscal years 1972 through 1976 and not less than 10% thereafter. (d) Sec. 4.04 Requires Bank approval of financial plan for projects costing in excess of $A 10 million. (e) Sec. 4.05 Maximum future debt service coverage may not be less than 1.5 times. (f) Sec. 4.06 Dividends may not be declared or paid prior to July 1, 1978. All the above covenants have been met with the exception of (c) and (e). See para. 5.03. III. IMPLEMENTATION Effectiveness and Startup 3.01 The loan became effective on July 30, 1971, only 65 days after signing of the loan. 3.02 The invitation-to-tender for the main civil works was advertised on June 29, 1971, opened on October 14, 1971 and awarded on February 14, 1972. The invitation-to-tender for electrical and mechanical works was advertised on April 15, 1971, opened on August 26, 1971 and awarded on February 2, 1972. There was little time lost due to procurement. Annex 1 gives details of the major contracts which were awarded and administered. It indicates the names of the contractors or suppliers, the award date, the completion date, the awarded contract price and the final contract value. 3.03 There were some initial delays in the civil works contract due to late mobilization and poor rock conditions encountered in the access shaft and tailrace tunnel. However these initial delays did not affect the overall progress of the project. Revisions 3.04 The project was carried out as designed. The following rectifi- cation works and modifications, however, were made during the execution of the project. (a) After the filling of the pressure shaft, leakage of about 2,000 liters per minute from the pressure shaft towards the machine hall and access shaft was discovered. The problem was solved by high pressure grouting undertaken during the period October 16 to November 10, 1975. Since then, the leakage has been substantially reduced and stabilized at about 85 liters per minute, well below the acceptable limit; (b) fourteen transmission line towers were relocated or by-passed due to the threats of landslides or washouts of foundations by floods; (c) the cooling water system of the turbo-generating units was modified to cope with the silty water during floods. Implementation Schedule 3.05 The scheduled and actual dates of commissioning of generating units were as follows: -5- Delay Appraisal Target Actual (months) Unit No. 1 7/1/75 11/15/75 5 Unit No. 2 7/30/75 2/4/76 6 Unit No. 3 9/30/75 8/6/76 9-1/2 Overall project 12/31/75 9/30/76 9 Final acceptance tests for Nos. I and 2 units were completed on March 26, 1976 and that for No. 3 unit on September 7, 1976. The implementation schedule is shown in Annex 2. 3.06 Civil works were essentially complete on May 23, 1975, about three months ahead of schedule. Delays in commissioning of the generating units were mainly attributable to the electrical and mechanical works contractor because of: (a) late ordering of cables, the delivery of which was further delayed as a result of industrial disputes at the manufacturer's factory; (b) delays by the alternator subcontractor in the fabrication of pole wheel plates (pole wheel plates were initially rejected during shop tests for not complying with specifications); (c) delays in the manufacture and shipping of turbine governors; (d) late preparation of the final design data for control board manufacture; (e) late arrival of erection and test personnel; and (f) an inadequate supply of test instruments. 3.07 The actual progress of transmission line and substation contracts compared with the appraisal targets was as follows: -6- Delay Appraisal Target Actual (Months) Transmission Lines Ramu I - Ramu II 7/75 07/11/75 On time Ramu II - Lae 7/75 07/11/75 On time Ramu I - Goroka 7/75 02/06/75 On time Ramu II - Madang 7/75 12/12/75 4-1/2 Goroka - Mt. Hagen 7/75 02/19/76 6-1/2 Substations Lae (Taraka & Milford) 6/75 09/07/75 2-1/2 Madang 6/75 12/24/75 6 Goroka 6/75 02/04/76 7 Mt. Hagen 6/75 03/04/76 8 Kainantu (extension only) 6/75 02/03/76 7 Kundiawa (extension only) 6/75 03/03/76 8 3.08 Reasons for delay in the construction of the transmission lines were the late award of contracts, difficulties in obtaining steel angles in the initial stage, and relocation and by-passing of a number of towers due to landslides and foundation washouts. Reporting 3.09 Reporting requirements included quarterly progress reports and annual and quarterly financial reports. These requirements were met. Procurement 3.10 Preparation of bid documents and procurement of the equipment and materials were in accordance with the Bank's guidelines. 3.11 There were no major difficulties in procurement. The main issues arose as a result of world inflation following the energy crisis. All contracts carried a clause limiting escalation to a ceiling of 10%. However, actual inflation exceeded normal contract anticipation. Claims were made by contractors for renegotiation of the contractual escalation ceiling but these were not accepted by ELCOM. Instead, ELCOM compromised with the contractors by waiving its claims for liquidated damages arising fr,om delays in contract execution. -7- Project Cost 3.12 The appraisal estimate and the actual cost of the project are compared below: Table : COMPARISON OF APPRAISAL ESTIMATE AND ACTUAL COST (In 000's) Appraisal Estimate Actual Foreign Local Total Foreign Local Total (us$) (K) (US$Y (US$) (K) (K) (US$T Land - 850 850 950 - 536 536 707 Preliminary works 380 1,300 1,645' 1,835 537 1,388 1,795 2,369 Civil works 8,810 3,940 11,810 13,190 12,178 3,324 12,550 16,566 Electrical and mechanical works 3,745 610 3,960 4,410 3,268 289 2,765 3,650 Transmission lines and substations 9,040 640 8,710 9,725 9,941 2,536 10,067 13,288 Consulting service and overheads 1,225 2,270 3,370 3,760 956 4,686 5,410 7,142 Total 23,200 9.610 30,345 33,870 26,880 12,759 33,123 43,722 (68.5%) (31.5%) (61.5%) (38.5%) 3.13 When expressed in US dollars, the final project cost of US$43.7 mil- lion was about 29.1% higher than estimated during appraisal. When expressed in Kina, the cost overrun was only about 9.2% which was directly due to physical variations and contract price adjustments. Disbursements and Financial Sources 3.14 The loan amount of US$23.2 million was fully disbursed on November 20, 1975, about 10 months earlier than the original closing date of September 30, 1976. The actual disbursements against the disbursement schedule forecast at the time of appraisal are compared in Annex 3. 3.15 The actual allocation of the proceeds of the loan compared with Schedule 1 of the Loan Agreement was as follows: -8 - Table : ALLOCATION OF PROCEEDS OF LOAN Category Original Actual -----------------(us$) ---------- I. Civil works 8,400,000 12,747,489.80 II. Electrical and Mechanical equipment 4,100,000 2,419,940.98 III. Transmission lines and sub- stations 7,700,000 7,032,396.54 IV. Consultants' services 1,200,000 1,000,172.68 V. Unallocated 1,800,000 Total 23,200,000 23,200,000.00 3.16 The only changes in the financing plan were that the overrun in foreign costs of about US$3.68 million was financed by the Bank under the Second Power Project (Loan 999-PNG) while the overrun in local costs of about K3.15 million was financed by ELCOM. Project Supervision and Operation 3.17 ELCOM, which is the executing agency, provided overall management for the implementation of the project. The field supervision of civil works and electrical and mechanical works was carried out by the prime conultants, the Commonwealth Department of Works (reorganized as the Department of Housing and Construction from 9/73 to 12/75, thereafter as the Construction Agency from 1/76). The supervision of transmission lines and substations was managed by ELCOM's staff. Local staff were assigned to work together with the Consultants for training and several such staff were later appointed to supervisory positions for plant operation and maintenance. 3.18 During August 1973, an intensive training course was conducted by ELCOM in which contractors' as well as consultant's personnel participated. This course offered training to the maintenance personnel in all aspects of the generating plant and associated equipment. After 1974, courses were conducted in ELCOM's training center to train operators and system controllers for the Ramu power station. On-the-job training was later provided under the supervision of the training officers financed under Loan 999-PNG. -7- Project Cost 3.12 The appraisal estimate and the actual cost of the project are compared below: Table COMPARISON OF APPRAISAL ESTIMATE AND ACTUAL COST (In 000's) Appraisal Estimate Actual Foreign Local Total Foreign Local Total (us$) (W) K) (US$y (us$) (K) (K) (us$) Land - 850 850 950 - 536 536 707 Preliminary works 380 1,300 1,645 1,835 537 1,388 1,795 2,369 Civil works 8,810 3,940 11,810 13,190 12,178 3,324 12,550 16,566 Electrical and mechanical works 3,745 610 3,960 4,410 3,268 289 2,765 3,650 Transmission lines and substations 9,040 640 8,710 9,725 9,941 2,536 10,067 13,288 Consulting service and overheads 1,225 2,270 3,370 3,760 956 4,686 5,410 7,142 Total 23,200 9.610 30,345 33,870 26,880 12,759 33,123 43,722 (68.5%) (31.5%) (61.5%) (38.5%) 3.13 When expressed in US dollars, the final project cost of US$43.7 mil- lion was about 29.1% higher than estimated during appraisal. When expressed in Kina, the cost overrun was only about 9.2% which was directly due to physical variations and contract price adjustments. Disbursements and Financial Sources 3.14 The loan amount of US$23.2 million was fully disbursed on November 20, 1975, about 10 months earlier than the original closing date of September 30, 1976. The actual disbursements against the disbursement schedule forecast at the time of appraisal are compared in Annex 3. 3.15 The actual allocation of the proceeds of the loan compared with Schedule 1 of the Loan Agreement was as follows: - 8 - Table ALLOCATION OF PROCEEDS OF LOAN Category Original Actual -------------- (us$ ------------- I. Civil works 8,400,000 12,747,489.80 II. Electrical and Mechanical equipment 4,100,000 2,419,940.98 III. Transmission lines and sub- stations 7,700,000 7,032,396.54 IV. Consultants' services 1,200,000 1,000,172.68 V. Unallocated 1,800,000 Total 23,200,000 23,200,000.00 3.16 The only changes in the financing plan were that the overrun in foreign costs of about US$3.68 million was financed by the Bank under the Second Power Project (Loan 999-PNG) while the overrun in local costs of about K3.15 million was financed by ELCOM. Project Supervision and Operation 3.17 ELCOM, which is the executing agency, provided overall management for the implementation of the project. The field supervision of civil works and electrical and mechanical works was carried out by the prime conultants, the Commonwealth Department of Works (reorganized as the Department of Housing and Construction from 9/73 to 12/75, thereafter as the Construction Agency from 1/76). The supervision of transmission lines and substations was managed by ELCOM's staff. Local staff were assigned to work together with the Consultants for training and several such staff were later appointed to supervisory positions for plant operation and maintenance. 3.18 During August 1973, an intensive training course was conducted by ELCOM in which contractors' as well as consultant's personnel participated. This course offered training to the maintenance personnel in all aspects of the generating plant and associated equipment. After 1974, courses were conducted in ELCOM's training center to train operators and system controllers for the Ramu power station. On-the-job training was later provided under the supervision of the training officers financed under Loan 999-PNG. -9- IV. OPERATING PERFORMANCE Market 4.01 Actual system maximum demand and energy sales for the Ramu area compared with the appraisal forecast were as follows: Table COMPARISON OF ACTUAL MAXIMUM DEMAND AND ENERGY SALES Appraisal estimate Actual Year Installed Maximum Energy Installed Maximum Energy capacity demand sales capactiy demand sales (MW) (MW) (GWh) (MW) (MW) (MW) 1970/71 19.5 11.5 50.3 19.5 12.2 51.1 1971/72 21.0 15.0 65.7 21.0 13.5 63.3 1972/73 26.6 19.1 84.3 22.4 14.6 71.3 1973/74 32.8 23.6 105.2 28.5 15.3 77.1 1974/75 38.6 29.0 130.3 28.8 17.2 84.7 1975/76 83.6 39.7 175.5 54.8 19.1 87.7 1976/77 83.6 47.1 210.2 69.8 20.5 99.0 Average annual growth rate 26% 26% 10.65% 11.75% The actual growth was considerably lower than estimated, chiefly because of the changed economic conditions following the world energy crisis and the exodus of expatriates following independence in 1975. -10- Project's Role 4.02 The contribution of the project to the system is estimated to be: Dependable peaking capacity 22 MW /1 Firm energy 135 Gwh Tcorresponding to a capacity factor of 34%) Annual energy output 230 Gwh (corresponding to a capacity of 58%) 4.03 The balance of demand and supply for 1977/78 - 1982/83 is given below: Table 4: NEED FOR THE PROJECT Dependable Additional Peaking Year Maximum Demand /a Diesel Capacity Capacity Required (MW) (MW) (MW) 1977/78 24.1 11.7 12.4 1978/79 26.0 11.7 14.3 1979/80 28.0 11.7 16.3 1980/81 29.7 11.7 18.0 1981/82 31.8 11.7 20.1 1982/83 34.0 11.7 22.3 /a Based on ELCOM's revised load forecast. 4.04 The peaking capacity of the Ramu hydro station will be fully absorbed by the system by 1982/83. The objectives of the project were to meet system load requirements and to replace diesel fuel to the maximum extent possible. A further element of the project which has been of great benefit to ELCOM has been the transfer of technology through training. Plant Performance 4.05 The performance of the generating units since commissioning is analyzed below: /1 Limited by the low flow in the dry season and the storage capacity of the regulating pond. -11- Table 5: PLANT PERFORMANCE No. 1 No. 2 No. 3 Date of commissioning 11/5/75 2/4/76 8/6/76 Units generated up to 8/31/77 (GWh) 80.76 79.66 26.9 Months in operation 21.5 19.0 12.0 Capacity factor 34.8 38.8 20.5 These capacity factors are comparatively low because: (a) the system energy requirement was still comparatively low, water is spilled at the time of high flows; and (b) Unit No. 3 generated very little energy in the months from March to August 1977 due to the rectification work which was not completed until January 1978. 4.06 The units met the specified requirements during performance tests. V. FINANCIAL PERFORMANCE Financial Results 5.01 Energy sales during the period 1971/72 - 1976/77 increased at an average rate of 11% and revenues from energy sales rose by 20%. Operating costs increased by an average of 15%; and net income before interest, 29%. 5.02 ELCOM's income statements, balance sheets and sources and applica- tions of funds statements for the period 1971/72 - 1976/77 are shown in Annexes 5, 6 and 7 compared with those forecast at the time of appraisal. The key indicators are summarized below: -12- Table 6: KEY INDICATORS 1971/72 1971/73 1973/74 1974/75 1975/76 1976/77 Revenue per Kwh sold (Toea) Appraisal 3.94 3.89 3.79 3.71 3.66 3.56 Actual 4.01 3.94 3.85 4.34 5.45 6.22 Operating ratio (%) Appraisal 67.6 63.3 66.9 56.5 55.9 52.1 Actual 72.1 64.1 80.4 79.8 69.0 56.7 Rate of return (%) Appraisal 9.0 12.3 13.7 10.8 9.5 11.0 Actual 7.4 10.5 5.9 6.9 8.7 11.3 Debt service coverage Appraisal 2.0 2.3 2.2 2.2 2.0 2.1 Actual 1.8 1.8 1.2 1.1 1.6 1.3 Debt/equity ratio Appraisal 70/30 72/28 74/26 73/27 71/29 70/30 Actual 71/29 76/24 74/26 78/22 77/23 53/47 Financial Covenants 5.03 The Project Agreement requires that ELCOM take all necessary steps to achieve an annual rate of return of not less than 9% in the fiscal years 1972 through 1976 and not less than 10% thereafter and that the debt service coverage be not less than 1.5 times. After the energy crisis, ELCOM's financial position deteriorated as a result of increases in fuel prices, salaries and wages. The tariff adjustment in October 1974 of about 18% was not sufficient to offset the increases in costs. The rate of return and debt service coverage for 1973/74 and 1974/75 fell below the covenanted targets. 5.04 Upon the recommendation of the Bank, a tariff increase of about 18.6% was introduced in December 1975. The rate of return and debt service coverage improved to 8.7% and 1.6 times respectively in 1975/76. The rate of return further improved to 11.3% in 1976/77. The debt service coverage came down in 1976/77 as a result of payment of the outstanding government sinking fund loans. Internal Rate of Return 5.05 The internal rate of return of the project is recalculated to be 13.5% (Annex 4) compared to the appraisal estimate of 17.5%. This reduction is due to the cost overruns, higher operating cost, and a lower rate of load growth than orignally expected. -13- VI. INSTITUTIONAL PERFORMANCE Management 6.01 ELCOM's management is able, and its staff competent. ELCOM has had a training program in operation since 1963. Following the Government policy of employing national staff, the proportion of expatriates on its staff was reduced to 6% in 1976/77. The top management is now completely managed by national officers. Growth 6.02 ELCOM's growth and operations over the period 1972/73-1976/77 are shown below: Table 7: OPERATING STATISTICS Fiscal year 1972/73 1973/74 1974/75 1975/76 1976/77 Installed capacity (MW) - 75.6 88.2 104.3 116.8 Maximum demand (MW) - 38.6 44.0 48.2 51.5 Energy generation (GWh) 230.8 254.9 279.6 309.0 334.1 Energy sales (Gwh) 213.1 231.6 255.8 274.0 302.9 System losses (%) 8.0 9.1 8.5 11.3 9.3 No. of consumers Domestic 18,986 19,986 21,805 23,435 24,911 General supply 4,664 4,752 4,848 4,954 5,158 Maximum demand/a 23 24 21 20 21 Public lighting 1 1 1 1 1 Total 23,674 24,763 26,675 28,410 30,091 No. of employees Expatriates 264 211 207 166 123 National 1,348 1,388 1,553 1,667 1,790 Total 1,612 1,599 1,760 1,833 1,913 No. of consumers per employee 15 15 15 15 16 Sales per employee (kWh) 132,196 144,840 145,340 149,400 153,685 /a Two part tariff for large consumers with a maximum demand greater than 100 kW. 6.03 The increase in system losses was due to the additional transmission losses incurred after the completion of Upper Ramu hydroelectric project and its associated transmission facilities. -14- 6.04 Number of consumers per employee is extremely low. This is because ELCOM's service centers are small and scattered and furthermore it has to provide services to 124 diesel stations owned by the Government. Staff Training and Development 6.05 ELCOM operates a very extensive training center for training of technicians, clerks and skilled labors. Up to 1976/77, 32 courses were given, with 424 participants trained. 6.06 To cope with the nationalization policy, a vast in-service training program has been carried out financed under the Second Power Project (999-PNG). There were 78 training officers as of June 30, 1977 and 340 trainees received in-service training in 1976/77. VII. PROJECT JUSTIFICATION Project Achievements 7.01 The project was executed as planned. In spite of the minor delays, the objectives of the project have been achieved. It provides capacity as well as energy to the whole Ramu area as an integrated system. With backup by the existing diesel units, it can meet the load requirements up to 1982/83. Least Cost Solution 7.02 It has already been demonstrated in the appraisal report that the project is the least cost solution when compared with the best thermal alterna- tive based on a central steam station of 2x20 MW at Lae using heavy fuel oil. The equalizing discount rate based on actual project cost and fuel prices at the 1976/77 level is calculated to be 26% /1 compared to the appraisal estimate of 17.6%. This clearly demonstrates that the project is the most economical means of meeting the increasing demands for power. VIII. BANK PERFORMANCE Project Content and Scheduling 8.01 The economic study recommended by the Bank which resulted in a two-stage development was a wise decision; as was the scheduling of the project which divided stage 1 development into two phases-- Phase I for the /1 When comparing with other alternatives: A central steam station of 22 MW, with transmission facilities 17% Isolated diesel units of 22 MW in total, without transmission facilities 18% -15- run-of-river development and Phase II for the main storage dam. The phased development was appropriate in light of the low load growth as a result of the energy crisis and the exodus of expatriates following independence. Project Implementation and Operating Outcomes 8.02 Additional geological investigations and drilling recommended by the Bank were fully justified; no major difficulties were encountered during the execution of the project in spite of the poor rock conditions in the access shaft and tailrace tunnel. 8.03 The construction and procurement scheduling were realistic. Civil works were completed ahead of schedule. The estimated disbursement schedule was reasonable; the loan amount was fully disbursed before the closing date. 8.04 The load forecast was on the high side. This was due to the changed economic conditions which could not have been foreseen at the time of appraisal. However, the project justification was not affected. Supervision 8.05 Six supervision missions were made from 1972 to 1977. The second supervision mission was combined with the appraisal mission of the Second Power Project. The interval between missions of about once a year was adequate. 8.06 Normally only one staff member was dispatched to deal with both technical and financial matters. Working Relationship 8.07 The working relationship between the Bank and the Government has been very good. Recommendations made by missions have usually been implemented such as tariff adjustments and increase of government equity, etc. IX. CONCLUSIONS 9.01 The project was executed as planned and the objectives of the project have been met. The project was completed about nine months behind schedule and with about 9% cost overrun when expressed in the local currency. 9.02 The project is still the least cost solution up to a discount rate of 26% compared to the appraisal estimate of 17.6%. The internal financial rate of return is recalculated to be-13.5% compared to the appraisal estimate of 17.5%. This is because of lower sales of energy than originally envisaged and higher operating costs. 9.03 ELCOM's financial position is not as good as forecast at the time of appraisal, specially in 1973/74 and 1974/75 after the energy crisis. After a tariff increase of 18% in October 1974 and 18.6% in December 1975, a rate of return of 8.7% and a debt service ratio of 1.6 times were achieved in 1975/76. The rate of return further improved to 11.3% in 1976/77. East Asia and Pacific Regional Office March 13, 1979 ANNEX 1 - 16 - PAPUA NEW GUINEA UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT Data of Major Contracts Name of Completion Awarded contract Contract contractor/supplier Award date date price Final contract value Access road to intake Lucas Ducrow Pty. Ltd. 05/27/71 01/20/72 AS 152,908.54 K 171,000.00 and township road Buildings Morobe Construction 05/27/71 09/30/72 A$ 898,880.00 K 789,000.00 Pty. Ltd. US$537,000.00 Civil Works Hyun Dai Construction Co. 02/14/72 05/23/75 A$10,540,627.00 US$12,178,000.00 Ltd., Korea K 3,324,000.00 Nominated subcontracts Inclusive: 1. Cranes and hoists John & Waywood Ltd., 04/30/73 09/30/76 A$ 444,220.00 US$472,000.00 Australia K 123,000.00 2. Radial and intake gates Progres/Metalna, 02/15/72 12/31/75 A$ 411,216.12 US$452,000.00 Yugoslava K 38,000.00 3. Air conditioning and Carrier Air Conditioning 06/29/73 10/25/75 A$ 263,253.94 US$228,000.00 ventilation Pty. Ltd., PNG K 93,000.00 Electrical-Mechanical Works Progres International, 02/02/72 09/30/76 A$ 3,056,603.00 US$ 3,268,000.00 Yugoslavia K 289,000.00 Switchyard equipment T.A. Mellen Pty. Ltd., 09/28/74 03/01/78 AS 480,711.00 US $886,000.00 Australia K 142,000.00 Transmission lines Electric Power Transmis- 11/16/72 02/19/76 As 4,521,498.26 US$ 6,136,000.00 sion Pty. Ltd, Australia K 1,963,000.00 Transformers Tyree Electrical Co. Ltd., 05/14/73 07/31/76 AS 62,500.00 US$ 722,000.00 Australia K 30,000.00 Pauwels Trafo N/V, Belgium AS 399,387.00 Circuit breakers Reyrolle Pty. Ltd., 05/02/73 04/02/75 A$ 69,340.00 US$ 85,000.00 Australia 2,000.00 Carrier and protection Brown Boveri (Australia) 05/22/73 04/02/76 A$ 234,273.00 US$ 423,000.00 equipment Pty. Ltd. K 26,000.00 Zone substations T.A. Mellen Pty. Ltd., 08/07/73 03/31/76 A$ 1,347,782.08 US$ 1,689,000.00 Australia K 373,000.00 RAMU 1 PROJECT DESIGN & CONSTRUCTION SCHEDULE YER_ 1969 1970 1971 1972 17 1974 1975 1976 ITEM SONDJF MAMJ JAS OND FM1AMJ JAS OND JFMIAMJ JAS OND JFM AMJ JAS OND JFM AMJ JAS OND FMI AMJ JAS OND JFMIAMJ JAS OND ENGG DESIGN (CW) T0~ b IN1AKE ROA 10% YlA- 100% 2AZCOMMODATION ERi | LMTY~~~ eiDl100% TRANSIF1iR W/SHOP -- ( ,w - - - -i -1-------7_0 Mk~~~~E iA NETGTOS(& GUl|rPMRAL ACCESS ROAD AC:ESS IHAFT b TUMEL PKESRURE SHAFT 4 TUN~EL 1 ~~ ~ ~ ~ ^¯¯¯ ¯EL ~~~~~ ¯ ¯¯A ~ ¯¯ ¯ rr _/_r n N *110 MACi HALL 1 NDERSION WEiR CONTR04L snLO:NG SIJNDRY WOIRKS1 _100xs RADIA! INTAKE GATES NSC A/COND 9 VENTILATION NSC S00 4 1 H0 T5 ~ i s N S C % 0 TURGINES 8 ALVSDi F TUBE5 EM - - - - -- - - - - - - - - - - - - - - - -- - - ---- -00 % MANIFDLOS { SUPM.Y ONLY) AUXILARY EQUPMENT CONTROL EIJUIPMENTT CABLES% 0 C B S 1m ¯¯ ¯ ¯7 ~¯¯ 1J 10 -CARR|ER EQU'PKENT ZONE SUBSTATIONS - J 100% NTRANSI LINE CHART KEY. <MEDULED W0RK P.0RAMS 1'04 EACM 1TE IN < MSC0CUL MIE 000 0 LBE CA BY*4 A1 0001E 444E 04VIDE0 410 AIJERNATEL MATCH SNADEDifl 0CT1ONS ( VZlZlZZiN ) EAnt4 46T100 REPIERNT4 10% 1F Tl< P40S1AL W046K 10 BE Psplit. AS MN6K*0E <O 00E 10sCODtEDAt EVEN.0 OtSTinBUl(0 lN T0<. 44 LO01TH & SECTK< 1 Al 0AN 4EED NOT 1E 46MænM EVEN4 THWGM44 E*AC4 REPRESE04s Ec00t A40.0rE OF m)R. ACTIAL PRO4ESS 4$ SHOWN4 B¥ A PARLS0LEL0 00UME044 44l(6M0RL 01VIDED Uf0 ALTERNA1ELY FILL SOADED SE110.5 ( 1 EACH ALE6 00EPRESENT 4 10 44 fit OR. 14< PENCErTA1 C046r4LEm *4 TE <E'Til0 0ATE 6 04VEN AT T< RI01 MAND0 END0 10' PR00GRE ts00 C0'<60600U 0ATES ARE 440DEATED BY M4 SYM4A 00 - 18 - ANNEX 3 PAPUA NEW GUINEA UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT Actual Disbursement Vs. Appraisal Estimate (US$'000) Actual Appraisal estimate Cumulative Cumulative Quarter ending Disbursement total Disbursement total 1971/72 September 30, 1971 - 50 December 31, 1971 219 175 March 31, 1972 135 150 June 30, 1972 585 939 765 1,140 1972/73 September 30, 1972 627 1,025 December 31, 1972 655 955 March 31, 1973 1,017 1,060 June 30, 1973 1,138 4,376 850 5,035 1973/74 September 30, 1973 1,496 740 December 31, 1973 1,597 1,780 March 31, 1974 2,835 3,850 June 30, 1974 1,725 12,029 2,590 14,595 1974/75 September 30, 1974 1,937 1,735 December 31, 1974 3,067 2,220 March 31, 1975 2,216 1,560 June 30, 1975 2,846 22,095 1,755 21,865 1975/76 September 30, 1975 1,003 360 December 31, 1975 102 23,200 310 March 31, 1976 155 June 30, 1976 520 23,200 ANNEX 4 - 19 - PAPUA NEW GUINEA UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT /a Incremental Financial Rate of Return Cost streams Fiscal Distribution, sales Benefit streams year Capital O&M & administration /b Generation Sales Revenue /c Fuel (K million) -------- ------ (GWh) ------- (K million) saving /d 1971/72 5.06 - - 1972/73 4.63 - - 1973/74 9.73 - 1974/75 12.95 - 1975/76 4.62 0.4 - 59.5 (Actual) - - 2.56 1976/77 1.92 0.6 0.20 104.4 (Actual) 10.0 0.62 4.04 1977/78 - 0.6 0.52 121.9 (Forecast) 25.9 1.61 4.09 1978/79 - 0.6 0.68 131.0 34.2 2.13 4.11 1979/80 - 0.6 0.83 139.0 41.5 2.58 4.13 1980/81 - 0.6 1.00 146.3 49.6 3.08 4.13 1981/82 - 0.6 1.18 156.1 58.6 3.64 4.13 1982/83 - 0.6 1.36 166.5 68.2 4.24 4.13 1983/84 - 0.6 1.54 175.9 76.8 4.78 4.16 1984/85 - 0.6 1.76 187.7 87.7 5.45 4.18 1985/86 - 0.6 2.00 201.6 100.5 6.25 4.21 1986/87 - 0.6 2.18 210.6 108.8 6.77 4.23 1987/88 - 0.6 2.44 225.0 122.0 7.59 4.26 1988/89-2019/20 - 0.6 4.23 230.0 211.6 13.16 - IFRR - 13.5% /a Costs and benefits are expressed in constant (1975/76) prices, using the following index of consumer prices taken from the IMF "International Financial Statistics": 1972 = 0.63, 1973 - 0.68, 1974 = 0.84, 1975 = 0.93, 1976 = 1.00, 1977 = 1.04. /b Distribution, sales and administration expenses are estimated at K 0.02 per kWh sold. /c Revenues are calculated at K 0.0622 per kWh which is the average tariff effective since December 1975. /d Fuel saving is estimated at K 0.0443 per kWh generation at the diesel plants. PAPUA NEW GUINEA UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT Papua New Guinea Electricity Commission Actual and Estimated Income Statements/a (000 K) 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Units generated and purchased (GWh) 182.1 182.4 224.1 198.6 291.9 230.8 352.3 254.9 422.5 279.6 522.4 309.1 615.6 337.9 Units sold (GWh) 165.0 166.7 203.5 179.9 265.3 213.1 320.3 231.6 384.4 255.8 476.4 274.0 561.8 302.9 Average price per kWh (Toea) 3.88 3.90 3.94 4.01 3.89 3.9 3.79 3.85 3.71 4.34 3.66 5.45 3.56 6.22 Operating Revenue Sales of electricity 6,400 6,509 8,022 7,245 10,315 8,397 12,154 9,049 14,255 11,254 17,417 15,087 20,012 18,839 Sales of water 25 10 29 29 35 32 41 33 48 35 56 38 66 38 Other 17 34 17 57 18 68 19 107 20 100 21 103 22 117 Total Operating Revenue 6,442 6,553 8,068 10 8,497 12214 189 14323 389 15,228 15228 20,100 18,994 Operating Expenses Opperations and maintenance 1,859 1,777 2,222 2,223 2,978 2,817 3,328 3,855 3,824 5,413 4,118 5,905 4,050 6,411 Administrative expenses 1,679 1,639 1,766 1,736 1,862 1,252 2,032 2,052 1,990 2,045 2,440 1,705 2,463 1,577 Depreciation 1,293 1,245 1,470 1,327 1,726 1,375 2.084 1,478 2,286 1,625 3,216 2,894 3,962 2,774 Total Operating Expensee 4 8 5,458 5 286 6 90 97 10,504 10475 Operating income 1,611 1,892 2,610 2,045 3,803 2,053 4,770 1,804 6,223 2,306 7,720 4,724 9,625 8,232 Other income 124 88 131 52 167 176 207 328 256 303 315 197 382 643 Total Income 1736 1980 2,741 2,097 3,970 3,229 4 2,132 6,479 22609 8 035 4 10,007 8,875 Interest Charges Total interest charges 1,506 1,371 1,751 1,492 2,320 1,998 3,114 2,573 3,984 3,302) 4,600 5,236) 5,277 3,780 Less: Interest charged to construction 150 - 315 168 759 508 1,471 1,009 2,354 1,607 516 3,284 884 - Net Interest Charges 1,356 1,371 I,3 1.324 1,556 1 , l , 6 4084 2 4393 3,780 Net Income (loss) 379 609 1,305 721 2,409 1,739 3,334 568 8 914 3,951 2,969 5,614 5,095 Rate Base 25,614 25,018 29,134 27,643 30,936 29,035 34,781 30,521 57,379 33,361 81.049 54,032 87,801 72,874 Rate of return (Z) 6.3 7.6 9.0 7.4 12.3 10.5 13.7 5.9 10.8 6.9 9.5 8.7 11.0 11.3 Operating ratio (Z) 75.0 71.1 67.6 72.1 63.3 64.1 60.9 80.4 56.5 79.8 55.9 69.0 52.1 56.7 /a In the appraisal forecast, currency used was Australian dollar. I A$ = 1 K before 1975 = 1.133 K in 1976. = 1.156 K in 1977. Since the results would be the same in calculating the financial indicators, no adjustments were made here for 1975/76 and 1976/77. PAPUA NEW GUINEA UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT Papua New Guinea Electricity Commission Actual and Estimated Balance Sheets /a (000 K) 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Assets Fixed Assets Gross fixed assets in operation 33,350 31,965 36,112 33,863 40,151 37,220 47,612 49,565 89,716 45,863 100,454 85,332 110,399 89,262/b Less reserve for depreciation 4,862 4,669 6,332 5,873 8,058 7,141 10,142 8,603 12,428 10,104 15,644 13,026 19,606 15,821 Net Fixed Assets in Operation 2 29, 27,990 30,962 77,288 35,759 84,810 72306 90793 441 Work in progress 694 1,115 7,108 4,463 16,593 13,228 27,557 22,716 5,659 31,114 4,726 1,201 13,551 1,158 Total Fixed Assets 29,182 28,411 36,888 32,453 82,947 66,873 89,536 73,507 104,344 74,599 Long-term investments 2,288 2,792 2,883 3,054 3,562 3,834 4,357 5,916 5,284 5,789 6,330 6,882 7,554 7,639 a Deferred charges 265 266 234 235 204 205 175 176 148 749 122 1,212 98 1,668 ' Current assets 1,962 2,647 3,022 4,517 2,829 4,764 2,873 3,869 3,020 6,147 4,303 8,129 3,761 10,078/c Total Assets 33,697 116 4 40,259 552281 5 72,432 63639 91,399 79,558 100,291 8 115,757 93,984 Equity and Liabilities Equity 3,469 9,522 11,365 10,351 13,684 11,343 16,911 14,188 21,631 15,224 26,753 18,341 32,178 41,592 Long-term debt 26,674 20,951 27,456 25,433 36,268 35,679 49,137 44,868 61,786 58,135 67,276 63,020 76,718 46,314 Current liabilities 1,651 1,338 1,951 1,522 2,343 698 2,332 1,440 2,623 1,899 3,079 2,350 3,174 1,267 Current liabilities 1,651 1,338 1,951 1,522 2,343 698 2,332 1,440 2,623 1,899 3,079 2,350 3,174 1,267 Deferred credits 888 1,179 1,038 1,048 698 2,660 2,355 1,052 3,325 1,899 745 3,036 721 922 Operating reserve 1,005 1,080 1,197 1,424 1,551 1,730 1,654 2,091 1,979 2,571 2,370 2,983 2,885 3,889 Contributions in aid of construction 10 46 20 - 1,404 - 43 - 55 - 68 - 81 - Total Equity and Libilities 3 34116 43,027 40 55,281 52,110 72,432 63,639 558 100,291 89,703 115,757 93,984 Debt/equity ratio 88/12 69/31 70/30 71/29 72/28 76/24 74/26 74/26 73/27 78/22 71/29 77/23 70/30 53/47 /a See footnote la, Annex 5. /b Due to the lower rate of load growth, the investment program has been slowed down since 1973/74 for other construction. /c Current assets included: Cash at bank 854,755 Cash in hand 34,654 Stores & materials including fuel 2,549,946 Consumers accounts 1,815,932 Advanced payments 3,968,142 Unread meters 852,571 PAPUA NEW GUINEA UPPER RAMU HYDROELECTRIC DEVELOPMENT PROJECT Papua New Guinea Electricity Commission Sources and Applications of Funds Statements /a (000 K) 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Sources of Funds Internal cash generation Operating income 1,611 1,892 2,610 2,045 3,803 3,053 4,779 1,804 6,223 2,306 7,720 4,724 9,625 9,232 Depreciation 1,293 1,245 1,470 1,327 1,726 1,375 2,084 1,478 2,286 1,625 3,216 2,894 3,962 2,774 Insurance expenses 216 - 223 - 242 - 284 - 367 - 434 - 558 - Total Internal Cash Generation 312 3137 4,303 3,372 5 771 4 4 71 3 282 8,876 3,931 11, l 11, Borrowings 3,599 3,000 6,897 5,012 9,302 8,486 13,294 9,195 13,010 13,086 3,756 6,779 10,386 5,087 Capial contributions Other 901 396 245 135 303 2,152 360 1,687 435 840 527 796 627 4,634 Total Sources of Funds 72 6 11,445 8,519 15,376 1 20, 22,325 17,7 15,653 159 25 20,718 Application of Funds Construction expenditures Upper Ramu project 190 295 3,345 2,912 5,790 5,144 11,025 9,414 8,410 9,723 1,585 6,375 - - Other construction 5,208 4,289 4,617 2,334 6,975 6,978 5,929 2,419 9,442 4,927 6,377 3,812 17,886 3,887 Total Construction 5,398 4,584 72 5,246 1 12,122 1 7,962 9,557 1 3,887 Debt Services Sinking fund requirements 328 285 403 398 472 404 545 444 602 492 655 502 709 - Amortization 250 69 134 200 281 361 417 378 368 356 308 329 766 4,630/d Interest /b 1,506 1,371 1,570 1,324 1,777 1,414 2,281 1,467 2,987 1,573 4,600 1,803 5,277 3,780 Total Debt Services 2,084 I725 2,0 2,3 2,17 3,243 2,289 3,5 24 24 65 8,4 Increase (decrease) in work capital (361) (347) 976 1,320 (376) 482 63 (437) (151) 662 1,339 1,531 (459) 7,756 Insurance Investment Fund 276 224 296 - 332 - 391 - 496 - 590 - 747 - Others 223 347 104 31 125 283 141 479 171 79 199 1,471 232 665 Total Application of Funds 7,2 ,3 11445 8,519 1537 15,066 20,792 14,164 22,2 I8 l6 25 20, Debt service coverage /c 1.5 1.8 2.0 1.8 2.3 1.8 2.2 1.2 2.2 1.1 2.0 1.6 2.1 1.3 /a See footnote /a, Annex 5. /b To facilitate the reconciliation with ELCOM's financial statements, only operating interest, excluding sinking fund interest are presented here. Sinking fund interests are offset against other revenues. /c Debt service includes total interest (including I.D.C.) plus sinking fund interest and amortization plus loan repayments less interest deferred on construction (assuming that these correspond to administration loans). This definition follows the one used in the appraisal report. /d Including amortization of the outstanding government sinking fund loans. TERRITORY OF PAPUA AND NEW GUINEA PAPUA AND NEW GUINEA ELECTRICITY COMMISSION (ELCOM) MANUS Gazelle Peninsula 5 S0 100 ISO 200 00 '100 40 00<Å RAS L - NEW IRELAND WEST SEPIK EAST SEPIK EWAK MADANG RA WEST NEW BRITAIN i 1 BOUGAINVILLE WESTERN HIGHLANDS AD N Lo~oO,~ 0W Ki >Os. I ~~K D " M F ORRSTSi MOROBE j.o HLAZEN ø- ok'd LANDS H LANDS ,A . EAST NEW BRITAIN - RANhMISSION LINL1 \ K.ulolo l 'd rnu Ltd. WESTERN \ HD-DOA NORTHERN GULF OF ,09 i PAPUA -- pT MORESBI MILNE BAY * LASE >.l'O cete >a n BalEtmo dministro o nters operoted b> 0ublic * VAN110 admonntration center prop l for.. *t>ra« to etco1> iCENTRAL I ReU\'A 1 hydro po0r p'ants fl 11 >T1. 6 <s nmu st.ration h1idro 1ow0r Cplantsi r'é c Bwoomme r ulolo I ut<riaol hydro poer plant - R£0UA n 5 Pr1Opo-d E-.O( , hydro »00r port SAMARA ] M'6>1 No t'Frnoood I> . 101 ro 10a0 >120 ARA A pI-,-no.ord ainstration d hsol c r -r s L - A RAIrA Prcprsed - \ RI (copr/> th]rmal Poer pilnt I 11P?R O [15/09, /lu nProPsd tr K>ansiuonr e yyn inu L\io>>tp r4 y I ran i oj N%! r . l5e