Colombia - Fourth Guadalupe Hydro Power Project

Document of The World Bank FILE cop y FOR OFFICIAL USE ONLY Report No. 2938b-CO STAFF APPRAISAL REPORT COLOMBIA GUADALUPE IV HYDRO POWER PROJECT May 16, 1980 Projects Department Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Colombian Peso (Col$) Col$1 100 Centavos (ctv) Col$42.06 (1979 appraisal assumption of average) = US$1 Col$1,000 = US$23.78 (1979 average) Col$1,000,000 (MCol$) = US$23,776 (1979 average) MUS$1 = US$1,000,000 WEIGHTS AND MEASURES 1 meter (m) 2 3.281 feet (ft) 2 '1 square kilometer (km ) = 0.386 square mile (mi ) 1 cubic meter (m3) = 35.315 cubic feet (ft3) = 264.2 gallons (gal) = 6.290 barrels (bbl) 1 kilogram (kg) = 2.206 pounds (lb) 1 ton (t;metric;1,000 kg) = 1.100 short tons (sh. tons) 1 kilowatt (kW) = 1,000 Watts (103 W) 1 Megawatt (MW) = 1,000 kW (10 kW = 106 W) 1 Gigawatt (GW) = 1,000 MW (106 kW = 109 W) 1 kilowatt-hour (kWh) = 1,000 Watt-hours (103 Wh) - 830.3 kilocalories (kcal) 1 Gigawatt-hour (GWh) = 1,000,000 kWh (106 kWh) 1 Terawatt-hour (TWh) = 1,000 GWh (109 kWh) 1 kilovolt (kV) = 1,000 Volts (V) 1 kilovolt ampere (kVA) = 1,000 Volt amperes (103 VA) 1 Megavolt ampere (MVA) = 1,000 kVA (100 VA) 1 Megavolt ampere re- = 1 Megavolt ampere reactive active (MVAr) power (cos 0 = 00) 1 kilocalorie (kcal) = 3,968 British thermal units (Btu) 1 Hertz (Hz) = 1 cycle/second ... per ..;. ..per second ......../ .;s .per hour; ... per day; = . ./h; /d ... per inonth; ... per year =m. ... /a GLOSSARY OF ABBREVIATIONS EPM = Empresas Publicas de Medellin ISA = Interconexi6n Electrica S. A. EEEB = Empresa de Energia Electrica de Bogota EMCALI = Empresas Municipales de Cali CHEC = Central Hidroelectrica de Caldas CHIDRAL = Central Hidroelectrica del Rio Anchicaya S. A. CORELCA = Corporaci6n Electrica de la Costa Atlantica CVC = Corporaci6n Aut6noma Regional en el Valle del Rio Cauca ICEL = Instituto Colombiano de Energia Electrica NPD = National Planning Department 2-T - Junta Nacional de Tarifas FONADE = Fondo Nacional de Desarrollo JDB = Inter-American Development Bank KfW = Kreditanstalt fuir Wiederafbau Fiscal Year = Calendar Year  FOR OFFICIAL USE ONLY COLOMBIA EMPRESSA PUBLICAS DE MEDELLIN GUADALUPE IV HYDRO POWER PROJECT TABLE OF CONTENTS Page No. Energy Resources ...... .......................... . .................... . 1 Sector Organization .............................. ................ 3 Regulation, Planning and Coordination ............................ 4 -Present Developments .... .................... .. ........................ 6 World Bank Participation in the Sector .. ............ . ............ 7 Power Market and Supply .......................................... 8 Interconnected System Forecasts ..................... * ............ 11 Demand and Energy . ..... ... * ...** ........... * ......... . . .............. . 11 Supply .................................................................. 11 Rural Electrification ................................................. ....... 11 Sector Investment Program and Studies .............. .............. 12 Finances and Tariff ............... 0................. ............................. 13 Constraints on Sector Development ......... .................. O.. 14 2. THE BORROWER .......................................... ........... 16 General .......................................................... 16 Previous Bank Lending . ... ... . ............ ... ......... .. .. ......... 16 Organization ..................................................... 16 Personnel ......................................................... 17 Training ........................................... 0 ............ ............ 18 Accounting and Auditing . ............. . ...................... ...... 18 Billing and Collections ......... .......... .. ......................... 18 Insurance ................................................................... 19 Tarif f and Rates ................................................... ............ 19 3. EPM's MARKET .................................................................. 21 Supply Area, Access to Electricity ........ ....................... 21 Historic Development .............................................................. 21 Captive Plant ............................................................... 22 Forecasts ..................................................... ............ 22 This report is based on the finding of an appraisal mission, which visited Colombia during November/December 1979, comprising Messrs. W.F. Kuipper, M. Linder and J. Gorrio'. This document has a restricted distribution and may be used by recipients only in the performance of their omcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Cont'd) Page No. 4. THE PROGRAM AND TBE PROJECT ..................................... 25 The Program ........ 25 The Project ...................................................... 25 Objectives ................................................. 25 Description ....... 26 Cost ....................................................... 27 Financing ................................................... 28 Engineering Studies . ......... 28 Training ................................................... 28 Guadalupe IV ............................................... 28 Transmission, Distribution ................................. 29 Control Center ................ .................... .......... 30 Training ................. .................. ................ 30 Execution ..... 31 Implementation Schedule . ........... . . . ......... . 31 Procurement ... .................. ....................... .. 31 Disbursements .............................................. 31 Environmental Aspects ..................................... 31 Project Risk ............................................... 32 Project File .... ........ 32 5. FINANCE .................................. ....................... 33 Summary ............................................. ............ 33 Consolidated Financial Performance .............................. 33 Earning History ................................................. 34 Rate Base ................................................................... 34 Tariff Structure ................................................ 35 Financial Structure ............................................. 35 Investment and Financing Plans .................................. 35 Liability Reserves .............................................. 38 Future Finances ................................................. 38 Negative Pledge ................................................. 40 Fund Utilization Limitation ............. ....... .. ............... 40 Investment Limitation ........................................... 40 EPM's Tariffs Requirements ...................................... 40 6. ECONOMIC ANALYSIS ............................................... 41 Least Cost Solution ....... ............... ....................... 41 Return on Investment ...................... ...................... 41 7. AGREEMENTS REACHED AND RECOMMENDATION ........... .. .............. 43 During Negotiations ....... ............... ....................... 43 Conditions of Effectiveness ....................... 45 Recommendation ......................... ......................... 45  Table of Contents (Cont'd) Page No. ANNEXES 1.1 IBRD Power Loans ....... .................................... 46 1.2 The National Generation Development Program 1979-1985 ...... 47 2.1 EPM-Organizational Chart ...... ............................. 48 3.1 Consumption and Supply Data 1975-1986 .... .................. 49 4.1 1979-1986 Investment Program Cost Estimate ............. .... 50 4.2 Project Cost Estimate ...... ................................ 51 4.3 Project Implementation Schedule ............................ 52 4.4 Loan Disbursement Schedule ................................. 54 4.5 Contents of Project File ...... ............................. 55 5.1 Historic Financial Statements ..... ......................... 57 5.2 Summary of Projected Financial Performance 1980-1984 of Telephone, and Water and Sewerage Departments .............. 58 5.3 Schedule of Existing and Proposed Debt ..................... 59 5.4 Actual and Forecast Income Statements ...................... 60 5.5 Sources and Applications of Funds .......................... 61 5.6 Actual and Forecast Balance Sheets ......................... 62 5.7 Forecast Performance and Financial Indicators . . 63 5.8 Forecast Loans Disbursement Statement ...................... 64 5.9 Forecast Debt Amortization Statement .......... .. ........... 65 5.10 Forecast Interest Charges .................................. 66 6.1 Rate of Return on Development Program .................. .... 67 MAPS Main Generation and Transmission System IBRD 14880 Transmission System of Antioquia IBRD 14882   COLOMBIA EMPRESAS PUBLICAS DE NEDELLIN GUADALUPE IV HYDRO POWER PROJECT 1. THE SECTOR Energy Resources 1.01 Colombia's main indigenous commercial energy resources are hydro- power, coal, gas and oil. Potential hydropower appears to be the most promising at some 100 GW of capacity and 250-300 TWh of annual energy capability, as shown by the preliminary investigations made by the Govern- ment. Colombia is also endowed with very large coal and gas deposits. Over 1970-77 crude oil output declined at an average rate of 6.5%/a. Over the same period, consumption of petroleum products increased by 5.5%/a. As a result, Colombia, since 1977, is a net importer of crude oil and pros- pects are for imports to rise sharply in the early 1980s unless additional reserves are discovered and developed quickly. Measures are being taken to deal with this problem and to develop alternative energy sources. In the case of coal, there have been various obstacles to more adequate utilization of the existing potential: low prices compared with those prevailing on inter- national markets, the competition of low-priced petroleum, fragmentation of production among a large number of very small mines with low output and productivity levels, and lack of efficient marketing and transport infrast- ructure. However, the Government is currently taking action to address these problems (1.03). With respect to natural gas, a previous decline in known reserves and output has been dramatically reversed with the discovery of large depos 1s ie the Atlantic Coast region. These reserves (estimated at over 5 x 10 ft ) will provide energy and petrochemical feedstock to this rapidly industrializing region. 1.02 Production of primary energy during 1965-77 (see table next page) has not kept pace with overall economic expansion. It incre2sed only 3.6%/a during 1965-7y, when it reached its peak at 690 x 10 . Btu, and then declined to 637 x 10 Btu in 1977, mainly due to falling crude oil output. In contrast to the declining energy output, final energy consumption grew by 8.9%/a during 1965-70, and 8.5%/a during 1971-73, when economic growth was high and energy prices declined sharply in real terms. During 1974-77, the economic downturn and increase in real energy prices had a dampening effect on consumption, which now has settled at a growth of about 4.5%/a compared with a GDP growth of some 6%/a in recent years. 1.03 The Government's development strategy is aimed at achieving a more favorable balance between domestic energy supply and use, by increased utilization of domestic sources which are in abundant supply, i.e. hydro- power, natural gas and coal. The Government is planning a large-scale develop- ment of high grade coal deposits for export to help offset oil imports by  -2- COLOMBIA Energy Output and Consumption --------------------Primary Energy Output /1; /2