Colombia - Second Guatape Hydroelectric Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3718 PROJECT PERFORMANCE AUDIT REPORT COLOMBIA: GUATAPE II HYDROELECTRIC PROJECT (LOAN 874-CO) December 14, 1981 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 COLOMBIA: GUATAPE II HYDROELECTRIC PROJECT (LOAN 874-CO) TABLE OF CONTENTS Page No. Preface .................................................................. i Basic Data Sheet ................................................. ii Highlights ....................................................... iv Appendices 1 and 2 (Comments from the Government)................. vii Attachment: PROJECT COMPLETION REPORT I. Background ................................................. 1 II. Project Preparation and Appraisal .......................... 5 III. Project Implementation, Operation, and Cost ................ 7 IV. Project Justification ...................................... 11 V Financial Performance ...................................... 12 VI. Institutional Performance .................................. 14 VII. Lessons to be Learned ...................................... 15 Annexes: 1. IBRD Power Loans ........................................... 16 2. Institutional Issues and Bank Lending to the Sector ........ 17 3. National Generation Development Program .................... 20 4. Evolution of EPM System .................................... 21 5. Major Covenants of the Loan and Guarantee Agreements ....... 22 6. Project Timetable .......................................... 24 7. Bank-financed Transmission and Distribution Works .......... 25 8. Actual and Forecast Project Cost and Financing ............. 26 9. Price Deflator Indexes for Project Costs ................... 28 10. Actual and Forecast Quantities of Excavated Material ....... 29 11. Actual and Forecast Schedule of Disbursements .............. 30 .12. Original, Revised, and Final Loan Allocations .............. 31 13. Actual and Forecast EPM Sales by Customers, 1972-80 ........ 32 14. Actual and Forecast Internal Rate of Return ................ 33 15. Actual and Forecast Indications of Financial Performance - 1.972-79 .................................... 34 16. Actual and Forecast Income Statements, 1972-79 ............. 35 17. Actual and Forecast Sources & Applications of Funds, 1972-79 ........................................... 38 18. Actual and Forecast Balance Sheets, 1972-79 ................ 41 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.  - 1 - PROJECT PERFORMANCE AUDIT REPORT COLOMBIA: GUATAPE II HYDROELECTRIC PROJECT (LOAN 874-CO) PREFACE This report presents the results of a performance audit of the Guatape II Hydroelectric Project for which Loan 874-CO of US$56 million was made in January 1973 to Empresas Publicas de Medellin (EPM). The loan, which was the fourth to EPM and the eighteenth to the country's power sector, was fully disbursed and closed in June 19801/. The report consists of Highlights, prepared by the Operations Evaluation Department (OED), and a Project Completion Report (PCR), prepared by the Latin America and the Caribbean Regional Office. The Bank's project staff carried out a project completion mission to Colombia in February 1981 and the Borrower prepared a final project report. The information obtained from these sources has been taken into account in the preparation of the PCR. In accordance with OED's abbreviated procedure, the audit has reviewed the Appraisal and President's Reports, the loan documents, the Minutes of the Board discussions and the PCR. The audit has also discussed the project with Bank staff. On the basis of this limited review, the audit finds that the PCR has discussed adequately the significant aspects of the project's experience: the project's cost overrun, the delays in project implementation, the Borrower's unsatisfactory financial performance during the period 1973-74, the problems encountered during resettlement of people who were displaced or adversely affected by the increase in the capacity of the existing (Guatape I) reservoir, and the role of the Bank in the institutional development of the country's power sector. Furthermore, the audit finds no reason to disagree with the general conclusions of the PCR. Following normal OED procedures, a draft copy of this report was sent to the Government and EPM for comments. Those comments which were received are reproduced as Appendices to the Highlights 1/ Project Performance Audit Report (PPAR) on the Third Medellin (EPM) Power Project (Loan 369-CO) was distributed to the Executive Directors on May 24, 1974.  - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET COLOMBIA: GUATAPE II HYDROELECTRIC PROJECT (LOAN 874-CO) KEY PROJECT Item Appraisal Actual or Expectations Current Estimate Total Project Cost (US$ million) (a) Plant 80.0 110.5 (b) Transmission 3.8 5.8 (c) Distribution 14.4 19.9 Total!s 98.2 136.2 Cost Overrun % - 39/b Loan Amount (US$ million equivalent) 56.0 56.0 Disbursed 56.0 Suppliers' Credits (US$ million) 6.7 7.8 Date Physical Components Completed by Appraisal Target Date (a) Plant 12/77 Ol/80/c (b) Transmission 12/77 02/7&14 (c) Distribution 12/77 12/79 Proportion of Time Overrun (%) (a) Plant - 50 (b) Transmission 50 (c) Distribution 50 Incremental Financial Rate of Return ()16 11 Financial Performance Unsatisfactory in the earlier years, satis- factory thereafter. Institutional Per formance Same as financial performance. Cumulative Estimated and Actual Disbursements -- CUS$ million) As of June 30: 1972 1973 1974 1975 1976 1977 1978 1979 1980 (i) Appraisal 6.4 19.9 35.4 48.1 54.1 56.0 56.0 56.0 56.0 (ii) Actual 1.6 4.8 11.9 24.2 34.5 42.1 48.3 54.5 56.0 (ii) asa% of (i) 25 24 34 50 64 75 86 97 100 OTHER PROJECT DATA Original Item Plan Revision Actual First Mention in Rank Files - - 01/12/72 EPM's Loan Application - - 02/03/72 Negotiations - - 10/10-20/72 Board Approval - - 01/04/73 Date of Loan Agreement - - 01/12/73 Effectiveness Date - - 03/13/73 Closing Date 12/31/78 12/31/79 Borrower EmUpresas Publicas de Medellin tEPh) Executing Agency EPM Fiscal Year of Borrower Calendar Year Follow-on Project Guadalupe IV Loan Number 1868-CO Amount (US( millions) 125 Loan Date December 19, 1980 Borrower EPM /a Excluding financial charges. Fb In constant prices, the cost overrun was 60. 's Generators entered commercial operation between February 1979 and January 1980. /d Final work on Guatape substation was completed in April 1980.  - iii - MISSION DATA Month/ No. of No. of Staff- Date of Year Weeks Persons Weeks Report Pre-appraisal 12/71 1 1 1 02/12/72 Appraisal 02/72 2 4 8 12/19/72 Total 9 Supervision I 07-08/73 3 2 Z/a 08/27/73 Supervision II 02/03/74 3 2 2/a 03/29/74Lb 05/20/74Lb Supervision III 09/74 2 1 2 10/14/74 Supervision IV 12/74 1 2 2 12/13/74/c 02/07/75TS: Supervision V 03/75 1 1 1 04/03/75 Supervision VI 12/75 1 1 1 01/07/76 Supervision VII 04-05/76 1 2 2 06/04/76 Supervision VIII 08/76 1/2 1 1 09/13/76 Supervision IX 08/77 1/2 2 1 08/30/77 Supervision X 05/78 1 1 1 06/08/78 Supervision XI 05/79 1-1/2 1 1-1/2 06/14/79 Completion 02/81 1 1 1 08/13/81 Total 17-1/2 COUNTRY EXCHANGE RATES Name of Currency: Peso (Col$) Exchange Rate: At Appraisal (as of adjustment, January 1972) US$1 = Col$20.4 Intervening Year Average US$1 = Col$31.5 Completion Date (1979)y d US$1 = Col$42.7 /a Members of mission spent part of their time on other projects. /b Separate reports issued by engineer and financial analyst. /c Separate reports issued by financial analyst and loan officer.  - iv - PROJECT PERFORMANCE AUDIT REPORT COLOMBIA: GUATAPE II HYDROELECTRIC PROJECT (LOAN 874-CO) HIGHLIGHTS The project achieved the objectives of providing additional generat- ing capacity to meet the envisaged growth in energy demand from existing customers, and of extending electricity service to lower income groups. In 1980, the energy generated by the project amounted to about 30% of total energy sales of the Borrower, Empresas Publicas de Medellin (EPM),and during the project period 1973-79, nearly a quarter million new customers from lower income areas were connected to the power system (PCR para. 3.3.1). The generation component and the associated transmission facilities were constructed generally as designed while the distribution facilities were slightly increased in scope. The project, as a whole, was completed about 2 years behind schedule and its final cost was about 40% higher than the appraisal estimate (PCR paras. 3.2.2 and 3.4.2). Despite the cost increase and implementation delays, the project continues to be the least cost alterna- tive to meet the growth in energy demand (PCR paras. 4.2.1 and 4.2.2). Over the project period 1973-79, energy sales of EPM were marginally lower than the corresponding appraisal forecast (PCR, para. 4.1.1). The recalculated incre- mental financial rate of return on the project is 11% compared to 16% esti- mated at the time of appraisal (PCR para. 4.3.1). The enlarged reservoir, created by raising the height of the dam, inundated properties and dwellings of an entire town (population 3,200) and a small part of another town. The resettlement and compensation of the indi- viduals who were affected by inundation required lengthy negotiations, largely because the Borrower and the Bank failed to anticipate the complexity of the problems involved (PCR para. 6.1.1). The final cost of resettlement, in US$ equivalent, was more than double the 'original estimate and the process took about three years longer than envisaged. This delay, which in turn delayed the filling of the reservoir and storing of water energy, cost the economy the equivalent of EPM's energy generation for an entire year (PCR para. 3.2.8). The lessons learnt from this aspect of the project experience are reflected in OMS 2.33, dated February 1980, which describes the measures to be taken to ensure appropriate resettlement of inhabitants who would be adversely affected by the construction of a Bank-financed project. The financial performance of EPM deteriorated between 1973 and 1974, mainly because tariff increases, which were granted by the Government, were inadequate to meet rising operating costs. The rate of return on revalued assets during these two years was 4.4% and 6.8% respectively, compared to the 9% stipulated in the Loan Agreement. Partly because of the difficult  - v - financial situation, EPM delayed its financial contribution to the construc- tion program of lnterconexion Electrica S.A. (ISA) (PCR para. 6.2.3).1/ Since 1975, EPM's financial performance has shown a slow improvement; the net operating income, however, in real terms, has remained generally about the same between 1975 and 1979, which is about 40% lower than the appraisal estimate. In addition to the slow handling of the resettlement program, EPM's institutional performance suffered in the earlier years of the project period, largely due to frequent changes in its senior management. From 1976 onwards, under a new leadership, the performance has improved considerably and presently EPM is considered to be the best managed power utility in the country (PCR paras. 6.2.1). The staff training program which was supported by funds from the Bank loan was carried out successfully. The Bank has been involved in the Colombian power sector for about 30 years (27 loans amounting to about US$1.374 billion). During this period, with Bank support, Colombian authorities have taken measures to integrate the fragmented power sector (which reflected the strong tradition of virtual regional autonomy in Colombia). The measures included: (a) creation and growth of ISA, which is a national power generation and transmission utility, although it is closely controlled by its owners, the main municipal and regional utilities;2/ (b) establishment of the Junta Nacional de Tarifas, a Governmental regulatory agency that approves the tariff increases of public utilities; (c) consolidation of numerous small utilities; and (d) preparation by the sector and the Government of an overall development plan. This progress towards the strengthening of the institutional and financial basis of the sector was not, however, consistently maintained; when setbacks occurred, the Bank took actions to induce the Colombian authorities to implement measures which would improve the financial integrity of EPM and ISA and resolve the organisational issues surrounding ISA. Thus, between late 1974 and May 1975, the Bank informally suspended disbursements under Loans 575--CO and 681-CO to ISAV and Loan 874-CO to EPM, when the shareholders delayed their contributions towards ISA's construction program, partly because of their own financial difficulties (PCR, paras. 6.1.2, 6.2.3 and Annex 2), and EPM failed to earn its covenanted rate of return. These actions were suc- cessful to the extent that the utilities' financial performance improved sufficiently to enable completion of projects then under construction. The modest improvements in financial performance between 1974 and 1977 were not, 1/ See PPAR No. 2720 dated October 29, 1979 on Colombia: Power Interconnec- tion (Loan 575-CO) and Chivor Hydroelectric Projects (Loan 681-CO). 2/ The National Planning Department (NPD) has expresed some doubt about whether ISA, as a national power utility, has been strengthened in recent years, in view of the shareholder's continuing dominant role in decision-making. NPD believes that it should participate actively in ISA's financial and planning committees and in ISA's Board as a principal member, to help ensure the future energy sector expansion would be in line with national priorities (Appendix 2).  - vii - APPENDIX 1 COMMENTS FROM THE GOVERNMENT DOCTOR SHIV S. KAPUR . DIRECTOR OPERATIONS EVALUATION DEPARTMENT BANCO MUNDIAL WASHINGTON RE: PROJECT PERFORMANCE AUDIT REPORT ON COLOMBIA: GUATAPE II HyDROELECTRIC PROJECT (LOAN 874-CO) DESPITE THE FACT THAT THE DEVELOPMENT OF THE ABOVE MENTIONED PROJECT HAD VER%.. COMPLEX PROBLEMS, WE STAND TO LEARN A LOT FROM IT FOR FUTURE DEVELOPMENTS. WE HAVE FOUND .OUR REPORT MOST INTERESTING NOT ONL., IN MATTERS RELATED TO THIS PARTICULAR PROJECT, BUT ALSO IN THE GENERAL DEVELOPMENT OF THE POWER SECTOR. BEST REGARDS, LEONOR M!ONTOy,.A ALVAREZ DRECTOR GENERAL OF PUBLIC CREDIT  - viii - APPENDIX 2 Page 1 of 5 UINF:E:O2:921 Mr. Shiv S. Kapu:r 1 8 NO1981 Director *OV. 191 Operations Evaluation Department The World Bank 1818 H Street, N. W. Washington D. C. 20433 U. S. A. Reference Project Performance Audit Re- port on Colombia : Guatap6 II Hydroelectric Project ( Loan 874 - CO). Dear Mr. Kapur Enclosed you will find some comments on the " Project Performance Audit Report on Guatap6 II Hydroelectric Project. Loan 874-CO". These comments were written by the Energy Di- vision, National Planning Department. Yours faithfully, DIE OTERO PRADA Assistant Director National Planning Depart Attachment  FORM NO: 788 (1 -74) - ix - APPENDIX 2 TRANSLATION PE 2 Page 2 of 5 COMMENTS ON WORLD BANK "PROJECT PERFORMANCE AUDIT REPORT. COLONBIA: GUATAPE II HYDROELECTRIC PROJECT (LOAN 874-CO)" OF SEPTEMBER 17, 1981, RECEIVED WITH LETTER OF EVEN DATE The report consists of an introduction, a sheet of basic data, a summary of key project data, a project completion report with details of the execution of the plant and 18 annexes giving details on World Bank loans to the elec- tricity sector in Colombia, development of the EPM system and its financial situation and followup of the Guatap6 II Project. The key data include a two-year delay in the commissioning of the plant and a cost overrun of 6% in constant prices, both of these facts being due primarily to the difficulties and high costs caused by relocation of the population of El Peffol. Another factor was the late start of the works owing to deficiencies in EPM's management and finances. It is further noted that the Bank smpended lending to Colombia's electricity sector between 1973 and 1978, and disbursements for Chivor I and Guatape II in 1974 and 1975, owing to disputes among the partners in ISA and inadequate rate increases. The following points made in the project completion report are worthy of note: 1. Neither EPM nor the World Bank foresaw the magnitude and complexity of the relocation prog:ram required for relocating the people affected by the dam. 2. Delays with San Carlos I were caused by the institutional problems in ISA plus financing problems (the suspension of lending between 1973 and 1978 already referred to). 3. The loan agreement for the construction of Playas specified that EPM would endeavor to acquire the Antioquia and Choc6 power undertakings.  APPENDIX 2 Page 3 of 5 4. The suspension of disbursements for EPM and ISA in 1974 and 1975 (Guatap6 II and Chivor I projects) and the withholding of approval for new loans in 1973-78 was justified on the grounds that this would spur positive action on rates together with financial support for ISA from its shareholders. 5. As lessons learned from Guatap6 II, the report cites the special care required with relocation programs and the recommendation that the World Bank take forceful action whenever this is needed to maintain the financial integrity of its borrowers. After study of the report, it must be admitted that from the World Bank's angle the suspension of disbursements for Guatap6 II and Chivor I and the withholding of new lending between 1973 and 1978 were certainly justified. And again from its standpoint, these measures were successful since they prompted the progressive introduction of a financially sound rate structure and strengthening of ISA's position with the acquiescence of its shareholders. However, there are also valid grounds for examining the situation from the viewpoint of the position of the Colombian electricity sector, for which this is probably one of the instances of the cure being worse than the disease. The rate system has been improved, so that a greater volume of local-currency resources is being generated for investment, but the expansion programs have stagnated. The delays with the projects under construction or scheduled for starting in the period 1973-78 (Chivor I, Guatape II, Atlantic Coast Inter- connection Line, San Carlos I and Mesitas, all with World Bank funding, for which disbursements were suspended in 1974 and 1975 for the first two, while IBRD loans were not finalized for the others until 1978-79) were the reasons  - xi - APPENDIX 2 Page 4 of 5 OED Note: for the rationing in 1977 and in 1980-82. The World Bank has granted loans see the last aggregating around US$1 billion to Colombia's electricity sector, but has at para. of Highlights the same time been a factor in the origins of the power deficits whose cost to the national economy has been exorbitant. The Bank itself puts the cost of rationing in 1981 alone at US$3 billion (paragraph 1.2.3). It is also questionable whether ISA has been strengthened as a national body for the construction and operation of major power generation and trans- mission facilities. ISA shareholders' concern that its growth would result in lessening of their regional importance has led to a demarcation of ISA's sphere of action: construction of generating facilities that require a joint effort by the partners, ownership of trunk interconnection lines, and integral planning and operation of the high-voltage power system. However, no clear definition has been given of projects that require such joint effort or of what constitutes a trunk line; the shareholders have assumed partial or full ownership of projects in the 1984-88 expansion program that were initially ISA responsibilities (Betania, Playas, Guavio, Urra). The rules for the global planning work to be done by ISA and the decisions themselves are adjusted according to the shareholders' requirements and there are continual divergences of views on the control and operating models of the interconnected system and interchange rates. ISA as an entity does not have decision-making power but is an adminis- tration body for projects that the shareholders wish to undertake jointly. As regards the technical and commercial aspects of energy interchange, it performs such studies and other work as the shareholders assign it. At the present time it is clear that the individual decisions of each separate share- holder carry more weight than those of ISA as administrator.  - xii - APPENDIX 2 Page 5 of 5 To reconcile ISA's decision-making processes with the expansion of the energy sector and the needs of the country as a whole, a global planning approach is called for that can only be coordinated with the active partici- pation of the National Planning Department in ISA's financial and planning committees and in the ISA Board as principal member.  COLOMBIA: GUATAPE II HYDROELECTRIC PROJECT ATTACHMENT (LOAN 874-CO) Project Completion Report I. BACKGROUND 1.1 Bank Lending to the Power Sector of Colombia 1.1.1 Since 1950, the Bank has made 25 loans to the power sector of Colombia, amounting to US$979 million equivalent (Annex 1), 1/ including six loans amounting to about US$345 million to Empresas Publicas de Medellin (EPM), a municipally-owned public utility. The fourth loan to EPM (874-CO; US$56.0 million; 1973) helped to finance the Guatape II Project, the subject of this report. The fifth loan (1868-CO; US$125.0 million; 1980) is helping to finance the Guadalupe IV Hydroelectric Project, which is expected to be completed in 1984. The sixth loan (1953-CO; US$85.0 million; 1981) is helping to finance the Playas Hydroelectric Project, which is expected to be completed in 1986. 1.2 Power Sector Characteristics and Development 1.2.1 The complex organization of the Colombian power sector has its roots in the country's historic tradition of strong regional autonomy (bordering on virtual independence). Through the 1950's, a large number of power companies were set up in response to regional and departmental needs. In 1967, when the country's total electricity generating capacity stood at only 1,681 MW and reached only 35% of the population, the Government, with Bank encouragement, persuaded the municipal systems of Bogota, Medellin, Manizales, and Cali to join in the formation of Interconexion Electrica, S.A. (ISA), which would interconnect the shareholders (the municipal companies) and serve as a vehicle for the shared development of the country's large hydroelectric potential. The Bank helped to finance the first interconnection project (575-CO), which was carried out by ISA. By the end of 1980, Colombia's installed generating capacity had increased to 4,300 MW, with hydro stations accounting for 68% of total power generated, reaching 54% of the population. With Bank encouragement, Colombian authorities have gradually transformed the power sector from a large number of small, independent utilities into a more consolidated, interconnected, and efficient group.of companies. 1.2.2 Part of the substantial growth in capacity added was carried out by ISA, using funds in large part supplied by its shareholders, the regional power companies, which were particularly hard pressed during the mid-1970's to pay for their own construction programs because of tariff related financial constraints. From the protracted and not altogether harmonious effort to reconcile differing regional and national interests, ISA has emerged as a major national independent generation and transmission company; 2/ and 1/ Not including two loans (both approved but unsigned) in FY81 for the Guavio Hydroelectric Project (US$359 million) to EEEB and the Village Electrification Project (US$36.0 million) to CORELCA. 2/ ISA's shareholders now include all the major municipal and government- owned companies: Empresas Publicas de Medellin (EPM), Empresa de Energia Electrica de Bogota (EEEB), Corporacion Electrica de la Costa Atlantica (CORELCA), Corporacion Autonoma Regional del Valle del Rio Cauca (CVC), and Instituto Colombiano de Energia Electrica (ICEL). ICEL has thirteen subsidiary departmental power companies (electrificadoras) and CORELCA, eight subsidiary electrificadoras. - 2 - there has been a profound change in the outlook of the regional power companies-- a change running counter to the tradition of regional autonomy. The shareholders now see themselves as part of an expanding national system involving a consider- able degree of interdependence, not just as independent companies which happen to be interconnected. 1.2.3 While the regional power companies and ISA have made considerable progress in serving national as well as local interests, the effort to recon- cile conflicting interests has several times come close to collapse; and is likely to involve difficult trade-off decisions in the future. Annex 2 sets forth details on the period 1974-1978, when financial difficulties and shareholder reservations about the growing (and centralizing) role of ISA led the Bank to make no new lending to the power sector, and later (1979-1980) required a change in the emphasis of Bank lending. These factors -- shareholder financial difficulties and reservations about ISA, plus the Bank's not making new loans to the sector between 1973 and 1978 -- resulted in serious delays to the completion of generation projects under construction and the starting of new projects contemplated at appraisal of Guadalupe II. Because of insufficient investments during the 1970's, electricity is being rationed an average of four hours per day in the Central System (EEEB, CVC, EPM, and ICEL). The estimated energy shortfall for 1981 (1,200 GWh) is expected to last until the San Carlos and Mesitas hydro plants (1582-CO and 1628-CO, respectively) are commissioned. The Bank estimates the cost of this shortage (in terms of lost productivity, income foregone, and social welfare) at US$3 billion for 1981 alone (President's Report, Guavio Hydroelectric Project, P-3060, dated May 6, 1981, para. 28). 1.2.4 To catch up with rising power requirements, the power sector expects to increase its generating capacity to about 10,774 MW by 1988 -- 4,895 MW of generating capacity are currently under construction -- and to invest about US$15.4 billion (in current prices) through 1990 in generation, transmission, and distribution works. Of this total, some 54% would be foreign exchange, requiring on average external financing on the order of US$900 million per year, mostly from foreign capital markets. 1.2.5 To provide the internal financial resources needed for this program, in accordance with Government policy, tariff increases on the order of 40-45% are being enacted this year throughout most of the sector. Because tariffs alone cannot provide sufficient local financial resources and because the local domestic capital market is limited, the Government has decided to estab- lish, by the end of the year, a suitable domestic power-development financing facility that would provide the balance of local funds needed for planned sector investments. 1.2.6 In future years, tariffs will have to be maintained at levels suffi- cient to permit the financing of an important portion of the investment program as well as of the growing debt service. Adequate financial resource generation from internal sources, together with Bank involvement, is anticipated as a central factor in attracting large amounts of external financing needed to carry out the sector's future program. - 3 - 1.2.7 Also affecting efficient power development in the future is the need to ensure that ISA continues to have the institutional, managerial, and tech- nical capability to fulfill its central role. Through recent lending to ISA (1725-CO and 1725-CO), the Bank proposes to help strengthen ISA as national power dispatcher by financing a study to identify the means for attaining economic operation of the interconnected system. The completed study is expected to require substantial Bank involvement in order to work out and implement the agreements between the power sector entities because the agree- ments will entail further trade-offs between regional and national interests. 1.2.8 A third area expected to require substantial Bank involvement will be the institutional strengthening of ISA's weaker shareholders, particularly the ICEL group. In connection with a proposed Bank loan for the Guavio project (para. 1.1.1), the Government has agreed to prepare and carry out a program to restructure ICEL's companies into viable utilities (based on a preliminary study by the National Planning Department). The restructuring of ICEL is a complex task which will require several years to achieve as it will involve various acquisitions by major power utilities. The trade-offs involved imply difficult readjustments for the regionally based authorities and ISA. In connection with the Playas project (1953-CO), EPM will take a leading role in this process by assessing the feasibility of acquiring the Electrificadoras of Antioquia and Choco. 1.3 Power Sector Organization, Regulation, Planning, and Co-ordination 1.3.1 At present, public service electricity is provided by municipally- owned companies such as EPM, government-owned development corporations, and autonomous regional development corporations and their local operating subsidiaries. 1.3.2 Charged with formulating national policy for the power sector in conjunction with the National Planning Department (NPD), the Ministry of Mines and Energy exercises its influence indirectly through its chairmanship of ISA's board. 1.3.3 As part of NPD, the National Tariff Council (JNT) regulates retail electricity tariffs. Utilities are free to set tariffs at levels lower than those approved by the Council and have sometimes done so. ISA regulates bulk electricity tariffs through long-term purchase-and-sale contracts. In connection with loans 575-CO and 681-CO, the Bank required a consultant to review ISA's policy of pricing interchange electricity at cost. The consultants completed their work in 1974, but the shareholders did not agree to differential pricing for different classes of electricity until 1978 (Annex 2). In connec- tion with loans 1582-CO and 1725-CO, ISA's shareholders are carrying out studies to: (i) create a common accounting system; (ii) define the require- ments and contractual aspects for overall, least-cost operation of the system (para. 1.2.7); and (iii) determine the marginal cost of supply for certain major service areas to help provide a sound basis for setting. 1.4 Expansion of the Central System, 1972-1983 1.4.1 Gustape II was the "next step" in the least-cost expansion plan of the interconnected central system during the years 1972-1982. Under this plan, by 1977, the completion date of the Project estimated at appraisal, the interconnected central system was expected to meet a demand of about 14,100 GWh with 3,334 MW of installed capacity. The plan called for the following completion sequence: Alto Anchicaya, 340 MW, 1974; Chivor I, 500 MW, 1975; Guatape II, 280 MW, 1977; Chivor EI, 500 MW, 1978; San Carlos I, 620 MW, 1979--tormerly known as Samana I; and Mesitas, 515 MW, 1981. Actual effective capacity and demand for the interconnected central system in 1977 were, respectively, 2,969 MW and 11,942 GWh. The reduction in energy demand was primarily due to delays in completing Chivor I and Guatape II--both of which were completed about 15 to 24 months later than expected at appraisal. Geological problems encountered during construction, financial difficulties, and the replacement of a contractor delayed completion of Chivor I. A late start, slow implementation of a relocation program, plus some construction problems delayed completion of Guatape II. The Chivor II, San Carlos I, and Mesitas Projects, expected to be completed in 1978, 1979, and 1981 at appraisal of Guatape II, are now scheduled for completion in 1981-1983. Chivor II could not be started until the completion of Chivor I; San Carlos I could not be started on time (1975) because of institutional disagreements among ISA's shareholders and related financing problems (para. 1.2.3). Mesitas has experienced some construction delays. Annex 3 sets forth the up-dated national generation development plan through 1988. 1.5 The Borrower and its Role in the Power Sector 1.5.1 Created in 1955, EPM provides electricity, telephone, and water/sewer services to Medellin. The three departments of EPM operate as financially independent entities with separate accounts. 1.5.2 A Board of Directors administers EPM and appoints a General Manager, who oversees day-to-day operations. In 1980, a ruling by the Council of State empowered the Mayor to appoint and dismiss all board members of municipal entities, including EPM. At appraisal of Guatape II, the municipal council elected six of the nine members of EPM's Board. 1.5.3 In 1979, EPM operated 979 MW of hydro generating capacity, leased another 80 MW of generating capacity from ISA, and had sales of 3,035 GWh. These data are very close to the appraisal forecasts. Annex 4 sets forth pertinent data on the evolution of EPM since 1971. 1.5.4 EPM supplies electricity to the city of Medellin, to 25 towns within a 35 km radius of the city and, through sales to the Electrificadora de Antioquia, to 73 small municipalities, thus covering about 85% of the 116 muni- cipalities in Antioquia. In 1979, EPM served directly 280,000 customers, plus a further 100,000 users through sales to the Electrificadora, who in that same year consumed a total of 3,250 GWh. Reflecting the growth of industrial, commercial and agricultural activity, the company's sales have been growing rapidly at an annual rate of 9.3% since 1968 and 7.7% since 1975. It is - 5 - expected that EPM's sales will continue to grow during the period 1979-88, at about 8.7% per annum. To serve the expanding market and improve the coverage and quality o; services in rural areas, EPM is undertaking substan- tial investments in new facilities, both directly and through participation in ISA. EPM's expansion program, which forms part of the National Power Expansion Program, includes the Guadalupe IV Hydroelectric and the Playas Hydroelectric Projects (para. 1.1.1). II. PROJECT PREPARATION AND APPRAISAL 2.1 Project Origin, Appraisal, Negotiations, and Effectiveness 2.1.1 Guatape II was identified in 1962 by consulting engineers as the second-stage of the Guatape project which was the best scheme among alter- natives for developing the power potential of the Nare Basin. The scheme called for the diversion of waters from the Nare River (elevation: 1850 m) and discharging them into the Guatape River (elevation: 1000 m). Execution of the first stage involved construction of the Santa Rita dam (27 m), various intake works, 13 kilometers of tunnels, and a sub-surface (600 m underground) power- house with a generating capacity of 280 MW. The second stage required raising the height of the dam by 26 m, duplicating the intake works and tunnels, and enlarging the powerhouse for an additional 280 MW of generating capacity. 2.1.2 The Bank provided partial financing for Guatape I in 1964 (360-CO). The generating units for Guatape I were brought on stream in 1971-1972, two and one-half years late due to construction problems and poor performance on the part of some of the contractors. OED judged the Project to have been well executed, particularly in view of the difficulties which had to be overcome (Report No. 450, dated May 23, 1974). 2.1.3 Having received a least-cost justification for Guatape II, a Bank appraisal mission (March 1972) reported that the main issue was finding a financing plan which would maximize the participation of supplier financing (up to US$17.6 million) and which would cover an anticipated intermediate-term local-currency financing gap (about Col$250 million or about US$21.4 million). After analyzing EPM's cash-flow position and suppliers' terms which required a 15 percent downpayment and provided no financing for interest during construc- tion, Bank staff concluded (after several months) that only US$6.7 million of supplier financing was suitable for the Project and that the Bank loan should amount to US$56.0 million. Before negotiations (October 1972), EPM provided Bank staff with assurances that the local-currency financing gap would be covered by local borrowing and the issuance of bonds by EPM. 2.1.4 During appraisal, the mission briefly reviewed a master agreement (dated 1969) between EPM and the municipality of El Penol (population 3,200), which would be inundated by the rising waters of the reservoir. The agreement established a framework for carrying out a program to relocate the town. The problems of relocation and environmental protection had been studied by various public bodies in Colombia for several years. The agreement provided procedures for full and fair compensation, which under Colombian law obligated - 6 - EPM to negotiate compensation with each property owner. The agreement also committed EPM to establishing a new town of El Penol with a complete range of social welfare facilities, public utility services and roads. The town of Guatape (population, 2,500), which would lose several blocks of houses to the reservoir did not have a similar agreement, and dealt with EPM through their local authorities for direct compensation. 2.1.5 In April 1972, at Bank request, an environmental consultant carried out an ecological reconnaissance mission of the Project. While he did not conclude that the identified potential problems required a change in the plans to construct the Project, the consultant expressed concern about EPM's slow recognition of the substantial difficulties likely to be created by relocation for the people of El Penol. The consultant recommended that EPM establish a unit with specially trained people to oversee the relocation program. Aside from supporting this recommendation, which EPM accepted, Bank staff refrained from further comment on the relocation program prior to effectiveness of the loan agreement. For example, Bank staff neither requested nor proposed an implementation schedule for the relocation program. 2.1.6 No major issues delayed negotiations (October 1972). During negotia- tions, the Government agreed to carry out a study to identify a long-term generation and transmission program under terms of reference acceptable to the Bank. Because of delays in reaching agreement on the time-table for the study, Board presentation was delayed until January 1973, after which signing followed almost immediately. The Loan Agreement became effective in March. 2.2 EPM's Expansion Program 2.2.1 At the time of appraisal, EPM's expansion program for the years 1972-1978 consisted of: (i) the Project (para. 2.3.1): (ii) completion of Guatape I; and (iii) distribution expansion and future unidentified projects (beginning in 1976). The investment program was part of a least-cost program for the interconnected central system (para. 1.4.1), and was carried out with some delays and cost increases. 2.3 Project Description 2.3.1 The Project consisted of: (i) construction of the 280 MW second stage of the Guatape hydro- electric power station, including the heightening of the Santa Rita dam and duplication of most of the civil and electromechanical features of the first stage (para. 2.1.1); (ii) construction of a 230-kV power transmission line from Guatape to load centers and associated substations (from Guatape to the Miraflores substation); and (iii) expansion of the distribution system in EPM's service area (including training outside of Colombia for EPM staff in planning, design, and distribution-system maintenance--about US$100,000). - 7 - 2.3. According to the appraisal report, Guatape units 5 and 6 were scheduled to be part of EPM's installed capacity by about June 1977; and units 7 and 8, by about: December 1977. 2.4 Major Covenants of the Loan and Guarantee Agreements 2.4.1 Annex 5 describes the major covenants of the Loan and Guarantee Agreements for Loan 874-CO. While compliance was generally satisfactory, borrower performance under covenants pertaining to the tariff and interdepart- mental indebtedness led to an informal suspension of dibsursements in 1974-1975 (para. 1.2.3). III. PROJECT IMPLEMENTATION, OPERATION, AND COST 3.1 Bidding: Generation Works (Dam, Powerhouse, and Equipment) 3.1.1 Award of the civil-works or equipment contracts proceeded without dispute, although the signing of the civil-works contract for the power-house and related tunnels (March 1974) was delayed for six months while the winning contractor (a consortium led by a foreign company) investigated underground construction techniques (choosing traditional excavation methods with dynamite over use of a mechanical mole). 3.2 Project Timetable: Delays in the Relocation Program 3.2.1 Annex 6 compares the actual construction timetable for the hydroplant and other elements of the Project with the timetable shown in the feasibility report. The appraisal report indicated that the hydroplant would be completed by the end of 1977 but included no implementation schedule--a reflection of former Bank practices. 3.2.2 The Project was completed about two years behind schedule in part because of: (i) late signing of the civil-works contract (about 6 months); (ii) late delivery by manufacturers of excavation equipment (about 6 months); (iii) excavation and construction problems (about 10 months, due to initial use of over-size excavation equipment, extra measures to compensate for poor rock conditions, and welding deficiencies on the penstock); and (iv) late installation of turbines and generators (about 2 months--due to manufacturing, transportation, and testing delays). 3.2.3 More important than the above was the forty-two month delay in relocating the town of El Penol. As long as this program remained incomplete, the other delays in constructing the powerhouse were not of practical signifi- cance to the generation of additional electricity; but filling the reservoir, a two-year process, was crucial because the additional stored water of a,full reservoir could be used by the existing generation facilities of the Guatape powerhouse to generate additional electricity and thereby help to meet the rising national demand for electricity. -8 - 3.2.4 This delay had its origin in the complexity of the program and the determination of the inhabitants of El Penol not to leave their old town unless they obtained the opportunity for a better life in their new town. EPM began to carry out the time-consuming steps of the program in 1973, just two years before the originally scheduled filling of the reservoir. These steps included: (i) land and property acquisition, which depended on, first, title verification and, second, negotiation and agreement on levels of compensation; and (ii) construction of the new El Penol, which depended upon the agreement of the El Penol Negotiating Commission on the scope and design of new municipal facilities and houses. Similar steps were later required for Guatape, which would lose several blocks of houses. 3.2.5 Title verification required documentation which was not always avail- able; and establishing who held title often led to time-consuming procedures. For example, Colombian law confered title on a farmer who could prove that he had used otherwise vacant land for twenty years. The prospect of compensation made it worth the effort of many individuals, including members of the same family, to dispute the title to property previously ignored. 3.2.6 Colombian law also required EPM to negotiate levels of compensation (cash, kind, or both) with each property owner. In 1973 and 1974, during the early stages of land acquisition, EPM lacked sufficient numbers of qualified staff to complete speedily the negotiation process. As a result, the negotia- tions continued over several years, leading to different levels of compensation for similar properties, complaints of unfairness, and unrealistic expectations of rising levels of compensation. EPM discovered instances of speculation -- that is, the same property being bought and sold several times prior to its acquisition by EPM -- and found itself forced by the climate of local public opinion to agree to levels of compensation much higher than expected. Local political and ecclesiastical leaders encouraged property owners to settle only after they had received levels of compensation which met their expectations. Given the volatile political nature of the problem, EPM felt itself constrained from moving aggressively to complete the land-acquisition process. 3.2.7 Reaching agreement with the El Penol Negotiating Commission was also time-consuming. As the Commission had a veto power on the urban development projects proposed by EPM, the Commission obtained eventually a new El Penol with considerably improved municipal facilities and houses over those of the old town--including a new town hall, police station, health clinic, open-air market, training facilities (in effect, a junior college), paved roads, and a full range of public utility services (water, sewerage, and electricity). The houses were equipped with new, modern conveniences: electricity, running water, and in-door toilets. EPM built 830 houses in new El Penol (105, in Guatape). Construction of the new village of El Penol was completed in October 1978, a little more than three years behind schedule. Municipal and ecclesiastical leaders agree that the new El Penol has so many agreeable new features that, in their opinion, nobody would wish to return to the old village. Further, there is no evidence at present of any health hazards as *a result of enlarging the reservoir 1/. 1/ EPM is in the final stages of completing an anti-erosion (reforestation) program on the edge of the reservoir. - 9 - 3.2.8 EPM estimated that the delay in completing the relocation program and the corresponding delay in filling the reservoir caused the following loss in the equivalent of stored generation: 1975: 1,230 GWh; 1976: 1,254 GWh; 1977:,521 GWh; and 1978: 330 GWh. The total for four years amounts to 3,335 GWh--currently the equivalent of about one year's sales for EPM. Failure to complete the relocation program as scheduled has been a contributing factor to the power rationing currently experienced in Colombia. 3.3 Transmission and Distribution Works 3.3.1 At appraisal the transmission/distribution component of the Project consisted of: (i) a 230-kV line (51 km) from the Guatape Station to the Miraflores substation in Medellin, which was completed; and (ii) additional bays and transformer capacity for about 240 MVA at the 10 main substations of the 110 kV ring, increases to the underground network for the central part of Medellin and training in distribution techniques. About one-third of the distribution facilities would be for squatter reclamation areas. In 1977, the Bank agreed to finance 340 MVA of additional transformer capacity at ten substations, rather than 240 MVA, as called for by Schedule 2 of the Loan Agreement. Bank staff did not seek amendment to Schedule 2 because the appraisal report (para. 4.15) stated that, upon completion of the Project, undisbursed funds could be applied to other works associated with the Project. The training component consisted of training two men for 3 weeks at the head- quarters of a foreign consultant in connection with a study of EPM's distribu- tion system. The distribution program for low-income consumers benefitted about 236,000 new customers between 1973 and 1979. Annex 6 sets forth major transmission/distribution works financed by the Bank. - 10 - 3.4 Costs 3.4.1 Based on Annex 8, the table below summarizes the actual and forecast cost of the Project (excluding financing costs). Actual and Forecast Cost of the Project (in millions of US$) Differences Actual Forecast from Local Foreign Local Foreign Appraisal Cost Cost Total Cost Cost Total Amount % I. Direct Cost 1/ 2/ A. Generation Power station, civil works 14.1 14.9 29.0 15.7 23.6 39.3 (10.3) (26.2) Equipment and engineering 4.5 8.6 13.1 5.1 12.0 17.1 (4.0) (23.4) Relocation 3/ 23.9 3/ 6.8 30.7 12.8 - 12.8 17.9 139.8 Sub-total 42.5 30.3 72.8 33.6 35.6 69.2 3.6 5.2 B. Transmission and Distribution 7.8 9.0 16.8 6.6 8.8 15.4 1.4 (9.1) C. Total Direct Cost 50.3 39.3 89.6 40.2 44.4 84.6 5.0 6.0 II. Price Contingency Generation 26.7 11.8 38.5 7.1 3.7 10.8 27.7 256.5 Transmission and Distribution 4.2 4.9 9.1 1.8 1.0 2.8 6.3 225.0 Sub-total 30.9 16.7 47.6 8.9 4.7 13.6 34.0 250.0 III. Total Project Cost in Current Prices 81.2 56.0 137.2 49.1 49.1 98.2 39.0 39.7 1/ In constant 1972 prices, using indexes set forth in Annex 9. 2/ Reflects pro-rata distribution of physical contingencies. 3/ Includes expenditures amounting to about US$0.8 million (in constant prices) for relocation program in years 1969-1971. 3.4.2 In current prices and excluding interest charges, the Project cost amounted to US$137.2 million (see Annex 7 for sources), about US$39.0 million (or 40%) more than expected at appraisal. In constant prices (1972), the direct cost of the Project amounted to US$89.6 million (item C), just 6% more than expected at appraisal. - 11 - 3.4.3 The relocation program (item A) had a cost increase of US$17.9 mil- lion in constant prices because of higher-than-expected values for property acquisition and increases in the scope and design of municipal facilities and houses (para. 3.2.3 -.8). The cost of the transmission and distribution components in constant prices was about US$1.4 million higher than expected because of increased substation capacity (item B). These cost increases (US$19.3 million) were partially offset by lower-than-expected costs for civil works, equipment, and engineering (US$14.3 million). The lower-than-expected cost of the civil works reflected an over-estimation of excavated material for the Santa Rita dam (Annex 10). The foreign cost of imported equipment appears to have been overestimated. 3.4.4 Price contingencies were estimated at US$13.6 million, based on an expected annual inflation rate of 4% in foreign costs and 10% in local costs. While these expectations were based on recent trends at the time of appraisal, actual foreign inflation in 1972-1979 had an average rate of 14.2% annually; local inflation, 23.8%. 3.5 Loan Disbursement, Loan Allocation, and Project Operations 3.5.1 Annex 11 shows that actual disbursements lagged forecast disbursements. Only about 69% of the loan had been disbursed by the original project completion date (December 1977), about 83% by the original loan closing date (December 1978). Because of Project delays (paras. 3.2.2-3.2.8), the Bank twice extended the closing date; and the final closing date was June 30, 1980. The Bank also revised the allocation oE the proceeds of the loan to reflect extra costs (in current price) for installing generators and turbines and expanding substation capacity (Annex 12). 3.5.2 The four generating units of Guatape II entered into commercial operation on, respectiveLy: February 1, February 14, and June 8, 1979, and January 20, 1980. Subsequent performance has been satisfactory. IV. PROJECT JUSTIFICATION 4.1 EPM Energy Sales 4.1.1 The primary purpose of the Project was to help meet the growing demand for electricity in the service areas of EPM and the central inter- connected system. Within the service area of EPM, the actual level of sales was close to the forecast level during the originally expected and actual periods of project construction -- respectively, 1972-1977 and 1972-1979 (Annex 12). EPM sales to the interconnected system in 1975-1979 varied from forecast levels in response to the delayed completion of Chivor I (1975-1977) (para.1.4.1), the need to store water in the El Penol reservoir for future use (1978), and the delayed completion of Guatape II (1977-1979). - 12 - 4.2 Least-cost Justification 4.2.1 The appraisal report identified Guatape II as the "next step" of a ten-year least-cost development program for the central interconnected system. According to the appraisal report, the analysis was based on least-cost timing of projects for which there was firm engineering data -- Guatape II, Chivor II, San Carlos I, Mesitas, and an unnamed thermal plant to be inaugurated in 1985, using varying rates of discount (8-12%). The expected rate of exchange varied between US$1.00 = Col$20 to Col$30, and expected fuel costs varied be- tween Col$90 to Col$108 per ton of oil. The World Bank and the InterAmerican Development Bank have supported all of the above-mentioned hydro projects with loans. 4.2.2 In constant prices (1972), the actual and forecast per-kW base costs of the hydro plant plus transmission line were, respectively, US$272 and US$259. The actual cost compares favorably with other hydro projects built during this period. For example, the Sao Simao plant in Brazil (829-BR) had a per-kW cost of US$286 (in 1972 prices) and the Chivor I project in Colombia (Loan 681-CO) had a per-kW cost of US$232 (in 1970 prices). As compared with a re-ordering of San Carlos I and Mesitas, Guatape II remains as the least-cost "next step", as the other projects were too large, given expected market growth, to be economic. 4.3 Internal Rate of Return 4.3.1 The appraisal report indicated an internal rate of return on invest- ment of 16%. On the basis of actual costs (investment and operating), tariffs, and expected "downstream" regulation benefits, a similar analysis shows a return of just under 11% (Annex 14). This difference from the appraisal forecast results from the modest (6%) cost increase on the Project, the 28% decrease in real terms in the summary level of actual tariffs (average revenue per kWh sold) from that forecast at appraisal, and the delay in completion. V. FINANCIAL PERFORMANCE 5.1 Actual and Forecast Data 5.1.1 Annexes 15, 16, 17, and 18 compare actual and forecast key financial ratios, income statements, funds statements, and balance sheets for the years 1972-1979. 5.2 Actual and Forecast Financial Performance, 1972-1979 5.2.1 The appraisal forecast reflected the assumption that over the expected five-year construction period of the project (1972-1977) rising levels of sales, tariffs, and revenues would permit the power department of EPM to maintain an annual return of about 9% on net average revalued assets and a summary contribution ratio of about 30%. During this period, EPM's actual financial performance deteriorated (1973-1974) and then improved slowly after 1975, largely reflecting the efforts of the new general manager appointed in 1976. For lack of adequate tariff increases, ENP's financial performance for 1972-1979 was lower than that expected at appraisal. - 13 - 5.2.2 EPM's rate of return varied between 4.4% in 1973 and 13.0% in 1977 on assets revalued for local inflation (for the local-cost component of assets) and changes in the exchange rate between the US dollar and the peso (for the foreign-cost component of assets). As this method of revaluation did not generate sufficient levels of internal cash generation--the summary con- tribution ratio for 1972-1977 was only 18%--the Bank and EPM agreed on a new revaluation methodology in connection with the Shareholders' Agreement for the San Carlos I Project (1582-CO): to revalue all assets using a the national "blue collar" cost-of-living index. The Bank and EPM also agreed that EPM would earn a return on fully revalued assets of 7% in 1978, 6% in 1979, and 9% thereafter. 5.3 Tariff Increases and Inflation, 1972-1979 5.3.1 As measured by average annual rates of change, tariff increases lagged inflation in 1972-1975 (respectively, 19.0% vs. 23.6%); but in 1976-1979, tariff increases modestly surpassed inflation (27.5% vs. 25.2%). For the period 1972-1979, the average annual local inflation rate was 23.8% while tariffs increased 24.9% annually. On a summary (cumulative) basis, actual average revenue per kWh sold was 28.1% below the expected level (in constant 1972 prices--Annex 16). The positive trend in tariff levels followed the Bank's suspension of disbursenents on Loan 874-CO (para. 1.2.5) and was re-inforced by agreements reached in connection with loans to the power sector since 1978. 5.4 Actual and Expected Financing and Expenditure, 1972-1979 5.4.1 As shown in the summary table below, for the period 1972-1979, the increase in total applications of funds (Col$890.3 million) and the shortfall in internal cash generation (Col$236.8 million) was financed by an increase in borrowing (Col$1,074.3 million) and an increase in grants, contributions and other sources (Col$52.8 million). The shortfall in summary internal cash generation was primarily due to the decrease (28.1%) in the real level of tariffs (average revenue per kWh sold) below the level expected at appraisal (para. 5.3.1). The increase in applications (31.0%) was primarily due to increased expenditures for distribution facilities (for the period 1972-1977) and expenditures for the Guadalupe IV and Playas Hydro Power Projects (in 1978 and 1979), which were not foreseen at appraisal. Summary Sources and Applications of Funds, 1972-1979 (in million of constant 1972 Col$) Appraisal Percent Difference Actual Forecast from Appraisal Net internal cash generation 773.7 1,010.5 (23.4) Borrowings 2,865.1 1,790.8 60.0 Grants, contributions, and other sources 121.8 69.0 76.5 Total Sources: 3,760.6 2,870.3 31.0 Total Applications 3,760.6 2,870.3 31.0 - 14 - VI. INSTITUTIONAL PERFORMANCE 6.1 The Bank 6.1.1 During Project preparation, neither Bank staff nor EPM staff antici- pated the depth and complexity of the problems which materialized in respect of the relocation program. This clearly resulted from the very limited experience both institutions had with relocation programs. 6.1.2 The Bank acted correctly in unofficially suspending disbursements to EPM and ISA in 1974-1975. Low tariffs on the part of ISA's shareholders were contributing to the financial difficulties of ISA and the delayed comple- tion of the Chivor I Project. Nevertheless, financial constraints did not delay progress on the Guatape II Project, which could move no faster than the execution of the relocation program. By suspending disbursements unofficially and drawing the attention of the authorities to the fact that they were not complying with certain covenants in the Guarantee Agreements for Loans 861-CO and 874-CO, the Bank obtained positive tariff action and financial support for ISA among its shareholders. 6.1.3 In 1980, the Bank modifit-d the emphasis of its power lending to Colombia by making new loans to IS,.'s shareholders, who requested a re-allocation of new projects. Annex 2 sets forth details and background on this decision. The Bank assisted ISA's shareholders in reaching agreement on ISA's role as chief planner anfd dispatcher for the interconnected system. Future system expansion is expected to be based on least-cost principles. 6.2. The Borrower 6.2.1 EPM's financial performance for 1972-79 was lower than that expected at appraisal. However, this performance has improved substantially in 1980. EMP has become the strongest power company in Colombia -- managerially, tech- nically, and financially. EMP's current strong position represents an improve- ment over that of the early 1970's, when management was highly politicized and the company was not well managed. 6.2.2 As mentioned, EPM did not anticipate the depth and complexity of the problems of relocation and accordingly did not make appropriate plans, a reflection of the company's inexperience with relocation programs. 6.2.3 EPM's delayed contributions to ISA in 1974 and later reflected its own financial problems and serious doubts about the growing role of ISA, which, OED makes clear (Report No. 2720, October 29, 1979), was due to EPM's reluctance to subsidize other regions with funds generated within EPM's service area, particularly during a period of serious cash flow problems. However, in the last four years, EPM has supported ISA with timely financial contributions; and taken substantial action to help preserve the joint develop- ment effort through ISA, exercising positive leadership in the resolution of difficult issues faced by ISA's Board (see President's and Staff Appraisal Reports for the Playas Hydroelectric Project). - 15 - VII. LESSONS TO BE LEARNED 7.1 Relocation Programs 7.1.1 Given the extreme complexity and costliness of relocation programs, careful consideration should be given to alternative means of obtaining needed properties (direct compensation in cash vs. relocation). If relocation is the preferred alternative, realistic planning is a critical factor. In addition, such programs should be carried out by staffs of adequate size and training to avoid the delays which plagued Guatape II. This lesson appears to have been learned by the Bank, as evidenced by the particular attention now given to relocation programs. 7.2 Tariff Levels 7.2.1 The action taken by the Bank to help maintain tariff levels in Colombia at levels sufficient to maintain the financial integrity of its borrowers was justified. The Bank should continue to be prepared to take strong action when all realistic attempts to resolve serious financial problems threatening the completion or objectives of a project fail to produce progress over a reason- able period of time. August 13, 1981 -16- ANNEX 1 COLOMBIA EDMESAB PUBLICAS DE MMEDLLIN (EPM) GUATAP II (874-CO) IBRD Power Loans Borrowers Total and Year of Loan Amount Amount Loans Loan No. Agreement Project Description (MUS$) (MUS$) GOVERNMENT 1583-CO 1978 500-kV Interconnection (Central System/ 50.00 50.00 Atlantic System) ISA 575-CO 1968 Central System Interconnection (230 kV transmission lines and substations 18.00 681-CO 1970 Chivor I project (4 x 125 MW hydro) 52.30 1582-CO 1978 San Carlos I (4 x 155 MW hydro) 126.00 1725-CO 1979 San Carlos II (4 x 155 MW hydro) 72.00 268.30 EEEB 246-co 1960 Laguneta unit 4 (1 x 18.0 MW hydro) 17.60 Salto II units 1 and 2 (2 x 33.0 MW hydro) Zipaquira unit 1 (1 x 33.0 MW thermal) 313-CO 1962 Zipaquira unit 2 (1 x 37.5 MW thermal) 50.00 El Colegio units 1, 2, and 3 (3 x 50.0 MW hydro) 537-CO 1968 El Colegio units 4, 5, and 6 (3 x 50.0 MW hydro) 18.00 Canoas project (1 x 50.0 MW hydro) 1628-CO 1978 Measitas Hydro (El Paraiso 3 x 90 MW; La Guaca 84.00 3 x 110 MW; pumpint 3 x 10 MRP: Sesauile dam strengthening) 1807-CO 1980 Bogota Distribution 87.00 256.60 EPM 225-CO 1959 Troneras unit 1 (1 x 18.0 MW hydro) 12.00 Guadalupe III units 1 and 2 (2 x 45.0 MW hydro) 282-CO 1961 Troneras unit 2 (1 x 18.0 MW hydro) 22.00 Guadalupe III units 3. 4, and 5 (3 x 45.0 MW hydro) 369-CO 1964 Guatape I units 1 and 2 (2 x 66.0 MW hydro) 2/ 45.00 874-CO 1973 Guatape II units 1, 2, 3, and 4 (4 x 70 MW hydro) 56.00 1868-CO 1980 Guadalupe IV Hydro Power Project 125.00 1953-CO 1981 Playas Hydro Power Project 85.00 345.0 CVC/CHIDRAL 38-CO 1950 Anchicaya units 1 and 2 (2 x 12.0 MW hydro) 3.53 113-CO 1955 Anchicaya unit 3 (1 x 20.0 MW hydro) 4.50 Yumbo unit 1 (1 x 10.0 MW thermal) 215-CO 1958 Yumbo unit 2 (1 x 10.0 MW thermal) 2.80 255-CO 1960 Yumbo unit 3 (1 x 33.0 MW thermal) 25.00 Calima units 1 and 2 (2 x 30.0 MW hydro) 339-CO 1963 Calima units 3 and 4 (2 x 1n.n MW hydro) 8.80 44.63 CHEC 39-CO 1950 La Insula units 1 and 2 (2 x 10.0 MW hydro) 2.60 217-CO 1959 La Esmeralda units 1 and 2 (2 x 13.3 MW hydro) 4.60 7.20 LEBRIJA 54-CO 1951 Palmas units 1 and 2 (2 x 4.4 MW hydro) 2.40 2.40 ELECTRIBOL 347-CO 1963 Cospique units 2 and 3 (2 x 12.5 MW thermal) 5.00 5.00 Total Loan Amounts 979.13 979.13 1/ Does not include the 1.000 MW Guavio Hydroelectric Project of EEB (Loan 2008CO) for US$ 359 million of 1981): and Villa2e Electrification Project of 70RFLCA (Loan 1000-C" for TIS$ 36 million). 2/ Subsequently increased to 4 x 70 MW. ANNEX 2 - 17- - Page 1 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO) Institutional Issues and Bank Lending to the Sector 1. During the last two decades, the central objective of Bank lending to the power sector of Colombia has been to meet the growing demand for elec- tricity through a least-cost power-sector program of expansion and operation. Between 1968 and 1979, the major beneficiary of Bank lending in the power sector has been, not EPM, but ISA. Bank strategy for the sector was, and continues to be, strengthening ISA in its role as chief planner, dispatcher, and major generator to the interconnected system. To this end, the Bank made five loans benefitting ISA, amounting to about US$318 million and only two loans to the shareholders amounting to US$140 million during the decade of the 1970's. 2. Between 1974 and 1978, the Bank made no new loans to the power sector because of tariff-related financial constraints and institutional disputes. For example, in 1974, ISA experienced construction delays and cost increases on the Chivor I Project (681-CO), which the shareholders had great difficulty in covering. By the end of summer, 1974, EPM and the other shareholders owed ISA, respectively, Col$27.5 million and Col$97.2 million in overdue contribu- tions to ISA's expansion program (in the form of share and bond purchases). ISA owed about Col$125.0 million to its contractors, with whom relations had deteriorated. Further exacerbating the situation was EPM's refusal to purchase additional shares in ISA until ISA's by-laws were amended to permit the share- holders to play an expanded role in the construction and operation of new major power plants through the formation of satellite corporations (with varying participation by ISA and by individual shareholders). 3. In October 1974, as EPM had failed to earn its covenanted (9%) return and could not meet its covenanted obligation to liquidate the debt of the water-sewerage department to the power department, the Bank unofficially suspended disbursements on Loan 874-CO. The Bank conditioned a resumption of disbursements to EPM's Implementing satisfactory tariff increases, liquidating its inter-departmental debts, paying its overdue contributions to ISA (includ- ing a restoration of its equity participation), and providing assurances of contributions to ISA's 1975 expansion program. The Bank also unofficially suspended disbursements on loans to ISA (575-CO and 681-CO) until ISA's other shareholders paid their overdue contributions and unanimously agreed to ISA's 1975 budget, including arrangements for financing. The Bank informed the Government that it the Lntormal suspension became a formal suspension, the Bank would invoke covenants in the Guarantee Agreements of the above loans, requiring the Government to provide financing to complete the projects. By May 1975, the Bank observed sufficient, if not complete progress, on the issues of tariffs and contributions to resume disbursements on all three loans. - 18 - ANNEX 2 Page 2 4. In later years (1975-1977), the shareholders of ISA were slow to reach agreement on items of importance: (i) the admission of new shareholders to ISA; (ii) a least-cost system-wide expansion plan; and (iii) the recognition in contracts with ISA of price differentials on different classes of electri- city (firm, secondary, etc.). Throughout this period, the Bank continued to support the concept of centralized planning, construction, and operation of the national grid; and resisted proposals that would weaken ISA. 5. In 1978, having observed sufficient progress on tariffs and sectoral issues, the Bank resumed lending: Loan 1582-CO to ISA for the San Carlos I Project. In connection with this loan, the shareholders agreed on a revision of ISA's by-laws. ISA would define the future generation expansion program for the interconnected system and ISA would build and own plants requiring the joint effort of all shareholders. Subject to ISA's approval, plants of regional interest might be built by shareholders. It was expected that ISA would be responsible for planning, building, and operating all plants of national interest. Since then, ISA has functioned on this basis, which the Bank fully supported with new lending to the sector in 1978 and 1979. 6. By 1979, ISA had become a major supplier of electricity to the interconnected system. It was building an additional 1,910 MW of generating capacity; and was formulating plans to build about 70% of the generating capa- city additions for the interconnected system through 1987. Concerned at the growth of ISA and the associated loss of parity in relative generating capacity among themselves, the shareholders proposed a reallocation of construction and ownership of about 2,750 MW of additional planned generating capacity (Playas, 200 MW; Guavio, 1,000 MW; Betania, 500 MW; and Urra, 1,050 MW). The Bank did not object to EPM's building Playas (1953-CO) because of its small size; but it cautioned that a shift of the burden of construction financing from ISA, which had sector-wide financial resources, to the individual shareholders would lead to cases of high and unstable tariffs, financial problems, and construction delays. The Bank proposed that the shareholders agree on a long-term objective for direct ISA ownership of a major portion of sector capacity and energy and on joint ownership (ISA-shareholder) of the Guavio, Betania, and Urra plants, which would be constructed and operated by individual shareholders (subject to the presentation of viable financing plans). 7. In 1980, after extensive discussions, the Government and ISA's shareholders confirmed that: (a) the long-term relative "weight" of ISA would be at least 33% of over-all sector capacity and energy; (b) subject to the presentation of viable financing plans, individual ISA shareholders would build and own 50% and 60%, respectively, of the Betania and Guavio plants. Joint ownership of the Urra plant would continue to be studied; and (c) ISA would own and operate all trunk transmission lines of the interconnected system. - 19 - ANNEX 2 Page 3 8. The Bank's strategy for helping the power sector in the 1980's continues to be strengthening ISA as chief planner, dispatcher, and major generator for the interconnected system. However, as the shareholders have chosen to play a greater role in the constiuction and operation of new plants (within the context of a least-cost expansion program), the Bank has included in its lending operations substantial lending for generation expansion to the shareholders. To this end, the Bank made two loans to the shareholders in 1980-1981, amounting to about US$210 million (not including loans amounting to about US$210 million (not including loans amounting to US$482 million for the Bogota Distribution, and Guavio and Village Electrification Projects). - 20 - ANNEX 3 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) National Generation Development Program 1981-88 Plant Type Owner Capacity Year (MW) of Comissioning Zipaquirg IV S ISA-EEEB 66 1981 Chivor II H ISA 500 " Paipa III S ICEL 66 " Chinl GT ISA 100 1982 Ayurg H EPH 19 " El Paralso - La Guaca H EEEB 600 " Cerrej6n I S CORELCA 157 " San Carlos I H ISA 620 " Zipaquir! V S ISA-EEEB 66 1983 San Carlos II H ISA 620 1984 Jaguas H ISA 170 "1 Calderas H ISA 15 " Tasajero S ICEL 132 " 2/ Salvajina H CVC 180 Cerrej6n II S CORELCA 157 " 2/ Guadalupe IV E EPM 216 Playas H EPM 240 198_2/ Betania H ICEL 500 " Guavio H EEEB 1000 1987 Urra H CORELCA-ISA 1050 1988i' Total capacity addition of which: 6474 (1) Under Construction H 4440 S 355 CT 100 Sub-Total 4895 (2) Future H 1290 S 289 GT - Sub-Total 1579 (3) Total Program H 5730 S 644 GT 100 Total 6474 1/ H: Hydro; S: Steam; GT: Gas Turbine. 2/ Future projects. - 21 - ANNEX 4 COLOMBIA EMPRE3SAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Evolution of EPM System 1971 1978 1979 (Actual) (Actual) (Expected) (Actual) A. Installed Capacity (MW) (i) Troneras (Hydro - H) 36 36 36 36 (ii) Guadalupe (I, II, III) (H)* 320 302 320 302 (iii) Piedras Blancas (H) ** 11 6 11 6 ** (iv) Rio Grande (H)** 80 75 80 75 (v) Guatape I (H) 280 280 280 280 (vi) Guatepe II (H) - - 280 280 727 699 1,007. 979 (vii) Rights in ISA - 80 80 80 TOTAL 727 779 1,087 1,059 B. Transmission System (i) Length (km) 220 kV 128 230 - 230 110 kV 735 800 - 829 44 kV (subtransmission) 160 64 - 64 (ii) Substation Capacity (MVA) 770 - - 3,913 C. Distribution System (i) Length (km) Primary 1,680 2,151 - 223 Secondary 43,500 43,934 - 43,991 (ii) Transformer Capacity (MVA) 600 657 - 672 D. Other Operating Data (i) Number of retail customers (000) 190 261 - 282 (ii) Power department employees 1,370 1,717 -1856 (iii) Energy requirements (GWh) 2,150 3,185 - 3,974 (iv) Sales (GWh) 1,685 3,035 3,084 3,249 (v) Peak load (GWh) 422 957 825 875 (vi) Customers per employee 139 152 - 152 (vii) MW per employee 1.9 2.2 - 1.8 * Guadalupe I was derated from 40 MW to 22 MW and will be replaced by Guadalupe II (222 MW; Loan 1868-CO). ** Represents effective, rather than installed capacity. April 16, 1981 - 22 - ANNEX Page 1 of 2 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Major Covenants of the Loan and Guarantee Agreements 1. The Loan Agreement obligated EPM to: (a) operate each of its Departments separately, maintaining separate records adequate to reflect the operations and financial conditions of each Department (Section 5.01); (b) provide the Bank with audited financial statements of each Department within four months after the end of the preceeding fiscal year (Section 5.02); (c) seek prior Bank agreement to any long-term borrowing if net revenues shall be less than 1.4 times debt-service requirements; and revalue foreign-currency long-term debt to reflect the prevailing lawful rate of exchange (Section 5.05); (d) incur no long-term for the Telephone or Water-Sewerage Departments unless the lender explicitly agrees to forego any rights he may have to obtain satisfaction from the assets or revenues of the Power Department (Section 5.06); (e) maintain tariffs for each Department adequate to cover administrative and operating expenses, debt service, and a reasonable contribution to expansion; and earn 9% annually on net average revalued assets of the Power Department (Section 5.07); and (f) liquidate indebtedness of the Water-Sewerage Departments to the Power Department, amounting to Col$51.4 millions, on a schedule acceptable to the Bank. - 23 - ANNEX 5 Page 2 of 2 2. The Guarantee Agreement obligated the Government of Colombia to: (a) provide sufficient funds to complete the Project, whenever there was reasonable cause to believe that funds available to EPM would be inadequate to complete the Project (Section 2.03); (b) take all steps necessary to permit EPM to earn its covenanted rate of return (Section 3.02); and (c) take all steps necessary to enable EPM to obtain loans within and without Colombia (Section 3.03). COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Project Timetable Per Estimate of Engineering Consultant Type of Work in 1971 Actual Number of Months Difference No. of No. of Start Completion Months Start Completion Months Start Completion Execution I. Power Plant: Civil Works 1. Santa Rita Dam, auxiliary dams 1 & 2 treatment of rim areas 1 to 4 (a) Bidding & award 4/72 9/72 6 9/72 10/72 4 3 1 (2) (b) Construction 10/72 5/75 32 1/73 7/75 31 3 2 (1) 2. Treatment of rim areas 5 to 11 (a) Bidding & award 7/72 12/72 5 7/72 7/72 5 - - - (b) Construction 3. Powerhouse and related works (a) Bidding & award 6/72 12/72 6 5/73 9/73 5 11 10 (1) (b) Construction 5/73 12/76 43 11/73 8/78 57 6 20 14 i) intake works 5/73 3/75 15 11/73 3/76 26 7 18 11 ii) inlet tunnel, access 7/73 10/76 38 4/74 9/77 43 8 13 5 tunnel, & valve tank iii) surge tank 7/73 11/75 28 12/74 5/77 30 16 18 2 iv) penstock 7/73 6/77 47 12/75 5/78 30 29 12 (17) v) powerhouse 5/73 10/76 41 7/74 8/78 49 14 22 8 vi) tailrace tunnel 6/73 12/76 43 12/73 4/78 52 7 16 9 4. Installation of Generating Equipment (Construction only) 1/ (a) turbines 4/75 11/77 32 5/76 3/79 34 14 16 2 (b) generators 12/75 11/77 24 10/77 11/79 26 22 24 2 II. Relocation Program (construction only) 1/ (a) El Penol 4/72 4/75 36 1/77 2/ 10/78 2/ 22 2/ 56 42 (14) 2/ (b) Guatape 7/73 10/74 15 3/77 7/78 16 46 47 1 (c) Protection works. Guatape i) first stage 1/73 6/73 5 N.A. N.A. N.A. N.A. N.A. N.A. ii) second stage 9/74 5/75 9 N.A. N.A. N.A. N.A. N.A. N.A. III. 230 kV Line (construction only) 2/ (a) Guatape substation 2/76 10/76 9 10/ 77 9/78 12 21 24 3 (b) Miraflores substation 2/76 10/76 9 4/77 5/78 14 14 20 5 (c) Line 10/74 3/77 18 5/77 2/78 10 19 '9 (8) IV. Substations & Distribution Works 1/ No schedule prepared. See Annex 7. - - - 1/ Time period for bidding and award not shown in bar charts. 2/ Actual data does not reflect years prior to 1977, when RPM was solving legal-coupensation problems of relocation program. - 25 - ANNEX 7 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO.) Bank-financed Transmission and Distribution Works Fianc1g Bank Non-dank Progress Km MVA (Added) 220 - KV pi- Miralorres (Nwdelliln) a 100 S1 Singfe-phase trans Substorions ZvTP ower staoan a 100 6m57 Miraflores (Medellin) X 100 657 2 Bs 115 - KV wapi - Cementos Nore a 100 62 Subst. Guoyabal-Subst.Con trcJ a 0 5 Substatin, Listed in appraisal report as "distribution Barbola a 100 30 Transformer uss in distr. Ria Negro. Colombia a 100 Salto III a 0 Depinds om nickel mines development. Central (1) ,a x 100 60 Transformadoes not Bank financed . Guayabol (2) I a 100 60 TraniFormers not Bank financed. Bel4n (3) a X 100 25 Transormrs not Bank Financend. Zamora (Bello) (4) a 300 60 Rionegro (5) X 100 30 PeAol (6) X 700 7 Movable substation (7) X 100 22.4 Zamora (84110) (8) R 70 60 Further expansion Colombia (9) a 70 60 Further expansion. Guayabal (10i Anc6n Sur i 70 60 Further exoansion . Dispatch center a 100 Comunications. Distribution Lines/Underground Sysems East circuit (Guatook - Pwtol) X 100 44 Kv EPM combined East circuit ith Rio Negro Petol-lie. North circuit a 10 Connection to Nor*h Antioquic, never exe- cuted Further exponsic M&sher network X a 100 75 Supply cables, main equipment, transforme bank financed. Equ;,Pen AMerils DisvTrbution Prcnsfonners X 75 83.3 Added purchases program. Cables (uqderg,ound) a 75 219 Various I 90 Boroia Equipment included in obove. Tralning a 100 Execured NY We&tinghoue. Mayo, 3980. COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO ) Actual and Forecast Project Cost and Financing (in millions of current US$'s) Actual Expected Percent Difference Local Foreign Local Foreign Between Actual Expenditures Currency Currency Total Currency Currency Total and Expected A. Generation Civil Works Santa Rita Dam 7.7 6.5 14.2 6.1 8.5 14.6 Guatape II Power Station 12.9 18.5 31.4 7.8 12.4 20.2 MiCzellaneous 41.0 0.3 41.3 10.7 - 10.7 Sub-total 61.6 25.3 86.9 24.6 20.9 45.5 90.9 Electrical Equipment Turbines and Generators 2.8 9.6 12.4 0.6 6.8 7.4 Other 2.4 5.6 8.0 0.8 4.7 5.5 Sub-total 5.2 15.2 20.4 1.4 11.5 12.9 58.1 Engineering 2.4 1.6 4.0 3.6 0.2 3.8 5.3 Contingencies Physical - - - 4.0 3.0 7.0 Price - - - 7.1 3.7 10.8 Sub-total - - - 11.1 6.7 17.8 - Sub-total, generation 69.2 42.1 111.3 40.7 39.3 80.0 39.1 B. Transmission I C Transmission line 1.7 1.5 3.2 0.4 1.3 1.7 o Sub-station 1.3 2.6 3.9 - 1.3 1.3 Contingencies-Physical - - - - 0.2 0.2 -Price - - - 0.2 0.4 0.6 Sub-total, transmission 3.0 4.1 7.1 0.6 3.2 3.8 86.8 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO ) Actual and Forecast Project Cost and Financing (in millions of current US$'s) Actual Expected Percent Difference Local Foreign Local Foreign Between Actual Currency r-1uirrenv Total eTo La and Expected C. Distribution Net work expansion 7.1 4.5 11.6 5.8 5.5 11.3 Training 0.2 0.1 0.3 - 0.1 0.1 Substation 1.7 5.2 6.9 - - - Contingencies-Physical - - - 0.4 0.4 0.8 -Price - - 1.6 0.6 2.2 1 Sub-total, distribution 9.0 9.8 18.8 7.8 6.6 14.4 30.6 D. Total Project Cost 81.2 56.0 137.2 49.1 49.1 98.2 39.7 E. Interest During Construction - 12.8 12.8 - 10.9 10.9 17.4 Total 81.2 68.8 150.0 49.1 60.0 109.1 37.5 II. Finances IBRD - 56.0 56.0 2.7 53.3 56.0 - Suppliers Credits-Turbines - 3.9 3.9 - 3.3 3.3 18.2 -Generators - 3.9 3.9 - 3.4 3.4 14.7 Economic Development Institute of Antioquia - - - 1.2 - 1.2 - National Government 76. 8 - 76. 8 - - - Local Bank Loans 44 - 4.4 7.0 - 7.0 (37 2) EPM - 5.0 5.0 38.2 - 38.2 (86.9) Total 81.2 68.8 150.0 49.1 60.0 109.1 37.5 0: ro - 28 - ANNEX 9 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO) Price Deflator Indexes for Project Costs National Consumer Price Index (Blue Collar)-! Annual Deflator Year End Average Annual Average 1972 607.3 573.1 1.129 1.0652/ 1973 759.4 699.0 1.411 1.299 1974 963.5 875.1 1.791 1.626 1975 1136.0 1082.0 2.111 2.011 1976 1430.4 1297.9 2.658 2.412 1977 1849.3 1749.7 3.436 3.252 1978 2179.2 2042.4 4.050 3.796 1979 2828.6 2548.9 5.257 4.737 1980 N.A. 3207.5 N.A. 5.960 Average Annual International Price Annual Index.3/ Deflator 2/ 1972 45.2 1.046 1973 53.9 1.248 1974 66.8 1.546 1975 76.5 1.771 1976 77.8 1.801 1977 84.5 1.956 1978 100.0 2.315 1979 114.5 2.651 1980 128.2 2.982 I/ 100 = July 1954-June 1955. 2/ 100 = January 1972. 3/ 100 = 1978. - 29 - ANNEX 10 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO ) Actual and Forecast Quantities of Excavated Material Percent Difference Actual Forecast Between Actual and Forecast A. Santa Rita Dam Common excavation 793,000 1,670,000 (52.5) Rock excavation 51,000 520,000 (90.2) Fill 3,836,000 2,565,000 49.6 B. Guatape II (i) Intake works & foundations Common excavation 397 400 ( 0.8) Rock excavation 2,449 2,200 11.3 Concrete 4,881 4,000 22.0 (ii) Intake tunnels, valve chamber, and surge tank Common excavation 516 2,200 (76.5) Rock excavation 86,355 87,200 ( 1.0) Concrete 4,005 3,220 24.4 (iii) Penstock and discharge tunnels Common excavation 2,002 2,000 0.1 Rock excavation 184,062 174,600 5.4 Concrete 9,809 10,400 ( 5.7) (iv) Powerhouse Common excavation - - - Rock excavation 33,800 37,500 ( 9.9) Concrete 8,162 8,700 ( 6.2) - 30 - COMMIIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Actual and Forecast Schedule of Disbursements (in millions of US$'s) Actual Cumulative Disbursements as a Percent of IBRD Fiscal Year Forecast Cumul- and Half Actual Forecast ative Disburements 1972 June 30, 1973 1.6 6.4 25.0 1973 December 31, 1973 2.4 12.8 18.8 June 30, 1974 4.8 19.9 24.1 1974 December 31, 1974 7.4 27.0 27.4 June 30, 1975 11.9 35.4 33.6 1975 December 31, 1975 17.4 43.9 39.6 June 30, 1976 24.2 48.1 50.3 1976 December 31, 1976 30.4 52.3 58.1 June 30, 1977 34.5 54.1 63.8 1977 December 31, 1977 (original completion date) 38.5 56.0 68.8 June 30, 1978 42.1 56.0 75.2 1978 December 31, 1978 (original closing date) 46.4 56.0 82.9 June 30, 1979 48.3 56.0 86.3 1979 December 31, 1979 (amended closing date) 51.9 56.0 92.7 June 30, 1980 (amended closing date) 54.5 56.0 97.3 1980 December 31, 1980 56.0 56.0 100.0 April 21, 1981 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO ) Original, Revised, and Final Loan Allocations (in millions of US$'s) Revised Revised Revised Final Category Original (Nov. 9,1977) (Jan. 17,1979) (Nov. 14,1979). (January, 1981) I. Civil Works (power station intake 21,600 24,600 22.700 25200 25,485 and dam heigh,1teninag) II. Electro-mechanical equipment 4,700 4,800 3,300 5,300 5,275 (excluding turbines and generators) [II. Transmission line & substation 2,600 3,700 3,700 3,800 3,777 materials and equipment IV. Distribution equipment and training 5,600 8,200 8,100 8,800 8,571 V. Engineering consulting services 1,900 1,500 1,600 1,600 1,592 VI. Interest and other charges 10,900 10,900 10,900 11,300 11,300 TII. Unallocated 8,700 2,300 3,700 - - Total 56,000 56,000 56,000 56,000 56,000 Ho COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Actual and Forecast EPM Sales by Customer, 1972-1980 (in GWh) 1972 1973 1974 1975 Actual Forecast Actual Forecast Actual Forecast Actual Forecast Industrial 608 569 664 625 697 686 710 753 Commercial 140 148 161 160 184 174 187 189 Residential 924 950 980 1,017 1,056 1,087 1,139 1,160 Other 1/ 256 203 299 230 332 262 384 300 Energy billed, own system 1,928 1,870 2,104 2,032 2,269 2,209 2,420 2,402 Interchange with ISA 303 681 633 1,187 688 529 389 243 TOTAL 2f, 2-31 2i,551 2,737 3219 29-57 2,738 2,809 2,645 Summary Sales 1976 1977 1972-1977 1978 Actual Forecast Actual Forecast Actual Forecast Actual Forecast Industrial 818 827 803 908 4,300 4,368 ( 1.6) 893 997 Commercial 198 205 196 223 1,066 1,099 ( .3.0) 225 242 Residential 1,214 1,235 1,157 1,315 6,470 6,764 ( 4.4) 1,346 1,396 g Other 431 343 454 392 2,156 1,730 24.6 571 449 Energy billed, own system 2,661 2,610 2,610 2/ 2,838 13,992 13,961 0.2 3,035 3,084 Interchange with ISA 439 223 241 853 2,693 3,716 (27.5) 26 714 TOTAL 3,100 2,833 2,851 3,691 16,685 17,677 ( 5.6) 3,061 3,798 Summary Sales 1979 1972-1979 Percent Difference Actual Forecast 3/ Actual Forecast from Appraisal Industrial 942 Not Available (NA) 6,135 NA NA Commercial 236 NA 1,527 NA NA Residential 1,416 NA 9,232 NA NA Other 655 NA 3,382 NA NA Energy billed, own system 3,249 NA 20,276 NA NA Interchange with ISA 226 NA 2,945 NA NA TOTAL 3,475 3,426 23,221 24,901 (6.8) 1/ Bulk supply for EPM's service area (adjacent municipalities and Medellin street lighting). 2/ Actual sales were below forecast levels primarily because of national energy rationing. 3/ Taken from Annex 6.6 Staff Appraisal Report for San Carlos I Hydro Power Project (Report No. 1850a-CO, dated May 17, 1978) (Loan 1582-CO). April 28, 1981 - 33 - ANNEX 14 COlaffiA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Actual and Forecast Internal Rate of Return (in millions of constpnt 1972 Col$) 1981- 1983- 1. A raisal Data 1972 1973 1974 1975 1976 1977 1978 1979 1980 1982 2017 eimatedproject life, 1977-2017 - 40 years) (a) Margin sales (in millions of kWh) 1/ - - - - - 440 880 880 880 880 880 (b) Average revenue per kWh (in centavos) 2/ - - - - - 43.1 43.1 43.1 43.1 43.1 43.1 (c) Marginal revenues from Guatape II - - - - - 190 380 380 380 380 380 (d) Regulation benefits (San Carlos I) - - - - - - - - - 135 135 (a) Operating Costs - - - - - (sic) 20 20 20 20 20 (f) Construction Costs 49.6 408.8 466.6 623.1 259.2 95.1 - - - - - (g) Marginal return (%) 16.0% 2. Based on Actual Data (estimated project life, 1979-2019 - 40 years) (a) Marginal sales (in millions of kWh) 3/ - - - - - - - 162.2 1182.6 1289.0 1289.0 (b) Average revenue per kWh sold (in centavos) 4/ - - - - - -- - 17.0 17.0 15.6 15.6 (c) Marginal revenues from Guatape II - - - - - - - 27.6 201.6 201.6 201.6 (d) Regulation benefits (San Carlos I and Playas) - - - - - - - - - 154.6 154.6 (e) Operating Costs - - - - - - - 3.7 7.2 7.2 7.2 (f) Construction costs 20.3 151.1 288.8 374.8 302.8 436.4 2Q5.1 94.2 44.0 - - (g) Marginal return (%) 11.0% 1/ Difference in energy generation of Guatape I and II less energy generation for G4@tape I, adjusted for expected different patterns of annual generation forpeak, day,and night. 2/ Reflects average revenue per kWh nold, weighted for tariff and generation at peak, day, and night. 3/ Actual and expected generation from Guatape II only. The appraisal estimate of energy from Guatape II was very conservative. 4/ Actual and expected average revenue per kWh sold per Annex 15. May 11, 1981 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) Guatape II (Loan 874-CO) Actual and Forecast Indications of Financial Performances - 1972-1979 Summary Summary Ratio Ratio 1972 1973 1974 1975 1976 1977 1972-1977 1978 1979 1972-1979 Return on net average assets, annually revalued 1/ Actual 8.3 4.4 6.8 8.4 12.2 13.0 8.9 * 7.4 7.4 8.5 Forecast 9.3 9.2 9.6 9.4 9.2 8.8 9.3 * 9.9 6.1 ** 8.9 Debt-service coverage (times) 2/ Actual 2.30 1.74 1.97 1.86 1.90 2.57 2.03 1.55 1.96 1.93 Forecast 1.96 2.31 2.06 1.70 1.74 1.91 1.92 2.18 2.49 ** 2.02 Debt-service plus ISA investment coverage (times) Actual 1.48 1.23 1.75 1.45 0.99 1.80 1.36 1.20 1.91 1.40 Forecast 1.40 1.66 1.47 1.34 1.28 1.34 1.40 1.44 1.28 ** 1.39 Operating ratio (%) 3/ Actual 55.3 55.8 51.8 47.5 54.9 54.4 53.3 68.4 63.5 57.3 Forecast 49.2 46.5 47.6 51.0 58.3 58.9 53.1 56.5 50.0 ** 53.4 Operating ratio (including only charges for operation, maintaince, and administration) (%) Actual 28.7 27.9 27.7 27.0 22.0 25.5 26.2 28.9 28.0 26.9 Forecast 23.1 19.2 20.1 21.0 17.4 16.6 19.0 15.6 16.0 ** 18.0 Operation, Maintenance, and Administration Costs (in million of constant Col$, as of January 1972) Actual 102.1 100.3 105.8 108.9 110.9 120.1 648.1 166.0 165.8 979.9 Forecast 90.7 100.7 111.7 124.0 137.6 152.7 717.4 169.5 113.0 ** 999.9 Contribution to expansion (%) 4/ Actual 30.7 21.6 25.9 19.8 - 35.4 18.0 10.0 55.8 20.6 Forecast 53.1 31.6 20.3 18.3 32.9 60.8 29.9 99.0 33.3 ** 28.5 Debt-equity ratio (%) 5/ Actual 51 44 41 40 42 38 43 * 40 34 41* Forecast 42 44 47 49 47 45 46 * 41 58 ** 47 Collection period (days) 7/ 8/ Actual 46 67 77 44 47 66 56 ** 63 55 57 Forecast 42 40 43 44 46 44 43 39 NA NA Payments to ISA (Contributions and Investment) (in millions of Col$, as of January 1972) Actual 68.2 73.3 34.6 54.7 229.7 73.0 533.5 107.1 32.1 672.7 Forecast 65.8 81.5 93.1 93.9 130.8 164.2 629.3 207.6 201.4 1038.3 * Annual average. ** Taken from Staff Appraisal Report (SAE) for San Carlos I Project (Loan 1582-CO). 1/ Net operating income/net average assets revalued. (See Annex 18, footnote 3) 2/ Internal cash generation/debt service. 3/ Operating expenses/operating revenues. 4/ Net cash generation available for expansion/total appljcations (construction program plus change in net current assets). 5/ Long-term debt/total capital. 6/ Accounts payable/operating revenues x 365 days. 7/ Based on data from actual balance sheet and income sta,ement, unadjusted to base period (1/72) prices. 8/ Based on original data from balance sheet and income statement. April 27, 1981 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO) Actual and Forecast Income Statements, 1972-1979 (in millions of constant Col$ as of January 1972) 1972 1973 1974 1975 Appraisal Appraisal Appraisal Appraisal Actual Forecast Actual Forecast Actual Forecast Actual Forecast Energy Sales (GWh) 2,231.0 2,551.0 2,737.0 3,219.0 2,957.0 2,738.0 2,809.0 2,645.0 Average revenue per kWh sold (in centavos) 15.9 15.0 13.0 16.0 12.8 19.9 14.2 21.8 Operating Revenues Revenues from sales of power 353.9 381.9 357.0 514.8 378.2 543.7 398.5 576.5 Other operating revenues 2.4 10.1 2.4 11.0 3.5 12.0 5.5 13.0 Total operating revenues 356.3 392.0 359.4 525.8 381.7 555.7 404.0 589.5 Operating Expenses Operation and maintenance 63.4 54.5 64.5 60.5 66.4 67.1 67.6 74.5 Administration 38.7 36.2 35.8 40.2 39.4 44.6 41.3 49.5 Municipal tax 16.0 17.4 16.2 23.4 17.2 24.7 18.3 31.3 Depreciation 67.6 75.3 66.4 105.7 57.0 107.7 54.5 109.6 Contributions to ISA 11.4 9.3 17.5 14.9 17.6 15.1 10.4 31.6 Power purchases from ISA - - - - - 5.7 - 4.0 Total operating expense 197.1 192.7 200.4 244.7 197.6 264.9 192.1 300.5 Net Operating Expenses 159.2 199.3 159.0 281.1 184.1 290.8 211.9 289.0 Dividends from ISA - - 2.0 - 1.7 - 2.8 - Non-Operating Income 7.5 - 6.5 - 17.5 - 21.1 - Income Before Interest 166.7 199.3 167.5 281.1 203.3 290.8 235.8 289.0 Interest Charge 40.8 84.0 75.8 101.6 86.0 125.8 95.6 153.7 Less: Interest during 0 a construction ( - ) ( 1.5) ( 6.4) ( 19.3) ( 10.7) ( 47.9) ( 16.3) ( 79.8) Interest expense 40.8 82.5 69.4 82.3 75.3 77.9 79.3 73.9 Net Income 125.9 116.8 98.1 198.8 128.0 212.9 156.5 215.1 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO) Actual and Forecast Income Statements, 1972-1979 (in millions of constant Col$ as of January 1972) Summary Income Statement 1976 1977 1972-1977 Percent(%) 1978 Appraisal Appraisal Appraisal Diff.from Appraisal Actual Forecast Actual Forecast Actual Forecast Appraisal Actual Forecast Energy Sales (GWh) 3,100.0 2,833.0 2,851.0 3,691.0 16,685.0 17,677.0 ( 5.6) 3,061.0 3,798.0 Average revenue per kWh 16.1 27.4 16.3 24.5 14.7 20.9 (29.7) 18.7 28.0 (in centavos) Operating Revenues Revenues from sales of power 499.5 776.2 465.9 905.5 2,453.0 3,698.6 (33.6) 572.5 1,064.1 Other operating revenue 4.5 14.0 4.8 15.0 23.1 75.1 (69.2) 1.3 16.0 Total operating revenues 504.0 790.2 470.7 920.5 2,476.1 3,773.7 (34.4) 573.8 1,080.1 Operating Expenses Operation and maintenance 63.3 82.7 62.4 91.8 387.6 431.1 (9.6) 79.8 101.9 Administration 47.6 54.9 57.7 60.9 260.5 286.3 86.2 67.6 Municipal tax 23.0 36.6 22.3 42.6 113.0 176.0 (35.8) 28.1 45.6 Depreciation 120.0 131.2 95.9 159.8 461.4 689.3 (33.1) 106.6 180.1 Contributions to ISA 20.7 35.2 10.9 41.0 88.5 147.1 (39.8) 32.5 48.1 Power purchases from ISA 1.9 119.8 6.9 145.8 8.8 275.3 (96.8) 59.3 166.5 Total operating expenses 276.5 460.4 256.1 541.9 1,319.8 2,005.1 (34.2) 392.5 609.8 Net operating Income 227.5 329.8 214.6 378.6 1,156.3 1,768.6 (34.6) 181.3 470.3 Dividends from ISA 4.1 - 9.4 19.6 20.0 19.6 2.0 24.6 19.6 Non-operating Income 22.1 - 35.7 - 110.4 - - 47.9 - Income Before Interest 253.7 329.8 259.7 398.2 1,286.7 1,788.2 (28.0 253.8 489.9 Interest Charge 131.8 171.2 98.7 191.7 528.7 828.0 (36.1) 160.7 168.1 Less:Interest during cons- truction ( 32.7) ( 99.1) ( 27.7) ( 61.3) ( 93.8) ( 308.9) (69.6) ( 42.1) ( 0.5)4 Interest expense 99.1 72.1 71.0 130.4 434.9 519.1 (16.2) 118.6 167.6 M Net Income 154.6 257.7 188.7 267.8 851.8 1,269.1 (32.9) 135.2- 322.3 o 0 COLCMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO) Actual and Forecast Income Statements, 1972-1979 (in millions of constant Col$ as of January 1972) 1979 1/ 1972-1979 Percent (%) Appraisal Appraisal Difference from Actual Forecast Actual Forecast Appraisal Energy Sales (GWh) 3,475.0 3,426.0 23,221.0 24,901.0 ( 6.8) Average revenue per kWh inI. cetaos.VJ i5.01 21.7 (2.) Operating Revenues Revenues from sales of power 590.4 701.5 3,615.9 5,464.2 (33.8) Other operating revenues 1.6 3.5 26.0 94.6 (72.5) Total operating revenues 592.0 705.0 3,641.9 5,558.8 (34.5) Operating Expenses Operation and maintenance 70.11 537.51 Administration 95.7 113.0 442.4 999.9 ( 2.0) Municipal tax 29.4 32.0 170.5 253.6 (32.8) Depreciation 119.1 64.4 687.1 933.8 (26.4) Contributions to ISA 26.2 24.9 147.2 220.1 (33.1) Power purchases from ISA 35.6 117.7 103.7 559.5 (81.5) Total operating expenses 376.1 352.0 2,088.4 2,966.9 (29.6) Net Operating Income 215.9 353.0 1,553.5 2,591.9 (40.1) Dividends from ISA - 33.9 44.6 73.1 (39.0) Non-operating Income 84.3 16.6 242.6 16.6 1,361.4 Income Before Interest 300.2 403.5 1,840.7 2,681.6 (31.4) Interest Charge 138.5 101.3 827.9 1,097.4 (24.6) Less: Interest during construction ( 20.2) ( 36.9) ( 156.1) ( 346.3) (54.9) Interest expense 118.3 64.4 671.8 751.1 (10.6) Net Income 181.9 339.1 1,168.9 1,930.5 (39.5) 1/ Taken from Annex 6.6, Staff Appraisal Report (SAR) for the San Carlos I Project (1582-Co). COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO ) Actual and Forecast Sources & Applications of Funds, 1972-1979 (in millions of Col$ as of January 1972) SOURCES .1972 1973 1974 1975 Appraisal Appraisal Appraisal Appraisal Internal Cash Generation Actual Forecast Actual Forecast Actual Forecast Actual Percent Net operating income 159.2 199.3 159.0 281.1 184.1 290.8 211.9 289.0 Depreciation 64.4 75.3 65.7 105.7 55.2 107.7 53.5 109.6 Employee Contributions 4.8 - 4.8 - 6.5 - 8.1 - Non-operating income 7.5 - 6.5 - 17.5 - 21.1 - ISA dividends - - 2.0 - 1.7 - 2.8 - Sub-total 235.9 274.6 238.0 386.8 265.0 398.5 297.4 398.6 Less: Debt Service 102.6 140.1 137.1 167.1 134.6 193.1 160.1 234.6 1 Interest charge 40.8 84.0 75.8 101.6 86.0 125.8 95.6 153.7 W Amortization 61.8 56.1 61.3 65.5 48.6 67.3 64.5 80.9 CD Less: Investment in ISA 56.8 56.5 55.8 66.6 17.0 78.0 44.3 62.3 Net Internal cash generation available for investment 76.5 78.0 45.1 153.1 113.4 127.4 93.0 101.7 Long-term debt 164.1 67.5 163.1 323.6 319.5 470.9 365.8 430.2 Other loans 1.8 - - - 2.0 - - - Grants and contributions 7.1 1.3 0.8 8.2 3.5 29.4 11.2 22.8 Total sources 249.5 146.8 209.0 484.9 438.4 627.7 470.0 554.7 APPLICATIONS Construction program (ex- cluding IDC) 247.9 121.2 278.9 508.8 433.2 566.6 581.1 623.1 Net change in working capital 1.6 25.6 ( 69.9) ( 23.9) 5.2 61.1 (111.1) ( 68.4) Revaluation adjustment - - - - - - - - O -4 Total applications 249.5 146.8 209.0 484.9 438.4 627.7 470.0 554.7 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 8 74-CO ) Actual and Forecast Sources & Applications of Funds, 1972-1979 (in millions of Col$ as of January 1972) Summary Statement of Sources & Application SOURCES 1976 1977 of Funds, 1972-1977 Appraisal Appraisal Appraisal Percent M% Difference Internal Cash Generation Actual Forecast Actual Forecast Actual Forecast from Appraisal Net operating income 227.5 329.8 214.6 378.6 1,156.3 1,768.6 (34.6) Depreciation 118.6 131.2 94.5 159.8 451.9 689.3 (34.4) Employee contributions 68.2 - 21.3 - 113.7 - Non-operating income 22.1 35.7 - 110.4 - ISA dividends 4.1 - 9.4 19.6 20.0 19.6 2.0 Sub-total 440.5 461.0 375.5 558.0 1,852.3 2,477.5 (25.2) Less: Debt service 232.2 264.9 146.0 291.8 912.6 1 (29.3) Interest charge 131.8 171.2 98.7 191.7 528.7 828.0 (36.2) Amortization 100.4 93.7 47.3 100.1 383.9 463.6 (17.2) Less: Investments in ISA 209.0 95.6 62.1 123.2 445.0 482.2 7.7) Net internal cash generation available for investment A0.7) 100.5 167.4 143.0 494.7 703.7 (29.7) Long-term debt 751.4 202.4 301.4 89.6 2,065.3 1,584.2 30.4 Other loans 4.7 - 0.3 - 8.8 - Grants, contributions, I and others 139.6 2.6 3.6 2.5 165.8 66.8 148.2 Total sources 895.0 305.5 472.7 235.1 , . 16.1 H APPLICATIONS Construction program 639.5 277.2 412.8 167.8 2,593.4 2,264.7 14.5 Net change in working capital 211.9 28.3 59.9 67.3 97.6 90.0 8.4 Revaluation adjustment 43.6 - 3 - 43.6 - Total applications 895.0 305.5 472.7 235.1 2,73.6 2,354.716.1 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (LOAN 874-CO ) Actual and Forecast Sources & Applications of Funds, 1972-1979 (in millions of Col$ as of January 1972) Summary Statement of Percent () Sources & Applications Difference from SOURCES 1978 1979 of Funds, 1972-1979 Appraisal Appraisal AppraisaL/ Appraisal Internal Cash Generation Actual Forecast Actual Forecast Actual Forecast Net operating income 181.3 470.3 215.9 353.0 1,553.5 2,591.9 (40.1) Depreciation 106.6 180.1 119.1 64.4 677.6 933.8 (27.4) Employee contributions 32.9 - 31.3 - 177.9 - - Non-operating income 47.9 - 84.3 16.6 242.6 16.6 1,361.4 ISA dividends 24.6 19.6 - 33.9 44.6 73.1 (39.0) Sub-total 393.3 670.0 450.6 467.9 2,696.2 3,615.4 (25.4) Less: Debt service 254.3 306.9 230.1 188.2 1,397.0 1,786.7 (21.8) Interest charge 160.7 168.1 138.5 101.3 827.9 1,097.4 (24.6) Amortization 93.6 138.8 91.6 86.9 569.1 689.3 (17.4) Less: Investment in ISA 74.6 159.5 5.9 176.5 525.5 818.2 (35.8) Net internal cash generation available for investment 64.4 203.6 214.6 103.2 773.7 1,010.5 (23.4) Long-term debt 554.0 - 201.5 206.6 2,820.8 1,790.8 57.5 Other loans 12.5 - 23.0 - 44.3 - - Grants & contributions 10.5 2.2 (54.5) - 121.8 69.0 76.5 Total sources 641.4 205.8 384.6 309.8 3,760.6 2,870.3 31.0 APPLICATIONS Construction program (ex- cluding IDC) 617.6 129.4 413.3 286.9 3,624.3 2,681.0 35.2 o Net change in working capital 23.8 76.4 (22.4) 22.9 99.0 189.3 (47.7) Revaluation readjustment ( 6.3) - 37.3 - - Total applications 641.4 205.8 384.6 309.8 3,760.6 2,870.3 31.0 1/ Taken from Annex 6.6, Staff Appraisal Report (SAR) for the San Carlos I Project (1582-CO). COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) Actuall/and Forecast Ealance Sheets, 1972-1979 (in millions of constant Col$ as of January 1972) ASSETS 1972 1973 1974 1975 Fixed Assets Actual Forecast Actual Forecast Actual Forecast Actual Forecast Total Fixed Assets in - oneration 2,740.4 3.419.1 2,796.0 3,544.9 2,794.2 3,590.0 2,951.0 3,895.2 Accumulated Depreciation 432.7 384.8 497.2 490.5 541.7 598.2 617.2 77.8 Net Fixed Assets in Operation 2,307.7 3,034.3 2,298.8 3,054.4 2,252.5 2,991.8 2,333.8 3,187.4 Work in Progress 135.7 93.6 235.4 495.9 452.8 1,065.3 861.6 1,463.0 Total Net Fixed Assets 2,443.4 3,127.9 2,534.2 3,550.3 2,705.3 4,057.1 3,195.4 4,650.4 Investments in ISA 100.3 117.3 131.6 183.9 119.2 261.9 143.3 324.2 Current Assets Cash 13.3 34.3 6.6 12.5 55.5 72.6 14.0 0.2 Accounts Receivable 41.6 43.5 60.0 56.7 72.9 64.4 46.0 70.1 Stores 38.0 47.9 36.4 48.9 36.0 49.9 53.3 50.9 H Internal Debtors 62.0 51.4 62.5 46.4 28.3 20.0 38.7 - Total Current Assets 154.9 177.2 165.5 164.5 192.7 206.9 152.0 121.2 Other Assets 43.8 47.6 28.0 44.4 23.7 41.4 24.3 38.6 Total Assets 2,742.4 3,470.0 2,859.3 3,943.1 3,040.9 4,567.3 3,515.0 5,134.4 LIABILITIES & CAPITAL Equity 1,281.9 1,959.4 1,498.5 2,158.2 1,657.6 2,371.1 1,952.5 2,586.2 Long-term Debt (net of current maturities) 1,324.5 1,447.9 1,158.0 1,706.0 1,165.9 2,109.6 1,283.7 2,458.9 Current Liabilities 121.0 72.7 202.8 78.9 217.4 86.6 278.8 89.3 on Total Liabilities & Capital 2,727.4 3,470.0 2,859.3 3,943.1 3,040.9 4,567.3 3,515.0 5,134.4 x 0' COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN (EPM) GUATAPE II (874-CO) 1/ Actual- and Forecast Balance Sheets,1972-1979 (in millions of constant Col$ as of January 1972) ASSETS 1976 1977 1978 1979 Appraisal Appraisal Aporaisal Appraisal- Fixed Assets 3/ Actual Forecast Actual Forecast Actual Forecast Actual Forecast Total Fixed Assets in Operation3,026.3 4,796.3 3,049.2 5,670.8 3,107.0 6,004.7 4,571.6 Not Available (NA) Accumulated Depreciation 669.3 839.0 763.4 998.8 858.6 1,178.9 975.0 NA Net Fixed Assets in Operation 2,357.0 3,957.3 2,285.8 4,672.0 2,248.4 4,825.8 3,596.6 NA Work in Progress 1,184.3 938.2 1,493.3 292.8 1,702.0 88.8 504.7 NA Total Net Fixed Assets 3,541.3 4,895.5 3,779.1 4,964.8 3,950.4 4,914.6 4,101.3 NA Investments in ISA 303.4 419.8 293.7 543.0 313.1 702.5 246.3 NA Current Assets Cash 97.8 3.6 157.5 58.0 170.9 113.4 109.8 NA Accounts Receivable 58.7 96.8 79.7 110.2 84.4 130.7 79.9 NA Stores 58.5 51.9 44.2 53.9 37.5 56.9 39.9 NA Internal Debtor & Other 41.6 - 37.5 - 16.8 - 24.3 NA Total Current Assets 256.6 152.3 318.9 222.1 309.6 301.0 253.9 NA Other Assets 26.1 36.0 28.2 33.5 103.0 31.3 129.4 NA Total Assets 4,127.4 5,503.6 4,419.9 5,763.4 4,676.1 5,949.4 4,730.9 NA LIABILITIES & CAPITAL Equity 2,286.2 2,843.9 2,670.5 3,111.7 2,738.8 3,434.0 3,053.1 NA Long-term Debt (net of current 1,665.8 2,567.6 1,656.5 2,557.1 1,833.8 2,418.3 1,600.0 NA Current Liabilities maturities) 175.4 92.1 92.9 94.6 103.5 97.1 77.8 NA Total Liabilities & Capital 4,127.4 5,503.6 4,419.9 5,763.4 4,676.1 5,949.4 4,730.9 NA 1/ Restated in base period (1/72) prices after full revaluation according to annual change in national consumer price X index for Colombian worker (Annex 9). 0M 2/ Staff Appraisal Report for the San Carlos I Project (Loan 1582-CO) shows only summary balance sheet data N) (see Annex 16, footnote 1). 3/ The value of Fixed Assets in Operation shown in this Annex is based on accounting practices (followed in Colombia as per law) which are not in accord with the asset revaluation methodology described in para. 5.2.2. IBRD 3947 COLOMBIA EMPRESAS PUBLICAS DE MEDELLIN GENERAL LAYOUT OF THE ELECTRIC SYSTEM 5 0 U HA GUATAPE II Gudop DAMS GUADALUPE 1-1 DAMS s omw 1)< " 9 POWER PLANTS so 1 SUBSTATIONS 0i J SERVICE AREAS OF THE MEDELLIN POWER COMPANY L -]DPREVIOUS IBRD PROJECTS 110 KV LINES 230 KV LINES Go o er RnG G 0 1 ~ .j .. - - - RIOGRANDE N 80 MW \ D~ontot s Santo Domingo .Borbosa Concepcon 0 %< -- irordota CAoecandrna Polm,tas bono B tio SANTA RITA DAM ,Ž, ro aooa, <e Soan Crislobol E R BL NC S San Vicente P od GU- GuraB P IEDRA S B on 00 L Robldo BLANCASELLPECA PLANT M E D E Nili Mw. T i. L'o T 2l w2 tod e oGE Marinilla R IONEGROo 230Y'ý o Sabonera ., AN ONGranado Son Anron oo Caldas na LD El Carmen C El Rersro 0 Lo Cel. Can JUNE 1972