Colombia - Guavio Hydro Power Project

Document of The World Bank FOR OFFICIAL USE ONLY fILLE -cOPY Report No. 3408b-CO STAFF APPRAISAL REPORT COLOMBIA GUAVIO HYDRO POWER PROJECT May 6, 1981 Projects Department Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Average Calendar 1979 Average Calendar 1980 (Estimated) Currency Unit = Peso - Col$ US$1 = Col$4 '7.260 US$1 = Col$42.550 Col$1 = US$0.02115 Col$1 = US$0.02350 Exchange Rate Effective April, 1981 US$1 = Col$52.49 Col$1 = US$0.01905 WEIGHTS AND MEASURES 1 meter (m) 2 = 3.281 feet (ft) 2 1 square kilometer (km ) = 0.386 square mile (mi ) 1 cubic meter (m3) = 35.315 cubic feet (ft3) = 264.2 gallons (gal) = 6.290 bbl 1 kilogram (kg) = 2.206 pounds (lb) 1 ton (t;metric;l,000 kg) = 1.100 short tons (sh. tons) 1 kilowatt (kW) = 1,000 Watts (103 kW = 106 W) 1 kilowatt-hour (kWh) = 830.3 kilocalories (kcal) 1 Megawatt (MW) = 1,000 kW (103 kW = 106 W) 1 Gigawatt (GW) = 1,000 MW (106 kW = 109 W) 1 Gigawatt-hour (GWh) = 1,000,000 kWh (106 kWh) 1 kilovolt (kV) = 1,000 Volts (V) 1 kilocalorie (kcal) = 3.968 Btu 1 trillion cubic feet = 1012 cubic feet per annum = /a per month = /m per day = /d GLOSSARY OF ABBREVIATIONS CARBOCOL Carbones de Colombia CONPES National Economic and Social Policy Council CORELCA Corporacion El&ctrica de la Costa Atlantica CVC Corporacion Autonoma Regional del Valle del Rio Cauca ECOPETROL = Empresa Colombiana de Petr6leos EEEB = Empresa de Energ4a Electrica de Bogota EMCALI = Empresas Municipales de Cali EPM = Empresas Publicas de Medellin FDE = Fondo de Desarrollo Electrico GTZ = Deutsche Gesselschaft fur Technische Zusammenarbeit GmbH IBRD = International Bank for Reconstruction and Development ICEL Instituto Colombiano de Energla Electrica IDB = Inter-American Development Bank ISA = Interconexion Electrica S.A. JNT = Junta Nacional de Tarifas de Servicios Publicos NPD = National Planning Department OED = Operations and Evaluation Department (IBRD) PEFF = Permanent Electricity Financing Facility PMU = Project Management Unit FISCAL YEAR January 1 to December 31  COLOMBIA FOR OFFICIAL USE ONLY EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HYDRO POWER PROJECT TABLE OF CONTENTS Page No. 1. THE SECTOR ..................... ........................... Energy Resources .............. --..---..-.e...1 Power Sector Organization ....... .................. . 3 Regulation, Planning and Coordination ........ ............... 4 Present Developments ................................ . 5 World Bank Participation in the Sector ..... .......... . 8 Sector Market Statistics and Forecasts .......... .. ......... 10 Rural Electrification ........ ............ .................. 12 Sector Investment Program and Studies .......... .. .......... 12 Finances and Tariffs ..------------..---.--.-. 13 2. THE BORROWER ............................................... 14 General Description ....................... 14 Prior Bank Lending ........................--. 14 Organization and Administration ............. .. ............. 15 Employment .........--.......................... 15 Accounting and Auditing ........ ............................ 16 Billing and Collections ................... ................. 16 Insurance ................ ------------------....-----------17 3. EEEB'S MARKET ................ 17 Background ................ 17 Market Statistics and Forecasts ............................ 17 4. THE PROGRAM AND THE PROJECT ................................ 18 Background ................................................. 18 EEEB's Expansion Program ...... ............................. 19 Generation ................................................. 19 Transmission ............................................... 19 Subtransmission and Distribution ..... ...................... 20, Other Investments .......................................... 20 The Project ................................................ 20 Project Description ........ ................................ 21 Project Cost ... 22 Project Financing .......................................... 24 Engineering ................................................ 26 Studies .................................................... 27 Training ................................................... 27 This report is based on the findings of an appraisal mission, which visited Colombia from December 1 to 12, 1980, consisting of Messrs. M. Aguilar and J. L. Vietti. (Ms. Garcia-Zamor and Mr. Linder also participated during part of the mission) and on the findings of a financial post-appraisal mission by Mr. J.L. Vietti in January/February 1981. 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.  Page No. Project Organization and Implementation ..... ................ 27 Procurement ........... 28 Advanced Contracting and Retroactive Financing .... .......... 28 Disbursement ................................................ 29 Environment ................................................ 29 Project Risks ............................................,. 29 5. FINANCES . ........................................... 30 Summary . ........................................... 30 Earnings History ........................................... 30 Rate Base ............................................ 32 Tariff Structure ........................................... 32 Financial Structure ......................................... 33 Investment and Financing Plans ......... .................... 34 Future Finances ........................................... 37 Sector Finances ........................................... 38 6. ECONOMIC ANALYSIS ........................................... . 41 Least-Cost Solution ......................................... 41 Return on Investment ......................................... 41 7. AGREEMENTS TO BE REACHED AND RECOMMENDATION ..... ............ 43  Page No. ANNEXES 1.1 Energy Supply and Demand .............................. 46 1.2 IBRD Power Loans ...................................... 47 1.3 National Generation Development Program ............. .. 48 2.1 Organization Chart ............ ........................ 49 2.2 Forecast Performance Indicators ...... ................. 50 3.1 Actual and Forecast Sales and Gross Generation Required 51 4.1 Capacity Balance ...................................... 52 4.2 Forecast Generation per Plant ......................... 52 4.3 Construction Program .................................. 53 4.4 Project Cost ....................... 54 4.5 Proposed Project Financing ............................ 55 4.6 Project Implementation Schedule ....................... 56 4.7 Disbursements of Bank Loan ............................ 57 5.1 Financial Indicators .......... ........................ 58 5.2 Actual and Forecast Income Statement 177-1988 ......... 59 5.3 Sources and Applications of Funds 1980-1988 . . 6o 5.4 Actual and Forecast Balance Sheets 1977-1988 .......... 61 5.5 Schedule of Existing and Proposed Debt ................3 2 5.6 Forecast Loans-Disbursement Statement 1980-1988 ....... 64 5.7 Forecast Debt Amortization Statement 1980-1988 .. 64 5.8 Forecast Interest Charges 1980-1988 .... 5 5.10 Analysis of Power Sector Finances ..................... 66 6.1 Rate of Return on Development Program ..... ............. 77 Attachment 1 - Contents of the Project File ..... .............. 79 MAPS: Colombia - Electric Power Systems IBRD-l56l9 Colombia - EEEB Guavio Hydroelectric Plant IBRD-15620   COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HYDRO POWER PROJECT 1. THE SECTOR Energy Resources 1.01 Colombia's main indigenous commercial energy resources are hydro- power, coal, gas and oil. Potential hydropower appears to be the most promising at some 93 GW of capacity and 400 TWh of annual energy capabil- ity 1/. Colombia is also endowed with large coal and gas deposits. Since 1970 oil production has declined at an average annual rate of 6%. Over the same period, consumption of petroleum products increased on average 5.4% annually until 1975 and declined to 3.5% since then. As a result, Colombia has been a net importer of crude oil since 1976, with petroleum having become the country's largest single import. Prospects are for oil imports to rise sharply in the early 1980s unless additional reserves are discovered and developed rapidly. Measures are being taken to deal with this problem and to develop alternative energy sources. In the case of coal, there have been various obstacles to more adequate utilization of the existing potential: the competition of lower priced petroleum, fragmentation of production among a large number of small mines with low output and productivity levels, and lack of efficient transport infrastructure. However, the Govern- ment has been taking action to address these problems (1.03). 1.02 Production of primary energy during 1970-1980 (Annex 1.1) has not kept pace with overall economic expansion. It increased at 2.9%/a during 1970-1975, and then in the period 1976-1980 it increased only at 0.6%/a, mainly due to falling crude oil output. In contrast to the declining energy output, final energy consumption grew at 3.6%/a during 1970-1975, and at 6.1%/a during 1976-1980, and has now stabilized at a growth of about 6.0%/a. 1.03 The Government-s development strategy is aimed at achieving a more favorable balance between domestic energy supply and use through increased utilization of domestic sources which are in abundant supply, i.e., hydropower, natural gas and coal and by developing high-value energy resources for export to reduce the growing energy trade deficit. Toward this end, the Government is planning a large-scale development of high grade coal deposits for export by state entities in association with foreign investors. For this purpose, a new enterprise, Carbones de Colombia (CARBOCOL), has recently been created and has emerged as the Government's chief agency in coal-related matters. The Govern- ment attaches high priority to developing, primarily for export, the coal deposits at El Cerrejon (measured reserves well in excess of 1 billion tons) near Riohacha in the Department of La Guajira on the Atlantic Coast, under CARBOCOL's responsi- bility in cooperation with foreign investment. A portion of the thermal deposits 1/ Source: Electric Energy Sector Study (ESEE) prepared jointly by the National Planning Department (NPD) and ISA with the full time assistance of GTZ. (Deutsche Gesellschaft fur Technische Zusammenarbeit GmbH - Federal Republic of Germany) completed in 1979.  at El Cerrejon is earmarked for domestic consumption in power plants and industry in place of natural gas and fuel oil. The Government also intends to step up surveys of identified coal fields in the departments of Santander and Antioquia and to study the feasibility of using this coal for firing large thermal plants required in the early 1990s when potential hydro sites are expected to be increasingly more costly to develop (1.25). Small private firms which own coal mines are pursuing plans to expand output and expand operations in order to supply fuel for heat-intensive industrial processes and both in-plant and public power generation. In order to expand potentially viable mines, a well-coordinated Government program is needed to provide a rational price struacture, improvements in mine safety, credit facilities and support for marketing and infrastructure. Such a program would need substantial technical and capital assistance from abroad. The Bank has been providing guidance to the Government in the preparation of the proposed El Cerrejon and the Railways Improvement Projects. 1.04 In the hydrocarbon sector, the Government has taken action to stimulate investment in exploration and field development, which had declined after 1971 because the prices paid to the producers for domestic sales were below economic value. Currently, the prices paid for oil produced by increasing yields from existing fields and from new fields have been raised, with the latter now at world market levels, and the discriminatory exchange rate for petroleum has been eliminated. Moreover, the Government is encouraging foreign participation in exploration and development on the basis of joint venture contracts with Empresa Colombiana de Petroleos (ECOPETROL) (the Government oil agency). As a result, interest among foreign petroleum companies to expand or start operations in Colombia has been intensified and an upturn in exploration has taken place. Domestic petroleum product prices have been increased substantially in line with the Government's objective of reaching international levels over a reasonable period of time. A Bank petroleum project is being considered for secondary oil recovery, surveys and follow-up discoveries. With respect to natural gas, a previous decline in known reserves and output has been reversed with the dis- covery of large deposii in3the Atlantic Coast region. These reserves (esti- mated at over 4.5 x 10 ft ) will provide energy and petrochemical feedstock to this rapidly industrializing region. The Government has under consideration several projects for natural gas utilization, including a fertilizer plant, and the production of methanol as a fuel for vehicles. Nevertheless, the feasibility of such projects has not yet been thoroughly assessed. 1.05 Plans are underway to explore the country's uranium potential and the Government has contracted with the French Minatome group for such explora- tion. Uranium possibilities seem to exist in the Zapatoca, Caldas and Sanltander Departments. This potential would provide the country with another long-term energy option. Although the measures taken by the Government to achieve a domestically based energy balance have already yielded positive results, the Government recognizes that its planning and policy efforts have been insufficiently coordinated among the various energy subsectors. To remedy this, in 1980 the Government initiated a study to evaluate the country's  - 3 - options in developing domestic energy resources. The study will also focus on the policy measures that can maximize the benefits to be derived from recommended investments, based on least-cost solutions. The Bank is working closely with the Government in this endeavor. Power Sector Organization 1.06 Since 1970, electricity has been the fastest growing form of energy used in Colombia (8.2%/a); its share in overall energy consumption grew from 6.5% in 1970 to 8.9% in 1978. This process has been assisted by the gradual consolidation of isolated facilities into regional systems and the intercon- nection of these systems to facilitate development of Colombia's low-cost hydro resources. The main systems are the Central System, covering the interior and the Pacific coast, and the Atlantic (or Northern) system covering the northern part of the country. By 1983 a national grid will have been established with the completion of a 500-kV line interconnecting the Atlantic and the Central Systems. 1.07 At present, public electricity service is provided by: (a) municipally owned companies, independent of the National Government, of which the largest are Empresa de Energia Electrica de Bogota (EEEB), Empresas Publicas de Medellin, (EPM), and Empresas Municipales de Cali (EMCALI); (b) national enterprises such as Instituto Colombiano de Energia Electrica (ICEL), and Corporacion Autonoma Regional del Cauca (CVC), and the Corporacion Electrica de la Costa Atlantica (CORELCA); (c) a large number of local subsidiaries of ICEL, CORELCA and CVC 1/; and (d) a generating and transmission company, Interconexion Electrica S.A. (ISA), the shareholders of which are EEEB, EPM, CVC, ICEL and CORELCA. 1.08 The Ministry of Mines and Energy owns part of the sector directly through ICEL and CORELCA. EEEB and EPM, currently the largest utilities, are controlled by autonomous municipal governments. CVC reports to the National Planning Department (NPD). ISA was established in 1968 to provide a rational framework for sector development by interconnecting the systems of its share- holders, thus creating a national grid capable of transmmitting large amounts of power and energy between the regions. By pooling their financial resources (provided in part by Government contributions for ICEL and CORELCA) through ISA, its shareholders have been able to share the costs and benefits of the country's large hydropower resources, which are geographically concentrated 1/ In most cases, the ownership of these subsidiaries is shared with local governments.  - 4 - principally in the areas of Bogota (EEEB) and Medellin (EPM). One of the problems that the sector as a whole faces is the relatively low level of salaries of the top technical and managerial staff when compared with those of equivalent positions in the private sector, which has resulted in a relatively high turnover of senior staff. During negotiations agreement was reached that the Government will carry out a study on the adequacy of the structure and levels of the remuneration at all levels of employment in the power sector. The conclusions and recommendations of this study, which will be completed by June 30, 1983 will be received by the Bank. ISA and its shareholders will give all necessary assistance to the Government for carring out such study. Regulation, Planning and Coordination 1.09 The Ministry of Mines and Energy is charged with formulating na- tional policy for the generation, transmission and distribution of elec- tricity, including coordination and supervision of power sector planning, although it shares responsibility with NPD in defining investment priorities. The ministry discharges its functions through its Electric Energy Division (which is small and does not have the powers for issuance of licenses, regula- tion of tariffs, or approval of expansion programs to enforce its policies and programs). Electricity tariffs are regulated by the Junta Nacional de Tarifas de Servicios Publicos (JNT) which forms part of the NPD. JNT on the basis of requests from the companies approves rate increases, but utilities are free to set tariffs at levels lower than those approved by the Junta. Although the Government cannot enforce its policies directly on the municipally controlled power companies, a mechanism for reaching agreement on major issues affecting the sector is provided by ISA, in which the Government has a major although not controlling interest. 1.1( Sector planning and coordination have improved markedly in recent years, as illustrated by the following: (a) ISA defines the generation and transmission expansion program for the interconnected system. On the basis of studies carried out by it and its shareholders, ISA determines the least-cost expansion program. After approval by its Board and NPD, this becomes the national expansion program. ISA's bylaws specify that all plants requiring a joint effort of all its shareholders will be constructed, owned and operated by ISA. Plants of regional interest may be built by one or several shareholders, subject to ISA's approval. Under these arrangements, ISA is, in effect, responsible for an important part of sector regulation and planning. (b) In connection with the San Carlos I loan, ISA and its shareholders agreed to prepare and present to the Governmnt and the Bank for comments a Power Sector Development Master Plan, which has been received and reviewed by the Bank. This plan covers the period 1980-90 in detail and 1991-2000 in general terms and consolidates the programs for generation and transmission expansion. Similarly, ISA's shareholders undertook, under the coordination of the Ministry of Mines and Energy, to prepare and present, as part of ISA's Master Plan, to the Government and the Bank for comments by December 1981,  -5- a 20 year Sector Development Master Plan for Distribution; consolidating all existing and future programs for distribution and covering the period 1982-87 in detail. 1/ Overall, the Master Plan is expected to provide a valuable framework for long-range decisions on sector-financing, pricing and rural electrification which have in the past been based on partial and uncoordinated information; (c) as agreed under the San Carlos I loan, a tariff study based on marginal costing has been completed and received in the Bank. The study is an important step towards the understanding of electric power tariffs in Colombia and is the result of a commendable effort made by ISA and its shareholders. The Bank has given its comments to ISA and a Bank mission has been scheduled to discuss what next step should be taken; (d) also in connection with San Carlos I, a study was carried out by consultants to assess the extent and causes of excesive losses in the main power systems down to the level of distribution to recommend actions to minimize such losses. The Bank reviewed this study, and recommended that an action committee be set up, representing all the shareholders, to prepare a work program. A second phase of the study, which deals with metering errors, is underway; and (e) as agreed under the San Carlos II loan, a study on a uniform system of accounts and financial planning for the sector is underway by consultants, with participation of professional from ISA and its shareholders. The results of this study are expected by June 30, 1981. Present Developments 1.11 Considering the power sector's important role in Colombia's develop- ment process, the Government and the main power companies established in the mid-1970s the "Sochagota" Agreement, for orderly and efficient sector expansion. The Agreement envisaged that ISA would be responsible for planning, building and owning all plants of national interest. Since then, ISA has functioned on this basis. However, in 1979, the shareholders of ISA expressed reservations about the concentration of almost 70% of planned expansion in generating facilities through 1987 in the national company and the associated loss of parity among themselves in relative generating capacity. Another matter of concern was that ISA's construction capacity would be nearly fully committed over the next few years with works in progress (1,910 MW of hydro plant, 1/ The Government has delegated management of the study to ISA. CVC has completed a draft report, but no information has reached the Bank from ICEL. CORELCA is expected to have a draft report available soon. EPM has a distribution program covering 10 years, which was defined in cooperation with Westinghouse; this study will be expanded to cover the period up to the year 2000 with the help of consultants. EEEB will have the study executed by the same consultants to be engaged under the recently signed loan 1807-CO.  6 numierous 230-kV lines and a 500-kV line). These reservations gave rise to a proposal that the four plants in ISA-s 1984-88 Investment Program (Betania 500 MW, Guavio 1,000 MW, Playas 200 MW and Urra 1,050 MW) be constructed, owned and operated by individual shareholders. Although these plants would represent less than 1% of the hydroelectric resources that Colombia will develop over the next 20 to 30 years, the Government and the Bank felt that a sound pattern of development and use of the country's electric energy resources shotuld be maintained. In accordance with this, the Government and ISA-s Board have confirmed that: (a) as a long-term objective, ISA will own and have direct ownership of at least 33% of overall sector capacity and energy. To this end, plant ownership under the expansion program subsequent to the current 1984-88 Program (discussed below) will be allocated to ensure that ISA will have this share. Moreover, ISA will acquire and maintain ownership of all trunk transmission lines in the interconnected.system. These arrangements will assure ISA a predominant role in directing sector development and operation, while avoiding problems attendant upon overconcentration of sector responsibilities in ISA; (b) with respect to ownership of four hydro facilities in the 1984-88 Program, individual ISA shareholders would, subject to presentation of viable financing plans, build and own the Guavio (1,000 MW), Betania (500 NW) and Playas (200 MW) plants. 1/ The two Urra plants (310 MW and 740 MW respectively) would be owned jointly by CORELCA and ISA. On this basis, ISA-s direct control of the interconnected system (currently about 20%) would increase to about 30% by 1988. As stated above, the policy of 33% ownership will determine the allocation among ISA and its shareholders of plants to be selected for the 1989-93 Expansion Program and subsequent ones; (c) further, ISA will invest in the Guavio and Betania plants in exchange for absolute rights to 40% of the capacity and energy of the former and 50% of the latter, which ISA will sell to its shareholders under long-term contracts. These rights to plant output represent an additional 6% of the national system, thus bringing ISA's overall participation (direct ownership plus sharing in Guavio and Betania investments) in the sector's generating capacity to 35% by 1988; and (d) ISA, as the future national dispatch agency (facilities are being constructed), will operate the interconnected system at minimum cost. This objective has been fully endorsed by ISA-s Board; the means by which it would be achieved would be based upon the results of a dispatch study (under San Carlos II) scheduled for completion by end-1981. 1/ The proposed Bank loan for Playas was approved by the Board on March 3, 1981.  1.12 Another matter which has been under discussion has been the growth in overdue accounts owed to ISA by its shareholders (except EPM) for capital contributions and energy purchases. The Government and the sector took actions designed to overcome this problem; by the end of 1980 CVC and CORELCA were up-to-date, and measures are well in hand to erase EEEB's remaining arrears (for capital contributions) by end-April 1981. The capital contribu- tions of ICEL (a holding company for 13 mostly rural-based local power companies, "electrificadoras", which are normally paid by the Government, have been brought up to date, but its electrificadoras' overdue accounts for 1979-1980 energy purchases have not yet been paid (1981 accounts are up-to-date). The electrificadoras themselves have started taking action to improve their finances, in order to settle this debt and maintain timely payment of purchases, with some of them having increased rates by 3.3% per month. Within this context, the National Economic and Social Policy Council (CONPES) approved proposals formulated by NPD and ISA's Board, which would eliminate the elec- trificadoras' arrears. Financing is being provided to free resources to allow them to settle their overdue accounts to ISA shortly. CONPES has also decided that a 15% surcharge would be added to the electrificadoras' tariffs (as in the CORELCA system). Finally CONPES has resolved that national budgetary funds earmarked for public entities that did not settle their accounts with the power utilities would not receive the amounts equivalent to their outstanding accounts. For the long term, however, the Government has realized that the electrificadoras would need to be grouped into larger market companies to become financially viable and operationally efficient. In November 1980 CONPES, based upon recommendations of DNP, approved a number of measures aimed at attaining this, principally: (i) redistribution of markets through mergers of two or more electrificadoras; (ii) restructuring of ICEL's financial and operational aspects; and (iii) strengthening ICEL's ability to guide the electrificadoras on financial and technical matters. In support, the Bank has been encouraging the Government and the sector to consider specific institutional arrangements for these small companies. In response, some ISA shareholders have already begun to buy, or are contemp- lating buying ownership of electrificadoras in geographic proximity to them. For example, EEEB has ratified a proposal to obtain, as a first step, a 25% share of ownership of the Electrificadoras of Cundinamarca and Meta, and EPM will study the feasibility of acquiring the Electrificadoras of Antioquia and Choco, and if study results are favorable, the company will proceed with the acquisition (Playas Hydro Power Project, Loan 1953-CO). It should be recog- nized, however, that the reorganization will necessarily be achieved only gradually over a period of years. This effort would be assisted by the definition of strategy, coordinated at governmental and sectoral levels to implement the CONPES decision. During negotiations agreement was reached that the Government will prepare a program for implementing the recommendations of DNP regarding the structure and operations of ICEL. The program will be put into effect starting June 30, 1983. ISA and its shareholders will take all reasonable and appropriate action required on their part for the implementation of the program.  -8- World Bank Participation in the Sector 1.13 Since 1950, the Bank has made 25 loans to Colombia's power sector, totalling US$979 million (Annex 1.2). In addition, the Bank is currently supporting rural electrification under the Integrated Rural Development Project (1532-CO, 1977), and would continue such efforts under the proposed Village Electrification Project for the North Atlantic Coast. 1.14 Between 1973 and 1978 the Bank was unable to participate in sector development through lending because of institutional and financial difficul- ties including severe financial constraints (because of the Government's reluctance to press for rate increases under inflationary conditions) which reduced the sector's internal cash generation, well below levels needed for signiticant expansion of plant facilities. Decisions on system expansion required protracted negotiations among the shareholders and the Govern- ment. These negotiations were further complicated by the original share- holders' reluctance to allow the incorporation of CORELCA into ISA. Because of the time required for resolution of these fundamental issues, the Bank was unable, until 1978, to proceed with the San Carlos I, the 500-kV Inter- connection and Mesitas hydroelectric projects, all of them urgently needed to avoid power rationing in Colombia. Following satisfactory progress in resolv- ing these problems, seven loans were made, three in 1978 (San Carlos I, 1582-CO; 500-kV Interconnection, 1583-CO; and Mesitas, 1628-CO), one in 1979 (San Carlos II, 1725-CO) two in 1980 (Bogota Distribution, 1807-CO; and Guadalupe IV Hydro Power Project, 1868-CO) and one in 1981 (Playas Hydro Power Project, 1953-CO). Nevertheless, the underinvestment during the 1970s has resulted in substantial power shortfalls. Rationing is currently in effect and expected to intensify during this year, assuming average hydrological condi- tions (4.02). The power shortage has also been aggravated by delays in initiating commercial operation of the Guatape II hydroelectric plant as a consecquence of difficulties encountered in implementing the population relo- cation program associated with the project. 1.15 Overall Bank operations through 1970 have been reviewed by the Operations Evaluation Department (OED) in two reports 1/, which concluded that Bank financing had been successful in assisting the power companies to develop hydroelectric plants at lower unit cost than otherwise possible. This per- mitted greater urban coverage as well as cheaper and more reliable electricity supply to industry. OED also commended Bank efforts in the establishment of the central interconnected system which facilitsted further power sector development. In addition, OED identified as important considerations for possible future loans in the sector: the need to give greater attention to improving power distribution, financial recording and financial planning capabilities, and tariff structures; these have been addressed under the above mentioned loans. 1/ "Operations Evaluation Report: Electric Power" (Report No. Z-17, dated March 10, 1972) and "Bank Operations in Colombia - An Evaluation" (Report No. Z-18 dated May 25, 1972).  -9- 1.16 OED additionally reviewed four individual projects 1/. The most recent report (575-CO/681-CO), which pertains to ISA, discusses the engineer- ing, physical, financial and institutional difficulties encountered, particu- larly in connection with the Chivor Hydro Electric project, ISA's first generation facility and the largest hydro electric project undertaken in Colombia until then. The report concluded that the experience gained under these projects has had a considerable impact on the shaping of Bank policy for further lending in Colombia. Adequate provisions for price contingencies have been introduced; local financing is being secured through long-term financial commitents of the shareholders to ISA; and improved financial planning has been instituted by ISA and its shareholders, as well as continuous monitoring of their financial performance. 1.17 Recent developments in the sector indicate that a reasonable balance between regional and national interest will be maintained, thus providing a sound basis for continued Bank participation. Further objectives are, in general: coordinated sector planning, efficient organization and operation, and sound financial management; within the general scope of these objectives, specific attention in the short term should be given to: least- cost operations, stregthening of the operating efficiency and financial viability of the electrificadoras, rational urban and rural distribution developments, enhancing financial recording and financial planning capabili- ties and development of improved tariff structures and levels based on common concepts throughout the country. 1/ - Third Medellin Power Project - Loan 639-CO (1964; Report No. 450, May 24, 1974). - Third (EEEB) Power Expansion Program - Loan 537-CO (1968; Reoort No. 536, June 29, 1977). - Power Interconnection Project (1968) - Loan 575-CO; and Chivor Hydroelectric Project (1970)-Loan 681-CO (Report No.2720, Oct.29,1979).  - 10 - Sector Market Statistics and Forecasts 1.18 Per capita electricity generation in Colombia was about 735 kWh/a. in 1979, which is below the average for Latin America. Total installed capacity and gross generation are summarized below: Installed Capacity and Electricity Generation in 1980 1/ Public Service - Self-Producers 2/ Total 2/ MW % GWh % MW % GWh % MW % GWh % I Hydro Subtotal 2,888 67 14,382 69 20 - 88 - 2,908 68 14,470 69 2 Thermal 2.1 Steam 873 21 NA 162 4 851 4 1,035 24 2.2 Gas turbine 278 6 NA 39 1 188 1 317 7 2.3 ]Diesel - NA 22 1 96 1 22 1 Subtotal 1,151 27 5,256 25 223 6 1,135 6 1,374 32 6,391 31 3 Total Country 4,039 94 19,638 94 243 6 1,223 6 4,282 100 20,861 100 1/ Effective capacity. Source ISA: Balance Sistema Interconectado Colombiano UPE-EG-( 2/ Preliminary figures. 31 Assumed identical to 1978. Public entities accounted for 94% of the total installed capacity and gross generation. The remaining 6% was provided by self producers. In 1979, Colombia had about 2.3 million electricity subscribers, of which about 87% were residential and 10% commercial. ICEL statistics show that in 1979 electricity service reached 83.6% of the urban population, 13% of the rural population which combined represent a total of 54.3% of total population. 1.19 Electricity sales in 1979 totalled about 14,170 GWh. Consumption by consumer category is shown below: Sales Clients -/ Category GWh % No. % Residential 5,732 40.5 1,960,000 87.3 Industrial 4,342 30.6 29,400 1.3 Commercial 1,667 11.8 230,000 10.2 Others 2,429 17.1 26,600 1.2 Total 14,170 100.0 2,246,000 100.0 1/ Source: ISA  - 11 - 1.20 Market statistics for ISA's Shareholders in 1972 and 1979 are shown below: Average Annual Growth 1972 1979 % Gross Generation (GWh) 9,380 17,833 9.6 Maximum Demand (MW) 1,810 3,394 9.4 Total Sales (GWh) 7,600 14,170 9.3 Of which consumption percentages: Residential 38% 40% 10.4 Commercial 12% 12% 9.3 Industrial 34% 31% 7.4 Others 16% 17% 9.3 Losses 1/ 18% 21% - Source: Playas Hydro Power Project (Report No. 3240b-CO). 1/ Includes station use, transmission and distribution losses, and theft. Actual losses in 1979 are estimated at about 16%. During 1972-79 gross generation increased at an average annual rate of about 9.6% (GNP in the same period grew at an annual rate of 5.7%). Growth of sales in the period averaged 9.3%/a and ranged from 7.7%/a in the EPM system to 12%/a in the ICEL System. 1.21 The demand forecast for peak capacity and total gross generation in 1981 - 1990 is shown below: System Peak Gross Generation Required (TWh) Expected Demand 1/ (MW) Year EEEB EPM CVC ICEL CORELCA TOTAL 1980 5.6 4.4 2.7 3.8 3.1 19.6 3,125 2/ 1981 6.1 4.7 3.0 4.4 3.6 21.8 4,069 1982 6.8 5.1 3.3 5.0 4.3 24.5 4,608 1983 7.5 5.5 3.6 5.6 5.2 27.4 5,111 1984 8.2 6.0 3.9 6.1 5.9 30.1 5,629 1985 9.1 6.4 4.2 6.8 6.7 33.2 6,218 1986 10.1 6.9 4.6 7.4 7.5 36.5 6,851 1987 11.0 7.5 5.1 6.1 8.2 39.9 7,495 1988 12.1 8.2 5.5 8.9 8.8 43.5 8,182 1989 13.3 8.9 6.0 9.8 9.5 47.5 8,935 1990 14.6 9.7 6.5 10.7 10.2 51.7 9,739 Average Growth Rate 1981-1990 % 10.1 8.2 9.2 10.9 12.6 10.2 10.3 2/ 1/ Uotalned from tne simulation or 100 cases for the aggregated demand in in the interconnected system. 2/ Excludes CORELCA in 1980 because it will be interconnected to the system in 1981/1982. With CORELCA the equivalent peak-demand in 1980 would have been 3657 MW.  - 12 - Demand for gross generation and peak capacity are forecast to grow at average annual rates of 10.2% and 10.3%, respectively, in the priod 1981-1990, which is reasonable. The system load-factor is expected to remain constant at 61% during the period. The installation of about 6,600 MW is planned between 1981 and 1988 to meet demand (Annex 1.3). Rural Electrification 1.22 About 32% of the population lives in rural areas. Even though access to service is high in urban areas, only an estimated 13% of the rural population has electricity service. Complete information regarding ongoing and future rural electrification efforts is not available at present but would be available upon completion of the Master Plan (1.10). 1.23 Nevertheless, substantial rural electrification programs are currently underway in a number of regions in the country. Among the most important are: (a) The ongoing electrification subproject of an Integrated Rural Development Program (DRI) supported by IDB, Canadian International Development Agency and Bank financing (Loan 1352-CO) through which an estimated 15,000 rural families will acquire electricity service. At present, DRI II is under preparation, and is expected to cover substantial further areas; (b) the electrification program in the department of Choco, financed by the Netherlands Government; (c) the electrification program in the coffee- growing areas, financed by coffee sector resources; (d) an IDB financed rural electrification project for ICEL, which will provide service to about 130,000 households by 1984, as well as other ICEL projects for similar purposes; (e) EPM and EEEB programs to extend substransmission and distribu- tion facilities to rural areas in proximity to their own markets; and (f) finally, under a recently approved Bank loan, CORELCA is carrying out the first phase (1981-1985) of a 15 year village electrification program covering the North Atlantic region which will, upon program completion, provide electricity services to agroindustrial and commercial enterprises and about-215,000 households. Sector Investment Program 1.24 The total 1981-1990 investment program of ISA and its shareholders excluding interest during construction, is estimated at about Col$1,519 billion in current prices (about US$15.4 billion in current prices) with a foreign component of about 54% (Annex 5.10, Attachment 6 and 7). Some 81% of currently programmed investments would be for generation, which is extremely high (a range of some 40-60% would be the norm). Because the new generating capacity would be of little use without appropriate investments in sub- transmission and distribution it is probable that the estimated cost of  - 13 - Col$1,519 billion is understated. The Master Plan for power development being prepared by ISA and its shareholders would provide a basis for more complete sector investment estimates (1.10). 1.25 The introduction of large thermal plants later in the century is expected to play an important role in ISA's planning for the sector in the next few years (lead time for mine developmnt and power station cons- truction may aggregate some 10 years). Even the large hydro potential of some 93 GW (1.01) would be completely utilized by about year 2020 and the use of the country's large coal reserves in thermoelectric plants may be- come more economic than hydro before that time. The Government is aware of this scenario 1/, and the Government agencies involved, together with the Bank, are addressing it. The use of coal-fired thermal plants and the substitution of coal for gas and pretroleum would be the primary objectives. 1.26 The generation investment program is imposing a heavy financial burden on ISA and its shareholders. To ensure that only sound projects are undertaken, assurances were obtained under the San Carlos loans that, except for plants in the agreed National Expansion Program, ISA and its shareholders would not undertake construction of any generating plants of more than 200 MW (ISA) and 100 MW (shareholders) capacity prior to completion of San Carlos unless satisfactory evidence has been presented to the Bank that it is eco- nomically justified and that adequate financing is available to carry it out, as well as to meet other financial obligations. Finances and Tariffs 1.27 Except for EEEB and EPM, which have histories of adequate cash generation, the power sector has relied heavily on borrowings and budgetary contributions to finance its investments. EEEB and EPM operate low-cost systems and cover the most affluent markets in the country; they have, there- fore, been able to finance their investments with an appropriate balance of borrowings and cash generation while charging relatively low rates. GVC, previously dependent in part upon Government transfers, has strengthened its financial position considerably in recent years. Because there has been no mechanism to obtain financial transfers within the sector from the more affluent areas to the less affluent ones, ICEL and CORELCA, which operate high-cost systems in lower income areas than EEEB and EPM, have had to rely on budgetary contributions from the Government and fuel subsidies. In recent years, however, the opportunity of sharing in low-cost investments through ISA has provided an indirect transfer mechanism. In future, the re-structuring of ICEL and the interconnection of CORELCA with the central system are expected to strengthen further the sector's overall financial capability. 1.28 Between 1971-1974, rate adjustments lagged considerably behind yearly inflation. From 1975 onwards the situation began to improve insofar that rates were adjusted in line with inflation and starting in 1977 rates have been adjusted to increase them in real terms. This trend is expected 1/ Disponibilidad de capacidad hidroelectrica y su influencia en la generacion termica en el futuro (NDD, November 1978).  - 14 - to continue as the result of the agreements reached under the San Carlos I and II, Mesitas, Bogota Distribution, Guadalupe IV and Playas loans and current Government policy, which calls for maintaining tariff levels adequate to provide reasonable contribution to investment requirements. For 1981 this policy is expected to result in tariff increases in real terms of 20% through- out the sector. 1.29 The successful long-term execution of Colombia's power development is contingent not only upon the availability of sufficient cash generation by the individual entities but also upon domestic and external sources of finan- cing. The lag in generation investment during the 1970's together with the need to accelerate expansion of facilities even further to permit energy sub- stitution, has resulted in a financial bottleneck that cannot be fully relieved through tariff action (Annex 5.10). In recognition of this, during 1980, the Government reestablished the Electricity Development Fund (Fondo de Desarrollo Electrico , FDE) in order to overcome the constraint on investments represented by the insufficient availability of local commercial financing. This Fund has been made available to the utilities on the condition that their financial obliga- tions to ISA are duly attended to. Furthermore, in view of the high priority the Government attaches to planned power investments, authorization for significant for-eign borrowings to be monetized was given, even though Government policy normally precludes this. Moreover, the Government is in the process of estab- lishing a Permanent Electricity Financing Facility (PEFF) for the sector; funding for this facility could come from various sources including the Government, public entities with temporary cash surpluses and public bond issues, although the specific arrangements are still under study. The Government has confirmed that the PEFF will be established by January 1, 1982, and that the funds provided to such facility will be adequate to enable the timely carrying out of the National Power Expansion Program. 2. THE BORROWER General Description 2.01 The proposed borrower, Empresa de Energia Electrica de Bogota (EEEB), is an autonomous company owned by the Municipality of the Special District of Bogota. It was established by private Colombian interests and has operated the city's electric service for the past 80 years, since 1951 under municipal ownership. It has an installed capacity of 719 MW, 582 MW of which is hydro and the balance coal-fired thermal. It served about 580,000 subscribers at the beginning of 1981. Prior Bank Lending 2.02 The Bank has made five loans totalling US$256.6 to EEEB: 246-CO in January 1960, 313-CO in May 1962, 537-CO in June 1968, 1628-CO in November 1978, and 1807-CO in March 1980. The first two loans helped finance 304 MW of hydro and thermal generating plant additions, including the Sesquile Dam for the Guatavita Reservoir, and transmission and distribution system extensions. The third loan helped finance the 150 MW El Colegio hydroelectric plant and associated substations, construction of the 50 MW Canoas hydroelectric plant,  - 15 - expansion of the transmission and distribution systems, and engineering services. The fourth loan is helping to finance part of the 1978-82 national power expansion program including the 600 MW Mesitas hydroelectric facility. The fifth loan (Bogota Distribution Project), MUS$87.0, will help EEEB improve and expand the existing Bogota subtransmission and distribution systems. Works financed by the first three loans were completed successfully although with delays (of about one year and a half for the first two, and three years for the third) because of a variety of problems. The disbursements of the fourth loan began in September 1979 and the construction is progressing generally satis- factorily although with a delay of 3 to 6 months and some MUS$62 of cost over- runs due to changes in base prices (actual prices offered were higher than original cost estimates). Disbursements of the fifth loan are expected to begin shortly (the loan was signed on February 6, 1981), as soon as the loan is declared effective. Organization and Administration 2.03 EEEB is directed and administered by a seven-member Board of Directors headed by the Mayor of Bogota. Two members are elected by the Municipal Council, three are chosen by the Council from lists submitted by associations representa- tive of banks, commerce, and industry in Bogota, and one is chosen by the President of Colombia. This composition was worked out in connection with the Bank's initial loan to EEEB (246-CO) and has generally proven to be satisfactory. 2.04 EEEB's management is entrusted to a General Manager (appointed by the Board) assisted by four Deputy Managers, respectively responsible for (a) Administration; (b) Commercial and Financial; (c) Technical; and (d) Operations. There is also a Planning Division which provides support to the General Manager. The current organization chart is shown in Annex 2.1. Although EEEB has had a stable and competent management during most of its association with the Bank, turnover in its senior personnel increased during 1976 to 1978 resulted in a significant reduction in the number of experienced senior officers. The present financial manager, hired in late 1978, and main financial staff have shown adequate expertise in handling financial business. An important step for strengthening of financial management was taken in January 1979, when EEEB hired Peat, Marwick, Mitchele and Co., Management Consultants, to carry out a study on managerial, budgetary and accounting systems and financial planning; the study was completed; the findings were discussed by EEEB's management and the final recommendations are being imple- mented. Under the Bogota Distribution loan, EEEB agreed to enhance the effectiveness of its financial management through: (a) employing two financial experts; and (b) carrying out periodic training courses for its financial staff. The experts were hired and the financial staff have attended several courses and seminars. EEEB has planned further financial training for 1981-1982. Employment 2.05 EEEB had 2,662 employees at the beginning of 1981, including fiscal audit personnel of 56, administration personnel of 319, financial personnel of 479, operations personnel of 1,622 and technical personnel of 186, which are reasonable proportions of staff assigned to EEEB's various activities. The company's historical staff growth over the past 12 years in relation to the number of customers served and energy sold is shown below:  - 16 - Number of Number of Customer Total Sales, MWh 1/2/ Employees 2/ per Employee per Employee 1968 1,422 174 1,021 1971 1,520 198 1,317 1974 1,896 213 1,359 1977 2,234 216 1,587 1978 2,278 220 1,603 1979 2,465 216 1,506 1980 2,662 218 1,506 Average growth rate 1969-1980 (%) 5.4 1.9 3.3 1/ Includes bulk sales to other utilities. 2/ Source: EEEB. The total number of EEEB-s employees is projected to grow at an average of about 6.0% per year. The actual trend of generally improving ratios of the number of customers per employee and of the annual electricity sales per employee is expected to continue (Annex 2.2). Accounting and Auditing 2.06 EEEB's data processing and accounting are satisfactory. Internal auditing is carried out by a separate department under a General Auditor responsible to the Board of Directors and appointed by the Mayor of Bogota. Independent auditing of EEEB was carried out by external auditors acceptable to the Bank until 1977, at which time the function was taken over by the "Contraloria del Distrito Especial de Bogota", the auditing body of the Municipal Government of Bogota. Although audits performed by such body were in practice similar to those carried out by private auditing firms the audit report was signed by the Controller, who is the head of the organization and usually a political appointee of the incumbent Government administration, as are the General Manager of EEEB, as well as most of the Board. In order to guarantee a greater degree of independence between auditor and "auditee" and to ensure audits in accordance with sound commercial principles, under loan 1807-CO, EEEB agreed to appoint independent auditors acceptable to the Bank. EEEB hired in mid-1980, the independent auditor Liborio Cuellar and Associates, to perform the company's audits starting in fiscal year 1980. Billing and Collections 2.07 Billing, which covers a bi-monthly cycle for all customers, is carried out using a computerized processing system. Bills must be paid in caslh at the various company offices or banks located throughout the city. As of December 31, 1979, accounts receivable was 22% (about 79 days billing) of total annual sales, which represents an improvement over performance in previous years. However, the present estimate for 1980 is 23%, which is higher than the 18% target covenanted under the Mesitas and Bogota Distribution loans, due to arrears of some government entity bills. During negotiations EEEB agreed to reduce them to no more than 21% of annual sales by December 31, 1981; and to no more than 19% in 1982; and 17% in 1983 and thereafter.  - 17 Insurance 2.08 EEEB's assets are not adequately insured. Under the Bogota Distri- bution loan the company agreed to execute an insurance study with consultants satisfactory to the Bank. The Bank reviewed the terms of reference for the study and EEEB, which is currently evaluating the offers, expects to award the contract by March 31, 1981. The study would be completed by December 31, 1981, and implemented starting December 31, 1982 after giving the Bank an opportunity to review the study and comment on its conclusions and recommendations. 3. EEEB's MARKET Background 3.01 EEEB's service area includes the District of Bogota--the capital of Colombia--and the areas of influence of more than 55 municipalities within the nearby departments of Cundinamarca and Meta in the central zone. Total population living in EEEB's service area is estimated at about five million in 1979, or about 20% of Colombia's population in that year. Market Statistics and Forecast 3.02 EEEB's market statistics and forecasts for the period 1975-1990 are summarized in the following table and shown in detail for the period 1973-1990 in Annex 3.1: 1975 1980 1985 1990 Consumer Category GWh (%) GWh (%) GWh (%) GWh (%) Residential 1,042 39 1,672 42 2,875 44 5,193 47 Commercial 450 17 673 17 1,077 16 1,719 16 Industrial 855 32 1,263 31 2,049 31 3,240 29 Government and Public Lighting 316 12 401 10 604 9 896 8 Total Sales 2,663 100 4,009 100 6,605 100 11,048 100 Losses and Station Use 695 21 2/ 1,139 22 2/1,897 22 2/ 2,670 19 2/ Total Requirements 3,358 5,226 8,502 13,718 1/ Source: EEEB. Proyecciones Financieras, Enero 1981. 2/ As a percentage of total requirements. 3.03 The forecast for the period 1981-1990 was prepared by EEEB on the basis of historical trends and recorded indices for each consumer category for each of the years from 1973 to 1980. Trend curves were derived to project monthly and annual requirements which were subsequently adjusted to reflect population growth trends, sector economic conditions and market saturation effects. Residential consumption grew at an average annual rate of 11.5% in the period 1974-1980 and it is expected to grow at an average annual rate of 12% in the period  - 18 - 198:1-1990. Also residential consumption augmented its share of the market from 36% in 1973 to 42% in 1980 as a result of increased urbanization and access to service, as well as expansion of services to semi-rural areas. This trend is expected to continue over the next few years and by 1990 residential consumption would represent about 47% of EEEB's total sales. Commercial consumption grew at an average annual rate of 9% in the period 1974-1980 and it -is expected to grow at an average annual rate of 9.8% in the period 1981-1990. Commercial consumption which represented 17% of sales in the period 1973-1980 is expected to decrease slightly to 16% in the period 1981-1990. Industrial con- sumption grew at an average annual rate of 7.9% in the period 1974-1980 and it is expected to grow at an annual average rate of 9.9% in the period 1981-1990. The industrial consumption share of the market which decreased from 34% in 1973 to 32% in 1980, is expected to decrease slightly to 29% by 1990. Government and Public Lighting grew at an average growth rate of 4.6% in the period 1974-1980 and it is expected to grow at an average growth rate of 8.4% in the period 1981- 1990, as a result of public lighting expansions included in the Bogota Distri- bution project, as well as in other future distribution expansion included in EEEB's investment program. Government and Public Lighting consumption has shown a slightly decreasing share of total consumption and is expected to represent about 8% of total sales by 1990. Other consumption, which includes station use (mainly pumping for storage) and losses, grew at an average annual growth rate of 1.4.8% in the period 1974-1980 and is expected to grow at about 8.9% in the period 1981-1990. Actual losses represented about 22% of total gross genera- tion requirements in the period 1974-1980. EEEB's historical losses are relatively large and, as for most Colombian power utilities, may contain a substantial amount of theft. This problem is presently being studied for the entire sector (1.10(d)) and remedial action would be implemented as a result of the study. EEEB expects to reduce such losses gradually to about 15% by 1987, as a result of the measures to be implemented (Annex 2.2). In 1979 gross per capita electricity consumption in Bogota was about 707 kWh (assuming a popula- tionL of about 5 million for the Bogota area), which is lower than gross per capita electricity consumption in other large cities in Latin America (Medellin, about 1,000 kWh; Panama City, more than 810 kWh; Buenos Aires, estimated at more than 1,400 kWh). 4. THE PROGRAM AND THE PROJECT Background 4.01 In accordance with the most recent updated study on economic ranking (prepared by ISA during the second semester of 1980), the least-cost generation development in the interconnected system would be the following: Required Plant MW Completion Date 1/ Tasajero (Steam; ICEL) 150 1-1984 Cerrejon II (Steam; CORELCA) 158 8-1984 Guadalupe IV (Hydro; EPM) 216 10-1984 Playas (Hydro; EPM) 200 6-1986 Betania (Hydro; ICEL) 500 4-1986 Guavio (Hydro; EEEB) 1,000 11-1987 Urra (Hydro; CORELCA-ISA) 1,050 5-1988 Patia (Hydro; ISA) 1,200 6-1989 San Juan (Hydro; ISA) 1,500 12-1990 T7_ Source: ISA  - 19 - 4.02 After San Carlos I and II (1,240 MW), the first stage of Guavio (initial capacity 1,000 MW, final capacity 1,600 MW) would be the second largest plant in the national system. It would be an integral part of the Interconnected System and is urgently needed to avoid severe rationing in the national system in the late 1980s and early 1990s. (At present, power is being rationed an average of four hours per day in the Central System and this situation is expected to persist, with various degrees of severity until 1983, when San Carlos I begins operations). The Government, ISA and its Share- holders, in consultation with the Bank decided to assign to EEEB the owner- ship and full responsibility for the construction of the Guavio Hydroelectric Plant, which would be located close to Bogota in EEEB's area of influence. The shareholders of ISA will have absolute rights to buy 40% of the capacity and energy of the plant in exchange for financing 40% of the local cost of the investment (1.11(c), 4.13). EEEB's Expansion Program 4.03 In the period 1981-1990 EEEB plans to expand its operations to serve about 816,000 new customers, with its system reaching a peak demand of 2,532 MW and gross generation requirements of 13,718 GWh/a by 1990. EEEB's expansion program for the period 1981-1987 is based on the least-cost generation expan- sion program updated by ISA in 1980 and on subtransmission and distribution studies carried out by EEEB, and it has been designed to meet (together with projected electricity purchases from ISA, based upon EEEB's acquired rights to buy part of ISA's plant output) gross generation requirements in the EEEB system and to connect the new consumers in the period. Capacity and energy balances for the EEEB system are shown in Annexes 4.1 and 4.2. As of December 1980, EEEB's expansion program for the period 1981-1987 comprised the following projects: Generation (a) purchase from ISA of the Zipaquira IV thermal plant (Termozipa IV) which is to be completed in 1981; (b) completion of the Mesitas hydroelectric facility in 1982; (c) purchase from ISA of the Zipaquira V thermal plant (Termozipa V) which would be completed by 1983; (d) completion of the Sesquile pump-station expansion in 1984; (e) completion of the Sesquile dam reinforcement in 1985; (f) raising of the Muna Dam height (initiation of construction in 1982 and completion in 1985); (g) construction of the first stage (1,000 MW) of the Guavio hydroelectric plant (initiation of construction in 1981 and commissioning in 1987); Transmission (h) completion of the transmission components associated with the Mesitas hydroelectric facility (about 100 km of 230-kV lines) in 1983;  - 20 - (i) transmission components associated with the Guavio hydroelectric plant including about 200 km of double-circuit 230-kV transmission lines, the step-up substation at Guavio and four 230-kV bays at the Circo and Tunal substations in the future 230-kV Bogota Ring (initiation of construction in 1984 and commissioning in 1987); Subtransmission and Distribution (j) completion of ongoing works in 1981; (k) completion of the Bogota Distribution Project (Loan 1807-CO) in 1984; (1) a substransmission and distribution program (1985-1987); (m) completion of the rural electrification program 1980-1985; (n) part of a substransmission and distribution expansion program for the period 1987-1990; (o) part of a rural electrification program for the period 1986-1990; Other Investments (p) construction of a regional load-dispatch and telecommunications center (initiation of construction in 1982 and commissioning in 1985); (q) construction of a maintenance shop (initiation of construction in 1983 and completion in 1985); (r) completion of the EEEB's new Headquarters Building in 1982; (s) completion of construction of the Data Processing Center in 1985; (t) general plant in the period 1981-1987; and (u) studies and training. 4.04 The cost of the above 1981-1987 expansion program (Annex 4.3) excluding interest during construction is estimated at about Col$203.8 billion in current prices equivalent to about US$2,362 million in current prices. The foreign cost of the program would be about Col$95.6 billion or 47% (equivalent to about US$1,141 million), and the local cost Col$108.2 billion or 53% (equivalent to about US$1,221 million) (5.09 and 5.10). The ]'roject 4.05 EEEB's market expanded rapidly in the seventies. However, the company did not expand its generating facilities rapidly enough to keep pace with demand. In 1977 EEEB initiated the construction of the El Paraiso and  - 21 - La Guaca hydroelectric plants (total capacity 600 MW) for the Mesitas project (under Loan 1628-CO), which would be completed in 1983. However this addi- tional capacity will not allow EEEB to meet incremental demand beyond 1986, even taking into account possible purchases from the interconnected system (Annexes 4.1 and 4.2). 4.06 The proposed project aims at (i) providing new capacity and energy needed by EEEB and the rest of the National System to meet forecast demand; (ii) assisting EEEB to participate with the other ISA partners in the least- cost operation of the National System, as well as to improve its own efficiency; (iii) assisting EEEB in improving its maintenance practices through studies and a training program for its technical staff; (iv) encouraging adequate environmental protection in the project area; (v) assisting EEEB in the execution of the studies required to complete the assessment of the environ- mental impact of the Guavio hydroelectric plant; and (vi) promoting Govern- ment efforts to improve overall sector organization and to ensure sufficient access to local financing needed for the National Power Expansion Program. Project Description 4.07 The proposed project would comprise: (i) The Guavio hydroelectric p ant will be constructed on the Guavio river with a 950 million m useful capacity r servoir. The annual average flow into the reservoir would be 72 m /s. The p ant, designed for a gross head of 1,100 m and a flow of 176 m /s would have an initial capacity of 1,000 MW (5 units of 200 MW each) and a final capacity of 1,600 MW (addition of 3 units of 200 MW each by the end of the century). The average annual generation for the first stage would be about 7,500 GWh in average-hydrology years and about 5,350 GWh in dry years. The annual generation would increase marginally in the second stage. The plant would include: (a) river diversion, rockfill dam (with impervious core) and spillway tunnels; (b) intakes and diversion tunnels (about 4 km) to conduct waters of the Chivor and Batatas Rivers into the Guavio reservoir; (c) pressure tunnel (about 15 km), underground power house and transformer caverns with access tunnel (about 2 km), and tailrace tunnel (about 5 km); (d) five generating units of 200 MW each to be located in the underground power house; (e) ancillary electromechanical equipment for the power house; (f) a step-up substation, at Guavio, including five single-phase transformer banks (to be located in an underground cavern parallel to the main cavern) and a 230-kV outdoor switching station;  - 22 - (g) two double-circuit 230-kV transmission lines to Bogota (about 200 circuit-km), and four 230 kV line bays at the Circo and Tunal substations in the Bogota 230-kV ring (these substations are at present operating at 115-kV and would be expanded and uprated to 230-kV by 1985); and (h) infrastructure for the project, comprising about 107 km of access and service roads (including equipment for their maintenance), about five bridges and about 37 km of 115-kV transmission line and terminal substation. (ii) EEEB's regional load-dispatch and telecommunication center (to function as a satellite of the national dispatch center under construction by ISA); and (iii) consulting services for: (a) design and procurement and supervision during construction of the Guavio hydroelectric plant and associated 230-kV transmission system; (b) design, procurement, installation and supervision during construction of EEEB's load-dispatch and telecommunication center; (c) studies to be carried out as a result of the recommendations of the Environmental Reconnaissance study for Guavio; and (d) study and implementation of a maintenance improvement program for EEEB's generating plants. (iv) Training Program for EEEB's technical staff including: (a) training in Colombia and abroad for the staff which would operate and maintain the EEEB's load-dispatch and telecommunications center; and (b) training for the staff who would be responsible for operating and maintaining EEEB's generating plants. Project Cost 4.08 The bids for the two main civil-works contracts, which were received shortly after the completion of the combined IBRD/IDB appraisal mission in Deceimber 1980, 1/ showed average prices significantly lower than the originally estimated costs and, consequently, EEEB and INGETEC updated the project cost estimate (Annex 4.4). The project cost in current prices (which is summarized in the table below) excluding interest during construction, is estimated at about US$1,053 million of which the total foreign cost would be about US$678 million or 64% of the total cost. Interest during construction is estimated at about US$250 million. Total financing requirements for the project amount to about US$1,303 million, of which US$928 million represents the foreign component. 1/ Procurement procedures have been in accordance with Bank and IDB guidelines.  - 23 - Project Cost Summary Local Foreign Total Local Foreign Total -------(Col$ million) ------- -------(US$ million)------ I. Engineering and Adminis- tration 2,440.7 302.7 2,743.4 51.6 6.4 58.0 II. Infrastruc- ture and Land 600.7 430.4 1,031.1 12.7 9.1 21.8 III. Main Civil Works 8,173.4 13,821.1 21,994.5 172.8 292.2 465.0 IV. Electro- mechanical Equipment 222.3 4,214.4 4,436.7 4.7 89.1 93.8 V. Transmission System 354.8 908.1 1,262.9 7.5 19.2 26.7 VI. Load-Dispatch Center 99.3 614.9 714.2 2.1 13.0 15.1 VII. Studies 14.2 4.7 18.9 0.3 0.1 0.4 VIII. Training 9.5 33.1 42.6 0.2 0.7 0.9 Total Base Cost 1/ 11,914.9 20,329.4 32,244.3 251.9 429.8 681.7 IX. Contingencies Physical 1,892.0 2,861.7 4,753.7 40.0 60.5 100.5 Price 14,563.1 37,283.9 51,847.0 83.0 187.9 270.9 Total 16,455.1 40,145.6 56,600.7 123.0 248.4 371.4 X. Total Project Cost 28,370.0 60,475.0 88,845.0 374.9 678.2 1,053.1 XI. Interest During Con- struction - 23,755.3 23,755.3 - 250.0 250.0 XII. Total Financ- ing Require- ments 28,370.0 84,230.0 112,600.3 374.9 928.2 1,303.1 1/ 1980 prices.  - 24 - 4.09 All base prices are as of December 1980. The aggregate cost of engineering design, supervision and administration of the project represents about 6% of the total project cost excluding interest during construction, which is reasonable. Physical contingencies adopted are 15% for the dam and associated works, 20% for the underground works and for the load-dispatch center, 10% for the transmission component, and 10% for consulting services and the training program. Price contingencies were calculated assuming that local inflation varies from 25% in 1981 to 14% in 1990 and foreign inflation from 9.0 in 1981 to 6% in 1990. The average exchange rate was assumed to increase from, 47.30 Col$/US$ in 1980 to 125.05 Col$/US$ in 1988. Project Financing 4.10 A detailed financing plan is set out in Annex 4.5. In brief, local currency requirements would be provided by EEEB (about US$255 million, or 60% of the local cost) and ISA (about US$150 million, 40% of the local cost). The foreign exchange cost would be financed as follows: Amount % of Foreign % of (In Millions of US$) Exchange Requirements Total Requirements Commercial Banks 340 36.6 26.1 Suppliers 129 13.9 9.9 1DB 100 10.8 7.7 World Bank 359 38.7 27.5 Total 928 100.0 71.2 Based upon extensive discussions with other external sources of finance, the above represents the outer limit of cofinancing likely to be forthcoming, taking account of EEEB's total borrowing program over the period. However, a sine qua non for the high level of cofinancing projected would be EEEB's maintaining tariffs high enough to ensure sound finances. EEEB's first venture in the capital market was in 1975 with a US$7.5 million loan from the First National City Bank. Since then, it contracted three additional external loans totalling US$93.9 million equivalent and is working on a further one for US$35 million. Between 1981-1987, EEEB will need to mobilize about US$285 million in external financing for its investment program over and above the cofinancing of the proposed project of US$340 million (5.11). Commercial banks/suppliers would finance 50.5% of the foreign exchange needs or 36% of the total project requirements, while IDB and the Bank combined, 49.5% of the foreign exchange needs or 35.2% of the total requirements for the project. The proposed Bank loan, would finance 27.5% of the total project requirements.  - 25 - 4.11 The proposed Bank loan would be disbursed against: Amount Financed 100% of the foreign cost of: (US$ million) (i) river diversion, dam and spillway tunnels, main intake and initial part of the pressure tunnel, and intakes and diversion tunnels for the Chivor and Batatas rivers 255.0 (ii) infrastructure for the project, including associated maintenance equipment 15.0 (iii) ancillary electric and mechanical equipment for the underground power house 26.9 (iv) construction of EEEB's load-dispatch center 22.0 (v) studies and a training program for EEEB's technical staff 1.4 50% of the total cost of: (vii) consulting services for project design and supervision, as of January 1, 1981 38.7 Total 359.0 4.12 The proposed US$100 million IDB loan would finance about 51% of the foreign cost of the underground waterways, underground caverns and access tunnel. 4.13 Suppliers' credits totalling about US$129 million would finance 85% of the foreign cost of the main generating equipment, power transformers and 230-kY power cables, and of the 230-kV substation and transmission lines for the project. EEEB's own cash generation is expected to finance some US$225 million. The other ISA shareholders would contribute about US$150 million equivalent to cover 40% of the local cost of Guavio (4.02). 4.14 The Bank would assist EEEB in arranging the cofinancing by external commercial banks of the remaining US$340 million. An IDB proposal to assist with the co-financing of US$96 million (to finance the remaining 49% of the foreign cost of the underground waterways and caverns and access tunnel) was declined by the Government (IDB cofinancing requires Government guarantee, which is incompatible with Government policy not to guarantee commercial loans to decentralized agencies, in order to encourage prudent financial management).  - 26 - Engineering 4.15 The final feasibility study for the Guavio project, dated June 1978, is available in the Bank. The Guavio hydro facilities have been designed by INGETEC, one of the largest, most experienced and capable Colombian consulting firms. The final feasibility report takes account of possible alternatives (dam location and height, capacities, etc.). The Bank engaged a geologist consultant, Dr. Merritt (USA), who visited Colombia in September 1979 and reported favorably on project design and preparation. Pre-qualification documents for the main civil works were issued in January 1980, bidding docurnents by mid-1980 and the offers received in December 1980. EEEB has retained INGETEC to assist in the preparation of designs and bidding documents for the transmission system and for the acquisition of the main generating equipment, power transformers, and ancillary electric and mechanical equipment for Guavio, and to continue assisting in the design aspects until completion of the project. Supervision during construction would be carried out by other consulting firms, because the fiscal code for the District of Bogota proscribes using the same consultants for design and supervision. This regulation is being observed with good results in the Mesitas project financed by the Bank (Loan 1628-CO). Detailed engineering design, and supervision during construction are estimated to require 16,750 and 15,300 man-months of con- sulting services and have costs of about US$32.3 million and US$24.1 million in 1980 prices, respectively. The corresponding average man-month costs would be about US$1,900 and US$1,500 in 1980 prices. These costs, which are estimated by INGETEC on the basis of experience with recent projects, are reasonable 1/. 4.16 The consulting services for the study to determine the final characteristics, preliminary designs and final cost estimate for EEEB's load--dispatch center are being financed under Loan 1807-CO. EEEB hired the consulting firm Systems Control-Sistecom under satisfactory terms of reference. As agreed under Loan 1807-CO, the study, which is expected to be completed by the end of 1981, would be sent to the Bank together with EEEB's proposals for its iimplementation, for review and comments. In the meantime, preliminary cost estimates and construction schedule for this item were prepared by EEEB on the basis of bids received for ISA's National Dispatch Center and for EPM's satellite load-dispatch center (in both cases the studies were also carried out by Systems Control-Sistecom), and are reasonable. 4.17 Engineering services for supervision during construction of EEEB's load--dispatch center is estimated to require about 50 man-months of foreign consulting services and 300 man-months of local consulting services and have a total estimated cost of US$1.2 million. The corresponding average man-month costs would be about US$12,000 (ranging between US$10,000 and 15,000) and US$1,900 respectively. 1/ Both figures represent average billing per man-month in 1980 prices and reflect charges for services provided by professional staff, technicians, non-professional staff, overheads and fee.  - 27 - Studies 4.18 A study will be carried out to assess the improvements needed in EEEB's present operation and maintenance planning and practices in generating plants. The study will also recommend the necessary training required by EEEB's staff in charge of operation and maintenance of generating plants. The consultants for this study, which is estimated to cost about US$0.3 million (foreign cost US$0.1 million) will be engaged by EEEB under terms and condi- tions satisfactory to the Bank by June 30, 1982. The study will require some 30 man-month of consulting services. The average man-month cost will be about US$10,000. The study will be completed by April 30, 1983 and sent to the Bank for comments before starting its implementation by October 31, 1983. 4.19 Consulting services will also be engaged for the studies needed to complete the analysis of the environmental impact of the project, by December 31, 1981. The studies will be completed by December 31, 1982 (4.29), and their recommendations will be implemented starting June 30, 1983. The cost of this study has been preliminarily estimated at US$0.6 million in current prices (foreign cost US$0.2 million). The study will require about 60 man- months of which 20 will correspond to foreign consultants. The average foreign man-month cost will be about US$10,000. The studies are expected to be completed not later than December 31, 1982. Training 4.20 A training program will enhance the skills of operation and mainte- nance personnel for EEEB's generating plants. This training program will be designed taking into account the recommendations of the operation and mainte- nance study (4.18). The cost of such program, which will be completed by April 30, 1985, has been preliminarily estimated at US$0.4 million in current prices (foreign cost US$0.2 million). 4.21 Training will also be provided to EEEB's staff for the operation of its proposed load-dispatch center. This program will be provided by the load-dispatch center supplier and its terms and conditions will be discussed between EEEB and the Bank together with the bidding documents for the load- dispatch center. This program is estimated to cost about US$1.1 million in current prices (foreign cost about US$0.9 million. Project Organization and Implementation 4.22 The Guavio hydroelectric plant, the 230-kV transmission system, and the EEEB's load dispatch center will be constructed by contractors under the supervision of consultants. Construction is expected to start in May 1981. The project which would take some 7 years to construct, would be completed late in 1987. A detailed project implementation schedule is included in Annex 4.6.  - 28 - 4.23 EEEB, which is responsible for coordinating the implementation of the project, has created to this effect a Project Management Unit (PMU). The nineteen remaining staff positions of the twenty-five required by the PMU have been recently approved by EEEB's Board. So far, six posts had been staffed. During negotiations EEEB confirmed that experienced staff and experts will be appointed in line with project requirements. 4.24 EEEB received by the end of January from Instituto Agustin Codazzi the list and estimated values of lands to be purchased for construction of the access roads, and EEEB is now progressing satisfactorily in acquiring it. Since only some 250 scattered families live in the entire project area, EEEB will simply purchase the land; resettlement would not be necessary. EEEB is seekirng a firm support from both the local and regional governments, to facilitate timely acquisition. By June 1981, EEEB expects to obtain all the land for the access roads and main work areas of the project; if delays would be encountered, project start-up would have to be delayed. Procurement 4.25 All project items to be financed by the Bank will be procured under international competitive bidding (ICB), in accordance with Bank guide- lines. EEEB has requested a margin of preference in accordance with Bank guidelines for goods manufactured in Colombia; such expenditures would not exceed an estimated US$6 million. The IDB-financed project items would be procured in accordance with IDB guidelines. For those items to be financed under suppliers' credits, EEEB would also use ICB. All consultants services will be obtained under terms and conditions satisfactory to the Bank. Advanced Contracting and Retroactive Financing 4.26 Bids for the main civil works contracts, the foreign exchange for which would be financed by the Bank and IDB, were opened on 12/12/80 (4.08) and EEEB awarded the two contracts in April 1981 to permit commencement of the works not later than May 1981. Contract signing and initial expenditures would then take place before Board presentation of the Bank loan. Considering that these contracts include the construction of access roads, the rather long period of execution of the project (about 7 years), the shortage of generation capacity existing in Colombia, and the large project cost increases, as well as the adverse impact on the economy, which would result as a consequence of any delays in the completion of the project, the Bank did not object to the advanced contracting of the main civil works by EEEB. However, EEEB has been advised on the risks of advanced contracting in the event the Bank loan is not made or is delayed. Retroactive financing would be required for the down payments for the dam and civil-works contracts including access roads, as of January 1, 1981. In the aggregate, retroactive financing would not exceed some US$36 million, equivalent to 10% of the proposed Bank loan.  - 29 - Disbursement 4.27 Disbursements from the loan account will be fully documented and would be made for: (a) 66% of total expenditures for the civil works contract including the river diversion, dam, spillway tunnels and associated works, which is estimated to represent the foreign cost of such item; (b) 100% of foreign expenditures and 100% of the ex-factory cost of ancillary electro-mechanical equipment for the powerhouse (which is not suitable for suppliers' credits); (c) 100% of the foreign cost of the load-dispatch and telecommunication center and associated design consulting services; and 100% of the foreign cost of consulting services for the studies and training included in the project; and (d) 50% of the total expenditures for consulting services for engineering design and supervision for the Guavio hydroelectric plant including the associated transmission system, and for supervision during construction of EEEB's load-dispatch and telecommunication center. 4.28 Annex 4.7 shows the estimated disbursements from the proposed Bank loan. The closing date of the proposed loan will be May 30, 1988, six months after completion of the project in November 30, 1987. Environment 4.29 A preliminary comprehensive environmental reconnaissance on the project was received in the Bank before negotiations. This report identified the priority aspects which will be studied in detail under the Final Environ- mental Study to be partially financed by the Bank (4.19). During negotiations agreement was reached that the conclusions and recommendations of the study will be discussed with the Bank before starting their implementation by June 30, 1983. Project Risks 4.30 The execution of the project does not involve any major risks other than those normally associated with the construction of large dams and under- ground works. INGETEC, the firm responsible for project design is one of the most experienced and capable Colombian consulting firms and all appropriate precautions have been provided for. The fact that supervision during construction would be carried out by a different consulting firm does not involve any risks because such procedure has given good results in previous projects (4.11). EEEB has experience in managing and coordinating large projects. Assuming that the necessary land would be acquired in a timely manner (4.24) and that the PMU would be appropriately staffed (4.23), the project is expected to be carried out as scheduled.  - 30 - 5. FINANCE Suimary 5.01 Over its 20-year relationship with the Bank, EEEB has maintained a sound financial position. However, EEEB's 1979-1980 financial situation has been unusually difficult, as a consequence of three factors. First, over the last five years there has been a trend for operating costs to rise at a faster pace than tariffs, despite substantial tariff adjustments in real terms. The two other circumstances, beyond the company's control, have been delays in receiving authorization for requested tariff increases in 1980 and, insufficient availability of local financing in the same year. The extra-fiscal measures taken in conjunction with Bank-financed projects, including revaluation of assets, for monitoring financial performance, have considerably strengthened EEEB's financial structure. EEEB's 1981-1987 investment program including its own construction program, investments in ISA, interest during construction and requirements for working capital, amounts to MCol$327,081, of which MCol$88,845 or 27.2% correspond to the proposed Guavio project. EEEB's net internal cash generation would finance MCol$152,266 or 46.5% of the total re- quirements of the 1981-1987 program; ISA's contributions for Guavio would fund MCol$12,650 or 3.9% of the total; and the remaining 49.6% would be covered by loans amounting to MCol$162,165. The present financial projections are based on EEEB's plan of tariff increases and on external and domestic inflation assumptions. Net operating income with the above plan is expected to produce annual rates of return on fully revalued assets ranging from 15.3% in 1981 to 20.5% in 1988 and the company is expected to maintain an adequate financial position throughout the projection period. Earnings History 5.02 Over its 20-year relationship with the Bank, EEEB has maintained a sound financial position. During the period 1969-1978 its internal cash generation provided more than 50% of annual investments on average, including substantial contributions to ISA. This may be attributed in part to the high density of its market and low-cost facilities, given the area's geographic advantages for hydro generation. The balance of the company's investment funds has been obtained through borrowings, generally at reasonable cost; no Government funding has been required. 5.03 EEEB's 1979/1980 financial situation has been unusually difficult. This is a consequence of the tariff/operating cost trend of the last five year period and of two other developments in 1980, beyond the company's control: delays in obtaining authorization for timely tariff increases and very recently, lack of local financing. The tariff increases have not been sufficient to offset the increasing operating costs: EEEB's tariff has increased rapidly in current USO (from 1.2 per kWh in 1976 to approximately 2.7 in 1979 --3.1 USJ/kWh is estimated for 1980--) and it has also increased in real terms, 1/ 43% in the 1976-1980 period, under a 1/ Deflated on the basis of the Colombian blue collar consumer price index.  - 31 - program of fixad monthly increases. 1/ However, mainly because of the growing participation of the energy purchased from ISA in EEEB's total energy sold, during that period, operating costs have increased at a faster pace than tariffs, as shown below (in real prices indexes): 1976 1978 1979 1980 (estimated) Tariffs 100 126 141 143 Operating costs 100 137 146 144 This has resulted in an estimated foregone income (assuming tariff in- creases similar to operating costs increases) aggregating MCol$1,070 in end- 1980 prices, approximately equivalent to EEEB's arrears to ISA as of December 31, 1980. Furthermore, during 1980, the local authorities were reluctant to support in full the tariff increase request of EEEB's management due to the considerable increments in charges for other public services in the city of Bogota, combined with inflationary pressures and a slackening of economic activity. These facts did not cause any serious constraint to EEEB finances until mid-1980, when financial difficulties began to slow down the normal flow of its construction program and delay the payments to ISA (capital contributions and energy bills). In addition, the limited availability of domestic financing brought about, during 1980, shortfalls in planned local borrowing. National monetary policies aimed at dampening inflation severely constrained the domestic banking system. By mid-1980 the Government realized the impact of these policies on urgently needed power sector expansion, and reactivated the Electricity Development Fund (FDE), as an interim measure until long-term local financing arrangements could be established. However, it was not until late in the year that EEEB was able to obtain disbursements from FDE. 5.04 The 12% adjusted average rate of return covenant under the Bogota Distribution project (Loan 1807-CO) for the years 1979 and 1980 exceeds the actual rates of return for those years, 8.2% and 9.2% (estimated), respectively, and the estimated 1980 adjusted average was 5.5% (in accor- dance with the existing agreements for calculating the rate of return, 1979 shortfall has been carried forward to 1980 operating income). Never- theless, at end of 1979, EEEB's debt/equity ratio was 34/66, calculated on the basis of revalued assets, and the debt service coverage was 1.7. The company's working capital has been adequate in recent years; the current ratio has exceeded 1.4 since 1974 and reached 2.0 in 1978. Although accounts receivable as a percentage of annual sales had grown to 27% by the end of 1976, they decreased to 22% in 1979, which is somewhat higher than the 19% target agreed for that year under the Mesitas and Bogota Distribution loans (2.07). 1/ The present one year program (July 1980-June 1981) consists of an 8% flat increase (implemented in July 1980) and monthly average increases of 2.3%. (5.06).  - 32 - Rate Base 5.05 For public accounting purposes, Colombia's public utility regu- latory law has not allowed full revaluation of fixed assets but only revaluation to match the revaluation of outstanding foreign debt for changes in exchange rates 1/. To reflect the international and domestic inflation, an agreed fixed value of EEEB's assets and accumulated depre- ciation was assumed as of December 31, 1976 and, starting from this date, EEEB revalues its assets quarterly by the Colombian blue collar cost of living index for the Bank's purpose of monitoring its financial performance. Under the Mesitas and Bogota Distribution Projects, EEEB agreed to commission a consultant's study to establish the value of its assets. The study was to be completed and made available to the Bank by March 31, 1981, to discuss the advisability of revising the gross and net value of assets, the valuation methodology and the rate of return requirement. However, it took longer than expected to select consultants (Gilbert and Associates in consortium with Salgado Melendez) who were hired at the end of 1980. Because there is no urgency attached to revising the asset value, the Bank has extended the above dates as follows: by December 31, 1981, the study would be completed and submitted to the Bank for comments and by March 31, 1982 discussion with the Bank on the findings would take place. Tariff Structure 5.06 Although EEEB's average rate has improved significantly and is expected to continue to improve (5.03, 5.11), its tariff structure lacks appropriate balance among major categories of consumers. Under the Bogota Distribution Project, EEEB agreed to prepare by April 30, 1980 and put into effect by June 30, 1980, a program satisfactory to the Bank to correct the tariff structure, taking into account the conclusions of the ongoing country-wide tariff study referred to in Sections 5.10 of Loans 1582-CO 1725-CO. The purpose of the program is to revise gradually the structure of EEEB's tariffs and rates such that, for each category of consumers (residential, industrial, commercial and governmental) the aggregate tariffs and rates charged to the category, as a whole, will cover approximately the cost of the service received by each category. The revision will also take into account the income redistribution policies of the Government benefitting the lowest-income consumers. Also, EEEB agreed to implement such program by June 30, 1980. Because the completion of the country-wide study was delayed, and taking into account the possibility that the study would be further delayed (1.10 (c)), EEEB agreed to implement an interim program of adjustments, with the aim of bringing the average residential tariff to parity with the average industrial tariff over the period ending no later than October 1, 1982. However, when the tariff study becomes 1/ The Office of the Comptroller General of Colombia has recently pres- cribed by Resolution No. 8345 of July 30, 1980 that commissions shall be set up in public entities to identify a more realistic procedure for asset revaluation.  - 33 - available, the interim program is to be superseded by one based on the findings of the study. An important step toward the agreed objective was taken in July 1980, with the 1980-1981 program of tariff increases authorized by JNT and implemented by EEEB. The features of the program are: Increases Flat July 1980 Monthly (%) Col$ (%) Industrial 10 2.2 Commercial 10 2.2 Residential 1-200 kWh 20 0.01 201-400 kWh 16 0.015 401-600 kWh 16 0.02 601-800 kWh 5 2.6 801-1,200 kWh 6 2.9 1,201-1,600 kWh 8 3.0 1,601-2,000 kWh 10 3.0 2,000- 12 3.0 Financial Structure 5.07 As a result of the extra-fiscal measures taken under the San Carlos and Mesitas loans, including revaluation of assets for monitoring financial performance, EEEB's financial structure has been strengthened. As of December 31, 1979, EEEB's capitalization was: MCol$ % Capital 100 18 Accumulated Surplus 4,944 48 Capital Revaluation 13,133 48 Total Equity 18,177 66 Long-Term debt 6,040 22 Current Liabilities 2,279 8 Total Liabilities 8,319 30 Pension and Other Liability Reserves 1,108 4 Total 27,604 100 5.08 EEEB's principal creditor is the Bank; in 1979 debt under its first four loans from the Bank amounted to MCol$2,986 (56% of total long- term debt). The second largest creditor is the IDB with MCol$1,066 (20% of total long-term debt), followed by two private banks: The Merban Corp. MCol$352 (7%) and First National City Bank MCol$90 (2%) (Annex 5.5.) The pension and other liability reserves (noncurrent and contingent liabilities) are estimated at MCol$1,108.  - 34 - Investment and Financing Plans 5.09 EEEB's 1981-1987 investment program including its own construction program (4.03), investments in ISA, interest during construction and re- quirements for working capital, amounts to MCol$327,081, of which MCol$88,845 or 27.2% correspond to the proposed Guavio project; the ongoing works, which comprise mainly, the Mesitas and Bogota Distribution projects partially financed by Loans 1628-CO and 1708-CO, amount to MCol$34,125 or 10.4% of the total; other future construction, mainly including the purchase of Tennozipa IV and V from ISA, and urban and rural distribution projects, calls for an investment of MCol$80,887 or 24.7% of the total. Capital and bond contributions to to ISA amount to MCol$62,845 or 19.2% of the total, and the working capital requirements to MCol$15,024 or 4.6% of the total. The investment program and financing plan is summarized on the next page and shown in detail in Annex 5. 5.10 EEEB's net internal cash generation would finance MCol$152,266 or 46.5% of the total requirements of the 1981-1987 program; ISA's contri- butions for Guavio would fund MCol$12,650 or 3.9% of the total; and the remaining 49.6% would be covered by loans amounting to MCol$162,165. Of this figure MCol$14,976 comes from undisbursed proceeds of existing loans, including MCol$11,678 from the 1628-CO and 1708-CO loans. The Guavio project would require the following loans: (a) the proposed loan: MCol$29,555; (b) a proposed IDB loan: MCol$6,914; (c) cofinancing loans: MCol$32,438; and (d) suppliers credits: MCol$12,366. Other future loans would be required for the rest of the program 1981-1987: (a) MCol$26,461 from international financing institutions, commercial banks and suppliers; (b) MCol$11,355 froma ISA 1/ for financing the purchase of Termozipa IV and V; and (c) MCoL$28,100 from both the PEFF (5.13), which is currently being set up by the Government, and local commercial banks. Assuming adequate tariff levels are maintained, it is reasonable to expect that EEEB will be able, with major efforts on its part and Bank assistance, to obtain the financing estimated above in view of its present financial position, its planned tariff increases, Government support and the interest shown by commercial external lenders in projects supported by the Bank. As an indication of availability of adequate domestic financing, EEEB has provided the Bank, prior to negotiations, with a satisfactory plan to finance its 1981 construction program. The effectiveness of the proposed loan would be conditional upon receiving evidence that satisfactory arrangements have been made for the financing the balance of EEEB's Investment Program requirements for the period 1982-1983. 1/ One ISA four year loan (local cost component) and transference of two external loans.  - 35 - PROPOSED FINANCING PLAN 1981-1987 Col$ US$ Percentage 1/ (Millions of Current) Requirements of Funds Construction Program - Ongoing Works 34,125 518.2 10.4 - Proposed Project 88,845 1,053.1 27.2 - Other 80,887 791.4 24.7 Interest During Construction 45,355 503.1 13.9 Sub-total 249,212 2,865.8 76.2 Investment in ISA & other long-term investments 62,845 662.0 19.2 Increase in Working Capital 15,024 164.6 4.6 Total 327,081 3,692.4 100.0 Sources of Funds Net Operating Income 179,963 1,889.3 Depreciation 43,980 480.2 Liability Reserves (non-cash expenses) 5,282 60.1 Sub-total 229,225 2,429.6 Less: Debt Service (excluding interest during construction) 76,959 822.7 Net Internal Cash Generation 152,266 1,606.9 46.5 ISA Contributions 12,650 154.7 3.9 Borrowings: Existing 14,976 254.0 4.6 Guavio Proposed IBRD Loan 29,555 359.0 9.0 Proposed IDB Loan 6,914 100.0 2.1 Cofinancing 32,438 339.8 9.9 Suppliers 12,366 129.0 3.8 Local Banks and PEFF 4,023 47.0 1.2 Local Banks and PEFF 24,077 281.3 7.4 Other Future 26,461 283.2 8.1 ISA - Termozipa 11,355 137.5 3.5 Total Borrowings 162,165 1,930.8 49.6 TOTAL 327,081 3,692.4 100.0 1/ Percentages of MCol$.  - 36 - 5.11 EEEB would generate sufficient internal cash which, together with ISA's contribution and planned borrowings, would enable timely carrying out of the proposed project, as well as the balance of EEEB's 1981-1987 invest- ment program. EEEB plans a three year (1981-1983) program of tariff increases representing an estimated increase in real terms -for each year over the preceeding year's average- of about 20% for each year. The three year plan, which has been approved by EEEB's Board and authorized by JNT, is being put into effect in the present April-May 1981 billing period. The tariff adjust- ment will increase the yearly average for 1981, and subsequently for 1982 and 1983, by about 50% in nominal terms; for 1981 this comprises a one-time, flat 16.5% increase plus monthly increments of 2.37%. 1/ 5.12 ISA's share of local cost (40%) for the Guavio project would be provided to EEEB on appropriate terms and conditions based upon a schedule reflecting project requirements. 2/ In return for participation in the investment through the purchase of "Guavio Participations", 3/ ISA will acquire, on behalf of its shareholders, absolute rights to buy 40% of Guavio's power and capacity (at the purchase price established for bulk power transfers in the interconnected system), and will share in the financial return on the operation of the facility. To ensure that a suitable framework for this would be concretized in a timely fashion, EEEB and ISA, before negotiations, worked out the basic features of their collaboration. These include an estimated schedule of ISA contributions, the associated obligations and rights, the financial instruments to be used and a method by which Guavio profits will be calculated. Prior to loan effectiveness, the contractual arrangements, satisfactory to the Bank, on "Guavio Participations" would be finalized. 5.13 Sufficient availability of local financing would be needed to cover the balance of funds required for the program. Since the Govern- ment precludes the use of national budgetary resources for power invest- ments (except for ICEL and CORELCA), a rising need has emerged for financing part of the increasing share of local components of the construction programs, that cannot be fully financed through tariff action. However, because of the limited capital market in Colombia and the Government's contractionary mone- tary policies aimed at dampening inflation, it has been difficult for the power companies to mobilize sufficient domestic resources. Over the last 1/ The nominal tariff increases assumed in the financial forecast are slightly lower than the increases approved by JNT. 2/ Sector finances were analyzed in detail during a post-appraisal mission in January-February 1981 to ensure the feasibility of ISA's shareholders' contributions to the financing of Guavio (5.11 and 5.18 to 5.24). 3/ EEEB, which is wholly owned by the Municipality of Bogota, does not have legal authority to issue shares.  - 37 - year, this financing shortage slowed construction and presented cash flow problems for most of the companies and particularly for EEEB. To overcome this local financial bottleneck, the Government has been taking determined action to facilitate the sector's access to financing sources, including the setting up of a PEFF (1.29) to ensure that the heavy program of future con- struction will be carried out without significant delay. Because access to sources of local currency financing is essential for the carrying out of EEEB's investment program, including the proposed project, the Government has confirmed that the PEFF will be established by January 1, 1982, to complement internally-generated cash for the ongoing National Power Expansion Program, and that it would take all necessary measures to ensure EEEB access to all financing required for the project, as well as for the balance of its Investment Program. Future Finances 5.14 Present financial projections (Annex 5) are based on: (a) the updated assumptions for inflation and rate of exchange devaluation (4.09); (b) the energy balance agreed by ISA and the shareholders in October 1980 (1.21); and (c) the EEEB's plan of tariff increases (5.11), which assumes the following rates of nominal increases: 1981 47.5%; 1982 to 1986: 31.4% (about 2.3% per month); and 14% (about 1.1% per month) in 1987 and there- after. The financial forecast assumes a Bank loan of MUS$359 for the proposed project with an interest rate of 9.6% and a term of 17 years including 4 year grace period. 5.15 EEEB's net operating income with the above plan is expected to produce annual rates on fully revalued assets ranging from 15.3% in 1981 to 20.5% in 1988 (Annex 5.1). The unusually high rates of return result from the large internal generation of funds needed as a consequence of: (a) EEEB's heavy investment program; (b) the present limited supply of local financing from the domestic capital market and banking system to public utility companies; and (c) the amount of financing anticipated to be available from the PEFF during its first five-years of operation. To assure the internal cash generation needed during the period 1981-1987, during negotiations EEEB agreed that it would generate from its operations 35% of total investment requirements in each of the years 1982 to 1984 and 55% during each of 1985 to 1987. This would be consistent with the above rates of return. However, the 14% rate of return covenanted for 1981 and thereafter under the Bogota Distribution, will be repeated for the proposed loan because of the difficulties that could be engendered with respect to future tariff increases by covenanting higher rates of return. The methods for calculating the rate of return and for monitoring and implementing required adjustments of tariffs, (used in the quarterly financial reports "On the Adequacy of Tariffs and Cash Generation"--5.16--), both covenanted under Bogota Distribution, will be repeated for the proposed loan.  - 38 - 5.16 Under the Mesitas and Bogota Distribution loans, EEEB agreed to furnish to the Bank quarterly financial reports on cash generation, rate of return and adequacy of its tariffs; these covenants, including the provisions for submitting semi-annual financial forecasts, will be repeated for the proposed loan. During negotiations agreement was reached that the investment limitation covenanted under the Bogota Distribution loan will be amended as follows: EEEB will not: (a) construct generating plant exceeding 100 MW unless economically justified and adequately funded; (b) incur expenditures for investments not included in EEEB's Investment Program aggregating annually in excess of 1% of net revalued fixed assets in operation; or (c) incur investments unrelated to the power sector. 5.17 EEEB's financial position as measured by the debt/equity ratio (34/66 in 1979) would be maintained at safe levels throughout the projected period (Annex 5.1); despite the borrowings required for construction of Mesitas, Bogota Distribution, Guavio and other investments, it would not exceed 51/49. Debt service coverage on an annual basis would not descend under 1.5, which is satisfactory. The debt service limitation covenanted under Bogota Distribution loan will be repeated for the proposed loan. Sector Finances 5.18 Introduction: The analysis of the power sector finances is based for the first time, on consolidated financial projections (Annex 5.10) which were carried out by ISA, as the sector planning agency, and its share- holders, with Bank assistance, in the period May 1980 to February 1981, 1/ to demonstrate the viability of the "Acuerdo de Cali" 2/ proposal and to ensure the feasibility of ISA's shareholders' contributions to the financing of Guavio. These consolidated projections, aiming at displaying the financial outlook for the 1980-1990 period, are preliminary and have to be deemed as a basis-for-discussion document requiring further analysis among the electric sector entities and the Government. 5.19 Methodology: The working group developed a methodology for the electric sector financial consolidation, which consists of the arrangement and aggregation of the individual financial statements of the Colombian electric companies, forecasted on a homogeneous basis. The intercompany accounts and transactions that cancell out each other have been compensated for or eliminated in two steps: (a) ICEL and CORELCA and its "electrificadoras"; and (b) ISA and its shareholders. Several simplifications for correcting different accounting or projecting approaches have been used for calculating some global items (i.e. purchased energy, other operating costs, non operating income, etc); therefore 1/ This report includes financial projections finished by January 26, 1981. Subsequently, EEEB's and CORELCA's financial projections have been modified for the Guavio and Village Electrification Staff Appraisal Reports. 2/ Present agreement on future plant ownership allocation (October 1979) which modifies the previous "Acuerdo de Sochagota" (1.11).  - 39 - some consolidated financial items may differ slightly from the individual original statements. These adjustments grant the consolidation an acceptable degree of uniformity and coherence giving reasonable validity to the findings. However, minor errors may subsist. 5.20 Basic projection parameters were agreed among the Bank, ISA and its shareholders during May to October 1980. The main concepts have been applied consistently and are summarized: (a) energy balance: based on pro- jected demand, sector expansion and generation programs, energy interchanges, tariff for interchanges in the interconnected system, commissioning schedules, construction programs, 1/ etc.; (b) expected international and domestic inflation rates and rates of exchange; (c) annual asset revaluation using the expected domestic inflation rates; (d) tariff increases projected individually by each company, according to its particular financial situation; the nominal average increase resulting for the sector is 35% per annum for 1980-1984 and 16% per annum per 1984-1990; (e) depreciations, operating costs and working capital requirements have been estimated with adequate projection criteria based on the recent historic experience; (f) capital contributions from national budgetary resources to ICEL, CORELCA, and ISA (through CORELCA for the 500-kV Interconnection); (g) reasonable availability of external financing from international institutions, commercial banks and suppliers for foreign components of construction programs; (h) limited availability of local financing from: (i) FONADE (studies), (ii) "Fondo de Desarrollo Electrico" (refinancing of long-term debt), and (iii) the PEFF (local component of construction programs). 5.21 The electric companies, except ICEL, forecast their financial projections according to methodologies, formats and timing agreed with the Bank under San Carlos I Loan 1582-CO; financial planning offices and trained staff regularly prepare such financial projections as well as other financial monitoring reports on rate of return and adequacy of tariffs. On this occasion, for the first time, ICEL (having no financial planning body in its management organization) has made an important step towards financial planning by projecting its financial statements as well as the financial statements of its "electrificadoras". Nevertheless, some of ICEL's projection assumptions should be further reviewed and discussed with ISA and DNP, especially those related to estimated capital contributions from the national budget and construction programs. 1/ Under the ongoing program, EEEB would construct and own the Guavio Plant, with 40% of its output guaranteed to ISA; the Betania facility (500 MW) would be owned by ICEL, with 50% of its generation allocated to ISA. Playas (200 MW) would be the property of EPM, and Urra (1000 MW) would be owned jointly by CORELCA and ISA.  - 40 - 5.22 Preliminary Findings: The investment program and financing plan for 1980-1984 that resulted from this exercise is as follows: MCol$ Percentages Construction Program 385,144 Interest during construction (I.D.C.) 37,677 422,821 93 Other Investments 504 - Working Capital 30,158 7 453,483 100 Gross Internal Generation 226,454 Debt Service (excluding I.D.C.) 111.115 Net Internal Contribution 115,339 25 Capital Contributions 103,561 23 Borrowings: 234,583 52 External 213,582 47 Domestic 21.001 5 453,483 100 5.23 The financing plan referred to above shows: (a) net internal generation of funds of 25% 1/ resulting from a sharp and sustained tariff action (10% per annum real increase over the period); starting from the present tariff levels, strong measures should be taken to ensure that tariff increases are to reach this target; (b) capital contributions from the national budget (maLinly to ICEL and CORELCA) 23%; this estimate on the capital contribution is higher than the one originally foreseen by ISA and DNP and implies a heavy resources allocation from the national budget; and (c) borrowing 52% (foreign 47%:--financing the foreign costs of the construction program--and domestic 5%). 5.24 Because of the importance of the contributions of ISA and its shareholders to the project financing plan, during negotiations, agreement to this effect was reached (between the Bank and the companies--ISA, EEEB, EPM, CVC, ICEL and CORELCA--) through a draft Sponsors' Agreement (5.12). In addlition, to ensure that ISA and its shareholders will be able to meet their financial commitments to the project without compromising their other finan- cial obligations, the Sponsors' Agreement also includes suitable financial performance indicators as follows: (a) EPM: those covenanted under the Playas loan 1953-CO; (b) ISA and CVC: those covenanted under the San Carlos II loan 1725-CO; (c) CORELCA: those agreed under the Village Electrification project. ICEL's obligations will continue to be covered by Government con- tr:ibutions from the national budget. However, the Sponsors' Agreement will provide for reorganization of ICEL (1.12) which is expected to enable the ICEL group to evolve gradually into financially viable and operationally competent enltities. 1/ The 1980 financing structure of the electric sector is: net internal generation 7%; capital contributions mainly from national budget 27%; borrowing 66% (foreign 53 and domestic 13%).  - 41 - 6. ECONOMIC ANALYSIS Least-Cost Solution 6.01 ISA prepared in 1977 a first report to establish the least-cost expansion for the sector for the period 1984-1988, 1/ on the basis of the economic comparison of least-incremental costs for several alternative expansion programs, including thermal plants (both fuel-oil and coal-fired steam units), gas turbines and hydroelectric projects (San Carlos II appraisal report No. 2464a-CO). The alternative expansion programs were designed to meet the sector energy and peak demand requirements through 1990. The studies are carried out using a model with stochastic variables for both hydrology and demand, and with the restriction that under adverse hydro- logical conditions occurring less than once in 20 years, energy requirements would not have to be met. The operation of the system is then simulated through computer models to estimate the operational costs of each alternative program and to compute the probability for the program of not meeting the system requirements. Adjustments are introduced to ensure that capacity deficits would have a probability of occurrence of less than 5% in any one year of the period. The alternative program representing the least-cost alternative is then selected as the System Expansion Program, representing the least net present value of all the costs associated to it, discounted at 11% (which represents the estimated opportunity cost of capital in Colombia). Sensi- tivity analysis of the program costs to the discount rate (10% and 12%) and to fuel prices (plus minus 20%) do not show any substantial changes in the merit order of the best and second-best alternatives. The analysis also shows that the results are insensitive to a reasonable range in variation of the standard conversion factor (corresponding to the shadow-price exchange rate). Also, the results are insensitive to the use of conversion factors since neither the timing of individual plants within a proposed expansion program, nor the ranking of the several alternative programs are affected whether conversion factors are or are not used. Since 1977, ISA annually reviews and revises if necessary the least-cost expansion program for the sector. The latest revision (1980) has introduced only minor changes to the commissioning dates of the proposed projects but has not changed the sequence of implementation of the hydroplants proposed by previous programs. Such sequence includes in the same order, Guadalupe IV (Loan 1868-CO), Betania (being constructed by ICEL), Playas (Loan 1953-CO), Guavio and Urra (4.01). Return on Investment 6.02 The return on investment was calculated as the discount rate equalizing the present values of the streams of benefits and costs associated with EEEB's 1981-90 development program of which the Bank project is a part 1/ "Verficacion y actualizacion del programa de expansion del sistema inter- conectado, periodo 1984-88; diciembre 1978" (subsequently partially amended by several reports for updating and to justify emergency programs).  - 42 - and cannot be reasonably segregated. In addition to the project, EEEB's program includes transmission, subtransmission and distribution expansion (4.03). EEEB's transmission program has been designed by INGETEC. The subtransmission and distribution programs have been designed by EEEB on the basis of the 1981-90 load forecast. The subtransmission and distri- bution program for the period 1980-82 is being financed by the Bank under Loan 1807-CO. EEEB hired the consulting firm Gilbert and Associates to assist the company in reviewing and revising if necessary the subtransmission ancl distribution expansion after 1982 and to prepare a Master Plan to cover up to the year 2000. 6.03 The cost streams comprise the capital costs of this program and incremental operational and maintenance cost related to the incremental sales associated with the program. These costs were converted to border prices using weighted average conversion factors for individual local cost components (materials, machinery, equipment, labor, consumables and such). As a proxy for benefits, revenues were used, derived from incremental sales associated with the program and average 1988 annual rates, deflated to 1980 and adjusted to border prices by the standard conversion factor (Annex 6.1). 6.04 On this basis, the return on investment is about 15.0% (Annex 6.1), which compares favorably with the opportunity cost of capital for Colombia, estimated to be 11%. 6.05 A sensitivity analysis was carried out to estimate the impact on the internal financial return of possible changes in cost and revenues. These are summarized below: Rate of Return on Investment Program (%) Benefits 85% 100% 11% Cost 100% 11 15 17 115% 10 12 15 If the cost of the program increases by 15%, the rate of return would be about 12%. If the program costs do not increase but benefits are 15% lower than estimated, the return would be about 11%. If the program costs increase by 15% and the benefits decrease by 15% the return on the investment program would be -about 10%. The equalizing rates obtained understate the real economic rate of return of EEEB's investment program since revenues from electricity sales do not fully reflect all benefits to society.  - 43 - 7. AGREEMENTS REACHED AND RECOMENDATION During Negotiations 7.01 Agreements were reached on the following principal points: (a) The Government will carry out a study on the adequacy of the structure and levels of remuneration at all levels of employment in the power sector by June 30, 1983, and furnish to the Bank a copy of such study (1.08); (b) ISA and its shareholders will give all necessary assistance to the Government for carrying out the power sector remunera- tion study (1.08); (c) The Government will prepare a program to implement the recom- mendation of DNP regarding the estructure and operations of ICEL and its Electrificadoras; such plan will be put into effect starting June 30, 1983,with the assistance of the sector (1.12); (d) ISA and its shareholders will take all reasonable and appropriate action required on its part for the implementation of the program regarding the structure and operations of ICEL (1.12); (e) The Government will establish, by January 1, 1982, a PEFF which will provide sufficient local funds to finance the sector expansion program (1.29 and 5.13); (f) EEEB will engage by June 30, 1982 satisfactory consultants: (i) to carry out by April 30, 1983, a study which will include: (1) an assessment of the improvements needed in EEEB's current operation and maintenance planning and practices in generating plants and implement by October 31, 1983 the recommendations of such study; and (2) recommendations for a training program for EEEB's personnel in charge of operation and maintenance in generating plants; and (ii) to assist EEEB in the implementation of the above training program which will be started by October 31, 1983 and completed by April 30, 1985. The Bank will be given an opportunity to comment on both the above program of improvements and the training program prior to their implementation (4.18, 4.20 and 4.25); (g) EEEB will engage satisfactory consultants by December 31, 1981 to execute the studies required to complete the assessment of the environmental impact of the project not later than December 31, 1982. The conclusion of such study will be discussed with the Bank prior to their implementation by June 30, 1983 (4.19, and 4.29); (h) EEEB will gradually staff the PMU according to project requirements (4.23); (i) EEEB will generate from its internal sources 35% of total investment requirements in each of the years 1982 to 1984 and 55% during each of 1985 to 1987 (5.15); and  - 44 - (j) ISA and its other shareholders will agree to comply with suit- able performance covenants to enable them to meet their commit- ments under the proposed project, without compromising their other financial obligations (5.24); 7.02 Agreements were reached that the corresponding provisions of Loan 1807-CO will be amended: (a) EEEB's accounts receivable as a percentage of the total annual sales will not exceed 21% in 1981; 19% in 1982; and 17% in 1983 and thereafter (2.07); and (b) EEEB will not: (a) construct a generating plant exceeding 100 MW unless economically justified and adequately funded; and (b) incur expenditures for investments not included in EEEB's 1981-1987 Investment Program aggregating annually in excess of 1% of net revalued assets in operation, or (c) those unrelated to the power sector (5.16). 7.03 The following main provisions of Loan Agreement 1807-CO will be repeated: (a) Execution of the Project (Section 3.01); (b) Insurance (Section 3.03 and 4.03); (c) Information to the Bank (Section 3.04); (d) Acquisition of Land and Rights for the Project (Section 3.05); (e) Environment (Section 3.06); (f) Management and Operations of the Borrower (Section 4.01 to 4.04); (g) Records, Auditing and Accounting (Section 5.01 to 5.03); (h) Reporting on Adequacy of Tariffs (Section 5.07); (i) EEEB's Indebtness Limitation Covenant (Section 5.08); and (j) Rate of return covenant for 1981 and thereafter (Section 5.06). Conditions of Effectiveness 7.04 Prior to declare the loan effective, the following conditions will have been met: (a) satisfactory arrangements would have been made for the financing of the balance of EEEB's Investment Program requirements for the years 1982 and 1983 (5.10); and  - 45 - (b) EEEB, ISA and its other shareholders will finalize contractual arrangements for the "Guavio Participations" (5.12). Recommendation 7.05 With the above assurances the proposed project would be suitable for a Bank loan of MUS$359 equivalent, to be made to EEEB with the guarantee of the Government of Colombia. The loan would have a repayment period of 17 years, including 4 years of grace. May 6, 1981  ANNEX 1.1 -46- COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HIYDRO POWER PROJECT Energy Supply and Demand 1/ 2/ 1970 1975 1979 1980 I0/ PRIMARY ENERGY SUPPLY 3/ (1012 Btu) (10 Btu) (1012 Btu) (1012 Btu) Crude Petroleum (million bbl) Local production 79.6 445.8 57.3 320.9 45.3 b/ 253.7 41.1 b/ 230.2 Imports _- - - 9.1 b/ 50.9 24.1 b/ 134.9 Sub-Total 79.6 445.8 57.3 320.9 54.4 304.6 65.2 365.1 Petroleum Products (million bbl) Local refining 41.3 231.3 47.1 263.7 48.6 272.2 56.2 314.7 Imports - _ 1.8 10.1 7.2 40.3 0.6 3.4 Sub-Total 41.3 231.3 48.9 273.8 55.8 312.5 56.8 318.1 Natural Gas (million ft3/d) 139.6 51.0 180.6 65.9 264.0 96.4 264.0 96.4 Coal (thousand ton) 3,317.0 86.9 3,800.0 99.6 4,881.0 127.9 6,000.0 157.2 Gross Hydropower (GWh) 4/ 7,308 a/ 24.1 11,236 e/ 37.1 14,095 a/ 46.5 16,988 d/ 56.1 Total Supply 5/ 607.8 533.6 615.7 678.2 of which: Local supply 607.8 523.5 524.5 539.9 Imports - 10.1 91.2 138.3 ENERGY DEMAND Crude Petroleum (million bbl) Exports and/or losses b/ 38.3 214.5 10.2 57.2 5.8 33.5 9.0 50.4 Petroleum Products (million bbl) Total Local Consumption 31.3 175.3 38.9 217.8 48.2 269.8 50.4 282.2 Electric Sector Consumption b/ (2.6) (14.4) (3.7) (20.8) (1.9) (10.6) (2.2)9/ (12.1) 9/ Net Local Consumption 7/ 28.7 160.9 35.2 197.0 46.3 259.2 48.2 270.-1 Exports and Losses 10.0 56.0 10.0 56.0 7.6 42.6 6.4 35.9 Net Demand 7/ 38.7 216.9 45.2 253.0 53.9 301.8 54.6 306.0 Natural Gas (million ft3/d) Total Local Consumption 139.6 51.0 180.6 65.9 264.0 96.4 264.0 96.4 Electric Sector Consumption b/ (11.8) (4.3) (41.5) (15.2) (109.3) (39.9) (142.0) (51.8) Net Demand 7/ 127.8 46.7 139.1 50.7 154.7 56.5 122.0 44.6 Coal (thousand ton) Total Local Consumption 3,308 86.7 3,757 98.4 4,500 117.9 5,100 133.6 Electric Sector Consumption b/ (358) (9.4) (259) (6.8) (794) (20.8) (782) (20.5) Net Local Consumption 7/ 2,950 77.3 3.498 91.6 3,706 97.1 4,318 113.1 Exports and/or Losses 9. 0.2 43 1.1 381 10.0 900 23.6 Net Demand 7/ 2,959 77.5 3,541 90.5 4,087 107.1 5,218 136.7 Gross Electricity Generation (GWh) 7,358 a/ 24.4 9,789 e/ 32.3 17,350 a/ 57.3 20,861 dl 68.8 Total Net Demand 8/ 580.0 488.7 555.2 605.5 Other Losses 8/ 27.8 49.9 60.5 71.7 Total Gross Demand 607.8 533.6 615.7 678.2 of which: Total Net Local Demand 7/ 309.3 369.4 470.1 496.6 Exports and/or Losses 298.5 164.2 145.6 181.6 1/ Sources (where not indicated in the Table, source is c) below: a) Playas Hydro Power Project (Report No. 3240b-CO, February 9, 1981. b) Coyuntura y Desafio Energetico 1980, Oficina de Planeacion, Ministerio de Minas y Energia. Colombia. c) Plan de Integracion Nacional 1979-1982. Departamento Nacional de Planeacion. d) Guavio Hydro Power Project (Report 3408a-CO, March 30, 1981). e) La Electrificacion en Colombia 1976-1977. ICEL 1977. 2/ Given the several sources of information used, some data had to be modified for consistency of the results. 3/ Excludes firewood and bagasse, for which information is not available. 4/ Gross hydro power determined from gross hydro electricity generation assuming 85% efficiency. 5/ Assumes following equivalences: 3300 Btu/kWh; 5.6 x 106 Btu/bbl for crude petroleum and petroleum products; 106 Btu/103 cu ft for natural gas; and 26.2 x 106 Btu/t for coal. 6/ Determined as local production plus imports minus local refining. 7/ Excludes consumption for electricity generation. 8/ Computed as difference between total supply and total net demand, includes losses in thermoelectric plants. 9/ Estimated assuming 25% average efficiency for thermoelectric generation in 1980. 10/ ForecaEt. April 27, 1981  4 h7 - ANNEX 1.2 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HYDRO POWER PROJECT 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 It units I 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 Mesitas Hydro (El Paraiso 3 x 90 MW; La Guaca 84.00 3 x 110 NM; pumping 3 x 10 MiW: Sesauile dan strengthening) 1807-CO 1980 Bogota Distribution 87.00 256.60 EPM 225-CO 1959 Troneras unit I (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) V/ 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/CHIDP.AL 38-CO 1950 Anchicaya units 1 and 2 (2 x 12.0 PM 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 30.0 0 P hydro) 8.80 44.63 CMEC 39-CO 1950 La Insula units 1 and 2 (2 x 10.0 MW hydro) 2.60 .211-C0 1959 La Esmeralda units I 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 lf Subsequently increased to 4 x 70 MW. March17, 1981  _48 - ANNEX 1.3 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA-EEEB GUAVIO HYDRO POWER PROJECT National Generation Development Program 1981-1988 Capacity Year of Plant Type l/ Owner (MW) Commissioning Zipaquira (Termozipa) IV S ISA 3/ 66 1981 Chivor II H ISA 500 'I Paipa III S ICEL 66 " Emergency additions GT ICEL 60 if Chin- GT ISA 100 2/ f Pajaritc-Dolores-Nechi diversions (Guadalupe III and IV) H EPM 4/ 1982 Tunjita-Rucio-Negro diversions (Chivor) H ISA 4/ ' AyuraS H EPM 19 it Cerrej 'n] I S CORELCA 158 t San Carlos I H ISA 620 El Paralso - La Guaca H EEEB 600 1983 Zipaquira (Termozipa) V S ISA 31 666 San Carlos II H ISA 620 1984 Jaguas H ISA 170 Calderas H ISA 15 Tasajero S ICEL 150 Salvajina H CVC 270 Cerrej6n II S CORELCA 158 Guadalupe IV H EPM 216 Playas H EPM 200 1986 Betania H ICEL 500 Guavio H EEEB 1000 1987 Urra I and II H CORELCA-ISA 1050 1988 Total capacity addition of which: 6604 H 5780 S 664 GT 160 TOTAL: 6604 1/ H: Hydro; S: Steam; GT: Gas Turbine. 21 Final capacity might be up to 133 MW. 3/ To be transferred to EEEB in the near future. 41 Increase in annual generation only. April 22, 1981  - 49 - ANNEX 2.1 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA Organizaton Chart |BOARD L AUDITORS GENERAL vlANAGER Lc DL istribPLANNING ADVISORS r ADMINISTRATION r ~FINANCE AND E N DGIN_ OPERTION A COMRILAN PRTO -1l|Gnratio and Industrial Statiitis m oudget _ Transmission R n erdsoandnoeiia u-rasso i-| Arccounting l -| Distribution Treasury ~~~~~~~~Programmi ng J t Ral Estate E eTriSema aLn and Statistics d Transmission Procurceno C o R Engineering ID aI Supd Supplies 4 | Records and l 11 Commercial | -t ~~~~~~~~~~~~~Sub-transmission| _| Dsrbto apesnision Constructince |1 Warehouses l -| ~~~~~~Distribumln n sntao I and Supervision SYstematizatIo 1 and Cani - 22853 | > Systems and l I i ;| ~~~~~~~Design | |-| Data l 1 4~~~Prcesin Construction l | Rural - Meitas Project Elcriiato I I I ~~~~~~~Systems I |||I Cntuto -1 Development |r n uevso L Subscribers l Consumers l Ll ~~~~~~~Supporting E Requests~ ~~ ~~~~pau Services Transportation I r 7 ~~~~~~~~~Project I uI - Suevson L Construction I Instlrlation , rl andi Supervision rl and Suevso MARCH 1981 VVorld Bank -22653  COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HYDRO POWER PROJECT Forecast Performance Indicators 1979 19807/ 1981 1982 1983 1984 1985 1986 1987 1988 Service Gross generation, own plants (GWh) 3,532 3,601 4,108 4,777 4,842 5,347 5,611 5,635 7,597 8,791 Purchases (GWi) 1,149 1,625 1,643 1,587 2,179 2,361 2,891 3,787 2,678 2,476 Total Supply (GWh) 4,681 5,226 5,751 6,364 7,021 7,708 8,502 9,422 10,275 11,267 Sales 1/ (GWh) 3,713 4,009 4,410 4,875 5,393 5,967 6,605 7,315 8,104 8,982 Losses and un accounted for (GWh) 891 1,097 1,208 1,177 1,229 1,310 1,403 1,508 1,593 1,690 (%) 2/ 19.0 21.0 21.0 18.5 17.5 17.0 16.5 16.0 15.5 15.0 Number of customers (1000) 532 580 633 690 753 822 898 980 1,071 1,170 Number of employees 3/ 2,465 2,662 2,822 2,991 3,170 3,361 3,562 3,776 4,003 4,243 Customers per employee 216 218 224 231 238 245 252 260 268 276 o Energy sales per employee (MWh) 1,506 1,506 1,563 1,630 1,701 1,775 1,854 1,937 2,024 2,117 Financial Rate of return for the year (%) 8.2 9.2 15.3 14.5 14.5 16.8 20.2 25.2 23.2 20.5 Self-financing ratio (%) 4/: annual - 32 21 32 37 36 49 55 70 97 Debt service coverage ratio 5/ 1.7 2.3 1.8 1.6 1.5 1.7 1.7 1.8 2.3 2.4 Debt/equity ratio 6/ 34/66 40/60 47/53 51/49 51/49 51/49 49/51 46/54 41/59 33/67 Accounts receivable as a % of annual sales 22 23 21 19 17 17 17 17 17 17 1/ Excludes own consumption. 2/ % of total supply. 3/ Projected to grow at an average of about 6% per year. 4/ Net internal cash generation/construction program plus interest during construction and investments in ISA 5/ Times that total debt service is covered by net income. 6/ Total debt (including ISA Contributions to Guavio and liability reserves)/total equiJy. 7/ Preliminary figures. March 25, 1981  COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HYDRO POWER PROJECT Actual and Forecast Sales and Gross Generation Required (GWh) Government & Total Losses and l/ Total Residential % Commercial % Industrial % Pub.Liahting % Sales % Station Use % Requirements 1973 782 367 742 292 2183 433 2616 1974 923 411 809 305 2448 426 2874 1975 1042 39 450 17 855 32 316 12 2663 100 695 21 3358 1976 1175 513 945 347 2980 625 3605 1977 1237 589 995 353 3174 836 4010 1978 1392 628 1104 351 3475 787 4262 1979 1549 622 1168 374 3713 968 4681 1980 1672 42 673 17 1263 32 401 10 4009 100 1139 22 5226 Average Growth rate (1974-1980) % 11.5 9.0 7.9 4.6 9.1 14.8 10.4 1981 1808 741 1420 441 4410 1341 5751 1982 2029 813 1556 477 4875 1489 6364 1983 2278 893 1706 516 5393 1628 7021 1984 2558 981 1869 559 5967 1741 7708 1985 2875 44 1077 16 2049 31 604 9 6605 100 1897 22 8502 1986 3233 1182 2246 654 7315 2107 9422 1987 3637 1298 2461 708 8104 2171 10275 1988 4094 1425 2697 766 8982 2285 11267 1989 4610 1565 2956 829 9960 2466 12426 1990 5193 47 1719 16 3240 29 896 8 11048 100 2670 19 13718 Average Growth rate (1981-1990) % 12.0 9.8 9.9 8.4 10.7 8.9 10.1 1/ As a percentage of total requirements. April 2, 1981  -52 - COLOHBTA ANDEX 4.1 RMPEESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO PYDRO POWER PROJECT Capacity Balance 1/ 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1.1 ydroplants 55.5 - _ _ _ _ _ _ _ _ _ Salto II 70.0 - - - - - - - - - - La.guneta 72.0 - Colegio 300.0 - Canoas 50.0 - - - - - - - - _ EL Paraiso - - 92.0 12/ 94.0 La Guaca - - 180.0- 216.0 - - - _ _ - _ Guavio - _ _ _ _ _ 600.0 6 / Subtotal Hydra 547.5 547.5 747.5 1,147.5 _ _ - 1,757.5 1.2 Thermal Plants Zipaquira I, III 6J 136.5 136.5 136.5 136.5 136.5 Zipaquira IV 61 - - - - 66.0 Zipaquir- V - 6/ _ - - - 66.0 Subtotal Thermal 136.5 136.5 136.5 136.5 268.5 - 1.3 Total Capacity 684.0 684.0 884.0 128.4 1,416.0 1,416.0 1,416.0 2,016.0 2 Guaranteed from the System 317.0 491.0 116.0 273.0 380.0 441.0 624.0 264.0 520.0 705.0 872 0 3 Total Capacity Available 1,001.0 1,175.0 1,000.0 1,557.0 1,796.0 1,857.0 2,040.0 2,280.0 2,536.0 2,721.0 2,888.0 4 Peak Demand 970.0 1,069.0 1,179.0 1,298.0 1,427.0 1,569.0 1,727.0 1,898.0 2,090.0 2,301.0 2,532.0 5 Surplus (deficit) 31.0 106.0 (179.0) 259.0 369.0 288.0 313.0 382.0 446.0 420.0 356.0 Reserve % 3.0 10.0 - 20.0 26.0 18.0 18.0 20.0 21.0 18.0 14.0 1/ Effective capacity. 2/ Commission Nov. 1982 (1st unit). 3/ 600 MW assigned to E;EE and 400 to ISA. 4/ Commissioned 4/81 but to be utilied by ISA until end of 1983. 5/ To be commissioned 2/83 but to be utIlized by ISA until end of 1983. 6/ Zipaquira Therm Plants are also called Termozipas. AIINNEX 4.2 COLOMBIA EMPRESA DE ENERCIA ELECTRICA DE BOGOTA (EEEB) GUAVIO BYDRO POWER PROJECT Forecast Generation per Plant (GWh) 1/ - PLANT 1980 1981 \,1982 1983 1984 1985 1986 1987 1988 1989 1990 1- Iydro Canoas 261.1 294.6 189.0 95.9 120.7 130.2 130.2 130.2 130.2 130.2 130.2 Salto I 305.6 345.3 222.6 112.9 142.2 153.3 153.3 153.3 153.3 153.3 153.3 Salto II 365.6 412.7 264.5 134.2 169.0 182.2 182.2 182.2 121.2 182.2 182.2 Laguneta 396.9 448.3 287.5 146.0 183.8 198.2 198.2 198.2 198.2 198.2 198.2 Colegio 1,566.8 1,769.1 1,135.8 576.4 725.7 782.5 782.5 782.5 782.5 782.5 782.5 Guaca - - 993.4 1,702.9 1,702.9 1,702.9 1,702.9 1,702.9 1,702.9 1,702.9 1,702.9 Paraiso - - 846.2 '1,450.7 1,450.7 1,450.7 1,450.7 1,450.7 1,450.7 1,450.7 1,450.7 Guavio (60%) - - - - - - - 1,997.0 3,015.0 3,192.0 3,012.0 Subtotal 2,896.0 3,270.0 3,939.0 4,219.0 4,495.0 4,600.00 4,600.0 6,597.0 7,615.0 7,792.0 7,612.0 2- thermal Zipa I 170.4 202.6 202.6 150.6 104.8 124.3 127.2 122.9 144.5 159.0 144.5 Zipa II 193.7 130.2 230.2 171.2 119.0 141.2 144.6 139.7 164.2 180.7 164.2 Zips III 340.9 405.2 405.2 301.2 209.4 248.5 254.4 245.8 289.1 318.1 289.1 Zipa IV - - - - 209.4 248.5 254.4 245.8 289.1 318.1 289.1 Zipa V - - _ - 209.4 248.5 254.4 245.8 289.1 318.1 289.1 Subtotal 705.0 838.0 838.0 623.0 852.0 1,011.0 1,035.0 1,000.0 1,176.0 1,294.0 1,176.0 Total Generation 3,601.0 4,108.0 4,777.0 4,842.0 5,347.0 5,611.0 5,635.0 7,597.0 8,791.0 9,086.0 8,788.0 Nat transfers fr-m ISA1,625.0 1,524,0 1,564.0 2,179.0 2,361.0 2,891.0 3,787.0 2,678.0 2,476.0 3,340.0 4,930.0 Total Energy Avail. 5,226.0 5,751.0 6,364.0 7,021.0 7 ,708.0 8,502.0 9,422.0 10,275.0 11,267.0 12,426.0 13,718.0 Total Requirements 5,226.0 5,751.0 6,364.0 7,021.0 7,708.0 8,502.0 9,422.0 10,275.0 11,267.0 12,426.0 13,718.0 Surplus (deficit) - - - - - - - - - 1/ Average-hydrology year Apiril 6, 1981  - 53 - ANNEX 4.3 COLOMBIA EMPRESA DE ENERCIA ELECTRICA DE BOGOTA GUAVIO HYDRO POWER PROJECT Construction Program (Millions of Col$) i980 1981 1982 1983 1984 1985 1986 1987 1988 ONGOING WORKS Fifth Program F.C. 3,307 4,662 2,094 348 154 487 - - - L.C. 1,796 2,277 2,925 2,351 1,272 764 - - - T. 5,103 6,939 5,019 2,699 1,426 1,251 - - - Sixth Program F.C. 197 1,535 3,075 2,148 455 325 - _ _ L.C. 606 788 1,734 2,278 3,284 1,169 - - - T. 803 2,323 4,809 4,426 3,739 1,494 - _ _ GUAVIO PROJECT PFC. - 3,215 3,243 6,966 10,005 22,050 10,363 4,633 - (Seventh Program) LLC. 176 2,197 2,264 4,063 5,602 7,629 4,963 1,652 - T. 176 5,412 5,507 11,029 15,607 29,679 15,326 6,285 - FUTURE INVESTMENTS Sixth Program P.C. - Pg- - 815 2,298 5,525 4,593 - (Continuation) L.C - - - 451 3,013 4,602 5,543 - T. - - - - 1,266 5,311 10,127 10,136 - Eighth Program P.C. - - - - - - - 5,358 6,955 L.C - - - -- - - 5,386 6,834 T. - - 10,744 13,789 Ninth Program F.C. - - - -- - 579 751 985 L.C. - - - - - - 791 1,001 1,283 T. - _ - - 1,370 1,752 2,268 Tenth Program P.C. - - - -- L.C - - 11,329 16,087 20,599 T. - _- - 11,329 16,087 20,599 TERMOZIPA F.C. - - - - - - - - - L.C. - - 672 738 11,355 - - - - T. - - 672 738 11,355 - - - - TOTAL F,C. 3,504 9,412 8,412 9,462 11,429 25,160 i6,467 15,335 7,940 95,667 L.C. 2,578 5,262 7,595 9,430 21,964 12,575 21,685 29,669 28,716 108,180 T. 6,082 14,674 16,007 18,892 33,393 37,735 38,152 45,004 36,656 203,857 TOTAL (Millions of US$) F.C. 74.1 173.0 134.4 131.4 138.4 269.8 159.5 134.9 63.5 1,141.4 L.C. 54.5 96.7 121.3 131.0 265.9 134.9 210.0 261.1 229.6 1,220.9 T. 128.6 269.7 255.7 262.4 404.3 404.7 369.5 396.0 293 1 2,362.3  - 54 - ANNEX 4.4 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA (EEEB) GUAVIO HYDRO POWER PROJECT Project Cost ---------- MCol$ ---------- ---------- MUS$ -------