Ceylon - Norton Bridge Hydro and Second Granpass Thermal Power Project

RETURN TO REPORTS DESK R E S T R I C T E D VJITH'. Report No. TO-268t ONE WEEK This report was prepared for use within the Bank. It may not be published nor may it be quoted as representing the Bank's views. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL REPORT NORTON BRIDGE HYDRO AND SECOND GRANDPASS THERMAL POWER PROJECT CEYLON April 17, 1961 Department of Technical Operations  C URRENC Y EQUIVALENTS Unit = Ceylonese Rupee U.S. $1 = Rs. 4.76 Rs. 1 = U.S. $0. 21  TABLE OF CONTENTS Page SUIARY - I. INTRODUCTION 1 II. HISTORY AND OPERATIONS 1 Previous Bank Loans 1 Existing Facilities 2 III. ORGAINJIZATION AMD MANAGENEN\T 2 IV. THE POWER IARKET 5 V. CONSTRUCTION PROGRAM 5 Description and Status of Project 6 Cost Estimates 8 Construction Schedules 8 Justification of the Projects 9 VI. FINANCES 10 Past Record 10 Rates 11 Financial Plan and Projectioons 11 VII. CONCLUSIONS 15 A1STEXES 1. Generating Facilities of the DGEU Interconnected System 2. Production and Sales Records and Forecasts 3. Planned Sector 4. Estimated Peak Demand and Plant Availability 5. General Layout of Norton and Laksapana Power Stations 6. Description of the Projects 7. Construction Cost Estimates 8. Comparison of Hydro Plant with Thermal Alternative 9. Past and Projected Income Statement 10. Past and Projected Balance Sheets 11. Projected Cash Flow MAP  NORTON BRIDGTE HYDRO AND SECOND GRANDPASS T,', '1. POT7IER PROJIECT - CEYLON i. The Government of Ceylon h.s asked the Bank to finance the foreign exchange cost of an expansion of the power system operated by the Department of Government Electrical Undertakings (DGEU). The project would add 75 NVI of additional capacity to the system. The total cost is estimated at Rs 154.7 million (US$32.5 million) of which the equivalent of about US$15 million is needed in foreign exchange. The Government of Ceylon would be the borrover. ii. The DGEiU integrated power system has a present effective capacity of 74.5 1MW servin- the major load centers in the island. A new steam power station equipped with a 25 1MW unit is presently under construction at Grand- pass in Colombo. iii. The present organization of the D01EU is unsatisfactory and the rules and regulations which apply to it as a government department make it difficult to conduct operations in accordance with sound public utility practice. The government has now decicled to present legislation to Parlia- ment to create an autonomous Electricity Board. The setting up of such a board would solve many of the existing problems, although there are additional measures that need be taken thereafter. It would not now be practicable to defer a loan until the Board is established, since it will take several ri,onths to corplete the legislative procedures and there is danger of an early power shorta-e. It would therefore be appropriate for the Bank to consider a loan at this tiTne. iv. The Bank has made two previous loans to the government totalling US$26.5 million (of which US$2.6 million was cancelled) for expansion of the DGEU system. Market studies indicate a high rate of growJth in power demand. The 75 17- of additional capacity which would be built with proceeds of the proposed tlhird loan would meet requirements through most of 1966. Additional projects wrould have to be undertaken to meet the demand there- after. v. The project proposed for Bank financing consists of a 50 !' hydro plant at Norton Bridge, the addition of a second 25 --r steam unit at the Grandpass station, and associated transmisE on and distribution facilities. The project is technically sound and satisfactory arrangements have been made for its execution. The estimated cost is reasonable and includes adequate allowance for contin,encies. vi. Deficiencies in the accounting system prevent an wholly accurate assessment of past earnings. After making adjustments to correct these shortcomings, the present financial position of the D3SU appears sound. The financial plan contemplates the creation of the Board and the conseouent  - ii - revision of the capital structure to elininate debt oi-ed to the Ceylon Governmment. The plan is sound. A sl:roncg financial pos-tion will be maintained during the period of the program through 1967. vii. The project is suitable for a Bank loan in an amount of US$15 million equivalent with a term of 25 years including a -race period of 32 years.  APPRAISAL REPORT NORTON BRIDGE HYBRO AND SECOND GRANDPASS THER2AL POVER PROJECT - CEYLCN I. INTRODUCTION 1. The Government of Ceylon has asked the Bank to finance the foreign exchange cost of an expansion of the power system operated by the Department of Government Electrical Undertakings (DGEU). The project consists of the construction of a 50 InT hydro plant at Norton Bridge, a second 25 NTW thermal unit at Grandpass, and additional transmission and distribution facilities. The total cost of the project is estimated at Rsl54.7 million ($32.5 million) of which the equivalent of about US1i5.0 million would be in various foreign currencies. As in previous Bank loans the Government of Ceylon would be the borrower. 2. A Bank mission visited Ceylon in November 1960 to appraise the project. This report is based on information obtained in the field by the Bank mission and on a report of the consulting engineers, Preece, Cardew and Rider of London. II. HISTORY AND OPERATIONS 3. The LGEU was formed in 1927 to operate a small private electric- ity supply undertaking which had been purchased by the government. Under an ordinance of 1935 provision was made for the establishment of an inde- pendent Electricity Board of Ceylon9 This Board was dissolved two years later and since then all matters pertaining to government electricity supply have been the responsibility oL the DGEU as a government department. In addition, a number of Local Authorities - municipal, urban and village communities - maintain public utility services of their owns The Local Authorities operate under licenses obtained from the government and may either generate and distribute powpier or purchase power for distribution from the DGEU. There are now 121 Local Authorities, of which about 75 are supplied in bulk by the DGEU. The service area of the DGEU covers some 3,500 square miles with a populabion of about 4 million, close to half the total population of Ceylon. Previous Bank Loans In July 1954 the Bank made a loan of 119.1 million to the Government of Ceylon to finance the foreign exchange cost of the expansion of the 25 WvT Laksapana hydro plant. The expansion included the construction of the Castlereagh storage dam on the Kehelgamu River, the installation  in the Laksapana powerhouse of an additional 25 HM7 of generating capac- ity and the construction of transmission and distribution facilities. As foreign exchange requirements were lower than had been estimated, the loan was later reduced to 416.5 million. The project has been completed and is in operation. 5 ~ In September 1958 the Bank made a second loan of 4i7.4 million for the purpose of financing the foreign exchange cost of a thermal power plant at Grandpass with one 25 IN, turbo-generator, a 132 kv transmission line to the Kolonnawa switchyard in Colombo and an expansion of distribution faci- lities. It is expected that construction of the project will be completed by March 1962, about on schedule. Existing Facilities 6. The effective generating capacity of the integrated power system is at present 7b.5 i;i, consisting of 50 I7WJ hydro capacity at Laksapana and 10 NW steam and 14.5 MN diesel capacity at the Stanley and Pettah power stations in the city of Colombo. The main switchyard at Kolonnawa is adjacent to the Stanley power station. The transmission system consists of 228 miles of 132 kv and 66 kv primary lines and 922 miles of 33 kv and 11 kv secondary lines. In addition, the DGEU has a 4 MU diesel gener- ating station at Jaffna in the north of the island, which is not connected to the grid. This station is bein,b enlarged by an additional 4 1TW. Gener- ating facilities of the system are shown in Annex 1 and the primary trans- mission lines are indicated on the attached map. 7. The DGEU retails power in Colombo, which is by far the most impor- tant load center, and in the towns of Nuwjara Eliya, Norton, Diyatalawa and Jaffna. The number of customers as of September 30, 1960 was 33,500. Included in this number are the Local Authorities receiving bulk supply, but not their customers, so that the total number of consumers receiving power from the system is considerably higher. The DGEU retails also to certain large industrial consumers even though they are situated within the area licensed to Local Authorities. III. ORGA;'TIZATION ANDIS i s.I 8. The DGEU is a department of the 'linistry of Agriculture, Land, Irrigation and Power. As a government department it is subject to control and supervision by this 1Ministry which in turn is responsible to the government through the "inistry of Finance in respect of any major expenditures. The DGEU's operations are governed by the Electricity Act of 1950 and by the accompanying regulations.  - 3 - 9. The internal organization of the department follows broadly the recommendations of an electrical engineering advisor retained in 1955 under the Colombo Plan who recommended the establishment of greater delega- tion of authority along functional lines. It is headed by a General Planager assisted by four principal officers: a Deputy General HIanager and Chief Engineer; a Chief Commercial Officer, a Chief Accountant; and a Chief Administrative Officer. The operation of the transmdssion and dis- tribution systems is handled by fotr regional divisions whose managers report directly to the General 14anager. 10 There are a number of organizational shortcomings which seriously impair the operating efficiency of the department. A major portion of these stem from the application of the Financial Regulations, a code of 1,760 provisions broadly covering any activity in the government which involves the spending of money. These regulations severely limit the authority of the General Manager to act without ministerial approval. They reouire the authorization of the ministry for even minor expenditures, as well as resort to government stores for purchases regardless of price or availability. They govern accounting practices, modes of travel, employ- ment policies, etc. and they make government employees personally liable for any violation, which has an inhibiting effect on initiative. 11. As a government department the DGEU is subject to normal govern- ment budgetary procedures. Every position on the permanent staff outside the labor grades is listed in the budget and additional personnel cannot be engaged without a parliamentary vote. Expenditures have to be approved annually by parliament and all appropriations lapse at the end of the fiscal year. This system is not suitable for a commercial organization. 12. Civil service regulations impose a complex structure of job and salary classifications and tenure provisions. In addition there are 18 separate unions operating within the DGEU, covering all its 3,600 employees except the Ueneral Manager and his deputy. 13. 5While the DGEU keeps separate accounts from those of the govern- ment, the accounting system leaves much to be desired and established principles of commercial utility accounting are not followed. As the figures are many months late in being prepared, an up-to-date financial position at any given time is not available. Adherence to the Financial Regulations makes operations inflexible and time consuming. Accountants are frequently transferred from one government department to another.  - 4 - 14. The shortcomings of the existing organization were discussed by the government and the Bank even before the first Bank loan. At that time it was agreed that the more important defects could be remedied by organizational and procedural changes. However, with the rapid growth of the DGEU system it became plain that the best solution would be to establish an Electricity Board to replace the DGEU and the government has stated its intention of putting the necessary legislation before parliament as early as possible. 15. The bill provides for the transfer of all assets, liabilities and operations of the DGEU to the new body, which is to be governed by a five- member Board to be appointed by the minister under whose jurisdiction the department now falls. A uthority will remain with the minister to remove Board members without assigning cause. 16. This act should go far toward solving the administrative problems of the present organization. The Financial Regulations will no longer apply. The Board will have its own budget, separate from that of the government. The law requires that the present employees be retained on terms not less favorable than those they now enjoy. The Board will have freedom to hire new personnel without the previous government restrictions. 17. The problem of setting up a proper commercial accounting system will be a major one. The government has expressed its intention to obtain an experienced accounting advisor as soon as possible to set up accounting procedures in accordance with established cammercial and utility practices and to assist in the execution of such a program after it had been adopted by the Board. 18. Since the legislative procedures are likely to take several months and since there is an urgent need to begin construction in order to avert a power shortage, it would not be practicable to postpone consideration of the proposed loan until the Board has been established. 19. The government intends to submit the bill to the next session of parliament which convenes in June 1961, and it would accordingly be approp- riate for the Bank to consider a loan to the government now rather than await creation of the Board. After the Bill has been passed there will neces- sarily be a transitional period during which the Board will be appointed and organizational procedures implemented. This may require some additional time and for the purposes of the financial forecasts it has been assumed that the financial provisions of the Bill will become effective late in 1962.  -5- IV. TXE FPR I1RKT 20. In the fiscal year ended September 30, 1960, the DGEUts energy sales amounted to 218 million kwh distributed among consumer classes as follows: Domestic 16.4%; Commercial 23.3%; Industrial 32.8%; Local Author- ities 2h.1%; Traction and Public Lighting 3.4%. The peak demand was 57.7 lgf. 21. The table in Annex 2 shows the growth of load and generation since 1955 and future estimates through 1967. In the five-year period ended September 30, 1960 the peak demand increased from 33.5 MW to 57.7 14W,, or at an average annual rate of 11.5%, and energy sales increased from 121 million kwh to 218 million kwh, or at an average annual rate of 13%. 22. In order to estimate the future peak demand, the basic rates of growth derived on the basis of past experience were taken for each con- sumer class. Additions to these estimated loads were made in respect of new Local Authorities, other prospective loads (including a hospital, broadcasting station, municipal water supply, army cantonment, etc.), and the Planned Sector. The Planned Sector is a government scheme for the establishment of basic government-owned industries. Only those require- ments were included in the forecast which could be considered reasonably certain, either for increases to existing consumers or for new projects in an advanced stage of planning. The plans have been discussed with responsible officials of the government and the requirements that have been included in the forecasts appear realistic. Details of prospective Planned Sector loads are shown in Annex 3, 23. The foregoing load projections indicate a growth of peak demand during the five-year period ending September 30, 1965 from 57.7 MW to 116.0 1w, or an average annual rate of 15%. This compares with the average rate of growth of 11.5% for the preceding five years, during which no such major industrial projects as those of the Planned Sector were undertaken. Energy sales are expected to grow from 218 million kwh to 515 million kwh, or at an average annual rate of 18%. This is a higher rate than in the past, reflecting an improvement in the system load factor due to a larger contribution of industrial load. The rate of growth of peak load from 1965 through 1967 has not been studied in detail but has been assumed to continue the trend established in the preceding five years. The present load factor of 52% is expected to reach 60% in 1965 and to remain at this level. V. CONSTRUCTION PROGRATH 2h. The estimated peak demand and energy requirements of the system compared with available plant capacity and generation are shown in tabular and graphic form in Annex 4. The effective firm capacity, including the thermal unit under construction at Grandpass, would be sufficient to meet requirements only to about September 1962. Thereafter it would be neces-  - 6 - sary to have recourse to stand-by capacity or to rely on favorable water conditions if curtailment of the electricity supply is to be avoided. 25. It was first proposed to start construction of a 50 IW hydro plant at Norton Bridge in 1958. The Bank agreed to consider a loan for the project. However, as the government at that time had come to the con- clusion, after discussions with the Bank, that the time had come to set up an Electricity Board to take the place of the DGEU, the Bank said it would prefer to await the establishment of the Board before making the loan. However, due to changes in government and other events, there has been con- siderable delay in proceeding with this proposal and appropriate measures were initiated only recently. Since the hydro plant cannot now be completed before mid-1964, it is necessary to start construction of a second thermal unit at Grandpass immediately, which could be ready a year earlier. This unit will be recuired in any event for thermal backup for later stages of hydro development. After both the hydro and the thermal units have been put in operation, it should be possible to meet system requirements until the latter part of 1966. Brief periods of shortage of firm generating capacity are expected to occur during the construction period, but these would not be critical provided the construction of Norton Bridge and the second Grandpass unit are started on time and carried out expeditiously. 26. Further hydro capacity should be added in 1966. A Bank mission has recently visited Ceylon to consider,amongst other things, what pri- orities should be given to the development of the various river basins. However, for the purposes of this report it is assumed that the next development would be that of the I4aske]iya River for which the preliminary investigations are the most advanced. The first stage of the Maskeliya project (75 MW) would be started in April 1963 and the second stage (50 MW) in 1966. This assumption does not reflect on the merits of other alternate projects and has been made only for the purpose of estimating financial requirements until 1967. The completion of these works is expected to provide adequate capacity to satisfy recuirements until the early 1970's. Descrintion and Status of the Project 27. The project proposed for Bank financing consists of (a) the Norton Bridge Hydro Plant, (b) the Grandpass second thermal unit, and (c) associated transmission and distribution facilities, described more in detail below. (a) Norton Bridae Hydro Plant This plant would utilize the difference of head of 746 feet be- tween the dam at Castlereagh and the Norton reservoir which pro- vides the daily storage for the existing Laksapana power station. Water from the Castlereagh reservoir would flow through a tunnel 20,000 feet long, then drop through penstocks to the powerhouse and discharge into the Norton reservoir. The new plant would have an installed capacity of 50 IW, would operate at an average annual load factor of 28% and would be connected to the Laksapana plant by a 132 kv transmission line. The general location of the existing and proposed hydro installations is shown in Annex 5.  (b) Second Grandpass Thermal Unit A second 25 TV unit of the saime specifications as the one presently under construction would be installed in the powerhouse at Grandpass. The unit would operate at a steam pressure of 900 p.s.i. and a temperature of 9000F. The installation would be of conventional design, comprising a single boiler, turbo-generator, and step-up transformer and would be connected by a 132 kv transmission line to the Kolonnawa switchyard. Part of the auxiliary installation provided for the first unit will be common to both, such as cooling water intake, fuel oil storage tanks, feed water treatment p2ant, outdoor step-up station, etc. (c) Transmission and Distribution Facilities Double circuit 132 kv transmission lines would be con- structed between Laksapana and Galle in the southern part of the island (93 miles) and between Bolawatta and Puttalam in the north (50 miles). A three-mile 132 kv line would connect Norton to Laksapana. About 200 miles of 33 kv and 11 kv lines and about 200 substations would be constructed. A more detailed description of the projects is given in Annex 6. 28. Tender documents for the Norton Bridge hydro plant and for the primary transmission lines were prepared by the consulting engineers, Preece, Cardew and Rider of London. Tenders invited on the basis of international competition were received in Mlarch 1959 and were reviewed by the consultants who advised on the selection of the contractors. The government Tender Board issued in March 1961 letters of intent to the selected contractors in which it indicated that firm orders would be placed with them after a Loan Agreement had been concluded with the Bank. 29. In order to avoid delays in the procurement of the second thermal unit for Grandpass, the consultants were instructed to obtain quotations from the manufacturers of the first unit who had been chosen on the basis of international competitive bidding. Because of the advanced stage of engineering of the first unit, these manufacturers were able to quote generally lower prices than those quoted for the first unit and also offer shorter delivery terms. In view of the urgent need for additional capacity to tide the system over until the Norton Bridge plant would come in operation, the Bank agreed to the proposed procurement procedure after a review of the quotations indicated that prices would be satisfactory. 30. The equipnent and materials for the lower voltage transmission and distribution facilities will be purchased on the basis of inter- national competition as in the case of the primary transmission at 132 kv.  - 8 - 31. The present consultants will be responsible for the engineering of tle project and for the supervision of construction. The existing contracts with the consultants would be extended to ccver the new project. It has been agreed with the borrower that design and tender specification for 33 hkv and 11 kv lines and substations and for the loW voltage distri- bution would be prepared by the DGEU and that the construction would be carried out partly under contract and partly departmentally. Consultants, however, would be retained by the DGEU to make a general revie-i of these facilities and to a0priase the adequacy of design and construction. Cost Estimates 32. Details of the estimated costs of the project are given in Annex 7. A summslary is as follows: Foreign Exchange Local Currency Total vIHil.Equiv. "',Mil. Equiv. 4uJieEQuiv. Norton Bridge Hydro Plant 7.4 10.7 18.1 Grandpass Second Therm;nal Unit 3.0 1.6 8.6 Transmission and Distribution Facilities, inclucding Carrier System _4.6 5.2 9.8 Total 15.0 17.5 32.5 Interest during construction is included in the total cost of the project, but is not inclucled in the amount of foreign e.xchange (,15 million) pro- posed for financing by the Bank. 33. Construction costs are based on tenders received for the Norton Bridge project and on quotations obtained for the thermal unit from the manufacturers of the first unit. The contingency allowances on the estinated direct cost of the project are about 15% on foreign and 20% on local currency costs for the Norton Bridge project and 12% on foreign and 155 on local costs for the second Gr,ndpass thernal unit. These al1lowances should be adequate to cover possible omissions from estimates, unforeseen expenses and price escalation during construction. The estimated cost per kw of installed capacity is $360 for the hydro station and S180 for the second thermal unit. These costs are reasonable. Construction Schedules 3h. The construction of the Norton Bridge project is scheduled over a period of three years; that of the second steam unit at Grandpass is estimated 'to require 26 months. If a Bank loan is approved for the pro- jects, the target date for startin- operation is June 1963 for the thermal unit and April 1964 for the first hydro unit, followed two months later by the second hydro unit. This schedule is feasible. Estirmated completion dates for other projects included in the long-range program are given in Anne;: 4.  - 9 - 35. The estimated schedule of expenditures in foreign and in local currencies is given in the following table: Schedule of Expenditures for the Project (Rs. Million) Years ending Foreign Local September 30 Currenc Currency Total 1961 16.2 11.8 28.0 1962 27.6 24.4 52.0 1963 22.8 20.5 43.3 1964* 4.8 18.8 23.6 Total** 71.4 75.5 146.9 (Million US$) (15.0) (15.9) (30.9) * Includes retention and customs duties, which will be paid following completion of construction. These payments may extend into the fol- lowing year. * Exclusive of interest during construction amounting to Rs. 7.8 million. Justification of the Project 36. The project is designed to meet the estimated annual growth of the DGEU system requirements for the next five years. While hydro power is produced in the system at a lower cost than thermal power, its gener- ation is limited by the water availability in the existing storage reser- voirs on the Kehelgamu River. The general conception of the proposed hydro schedule is to develop the difference of head between the seasonal storage of the Castlereagh dam and the diurnal storage of the Norton dam. The effect would be to use the same water at different levels for both the existing and the new hydro stations. The Norton Bridge power station would add about 123 million kwh per year to the system, calculated at low water conditions, and would permit utilization of the full potential develop- ment of the Kehelgamu River. The balance of requirements would be supplied by thermal generation from the Grandpass station. Although it would have been required ultimately for thermal backup in any case, construction of the second thermal unit at Grandpass is necessitated immediately in order to avert a power shortage before Norton Bridge can be completed. 37. A comparison has been made of the costs of the Norton Bridge project with those of a theoretical thermal alternative based on the costs of Grandpass. This shows a return on the additional investment for the hydro project of l7.9%. Details are set forth in Annex 8.  - 10 - VI. FINANCES A. Past Record 38. Being a government department, the DGEU does not follow the accounting practices of private commercial utilities. Examples of de- partures from commercial practice are the following: (i) No depreciation has ever been charged and the entire amount of all past capital expenditures is carried on the balance sheet. (ii) The total debt services, including both interest and amortiza- tion, is charged to operating revenues which, to a certain extent, offsets the fact that no depreciation has been charged. This is again different from normal commercial practices. (iii) Certain replacement expenditures which are of an operating nature are regularly made out of reserves and not shown in the income statement. 39. For these reasons it is impracticable to obtain a true picture of earnings and financial position. In Annex 9 the income statements for the five years ended September 30, 1960 have been set forth with adjust- ments for (ii) and (iii) above, but no adjustment has been possible for the depreciation that should have been charged in those years. The figures are shown here solely to indicate the general order of magnitude of the items shown, and should not be interpreted as an accurate state- ment of past results. 40. In similar fashion the year-end balance sheets for the five years to September 30, 1960 are shown in Annex 10. The property and sur- plus accounts are, of course, overstated because of the failure to charge depreciation, and the statements accordingly do not reflect the true financial position. 41. Because of the length of time recuired for the DGEUts accounts to be prepared, the income statement for the year ended September 30, 1960 and the balance sheet as of that date have had to be estimated, following the form of presentation of prior years. Both have then been adjusted. An analysis of the property account has been made from estimated and from such records of acquisition dates and costs as there are. The net value of the plant has then been calculated as if proper depreciation charges had been made, and the plant account has been written down to this figure by a charge to earned surplus. Work in progress has been shown as a separate item. That portion of the writedown applicable to the year ended September 30, 1960 has been charged in the income statement for that year, and other minor adjustments have been made.  42. The foregoing adjustments result in a balance sheet which sub- stantially reflects the financial position of the DGEU on September 30, 1960 and which could be summarized as follows (Rs. million): ASSETS LIABILITIES Current Assets Current Liabilities Cash - Denosits 2.5 Treasury Deposit 10.4 Accounts Payable .6 Accounts Receivable 10.3 Other .2 Stores 8.5 Total Current Liabilities 3.3 Other .6 Total Current Assets 29.8 Long-term Debt Fixed Assets IBRD 67.1 Ceylon Government 137.1 Gross Fixed Assets 261.8 Total Long-term Debt 204.2 Less Depreciation 49.L Met Fixed Assets in Operation 212.4 .auitiv Work in vrogress 3.5 Canital - Total Fixed Assets 215.9 Surnlus and Reserves 38-2 Total Equity 38.2 Total Assets 245.7 Total liabilities 245.7 B. Rates 43. The DGEU's Commercial Advisor has recommended a change in the existing rate structure which has been in effect since 1953. Although the pronosals are designed to bring rates for individual service classifications more into line with their costs, they will at the same time result in an increase in revenues of about 3%. The government proposes to put the new rates into e"fect at the earliest nossible date. (Once in operation, the Board will have the Power to set its own rates'.) The financial forecasts are based on the assumption that this rate increase will be in effect starting October 1, 1961. C. Financial Plan and Projections 44. The financial olan for the present nhase of expansion un to 1967 is predicated unon the assumption that the Bill for the creation of the Electricity Board will be enacted befo>-e June 1962 and that the financial provisions of that Bill will then come into effect by October 1962. The financial plan is made uD of the following elements:  - 12 - (i) Conversion into equity capital of the DGEU's present debt to the Ceylon Government as well as of the additional debt to be incurred by the DGEU in 1961 and 1962. The present debt totals Rs. 137 million and has been incurred over the past 30 years to finance construction expenditures. It has matu- rities running from one year to 50 years and interest rates varying from 3O% to 5%. The financial forecast shows that the DGEU would need approximately Rs. 63 million of additional financing during the period 1961-62, and it has been assumed that this amount would be provided through government loans. It is proposed by the Draft Legislation to convert all out- standing debt into equity on which would be paid a dividend not to exceed 4%. For the purpose of the financial forecast this conversion, including the Rs. 63 million in government loans in 1961-62, has been shown as taking place as of October 1, 1962. (ii) Undertaking by the Board of obligations to the Ceylon Govern- ment equivalent to the government's obligations urder the twso existing Bank loans. These debts would be coumterparts of the Bank loans in amount, interest rate and maturity. (iii) Assumption by the Board of all assets and liabilities of the DGEU. Included in the assets is an amount of Rs. 10.4 million on deposit with the treasury which would be paid over in cash. (The draft bill also obliges the government to provide the Board with working capital, although the projections do not show an immediate need for additional amounts.) (iv) Withdrawal of the remaining Rs. 42 million (US$8.8 million) of the existing Bank loans and completion of the projects for which they were granted. (v) A Bank loan to the Ceylon Government at this time of Rs. 71.4 million (US$15 million) for the foreign exchange costs of the Norton Bridge hydro plant and the second thermal unit at Grand- pass. It is assumed that this loan would be for 25 years with 3-1 yearst grace and an interest rate of 5-3/4%. It would have a counterpart as in (ii) above after the Board is created. (vi) Loans in 1963 and 1966 of Rs. 64 million (US$13.4 million) and Rs. 62 million (US$13.0 million) respectively for the foreign exchange costs of the first two stages of the 14askeliya project. The load forecasts indicate the need for additional capacity in 1966 and it would be necessary to start the Maskeliya project in 1963 for it to be available at that time. However, it is emiphasized that there are alternatives to this project and that the cost estimates for it are based only on preliminary engineer- ing studies. It has been included in the financial plan orily because it would be unrealistic not to show some further develop- ment during this period and because it is the one at present in the most advanced stage of study.  - 13 - (vii) Additional funds totalling Rs. 120 million invested by the Ceylon Government to cover a portion of the local currency costs of the construction -Dro.ram. These funds would be provided in the form of loans amounting to Rs. 63 million in 1961-62 (see (i) above) to be converted into equity as of October 1, 1962 and of share capital amounting to Rs. 57 million in 1963-66. (viii) Internally generated funds amounting to Rs. 262 million including depreciation of the various components of the written-down plant on a straight line basis over their remaining useful lives. 45. The foregoing program, extending through September 30, 1967, is set forth in the cash flow in Annex 11 and is sumn-arized below (Rs. mi.llion): Sources of Funds Application of Funds Internal Funds 262.0 Plant Additions Long-term BorrowAings Emisting Projects 7120 Norton Bridge and Existing IBRD Loans 41.9 Grandpass II 1i6.9 Proposed IBRD Loan 71.4 Naskeliya A 12h.0 Assumed Loan - NIaskcliya A 64.0 ,,-1>liya B 45.0 Assumed Loan - lIaskeliya B 26.4 Other 21.6 Total 203.7 Total Government Funds 120,0 Interest and Amor- tization 113.7 Dividends 47.9 Income Taxes 6.4 Cash Accrual 4.2 Total Sources 585e7 Total Applications 585.7 46. Income statement and balence sheet projections encompassing this plan are shown in Annexes 9 and 10. Certain conclusions can be drawn therefrom: (i) Creation of the Board and conversion of the Ceylon Government de'jt into equity is the basis of the plan. If the outstanding government loans were not converted into equity and all future government investment took the form of debt, coverage of the total  debt service would be unsatisfactory. For the purpose of the financial forecast it has been assumed that prior to the creation of the Board the government would provide additional funds needed by the DGEU in the form of loans and that upon creation of the 3oard in 1962 these funds would be converted into equity. The additional investment by the government during the period 1963-67, after creation of the Board, was also ass.uned to be in the form of equity. Under these assumptions the debt service coverage would be satisfactory. It would range from slightly under one time in 1962 before creation of the Board to 2.7 times in 1967, averaging around 2.2 times, (See Annex 9). The draft legislation specifically authorizes additional borroTings from the Ceylon government, but if the Board w;ere permitted to build up again a large indebtedness, the point would soon be reached w,here debt service coverage was endangered unless rates were increased to cover the additionaal finanicial buurden. (ii) The Board will have no cash with which to begin operations unless the avaount on deDosit with the treasury is paid over in cash. Such transfer is provided for in the draft legis- lation. (iii) Additional working capital will not be recquired if the present high level of receivables (about four rrionthsT billings, lar-ely due to delays in payments by local authorities,) can be controlled. It has been assumed that this wqill be possible once the Board is free to pursue more generally recognized commercial practices. Also, stores have been kcept at an abnormally high level because of the -purchasing regulations now in effect, and should not need to be materially increased for some time. (iv) Because of credits for the heavy capital expenditures, incore taxes will be payable in only one year during the period studied. This is 1962, then the present carry-forward will be exhausted and before crcdits are available from the new expansion program. (v) Net income would show a sharp increase in 1963 whcn interest charges on Ceylon government loans would cease. Thereafter it would remain relatively constant for several years before turning upward again at the end of the periodc covered. The rate of retcrn on the written-down Plant would range from 5.8%, to 8%, averaging around 6.9%.  - 15 - (vi) After meeting all debt service requirerents, taxes and divi- dends over the seven-year period, thre Board would be able to finance about 22%o of its construction costs from internally generated funds, If the governzment were to forego dividends during these years, the percentage would rise to 3)4. (vii) The financial condition of the Board would be strong, with a debt/equity ratio on September 30, 1967 of 40/600 The ratio would not, of course, remain as strong if the a-ditional funds provided by the government took the form of loans. VII. CONCLUSIONS 47. To meet the immediate prospective demand for power in the area served by the DGLTU system, installation of 75 MAT of generating capacity and associated transmission and distribution facilities will be required. It is proposed to meet this demand by the construction of a 50 Pil hydro plant at Norton Bridge and the addition of 25 IkS of thermal capacity at C-randpasso The total system capacity after completion of these plants would be sufficient 'o meet the demand until the latter part of 1966, although some shortage might occur before the thermal plant could be put into operation. It is essential that further construction be started in 1963 in order that the reouired new capacity be available by 19660 480 The proposed 'nydro plant wrill produce the cheaper power, though the thermal plant can be coinmleted earlicr and, while it would be requiired ultiMately in any event, is needed at this time to prevent an immediate shortage of capacity, It will be necessary to complete both plants on schecdule if curtailment of supply is to be avoided. 49. Construction cost estimates ase realistic and include adequcte allow-Tances for contingencies. Satisfactory arrangements have been made wsith consultants for the engineering of the project and supervision of its construection. 50. The present organization of tlhe DGEU is not satisfactory and the rules and regulations under which it is required to operate as a government department are not suitable for commercial operations. 51 Legislation providing for the establishmernt of an autonomous Electricity Board has been prepared by the government. Many, although not all, of the organizational defects of the DGEU w.ill be cured by the establishment of the Board.  - 16 - 52. The financial posi,tion w-ould be sound if all the steps contem- plated b7 the financial ulan are taken. The rate of return, t'he coverage of debt service and the internal contribution to construction requirements will not be high, but can be considered adequate in view oT the heavy expansion program. 53. It is not now practicable to postpone consideration of the proposed loan until the Board has been established, since the im,lpending potrer shortage makes it imperative to begin construction immediatelya The Bank has been assured that the bill creating the Board will be enacted during the next session of Parliament, and it is therefore appropriate that the proposed loan be considered at this time. 54. The project is considered suitable for a Balnk loan equivalent to an amount of $15 million for a period of 25 years including 3-1/2 years grace0  ANNEX 1 C E Y L 0 N DEF'RAr. ElHT OF GOVERNMENT ELECTRICAL UNDERTAKINGS Generating Facilities of the DGEU Interconnected System (excludin_ Jaffna) Effective Capacity* Condition kw At Colombo Stanley Power Plant 3 x 3,000 kw Steam units Old 7,500 Pettah Power Plant 1 x 3,000 kw Steam unit Old 2,500 3 x 1,000 kw Diesel units Old 2,500 6 x 2,000 kw Diesel units New 12,000 At Laksapana Laksapana Power Plant 3 x 8,333 kw Hydro units New 25,000 2 x 12,500 kw Hydro units New 25000 Total effective capacity 74,500 Total effective firm capacity (effective capacity less largest unit in reserve) 62,000 Under construction at Grandpass (Colombo): 1 x 25,000 kw Steam unit scheduled for operation in Ilarch 1962 (25,000) *Effective capacity calculated after derating the name-plate capacity of the older units to take into account present condition of equipment.  ANN 2 C EY L 0 N DEPARTMENT OF GOVERNMENT ELECTRICAL UNDERTAKINGS Production and Sales Records and Forecasts* Year Ended Load SePt. 30 Generation Losses Sales Peak Load Factor (million (million % (million (mw) kwh) kwh) kwh) Actual 1955 148.7 27.3 18.4 121.4 33.5 50.7 1956 163.1 30.7 18.8 133.3 37.6 49.5 1957 181.1 29.3 16.2 151.8 41.5 49.8 1958 199.3 36.7 18.2 163.1 45.1 50.4 1959 228.3 40.1 17.5 188.2 52.3 49.8 1960 263.4 45.3 17.2 218.1 57.7 52.1 Forecast 1961 305.0 47.0 15.4 258.0 67.D 52.0 1962 360.0 52.0 14.5 308.0 73.0 56.0 1963 440.0 68.0 15.4 372.0 89.0 56.2 1964 540.0 89.0 16.4 451.0 105.0 58.6 1965 610.0 95.0 15.5 515.0 116.0 60.0 1966 695.0 105.0 15.1 590.0 132.0 60.0 1967 780.0 115.0 14.8 665.0 148.0 60.0 *Excluding Jaffna N.B. Peak load is that recorded at generating station busbars; load factor is expressed in relation to units generated.  C E Y L O N DEPARIMENT OF GOVERNMENT ELECTRICAL UNDERTAKINGS PIANN9R SECTOR (Government Scheme for the Establishment of New Industries) Maximnm Demand - MNawatts Year ending September 30 1961 1962 1963 1964 1965 1966 1967 AM PM AM PM PM AM PM A PM M Ip AM PMAN Cotton Spinning (Voyangoda) 1.0 1.0 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 i.5 1.5 1.5 1.5 Cotton Weaving - - - - 2.0 2.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Kaolin Refinery - - 0.4 0. 0.4 0. .A 0.1 0.4 0.1 0.44 0.1 0.4 0.1 Tile Factory - Bangadeniya 0.1 - 0.1 - 0.1 - 0.1 - 0.1 - 0.1 - 0.1 - Tile Factory - Peradeniya - - 0.1 - 0.1 - 0.1 - 0.1 - 0.1 - 0.1 - Ceraz c Faotory 0.2 - 0.2 - 0.2 _ 0.2 - 0.2 - 0.2 - 0.2 - Second Ceramic Factory, - - - 0.5 0.1 0.5 0.1 0.5 0.1 0.5 0.1 0.5 0.1 Leather Factory 0.2 - 0.2 - 0.2 - 0.2 - 0.2 - 0.2 - 0.2 - Paranthan Chemicals - - - - - - - - - - - 1.0 1.0 Gintota Plywood - - - - - 0.5 - 0.5 - 0.5 - 0.5 - Second Spinning and Weaving Mills - - - - - - - 1.0 1.0 2.0 2.0 4.5 4.5 OGass Sheet - - - 0.3 0.1 0.3 0.1 0.3 0.1 0.3 0.1 0.3 0.1 Steel Rolling Mill - - - - - 4.5 h.5 4.5 4.5 5.8 5.8 7.2 7.2 Tire Factory - - - 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Fertilizer Plant - - - - - - - - (13.0) (13.0) 13.0 13.0 13.0 13.0 Oil Refinery - -- - - - (4-5) (4.5) (4.5) (4-5) (4.5) (4.5) K.K.S. (Jaffna Line) - - - - - - - - - (6.0) (6.0) Puttalam Cement - - - - - - 2.5 2.5 2.5 2.5 2.5 2.5 5.0 5.0 Clinker Grinding - Galle - - - - 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Flour Mill - Galle - - - - - - 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Concrete Products - - - - 0.3 - 0.3 - 0.6 - 0.6 - 0.9 - Galle Harbour - - - - - - 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Colombo Port (EMectrjification and Additions) - - - - - - - 1.0 1.0 _1.5 1.5 2.0 2.0 Total 1.5 1.0 2.5 1.6 9.1 7.3 20.1 17.8 22.4 19.8 38.2 35.6 46.4 41.0 Diversified Contribution to System Maimaim Demand (Di-versity 1.3) 1.5 1.0 1.9 1.2 7.0 5.6 15.2 14.7 17.2 15.2 29.4 27.5 35.6 33.8 fI Beoluding loads indicated in brackets, which are not considered suffiiciently firm. i-,  ANNEX 4 Page 1 C E Y L 0 N DE.PAFPI'T"T OF GOVERNME11T Ei- I'DAL UNDERTAKINGS Estimated Peak Demand and Plant Availability Year ending Effective Effective Fima September 30 Peak Demand Plant Capacity Plant Capacity (NW) (MW) (MW) 1961 67 74.5 62 1962 73 99.5 74.5 1963 89 124.5 99.5 1964 105 174.5 149.5 1965 116 174.5 149.5 1966 132 224.5 199.5 1967 148 249.5 224.5 Estimated Eneray Requirements and Availability (million kwh) Firm hydro kwh available average minimum Thermal Total Project kwh water water kwh firm kwh Date Completed required _year year available available Sept. 30 1960 263.4 270 225 63 288 Sept. 30 1961 305 270 225 63 288 March 1962 Grandpass I - 270 225 216 441 Sept. 30 1962 360 270 225 216 441 June 1963 Grandpass IT - 270 225 369 594 Sept. 30 1963 440 270 225 369 594 April 1964 Norton Bridge - 393 323 369 692 Sept. 30 1964 540 393 323 369 692 Sept. 30 1965 610 393 323 369 692 April a/ 1966 Maskeliya A.1 603 513 369 882 Sept. 30 1966 695 603 513 369 882 April 1967 Yaskeliya A.2 708 608 369 977 Sept. 30 1967 780 708 608 369 977 a/ Maskeliya A.1 - 50 MW and 210 million kwh per annum b/ Maskeliya A.2 - 25 MW and 105 million kwh per annum  2250 CYO.. ___________l 2250 225 ~~~~~CEYLON ESTIMATED MAXIMUM DEMAND I AND PLANT AVAILABILITY 200 .41-N 175 _ - 25 _-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I w~~~~~~~~~~~~~~~~ TOTAL. EFFECTIVE PLANT-oil EFFECTIvE F-IRM PL.ANT 0 (n cn --oS.pt. 30 ~ -- ept 0 1961 1962 1963119649196566S66 196 6 Z= ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ - (FISSPt 30 JANUARY 1961IBRD-7R965 :7-2 ESTImA TED MAXIMUM DEMAND 5C - U)~~~~~~~~~~~~~~~~~~~U 0 -~~~~~~~ z .4 25~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1961 1962 1963 1964 1965 1966 1967 CALENDAR YEARS (FISCAL YEARS END SEPT 30) JANUARY 1961 IBRD-774R  CEYLON w -'W ANNUAL KWH REQUIREMENTS 0 _ 2 AND FIRM KWH AVAILABILITY (MINIMUM WATER CONDITIONS) 900 _ L- 0 0 C 800 _0 __ I I FIRM KWH AVAILABILITY 16Sept30 S 600 _ _4 __ n c 1965 _ _ 6 600 ePt.0 30 l 1960 1 l _ 1,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~16 200 _ _ -__ _ _ __ 1961 ~ 196 196 196 16519696 U' z~~~~~~~~ <~~~~~~~~~~~~FSA YEAR IMA rED 3 JAUR 600 1 13RD673 -J~~~~~~~~~~~~ 400} Sept30 ~ ~ ~ ep 3 1960 z 200 _ _ _ _ _ _ _ _ 1961 1962 1963 1964 1965 1966 1967 CALENDAR YEARS JANUARY !961 ~ ~~~~~~~~~~~~~~~~(FISCAL YEARS END SEPT 350)R-73  DIAGRAMMATIC SECTION CAST LER E AG RESERVOIRGH C _ g- r,HAM*BER CASTLEREAGH / ~~~~~~~~~~NORTON BRIDGE { ~~~NORTON POWER HOUSE DAM~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A / HOUSE NORTON RESERVOIR NNSTCICK < / ~~~~~~~~~~~~~PLAN\ LAKSAPANA / ~~~~~~~~~~~~~~~~~~~~~~~~SURGEA RACE S ee, / -,,XV VLVE -TUNNEL >sNORTON dAM /=== t= +-G zi!> _ oPENST~~~~~~~~~~OCK x rw,< ~ - "I I I 'iNT *rC>tO RACE ORTON 7 GENERAL LAYOUT CASTLEREAGH \it -wP.r LARHOUSN SWITCHYARD P d CEYLON EHOUSE \ ; Bi' V - c > ~~~~~~~~~~GENERAL LAYOUT OF ~4wes\- LANSAPANA Z7 KID0ELNORTON a LAKSAPANA IANUAR; i961 POWER STATIONS I7 J'ANUARY 1961 IBRD-779  ANNEX 6 Page 1 C E Y L 0 N Dr ?.-rh1F L iT OF GOVERNIMEIT ELECTIMCAL UNDERTAKINGS Description of the Projects Norton Bridge Hvdro Plant This plant would develop the head of 746 feet between the Castlereagh and Norton reservoirs on the Kehelgamu River. The upstream reservoir has a useful capacity of 1,300 million cubic feet, sufficient to provide seasonal regulation. The downstream reservoir, with a capacity of 13.3 million cubic feet provides daily regulation for the existing Laksapana power plant. The intake structure at Castlereagh has been constructed in connec- tion with the dam. The works to be carried out include a concrete lined in- take tunnel about 20,000 feet long designed for a maximum flow of 1,000 cubic feet per second, a surge chamber, a valve house, two 2,900 foot steel pen- stocks, a powerhouse and a short tailrace channel. The powerhouse would be equipped with two 25,000 kw generating units driven by vertical, Francis type turbines. An outdoor substation would be provided with two banks of three 10 ITVA single phase, 11/132 kv transformers. Because of the limited capacity of the Norton reservoir, the operation of the two plants would have to be closely co-ordinated to avoid wasting water at the Norton Bridge spillway. The Norton plant would therefore be operated by remote control from the con- trol room at Laksapana. The evaluation of 15 years of streamflow and 35 years of rainfall records show that the new capacity could be effectively utilized, mainly to provide peaking power to the system. Geological studies based on borings indicate that the conditions in general are favorable. Second Grandpass Thermal Unit A second steam unit of 25 MW would be installed at the Grandpass powerhouse. It would operate at a pressure of 900 p.s.i. and at a tempera- ture of 9000F. It would be equipped with regenerative feed heating, surface condensor and necessary auxiliary equipment. The single boiler would be of the outdoor type designed to produce 250,000 lbs. of steam per hour. It would be fired by fuel oil. The installation of this unit would be arranged on the unit system, i.e. the turbo-alternator connected to its own boiler, with however, pro- vision for a limited degree of interconnection on the steam and feed systems so as to permit either unit to be supplied with steam from either boiler.  A"TUTEX 6 Page 2 Cooling wa-;er would be pumped from the Kelani River. The intake and discharge culverts are part of the construction program for the installa- tion of the first unit and have been designed accordingly. A suitable water treatment plant and storage tanks for city water are also included in the first project. F\uel oil would be delivered to the site through branchoffs from the existing pipeline connecting the port area with the storage tanks at Kolonnawa. One 32 MVA, 11/132 kv, 3-phase transformer with the necessary swtich- gear and control equipment would be installed in the outdoor substation. Transmission Lines and Substations There would be provided a 132 kv double circuit interconnection between the Norton Bridge and laksapana power stations. Two new 132 kv double circuit transmission lines would be constructed between laksapana and Galle (93 miles) and between Bolawatta and Puttalam (50 miles). Stepdown substations would be built at Galle, Balangoda and Puttalam to supply power to new areas mainly in the southern part of the island. A total of about 200 miles of 33 kv and 11 kv transmission lines and about 200 service sub- stations ranging in size from 25 kvA to 200 kvA would be constructed.  L. E_ 7 Page 1 C E Y L O N DEPARTMENT OF GOVERNNENT ELECTRICAL UNDERTAKINGS Construction Cost Estimates (Thousand Rupees) Foreign Local Exchange Currency Total Norton Bridge Hydro Plant and Associated Facilities Generation 1. Civil works comprising gates at the existing intake at Castlereagh reservoir, lined tunnel, surge chamber, powerhouse and auxiliary works 9,300 19,260 28,560 2. Penstocks 3,080 970 4,050 3. Electrical and Mechanical Plant for the powerhouse and substations 15.880 3,720 19.600 Sub total 28,260 23,950 52,210 Transmission and Distribution 4. Transmission lines to Puttalam, Galle and between Laksapana and Norton Bridge power stations 8,430 5,100 13,530 5. 33 and 11 kv lines and substations (about 200 miles of lines and 200 substations) 8,680 5,100 13,780 6. Low voltage connections 1,000 250 _L.250 Sub total 18,110 10,450 28,560 Communications 7. Extension of Carrier system to Norton, Puttalam, Galle and Balangoda 500 100 600 General 8. Transportation Equipment, UIayleaves, Acquisitions, Buildings and Roads 700 9,070 9,770 9. Engineering and Supervision 2,300 3,730 6,030 10. Customs Duty - 10,250 10,250 11. Unallocated (Contingencies*) 7,25 11.500 18,750 Sub total 10,250 34,550 44,800 Total Norton Bridge 57,120 69,050 126,170  ANNEX 7 Page 2 Foreign Local Exchanee Currencv Total Second Grandpass Thermal Unit 1. Civil works 1,180 1,090 2,270 2. Steam Generating Plant 3,650 1,090 4,740 3. Turbo-Generator 5,900 470 6,370 4. Switchgear, Transformer, Cabling, and Control Equipment 1,400 570 1,970 5. Engineering and Supervision 650 400 1,050 6. Customs Duty - 2,000 2,000 7. Unallocated (Contingencies*) 1.50 830 2,33 Total Grandpass II 14,280 6,450 20,730 Interest during construction** - 7,830 7,800 Grand Total 71.400 83.300 154,700 (Thousand US$ Equivalent) (15,000) (17,500) (32,500) * Contingency allowances for the WTorton Bridge Hydro Plant and transmission and distribution equipment are 15% on direct foreign costs and 20% on local currency costs; for the Grandpass II unit contingency allowances are 12% and 15% respectively. ** Interest during construction estimated at about $1.6 million is not included in the proposed Bank loan.  ANNEX 8 C E Y L O N DEPARTMENT OF GOVERNMENT EIECTRICAL UNDERTAKIfIGS Comparison of Hydro Plant with Thermal Alternative Steam Hydro Capacity 50 MW 50 MW Cost per kw installed US$215 US$360 Total estimated cost US$10.7 million US$18.0 million Additional investment in hydro US$7.3 million Sales per annum 123 million kwh 123 million kwh Annual.Operating Costs Fuel US$1,160,000 Operation and maintenance 250,000 US$180,000 Depreciation / 225,000 150,000 Total US$1,635,000 US$330, 000 Savings in annual costs ($1,635,000 - $330,000) = US$1,305,000 Return on additional investment (TJS$1,305,000 -. US$7,300,000) = 17.9% 1/ 5% sinking fund basis. Steam 25 years; hydro 40 years.  C E Y L O N DERA10E CF G02AACMEIT ELECTY2C 41 DE TA{ KINCA Past and Projected 1-ose ltatesents (Touad Noose) - ---- --- ------------------------