Colombia - Third Power Expansion Project

RETFrURN TO \ C0PY RESTRICTED lEPORTS NESK FILE COI?N Report No. TO-637a WITHIN ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility,for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE THIRD EXPANSION PROGRAM EMPRESA DE ENERGIA ELECTRICA DE BOGOTA COLOMBIA May 9, 1968 Projects Department  CURRENCY EQUIVALENTS U.S. $1 = Col$ 16. 3 (unless otherwise stated) Col$ 1 = U.S. $0. 061 Col$ 1 million = U.S. $61, 350 Empresa's fiscal year ends December 3.1 MEASURES EQUIVALENTS One meter (m) = 3. 28 feet One kilometer (km) = 0. 6214 miles  APPRAISAL OF THE THIRD EXPAN-SION PriOG:bI.i EMPRESA LE ENERGIA EIECTR-ICA DE BOGOTA COLOMBIA TABI.E OF CONTENTS Page SUMMARY i 1. INTRODUCTION 1 2. INTERCCNNECTION WITH OTElR MAJOR SYSTEMS 1 3. THE BORROWER 3 Existing Facilities 4 4. THE PROJECT 4 El Colegio 4 Canoas 5 Transmission and Distribution 6 Summarized Cost Estimate 6 Procurement 7 Method of Financing 8 Engineering and Supervision of Construction 8 5. POWER MARKET 9 Justification for the Project 10 6. FINANCIAL ASPECTS 10 Past Performance 10 The Tariff Situation 12 Present Financial Position 12 Revaluation of Assets 14 Construction and Investment Programs 1968-1974 14 Financial Plan 15 Estimated Future Performance 17 7. CONCLUSIONS 18 This report was prepared by E. B. Arnold, Paul Geli and I. A. Menezes from information obtained during investigations and discussions in Bogota in February 1967 and revised by Messrs. Arnold and Vigie in January 1968.  LIST OF ANNEXES 1. System Sales and Demand 2. Load and Capability Development 3. Project Cost Estimate 4. Comparative Schedules of Rates 5. Actual and Forecast Income Statements 1963 - 1974 6. Sources and Applications of Funds 1968 - 1974 7. Actual and Forecast Balance Sheets 1963 - 1974 Map - Colombia, Proposed Expansion Program for the Empresa de Energia Electrica de Bogota  APPRAISAL OF THE THIRD EPAd1'3SION PROGRAM EMPRESA D1E ENERGIA EL'CTEiZCA DE -30G0TA COLOMBIA SUNvARY i. Empresa de Energia Electrica de Bogota requires the equivalent of US$25.o million to complete the financing of a project consisting of the installation of the final three 50 MW units of El Colegio hydro plant, the construction of the Canoas hydro plant with one 50 NW unit installed and normal distribution and transmission expansion. The cost of the project, estimated at the equivalent of US$h3.7 million including interest during construction of about US$4.4 million equivalent, represents about 87 percent of Empresa's planned construction investments during the project construction period. The external financing is required to cover the foreign exchange cost of imported goods necessary for the project. This would be provided by the Bank and major industrialized countries under arrangements described herein if the proposed loan is approved. ii. The additional generating capacity is needed to meet reasonable load growth estimates for the Bogota area and comprises generating plant additions approved for early construction in anticipation of electrical interconnection of the Bogota, IIedellin and Cali power systems. iii. A loan for this program has been under discussion for more than a year but processing of the application was delayed until satisfactory arrangements were made to proceed with the Interconnection Project. iv. This would be the Bank's third loan to Empresa. The first was made in 1960 (246-CO) and the second in 1962 (313-CO); the two Loans totalled US$67.6 million equivalent. Work under both Loans has been completed and both Loans have been fully disbursed. v. There should be no unusual problems in carrying out the proposed program. Similar and more difficult work has been successfully completed in the past by Empresa and its consultants. The cost estimates contain provisions for local price increases and contingencies and should prove reliable. vi. Empresa's financial position has been difficult during the past three years due to increases in operating and construction costs and delays in applying for and obtaining needed tariff adjustments. However, it is now much improved, and the financial plan provides for payment of current obligations resulting from recent cash difficulties and for a substantial increase in working capital. It is intended to be conservative and forms a satisfactory basis for financing the proposed project. vii. The project would be suitable for a Bank loan of US$18.0 million equivalent, for a term of 20 years including about 3