Chile - ENDESA Power Expansion Project

R R T FILE COPYS T R I C T E RETURN TO V1 REPORTS DESK Report No T.O122-A WITHIN ONE WEEK This document was prepared for internal use in the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF ENDESA POWER PROJECTS C HIL E October 22, 1956 Department Technical Operations  CURRENCY EQUIVALENTS 1 U.S. Dollar a 500 pesos 1 Pesos a $.002  APPRAISAL OF FNDF.SA POSER PROJECIS CH I LE TAMLS OF CONTEY7S Pa ge Ilo. I. SUr'IT4ARY 1 H. INTRODC1ION 3 III . PTFR F MARKEET FOPEC!' S Ts 3 IV. LOAdT 5 CH 7 7V. i1, ETDEBA EXPAINSION PROCPAM 8 VI. PROTEC.TS PROPO-3,D FOR BANK FINA)CING 9 VII. PR)TjUCYJCI10 CP,SI ANT) rA'ES 18 VIII. '1HE PBOPOED EO)hR'DtERS 19 IX. FIPBNCTAL ASPEC'J 21 X. CONMUSIOINS AND RECOMENDATIONS 24 NAP APPENDICES NOS. 1 - 9  APPRAISAL OF END&SA POWTER PROJECTS C H I L E I. SU1A1Y 1. This report covers an appraisal of a power development program proposed by the Empresa Nacional de Electricidad S. A. (Endesa) designed to meet the needs of Chile through 1965. It includes recoziuendations conceming three specific projects within the program which could form the basis for a Bank loan of $15.0 million. 2. The Endesa program will add about 406.,000 kw in generating capacity and will increase production by about 2.1 billion kwn/year, The total estimated cost is equivalent to $113 million of which about 40 million is required as foreign exchange. 3. Miarket forecasts show an average annual increase in demand of 8.7% for the period 1955-1265 with a corresponding increase of 9.0% in energy consumption for the Endesa interconr.ected system. These estimates are reasonable. The Endesa prog-ram2 plus the addition of 120,000 kw by the Cia Chilena, irepresents a co,servative basis for meeting these requirements. 4. Within the Endesa program, there are three projects on which work has advanced sufficiently to permit consideration by the Bank as a basis for a loan as follows: Abanico Expansion 49,000 kw Pullinque System 499,000 kw Cipreses System Expansion and Isla Hydro Plant 68,000 kw Total: 166,000 kw These projects are sound from an engineering standpoint and fit well into the overall program. 5. The total cost of the three projects is equivalent to about $55 million of which about 617 million is required as foreign exchange. The cost is reasonable, considering the high proportion of transmission and distribution facilities involved and the seasonal storage which will be provided. 6. It is proposed that Corporacion de Fomento de la Produccion (Fomento) and Endesa will be co-borrowers as in the case of Loan 5 CH. The present financial position of both is good and prospects for the future are satisfactory. Neither company obtains an adequate return as yet but earnings have shown a steady improvement over the years and future prospects are good,  - 2- 7. The proposed projects are suitable for a loan of k15.0 million. Based on the useful life of the equipment and the financial prospects of Endesa, a term of 20 years is appropriate. A grace period of 4 years is indicated by the construction schedule.  - 3- II RITROIDUCTION 8. On March 25, 1948, the Bank made a loan of $13e5 million to Corporacion de Fomsento de la Produccion (Fomento) and Empresa 1hacional de Electricidad, S. A. (Endesa) as co-borrowers for a program of power develop- ment to be executed by Endesa. All works included in the projects covered by the loan have been completed except for some small itemrs of mechanical irrigation which are still under construction. 9. A Barlc Minision visited Chile in April, 1956 to reviewi the general economic situation and to examine the prospects cf resunLng operations in Chile. This imission concluded that the Bank could consider additional lending at this time and gave power and coal mining top priority as development categories, 10. This report covers an appraisal of the Endesa program for electric pov-.>r exparsion and rezommends spec-fic projects in tne prograi-a for consider- atioi