Colombia - Second Bogota Distribution Project

Document of The World Bank FOR OFFICIAL USE ONLY 2C3 - Co Report No. 5506-CO STAFF APPRAISAL REPORT COLOMBIA BOGOTA DISTRIBUTION II PROJECT May 28, 1985 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 Currency Unit = Colombian Peso (Col$) Col$1 - 100 Centavos (ctv) Col$113.89 = US$1.00 (Dec. 31, 1984) Col$1,000 = US$8.78 (Dec. 31, 1984) AVERAGE EXCHANGE RATES (Co1$/US$) 1980 1981 1982 1983 1984 47.3 54.5 64.1 78.9 100.8 WEIGHTS AND MEASURES I/ 1 meter (m) = 3.281 feet (ft) 1 square kilometer (ki2) = 0.386 square mile (mi2) I cubic meter (m3) = 35.315 cubic feet (f 0) 1 barrel (bbl) = 0.159 cubic meter 1 kilogram (kg) = 2.206 pounds (lb) I ton (t) = 1,000 kilogram 1 kilowatt (kW) = 1,000 watts (W) I Joule (J) I Watt. second = I Newton. meter - 2.388.10-4 kcal = 9.478.10-4 Btu 1 ton oil equivalent (toe) = 42.2.109 j 1 kilowatt-hour (kWh) - 3.6.10o6 1 kilovolt (kV) 1,000 Volt (V) 1 kilovolt ampere (kVA) 1,000 Volt ampere (103 VA) 1 Hertz (Hz) 1 cycle per second ABBREVIATIONS k (kilo) = io3 (-housand) M (Mega) = 106 (million) G (Gig) = 10 (billion) T (Tera) 1012 (trillion) P (Peta) = 1015 (quadrillion) E (Exa) = 10l8 (quintillion) CONPES = Consejo Nacional de Politica Economica y Social CORELCA = Corporacion Electrica de la Costa Atlantica CVC = Corporacion Autonoma Regional del Cauca DNP = Departamento Nacional de Planeacion (National Planning Department) EAAB - Empresa de Acueductos y Alcantarillados de Bogota EEEB - Empresa de Energia Electrica de Bogota EMCALI = Empresas Municipales de Cali EPM = Empresas Publicas de Medellin FEN - Financiera Electrica Nacional FONADE Fondo Nacional de Desarrollo ICEL = Instituto Colombiano de Energia ELectrica IDB - Inter-American Development Bank ISA = Interconexion Electrica S.A. JNT - Junta Nacional de Tarifas (National Tariff Board) KfW - Kreditanstalt fuer Wiederaufbau UNDP - United Nations Development Program FISCAL YEAR = CALENDAR YEAR 1/ The SI (Systeme International) and its multiples are used whenever possible in this report.  FOR OMCAL USE ONLY COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT TABLE OF CONTENTS Page No. Summary 1. THE ENERGY SECTOR Energy Resources and Policies............................... 1 Sector Financing............................................ 3 Institutional Arrangements in the Power Sector.cto......... 4 Power Market and Supy.... 6 Recent Developments 7 Bank Participation In the Power Sector..............o....... 7 2. THE BORROWER General Description........0............ ............. .... 9 Prior Bank Lending......... 00............ .................. 9 Organization and Adu istraioo.: 10 EAccoyntin a.d... lng.......................... ...... e..... 10 Accounting and A uilg11 Billing aad Collection ............... ... me...... .......... 11 Insurance and Taees ........2.................. 12 3. EElB's MARKET Ba ckgg r o u nd...... *e..........e.eee....ee...e.ee.e...eee.eee 13 13 Forecast ....,...................................... 14 This report was prepared by Messrs. Marcelo Osorio (Power Engineer) and Julius Wilberg (Financial Analyst) on the basis of an appraisal conducted In November 1984. 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.  ii Page No. 4. THE PROGRAM AND PROJECT EEEB's Expansion Program. .... .........*. ........ ee...... .e... 16 The Project .......................... 6S 17 Estimated Project Cost...................................... 20 Financing ................ ................................ .... ..... 22 Consulting Services......................................... 22 Training and Technical Assistance........................... 23 Implementation Schedule ..................................... 24 Procurement ..e...e..eo.eoe.................................e....... 24 24 Disburseme nts ......................... .........*...... ................ 25 Environment ............. . *........s......................... SS6S@6*6*S 26 Project ...................... @0C6Ce6*C*6........... 26 Project File ......... 26 5. FINANCE -Summary...... @0S66@660 SeseCeSs *6~6S@@~@C6 .......... *** 66,60 27 Earnings Hitr ................................27 Rate .......................... ...................... 29 Tariff Structure.......... ********************** @6066 30 Financial Structure ........................ CSU@@*SS@*SS6SSS 30 Investment and Financing elan............................... 31 Future Fnne ............................... 33 Financial Covenants. ....................................... 34 6. ECONOMIC ANALYSIS Least-Cost Solutions...............6....... 35 Return on Investment ................... . 35 7. AGREEMENTS REACHED AND RECOMMENDATION Agreements and Provisionse....... S.e....... ...........e@*SC 37 Conditions of Effectiveness .. s@C@@sw C *e....e.....C 38 Recommendation. eSCC o Cee......e666..e.......6....... .. 38 ANNEXES 1.1 Energy Resources - Background ......... C6S6*66...*.C..... 39 1.2 Energy Output and Consumptione......... ................... Cee e 42 1.3 Public Electricity Service in Colombia....................... . 43 1.4 Power Market and Supply...... 566 06666 C 666 C............ ...... 46 1.5 October 1984 - ISA Interconnected System Expansion Plan..... 50 1.6 Bank Participation in the Colombiax Power Sector............ 51 1.7 IBRD Power Loans ............................ 53 2.1 Organization Charc....................... . 54 2.2 Forecast Performance Indicatorso............................. 55  iii Page No. 3.1 Historical Electricity Consumption and Supply 1978-83 ....... 56 3.2 Forecast Sales and Supplye.......e............e......... s *e .... 57 4.1 Cost Estimate Construction Program 1985-90 (US$) ............ 58 4.2 Cost Estimate Construction Program 1985-90 (Col$) ........... 59 4.3 Investment Program (US$)........................ ........ .... 60 4.4 Proposed Project Financing .................................. 61 4.5 Project Implementation Schedule ............................. 62 4.6 Loan Disbursement Schedulee... ....e.... . .... .................. 64 4.7 Procurement Arrangements ..... ..................e..s..........e 65 5.1 Residential Consumers C1983)................................ 66 5.2 Historic and Forecast Income Statements 1982-91............. 67 5.3 Estimated and Forecast Sources and Application of Funds (1982-1991) ........ ........................................ 68 5.4 Actual and Forecast Balance Sheets (1982-1991).............. 69 5.5 Financial Indicators ....................... .. 70 5.6 Tariff Structure......0.......... . ........................... 71 5.7 Schedule of Existing and Proposed Debt...................... 74 5.8 Forecast Loans Disbursement Schedule 1984-1991.............. 75 5.9 Forecast Debt Amortization Statement 1984-1991 .............. 76 5.10 Forecast Debt Interest Statement 1984-1991 .................. 77 5.11 Main Coefficients Used.......... ............................ 78 6.1 Cost Estimate Construction Program 1985-90... ............... 79 6.2 Rate of Return on 1985-1990 Progra ......................... 80 7 Contents of Project File................ ............. ....... 82 MAS IBRD Map No. 17690R IBRD Map No. 14375R  COLOMBIA EKPRESA DE ENERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT Project Summary Borrower: Empresa de Energia Electrica de Bogota (EEEB) Guarantor: Republic of Colombia Amount: US$171 million equivalent Terms: Repayment in 17 years, including 4 years of grace, with interest at the Bank's standard variable rate. Project Sectoral Ohjective: The Bank's principal objective in the Colombian power sector is to achieve greater efficiency in the operation of the country's electric utilities. The substantial energy losses prevalent throughout the sector constitute one of the major deficiencies in the current operations of these utilities (EEEB's energy losses have reached almost 23% of gross generation). Improved subtransmission/distribution system and theft prevention measures represent an effective method for reducing such losses. Since EUEB is one of the largest power utilities in Colombia, improved efficiency in EEEB's distribution system would have a major impact on total losses experienced by the sector. Project: The principal objectives of the project are to achieve greater etficiency in EEEB's operations and to extend electric service to a larger segment of Bogota's population. The project consists mainly of the 1985-90 time-slice of EEEB's distribution and subtransmission program, including the expansion and improvement of Bogota's network, studies to improve EEEB's distributlon and operational planning, a training program for EEEB's staff and a program for reducing the system's losses. Around 240,000 new customers will be connected to the power service, 1,100 MVA in subtransmission substations will be built, and about 10 km of 230 kV and 75 km of 115 kV lines will be constructed, together with 350 MVA in distribution substations and 1,000 MVA of distribution transformer capacity and more than 1,400 km of new primary and secondary distribution circuits. Risks: No technical risks are anticipated although timely completion of the project will depend upon EEEB's project management ability. Establishment of a project coordination unit and acceleration of the impleuentation of a training program for the improvement of EEEB's organization and management are expected to reduce this risk.  &stimated Cost Local Foreign Total Subtransmission 5.9 12.5 18.4 Distribution 141.2 80.3 221.5 Maintenance and Laboratory Equipment 0.3 15.1 15.4 Training and Technical Assistance - 2.0 2.0 Studies 0.8 - 0.8 Energy Losses Reduction Program 1.0 1.0 2.0 Engineering, Administration 13.0 - 13.0 Total Base Cost 162.2 110.9 273.1 Physical Contingency 16.2 11.1 27.3 Price Contingency 21.6 26.6 48.2 Total Project Cost 200.0 148.6 348.6 Interest during Construction - 41.0 41.0 Total Financing Required 200.0 189.6 389.6 Financing Plan Suppliers Credit 18.6 18.6 IBRD Loan (Project) 130.0 130.0 (IDC) - 41.0 41.0 EEEB 200.0 - 200.0 Total Financing 200.0 189.6 389.6 Estimated Disbursements: Bank FY 86 87 88 89 90 91 (Project Only) Annual 15.9 24.3 26.7 26.1 21.7 15.3 Cumulative 15.9 40.2 66.9 93.0 114.7 130.0 Rate of Return: 12.1Z _APS: IBRD No. 17690R IBRD No. 14375R  COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT 1. THE ENERGY SECTOR Energy Resources and Policies 1.01 Colombia is rich in energy resources, particularly in hydroelectricity and coal. Its reserves of oil and natural gas are modest by international standards, yet significant at the national level. The country's recoverable coal reserves are estimated at 16 billion tons (441.6 EJ) and its hydropower potential, at 100 GW, is capable of yielding about 440 TWh (4.62 EJ) per year (231 EJ over 50 years). Compared to this, gas reserves are only 4.07 trillion cubic feet (5.1 EJ) and oil reserves are 734 million barrels (4.3 EJ). As regards the latter, on the basis of recent success encountered by Occidental Petroleum in its oil exploration in the Llanos area, preliminary estimates now suggest that Colombia's oil production will exceed its internal consumption in the near future. Further detail on the size and past development of Colombia's energy reserves is contained in Annex 1.1. Estimated Recoverable Reserves and Production (1983) Reserves Production Reserves/Prod EJ Mtoe (X) GJ Mtoe (X) (years) Hydroelectricity 231.0 5,475 33.9 160 3.8 21.4 Renewable Coal 441.6 10,466 64.7 96 2.3 12.9 4,550 Natural Gas 5.1 121 0.8 167 4.0 22.5 30.3 Crude Petroleum 4.3 102 0.6 322 7.7 43.2 13.2 682.0 16,164 100.0 745 17.8 100.0 As the table above shows there is an imbalance between reserves and production for different sources of energy. For example, the huge reserves of hydroelectricity and coal account for only 21.4% and 12.9% respectively of annual production while the rather modest gas and oil reserves contribute 22.5% and 43.2% respectively to annual production. Current consumption of commercial energy relies primarily upon oil products (41%) and less on gas (17%), coal (15Z) and electricity (27%). The table below shows.the distribution of this consumption by sector.  Energy Consumption (1983) Sector GJ Mtoe z Transport 230 5.5 27 Residential/Commercial 84 2.0 10 Industry 242 5.8 28 Electric Sector 280 6.7 31 Other 38 0.9 4 Total 874 20.9 100 1.02 Colombia traditionally enjoyed a posltive trade balance in energy because of its relatively rich energy endowment and modest yearly per capita consumption which, at about 0.7 ton of oil equivalent, is below average for middle-income developing countries. However, in 1976 the country became a net importer of energy, and by 1981 the (net) cost of oil imports reached almost US$400 million. This came about because of a decline in total domestic energy productlon, resulting from a 7% annual fall in oil output between 1970 and 1979. As this situation was threatening to compromise balance of payments prospects, the Government moved in the late 1970s to redress the negative energy trade balance through: (i) pricing measures designed to increase the overall cost of energy to consumers, change relative prices to encourage consumers to move away from oil, and provide incentlves to producers; and (ii) direct public sector investments in the energy field, particularly for petroleum exploration and secondary petroleum production, hydroelectricity and coal. As a result, since 1980, the previous trend has been reversed: petroleum production has Increased, GDP has grown faster than aggregate energy consumption, and petroleum's share of total primary energy consumption has fallen while that of hydroelectricity, coal and natural gas has increased. 1.03 As shown in Annex 1.2, primary energy output has increased about 3% per year since 1978, while final energy consumption rose by about 3.8Z per year. 1.04 In Colombia, electricity, petroleum and natural gas prices are set by the Government; coal prices are market-set. The price levels for petroleum products are close to international prices, while natural gas is sold at low prices, as a financial incentive to consumption. The development of an integrated energy investment program and adequate incentives for each subsector will depend on the availability of reliable information regarding the investment requirements of dlfferent energy sources, particularly coal. To this end, the Government has undertaken a major effort to improve sector knowledge through a National Energy Study (ENE). Its first stage was carried out during 1979-82 by the National Planning Department (DNP) with the help of local consultants and technical assistance from the Federal Republic of Germany. This study provides significant information needed for energy planning, including a preliminary evaluation of energy demand growth and investments that could best serve such growth.  1.05 A second stage of the ENE, consisting of several specialized studies, is almost complete 1/. This current effort has elicited considerable foreign technicial assistance from officlal sources. The Federal Republic of Germany is providing assistance on modeling and data gathering, France on industrial energy savings, Italy on energy studies for isolated regions, the Organization of American States (OAS) cn energy use in transportation and the European Economic Community on industrLal uses of energy. Several energy sector agencies provide counterpart staff and DNP coordinates the external assistance. The third phase of the study, concerned with energy strategy formulation, is about to start. Work in this phase will be focussed on identification and comparison of the costs and benefits of developing each of the country's energy resources. Once such work has been completed, selection among alternative energy sources will be possible and a long-term strategy for development of Colombia's energy resources can be formulated. Recently, DNP has asked that the Bank assist In its revLew of these studies and help in the formulation of a strategy for the energy sector. These tasks will be accorded high priority 'n the context of the Bank's country and economic sector wcrk for Colombia. Sector Financing 1.06 Over the past five years, Colombia has been successful in mobilizing external resources to finance energy development. This has been achieved through direct foreign investment (in oil and gas first and lately in coal) and external loans to the energy agencies, includlig power companies. However, the current conditions in the LaternatLonal lending markets are making external financing more difficult to obtain. Local financing requLrements are covered primarily by internally generated resources and Government contributions, with the incipient local capital market traditionally providing only a marginal share of financing. 1.07 The establishment in 1982 of a financial institution for the power sector (Financiera Electrica Nacional-FEN) designed to mobilize domestic as well as foreign funds for the sector's utilities has increased the contribution of the domestic capital market to the sector's financing and enabled the sector to maintain a presence in the increasingly cautious international capital markets. Despite its recent creation, FEN has become one of the largest financial institutions in the country. It has already recorded notable success in the domestic market and served as the borrowing agency for a major power development finance loan from the Bank (2401-CO) and various cofinanciers. By going to capital markets on behalf of the consolidated power sector, FEN has mobilized resources which the indlvldual utilities would not otherwise have been able to access and this institution promises to make a substantial contribution to the alleviation of the financial constraints currently confronting the sector. As regards more traditional sources of local cost financing, in order to increase internal resource mobilization by the main energy sector agencies, prices charged to consumers of petroleum products and electricity have been increased significantly in real terms. Furthermore, in 1980, the Government created the National Coal Fund (FNC) which receives revenue from a tax on coal production valued at the mine-head. This revenue is currently allocated to finance coal exploration (80%) and to assist small and medium-scale coal mining operations (20%). 1, Among others, studies on natural gas available for ammonia-urea fertilizer production and coal exploration studies to assess the economic potential of several promising areas in the Atlantic and Central Regions.  - 4 - Institutional Arrangem nts in the Power Sector 1.08 Sector Organization. At present, public electricity servlces are provided by: (a) municipally-owned companies, of which the largest are EEEB (in Bogota), EPM (in Kedellin) and EMCALI (in Call); (b) national enterprises whose principal purpose is the distr:bution of power to particular regions (ICEL, CVC and CORELCA); and (c) a generating and transmission company (ISA). These are described ln Annex 1.3 and the electric power systems are shown in Map IBRD-17690R. 1.09 Through the 1950s, a large number of power companies were set up by local governmental authorities and, lacklng interconnection with each other, were operated independently. Less than 20 years ago, the country's total electricity capaclty stood at a mere 1,681 MW (equivalent to about 88 watts per inhabltant) and reached only about 35% of the population. Although large hydropower sites held the potential of Lncreasing substantially the supply of electricity at lower cost than otherwlse possible, they were too blg to be tapped by any one company. With encouragement from the Bank, the Government persuaded the regional power companies to break with tradltion and pool their resources in a shared effort to plan and to develop the country's large hydroelectric potential. To accomplish this, Interconexion Electrica S.A. (ISA) was created as an Independent, national generation and interconnection company, whose shareholders now include all the largest municipal power utilities and the Government-owned power companies. By 1984, Colombia's instaLled capacity had cliabed to 5,049 KW - more than triple the pre-ISA level - and reached 54X of the population. The successful execution of a series of major power generation projects had produced an experienced and highly-regarded local engineering/construction industry and the planning methodologies employed iD the sector had achieved an enviable level of sophistication. In addition to its planning and plant construction functions, ISA operates the interconnected power system. Though adequately staffed and technically capable, ISA lacks a homogeneous decision-making process. Its shareholders (EEEB, EPM, CORELCA, ICEL and CVC) are inclined to allow their regional and sometimes conflicting interests to take precedence over national goals. Furthermore, the financlal constraints that most of the companles are facing have caused them to reduce their contrlbutions to ISA. The resulting arrears had reached about US$170 million equivalent by end-1984. In an effort to advance national interests in ISA, the Government has decided to strengthen its representation on ISA's Board. In addition, the Government intends to penalize the companies that have debts to ISA, by impeding their access to FEN loans. 1.10 Several other actions have been taken by the Government to improve the sector's institutional structure and hence its prospects for efficient growth. It established the National Tariff Board (JNT) in DNP to approve requests from the power companies for tariff increases; and it has fostered the consolidation of numerous small utilities, particularly in the North Atlantic Region. The Government has also recognized the constraint on sound  - 5 - sector development and finance represented by the current organization of ICEL - a holding company which groups together twelve largely rural-based utilities (electrificadoras) - and It has explicitly confirmed the need to restructure the ICEL group. 1.11 As the discussion above suggests, the current sector organization does not provide for effective operations. The sector lacks a central authority to enforce planning and tariff decislons, based on a national plan. The decision-making process is tortuous and slow, and dependent on negotiations between the central government, the utilities and the local governments. The current resource constraints have highlighted the need for change, but the importance of the power sector in the country's economy, its substantial share ln Colombia's foreign indebtedness (25X of the public foreLgn debt) and the magnitude of its investment program clearly require that any improvements in the sector's institutional organization should only be adopted in the context of a thorough review of overall sectoral policy. The Government recognizes this and has requested that the Bank assist in carrying out such a review. To this end, the Bank has been supporting efforts by both che Government and ISA to develop and monitor sector-wide financial projections, more flexible investment plans and other data. Acknowledging the long-standing and deeply entrenched tradition of reglonal autonomy that underlies the sector's existing organizational structure, the Bank and the Government have agreed to approach the institutional problems through a workshop designed to marshall the skills and resources of those familiar with the sector to consider the objectives of the power sector and strategies that might achieve them. 1.12 Planning and Coordination. The Ministry of Mines and Energy is charged with formulating national policy for the generation, transmission and distrLbution of electricity, including coordination and supervision of power sector planning. It shares with the National Social and Economic Policy Council (CON?ES), DNP and ISA the responsibility for defining investment priorities. ISA defines a generation and transmission expansLon program for the interconnected system; after approval by the Ministry, DNP and CONPES, this becomes the National Power Expansion Program. The Program is revlewed annually by ISA and revisions, if necessary, are proposed. On the basis of requests from the companies, JNT approves rate increases. Although the Government cannot enforce its policies directly on the municipally controlled power companies, ISA is intended to provide a mechanism for reaching agreement on major issues affecting the sector. Sector planning and coordination have improved markedly since ISA's creation and Bank lending has strongly supported this evolution; although, as was mentioned In paras. 1.10 and 1.11, some further improvements in the sector's institutional arrangements will have to be implemented before the planning, priclng and coordination system can function satisfactorily. 1.13 Least-Cost Power Development Program. Colombia's economic gr_th was affected by the world-wide economic recession from 1981-83. Taking account of the consequent slowing of electricity demand growth, on May 16, 1983, CONPES approved a revised National Power Expansion Program for plants entering into service during 1987-96. In October 1984, ISA presented the latest revised Program with a two year deferment on all major future projects. The plan is based upon a gradual and phased resumption during 1985-2000 of the long-term average annual economic growth rate of about 5%  - 6 - achieved from 1965-80; estimated fuel prices; and a projection of 6.5Z growth in average gross annual electricity consumption during the 15-year period from 1985-2000. To ensure that significant variations in demand are suitably taken into account, ISA together with the Government and the Bank (as provided under Loan 2401-CO), will continue to review and update the Program. The Bank is currently reviewing with DNP and ISA the financial implications of this revised investment Program. 1.14 In support of ISA's efforts to strengthen its planning methodology, a UNDP-financed study, for which the Bank acted as the executing agency, was completed by end-1984. The study was devoted to the refinement of ISA's existing planning models. Another UNDP and Bank-financed study providing assistance in construction management is now underway and it is anticipated that its benefits will extend, through ISA, to its shareholders as well. Power Market and Supply 1.15 Electric power has become the fastest-growing form of energy, use in Colombia. Its share of total energy consumption has risen from 6.5Z in 1970 to 27% in 1983. Generation increased by an average of about 10% annually during 1970-1980, although it has slowed over the last years to 5.8Z per annum in 1980-83 (details of past and projected growth in both supply and demand for electric power are contained in Annex 1.4). Effective installed capacity at the end of that year was 5,049 KW, including self-producers, with public entities accounting for 95Z of the total installed capacity and generation. Peak demand was about 4,530 KW, and total electrical energy generation in 1983 amouuted to 22.7 TWh. Hydroelectric plants accounted for about 65% of the total electricity generated. 1.16 About 54Z of Colombia's 27.5 million population has electric power, compared to 26% in 1950 and 45% in 1970. The urban population, comprising about 65% of the population, has greater access. In 1976, for example, 90% of households in large cities (population of 50,000 or more) had electrical service while in rural towns (popullation between 500 and 2,500) the corresponding figure was 36%; in other rural areas, 16%. Various prograus including the Bank-financed First and Second Integrated Rural Development Projects and the Village Electrification Project as well as programs financed by IIUB, Kreditanstalt fuer Wiederaufbau (KfW) and the Colombia Coffee Growers Association, are aimed at increasing rural coverage. In 1983 there were about 3.3 million electricity subscribers of which 89.9% were residential and 7.7% comercial. Residential consumption accounted for 48.6% of 1983 electricity sales (which totalled 17.4 TWh) and industrial consumption accounted for 28.2%. EEEB generated 172 of the total electricity supply, EPM 22%, CORELCA 20%, CVC and ICEL 20Z, ISA 19%, and others the remaining 2%. 1.17 During 1978-1983, gross production of electricity increased at an annual average rate of about 7.3% compared with a GNP growth rate of 4.3%. However, sales increased at an annual average rate of only about 6.0% because energy losses increased from 18.4% in 1978 to 22.6% in 1983. Approximately half of these losses are technical (network) losses in the distribution system, while the remainder are thefts. A portion of the energy thefts can be traced to large consumers but theft by sqtatters tapping into lines is also presumed to be substantial in some areas. In 1984, a joint DNP/ISA comittee was established to study the issue of energy losses and to  -7- recommend solutions for the problem. In addition, the proposed project is designed to assist EEEB in reducing both technical losses and theft (para. 4.04 (f)). Recent Developments 1.18 By the early 1980's Colombia 1had already embarked upon an extensive investment program for the power sector - concentrated primarily on several large-scale generation projects requiring substantial long-term financial commitments. Since then the availability of both external and domestic financing has been severely reduced and the stabilization of Colombia's external and fiscal balances has become one of the most urgent issues facing the country at this time. As a consequence of the power sector's substantial share in both Colombia's anticipated investment requirements (28% of total public investment) and its foreign indebtedness (over 25% of public sector foreign debt), the sector has also been obliged to shoulder its share of the burdens imposed by the resource constraints that confront the country. Specifically, during the past three years, the sector has suffered from financial problems caused mainly by insufficient availability of financing, slower than anti:ipated demand growth and delays in rate adjustment. Local borrowings needed by the sector have outpaced the domestic banking system's lending capability. Varlous shareholders lacked funds to pay fully for the electricity supplied to them by ISA and their share in the cost of ISA's development program. As a consequence, ISA has fallen behind in its contractual payments to suppliers and contractors and this, in turn, has caused construction delays. In addition to similar problems, CORELCA and ICEL have not received their budgeted Government contributions on schedule. Moreover, the sector has suffered because Government-related lending has been held back and the financing of local costs with external b)rrowings authorized only on a highly selective basis. 1.19 The developments described above, combined with the 1982 civil disturbances reflecting consumer discontent with increased electricity charges and the quality of service, have led the Government to review the investment program and the financing plan for the sector. Through the exercise of redefining the sectoral financing program, the Government has focused increasingly on the macroeconomic and institutional implications of the 1984-90 power investment program. In May 1983, it reviewed in detail the justification for, and financial feasibility of, all new investments in the aforementioned program, taking account of competing demands from other priority sectors; and in December 1984, the Government decided to.reduce by about one-half the previous planned capital outlays for the sector (see para. 1.13). In the context of the Government's overall review of its policies for the sector, both ISA and the Government will continue to monitor the current investment program to ensure that it remains consistent with -he evolving sectoral strategy. Bank Participation in the Power Sector 1.20 The Bank has made 29 loans since 1950 for the Colombian power sector totalling US$1,739 million. Several OED reports have found previous Bank lending to the sector to have been generally successful. One of these reports 'Power Interconnection (575-CO) and Chivor Hydroelectric Projects (681-CO)' (Report No. 2720, October 29, 1979) commented upon the Bank's  - 8 - participation in Colombia's efforts to evolve a stronger and more efficient power sector organization. Through the creation of ISA in conjunction with these projects, and the steps taken to overcome financial and institutional difficulties, progress was made toward more coordinated sector development. Despite implementation delays and increased costs both projects were successfully executed. In the past, the bulk of Bank lending for power was devoted to the expansion of Colombia's generating/transmission capacity. While Bank-financed power projects have often contained distribution components, the initial Bogota Distribution Project (1807-CO, 1980) was the first Bank loan to Colombia to support exclusively distribution expansion. In continuing the efforts successfully initiated through that first distribution project (and expanded in subsequent rural electrification projects) the Bank will be reaffirming the importance of a smoothly functioning distribution system for the efficient utilization of Colombia's existing generation capacity. Broadly stated, the Bank's objectives for the power sector are: (a) to achieve greater efficiency in the operation of Colombia's electric utilities; (b) to improve resource mobilization for the sector as a whole; and (c) to improve the sector's institutional arrangements. Until recently, the Bank sought to promote development of sector-wide strategies for the power sector by addressing these broad sectoral issues in the context of lending operations with individual utilities. This lending strategy has however, been evolving toward a greater focus on sectoral lending. Reflecting this evolution, the Bank has oriented its most recent efforts towards the establishment of a sector-wide financing facility (FEN) and plans to extend these efforts through a future power sector loan, to be channelled through FEN, and focused primarily on improving the efficiency of the distribution system by reducing energy losses*  - 9 - 2. THE BORROWER General Descript Lon 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 85 years, since 1951 under municipal ownership. It has an installed capacity of 1,288 MW, 1,151 MW of which is hydro and the balance coal-fired thermal. It served about 700,000 subscribers at the beginning of 1985. Prior Bank Lending 2.02 The Bank has made six loans totalling US$615.6 million to EEEB: (see Annex 1.7) 246-CO in January 1960, 313-CO in May 1962, 537-CO in June 1968, 1628-CO in November 1978, 1807-CO in March 1980 and 2008-CO in March 1982. The first two loans helped to finance 304 MW of hydro and thermal generating plant additions, including the Sesquile Dam for the Guatavita Reservoir, and transmissiou and distribution system extensions. The third loan helped to finance the 150 MW El Colegio hydroelectric plant and associated substations, construction of the 50 MW Canoas hydroelectric plant, expansion of the transmission and distribution systems and engineering services. The fourth loan helped to finance part of the 1978-1982 national power expansion program including the 600 MW Mesitas hydroelectric plant. The fifth loan for Bogota's first Distribution Project (US$87 million) was used by EEEB to expand and improve the existing Bogota subtransmission and distribution systems. Finally, the sixth loan of US$359 million is earmarked for the financing of the Guavio hydroelectric plant now under construction. Works financed by the first three loans were completed successfully although with delays (of about one and a half years for the first two, and three years for the third). The Project Performance Audit Report (Report No. 1654) for Loan No. 537-CO was distributed to the Executive Directors on June 29, 1977. The disbursements of the fourth loan (Mesitas - 1628-CO) suffered a total delay of 2 years; the project as such was completed with a 30 month delay, with a cost overrun of around US$150 million (55X higher than the initial estimate). This was due to technical problems related to geological conditions for the civil works (tunnel construction and others) and to difficulties with civil work contractors. Loan 1807-CO is being disbursed with some delay but no cost increase. The project is to be completed by mid-1985, about 30 months behind the original schedule. Finally, Loan 2008-CO (Guavio) started disbursements in 1982, well behind schedule, since the project suffered several delays, such as effectiveness because of tariff action and difficulties in land purchases.  - 10 - 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 representative 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 (4) Deputy Managers, respectively responsible for (a) Administration and Supplies; (b) Financial; (c) Technical; and (d) Operations. The General Manager is also supported by 2 staff units: a Planning Division and a Legal Division. The current organization chart (Nov. 84) is shown in Annex 2.1. There is perhaps an excessive number of ads. Aistrative units, roughly 270 divisions, departments and sections, and this has led in some cases to a lack of communication and coordination among them. But at the top level, the company has had a competent and stable management during most of its association with the Bank. There was some turnover of senior personnel in 1976-78, but this has diminished considerably and at present it is very low since the company offers interesting fringe beneflts. Most of the senior and mid-level management staff are young (under 40) and dynamic. With the construction of one big hydroelectric plant and one large distribution program, there is a need to adapt the current structure, mianly the technical and operational organization. For this purpose, the company has engaged in a study, assisted by consultants and partly financed by the Bank (Loan 2008-CO). On the financial side, the study on managerial, budgetary and accounting systems prepared by Peat, Marwick, Mitchell and Co., management consultants, was completed and its recommendations implemented gradually during 1983 and 1984. The accounting system was the last to be introduced (May 1984). Financial administration and planning are carried out by a small but competent staff. Employment 2.05 EEEB had 3,397 employees at the end of 1984, of which 38 were in the Planning and Legal Division; 905 administration personnel, 467 financial personnel, 1,706 operational and 281 technical personnel. The company's historical staff growth over the past years in relation to the number of consumers served and energy sold is shown below: (Source: EEEB)  - 11- Number of Number of Customers Total Sales, MUh Employees 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 2,658 211 1,488 1981 2,820 207 1,359 1982 2,988 208 1,382 1983 3,179 209 1,361 1984 a/ 3,397 205 1,282 Average growth 6.0 1.1 1.9 rate 1969-84 (x) a/ Estinated. The total number of EEEB's employees is projected to grow at an average of less than 4Z per year. Thus, the actual trend of declining ratios of number of customers per employee and of sales per employee will stabilize and start to improve from 1985 on (see Annex 2.2). With the Bank's support (Loans 1807-CO and 2008-CO), EEEB is maintaining a training program for its technical staff. This program should be continued and extended to other areas of the company, mainly for the financial and administrative personnel. Accounting and Auditing 2.06 EEEB's accounting procedures were revised in the beginning of 1984, following the consultant's recommendation (see para. 2.03). Accounting is highly based on computer data processing and integrated with personnel, supplies and the other financial computer systems used by the company. Internal Auditing is carried out by a separate department, the "revisoria fiscal", under a General Auditor responsible to the Board of Directors and appointed by the Mayor of Bogota. This department has a staff of 40 and acts both as a financial and administrative procedures auditor. The function of external audjtors was carried out until 1979 by the 'Contraloria del Distrito Especial de Bogota", the auditing body of the Municipal Government of Bogota for all its public utilites. To ensure a greater degree of independence between auditor and 'auditee", under Loan 1807-CO, EEB agreed to appoint independent auditors acceptable to the Bank. In mid-1980, the independent auditor firm of Liborio Cuellar & Asoclados was hired to perform the company's audits starting in fiscal year 1980. Their performance was considered satisfactory and their contract was renewed in successive years, the last time in November 1984 for another 2 years. Billing and Collection 2.07 The Company is using a bi-monthly billing system for the bulk of its consumers. Exceptions are the big industrial consumers (about 350,  - 12 - representing 20% of total revenues) which are billed monthly and a group of low consumption (under 100 kWh/month) users in rural areas, where meters are read every 4 months and bills issued every 2 months. A computerized billiug process is used and bills are delivered by specially hired personnel directly to the consumer. This, according to EEEB, is both cheaper and safer than using the local mail service. Bills must be paid within 10 days, either at one of about 900 bank offices located all over the city of Bogota and surroundings, or at an EEEB office, of which there are 10 at this moment. After 10 days, there is a penalty of 2.5% and bills can only be paid at EEEB's offices. After another 14 days, the penalty is increased to 10Z of the total amount due and the subscriber is subject to having the service suspended. At the end of 1984, there were about 30,000 late payers among the total 699,000 consumers, most of them residential, and the total accounts receivable was 25% (about 88 days billing) of total annual sales. This is higher than the 17% target covenanted under the Guavio (2008-CO) loan. EEEB is constantly improving their billing and collection system, seeking greater efficiency and flexibility. A study has just begun to identify the shortcomings of the present procedure and to incorporate new techniques in meter-reading as well as extended collection agreements with financing entities. Insurance and Taxes 2.08 EEEB's main assets are insured at book value, i.e. below their replacement cost. In a study performed by Commercial Union Risk Management, following a covenant in Bank Loan 1628-C0, replacement costs for najor equipments were calculated and an indication of the values to be insured was given. Until now, the premiums paid by EEEB are low (around Col$20 million/year), but if the new values were used this cost could attain a range of Col$100 to Col$200 million per year. Since very few accidents have occurred in the last year, coverage has been good and there is no consedsus in EEEB about raising dramatically the annual premium; the company has evaluated the risk of future accidents and decided to adopt the recommpndations of the above-mentioned study. At present, a prequalification of insurance companies is under way, to provide better coverage for EEEB's assets under the new values. 2.09 Under the current legislation, EEEB is exempt from any direct taxes, including import duties for equipment to be installed in its projects.  - 13 - 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 Cundinsuarca and Meta in the central zone. EEEB's estimate of the service area population is 5.5 million, about 20Z of the total population of Colombia. The service area accounted for about 24Z of the national gross electric energy requirements in 1983. Historic 3.02 EEER's 1978-1983 consumption and supply data are shown in Annex 3.1. They exclude the supplies from ISA's system to other utilities via the EEE system, for which no charge is made. A summary of the consumer data for 1978 and 1983 is given below: ---1978- 1983- Annual Growth GWh Z GWh Z Z Residential a/ 1,398 41 1,988 48 7.3 Commercial 622- 18 576 14 -1.5 Industrial 1,052 31 1,120 27 1.3 Government 340 10 443 11 5.4 Total 3,412 100 4,127 100 3.9 Losses 666 16 b/ 1,287 23.5 b/ - Station Uses 75 71 Total Requirements 4,153 5,485 5.7 Maximum Demand (MW) 819 1,006 4.2 No. of Consumers (1,000) 500 666 5.9 a/ Includes bulk sales to rural customers. b/ Z of total requirements. The annual demand growth over the past five years slowed to only 5.7%, while in the previous period 1973-1978, this growth rate was a yearly 9.7%. This decrease oc'lrred as a consequence of the overall economic recession in the country. Industrial and commercial consumption were the most affected by this recession, and their market share decreased substantially, while  - i4 - residential consumption increased commensurately, mainly due to the continuous growth of the city of Bogota. EEEB's energy losses increased dramatically from 1978-83, rising from 16% to 23% of gross generation. Although the investments in the company's distribution system initiated under the first Bogota Distribution Project were effectve in containing some technical losses, that project was devoted primarily to the expansion of the system and improvements in the quality of service. Investments for rehabilitation of deteriorated and/or overloaded circuits to maintain technical losses at acceptable levels, were to be financed with EEEB's own resources as part of normal maintenance. However, these investments have been largely insufficient and the rapid growth in the size of the company's generation and distribution capacity since then has engendered a steady increase in energy losses- a sizable proportion of which can probably be traced to increasing energy theft. Generally, energy losses result from a combination of factors whose relative importance is rather difficult to measure. These include: (i) deterioration of the existing distribution circuits, (ii) increased circuit loads and losses because of larger consumer demand; (iii) lack of means to detect and to control energy thefts; and (iv) urban squatters illegally connected to the distribution system. A specific program to deal with the problem of energy losses is included in the proposed project. Forecast 3.03 Projected annual growth of EEEB's energy requirements is 5.7% over the period 1985-1990. This growth is based on ISA's forecast of an average 6.5% annual growth for the whole country and on the fact that historically, ZEEB's energy growth has been slightly lower than the country's average. This forecast is compatible with the projected GNP growth (see para. 1.13) for the country. 3.04 EEEB's sales are expected to grow faster than the demand, at an average annual rate of 8.2%, because the Project includes a specific program to reduce energy thefts. Consumers were dLvided into five main categories, residential, commercial, industrial, Government and bulk (sales to rural cooperatives). Trend curves were derived to project requirements by categories for the period 1985-1990 which were subsequently adjusted to reflect population trends and ISA's sector forecast. A comparlson of the 1985 and 1990 forecasts with the 1983 figures (see para. 3.02), are summarized in the following table:  - 15 - -1983-- -1985-- -1990 Annual Growth GWh % GWh X GWh X 1985-lYso Residential 1,897 46.0 2,023 44.2 2,852 42.0 7.1 Commercial 576 14.0 614 13.4 1,087 16.0 12.1 Industrial 1,120 27.1 1,328 29.0 2,037 30.0 8.9 Government 443 10.7 508 11.1 679 10.0 3.3 Bulk 91 2.2 105 2.3 136 2.0 5.3 Total 4,127 100.0 4,578 100.0 6,791 100.0 8.2 Losses 1,287 23.5 a/ 1,337 22.3 a/ 1,042 13.2 a/ Station Uses 71 90 90 Requirements 5,485 6,005 7,923 5.i Maxium Demand (KW) 1,006 1,116 1,466 5.6 Number of Consumers(1,000) 666 734 937 5.0 a/ Z of total requirements. 3.05 Industrial and Comuercial consumers are expected to increase their share of the market because the forecast of the GNP growth is based mainly on a substantial growth of the GIP (Gross Industrial Product). Residential consumption growth is estimated to follow the trend of the 1978-1983 period. The number of consumers is expected to Increase by about 5.0% per annum, slightly lower than the historical trend over the past five years (5.9%). The adopted 5% takes into account the continuing expansive trend of the city and the incorporation of the current illegal consumers, as well as the progressive market saturation. Losses are expected to decrease from 22Z in 1985 to 13% in 1990, with the planned improvements of existilg circuits and actions to be taken agaLnst thefts. The load factor is expected to rise from 61% to 62% during the period (see Annex 3.2) because of small changes in the load pattern, resultLng in a growth of maximum demand commmensurate with the energy requirements growth.  -16 - 4. PROGRAM AND PROJECT EEEB's Expansion Program 4.01 By 1990, EEEB's system will have to be expanded to serve about 940,000 customers with a peak load of about 1,470 MW and an annual energy demand of about 7,900 GWh. This will mean an increase of 240,000 customers, 410 14W and 2,200 GWh from estimated 1984 levels. The 1985-1990 expansion program designed by EEEB to meet these requirements is well-balanced, with appropriate emphasis given to generating plants, subtransmission facilities and both rural and urban distribution. The generation expansion plan is very ambitious and represents the largest investment of EEEB's expansion program - (60Z). It includes construction of two major hydroelectric plants - Mesitas (600 MW) and Guavio (1,000 MW) - both with the Bank's financial support; and acquisition of two thermal plaxts - Zipa IV and V (132 KW) from ISA. The distribution expansion program is an indispensable complement to this generation expansion, as the efficient delivery of generated electricity depends beavily on the quality and reliability of the distribution network. The distribution program consists of the final stages of the Bogota Distribution I Project, which included EEEB's 1979-1985 subtransuission and distribution program (partially financed by Bank Loan 1807-CO),. the proposed project, and a rural electrification program for the area surrounding Bogota, partially financed by KfW and for which EEEB will seek the Bank's participation. One further component of BEEEB's expansion program is a control center to be completed by mid-1988 and financed by the Bank under the Guavio Loan (2008-CO). The investment program necessary to carry out this expansion program is. summarized below. Annex 4.1 shows the detailed investment costs in millions of current dollars, and Anaex 4.2 in current Colombian pesos. gEEB's 1985-1990 Investment Program (millions of current US$) Foreign Local Total Generation 478.9 447.3 926.2 Distribution Urban 169.4 210.3 379.7 Rural 51.4 67.5 118.9 Control Center, Gen.Plant 28.8 10.5 39.3 Future Investments 347.9 403.4 751.3 Studies - 27.1 27.1 Total 1076.4 1166.1 2242.5 -  - 17 - The above estimate was prepared on the basis of prices prevailing in mid-1984 and includes 1OX of physical contingencies. The cost estimate also includes appropriate price contingencies (see para. 4.07). Generation costs consist of: 1985-1989 investment for Mesitas and Guavio; and total cost of Zipa IV and V thermal plants (132 MW), which will be acquired by REEB from ISA in 1986. This plant is currently being constructed by ISA and has two 66 MW units: the first one was completed in 1983 and the second one should be completed by June 1985. Distribution costs consist of investments for the ongoing Bogota Distribution Project, the 1985-1990 rural distribution program and the proposed Project. The Control Center cost consists of its investment over the 1985-1990 period. An estimate for investments in EEEB's future expansion program, not yet fully defined, and to start by 1988-89 is also included. Finally, the program includes expenses for general facilities and other investments, mainly for studies and vehicles. The Project 4.02 General and Objectives. The project proposed for Bank financing consists of EEEB's 1985-1990 program for the expansion and improvement of its subtransmission and distribution system and modernization of the existing system for the urban areas. This project builds on the first Bogota Distribution Project (1979-1985), which is being financially supported by the Bank, under Loan 1807-CO and it is a fundamental component of EEEB's 1985-1990 expansion program. The objectives of the proposed project are: (a) to enhance the benefits derived from the power sector's investments (in generation, transmission and distribution) by ensuring efficient delivery of generated power; (b) to extend the benefits derived from EEEB's investments to the majority of Bogota's population, including a large number of low-income new customers; and (c) to improve the efficiency of EEEB's operations by reducing energy losses (both technical losses and theft). The project has been designed to achieve these objectives through investments in the subtransmission and distribution system and by strengthening EEEB's organizational structure, and its technical and managerial capabilities. 4.03 Description. The project consists of the following; (a) Subtransmission: Installation of about 1,100 MYA of substation capacity at 230/115 kV and related equipment, about 10 km of 230 kV lines and about 75 km of 115 kV lines; (b) Distribution: (i) installation of about 350 MVA of distribution substation capacity 115/11.4 kV, 115/34.5 kV and 230/11.4 kV;  - 18 - (li) line extensions of about 750 km and Liprovements to about 1,600 km of lines at 11.4 kV and 34.5 kV; (111) installatLon of about 650 km and improvements to about 900 km of secondary circuits; (lv) lnstallation of about 1,000 [VA of dlstribution transformer capacity; (v) installation of about 10 MVA of voltage regulators and 60 MVAR of capacLtors; (vi) installatlon of about 300,000 meters; and (vii) public lighting. These quantities should be annually adjusted ln accordance with the actual demand growth and demographLc expanslon. (c) Acqulsition of maintenance equipment for substations, lines and hot lines, and laboratory equipment for testing low, medium and high voltage equipment; (d) consulting engineerLig servlces for: (L) illegal customers evaluation; (li) a study on dlstribution system reliability; (iii) a study on subtransmission system operation; and (iv) losses control systematizatLon; (e) a training and technical asslstance program to improve EKEB's technLcal and managerial skills; and (f) a program for reductlon of energy losses. 4.04 The project's components have been deflned on the following basis: (a) The substatlon expansion has been defined on the basis of the system's capacLty balances, whlle subtransmission llnes included in the Project are to connect existing plants and substations to the present subtransomission system. (b) The dlstrlbution component was designed to extend the servlce to about 240,000 new customers and to Lmprove the existLng system. Planning and engineering studies were made to define primary cLrcuLts voltage, and standards for design and construction of primary and secondary clrcuits, feeders, distrLbutLon substatlons and public lighting (see para. 4.05). Substatlon capacltles have been defined on the basis of annual capacity balances for each substatlon. Voltages selected for primary circuits are 34.5 kV for Lndustrial and !1.4 kV for the resldentlal and commerclal loads. The Lprovement of existlng clrcults will Lmprove quality and  - 19 - reliability of service to residential, commercLal, industrial and low-lncome urban customers, and reduce energy losses. Circults to be improved have reached their economic Llfe; they have high losses and frequent outages due to an extremely hlgh number of splices. EEEB would employ the results of the studles described ln sectLon (d) below in formulating plans to maximize beneflts through lnvestments to achleve energy losses reductlon. Additlon of voltage regulators and capacltors will Liprove servlce; targets are to have not more than 10 of voltage reductlon at the end of any clrcult and to maLntaLn a power factor of 90X. Acqulsitlon of meters will allow the extenslon of service to new customers and reduce thefts by installing meters to now illegal customers. (c) AcquisitLon of maintenance equlpment Is to replace old equLpment and expand maLatenance capabilltles, mainly for hot lne... Laboratory equlpment wll allow EEEB to test medlum and high voltage equipment. Cd) The four studLes Lncluded in the project are to liprove EEEB's distribution and operation planning, already successfully Initiated through the Bogota Dlstrlbutlon I Project. (e) The traLning and technLcal assistance component (whLch builds on a program financed under Bank loan 2008-CO) consists of a traLuing program for managers and professlonal staff to Improve UEB's organLzation planning and operational practlces. (f) The program for reductlon of energy losses ls a partLcularly important feature of the project; whlle technical losses would be reduced by subtransmLssion expansion and dlstrlbutlon Liprovements descrlbed in sectLons (a) and (b) above, EEEB should assign an administratlve unit to take charge of plannLig and lmplesenting actions to reduce thefts. This unit would also monitor KEEEB's progress ln reachlng target levels for losses reductlon (see para. 7.01(a)). Targets for losses, both theft and technical, are to reduce such losses from 23% in 1984 to 21% in 1986, 16% In 1988 and 13% in 1990. EEEB will send to the Bank annual reports on Lts system energy losses, detaliLng types of losses and consumer sectors (see para. 7.01 (b)). The establishment of this unit is a condltion of effectlveness of the proposed loan (see para. 7.04). 4.05 Design. PlanLnig and Design Procedures have been defined on the basis of two studies: (a) 'EstudLos de Planeamiento del Sistema de Subtransmislon y Distribucion", carried out under the ongoing Bogota Distribution Project. It was completed in May 1981 by the consultants Gilbert Associates Inc. and Salgado, Melendez y Asociados; and (b) Ingenieria de DLstribucLon' completed in July 1983, by Salgado, Melendez y Associados. The first study was a revisLon of EEEB's planning and design  - 20 - practices, and was commented on and approved by the Bank. The second study complemented the first one and prepared standards for distribution design and construction. These studies cover all the basic engineering needed for defining the distribution system expansion, mainly: economic subtransuission and distribution voltage; economic conductor size; economic circuit loading policies; substation arrangement; transformer loading criteria; system protection, and public lighting system criteria. The Planning Study (Estudios de Planeacion del Sistema de Subtransmision y Distribucion) also covered the economic analysis for converting the distribution system voltage from 11.4 kV to 13.2 kV. The studies defined the least-cost solution in each case, which was adopted for the design standards. Although the studies mentioned above covered all the main issues for a distribution system, future in-depth studies are necessary for a continuing improvement of the system; they are included in the Project (see para. 4.09). 4.06 Engineering. EEEB's practice is to use local engineering firms to assist its staff as needed for detailed design, procurement, and supervision of construction; this practice would also be followed for the project. As indicated above (see para. 4.05), FEE has completed basic distribution studies and design standards. Therefore. oarticipation of local firms will be restricted to some complementary designs and supervision of construction. Most of the construction would be performed by local contractors, including 230 kV and 115 kV substations, 115 kV lines and primary distribution circuits. EEEB, like most utilities in Colombia, does not maintain a staff to implement and supervise large construction projects. The practice of utilizing local engineering and construction firms has proven successful in the past and no major problems are expected in using this method of project implementation. However, the distribution expansion involves many inter-related activities such as procurement, design, material inventory, management of construction and consultants contracts. At this moment, there is a certain lack of coordination among the units dealing with these activities. This may have been one of the causes for delays in the first Distribution Project (Loan 1807-CO). It is therefore necessary that a strong unit with experienced staff be created to coordinate all the distribution activities in EEEB. Before effectiveness, an administrative unit in charge of this task and with powers and responsibilities satisfactory to the Bank should be in operation (see para. 7.04). Estimated Project Cost 4.07 The table below summarizes the estimated cost of the project (see Annex 4.3), totalling US$348.6 million (before IDC), of which US$148.6 million, or 43Z is expected to be in foreign exchange.  - 21.- C08st in US$ million-- Foreign Local Total Subtransuission 12.5 5.9 18.4 Distribution 80.3 141.2 221.5 Maintenance Equipment and Laboratory 15.1 0.3 15.4 Training 2.0 - 2.0 Studies - 0.8 0.8 Energy Theft Reduction Program 1.0 1.0 2.0 Engineering and Administration - 13.0 13.0 Sub-total Base Cost (June 1984) 110.9 162.2 273.1 Physical Contingencies (10%) 11.1 16.2 27.3 Price Contingencies 26.6 21.6 48.2 Total Project Cost 148.6 200.0 348.6 Interest Daring Construction (IDC) 41.0 - 41.0 Total Project Cost after IDC 189.6 200.0 389.6 - _ These costs were prepared on the following basis: (a) The base cost estimates were prepared by ESEB using mid-1984 price levels. These costs do not include any direct taxes nor duties since EEEB is exempt from them (see para. 2.09). They do, however, include the indirect taxes that EEEB's contractors have to pay. Subtransmission, Distribution, Maintenance Equipment and Laboratory costs are based upon actual costs for the ongoing Bogota Distribution Project, which has very similar works to the proposed project. Training costs were estimated at US$2,000,000, of which US$800,000 are to cover part of ANSALDO's assistance and training program and US$1,200,000 are the estlmate for training courses for professional staff. The remaining ANSALDO's program cost will be financed under Guavio Project (Loan 2008-CO), by a grant of the Italian Government and EEEB's own resources. Study costs were based upon EEBB's man-months estimate and actual Colombian Consultant's salaries. Costs for the Energy Theft Reduction Program were based on EEEB's estimates for vehicles, equipment and services to carry out this Program. Engineering and administrative costs are estimated at 5% of total equipment and construction costs; this is lower than the 8% estimated at the ongoing Distribution Project, because most of the engineering studies made under the former Project will be utilized on the proposed project. (b) A 10% physical contingency is included for both foreign and local costs. (c) A price contingency has been added to the estimated base cost. Because of the significant divergence between local and foreign inflation, different inflation rates have been estimated and applied separately to local costs (in Colombian pesos) and to foreign costs (in US dollars). After that, Colombian pesos were transformed to US dollars using a forecasted exchange rate for each year. Local cost, in Colombian pesos, was assumed to increase 20% per year from 1984 to 1986, and 18% per year thereafter; foreign cost, in US dollars, was assumed to increase -2.8% in 1984; 5% in 1985; 7.5% in 1986; 8%  - 22 - per year from 1987 to 1990; and 5X in 1991; the average exchange rate was assumed to increase from Col$101.19 per US$ ln mid-1984 to Col$219.35 in mid-1990 (see Annex 5.11). Financing 4.08 A US$171 milliou loan is proposed to finance 90% of the foreign exchange or the 44Z of the total cost (see Annex 4.4). US$ million Subtransuission 9.0 Distribution 97.1 Maintenance Equipment 20.1 TraLning, Studies 2.6 Energy Theft Reduction Program 1.2 Interest During Construction 41.0 Total 171.0 About US$18.6 million equivalent would be sought through suppliers credits and the remaining US$200.0 million would be financed by EEEB. The proposed loan would include the financing of the Bank's interest and commitment fee charges accrued during the construction period (from 1985 to 1991). This is warranted in view of the foreign exchange constraints currently facing Colombia; EEEB's own inability, as a domestic-based utility, to generate foreign exchange; and the considerable size of Bank support for EEEB's capital development program, when compared with the size of the borrower's fixed assets in operation. Consulting Services 4.09 The proposed project includes the services of consultants, which will be engaged by EEEB under terms and conditions acceptable to the Bank, to assist EEEB with respect to: (i) illegal customers evaluation (see para. 4.04 (d)); (ii) distribution system reliability; (iii) subtransmission system operation; and (iv) losses control systematization. (i) Ulegal Customers Evaluation: This evaluation will allow EEEB to improve its program of illegal customer incorporation into its billing system. Consultants should evaluate types and location of illegal customers and analyze and recommend the strategy for connecting them to EEEB's normal service and design a system to keep this inventory updated. This evaluation will start by July 31, 1985. (ii) Distribution System Reliability: Costs for improving EEEB's system reliability and outage statistics will be analyzed in order to recommend to EEEB the optimal reliability level. Consultant services should include the elaboration of a methodology for KEEB to apply in the future to evaluate its system's reliability. The consultants will be engaged not later than December 31, 1985.  - 23 - (iii) Subtransmission System Operation: Under this study, consultants will analyze existing circuit loads and technical energy losses in order to review circuit design, mainly economical conductor size, capacitors required for normal and critical conditions and equipments' short-circuit capacity. Consultants for this assignment will be engaged by December 31, 1985. (iv) Losses Control Systematization: The objective of this study is to establish a methodology for measuring and estimating EEEB's system technical losses and determine optimal level for the system's losses . Although a national energy losses study was carried out by ISA'S consultants in 1978, current status needs to be analyzed and systematization for periodic control is necessary. In addition to this, the study should evaluate the optimal level of losses for EEEB's system on the basis of economic and social costs of these losses and implementing costs of energy reduction measures. Consultants for this assignment will be engaged by December 31, 1985. Training and Technical Assistance 4.10 The training and technical assistance component of the project has been designed to improve the company's organization and staff skills in order to equip BEEB to handle the demands of a rapidly expanding distribution and generation network and to adapt smoothly to changes in its operating environment. This component consists of two programs: Ci) Technical assistance for improvement of EEEB 's organization, managerial skills, technical and operational planning, system operation and human resources management, and for expansion of the existing internal training unit. This program, which grew out of technical assistance financed under the Guavio project (Loan 2008-CO), has a total cost of US$7.2 million, the bulk of which is being financed under the Guavio project by EEEB (US$2.9 million), the Government of Italy (US$2.9 million) and the Bank's Guavio loan (US$0.6 million); the balance, US$0.8 million, is included in the proposed project. With the Bank's approval, REEB has selected consultants to assist them in this program. The consultants should be engaged by March 31, 1986. EEEB should submit for Bank approval the consultants' detailed program for this technical assistance and to ensure that the program includes appropriate provision for active participation by EEEB's staff in the assessment of the existing organizational structure and in the formulation of measures for the improvement of EEEB's organization and management. (See para. 7.01(c)). (ii) Training and specialization courses for professional staff. Training for EEEB's staff of competent professionals is being provided both in Colombia and abroad. However, foreign exchange constraints have prevented EEEB's administrators and engineers from  - 24 - benefitting from many courses, seminars and fellowships available outside the country. Since several of these foreign training opportunities offer exposure to technological advancements and technical specializations not yet available in Colombia, the proposed loan would finance the foreign component of the training program-about $1.0 million for five years. The following subjects would be covered in the courses offered through the training program: (a) Planning - Optimum planning for distribution systems - Load management and energy conservation - Reliability and marginal costs for generation and distribution systems (b) Engineering - Protection, digital control and supervisory systems - Load-flow management (c) Distribution system operation - Dispatch centers management and operation - Optimization of urban distribution network operation - Telecommmications Sd) Finance and Management - Advanced finance and economics - Advanced manageient - Development of Information System The program will provide courses for about 15 staff members per year from 1986 to 1990. Participants will be selected by EEEB in the context of its overall staff development program. Implementation Schedule 4.11 The project implementation schedule envisages completion by June 30, 1991, which is a 5.5 year project execution period. The disbursement program (see para. 4.14) corresponding to this implementation schedule fits the recommended Bank-wide standard profile for distribution and transmission projects. The key dates as shown in Annex 4.5 would be used to monitor progress during project implementation. Procurement 4.12 - Procurement of goods with a value of over US$100,000 to be financed by the proposed loan, except for vehicles for the Energy Losses Reduction Program will be through international competitive bidding (ICB) under Bank guidelines for procurement. Goods, estimated to cost the equivalent of  - 25 - US$100,000 or less, up to an aggregate amount equivalent to US$2,000,000, would be procured through Limited International Bidding (LIB), to allow faster purchases in the case of additional goods needed due to final adjustments to the project. Goods and software estimated to cost less than US$100,000, up to an aggregate Amount equivalent to US$500,000 would be procured by Direct Contracting, mainly to acquire spare parts, standard laboratory equipment and software. EEEB will procure vehicles for the Energy Losses Reduction Program through local competitive bidding (LCB) to facilitate timely project execution. The cost of these vehicles would total US$100,000, less than O.1X of the proposed loan. As the amount allocated to vehicles is so small, their procurement through ICB will not affect the project cost, but an early start of the Losses Reduction Program is important for the Project. LCB procedures, which do not preclude foreign contractors from bidding, have ben reviewed and found acceptable to the Bank. Consultant's services to carry out the studies included in the Project would be contracted under the Bank's guidelines. Consultants for technical assistance and training have already been selected with the Bank's approval. Contracts for goods in excess of US$500,000 will be subject to prior review by the Bank. This shouid permit Bank review of approximately 80% of goods procurement. The table of Annex 4.7 summarizes the procurement arrangements for the project. 4.13 The goods to be financed from suppliers credits without associated Bank financing will also be procured under international competitive bidding (ICB) limited to the suppliers offering credit under acceptable terms and conditions. Procurement of poles and minor distribution accessories to be financed by EEEB's internal sources, will be through local competitive bidding (LCB). Costs of these local goods are competitive with foreign ones and their procurement by LCB will not affect the project cost. Procurement of civil works to be financed by EEEB's internal sources will also be through LCB. Local contractors have proven to be successful and competitive for subtransmission and distribution civil works. Disbursements 4.14 Funds from the proposed loan will finance: (a) 100% of foreign expenditures for imported equipment and materials; (b) 94% of the ex-factory cost of locally manufactured equipment and materials; (c) 100% of foreign and 50% of local expenditures for consultant's services and training; and (d) interest during construction and commitment fee for the period 1985-1991. The estimated schedule of disbursements is based on the formulated procurement program and is in accordance with the corresponding Bank-wide standard profile. Loan proceeds would be disbursed into a US dollar denominated revolving fund in a special account in Banco de la Republica to be established, by EEEB, solely for the purposes of the Project. The Bank would make an initial deposit into the fund of US$9 million, equivalent to the estimated disbursements during the first 120 day period after loan effectiveness. The bulk of the project is expected to be executed by December 31, 1990 with minor works and testing to be completed by June 30, 1991 (see para. 4.11). The closing date should be December 31, 1991, six months after the last contract's final liquidation to allow for payment of retention monies and unforseen delays. The estimated schedule of disbursements is shown in Annex 4.5. All disbursements will be fully  - 26 - documented except for contracts with values of US$200,000 equivalent or less, for which disbursements would be based on statements of expenditures. Documentation for these expenditures will not be submitted to the Bank, but will be retained by EEEB for periodic review by the Bank. Environmnt 4.15 EEEB has carried out previous projects with due regard to environmental protection. The proposed project wlll not negatively affect the environment because it consists only of extension of existing high voltage substations, short hlgh voltage lines adjacent to existing hlghways, aerial distribution clrcuits under international standards for urban distribution systems,, and underground circuits to replace old aerial circuits in downtown Bogota and of extending the distribution system in selected areas. Project Risk 4.16 The procurement and construction schedule asssumed for the project is reasonable and takes into consideration normal engineering, administrative and construction procedures; no unusual delays are anticipated. Timely completion of the project by EEEB will depend to a large extent upon project management ability, mainly to coordinate design and procurement activities. Project File 4.17 Annex 7 shows the contents of the Project File.  - 27 - 5. FINANCE Summary 5.01 EEEB has maintained a satisfactory fLnancial position through its 25-year relationship with the Bank, with a slightly declining trend since 1979. The construction of the Guavio Project (started In 1982) is imposing a heavy burden on the company. In spite of substantial tariff adjustments, EEEB has not been able to generate sufficient funds for its Investment program. The average tariffs are among the highest in Colombia (USc6.1/kWh In 1984). The extra-fiscal measures taken in conjunction with Bank-financed projects, including revaluation of assets for monitoring financial performance, have considerably strengthened its financial structure. The investment for the 1985-90 period amounts to US$2,243 million as shown in Annex 4.1. For the purpose of a financial analysis, the period 1984-91 is used. During this period, EEEB's total financial requirements, Licluding investments in ISA, interest during construction and working capital requirements amount to Col$889.5 billion, (US$4,793 million) of which Col$64.2 billion (US$349 million) correspond to the proposed Distribution II Project. EEEB's net Lnternal cash generation would finance Col$342.9 billion, (US$1,789.4 million) or 39% of the total requirement of this program, ISA's contribution (Guavio Project) is expected to cover about Col$13 billion (US$79 million) (1X), and the balance of Col$533.5 billion (US$2,925 million) (60%) would be covered by loans both external and internal. The present flinncial projections are based on an annual sales growth of 8.2% for the 1985-1990 period (7.8% for 1984-1991) and on nominal tariff Increases of 37% in 1985 and 1986, 23% ln 1987 and a constant 18Z (equal to estimated local inflation) from 1988 on. Net operatlng Lncome with the above plan is expected to produce annual rates of return on revalued assets ranging from 17.3% in 1985 to 16.6% in 1991 and the company is expected to maintain an adequate flnancial position throughout the projection period. Earnings History 5.02 Over its 25-year relationship with the Bank, EEEB has maintained a sound financial position. During the period 1969-1978, its internal cash generation provided more than 50X 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 financing was required during that period. 5.03 In the years from 1979 to 1983, EEEB's financial situatlon was somewhat more difficult as a consequence of several factors, not all within the company's control: first, delays in obtaining authorization for timely  - 26 - tariff increases in 1980 and 1981. Second, the lack of local financing for its rapidly expandLng investment requirements Ln the begLnning of the eighties - mainly the Guavio and Mesitas Projects. As a result, in 1981, EEEB had a deficit of Col$3,400 million (US$62 million equivalent) financed with arrears in its payments to ISA and to contractors. Third, the percentage of unpaid bills ln relation to total annual sales showed a regressive tendency in 1979 and 1980 when compared with the 18% stipulated in the Loan Agreements for Guavlo: 25S In 1979 and 29% in 1980. These arrears added to the already existing cash probles. Further, in 1981 a rationing of power occurred in the interconnected ColombLan system due to poor hydrological conditions which diminished EEEB's sales by about US$40 million below the expected figures. The tariff situation improved in 1983 and 1984 when EEEB's average tariff attained Col$4.66 per kWh (USc5.9), and Col$6.17 (USc6.1) the highest average in the country. The financial needs were covered with borrowing both from local and external sources but those loans were still insufficient to meet the investment program. At the end of 1983, the company had accounts payableof Col$8.3 billion (US$93 million equivalent), mainly represented by arrears to contractors (Guavio and Mesitas) and to ISA (EEEB's share In energy purchases and in ISA projects). This debt will be gradually reduced to normal levels until December 1987 and EEEB shall furnish to the Bank an acceptable program for this by December 31, 1985 and carry out such program. The starting operations of Financiera Electrica Nacional (FEN) in 1984 is enabling EEEB to obtain the required additional long-term funds in local currency, to meet its investment program. It is interesting to follow the evolution of certain financial parameters in the period 1980 to 1983. The following table shows a comparison between actual and Guavio SAR forecasted values (in December 1980), which are expressed as indices based on the SAR's 1980 values (SAR's 1980 values - 100). 1980 1981 1982 1983 Sales (kWh) - Forecasted 100 110 122 135 Actual 99 96 105 103 Tariffs - Forecasted 100 147 193 254 Actual 101 142 203 322 Net Operating Income - Forecasted 100 199 348 555 Actual 85 134 254 502 Net Internal Cash Generation- Fore. 100 162 296 428 Actual 65 60 206 287 Investment Program - Forecasted 100 249 30; 371 Actual 106 175 195 340 From the above table It can be seen that sales in 1983 were well below the forecast values, while tariffs had increased more than initially foreseen. The combination of these two resulted in that both the net operating income and net internal cash generation were lower than expected. EEEB's investment program, on the other hand, started with somewhat lower figures in 1981 and 1982, but reached the expected level in 1983.  a - a~~~~~~~~9 - 5.04 The 14% average rate of return on net fixed assets covenanted under the Guavio Hydroelectric Project (Loan 2008-CO) was met in 1982 and 1983, when values of 16.2Z and 14.8Z were attained. From 1983 on, asset figures revalued according to more satisfactory procedures were used (see para. 5.05). The increase in the rate base caused by these revaluation procedures is about 3S% and a further rate base increase due to further revaluation to better reflect replacement costs is to take place in 1985 and, consequently, it would be sufficient to adopt a lower rate of return, of 12X. At negotiations, it was agreed that the previous covenant would be changed accordingly in the present loan. Under the same Loan 2008-CO, self-financing ratios of 35% in 1982, 1983 and 1984 and of 55% from 1985 to 1987 were stipulated; these very higi' figures were adopted at that time to ensure a substantial internal cash generation. This covenant would be somewhat changed in the proposed project (see para. 5.15). The covenanted values for accounts receivable (as a percentage of annual sales) were not achieved in the 1980-83 period: instead of 23%, 21%, 19% and 17%, the actual figures were 42Z, 52Z, 41% and 38% respectively. The main responsibility for these arrears belongs to private subscribers, with 55Z of the total while official entities represent 33% and the remaining 12X are several debtors. The company is engaged in a publicity campaign, combined with stricter penalties to late payers, to reduce these arrears; with the major official entities, arrangements are made to compensate their arrears with existing credits as for instance with the local water and sewerage company, EAAB (see para. 5.10). The company's debt/equity ratio was 41% at the end of 1983, and the debt service coverage was 1.3 times in that year., The current ratio exceeded 1.4 since 1974 and reached 2.0 but dropped to 1.5 in 1982 and 1983. Rate Base 5.05 For public accounting purposes, Colombia's public utility regulatory law (Decree Law 444/67) does not allow full revaluation of fixed assets but only a partial one, to match foreign exchange losses caused by the revaluation of outstanding foreign debt due to changes in exchange rates. Under the Mesitas loan (Loan 1628-CO) in April 1979 it was agreed to reflect the international and domestic inflation, an agreed fixed value of EEEB's assets and accumulated depreciation was assessed as of December 31, 1976. 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. Furthermore, under the Mesitas and Bogota Distribution Projects, EEEB agreed to commission a consultant's study to establish the value of its assets on the basis of a more detailed assessment. The study was to be completed and made available to the Bank by March 31, 1981. However, it took longer than expected to select consultants (Gilbert Commonwealth in consortium with Consultores Regionales Asociados Ltda.) who were hired at the end of 1980. The Bank extended the presentation date and for various reasons, mainly the lack of local experience in this field, the study was not completed until mid-1984. It was sent to the Bank at the end of 1984 for comments. The main conclusion is that the revalued total assets of EEEB as of December 31, 1982 are Col$134,153.6 million, compared with a book (and balance sheet) value of Co.1$62,599.6 million. Using the revaluation system which is now being applied, the value is Col$96,849 million, about 28% below the correctly revalued figure. It would therefore appear that the index now used for asset revaluation does not  - 30 - ref lect correctly the real construction cost of hydroelectric and other power projects in Colombia. Under Loan 2401-CO (FEN), the Government agreed to prepare an appropriate price index for the power sector. This index could be used in the future to revalue EEEB's assets. EEEB is consulting with its auditors (Revisoria Fiscal) as to how this new asset value can be incorporated into their accounting base, both from a legal and accounting standpoint. For the reason above, EEEB's assets have been undervalued and this explains to some degree the relatively high rates of return obtained in the last years. During negotiations, agreement was reached that by December 1985, EEEB shall present their 1984 financial statements with the new asset base (see para. 7.01 (d)). Tariff Structure 5.06 EEEB's average rate has improved significantly in the last years, and at the end of 1984 it was among the highest in Colombia (Col$6.17/kWh). The tariff structure, however, lacks appropriate balance among major categories of consumers; this tendency has been increasing in the last 3 years and should be corrected (see Annex 5.6). To induce consumers to be legally connected to the grid, EEEB has a low tariff, and connection charge for low-consumption customers. The connection charge may be financed by EEEB. 5.07 The Government issued Decree No. 2545 on October 12, 1984 which established a new national tariff structure. This decree, though legally in force, will be gradually put into practice, according to the particular condition of each utility. As a condition of effectiveness of the proposed loan, EEEB shall begin to carry out a restructuring of its tariff structure, within the framework of this decree (see para. 7.04 (b)). Fiuancial Structure 5.08 As a result of the extra-fiscal measures taken under the Mesitas loan, including pro-forma revaluation of assets for monitoring financial performance, EEEB's financial structure has been strengthened. As of December 31, 1983, its capitalization was: Col$ million z Capital 100 - Accumulated Surplus 16,119 9 Capital Revaluation 85,606 50 Total Equity 101,8Z57 '23 Long-term Debt 52,763 31 Current Liabilities 9,427 5 Total Liabilities -6219 *;m Pension and Other Liability Reserves 8,837 5 Total 172,852 100  - 31 - 5.09 eEEB's principal creditor is the Bank: in 1983, debt under its six loans amounted to Col$10,511 million (18% of total long-term debt). The second largest creditors are two private banks: Lloyds Bank Iaternational wlth Col$8,424 million (15%) and Bank of America with Col$8,433 million (15%) followed by IDB wlth Col$6,094 million (11%) and other private banks, bothi foreign and local (see Annex 5.5). The pension and other liability reserves (non-current and contingent liabilities) are estimated at Col$8,837 million. Investment and Financing Plan 5.10 EEEB's 1984-1991 investment program (see para. 5.01), including its own construction program, investments in ISA and EAAB, interest durLng construction and requirements for working capital amounts to Col$889.5 billion (US$4,793 million equivalent) of which only Col$64.2 billion or 7% correspond to the proposed Distribution Project; the ongoing works which encompass mainly the Guavio project, the purchase of Termozipa IV and V plants and rural distribution amount to Col$198.4 billion (22%); other future construction, including the expansion of both rural and urban distribution after 1990 as well as the projected investments for an additional generating plant and provision for future expansion, not yet fully defined, (disbursements after 1988) need an investment of Col$305.8 billion or 34% of the total. Interest during construction, several studies, capital and bond investments in ISA and in Empresa de Acueductos and Alcantarillado de Bogota (EAAB)2/ amount to Col$279.3 billion (32%) and finally the working capital requirements amount to Col$41.8 bllion, or 5X of the total. The investment program and its respective financing plan is summarized on the next page and shown in Annex 5.3. 5.11 EEEB's net internal cash generation would finance Col$342.9 billion or 39% of the total requirements of the 1984-1991 program; ISA's contribution would fund Col$13.0 billion or 1% of the total and the remaining 60% would be covered by loans both foreign and local amounting to Col$533.5 billion. Of this figure, Col$125.8 billion comes from undisbursed proceeds of existing loans, including Col$49.1 billion from the 1628-CO (Mesitas), 1807-CO (Distribution I) and 2008-CO (Guavlo) loans. The Bogota Distribution II Project would require the proposed loan of Col$31.6 billion (US$171 million) plus an additLonal US$18.6 mllion from suppliers credits. Other future loans would be required for the rest of the program, mainly for the Guavio plant, during the 1985-1991 period: (a) US$137 million from several suppliers; (b) US$340 million from IDB, already signed in 1984 and to be disbursed from 1985 on, combined with commercial bank co-financings of US$42 million in 1986 and US$112 million in 1988; (c) the utilization of EEEB's share of US$106 million from the Bank loan to FEN in 1984 and 1985; (d) a planned new Bank loan of about US$44 million for EEEB's rural distribution project; (e) local funds from FEN for about Col$37 billion, averaging Col$6.2 billion per year from 1985 to 1990; (f) Col$175.3 mllion from ISA for financing the purchase of Termozipa IV and V in 1986, together with the transference of 5 external loans already contracted by ISA; (g) Col$2.9 billion from FONADE for several studies; and (h) about US$557 million and Col$130 billion for the future expansion program, starting in 1988-89. The country has had problems during 1984 In obtaining foreign currency. 2/ This contribution to EAAB was agreed between the two companies to settle EKEB's debt with EAAB regarding the Chingaza Reservoir.  - 32 - PROPOSED FINANCING PLAN 1984-1991 (Millions of Current) ColS z US$ (Equivalent) Requirements of Funds Construction Program - Ongoing Works 198,413 22 1,353.3 - Proposed Project 64,238 7 348.6 - Future Construction 305,782 34 1,366.4 Interest During Construction 169,006 19 880.6 - Studies 5,805 1 35.3 Sub-total 3a9.72 Investments in ISA and other long-term investments 104,482 12 544.3 Increase in Working Capital 41,812 5 264.9 TOTAL ,538 4,793. Sources of Funds Net Operating Income 540,428 61 2,803.1 Depreciation 117,933 13 608.0 Liability Reserves 26,256 3 138.9 Sub-total 684,617 T77 3,550.0 Less Debt Service 341,668 38 1.760.6 Net Internal Generation 342,949 -39 1,789.4 ISA Contributions 13,046 1 79.0 Borrowings: Existing 125,772 14 903.9 Proposed IBRD Loan (Project) 23,742 3 130.0 (IDC) 8,112 1 41.0 Future Local 181,194 20 895.8 Future Foreign 194,723 22 954.3 Total Borrowings a/ 533,543 60 2,925.0 TOTAL 889,538 100 4,793.4 a/ See Annex 5.8 for details. May 13, 1985  - 33 - Therefore, the Government has restricted the use of foreign currency to priorlty projects including the proposed project. If the situatlon does not deteriorate for Colombia, it Is reasonable to expact that LEES be able to obtain the financing listed above. 5.12 EESB 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 KEElBs 1984-1991 Investment program. The three year (1984-1986) program of tariff increases (see para. 5.14) would represent an important contribution to this cash generation. 5.13 Adequate availability of local financing seems to be existing fro 1984 on with the full operation of FEN. Its capacity in raising funds in the local capital market plus its retained earnings could result in a total availability of ColSIS to 20 billion per year initially, part of which would be available for EEEB. As a financlg agency for the Colombian power sector, FEN would also be in a favorable position to secure now credits in foreign currency, In addition to its first co-financIng operation with the Bank. Future Finances 5.14 Present financial projections (1984-1991) in Annexes 5.2, 5.3, and 5.4 are based on: (a) updated assumptions for inflation and rates of exchange devaluation (see Annex 5.11); a peso devaluation mch greater then the projected one would influence EEEB's financial posLtion because of Its debt iin foreign currencies; (b) the energy balance as agreed by ISA and Its shareholders in Idd-1984; and (c) EEEB's plan of tariff increases (see Annex 5.6) which assumes the following rates of noaminl Increases: 1985 and 1986-37% (about 2.7Z per month); 232 in 1987 and 18% (about 1.4% per month) In 1988 and thereafter. The financial forecast assumes a Bank loan of US$171 million for the proposed project, with an interest rate of S.29% and a term of 17 years including a 4-year grace period, to finance foreign direct cost plus interest daring construction. 5.15 EEDB's net operating income with the above plan is dxpected to produce annual rates on revalued assets ranging from 16.8% in 1984 to 16.6% in 1991 (see Annex 5.5). The increasing values from 1984 to 1989 are caused by the delay in the incorporation to the rate base of the Guav'io Project, which accordIng to local practice ls kept as work In progress and only capltalized when In operation (in 1990). It is of extreme importance that EEED generate a sufficient portion of its investment needs from its operational income; the tariff evolution should be closely monitored by the Bank. As for the cash generation ratio, EEES is currently generating (1984) 22%, instead of the covenanted 55Z, which is very high. The projections show increasing values but always in the 35% range maluly due to the very high Investment program the company has during the 1984-1988 period. Accordligly, at negotiations tbh ratio was lowered to 352 which is reasonable (see para. 5.18 (a)). 5.16 Under the three previous loans (Kesitas, Bogota Distribution I and Guavio), 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 annual financial forecasts, will be repeated for the proposed loan. The investment limitation covenanted under  - 34 - the Guavio loan would also be maintained (see para. 7.03 (a) and (b)). 5.17 EEEB's financial position as measured by the debt/equity ratio (41/59 in 1983) would be maintained at safe levels, with a high of 49/51 in 1986 but decreasing to 35/65 in 1990 (see Annex 5.5), despite the borrowings required for the ongoing construction of Guavio and the distribution investment, both urban and rural. Debt service coverage would not descend under 1.8 (in 1987 and 1988) which is very satisfactory; the limitation covenanted under the Guavio loan would be repeated for the proposed loan (see para. 7.03 (e)). Financial Covenants 5.18 The following financial covenants under the previous loans would be changed: (a) The cash generation ratio shall be not less than 35Z in the years 1986 to 1991, instead of the 55% self-financing ratio covenanted in the Guavio (2008-CO) loan (see para. 7.02(a)). (b) Rate of Return, as covenanted under the Bogota Distribution Loan (1807-CO) and repeated under the Guavio loan, shall be not less than 12% on the net current value of its revalued assets in operation (see para. 7.02(b)). 5.19 The following financial covenants from previous loans shall be maintained: (a) Reporting Requirements as covenanted in the Guavio loan (2008-CO), EEEB shall submit to the Bank its audited financial statements, a report on its past performance and a report on up-to-date projections of its future financial statements for the following seven-year period (see para. 7.03 (a)). (b) Investment limitation substantially as covenanted under the Guavio loan (see para 7.03 (b)). (c) Accounts Receivable: EEEB's accounts receivable as a percentage of the total annual sales will not exceed 17% in 1986 and thereafter (see para. 7.03 (c)). (d) Debt-service coverage, as covenanted under Loan 1807-CO and repeated untder Loan 2008-CO, i.e. EEEB's debt service coverage shall not be inferior to 1.5 (see para. 7.03 (d)). (e) Reporting on Adequacy of Tariffs: EEEB shall review the adequacy of its tariffs to meet the requirements established in item (c) above and shall furnish to the Bank the results of such review. If found insufficient, action shall be taken to adjust tariffs accordingly (see para. 7.03 (e)).  - 35 - 6. ECONOMIC ANALYSIS Least-Cost Solutions 6.01 The 1985-1990 subtransmission and distribution program was designed on the basis of EEEB's load forecast (see para. 3.03). Since the objective is to provide electric service to some 40,000 new consumers each year and to improve service coverage and quality through improvement and expansion of the existing system, reasonable alternatives are limited. However, EKEB has made valuable studies and Bank supported planning efforts to determine least-cost solutions for the main components, and standards for distribution design and construction. Economic comparisons to determine the least-cost solution have been made for selecting voltage levels for subtransmission and distribution primary circuits and for substation arrangements. On the basis of these comparisons, EEEB selected the 230 kV and 115 kV voltage for subtransmission, and 34.5 kV and 11.4 kV for distribution primary circuits. The 230 kV voltage is for the main subtransuission grid surrounding the city; the 115 kV voltage is used for subtransmission lines inside the city, to connect the main grid to distribution substations; 34.5 kV is adopted for distribution to industrial loads and 11.4 kV to residential and commercial loads. The existing 57.5 kV lines will be converted to 115 kV under the proposed project. Under the ongoing Bogota Distribution Project, EEEB studied the conversion of the primary distribution circuits from 11.4 kV to 13.2 k'S because the system was designed to operate at this voltage; the study ahowed that this conversion would be uneconomical because of the cost of transformers. Distribution design standards were prepared for BEEB on the basis of the ongoing distribution project. Preliminary conductor sizes have been assumed for cost estimate purposes; economic comparisons to determine definitive sizes must be made during project execution. However, the following two important system aspects will require technical and economic evaluation for future expansion programs: (a) analysis of the economic reliability level for EEEB 's system, including the analysis of social and economic cost of electric service outages on one hand, and costs for improving the existing system reliability on the other; and (b) analysis of the economic level of technical losses, based on real prices for energy, equipment and material. The studies to carry out both of these analysis are included in the proposed project (see para. 4.09). 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 1985-1990 development program of which the proposed project is a part. The cost streams comprises the capital costs of this development program and incremental operation and maintenance costs related to the incremental sales associated with the program. Capital costs include EEEB's  - 36 - total 1985-1990 investment program, but they do nut include provision for future expansion not yet defined (see Annex 6.1). As an estimate for benefits, revenues derived from incremental sales associated with the program and tariffs derived from current values and approved tariff increase policy up to December 1986 were used (see Annex 5.6 and para. 5.14). Tariffs are supposed to be constant in real value thereafter (see Annex 6.2). The calculations are based on a 30-year period, because this was assumed to be the average life-time of EEEB's installations included in the 1985-90 investment program. 6.03 The rate of return is about 12.1Z which compares favorably with the opportunity cost of capital for Colombia estimated to be 11%. This rate understates the socio/economic justification of return of the program, as revenues from sales of electricity may not fully measure social and indirect benefits. Shadow prices analysis for local costs components were disregarded because Colombian shadow-prices parameters are very close to unity, but if these shadow prices were taken into account, the rate of return of the project would be somewhat higher. 6.04 A sensitivity analysis was carried out to measure the impact of major uncertainties underlying the return calculations. The parameters used In the analysis were tariff, cost of the proposed project and the total development program cost. The analysis shows the following: Rates of Return -----Change from Base (Z) Prameters -20 -10 Base +10 +20 -----Rate of Return (X)---- Tariff 7.9 9.0 12.1 13.5 14.9 Project Cost 12.5 12.2 12.1 11.7 11.5 Total Costs 15.2 13.6 12.1 10.5 9.2 The results indicate rates of return which compare favorably with the opportunity cost of capital except in the case of a reduction in tariff. With a 10% tariff reduction, the rate of return is lower than the opportunity cost. However, conditions are favorable to apply the approved tariff increase policy until December 1986 as EEEB has planned. The rate of return is higher than the opportunity cost of capital even for a 20% project cost increase.  - 37 - 7. AGREEMENTS REACHED AND RECOMMENDATION Agreements and Provisions 7.01 During negotiations, agreements were reached on the following: (a) EEEB shall present for the Bank's comments the structure, functions and responsibilities of the two project implementation units mentioned in paras. 4.06 and 4.04: (i) an administrative unit in charge of the whole project coordination (technical, financial and administrative matters); and (ii) an administrative unit in charge of the energy losses reduction program. (b) EEEB will implement an energy losses reduction program in such a way that the maximum system losses be the following: 21% in 1986, 18% in 1987; 16% in 1988; 14% in 1989 and 13% in 1990. EEEB will send to the Bank biannua'l reports on its system energy losses, detailing types of losses and consumer sectors (see para. 4.04). (c) EEEB shall: (i) by December 31, 1985, furnish to the Bank for its comments, a detailed program or plan of action for the implementation of the training program to define, inter alia, the participation of the Borrower 's staff in the preparation-of such study; and (ii) by March 31, 1986, employ Consultants to assist EEEB on the training program (see para. 4.10). Cd) EEEB, by December 31, 1985, shall present to the Bank for comment their financial statements for the Calendar Year 1984, using the revalued 1982 rate base (see para. 5.05). (e) EEEB shall make every effort to reduce its arrears towards ISA, for energy and construction contributions, to normal levels at the end of 1986; the deadline for settling these payments is December 31, 1987. 7.02 The following provisions of Loan 2008-CO will be amended: (a) Except as the Bank shall otherwise agree, the Borrower shall take all measures (including adjustments of its tariffs) as shall be required to ensure that the funds from internal sources generated by the Borrower shall be equivalent to not less than 35% in each of the fiscal years from 1986 to 1991 of the Borrower's average investments in fixed assets and investments in ISA for that year, the previous and the next year (see para. 5.18(a)). (b) Except as the Bank shall otherwise agree, EEEB shall earn, for each of its fiscal years, an annual return of not less than 12% of the average net value of its fixed assets in operation (see para. 5.18 (b)).  - 38 - 7.03 The following main provisions of Loan 2008-CO will be repeated under the proposed loan (see para. 5.19): (a) Reporting Requlrements; (b) Investment Limitation; (c) Accounts Receivable; (d) Debt Service Coverage; and (e) Adequacy of Tariffs. Conditions of Effectiveness 7.04 Prior to declaring the loan effective, the following conditions will have been met: (a) the two administrative units mentioned under para. 7.01 (a) should be implemented and operating with powers and responsibilities satisfactory to the Bank. (b) EEEB shall have started the implementation of a change in its tariff structure, within the framework of Decree No. 2545 (see para. 5.07). Reco-uendation 7.05 With the above assurances, the project would be suitable for a Bank loan of US$171 million 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 a grace period of 4 years. May 28, 1985  -39 - ANNEX 1.1 Page 1 of 3 COLONBIA EMPRESA DE ENERGIA ELgTRICA DE BOGOTA BOGOTA DISTRIBUTION II k:iCJ_T Energy Resources - Background Oil 1. Known oil reserves at the end of 1983 totalled about 4.3 EJ (102 Mtoe) or only about 13 years at the present rate of production. Policies pursuing artificially low prices during the 1960. and the early 19709 contributed to a deteriorating oil situation. In recent years, the Government has moved forcefully to remedy this by bringing internal consumer prices closer to international levels (internal prices were increased by more than threefold in real terms between 1974 and 1980, and, lately, have fluctuated around 80-90 of international prices) and by enabling producers to benefit from a large part of the price increases. As a result, exploration increased from 20 wells per year in 1975 to 100 in 1981 and despite a subsequent decline In activity (to 37 new wells in 1983) as a consequence of the deterioration in global oil prices, a total of 346 exploratory wells were drilled from 1977 to 1983. This heightened exploratory activity led to the expansion of known recoverable reserves by about 343 million barrels between L978 and 1983, after several years of steady decline. In addition, crude oil production has been increasing at almost 8Z per year since 1980, reaching 152,000 bbl/d at the end of 1983 (equivalent to about 912 of domestic consumption). Since average growth in consumption did not surpass 2.41 per year during 1978-1983, self-sufficiency in oil may be within reach by the end 1980s. In the near future, oil export appears likely, as new discoveries by Occidental Petroleum in the Llanos region have been very encouraging. Natural Gas 2. Measured natural gas reserves stood at about 4.07 trillion cubic feet (5.1 EJ) at the end of 1983, or almost 30 years' consumption at present rates of production. Most reserves, production and consumption are concentrated on the nortbern coast, with natural gas being piped to the main population and industrial centers along the coast. Growth in gas consumption (which averaged about 7%/a over the last five years) has been provided a major push by fuel conversion of power plants from oil to gas. Thermal power plants now account for about half of total gas consumption. Industry represents the bulk of the remainder with oil refineries also Important consumers. At present there is significant excess supply in the northern region. Further important increases in gas consumption are tied largely to  - 40 - ANNEX 1.1 Page 2 of 3 several new gas-processing options currently being studied. The best alternative appears to be an ammonia-urea plant for which the Bank is the Executing Agency of a UNDP-financed feasibility study. 3. As a consequence of the natural gas surplus on the northern coast, the Covernment has oot yet defined a clear pricing policy for natural gas. Prices for new deliveries are negotiated ex-post with producers on a case by case basis. This acts as a disincentive for exploration. Although consumer prices are currently relatively low (less than US$2 per 1,000 cubic feet) the extent to which they result in misallocation of resources is not clear because the viability of future gas-consuming projects remains to be established. Coal 4. Colombia's coal resources are substantial, with reserves estimated at some 16 Gt, of which only about 20% can be classified as measured. At present rates of utilization, reserves would last hundreds of years. In view of the magnitude of these reserves, Government policy is to encourage domestic consumption of coal, both alone and in combination with natural gas and fuel oil, and to promote coal exports, mainly from El Cerrejon but also from other deposits located near the Atlantic Coast. Since 1979, the UNDP and the Bank have been working jointly with the State coal corporation, CARBOCOL, that together with an EXXON subsidiary is developing a 15 Mt/year production facility at El Cerrejon North. A proposed Bank-financed Coal Exploration Project will assist in assessing the economic potential of several other promising areas in the Atlantic and Central Regions. 5. Coal production grew at an average of about 4X per year over the 1978-83 period to reach a level of about 5.8 Mt in 1983. Production came from some 400 small and medium-rscale mines, virtually all of which are non-mechanized, run by the private sector and located in Central Colombia. More than half the production and consumption of coal is concentrated in the highlands of Bogota. Sixty percent of all coal is consumed by industry, and most of the rest by the power sector. Residential consumption and exports represent only a small share of total output. Colombian coal is bituminous, of high calorific value (around 27.6 NJ/kg) and with low sulphur content (mostly less than 1%). Some coal in central Colombia possesses coking properties. In 1984, domestic coal prices, which are freely set by market forces, typically ranged between US$20-30/t delivered to large consumers in the industrial centers of Bogota, Medellin and Cali. These are well below international prices, but high internal transport costs, imposed by the long distance to ports and difficult terrain effectively preclude the export of coal from the interior of the country for the present. Hydroelectric Power 6. Colombia's hydroelectric potential, at about 100 SW, is amongst the largest in the world. Although the country has made strides in developing  - 41 - ANNEX 1. I Page 3 of 3 this potential (hydroelectric power generation grew at about 10 per annum during the 1970s), total instalLed hydro-capacity by end-1983 was only 3.5 GW; however, by 1990, installed hydro-capacity is expected to increase to about 8 CrW. Hydroelectric plants currently represent about 66% of total electric power generation and thermal plants the rest. The largest part of the thermal capacity is located on the northern coast where hydro potential is limited, but where coal and natural gas are abundant. Since plentiful hydro-reserves can be developed at relatively low cost, they represent an option of high priority. However, the optiual mix of hydro, coal and gas-fired plants needs to be determined ia order to take advantage of the projected increased supply of coal and the existing natural gas surplus. This matter is currently being addressed in the context of the Covernuent's National Energy Study.  -V MEuMA w* IX uMM Iawa ISUiMmI n U 197- -971---- -119-- -- -1-1961- -sin----- - 0_m not M -. 0 Bttd. qn t w-. q _tp. IsmO W& Ib (0) 6.23 65 11,914 53.1 13,04 137.5 14,35 150.1 14.3D1 1m 15,00N LU7.6 15,21 L.7 5.0 1au a11 Ga) 10,66 46.2 6,592 2 6,2 266.0 6,342 20.0 6,17 209.0 7,3A 36.2 7,97 33.7 3.9 11 n I) 3,153 117.3 4,164 154.9 4,39 153. 4.552 169.3 4.768 177.4 4,93 13.9 3.86 145.1 (1.6) bl (i) 2,717 73.0 4,754 131.2 4, 133.6 4.,947 13S5 5,03 13L. 5,55 IS3.2 5, IU.I 4.1 IA1 77.0 691.4 07.1 72.9 755.3 73.9 1I.6 3.0 1 FErnS luW OXWAtlm 0 aattcty (G) 6.14 63. 16,132 169.4 17,7M 186.9 19.42 34.0 19,631 36.1 21,467 22.6 22,3M 2321 7.1 fttuulam ftu6s (kt) ! n.1. n.m. 7,510 319.2 8,4t4 357.6 8,734 371.2 6,w 377.7 8,395 365. ,4 359.0 24 wa am 01k3) 2,501 93.0 3,416 I7.1 3,530 131.3 3,796 141.2 4,a 152.1 4,23 159.3 3,6M 143.1 2.4 cmi (li) nm- . n.A. ,2j L/ 119.4 4.IO6 121.6 L4.46 123.6 A 126.9 5.057 139.6 53.3 14L3 4.2 ta n.6. n.m. 73.1 797.4 6.2 866L 17.6 SIL6 3.8 !j/ aod, dumul xd beu m imptaIt atw mcm In (flata, but its _ l.m 1not h f pl . I. St I ..it J (mile) ad its m4t41 an umW w m s V - 9.473l 10h bu - 2.306. kw. e/ %at *dmulato cmldal t 10.5 lU/KIh 1w hpkq.r (Dtftatim huia); 42.5 KA fcr aub dl ad lu h:o&xt., 37.2 Wh3 ftr na.l go ad 27.6 /Ig fLw wal. 3ho ditUat tum pumy tnl _tp- t find lawc wwitlm . as d tontt .iAatls, mutib d tin aWombome M d tat.! i ad hlalat a pmittaa pln ibwt iaie eyrt. btbtea a 9UIZ d psiztlta swin a s for ISIIO (0.17), INI (91.42) ad 19t2 (91.12). lbt walabl a ttmt.m , awm fw 197t ad 1979. Iswwa (I) "ag*a ad elrtet tyqs St._ 2eetrico 0Ar.84a0, 4a1 suaptiF t wtie, IS IEI Sewse 1963 bawa & h ReplbAl, Om 163 (2) oil ax ticns bi4e Ia kw d I bp*uiea, nero 596 (3) "11is &I Gr 1963, Ilnateo & 11am y Dn.ta. ".a. -t.aA not awlelaw. btr 22, 1964  - 43 - ANNEX 1.3 Page 1 of 3 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT Public Electricity Service in Colombia 1. Public electricity service is provided in Colombia 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 Coloubiano de Energia Electrica (ICEL), and Corporacion Autonoma Regional del Cauca (CVC), and the Corporacion Electrica de la Costa Atlantica (CORELCA). ICEL and CORELCA have a total of 20 electrificadoras, subsidiaries which mainly distribute power at the local level; and (c) a generating and transmission company, ISA, the main shareholders of which are EEEB, EPM, CVC, ICEL and CORELCA. The Ministry of Mines and Energy owns part of the sector directly through ICEL and CORELCA. EEE and EPM, currently the largest utilities, are controlled by autonomous municipal governments. CVC reports to DNP. A brief description of each principal utility follows below. 2. ISA. Established in 1967 as a public corporation, IMA has provided a cohesive framework for sector development by creating a national grid capable of transmitting large amounts of power and energy at 220 kV and 500 kV between the regions. Because ISA undertook development of large hydroelectric resources on behalf of its shareholders, the latter have been able to share the costs and benefits of the country's low-cost hydropower potential, which is geographically concentrated in the areas of Bogota (EEEB) and Medellin (EPM). The holdings of ISA's shareholders as of December 31, 1984, are: Utility Shares Z EEEB 20,200 23.6 EPM 22,012 25.7 CVC 17,276 20.1 CnIDRAL a/ 334 0.4 ICEL 12,403 14.5 CHEC b/ 334 0.4 CORELCA 13 208 15.3 8-5 767 ~~100.0 al A CVC subsidiary. bi An ICEL subsidiary.  - 44 - ANNEX 1.3 Page 2 of 3 Headquartered in Medellin, ISA is administered by its Shareholder Assembly, a 5-member Board of Directors and a General Manager supported by a competent technical staff. The Assembly must act on all major issues and, to ensure that decisions are based on a consensus, ISA's bylaws specify that the Shareholders Assembly achieve the concurrence of 75Z of the shares. Decision-making tends to be slow when the interests of the various shareholders differ. ISA has constructed the 500-MW Chivor I (681-CO, 1972) and 500 MW Chivor II hydro plants, as well as 133 NW of thermal capacity at Zipaquira and 133 NW in gas turbine capacity at Chinu. It has completed in 1984 the 1,240-MW San Carlos I and II hydro plant (1582-C0, 1978, and 1725-CO, 1981) and the Jaguas hydro plant (170 NW), as well as the 500-kV line, financed by the Government (1583-CO), interconnecting the northern system (CORELCA) with the central system. 3. EEEB. An autonomous company, EEEB is owned by the Municipality of the Special District of Bogota, which generates, transmits and distributes electricity. It serves some 575,000 consumers in metropolitan Bogota directly and sells power in bulk to a local distributor in the department of Cundinamarca. EEEB is administered by a 7-member Board of Directors and a General Manager. The Mayor of Bogota serves as the Chairman of the Board of Directors. The General Manager, who is responsible for the day-to-day management of the company, is appointed by the Board subject to the Mayor's approval. EEEB has an installed capacity of 1,288 MW (1,158 MW hydro and 130 MW thermal). The company has under construction the 600 MW Mesitas (1628-CO, 1979) and the 1,000 NW Guavio (2008-CO, 1982) hydro project, as well as a Bogota Distribution Mroject (1807-CO, 1981). 4. EPM. An autonomous company, EYff is owned by the Municipality of Medellin, which provides power, water, sewage, and telephone services for the city of Medellin and vicinity. It serves some 350,000 power consumers and 229,000 water consumers in metropolitan Medellin and sells in bulk to a distributing company in the department of Antioquia and has 256,000 telephone subscribers. EPM is headed by a 7-member Board of Directors and a General Manager. The Mayor of Medellin, or his representative, is the Chairman of the Board of Directors. The various services of EPH are managed as separate entities with separate accounting systems. EPM has an installed capacity of 998 MW which will Increase to 1,211 NW with the completion of the Guadalupe IV project in 1985. The Bank is providing financing for Guadalupe IV (1868-CD, 1981) and the 200 MW Playas hydro project (1953-CD, 1982) and the 322 MW Rio Grande Project (2449-CO). 5. CVC. An autonomous multipurpose State corporation under DNP, CVC is responsThTe for developing the Cauca Valley and has been discharging its mandate with notable success. One of its main activities is generating and transmitting power in the Valley, undertaken In part through CHIDRAL, which is owned by CVC (65%), the Municipality of Cali (17X) and EMCALI (18%). CVC-CHIDRAL sells power in bulk to EMCALI and other distributing companies (subsidiaries of ICEL and CVC) serving a total of some 400,000 consumers. CVC is administered by a 7-member Board of Directors and an Executive Director appointed by the President of the Republic. CVC's various  ANNEX 1.3 Page 3 of 3 activities are managed as separate enterprises with independent accounting systems. CVC-CHIDRAL has received five fully-disbursed loans from the Bank totalling MUS$44.6 (the last of which was made in 1963). It has an installed capacity of 579 MW (534 MW hydro, 45 MW thermal). CVC's multipurpose Salvajina project (intended mainly for flood control and Lrrigation), when completed in 1985, will provide 270 MW of generating capacity and corresponding transmission facilities. 6. CORELCA. An autonomous corporation since 1972, CORELCA has been responsible for power generation and transmission in 7 departments of the Atlantic Coast. The 7 distributing companies in the area are subsidiaries of CORELCA and buy power in bulk from it. Together they have an installed capacity of 766 MW (all thermal) and serve about 425,000 consumers. A 170 KW steam station fueled by coal from El Cerrejon was commissioned in 1983, and a second 170 MW unit is being installed. CORELCA is administered by a 7-member Board of Directors and a Managing Director. It has implemented construction programs within its service area that included thermal plants with units in the range of up to 150 MW, high voltage interconnecting transmission lines, distribution system expansion, rural electrification and works to improve its operating efficiency. Under Loan 1583-COJ ISA connected CORELCA to the central grid at 500 kV (the temporary operation at 220 kV will be changed to 500 kV in 1985). 7. ICEL. A government institute, ICEL reports to the Ministry of Mines and Energy and provides electric power services largely to small towns and rural areas of the country not served by the other main utilities. It does so with the assistance of Government contributions through 11 subsidiary companies in which it is the majority shareholder (the others are the respective local governments). ICEL's subsidiaries have an installed capacity of 652 NW (329 MW hydro, 327 MW thermal) and serve about 933,000 customers. ICEL and some of its subsidiaries are expanding generation facilities, the largest of which is the Betania hydro plant which is to add 500 KW to the national system in 1986. ICEL is also responsible for the investment program of lost of its subsidiaries, comprising essentially expansion of the various subtransmission and distribution systems and their connection to the inter-connected system, together with generating additions to isolated systems. The projects carried out by ICEL are generally transferred to its subsidiaries in the form of capital contributions. ICEL is administered By a 5-member Board of Directors (chaired by the Minister of Mines and Energy) and a General Manager appointed by the President of the Republic. February 6, 1985  _ 46 - ANNEX 1.4 Page 1 of 4 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT Power Market and Supply 1/ Current and Historic 1. Electric power has become the fastest-growing form of energy use in Colombia. Its share of total energy consumption has risen from 6.5X in 1970 to 23% in 1978 and 27Z in 1983. Generation increased by an average of about 10% annually during 1970-1980, although it has slowed over the last years to 5.8Z/a in 1980-83 (see para. 3 below). Annual per capita generation In 1983 was about 840 kWh, which is below the average for Latin America. Effective installed capacity at the end of that year was 5,049 NW, including self-producers, with public entities accounting for 95Z of the total installed capacity and generation. Peak demand was about 4,530 MW, and total energy generation in 1983 amounted to 22.7 TWh. Hydroelectric plants accounted for about 65.4% of the total energy generation. 2. About 54Z of Colombia's 27.5 million population has electric power, compared to 26Z in 1950 and 45% in 1970. The urban population, comprising about 65Z of the population, has greater access. In 1976, for example, 902 of households In large cities (population of 50,000 or more) had electrical service while in rural towns (population between 500 and 2,500) the corresponding figure was 36%; in other rural areas, 16Z. Various programs including the Bank-financed First and Second Integrated Rural Development Projects and the Village Electrification Project as well as programs financed by tDB, Kreditanstalt fuer Wiederaufbau (KfW) and the Colombia Coffee Growers Association, are aimed at increasing rural coverage. In 1983 there were about 3.3 million electricity subscribers of which 89.9% were residential and 7.7Z commercial. 3. During 1980-83, gross generation increased at an average annual rate of about 5.82, compared to the 102 annual average during the 1970s. The lower rate was brought about by economic recession In 1981 that affected adversely all economic sectors in Colombia, compounded by drought conditions that reduced generation from the hydro plants. This caused power restrictions and brownouts in the cities. Rate increases on the order of 15-20X above the consumer price index throughout the sector in that year may have further decreased demand. As mentioned in the Appraisal Report (see para. 1.12), the new National Power ExpansLon Program takes account of these factors. 1I/ Sources: ICEL 'La Electriflcacion en Colombia 1982-1983", and ISA, "Energy Balance (August 1982)".  - 47 - ANNEX 1.4 Page 2 of 4 4. Electricity sales in 1983 totalled about 17.4 TWh. Residential consumers were responsible for the largest ohare of electricity sales by the major utilities in 1983, followed by industry: - Sales--- - Subscribers- Category GWh Z No. X Residential 8,463 48.6 2,936,831 89.9 Industrial 4,910 28.2 34,994 1.1 Commercial 2,058 11.8 253,164 7.7 Others 1.993 11.4 42,805 1.3 Total 17,424 100.0 3,267,794 100.0 Source: ICEL: La Electrificacion en Colombia. 1982-1983. In 1983, electricity requirements in Colombia totalled about 22,700 GWh. Of this, BEEB accounted for about 26Z, RM about 22Z, CVC about 132, ODRELCA about 18Z and ICEL and others about 211. 5. EEED generated 17Z of total electricity supply, EPM 22Z, CORELCA 20%, CVC and ICEL 201, ISA 19X, and others the remaining 2Z. The following table summarizes installed capacity and energy generated in Colombia in 1983: 1w Z NW % Rydro - subtotal 3,539 66 15,207 65 Steam 1,111 6,382 28 Gas turbine 506 1,425 6 Diesel 200 248 1 Thermal - subtotal 1,817 34 8,055 35 Total 5,356 100 23,262 100  - 48 - ANNEX 1.4 Page 3 of 4 6. The 1978-1983 market statistics are summarized as follows; Average Annual 1978 1983 Growth (Z) Gross Generation (GWh) 16,157 23,262 7.6 Maximum Demand 3,130 4,530 7.7 Total Sales 13,039 17,424 6.0 of which consumption percentages (Z) Residential 39.7 48.6 10.3 Commercial 12.4 11.8 5.0 Industrial 31.1 28.2 3.9 Others 16.8 11.4 -1.8 Station Use (Z) 2.1 2.3 - Losses (X) 17.2 22.7 - During 1978-1983, gross production of electricity increased at an annual average rate of about 7.6% compared with a GNP growth rate of 4.3%. Meanwhile, sales increased at an annual average rate of only about 6.0% because technical losses and energy thefts increased from 17.2% in 1978 to 22.7% in 1983. The proposed project wlll assist EEEB in reducing both the technical losses and theft. Sector Forecast 7. Demand and Energy. Projected demand and energy requirements are based on the analysis of ISA and its shareholders of past consumption and on a study of the correlation between power sector growth and growth of GNP. Expected growth of GNP is 1.5Z in 1984 to 5Z in 1988 and thereafter. Projected growth of energy requirements is 6.5% over the period 1984-2000. It takes into account the recovery of technical losses. Total projected demand and energy requirements are: Energy Coincident Requirements Maximum Demand Year GWh MW 1985 26,446 4,807 1986 28,322 5,148 1987 30,300 5,508 1988 32,480 5,913 1989 34,725 6,322 1990 37,039 6,711  - *9 - ANNEX 1.4 Page 4 of 4 8. Supply. In order to meet forecast requirements, an additional installed 4,450 MW is planned to be added by 1990 to the existing 1983 capacity of 5,049 MW. Details of the generation expansion program are shown in Annex 1.5. The 1983-1990 balances for energy and capacity for the sector are summarized below: 1983 1985 1990 Requirements Maximum Demand (MW) 4,530 4,807 6,711 Gross Generation (TWh) 23.2 26.4 37.0 Z Hydro 65.0 80.0 83.0 Z Thermal 35.0 20.0 17.0 Effective Capacities (MW) 5,049 6,939 9,139 X Eydro 66 70 76 Z Thermal 34 30 24 Because of the large percentage of hydro capacity in the system, total effective capacity could be reduced by as,much as 20Z during dry years. Hydroelectric generation is expected to increase its share in the total energy production from 66% in 1983 to 83% in 1990.  - 50 - ANNEX 1.5 COLOMBIA ENPfESA DE EKERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT October 1984 - ISA Interconnected System Expansion Plan Capacity Plant Type NW Date of Operation Termozipa V Thermal 66 November 1984 Tasajero Thermal 150 November 1984 Mesitas Hydro 600 December 1984 Salvajina Hydro 270 May 1985 Guadalupe IV Hydro 213 June 1985 Calderas Hydro 18 January 1986 San Carlos II Hydro 620 June 1986 Teruoguajira II Thermal 170 July 1986 Jaguas Hydro i70 January 1987 Betania Hydro 500 April 1987 Playas Hydro 200 April 1987 Termosmaga Thermal 150 December 1989 Guavio Hydro 1000 October 1990 Rio Grande Hydro 322 April 1991 Calima III Hydro 240 April 1993 Miel I Hydro 384 October 1993 Urra I and II Hydro 1200 January 1994 Canafisto Hydro 1500 January 1996 Miel II Hydro 351 January 1997 February 6, 1985  - 51 - ANNEX 1.6 Page i of 2 COLOMBIA EMPRESA DE ENERGIA ELECTRICA DE BOGOTA BOGOTA DISTRIBUTION II PROJECT Bank P&rticipation in the Colombia Power Sector 1. The Bank has made 29 loans to Colombia's power sector, totalling US$1,739 million (see Annex 1.5). Loans have assisted the expansion of generating capacity, and transmission and distribution facilities in the systems serving Bogota, Medellin, Cali, Cartagena, Bucaramanga and Manizales, including expansion of electricity distribution to low income areas (874-CO, 1973; 1807-CO, 1980; and 1868-CO, 1980). The Bogota Distribution Project (1807-CO, 1981) has been the first Bank loan to Colombia to support exclusively distribution expansion and, in addition to other beneficiaries, would directly benefit about 340,000 lower income consumers. In addition, the Bank has supported rural electrification under 256-CO (1960) and 313-CO (1962), the First aad Second Integrated Rural Development Project (1352-CO, 1977; 2174-CO, 1983), and the Village Electrification Project (1999-GO. 1983). Other recent loans have been indicated above (see Annex 1.2, item 2) which complete the task of interconnecting the country's regional power systems begun under 575-CO (1968), and add a total of 3,253 MW of capacity to the national interconnected system. In additiou to coordinating a technical assistance project to strengthen system planning, the Bank is the executing agency for another UNDP-financed project which would enhance the sector's construction management capability for large hydroelectric facilities (see paras. 1.15, and 1.16). Further, in connection with Bank lending, marginal cost tariff studies have been carried out for the major markets by ISA's shareholders. The adoption of the results of the study into the various tariff structures is being carried out by JNT, after the edition of Decree No. 2545 (see Annex 5.6). Taken together, the above-mentioned projects reflect the Bank's participation in overall power development in Colombia, from the planning stage through financing and construction of generation and transmission facilities, to delivery of service to the final consumer. 2. Previous Bank lending to Colombia's power sector has been found generally succesful in several OED reports. For instance, the most recent report, 'Power Interconnection (575-CO) and Chivor Hydroelectric Projects (681-CO)" (Report No. 2720, October 29, 1979), commented upon the Bank's participation in Colombia's effort to evolve a stronger and more efficient power sector organization. Through the creation of ISA in conjunction with  - 52 - ANNEX 1.6 Page 2 of 2 these projects, and the continuous efforts to overcome financial and institutional difficulties, real progress was made toward more coordinated sector development. Despite Implementation delays and increased costs, both projects were successfully implemented. Also, the report entitled "Bank Operations in Colombia, an Evaluation" (Report No. Z-18) of May 25, 1972, concluded that Bank financing was successful in assisting the power companies to develop hydroelectric plants at lower unit cost than they otherwise would have been able to do. In turn, this permitted greater urban coverage as well as cheaper and more reliable electricity supply to industry. The report commended Bank efforts in the establishment of JNT and the central interconnected system, which facilitated further power sector development. Among other things, the report recommended that in the future the Bank pay increased attention to the companies' financial planning, tariff structures, distribution programs and energy losses. These points have been addressed under the aforementioned recent loans, which have been the first Bank operations since late 1972 because sector financial difficulties precluded needed expansion of generation facilities in the interim. Complementary measures to sustain investment capability, and thus ensure completion of high priority projects in a reasonable period, and to strengthen financial planning are in constant focus and, most recently, have been supported by the Power Development Finance project (2401-CO, 1984). February 21, 1985  - 53 - Ml 1.7 ad ~ ~ ~~~~au Im ~~~~. PluJ011 ni o1p1a 1inS) 2111-0, 119 bad* nmu rs 1 ~ ~ ~ ~ t -oim (_l~ 12000 . ammm LD-CD 1 1 Vm1 9p m rm nind (220 mm 11 D a<D 1F r d 18.0 111-0 _ r Iw gawut (4. 1520 Ii) 2. 1973 Sm Clm 1 (4 x 3530Idin) 25.0 iSad U (4 255 1w) 71t1 21.3 2*10 Ig~so t_gw *f 4 C z ILO M 1ifo '17.40 S- u b vIdtb I ad 2 2C X 0 IV low) adIt I ( x 3L3.W0 d1) 3137.D 1951 uq.dAu noa U xD:2.5 0 "Mao 3.O IM . _n ammx 1 2, mg 3(3x M0A W 5S60 1u11 U1dm 4,5, ad s6C3z.0 0Lv&O) 3.0 anwpjw (I x DLO D fte) 14<.0 197 t 1 i_U OM fl lm 3 9D0 Ia Om 3 a 111 NW - 3z 10 NIP. _t2. d stnw11amu) 860 137-0 1911 CS zIX _ NO1)mm W.0 QdUXiMalm I _d 2 (2z4S&020gm) au-m 191 F adt 2 (C x LO0 IV bln) 2.10 GAmi- M wmm 3, 4, ad S (3:4500 z Win) 3690C I%G Qwu 196w d I A 2(2 CZ u 0 WIV o ) a 45. -4.0 1973 Utai 1. 2, 3. a d(4 x70W 56. 0W I!IND I2M) Q2dm IT Am 0 x 71 NO 13.Z0 193-. 190 Flow lo (I3 x a7 we LOD 2<D 310 1936 Me t y 03 x 1m) mm t s_1ly _ 56.) 39.3 30 19o0 Ad_M unt I _ 2 (2 x Z.0D W Io) L53 11.0 1955 Ada rAt 3 Cl 3 D.00 1 1W) 4.3D 11 wIt 1 ( 1 10.010 dmwl) 233.D 1931 mi t2 (1 xO z tl0_ =) LD 2m 13s0 i adz 3 (1 t 33.00 dlm) 2LOD Cd.L1min I ad 2 C2Z 3L.a 20M % ) 33. 1913 Odin maI 3 d * (2 : 3060 MI hd) IO M.63 3N0 193 t1 w_ idt. I ad Z (23 10M0 1dn) 2.D 217-0 193 la _ _n _lZ12u 1 ad 2 C 3.3 l %*a) 4.eo 7.20 U- YD nu 1ti adoIa 2 tZ x 46 Pu byae) : X 4 2. 3961 9 x4 malzo0 2 ad 3 tZ x 123 W thmm Y l . 5J 19.0 193 Ak1ne vU_lm flfIt 31.D 3SA0 Ist _ 3m A.7343 ff aSUANFECL InEMO in 4z 702Mg. 0101wo 3.139  - 54& - COLOMmA ANNE 2.1 EMPES o0 VENGI* ELITCA DE BOGOTA Ordo"@", 1I Project Coordiation Uni t. LEE]A -coe -- LE mt3t -{G} ~~~~~~~10418T l CM Su_m *UUL I/ Pro ject Coordi-'tlon ,eLt. ~~~~~~~~~~~~A CONTRACTS q - I q tut_ I H "--1 < t"|*-ISpeco q e_r | 4 tWn_- | PWM""1. T wt l _ s"  AM2.2 N.A IE EWG u.aCMc JE UOWr lOorA DWSMX3f II L' rI Fozcit 1fzfea d IndCRtM 1964 a/ 198 1986 1987 198 1989 19k) Ghms Omta , am (GM) 213 3319 3M 3406 3670 4076 4501 Pbwdmu () 2470 2686 2950 3303 3422 3422 3422 Tot a9ly (MO) 5683 6005 6349 6709 7092 7498 7923 Sale (G"i) b/ 4356 4647 5019 5482 5956 6429 6893 loom and theft ((Wi) 1311 1337 1314 1218 1134 1074 1042 () c/ 23 22 21 i8 16 14 13 Nzber 4E astmz (000) 69. 733.8 M.5 8D9.1 849.5 892.0 ML6 bhber of ouplaye 3,39 3,545 3,687 3,817 3,970 4,130 4,277 Qsto.iw per eql1ayX'2 M7 2D9 212 214 216 219 &mr sles per silayse (h) 1282 1310 1361 1436 1500 1557 1612 Pate of zeturn for ye3 (7) 16.8 17.3 17.9 19.9 21.9 23.8 17.3 Cash n,miax ratio (1) 22 28 42 42 39 63 45 Debt aervi weraged/ 2.2 2.6 2.3 18 L8 2.2 L9 Debt/ + eqdtye/ i46 48 49 46 41 39 34 Acomits neoivable f/ 25 17 17 17 17 17 17 a/ Wllmdzazy Jlgres. bJludw smle cE atwve pme and bak uzply tD Mw1 MperatiVeg. A s a permtap ef toa af ly. Ts that debt servios Is awered byg inteuml cah Smeatios. Tol ebt/ttl equity pli lIaMLLtl, la peoent. As a perBitqp of aE il sas 1Nard 14, 1985  -56 - Annc 3.1 COLOMBIA EIPESA DE ENEROIA ELECTRICA DE DOOUTA 8DOTA DISTRIBUTION I MROJECT HISMRICAL ELECTRICITY COUNUNPTION AND SUPPLY 1978-1993 1978 179 1980 1981 1982 1983 SaIn Rusidential 1392 1549 160 1593 1992 1997 Co_mucil 2 617 639 569 (1) 595 576 Industrial 1052 1135 1184 1135 1130 1120 overnnnt (2) 30 363 419 470 439 443 hlk (3) 6 1 1 1 50 91 Sub-ttatl Sales 3412 3665 3902 3768 4106 4127 Station Use (4) 75 77 74 65 79 71 Lum and Uaccmt hd r f66 892 995 963 1121 1297 Total Enargy hquirmts 4153 4634 4961 4696 5306 5485 Energy Supply EEB Hydro Plant 2202 277 2764 2767 2896 3337 EEED Thwrmul Plant 710 655 639 510 672 597 ISgA 1241 1101 1559 1418 1738 1550 Naui.e hmund (NV) B19 89t 917 875 993 1006 Load Factor I) 58 59 62 61 61 62 Loass and Thefts (Z) (5) 16.0 19.2 19.9 18.4 21.1 23.5 Numir of Cmonuwos (1000) 500 532 560 595 622 666 (1) Notel cuusmption s clangd frm Cowrcial to Industrial (2) Bovwrnmnt and City, includi Public Lighting (3) Energy salen to Rural Cmopara ivu 14) Priurily pu ing f gr stara nd head pond (5) Losses nd u uccuntud for an Z of Energy Requirements 11-19-1984  - 57 - Anne 3.2 COLM01A EIPRESA DE ENERtIA ELECTRICI AE BUTA 00WTA DISTRIBUTION II PROJECT FIRECAST SALES AND SUPPLY 1994(1) 1995 1906 1987 1998 1999 19O Sales 16uh) Residential 1945 2023 2131 2269 2465 2660 2852 Commercial 515 614 722 164 939 1014 I7 Industrial 1223 1328 1459 1620 1760 1900 2037 evernf,t (2) 502 508 524 540 97 633 679 klik (3) 107 105 109 108 117 127 136 SuBo-total Sales 4m29 4579 4945 540I 5968 6334 6791 Station Use (Guh) (4) B0 90 90 90 90 90 90 Loss and Unaccountod for(luh 1311 1337 1314 1219 1134 1074 1042 Total Enery R.quirants 5693 6005 6349 6709 7092 7499 7923 Energy Supply Wuh) EEEB Hydro Plat 15) 290 3199 3169 3176 3440 3946 4271 EEEB Thwreal Plant 373 121 230 230 230 230 230 ISA 2470 2616 2950 3303 3422 3422 3422 Naximus kand (NM) 1057 1116 1179 1244 1315 1318 1466 Load Factor (Xi 61 61 61 62 62 62 62 Losss and Thefts I) (6) 23.1 22.3 20.7 18.2 16.0 14.3 13.2 Nluber of Cmnsuers 11000) 69 734 771 909 850 892 937 (1) Provisional figurn (2) vwrnmt and City, including Public Lighting 13) Enrgy sal to Rural Cooprativ (4) Pri rily ping for tore and head pond (5) Figur Ms riflect the entr into operation of llsitas in 1995 and ha,io in I . 16) ses and unaccount d fo in Z of Energy R.quiruets Dte: 12-26-84  CILUhIA -5 OROEl KE EIEA ELEMICIEA E NOT5 OOOTh DIUIIU I 11 "UlT Cast Eutistl Cautructim Proirg hun 4.1. Milluon mf Cirrut VI) TOTAL 1. hlEORE111" l1905 1986 1991 199 19m 1990 1991990 a) INRTI011 1.1 keita F 11.5 I. L 10.7 10.7 T 22.2 22.2 1.2 hale F 63.9 116.9 171.6 69.5 0.0 421.1 L 94.0 93.2 9.6 61.2 29.3 356.3 T 157.9 200.1 2uiO.2 13.7 29.3 779.2 1.3 Zipa 1, II F 1.9 1.2 1 2.5 2.5 T 4.3 4.3 1.4 Zip IV,VII F 43.9 43.1 L 77.7 77.7 T 121.5 121.5 hi OISTRIIUTIU 1.5 liia Distrihuticn I F 20.9 20.9 L 10.3 10.3 T 31.1 31.1 1.6 kral Eluctrificatiu F 9.4 8.9 5.5 6.1 10.4 11.2 51.5 1 12.8 11.0 9.1 10.5 11.1 13.0 67.5 T 22.2 19.9 14.6 16.5 21.5 24.2 118.9 ci IEl.PLANT;COTRIL CENT F 9.6 9.0 8.5 3.8 29.9 L 7.0 1.5 0.6 1.5 10.5 T 15.5 9.5 9.0 5.3 39.3 2. DISTRINTIUN 11 PROWJE F 3.9 26.0 26.9 35.8 28.6 27.3 149.5 -L 6.5 27.4 39.2 40.9 42.9 44.2 200.1 T 10.4 53.4 6. I 76.7 71.5 71.5 349.6 2/ 3. FUTUIE IlHESTIEITS F 27.6 154.0 166.3 347.9 L 27.6 199.4 196.4 403.4 T 55.2 343.4 352.7 751.3 4. STUDIES F - -L 6.7 7.4 3.0 3.3 3.0 3.6 27.1 T 6.7 7.4 3.0 3.3 3.0 3.6 27.1 TOTAL EOUNUCTIU F 119.8 203.6 212.5 142.7 193.0 204.8 1076.4 Puamun L 150.4 208.2 139.5 145.0 275.7 247.2 1166.1 T 270.3 411.9 352.0 297.7 48.7 452.0 2242.5 llotnss 11 Comlotat plants trasfurred from ISA to EE8. 2V Irdlud. Ut 18 million to he diusbrud in 19I. F * frew curruy L l local crrcy r- toW  OKIII - 59 - mm if EKUJA EIECTiA K OVA MUA DIUMIhITIh II PUECI mnn 4.2. Cut Esltjto Comntrctim Prgr (Nillio of Currut Coll) 1. miln mmlCt 1911 19U 1937 19. 1M I"O 1915-1990 a) IIEITIE 1.1 ulit. F 1452 1412 L 1361 13611 T 2113 2913 1.2 Iu.io F U0P9 17400 29449 1257 0 6151 L 11900 12376 14697 110115 515 513 T I99 29776 43146 236 50 122379 1.3 Zip& 1, 11 F 233 233 L 315 315 T so 54 1.4 Zip& IV, V 1/ F 6513 6510 L 11517 11567 T 13035 1mes5 b) DiITRIUTII 1.5 oneota Distributiw I F 2631 2631 L 1306 1306 T 3937 3 1.t Rural ElctrificatiN F 1192 1316 914 109 2064 2457 042 L 1616 1642 1510 1995 2192 2361 11716 t 203 2953 2424 2994 4251 5319 2073 c) IE.lPLIT;CODNTROL CEWTER F 105 19 1402 6Z7 4313 L 13 220 94 275 1472 T 1968 1410 1496 961 5135 2. DI1TRIUTIO I1 PROJECT F 494 319 4460 6443 5161 6212 27179 L -23 4077 6334 7407 8492 9926 37059 T 1317 7946 iO794 1390 14153 1i138 64233 21 3. FUTURE IVNESTNEFTS F 5000 304SS 36469 71954 L 00 37435 4095 9333O T 10000 67970 77364 155334 4. STUIIES F 0 0 0 0 0 0 0 L 850 1100 500 600 O 800 4450 r 850 1100 500 600 6 00 4450 TOTAL CONITRUCTIN F 15176 30293 35225 25346 33210 45139 1t9080 - -- L 19054 302 23135 26262 54574 54482 209489 T 34230 61275 WM360 5i200 92984 99620 393377 I elt.d plat. tr redufu rod ISA to EE}b. 21 In des Colt 4,403 million to ke dishurgud in 1M1. F * oei crrcy L lIcal currWCy T total  o-i-ft l'*) 91*' O'a