Uganda - Electricity Board Project

R EST R ICT ED RETURN TO REPORTS DESK Report NO. TO-Z53b WITHIN ONE WEEK_ This report was prepared for use within the Bank. It may not be published nor may it be quoted as rrpresenting the Bank's views. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT UGANDA ELECTRICITY BOARD PROJECT March ZO, 1961 Department of Technical Operations CURRENCY EQUIVALENT 20 E. A. Shillings - h 1 Sterling = U. S. $2. 80 Table of Contents Page Summary i I. INTRODUCTION II. THE UGANDA ELECTRICITY BOARD (UEB) 1 Organization and Management 1 Facilities of the UEB 2 III. THE POJER MARKET 3 Sales Forecast 3 Load Growth Forecast 3 Kenya Bulk Supply Contract 4 IV. THE PROJECT Estimated Cost 6 Status of Engineering 7 Construction Schedule 7 V. FUTURE EXPANSION PROGRAM 8 VI. FINANCIAL ASPECTS 8 Financial History 8 Past Financing 11 Present Financial Position 13 Financial Plan 14 Forecast Cash Position 15 Estimated Future Earnings 15 Debt Service and Interest Coverages 15 Debt/Equity Ratio 16 Rates 16 VII. JUSTIFICATION OF THE PROJECT 17 VIII. CONCLUSIONS AND RECOiMENDATIONS 17 Annexes Annex 1. Actual and Estimated Sales of Energy 1953-1973 2. Main System. Actual and Estimated Kwh Generated and System Maximum Demands 1953-1973 3. Main System. Graph Showing System Maximum Demand and Installed Generating Capacity 1953-1973 4. Summary Balance Sheets 1948-1960 5. Income Statements 1948-1960 6. Forecast Sources and Applications of Funds 1961-1973 7. Forecast Income Statements 1961-1973 8. Forecast Summary Balance Sheets 1961-1973 Map of Uganda showing principal UEB generating plants and main transmission and distribution lines - i - Surnary i. The Government of Uganda has asked the Bank for a loan of 38.4 million equivalent to finance 60% of the estimated cost of a $14.0 million project. The project, which is part of the Uganda Electricity Boardts (UEB) 1959-1963 expansion program consists of extensions to the existing transmission and distribution systems, and small schemes with hydro-electric and diesel generating stations to supply remote areas. ii. The borrower would be the Uganda Protectorate which would in turn relend to the UEB. iii. The project will bring electricity supplies to outlying and remote areas of agricultural and other economic importance, and will help to build up the load on the UEB's main hydro-electric generating plant at Owen Falls on the Victoria Nile, which at the present time is operating at about 50% capacity. iv. The project is technically sound, the estimated cost is reason- able, and construction schedules are realistic. The UEB's operations are well managed and its organization is sound and it is capable of constructing and operating the project. v. The existing Ordinance governing the UEBts operations, although generally acceptable to the Bank, does not give the Board sufficient free- dom to manage its own affairs. The Government and the UEB both agree a revision is necessary and amendments which meet the Bank's requirements have been prepared. The Government plans to obtain Leglslative Council approval of either a new or amended Ordinance by M7ay 1961. vi. The UEB has made a large capital investment mainly in generating facilities based on excessively optimistic estimates of load growth and as a consequence its financial results haire been extraordinarily poor. vii. The 1960 year end cumulative deficit would have been over T1.5 million if substantial amounts of interest, beyond the amounts imputed to interest during construction, had been charged to income instead of capital- ized. viii. The UEB's capitalization is virtually all debt of which about 65% (nearly L20 million) is not covered by scheduled annual repayments including almost L million of non-funded debt. ix. During negotiations a financial plan was evolved to improve gradu- ally UEB's financial position and to provide the estimated capital require- ments through 1973. - ii - x. Before the loan becomes effective: a) Standard tariffs will be raised by 18% to increase total revenues by about 13%; b) The existing debt will be extended and rescheduled on a prudent basis; c) A long-term loan of b2.5 million from the United Kingdom Exchequer will be available as required by the UEB to fund Uganda Government advances and short-term loans; d) UEB's accounting methods will be revised so that interest, other than interest properly chargeable to work in progress, will no longer be capitalized and depreciation will be charged on a straight- line basis; and e) The Ordinance covering UEB's operations will be satisfactorily revised or amended. xi. This plan should provide the funds needed to enable the UEB to meet its cash obligations and the estimated costs of its forecast expan- sion requirements through 1973. xii. A debt limitation covenant and a rate covenant satisfactory to the Bank were agreed upon during negotiations. xiii. The project would be suitable as a basis for a Bank loan of $8.4 million equivalent for a period of 20 years, including a grace period of three years on amortization payments. Uganda Electricity Board Project I. INTRODUCTION 1. The Government of Uganda has asked the Bank for a loan of b3.0 million ($8.4 million) to finance 60% of the estimated cost of a L5.0 million ($1.0 million) project. The proposed project, which is part of the Uganda Electricity Boardts (UEB) 1959-1963 expansion program, esti- mated to cost 15.76 million (316.1 million), consists of extensions to the existing transmission and distribution systems, and small schemes with hydro-electric and diesel generating stations to supply remote areas. 2. The borrower would be the Uganda Protectorate which would in turn relend to the UEB. 3. This report is based on information obtained by a Bank mission which visited Uganda in April 1960, from reports submitted by the UEB, and from discussions held with UEB and Uganda Government officials during their visit to the Bank in late January and early February 1961. II. THE UGANDA ELECTRICITY BOARD 4. The UEB is a statutory corporation of the Government of Uganda. It was established on January 15, 1948 by the Uganda Electricity Board Ordinance of 1947 to acquire and operate existing electricity undertakings in Uganda, and to generate, distribute and supply electricity within and without the borders of the Protectorate. The UEB commenced operations in June 1948 when it acquired the assets in Uganda of the East African Power and Lighting Company, and in 1949 it started the construction of a 150 MH hydro-electric scheme at Owen Falls on the Victoria Nile. The UEB is now the only public utility supplying electricity in Uganda. There are a few private generating plants supplying mines, cotton ginneries and tea facto- ries but these are being replaced as UEB power lines reach further out into the country. 5. The existing Ordinance governing the UEB's operations is gener- ally acceptable to the Bank, except that it does not give the Board sufficient freedom to manage its own affairs. The Uganda Government and the UEB both agree a revision is necessary and amendments which meet the Bank's requirements have been prepared. The Government plans to obtain approval of either a new or an amended Ordinance by the Legislative Council when it meets in April or May 1961. Organization and Management 6. The existing Ordinance provides for a Board, to be appointed by the Governor in Council, consisting of a Chairman and not less than six - 2 - or more than twelve other members. The Chairman and members are appointed for such periods and subject to such conditions, including remuneration, as the Governor in Council may direct. At the present time the Board consists of a full tire Chairman, who is also the Chief Executive Officer, a full time member, and seven part time members of whom five are Euro- peans and two are Africans. The constitution of the Board will be changed when the Ordinance is revised, or amended, to a Chairman and not less than four or more than seven members, who will be appointed for periods of not less than two years. 7. The Chairman and Chief Executive Officer of the Board is a capable and experienced engineer and able administrator, who has occupied this position since 1954. Practically all senior posts in the UEB are held by British expatriates but the UEB, in keeping with the Uganda Government's policy, intends to replace progressively these officers with local officers, providing that in doing so the efficiency of its operation is not impaired. The present situation is, however, likely to continue for some consider- able time as trained local personnel are not available and are not likely to become available in sufficient numbers in the near future. The UEBts operations are well managed but its financial results, which are discussed in Chapter VI, have been extraordinarily poor. The caliber of its senior staff is high, and its organization which has been built up over the past twelve years, is sound and adequate to meet present requirements and those of the foreseeable future. On the basis of its past performance the UEB should be fully capable of constructing and operating the project. Facilities of the UEB 8. The principal generating facilities of the UEB consist of a 120 IM hydro-electric plant at Owen Falls on the Victoria Nile and two diesel generating plants with a combined capability of about 10 W. Foundations have been provided at Owen Falls for two additional 15 M-T generating sets which when installed will bring the capacity to 150 MW and the total main system capacity to 160 MU. The two diesel plants, one at Jinja and the other at Kampala, were built as an interim measure in 1949 to meet demands during the period 1949-1954 when the Owen Falls scheme was being constructed, as the generating plant taken over from the East African Power & Lighting Company in 1948 was obsolete and far too small. Both diesel plants, which are connected to the main system, are now on a care and maintenance basis. 9. The main UEB transmission and distribution system, connected to the Owen Falls plant, covers the whole of the southern part of Uganda between Lake Victoria and Lake Kyoga and in eastern Uganda, north as far as Soroti. The system is now being extended from Soroti to Kaberamaido, north of Lake Kyoga. A map showing the UEB's principal generating plants and main transmission and distribution lines is attached as an annex. 10. The main transmission system consists of a double circuit 132 KV line and a single circuit 66 KV line from Owen Falls to Kampala, and a - 3 - double circuit 132 KV line from Owen Falls to Tororo near the Kenya border. There are 132/33 KV step-down substations at Kampala and Tororo and a bulk supply at 132 KV is given at Tororo to the Kenya Power Company. 11. In addition to the main system fed from the Owen Falls plant, there is a small system in western Uganda which covers the Mbarara area. The system is supplied by a combined hydro-electric and diesel generating plant at Kikagati with an installed capacity of 1.65 N. III. POER MARKET Sales Forecast 12. The power market forecasts made by the UEB are reasonable and acceptable; if anything, they are on the low side. A table showing the actual and estimated sales for the years 1953 through 1973, broken down into various categories, is attached as Annex 1. The unsettled political situation in Uganda during the years 1959 and 1960 has adversely affected sales to domestic consumers and resulted in the percentage increase per annum for this category of consumers dropping from 8.0% in 1958 to 3.8% in 1959 to 0.5% in 1960. The percentage increase per annum for total sales, although lower than for previous years, was still high, being 24.6% in 1959 and 15.1% in 1960, but these figures are misleading as they were mainly due to large increases in bulk sales to Kenya. A better over- all picture is obtained by considering only sales to general consumers (domestic, commercial, ordinary industrial and street lighting). The rate of increase per annum for these consumers dropped from 12.2% in 1958 to 9.0% in 1959 to 7.95 in 1960, which suggests sales generally were affected by the political situation. 13. The forecast for the period 1961-1973, which assumes the politi- cal situation will gradually improve, shows the percentage increase per annum for sales to general consumers is expected to be 9.3% in 1961 and to average 9.2% per annum for the whole period. The average percentage increase per annum for total sales for the period 1961-1973 is 5.8%. A gradual increase in sales to domestic consumers is ex_pected, the percent- age increase in 1961 being 2.,% and for the whole period the average in- crease per annum is 7.2%. The forecast includes a supply to a fertilizer factory due to commence operations in 1962 with an estimated annual con- sumption of 4 million kwh and a supply to Kilembe mines in 1963 with an estimated annual consumption of 4 million kwh. A supply for a steel mill with an annual consumption of 20 million kwh may be required in 1964, but as this project is only in the planning stage it has not been included in the forecast. Load Growth Forecast 14. The total main system generating capacity of the UEB is 130 IW, which can be increased by the addition of two 15 W sets at the Owen Falls plant to 160 M1. The present system maximum demand is only about 63 I and the UEB estimate it will reach 142 PiN in 1973. A table showing the actual and estimated kwh generated and system maximum demands, based on actual and estimated sales for the years 1953 through 1973 is attached as Annex 2. A chart is attached as Annex 3 which shows the curve of system maximum demand in relation to installed generating capacity. By reference to the chart it will be seen that the Kenya bulk supply now takes about 22 Yq, one third of the total maximum load on the system. Kenya Bulk Supply Contract 15. When the Owen Falls plant was constructed considerable industrial development was anticipated, but this did not materialize. In order to utilize some of its spare generating capacity, the UEB in 1955 negotiated a 50 year contract with the Kenya Power Company to supply power in bulk at the Uganda/Kenya border, commencing January 1, 1958, at very low rates. This contract, which still has a 47-year remaining life, has no provi- sion for rate adjustments, other than by mutual agreement. At the present time revenue obtained from bulk supply covers only about 50 of the cost of supply if provision is made for straight-line depreciation and full interest charges on long-term debt. 16. Under the terms of the bulk supply contract the Kenya Power Company is required to pay, commencing January 1964, after the first six years of supply, a minimum charge per annum of T397,500 ($1.1 million), equivalent to a demand of 30 MIW at the contract rate of b13.25 ($37.10) per annum per Kw applicable in 1964 and thereafter. At the present time the contract rate is ll ($30.80) per annum per Kw. After January 1964 the company may increase the demand up to a maximum of 45 M at b13.25 ($37.10) per annum but this is unlikely as any load above 35 Mr would require additional transmission facilities in Kenya, which would cost about 1.0 million ($2.8 million). The UEB would also have to provide additional transmission facilities between Owen Falls and the Kenya border which would cost about 1l.2 million (3.2 million). 17. The Kenya Power Company proposes to proceed with the develop- ment of a project known as the Seven Forks hydro-electric scheme which will be situated about 60 miles from Nairobi, the main load center in Kenya. The site of the proposed scheme was inspected by the mission. This scheme ultimately will provide about 240 MT at an estimated cost of T624.0 million ($ 67.2 million), including transmission facilities. Initially only the first stage will be constructed and this will provide 4O TIV at a cost of about M7.2 million ($20.2 million). Financing is being discussed and it is hoped work will commence late in 1961 or early 1962 and that the plant will be in operation in 1965. As a consequence of this proposed development the Kenya Power Company has informed the UEB that its bulk supply requirements will reach a maximum of 35 MW (the limit of existing transmission facilities) in 1965 and will then drop in 1966 to 30 IW, the demand on which the present minimum charge is computed. The estimated sales to Kenya shown in the table attached as Annex 1 are based on these demand figures. 18. Attempts by the UEB to get the Kenya Power Company to agree to an upward revision of the bulk supply rate have so far been unsuccess- ful but the situation may change when the first stage of the Seven Forks scheme is commissioned, as it is probable the company will not then re- quire the minimum contract allocation of power (30 MW) from the UEB. Consequently, it may then be possible to negotiate a new bulk supply at economical rates which will provide for an interchange of power and allow Uganda to take a supply from Kenya when the Owen Falls plant is fully loaded and thus delay the need for additional UEB investment in generating facilities. IV. THE PROJECT 19. The expansion program of the UEB covering the period 1959 through 1963 is estimated to cost ;,5.764 million ($16.14 million). The following items of this program have been presented as a project for Bank financing. a) The expansion and improvement of existing transmission and distribution systems supplied by the Owen Falls and Kikagati hydro-electric plants. b) The extension of the transmission and distribution systems to supply the small townships of Gulu, Lira, Masindi and Hoima in north and northwestern Uganda, and the Kilembe copper mine and the townships of Fort Portal and Kasese in western Uganda. c) The construction of a hydro-electric plant, with a capacity of 0.75 M and a distribution system to supply the Kabale area in southwestern Uganda. d) The installation of a 0.64 Md generating set in the Kikagati hydro-electric power station which supplies the Mbarara area in southwestern Uganda, and the installation of a 0.60 MW diesel generating set for standby purposes at Soroti in north- western Uganda. -6- Estimated Cost 20. The total estimated cost of the proposed project is b4.990 million (414.0 million), which is reasonable. Of this sum about 52.925 million ($8.2 million) would be required to meet foreign exchange costs. The estimated cost of each item is as follows: Foreign Exchange Local Total Cost Cost Cost (b Millions) a) Expansion of existing transmission and distribution systems 1.827 1.191 3.018 b) Extension of transmission and distri- bution systems to supply Gu2tu, Lira, Masindi, Hoima, Kilembe mines, Fort Portal and Kasese 0.958 0.747 1.705 c) Construction of a 0.75 MW hydro- electric plant and distribution system to supply Kabale 0.078 0.084 0.162 1/ d) Installation of a 0.64 MN hydro genera- ting set at Kikagati and a 0.60 TV diesel generating set at Soroti 0.062 0.043 0.105 Totals 2,925 2.065 4.990 Totals expressed in millions of $ 8.190 5.782 13.972 1/ The hydro-electric plant cost is 194,000 ($263,000) which is equal to a cost of b125 030) per Kw installed. 21. The estimated cost of items (a) and (b) covering the extension, expansion and improvement of existing transmission and distribution systems is Tn4.723 million (.13.2 million)or 95% of the total project cost. Of this sum 12,785 million ($7.8 million) or about 60% would be required to meet foreign exchange costs. A total of about 1.78 million ($5.0 million) was spent on these two items during 1959 and 1960. To produce documentary - 7 - evidence of the foreign exchange expenditure on the large number of small jobs which collectively constitute these two items would be extremely difficult. This situation would also apply to future expenditures on the two items. It is therefore proposed that the Bank loan be equal to 60o% of the total estimated cost of the project, or 13 million ($8.4 million), which is approximately equal to the estimated foreign exchange cost. Status of Engineering 22. The various items which make up the project have been planned and designed by the UEB with assistance from its consultants, Messrs, Kennedy and Donkin, who have an office in Kampala. Practically all de- signs have been completed and construction work on items (a) and (b) is well advanced using materials and equipment from stock, and is about to commence on other items. Construction work will be carried out partly by the UEB's own organization and partly by contractors selected on the basis of competitive bidding by local and foreign firms. Bids will be invited on an international basis for all major items of plant and equipment, in- cluding the replacement of stock items. Construction Schedule 23. The scheduled dates for the commencement and completion of the various items is as follows: Construction To be Commencement Completed a) Expansion of existing transmission and distribution systems Jan, 1959 Dec. 1963 b) Extensions of transmission and distri- bution systems to supply Gulu, Lira, Masindi, Hoima, Kilembe mines, Fort Portal and Kasese Oct. 1960 Mar. 1963 c) Construction of a 0.75 MN hydro- electric plant and distribution system to supply Kabale Jan. 1962 Oct. 1963 d) Installation of a 0.64 MY hydro generator at Kikagati and a 0.60 MW diesel set at Soroti Oct. 1959 June 1962 - 8 - V. FUTURE EXPANSION PROGRAM 24. In addition to the expansion program covering the years 1959-1963, provision has been made in the financial forecasts for the years 1964 through 1973 for the following items. Estimated Cost Expressed in Millions of: a) The installation of generating set No. 9 (15 MW) at Owen Falls 1966-1967 0.632 1.77 b) The installation of generating set No. 10 (15 IN) at Owen Falls 1969-1970 0.610 1.71 c) The expansion and improvement of transmission and distribution systems 7.160 20.05 d) Miscellaneous expenditures 0.300 o.84 Total 8.702 24.37 The estimated costs do not include any interest during construction. VI. FINANCIAL ASPECTS Financial History 25. The UEB was organized as a public cornoration on January 15, 1948 (paragraph 4) and began operations the following June when it acquired from East African Power & Lighting Co. Ltd., properties supplying electricity in Entebbe, Jinja and Kampala. Summary balance sheets for December 31, 1948 and for subsequent years through 1960, and summary income statements for seven months ended December 31, 1948 and the calendar years thereafter through 1960 are given in Annexes 4 and 5. These statements are based on the annual reports of the UEB, all of which have been audited by Cooper Brothers & Co., chartered accountants, or their predecessors, Cooper Brothers, Leslie Deex & Co., except for 1960 for which preliminary unaudited figures were furnished. As a consequence of having made a large capital investment, mainly in generating facilities, to meet the optimistic estimates of industrial demand which prevailed in Uganda but never materia- lized, the UEB's financial results have been extraordinarily poor. - 9 - 26. No depreciation other than relatively minor depreciation of motor vehicles, furniture and tools was charged prior to 1954, although the UEB had been in continuous operation for 51 years by January 1, 1954 and had a considerable investment (over b3 million) in thermal plant and in complementary transmission lines and distribution systems. An initial charge designated a "sinking fund" contribution was made to operating ex- penses in 1954 based, however, on only a part of the capital investment in operation (Owen Falls - 20%). These charges, in lieu of depreciation, were in the form of an annuity and, as to be expected in the case of a predominately hydro project, resulted in lower annual charges than would have been experienced with straight-line depreciation. The UEB plans to adopt straight-line depreciation as of July 1, 1961 (see paragraph 42). 27. During UEBts entire existence substantial amounts of interest beyond the amounts imputed to interest during construction were capitalized rather than charged in the income account. There was also some over- capitalization of "head office" expenses. 28. The amount of the over-capitalization of interest, relatively modest during the construction of the Owen Falls dam, became quite sub- stantial subsequent to its completion in 1954. This capitalization of interest, which is in effect the capitalization of operating deficits, continued until December 31, 1960. It has now ceased. 29. In April 1960 the UEB management made a computation of the annual amounts of interest that should have been charged as interest during construction. Up to and including 1960 these aggregated approximately Tl,600,000 as against approximately L3,100,000 charged and included in fixed assets. 30. Except for restatement of this over-capitalization of interest, Annexes 4 and 5 reflect the accounts as reported by the USB. No attempt has been made to reassess the non-existent or inadequate depreciation provisions nor the accounting for "head office" expenses. 31. Annex 4, the summary balance sheets, shows the "sinking fund" as a depreciation reserve. Net current assets are shown on the asset side of the balance sheet but exclude short-term loan indebtedness, shown separately on the liability side. For simplification, the invest- ment account, which was initiated in 1954 and which represents a fund of 1% annually on certain funded indebtedness, is shown on the liability side of the balance sheet as a notional deduction from funded debt. - 10 - 32. The December 31, 1960 balance sheet, based on the UEB's prelimi- nary figures, is as follows: (E 000) ASSETS Fixed Assets 27,212 Less Sinking Fund (Depreciation) 2,000 Net Fixed Assets 25,212 Unamortized Acquisition Expenses, Debt Discount Expenses and Development Expenses 2,050 Total Capital Items 27,262 Net Current Assets 110 Total Assets 27,372 LIABILITIES Funded Debt Uganda Govt., 3% Stock, Due 1969 9,083 Uganda Govt., 4 3/4% Stock, Due 1973 4,000 UEB 5% Stock, Due 1978 6,000 U.K. Exchequer Loans, 5 5/8% and 6 1/4%, Due 1985 6,000 Sub-Total 25,083 Less Investment Account 1,052 Net Funded Debt 24,031 Non-Funded Debt Uganda Govt. Advances 1,996 UEB Provident Fund 70 Electricity Development Bonds 1,300 Other Short-Term Loans 400 Bank Overdraft 12 Sub-Total 3,778 Total Borrowings 27,809 Benevolent Fund 3 Capital Reserve 1,099 Revenue Deficit 1,539 Equity - 44o Total Liabilities 27,372 - 11 - 33. The entire capital of UEB is loan or debt capital. The capital reserve or capital surplus, consists mainly of customers' contributions and a single payment of L980,000 made in 1955 by the Egyptian Government as compensation for an agreement by UEB to maintain certain flows of water at Owen Falls. As of December 31, 1960 this capital reserve totalled l,099,000; it was somewhat more than offset by deficit in the income account of 11,539,000, the result being a negative equity of over 1k00,000. Past Financing 34, The loan capital of the UEB at the end of each year is shown in the following tabulation, which also gives the comparable total net assets. Non- Total Total Funded Funded Less Net Net Dec. 31 Debt Debt Total Investment Borrowings Assets ------------------------(b oo)--------------------------------- 1948 664 - 664 - 664 660 1949 1,796 - 1,796 - 1,796 1,786 1950 1,945 1,909 3,85 - 3,35 3,850 1951 3,019 3,100 6,119 - 6,119 6,142 1952 1,369 9,083 10,452 - l0,452 10,437 1953 5,430 9,083 14,513 - 14,513 14,498 195k 8,085 9,083 17,168 182 16,986 17,90k 1955 6,540 13,083 19,623 282 19,31 20,105 1956 3,181 19,083 22,264 4o6 21,358 22,32 1957 5,170 19,083 2k,253 566 23,687 23,866 1958 7,916 19,083 26,999 718 26,281 26,207 1959 9,2k1 19,03 28,32k 821 27,443 27,211 1960* 3,778 25,083 28,861 1,052 27,509 27,372 * Preliminary Estimates In 1954, as a result of the receipt of the Egyptian Governa.at payment, total net assets slight.y exceeded the net borrowings. By 1958, however, indebtedness again exceeded assets; at December 31, 1960 this excess was almost 450,000. 35. As indicated above UEB never fully funded its long-term capital requirements. An initial issue of T9,083,000 of 3 % Uganda Government stock was sold in two tranches in London in 1950 and 1952. In 1955 a second Uganda Government stock issue of k,000,000 of k 3/4% was sold. The pro- ceeds of these issues were reloaned by the Uganda Government to the UEB. In 1956 a b6,OOO,OOO 22-year term issue, 5;, of UEB (guaranteed by the - 12 - Uganda Government) was sold locally in British East Africa. About L5.5 million of this issue are held by various East African Government agencies or funds. 36. On December 31, 1956, after the b6 million funding issue, short- term debt remained at L3,181,000. By December 31, 1959 this had increased to over b9 million. In 1960 two 25-year Exchequer loans, each of T3 million, were made by the British Treasury at 5 5/8% and 61% but a large short-term debt of almost b4 million remained at the year end. 37. The income statements, Annex 5, show deficits except for 1951 (2,000 profit) and 1954 (L24,100 profit), in each of the eleven other years. The 1960 year end cumulative deficit was b1,539,000, of which approximately Tl,400,000 or 92% has been incurred since Owen Falls was commissioned in 1954. The following tabulation shows the annual amounts of interest chargeable to revenue and the gross income available for such payments. Interest Total Gross Chargeable Annual Year Revenues Income to Revenue Deficiency ------------------- 0o)----------------------- 1948 43 -1 5 6 1949 93 -6 8 14 1950 153 10 26 16 1951 273 43 41 2 surplus 1952 369 21 74 53 1953 556 62 92 30 1954 724 291 267 24 surplus 1955 748 306 463 157 1956 845 385 689 304 1957 1,107 55o 860 310 1958 1,394 726 1,002 276 1959 1,669 867 1,046 179 1960* 1,854 941 1,146 205 * Preliminary Estimates - 13 - 38. The annual rates of return on total net assets, that is gross incor.e compared with total net assets at the end of the preceeding year, were as follows: 1949 Negative 1950 0.6% 1951 1.1 1952 0.3 1953 0,6 1954 2.0 1955 1.7 1956 1.9 1957 2.1 1958 3.0 1959 3.3 1960 3.5 These are inadequate rates of return and constitute a 13-year record of poor performance. Prior to 1954 the rates of return are somewhat under- stated as the assets, although excluding all additional expenditures made during the year, contain considerable amounts of construction work in progress. After 1954 this factor is not important. Present Financial Position 39. As shown in paragraph 32, the capitalization at the end of 1960 consisted entirely of debt aggregating ;27,809,000 after notionally credit- ing bl,052,OCO from the investment account. Of this amount b3,778,000 was non-funded. 40. The two Uganda Government stock issues totalling bl3,083,000 have annual sinking fund charges of 1% which would provide only about 25% of the face amounts of the two issues at their maturities. The b6,000,000 UEB 5% stock issue due in 1978 has no provision for amortization. Only the United Kingdom Exchequer loans aggregating b6,000,000 are required to be repaid by level debt service payments similar to Bank practice. All of the funded and non-funded debt, including the Electricity Development Bonds, have either been borrowed from, or have been guaranteed by, the Government. The Development Bonds have served as a vehicle to mobilize local savings to help finance the UEB but are redeemable on 30 days notice. Of their authorized amount of b2,000,000 as much as 1,500,000 were out- standing in early 1960 but subsequent redemptions have reduced the amount presently outstanding to about T1,300,000. 4l. Thus nearly b20,000,OO0 of UEBts indebtedness is not covered by scheduled annual repayments including almost b4,000,000 of non-funded debt. As described in the financial plan detailed in the following para- graph, the Government has agreed to meet the existing maturities of the - l - two Uganda Government stock issues and, if necessary, the UEB 5% stock issue, rescheduling with the UEB their repayments to the Government on a prudent basis. The United Kingdom has also agreed to make another long- term Exchequer loan to the Government to be relent to UEB to refund the current Uganda Government advances and other short-term loans. In addi- tion, the Uganda Government agreed that should the arount of Electricity Development Bonds currently outstanding be reduced by further redemptions, the Government would provide a loan on reasonable terms to meet any amount the UEB could not prudently redeem. Financial Plan 42. Thirteen-year forecasts (1961-1973) of sources and applications of funds, summary income statements and balance sheets, based on the esti- mates prepared by the UEB and reflecting the financial plan described below, are given as Annexes 6, 7 and 8 respectively. Since its inception the UEB has been continually confronted with the major problem of finding cash to cover operating costs, debt service and plant additions. During negotiations a financial plan was evolved to improve gradually UEB's financial position, necessitating either the refunding and/or funding of most of the outstanding indebtedness, and to provide the estimated capital requirements through 1973 aggregating bl2,085,000. Under this plan, which assumes the proposed Bank loan of b31000,000, the UEB has agreed: a) to increase internal cash generation by increasing its standard tariffs by 18% to be effective no later than July 1, 1961 (see paragraph 48), and b) to revise its accounting methods so that (i) starting January 1, 1961 interest, other than interest properly chargeable to work in progress, will no longer be capitalized and (ii) comencing no later than July 1, 1961 depreciation will be charged on a straight-line basis, and the Government of Uganda has agreed: a) to amend its loan indentures or contracts with UEB covering its two Uganda Government stock issues aggregating bl3,083,000 so that they are repayable by the UEB in 1967 through 1976; b) to assist the UEB in rescheduling the maturity of the b6,000,000 UEB 5% stock issue so that it becomes due in 1976 through 1981; c) to obtain a long-term loan of b2,500,000 from the United Kingdom Exchequer to be relent as required by the UEB to fund Uganda Government advances and short-term loans aggregating about I2,466,ooo; and - 15 - d) to lend to UEB on reasonable terms any amount up to 1,300,000 for Electricity Development Bonds which might be redeemed and which the UEB could not repay. Forecast Cash Posititn 43. No borrowings other than those mentioned above are contemplated throughout the projected period. After giving effect to the 18% increase in standard tariffs, the rescheduling of debt maturities and after -ro- viding for modest annual capital additions including the installment of the final two generating sets, UEB's cash position would continue to be tight. As shown in Annex 6 no significant amount of cash is forecast to accumulate until after 1970. Estimated Future Earnings h. Forecast income statements based on UEBIs operating projections for the 13 years ending 1973 are shown in Annex 7. Although gross income is estimated to rise from about 1900,000 in 1961 to about L1,200,000 in 1962, U1,h0,000 in 1963 and to continue to increase steadily thereafter, the return on investment will be low for a number of years. The rates of return on net fixed assets (including deferred expenditures) would be exceedingly low through most of the 1960's and although increasing steadily would be less than 8% until 1968, as follnws: 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 3.1% 4.1% 4,8% 5.7% 6.6% 7.0% 7.9% 8.8% 9,6% 10.4% 11.2% 12.3% 13.4% Although the indicated rates of return in the latter years are high they are necessary to compensate for the inadequate current rate of return and to provide the cash flow projected in Annex 6. The amount of cash to be accumulated in the final years of the projections, T,4 million by 1973, together with substantial fresh borrowings that could be undertaken after 1969 (paragraph 46), should enable UEB to finance a future hydro-electric project or other capital facilities required to meet system load growth. Debt Service and Interest Coverages 45. The year end ratios of debt service coverage are distorted to the extent that there will be no repayments due on about 65 of the debt until 1967. A more rational measurement of the ability of UEBTs earnings to support its debt on a prudent basis would be shown by interest coverages. 46. Gross income would not cover interest in any year until 1964 when it would barely do so and not until 1969 would interest be covered two times. The proposed Loan Agreement contains an interest coverage covenant which would operate to limit additional borrowings until adequate earnings - 16 - are realized. This covenant would prevent any additional long-term borrow- ing and all borrowing from the Government of Uganda unless latest annual historic gross income (adjusted for any rate increases subsequently in effect) would amount to at least two times the annual interest requirement on all debt, including the debt to be incurred. Based on the 13-year forecast, the UEB would not be able to incur additional long-term debt until after 1969 when it could borrow increasingly greater amounts; by 1973 it could borrow over lO million, assuming interest at 6%. Debt/Equity Ratio 47. Forecast balance sheets through December 31, 1973 are shown in Annex 8. In the financial forecasts (Annexes 6, 7 and 8) it has been assumed that the excess capitalization of interest - approximately b1.5 million up to December 31, 1960 - would remain in the fixed asset account but would be depreciated at the same rates as those of the corresponding fixed asset items. All of UEBts capital requirements to date have been met by borrowings and the absence of any retained earnings have resulted in a capitalization composed solely of debt, As shown in Annex 8, not until 1972 would retained earnings produce a satisfactory debt/equity ratio of 60/40. Rates 48. UEB and Government officials have long been averse to rate in- creases to improve the inadequate level of earnings but as the projected load growth failed to materialize according to earlier estimates, rate increases became inevitable. Rates were increased in mid-1950 but were correspondingly reduced at the end of 1954 just after Owen Falls came into operation. In April 1959 standard tariffs were increased about 13%, producing about a 10% increase in total revenues. An 18% increase in standard tariffs, which should increase current total revenues by about 13%, was agreed on during negotiations and will be a condition of effective- ness. This 18% increase was considered, both by the Uganda Government and the UEB management, to be the maximum that could be prudently effected at this time. It is not possible to increase at present the tariffs which apply to the UEB's three large industrial consumers as these supplies are covered by contracts which expire in 1962, 1964 and 1965 respectively. However, the UEB intends to increase the tariffs to these consumers by about 15% when their contracts expire and has reflected such increases in the financial forecasts. 49. The proposed Loan Agreement contains a rate covenant agreed upon during negotiations which provides that (1) rates would be adjusted from time to time as required to produce revenues sufficient to cover operating expenses (including adequate maintenance and renewals, taxes and interest) and repayments on long-term indebtedness, and (2) that rates will be such as to earn not less than a reasonable return on net investment after charging - 17 - operating expenses, adequate depreciation, and taxes other than income taxes. A proposed side letter, also agreed upon during negotiations, explains that under the first requirement earnings should be sufficient, with other cash resources of the UEB, to provide cash for the payment of the UEB's obliga- tions. Regarding the second requirement, the letter suggests that in the present circumstances in Uganda a reasonable return would be 712. The letter acknowledges the UEB's inability to reach this rate of return until 1967 and that owing to the heavy burden of repayments of the rescheduled debt schedule, higher earnings will be required from time to time in order to satisfy the first requirement. The letter also cites the UEBIs 13-year (1961-1973) forecasts, which are an attachment to the letter, as indicating the levels at which earnings would have to be kept in order to meet the requirements of the rate covenant. VII. JUSTIFICATION OF THE PROJECT 50. About 95% of the total project cost will be spent on the expan- sion of transmission and distribution facilities connected to the Owen Falls hydro-electric plant. Outlying areas with tea estates and factories, and cotton ginneries, will receive electricity supply for the first time, and a supply will be given to Kilembe copper mines to augment their own generating plant, which will enable production to be increased. The ex- pansions will help to build up the load on the Owen Falls plant, which at the present time is operating at about 50% capacity. Provision is also made in the project for the construction of small schemes with hydro- electric and diesel generating stations to supply areas too distant to be supplied economically from the main transmission system. These schemes, which will cost only about 5% of the total project cost, although ini- tially unprofitable, should produce revenue sufficient to cover straight- line depreciation and interest after three or four years of operation. The inclusion of the schemes, which will bring the benefits of electricity to remote areas, is considered essential by the Government of Uganda. VIII. CONCLUSIONS AND RECOMMENDATIONS 51. The project is technically sound, the estimated cost is reason- able and construction schedules are realistic. 52. The project will bring electricity supplies to outlying and re- mote areas of agricultural and other economic importance, and will help to build up the load on the Owen Falls hydro-electric plant, which at the present time is operating at about 50% capacity, 53. The UEB's operations are well managed and the organization is sound and capable of constructing and operating the project. - 18 - 5h. As a result of capital investments mainly on generating facili- ties based on excessively optimistic estimates of load growth, the finan- cial results of the UEB have been extraordinarily poor. 55. During negotiations a financial plan was evolved to improve gradually UEBis financial position (see paragraph 42). 56, Before the loa, becomes effective: a) Standard tariffs will be increased by 18%; b) UEB's debt will be extended and rescheduled on a prudent basis; c) A long-term loan of b2. million from the United Kingdom Exchequer will be available as required by the UEB to fund Uganda Govern- ment advances and short-term loans; d) UEB's accounting methods will be revised so that interest other than interest properly chargeable to work in progress, will no longer be capitalized and depreciation will be charged on a straight-line basis; e) The Ordinance covering UEB's operations will be satisfactorily revised or amended. 57. The project would be suitable for a Bank loan of $8.4 million equivalent for a term of 20 years, including a grace period of three years. UGANDA ElECTRICITY BOARD Main Sstem and Up Countr Sche,es Actual and Estimated Sales (Millions of Kwh) Total General Total Domestic Comercial Ordimry Industrial . Street Lightirg Consumers Large Industrial Kenya Bulk Supl All Consumers Annual Annual % Annual 7 Annual % Annual % Annual Annual Annual Year Kwh. Increase Kwh. Increase Kwh. Increase Kwh. Increase Kwh. Increase Kwh. Increase Kwh. Increase Kwh. Increase Year Actual 1953 18.1 - 8.8 - 14.6 - 0.5 - 42.0 - 9.1 - - - 51.1 - 1953 1954 21.6 19.3 10.7 21.6 20.3 39.0 0.9 80.0 53.5 27.4 10.1 11.0 - - 63.6 24.5 1954 1955 25.7 19.0 12.5 16.8 20.7 2.0 1.3 44.4 60.2 12.5 9.0 -11.0 - - 69.2 8.8 1955 1956 30.8 19.8 14.2 13.6 21.7 4.8 1.5 15.4 68.2 13.3 14.1 56.7 - - 82.3 18.9 1956 1957 36.4 18.2 14.8 4.2 31.1 43.3 2.0 33.3 84.3 23.6 49.2 248.9 - - 133.5 62.2 1957 1958 39.3 8.0 17.6 18.9 35.2 13.2 2.5 25.0 94.6 12.2 68.1 38.4 90.0 - 252.7 89.3 1958 1959 40.8 3.8 19.3 9.7 40.3 14.5 2.7 8.0 103.1 9.0 82.3 20.8 129.4 43.8 314.8 24.6 1959 1960 41.0 0.5 23.6 22.3 43.5 7.9 3.2 18.5 111.3 7.9 91.1 10.7 160.0 23.7 362.4 15.1 1960 Estimated 1961 42.0 2.4 26.2 11.02 50.0 14.9 3 5 9.4 121.7 9.3 100.0 9.8 175.0 9.4 396.7 9.5 1961 1962 44.0 4.8 30.3 15.6 56.0 12.0 3.6 2.9 133.9 10.0 114.4 14.4 190.0 8.6 438.3 10.5 1962 1963 47.0 6.8 34.5 13.9 65.2 16.4 3.9 8.3 150.6 12.5 124.7 9.0 205.0 7.9 480.3 9.6 1963 1964 50.5 7.4 39.3 13.9 73.2 12.3 4.2 7.7 167.2 11.0 125.5 0.6 20.0 7.2 522.7 8.8 1964 1965 54.5 7.9 44.4 13.0 81.2 10.9 4.4 4.8 184.5 10.3 127.0 1.2 260.5 13.3 572.0 9.4 1965 1966 58.8 7.9 49.2 10.8 88.9 9.5 4.8 9.1 201.7 9.3 127.0 1.2 228.5 -12.3 558.7 -2.3 1966 1967 63.5 8.0 54.0 9.8 96.8 8.9 5.0 -4.2 219.3 8.7 130.0 1.2 22.0 1.5 58 .3 4 1967 1968 68.6 8.0 58.8 8.9 105.3 8.8 5.2 4.0 237.9 8.5 130.0 1.2 232.0 1.5 581.3 4.0 1967 1969 74.1 8.0 63.7 8.3 114.4 8.6 5.4 3.8 257.6 8.3 157.0 20.8 236.5 1.9 631.6 8.6 1968 1970 80.0 8.0 68.9 8.2 124.0 8.4 5.6 3.7 278.5 8.1 157.0 Nil 242.0 2.3 656.6 4.0 1969 1971 86.4 8.0 74.5 8.1 134.5 8.5 5.7 1.8 301.1 8.1 157.0 Nil 242.0 Nil 700.1 3.3 1971 1972 93.5 8.2 80.6 8.2 145.3 8.0 5.9 3.5 325.3 8.0 157.0 Nil 242.0 Nil 724.3 3.4 1972 1973 101.0 8.0 87.2 8.2 157.0 8.1 6.1 3.4 351.3 8.0 157.0 Nil 242.0 Nil 750.3 3.6 1973 Average percentage increase per annum 1961-1973 7.2% 10.64! 10.44 5.1% 9.2% 4.5% 3.4% 5*8% 1/ The Kenya Bulk Sup2ly reaches a moaximum of 35 1T. in 1965 and then drops back to 30 MJT. / Increase chiefly due to estimated consumption by yanza textile factory increasing from 51 million Kwh to 76 million Kwh per annum. ANNEX 2 UGANDA ELECTRICITY BOARD Main System Actual and Estimated Kwh Generated, System Maximum Demands, Installed Generating Capacity and System Annual Load Factor System Installed System Kwh Kwh Maximum Generating Annual Sold Generated Demand Capacity Load (Millions) (Millions) (MW) (MW) Factor 1953 51.1 59.5 13.0 16.7 52.2% 1954 63.6 73.2 15.1 40.01/ 55.4 1955 69.2 79.7 15.6 70.2 / 58.3 1956 82.3 94.9 21.6 100.02/ 50.1 1957 133.5 148.8 29.8 100.0 57.0 1958 252.7 278.4 51.8 115.0 4/ 61, 1959 314.8 345.9 57.8 130.0 / 68.3 1960 362.4 395.7 63.2 130.0 71.5 1961 396.7 434.2 69.6 130.0 71.0 1962 437.4 476.9 77.0 130.0 70.5 1963 478.3 522.5 85.5 130.0 70.0 1964 519.7 566.9 92.4 130.0 70.0 1965 568.4 619.5 101.8 130.0 69.5 1966 554.5 606.2 101.1 130.0 68.5 1967 576.5 632.3 105.1 130.0 68.5 1968 626.1 686.4 115.1 145.o 6/ 68.0 1969 650.8 714.2 119.5 165.0 68.0 1970 671.1 736.8 124.5 145.0 67.5 1971 693.1 762.9 129.6 160.0 :/ 67.0 1972 716.7 791.6 135.8 160.0 66.5 1973 742.1 820.3 141.9 160.0 66.0 Commissioning of 15 14 Sets at Owen Falls 1/ No. 1 and 2 Sets 7/ No. 3 and 4 Sets 3/ No. 5 and 6 Sets T/ No. 7 Set 3/ No. 8 Set 6/ No. 9 Set / No. 10 Set ANNEX 3 UGANDA ELECTRICITY BOARD MAIN SYSTEM MAXIMUM DEMAND AND INSTALLED AND FIRM GENERATING CAPACITY 180- -- 160 OX5MW HYDRO I0MW DIE SEL INSTALLED xISMW HYDRO O -CAPACITY IOMW DIESEL . X5MW HYORO X15MWHYDROYDR OM( DIES Lp 3: 6m51VIW HY RO1 ....L __ -CA PACITy D 80 -- --MAND 60- -- KENYA 2x1IVIW HYDRO MW DIESEL AIUM DEM1AND 401 (AsoaOwenFa//s) 20 -__ 1953 '54 '55 56 '57 '58 '59 '60 '61 '62 '63 '64 '65 '66 '67 '68 '69 '70 '71 '72 1973 YEAR END FEBRUARY 1961 IBRD-698R UGAnDA ELECTRICITY BOARD Summary Balance Sheets 1948 - 1960 Years Ended December 31 1948 1949 195o 1951 1952 1954 1 .UZ 1960 (Preliminary) - - - - - - - - - - - - - - - - - - - - - - - -in Thousands of Pounds - - - - - - - - - - - - - - - - - - - - - - - - - - AseSts Fixed Asseta 503 1,479 3,331 5,810 9,361 13,550 16,399 19,091 21,198 23,557 24,883 26,284 27,212 Less Sinking Fund (Depreciation) - - - 214 3 Bg 188 ___2o Net Fixed Assets 50 ,7 ,3 ,1 ,6 380 1,8 1,3 040 2,6 365 2,72,1 Unamortised Acquisition Epense 165 165 165 165 165 165 164 163 162 162 161 159 Unamortized Debt Discount and Expense - - 117 120 584 885 842 990 1,058 996 931 864 (2,050 Unamortised Developsent Expense - - -. - - - . 64 108 1.1 1. L Deferred Expenditures - Net -9 1 2 T 1,050 1,06 1,152 2,202 2,140 2,050 Total Capital Items 668 1,644 3,613 6,095 10,410 14,600 17,191 19,892 21,744 23,834 25,897 26,918 27,262 Net Current Asseta 142 237 47 27 (102) 13 213 598 32 310 - 2 Total I-L 3- L "I U_3 a_L2 jZQ4 j& ay2 Q3866 jj5M0 2A.21; Liabilities Funded Debt Uganda Govt., 3 1/2% Stock, Due 1969 - - 1,909 3,100 9,083 9,083 9,083 9,083 9,083 9,083 9,083 9,083 9,083 Uganda Govt., 4 3/4% Stock, Due 1973 - - - - - - 4,000 4,000 4,000 4,000 4,000 4,000 UM 5% Stock, Due 1978 - - - - - - - - 6,000 6,ooo 6,000 6,000 6,000 Exchequer Loans, 5 5/8% & 6 1/4%, Due 1982 -- 60Q- Total -- 1,909 310 9 ,0 83 9,0 83 9,003 1,063 19,03 19,063 19,'083 25,83 Less Investment Account - 82 282 406 56.6 881 1.052 Unfunded Debt Uganda Govt. Advances 664 764 - 900 - 3,479 7.273 5,886 2,200 3,966 6,180 7,416 1,996 Uganda Development Corp. Loans - - 1,000 1,850 750 405 - - - - UEB Provident Fund Loans - - - 24 41 51 62 94 73 1o4 55 84 70 wlectrioity Development Bonds - - - - - - - - - 366 763 1,335 1,300 Bank Overdrafts - 82 95 560 328 - - - - - - 12 Other Short-Term Loans - 0950 0 - - 19a 406 400 Total Unfunded Debt 1,96 1,945 3,019 1,39 5,430 r,05 6,5i0 3,181 5,170 7,916 9,241 3,778 Total Debt 664 1,796 3,854 6,119 10,452 14,513 16,986 19,341 21,858 23,687 26,281 27,443 27,809 Provident or Benevolent Fund - 4 13 1 2 2 4 3 4 5 4 3 3 Capital Reserve or Capital Surplus- 4 17 54 68 98 1,005 1,015 1,038 1,051 1,075 1,099 1,099 Rev Surpl efiit) ) ) (32) (8) 1 ) ) 5) ) 87) ( 2) ( ) (1.539) Equity or (Deficit) (4) (+104) . 67) &2.7 A 914 761 4. 7 (78 (235) .7. Total 60 ".8 .42 1037 1.498 )..94 0.0 22.34Y2 2J866 2620 "?o 7.2z1 a" UGANDA ELECTRICITY BOARD Income Statements 1948 - 1960 Years Ended December 31 1948 1949 1950 U 1952 i 1954 121 1956 1958 i (Pe (Preliminary) Sales (Millions of kwh) Uganda General Consumers (9 14 25 34 51 64 69 82) 85 95 103 111 Large Industries L ) .2_2 68 82 Total Uganda 9 14 25 34 51 64 -69 82 134 163 185 202 Kenya Bulk Supply - - - - - 913 160 Total 9 14 2.5 34 51 =48 134 2331 Average Revenue per kwh Sold in Mills (US) Uganda General Consumers - - - - - 30.7 30.4 33.2 34.9 Large Industries - - - - - - 9.8 9.0 8.3 7.7 Total Uganda 27.7 29.6 29.8 29.6 30.1 31.6 30.3 28.7 23.0 21.5 22.2 22.6 Kenya Bulk Supply - - - - - 4.3 4.2 3.8 Total Sales 27.7 29.6 29.8 29.6 30.1 31.6 30.3 28.7 23.0 15.4 14.8 14.3 - - - - - - - - - - - - - - - - - - - - - - - - -in Thousands of Pounds- - - - - - - - - - - - - - - - - - - - - - - - - - - Revenues Standard Tariffs ( 41 89 148 266 360 549 722 746 840) 931 1,032 1,223 1,382 Large Industries ( ) 171 218 242 249 Kenya Bulk Supply - - - - - - - - - 139 196 218 Rentals and Misc. 2 4 9 7 2 2 5 5 Total 43 93 153 273 3656 724 748 845 1,107 1,394 1,669 1,854 Operating Epenses Costs of Operations 44 99 142 229 347 492 308 295 290 313 395 448 500 Sinking Fund - Depreciation - - 1 1 1 2 125 170 244 413 Total 44 99 143 230 348 494 433 442 460 557 668 802 913 Gross Income (1) (6) 10 43 21 62 291 306 385 550 726 867 941 Deductions Interest Paid 9 20 91 140 311 398 528 596 861 1,033 1,139 1,189 1,336 Interest Charged to Construction (Credit) (4) (12) (49) (94) (224) (306) (253) (119) (148) (130) (99) (91) (130) Interest Earned (Credit) (16) ( (13) - (8) (1) (24) (43) (3) ( (60 Total 5 8 26 41 74 92 26?- 463 689 860 1,002 1-77 1461 Net Surplus or (Deficit) (6) (14) (16) 2 (53) (30) 24 (157) (304) (310) (276) (179) (205) Balance Beginning Period 2 (4) (18) (34) (32) (85) (115) (91) (259) (558) (877) (1,153) (1,334) Year End Adiustments - - - - - - - (6) - (9) - - l Balance End of Period (4) (18) (34) (32) (85) (115) (91) (254) (558) 877 (1,153) (1,334) (1,539) 1/ Seven months ended December 31 UGANDA ELECT T CITY BOARD Forecast Sources and Applications of Funds 1961 - 1973 Years Ending December 31 1961 1 1963 1964 1965 1966 1 1968 1969 1970 1971 1972 1 ------------------------------------------------in Thousands of Pounds------------------------------------------------------ Sources of Funds Internal Cash Generation Gross Income 884 1,202 1,450 1,693 1,949 2,083 2,?41 2,606 2,831 3,069 3, 09 3.584 3,886 Depreciation 781 79 889 904 9 9 96 9 1.017 1.044 1.08 1.121 1.153 Total 1,665 1,997 2,339 2,597 2,878 3,036 3,307 3.603 3,848 4,113 4,397 4,705 5,039 Borrowings Proposed IBRD Loan 1,826 864 310 Proposed Echequer Loan 2O 00 Total 4,126 864 310 Contributions and Interest Feceived 24 24 24 24 24 24 24 24 24 24 24 24 24 Available from Sinking Fund 3.032 17 Total Sources of Funds 5,815 2,885 2,673 2,621 2,902 3,060 3,331 3,627 6,904 4,1? 4,421 4,729 5,233 Ayplications of Funds Additions to Plant 1,128 1,658 597 793 819 862 1,107 668 936 1,099 830 792 796 Debt Service Interest 1,466 1,521 1,544 1,543 1,526 1,508 1,489 1,450 1,393 1,309 1,219 1,128 1,034 Amortization 84 28 3 324 8 1.364 4.569 1 1.558 17 Total 3,932 1,605 1,697 1,832 1,832 1,832 2,333 2,514 5,962 2,818 2,752 2,686 2,820 Sinking Fund Reouirement 13 131 1l1 131 131 131 191 231 131 40 40 40 40 Total Applications of Funds 5,191 3,394 2,425 2,756 2,782 2,825 3,571 3,613 7,029 3,957 3,625 3.518 3,656 Cash Surplus or (Deficit) 624 (509) 248 (135) 120 235 (240) 14 (125) 180 799 1,211 1,577 Cumulative Cash Surplus 624 115 363 228 348 583 343 357 232 412 1,211 2,422 3,999 Times Interest Covered by Gross Income - - - 1.10 1.28 2.38 1.57 1.80 2.03 2.34 2.71 3.18 3.76 Note: It has been assumed in these calculations that the rate of interest on the exterded amcunts of the Uganda Government 3 1/2 Stock and L, 1/4" Stock and the IEB 5 2tock to be outstanding after their origInal maturities, would be 6'. It has also been assumed that The proposed new United Kingdom Excheluer loan be for a term of 25 years, including a two-year grace period, with interest at 6 1/4. UGANDA ELECTRI CITY BOARD Foreca't Income Statements 1961 - 1973 Years Ending December 31 1961 1962 1963 1964 1965 1966 167 1968 1969 1970 1971 1972 1973 Sales (Millions of kwh) Uganda General Consumers 121.7 133.9 150.6 167.2 184.5 201.7 219.3 237.9 257.6 278.5 301.1 325.3 351.3 Large Industries 100.0 114.4 124.7 125.6 127.0 128.6 130.0 167.0 157.0 157.0 167.0 157.0 157.0 Total Uganda 221.7 7B 19277. 2927 311.5 3 " 3 F9. 39.9 n77 73T. 787- 92.7 3 Kenya Bulk Supply 175.0 190.0 205.0 230.0 260.5 228.5 232.0 236.5 212.0 242.0 242.0 242.0 2h2.0 Total 396.7 73T ITF07 .,,22, 52.-~ 7 ~611.6 ~ T 70. J 2.3 7 Average Revenue per kwh Sold in Mills (U.S.) Uganda General Consumers 38.4 1. 42.6 !2.? 41.7 41. 41. 41.3 1.3 413 41.2 41.2 41.2 Large Industries 7.6 7.5 7.8 7.8 8.2 8.6 9.5 9.0 9.0 9.0 9.0 9.0 9.0 Total Uganda 24.5 26.8 26.8 27.6 28.0 28.6 29.6 28.6 29.1 29.6 30.2 30.1 31.3 Kenya Bulk Supply 4. 5 4.2 4.7 b.9 5.0 4.9 4.8 4.7 11.6 4.6 4.6 4.6 b4.6 Total Sales 15.7 16.5 17.Li 17.5 17.5 18.9 19.7 19.6 20.0 20.7 21.3 22.0 22.7 -------------------------------------------------in Thousands of Pounds---------------------------------------------------- Revenues Standard Tariffs 1,667 1,98 2,182 2,378 2,572 2,778 3,000 3,239 3,198 3,777 4,079 4,4o5 4,767 Up Country Schemes 107 113 176 203 216 272 298 326 362 380 111 Large industries 270 307 346 350 371 396 439 506 506 506 506 506 506 Kenya Bulk Supply 283 288 365 398 461 398 398 398 398 398 398 398 398 Rentals 6 6 7 8 9 10 11 12 13 Thl 15 16 Total 2,225 2,585 2,986 3,27 3,59 3781K 77 F,M2 .7M 5,020 5,3. ,71T ,8 Operating Expenses Costs of Operations 560 e88 617 679 712 78 785 823 86 907 952 990 1,0l9 Depreciation 781 795 889 904 929 953 966 907 1 017 1 o. 1 088 11213 Total 1 37 1,33 5 3 161 1,701 171 1,20 t 1:951 2,120 2,202 Gross Income 884 1,202 1,650 1,693 1,949 2,083 2,341 2,606 2,831 3,069 3,309 3,584 3,886 Income Deductions Interest Paid 1,L66 1,521 1,544 1,543 1,526 1,508 1,L89 1,),50 1,393 1,309 1,21.9 1,1?8 1,034 Interest Charged to Construction (Credit) (3) (90) (18) (24) (25) (26) (33) (20) (28) (33) (25) (2) (21) Interest Earned (Credit) (61) (73) (82) (91) (102) (111) (122) (133) (146) (1) (16) (17) (19) Total 1,36 1,358 1,4u4 1,426 1,399 1,371 1,331 1,297 1,219 1,2 1,178 1,0791 Net Surplus or (Deficit) (18) (156) 6 265 550 712 1,007 1,309 1,612 1,807 2,131 2,497 2,895 Return on Net Fixed Assets (Including Deferred txpenditures) 3.1 4.1 4.8% 6 5.7% 6.6% 7.0% 7.9% l.8, 9.6, 10., 11.2% 12.3% 13.h% Notes: It has b-en assumed in these calculations that the rate of interest on the ext-nded nmounts of the Uganda Government 3 1/2% Stock and h 3/4,6 STock and the ULB 5,% 3ock to be outstanding after their original maturities, wolld be 6%. Tt has also been asses that tne proposed m-w united Kingdom ixcnequer Loal would be for a 1,-rrn of 27 -ars, including a two-year grace pr,ad, with interest at 6 1/1%. 1/ Standard Tariffs have been assumrnd to be increased by 137 as of July 1, 1Q61. UGANDA ELECTRICITY BOARD Forecast Summary Ba"ance Sheets 1961 - 1973 0o1 1962 163 1964 i2ki 1966 196 1968 1969 19 1921 1912 1973 -----...---------.----.------------------------in Thousands of Pounds----------------------------------------------------- Assets Fixed Assets 29,862 31,610 32,225 33,042 33,886 34.774 35,914 36,602 37.566 38,698 39.553 40,369 41,.189 Less Depreciation 2.706 3426 4.24 5,069 5 6.801 7692 86 9 ,.55 10525 11.538 5 1 Net Fixed Assets 27,156 28,184 27,985 27,973 27,963 27,973 28,222 27,988 28,010 28,173 28,015 27,785 27,527 Deferred Expenditures - Net 1,975 1.90. 1825 1259 1 5 1.60 1.25 1.45 1,3.5 _ 00 1..225 1,10 17 Total Capital Items 29,131 30,084 29,810 29,723 29,638 29,573 29,747 29,438 29,385 29,473 29,240 28,935 28,602 Net Current Assets 210 458 2 678 438 _52 2 5 1306 -2.5.1 4.0 Total 2985 30.294 3o.268 3o 30.081 30.25 30,185 29.e90 .271 29.98 go.546 31.452 2 Libilities Funded Debt Uganda Govt., 3 1/2% Stock, Due 1969 9,083 9,083 9,083 9,083 9,083 9,083 8,583 7,583 3,400 2,300 1,200 100 Uganda Govt., 4 3/4% Stock, Due 1973 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 2,800 UEB 5% Stock, Due 1978 6,000 6,000 6,000 6,000 6,000 6,oco 6,000 6,000 6,000 6,000 6,000 6,000 6,000 Exchequer Loans 8,300 8,216 8,063 7,877 7,680 7,471 7,249 7,014 6,765 6,501 6,221 5,925 5,611 Proposed IBRD Loan 1,826 2,.690 3000 2.897 2,788 2.673 2.51 2,422 2.285 2.140 1.987 1.825 1 Total 29,209 29,989 30,146 29,857 29,551 29,227 28,383 27,019 22,450 20,941 19,408 17,850 16,064 Less Investment Account 1,236 1426 1.625 1.833 2.052 2.280 2.519 .769 - 40 _ 125 - Net Funded Debt 27,973 28,563 28,521 28,024 27,499 26,947 25,864 24,250 22,450 20,901 19,326 17,725 16,064 Electricity Development Bonds 1.300 .3 1.300 a0..2 1.300 1.30 1.30 1.30 - 1.0 139 --3 12.Q - Total Debt 29,273 29,863 29,821 29,324 28,799 28,247 27,164 25,550 23.750 22,201 20,626 19,025 17,364 Capital Reserve 1,112 1,122 1,132 1,142 1,152 1,162 1,172 1,182 1,192 1,202 1,212 1,222 1,232 Retained Surplus or (Deficit) ) (691) (685) (20) 130 842 1.849 3.158 4770 L= 8.708 11.205 14.10 Equity 577 431 447 722 1,282 2,004 3,021 4,340 5,962 7,779 9,920 12,427 15,332 Total 28Q0 30.224 3.268 08 M 30.l13018 280 2 12 0 4 3426 Debt/Equity Ratio 98/2 99/1 99/1 98/2 96/4 93/7 90/10 85/15 80/20 74/26 68/32 60/40 53/47 Note* It has been assumed in these calculations that the rate of interest on the extended amounts of the Uganda Government 3 1/21 Stock and 4 3/4V Stock and the agR c4 Stonk to bo outstardinF after their ori-inal maturities, would be 6<. It has also been assumed that the proposed new United Kingdom Exchequer Loan be for a term of 25 years, including a two-year grace period, with interest at A 1/0'. UGANDA PROTECTORATE UEB PRINCIPAL GENERATING PLANTS TRANSMISSION AND DISTRIBUTION LINES EXISTING HYDRO STATIONS S U D A N PROJECTED HYDRO STATION EXISTING THERMAL STATIONS PROJECTED THERATL TRANSMISSION LINES Ex,sting 132KV doub ie Projected 132 KV Projected 66KV Exisfing 33KV ond 11KV Projected 33KV and IIKV GULU Projected conversion of t7'7' 7' 33KV to 66KV operation 0 0 25 50 75 100 125 150 175 200KM F-hs LIR Orungu L AWMasindi S 7PortSOT /v ALBE RT MASINDI 1z PALLISA MBALE ' MT ELGON O TOlRO FORT PORTAL Ke Nkendo R.MITYANA OWEN FALL JINA Kosese RUWENZR1 Katonga R. rr r¯QUATOR -- T A N G A N Y l K A .RUANDA - URUNDi FEBRUARY 1961 IBRD-789