Colombia - Cospique Thermal Power Project

RETURN TO REPORTS D,sK RESTRICTED WITHIN Report No. TO-354b ONE WEE-K fAJY This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE COSPIQUE THERMAL POWER PROJECT ELECTRIFICADOR DE BOLIVAR S. A. COLOMBIA July 1, 1963 Department of Technical Operations CURRENCY EQUIVALENTS 1 U.S. $ = Colombian Pesos 9. 0 1 Ps = U.S. 11. 1 1 million Pesos = U.S. $111, 111 APPRAISAL OF THE COSPIQUE THERMAL POWER PROJECT ELECTRIFICADORA DE BOLIVAR COLOMBIA TABLE OF CONTENTS Page No. SUMMARY i - 11 I. INTRODUCTION 1 II. THE BORROWER AND SHAREHOLDERS 1 Electrificadora de Bolivar (Electribol) 1 Electribol's Power Facilities 3 Empresas Publicas Municipales de Cartagena (Empresas) 3 Instituto de Aprovechamiento de Aguas y Fomento Electrico (Instituto) 4 III. THE POWER MARKET 5 IV. THE PROJECT 7 The Power Plant and Transmission Lines 7 Transmission and Distribution System 8 Cost Estimates 9 V. FINANCIAL ASPECTS 11 Tariffs 11 Present Financial Position of Electribol 11 Recent Earnings Record of Electribol 12 Proposed Financing Plan of Electribol 13 Estimated Future Earnings of Electribal 15 Future Financial Position of Empresas 15 Proposed Rate and Debt Limitation Covenants 17 Auditors 17 VI. CONCLUSIONS 18 LIST 0 F AN NEX ES 1. Existing Facilities 2. Electric Energy Production and Load Growth 3. Customers, Electric Energy Sales, Revenues, and Expenditures h. Peak Load, Capabilities and Installation Schedule 5. Annual Energy Production and Population Growth 6. Description of Project 7. Fabrication and Construction Schedule 8. Cost Estimate 9. Expenditure Program 10. Electribol - Income Statements 1961-69 10a. Assumptions for Fzrecast Income Statements 11. Electribol - Sources and Applications of Funds 1963-69 12. Electribol - Balance Sheets 1961-69 13. Empresas - Income Statements 1961-69 14. Empresas - Sources and Applications of Funds 1963-69 15. Rapreeas - Balance Sheets 1961-69 MAP: Cospique Thermal Power Project APPRAISAL OF THE COSPIQUE THERMAL POWER PLANT COLOMBIA SUMMARY The Electrificadora de Bolivar S.A. (Electribol) has asked the Bank for a loan to finance the foreign exchange cost of a 25 MW expansion of the Cospique Thermal Plant, the expansion of its transmission and dis- tribution facilities, and of the distribution facilities of Empresas Publicas Municipales de Cartagena (Empresas), its principal customer. The amount of the proposed loan would be US$5.0 million of which US$0.h6 million would be relent by Electribol to the Empresas. The total cost of the project would be US$6.39 million. ii. The project would comprise the addition by Electribol of two 12.5 MW thermal generating units to the existing Cospique 10 MW steam power plant in Cartagena, Colombia, the addition to the transmission system of approximately 140 km of 13.2 kv lines, with the associated substations, and the rehabilitation and expansion of the distribution systems in Cartagena and the improvement of distribution in a number of small commu- nities in north Bolivar. iii. Electribol, an autonomous public agency, which would operate the project, is one of 15 subsidiaries of the Instituto de Aprovechamiento de Aguas y Fomento Electrico (Instituto). The Instituto is an autonomous agency formed by the Colombian Government to develop water resources and electric power, and owns about three-quarters of Electribol's stock. iv. Planning of the project was performed jointly by the Instituto and its consultants. Syndibel of Belgium prepared the engineering as- pects of the project, and Alfonso Posada de Francisco of Bogota, Colombia prepared the load projecticz and financial studies. With the help of these consultants the Instituto and Electribol are capable of success- fully carrying out the project. v. The city of Cartagena constitutes the principal power market for Electribol. More than 95% of Electribol's power sales are made in bulk to Empresas which distributes power in the city. The balance of the power is sold by Electribol in the small communities in the northern portion of the department. vi. Electribol owns and operates the 10 MW Cospique power plant and leases from Empresas the Manga plant which has an installed capacity of 11.65 TW. Electribol is the sole producer of power for public use in the area. The principal purpose of the project is to provide power needed by a new fertilizer plant, and to meet the increasing needs of the city of Cartagena and of the small communities and the adjacent rural areas. Industrial expansion is occurring in the area and this together with the normal power load growth justifies the power expansion program. The pro- posed expansion program would meet the expected power demands until 1970. vii. The financial position of Electribol has been weak because of low tariffs and high costs resulting primarily from the inefficient use of generating facilities in the Cartagena area and more recently from inflation- ary increases after the peso devaluation. This situation has been consid- erably improved by two rate increases for Electribol and Empresas which - ii - became effective in November 1962 and May 1963. Furthermore the lease of the Manga plant to Electribol permits the use of the more efficient generating units of Cospique on base load, and the less efficient units of Manga plant on peak loads. viii. As a result the financial prospects of Electribol and Empresas are reasonably good. The initial low return on Electribol's investment would, after the completion of the project, show an increasing trend to satisfactory levels and both entities would maintain satisfactory cash positions throughout the period under review. This is shown by the year- end debt service and interest coverages and by the contributions from earnings towards new expansion. Inflationary pressures may require fur- ther adjustments in rates. Appropriate rate covenants were therefore agreed upon which would safeguard the solvency of Electribol and its largest customer, Empresas. In addition, a debt limitation covenant is included in the loan agreement with Electribol which would make the in- currence of new debt dependent on a proper level of earnings. ix. The project is teohnically sound and is a logical step in the expansion of both Electribol's and Empresas' facilities. It is suitable for a Bank loan in the equivalent of US$5 million for a term of 20 years including a period of grace of 31 years. APPRAISAL OF THE COSPIQUE THERMAL POWER PLANT COLOMBIA I. INTRODUCTION 1. The Electrificadora de Bolivar, S.A. (Electribol) through the Instituto de Aprovechamiento de Aguas y Fomento Electrico (Instituto) has asked the Bank for a loan to finance the foreign exchange cost of a 25 MW expansion of the Cospique Thermal Plant and of the expansion of associated transmission and distribution facilities. The total cost of these works, including interest during construction, is estimated at $6.39 million equivalent, of which $5.05 million would be foreign exchange. The pro- posed loan would cover $5.0 million, $0.46 of which would be relent by Electribol to Empresas Publicas Municipales de Cartagena (Empresas), the remainder would be financed from Electribol's and Empresas' own resources. 2. The expansion is required to supply the growing demand for electric power in the Department of Bolivar, including power to a new fertilizer plant near Cartagena. 3. Electribol is one of 15 subsidiaries of the Instituto, an auton- omous agency formed by the Colombian Government in 1946 with the responsi- bility for development of water resources and electric power. It owns about three-quarters of Electribolls stock. The Instituto concurs in the need for the loan. 4. The appraisal of the proposed project and of the operations of Electribol is based on reports prepared by Electribol, the Instituto, and their consultants, supplemented by information obtained by Bank staff members during two visits to Colombia in May 1961 and March 1962 and upon cost data furnished by the Instituto subsequent to the devaluation of the peso late in 1962. A map of the project area is attached at the end of this report. II. THE BORROWER AND SHAREHOLDERS Electrificadora de Bolivar (Electribol) 5. Electribol was incorporated in December 1954, to develop and supply power in the Department of Bolivar. As a corporation, Electribol is subject to the regulations and supervision of the National Superinten- dent of Corporations. Although considered an autonomous organization, its stockholders are governmental. Electribol is exempt from taxation. 6. The principal owners and their respective holdings in Electribol as of December 31, 1962, are as follows: -2- (in millions of Pesos) Instituto de Aprovechamiento de Aguas y Fomento Electrico 21.7 75.9% Department of Bolivar 2.8 9.8% Empresas Publicas de Cartagena 2.8 9.8% Municipalities of North Bolivar 1.3 4.5% 28.6 100.0% 7. Electribol's authorized share capital was increased from Ps 20 million to Ps 40 million in 1961. The formal authorization of this increase by the National Superintendent of Corporations would be a condition of effectiveness of the proposed loan. 8. Electribol is governed by a Board of Directors consisting of five members, appointed for one-year terms at the shareholders annual meeting. The directors are: the Governor of Bolivar or his represen- tative; one representative each of the Instituto and Empresas; and two members representing other area interests. Because the Instituto holds about three-quarters of the stock it could elect the majority of directors. However, it consults with the Governor and interested local groups to select candidates from a representative group of persons in industry, banking and commerce. As a matter of policy, it has been the practice of the Instituto to include an engineer on the Board. The principal executive of the company is the General Manager, who with the auditor is appointed by the shareholders. The present general manager has held the position for more than four years. The auditor is a staff member under the super- vision of the general manager. He is selected from a list of three names submitted by the National Comptroller. 9. Electribol is the principal shareholder of three subsidiary companies which operate in Sincelejo, Magangue and Zambrano, small towns in the south of the Department of Bolivar. 10. The present management of Electribol has not had extensive utility operating experience. Administration of operations should be strengthened by assistance from the Instituto or from other outside sources. Electribol now has more than 200 employees. This is high, though many are employed in transmission line and other construction activities. The Instituto has made a study to determine the number of employees necessary for Electribol, and has made recommendations which, if implemented, would bring staff down to satisfactory levels. Plant operating conditions are being improved by the correction of several deficiencies which should reduce operating costs and increase efficiency. The Instituto has agreed that in the future it would provide financial, technical and administrative guidance, propose measures to improve operations and assist in determining Electribol's staffing needs. - 3- Electribol's Power Facilities 11. At the end of 1962 the total generating capacity operated by Electribol consisted of the two 5 MW units in the Cospique Power Plant, which were put into service in May 1960. Except for industrial instal- lations totaling about 7.5 MW, the only other significant power source in northern Bolivar is the Manga plant in Cartagena, with an installed capacity of 11.65 MW. The lease of the Manga plant to Electribol (see paragraph 17) makes Electribol the sole producer of public power in the area, with a total effective capacity of 21.65 MW. The generating faci- lities of Electribol are described in Annex 1. The units at the Manga plant are best suited for peaking and standby service. The oldest unit will probably be retired when the proposed power expansion is completed. 12. Electribol also operates transmission and distribution faci- lities that include approximately 50 km of 66 kv line, 70 km of 13.2 kv line, and three principal substations. It is constructing additional transmission facilities. There are no connections between the Cartagena area transmission system and that of any other metropolitan area, nor with the generation at the industrial plants. Annex 1 gives a detail description of the existing transmission and distribution facilities. 13. Electribol sells energy wholesale to Empresas and transmits and distributes power to customers in small towns and rural areas in the northern part of the Department of Bolivar. Power is delivered to Empresas at four points, at two substations in the city of Cartagena for municipal requirements, at the Gambote substation to serve the municipal water pumping plant (see map) and at the Cospique switchyard to serve the Abocol fertilizer plant and other requirements to the south of Cartagena. Within the Empresas' organization the power department sells power at cost to the water department from the Gambote substation. Empresas Publicas Municipales de Cartagena (Empresas) 1. Empresas is an autonomous agency owned by the city of Cartagena. It is the sole authorized distributor of electricity in the city and sur- rounding areas. The agency is governed by a Board of Directors which em- ploys a manager to conduct its affairs. 15. In 1951 Empresas was formed as a department of the municipal government and started operations by acquiring the existing Manga plant, which consisted of three steam units with a total installed capacity of 6.6 MW. In 1952 and 1954 diesel units were added to the plant to bring the total nameplate capacity up to 11.65 MW (Annex 1). The oldest steam unit (2.5 MW) has been in service about 30 years; the other two units about 13 years. 16. After Empresas installed the additional 5 MW of diesel capacity in the Manga plant in 1952 and 1954, the service improved, but the rapidly growing demand continued to overload the facilities. Empresas made commit- ments to purchase two new steam units, but it was not able to meetthe pay- ments. The Instituto was asked for financial help, and Electribol assumed Empresas' remaining financial obligations for the equipment, which was installed in Electribol's Cospique plant. For its equity in the equip- ment, Empresas received Electribol shares. After the Cospique plant was commissioned in early 1960 and until the lease of the Manga plant in May 1962, Empresas purchased from Electribol all of its energy requirements in excess of that which it could not produce. The purchases amounted to about one-third of the Empresas needs. 17. In 1961 a Bank mission recommended to Electribol and Empresas that operation and control of generating facilities be integrated to achieve the most economical production of power. By contract effective May 1s 1962, the Manga power plant was leased to Electribol. This per- mits Electribol to utilize efficiently the generating facilities of both Cospique and Manga and should decrease average power production costs. Electribol has agreed to make no changes in the leasing arrangements of the Manga plant without first discussing the proposed changes with the Bank. Electribol has also agreed that it would consult with the Bank before entering into any other leases of equipment for power generation or contracts for the purchase of power. 18. Empresas' principal functions until 1961 were to sell electri- city and water in the city, although it was also charged with operating sanitation facilities and providing other minor services to the city. In July 1961 Empresas was reorganized and made an autonomous body with ex- panded functions. The reorganization resulted from the financial require- ments of an expanded water supply program for which the lending institutions demanded an autonomous agency as the borrower. Empresast expanded activi- ties to the city now include the furnishing of power, public lighting, municipal water supply, sewage disposal system, fire protection, abattoir, parks, street cleaning, garbage collection and paving of streets. In addition, it collects taxes including real estate taxes from which it re- tains a portion for performing services. The power activities are established as a separate department and independent accounts are main- tained for its operations. Assurances have been obtained that the funds of the power department would be used exclusively for activities of the power department. Instituto de Aprovechamiento de Aguas y Fomento Electrico (Instituto) 19. The Instituto was established in 1946 for the purpose of planning and constructing works for electricity production, the development of irrigation, land drainage and water control. The Instituto's funds come from appropriations of the National Government, from special taxes to foster electrification and from repayment of loans and charges on projects financed by the Instituto. In the field of electric power, the Instituto has established fifteen affiliated corporate organizations which control and operate the power facilities in their respective areas. The Instituto is a principal stockholder in these affiliates, having accepted stock for the substantial amounts of development capital provided to each of them. Assurances have been obtained that the Instituto would give priority to the Cospique Project in the allocation of available funds if Electribol requires additional funds to complete the project. 20. The Instituto has a small technical and administrative staff in its Bogota office. It relies largely on foreign and Colombian consultants for details of planning, design and construction. Its staff is engaged principally in general administration of the Instituto's program,in super- vising the consultants' activities and in directing its affiliates. Assurances have been obtained that the Instituto will furnish financial, technical and administrative management assistance to Electribol and that the Instituto will select consultants, acceptable to the Bank, to plan; any major expansion projects for Electribol. III. THE POWER MARKET 21. The city of Cartagena is the principal power market of the area served by Electribol. In 1962 approximately 97% of Electribol's power was sold in bulk to Empresas for distribution in the city and suburbs. The remaining 3% was sold by Electribol over its own transmission and dis- tribution lines to consumers in three small communities and the rural area. The additional transmission facilities being constructed by Electribol will increase slightly the power sold in small communities, but any future ex- pansion of generating facilities will depend almost entirely on the growth of the market in Cartagena and its immediate environs. 22. Population of Cartagena and its suburbs was estimated at 164,000 in 1962. Census figures for 1938 and 1951 and estimates in subsequent years indicate a population growth of slightly more than 3.5% per year. Gross generation from 1955 through 1961 increaseiby more than 11% annually. Per capita sales of electric power in 1962 exceeded 400 kwh, and peak load was 18.6 MW. In recent years the load factor has been approximately 55%. Population and basic load data for Cartagena and its suburbs are given in Annex 2. In the recent past energy sales to the principal cate- gories of consumers have been approximately: 50% residential; 25% industrial; 17% commercial; 8% for public uses. (See Annex 3). 23. Two new power uses expected to develop in the area are: the Abocol fertilizer plant which would require more than 4 MW and the expan- sion of the municipal water system, which would add more than 0.5 1W of pumping load. The fertilizer plant should start operations in 1963. It is estimated that the plant would have a 90% load factor and the energy requirements would be about 30 million kwh per year. As the sole author- ized marketing agency for the area, Empresas will sell the power, which will begenerated by Electribol. 24. A cement klinker grinding plant is under construction and will require power late in 1963 or early 1964. Plants for the production of soda ash and ammonia are also under construction, but will generate their own power, 25. The expansion program planned by Electribol includes the extension of the transmission lines to seven small communities and adjacent rural areas, together with the expansion of the substation facilities. Some of - 6 - these communities are served by local diesel plants. Sales to such users would not exceed 5% of total sales thrugh 1970. The extension of trans- mission lines to these areas would meet the Instituto's objective of pro- viding electric power to areas without such service. However, to avoid burdening Electribol with high-cost, low-revenue producing facilities, Electribol and the Instituto have agreed to limit expansion in rural areas. (See paragraph 37.) 26. Future power loads at the Cospique power plant were projected by estimating the requirements of the city of Cartagena to which was added the need of the Aboool fertilizer plant, the municipal water pumping plant, and the small communities and rural areas. Cartagena's requirements were determined by assuming a population increase of approximately 3.5% per annum and a 5% annual increase in per capita electricity consumption. This is considered conservative, compared with Cartagena's past annual growth intotal electricity consumption of more than 11%, and its annual average increase of 8% in total customers. Energy consumption would increase more than 50% in 1963 when the Abocol plant begins operations and when the water pumping plant expands its output. Thereafter to 1970, annual in- creases in energy consumption are estimated at about 8%. (See Annexes 4 and 5.) 27. In 1965 there would be on the Electribol system an estimated peak load of 24.8 MW at the bus bars and production of 146.3 million kwh and in 1970 an estimated peak demand of 36.0 MW and production of 206.3 million kwh (Annexes 4 and 5). Before the first 12.5 MW unit is com- missioned, there would be periods of power shortage. After the first unit is commissioned, the peak load on the system would still exceed plant capacity with the largest unit out of service. This condition would be acceptable only for a short period. Reserve capacity is necessary because the system is without any connection to other systems from which reserve cap-icity might be drawn. The load is also quite uniform during the entire year. A second 12.5 MW unit is therefore included in the project for commissioning a year later. The 25 MW of capacity would provide a depend- able source of power for the estimated loads until 1970. 28. The initial power requirements of the Abocol plant could for a tire be provided from the existing facilities of the Cospique plant. How- ever, because of the growing demand in the city of Cartagena, Abocol has insisted that Electribol must have construction of additional generating capacity underway, or the assurance thereof, to provide Abocol with its power requirements with a minimum of rationing in the city. 29. Suitable contract arrangements have been consummated between Abocol, Empresas and Electribol to furnish Abocol's power requirements. -7- IV. THE PROJECT The Power Plant and Transmission Lines 30. The project which the Bank has been asked to assist in financing consists of: (a) the expansion of the Cospique thermal plant by the installation of two 12.5 MW units including two semi-outdoor type boilers designed to burn Bunker-C oil or gas and to operate at 600 pounds per sq. inch and at 8250F. The necessary exten- sions would be made to the switchyard, cooling water system and other auxiliary facilities at the plant; (b) construction of the additional transmission lines and the expansion of the substations and the Cospique switchyard; (c) rehabilitation and expansion of the distribution systems in Cartagena and in seven small communi- ties of the northern part of the Department of Bolivar. Details of the project are given in Annex 6. 31. The first 12.5 MW unit would be commissioned by the end of 1964 (together with about 140 km of transmission lines), and the second about one year later. The schedule of construction (Annex 7) is realistic6 32. The expansion would increase the i:stalled capacity at the Cospique power plant to a total of 35 MW by the end ot 19651 providing fov the first time reasonable amounts of power for industrial growth in the Cartagena area. With the lease of the Manga power plaht, tlectribol would control more than 46 MW of installed capacity. 33, Fuel for the Cospique plant is obtained from the Manonal re- finery, located approximately two miles from the Cospiqui power plant, through an oil pipeline owned by the refineryo Tho rdfinery is supplied by an oil pipeline directly from the oilfields. Adequate fuel supplies are thus assured for the power plant. 34. Planning and preparation of reports on the project were done jointly by the Instituto and its consultants. Syndibel of Beigium pre-' pared plans and specifications for the engineering, and Alfonso Posada do Francisco, a co' sulting engineer of Bogota, prepared load projections and financial studies. 35. Early in 1961 bids were received on the basis of international bidding for the first 12.5 MW unit, boiler, transformers and all related equipment to complete the installation of the first unit. The successful - 8 - bidder MAN of Germany was awarded the contract late in 1962 and agreed to complete the installation 24 months after signing the contract. On the basis of this, the new unit should be ready for operation early in 1965. The Instituto has also advised the manufacturer that it would exercise the option to purchase the equipment for the second unit at the same price quoted for the first unit, subject to escalation provisions quoted by ,AN in its bid for the first unit. The second unit is scheduled for operation at the end of 1965. 36. With Syndibel assuming responsibility for technical adequacy of the power plant designs and for supprvision of construction, Electribol and the Instituto should be capable of completing the work on the power plant. Transmission and Distribution System 37. Low tension transmission lines extending from the Cospique power plant and from the existing 66 kv line are under construction to serve the small towns and villages in the northern portion of the Department of Bolivar. Additional low tension transmission lines will be constructed and these together with those already under construction will be included in the project. The total length of low tension lines will be approximate- ly 140 km to serve seven towns and villages as shown on the attached map. New substations and expansion of existing substations are also included in the project. These lines and substations are being constructed to meet the objectives of the National Government to provide electric service to the rural areas. As is the case with most rural lines the revenues will be low particularly in the initial years and it may be a number of years before these facilities will be able to pay their way. Consequently, Electribol and the Instituto have agreed that the construction of such lines should be limited to those that can be constructed with funds available from taxes, appropriations, or other equity contributions obtained from the National Government, the Department of Bolivar or muni- cipalities. 38. The re'abilitation and expansion of the distribution facilities in the city of Cartagena are an important supplemental feature of the ex- pansion program. A portion of this work has already been started by the Empresas and would be continued at a pace to meet all requirements as the load develops. It is estimated that the total expenditure of approximate- ly US$0.7 million equivalent would be required on the system through 1965. Of this amount US$0.46 million is included in the proposed loan to Elec- tribol for relending to Empresas. Electribol has agreed to enter into a subsidiary loan agreement with Empresas on terms and conditions satis- factory to the Bank. 39. The staffs of Electribol and the Instituto are jointly doing the engineering work for the transmission, distribution and substation facili- ties operated by Electribol. From their past experience, it appears that these two organizations are capable of doing the work satisfactorily. The staff of Empresas is designing and constructing the distribution system expansion at Cartagena. Empresas has agreed to employ an engineer- - 9 - ing consulting firm to review its plans of expansion to assure adequate and economical designs. 40. By late 1969 or early 1970 additional facilities will be required to meet further increases in power loads. The Instituto has plans for the construction of a large generation plant approximately 150 km south of Cartagena near Magangue where a large natural gas field is located. The Instituto has programmed the commissioning of the first generating units of this plant for late 1968 or early 1969 from which adequate electrical energy would be available to meet the future needs of the Cartagena area. In accordance with the plans of the Instituto, Electribol has planned an expansion program which includes the construction of transmission lines between the proposed power plant and Cartagena. Construction of the transmission lines would be started in 1967 and be completed in 1969 to meet the expanding needs of Cartagena. Cost Estimates 4l. The construction costs of the project are as follows (for details see Annexes 8 and 9): (in millions of US$) Foreign Local Exchange Costs Total Electribol Power plant equipment 3.60 .21 3.81 Civil works .13 .44 .57 Transmission lines, distribution lines & substation additions .37 .41 .78 Engineering .10 - .10 Sub-total 4.20 1.o6 5.26 Interest during cornstruction .39 .39 Electribol total 4.57 1.o6 5.65 Empresas Distribution system .42 .27 .69 Interest during construction .04 .01 .05 Emoresas total .46 .28 .74 Grand Total 5.05 1.34 6.39 - 10 - 42. The estimates for equipment in the power plant are based upon a firm contract for the first unit with an option to purchase the second unit at the same price plus escalation to compensate for increases in the cost of fabrication and labor erection through 1965. In addition, 6% has been added to the cost of the second unit for contingencies. The estimated cost of civil works for the power plant is based upon bids received in March 1963 to which has been added 20% for contingencies. The estimates for transmission and distribution lines are based upon the costs of similar works currently being performed by Electribol to which has been added 15% for contingencies. The estimates have been prepared on a realistic b9sis and the allowances made are reasonable. 43. The cost for the expansion of the Cospique plant amounts to US$192 per kw This is reasonable for expansion of a plant of this size where many of the basic facilities are already installed. If the addi- tions to the transmission lines, distribution system and substations of Electribol's system are included the unit cost would increase to US$226 per kw. 44. With the new 12.5 MW units operating on base load the cost of generation on the system should be considerably lower than at present. The cost of energy produced would depend on the percentage of use of the older and less efficient units and this would vary from time to time. For the next few years the cost of energy sold is estimated to average about 12 centavos (9.3 mills US) per kwh. All alternatives for the pro- posed project including smaller size units would result in higher pro- duction costs. The estimated load growth justifies the capacity of the 25 I-IN proposed. In the first few years of operation sales in the rural areas would be small. However, sales are estimated to increase, and by 1969 would show rather satisfactory profits and, in any event, the lines would not be an undue financial burden to Electribol provided the pre- sent program of construction is not exceeded. Serving the rural loads by transmission lines would be more economical than providing service through diesel plants in each of the small towns. - 11 - V. FINANCIAL ASPECTS Tariffs 4S. The rates of electric public utilities in Colombia, both privately and publicly owned, are subject to the approval of the Superintendencia de Regulacion Economica, an agency under the Ministerio de Fomento. For the most recent rate increase in May 1963 the Superintendencia had to obtain in addition a specific approval of the Government's Council of Ministers. 46. Electribol sells the major portion of its energy to Empresas in bulk. The original tariffs were 9.6 centavos (10.7 US mills) per kwh for the first 3 million kwh per month and 8.2 centavos (9.1 US mills) for each additional kwh. These tariffs proved inadequate to produce revenues sufficient to cover operating cost and in early 1962 Electribol applied for a rate increase which was approved by the Superintendencia as of November 1, 1962. This rate increase was soon offset by the cost in- creases resulting from the devaluation of the Colombian peso from Ps 6.7 to Ps 9 to the US$ in October 1962. As of May 1, 1963, another rate ad- justment was therefore granted which provided for a 35% increase over the November rate level raising tariffs to 13.5 centavos (15 US mills) per kwh for the first 10 million kwh per month and 12.15 centavos (13.5 US mills) for each additional kwh. 47. Electribol's retail customers in the small communities and rural areas in the northern part of the Department of Bolivar are billed at a rate of 30 centavos (33.3 US mills) per kwh. This rate has remained un- changed. 48. Empresas purchases power from Electribol and distributes it in the Cartagena area. Its rates are therefore closely related to Electribol's and were increased correspondingly. In 1962 revenues from sales to all classes of consumers averaged 12.7 centavos (14.1 US mills) per kwh. This was insufficient to meet operating cost. A rate increase of about 16% as of November 1, 1962 resulted in an average rate of 14.8 centavos (16.4 US mills) per kwh. To compensate for cost increases after the 1962 de- valuation of the peso, another increase of about 40% was approved and be- came effective as of May 1, 1963 bringing the average rate to 20.7 centavos (23 US mills) per kwh. 49. The rates in effect as of May 1, 1963 were used as a basis for the financial forecasts of Electribol and Empresas. Allowing for con- tinuing inflationary increases in operating costs, a further increase in average revenues per kwh of about 10o would be necessary by 1965. (See paragraph 61.) Present Financial Position of Electribol 50. A condensed balance sheet of Electribol for December 31, 1962 in millions of pesos is shown below: - 12 - ASSETS LIABILITIES Fixed assets in operation Capital 28.6 (at cost) 23.1 Less: Depreciation reserve 2.1 Net fixed assets in operation 21.0 Work in progress 1.3 Surplus and reserves .2 Total net fixed assets 22.3 28.8 Investment in subsidiaries 5.1 Long-term debt (incl. 12 months maturities) 2.3 Current and other assets (net) 3.7 31.1 31.1 Debt/equity ratio 7/93 51. Long-term debt as shown above consists of (a) a dollar loan from the Coffee Federation equivalent to about Ps 1.3 million, at an interest rate of 6%, for the financing of transmission and distribution equipment; this loan is repayable in pesos over 5 years starting in 1965 after a 3-year grace period; and (b) various suppliers' credits for the power plant at Cospique totalling about Ps 1 million, scheduled to be re- paid by 1964. 52. The equity of Ps 28.8 million ($3.2 million) consists of the capital paid in (see paragraph 6) net of accumulated losses amounting to about Ps 700,000 (see paragraph 53) plus capital surplus and reserves of about Ps 900,000. Recent Earnings Record of Electribol 53. Condensed income statements for 1961 and 1962 are shown in Annex 10, Electribol started operations in May 1960 and at the end of the 8- month period to December 1960 showed an operating loss of Ps 108,000. Electribol continued to operate at a loss in 1961 and 1962 closing these years with losses of about Ps 390,000 and Ps 220,000 respectively. 54. The financial problems of Electribol in the past stemmed from the following conditions: (a) the ineffective use of the Cospique capacity in 1960, 1961 and part of 1962; (b) poor administrative management and excessive staff; - 13 - (c) poor technical operation of the plant; and (d) delay in adjustments of tariffs. 55. The integration of power operations through the lease of the Manga plant, the strengthening of administrative and technical control by the Instituto and the tariff increase obtained in November 1962 were de- signed to solve the problem. However, sizeable cost increases after the peso devaluation in late 1962 again worsened Electribol's financial position. Unit costs for fuel increased about 49% and other operating costs increased by about 45%, but the necessary rate increase was tot ap- proved 'until May 1963. With the expected rapid increases in sales, parti- cularly to the Abocol fertilizer plant, with the technical and adminis- trative improvements already achieved and with the higher tariffs, Electri- bol's operations should show profits from 1963 onwards. Proposed Financing Plan of Electribol 56. A 7-year forecast (1963-1969) of sources and applications of funds is given in Annex 11. It is based on a forecast of earnings shown in Annex 10 and specific assumptions listed in Annex 10a (see also para- graph 61). Total capital expenditures during this period are estimated at about Ps 94 million ($10.4 million). This program includes the pro- posed project, new investments in subsidiaries, and the possible future expansion of the transmission lines to connect with the Magangue plant which the Insituto plans to build. 57. The following summary of Annex 11 shows the financial require- ments during the construction period of the proposed project (1963-1966) and the period thereafter (1967-1969) and the sources from which these requirements would be met: 1963-66 1967-69 (TI millions of Pesos) Financial Requirements Construction expenditures Proposed project 1/ 46.1 - Assumed future expansion - 45.0 Investmnt in subsidiaries 2.9 - Capital expenditures 49.0 45.0 Debt service 8.9 ./ 14.8 Total Financial Requirements 57.9 59.8 1/ A payment of $137,000 (Ps 1.2 million equivalent) was made in 1962 to MAN, Germany, supplier of the first unit included in the project. 2/ Includes Ps 3.1 million interest during construction financed from IBRD loan, and Ps 700,000 debt service payments recovered from Empresas (see Sources of Funds). - l - 1963-66 1967-69 (in millions of Pesos) Sources of Funds Internal cash generation 18.1 28.8 Long-term borrowings: Proposed IBRD loan 45.0 Less: portion relent to Empresas 4.1 40.9 - Assumed future loan - Equity contributions 7.7 - Recovery from Empresas .7 1.2 Total Sources of Funds 67.4 52.5 Cash accrual (deficit) 9.5 (7.3) Y 58. Under the proposed financing plan Electribol would be able to meet all financial requirements during the construction period and would in addition accumulate a cash surplus which would be used to meet increased working capital requirements and to help in the financing of the assumed future expansion program through 1969. 59. The borrowings assumed are as follows: (a) The proposed Bank loan of $5 million would be obtained in mid-1963, at an assumed rate of 5-1/2% and for a term of 20 years including a grace period of 31 years. A major portion of interest during construction is included in the loan; the difference would be provided from Electribol's own funds. $460,0o of this loan would be relent to Empresas; (b) Another foreign exchange loan would be obtained in late 1967 for financing the estimated foreign ex- change cost of the Magangue transmission line at an assumed interest rate of 5-1/2% and with amortiz- ation to start in 1970 after a 3-year grace period. 60. In 1963 Electribol is expected to receive equity contributions totalling Ps 7.7 million. Ps 5.9 million of this amount would come from the approved 1963 budget of the Instituto and Ps 1.8 million from the Department of Bolivar. No further equity contributions have been taken into consideration. Y This deficit would be covered by the previously accumulated cash balance. - 15 - Estimated Future Earnings of Electribol 61. A forecast of income statements for the 7 years 1963-69 is shown in Annex 10. The assumptions on which it is based are listed in detail in Annex 10a. Unit prices for fuel and other operating costs up to the end of 1965 include an annual inflation allowance of 7% over and above the recent adjustments in these costs (see paragraph 55). On this basis an additional increase in rates of about 10% in 1965 would be necessary for Electribol to maintain an adequate financial position. No further cost adjustments were made after the completion of the project in 1965 on the assumption that further inflationary cost increases would be corrected by a proportionate rate increase under the proposed rate covenant (see para- graph 65). The financial results would be as follows: (a) Net profits in 1963 of Ps 1.2 million would off-set the cumulative losses of previous years and would increase to Ps 5.3 million by 1969; (b) The rate of return of net fixed assets in operation (at cost) would amount to 7.6% in 1966 after com- pletion of the project and would increase to 13.1% in 1969 (Annex 12). If the assets were revalued to reflect the higher Peso equivalent of the foreign exchange component after the peso devaluation, the return would be 6.5% in 1966 and 11.7% in 1969; (c) The year-end debt/equity ratio would range between 2/76 and 51/49 (Annex 12); (d) Total debt service payable would be covered 2 times by Electribol's internal cash generation in 1967 when full debt service on the proposed IBRD loan is assumed; in 1969 the coverage would be 1.9 times (Annex 11); (e) Net income from operation would cover total interest payable more than 2 times after the completion of the project in 1965. (Annex 11). 62. These ratios and coverages show that Electribol would on the basis of present forecasts and assumptions maintain a satisfactory cash position throughout the period under review. The return on investment which is initially rather low wold improve gradually and reach a satisfactory level by 1967. Future Financial Position of Empresas 63. The financial appraisal of Empresas' Power Department is based on a report prepared by the Instituto. Forecast5of Empresas' income state- ments, cash flow and balance sheets for the seven years 1963-69 are shown in Annex 13, 14 and 15. Empresas' financial position during these years would be as follows: - 16 - (a) As a result of the recent tariff increases Empresas would operate at a profit from 1963 on, while operat- ing losses were incurred in the past (Annex 13). The assumed 10% increase of Electribol's rates in 1965 (see paragraph 61) would require an increase of similar magnitude for Empresas. The forecast income statements are based on this assumption; (b) Past losses of Empresas' Power Department have been covered adequately by internal loans from other departments of Emprecas. The total of these loans as of March 31, 1963, amounted to Ps 7.3 million including Ps 1.6 million contributed early in 1963. This inter-departmental debt is free of interest and is kept on Empresas' books as deferred liability without repayment terms. (c) The proposed construction program of Empresas during 1963-66 contemplates expenditures of Ps 6.2 million. The proposed loan of $460,000 (Ps 4.14 million) re- lent by Electribol to Empresas would cover the foreign currency cost or about 61% of the total con- struction expenditures during this period, plus interest during construction on the foreign exchange loan. The remaining 39% would c,me from internal loans and cash generation. From 1967-69 Empresas plans to spend for its expansion an average of Ps 370,000 annually which is assumed to be financed 100% from internal cash generation; (d) Debt service coverage would range between 2.8 and 7.8 times after the project is completed in 1965; (e) The rate of return on net fixed assets in ooeration would be 7o in 1966 after completion of the pro- posed program and would increase to 15.1% in 1969 (Annex 15). If the assets were written up to re- flect the peso devaluation the returns would be 5.% in 1966 and 12.7% in 1969; (f) The year-end debt/equity ratio would range between 62/38 in 1965 when the proposed loan is fully dis- bursed, and 45/55 in 1969. 64. These ratios and coverages are satisfactory or would reach satisfactory levels towards the end of the forecast 7-year period. Empresas would have no difficulties to meet its financial obligations to- wards Electribol and to finance the required expansion of its distribution network. - 17 - Proposed Rate and Debt Limitation Covenants 65. It has been shown in the previous two sections that both Electribol and Empresas would maintain a satisfactory cash position through- out the period under review. Further rate adjustments would, of course, be required if inflationary cost increases should continue. In order to ensure an adequate level of rates both entities have agreed to keep tariffs at a level which would allow them (a) to cover from revenues all operating and related expenses, depreciation or amortization (whichever is greater), and interest and (b) to make reasonable allocations to reserve. 66. These allocations to reserve are generally expressed as con- tributions towards expansion. Electribol's expansion beyond the present project is, however, not well defined. It was therefore agreed that the desirable level of tariffs would be determined annually by estimating the total requirements under (a) above for the subsequent two years and by adding at least 15% of this total as a margin which would protect Electribol against unexpected deviation from the estimates. The initial test under this covenant would be made early in 1965 when the first unit of the pro- ject would go into operation. In the forecasts presented, Electribol would annually meet the requirements of this covenant. The appropriateness of the figure of 15% would be reviewed from time to time. 67. In addition, Electribol agreed to a covenant which would require the Bankts prior approval to incurring new debt unless internal cash generation of the previous 12 months (adjusted for tariffs in effect at the time of the calculation) plus recovery from Empresas would cover maximum future debt service at least 1.4 times. The assumed new debt in late 1967 would conform to these requirements. 68. In the case of Empresas the allocations to reserve would be defined as a reasonable portion of expansion cost and Empresas has agreed to a commitment in the subsidiary loan agreement that this reasonable portion would amount to at least 30% of the sizeable construction program during the period 1963-66, and to at least 50% of all annual requirements thereafter. To implement this agreement, operating results and con- struction expenditures would be reviewed at the end of each year using a 2-year averagce, the year just ended and the year following. The estimates of revenues for the future year would be based on the rates in effect or approved at the time of the review. This covenant should be adequate to protect the liquidity of Empresas, Electribol's largest customer, and no debt limitation covenant seems to be required. Auditors 69. Since the present auditor is a staff member under the supervision of the General Manager (see paragraph 8) Electribol agreed to engage an outside accounting firm acceptable to the Bank to audit its accounts in the future. - 18 - VI. CONCLUSIONS 70. The project is technically sound, the estimated cost reasonable and the construction schedule realistic. 71. The market for power in the area justifies the installation of the proposed facilities. 72. The Instituto and Electribol with the assistance of its con- sultants are capable of constructing the project. The Empresas is capable of constructing the Cartagena distribution expansion with the aid of qualified consultants. 73. The financial situations of Electribol and Empresas have been improved by the tariff increases obtained in May 1963 which have off- set recent cost increases due to the peso devaluation. On the basis of present forecasts, both entities should arrive at, and maintain, a sound financial position after the completion of the project in 1966. Appro- priate covenants for this purpose have been included in the respective loan agreements. 74. The project, including the expansion of distribution facilities in Cartagena, is considered suitable for a Bank loan of $5.0 million with a term of 20 years including a period of grace of 32 years. June 24, 1963 ANNEX . EXISTING FACILITIES Generation Facilities The generating facilities which provide the power for the re- gion, consist of the Manga plant and the Cospique plant. The Mv1anga Plant The Manga plant has both diesel-electric equipment and turbo- generators. The total installed capacity is 11,650 kw, divided between the following units: Unit No. 1. - Sulzer diesel motor, two cycle, 10 cylinders 3,600 H.P. 275 r.p.m., with 3,100 kva and 4,160 volts alternator Fuel: (unker-C afid Gas-oil. Unit Nos. 2 & 3.- Worthington extraction turbines, 400 p.s.i., 8500F., 3,600 r.p.m. with 3,750 kva and 4,160 volts alternators. Foster Wheeler boilers. Unit No. 4 - General Electric 200 p.s.i., 5000F., 3,600 r.p.m. extraction turbine with 2,670 kva and 4,160 volts alternator. Riley boiler. Unit No. 5 - Sulzer diesel motor, two cycle, 10 cylinders, 3,600 H.P., 275 r.p.m., with 3,100 kva and 4,160 volts alternator. Fuel: Bunker-C and Gas-oil. Unit No. 4 is in poor condition after 30 years service and at present is used only during peak load. In future it is planned to use the unit only for standby purposes. Unit No. 1 is not similar to Unit No. 5 and has a lower efficiency. The two diesel units have been operated 27,000 hours each up to March 1962. At the time of the visit by the Bank mission in mid-1962 Unit No. 5 was being overhauled and upon completion of that work, Unit No. 1 was to be overhauled and converted for Bunker-C operation. Total cost of the work on the two units is estimated at Col. Ps. 1.2 million. Unit No. 1 is used only during peak hours, while Unit No. 5 is generally used from 8 a.m. to 10 p,r. Units No. 2 and 3 are normally used to supply part of the base load to the city. Fuel for the Manga plant is delivered by boat from the refinery at Mamonal. Because of the location of the Manga plant, future extensions to it have not been considered, ANNEX 1 Page 2 The Cospique Plant The Cospique plant commenced operation in May 1960. It is lo- cated on the bay, approximately 10 airline km south of Cartagena. The plant is close to the oil refinery of the International Petroleum Company at Mamonal, which is also the coastal terminal of the Andian National Corporation oil pipeline that extends from central Colombia. The plant has two identical 5 MW MAN steam turbines, h00 p.s.i., 7500F., 3,600 r.p.m., with 6,250 kva and 4,160 volts alternators, with MAN boilers. The fuel for the plant is supplied from the storage tanks of Easo Colombiana at the re- finery through a pipeline of approximately 2 kilometers in length. Transmission and Distribution System of Electribol The Cospique and Manga plants are connected by a 66 kv (No. 2/0 AWG) transmission line approximately 18 km long. Approximately 15 km of this line is installed on steel towers, is double circuit, and connects with the El Bosque substation at the Cartagena city limits as well as with the 66 kv line which extends approximately 32 km to the substation at Gambote. These lines constitute the high voltage system of the region. A system of 13.2 kv lines approximately 32 km in total length and in operation since late 1960 extends from the Gambote substation to the urban distribution systems in the small towns of Arjona, Turbaco, and Turbana. The Cartagena aqueduct pumping station at Gambote has been served from the Gambote substation since November 1960. The lines are now being extended to towns beyond Gambote. The Cartagena distribution system is fed from the Manga substation and from the El Bosque substation which started operation in February 1961. The Mamonal zone is served directly by a 3 km line from the 4.16 kv bus at the Cospique switchyard. A new line between the Abocol fertilizer plant and the switchyard is now under construction. The Manga substation is equipped with a 66/4.16 kv, 6 MVA trans- former and the El Bosque substation with a 55/7.2 kv, 6 MVA transformer. The 66 kv lines are served from Cospique by two 6.25 MVA transformers. The Gambote substation is presently equipped with a 66/13.2 kv, 3 MVA trans- former. ELECTRIC ENERGY PRODUCTION AND LOAD GROWTH EMPRESAS DE CARTEGERA SYSTEM 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 Estimated Population - in thousand 111.3 115.3 119.5 123.8 128.3 132.9 137.7 12.7 147.8 153 159 164 Gross Generation - kwh l thousands 16,976 19,757 21,480 28,764 38,704 42,509 50,783 55,667 60,140 66,466 73,061 Station Use - kwh thousands 796 1,842 1,187 1,632 2,201 2,443 3,564 3,158 2,355 2,93b 2,809 Net Output - kwhZl thousands 16,180 17,915 20,293 27,132 36,503 0,066 47,219 52,509 57,785 63,532 70,252 ) 2/ Energy lost - kwh - thousands 3,99 5,015 5,618 7,784 8,422 5,970 6,731 7,921 8,752 9,250 9,563 Energy Lost - 21.6 28.0 27.6 28.7 23.1 12.9 14.2 15.1 15.1 1.5 13.6 Total Energy Sales - kwh thousands 12,681 12,900 14,675 19,348 28,081 34,096 50,588 55,588 59,033 55,292 60,689 67,593 Available Station Capacity - kw 3,400 5,000 5,430 6,650 9,150 11,650 11,650 11,650 11,650 21,650 21,650 21,650 System Peak Demand - kw 3,00 4,950 5,30 6,400 8,850 9,300 10,850 10,700 11,555 12,700 15,500 18,600 Annual Load Factor 0.57 0.46 0.45 0.51 0.52 0.52 0.53 0.59 0.59 0.60 o.58 0.596 Per Capita Annual Gross Generation 153 171 180 :232 302 320 369 390 506 534 458 2/ 1 Includes purchased power from Cospique Power Plant Not available June 17, 1963 CUSTOMERS, ELECTRIC ENERGY SALES, REVENUES AND EXPENDITURES EMPRESAS DE CARTAGENA SYSTEM Years: 1955 1956 1957 1958 1959 1960 1961 1962 Customers - Residential 10,856 13,124 13,917 14,894 16,050 17,531 18,973 - Commercial 571 641 674 710 725 753 790 - Industrial 205 211 216 227 230 229 236 - Others 100 105 11h 127 143 154 182 Total Customers 11,731 13,139 14,081 15,921 15,958 17,158 18,567 20,181 Electric Energy Sales - Residential kwh thousands 13,835 17,655 20,056 25,216 25,986 28,250 31,392 36,864 - Commercial kwh thousands 5,519 5,188 5,567 6,263 7,547 8,900 10,515 11.699 - Industrial kwh thousands 7,515 9,345 10,795 9,958 11,855 13,087 15,535 14,213 - Others kwh thousands 2,312 1,909 A,071 3,151 3.646 4,065 5,25 Total Electric Energy Sales kwh thousands 28,081 35,896 50,588 45,588 59,033 55,292 60,689 67,593 Revenues from Sales of Energy - Residential - Ps thousands 1,295 1,590 2,198 2,755 2,968 3,557 5,113 4,938 - Commercial - Ps thousands 655 720 871 1,071 1,225 1,562 1,731 1,914 - Industrial - Ps thousands 512 581 638 705 855 1,125 1,558 1.558 - Others - Ps thousands 99 236 281 280 330 106 107 Total Revenues - Ps thousands 2,560 3,027 3,988 5,810 5,376 6,259 7,h09 8,813 Average Revenue per kwh from Energy Sales centeros 8.76 8.88 9,85 10.78 10.96 11.51 12.20 13.10 Operating Expenses and Reserve - Ps thousands 2,182 2,771 3,687 5,752 5,999 6,891 8,505 10,181 Average Operating Expenses per kwh cent avos 7.76 8.13 9.11 10.65 12.33 12.70 15.00 15,06 67 6/17/63 50 50 COLOMBIA ELECTRIFICADORA DE BOLIVAR PEAK LOAD. CAPABOLOTBES AND M5TALLATBON SCHEDULE 40 F T 40 U) NOMINAL CAPACiTY- 0 -30 30 wz 00 00 zOFIRM CAPACITY A < (with largest unit (n out of service) 0 2 z w TOA YTM EKLA 45 '6 '7 '8 '9 '5o5 5 5 5 55 '6 '7 '8 '9 0 6 62 '3 6 '6-6 '7 '8 6 7 PMEASURED AEST ATDS JUN 1930RD96 ------------------o- -i MEASJREDND STIALE D JUN 193I0D96 ANNEX 5 (M I L L ION K WH; TEN THOUSAND INHABITANTS) LO ~ 0 9 in 0 f N o in W34 SE30 S...*..... ...... . . . . . . . . . . . . . ... wzz z < o 0o :)¯¯< > >>r ~4 r- 04 0 0 LO c CY S Il8VHN N s O I N 1 tH X N 1I114 haa 6 DESCRIPTION OF THE PROJMCT 1. Steam Characteristics The steam condition at the turbine inlets would be as follows: Pressure 600 p.s.i. --------- [2 kg/cm2 Temperature 8200F -------- 4o0 C The heat consumption of the units at full load would be 13,220 Btu/kwh. The corresponding cost would be [.0 centavos/kwh or 4.5 US mills per kwh with Bunker-C costing USV'0,051:per US gallon or US'0.34 per million Btu. 2. Turbine Generator Characteristics Each turbine-generator unit would have the following characteristics: Iaximum continuous output 15,625 kva Power factor 0.8 Rated voltage 13,800 volts Frequency 60 cycles Speed 3,600 r.p.m. 3. Boiler Characteristics The boiler would have a maximum continuous rating of 64 t/h at Pressure 640 p.s.i. --------- 45 kg/cm Temperature 8400F -------- -480c The boilers would have a mean thermal efficiency of 91.5 percent. Each boiler would be fitted with an economizer, a super-heater and an air preheater. Ilixed burners would allow fuel oil and gas com- bustion. Combustion would be automatically regulated (induced and forced draught, fuel flow, super-heating temperature, waterlevel). ietering control and indicating devices, would be grouped on a control panel. Soot blowers would be provided. L. Fuel Oil Equipment To maintain the 7 days of oil reserve as installed for the pre- sent units a new tank of about 1,200 ,m3, would be provided for the new unit. A new service tank of about 75 m3 would also be provided. A transfer pump of 40 cu.r/hr would fill the tank in less than 2 hours, and the tanks would be interconnected for flexibility of operation. ANNEM 6 Page 2 5. Condensers and Auxiliaries The condensers would be cooled by sea-water and would consist of two halves which can be cleaned while in operation. Each condenser would be served by two steam ejectors i.e.: - a spare and starting ejector, - a normal service low-capacity ejector. Two condensate pumps would be provided for each unit: - a normal service motor driven pump, - a spare and starting turbo-pump. A new pump house and pumps for the cooling water would be pro- vided. Chlorination equipment would be provided to treat the cooling water. 6. Power Plant, General Civil works would be constructed for the two generating units which would include the building to house the units and auxiliary equip- ment, the enlargement of the switchyard, the construction of roadways and walkways, and the grading of grounds in the new plant area. Electri- cal equipment to be added to the switchyard to meet the new requirements of the added generation would include a 15 MWA transformer 13.8/66 kv, circuit breakers, disconnecting switches, and other accessories to com- plete the installation. 7. Transmission Distribution and Substation Facilities The 13.2 kv transmission additions to be constructed would in- clude approximately 140 km of 3-phase line. Extensions to the distribution facilities would be made in the towns of Santa Rosa, Villanueva, San Estanislao, Soplaviento, Calamar, Santa Catalina, San Juan, and other small communities in addition to the rehabilitation and extension of the distri- bution facilities in Cartagena. Two 6 MVA 66/4.16 kv transformers with switching equipment and accessories would be added to the El Bosque sub- station. A 6 MvA 66/4.16 kv transformer would also be added to the Manga substation. COLOMBIA C OSPUQUE POWER EXPANSOON PROJECT FABRICATION AND CONSTRUCTION SCHEDULE 1963 1964 1965 JIF MAIMJJ ASON D J FMAMIJJ JASION D J F MA M JJA SOND POWER PLANT EQUIP. FABR. ---First Unif Second Unit TRANSPORTATION First Unit Second Unit First unit Second Unit ERECTION- --- m m-- - m- m-m-I-m CIVIL ENG. WORKS BIDDING EARTH MOVEMENT FOUNDATIONS SUPERSTRUCTURE --- First Unit Second Unit 13.2KV TRANS. a SUBS. URBAN DISTRIBUTION > z m , In service dote of unit JUNE 1963 IBRD-986RI ANNEX 8 C 0 ST ESTIMATE Cospique Thermal Power Project Foreign Local Exchange Currency Total $1000 Ps.1000 $'000 Ps.1005 ELECTRIBOL First 12.5 kw Unit Boiler & accessories 408 300 440 3,970 Turbine & water supply 792 330 830 7,460 Piping 130 65 135 1,235 Electrical equipment 462 200 485 4,358 Second 12.5 kw Unit 1/ Boiler & accessories 430 300 460 4,170 Turbine & water supply 835 355 880 7,870 Piping 62 60 67 620 Electrical equipment 266 210 290 2,600 Contingencies (approx. 6%) 212 100 221 2,010 Total for Power plant equip ent 3,597 1,920 3,810 34,293 Civil works 110 3,280 475 4,275 Contingencies (approx. 20%) 21 650 93 839 Total for civil works 131 3,930 568 5,114 Engineering consultants lap - 100 900 Total for powerhouse 3,828 5,850 4,478 40,307 13.2 kv transmission & substation 268 2,215 514 4,626 Urban distribution systems 53 935 157 1,412 Contingencies (approx. 15%) 45 474 98 879 Engineering consultant - 85 9 85 Total for lines and substations 366 3,709 7?8 7,002 Total powerhouse, transmission, dis- tribution & substation 4,194 9,559 5,256 47,309 Interest during construction financed by IBRD loan 391 - 391 3.520 Total Electribol 4,585 9,559 5,647 50.829 ERPRESAS Distribution system in Cartagena 418 2,42 68a 6,187 Interest during construction financed by IBRD loan 42 84 51 462 Total Empresas 460 2,509 739 6,649 Total Project 5,045 ?J 12,068 6,386 57,478 1/ 6.0% overall added to actual prices to compensate for price increase in fabrication, transport and labor erection costs through 1965, and for inflation during the year between the erection of the first and second units. J $45,000 of interest during construction on Electribol's expansion not financed by Bank loan. June 17, 1963 EXPENDITURE PROGRAM Cospique Thermal Power Project (in thousands of Pesos) 1962 1963 1964 1965 1966 E LC. F.E. L.C. F ELF ac.C ELECTRIBOL First unit 1,231 - 5,934 2,340 10,140 2,513 1,623 - - - Second unit - - 1,500 - 7,026 481 5.500 515 1,500 - Transmission & distribution expansion - - 899 1,200 2-254 2,510 143 - - - Sub-total 1,231 - 8,333 3,540 19,420 5.504 7,266 515 1,500 - Interest during construction - - 220 - 1,310 - 1,990 - - - Total Electribol 1.231 - 8,553 3.540 20,730 5.504 9,256 515 1.500 - EMPRESAS Distribution system - - 990 545 1,368 665 1.404 710 - 505 Interest during construction - - 60 20 122 23 196 24 - 17 Total Empresas - - 1,050 565 1,490 688 1,600 734 - 522 Total Project 1,231 - 9,603 4.105 22,220 6,192 10,856 1,249 1,500 522 --------------- in thousands of Pesos ---------- SUMMARY Foreign Exchanze Local Currency Electribol project cost 37,750 9,559 47,309 Interest during construction 3,520 - 3.520 Total Electribol 41,270 9,559 50,829 Empresas project cost 3,762 2,425 6,187 Interest during construction 378 84 462 Total Empresase 4,140 2,509 6,649 Grand Total 45,410 12,068 57,478 June 17, 1963 ELECTRIFICADORA DE BOLIVAR Income Statements 1961-1969 (in thousands of Colombian Pesos) ---Actual ---------- ---------------------------------- Forecast--------------------------------------- Total Year Endinp December 31 1961 1962 196 1 1968 Sales in millions of kwh: To Empresas 29.3 72.2 109.8 122.3 130.9 139.3 148.7 159.0 170.5 Small communities .2 1.9 6.0 Total sales of power 112. 126.1 135.3 144.7 154.5 165.0 176.9 Revenues from power sales 3,108 7.166 14,470 17,620 20,728 22,181 23,570 25,013 26,682 150,264 Other revenues 150 70 70 70 70 70 70 Total revenues 3,187 7.325 14,620 17,690 20.798 22,251 23,640 25,083 26.752 150.834 Operating cost: Operating expenses 2.786 6,440 11,870 14,500 14,700 13,900 14,500 14,900 16,000 100,370 Lease of Manga Plant and Warehouse Purchases - 295 600 600 6o0 503 420 420 420 3.563 Depreciation 750 794 860 1,030 2.110 2.960 2.960 2.960 2,960 Total operating cost 3,536 7,529 13,330 16,130 17,410 17,363 17.880 18,280 19,380 119,773 Net income from operation (349) (204) 1,290 1,560 3,388 4,888 5,760 6,803 7,372 31,061 Interest payrable. net of interest recovery from Empresas 307 1,387 2,064 2,202 2,249 2,710 3,076 13,995 Less: Interest capitalized _________220 1.310 1.990 - - 560 1.030 10 Interest charged to operation 40 14 87 77 74 2.202 2.249 2,150 2,046 8,885 Net profit (389) (218) 1,203 1,483 3,314 2,686 3,511 4,653 5,326 22,176 Note: Assumptions for the forecast income statements are listed in Annex 10a. June 17. 1963 ANNEX 10a Assumptions for Forecast Income Statements 1. Forecast revenues from power sales are based on sales forecasts described in para. 26 and the rates in effect as of May 1, 1963 given in para. 46. A 10% increase in average revenue/kwh is assumed at the beginning of 1965 (see para. 61). 2. Operating expenses from 1963 on reflect the increases in fuel and other costs which occurred after the peso de- valuation. Additional inflationary increases of 7% annually have been assumed through 1965 (see para. 61). 3. In accordance with the contract signed between Electribol and Empresas, the fee to be paid to Empresas for leasing the Manga Plant would be Ps 420,000 per year, which was computed to cover the annual depreciation accrual. 4. During 1963-67 Electribol would purchase from Empresas' warehouse material for the maintenance of the Manga Plant for a value of about Ps 700,000. 5. Depreciation has been calculated at 4% of the capital investment on a straight line method. ANNEX ELECTRIFICADORA DE BOLIVAR Sorces and Apolications of Funde 1963-1969 (in thousands of Colombian Pesos) Total Year Ending December 31 1392 12k 9. SOURCES OF FUNDS Internal cash generation: Net income froe operation 1,290 1,560 3.388 4,880 5.760 6,803 7,372 31.061. Depreciation 860 1.030 2.110 2.96C 2.960 2.9§0 2.960 1- Total internal cash generation 2,150 2,590 5.498 7,848 8,720 9,763 10,332 ,901 Recovery from Empresas 60 122 196 303 378 376 378 1,815 Borrowings: Proposed I:RD loan It 10,830 22,220 10,450 1,500 45,000 Assumed future loan - - - - 2.290 11.250 9.000 1' Total borrowings 10,830 22,220 10,450 1.500 2,250 11.250 9,000 67,500 Equity contributions Instituto 5,947 Department of Bolivar 1.800 Total equity contributions 7.747 7,747 Total sources of funds 20,787 24,932 16.144 9,651 11,348 21.391 19,710 123,963 APPLICATIONS OF FUNDS Construction Expenditures: Proposed project: foreign exchange 1 8,333 19,420 7,266 1,500 36.529 local currency 3,540 sja04 515 - Total project expenditures 11,873 24,924 7,781 1,500 46,078 Assumed future expansion - - - 4.10 22.00 18.000 Total construction expenditures 11,873 24,924 7,781 1.500 4,500 22,500 18,000 91,078 Investment in affiliates 1,600 670 670 - - . - 2,940 Advances to Eapresas 1,050 1,490 1,600 - - - 4,140 Debt service: Interest: Coffee Federation loan and supplies 87 77 74 58 43 27 12 378 Proposed IBRD loan 280 1,432 2,186 2,372 2,430 2,338 2,240 13,278 Assumed future borrowings - - - - - 160 1.990 Total interest 367 1,509 2,260 2,430 2,473 2,925 3 '282 15,246 Amortisation: Suppliers' credits 821 109 27 - - - - 957 Coffee Federation loan - - 258 258 258 258 258 1,290 Proposed lBRD loan - - - 817 1,679 1.771 1,869 6 Total amortisation 821 109 285 1.075 1.937 2,029 2,127 8.383 Total debt service 1,188 1,618 2.545 3.505 4,410 4,954 5,409 23,629 Total applications of funds 15.711 28,702 12,596 5,005 8,910 27,454 23,409 121.787 Net cash accrual (deficit) 5,076 (3.770) 3.548 4,646 2,438 (6,063) (3,699) 2.176 Cash balance at beginning of year 430 5,506 1,736 5,284 9,930 12,368 6.305 430 Cash balance at end of year 5,506 1.736 5,284 9,930 12,368 6,305 2,606 2.606 Debt service coverare: Internal cash generation 7.848 8,720 9,763 10,332 Total debt service 3,505 4,410 4,954 5,409 Times covered 2/ g/ g/ 2.2 2.0 2.0 1.9 Interest coverage: Net income from operation 4,888 5,760 6,803 7,372 Total interest payable 2,430 2,473 2,925 3,282 Times covered g/ 2/ 2/ 2.0 2.3 2.3 2.2 I/ Electribol made a down payment of US$137,000 on the first Cospique unit in 1962 which is assumed reimbursable under the proposed Bank loan. 2/ Interest during construction is included in the Bank loan and has not to be met from Electribol's own funds. Coverage calculations would therefore not be very meaningful June 17, 1963 ELECTRIFICADORA DE BOLIVAR Balance Sheets 1961-1969 (in millions of Colombian Pesos) March 31 Year Ended December 31 1961 1962 1963 1963 1964 1965 1966 1967 1968 -------- Actual ----------- --------------------------------- Forecast--------------------------------- ASSETS Fixed assets in operation 20.6 23.1 23.3 25.7 30.5 52.7 74.0 74.0 74.0 74,0 Less: Depreciation Reserve 1.3 2.1 2.3 3,0 4,0 6.1 9.1 12.0 15.0 17.9 Net fixed assets in operation 19.3 21.0 21.0 22.7 26.5 46.6 64.9 62.0 59.0 56.1 Work in progress .4 1.3 1.3 10.9 32.2 19.8 - 4.5 27.6 46.6 Total net fixed assets 19.7 22.3 22.3 33.6 58.7 66.4 64.9 66.5 86.6 102.7 Investments in subsidiaries 5.0 5.1 5.8 6.7 7.4 8.1 8.1 8.1 8.1 8.1 Advances to Empresas 1.0 2.5 4.1 4.0 3.9 3.7 3.5 Current and other assets (net) 3.0 3.7 3.6 8.7 5.0 8.5 13.2 15.6 9.5 5.8 Total assets 27.7 31.1 31.7 50.0 73.6 87.1 90.2 94.1 107.9 120.1 LIABILITIES Capital 25.6 28.6 29.6 36.3 36.3 36.3 36.3 36.3 36.3 36.3 Surplus and Reserves (.13) .2 (.1) 1.5 2.9 6.3 8.9 12.5 17.1 22.4 Total equity 25.3 28.8 29.5 37.8 39.2 42.6 45.2 48.8 53.4 58.7 Long-term debt Suppliers' credits 1.1 1.0 .9 .1 - - - - - Coffee Federation loan 1.3 1.3 1.3 1.3 1.3 1.0 .8 .5 .3 - Proposed IBRD loan - - - 10.8 33.1 43.5 44.2 42.5 40.7 38.9 Assumed future loan - - - - - - - 2.3 13.5 22.5 Total long-term debt 2.4 2.3 2.2 12,2 34.4 44.5 45.0 45.3 54.5 61.4 Total liabilities 27.7 31.1 31.7 50.0 73.6 87.1 90.2 94.1 107.9 120.1 Debt/equity ratio 7/93 7/93 24/76 47/53 51/49 50/50 48/52 51/49 51/49 Return on (average*) net fixed assets in operation l/ / / 5.9* 6.3 7.3 7.5 9.3 11.5 13.1 / During the periods shown Electribol operated at a loss. June 17, 1963 EMPRESAS PUBLICAS MUNICIPALES DE CARTAGENA Power Department Income Statement 1960-1969 (in thousands Colombian Pesos) --- Actual ----- ---------------------------- Forecast ---------------------------- Total Year Ending December 31 1961 1962 1 1964 1 1 2 12.2 1963-1969 Sales in millions of kwh: To the city of Cartagena 66.7 72.5 79.2 86.0 93.5 101.7 111.0 the Abocal fertilizer plant 25.0 30.0 30.0 30.0 30.0 30.0 30.0 the Water Department at Gambote 4.7 5.4 5.9 6.5 7.0 7.4 7.9 Total sales 59.7 66.7 96.4 107.9 115.1 122.5 130.5 139.1 148.9 Revenues from power sales 7.409 8,703 16.540 20.099 23,494 25,434 27,213 29,141 31,337 173,258 Rent from Manga plant and warehouse sales - 295 600 600 600 503 420 420 420 3.563 Other revenues 280 225 350 380 400 450 500 550 600 Total revenues 7,689 9,223 17.490 21,079 24,494 26,387 28,133 30.111 32,357 180,051 Operating cost: Cost of purchased power 2,517 6,217 13,720 16,480 19,276 20,400 21,656 23,033 24,570 139,135 Operating expenses 5,468 3,349 2.970 3,370 3,820 4,050 4,290 4,550 4,830 27,880 Depreciation (incl. Manga) '19 7 564 620 700 780 800 810 830 1 Total operating cost 8,504 10.140 17,254 20,470 23,796 25,230 26,746 28,393 30,230 172.119 Net income from operation (815) (917) 236 609 698 1,157 1,387 1,718 2.127 7,932 Interest payable - - 175 209 263 277 255 228 206 1,613 Less: Interest capitalized - - 80 145 220 17 12 13 14 Interest charged to operation 109 41 95 64 43 260 243 215 192 1,112 Net profit (924) (958) 141 545 655 897 1,144 1,503 1,935 6,820 / Forecast of revenues is based on rates of May 1, 1963: an average of 20.7 centavos per kwh for sales to the city, 14.5 centavos per kwh to Abocol and at cost to Gambote. A 10% rate increase is assumed at the beginning of 1965 concurrent with the increase in the cost of power purchased from Electribol. 2/ Interest capitalized includes (a) interest during construction on foreign exchange loan and (b) a 7% annual interest charge on all local funds invested. June 17, 1963 EMPRESAS PUBLICAS MUNICIPALES DE CARTAGENA Power Department Sources and Agplications of Funds 1963-1969 (in thousands of Colombian Pesos) Total Year Ending December 31 1963 16 19 11 6 SOURCES OF FWDS Internal cash generation Net income from operation 236 609 698 1,157 1,387 1,718 2,127 7,932 Depreciation 564 620 700 780 800 810 830 1 Total internal cash generation 800 1,229 1,398 1,937 2,187 2.528 2.957 13.036 Proposed Electribol loan (IBRD) 1,050 1,490 1,600 - - - - 4,140 Internal debt 1,592 - - - - - - 1 Total sources of funds 3,442 2,719 2,998 1,937 2,187 2,528 2,957 18,768 APPLICATIONS OF FUNDS Construction expenditures Proposed program: foreign exchange 990 1,368 1,404 - 3,762 local currency 545 665 710 950 Total program expenditures 1,535 2,033 2,114 505 6,187 Assumed future additions - - - 350 370 390 1 Total construction expenditures 1,535 2,033 2,114 505 350 370 390 7,297 Debt Service Interest - Existing loans 115 87 67 49 31 13 - 362 Proposed Electribol loan 60 122 196 228 2Z4 215 26121 Total interest 175 209 263 277 255 228 206 1.613 Amortization - Existing loans 698 499 407 300 300 216 - 2,420 Proposed Electribol loan - - - 75 154 163 172 Total amortization 698 499 407 375 454 379 172 2,984 Total debt service 873 708 670 652 709 607 378 4,597 Total applicationsof funds 2,408 2,741 2,784 1,157 1,059 977 768 11,894 Net cash accrual (deficit) 1.034 (22) 214 780 1,128 1,551 2,189 6,874 Cash balance at beginning of year - 1,034 1,012 1,226 2,006 3,134 4,685 Cash balance at end of year 1,034 1,012 1,226 2,006 3,134 4,685 6,874 Debt service coverate Internal cash generation excluding revenues from warehouse sales 680 1,049 1,218 1,854 2,187 2,528 2,957 Total debt service 873 708 670 652 709 607 378 Times covered - 1.5 1.8 2.8 3.1 4.2 7.8 June 17. 1963 EMPRESAS PUBLICAS MUNICIPALES DE CARTAGENA Power Department Balance Sheets 1962-1969 (in millions of Colombian Pesos) March 31 Year ended December 31 1961 1962 1963 ASSETS Fixed assets 13.8 15.1 15.5 16.7 18.9 21.2 21.8 22.1 22.5 22.9 Less: Depreciation reserve 3.2 3.7 3.9 4.3 4.9 5.6 6.4 7.2 8.0 8.8 Net fixed assets 10.6 11.4 11.6 12.4 14.0 15,6 15.4 14.9 14.5 14.1 Investment in associated company (Electribol) 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 Current and other assets (net) 1.5 .2 1.4 1.3 1.2 1.5 2.2 3.4 4.9 7.1 Total assets 14.9 14.4 15.8 16.5 18.0 19.9 20.4 21.1 22.2 24.0 LIABILITIES Capital and surplus 7.1 6.2 6.2 6.4 6.9 7.6 8.5 9.6 11.1 13.1 Long-term debt: Internal debt 4.7 5.8 7.3 7.3 7.3 7.3 7.3 7.3 7.3 7.3 Existing debt 3.1 2.4 2.3 1.7 1.2 .8 .5 .2 - - Proposed loan from Electribol - - - 1.1 2.6 4.2 4.1 4.0 3.8 3.6 Total long-term debt 7.8 8.2 9.6 10.1 11.1 12.3 11.9 11.5 11.1 10.9 Total liabilities 14.9 14.4 15.8 16.5 18.0 19.9 20.4 21.1 22.2 24.0 Debt/equity ratio 52/48 57/43 61/39 61/39 62/38 62/38 58/42 55/45 50/50 45/55 Return on (average*) net fixed assets 2/ / / 5* 3.3* 3.5* 7.0 9.3 11.8 15.1 excluding revenues from warehouse sales 1/ This debt is interest free and has no repayment term (see para. 63 b). 2/ Rate of return not calculated because of operating loss. June 17, 1963 介 JUNE 1965 18RD~glgR