Sierra Leone - Second Power Project

RETURN TO Fla C y RESTR ICTED REPORTS DESK W - Report No. TO-626a WITHIN ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published-nor may it be quoted as-representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION SIERRA LEONE SIERRA LEONE ELECTRICITY CORPORATION APPRAISAL OF ELECTRICITY EXPANSION IN FREETOWN AND PROVINCES June 3, 1968 Projects Department  CURRENCY EQUIVALENTS US$1 = Leone .833 Leone 1 = US$1. 20 Leone 1 million = US$1. 20 million FISCAL YEAR Fiscal year ends March 31  SIERRA LEONE APPRAISAL OF THE ELECTRICITY EXPANSION IN FREETOWN AND PROVINCES TABLE CF CONTENTS Page No. SUMMARY i 1. INTRODUCTION 1 2. THE BORROWER 1 3. THE FACILITIES OF THE SLEC 2 4. THE PROJECT 3 King Tom Power Statiot 3 Expansion of Freetown Distribution System 3 Kenema 3 Koidu 4 Estimated Cost 4 Engineering, Procurement Construction 5 Other Capital Expenditures 5 5. FUTURE EXPANSION 5 6. JUSTIFICATION OF PROJECT 6 Losses 8 7. FINANCIAL ASPECTS 8 Tariffs 8 Audit 9 Present Financial Position 9 Past Earnings 10 Future Finances 11 Financing Plan 11 Future Operating Results 12 Financial Position 12 8. CONCLUSIONS 13 This report was prepared from information obtained by Messrs D. King and S.S. Scales during a mission to Freetown, Sierra Leone in September 1967.  SERRA LEONE SIERRA LEONE ELECTRICITY CORPORATION LIST OF ANNE)MS 1. Generating Station Facilities, Freetown and the Provinces 2. Project Cost Estimate 3. Actual and Forecast Sales of Energy 4. Peak Demand, Installed and Firm Capacity 5. Balance Sheets - 1966 to 1972 6. Statement of Actual Income 1966-1967 and Forecast Income 1968-1972 7. Statement of Sources and Application of Funds Map of Sierra Leone showing project locations and other generating plant.  SERRA LEONE SIERRA LEONE ELECTRICITY CORPORATION SU1MARY i. This report covers the appraisal of a project of the Sierra Leone Electricity Corporation consisting of the expansion of the electricity system in the capital city of Freetown and in two large towns in the Provinces. The project is estimated to cost a total of US$4.8 million and the proposed Bank loan would amount to US$3.9 million equivalent. The project represents a portion of the overall expansion program of the Corporation, the total cost of which is estimated at US$7.5 million in the period April 1968 - March 1971, during which the project would be constructed. ii. The Corporation which would be the borrower, is an autonomous statutory corporation of the Government of Sierra Leone. A previous Loan No. 388-SL, for US$3.8 million equivalent was made in 1964 for expansion of electric facilities in Freetown. Experience with this loan has been satisfactory. iii. The project is technically sound, the estimated costs are reasonable and the arrangements for procurement and construction are satisfactory. The facilities to be provided are necessary to enable the Corporation to meet the expected demands for power. iv. The Corporation would be a suitable borrower. Since its inception in 1964 it has operated the electricity system efficiently, and has made considerable progress in developing its organization, staff, management and accounting. v. Although the leone was devalued in November 1967 by 14.3% the expected return on estimated revalued net assets would average about 9%, which exceeds the requirement of the rate covenant. The reduction in tariffs, being considered before devaluation would no longer be justified. The continued strong financial position of the Corporation would enable it to waive the Government subvention for the provincial operating losses up to 1969, initiate earlier interest payments on the 'A' loan stock, and provide both the local currency for the project and the cost of other capital expenditure during the construction period. vi. The project would be suitable for a Bank loan of US$3.9 million for a period of 20 years, including a grace period of 3