lo 632-CiL nI wOT rI RESTRICTED
Report No. PU- 14a
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 maynot be published nor may it be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
COSTA RICA
TNT TC'T'TTT'T'f e^C'T A T. fl T ,TQ'NTC1- rV%' MT r1ef'IrTe-T,T%A I-%
APPRAISAL OF
POWER AND TELECOMMUNICATIONS
EXPANSION PROJECT
June 11, 1969
Public Utilities Projects Department
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CURRENCY EQUIVALENTS
US$ 1.- a 6.65 Colones (0)0 1.- - US$ 0.15d 1 million - US$ 150,376
TOE's Fiscal Year ends December 31
MEASURES EQUIVALENTS
MW - Megawatt = 1,000 kilowatts (kw)W.,h -_ 1gaw+att honr 1 -OOO kilowatt hours
kwh - Kilowatt-hour - 1,000 watt hoursiey - I lnrnlt *1,000 volts
m - meter - 3.281 feetim- kilometer = 0.621hl mileR
km2 square kilometer = 2.59 square miles
m3 - cubic meter - 35.313 cubic feet
CAEEI - Central American Bank for Economic Integration
CACM - Central American Common Market
CNFL - Compeania Nacional de Fuerza y Luz
COCESNA - Central American Civil Aviation Organization
COWfELCA - Regional Technical Commission forTelecommunications in Central America
EBASCO - Electric Bond & Share Company
GDP - Gross Domestic Product
GNP - Gross National Product
HF - High Frequency
ICE - Instituto Costarricense de Electricidad
IDB - Inter-American Developmient Bank
ITT - International Telephone & TelegraphCorporation, USA
ITU - International Telecommunications Union
LU - Line Unit. telephone exchange equipment forone main subscriber's line
RADIOGRAFICA - Radiografica Costarricense S.A., San Jose
SOFRELEC - Societe Francaise d'Etudes et deRealisations d'Equipments Electriques, Paris
STD - Subscriber Trunk Dialing (long-distance andinterurban)
USAID - US Agency for International Development
VHF - Very High Frequency
COSTA RICA
INSTITUTO COSTARRICENSE DE ELECTRICIDAD
Appraisal of Power and Telecommunications Expansion Projects
TABLE OF CONTENTS
Page No.
SUMMARY AND CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . i
1. INTRODUCTION .... . . . . . . . . . . . . . . . . . . . . . . 1
2. THE ELECTRIC POWER AND TELECOMMUNtCATIONS SECTORS . . . . . . . . 3
Electric Power Facilities . . . . . . . . . . . . . . . . . 3Telecommunications Facilities . . . . . . . . . . . . . . . 4Regulatory Agency and Tariffs . . . . . . . . . . . . . . . 5
3. THE BORROWER . . . . . . . . . . . . . . . .. . . . . . . . . . . 6
Organization and Management . . . . . . . . . . . . . . . . 6Cia Nacional de Fuerza y Luz . . . . . . . . . . . . . . . 7Accounts and Audit .... . . . . . . . . . . . . . . . . 8Capital Structure and Financial Position . . . . . . . . . 8Earnings Record . . . . . . . . . . . . . . . . . . . . . . 10
4. THE POWER SECTION ............... ...... .. . 11
The Power Pro.ect . . . . . . . . . . . . . . . . . . . . . 11Project Costs .. 12Engineering, Construction and Procurement of Goods . . . . 13Justification of Power Project . . . . . . . . . . . . . . 15Financial Aspects .17
5. THE TELECOMMUNICATIONS SECTION ...... . .. . .. . .. . . 20
The Telecommunications Pro.ect . . . . . . . . . . . . . . 20Program Costs . . . . . . . . . . . . . . . . . . . . . . . 21
Engineering. Construction and Procurement of Goods . . . . 22Justification of Telecommunications Project . . . . . . . . 23Financial Asspets . . . . . . . . . . . . . . . . . . . . . 25
6. FINANCING PLAN AND FUTURE FINANCIAL POSITION FOR ICE'S POWER ANDTELECOMMUNICATIONS SECTIONS COMBINED . . . . . . . . . . . . . 27
7. AGREEMENTS REACHED DURING NEGOTIATIONS . . . . . . . . . . . . . 28
This report has been prepared by Messrs. R. V. Sear,M- Scoffier- R. Knothe and E. C. Wessels.
BIST 0F ANNEXES
1. ICE, Balance Sheets 1964-1968.
2. ICE, Details of Long-Term Debt as of September 30, 1968.
3. ICE. Income Statements 1965-i968.
4. CNFL. Financial Informat'.ion.
5. Installed Generating Capacity in Costa Rica as of December 31. 1967.
6, Ihtefconnected Power System. Actual &nd Forecast Sales by Compauy.
7. Actual and Forecast Power Sales of ICE.
8. Pover- Foreeast System Demand and Installed Capacity.
9. Bsin n3ata for 1968 snd for the 196Q/73 Telecommunications Program.
10. P.1 .emm11rv tntionns Faei 1 1tI p
U. Teleo a. - … 4. ------ .
12. Cost Est4.-i+.es = Power Pr-oject.
1 la .XX .Les 1o- - - Forecasts.
14. h oer --Awa V-dFocas+ Income S+a+-en+s 1967=1°075.ILY ZIW=.L I 2t%; %LLO..L CM" I .jJJ. V~ - I.W
1,J. Pvuloer, Souarces an%d AppliUcationz ^,f >s16-9
16. LW.LWUVcom=uu.LIct.a.LL1n, EstiLJ U b± A cos 1. the. Progre. (1--'&7 ..
17. T-eleomm-unications, International Oervices and Central A ner.can
Communications Network.
18. Telecommunications, Cost Benefit Analysis.
19. Telecommunications, Income Statements 1967-1975.
20. Telecommunications, Sources and Applications of Funds 1968-1975.
21. ICE, Sources and Applications of Funds 1968-1975.
22. ICE, Income Statements 1967-1975.
23. ICE, Debt Service Requirements, 1968-1975.
24. ICE, Condensed Balance Sheets 1967-1975.
MAPS:- 1. Costa Rica
2. interconnected Power System
3. Proposed Tapanti Pover Project!
- 4. Telecommunications, Existing and Proposed Exchangesand Long Dietance Links
COSTA RICA
INSTITUTO COSTARRJCENSE DE ELECTRICIDAD
Pwver and Telecommunications Expansion ProJlects
SUMMARY AND CONCLUSIONS
i. At the request of Instituto Costarricense de Electricidad (ICE) apower and a telecommunications project have been appraised which consist ofthe following:-
Powet Project
ii. The Power Project consists of (i) the Rio Macho hydroelectric plantexpansion to add 60 MW of generating plant to the system; (ii) the raising ofthe existing Cachi reservoir to its full level; (iii) transmission system ex-tensions associated withi the added generating plant capacity.
iii. The total cost of the project including interest during constructionis estimated at US$25.7 million equivalent of which the Bank has been requestedto finance US$12 million. ICE's total power expaasion program during 1968-1975is estimated to cost about US$75 million including interest during construction.
iv. The project is needed to meet forecast system demand in ICE's inter-connected system by 1972 and is the most economical means of doing so. Theincremental rate of return on the nev investment would be about 15%.
Telecommunications Project
v. The Telecommunications Project is part of ICE's second stage Tele-communications Program (1967-1973). It consists of new automatic exchanaeequipment for 22,500 telephone lines, cable and line networks and long-distancefacilities to be completed over the four year period 1969 through 1973.
vi. The total cost of the project is estimated at US$9.5 million eauiva-lent of vhich the Bank has been requested to finance US$6.5 million. ICE'stotal second stage telecommunications program during 1967-1973 is estimatedto cost about US$11.8 million. The proJect is required to meet a reasonablegrowth of demand. The incremental rate of return on the new investment wouldbe about 17%.
Procurement and Disbursement
vii. With the exceptions noted below, procurement would be made afterinternational bidding in accordance with Bank Guidelines; disbursement. wouldbe for the foreign exchange cost of materials and equipment and the foreignexchange component of civil vorks construction contracts and consulting ser-vices.
viii. Under Loan 346-CR Costa Rican suppliers were granted a 15% prefer-on-e& for puraoses of bid comnarison. In order to compLy with the terms of theCentral American Agreement on Fiscal Incentives for Industrial Development,,rndAr the pronosed Loan supoliers from Central American Common Market (CACM)
member countries including Costa Rica would be granted a preference of 15% or'ini nf the customs dutvy whichever is lower, for DurDoses of bid evaluation.
Contracts so awarded to Central American Common Market bidders would be finan--ed inder the nronosed 1oan. It is expected that about US$2.4 million euuiv-
alent of contracts may be involved under this arrangement; US$1.8 million for
the Power Projeet and U11.S6- million for the Telecommunications ProJect.
ix. Tn nrder to meet power nvatem construction achedules ICE had to
start placing orders for equipment in January 1969. On the assumption thatthe proposed loan is made. hbr mid 1(60 it mary be _neasrsy to reimburse TGE up
to US$500,000 for expenditures on equipment and materials made since January 1,
x. U o* the~ 4elb inicD-+W t4^'4 -ProJaec.t vf1d ctait o%f' mytimunafe
units for filling up vacant spaces in the equipment units of existing tele-"orve excha--gess procu-red-aft er internat_4-___= nmvpetiti-u 14b idAding umnde I.onr.
346-CR. Equipment of the same type for about US$1 million would therefore
be procured from the origlnr, suappliers on a negotiated basis. The prices
payable for additional supplies will take into account the earlier pricesand' Calo pr'ice le-va.ls ast8bbihe 4-, w or other excihs"g for which tende-rs 411l
be issued under the proposed loan. The Bank would finance such extensions ifi.t1 Ls Satisfied . that tLhe pr4ces -5mA uo th -^n 4le.
Thi TOrro4er
xi.' -hea bor7UWWV 'Voui LLUVW a V= ent W - edd zutnormouV Wti C-j to
which two previous loans aggregating US$30.8 million have been made. The
projects undur the prcviO'uS loans have been completed. ICE i8 satisactori'Ly
operated and managed and is capable of executing the; proposed projects andoperating them satisfactorily.
xii. ICE:s present vad forecast financial situatiou are generazl-1y satis-
factory except for a rather unsatisfactory but manageable debt service cover-
age until 1971. The proposed financing plan and expected earnings are satis-factory. The financing plaAs for the proposed Power and TelecommunicationsProjects show that internal cash generation net of deDt service would rinanceabout 39% of total construction expenditures.
The Proposed Loans
xiii. The two projects would be suitable for Bank loans totalling US$18.5
million. The proceeds of the loans would be allocated as follows:- (a) US$12
million equivalent for the Power Loan for a term of 25 years including a grace
period of 43 years; (b) US$6.5 million equivalent fqr the l'elecommunicationsLoan for a term of 20 years also including a grAce period of 4½ years.
COSTA RICA
TJIFtSTI1.'JTf1 £'Ac1AD>DTr'^SE~ ThL PTWfTICTRICIA1
1. INTRODUCTION
1.01 This report covers hUe appraisal OI the power and teleeimicationsexpansion projects of the Instituto Costarricense de Electricidad (ICE) whichincl-ude (ii the Tapsati Power Project consisting of the addition of two 30 MWgenerating units to the existing 30 MW Rio Macho Hydroelectric Station andthe construction of associaeed civil works and transmission facilities; theinstallation of gates at the Cachi Hydroelectric Station to bring the reservoirto its final level, and (ii) the Second Telecommunications Project consistingof new automatic exchange equipment for 22,500 telephone lines, cable andline netvorks and long-distance facilities for expanding existing systems andserving new areas.
1.02 The estimated cost of the two projects is about US$37.5 millionequivalent of which US$25.7 million would be for the Power,Project and US$11.8million for the Telecommunications Project. The Bank has 'oeau requested tofinance US$18.5 million equivalent of the cost including interest during con-struction: US$12 million for Power and US$6.5 million for Tolecommunications.The remainder would be financed from ICE's internal cash generation and by thesale of bonds in Costa Rica.
1.03 The Borrower would be ICE to which the Bank has made two previousloans aggregating US$30.8 million. The first loan (276-CR) of US$8.8 millionwas made in January 1961 for the first stage of the Rio Macho HydroelectricStation (30 MW) and the installation of 8 MW at the Colima Diesel Station.The second loan (346-CR) of US$22 million was made in July 1963 of whichUS$12.5 million was used for Power Expansion and US$9.5 million to start theformation of the Telecommunications System. The project financed by Loan346-CR consisted of the first stage of the Cachi Hydroelectric Station (64 mW)and associated transmission lines; and the construction of automatic telephoneexchanges, outside plant for about 35,000 telephones, and long-distance net-works. The work financed under the previous loans has been satisfactorilycompleted except for some minor telephone exchanges which are expected to becompleted during 1969. Both loans have been fully disbursed.
1.o4 The proposed Power and Telecommunications Projects are the logicalnext steps in-the expansion of these systems to meet the increasing demAndfor electric and telephone service. They were first discussed in December1966 during a project supervision inspection. In October 1967 a loan appli-cation and a feasibility report for the power pro.ect were sent to the Bankby ICE. This was accompanied by a separate report by Societe Francaise d'Etudeset de Realisations d'EauiDements Electriaues (SOFRELEC) as power consultantsto ICE. The project was discussed with ICE in Costa Rica in December 1967.and asain in Washincton in Mav 1968 to obtain additional information. A fea-sibility report and loan application for the Telecommunications Project were
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~. A.1--. fl1 .- -An1%C A J .*. aa-- -. , , a-UWUt, UV tLh «LnJ Vn Oct' 1968. A I.iDw.LVL UoimA.UJAg UL VIUUBrB. R. V. Sar,
M. Scoffier, R. Knothe and E. C. Wessels visited Cost& Rica in November 1968To appraise the proj'ects. hs reppOrt has been prepa8d by the mission andis based upon its findings and information obtained from ICE and its consultantsSOr-L.nC -
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2. THE ELECTRIC POUWER AND TELECOMMUNICATIONS SECTORS
2.01 Costa Rica is one of the six Central American Republics and isbordered oh the north by Nicaragua and on the south by Panama. It stretchesacross the isthmus from the Cari4bean Sea to the Pacific Ocean (see Map 1).It has a total area of 51,000 km- and a population of about 1.59 million ofwhich two-thiids live in the Cent5al Highlands at between 500 and 1,500 meterselevation, in an area of 9,200 km where the climate is mild. The remainderof the country is close to sea level and is mainly tropical in nature.
2.02 The economy o? Costa Rica is based mainly on agriculture, whichcontributes about 26% to GDP. The importance of the manufacturing sectorhas been increasing during recent years and has contributed about 21% to GDPin 1968. The GNP, at 1962 prices, increased from US$503 million equivalentin 1963 to an estimated US$674 million in 1968 or by about 6% per annum. Dueto the rapid population growth of about 3.5% per annum, however, per capitaGDP rose by only about 2.5%. It is expected that GDP will continue to growat about the same pace as in the recent past. While the industrial sector isexpected to substantially participate in this growth process, the annual growthrates of the industrial sector are likely to be somewhat below those achievedin the recent past, because the industrial import substitution process isunlikely to continue to expand as rapidly as it has recently. This prospectwas taken into consideration when reviewing the proposed proJects.
Electric Power Facilities
2.03 The DrinciDal supplier of electric nower in Costa Rica ia ICE andits subsidiary Cia Nacional de Fuerza y Luz (CNFL). About 94% of all powergenerated is used in the central zone which has the canital city of San Joseas its hub. A series of transmission lines stretch from Puntarenas on thePacific coast to San JOae and to Turrislba nn the &"tern nlopne Of the Gentra.1Highlands. This is known as the Interconnected System (see Map 2). All themalor power generating stationg and several minor stationa are connected tothis system. The remainder of the country is served by a number of small iso-lated diesel and hydroelectrie plants, some Of whinh TCE ewnq whil& the mainr-ity are privately or municipally owned.
2.04 The total installed generating capacity in the country increased byabout 90% from 962-106?7 At the end 0f 1967 the total eapacity was nbout216 MW of which ICE had 157 MW in 9 stations and CNFL 38 MW in 8 stations;the remaining 21 MW w*weire a ditw4hiibaid avne% a it"nhbr oee amoll mnt4+4ta. PMAnnex 5 for details.
2.05 From 1962 to 1967 total gross generation of electric power in CostaR,ica 4n"craasA a+ a ota4* oP' ahot+ %L pr umfromm about 4PA59_ Gc to mabOut707 GWh per annum. 94% (668 GWh) were generated in the Interconnected System-ad of th4a ICE generatea < (415 GW.i); CNFT. tT,T onA 2O9% (1i9 fY'L.T andother small entities combined generated 9% (61 GWh).
2.06 ICE sells 86% of its power in bulk and CNFL, its subsidiary andto %LsLe to Ic G 0 e & UUU UUpt 11 Li,5 ,ba. Or . ±U= -W=A . gLLJL .L* axe
- 4 -
sold directly to retail customers tnrougn ICE's distrioution systems at Li4onand Puntarenas and at other isolated locations.
Telecommunications Facilities
2.07 The major part of internal telecommunications facilities in CostaRica is provided by ICE. As in the case of electric power these facilitiesare principally in the Central Zone of the country where the population isconcentrated. The long-distance system links this zone with the ports of theAtlantic and Pacific coasts and to the neighboring countries.
2.08 Most of ICE's telecommunication system was established and developedunder ICE's first stage program vhich was financed by loan 3X6-CR. The pro-gram provided a modern automatic telephone system in the San Jose area, where80% of the telephones in the country are located, and interconnection withthe main outlying towns. By December 31, 1968, there were 37,500 telephonestations including 29,000 main subscriber stations; automatic stitching equip-ment for 35,300 telephone line units had been installed in 24 exchanges. Sub-scriber networks consist of primary underground duct and cable systems withsecondary extensions by overhead cables and pole lines.
2.09 Long distance arteries comprise underground carrier cable routesbetween San Jose and the principal cities of the central plateau and microwaveradio links to Liberia, Limon, Puntarenas and to the border of Panama. Dis-tant smaller exchanges are connected with provincial centers by VHF radiolinks. An automatic trunk exchange equipped with 1000 circuits in San Joseand the necessary trunking units in the local exchanges provide country-widesubscriber trunk dialing (STD). All systems are modern and use high Perform-ance equipment. Details are given in Annexes 9 and 10, and in the attachedMap 4.
2.10 International telecommunications are operated principally bv Radio-
grafica Costarricense S.A., a concessionary company owned jointly by ICE (50%)and-nrivate shareholders. Radiozrafica provides adequate and reasonably ef-ficient interconnection for telephone, telegraph and telex services with NorthAvme ra and EuronEp and, for the present. limited traffic with the rest of the
world. It also operates 19 circuits of the regional interconnectilon networksmbv.-4, the fhve et'nuntriea of the Central Ameriean Common Market (CAVM) AndPanama, developed recently by ICE on a temporary basis to cope wit3 increasingdemn-vd for serwvice. The fnnrg iimportance of the CAGM hA Rti41lisAtd traf-
fic along the north-south axis of Costa Rica, paralleling the Inter-AmericanU4 " *,wAn onA ht,v+raa "he + 4 a hhnwi v pnimt,4 a
2. U5 Up to 1965, Costa R±ca's tel- eh^e -fxacil-t34 s consisted of a EwLobsolete manually operated installations. Service was very poor and in many
0± YdUB I..L1UUILJ UJASYnA.LD UtAfer�J. hW. .IA. fili &ies as JL"Ltsv
under ICE's previous program in 1966, the number of telephones in servicegrvw -azi u:anzanuum.1u Urat S. ofY7 C, L 6L%JW DWO JdLI.UTXU Ju.&L3 1J3 li"W uVm.L.LW.LIJ.Li'y
of lines. The demand and use of telephone facilities for local and trunkservice exceed expectations. In 1967, to avoid sat-uration VI thn f=ailitias,ICE had to order 5,000 a4ditLonal lines for San Jose and th:,,ee main cities inadvance of tne second stage program wnien is now urgently required.
-5-
--g'u,tory Agency and Tariiff
2.12 Tne electric power and telecommunications industry 'i Ccost;a Rica LsreguliLted by the Electric Service Law enacted in 1941. The Law is o.dminis-tered by the Servicio Nacional do Electricidad (SNE), which awards :zranchisltsfor the producticn and distribution of electric energy and for operation oftelecommunications services subject to approval of Congress. SNE iin also ri.-spons:.ble for the appraisal and regulation of tariffs and service stiandards,.Tarif:" changes are subject to Government approval.
2.13 The tariff provisions of the Electric Service Law state thkat elec.-trici';y and telecommunications tariffs shall be comjiuted to provide revenue isuff4i!ient to cover the cost of the service including a fair compenniation f:)rthe uze of capital.
2.14 SNE has in the past authorized electric and telecommunications tar-iffs or ICE vhich were estimated to provide a rate of return of 7.5% on thlnet fi.xed assets in operation as required under Loan 346-CR. Telephtone rat !s(see details in Annex 11) have been adequate to achieve this objectl.ve. Asregar(Is power, adjustments have not always been made in time and thu returnachieved were in general not quite satisfactory. As a result of adJustmentmade i.n February 1968, ICE's electric tariffs are adequate at presetit. Tomeet 1;he financing needs for the proposed power and telecommunicati,ns pro-jects rates of return higher than the 7.5% agreed upon between the 11ank andICE wv11 have to be reached in future years. ICE would be able to iearn the!;ehigheV returns without adjustments to tariffs at present.
2.15 The matter of tariffs was discussed during negotiations aind assur-ances obtained from ICE and the Government that a rate of return of not lesthan S% on net fixed assets in operation will be maintained for ICE's powersecticrn (see paragraph 4.32) and that CNFL will be given tariff adjtustmentssufficient to enable it to fulfill the obligations of its new concei;sion co L-
tract. (See paragraphs 3.07 to 3.12 for CNFL's situation). For the. tele-commut.ications section. assurances were obtained that the present level oftarifis would not be reduced during the construction period of the programwithouct the Bank's consent, and that ICE should earn a return on nel; fixedassets in operation of at least 11% from 1970 to 1972. Telephone trtiffswould be reviewed after 1972 bv ICE and the Bank in the light of ICE"s fi-nancit g requirements at that time. The Bank would also be given thn oppor-tunitv to review tariffs which would apply to now services to be haudled bvICE stc.h as telegraph and telex and also any readjustments in rates to ensu 0compli3ance with the agreed financing plan (see paragraph 5.21).
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3. THE BORROWER
3.01 The Borrower would be ICE, a government-owned statutory corporationestablished in April 1949 to plan and carry out a coordinated program of elec-
trification of the country. The law establishing ICE defines it as an autono-
mous organization which shall carry out its activities completely independent
of the Government except for the approval of tariffs.
3.02 By a Law No. 3226 of October 28, 1963, ICE was given the additional
responsibility and permanent concession to provide telecommunications services
in Costa Rica. The law authorizes ICE to unify these services and to acquire,
for this purpose, the rights and properties of the present concessionaires.
Organization and Management
3.03 ICE has a Board of Directors consisting of seven members appointedb'r th. Pre.ident of the Republic. They serve stagwered 8-year terms. Accord-
ing to the law, at least three members must be engineers, one a lawyer, one aneconomit and the last two must have acquired experience in the fields of fi-
nance, industry or agriculture. The members are eligible for reappointment.This arranement heas worked very well and the Board has conducted the affairsof ICE on a businesslike basis substantially free from political interference.
3.04 The Chief Executive officer of ICE is the General Manager who isLprpoInted hy the Board, which also appoints the Denutv Manazer the Treasurerand the Chief Auditor. All other officers are selected and appointed by the
General Man-ere ICE is satisfactorilv managed and operated: it has a capableand experienced stsff which is able to construct the proposed power and tele-comm-ications projeets and to o-r ate the ne fatilitie..
3.05 ICE's ¶,wer aind teleommmu-nic4ations n-y,rati-nm are nrganiemd into
operating departments which are satisfactorily staffed and efficiently run.Telecommicaltion operatio4s start-ed only in 1963 under the fi4rst teltecmmu-
nications program financed by Loan 346-CR. They were initially handled by a
technical section maimly 4 ^-h arr-o the contru-ti^_ -n putting --to oper-ation of the facilities. Due to the groving importance of the operational and
admi-istratiLve r-espoLs' 5 bl'tI of the teleco icai4c seo n, its isna
gerial and technical staff iq being,progressively strengthened. The size of
the teleeommunications netwoArk is groving rapidly and the complexity of re-gional and international operations is also increasing. These developmentspoint to the need for eparsting power and teleco--munications operatIon- & udrindependent and autonomous entities. A suitable time for accomplishing t#iswould be in asbout five years -w-hen higher management prsoi--e l o-r the telT-communications section would have been trained.
3.06 Up to the end of 1968 the accounts of the power and telecommunicationssections were only partially separatted and no separate balance sheets were pro-duced. During the appraisal of the proposed project it was agreed that infuture ICE will have completely separate accounts and financial statements forpower and telecommunications (see also paragraph 3.13). Due to the growing
7
complexity and importance of both power and telecommunication bperations (seealso paragraphs 3.07 to 3.12 on ICE's acquisition of CIPL), consideretionshould now be given to the steps to be. taken to achieve a more completefinancial and administrative separaticn between these tWo main activities tofully reflect their size, importance, and costs. During negotiations ICEagreed to take appropriate steps to progressively achieve a complete separa-tion of the tio sections in the future. It also agreed to coniult the Bankbaefore making any changes to the position of General Manager.
Cia Naciorka de Fuerza y Luz (CNFL)
3.07 in 1968 the Government authorized ICE, by law dated September 20.1968, to purchase CNFL, the principal power distkibuting company in the country.For"erly owned by Electric Bond & Shar Companv (EBASC0), CNFL serves San Joseand the surrounding area and has operated in Costa Rica since 1928. The mat-ters of principal interest to the Bank in ICE's acquislition of CNFL have todo with the institutional, financial and mRanagement aspects of the mcdifiedcon^cssion .ontact a-w..row.Ad b, thei Govenmet for cNn. -
3.Q f'TWT 4. 4 ^.inuas a stock c,, in w hich ICE holdi 92o3 ofww %11K j. u., fnya . -
the shares, the remainder being held by private shareholders. The st1ockholdXersappo.int the board of dirWetors which 4ippints the prin 4 ipal officers of thecompaqy.. In effect this places the control and management of CNFL irn thehandUa .' of.L _r~Tr -JJ.Loar. T/IVI + LJ,LL- .'&L~~~ k~*~1b h .. IC-D' bod IC' '%Ai nteri48'I au"AAtor concer"..lt" jrfors lthe sa-functionl in CNFL.
3.09 CNFL will be regulated and its tariffs appraised by SNE as before.Its new concessiLon contract approved by Congress el4iinates the r-strictionspreviously imposed on the foreign owned company and brings CNFL under theproviBions of the Electrie Sevrice Laww in common w-th all power ent5t;lis in
Costa Rica.
3.10 The purchase of CNFL was effected by ICE through a cash do%a-paYrmeLtof US$1 million and the issuance of US$9.5 million 7_3/4d negotiable %1ot e. -deemable over a period of 17-1/2 years and guaranteed by the Government. TheBank waR kept informed during the negotiations of this saule and had no ob-jections to the terms and conditions. CNFL's new concession contract. providEsthat it be granted tariffs sufficient to maintain axrunugs at a iGl whichwould permit it to carry out the investments in its distribution netw-rk nec-essary to serve future power demand and to provide ICE with the undus formeeting the debt service payments to EBASCO. CNFL would not be requi1xed toconstruct additional generating stations as it would continue to purciauefrom ICE all future power requirements above those provided by its ova gener-ating plants.
3.11 CNFL's present earnings would not be sufficient to meet the finan-cial obligations outlined above. CNFL plans to sell ¢3 million bonds during1969 to make up the difference. In addition, ICE is studying hoW to tgiangethe structure of CNFL's tariff schedules to increase revenues without havinga declared tariff increase, which would be politically unacceptable bocauseof the tissurance given Congress that there would be no immediate incrtsse
- 8 -
after it approved the new concession contract for CNFL. It is estimated thatthe rescheduling of tariffs would result in about a 7% increase in gross reve-nues. If the proposal under study materializes, CNFL would be placed in asatisfactory financial position in 1970. SNE is aware of these plans to in-crease earnings.
3.12 Since CNFL has only just started to operate under its new concessioncontract it is difficult to forecast operating costs. Also, since its assetsmay be undervalued, it is not possible at present to determine a specific rateof return which would allow CNFL to meet all its obligations. This matter wasdiscussed during negotiations and assurances obtained from the Government andICE, that CNFL will be granted the level of tariffs permitted in its concessioncontract (see paragraph 3.10). Annex 4 gives details of CNFL's financial sit-uation.
Accounts and Audit
3.13 ICE keeps its accounts on a calendar year basis. For several yearsICE's auditors have been Peat, Marwick, Mitchell & Co. ICE's accounting prac-tices. especially the allocation of overhead charges and the separation ofthe accounts for power and telecommunication operations, have been the subjectof discussions between ICE and the Bank for some time. The auditors hsue nor.
agreed also to advise ICE on accounting methods and procedures and to givetheir oninion on the financial statements of ICE as a whole and of it, piwer
and telecommunications divisions separately. This arrangement is satisfactoryto the Bank. This matter was discussed during negotiations and assurAnt,.were obtained that ICE will continue its efforts to improve its accountingAnd intarnal auditins setiv{tion-
Owapital Structure and Financi Al Pnni+tl nn
3.14 Rl""nwmars or nt R's T! dited balanee sheet as of Deceme-r 31, 1964through 1968 are given in Annex 1. They reflect the rapid expansion of ICE'sPowe atsnd telecommunications facilities 1 artl fiyir ced *Ader Ljo, 34v-CICE's cp&pital struCture and financial position are generally sound and the
a 4 * 4 an *.wrh 4 nh .a - ra-e ti4ght for so -s hs i ..n du.'- g
1968.
3.15 The folloving is a summary of the balance sheet at December 31, 1968:
¢or us$(millions)
ASSETS
Fixed assets in Operati6n 562.6 84.6Leos: depreciation 8T.4 13.1
Not fixed assets in operation 475.2 71.5
Work in progress 60.1 9.0Other lass6ts 86,o ]2 0Current assets 67.0 10.1
Total Assets 688.3 103.5
LIABILITIES AND EQUITY
Capital 167.2 25.1P.sWs ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~Q ^2z 1- 5RDsan a. -a On, aa
Tot.a.1. cQi 2".; 3T.
AJc6.1il' t'..rj.nJrv-c 5. 3 Q
Long-term debt 382.4 57.5Consmers' Deosfits 2.8 0.4Current liabilities (including current
Maturities of long-term CiDt, )477 7.2
Total Liabilities and Eauity 688.3 i.5
3.16 ICE's fixed assets are fairly valued. Net fixed assets are re-corded at original cost loss straight-line depreciation and adjustments weremade when the Colon was last devalued in 1961.
3.17 ICE's capital consists mainly of contributions made by the Govern-ment through the year 1967 in the form of equipment, the proceeds of certaintaxes, and budget appropriations. These contributions have now reached ¢155million and no further government contributions are to be expected. The re-mainder of the capital was furnished by ICE's telephone clients in the formof non-refundable subscriber connection fees. Reserves comprise reserves forcontingencies and capital development accounts which represent the accumulatedearned surplus to date. No dividends are paid by ICE.
3.18 To carry out its sizeable expanaion program ICE has had to rely toa large extent on debt financing which caused the debt/equity ratio to changefrom 43/57 at the end of 1964 to 60/liO at the end of 1968. Details of thelong-term debt are shown in Annex 2. Of the total debt 48% is owed to theBank undr Jonens 276-CR and 346-CR. 17% is owed to local bondholderi4. 16% toEBASCO far tho purchaae of C-nF, and 19% to various other qrrditcrs.
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3.19 During the past four years ICE has successfully tapped the localcapital market by floating 8% 10-year or 20-year bonds at an average annualrate of about 013 million. Some of these bonds carry a repurchase agreementwhich obliges ICE to repurchase them after due notice. Up to nov ICE has notencountered any difficulty in immediately reselling all repurchased bonds.ICE's bonds are well rated in the market, and are being quoted at par. Atthe Bank's request ICE has agreed to limit the amount of bonds sold with arepurchase agreement to 40% of the total amount of bonds outstanding at any-time. During negotiations ICE formally confirmed this agreemnt.
3.20 ICE's current position has been tight over the past years. At theend of 1968 the current liabilities of 047.7 million and 026.6 million of bondsplaced with a repurchase agreement exceeded the current assets of 067.0 mil-lion by 07.3 million. Since thon the situation has improved somewhat due torefunding of short-term obligations. In view of the fact that ICE has foundno difficulties to immediately reselling all bonds repurchased, ICE's currentposition appears manageable.
Earnings Record
3.21 Summaries of the audited income statements for the four fiscal years1965 throu,h 1968 are shovn in Annex 3. Under the conditions of Loan 346-CRICE is required to earn a return of not less than 7.5% on its investment inpover falelitll s durina, each fiscal year beoinning January 1. 1964. and a re-turn of not less than 7.5% on its investment in telecommunication facilitless+tartingfl with the first veer of full oneration of the telecommunication system.
3.22 9 T"a r,nf1t+Ahi41jtv has imroved since the first Bank loan vas madein 1961. However, the rate of return on its power facilities had only reiched7.5% o"e pr_or to 19O68 An e rea"ult nf the tariff increase granted in Febru-ary 1968 the return was 7.6% and further improvement is expoeted from 1969 on-wards -hi-" the Ca^chii plar+ 4i m,rew fillnyn uti1iizd an its ca acitv is absorbed
iL supplying the growing system demand. The system efficiency and operatingc4.. -a -a .. 4ao r.rt
3.3 h mL us 4.. TICEs- 4..4...mv+ 4vm 4teloc.v-umi,ratinn faei litie. van
8.8% in 1967 and 12.1% in 1968. These rates Of return exceeded expectations,they were due to the rapid in dad and traffic which took plae aftrinstallation of the automatic telephone system in 1966. The operating effi-ciency of the v- lsetAio . … 4i -ia ta.;.
4. THE POWER SECTION
The Pnver Prni.et
4.01 The Power ProJoet consists prinei1,lv of the folloing!
(i) Thm ~ airs4"io4n of na Ih5 IrEm *iminal findri othor niw4l
works to convey the water of the Reventazon River to4h~ ,4a 404ne, 120 Mn.h +0in% a"A tlhm aAA4+4a,i% %f'thA x-.cho t._ l, -. d the - oW2 x 30 MW generating units in an extension to the
ar4 h o44 ftl4a Uan of spi"a1'.s. av est,a+4 an gc4~14 ny1. 4,41.4..a -4.i. -.4 4, .. ^44+eA
Ut..A I &.Aq .4 SJi . .L 1 45~W~P - A
civil works, to raise to full level the reservoiroJLP t0he CvachUi hy- oe lectric st0t ion; when the s
was built under Loan 346-CR it was planned eventuallyA-0 A- .UI. .
.(iii) coustruct-ion Of- vario-us shorto 10rrasmission lines
and substations associated with the power plant
4.U0 *The proposed Project forms about .34 oI ICE!s power expaln pro-
gram for the 1968-1975 period which is estimated to cost about ¢500 million(US$75 million) including interest during construction. The other items inthe program are:
(i) The start of construction in 1972 of a new thermalplant (50 MW-) and a new hydro plant (120 MW) forservices in 1975 and 1977, respectively.
(ii) The construction of further,transmission and dis-tribution system facilities to meet system demand.
(iii) The construction of an office building.
Rio Macho Extension (Tapanti Project)
4.03 The Rio Macho (30 MW) hydroelectric station, which was constructedunder Loan 276-CR in 1961, formed the first step in the utilization of theReventazon River and its tributaries for power generation. At that time thetunnels for the Rio Macho statton were sized for an ultimate installed capac-ity of 120 MW. The proposed Project is one of two steps previously envisagedto extend the Rio Macho station. The final step would consist of the instal-lation of a fourth 30 MW unit.
4.04 Map 3 shows the proposed Project and the existing Rio Macho Project.The proposed Project would consist of the construction of an intake at Grandede Tapanti in the upper reaches of the Reventazon River to divert its watersinto a 14.5 km 3.62 meter diameter tunnel also to be constructed to join the
Tapanti intake to the intake of the existing Rio Macho Project at Salto Grande.Along t-h- ro^-te two ,- tributaries, the H-11-mo and th-o Villefgw G_ M11A 'Km
diverted,into the tunnel to give a total annual average flow of about 15 m /see.
4.05 In order to permit maintenance work on the existing regulatory basinP+ E1 L1 - 4 t---el i8. 4to bo co--t-,4et A +,. 4- -- A --A B s
that, when necessary, the station can be kept running even when the regulatorybasi 4 s n out, ofP Be-- Ca se 4 ).&J SJ*A* '.5 0 L Y.L'.. Ma ~ pJOj J
WV A.LAQ RiCALo Adl>-Lo PWverLuUUwe -ouUdL(24 U= eendLed VW "'OJW W&L XSJJVOW.L
2 x 30 MW units and an extension to the penstock would be made to serve theproposed unLits and provlue a conunection fUr a futpurL wrUit of s.lLJ.ar sizc.No other work would be required since the existing tailrace is adequate forJU i'_iT --- A rJ ffw%__ ~ ---- .0-- v_ _ r__ - tZ_._ _ rm u w___U"A 1UJV. 'CV in"Y .LJ.LL Upff;.#.y p. U.LLGU ±UL- %1LLO rA.UV PMLUV &n31%01._Lvu. LLu 11Wu
new units vould have an output of about 300 GWh annually.
4.07 Electrical works for the project would consist of extensions to the8wwitchyard, additions to transformer Capacicy, anud control aud metering equip-ment.
Cachi Reservoir
4.08 The Cachi hydroelectric station (64 MW) was constructed under Loan34O-CR and the thin arch dam was built to its full height but the gates werenot installed in the spillway. It is now proposed to carry out this work whichwould consist of (i) constructing a grout curtain in the left abutment of thedam above the present reservoir water level and (ii) installing gates in thespillway. This work wouild raise the3reservoir elevation by 20 meters and in-crease the storage by 50.5 million m , which would enable the existing pl4ntto generate about 32 G-Wh more annually. During the time that the reservoirwas being operated at its maximum level some 8 MW of additional capacity wouldalso be obtained from the existing plant due to the increased head. However,the principal advantage of raising the res9rvoir would be t 9 obtain the addi-tional energy already referred to above.
Transmission Lines and Substations
4.09 In order to convey the poaer generated at the Rio Macho and Cachistatiomi to the consumers, it will be necessawy for ICE to make miscellaneoustransmivsion and distribution line extensions;and to construct associatedsubstati.ons. The total cost of these works is estimated US$1.8 million equiva-lent or less than 8% of the total cost of the project.
Project Costs
4.10 Details of the cost estimated of the proposed project are given inAnnex 12. The estimated cost is summarized below:
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Local Foreign Total Local Foreign TotalCost Exchange Cost Cost Exchange Cost
(Colones million) or (US$ million)
Tapanti Project 64.6 57.8 122.4 9.7 8.7 18.4Cachi Reservoir 13.6 7.6 21.2 2.0 1.2 3.2
Transmission linesand substations 4.3 7.6 11.9 0.7 1.1 1.8
Construction Costs 82.5 73.0 155.5 12.4 11.0 23.4
Interest duringconstruction 5.2 10.4 15.6 0.8 1.5 2.3
Total X 83.4 171.1 13.2 12.5 25.7-'~~ _
1/ IT-inteluiaR. m. riillion spent on proJect prior to JanuarY 1. 1969 of which
US$0.5 million were foreign exchange.
The cost estimates are reasonable and adequate. Equipment costs are based
upon known costs for the recently completed Ccehi (64 MW) hvdroelectric sta-
tion, adjusted for estimated price increases. The civil works costs arebased on unit costs now being eperiened for work on ar-cess roads; tunnel
adits and the main tunnel which were started in 1967. Some 1.5 km of the
.ai.n .. %. u.nnel1. has been A.i411Aed and 14ned vith sho+crete. Contingencies ofabout 12% have been included in the estimates which is satisfactory.
4.11 The proposed Bank loan of US$12 million equivalent would finance:US$15.L. .LLU equivalent. for equipment, materias a…d sevices for the n ni-
ect, of which about US$1.8 million equivalent of contracts for materials andequipment may be avrded n C *entra I-erica, JnCl osta Rica (see -pra-
graph 4.15); and US$1.5 million interest during construction. The total cost
OI the worLs to be carriLe ouv .a.u the l -197I Je.iod i8 e8-t -at-ed to be
US$23 million. Should savings be made in the cost of the project any excess
.Loan 'Luds vould be a ub I,Jecto tuo caucellA.atio-.
Engineering, Construction and Procurement of Goo-s
4.12 As in the previous two proJect 4'nanced by the Bn, ICE has done
the engineering with its own staff and intends to carry out the construction
work which has already been started, -with its own crews. This arrange-ent
has been satisfactory in the past and would be acceptable for the proposedproject.
4.13 ICR engages consultants to assist in specific problems. At the
present time the following firms vhich are satisfactory to the Bank are beingemployed:
(i) Consultores de Baragems e Aproveitementos Hidraulicos Ltd.,(Portugal) for advice in raising the reservoir level ofCachi.
- 1 1.
(ii) Geoconseil (France) and Sondages, Injections et Forages(Fncl tov asupervise the -Wrrk on the cachl grout Curtaia.
weurnces -cre obtained %mrAu,- negot'ioU I.U5 .L#-i WX.n.L to employ
experienced consultants under terms and conditions satisfactory to the Bank toassist ila probelems associated with the uesign ana construction or tne Project,as well as, for system studies and management and accounting matters for ICE
L.14 Construction work on the proposed project was started in 196T withthe building of access roads and tunnel adits, and in 1968 work was startedon parts of the main tunnel. rhis was necessary in order to meet the construc-tion schedule which is designed to achieve completion of the project by mid1972 when it will be urgently required to meet forecast system demand. Thisschedule is realistic and can be met provided the procurement of equipment andmaterial can go forward as planned.
4.15 ICE proposes to follow its usual custom of procuring all equipmentand materials for the project through international competitive bidding inaccordance with the Bank's Guidelines for Procurement. In the past the Bankhas agreed that ICE give Costa Rican suppliers a 15% preference vhen makingthe evaluation of international bids. During negotiations when this matterwas discussed ICE advised the Bank that in May 1969 a Central American Agree-ment on Fiscal Incentives for Industrial Development became effective. Underthis agreement even though ICE is exempt from the payment of customs dutiesit would be obliged to give preference to suppliers from all member countriesof the Central American Common Market by adding 50% of the import duties, lev-ied by Costa Rica on imports by non-exempt agencies, to the bids from nonmember countries when making bid comparisons. It was therefore agreed duringnegotiations to allow ICE to give suppliers from Central American Common Marketmember countries including Costa Rica a preference of 15% or 50% of the importduty whichever was the lover. The items most likely to be found competitiveunder this arrangement are cement, reinforcing steel, tires, fuel and weldingrods. An amount of up to US$1.8 million equivalent of contracts for materialsand equipment might be avarded under the above procedure to suppliers in CostaRica. Of this, the foreign exchange component is estimated at rather overUS$800,000 and the local currency component at just under US$1.0 million. How-ever, the cement industry in Costa Rica is already having difficulties in meet-ing local demand, and this may mean that additional cement requirements have tobe met from imports. In that event, the amount of local cost financing underthe proposed Bank loan would be reduced to under US$500,000.
4.16 In order to meet the construction schedules it has also been neces-sary to invite tenders for most of the major equipment and large contracts formaterials. Some of these contracts have to be awarded durinz the first halfof 1969 before the proposed loan could be made effective. ICE has made com-mitments of about US$0.4 million to date. It was agreed during negotiationsto allow up to US$500,000 for retroactive disbursements from the proposed loanto finance initial and progress payments for those contracts made after Janu-ary 1, 1969.
4.17 Disoursements from the proposed Bank loan would be made for the costof equipment and materials and the foreign exchange components of the e-stworks and consultants contracts. c iViL-
.5 -
justificetion of Povs: ProJect
4.18 Since the proposed project wouild be used exclursiv-7elny 'to sezre theinterconnected Svytem- d as 94% of all Costa ERica's pownr is generr-.ted in
that systeit, this chapter of the renort rcfer3 only to theontcorceeSystem, excluding t'he. amall isolated syS,.e.ri.
Estimmate of Sal-es
4.19 ICE has made a deta.iled anal>yaiim cO the salon in -h- lnterc,nnecrted
System for the past 10 years and has Zor,cast sales to 1975 on tbeb si ofthat analysis and anticipated futuze]e trends in the area's e-onomic dPvn,1:-
opment including the fatire demand from known large new cusitorners 1yoe4 in_
stallations are now -,-der construcrotion, Tn revicwing it. n-Pte!m d i)Y#t
ICE engaged SOFRELEC as consultants to make an independent report; the fia4ingsconfirmed the conelbssions reached by IE.
4.20 Annex 6 gives details of the beVees by ICE and ot2her7 ati-tin In theInterconnected System from 1958 to 1968 and the forecast of 3 f-roxe 1,969
to 17.'r Ti.s Aanex sho-s t1hat dsg t.he pt 10 y sv-s the annii15d v7rry¶wth
rates in total sales in the Interconnected System hasve reaged fr<.mn r., 3% 1:
14%, -with an a-.erage ol 9.7%. The forecast of sal-es for 1959-197 's
average growth of 9.3% per annum.
4.21 In view of the expected slow-down in the growth of 1hwe inixuitrial
sector ( see paragraph 2.02) the forecas ± of luure sales gr.fwt*h izz s*o .ht
more conservative than past experience would suggest. Total sales, t.s rth .
1969 is estimated at 8.4%t Aun abrupt increase in gro-wth to 11o* 2 rX a-ilnuaz
is shawn for 1971 which is explained by the coming into serrice of' the ;.eiwpotable water system (2.7 MWT demand sad about 20 G'h aznually-) f'r San Jc.now being constructed with financing by US AID and IDB. in 1°977 nd 2.27annual growth rates are 9.6% and 10.5% due to increasos in dekzuAd b:Y 'he "ja
Jose water system and further additions to the Interconnect.ed Oy-Ynste.,x a- tzaF
mission lines are extended to feaed Puerto Lmon on the rlbean cc-t.
4.22 Tne sales forecast prepared by ICE for the Intterconnected stl;mwas discussed extensively during the Bank's supervision visits in D#cbnr
1966 and 1967. It has been modified several times to refleet cerikez in tkheeconomic situation in Costa Rica. The present forecast for 1969-1975 r-hor.ring
an average annual growth of 9.3% in sales is realistic and conservati.v-Xs of
industrial development exceeds the forecast level the growth could acceleraeeto about 10% per annum.
4.23 The Interconnected System is supplied by power generated by t,;he
plants of the various distributing companies serving the system plus pa.r
these same companies purchase in bulk from ICE. In 1968 all po-er pl.rnsts
other than those belonging to ICE were producing their maximum outplut. Thusin future, all growth in sales for the Interconnected System will have to besupplied by ICE. As time goes on the plants of the distributing companien
will tend to become less efficient so that their outputs will decline until
they are ultimately retired completely. Annex 7 gives the actual and forecasts-les for ICE alone. It shows that from 1965-1968 the average annual growth
of sales was 10.6% and that the forecast annual grodth in sales from 1969-1975will average 11.4%-
EstimRate of Demp-rd
4.24 The climate in the area served by the Interconnected System is rela-
tively stable throughout the year, therefore the system load factor is fairlyconstant. The annual load factor wan about 50% in 1962 wnd has improved to52% at the present time due to the growth of industry during the past 6 years.T+ is expected that- the load factor will imprmove aradu a1v during the next 5
years.
4.25 The actual and forecast system demand and inste.lled capacity from19 Y6,5-197m 'F5 is given in _-ex 8. It will- be seen that- tvo f'orecaf-ts are madae:
(i) the "low level" which takes into consideration a probable slow-down in
the pace of industria1 impo-t substi+vution, And (i) the "high level" whichassumes that industrial import substitution would continue at about the same
[-t1, reecent past. The aver,mig D increase in deim-nd frnm 1962-rate as inL u"e lw _ge
1968 was 7.6% and the "high level" forecast from 1969-1975 gives an averageannual increase of 8.5, while the "low level" forecast g4ves a a.-rae a-
nual increase of 7.5%. The "low level" forecast has been used in the salessand financival for-ecast "lo give a cons,rati*,fe pietu=-.e
4.26 It -a'1 be seen from. A--ex 8. that tlhe "l. n I f:oree2sat system'f4C w J I.. W.±L 'L V a u I. L IAI lLM" - ULIbO.~ vi L..W .w .+ _. -
maximum demand will just be met in 1972 when the proposed project is scheduledto be completed. However, if system demand i"ncreases at the 'high level"shown La the upper curve there will be a critical period from late 1971 untilthe proposed project is compleeed in 1972. It is expected that whIle som0
power shortage may occur during this period the situation will be manageable.Nevertheless, it is obvious that the proposed project m-.,ist move forward asscheduled if serious power shortages are to be avoided.: This iB the reasonICE started preliminary work in 1966, and has now in-vited tenders for equip-ment and materials (see comments under procurement paragraph 4.16).
Analysis of System Plant Additions
4.27 ICE with the assistance of SOFRELEC has made a detailed analysi,s ofthe various alternatives of system development to meet fore-sat demand through1975. In essence this involved eight different combinations or programs ofhydroelectric plant and thermal plant devlopment. Comparisone were madebetween the alternatives by discounting the total capital and operating costsat various interest rates for the period up to the year 2OUv. fThe proposed
project which would be followed by a thermal project was demonstrated to bethe best of the programs studied.
4.28 The proposed Tapanti project was compared with an alternative thermalplant of equivalent capaclty. The discounted cai4h flow comparison on a pro-ject basis gave 12% as the equalizing interest rate, showing that the proposedhydroelectric project would be economically prererred as long as the cost ofcapital is below that rate.
Rate of Return of the Project
4.29 The incremental rate of .beturn on the new assets of the proposedTapanti project was calculated by quantifying incremental net revenues attri-butable to the project and by valuing the output at current tariffs. The cal-culations show that the revenues from the new investment would yield a rate ofreturn of 14.5%. The influence of risk on this result was tested by assumingincreases in construction cost of about 10%, in operating cost of about 20X,and by assuming that the plant would reach its maximum output after 8 insteadof 5 years. Even under these conditions the rate of return remained above12.5%.
Financial Aspects - Power
Proposed Financing Plan
4.30 The financing plan for the proposed power project for the years1969-1973 can be summarized as follows 1/:
1/ For assumDtions used in prenaring all financial forecasta see Annex 13.
US$
-million-
Aptlication of Funui8
Cs-mtruction expenditures(excluding interest)
Proposed project 129.9 19.5 47.1Future expansion 78.4 11.8 28.3Other 51.8 27.8 18.8
Total construction expenditures 260.1 39.1 94.2
Increase in vorking capital 16.0 2.4 5.8
Total Applications 276.1 100.0
Sources of Funds
Internal cash generation 322.8 48.5 116.9less: debt service 222.5 33.4 80.6
100.3 15.1 36.3
Borrowings
Proposed IBRD loan (including interest) 79.8 12.0 28.9Bond issues 32.5 4.9. 11.8Future loan 40.0 6.0 14.5Other loans 9.9 -1.5 .6
Total borrowings 162.2 24.4 588B
Amortizations received from CNFL 7.182 Consumers' contributions and other sources 5.8 0.8 2.1
Total Sources 276.1 41.5 100.0
-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- - z. -3 YA
Internal cash generatio# (get of debt service) would provide -k, borrowings58 8/05Ai and other sources 31of the funds required. The proposed financine nian
is satisfactory. 4.97
Future Earnings and Financial Position
4.31 Inqome statement projections and a forecast of sour"es and appli-cations of funds for the yeara 196Q-1lQ7r are given in Annexea I4 AknA 15. Thg
rate of reture which was 7.6% in 1968 would increase to about 8.3% in 1969and 10.8% in 1Q71. There vould be a doeline to aboust 9, in 1972 anA 1973
due to the addition of sizeable amounts of new conatruction to the rate base.v.k.rea4er +e reu,n ou'd again 4-pro,e to about 11I Th aI--ea rtn
for the whole period would be 9.7%.
4.32 ICE's financial needs and the fact that no further Government con-tribAio -~can be ---ecte7 (see a.17) mae i u ---- _fiy ffor ICE toearn a minimum rate of return of 9% beginning in 1970. During negotiationsan unde-taking was obtaUned froA ICE and the Uovernment that ICE -will applyfor and the Government will cause ICE to be granted, tariffs which would give
ICE an nnua1 rate of rexurn of not less tha-n 9 Deginning in 9Yfu.
4.33 interest would be covered 1.8 to 2.5 timee by income before interestin the 1969-1975 period. Debt service coverage is tight in the years 1969and 1970 due to the substantial amount of medium-term debt already contractedby ICE,i Internal cash generation would cover debt service 1.3 tim,es in 1969and ±970. Tne ratio would tnen improve rrom 1.4 in 1971 to 1.y in ly-97 wnlcnis more satisfactory.
4.34 ICE's debt management ha;X given cause for concern in the past. Du-ring negotiations for Loan 346-CR a debt limitation covenant was agreed uponin the form of an earnings test which allows ICE, without Bank approval, toincur debt as long as its overall power and telecommunications earnings fora past 12 months period would cover overall maximum debt service 1.5 times.On the basis of this test ICE would not at present be qualified to assume anyof the debt proposed in the financing plan for the proposed project. However,as the financing plan is satisfactory, it was agreed during negotiations thatthe Bank agree to the 037.5 million bond issues required to finance part of thelocal cost of the proposed project. The major part of these bonds would beissued in 1969-1971, i.e. 015 million in 1969 and ¢7.5 million each in 1970and 1971. Based on past experience ICE should not encounter difficulties inplacing these bonds. The debt limitation covenant under Loan 346-CR has beenrepeated under the proposed loan with the only modification being that thetest be applied separately to ICE's power and telecommunications operations.The debt limitation covenant would also have to be applied to CNFL since itis now a subsidiary of ICE.
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5. THE TELECOMMUNICATIONS SECTION
The Telecommunications Project
5.01 ICE's second telecommunications program provides for a total ex-penditure of US$11.8 million equivalent over the 1967-73 period. The programis the logical next step in expanding the domestic telecommunications systemswhich were started under Loan 346-CR.
5.02 Part of the above program is already financed. In 1967 and 1968,tovwards the end of the project financed by Loan 346-CR, ICE had to install inadvance about 5,000 lines and some additional channeling equipment, whichwere originally planned as part of the next stage. This was to prevent sat-uration of the new facilities provided under the first program for which de-mand and use proved much higher than anticipated. In 1967, ICE started con-struction of this part of the program, after consultation with the Bank. at acost of approximately US$1.6 million equivalent. ICE arranged suppliers'credits for approximately US$0.5 million, and the balance of the funds weresecured through other borrovwings. Construction is scheduled for completionin 1969.
5.03 The proJect for which ICE is nov requesting Bank financing is theremaining portion of the domestic program scheduled for construction from thesecond half of 1969 throuih 1973. It provides for a total capital expenditureof US$9.5 million during the four and a half year period. The proposed Bankloan would cover US$6.5 million for procurement in foreign exchange. Themain items included in the Bank project are the expansion of local and longdistance telenhone systems and the establishment of a modern network for telexand telegraph services.
5.04 International telecommunications facilities will have to be expandedover the same priod (Annex 17). Sorvee to eountries outside Cantral Americais adequate, but service to CACM countriep will require considerable strength-ening. A Central Amrican 'numunie aLti nst Notirrnvk h^- hbn pnronp^- to fi I
this need. Final arrangements for the network are still to be agreed to by theCACM cointries, aa,d it is epected that IrE will play an important part inthe construction and operation of Costa Rica's portion of the project. ICE
4 11 hae taoa scon'ent- before incv-rin- ,, debt in connectionwith the financing of the network. This will permit the Bank to review andA4-,,-Si it+h NE the scope W,rP its mr-ttui4a e-, m4 +tmev.+a av«A resp,onsibilitis+4
in this field.
Telephone Systems
5.05 The project would increase the installed capacity of ICE operatedautsJ~ ~~~ _ tic% 2xuusq 0200% tec1ou ines IDyr 2-2 aA%,500.p -4 Of% "s -,o InesaU.UI.VM=%.L%u =UA fa.uU6= WI JV9 lJ' 9 LLjwU VJ± %*".LUa J, 9rj VWJ .I.~
would be added to 18 existing exchanges, and 14,000 to 11 new exchanges. Thesea6u1itioas- were pl,n-ed on the bis ol s-urveys of the a-nt-utip.aFtedU Krow6a Ln
each of the eTchanige are"s. 'The number of telephone stations of all kinds inservice is expected to increase by 26,500, fr-om1 37,500 telephoues au;i ye end
- 21 -
of 1968 to 64,ooo at the end of 1973, or an avetageiannual growth of 11%. Theurban networks and outside plant in the exchange areas will also be expandedto keep in line with the increased capacity of the exchanges. A detailed listor the proposed extensions and the schedule for completion of the exchangeinstallations are given on pages 3 and 4 of Annex 10.
5.o6 The project also provides for the expansion of multiplexing equip-ment on the existing backbone microwave and coaxial routes. The planned trunkcircuit increases take into account the traffic growth observed on existinglinks and the development of local systems. In addition, about 24 small ca-pacity VHF links will be installed between distant exchanges or isolated publictelephones and the principal microwave stations. Details of the routes areshown on Map 4. Trunk switching equijpment will be added in San Jose and inthe main exchanges to terminate a total of 300 new long-distance circuits andto provide automatic interconnection for all subscribers within Costa Rica.
Telex and Telegraph Facilities
5.07 A 400-line automatic telex exchange for local subscribers and trunkcircuits would be installed in San Jose, and two small 50-line telex exchangesin Limon and Puntarenas. Subscriber telex stations would be provided in thesecities and equipment for distant telex subscribers would permit the c,onnectionof about 50 isolated stations :in 15 cities. The proJect also includes a numberof teleprinters and trunk telex circuits which would be installed in and be-tween the principal cities. In cooperation with the Government Telegraph De-partment, the telex network would be used for public telegraplh between thetelegraph offices of the principal cities. This would greatly improve tele-graph service in Costa Rica, which is presently obsolete and inadequate.
Program Costs
5.08 Details of the cost estimates of the second stage program (1967-1973)showing separately the proposed Bank-financed works to be realized from 1969through 1973 under the project, and the projected yearly expenditures, aregiven in Annex 16. The estimated cost is summarized below:
- 22 -
Local Foreign Total Local Foreign Total
- - e Mi$ion---- or ---- U1S$ Million----
A. Bank-financed Items
Exchanges 4.0 19.4 23.4 o.6 3.0 3.6Local networks and installations 5.3 12.1 17.4 0.8 1.8 2.6Long-distance networks and telex 1.3 5.4 6.7 0.2 o.8 1.0
Engineering and supervision 7.7 0.5 8.2 1.1 0.1 1.2
Contingencies o.6 2.6 3.2 0.1 0.4 0.5
Construction costs 18.9 40.7 59.6 2.8 6.1 8.9
Interest during construction 1.3 2.5 3.8 0.2 0.4 0.6
Sub-Total - A 20.2 43.2 63.4 3.0 6.5 9.5
B. Other Items
Advanced 1967-68 works 6.2 4.2 10.4 0.9 o.6 1.5Other works 1.5 2.3 3.8 0.3 0.3 o.6Interest during construction 0.5 0.5 1.0 0.1 0.1 0.2
Sub-Total - B 8.2 7.0 15.2 1.3 1.0 2.3
Grand Total - A & B 28.4 50.2 78.6 4.3 7.5 11.8_ _= SIMMON
The cost estimates are reasonable and adequate. The costs of material, equip-Mnt .nsd inftAllaitinn haey boon baaed on recent nuotations and on ICE's ex-
perienqe under the previous program. Contingencies of about 7% have been in-cluded to cover n -nforeseen ranuir_ments And variations such as possible changes
in lead and copper prices; this is satisfactory. The portion of the projectpropo-ed for sRnk finAn&4ng (HRt6.5 milion) coverm the foreiArn exchanne com-
ponent of construction works totaling US$9.5 million equivalent including in-.e.s94 during C__fl.…i….v t… …b ca-ried out A…-in0 'he 1969-1073 per40d.
Other items total US$2.3 million equivalent, covering switching equipment-.1 O , AordreA, m4sce a-ous e-,i_Ah-+ fPo. c^w.r.yn amww4n oa wtia+m"4ala
for the installation of the systems by ICE's staff.
Engineering, Construction and Procurement of Goods
5.09 Under the previous project financed by the Bank, ICE has demonstratedits a .lit-; to planu ad inst-ll the .scilities, to - andto operate the system. ICE, however, engages consultants to get assistance in
-. ~.. - Y.. J.1..A - --- . . TT'4- -. 1 -.. --- 4.. 4-speciflc pr6ublMMbe. LU VUU. YZUWJCII, L%1J y1Luk_D%mu -vv WMFuivi ±jLWJ. %.&YW LV12 VWadvise on the construction and organization of the new telex system and to co-
ordinate the development and o-peration of the domestic and regions' trunk tele-
phone networks. ICE also uses the advice of the regional ITU experts for
'Central America. Assurances were obtained during negotiations that ICE would
continue to emoloy expertenced consultants uncLer terms and conditions satis-
factory to the Bank to &.8sist in carrying out1 its telecommunications fUICtlols.
- 23 -
5.10 IWE proposes to ro±±ow its usual practice or procuring equipment.and materials through international competitive bidding. The issue of localpreference does not arise. However, in respect of equipment required to extendexisting telephone exchanges and long distance systems up to their plannedcapacity, estimated at about USO$1 million, ICE proposes to procure from theoriginal suppliers equipment of the type presently installed.
5.11 This is the most practical way to obtain the needed capacity and atthe same time make Null use of the available common equipment. Procurementfrom other manufacturers would involve the planning of separate systems whichwould require duplicating common units, extra building space for new equipment,installing junction units, transferring or scrapping unused materials, etc.IThese added costs, estimated at about 30%, would outweigh the possible gainsfrom international competitive bidding, particularly in this case where theprices of extension units would be based on the prices in contracts awardedafter international competitive bidding under Loan 346-CR, which, at aboutUS$90 per line in large exchanges and US$80 per line in small exchanges, wereand would continue to be highly competitive. In negotiating the prices forthe extension equipment, ICE will take into account these earlier prices andalso the price levels set for other similar equipment for which tenders willbe issued. The proposed method to ensure the competitiveness of the pricesnegotiated is realistic. ICE could seek supplier financing for these instal-lations as an alternative to Bank financing. This was done for the extensionsalready carried out (see paragraph 5.02), but ICE's heavy debt service obli-gations make such financing unsuitable (see paragraphs 5.22 and 6.02). Equip-ment for both new and extended installations of the proJect have thereforebeen included in the proposed loan. All contracts to extend installationsprocured under Loan1356-CR will be subJect to Bank approval and in each caseICE will be required to produce satisfactory evidence of the reasonableness ofthe negotiated costs.
5.12 During neaotiations it was agreed that the mreference to suppliersfrom CACM member countries described in paragraph 4.15 under the Power Projectwould also applv to the Telerenmuninations Proiect- It in likely that aboutus$o.6 million equivalent of contracts for telephone cables would be awardedunder this arrangement to suppliers in CACM countries other than Costa Rica.
5.13 Disburnsments from the pronosed RAnk Loan would be mnAe fnr the Cr&icost of imported material and equipment and for the foreign exchange componentof> e,nn8ulrn1tna r Ontrat,tu
Justification of Telecommunications ProJect
-II1 ljU to no^ ICE hJa bee" e-ngagd in th-e eSt-1-.-su- _O-PoOttelephone exchanges to replace obsolete facilities and meet new demand, and4" v+ hd 4- As^4 -..P m,004-~I4--+,, ... 4, T- es n.v-- th- Wn,dclno rfeetitrb ao,ic*.J. 4In s-om areas thes uefacilities are getting used up leading to congestion on certain routes. Thepunernth pfogrst pjas et an a- up bd sr vey of thereq uire met. IhUabeunder the first project and a detailed survey of the requirements. It has been
drawn up to satisfy essential demand and is based on the use of well structured
and efficient modern systems which provide the required capacity with the low-east investment and operating cost.
5.15 For planning local systems, in addition to its own statistical ob-servations and forecasts, ICE carried out an on site survey of the number of
potential commercial and residential subscribers in each town, and then studied
local industrial and urban development projects and population trends in orderto determine the probable growth rate of demand. Detailed forecasts and plan-ning were prepared in each case, and adjustments to the program can easily be
accommodated if necessary. The predicted grovth rate in number of telephones,which averages 11% per year, is conservative. Telephone density would in-crease from the present 2.0 to 3.1 telephones per hundred population by 1975.
International comparisons which have shown a high correlation between tele-phone density and GNP per capita, would indicate a potential density of 4 to
4.5 telephones per hundred population for a country at Costa Rica's stage ofdevelopment (GNP per capita in 1968 estimated at US$450).
5.16 Long distance systems are at an early stage of development. ICE ispresently making a careful analysis of the traffic and of the use of the newfacilities. Annual growth rate of trunk calls was more than 40% in 1968, how-
ever, this growth rate is not indicative of future demand since the systems
have been established only recently. The experience in other countries isthat the rate of growth of long-distance calls is as much as twice as high as
the growth rate of telephones when quality of service is good. The new sys-
tems and extensions have been designed to eliminate present congestion ofcertain links and to cope with an expected traffic growth of about 18% up to
1974, which is conservative and reasonable.
5.17 The telex project is limited to facilities in and between threel.rge cities and the principal provincial towns where business, trade and pub-lic administration are concentrated. The anticipated demand was surveyed in
detail by ICE with all prospective customers. The new network will replace
the present temporary network of private circuits. In addition, the telex
net+work vi1l be utilized for the nublic telegraph service between the maincities and for international traffic. The government has assigned a high
priority to the improvwment Of this service.
Ba+e Rtw R-l-
5.18 The incremental rate of return on the new investment for the pro-
posed expansion of telecommunications services is about 16.9% (see Annex 18).
.Tis rate of return has been caleulated using estimates of coat And incre-mental net revenues derived from ICE's projections, and excludes benefits to
telecommunaications *users i excess of the ratea they p-a f -+ the sevice-
These additional benefits can be expected to be considerable in a country like
Costa Riea, in which the main center of co4 = rcial, industrial ead ad-inis-trative activity, San Jose, is removed from the main import/export centers(Puntarenas and ruerto Limon) and from the more dynamic agricultural areas in
the south and in Guanacaste (Map 1). The project is economically justified.
Financial Aspects - Telecommunications
Proposed Financing Plan
5.19 Tne financing plan for the proposed telecommunications project dur-ing the construction period 1969-1973 is summarized below. 1/
p or US$ _
--million---
Application of Funds
Construction expenditures(excluding interest)
Proposed project 59.6 9.0 65.7Works in progress 5.6 0.8 6.2Other 15,.0 2.3 26.5
Total construction expenditures 79.5 12.0 88.4
Increase in working capital 10.5 1.6 11.6
Total Applications 90.7 13.7 100.0
Sources of Funds
Internal cash gzeneration 108.0 16. 119.1less: debt service 76.8 11.6 84.7
31.2 4.7 34.4
Borrowings
Proposed IBRD loan (including interest) 43.3 6.5 47.7Bond i8sue 5-0 .8 Other loans 3.3 0.5 3.7
51.6 7.8 56.9
Connection fees and consumers' deposits 7.9 1.2
Total Sources 90.7 13.7 100.0
j/ For assumptions used in preparing all financial forecasts see Annex 13.
Intprnal cash generation (net of debt service) would provide , borrowingsTo.9,rti* and other sources -OM of the funds required. The proposed borroving
plan is satisfactory. 6.7i2
Future Earnings and Financial Position
5.20 Income statement projections and the forecast sources and appli-_A.Stn or^ ud-2_ o--e _J_.eu 4 A-" -- 9 IA d -- O n Gig o-l e8^iW06WO.L(J5 oJi I. uLuu WkL- J.L VUL" J.I UUA8LUD J.7 OULL. rV. rU.L-LL4ALKM~ WUU.LLL1) UV JJ1
tory in the seven years 1969 through 1975. The rate of return, which was 12.1%in .196 -would dcc.L.Lue to aUbo-.LVP 10 ." 1969,ueU coustruction a-dM ttio5bIng Offacilities included in the first stage of the automatic telephone network iscompleted and the cost of these faeilities is added to the rate bsae. The rateof return would improve to about 14% in 1972, decrease to about 13.5% in thefollowing two years due to large asdditions to operating capacity, and then im-prove to about 14% in 1975. The average rate for the whole period would be
5.21 in order to avoid a casn deficit in tne years 9LY7u to 1972, it willbe necessary for ICE to earn a rate of return on net fixed assets in operationof not less then 11% during these years. Assurances were obtained during ne-gotiations from ICE and the government that ICE's present tariffs will not bereduced without the Bank:s consent before 1972 and that ICE will seek and thegovernment will authorize any tariff increases necessary to maintain a returnof at least 11 in hne years 1y9u to 1yf7. After 1y-9e, this rate of returnwill be reviewed by ICE, the government and the Bank taking into considerationICEls investment program and financial position.
5.22 Interest would be covered 1.4 to 2.7 times by income before interest.Debt service coverage is tight in the years 1969 through 1971 due to the sub-stantial amount of short and medium'term debt (including suppliers' credits)contracted by ICE to finance construction and expansion of the telephone sys-tem. However, with the Bank's consent, ICE has arranged suitable refinanfingof the shorter maturities of its debt. Debt service coverage would be unsat-isfactory until 1972. The ratio would be 0.9 in 1969, 1.3 in 1970, and thenwould improve from 1.4 in 1971 to 2.1 in 1975, which is satisfactory.
t
5.23 As already mentioned in paragraph 4.34, the debt limitation covenantunder Loan 346-CR would at present not allow ICE to incur additional debt forits telephone operations. Hovever, as the proposed financi*g plan appearssatisfactory it was agreed during negotiations that the Bank would permit a5, million bond issue in conjunction with the proposed Bank loan. The debt
limitation covenant under Loan 346-CR was repeated in the proposed Telecommuni-cations Loan.
- I -
6. FINANCING PLAN AND FUTURE FINANCIAL POSITION FOR ICE'S POWER- ~ ~rMI ^ &kT1f r^TTT9A Mrl e fImtM-r,TO. flf¶WflTW1T%
Proposed Financing Plan
6.01 The financing plans for the proposed power and telecommunicationsprojects show that internal cash generation net of debt service would financeabout 36% of the applications of funds and about 39% of ICE's total construc-tion expenditures. To a large extent ICE will have to rely on borrowings tocarry out its investment progrfm and meeting its other obligations. Borrowingswill total 0213.7 miLlion (US$.J2.2 million) and will provide about 5:c or allfunds required. The overall financing plan is acceptable. A forecast ofsources and applications of funds for ICE as a whole for seven years 1969-1975is given in Annex 21.
Future Earnings and Financial Position
6.02 The income statement projections for ICE's combined operations
(Annex 22) show that earnings during the seven years 1969 through 1975 wouldbe satisfactory. Interest would be covered in the forecast period 1969-1975between 1.7 and 2.6 times by income before interest which is satisfactory.The debt service coverage, though unsatisfactory in 1969 and 1970, graduallyimproves to a satisfactory level in 1975 when debt service would be covered
2.Q0 times by internal cash generation. (For the proposed debt limitation cov-enant see paragraphs 4.34 and 5.23 and for debt service requirements Annex 23.)
6.03 Forecast balance sheets for the period 1969 to 1975 are shown inAnnex 24. Total net fixed assets during these seven years would increase from0535 million at-the end of 1968 to 0955 million at the end of 1975, or by about80%. ICE4s eauity would more than double during this period, reaching 0567million by,the end of 1975 whereas outstanding long-term debt would only in-crease by about 32% to 0510 million. The debt/equity ratio is therefore ex-pected to improve steadily from 60/40 at the end of 1968 (during which yearthe debt for the purchase of CNFL was incurred) to 47/53 by the end of 1975which is satisfactory. ICE's current position which improved during NM isexpected to improve further in the coming years. 1969
Security
6.o4 At present. practically all properties of ICE are encumbered in oneway or another. The Bank's first two loans are secured by mortgages on prop-erties used for the power and telecommunications systems. It was agreed duringnegotiations that the proposed loans also be secured by existing mortgages onprnnertie8 used for the power and telecommunications svstems and/or by extend-ing existing mortgages.
28
7. AGREEMENTS REACHED DURING NEGOTIATIONS
7.01 The following principal agreements were reached during negotiations:-
(i) The Government and ICE agreed that:
(a) electricity tariffs vould be established to enable ICEto earn a return of not less than 9% on net fixed assetsin operation beginning 1970;
(b) electricity tariffs would be established to enable CNFLto fulfill the obligations of its new concession contract;and,
(c) telecommunications tariffs would be established to enableICE to earn a return of at least 11% on net fixed assetsin service from 1970 to 1972, and that the rate of returnfor later years would be reviewed by ICE, the Governmentand the Bank before the end of '1972; tariffs will not bereduced without the Bank's consent before 1972.
(ii) ICE agreed to restrict the amount of bonds sold with a repur-chase agreement to 40% of the bonds outstanding.
(iii) ICE agreed to inform the Bank of any impending change in theposition of its General Manager and to give the Bank an oppor-tunity to comment.
(iv) The Bank agreed to grant suppliers from Central American CommonMarket member countries, including Costa Rica, a preference of15% or 50% of the customs duty whichever is lower when comparinginternational bids.
(v) The Bank agreed to allow up to US$500.000 equivalent under theprcposed pover project for retroactive disbursement for con-tracts made after Januarv 1, 1969.
(vi) The Bank aureed to all oi ICE to award eauinment contracts forabout US$1 miglion for the extension of existing telephone.in-atAllatoinn nn a negotiated basis using funds from the pronosedloan provided that satisfactory evider4ce is produced regardingthe reasonableness of the neffgntiated prices sad the pnrposedcontract awards are approved by the Bank in each case.
June 11, 1969
ANNEX 1
COSTA RICA
INSTINIULO COSTARRItUfNS. D. fLSCTRICIDAD
AUDITFD BALANCE SHEETS 1i6a-1968(in million 0)
Year ended December 31 1964 1965 1966 1967 1966
AssetsFixed Assets in Operation
Power System 234.1 247.5 257.1 418.9 430.2less Depreciation 27.6 33.8 40.1 49.5 59.7
2_06_.5 2_3.7 2i7.0 3b69-4 37C.5
Telephone System 5.7 6.O 33.7 80.7 95.1less: Depreciation 0.8 1.7 3.2 6.6 7.3
97 3 30.5 T 8T7
Other Properties 28.6 35.1 36.2 37.0 37.3lesssDepreciation 10.3 12.6 15.4 18.1 20.4
IT 2 5 2D. TW3 1D.9
Total Net Fixed Assets in Operation 229.7 240.5 268.3 462.4 475.2
Construction W'ork in ProgressPower System 81.5 157.7 151.2 33-. 44.9Telephore System-, 5.2q: 302 R I0 .1
Sub-total lff.9 218. 50. t
Total Net Fixed Assets 316.4 428.4 486.9 512.8 535.3
Investments 5.1 4.5 4.9 5.3 75.4Social Benefit Fund - - 2.8 3.5 4.3Long-term Receivables 1.1 1.0 0.8 0.6 1.5
Suvb-total W3 7E 81.2
Current AssetsCash 2.1 3.0 4.4 3.1 5.2Accounts Receivable (net) 3.4 13.0 9.2 14.1 14.0Materials and Supplies 73.5 59.8 47.5 44.8 42.9Other 4.3 2.1 2.1 11.8 4.9
Sub-total 83.2 78.5 63.2 73.a c7.0
Deferred Assets 2-5 2.8 3.0 4.2 4.8
TOTAL ASSETS 408.3 515.2 561.6 ooo.2 o88.3
Capital and LiabilitiesEquity
Capital contributed by goverrment 14.5 152.7 157.0 158.0 154ao
Capital r' 't others 3.0 5.6 8.4 10.3 12.oSub-total 15. 158.53 167.2
Retained Earrdngs325 4. - 6t3 89
Total Equity 1.h0 2CT.3 2-20. 232.3 250.1
Liability Reserves 4.0 5.6 4.1 4.1 5.3
Long-term DebtBonds 6.u 28.8 22.0 26.2 38.4Loans 126.0 196.3 218.8 243.1 313-4Others 1ff.4 26.2 19.6 8.3 4.0
Total 136.4 251.3 260.4 27,°.b 355.8Bonds sold with Repurchase Agreement 1.2 0.4 26.8 31.0 26.0Consumers' Deposits 0.4 1.b 2.5 3.2 2.8
Current liabilitieesCurrent Portion of long-term Debt 27.4 3o.4 34.9 38.7 29.4Accounts Payable 52.2 10.4 6.9 7.3 13.0
Others 2.7 5.2 5.o 4.0 3.3Total o23 32.0 47- 5h0-0 47.7
Total Capital and Liabilities 4 515.2 561.6 600.2 688.3
Debt/Equity Ratio 43/57 55/45 57/43 57/43 oc/40
y,ay 1909
COSTA RICA ANEX 2
INSTITUTO COSTARRICENSE DE ELECTRICIDAD
DETAILS OF LONG-TERM DEBT AS OFDECEMBER 31, 196 1)
(in millions of Colones)
Interest .sadBalanceAmount Rate Repaymaent to Dec. Outstanding
Authorized in7 Period 31, 1968 Dec. 31. 1968Bonds
ICF, 1964 2 issues of 10 year bonds 10.0 8.0 1964-1974 3.6 o.4ICE, 1965 4 issues of 10 year bonds 20.0 8.0 1965-1975 5.2 14.8ICE, 1965 1 Issue of 20 year bonds 5.0 8.0 1965-1985 o.3 4.7ICE, 196o 5 issues of 20 year bonds 25.0 8.0 1966-1986 1.4 23.o1CE, 1957 2 issues of 20 year bonds 10.0 8.0 1967-1987 0.3 9.7
CE, 1-9 2 issues of 20 yew bors 10.0 8n. o 1n98-1988 0. nSub-Total 11.0 o9. 0
Local Lo.ans
Caja Costarricense de Seguro Social 1 - 19 year loan 26.0 7.0 1962-1977 7.8 l8.2Caja Costarricense de Seguro Social 1 - 15 year loan 10.0 7.0 1963-1978 1.1 8.9Compania Nacional de Fuerza y Luz 1 - 6 year loan 5.8 8.0 1963-1970 4.3 1.5Banco de Costa Rica 1 - 12 year loan 1.2 7.0 1965-1977 0.1 1.1Banco Nacional de Costa Rica 1 - 16 year loan 0.3 8.0 1967-1983 - 0.3Employee Benefit F2und 2 loans 1.9 8.u none agreed -1.hunicipalidad de Grecia 1 - 3 year loan 0.1 0.0 1967-1970 - 0.1
Sub-Total 45.3 lj.3 32.0
Foreign Loans
IBRD - 276 CR 1 - 25 year loan 58.5 5.75 1963-1985 7.7 50.8IBRD - 346 CR 2/ 1 - 24 year loan 146.3 5.5 1967-1986 0.0 13q.7Inter-American Development Bank - 1 - 20 year loan 17.9 5.75 1966-1982 2.8 12.7AID - 515-L-0153/ 1 - 38 year loan 1.0 2.0 1975-2005 - 0.5Central American Development Bank 1 - 10 year loan 7.3 6.25 1964-1974 2.4 4.9LAMEX Intern. Finance 1 - 11 year loan 13.3 9.5 1970-1979 - 13.3First National City Baik - Chicago 1 - 5 year loan 5.0 7.75 1969-1973 - 5.0Bank O ica I 10.0 7.75 19±U8-1971 2.5 715Chemical Intern. Finance 1 - 3 year loan 3.3 8.5 1967-1970 1.0 2.3EBASCO LI 1 - 17 year loan 69.8 7.75 1969-1986 6.o 3.2Chase Manhattan Bank- 1 - 5 year loan 10n0 5/ 1QAQ-1973 -
Sub-Total 34 2-T 2977r
Grand Total 4977 LI 7
1/ Excluding 0 4.2 million suppliers' credits2/ 0?.4 million not yet drawn down as of 12/31/6837 20.5 million not yet drawn down as of 12/31/6841 1l3.0 million not yet drawn down as ol 12/31i/68L ' 1.' over prime rate New York
Iiay 1960
COSTA RICA
14SgTMITUT COST-A]R-RICFME DE E.T.ECTRTIGTDJAD
AUDITED INCOME STATEMENTS 1965-1968
(in e '000)
Year ending December 31 1965 1966 1967 1968
Onerating RavenuesPower System 41,645 42,363 47,469 56,713Telephone System 4,945 9,026 15,968 24,199Otuher 103 i40 152 217
Total 4,9 51,529 777 7 81,129
Operating ExpensesElectric Power Purchased 2,623 2,623 2,623 2,623Operation, maintenance, depreciation - Power System 17.OQO I13-7 17L,Q91 20p260Operation, maintenance, depreciation - relophone System 4,593 6,579 7,820 9,417General and administrative 2 687 5 601 9,493 9,t415
Total "26,53 27,910 37,4i27 Wd,715
Net Income from operations 19,740 23,619 26,162 39,4L4
Other Income (net) 918 2,421 1,566 5,608
Income before Interest 20,658 26,040 27,72b 44,022Extraordinary Charge = -
Interest Payable 13,866 18,926 21,294 25,245less: interest capitalized 6,696 4,232 2,314 2,439
interest charged to operations 7,170 14,694 18,980 22,606
Net Profit 13,488 11,346 87h48 19;1L.8
/,, Man i dend and interest paym..ents from CNF.2/ Extraordinary write-off of manual telephone system.
May 1969
AtThTRx 4
Page 1 of 4 pages
COSTpr, DTrA
r1o,,pania Naciona-l de D y LUZ S.A.LI. T (rnFu)
FUlanc ial J-11ornia-,-t
1. Prior to being taken over by ICE, Cl rF was a private compaiy andoperated under a concession contract which imposed restrictions which mayhave influenced the value given its fixed assets and caused distortions inthe financial statements. Consequently condensed balance sheets and incomestatements for the years 1965, 1966, 1967 and of September 30, 1968 aregiven simply as a matter of record. The results shown therein do notnecessarily give any indication of CNFL's future operatimng results underits new concession contract which eliminates the previous restrictions andplaces CNFL under the Electricity Law along with all other electric utilitiesin Costa Rica.
2. During the appraisal of the proposed project forecast income andcash flow statements were prepared by CNFL. It became evident from ananalysis of these forecasts that CNFL would not be able to meet its financialobligations under the new concession contract which require it to providefrom internal cash generation sufficient funds to finance distribution systemexpansion and to pay such dividends to ICE which would enable the latter tomake the debt service payments to EBASCO, the former owners of CNFL. Inorder to overcome the shortage of internal cash generation during 1969 CNFLwill sell bonds on the local market.
3. For the long term solution CNFL is studying its tariff schedulesand expects to be able to change these during 1970 to obtain a more equitabledistribution of charges between domestic and industrial customers. At thesame time about a 7% increase in gross revenues is expected to result fromthose tariff changes. The forecast financial statements of this annex arebased on that assumption and show that CNFL would be able to meet itsobligations on this basis.
ANNEX 4CT CPa 2 of 4 pages
rOMPANTA NACIONAL de FUERZA Y LUZ S.A.
EALAsCHEETs 196-1.968i--n million i)
Deo.3i Dec.'! LDec.31 S.30t
1965 1966 1967 1968
Assets''xed assets in onerationPlant 126.7 130.7 134.3 137.7less Depreciation 36.6 38.6 39.7 40.8
Net fixed assets in operation 90.1 9Z.1 Y4.o 90.,
Construction in Progress 1.1 1.5 1.3 1.4Total Net Fixed Assets- 91.2 93.b /5.9 -E
Investiments L.3 3.1 2.0 1.2
Current AssetsCash and Bank 3.1 2.8 6.8 7.4
Notes Receivable 1.1 1.2 1.2 1.1Accounts Receivable 4.3 4.8a 4. 6.6
Materials 0.8 0.8 1.4 1.0Others 0.8 o.6 0.3 0.2
Sub-total 10.1 10.2 14.3 1TT7
Total Assets 105.6 106.9 112.2 115.8
Capital and Liabilities
Capital StockOrdinary 26.0 26.0 26.0 26.0Preferred 0.1 0.1 0.1 0.1
Sub-total 26.1 26.1 U2iSE 26.1
ReservesLegal 2.6 2.6 2.6 2.6
Other 0.4 0.7 0.7 0.7Earned Surplus 3.9 o 5.3 5.3
Sub-total b.9 ..j 6.b
Total Equity 33.0 34.4 34.7 34.7Contributions in Aid of Construction 6.7 7.2 V.0 8.7Long-term Debt 23.5 25.7 51.9 55.8
Cur-rent liabil-tis4Current maturing long-term Debt 26.6 24.9 0.5 0.5Notes and Accounts payable 4.8 3.1 3.1 3.6
Customer deposits 2.4 2.2 2.4 2.6Others 8.6 9.4 11.6 9.9
Sub-total 42.4 39y.0 17.0 1O.0
Total Capital ad Li'ablit'ie 1 05. 106.9 112.2 115.8
Deot/Equni-, ty Ratio h2/q8 L3/57 60A0 62/38
Narch 196y
AN.AEX 4Page 3 of 4 pages
COSTA RICA
COMPANIA NACIONAL de FUERZA y LUZ S.A.
SOUHCES AND APPLICATIONS OF FUNDS 1968-1973(in '0000)
1967 1968 1969 1970 1971 1972 1973Sources of FundsOperating Income 9,477 8,896 13,212 13,059 12,976 12,850Depreciation 1,331 2,816 2,914 3,064 3,214 3,364
Total Internal cashgeneration 10,808 11,712 16,126 16,123 16,190 16,214
Debt Service Paymentsre ei<.ed 1,300r1,200 2l- -- -130-
Consumers' Deposits 200 210 220 230 240 250Consumers' Contributions 839 852 800 800 800 800Sale of bonds 945 2,805 1,000 1,000 1,000 1,000Payment by EBASCO for exchange
adjustment 1,661 -- -- -- -- --
I U tal s- 5-uCes of 'rarids i5753 i6,779 i80,392 180,153 18,230 18,264
Applications of FundsConstruction Expenditures 4,601 4,778 5,000 6,000 6,5oo 7,000Debt Service 5,600 6,719 6,789 6,927 7,036 7,136Dividend Payments 3,908 h,688 5,208 5,208 5,208 _4,168
?otal Application of Funds 14,109 16,185 16,997 18,135 18,744 18,304
Cash Surplus (Deficit) 16h 59)u 1,395 18 (5114) (4o)
Accumulated Cash end ofperiod 5,905 7,5%9 8,lh.3 9,538 9,556 9,042 9,002
Retilrn on average netfixed assets in operation (5) 9.9 9.0 13.1 12.6 12.2 11.7
COSTA RICA
COMPANIA NACIDNAL DE FUERZA v LUZ S.A,
Al-MsT A.17M FI: CLOS T r Ns M STPAfA: mMDnS l 965- _-
(In '000 ¢)
~~~esr D ~~~~~~~~~Actual Forecastiear ercding December 31 -At 1967 ±yuu i>p9 1970 _97i 1972 - I73
Sales of energy (million kwh) 353.9 383.6 416.0 453.0 494.2 536.7 582.8 633.0 687.4Average price per kwh exci.
fuel (centimos) 12.58 12.72 12.57 12.55 12.57 13.45 13.h5 13.45 13.45Operating Revenues
Inczae frm seales 4ih,53B h 8,7h4 52,277 56,873 62,125 72,186 78,387 85,139 92,455Fuel adjustment 3,192 1,377 902 1,109 1,242 1,349 1,h65 1,591 1,728Other 74 96 108 92 90 90 90 90 90
Total 47,796 50,267 53,287 58,074 63,457 73,625 79,942 86,820 94,273
Operating ExpensesPurchase of Energy 22,773 26,771 30,4L2 36,594 41,649 46,751 52,391 58,471 65,132Fuel 3,192 1,377 902 1,1U4 1,242 1,349 1,465 1,592 1,728Operating Cost 9,240 9,906 10,345 10,370 9,304 9,816 10,356 10,926 11,527Taxes 743 791 961 960 90h 937 961 996 1,026Depreciation 2.186 1.979 1.017 1.331 2.816 2*914 3,064 3,214 3.364
Total 38,134 40,824 43,667 50,369 55,915 61,767 68,237 75,198 82,777
Net Operating Eevenues 9.s62 9,443 9,620 7,705 7,542 11,858 11,705 11,622 11,496
Income from Plant leased 1,566 1,712 1,671 1,772 1,354 1,354 1,354 1,354 1,354
Operating InTcome 12,228 11,155 11,291 9,477 8,896 13,212 13,059 12,976 12,850
Interest h,662 4,625 4,735 4,611 4,806 4,734 4,721 4,672 4,608
Net Income 6,566 6,530 6,556 4,866 4,090 8,478 8,338 8,304 8,242
DividendsComnon 6,499 5,199 5,979 3,899 4.679 5,199 5,199 5,199 4.159Preferred 9 9 9 9 9 9 9 9 9
Retained Profit 58 1,322 568 958 (598) 3,270 3,130 3,o96 4,074
Dividend Rate on Cmanon SLock 25% 20% 23% 15% 18% 20% 20% 20% 16%
Note: Beginning 1970 a change in the tariff structure is assumed which would result in a 7 increase in revenues.
ANINEX 5
COSTA RICA
INSTALT.F.D ,ENERATING CAPACITY IN COSTA RICA AS OF DECEMBER 31. 1967
InstalledCapacity
Utilitv Tvnp and Name of Plant (MW)
Intr nnnected .System ICTE (Pdr - N3
-La Garita 30.0_ R;r.~ Mnror 30.0
- Cachi 64.0- Asuncion 0.7
Thermal - Colima 20.0Sub-total 1)X6=2
(.Th1vdo= etaa 10.0~~JiMi jJ .L~ A. .~ 1 -1 - -.
- Nuestro amo 7.5= Brasil 2.)- Belen 4.3- Electriona 2.7- Rio Segundo 0.2
- snonos o~~.6
Thermal - San Antonio 10.0M. L.. .4. -4-1 -v7 juvub-ota'l ,.7
Munlicipalty Heredia (JASERII) Hydro - Carrillos 2.0- La Joya 0.3
Sub-total 2.3
Municipality Alajuela (JASEMA) Hydro - Cacao 0.7
CASSA Hydro - Birris 1- Birris 2 2.4
Sub-total 3.9
Miller Hydro - Puerto Escondido 0.2- Avance 0.2- Los Lotes u.4
Sub-total 0.8
Total interconnected system 191.6
Isolated Systems ICE Thermal - Limon 8.0- Liberia 2.2- Santa Cruz 0.3
Sub-total 1U.5
Others 13.6
Total isolated systems 24.1
Total installed capacity 215.7
COSTA RICA
IfERCONNECTED SYSTEM
Actual and Foreoast Retail Sales b pay(Ovh)
increaseYear ICE CNFL JASENH JASEMA JASDC !)thers Total in % 1)
1958 18.7 211.1 - 10.8 12.2 - 252.8 -
1959 21.4 230.7 12.0 12.3 12.7 0.2 289.3 14.41960 26.8 251.0 13.4 13.3 15.9 4.8 325.2 12.41961 29.8 271.9 13.6 lh.O 15.5 9.2 35L.0 8.91962 31.h 292.5 1L.7 16.0 16.4 9.5 380.5 7.51963 42-3 313-3 15.2 17.3 17.2 10.6 415.9 9.3
1965 72.6 353.8 17.2 19.6 19.3 14.8 497.3 7.91966 70.8 383.4 18.3 20.8 20.5 17.3 531.1 6.81967 78.7 415.0 20.5 22.4 22.5 19.1 578.2 8.81968 98.3 452.0 21.6 23.9 24.9 21.2 641.9 11.0
1969 100.6 494.2 23.2 26.4 23.2 28.1'' 695.7 8.h197C 105.0 536.7 2 4.9 28.6 24.6 32.0 751.8 8.11971 11.L 582,8 26.7 110 26.2 36,1 836.2 11.23)1972 145.7 633.0 28.7 33.5 27.9 39.7 908.5 8.61973 168.8 687.4 30.8 36-3 29.8 43.0 996.1 9.6197l 182.8 712. 33-1 39.2 31.8 LAS 1,A75.8 8n
1975 223.8 801.8 35.6 42.4 33.8 51.9 1,189.3 10.55)
Notes1) Average annual increase 1958-1968: 9.7%; 1969-1975 i 9.3£2) Interconnection of two rural co-operatives3) Connection of pobtble uAter supply pumps4) Addition of 2nd stage of water supply pUmps5) Interconnection of Limon distribution system
l .,l 1969
I
r'^mA R¶ICA
TrV. = ,nuWr, qina,r=
A-u dUU rvreecast Sales(in Gwh)
Sales in Increase Sales in increase Total IncreaseYear Interconnected in'E Isolated in Sales in
System b biystems
196;F U 5 336 13 349 (5-7)1966 351 4.5 i6 23.1 367 5.21967 396 12.8 17 6.2 413 12.51968 455 14.9 20 17.6 475 15.0
1969 510 12.1 22 10.0 532 12.0 2)1970 548 7.5 25 13.6 573 7.731971 627 14.4 27 8.o 654 14.11972 694 10.7 30 11.1 724 10.74)1973 778 12.1 32 6.7 810 11.91974 8625) 10.8 35 9.4 897 10.75)1975 972 12.8 175) (51-5) 989 10.3
Notes
1) Average annual increase 1965-1968: 10.6%; 1969-1975: 11.4%2) Interconnection of two rural co-operatives3) Connection of potable water supply pumps4) Addition of 2nd stage of water supply pumps5) Interconnection of Limon distribution system
March 1969
COSTA RICA: IIYSIITIJTCi COSTARRICENSE DE ELECTRICIDAD (I.C.E.)SYSTEM DEMAND AND) IN'STAI_LEID GIENEIRATING CAFPACITY
325 35___ _____ _ _ _ __ _F3
304z _ ___ __ __J -_w -300O~~~~~~~~~~~~~~~~~~~ F- Z In /
27!S~~__ __ _ _ _ _ ___ _ _ _ _ _ _ _ - , 0 F -- -_ __275
300- _ __ ___ __2 _ - -3000
w~~~~~E1.-* ~ ~ ~~C)0 0O
c 2 75- _- _ 3c_ --| L- -~ ac _ __ ._. . _ 7 S i _ . CwRS CTME5-2750
75___ __I__ T_ __ __ __\__. ._ _ 17'
250 ~ - -o * EVE DEA DFRE-
275 4 31 -~~~~~~~~~~~-3-
15)___ __ _f~_ __ ___ _ _ _..2_l50
4 I-~~~~~~~~~~
> x~~~~s
22 5 - -3 (J _ -2I'D~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1'i - _ _ __ ._ __ __- - P.SIL TEMPRA
200- -- _.__ __-._ _ _~ POWE _OTM I_ - 200__,
N I ~~ HIG LVELCl
j785 _ __ _ U ._ - __ __ _ _ _ - _ _at_on- - - ~~~~~~~~~~~~~~~.1I- 2
1965 1966 1967j 19681 1969 1!370 1971 1972s 1973 1974 1<375D
z cr~~~~~~~~~~~~~~~~~~~~
- - -- ACTUAL- -~*- -- FORECP,ST----- I G
0~~~~~~~~~~~~~~~~~~~~~~~~
___________________________ ~~~~~~~~~~~~~~~~~~~~~~~~~(ZR)IBRO)-427I
_ _ . - _ __ _-~~~~~~~~~~~~~~~~~~~~~~I
ANNlEX 9
COSTA RICA
ME - TEfiLECOVIRIUNICAT1IUNO SEC'TION
Basic Data as of 1968 and for the 1969/73 Telecommunications Program
Plant and Telephones in Service (End 1968)
Number of telephone stations in service 37,500Number of main subscriber lines 28, 842Percent automatic subscriber lines 100%Number of telephone exchanges 22Number of long-distance circuits 500Length of long-distance circuits 28,000 KmPercent automatic long-distance traffic 100%Average yearly growth rate in total number
of telephones since 1965 29SNumber of users of international telex services
(Radiografica Costarricense. S.A.) 200
Total Staff (September 1968) h85
Asset Value and Revenue of Telecommunications Departm.ent
Net fixed assets ¢ 1066 r,illionAverage capital cost per telephone in service 0 2,700Total revenues for 196e8 ¢r on
ProDosed Expansion and EGstmnte rqts (1969/73 - Telecommunications)
Estimated yearly growth rate in subscribers 11 *Estimated increase in number of subscribers (End 1973) 21,500Proposed growth in numl,ber of long^istance cIrcuits 250Projected staff (1972) 580Investment costs of 1969=73 expansion pFogra. C 69.lm4 mlllon
Mla.y 6L7U7
ANNEX 10Page 2 of 7
4. The transmission facilities installed for STD during the firststage are beginning to show signs of congestion during peak hours prlnci-pally between the main cities of the central plateau and between San Jose,Limon and Puntarenas. It will be necessary to expand them to handle pro-jected traffic. Equipment on existing routes installed during the firststage project has been designed to permit such an expansion which in mostcases will be limited to additional channeling equipment. Map h showsthe existing main long distance links and the proposed expansion.
C. Local Telegraph
5. Local telegraph service is provided by the Bureau of Telegraphsand Radio, a Department of the Interior Ministry, which also provides alimited radio telegraph service to other Central American countries. Domes-tic telegraph network and installation operated by this dePartment is ob-solete and insufficient. The Bureau rents some of its lines from ICE.There are no switching facilities for domestic telex service in Costa Rica.After completion of the second stage program, it is envisaged to use ICE'sdomestic telex network for public teleeraDh between the principal cities.This will result in largely improving and rehabilitating telegraph servicewithin the country.
D. International Servines
6. International tTnnlA- iinicatonns are principnilvn operated hyRadiografica Costarricense S.A., a concessionary company owned jointly byICE (501) and private investors. Radiografica operates HF4 and VHF channelsto the other Central American countries and Panama, HF telephone, telegraphAnd ei nircuits +oN 1TJr+1nh-,n Amn--eri -a E1,ope on its o installa-tion, and, through a submarine cable from Panama, provides communicationsto +he TTS and the rest Of the world. DRadgafica also provides-, interna-tional telex communications to 200 subscribers in San Jose on a privatelineMhni Ibas n4s, whic hav ------ 4to ir,ter.,ationa r.zvor ory.Rdig... ve .X.%&VC Q UVJ LL, V±.L L,.ULLA1a.± ne4fWV.L rt. VI..L)( . kUWLU-LV LaJLd.L'.,LA
rents a part of its VHF channels and circuits to the other CACM countriesand to Par.,.a- fror-iU.. IC,whichUI in Il u-EIU renD Ulcffnrels f''rr, 'LtheCnraAmerican Civil Aviation Organization, COCESNA.
7. Costa Rica is a signatory of the Central American CommunicationsTreaty, and has therefore agreed to particLpate in tle construction of acommunications network serving the five countries of the Central AmericaniCuLuaL±± MaWrke t,. ICE Laresent5 Costa Rica on tne Regionai Tecnnical Commis-sion for Telecommunications (CCNTELCA), which is in charge of planning andcoordnatzing the construction and initial operation of the network. A tem-porary network including 19 circuits between San Jose and the capital citiesoI- the four other countries of the Common Iviarket and Panama has been inoperation since 1967. The network uses channels rented from COCESINA andterminal facilities installed by the concerned telecommunication operatingentities. Due to the experience acquired under the first stage of its pro-gram, ICE had a pilot role in the planning and tendering of the proposedfuture regional network which was made in 1968. Details on the proposednetwork which would include a high capacity microwave route interconnectingthe five capital cities of the CACM countries and a link between San Joseand Panama and on its construction schedule, are given in Annex 17.
JANEX 10Page 2 of 7
4. The transmission facilities installed for STD during the firststage are beginning to show signs of congestion during peak hours princi-pally between the main cities of the central plateau and between San Jose,Limon and Puntarenas. It will be necessary to expand them to handle pro-jected traffic. Eauipment on existing routes installed during the firststage project has been designed to permit such an expansion which in mostcases will be limited to additirnnl nhanneling equipment. MaD h showsthe existing main long distance links and the proposed expansion.
C. Local Telegraph
5. Local telegraph service is provided by the Bureau of Telegraphsnnti RnArl;% n c%nhn P+ rso hm nvv M;nMcf.r wrhith :ul.n nrnvie;JP.< :n
limited radio telegraph service to other Central American countries. Domes-tic telegraph n,etwtork and in.stallatvion operateA lnr +h.i Adert-iiert e ob-solete and insufficient. The Bureau rents some of its lines from ICE.
Ti - - *U' P -fl .J - PU '44 'JI*4LI +&'..d 4J%lV"b. ~ SJ.lI a.O.II--r are ..o siwching h4- f4itiew for dwies_ic telex servi -nGsa n
After completion of the second stage program, it is envisaged to use ICE'sI. LVoU v u WU.tA ue s IWIJ u%w. Jus .L .u w G1JL V) .iWOWLZ UL . w
This will result in largely improving and rehabilitating telegraph service.WLUALL Ie co.Ly
LI. .LU L.rCa +Uio-l. Sevices
U. .LH b ±Ofl4. ~ (Q111LI14C~. ±VL1 uLJ L.LjJ'L.LJY Up.J-L d.L,LUU
Radiografica Costarricense S.A., a concessionary company owned jointly byICE (50%) and. private investors. Radiografica operates nF and VHF chuanelsto the other Central American countries and Panama, HF telephone, telegraphand telex circuits to lorthern America and Europe on its own radio installa-tion, and, through a submarine cable from Panama, provides communicationsto the US and the rest of the world. Radiografica also provides interna-tional telex communications to 200 subscribers in San Jose on a privateline basis, which have access to international network only. Radiograficarents a part of its VHF channels and circuits to the other CACM countriesand to Panama from ICE, which in turn rents channels from the CentralAmerican Civil Aviation Organization, COCESNA.
7. Costa Rica is a signatory of the Central American CommunicationsTreaty, and has therefore agreed to participate in the construction of accmmunications network serving the five countries of the Central AmericanCommon Market. ICE represents Costa Rica on the Regional Technical Coimmis-sion for Telecommunications (CcMELCA), which is in charge of planning andcoordinating the construction and initial operation of the network. A tem-porary network including 19 circuits between San Jose and the capital citiesof the four other countries of the Common Market and Panama has been inoperation since 1967. The network uses channels rented from COCESNA andterminal facilities installed by the concerned telecommunication operatingentities. Due to the experience acquired under the first stage of its pro-gram, ICE had a pilot role in the planning and tendering of the proposedfuture regional network which was made in 1968. Details on the proposednetwork which would include a high capacity microwave route interconnectingthe five capital cities of the CACM countries and a link between San Joseand Panama and on its construction schedule, are given in Annex 17.
ANNEX 10Page 3 of 7
COSTA RICA
List of Telephone Exchanges and Line Capacity1 1
A= Existing Exchnnges (end 1968)
-E---------Extensions (2nd stage)-------------Bank-
Installed Financed ScheduledCapacity Committed Projects Completion RemarksS"
1. San Jose Metropolitan Area
San Jose I & II 17,600 2,400 - June 1969 Euan Pedro - local 7,200 _u 2,Q^o une 1973 E
- trunk 1,000 - - Escaz-u 1,UUU - 50u Juue 190 rU
Santa Ana 400 - -
oan Lsidro Coronado 200 - _uu june ±yog
Total Metropolitan Area 27,400 2,400 3,500
2. Provincial Capitals
Limon 500 300 June 1973 CLiberia 500 - 200 June 1972 CCartago 1,000 1,000 - June 1970 CPuntarenas 1,000 - 500 Dec. 1973 CHeredia 1,200 800 1,000 ( June 1969 C
( Dec. 1972Alajuela 1,500 700 1,300 (June 1969 C
(Dec. 1972
Total Provincial Capitals 5,700 2,500 3,300
3. Small Cities
Turrialba 300 - 400 Dec. 1972 CTres Rios 300 - 300 June 1971 CPalmares 300 - 200 June 1973 CGrecia 400 - 200 June 1972 CNicoya 150 - 150 June 1972 CCanas 150 - 50 Dec. 1973 CNaranjo 150 - 150 June 1971 CGolfito 150 - 100 June 1971 CSan Cruz 150 - 50 June 1973 CEl Roble 150 - 150 June 1973 C
2,200 1,750
1/ Capacity in line units (LU) for existing facilities and proposedextensions under second stage program.
2/ E: Equipment for orir-ril ex:chaiYje- .- nin1rp1o 1v f,Ericsson of Sweden;C: Compagnie Generale at Constructions Telephoniques (CGCT) - France,
an affiliate of I.T.T.
AINX 10Page 4 f 7
List of Telephone Exchanges and TLinp- Capacity (cont'd)
4. Small Exchanges Operated by the MunicipalitiesL"
San Isidro del General 400Que s ada 2Total small exchanges 6_0
Total Existing 'Exchanges in Costa Rica 3590 4,90oo 45
B.New Exchanges Cpacity ShdldCmlto
1. an Tose Metropolitan Aruea
Oan Jose III.L 5,000 June 1972San Jose Sur 7,000 June 1973
Total Metropolitan Area 12,000
2. Smaller Cities
Puriscal 250, June 1971San Ramon 60u June 1971Atenas 150 June 1970Orotina 200 June 1971Zarcero 200 Dec. 1970Quepos 200 June 1970Villa Neilly 150 June 1971Filadelfia 150 June 1971Guapiles 150 June 1972
Total Smaller Cities 2,050
Total New Exchanges 14,050
Total lines installed in new andexisting exchanges (second stageprogram) 27,400
Total installed capacity in LU,end second stage (in ICE andmunicipalities exchanges) 63,300
/ These two exchanges not accounted for in ICE's statistics.
ANNEX 10Page 5 of 7
COSTA RICA
ICE - TELECOMMUNICATIONS DEPARTMENT
Installed Capacity, Main Lines and Telephones in Service(As at December 31 of each year)
ActualInstalled 1 n Main 2,
Year Capacityl Lines Telephones/
1965Ž! 9,440 9,381 17,871
19662i 22,000 17,528 24,550
1967 31,000 25,655 31,980
196-82?1 35,000 29,000 37,500
Frorecast
iyy 37,5uv 3+, _uv
i970 308,500 37,500 4,0
1971 45,000 42,300 53,000
1972 50,000 46,500 58,500
1973 57,000 50,500 64,ooo
1974 58,500 55,000 68,500
1:J In telephone line units (LU)j Main subscribers' line in service./ Telephone stations of all kinds in service.
Ž Manual lines.5/ First year of operation of automatic telephone installations
financed by Loan 346-CR, San Jose main exchange started operationsin May.
6/ 1968 figures are subject to confirmation at publication of officialannual statistics.
COSTA RICA: INSTITrUTO COSTARRICENSE DE ELECTRICIDADTELEPHC)NE GROWTHI-DIEMAND, 1966-1974
80,,00C) - r | 1 ,, _- , T- - 80,000DECEMBER 31 iDF EACH YEAR
70,000 - _ _ _ - - 70,0100
60,000 ___ - - - - 60,0100
TEI_EPHONE STATIONS (ALL KINDS) -f ,50,00CI0 _ _ _ __ - 50,0100
Z~~~~~~~~~~ --shn seic -^ r- . - IN- TILEI LIEUIT(UILl~~~~~~f (Mw 19iicv
30,000 4_ _ f _ _ 30,000
20,000 /___I MAIN SUBESCRIBERS' LINES__- - -L 20,000
30,000 f3_ _ __ _ _ I0,000
0 1JL. 1a1966 19,67 1968 IS169 1970 1971 1972 1973 1974
- ACTUAL -'- -PROJECTED- -- o
(R)IBRO-4263.. ~ _….…… -J 0
COSTA RICA: INSTITUTC) CC)STARRICENSE IDE ELECTRICIDADGROWTH OF LONG-DIISTANCE SYSTEMS, 1967-1973
800) - -- -- - -F -__ | - 4 5DECEMABEFt 31 OF EACH YEAR So
70C) - _ _ _ -40
60C) - _ -- - - 35
LONG-DISTANCE TELEPHONE // -ICIRCUlIrS ' ci
' 50C) ( * - - Left scale) 30 D-
500 ~ ~ / ci XI} ci 40C) - -i--- __ -_2'5 Ik: / _ -LENGTH OF CIRCUITS 3
(Right scale -e)C
5; 300 - -20 olz /C.
Z.t____ I i -_ _ _
200-- -15
Cl oc I . , I __ _I0k
0 L~~~~~~~~~~~~~L L L ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 1966 1967 1968 1969 1970 11971 1972 1973 1974 z-ACTUAL- -- -PROJECTED - -- M x
(R) IEIRD-4264 o c
Page 1 of 2 pages
PfCQr!A D Tr'A
I - ITV A1ri'I.A d-AJ . UTAT-Nrr JAT QV .Tn'I'
TAR IF FS
1. General Tariffs Structure
The present tariffs, which were reviewed by the Bank under Loan346-CR, were approved by SNE in September 1967 and are in force until themiddle of 1969. The tariffs include a monthly rental, which entitles thesubscriber to a specified number of call units, and a charge for callunits in excess of this limit. Subscribers are divided into threecategories:
1. Duplex (two-party line);
2. Residential; and,
3. Commercial.
Metering is applied for local and long-distance calls based on registration ofpulses in call units in the subscribers' meters. The subscribers arecharged accordingly on the basis of 00.10 per unit pulse. Basic duration oflocal calls is five minutes which are metered as one call unit or pulse, andso on per subsequent five minute calls. Long distance calls within thecountry are charged in relation to distance and duration. Duration of callunits in interurban service is reduced as the call distance increases.Lower tariffs apply in off-peak hours. Representative telephone rates as atNovember 1968 are set out in paragraph 2 below. These tariffs reflect costsadequately, although the structure is somewhat complicated. The localservice rates are not out of line with those in other developing countries, ex-ceot for the rather low e-ll eharge, which iA enqiivA1Ant toa aboult US cents 15per five minute call. ICE expects that SNE will authorize the continuationof these tariffs, with some adiustments to simnlifv their structure. during1969, and in successive years.
ANNEX ilPage 2 of 2 pa.ges
Representative Telephone Rates as at November 1, 1968
Metropolitan Provincial2. Area Capitals Other
1. Installation Fee
Duplex (Party) Line 0 228.00 0 192.00 0 156.00Residential 336.oo 288.00 240.00Commercial 444.00 372.00 300.00
(In addition to the above, adeposit of Vq0.00 is required.)
Monthly Free ChargeRental Units L/ Per Unit 1/
2. Duplex (Party) Line M 19.00 50 X 0.10Residential 28.00 100 0.10Commercial 37=°° 100 0.10
3. Sample long distance charges for three minutes:San Jose - Cartago (about 20 Km") p .00
San Jose - Puntarenas (about 90 Km) 2.10Liberia - LJnon (about 320 Km) 6.30
1/ 1 Unit = 5 minutes (local calls) or from 3 to 45 seconds forlong distance calls; from 1 to 3 units are chargedper connection for long distance calls only.
ANNEX 12Page 1 of 2 Pages
COSTA RICA
PowsR PRwJ-CT - COST E LiMATES
Rio Macho Extension
ITEM Foreign Local Total Foreign Local TotalExchange Cost Cost Exchange Cost Cost
(Colones Millions) or (US$ Millions)
Planning 2.500 2.500 - .376 .376
Land _ 500 .500 - .075 .075
Access Road 1.720 9.000 10.720 .259 1.353 1.612
Diversion Works .090 .400 .490 .014 .060 .074
Dam 2.700 4.500 7.200 .406 .677 1.083
Intake 1.800 2.700 4.500 .271 .406 .677
Tunnel 23.183 15.400 38.583 3.486 2.316 5.802
Adits - 2.800 2.800 - .421 .421
Penstock 1.800 .800 2.600 .271 .120 .391
Equipment 9.600 3.000 12.600 l.444 .451 1.895
Powerhouse .140 .250 .390 .021 .038 .059
Bypass 1.400 1.600 3.000 .211 .2h0 ___
Surgetank .270 .200 .470 .041 .030 .071
ConstructionEquipment 5.859 - 5.859 .881 - .881
Contingencies 7.980 5.931 13.911 1.200 .892 2.092
Engineering andAdministration 1.29h 15.002 16.296 192 2.257 2.14149
Total 57.836 6h4583 1221419 8.697 9.712 18.1409
ANNEX 12Page 2 of 2 Pages
Cachi Reservoir
ITEM Foreign Local Total Foreign Local TotalExchange Cost Cost Exchange Cost Cost
(Colones Millions) or (US$ Millions)
Land - 2.600 2.600 - .391 .391
Access toads - 1.350 1.350 - .203 .203
Civil Works 5.100 4.16o 9.260 .766 .626 1.392
Gates 1.100 .500 1.60o .166 .075 .241
Other Works .300 .390 .690 .0h5 .059 .104
Contingencies .964 1.293 2.257 .145 .194 .339
Engineering andA dmin.istration . 1ir 3.270 3.-410 .021 nJ92 .513
7 AO). 13.563 21,6A7 1 14 2. 04n 3V183
qI`-ans.-,..SSiCT Lir.es
and Substations
Associated Substation &iT dralnmisslUl TiLr S 1e
Total 6.408 3.001 9.409 .964 .451 1.415
Contingencies .998 .380 1.378 .150 .057 .207
Engineering andA .3o4 -4 sA , 4.34 1190 i .653 ARAItUM4.IL UL t lzat.U-I1 *- 447w.'. L * L.L. *4JiJ ___J
- -n -~~~~7 e4n'21.') 11 C)C On 1 112'7 A z -1 70(1
Io0Ui.a± 01 U0bI 7.~ -a_uTota'l of Costu Estima'ws
Total 7.w 2U88 15.48 8 1097 Da40 23.38
Tnt,erest duringConstruction 10.400 5.227 15.627 1.564 .786 2.350
83.400 87.715 171.115 12.541 13.191 25.732
April 1969
A'1ŽJEX 13Page 1 of 2 pages
COSTA RICA
Instituto Costarricense de Electricidad
Assumptions used in preparing thefinancial forecasts
1. The Power Section
(a) Sales of energy in accordance with the estimatesgiven in Annex 17;
(b) Tariffs as authorized in February 1968;
(c) Operating, administration and maintenance expensesbased on present costs, adjusted for new facilitiesto come into service and general cost increases;
(d) Depreciation calculated by the straight-line method.The average annual charge is equivalent to about 2.5%of gross fixed assets:
(e) Interest of 6.5% and commitment charges of 3/L% onthe proposed Bank loan of US$12 million which isassumed to be for a period of 25 vears including agrace period of four and a half years. In view of an expectedtight current position, inte-rest duiring construct ontotalling US$1.6 million has been included in thelonn for the first 3-1/2 years. The sam.e conditionshave been assumed for a future loan of US$24 millionof -..ich UTT04, m,illion v-r.uijr'lkm be4 4,',.M AFr. in 1 Q72-
1973 and US$14 .5 million in 1974-1975;
(f) ICE's placing of 032.5 million (US$5 million) 8%t1vTe-+r ye&- bkond.s or. then 1ocal marLke in t.4.4 TSM J %
1969 through 1972;
(g) By making debt service and dividend payments to.1. - jJ" .4.8 J UA.LU.A A J. 'J VL4 L LP . S {L ._ W. V LJ Uj
to meet the debt service payments to EBASCO. ThiswouLd require ClJrln tpa UJ.VJ-±UUU on-I COmIUon stoW ckiVU of between 15% to 20% during the years 1969-1972wi th a reduction to 16u bhereafter; a-nd
(h) Th.e tota ost, of the project is est, at,est ed t,o be0155.5 million (excluding interest) of which25.6 million were spent prior to 1969.
,AT\NNhTX 13Page 2 of 2 pages
2. The Telecommunications Section
(a) Tariffs as authorized in September 1967;
(b) Operating, administration and maintenanceexpenses blUasedU on p.-esent cost s, adLJ StAfor new facilities to come into service andgenerdiu costu increases;
kc) uepreciation calculated by the straight-lilnemethod, using 5% for telephone plant and 10%on construction equipment, tools, etc;
(d) Interest of 6.5% and commitment charges of3/4% on the proposed Bank loan of US$6.4million which is assumed to be for a periodof 20 years including a grace period of four and a halfyears. In view of the rather tight currentposition expected for the first 2-1/2 years,interest during construction totallingUS$377,000 has been included in the loan;and
(e) ICE's placing of 05 million 8% twenty yearbonds on the local market in 1969.
COSTA RICA
INSrITIJTO COSTARRICENSE DE ELECTRICIDAD
ACTUAL AND FORECAST INCOME STATFflFXTS 1968 - 1975
IELECTRICITY OPERATIONS ONLY
TotalYear ending December 31 1968 1969 1970 1971 1972 1973 1974 1975 1Y69 - 1975
Actual------------------------------------------------- -Forecast-----------------=__________-_____________-__________Sales (Gwh) 475 532 573 654 724 810 897 989 5,17ySales increase in t 15.0 12.0 7.7 l1.l 10.7 11.9 10.7 10.3Average revenue per Ewh (cent) 11.9 11.9 11.9 11.8 11.7 11.6 11.6
Operating Revenues.9ale of Energy 56,713 63,200 68,075 76,854 84,781 95,131 103,753 lL4,019 604,dl3Other 2'17 200 200 200 _ 200 2C0 200 200 1, 00
56,5130 63,500 68,275 77,055 81,981 94,331 103,953 114,219 606,213
Operating ExpensesPower Purchased 2,623 2,620 2,620 2,620 2,620 2,620 2,620 2,620 18,350Operations and maintenance 8,250 10,320 11,4 80 12,47( 1:3,730 14,780 15,820 18,190 96,'79CGeneral and administrative 4,5,03 6,96c 5,800 6,210 7,100 7,7C0 8,310 9,790 51,870Depreciation 12,010 11,690 11,900 12,5X0 14,900 16,0C9 16,200 18,700 101,190
Sub-total 27,786 31,590 31,138C 33,800 38,350 1i,1Co 42,950 49,300 26B8p3,i
Net income from Operations 29,155 31,810 36,475 53,255 56,631 53,231 61,003 65,919 337,323
Other Income (net)1) 3,3178 7,000 7,200 7,200 7,000 6,00C 5,300 5,90o 44,600
Net Incomne before Interest 32,522 38,810 53,675 50,455 53,631 59,231 66,303 69,819 381,923
Interest Payable 18,15L 21,955 22,869 23,567 24,584 25,511 26,357 27,581 172,5405less: Interest Capitalized 1,L27 2200 3,400 5,30I 7,800 2,7CC 5,100 7.80§ 34300
Inter-est charged to operatLons 16,687 19,755 19,469 18,267 16,785 22,811 21,257 19,781 138,105
Net Incune 15.635 19,065 24.206 32,18'7 36,857 36.520 45.5o6 50.038 ,24819
Tines Interest PaymentsCsvered by Incone befre Interest 1.8 1.9 1.9 2.1 2.2 2.3 2.5 2.5 2.2
Average Ntet Kixed Assets in Operation (million) 384.0 383.0 382.7 399.5 583.3 557.9 561.8 584.3 496.5
Return on Average Net Fixed Assets in Operation CS) 7.6 8.' 9.5 1(.8 9.6 9.5 10.8 1l1.1 9.7
1) Mainly dividend and interest paymeants from CNFL
May 1969
AMNEX 15
COSTA RICA
INSTITUTO COSTARRICENSE DE EL1CTRICIDAD
SOURCES AND APPLICATIONS OF FUNDS 1969 - 1975
ELECTRICITY OPERATIONS CNLY(0 '000)
Total
Year ending December 31 1969 1970 1971 1972 1973 197h 1975 1969-1975
Pua.rces of Funds
Net income before interest 38,810 03,675 50,h55 53,631 59,231 66,303 6:,blb 301,923ciation zharged to operations 11P690 112900 172500 15,900 16,000 16,200 lb,70i 101,b90
caoitalized 2 860 2 600 1 900 1,300 1 400 1 700 2,200 13 960Internal cash generation 532 3 8tT¶ 3Et&8[ 6 6,31 Bl,,20 90,719 1960
Anortizations received from CNFL 1,326 1,L32 1,556 1,670 1,803 1,957 .,1O l.L,o25Corisumers' contribution 500 L10 470 h70 h20 590 hoo ~ ,2L0
Other 700 700 700 700 700 700 710 I±±9C
Sub-total 2.526 2,582 2,716 2,8h0 2,923 3,137 ',201 19,9;05
borrowings
Proposed IBRD loan 10,700 25,,0O0 31,800 10,700 2,60o - 729,51U.wFture loa n - - 10,000 30,000 53,000 2KI uk 6 100
IDB - loan 2,518 - - - - - - ',510
Chase Manhattan Bank 7,500 - - - - - - 7,500
8% - Bonds 15,000 7,500 7,500 2,500 - 32,51uFirEt National City bank Chicago - - - - -_ - -
Sub-total 35,618 31,500 39,300 23,200 32,6co 53,000 h3,080 25o,2i8
Total Sources 91,50h 92,2]7 106,870 95,871 f12,l15 150,31;0 137,00o; 775 AStb
Application ot Funds
Con strue t ion, e^-enui twl- es i e ..interest during constru!ct,ion)
Present. Rrnarm (2.6-12- 1,750 - - - - - - 1',"ILb - Project 5,670 1,86C - -,
Proposed Project 26,000 37,iOo 06,000 17,0X0 Q,68, - - 1-9,065Ruture Expansion - 520 21,,800 53,130 8o,0OC 71,70o 13063:COtle r 9,960 7,660 10,25 6,170 6,62C 4O90n 15,d62 f:9Lb,08
Sub-total 03,380 56,320 56,770 h7,970 65,635 b; ,0X 7,b 82,030, 115Th
1 ebt Service
A-- ::at:ion 19)jL6 2nP?17 21 215 204Q6Q 21 07 22,305 1.;) l l.21.1. :,-s 21,9h5 LzL,69 23,567 25,585 25,511 26 157 27,5bl 172I,IJ
Sub-total 01,361 53,786 55,682 h5,1Wh 1i6,558 1b,652 L6, 221! 31 7
p eJ:i~ on for increase inaccournts receivable 600 500 900 800 900 950 1022
T.tal A:uiiertions 85,351 90,606 102,352 3,L9h 115,002 150,002 135,- , LLL.L
i.e- cash surplus (deficit 6,163 1,611 5,518 1,957 (1,868) 338 1,L76 L5,I,0
Ti3- d ebIt s rJ c- e c ov~e red bjl;ne:ral coab generation 1.3 1.3 1.14 1.5 1.6 1.7 1.- I
:,'a) 1i6 -
CCSTII 11CA
ISA - TOLitC?OflCLaTIfNi SECTION
ESTIMATED COS'S OF Ph1 SECOND STAGE PR(OGR1AM
1967-15~~~~~~~~73)-~19 A. 19twaTotal of Secont Stage itronaz
-(1967-15'73)- ActuoaL __ ___________________ _ Pro e______________________________ ~~~~~~~~167 19d1970 _17217
Loc7l Fc tieiSS .- LocanL Foreign Total Total Total Loc31 ored go tn Foreign gn!T -Ig i i i ; -19 F reignCost Cost Co-it Ccst Coot Cost Cost Coot Coat Coat cost Cost Cost Cost
_ _ ----- __G. _-_-_--_-_ S =----t-O--O -- ----- -------- -----------------------------.----- t-0.--= --------------------------------------------------------------------- ~ ~ Eank Financed Wr-ks
}. Prcn,eresent annc tsrks
Land and hilcnngs 1,355 185 1.5JO 200b 2' 232 - 250 57 715 1.22 390 6 -
Telephone e-changes 2,6bO 19,892 22,532 :397 2.991 3,3813 - - 78 797 272 2,380 479 7,610 1,775 ?,.I 36 1,718
Local ,atw,rke 3,232 6,568 9,800 14i6 967 1,b7.3 - - - 738 7146 2.646 1,791 1,337 6509 1,2b22 66 605
Long distaince mtworksk 1,213 3,665 4,878l 1.82 551 733 - - 180 863 2825 i,oO8 388 1,246 308 b69 55 79
Tel.e 71 1,662 1,733 iUL 250 261 - - 1 166 52 951. 19 542 - - - -
Other works 2,003 5,656 7,659 301 850 1,151 - - 4o0 782 4107 1,810 1.83 nb6 61.1 1,960 72 250
II. aedierig and supwerisior 7,684 467 8,151. 1,155 70 1,225; - 1,264 53 2,513 107 1,816 107 1,897 100 191b 100
110i . Contingenies 654 2.630 3,261. 98 396 4.94 - - 57 205 16.2 _i36 20b 6dj3 _187 1.01,6 l. 160
Total works 18,d52 140,725 59,577 2,834 6,123 8.957 - _ 2,259 3,661 5,1419 9,563 5,570 12,377 5,417 12,20L 157 2,920
Intesrest duAL ng cons- I/ V'truction 1,20 2.or 3.d21) 198 377- Z
SI3B-TOTAL A 20,172 b3,225 63,397' 3,(32 6,500 9,51.
B. Otherwise Fimndnc Cpit.L Works
Loc:l and long distancesyr-tes (adntoed porti-o 6,162 4,192 10,351. 927 630 1,557 2,352 6,827 391 761 - - - - _ -_
of the Pr Dgrom)Ycs-llaneous 1.179 2.326 3,80 .222 350 572 - _ 1010 612 169> Lao _- S 1.00 b _oo
Total w,rkn 7,641 6,518 l14,159 1,1L9 980 2,12'9 2,352 6,627 i,bol 1,396 169 10o3 - 51 - b0o -bo
Interest dirIng cons-tructLon _X2~~5, 456 99] do 69 141.9
sr3-TOTAL 11 d,176 6,971 15,150 1,229 1,049 2,27d
TG'AL SECOI1D STAGI (A 0 B) 28.31 09 , 7 ,. 2.;261 Z.2l a
1/ The torelgo eccange portion of interest daring construction ts- the p-.ject hac, been estloatedan being eqoal toz interst and cooe,sitoert charge on the proposed R-ak lo"an ciring the f.Lrst2-5 years.
.lne 6, 1969
ANNEX 17Pag 1o° 3 pages
COSTA RICA
ICE - TELECOMMUNICATIONS SECTION
International Services and Proposed Central American Communications Network
1. International communications are operated by Radiografica Costa-rricense, S.A. (see para. 2.10) which has the concession for internationalservices to countries outside Central America until 1978. ICE holds 50%of the shares of the company and is not directly concerned with the develop-ment of its facilities which are presently adequate and sufficient to meetthe demand for these services.
2. In addition to its domestic program, ICE will be involved in aproject of the five Central American Common Market (CACI') countries forinternational communications within the region. This consists of a highcapacity microwave link between Guatemala, San Salvador, Tegucigalpa(Honduras), Managua (Nicaragua), and San Jose, with extension linkstowards the Mexican border from Guatemala and the Panamanian border fromSan Jose. The regional network is being advanced pursuant to the CentralAmerican Communications Treaty which was ratified by Costa Rica in 1967.Costa Rica is represented by ICE on the Regional Technical CommunicationsCommission (COMTELCA), created by the Treaty. COMTELCA has prepared afeasibility study and is in charge of coordinating the project. COMTELCA'sPermanent Secretariat is housed in ICE's Telecommunications Department inSan Jose and ICE's staff had a major role in preparation of the study.The project is considered of high economic priority by all CACIH countries.
3. The attached statements, which are taken from the feasibilitystudy from the COVITELGA nroiect. show the forecast income statementsand sources and applications of funds for Costa Rica's section of theproject. The total estimated cost of the Droject excluding interestduring construction is US$11.8 million equivalent of which Costa Rica'sportion would be TTS$2.5 million equivalent CA-RE! has agreed in prin-ciple to extend loans to each participating country to finance bothlocal and foreign costs of its portion of the network.
4. In August 1968, an international call for tenders from pros-pective suppliers of equipment was made. The scheduled completiondatie for the network is 1971 and operations are expected to commencein 1972. The study assumes that foreign currency expenditures will
AiiiiEX i7Page 2 of 3 pages
be financed with a 20-year loan (including four years grace) with aninterest of 7%, and local currency expenditures will be financed withan li-year loan (including 5 years of grace) with an interest of 8%.If the assumptions of the forecast are realized, the network willearn a return of 13.2% on net fixed assets in operation in 1972, itsfirst year of operation and higher thereafter. Debt service coveragewill be 1.2 times in the year 1974, in which repayment on both loansis assumed to start, and increases thereafter.
5. Final construction, financing, and operating arrangementsfor the network are still to be agreed to by the CACM countries.As is explained in para. 4.34h ICE will not be in a position toincur additional debt without the Bank's consent. This circumstancewill permit the Bank to exercise adequate supervision over the scopeof ICE's eventual commitments and responsibilities in connectionwith the proposed COMTELCA project.
ANNEX 17Page 3 of 3
COSTA RICA
Central Anmrican Communications Network - Costa Rican Section
Projected Sources and Applications of Funds(US$1000)
3LvEo 1902 1971 1972 1971 1294 1975 1976
Net Operating Income - - - 277.4 314.7 343.4 389.1 435.9Depreciation - - - 149.7 163.0 176.3 176.3 176.3
Total Internal Cash Generation 427.1 477.7 519.7 565.4 612.2
Borrowings - Foreign Currency - 918.0 980.1 300.2 312.1 - - -Local Currency 78.2 129.7 139.2 56.2 58.7 - -
Total Sources of Funds 78.2 1.047.7 1,119.3 783.5 848.5 519.7 565.4 612.2
AiPPLICA MLO iMS
Construction 75.2 1,005.9 1,005.9 200.0 200.0 - - -Repayment - FnA U1'f- ~~- - - 156 (* ) 1-6 E* 9 I *~ a
Local Currency Loans - - - - 46.2 46.2 46.2Interest - Foreign Currency Loans - 31.0 93.1 130.2 142.1 175.7 164.7 153.8
Local Currency Loans 3.o 10.8 20.3 26.2 28.7 37.0 33.3 29.6
Total Debt Service 13.0 41.8 113.4 156.4 170.8 hi 41A ), -1 386-5
Total Applications of Funds 78.2 1,047.7 1.119.3 356.4 370.8 415.8 401.1 386.5
Net Cash Surplus .427.1 477.7 103.9 164.3 225.7
Debt Service Ratio 2.7 2.8 1.2 1.4 1.6
Projected Inooms Statement(US.$1000)
1972 1973 1974 1975 1976
RS'VZUS 715.6 780.6 837.0 897.2 958.4
.~~~~~~~~~~~~~~~~~~~~~~~~~~7.Opeatin tandv Maitennc 61. 64-4 67. -4 70.3Operation and Maintenance 229.9 241.4 252.9 264.4 275.9Depreciation 149. 163.0 176.3 116.3 176.3
Total Operating Expenses 438.2 465.9 493.6 508.1 522.5
Net Operating Income 277.4 314.7 343.4 389.1 435.9Interest 156.4 170.8 212.7 198.0 183.4
Net Profit 121.0 143.9 130.7 191.1 252.5
Net Operatirg Income - % of Net FixedAssets in Operation 13.2% 14.7% 15.9% 19.6% 24.1%
liarch, 19.99
ANNEX 1 Page 1 of 2 pages
COSTA RICA
ICE - TELECOMYiUNICATIONS SECTION
Cost Benefit Analysis
1. A cost benefit analysis in the telecommunication sector isdifficult and can be no more than indicative. There is not muchdifficulty in analyzing the costs of communication which broadly fallinto three categories viz. using mail, telecommunications and personalvisits. The difficulty is to establish data which will help to assignvalue to benefits arising from a communication, or even from the factalone that communication facilities are available. These benefits,direct and indirAct, vary considerably and denend on the circumstance,nature of activity and a number of other less material factors.
2. Within cities, telecommunications provide a more economicalforn of communiCation - -and -aspeed er and easier form - than the otherforms of communication. Elsewhere,long-distance telephone calls areless 'cstly~ thanr prso-nal vi--sit ar.d -in r+.os cases achieve t.he des4redi
objective. Telecommunications help to promote a more efficientutilization of tra-sportation and pla- an 4Jm.porY+n+r role in nromot.i no,
and integrating a country's trade, especially in the case of bulk orex-port- commodities -whl-ere i4t is -sa to 4 perate or. low margins _of
U IJJUJ.4. .L~O J.UZL A.0.U .~ l UOUC%_ IU ) F . U~ U.L .J'.)L VW AII.L r, .
profit. The importance of telecommunication to decentralization ofad.ministration ani d industry, uo pub kLic safetIy anILdU ULoUrd, aCs. WV-ell as -'
the development of suburban communities, is recognized. Its uses forUUocurs danlU U oLthLL jJ U fte lU10 p 3U-p le C I ±L7 Utd.L.L Ir, W.LU LII Us III l o
public health and protection, etc., are clear.
3. A cost benefit analysis using the customary competitiveequilibrium -model, which attempts to quantify benefits in terms of theprices consumers would be willing to pay for the service, was notconsiludereu nPece-sUsry EIn th1is Case. SUch!l a s tUU Wudy WUUld req4ui-re ansestimate of the demand curves for telecommunications services in Costanlca for eacn year in tUhe period of the a[ialysis. The inLLU.LiUc±Ii.LULI
needed for such estimates would have to be obtained through specialsurveys. As a first approximation, the cost benefit analysis has beencarried out using market prices to value telecora.nunications services.Although this approach leads to an understatement of benefits, thetariffs in Costa Rica are evidently near to the value of the servicefor the marginal subscriber; this situation is different from thatprevailing in countries with long waiting lists for telephone services.Another factor which decreases the divergence between market prices andtotal benefits is the use of discriminatory pricing: ICE's businessrates are higher than its residential rates, presumably reflectinghigher value of the service to the former class of subscriber.
4. Benefits were calculated on the basis of the additional cashinflows generated by the project. Collections of revenues from tele-phone services were divided between the project and existing installations
ANNEX 18PL.age 2 oP 2 -ae
'- -J V--
on the basis of ICE's projections of demand by- exchange. An occupancy factor
of 100% was assumed. In normal operating practice, the factor would not ex-
ceed 90%. The higher factor was chosen as a conservative assuxgtion WhiChdepresses the rate of return on the new facilities, due to delayed saturation
of the existing exchanges. A part of the traffic on existing installationsshould be attributed to the availability of new subscribers. At the same time,
it may be argued that the intensity of use of existing install ations might be
higher in the absence of the project. It is assumed that these effects are
mutually offsetting. Other benefits include revenues from telex services,
connection fees and subscriberst deposits. It was assumed that the useful
life of the project would be 20 years, and that subscribers' deposits would
be returned at the end of that period.
5. Costs were estimated as being equal to the investment and operating
costs (excluding depreciation) of the new installations plus an allocation to
reflect the increase in administrative and general costs due to the new
installations.
6. With the above assumptions, the internal rate of return of the proposed
program is about 16.9%.
7. In order to determine whether risk analysis should be carried out, the
return was tested for sensitivity to lowered per-line revenues, overruns on
construction costs, shortened economic life and slower initial growth in
demand. It was found that sensitivity was very low and that a risk analysis
was therefore not required. None of the tests described below reduced the
rate of return below 1h4,.
8. Sensitivity to lowered per-line revenues, which could come about as a
reunlt of traffic falling below expectations or of a different subscriber mix
from that assumed, was tested by assuming that per-line revenues would not in-
crease from their September 1968 level of 0776. This produced lower total
revenues in each year. (The resulting reduction in net income could also be
attributed to higher costs- For example, second stage telephone revenues in
1975 would fall from 017.3 million to 016,1 million. This decrease wasequivralent to about 22% of out of pockpt costs in the year.)
9. Sensitivity to overruns in capital costs was tested by assuming that
costs would be 10% higher than the estimates.
10. Sensitivity to a lower initial growth rate in demand was tested byassumring that te number oA subscr.bers .r.,o,ld grow at a rate of 1 0 ner annun.
The rate assumed in the forecast was 11.5% through 1973 and slightly lower
thereafter. Sensitivity might be magnified by geographical shifts in growth
rates. (For example, the growth rate might be lowered in an area with excess
excnange capaci'-y, and increased in areas where capacitay is nearly saturated.)
This factor was not considered. It was assumed that further capital invest-
ment after the second stage would be deferred in view of the lower demnard
projections.
11. Sensiti-ity to a shortened economic life was tested by assuming that
the project would be in ser-vice for 17 years instead of 20 years.
COSTA RICAInstituto Costarricense de Electricidad
Actual and Forecast IncomeStateme'n t 19=- 1975Telecomm icatin 0perations OrLy
Total
Year ending December 31 1968 19659 1970 1971 1972 1973 1974 1975 1969-1975ActuaL -- a _ - - - - - - - - -- - - -- - - -aorecast -
Average No. of subscribers 26,82:L 32,000 35,700 39,203 44,00o 47,800 51,700 55,900
Average income per subscriber in 0(local and interzurban) 822 780 795 810 820 825; 830 830
Average rental in e 365 365 365 3614 3614 3614 364 364
OPEFRATING REVENUES
Local and interurban telephone 22,040 24,960 28,370 31,750 36,000 39,45() 42,880 146,400 249,810International 1,8147 2,210 2,910 2,500 1,060 1,120 1,180 1,250 12,260
Telex - - - 200 632 632 632 632 2,728
Other revenue 312 380 400 420 440 460 480 500 3,080
Total OperatingZ Revenues 24,199 27,550 31,710 34,870 38,13:2 41,662 45,172 148,782 267,878
OPERATING EXPENSES
Operation and maintenance 4,712 6,826 7,084 7,603 7,542 8,9613 9,619 10,300 57,942
Depreciation 4,22B 5,729 6,589 6,926 7,417 8,146 9,055; 9,969 53,831
General and administrative 4,989 4,908 5,717 6,798 6,89D B,1113 8,52 8,2140 49,200
Tot,al operating expenses 13,929 17,463 19,390 21,327 21,849 25,232 27,203 28,509 160,973
Net OperaLting :[ncome 10,279 10,087 12,320 13,543 16,283 16,430) 17,969 20,273 106,905
Other Income 1,231 1,000 1,000 900 800 800 800 800 6,100
Net Income before interest; 11,501 11,087 13,320 14,143 17,083 17,230 18,769R 21,073, 113,005
Interest Payable 7,131 7,8214 7,9h47 8,132 8,512 8,553 8,22L 7,816 57,005
less: Interest Capitalized 1 012 738 1 215 1,967 1 265 624 46r 6431 6 919
Interest Charged to operations 619 7716 6,7ff ,16; "7t77 - 779-2 77-1T 7I7Extraordinary Charge 2,069 - - - -
Net, Income 3,313 1,001 6,588 8,278 9,836 9,301 11,015 13,900 62,919
Times Interest Payments covered by Incomebefore Interest 1.6 1.4 1.7 1.8 2.0 2.0 2.3 2.7 2.0
Ave:rage Net Fixed Assets :Ln Operation, (milLion) 81.8 97.6 108.9 111.7 114.8 122.2 134.3 116.1 121.1
Return orn Average Net Fixed Assets in operation (%) 12.1 10.3 L1.3 12.1 14.2 13.4 13.4 11.9 12.6
June 1969
COSTA RICAInstituto Costarriconse ae Slectricidad
Sources and Applic-ations of Funds 1969 - 1975
TeCOMMUC&aTon Operatione
Total
YeV. fnd lihg December 31 1969 1970 1971 1972 1973 197h 1975 1969-1975
Sources of Funds
Net income before interest 11,087 13,320 l14,443 17,083 17,230 18,769 21,073 113,20
Depreciation 5,729 6,589 6,926 7,417 5,146 9,055 9,969 53,831
Internal Cash Generation 1',816 i9,9W 21,369 21),500 25,376 27,824o 31r0n 166.836
Gonnection fees 1,295 1,272 1,476 1,473 1,417 1,420 1,741 10,091,
Deposits 205 181 221 208 199 207 245 1,1468
Sub-total 1,500 1,155 1,697 1,681 1,616 1,627 1,986 11,562
Borrowings
Proposed IBRD Loan 3,931 10,357 13,817 12,200 2,920 - - 43,225
8% - Bond5s - - - 7L8o
Suppliers' credits 784 - - _ - - 784
Chase Manhattan Bank 2,475 - 2,475
Total Borrowings 12,190 10,357 13,817 12,200 2,920 - - 51,l84
Total Sources 30,506 31,721 36,883 38,381 29,912 29,451 33,028 229,882
Applications of Funds
Construction expenditures (excludingInterest during construction)t
Works in Progress 5,604 - - - - - - 5,604
Proposed Project 5,920 14,712 17,947 17,621 3,377 - - 59,577
Others - 869 5114 2,115 11,537 12,66B 16,688 44,391
Sub-total 11,524 15,581 18,461 19,736 11,914 12,668 16,688 109,572
Debt Service 17,793 15,098 14,747 14,121 11,992 15,285 14,930 106,906
Provision for increase mn
Accounts Receivable 730 690 520 550 590 590 590 4,260
Total Applications 30,04n 1 7 41 ifQ 33728 31,.b07 3o.L96 28,513 32.208 220,798
Net Cash surplus (deficit) 1459 352 3,155 3,974 (584) 908 820 9,0814
Tines debt service covered byInternal cash generation 0.9 1.3 1.4 1.7 1.7 1.8 2.1 1.
June 1969
ANNIX 21COSTA RICA
Instituto Costaui-Fense de ElectriciladSources and Applications of Funds 1969-1975
Electricity and Telecommunication Operations Combined
Total
Year ending December 31 1969 1970 1971 1972 1973 197!J 1975 1969-1975
Sr,-uxces of F`undsInternal Cash Generation
- Power 53,360 58,175 66,856 69,831 76,631 5L,203 90,719 497,773
- Telecommunications 16,816 19,909 21,369 26,500 25,376 27,826 31,J4,2 166,836
Total internal Cash Generation 70,176 78,086 86,223 94,331 102,007 112,027 121,7hl b6h,609
cnnoecti on fees, consumerIs deposits & other funds 6,026 3,997 4,613 6,521 8,539 4,761 5,2n 7 31,527
Rorrnwings- Power
Proposed IBRD Loan 10,700 26,000 31,803 10,700 2,600 _ - 7_9500
0ther 24,91s 7jSoo 7 ,5DO 12,500 3O;0,000 53,°°°000 Lso0 178,418
- £elecornmunicattonsProposed IBRD Loan 3,931 10,357 13,817 12,200 2,920 - _ 13,225
Other 8,259 _ - - _ - _ 8,359
Total Borrowings 1,7,808 61,857 53,117 35,400 35,520 53,000 43,023' 309,702
ro:al Sources of Funds 1220010 123,938 s j367252, 162,066169,791 {DO28 1
A ,pli cations of Funds
Construction Expenditures (excludingInterest during constructmon)
- P ower.roposed Project 26,000 37,000 o6,000 17,0D0 ,884 - - 129,886
Other 17,38C 9,320 10,770 30,970 01,750 90,600 87,6t0 303,190
- Telecommsunicat onsProposed Pr,ject 5,920 1!:,712 17,917 17,621 3,377 59,577
Others 5,606 869 51l 2,115 11,537 12,68 1o,oSf 88 .9Aurf
Total 564,50n6 61,901 75,231 67,706 80,668 103,068 1i06,2:8 ,!.7, ,,-
Debt Service
ArrtriiationPower 19,416 20,917 21,115 20,560 21,S97 22,305 1':, ;* 1!,1)53
Telecommuni cations 9,969 7,151 6,615 5,6009 6,39 7,064 7,11L 9,9Q5V1
interestPower 21,9645 22,869 23,567 ?12,584 25,511 25,347 27,685 172,_'O4
Telecommunications 7,826 7,962 8,132 5,512 8,553 8,221 7,810 57,006
Total 59,151, 58,884 59,629 59,265 62,500 6D3,937 c.,l :)25,023
.ov-sLon tor increase in accouLnts receivablePower 600 500 900 800 900 95O n , , 50
Telecormmunications 730 690 520 550 590 590 , _ 2r.f_
Total 1,330 1,190 1,420 1,150 1,690 1,54C 14,590
Total Applications 115,388 121,975 136,080& l28,321 161~6 16S 367,732 982,59
::eL cash surplus (deficit) 6,622 1,96; 7,67' 5,931 (2,672) 1,266 2,296 2.,
it .. h- .t beginning of period 2,278 8,900 10,863 15,536 26,667 21,995 23,243 -,7'8
- at end cf period 8,900 19,863 18,536 24,667 21,995 23,2641 25,537 26,59?
Times Debt Service covered byInternal Cash generation 1.2 1.3 1.6 1.6 1.6 1.7 2.0
J ne 1966
COSTA _OLAiNSTITUTO COSTARRICFNSE DE ELECTRICIDAI.
INCOME STATEMENTS 1268 - 1975ELECTiZICITY AND TELECOMMUNICATTON CPERATIONS COMBINED
TotalYear encinig Lecember 31 1968 19?69 1?7C 1971 1972 1973 197Z 1975 1?69-1975
-Actual- ----------- Forecast - -
O3e'at3n RevenueF?ower i.evenues 56,>30 63,:Loo 65,275 77,05)h 8Z6,981 63,331 1.3,953 1l16,219 C06,213Telecommunications Revenues 2L,199 27,'550 31,71L 336,870) 38,132 1,662 65,172 8,782 267878
Total Operating Revenues 81, 29 91 ,950 99,985 111,9)26 123,113 135,993 1149,125 163,001 876,091
Onerating ExpensesPowe:r Ooerating Expenses 27,786 31,590 31,800 33,50( 38,35 0 h6,loc 62,950 69,300 268,890Telecommunication Operating Expenses 13,2-9 17,6,63 19,390 21,327 21,819 25,232 27,203 28,509 L60,973
Total Ooerating Expenses 41,7L5 69,0(53 51,190. 55,127' 60,199 66,332 70,153 77,809 L2Y,863
B,et Income fror Ooerations 39,6l1, L2,897 68,7795 56,797 b2, '116 6>,661 '/8,972 85,192 LLL,228
Other Income 6,609 ICoc o,2C0 8,100 7,800 6,80o -6100 5,7cC 50,700
Net Income before Interest 6,02;?3 L9,897 56,995 61,,897' 70,716 76,661 85,072 90,892 696,928
Interest Payable 25,215 29,769 30,1l6 '1,699 33,096 36,066 36,568 35,397 229,LC9less: Interest Capitalized 2,6-39 2,938 1,615 7,267 9,0C65 3,326 5,567 8,663 61,219
Interest Charged to Operatirns 22,80(6 26,0r31 :6,201 2.32 2LI,(3 3 0,7610 29,001 26,?56 188,190
S.,felcr Charge 2,06) - - - - -
Net Income 19,163 22,266 3C,796 60,665; L6,6B'3 65,721 5:6,071 63,938 306,738
Times Interest PavmentsCovered by Income before Interest 1.7 1.7 1.8 2.0 2.1 2.2 2.5 2.6 2.2
0OSTA RICA
INSTITUTO COSTARRICE&ISE DE ELECTRICIDAD
Di- SERVICut LThUJThT5 1969 - 197$(in e '000)
Year ending Decer.ster 31 1969 1970 1971 1972 1973 1974 1975 1969 - 1975
AmortizationElectricity O,erations
Bonds-87 3,714 5,102 5,602 5,090 5,537 5,223 3,576 31,8541Local Boans 1,690 1,809 1,936 2,072 2,217 2,372 2,539 14,6351BRD - 276 CR and 3b6 CR 4,505 4,763 5,033 5,305 5,619 5,941 6,270 37,)J35Proposed TBRD loan - - - - 95. 2,012 2,162 .12EBASC0 1,993 2,150 2,320 2,500 2,700 2,910 2,750 17,320US - Banks 5,581 5,2h59 ,380 2,75C 2,i30 1,0CC - 21,090Other 1,936 2,844 2,645 2,845 2,844 2,857 2,046 15,205
S_b-Totai 19,416 20,917 21,115 20,5n60 2 1 22, 305 1 9,II 1. , 3
Telecoemenlications OperationsBonds-o% 702 786 851 921 995 1,079 1,108 6,502Local Loans 1,814 971 755 797 853 913 977 7,070I3RD - 346 CR 2,039 2,155 2,269 2,385 2,527 2,671 2,815. 16,858Proposed EBPD loan - - - - 775 1,602 1,666US - Banks 2,527 1,8b25 1,365 500 500 310 - 7,026Other 2 887 1l515 1 386 1,007 789 489 589 8462
Sub-total 9,96 7,151 6 59 7,065 7,119
Total Amortization 29,385 28,06B 27,730 26,169 25,4j6 29,369 26,557 195,615
Int erestF.1 ectri citv f lnrarti ens
B.nds-b% 5,203 4,^52 5,006 4,972 4 ,651 4 ,205 3,823 31,612Local Loans 1,335 1,216 1,C89 953 808 653 586 6,539IBRD - 276 CR and 346 CR 7,221 6,965 6,693 6,523 6,107 5.785 5,457 44,650Proposed IBPD Ioan 56a 1,890 3,550 45600 5,100 5,05D 5,900 254,55EFBASCO 5,86D 5,700 4,530 4,350 4,150 3,950 3,710 30,250Uo - Banks 1,388 960 600 390 190 13 - 1,538Otner 2,479 2,367 2,199 2,896 4,505 6,704 9,205 ,,375
Sub-total 21,955 22,869 23,567 25,585 25,511 26,357 27,581 172,404
TeLecorsmunicat ions OperationzsBonds-8,% 2,196 2,238 2,173 2,103 2,028 1,945 1,856 15,539
,oce' 1o-ns ?66 653 600n 55 5 532 36 3,859TBRD - 346 CR 3,285 3,170 3,055 2,940 2,797 2,653 2,5v100Propo3ed IBrD loan 266 794 1,545 2,201 2,638 2,716 2,652 12,707US - Banks 410 2'1 130 90 55 5 - 95lOther 901 841 734 630 543 470 430. 549
Sub-total 9 7,212 W i 2 ,12 785 8T16 5I 0i
Total Interest 29,769 30,816 31,699 33,096 34,064 34,568 35,397 229,405
Total Debt Service 59,154 58,884 59,429 59,265 62, 50 63,937 61,855 525,
Nay 196?
COSTA RICAInstituto Costarricense de Electricidad
Condensed Balance Sheets l9bW-1975Electricity and Telecommunication Operations Combined
( in c million )
December 31 1968 1969 1970 1971 1972 1973 1974 1975Actual Forecast
Assets
Fixed Assets in Operation 562.6 595.6 619.8 672.8 835.3 883.2 916.8 1,005.8less: Depreciation 87.4 104.8 123.3 142.7 165.0 189.2 214.4 243.1
Net Fixed Assets in Operation 475.2 490.8 496.5 530.1 670.3 696.o 702.64 762.7
Work in Progress 60.1 82.1 121.8 149.4 62.3 96.9 170.2 191.8
Total Net Fixed Assets 535.3 572.9 618.3 679.5 732.6 790.9 872.6 Y58.5
Investments in associated companies 81.2 79.9 78.4 76.9 75.2 73.4 71.5 69.oCurrent Assets (net) 53.5 61.4 64.6 73.7 81.0 80.0 82.8 86.7
Total Assets 670.0 714.2 761.3 830.1 888.8 966.3 1,026.9 1,110.6
Equity and Liabilities
Capital 167.2 168.5 169.8 171.2 172.7 17.1 175.5 177.3Retained Earnings 82.9 106.0 136.8 177.2 223.9 269.6 325.7 389.6
Total Equity 250.1 276.5 306.6 3688.6 396.6 643.7 501.2 5669.
Liability Reserves 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5 .3
Lonw-term LiebtBonds 65.0 80.1 82.1 83.6 79.6 73.3 (8.6 66.LIBRD Loans 186.0 191.7 218.8 256.7 269.7 263.0 253.1 236.6Other 136 2 134.5 120-8 109.9 109.2 129Q6 175.3 n9
Total Debt 385.2 606.3 421.7 650.2 458.5 465.9 L961.0 510.4
Current Maturities of long-term Debt 29.6 28.1 27.7 26.2 28.6 29.4 26.6 28.0
Total Liabilities 670.( 71L.2 761.3 fl30.1 8B8.8 914)l.3 !,02S.9 1,110.6_~~ ~ ~~ _ = _ - 1t
Debt/Equity Ratio 60/40 60/6o 58/62 56/L,44 56/6 51/LJ9 50,50 h7/5
J.ne 1960'
N I C A R A G U A
A N A 4R
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PUNTARENAS v< 3SN \TENAS TUNRIALBA
Ifz~~~~~~ - c6EW\y~~~~~~~~ Tr(~~~~ 640IsN .1COSTA RIC-AZA LA GAIT J ENTaON\UE
SCtN P LANT ~ 34.0kv GNAOAR.I1SSION LIC JI A ANT INSTITUTO COSTARRICENSE<>n 34.5ky 'MANSMISSION LINESj< 64NlW [DE ElLECTRICIDAD
Rio MIACI\ (CE )p PLAN1T 30.0 MW INTERCONNECTED) SYSTEM
RPA MACHO EXTENSION PROJECT SHOWN ]N COLORPA C/F/C OC'A N (T. I PROJEep1:vv
S,.itchyard.s
% ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Trant.=isl on line..
- - 138 kv0 5 10 115 20 25 38 kv
I - 34.5 kv
KIIOMETERS
MLARMI 1969 IB0) 2510R1
DAM INTAKEAND SETTLING BASIN ADIT E,
AT GRANIDE DE TAPANTI Llm
COSTA RICA '3.10
IN;STITrUTrO COSTARRICEINSIE TUN SECTIONTuNNEL No. 3~~TNNL ECIO
DE ELECT RICIDAD ATNL N.
([CE) L=233 ,,
AD[T 0 :EXISTING I2NTAKE FORRIO0 MACHO EX,TE:-NS,:)ION L=93 m. RIO )VACIIO PL4NT. AT
(TAXPA\N-r I PF-OJECT) SALTO GRANDE
PROJECT SHOWN IN COLORBYPASS TUNL EXISTING
A. ~~~~~~~~~~~~~~~~~~~~~REGUIATING/ BASIN
rU ~~~~~~~~~~~~~~~EX ISTI NGr1 ~~~~~~~~~~~~RIO MAC-O <
POWER HOUSL d EXTENSION
TO RIO MACIIO P L A N0 1 2 3 4 POWLR lOilSE
KILaOFETERS >
1WRCH 1969 IBRD- 251 lRl
-'% zz\BasR j /V/CAR'A GUA --0
La Cruz \
- 3 '\ 7\ / \:.~~~~~~.1 hiles \ ; -> 5
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(OS;TA R11CA oo -1% INSTITUTO COSTARRICENSE DE El ECTRICIDAD -, , ' --- \
DEVELOPMENT PROGRAIH - 2nd STAGE t1969 19731 k . Buenos
TELiEPHONE EXCHANGES I. LONG DISTANCE NETWORK << \ Ai LEXISTING TELEpNONE EXCHANGES & LOwIG DISTANCE 6463O6K T\ OpRo
0-0~~~~~~~~~~~~0
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d616461o6X x
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* 96. 6>ch4n46 e ,e o, oc e > - /'_ 5 °p.,, 0
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KILOMETERS
1969 15~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~RG. 250,19
