Document of "-W l l

The World Bank HX cA)UFOR OFFICIAL USE ONLY

Report No. 3185-IND

STAFF APPRAISAL REPORT

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

January 16, 1981

Projects DepartmentEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit - Indonesian Rupiah

US$1 = Rp 625Rp 100 = US$0.16

Rp 1 million = US$1,600

WEIGHITS AND MEASURES

1 metric ton = 1,000 kilograms (kg)1 liter (1) = 0.0063 barrels1 kilometer (km) = 0.6215 miles (mi)1 kilovolt (kV) = 1,000 volts (V)1 megavolt-ampere = 1,000 kilovolt-amperes (kVA)1 kilovolt-ampere = 1,000 volt-ampere (VA)1 megawatt (MWl7) = 1,000 kilowatts (kW)1 gigawatt hour (GWh) = 1 million kilowatt hours (kWh)

ABBREVIATIONS

BAPPENAS - National Planning AgencyBATUBARA - National Coal EntityDGEP - Directorate-General Electric Power, Ministry of Mines and EnergyDPMIA - Institute of Hydraulic Engineering, BandungCOI - Government of IndonesiaLE UNPAD - Institute of Ecology, Padjadjaran University, BandungLNG - Liquified natural gasNINE - M.linistry of Nines and EnergyNewjec - New Japan Engineering Consultants, JapanNI.RA-ENEL - Italian Nuclear and Electricity AgenciesOECF - Overseas Economic Cooperation Fund (Japan)PCR - Preece, Cardew and Rider, UKPERTANINA - National Oil CompanyPLN - National Power AuthorityREPELITA - Five-Year Development PlanSBC - Special Board of Consultants

GOVERNMENT OF INDONESIAFISCAL YEAR

April 1 - March 31

FOR OFFICIAL USE ONLY

INDONESIA

PERUSAHAAN UMUM LISTRIK-NEGARA

TENTH POWER PROJECT

Table of Contents

Page No.

1. THE-ENERGY SECTOR . . . . . . . . . . . . . . . . . . . . . . . 1

Energy Resources and Status of Development . .. . . . . . . 1Petroleum .... . . . . . . . .. 1Natural Gas .... . . . . . . .. 2Coal ........... ... 2'Hydroelectric Resources ... . . . . .. 3Geothermal Resources ... . . . . . . . . . . . . . . .. 4Nuclear Power .... . . . . . . . . . . . . . . . . . . . . 4Non-Commercial Sources ... . . . . .. 4Growth of Energy Consumption ... . . . . . . . . . . .. 5Organization of the Energy Sector . .. . . . . . . . . . . . 5Problems in the Energy Sector, Policy and Pricing . .. . . . 6The Electricity Subsector ... . . . . . . . . . . . . .. 6DGEP ........... ... 7PLN ........................ ... 7Captive Plants .... . . . . .. 7

Rural Electrification ... . . . . . .. 8

2. THE POWER MARKET AND THE DEVELOPMENT PROGRAM . . . . . . . . . 8

Status of Surveys .... . . . . . . . . . . . . . . . . . . 8Demand Projections . . . . . . . . . . . . . . . . . . . . . 9Access to Service . 10Connection Programs . . . 10Development Program . 11Overview of the Program . 12

3. THEBENEFICIARY ....................... . 13

Legal Status and ResponsibilitiesP .. .. . . .... . . . . . 13Organization and Management ... . . . ..... . . . . . . 14Present Facilities . . . . . ... . . . . . . . . . . . . . . 16Manpower and Training . ...... . ..... . . . . . . . 17Research .... . . . . . . ...... . . . . . . . . . . 17Accounting and Audit . . ... . . ..... . . . . . . . . 18Insurance .... . . . . . . ...... . . . . . . . . . . 18Peformance Under Earlier Bank Operations . . . . . . . . . . 18

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Page No.

4. THE PROJECT ......................... . 19

Objectives of the Project ... . . . . . . . . . . . . . . . 19Project Description ... . . . . . . . . . . . . . . . . . . 20Investigations and Suitability of the Saguling Site . . . . . 21Dam Site and Other Features ... . . . . . . . . . . .. . . 22Optimization of Project Features . . . . . . . . . . . . . . 22Geology .... . . . . . . . ...... . . . . . . . . . . 23Seismology .... . . . . . . ...... . . . . . . . . . 23Allied Structures .... . . . . ...... . . . . . . . . 23Reservoir Area .... . . . . . ..... . . . . . . . . . 23Siesmology .... . . . . . . ...... . . . . . . . . . 24Hydrology .... . . . . . . . ..... . . . . . . . . . . 24Sedimentation .... . . . . . ...... . . . . . . . . . 25Construction Materials . . . . . . . . . . . . . . . .. . . 25Engineering and Design ... . . . . ..... . . . . . . . 26Environmental Aspects ... . . . . . . ... . . . . . . . . 26Construction Equipment for PLN Task Force . . . . . . . . . . 29Engineering of Cirata Hydroelectric Project . . . . . . . . . 29Project Cost Estimate ... . . . . ...... . . . . . . . 30Contingencies .... . . . . . ...... . . . . . 31Consulting Services ... . . . . . ..... . . . . 31Financing .... . . . . . . . ..... . . . . . . 32Construction . . . . . . . . . . . . . . . . . . . . 32Implementation Program ... . . . . ..... . . . . . . . 33Procurement .... . . . . . . ...... . . . . . 33Disbursement .... . . . . . ...... . . . . . 33Maintenance for Dam Safety ... . . . .... . . . . . . . 34

5. FINANCIAL ANALYSIS . . . . . . . . . . . . . . . . . . . . . . 34

Past Results .... . . . . . ...... . . . . . 34Present Financial Position ... . . . .... . . . 35Future Financial Performance . . . . . . . . . . . . . . . . 36

6. JUSTIFICATION .... . . . . . . . . . . . . . . . . . . . . . 37

Demand .... . . . . . . . ..... . . . . . . . 37Least Cost Solution ... . . . . . ..... . . . . 38Internal Economic Rate of Return . . . . . . . . . . . . 38Risks .39

7. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS . . . . . . . . . 39

ANNEXES

1. Organization Chart of the Ministry of Mines and Energy2. Forecast of Future Generation Requirements

3. Growth of Generating Capacity, Sales and Peak Demand in Java4. PLN-s Organization Chart5. Principal Features of Saguling Hydroelectric Project6. Citarum River Development Plan7. Salient Features of Cirata Hydroelectric Project8. Project Cost Estimate9. Summary of Financing for the Saguling Project

10. Implementation Schedule of the Saguling Project11. Milestone Schedule for Main Civil Works and Penstocks12. Estimated Schedule of Disbursements13. PLN Past Financial Results14. PLN Financial Forecasts15. Assumptions for the Financial Forecast16. Cost and Benefit Streams for IERR Calculations17. Information Available in the Project Files

MAPS

Public Generating Facilities by AreasJava Power SystemSaguling Power ProjectGeneral Site Arrangement

This report was prepared by Messrs. C.K. Chandran and B. Keith Thomas, whoappraised the project in August/September 1980.

1. THE ENERGY AND ELECTRICITY SECTORS

Energy Resources and Status of Development

1.01 Data on energy resources in Indonesia are incomplete and thecoverage is uneven, varying from fairly good documentation on oil reservesto very little on geothermal resources or nuclear fuels; data on existingand potential energy consumption patterns is similarly incomplete. Energypolicy formulation is thus rendered difficult and is presently limited tobroad generalities. In the past the Bank has agreed to finance a number ofstudies designed specifically to rectify statistical deficiencies (e.g.,hydropower surveys - Power VI Loan 1365). Recently, however, the Minister ofMines and Energy has asked the Bank to undertake a more comprehensive surveyof the energy sector with a view to systematizing the data currently avail-able, identifying the major deficiencies and assisting the Government ofIndonesia (GOI) to determine the best method of proceeding with sectordocumentation and policy formulation. A Bank mission to initiate this workvisited Indonesia in November 1980. Available information on the energysector and the main issues are summarized in the following paragraphs.

1.02 Indonesia is endowed with abundant energy resources and has largeas yet underdeveloped natural gas, coal, hydroelectric power and geothermalsources. Petroleum reserves have been exploited for some time. Theavailability of indigenous oil caused Indonesia to develop a petroleum-basedenergy sector rather than exploiting other available energy resources.Prior to independence, the country relied on coal and hydroelectric energyto a large extent for its commercial energy but now petroleum accounts for90% of total commercial energy consumption. Steps are being taken by theGovernment to increase the shares of coal, hydroelectric power and geo-thermal energy as rapidly as possible.

Petroleum

1.03 Petroleum reserves are estimated at about 50 billion barrels, butproven resources are between 10-15 billion barrels. The figure has not in-creased significantly since 1970. Present production is about 1.6 millionbarrels per day, and it is expected to increase to 1.8 million barrels perday by 1984. The government assessment is that with virtually staticreserves and constant production, and the rapid increases in domestic demand(about 14% per year), surpluses available for export would steadily decline,seriously undermining the economy. GOI has therefore adopted a policy ofdeveloping other indigenous energy sources such as coal, hydroelectricity,natural gas and geothermal for internal consumption. As a result of thesepolicies and due to expected increases in oil prices the annual growth ofdomestic consumption of oil is expected to decrease to about 8.5% in 1983.Liquified natural gas (LNG) and condensate exports are expected to increase

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rapidly and will compensate partially for the slowdown in oil exports. Inthe above context, it is imperative that detailed plans be drawn up urgentlyfor well-coordinated development of the energy sector and its varioussubsector_.

Natural Gas

1.04 The estimated natural gas reserve is about 34 trillion cu ft, ofwhich 5 trillion cu ft represents gas associated with oil production. Thepresent production level is about 80 billion cu ft per year. Pipelines haverecently been laid to steel and fertilizer factories and consumption isexpected to increase at the rate of 15% per year during the next five years.Following agreement reached with Japan a few years ago, export of naturalgas in the liquid form (LNG) has commenced and is expected to grow rapidly.A study of natural gas pricing and utilization has been agreed under Credit451-IND to determine the potential usage of gas in Indonesia and theresources available. GOI policy is to use surpluses, where available, forelectricity production. In Java, where some thermal stations have beendesigned for dual firing (oil and gas), no surpluses are now available.Natural gas is being used however in Java and Sumatra.

Coal

1.05 Indonesia-s coal reserves are conservatively estimated at 1.2billion tons, 86% of which are in Sumatra and the balance in Kalimantan.Some estimates place the total reserves at 15.0 billion tons. Actualproduction was as high as 2.0 million tons per year in 1940, but declinedto 140,000 tons in 1973. Rehabilitation measures increased production to250,000 tons in 1979. Of this, 150,000 tons came from the Bukit Asamcollieries and 100,000 tons from the Ombilin mines, both in Sumatra.

1.06 Government has decided to encourage the development of coal fornational consumption wherever technically and economically feasible. Thepower sector is the largest market for Indonesia-s coal. Explorationcarried out between 1976 and 1979 having confirmed that proven reservesof about 125 million tons were available at Bukit Asam, and aided by aUS$10.0 million engineering loan from the Bank, GOI proceeded to evolvean integrated mining and transportation system to deliver about 3.0 milliontons per year for use at an 800 MW dual-fired (oil and coal) thermal powerstation at Suralaya in West Java. This power station is now underconstruction with financial assistance from the Bank (Loans 1708 and 1872).The first generating unit of 400 MW is expected to be commissioned inJanuary 1984. The Bank is now considering a loan for this integrated coalmining and transportation project. An appraisal mission visited Indonesiain September 1980. Other similar projects are expected to follow. GOI hasalso encouraged private concessionaires to survey reserves with a view toincreasing the export of coal. A large concession in South Sumatra wasgiven up by Shell, but other concessions in Kalimantan are under activeconsideration.

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Hydroelectric Resources

1.07 The hydroelectric potential of the country has been roughlyestimated at 31,000 MW distributed as follows: Irian Jaya 9,000 MW,Kalimantan 7,000 MW, Sumatra 6,750 MW, Sulawesi 5,600 MW and Java 2,500 MW.The greatest potential lies in Irian Jaya where electricity demand is thesmallest while Java, where the demand is the greatest, has the least.

1.08 The figures in para. 1.07 are estimates of the theoreticalpotential. There are no reliable estimates of the proportion that can beactually developed. Reconnaissance and preliminary studies (mostly theformer) of the sites where an aggregate installed capacity of about 15,000MW is believed technically feasible have been carried out but little isknown about the costs of their development.

1.09 The total installed hydroelectric generating capacity in thecountry now is 662 MW, of which 460 MW is in Java, 174 MW in Sulawesi andthe balance in Kalimantan (20 MW) and Sumatra (8 MW). A major hydroelectricproject is under construction at Asahan (600 MW) in Sumatra, as part of alarge aluminum complex being built by a Japanese consortium of investors. Itssurplus capacity of about 50 MW will be made available to the nationalelectricity entity, Perusahaan Umum Listrik Negara (PLN) for distribution.Besides the 700 MW Saguling project to be financed with assistance from theproposed loan, three hydroelectric sites, Cirata (500 MW) in West Java andMrica (180 MW) and Maung (120 MW) in Central Java are under detailed fieldinvestigations. These projects are included in PLN's development program,along with a few small hydroelectric stations associated with irrigationprojects.

1.10 The limited reserves of petroleum and the relatively high cost ofenergy from new coal-fired thermal stations place a high premium on develop-ment of hydro resources. Unfavorable location of potential sites away fromthe main demand centers, and relatively long gestation periods, have limiteddevelopment in the past. The pace of investigation of hydroelectricprojects has been slow, however, and needs to be accelerated. During 1979PLN agreed to build up its investigative capabilities to expedite hydropowersurveys. Funds for the necessary technical assistance were arranged out ofthe savings available under Loan 1365. PLN has decided to draw upon a firmof consultants experienced in the field to provide the services of threeexperts who would work with a PLN counterpart team and prepare within acouple of years (a) a detailed inventory of all sites, (b) a priority listof these sites based on location, demand growth in likely areas of supply,status of supply and available alternatives, and (c) a detailed investiga-tion program. Most of this work would be outside Java where the main siteshave been either developed or investigated.

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Geothermal Resources

1.11 Judging from evidence of surface activity, stretching from Sumatrato Irian Jaya, and limited exploration, Indonesia is believed to havesubstantial geothermal resources. They are not all close to major loadcenters and are widespread. Over 17 significant (greater than 100 MW, heatvalue) fields have been identified indicating development potentials inSumatra, Java, Bali, Flores and Sulawesi. The full potential of thesefields is not certain. Some identified fields in Java (e.g., Kamojang) arereasonably close to load centers. A 30 MW plant is under construction atKamojang at a total construction cost of about US$1,200 per KW installed.The Government of New Zealand is providing financial assistance. GOIattaches high priority to development of geothermal energy as a part of itspolicy of diversification of energy sources (para. 1.02) and conservingpetroleum. It has recently invited proposals from interested parties inseveral countries for financing exploration and exploitation of sevenidentified geothermal fields in Java, on a commercial basis. The resultsare awaited.

Nuclear Power

1.12 Since 1976 several studies have been carried out on the need fornuclear power in Java. The general consensus of these studies, with whichthe Bank agrees, is that a nuclear power station would not be economicallyjustified until the early nineties. PLN's investment program until 1990therefore does not provide for one. However, a recent study carried out byNIRA-ENEL of Italy has concluded that introduction of the first nuclearpower station with a 636 MWe CANDU type generating set by FY89/90 would befeasible. The Bank-s initial reaction is that the underlying assumptions ofthe study as to capital and fuel costs strongly'favored the nuclearalternative against equivalent coal-fired thermal stations with which it wascompared. The question is being carefully examined by PLN and otherGovernment agencies concerned.

Non-Commercial Sources

1.13 Accurate information on firewood and agricultural waste consump-tion in Indonesia is not available although some scattered statistical datahas been collected in this admittedly important area. A recent nationalsurvey conducted by the Forestry Products Research Institute for instancehas estimated that the per capita consumption of firewood in rural areas hasincreased about threefold from 0.6 cu m p.a. in 1971. Charcoal consumptionestimates show a sharp decline since 1968. About 17.0 million tons ofagricultural wastes (in the form of rice husks, baggasse and sawmill wastes)are produced annually but most of these are not used as energy sources.Recognizing the need to develop these energy sources GOI set up theDevelopment Technology Center in 1973 but with its limited staff the resultsachieved so far have been meager. Shortly a USAID-financed study involvingfield work and data collection is expected to clarify both resources andexisting patterns of use.

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Growth of Energy Consumption

1.14 Consumption of commercial forms of energy in Indonesia grew in therecent past at about 13.6% p.a., doubling in about five years. For RepelitaIII (FY80-84), growth is projected at 11% p.a., with the share of petroleumproducts falling from 90% in 1977 to 79% in 1984. Currently) electricityprovides only 7% of the country's energy, but is projected to increase to11.3% by 1984. The table below shows a breakdown of consumption by energysources:

Table 1.1: ENERGY CONSUMPTION BY SOURCES(in million tons of coal equivalent - MTCE)

1970 % 1977 % 1984 X

Petroleum products 8.656 87.9 21.670 90.0 41.202 79.1LNG - - 0.189 0.4Natural gas 0.880 8.9 2.017 8.4 8.339 16.0Coal 0.161 1.6 0.178 0.7 1.254 2.4Hydro 0.154 1.6 0.219 0.9 1.084 2.1Geothermal - - 0.015 0.0

Total 9.851 100.0 24.084 100.0 52.083 100.0

Organization of the Energy Sector

1.15 In May 1978, the Ministry of Mines and Energy (MME) wasestablished as part of a general reorganization of government departments tocoordinate all activities in the energy sector. MME has overall respon-sibility for mining, oil, natural gas and electricty. It controls the stateenterprises responsible for the execution of the government policies in theenergy subsectors - viz. the national oil and gas entity (PERTAMINA), thecoal agency (BATUBARA) and PLN. The Ministry has been recruiting staff overthe past two years and developing its organization to fulfill its role inthe energy sector. MME-s organization chart is shown in Annex 1.

1.16 GOI has established an interdepartmental energy policy andplanning committee at the technical level. The Chairman and Vice-Chairman ofthe Committee are the MME-s Directors-General of Oil and Gas and of ElectricPower (DGEP), respectively. A permanent energy committee has also beenformed by the Minister and entrusted with the tasks of assessing energytechnologies, dealing with day-to-day energy problems and preparinglong-term projections for demand and supply. A ministerial level NationalEnergy Board has recently been formed to review proposals emerging from the

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technical committee and eventually to establish a more clearly definedenergy policy with specific implementation instructions to the ministriesconcerned. The first meeting of this Board will be held towards the end of1980.

Problems in the Energy Sector, Policy and Pricing

1.17 Because of the deficiencies of available statistics on bothresources and consumption (para. 1.01) a comprehensive energy balance, indi-cating the various sources of energy, patterns of transformation, transpor-tation and consumption has not yet been prepared for Indonesia. The countryconsequently lacks a quantitatively based overall energy policy. This policyweakness is compounded by a system of energy pricing that does not equaterational consumer choices with the national interest. In particular,petroleum prices - subsidized by Government for political and social reasons- have caused serious distortions in the economy by failing to reflect theirvalue to the economy as an export good. The effect has been to favor theuse of oil over other competing fuels, promotion of domestic consumptionover exports, and because the degree of subsidy between oil products isuneven, to distort the demand between individual petroleum products.

1.18 The elimination of these subsidies has been under seriousdiscussion between GOI and the Bank for some time. In the context ofnegotiations of Loan 1872 (Power IX), the Government confirmed that, as amatter of policy, it would ultimately abolish subsidies on domestic oilconsumption, subject to the ability of consumers to pay, and a further stepin this direction was taken in May 1980 when oil prices were increased 50%.In order to consider the full implications of removal of subsidies and thebest manner of achieving this objective, GOI and the Bank agreed that anenergy pricing study would be carried out using about US$3.0 million out ofthe surplus available under Loan 1513 (Power VII Project). The Bank hasrecently provided GOI with an outline scope for this pricing study andsuggestions regarding terms of reference and is awaiting MME response. Thisstudy would also provide guidelines for pricing of competing energy sources.

1.19 The Bank has also agreed to provide funds through Loan 1513 tobuild up a management information system for DGEP activities in theelectricity sector and ensure that development programs in the electricitysector are entirely consistent with national policy objectives. Proposalshave been invited recently from an agreed short list of consultants to carryout the study in accordance with terms of reference finalized in consultationwith the Bank.

The Electricity Sector

1.20 The Electricity subsector is regulated by MME through DGEP. Itcomprises (i) PLN, (ii) captive plants installed by private parties fortheir own use, (iii) some small municipal franchises, and (iv) a small

number of cooperatives which were set up to provide electricity in certainrural areas remote irom PLN supply systems.

1.21 Legislation was enacted in 1979 to provide for private and co-operative franchise participation in the electricity sector with theintention of providing electricity generation/supply in areas where PLN wasunable to develop its own supply systems fast enough. However, no newparties have so far been licensed.

1.22 DGEP. Since its inception in 1978 DGEP has been responsible forelectricity sector policy in the country. Until its establishment, PLN hadbeen responsible for giving advice to the Minister on sector policy and forplanning and licensing. Legislation enacted in 1979 transferred theseresponsibilities, particularly in policy planning, licensing of franchises,and general supervision of the sector from PLN to DGEP. Its organizationalstructure is shown in Annex 1.

1.23 PLN. PLN was first formed in 1961 when three Dutch-ownedelectricity utility companies were nationalized, but its growth as an ef-fective modern organization started around 1972, when its status was changedfrom that of a department of a ministry to an autonomous entity and foreignfinancing became available for its urgently needed rehabilitation and ex-pansion programs. PLN's subsequent growth has been impressive. It nowhas over 2.2 million consumers and provides 70% of the total electricitysupply in the country. Further details are given in Chapter 3.

1.24 Captive Plants. Until the mid-seventies public sector developmentwas severely constrained due mainly to lack of foreign financing and PLNcould not meet the demand with any reliability. Captive plants thereforegrew rapidly (see Table 1.2 below). Currently, the total capacity of suchplants is about 2000 MW compared to 2,662 MW of PLN; most of the plants aresmall diesel installations, with a few larger gas turbines. During 1973-76,the average annual growth rate of captive plant was 15% (with a peak of 22%in 1975). Since then the growth has fallen off rapidly to an average ofabout 4% during 1976-79 (Annex 2). It has been negligible during 1979/80.This is a direct consequence of the rapid augmentatiohi of PLN-s systemsupply and significant improvements in reliability standards and otherpositive marketing measures. It is PLN's policy, when connecting owners ofcaptive plant to allow such plant to remain in use as reserve until the endof its economic life. Some captive plants will continue to be installed asPLN's investment program is not large enough to meet the entire demand atall locations in the country, but the rate of growth is more likely to bebelow 5%.

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Table 1.2: GROWTH OF CAPTIVE POWER IN INDONESIA

Connected Not connected PercentYear to PLN to PLN Total increase

1973 325.5 848.2 1,173.7 131974 358.5 971.0 i,329.5 131975 483.8 1,143.3 1,627.1 221976 535.? 1,292.3 1,828.2 121977 568.1 1,326.7 1,894.8 41978 597.9 1,391.0 1,988.9 51979 609.7 1,413.6 2,023.3 2

Rural Electrification (RE)

1.25 Rural electrification is being undertaken by PLN with consultancyassistance, among others, from the National Rural Electric CooperativeAssociation (NRECA) of the US and financed by USAID, which provided a loarnfor seven proiect areas (-US$20 million). Financial assistance in the formof a loan has also been committed by Holland (Fl 15.5 million/ US$7.7million) and as a grant by Finland (FM 0.48 million, US$0.12 million).

1.26 Rural electrificatior. as defined in Indonesia covers all towns andvillages in the country except provincial capitals and second level provin-cial towns. During Repelita III PLN plans :o electrify about 3,700 of the64,000 villages in Indonesia; currently 1,081 villages are included incommitted projects whlch will benefit about 29,000 consumers.Indonesia does not yet have a plani or time scale in which all villages inthe country will be provided access to electric.ity, but those villages andareas in which electricity would have the greatest economic impact are givenpriority. Some time must elapse before the modest national RE plan isaccelerated; currently only 6% of the total population has electricity and asector base to support RE is required 'before a national program can beeffective.

IL THE POWER. MARKET AND TrE DEVELOPMENT PROGRAM

Status of Surveys

2.01 Several attempts have been made during the seventies to prepare ameaningful demand forecast for the Indonesian power sector. They were dif-ficult because of the very Low prevailing consumption levels and severerestrictions on supply which made past records (limited to ?LN's sales which

then accounted for only a fraction of the total consumption) an unsatis-factory basis for future projections. One of the first of these attemptswas by Chas T. Main of the USA in 1973. It applied an indirect method ofusing growth probabilities in selected sensitive economic sectors and theirprobable impact on other sectors to arrive at the demand for electricity. Amore direct detailed assessment of the underlying demand and future trends(up to 1985) was made during 1974-76 by Preece, Cardew and Rider (PCR) ofthe UK as part of a Bank-financed System Development Study (Credit 399).This study quantified the effects of restrictions on supply and lowvoltages, self-generation and PLN's waiting lists. It was limited to Java,which is believed to account for two-thirds of the market (see para. 2.03).

2.02 In recent years PLN has carried out market surveys in some of theother islands using consultants. PLN has also begun to develop methods toscan the power market using its own limited organization at headquarters andin PLN's operational regions (Wilayahs). The stage has now been reached(see para. 2.07) where PLN has to build up a power market survey unitcapable of updating the PCR study in Java and similar consultant studies nowin progress and to compile similar data for all islands. PLN's intention isto expand the presently small unit in the Planning Directorate. To improvethe quality of its power surveys PLN requires the active association of theDGEP of MME which should provide (i) guidelines on national energy policies,

(ii) firm data on primary energy availability and (iii) usage and pricingpolicies, as these influence the demand for electricity. PLN will, infuture, take full responsibility for the work and will employ experts, drawneither from operating entities or other organizations involved in this work,

on a short-term basis at periodic intervals. Funds have been provided inthe proposed loan to meet the requirements of such experts. Henceforth theuse of consulting firms should be selective and confined to tasks for whichPLN is unable to mobilize adequate manpower if the time required. Anassurance that PLN, with the assistance of GOI, will take steps to improvethe capability of its power market survey units - at Central (Pusat) andWilayah (Regional) levels to carry out surveys to update the PCR study inJava and similar consultant studies in other islands and compile data forall islands, was obtained from PLN and GOI during negotiations.

Demand Projections

2.03 The initial results of the PCR study in Java (2.01) implied thatthe magnitude of the underlying demand was so large that annual growth ratesof public electricity supply would have to be of the order of 30-35% duringFY76-85 against historic rates of 10-12%. It was recognized, however, thatPLN's sales in Java could not quickly rise to such levels and that, in theshort and medium term, they would depend on the rate at which PLN couldbuild up its facilities and meet an increasing proportion of the existingdemand, whereas, in the longer term, PLN sales would reflect more closelythe growth of the power market based on the overall levels of economicdevelopment. Retaining the initial results as "high" forecasts, and in

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order to provide a basis for preparing a practicable development program forPLN, PCR then determined lower, but more realistic projections, referred toas its "low forecasts." The forecasts are summarized in Annex 2.

2.04 Optimized programs of generation and transmission were prepared byPCR for both "high" and "low" forecasts. During FY77-79 PLN and the Bankagreed that PLN would (i) adhere to the low forecast for its developmentprogram in Java and (ii) ensure a proper balance between its investments ongeneration, transmission and distribution. It was also agreed that PLN-sdevelopment should be annually updated to accord with actual experiences andbe jointly reviewed by PLN and the Bank for necessary modifications. Thereviews have indicated that PLN's studies of the power market are ratherlimited and need to be improved (para. 2.02). The reviews also resulted insomewhat lower forecasts of sales than the PCR "low" forecast in the nearfuture with prospects of catching up with it by 1990. According to thelatest (1979) such revision (Annex 2) the average growth rate betweenFY79-85 was expected to be 21% per year; thereafter the growth is expectedto decline to about 15% per year. The development program based on theserates of growth has been accepted by GOI and incorporated in Repelita III.During FY79 and FY80 PLN's sales in Java increased by 22% and 24%respectively which is slightly better than expectations.

Access to Service

2.05 The per capita consumption of electricity in Indonesia is stillextremely low at about 70 kWh (FY80) compared to 570 kWh in Malaysia, 250kWh in the Philippines and 250 kWh in Thailand. Indonesia-s population haslow access to electricity; only about 6% of the households are connected.The degree of electrification in different regions varies, being about 9.6%in Java, 4.3% in Sumatra, 5.0% in Kalimantan, 4.2% in Sulawesi, 4.6% in WestIrian and 2% to 3% in the other islands.

Connection Programs

2.06 During FY78 PLN agreed with the Bank that it would prepare andactively implement a consumer connection program consistent with itsimproved capabilities. The results are summarized in Table 2.1 below.Figures in parentheses indicate the growth over the previous year.

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Table 2.1: GROWTH OF PLN'S CONSUMERS AND SALES

Number of Connected SalesYear consumers load MVA in GWh

1975/76 1,140,745 1,426.4 2,804(5%) (13.0%) (14.7%)

1976/77 1,208,538 1,594.5 3,082(5.8%) (11.8%) (10.1%)

1977/78 1,413.068 1,933.5 3,527(16.9%) (21.3%) (14.6%)

1978/79 1,784.001 2,448.5 4,287(26.2%) (26.6%) (21.6%)

1979/80 2,246,657 3.063.4 5,343(25.9%) (25.1%) (24.6%)

2.07 PLN exceeded the consumer connection program targets during FY78-80.During FY81, the target set for Java was 23% but midway during the yearconsideration is being given to reducing it to about 21.5%, because of delaysin commissioning the 4th generating set (200 MW) at Muara-Karang and in thecommissioning of some 150 kV transmission lines and substations. Alternativesdiscussed during appraisal may make this reduction unnecessary. In some ofthe Wilayahs, notably in East Java (XII) and North Sumatra (II) the resultsof PLN's efforts at expediting consumer connections have been reallyimpressive and must be regarded as a clear indication of growth potential inthe near future. In East Java the growth rates in FY79 and FY80 were 30%and 36% recently and the target of 33% set for FY81 could easily be attainedor even exceeded, judging by the progress so far on payments of connectioncharges and waiting lists. These growth rates are ahead of the growth ofPLN-s supply capacity and it is a matter of some concern that (i)construction of the 150 kV Central-East Java link and (ii) financing ofGresik Unit 3 (included in the development program and planned forcommissioning in FY83 with assistance from the Overseas Economic CooperationFund (OECF) have not kept pace. The latest demand forecast in the East Javaregion is some 20-25% higher than the PCR "low" forecast, and could justifyadvancing the construction of the 500 kV Central-East Java link, planned forcompletion in FY88, two years earlier. The situation in North Sumatra issimilar. There is an urgent need for PLN to carry out a detailed powermarket survey both in Java and other islands in order to properly plan thescale and pace of its immediate expansion program. To sustain the momentumbuilt up during the past 3 years, special efforts should be made by PLN andGOI to ensure that the targets of expansion of power supply facilities in

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Repelita III are achieved by improved monitoring of construction, andproviding financial resources, where necessary. Serious consideration hasalso to be given from now on to initiating work on schemes whose benefitsare to be derived in the early years of Repelita IV. PLN hao& also toimprove its system planning capabilities, to identify emerging systembottlenecks in advance and to ensure that its power systems continue to beadequate as the demand escalates. PLN intends to improve the capability ofits central system planning unit at headquarters to do this, using expertson a short-term basis (para. 2.02) with funds to be provided under thisloan, and an assurance on this was obtained during negotiations.

Development Program

2.08 Within the limitations of its power market surveys(paras. 2.02/2.04) PLN follows the practice of preparing annually a 10-yeardevelopment plan to cover the projected requirements of generation,transmission, distribution and other facilities. The latest plan finalizedin August 1980 for Java, covers the development period FY80 to FY90.Investment requirements based on this plan were revised in September 1980.A time slice of the program for the period FY80-84 has been incorporated inRepelita III. In the past, least cost investment programs for generation,transmission and distribution were planned with the help of the consultants.PLN has recently developed in-house capability for carrying out least costgeneration planning studies with computer modelling which is utilized toreview and update the Java generation plan. It represents a significantimprovement, but requires further refinement.

2.09 Java accounts for 62% of the population of the country (90 millionout of 145 million) and 80% of electricity sales!,of PLN in FY80 (4,242 GWhout of 5,343 GWh). Of PLN's total installed generating capacity of 2,662 MWin the country, 1,760 MW (66%) was in Java. In FY89, the proposed installedcapacity in Java would be 6,410 MW (71.3%) against the total of 8,986 MW andthe sales of electricity would be 21,530 GWh, about 80% out of the totalprojected sales of 27,010 GWh; Java continues to be the centerpiece of thepower development plan of Indonesia.

2.10 Detailed studies have been carried out to devise the optimal deve-lopment strategy for the power system in Java and the least cost path hasbeen identified. The plan has been formulated to achieve the followingobjectives: (a) optimize resource utilization by substituting oil by usingcoal, by greater exploitation of hydro and geothermal resources for powergeneration and by reducing the use of fuel inefficient installations;(b) realize economies of scale by larger sized installations; (c) achieveoperational economy by coordinating the utilization of plants throughinterconnected operations; and (d) provide acceptable standards ofreliability of supply.

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2.11 During the past two years PLN's system planning unit has madeefforts to refine its development program (included in Repelita III) for theother islands, which had not been based on (a) reliable demand forecasts and(b) an accent towards full use of indigenous energy resources. More workrequires to be done in this area, as recent trends indicate that the demandgrowth may have been under-estimated. PLN expects to be able to bring itsstudies for other areas up to acceptable standards within a couple of years.

Overview of the Program

2.12 The energy sales forecasts and the generating capacity require-ments are summarized in the following tables:

Table 2.2: FORECAST OF ENERGY SALES (GWh)

Year Java Outside Java Total % growth

1980/81 5,324 1,178 6,502 22.01981/82 6,495 1,438 7,933 22.01982/83 7,924 1,754 9,678 22.01983/84 9,588 2,122 11,710 21.01984/85- 11,506 2,547 14,053 20.01985/86 13,692 3,030 16,722 19.01986/87 16,157 3,576 19,740 18.01987/87 18,604 4,606 . 23,210 17.61988/89 21,530 4,480 27,010 16.0

Table 2.3: INSTALLED CAPACITY (MW)

Installed Java Outside JavaCapacity 1979/80 1988/89 1979/80 1988/89

Hydro 460 1,720 47 353Steam 700 3,900 50 1,195Gas turbine 600 600 147 147Diesel - - 546 1,412Geothermal - 30 - -

Total 1,760 6,250 790 3,107

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2.13 The estimated investment at end 1979 constant prices for genera-tion, transmission and distribution facilities to meet the development planfrom 1979AIC to 1988/89 is equivalent to US$11.0 billion with a foreigncomponent of about US$7.0 billion.

2.14 In Repelita III covering the period FY80 to FY84, investmenttargets shown in Table 2.4 below are incorporated:

Table 2.4: INVESTMENT TARGETS IN REPELITA III (FY80-84)(In US$ million, constant FY79 prices)

InvestmentIter Foreign Local Total

Generation 1,536 645 2,181Transmission 586 175 761Distribution 1,034 701 1,735Rural Electrification 123 87 210Administration - 8 8Management & Organization 5 5 10Research & Development 21 20 41Facilities & Buildings - 96 96Survey of Energy Resources 53 65 118

Total 3,358 1,802 5,160

2.15 The program for expansion of generating capacity, sales and peakdemand is detailed in Annex 3.

3. THE BENEFICIARY

3.01 The beneficiary would be PLN, the Government-owned national powerutility.

Legal Status and Responsibilities

3.02 By Presidential Decree No. 18 of 1972, PLN was constituted apublic corporation (Perum), with responsibility for the generation, trans-mission and distribution of electricity and the planning, construction andoperation of electricity supply facilities. Until 1979 these

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responsibilities were exclusive to PLN, but in that year, with the objectiveof facilitating the exploitation of electric power to the greatest degreepossible, GOI enacted legislation allowing the intervention of privateentities and cooperatives in the sector under license of MME. PLN isrequired to participate in the national economic planning process and in theformulation of national power policies. Financially, PLN is expected tocover all operating and maintenance costs (including depreciation andfinancing costs) from current revenues, and to generate a contribution to thefinancing of its expansion program; the amount of this contribution has beenthe subject of a continuing dialogue with the Bank (para. 5.07). PLN'sinvestment plans and tariffs are subject to approval by GOI, as are bidevaluation and contract awards.

Organization and Management

3.03 PLN is managed by a board of directors headed by a presidentdirector, who is appointed by the President and is accountable to theMinister of Mines and Energy. The president director has authority for allday-to-day operations of PLN. The board currently comprises five otherdirectors with functional responsibility for planning, construction,operations, finance and administration. These directors operate more in astaff than a line role, since line responsibility strictly devolves from theboard as a whole (following the principle of collective responsibility) to16 regional operating managers on the one hand and 12 construction projectmanagers on the other. Regions are responsible for minor construction work,whereas all major construction work is handled by construction managers.PLN's organization chart is at Annex 4.

3.04 The exact division of responsibility between the regions/construc-tion divisions and the central departments is sometimes unclear. Forexample, construction managers are not fully responsible for ensuring theprogress of their projects on schedule since, inter alia, all contractingwork is handled by the Directorate of Construction. The Directorate doesnot have practical systems to effectively control such a large and far-flungdevelopment program as PLN-s is. In order to overcome the problem and tospeed up project construction, Power VIII (Loan 1708) provided US$2.5million to cover foreign costs of a thorough review by a managementconsultant of PLN-s construction organization and procedures. The work hasunfortunately not yet been initiated, owing to delay in contractnegotiations; but the appointment of a suitable consultant is expected withinthe next three-six months.

3.05 The next major management development in PLN is therefore likelyto involve increased decentralization of responsibility, so as to strengthenregional and construction management and avoid the risk of headquartersbecoming a bottleneck as the corporation grows. Steps towards greaterregional involvement in facilities planning were taken during the 1981

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planning cycle, and a series of management development courses has beeninitiated specifically for regional and branch managers. Extension of thedecentralization policy to regional operation and construction units mustnaturally be undertaken slowly and carefully; to some extent It will bedependent on the introduction of improved and restructured informationsystems (paras. 3.06 and 3.11).

3.06 PLN's management systems have in general been well designed andalthough there are some undoubted weaknesses (para. 3.04) progress in theirimplementation in recent years has been impressive. Recently they werereviewed in the context of a management audit commissioned by PLN andcarried out by a local firm working in association with internationalmanagement consultants. Their report contained a large number ofrecommendations for improvement covering in particular the establishment ofa more comprehensive corporate planning process; improvements in coordinationbetween the various headquarters departments, and between headquarters andthe regions; adoption of common design standards and methodology for projectfeasibility studies; and detailed technical proposals for improvement inprocurement, accounting, computing, inventory control and personnelmanagement. The president director has set up a working party to progressconsideration of the recommendations, and a number have already beenimplemented. There is currently a pressing need for better information tosupport planning and decision making, both within PLN and between PLN, MMEand other ministries and agencies concerned with power development. Thisproblem will be addressed in the upcoming power sector managementinformation system study, which is to be financed out of savings on thePower VII Project (Loan 1513).

Present Facilities

3.07 Until the early seventies, PLN's expansion was severely restrictedbecause of the lack of foreign exchange in the country. A crash programresulted in gas turbines being preferred; currently they comprise about 34%of the total capacity. The imbalance in plant is being corrected with thecommissioning of 1,000 MW of new steam capacity by 1982 and PLN's planningis now based on the least cost program of system development for Java.Similar programs are being developed for the grids located in the otherislands. PLN's istalled capacity on March 31, 1980 is shown below:

Type of plant MW %

Hydro 504 18.9Steam 756 28.4Gas turbines 896 33.7Diesel 506 19.0

Total 2,662 100.0

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3.08 PLN operates over 4,000 km of transmission lines at 70 and 150 kVand about 45,000 km of distribution lines, the bulk of which are in Java.About 2,000 km of 150 kV transmission under construction are scheduled forcompletion by 1982. Java will have a fully interconnected grid at 150 kV by1982. By 1984, a 500 kV system linking West and Central Java will becommissioned, and extended thereafter to cover all Java.

Manpower and Training

3.09 PLN now has a total of about 29,000 staff of which about 19,000are on the permanent payroll; of these 1,200 (4%) are university and collegegraduates and 6,300 (22%) are high school graduates. A steady improvement inthe proportion of graduate and high school staff has occurred in recentyears. Difficulty is encountered in obtaining technical manpower insufficient numbers; PLN sponsors 30-40 scholarships annually at technicaluniversities and 70-80 university graduates and 40-50 college graduates arerecruited each year, to overcome the problem.

3.10 Six training schools are run by PLN throughout the country toprovide vocational courses for the staff; about 1,100 attend the variouscourses each year. Staff members are sent abroad for advanced and othertraining not available in Indonesia. Project oriented training,particularly in foreign financed projects, is also provided. Numberstrained and the courses given are not yet geared to provide adequate staffof all the categories required by comprehensive manpower planning but PLNwill move closer to this goal in conjunction with the program ofstrengthening regional staffs during the next two years.

3.11 PLN does not have adequate training facilities for the operationand maintenance staff for steam power stations. About 40 people have beentrained in the USA with the assistance of Black and Veatch International(BVI), the Project Consultants for the Muara Karang and Semarang steamstations. A similar training program is also being arranged for theoperation and maintenance staff for the Suralaya project. To provide moreadvanced training needed, Power IX Project (Loan 1872) contains a provisionfor the establishment of a thermal station training school including asimulator replacing the existing facility at Tanjung Priok.

Research

3.12 PLN has established a power research institute which includes ahigh voltage testing laboratory. The institute, which conducts appliedresearch in power associated areas, has a staff of 278, including 87graduates.

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Accounting and Audit

3.13 PLN prepares its financial statements according to generallyaccepted accounting principles and normal utility practice. Assets in useare revalued from time to time according to indices published by theMinistry of Finance, and annual depreciation charges are revised accordingly.PLN has agreed with the Bank that in years when an official revaluation isnot carried out it will make a memorandum revaluation for Project Agreementpurposes. PLN-s accounting system was installed by consultants in the early1970s and, while it has generally served the company's needs well, there arenow some signs that it may be due for overhaul. Furthermore, the trendtowards increased decentralization of management functions (para. 3.05) willcall for some restructuring of the system so that adequate financial informa-tion is available to local managers in a timely manner. These systemdevelopments are likely to involve increasing use of computers, possiblyincluding terminal links between regions and headquarters. PLN has aninter-departmental working group examining this and related data processingdevelopments, and the Bank should stand ready to assist with appropriatecomponents of future projects when the needs have been defined.

3.14 Audit of PLN's accounts by the Directorate General of StateFinancial Control is prescribed by PLN's charter. The Directorate Generalfollows the standards of the International Accounting Standards Committee(IASC) and the International Auditing Guidelines of the InternationalFederation of Accountants (IFAC) and their audit reports are acceptable tothe Bank. In 1981 they plan to introduce a management audit component intotheir audit program which will examine the efficiency of PLN-s operationsand systems as well as the accuracy of its accounting. PLN also has aneffective internal audit group which carries out various special investiga-tions in addition to keeping general accounting matters under review.

Insurance

3.15 PLN carries motor vehicle insurance, and transit and marineinsurance on equipment and materials in transit. Fire and other hazards areself-insured. In view of the geographical spread of PLN's assets, anysingle loss would be relatively small by comparison with total assets andoperations, and this policy is therefore considered satisfactory. PLN isseparately examining the particular risks associated with the proposedproject (para. 6.07)

Performance Under Earlier Bank Operations

3.16 The Bank has provided US$889 million for power generation/distri-bution facilities in and around Jakarta and in West and Central Java. Threedistribution projects (Credits 165 and 334, and Loan 1259) for the rehabi-litated and expanded the distribution facilities in the greater Jakartaarea. They also enabled some major institutional, organizational andfinancial reforms to be carried out in the electricity subsector, including

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providing PLN with a new charter giving it substantial autonomy. Six powergeneration projects ICredit 399, and Loans 1127, 1365, 1513, 1708 and 1872)in West and Central Java were undertaken to help PLN expand electricitysupply in Java. Past loans and credits have also provided funds for variousconsulting services such as the large management consulting effort ofSOFRELEC, the Java System Development Study undertaken by PCR, andfeasibility studies for thermal, hydroelectric, transmission anddistribution projects.

3.17 A completion report on the first two projects (Credits 165 and 334)was issued in November 1979. It describes how, after an initial perioddifficulty and delay (the two projects were completed some three and a halfyears behind schedule) many of the institutional and operational developmentimprovements were effected, greater reliability of supply was achieved, andPLN-s sales began to increase rapidly. Lessons learnt from these operationswere applied to subsequent operations. A specific program for financialrecovery, designed to improve PLN's management capabilities and to overcomeits financial weaknesses over time was incorporated in Credit 399, forexample, and it was accomplished ahead of target during FY76.

3.18 PLN's performance in implementing the 9 Bank-assisted powerprojects has been uneven but is now improving. The earliest generationproject (Credit 399) covering the first and second 100 MW units at MuaraKarang thermal station was completed about two years behind schedule; thenext (Loan 1127) for the third 100 MW unit, had a delay of less than oneyear. Subsequent generation projects at Muara Karang (Loan 1365) andSemarang (Loan 1513) are about 4-6 months behind appraisal schedule; twoprojects at Suralaya (Loans 1708 and 1872), although still at an earlystage, are more or less on schedule. These projects are currently free ofmajor problems.

3.19 There are other quantitative indications of PLN-s steady improve-ment in performance. Its system losses, as high as 27% on FY75, were downto 5% during FY79 and less than 22% in FY80. The generation (MWH) peremployee increased from 240 in FY75 to about 340 during FY80. There is stillscope for considerable improvement.

4. THE PROJECT

Objectives of the Project

4.01 The main objective of the project is to utilize the largeundeveloped, hydroelectric potential of the Citarum river - the thirdlargest river in Java - to meet Java's rapidly growing demand forelectricity in the most economic manner. It will also provide PLN withtechnical assistance build up its capabilities in the fields of power marketsurveys, system planning, and contract management of major civil worksawarded under international competitive bidding procedures.

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Project Description

4.02 The main project comprises construction of:

(a) a 97.5 m high rockfill dam at Saguling, with a crest length of290 m and volume of 2.9 million cu m;

(b) a side-channel, gated, concrete spillway with a capacity of 2,400cu m/sec;

(c) two horse-shoe shaped diversion tunnels, 750 m long with insidediameters of 7.5 m and 9.0 m, respectively;

(d) a tower type, intake structure, with a capacity of 224.0 cu m/sec;

(e) two lines of water conductor system each involving: (i) a 4.7 kmlong circular, 5.8 m diameter, concrete lined pressure tunnel;(ii) a 12.0 m diameter, 100.0 m high, differential surge tank; and(iii) a 530 m long penstock tunnel with an inside diameter of5.5 m and an embedded steel liner; and (iv) about 1,250 m ofpenstock, with inside diameters varying from 4.3 m at the steelliner end to 2.54 m at the power house end;

(f) a conventional type power house at Saguling with an initialinstalled generating capacity of 700 MW (4x175 MW, with Francistype turbines); and

(g) a 500 kV switchyard.

The Saguling power station will provide the Java Grid with 700 MW ofpeaking capacity and 2,156 GWh of energy annually, of which 80% would befirm. Further details are at Annex 5.

4.03 The following preparatory works of the project are now in variousstages of implementation:

(a) construction of about 34 km of access roads, improvement andupgrading of about 17 km of existing roads, and two main construc-tion camps;

(b) relocation of about 8 km of roads and construction of 3 newbridges;

(c) resettlement of some 3,000 families; and

(d) miscellaneous environmental related works.

4.04 The costs of the following items are also included in the scope ofthe project:

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(a) construction equipment for a PLN task force to be established byPLN (para. 4.32);

(b) selected consultancy services, including the Special Board ofConsultants and other experts who will be appointed by PLN on ashort-term basis to assist: (i) civil works contract management(para. 4.44); (ii) power market surveys (para. 2.02); and(iii) power system planning (para. 2.07); and

(c) detailed engineering of the Cirata Hydroelectric Project(para. 4.34).

Investigations and Suitability of the Saguling Site

4.05 Three sites on the Citarum river viz Saguling, Cirata andJatiluhur, have been known for many years to be topographically suitable forconstruction of storage dams. A fourth site, Rajamandala with a relativelysmaller potential is located between Saguling and Cirata. It is estimatedthat about 4,480 GWh of energy can be generated annually at these foursites. Their location and features are shown on Map 3 and the profile ofthe Citarum River Development at Annex 6. Jatiluhur, the lowermost of thesesites, was developed in 1964 primarily for irrigation of 244,000 ha; its 125MW power station provides about 800 GWh of energy (mostly seasonal) annuallyto the PLN system.

4.06 A reconnaissance survey of the other two sites was first carried outby New Japan Engineering Consultants (Newjec) during 1972/1973 on behalf ofthe Overseas Technical Cooperation Agency of Japan. It was followed during1975/78 by a feasibility study, with financial assistance from IDA(Cr 399-IND). The study was carried out by Newjec in two phases. Duringthe first phase, the features of the Saguling site (which had the advantageof a sharp 330 m natural drop in river bed level in a 6 km stretch, butrequired a long water conductor system) and Cirata (which had the advantagesof a larger catchment area and shorter water conductor system - about 1.0 km- but could develop a head of only about 100 m) were compared. Theseinvestigations established that the Saguling site was the better of the twoto initiate further hydro-electric development of the Citarum river.Further feasibility studies were concentrated at Saguling. Funds from TA451 were used in 1978 to complete the feasibility study and to have itreviewed by the SBC constituted with well-known specialists. Guidance ofthe SBC was also available for the subsequent work of detailed engineeringwhich has been carried out by Newjec since 1979, with financial assistancefrom the OECF. Final project designs were completed by mid-1980 and theresults were incorporated in tender documents issued to prequalified biddersfor civil and metal works on August 1, 1980 (para. 4.46). Bids have beenreceived and are under evaluation.

Dam Site and Other Features

4.07 Two dam sites, located about 700 m apart, were available nearSaguling village and were investigated in detail at the feasibility stage.The downstream site was preferred because it was narrower - requiring

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smaller volumes of excavation and fill - and the thickness of lake depositson the right bank was thinner (10 m) than at the upstream site (35 m). Thefoundation rock at both sites was such that only an embankment type dam waspossible. In view of several faults observed, deep weathering and thepattern of jointed rock, the downstream site was further explored with 60drillings of about 3,000 m and 12 adits totalling 700 m.

4.08 The steep valley walls and deeply weathered rock posed problemsfor spillway design. The spillway will be located on the left bank, andconsists of both a gated and free overflow section, with a spillway chuteand stilling basin. The arrangement and final design of the spillway hasbeen based on a hydraulic model study Larried out at Bandung University inIndonesia. The results have been accepted by the SBC.

4.09 The alignment of the main headrace tunnels - some 5 km long - wastopographically obligatory on the right bank. Two tunnels, rather than one,were chosen for the project, especially in view of the poor geologicalconditions expected in the initial section (about one third) of the tunnelroute (para. 4.15) and also to provide better reliability in operation. Thetunnel route has been investigated by 14 drillings, extending about 1,100 mand one adit.

4.10 The 1.8 km long penstock route, with an average gradient of 170,was explored by 21 drillings totalling 1,000 m, 3 adits totalling 170 m and3 tiltmeters. The tiltmeters were installed in 1978 on the suggestion ofthe SBC, to investigate creeping in view of shallow landsliding observed.Although no signficant signs of creep have been observed, these investiga-tions have led to the adoption of a trench type layout which will ensuregood anchors for the penstock. Consideration was given to the alternativeof underground shafts (instead of surface penstocks) but seismic explorationscast considerable doubt on the adequacy of the rock for an undergroundpowerhouse chamber. The underground powerhouse alternative was thereforenot pursued further. A conventional surface power station, founded on soundrock, has been adopted.

Optimization of Project Features

4.11 After the dam site was chosen, the project features were optimizedfor the maximum operating level of the reservoir, the ultimate capacity ofthe water-conductor system and generating capacity of the Saguling powerstation.

4.12 High water levels of the reservoir were critically examined in therange of 645 m to 650 m. It was finally fixed at 645 m as the incre-mental gain in energy was estimated at only 20 GWh annually, whereas thesubmergence would extend to 2,500 additional hectares of land affecting some24,000 more inhabitants. At 645 m, the number of people affected would beonly 13,500, (3,000 families) whose resettlement was considered manageable.The area submerged is 56.1 km2, of which 40% represents rice fields, 30%farm land and 30% forests, orchards and residential areas.

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4.13 The Saguling site is well suited to provide a major source ofpeaking capacity for the Java Grid. Based on PCR's Java System Study andNewjec's further aa-lysis, the ultimate capacity of the station has beenoptimized at 1,400 MW, which would enable it to operate at an average annualplant factoi of about 17.5%. In the present stage of development (700 MW)the station would operate at an average plant factor of 35% which isappropriate. Operation studies carried out by PLN have shown that aninstalled capacity of 700 MW at Saguling would during 1986/87 relegate gasturbines (which would otherwise have to be operated to provide energy) toonly peak load functions. Plans for extension of the water-conductor systemand power station at a future stage have been incorporated in the projectdesigns. The need for a downstream reregulating pond was considered indetail during the feasibility study and it was not recommended as (a) thereare no downstream users, e.g., irrigation, whose abstraction of river flowswould be adversely affected, (b) the construction of Cirata reservoir(expected to follow within a few years) would eliminate possible hazards or,account of sharp fluctuations in river flows, and (c) in the interim periodhazards would be kept at a minimum by warning systems, whose costs areincluded in the project.

Geology

4.14 Main Dam. The foundation rocks at the downstream site areandesite, agglomerate, conglomerate, and conglomerate with limestone pebblesand mudstone. There are a number of minor faults, none of which is active.Except for a few local places in the river bottom and a few areas locatedabove two thirds the dam height on both abutments which can be treated, thefoundation rock is impervious and is expected to be stable.

Allied Structures

4.15 The tunnel route comprise lake deposits for the first 50 m,followed by fairly good, though not very hard, andesites, agglomerates andconglomerates for about 1,700 m. The tunnel then traverses a 1,000 m weakstretch of soft and cracky rocks comprising alterations of sandstones andmudstones. All other rocks along the tunnel route are hard and compact.

4.16 The foundations along the penstock slope comprise overburden,badly weathered sandstone and shale. The surface penstocks will be laid ina trench excavated to a sufficient depth to give sound rock foundations.Stable rock conditions are expected at depths not exceeding 20 m.

4.17 The powerhouse excavation level corresponds with the level ofunderlying hard limestone. Rock below this level is sound and continuous.Local slots, pinnacles and chimney-like channels are considered possible,but drilling data does not suggest that these would be extensive.

Reservoir Area

4.18 There is little concern about leakage of water from the reservoirbecause the reservoir is largely covered with lake deposits and the abutmenLof the dam site and the reservoir area are composed of impervious beds of

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volcanic tuffs and tuff breccias. There are no topographically thin ridgesaround the reservoirs that would be favorable to leakage of water. Somelandslides have been observed in the area but they are mostly on a smallscale, occurring in the lake deposits and at the lower sections of thereservoir and below the lake level. They have been studied in detail toenable preventive action to be taken against damage to temporary worksduring construction.

Siesmology

4.19 Siesmological studies have been made by Newjec with earthquakedata available for the last 30 years, which indicate a low probability ofearthquake occurrences in or around Saguling. Newjec has used a designseismic coefficient of acceleration of 0.15 g, which is greater than thatused at Jatiluhur (0.10 g). The SBC has concluded that the analysis madeleads to conservative safety factors which are in line with currentengineering practice.

Hydrology

4.20 The project area has a rainy season from November to April result-ing from a western monsoon and a dry season for the rest of the year. Themean annual rainfall is about 2,300 mm. River discharge data are availableas follows: (a) at the damsite - for 9 years; (b) at 80% of the drainagearea - for 20 years; (c) at 105% of the drainage area - for 12 years; and(c) at 175% of the drainage area - for 36 years. This data, consideredadequate, was used to establish a long-term pattern of flows at the dam sitefor power potential studies.

4.21 There are about 90 rainguage stations in the drainage area datingback to 1919. The available data was ample to compute probable maximumflood flows. Floods with the following return periods were computed to havepeak flows as follows:

Return period Peak flow cu m/sec

Once in 10,000 years 6,597Once in 1,000 years 6,165Once in 100 years 3,942Once in 20 years 3,208

The hydrological data and studies used to support the project are acceptable.The project has been designed for the maximum probable flood of6,597 cu m/sec.

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Sedimentation

4.22 The Institute of Hydraulic Engineering (DPMA) in Bandung has beencarrying out measurements of the silt carried by the Citarum river, and ofriver bed loads since 1972. These have not been continuous, however.During 1976 Newjec sampled suspended loads at 138 points, and collected dataon river bed materials at 7 points. On the basis of analyses of this dataNewjec has conservatively estimated the erosion rate from the 2,283 sq kmSaguling catchment at just over 2.0 mm/year (this compares with about 1.0mm/year assumed for the Jatilihur project downstream). The correspondingsediment volume was estimated at 4.0 million cu m per year. The storage inthe reservoir below the intake level (618 m) is 50 times this volume.Newjec has also carried out a study of the likely effect on live storage atSaguling by aggradation at the reservoir entrances, taking into account thetopographic characteristics of the Saguling reservoir. Its conclusion isthat sedimentation at the top levels of the Saguling reservoir would besmall and will not be significant for about 50 years after construction.

4.23 There are uncertainties about future land use patterns and erosionrates in the watershed. In response to these, a supplementary sedimentmonitoring program has been included under environmental related measures.It would consist of daily monitoring at Nanjung, just upstream of thereservoir during the wet season. If sediment loads are seen to be higherthan assumed, monitoring would be extended to other locations to identifysources of increased sedimentation and create a data base for correctiveaction.

Construction Materials

4.24 During 1975-80 several field and laboratory investigations werecarried out by Newjec under the close supervision of the SBC. These haveconfirmed the availability and suitability of sufficient rock and earthmaterials for the construction of the main dam and for aggregate.

4.25 Three quarry sites were identified for rockfill materials duringreconnaisance. Of these a site 8 km upstream of the dam at Karang, exploredby 11 drillings of 670 m and 2 adits of 100 m, was chosen at the stage ofdetailed engineering, after establishing that it could provide an adequatequantity of good quality andesite suitable for dam embankments and forconcrete aggregate production. The location of the main quarry site isshown in Map 4. A smaller scale limestone quarry site at Sangiantikoro hasalso been identified and explored. It will provide aggregate for concretework at the surge tank, penstock and power house sites. Basic concretetests using local cement, and aggregates from the two quarry sites werecarried out in Indonesia and Japan and have yielded satisfactory results.

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4.26 Sites at: (a) Selak, 1.0 km upstream of Saguling; and (b) Kaak,1.5 km downstream, were investigated for core materials. The Kaak site (seeMap 4) proved more favorable in regard to the quality of clay. The site hasbeen inve-sz;gated by 20 drillings totalling 400 m, 3 vertical shafts 30 mdeep and a 50 m adit. Soil tests were carried out at the project fieldlaboratory. The results were satisfactory.

Engineering and Design

4.27 Newjec of Japan is the consulting engineer and is responsible fordesign and construction supervision of the project. The SBC was appointedearly in 1978 to review the investigations and designs of the project andensure that due consideration was given to all aspects involving safety ofthe structures. It has been agreed with PLN that the SBC will be continuedthroughout the construction stage. The appointments of Newjec and the SBCmembers were made by PLN in consultation with the Bank. An assurance ofcontinued appointment of consultants under terms and conditions satisfactoryto the Bank was obtained during negotiations of the proposed loan.

4.28 Detailed engineering of the project was completed during mid 1980.Final designs, including proposals for instrumentation, have been preparedand incorporated in bid documents for the main civil works (comprising thedam, water-conductor system, penstocks, power house & switchyards) whichwere issued on August 1, 1980. The final designs, as well as the biddocuments have been reviewed by the SBC.

Environmental Aspects

4.29 Environmental aspects have been given due consideration from theinitiation of the project investigations in 1976. Issues were identified intime and action taken to ensure that proposals incorporated in the project:

(a) are sound in terms of cost estimates, schedule, and practicalconsiderations;

(b) minimize the risks which could delay construction or cause budgetoverruns;

(c) are acceptable to both project management and the administrativehierarchy of the project area; and

(d) are sensitive and responsive to the expectations of families whowill be displaced from their homes or otherwise directly affectedby the project.

There has been extensive involvement of environmental specialists in base-line and impact studies, design review, and implementation planning. Seniorenvironmental specialists and managers from the Institute of Ecology

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Padjadjaran University, Bandung, (LE UNPAD) the Royal Tropical Institute,Amsterdam, The Netherlands and several others have contributed approximately3 man-years of effort to the project, supported by an additional 12man-years of effort by junior specialists, technicians, and students.Twenty-four project reports have been prepared and a formal project seminarwas conducted. The cooperation of project management and provincial andKabupaten leaders has been commendable. Project management has beenresponsive to environmental recommendations of specialists and the Bank, andeffective in arranging compromise approaches to complicated problems such asresettlement. The Governor of West Java and the Bhupati of Kabupaten,Bandung have supported the project by issuing five decrees to facilitateland acquisition, resettlement planning and resettlement implementation. InJune 1980 the Minister for Environment, GOI, cleared the project forconstruction.

4.30 Apart from the problem of optimizing the high water level of thereservoir and its design life (dealt with in paras. 4.12 and 4.22 above),resettlement, public health impacts, aquatic weed control, fisheriesenhancement and drawdown agriculture were the main environmental issues.Compensation and resettlement of persons with homes or other major interestin the reservoir areas was the most serious environmental problemconfronting the project mainly because:

(a) areas surrounding the reservoir are densely populated; about 9,500families have to be dealt with, 3,000 of whom reside in thereservoir area and 6,500 reside elsewhere but own land or work inthe reservoir area;

(b) of complex proprietary and inheritance rights and out of daterecords of land ownership; and

(c) traditions, customs, economic conditions, and perceptions oftransmigration are such that most families prefer to remain in thevicinity of the reservoir and are reluctant to leave Java.

4.31 The following actions have been taken to date to deal with theresettlement problem:

(a) a 2-year anthropological, socio-economic, and ecological baselineand impact study (including censuses and property inventories) hasbeen completed;

(b) alternatives to transmigration have been developed, scheduled, andevaluated. These include resettlement in Java through the NucleusEstate Smallholders program (NES - 5) for about 1,200 families,resettlement in Java through the independent redevelopment of anabandoned plantation (for 500 families), development of aquacul-ture and drawdown agriculture in the reservoir area, employmenttraining (for 500 families), and simple compensation (for 300 fam-ilies). Transmigration is expected to cover about 500 families;

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(c) decrees (para. 4.29) freezing land transactions, creating aResettlement Coordinating Board, stating resettlement policy, andcreating the resettlement implementation team have been issued andare now in effect;

(d) a direct-payment compensation system has been in satisfactoryoperation for more than a year;

(e) a resettlement cost estimate has been prepared on the basis ofrecent local experience in land acquisition, compensationadministration, access road construction, and site planning anddevelopment;

(f) detailed implementation planning has been initiated; and

(g) an aide memoire listing and scheduling additional resettlementnecessities (for item b above) has been prepared by PLN. Theproposed arrangements constitute a program acceptable to the Bank.

4.32 The status of other environmental aspects of the project is asfollows:

(a) Public health - A fortunate circumstance of the project, whichreduces the potential for adverse impacts of the project on publichealth, is the fact that the geographic ranges of vectors ofseveral parasitic diseases including schistosomiasis, sleepingsickness, and river blindness, which are associated with riversystems, reservoirs, and irrigation systems in other parts of theworld, do not extend into the project area. However, concernabout epidemics of water-borne and insect-borne diseases hasresulted in the developing of monitoring programs that willcontinue through the early years of operation. Constructionhealth services will be provided in accordance with past practiceon other PLN projects.

(b) Aquatic weed control - Because circumstances appear likely tofavor the growth of aquatic weeds in many parts of the reservoir,provisions have been made for an aquatic weed control plan to beimplemented in 1984.

(c) Fisheries enhancement and drawdown agriculture - As development ofthe reservoir shoreline area between elevations 640 m and 645 mis possible as also development of penned culture of carp andother species of fish, these potentialities will be assessed indetail during FY81 and implementation plans will be developed inaccordance with the findings.

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(d) Watershed erosion - In response to observations of increasingerosion rates in other watersheds and concern about the effects ofpopulation pressure and clearing of steep slopes on future erosionrates in the Saguling catchment area, supplemental sedimentmonitoring will be initiated in early 1981.

(e) Safety measures for persons living near the river downstream ofthe power house - These will be reinvestigated during thefeasibility study for the Cirata Project which would inundate muchof this area. Appropriate safety measures, including footbridges, warning systems, bathing facilities, and resettlement,will be implemented thereafter. The project cost estimate makesadequate provision for these.

4.32 There are no archaelogical sites or artifacts of any significancein the submergence area. Construction of the project is not expected toadversely affect fauna in the valley.

Construction Equipment for a PLN Task Force

4.33 Basically all the project works will be done by contract. How-ever, PLN intends to build up a small construction task force of its own,equipped to deal with emergencies - mainly on work being carried out bylocal contracts - to ensure that the construction schedule of the mainproject is not adversely affected by delays, etc. The Bank agreed thatthis is necessary under the prevailing circumstances. The constructionequipment required, estimated to cost about US$500,000, is thereforeincluded in the scope of the project.

Engineering of Cirata Hydroelectric Project

4.34 As explained in para. 6.01, there would be need for both asubstantial addition of generating capacity and energy potential of the JavaGrid before FY88 in addition to the Saguling Project. Of the availablesites for hydroelectric potential the Cirata site (para. 4.02) has thelargest firm energy potential. Its salient features are at Annex 7. PLN-slatest update of studies of the least cost development sequence for Javaindicated that the Cirata site should be developed for commissioning during1986/87. Feasibility investigations of the site are in progress withfinancial assistance through Loan 1365 (Power VI) and an interim report wassubmitted in December 1980. It has been reviewed by the Bank, and one ofthe members of the SBC. The report confirms the technical feasibility ofconstructing the Cirata dam. A final report will be prepared by May 1981.PLN intends to carry through with detailed investigations and engineering ofthis project. MME and the national planning commission (BAPPENAS) supportthis approach and have requested the Bank to provide funds under this loanfor the purpose. The Bank has agreed to do so and the project includesUS$7.5 million for the foreign costs of detailed investigations and designsup to the stage of preparation of bidding documents.

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Project Cost Estimate

4.35 The total project cost over the 6-year implementation period(1980-86) is estimated at US$726.7 million equivalent, of which US$386.6 mil-lion represents the foreign component. The costs are summarized in thetable below and are detailed in Annex 8:

Table 4.1: PROJECT COST ESTIMATE (SUMMARY)

Item Local Foreign Total Local Foreign Total---- Rupiah billion----- -----US$ million-------

Saguling hydro-electric 211.3 235.7 447.0 338.1 377.1 715.2project (700 MW)

Construction equipment - 0.3 0.3 - 0.5 0.5Engineering of Ciratahydroelectric project 0.9 4.7 5.6 1.5 7.5 9.0

Selected consulting services 0.3 0.9 1.2 0.5 1.5 2.0

212.8 241.6 454.1 340.1 386.6 726.7

4.36 The cost estimates for the preliminary works of the Sagulingproject (access roads and construction camps) are based on local contractsawarded. The cost of road relocation has also been estimated on the basisof these rates. The costs of compensation and resettlement are based on (a)a detailed program of resettlement and (b) rates based on PLN's recentexperiences in the project area in connection with preliminary works. Thecost of the other environment-related items (included in the "miscellaneous"category) are based on detailed estimates for known work and lump sumestimates for the rest, made by PLN in consultation with LE UNPAD and Newjec.

4.37 The cost estimates of the main civil works to be carried out throughcontracts under ICB have been prepared by Newjec on the basis usuallyfollowed by contractors viz a detailed construction program was first workedout and then equipment and manpower of known capacities were applied to thepreliminary bill of quantities estimated from detailed final designsincorporated in the bidding documents. Other items such as fuel, power,compressed air, lighting etc. were added. Foreign costs cover thefollowing: (a) mobilization and supervision costs; (b) foreign skilledlabor; (c) main steel structural materials and principal reinforcement; (d)

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freight, insurance and transportation of equipment and materials; (e)depreciation on equipment; (f) explosives and (g) fuel costs. Local costscover: (a) applicable mobilization and supervision costs; (b) local labor;(c) timber; and (d) cement and supplementary reinforcement bars. The methodfollowed and the resulting estimates are acceptable.

4.38 The costs of penstock steel have been estimated on the basis ofdesigns prepared by Newjec, expected international prices for mild and hightensile steel, and adequate provisions for fabrication (at shop and site),transport and erection. The costs of turbines, generators, transformers,switchgears, spillway gates and screens (all items which are to be coveredby OECF financing) are based on prices relevant to the type of limitedbidding involved.

Contingencies

4.39 Physical contingencies have been provided for at the followingrates (a) electrical and mechanical equipment - 5%; (b) penstocks and othermetal works - 10%; and (c) civil works - 15%. These are adequate. Baseprices are at September 1979 price levels. Price contingencies on the localcurrency portion have been estimated at the following rates: 15% forFY80/81 and 10% thereafter. For electrical and mechanical equipment andengineering costs, foreign escalation has been based on an annual escalationrate of 5% (reflecting the expected rate in the country of origin of goodsand services agreed between OECF and PLN during OECF appraisal in July 1980)whereas other foreign costs have been calculated at the following rates:10.5% for FY80; 9.0% for FY81; 8.0% for FY82; 7.0% for 1983-85 and 6.0% for1986.

Consulting Services

4.40 The cost estimate for engineering of the Saguling Project covers740 man-months for construction design and 1,100 man-months for supervisionof construction. The average man-month cost, including basic salary,overhead and fee, international travel, overseas allowance for resident fieldengineers and subsistence allowances for staff on short field visits, isabout US$10,400. Detailed engineering for the Cirata hydroelectric projectcovers the work up to preparation of bid documents, and is expected to take20 months, involving about 500 man-months of expatrate effort, at an averageman-month cost (as explained above) of US$10,000. In addition, localsubconsultants, will contribute about 80 man-months of work estimated tocost about US$2,400 per man-month. Both the estimates include additionallyprovisions for test equipment, testing and surveys, and other minor items.The cost of selected consulting services is based on an estimate of theperiods of use and prevailing rates.

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Financing

4.41 The project would be financed as follows:

Proposed Bank loan ...... US$250.0 millionOECF loans .............. US$136.6 millionPLN/GOI ................. US$340.1 million

Total ............ US$726.7 million

4.42 The Bank loan will cover the estimated foreign costs of (i) themain civil works and penstocks ($240.5 million), (ii) engineering of Ciratahydroelectric project ($7.5 million), (iii) selected consulting services($1.5 million), and (iv) limited construction equipment ($0.5 million). TheOECF loan would cover the foreign costs of (i) engineering and constructionsupervision of the project, and (ii) electrical, mechanical and hydraulicequipment. The local costs of the Project will be financed partly from PLN-sown cash flow and partly through contributions from the GOI. These areassured because of the high priority accorded to the project by PLN/GOI.Annex 9 provides a summary of the items to be financed by the main sourcesand their costs.

4.43 As in previous operations, the Bank loan would be to the Govern-ment which will relend the proceeds to PLN, the beneficiary, on the sameterms as the Bank loan. Interest and commitment charges during the graceperiod of the loan would be capitalized. Signing of the Subsidiary LoanAgreement will be a condition of loan effectiveness.

Construction

4.44 The project will be implemented by PLN, with the help of consul-tants engaged in consultation with the Bank. PLN has appointed a projectmanager who has experience in dam construction in Indonesia, along with anadequate complement of field staff. The project manager will be assisted byPLN's headquarters staff, who also have some experience in execution ofhydroelectric projects on a smaller scale. The engineer, Newjec, will besolely responsible for technical supervision and control of the project. Asthis is the first major ICB civil works contract which PLN will be involvedin, it feels that expert advice may be required on occasion during theimplementation period particularly on contract disputes where PLN as theemployer would have an important role. Funds have been provided under theproposed loan for the use of such experts by PLN. The constructionorganization and arrangements proposed are appropriate for the nature ofwork involved.

4.45 The preparatory works on the project are being carried out bylocal contractors selected on the basis of local bidding. The contractswere placed in time and progress of construction so far has been adequate tomeet the deadlines for providing access and other facilities to thecontractors to be selected for the main works.

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Implementation Program

4.46 The main project works have been divided in categories, inaccordance with the requirements of associated financing. The work has beendivided into eight lots. Bid invitations for four of these covering civilworks for the (i) dam and spillway, (ii) water-conductor system, (iii)powerhouse and switchyard, and (iv) metal work viz penstocks, have beenissued on August 1, 1980. They are multiyear contracts with adequate (15%)provision for advance payments. The bid invitations for the items to befinanced by OECF, viz. (i) gates and screens, (ii) turbines, (iii)generators and (iv) main transformer and switchyard equipment, have beenissued in October 1980. The implementation schedule for the main projectworks is at Annex 10. The target is to commission the first two generatingsets by March 1985 and the remaining two by September 1985. Milestoneschedules have been prepared for both sets of contracts and are presented inAnnex 11.

4.47 The construction program is tight but capable of being achieved.Crucial to the success of this program is the award of the main civil workscontract in time to enable the main contractor to mobilize and start work onthe diversion tunnels for the main dam by July 1, 1981. Only then would itbe possible to complete the first diversion tunnel in time to start diver-sion of dry weather river flows by April 1982 and thus keep to the scheduleof construction of the main dam. A failure to achieve these dates would setback completion of the dam, and hence the commissioning of the project by awhole year. Cognisant of the problem, PLN and GOI have reviewed theirprocedures and prepared a detailed working arrangement involving specialprocedures for bid evaluation and contract approval of the main civil workscontracts, which, if adhered to by all parties involved, could meet theproject requirements. The arrangements are workable. The crucial dates foraward of the other contracts are 2-6 months later than the civil works (May1981). There is adequate time to follow normal procedures for award of thesecontracts.

Procurement

4.48 Procurement of items to be financed under assistance from the Bankloan would be through international competitive bidding in accordance withBank guidelines. The civil and metal works bidders were prequalified byPLN, after due international notification, in consultation with the Bank.The items to be financed under the OECF loan would be procured throughlimited bidding in Japan and less developed countries. Other local costitems would be procured, as hitherto, through local bidding procedures,which have been found to be appropriate so far.

Disbursement

4.49 The Bank loan will be disbursed against the following items:

(a) metal works - 100% of the foreign expenditures;

(b) civil works - 61% of expenditures;

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(c) construction equipment - 100% of foreign expenditures for directlyimported goods, 95% of the ex-factory cost for locallymanufactured goods and 65% of the total expenditures for importedgoods procured locally; and

(d) consultants services - 100% of expenditures.

No disbursements will be made for expenditures prior to loan signing.

4.50 The schedule of disbursement of the Bank loan is at Annex 12. Ithas been based on the implementation schedule of the project (Annex 10) andthe payment provisions made in the bidding documents. If contract approvalis accorded by the critical dates in the milestone schedule (Annex 11), theschedule can be achieved.

Maintenance for Dam Safety

4.51 In order to ensure that the project works are maintainedsatisfactorily, it was agreed, during negotiations, that PLN will, beforecompletion of the project, prepare a program of periodic inspection andmaintenance of the project works, which is satisfactory to the Bank, andimplement it throughout the operational period of the project.

5. FINANCIAL ANALYSIS

Past Results

5.01 PLN-s operations have grown strongly throughout the last decade,and energy sales tripled between 1971 and 1980. During the last five yearsthe rate of growth accelerated; energy sales increased from 2,800 GWh in1975/76 to 5,300 GWh in 1979/80, and for the last two years the rate ofgrowth has exceeded 20% per year.

5.02 Revenues from energy sales in recent years have been derived froma tariff which was introduced in 1973. The tariff contained provision forthe application of a surcharge to recover increased costs attributable tofuel prices, and this facility was used in 1974/75 and 1975/76 to increaseaverage revenues to Rp 27 per kWh, at which level they remained until theintroduction of a completely new rate schedule on May 1, 1980 (para. 5.06).With this revenue base PLN operated at or near breakeven in net income termsthrough 1978/79. A loss of Rp 22 billion is reported for 1979/80,/i attrib-utable entirely to increased depreciation charges arising from the revalua-tion of assets which was carried out during that year (para. 3.13).

/_ 1979/80 financial results are provisional and subject to audit.

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5.03 PLN's investment program began to accelerate rapidly in 1974/5from the low level of the early 1970s, and by 1979/80 capital expenditurewas running at over Rp 300 billion annually - more than twice sales revenue.With negligible net income, PLN's only sources of internal funds have beendepreciation retentions and customers' connection fees, which amounted to17% of capital expenditures over the last five years. GOI provided the restof the funds required, mainly in the form of -uity capital, though since1978 the onlending of finance from international lenders has formed anincreasing proportion of GOI funding Lo PLN.

5.04 Income statements, funds flow statements and balance sheets forthe last five years are at Annex 13.

Present Financial Position

5.05 PLN's balance sheet at March 31, 1980 may be summarized asfollows:

Rp billion

Net WorthFixed assets in operation,at depreciated replacement cost 684

Construction in progress 857

1,541

Current assets 187less current liabilities 44

Net current assets 143

Total net worth 1,684

Financed byCapital and reserves 1,336Customer contributions 157Long-term debt 191

1,684

Since loan financing is a relatively recent innovation for PLN, the debt:equity ratio stands only at 12:88, which leaves the company conservativelyleveraged to sustain a high level of borrowing for capital expenditure. The

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current ratio is 4.3, and with current assets including Rp 70 billion incash the company's liquid position is satisfactory. The level ofreceivables has given some cause for concern in the past, but as a result ofthe adoption in 1980 of a more rigorous policy towards delinquent debtorsthe average length of credit has been reduced from 94 to 72 days. Whilestill too high, this measure reflects mainly the long delay in settlement ofcertain public accounts; discussions are presently in progress between PLNand the concerned authoriities to try to improve payment procedures. Atnegotiation of the Power IX Project (Loan 1872), it was agreed that GOIoutstanding accounts will be reduced to two months billing by March 31,1982; this covenant will be repeated in the proposed loan.

Future Financial Performance

5.06 PLN introduced a new tariff on May 1, 1980, whose salient featureswere as follows:

(a) the structure of the tariff and classification of customers wererevised, so as more closely to reflect the long run marginal costsof supply to the various consumer groups, while at the same timerestricting charges to the lowest income households to what wasconsidered affordable;

(b) rates were revised, increasing average revenue per kWh sold fromRp 27 to Rp 42; and

(c) the surcharge facility was widened to allow all cost increases tobe passed on, not merely those relating to fuel.

Coincidentally with this tariff increase GOI raised the price of allpetroleum products by 50%, so that initially about one third of PLN'sadditional revenue will be absorbed in higher fuel bills. In terms of netincome, PLN would be able to maintain breakeven for two years if the newtariff were retained without change.

5.07 In 1977 PLN and the Bank agreed that a level of contribution tocapital expenditures from internally generated funds was suitable as ameasure of financial performance. At negotiations for the Power VIII Project(Loan 1708) this was set at 30% (on a 3-year moving total basis) which wasto be achieved by 1985/86; this agreement was repeated in the loan documentsfor the Power IX Project (Loan 1872). Indicative targets for theintervening years have also been the subject of discussion and revision fromtime to time between PLN and the Bank; the latest ones are:

FY81 through 82 12%FY83 through 84 20%FY85 25%

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Projections indicate that the 1980 tariff increase will permit continuedgrowth of internal cash generation, and this would be sufficient to attainPLN-s current indicative targets for FY81 and 82. But, because the rate ofgrowth will be lower than that of capital expenditures, PLN will need afurther tariff increase to achieve its indicative targets for FY83-85 andthe convenanted level for FY86. This is estimated to be on the order of20-30% in real terms. Some flexibility exists as to the timing of thisincrease; in the financial forecasts (Annex 14) it is assumed to beimplemented in two approximately equal steps in FY82 and FY84.

5.08 Around 1986, PLN is expected to enter a period in which its unitcosts will decline gradually (1-2% per year) in real terms. The factorscontributing to this include, in particular:

(a) the expected impact of the loss reduction program;

(b) increased efficiency of operation in Java on completion of theEHV transmission line; and

(c) increasing economy of operation in some of the systems outsideJava as a result of scale and improving load factors.

These considerations suggest that for the remainder of the forecast period(through 1989) PLN's requirements for increased unit revenues will beentirely within the scope of the tariff's surcharge facility (para. 5.06(c)),and that average revenues may therefore be allowed to advance at rather lessthan the rate of cost inflation.

5.09 On this basis, PLN would maintain its target self-financing ratiothroughout the remainder of the forecast period and would generate a rate ofreturn (on revalued net fixed assets in operation) approaching 8% by the endof the period. Continuation of GOI's existing policies on capitalization ofPLN would result in a debt: equity ratio of about 25:75 at the end of theperiod with debt service covered over 3 times throughout, thus leaving thecompany comfortably leveraged for continued growth in the 1990s. Theforecasts indicate that the existing agreement between GOI and the Bank onsecuring an adequate cash flow for PLN (para. 5.07) is reasonably quantifiedfor the medium term; it will be continued under the proposed project.

6. JUSTIFICATION

Demand

6.01 The forecast of electricity demand in Java (Annex 2) and growth ofsupply (Annex 3) indicates that the available generating capacity based onadditions under implementation through 1985/86, would not be able to meet

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the anticipated maximum demand of about 3,440 MW during 1986/87 or itsenergy requirement of about 20,500 GWh. The installed generating capacityduring 1985/86 would be 3,727 MW, which, after allowing for the 25% marginwhich studies have shown to be necessary to provide a reliability index(loss of load probability) of one day in one year, can safely meet a maximumdemand of about 3,000 MW. The energy capability of the system, assumingoperation of all its steam plant at base load and all of its gas turbines atannual capacity factor of 25%, would be only 18,100 GWh. Augmentation ofgenerating capacity is required before 1986/87. The most recent trends ofacceleration in the growth of PLN sales (para. 2.07) indicate that thedemand indicated above may materialise earlier than 1986/87. Because ofthis, and the possible fuel savings, PLN has planned to commission theSaguling hydroelectric project during 1985/86. This is appropriate.

Least Cost Solution

6.02 The Java system development study carried out by PCR of the UKwith Bank assistance (Credit 399) had established a least cost developmentsequence of expansion of generating capacity for discount rates up to 15%.PCR recommended in 1976 that out of all the new generation schemes examined,the Saguling hydroelectric project had the highest economic rate of return(18%) and that it should be implemented with an installed capacity of 700 MWby 1981, if possible. However, investigations of the scheme did not proceedrapidly enough and precedence was correctly given to the Suralaya thermalstation. This enabled PLN to complete the investigations of the Sagulinghydroelectric project thoroughly and meet the equally urgent need for alarge base load thermal power station at Suralaya. Subsequent investiga-tions by PLN and other agencies have confirmed that the conclusions of thePCR study still remain valid and that the Saguling hydroelectric project isthe most economic next step in the least cost development sequence.Economic studies carried out by Newjec for the feasibility report (1978),indicated that for the range of discount rates used (6-20%) the Sagulingproject was more economic than thermal power stations, as well as gasturbine installations.

Internal Economic Rate of Return

6.03 The internal economic rate of return (IERR) is the discount ratewhich equalises present values of the streams of economic costs and benefitsattributable to the project. The costs include all the direct costs ofconstruction of the project, and those required to deal with rehabilitationand environmental measures. Extensions of the transmission and thedistribution systems required have been allowed for in the estimates ofcosts.

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6.04 As the scheme has been designed and is being constructed as apeaking station (with an initial plant factor of 35%, capable of extension tooperate ultimately at 17.5% plant factor) incremental revenues, which areused as a proxy for total benefits, have been assessed on the basis of theproject design and the expected pattern of operation of this power station.Roughly half the energy output of the scheme would be generated during the4-hour peak period and the balance during off-peak hours. These componentshave been evaluated at the respective tariffs currently applied by PLN.

6.05 The cost and benefit streams and details of shadow pricing areprovided in Annex 16. The IERR is 16%. It is a minimum measure of thebenefits principally because consumer surpluses have been ignored. Theproject would, in addition to the benefit of power generation at Saguling,afford downstream benefits both for further power generation as at Cirataand Rajamandala sites. These have not been evaluated.

6.06 The IERR of the project would be reduced to about 14% if there isa delay in construction of 12 months involving a cost increase of 10%. Thethorough investigations carried out, ample physical and price contingenciesand adequate rates for base cost estimates, and assurances by PLN and GOIauthorities and expeditions action on contract approvals make it unlikelythat such an increase in cost would occur on this project.

Risks

6.07 The risks associated with the proposed project are the uncertain-ties inherent in most hydroelectric projects, such as possible geologicalproblems, hydrological complexities, and similar matters. However, thethorough and competent preparatory work undertaken by PLN and consultants, aswell as the precautions taken in establishing the SBC right from the stage offeasibility studies through detailed engineering, are expected to keep therisks to a minimum. Contractors have been directed to provide forconventional all-risk insurance as a separate item in their bids. PLN isseparately carrying out a risk analysis study using a consultant acceptableto the Bank. If the study indicates that it would be more advantageous toPLN to modify its insurance for the project, the question would be reviewedand necessary changes made in the contract documentation.

7. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS

7.01 The following main covenants in the earlier power loans andproject agreements will be continued in the agreements for the proposed loan:

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(a) GOI should, through PLN, review annually with the Bank changes inthe demand growth in Java and consequent variations in PLN'sdevelopment program for Java, and take steps to implement suchdevelopment programs;

(b) GOI should, through PLN, review annually with the Bank, PLN'sinvestment program for the next year;

(c) PLN should prepare and furnish to the Bank annually for review,its customer connection program, and thereafter implement it in asatisfactory manner;

(d) PLN should attain a level of contribution to its capitalexpenditures of not less than 30% by 1985/86;

(e) PLN should maintain a debt:equity ratio of not more than 60:40;

(f) PLN should maintain a debt service cover of not less than 1.3times;

(g) GOI shall ensure (i) that amounts owing by its departments andagencies to PLN for elecric power shall be settled by the 15th ofthe month in which they are due; and (ii) by March 31, 1982 theamounts so owing to PLN do not exceed two months billing.

7.02 The specific agreements reached during negotiations of this loanare:

(a) PLN would with the assistance of GOI take steps to improve thecapability of its power market survey units - at Central andWilayah levels - to carry out power market surveys to update thePCR study in Java and similar consultant studies in other islandsand compile data for all islands (para. 2.02);

(b) PLN would improve the capability of its central system planningunit at heaquarters appropriately to identify emerging systembottlenecks in advance and ensure that its power systemscontinue to be adequate as the demands escalate (para. 2.07);

(c) PLN would continue to employ consultants (including the SBC) onterms and conditions satisfactory to the Bank for engineering ofthe project (para. 4.27); and

(d) PLN would, before completion of the project, prepare a program ofperiodic inspection and maintenance of the project works which issatisfactory to the Bank, and implement it throughout theoperational period of the project (para. 4.51).

(e) Signing of a subsidiary loan agreement will be a condition ofeffectiveness of the loan.

- 41 -

7.03 Agreement having been reached on the above matters, the project issuitable for a Bank loan of US$250 million, for a period of 20 years,including 5 years of grace, at interest rates prevailing at Boardpresentation.

INDONESIATENTH POWER PROJECT

ORGANIZATION CHART OF THE MINISTRY OF MINES AND ENERGY

SwI . ..o.. W. E

of kinaO

D,reoforta ford. D.raotset. Diectoret Fircooat QxwloglAttain tarop.et.ic

ofr Mioj g lg y R.oOoro. B at Hur 0.*0 D.oforrs.eo | | io t | i | 0 GIn Forrtr llIn oration 0 511 f ; n| ent r gyt fon rSerorou |

, ndc.trieo Gac.itr. Di.. _ en .. f

Regiomnl Offi ic of Th. De4otoLnt of Minat .d Eerity

State EnterpKiem

PN, T t Ti.- ft T. AE tn PGN

C"l ~~~1to) [jGM,, inBJ io(0 ol fEetily Utility G.,f

World Book - 21988

- 43 -

ANNEX 2

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

Forecasts of Future Generation Requirements in Java (GWh)

Year PCR (high) PCR (low) PLN/IBRD(1) (2) (3) (5)

1981 18,538 11,639 8,491

1982 21,513 13,285 10,291

1983 24,894 15,054 12,388

1984 27,212 16,999 14,771

1985 31,393 19,198 17,332

1986 36,187 21,646 19,810

1987 41,684 24,370 22,643

1988 47,986 27,393 26,039

1989 55,266 30,739 29,945

1990 63,669 34,439 34,437

ANNEX 3

INDONESIA

TENTh POWER PROJECT

Growth of Generation Capacity, Salea, and Peak Demand in Java

Actual Forecast1975/76 76177 77/78 78/79 79/80 80/81 81/82 82/83 83/84 84/85 85/86 86/87 87/88 88/89

Sales target (GWh) 2,286 2,506 2,840 3.446 4,242 5,324 6,496 7,924 9,588 11,507 13,692 16,157 18,604 21,530

Increase (2) - 9.6 13.3 21.3 22 25 22 22 21 20 19 18 15 16

Losses (CGh) 769 804 911 1,051 1,307 1,681 1,995 2,367 2,800 3,264 3,640 4,321 4.946 5,552

Gross generation (GUh) 3,055 3.310 3,751 4.510 5,544 7,005 8,491 10,291 12,388 14,771 17,332 20,478 23,550 27,082

system pek (NW) 491 556 630 766 955 1,176 1,425 1,728 2,080 2,480 2.910 3,438 3,953 4,546

System load factor 71 68 68 67 66 68 68 68 68 68 68 68 68 68

Installed capacity (NW)

HydroBasis 406 406 406 406 406 406 406 406 406 406 406 406 406 406

Vlingi I 6 2 - - - 27 54 54 54 54 54 54 54 54 54 54

Garung I A 2 - - - - - - 28 28 28 28 28 28 28 28Saguling 1-4 - - - - - - - - - - 700 700 700 700

Mrica 1-3 - - - - - - - - - - - - - 120

Saepor - - - - - 1 1 1 1 1 1 1 1 1

Wonogiri - - - - - - 13 13 13 13 13 13 13 13

Juanda 6 - - - - - 25 25 25 25 25 25 25 25 25

Lodoyo - - - - - - - 5 5 5 5 5 5 5Sengguruh - - - - - - - - 29 29 29 29 29 29

Kesamben - - - - - - - - - 33 33 33 33 33

Curug - - - - - - - 6 6 6 6 6 6 6

Cirata - - - - - - - - - - - 250 500 500

Total Hydro (HW) 406 406 406 433 460 486 527 538 567 600 1_300 1,550 1,800 1,920

SteamBasis 200 200 200 200 200 200 200 200 200 200 200 200 200 200

Semarng I & 2 - - - 100 100 100 100 100 100 100 100 100 100 0oo

Semarang 3 - - - - 200 200 200 200 200 200 200

Perak364 - - - 100 100 100 100 100 100 100 100 100 100 100

Gresaik I 2 - - - - - - 200 200 200 200 200 200 200 200

Huars KaIarg 1-3 - - - 100 300 300 300 300 300 300 300 300 300 300

Xuara Karang 4 & 5 - - - - - 200 AKOO 400 400 400 400 400 400 400

Gresik 3 - - _ _ _ _ _ _ 200 200 200 200 200 200

Surlay I &2 - - - _ - _ _ _ - 400 800 800 800 800

New coal fired station - - - - 400 1,400

Total Steam (NW) 200 200 200 SOO 700 900 1,300 1,500 1.700 2,100 3

2500 2,500 2,900 3,900

Gas TurbinesBasis 200 340 340 340 340 340 340 340 340 340 340 340 340 340

Semarsng - - 20 20 20 20 20 20 20 20 20 20 20 20

Tg. Priok - - 200 200 200 200 200 200 200 200 200 200 200 200

Gresik I & 2 40 40 40 40 40 40 40 40 40 40 40 40

Total Gas Turbines (HW) 200 340 600 600 600 600 600 600 600 600 600 600 600 600

Total Diesels (MU) 57 57 57 14 - - - - - - - _ _ _

Geothermal (NW) Kamojung T /s - - - - - - 30 30 30 30 30 30 30 30

Total Installed (MW) 863 1,003 1,263 1,547 1,760 1,986 2,457 2.668 2,897 3,330 4,430 4,680 5,330 6,450

Energy generatingcap-bility (GWh) /b - - - - 5,500 6,700 9,700 11,800 12,400 18,iOO 18,100 18,100 18,100 18,100

/a New geotherml plants are expected to be constructed by other organizations under the ministry of Mining and Energy and are not shown inPLN's schedule of capacity.

/b Assuming Saguling, Cirsta and Mrics hydroelectric and new coal fired steam stations are not contructed, 6,000 operating hours for Lteam plant,2,000 operating hours for gas turbines and full energy output of hydroelectric stations, based on average runoffs.

kANNEX

INDONESIATENTH POWER PROJECTOrganization Chart of PLN f P g

Snemcal Area of Acan

The Board of Oir etor | t.N PRqion itof PLN i Ncrtn Sumatwra

PLN Region III

Dirwror f Oirector sto of VWet Sumatera ano Riau_ Oir,ctorat. sf § irbetorete i f_

_ ,P!an Acministration PLN Rgieon IV

South Sumatera. Lamoung,

Directorate of Oirectorate of Jambi ano 3anghuluMain Pro$ I Conrjitucton Finance

IGenreraton anri Trammtmion __ PLN Regioon a"JRo"t 5u - twa _ est KaiimanaDirectorate of

__ _ __ _1: _ _ _ South _ PLN Region VItG eneration ano Transrnisigion I ot,Cnra n 1

West uranam, s South, Central t ant

Main Project

Tahen.ist Contral i PLN Region Vil

Ea _ J atre North an at C Ssn aet

-sMain ProjectThermal Power Central PLNS Region Vill

CEetra Java Workshop South an a Soutn Es Suinw |

Mai'n Project P" einX7HadsoiPoien BegN Regtanm EaX

Cntral JaI N I. IeiI

Main ProjectT rransm ssicn Pwe PLN Region XI I

Central Java Iri~~~~~~~~~~~~~~~~~~~~ast Java

Main Projectj Hyrm Poww PLN Region Xi 5

| Central JavaanaJWe and5 YSaa t

Main ProjanPINGeeato'aysmson oWer Jaw Java egtnd Jaara a

Wt Jail

3 Main Project5 TermamPssiow PUN Rgdiotibtin

| Javaand Jakat i I| N WTestr aw a |

Wes Ja Wls r &adJicraRy

Main Project

EH Transm"si4 envSs 9, PLN eOlsibti |

I Main Psiaj II m| hsia ahnnr SPro i PLN Dinonidurian

Facilities Jakarta RJ and Yagerang

5learic Ho E-ducat L Bnank- 51

5 Wen Jr I r H W" J wnd JoResearch '~~~~~~~~~~~~~~~~~~~~~~~oi SaI - 2

-46- ANNEX 5

Page 1 of 2

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

PRINCIPAL FEATURES

SAGULING HYDROELECTRIC PROJECT

General

1. The main features of the Saguling hydroelectric project are a97.5 m high rockfill dam and spillway, an about 6.5 km long water-conductorsystem comprising tunnels, surge shafts and penstocks and a 700 MWoverground power station.

A. Saguling Reservoir

Full Supply Level (FSL) +643 mMaximum Reservoir Level (MRL) +645 mMinimum Operating Level (MOL) +623 mGross Storage Capacity (at +645) 982 x 106 m3Effective storage (capacity) 609 x 106 m3

Effective storage (between FSL & MOL) 609 x 106 m3Surface area at: MRL 56.1 km2

Catchment area 2,283 km2

Average annual rainfall 2,322 mmAverage annual inflow 80.5 m3/sec

B. DamType Rockfill dam with an impervious

central coreCrest elevation +650.5 mCrest length 301.4 mHeight 97.5 mEmbankment volume 2,959,000 m3

SpillwayType/capacity Chute type with side

channel/2400 m3/secGate particulars 3, fixed roller gates 10 m x 8.3 m,Net crest length 62mChute width 62mInflow design flood 5,193m3/secEnergy dissipator Stilling basin with baffle piers

ANNEX 5Page 2 of 2

Diversion tunnelNumber 2Length 750 m, eachCross section horse-shoe shaped, with inside

diameter of 7.5 m and 9.0 mrespectively

Lowlevel Outlet WorksNumber 1Location inside one of the diversion

tunnelsType Hollow jet valve

C. Water Conductor System

(a) IntakeType/capacity Tower/224.0 m3/sec

(b) Pressure tunnelNumber 2Length 4690 mCross section circular, 5.8 m wide diameter

(c) Surge TankNumber 2Type Differential, with a circular

sectionInside diameter 12.0 m

Height 103.2 m

(d) Penstock TunnelNumber 2Length 530 m eachCross section Horse-shoe shaped, 5.5 m wide

and 5.5 m highSteel liner inside diameter4.3 m embedded

in the tunnel

(e) Open portion of PenstockLength about 1,250 mWidth of grade 14 mPenstock pipe 2 lines, inside dia 4.3 m

reducing to 2.54 mD. Power Station

Width 32.5 mLength 104.4 mHeight 44.0 m

_ 48 -

INDONESIA ANNEX 6TENTH POWER PROJECT

CITARUM RIVER DEVELOPMENT PLAN

verage inflow 8 0 .5rn /sec (CA = 2,283 km2 )

SAGULING DAM

N .W .L 643 E L 650.5

s7LW. L 623 609 x tG6m3 Q.

600 - dead storage , n

27 x . p z: E. L. 553

0Doperating rule of Saguling

release f irm discharge 52m fsec constantly,500 except when water level of other downstream '

reservoirs reaches LVVL, when discharge req- -Euired for supply will be released E r

0. r;

(3operating rule of Cirata ,400 ~ release f irm discharge 125 m /sec constantly, E .2

except when water level of Jatiluhur reservoir Ereaches LWL, when discharge required for x x Saguling Power Stationsupply will be released E E TWL 252

E 3P-700 MW)z average inflow 179.9m /sec lE - 2156 GWh Avi

300 average inmow /CA=4,500 ki 2) Rajamandala dam< ~~163.4 mn Rajamandala Power Station

> (CA-4,090 km2j (P - 57 MW) EL 255> . IE -183 GWh Av) D N.W. L 252 E

N.W.L22C \, | ~~~Cirata dam | L25/ W z L2~~~4~~~220 __~~~~L 2

200 _ ~~LW. L 200 968 x 06m,3 200 -6xO

EL 138

dead storage 8 . _

345 x 106m3 Jatiluhu;d E

N.W.L 106 3.000 x 106 m3 EL 11.5Cirata Power StationtO0 -T 0% EL 102

LW. L 78 1 900 x 106 m3 (p-500 MW). Ejgt E l ~~~~~~~~~E - 1332 GWh AOE

EL 47.5 S60 x 108 m3 7Jatilihur Power Station

O. -(E = 807 GWh Av)

Doperating rule of Jatiluhur Requirement*releese discharge required for supply, irrigated area

keeping minimum discharge 750m3/sec 244 x 103 hafor power until water levei reaches water supply for Jakartato L.W. L 17.7m3/sec

*release discharge required for suppiy, LEGENDusing dead capacity when waterlevel of other upstream reservoirs reaches to LVW.L M Existing T3Tenth Project Ea Future

World Bank - 21987

ANNEX 7-49- ........... Page 1 of 2

INDONESIA

TENTH POWER PROJECT

Perusahaan Umrum Listrik Negara

Salient Features of Cirata Project /a

Main FeaturesInstalled capacity . . .500 14WMaximum discharge . . .516 cu m/secMaximum effective head ... 112 m

Reservoir and HydrologyCatchment area ........................ 4,090 sq km (Saguling 2,283 sq km)Reservoir area ....................... . 58.8 sq km

High water level ...................... HWL 220.0 mLow water level ....................... LWL 200.0 mTotal volume .......................... 1,883 x 106 cu mEffective volume ...................... 968 x 106 cu mMean annual yield ..................... 163.4 cu m/secProbable flood discharge .............. 8,000 cu m/sec (1/1000/years)Probable after Saguling ............... 5,600 cu m/sec (1/1000/years)Actual flood .......................... 1,400 cu m/sec (Sec. 1973)

Energy AssessmentHigh water level....................... HWL + 220.0 mLow water level ....................... LWL + 200.0 mTailrace water level .................. TWL + 102.0Gross head (maximum) ................... + 118 mGross head (minimum) .................. + 102 mMaximum effective head ....... ......... 112 mInstalled capacity .................... 500 MWEffective output ...................... 432 MWAnnual generated energy ...... ......... 1,332 GWhFirm discharge ........................ 125 cu m/secPeak discharge ......................... 516 cu m (24% plant factor)

Structures

Dam

Dam type ....................... Concrete gravityDam height ...................... + 101 mCrest length ...................... 481 mConcrete volume ............... ,.1,654,000 cu m

/a Engineering for the future Cirata Project is included in the Tenth PowerProject covering construction of the 700 MW Saguling HydroelectricProject.

-50-

ANNEX 7Page 2 of 2

SpillwayCapacity .......... 5,600 cu m/secWidth .......... 6 x 10 mDepth .......... 10 m

Waterway Conductor System

Intake .......... Inclined typeHeadrace .......... 4 x 1,068 m, 7.3 m, diaSurge tank .......... Differential open type

PenstockType ............ Underground diagonal tunnelDimensions ............ 5.6 m dia; 4 x 236 m, 4,090 ton

Power House ............ Semi-underground type

Electro Mechanical

Unit size .......... 125 MWNumber .......... 4Type .......... Francis

-51- ANNEX 8

Page 1 of 2

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

Project Cost Estimate(US$'000)

Local Foreign Total

I. Saguling Hydro-Electric ProjectPreliminaries

Site preparation 15,396 15,396Road relocation 12,357 - 12,357Miscellaneous (Environment) 14,485 2,826 17,311Resettlement/Compensation 49,220 - 49,220

Subtotal 91,458 2,826 94,284

Main Civil & Metal WorksDam and spillway 25,230 51,573 76,803Water conductor system 21,764 39,302 61,066Powerhouse/switchyard 15,529 19,004 34,533Gates & screens 675 6,276 6,951Penstocks 6,552 43,089 49,641

Subtotal 69,750 159,244 228,994

Electrical/Mechanical EquipmentTurbines and auxiliaries 1,224 20,784 22,008Generators and auxiliaries 3,937 29,687 33,624Transformers/switchgear 6,592 34,168 40,760

Subtotal 11,753 84,639 96,392

Engineering 7,600 19,265 26,865Administration 6,126 - 6,126

Total Base Cost 186,687 265,974 452,661

ContingenciesPhysical 28,904 26,818 55,722Price 122,476 84,357 206,833

Subtotal 151,380 111,175 262,555

Total Cost of SagulingProject 338,067 377,149 715,216

II. Construction Equipment - 500 500

III. Engineering of Cirata Project 1,500 7,500 9,000

IV. Consulting Services 500 1,500 2,000

Total Project Cost 340,067 386,649 726,716

-52-

ANNEX 8Page 2 of 2

INDONESIA

TENTH POWER PROJECT

Perusahaan Umum Listrik Negara

Project Cost Estimate (Contingencies Included in Each Item)(US$'000)

Local Foreign Total

Saguling Hydroelectric Project

PreliminariesSite preparation 22,238 - 22,238Road relocation 22,010 - 22,010Miscellaneous 30,717 3,264 33,981Resettlement/compensation 86,673 - 86,673

Subtotal 161,638 3,264 164,902

Main Civil and Metal WorksDam and spillway 44,966 81,120 126,086

Water conductor system 40,331 63,334 103,665Powerhouse/switchyard 28,036 30,079 58,115

Gates and screens 1,336 9,713 11,049Penstock 12,530 66,010 78,540

Subtotal 127,199 250,256 377,455

Electrical/Mechanical EquipmentTurbine and auxiliaries 2,552 24,006 26,558Generator and auxiliaries 8,175 34,288 42,463Transformers and switch gear 13,676 39,463 53,139

Subtotal 24,403 97,757 122,160

Engineering 13,989 25,872 39,861Administration 10,838 - 10,838

Total Cost of Saguling Project 338,067 377,149 715,216

Construction equipment - 500 500Engineering of Cirata Project 1,500 7,500 9,000Consulting services 500 1,500 2,000

Total Project Cost 340,067 386,649 726,716

-53-

ANNEX 9

INDONESIA

TENTH POWER PROJECT

Perusahaan Umum Listrik Negara

Summary of Cost of Saguling Project by Financing Sources(US$ '000)

Foreign Local Total

IBRD Financed Items /aA-1 (Civil: dam) 81,120 44,966 126,086A-2 (Civil: waterway) 63,334 40,331 103,665A-3 (Civil: powerhouse) 30,079 28,036 58,115B-2 (Metal: penstock) 66,010 12,530 78,540

Subtotal 240,543 125,863 366,406

OECF Finance Items /aB-1 (Metal: gates) 9,713 1,336 11,049C-1 (Elec.: turbine) 24,006 2,552 26,558C-2 (Elec: generator) 34,288 8,175 42,463C-3 (Elec.: trans.) 39,463 13,676 53,139Eng (Engineering) 25,872 13,989 39,861D-3 (Hydro monitoring equipment) 3,264 880 4,144

Subtotal 136,606 40,608 177,214

Local FinanceD-1 (Preparatory) - 22,238 22,238D-2 (Road) - 22,010 22,010D-3 (Miscellaneous environment) - 29,837 29,837OWN (Administration) - 10,838 10,838COM (Resettlement) - 86,673 86,673

Subtotal 171,596 171,596

Total 377,149 338,067 715,216

/a IBRD and OECF will finance only the foreign costs of the items includedin the respective lists.

INDONESIAPERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECTIMPLEMENTATION SCHEDULE OF THE SAGULING PROJECT

lOtT` YVEAR 1979 1980 1981 1982 1983 1984 1985 1986 198 1

No. ITEM OlJARTER 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

CIViL WORKS Prepare DesignPrepare Specification

Piequalilication Tender Call Eva l I It for .Ci or k r

(Civil Worl I ldrS e L/C | | Work

A--i Da3 & Spillway Ternder Coll Eval. Neg. L/C Diversi|n Tunnel Closure

(Civil Work) I I I ConstructionTen Te nd er Call Eval. NLI. L/C

A2 Watcrvway IEl

(civil Work) I- -Construction e r - a - |

A - 3 Powerhouse and Tuilrace Teside Call Eval. NIu .I a

(Civil Work) *-- Cntuio

METAL WOHKS I ILTender Call Eval. Nag. L/C

[S - I Gate Screen tlridgepo II

(Metal Work) I, sm Ilnstallation and Taestin |

8 2 Penetock ~~~~~~~~~~~~~~~Tender Cal Evel. Neq. LIC,

C (- W Penstc rk Design Manul. and Delivery , f . 1 2

Cw . .1 Tue [snel lnd Aux. E.qu ipl.melnJ.L4tIJ.Il l.-e.der Call Eval. Nag ICD C , I Tuo biiie anti Aux. Etluipment dwm Designi Manul1. anBd 22141

(Elecitescl/Mechanical) I I 11 ,I~ Istlaio n Tesing

C -2 Genierator andi Ausx. E4quiprent DIne alEj.Ng1C[e sign MauanDeie II F I(Elactricdt/Mechanical)

nsYaTIatioin arid Teasting

C - 3 Main Trarrsfrrrnrer arid ~~~Tenider Cell ElNag L/CC - Man Tasifu(ieriin vaDeOsign Matftad eivr

SwIlt;tryard] Eqluipnrunt n an

(Elecirical/Mechanicall IntlaioJn

Wobild Bank -22141

-55-

ANNEX 11Page 1 of 2

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

Milestone Schedule for Main Civil Works and Penstocks

Main dam, Water Power house Penstockspillway conductor & switchyard metalworks system civil works work

Issue for bid 01 Aug 80 01 Aug 80 01 Aug 80 01 Aug 80

Bid opening 03 Nov 80 03 Nov 80 03 Nov 80 03 Nov 80

Latest date evaluationcomplete PLN/NEWJEC 08 Feb 81 08 Feb 81 08 Feb 81 21 Mar 81

Latest date GOV.(SEKNEG) approval 15 Feb 81 15 Feb 81 15 Feb 81 30 Mar 81

Latest date issueIBRD approval 21 Feb 81 21 Feb 81 21 Feb 81 07 Apr 81

Latest date of issueletter of intentto negotiate 23 Feb 81 23 Feb 81 23 Feb 81 09 Apr 81

Latest date contractaward 31 Mar 81 31 Mar 81 31 Mar 81 15 May 81

Date letter of creditopened 01 May 81 01 May 81 01 May 81 15 Jun 81

Starting date beginshipment (FOB) N.A. N.A. N.A. 01 Apr 82

Complete shipment(at site) N.A. N.A. N.A. 31 Jul 83

Begin construction(mobilization complete) 01 Jul 81 01 Jul 81 01 Jul 81 01 Sep 82

Latest date completeconstruction 31 Dec 84 31 May 85 30 Sep 85 31 Mar 85

Plant initial/trail N.A. N.A. N.A. N.A.operation

Commercial operation N.A. N.A. N.A. N.A.

-56-

ANNEX 11Page 2 of 2

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

Milestone Schedule for Electrical and Mechanical Equipment, aid Gates

Transformer Gates &Turbines Generators & switchgear screens

Issue for bid 29 Oct 80 29 Oct 80 29 Oct 80 01 Jul 81

Bid opening 29 Jan 81 29 Jan 81 29 Jan 81 30 Sep 81

Latest date evaluationcomplete PLN/NEWJECapproved 30 Jun 81 30 Jun 81 30 Jun 81 31 Jan 82

Latest date OCEFapproval 20 Jul 81 20 Jul 81 20 Jul 81 20 Feb 82

Latest date issueletter of intent tonegotiate 31 Jul 81 31 Jul 81 31 Jul 81 28 Feb 82

Latest date contractaward 31 Aug 81 31 Aug 81 31 Aug 81 31 Mar 82

Date letter of creditopened 30 Nov 81 30 Nov 81 30 Nov 81 30 Jun 82

Starting date beginshipment (FOB) 01 Jan 83 01 Jan 83 01 Jan 83 01 Jan 83

Comple shipment(at site) 31 Jan 84 31 Jan 84 28 Feb 84 31 Jul 83

Begin installation(mobilization complete) 01 Mar 83 01 Mar 84 01 Jan 84 01 Nov 83

Latest date completeinstallation 01 Jan 85 01 Jan 85 01 Jan 85 31 Oct 84

(No. 1&2) (No. 1&2) (No. 1&2)01 Jul 85 01 Jul 85 01 Jul 85(No. 3&4) (No. 3&4) (No. 3&4)

Plant initial/trial 01 Feb 85 01 Feb 85 01 Feb 85 N.A.operation (No. 1&2) (No. 1&2) (No. 1&2)

01 Aug 85 01 Aug 85 01 Aug 85(No. 3&4) (No. 3&4) (No. 3&4)

Commercial operation 31 Mar 85 31 Mar 85 31 Mar 85 N.A.(No. 1&2) (No. 1&2) (No. 1&2)30 Sep 85 30 Sep 85 30 Sep 85

(No. 3&4) (No. 3&4) (No. 3&4)

-57-ANNEX 12

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

Estimated Schedule of Disbursements(US$ million)

IBRD Quarter Disbursement Cumulative disbursementfiscal year ending during quarter at the end of quarter

FY81 06/30/81 30.0 30.0

FY82 09/30/81 7.0 37.012/31/81 6.5 43.503/31/82 7.5 51.006/30/82 17.5 68.5

FY83 09/30/82 17.0 85.512/31/82 17.0 102.503/31/83 12.0 114.506/30/83 20.0 134.5

FY84 09/30/83 19.0 153.512/31/83 12.5 166.003/31/84 12.0 178.006/30/84 14.0 192.0

FY85 09/30/84 14.0 206.012/31/84 6.0 212.003/31/85 6.0 218.006/30/85 6.0 224.0

FY86 09/30/85 7.0 231.012/31/85 6.5 237.503/31/86 6.0 243.506/30/86 6.5 250.0

INDONESIA

PERUSAHAAN UMUN LISTRIK NEGARA

PAST FINANCIAL RESULTS

INCOME STATEMENTS(Rupiah, Billions)

Years ended March 31

1976 1977 1978 1979 198011

Sales Increase % -6.5 9.9 14.4 21.1 25.0

Energy Sales (GWh) 2804 3082 3527 4270 5340

Average Price/kWh 21.7 27.2 27.4 27.4 27.3

Energy Revenue 61 84 97 117 146

Other Operating Revenue - - 1 1

Other Income Net - 5 1 - 4 1 5

Total Revenue 56 85 94 119 151

Operating ExpensesFuel 14 22 28 31 52 1

Operations - 30 38 44 51 66 n

Depreciation 13 16 23 29 55

Total Expenses 57 76 95 111 173

Operating Income -1 9 -1 8 -22

Net Income before Interest -1 9 -1 8 -22

Interest 1 4 4

IDC 1 4 4

Charged to Operation

Net Income -1 9 -1 8 -22

Rate Base 128 150 189 254 5092/

Rate of Return % -1.0 6.0 -0.5 3.1 -4.3

Operating Ratio % 101.8 89.4 101.0 93.2 114.5 ° t

1/ Provisional/ Revalued Assets

INIONESIA

PERUSAHAAN UMfJM LTSTRIK NECAUA

PAST FINANCIAI. RESULTS

FUlNDS FLOW STATEMENTS(Rupiah, Billions)

Years ended March 31

1976 1977 1978 1979 19801/

Internal Sources of FundsOperating Income -1 9 -1 8 -22Depreciation and other non-cash

charges to Income 13 16 28 30 57Consumers Contributions 18 13 26 37 40

Total Internal Funds 30 38 53 75 75

Operational RequirementsVariation Working Capital 14 18 8 10 10Interest Charge to OpDebt Repayment 1

Total Operational Requirements 14 18 9 10 10

Internal Funds Availablefor Investament 16 20 44 65 65

Total Capital Investment 187 160 258 294 330Balance to be financed 171 140 214 229 265

Financed byBorrowings 8 4 31 37 111Equity 159 149 197 198 175

Total Capital Sources 167 153 228 235 286

Cash Increase/Decrease -4 13 14 6 21Caslh at beginning of year 20 16 29 43 49 I D.Cash at year end 16 29 43 49 70Annual Contribution

0 )

- To Construction 8.5 12.5 17.0 22.1 19.4 '- 3 Year Average % 8.3 13.7 13.2 21.0 19.6 1

1/ Provisional

INDONESIA

PERUSAIIAAN UIMUM lIASTRIK NECARA

PAST FINANCIAL RESULTS

BALANCE SHEETS(Rupial, Billions)

As at March 31

1976 1977 1978 19/9 1980-1

AssetsFixed Assets 21Plant in Service 229 306 391 556 741-Less Depreciation 61 78 106 136 57Operating Plant 168 228 285 420 684Work In Progress 274 358 531 660 857

Current AssetsCash 16 29 43 49 70Inventories 25 31 40 50 57Receivables 15 22 24 34 34Other Current Assets 27 35 36 34 26

Total 83 117 143 167 187

Total Assets 525 703 959 1247 1728

Equity and Liabilities

Capital and Reserves 468 617 814 1013 1352Retained Earnings -10 -1 -2 5 -16

Total Equity 458 616 812 1018 1336

Long Tern Debt 8 12 42 78 188 ptOther Long Term Liabilities I 1 2 3Current Liabilities 18 20 24 32 44 :Consumers Contributions 41 54 80 1.17 157

oI'tal Equity and Liabilities 525 703 959 1247 1728

Debt % of IDebt t Equity 1.7 1.9 4.9 7.3 12.3Current Rtatl.o 4.6 5.8 5.9 4.1 4.3

, trovlseonali2/ After Itevalusition

INDOUNSIA

PERUSAHAAN UMUM LISIRIK NEGARA

FINANCIAL FORECASTS 1981 . 1989

INCOME STATEMENI( RUPIAH, BILLIONS)

1961 1982 1983 1904 196S 1986 1987 1988 1989SALES INCREASE X 21.95 Z2.0U 21.94 21.20 19.88 19.07 18.05 17.52 16.37ENERGY SALES(GWH) 6500 7930 9670 11720 14050 16730 19750 23210 27010AVE PRICE/KWH 41.2308 53.9723 53.9814 66.6382 66.7616 71.0102 7hO6070 80.4826 83,4876

ENERGY REVENUE 2b8 426 522 751 938 1188 1513 1808 2255OTHER OP REV I 1 2 2 2 3 4 4 5OTHER INC NET 5 7 10 14 19 25 31 38 47

TOTAL REVENUES 274 436 534 797 959 1216 1548 1910 2307

OPERATING EXPENSES

PUEL I 121 119 147 242 306 354 460 569 649FUEL/BULK POWER 12l 119 147 242 306 354 460 569 649

POWER PURCHASE 2 2 3 3 3 6 10 17 25PERSONNEL EXP. 4b 57 bb 74 84 94 106 122 138MATERIALS 29 40 54 73 96 125 156 192 231SERVICES 10 12 13 17 20 26 32 39 47ADMINISTRATION 13 IS 17 - 19 21 24 26 30 33INSURANCE 2 3 4 4 6 7 9 1t 13OPERATIONS 104 t29 157 190 230 282 339 all 487DEPRECIATION 53 87 119 163 220 280 353 439 539

TOTAL EXPENSES 2e8 335 423 595 756 916 1152 1419 107S

OPERATING INCO.t -4 101 111 202 203 300 390 491 632

NET INCOME BEFORE. INTEREST .4 101 III 202 203 300 396 491 632

INTEREST 21 45 69 96 128 162 194 229 268IDC 20 30 46 64 90 64 70 7b 91

|~~~~- -- _ , _ _ _ _ _ _

- CHRGD OPERATIl)NS I 1S 23 32 38 98 124 153 177

NET INCOME -5 8b 88 1 I 165 202 272 338 455

RETAINED EARNINGS -5 bo 88 17U 265 202 272 338 455

RATE BASE 636 940 1410 2094 3005 4035 5150 o402 7944RATE OF RETURN X -U.6 10.7 7.8 9.6 6.8 7,4 7.7 7.o 8.0OPERATING RAltO X 1O0.S 76.8 79.2 74.7 78.8 75.3 74.4 74.3 72.8

INDONESIA

PERUSAhAAN UHUM LISlRII NEGAijA

FrINANcIAL FOHECAs` 6 1983 _ 1989

FUNuS FLuIw STATLMntT1 RUPIAH, BILLIUNSI

1981 1 9$ 1983 1984 1985 198h 1987 1988 1989 TOTAL

INTERNAL SOURCES-OF FUNDS

OPERATING INCOML -4 101 111 2u2 2u3 300 3ve 4"91 e32 2432

DEPRECIATION 53 87 119 103 224 280) 353 439 539 2253

CONSUMERS COhTBNS 39 55 72 88 102 120 132 144 15 909

TOTAL INTERNAL. FUNDS 8e 243 302 453 525 74u 881 1074 1328 5594

OPERATIONAL- REQUIE ENIS

INCREASE#DECREASE* WORKING CAPITAL 25 50 20 59 26 45 56 79 69 429

INTEREST CHARGED- OPERATIONS I 15 23 32 38 98 124 153 177 661

DtBT REPAYMENT 0 9 is 23 29 75 100 130 157 530

TOTAL OPERATIONAL-REQUIJFNENTS 26 74 58 114 93 218 280 362 403 1628

INTERNAL FUNDS* AVAILABLE FOR

- INVESTMENT 62 169 244 339 432 482 601 712 925 3966

CAPItAL INVEST7ENT-....... _..........

TOTAL CONSTRUCTION 535 684 997 1177 -152 1423 1732 1920 2041 11661

INTEREST OURINC

' CONSTRUCTION 20 30 46 64 90 64 TO 76 91 '551

TOTAL CAPITAL* INVESTMENT 555 714 1043 1241 1242 1487 1802 1996 2134 12212

B ALANCE TO BE- FINANCED 493 545 799 902 810 1005 3203 1284 32o7 8246

FINANCED BY

;oIRoRIN0S 155 312 340 355 426 414 466 521 602 3591

EOUITY 317 232 444 590 395 635 777 801 626 4857

_ ,,.- -…

TOTAL CAPITAL

SO* WRCES 472 544 82 945 821 1049 1243 1322 1228 8448

CASH INCREASE/- DECREASE -21 -1 Z5 43 11 44 42 38 21 202

CASH AT BEGINNINGi O oF YEAH 70 49 48 73 jib 127 171 213 251 70 .

, CASH AT IEAR END 49 48 73 116 127 171 213 251 272 272

ANNUAL DOTB SERVICE

NNV DERAGE 49.0 7.8 6.1 6.6 6.3 3.4 3.3 3.3 3.5 3.9 ° 4U

ANNUAL CONI"N- Tn CONSTRUCTIOn 11.2 23.7 23.4 27.3 34.8 32.4 33.4 35.7 43.4 32.5

- 3 YEAR AVERAGE X (F) I1.6 21.9 24.4 2h.9 32.7 31.9 34.1 3u*0 45.4

* 3 YEAR AVERAGE X (RI 16.3 14.0 20.5 25.1 28.8 31.o 33.4 3o.0 37.7

INDONESIA

PEAUSAHAAN UNUN LISTRIK NEGARA

FINANCIAL FURECASTS 1981 * 1989

_ALANCE SHEETS---- - t N*'Pl-AW-FUIttTURTT- -__ ____

1901 1982 195-1 ----984 1-98-- -1986 -- r?7 -- 6 1989

ETS

;;RVICE 0t51 1616 24th 3S13 4949 6492 d335 1050G 13015_ _ ..-RECIATIUN 1 z e9 34b 537 duo 1144 1S62 2138 283S

OPERATING PLANT 941 1407 2066 2976 4149 534G 6753 83c6 so0o0

NORK IN PROGRESS 1102 1368 1754 2090 2179 2521 2960 3402 3802

CURRENT ASSEtS

CA4H 4e 4e 73 116 l27 171 213 1SI 272INVENTORIES 5 72 97 122 138 167 210 260 302RECEIVABLES 6S 105 114 160 179 211 248 306 370OTHER CURR ASSET 21 26 32 38 44 52 61 71 83

- _-TOTAL 191 2St 31t 436 488 601 732 - 88 1027

TOTAL ASSETS 2234 3026 4138 5502 6836 8470 10445 126e6 150t 9

EQUITY AND- LIABILITIES........ ___....

foullyt w. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~0

PAlO IN CAPITAL 3483 1715 2199 2789 3184 3819 45s9 5397 6023SETAINED EARNINGS -21 65 153 323 488 690 982 1300 1755REVALUATION REORVE 387 270 3bs 505 706 989 1325 1752 2282

TOTAL EQUITY 3649 2es0 272t 3617 4378 5498 e883 8449 10060

LONG TERN DEBT

DEOT DUE 343 646 971 1303 1700 a039 2405 2796 3241

CURRENlLIASILITIES

PA4VALES 46 57 77 95 110 134 167 206 255

' TOTAL 46 57 77 95 110 134 167 206 a55

CONSUNERS CONTIONS 19e 273 36b 487 628 799 990 1207 1453

TOTAL EfUIl ANt)* LIABILITIES 2234 3026 4138 5502 6836 8470 10445 12658 15o09

DEST I OF- DEBT t EQullY 17.2 24.0 o .s 26.5 a2.0 27.1 25.9 24.9 24.4CURRENT RATIO -- 4.- --- 44 - - 4.6 -4.4 4.5 4-4 4 3 4.0NM INSTALLED 2970 34713 4076 4791 5341 6s7s 7078 7835 8986GROSS PLANT -- - --/KW tIH RUPIA) 313.0 440.0 o92.0 733.2 926.6 987.4 1177.6 134o.9 1448.4

-64-ANNEX 15Page 1 of 2

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

Assumptions for the Financial Forecasts

General

1. Inflation has been taken into account at the following rates (%):

81 82 83 84 85 86 87 88 89

Offshore costs 9 8 8 7 7 6 6 6 6Local costs (exc. fuel) 15 10 10 10 10 10 10 10 10Fuel costs - - 30 10 10 10 10 10 10

Income Statements

2. Revenues assume a tariff increase of approximatey 12% in realterms in 1982 and another of about 8% in 1984. This assumption is adoptedto exemplify the scale of tariff adjustments likely to be required beforeFY 86; in practice, the phasing of the adjustments may vary somewhat, andthey may be consolidated. Thereafter use of the surcharge facility isassumed to maintain a self-financing ratio above 30% for the rest of theperiod.

3. Fuel/Bulk Power is derived directly from the planting schedule atAnnex 3. Power produced at geothermal plants is assumed to be bought by PLNfrom the agency responsible for generating it.

4. Operating Expenses have been forecast in detail taking intoaccount the facilities expected to be in use each year, and subject tolocal cost inflation indices as at 1 above.

5. Depreciation is based on the application of PLN's normal rates toassets revalued annually as described at para. 8.

Funds Flow

6. Financing. Borrowing has been assumed for 50% of the foreignexchange component of capital expenditures, except where loan agreementswith international agencies require a higher proportion of foreign exchange

-65-

ANNEX 15Page 2 of 2

costs to be financed as debt. Assumed terms on future borrowings are 9% for19 years, including 4 years grace. Remaining foreign exchange and all localcapital expenditures (after deducting internal cash generation) are assumedfinanced by equity contribution.

7. Capital Expenditures exclude geothermal generating plants, whichare assumed to be constructed and operated by another agency.

Balance Sheet

8. Fixed Assets are revalued annually according to the followingassumed indices:

1981 ........ 1.111982 ........ 1.091983-85 ........ 1.08Thereafter ...... 1.07

-66-

ANNEX 16

INDONESIA

TENTH POWER PROJECT

Perusahaan Umum Listrik Negara

Cost and Benefit Streamsfor Internal Economic Rate of Return Calculations

(in US$ million)

Costs /a Incremental BenefitsFor- Domes- revenues /e (net)

Year eign /b tic /c O&M /d Total (1) (2) (3) (4)

1979 - 0.4 - 0.4 - - -0.4 -0.41980 0.4 9.6 - 10.0 - - -10.0 -10.01981 68.7 34.6 - 101.3 - - -101.3 -85.71982 50.8 38.8 - 89.6 - - -89.6 -99.81983 79.7 48.6 - 128.3 - - -129.3 -132.71984 127.5 42.0 - 169.5 - - -169.5 -191.01985 54.2 33.4 4.0 91.6 - - -91.6 -107.71986 13.4 35.0 5.2 53.6 149.4 - 95.8 +59.91987 - - 5.2 5.2 149.4 149.4 +144.2 +131.71988-2036 - - 5.2 5.2 149.4 149.4 +144.2 +144.2

/a Inclues full cost of the 700 MW Saguling Project (US$508.4 million) andattributable costs of transmission and distribution (US$200.0 million),less taxes (about 5% of total costs).

/b Shadow price 1.0.

/c Composite labor conversion factor of 0.8 applied.

/d Includes normal project operation costs at US$4.0/KW/year, insurance andreservoir maintenance: transmission and distribution costs have beenassumed at 1% of capital investment.

/e Figures in column (1) are based on the expected pattern of utilizationof the energy output of the project viz about 1,020 GWh during the 4-hourpeak load period (with a corresponding tariff rate of Rp 86.8/kWh) andthe balance of 1,136 GWh during off peak hours (with a correspondingtariff rate of Rp 28/kWh). This works out to an average of Rp 55.8/kWh.The prevailing average revenue is Rp 42.0/kWh. The energy sale isassumed to be 75% of the gross generation during peak hours and about85% during off peak hours. Figures in column (2) and column (4) arebased on an increase in the cost of construction of Saguling Project by10% and a commissioning delay of six months.

- 67 -

ANNEX 17Page 1

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

TENTH POWER PROJECT

Information Available in the Project File

A. Reports on the Sector(1) IBRD Appraisal Reports PU 18(a) of 1969

PU 95 of 197287(a)-IND of 1973766-IND of 19751054(b)-IND of 19761289(a)-IND of 19771638(a)-IND of 19782375-IND of 19792694-IND of 1980

(2) Java System Development Planby Preece, Cardew and Rider (PCR) UK: 1975-1976

(3) Legislation affecting PLN 1972; 1979

(4) Final Accounts of PLN through FY1979 andDraft A/Cs, FY1980

(5)- Audit Reports of PLN through FY1979

(6) Financial forecasts and working papers

(7) Management Audit Report, S. Parman & Co., October 1979October 1979

B. Reports on the Project

(1) Survey Report on the Saguling HydroelectricPower Development Project By OverseasTechnical Cooperation Agency, Governmentof Japan March 1973

(2) Technical Proposal for Citarum HydroelectricFeasibility Study By Overseas TechnicalCooperation Agency, Government of Japan July 1974

(3) Report for Stage I Study of Citarum Hydro-electric Feasibility Study By Newjec(Vol. I & II) August 1975

- 68 -

ANNEX 17Page 2

(4) Summary Report for Stage II Study (SecondInterim Report) of Citarum HydroelectricFeasibility Study by Newjec February 1977

(5) Draft Final Report - Stage II Study ofCitarum Hydroelectric Study January 1978

- Supporting Data (Geology) for Chapter 3- Supporting Reports No. 5, 6, 15 and 16- Exhibits

(6) Final Report for Stage II Study of CitarumHydroelectric Study March 1978

(7) Report for Stage II Study (March 1978) byNewjec Vol. 3 Supplementary Reports on"Erosion and Sedimentation Studies,""Environmental Assessment, " "ProjectOutput Studies" and "Compensation forResettlement" March 1978

(8) "Draft Environmental Impact Analysis ofSaguling Dam

- By Institute of Ecology, PadjadjaranUniversity, Bandung February 1379

(9) Consultant's report on the EnvironmentalStatus of the Project by Newjec August 1979

(10) Prequalification Document April 1980

(11) (i) Geological Investigation Work ofSaguling Hydroelectirc Project

(ii) Interim report on GeologicalInvestigation work for SagulingHydroelectric Project

(iii) Supporting data for 7 (ii) above

(iv) Interim report on Investigation offill materials

(v) Supporting data for 7 (iv) above

(vi) Technical specifications for fieldembankment tests on Quarry

-69-

ANNEX 17Page 3

(vii) Technical Specifications for fieldembankment tests on Soil Materials

(viii) Comparison between Present Dam Designand a Homogenous Embankment with anUpstream Impervious Membrane May 1980

(12) Design Reports - Saguling HydroelectricProject October 1980

(13) Tender and Contract Documents for

(a) Main Dam and Spillway

(b) Water Conductor System

(c) Power House Civil Works and Switchyard; and

(d) Penstocks August 1980

(15) Addenda to (9) above September 1980

(16) Final Prequalification Evaluation Report October 1980

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