RETURN TORESTRICTEDREPORT(S r.,'H S,0!REPORTS Report No. TO-354b

WITHINFIECPLONE WEEK noi COPYThis report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF

THE COSPIQUE THERMAL POWER PROJECT

ELECTRIFICADOR DE BOLIVAR S.A.

COLOMBIA

July 1, 1963

Department of Technical Operations

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CURRENCY EQUIVALENTS

1 U.S. $ = Colombian Pesos 9. 01 Ps = U.S. ¢ 11.11 million Pesos = U.S. $111, 111

APPRAISAL OF THE COSPIQUE THERMAL POWER PROJECT

ELECTRIFICADORA DE BOLIVAR

COLOMBIA

TABLE OF CONTENTS

Page No.

SUMMARY i - ii

I. INTRODUCTION 1

II. THE BORROWER AND SHAREHOLDERS 1

Electrificadora de Bolivar (Electribol) 1Electribol's Power Facilities 3Empresas Publicas Municipales deCartagena (Empresas) 3

Instituto de Aprovechamiento de Aguasy Fomento Electrico (Instituto) 4

III. THE POWER MARKET 5

IV. THE PROJECT 7

The Power Plant and Transmission Lines 7Transmission and Distribution System 8Cost Estimates 9

V. FINANCI.AL ASPECTS 11

Tariffs 11Present Financial Position of Electribol 11Recent Earnings Record of Electribol 12Proposed Financing Plan of Electribol 13Estimated Future Earnings of Electribol 15Future Financial Position of Empresas 15Proposed Rate and Debt Limitation Covenants 17Auditors 17

VI. CONCLUSIONS 18

L I S T O F A N N E X E S

1. Existing Facilities

2. Electric Energy Production and Load Growth

3. Customers, Electric Energy Sales, Revenues, and Expenditures

4. Peak Load, Capabilities and Installation Schedule

5. Annual Energy Production and Population Growth

6. Description of Project

7. Fabrication and Construction Schedule

8. Cost Estimate

9. Expenditure Program

10. Electribol - Income Statements 1961-69

10a. Assumptions for Farecast Income Statements

11. Electribol - Sources and Applications of Funds 1963-69

12. Electribol - Balance Sheets 1961-69

13. Empresas - Income Statements 1961-69

14. Empresas - Sources and Applications of Funds 1963-69

15. RhpzEres - Balanee Sheets 1961-69

MAP: Cospique Thermal Power Project

APPRAISAL OF THE COSPIQUE THERMAL POWER PLANT

COLOMBIA

The Electrificadora de Bolivar S.A. (Electribol) has asked theBank for a loan to finance the foreign exchange cost of a 25 MW expansionof the Cospique Thermal Plant, the expansion of its transmission and dis-tribution facilities, and of the distribution facilities of EmpresasPublicas Municipales de Cartagena (Empresas), its principal customer.The amount of the proposed loan would be US$5.o million of which us$o.46million would be relent by Electribol to the Empresas. The total cost ofthe project would be US$6.39 millior.

ii. The project would comprise the addition by Electribol of two12.5 MW thermal generating units to the existing Cospique 10 MW steampower plant in Cartagena, Colombia, the addition to the transmission systemof approximately 140 km of 13.2 kv lines, with the associated substations,and the rehabilitation and expansion of the distribution systems inCartagena and the improvement of distribution in a number of small commu-nities in north Bolivar.

iii. Electribol, an autonomous public agency, which would operate theproject, is one of 15 subsidiaries of the Instituto de Aprovechamiento deAguas y Fomento Electrico (Instituto). The Instituto is an autonomousagency formed by the Colombian Government to develop water resources andelectric power, and owns about three-quarters of Electribol's stock.

iv. Planning of the project was performed jointly by the Institutoand its consultants. Syndibel of Belgium prepared the engineering as-pects of the project, and Alfonso Posada de Francisco of Bogota, Colombiaprepared the load projecticz and financial studies. With the help ofthese consultants the Instituto and Electribol are capable of success-fully carrying out the project.

v. The city of Cartagena constitutes the principal power marketfor Electribol. More than 95% of Electribol's power sales are made inbulk to Empresas which distributes power in the city. The balance ofthe power is sold by Electribol in the small communities in the northernportion of the department.

vi. Electribol owns and operates the 10 MW Cospique power plant andleases from Empresas the Manga plant which has an installed capacity of11.65 MnW. Electribol is the sole producer of power for public use in thearea. The principal purpose of the project is to provide power neededby a new fertilizer plant, and to meet the increasing needs of the cityof Cartagena and of the small communities and the adjacent rural areas.Industrial expansion is occurring in the area and this together with thenormal power load growth justifies the power expansion program. The pro-posed expansion program would meet the expected power demands until 1970.

vii. The financial position of Electribol has been weak because of lowtariffs and high costs resulting primarily from the inefficient use ofgenerating facilities in the Cartagena area and more recently from inflation-ary increases after the peso devaluation. This situation has been consid-erably improved by two rate increases for Electribol and Empresas which

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became effective in November 1962 and May 1963. Furthermore the lease ofthe Manga plant to Electribol permits the use of the more efficientgenerating units of Cospique on base load, and the less efficient units ofManga plant on peak loads.

viii. As a result the financial prospects of Electribol and Empresasare reasonably good. The initial low return on Electribol t s investmentwould, after the completion of the project, show an increasing trend tosatisfactory levels and both entities would maintain satisfactory cashpositions throughout the period under review. This is shown by the year-end debt service and interest coverages and by the contributions fromearnings towards new expansion. Inflationary pressures may require fur-ther adjustments in rates. Appropriate rate covenants were thereforeagreed upon which would safeguard the solvency of Electribol and itslargest customer, Empresas. In addition, a debt limitation covenant isincluded in the loan agreement with Electribol which would make the in-currence of new debt dependent on a proper level of earnings.

ix. The project is teohnically sound and is a logical step in theexpansion of both Electribol's and Empresas' facilities. It is suitablefor a Bank loan in the equivalent of US$5 million for a term of 20 yearsincluding a period of grace of 321 years.

APPRAISAL OF THE COSPIQUE THERMAL POWER PLANT

COLOMBIA

I. INTRODUCTION

1. The Electrificadora de Bolivar, S.A. (Electribol) through theInstituto de Aprovechamiento de Aguas y Fomento Electrico (Instituto) hasasked the Bank for a loan to finance the foreign exchange cost of a 25 MWexpansion of the Cospique Thermal Plant and of the expansion of associatedtransmission and distribution facilities. The total cost of these works,including interest during construction, is estimated at $6.39 millionequivalent, of which $5.05 million would be foreign exchange. The pro-posed loan would cover $5.0 million, $o.46 of which would be relent byElectribol to Empresas Publicas Municipales de Cartagena (Empresas), theremainder would be financed from Electribolls and Empresas' own resources.

2. The expansion is required to supply the growing demand forelectric power in the Department of Bolivar, including power to a newfertilizer plant near Cartagena.

3. Electribol is one of 15 subsidiaries of the Instituto, an auton-omous agency formed by the Colombian Government in 1946 with the responsi-bility for development of water resources and electric power. It ownsabout three-quarters of Electribolls stock. The Instituto concurs in theneed for the loan.

4. The appraisal of the proposed project and of the operations ofElectribol is based on reports prepared by Electribol, the Instituto, andtheir consultants, supplemented by information obtained by Bank staffmembers during two visits to Colombia in May 1961 and March 1962 and uponcost data furnished by the Instituto subsequent to the devaluation of thepeso late in 1962. A map of the project area is attached at the end ofthis report.

II. THE BORROWER AND SHAREHOLDERS

Electrificadora de Bolivar (Electribol)

5. Electribol was incorporated in December 1954, to develop andsupply power in the Department of Bolivar. As a corporation, Electribolis subject to the regulations and supervision of the National Superinten-dent of Corporations. Although considered an autonomous organization,its stockholders are governmental. Electribol is exempt from taxation.

6. The principal owners and their respective holdings in Electribolas of December 31, 1962, are as follows:

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(in millions of Pesos)

Instituto de Aprovechamiento deAguas y Fomento Electrico 21.7 75.9%

Department of Bolivar 2.8 9.8%Empresas Publicas de Cartagena 2.8 9.8%Municipalities of North Bolivar 1.3 4.5%

28.6 100.0%

7. Electribol's authorized share capital was increased from Ps 20million to Ps 40 million in 1961. The formal authorization of this increaseby the National Superintendent of Corporations would be a condition ofeffectiveness of the proposed loan.

8. Electribol is governed by a Board of Directors consisting offive members, appointed for one-year terms at the shareholders annualmeeting. The directors are: the Governor of Bolivar or his represen-tative; one representative each of the Instituto and Empresas; and twomembers representing other area interests. Because the Instituto holdsabout three-quarters of the stock it could elect the majority of directors.However, it consults with the Governor and interested local groups toselect candidates from a representative group of persons in industry,banking and commerce. As a matter of policy, it has been the practice ofthe Instituto to include an engineer on the Board. The principal executiveof the company is the General Manager, who with the auditor is appointedby the shareholders. The present general manager has held the positionfor more than four years. The auditor is a staff member under the super-vision of the general manager. He is selected from a list of three namessubmitted by the National Comptroller.

9. Electribol is the principal shareholder of three subsidiarycompanies which operate in Sincelejo, Magangue and Zambrano, small townsin the south of the Department of Bolivar.

10. The present management of Electribol has not had extensiveutility operating experience. Administration of operations should bestrengthened by assistance from the Instituto or from other outsidesources. Electribol now has more than 200 employees. This is high,though many are employed in transmission line and other constructionactivities. The Instituto has made a study to determine the number ofemployees necessary for Electribol, and has made recommendations which,if implemented, would bring staff down to satisfactory levels. Plantoperating conditions are being improved by the correction of severaldeficiencies which should reduce operating costs and increase efficiency.The Instituto has agreed that in the future it would provide financial,technical and administrative guidance, propose measures to improveoperations and assist in determining Electribol's staffing needs.

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Electribolls Power Facilities

11. At the end of 1962 the total generating capacity operated byElectribol consisted of the two 5 MW units in the Cospique Power Plant,which were put into service in May 1960. Except for industrial instal-lations totaling about 7.5 MW, the only other significant power sourcein northern Bolivar is the Manga plant in Cartagena, with an installedcapacity of 11.65 MW. The lease of the Manga plant to Electribol (seeparagraph 17) makes Electribol the sole producer of public power in thearea, with a total effective capacity of 21.65 MW. The generating faci-lities of Electribol are described in Annex 1. The units at the Mangaplant are best suited for peaking and standby service. The oldest unitwill probably be retired when the proposed power expansion is completed,

12. Electribol also operates transmission and distribution faci-lities that include approximately 50 km of 66 kv line, 70 km of 13.2 kvline, and three principal substations. It is constructing additionaltransmission facilities. There are no connections between the Cartagenaarea transmission system and that of any other metropolitan area, norwith the generation at the industrial plants. Annex 1 gives a detaildescription of the existing transmission and distribution facilities.

13. Electribol sells energy wholesale to Empresas and transmits anddistributes power to customers in small towns and rural areas in thenorthern part of the Department of Bolivar. Power is delivered to Empresasat four points, at two substations in the city of Cartagena for municipalrequirements, at the Gambote substation to serve the municipal waterpumping plant (see map) and at the Cospique switchyard to serve the Abocolfertilizer plant and other requirements to the south of Cartagena.Within the Empresas' organization the power department sells power at costto the water department from the Gambote substation.

Empresas Phblicas Municipales de Cartagena (Empresas)

14. Empresas is an autonomous agency ovmed by the city of Cartagena.It is the sole authorized distributor of electricity in the city and sur-rounding areas. The agency is governed by a Board of Directors which em-ploys a manager to conduct its affairs.

15. In 1951 Empresas was formed as a department of the municipalgovernment and started operations byr acquiring the existing Manga plant,wlaich consisted of three steam units with a total installed capacity of6.6 Aw. In 1952 and 1954 diesel units were added to the plant to bringthe total nameplate capacity up to 11.65 MWI (Annex 1). The oldest steamunit (2.5 MW) has been in service about 30 years; the other two unitsabout 13 years.

16. After Empresas installed the additional 5 MW of diesel capacityin the Manga plant in 1952 and 1954, the service improved, but the rapidlygrowing demand continued to overload the facilities. Empresas made commit-ments to purchase two new steam units, but it was not able to meetthe pay-ments. The Instituto was asked for financial help, and Electribol assumed

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Empresas' remaining financial obligations for the equipment, which wasinstalled in Electribol's Cospique plant. For its equity in the equip-ment, Empresas received Electribol shares. After the Cospique plant wascommissioned in early 1960 and until the lease of the Manga plant in May1962, Empresas purchased from Electribol all of its energy requirements inexcess of that which it could not produce. The purchases amounted toabout one-third of the Empresas needs.

17. In 1961 a Bank mission recommended to Electribol and Empresasthat operation and control of generating facilities be integrated toachieve the most economical production of power. By contract effectiveMay 1, 1962, the Manga power plant was leased to Electribol. This per-mits Electribol to utilize efficiently the generating facilities of bothCospique and Manga and should decrease average power production costs.Electribol has agreed to make no changes in the leasing arrangements ofthe Manga plant without first discussing the proposed changes with theBank. Electribol has also agreed that it would consult with the Bankbefore entering into any other leases of equipment for power generationor contracts for the purchase of power.

18. Empresas' principal functions until 1961 were to sell electri-city and water in the city, although it was also charged with operatingsanitation facilities and providing other minor services to the city. InJuly 1961 Empresas was reorganized and made an autonomous body with ex-panded functions. The reorganization resulted from the financial require-nents of an expanded water supply program for which the lending institutionsdemanded an autonomous agency as the borrower. Empresas t expanded activi-ties to the city now include the furnishing of power, public lighting,municipal water supply, sewage disposal system, fire protection, abattoir,parks, street cleaning, garbage collection and paving of streets. Inaddition, it collects taxes including real estate taxes fromn which it re-tains a portion for performing services. The power activities areestablished as a separate department and independent accounts are main-tained for its operations. Assurances have been obtained that the fundsof the power department would be used exclusively for activities of thepower deoartment.

Instituto de Aprovechamiento de Aguas y Fomento Electrico (Instituto)

19. The Instituto was established in 1946 for the purpose of planningand constructing works for electricity production, the development ofirrigation, land drainage and water control. The Institutols funds comefrom appropriations of the National Government, from special taxes tofoster electrification and from repayment of loans and charges on projectsfinanced by the Instituto. In the field of electric power, the Institutohas established fifteen affiliated corporate organizatiorns which controland operate the power facilities in their respective areas. The Institutois a principal stockholder in these affiliates, having accepted stock forthe substantial amounts of development capital provided to each of them.Assurances have been obtained that the Instituto would give priority tothe Cospique Project in the allocation of available funds if Electribolrequires additional funds to complete the project.

20. The Instituto has a small technical and administrative staff inits Bogota office. It relies largely on foreign and Colombian consultantsfor details of planning, design and construction. Its staff is engagedprincipally in general administration of the Instituto's program,in super-vising the consultants' activities and in directing its affiliates.Assurances have been obtained that the Instituto will furnish financial,technical and administrative management assistance to Electribol and thatthe Instituto will select consultants, acceptable to the Bank, to planany major expansion projects for Electribol.

III. THE POWER MARKET

21. The city of Cartagena is the principal power market of the areaserved by Electribol. In 1962 approximately 97% of Electribol's powerwas sold in bulk to Empresas for distribution in the city and suburbs.The remaining 3% was sold by Electribol over its own transmission and dis-tribution lines to consumers in three small communities and the rural area.The additional transmission facilities being constructed by Electribol willincrease slightly the power sold in small communities, but any future ex-pansion of generating facilities will depend almost entirely on the growthof the market in Cartagena and its immediate environs.

22. Population of Cartagena and its suburbs was estimated at 164,000in 1962. Census figures for 1938 and 1951 and estimates in subsequentyears indicate a population growth of slightly more than 3.5% per year.Gross generation from 1955 through 1961 increaselby more than 11% annually.Per capita sales of electric power in 1962 exceeded 400 kwh, and peakload was 18.6 MW. In recent years the load factor has been approximately55%. Population and basic load data for Cartagena and its suburbs aregiven in Annex 2. In the recent past energy sales to the principal cate-gories of consumers have been approximately: 50% residential; 25%industrial; 17% comm!lercial; 8% for public uses. (See Annex 3).

23. vTo new power uses expected to develop in the area are: theAbocol fertilizer plant which would require more than 4 INW and the expan-sion of the municipal water system, which would add more than 0.5 1NJ ofpumping load. The fertilizer plant should start operations in 1963. Itis estimated that the plant would have a 90% load factor and the energyrequirements would be about 30 million kwh per year. As the sole author-ized marketing agency for the area, Empresas will sell the poser, whichwill begenerated by Electribol.

24. A cement klinker grinding plant is under construction and willrequire power late in 1963 or early 1964. Plants for the production ofsoda ash and ammonia are also under construction, but will generate theirown power.

25. The expansion program planned by Electribol includes the extensionof the transmission lines to seven small communities and adjacent ruralareas, together with the expansion of the substation facilities. Some of

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these communities are served by local diesel planLs. Sales to such userswould not exceed 5% of total sales thrmugh 1970. The extension of trans-mission lines to these areas would meet the Institutols objective of pro-viding electric power to areas without such service. However, to avoidburdening Electribol with high-cost, low-revenue producing facilities,Electribol and the Instituto have agreed to limit expansion in rural areas.(See paragraph 37.)

26. Future power loads at the Cospique power plant were projected byestimating the requirements of the city of Cartagena to which was addedthe need of the Aboool fertilizer plant, the municipal water pumping plant,and the small communities and rural areas. Cartagena's requirements weredetermined by assuming a population increase of approximately 3.5% perannum and a 5% annual increase in per capita electricity consumption. Thisis considered conservative, compared with Cartagena's past annual growthintotal electricity consumption of more than 11%, and its annual averageincrease of 8% in total customers. Energy consumption would increase morethan 50% in 1963 when the Abocol plant begins operations and when thewater pumping plant expands its output. Thereafter to 1970, annual in-creases in energy consumption are estimated at about 8%. (See Annexes4 and 5.)

27. In 1965 there would be on the Electribol system an estimatedpeak load of 24.8 MW at the bus bars and production of 146.3 million kwhand in 1970 an estimated peak demand of 36.0 MW and production of 206.3million kwh (Annexes 4 and 5). Before the first 12.5 MW unit is com-missioned, there would be periods of power shortage. After the first unitis commissioned, the peak load on the system would still exceed plantcapacity with the largest unit out of service. This condition would beacceptable only for a short period. Reserve capacity is necessary becausethe system is without any connection to other systems from which reservecap-icity might be drawn. The load is also quite uniform during the entireyear. A second 12.5 MW unit is therefore included in the project forcommissioning a year later. The 25 MW of capacity would provide a depend-able source of power for the estimated loads until 1970.

28. The initial power requirements of the Abocol plant could for ati-ie be provi&ed from the existing facilities of the Cospique plant. How-ever, because of the growing demand in the city of Cartagena, Abocol hasinsisted that Electribol must have construction of additional generatingcapacity underway, or the assurance thereof, to provide Abocol with itspower requirements with a minimum of rationing in the city.

29. Suitable contract arrangements have been consummated betweenAbocol, Empresas and Electribol to furnish Abocol's power requirements.

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IV. THE PROJECT

The Power Plant and Transmission Lines

30. The project which the Bank has been asked to assist in financingconsists of:

(a) the expansion of the Cospique thermal plant bythe installation of two 12.5 MW units includingtwo semi-outdoor type boilers designed to burnBunker-C oil or gas and to operate at 600 poundsper sq. inch and at 8250F. The necessary exten-sions would be made to the switchyard, coolingwater system and other auxiliary facilities atthe plant;

(b) construction of the additional transmission linesand the expansion of the substations and theCospique switchyard;

(c) rehabilitation and expansion of the distributionsystems in Cartagena and in seven small communi-ties of the northern part of the Department ofBolivar.

Details of the project are given in Annex 6.

31. The first 12.5 MW unit would be commissioned by the end of 1964(together with about 140 km of transmission lines), and the second aboutone year later. The schedule of construction (Annex 7) is realistic.

32. The expansion ujould increase the i:stalled capacity at theCospique power plant to a total of 35 MW by the end of 19659 providing fctthe first time reasonable amounts of power for industrial gtowth in theCartagena area. With the lease of the Manga power plant, Ulectribolwould control more than 46 MW of installed capacity.

33. Fuel for the Cospique plant is obtained from the anional re-finery, located approximately two miles frcm the Cospique power plant,through an oil pipeline owned by the refineryo Tho rdfinery is suppliedby an oil pipeline directly from the oil.fields, Adequate fuel suppliesare thus assured for the power plant.

34. Planning and preparation of reports on the project were donejointly by the Instituto and its consultants. Syndibel of Beigium pre-pared plans and specifications for the engineering, and Alfonso Posadade Francisco, a co, sulting engineer of Bogota, prepared load projectionsand financial studies.

35. Early in 1961 bids were received on the basis of internationalbidding for the first 12.5 PM unit, boiler, transformers and all relatedequipment to complete the installation of the first unit. The successful

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bidder MAN of Germany was awarded the contract late in 1962 and agreed tocomplete the installation 24 months after signing the contract. On thebasis of this, the new unit should be ready for operation early in 1965.The Instituto has also advised the manufacturer that it would exercisethe option to purchase the equipment for the second unit at the same pricequoted for the first unit, subject to escalation provisions quoted by 1,MNin its bid for the first unit. The second unit is scheduled for operationat the end of 1965.

36. With Syndibel assuming responsibility for technical adequacy ofthe power plant designs and for supervision of construction, Electriboland the Instituto should be capable of completing the work on the powerplant.

Transmission and Distribution System

37. Low tension transmission lines extending from the Cospique powerplant and from the existing 66 kv line are under construction to serve thesmall towns and villages in the northern portion of the Department ofBolivar. Additional low tension transmission lines will be constructedand these together with those already under construction will be includedin the project. The total length of low tension lines will be approximate-ly 140 km to serve seven towns and villages as shown on the attached map.New substations and expansion of existing substations are also included inthe project. These lines and substations are being constructed to meetthe objectives of the National Government to provide electric service tothe rural areas. As is the case with most rural lines the revenues willbe low particularly in the initial years and it may be a number of yearsbefore these facilities will be able to pay their way. Consequently,Electribol and the Instituto have agreed that the construction of suchlines should be limited to those that can be constructed with fundsavailable from taxes, appropriations, or other equity contributionsobtained from the National Government, the Department of Bolivar or muni-cipalities.

38. The recabilitation and expansion of the distribution facilitiesin the city of Cartagena are an important supplemental feature of the ex-pansion program. A portion of this work has already been started by theEmpresas and would be continued at a pace to meet all requirements as theload develops. It is estimated that the total expenditure of approximate-ly Us$0.7 million equivalent would be required on the system through 1965.Of this amount US$o.46 million is included in the proposed loan to Elec-tribol for relending to Empresas. Electribol has agreed to enter into asubsidiary loan agreement with Empresas on terms and conditions satis-factory to the Bank.

39. The staffs of Electribol and the Instituto are jointly doing theengineering work for the transmission, distribution and substation facili-ties operated by Electribol. From their past experience, it appears thatthese two organizations are capable of doing the work satisfactorily.The staff of Empresas is designing and constructing the distributionsystem expansion at Cartagena. Empresas has agreed to employ an engineer-

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ing consulting firm to review its plans of expansion to assure adequateand economical designs.

40. By late 1969 or early 1970 additional facilities will be requiredto meet further increases in power loads. The Instituto has plans for theconstruction of a large generation plant approximately 150 km south ofCartagena near Magangue where a large natural gas field is located. TheInstituto has programmed the commissioning of the first generating unitsof this plant for late 1968 or early 1969 from which adequate electricalenergy would be available to meet the future needs of the Cartagena area.In accordance with the plans of the Instituto, Electribol has planned anexpansion program which includes the construction of transmission linesbetween the proposed power plant and Cartagena. Construction of thetransmission lines would be started in 1967 and be completed in 1969 tomeet the expanding needs of Cartagena.

Cost Estimates

41. The construction costs of the project are as follows (for detailssee Annexes 8 and 9):

(in millions of US$)Foreign LocalExchange Costs Total

Electribol

Power plant equipment 3.60 .21 3.81Civil works .13 .44 .57Transmission lines, distributionlines & substation additions .37 .41 .78Engineering .10 - .10

Sub-total 4.20 1.o6 5.26

Interest during crnstruction .39 .39

Electribol total 4.57 1.06 5.65

Enipresas

Distribution system .42 .27 .69Interest during construction .o4 .01 .05

Emoresas total .46 .28 .74

Grand Total 5.05 1.34 6.39

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42. The estimates for equipment in the power plant are based upon afirm contract for the first unit wfith an option to purchase the second unitat the same price plus escalation to compensate for increases in the costof fabrication and labor erection through 1965. In addition, 6% has beenadded to the cost of the second unit for contingencies. The estimatedcost of civil works for the power plant is based upon bids received inMarch 1963 to which has been added 20% for contingencies. The estimatesfor transmission and distribution lines are based upon the costs ofsimilar works currently being performed by Electribol to which has beenadded 15% for contingencies. The estimates have been prepared on arealistic bisis and the allowances made are reasonable.

43. The cost for the expansion of the Cospique plant amounts toUS$192 per kw. This is reasonable for expansion of a plant of this sizewhere many of the basic facilities are already installed. If the addi-tions to the transmission lines, distribution system and substations ofElectribol's system are included the unit cost would increase to US$226per kw.

44. With the new 12.5 MW units operating on base load the cost ofgeneration on the system should be considerably lower than at present.The cost of energy produced would depend on the percentage of use of theolder and less efficient units and this would vary from time to time.For the next few years the cost of energy sold is estimated to averageabout 12 centavos (9.3 mills US) per khd. All alternatives for the pro-posed project including smaller size units would result in higher pro-duction costs. The estimated load growth justifies the capacity of the25 ILIN proposed. In the first few years of operation sales in the ruralareas would be small. However, sales are estimated to increase, and by1969 would show rather satisfactory profits and, in any event, the lineswould not be an undue financial burden to Electribol provided the pre-sent program of construction is not exceeded. Serving the rural loads bytransmission lines would be more economical than providing service throughdiesel plants in each of the small towns.

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V. FINANCIAL ASPECTS

Tariffs

45. The rates of electric public utilities in Colombia, both privatelyand publicly owned, are subject to the approval of the Superintendencia deRegulacion Economica, an agency under the Ministerio de Fomento. For themost recent rate increase in May 1963 the Superintendencia had to obtainin addition a specific approval of the Government's Council of Ministers.

46. Electribol sells the major portion of its energy to Empresas inbulk. The original tariffs were 9.6 centavos (10.7 US mills) per kwh forthe first 3 million kwh per month and 8.2 centavos (9.1 US mills) for eachadditional kwh. These tariffs proved inadequate to produce revenuessufficient to cover operating cost and in early 1962 Electribol appliedfor a rate increase which was approved by the Superintendencia as ofNovember 1, 1962. This rate increase was soon offset by the cost in-creases resulting from the devaluation of the Colombian peso from Ps 6.7to Ps 9 to the US$ in October 1962. As of May 1, 1963, another rate ad-justment was therefore granted which provided for a 35% increase overthe November rate level raising tariffs to 13.5 centavos (15 US mills)per lcwh for the first 10 million kwh per month and 12.15 centavos (13.5US mills) for each additional kwh.

47. Electribol's retail customers in the small communities and ruralareas in the northern part of the Department of Bolivar are billad at arate of 30 centavos (33.3 US mills) per kwh. This rate has remained un-changed.

48. Ermpresas purchases power from Electribol and distributes it inthe Cartagena area. Its rates are therefore closely related to Electribollsand were increased correspondingly. In 1962 revenues from sales to allclasses of consumers averaged 12.7 centavos (14.1 US mills) per kwh. Thiswas insufficient to meet operating cost. A rate increase of about 16% asof November 1, 1962 resulted in an average rate of 14.8 centavos (16.4US mills) per kwh. To compensate for cost increases after the 1962 de-valuation of the peso, another increase of about 40% was approved and be-came effective as of May 1, 1963 bringing the average rate to 20.7 centavos(23 US mills) per kwh.

49. The rates in effect as of May 1, 1963 were used as a basis forthe financial forecasts of Electribol and Empresas. Allowing for con-tinuing inflationsry increases in operating costs, a further increase inavera-e revenues per kwh of about 10% would be necessary by 1965. (Seeparagraph 61.)

Present Financial Position of Electribol

50. A condensed balance sheet of Electribol for December 31, 1962in millions of pesos is shown below:

- 12 -

ASSETS LIABILITIES

Fixed assets in operation Capital 28.6(at cost) 23.1

Less: Depreciation reserve 2.1

Net fixed assetsin operation 21.0

Work in progress 1.3 Surplus and reserves .2

Total net fixed assets 22.3 28.8

Investment in subsidiaries 5.1 Long-term debt(incl. 12 months maturities) 2.3

Current and other assets(net) 3.7

31.1 31.1

Debt/equity ratio 7/93

51. Long-term debt as shown above consists of (a) a dollar loanfrom the Coffee Federation equivalent to about Ps 1.3 million, at aninterest rate of 6%, for the financing of transmission and distributionequipment; this loan is repayable in pesos over 5 years starting in 1965after a 3-year grace period; and (b) various suppliers' credits for thepower plant at Cospique totalling about Ps 1 million, scheduled to be re-paid by 1964.

52. The equity of Ps 28.8 million ($3.2 million) consists of thecapital paid in (see paragraph 6) net of accumulated losses amounting toabout Ps 700,000 (see paragraph 53) plus capital surplus and reserves ofabout Ps 900,000.

Recent Earnings Record of Electribol

53. Condensed income statements for 1961 and 1962 are shown in Annex10. Electribol started operations in May 1960 and at the end of the 8-month period to December 1960 showed an operating loss of Ps 108,000.Electribol continued to operate at a loss in 1961 and 1962 closing theseyears with losses of about Ps 390,000 and Ps 220,000 respectively.

54. The financial problems of Electr ibol in the past stemned fromthe following conditions:

(a) the ineffective use of the Cospique capacity in1960, 1961 and part of 1962;

(b) poor administrative management and excessive staff;

- 13 -

(c) poor technical operation of the plant; and

(d) delay in adjustments of tariffs.

55. The integration of power operations through the lease of theManga plant, the strengthening of administrative and technical control bythe Instituto and the tariff increase obtained in November 1962 were de-signed to solve the problem4 However, sizeable cost increases after thepeso devaluation in late 1962 again worsened Electribol's financialposition. Unit costs for fuel increased about 49% and other operatingcosts increased by about 45%, but the necessary rate increase was rot ap-proved 'untl May 1963. With the expected rapid increases in sales, parti-cularly to the Abocol fertilizer plant, with the technical and adminis-trative improvements already achieved and with the higher tariffs, Electri-bolls operations should show profits from 1963 onwards.

Preposed Financing Plan of Electribol

56. A 7-year forecast (1963-1969) of sources and applications offunds is given in Annex 11. It is based on a forecast of earnings shownin Annex 10 and specific assumptions listed in Annex lOa (see also para-graph 61). Total capital expenditures during this period are estimatedat about Ps 94 million ($10.4 million). This program includes the pro-posed project, new investments in subsidiaries, and the possible futureexpansion of the transmission lines to connect with the Magangue plantwhich the Insituto plans to build.

57. The following summary of Annex 11 shows the financial require-ments during the construction period of the proposed project (1963-1966)and the period thereafter (1967-1969) and the sources from which theserequirements would be met:

1963-66 1967-69Tin millions of Pesos)

Financial RequirementsConstruction expendituresProposed project J 46.1 -Assumed future expansion - 45.0

Investment in subsidiaries 2.9 -

Capital expenditures 49.0 45.0

Debt service 8.9 2/ 14.8

Total Financial Requirements 57.9 59.8

1/ A payment of $137,000 (Ps 1.2 million equivalent) was made in 1962 toMAN, Germany, supplier of the first unit included in the project.

j/ Includes Ps 3.1 million interest during construction financed fromIBRD loan, and Ps 700,000 debt service payments recovered from Empresas(see Sources of Funds).

- 14 -

1963-66 1967-69(in millions of Pesos)

Sources of FundsInternal cash generation 18.1 28.8

Long-term borrowings:Proposed IBRD loan 450.Less: portion relent to Empresas 4.l 40.9 -Assumed future loan - 22-5

Equity contributions 7.7 -Recovery from Empresas .7 1.2

Total Sources of Funds 67.4 52.5

Cash accrual (deficit) 9.5 (7-3) Y

58. Under the proposed financing plan Electribol would be able tomeet all financial requirements during the construction period and wouldin addition accumulate a cash surplus which would be used to meet increasedworking capital requirements and to help in the financing of the assumedfuture expansion program through 1969.

59. The borromings assumed are as follows:

(a) The proposed Bank loan of $5 million would beobtained in mid-1963, at an assumed rate of 5-1/2%and for a term of 20 years including a grace periodof 3l years. A major portion of interest duringconstruction is included in the loan; thedifference would be provided from Electribol's ownfunds. $460,ooo of this loan would be relent toEmpresas;

(b) Another foreign exchange loan would be obtained inlate 1967 for financing the estimated foreign ex-change cost of the Magangue transmission line at anassumed interest rate of 5-1/2% and with amortiz-ation to start in 1970 after a 3-year grace period.

60. In 1963 Electribol is expected to receive equity contributionstotalling Ps 7.7 million. Ps 5.9 million of this amount would come fromthe approved 1963 budget of the Instituto and Ps 1.8 million from theDepartment of Bolivar. No further equity contributions have been takeninto consideration.

y This deficit would be covered by the previously accumulated cash balance.

- 15 -

Estimated Future Earnings of Electribol

61. A forecast of income statements for the 7 years 1963-69 is shownin Annex 10. The assumptions on which it is based are listed in detail inAnnex 10a. Unit prices for fuel and other operating costs up to the endof 1965 include an annual inflation allowance of 7% over and above therecent adjustments in these costs (see paragraph 55). On this basis anadditional increase in rates of about 10% in 1965 would be necessary forElectribol to maintain an adequate financial position. No further costadjustments were made after the completion of the project in 1965 on theassumption that further inflationary cost increases would be corrected bya proportionate rate increase under the proposed rate covenant (see para-graph 65). The financial results would be as follows:

(a) Net profits in 1963 of Ps 1.2 million would off-setthe cumulative losses of previous years and wouldincrease to Ps 5.3 million by 1969;

(b) The rate of return of net fixed assets in operation(at cost) would amount to 7.5% in 1966 after com-pletion of the project and would increase to 13.1%in 1969 (Annex 12). If the assets were revalued toreflect the higher Peso equivalent of the foreignexchange component after the peso devaluation, thereturn would be 6.5% in 1966 and 11.7% in 1969;

(c) The year-end debt/equity ratio would range between2V/76 and 51/49 (Annex 12);

(d) Total debt service payable would be covered 2 timesby Electribol's internal cash generation in 1967when full debt service on the proposed IBRD loan isassumed; in 1969 the coverage would be 1.9 times(Annex 11);

(e) Net income from operation would cover total interestpayable more than 2 times after the completion ofthe project in 1965. (Annex 11).

62. These ratios and coverages shiow that Electribol would on the basisof present forecasts and assumptions maintain a satisfactory cash positionthroughout the period under review. The return on investment which isinitially rather low would improve gradually and reach a satisfactory levelby 1967.

Future Financial Position of Empresas

63. The financial appraisal of Empresas' Power Department is basedon a report prepared by the Instituto. Forecast5of Empresas' income state-ments, cash flow and balance sheets for the seven years 1963-69 are shownin Annex 13, 14 and 15. Empresas' financial position during these yearswould be as follows:

- 16 -

(a) As a result of the recent tariff increases Empresaswould operate at a profit from 1963 on, while operat-ing losses were incurred in the past (Annex 13).The assumed 10% increase of Electribol's rates in1965 (see paragraph 61) would require an increase ofsimilar magnitude for Empresas. The forecast incomestatements are based on this assumption;

(b) Past losses of Empresas' Power Department have beencovered adequately by internal loans from otherdepartments of Emprecas. The total of these loansas of March 31, 1963, amounted to Ps 7.3 millionincluding Ps 1.6 million contributed early in 1963.This inter-departmental debt is free of interestand is kept on Empresas' books as deferredliability without repayment terms.

(c) The proposed construction program of Empresas during1963-66 contemplates expenditures of Ps 6.2 million.The proposed loan of $460O,000 (Ps 4.14 million) re-lent by Electribol to Empresas would cover theforeign currency cost or about 61% of the total con-struction expenditures during this period, plusinterest during construction on the foreign exchangeloan. The remaining 39% would c me from internalloans and cash generation. From 1967-69 Empresasplans to spend for its expansion an average ofPs 370,000 annually wAhich is assumed to be financed100% from internal cash generation;

(d) Debt service coverage iwould range between 2.8 and7.8 times after the project is completed in 1965;

(e) The rate of return on net fixed assets in ooerationwould be 7% in 1966 after completion of the pro-posed program and would increase to 15.1% in 1969(Annex 15). If the assets were written up to re-flect the peso devaluation the returns would be5.4% in 1966 and 12.7% in 1969;

(f) The year-end debt/equity ratio would range between62/38 in 1965 when the proposed loan is fully dis-bursed, and 45/55 in 1969.

64. These ratios and coverages are satisfactory or w-ould reachsatisfactory levels towards the end of the forecast 7-year period.Empresas would have no difficulties to meet its financial obligations to-wards Electribol and to finance the required expansion of its distributionnetwork,

- 17 -

Proposed Rate and Debt Limitation Covenants

65. It has been shown in the previous two sections that bothElectribol and Empresas would maintain a satisfactory cash position through-out the period under review. Further rate adjustments would, of course,be required if inflationary cost increases should continue. In order toensure an adequate level of rates both entities have agreed to keep tariffsat a level which would allow them (a) to cover from revenues all operatingand related expenses, depreciation or amortization (whichever is greater),and interest and (b) to make reasonable allocations to reserve.

66. These allocations to reserve are generally expressed as con-tributions towards expansion. Electribol's expansion beyond the presentproject is, however, not well defined. It was therefore agreed that thedesirable level of tariffs would be determined annually by estimating thetotal requirements under (a) above for the subsequent two years and byadding at least 15% of this total as a margin which would protect Electribolagainst unexpected deviation from the estimates. The initial test underthis covenant would be made early in 1965 when the first unit of the pro-ject would go into operation. In the forecasts presented, Electribolwould annually meet the requirements of this covenant. The appropriatenessof the figure of 15% would be reviewed from time to time.

67. In addition, Electribol agreed to a covenant which would requirethe Bank's prior approval to incurring new debt unless internal cashgeneration of the previous 12 months (adjusted for tariffs in effect at thetimie of the calculation) plus recovery from Empresas would cover maximumfuture debt service at least 1.4 times. The assumed new debt in late 1967would conform to these requirements.

68. In the case of Empresas the allocations to reserve would bedefined as a reasonable portion of expansion cost and Empresas has agreedto a commitment in the subsidiary loan agreement that this reasonableportion would amount to at least 30% of the sizeable construction programduring the period 1963-66, and to at least 50% of all annual requirementsthereafter. To implement this agreement, operating results and con-struction expenditures would be reviewTed at the end of each year using a2 -year avera'e, the year just ended and the year following. The estimatesof revenues for the future year would be based on the rates in effect orapproved at the time of the review. This covenant should be adequate toprotect the liquidity of Empresas, Electribol's largest customer, and nodebt limitation covenant seems to be required.

Auditors

69. Since the present auditor is a staff member under the supervisionof the General Manager (see paragraph 8) Electribol agreed to engage anoutside accounting firm acceptable to the Bank to audit its accounts in thefuture.

- 18 -

VI. CONCLUSIONS

70. The project is technically sound, the estimated cost reasonableand the construction schedule realistic.

71. The market for power in the area justifies the installation ofthe proposed facilities.

72. The Instituto and Electribol with the assistance of its con-sultants are capable of constructing the project. The Empresas is capableof constructing the Cartagena distribution expansion with the aid ofqualified consultants.

73. The financial situations of Electribol and Empresas have beenimproved by the tariff increases obtained in May 1963 which have off-set recent cost increases due to the peso devaluation. On the basis ofpresent forecasts, both entities should arrive at, and maintain, a soundfinancial position after the completion of the project in 1966. Appro-priate covenants for this purpose have been included in the respectiveloan agreements.

74. The project, including the expansion of distribution facilitiesin Cartagena, is considered suitable for a Bank loan of $5.0 million witha term of 20 years including a period of grace of 3- years.

June 24, 1963

ANNEX I

EXISTING FACILITIES

Generation Facilities

The generating facilities which provide the power for the re-gion, consist of the Manga plant and the Cospique plant.

The Ivianga Plant

The Nanga plant has both diesel-electric equipment and turbo-generators. The total installed capacity is 11,650 kw, divided betweenthe following units:

Unit No. 1. - Sulzer diesel motor, two cycle, 10 cylinders3,600 H.P. 275 r.p.m., with 3,100 kva and 4,160volts alternatorFuel: Bunker-C anid Gas-oil.

Unit Nos. 2 & 3.- Worthington extraction turbines, 400 p.s.i.,8500F., 3,600 r.p.m. with 3,750 kva and4,160 volts alternators.Foster WTheeler boilers.

Unit mo. 4 - General Electric 200 p.s.i., 5000F., 3,600 r.p.m.extraction turbine with 2,670 kva and 4,160volts alternator. Riley boiler.

Unit No. 5 - Sulzer diesel motor, two cycle, 10 cylinders,3,600 H.P., 275 r.p.m., with 3,100 kva and4,160 volts alternator.Fuel: Bunker-C and Gas-oil.

Unit No. h is in poor condition after 30 years service and atpresent is used only during peak load. In future it is planned to usethe unit only for standby purposes.

Unit No. 1 is not similar to Unit No. 5 and has a lower efficiency.The two diesel units have been operated 27,000 hours each up to March 1962.At the time of the visit by the Bank mission in mid-1962 Unit No. 5 was beingoverhauled and upon completion of that work, Unit No. 1 was to be overhauledand converted for Bunker-C operation. Total cost of the work on the two unitsis estimated at Col. Ps. 1.2 million. Unit No. 1 is used only during peakhours, while Unit No. 5 is generally used from 8 a.m. to 10 p.m. Units No. 2and 3 are normally used to supply part of the base load to the city.

Fuel for the I'4anga plant is delivered by boat from the refineryat Namonal. Because of the location of the Manga plant, future extensionsto it have not been considered.

ANNEX 1Page 2

The Cospique Plant

The Cospique plant commenced operation in May 1960. It is lo-cated on the bay, approximately 10 airline km south of Cartagena. Theplant is close to the oil refinery of the International Petroleum Companyat Mamonal, which is also the coastal terminal of the Andian NationalCorporation oil pipeline that extends from central Colombia. The planthas two identical 5 MW MAN steam turbines, 400 p.s.i., 750°F., 3,600 r.p.m.,with 6,250 kva and 4,160 volts alternators, with MAN boilers. The fuel forthe plant is supplied from the storage tanks of Esso Colombiana at the re-finery through a pipeline of approximately 2 kilometers in length.

Transmission and Distribution System of Electribol

The Cospique and Manga plants are connected by a 66 kv (No. 2/0 AWG)transmission line approximately 18 km long. Approximately 15 km of thisline is installed on steel towers, is double circuit, and connects with theEl Bosque substation at the Cartagena city limits as well as with the 66 kvline which extends approximately 32 km to the substation at Gambote. Theselines constitute the high voltage system of the region.

A system of 13.2 kv lines approximately 32 km in total length andin operation since late 1960 extends from the Gambote substation to theurban distribution systems in the small towns of Arjona, Turbaco, andTurbana. The Car-tagena aqueduct pumping station at Gambote has been servedfrom the Gambote substation since November 1960. The lines are now beingextended to towns beyond Gambote.

The Cartagena distribution system is fed from the Manga substationand from the El Bosque substation which started operation in February 1961.

The Mamonal zone is served directly by a 3 km line from the 4.16kv bus at the Cospique switchyard. A new line between the Abocol fertilizerplant and the switchyard is now under construction.

The Manga substation is equipped with a 66/h.16 kv, 6 MVA trans-former and the El Bosque substation with a 55/7.2 kv, 6 MVA transformer.The 66 kv lines are served from Cospique by two 6.25 MVA transformers. TheGambote substation is presently equipped with a 66/13.2 kv, 3 MVA trans-former.

ELECTRIC ENERGY PRODUCTION AND LOAD GROWTH

EIPRESAS DE CARTEGERA SYSTEM

1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962

Eatimated Population - in thousand 111.3 115.3 119.5 123.8 128.3 132.9 137.7 142.7 147.8 153 159 164

Gross Generation - kwh /1 thousands 16,976 19,757 21,480 28,764 38,704 42,509 50,783 55,667 60,140 66,466 73,061

Station Use - kwh thousands 79B6 1,842 1,187 1,632 2,201 2,443 3,564 3,158 2,355 2,934 2,809

Net Output - kwhLl tbousands 16,180 17,915 20,293 27,132 36,503 40,066 47,219 52,509 57,785 63,532 70,252 ) 2/Energy Lost - kwh - thousands 3,599 5,015 5,618 7,784 8,422 5,970 6,731 7,921 8,752 9,240 9,563

Energy Lost - 21.6 28.0 27.6 28.7 23.1 12.9 14.2 15.1 15.1 11.5 13.6

Total Energy Sales - kwh thousands 12,681 12,900 14,675 19,348 28,081 34,096 40,488 44,588 59,033 54,292 60,689 67,593

Available Station Capacity - kw 3,400 5,000 5,430 6,650 9,150 11,650 11,650 11,650 11,650 21,650 21,650 21,650

System Peak Demand - kw 3,400 4,950 5,430 6,400 8,85o 9,300 10.850 10,700 11,555 12,700 14,500 18,600

Annual Load Factor 0.57 o.46 0.45 0.51 0.52 0.52 0.53 0.59 0.59 o.60 o.58 0.596

Per Capita Annual Gross Generation 153 171 180 232 302 320 369 390 406 434 458 2/

/ Includes purchased power from Cospique Power Plant

a/ Not available

June 17, 1963

CIJSTOMERS, ELECTRIC ENERGY SALES, REVENJES AND EXPENDITURES

EMPRESAS DE CARTAGENA SYSTEM

Years: 1955 1956 1957 1958 1959 1960 1961 1962Customers - Residential 10,856 13,124 13,917 14,894 16,050 17,1431 18.973- Comsercial 571 641 674 710 725 753 790- Industrial 204 211 216 227 230 229 236- Others 100 105 1114 127 143 154 182Total Customers 11,731 13,139 14,081 14,921 15,958 17,148 18,567 20.181Electric Energy Sales - Residential kwh thousands 13,835 17,654 20,056 25,216 25,986 28,240 31,392 36.864- Commercial kwh thousands 4,419 5,188 5,567 6,263 7,547 8,900 10,514 11,699- Industrial kwh thousands 7,515 9,345 10,794 9,958 11,854 13,087 14,535 14,213- Others kwh thousands 2,312 1,909 4,071 3,151 3.646 4.065 4,248 4817Total Electric Energy Sales kwh thousands 28,081 34,896 40,488 4141,588 49,033 54,292 60,689 67,593

Revenues from Sales of Energy - Residential - Ps thousands 1,2914 1,590 2,198 2,754 2,968 3,557 14,113 4,938- Commercial - Ps thtousands 655 720 871 1,071 1,2214 1,1462 1,731 1,914- Industrial - Ps thousands 412 481 638 705 854 1,124 1,458 1,558- Others - Ps thousands 99 236 281 280 330 106 107 403

Total Revenues - Ps thousands 2,460 3,027 3,988 4,810 5,376 6,249 7,409 8,813Average Revenue per kwh from Energy Sales centeros 8.76 8.8S 9.85 10.78 10.96 11.51 12.20 13.10

Operating Expenses and Reserve - Ps thousands 2,182 2,771 3,687 4,742 5,999 6,891 8,504 10,181Average Operating Expenses per kwh centavos 7.76 8.13 9.11 10.64 12.33 12.70 14.00 15,06

6/17/63

50 5

ELECTRIFICADORA DE BOLIVAR PEA LOAD. CAPABOLOTDIES ANDI

MSTALLATIOON SCHEDULE______40 FO THI CARTAGEA AREA 40

LU

0

U,) NOMINAL CAPACITY -1i

0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

0 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~zw ~~~~~~~~0

U- 0

o) C )

0 ~~~~~~~~~~~~~~~~~FIRM CAPACITY -N< (~~~~~~~~~~~~~~Wiih largest unit 0

CI) out of service)D 20 20 0

TOTAL SYSTEM PEAK LOADOr ~~~~~~~NCLUDING CONNECTED

w (L ;~~~~~~~~~~~~~NDUSTRIAL LOADS0~~~~~~

PEAK LOAD ) PEAK LOAD-CARTAGENA AND SMALL TOWNS

a0 10

z~~~~~~~~~~~~~~~~~~~

0 I III I I I0 Z'45 '46 '47 '48 '49 50 '51 '52 '53 54 '55 56 '57 '58 '59 '60 '61 '62 '63 '64 '65 '66 '67 68 '69 '70 r

MEASURED ESTIMATED -

JUNE 1963 IBRD-916R

225 225

COLOMBIA

ELECTRIFICADORA DE BOLIVAR200 . 200

ANNUIAL ENERGY PRODUOCTOON.AND 1 POPULDAiTOON GROWTH E,

17517

'4 '4 4 4 4 '0 ':5 3 '4 .'6 '7 '8 5 6 6 6 '3 '4'5 '6 6 6 6 *

4

J 150 I

z

'A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P1

o zEnergy Production ..

z 100 * * .:

I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~z..

50

25 2

zz

'45 '46 '47 '48 '49 '50 '51 2. ~53 '54 t5 '56 '57 'se '59 '6.0 l '62 %3 654 '6.5 '66 '67 '6 s .70

MEASURED 4-EsrIMATED 0JUNE 1963 IBRD-915R

hawa 6

DESCRIPTION Oi? THE PROJMCT

1. Steam Characteristics

The steam condition at the turbine inlets would be as follows:

Pressure 600 p.s.i.- - 2 kg/cm2

Temperature 820°F -------- 44oC

The heat consumption of the units at full load would be 13,220Btu/kwh. The corresponding cost would be 4.0 cer,tavos/kwh or ̂ 5 US millsper kwh with Bunker-C costing USV '0,0i per US gallon or US0Q0.34 per millionBtu.

2. Turbine Generator Characteristics

Each turbine-generator unit would have the followingcharacteristics:

.Iaximum continuous output 15,625 kvaPower factor 0.8Rated voltage 13,800 voltsFrequency 60 cyclesSpeed 3,600 r.p.m.

3. Boiler Characteristics

The boiler would have a maximum continuous rating of 64 t/h at

Pressure 640 p.s.i. - -- 5 kg/cmTemperature 840F -------- 4480C

The boilers would have a mean thermal efficiency of 91.5 percent.

Each boiler would be fitted with an economizer, a super-heaterand an air preheater. Ilixed burners would allow fuel oil and gas com-bustion. Cormbustion would be automatically regulated (induced and forceddraught, fuel flow, super-heating temperature, waterlevel). Mieteringcontrol and indicating devices, would be grouped on a control panel.Soot blowers would be provided.

L. Fuel Oil Equipment

To maintain the 7 days of oil reserve as installed for the pre-sent units a new tank of about 1,200 m3, would be provided for the new unit.

A new service tank of about 75 m3 would also be provided. Atransfer pump of 40 cu.m/hr would fill the tank in less than 2 hours, andthe tanks would be interconnected for flexibility of operation.

ANNEX 6Page 2

5. Condensers and Auxiliaries

The condensers would be cooled by sea-water and would consist oftwo halves which can be cleaned while in operation.

Each condenser would be served by two steam ejectors i.e.:

- a spare and starting ejector,- a normal service low-capacity ejector.

Two condensate pumps would be provided for each unit:

- a normal service motor driven pump,- a spare and starting turbo-pump.

A new pump house and pumps for the cooling water would be pro-vided. Chlorination equipment would be provided to treat the coolingwater.

6. Power Plant, General

Civil works would be constructed for the two generating unitswhich would include the building to house the units and auxiliary equip-ment, the enlargement of the switchyard, the construction of roadwaysand walkways, and the grading of grounds in the new plant area. Electri-cal equipment to be added to the switchyard to meet the new requirementsof the added generation would include a 15 MWA transformer 13.8/66 kv,circuit breakers, disconnecting switches, and other accessories to com-plete the installation.

7. Transmission Distribution and Substation Facilities

The 13.2 kv transmission additions to be constructed would in-clude approximately 140 km of 3-phase line. Extensions to the distributionfacilities would be made in the towns of Santa Rosa, Villanueva, SanEstanislao, Soplaviento, Calamar, Santa Catalina, San Juan, and other smallcommunities in addition to the rehabilitation and extension of the distri-bution facilities in Cartagena. Two 6 MVA 66/4.16 kv transformers withswitching equipment and accessories would be added to the El Bosque sub-station. A 6 TvA 66/4.16 kv transformer would also be added to the Mangasubstation.

COLOMBIA

0 OSP0QUE POWER E:XPAGSOO PROJECTFABRICATION AND CONSTRUCTION SCHEDULE

1963 1964 1965J F MA M JJ JAI SION D J F M A M JJ JA SION D J F M A M J I J |A SO ND

POWER PLANT EQUI P FABR. _ _ _ First Unlf Second Unit

TRANSPORTATION Fir Ui - - - - SE|First unit Second UnitERECTION- --- mm-- -m- m-m-I-m

CIVIL ENG. WORKS BIDDING

EARTH MOVEMENT

FOUNDATIONS

SUPERSTRUCTURE-mm m-mmmm-

EQUIPMENT TESTS First Unit Second Unit

13.2KV TRANS. a SUBS. - _ m m m_

URBAN DISTRIBUTION > m m - m m m m m m x

m

IA In service dote of unit

JUNE 1963 IBRD-986RI

ANNEX 8

C 0 S T E S T I M A T E

Cospique Thermal Power Project

Foreign LocalExchange Currency Total$'000 Ps.1000 $'000 Ps.'005

ELECTRIBOL

First 12.5 kw Unit

Boiler & accessories 408 300 440 3,970Turbine & water supply 792 330 830 7,464Piping 130 65 135 1,235Electrical equipment 462 200 485 4,358

Second 12.5 kw Unit l1

Boiler & accessories 430 300 460 4,170Turbine & water supply 835 355 880 7,870Piping 62 60 67 620Electrical equipment 266 210 290 2,600Contingencies (approx. 6%) 212 100 221 2.010

Total for Power plant equipnent 3,59? 1,920 3,810 34,293

Civil works 110 3,280 475 4,275Contingencies (approx. 20%) 21 650 93 839

Total for civil works 131 3,930 o68 5,114

Engineering consultants 10 - 100 900

Total for powerhouse 3,828 5,850 4,478 40,307

13.2 kv transmission & substation 268 2,215 514 4,626Urban distribution systems 53 935 157 1,412Contingencies (approx. 15%) 45 474 98 879Engineerirg consultant - 85 9 85

Total for lines and substations 366 3,709 7?8 7,00O

Total powerhouse, transmission, dis-tribution & substation 4,194 9,559 5,256 47,309

Interest during construction financedby IBRD loan 391 _ 391 3,520

Total Electribol 4,585 9,559 5,647 50,829

ERPRESAS

Distribution system in Cartagena 418 2,425 688 6,187Interest during construction financed byIBRD loan 42 84 51 462

Total Enpresas 460 2,509 739 6,649

Total Project 5,045 2/ 12,068 6,386 57,47j

1/ 6.0% overall added to actual prices to compensate for price increase in fabrication, transport and laborerection costs through 1965, and for inflation during the year between the erection of the first and secondunits.

gj $45,000 of interest during construction on Electribol's expansion not financed by Bank loan.

June 17, 1963

E X P L N D I T U R E P R O G R A

Cospique Thermal Power Proiect

(in thousands of Pesos)

1962 1963 _____1964 _ _1965 1966

ELECTRIBOL

First unit 1,231 - 5,934 2,340 10,140 2,513 1,623 - -Second unit - 1,500 - 7,026 481 5,500 515 1,500Transmission & distribution expansion - - 899 1.200 2-254 2.510 143 - -

Sub-total 1,231 - 8,333 3,540 19,420 5.504 7,266 515 1,500

Interest during construction - - 220 - 1,310 _ 1,990 - -

Total Electribol 1.231 - 8,553 3,540 20,730 5.504 9,256 515 1,500 _

EMPRESA$

Distribution system - 990 545 1,368 665 1.404 710 - 505Interest during construction - - 60 20 122 23 196 24 - 17

Total Empreeas - - 1,050 565 1,490 688 1,600 734 - 522

Total Project 1,231 _ 9,603 4,105 22,220 6,192 10.856 1,249 1,500 522

--------------- in thousands of Pesos ------SUMMARY Foreien Exchange Local Currency Total

Electribol project cost 37,750 9,559 47,309Interest during construction 3,520 - 3,520

Total Electribol 41,270 9,559 50,829

Empresas project cost 3,762 2,425 6,187Interest during construction 378 84 462

Total Empresas 4,140 2,509 6,649

Grand Total 45,410 12,068 57,478

June 17, 1963

ELECTRIFICADWRA DE BOLIVAR

Income Statements 1961-1969

(in thousands of Colombian Pesos)

____ Actual _______________-- ------------------- Forecast ---------------------------- …- TotalYear Endine December 31 1961 1962 1963 1964 196, 1966 1967 1968 1969 1953-1969

Sales in millions of kwh:To Empresas 29.3 72.2 109.8 122.3 130.9 139.3 148.7 159.0 170.5

Small communities .9 1.9 _2.5 3.8 4.4 S4 5.8 6.o 6.4Total sales of power 30.2 74.1 112.3 l26 1 135.3 144.7 154.5 165.0 176.9

Revenues from power sales 3,108 7,166 14,470 17,620 20,728 22,181 23,570 25,013 26,682 150,264Other revenues 79 159 150 70 70 70 70 70 70 570

Total revenues 3,187 7.325 14,620 17,690 20,798 22,251 23,640 25,083 26,752 150.834

Operating cost:Operating expenses 2,786 6,440 11,870 14,500 14,700 13,900 14,500 14,900 16,000 100,370Lease Of Manga Plant and Warehouse

Purchases - 295 600 600 600 503 420 420 420 3,563Depreciation 750 794 860 1.030 2.110 2.960 2.960 2.960 2.960 lS84

Total operating cost 3,536 7,529 13,330 16,130 17,410 17,363 17.880 18,280 19,380 119,773

Net income from operation (349) (204) 1,290 1,560 3,388 4,888 5,760 6,803 7,372 31,061

Interest payable, net of interestrecovery from Empresas 307 1,387 2,064 2,202 2,249 2,710 3,076 13,995

Less: Interest capitalized 220 1,310 1.990 - - 560 1.030 S.llOInterest charged to operation 40 14 87 77 74 2,202 2.249 2,150 2,046 8,885

Net profit (389) (218) 1,203 1,483 3,314 2,686 3,511 4,653 5,326 22,176

H

Note: Assumptions for the forecast income statements are listed in Annex lOa.

June 17, 1963

ANNEX lOa

Assumptions for Forecast Income Statements

1. Forecast revenues from power sales are based on salesforecasts described in para. 26 and the rates in effectas of May 1, 1963 given in para. 46. A 10% increase inaverage revenue/kwh is assumed at the beginning of 1965(see para. 61).

2. Operating expenses from 1963 on reflect the increases infuel and other costs which occurred after the peso de-valuation. Additional inflationary increases of 7%annually have been assumed through 1965 (see para. 61).

3. In accordance with the contract signed between Electriboland Empresas, the fee to be paid to Empresas for leasingthe Manga Plant would be Ps 420,000 per year, which wascomputed to cover the annual depreciation accrual.

4. During 1963-67 Electribol would purchase from Empresas'warehouse material for the maintenance of the Manga Plantfor a value of about Ps 700000.

5. Depreciation has been calculated at 4% of the capitalinvestment on a straight line method.

ANNEX

EIECTRIFICADORA DE BOLIVAR

Sourcoes and Apolications of Funds 1963-1969

(in thousands of Colombian Pesos)

7otal

Year Ending December 31 1619 1967 12519

SOURCES OF FUNDS

Internal cash generation:Net inciomefoze operation 1.290 1,560 3.388 4,888 5,760 6,803 7,372 3I.D61Depreciatton 860 1.030 2.110 2.960 2.960 2.?96o 2.96.0 1Total internal cash generation 2,150 2,590 5,498 7,848 8,720 9,763 10,332 ,901

Recovery from Erpresas 60 122 196 303 378 378 378 1,815

Borrowings:Proposed IPRD loan 1t 10,830 22,220 10,450 1,500 45,000Assowd future loan - - - - 2.250 11.250 9 000 SItotal borrowings 10,830 22,220 10,450 1,500 2,250 11,250 9,000 7,500

Equity oontributionsInstituto 5,947Department of Bolivar l.800

Total equity contributions 7,747 7,747

Total sources of funds 20,787 24,932 16,144 9,651 11,348 21,391 19,710 123,963

APPLICATIONS OF FUNDS

Constroction Expenditures:Proposed project: foreign exchange 1 8,333 19,420 7,266 1,500 36.529local currency 3.S40 5.504 515 - 9-559Total project expenditures 11,873 24,924 7,781 1,500 46,o78Assumed future expansion - - - - 4.500 22.500 18.000 45OOQTotal construction expenditures 11,873 24,924 7,781 1,500 4,500 22,500 18,000 91,078

Investment in affiliates 1,600 670 670 -- - 2,940Advances to Eupresas 1,050 1,490 1,600 - 4,140Debt service:

Interest:Coffee Federatios loan and supplies 87 77 74 58 43 27 12 378Proposed IBRD loan 280 1,432 2,186 2,372 2,430 2,338 2,240 13,278Asouxed future borrowings -_ _ - - 560 1.0 3.0?0Total interest 367 1,509 2,260 2,430 2,473 2,925 3,282 15,246

Amurtisation:Suppliers' credits 821 109 27 - - - - 957Coffee Federation loan - - 258 258 258 258 258 1,290Proposed iBRD loan -- - 817 1.679 1.771 1.869 6.1Total aortization 821 1o9 285 1,075 1,937 2,029 2,127 8,383

Total debt service 1,188 1,618 2,545 3,505 4,410 4,954 5,409 23,629

Total applications of funds 15,711 28,702 12,596 5,005 8,910 27,454 23,409 121.787Net oah accrual (deficit) 5,076 (3,770) 3,548 4,646 2,438 (6,063) (3,699) 2,176Cash balance at beginning of year 430 5,506 1,736 5,284 9,930 12,368 6,305 430Cash balance at end of year 5,506 1,736 5,284 9,930 12,368 6,305 2,606 2,606

Debt service cover:Internal cash generation 7.848 8,720 9,763 10,332Total debt service 3,505 4,410 4,954 5,409Tines covered 2/ 2/ 2/ 2.2 2.0 2.0 1.9

Interest covera pte:Net inoome fros operation 4,888 5,760 6,803 7,372Total interest payable 2,430 2 473 2 925 3,282Times covered 2/ _J 2.0 2.3 2.3 2.2

/ Electribol made a down peament of US$137,000 on the first Cospique unit in 1962 which is assumed reimbursable under the proposed Bank loan.2/ Interest during constructien is included in the Bank loan and haa not to be met from Electribol's own fonda. Coverage caloulations would therefore not be very meaningful.

June 17, 1963

ELIETRIFICADORA DE BOLIVAR

Balance Sheets 1961-1969

(in millions of Colombian Pesos)

March 31Year Ended December 31 1961 1962 1963 1963 1964 1965 1966 1967 1968 1969

----__- Actual - - - - - Forecast --------------------------------

ASSETS

Fixed assets in operation 20.6 23.1 23.3 25.7 30.5 52.7 74.0 74.0 74.0 74.0Less: Depreciation Reserve 1.3 2.1 2.3 3,0 4,0 6.1 9.1 12.0 15.0 17.9

Net fixed assets in operation 19.3 21.0 21.0 22.7 26.5 46.6 64.9 62.0 59.0 56.1

Work in progress .4 1.3 1.3 10.9 32.2 19.8 - 4.5 27.6 46.6Total net fixed assets 19.7 22.3 22.3 33.6 58.7 66.4 64.9 66.5 86.6 102.7

Investments in subsidiaries 5.0 5.1 5.8 6.7 7.4 8.1 8.1 8.1 8.1 8.1Advances to Empresas 1.0 2.5 4.1 4.0 3.9 3.7 3.5

Current and other assets (net) 3.0 3.7 3.6 8.7 5.0 8.5 13.2 15.6 9.5 5.8

Total assets 27.7 31.1 31.7 50.0 73.6 87.1 90.2 94.1 107.9 120.1

LIABILITIES

Capital 25.6 Z8.6 29.6 36.3 36.3 36.3 36.3 36.3 36.3 36.3Surplus and Reserves (.3) .2 (.1) 1.5 2.9 6.3 8.9 12.5 17.1 22.4

Total equity 25.3 28.8 29.5 37.8 39.2 42.6 45.2 48.8 53.4 58.7

Long-term debtSuppliers' credits 1.1 1.0 .9 .1 - - - - -Coffee Federation loan 1.3 1.3 1.3 1.3 1.3 1.0 .8 .5 .3 -Proposed IBRD loan - - - 10.8 33.1 43.5 44.2 42.5 40.7 38.9Assumed future loan - - - - - - - 2.3 13.5 22 5

Total long-term debt 2.4 2.3 2.2 12,2 34.4 44.5 45.0 45.3 54.5 61 4

Total liabilities 27.7 31.1 31.7 50.0 73.6 87.1 90.2 94.1 107.9 120.1

Debt/equity ratio 7/93 7/93 24/76 47/53 51/49 50/50 48/52 51/49 51/49

Return on (average*) net fixed assets *in operation 1/ 1/ 1/ 5.9 6.3 7.3 7.5 9.3 11.5 13.1

i/ During the periods shown Electribol operated at a loss.

June 17, 1963

EMPRESAS PUBLICAS MUNICIPALES DE CARTAGENA

Power Department

Income Statement 1960-1969(in thousands Colombian Pesos)

--- Actual ----- --------------------- _--- Forecast ----------------- _---- TotalYear Ending December 31 1961 1962 1968 1964 1965 1966 122 1963-1969

Sales in millions of kwh:To the city of Cartagena 66.7 72.5 79.2 86.0 93.5 101.7 111.0

the Abocal fertilizer plant 25.0 30.0 30.0 30.0 30.0 30.0 30.0the Water Department at Gambote 4.7 5.4 5.9 6.5 7.0 7.4 7.9Total sales 59.7 66.7 96.4 107.9 115.1 122.5 130.5 139.1 148.9

Revenues from power sales 7.409 8,703 16,540 20.099 23,494 25,434 27,213 29,141 31,337 173.258Rent from Manga plant and warehouse sales - 295 600 600 600 503 420 420 420 3.563Other revenues _ 280 225 350 380 400 45o 500 550 600 3,230

Total revenues 7,689 9,223 17.490 21,079 24,494 26,387 28,133 30.111 32,357 180,051

Operating cost:Cost of purchased power 2,517 6,217 13,720 16,480 19,276 Zo,400 21,656 23,033 24,570 139,135Operating expenses 5,468 3,349 2,970 3,370 3,820 4,050 4,290 4,550 4,830 27,880Depreciation (incl. Manga) 519 S74 564 620 700 780 800 810 83o 104

Total operating cost 8,504 10.140 17,254 20,470 23,796 25,230 26,746 28,393 30,230 172.119

Net income from operation (815) (917) 236 609 698 1,157 1,387 1,718 2,127 7,932

Interest payable - - 175 209 263 277 255 228 206 1,613Less: Interest capitalized - - 80 145 220 17 12 13 14 SC1

Interest charged to operation 109 41 95 64 43 260 243 215 192 1,112

Net profit (924) (958) 141 545 655 897 1,144 1,503 1,935 6,820

1/ Forecast of revenues is based on rates of May 1, 1963: an average of 20.7 centavos per kwh for sales to the city, 14.5 centavos per kwh to Abocol and at cost to Gambote.A 10% rate increase is assumed at the beginning of 1965 concurrent with the increase in the cost of power purchased from Electribol.

2/ Interest capitalized includes (a) interest during construction on foreign exchange loan and (b) a 7% annual interest charge on all local funds invested.

June 17, 1963

EMPRESAS PUBLICAS MUNICIPALES DE CARTAGENA

Power Department

Sources and Apolications of Funds 1963-1969

(in thousands of Colombian Pesos)

TotalYear Ending December 31 1963 141 1966 1967 16 1262 1963-1969

SOURCES OF FUNDS

Internal cash generationNet income from operation 236 609 698 1,157 1,387 1,718 2,127 7.932Depreciation 564 620 700 780 800 810 830 S.10

Total internal cash generation 800 1,229 1,398 1,937 2,187 2.528 2.957 13.036

Proposed Electribol loan (IBRD) 1,050 1,490 1,600 - - - - 4,140

Internal debt 1.592 - -- - - - 1.592

Total sources of funds 3,442 2,719 2,998 1,937 2,187 2,528 2,957 18,768

APPLICATIONS OF FUNDS

Construction expendituresProposed program: foreign exchange 990 1,368 1,404 - 3,762

local currency 545 665 710 505 2.425Total program expenditures 1,535 2,033 2,114 505 6,187

Assumed future additions - - - 350 370 390 1.110Total construction expenditures 1,535 2,033 2,114 505 350 370 390 7,297

Debt ServiceInterest - Existing loans 115 87 67 49 31 13 - 362

Proposed Electribol loan 60 122 196 228 2Z4 215 206 1.251Total interest 175 209 263 277 255 228 206 1.613

Amortization - Existing loans 698 499 407 300 300 216 - 2,420Proposed Electribol loan - - - 75 154 163 172 564

Total amortization 698 499 407 375 454 379 172 2,984Total debt service 873 708 670 652 709 607 378 4.S97

Total applicatiorsof funds 2,408 2,741 2,784 1.157 1,059 977 768 11,894

Net cash accrual (deficit) 1.034 (22) 214 780 1,128 1,551 2,189 6,874Cash balance at beginning of year - 1,034 1,012 1,226 2,006 3,134 4,685Cash balance at end of year 1,034 1,012 1,226 2,006 3,134 4,685 6,874

Debt service coverageInternal cash generation excluding revenues

from warehouse sales 680 1,049 1,218 1,854 2,187 2,528 2,957Total debt service 873 708 670 652 709 607 378

Times covered - 1.5 1.8 2.8 3.1 4.2 7.8

June 17. 1963

EMPRESAS PUBLICAS MUNICIPALES DE CARTAGENA

Power Department

Balance Sheets 1962-1969

(in millions of Colombian Pesos)

March 31Year ended December 31 1961 1962 1963 1968 1264 126A 196 196 8 1969

ASSETS

Fixed assets 13.8 15.1 15.5 16.7 18.9 21.2 21.8 22.1 22.5 22.9Less: Depreciation reserve 3.2 3.7 3.9 4.3 4.9 S.6 6.4 7.2 8.0 8.8

Net fixed assets 10.6 11.4 11.6 12.4 14.0 15.6 15.4 14.9 14.5 14.1

Investment in associated company (Electribol) 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8

Current and other assets (net) 1.5 .2 1.4 1.3 1.2 1.5 2.2 3.4 4.9 7.1

Total assets 14.9 14.4 15.8 16,5 18.0 19.9 20.4 21.1 22.2 24.0

LIABILITIES

Capital and surplus 7.1 6.2 6.2 6.4 6.9 7.6 8.5 9.6 11.1 13.1

Long-term debt:Internal debt / 4.7 5.8 7.3 7.3 7.3 7.3 7.3 7.3 7.3 7.3Existing debt 3.1 2.4 2.3 1.7 1.2 .8 .5 .2 - -Proposed loan from Electribol - ^ - 1.1 2.6 4.2 4.1 4.0 3.8 3.6

Total long-term debt 7.8 8.2 9.6 10.1 11.1 12.3 11.9 11.5 11.1 10.9

Total liabilities 14.9 14.4 15.8 16.5 18.0 19.9 20.4 21.1 22.2 24.0

Debt/equity ratio 52/48 57/43 61/39 61/39 62/38 62/38 58/42 55/45 50/50 45/55

Return on (average*) net fixed assets 2/ 2/ 2/ .5 3.3* 3.5* 7.0 9.3 11.8 15.1excluding revenues from warehouse sales

1/ This debt is interest free and has no repayment term (see para. 63 b).2/ Rate of return not calculated because of operating loss.

June 17. 1963

.itSanta Catlilna \ _//= COLOMBIA

./ . : : n