/.P#fA ~-715 -rA) RESTRICTED FIL COPYRESTRICTED Report No. PU-48a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCnION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE KIDATU HYDROELECTRIC PROJECT OF TANZANIA ELECTRIC SUPPLY COMPANY LTD. TANZANIA October 8, 1970 Public Utilities Projects Department QwTerny Zquivlt US$1 - 7.14 Tansania Shlings (Tsh) 1 Tansania Shilling D IS$0.14 1,000,000 Tah - B$14MO,000 Abbroviationm and Acroams kV - Kilovolt - 1,000 volts kW - Kilowatt * 1,000 watts Af - nbgsatt a 1,000 kilowatts kWh - Klowatt hour - 1,000 watt hours aft a Gigatt hour - 1,000,000 kWh kVA * Klovolt apre * 1,000 volt amprs MVA - Nhavolt ampere - 1,000 kilovolt wmeres m - Meter m3 - Cubic mter kml in saM ter TANRCO Taisaia Lctric Suply CoaRy Ltd. SIDA wedish Internatioal Developnt Authority SW30 Swedish Conslting Grou 3AP&L The hat African Pow and Lighting ComparW Ltd. TrlIPt Tanganyika-Italian Petroleum Refinery CoMany Ltd. TAINC0's Financial Year * Calendar year TANZANIAI APPRAISAL OF TI-I KIDATU :TND2RO2LEC 11RIC PROJECT OF TANZANIA ELECTRIC SUPPLY COi1PŁANY LTD. Table of Contents Page No. SUT12ARY AND CONCLUSIONS i 1. ITTRODUCTION 1 2. GEdERAL ECONOMIY AND THE PO01,. SECTOR 2 The Country and the Economy 2 Energy Resources 3 The Power Sector 3 acisting Power Facilities 4 Power Development Program 14 3. THE PROJECT 5 Description 5 Estimated Cost 6 Status of Engineering, Procurement 7 Disbursements 7 Construction Schedule 8 4. JUSTIFICATION OF THE PROJECT 9 Market Growth 9 Comparison with Alternatives 9 Incremental Rate of Return 10 5. THE BORROWER 11 Company's Memorandum of Association and Licenses 11 Organization & Management 11 Training 13 6. FI4ANCIAL ASPECTS 14 Tariffs 14 Past Operating Results 15 Present Financial Position 15 Audit 17 Accounting 17 Proposed Financing Plan 18 Future Operations 19 7. RECOr1MENDATIONS 21 This report is based on the findings of a mission in April 1970 to Tanzania composed of Messrs. Erkmen, Rydell and Russell. LIST 0? ANqTEXES ANNE 1. TANESCO's Existing Power Facilities 2. Description of Kidatu Hydroelectric Development 3. Cost Estimates of the Project 4. Schedule of Disbursements 5. Coastal System Capacity and Maximum Demand Curve 6. Past Sales and Haximum Demand in Coastal System 7. Projection of Sales and Mqaximum Demand in Coastal System 8. Alternative Projections of Sales in Coastal System 9. Comparison of Alternative Schemes 10. Comparison of Project with Alternative Thermal Development 11. Incremental Rate of Return 12. Actual and Estimated Income Statements 1966-1977 13. Actual and Estimated Balance Sheets 1966-1977 14. Long-Term Debt Outstanding at December 31, 1969 15. Estimated Sources and Applications of Funds Statements 1970-1977 YAP TAMZ-ANIA APPRAISAL OF THE KIDA'U7 HMDROELECTRIC PROJECT OF TANZANIA ELECTRIC SUPPLY COJPANY T TD. SMItARY AND CONCLTJSIONS i. This report covers the appraisal of a project required to enable the Tanzania Electric Supply Company Ltd. (TANESCO) to meet the rapidly growing demand for power in its coastal system, which provides service to the Dar es Salaam, Morogoro and Tanga areas wihere most of Tanzania's economic activity is concentrated. The Project covers the installation of additional generation and transmission facilities, at a total cost of uS$59 million equivalent including contingencies but excluding interest during construction. ii. The Government of Tanzania has requested assistance from the Bank and from the Swedish International Development Authority (SIDA) in financing the Projectts foreign exchange requirements, which are estimated to total US$42 million equivalent, and wouild be financed by a Bank Loan of US$30 million and by a SIDA credit of US$12 million. The local currency requirements of US$17 million equivalent, represent- ing about 29zc of total Project cost, iwould be provided by the Government as equity capital. iii. This would be the Bank's second lending operation in the power sector of Tanzania; the first was Loan 518 TA for US$5.2 million to cover part of TANESCO's development program for the years 1967 through 1970. Implementation of the program is on schedule. iv. The growth of electricity consumption in the coastal system of Tanzania has been high, averaging more than 12% per annum since 1961; in 1969, it was 13˘ and is expected to reach a peak of about 19%, in 1972, with the commissioning of new industrial plants now under construction. Thereafter the rate of annual growuh is expected to decrease to about 10% per annum. New sources of generation will be needed by the end of 1972 to supply the coastal system. The proposed Project provides for 15 MU, of interim diesel plant to be installed by then at the Ubungo generating station near Dar es Salaam and for construction of a 100 MU4 hydroelectric station at Kidatu on the Great Ruaha River together with a 220 kV trans- mission line from Kidatu to Dar es Salaam by 1975. This will meet the growing demand for TANESCO's coastal system until 1980. v. Tanzania has important reserves of hydroelectric potential on several rivers at sites near enough to the focal point of the coastal system to be worthy of consideration for development. The Kidatu Project representis the least-cost choice among these possible sites for meeting the estimated demand for power. In comparing the Kidatu scheme with a fuel-oil based steam alternative in Dar es Salaam, it is found that the equalizing rate of discount is more than 13% which is believed to be - ii - above the opportunity cost of capital in Tanzania. Cost estimates are based on market trends allowing for adequate escalation of prices during the construction period and for contingencies of about 20% for the civil engineering works. vi. Procurement of goods and services to be financed by the Bank and SIDA, with the exception of about US$4 million for engineering services, would be on the basis of international bidding in accordance with the Bank's procurement guidelines. vii. The Borrower would be TPESSCO, a stock company with limited liability established in 1931, which is responsible for the generation and distribution of electricity throughout the mainland of Tanzania. The Government has held all the company shares since 1964. The manage- ment and about 40c of the senior staff in TANESCO are expatriates. The utility is well managed and efficient. In addition to operating the power system, it constructs woodpole transmission lines and distribution facilities. The help of consultants is required for the design and con- struction of other works. viii. TANESCO's past operations have been satisfactory. Since 1966 it has achieved a rate of return in excess of 10% on its net fixed assets in operation. It is expected that TAME.SCO will maintain satisfactory earnings in the future. ix. The investment requirements during the seven-year period 1970 through 1976 amount to Tsh698.2 million (US$97.8 million) including interest during construction. Of this total, Tsh465.6 million (US$65.2 million), or 67%,is applicable to the Bank Project. The 1970-76 program, which would increase TANESCO's fixed assets by about 200%, is expected to be financed from the following sources: internal cash generation, Tshi94.3 million (US$27.2 million); foreign loans, Tsh359.3 million (US$50.3 million); Government equity investments, Tsh134.8 million (US$18.9 million); miscellaneous receipts, Tsh9.2 million (US$1.3 million)3 and a grant from SIDA TshO.6 million (US$0.1 million). The financial plan is satisfactory. x. The proposed Project would form a suitable basis for a Bank Loan of US$30 million repayable over 25 years including a 5-year grace period. TANZAITIA APPRAISAL OF THE KIDATU HIDROELECTRIC PROJECT OF TAIMZAUIA ELECTRIC SUPPLY CO;4PANIY LTD. 1. INTRODUCTION 1.01 The Government of the United Republic of Tanzania (the Govern- ment) has requested that the Bank, along with the Swedish International Development Authority (SIDA), finance the foreign exchange requirements of a project comprising the major part of the 1970-1975 development pro- gram of the Tanzania Electric Supply Company Ltd. (TANESCO). The Project would meet the growing demand for power until the year 1980 in the coastal area centered on Dar es Salaam and Tanga which accounts for about 80' of TANESCO's sales of electricity. 1.02 The proposed loan would be the second -lending operation of the Bank Group to TANESCO. Loan 518 TA forTUS$5,2million was made in 1967 primarily for an extension of the Ubungo diesel power station and transmission and distribution, performance on which has been satisfac- tory. 1.03 The Prcject first came to the attention of the Bank in February 1966 when the Government on behalf of TANESCO, requested the BankIs assistance in financing the foreign exchange costs of TANESCO's ten year development program covering the period from 1966 through 1975. The Bank-Is economic mission in 1966 found that preliminary studies of alter- native power sources, including thermal developments and possible hydro- electric sites, had already been undertaken by TANESCO's consultants and a hydroelectric station at Xidatu on the Great Ruaha River selected as the most economic project for the subject of a feasibility report. Parallel with these studies the IWater Development and Irrigation Division of Government had investigated and was preparing a multipurpose irrigation/hydroelectric developmenu on the lWami River based on different assumptions, making direct comparison with the Kidatu Project impossible. The Bank economic mission in 1966 recommended that a study of the rival schemes should be prepared on a strictly comparable basis, and it was agreed during negotiations for Loan 513 TA that consultants would be engaged for this purpose. This study, jointly undertaken by Balfour, Beatty and Co. Limited of U.K. and the Swedish Consulting Group (SWECO), was completed in July 1968 and recommended the Kidatu scheme as the most economic development. A feasibility report on the Kidatu Project was received by the Bank in December 1969 following which lIessrs. Erlmen, Rydell and Russell visited Tanzania in April 1970 to appraise the Project. 2. GENERAL ECONOKTIY ATD T¶E POWER SECTOR The Country and the Economy 2.01 The United Republic of Tanzania comprises mainland Tanzania (formerly Tanganyika) and Zanzibar. All references in this report are to mainland Tanzania only, which is situated on the east coast of Africa, just south of the equator. It is bordered on the north by Kenya and Uganda, on the west by Rwanda, Burundi and the Democratic Republic of the Congo and on the south by Zambia, Malawi and Mozambique. Its total area is about 362,000 square miles, including nearly 21,000 square miles of inland water. Except for a narrow coastal strip, the country lies at an altitude of over 1,000 feet, a large part being a plateau at about 4,000 feet. The population is approaching 13 million, with an annual growth rate estimated at 2.7%; urban population has been growing at over 6% p.a. Average population density is only 38 to the square mile but, since the tsetse fly makes a large part of the country uninhabitable, the bulk of the population is in the remaining areas, some of which suffer from population pressure. Dar es Salaam, the capital, has a population of 350,000. 2.02 The economy is based largely on agriculture, in which over 90% of the population is engaged, much of it at the subsistence level. Total GDP in 1968 was US$822 million, of which agricultural output accounted for 50%, manufacturing and mining for over 8%o and services (including commerce and transport) for nearly 32%. Subsistence production contrib- uted about 28% of total GDP. According to published figures, between 1963 and 196g total GD? greTwr at 4.4% at constant prices and monetary GDP at 5.1% p.a. These rates are expected to accelerate to 6.5% and 7.7% under the five-year plan, covering the period 1969-1974.* Agriculture will remain the dominant sector of the economy but will decline in relative importance as other sectors are projected to grow at faster rates, particularly manufacturing (nearly 11% p.a.), construction (10% p.a.) and commerce (8M p.a.) as against 8% and 3% respectively in the monetary and subsistence agricultural sectors. 2.03 GNP per head at about US$80 in 1968 is the lowest among the three countries of the East African Community.** The Government's long- term objective is to raise this to US$126 by 1980. Success in achieving this object will depend largely on the Government itself, since the main sectors of the economy are now under public control through either out- right nationalization or the establishment of majority government holdings. * The growth rate projections quoted are those of the 1969 Bank Economic ILission to Tanzania (Report No.AE 7 dated iIarch 17, 1970). ** The corresponding figures for Kenya and Uganda in 1968 were US$130 and US$110 respectively. -3- Energy Resources 2.04 The main indigenous energy resource is hydro power. The potential available is currently estimated at 1,315 megawatts contin- uous. Mlost of this is in the basins of eight rivers draining into the Indian Ocean, although there is also scope for hydro development on three of the rivers of the Nile system within Tanzania. Only about 50 DW of hydro capacity has been installed so far, nearly all on the Pangani River. 2.05 A small quantity of coal is mined in the Songwe-Kiwiri area but commercially exploitable bulk deposits have yet to be proven. Size- able deposits of bituminous coal ha're been discovered in the Ruhuhu Valley in the southern part of the country and the possibility of exploiting them in association with nearby deposits of iron ore is under study. The remoteness of this coalfield makes it unlikely that the coal wiould be economic for electricity generation in the coastal region in the foresee- able future. Oil exploration has been carried on for many years without success; the Government recently granted the Italian oil company AGIP exclusive prospecting rights in the coastal sedimentary belt and the continental shelf. 2.06 Firewood is the main fuel in the subsistence sector but is also used by industry for generating steam. The main commercial form of energy, however, is oil which is imported as crude and processed in the refinery at Dar es Salaam, which has a capacity of 750,000 tons p.a. It is operated by the Tanganyika-Italian Petroleum Refinery Co. Ltd. (TIPER), which is under Government control. The existing diesel power stations use oil fuel supplied from this refinery, their total consumption in 1969 being about 21,000 tons. The Power Sector 2.07 Because it operates almost exclusively in the areas of most intensive development, the power sector has been growing much more rapidly than the economy as a whole. Sales by TANESCO, which is responsible for public supplies throughout the country, rose at an average rate of 12% p.a. between 1960 and 1969. Total investment by TANESCO during 1964-1968 amounted to Tsh214 million (US$30 million) or about 57Z, of the national total of Tsh4,239 million (US$594 million). Power investment in the Government's current plan (1969-1974) is projected at Tsh457 milliore (US$64 million), representing about 65- of the total planned national in- vestment in the period of Tsh8,085 m,illion (US$1,132 million). 2.08 Industry accounts for the bulk of electricity consumption, sales to industrial users amounting to about 60,%) of total sales with sales to the domestic sector next at about 18G, and to the commercial sector about 16%. The sisal industry has hitherto been the main consumer in the industrial sector but its relative share has been falling wTith the * At constant 1968/1969 prices. - 4 - declining fortunes of the industry - from 261% of total TATESCO sales in 1963 to around 12% in 1969. Existing Powier Facilities 2.09 Tanzania's total installed generating capacity is about 130 II. Of this total, about 80%o (102 III) belongs to TANESCO and the remainder (28 NV) to power users who either are out of reach of TANESCO's supply lines or who find it more econoinical to use industrial by-products as fuel for their generating equipment. Plants already under construction and scheduled for commissioning in 1970 will bring TANESCO's installed capacity to 122 MW and the country's total to 150 MW. 2.10 TAIMCO has an interconnected power system operating at 132 kV in the coastal region between Dar es Salaam, Tanga and Morogoro. Gener- ation in the system is provided by two hydroelectric stations on the Pangani River totalling 38.5 IfU, and two diesel stations close to Dar es Salaam totalling 30 Ili; altogether they account for 67% of the company's total generating capacity. One of the diesel stations (Ubungo) is now being extended by about 18 .117 with finance provided by Bank Loan 518 TA. 2.11 The remaining 33 -11W capacity owned by TANESCO is provided by 66 diesel generating sets located at 17 different locations and seven hydroelectric sets at three locations. Diesel units vary in size from 35 kW to 2,200 Ikr. TAIESCO's existing facilities are described in greater detail in Annex 1, and are shown on the map attached to this report. Power Development Program 2.12 Apart from the proposed Project which T4ill meet the growring demand in the coastal system TA1YESCOts development program in the period 1970-1975 includes only extensions of existing distribution facilities and construction of three small diesel stations in the townships of M1afia, Nansio and NIijombe. However a number of projects are under longer term planning including a major hydroelectric project with an ultimate capacity of about 800 to 1,000 hI11 at Stieglerts Gorge on the Rufiji River to supply the coastal system in the late 19CO's, and 132 kV transmission line from Hale to Kikuletwa. 3. TTIE PROJECT Description 3.01 The proposed Project, which iwould meet power generation require- ments of TANESCO's coastal system up to 1980, comprises the following: (a) construction of the first stage (2 x 50 IV) of a hydro- electric development at Kidatu on the Great Ruaha River with related step up substation to be commissioned in 1975. The principal elements of the development include a repulating dam with a storage capacity of about 125 million miJ, a head- race and a tailrace tunnel, and an underground generating station. The storage capacity is sufficient to provide at least 85 T1M1 during peak load hours under drought conditions; (b) a 15 NM extension o.f the existing Ubungo diesel generating station near Dar es Salaam to avoid a power shortage between 1972 and commissioning of the Kidatu Project; (c) construiction of a single circuit 220 kV, 306 km transmission line .'-om laidatu to Dar es Salaam, with related step down substation at Ubungo; and (d) Consulting services to undertake comulementary studies covering the ecological effects resulting from the work under part (a) above and subsequent stages of development. The Project is described in more detail in Annex 2, and the site of the Kid-atu power station and the route of the transriussion line to be con- strietad under the Project are shown in red on the map attacled to this report. 3.02 The second stage of development-planned for commissioning at the begi:-ing of 1980 would inv:clve the addition of a third 50 MW unit at the Kidati station together with the construction of an ealth-fill. dam at Mtera locatud. some 175 km upstream of Kidatu. This is the only site upstream of Ki,acu capa'ble of providinrg the storage capacity required-to maintain an output of 200 NW on peak throughout the year. The third stage would consist of the addition of a fourth 50 111 unit at Kidatu in 1983. 3.03 Although there are no-competing claims for the waters of the ureat Ruaha River upstream of the Kidatu damsite continued availability of water in sufficient quantities for the Project and its subsequent stag s is very important. Du ing negotiations it was agreed What the C-ovsrnurent of Tanzania. will l-v, periat ay-,. abstractir- f.C watar from the Great Ruaha River or its tributaries upstream of I idaTu that will reduce the potential output.of the.Kidatu generating station. Estimated Cost 3.h0 The Project cost is estimated to be Tshp22 million (US$59 million equivalent), of which Tsh300 million (U3$h2 million equivalent) wTould be foreign exchange. The cost of the principal features is shown below; a more detailed cost breakdown is given in Annex 3. In Tsh In US$ of local Forisn Total Local Foreign Total Total -----millions----------------- Civil Works 63.5 10.5 168.0 8.9 14.6 23.5 39.8 Elect. & "Hech. Works 4.5 43.o 47.5 0.6 6.0 6.6. 11.2 Transmission Line 5.5 31.0 36.5 0.8 4.3 5.1 8.6 15 IrI diesel 2.5 11.5 14.0 0.4 1.6 2.0 3.3 Engin. & Super. 4.0 30.0 34.0 o.5 0.2 4.7 8.0 Duties & Taxes 12.0 - 12.0 1.7 - 1.7 2.9 Contingencies 17.0 28.0 45.0 2.4 3.9 6.3 10.7 Price Escalation 13.0 52.0 65.0 1.8 7.3 9.1 15.h Total Construc-tion Costl22.0 300.0 422.0 17.0 42.0 59.0 100.0 The proposed Bank loan of US$30 million and the SIDA credit of US$12 million would jointly cover the foreign exchange requirements for construction of the Project. 3.05 The above cost estimate does not include interest charged to construction totalling Tsh46.5 million (us$6.5 million equivalent) 7w.hich will be met from TANESCO's internally generated cash. The cost of prelimi- nary investigations which amounts to about Tsh3.8 million (US$0.5 million), and is covered by SIDA grants, is also excluded from this estimate. The provision for physical contingencies, amounting to about 115% of total cost, is composed of about 201 of the cost of civil engineering workcs and about 10' of the other items. This level of contingencies for civil engineering works is justified in view of the extensive underground construction involv- ed. The local contribution to the construction of civil works will consist almost entirely of unskilled and semi-sLkilled manpower and the requirements of cement and timber. 'Tlhe proportion of foreign exchange content in the cost of civil works is therefore relatively high. 3.06 Tne location and dimensions of the dam, waterlfays and power station; size of plant and size of individual units; dimensions and voltage of trans- mission equipment and other par&meters have all been determined by TANESCO's consultants as a result of a series of optimization studies based on the estimated load growth in the power system, on the pre-Tailing local condi- tions (hydrological, geological and topographical), and on sound engineering principles, to give the minimum present cost over the life of the Project. In these studies special attention was given to the optimum size of indi- vidual units. 'The alternative of delaying the construction of the hydro- electric station and -the interim installation of thermal sets (diesel, gas turbine or steam) in 15 and/or 30 111 sizes up to a total of 75 MW1J, was also considered. -7- 3.07 The costs of the second and third stages of the Kidatu hydro- electric development are estimated to be US$13.5 and us$h.6 million equivalent, respectively, giving a total of US$18.1 million. One reason for the comparatively low cost of these later stages is that the first stage Project includes underground excavations related to the second and third stages. It is therefore desirable that further stages of Nidatu scheme be completed before other major projects are developed for the purposes of meeting additional demand in the power system to which ,Yidatu power station would be connected unless it can be shown that the alternative would be more economical. During negotiations the Government agreed to ensure that TA1TESCO will extend the Kidatu scheme so long as studies show to the satisfaction of Tanzania and the Bank that such course would be the most economical means of producing additional power for the system. Investments for up to 15 NiW are excluded from this restriction so that TANESCO has the flexivility to deal speedily with unusual circumstances and minor requirements in other supply areas. Status of Engineering, Procurement 3.08 For the design, preparation of bidding documents, bid evaluation and supervision of all works included in the Project, TANESCO has engaged the Swedish Consulting Group (SiECO) of Stockholm, a joint enterprise in which ten Swedish consulting firms participate. SWECO was responsible for the July 1968 Study (see paragraph 1.03) along with Balfour, Beatty & Co., Ltd. of the United Kingdom. SWECO also prepared the feasibility study for the Kidatu scheme and is accpetable to the Bank. 3.09 A general ecological review of the Kidatu and Mtera reservoir proposals was completed in September 1970. An in depth study of some aspects of the ecology recommended in the general review is already underway. This study which is estimated to take about a year is expected to lead to the development of measures required to mitigate any adverse effects and make recommendations with regard to further development of beneficial effects in the fields of game preservation, fishing, etc. 3.10 An access road of about 11 Im to the dam site is already under construction. Site investigations for Kidatu civil engineering works are completed, and design and preparation of bidding documents are under- way. Survey of the route of the 220 kV transmission line is being con- ducted by 5JECO, and design is proceeding. Design work for the 15 IVI diesel installation is completed. 3.11 Procurement of goods and services to be financed by the Bank and SIDA would be on a basis of international competitive bidding, with the exception of about US$4 million for the professional engineering services. SIDA has requested that the Bank supervise all procurement for the Project. Disbursements 3.12 The foreign currency costs already incurred or committed for the site investigations, engineering and access road up to the time of completing financial arrangements are estimated to amount to about US$1.0 - 3 - million. SIDA has indicated that it would disburse against these costs, provided that after the effective date of the Bank loan the Bank would disburse up to an a-mount equal to the SIDA disbursement multiplied by the loan-to-credit ratio of 30/12. Thereafter, disbursements would proceed in parallel in the same ratio against the actual foreign exchange component of (a) cost of consultant's services and imported goods, and (b) cost of erection and construction as specified in the contracts. These arrange- ments have been confirmed during negotiations. 3.13 The schedule of disbursements from the proposed Bank loan is shown in Annex 4. Any part of the proposed Bank loan not needed to meet the Projectts foreign exchange costs should be cancelled. Construction Schedule 3.14 It is necessary to commission the 15 :1ii diesel equipment before the end of 1972 and the first machine at Kidatu by mid-1975 if the expected demand is to be met. To ensure that the commissioning date for the Kidatu equipment can be achieved, the bidding documents for civil engineering works are already issued and the main contracts are expected to be placed before the end of 1970. Provided there are no unforeseen delays, it shoWud be possible to achieve these target dates. 3.15 Projected maximum demand in TANESCO's coastal system is shown in Annex 5 together with system installed and firm capacity curves corre- sponding to the above construction schedule. 3.16 The transmission line from Kidatu to Dar es Salaam is scheduled for completion at the end of 1974 to ensure there will be no delay in commissioning Kidatu if progress in construction of the powier station is ahead of schedule. - 9 - i4. J_TIFICATION OF TEE FiOJECT Market Growth 4.01 The Project would form a part of the interconnected coastal system of the TANESCO supply area. This system accounted for about 80% of total TANESC0 sales in 1969. It includes the capital, Dar es Salaam (population 350,000), where most of the commercial and industrial develop- ment in the country is concentrated, as wFell as the important urban centers of Tanga (population 70,000) and Norogoro (population 30,000). The average rate of growth of electricity sales in the systemn since 1960 has been 12.4% p.a. IJithin the total, industrial sales have been growing at 13.56fi p.a., commercial sales at 16.3% p.a., and domestic sales at 6.9% p.a. The detailed figures by consumer category for the main load centers are shown in Annex 6 together with the corresponding trends in maximum demand and generation. 4.02 The TANESCO forecast of sales up to 1965 for the area to be served by the Project is shown in Annex 7. This is an updated version of a projec- tion prepared in 1968 by the British consulting firm of Merz and McLellan. The method used was to establish the underlying growth rate of past sales by eliminating major new loads as they occurred and to project this rate into the future, adding in known or anticipated new loads over the next few years and assuming a stabilizing of the rate of growth thereafter. The resulting forecast shows a rate of growth averaging about 12.1% p.a. up to 1975, fall- ing subsequently to around 10f p.a. This is higher than the rates being assumed in the other two member countries of the East African Community, Kenya and Uganda, which are 9% and 6% respectively. A higher growth rate is to be expected in Tanzania, however, as electricity consumption per head is much lower - 24 ki.h in 1969, against 53 kWh for Kenya and 47 keWh for Uganda. Moreover, Tanzania has in the past relied to a considerable extent on second- ary industries in Kenya and Uganda. The present trend towards developing parallel industries in Tanzania not only increases the demand for power in Tanzania but for a while at least depresses the rate of growth in the cther two territories. The forecast also looks reasonable in relation to the Government's plans for raising the rate of growth of the economy to 6.5/6 p.a. compared with an average in recent years of about 5% p.a. 4.03 The TANESCO forecast has been checked by making independent pro- jections based on the relationships between electricity sales, monetary GDP, industrial output and urban population as established by statistics for the period 1960-69. The method is explained in Annex 8, wihich also shows the resulting projections of electricity sales. These show average annual growth rates ranging from 10,%, to 12. 5%, compared with the TANESCO figure of 11%. The effects on the economics of the Project of different growth rates are considered in paragraph 4.07 belowi. Comparison of Alternatives 4.04 The alternative to the present Project would be another hydro scheme or a thermal station. Nine alternative hydro schemes were examined by TANESCO's general consultants, Balfour, Beatty & Co., Ltd of U.K.,-in a series of studies carried out over the past 4-5 years (see Annex 9). IIost of these were eliminated from detailed consideration because they were too remote, too small, or geologically unsatisfactory. Stiegler's - 10 - (Iorge was eliminated because the site could only be economically developed with much more capacity than the TAIMSC0 system could absorb for many years to come (see paragraph 2.12). The choice was finally narrowed down to two schemes at Pongwe on the Wami and at Kidatu on the Great bRuaha River (see paragraph 1.03). A comparative study of the two schemes showed that the Wami scheme would have a much lower output than Kidatu and would have to be supplemented by additional thermal plant raising the estimated capital cost to US$92.5 million compared with US'$'68 million for Kidatu. The annual costs attributable to these two alternatives are equivalent to power costs in Dar es Salaam of about 9 and 6 US mills/kWh respectively. 4.05 The Kidatu scheme was therefore chosen as the preferred hydro development and compared with an alternative thermal development based on a steam station at Dar es Salaam using residual fuel oil from the TIPER refinery. For this purpose it was necessary to compare two alternative programs of development; the first comprising the Project plus a further 100 MW of hydro capacity to complete the I'idatu development (see Annex 9); the second consisuing of 210 MKr of steam capacity, to be installed in 30 Hd stages in accordance with the projected growth of demand. An oil price of Tsh35 (US$12) per long ton was assumed (see Annex 10). 4.o6 The hydro based program has higher capital costs but nuch lower running costs. A comparison of the discounted cash flows, both capital and operating, of the two alternatives over a period of 60 years, using the TANESC0 load forecast and the consul.tants' estimates of capital and running costs (see Annex 10), showed that at a cost of capital up to 13% the Kidata scheme is the preferred alternative. 4.07 The sensitivity of the discount rate to different assumptions about the main variables (load growth, capital costs, running costs) was tested, as described in Annex 10. This shows that a variation in the price of oil of +20% would reduce or raise the equalizing discount rate by about 1.5 percentage points. A variation in load growth of +20% would raise or lower the rate by 0.5 percentage point. A 3"O annual escalation of all costs (other than the cost of oil) wTould improve the advantage of the hydro alter- native, raising the equalizing discount rate by about 1 percentage point. As shown in Annex 10 the equalizing discount rate is unlikely to be less than 12%, which adequately justifies the higher capital costs of hydro development at Kidatu since the opportunity cost of capital in Tanzania is believed not to exceed 12%. Incremental Rate of Return 4.08 The incremental financial rate of return on the Project, calculat- ed by finding the discount rate wihich equates the present values of the estimated capital and operating expenditures of the Project over its life (excluding taxes and depreciation) and the revenues attributable to it, is estimated at 16%. A sensitivity analysis shows that the return could be between 10%' and 19% depending on the rate of load growth and other factors (see Annex 11). This is satisfactory. - 11 - 5. THE BORROrER 5.01 Tanzania Electric Supply Company Limited (TANESCO), the Borrower, was founded as a private company in 1931. It was acquired by the Government of Tanzania in 1964 through purchase from the East African Power and Light- ing Company Ltd. (EAP&L) of Kenya of all the issued shares other than those already held by the Government. Payment is being made over a 12-year period by means of bills of exchange dated at six-month intervals. There are ten shareholder nominees; they attend the general meetings of the Company, whose business is conducted in accordance with the Companies Ordinance (Chapter 212 of Revised Laws of Tanganyika Territory, 1947). The majority vote is vested in the Registrar of the Treasury, one of the shareholder nominees. TANESCO has been made responsible for the development of the countryls power industry, and it functions as the sole organization for the public genera- tion and distribution of electricity throughout mainland Tanzania. It oper- ates in accordance with commercial principles. Company's emorandum of Association and Licenses 5.o2 The Company's Memorandum of Association dated September 21, 1931 defines the objectives of the Company as follows: "tto acquire concessions for the sole and exclusive right to produce, distribute, supply and sell electrical energy within the area of Tanganyika, and to undertake all kinds of financial, commercial, trading and other operations, and to carry on any other business (except life insurance) which may seem to be capable of being conveniently carried out in connection with the main objectives of the Company or render profitable any of the Company's property or rights." 5.03 Issued in 1957 under Electricity Ordinance No. 3 (Chapter 131 of the Laws), and expiring in the year 2012, the Company's licenses provide for it to have first refusal of any additional areas to be licensed for public supplies of electricity in Tanzania. The licenses define areas of "compulsory supply" within which the Company is obliged to provide a supply upon payment of the required charges by the consumers, and lay dowTn maximum rates (see paragraph 6.01) for the sale of energy for lighting and power. 5.04 The licenses also make provisions for the designation of power development reserves at potential hydroelectric sites on rivers throughout the country, water rights on the Pangani River, the right to export power to neighboring countries, increases in maximum rates in event of tax in- creases, the right to charge interest to capital account during construc- tion of projects, and the usual rights and obligations to protect the interests of the Company and its consumers. 5.05 The Company's Memorandum of Association and Licenses are accept- able to the Bank. Organization and Management 5.06 The Company's Board of Directors is composed of a full-time Executive Chairman and eight part-time members: five are higl-ranking officers of various M1inistries, two are the general managers of industrial - 12 - enterprises, and one represents EAP&L (the right to nominate a member until payment is complete was given EAP&L when it agreed to sell its shares in the Company in 1964). TANESC0 contirnues to operate on the same commercial principles as it did before Government purchased all the shares in the Company. 5.07 Despite the changes in ownership described above, continuity of management has been maintained. Since 1955, the General Manager has changed only once -- in 1965, due to retirement. At that time a replacement expa- triate was provided for five years under a British Government technical assistance program. In 1970, TANESC0 renewed his contract for two years, the duration of contract being in accordance with the standing practice for all contracts with expatriates in Tanzania. 5.o8 TANESC0 employs 50 expatriates, mostly in senior technical posts; 12 are permanently employed while the remaining 38 have two-year contracts. Company policy is to fill all vacancies with citizens of Tanzania wihen practicable; to promote existing staff to fill senior vacancies on the basis of merit and to offer training opportunities to those employees who possess basic qualities which can be developed to fit them for senior posts of re- sponsibility when such vacancies occur. This policy which is being prudent- ly applied so as to maintain efficiency has brought about an increase in the percentage of Tanzanians in both total staff and senior staff positions, as shown in the table below. Percentage of Tanzanian Citizens In Total In Senior Year Staff Staff Posts 1964 87 19 1965 88 24 1966 90 34 1967 92 46 1968 94 62 5.09 TANIESCO's total staff of 3,011 at first sight appears large for a sales voluLme of about 307 million kUh providing service to some 46,000 consumers when judged by the standards of more highly developed countries. This staffing is justified, however, since power generation is divided among 94 units of which 80 are diesel sets at 19 different locations. Day to day operations are handled by men on the spot at isolated branches separated by some hundreds of miles and poor communications, the smallest having a sales volume as low as 173,000 kWh per annum and serving only 207 consumers. TIore- over, TANESC0 staff is responsible for the design and construction of all distribution facilities as well as all woodpole transmission lines. The staff is successfully carrying out the project financed by Loan 518 TA which includes an 18 P11 extension of the Ubungo diesel station near Dar es Salaam, now practically completed, plus other works. 5.10 The company normally employs consultants and contractors for all major power station and transmission developments. As now constituted, the management and staff of the Company are competent to carry out the proposed Project with the assistance of consultants. During negotiations TANESCO - 13 - has a-reed that (a) it shall at all times employ0 a general mana-ger w-Those experience, qualifications, responsi.b,it es and functions are futually satisfactory to the Bank and the Company-; (b) it shall continue to appoint, retain or promote sufficient qualified and experienced staff to enable the Company to conduct its operations efficiently; and (c) in carrying out Jhe Project the Company shall continue to employ consultants acceptable to the Bank upon terms and conditions satisfactory to the Bank. Training 5.11 TANESCO has accelerated its training activities, especially since 1968 when it established and made operational a braining school lwith twO workshops, three lecture rooms and a cinema for education films. It is under- stood that SIDA intends making a grant to the 5overnment to cover the costs of a study of the Company's training needs and of ensuring measures to be taken as a result of the study. - 14 - 6. FINANCIAL ASPECIS Tariffs 6.01 Tariffs in Tanzania are controlled by the Electricity (Amendment) Ordinance of 1957 and also by the license issued by the Government. The Ordinance prohibits the licensee from charging tariffs in excess of the maximum prices as stated in the license; but within such limitations, tariffs may be changed by TANESCO, upon Government approval, at the end of each three-year period. The maximum rates prescribed in the 1957 license are so high (for light Tshl.20 per kWh (UScents 16.8) and for power TshO.60 per kWh (UScents 8.4) compared to the 1969 average actual rate of Tcents 23.65 per kWh (UScentg 3.313)that it is unlikely that TANESCO will find it necessary to request increases in these maximum rates. 6.02 TANESCO, upon its own initiative and without further reference to the Government, may increase tariffs previously approved by the Government by up to 10e, prcvided such increase does not exceed the maximum rates in the license. Increases in excess of 10%. must have Government sanction, bat such new price levels then become the basis for any additional increases of up to 10% without Government approval. Subject to these restrictions. TAMESCO may at any time increase its tariffs to cover increases in taxes oni electrical energy or taxes on fuel. 6.03 Prior to February 1, 1966, tariffs were maintained at the same level for several years but were not standardized throughout all areas served by TANESCO. Revised tariffs becane effective February 1, 1966, where- by the average rate per kWh was increased about 17%, wTith Government appro-raL and rates became standardized throughout the country. Since that time, while tariffs have remained unchanged, the average annual price per kWh has de- creased slightly because of increased consumption at lower tariff rates. 6.o4 The existing Loan Agreement No. 518 TA required TANESCO (a) to take all steps necessary to achieve a 10%o return on its average net fixed assets in operation, and (b) not to reduce its then prevailing tariffs during the construction period of that project. TANESCO is expected to achieve a return in excess of 10% during each year 1970 through 1974. Reflecting the very substantial increase in its rate base due to commis- sioning of Kidatu Stage I, the return is expected to drop to 9.3% and 6.9p in 1975 and 1976, respectively; thereafter, with the expected steady increase in utilization of the Projectts capacity, the return should improve annmally, reaching 10.5%' in 1982. Since no financial reasons are presently apparent which would make necessary a tariff increase during the expected six-year period of below 10% returns it was agreed during negotiations that a rate covenant wiould be included in the proposed loan requiring that, unless the Bank shall otheriise agree, TANESCO will: (a) take all steps necessary to achieve an annual rate of return of not less than 10% on its average net fixed assets in operation, except in respect of the years 1975 through 1931, during which the annual rate of return may not be less than 7%, and (b) make no reduction in its presently prevailing tariffs through the year 1981. - 15 - Past Operating Results 6.05 The table below summarizes the trend in sales during the period 1966 through 1969: Units Sold Units Generated Annual % Sales Revenue Year kWh Million kWh Million Increase Tsh'O0O 1966 252 215 19 54,440 1967 282 240 12 59,857 1968 313 266 11 65,762 1969 358 307 t5 72,608 6.06 The difference between kTIh generated and klWh sold represents TANESCO's own consumption and power losses. The annual percentage of units sold to units generated has been maintained at about 86% which is considered satisfactory for an extended power network such as TANESCO's. The irregular trend in sales is due mainly to a depressed sisal market and the addition of new large consumers. Income statements for the four years, 1966 through 1969, are shown in Annex 12. 6.07 In 1966 the operating ratio (operating expenses including depre- ciation and taxes/operating revenues) was about 65f. During the following three years this ratio increased to about 695, mainly because of a sub- stantial increase in income taxes. Operating costs per kT1Jh sold, excluding income taxes, decreased from Tcents 15.12 (UScents 2.12) in 1966 to Tcents 14.44 (UScents 2.02) in 1969. 6.08 Operating income increased from Tsh19.4 million in 1966 to Tsh22.6 million in 1969. During these four years, TANESCO achieved an annual rate of return varying between 10.25 and 11.3%. Annual interest coverage was very high, about 4 tines or more during this period, wlich indicates TANESCO's capacity to generate sufficient funds for its past expansion program with the result that long-term debt was held at a very low level. Since 1966, TANESCO has paid an annual dividend of 6-2/3% on the outstanding share capital and the balance of net income has been allocated to provisions for deferred income taxes (see paragraph 6.13) and to earned surplus. Present Financial Position 6.o0 A summary of the latest balance sheet at December 31, 1969 is shown in the following statement: - 16 - Szmmary Balance Sheet December 31, 1969 Amount (M4illions) ASSETS US$ Tsh Equialent Fixed Assets Gross fixed assets in operation 347.8 48.7 Less reserve for depreciation 111.0 15.5 Net fixed assets in operation 236.8 33.2 Work in progress 28.3 _.0 Total Fixed Assets 265.1 37.2 Current Assets 28.8 4.0 Total Assets 99.2 EQUITY AND LIABILITIES Equity Ordinary Stock 111.1 15.6 Surplus 1.6 0.2 Reserves 33.8 4.7 Total Equity 146-5 20.3 Long-Term Debt 84. & 11.9 Current Liabilities 22.6 3.2 Contributions in Aid of Construction 12.0 1.7 SIDA Grant 3.2 0.4 Accumulated Deferred Income Taxes 25.o 365 Total Equity and Liabilities 29.9 i.2 j/ Includes Tsh6.2 million (US$0.9 million) long-term debt due within one year. 6.1o TANESCO's financial position at the end of each year, 1966 through 1969, is shorin in the balance sheets, Annex 13. Gross fixed assets in operation are stated at original cost. Tanzania's currency exchange rate has a long record of stability; its internal price level has been relative2.2i steady; and no problem arises at this time as to valuation of its fixed assets. The above summary statement shows a satisfactory financial positicon as of December 31, 1969. Including long-term debt due within one year as current liabilities, the current ratio is 1/1. The debt/equity ratio is 37/63, again reflecting a conservative pattern of past financing. 6.11 Details of the long-term debt of TshS4.6 million are shown in Annex 14. 6.12 The outstanding debenture stock of Tsh48.4 million (US$6.8 million) requires special mention. This debt, held by the Commonwealth Development Corporation, was incurred in 1961 in connection wfith construc- tion of the Hale Hydroelectric station. It is repayable in 17 annual - 17 - installments ending in 1 98B, and was secured oy a first mortgage on all then existing freehold and leasehol-d properties of TAIESCO and on all such property acquired in connection with the Hale project, plus a floating charge over all other properties of TANESCO owned at that time or sub- sequently acquired. In order to provide adequate security under these conditions for Bank Loan No. 518 TA, it was necessary to open up the exist- ing mortgage deed so as to include the Bank Loan in the security on a pari passu basis. The same situation will arise with respect to the proposed Bank loan, and during negotiations assurances were obtained that the exist- ing mortgage will be reopened so as to include the proposed loan in the security as soon as practicable but not later than September 30, 1971. 6.13 In 1969, TANESC0 established an Accumulated Deferred Income Taxes account in the amount of Tsh25.C million (US$3.5 million) by allocation of amounts from surplus and general reserve accounts. This new account represents accumulated tax savings of prior years which resulted from a Goverrment policy to encourage expansion and development. This policy allows a liberal tax deduction of 12-1/2% on the declining balance of fixed assets in operation in lieu of normal depreciation charges, which in the case of T^ANESCO would be about 3-1/2% of gross plant in operation. The accumulated deferred taxes are potentially payable at some future time. H-owever, assuming continuation of the liberalized depreciation policy, this is not expected to occur in the foreseeable future since TANESCO's sub- stantial construction program will by 1976 increase its depreciable property by about 200% and result in further large annual tax savings in this period and beyond. Audit 6.14 For the past several years, TANESCO's accounts have been audited by Messrs. Gills and Johnson, Chartered accountants, a local firm associated with the British firm of Deloitte, Plender, Griffiths and Company. These arrangements have been satisfactory. Bank Loan No. 518 TA requires TANESCO to continue employing auditors satisfactory to the Bank and such a covenant has been repeated in the proposed loan agreement. Accounting 6.15 TANESCO has a capable accounting staff, under the direction of qualified professional accountants. It employs a satisfactory accounting system and its records are maintained on a current basis. Host of the accounting functions are centralized at TANESCO's headquarters in Dar es Salaam. All billings are currently being recorded on computer equipment at the head office. TANESCO has had a good collection record in the past. The average number of days receivables outstanding is about 40. 6.16 In 1968, TANESCO entered into a two-year contract with Inter- national Computer Limited of U.K. for leasing computer equipmaent at an annual rental of Tsh360,000. This contract expired in April 1970 and was renewed for another two years. The computer division is well managed and after overcoming the usual problems with the installation of a computer system, it has been operating satisfactorily. Cost studies have been made and TANTESCO estimates that in 1970 it will break even on the cost of the - 18 - coinpu ter system and thereafter it expects to attain annual savings. Proposed Financing Plan 6.17 A summary of the financing plan is presented in the following statement showing the funds required and the sources of such funds during the seven-year period 1970 through 1976 knount (Millions) US $ Tsh Equivalent '! Required Funds Construction Expenditures IBRD Loan 518 TA project 35.6 5.0 5.1 Proposed IBRD Project 419.1 58.7 60.0 Other construction 176.6 24.7 25.2 631.3 88.4 90.3 Interest during construction 47.8 6.7 6.9 Total construction expenditures 679.1 95.1 97.2 Increase in Net Working Capital 19.1 2.7 2.8 Total Required Funds 6o8.2 97.8 100.0 Sources of Funds Net Internal Cash Generation Internal cash generation -0C. 56.1 57-1 Lesst Interest charged to operations 70.S 9.9 Amortization of long-term debt 48.2 6.8 Dividends paid 87.0 12.2 Total deductions 2061 70.9 29.5 Ilet internal cash generation 194.3 27.2 27.9 Borrowings IBRD Loan 518 TA 20.0 2.8 2.9 Proposed IBRDT Loan 214.2 30.0 30.7 Proposed SIDA Credit 85.7 12.0 12.3 Other 39.4 5.5 5.6 Total borrowings 359.3 50.3 g7§ Other Sources Equity Investments 134.8 18.9 19.2 ;Miscellaneous Receipts 9.2 1.3 1.3 SIDA Grant o.6 0.1 0.1 Total other sources 144. 20.3 2076 Total Sources 698.2 97.8 100.0 - 19 - 6.18 TAUESCO's net internal cash generation, based on the revenue forecast as indicated in the forecast income statements (Annex 12), is expected to provide Tsh194.3 million or about 2(3%- of the total fund requirements after covering interest charged to operations, amortization of long-term debt and dividends. Although a 20C% contribution by TANESCO towards the fund requirernent may appear somewhat low it is adequate during this period of exceptionally high capital expenditures which will increase the fixed assets of the company by about 200% in a relatively short period of time (see Annex 13). 6.19 Of the total estimated Tsh359.3 million funds from borrowings, Tsh22.4 million, or about 6%, will be provided from undrawn balances of existing loans. The proposed IBRD and SIDA financing wiill provide Tsh299.9 million, or about 84'. of the total borrowings. It has been assumed for the purpose of the financial forecast that the Bank loan of Tsh214.2 million (US$30.0 million) would carry a 7-1/WL' interest rate and would have a term of 25 years including a 5-year grace period. The SIDA credit of TshG5.7 million (US$12.0 million) will be made directly to the Government and relent to TANESCO on terms similar to the terms of the proposed Bank loan. The SIDA credit -nll be made effective prior to or simultaneous with the effectiveness of the proposed Bank loan. At present no definite arrangements have been made for the estimated remaining loans amounting to Tsh37.0 million, or about 101 of the total borrowi-ngs, because rmiost of these funds (for a transmission line between Hale and Kikuletwa and for the second stage of Kidatu) will not be required until 1974 and there- after. No difficulty is expected in obtaining this additional financing at the appropriate time. 6.20 The balance of the required funds over the period 1970 through 1976 will be supplied by Goverrnvient equity investments of Tsh134.8 million or 19.2% of the funds required, by miscellaneous receipts of Tsh9.2 million (1i.3b), and by a small grant from SIDA covering the cost of preliminary investigations to be incurred in 1970. 6.21 A Source and Application of Funds Statement is shonm in Annex 15. The financing plan is satisfactory. Howfever, to assure that the Project will nct be delayed because of unexpected shortage of funds during the years 1970 through 1976, assurances were obtained: (a) that unless the Bank agrees othenrise the present dividend rate of 6-2/3c% paid to the Government on the ordinary stock will not be increased during the period 1970-1976, and (b) in the event of a shortage of funds, that the Governmnent wyill supply TAiESCO iath such funds as ar ecessary to carry out the time- ly completion of the Project, on terms an tEonditions satisfactory to the Bank. Future Operations 6.22 Based on the present market forecast and on the existing tariffs, TANFESCO's total operating revenue is expected to double, from Tsh74.1 million in 1969 to Tsh148.2 million in 1977. Although operating expenses are expected to increase between 1969 and 1974, they are reasonable in - 20 - relation to increased Production and the expanded power system. The cost per kTJh sold, excluding income taxes, is expected lto decrease frorn Tcents 144.4 (UScents 2.02) in 1969 to Tsents 11.80 (TiScents 1.65) in 1974. In 1975, when Kidatu Project Stage i comes on streai the cost per klelh should increase slightly to Tcents 11.96 (UScents 1.67) because of the substantial depreciation charge associated with the Project wihich more than offsets savings in other operating expenses resulting from the use of hydro power. By 1977, however, as the savings in other operating expenses increase, the cost per kWh sold should decrease to Tcents 11.41 (UScents 1.60). 6.23 TANESCO's current position should be satisfactory as indicated by the current ratio (including long-term debt due wiithin one year as a current liability) which is 1/1 or better in seven years of the eight-year forecast period. A temporary shortage of cash is expected to occur at the end of 1975, and TANFESCO plans to cover this by a bank overdraft which would be repaid in early 1976. 6.24 The relationship of long-terr debt to equi-ty is satisfactory. The debt/equity ratio increases steadily each year from 37/63 in 1969 to a high of 54/46 in 1976 which is reasonable, reflecting an increasing rate of borrowing uo finance its heavy expansion program. The ratio declines slightly in 1977 and should continue decreasing in subsequent years until the next major construction project requirilng extensive borrowing is under- taken. 6.25 The first Bank loan to TANESCO included a debt limitation covenant to the effect that, except as the Bank shall ot,herw-ise agree, T.TESC0 shall not incur any debt unless the internal cash generation is at least 1.5 times the maximum future debt service, calculated on the basis of amounts drawn down. A similar covenant has been included in the proposed loan agreement. However, to facilitate the administration of the covenant it was changed so as to require that (i) debt shall be deemed to be incurred on the date of execution of a loan contract, and (ii) the maximum future debt service shall be covered not less than 1.4 times. The financing plan for the 1970-76 construction program includes a proposed loan to be contracted for in 1973, followed by another foreign loan in 1975 (Annex 15). The present financial forecasts indicate that TANESCO may not be able to meet the 1.4 times coverage test of the proposed covenant in respect of the 1973 loan, in which event the problem could be reassessed 4in light of the then prevailing circumstances. The test for the 1975 loan could apparently be met without difficulty. - 21 - 7. RECOHi-C7ND'aTIMTS 7.01 During loan negotiations agreement was reached on the following principal points. (a) The Government of Tanzania shall not permit any abstraction of water from the Great Ruaha River or its tributaries upstream ofI Kidatu that will in any way reduce the potential output of the Xidatu generating station (paragraph 3.03); (b) TANESCO shall extend the Kidatu scheme so long as studies show t,o the satisfaction of Tanzania and the Bank that such course would be the most economic means of producing additional power for the system to -w^hich lKidatu is interconnected (paragraph 3.07); (c) except as the Bank shall otherwAse agree, (i) revenues will be sufficient to earn ar, annual rate of return of not 'Less than 10<, except for the years 1975 through 1981, wxhen the rate of return may not be less than 7g; and (ii) the presently prevailing tariffs shall not be reduced through the year 15101 (paragraph 6.o4); and (d) the proposed loan will be secured under the existing mortgage as soon as practicable but not later than September 30, 1971 (paragraph 6.12). 7.02 The SIDA credit will be made effective prior to or simultaneous with the effectiveness of the proposed Bank loan (para- graph 6.19). 7.03 The proposed Project constitutes a suitable basis for a Bank loan of US$30 million, for 25 years including five years of grace. October 8, 1970 AIThIEX 1 Page 1 of 2 pages TANZAI'TA 'IT71AzA ELECTrIIC SUPPLY COUPAUŹ LLI2TE, TAIIESCOIS EKISTITTG PcIER FiTCTLITIES 1. TANESCO has an interconnected power system operating at 132 kV in the coastal region between Dar es Salaain, Tanga and Morogoro. This system accounts for 67N of the company's installed generating capacity, 63% of its 46,000 electricity consumers, and about 805j, of its tvotal 1969 sales of 307 million k'^Jh. These figures reflect the concentration of urban population and general economic activity in the coastal region. Other population*centers with considerable economic activity include -- the loshi-Arusha area in the foothills of IIount Kilimanjaro, with an installed capacity of 15 TIN, the .11anza area in the Lake Victoria region (7.5 IGJ), the Mtwara-Lindi area in the south coastal region (2.6 m), and the towns of Iringa, Dodoma and Tabora in the central plateau, with an installed capacity among them of 4 if-T. Ten other population centers have public supplies of electricity, with generating equipment ranging from 145 to 800 kW installed capacity. The locations of the interconnected power system and of the other centers with public supplies are shown on the map attached to the report. 2. Hydroelectric pouer plant owned by TATESCO has a total capacity of 48 I!S, consisting mainly of 17.5 H,1T at Pangani Falls, 21 IP2J at Hale and 8 Th1T at 1yunmba-ya-Mbungu. All these stations are on the Pangani River, the first two feeding into the coastal system and the other into the Hoshi- Arusha system. Both the Pangani Falls station built in 1934 and the Hale station build in 1964 are run-of-river type with limited pondage. The river flow is controlled upstream at Nyunba-ya-IMungu, where a dam creating a large multipurpose reservoir of 1,500 million m) was constructed in 1967. The Nywmba-ya-Mungu Power station was added in 1969. A small hydroelectric station of 1.2 MIS built in 1935 at IKikuletwa on the Pancani River supplies the tonms of 14oshi and Arusha. Amother small hydroelectric plant of 0.3 LA on the flwaya River has been supplying the town of Mlbeya since 1958. 3. The remaining 53.8 NJ capacity owmed by TAXESCO is provided by 80 diesel generating sets, at 19 different locations. These unilts vary in size from 35 k| to 4,400 kW. Under Bank Loan 518, TA, the Ubungo staticen is now being extended with three 6,100 lf,T units and the '-,ranza station on Lake Victoria with twyo 1,500 kT: units. The installed capacity, maximum demands and k`LlTn sales for 1969 at all TAITESCO branches are shown at the end of this Annex. * Arusha is the capital of the East African Community. AiqNEX 1 Page 2 of 2 pages 4. The coastal system is interconnected by means of 132 kV single circuit transmission lines on steyed steel towers totalling about 370 km in length. In the ?4oshi-Arusha system a 66 kV line of 33.5 km in length carries power from Nyumbu-ya- iingu station to the load centers in the north. The operating voltage for the secondary transmission lines in both systems is standartized at 33 kV. For distribution networks two standard voltages (11,000 and 400 volts) are adopted. In spite of long transmission distances and high incidence of lightning, the reliability of supply is well maintained. Transmission and distribution losses expressed as a fraction of units sent out are 13% wihich is satisfactory. 5. The TANESCO transmission system is shown on the map attached to the report. TDro main transmission lines are currently under construc- tion: a 132 kV line from liale station to Tanga to meet the growing demand brought about by -the town's fertilizer plant and steel rolling mill now under construction, and a 33 kV line from TItwara to Lindi which will make it possible to shut down the small and costly diesel plant at Lindi. List of Capacity, Demand and Sales 1969 1969 Capacity (k`WJ) Demand (kW) Sales (000 kI.,) Coastal System 68,380 51,300 243,698 iYioshi-Arusha System 15,160 10,910 26,465 Bukoka 800 470 1,444 Dodoma 1,210 910 3,80)4 Iringa 1,670 870 3,837 Kigoma 720 280 915 Lindi 4h0 202 611 Mbeya j 660 675 2,358 Mpwapwa 240 94 218 Mtwara 2,175 560 1,753 -lWusoma 500 2h0 545 Mwanza 7,560 4,100 15,491 Nashingwea 250 120 333 Singida 360 180 517 Songea 380 75 new Tabora 1,110 790 2,692 Tukuyu 14 78 173 Shinyanga 2/ - 600 1,923 TOTAL 101,760 306,777 1/ A diesel unit of 330 k1eh is being transferred from 1Iwanza. 2/ Power is purchased from i'Jilliamson Diamond 1'lines. July 23, 1970 ANNEX 2 TANZAL:IA of 3 pages TATUZANIA ELECTRIC SUPP'LY COMPANY Lfl>TITED DESCRIPTION OF KIDATU HYDROELECTRIC DEVELOM4ERT Topography and Hydrology le The Great Ruaha River, an important tributary of the Rufiji River rises in the mountainous south-western region of Tanzania, close to northern tip of Lake Nyasa wihere the rainfall is one of the heaviest in the country. From there it flows in a north easterly direction until it reaches 11tera where other major tributaries join it and the flow turns in a south easterly direction. The river falls about 175 m over a distance of about 34 km before it reaches the Ijikumi-Ifakara road bridge at Kidatu and then it enters a long flat plain flowing at a gentle gradient in main- ly easterly direction until it joins the Rufiji River. 2. At Kidatu where the proposed hydroelectric development is located- the average flow of Great Ruaha River is 191 m3/s which corresponds to ather- retical annual flow of 6,025 million m3. However direct discharge mea- surements obtained over a period of 14 years from 1954 to 1966 (and supple- mented by earlier rainfall measurements) show that the annual flow varies from year to year between 1,665 million m3 and 17,650 million m3. In addition to these aniual variations, the discharge figures show a greater seasonal variation. Between wet and dry months of the same year the discharge variations may show a ratio of as high as 100 to 1. Dam and Spillway 3. The first stage of the proposed Kidatu hydroelectric development based on these topographic and hydrologic conditions would involve the construction of a rock-fill dam located 11 ka upstream of the Hikumi-Ifakara road bridge, with a maaximum height above the river bed of about 37 m and a total crest length of about 350 m. The dam would provide a live storage of some 125 million m3 at a draw dowm of 17 m, which in turn would provide a regulated river flow during dry seasons slLfficient for the requirements of the first stage of development. On the riverts right bank a concrete spillway would be construcaed with radial gates capable of passing a discharge of about 7,500 mJ/s which is the calculated 10,000 year flood. Power Plant 4. The water Twould be conveyed from the reservoir to the turbines through a concrete intake structure, a headrace tunnel, and four vertical penstocks. The intake structure would be located on the right bank of the river just upstream of the dam and would be provided with trash racks and a vertical lift gate. The headrace tunnel would be about 10 Iam in length and about 10 m in diameter, and since according to geological in- vestigations the rock species in the area is sedimentary gneiss, it would not require lining except possible strengthening in weak zones. At the dowmstream end of the tunnel a surge gallery would be arranged. Only two of the penstocks would be provided with steel lining and cylindrical gates during the first stage construction and the other two shafts would remain A41\T 2 Page 2 of 3 pages unfinished behind two simple sliding gabes until the construction of the second and third stages of development. 5. Two vertical shaft- Francis type turbines which would operate under a maximum net head of about 172 m in an underground station 200 m below ground would be coupled to two generators, each of 50 141i rating. From the turbines water would be discharged (nomzinally 38 F/S for each set) to a tailrace tunnel 900 m in length 2nd 80 m2 in cross-sectional area. This tunnel would join the river via a short tailrace canal just upstream of the road bridge. 6. In the Kidatu powTer station, 220 kV 55 11VA step-up transformers, one for each generating set, would be placed underground in separate rooms adjacent to the main machinery hall. Power from the transformers would be carried by 220 kV cables located in a vertical shaft to a pothead arrange- ment at ground surface, whence it would be transmitted by a short overhead line to an outdoor switch-yard situated near the Kidatu bridge. A single circuit, 306 km 220 kV transmission line wTould transmit the power to a stepdown substation to be constructed at Ubungo on the outskirts of Dar es S alaam. Further Stages 7. The second stage of development, planned for commissioning at the beginning of 1980, would involve the addition of a third 50 DTR. unit at the Kidatu station together wzith the construction of an earth-fill dam at MItera located some 175 la upstream of Kidatu. This dam would have a maximum height of about 26 m and a cres' length of about 1,900 m. The reservoir formed by this damn would have a live storage of about 3,400 million m3, thus ensuring the availability of water during the driest seasons sufficient for the Kidatu station even after 19e3, when a fourth unit of 50 I'4W would be installed raising the total capacity to 200 NW. Transmission 8. The 220 kV transmission line from Kidatu to Dar es Salaam would be a single-circuit line on stayed steel towers with s-teel-reinforced alu- miniun conouctors equivalent in cross-sectional area to 343 mm2 copper conductors. Between Dar es Salaam and Hlorogoro the line would closely follow the route of the Tanzania-Zambia main road, beside wh,ich now runs the existing 132 kV transmission line from Hale to Dar es Salaami. Between .,orogoro and Kidatu the line -Tould be routed close to secondary roads to facilitate maintenance. 9. The terminal substation at Ubungo would reduce the voltage from 220 kV to 132 kV by means of two 75 .:1A auto-transformers, which would feed into the existing 132 kV transmission system. 9JTo other 50 IiVA 132/33/11 kV transformers would feed into the 33 'kV and 11 LcV systems at Ubungo. A'IThEK 2 Page 3 of 3 pages Utilization 10. The klh units to be generated at t-he Kidatu power plant during 9 years from 1975 to 1983 are shown in the table below. TANESCO's con- sultants made extensive computer studies for each year included in this table in order to determine the number of units that may be generated at Kidatu power plant to meet the corresponding estimated load* when applying the same water flow conditions in the Great Ruaha River as were prevalent during each separate year of the observed 14 year series 1954 to 1968 which include considerably wet as well as considerably dry conditions. The table shows the mean value of the 14 different annual production figures calculat- ed thus for each of the individual years. Year Installed Capacity Units Generated Time of Utilization (li}slJZ) (million kw,.Th) (hours) 1975 100 353.8 3,590 1976 100 412.8 4,130 1977 100 465.8 4,660 1978 100 519.6 5,200 1979 100 564.8 5,650 1980 150 749.0 4,990 1981 150 843.0 5,620 1982 150 953.8 6,230 1983 200 1,054.0 5,270 11. The amount of generation from Kidatu plant after 1983 will depend on the total system load and the characteristics of other power plants feeding into the system. Calculations have not been extended to include the years after 1983. However, it is estimated that the maximum average annual generation is about 1,300 million k.h. * Estimated load in these calculations refer to load projections prepared by Merz and IMcLellan Co. Ltd. of U.K. in 1968. Although these projections have been updated in 1970 for the purposes of this report, the above referred to calculations have not been revised because the differences in the load forecasts as updated were not of great significance as far as these calculations were concerned. June 24, 1970 ANNEX 3 TANZANIA Tanzania Electric Supply Company Limited COST ESTIMATES OF THE PROJECT In Tsh In US$ % of Local Foreign Total Local Foreign Total Grand Total …---------------…millions------------------- A. KEDATU POWER STATION 1. Civil Works Dam & Diversion Works 22.0 34.0 56.0 3.08 4.76 7.84 13.27 Power Station, Tunnels & Switch-Yard 20.5 44.5 65.0 2.87 6.23 9.10 15.40 Access Road & Camps 11.0 3.0 14.0 1.54 0.42 1.96 3.32 Contractor's overheads 10.0 23.0 33.0 1.40 3.22 4.62 7.82 Subtotal 1 63.7 i1 lOS.CY -F- W 176T 23.52 39.81 2. Mech.&Elec. Equip. Gates etc. for dam 0.5 7.0 7.5 0.07 0.98 1.05 1.78 Gates for intake, pen- stock & draft tb 0.7 6.6 7.3 0.10 0.92 1.02 1.73 Turbines 0.7 6.5 7.2 0.10 0.91 1.01 1.71 Generators 0.7 6.1 6.8 0.10 0.85 0.95 1.61 Transf.sw.yd&const.equipl.2 10.7 11.9 0.16 1.51 1.67 2.83 Aux.mec.&elec.equip. 0.7 6.1 6.8 0.10 0.85 0.95 1.61 Subtotal 2 4. 43.0 7.5 Th5 60 T7 11.97 Subtotal 0 177 7 2=15. 9.52 20.65 30.17 51705 B. TRANSMISSION LINE Steel towers & insu- lators 1.0 11.0 12.0 0.14 1.54 1.68 2.84 Foundations 1.5 2.0 3.5 0.21 0.28 0.49 0.83 Conductors & Static wire 0.5 15.5 16.0 0.07 2.17 2.24 3.79 Right of way & clear- ing 2.5 2.5 5.0 0.35 0.35 0.70 1.18 Subtotal B T15 31.0 36.7 0.77 4 5.11 C. 15 MW UBUNGO DIESEL Building & Foundations 1.0 1.0 2.0 0.14 0.14 0.28 0.47 Diesel Generator 1.0 8.5 9.5 0.14 1.19 1.33 2.25 Electrical Equipment .0.5 2.0 2.5 0.07 0.28 0.35 0.59 Subtotal 2 11.5 14.0 0.35 -T71 1.9 3.31 D. DKGINEERING & SUPER- VISION 4.0 30.0 34.0 0.56 4.20 4.76 8.06 E. DUTIES & TAXES 12.0 - 12.0 1.68 - 1.68 2.84 F. CONTINGENCIES 17.0 28.0 45.0 2.38 3.92 6.30 10.66 G. PRICE ESCALATION 13.0 52.0 65.o 1.82 7.28 9.10 15.40 GRAND TOTAL 122.0 300.0 422.0 17.08 42.00 59.08 100.00 July 16, 1970 TANZANIA TANZANIA ELECRIC SUPPLY COMPANY LIMITED Schedule of Disbursements The schedule of disbursements from the proposed Bank loan is expected to be: In US$ (millions) First Quarter Second Quarter Third Quarter Fourth Quarter Disburse- Disburse- Disburse- Disburse- Years ment Balance ment Balance* ment Balance* ment Balance* 1971 0.50 29.50 0.90 28.60 1.10 27.50 1.31 26.19 1972 1.40 24.79 1.40 23.39 1.50 21.89 1.60 20.29 1973 1.70 18.59 1.80 16.79 2.00 14.79 2.15 12.64 1974 2.30 10.34 2.20 8.14 2.14 6.oo 2.11 3.89 1975 o.60 3.29 o.60 2.69 o.50 2.19 040 1.79 1976 o.60 1.19 1.19 0.00 * Undisbursed Loan Balance September 21, 1970 TANZANIA ELECTRIC SUPPLY COMPANY LIMITED COASTAL SYSTEM CAPACITY AND MAXIMUM DEMAND CURVE (MEGAWATTS) 350 I I I I 350 z 0 0' 0 0 o o E _ _ _ _ _ _ 300 o 300 z < 0~~~~~~~~~~~~~~ z Z ~~~~~~~~~~~~~~~~~~~~~U). 250 2 50 x I NSTALLE D CAPACITY o .o 200 I --200 150 _ _ O O < WR~~~~~~~~~~~~~~~~~~~~IM CAPACITY op 1 0 0 Z m m g $ _- _, _ . .z -~ 1 0 15--0''~ 1~50 20 ACUA J - - PROJECTED200 SETEBE 3190 XD 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~BD44 (2R Z ° 150 ____ -- - -- 77* 15 0z :, , nwz U,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 50PTMBER30 150 0 I I I I I I I I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~BR -97 2) L TANZANIA Tanzania Electric Supply Company Limited PAST .3ALES AND MAXIMUM DEMAND IN COASTAL SYSTEM 1960 - 1969 Domestic Sales, GWh I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Dar es Salaam 15.25 26.66 19.01 21.18 23.51 26.20 28.90 30.92 33.63 39.28 Morogoro o.59 o.64 0.71 0.80 0.87 1.03 0.93 o.s4 0.98 0.99 Tanga 8.08 7.60 7.86 8.ol 8.10 8.24 6.81 5.74 5.30 5.23 Total Domestic 23.92 24.90 27.58 29.99 32.48 35.47 36.64 37.60 39.91 45.50 Commercial Sales. GWh Dar es Salaam 8.22 9.98 11.95 13.80 15.64 18.30 20.50 21.50 23.70 28.53 Morogoro o.46 0.50 o.57 0.55 0.58 0.91 2.18 2.25 2.60 2.64 Tanga 1.11 1.21 1.52 2.38 2.47 2.55 5.95 6.33 6.09 6.65 Total Commercial 9.79 11.69 14.04 16.73 18.69 21.76 28.63 30.08 32.39 37.82 Industrial Sales, GWh Dar es Salaam 16.13 18.50 21.58 22.43 27.14 33.81 55.26 75.14 92.20 103.34 Morogoro 0.51 o.56 o.65 o.84 2.82 8.91 10.30 10.87 9.46 10.58 Tanga 37.31 37.75 43.34 47.30 47.85 45.19 44.77 43.05 39.93 44.39 Total Industrial 53.95 56.81 65.57 70.57 77.81 87.91 110.33 129.06 141.59 158.31 Street Lighting, GWh Dar es Salaam 0.50 o.54 0.69 0.80 o.89 0.96 1.11 1.18 1.34 1.49 Morogoro o0o6 o.o6 o.o8 0.08 0.10 0.12 0.13 0.16 0.19 0.21 Tanga 0.23 0.24 0.29 0.30 0.31 0.34 0.35 0.37 0.35 0.36 Total Street Lighting 0.79 o.84 1.06 1.18 1.30 1.42 1.59 1.71 1.88 2.06 Total Sales. GWh Dar es Salaam 40.10 45.68 53.23 58.21 67.18 79.27 105.77 128.74 150.87 172.64 Morogoro 1.62 1.76 2.01 2.27 4.37 10.97 13.54 14.22 13.23 14.42 Tanga 46.73 46.80 53.01 57.99 58.73 56.32 57.88 55.49 51.67 56.63 TOTAL SALES COASTAL SYSTEM, GWh 88.45 94.24 108.25 118.47 130.28 146.56 177.19 198.45 215.77 243.69 UNITS GENERATED. GWh 104.39 111.20 127.74 139.79 153.73 172.90 209.08 233.18 248.31 288.23 MAXIMUM D3NAND, MW 21.92 24.85 26.08 27.79 29.43 36.58 41.70 42.84 43.59 50.03 September 22, 1970 TANZANIA Tanzania Eleptric Supply Company Limited PROJECTION OF SALES AND MAXIMUM IEMAND IN COASTAL SYSTEM 1970 1985 Domestic Sales, GWh 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Dar es Salaam 43.65 48.50 53.89 59.88 66.54 73.94 82.16 91.30 100.43 110.47 121.52 133.67 147.04 161.74 177.91 195.70 Morogoro 1.05 1.12 1.19 1.26 1.34 1.42 1.51 1.60 1.73 1.87 2.06 2.27 2.50 2.75 3.03 3.33 Tanga 5.49 5.76 6.05 6.35 6.67 7.00 7.35 7.72 8.26 8.84 9.55 10.31 11.13 12.13 13.34 14.67 Total Domestic 50.19 55.38 61.13 67.49 74.55 82.36 91.02 100.62 110.42 121.18 133.13 116.25 160.67 176.62 194.28 213.70 Comwareial Sales. GWh Dar es Salaam 32.24 36.43 41.17 16.52 52.57 59.40 67.12 75.85 83.44 91.78 100.96 111.07 122.18 134.40 147.84 162.62 Morogoro 2.85 3.08 3.32 3.59 3.88 4.19 4.53 4.89 5.38 5.92 6.51 7.16 7.88 8.67 9.54 10.49 Tanga 6.98 7.33 7.70 8.09 8.49 8.91 9.36 9.83 10.52 11.26 12.16 13.13 14.31 15.60 17.16 18.86 Total Commercial 42.07 46.84 52.19 58.20 64.94 72.50 81.01 90.57 99.34 108.96 119.63 131.36 144.37 158.67 174.54 191.99 Industrial Sales. GWh Dar es Salasn 116.77 131.95 176.20 195.58 217.48 242.23 270.20 301.80 3141,03 385.36 431.60 483.39 536.56 595.58 655.114 720.65 Morogoro 11.32 12.43 13.28 11.19 15.16 16.20 17.31 18.50 19.98 21.58 23.74 26.11 28.72 31.59 34.75 38.23 Tanga 46.61 55.94 58.39 60.96 63.66 66.49 69.46 72.58 77.66 83.87 91.42 100.56 110.62 121.68 133.85 1147.2 Total Industrial 174.70 200.32 247.87 270.73 296.30 324.92 356.97 392.88 438,67 490.81 546.76 610.06 675.90 748.85 823.74 906.12 Street Lighting. OWh Dar .a Salaa, 1.64 1.80 1.98 2.18 2.40 2.64 2.90 3.19 3.51 3.86 4.25 4.66 5.13 5.64 6.20 6.82 Morogoro 0.23 0.25 o.28 0.31 0.34 0.37 0.41 o.45 0.50 0.55 0.61 0.67 0.74 0.81 0.89 0.98 Tanga 0.39 0.42 0.45 0.49 0.53 0.57 0.62 0.67 0.74 0.81 0.89 0.98 1.08 1.19 1.31 144 Total Street Lighting 2.26 2.47 2.71 2.98 3.27 3.58 3.93 4.31 4.75 5.22 5.75 6.31 6.95 7.64 8.40 9.24 Total Sales. GWh Dar es Salaam 194.0 219.0 273.0 304.o 339.0 378.0 422.5 472.0 528.5 591.5 658.5 733.0 811.0 894.5 987.0 1086.0 Morogoro 15.5 17.0 18.0 19.5 21.0 23.0 24.0 25.5 27.5 30.0 33.0 36.o 40.0 44.0 48.o 53.0 Tanga 59.5 69.5 72.5 76.0 79.5 83.0 87.0 91.0 97.0 105.0 114.0 125.0 137.0 150.5 165.5 182.0 TOTAL SALES TO COASTAL S!ST!24 269.0 305.5 363.5 399.5 439.5 484.o 533.5 588.5 653.0 726.5 805.5 894.o 988.0 1089.0 1200.0 1321.0 UNITS GEMNRATED. GWh 303.0 343.0 408.0 447.0 491.o 541.o 595.0 656.o 727.0 808.0 lo. 1210.0 .13.. 0 S- -14Q10 a M-UIM D3HBtD, Mf 56. 6 7 7 85.5 94.0 103.0 113.0 125.0 138.0 154.0 170.0 189.0 209.0 23b.0 54.0 279.0 September 22, 1970 A3,\'h JL 8 Page 1 of 2 pages TANZANIA TANZAANIA ELECTRIC SUJPPLY COTIPANY LII4iTED ALTERN1TIVE PROJECTI1IMTS OF SALES IN COAST.L SrSTMi 1. As a check on the TAITESCO forecast of energy sales in the coastal system to 1985, three other projections have been made by regres- sion analysis of the relation between past sales and other economic va- riables. The variables used were monetary GDP, the values of manufacturing output and urban population growth in the three main load centers of Dar es Salaam, I{orogoro and Tanga; annual values of these variables were obtained going back to 1960. 2. Statistical analysis L/ showed strong correlations between these variables and electricity sales, as follows: (1) Total electricity sales and monetary GDP - correlation: 0.98 (2) Total electricity sales and all three variables, correlation: 0.99 (3) Industrial electricity sales and manufacturing output, correlation: 0.98 (4) Domestic and commercial sales and urban population, correlation: 0.88 The following regression equations were derived: (1) Total electricity sales = -182.9 + 0.111 (GDP) (2) Total electricity sales = -67.0 + 0.0M (GDP) + 1.16 (Manufactur- ing output) - 0.50 (Urban Population) (3) Industrial electricity sales = -22.17 + 0.64 (IIanufacturing output) (4) Domestic and commercial electricity sales = -47.5 - 0.326 (Urban Population) Projected annual growth rates to 1974, based on the current five year plan, are 7.7% for monetary GDP, 10.7<. for manufacturing output and 7,i for urban population ?/. It was assumed that these rates would be maintained to 1980 1/ The statistical calculations were carried out by Mr. Vito Lara, Statistical Services Division. The GDP and manufacturing output growth rates are as estimated by the 1969 Bank economic mission. The urban population growth rate is based on Government projections. ANNEX 8 "-, o7 8 r oage of 2 pages but would then decline to average rates of 7%, 1O< and 6, respectively. On these assumptions, the following three projections of total electricity sales were obtainei using the above equations, and adding in the TANESCO projections of street lighting sales, which are a very small proportion of the whole. The TANESCC projections of total sales in the coastal system are shown for comparison: GTIh Projection 1 Projection 2 Projection 3_ ANSCO Projection (Equation (1)) (Equation (2)) (Equations (3) + (4)) 1970 264 257 281 269 1971 298 293 313 306 1972 335 333 350 364 1973 375 376 390 400 1974 418 427 433 440 1975 465 490 478 484 1976 515 560 526 534 1977 568 63F8 580 589 1978 626 724 638 653 1979 689 820 702 727 1980 756 928 773 806 1981 822 1,035 8h5 894 1982 893 1,150 S23 988 1983 968 1,280 1,010 1,082 1984 1,049 1,423 1,104 1,200 1985 1,135 1,580 1,207 1,321 3. The lowest of the three projections implies an average annual growth rate of 10%/ and the highest a rate of 12.5%. The TANESCO projection falls in about the middle of this range, with an average growth rate of about 11'%- per annum. June 24,)1970 ANNEX 9 page 1 of 3 pages TANZANIA TANZANIA ELECTRIC SUPPLY COMPANY LI'ITM COMPA1ITSON OF ALTFERNATIVE SCHENES 1e The level of maximum demand and the size of projected annual increases had become so large towards the mid 1960's that it became necessary for TANESCO to plan in terms of larger units of power produc- tion for the period 1970 onward. With a view to determining a major energy source to meet the projected requirements, the Company, in 1I965, asked their consultants Balfour, Beatty and Co. Ltd. of London, to con- duct studies on the Rufiji River and its tributaries and the IWJami River, all of which had promising sites for hydroelectric development within reasonable distance from the focal point of the coastal system; and to compare the results with steam alternatives using residual fuel oil from the new refinery at Dar es Salaam. The only other source of fossil fuel available within Tanzania was in a remote area 700 km from the system at the Ruhuhu coalfields in the southern part of the country. This prelimi- nary study resulted in a report, "Power Generation to INeet Demand in 1970- 83f", dated October 1966, which examined the available data for the 10 sites listed below: Site Location Kijangwe !Jami River Pongwe Wami River * INtera Great Ruaha River Kidatu Great Ruaha River* Tavetta Kilombero River* - *Inyera tributary Mkasu Kilom.bero River* - Ruhuji tributary Kingenena '1Kilombero River* - Ruhuji tributary Nyangazi Rufiji River - Luwegu tributary Shuguri Falls Rufiji River - Ulanga-Luwegu confluence Stiegler's Gorge Rufiji River * Tributaries cf the Rufiji. 2. The Tavetta and 0kasu sites were eliminated from consideration because of their distance from the focal point of the coastal system, the difficulty of access to the sites during the rainy season, the low levels of possible annual power production (150 Glh in both cases), and the very high estimated cost per IkTh generated. The Kingenena site, whlere the possible average production was estimated at about 300 G(Wh, was eliminated because an appreciable amount of land would be flooded and the Ifakara-IlIehenge road would have to be realigned. At the Nyangazi site, geological conditions are likely to be difficult. At the Shuguri site, part of the available head would be included in the Stiegler's Gorge scheme and should therefore be considered only as a stage development of that scheme. The Stiegler's Gorge site was eliminated because of the very high initial investmen' required for this very important development with about 600 I4T firm generation capacity, which is too large in compari- son with system requireinents for the time period under consideration. IiNIT1,1Jr,X 9 P ag-e of 3 pages 3. Detailed consideration was therefore given to the two alterna- tives on the Wami River and to the two sites on the Great Ruaha River. According to the investigations undertaken, it was found that Kidatu and Mtera sites on the Great Ruaha River would provide for stage development at lower cost than the Wami alternative. 4. About the same time the Water Development and Irrigation Depart- ment of the Government secured the help of the Swedish International Development Authority (SIDA) to finance a comprehensive study of a multi- purpose scheme on the lower part of the Wami River. A Swedish Consulting Group (SWECO) was asked to carry out a preliminary study, whose findings included estimates on the Kidatu/AItera development for purposes of compari- son. The ensuing report, also dated October 1966, concluded that develop- ments on the Wami River would be more advantageous since it provided some irrigation benefits in addition to power. 5. In 1967, Balfour, Beatty & Co. Ltd. made a more detailed appraisal of the Kidatu/Mtera scheme, along with a detailed appraisal of a steam station near the TIPER refinery in rtr es Salaam, using the refinery's residual fuel. Comparison of these alternatives on the basis of discounted cash flow gave an equalizing rate of discount of 7%. 6. The parameters such as interest rates, depreciation, amortizatien, escalation etc., used by SWECO and Balfour, Beatty in their reports on the two projects, were not the same, so that direct comparison of their con- clusions was not possible. 7. The building of new irrigation schemes in thie foreseeable future was not recommended by the Bank's 1967 economic mission to Tanzania. Consequently, the mission recommended that a consultant be commissioned to draw up a detailed comparison of the two schemes, Wami and Kidatu, on a basis of power benefits only, and using as far as possible the information contained in the various studies already made. This recommendation was adopted and subsequently put into effect, and it was agreed during nego- tiations for Loan 518 TA that consultants would be engaged to make an economic comparison of the Kidatu and Wami hydroelectric projects on a strictly comparable basis and to recommend one of the projects for an economic comparison with thermal alternatives, as the next major generating project to be developed in the Coastal Region. 8. This study was jointly prepared by SWECO and Balfour, Beatty at the Government's request in July 1968 under the name of t"Comparative Study". It gives the following information on the salient characteristics of the two alternative schemes, together with the characteristics of a comparable thermal generating system: ANl-EX 9 Pa,e 3 of 3 pages Total Total Cost Overall Unit Cost Ruaha Projects Project Output (millions) at Dar es Salaam Stage I Kidatu 100 1MW 100 114 & 510 GWh US$42 7.83 US mill/kWh Stage II Kidatu 100 YMW 200 MW & 980 GWh Us$68 5.77 US mill/kWh IWami Projects Stage 1 Pongwe I 60 MW 60 AW & 320 GWh US$48 12.51 US mill/kWh Stage 2 Thermal 60 MW 120 IW & 665 GWh US$60.5 9.87 US mill/kWh Stage 3 Pongwe II 60 MW 180 NW &1,010 GWh US$86.5 8.65 US mill/kiTh Stage 4 Thermal 30 PRW 210 MW &1,010 OWh US$92.5 9.27 US mill/kWh Thermal 210 MW &l,500 GWh US$44 7.84 US mill/kWh It can be seen that the lower costs and greater output of the Kidatu project make it much more attractive than the VTami project from the point of view of power generation. 9. For the economic comparison of oil fired steam generation with hydro generation, estimates of costs for a comparable size thermal installa- tion were prepared and the cost of steam power compared with that for the Kidatu and Wami projects. These calculations show that the equalizing discount rate for the alternative cost streams is 12% for the Kidatu scheme and the thermal alternative, and 5% for the Wami scheme and the thermal alternative. This indicates that if the opportunity cost of capital is not greater than 12%, the Kidatu project is the most economic of all the alternatives. July 1, 1970 AITM 1 0 Page 1 of 3 pages TAMrZATIA TAINIZAITIA LECTRIC SUPPDLY CO-,jANY LqTIED C911PARISON OF PROJEC? 1ITH AL7'MMEN.TIVE '1EI?IAL, DEVELOPIHMTT 1. T'ne thermal alternative to the Project would be a steam station at Dar es Salaam using residual fuel oil from the rIPE refinery. In making the comparison it is not sufficient to cormpare the Project writh an equivalent steam station, since construction of the Project will necessari- ly involve the subsequent installation of a further 100 MWS of hydro capacity to complete the development of the Kidatu site. It is necessary therefore to compare two alternative development programs covering the period up to 1983; the first comprises the Project plus a further 100 MS of hydro capacity constituting Phase II of the Kidatu scheme; the second would consist of 21 0 IV of steam capacity, to be installed in 30 iF4J stages in accordance with the projected growth of demand. 2. The hydro development would involve higher capital expenditure but lower running costs than the thermal alternative. The method adopted was to find the rate of discount which equalizes the present values of the capital and operating costs of the two alternative programs over a period of 60 years, which is the estimated life of the hydro scheme. Using the TA1ESCO load forecast and the consultantst cost estimiates, the equalizing discount rate is 13.4,'. The hydro capital costs, however, include sunk costs estimated at about Tsh7 million (US$1 million), which shbuld not enter into the calculation. Allowing for this, the equalizing discount rate rises to 13.83. 3. This understates the economic return on the extra investment required for the hycro development for two reasons. The first is that the unskilled labor component of costs (w4hich is higher for hydro) is based on money wqages rather than the real cost to the economy of this labor as measured by the value of its product in alternative employment. Estimates of this were found to vary from zero to 50g of the money wage, depending on Twrhejher the labor was assumed to be otherdise unenployed or to be engaged in the subsistence sector and, in the latter case, on the estimated marginal product of labor in the subsistence sector. The Government department responsible for industry estimates this at 355. of the money wTage, while the National Development Corporation, which undertakes industrial projects in the public sector, uses a value of 5Cf in its project assessments. The higher figure is assumed here. 4. The other reason why the calculated discount rate underestimates the return to the economy is that it does not allou for the additional contribution to national income attributable to the multiplier effect of the extra local expenditure associated with the construction of the hydro scheme compared uith a steam stabion. This depends on the value of the multiplier. No attempt had been made to calculate this in Tanzania but it was suggested to the Bank mission that it was reasonable to assume it would not be very different from the figure of about 2.6 which had been calculated for Kenya. It is conservatively assumed here to be 2. If the hydro ANNEX 10 Page 2 c- 3 pages development is credited with the resulting multiplier effects, and if unskilled labor is costed at 50XI of the money wage, the equalizing discount rate rises to 16.8%. 5. The sensitivity of the discount rate to changes in the inain variables (capital costs, operating costs, load growth) was tested as follows: Capital Costs 6. It was considered unlikely that the consultants' capital cost estimates for either the hydro or the thermal scheme would be exceeded, since they include adequate allowances for escalation and contingencies, but they could be up to 10% lower in both cases. The effect of reducing them by this percentage is to raise the discoumt rate by about 0.5 per- centage point. Operating Costs 7. If all costs (other than the cost of residual fuel oil) are assumed to increase by 3% per annum, the discount rate goes up by about 1 percentage point. Oil Price 8. The consultants assumed a price of Tsh85 per long ton for resi- dual fuel oil from the TIPE refinery to supply the alternative steam sta- tion. This compares with the current price paid by TANESCO of about Tshl0O per ton but this is for relati-ely small quantities of oil of 1,000 seconds viscosity Redwood No. 1, wrhich is actually a blend of about 86; residual and 14). gas oil. The figure of Tsh85 assumes that the steam station wTould use fuel oil of 3,500 seconds viscosityr, which wrould be cheaper than the present blend, and that the much larger quantity required would be supplied at a lower price. Discussions with TIPER, the oil marketing companies in Tanzania and Shell International in London confirmed that the figure of Tsh85 was a reasonable assumption, and that there would be no difficulty in meeting the requirement (55,000 tons initially, rising to over 300,000 tons by 1983), although TIPER thought that the oil supplied would probably be 2,000-2,500 seconds viscosity. It was suggested that + iCr could be taken as the range of variation about this figure for the medium term. The effect is to raise or lower the equalizing discounu rate by about 1 percentage point. For a 20% variation in the price of oil the rate would rise or fall by about 1.5 percentage points. Load Growth 9. The load growth forecast by TANESC0 was used. 'he alternative proictions in Annex 7 suggest a possible range of variation about the TA;C0 estimate of + 20%. Variations of this order would raise or lower the equalizing discount rate by 0.5 percentage point. ANNTL 10 Page . of 3 vares 10. The sensitivity analysis carried out indicated that only with an unlikely combination of adverse factors (30b inflation of hydro costs, 10% lower thermal capital cost, 20% lower fuel oil price, no allowance for positive multiplier effects) would the return on the extra investnent required for the hydro scheme fall below 105" (to 9.5%). It is unlikely to be less than 12' even if the hydro scheme is not credited with the positive multiplier effects attributed to the extra local expenditure it involves. This is satisfactory since the opportunity cost of capital 1n Tanzania is believed not to exceed 12%. July 28, 1970 AMlNEK 1 1 Page 1 of 3 pages TANZANIA TANZANIA .ELECTMIC SUPPLY COHPAINY LDKITED Incremental Rate of Return 1. The incremental financial rate of return for the Project is defined as the discount rate at which the present worth of the estimated capital and operating costs of the total hydroelectric development (see Annex 3) over its life equals the present worth of revenues attributable to it. 2. Capital costs are assumed to consist of the estimated expen- di-tures for constructing Kidatu and litera dams, Kidatu power station, iidatu-Ubungo transmission line, and 15 III Ubungo diesel station, and the estimated expenditures required to extend the distribution networks within the coastal system sufficient to absorb the power generated by these additional plants. Yearly capital outlays are included in the cost stream which is extended over 80 years (the life of the civil engineering works). Other installations, except Ubungo diesel plant, are assumed to be reconstructed at the end of 30 years of operation which is taken to be their useful life, and the retirement value of such installations are assumed to be nil. However, the renewals for distri- bution are not repeated after the first ones since the discount factors become exceedingly small after the 60th year and the effect on the equalizing rate of discount becomes negligible. Plant renewal phasing and costs are assumed to be the same as the original phasing and costs. 3. Operating costs are assumed to consist of estimated increases in annual operation and maintenance expenses (over and above the expenses incurred in 1971, the final year before the 15 MW diesel plant at Ubungo is commissioned), for generation, transmission and distribution and estiimated increases in general administration expenses. These expenses are assumed to remain constant from 1986, when the Kidatu station is fully loaded, until theend of the 80-year period under consideration. 4. Annual benefits attributable to the Project are assumed to consist of the increases in the electric revenues of TANIESCO from the consumers in the coastal system over and above the revenues realized in 1971, and reaching a ceiling in 1987. The increases in the revenues from this date onwards are assumed to be attributed to succeeding developments in the coastal system. Average revenue to be realized from the Project is assumed to decrease from 19.07 Tcent/kUTh in 1972 to 17.50 Tcent/kWh in 1981 due to increase in sales to large consumers who benefit from lower rates associated with large consumption. The average rate is assumed to be constant after 1981. NNX 11 Page 2 of 3 pages 5. The stream of costs and benefits based on these assumptions is shown in the table below. The discount rate which equalizes the present worths of total costs and benefits is found to be 16%. 6. The above computations are based on the growth of sales shown in Annex 7 which corresponds to about 12% up to 1975 and 10% thereafter. The rate of return computations have been repeated for two other condi- tions where the growth in sales is taken to be 8% and 12% respectively throughout the range. Calculations have also been made for a 10% reduction in the estimated capital cost of hydroelectric development and operating costs as well as a 30% reduction in the estimated adminis- tration expenditures. From all these calculations it was found that the rate of return varies over a range of from 10% to 191% showing more sensitivity to variations in the sales forecasts than to costs. ANNEX 11 Page 3 of 3 pages COSTS EENEFITS Cppital Costs Hydroelectric Distribution 0 & K Expenses Years Development & Diesel Extensions Including Diesel pixel Revenues ------------------------ Tsh (millions) ------ 1969 3.5 0 0 0 1970 11.5 0 0 0 1971 46.5 0 0 0 1972 81.0 14 2.5 11.5 1973 106.0 15 6.2 18.9 1974 123.5 17 10.5 25.2 1975 30.0 18 8.0 33,2 1976 20.0 20 9.5 41.2 1977 2.5 22 10.9 50.6 1978 32.0 24 12.)4 62.4 1979 45.0 26 13.8 74.4 1980 33.0 29 15.4 88.1 1981 45.0 32 16.9 103.3 1982 18.5 35 18.5 119.8 1983 26.5 38 20.2 137.6 1984 0 42 21.8 156.9 1985 3.5 46 22.8 178.0 1986 0 50 24 201 1987-2002 0 0 24 226 2003 0 14 24 226 2004 0 15 24 226 2005 17 17 24 226 2006 0 18 24 226 2007 0 20 24 226 2008 0 22 24 226 2009 0 24 24 226 2010 17 26 24 226 2011 0 29 24 226 2012 0 32 24 226 2013 17 35 24 226 2014 0 38 24 226 2015 0 42 24 226 2016 0 46 24 226 2017 0 50 24 226 2018-2034 0 0 24 226 2035 17 0 24 226 2036-2039 0 0 24 226 2040 17 0 24 226 20o1-2042 0 0 24 226 2043 17 0 24 226 2044-2055 0 0 24 226 July 1, 1970 TANZAtIIA Tanzania Electric Supply Company. Limited ACTUAL AND ESTIMATED INCOME STATEMENTS 1966-1977 (Thousand Tsh) Actual Estimate Year Ending December 31 1966 1970 1971 V 72 1973 1974 1975 1976 1977 Units generated (million kWh) 252 282 313 358 399 450 529 585 641 706 796 874 Units sold (million kWh) 215 240 266 307 340 382 452 500 548 603 680 747 Average revenue per kWh (Tcent) 25.32 214.914 24.72 23.65 22.61 22.00 21.02 20.61 20.35 20.07 19.60 19.37 Operating Revenue Sale of energy 54,440 59,857 65,762 72,608 76,866 84,038 95,031 103,030 111,535 121,019 133,275 144,683 Other oPerating revenue 1420 1,1470 1.657 1_458 1,630 1.830 2,080 2,330 2,580 2,880 3,180 3,480 Total operating revenue 54,860 61,327 67,419 74,066 78,496 85,868 97,111 105,360 114,115 123,899 136,455 14818,163 Operating Expenses Generation 9,480 10,654 11,121 14,681 14,637 15,080 18,193 20,351 24,235 23,071 23,043 214,875 Transmission and distribution 4,840 6,040 6,272 5,270 5,361 5,646 5,769 6,288 6,639 7,014 7,414 7,846 Administration 8,800 9,650 10,968 11,694 10,754 11,399 12,015 12,821 13,798 15,183 15,297 16,226 Depreciation 9,360 9,o46 10,931 12,673 14,278 16,000 17,263 18,406 19,935 26,884 34,702 36,304 Income tax 2,960 6,963 7,589 7,150 7,910 9,776 13,298. 15,438 16,150 2,120 2,181 6,887 Amortization of preliminary expenses 20 Total operating expenses 35.460 42,353 46,881 51,468 52,940 57.901 66,538 73,304 80,757 74,272 82,637 92,138 Operating Income 19,hOO 18,9714 20,538 22,598 25,556 27,967 30,573 32,056 33,358 49,627 53,818 56,025 Other Income 300 491 252 342 320 400 600 500 200 200 800 Total Income Before Interest Charges 19.700 19,465 20,790 22,940 25,876 28.367 31,173 32,556 33.558 49,627 54,018 56,825 Interest Charges 4,380 4,880 4,835 5,104 5,733 9,811 12,204 16,160 21,554 25,602 27,694 28,193 Less interest charged to construction 378 - - -.06 6,423 10,761 16.522 9.912 735 1.715 Interest charged to operations 14,380 14.502 -4,835 5,104 5,733 6,335 5,781 5.399 5,032 t5,690 26.959 26,478 Net Income 15,320 14,963 15,955 17,836 20,143 22,032 25,392 27,157 28,526 33,937 27,951 30,347 Less Net Income Allocations Dividends 7,300 7,305 7,305 7,305 7,839 8,872 10,339 12,306 15,106 16,106 16,390 17,o56 Provisions for deferred tncome taxes _ _ _3,483 3,566 3,192 _2433 1.839 1,942 12.592 9,993 8,376 Balance to Surplus 8,020 7.658 8,650 7.048 9,968 12,62 13,012 11,478 5,239 676 _4,915 Rate of return (operating income to average net fixed assets in operation) 11.3% 10.8% 10.7% 10.2% 10.1% 10.1% 10.8% 11.3% 11.7% 9.3% 6.9% 7.2% Times interest charges covered by operating 192 income 4.4 4.0 4.2 4.4 4.5 2.9 2.5 2.0 1.5 1.9 1.9 2.0 Operating ratio 64.6% 69.0% 69.5% 69.4% 67.4% 67.14% 68.5% 69.6% 70.8% 59.9% 60.6% 62.2% September 22, 1970 TANZANIA Tanzania Electric Oupew Coeooany Limited ACT7AL 6N)D ESTIMATED R3AANCE SHEETS 1966-1977 (Thousand Tsh) ActuAl Estiente Dece-ber 31 1966 1967 1968 1969 1970 1971 1972 1973 197 1275 1976 977 ASSETS Fined A.sett Fined a.sets in operation 254,043 267,102 306,850 347,789 395,097 423,461 411 561 461,361 482,961 1,o01 838 1,038,049 1,065,649 Lest -ccosulated provision for depreciation 81,158 89,413 98,936 111,017 125,295 141,295 158,558 176,964 196,899 223,783 258,485 294,789 Net fined assets in oper-ti-c 172,805 177,689 207,922 236,772 269,802 282,166 283,003 284,397 286,o62 778,055 779,564 770,860 W-rO iD proEr s- 29,307 47,750 11,1,447 28,339 25,922 69,827 157,250 274,011 429,033 11,143 17,167 42,882 Total fined aseete 202,192 225,439 24 9,369 265,111 290,724 351,993 140,253 558,108 315,095 789,198 796,731 813,742 Current Aesete Cash 10,696 7,041 8,950 5,585 5,089 15,200 19,511, 18,969 10,105 500 643 10,115 InTentorins 11 481 11,255 11,459 14,070 108,0o 20,500 23,000 25,500 28,000 35,oOO 39,000 43,000 Net recei-able- 4,784 6,692 7,659 8,904 8,549 9,457 10,577 11,414 12,292 13,251 14,467 15,586 prepaymeets 188 318 110 71, 168 100 100 100 100 100 100 100 Narketabl,eeo rities 198 198 198 198 Total current assts 27347 25,50h 28,376 28,831 31,936 45,257 53,191 55,983 50,497 48,851 54,210 63,801 Toisa a-ssto 229,539 250,943 277,745 293,942 327,660 397,250 493,444 61,391 76,592 838,049 850,9u1 882,543 EQUITY AND LLtEILITIES Eoui-tv Ordinary. conck 1 09,973 109,573 109,573 111,086 117,506 133 ,86 155,686 184,586 226,586 241 ,586 245,846 255 846 Surplus 1 9,331 17,982 1,6119 10,387 20,311 32,975 45,9d7 74 62,704 63,380 -8,295 Reeseroes Genera reseros 6,400 6,,00 6,4,00 Capiti reserve 3,1430 3,140 3,1C0 33114 3,1110 3,140 3,140 3,140 3,14o 31140 3,140 31140 De-elcpmeat reserve 11,800 11,800 11,80O 20,000 20,000 20,000 20 000 20,0 0 20,0 0 20,O00 20,000 20,000 Ourres-y Ieoal ation 10,120 10,120 10,6433 10.61,3 10,63 10_643 10,643 10,61,3 10,643 10,643 1o,643 Total reserves 21.340 31.460 31,460 33,783 33,783 33,783 33,783 33,783 33,783 33,783 33,783 33.783 Toit1 cqntt 132,587 150,364 159,015 11,6,518 161,756 187,224 221_844 264,356 317,834 338,073 343,009 357,924 Lnng-Term Debt ..1D.. Deositcre stock 7-1/41 60,0o0 51,429 51,429 48,412 45,395 47,378 39,361 36,344 33,327 30,310 20,293 24,276 Mosrn,maOt lan (3nke shore pntcct-ti orhak) 740 740 741 592 444 296 1148 Rasker Siddely interbational Limited 9,573 6,561 7,206 4,780 2,711 642 214 R-ston and 8-reby Limited 5,405 3,707 2,780 1,853 926 Go-erncs,t Loan (transmission lines) 3,679 10,331 10,730 13,211 13,214 13,214 13,214 13,214 13,21L 13,214 12,333 Gnvencmn Loan (genera dsc-lnpcnt-sa-co...eio Powjects) 95e3 893 833 773 713 653 593 533 473 413 IHBD Lnan No. 518 TA 5,678 17,137 34,569 35,807 31,415 32,951 31,416 29,774 28,025 26,169 Pe-eanent housing Finane" 193 179 164 147 129 110 89 66 41 proposed F-reihn Lnane I80D loan (Ilidah Project - Stags I) 27,232 69,358 123 979 186,454 201 448 209,032 223,606 SIDA loan (1idta ProJect - Stage I) 10,968 27,782 49,661 74,686 80.692 83,675 81,523 Canadian loan )Aaie/liAtlstwa tra-nission line) 9,000 15,0c0 18,00O 18,000 Soppliers Credit )Ilaaa - set no. 7) 2,5o0 2,000 1 ,500 1 ,0OO 500 Svppliern Credit (Meansa - set no. 8) 2,500 2,000 1,500 Foreige loan ()idat F-rojont - Stage II) _ 14,Do0 28,0O0 Total 75,718 66,119 79,'20 84,598 98,271 133,914 187,352 258,431 349,800 377,060 395,748 395,861 Lees lnag-ter- debt due st-in o.- y-,r 2,996 6,623 6,235 7,556 5,562 5,421 5,131 5,2W 13,o52 13,887 1h.554 Tatal long-tern debt 75,718 63,123 72,497 78,363 90,715 128,352 181,931 253,368 34,1560 361,008 381,861 381,307 C--rset Liahiflties Suadry creditors end aooroed oha-ges 11,595 23,830 28,293 22,596 22,540 27,027 31,830 36,347 39,659 46,100 28,800 35,598 Long-temn debt doe aithis Pen year 2,996 6,623 6,235 7,556 5,562 5,421 5,131 5,240 13,052 13,087 14,554 Bak ooverdraft _4,725 Total currsat ltabilities 11,595 26,826 34,916 28,831 30,006 32,589 37,251 _1,478 44,899 63,877 42,687 50.152 Contribution- in Aid of Constrastion 9,639 10,630 11,317 11,978 12,678 13,478 14,378 15,378 16,478 17,678 18,978 20,378 SIDA Grant 3,189 3,786 3,786 3,786 3,786 3,786 3,786 3,786 3,786 Ao lsaiated Deferred ncome Tees 25,063 28,629 31,821 34,254 36,093 38,035 50,627 60,620 68,996 Tsta1 Eqeity and Liabilities 295.539 250,943 277,745 293,942 327,660 397,250 493,444 614,391 765,592 838,049 850,941 882,543 L Eebt/Eqsity Ratio 36/64 31/69 33/67 37/63 38/62 42/58 46/54 49/51 52/48 53/47 5W/46 53/47 September 22, 1970 ANNEX 14 TANZANIA Tanzania Electric Supply Company Limited Long-Term Debt Outstanding at December 31, 1969 (Thousand Tsh) Date Original Interest Amortization Outstanding of Principal Rate Period at Description Loan Amount % (Years) 12/31/69 Debenture Stock 1961 51,429 7-1/4 17 48,412 Government Loan (Lake Shore Protective Works) 1966 740 7 5 592 Supplier Credits: Hawker Siddeley 1966 10,337 6 5 4,780 Ruston & Hornsby 1966 4,269 5-1/2 5 1,853 Government Loan (Transmission Line) 1966 13,214 3-1/4 15 10,738 Government Loan (Sub-Economic Projects) 1968 983 - 17 893 IERD Loan 518-TA 1967 37,128 6 16-1/2 17,137 Permanent Housing - 200 8-1/2 10 193 Total 118,300 84,598 TANZANIA AfNNf 15 Tanzania Electric Supply Company Limited ESTrIATED SOURCES AND APPLICATIONS OF FUNDS STATEMENTS 1970-1977 (Thousand Tsh) Seven Year Sumnary Year Ending December 31 1970 1971 1972 1973 1974 1975 1976 1970-1976 1977 SOURCE OF FUNDS Internal Cash Generation Operating income 25,556 27,967 30,573 32,056 33,358 49,627 53,818 252,955 56,025 Lepreciation 19,278 16,000 17,263 18,406 ,3 26,89 39,702 147,468 36,309 Total internal cash generation 39,839 43,967 97,836 50,962 53,293 76,511 88,520 900,923 92,329 Long-Term Borrowings Government loan (Canadian loan) 2,476 2,476 IBRD Loan No. 518 TA 17,932 2,559 19,991 Proposed IBRD loan (Kidatu Project - Stage I) 27,232 42,126 54,621 62,475 14,994 12,752 214,200 Proposed SIDA loan (Kidatu Project - Stage I) 10,908 16,879 21,879 25,025 6,oo6 4,988 85,680 Future Canadian loan (Hale/Kikuletwa transmission line) 9,000 9,000 18,000 Suppliers Credit (hwanza set no. 7) 2,500 2,500 Suppliers Credit (M4wanza set no. 8) 2,500 2,500 Foreign loan (Kidatu Project Stage II) 14_ 19,000 14,000 14,000 Total long-term borrowings 19,908 93,199 59,000 76,500 96,500 32,500 31,740 359,347 14,000 SIDA Grant 597 597 Equity Investments 6,500 15,500 22,000 29,500 42,000 15,000 4,260 134,760 10,000 M4iscellaneous Receipts 1,020 1,200 1,500 1,500 1,300 1,200 1,500 9,220 2,200 Total Source of Funds 67,859 103,266 130,336 157,962 193 125,211 126,020 909,397 118,529 APPLICATION OF FULDS ConstructiDn Expenditures (excluding interest charged to construction IBD Project (Ubungo and other) 28,724 6,911 35,635 Kidatu Project - Stage I 12,097 46,500 81,000 106,000 123,500 30,000 20,000 419,097 Eidatu Project Stage II 16,000 16,000 24,000 Other cowstruction 4,070 15,38 18,100 19,800 36,600 91,075 25,500 160,527 27,60 Total construction expenditures 94,891 68,793 99,100 125,800 160,100 71,075 61,500 631,259 51,60 Debt Service Amortization of long-term debt 6,235 7,556 5,562 5,421 5,131 5,240 13,052 48,197 13,887 Interest 5,733 9,B11 12,204 i6,i60 21,959 25,602 27,694 118,758 28193 Total debt service 11,968 17,367 17,766 21,581 26,685 30,892 40,796 166,955 42,080 Increase or (Decrease) in Net Working Capital Cash (496) 10,111 4,314 (545) (8,864) (9,605) 143 (4,942) 9,472 Inventories 3,930 2,500 2,500 2,500 2,500 7,000 4,000 24,930 4,000 Net receivables (355) 908 1,120 837 878 959 1,216 5,563 1,119 Prepayments 26 26 Marketable securities (198) (198) Increase in sundry creditors and accrued charges 56 (4,487) (4,803) (4,517) (3,312) 13,559 (2,700) (6,204) (6,798) Bank overdraft (9,725) 4,725 Total increase in net working capital 3,161 8,B34 3,131 (1,725) (8,798) 7,188 7,384 19,175 7,793 Dividends Paid 7,839 8,872 10,339 12,306 15,106 16,106 16,390 8L6958 17,0I6 Total Application of Funds 67,859 103,866 130,336 157,962 193,093 125,211 126,020 909,397 118,529 Cash balance beginning of year 5,585 5,089 15,200 19,514 18,969 10,105 500 643 Cash increase or (decrease) during year (496) 10,111 4,319 (545) (8,864) (9,605) 143 9,472 Cash balance end of year 5,o89 15,200 19,514 18,969 10,105 500 643 10,115 Times annual debt service covered by internal cash generation 3.3 2.5 2.7 2.3 2.0 2.5 2.2 2.2 Sepzember 22, 1970 U G A N D A 352 *\6 TANZANIA O. .-*--*-*--.. , 7n \Other potentl hydroelectrmc sites Licensed supply -rea 0. of Deet or St. 569 As A Interntironj boundaries St)eotg y ' o5OaV K~teEWQR:.E. PRoPoaserala Xcndbo K..doo t F Banzibor -EMOC(