Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2741 PROJECT PERFORMANCE AUDIT REPORT INDONESIA: FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND) November 16, 1979 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT FOR OFFICIAL USE ONLY INDONESIA: FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND) Table of Contents Page No. Preface (i) Project Performance Basic Data Sheet (ii) Highlights (iv) Appendix (Comments from the Utility) (vi) Attachment: Project Completion Report I. Introduction 1 II. Project Preparation and Appraisal 1 III. Project Implementation 3 IV. Operating Performance 8 V. Financial Performance 10 VI. Institutional Development 11 VII. Project Justification 15 VIII. Association Performance 16 IX. Conclusion 17 Annexes: 1. Summary of Particular Covenants 18 2. Actual Disbursements vs. Appraisal Estimate 19 3. Map - Jakarta: Voltage Conditions in 1970 20 4. Map - Jakarta: Voltage Conditions in 1976 21 5. Financial Recovery Plan 22 6. Training 40 7. Internal Economic Return 42 8. Financial Tables (1 and 2) 44 9. Breakdown of Project Foreign Costs 46 Map This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties. Its contents may not otherwise be disclosed without World Bank authorization.  (i) PROJECT PERFORMANCE AUDIT REPORT INDONESIA: FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND Preface This report presents the results of a performance audit of the First and Second Electricity Distribution Projects for which Credits 165-IND and 334-IND were made in October 1969 and September 1972 respectively. The two credits were disbursed and closed in December 1975 and June 1978 respectively. The report consists of Highlights prepared by the Opera- tions Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the East Asia and Pacific Regional Office. The Utility has prepared a completion report which has been taken into account in the preparation of the PCR. Following its abbreviated procedure, OED has reviewed the respective Appraisal and President's Reports, the credit documents, the minutes of the Board discussions and the PCR. OED has also discussed the project with Bank staff. On the basis of this limited review, OED finds no reason to disagree with the analysis and the conclusions of the PCR. Following normal OED procedures, a copy of the draft audit report was sent to the Utility and the Government for their comments. Those comments which were received have been taken into account in finalizing the report. They are also reproduced as an Appendix to the report.  (ii) PROJECT PERFORMANCE BASIC DATA SHEET I/ INDONESIA: FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND) KEY PROJECT DATA Appraisal Actual or Item Expectation Current Estimate Total Project Cost (US$ million) 74.8 101.0 Overrun (%) 33 Credit Amount Cr. 165 (US$ million) 15.0 15.0 Disbursed 15.0_ 15.0 Credit Amount Cr. 334 (US$ million) .40.0 40.0 Disbursed 40.0 40.0 2/ Date for Completion of Physical Components 6/76 12/79 Proportion Completed by Appraisal Target Date (%) 50 Proportion of Time Overrun (%) 75 Incremental Financial Rate of Return (%) 18 10 Financial Performance Poor but better than expected at appraisal Institutional Performance Satisfactory Cumulative Estimated and Actual Disbursements (Cr.334) 3/ (Us$ million) As of June 30: 1974 1975 1976 1977 1978 Dec. 1978 (i) Estimated 16.5 34.5 40.0 40.0 40.0 40.0 (ii) Actual 2.0 11.7 27.5 36.8 39.6 40.0 (ii) as % of (i) 12 34 69 92 99 100 OTHER PROJECT DATA Item Original Actual Plan First Mention in Files or Timetable About mid-1967 Negotiations 9/69 (165-IND) 5/72 (334-IND) Board Approval 10/21/69 (165-IND) 6/2/72 (334-IND) Credit Agreement Date 10/29/69 (165-IND) 9/29/72 (334-IND) Effectiveness Date 6/1/79 (165-INDI 3/12/73 (334-IND) Closing Date 12/31/73 12/31/75 (165-IND) 12/31/76 6/30/78 (334-IND) 9orrower Repthlit of Indoneaia Executing Agency Perusahaan Umum Listrik Negara (PLN) 1/ This Data Sheet covers the combined project for the two Credits 2/ About US$9,000 was cancelled. 3/ A Disbursement Schedule was not provided for Credit 165. (iii) Fiscal Year: April 1 - March 31 (Until 1973 PLN's fiscal year coincided with calendar year). Follow-on Project Name: West Java Thermal Power Project Credit Number: 399-IND Amount (US$ million): 46.0 Credit Agreement Date: June 22, 1973 Mission Data No. of No. of Man Month/Year weeks Persons Weeks Date of Report Appraisal 165-IND April 196? 3 2 6 Oct. 8, 1969 Appraisal 334-IND various - - up to 5 June 2, 1972 Appraisal 399-IND November 1972 3 2 6 May 10, 1973 Supervision October 1973 2 2 4 Nov. 13, 1973 Appraisal 1127-IND November 1974 3 3 9 May 20, 1975 Supervision July 1975 2 2 4 Sept. 29, 1975 Appraisal 1259-IND December 1975 3 2 6 April 30, 1976 Appraisal 1365-IND May 1976 3 2 6 Jan. 12, 1977 Supervision Sept. 1977 2 2 4 Jan. 26, 1978 Supervision Feb. 1978 3 1 3 July 17, 1978 Supervision July 1978 2 1 1 Aug. 22, 1978 Country Exchange Rates Name of Currency: Rupiah (Rp) 1971 1977 Exchange Rate: US$ 1 = Rp 420 US$ 1 = Rp 415 1/ Brief contacts were maintained by the Bank with the Borrower during 1969-71. Towards the end of 1968, a power engineer was attached to the resident mission in Indonesia. (iv) PROJECT PERFORMANCE AUDIT REPORT INDONESIA: FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND) Highlights The two credits were the Bank Group's first and second operations in the Indonesia Power Sector. They financed a combined project which consisted mainly of rehabilitation and expansion of Jakarta's distribution system. The two operations were also intended to carry out some major institutional, organizational, and financial reforms in the power sector with the help of management consultants. The envisaged reforms included the drawing up of a new charter to give a greater degree of autonomy to Perusahaan Umum Listrik Negara (PLN), the utility responsible for public power supply. The first credit was made without a proper project feasibility study, and sizeable portions of the two credits were earmarked for financing the costs of services of management consultants. Furthermore, the credit agreements did not include any of the Bank Group's standard covenants on the financial aspects of the utility (e.g., rate of return on assets, net internal contribution towards construction expenditure, limit on debt service or total debt) other than a cost recovery covenant. These features of the credits reflect the fact that: the project was urgently required to improve the dismal quality of power service which, among other things, was impeding the industrial and commercial development of the country; the power sector and the utility were badly organized; and the financial state of the utility was poor. The project was slightly revised and is now expected to be fully completed by end-1979, some 3 1/2 years later than originally scheduled, while its final costs are expected to be about 33% higher than the appraisal estimate. About 16% of the credits was disbursed towards the costs of management consulting services (PCR para. 3.12). As a result of the project, the reliability of power supply and the level of supply voltage at the consumer end have improved, and energy sales have increased by over 100% during the four-year period 1973-77 (PCR paras. 4.01, 4.02, 4.03). On the other hand, transmission and distribution losses are still at an unacceptably high level (about 20% of generation), due in large part to overloaded distribution networks, illegal consumption and inaccurate assessment of unmetered.consumption. Consequently, a program to reduce losses has been prepared (PCR paras. 4.04, 4.05). The financial situation of the utility has improved and the actual results, measured in terms of operating revenues covering operating costs, have been better than envisaged at the time of appraisal (PCR para. 5.01). The recalculated incremental financial rate of return on the project is 10% compared to the appraisal estimate of 18%. (v) Many of the envisaged institutional and other reforms were carried out with the help of management consultants. PLN has been given a substantial degree of autonomy in the management of the power sector including the responsi- bility for project construction and procurement. It was placed directly under the Minister of Public Works and Electric Poer, and the intermediate position of Director General of Power was abolished I'. PLN is now a reasonably well- managed utility (PCR paras. 6.06-6.09) 2 . The following points may be of particular interest: - domestic inflation contributed to project cost overrun (PCR para. 3.12); - several factors contributed to project implementation delays, e.g. misunderstanding between the utility and the Bank Group on the appointment of consultanats, inexperience of the utility in dealing with foreign consultants and suppliers, unfamiliarity of the utility with Bank Group's procurement procedures, problems in acquisition of land and in obtaining rights-of-way, and difficulty in changing over to a new system voltage (PCR paras. 3.02, 3.06, 3.07); - excellent workmanship on the distribution system has led to low fault rates, lower even than the fault rates on similar systems in some developed countries (PCR para. 4.06); - staff recruitment and training contributed towards the utility's improvement in project implementation and system operation (PCR paras. 3.08, 3.14, 3.15); - the consultants gave an impressive performance after successfully overcoming the problems arising from language barriers and from chaotic conditions which originally prevailed within the utility (PCR para. 6.10); - Bank Group's missions provided assistance to the utility and to its consultants particularly on matters of procurement (PCR para. 3.11). 1/ By way of contrast, the transformation of the telecommunications utility into an autonomous public sector enterprise took about four years, and the intermediate position of Director General of Telecommunications was retained - see Project Performance Audit Report on Indonesia: First Telecommunications Project (Report No. 1646, dated June 22, 1977). 2/ Further institutional changes have recently been introduced in the power sector and changes to PLN's charter have been contemplated. In 1978, PLN was placed under the newly established Ministry of Mines and Energy and the Directorate General of Power was re-established to perform the functions of policy planning, regulation and licensing. (vi) APPENDIX Page 1 COMMENTS FROM THE UTILITY act. 24, 1979, Jakarta 2959 FOR KAPUR. RECEIVED TELEX-MESSAGE EpQU-JLA AROJONO OF PLN TO BE CONVEYED TO YOU READIt.G AS FOLLOWS : QUOTE REURLET SEPTEMBER 28, 1979 WE ARE PLEASED TO CONFIRM OUR AGREEMENT ON THE DRAFT PERFORMANCE AUDIT REPORT ON INDONESIA- FIRST AND SECOND DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND). REGARDS, SURYONO UNQUOTE. THANKS AND REGARDS, SARDJONO, PLN. REGARDS BALLEREAU  INCOMING TELEX Oct. 30, 1979, Jakarta (vii) APPENDIX Page 2 COMMENTS FROM THE UTILITY 3002 FOR KAPUP RECEIVED THE FOLLOWING TELEX FOR YOUR ATTENTION. 0.00TE REOUP TLX NO.300/TLX/79, OF OCT.24, 1979, PLEASE CONVEY THE FOLLC''ING TELEX MESSAGE TO 11R. KAPUR, IqRD WASHINGTON : RE : PROJECT PERFORMIANCE AUDIT REPORT., CREDITS 165-IND AND 334-IND. COCERNING THE STATISTICAL FINANCIAL FIGURES WE FOUND THE FOLLOW- IfIG SPIALL DIFFERENCES AS COMPARED TO OUR AUDITED ANNUAL ACCOUNTS 1) FINANCIAL PERFOR'lANCE (PAGE II) 1971 1972 1973 1975 1976 1977 1978 REVENUE/COST RATIO 72,7 72,1 77,4 94,9 99,3 106,4 102,4 7) I'ICO11E STATEMENT - ACTUALS (ANNEX 8 - TAnLE I) 1972 1973 1975 1976 SALES REVENUE 17 24 40 61 OTHER REVENUE 2 - - - TOTAL REVENUE 19 24 40 61 OPEPATING EXPENSES FUEL 5 7 10 15 nPEPATIOtIS 11 13 19 28 IEPRECIATIO!i 10 11 12 13 TOTAL EXPENSES 26 31 41 57 -7 -1 1. 1,:T ICr),E (r)E,7. ) -7 -1 4. nA'r OF oE"Jn' (9/n) noQA'I*IG rATIO (010) 136,3 129,2 102,5 93,4  (viii) T) -XALP A F ' ET-A CT'JALSS(A"NEX 3 - TALE II) APPENDIX Page 3 F1 7 197 1E'5 1 5r-r DL A '! I' S'EP VIC J3 16 19r2 ) L S o EC IATIo'' 7 61 IrrnATTI'r PL N 'T 11C 174 152 161 fltv, In 3. 23 117 274 CueQEINT ASSETS 1972 1973 1975 1976 CASH 6 8 20 16 ITJVETTORIES 10 21 20 25 RECEIVARLES 8 24 18 23 T 0 T A L ?4 53 58 69 TOTAL ASSETS 171 210 328 511 EQUJITY PAID-IN CAPVtAL 167 208 309 .475 RETAVIED EARilINGS -1? -13 -8 -10 TOTAL EOUTV 155 195 301 465 98x3DO6 3 1 4 4 CONSUIER CONJTR. 8 14 23 41 TOT. EO/LIARILITIES 171 210 328 511 4) nASED ON T4E AROVE, THE FUNDS FLOW STATEMENITS SHOULD RE ADJUSTED ACCORDIGLV. PEiAPDS, SURVONO, PLI. JIMUOTE REGARDS 9ALLEREAU  Attachment INDONESIA: FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS (CREDITS 165-IND AND 334-IND) Project Completion Reportl/ I. INTRODUCTION 1.01 This report covers two interrelated projects for the common purpose of: (a) rehabilitation and expansion of the electricity distribution system in the city of Jakarta and its environs; and (b) provision of extensive management consulting and training services to improve the organization and efficiency of PLN. Financing of the project was provided by the initiating credit of US$15 mil- lion (165-IND) which assisted in implementing the most urgent rehabilitation work and engineering studies to define an appropriate distribution project (para. 3.01), and a credit of US$40 million (334-IND) equivalent which enabled completion of the expansion project as defined by the first project. 1.02 The credits contributed only about 8% of the then estimated 10-year investment program of about US$670 million but provided an opportunity for the Association to make an effective contribution to the development of the Indonesian power sector and PLN. The comprehensive institution building effort which commenced through these two credits laid the foundations for the improvement of PLN's management and operations from a chaotic level to the present standard of reasonable competence. II. PROJECT PREPARATION AND APPRAISAL Origin 2.01 Credit 165-IND. As a result of the difficult political and economic conditions experienced in Indonesia before 1968, maintenance and development of the electric power facilities were neglected and operations of the public power sector became disorganized. The Bank's Resident Staff (RSI) recommended in February 1969 that an IDA credit should be considered for the expansion of the electricity distribution system in Jakarta and the Government of Indonesia followed with an official request in the same month. 1/ The Utility and its consultants have prepared a completion report dealing mainly with the technical aspects of the project. The information provided therein was useful in the preparation of the Bank's Completion Report. - 2 - 2.02 From the beginning, the project was conceived only as a "first contact" operation to use a minimum input of IDA funds to provide resources for urgently needed rehabilitation of the Jakarta distribution system, improvement of PLN's operations, and an engineering study for expansion of distribution. The Jakarta area was chosen because the weakness of the distribution system was impeding the restoration and development of industry and commerce in the capital city and its environs which accounted for about 50% of the country's electricity demand. 2.03 Credit 334-IND. After having overcome initial difficulties in getting the first credit underway (para 2.04), the Association decided to continue assisting Indonesia in the power sector by financing the balance of work required to complete the Jakarta distribution rehabilitation and expansion program defined by the consultants as part of the first project. Preparation, Appraisal, Negotiation and Approval 2.04 Great difficulties were encountered during processing of Credit 165-IND in convincing the Indonesian authorities of the need for institutional improvement to be carried out with the help of consultants. Inexperience in dealing with foreign organizations, suppliers and consultants aggravated the situation and, last but not least, Indonesia's protracted Government rules and regulations prevented any tangible progress for some time. Language problems and inexperience of the consultants in overseas work made progress even more difficult. 2.05 With the exception of the 165-IND appraisal mission, which was in the field in March/April 1969, no "organized" assignment schedule was observed. Matters were dealt with in an ad-hoc fashion with RSI taking the lead in many respects and headquarters staff travelling to Indonesia as and when the need arose. The appraisal of Credit 334-IND was based on information obtained during various missions and through correspondence with the Government, PLN, the consultants and RSI. 2.06 Credit 165-IND was made in 1969 without a project feasibility study. However, by the time Credit 334-IND was considered in 1972, consultants had completed the feasibility study for systematic expansion of the Java Distri- bution system. 2.07 Credit 165-IND was approved by the Board on October 21, 1969 and the credit was signed on October 29, 1969. Credit 334-IND was approved on June 2, 1972 and signed on September 29, 1972. Project Description 2.08 .. The principal features of the original project are the following (both credits): A. Rehabilitation and expansion of the electricity distribution system of the city of Jakarta and environs, including: - 3 - (a) provision of distribution transformer, switchgear, cables, street lighting, metering and other equipment and supplies; (b) establishment of a standard voltage of 220/380V for the secondary distribution system (voltage conversion) ; and (c) associated engineering consulting services. B. Provision of extensive management consultants' services to improve the organization and efficiency of the power sector and to provide assistance and training in the operations, technical, financial and administrative sphere of activity. 2.09 The project was carried out in accordance with the above project description, with some changes required by the changing development pattern of the city. These are common with distribution projects and are explained in paragraph 3.09. Covenants 2.10 The particular covenants included in the documents of both credits deal largely with financial, institutional and managerial matters. One of the most important of these (Sect. 4.08 of the Credit Agreement) was that PLN should be vested with full and exclusive responsibility for the public elec- tricity sector of Indonesia, including planning, procurement, construction, operation, maintenance and ownership of all facilities. Their contents and effect on the sector and PLN's operations will be discussed, in general terms, in the respective paragraphs of this report. Annex 1 provides a summary of the covenants. III. PROJECT IMPLEMENTATION Credit Effectiveness and Project Start-up 3.01 Under Credit 165-IND it was agreed that the following conditions of effeciveness would be observed. PLN would be charged with the full and exclusive responsibility for the public sector, including: (i) selection and procurement of services and equipment, materials and supplies for the project and for the public electric power system in the country; and (ii) carrying out of project construction with the exception of those projects which were started prior to September 17, 1969. 3.02 It took longer than anticipated for the Government to provide satisfactory evidence to the Association that it had the firm intention to fulfill the above-mentioned conditions of effectiveness. This ultimately took the form of Presidential Decree No. 18/72 under which PLN has been operating and subsequently built up its image as a premium institution in the country. Furthermore, serious difficulties arose with the selection and appointment of the engineering and management consultants which formally ended not before June 1970 when SOFRELEC of France was chosen for both consulting activities. Credit 165-IND was declared effective on June 1, 1970, seven months after signing. Credit 334-IND became effective on March 12, 1973, about six months after credit signing. In this case, the reason for the long interval between credit signing and effectiveness was the delay in introducing PLN's new tariffs. The Government had undertaken to permit PLN to introduce a new structure for electricity tariffs by January 1, 1973 coupled with a 25% increase in level but delayed the decision until late May 1973 when it gave a firm commitment to IDA to raise the tariffs on July 1, 1973, which it actually did. Project Implementation 3.03 As mentioned in paragraph 2.08, the project consists of a distribu- tion rehabilitation and expansion project for Jakarta and a comprehensive management consulting effort. The following paragraphs deal only with the technical aspect of the project whereas the management aspects will be described in Chapter VI (Institutional Development). 3.04 State of the Distribution Network at the Beginning of the Project. Immediately after their appointment in June 1970, the consultants (SOFRELEC) started to analyze the prevailing state of the Jakarta distribution network and found the following: (i) an insufficient number and low capacity of high voltage/medium voltage substations; (ii) overloaded low voltage distribution lines resulting in average drops of 35% with extremes of 70% in some suburbs; (iii) overloading of distribution systems which resulted in frequent power failures and inability to connect new industrial consumers; (iv) too many distribution voltages (12 kV, 7 kV and 2.4 kV for primary; and 220/380V and 1?7 1220V for secondary); (v) obsolete equipment; (vi) the system design did not provide for emergency supply in case of failures, for instance cable faults; (vii) high distribution system losses (about 26%); and (viii) a very low level of urban electrification (one consumer per 43 inhabitants; about 30% of the urban areas not electrified). 3.05 Consultants' Recommendations. SOFRELEC completed the feasibility study in early-1971 and made the following recommendations: - 5 - (a) reinforcement and extension of the 70 kV network; (b) increase in the number of high voltage/medium voltage substations from 6 to 11; (c) adoption of the 20kV and 380V voltage levels respectively for medium and low voltage distribution; (d) construction of about 950 medium voltage/low voltage substations; (e) installation of a grid of 20 kV underground cables appropriately arranged for better security of supply; and (f) strengthening of the low voltage network and the service entrances. 3.06 Implementation. At the time of appraisal, completion of the distribution project was expected by mid-1976. All equipment has now been purchased and the funds of both IDA credits have been disbursed, but comple- tion of the construction and installation work is not expected until end-1979, 3-1/2 years behind the original schedule.l/ The delays are greatest on the low voltage network and this is due to the difficult problem of changeover to the new system voltage (para. 3.05(c)). 3.07 The major difficulties encountered in implementing the project were the following: (a) delays in procurement, arising, inter alia, out of initial un- familiarity with IDA procedures. An average of 18 months elapsed between issue of invitations to bid and delivery.. Most of these delays were due to slow processing of documents by the Indonesian authorities as the following breakdown illustrates: - bidding 3 months - bid evaluation including evaluation approval by the Government 3 months - IDA approval of documents 1 month - contract signing 1 month - issue of letter of credit by Bank Indonesia 5 months - time of delivery to Jakarta harbor 4 months - customs clearance 1 month Total 18 months (b) shortage of PLN and contractors' personnel trained in equipment installation in the earlier stages; (c) delays in obtaining right-of-way permits for cable trenches. The municipality of Jakarta has in the past delayed issuance of permits for laying cables by up to 6 months. It was only after a high 1/ The project is now yirtually complete. - 6 - level meeting between PLN and the Deputy Governor of Jakarta in late 1975 /1 that a more expeditious procedure was introduced; (d) delays in land acquisition for substations; (e) lack of accurate maps of the city and frequent alterations in development plans for some parts of the city; and (f) in the early stages of the project shortage of warehouse space delaying procurement of equipment and material. 3.08 Since 1975 distinct improvements were noticeable in project imple- mentation. This was mainly attributable to more efficient engineering work by PLN/consultants and an appreciative attitude by Government authorities towards PLN's financial needs. It also reflected SOFRELEC's successful efforts in training PLN's and contractors' personnel. The following table illustrates the physical progress in project implementation: Implementation Progress Year Annual Progress Cumulative Progress (%) (%) 1972 - - 1973 4 4 1974 10 14 1975 20 34 1976 20 54 1977 27 81 1978 10 (estimated) 91 (estimated) 1979 9 (estimated) 100 (estimated) 3.09 Change in Project Scope. The project has been carried out in general accordance with the project description. During implementation, however, some changes in scope were necessitated by alterations in the city's development plans and regulations./2 The number of substations and the length of medium voltage cables increased by about 25%, which could not be accommodated by the physical contingencies provided (about 10%). To deal with this situation, the reinforcement and extensions in the high voltage system (70 kV) (US$3.74 million) and the load control center (US$1.05 million) were deleted from the project and PLN used funds from other sources to complete these works. 3.10 As of June 30, 1978 the status of project implementation was as follows: /1 An IDA Supervision mission initiated this meeting. /2 A municipal decree prohibited installation of overhead distribution lines within the city limits. - 7- Total Quantity Required to Quantity Percent of Items Complete Project Implemented Implementation Medium voltage cables 945 km 945 km 100% Substations 950 950 100% Low Voltage Network 16,000 poles 11,064 poles 69% Service Entrances 93,000 consumers 63,776 consumers 69% Voltage change 111,000 consumers 81,875 consumers 74% Public lighting 1,870 poles 1,040 poles 56% Control cables 35 km 35 km 100% Procurement 3.11 Procurement was made on the basis of international competitive bidding in accordance with the Association's Guidelines. Special efforts were made by the Association through field supervision by a procurement specialist to provide technical assistance to the consultants and PLN. This assistance has been of great value to PLN on this and succeeding projects. The equipment required for the project was procured under eight different tenders (called lots), resulting in eighty contracts. The lots were initially kept comparatively small on account of PLN's limited storage space. It contributed to slow progress because PLN had to run through the Government approval process (para. 3.07) more often than would have been necessary with fewer lots - a system adopted for the next project. Costs 3.12 The total costs of the project at appraisal and at present are summarized below. A breakdown of estimated and actual foreign costs on the project is given in Annex 9. Similar breakdown of local costs is not available. Local Foreign Total ---(in US$ million)----- Appraisal 19.8 55.0 74.8 At present 46.0 55.0 101.0 The increase in local costs is largely due to the rapid local inflation, particularly during the period 1973/76 which was not foreseen at the time of appraisal. Increases in the foreign component, which were largely due to increases in the number of substations and length of cables were counter- balanced by deleting other items (para. 3.09). -8- Disbursements 3.13 Due to the reasons mentioned in various paragraphs, disbursements were much slower than anticipated at the time of appraisal. A comparison of the estimated versus actual disbursements is attached as Annex 2. Performance of Consultants and Beneficiary 3.14 SOFRELEC's performance as engineering consultant was good. Design work, document preparation and bid evaluation was done efficiently and on time, and staffing of the supervisory team was adequate. 3.15 PLN's contribution to implementing the project improved gradu- ally. During the first three years, PLN was not adequately staffed to contribute sufficiently to the progress of the project. Thereafter, PLN's distribution construction group has been progressively staffed with youn- ger, competent and dedicated engineers who, together with trained contrac- tors, have since been able to carry out the project efficiently. IV. OPERATING PERFORMANCE 4.01 The efficiency of a distribution project can best be judged by the following performance indicators: (a) capability to supply loads; (b) improvement in supply voltage; (c) reduction in distribution losses; and (d) fault statistics. Capability to Supply Loads 4.02 Between 1973 and 1977 the electricity demand in Jakarta increased as follows: Peak Demand Demand Energy Energy Year (MW) Growth (Gwh) Growth 1973 158 29.5% 666 28.8% 1974 181 14.6% 737 10.7% 1975 192 6.1% 893 21.2% 1976 205 6.8% 1,053 17.9% 1977 255 24.4% 1,387 31.7% - 9 - This improvement was made possible through transfer of loads from the old 12 kV system to the new 20 kV system. The 12 kV distribution system would not have been able to cope with the load growth. Most of the new loads were supplied from the 20 kV network as shown below: Peak demand on Increase Peak demand on Increase Total Increase 12 kV system on 12 kV 20 kV system on 20 kV demand in total Year (MW) system (MW) system (MW) demand 1973 158 29.5% - 158 29.5% 1974 176 11.4% 5 - 181 14.6% 1975 152 -13.6% 40 700.0% 192 6.1% 1976 142 - 6.6% 63 57.5% 205 6.8% 1977 145 2.1% 110 74.6% 255 24.4% 1978 130 -10.3% 160 45.5% 290 13.7% The total firm capacity/1 of the distribution system is now 420 MW, 290 MW at 20 kV and 130 MW at 12 kV. These figures understate the actual potential as the cables have been designed with additional. capacity which can be utilized as needed by adding transformers at substations. Improvement in Supply Voltage 4.03 As mentioned in paragraph 3.04, the distribution system in Jakarta suffered from severe voltage drops which reached the unbelievable level of 70% in certain areas. Annex 3 illustrates the distribution of low voltage areas prevailing in 1970 by black dots from which it is evident that there was hardly any area with satisfactory service conditions. Annex 4, which shows the same area in 1976 after completion of slightly more than 50% of the project, indicates the sharp decrease in districts with unsatisfactory voltage levels, an appropriate illustration of the project's impact on the quality of electricity supply. Distribution Losses 4.04 The distribution losses in the project area, which were 18.9% in 1970, increased further to 25.8% in 1974 due to overloading of the distribu- tion system by growth of demand. From 1975 onwards the impact of the project was felt and losses decreased to a level of 19.5% in 1977. 4.05 The prevailing level of losses (19.5%) is still unacceptably high reflecting probably pilferage, inaccurate assessment of consumption by unmetered customers, and, in general, management difficulties. There is scope for further reduction in the level of technical losses by about 6-8% as the new project facilities are fully utilized (the load is presently only about 10% /1 As indicated by the transformation capacity presently provided. - 10 - of the design capability of the 20 kV system and the low voltage networks have yet to be fully commissioned). During appraisal of Loan 1513-IND the Bank indicated to PLN its serious concern at the inadequate progress in loss reduction and requested PLN to prepare a comprehensive program of reduction of losses by region and category (generation, transmission and distribution). This overall program has been agreed, but the first step, identification of the most heavily loaded sections and preparation of specific plans to rein- force them, is still under preparation. This indicates that PLN's management has to assign adequate priority to this work and that much progress has still to be achieved in PLN's system planning which apparently has hitherto concen- trated more on planning and organizing of financing than on planning aspects of a technical nature (para. 6.09). Fault Statistics 4.06 The high quality of construction work of the project is reflected in the low number of faults on the 20 kV cable system. Length of 20 kV Number of Faults per 100 km Year cables in service faults per year 1975 180 km 1 0.6 1976 420 km 21 5.0 1977 895 km 25 3.0 The corresponding failure rates in other countries are: France 9.6 faults/100 km/year UK 12 faults/100 km/year Germany 10.5 faults/100 km/year Italy 12 faults/100 km/year Even after allowing for the fact that the network in Jakarta is new, it can be concluded that the quality of workmanship is excellent to achieve such low fault rates. V. FINANCIAL PERFORMANCE 5.01 When the appraisal report for Credit 165-IND was drafted in 1969, no basis for preparing meaningful financial data was available and the future was even more obscure. Therefore no financial analysis could be made at that time. Although financial statements employing conventional utility accounting practices were prepared in 19/2 (appraisal of Credit 334-IND), they were not considered reliable enough to constitute more than an indication of PLN's - 11 - possible future financial performance. Consequently it does not appear meaningful in this report to carry out the normal comparison of projected versus actual financial results.1/However, to indicate PLN's improved financial position to date, the following table is provided to show several financial indicators: Fiscal year /a 1971 1972 1973 1975/b 1976 1977 1978 ------------------(M)------------------------ Revenue/Cost Ratio!l 72.7 72.1 77.4 94.9 993 106.4 102,4 Rate of Return - -7.2 -6.3 - 4.0 3.6 2.0 Increase in Average Revenues - 4.2 23.9 47.1 33.3 27.0 27.4 Net Internal Cash Generation as % of Investments /c 28.4 -47.5 15.8 7.8 14.5 18.2 /a Until 1973 the fiscal years coincided with the calendar year. Since 1975 they extend from April 1-March 31. /b First quarter 1974 omitted. /c Records for 1971 not available. VI. INSTITUTIONAL DEVELOPMENT 6.01 The Bank Group's operations were largely responsible for PLN's transformation from a state of complete chaos to a viable public utility, capable of supplying electricity to the economy in a reliable manner. This management improvement effort started with Credits 165-IND and 334-IND but progress in the early stages was slow and sustained efforts were needed in subsequent operations. Situation at the Time of the Association's First Involvement 6.02 During 1953-57 the three Dutch-owned electric utility companies supplying power in Indonesia were nationalized. The transfer was far from amicable. Records were destroyed and there was no transition period during which the new Indonesian management could have been trained by its pre- decessors. During subsequent years the decline in the efficiency of the 1/ For comparison purposes, the forecast and actual results are given in Annex 8. 2/ Includes allowances for bad debts, - 12 - utilities was marked by inadequate expansion and poor operating conditions. In 1961 the three nationalized utilities were consolidated into a single entity, the predecessor of PLN, responsible for all public electric utility facilities in the country. In 1965, when PLN was organized, it was relieved of the responsibility of major power construction, and system planning was made the responsibility of both the Ministry of Public Works and Electric Power/1 and PLN. 6.03 PLN was operating under a body of laws relating to Government agencies in general (and a 1965 decree concerning it specifically) which appeared to convey autonomous powers to PLN. In reality, however, PLN functioned as a Government agency responsible to the Directorate General of Power, which was the policy making body and the department, together with the Public Works Department, responsible for construction of generating plant. The actual function of PLN was primarily that of implementing policies and administering them on a day-to-day basis. PLN's management was thus rele- gated to a secondary role. 6.04 In 1969 PLN was incapable of providing adequate and reliable electric service and this has led to a large buildup of captive plant (equivalEnt to PLN's own installed capacity by 1976). With the expected growth of the sector, it was essential to analyze the weaknesses of PLN and introduce changes to make PLN responsible for the public sector of the Borrower, in- cluding construction, system planning, procurement, staff employment and finance in the public power sector. The Management Consulting Effort 6.05 No improvement could have been expected without outside help. Consequently, PLN with Association concurrence, appointed SOFRELEC of France who, with the assistance of Peat, Marwick and Mitchell of the United Kingdom in matters of accounting and finance, carried out the consulting services. 6.06 It took time before SOFRELEC could formulate recommendations with respect to PLN's problems. Records had to be reconstructed and assets physically identified; large outstanding consumer accounts had to be verified and means found for their settlement; tariff levels and structure had to be studied. The initial phase of the consultants' work took about three years and involved, to a considerable degree, essential fact finding. The main accomplishment during the period included: (a) draft of an Electricity Act which provided normal autonomy to PLN. More specifically, it provided PLN with the responsibility for project construction and procurement of goods and services. With /1 At that time PLN's supervising agency. From May 1978 PLN reports to the Ministry of Mines and Energy. - 13 - Association agreement, this Act formed the basis of Presidential Decree No. 18/72,1l the law on which PLN's corporate existence is based; (b) recommendations on a new structure and level of tariffs; (c) preparation of an accounting system and recommendations on cash management and control, inventory control, consumer administration, mechanization and budgeting; (d) physical identification, classification and valuation of assets; (e) recommendations on personnel regulations and administration, job analysis and job structure; and (f) design of a comprehensive training program. The Financial Recovery Plan 6.07 The lessons learned from Bank Group operations under Credits 165/334-IND were applied at the time of appraisal for Credit 399-IND in late 1972. PLN's problems were then far better identified and specific recommendations for their solution were available. Among other things SOFRELEC's investigations had revealed that PLN's financial situation was worse than earlier anticipated, with high operating losses and very low internal cash generation. Consequently, a financial recovery plan, designed to improve PLN's management capabilities and to overcome its financial weaknesses over time, was agreed upon and, until recently, constituted the yardstick against which PLN's progress was measured and achieved. Its main features were: (a) a detailed plan of activities designed to improve PLN's operations and, as a consequence, its financial position (Annex 5); (b) annual programs of the activities to be taken towards improvement. These programs were discussed with and supervised by the Associaton; and (c) improvement of PLN's finances so that operating revenues would cover 80% of operating expenses in FY75, 90% in FY77 and 100% in FY79 (PLN has actually achieved more than 100% coverage already in FY76 - para. 5.01). /1 Government preferred a partially rather than fully autonomous entity since total autonomy would have been inconsistent with its policy of controlling important sectors of the economy. Consequently, the Government retained responsibility for matters affecting the national economy (tariffs, approval of investment plans) and exercised control over other matters it considered important (evaluations of bids and decisions on contract awards for investments financed through the Government budget). - 14 - Progress Achieved Under the Financial Recovery Plan 6.08 The progress achieved to'date is encouraging on balance despite the fact that in certain areas, particularly in system planning (para. 6.09) and in introducing accounting systems in the outlying areas, better progress could have been made. The achievement made can be summarizes as follows: (a) Accounting and Finances: Unexpectedly good and fast improvement, though far from being perfect, has been registered in the field of accounting and finance. Financial control systems have been introduced, a reporting system has been designed and mechanization is progressing on schedule. A detailed fixed asset accounting system will be introduced soon, in headquarters as well as in the outlying areas. Large government dues to PLN -through October 1969 *re paid up (Annex 1). (b) Operations: Good results have been achieved in system operations and maintenance where operating manuals and maintenance procedures have been developed and introduced. Overall efficiency has improved. High system losses are still a problem but are being attacked with a specific loss reduction program. Considerable sales increases are also expected as a consequence of an aggressive consumer connection program. (c) Construction: Improvement in the management of construction activities has been slow in the past and is only accelerating now somewhat. This is not entirely PLN's fault since the reasons for delays have been Government involvement and delays in approving consultants' and supply contracts and opening of letters of credit. The slow and meticulous approval process which also involves detailed questioning of PLN staff has made PLN personnel very cautious, for instance in bid evaluation, and does not convey to them the need for speedy work. Decisive improvement will only occur when a more pronounced business sense will enter the thinking of Government officials and PLN. (d) Planning: Progress in this difficult field was slow in the past, mainly due to lack of experienced personnel. The Bank Group is presently trying to assist PLN to put its system planning in Java on a sound basis and for this purpose PLN has set up a program for the planning period 1978-79 to 1986-87. Planning for the areas outside Java will be improved in the near future with Bank assistance (see also para. 6.09). (e) Training. An extensive training program has been initiated by PLN with the assistance of SOFRELEC. It is continuously being main- tained (Annex 6). - 15 - 6.09 During appraisal of Credit 334-IND, it was apparent that PLN was insufficiently involved in the technical aspects of planning for optimal development and it was feared that the financing approach adopted (division of the country into subregions with separate financing agencies undertaking the responsibility of assisting PLN in overcoming problems in each area) would weaken PLN's effort and result in poor coordination. There is evidence that coordination has not been satisfactory though PLN established a system planning unit and trained younger engineers who are competent and fully capable of performing most of the technical work with a minimum of expatriate assistance. But far more commitment is required to this work by top echelons in PLN and more inter-sectoral coordination is needed to maximize benefits. The prevailing high level of system losses (paras. 4.04 and 4.05) and the fact that weaknesses in approach to long term system planning are seen in areas outside Java (where PLN is not assisted by consultants to the extent it is in Java) indicate the urgent need for further improvement in this area. Consultants' Performance 6.10. Considering the difficult circumstances which prevailed in the beginning, SOFRELEC and Peat, Marwick and Mitchell have done a good job. Initially, language barriers and inexperience of the consultants in working in such chaotic conditions delayed progress. But as soon as these barriers were erased, progress was impressive. The consultants' proved their ability to establish a good rapport with the client and to overcome the initial reser- vations. Under the circumstances it is not surprising that their progress reporting in the earlier period did not always live up to expectations. VII. PROJECT JUSTIFICATION Proiect Oblectives 7.01 As pointed out in Chapter IV, the project has been successful in improving system performance and ensuring continuity of supply. It enabled PLN to supply a much larger share of the market in Jakarta under much better standards (voltage levels and reliability) than it would otherwise have been able to do. It also has resulted in a successful management consulting effort. Internal Rate of Return 7.02 During appraisal of Credit 334-IND the internal rate of return was estimated at 18%. The recalculation, details of which are given in Annex 7, results in a rate of return of about 10%. In calculating the rate of return the following assumptions have been maae: - 16 - (a) for purposes of comparison, the same partial load carrying capacity as assumed during appraisal (811 GWh per year, 422 GWh above the previous level of 589 GWh). This level corresponds to the capacity of the system to distribute power from generating stations in existence at the then expected time of commissioning of the project (1975) and is considerably lower than the actual distribution capacity of the project, thus understating the benefits; (b) discounting of the actual cost streams to arrive at constant 1973 prices (the year when actual project implementation started (para 3.08) by using the actual inflation factors (Annex 7); and (c) valuation of the benefits by using the average revenues per kwh sold in any given year between FY 1973 and 1979 discounted to arrive at constant 1973 levels by using the actual inflation factors (Annex F). 7.03 The rate of return is lower than that estimated at the time of appraisal. The main reason for this is the sharp increase in fuel prices during the past several years which was not foreseen during appraisal. VIII. ASSOCIATION PERFORMANCE Working Relationship 8.01 During the first two years of project implementation the working relationship between PLN and the Association, although not inadequate, has not been as good as one would have wished. The reasons for this somewhat unhappy beginning can be summarized as follows: (a) inexperience on the part of the Indonesian authorities in dealing with international organizations and, generally, foreign consultants and suppliers; and (b) disagreements between the Association's headquarters and the Resident Staff in Indonesia, particularly with respect to the appointment of consultants. 8.02 The above-mentioned situation has resulted in frequent misunder- standings. For instance, long discussions were required to sort out the problem of whether IDA or PLN should select the consultants; PLN misunder- stood the significance of a consultants' shortlist and, without informing Association's headquarters but with the agreement of the Resident staff, increased the list from 6 to 21 and, in addition, solicited financing terms. - 17 - 8.03 The above has been recounted only to illustrate the difficulties of the earlier years. Fortunately they are all problems of the past. Today the relationship between PLN and the Bank Group is excellent and PLN has become a competent counterpart for foreign suppliers, contractors, financiers and international organizations. Supervision 8.04 As Bank Group has been financing power projects on an annual basis and in continuous contact with PLN and the Government, supervision was carried out mostly in the context of these appraisals. Separate supervision reports have not always been prepared. The operation has provided the Bank Group and Government of Indonesia with the valuable experience of institution building through a combination of legal and administrative improvements and expert management assistance. IX. CONCLUSION 9.01 The engineering part of the project was conventional but involved major problems of (i) changing over to a new system of distribution voltage, and (ii) coordination with changing City Department plans. These caused implementation delays, but the project has fulfilled its objective of providing a modernized, and adequate, distribution system for the Metropolitan area. Employment of foreign consultants may not always be the ideal solution in developing countries but very often it is the only feasible one and, as in this case, where it was adopted with persistence, it has provided benefits of lasting value. 9.02 The operation has provided the Bank Group and the Government of Indonesia with the valuable experience of institution building through a com- bination of legal and administrative improvements and expert management assistance. 9.03 The Indonesian public sector is subject to strict Government control even in day-to-day matters and PLN has been no exception to this rule. Although PLN has had considerable improvement in its autonomy, governmental control is still too great - particularly in regard to procurement matters - and results in slow project implementation. East Asia and Pacific Regional Office February 1979 - 18 - ANNEX 1 INDONESIA PERUSAHAAN UMUM LISTRIK NEGARA (PLN) CREDITS 165 AND 334-IND FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS Summary of Particular Covenants Condition of Effectiveness Comment PLN should be vested with the full and Fulfilled by stating intention exclusive responsibility for all procurement to introduce legislation in the of goods and services and is responsible for Legal Opinion. Actually given the public electricity sector of Indonesia, effect to by Presidential Decree including planning, procurement, construction, No. 18/72. operation, maintenance and ownership of all facilities. Other Covenants The electricity debts of Government Most of the debts outstanding on agencies outstanding on October 29, 1969 October 29, 1969 were paid within shall be paid within one year, and the one year. There were some account- Government shall take all action necessary ing discrepancies between PLN to ensure at all times that amounts owed and some Government agencies, par- to PLN for electricity services will be ticularly the military, and IDA paid promptly when due. agreed to a special audit. Current debts are being settled on a quarterly basis. PLN shall employ management consultants Implemented mainly in the context satisfactory to the Association and of the Financial Recovery Plan. carry out the consultants recommendations as the Government, PLN and the Association consider appropriate. Introduction of new tariffs Introduced on July 1, 1973 with by January 1, 1973. Association Agreement. - 19 - ANNEX 2 Actual Disbursements versus -Apraisal Estimate 1. The appraisFl report for Credit 165-IND does not include an estimated disbursement schedule wh-ch at that time was not a standard requirement for appraisals. Consequently, the following tables include the actual disbursements of Credit 165-IND in both columans for actual as well as estimated disbursements. 2. The actual and estimated disbursement schedule of the combined credits 165 and 334-IND i3 as follows: Cumulative IDA Fiscal Year Actual Estimated and Semester Disbursements Disbursements in US$ thousand) 1971/72 2nd semester 400 400 1972/73 1st semester 3,600 3,600 2nd semester 9,300 9,300 1973/74 1st semester 11,045 22,000 2nd semester 13,631 31,500 1974/75 1st semester 18,872 41,500 2nd se:iester 27,337 49,500 1975/76 1st 6emester 36,480 53,000 2nd semester 40,000 55,000 17 77 1st semester ho,700 - 2nd semester 52,600 - 1977/78 1st semester 53,900 - 2nd semester 55,000 - 一20一Annex旦 •州 Annex 21 .Volta e Conditloný in 1976 Low Voltage Aveas 00 w,, " V JA11r1.311 Gik 4 T, r - 22 - ANNEX 5 Page 1 of 7 FINANCIAL RECOVERY PLAN MANAGEMhNT SERVICES FOR PERUSAHAAN umUM LISTRIK NEGARA TEFMS OF REFERENCE BACKGROUND AND DESCRIPTION OF SERVICES Perusahaan Umum Listrik Negara (PLN) is presently engaging the French consulting firm SOFRELEC to assist it in providing extensive manage- ment consulting and engineering services (first phase) with the assistance of the International Development Association (IDA) financing through Credit No. 165-iD for the First Electricity Distribution Project in Jakarta. IDA has recently extended a new credit for the Second Electricity Distribution Project, IDA Credit No. 334-IND, which, inter alia will be used to finance the foreign exchange cost of the second phase management consultant services complementary to the services being provided under Credit No. 165-IND. A new charter has been issued by the Government (Government Regulation No. 18, 1972) to define the status, duty and responsibility of PLN. The extensive Management and Training Services represent part of PLN's on-going five year expansion program in the framework of the compre- hensive financial recovery plan, which takes into account all aspects of PLN's adinistration and operations and is designed to allow PIN not later than during its fiscal year 1978/1979 to cover out of the revenues from its sales of electricity all its administrative and operating expenses (in- cluding maintenance, adequate provision for depreciation and bad debt, and taxes, if any) and interest and other charges on debt. Furthermore, these Services are designed to enable PLN to plan annually the measures required to make adequate progress towards financial recovery during each of its annual financial recovery programs and to re- view and assess in semi-annual intervals the actual progress made. The Services are expected to be completed by June 30, 1976. SCOPE OF SERVICES The management consultant will make recommendations to PIN and assist PLN in improving its entire management including the accamplishment of training. The improvement of management would cover activities relating to planning, personnel, finance, construction, operation and maintenance of the generating plants, transmission and distribution systems, and would allow PIN to achieve financial recovery and attain the following operating ratios not later than over the following fiscal years: 197L/75 - 80 percent, 1976/77 - 90 percent, and 1978/79 -100 percent. - 23- ANNEX 5 Page 2 of 7 In performing the Services, the Consultant should identify and systematically analyze, in consultation with PLN, the problems confronting PL,N and submit in due time program proposals, stipulating clearly the activities, the flow of activities and detailed time schedules. In addition to providing continuing day-to-day assistance and advice to PLN's management on all aspects of the company's operations, the Services will consist of the following: I. PLANNING 1. Assist PIN in the restructuring of the Directorate of Planning, including preparation of an appropriate organization chart and all related documents (e.g. job descriptions, definition of responsibilities, etc.). 2. Assist PLN in the preparation of its investment program and, in coordination with the Directorate of Finance, assist in the drafting of Financial Forecasts, including Revenue Account, Balance Sheet, Source and Application of Funds Statement, etc. 3. -Assist PLN in the preparation of its overall planning including the definition of a general policy for investment and projects priorities. 4. Prepare terms of reference for a National Long Range Power Devel- opment Study (Overall Long Range System Planning and Long Range Financial Planning), advise PLN on facilities needed and assist in the execution of such Study. 5. Assist PLN in establishing a "Central Data Bank for-Management Purposes." 6. On-the-job training for general planning techniques. II. PERSONNEL AND TRAINIG 1. Assist PLN in the continuation of efforts and actions already in progress resulting from the services provided by the Consultant under Addendum B dated April 25, 1972 to the Contract between PLN and the Consultant, dated June 3, 1970 No. Pdj. 031/PST/70., including specifically: (a) implementation of new personnel regulations based on Government Regulation No. 18, 1972 such as: recruiting and dismissal, salaries, wages and pensions, assess- ment, transfers, etc.; - 24 - AEX 5 Page 3 of 7 (b) restructuring and trining of its labor force, and in the implementation of the job organogram, job analysis, job qualifications and job descriptions; and (c) establishment of the necessary training centers. 2. Assist PLN in the implementation of new administrative procedures and office management at the Head Office and other areas. 3. Assist PIN with other general organization or training problems on request (e.g. planning, finance, construction, safety, etc.) III. FINACE L. Continue and complete all activities in progress on the revised financial and accounting systems and procedures, including: (a) consumer administration: improvement and assistance in the implementation of clerical procedures covering consumer service, billing, consumer accounting, credit control, data control, collecting, meter reading; (b) conditions for connection: in connection with Part VII of these Terms of Reference, drafting such conditions, covering among other things, PLN consumer contracts, conditions of access to the premises, collection, dis- connection, etc.; (9) mechanization of consumer adninistration: drafting all necessary instructions, assistance in the negotiations with electronic data processing companies, and training and implementation; (d) cash control: improvement of the system already implemented in Java and assistance in further implementation; (e) cash accounting and cash management: drafting the necessary instructions and assisting in their implementation; (f) uniform accounting: review and improvement of the new uniform code of accounts; (g) inventory control: assistance in the implementation of the new proposed system, in connection with Parts V, VI and VII of these Terms of Reference; (h) fixed assets administration: drafting the necessary instructions and assisting in their implementation; (i) depreciation: review the outline proposals already submitted, draft final instructions concerning a , depreciation policy and assist in their implementation; - 25 - ANNEX 5 Page I of 7 (j) revaluation of fixed assets: drafting a method for the revaluation of fixed assets and assisting in its imple- mentation, including the necessary discussions with the Ministry of Finance; (k) budgeting: improvement of the already implemented system, covering operating and investment budgets, and assistance in its implementation; (1) annual accounts: improvement of the forms in connection with the annual accounts, including Revenue Account, Balance Sheet and all necessary supporting schedules; assistance in the completion, including consolidation of said annual accounts; (m) management reporting system: drafting an outline of general management reporting system, assistance in its implementation, and thereafter, improvements to the system; (n) payroll accounting: drafting the necessary instructions and assistance in their implementation; (o) internal audit: issue the necessary recommendations con- cerning a comprehensive internal audit program and assist in its implementation; (p) project cormissioning: in connection with Part IV of these Terms of Reference, review and improve the existing procedures concerning project commissioning and there- after, the transfer of the related financial data from "work in progress" to 'fixed assets in operatiQn" in PLN's accounts; (q) insurance: assist PLN in the establishment of a comprehensive insurance policy; (r) financial forecasting: in connection with Part I of these Terms of Reference, assist in the establishment of long-term financial forecasts, including Revenue Account, Balance Sheet, Source and Application of Funds Statement, etc.; and (s) tariffs: propose all necessary tariff adjustments, assist in the negotiations with all Ministries concerned, and assist in the implementation of the agreed tariff. 2. Provide continuing advice and guidance to the management of PLN on all financial and related matters, including nego- tiations with third parties. - 26 - ANNEX 5 Page 5 of 7 3. Assist PIN in the development and implementation of its new organization as may be required by the financial functions with- in PLN. 4. Make additional follow-up visits to review progress at the Head Office and other areas, and provide further advice and guidance for the improvement of all systems and procedures. 5. Undertake a feasibility study to evaluate the justification of further utilization of electronic data processing systems. 6. Continue and develop the training programs in the financial and accounting fields. IV. CONSTRUCTION 1. Establish basic technical standards for generation, transmission and distribution equipment. 2. Assist PLN in improving the organizational aspects of construction activities (Head Office, Regional Offices and job sites). 3. Assist PLN in defining the relations between the Directorates of Planning, Construction and Operation during study, design, execution, trial operation and comnissioning of projects. 4. Establish procedures to improve the management of projects (including appraisal, budgeting, accounting and reporting) and assist in their implementation. 5. Organize and conduct training for administrative and financial management of projects. 6. Assist PLN in improving the procedures to accelerate the completion of projects and to achieve optimum results. 7. Advise PLN on establishing the necessary facilities and pro- cedures for project commissioning and acceptance testing. V. GENERATION In addition to the services already contracted for in Addendum C dated April 18, 1973 to the Contract between PLN and the Consultant, dated June 3, 1970 No. Pdj. 031/PST/70, the Consultant shall: 1. Recommend improvements on the logistics of fuel handling and assist PLN to negotiate long-term fuGl contracts. 2. Assist PLN in the implementation of inventory control pro- cedures in the power plants. 41 - 27 - ANNEX 5 Page 6 of 7 3. Assist L i the establishment of a Directorate of Generation at the F-ad Office. b. Assist PTV to improve the power plant protection systems. 5. Study and assist in the iplerentation of special safety regulations for the vowier planits. 6. Prepare and assist PLN in the implementation of procedures for operation and maintenance of gas turbin3 and diesel power plants (a) in the capital cities of the Provinces, and (b) intercon- nectee. with the high-voltage network. 7. Prepare and assist PL1 in the implementation of procedures for operation and maintenance of hydro power plants in accordance with priorities as may be determined by PLN. VI. TRANIMTSSION 1. Recomnond improvoments in operation and maintenance procedures and assist in their implemenbation. 2. Undertake a study and assist in the establishment of a load dis- patch center for West Java. 3. Recorunend load dispatch procedures to Minimizs operating costs. 4. Recomend adequate and reliable system proectio*n schemes. 5. Recomriend appropriate technical system standards. 6. Design a training program for transmission operation and main- tenance. Advrise PLN on appropriate rieasures to reduce systOrt losses. VII. DIETRIBUTION 1. Assist PLN in the organization and establishment of Regional Distribution CanLrs. 2. Assist PLN in the irprovemant and implementation of general procedures for distribution operation and mairiteinance, including appropriate system protection. 3. Assist PLN in tle eitablishment of appropriate cnmercial policies for the distribution of power. - 28 - ANNEX 5 Pag 7 of 7 4. Assist PlN in the organization and establishment of a Directorate of Distribution at the Head Office. 5. Assist P2N in the improvement and implementation of administrative procedures for the distribution of power (inventory control, con- sumer administration, system standards, etc.). 6. Training as included in Part II of these Terms of Reference. 7. Advise PLN on appropriate measures to reduce system losses. A more detailed specification of activities required for PEN's financial recovery is stipulated in the appendix attached as an integral part of these Terms of Reference. This appendix oulines the Consultant's activities and the approximate time schedule for commencement of each activity, as well as those actions needed on the part of PLN and the Govern- ment to supplement the Services. The appendix is divided into two (2) categories: 1. Category A specifies activities which should have the immediate impact and rEquire immediate action in allowing PLN to recover its financial position. 2. Category B specifies supplementary activities, the implementation of which is expected at a later stage. April 24, 1973 Annexes Category A Category B O a U esponsibility of Areas of 0 PLN and Responsibility imple- Consultant Responsibility of Consultant of PLN mentation * Submission of Preparatory work Start of implemen- a Govern- 0 m Basic data recommendations for implem3nta- tation ith assist- oo e w ev ment in- E available to by Consultant tion undertaken ance of Con- m SE volve- -N o. ACTIVITY Consultant to PLN by Consultant sultant 4 O ment I. PLANNING 1. Investment program Junb 73 Review Oct. 73 - April 74 yes yes yes Approval 1.2 by Jan. 7h 2. Cash flow June 73 Review Oct. '3 - April 74 yes yes yes Approval 1.2 by Jan. 74L 3. Central Data Bank - Nov. 73 March 7h June 74 yea - - - I.5 II. PERSONNEL AND TRAINING Regulations 4. a. Personnel Complete Complete Oct. - Dec. 73 Dec. 73 yes yes yes Regulation II.1(a) by Oct. 73 b. Salaries and wages Complete Complete Oct. - Dec. 73 April 74 yes yes yes R3gulation II.I(a) by Oct. 73 C1 0 4 ce Pesponsibility of Areas of -g PLN and Responsibility imple- 0 (g Consultant Responsibility of Consultant of PLN mentation Govern- 0 Basic data Submission at Preparatory work Start of implemen- ment in- available to recommenations for implementa- tation with assist- $.3 $ , c volve- 1-4 Consultant by Consultant tion undertaen ance of Con- to 0 ,ent No. A CT I VI TY to PLN by Consultant sultant c0 (1) (2) (3) (1.) (5) (6) P7T TT ) -7U (1 6. c. Pensions May 73 June 73 Oct.-Dec. 73 April 74 yes yes yes Regula- II.1(a) tion by Oct. 73 7. d. Dismissal and Complete June 73 Ot. 73 Jan. 7 yes yes yes - II.1(a) recruitment 8. e. Assessment, trans- Complete July 73 Aug. 73 Jan. 74 up to yes yes yes - II.1(a) fers, etc. Feb. 76 0 Mnpower Planning 9. a. Job organogram, job Complete June 73 Aug. 73 Oct. 73 yes yes yas - II.1(b) analysis, job quali- fications and job descriptiorn 10. b. Restructuring program Complete Complete Oct. 73 Jan. T4 up to Feb. yes yes yes Approval II.1(b) 76 by Oct. 73 U. Training centers and To be completed Start June 73 June 73 yes yes yes - 1.6 traLnixg Dec. 73 . II.l(b)(c) 11.3 111.6 r.5 vI.6 vii.6 Responsibility of Areas of PLU and Responsibllty of imple- 0 Consultant Responsibility of Consultant P LN mentalAon Z C 0 Pasic data Submission of Preparatory -work Start of implemen- tiovern- % avaLlable to recommerdations for implmenta- tCttion with assist- .4 .g ment in- 0 Consultant by Cnnsltant tion undertaken ance of 3on- volve- V No. ACTIVIT T _ to PLN by Consultant aultant M ment r (10 (2) (5) (,) (7) (8) (9)** (10) (11) 12. office management May 73 Jan. ? March T April 7Th yes - - - 11.2 procedures 13. Safety ragulations Complete Jue 7h July-Dec. Th Jan. 15 yes Y-js yes II.3 V.5 III. FINANCE 14. Consuner administration Complete Complete Complete Jan. 73 - yes Regu7lation IiI.1(a) Complete Complete - Aug. ?4 - . yas Regulation ItI.1(a) 15. Conditions for connection June 73 Dec. 73 - June ?h yes yea yes Regulation III. (b) 16. Mechanization of consumer - Complete underway underway - WJ* 1 - II.1(c) administration EJ** 17. Cash control improvement - Continuous Continuous Continuous yes yes 1/2 - ii.1(d) 5/6 18. Cash accounting and cash - Dec. 73 March h July 74 yes yes yes - III.1(e) man gemnt 19. Uniform accounting im- - Continuous Continuous Continuous yes yes yes Inform III.1(f) provement 20. Inventory control Complete Complete Aug. 73 Jan. 7h yes yes yes - III.1(g) 21. Fixed assets adminis- . June 7 Dec. 74 April 75 yes yes yes Inform iiI.1(h) tration 22. Depreciation poliqy - June 73 April 74 yea yes yes Approval III.i(i) SWJ - West Java ** J - East Java *** Nubers refer to Exploitasis 00 easpoasibility of Areas of C 0 PLN and Responsibility imple- Consultant Responsibility zf Consultant of PLN mentation Submission of Preparatory work Start of implemn- Govern- 0 Basic data recommendations for implementa- tation with assist- m ment in- available to by Consultant tion undertaken ance of Oon- . 1 volve- e a. ACT IVITY Consultant to LN y Consultant sultant, ment 17 (2) (3) (4) )A) (6) (7) -)()1 3. Revaluation of fixed - June 7 Sept. 74 Feb. 75 yes yes yes Approval III.1(j) assets 4. Operating budget im- - Continuous Continuous Continuous yes yes yes - III.1(k) prvvement 5. Investment budget - Continuous Continuous Continuous yes yes yes - III.1(k) improvement 6. Annual accounts im- provement - Continuous Continuou Continuous yes yes yes - III.1(1) 7. General management re- porting system Complete Oct. 73 Nov. 73 Jar.. 74 yes yes yes - III.1(m) 8. Payroll accounting - Jum3 73 Dec. 73 April 74 yes yea yes - III.1(n) 9. Internal audit ay 73 Dec. 73 Jan.-March 74 April 7 yes yes yes Inform III.1(o) 0. Project conissionizg July 73 Oct. 73 April 74 yes yes - - iiI.1(p) 1. Insurance Dec. 73 Jan. 7h Jan. 75 yes yes yes Approval III.1(a) 2. Financial forecasting June 73 Oct. 73 April 74 yes yes yes Approval III.1(r) 3. Tariffs Complete Yearly review in (die time in due time yes yes yes Approval 111.1(8) Responsibility of Areas of PLN and Responsibility of imple- Consultant Responsibility of Consultant PLN mentation Submission of Preparatory work Start of implemen- 71 Govern- 0 Basic data recormendations for implementa- tation with assist- e ment in- rt available to by Consultant tion undertaken ance of Consult- 0 4 volve- No. ACTIVITT Consultant to PLN by Consultant ant ,wnt (2) (3) (4) (5) (6) (7) (a) T9) 7 (11) IV. CONSTRUCflON 34. Basic technical July 73 March 74 - June 74 yes yes yes Support IV.1 standards 35. Improvement of anage- June 73 June 74 July 74 Oct. 74 yes yes ye Raulation IV. 4 ment of projects by June 74 36. Procedures to accele- IV 3 rate the completion iv.6 of projects and to achieve optimum results - project execution and July 73 Start Oct. 73 - April 74 yes ye - - supervision - construction procure- July 73 ment foreAgn currency - Complete - April 7% yes - - - lael currency - Oct. 73 - April 74 yes yes - - - project commissioning July 73 Oct. 73 - April 7L yes yes - V. GENERATDN Steam ard gas turbine 37. a. Improvement of oper- Complete Dec. 73 - Jan. 74 - yes yes . Addendum 0 ation and maintenance and V,6 procedures O z Responsibility of Areas of . E PLN and Rdeponsibility of Jnple- Consultant Responsibilly of Consultant PLN mentation Subytissicn of Preparatory work Start of impleman- 0 Govorn- 0 Basic data reaommendations for implementa- tation with assist- o. e- i ment in- available to by Consultant tion undertaken ance of Con- volve- a o. ACTIVITY Consultant to FLN by Consultant sultant ment 17 (2)) W k} t6) 7) U (9) (10) (1) B b. Plart location data CompL3 te July 73 Oct. 73 yes yes yes Support V.1 by Aug. 73 9. c. Fual handling and Complete Oct. 73 April 74 - yes yes Support V.1 storage 0. d. Fuel requirementa Complete Oct. 73 Jan. 74 - yes yes - V.1 ana specifications a. e. Long-term fuel con- . Dec. 73 Feb. 7U April 74 yes ye yes Support V.1 tracts by March 74 12. f. Control of fuel qiality Complete Start Oct. 73 April 74 - yes yes Support V.1 and quantity 3. g. Facilities for fuel - Start Dec. 73 April 74 - yee yee Support 7.1 quality control (plant) 4. h. Facilities for fuel Dec. 1 Feb. 75 - April 75 - yes yes Support V.1 quality control (master lab.) S. Inventory control Complete Complete Aug. 73 Jan. 74 yes yes yes -V.2 46. Establishment of Direc- Complete Complete Sept. 73 Jan. 74 yes - - .3 torate of Generation 47. Power plant protection system Complete Dec. 73 - April 74 - yes yas Support V.4 OC Responsibility of Arnas of 0 PLN and Responsibility of imple- ' Consultant Responsibility of Consultant PLN mentation 0 V Subnission of Preparatory work Start of implemen- V Govern- 0 Basic data recomnendations for implementa- tation with assist- -C i mnt b- M available to by Consultant tion undehrtaken ance of Con- . " volve- A C T I V I r Y Consultant to PIN by Consultant sultant o ent El(3 7T f 9 3 Diesel and hydro power . Procedares for oper- - Start Dec. 73 - Jan. 7h - yes yes Support V.6 ation and maintenance V7 VI. rRANSmiSSIm Impmvernant of operation Complete Start Jan. 7h - Feb. 74 - yes yes Support VI.1 ind Yraintunance pro- cedure-; Load dispatch center Complete Dec. 73 April 74 - WJ* - Support VI.2 (only study) (engineering de- VI3 sign) System protecti m Complete Dec. 73 April 7 - WJ* - Support VI.L Appropriate technical June 73 Start March 74 - June 74 yes yes yes Support VI.5 system standards System loss reduction - Start Nov. 73 Continuous Continuous - yes yes Support VI.7 S I VII. DISTRIBUrl0No Organization and establish- Complete Complbte Sept. 73 Jan. 7 yes - - - VII.b ment of Directorate of Distribution * WJ - West Java 0 0 Rasponsibility of Areas of PLN and R)sponsibility imple- Consultant Responsibility of Consultant of PLN mentation Submission of Preparatory work Start of implewen- a Govern- Basic data recorb,ndations for implementa- tation with assist- mm m ment in- available to by Consultant tion rdertaken ance of Con- i. - volve- 4o. A C T I V I T T Consultant to PLN by Consultant sultnnt :-nt 55. Organization and estab- Complate Complete Jan. 7L April 74 - yes - - VII.1 lishment of Regional Distribution Centers 56. Operation and maintenance Complete Start F3h. 7L - march 7 - yes yes - VII.2 procedures 57. System loss reduction - underway Continuous Coiitinuous - yes yes - VII.7 Administrative procedures 58. a. Inventory control Complete Comple te Aug. 73 Jan. 74 yes yes yis . VII.5 59. b. Consumer administra- June 73 Dec. 73 June 74 yes yes yes Regulation VII.5 tion (conditions for by June connection) 73 SO. c. Installation reg- Complete June 7L July-Dec. 7[ Jan. 75 yes yes yes hegulation VII.5 ulationk by Aug. 7X 51. Comerc3al policies - Continuous Continuous Continuous yes yes y-s Approval VII.3 Responsibility of Areas of 0 FLN and Responsibility imple-* Consultant Responsibility of Consultant Of PLN mentat on a Submission of Preparatory work Start of implemn- 0 m Govern- 0 Basic data recommendations for implementa- tation with assist- 0 * ment in- available to by Consultant tion undertaken ance of Con- 9064 volve- o. A TIVI Y Cosultnt t PLNby Consultant ,sultant mn T (2) (3) (6) 17) (6) (9) 10) (11) I. PIANNIN3 62. Overall long-range planning July 73 Sept. 73 Nov. 73 Study Jan. 7 yes yes yes Support 1.3 I.4 II. PERSONNEL AND TRINING 53. Office management procedures Ph 73 Juni72j July -Sept. 74 Oct. 7 - ys yes - 11.2 III. FINANCE C$. Gash control July 75 - - 3/I - III.1(d) 55. Mechanization of con- - July - C /5/ - aumer administration 6 i6. Project commissioning July 74 Oct. 7 'April 75 - - yes * III.1(p) * CJ * Central Java ** Numbers refer to bxploitasis o a Responsibility of Areas of o PLN and Responsibility imple- :I Consultant Responsibility of Consultant of PLN - mentation 3 Submission of Preparatory work Start of implemen- 0 Govern- o Basic data recomendations for Jmpl,menta- tation with assist- 4 a ment in- available to by Consultant tion undertaken ance of Con- in 0; volve- ACTIVITT Conultant toPLN by Consultant sultant ment (3 (5) (6) (7) 7 (9) 7TUT -70 IV. CONSTRUI Procedures to accele- rate the completion at projects and to achieve optimum re- sults - project execution and July 74 Oct. 74 - April 75 - - yes - IV.6 auperviaion - procurement in local - Oct. 7h - April 75 - - yas - IV.6 currency 0D - project conmi3aioning July 74 Oct. 7 - April 75 - - yes - IV.3 I - facilities for commis- Dec. 73 MUVh 74 - June 74 yes - - Support I.7 aioning and acceptance teats V. gNERATION Diesel plants - fuel atorage and band- lirg Completo Oct. 74 Dec. 75 - yes yes Support V.1 - control of fuel gpan- ity and quality aSpt. 74 Oct. 7T4 Dec. 7h - yes yes Support V.1 - facilities for fuel quality control (plant) Dec. 7I Start Dec. 74 - April 75 - yeas yes Support V.1 0 a Responsibility of Areas of FLN and Responsibility imple- Consultant Responsibility of Consultant of PLN mentation Submission of Preparatory work Start of implemen- 8 m as Govern- o Basic data recome ndations for implementa- tation with assist- m|' $ ent in- available to by Consultant tion undertaken ance of Con- 98 8 volve- * No. ACTIVITY Cornultant to PLN by Consultant sultant ment TI(2) (3) (4) MT67 (7 - -- -7TTO7 VI. TRANSMISSION (For reference) - - VII. DISTRIBUrIGN 69. Organization and estab- Complete June Th Sept. Th Jan. 75 - - yes - VII.1 lishment of Pagional Distribution Centers 1 - 40 - ANNEX 6 Page 1 of 2 pages INDONESIA PERUSAHAAN UMUM LISTRIK NEGARA (PLN) Training The following training activities have been undertaken in the past or are presently underway. A. TRAINING CENTERS 1. In Operation (a) Slipij: This is the training center for finance and administration. It was originally inaugurated in 1972 and, after some interruption, reopened in September 1974. During the first phase about 150 employees were trained. The total capacity has been increased to about 300 trainees per year. Between October 1975 and end-1978 420 persons have been trained. The center employs 7 full-time teachers. (b) Cibogo: Center for technical training in generation, transmission and distribution control. It was opened in 1973. By end-1974 159 employees had been trained and training program for another 470 have been conducted between early 1975 and end-1978. The Center employs 8 full- time and 16 part-time instructors. (c) Ancol: Center for distribution construction and maintenance. It was originally inaugurated in 1972 and, after interruption, reopened in early 1975. The total capacity is about 180 persons per year in classes of 12-32 weeks duration. (d) Tanjung Priok: Center for steam and gas turbine plant opera- tion. The center was opened in March 1976. Its capacity is 60 employees per year. -41 - ANNEX 6 Page 2 of 2 pages 2, Planned (a) Pandaan: Center for diesel plant and distribution (Surabaja) operation. Capacity of 60 trainees per year. (b) Ujung Pandang: Center for diesel plant and distribution operation. (c) Medan: Center for diesel plant and distribution operation. B. OTHER TRAINING ACTIVITIES (a) On-the-job training for operation of steam power plants. SOFRELEC has successfully completed a 9-month course in Surabaja and similar classes in Tanjung Priok. Similar efforts are being continued by consultants in the context of steam plant design and supervision of construction jobs (for instance Black and Veatch in Muara Karang). (b) Continuous on-the-job training in accounting mechanization. (c) Training of about 200 employees outside PLN and abroad in computer operation, management, system planning and personnel management. - 42 - ANNEX 7 Page 1 of 2 pages INDONESIA PERUSAHAAN UMUIM LISTRIK NEGARA (PLN) CREDITS 165 AND 334-IND FIRST AND SECOND ELECTRICITY DISTRIBUTION PROJECTS Internal Economic Return 1. The internal economic return was computed on the Jakarta electricity distribution rehabilitation and expansion project with a capital cost of US$105.8 million equivalent at current prices (including reinforcement of the 70 kV system and the load control center which were financed from services other than the IDA credits). It is the discount rate at which the present worth of the project cost and other attributable costs, at constant prices, net of duties and taxes, is equal to the present worth of the revenues, at constant prices, derived from it. The table below show the assumptions made: Additional Additional Additional Project Additional Fiscal Generation Sales Revenues Cost Generation Cost (GWh) (GWh) --------------US$ million--------------- (1963 Prices) (a) (b) (c) (d) (e) 1973 - - - 13.32 - 1974 29 32 1.05 7.16 0.52 1975 100 115 3.31 16.96 1.80 1976 195 220 7.38 15.03 3.50 1977 304 352 13.41 12.61 5.19 1978 395 422 14.83 3.32 6.90 1979 395 422 14.00 - 6.83 1980 395 422 14.00 - 6.83 1981 395 422 14.00 - 6.83 19?2 395 422 14.00 - 6.83 2002 395 422 14.00 - 6.83 (a) and (b): The additional generation and sales are those included in SOFRELEC's feasibility study dated December 1971. The additional energy generation required is less than the estimated increase in sales; this is due to much lower system losses with the new distribution system. - 43 - ANNlEX 7 Page 2 of 2 pages (c): Valued at the average revenues per kWh sold in any given year between FYs 73 and 79 discounted to arrive at constant 1973 levels by using a 50/50 mix (local/foreign) of the actual inflation factors. (d): The total cost of US$68.4 million equivalent at constant 1973 prices (US$40.9 million for foreign and US$27.5 mil- lion for local) was arrived at by discounting the cost streams by using the following annual inflation factors: Foreign Local 1974 8% 34.6% 1975 8% 19.4% 1976 8% 17.0% 1977 9% 11.8% 1978 7% 11.0% (e): Using the actual prices of fuel oil at Singapore between FYs 1973 and 79 discounted to arrive at constant 1973 levels by using the actual foreign inflation factors. The discount rate which equalizes the above cost and benefit streams is about 10%. INDONESIA PERUSAHAAN UMUM LISTRIK NEGARA Income Statements: FY72-79 (Billions of Rupiah) 1972 1973/a 1975 1976 1977 1978 Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual Sales increase (%) 7.6 6.0 10.0 14.9 10.0 12.4 13.8 14.7 13.9 9.9 14.0 14.4 Energy sales (GWh) 1,900 1,893 2,090 2,175 2,530 2,444 2,880 2,804 3,280 3,082 3,740 3,527 Average price/GWh 8.0 9.0 10.0 11.0 12.5 16.4 12.5 21.7 12.5 27.3 14.4 27.5 Energy revenue 15 17 21 24 32 40 36 61 41 84 54 97 Other revenue 3 2 3 3 4 0 4 0 4 0 Total Revenue 18 19 24 24 35 40 40 61 45 84 58 97 Operating Expenses Fuel 4 5 5 7 5 10 5 15 6 23 7 29 Operations 16 11 16 13 16 19 18 23 19 37 21 43 Depreciation 10 10 11 11 13 12 14 13 16 16 17 23 30 26 32 31 34 41 37 57 41 76 45 95 Operating income -12 -7 -8 -7 1 -1 3 4 4 8 13 2 Interest 1 5 6 8 9 Charged construction 1 5 1 3 3 Charged operations 0 0 5 5 6 Net income -12 -7 -8 -7 1 -1 -2 4 -1 8 7 2 Rate base 91 100 114 155 149 126 177 128 197 152 219 194 Rate of return (%) -13.2 -6.0 -7.0 - -1.3 -1.6 1.7 -1.6 2.0 5.3 5.9 1.0 Operating ratio (%) 166.6 136.8 133.3 129.2 97.1 102.5 92.5 *93.4 91.1 90.5 77.6 97.9 fa Fiscal year end changed from December 31 to March 31 for FY75. Appraisal figures are on calendar year basis. Cr. INDONESIA PERUSAHAAN UMUM LISTRIK NEGARA Balance Sheets: FY72-79 (Billions of Rupiah) 1972 1973ja 197: 1)76 197; -978 Appraisal Actual kpvraisal Xctual Appraisal Artual Appraisal Actu-al Appraisal Actual kppraisal Actual Assets rixed Assets Plant in service 117 134 159 166 225 99 256 229 294 30b 333 39( Less Depreciatio. 19 20 30 32 56 47 70 $;1 R6 78 103 106 Operating plant 98 114 129 134 169 152 186 168 208 228 230 284 Works in progress 3a 33 15 23 26 1.7 28 274 29 35E 30 531 Current Assets Cash 2 6 6 8 11 20 10 16 10 29 15 39 Inventories 6 10 6 21 7 20 7 25 8 31 9 40 Receivables 5 8 6 24 7 18 8 28 9 35 9 48 Total 13 24 18 53 25 58 25 69 27 95 33 127 Total Assets 150 171 162 210 220 328 239 511 264 681 293 942 Equity and Liabilities Eguity Paia-in capital 167 167 175 208 186 309 187 475 187 617 187 814 Retained earnings -20 -12 -28 -13 -35 -8 -37 -10 -38 -1 -31 -2 Total Equity 147 155 147 195 151 301 150 465 149 616 156 812 Long-Term Debt Debt due 12 65 85 8 111 11 132 42 Curren.. Tiabilities PayaD-es 3 8 3 1 4 4 4 4 1 5 8 Total 8 3 1 4 4 4 4 4 1 5 8 Consumers' contributions 8 14 23 41 53 80 Total Equity and Liabilities 150 1 162 210 220 328 239 511 264 681 293 942 Increase in gross plant (%) 25.8 21.8 35.9 24.6 41.5 19.2 13.8 15.1 14.8 33.6 13..3 27.4 Debt as % of debt & equity 7.5 30.0 36.2 1.7 42.6 1.8 45.8 4.9 Current ratio 4.3 2.9 6.0 17.7 6.2 12.2 6.2 17.2 6.8 95.0 6.6 15.9 .a Fiscal year end changed from December 31 to March 31 for FY75. Appraisal figures are on calendar year basis. - 46 - ANNEX 9 BREAKDOWN OF PROJECT FOREIGN COSTS Appraisal Current Estimates Estimate . 1. Righ Voltage system (70 kV) 2.8 nil 2. Medium voltage system 6.5 13.5 3. Distribution substations 10.3 9.3 4. Low voltage system 3.6 8.9 b. Service entrances 5 2 3.9 6. Voltage change 1.3 2.3 7. Street lighting 3.4 1.2 '. Regional and National Control Centre 0.9 0.1 -j. Transportation 4.4 n.a.l/ 10. Engineering services and training 4.4 6.6 11. Management Services 5.0 8.6 2/ i2. Contingencies - Physical 3.8 nil - Prices 3.5 nil TOTAL . . . . 55.0 54.4 NOTE: For the sake of practicality, the two credits have been put together, at least from the technical point of view. This breakdown slightly differs for some items from the Appraisial Report because categories of both credits are not the same as number and content. L' i)sir -ition cosi - are included in each project component. in 1 -7e ot USS8.6 million constitutes about 16% of the total sum )na. to - :j redits. INDONESIA PUBLIC GENERATING FACILITIES BY AREAS (MARCH 31, 1975) o ,o ,o .' °sInstalled MW Installed MW 1 8.8 Vill 46 1 Al AND "1 41-5 Ix 57 S,/ S 111 228 x 113 PHILIP INES IV 709 XI 391 v 9.0 G1 1858 *BandaAceh South China Sea vI 119 G2 1119 A B A H VII 166 G3 444.7 MALAY A X PLN's Explostasi Numbers SExploasm Boundaries vI Explotasi Headquarters •Medan KUALA - International Boundaries Ce/ebes Sea 0 --- - - Sbgao d - - -S AR AiW A K-¯ ¯ - ~SboI ARÄWKV/KILOMETERS NGAPORE 0 Menado. L MILES 4 5 Pont,an~k K A L- T,A N Macc Sea P 4 Samarinda k CR oa N RIAN JAYAppa n n Ocean / T Jaova Sea UnaPapdinn p.reo 11~ 9n 03~~IRA JJAYAaon.\ Il ndian .Ocean t,~ Telkb o,, jdna SeoiugPadn .1n SUc TeM 4tor n a ~ n