'04V 6 29 -V RESTRICTED Report No. PU-6a 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 The report may not be published nor may it be quoted as representing their views.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 RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL O'k GURI POWERHOUSE EXTENSION C. V. G. ELETRIFICACION DEL CARONI C. A. VENEZUELA June 4, 1969 Public Utilities Projects Department EDELCA's Fiscal Year Coincides with the Calendar Year CURRENCY EQUIVALENTS US$1.00 = Bolivares (Bs) 4.50 Bs 1.00 = US$0.22 Bs 1 Million = US$222,222 ABBREVIATIONS AND ACRONYMS EHV Extra-high-voltage MW Megawatt, 1,000 kilowatts Gwh Gigawatt hours, 1 million kilowatt hours m ton Metric ton, 1,000 kilograms, 2,204 pounds ALCASA Aluminio del Caroni Sociedad Anonima CADAFE Compania Anonima de Administracion y Fomento Electrico CAFRECA Cambio de Frecuencia Compania Anonima Consorcio Consorcio Guri (general contractor) CVG Corporacion Venezolana de Guayana EDELCA C.V.G. Electrificacion del Caroni Compania Anonima Harza Harza Engineering Company International La Electricidad Compania Anonima La Electricidad de Caracas OPSIS Operacion de Sistemas Interconectados SIDOR Planta Siderurgica del Orinoco VENEZUELA APPRAISAL OF GURI POWERHOUSE EXTENSION CoV.G, ELECTRIFICACION DEL CARONI CoA, TABLE OF CONTENTS Page No. SUMMARY i I. INTRODUCTION 1 II. THE BORROWER 2 III. THE POWER SECTOR 5 Composition of the Sector 5 The Frequency Unification Problem 7 IV. EDELCA'S PROGRAM AND THE PROJECT 8 The Program 8 The Project 9 V. JUSTIFICATION OF PROJECT 10 The Market Forecast 10 Internal Rate of Return 12 VI. FINANCIAL ASPECTS 14 Past Performance 14 Projected Operations 16 Financing Plan 1969-1980 17 VII. CONCLUSIONS 18 Annexes Photograph Map This report was prepared by F. H. Howell. LIST OF ANNEXES Annex 1 - Estimated Peak Demands, Energy Sales, and Revenues Annex 2 - Project Cost Estimate and Construction Expenditure Schedule Annex 3 - Tariff Structure Annex 4 - Actual and Estimated Income Statements 1963-1980 Annex 5 - Estimated Sources and Applications of Funds 1969-1980 Annex 6 - Condensed AOtual & Estimated Balance Sheets 1963-1980 VENEZUELA APPRAISAL OF GURI POWERHOUSE 23XTENSION C.V.G. ELECTRIFICACION DEL CARONI C.A. SUMMARY i. C.V.G. Electrificacion del Caroni C.A. (EDELCA) has requested a Bank loan of US$31 million equivalent to assist in financing the foreign exchange costs of extending the powerhouse structure of the Guri hydro- electric project from the present three unit capacity to the full ten unit capacity contemplated; installing the fourth unit; and installing the embedded parts for the remtiining six units. The total estimated cost of the proposed Project is US$62 million equivalent including interest and other charges payable during the construction period, of which about $36 million would be foreign exchange. The Bank has made two Loans to EDELCA aggregating US$100 million equivalent for the initial phase of Guri and extra-high-voltage facilities to transmit the power to the Caracas market area. Guri Dam and the three-unit powerhouse are essentially completed, and the transmission system is well advanced and on schedule. ii. The proposed Project has been satisfactorily designed and engi- neered, and the cost estimates contain a large contingency allowance, prudent in view of past experience with major civil works in the same river. Even when this generous allowance is taken into account, EDELCA's expansion program is economically justified, with an internal return on the additional investment estimated at about 17-18%, valuing output at current tariffs. iii. The total Project cost of $62 million equivalent would be met by the proposed Bank loan (50%), government investments (27%) and retained earnings (23%). The loan would finance only the foreign exchange costs of the civil works, the equipment, and the engineering. EDELCA will finance interest charges during construction. Procurement will be on a broad inter- national basis. Any surplus loan funds would be cancelled. iv. EDELCA continues to be capably managed by executives and staff well known to the Bank. Past and short-term future financial performance have not been and are not expected to be as good as originally forecast. This is attributable principally to the failure of sales to other utilities to develop as anticipated. This in turn stems from delays in converting the private system serving Caracas from 50 to 60 cycle operation, and the delays in completing Guri precluding sales to another government-owned power agency. However, the performance criteria established in the first two Loans should be met, although with a delay of two years, approximately commensurate with the lag in projected power sales. The frequency conversion is well under- way, and a long-term power sales agreement was recently signed by EDELCA and its two principal utility customers. v. The proposed Project would form a suitable basis for a Bank loan of US$31 million equivalent for a term of 20 years including about 5 years of grace. VENEZUELA APPRAISAL OF GIJRI POWERHOUSE EXTENSION C.V.G. ELECTRIFICACION DEL CARONI C.A. I. INTRODUCTION 1.01 In September 1963 and in January 1967, the! Bank made two power- development Loans to C.V.G. Electrificacion de] Caroni C.A. (EDELCA) of US$85 million (353-VE) and US$15 million equivalent (482-VE) for the con- struction of the initial stage of the Guri Hydrolelectric Project, and for an extra-high-voltage (EHV) transmission system to the Caracas market center, respectively. The first stage of Guri is nearing completion with three 175 MW units as planned, although a little more than a year behind the original schedule because of difficulties experienced by the general contractor. Power generation began November 8, 1968. The EHV system, under construction from Guri to Caracas, is expected to be in service during the third quarter of 1969 as initially scheduled. 1.02 The Guri Project and associated EHV transmission system are de- signed to serve primarily the north-central population and industrial center comprising the Caracas-Maracay-Valencia area and environs, and the rapidly growing industrial center of Ciudad Guayana whose development is being aggressively promoted by the autonomous regional agency, Corporacion Vene- zolana de Guayana (CVG), the parent of EDELCA. In the north-central area EDELCA will wholesale power to two other power systems, while in the Ciudad Guayana area the principal eustomers are major foreign-owned industrial companies and electrometallurgical subsidiaries of CVG. These several regions, as well as intermediate zones, form the logical market area for Guri power, and it is now clear that Guri will be the prime source for this growing market over the next decade. 1.03 The Caroni River is one of the major rivers of Latin America, its annual average flow being'about 5,000 cubic meters per second at the Guri site. The topography of the area upstream of the Guri project is such that a large reservoir has been created, some 11,000 million cubic meters. This feature together with the Caronits large flow enable the development of some 1,600 NW of dependable power. The regulation of the river also guarantees the capability of an existing 365 1I4W downstream installation, Macagua. 1.0h Guri is designed to be expanded in several stages over several decades, by installing additional generating units and later raising the height of the dam proper twice. The original design took this into account, and contemplated the installation of ten 175 MW units during the late 1960's and the 1970's before raising the dam. As noted, three units are now in- stalled. (An additional 400 MW can be developed in the first 10 machines by raising the dam modestly. A second powerhouse wiould be constructed in connection with raising the dam the second time.) EDELCA now plans to ex- tend the existing powerhouse to its full size as soon as possible, and to purchase and install the remaining seven units between now and 1980. The - 2 - basic powerhouse construction would be completed during 1969-72, with the first additional unit, No. 4, coming into service in 1973. The remaining units would be erected and placed in service one each year except 1974. 1.05 The total cost of completing the entire powerhouse and installing the last seven units is estimated to be about US$91 million equivalent, of which about US$61 million would be in foreign exchange, including interest charges on the proposed Bank loan. (This compares with a total of approxi- mately US$187 million EDELCA will have invested to complete the initial phase of Guri with three units, and the EHV facilities.) LDELCA has requested Bank assistance in financing the civil engineering works of the powerhouse extension, Unit No. 4, and the embedded parts of Unit Nos. 5-10. The total cost of this phase, to be carried out during 1969-73, is estimated to be equivalent to US$62 million (including interest charges on the proposed Bank loan during the con- struction period) of which US$36 million would be in foreign exchange. A loan of US$31 million equivalent is proposed, with EDELCA financing the approximately US$5 million of interest charges during the construction period. l.O6 During the construction of Guri dam, certain difficulties were ex- perienced by the general contractor Consorcio Guri, a group of U.S. and Danish firms managed by Kaiser Engineers & Constructors Inc. These difficulties not only contributed to the delay in execution of the work, but have also given rise to claims, not yet settled, of substantial magnitude. Consorcio Guri and EDELCA completed financial arrangements in mid-1967 under which EDELCA has made certain payments to Consorcio (including disbursements from Loan Account 353-VE) the final disposition of which may not be known for five years. This situation is discussed more fully in Chapter II, "The Borrower". 1.07 This report was prepared by F. H. Howell, and is based upon informa- tion obtained from engineering studies by EDELCA and its consultants; a continu- ous liaison with CVG and EDELCA since mid-1962; an appraisal in Venezuela in November 1968; and upon a visit to Venezuela in March 1969 to review recent developments. II. THE BORROWER 2.01 EDELCA is a wholly-owned subsidiary of CVG, the nationally chartered regional authority responsible for development of the area known as the "Guayana" surrounding the confluence of the Orinoco and Caroni Rivers. TPhe Guayana has considerable natural resources, among them abundant hydroelectric potential, natural gas, high-grade iron ore and vast areas of land which could be made productive by control of the Orinoco. CVG is active in many fields: (i) Iron and steel production through another wholly-owned subsidiary PTanta Siderurgica del Orinoco (SIDOR) which operates an olectric iron smelter, steel conversion facilities, a pipe factory and has under construction a rolling mill. - 3, - (ii) Aluminum production through another subsidiary jointly owned with Reynolds Metals Company, Aluminio del Caroni S.A. (ALCASA) operating a 12,500 m ton aluminum smelter; capacity is now being doubled, and rolling facilities are being planned. (iii) Land reclamation in the Orinoco delta, as part of a general plan to encourage migration to the Guayana. (iv). Urban development, centered around expansion of the new Ciudad Guayana, embracing the corrmunities of Puerto Ordaz and San Felix. (v) Tourism, through construction with Intercontinental Hotels of a new hotel in Ciudad Guayana. CVGIs promotional activities are important to EDELCA's market, because the Guayana is expected to account for 36% of EDELCA's revenues during 1969-80. 2.02 EDEICA was created in August 1963 to assume ownership and opera- tionis of CVG's electric power properties, then principally the 365 MW Macagua hydroelectric plant constructed to serve SIDOR. EDELCA's Charter and By-Laws were drafted-in close consultation with the Bank. The Charter requires that the President must at all times be a person of proven experience and executive capacity: breach of this provision would constitute a default under both Loan Agreements. This provision will be continued in the proposed loan. The current President has been in charge of EDELCA since its creation, and has as well continuously directed CVG since its founding in December 1960. He is a very capable man, in large measure responsible for the cooperation between the public and private power sectors. He is assisted by a competent staff who are successfully operating Macagua, completing construction of Guri and the EHV system, and planning the proposed expansion of Guri powerhouse. Suitable personnel have been appropriately trained to operate Guri and the EHV facilities, and CVG has furnished key personnel for operation of the interconnected systems discussed in Chapter III, 'Power Sector". 2.03 EDELCA (and CVG before it) has retained the services of Harza Engineering Company InternEtional (IJSA) throughout the design and construction of Guri. EDELCA intends to continue to employ Harza in connection with the expansion of the powerhouse. Certain specialized engineering and supervisory services necessary to carry out construction of the EHV system are being provided by Kennedy-& Donkin (UK) and Techint (Italy). These arrangements have proven satisfactory, and with them EDELCA is capable of executing the proposed program of expansion. During negotiations assurances were obtained that these or sim-larly satisfactory arrangements will be continued. 2.04 In early 1967, the general contractor at Guri, Consorcio Guri, requested financial assist4nce from EDELCA, outside the scope of the contract, alleging changed conditions caused it to suffer grave damage. Consorcio 4- clairned it would otherwise be forced to abandon the job, its losses during 1963-67 having reached such proportionsl/that most members of the joint venture were unwilling to put more money into the contract. After consider- able negotiations, during which the Bank offered its good offices, an agree- ment was reached under which Consorcio obligated itself to complete the job, and EDELCA obligated itself to make certain payments to Consorcio in contem- plation of Consorcio's continuing to work. The principal features of this Financial Agreement are: (i) Consorcio would continue to work to completion, and EDELCA would pay Consorcio regular Contract Revenues in accordance with the provisions of the general contract. (ii) Consorcio would render an accounting of its-costs to prosecute this work, and EDELCA would make Special Advances under the Financial Agreement equal to the amount Consorcio's costs exceeded Contract Revenues. That is, EDELCA would reimburse all Consorcio's expenditures. (iii) The aggregate amount of Special Advances would not exceed the face amount of Consorcio's performance bond of (about) US$37 million. At the same time, the sureties who wrote the bond agreed to an amendment whereby they bound themselves to promptly reimburse EDELCA directly for the Special Advances if Consorcio abandoned the work prior to its completion. (iv) Any claims presented by Consorcio and accepted by EDELCA would cancel a corresponding obligation of Consorcio to repay the Special Advances. (v) Any Special Advances outstanding upon completion of the contract would be repaid promptly by Consorcio, except for armounts equal to unresolved claims. Two years would elapse during which an attempt would be made to settle claims. Following this period, Consorcio woiad be obliged to repay the unsettled balance of the $pecial Advances in three equal annual payments. 1/ During inauguration of the work November 8, 1968, Edgar Kaiser representing Consorcio stated in his public address that losses had reached more than US$60 million. The estimated original value of the general contract was about US$72 million. - 5 - At the present time the work required by the General Contract is almost complete, but the full extent of Consorciols claim is not yet known, nor can EDELCA estimate how much it is likely to accept. 2.05 As of March 1969, EDELCA had made aggregate Special Advances to Consorcio of US$26.9 million, and expects to make additional Advances of about US$0.4 million by June 1969 when the works will have been completed. Following the accord reached by EDELCA and Consorcio which led to the Financial Agreement in mid-1967, the Bank agreed to disburse .rom Loan Account 353-VE an amount up to US$13.h million pari passu with EDELCA, for purposes of the Special Advances.l/ EDELCA has in turn agreed that one-half of any repayments made by Consorcio under the Financial Agreement will be applied to reduce Loan 353-VE by prepaying the last maturities. 2.06 It would be imprudent to speculate as to the extent of Consorcio's claims and how much EDELCA would accept. Therefore, while it is obvious the settlement of claims may have a major impact on EDELCA's future financial position, it cannot be quantified. For purposes of making the financial pro- jections in this report it has been assumed that Consorcio wifl present and EDELCA will accept claims equal to the total amount of Special Advances, i.e. US$27.3 million. This would seem to be the most pessimistic view. III. THE POWER SECTOR 3.01 Located on the Caribbean coast of South America, Venezuela had a population estimated at 9,351,600 at the end of 1°67. Per capita GNP was equivalent to US$984 in 1966 (measured at market prices); petroleum continues to be the largest sector (26% of GDP at factor costs). The nation is rapidly industrializing, and produces a range of basic metal products, automobiles, electrical appliances, construction materials, etc. More than 65% of the total population, which tends to be concentrated in the major cities, has electric service available. Per capita use, excluding the petroleum sector, was 750 kwh in 1967, ranking Venezuela among the highest in Latin America. Composition of the Sector 3.02 Public power supply in Venezuela is provided both by privately-owned companies, and by government agencies at the municipal and federal level. The more important enterprises are the following: (i) EDELCA, serving directly the industrial Guayana market and providing bulk power for the utilities serving the eastern and central regions of the country. 1/ These funds were available in the Loan Account from the usual provision for contingencies, as well as the considerable savings realized by purchasing the Project's electro-mechanical equipment under extremely favorable market conditions. The full US$13.4 million has been disbursed, and future payments will be borne entirely by EDELCA. -6- (ii) Compania Anonima de Administracion y Fomento Electrico (CADAFE), a government-owned agency providing service throughout most of the country, which operates 568 MfW of thermal generating plants, as well as transmission, and distributioh facilities. CADAFE serves 466,000 customers directly, and a large number of municipal systems at wholesale. Except for the industrializing Maracay and Valencia areas, the market is primarily smaller communities and rural areas so that load density is inherently low, while investments and operating expenses are inherently high. CADAFE operates a 230-kv transmission system financed by Loan 391-VE, which integrates its eastern and central systems with EDELCA's plants on the Caroni River and forms an important link in the transmission of Caroni power to the Caracas market. (iii) Compania Anonima La Electricidad de Caracas (La Electricidad), a wholly-Venezuelah privately-owned company which has been supplying Caracas and its environs for nearly 70 years. La Electricidad operates a 620 MW, 50 cycle system now being converted to 60 cycle operation, the national frequency standard. (iv) C.A. Energia Electrica de Venezuela and C.A. Energia Electrica de Barquisimeto, Canadian-controlled companies which operate in the major cities of Maracaibo and Barquisimeto, respectively. There are other Venezuelan- owned private companies operating in Ciudad Bolivar, Valencia, Anaco and Puerto Cabello. (v) The municipal systems which buy bulk power from CADAFE. Total public supply capacity was about 2200 MW at the end of 1968. In addition, the petroleum sector ownp and operates nearly 500 MW in captive plants, which provide power for well and refinery operation, but whose production is not generally available to the public. In 1967, these plants accounted for about 17% of all electricity produced in the country. Average annual growth in public supply production during 1962-68, exclusive of captive plants, was over 15%. 3.03 La Electricidad and the Canadian companies operate large thermal plants, as does CADAFE to serve its central market area which lies within the Caracas-Valencia-puerto Cabello area, and includes the large water-pumping load of the Caracas water-supply system operated by the Instituto Nacional de Obras SAnitarigs. Except for the EDELCA hydroelectric plants on the Caroni, most of the rest of the pouRtry is served from smaller, old conventional steam plants, gap turbines, or isqlated diesel units. CADAFE in particular has a long-range program of interconnecting isolated communities at 115 kv and 7- integrating regions at 230-kv so that service can be provided from larger, more efficient central stations. It is anticipatE'd that this will be the pattern in the east and west of Venezuela. The Frequency Unification Problem 3.04 On the other hand, market development in -the north-central in- dustrial zone and the Caracas area itself as well as in the Guayana will be met from Guri. In 1963, at the time of making Loan 353-VE for the initial phase of the Guri Project, the Bankc noted that its economic justi- fication hinged upon the inclusion of the important Caracas load in the market to be served. The Government agreed, and through a series of executive and legislative measures arranged to have La Electricidad's system converted to 60 cycle operation, and provided the funds to defray the cost of doing so. At the same time La Electricidad agreed to limit its expansion of generating capacity when Guri power became available, and to buy its future requirernents from EDELCA. The studies and negotiations leading to these results proved to be more complex and difficult than had been visualized. The work of frequency conversion has started only recently, and will riot be complete until mid-1971 instead of 1968 as had been planned in 15;63. In spite of these delays, the working out of the agreements and the actual beginning of the physical conversion must be considered an outstanding example of cooperation between the public and private sectors. 3.05 Based upon conversion of La Electricidad's system, EDELCA, CADAFE and La Electricidad have entered into a long-term power sales agreement whose fundamental feature is to require CADAFE and La Electricidad to cease the acquisition of generating capacity in the Guri market area, and purchase power from EDELCA until the first stage 1,750 IlW capacity of Guri is completely absorbed, now expected about 1980. This agreement was not reached until all parties--particularly CADAFE and La Electricidad--had been satisfied such a program was in their own best interests. La Electricidad will purchase power at the northern terminal of EDELCA's EHV system, while CADAFE will purchase there, and at I4acagua and El Tigre as well. 3.f06 The task of analyzing, programming, and actually carrying out the work: of frequency conversion is complex and difficult. La Electricidad has formned a subsidiary company for this purpose alone, Ca.mbio de Frecuencia Coinpania Anonima (CAFRFCA). A census of consumers and their equipment was taken, and a program of conversion drawn up. Work began in mid-1968, and is progressing well. Three 25 MW generating units have been converted, as has about 75 MW of load (as of March 15, 1969). A 60 cycle tie-line is in service between La Electricidad and CADAFE. At present about 7 MW of load are being converted monthly, and when full-scale operations are achieved, a rate of about 20 Pif per month is anticipated. La Electricidad's load is now about 400 MW, and is growing about 3 MW per month. The regions experiencing the most rapid growth are being converted first. -8- 3.07 The three interconnecting parties are setting up an operating arm, the final legal status of which has not yet been determined. It will be responsible for daily operation of the interconnected pool under the terms of the power agreement, and is currently called Operacion de Sistemas Inter- conectados (OPSIS). At present, OPSIS has-only a skeleton staff, but is training operators in Venezuela and abroad. When frequency conversion is complete and full pool operation achieved, OPSIS will direct the generation of the three interconnected parties in accordance with system requirements. IV. EDELCA'S PROGRAM AND THE PROJECT The Program 4.01 The three-party interconnection agreemenit is based upon the con- tinuous expansion of Guri to meet market growth until the first stage (ten 175 MW units) is complete. At present, it is estimated this will be required by 1980. At that time, the overall load/capacity situation will be critically reviewed, and it is likely new thermal generating facilities will be con- structed in the north-central region before the Guri dam is raised for the second stage expansion. Thus EDELCA's expansion program over the next 12 years will consist of: (i) irmnediate expansion of the existing powerhouse to its ultimate size for ten units; (ii) sequential installation of generating units h through 10 during 1973-80; (iii) construction during 1973-75 of a second 400-kv (EHV) transmission system, from Guri to the north-central region, possibly west of Caracas; and (iv) construction as required of lower voltage trans- mission facilities to serve major industrial customers in the Guayana region. 4.02 EDELCA and its consultants Harza have studied the possibility of extending the powerhouse civil works piecemeal as additional units are required, and compared the costs with carrying out the complete extension now. Their studies indicate that the differences among the present values of the costs (calculated at a discount rate of 12%) of the several schemes are smaller than the margin of error inherent in making engineering estimates. / Thus the timing of the wQrk-is a matter of indifference as regards its costs. EDELCA plans to initiate the entire extension in the immediate future and the Bank agrees with these plaps. EDELCA will, however, run the risk of having 1/ The maximum difference in present value is equal to little more than 1% of the estimated total construction cost. The present value of the different cost estimates is remarkably insensitive to the discount rate. - 9 - a prematurely completed powerhouse in the event there should be slackening of demand in the late 1970"3. The magnitude of this risk is reduced by the operation of the interconnection agreement which! in effect fixes five years in advance the amount of power and energy CADA'EV and La Electricidad are obliged to purchase. (See paragraph 5.0Q.) Thiis, for example, they will be obligated to purchase in 1975 amounts determine6 by a forecast to be made in 1970. 4.03 EDELCA proposes to purchase all seven additional generating units in the immediate future. There is likely to be a price advantage over buying units singly or in pairs, and there is an obvious advantage in standardization. The contracts would provide for phased delivery, and would contain correspond- ing provisions for payments over the entire delivery period of 1969-80. EDELCA would control the timing of the delivery of future units. Certain of the embedded parts of all the turbines and generators would be delivered early and be erected and installed by the general contractor for the powerhouse civil works. 4.04 The total estimated cost of all the components of the program is equivalent to US$129.5 million. The new work to be undertaken will cost the equivalent of about US$116 million, while during 1969 EDELCA will be spending about US$13.5 million equivalent on the completion of the two Bank-financed projects, i.e., the initial phase of Guri and the first 4OO-kv transmission line. Details are shown in Annex 5. The Project 4.05 The Project for which Bank financing 1s proposed would include the following: (i) Complete civil works for the full ten-unit powerhouse; (ii) Installation of Unit No. 4 complete; (iii) Installation of embedded parts for Units 5-10; and (iv) Engineering and supervision during procurement and construction. h.o6 The existing three-unit powerhouse, located at the toe of the main concrete gravity dam, will be extended completely across the river. Openings have been provided in the dam to accommodate the penstocks for the future units. The powerhouse foundation is on rock in the river bed, the downstream area being flooded by the tailrace and spillway. The area in which the extension will be made is under water, and so must be isolated by coffer- damming between the !existing powerhouse and the spillway. The excavation and construction would take place in the dry behind the cofferdam. 4.07 The general contract for the civil works would be placed on a unit price basis after international competition among prequalified contractors or - 10 - consortia of contractors. (Consorcio would be included, but it is not certain the sponsors would wish to participate in the bidding.) The electro-mechanical equipment would also be procured on a broad inter- national competitive basis. The estimated cost of the work proposed for Bank financing is surmarized below and presented in more detail in Annex 2. Estimated Cost of Proposed Project Expressed in Bs Millions Expressed in US$ Millions Local Foreign Local Foreign Currency Exchange Total Currency Exchange Total Civil Works 96.2 70.2 166.4 21.4 15.6 37.0 Turbine/Governor/Misc. Mech. Equip. 1.4 24.8 26.2 0.3 5.5 5.8 Generator/Accessories 0.6 12.8 13.4 0.1 2.8 2.9 Transfbrmers/Switchgear 0.5 3.8 4.3 0.1 0.8 1.0 98.7 in.6 210.3 21.9 24.7 46.7 Contingencies 13.7 15.8 29.5 3.0 3.5 6.6 112.4 127.4 239.8 24.9 28.2 53.3 Engineering/Supervision 5.0 11.5 16.5 1.1 2.6 3.7 TOTAL 117.4 138.9 256.3 26.0 30.8 57.0 Disbursements from the loan account would be made for foreign exchange costs of the general contract and equipment, and the consultants' services. Funds deter- mined to be surplus at such time as the works are sufficiently advanced would be cancelled. 4.08 The civil works and erection of Unit No. 4 would be completed by mid- 1973. To maintain this schedule, which is fairly tight, the process of selecting the general contractor will have to begin soon to enable him to move in before the low water period occurs in the Caroni, beginning around January 1970. EDELCA. plans to purchase with its own funds local sheet piling and have it on- site before the contractor moves in. This is the critical material for placing the cellular cofferdam needed to permit excavation in the dry. EDELCA plans to erect Units 5-10 by force account under the direction of factory engineers. An undertaking has been obtaiaed that EDELCA will carry out this work as market developments require. V. JUSTIFICATION OF PROJECT The Market Forecast 5.01 The load/capacity situation in the Guri market area at the end of 1968 was as follows: Installed Peak Capacity Demand Cormpany MW MW La Electricidad 518 414 CADAFE 319 310 EDE4CA 545 310 La Electricidad's market is heavily urban in nature, and has experienced a long-term rate of growth which has exhihitted remarkably little tendency to vary. The Company's plarning division has Jound that forecasts based upon past; trends yield results fully as accur;ite as more elaborate tech- niques. Their f'orecast is based upon a continuation of the historic rate of nearly 10% per year for the next several ye:rs, but. assumes that this will fall to the equivalent of only 7.5% in the later 1970's. Thus, the estimate of La Electricidad's market development is probably pessimistic over the long run. La Electricidad has under construction now a 60 MW jet-engine- powered 50/60 cycle unit expected in service late June 1969. This unit was pur- chased when it became known Guri would be delayed. In addition, certain modifications are being mqde to the boilers in two plants to permit supple- mental firing which may develop as much as 3", NW additional capability. Both these factors reduce La Electricidad's requixernment Lo buy from EDELCA in the future. 5.02 CADAFE's market on the other hand incltudes industrial operations, and as new industries are connected, load growth occurs in steps imposed upon the general trend. There has been a tendency Ln the past to plan power facility expansion around the expectation of load increases without obtaining contractual commitments from the potential customers. CADAFE's management is aware of the dangers in this approach to system planning, particularly in view of the obligation it now has towards EDELCA, explained in paragraph 5.04. The long-term growth trend of CADAFE's major market area has been estimated to be about 10% per year for the next six years, and then decreasing linearly to 7% by 1981. 5.03 EDELCA's direct consumers include only the industrial operations in the Guayana, and in particular CVG's steel and aluminum facilities SIDOR and ALCASA. Both are presently undergoing expansions: SIDOR's load will increase modestly, while ALCASA's will double in 1969, and is expected to double again in the mid-1970's as production increases from the present 12,500 m tons per year to 25,000 and finally 50,000.' Concurrently, general use in the Ciudad Guayana area will grow as the city itself grows. Population has increased from 2-3,000 in the early 1950's before CVG began i;ntensive operations to over 75,000 today. 5.Ob EDELCA's sales will thus be relatedl to the growing requirements of CADAFE, La Electricidad, and its own immediate customers. Since they are pro- hibited from adding capacity of their own, EDELCA's market is in a sense guaran- teed, so long as there is growth in the markets served by La Electricidad and CADAFE. Given the nature of these markets one would have to postulate a general stagnation of the economy to assume no growth in EDELCA's sales. The three parties must agree each year on a five-year sales forecast which commits the purchasing parties to "take or pay" for the amounts forecast. 5.05 During negotiations, it was deemed prudent to obtain an undertaking from the Government that it will require its own agency CADAFE promptly to pay its accounts with EDELCA. In the past CADAFE has had difficulty in collecting from other government enterprises, notably the Caracas water supply system,. and there is a general tendency to overlook delinque.nt intragovernmental accounts. - 12 - 5.06 EDELCA's estimated sales and corresponding capacity are shown below in condensed form. Annex I presents more detail. Estimated Sales - Power & Energy (Actual) Power - MW 1968 1971 1974 1977 19 CADAFE 40 2L8 366 544 677 La Electricidad - 26 121 326 522 Guayana Region 290 341 379 485 618 Total 330 615 866 1,355 1,957 EDELCA Capability - Gross 545 805 971 1,h69 1,957 Energy - Gwh 1968 1971 1974 1977 1980 CADAFE 516 1,800 2,483 3,249 3,837 La Electricidad - 1,477 2,197 3,117 3,7h8 Guayana Region 1,897 2,355 2,823 3,51 h,l10 2,413 5,632 7,503 9,880 11,695 EDELCA's sales will apparently grow at a rate greater than those of CADAFE and La Electricidad because Lhe base year - 1968 - shows very modest sales and nearly all the growth of lnad in the other systems will be furnished by EDELCA. 5.07 The market forecast summarized above was arrived at by the three parties jointly, and corresponds very closely to an independent survey made by International Middle West Company (US), consultants to the interconnecting parties. It differs from the forecast made in September 1966 in connection with the appraisal for Loan 482-VE principally in that frequency conversion has been delayed, arid certcin loads expected by CADAFE have failed to materialize. The two forecasts are in fact closely parallel, but the later lags the earlier by somewhat less than one year. The present forecast is reasonable wider currept c:rcumstances, and forms a suitable basis for planning. In any event, the power sales agreement assures EDELCA that CADAFE and La Electricidad will pay for Guri generating capability once they have scheduled future purchases based on jts availability, whether or not they use it. Internal Rate of Return 5.08 Based upon the jointly-accepted market forecast, the operation of the interconnection agreem iiL would require all ten generating units to be in service by 1980. This com*plres with a projected schedule made ipi 1966 during the appraisal of the EHV facilities as shown in the table below. - 13 - Expected ln-Service Dat.f Current Unrt No. 1966 Forecast Forecast h 1971 1973 5 1972 1975 6 1974 1976 7 1975 1977 8 1975 1978 9 * 1979 10 * 1980 *t - not estimated in 1961K- The present schedule represents a delay of b-twoen two and three years. This is attributable to several principal factors: (i) The delav of about 16 months in completion of Guri dam itself and initial commercial operation of the first three generating units; (ii) The delay in initiating frequency conversion of La Electricidad's system, and thle purchase of the 60 MW aviation-engine gas turbine plant; (iii) The failure to materialize of certain loads projected by CADAFE, and the i:?stallation of gas-turbine peaking capacity in the Guri market area. The delays in market development and the installation of the gas turbines have led to commensurate deferments in making the investments in the additional units at Guri. 5.09 A calculation was made of the internal rate of return on all the additional investment in the powerhouse and Units )4-10. Expenditures were assumed to occur over the 12 years 1969-80, a,nd sales to continue for 20 years until 1988 in accordance with the contract La Electricidad entered into with the Government in which it so obligated itself, in return for the guaran- tee that the costs of conversion would be paiJ by the Government. These assumptions should lead to a pessimistic view of the probable return since the life of the facilities exceeds 20 years and sales based upon their capacity will continue well beyond 1988. Using contractual prices for, power and energy, the calculatioli indicates the return lies between 17% and 18%. Such a high return is of course, due to the fact that the dam is treated as a "sunk cost". - X, - VI., FINANCIAL ASPECTS Past Performance 6.01 At the time Loans 353-VE and'482-VE were made in 1963 and 1967, it was not expected that EDELCA's sales, revenues, or income would be significant until the initial three Ouri units had been completed, and La Electricidad's system converted to 60 cycle operation. As seen, Guri is somewhat more than a year behind schedule, and frequency conversion a further 1-1/2 years. These two effects have of course combined to produce operating results somewhat less favorable than had been forecast earlier. Results of 1968 operations are condensed below, together with comparable figures forecast in October 1966. 1968 Condensed Income Statement Bs Millions Actual 1966 Forecast Sales - Gwh 2,b13 2,201 Operating Revenues 32.7 33.2 Operating Expenses Operation & Maintenance 5.3 2.9 Depreciation 5.0 h.7 General Expenses 2.0 2.1 12.3 9.7 Operating Income 20.4 23.5 Interest 18.9 2h .1 Interest Charged to Construction 18.9 24.1 Interest Expense Net Income 20.4 23.5 Rate of Return 9.9% 12.1% EDELCA's accounts are audited by Price Waterhouse and are kept on an accept- able and consistent basis. 6.02 Financial resources have been sufficient for the execution of both Guri and the EHV Project. A temporary shortage of funds developed in mid-1967 as a consequence of EDELCA's obligations to Consorcio under the Financial Agreement (paragraphs 2.04- 2.05) but'this was swiftly corrected with CVG borrowings in the U.S. which allowed it to make advances to EDELCA. Both CVG and EDELCA have enjoyed access to the federal budget for investment funds. - 15 - EDELCA is making on-time interest payments on Loan 482-VE and repayments of Loan 353-VE. 6.03 EDELCA's position as of December 31, 1968 is shown below in condensed form. EDELCA Condensed Balance Sheet December 31, 1968 Bs Millions Assets Plant in Service 243.8 Depreciation Reserve 34.7 209.1 Work in Progress 692.4 901.5 Cash 20.1 Other Current Assets - Net 8.3 Advances to Consorcio 110.8 1,040.7 Liabilities Capital Paid-In 488.3 Earned Surplus and Reserves 58.2 546.5 Long-Term Debt Loans 353-VE/482-VE 391.3 Other Liabilities 23.0 Retentions against Contracts 24.5 Advances from CVG 55.4 1,040.7 The plant account includes the Macagua hydroelectric plant, and the minor transmission facilities in the Guayana area. "Work in progress" includes Guri dam and Units 1 - 3, as well as the EHV system under construction. "Advances to Consorcio" is the aggregate of the Special Advances made both from Loan Account 353-VE and through CVG's advances to EDELCA (paragraph 6.02). As noted in-paragraph 2.05, to the extent these "Advances" are recovered from ConsQrci.o, EDELCA will repay,the Bank. - 16 - Projected Operations 6.o4 Except for certain industrial operations not yet firmly committed, EDELCA's revenues from sales will be developed from contractual tariffs. The principal tariffs are: (i) La Electricidad and CADAFE, which contain prices for demand and firm energy, and economyl/ (or fuel re- placement) energy. The levels represent the result of the bargaining leading to the interconnection agreement. (ii) SIDOR and ALCASA, which are based solely on energy consumption. Until the mid-1970's when sales to CADAFE and La Electricidad become more important, average sales revenue will be equivalent to about US3 mills per kwh. From then on, average revenue will be about US4 mills. Details of the tariffs in effect are shown in Annex 3. 6.05 Projected Income Sta!tements are shown in Annex h. Operating ex- penses are projected from experience at Macagua, plus estimates for Guri and the'EHV transmission system. Depreciation is calculated in accordance with rates agreed upon in connection with Loan 353-VE. 6.o6 Both Loans 353-VE and 482 -VE contain performance criteria that re- quire EDELCA to earn not less than 6% on its average net plant in 1973 and later years. It is unlikely this target will be met, due primarily to two factors: (i) the failure of sales to develop as forecast earlier; and (ii) EDELCA's decision to complete the powerhouse in one step, making what had been originally conceived of as a fairly well spread investment into a "lumpy" one. The projections in this report assume all the civil works will be placed in the :plant account when completed in 1973.2 The 8% target should, however, be achieved in 1975 and later years. This estimated performance is consistent with the several-year delay in market development. It would be reasonable to waive the requirement for 1973 and 1974, particularly since the events leading to the delays were beyond EDELCA's control. 1/ &ergy that is supplied on a "when available" basis, not under contract. Its u§e generally enables the purchaser to reduce generation by thermal units. 2/ Ifadjusted to prorate the investment in civil works over the last seven units, the 8% target would still not be achieved. Results would be about 7.1% in 1')73 and 7.5% in 1974. - 17 - Financing Plan 1969 - 1980 6 07 The twelve-year period extending to the completion of the first scage of Guri with 1,750 SW installed in 1980, can be conveniently divided at the end of 1973 when the civil works for the powerhouse are expected to be completed. The iProject proposed for Bank financing will be executed in the first five years of this period. The financing plan is presented below in summary form and in detail in Annex 5. Financing Plan 1969-1980 Bs Millions 1969-80 1969-1973 1974-1980 Total Sources Operating Income 22b.6 667.7 1,092.3 Depreciation 83.3 181.3 264.6 307.9 1,049.0 1,356.9 Debt Service (205.9) 364.7) ( 570.6) Net Internal Cash 102.0 684.3 786.3 Govermaent Investments 80.7 30.0 110.7 CVG Advance 3.2 - 3.2 83.9 30.0 113.9 Borrowings Loan 353-VE 37.5 - 37.5 Loan 482-VE 21.3 - 21.3 Proposed Loan 138.9 - 138.9 197.7 - 197.7 TOTAL SOURCES 383.6 714.3 1,097.9 Applications Construction Guri 1-3 44.1 _ 44.1 EHV Project 27.4 - 27.4 Proposed Project 256.3 - 256.3 Guri 5-10 - 129.5 129.5 EHV Expansion 43.3 57.9 101.2 Guayana Transmission 15.7 8.8 24.5 386.8 196.2 583.0 Advances to Consorcio 6.4 - 6.4 Increases in Working Capital 6.0 15.5 21.5 Dividends to CVG - 95.0 495.0 399.2 706.7 1,105.9 Increase (Decrease) in Cash ( 15.6) 7.6 ( 8.0.) - 18 - 6.08 EDEICA will require additional Government investments in ,970, 1971 and 1974, aggregating Bs 65.2 million, or equivalent credits.-/ These could be on fairly short term, provided repayments were fixed for 1975 and later. The proposed third Bank loan would complete the financing plan. The future construction program beyond 1974 could be financed wholly from internal sources, while at the same time EDELCA could begin to pay a cash dividend on CVG's very large investment. This would be possible beginning 1975, and during 1975-80 would represent an average return of a little over 9%. 6.09 The financing plan is satisfactory. During negotiations an under- taking was obtained as to the sources of the funds needed in 1970-71. It is expected that a law authorizing EDELCA to borrow from the Bank will contain specific provisions for these funds. 6.10 The special provisions included in the previous Loans would be maintained: (i) A prohibition on cash dividends to CVG; this will be extended to 1975; (ii) The tariff covenant requiring a rate of return of 8% in 1973 and later years; this will be waived for 1973 and 1974; (iii) The debt limitation covenant, with an historic earnings vs future maximum debt service coverage of 1.4 times. VII. CONCLUSIONR 7.01 The proposed Project has been satisfactorily engineered, and the cost estimates are conservatively stated. This is prudent in view of the experience in the execution of the civil works for the initial phase of Guri. 7.02 Current construction programs for Guri Units Nos. 1-3 and the first EHV system are proceeding satisfactorily. It is unlikely the final cost of Guri, or the disposition of EDELCA's Special Advances to the general con- tractor will be known for several years. The projections in this report assume the most pessimistic (and unlikely) view that none of the Advances will be, recovered. 7.03 Past operating results have not been as g9od as anticip,ate4, but have not affected EDELCA's ability to carry out its large construction program. Projected results are in general satisfactory, but the 8% rate of return target of Loaps 353-VE and 482-iVE will not be met in 1973 as required. This wiLl be waived until 1975. 1/ The 1969 funds shown in Annex 5 as "Government Investment" for that year are already budgeted. - 19 - 7.Ob The Project would form a suitable basis for a third loan of US$ 31 million equivalent, for a term of 20 years including a period of grace of about five years. During negotiations, EDELCA and the Govern- ment confirmed that: (i) satisfactory engineering arrangements will be continued (paragraph 2.03); (ii) EDELCA will complete the installation of Units 5 through 10 in a reasonable time (paragraph 4.08); (iii) CADAFE will promptly pay EDELCA for all purchases under the power sales a#,reement (paragraph 5.05); (iv) funds to complete the financing plan in 1970 and 1971 will be arranged on satisfactory terms (paragraph 6.08); and (v) the special provisions of Loans 353-VE and 482-VE re- lating to the President's capabilities (paragraph 2.02) and financial performance (paragraph 6.10) will be maintained with appropriate amendments in the proposed loan. June 4, 1969 V E N E Z U ELAA EDELCA Estimated System Loads, Capabilities, and Purchases mw 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 LA ELECTRICIDAD Peak Load - November 446 481 515 555 598 643 690 738 796 855 918 987 Capability 618 618 618 618 618 618 618 618 618 618 618 618 Purchases from EDEWA - - 26 48 117 121 183 250 326 403 471 522 CADAFE Peak Load - November 341 375 412 453 498 538 581 627 671 718 768 822 Capability 1/ 282 267 267 252 252 252 252 252 252 252 252 252 Purchases from EDELCA 1I41 202 248 291 360 366 423 485 544 605 659 697 EDELMA Peak Load - November 347 365 370 386 401 421 457 482 505 525 564 638 Sales 144 202 274 339 477 487 606 735 870 1,008 1,130 1,219 TOTAL 491 567 644 725 878 908 1.063 1.217 1.375 1.533 1.694 1.857 Capability 2/ 805 805 805 805 971 971 1,137 1,303 1,469 1,635 1,801 1,957 Number of Guri Units (3) (3) (3) (3) (4) (4) (5) (6) (7) (8) (9) (10) Reserve Margin NW 314 238 161 80 93 63 74 86 94 102 107 100 Percentage of Load 64 42 25 11 11 7 7 7 7 7 6 5 Notes 1/ Capability decreases as gas-turbine units are relocated outside EDELCA's market 2/ Based on hypothetical dry-year 0 December 4, 1968 Revised March 24, 1969 g e V E N E Z U E L A EDELCA Estimated Peak Demands and Energy Sales MW and Gwh 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 PEAK DEMANDS Purchases by La Electricidad - - 26 48 117 121 183 250 326 403 471 522 Cadafe 144 202 248 291 360 366 423 485 544 605 659 697 Guyana Region Sidor 250 250 250 260 275 275 275 285 300 310 325 325 Alcasa 50 50 50 50 50 50 100 100 100 1Q0 100 100 Other Industries 27 38 41 45 48 54 62 77 85 95 U19 193 TOTAL 1/ 471 54o 615 694 850 866 1,043 1,197 1,355 1,513 1,674 1,837 ENERGY SALES Purchases by La Electricidad Primary - - 136 252 615 636 962 1,314 1,713 2,118 2,475 2,743 Secondary 133 535 1,341 1,490 1,216 1,561 1,643 1,589 1,404 1,174 879 1,005 Cadafe Primary 757 1,061 1,303 i,529 1,892 1,924 2,223 2,549 2,859 3,180 3,463 3,663 Secondary 649 469 497 522 308 559 559 503 390 280 137 174 Guyana Region Sidor 1,547 1,754 1,708 1,909 2,028 2,113 2,148 2,200 2,234 2,240 2,240 2,240 Alcasa 324 430 430 430 430 430 856 856 856 856 856 856 Other Industries 177 203 217 237 251 280 318 378 424 482 615 1,014 TOTAL 3,587 4,452 5,632 6,369 6,740 7,503 8,709 9,389 9,880 10,330 10,665 11,695 0 Note 1/ Differs from p.1 figures by transmission losses 0 December 4, 1968 xev1sed December 23, 1968 V E N E Z U E L A EDELCA Estimated Operating Revenues Bs millions 6 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 SALES TO La Electricidad Contract Demand - - 3.9 7.1 17.4 18.0 27.2 37.1 48.4 59.8 69.9 77.5 Secondary Energy o.8 3.2 8.o 8.9 7.3 9.4 9.8 9.6 8.4 7.0 5.3 6.o Cadafe Contract Demand 14.3 20.0 24.5 28.9 35.5 36.2 41.9 48.o 53.9 59.9 65.2 69.0 Secondary Eniergy 3.2 2.3 2.5 2.6 1.5 2.8 2.8 2.5 1.9 1.4 0.7 0.9 Guyana Region Sidor 21.7 24.6 23.9 26.7 28.4 29.5 30.0 30.8 31.7 31.4 31.4 31.4 Alcasa 3.2 4.3 4.3 4.3 4.3 4.3 8.6 8.6 8.6 8.6 8.6 8.6 Other Industries 5.3 6.1 6.5 7.1 7.6 8.4 9.5 11.3 12.7 14.5 18.4 30.3 TOTAL 48.5 60.5 73.6 85.6 102.0 108.6 129.8 147.9 165.6 182.6 199.5 223.7 -d A w December 4, 1968 VENS 2TI EDILCA Project,Cost I.timate & Construction Expenditure Schedule (3xpressed in Ba Millions) 1969 1970 1971 1972 1973 Total Civil Works Local Currency 13.6 33.1 34.0 15.5 96.2 Foreign Exchange 23.9 24.6 31.8 0°2 Turbine/Oovernor/Misc. Mechanical Equipt. Local Currency 0.4 o.4 0.5 0.1 1.4 Foreign Exchange 6 7' 8 1-4 24.8 Generator & Accessory Electrical Equipt. Local Currency 0.2 0.1 0.1 0.2 0.6 Foreign Exchange 3.1 3.2 2.6 12.8 3.3 3.3 2.7 411. Transformer & Switchgear Local Currency 0.1 0.2 0.2 0.5 Foreign Exchange o.6 1.2 2.0 -~ ~ ~ - Total Direct Coat Local Currency 13.6 33.7 34.6 16.3 0.5 98.7 Foreign Exchange 6 36.3 X X 111.6 23.5 65.3 70.9 39.7 7.9 210.3 Contingencies Local Currency 2.0 4.7 4.6 2.1 0.3 13.7 Foreign Exchange 1.4 4.7 4.8 0 1.9 15.8 3.4 9.4 -9.4 2.2 29.5 Engineering & Supervision Local Currency 1.0 1.0 1.1 1.5 0.4 5.0 Foreign Exchange 4. 30 2.9 1.5 0.1 11.5 5.o -S05 T.-b 3.0 o. 16.5 Interest on Proposed Loan 1.5 3.1 5.6 7.7 4.0 21.9 Total Project Cost Local Currency 16.6 39.4 40.3 19.9 1.2 117.4 Foreign Exchange 16.8 45.4 4.6 35.6 13.4 160.8 33.4 8h.B 89.9 55.5 14.6 278.2 December 5, 1968 Revised December 23, 1968 ANNEX 3 VENEZUELA EDELCA Tariff Structure 1. Interconnected System EDELCA will furnish firm power (contract demand) to both CADAFE and La Electricidad in accordance with 5-year load forecasts as provided for in the interconnection agreement. This power carries with it 5,256 hours use of demand annually, corresponding to 60% load factor. In addition, CADAFE and La Electricidad may purchase secondary hydroelectric energy at a much reduced price. The prices fixed by the agreement are summarized below: Contract Demand Secondary Energy Bs per kw per month centimos per kwh CADAFE 8.250 0.495 La Electricidad 12.375 0.600 These prices are, in the case of La Electricidad, equivalent to US$33 per kw-year, and US1.3 mills per secondary kwh. CADAFE's prices are lower on two accounts: (i) CADAFE is providing 230-kv transmission facilities between the Guayana region and the north-central market area; and (ii) CADAFE's fixed charges for alternate thermal generating facilities are less than La Electricidad's by virtue of CADAFE's lower earnings and lower taxes on income. 2. Guayana Industries Industrial sales in the Guayana are based on simple energy tariffs, without regard to demand. The principal tariffs are shown below, with their equivalents in United States currency. Price per kwh Centimos US mills SIDOR 1.4 3.1 ALCASA 1.0 2.2 Other Industries 3.0 6.7 December 5, 1968 Y bilWSIU Actual & Estimated Iom. StateManto 163-1980 (. Be llior ) 163 1964 1965 1966 1967 1968 1969 1970 971 1972 173 V74 175 176 177 178 1979 1980 ,alem - GWth 918 1019 1193 1202 1493 2413 3587 4452 5632 6369 674a0 7503 8709 9386 9880 10,330. 10,665 11,695 Operating Bemen 5.8 16.8 20.3 20.6 22.8 32.7 48.5 60.5 73.6 85.6 102.0 108.6 129.8 147.9 165.6 182.6 199.5 223.7 Operating Epenaes Adminiatration 0.2 1& 1.2 1.2 1.0 1.9 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2. 2 0 2.0 Generation ( ) 2.6 4.2 4.7 5.0 5.2 5.5 5.7 6.5 6.7 6.9 7.1 7.3 7.5 Tranmission (1.3 3.9 4.5 6.5 7.6) 0.3 o.6 1.0 1.0 1.0 1.0 1.0 1.0 1.6 1.6 1.6 1.6 1.6 OPSiS ( ) 0.5 0.6 o.6 0.6 o.6 o.6 0.6 0.6 0.6 o.6 o.6 o.6 0.6 General Sapenese ( ) 2.0 3.3 3.8 4.1 4.4 4.5 4.6 4.7 4.7 4.7 4.7 4.7 4.7 Depreciation 1.4 4.5 4.2 4.5 4.6 5.0 9.9 17.9 18.1 18.1 19.3 19.3 215 25.7 26.9 28.1 29.3 30.5 Total 2.9 1.00 9.9 12.2 13.2 32.3 20.6 30.0 30 31.3 32.9 33.2 63T3 -U.i3 i ;_ 9 Operating Income 2.9 6.8 10.4 8.4 9.6 20.4 27.9 30.5 42.8 54.3 69.1 75.4 93.5 106.6 122.9 138.5 154.0 176.8 Intereet - 4.6 6.8 8.7 11.8 18.9 24.4 24.8 28.7 29.9 29.9 29.4 28.2 27.0 25.6 24.2 22.8 21.2 Interest Charged to Conetrction _ 4.6 6.8 8.7 11.8 18.9 14.5 3.1 5.6 7.7 4.0 _ _ _ _ - - - Interest Brpen-- - ---" .-y 7*7 -7.1 22. 15;Y 1Y;I i 7 ; ZT7U 75 S 16Y 2; 771 Net Income 2.9 6.8 10.4 8.4 9.6 20.4 18.0 8.8 19.7 32.1 43.2 46.o 65.3 79.6 97.3 114.3 131.2 155.6 Rate of Resurn on Average Not Plant in Serwice - 3.4% 5.2% 4.3S 4.8% 9.9% 5.3% 3.4% 4.6% 5.9% 6.7% 6.5% 8.1U 8.9% 9.8S ll.U 12.5% 14.4% Deember 5, 1968 Revised Karch 24, 1969 VENEZUELA EDELCA Estimated Sources and Applications of Funds 1969-1980 (Bs Millions) 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 SOURCES Operating income 27.9 30.5 42.8 54.3 69.1 75.4 93.5 106.6 122.9 138.5 154.0 176.8 Depreciation 9-9 17.9 18.1 18.1 19.3 19.3 21.5 25.7 26.9 28.1 29.3 30.5 Total Internal 37.8 48.4 60.9 72.4 88.4 94.7 115.0 132.3 149.8 166.6 183.3 207.3 Loan 353-VE 37.5 -- - - - - - -_ Loan 482-VE 21.3 - - - - _ _ _ _ - _ _ Proposed Loan 15.1 42.3 44.0 27.9 94 - - - 7h.1 42.3 44.0 27.9 9.4 - - _ - - - - Government Investment 45.5 10.0 25.2 - - 30.0 - - - - - - CVG Advances 3-2 - - - - Total External 122.8 52.3 69.2 27.9 9.4 30.0 - _ - - _ TOTAL SOURCES 160.6 100.7 130.1 100.3 97.8 124.7 115.0 132.3 149.8 166.6 183.3 207.3 _ _ _ e = _ = _ _ = APPLICATIONS Construction Guri Project 1-3 44.1 - - - - - - - - - - - EHV Project 27.4 - - - _ _ _ _ _ _ _ _ Powerhouse Extension 31.9 81.7 84.3 47.8 10.6 - - - - - - - Guri Units 5-10 - - - - - 22.2 23.0 23.5 23.9 24.3 12.6 _ EHV System Expansion - - - - 43.3 47.0 10.9 - - - - - Guayana Transmission 4.9 5.1 1.9 1.9 1.9 1.9 1.9 1.0 1.0 1.0 1.0 1.0 108.3 86.8 h9.7 55.8 71.1 35.8 24.5 24.9 25.3 13.6 1.0 Debt Service Interest 353/482-VE 22.9 21.7 23.1 22.2 21.4 20.5 19.5 18.5 17.4 16.3 15.2 13.9 Interest Proposed Loan 1.5 _._ 5.6 7.7 8.5 8.7 8.2 7-9 7.6 7.3 24.4 24.8 28.7 29.9 29.9 29.4 28.2 27.0 25.6 24.2 22.8 21.2 Amortization 353/482-VE 10.6 12.4 14.2 15.1 15.9 16.8 17.8 18.8 19.9 21.0 22.1 23.4 Amortization Proposed Loan - - 5 59 6.1 6.3 6.6 6.9 7.2 7.5 10.6 12.4 14.2 15.1 15.9 22.7 23.9 25.1 26.5 27.9 29.3 30.9 Total Debt Service 35.0 37.2 42.9 45.0 45.8 52.1 52.1 52.1 52.1 52.1 52.1 52.1 Advances to Consorcio 6.4 - - - - - - - - - - - Increase in Working Capital 1.0 1.0 1.0 1.5 1.5 1.5 2.0 2.0 2.0 2.5 2.5 3.0 Dividends to CVG - - - _ _ _ 25.0 50.0 70.0 85.0 115.0 150.0 TOTAL APPLICATIONS 150.7 125.0 130.1 96.2 103.1 124.7 114.9 128.6 149.0 164.9 183.2 206.1 Increase (Decrease) in Cash 9.9 (24.3) - 4.1 (5.3) - 0.1 3.7 0.8 1.7 0.1 1.2 Year-End Cash-on-Hand 30.0 5.7 5.7 9.8 4.5 4.5 4.6 8.3 9.1 10.8 10.9 12.1 December 5, 1968 Revised March 24, 1969 VElBZUEIA EIELCA Condensed Actual & Eatitated Balance Sheeta 1963-1980 (Be millions) - - - - - - - - ACTUAL -- - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - SSTI7D - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1963 19664 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 ASSETS Fixed Asaets Gross F.lant in Service 207.7 220.5 210.1 220.7 232.6 243.8 884.7 1003.9 1003.9 1003.9 1282.1 1282.1 1313.2 1436.0 1457.6 1479.2 1500.8 1527.3 Depreciation Beserve 9.8 14.5 18.5 24.3 29.7 34.7 44.6 62.6 80.7 98.8 118.1 137.4 158.9 184.5 211.6 239.8 269.1 299.6 Net Plant in Service 2 0. 91.o 21 z 0971 Mr Y.3 92. -5;T TT T104.0 T Tlll;T T2wy 5T; n T;7 T. 7 7 Works m Progress 77.2 154.6 254.1 362.8 517.3 692.4 154.3 125.0 216.8 274.2 55.8 126.9 131.6 33.3 36.6 40.3 32.3 6.8 Total Net Fixed Assets 275.1 360.6 445.7 559.2 720.2 901.5 994.4 1066.3 1140.0 1179.3 1219.8 1271.6 1285.9 1284.8 1282.5 1279.7 1264.0 1234.5 Current Aasets Cash 6.7 23.0 63.2 39.4 7.6 20.1 30.0 5.7 5.7 9.8 4.5 4-5 4.6 8.3 9.1 10.8 10.9 12.1 Other Current Assets - Net 1.8 8.2 7.4 6.3 10.3 8.3 9.3 10.3 11.3 12.8 14.3 15.8 17.8 19..8 243 26.8 2.8 =5 70. '7T 7 "7 - 1=T T7- 16 9;1i -WTF 1 8 . 8 20.3 22.4 2 8.1 ;T J -r7 4i.9 Other Asaets I/ - 0.1 0.2 0.1 57.0 110.8 117.2 117.2 117.2 117.2 117.2 117.2 117.2 117.2 117.2 117.2 117.2 117.2 Total Assets 283.6 391.9 516.5 605.0 795.1 1040.7 1150.9 119.5 1274.2 1319.1 1355.8 1W.1 14X- 1 1 -6 1432.0 14.8.9 1393.6 LIABILITIES Spuitzr capital 198.0 296.8 348.1 363.9 400.0 488.3 538.3 548.3 573.5 573.5 573.5 603.5 603.5 603.5 603.5 603.5 603.5 603.5 Retained earniAgs 2.9 9.3 19.3 26.9 35.9 55.3 72.4 80.8 99.5 130.0 171.0 214.7 251.7 277.3 299.7 323.3 332.9 330.8 Legal reserves 0.2 0.5 1.0 1.4 1.9 2.9 3.8 4.1 5.1 6.7 8.9 11.2 14.5 18.6 23.2 28. 35.5 43.2 2T0 W 38.1 399 3 6r.4 a :2 l i7m 5- IT 4.5 33.2' 6781 -9 Wl - - 924 9 55. ' 7 47 Lonr Tam Debt Lorans 353/482-tB 33.6 69.1 117.3 173.2 285.6 391.3 439.5 427.1 412.9 397.8 381.9 365.1 347.3 328.5 308.6 287.6 265.5 242.1 Proposed Loan - - - - - - 15.3 57.6 101.6 129.5 Me-2 l33-o 126 9 120.6 114.0 W.l 92.4 Retentions against contracts 5.0 9.9 13.9 20.0 20.2 24.5 COM Advances to be converted 39.0 0.2 2.5 0.7 - - COl Advances for Coasorcio - - - - 28.5 55.4 58.6 58.6 58.6 58.6 58.6 58.6 58.6 58.6 58.6 58.6 58.6 58.6 Other Liabilities 4.9 6.1 14.4 18.9 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 Total Liabilities 283.6 391.9 516.5 605.0 795.1 1040.7 1150.9 1199-5 1274.2 1319.1 1355.8 1409.1 1425.5 1430.1 1430.6 1432.0 1418.9 1393.6 I/ Includes advances to Consorcio. Decesber 5, 1968 Revised March 24, 1969 '4 -~~~~~~~~~~~~~~~~~~~~~~~w At-L~~~~~~A VENE ZUELA PROPOSED EXTENSION OF GURI POWERHOUSE Lo G.oiro-. ; p2Z>t'' + P(°U2LOA 3 ' '-ARBA0 CA DAFE'5 CENTRAL ZONE , AND LA EL ECTRRIC/DAD 1' \ ~~~~~~CA DAfE'5 . CA DA FE / EASTERN ZONE-, 2, ., /N- LOANI 391 VE LOAN 4-Vt .E .GRNACO, TRANSMISSION LINESGuyo 230 KV (existing) MA GU - - - - - - EHV (under construction) Ll "____ __X CiLbAD. BOLIVAR. - TRANSMISSION~~~~~~~~ ~ ~ ~ ~~ ~ ~~~~~~~~ LINE EXTNSIdON 020 40 60 e,o'°° K M