RESTRICTED Report No. TO-335c 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 The report may not be published nor may it be quoted as representing their views.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 OF THE MARIA CRISTINA FALLS HYDRO POWER EXPANSION IN MINDANAO PHILIPPINES October 29, 1962 Department of Technical Operations CURRENCY EQUIVALENTS US $1 = Peses (P) 4 P 1 = US$0.25 APPRAISAL OF 'EE TARIA CRISTIMTA FALLS HYDRO POWJER EXPANSION IN M4INDANAO PHILIPPINES TABLE OF CONTENTS Page SU,MARY i I. INTRODUCTION 1 II, TSHE BORROWER 1 III. THE POW.ER TIMRT 2 Mindanao (Agus Grid) 2 Luzon Grid 3 IV. THE PROJECT 4 General Description 4 Cost Estimate 4 Rate of Expenditure and Method of Finance 5 Schedule of Construction 6 Engineering and Supervision of Construction 6 V. JUSTIFICATION FOR THE PROJECT 6 VI. FINANCIAL ASPECTS 6 Rates 7 Present Financial Position 8 Earnings Record 10 Financing Plan 10 Estimated Future Financial Position 11 VII. CONCLUSIONS 12 LIST OF ANNEXES Annex 1. Mindanao (Agus) Grid - Load and Energy Forecast Annex 2. Agus Grid - M'indanao - Load and Capacity Development Annex 3. National Power Corporation - IManila - Balance Sheets 1961-62 to 1971-72 Annex 4. National Power Corporation - Manila - Income Statements 1961-62 to 1971-72 Annex 5. National Power Corporation - Hi'anila - Sources and Applications of Funds 1960-61 to 1971-72 Annex 6. National Power Corporation - M4anila - Net Cash from Operation Contributed towards Expansion 'Lap APPRAISAL OF THE 1ARIA CRISTINA FALLS HYDRO POTJER EXPANSION IN IJNDANAO PHILIPPINES SUN'IARY i. The National Power Corporation (NPC) has asked the Bank for a loan of $3.7 million to cover the foreign exchange cost of a project which would increase by 50 MW the capacity of the existing (2 x 25 MW{) Maria Cristina Falls hydro station on Ilindanao. The total cost of the project is estimated to be $7.1 million. ii. This would be the Bank's third loan to NPC. Both previous loans were for hydro power projects on Luzon. The project for which the first loan was made was successfully carried out within the total cost estimate. The second project is under construction. iii. The NPC management and staff would carry out this project without consultants. They are qualified to do so. The project is relatively simple, consisting of a single unit addition to an existing station plus minor river regulatory works and transmission. No problems should be experienced in meeting the scheduled completion date of Pmcen>ber 1964. The cost estimate, which is based on good pricing data and adequate allowances for contingencies, is equivalent to $142 per kw installed. This is a very low price for a pro- ject wfhich would add 50 W of 100 firm capacity to the system as wiell as transmission facilities. iv. The project is needed to meet load growth of industrial consumers. No alternative source of power could provide the required energy as economi- cally. v. NPC's financial position has been weak. W4hile it is improving, it is not realistic to assumme that it would reach desired levels until the rate structure between NPC and its main customer, the Nianila Electric Company (which accounts at present for about 703 of NPC's total revenues), is allowed to be increased. As 14anila Electric has a contract which reouires a three year notice for cancellation, it may take three years for rate adjustments to be made. Of course, it is possible that such adjustments could be made sooner, but it has been assumed in this report that they would not. vi. On this basis, the rate of return on NPC's net fixed power assets in operation, which averaged 5.4% over the past four years, would average a- bout 6.6/O' during the next four years (fiscal years 1962-65) and then improve to 9% in 1966 and remain above 8% through 1972. NPC's ability to provide financing from earnings for its future construction program would show corres- ponding improvement. vii. Given this improving situation, the project would be suitable for a loan of $3.7 million for a term of 18 years including a grace period of 2'- years on amortization payments. APPRAISAL OF THE MtRIA CRISTINA FALLS HYDRO POWER EXPANSION IN MINDANAO PHILIPPINES I. INTRODUCTION 1. The National Power Corporation (NPC) has applied for a loan of $3.7 million to cover the foreign exchange cost of a 50 I4W expansion to its ICaria Cristina Falls hydro plant in 'Iindanao. The total cost of the project is es- timated to be $7.1 million. This report covers its appraisal. 2. The Bank has previously made two loans to NPC. The first, of $21 million in 1957, later reduced to $18.5 million, (183 PH) was for the Binga hydro project in northern Luzon. The second, of $34 million in 1961 (297 PH) was for the Angat hydro project near Manila. The Binga project was completed on schedule within the total original cost estimate. The Angat project is now under construction. 3. The Bank had considered including the foreign exchange cost of the Maria Cristina expansion with the Angat loan in 1961. The project was des- cribed in the Angat appraisal report (Report TO 298 b of October 5, 1961). However, since it appeared at the time that there would be a delay of six to eight months before the industrial demand which justifies the expansion would be confirmed, the decision on the Maria Cristina loan was deferred. 4. The power market is developingn rapidly on ;Vindanao. It now appears that NPC will have to proceed within a year with construction of a second sta- tion upstream from Maria Cristina as well as with the immediate installation of the 50 U1 addition to Maria Cristina. 5. This report is mainly related to power developments on Vindanao and to updating financial projections on total NPC operations. It is supplemental to the Angat report which contains background information on NPC and its long range program. II. THE BORROIAER 6. NPC is a Government owned entity with authorized stock capital of P 250 million. It has borrowing power of up to P 500 million including $100 million equivalent in foreign exchange to be guaranteed by the President of the Philippines. 7. The General Manager is appointed by the National Power Board, sub- ject to the approval of the President of the Philippines. The NPC management and staff are competent to carry out the project without outside assistance. 8. NPC's major investment is in its Luzon properties which constitute the Luzon grid. I'.ost of its operating revenues accrue from the Luzon grid, and, within the grid, the largest percentage of revenues are derived from the - 2 - Manila Electric Company (ERIdLCO). Ieralco is the retail distributor in Yanila and vicinity. It also owns generating facilities but depends on large bulk power purchases from NPC to supply its franchise area. Meralco, a former hold- ing of General Public Utilities of the U.S., was sold early this year to the Meralco Securities Corporation, a Philippine investment group. 9. The relative importance of the three spheres of NPC's operations (Luzon, Mlindanao and all other) can be judged from the following comparison of electric plant assets as of June 30, 1961 and of energy sales for the fiscal year 1961. Gross Fixed Assets Energy Sales Location (P Millions) (kwh millions) Luzon Grid 244 830 1 Yindanao (Agus Grid) 12 154 All other 15 41 III. THE POZER TUAR13T Mindanao (Agus Grid) 10. The market served by the Agus grid is largely industrial. It is supplied by the existing two-unit (2x25 'Y.r) Maria Cristina station. Major customers include the National Steel and Shipyard Corporation (NASSCO), the Mlarcelo Fertilizer Company and Maria Cristina Chemical Industries (M11CCI). These customers accounted for a demand of 34 IN on the 50 191' total capacity in 1961. Two new customers, the MIindanao Portland Cement Company (I'.CC) and the Central Philippines i,illing Corporation will increase the load to 39 TTTbe- fore the end of 1962. The station will be fully loaded by early 1964. 11. The system load is expected to reach 59 BMM by mid 1965 and increase to 93 TiM the following year. This sharp increase is due to expansion plans by some of the existing customers and establishment in the area of new cus- tomers. Two of these, which account for the major part of the increase in demand, are described below: 12. The Ifarindukue Iron Mining Company: This company is planning to de- velop a base metal complex with copper fabricating facilities near NPC's laria Cristina station. Akmonium sulfate fertilizer would also be produced. The development is expected to be undertaken in two phases, the fertilizer plant first and a copper/zinc reduction and fabricating plant second. 13. The development has been studied and tested by Marindukue and its consultants since early 1959. A U.S. Ex-Im Bank credit was applied for in late 1959 and, in January 1961, Ex-Im issued a letter of commitment for a loan of $13 million dependent among other things upon large scale pilot trials. These trials were completed and accepted by Ex-Im in January 1962. Cost estimates for the complete development with process design based on the pilot runs wiere completed in MTarch 1962. The new, and for the first time complete, estimate tJ Sales to iHeralco were 681 million kwh or 8Z2 of NPC sales on Luzon (66% of sales from all NPC operations). -3- totalled about $27 million plus P 45 million. These estimates are now being studied by Ex-Im. 14. Meanwhile, $12 million of the original $13 million credit Will be available for iimediaħe construction of an a2=onium sulfate plant. The initial power requirements of the plant would be about 8.5 M4. When the second phase of tha project is coTpleted the power demand would increase to 20 MW. 15. As the immediate justification for the proposed project is to meet system demcnd resulting from the Marinduklefertilizer plant, the final presenta- timn of this prnposed loan has been delayed Atile waiting for reasonable evidence that the Ex-Im credit to Harindukue would be made. 16. Philippine Integrated Steel Mill: A scheme to install an integrated steel works in Mindanao has been pending for several years. A $62.3 million U.S. Ex-Im credit for that purpose was authorized in late 1960. The formation of a corporation which would meet conditions of the Ex-Im Bank and thus allow the credit to be releesed is expected soon. 17. The steel mill construction program would require four to five yeers. When completed, the load edded by the steel mill would cause total system demand to exceed the 100 PT capacity of the Maria Cristina station. NPC plans to con- struct a new plant (Agus 2) upstream from Maria Cristina to meet this increased demand. The Agus 2 plant would not be storted, however, until the steel program wT"as financed and under construction. 18. The present estimates of capacity and energy requirements are sum- mcrized below: Demand (MI) - Agus Grid (Fiscal years end 6/30) 1964 1965 1966 1967 1968 Existing i/ 40.0 46.o 52.0 55.9 58.8 Marindukue Mining Company 8.5 8.5 20.0 20.0 20.0 Steel Mill m 13.5 28.5 51.5 Miscellaneous new loads 2/ 1.5 4.5 7.5 10.6 13.7 Total 50 59 93 115 ZTW NFC plsnt rating 50 100 100 200 200 Installation MC-1,2 MC-3 Agus 2 Luzon Grid 19. The power n-rket forecasts for the Luzon Grid were covered in detail in the Angat appraisal report. The data therein was reviewed in April 1962 and left substentially unchanged. In summary, the m-rket consists of the Manila Metropolitan Area served by Meralco and the "provincial area" to which NPC supplies wholesale bulk power for distribution by various retailing agencies. 1/ Includes reesonably firm expansions planned by existing customers. / Mostly accounted for by the City of Cagayan de Oro. Rights-of-way for the transmission line to serve the city are now being negotiated. - 4 - System planning is based on a growth rate of around 112! per year. The long range forecast of capital additions on which YPC's financial projections are based takes this growth rate into account. IV. THE PROJECT General Description 20. The expansion of generating capacity to meet the demand of the Agus grid would utilize the Agus River's excellent hydro power potential. This river, 36 kilometers long, connects Lake Lanao at elevation 700 meters above sea level to Iligan Day on the north central coast of llindanao. Its course provides seven sites suitable for the ultimate development of about 750 121. 21. Lake Lanao is large, having a surface area of about 350 souare kilo- meters and drainage area of some 2,100 scouare kilometers. The level of the lake remains fairly constant, the maximum fluctuation during 21 years of record being only 1.41 meters. With its large volume it thus provides an easily re- gulated natural reservoir for power developments planned along the Agus river. Storage reservoirs would consequently not be required at the individual plant sites. 22. The seven power sites are designated Agus 1 through Agus 7 from the lake to the sea. The existing development is called the Maria Cristina Falls station. It is also Agus 6. The project would expand its present capacity of two 25 14W units by a single 50 1MUJ addition. 23. The layout of the plant is simple and economical. A net head of a- bout 159 meters (520 feet) is gained by diverting water from above the Varia Cristina falls to the plant at the foot of the falls. Only part of the water is diverted at present. Facilities for the third unit would closely parallel those existing and would also provide intake bays for future units 4 and 5. The project would include a small regulation dam at the outlet of Lake Lanao and 32 circuit kilometers of 69 kv transmission necessary for distribution of the plant's increased capability. 24. The capability of the plant would be 100l firm after completion of the partial lake regulation included in the project. Cost Estimate 25. The total cost of the Maria Cristina expansion, including the Lake Lanao regulating works, transmission, intake bays for future units 4 and 5 and interest during construction would be equivalent to about $7.1 million. This includes contingencies and provisions for local price increpses which make up about 18% of the direct cost estimate. The total cost, expressed as cost per installed kilowatt of new capacity, would be about $142 per kilowatt. This is a very low price for firm hydro capacity. 26. The estimate is summarized below: -5 - Cost (in $ thousands) Itemn Foreign Local Total Hydraulic Plant Land and camps - 65 65 Structures and dikes 475 2,020 2,495 Turbine and generator 980 50 1,030 iMiscellaneous electrical 285 25 310 Miscellaneous mechanical 175 10 1g5 Sub-total 1,915 2,170 4,085 Transmission Plant Land and R.O.11's - 45 45 Substations 1,115 15 1,130 Poles and conductor 185 60 245 Sub-total 1,300 120 1,420 Supervision and Administration 55 160 215 Sub-total (Direct. Cost) 3,270 2,450 5,720 Contingencies 430 315 745 Price Increases - 310 310 Interest During Construction 300 - 300 4,000 3,075 7,075 27. The estimate is based on unit prices experienced in similar construc- tion. Cement and reinforcing steeliould be procured locally. A contingency of about 12 1/24 for local price increases has been included. Bids for the major foreign equipment were received in 1958 and are still firm. Since the suppliers have been willing to keep the bids firm and because of an unexpected good response on Angat equipment bidding, NPC expects that some savings would result through readvertising the original specifications. Invitations have conseo~uertly been readvertised. The construction period is shnrt and as the project has heen well investigated, no piarticular problems are expected. 'De cost estimate should prove reliable. Rate of Expenditure and Method of Finance 28. The scheduled expenditures including interest during construction on the proposed loan are shown below: Expenditures (in $ thous-.nds) (Fiscal year ends 6/30) 1963 1964 1965 Total IBRD Loan 2,250 1,000 450 3,700 IBRD Interest 70 175 55 300 Local Costs 1,560 ,Q000 515 _ -3075 Total 3,880 2,175 1,020 7,075 - 6 - 29. The direct foreign exchFnge cost of 53.7 million would be financed by the proposed Bank loan. Interest during construction snd local costs would be met from NPC1s own resources. Schedule of Construction 30. Construction is scheduled for two years from the time of making awards for the major imported equipment. As awards should be made by the end of Noverner the plant should be in operation by 1fecai*er 1964. This scheduled completion date should be achieved without difficulty. Engineering and Supervision of Construction 31. The existing two unit stotion was designed by NPC. Construction was mainly by contract under NPC engineering supervision. Since then NPC as an organization has gained additional experience on Binga construction, for which it shared engineering responsibility with consultants. In the circumstances there is no resson for NPC to engage consultants for the Maria Cristina addi- tion. Civil works construction would agein be by contract awarded on the basis of competitive bidding. NPC follows satisfactory procedures in advertising for and evaluEting bids. The organization is capable of executing the project. V. JUSTIFICATION FOR THE PROJECT 32. The 50 1>l expansion to the Meria Cristina station is necessary to meet forecast industrial load growth. The total project cost is about the equivalent of $142 per kilowatt. The expended cepecity of the station (100 Nq) would be 100% firm. 33. No alternative source of power could compete on either an economic or technical basis. VI. FINANCIAL ASPECTS 34. As will be discussed later, NPCts past financial position has been weak. Its efforts to meet financial objectives agreed with the Bank as desirable in the past have not been particultrly successful. A two-year delay was ex- perienced in implementing a rate increase which NPC hed undertaken to seek in connection with the Binga loan in 1957. Furthermore, the rate increase finally obtained resulted in about an 18% increase in revenue instead of the objective of 25%. In connection with the Angat loan in 1961 NPC agreed to take action before June 30, 1962 to seel further rate adjustments so that at least 25% of new investments during fiscal years 1962-63 to 1964-65 could be financed from cash generated internally. lTC will not realize this aim until ro.tis a'nlying to XarLiia Electric .-1r revised un'!ard. 35. .bility to :r,eet the various objectives of the r,%3t l ,s not been entire- ly within the. control of `P". f'he recent freeing of exchan.7e regulations and subsequent drop in value of the peso, although beyond the control of' NPC, is a - 7 - significant factor in forecasting its debt servicing ability and also contri- bution of earnings toward expansion. The underlying problem is one of rates, not only in respect to the general price level but also to the type of tariff structure. Rates 36. NPC's rates are subject to approval of the Office of Economic Coor- dination (OEC), an agency responsible for supervision of government-owned cor- porations. Rate adjustments, when approved by OEC, are passed on to most cus- tomers within a reasonable period of time as most of NPC's power contracts con- tain provisions for price adjustments. The major exception is the contract be- tween NPC and i4eralco which is in the form of a long-term bulk supply contract with no provision for price adjustment and subject to cancellation only upon three yearst written notice by either party. 37. In Mi4arch 1962, NPC received OEC authorization for a general rate in- crease of around 171% to be effective by July 1. In addition a general escala- tion clause was introduced which provides for automatic rate adjustments for fluctuations in the exchange rate from a base of US$ 1:P 3.50. However, in view of the protection afforded by the three-year contract cancellation pro- vision, !'ieralco may not accept this increase unless allowed to pass on the higher charges to its customers. Since the major portion of NPC's revenues are derived from sales to IIeralco, I'PC's earnings position would not be much improved by further rate increases applied only to customers other than Iieralcq NPC has consequently decided to give notice of contract cancellation to Meralco so that the form of the contract can be changed at the latest in three years if it should prove impossible to do so earlier through -mutual agreement. 38. Because of this time delay and the further likelihood that the pre- sent increase would be inadequate for the future, the assumption has been made for the purpose of this study that new rates applying to lieralco starting thus in 1966 would be increased more than the 17ia presently authorized. Demand charge is assumed to increase from P 60 to P 70 per kilowatt year with a pro- vision for escalation from a base exchange rate of 3.5:1, and energy charge to increase from P 0.0105 to P 0.0150 per kwh. This would amount to an increase (before escalation) of about 2St over present rates at 50Q load factor. -Tith a 50 load factor and exchange rate of 4:1, the assumed new rates would result in a sales price to Meralco equivalent to US 8 mills per kwh. 39. This general rate problem was explored during loan negotiations and several measures agreed upon which should provide a solution for the future. These measures are: i) NPC has arranged to have a financial and rate study made. The scope of the study and the arrangements for having it undertaken are satisfactory to the Bank. It is expected to be completed by early November and to result in recommendations for revising the form of contracts as well as the price levels charged for power and energy. -8- ii) Following the study NPC will attempt to renegotiate a new contract with Mteralco. The success of these negotiations will depend largely on whether Meralco will be allowed to pass on the increase to its customers. iii) The Government is aware that a solution to NPCts rate problem can not be made without considering its effect on Heralco. Meralco's rates are regulated in turn by the Public Services Commission (PSC), a cuasi- judicial body having regulatory functions in the electric utility field, except over NPC, The Government therefore has agreed to direct the PSC to investigate the effect on Meralco of NPC rate revisions with the aim, if necessary, of allowing secondary rate relief for NPC rates to be revised. Present Financial Position 40. Condensed balance sheets for the fiscal years ended June 30, 1958 through 1961 and as of December 31, 1961 are shown in Annex 3. 41. NPC's accounts, which are kept in accordance with accepted business principles and practices, are audited by independent auditors appointed by, and responsible to, the Auditor General of the Philippines. 42. As of June 30, 1961, fixed powrer assets and work in progress totalled about P 289 million. Deducting the depreciation reserve of P 13 million, net fixed powier assets were P 276 ;ullion. The net fertilizer investment of P 13.7 rmillion represents receivables on account of the sales of NPC's ferti- lizer plant which are due in 30 equal semi-annual installments at 6%. 43. NPC's authorized capital stock, wholly owned by the Government, amounts to P 250 million, of which about P 231 million had been issued as of June 30, 1961: P 82 million against prior government advances, P 10 million by conversion of surplus and about P 139 million for conversion in 1961 of NPC's then outstanding local bonded indebtedness. The NPC Act as amended in M4ay 1961 requires that: a) cumulative interest Eat 4%7 has to be paid on P 221 million of the presently issued P 231 million capital stock [ the R 10 million of stock converted from surplus is interest free]; b) cumulative interest [at 6%]g has to be paid on the difference between the authorized [R 250 million|/and outstanding [R 231 million 7 capital stock when and as issued provided, however, that interest accrued under both a) and b) will be capitalized and converted to additional share capital up to June 30, 1970 and c) P 158 million of the total authorized P 250 million capital stock has to be repaid starting July 1, 1970 [ 30-year, 3-o sinking fund .me foregoing is summarized in the following tablet -9- Authorized Share Capital Interest Amount Origin Payable ! Redemption a) P 10 million Surplus none none b) P 82 million Government advances 4% none c) P158 million i) Conversion of bonded debt - P 139 million 4%) 3sinkingr fund P250)siknfud ii) Future government ) 3-' starting advances - ^ 19 million 6% ) July 1, 1970 d) P 85 million Accrued capitalized in- (estimated) terest on b) and c) above none none 44. A substantial portion of NPC's capital stock thus assumes the char- acter of long term debt with fixed repayment terms. It cannot be considered equity. A more apt description for this portion of NPC's capital structure would be capital notes instead of capital stock. Consequently NPC's total capitalization as of June 30, 1961 can be shown as follows: Capitalization as of June 30, 1961 Pesos % of (in millions) Total Equity Authorized and issued capital stock 92.0 29.5 Reserves and net surplus 15.1 4.9 Total equity 107.1 34.4 Debt outstanding Authorized capital stock: P 158 million repayable after July 1, 1970, of which issued 139.2 44.5 Foreign currency loans (exchange rate: US$1:P2): Export-Import Bank, 4L, 1952-75 28.4 IBRD (Binga), 6/, 1957-82 33.6 Sub-total 62.0 19.9 Local currency loans 3.9 1.2 Total debt outstanding 205.1 65.6 Total capitalization 312.2 100.0 1/ To be capitalized and converted to additional capital stock up to June 30, 1970, (See item d). - 10 - 45. About 20% of NPC's capitalization at June 30, 1961 was in foreign currency loans consisting of a $20 million loan from the U.S. Ex-Im Bank for construction of the Arnbuklao hydro project and the IBRD loan of $21 million, later reduced to $18.5 million, for the Dinga hydro project. A further IBRD loan of US $34 million at 5-3/4% for 25 years was made during the fiscal year 1961-62 for the construction of the Angat project. A Japanese war reparations loan was also made for transmission line extensions in Luzon and Plindanao; it is equivalent to P 11 million, bears interest at 3% and is repayable over a period of ten years. 46. Foreign exchange loans were serviced at the official exchange rate of US $1 = P 2.0 until Decmeber 1961 and after that date at the free market rate resulting from liberalization of foreign exchange controls. During the current fiscal year NPC was able to make forward arrangements for debt service payments when the free market rate was 3:1. The present exchange rate is around 4:1. This exchange rate was therefore used for the forecasts in this report. 47. Local currency loans were reduced to an insignificant figure through the conversion of local bonded indebtedness (paragraph 43) into capital stock in Hay 1961. The remaining total of P 3.9 million consists of P 2.7 million interest-free government advances without repayment terms and two small 4% loans amounting to P 1.2 million. Earnings Record 48. Summarized income statements for the fiscal year ended June 30, 1961 and the 6 months ended December 31, 1961 are shown in Annex 4. For reasons pointed out earlier NPC's past earnings have not been satisfactory. The rate of return on net power assets in operation (excluding the fertilizer invest- ment) averaged only 5.41 in the fiscal years 1958-61, and was 6.1% in 1961. (There was a slight improvement for the first six months of the last fiscal year). Contributions of earnings to expansion were only about 5% during these four years as shown in Annex 6 and interest and debt service were barely covered. In order to improve this situation NPC was granted the rate increase previously described. Financing Plan 49. Annex 5 presents sources and applications of funds for the twelve fiscal years 1960-61 through 1971-72. It is based on similar assumptions of energy sales (modified by current estimates of Ilindanao sales) and future capital investments as the forecast of the Angat project appraisal report of October 1961. The major changes from the previous forecast are a) an exchange rate of 4:1 is now used instead of 3:1 as in October's report and b) revenues are based on the rate increase discussed in paragraph 36. No increase in rates applying to Hleralco is assumed until fiscal year 1966 when the present contract would expire if NPC gives cancellation notice now. 50. During the 3-year period ending June 30, 1965 in which the proposed lMaria Cristina project would be built and w-rould start operation, plant addi- tions including interest during construction would amount to about P 272 million (Annex 6) of which the Miaria Cristina expansion would represent about 10%. Under the proposed plan NPC would finance about P 56 million or 21% of its requirements from net cash earnings, about P 10 million or 3% from existing - 11 - cash and construction inventories and from the proceeds of the fertilizer plant sale, P 13 million or 5% from additional purchases of shares by the Government, and the balance of roughly P 193 million or 71% from borrowings. 51. The borrowings assumed over the period 1961-62 to 1971-72 are as follows: a) A Bank loan of US $3.7 million would be obtained in 1961-62 for the addi- tion of the 3rd unit to the Maria Cristina plant in Mindanao, at an assumed interest rate of 5 3/4% and for a term of 18 years including a 3-year grace period. b) Another foreign exchange loan of US $6.4 million, to be obtained in 1963-64, is assumed for the Agus 2 project in Mindanao at an assumed interest rate of 5 31/4 and for a term of 25 years including a 3-year grace period. c) Further foreign exchange loans totalling about US $114 million would be obtained in the 9 fiscal years 1963-64 through 1971-72 for the financing of NPCts future excansion. d) Local currency 6% 30-year bond issues totalling P 25 million would be re- quired during the next 3 fiscal years and will probably be allocated to the financing of the Angat and Agus 2 projects. This assumption is based on the present practice that NPC is allowed toissue annually a certain amount of bonds which are placed with government financial institutions. Additional P 35 million in bond issues are assumed for the period 1965-66 through 1971-72. Estimated Future Financial Position 52. NPCOs earnings level is still weak. In a side letter to Section 5.09 of the Angat loan agreement the Government and NPC agreed with the Bank to establish rates at such a level that NPC's internal cash generation after debt service would finance not less than 25% of the new construction during fiscal years 1962-63 to 1964-65. As already indicated, the present rate increase will not achieve this aim mainly because it is not applicable to Meralco due to the 3-year cancellation clause. The deterioration of the peso exchange rate also contributes to NPC's problems because, within a few years, close to half of its capitalization would be in foreign exchange debts. The escalation clause authorized by OEC (paragraph 37) is intended to compensate for changes in the exchange rate but it is not clear at this time that the formula used would be entirely adequate. This is one of the reasons why the iate study Is being made (paraZraph 39). 53. Forecast income statements for the 11 years ending June 30, 1972 are given in Annex 4. Net income before interest is expected to rise from P 20.6 million in 1962 to P 32 million in 1965. In 1966 it would increase to P 52.2 million on account of new capacity added in 1965 and also because of assumed new rates applied to Meralco, and would then rise to P 92.9 million in 1972. The return on net fixed assets in operation would increase from 7.3% in 1962 to 8.1% in 1964 and would, after a drop to 6.9% in 1965, rise to 9% in 1966. - 12 - It would then stay above the 8% level throughout the period under review. Year- end interest and debt service coverage ratios as shown in Annex 5 would remain at an acceptable level through 1970 averaging 2.3 times and 1.8 times respec- tively. In 1971 when interest and sinking fund payments on capital stock be- come due as pointed out in paragraph 43, coverages would drop to 1.7 and 1.3 times respectively. Cash earnings (including depreciation), after deduction of interest and amortization on existing and proposed debt (excluding interest during construction financed by the Angat loan), are expected to provide about P 56 million or 21% of total requirements between 1963-65. The equivalent fig- ures for the period 1966-72 would be P 235 million or 32%O 54. The debt limitation covenant of the Angat and Binga loan agreements requires Bank approval prior to the incurrence of debt by NPC unless maximum future debt service is forecast to be covered 1.4 times by net revenues of the last fiscal year (adjusted for rates in effect at the time of the calculation) plus 75% of the estimated net revenues from plants under construction and to be constructed. This covenant has proven difficult to check in actual practice. 55. A revision was therefore agreed upon during negotiation. The revised co-venant would require the Bank's agreement before NPC could incur debt unless a) its net revenues for the previous 12 month period (or fiscal year) shall have been at least 1.3 times the maximum annual debt service requirement for any suceeding fiscal year or b) its net revenues for the previous 12 month period (or fiscal year) plus 75% of the estimated increase in net revenue from all NPC's power operations for the first full year's operation after completion of the facility for which the proposed debt would be incurred, shall be at least 1.5 times the maximum annual debt service reiuirement for any succeeding fiscal year. Allowance would be given for the effect of any rate increase approved at the time of the test. This covenant would be included in the proposed loan agreement. VII. CONCLUSIONS 56. The project is sound and is necessary to provide the capacity required to meet the estimated increase in power demand in Milindanao. 57. The management of NPC is competent. Its staff is well qualified to construct and operate the project. 58. Ihe recent rnte increase, wshich also provided for escalation based on the peso/dollar exchnige rste, will not achieve its purpose until applied to NPC' Is rain customer, Mer,lco, which is protected by a contract with a 3-year cayiceliation clause. 59. Once this contract has been changed the long-range financial position of NPC appears acceptable. If it can not be changed sooner than after the 3-year notice of contract cancellation, the Bank would have to accept, for the proposed loan, a forecast of 21% contribution of earnings toward expansion rather than the objective of 25% covered by the side letter to the rate covenant of the Angat loan agreement. - 13 - 60. NPC's financial situation is improving and the measures arreed upon during negotiations should lead to a satisfactory position for the future. The proposed project is considered suitable for a loan of $3.7 million, for a term of 1 years including a grace period of 2;, years on amortization paymcwnt3. ANMEX 1 MINDANAO (AGUS) GRID LOAD AND ENERGY FORECAST Aggregate Total Year Demand Sales (ends 6/30) (Mw) (kwh millions) 1956/57 33.6 145.5 1957/58 33.0 174.0 1958/59 33.0 200.6 1959/60 34.0 176.3 1960/61 34.0 153.6 --FORECAST-- 1961/62 39 188 1962/63 41 198 1963/64 50 257 1964/65 59 309 1965/66 93 512 1966/67 115 582 1967/68 144 897 1968/69 171 1,073 1969/70 195 1,246 1970/71 221 1,310 1971/72 224 1,323 PHILIPPINES AGUS GRID-MINDANAO LOAD AND CAPACITY DEVELOPMENT 700 T 600 _ _ _ _ 0 ' ~ M 500 UNITS I82 5M) 4~~~~~~~~~~~~~~~~~~~~~~~~~~~ z 4 O N- 30 t960 1961Z1962 F963 1964 196S 1966 t967 t968 1969 1970s1971a197Z MAY 1962 0 MW R 0 0 ~~~~~~~~~~~~~z 2 00 200__ ____ z Syst~~~~~~~~~~ema Cpadt MARIA CHRISTINA UNITS 50IMW (Nam2late atMng 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~r O.~~~~~~~~~~~~~~~~~~~~~~~~~~I 19 60 961 192 196 196 4 1965 96 6 167 196 1969 970 191 197 200 _ _ _ _ _ ______ ______ _____CALENDAR YEARS MAY 1962 IBRD 889R~~~~~~ NATrONAL POVER CORPORATION MAN ILA Balnce Sheets 1961-62 to 1971-72 (In mllions of Pesos - Nate of exmhange: U05l = P2 until 1962, Y4.00 thereafter) A C T U A L Dec. 31 Fiscal Year Endine June 30 1960 2 ;2 6L 1962 196 s 2 16 12 iZ 19 § 2.2 1970 q Fixed assets in operation 169.70 170.37 264.80 270.87 272.65 286.10 359.40 364.90 613.93 623.49 753.13 814.21 942.50 1,048.62 1,119.67 1,297.94 Less: Depreciation reserve 4A 7- 1 46 12.S6 1U.38 is UR 22.60 29.58 38.81 50.21 6&.03 80.12 9S.60 114.82 143.36 170.17 Net fixed assets in operation 164.24 163.02 254.94 258.01 25S.27 270.12 336.80 335.32 575.12 573.28 689.10 734.09 843.90 928.80 976.31 1,127.77 Surveys, work in progress etc. 35.68 77.38 13.19 17.67 20.99 64.63 137.91 227.45 75.45 170.64 148.69 177.71 173.71 208.15 226.34 140.35 Total net fixed assets 199.92 240.40 268.13 275.68 279.26 334.75 474.71 562.77 650.57 743.92 837.79 911.S0 1,017.61 1,136.95 1,202.65 1,268.12 Net fertilizer investment 13.10 12.10 10.99 13.65 13.02 13.04 12.39 11.70 10.97 10.20 9.38 8.51 7.59 6.61 5.57 4.47 Net current and other assets 16.89 10.73 12.72 9.09 17.90 11.25 7.55 3.67 3.72 3.40 3.14 3.74 4.67 6.35 5.61 15.70 Sinking fund asseto - - - 13.75 14.02 14.23 14.73 15.44 16.46 17.72 19.21 20.75 22.45 24.40 - - TOTAL ASSNT 229.91 263.23 291.84 312.17 324.20 373.27 509.38 593.58 681.72 775.24 869.52 944.80 1,052.32 1,174.31 1,213.83 1,288.29 LIAi3ILITI£S Equity Capital stock issued - - 92.00 231.19 231.19 237.00 247.50 250.00 250.00 250.00 250.00 250.00 250.00 250.00 179.76 179.76 Interest accrued on debt con- verted into capital stock 2 - - - - - 8.85 18.05 27.88 37.86 47.84 57.82 67.80 77.78 87.76 - - Reserves and net surplus 12.19 15.37 11.02 15.09 19.67 22.16^ 30.41 42.52 58.39 85.98 122.94 143.61 182.04 222.40 264.49 313.68 Total equity 12.19 15.37 103.02 246.28 250.86 268.01 295.96 320.40 346.25 383.82 420.76 461.41 509.82 560.16 444.25 493.46 Debt Foreign currency loansl/ Export Import Bank loan 34.55 32.52 30.49 28.45 27.44 26.42 48.78 44.72 40.66 36.60 32.54 28.48 24.42 20.36 16.30 12.24 IBRD 183 PRE Binga 6.81 25.16 32.81 33.56 34.56 35.02 68.16 66.16 64.04 61.860 59.40 56.88 54.20 51.36 48.32 45.12 IBRD 297 PH: Angat - - - - - 33.96 74.69 115.46 134.40 131.12 127.64 123.96 120.04 115.92 111.56 106.92 Proposed IBRD loan-. Maria Cristina 3 - - - - - - 9.00 13.00 14.48 13.84 13.16 12.44 11.68 10.88 10.04 9.12 War reparation loan - - - - 2.52 6.12 9.22 8.12 7.02 5.92 4.82 3.72 2.62 1.52 .42 - Future loan: Ages 2 - - - - - - - 4.00 14.00 24.00 25.71 25.11 24.47 23.80 23.09 2.2.3& Assumed future loans - - - - - - - 8.32 32.644 80.08 137.60 185.04 252.40 327.64 368.64 413.13 Sub-Total 41.36 57.68 63.30 62.01 64.52 101.52 209.85 259.78 307.24 353.36 400.87 435.63 489.83 551.48 578.37 608.87 Local currenc loans 2 182.55 198.08 136.56 3.88 8.82 3.74 3.57 13.40 28.23 38.06 47.89 47.76 52.67 62.67 220.67 220.67 Less: Sinking fund assets . (6.19) (7.90) (11.04) 3 8 _ - _ _- - - - - (29.46) (34-69) Sub-Total 176.36 190.18 125.52 3.88 8.82 3.74 3.57 13.40 28.23 38.06 47.89 47.76 52.67 62.67 191.21 185.96 Total debt 217.72 247.86 188.82 65.89 73.34 105.26 213.42 273.18 335.47 391.42 448.76 483.39 542.50 614.15 769.58 794.85 TOTAL LIABIIITIE! 229.91 263.23 291.84 312.17 324.20 373.27 509.38 593.58 681.72 775.24 869.52 944.80 1,052.32 1,174.31 1,213.83 1,288.29 J The sinking fund created for repayment of the local debt converted into capital stock in 1960-61 midl be kept on NPC'a books and will continue accruing 3j% interest per annum until 1970; during this 10-year period it is therefore shown as an aEset rather then a deduction from long-term local currency debt. 2 P 158 million of the authorized, issued share capital will be repayable after July 1, 1970 and is therefore shown as long-term local debt from then or. Interest accrued on capitel stock is capitalized up to June 30, 1970 and is considered additional authorized capital pursuant to Republic Act No. 3043. 2/ The balances of the 1!2im Bank loan and the IBRD (Binga) loan, outstanding as of July 1, 1962, are revalued to reflect the free exchange rate of F 4.00 = B$1; it has been assumed that fixed assets would be revalued to the same extent. The Angat disbursement in 1961-62 is shown at the exchange rate of F 4.00 = U51. 4./ AdJusted for a foreign exchange loss of F 900 thousand on amortization payments in 1961-62. N A T I O N A L P O W E R C O R P O R A T I O M A NI L A Income Statements 1961-62 to 1971-72 -A CT UA L 6 sonths to Fiscal leer Ending June 30 61 Dec. 31. 1961 126_2 166 1 1967 1968 2 1970 17 Sales in millions of KWE 1,025 1,223 1,237 1,308 1,607 2,204 2,690 3,251 3,685 4,262 4,790 5,325 Operating revenues 23.14 13.88 28.31 35.40 40.31 47.98 70.90 85.83 100.54 114.44 130.64 147.83 167.11 Operating costs: Opers,41g expeseas 3.68 2.34 4.14 4.68 4.91 5.57 5.80 15.83 21.70 21.26 30.44 40.16 44.08 Real estate tax .62 .03 1.31 1.32 1.37 1.89 2.19 2.36 2.47 3.01 3.11 3.27 3.67 Depreciation 3.04 1.52 3.12 6.62 6.98 9,23 11.40 13.82 16.09 18.48 21.22 23.54 26.81 Total operating costs 7.34 3.89 8.57 12.62 13.26 16.69 19.39 32.01 40.26 42.75 54.77 66.97 74.56 Operating income 15.80 9.99 19.74 22.78 27.05 31.29 51.51 53.82 60.28 71.69 75.87 80.86 92.55 Other income (net) .51 .18 .81 .77 .73 .69 .65 .60 .55 .50 .44 .38 .32 Net lncome before interest 16.31 10.17 20.55 23.55 27.78 31.98 52.16 54.42 60.83 72.19 76.31 81.24 92.87 Income deductions: Total interest payable 11.84' 5.92 6e17 10.84 14.02 17.59 20.92 24.39 27.07 30.20 34.06 47.45 49.56 Total interest accrued on capital stook - - 8.85 9.20 9.83 9.98 9.98 9.98 9.98 9.98 9.98 - - Interest charged to con- *truction (credit) - - (1.96) (4.24) (7.66) (10.92) (5.75) (6.29) (6.22) (5.69) (7.30) (7.45) (4.86) Interest earned on sinking fund (credit) (.38) (.18) (.48) (.50) (.52) (.54) (.58) (.62) (.67) (.73) (.79) (.85) (1.02) Total income deductions 11.46 5.74 12.58 15.30 15.67 16.11 24.57 27.46 30.16 33.76 35.95 39.15 43.68 Net profit from power operations 4.85 4.43 7.97 8.25 12.11 15.87 27.59 26.96 30.67 38.43 40.36 42.09 49.19 Net profit or (losa) frcr, fertilizer operations (.78) Net profit 4.07 Return on net fixed assets in operation 6.1 7.8 7.3 6.8 8.1 6.9 9.0 8.5 8.2 8.5 8.2 8.3 8.2 Return on average total net fixed assets 5.8 TF2 6.5 5.6 5.2 5.1 7.4 6.8 6.9 7.4 7.0 6.9 7.5 / From 1961-62 on: interest earned on the unpaid balance of the salect. =tVe for the fertilizer plant. / The fertilizer plant wE sold by EPC in 1960-61. a Return on average net fixed assets as *ngat (1964-65) and Agus 2 (19566L-72) -re assumed to operate for only half a year. NITIONAL POWER CORPORATION N A 11 I L A Sour. nad AuuiUoatoo ofi'ud 1960-61 to 19v1..7 (lc ai IoII of, e - 2 at- of ol g 0561 = r 2 umtil 19622 , P 4 threarter) Fisca lear Winc Zoo, 30 1962 1963 19" _ 16 1 SOURcES O PMS Internal cash generation Set Uoo.. before interest 16.12 20.55 23.55 27.78 31.98 52.16 54.42 60.83 72.19 76.31 81.24 92.87 Doepreciatioa 3.04 3.12 6.62 6.98 9.23 12.40 i3.82 16.09 28.48 21.22 23.54 26.81 Sot 19.16 23.67 30.17 34.76 41.21 63.56 68.24 76.92 90.67 97.53 104.78 119.68 Reosipt. frm ale or fertilixer plant 3.18 .61 .65 .69 .73 .77 .82 .87 .92 .98 1.04 1.10 Gceormont ootributioa 5.86 5.81 10.50 2.50 _ - - - - - - - 521 contribetioa to "gat - 4.50 7.00 6.50 3.50 - - - - - - - Foreiga currency loo IED 183 PH. BLAg 1.71 2.48 - - - _ _ _ _ _ IHPD 297 PH: AAgat - 33.96 40.73 40.77 20.54 - _ - _ _ _ _ Propoed IIRD low: Maria Cri1.i6 3 - - 9.00 4.00 1.80 War reparatio loen - 6.81 4.20 - - oturs lona: Aguo 2 - - - 4.00 10.00 10.00 2.00 A-d future lo_a - 8.32 24.32 47.44 57.52 52.08 73.68 81.92 54.64 61.12 hSub-Total 1.71 43.25 53.93 57.09 56.66 57.44 59.52 52.09 73.68 81.92 54.64 61.12 1oal currency logo 1.00 _ - 10.00 15.00 10.00 10.00 - 5.00 10.00 - - Total borroaloga 2.71 43.25 53.93 67.09 71.66 67.44 69.52 52.08 78.68 91.92 54.64 61.12 TOTAL SOURUS OF FDIIS 30.91 77.84 102.25 111.54 117.10 131.77 138.58 i29.87 170.27 190.43 160.46 181.90 APPLITIONS OF FMW3 Additioa to plant 131D 183 PH: Biogn 4.07 2.48 - - - INHD 297 PH. ingat a - 49.50 60.80 58.55 28.45 - _ - _ _ _ _ Proposed IB20 praoJet Cri. itim 3 _ 15.24 8.0 3.86 Agas 2 -- 10.00 23.50 23.50 6.00 - - - - _ Ass-d jor generatio additions - - - 1.83 31.07 65.94 86.59 72.30 105.50 126.74 76.74 81.92 Other additiooc, ooluioIg transadiom 6.49 12.75 11.86 5.50 2.73 9.56 8.81 11.58 13.10 6.52 5.05 5.50 Total additios 10.56 64.73 87.90 93.88 89.61 99.00 101.40 83.88 118.60 133.26 81.79 87.42 Iotcrert Foreign currency loas trport ISport Bonk: AubWtlao 1.16 1.46 2.08 1.92 1.76 1.60 1.44 1.24 1.01 .92 .76 .60 IHRD 183 PH: rog 1.76 2.61 4.24 4.12 4.00 3.88 3.72 3.60 3.44 3.28 3.08 2.92 I58D 297 PH: "gat - 1.96 3.% 5.96 7.32 7.72 7.52 7.32 7.06 6.88 6.64 6.36 Prop.,aed IEuD project: Mari. Cinc.t 3 - - .28 .70 .86 .84 .80 .76 .72 .68 .64 .56 War repatioon loa H .10 .24 .28 .24 .21 .18 .14 .11 .7 .064 .01 Future eno: Ago 2 - - .15 .65 1.15 1.50 1.48 1.44 1.41 1.37 1.33 As-9e future lo. - - - .25 1.23 3.40 6.51 9.82 13.33 17.22 21.34 24.20 Sob-Total 2.92 6.13 10.80 13.38 16.06 18.80 21.67 24.36 27.20 30.46 33.87 35.98 Local curramoy loom 5.64 .04 .04 .64 1.53 2.12 2.72 2.71 3.00 3.60 3.60 3.60 Ioteraet - capital took 3.28 - - - - - - - - - 9.98 9.98 Sub-Total 8.92 .04 .04 .64 1.53 2.12 2.72 2.71 3.00 3.60 13.58 13.58 Total iotare.t 11.84 6.17 10.84 14.02 17.59 20.92 24.39 27.07 30.20 34.06 t7.45 49.56 Amortisoti-o Poreign 007r007 baa.w Ieport Tgpor c Ek. Aaboll 2.03 2.65 4.06 4.06 4.06 4.06 4.06 4.06 4.06 4.06 4.06 4.06 IERC 183 PR: mung. .96 1.30 1.88 2.00 2.12 2.24 2.40 2.52 2.68 2.84 3.04 3.20 IH 297 PR. Angst - - - 1.60 3.28 3.48 3.68 3.92 4.32 4.36 4.64 Propood IIIOD loan: aria, Cristit 3 - - - .32 .64 .68 .72 .76 .80 .84 .92 War rcpscatima loo. - .69 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 .42 Future Ien: Ago 2 - - - - - - .29 .60 .64 .67 .71 .75 Aa-md future lo - - - - - - - 4.64 6.32 6.68 13.64 16.63 Sob-Total 2.99 4.64 7.04 7.16 9.20 11.32 12.01 17.32 19.48 20.27 27.75 30.62 Local corroJsy lown, Aaortittioo .06 .14 .17 .17 .17 .17 .17 .13 .09 - - - S 4oig fubd 2.50 - - .19 .48 .68 .87 .87 .97 1.16 4.21 4.21 Sub-Total 2.56 .14 .17 .36 .65 .85 1.04 1.00 1.06 1.i6 4.21 4.21 Total ortietiom 5.55 4.78 7.21 7.52 9.85 12.17 13.05 18.32 20.54 21.43 31.96 34.83 Total debt servioe 17.39 10.95 18.05 21.54 27.44 33.09 37.44 45.39 50.74 55.49 79.41 84.39 TOTAL APLIC2STIOUS Or 7131)5 V 75.68 105.95 115.42 117.05 132.09 138.84 129.27 169.34 188.75 11.20 l71.81 A,n,o. oh accsI (dafioit) 2.96 2.16 (3.70) (3.88) .05 (.32) (.26) .60 .93 1.68 (.74) 10.09 Sabh tulaoce at begioning of year 10.10 13.59 15.75 12.05 8.17 8.22 7.90 7.64 8.24 9.17 10.85 10.11 Gab balanoe at end of ye 13.59 4 15.75 12.05 8.17 8.22 7.90 7.64 8.24 9.17 10.85 10.11 20.20 Nb.r of tiSme ot io. oovers interest p.yhbla and aocrud 1.4 1.4 1.2 1.2 1.2 1.7 1.6 1.6 1.8 2.7 1.7 1.9 Daber of time not income covera irteat Pqabl. 1.4 3.3 2.2 2.0 1.8 2.5 2.2 2.2 2.4 2.2 1.7 1.9 Number of ti o ob goaration oors total debt service 1.1 2.2 1.7 -1.6 1.5 1.9 1.8 1.7 1.8 1.8 1.3 1.4 ' oa, foraite aokEage portion of auditeur. and disbaro.ente o tbe Aagat paot in 1961-62 ace boan at tbh rxotang. -ut, of e 4 *US 1. Debt service p.y.ata 0 thn Reb. Bad l.onn and the IBPD (RLoa) loan cprect actual P emomta paid by NPC (.exbog. ratea, 8o 2 and 8 3 MS 1). J UEA oontribution to Angst will ot -na W1'1 books d ace thcaor. not conoidured as port of fixd aets in the Weno. sheets. J/ nolwl g 3.05 mi11m oi nintdag rn paymenta m 0 158 mini1 of *apltl etook. / Incrad by F 530 thousand in adjustment for a deorea. u in ckrag capital (1 1.67 aillica) and chacgrg to aurplw (8 1.14 .l111). 5t Sea incom stat_nt for intarest aecrwd an capital stock. NATIONAL P O W R C O R P O R A T I LK ANIZI 6 MA NIL A Net Caah from Operation Contributed towards ERaanion (in dillions of Posoo - Rate of Exchange U581 = P 2 until 1962 V/4.0OO thereafter) .4 years 1958 - 61 4 years 1962 - 65 3 yeare 1963 - 65 Fiscal lear Ending June 30 1958 9 1292 1961 Total % 1S621 1963 n L2 n Total % Total S Internal caoh generation 10.87 13.49 14.24 19.16 57.76 45.5 23.67 30.17 34.76 41.21 129.81 38.8 106.14 39.1 Less: Total debt service 11.73 13.38 17.90 17.39 60.40 47.5 10.95 18.05 21.54 27.44 77.98 23.3 67.03 24.7 Interest during construction (credit)& (1.15) (2.92) (5.02) - (9.09) (7.1) (1.96) (3.96) (5.96) (7.32) (19.20) (5.8) (17.24) (6.3) Net cash from operation 0.29 3.03 1.36 1.77 6.45 5.1 14.68 16.08 19.18 21.09 71.03 21.3 56.35 20.7 Decrease in working eapital - 5.71 3.42 - 4.91 3.8 - 3.70 3.88 - 5.37 1.6 7.53 2.8 Sale of fertilizer plant _ - - 3.18 3.18 2.5 .61 .65 .69 .73 2.68 .8 2.07 .8 Sub-Total: own caoh resourceso 0.29 8.74 4.78 4.95 14.54 11.4 15.29 20.43 23.75 21.82 79.08 23.7 65.95 24.3 Government equity contributions - - - 5.86 5.86 4.6 5.81 10.50 2.50 - 18.81 5.6 13.00 4.8 BDrrovings 32.62 33.86 37.29 2.71 106.48 84.0 43.25 53.93 67.09 71.66 235.93 70.7 192.68 70.9 Total Sources -/ 32.91 42.60 42.07 13.52 126.88 100.0 64.35 84.86 93.34 93.48 333.82 100.0 271.63 100.0 Additiono to plant 3/ 30.50 39.68 37.05 10.56 117.79 92.9 60.23 80.90 87.38 86.11 314.62 94.2 254.39 93.7 Interest during construction 1.15 2.92 5.02 - 9.09 7.1 1.96 3.96 5.96 7.32 19.20 5.8 17.24 6.3 Iccrease in working capital 1.26 - - 2.96 - - 2.16 - - .05 - - - - Total Applications 32.91 42.60 42.07 13.52 126.88 100.0 64.35 84.86 93.34 93.48 333.82 100.0 271.63 100.0 lJ See also footnote 1 of Annex "Sources and Applications of Funds". 2/ For the period 1962-65 this represents interest during construction financed by IBRD loan 297 PE; other interest during construction for the same period is included in total aebt service above. ,/ Most of this decrease represents the investnent in plant of funds borrowed for construction or accumuated in earlier years. This does not affect NPC's working capital position as far an operations are concerned. 4/ Only the net variation of working capital is shown in the tbree and four-year totals. Y/ Additions to plant 1962-1965 exclude contributions from NWSA of P 21.5 million for Angat as they wil not enter NPC's books. MILLING COMPANY Areo covered li COKING . : . -- . . - - I ^ ~COAL- : CEMEN/T PLANT'-M ' ' ' ' - , . t -f g ................... g n ?DAVAO S TEEL WORKS FER 7T/L IZER PLANT9 -g MC CHEMICAL.QMAR/A CR/ST/NA AGUS No. 6 POWER STA TION Proposed Copper-Zinc a Fertilizer Complex AGUS No. 5 \AGUS Nvo. 4 AGUS AUo. MINDANAO ISLAND GUS No. 2 PROPOSED EXTENSION OF A MARIA CRISTINA HYDROELECTRIC STATION FUTURE POWER STATIONS 0 EXISTING POWER STATION - NVE LakR L onGo NOVEM8ER 1957 IBRD-396