"/1/ _ a  _ ) V~~~~~~rI LIl OV101r [ILL IAII ~~~~Vol. 1 r-- ------------ ----- 7-71 L'This report is restricted to use wiithin the Baini kJ INTERNATIONAL BANK FOR REF8NSTRUCTION AND DEVEIDPMENT REPIRT ON THE ANCHICAIA HYDROEIECTRIC PROJECT IN OIOMBIA Loan leaAj leM Loan rDepartme-n'T REPORT ON T.HE ANCHICAYA HYDROELECTRIC PROJECT (CALI, COLO0BIA) I - Purpose and Scope of this Report This report presents an analysis of the Anchicaya hydroelectric project which is designed to determine its suitability for a loan. It includes the recommendations of the Engineering Staff concerning the project. The report is based on information obtained from a number of sources, including technical descriptions and drawings by the Charles T. Main Company of Boston, consulting engineers for the project, construction cost estimates supplied by Christiani & Nielsen. Ltda., Morrison-Knudsen, Inc., and by the Central Hidroelectrica del Rio Anchicaya, Ltda., supplemented by personal investigations of 'A!r. Carl Flesher in his canacitv as a member of the Currie Mission and later as a member of the IBRD Engineering Staff. This report supersedes an earlier document of January 31, 1950, releasd iinerA- t.he tAtle "Report. on Imnhianr annhi raya WHrAroe1ectrin Proiect," No. Loan 81. II - The Borrower A loan to meet part of the foreign exchange costs of the project 'las been requested by ulhe Central lHidroelectrica dl Rio Anchiiaya, Ltda. known as CHIDRAL. This company will build and operate the system, intended for the present to supply the City Of Cali, although it is expected that even- tually additional transmission lines will be built in order to supply other areas. CHIIDRAL was organized in 1944 under Colombian law as a commercial company of limnited liability with the national, state and municipal govern- ments as the only shareholders. The original share capitaL was 1,500,000 pesos, with the National Government subscribing 51%, the Department of Valle del Cauca 23%, and the Miunicipality of Cali, 26%. Capitalization was gradu- ally increased to 11,200,000 pesos in the original *proportions. Stock sub- scriptions were in the form of notes maturing over a period of five years, the last maturity date being December 1950. According to the balance sheet as of M,1ay 31, 1950, (see Table 5) the notes in hand amounted to 1,638,992 pesos. The payments have been made in the form of notes with varying maturity dates because the cash resources of the participating official agencies are subject to annual budget appropriations. NOTES: (1) Rates of exchange used in this report = 1.96 pesos I peso = $.51 (2) The $ sign is used exclusively for U.S. dollars; pesos are _______te ac ____ - 2- increase the capitalization of the company by another 10 million pesos, still retaining thle 0or-irginal io of subscripti.s. The Nat ionlJ UGoVerrLentL LLJU the Department have paid up the new subscriptions in cash. The Municipality of Caii has turned over to CuIDRAL its generating facilities in lieu of cash. According to the latest available information, these have been appraised at 4,CLn/,000 pesos. During the construction period, these properties will be leased back to the Municipality of Cali at a rental of 4% per year plus depreciation charges calculated in conformity with Colombian law at 3.209:L% per year. Because part of the capital has in the past been provided in forms other than cash, a "nulidad absoluta," a technical defect in the incorpora- tion. has been incurred. CHIDRAL has been so notified and will take steo3 to remedy the situation, in order to comply with the provisions of Colombian law governing limited liabilitv cnmnpan!es In the opinioni O Bank onn seve who have visited Colombia, the management of CHIDRAL is competent and capable of satisfactory execution of the nrojiet and its operation af+er completion. ITT - jeacri-twon of the Prolect GHUTMvAT has ^.'1 rig.S.s t-o the development of the Anchi1cayra Riv which is estimated to have a power potential of between 350,000 and 400,000 kw. The ediate projevt concerns the develop1me.nx of only one station kUown as the Anchicaya Center with an initial capacity of 24,000 kw. The originial plans for the project were de-veloped by Colombian engineers and called f o:r the construction of an arch dam on the Anchicaya River, about 30 miles from Cali, which was expected to connect through a gravity tunnel to a power s-ta- tion containing six 15,000 kw generating units. Work was started on the project in 1945 and was stopped in 1948, due primarily to the fact that unsatisfactory foundation conditions developed which rendered the arch dan originally designed for the project unsuitable for the site. In view of the difficulty encountered on the project, the manage- ment retained Charles T. Main, Inc., to review the entire project and to make modifications in the design of the dam and other works which would overcome the difficulties encountered. Charles T. Main recommended that the arch type dam be abandoned in favor of' a gravity type dam, and that the planned eventual production from this station be reduced from 90,000 kw to 72,000 kw. In the revised project, the dam will be a gravity type concrete structure having a maximum height of 180 feet and a length of at least 62j5 feet. The spillway will run approximately 485 feet, which is considered ndequate to handle the max imim flood diseharge in the river. The reservolr created by the dam will have a useable capacity of 2.3 million cubic meters which amoiivnts to little more than weekly regulations for thpe station. Water waill be earriedA from the. reruir through a GOnGrete lined gravity tunnel approximately 20 feet in diameter and 4,400 feet long equipped with a differential surge tank at the lower end, The penstock consists ofi steel pipe with fittings at the base for connection to the turbines. Generating equipment will consist of two 17,100 h.p. Francis type turbines, eaeh directly connected to a 12,000 kw generator. The effective average head on the turbines is 240 feet. Auxiliary electrical equipment is conventional. The powerhouse will be of the outdoor type with the substation located on an auxiliary platform in the rear of the powerhouse. Transforner equipment will step up from the generator voltage of 6,600 to the transmisiion voltage of 115,000. The transmission line will consist of a double circuit system from the power station to Cali. It will be of aluminum cable with a steel core, strung on steel towers. Tqtal length of the line is about 30 miles. A sub- station will be provided in Cali having characteristics necessary to feed the power into the existing distribution system. TV - Water AvailabilitY Stream fMlw reeords for the Anch4eaya River date from 1942 and are not continuous. The watershed above the dam has not been surveyed and rain- fall data in the valley are a1amlab1e nnlv since 194|5T However, by correla- tion with data available on the nearby Cauca River which date back to 1934, it hns bhen estimated that the minimTm Ackilyr fl^r o%f the Anehiesya R;ver at the site of the dam will not be less than 20 cubic meters per second. This asslrMption se. ob esnbe On the basis oP a mn - Im flow of 20 cub4c -eter- per second tinuous power (i.e. 100% load factor) is estimated at 15,600 kw taking into ac_ CO 4 4-t,- A'_A..AT :r 4-U IA __A 4AA : t -u A.T_ An GWVVIILA UI14 |QtUJ.LC&r W 14L 1.l W.A ..LJ UI P .LVV U>)U .A LU Vii I UIIV.LVS .L 1 D I'1C IL estimates that continuous power equivalent to 24,000 kw will be available 95% of the teL.l WAUI s ag JV 4of ULL-LL.LU1I (LUJ.U IIfz%Uers andu ori rUliasħLs of a 52% weeU.y load factor, they estimate a firm capacity of 30,000 kw for the project hius is a very conuervative basis of calculating firm power, srunce it may be expected that the system load factor will decline to about 40 pex- cent as more power becomes available. Under these conditions, firm power will be about 40,000 kw if the periods of minimum flow are less than about one week. This is obviously more than adeouate to meet the requirements of the initial installation. V - Estimated Cost of the Prolect A clear presentation of the estimated cost of the project cannot be given at the present time, as construction contracts for completing the pro- Ject have not yet been awarded. It appears likely that the contract will be given either to Christiani & Nielsen, Ltda., or to iAorrison-Knudsen, Inc., as the bids submitted by these companies are the two lowest of all the bids submitted and, in addition, agree closely in respect of total cost. It should he nnted; howeever. that the two pronosals differ considerably in the relative quantities and values of construction machinery required, in the cost of foreign personnel; and in the unit prices used for manor construction - 4 - materials such as cement and steel. For purposes of this report, the 'C-istliani-cc &Nielsen proposa[ l wras use' as it Ls LtIhI lowr ol te t bIo WU o U The estimated cost of the project given below represts a synt"he- sis of figures presented as of May 31, 1950: (a) by CHIDRAL on expenditures to date and on commitments for equipment to be imported; (b) by Charles T. Hain on the cost of certain equipment items and construction materials not yet ordered, and (c) by Christiani & Nielsen on costs of completing the project not included under (a) or (b). The estimates of the costs remaining to be met have been adjusted to include equipment for and installation of two units only, this represent- ing the project to be financed by the Bank. The total cost of the project as such, which in the report of January 31. 1950, was estimated at 23.8 million pesos, is currently esti- mated at 26.1 million pesos, broken down as follows (figures rounded): Local Foreign Total Cost Currency Cost Currency Cost 7Tn thousr'nR of nesos! thnusands of ULS. dollars equivalents in parentheses) Expended and com- m4itteA +t A 10 ion ( , 1 o A 69o (3, . 3, 2 40 (i Ari) Required to complete 15,340 ( nt 9j710 (i.-;56)') 561l (9r'72'n struction 530 ( 270) - ( - ) 530 ( 270) Total 26,060 (13,296) 16f660 (8,501) 9,400 (4,795) (Note: These figures do not include working capital Z- . - ..L Ann~t f^f^# - _ _ est-ilaut.;u uu auoLu, 4uI,UVV pesos.) The increase over the earlier estimate reflects the increase in the estimated cost of completing the project, the earlier figure being based upon a preliminary estimate submitted by Chri.tiani & Nielsen, while the current figure is based on the most recent estimate available. The difference in the relative shares of local currency and foreign exchanLige cost;s results Lrom ()bie t UbbtbiUbJoL1 0o revised bids f or the com- pletion of the project, (b) a revision by CHIDRAL in the estimated amounts spent to date, and (c) a change in the basis upon which the estimate of the foreign exchange costs required to complete the project waa computed. lviore specifically, the current estimate of foreign exchange costs required to com- plete the project excludes contractors' fees and miscellaneous overhead items,, here included in the local currency costs, since it is not known in what pro- portion these will be divided between foreign and local currencies. Also excluded from the current estimates of foreign exchange costs required to complete the project are certain progress payments on imported machinery and equipment, which have been made periodically during the period in which the loan has been under consideration. Additional detail on the cost of the project is presented in Table 2. VI - Schedule of Construction Approximatelyv 20% of the construction has been finished. The con- struction program furnished by Christiani & i1ielsen provides for the starting of work approximately three months after signing of the construction contract. The estimated completion times for the different items are as follows: Number of months estimated to complete After resumption of IteTm wok nn Anchincaya Item A. Prvpa-nrtn work (^n.1r shops and concrete diversion tunnel 8 6 C. Existing diversion tunnel 9 6 De Dam 29 28 E. Pressure tunnel 25 25 F. Surge tank 18 1 G. Powerhouse 30 29 H. Transmission line 24 18 I. Cali substation 19 11 NOTE: This table does not~ include the plugging of the new diversion tunnel and the installation of the valve in the old tunnel. These are minor operations and are scheduled for convenience near the end of the project. - 6 - Christiani & Nielsen estimate that it will be possible to deliver power to Cali within 28 months after resumption of work. VII - Schedule of Expenditures Expenditures to date represent about 38% of the estimated cost of the project. The scheduling of future expenditures cannot be completely given at the present time. However, the Christiani & Nielsen bid includes a schedule of construction expenditures excluding the purchase of construc- tion machinery and fees. This schedule, which covers about 61% of the esti- mated cost required to complete the project, is reproduced below on a per- centage basis: Percent Soent: End of Specified Quarter In Quarter Cumulant 1st 5 5 2nd 10 15 3rd 12 27 4th (lst year) 10 37 5th 14 51 6th 13 64 7th 14 78 8th (2nd year) 10 88 9th 7 95 10th (project completed) 5 100 Because contracts requiring the expenditure of the bulk of the foreign exchange still needed for the prolect have not been placea, it is not possible to present a schedule of expenditures of foreign currencies. However, for the purposes of estimating interest during construction, it was assumed tlat the construction equipment and materials would all be imported during the first-quarter after the effective date of the loan, an,l that the remaining expenditures would be made at a constant rate. Since the equivalent of about tj32 million has not yet been committed, it is quite possible that orders for some items may be placed in member coun- tries other than the U.S. Should such orders be placed, it may be possible to use a part of the 18 percent subscriptions of these countries. - 7 = VII " 'Ito's of Financing V ħħ..L -il1u IdUUl u IL£ħIiħM The9 original plan for financing thjis project contemplated that iv could be done entirely through stock subscriptions of 11.2 million pesos ($5.(7 million). When it was founu, hIwever, that the cost Of the project would exceed substantially the originally estimated amount, a request for a loan was presented to the IBRD in the amount; of 'lY5°4 million, a sum which included reimbursement for foreign exchange expenditures already made. The analysis of january 31, 1950, indicated that the total cost of the project would be the equivalent of $'j12.2 million. As the equivalent of about 4,$4.9 million had been spent, additional expenditure of about $7.3 million could be expected to be made, of which about $3.5 million represented the foreign exchange component. Therefore, in the previous report a loan of up to $3053 million was recommended, sufficient to meet all foreign exchange require-nents, including interest during construction and working capital sufficient for six months' debt service on the proposed loan. At that time the estimated total cost of the project had not yet been accurately determined. The Engineering Staff therefore based its calcu- lations. resulting in the above-mentioned total. unon information available in January 1950, which consisted of estimates of construction costs made in the summer of 19,9. The above calculation indicated that 6 million nesos of additional capital would have to be subscribed and paid in, bringing the total share capital un to 17.2 million pesos. However; it was understood- that the National Government, the Municipality of Cali, and the Department of Valle del Gauca were go4ng to supply whatever equity capital wo'ld be required to complete the project over and above the amount of the proposed loar. At 4 ail earl phase oP the disc-ssions, the tar-ha adv`sed CHIDRAL that it considered it important that CHIDRAL be in a position to control the operation oI the existing diesei generating facilities oI Cali for the reason that these facilities would be utilized for peaking and standby purposes and must therefore be within the control of the management of the hydroelectric project. Subsequent to January.1950, the management of CHIDRAL decided to negotiate for the purchase of both the hydro and diesel generating facilities owned by the E"mpresas Municipales of Cali. A contract therefore has been concluded under which the Municipality of Cali will sell to CHIDRAL the above- mentioned power plants for the sum of 4,076,000 pesos. This arrangement con- templated that the purchase by CI41DRAL will be, in a sense, in the form of a wash transaction to the extent that the IMunicipality was called upon to pro- vide its share of the original capital for which it has given promissory notes in part. During the period of construction of the Anchicaya project, CHIDRAL will lease back to Cali the existing generating facilities at an annual rental of 4.5% of the net value, plus charges for depreciation. Based upon the contract of purchase of the generating facilities of Cali, the manage- ment of CHIDRAL had decided to increase its capital by 4 million pesos in addition to the 6 million pesos shown to be required in our January estimates, hring.ina the total nu to 21A2 million nesos. still maintaining the original sub Lscripti-on percer.tages oil" 'or eO.- eNtoaGvrrt,2,frth Department of Valle del Cauca, and 26% for the Municipality of Cali. There is a difference of 398,000 pesos between the purchase price of Calils generating faciliti.es and itb unpaid share in the capital of CHIDRAL (3,678,000 pesos). This amount will be amortized by applying the above-mentloned depreciation charges against it. Al-though the competing contractors, of which Christiani & Nielsen, Ltda. and Morrison-Knudsen, Inc., were the two lowest bidders, had filed their bids with CHIDRAL in the late summer of 1949, the Bank did not receive copies of them until March 1950. In the fall of 1949, the Bank was informed by a representative of Christiani & Nielsen, the lowest bidder, that the bid as filed was consistent with the estimate, on the basis of which the Bank's calculations of January 1950 were subsequently made. Furthermore, the bids as filed by both the competing contractors mentioned were on the basis of three 12,000 kw units rather than two, as contemplated for the Bank-financed project. On the basis of information which came in the Bank's hand, no new analysis of the bids was made until July 1950 for the purpose of preparing this report. When the bids were analyzed and reduced to the scale of two units, it was discovered that the completion of the pro4ect based upon the bid of Christiani & Nielsen. Ltda. exceeded earlier estimates of the Bank by 2,245,000 pesos, making a total of 26,060,000 pesos. A comparison between the situation in January and the present is shown. in the following stimnary table: (In thouannQ of pAesqos January 31 September estbr,i.a+e t stma+ te ' 1 Ov-1al 1 of2 01 ec 9l 2606 2. Additional working capital required 400 400 I Aori44ai,inn ^^Qa+o o f'.Pal &nlnV%+e - I 7A 4. Total cost to be covered 24,215 30,536 Proposed sources of funds: 1. A-oUr;t P loar. ($--- 9 "5J r-rn nf)n OOO 'I n.tV1 Cn9 n J.s u ULUUW O.L ħJAUJW ..LIqLA cl,'JUk7 / ,7.L7 v7- 2. Capital paid in or committed for 11,200 21,200 3. C,redkt ħ1f-l al.L. - 3 18,119 28,517 Indicated shortage of resources 6,096 2,019 Less estimate cash revenues during construc- tion from lease of Cali plants to Hunici- pality per Table 4 485 Net deficiency 6,096 1,534 1; I.e. the difference between acquisition cost of the Cali plants and the amount owed by Cali. -7- ILLI Ul.It .L.LgIlLL. UJ. t,IiAU %;1PJLUjR.L.L.LVW IħU.LrLL-W r,LVrZU LLU w4z .LJUVVVUU.V it is evident that CHIDRAL will have to increase its capital by 1,534,000 pesos or, say, 1,600,000 pesos, in order to cover the estimated costs based upon the proposed contract of construction. The Bank is aware that the proposed contract contains escalation clauses calli.ng for increases in the contract price in the event that cost of labor or material rises from the levels originally assumed by the bidders. There is no doubt that these costs have risen appreciably since the late summer of 1949 and may rise further during the construction period. It is, however, not recommended that on account of these factors additional sub- scription to the capital of CHIDRAL should be required precedent to signa- ture of the loan agreement or to the effective date of the loan. IX - The M4arket for Power The Municipality of Cali is estimated to have a population of 165,000 inhabitants. The city is located in the rich agricultural Cauca Velley not far from the southern boundary of the Department of Valle del Cauca, and is the center of an air, rail and highway network connecting other population centers such as Popayan in the south, Manizales and I4edellin in the north, and Buenaventura, which is the maior port of Colombia. Except for Cali and Buenaventura. which is some go air kilometers from Cali, the population is predominantly rural. The growing of coffee, corn- riGjp-tain- a sugar ne; anttte raiAing arA the mainr agricultural activities. Industry, as in other sections of the country, is -ralnl+A -tal tr iini;mne%-+an+ al+.hrmlerh crrim.Tner or-+ilrnly T^66- - E,T s- few and, in this area, limited mainly to textiles and sugar refining, although I t n na + ĥa to recer+1 yel ats+ bot c~ ,~. emer. ,a n contai,4ne,+,n r lan,rac ing c1vnrnaAse some importance. Electric power is, in this area as elsewhere in Colombia, in shortI suppjLy arLLU PI-UoyouLti f.L7r sinWL.LJg theULL pJUWer ULo Ube prucedUUU b)y Uthe neL1 station appear good, as considereble industrial expansion is being planned. At present Cali and the immediately surrounding areas are being served by five municipally owned generantig plants and in addition, peak power is purchased from the Compania Colombiana de Electricidad at Palmira. The generating capacity of the municipally owned plants consists of one hydro plant of 400 kw, one diesel and two nydro piants oI 1,00U hw each and one diesel plant of 5,040 kw. These plants were formerly owned by the Compania Colombiana de Eilectricidad, a subsidiary of American and Foreign Power. Its properties within the legal limits of the Manicipality of Cali were expropriated several years ago and the price to be paid for them was the subject of protracted negotiations, but the matter has finally been settled on mutually acceptable terms. The Empresas Municipales of Cali have recently purchased a new diesel electric unit with a capacity of 1,680 kw which was scheduled to go into operation on October 1, 1950, thereby increasing the total capacity of the hydro and diesel plants to about 10,100 kw. Peak load requirements can be obtained to the extent of about 4 500 kw from the "Nima" hydro station of the Compania Colombiana de ElectriciSad. - 10 - A contract has been drawn up and approved between CHIDRAL and Cali under which the former will be the sole supplier of electric energy to Cali, and Cali will be the sole distributor of energy generated by CHIDRAL. These provisions will go into effect as soon as CHIDRAL is capable of supplying 24,000 kw to Cali. The latter will also be bound by the terms of its con- tract to expand its distribution system so that it will be capable of absorb- ing 100 million kwh per year. This expansion is to be programmed so that both the Anchicaya plant and the distribution system shall be completed at the same time. It appears, therefore, that there will be adequate distribu- tion facilities for the electric energy to be generated by CHIDRAL. The probable development of the market for power is presented in Table 1. It is based on records for 1948 and 1949 of energy generated by Empresas Hunicipales of Cali, plus purchases of power from Palmira, since generation bv CHIDRAL wvill replace both sources. An annual rate of increase of 6% in kwh generated was assumed for the period 1951-1963. While possibly a higher rate might be exneAr1enced in earlier years; it is nronable that distribution losses will be substantially reduced from their present level of about 20i-. This will result f'rom the fact that additional capacity will be provided for existing grids, while new distribution lines will at first be- 1-nl+lrr lad The pierce..+age increas4e 4i Ik., enerated will1 therefore be lower than the increase in lkwh sold. For this reason, it seemed advisable to adopt the- more- mddet rt04 -nre? - in kwh generat4-ed o- e 4-1-1 thouh;u UL Qi.4 SJjJ Li i'i Luvlu i L IWJ'.-L c .x .V iJ iLiu. ip JLA ZlW14 rVL v.4~~ JL -10 UIJ.L U"r11VA~UIL the entire period. The load factor in 1948 was approximately 47 percent. It is prob- able thaiM as iaie ava.LLab.iLivies UL enTerrgy increase, truit load facvor wil.l gradually decline to about 40 percent. On this basis, the two units to be installed at Anchicaya will be fully loaded by the e-nd Of 1'9)5 at which X Ime it will be necessary to draw upon the generating facilities purchased from Cali. These should be adequate to meet the growing demand until 1960 or 1961, when it will be necessary to install a third unit. It should be noted that the current estimate of CHIDRAL1s market for power, as presented in Table 1, is considerably nigher than the estimate presented in the report of January 31, 1950. Thus, the current estimate of kwh to be generated by Anchicaya in 1954 is 51%o higher than the estimate of January 31, 1950, for the same year. At the time of writing of the earlier report, the itformation available to the Bank indicated that kwh sold to consumers in Cali amounted to about 35 million kwh in 1948. The projections for future years were based upbn this figure, adjusted for distribution losses. Information received recently indicates that the earlier consumption figure represented only metered consumption, which should be increased by about 23% to take into account public street lighting and unmetered sales. Also, in the absence of any basis for determining distribution system losses, it had been assumed that these were 10 percent, in order to provide a con- servative basis for forecasting the probable future market. It now appears that distribution losses amount to about 18% - 20% of kwh generated and pur- chased. Finally, an increase of 20 percent in consumption took place between 1QA8 and 19/9. The nurrent forecast for future years has taken into account - 11 - the three factors mentioned above, the combined effect of which is to increase the estimated market for power in Cali by approximately one-half. The esti- mated sales by CHIDRAL to Cali show an even greater increase over the earlier figures. FoIr, while at the earlier date it appeared that Cali would continue to own and operate the existing plants, using the hydro plants for base load operation, and the diesel plants for peak loads in later years, under the present arrangement, with CHIDRAL owning the existing plants, all power gener- ated by these! plants will be sold by it. X - Earnings and Cash Position The AnchLcaya station is a high cost installation, the investment amounting to about i560 ner installed kw. If it were necessarv to service the full amount of the investment, the cost of power even at full capacity woil(d ha aboutht. T.ST. npr wLh, asc c.omnnred writth n-flA TT-; in ronmnArshTh plants in Europe and North America. However, about 73% of the cost of this plasnt is estimated~ to, bea met wit shr capit-al so~ that. ajy'r ric i9 ael' on only about 27% of the investment. Estimated revenues, expenses, earnings and the cash position of CHmTRAT Lfro. 1950 t9 ough 10are in, maL- es 32 and 4 T. 4I-1n calculations on which the tables are based, revenues have been estimated onI,I the bas s of aMLL, wquiLVa.tLWL to 2.6U centaIJVUos p.-l kWh. This rate is based upon the following rate schedule agreed upon between CHIDRAL and tUhe 14Uħi.LUalF y fU CliUU., an.d a1pUrUved by VU e11 sharVehoħLUders- . of n.LLaL; 2.6 centavos per Kwh ior tne first iOL miliion kwn consumea during the month; 2.2 centavos per kwh for the next 2.5 million kwh consumed during the month; 1.5 centavos per kwh for the next 2.5 mi7lion kwh consined during the month, 1.0 centavo for each additional kwh consumed during the month. Since monthly sales by Anchicaya will average less than 10 million kwh until 1961, the effective rate will be 2.6 centavos throughout the period covered by Tables 3 and 4, except to the extent that seasonal variations may result in consumption in some months in excess of 10 million kwh. The loss in revenues resulting from this factor would in any case be of minor impor- tance during the period 1953-1960, and for that reason nb attempt was made to adjust the figures for this possibility. The above rates, while expressed in local currency, will be subject to adjustment should the Colombian peso be devalued in relation to the dollar. Operating expens'es used in the calculations are those estimated by CHIDRAL for the Anchicaya plant, adjusted for the operation of two units, plus the cost of keeping the Cali stations in standby condition until 1955. - 12 - For later years the above figures have been increased by the costs of opera- tion of the Cali diesel plants. Debt service is on the basis of an assumed loan of I.V3.53 million. The term of t,he loan is assumed to be 20 years, including a 3-year moratorium on amortization. A commitment charge of three-fourths of one percent was assumed, with an interest rate, including commission, of 4%. It appears that this project will show a net surplus after service of the proposed loan of about <186,000 in the first half-year of operation. The net surplus rate for the next year will be somewhat lower, but will ris3e at a moderate rate of about j`60,000 a year throughout 1960. The rate of return on the total investment, includine the existine plants, will rise from 2.7% per year in 1954 to about 5.5% by L960. Sometime during 1960 or in early 1961. the vsatem will be overloaded and it will he neeessarv to install additional generating capacity. Probably the most economical means of providingr this qdditicnal capacity will be through the installation at Anchicaya of a third hydro unit similar to the first two. Since the civil works will have been completed, the new investment for a unit of this size will be moderate. If it is assumed that the cost per kw will amount to as mu-tch -as `4150- for the th4rd unit, an ir,vestment of albout $1 0,0 wl be required. The acciunulated surplus throughout these years will be more than. sa,,CCier. a+o4. cover +his ne i-.,*nran4nmnb,+ IJttA 4 ~)4')* U ') I.AJV'). L.O AV .&LhV 4Q t4U~. l- A It4 1.1_h1o 'd b notl-edtathe es'Xa'es of the costu O.L tlle prJec-Vt; and of the market for power must be accepted with some qualifications. The cost of completing the project may exceed the current estimates. The market for power may be lower than has been estimated here, since it is not certain that the figures for kwh generated and distributed in Cali are correct. Nevertheless, the earnings prospects on sales as low as 56 million knwh per year (i.e. 10% lower than the 1949 generation plus purchases by Cali), would be sufficient to meet all operating and financial charges, including service of the IBRD loan and depreciation on both the Rio Anchicaya and the Cali generating facilities. Should the cost of completing the project rise above the current estimates, it would become necessary for CHIDRAL to raise addi- tional equity capital, but once the necessary amounts are obtained, earningts would be more than sufficient to assure service of the IBRD loan. XI Recommended Basis for a Loan A loan on this project appears to be justified for the following reasons: 1. The estimated expansion of the market for power in the Cali area seems to assure an adequate initial demand on the Anchicaya station and indicates that capacity opera- tion will be obtained by 1956. 2. 1Cstimated earnings show that the project is self-liqui- datingg in termg of lntal crv'r1encyv enuivalent of the amounts required to service the proposed loan. - 13 - 3. The project provides a basis for future expansion to a capacity of 72,000 kw at relatively low cost, provided that this amount is supplemented with steam and diesel units. 4. An investment equivalent to about $5.2 million has already been made in the project and the additional investment of about $L8.1 million which is required for completion has satisfactory earning prospects. 5.- The existence of a new supply of power with the possi- bility of easy expansion should accelerate industrial exDansion, rural electrification and increased use of irrigation in the Cauca Valley. It appears that the Bank can favorably consider a loan on this proiect un to $;3,.53 million to cover nart of the foreign exchange cost of the project. The distribution of foreign exchange requirements by subsections of the entire project cannot at the presen.t time be properly spenified because of -the wide variations between the two lowest bidders in the compo- sition of the total e mene A tentative breakdown, based on t1 i a & Nielsen bid, is approximately as follows: 1.. Dam and headworks ..................... , $ 77,000 2. Powerhouse and step-up substation ......... 313,000 3. Transmission line .................... . 377,000 4. Cali substation . ....................f. 47,000 5, Construction equipment and materials ...... 1,365,000 6. Interest during construction ............. e 270,000 7. Freight, escalation, and contingencies .... 535,000 8. Unspecified, including fees, overhead, and miscellaneous items..... . ... . 546,000 Total ........... 3,530,000 N.OTE: The allocation between the powerhouse and the Cali substation is somewhat arbitrary, as CHIDRAL does not allocate p-Jy.ments on a Westingb.ouse order for electrical equipment for the two subprojects. - 14 - If a loan is granted on the project, it should be subject to the following conditions: 1. Before the effective date of the loan, additional share capital will be assured to cover the local currency required to complete the project and to provide adequate working capital for its operation. This is estimated at approximately 1.6 million pesos. The increase in capital shall be obtained in a manner that is in conformity with existing Colombian law and shall also be on a schedule that will permit mainte- nance of the construction schedule established for this oroiect bv the contractor nhosen for the iob. 2- Before the effentive date of the loan, Rntisfctnory contracts between CHIDRAL and the proper authorities in CGli shall hp. mihmit ħPA to the Bpnkr eurering the terms and conditions under which the sale of power to Cali wil.17 +tae, place 3. A copl+ list o-f go s n+ be until international bids have been received on all prinWip4a-- 4te -- to b purchased wit the 4rced of4 ~- --- tL J.LI4.L1%.J~.CL. J.1 ZII UV PL~ J 4ħ %A~ W. .Lħ1 ULJ U~ ..L the loan. Any substantial reduction in the estimated foreign excIange UOUtS of the project sho-uid bring about a reduction in the amount of the loan. J. Grauman This report has been prepared in cooperation with the Assistant Loan Officer. I'ABIE 1. Forecast of Electric Energy Requirements and of K.W. Demand by Cali Energy requirements for Cali Load factor K.W. demand (millions of K.W.H.) (percent) / by Cali 1948 51.71/ 1949 62.22/ 1951 680 IR/ 1953 7605-3/ 45 19,400 1954 81.1 43 21,500 1955 86.0 42 23,400 1956 91.2 41 25,400 1957 96.7 40 27,600 1958 102.5 40 29,300 1959 108.7 40 31,000 1960 115.2 40 32,900 1961 122.1 40 34,800 1/ Actual, according to information transmitted by CHIDRAL in "Informe, 19L8" published bv Emnresas 10hiritn1pas Cali, and in le-tter Nob 220/250-G, of July 26, 1950. Figures represent generation by Gli's c ni.m nlants nlu purchases of peak po^-wer fr-om 4a v-in °/ Caculaed o the ssum+ion+ha.+ A4-wdise ui-t of about 1700 K.WJ,,, now being installed, would be operated at a 40% load factor , cmid t+ +.the generStio of tuL ,emining its, , .lus -r chases from Palmira would be held at the 1949 level. 3/ It is assumed that the annual rate of increase in energy requirements wJJll be arproxuuuey vio per WJULWI f or v.hej per-iod 1953-1961. 4/ The load factor in 1948 was approximately 47 per cent,. IT is assumed here that as the supply of electric energy is improved, the load factor will decline in the manner shown in this column. Table 2 - Estimated Cost of Construction and Equipment of the Anchicaya aydroelectric Station. Including Trans- mission and Cali SubstatioU (All figures expressed in U.S. dollar equivalents) Estimated Cost,Spent Estimated Cost to be Spent Total Esti.mated Cost Local Local Local Total Currency U.S.$ Total Currency U.S. $ Total Currency U.S.$ I - Const.& Const.Mach. & Suppliesr 1. Land and rights 27,000 27,000 0 0 0 0 27,000 27,000 0 2. Roads and auxiliary works 719,200 - - 78,200 - - 797,400 - _ 3. Auxiliary plant 253,300 - - 0 0 0 253,300 - _ 4. Dam,headworks,diversion tunnel 1,341.200 - - 3,115?700 - - 4,456,900 - 5. Power tunnel 806,100 - - 727,800 - - 1,533,900 - 6. Penstocks 100 - - 173,300 - - 173,400 - 7. Powerhouse and tailworks 703,900 - - 1,152,700 - - 1,856,600 - - 8. Station mech. & elec.equipment incl. step-up substation 6,ooo - - 158,500 - 164,500 - - 9. Transmission lines 99,300 - - 230,300 - - 329,600 - 10. Cali su station 1,300 - - 144,400 - - 145,700 - - 11. Other 11 50,000 0 50,000 147,100 0 147,100 197,100 0 197,100 12. Total I 2 4,007,400 3,545,100 462,300 5,928,000 4,246,400 1,681,600 9,935,400 7,791,500 2,143,900 II - Mach. & Equip. excl.construction - 13. Tunnel gates 31,100 0 31,100 G 0 0 31,100 0 31,100 14. Mechanism for tunnel gates 62,400 0 62,400 1,800 0 1,800 64,200 0 64,200 15. Penstocks 95,800 0 95,800 0 0 0 95,800 0 95,-800 16. Turbines and governors 309,500 0 309,500 4,900 0 4,900 314,400 0 314,400 17. Generators,switchboard, transf. 486,300 0 486,300 125,700 0 125,700 612,000 0 612,-000 18. Auxiliary hydraulic equipment 58,600 0 58,600 0 0 0 58,600 0 58,600 19. Cali substation 130,000 0 130,000 46,400 0 46,400 176,400 0 176,400 20. Towers for transmi-sion line 0 0 0 126,100 C 126,100 126,100 0 126,100 21. Trans.lines & accessories 0 0 0 250,300 0 250,300 250,300 0 250,300 22. Cranes 0 0 0 33,900 0 33,900 33,900 0 33,900 23. Misc.Equipment for Dam 0 0 0 74,600 0 74,600 74,600 0 74,600 24. Mise.Powerhouse Equioment 0 0 0 149,900 0 149,900 149,900 0 149,900 25. Freight, I surance, Misc.1/ 17,300 0 17,300 200,000 C 200,000 217,300 0 217,300 26. Overhead 4.' 0 0 0 270,000 270,00C 0 270,000 270,000 0 27. Escalation & contingenctes (10%) 0 0 0 165,000 0 165,000 165,000 0 165,000 Table 2 (Cont.) Wstimated Cost Spent Estimated Cost to be Soent Total Estimated Cost Local Local Local Total Currency U.S.$ Total Currency U.S.$ Total Currency U.S.$ 28. Fees not included in above 0 0 0 450,700 439,0o 11,500 450,700 439,200 11,500 29. Total above 1,191,000 0 14l3,000 1,899,300 709,200 1,190,100 3,090,300 709,200 2,381,100 30. Total I and II 5,198,400 3,545,100 1,653,300 7,827,300 4,955,6oo 2,871,700 13,025,700 8,500,700 4,525,000 IlI o Interest during construction 0 C 0 270,000 0 270,000 270,000 0 270,000 Grand Total 5.198.400 93545.100 1.653,300 8,097.300 4.9S5S.600 3,141,700 13.295.700 Soo 800.7o 4.795.000 Note: This table was obtained by adjusting the figures in IBBD document No. Loan 81, Table 3, in accordance with revisions surplied by CHIDRAL and Christiani and Nielsen. The figures in items 15, 16, 18, 19 and 21 represent a somewhat arbitrary allocation of two orders placed with S. Morgan Smith and Westinghouse. In the above table, the dash ( - indicates that the breakdowrn of exoenditures into local and foreign currencies is not available. lj Includes design fees and costs of foreign personnel. V/ The U.S. dollar component represents the sum of line 11 and of the delivered cost of construction machinery and supplies which have been allocated to items 2 - 10. 3] For itemns 13 - 24 only. i/ Represents the cost of the central office and of a construction supervisory and auditing staff. TABLE 3. Forecast of Current Income of and Expenditures by CHIDRAL, 1953-1960 (All figures in thousands of U.S, dollars) Operating Income expen5es avail]ble TRRnT Income .rom including for IBRD debt Net Surplus Year EnerFv salesY denreniationnv deht servire _ servie Ai lnTt 195& q057 21i 293 107 186 1A 1954 1,076 428 648 288 360 5146 ___< 1 1i1 1428 713> 288 1425 97) 1956 1.,210 136 774 288 486 11457 19517 -i 3 ))Ao 69 ,' 2 1958 2.,360 1483 877 288 589 2,572 1°ff9 ~ ~ ~ ~~~1 0A nl.2 lQ 9Q 9e -l 288 62 3c: J.,L4A4 ~ 47W .44 rLJ .,3 IJp 1960 1,528 515 1,013 288 725 3,953 Based on f'orecast of kwh requirements of Cali, to be sold at a price of 2.6 centavos (1.3265 cents U.S.) per kwh, g/ Composed of the following items: Operating expenses of Anchicaya station $123,000 per year; cost of keeping the generating facilities purchased from Cali in standby condition = $25,000 per year; depreciation - $213,000 for the Anchicaya plant and $67,000 for the Cali facilities; operating costs of Cali's diesel units = .75 cents U.S. per kwh, y/ Calculated on the basis of a loan of $3.53 million, at 4% interest, and three year moratorium on amortization, For the purposes of this table, it is assumed that the effective date of the loan was October 1, 1950. Debt service is charged to the period in which it is accrued. W Figures represent one-half year's operation. Table 4 - Estimated Cash Position of Central Hidroelectrica del Rio Anchicaya Ltda. ;J To 12/31 1951 9.52 1M53 19S4 1955 1956 1957 1958 1559 19_6 1950 I II I Ii I II A. Local currency in thousands of pesos- Balance from preceding period - 7,379 6,127 4,247 1,918 - 1l44 -1,134 - 768 - 62 771 1,724 2,755 3,910 5,195 Payments on cagital subscriptions 21,200 - - - - - - - - - - - Loan from Cali / 398 - - - - - - - - Sales of nower - - - - - - 995 2,109 2,236 2,372 2,515 2,666 2,826 2,995 Other: Rental Charges on Cali plants 3/ 46 91 89 88 86 84 - - - - - - - - Depreciation It 33 66 66 66 66 66 - - - - - - Total funds available 21,677 7,536 6,282 4,401 2,070 7 - 139 1,341 2,174 3,1IL3 4,239 5,421 6,736 8,190 Constr.fexpenditures !J 51 10,189 1,343 1,969 2,417 2,148 1,073 - - - - - - - - Purchase of 'Cali en. plants 4 076 - - - - - _ _ _ _ _ _ _ Amortiz. & int. on loan from Cali 33 66 66 66 66 66 - - - - - - - - Operating expenses incl. deprecia- tion & IBRD debt service - - - - - - 629 1,403 1,403 1,419 1,484 1,511 1,541 1,574 Balance at end of period 7,379 6,127 4,247 1,918 - 144 -1,134 - 768 - 62 771 1,724 2,755 3,910 5,195 6,616 B. Foreign Exchange in thous. of dollars- Pal. from preceding period - 1,996 1,609 1,215 816 412 IBED loan 3,530 - - - - Expenditures including interest during construction 5j 1,534 387 394 399 404 412 Balance at end of period 1,996 1,609 1,215 816 412 - 1/ It is assumed that the transfer of the Cali generating olants w-s effected and that rental and deoreciation charges began as of October 1, 1950. This Table does not include workin-j capital requirements, estimated at 400,000 pesos. .Jl The sum of 39&,000 pesos renresents the difference between the assessed value of the Cali generating plants and- the amounts still owed by Cali to CHIDRBJL on its snare in the oldi subscription of 11.2 million ipesos plus the new subscription of 10 million pesos. The sum will be amortized by applying the depreciation charges (3.2091A per year calculated quarterly) against principal and interest at 4.5 per year. 3/ Calculated quarterly at the rate of 4.5` per year on the depreciated value of the Cali generating plants. 4/ The timing of peso expenditures is based upon the expenditures schedule of Christiani & Niielsen. 5/ Por the purposes of this table, it is assumed that the total amount of the Bank loan will be withdrawn; the total peso expenditures for construction represent the difference between the estimated cost required to complete the project and the amount of the loan. TABLE 5. Balance Sheet of CHIDRAL as of May 31, 1950 (in thousand pesos, rounded) ASSETS LIABILITIES Cash 0.1 Subscribed caDital 11,200.0 Banks 54.9 Various creditors 238&.4 Shareholders notes Current accounts 269.7 National Govern- Interest, discounts & ment 561.0 sundries 160,2 Municipality of Cali 1,078. 1.639.0 Investments 2.5 Funds available 1,696.5 Prod-untion of materials 8.8 Equlnn..ent and supplies l,128.7 Tess : Aoccumlat:ed depreciation 273.0 85 .7 Permanent machinexy 2,592.0 C.ost of cornstLr-cic- tion to date 6,715.3 10, 171 o 11,8683,3 119,868.3 Contingent Assets Contineent Liabilities (contra) 436.1 (contra) 436.1