RESTRICTED Report No. TO-320a 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 The report may not be published nor may it be quoted as representing their views.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 THERMAL POWER AND SEA WATER DISTILLATION PROJECT MALTA July 29, 1963 Department of Technical Operations CURRENCY EQUIVALENT 16= US $2. 80 TABLE OF CONTENTS Page SU4vARY i I. INTRODUCTION 1 II. ELECTRICITY AND WJATER SUP?LIES IN 1NALTA 1 Electricity Supply 2 later Su ;:ply 3 III. THBE ivALTi ELECTRICITY BOARD (IE3) 3 Organization and lfanagement 3 IV. THE PiARK.2axT FOR POUER AND -WATER 4 Power Sales 4 Forecast of Power Sales 5 Growth in Power System Denand 5 New Generating Plant Requirements 6 Wgater Consumption 6 Growth in iater Consumption 6 Water Distillation Plant Requirements 6 V. THE PIROJECT 7 Status of Engineering 8 Construction Schedules 8 Estimated Cost 8 Allocation of investrent between Power and Water Distillation 9 Power - Unit Construction and Generation Costs 10 Water Distillation Costs 10 Water Delivery Costs 11 Total IWTater Production Costs 11 VI. FUTURE EXPANSION PROGRAMI 11 VII. FIMA.-TTCIAL ASPECTS 12 The Dialta Electricity Board 13 Status of the Government Capital 13 Capital Expenditures and Sources of Funds 14 Rates and Estimated Financial Results 15 Auditing Procedures 16 V:II, JUSTIFICATION OF THE PROJECT 16 IX. CO\CLUSIOYS 16 TABLE OF CONTENTS (Cont'd) AREXES 1. Actual and Estimated Sales of Electricity, 1957/58 - 1969/70. 2. Actual and Estimated kwh Generated and System Maximum Demand, 1960/61 - 1969/70. 3. Graph Showing System Maximum Demand and Firm and Installed Generating Capacity, 1958/59 - 1960/70. 4. Detailed Description of the Project. 5. Site Plan of' Malta "B" Thermal Power and Sea Water Distillation Station. 6. Comparison of the Estimated Costs of a 25 IW Power and Distiliation Plant with the Estimated Cost of a 25 DiW Power Plant. 7. Malta "B" Station - Details of lenerating Costs. 8. Details of 'Jater Distillation Costs. 9. Income Statements, 1960/61 - 1969/70. 10. Cash Flow Forecast, 1963/64 - 1969/70. 11. Estimated Balance Theet, 1962/63 - 1969/70. Hap of Malta, Comino and Gozo. MALTA THEIRMAL POWEJR AND SEA VIATLER DISTIDLATION PROJECT SUNEARY i. This report covers the appraisal of a project of the Malta E-ectricity Board (KEB), consisting of the first stage of the Mlalta "B" thernal power and sea water distillation station, the provision of water Rains from the station to an existing reservoir, and the provision of workshop, office and stores buildings. A Bank loan of US$7-5 million equivalent has been requested to cover the foreign exchange cost of the project, the total cost of which is estimated to be the equivalent of US$jlO.12 million. ii. IEB has been established to take over the assets, liabilities and responsibilities of the Electricity Branch of the Government Water and Electricity Department. The borrower would be the State of Malta, which would in turn relend to MEB. iii. The Mfalta "B" station would have an initial installed generating capacity of 25 PIWT and a water production capacity of one million imperial gallons per day. It is being designed for an ultimate capacity of 100 1"W and a water production of six million imperial gallons per day, and many features, such as the cooling wqater system, would be suitable for the next stage of development. The station would be operated by MEB as an integral unit. Its electrical output would be fed into the MEB distribution system and its output of distilled water would be sold in bulk at cost to the Government 1Water Department. iv. The project is technically sound, the estirated cost is reason- able, construction schedules are realistic, and arrangements for construc- tion are satisfactory. v. The Ordinance which has established MEB and which will govern its operation is satisfactory. vi. The organization planned for DED should be satisfactory. As an interim measure the existing staff of the Electricity Branch of the Electricity and Water Department is being detailed for service with NEB. This staff will have to be strengthened, particularly at top levels, if IEB is to operate efficiently. The Government has agreed to recruit additional staff to strengthen its management. vii. The financial position of NEB is expected to remain sound through 1965/66 without the need for any additional increase in tariffs. An overall tariff increase of about 5% will probably be required in 1966/67. The return on net fixed assets in operation is expected to average about 8% for the period April 1, 1963 to Iifarch 31, 1970. This is satisfactory. 1EB should be able to cover about 3h% of its capital requirements for expansion during this period from internal resources. - ii - viii, The project is justified by the growing demand for electric power and increased needs for water which can no longer be met from natural sources. There is no alternative method of meeting these demands w-hich would compare favorably on an economic basis. ix. The project is considered suitable for a Bank loan of US87.5 million equivalent, for a period of 20 years, including a grace period of three years on amortization payments. MKALTA THER14L POT'IE.t? [.UD SEA S ATIE DAT STILLATiON PROJECT I. INT2.0DUCT ION 1. This report covers the appraisal of a project of the Malta Electricity Board (NIB) consisting of the first stage of the Plalta "B" thermal power and sea water distillation station, the provision of wTater mains from the station to Luqa reservoir, and the provision of workshop, office and stores buildings. 2. The station would have an installed generating capacity of 25 11W and a water production capacity of one million gallons j per day. It would be operated as an integral unit and the output of distilled wrater would be sold in bulk at cost by 1VEB to the Government Water Department. 3. The estimrated cost of the project, including interest during construction, is 13.62 million (US$10.12 million). The Bank has been asked to make a loan of 12.68 million (US$7.5 million) to cover the esti- nated foreign exchange cost. 4.. DEB has been established to take over the assets, liabilities and responsibilities of the Electricity Branch of the Government Water and Electricity Department. The borrower would be the State of M.alta, which would in turn relend to WEB. 5. This report is based on information subii-itted to the Bank by the Government of 11alta, and on the findings of a Bank mission which visited Malta in January and February 1962. It has subsequently been updated by more recent information subomitted by the Government. The consideration of the loan was held up pending passage of necessary legislation. II. ELECTRICITY kNTD MiATER SUPPLIES IN MALTA 6. The Maltese Archipelago, a British colony in the hediterranean, has an area of some 120 square miles, and a population of about 330,000. The first public electricity supply system in halta commenced operations in 1894. The public water supply system started operations much earlier. Both electricity supply and water supply were the responsibility of the Government Public Works Department until 1930 when a new department, the Vlater and Electricity Department, was established to take over these functions. 1/ Imperial gallons used throughout this report. One imperial gallon = 1.2 U.S. gallons. - 2 - 7. The Government decided some years ago that existing arrangements for electricity and water supply were unsatisfactory and in 1960 appointed a committee to exarine and report on the situation. In 1961 the conmittee recommended the establishment of an autonomous statutory authority to take over responsibility for electricity supply and the setting up of a separate government department to be responsible for water supply. 8. The committee's recommendations were accepted by the Government and an Ordinance establishing the l-falta Electricity Board has recently been approved by the Legislative Council. This Ordinance is discussed in Chapter III below. Electricity Supply 9. i1B is the only authority supplying electricity to the public. The Ioyal Navy operates a system which supplies the Naval Dockyard and NTaval, Military and Air Force establishments throughout h,,alta. There are also a few small private diesel generating sets in operation which were installed immediately after the war when public supplies were restricted. 10. The Navy power station, which is situated in the Dockyard, has an installed capacity of about 20 MW. The generating plant consists of two 6-41iW steam units which were installed in 1955 and a number of diesel units9 of various capacities, which are 20 to 25 years old and are due for retire- nent in 1965. The two systems are interconnected by a cable rated at 3 1NVJT, but additional cables are being installed which will more than double the present capacity. J1 PIEB's facilities consist of a 25-1lY steam power station and a distribution system which supplies Lalta and the two small and sparsely populated islands of Comino and Gozo. 12. The power station, which is located underground at h-arsa in allta, has five 5-l,H units, three of which were commissioned in 1953 and the other twzo in 1960. The station was constructed underground for de- fense reasons. 13. Prior to 1953 when the Varsa power station, which operates at 11 kv 3 phase 50 cycles, was commissioned the supply frequency was 100 cycles per second. To enable supplies to be given over the existing dis- tribution system freouency changers were installed but it soon became apparent the s-ysteml rould be inadequate to nmeet increasing loads and the installation of a completely new 11-kv 3-phase 50-cycle distribution system was commenced in 1954 and cormpleted in 1959. The new systerm supplies the islands of Conino and Gozo by subrarine cables. Previously each island had its oim diesel generating plant. Supplies to consu-ers from the new 50-cycle system are given at either 2h0 volts single phase or 415 volts 3 phase instead of at 200 volts single phase from the original 100-cycle system. - 3- Iatea Supply1 14. The Government Water Department supplies practically all of the water consumed in Malta. There are a few industrial establishments and a nuriber of farms with their own wells and pumping equipment but the amount of water they produce is relatively small. 15. All the water obtained in Pialta is pumped from underground sources. -3ain water percolates through the ground and forms twzo water tables knowm as the Upper WITater Table and the Lower lain Sea Level v.ater Table. The Upper Wlater Table consists of rainwater which has percolated through rock formations and which rests on an impermeable layer of clay. The Lower Wlater Table consists of rainwater which during its descent through rock formations and fissures finds no impermeable layer and floats at sea level on saline water from the sea which saturates the rock at this level. \bout 95% of the island's water supply is punped from the Lower Tater Table. 16. The Depcartnent s Consultants consider the maxinum amount of water which can be obtained economically from natural sources is about 4,300 million gallons per annum. Additional extraction from the Lower TWater Table would increase salinity beyond the acceptable limits. The Consultants state a relatively small amount of additional water, at the mnost 200 million gallons per annum, could be obtained from the Upper WV%ater Table by sinking more wells but the cost of production would be prohibitive, about 144 pence (US$1.68) per 1,000 gallons. 17. As present consumption is about 3,400 million gallons per annum, it will be necessary to find other sources of supply in the near future. III. TE IKALTM CLT;CTR31T B OA.RD (IEB) 18. The Ordinance to establish NEB in its original draft form, although generally acceptable, did not give the Board sufficient freedom to run its own affairs in accordance with sound business and utility practice. It was subsequently amended in accordance with the Bank's suggestions and it has now been approved by the Legislative Council in a form satisfactory to the Bank. Organization and ianagement 19. The Ordinance provides for a Board consisting of not less than five and not more than seven members to be appointed by the ,iinister of Power, one of whom shall be designated by the Minister as Chairran, and of the person holding the office of General lpanager as an ex-officio member. The members will be appointed from persons appearing to the >.iinister to be qualified by reason of having had experience of, and show- ing capacity in, natters relating to public utilities, electricity supply, industry, trade, finance, sc.ence or administration. Plembers, other than the General flanager, will be appointed for a period of three years and - 4 - will be eligible for reappointment, except that in the case of the first members, tuTo will be appointed for a period of one year, one or two nembers, as the P1linister shall determine, for a period of two years and the remaining members for a period of three years. 20. The Ordinance provides for the Board, with the approval of the Prime Yfinister, to appoint a General Mlanager, at such remuneration and upon such terms as it thinks fit, who shall, subject to the direction of the Board on matters of policy, be charged with the direction of the business of the Board, its administration and organization, the administrative con- trol of its employees, and the exercise of such powers as may from time to time be delegated to him by the Board. 21. Provision is made in the Ordinance for the Board to appoint and employ, at such remuneration and upon such terms as it thinks fit, a Chief Engineer, a Chief Finance Officer, a Secretary and such other staff as may be necessary for the due and ef-ficient discharge of its functions. It also provides that the Board may, from time to time, delegate to the General ianager all or any of these powers in respect of any of its staff other than the Chief Engineer, the Chief Finance Officer and the Secretary. 22. The Ordinance also provides for the existing staff of the Electri- city Branch of the Vfater and Electricity Department to be detailed for service with IFB as an interim measure. The Government realizes this staff will have to be strengthened, particularly at top levels, if AtEB is to oserate effectively and has agreed to recruit an experienced General 1Inager and a Chief Finance Officer. IV. THE hARUET FOR PO0,AR AIND T'ATER Power Sales 23. Sales of electricity by the Water and Electricity Department during the past five years have increased at an average rate of 156% per annum, the averagre rate of increase for the last two years being 11.4% per annum. The total number of consumers supplied has risen from 73,000 in 1957/58 j to 89,000 in 1961/62, an increase of 22%O. 24. Prior to the introduction of a new rate structure in October 1960, sales were only recorded under three main heads, i.e. lighting, power and street lighting. The new structure, which was designed to re- duce charges generally and to stinrulate sales, particularly to domestic and industrial consumers, has four main categories of consumers0 A sunsary of sales broken down into these categories for 1961/62, the first full year of operation with the new rate structure, is as follows: 1/ The fiscal year is April 1 - Niarch 31. - 5 - Sales During PTRCENTAGE OF Type of Use 1961/62 Total Sales (millions of kwh) Domestic 19.O 36.6 Conrmercial 1h47 28.3 Industrial 13.6 2652 Street Lighting 4,6 8.9 Total 51 9 100l, Forecast of Power Sales 25. The WHater and Electricity Departrentts forecast of sales for the years 1962/63 - 1969/70 is reasonable and acceptable, if anything, it is on the low side, A table showing the estimated sales broken down into categories is attached as Annex 1. A new category, Sales to Baileyr's Dockyrard, has been added, making a total of five mrain categories, This Dockyard, which prior to August 1962 was supplied by the Naval Dockyard Power Station, presently consumes about 12 million kw1h per annum. Con- suTption is expected to progressively increase to 20 million kwh in 1968/69. 26. In Annex 1 the percentage increases per annum, including and excluding sales to Bailey's Docicyard are ehown. The average rate of in- crease per annum. of total sales, during the period 1962/63 - 1969/70, if sales to the Dockyard are included, is 1206%, If sales to the Dock- yrard are excluded, the rate of increase is 10.2%. 27. The high rate of increase in total sales over the past five years has been influenced by the industrial expansion which is taking place in Pialta and by the introduction of the new rate structure. The estimated rate of increase in industrial sales during the period 1962/63 - 1964/65 is nearly 17% per annum. After 1964/65 there are few known comm- mitments for large industrial supplies and the Departrent estimates the rate of increase will drop to about 6% annually. This rate of increase is low and may well be exceeded if the Governmentts plans for continued industrialization mraterialize. The department considers the high rate of increase in domestic and cormercial sales since the introduction of the new rate structure is unlikely to continue. It expects the percentage increase per annum to gradually drop from 14.7% for domestic sales and 12.2% for commiercial sales in 1962/63 to 5.2% and 9.0% respectively in 1969/70. Growth in Power System Demand 28, The maximum demand on the system has increased from 11.9 IXW in 1957/58 to 20i0 P111 in 1961/62 and is expected to reach 45b4 1f'vI in 1969/70. The actual increase per annum has averaged 14.0% and the average increase per annum forecast to 1969/70 is 10.8%. - 6 - 29. A table showing the actual and estimated kwh generated and system maxirum denrand, based on the actual and estimated sales for the years 1960/61 through 1969/70 is attached as Annex 2. A chart is attached as Annex 3 which shows the curve of system maximum demand in relation to installed and firm generating capacity. By reference to the chart it will be seen that existing firm generating capacity is insufficient! to meet present demands. New generating plant is scheduled to be in operation by 'June 1965 but system demand is expected to exceed installed capacity long before this date. To enable system demands to be ret before the new plant is operating, arrangements were nade in November 1962 for the Naval Dockyard power station to feed up to 4 11J into the system. New Generating Plant Requirements 30. The new thermal power and water distillation station, Malta '"B", which is part of the project proposed for Bank financing, will have two 12e5-I1T sets. The first set is scheduled for completion in June 1965 and the second set in August 1965. The period between January 1963 and the commissionin- of the first set in June 1965 will be critical if system demand increases as expected, as adequate standby plant will not be avail- able and any plant breakdown will result in load shedding. After the second 12.5-41W set is commissioned in August 1965 sufficient firm capacity should be available to meet derand until mid 1967 when DEB plans to have a third set with a capacity of 25 FiW in operation. Tiater Consumption 31. The consumption of water during the last five years has increased at the rate of approximately 100 million gallons per annum, the consumption during 1Q61/62 being about 3,h00 million gallons. The rate of increase has been kept down by highly progressive rates designed to discourage exces- sive consumption, particularly by domestic consumers. The present consump- tion is about 26 gallons per day per person, which, compared with the normally accepted standard in Europe of 40 gallons per day, is low. Growth in -Jater Consurption 32. Estimates of water consumption, prepared by the Consultants, show an average rate of increase of about 5% per annum during the next decade. This is considerably higher than the average rate of about 3% for the past five years. In view of the present low per capital consump- tion and the industrialization which is now taking place in Malta, the estinates are reasonable. 33, Consumption of water, based on these estimates, is expected to reach 4,300 million gallons per annum, the maximum which can be obtained from natural sources, in 1965/66, and rise to about 5,100 million gallons per annum in 1969/70. WIater Distillation Plant Requirements 34. The only practical way of meeting future demands for water in Ialta is to convert sea water to fresh water. This can be carried out by - 7 - a number of processes but most of them are in the experimental or develop- zental stage. The only process at present in use on a commercial basis for the conversion of large quantities of sea water is the distillation process. The most advanced type of plant using this process is the multi- stage "flash" distiller. 35, The project proposed for 3ank financing includes a one-million- gallon per day multi-stage "flash" distillation plant which will be in- stalled in the i'halta "B" station and operated by steam supplied from the power generating plant. The distillation plant, which is schedaled to be in oper-ation by September 1965, will have an annual output of about 333 million gallons. It will be operated by IEB and its output sold in bulk at cost to the Wlater Department. 36. To meet demands for water up to 1970, MEB plans to have three additional plants of similar capacity in operation by this date. V THE PROJECT 37. The project proposed for Bank financing consists of the first stage of the Malta "B" thermal power and sea wiater distillation station with an installed generating capacity of 25 ENW and a water product'on capacity of one million gallons per day, the provisi on of water mains from the station to Luqa reservoir, and the provision of office, workshop and stores buildings. 38. The station is to b e constructed at Pliarsa, at the head of the Grand Harbor in the city of Valletta. It will be flanked by Church lharf on the harbor side and on the other side by Jesuitls Hill, which has been partly cut away to provide the level ground on which the station would be built. A general site plan of the station is attached as Annex 5, The station would be adjacent to the existing 1i1alta "A" thermal power station which is located underground in Jesuitts Hill. 39. Although the initial capacity of the station would be 25 MW and about one nillion gallons per day water production, it is being de- signed for an ultimate capacity of 1O MIW and a water production of eix million gallons per day and many features, such as the cooling water system, will have sufficient capacity for the next stage of development. 40. The generating plant would consist of two 12.5-141 pass-out turbo-alternators and two 200,000 lbs. per hour boilers. The turbines would be designed to operate with steam conditions of 600 p.s.i. and 850°F. The boilers would be operated on Bunker '"C" fuel oil which would be delivered by ship to a nearby wharf. 41. Low pressure steam would be supplied from the turbines to a "flash" type distiller with a capacity of one million gallons per day. - 8 - )42. During the period September 1, 1965 - August 31, 1966, the first twelve rnonths of operation with two 12.541M sets and one one-million- gallon per day distiller in commission, the output of the station is esti-- mated at 120 million kwh and 333 million gallons of distilled water. The electrical output would be fed into the existing Mvlalta 11 kv distribution system. The output of distilled water would be pumped through twin mains to an existing reservoir at Luqa, some 4,000 yards from the plant, where it would be blended with water obtained from underground sources. L3. A more detailed description of the project is given in Annex 4. Status or Engineering 44. The project has been planned and is being designed by the Govern- rent's Consultants, Preece, Cardew & Rider of London. The Consultants will supervise the construction of the project. Preliminary work on site has been corpleted and design work is well advanced. Specifications for civil works were completed some months ago and international bids have already been obtained. Specifications for the supply and erection of equipment are being prepared and international bids will be invited. Construction Schedules 45. The project is scheduled for completion in September 1965, with the first 12.5-T1P! set to come into operation in June 1965, and the second set in August 1965. 46. The schedules dates for the commencement and completion of the rain features of the project are as follows: Construction To be Commences Completed Civil Works August 1963 May 1965 Boiler No. 1 April 1964 Pay 1965 Turbo-Alternator No. 1 Sept. 1964 June 1965 Boiler No. 2 July 1964 July 1965 Turbo-Alternator No. 2 Dec. 1964 Aug, 1965 Distiller Oct. 1964 Sept. 1965 Electrical WTorks Aug. 1964 June 1965 This schedule is reasonable. Estirated Cost 47, The total estimated cost of the project and the estimated cost of the principal features are shown in the following table: (A more detailed breakdoun of costs is given in the project description in Annex 4.) - 9 - Estimated Cost of the Project (L Millions) Foreign Exchange I*cal Total Costs Costs Costs Civil Works o.42 O.:38 0.80 Generating Plant 1.22 0.15 1.37 Distillation Plant 0.35 0109 0o44 W.,Tater Mains 0.06 0,03 0.09 Office, Workshop and Stores Buildings 0.08 0o07 0.15 Engineering and Site Supervision 0.10 o.o6 0.16 Contingencies 0.14 0.05 0.19 Price Escalation 0.11 0.03 0.14 2.48 0o86 3,34 Interest during Construction 0.20 0.08 0.28 2.68 0.94 3.62 Totals expressed in Millions of US$ 7.50 2,62 10,12 p48. The cost estimates are realistic and should be adequate. The sums included for price escalation and contingencies should be sufficient to cover any normal increases in the cost of labor and materials and increases in costs which may arise due to constructional difficulties. 49. The estimated yearly expenditures on the project and Bank loan dis- bursements are as follows: 1963/64 1964/65 1965/66 Total T. Millions 0.86 1.57 1.19 3.62 Equivalent US$ Millions 2.41 4.38 3.33 10.12 Bank Loan Disbursements, US$ Millions 1.80 3.00 2.70 7e50 Allocation of Investment between Power and Water Distillation 50. The total estimated cost of the project, including interest during construction is L.3.62 million (US$10.12 million). This includes provision for the Malta "B" station, the water mains to Luqa reservoir, and for the office, workshop and stores buildings. The estimated cost of the Malta "B" thermal power and water distillation station alone is L3.27 million (US$9.16 million). 51. A comparison between the cost of a plant to produce power only and the cost of the combined power and water distillation plant shows the cost of the combined plant to be L772,000 more. This is the cost allocated to water distillation. If interest during construction is added the total cost to be - 10 - allocated to water distillation becomes T814,000, A summary of these estimates is attached as Annex 6. 52. Of the total estimated cost of L3o27 million (Us$91l6 million) for the Malta "B" station, L2.46 million (US$6.89 million), about 75,, would be allocated to power and LO.Sl milLion (US$2.27 million), about 2551' to water distillation. Power - Unit Construction and Generation Costs 53. The cost allocated to power, including interest during construction, is L2.46 million (US$6.89 million). The estimated cost, excluding interest during construction, is L2.22 million (US$6.22 million), which is equal to a unit cost of US$249 per kw installed. There are, however, a number of features such as the cooling water system, which will have sufficient capacity for the next stage of development. If allowance is made for part of the cost of these features the estimated cost of the first stage becomes Ll,83 million (US$5.12 million) or US$205 per kw installed, which is a reasonable cost for the size of the units to be installed. 540 The estimated cost of energy generated by the Malta "B" station during the period September 1, 1965 - August 31, 1966, the first 12 months of operation with two 12,5 MW sets in commission, is 1.02 pence per kwh generated, or 11.9 US mills, which is reasonable for the size and type of plant, Details of generating costs are given in Annex 7. Water Distillation Costs 55. During the period September 1, 1965 - August 31, 1966, the first 12 months of operation with one distiller in commission, when it is expected 333 million gallons of distilled water will be produced, the estimated cost per 1,000 gallons of distilled water is 99 pence (US$1.15). This cost in- cludes all fixed and operating costs. Interest on the investment allocated to water distillation has been taken at 6% per annum and straight line depreciation at 4, per annum, Details of water distillation costs are given in Annex 8. 56. As far as can be ascertained, the estimated cost of US$1el5 per 19000 gallons compares favorably with costs for plants of similar capacity ooeratinz elsewhere, which appear to range between US$1.25 and US$1.50 per 1,000 gallons. It is, however, extremely difficult to make comparisons as the methods used for the allocation of fixed and operating costs vary considerably. 57, During the period September 1, 1966 - August 31, 1967 when MEB plans to have two distillers in operation, the cost per 1,000 gallons is expected to fall to about 90 pence (US$1.05) and in 1970 with four distillers in operation, to about 81 pence (US 94 cents). - 1). - Water Delivery Costs 58. Distilled water produced by the Malta 'IB" station will be delivered through twin water mains to Luqa reservoir where it will be blended with water from underground sources. The estimated cost of the mains, which are part of the project, is l116,000, including interest during construction. Interest at 6 per annum on the investment and straight line depreciation at 212% per annum will be charged to the Government W4ater Department by MEB. This is estimated to amount to L9,860 which in 1965/66 would be equal to about 7 pence (US 8.2 cents) ner 1,000 gallons of water delivered. In 1970, with four distillers in oneration, the cost would fall to about 1.75 pence (US 2,0 cents) per 1,000 gallons delivered. Total Water Production and Delivery Costs 59. During the period September 1, 1965 - August 31, 1966, the total estimated water production cost per 1,000 gallons delivered to Luqa reservoir is: Distillation cost - 99 pence or US$1.15 Delivery cost - 7 pence or US$0.08 106 pence or US$123 In 1970 with four distillers in operation the total cost per 1,000 gallons delivered is expected to be: Distillation cost - 81 pence or US$0.94 Delivery cost - 2 pence or US$0002 83 pence or US$0.96 VI. FUTURE EXPANSION PROGRAM 60. In addition to the facilities covered by the project, provision has been made in the financial forecast for the years 1962/63 through 1969/70 for the following items: Estimated Cost Exoressed in Millions of US$ (a) Expansion of IMalta "B" plant with three distillers, two boilers and a 25 MXi generating unit 30o6 8.57 (b) Expansion of distribution facilities 0.83 2.32 3.89 10o89 These costs do not include interest during construction. - 12 - VTII. FINASTCLJ11 ASPECTS 61. The Electricity Branch was a division of the Electricity and Water Department of the Government of Malta. It had no financial autonomy. 62. Reports of the Electricity and Water Department were prepared annually for the fiscal years which end on March 31. The financial information was not audited and was not presented in comprehensive detail. Although no balance sheet was given in the Annual Report for the Water Branch there was one for the Electricity Branch, which recorded on the asset side the depreciated value of the fixed assets at the beginning of the year, additions during the year and the depreciation charged during the year. Depreciation was computed on a declining balance basis. The resulting year-end depreciated value of fixed assets was balanced on the liability side, after certain adjustments, with an item representing government capital. The income and expense schedules in the Annual Reports did not differentiate clearly between operating items and capital items and the scheduled amounts of capital additions for the Electricity Branch were somewhat less than the additions shown on the balance sheet. 63. Electricity rates were established by the Department itself with the approval of the Ninister of Public lWorks. Their determination was not subject to any precise set of rules. In practice, rates had been rather high, up to 1960, averaging nearly 5 pence (US 5.8 cents) per kwh sold. On the advice of a consultant, they were reduced by about 25% in 1960. In spite of this reduction, the rates produced revenues sufficient to cover all operating expenses of the Electricity Branch including depreciation and to leave a substantial operating surplus. 64. This surplus, together with depreciation allowances, (i.e., the net receipts from operations) was paid back to the Government's general revenue account, while funds for new construction were provided out of an entirely separate government capital budget. 65. Operating results of the Electricity Branch for the years 1960/61, 1961/62 and preliminary figures for 1962/63 are summarized in Annex 9. The figures are based on an attempted elimination of capital items but must be regarded as approximations. Because of the reduction in rates, revenues from sales of energy decreased from L781,000 in 1960/61 to i.698,ooo in 1961/62 in spite of an increase in sales from about 47 to about 52 million kwh. This has resulted in total payments to Government declining from 1.379,000 in 1960/61 to 1.296,000 in 1961/62. 66. Although the return on investment is difficult to ascertain with accuracy because of the form in which Government accounts have been kept, it is estimated at about 4.26 for the 1962/63 fiscal year. - 13 - The Malta Electricitv Board 67. The summary opening balance sheet of oE estimated as of April 1, 1963 is as follows: (L Millions) ASSETS Fixed assets in operation 4.98 Net current and other assets 0,31 Total Assets 5029 LIABILITIES Government capital 5.29 68. The basis for establishing the valuation of the fixed assets in oneration as shown above was the balance in the respective accounts on the books of the Electricity Branch as of Mlarch 31, 1962, adjusted for the ezti- mated additions and depreciation to March 31, 1963. A summary of this cal- culation is presented below: Book value of fixed assets in operations on March 31, 1962 L4,971,478 Additions during the year ending March 31, 1963 189,675 Total 5,161,153 Depreciation for the year ending I-'arch 31, 1963 181,358 Balance March 31, 1963 L4,979,795 In the future depreciation on this acceptable valuation will be computed on the straight line method. Status of the Government Capital 69. The Government has agreed that it will treat the capital of I1B as non-repayable advances represented by permanent subordinated debentures carrying interest at 65 per annum. As these debentures iill not be subject to any amortization or sinking fund provision, and will be subordinated to all other form of loans, the permanent capital of MEB will be regarded as equity. 70. At the rate of 6$ per annum, payments on this permanent capital will continue to provide the Governmentts general revenue with substantial funds initially amounting to L317,000 annually. The Government has agreed that it will contribute additional capital of L150,000 and L375,000 during the fiscal years of 1963/64 and 1964/65 respectively. These funds will be advanced under the same terms and conditions as those applicable to the original Government capital contribution. The eventual payments to the Government will be L349,000 annually. - 14 - Capital Expenditures and Sources of Funds 71. MEB's total capital requirements for new construction in the seven years 1963/64 to 1969/70 are estimated at about L8.06 million (US$22.6 million) with nearly half of the expenditures to be incurred in the three years 1963/64 to 1965/66 for the execution of tne project. 72. The following table gives a comparison between MEB's requirements of funds and its estimated internal resources. (For details see Annexes 9 and 10.) Total 1963/64-1265/66 1966/67-1969/70 1963/64-1969/70 (in millions of L,) Construction costs 3.96 4.10 8.o6 Increase in working capital 0.11 (001) 0.10 Total requirements (A) 4.07 4.09 8.16 Met receipts from operations 1.82 4.45 6.27 Less: Debt service charges 0-95 2.55 3.50 Available for reinvestment (B) 0.87 1.90 2Q77 B/A 215f 465P 34% 73, MZB would thus meet out of its oam resources about 2151 of its capital needs over its first three years of operation and about 46% over the four years following completion of the project. For the full seven year period, internal cash generation would cover about 34% of capital requirements, 74. Sources of funds for the capital expansion program would be approxi- mately as follows, expressed in percentages: Total 1963/64-1965/66 1966/67-1969/70 1963/64-1969/70 Internal cash generation 21 46 34 Goverrment advances 13 _ 6 Foreign borrowings 66 49 58 Local borrowinas _ 5 2 100 100 100 75. During the period 1963/64 through 1965/66 new funds would consist of (a) the proposed Bank loan of L2.7 million (US$7.5 million) and (b) govern- ment advances totalling L525,000 (USt1.47 million). These advances would be in the form of subordinated debentures, which will form part of the permanent capital of MEB and on which 6% per annum will be paid. - 15 - 76. A future foreign loan of L2 million (US$5.6 million) has been assumed in 1966/67 to cover a large part of the foreign currency requirements of Stages II and III of the expansion project. Local borrowings of L.200,000 have also been assumed in the year 1968/69. 77. The proposed financing program is reasonable. Rates and Estimated Financial Results 78. As already mentioned (paragraphs 35, 55-59), charges for distillation and delivery of water will be equal to actual costs. Water charges are ex- pected to decrease gradually from 105.8 pence (US$1.23) per 1,000 gallons in 1965/66 to 82.6 pence (Us 96 cents) in 1969/70. 79. It is expected that present electricity rates will be maintained through the 1965/66 fiscal year and that a general overall rate increase of approximately 5% will be in effect thereafter. Average revenue per kwh sold during the period 1963/64 through 1969/70 would be approximately 3.01 pence (US 35 mills). This rate level should satisfy the requirements of the Electricity Ordinance which provides, inter alia, that rates should be sufficient to cover operating expenses including interest and depreciation or amortization, whichever is higher, and permit accumulation of a reasonable surplus for reinvestment. 80. A forecast of earnings is presented in the income statement for the years 1963/64 through 1969/70 in Annex 9 and the projection of cash flows for the same period is attached as Arnex 10. The estimates of revenues are based on the growth of sales as discussed in Chapter IV. 81. As the wording of the Ordinance clause referring to electricity rates is rather general, MBE has undertaken to establish rates at a satis- factory level to maintain an operating ratio not greater than 67%, calculated on a three-year moving average, commencing April 1, 1963. 82. For purposes of calculation, the proposed Bank loan has been assumed to carry interest at 5-1io per annum and have a term of 20 years, with amorti- zation beginning in April 1966. The foreign loan to be obtained in the fiscal year 1966/67 has also been assumed to carry an interest rate of 512p and a term of 20 years T4ith a grace neriod of three years. 83. The operating income is expected to increase from 1307,000 in 1963/64 to L785,000 in 1969/70. The annual operating ratio would improve from ?0.0O; in 1963/64 to an average of 63.85! in the succeeding years through 1969/70. 84. The rate of return on the average net fixed assets in operation is expected to be 6.35 in 1963/64 and this percentage should improve and average about 8.7% during the next six years. During the initial year of operation the full payments of 6% on the government capital will not quite be covered. - 16 - 85. Considering the Governmentts investment as equity rather than debt, the debt service coverage wiould range from a low of 1.71 in 1966/67 to a high of 2.75 with an average of approximately 2.28. The computa- tion of this coverage was based on the current debt service plus that applicable to the debt to be lncurred and related to the previous year's operating income plus depreciation, 86e Projected balance sheets of MEB as at the end of each year from 1963/64 to 1969/70 are shown in Annex 11. Net fixed assets in operation would more than double during this period. If government capi- tal is considered as equity, the ratio would be 11/89 as of Mlarch 31, 1964, and 39/61 as of March 31, 1970. 87. W1AEB has also undertaken not to incur additional debt unless net receipts from operations for a recent 12-month period, factored with any rate increase in effect at the time the new debt is to be incurred, should be at least 1.6 times the maximum debt service requirements for any suc- ceedinz fiscal year on all indebtedness, excluding subordinated Government debt but including the indebtedness proposed to be incurred. Auditing Procedures 88. Previously the operations of the Electricity and Water Depart- ment were not subject to regular audits. MEB has agreed to arrange for annual audits of its accounts and certifications of annual financial statements by qualified independent public accountants. VITII. JUSTIFICATION OF THE PROJECT 89. The project is needed to meet growing demands for electric power and water in Mlalta. The construction of the Iialta "B" thermal power and sea water distillation station is an economical means of increasing genera- ting capacity and is considered by the Government's consulting engineers to be the only practical means of providing additional fresh water. 90. About 16% of HEBts total revenues during the period April 1, 1965, through Miarch 31, 1970, would be from the sale of water. The water would be sold in bulk to the Water Jepartment at cost, including 6% interest and adequate depreciation. IX. CONCLUSIONS 91. The project proposed for Bank financing is technically sound, the estimated costs are reasonable, the construction schedule is realistic and arrangements for construction are satisfactory. 92. The new generating facilities are necessary to meet the reason- able estimated increase in power demand. The construction of the water distiller plant is required to meet the growing derand for water which can no longer be met from natural sources. The combination of these instal- lations provides savings both in initial investment and in operating costs, - 17 - 93. Taking into account the planned addition of top level sta'f to strengthen the management of MEB, its organization can reasonably be expected to be competent to carry out the construction ol the project and satisfactorily operate the expanded power system and water distilling plant. 94. The funds required by MEB to finance the project in addition to the proposed Bank loan would be obtained from retained earnings supple- mented by Government advances. Financial forecasts show that the financial position of HEB can be expected to remain sound. The return on net fixed assets in operation should average about 8% and IEB could be expected to finance over 30% of future capital requirements from internally generated funds. 95. In connection with the proposed loan MEB has, in particular, undertaken: (a) To continue to retain qualified consulting engineers to be responsible for design, engineering and supervision of con- struction. (b) To appoint a General Manager with qualifications and experi- ence satisfactory to the Bank. (c) To maintain power rates at a level sufficient to assure an operating ratio of not more than 67%, calculated on the basis of a three-year moving average. (d) To retain independent qualified public accountants to carry out regular audits of 14EB's accounts. 96. The project forms a suitable basis for a Bank loan of $7.5 million equivalent. A period of amortization of 20 years, including three years of grace, would be appropriate. July 29, 1963 AC11 J AND 9s S?7 9TD s - 1957 5S_- 1563109 (i2iillions Wo Ow) vercntage Percntage Percenta e rcentage g Perc%enztal Pe na KO.Opeaee of Total -ncrease of Tntel lncrease of Total Increase Year 2, eA Sales swnc-r lAn-- Sal-e trn per cnn 5ales kwh ACTUAL 1957/53 13.5 - 9 L.9 12.9 43.9 3.0 ° 13.2 29.4 1559/59 15.2 12.6 1 .0 13.2 2.3 4 .6 3.3 1o.0 1.o. 41 31. 7.6 1959/60 12.5 19.1 L1.9 % .9 5o30.0 3.L 9.0C 9.1 I 11.9 31.9 I/ 1960/61 - - _ - 3.8 11.1 3.2 46.5 11.? 196)1,62 - _ _ _ _ 6.6 21.1 3.9 S1.9 11.6 Increase per encore 15.6 Owseictl Onseercial. Barcra iley's DQekyerd Strete L1g611.nc Total Sales TotAl Sales Percentage P er ce rene rcntage Percentag e Peycentag Fernestage Percenetage. Perentsa k Pr e d c e n c lacrease Of Totle Increase of Total ncrease .o Total lncrease of Total Inrea se a! lotal Increae Pesamage1nere Year rat per rAwa Sales ikWh per Aanuae Sales two per Anroe Sales ar rA Sales kYt per Asses Sales tes per Aesee kle6 ree Ansse Yar AOTUAI T17z2 19.0 - 36.6 11.9 - 2d.3 13.6 _ 26.2 _- _.6 21.1 S.9 51.9 11.6 51.9 11.6 1961/62 1962/63 21.6 16.7 33.0 16,5 12.2 26.5 15.0 10.3 2..1 b.C - 6.14 ° 8.7 8.0 62.3 20.0 56.3 12.3 1962/63 1963/64 24.a 13.3 31.5 1d.5 12.1 23.8 1,1. 2C.0 32.2 12.0 230.0 15.2 3.6 12.0 7.1 72.9 26.6 66.9 Sl.9 /963461 1961/65 22.9 12.1 31.6 20.5 10.8 23.3 21.5 1i.o 112. 12.0 - 13.6 6.2 1.37 2.1 59.0 11.5 76.0 13.6 196 165 1965366 31.1 11.9 32.0 22.8 U1.2 23.5 22.e 8.2 23.1 lo.0 16.7 16.1 5,e 9.7 7.0 97.1 10.3 S3.1 9.3 1965/66 1966/67 31.d 11.9 32.5 25.1 l1.1 23.5 23.6 9.1 93.i 16.0 lb.3 1, 9 7.5 Z0.3 2.0 107.D 10.2 91.0 9.5 1966/67 1967f68 36.6 5.2 31.5 27.6 10.C 23.2 33.1 9.3 22.2 19.3 12.9 05.3 9,2 9.3 ?.1 116.2 S.6 98.2 7.9 1962/68 i968/69 38.5 5.2 30.9 30.1 9.1 2'.1 27.3 ,.d 21.9 20.0 .1.1 16.0 9. . B.5 7.1 171.5 7.1 104.8 6.7 1966/69 0969/?0 12.5 S.7 3C,6 32.3 9.0 28., 6 --3 7.3 23.9 20.0 _ 12.1 9.7 9.( 7.3 132.3 6.0 112.3 7.2 1969/70 P Average percertaage inerease per an1 L9683vu- Z1969M70 Io.o 19.1 10.2 36.1 r,g 12.6 10.2 A-vTa h erQefltOgS _ ____ 32.C 2b.1 3.. 13,9 7.2 Fl.anclal Yeer - Akr-L 1 - Seed 31. 1/ late hilliog 10 13385/9 narr.ed 0005 0 i.-,9/i . 9 391d-year c,rage to cr rate otracte. JUly 23, 2963 14ALTA Actual and Estimated kwh Generated and Sold, System 14aximum Demand, Installed and irm Generating Capacity, Annual Load Factor and System Losses Kwh Sold (M4illions) Kwh To To System Power Station System Annual System Installed Available Firm Year Generated Consumers Distillers Total l A iarie / Load Factor m Demand y aci (Millions) 7 ACTUAL 1960/61 65.6 46.5 - 46.5 23 9 4h.3 16.9 25.0 - 20. 1961/62 74.7 51.9 - 51.9 23 9 42.6 20.0 25.0 - 20. ESTIMATED 1962/63 87.8 62.3 - 62.3 22 9 42.5 23.6 25.0 4.0 / 24 1963/64 111.1 78.9 - 78.9 22 9 46.7 27.1 25.0 4.0 24 1964/65 122.2 88.0 zero 88.0 20 10 50.0 27.9 25.0 4.0 24.0 1965/66 136.0 97.1 0.8 97.9 20 10 47.0 33.0 50.0 4.0 41.5 2/ 1966/67 145.3 107.0 2.8 109.8 18 8 45.5 36.4 50.0 - 37.5 1967/68 158.3 116.2 4.8 121.0 18 7 45.0 40.1 75.o - 50.0 i 1968/69 166.2 124.8 6.8 131.6 16 6 44.8 42.3 75.0 - 50.0 1969/70 177.8 132.3 8.0 140.3 16 6 44.6 45.4 75.0 - 50.0 2 Kwh used by Power Station auxiliaries are high because "A" Station is under, round and requires forced ventilation and permanent artificial li2hting. J 4 MW available durinp daily peak load periods from Naval Dockyard Power Station. J Not.1 and 2 - 12.5 MW sets, "B" Station to be cormissicned ir June 1°65 and August 1965 respectively. 2 No. 3 - 25 MW set, "B" Station tc be com,,issioned in mid 1967. July 23, 1963 0 MALTA ACTUAL AND ESTIMATED MAXIMUM DEMANDS 90 ~~~AND INSTALLED AND FIRM GENERATING CAPACITY 0 o~ 80~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 0~~~~~ 70 - 0 INSTALLED CAPACITY ___ ~ ~ ~ ~ ~ ~ ___ ___ _5_ ____ ________§ rn 60U)* 1-' 0 Z C2 r Cd ~~~~~~~~~~50 50 50 Z - -T - 0 < ~ ~ ~ ~ ~~0 - CUL- -ETMAE Ui)I I *,..- SYSTEM DEMAND O ~ ~ ~ _ ___ lI 302 . __ _ _ _ _ - 25 .........24.AFIRM CAPACITY JANUARY__ 193iRD97120 20 10 ~~~10 ACTUAL ESTIMATED- 1958/59 1959/60 1960/61 1961/62 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 FISCAL Y-EARS April 1 - March 31 JANUtARY 1963 I BRD-977RI2 ATNEX 4 Detailed Description of the Project The I'alta "B" thermal power and sea water distillation station would be constructed at Alarsa, at the head of the Grand Harbour on level ground between Jesuit's Hill and Church Wharf. It would be adjacent to the existing hialta "A" thermal station which is situated underground in Jesuit's Hill. A site plan of the station is attached as Annex 5. The station would be designed for an ultimate capacity of 100 IvMW and a water roduction of 6 million gallons per day. Initially only 25 11W of generating plant and a one million gallon per day distiller would be installed but rany features would have sufficient capacity for the next stage of develop- ment. The station, which would be operated as an integral unit, vDuld utilize loW pressure pass-out steam from turbo-alternator generating sets for the distillation of sea water. The station would be of the semi-outdoor type with a steel framed structure covered with light weight steel cladding to house the turbo- alternator sets and control equipment. Sea water would be used for cooling purposes and this would be pumped to the station from an intake chamber at Bridge 7Jharf through tunnels and returned through similar tunnels to an outfall at Church W-harf. The size of the tunnels would be sufficient for thie next stage of developmlent. The generating plant would consist of two 12e5 1s1W pass-out turbo-alternator sets and two 200,0C0 lbs. per hour boilers. The turbines would be designed to operate with steam conditions of 600 p.s.i. 850°F, and a vacuum of 27.75 inches rg with cooling water at 800F, and would each be capable of passing out up to 112,000 lbs. per hour of steam at a pressure of 5 p.s.i. gauge. At full output each dis- tiller would require about 36,500 lbs. per hour of pass-out steam; hence each turbine would be capable of supplying three distillers. To enable the turbines to be operated as conventional condensing units, if pass-out steam is not required for sea water distillation, condensers of sufficient capacity for full load operation would be provided. Each turbine will be directly coupled to a 12.5 fEW, 3 phase 11 1Mv 0.8 pf 50-cycle alternator. The boilers, which would be of the outdoor type, would be designed to operate on Bunker "tC" fuel oil. Steam conditions at the super heater outlet would be 625 p.s.i. and 8750F. Each boiler would be a self-contained unit with an economizer, air preheater and forced and induced draft fans. The boilers would be connected to a high pressure steam main from which the turbines would be supplied. Feed heating, de-aerating and water treatment plant, together with two motor driven and one steam driven feed pumps would be installed. Fuel oil, which would be delivered by ship to a nearby wharf, would be pumped into two storage tanks, each of 4,000 tons capacity, which would be erected on Jesuit's Hill, behind the station. The electrical output of the station would be fed into the lalta 11 kv d-istribution system via the main switchboard of the 1alta "A" station. ANNEX 4, p. 2 The sea water distillation plant would consist of a "flash" type distiller with a capacity of 1 million gallons per day. Low pressure steam at about 5 p.s.i. gauge would be supplied from the power plant pass-out turbines and from the exhausts of turbine driven brine recirculating pumps to operate the distiller. Steam for the turbine driven punps and steam to operate air ejectors would be supplied direct from the boiler plant. £n a "flash" distiller, sea water is progressively heated and then introduced into a chamber where a pressure just below atmospheric pressure is maintained, thus reducing the boiling point of the hot sea water, or brine. When the brine enters this chamber the reduced pressure causes part of the liquid to immediately boil - or flash - into steam. The remaining brine is passed through a series of similar cham1bers at successively higher vacuums where the flash process is repeated at pro- gressively lower temperatures. A simplified diagram showing the operation of a flash type distillation plant with three chambers or stages is attached herewith. In practice the number of stages would be much higher, usually between 20 and 40, the actual number depending on the steam/distillate ratio required. By reference to the diagram,it will be seen progressive heating is accomplished by piping incoming sea water through heat exchanges situated in each flash chamber, starting at the low temperature end (No. 1 chamber). In each chamber the flashed vapor condenses upon coming into contact with thei heat exchanger and thus gives up its heat to the incoming sea water, or brine. The brine is then passed through the feed heater which is supplied by low pressure steam from the pass-out turbines of the power plant. The hot brine then enters No. 3 chamber where the reduction in pressure causes part of it to flash into vapor. The vapor condenses when it contacts the heat exchanger, falls cnto a collecting tray, and is then piped away. The renaining brine is then passed to chambers No. 2 and No. 1 where the process is repeated at successively higher vacuum and pro- gressively lower temperatures. A high vacuum is created in No. 1 chamber and progressively lower degrees of vacuum in subsequent chambers by a steam jet air ejector which is operated by steam supplied from the power plant boilers. The estimated water production costs during the period September 1, 1965 - August 31, 1966 are detailed in Annex 9. By reference to this table it will be seen 36,500 lbs. per hour of low pressure steam from the pass-out turbines and 13,000 lbs. per hour of steam direct from the boilers to operate the recirculating pumps and air ejectors, making a total of 49,500 lbs. per hour of steam, will be required to obtain a water production of 1 million gallons per day. MALTA SIMPLIFIED DIAGRAM SHOWING OPERATION OF FLASH TYPE DISTILLATION PLANT LOW PRESSURE STEAM |AUR OUT FROM PASS-OUT TURSINES HIGH PRESURE n ST _ 1 ~~~~~~NO. I CHAMBER NO. 2 CHAMBER NO. 3 CHAMBER AIR EJECTORANE HEAT EX4AN) U EXCHAF) SE WATER IN|| || || '| , DISTILLAT DISTILLA DISTILAT l <,<-FL H VAPOR l /\ POWERAD SE WTEATION ST ATION APRIL92 4,000 TON I MALTA "B" STORE5 5\ t11| i- _ J2\ POWER AND l OKDTLIER _________ _ WAT ER t Hr TJOAWTEITR _.S __ *__t= alta "Btl Thermal Power and later D stillation Station Power Generating Costs, September 1, 1965 - August 31, 1966 Total investnment Allocated to Power 2,460,000 Installed Capacity 2 5 P9, Kwh Generated 120 million kwh Annual Average Gross Thermal Efficiency 24.5% ieat Value of Fluel 18,500 B.T.U. per lb. Unit Cost of Fuel O5 (US tJ14.0) per metric ton 1/ or US 34 cents per million B.T.U, Annual Fuel Consumption 40,816 metric tons Annual Costs Fixed Costs Interest at 6% per annum on 12,460,000 1147,600 Depreciation, Civil wJorks - 2% per annum on 965,000 19,300 Generating Plant - 4% per annum on Ll1,495,000 59,800 n226, 700 Operating 3osts Fuel T 204,080 Salaries, HJages, etc. 45o000 Repairs and iFaintenance 35,000 L284,080 Total Annual Costs L510,780 Cost per kwh Generated 1.02 pence or US 11, 9 mills 1/ One metric ton = 2,205 lbs. M.'alta "B" Thermal Power andc ,ater Distillation Station Distilled Twater Production Costs, September 1, 1965 - August 31, 1966 Total investment allocated to water distillation . 81i,000 Capacity of distiller 1 million gallons per day Operating hours 8,0CO per annum eQlater Production 333 million gallons per annum Fixed Costs Interest at 6%o per annum on I 814,000 E 48,840 Depreciation at 4% per annum 3?,560 761 ,400 Fixed cost per 1000 gallons of distilled iat6r- 59 pence Operating Costs Steam requirements of distiller: Low pressure steam from pass-out turbines 36,500 lbs/hr. Low pressure steam from turbine- driven brine recirculating pumps 12,000 " Stear direct from boilers to operate air ejectors 1,000 Total h9 700 lbs/hr. Additional stear to be supplied by the boilers for distiller operation: 15,000 lbs/hr. to pass-out turbines' 12,000 " to turbine driven brine recirculating pumps 1,000 lbs/hr. to air ejectors Total 2d,000 lbs/hr. Boiler fuel consunmption for additional steam = 2,050 lbs/hr. = 73.2 lbs/hr. of steam ater production per hour 41,600 gallons 1/ To supplyr 36,500 lbs/hr. of low pressure steam to the distiller the power plant pass-out turbines will require about 15,000 lbs/hr more steanm from the boilers than conventional condensing type sets. ANTNEX _ p, 2 Fuel required to produce 1000 gallons 49.2 lbs. of distilled water Unit cost of fuel oil -5 per metric ton (2050 lbs.) Cost of fuel to produce additional steam per 1000 gallons of distilled water 26.5 pence Electric power for distiller auxiliaries 2.5 million kwh per annum Cost per kwh generated "B" station 0.6 pence Cost of power for distiller auxiliaries and pumping per 1000 gallons of distilled water 4.5 pence Cherical treatrent - Estimated annual cost 7000 Cost of chemical treatn-ent of sea water per 1000 gallons of distilled water 5 pence Operation and maintenance - Estirated annual cost L5500 Operation and maintenance cost Der 1000 gallons of distilled water 4 pence Total cost of water distillation per 1000 gallons Pence Fixed cost ~9 . Fuel for additional steam 26.5 Electric power 4,5 Chemical treatrent of sea water 5.0 Operation and naintenance 0 99g0 = Us t11.5 per 1000 gallons Water Delivery Cost Cost of water Plains to Luqa reservoir, including interest during construction L116,000 Interest at 6% per annum L6,960 Depreciation at 212% per annum 2,900 L9,560 Cost per 1000 gallons of distilled water delivered 7 pence - US 8.2 cents j/ Cost of pupping equipment and electric power to operate pumps included in distillation costs. ANNE 8, p 3 Total Cost of Water Production Cost per 1000 gallons delivered to Luqa reservoir Distillation cost 99 pence = US$,, 1.15 Delivery cost 7 pence = =h'; 0.08 106 pence = US1 1.23 MALTA ELECTRICITY BOARD ACTUAL AND FORECAST - INCOME STATEMENT (in thousands of s) Actual Forecast Fiscal Year Ending March 31 19611/ 19621/ 19631/ 1964 1965 1966 1967 1968 1969 1970 Kwhs sold - million 46.5 51.9 62.3 78.9 88.0 °7.1 107.0 116.2 124.8 132.3 Average revenue per kwh (in pence) 4.03 3.23 3.07 2.94 2.914 2.92 3.06 3.06 3.06 3.06 Water sold (million gallons) 166 499 832 1,165 1,332 Average bulk price per 1,000 gallons (in pence) 105.8 94.7 86.5 83.5 82.6 Revenue fram sales of electricity 781 698 797 965 1,078 1,180 1,364 1,482 1,591 1,687 Other electric operating revenues 151 76 76 58 60 62 65 68 72 75 Revenue from sales of water 73 197 300 405 458 Total revenue 932 774 873 1,023 1,138 1,315 1,626 1,850 2,068 2,220 Operating expenses 553 478 482 514 545 598 703 795 869 952 Depreciation 156 156 181 202 206 211 332 363 460 483 Total operating expenses 709 634 663 716 751 809 1,035 1,158 1,329 1,435 Operating income 223 114o 210 307 387 506 591 692 739 785 Interest expense Proposed IBRD loan 147 142 137 131 Future foreign loans 110 Local borrowing 12 Total interest 147 142 137 253 Net profit 307 387 506 444 550 602 532 Payments on Gaverrment capital 317 317 317 349 349 349 349 Balance to surplus (10) 70 189 95 201 253 183 Surplus or (deficit) beginning of year -0- (10) 60 249 344 545 798 Surplus or (deficit) end of year (10) 60 2149 344 545 798 981 Return on average net fixed assets in operation 4.2% 6.3% 8.2S 10.9% 9-4S 8.4% 7.8% 7.5S Operating ratio 76% 82% 76t 70.0% 66.0% 61.5% 63.7% 62.6% 614.3% 64.6% Operating ratio based on a three-year moving average - - - - 65.5% 63.6% 62.7% 63.5% 63.9% 1/ For 1960/61, 1961/62 and 1062/63 data refer to the Electricity Branch of the Water and Electricity Department. 7/23/63 M1ALTA ELEC'RICITY BOiitD Forecast of Jources and Application of Funds 1963 - 1Q70 (in thoasands of Ls) _--__________----____________________E:stimatedt------------------------------------------- 3 Year 4 Year 7 Year Total Total rotall Fiscal year ending March 31 - 1964 1965 1966 1967 1968 1969 1970 1963-66 1967-70 1963-70 Sources of Funds Internal cash generation Operating income 307 387 506 591 692 739 785 1,200 2.807 4,007 Add depreciation 202 206 211 332 363 460 483 619 1.638 2,257 Total 509 593 717 923 1.055 1.199 1.268 1.819 4,445 6.264 Borrowings Proposed IBRD loan 648 1,069 962 2.679 2.679 Future foreign loan 667 1,000 333 2,000 2,000 Local borrowings 200 200 200 Total borrowings 648 1.o69 962 606 1.000 533 2.679 2.200 4.879 Government capital lSO 37S 525 525 Total sources of funds 1.307 2.037 1.679 1.590 2.055 1.732 1,268 5.023 6,645 11.668 Application of funds Construction expenditures (including c->italized interest) IBRD project 856 1,563 1,197 3,616 3,616 Future expansion project 760 2,130 1,028 350 3,268 3,268 Other construction 120 127 97 178 155 250 250 344 833 1.177 Total construction 976 1.690 1.294 938 1.285 1.278 600 3,960 4.101 8.061 Debt service Interest (other than capitalized) Proposed IBRD loan 147 142 137 131 557 557 Future foreign loan 110 110 110 Local borrowings 1Z 12 12 Total interest on non-permanent debt 147 142 137 253 679 679 Amortization Proposed IBRD loan 93 98 103 109 403 403 Future foreign loan 69 69 69 Local borrowings 5 5 5 Total amortization 93 98 103 183 477 477 Total debt service 240 240 240 436 l.lS6 1.156 Payments on Government capital 317 317 317 349 349 349 349 951 1.396 2.347 Total application of funds 1.293 2.007 1.611 1.527 1.874 1.867 1.385 4,911 6.653 11.564 Cash surplus or (deficit) during year 14 30 68 63 181 (135) (117) Cash balance at beginning of year 14 44 112 175 356 221 Cash balance at end of year 14 44 112 175 356 221 104 Coverage of debt service (1) 2.12 2.47 1.71 2.20 2.42 2.75 (1) Ratio of Qost recent year's oper-ting income luls -enreciation to naxinum futurc debt servoe MALTA ELECTRICITY BOARD ESTIMATED BALANCE SHEET (in thousands of Ls) 4 3/31/64 3/31/65 3/31/66 3/31/67 3/31/68 3/31/69 3/31/70 Assets Fixed assets in operation - cost 4,980 4,980 5,100 5,227 8,940 9.741 12,191 12,791 Less accumulated depreciation - 202 408 61 951 1.314 1.774 2,257 Fixed assets in operation - depreciated value 4,980 4,778 4,692 4,608 7,989 9,427 10,417 10,534 Wiork in progress - 976 2,546 3,713 938 i,422 250 250 Total fixed assets 4,980 5,754 7,238 ,321 8,927 9,849 10,667 10,784 Net current assets 306 320 350 418 481 662 527 410 Total Assets 6.086.S 6,74 7.588 9.408 lO.S11 11,194 11,194 Liabilities Proposed IBlD loan _ 648 1,717 2,679 2,586 2,488 2,385 2,276 Future foreign loan - - - 667 1.667 2,000 1,m Local borrowings - - - 200 195 Total long term debt (other than Government capital) _ 648 1,717 2,679 3,253 4,155 4,585 4,402 Capital Government capital 5,286 5,436 5,811 5,811 5,811 5,811 5,811 5,811 Accumulated surplus or (deficit) - (10) 60 249 344 545 798 981 Total Liabilities and Capital 2.8 8,73 4 lO 0_1,5 i l i94 11,194 Debt/Equity ratio 0/1oo 11/89 23/77 31/69 35/65 40/60 41/59 39/61 1/ Depreciated book value of assets contributed by Government. 7/23/63 Ca~~~~ TI a a~~~~~~~~~~~~~~~~C ~~jfI~~~~~' ~~~ () ~~~~C ~~~~( -I ~ ~ ~ ~ ~ ~ ~ c ,-\ as ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~N