RETURN TO REPORTS DESK RIESTRICTED WITHIN HFILE i; V Report No. -307a ONE WEEK Wl[I This report was prepared for use within the Bank. It may not be published nor may it be quoted as representing the Bank's views. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT APPRAISAL OF THE SECOND EXPANSION PROGRAM EMPRESA DE ENERGIA ELECTRICA DE BOGOTA COLOMBIA May 15, 1962 Department of Technical Operations CURRENCY EQUIVALENTS 1 US$ = 6. 7 Pesos (Ps) (The official rate at which the Empresa services its foreign debt is presently 6. 7:1. The free market rate in March 1962 was about 8. 75:1. Although the official rate is used herein, an assumed rate of 8:1 was used in computing future interest and debt service coverage ratios as shown in Annex 8.) APPRAISAL OF THE SECOND EXPANSION PROGRAM EM.RFSA DE ENERGIA ET ECT?rCA DE BOGOTA COLOMBIA TABLE OF CONTENTS Page No. SUTWjARY i I. INTRODUCTION 1 II. THE BORROWER 1 Existing Facilities 2 III. THE DOWER MARKET 3 Historical 3 Forecast 3 IV. THE PROJECT 4 The Colegio Hydro Development 5 The Zipaquira Thermal Addition 5 The Second Stage of the Guatavita Dam and Reservoir 6 The Muna Pump Storage Installation 6 Transmission and Distribution Additions 7 Estimated Cost of the Project 7 Engineering and Supervision of Construction 8 Schedule of Construction 9 Rate of Expenditure and Method of Finance 9 V. FUTURE PROGRAMS 9 VI. JUSTIFICATION FOR THE PROJECT 10 VII. FINANCIAL AS'ECTS 11 Rates 11 Auditors 12 Rate of Exchange 12 Present Financial Position 12 Past Earnings Record 14 Financial Plan 14 Estimated Puture Earnings 17 Debt Service Coverage 17 Debt/Equnity Ratio 18 VIII. CONCLUSIONS 18 TABLE OF' CO1,ITENTS Page 2 ANNEXES 1. Summary of Energy and Demand Requirements 2. Load and Capacity 3. Technical Features of the System 4. Estimated Cost of the Project 5. Actual and Forecast Balance Sheets 1958-1968 6. Actual and Forecast Income Statements 1958-1968 7. Forecast of Sources and Applications of Funds 1961-1968 8. Actual and Forecast Financial Ratios 1958-1968 MAP APPRAISAL OF THE SECOND EXPANSION PROGRAM EIAPRESA DE ENERGIA ELECTRICA DE BOGOTA COLOMBIA SUNMARY i. The 3mpresa de Energia Electrica de Bogota has asked the Bank for a loan of $50 million to cover the foreign exchange cost of a pro- ject consisting of new hydro and thermal generating facilities plus ad- ditions and improvements to Empresa's transmission and distribution sys- tems. The project is estimated to cost the equivalent of $74.1 million, including interest during construction. ii. The Bank made a loan of $17.6 million (246 CO) to the Empresa in January 1960 to assist in financing the first expansion program. Part of that project has been completed and the balance is under construction. iii. The Empresa is an autonomous organization owned by the lTunici- pality of Bogota. iv. The management is capable of carrying out the project. vs The project is necessary to meet the forecast load growth in the Bogota area. It is well planned. The proposed investment is justi- fied. vi. The financial plan proposed by the Empresa is satisfactory. vii. The project would be suitable for a Bank loan of $50 million, including interest during 3-2 years of the construction period, for a term of 25 years including a grace period of 4 years on arnortization payments. APPRAISAL OF THE SECOND EXPANSIOM PROGRAMI EMPRESA DE ENERGIA ELEICTRICA DE BOGOTA COLOMBIA I. INTRODUCTION 1 e This report covers the appraisal of the second expansion program of the Empresa de Energia Electrica de Bogota. The Empresa has requested a Bank loan equivalent to $50 million including interest during construction of $5.7 million. The project would consist of the first stage construction of the Colegio hydro development (150 14W), the addition of a second thermal unit (33 Ng) at the Zipaquira thermal station plus expansion and improvements to the Empresa's power transmission and distribution facilities. The project would also include $3 million for the peso costs of engineering services and about $1.7 million for transmission and distribution facilities in a number of larger towns near Bogota. The total cost of the project is estimated to be equivalent to $74.1 million. 2. This would be the second loan to the Empresa. The first loan ($17.6 mil-lion) was made in January 1960 (Loan 246 CO). 3. The project for which the previous loan was made included three separate generation additions, a reservoir and transmission and distribution system improvements. The major components of the project were: a. The addition of an 18 Y1Ti unit to the three unit 54 MW Laguneta hydro plant. b, The construction of the Salto II (66 MW) hydro development. c. The construction of the Zipaquira (33 14W) thermal station. d. The first stage construction of the Guatavita reservoir and pump storage facility on the Siecha River. e. M4odernization and expansion of the Empresa's transmission and distribution facilities. 4. The Laguneta addition was completed early in 1961. The other com- ponents of the first project are still under construction. The Salto II hydro plant is now scheduled for first commercial operation in mid 1962 and the Zipaquira thermal station for the end of 1962. Both are about six months be- hind original construction schedule forecasts. The previous project is being carried out in a satisfactory manner, however. II. THE BORROWJER 5. The Borrower would be the Empresa de Energia Electrica de Bogota, an autonomous municipally owned public utility which serves the capital city of Bogota and vicinity. It is the only electric utility in the Bogota area, an area with a population of about 1.2 million. - 2 - 6. The Empresa is a juridical entity with legal capacity to borrow from the Bank. It has, or can obtain by existing legal procedures, various rights, including the right to acquire land necessary for the execution of the project. The enterprise has a Board of Directors who choose a manager responsible for day-to-day operations. The present Board consists of seven members. Four are selected by a consortium of Bogota banks and three by the Municipal Council. 7. The banks' authority to select the Board majority is temporary, ex- piring in 1968. It is the result of a trust agreement of 1951, when a consor- tium of four local banks financed the acquisition by the Mkunicipality of the then outstanding stock (49%) of a private corporation (Empresas Unidas de Ener- gia Electrica de Bogota, S.A.) which anteceded the Empresa de Energia Electrica, 8. During negotiations for the previous loan the Municipality agreed that, after the trust agreement expires, the seven members of the Board will be: the Mayor of Bogota, two members elected by the Council, three members chosen by the Council from lists submitted by associations representative of banks, commerce and industry of Bogota and one member chosen by the President of the Republic. 9. The M1unicipality has informed the Bank that this undertaking con- tinues in effect. 10. The management and staff of the enterprise are competent and capable of carrying out the proposed project with the assistance of consultants and additional personnel as discussed later. Existing Facilities 11. The Empresa's generating facilities include 131 MW of hydro capacity and 15 MNJ of thermal capacity at present with the 66 MW Salto II hydro plant and 33 10TV Zipaquira thermal plant both scheduled for completion by the end of 1962. Hydro generating facilities consist of a series of hydro plants located along a stretch of the Bogota River a short distance downstream from Bogota. The existing steam plant is also close to 73ogota, near the upstream end of the stretch of river being developed for hydro power. 12. The Empresa also owns two important reservoirs. One, the Guatavita reservoir, is on the Siecha River, an important tributary of the Bogota River. The Guatavita is the largest storage reservoir in the Bogota River watershed. Its use will be essential to full annual regulation of the river. The first stage of the Guatavita dam will be completed in mid 1962. The dam would be brought to its final height as a part of the proposed project. The company's other reservoir (2MIurna reservoir) is used for daily and weekly regulation. It is located at the upstream end of the stretch of river being developed for hydro power. Due to the series arrangement of the hydro plants and because none have more than a few hours pondage, they are all operated as one plant. The Muna reservoir is the key factor in the operation of this hydro system as it provides the close control of water releases necessary for proper opera- tion of the series arranged generating facilities. 13. The enterprise also owns the transmission facilities necessary to interconnect and properly deliver the power from its various generating plants as well as the complete distribution system in Bogota and vicinity. 14. The system is not interconnected with any other utility although one transmission link is being constructed betwreen the Bogota system and a relatively small thermal power installation near Paipa which serves the depart- ment of Boyaca and the Paz del Rio steel mill. This line, about 115 kilometers long, is being constructed by the Instituto de Aprovechamiento de Aguas y Fo- mento Electrico, a government agency, which in addition to its other functions, is responsible for general powrer development in Colombia. III. WhE POWER YiARKET Historical 15. The 3ipresa's kwh sales increased from 200 million in 1951 to 606 million in 1960. This threefold increase in nine years represents an average growth rate of slightly over 13% per year. The relative proportions of the three main sales categories remained remarkably constant during this period at around 26% residential, 25% commercial and 32V industrial. The balance is accounted for by street lighting, traction and other government uses and bulk power sales. Bulk power sales, which account for only a small part of total sales, are made to a few small communities in the Bogota area. Owner- ship of the distribution facilities in several of the communities is in the process of being transferred to a newly created government agency, the Cor- poracion Autonoma Regional de la Sabana de Bogota y Valles de Ulbate y Chi- guinquira (CAR). This is not expected to provide competition to the Empresa, however, since there would be no reason for CAR to install its own generating facilities as long as power were available from the Empresa's system. 16. The growth in kw demand recorded on the system increased at a slightly lower rate during the nine years, mainly because capacity was seldom sufficient to meet peak demands. Demand increased from 45,800 kw in 1951 to 129,000 kw in 1960. 17. The impressive past growth of power and energy consumption has been achieved in spite of load restrictive measures which still exist. Forecast 18. Annex I shows both the historic and forecast energy and load charac- teristics of the system and Annex II shows the relationship between expected load growth and planned capacity additions in graphical form. As forecast in the first loan appraisal report, artificial restrictions to free load growth will have to be continued until the 66 -Irl Salto II hydro plant is completed. - 4 - The kwh sales forecast until that time consecuently reflects the system capa- bility rather than the market. After Salto II completion (to be followed shortly by completion of the first 33 MW unit at Zipaquira) it should be possible to remove all restrictions. For several years, starting in the last half of 1962 it is reasonable to expect a sharp increase in energy consumption as the deferred demand is satisfied. It is interesting to note that estimated deferred demand at the end of 1961 totalled about 112 1IN, or a little more than the combined capacity of the two plants now under construction. The estimate was based on actual requests made to the Empresa for service. It breaks down as follows: Deferred Cate,ory Demand (NW) Residential (Bogota) 33.3 Residential (Rural) 18.3 Industrial 44.6 Commercial 7.7 Other 8.0 Total 111.9 19. Sales are estimated to increase 28% in 1963, 26% in 1964 and about 15% in 1965. After 1965 the rate of growth is expected to diminish, resulting in an average annual increase of 12.8% in kwh sales for the period 1960-1970. This represents an increase of 3.3 times in the ten years. Total generation (as distinct from sales) and total kwr demand would increase more rapidly during the period because of the Em.presa's increasing requirements for water storage pumping. The present practice of limiting peak period demand would also be abolished. The forecast indicates that the growth in kw demand would increase slightly more than 4 times or at an average annual rate of 15% during the decade. 20. It will be difficult to achieve the 1963 and 1964 estimated sales without substantial improvements to Bogota distribution facilities. The market is available but the Empresa will have to expedite its efforts in the distribution field to reach it. This has been discussed with the Empresa management and during negotiations the management agreed to engage a qualified engineer to assist in expediting the distribution program and to augment its construction forces as necessary. IV. THE PROJECT 21. The proposed project would continue the development of the Bogota River's hydropower potential downstream from Bogota through construction of the Colegio plant with an initial capacity of 150 QW. The Guatavita dam and storage reservoir would be completed to its final height and a second 33 NIWi unit would be added to the thermal plant. Both were financed, in part, by the previous Bank loan. Transmission and distribution system improvements would also be continued. - 5- The Colegio Hy7dro Development 22. The Bogota River, after traversing the T3ogota plateau at an elevation of about 2,250 meters above sea level, begins a precipitous drop toward the Miagdalena Valley from a point some 20 kilomieters west of the city of Bogota. In the first 24 kilometers after leaving the plateau the river drops 1,800 meters. In the next. 90 kilometers, it drops an additional 420 meters before joining the 11agdalena River. The situation is extremely favorable for low cost, high head hydro power development. The Colegio development would uti- lize the last 975 meter head of the first 24 kilometer stretch of the river. 23. At the tinme of the first loan this last 975 meter head was tenta- tively scheduled for development by two consecutive underground plants to be located along the right side of the river. Subsequent topographical and geological investigations indicated, however, that this would be extremely difficult and costly. The present design was therefore evolved to utilize the left side of the river. Topocraphical conditions on the left side make it impractical to utilize this head by more than one plant. 24. The power plant will be laid out for an ultimate installation of six 50 121 gienerating units. Installation of the first three units would be included in the proposed project. 25. The layout of the development follows that of other upstream hydro plants. The intake would be constructed across the river from the tailrace of the Laguneta plant, now the plant farthest downstream in the system. A small pond would be backIed up at the intake by construction of a simple diversion weir. Tater would be conveyed through an 8.2 kilometer long tunnel to a surge tank and thence tiirough valve c>acmmbers to two steel penstocks to a surface powerhouse. Only one penstock would be installed as part of the pro- posed project although grading and anchors for the second penstock would be completed as a part of the initial development. 26. The annual plant output wlien fully developed (300 'Th7) would be about 1,300 million kwh. This would represent a plant capacity factor_/of about 50% and average stream flow of 18.8 cubic meters per second. The number and rating of units is a good choice considerin!g water conditions, the character- istics of the upstream hydro plants and the characteristics of the load to be served. The Zipaquira Thermal Addition 27. The major equipment for the first unit of the Zipaquira station was bought from the Government by the C.mrresa in 1960. The equipment is being supplied by a group of French mrnufacturers who had originally held a contract with the Government to supply and erect a two unit (2 x 33 AINT) 'hermal plant located near Paipa to serve tne department of Boyaca and the Paz del Rio steel mill. The foreign exchange cost of modifying the equipment and of additional equipiment necessary to adapt the plant to single unit operation was included in the previous loan. The ratio of the energy production of the plant to its nameplate rating if orerated at full capacity. - 6 - 28. A second 33 Ml unit would be installed as a Dart of the proposed project. This extension to the station would utilize some existing facilities. The coal handling and fuel storage system would require only minor changes. The electrical control room, turbine room crane, offices and personnel facilities would also be adeauate for the second unit. The Second Stage of the Guatavita Dan and Reservoir 29. The initial stage of the Guatavita dam and reservoir development included an earthfill dam of about 38 meters maximum height and volume of about 1 million cubic meters. This dam will impound a reservoir with usable storage capacity of about 340 million cubic meters. The dam is on the Siecha River just upstream of its confluence with the Bogota River, and about 215 river kilometers unstream from the first hydro plant. The initial develop- ment also includes a control weir on the Bogota River and a 3,000 horsepower r>umping installation which nermits storage of excess flows of the Bogota River, in addition to normal storage from the Siecha River runoff. The area controlled by the weir, pump installation and dam is about 21-1/2% of the total Bogota River watershed. There are provisions for the future instal- lation of additional Pimping units and the dam was laid out initially to facilitate increasing its heiaht, 30. The dam would be heightened 11 meters. This would increase the usable reservoir storage volume 425 million cubic meters, giving the reservoir a total volume of 7P5 million cubic meters. This is enough to operate all of the Empresa?s hydro plants at 509 capacity factor for aonroximately one year. Since this is the only large storage reservoir in the watershed, it is important to the operation of the whole system. The Muna Dump Storage Installation 31. The function of the 1una nump storage reservoir has been mentioned earlier (paragranh 12). It is relatively small, having a canacity of only 40 million cubic meters. The reservoir is Dresently supplied by a pumping installation of 4 cubic meter ner second canacity which allows part of the flow of the Rogota River to be stored for release when normal river flow is less than required by hylro plants immediately downstream. Due to distance and large intervening watershed area it is impossible to provide close river regulation from the Guatavita reservoir without substantial waste. The tIna reservoir serves the same function to the series of downstream generating facilities as would the reservoir of the normal hyHro power develoPment with generating facilities adjacent to the dam. 32. The proposed installation would include a second pumping station consisting of an intake, pump-house with an 8 clubic meter Per second elec- trically driven Pump installed, penstock and outlet structure for discharge into the reservoir. From the economic point of view it is interesting to note that the nower required for numning and storing water at the rate of 12 cubic meters ner second could be oroduced from the downstream hydro plants (after completion of Colegio) by a flow of about 0.5 cubic meter ner second. 1/ Previously called Tomine. - 7 - Transmission and Distribution Additions 33. Modernization and expansion of the Empresats 115 kv and 57.5 kv primary voltage substations and transmission lines would be continued. This would include about 180 circuit kilometers of new lines between the generating plants and Bogota receiving substations, and between the substations, and 360 INA of new substation capacity. 34. The project would also continue the program started under the previous loan of rebuilding the existing 6.6 kv distribution network to 11.4 kv, adding secondary transformer capacity and, in general, revamp- ing and enlarging the entire secondary distribution network. The cost of meters for new customers expected between 1962 and 1964 would be in- cluded. 35. The proposed loan would include $50,000 to cover the foreign exchange cost of overhauling the existing 15 MT1 thermal station and $125,000 for new machine shop equipment. About ii500,000 would be in- cluded for equipment. This equipment would be purchased by the Empresa for use in its expanded distribution reconstruction program and possi- bly for opening new coal sources in the Zipaquira area. Any equipment purchased in connection with coal supply would be made available, by lease or other arrangement, for use by independent mining enterprises being developed to fill the fuel requiremnents of the thermal station. The loan would also include about $1.7 million to cover the cost of material needed to rebuild the distribution systems in several towns near Bogota. Certain of the distribution systems will be owned by the Empresa and some will be owned by CAR (paragraph 15). The Empresa would, in all cases, do the construction work with its own forces. Suitable arrangements would be made for repayment to Empresa by CAR of the costs incurred on its behalf. 36. The features of the system and the project are described in more detail in Annex 3. Estimated Cost of the Project 37. The project is estimated to cost the equivalent of $74.1 mil- lion, including interest during construction of about $8.0 million on foreign and local loans. It is summiarized below and shovm in more de- tail in Annex 4. -8 - Estimated Cost (equivalent $ thousands - rounded) Feature of the Project Foreign Local Total Colegio Hydro (150 MW) 18,030 9,730 27,760 Zipaquira Thermal (33 KW) 5,530 1,420 6,950 Second Stage Guatavita Dam 730 900 1,630 M4una Pump Station 725 500 1,225 Transmission 3,930 1,920 5,850 Distribution 4,545 1,570 6,115 Provision for CAR program 1,700 - 1,700 Construction equipment 500 40 540 Miscellaneous 175 400 575 Engineering & Supervision 4,180.1/ 1,380 5,560 Sub-total - Direct Cost 40,045 17,860 57,905 Contingencies 4,285 2,635 6,920 Price Increases - 1,320 1,320 Interest during construction 5,670 2,295 7,965 Sub-total 9,955 6,250 16,205 Total Estimated Cost 50,000 24,110 74,110 38. The estimate includes contingency provisions equivalent to $6.9 mil- lion and also an allowance of approximately $1.3 million equivalent to cover possible increases in the local costs of labor and materials. The latter allow- ance was calculated from the assuxnption that local prices would increase approx- imately 5% per annum during the construction period. The amount of the proposed Bank financing would be $50 million, including $3 million for the local cost of engineering services. 39. The estimate is based on engineering work that is well advanced. Bids for construction of the Colegio tunnel were opened October 24 and the work is underway. The cost of the other project components can be estimated with a bet- ter than average degree of assurance. Bids have been received and letters of intent issued for the major equipment for the thermal addition and the second stage construction of Guatavita dam is covered by the existing first stage unit price contract. The cost of the liuna pump station can also be estimated quite closely as it represents, in large part, the cost of equipment for which good pricing data were available. Engineering and Supervision of Construction 40. The Empresa does only engineering work necessary for normal operation and maintenance and for checking on the work and recommendations of its engineer- ing consultants. This is a sound policy as long as the managemnent is adequately informed so as to evaluate the consultants' performance and recommendations. 41. The Colombian engineering firm of Ingetec, Ltda. does most of the Em- presa's engineering work including feasibility studies and recommendations fcr long range expansion planning and financing. Ingetec, Ltda. in turn engages consultants in specialized fields when necessary. j Includes local currency costs of about $3 million, - 9 - 42. Ingetec is associated with the J. G. U;hite Engineering Corporation of New York on the Zipaquira thermal station but would have primary responsi- bility for design, bid preparation and evaluation and engineering supervision of construction on all other major features of the project. Although the scope of this general arrangement is considered satisfactory the Empresa is tending to rely too heavily on its consultant. The Empresa's technical management is capable but not adequately staffed to follow the accelerated construction program now planned. Because of this the Empresa management agreed during negotiations on satisfactory measures aimed at strengthening its technical management and staff. 43. All construction, except distribution which the Empresa does itself, would be undertaken by contractors. Construction and supply contracts would be awarded after securing international competitive bidding. This has been the Empresa's practice in the past. Schedule of Construction 44. The project is scheduled over four years with completion by the end of 1965. Some of the individual components would be completed earlier. Completion of the second 33 MW thermal unit is scheduled for December 1963 and completion of the first 50 IJ Colegio unit for early 1965. Expansion of the transmission and distribution facilities should be a continuing pro- cess. The project therefore includes the necessary work, between 1962 and 1965, to meet the growing power demand of the Bogota area. Rate of Expenditure and i[ethod of Finance 45. It is proposed that the foreign exchange cost of the project, local engineering costs during 1961-63 and interest during 32 years of the construc- tion program would be financed by a Bank loan of $50 million. The remaining local currency costs, wJhich are estimated to be Ps. 137.4 million ( $24.1 mil- lion), would be met from retained earnings of about Ps 100 million ($15 mil- lion) and local and foreign bank borrowings. 46. The estimated rate of expenditures, including interest during con- struction are shown below: Expenditures (rounded $ millions) 1962 .1/ 1963 1964 1965 Total Foreign ExchangeV 11.8 18.9 17.1 2.2 50.0 Local currency 5.6 7.1 9.0 2.4 24.T 17.4 26.0 26.1 4.6 74.1 V. FUTURE PROGRA,3 47. The proposed project would provide sufficient generating capacity to meet demands into 1967 on the basis of the market estimates discussed ir. Chapter III. The year end demand at that time is expected to be about 405 r4. This would be supplied by the system nameplate rating of 428 141 which would 1/ Includes relatively small 1961 expenditures. 2/ Including $3 million for local engineering costs. - 10 - be available after completion of the oroject. It will thus be necessary to add further generating capacity in about mid 1967. The first olant addition is expected to be the 42 MW Canoas hydro development. The Canoas ulant would utilize a short stretch of the Bogota River immediately below the Muna reservoir. The development would be sound. 48. The Canoas development would be followed by the addition of the last three 50 MW units of the Colegio plant. These two steDs would add 192 MW to the system. Further generating canacity would have to be added about the end of 1971 and for this the comoany is looking to another river basin. Preliminary investigations are now being made on the Bata River about 120 kilometers north-west of Bogota and a promising site (Chivor project) has been selected. If the site oroves to be suitable, a project with seasonal storage and about 600 MW notential can be developed. 49. Financial orojections discussed later are based on this program of capacity additions. VI. JUSTIFICATIONM FOR THE PROJECT 50. The Droposed Droject is clearly justified by the market projections discussed in Chapter III. Bogota is Colombia's principal city and manu- facturing center. 51. The Colegio development in its initial phase would add 150 MW to the system at a total cost, including ample contingency orovisions and interest during construction, equivalent to $3°.7 million. On a unit basis this is equal to about 0265 ner kw capacity for firm hydro power. This unit cost, which is very low for hydro, would be reduced to about $190 per kw when the total 300 MW are installed. No alternative source of thermal power would be as economical. 52. The 33 MW thermal addition is needed to avoid a power shortage before the completion of Colegio. The Canoas hydro development, which is about the same capacity (42 MJ), would be more economical but it would not provide the same degree of system flexibility. 53. This flexibility or degree of indenendence on water flow is ex- tremely important while filling the Guatavita reservoir and to a lesser extent until the Emoresa diversifies its hydro facilities by construc.~tion on a dif- ferent river basin. The reservoir, when filled, would provide water for a full year's hydro power operation; it may take several years to fill, however. 54. Another consideration is one of timing. The completion date of the thermal addition can be forecast more accurately than that of Canoas. The Empresa management is aware of the unfavorable oublic reaction that could be expected shouldload limiting restrictions be lifted in 1962 and then reimposed in 1964. This would be the situation, based on the market forecasts of this report, if Canoas were included in the prooosed nroject (instead of Zinaquira) but not completed early in 1964. - 11 - VII. FINANCIAL ASPECTS Rates 55. The tariff structures for power utilities in Colombia, both privately and publicly owned, are subject to the approval of the Super- iatendencia de Regulacion Economica. 56. Although charges for electricity in Bogota have been increased about 54% since MIay 1960 they are still very low in comparison to global averages. Rate adjustments in Htay 1960 increased the average revenue per kwh sold from 6.8 centavos (10.1 US mills) to 7.9 centavos (11.8 US mills). On February 1, 1962 further increases in rates raised the reve- nue per kwh sold to 10.5 centavos (15.7 US mills). 57. The amount of the 1960 rate increase resulted from financial projections made in connection with the previous loan. These projec- tions also forecast the need for a further rate increase to 10 centavos per kwh by January 1962 to enable the Empresa to carry out the second expansion program. Because of the change in the planned development of the Colegio site (one plant instead of two, see paragraph 23) the estimated costs of the proposed second expansion program became sub- stantially larger than forecast in 1959. As a consequence the "mpresa management applied for and received approval of a rate increase calcu- lated to achieve an average revenue of 10.5 centavos (15.7 US mills) per kwh sold. The increase want into effect on February 1, 1962. Since it will be several months before the effect of the rate adjust- ment can be judged with certainty the average rate of 10.4 centavos per kwh sold has been used for preparing the financial projections. No further increases have been assumed. 58. Even with the new rate increase, Smpresa will not be able to generate sufficient cash to cover all of its local expenditures during the construction period of the proposed program. The Empresa, there- fore, is obliged to undertake a fairly costly scheme of medium-term local currency borrowings. In future, timely review of the Empresa's financial situation will be necessary to secure prompt action in ob- taining rate adjustments. The Empresa has agreed to maintain the rate covenant included in the previous Bank Loan. This covenant states that the Er.presa shall take all steps necessary to obtain rate adjust- ments to provide revenues sufficient to cover operating expenses in- cluding taxes, maintenance, depreciation and interest, to meet repay- ments on long-term debt, and to leave a reasonable surplus to finance new investments. As discussed in paragraphs 78 and 79 this reasonable surplus should provide at least 4% of the 3Smpresa's expansion pro- gram in 1963-66. - 12 - Auditors 59. The Empresa's financial statements are prepared by a local auditor appointed by the Banco de la Republica. Although the auditor technically reports only to that bank, his assignment is full time and he is on Empresa's payroll. Consequently, in connection with the previous loan, the Bank re- quested 3mpresa to engage an outside accounting firm to audit its accounts. The Empresa has employed a well known firm of independent accountants satis- factory to the Bank and has agreed to continue these annual independent audits for the duration of the proposed loan. Rate of Exchange 60. The official rate is Ps. 6.7 to US$1 and this rate has been used throughout this report except that in Annex 8 interest and debt service coverage ratios have been calculated at an assumed rate of Ps. 8 to US$1. 61. The official rate was Ps. 6.4 to US$1 at the time the first loan to the "mpresa was made in 1960 and the free market rate about Ps. 8 to US$;1D The free market rate is presently aroung Ps. 8.7 to US$1. 62. Taking into account the volume of exchange transactions at each rate leads to the conclusion that a more realistic rate for the purpose of the financial forecast in this report would be about Ps. g to US$1. A higher or lower rate has only minor effects on the immTrediate financial analy- sis. In 1963 and beyond, however, due to the increasingly large portion of the Empresa's total debt service payable in foreign exchange, the rate assumed does become significant. Because of this, the debt service covera-e ratios shown in Annex 8 iwere calculated at an assumed exchange rate of 8:1. Present Financial Position 63. Condensed balance sheets for the years 1958 through 1961 are shown in Annex 5. Met fixed assets and work in progress as of Decem¸ber 31, 1961 totalled Ps. 270.7 million as follows: Fixed Assets Millions of Pesos Gross fixed assets 174.6 Less depreciation 38.8 Net fixed assets 135.8 Vlork in progress 134.9 Net fixed assets and work in progress 270.7 64. Gross fixed assets plus work in progress more than doubled betwieen 1958 and 1961 from Ps. 147.9 ($22.1 million) to Ps. 309.5 million ($46.2 mirl lion). Fixed assets are carried at original cost. - 13 - 65. The capitalization as of December 31, 1961 consisted of Ps.90.9 million (+13.6 million) of debt and Ps.175.5 nillion ($26.2 million) of equity. The debt/equity ratio was 34/66. The Empresa's capitalization was then as follows: (millions of Pesos) Long-Term Debt Peso Debt: liunicipalization debt 8% 7.1 Local banks and Stabilization Fund loans 8% 12.9 Funded debt 8-1/2% .7 Thermal unit loan 8.2 Other debt 8'3 Total Peso Debt 37.2 14% Foreign Currency Debt: IBRD Loan 246-Co 6% 53.2 Suppliers' credit .5 Total Foreign Debt 53.7 20% Total Debt 90.9 34% Equity 17-5.5 66%1 Total capitalization 266.4 100% 66. The Ps.7.1 million Iunicipalization debt was the balance due on an 8% Ps.12.25 million long-term loan from local banks incurred in 1952 by the Mviunicipality of Bogota to exercise an option to purchase the then out- standing 49% minority interest in Empresa. Due to the heavy financial bur- den during the period 1962-1964 (see financial plan para. 74) the Empresa has negotiated an extension of the maturity schiedule on this debt whereby the bulk of scheduled amortization payments (due to the Stabilization Fund) will be paid off in 1966 and 1967. The total debt will be amortized by 1968. Under an agreement re ched in June 1959 with the lM'unicipality, Em.presa has formally assumed this debt and adjusted its financial state- ments accordingly. 67. During negotiations for Loan 246-CO arrangements were made that extended the maturities of the &S short-term bank and Stabilization Fund loans then outstanding. The impresa has now arranged to refinance the bank loans (see para.74) and to extend again the maturities on the Stabilization Fund loan so that it would be paid off in 1965 and 1966. At the same time interest on this Stabilization Fund loan has been lowered from 8% to 6%. 68. The 8-1/2% long-term funded debt with the Banco Central liipotecario matures in 1962 and is secured by the Salto I hydro pl,nt. The thermal unit debt, incurred in 1959 to help finance the purchase of basic equipment - 4 - of the 33 WG thermal unit at Zipaquira, will be Daid off by the end of 1964. The sunnliers' credit and miscellaneous loans will be completely naid off by 1965. 69. The 1960 IBRD Loan (246 C0) is scheduled to be fully disbursed early in 1963. Amortization payments will start in 1963 and terminate in 1984. 70. In addition to its debt obligations, Emnresa is required to credit to the iunicinality an annual dividend of 10% of net Drofits i/ to be used exclusively to cover Dower billings and imDrovement of the Minicinal street lighting system, 71. Total equity has increased from Ps. 89.6 million (l13.4 million) in 1958 to 's. 175.5 million (`^26.2 million) in 1961. As previously mentioned, the Municipality is the sole owner of Emnresa. Past Earnings Record 72. Income statements for the Deriod 1958 - 1961 are shown in Annex 6. Gross income increased from Ps. 18.4 million (¢2.7 million) in 1958 to Ps. 42.8 million in 1°61 (M6.4 million). The return on net fixed assets, including work in nrogress, was about 151 in 1958 and 1959, 22.5S* in 1960 and 15.8% in 1961. Financial Plan 73. A seven year forecast (1962-1968) of sources and anplications of funds is given in Annex 7. The forecast demand for power in the Bogota area requires a long range orogram of sizeable olant add3itions and considerable caoital exoenditures. Dliring the seven-year period olant additions are estimated to cost in aggregate Ps. 1,016.1 million (t15l.7 million) as follows: (in millions) Completion of First program Ps 134.8 Proposed Bank project 441.7 Provision for expenditures in 1965-68 for future orograms 367.0 Interest during construction 72.6 1,016.1 74. The Emnresa was faced with a difficult local currency financing problem to cover the short range period 1962-1963. Several methods of raising the necessary funds were exnlored before the Hmpresa was able to secure firm commitments for the oresent Plan. The main elements of the plan include: lJ Before crediting interest chargled to construction. - 15 - a) increased revenues as a result of a rate increase of approximately 3Z% put into effect in February 1962; b) the rescheduling of certain maturities on some exist- ing indebtedness as discussed in paragraphs66 and 67; c) borrowing of Ps. 70.1 million ($10.5 million) on a medium-term basis as follows: (1) Ps. 20e1 million ($3 million) in 1962 from the Chemical Bank New York Trust Co. through a "?swap" operation with the Banco de la Repub- lica, at 125I interest (inclusive of various commissions) to be amortized in 4 years; (2) Ps. 50 million ($7.5 million) from a consortium of 14 local banks, to be used Ps. 30 million ($4.5 million) in 1962 and Ps. 20 million ($3 miillion) in 1963. This loan, carrying 8% inter- est, is for a period of 5 years including three years of grace. Ps. 4.1 million will be used to refinance existing local bank loans in 1962. The first amortization payment of Ps. 25 mil- lion will be made in 1965 and two subsequent payments of Ps. 12.5 million each will be made in 1966 and 1967 respectively. 75. The medium term financing outlined above is ex-oensive. The need for the funds is immediate, howiever, and conditions of the finan- cial market in Colombia preclude better terms at this time. The pre- sent situation has emphasized the value of continued financial plan- ning to the Eniipresats management. The co0npany will therefore engage an experienced financial executive to establish and maintain sound financial programming in accordance with modern utility practices. 76. In addition to the short-term borrowing, the following as- sumptions have been made regardin- long-term borrowings: a) The 1960 IBRD Loan 246 CO bearing interest at 6% will be fully disbursed by early 1963; amortization pay- ment will start in 1963 and terminate in 1984; - 16 - b) For the ournose of calculatton, the oroposed IBRD loan has been taken at 5-3/4A interest and a term of 25 years, including a grace period of four years. Interest during 37- years of the construction neriod has been included in the pronosed loan. Amortization is calculated with equal semi-annual payments of combined nrincipal and interest and is assumed to begin in the first quarter of 1966; C) A foreign currency loan at 61 interest, for financing a Dart of the foreign exchange cost of future nrograms,would be incurred in 1965. 77, A summary of sources and anolications of funds follows: Sources of Funds 1962-65 1962-68 Amount % Amount % (peso millions) Internal cash generation 352.7 749.8 Tess: Debt service Dlus dividends to Municinality (Excluding interest duaring construction) 133.7 306.9 210.0 30.7 442.9 42.6 Reserve for employee benefits 14.0 2.0 27.7 2.7 Total internal resources 233.0 32.7 470.6 45.3 Borrowings: Balance of IBRD Loan 246 CO 64.7 9.1 64.7 6.2 Proposed IBRD loan 335.0 47.0 335.0 3202 Pronosed local currency loans 7n.1 9.8 70.1 6.7 Future foreign loans 10.0 1.4 100.0 9.6 Total borrowings 479.8 67.3 569.8 54.7 Total sources 712.8 100.0 l.040.4. 100.0 Applications of Funds Completion 1st Program 134.8 18.9 134.8 13M0 Pronosed project (2nd Program) 441.7 62.0 441.7 42.5 Future Programs 55.0 7.7 367.0 35.3 Interest during construction 62.2. 8.7 72A6 6.9 Total construction 693.7 97.3 1,016.1 97.7 Additions to working capital and cash accrual 19.1 2.7 24.3_ 2 3 Total applications 712.8 100.O l.40L._ 100.0 - 17- 78. A side letter was agreed unon during negotiations for the previous loan thrcugh which the EmPresa undertook that "rates should be set at a level which would permit at least 40% of new investment in power facilities to be financed from retained earnings". The letter does not indicate a specific neriod of time during which thlis would be accomplished. Internal cash generation during the four years 1962-65, after deducting debt service and dividends to the Municipality but including the reserve for employee benefits, would cover about 33% of total construction exDenditures. INhile the letter of the undertaking would not be met during the neriod of the next four years, the Emnresa's contribution towards the cost of the four-year orogram does meet its intent, esnecially when considering the rapid build-up of fixed assets wbich will more than double between 1962 and 1963 at the end of the first program and double again b7y 1965 at the end of the second program (Annex 5). Furthermore, during the seven-year Period 1962-1968 internal cash generation would more than cover the 40% contribution toward total construc- t.ion expenditures snecified by the side letter. 79. In the circumstances, the objective of the side letter is being realized. The objective is a sound one and the Emoresa has agreed to maintain its rates at a level so as to be able to provide at least 40% of its 1963-66 exoansion orogram from internal cash generation and agreed to review with the Bank any adjustment of its rates thereafter. Estimated Future Earnin s 80. A forecast of income statements for the seven years ending 1968 is shown in Annex 6. rjross income is estimated to increase from Ps. 42.8 million (M6.4 million) in Q961 to Ps. 110.0 million (^l6.4 million) in 1968. 81. Over the seven year period (19162-68) the return on net fixed assets in operation would range between 37.4'/ in 1962 and 10.4% in 1965, and the return on net fixed assets, including work in progress, would range between l1.3% in 1962 and 9.2% in 1964 (Annex 6). nebt Service Coverave 82. Debt service coverage, which would be 2 times in 1962, would decline to 1.5 and 1.7 times in 1965 and 1066 resnectively due to the repayments on the medium-term local bank loans and increase again to 2 times in 1967 and 2.8 times in 1968. These coverages are year end ratios as shown in Annex 8 for an exchange rate of Ps. 8 to TJSUl. The coverages are higher, of course, when calculated with the Ds. 6.7 to TJS1 rate as shown in Annex 7. 83. Section 5.09 of the Agreement for Loan 246-CO stated that, unless otherwise agreed, the Emoresa "shall not incur debt unless its net revenues for the fiscal year next nreceding such incurrence or for a later twelve- month neriod ended Drior to such incurrence shall be not less than 1.3 times the maximum debt service requirement for any succeeding fiscal year on all debt, including the debt to be incurred". lThen the covenant was drafted and - 18 - tested in 1959 during the appraisal of the previous loan, no problems were envisaged for the Empresa in complying with it, having taken into consideration the long-range programs then being planned and the tenta- tive plans for financing them. The Drogram is now considerably more costly than expected in 1959, partly because the Colegio project is to be undertaken in one step instead of two (paragraph 23). Although a large rate increase has been obtained it will not eliminate the need for sizeable peso borrowings in 1962-63. On the other hand, a rate increase large enough to have reduced these borrowings substan- tially would have been unrealistic considering the nature of the pro- blem. The peso borrowings will be relatively short term. Because of this the total borrowings would exceed those allowed by the covenant. 84. In the circumstances the Bank has accepted the planned bor- rowing program even though the rea,uirements of the covenant would be temporarily exceeded. Year-end debt service coverage rates would still be adeo'uate. The Empresa has agreed to maintain the covenarnt in the proposed loan. Debt/Eauity Ratio 85. The year-end debt/equity ratio, which was 34/66 in 1961, would become 60/40 in 1964 as a result of the large medium-term indebtedness with the local banks and improve to 46/54 by 1968 (Annex 5). VIII. CONCLUSIONS 86. The proposed project is well planned and its cost estimate based on adequate information regarding prices and quantities. 87. The management and staff of the Empresa are qualified to carry-out the project with the assistance of its consultants and the additions to its staff previously mentioned. 88. The financial plan proposed by the Elmpresa is satisfactory to the Bank. Although the financial forecasts (Annexes 5, 6 and 7) are based on the official exchange rate of Ps. 6.7 to US",1, the more realis- tic rate of Ps. 8 to US$1 has been used in computing the significant interest and debt service coverage ratios shown in Annex 8. These ratios indicate that the Empresa's cash resources would be ample to service all of its debt including the new borrowings. In the circum- stances it would be reasonable for the Bank to agree to the necessary borrowings. 89. The proposed project is considered suitable for a Bank loan of $50 million, for a term of 25 years including 4 years of grace on amortization payments. EDPRESA DE ENERGIA ELECTRICA DE BOGOTA SUMMARY OF ENERGY AND DEMAND REQUIREMEFIS (in kwh millions and megawatts) A C T U A L19-6 1951-60 Average Increase Category of Consumer 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 (Percent) Residential 51.3 55.0 62.1 70.8 80.9 91.8 106.1 131.7 144.3 164.3 13.8 Commercial 49.8 56.5 71.4 85.3 96.3 106.9 114.9 123.9 129.8 148.1 12.9 Industrial 68.4 66.7 81.3 93.0 103.1 110.1 119.2 138.8 159.0 186.4 11.8 Official 18.7 20.0 22.0 24.5 27.2 29.6 38.1 38.1 43.5 53.8 12.5 Street Lighting 11.9 12.2 12.5 13.5 14.2 14.9 15.8 19.8 19.3 25.4 8.8 Aiolesale -- -- -- -- -- --3. 21.0 27.8 -- Total Sales 200.1 210.4 249.3 287.1 321.7 353.3 394.1 4563.1 516.9 605.8 13.1 Annual Sales Increase (%) 10.1 5.0 18.5 15.0 12.0 10.0 11.5 16.0 13.3 17.2 System Peak Demand 45.8 54.7 61.4 68.6 70.4 76.0 100.6 113.5 129.0 129.0 12.2 F O R E C A S T190-7 1960-70 Average Increase Category of Consumer 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 (Percent) Residential 170 187 225 300 365 416 469 525 583 642 14.6 Commercial 150 157 188 213 230 250 272 293 315 338 8.6 Industrial 207 228 324 424 480 530 585 645 710 780 15.4 Official 57 59 69 73 82 86 90 95 100 105 6.9 Street Lighting 26 28 31 35 39 43 47 52 56 62 9.3 Bulk Power 1524 38 52 68 73 78 83 88 94 13.0 Total Sales 6625 683 875 1,100 1,264 1,398 1,541 1,693 1,852 2,092 12.8 Annual Sales Increase (%) 3.0 10.0 28.0 26.0 15.0 10.5 10.5 10.0 9.5 9.5 Company Use 10 12 21 21 28 30 30 33 35 35 Losses 88 96 123 156 178 178 199 214 214 229 Gross Generation 723 791 1,019 1,277 1,470 1,606 1,770 1,940 2,101 2,285 Load Factor (%) 57 51 50 50 50 50 50 50 50 50 System Peak Demand 145 176 233 292 336 367 405 444 480 523 15.0 900 900 800 _ _800 Soo - 0 Soo~~~~~~~~~~~~ PROPOSED BANK PROJECT I FUTURE PLANTS 0 0 _ _ _ _ _ _ _O _ _ _ 700 I ** 700 PREVIOUS BANK PROJECT |r I- . 3 1 - -(LOAN 246CO)i / 1 0~~~~~~~~~~~~ 4 ~~~~~~~~~~~~~~~~~~~~~y0 0 600 1 in0 600 J ~ ~~~~~~~~~~~~ w 0~~~~~~~~~~~~~~~~~~~~~~ w~~~~~~~~~~~~~~~~~~~~~~ w- LOAD AND LOACIT CURVOPEN 400 2 5 400 1959 1960 1 13 1 3 CONSULTAPLANTCAPACIT o I~~~~~~~~6- z1 300 - z 0 E A R S 0 2 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~0 200 - ~ ~ -JCOLOMBI A ______ ~~~~~~~~~~LOAD AND CAPACITY DEVELOPMENT - … .1 … . ~~~~~~~~~~~~~~~BOGOTA POWER COMPANY 100 - 00 2 2 0 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~x 1959 1960 1961 1962 1963 1964 19 65 1966 19 67 1968 1969 19 70 197 1 19 7 2 OCTOBER 1961 1 ~RD 917 A7NEX 3 TECT-ET-YCAL FTZATUR -S OF THE SYSTEVN The Bogota River The Bogota River, a tributary of the Magdalena River, flows south- westerly approximately 370 kilometers fron its origin, at an altitude of 2590 meters, ten kilometers northwest of the town of Villapinzon, to its con- fluence with the lIagdalena River, near the city of Girardot. It has a drain- age area of about 5730 square kilometers. The first 256 km (70% of its total length) traverse the Sabana de Bogota, a plateau situated at an elevation of 2,550 meters above sea level witlh a drainage area of 4,270 square kilometers. The average slope of the river from the confluence of the Aiecha River to the Muna River at Alicachin, a distance of 200 kilometers is only .012%. At Ali- cachin where the river leaves the Sabana, it fall's rapidly descending in the next 114 kilometers about 2,220 mcnters until it reaches the iHIagdalena River. The fall in the first 24 kilometers as it leaves the plateau is about 1,800 meters. Hydrology The basic data available for analysis of the regime of the Bogota River are flow records from Tocancipa (31 years) and Salto (26 years) and rainfall records fromn Bogota (97 years). Flow records are available from 19 other stations (tributaries and rqain &tream) for varying lengths of time and rainfall data fromi 26 other observation points in the basin. Good correla- tion between rainfall in Bogota and stream flow at Salto have been established. Based on the correlation, it appears t1hat the most critical 5-year dry period occurred between 19L45-49 and the second -iost critical between 1939-43. Plant capacity has been planned on regulation related to the second most critical period. The flow of the Bogota River nas averaged 26.2 m /s for the period of record (1934-60). The rainfall over the basin has averaged about 843 nmn per year over the same period. This represents a thneoretical average runoff of 114 m3/1s. Therefore actual runofr has been about 23% of precipitation, or in other words, 77% of the rainfall does not reach Alicachin as runoff. Before the construction of reservoirs the flow of the river at Ali- cachin could reach a minimum oF 1 m3/5 during dry seasons. With completion of the Tomine reservoir and pumping development, however, regulation between 14.4 and 21.6 m3/s will be possible. System. Operation Due to the fact that only the Alicachin pond, with back up from the Muna reservoir, has enough pondage to provide weekly regulation, all the downi- strear hydro plants have to operate followving the same load curve, or, in other words as one plant. As long al- river discharge at Alicachin exceeds the requirement for m.ean plant flow and the hydro capacity equals or exceeds the system peak demands, tlle hydro plants can handle the total system load and thernal capacity can be in reserve. WJflhen regalated flow is less, the thermal capacity has to be brought into operation. ANNEX 3 Page 2 It is not possible to provide a permanent hydro reserve unit in the present system because its operation would upset thzt of all the other plants in the chain. For t:his reason the existing or proposed thermal unit, singu- larly or together, will have to be considered as the system reserve in future planning. Thermal capacity will probably be used at a high capacity factor during the first few years after its completion, or until the Colegio plant is in service, as a means of reducing water wastage (since the unused water flowing past the Colegio site is a loss) and allowing storage in the Gu;atav-ita reservoir. A large storage volume at Guatavita is the nnly guarantee for main- taining higher regulated flows in future years as trie hydco system, incluaing the full 300 1TW development of Colegio, becomes loaded. The Colegio Development A gross head of 975 meters would be utilized by the proposed devel- opment. Twelve years ago the Bogota Power Company carried out a reconnais- sance of the region and a general development schene was evolved. Within this scheme, the Laguneta plant was built as a right bank development starting from the then existing Salto I tailrace. The Laguneta tailrace was laid out to facilitate the future construction of a pondage basin and intake for the next downstream plant (now Colegio). Several schemes for the development of the 975 meter head were investigated during recent years but geological and topo- graphical investigations carried out in 1960 showed that the best development would have to be along the left bank of the river. Hard sandstone bluffs along both sides of the upper valley (Salto and Canoas areas) overlie strata of shale which is the only type of rock found in the secondary ridges of the lower valley below Salto. The greater part of the lower area is built up from materials of ancient and recent slides. The resulting overburden reaches depths of nore than two hundred meters in some places. In certain zones between the lower shale ridges great slides have and still occur, probably due to high permeability and low consolidation of the overburden which allows surface wiater to penetrate to great depth. The penetration of the surface water develops, in turn, new slide planes on the underlying rock surfaces. These conditioins strongly influenced the layout and design of the Colegio development. Difficult conditions for the intake and first section of the tunnel can not be avoided but more favorable condi- tions are expected for the lower part of the tunnel and penstock. The development would consist of a diversion weir, an intake struc- ture, a sand trap, a pressure tunnel, a surge tank, a valve chamber, twin pen- stocks and a six-unit powerhouse. The powerhouse would contain six vertical axis impulse turbine driven 50 iiW generators when completed. The turbines would be fed in groups of three by each of the two penstockri. A switchyard would be located adjacent to the powerhouse. Two 115 kv double circuit trans- mission lines are planned, one to Laguneta and the other directly to the Solitre substation in Bogota. ANNEX 3 Page 3 The Second Thermal Unit The Second unit would consist of a 33 IgW steam turbine generator with boiler and auxiliaries installed as a separate operating group without interconnection to the first unit except for certain auxiliaries such as ash handling and service water. The turbine generator unit would be rated 33,000 kw, 3600 rpm, 850 psig 900°F TT steam with 44,118 kva, .85 pf, 13.8 kv hydrogen cooled generator and direct connected exciter. The boiler would be the semi-outdoor type with 300,000 lb/hr., 900 psig9000F TT steam conditions. Coal would be the basic fuel. The switchyard for the first unit would be enlarged to con- tain the step-up transformers and circuit breakers for the second unit. The Second Stage of the Guatavita Dam_! The Guatavita Dam is located on the Siecha River, about 2,500 meters upstream from its confluence with the Bogota River. The dam is of earthfill with an inclined impervious clay core and a positive concrete cut-off to bed- rock. The principal characteristics of the project are shown below: Dam Stage 1 Stage 2 Height above ground 30.2 m 41.5 m Height above excavation 38.0 m 49.5 m Crest length 325 m 350 m Crest elevation 2,594.2 3 2,607 m Volume of fill 1f,020,000 m 820,000 m3 Slopes 2.5:1 Maximum depth to cut-off 60 m Spillway Crest length _ 25.0 m Crest elevation - 2,603.5 m Capacity - 325 m3/s Reservoir Maximum level - 2,605.5 m Minimum level - 2,571.2 m Useable storage 343 imn3 765 Mm3 Dead storage (at elevation 2,571.2m) 10.1 Mm3 The initial stage of the dam is under construction and work is well underway. The second stage would be completed early in 1963. The Muna Pump Station The present 4 cubic meter per second pump installation is used for pumping Bogota River surplus flows into the i4una reservoir for release when- ever natural river flow is less than required by the downstream hydro plants. The total volume pumped was 35 million cubic meters in 1959 and 51 million cubic reters in 1960. The reservoir volume is 40 million cubic meters. 1/ Previously called Tomine. ANN E 3 Page 4 Close control of the flow of the river (at Alicachin) is difficult because of the distance between the storage reservoirs on the tributaries and the first power intake below Alicachin. Flood crests reach Alicachin almost a week after they occur in the headwaters and the time lag for minor changes of reservoir discharge is even greater. Therefore an adequate storage volume at the Muna reservoir is absolutely imperative for the successful operation of the generating system. After Guatavita reservoir is in service a closely controlled opera- tion wiU permit the drawdown of the Muna reservoir in advance of expected high natural river flows. The outflow from the Guatavi-ta reservoir would also be reduced or closed completely during this period. The Muna reservoir would then be refilled starting as soon as uncortrolled river flow excesded the required power flow. In case of excessive drawdo-wn of the Muna reservoir during a dry season, transfer of water between the Gua-tavita and the Muna reservoirs would permit refilling Muna and would thus re-estabLish the flexibility of operation required at the power intake. Due to the conditions described above it is important that the Muna pump installation be of sufficient capacity to handle excess river flolws of relatively short duration. The proposed pumping installation would include a second pumphouse structure, 8 cubic meter per second pump, penstock (355 meters long) surge chamber and tailrace for discharge into the existing reservoir. Transmission System Expansion and Reconstruction The following transmission line work would be included as a part of the project: A. Completion of field construction of the following works: - Salto II Plant to Concordia Substation Line: 36 km long, 115 kv, double circuit. This line would include the mod- ernization of Line 9 from the Laguneta Plant to the Salto IT Plant, 3 kilometers in length, 115 kv, double circuit, (one circuit was included in the previous project). - Zipaquira Plant - El Sol Line: 7 km long, 115 kv,, double circuit. This work would include the completion of erection and connection of the second circuit from El Sol to the Salitre Substation, 40 km in length, on existing structures. - Zipaquira Plant-Sesquile Pumping Station Line: 20 km long, 115 kv, single circuit. - Calle 52 Substation-Usaquen Substation Line: 7 km long, 57.5 kv, single circuit. - Salitre Substation-Morate Substation-Usaquen Substation Line: 9 km long, 57.5 kv, single circuit. ANNEX 3 page 5 - Salitre. Concordia and Veraguas Substations, 115 kv/57.5 kv, 60 mva each. - Rural Substation at the Termozipaquira Plant, 115 kv/57.5 kv/33 kv, 24 nva. - Calle 52 Substation, 57.5 kv/11.4 kv, 14 rmva. - Usaquen Substation, 57.5 kv/1l.4 kv, 7 mva. - Addition of approximately 20 mva, to existing 57.5 kv/11.4 kv Substations. B. New Work: - El Colegio-Laguneta Line (part of El Colegio-Salto II Line): 13 kilometers in lenEth, 115 kv, double circuit. - Installation of the second circuit from the Laguneta to the Salto II and the Concordia Substation: 52 km long, 115 kv. - El Colegio-Salitre Substation Line: 48 km long, 115 kv, double circuit. - Cable from Concordia Substation to Calle la Substation: 3.5 km long, 57.5 kv. - Other cables at different substations: 57.5 kv. - Additions to existing substation: 120 rava to 115/57.5 kv Substations 70 miva to 57.5/11.4 kv Substations - 80 mva in new substations: 115/11.4 kv 57.5/11.4 kv Distribution System Expansion and Reconstruction The distribution work proposed as a part of the project would in- clude the procurement and installation of about 180 mva of transformer capac- ity, the expansion of distribution circuits to meet the expected population in 1964 of 1.4 million, the procurement and installation of meters for an estimated 50,000 new customers and a continuation of the work of modernizing and revamping the existing primary and secondary system. Equipment This item would include the overhaul of one steam turbine at the Charqueto plant, including the cost of a new runner, and the procurement and installation of one lathe and other minor machine shop equipment in the Em- presa's existing central maintenance shop. Provisions for CAR proram Extention of transmission ind distribution facilities in the areas served by CARo AIiTNBX 4 ESTIMATED COST OF THE PROJECT (in thousands of pesos) Cost Foreign Local Total A. Colegio Land 800 800 Access roads & camps 1,206 3,600 4,806 Weir, intake & tailrace 1,843 4,000 5,843 Power tunnel & surge tank 35,577 27,280 62,857 Valve house & equipmnent 804 540 1,344 Penstock 43,148 15,300 58,448 PowTerhouse & switchyard (inc, turbines & generators) 34,773 7,680 42,453 Miscellaneous facilities 3,449 6,000 9,449 Sub-total 120, 800 65,200 186,000 Engineering & supervision 10,410 3,900 14,310 Contingencies 18,000 12,800 30,800 Price increases - 6,364 6,364 Total 149,210 88,264 237,474 B. Zipaquira II Boiler & turbine 22,311 50 22,361 Electrical equipment 2,546 160 2,706 I-Tisc. powerhouse equipment 1,990 1,040 3,030 Erection of equipment 4,491 4,185 8,676 Civil works 2,902 3,040 5,942 Transportation 2,800 1,060 3,860 Sub-total 37,040 9,535 46,575 Engineering & supervision 6,295 140 6,435 Contingencies 3,700 955 4,655 Price increases - 439 439 Total 47,035 11,069 58,104 C. Guatavita Reservoir (second stage) Damn heightening 3,015 3,500 6,515 Dike heightening 1,138 1,500 2,638 Spilli-ay 335 500 835 lvlisc. structures 402 500 902 Sub-total 4,890 6,000 10,890 Engineering & supervision 1,165 - 1,165 Contingencies 600 600 1,200 Total 6,655 6,600 13,255 ANNEX 4 Page 2 Cost Foreign Local Total D. Muna Pump Storage Land _ 400 400 Pumphouse & equipment 2,902 2,000 4,902 Penstock 1,508 500 2,008 Tailrace 33 160 193 Misc, structures 402 320 722 Sub-total 4,845 3,380 8,225 Engineering & supervision 900 - 900 Contingencies 500 500 1,000 Price increases - 188 188 Total 6,245 4,068 10,313 E. Transmission & Substations 115 kv: Salto II - Concordia (com;pletion) 261 2,290 2,551 Colegio - Salto II 1,461 1,380 2,841 El Sol - Zipaquira (completion) 60 430 490 Zipaquira - Tomine 127 946 1,073 Colegio - Salitre 5,126 3,800 8,926 57.5 kv: Calle 52 - Usaquen (completion) 100 260 360 Salitre - J.:.orato - Usaquen (completion) 168 260 428 Concordia - Calle I (cable) 1,440 260 1,700 IK.iscellaneous 281 84 365 Substations: 115/57.5 kv 9,152 1,170 10,322 57.5/11.4 kv 8,154 1,980 10.134 Sub-total 26,330 12,860 39,190 Engineering & supervision 2,135 900 3,035 Contingencies 2,600 1,300 3,900 Price increases - 806 806 Total 31,065 15,866 46,931 ANTEX 4 Page 3 Cost Foreignj/ Local Total F. Distribution Expansion: Transformers 5,025 760 5,785 Circuits (primary) 5,025 260 5,285 Circuits (secondary) 4,690 260 4,950 Labor & local materials - 4,020 4.020 Sub-total 14,740 5,300 20,040 Modernization: Transformers 4,355 700 5,055 Circuits (prirary) 4,355 220 4,575 Circuits (secondary) 5,526 700 6,226 Labor & local materials - 2,400 2,400 33 kv improvements 1,474 1,180 2.654 Sub-total 15,710 5.,200 20,910 Provisions for work to be arranged with CAR 11,390 - 11,390 Engineering & supervision 3,035 1,300 4,335 Contingencies 3,100 1,000 4,100 Price increases - 740 740 Total 47,975 13,540 61,515 G. Other Items Thermal overhaul 335 50 385 Machine Shop Equipment 840 125 965 Construction Equipment 3,350 260 3,610 Office Building Improvements - 2,500 2,500 Engineering for Future Program 4,080 3,000 7,080 Contingencies 235 835 1,070 Total 8,B40 6,770 15,610 Grand Total 297,025 146,177 443,202 1/ Includes local cost of engineering services to be covered by the proposed Bank loan. EMPRESA DE ENERGIA ELECTRICA DE BOGOTA Actual and Forecast Balance Sheets 1958 - 1968 (in thousands of pesos) Exchange rate 6.7:1 A CT U AL FO0R EC A ST (Years ending December 31) 1958 1959 1960 1961 1962 1963 F O 1966 1967 1268 ASSETS Fixed Assets 131,851 144,490 155,026 174,644 191,091 448,962 614,139 936,694 953,672 1,040,844 1,068,323 Less: Depreciation 23.806 28401 33.100 38,790 45.225 59.675 80.080 110.220 140.870 174.210 208. Net Fixed Assets in Operation 108,045 116089 121,926 135,854 145,866 389,287 534,059 826,474 812,o02 86:,634 859, A Work in Progress 16,035 17,076 50,990 134,920 336,627 283,626 302,724 66,608 133,693 119,896 257,367 Total Net Fixed Assets 124,080 133,165 172,916 270,774 482,493 672,913 836,783 893,082 946,495 986,530 1,117,315 Current and other Assets 11.346 20.871 33.768 11.043 20,589 28,437 34'605 30,169 33,947 57,052 35'335 135,426 154,036 206,684 281,817 503,082 701,350 871, 88 923,251 980,442 1,043,582 1,152, 50 LIABILITIES Capital and Surplus 89,626 107,885 142,203 175,541 224,770 277,641 341,186 402,641 457,458 524,544 602,108 Reserve for Employee Benefits 5,084 7,729 9,323 15,369 18,469 21,819 25,469 29,369 33,619 38,219 43,119 Debt Existing Municipalization 8,250 7,875 7,500 7,125 6,750 6,375 6,ooo 5,625 4,125 375 - Funded 5,084 3.714 2,251 659 - - - - - _ Local Banks 15,080 15,650 14,270 12,890 8,750 8,750 8,750 3,750 _ _ _ Supplier Credits 10,081 6,366 3,494 509 - - - - - - IBRD 246-CO - - 11,679 53,252 109,161 115,233 112,379 109,357 106,148 102,744 99,126 Thermal Unit - - 10,880 8,160 5,440 2,720 - - - - Other 2,221 4.817 5.084 8,312 3.0 471 169 - - -_ 40,716 38,422 55,158 90,907 133,136 133,549 127,298 118,732 110,273 103,119 99,126 Future Proposed IBRD 79,120 205,780 320,200 335,000 326,592 317,700 308,297 Local Loans for Project 47,587 62,561 57,535 27,509 12,500 - _ Future Foreign - - _ 10.000 40,000 - 60.000 100.000 126,707 268,341 377,735 372,509 379,092 377,700 408,297 Total Debt 40.716 38,422 5.158 90.907 2498843 4 505,033_ _ 124l 489 819 507423 135,426 154,036 20 ,684 281,817 503,082 701,350 871, 88 923,251 980, 1,03,52 1,15, Debt/Equity Ratio 31/69 26/74 28/72 34/66 54/46 59/41 60/40 55/45 52/48 48/52 46/54 NOTE: Adjustments made in 1961 to convert from exchange rate of Ps 8 to $ 1 used by Empresa to exchange rate of 6.7:1 used in the report. Fixed assets include investment in CAR construction. EMPRESA DE ENERGIA ELECTRICA DE BOGOTA Actual and Forecast Income Statements 1952 1968 (in thousands of pesos) Exchange rate 6.7:1 A C T_U A L FO0R E CATTotal (Years ending December 31) 198 959 1960 1961 12 19 1 1965 1966 196 168 1962-1968 Sales (millions of kwh) 456 51? 606 625 683 875 1,100 1,264 1,398 1,541 1,693 Average Revenue per kwh (centavos) 5.17 5.25 7.41 7.83 10.25 10.40 10.40 10.30!1 10.30 10.30 10.30 Operating Revenues Power Sales 23,588 27,115 44,935 48,918 70,000 91,000 114,400 130,200 144,000 159,000 1?4,400 883,000 Other 4.817 4.86? 7.617 12.626 6.000 8.000 8.100 9.400 - 31.500 Total Operating Revenues 28,405 31,978 52.552 61,544 76,000 99,000 122,500 139,600 144,000 159,000 174,400 914,500 Operating Expenses Cost of Operations 7,724 10,251 10,971 14,393 15,950 21,400 z6,400 24,650 25,600 26,450 31,200 171,650 Depreciation 3.524 4.636 4.772 5.763 6.435 14.450 20.405 30.140 30.650 93.340 34.165 169,585 Total Operating Expenses 11,248 14,887 15,743 20,156 22,385 35,850 46,805 54,790 56,250 59,790 65,365 341,235 Operating Income 17,157 17,091 36,809 41,388 53,615 63,150 75,695 84,810 87,750 99,210 109,035 573,265 Other Income 1,228 2,514 2,043 1,369 1,000 l,o00 1,000 1,000 1,000 1,000 1,000 7,000 Gross Income 18,385 19,605 38,852 42,757 54,615 64,150 76,695 85,810 88,750 100,210 110,035 580,265 Income Deductions Interest Paid 2,35r84± 2,069 3,173 4,334 13,455 24,286 29,484 30,792 30,134 29,420 29,353 186,924 Less: IneetCagdt osrcin 138 15 711 2.263 12.185 16.993 21.055 1.939 2.063 3J3772.956o Interest Charged to Operations 2,220 2,054 2,462 2,071 1,270 7,293 8,429 18,853 28,071 26,045 24.403 114,364 Net Profit 16,165 17,551 36,390 40,686 53,345 56,857 68,266 66,957 60,679 74,165 85,632 465,901 Dividends to Municipality 827 1,713 3,578 3,710 4,116 3,986 4,721 5,502 5,862 7,079 8,068 39,334 Retained Earnings 15,338 15,838 32,812 36,976 49,229 52,871 63,545 61,455 54,817 67,086 77,564 426,567 Return on Net Fixed Assets in Operation 17.0% 16.9% 31.9% 31.5% 37.4% 16.5% 14.4% 10.4% 10.9% 11.6% 12.8% Return on Total Net Fixed Assets, Including Work in Progress 14.8% 14.7% 22.5% 15.8% 11.3% 9.5% 9.2% 9.6% 9.4% 10.2% 9.8% J Prior to audit. ] Decrease of 10 mills due to elimination of "meter rent". ] Connection charges would be eliminated in 1966. J Including write offs in 1958 of Ps 88,ooo. ANNaX 7 EMPRESA DE ENERGIA ELECTRICA DE BOGOTA Forecast of Sources and Applications of Funds 1962 - 1968 (in thousands of pesos) Exchange rate 6.7:1 Total (Years ending December 31) 1962 1961 1964 16 1966 1967 129& 1962-1968 SOURCES OF FUNDS Internal Cash Generation Gross Income 54,615 64,150 76,695 85,810 88,750 100,210 110,035 580,265 Depreciation 6.435 14.4S0 20405 30,140 30.650 33,340 34.165 169.535 Total 61,050 78,600 97,100 115,950 119,400 133,550 144,200 749,850 Reserve for Employee Benefits 3,100 3,350 3,650 3,900 4,250 4,600 4,900 27,750 Borrowings IBRD Loan 246-CO 55,9094I 8 759 _ - - - - 64,668 Proposed IBRD Loan 79,126OV 126,660 114,420 14,800 - _ - 335,000 Local Currency Loans: Chemical Bank Loan 20,100 _- - - 20,100 Local Banks Loan in 1962 and 1963 30,000 20,000 _ - - - 50,000 Future Foreign Currency Loans _ _ - 10.000 30.000 20,000 40.000 100 000 Total Borrowings 185,129 155,419 114,420 24,800 30,O00 20,000 40,000 5 6 Total Sources of Funds 249,279 237,369 215,170 144,650 153,650 158,150 189,100 1,347,368 APPLICATIONS OF FUNDS Construction First Program: Foreign Currency 44,235 7,425 - - - - - 51,660 Local Currency 51.390 21.792 10.000 - - - - 83.182 Toctal 95,625 29,217 10,000 _ _ _ _ 134,842 Second Program: Foreign Currency 75,344 116,660 98,420 5,500 - - - 295,924 Local Currency 35.000 42.000 S4.800 14.000 - - - 145 800 Total 110,344 158,660 153,22 19,500 - - -724 Future Programs: Foreign Currency _ - - 30,000 52,000 45,000 100,000 227,000 Local Currency - _ - 25.000 30.000 25.000 60.000 140.000 Total - - - 55,000 82,000 70,000 160,000 367,000 Total Construction Expenditures 205,969 187,877 163,220 74,500 82,000 7O,000 160,000 943,566 Debt Service Interest Municipalization Debt 8% 570 540 510 480 450 196 30 2,776 Existing Local Bank (8%) and Stabilization Fund (6%) Loans 680 525 525 414 113 _ _ 2,257 Funded Debt 8*% 20 - - _ _ _ _ 20 Thermal Unit Loan 524 525 525 - _ _ 1,574 IBRD Loan 246-CO 6% 5,100 7,037 6,869 6,702 6,514 6,320 6,105 44,647 Proposed IBRD Loan 5-3/4% 2,700 10,000 16,000 18,931 19,263 18,779 18,268 103,941 Local Currency Loans: Chemical Bank Loan 12% 2,261 1,659 1,055 452 - - - 5,427 Local Banks Loan in 1962 and 1963 8% 1,600 4,000 4,000 2,800 1,731 750 - 14,881 Future Foreign Currency Loan - _ _ 1.013 2.06 137S 4.950 11 401 Total Interest 13,455 24,286 29,484 30,792 30,134 29,420 29,353 186;924 Amortization Municipal Debt 375 375 375 375 1,500 3,750 375 7,125 Existing Local Bank and Stabilization Fund Loans 4,140 - 5,000 3,750 - 12,890 Funded Debt 659 _ - - - _ _ 659 Thermal Unit Loan 2,720 2,720 2,720 _ - - - 8,160 IBRD Loan 246-CO - 2,687 2,854 3,022 3,209 3,404 3,618 18,794 Proposed IBRD Loan - - - - 8,408 8,892 9,403 26,703 Proposed Local Currency Loan: Chemical Bank Loan 2,513 5,026 5,026 5,026 2,509 - - 20,100 Local Banks Loan in 1962 and 1963 - - _ 25,000 12,500 12,500 - 50,000 Supplier Credits 509 _ - - - - - 509 Other 5 2737 z2564 302 169 - - - 8.312 Total Amortization 16;193 13,372 11,277 38,592 31,876 28,546 13,396 153,252 Total Debt Service 29,648 37,658 40,761 69,384 62,010 57,966 42,749 340,176 Working Capital 10,000 - i,000 1,000 1,000 2,000 2,000 17,000 Dividends to Municipality 4,116 3,986 4,721 5,502 5,862 7,079 8,o68 39,334 Total Applications of Funds 249,733 229,521 209,702 150,386 150,872 137,045 212,817 1,340,076 Net Cash Accrual (454) 7,848 5,468 (5,736) 2,778 21,105 (23,717) 7,292 Cash at the Beginning of Year 4,222 3,768 11,616 17,084 11,348 14,126 35,232 4,222 Cash at the 0nd of Year 3,768 11,616 17,084 11,348 14,126 35,231 11,514 11,514 Interest Coverage 4.1 2.6 2.6 2.8 2.9 3.5 3.7 3.1 Debt Service Coverage 2.1 2.1 2.4 1.7 1.9 2.3 3.4 2.2 1/ Including Ps 6.574 million reimburaement of 1961 expenditures. ,1 Including Ps 1.076 million reimbursement of 1961 engineering expenditures. EMPRESA DE ENERGIA ELECTRICA DE BOGOTA Interest and Debt Service Coverage Ratios 1962 - 1968 (in thousands of pesos at an exchange rate of 8:1) 1962 1963 1964 1965 1966 1967 1968 Interest Coverage Gross Income 54,615 64,150 76,695 85,810 88,750 100,210 110,035 Total Interest 14,968 27,591 33,921 35,962 35,535 34,94h 35,041 Times Covered 3.6 2.3 2.3 2.4 2.5 2.9 3.1 Debt Service Coverage Gross Income plus Depreciation 61,050 78,600 97,100 115,950 119,h00 133,550 1-44j,200 Total Debt Service 31,161 41,h84 45,752 75,140 69,664 65,875 50,963 Times Covered 2.0 1.9 2.1 1.5 1.7 2.0 2.8 ffi~~~~~~~~AATTV fydro installaxtions / FACATATIVAA,2, [.Eisting and Under Construction Transmission Lines 0E0 COLEGC Eojo c o Reservoir us I I| Proposed IRD projects Reservoir(Nsot ored by 0 5 I0 15 2OKm . Mad,id ZIPAQUtRA SALTOZ _ s LAGUSNErA osurolPA,2U/GA THERMAL- |PROPOSED rHERMAL| SALTOHr 72 MW 3 wA ro;3m SALTOC,54MW AOAS,42TbMWC EXISTrNG T/ERMAL 1 *0 5 mA PLAeLeCr-voirvo (so on.d by m,ra 300 0 - - - ___ -- N - j S,o 3000 EOOC _ ~~~~~Alu' Tf me R ,e .\ 250o 2 50_ P - _ E CANOAS RoSg/ -A\UR 196 IER -914R___ - ~~~~~~~~~~~~~~~~~~100 150 025 I R~~~~~~~~~~~~~~~~~OROZONTAL DISTANCES IN KILOMETERS________________ A/RIA MEASURED ALONG RIVER BED o ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PANAA 1500 ' COLOMBIA d.1 A EL COLE(i I I ~~~~~~~PROPOSED EXPANSION PROGRAM0 1000 ~~~~~~~~~~~~~~~~of the AC I I ~EMPRESAS DE ENERGIA ELECTRICA DE BOGOTA '' - - ~~~~PROF-ILE <5 PRU 50o -- 0 50 JANUARY 1962 IBRO -914R