,~~~~ . hX >;* > Ar r',sLs.rlL . IS ~~~A ~~~~No. Loan 107 RESTRICTED Ll 07 [This report is restricted to use within theVol. 2 ~~~~~~~~- -I TN`'RRNATTrT,AT. R A?'IC rNFOR Rr1rO?.ISTRUT1rTTCON AwN nflVWT.OPkA-FWr REPORT ON THE ANCHIGAYA HYDROELECTRIC PROJECT IN COLOMBIA October 18, 1950 Loan Department REPOT. UN THE A-VCHICAYA HYDROELECTRIC PROJECT (CALI, COLOBIA) I - Pulpse and Scope of this Report This report presents an analysis of the Anchicaya hydroelectric project which is designed to determine its suitability for a loan. It includes the recommendations of the Engineering Staff concerning the project. The report is based on information obtained from a number of sources, including technical descriptions and drawings by the Charles T. Main Company of Boston, consulting engineers for the project, construction cost estimates supplied by Christiani & Nielsen, Ltda., Morrison-Knudsen, Inc., and by the Central Hidroelectrica del Rio Anchicava. Ltda., supplemented by personal investigations of Mr. Carl Flesher in his capacity as a member of the Currie Mission and later as a member of the IBRD Engineering Staff. This renort sunersedes an earlier document of January 31, 1950; released under the title "Report on Colombian Anchicaya H-lydroelectric Prcject," No. TLnn Al.. II - The Por7rPTe 1 ncan 4n moa4 nov"+. n+ +ho 1 '-wO' 4 tC a Prsk, na+2 an +he onw4mec+ has been requested by the Central Hidroelectrica del Rio Anchicaya, Ltda., AnowrL as CH.IIAL. ThAiL UcUImpany Wi.L bU.L.LU aLnU VpereUI teYU-U, iLLrU.LUen for the present to supply the City of Cali, although it is expected that even- tually addi=tional transmission lines will be ouilt in order to supply other areas. CI4IDRAL was organized in 1944 under Colombian law as a commercial company of limited liability with the national, state and municipal govern- ments as the only shareholders. The original share capital was 1,500,000 pesos, with the National Government subscribing 51%, the Department of Valle del Cauca 23%, and the Municipality of Cali, 26%. Capitalization was gradu- ally increased to 11,200,000 pesos in the original proportions; Stock subto- scriptions wrere in the form of notes maturing over a period of five years, the last maturity date being December 1950, According to the balance sheet as of May 31, 1950, (see Table 5) the notes in hand amounted to 1,63S,992 pesos. The payments have been made in the form of notes with varying maturity dates because the cash resources of the participating official agencies are subject to annual budget appropriations. NOTES: (1) Rates of' exchange used in this report $1,=1.96 pesos 1 peso w t.5l (2) The A sign is used exclusively for U.S. dollars; pesos are designated as such. -2- On April 28, 1950, at a shareholders' meeting, it was decided to increase the canitalisation of the company hy another 10 million pesos, still retaining the original ratio of subscriptions. The National Government and the Depart.ent have paid up the new subscriptions in cash. The Munir-cipality of Cali has turned over to C!fIDRAL its generating facilities in lieu of cash, According ULLto U h 'aes aV -C 1 vail abl info LL 1 ll,,at Uon L ).these; hlave been appr-aised- at 4,C'/6,000 pesos. During the construction period, these properties will be leased back to the Municipality of Cali at a rental of 4y/o per year plus depreciation charges calculated in conformity with Colombian law at 3.2091%p per year, Because part of the capital has in the past been provided in forms other than cash, a "nulidad absoluta," a tecmnical defect in the incorpora- tion, has been incurred. CHIDRAL has been so notified and will take steps to remedy the situation, in order to comply with the provisions of Colombian law governing limited liability companies. In the opinion of Bank observers who have visited Colombia, the management of CHIDRAL is competent and capable of satisfactory execution of the project and its operation after completio4. III - Descrintion of the Project CHIDRAL has full rights to the development of the Anchicaya River which is estimated to have a nower notential of between 350.000 and 400,000 kw. The immediate project concerns the development of only one station known as thle Anchlnaya Center with en initial eapaeity of 2.o00n kw- The orig-nal plans for the project were developed by Colombian engineers and called for the construction of con arch Aamn on the Anrchictya River, anohu+ 30 mnil. from Cali, which was expected to connect through a gravity tunnel to a power sta- tion con4Uai-;n4L&-4 SiX +155w000 L-W, rgenerating units. I!Torl- was started on the project in 1945 and was stopped in 1948, due primarily to the fact that unndLaXtiy £undaUon cond itui-orts dUeve'opedu which rendereUl tie arc dam originally designed for the project unsuitable for the site. In view of the difficulty encountered on the project, the manage- ment retained Charles T. Yiain, Inc., to review the entire project and to make modifications in the design of the dam and other works which would overcome the difficulties encountered. Charles T. Main recommended that the arch type dam be abandoned in favor of a gravity type dam and that the planned eventual production f'rom this station be reduced from 90,000 kw to 72,000 kw. In the revised project, the dam will be a gravity type concrete structure hetving a maximum heighit of 180 feet and a length of at least 625 feet, The spillway will run approximately 485 feet, which is considered adequate to handle the naximum flood discharge in the river. The reservoir created by the dam will have a useable capacity of 2.3 million cubic meters which amounts to little more than weekly regulations for the station. Weater wijl be carried from the reservoir through a concrete lined gravity tunnel approximatelv 20 feet in diameter and 4,400 feet long equipped with a differential surge tank at the lower end. The penstock consists of steel pipe with fittings at the base for connection to the turbines. Generating equipment will consist of two 17,100 h.p. Francis type turbines, each directly connected to a 12,000 kw generator. The effective average head on the turbines is 240 feet. Auxiliary electrical equipment is conventional, The powerhouse will be of the outdoor type with the substation located on an auxiliary platform in the rear of the powerhouse. Transforme6r equipment will step up from the generator voltage of 6,600 to the transmission voltage of 115,000. The transmission line will consist of a double circuit system 'rom the power station to Cali. It will be of aluminum cable with a steel core, strung on steel towers. Total length of the line is abouit 30 miles. A sub- station will be provided in Cali having characteristics necessary to feed the power into the existing distribution system. IV - Watuer Availabilit Stream flow records for the Anchicaya River date from 1942 and are not continuous. The watershed above the dam has not been surveyed and rain- fall data in the valley are available only since 1945. H-owever, by correla- tion with dlntsR qvqi!hl? on the narbyv Crauna River which date hack to 194L. it has been estimated that the minimum daily flow of the Anchicaya River at the site of t.he dam will not be less thnn 20 cu_bic meters per seconnd. Tliq assumption seems to be reasonable. On the basis of a minimum flow of 20 cubic meters per second, con- tinuous power (i.e. lO load factor) js estimated at 15, ,An -wr +kirng J+e account the storage which will be provided in the reservoir. Charles T. 'Mlain etmess--4- 4thct contir.uou powe eqivle. to n 7,0 kW:1 'k- b ava i- klabl 95%ZI of the time. With storage of 2.3 million cubic meters and on the basis of a 52 weky oa f-aco 4they -s +ate a- 44. fi' capcit n% ,000 L-wor the ,'~op WU.M. 4-UVU ± CzUkIJ± , jy -:,0 U1U CtL-LU %aa. L- U.Y V}.L ~ A.W J project. This is a very conservative basis of calculating firm power, since it may be t;pcted that the system load factor will decline to about 40 per-- cent as more power becomes available. Under these conditions, firm power will De abolit 40,000 kM if the periods of minimum flow are less than about one week. This is obviously more than adequate to meet the requirements of the initial installation. V - Estimated Cost of the Project A clear presentation of the estimated cost of the project cannot be given at the present time, as construction contracts for completing the pro- ject have not yet been awarded. It appears likely that the contract will be given either to Christiani & Nielsen, Ltda., or to lMorrison-Knudsen, Inc., as the bids submitted by these companies are the two lowest of all the bids submitted and. in addition. aeree closely in respect of total cost. It should be noted, however, that the two proposals differ considerably in the relative quantities and values of aonntruction machinery recuired, in the cost of foreign personnel, and in the unit prices used for major construction - 4 - materials sUihl as cement and steel. For ourposes of this report, the Christiani & Nielsen proposal was' used as it is the lower of the twqo bids. The estimated cost of the project given below represents a synthe- sis of figu:res presented a of -4y 3', l'y (a) byG4TDA orGpnxt e1o da+e and onconi+er+ for equipment to be imported; (b) by Charles T. ilain on the cost of certain equipment items and construction [iiaberlal uot yet ordered, and (c) Dy Christiani & Nielsen on costs of completing the project not included under (a) or (b). The estimates of the costs remaining to be met have been adjusted to include equipment for and installation of two units only, this represent- ing the project to be financed by the Bank. The total cost of the project as such, which in the report of January 31, 1950, was estimated at 23.8 million pesos, is currently esti-- mated at 26.1 million pesos, broken down as follows (figures rounded): Local Foreign Total Cost Currency Cost Currenc-y Cost (In thousands of pesos; thousands of U.S. dollars equivalents in parentheses) Expended and com- mitted to 5/31/50 10,190 ( 5,198) 6,950 (30545) 3,240 (1,653) Required to complete 15,340 ( 7,828) 9,710 (4t956) 5,630 (2,872) Interest during con- struction 530 ( 270) - ( - ) 530 ( 270) Total 26jo60 (13.296) 16;660 (8A501) 9,400 (4,795) (Note: These figures to not include working capital estimated at about 400,000 pesos.) The increa-se ov-er the- ea-rlier- estli4.a+te refleects tlhe increasse 4m_he estimated cost of completing the prQject, the earlier figure being based upon 0. _14. V .LJ. vi 424 4 4.L0IQ Ve MADML5.L U V' J 1111S J..L 1410.J.. U wLhV ill4e th Sca .rrLr U figure is based on the most recent estimate available. The difference in the relative shares of local currency and fore:Lgn exchange costs results from (a) the substitution of revised bids for the com- pletion of the project, (b) a revision by CHIDBAL in the estimated amounts spent to date, and (c) a change in the basis upon which the estimate of the foreign exchalge costs required to complete the project wras computed. 1iore specifically, the current estimate of foreign exchange costs required to com- plete the project excludes contractors' fees and miscellaneous overhead items, here included in the local currency costs, since it is not known in what pro- portion these wilU be divided between foreign and local currencies. Also excluded frc,m the current estimates of foreign exchange costs required to complete the project are certain progress payments on imported machinery and eQuipment. which have been made periodically durine the period in which the loan has been under consideration. Additional detail on the cost of the pr.oject is presented in Table 2. VI - Schedule of Construction Approximately 20% of the construction has been finished. The con- struc+lton p rognram furyn-ished bJ-r Ghrestnia 2^ 1'S ezlse-n p-roer;A des- Por the Q +nr+i n g of work approximately three months after signing of the construction contract. Tzhe es t_lm-a-tedA CV-= eI- on ti,2 for the ` fferenP + ite- a re MaS fol'I^..s: J . V P. - %~ .~ Z4.J. .~J "- AftLer resumptiion of" Item work on Anchicaya Item A, Preparatory work (camps, shops and concrete plant) 12 12 B. Diversion of river, new diversion tunnel M 6 C. Existing diversion tunnel 9 6 D. Dam 29 28 E. Pressure tunnel 25 25 F. Surge tank 18 21 G. Powerh9use 30 29 H. Transmission line 24 18 I, Cali substation 19 11 NOTE: This table does not include the plugging of the new diversion tunnel and the installation of the valve in the old tunnel. These are ninor operations and are scheduled for convenience near the end of the project -6- Christiani & Nie:Lsen estimate that it will be possible to deliver power to Cali within 28 months after resumption of work., VII - Schedule of Expenditures Expenditures to date represent about 38% of the estimated cost of the project. The scheduling of future expenditures cannot be completely given at the present time. However, the Christiani & Nielsen bid includes a schedule of construction expenditures excluding the purchase of construc- tion machinery and fees. This schedule, which covers about 612. of the esti- mated cost required to complete the project, is reproduced below on a per- centage basis: Percent Spent: End of Snecified Ouarter In Quarter Cumulant I1st 2nd 10 15 44d 12 27 -, UJ.1 I- .A O U11 4LIU year' ) LV o* 6thi 1l3 64 O.L \.CLL k y)- ±r:'; L.LO 00~;V 8th (2uyar(0e ,Decause con'Lrac'ts requiriung t1he expenl- -f D blkoith foreign exchange still needed for the project have not been placed, it i; not possible to present a scheduie oI expenditures oI foreign currencies. However, for the purposes of estimating interest during construction, it was assumed that the construction equipment and materials would all be imported during the first quarter after the effective date of the loan, and that the remaining expenditures would be made at a constant rate. Since the equivalent of about $2 million has not yet been comiItted, it is quite possible that orders for some items may be placed in member coun- tries other than the U.S. Should such orders be placed, it may be possible to use a part of the 18 percent subscriptions of these countries. - .7 - VIII - Methods of Financing The original plan for financing this project contemplated that it CouLd le lorie entireLy 46hr.ough slw`ocklLUi subscriptions ofU 11.2 mil) ionL pesUos ($5.7 million). When it was found, however, that the cost of the project would exceed subsantially the originally estimated amount, a request for a loan was presented to the IBRD in the amount of sP5.4 million, a sum which included reimbursement for foreign exchange expenditures already made. The analysis of January 31, 1950, indicated that the tptal cost of the project would be the equivalent of §12.2 million. As the equivalent of about 4'4.9 million had been spent, additional expenditure of about q7.3 million could be expected to be made, of which about 63.5 million represented the foreign exchange component. Therefore, in the previous report a loan of up to `,3.53 million was recommended, sufficient to meet all foreign exchange requirements, including interest during construction and working capital sufficient for six months' debt service on the proposed loan. At that time the estimated total cost of the project had not yet been accurately determined. The Engineering Staff therefore based its calcu- lations, resulting in the above-mentioned total, upon information available in January 1950, which consisted of estimates of construction costs made in the summer of 1949. The above calculation indicated that 6 million pesos of additional capital would have to be subscribed and paid in. bringing the total share capital up to 17.2 million pesos. However, it was understood, that the National Governmennt, the MVfuinicipality of Crli, and the Deparnmen of Valle del Cauca were going to supply whatever equity capital would be required to co,gm&lente the project o-ver4 and abovTe +the amont+ of th+ p-ro-posA loan. At a fairly early phase of the discussions, the Bank had advised C^IDRL thl; UIRII, considuered LU Uitmportant that ATnIsL ib n a pUsiiion to control the operation of the existing diesel generating facilities of Cali for the reason that these facilities would be utilized for peaking and standmy purposes and must therefore be within the control of the management of the hydroelectric project. Subsequent to January 1950, the management or CH1DRAL decided to negotiate for the purchase of both the hydro and diesel generating facilities owned by the Empresas lHunicipales of Cali. A contract therefore has been concluded under which the Municipality of Cali will sell to CHIDRAL the above- mentioned power plants for the sum of 4,076,000 pesos. This arrangement con- templated that the purchase by CHIIDRAL will be, in a sense, in the form of a wash transac-tion to the extent that the Municipality was called upon to pro- vide its share of the original capital for which it has given promissory notes in part. During the period of construction of the Anchicaya project, CHIDRAL wilL lease back to Cali the existing generating facilities at an annual rental of 4.5% of the net value, plus charges for depreciation. E,ased upon the contract of purchase of the generating facilities of Cali, the manage- ment of CHIDRAL had decided to increase its capital by 4 million pesos in addition to the 6 million pesos shown to be required in our January estimates, bringing the total up to 21.2 million pesos, still maintaining the original - 8 - subscription percentages of 51% for the National Government, 23'' for the Department of Valle del Cauca, and 26%/f for the Mlunicipality of Call. Th-ere is a diff'erence o1 39,000 pesos beUween tlle puz'case price of Cali's generating facilities and its unpaid share in the capital of CiIIDRnA.L (-1"6OpUUV pesos). Tnis amount wili be amortized Dy applying the above-mentioned depreciation charges against it. Although the competing contractors, of which Christiani & .\Jielsen, Ltda. and IIorrison-Knudsen, Inc., were the two lowest bidders, had filed their bids with CH{IDRAL in the late summer of 1949, the Bank did not receive copies of them until March 1950. In the fall of 1949, the Bank was informed by a representative of Christiani & Nielsen, the lowest bidder, that the bid as filed was consistent with the estimate, on the basis of which the Bank's calculations of January 1950 were subsequently made. Furthermore, the bids as filed by both the competing contractors mentioned were on the basis of three 12,000 kw units rather than two, as contemplated for the Bank-finarced project. On the basis of information which came in the Bank's hand, no new analysis of the bids was made until July 1950 for the purpose of preparing this report. When the bids were analyzed and reduced to the scale of twa. units, it was discovered that the completion of the projiect based upon the bid of Christiani & Nielsen, Ltda. exceeded earlier estimates of the Banlk bv 2;2L5.000 nesos; making a total of 26.060;000 nesos. A c-omparison between the sitiintion in .Tanuyrv and the nresent is shown in the following summary table: (In thousands of pesos) janrily" r1 neptemb estimate estimate! 1. Overall cost of project 23,815 26,060 2. AAd+iona1 wri ca4+ea1 q 400 400 3. acquisition costs of Cali plants 4- L ,076 4. Total cost to be covered 15 30,536 Proposd solces of funeds: 1. Amount of IBRD loan (6,;3,530,000 at 1.96) 6,919 6,919 n 1t_ _. fi At & I A :- ffi A _' 4- . la -P n nn )I nr) _ uLap .k U*a- LU -.> LL1. U.k UCMMI.J La Ie .L UL o .J. L 4VV 4, iL wQV 3. Credit from Cali.Z/ 398 J.° P."7 2,517L Indicated srhortage of resources 6,096 2,019 Less estimate cash revenues during construc- tion froQT lease oI Cali plants to MIunici- pality per Table 4 485 Iiet deficiency 6,096 1,534 1/ I.e. the difference betwfeen acquisition cost of the Cali plants and the amount owed by Cali. - 9 - In the light of the comparative f'igures given in the above table, it iS eviAenLt that CIIDR.L will have to increase its capital by ' l ' ,5+#U pesos or, say, 1,600,000 pesos, in order to cover the est'imated costs based …. - -- - A -4 _ -4. -- u-pon the prUpUodU L rUL1JUIL, 4 ocUnstLrJuctiUon. The Bank is aware that thle proposed contract contains escalation clauses calling for increases in the contract price in the event that cost of labor or material rises from the levels originally assumed by the bidders. There is no doubt that these costs have risen appreciably since the late summer of 1949 and may rise further during the construction period. It is, however, not recommended that on account of' these factors additional sub- scription to the capital of CHIDRAL should be required precedent to signa- ture of the loan agreement or to the effective date of the loan. IX - The Market for Power The Municipality of Cali is estimated to have a population of 165,000 inhabitants. The city is located in the rich agricultural Cauca Velley not far from the southern boundary of the Department of Valle del Cauca, and is the center of an air, rail and highway network connecting other population centers such as Popayan in the sQuth, Manizales and M+edellin in the north, and Buenaventura, which is the major port of Colombia. Except for Cali and Buenaventura, which is some 8O air kilometers from Cali. the population is predominantly rural. The growing of coffee, corn, rice, plantains and sugar cane, and cattle raising are the major agricultural activities. Industry, as in other sections of the country, is relatively unimportant, although growing actively. Large-scale plants are fAw and- in thlii nr'An limited mainly to textiles and sugar refining, although in recent years both cement and container manufacturing hlave asswmed some 'ncpr'ane.n Eleic+"in prnw ies in this nvre no elsewhere in Cnltcmhii- in short supply and prospects for selling the power to be produced by the new station a.ppear good, as considerable ind,usrial expansion is bel-r. plarnyed. A+ nann+~ n.i AanA +lq'3 4rnmrlncA a+n p " ino ir Izna At present. Cali and _h --nediatelyI ---ondn aras-rtbin served by five municipally owned generating plants and in addition, peak powe'r ins purch-Iased froM the Compania 'Cona-i a,4an a deh E +lectrici-dad a + Palmir-a .1U, geU1R-.1ZUU..I A1, U |y UV1W u11LLLLL LP.LY UWu±VWU a;L1L)OtC of one hydro plant of 400 kw, one diesel and two hydro plants of 1,000 kN each andU oneU diesell p±lant1. C) ,4 rw. T e as e £o ry o.ned by the Compania Colombiana de Zlectricidad, a subsidiary of American and Foreign Power. It propperties within the legal lilits of the Manicipality of Cali were expropriated several years ago and the price to be paid for them was the subject of protracted negotiations, out tne matter has finaily been settled on mutually acceptable terms. The Empresas Municipales of Cali have recently purchased a new diesel electric unit with a capacity of 1,680 kwq which was scheduled to go into operation on October 1, 1950, thereby increasing the total capacity of the hydro and diesel plants'to about 10,100 kw. Peak load requirements can be obtained to the extent of about 4,500 kw from the "Nimall hydro station of the CompaniEL Colombiana de Electricidad. - 10 - A contract has been drawn up and approved between CHIDRAL and Cali under which the former will be the sole supplier of electric energy to Cali, and Cali will be the sole distributor of energy generated by CHIDRAL. These provisions will go into effect as soon as CHIDRAL is capable of supplying 24,000 kw to Cali. The latter will also be bound by the terms of its con- tract to expand i.ts distribution system so that it will be capable of absorb- ing 100 million kwh per year. This expansion is to be programmed so that both the knchicaya plant and the distribution system shall be completed at the same time. It appears, therefore, that there will be adequate di,stribu- tion facilities for the electric energy to be generated by CHIDRAL. The probable development of the market for power is presented in Table 1. It is based on records for 1948 and 1949 of energy generated by Empresas 1-iunicipales of Cali, plus purchases of power from Palmira, since generation bv ClTTInAAL will replaee both qonroes_ An annual rate of increase of 6% in kwh generated was assumed for the period 1951-1963. While possibly a higher ratpe might be ePv nnenced ln earlier years, it is probable that distribution losses will be substantially reduced from their present level ofP abou1+ on4 4.- Tis.8 w.ill result fr -. the t tha+-t addi+-lnal capacity will be provided for existing grids, while new distribution lines will at first be 4 _ gighl .y .C"u tl- I V ]oaed Ch pentelage increase in 1.Wlh 3Stenerat:eU wJiL- ll terefore be lower than the increase in kwh sold. For this reason, it seemed advisable u 0u iiUUI L,Ut2 IUU±Lt: luutzu-ait vuULt: Vi. ±I~.JJ1 AWL g,L1t:LkW Vi. U/C UV1EUUJ-1UULU the entire period. The load factor in 1948 was approximately 47 percent. It is prob- able that as the availabilities oI energy increase, the ioad factor wiii gradually decline to about 40 percent. On this basis, the two units to be installed at- Anchicaya will be fully loaaea y ithe ena oI 1955, at wnicn time it will be necessary to draw upon the generating facilities purchased from Cali. These should be adequate to meet the growing demand until 1960 or 1961, when it will be necessary to install a third unit. It should be noted that the current estimate of CHIDRAL's market for power, as presented in Table 1, is considerably higher than the estimate presented in the report of January 31, 1950. Thus, the current estimate of kwrh to be generated by Anchicaya in 1954 is 51% higher than the estimate of January 31, 1950, for the same year. At the time of writing of the earlier report,.the information available to the Bank indicated that kwh sold to consumers in Cali amounted to about 35 million kwh in 1948. The projections for future years were based upon this figure, adjusted for distribution losses. Information received recently indicates that the earlier consumption figure represented only metered consumption, which should be increased by about 23% to take into account public street lighting and unmetered sales. Also, in the absence of any basis for determining distribution system losses, it had been assumed that these were 10 percent, in order to provide a con, servative basis for forecasting the probable future market. It now appears that distribution losses amount to about 18% - 20% of kwh generated and pur- chased. Finally, an increase of 20 percent in consumption took place between 1Q4R and 190/9. The current forecast for future vears has taken into account - 11 - the three factors mentioned above, the combined effect of wlhich is to increase the estimated rmarket for power in Cali by approximately one--half. The esti- mated sales by CHIDRAL to Cali show an even greater increase over the earlier figures. For, while at the earlier date it appeared that Cali would coiltinue to own and operate the existing plants, using the hydro plants for base load operation, and the diesel plants for peak loads in later years, under the present arrangement, with CHIDRAL owning the existing plants, all power gener- ated by these plants will be sold by it. X - Earnings and Cash Position The Anchicaya station is a high cost installation, the investment amounting to about 8560 per installed kw. If it were necessary to service the full amount of the investment, the cost of power even at full capacity would be about l.Ld U.S. ner kwh. as comnared writh 0.5d U.S. in comparable plants in Europe and North America. However, about 73% of the cost of this plant is estiinatw to) 'h met with share capital so that service is reqlirprl on only about 27% of the investment. Estimated revenues, expenses, earnings and the cash position of C HI!DRAL from 19;50 th-roug.h 1960 are csimmarizeprd in Tlesk 3 and 4. ITn +thn calculations on which the tables are based, revenues have been estimated on theDasis, O3r a wholea- alle r at e seq uiv al ent to .6 ce)e per --- IThis rate is based upon the following rate schedule agreed upon between CHIDRAL -an the 1A,ur4Lci-1li- o4v Cal4 andJ approved by thle spharehll0uders of r-HIDPQA.AI C7,.LA 14 ALL1, J.CL.J%I pV±L UCL Wi1.$ UJ w1 L~I,± i±..±JL~W. UU i. U11L Ii during the month; 2,2 centavos per kwh for the next 2.5 million kwh consumed during the month; 1.5 centavos per kwh for the next 2.5 million kwh consumed during the month; 1D0 centavo for each additional kwh consumed during the month. Since monthly sales by Anchicaya will average less than 10 million kwh until 1961, the effective rate will be 2.6 centavos throughout the period covered by Tables 3 and 4, except to the extent that seasonal variations may result in consumption in some months in excess of 10 million kwh. The loss in revenues resulting from this factor would in any case be of minor impor- tance during the period 1953-1960, and for that reason no attempt was made to adjust the figures for this possibility. The above rates, while expressed in local currency, will be subject to adjustment should the Colombian peso be devalued in relation to the dollar. ODerating expenses used in the calculations are those estimated by C}IDRAL for the Anchicaya plant, adjusted for the operation of two units, plus the cost of keeping the Cali stations in standby condition until 1955, - 12 - For later years the above figures have been increased by the costs of opera- tion of the Cali diesel plants. Debt service is on the basis of an assumed loan of p,3.53 millicn. The term of the loan is assumed to be 20 years, including a 3-year moratorium on amortization. A commitment charge of three-fourths of one percent was assumed, with an interest rate, including commission, of 4%. It appears that this project will show a net surplus after service of the proposed loan of about ,186,000 in the first half-year of operation. The net surplus rate for the next year will be somewhat lower, but will rise at a moderate rate of about '60,000 a year throughout 1960. The rate of return on the total investment, including the existing plants, will rise from 2.7% per year in 1954 to about 5.5% by 1960. Sometime during 1960 or in early 1961, the system will be overloaded and it will be necessary to install additional generating capacity. Probably the most econormical means of providingJ this additional capacity will be through the installation at Anchicaya of a third hydro unit similar to the first two. Since the civil works will have been completed, the new investment for a unit of this size will be moderate. If it is assumed that the cost per kw will amount to as mneh ns I';1 for the tVhird unit. an inversntment. of hit. A1 -Ann -nnn w..ill be required. The accumulated surplus throughout these years will be more than sufficiegntr tr; covnrp" this n i rvestment It; should be noted +;nat the QS+ mates -f the coftO the pr,o;ec+ and of the market for power must be accepted with some qualifications. The cost of completing t e proJectJ may exceed 1t-hLe urrJert estm1ates. The UIC.e for power may be lower than has been estimated here, since it is not certain that Ut fLg-urs IVr- IkWhI grLeteUUtU anJIL l UL 4jULJ-JUVti;U are UcorrLec Nevertheless, the earnings prospects on sales as low as 56 million kwh per year (i.e. 10% lower than the 1949 generation plus purclhases by Cali), would be sufficient to meet all operating and financial charges, including service of the IBRD loan and depreciation on both the Rio Anchicaya and the Cali generating facilities. Should the cost of completing the project rise above the curreat estimates, it would become necessary for CH ±unAL to raise addi- tional equity capital, but once the necessary amounts are obtained, earnings would be more than sufficient to assure service of the IBRD loan. XI - Recommended Basis for a Loan A loan on this project appears to be justified for the following reasons: 1 The estimated expansion of the market for power in the Cali area seems to assure an adequate initial demand on the Anchic4ya station and indicates that capacity opera- tion will be obtained by 1956. 2. Estimated earnings show that the project is self-liqui- dating in terms of local currency equivalent of the amounts required to service the proposed loan. - 13 - 3, The project provides a basis for future expansion to a capacity of- `7200 L at realvl low cost, providedA that this amount is supplemented with steam and diesel uni s. 4. An investmentt u e .uvalent tO abo-ut d52 million has already been made in the project and the additional investment of about '8.l million which is required for completion has satisfactory earning prospects. 5. The existence of a new supply of power with the possi- bility of easy expansion should accelerate industrial expansion, rural electrification and increased use of irrigation in the Cauca Valley. It appears that the Bank can favorably consider a loan on this project up to '3.53 million to cover part of the foreign exchange cost of the project.. The distribution of foreign exchange requirements by subsections of the entire project cannot at the present time be properly specified because of the wide variations between the two lowest bidders in the compo- sition of the total exDenses. A tentative breakdown, based on the Christiani & Nielsen bid, is approximately as follows: 1. Dam and headworks ......................e $ 77,000 2. Powerhouse and step-up substation . ..... 313,000 3. Transmission line .................... . 377,000 4',, Cali substation .............. 47,000 5. ConstruLction equipment and materials ..... 1,365,000 6. Interest during construction .............. 270,000 7. Freight, escalation, and contingencies .... 535,000 S. Unspecified, including fees, overhead, andm iclaeu ite .s ........................... g.. nnn00 Total. .. . . r3,530, 00n NOTE: The allocation between the Dowerhouse and the Cali substation is somewhat arbitrary, as CHIDRAL does not allocate paYments on a Wlestinghouse order for electrical equipment for the two subprojects. - 14 - If a loan is granted on the project, it should be subject to the following conditions: lo Before the effective date of the loan, additional share capital will be assured to cover the local currency required to complete the project and to provide adequate working capital for its operation. This is estimated at approximately 1.6 million pesos. The increase in capital shall be obtained in a manner that is in conformity with existing Colombian law and shall also be on a schedule that will permit mainte- nance of the construction schedule established for this project by the contractor chosen for the job. 2. Before the effective date of the loan, satisfactory contracts between COMIDRAL and the proper authorities in Cali shall be submitted to the Bank covering the terms and conditions under which the sale of poller to Gali will take place. 30A ro,mplete. list. of gnnrods3 slnbrld not. 'h sbihnittpre until international bids have been received on all the loan. Any substantial reduction in the estimated foeg ext'ag csu __8SP|s o_ l + e prjc 810- A '_-; v about a reduction in the amnount of the loan. J. Grauman This report has been prepared in cooperation with the Assistant Loan Officer. TABIE 1. Forecast of Electric Energy Requirements and of K.W* W enemrnd byv Geli for Cali Load factor K.W. demand (m4114r,,c,^ o K.T (1ercent) '-/ by Ca3l -L748 5.,/ i95 1 98'v .1.740 ).L.~24: .1 u 1953 76. 5/ 45 19,400 1954 J,2. 81.1 43 21,500 1955 g.b 86.0 42 23,400 1956 91.2 41 25,400 19,57 96.7 40 27,600 1958 102.5 40 29,300 1959 108.7 2 40 31,000 _ 1960 115.2 40 32,900 1961 122.1 40 34,800 1/ Actual, according to information transmitted by CH1DRAL in "inf'orme, 1948"? published by Empresas Municipales, Cali, and in letter No. 220/50-G, of July 26, 1950. Figures represent generation by Cali's own plants plus purchases of peak power from Palmira. 2/ Calculated on the assumption that a new diesel unit of about 1700 K.iJ., now being installed, would be operated at a 40% load factor, and that the generation of the remaining units, nlus pur- chases from Palmira would be held at the 1949 level. 2/ It is assumed that the annual rate of increase in energy requirements will be approximately 6% Der annum for the period 1953-1961. L! The load factor in 1948 was aDproximately 47 per cent. It is assumed here that as the supply of electric energy is improved, the load faetor will dA,line in the manner shown in this column. Table 2 - Estimated Cost of Construction and Equipment of the Anchicaya Iydroelectric Station, Including Ttans- mission and Cali Substation (All fiaures expressed in UMS. dollar equivalents) Estimated Cost Spent Estimated Cost to be Spent Total Estimated Cost Local Local Local Total Currency U.S.$ Total Currency U,S. $ Total Currency U.S.$ I - Const.& Const.Mach. & Supplies - 1. Land and rights 27,000 27,000 0 0 0 0 27,000 27,000 C 2. Roads and auxiiiary works 719,200 - - 78,200 - - 797,400 - 3, Auxiliary plant 2530300 - - 0 O 0 253,300 - 4. Dam,headworks,diversion tunnel 1,341,200 - - 3,115,700 - - 4,456,900 - _ 5. Power tunnel 806,100 - - 727,800 - 1,533900 _ 6. Penstocks 100 - _ 173,300 - _ 173,400 o 7. Powerhouse and tailworks 703,900 - 1,152,700 - 1,856,600 _ 8. Station mech. & elec.equipment incl. step-up substation 6,ooo - - 158,500 _ _ 164,500 - _ 9. Transmission lines 99,300 - - 230,300 _ _ 329,600 - 10. Cali substation 1,300 - - 144,400 - - 145,700 - - 11, Other 1/ 50,000 0 50,000 147,100 C 147,100 197,100 0 197,100 12. Total I 4,007,400 3,545,100 462,300 5,928,000 4,246,400 1,681,600 9,935,400 7,791,500 2,143,900 II - Mach. & Equip. excl.construction - 13. Tunnel gates 31,100 0 31,100 c 0 0 31,100 C 31,100 14. Mechanism for tunnel gates 62,400 0 62,400 1,800 0 1,800 64,200 0 64,200 15. Penstocks 95,800 0 95,800 0 0 0 95,800 0 95,800 16. Iurbines and governors 309,500 0 309,500 4,900 0 4,900 314,400 0 314,400 17. Generators,switchboard, transf. 486,300 0 486,300 125,700 0 125,700 612,000 0 612,000 18. Auxiliary hydraulic equipment 58,600 0 58,6oo 0 0 0 58,600 0 58,600 19. Cali substation 130,000 0 130,000 46,400 0 46,400 176,400 0 176,400 20. Towers for transmission line 0 0 0 126,100 0 126,100 126,100 0 126,100 21. Trans.lines & accessories 0 0 0 250,300 0 250,300 250,300 0 250,300 22. Cranes 0 0 0 33,900 0 33,900 33,900 0 33,900 23. Misc.Equipment for Dam 0 0 0 74,600 0 74,600 74,600 0 74,600 24. Misc.Powerhouse EquiDment 0 0 0 149,900 0 149,900 149,900 0 149,900 25. Freight, Ii surance, MiSc.V 17,300 0 17,300 200,000 0 200,000 217,300 0 217,300 26- Ovrnd -4 0 270,000 270,000 0 270.000 270,000 O 27. Escalation & contingencfes (lOV) 0 0 0 1650OOO 0 165,000 165,000 0 165,000 Table 2 (Cont.) -Estimated Cost Spent Estimated Cost to be Spent Total Estimated Cost Local Local Local Total Currency U.S.$ Total Currency U.S.$ Total Currency U.S.$ 28. Fees not included in above 0 0 0 450,700 43912c0 11,500 450,700 439,200 11,500 29. Total above 1,191,0O 0 19J914cco 1,899,300 709,200 1,190,100 3,090,300 709,200 2,381,100 30. Total ! and II 5,198,400 3,545,100 1,653,300 7,827,300 4,955,600 2,871,700 13,025,700 8,500,700 4,525,000 III - Interest during construction 0 0 C 270,000 0 270,000 270,000 0 270,000 Grand Total 5.198.400 3.5L5.100 1.653.300 8,097.j00 4.955,600 3.141700 19.295,700 8.500.700 4,795.000 Note:. This table was obtained by adjusting the figures in IBRD document No. Loan 81, Table 3, in accordance with revisions supplied by CHIDRAL and Christiani and Nielsen. The figures in items 15, 16, 18, 19 and 21 represent a somewhat arbitrary allocation of two orders -olaced with S. Morgan Smith and. Westinghouse. In the above table, the dash ( - indicates that the breakdowm of expenditures into local and foreign currencies is not available. .,J Includes design fees and costs of foreign personnel. .| gThe U.S. dollar component represents the sum of line 11 and of the delivered cost of construction machinery and supplies which have been allocated to items 2 - 10. S/ For items 13 - 24 only. g Reoresents the cost of the central office and of a construction supervisory and auditing staff, by CHIDRAL, 1953-196# kW"1 figures 0 n thousands of U.OO doC1ars) Operating Income expen.es available IBRD Income frclm including for IBRD debt Net Surplus Year Energy sales2i depreciationiC debt service service2/ Annual Cumulative 19531/ 507 2124 293 107 186 186 1954 1,076 428 648 288 360 546 1955 ll;1 428 713 288 425 971 1956 1.,210 436 774 288 486 1J,457 1957 1,283 469 814 288 526 1,983 1958 1,360 483 877 288 589 2,572 1l59 1,442 498 944 288 656 3,228 1960 1,528 515 1,013 288 725 3,953 1/ Based on forecast of kwh requirements of' Cali. to be sold at a price cf 2.6 centavos (1,3265 cents U.S.) per kwhe g Composed of the following items: Operating expenses of Anchicaya station $123jOOO00 per tvizar; cost. of keepning the. gDrnartir!g facilities murhse.1IqP! from CalL in standby condition = $25,000 per year; depreciation - t213;000 for the lkr.chicaJ-ra plant ar.d AA7 n(o fo -he Ga…l fa-cili+-is; o-eratin…; costs of Cali's diesel units - .75 cents U%S, per kwh, yjl Calculated on the basis of a loan of $3.53 million, at 4% interest, and lree J evr mnra m mv+AY!n+A r%r For the o rof +hna it is assumed that the effective date of the loan was October 1, 1950., Debvl serf4LLCe is chargeL d to U'Whe perilod iJn w1hi.LchZ it J.is CaCccUed.O ITable 4 - 3stimated Cash Position of Central hidroslectrica del Rio Anchicaya Ltdia. l/ To 12/31 __ Q 1952 1'53 1954 1955 1956 12957 19i 1959 290 1950 I 1I I II I IT i. Local currency in thousarnds of seBos- Balance from preceding period - 7,379 6,127 4,247 1,918 - 1T4 -1,134 - 768 - 62 771 1,7ZY4 2,755 3.910 5,195 Payments on capital subscriptions 21,200 - - - - _- - - - - _ Loan from Cali 7 398 - - - - - -- - - - _ Sales of nower - - 99;5 2,109 2,236 2,372 2,515 2,666 2,826 2,955 Other: Rental Charges on Cali plants j 46 91 69 88 86 84 - - - - - - - _ Depreciation tilt U 33 66 66 66 66 66 - - - - - - - - Total funds available 21,677 7,536 6 ,22 4,401 2,070 7 - 139 1,341 2,174 3,1L3 0,239 5,421 6,736 84i90 ConstrŽG. (expenditures U 5/ 10,189 1,343 1,69 92,417 2,148 1,073 - - - - - - Purchase of Cali gen. plants 4,076 - - - - _ _ _ _ _ _ _ -Aortiz. & int. on loan from Cali 33 66 66 66 66 66 -- - - - - Operating expenses incl. deprecia- tion & IBBD debt service - - -- - - 629 1,L03 1,403 1,419 1,LS4 1,511 1,541 1,574 Balance at end of Deriod 7,379 6,127 4,247 1,918 - 144 -1,134 - 768 - 62 771 1,724 2,755 3,910 5,195 6,616 B. Foreign Exchange in thous. of dollars- Fal. from preceding period - 1,9%6 1,609 1,215 816 412 I3RD loan 3,530 - - - - - Eypenditures including interest tLring construction j/ 1,534 387 394 399 404 h12 Balance at end of period 1,996 1,6C9 1,215 816 L12 - 1/ It is assumed that the transfer of the Cali generating -olants wrs effected. and that rental and depreciation charges began as of October 1, 1950. This Table does not include sworking capital requirements, estimated at 400,000 resos. 2/ The sure of 398,0CO pesos represents the difference between the assessed value of the Ca3i generating Dlants and the amounts still owed by Cali to CHIDRLL on its share in the old subscrintion of 11.2 million mesos alus the new subscrintion of 10 million teses, The scim will be amortized by aWPIling the depreciation charges (3.2091% per year calculated quarterly) against principal and interest at 4.5;, per year. a/ Calculated quarterly at the rate of 4.5% per year on the deoreriated value of the Cali nenerating plants, 4/ The timing of peso expenditures is based upon the expenditures schedule of Christiari & Nielsen. S F For the purposes of this table, it is assUmled that the total amount of the Bank loan will be writhdrawn; the total peso expenditures for construction represent the difference between the estimated cost reqaired to comnlete the pro,ject a,ld the amount of the loan. TABlE 5. Balance Sheet of (1HITYRAT. as of May 31, 1950 (in thousand pesos, rounded) ASSETS T.T A PL T T .TmTr Gash 0.1 Subscribed caoital 11,200.0 Banks 5409 Various creditors 233.4 Shareholders notes Current u accoun7s 2n.7 National Qovern! Interest, discounts & menit 561.0 sundries 160.2 Municipality of rGal 1 4 n 1,639.0 ITvt,es4te',-n4s 0s Funds available 1,696.5 Production of mlatCeriualb . Equipment and supplies 1,128.7 Less: Aocumula.ted deDreciation 273.0 855.7 Permanent macbineiy 2,592.0 Cost of construc- tion to date 6.715.3 10.171,8 11,868.3 11,863.3 Contingent Assets Contingent Liabilities (econt~ra) 436.j J.J1 (tr ---I4