~ILE7CO?\ R E S TRESTRICTED Report No. TO-362b This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL REPORT KOTHAGUDEM POWER PROJECT INDIA May 16, 1963 Department of Technical Operations CURRENCY EQUIVALENTS 1 US $ = Rs 4.762 1 Indian Rupee = US $0. 21 Rs 1, 000, 000 = US $210, 000 TABLE OF CONTENTS Page No. SUEMMARY - ii I. INTRODUCTION 1 II. THE BORROWER 1 III. THE ELECTRIC POWER INDUSTRY IN ANDHRA PRADESH 1 IV. ANDHRA PRADESH ELECTRICITY AUTHORITIES 3 V. THE POWER MARKET 4 Past Growth of Power Demand 4 Forecast of Power Demand 4 Past Energy Sales 6 Forecast of Energy Sales 6 VI. THE PROJECT 6 Description 6 Status of Engineering and Arrangements for Construction 7 Construction Schedules 8 Procurement Procedures 8 Cost Estimates 9 Cost of Production 9 VII. RATES VIII. FINANCIALI ASPECTS 10 Past and Present Financial Position of the State Electricity Board 10 Future Financial Position of the State Electricity Board 11 Rate Covenant 13 Acceunting and Audits 13 IX. CONCLUSIONS 14 ANNEXES 1. Actual and Forecast Energy Sales 2. Actual and Forecast Output, Energy Sales, Installed and Firm Capacity, Maximum Demand 3. Graphs Showing System Capacity and Maximum Demand 4. Power Expansion Programs 5. Detailed Description of the Project 6. Construction Schedule 7. Estimated Cost of the Project 8. Estimated Cost of Production of Kothagudem Station 9. Notes to Financial Statements 10. Requirements and Sources of Funds, 1963-1971 11. Consolidated Income Statement, 1960-1971 12. Consolidated Statement of Assets, 1960-1971 MAP XDPRAL;:'AIL REPORT KUThAGUDFT POWER PROJECT, A' 'P RADESH - iNDIA SUlMMARY i. The Government of India has asked the Association to extend a Cre('9 of $20 million equivalent to help finarice a thermal power project consisting of a new 120 MW steam power station near Kothagudem, a reservoir to provide make-up water for the cooling towers of the station and some transmission facilities. The total cost of the proposed project is estimated at $41.6 mia.L. lion of which $17.4 million would be in foreign currency. ii. The credit would be made to the Government of India which would pr.- vide or cause to be provided all funds required for the project. The proceedE of the proposed credit would be relent by the Government of india to the Sta'ie Government of Andhra Pradesh. The State Government in turn would relend tha proceeds along with the additional funds required for the project to the State Electricity Board on terms satisfactory to the Association. There would be a project agreement between the State Government and the Association. iii. The proposed project would be carried out by the Andhra Pradesh State Electricity Board which was constituted in 1959 under the Electricity (Supply) Act of 1948. It is a corporate body with the general duty of pro- moting coordinated development of electric power in the State. It now oper- ates a power system with a total installed capacity of 213 SW. iv. The proposed project is a part of the power expansion program in- cluded in the Third Five-Year Plan for Andhra Pradesh, The power station will be constructed with the assistance of consultants. The reservoir dam will be built by the Irrigation Agency of the State Governmert. The transmission facilities will be built by the Electricity Board itself. The whole project is expected to be completed in March 1966. v. Power demand in Andhra Pradesh has grown at a fast rate. Due to insufficient generating capacity, there has been an acute shortage of power. The proposed project is urgently needed to improve the situation. There is no suitable alternative method of meeting the increasing demand. vi. Until very recently two State Government agencies, the Electricity Department and the State Electricity Board, have been responsible for electric power development in Andhra Pradesh. This has been unsatisfactory. The State Government has therefore recently transferred most of the functions of the Electricity Department to the Board and assured the Association that in the future the State Electricity Board would be the only government agency respon- sible for electric utility development and operations in the State and that the organization of the Board would be strengthened. vii. The Board recently increased its electricity tariffs by about 33%. This will provide more satisfactory earnings than in the past when the rate of return on the net investment in power facilities was only about 2.4%a During the next few years the return on net investment would be around 4% and afuer completion of the projects now under construction a rate of return of 8% is expected to be achieved on the basis of the new tariffs. ii viii. The State Government has agreed to maintain this level of earnings which would provide from revenue about 30% of the funds estimated to be re- quired for capital expenditures during 1966-1971. This is an adequate in- ternal contribution towards expansion. The Board's financial position is ex- pected to continue to be sound. ix. The Board would follow the accounting and audit procedure prescribed by the Indian Electricity (Supply) Act. Audits have been delayed in the past and the Indian authorities agreed that they should be expedited in the future. x. The project is suitable faran IDA credit of $20 million equivalent on the usual terms. This credit would cover the entire foreign currency re- quirements as well as part of the local currency requirement of the civil wor '-. APPRAISAL REPORT KOTHAGTJDEM POWER PROJECT, AIDHRA PRADESH - INDIA I. INTRODUCTION 1. This report covers the appraisal of a thermal power project proposed by the State Electricity Board of Andhra Pradesh. The Government of India has asked the Association to help finance the project by extending a credit of $20.0 million. 2. The project consists of: (a) a new 120 MW steam power station at Kothagudem; (b) a reservoir on the Kinnerasani River to provide cooling water; and (c) a 150-mile transmission line to connect the Kothagudem Power Station with the existing Ramagundam Thermal Station. 3. The total construction cost of the project is estimated at Rs. 198 million, or $41.6 million, of which Rs. 83 million or $17.4 million would be in foreign currency. The proposed credit would cover the entire foreign cur- rency requirement as well as part of the local currency cost of the civil works. 4. This report is based on information supplied by the Andhra Pradesh State Government, including a report by their consultants, and on findings by Association missions which visited Andhra Pradesh in 1961 and 1962. II. THE BORROWER 5. The Borrower would be the Government of India which has assumed the responsibi-ity to provide or cause to be provided all funds required for the Kothaguden Power Project. Proceeds of the proposed credit would be lent by the Govermnent of India to the State Government of Andhra Pradesh which in turn would relend the funds to the State Electricity Board which would carry out the project. This is the procedure generally followed by the Government of India in financing electr; power development. In the case of the Kothagudem Power Project, the Government of India would lend to the State Government at 4-2% interest for a term of about 20 years including a grace period during construction of the project. The State Government would relend to the Board on similar terms but at 5% interest. III. ELECTRIC POWER INDUSTRY IN ANDHRA PRADESH 6. The State of Andhra Pradesh, formed in 1956, is the fifth largest state (about 107,000 sq. mi.) in India, and fourth in population (1961: 36 million). Andhra Pradesh has considerable mineral resources including coal, which is mostly low-grade and concentrated mainly in the northern parts of the State. The State is composed of three regions, namely Andhra (northeast coastal area, formerly part of Madras State), Rayalaseema (south of the Krishna River, formerly also belonging to Madras) and Telengana (northwest area, formerly part of Hyderabad State). Two large rivers, the Godavari and the Krishna, flow through the State and offer good opportunities for hydro- electric development, especially in the north. - 2 - 7. Andhra Pradesh is predominantly agricultural, and only recently modern industries have begun to develop. Electric power supply started in 1909 with the commissioning of the Hussainsagar Power Station for the twin cities of Hyderabad and Secunderabad. Early developments were confined to a few large towns. Isolated diesel sets were installed in widely-separated places. Not until the First Five-Year Plan (1951-1955) was launched did the State begin to make progress in this field. Two hydroelectric schemes (Mach- kund and Tungabhadra) were undertaken jointly with two neighboring states and transmission lines were built to important lmad centers. They laid the foun- dation for power development in the State and stimulated the establishment of a number of diversified industries. Electric service has gradually been extended to rural areas. During the ten year period 1951-1961 the total installed ca- pacity of electric utilities in the State rose from 43 MW to 213 MW, a five- fold increase. The power demand went up even faster, being multiplied eight times during the decade. 8. In spite of this progress, the State is still comparatively backward in power development, ranking ninth in India. The present per capita annual consumption is only about 18 kwh, compared to over 30 for the whole of India, and 60, 38 and 61 for the neighboring states of Madras, Mysore and Maharashtra, respectively. 9. All former private licensees and municipal electricity undertakings have been acquired by the Government. The whole electric power industry is now owned and operated by State agencies. 10. Up to the present, the three regions of the State have been served by three separatPIy-operated systems. Andhra, industrially the most developed, is supplied mainly by the Macakund Hydro Station through a 132-kv transmission line. Rayalaseema, the least developed, is supplied by the two hydro stations of the Tungabhadra Interstal;e Scheme with 66-kv lines. The Telengana region, a developing area with high potentials, gets its power supply from the Ramagundam Thermal Strtion and several small plants near the State capital of Hyderabad, also connected by 66-kv lines. Altogether, there are four hydro- electric stations, five steam-electric stations and some 70 small diesel plants. The total installed capacity of the stations is 213 MW, of which only 140 MW is estimated to be firm. Two major 132-kv transmission lines are under con- struction. On their completion this year the three systems will be operated as one integrated grid. 11. In ten years the number of communities receiving electricity supply increased from 212 to 3,213, out of a total of 26,500 for the whole State. At present about 350,000 customers receive electric power service. 12. For several years there has been an acute shortage of power. To remedy this situation and to meet the growing demand, the State is implementing the power expansion program for the Third Five-Year Plan, 1961-1965. This program, after revision, now consists of three major projects, one hydro (Upper Sileru) and two thermal (Kothagudem and Ramagundam Extension), totalling 300 MW, and three minor projects, totalling 79 MW. The minor projects would be commissioned first but would not contribute sufficient capacity to keep pace with the demand. Only when the major projects are completed, early in 1966, will the power supply situation be improved. - 3 - 13. The tentative power program for the Fourth Plan (1966-1970) would consist of expansion cf the three major projects providing a total additional capacity of 660 MW. (See Annex 4.) IV. ANDHRA PRADESH ELECTRICITY AUTHORITIES 14. Until very recently two State Government agencies, the Electricity Department and the State Electricity Board, have been responsible for devel- opment and operation of electric power facilities in Andhra Pradesh. 15. The Electricity Department was formed in 1956 to assume all Govern- ment responsibilities in the field of electrical power in Andhra Pradesh. A number of these responsibilities were transferred gradually to the Board during the period from April 1959 through March 1963. Those transfers were, however, not enough to avoid an unsatisfactory overlapping of responsibilities. Much has been done about one month ago to remedy the situation when the assets and liabillities, functions and responsibilities of the Electricity Department were trarLsferred to the Board, except for those related to interstate projects and the Upper Sileru project; this project after its completion, presumably in 1964 will also be transferred to the Board. The Electricity Department would thereafter simply retain certain administrative functions including those re- lating to interstate schemes. 16. The two existing interstate bydro schemes (Machkund and Tungabhadra) are controlled by separate boards, with representatives of the respective State Goveriznrents. T.he Electricity Department administers the Andhra Pradesh proportions of capital expenditures, revenues, operating costs and power out- puts. The proport~ionate power output of Andhra Pradesh from these scheres is sold to the Board at operating cost plus capital charges. 17. The State Electricit- Board was constituted on April 1, 1959 under the Electricity (Supply) Act, 1948, as amended. It is a corporate body with the general duty of pr-.noting coordinated development of electric power in the State and with legal authority to set power rates. After the completion of the Upper Sileru project in 1964 the Board will be the only Government agency in Andhra Pradesh to exercise the following main functions: (a) planning and construction of all generating facilities; (b) planning and construction of all transmission and distribution facilities; (c) operation and maintenance of all generating stations and of all transmission and distribution facilities; and (d) sales of power; excluding, however, any such functions with regard to facilities operated or to be operated by interstate agencies. 18. The Board consists of a chairman and six members (two government secretaries, three Board engineers, and one industrial representative). The State Government recently replaced the part-time chairman who was in office since 1959 and appointed a full-time chairman. The State Government assured the Association that further steps would be taken to reorganize the Board to take full account of the transfer of responsibilities from the Electricity Department. This would include the strengthening of the planning department to facilitate the planning of future expansion programs in Andhra Pradesh, which has been inadequate in the past. The details of the reorganization would be subject to a review and comments by the Asseociation. V. THE POWER MARKET Past Growth of Power Demand 19. Power demand in Andhra Pradesh has grown at a fast rate. The average annual rate of increase during the first two Five-Year Plan periods (1951-1960) was 23.4%. 20. During recent years because of insufficient capacity the Board has had to sappress the peak loads by various measures, such as, staggering factory holidays, prohibiting industrial uses of power during the evening peak lo8d hours, charging such users at higher rates when specially permitted, re- stricting new connections, etc. More recently the government has taken further steps to restrict power consumption for public lighting and for commercial pur- poses. In spite of this, the total maximum demand climbed to 180 MW in fiscal year 196V1962 (April 1, 1961 - March 31, 1962) compared with 76.4 MW in 1956/1957, an average annual increase of 18.7%. 21. At present the largest power-consuming industries in the State are ferro-mang;Tziese, cement, paper, oil refining and shipbuilding. Forecast of Power Demaud 22. In 1959 the Central Government Water and Power Commission carried out a detailed l1ad survey of Andhra Pradesh jointly with State Government officials. Field staff conducted extensive investigations in the various service areas and con.acted government officials, public agencies and industries for ascertaining their programs of development and potential loads. The report published in April 1961, estimated the simultaneous maximum demands for the whole State at 478 MW and 8h6 MW in 1965/66 and 1970/71 respectively. Because of a more rapid industrial development, resulting in more applications for power supply than envisioned during the survey, the State authorities in 1962 raised the estimates to 591 MW and 1,287 MW respectively. 23. During the appraisal this matter was fully discussed. In view of the possibility that some industrial projects might be dropped, it was agreed that more conservative figures, 500 NW and 1,000 MW for 1965/66 and 1970/71 respectively, be used in planning the expansion programs and in estimating energy sales. This would represent a 19.5% average annual increase over the ten-year period 1961-1971. It is a very impressive rate of load growth but is reasonable for a developing region which recorded an even higher rate during the previous decade. 24. The breakdown of the estimated peak demands (day-time) into various categories would be as follows: 1965/1966 1970/1971 (MW) 1. Domestic and Commercial 20 28 2. Industries - small and medium 101 168 3. Industries- large and heavy 297 669 4. Mining 22 47 5. Waterworks and Sewage Pumping 8 ? 6. Irrigation and Dewatering 79 119 7. Bulk Supplies to Railways, ports, etc. 23 24 8. Unforeseen Loads 0 36 Total Aggregate of Demands m 1,100 Simultaneous Maximum Demand 500 1,000 25. The above table shows that large and heavy industries constitute the bulk of the total load. The following is a recent summary of power demands by the major industries which have sent in definite applications for new or addi- tional power supply: (MW) 1. Iron and Steel 48 2. Ferro Manganese 18 3. Textiles 12 4. Jute. Rayon, Rubber 4 5. Fertilizers and Chemicals 98 6. Cement 45 7. Engineering Industries 55 26. Power expansion programs have been laid out to meet the forecast demands. During thle mhird Five-Year Plan 379 MW of new capacity would be added. In the absence of a reliable program for expansion after 1966, the Association discussed with officials of the Board a set of tentative assumptions of the capacities to be added to the system between 1966 and 1971. According to these assumptions 660 MW would be further added during the Fourth Five-Year Plan period as described in detail in Annex 4. This tentative program has to be firmed up by detailed engineering studies and serves only to give orders of magnitude of probable requirements. 27. The graphs in Annex 3 show the relationship between the system capacity and the maximum demand. Since the power program of the Third Plan has suffered considerable delay the scheduled additional capacities will not meet the actual loads during the whole plan period and the system load will have to be greatly suppressed until the end of the period, early 1966. By then a large block of power would become available to supply the needs of the in- dustries. The system peak is therefore expected to increase to 500 MW very rapidly. It is possible that the first units of the Kothagudem and Upper Sileru plants may be commissioned during the second half of 1965/1966 and the demand would then increase more gradually than shown on the graph. From 1966 onwards the year-end firm capacities would nearly correspond to the maximum demands. -6- Past Energy Sales 28. Total energy sales of the Board for the first three years since its formation have increased from 426 million kwh in 1959/1960 to 698 million kwh in 1961/1962, an average annual increase of 28%. 29. The following table shows the recent pattern of power consumption. It is expected that this pattern would not change appreciably in the near future. % of Total Energy Sales Domestic 11 Commercial 6 Public Lighting 3 Industrial (Low Tension Supply) 10 Industrial (High Tension Supply) 60. Agricultural 10 100 Forecast of Energy Sales 30. Energy sales during the Third Plan would be limited by the maximum output from the power stations in operation. As shown in Annex 1 it is esti- mated that the sales in 1965/1966 would be 1,000 million kwh. The increase over the five-year period (1961-1965) would average 11% annually. 31e During the Fourth Plan period assuming continuing expansion of generating facilities sales are expected to continue to rise to an estimated 3340 million kwh in 1970/71. During the period 1961-1971 the average annual increase of total sales would be 18.8%. Per capita consumption would be about 75 kwh by 1970/71. VI. THE PROJECT Description 32. The main parts of the project are briefly described below; for more details see Annex 5. Power Station 33. The power station would be located a few miles from the small mining town of Kothagudem near the center of the coal fields in northern Andhra Pradesh. (See Map,) Its initial capacity would be 120 MW. Due to the stra- tegic location near fuel supply and load centers, the station could ultimately be developed to 1,000 MW or larger and would become one of the most important sources of power for the whole State. 34. The generating plant would initially consist of two 60 MW turbine- generator sets operating at 50 cycles with steam pressure at 1,250 lbs. per square inch and steam temperature at 950 degrees F. Two pulverized-coal-fired boilers, each rated at 560,000 lbs. per hour would be installed in an outdoor type of construction suitable to the climate. Considering the present magnitude of the power system, the unit size of the generating sets, as recommended by the consultants, is appropriate. The steam conditions are conservative, con- sistent with the requirements of reliability and easy maintenance at the pre- sent stage of development in the State. 35. Low-grade coal would be transported from the existing collieries over an aerial ropeway. In the future, it might be economical to utilize nearby deposits, which could be mined with open-cut method. Cooling towers would be used to cool the circulating water for the condensers. Kinnerasani Dam 36. Make-up water to compensate for evaporation losses in the cooling towers would flow through a 6 mile canal from a reservoir formed by an earth dam on the nearby Kinnerasani River. This reservoir would also supply water to a fcrtilizer factory to be located adjacent to the power station. The dam would have an initial height of about 96 feet. Storage capacity would meet the needs of the station up to a generating capacity of 240 MW and of the fer- tilizer factory. For further expansion of the power station the dam could be raised to increase the reservoir storage capacity. 37. The full cost of the dam would be covered under the Kothagudem Thermal Pro-ect. The Electrieity Board would c;erate the dam and collect appropriate payments for water from the fertilizer factory. Transmission Facilities 38. Power from the Kothagudem station would be supplied to the fertilizer factory and other industries to be established in the neighborhood. Generating voltage would be stepped up to 132 kv for transmission to load centers at Hyderabad and near the Ramagundam power station which is also being expanded. The station would also be connected to a 220-kv transmission line, the backbone of the State grid, to serve the industrialized coastal area and to interconnect with the power system of the State of Madras. 39. The part of the transmission facilities to be financed under the Kothagudem Thermal Project would consist of a double-circuit 132-kv line 150 miles long to connect the Kothagudem Station with the Ramagundam Station via Warangal, the second largest city of the State, and of equipment for expanding the substations at Ramagundam, Warangal and Hyderabad. Status of Engineering and Arrangements for Construction 40. The State Government has appointed Ewbank & Partners of London as consultants to design the power station, to prepare all documents for inter- national bidding and to supervise construction. Invitations to bid for the main equipment, (boiler plant, turbine generator plant and main switchgear) were issued respectively in August, September and December 1962. Tenders on boiler plant and turbine generator plant were received in January and February - 8-- 1963. Successful bidders would be responsible for erecting and commissioning the equipment. Civil works would be under separate contracts. All the work would be under the general supervision of the consultants, who have engaged as advisers another British civil engineering firm familiar with construction work in India. Other miscellaneous civil works outside the boundary of the power station such as access roads, staff quarters, etc., as well as the aerial ropeway for transporting coal, would be carried out by the State Electricity Board itself. Theso arrangements are satisfactory. 41. Work on the Kinnerasani Dam has been assigned by the State Govern- ment to the Irrigation Branch of the Public Works Department which has under- taken investigations and made preliminary lay-outs. It is now preparing de- tailed designs. It would be responsible for the construction of the dam, mainly by its own staff with local labor supplied under contracts. This agency has had considerable experience in similar work and is competent to handle the job. 42. Transmission facilities would be designed and constructed by the State Electricity Board itself which is experienced in this field. Construction Schedules 43. A detailed constructien schedule for the power station has been pre- pared by the consultants and is attached as Annex 6. The first unit would be commissioned in December 1965 and the second would follow three months later. 44. According to the latest construction schedule prepared by the Irrigation Branch, the Kinne:-asani Dam would be constructed in three working seasons (December - May) st vting from December 1962. Water is expected to be supplied to the power staticn by about October 1965. 45. The transmission facilities would be completed before tlle power station so that powel could be supplied to the State grid as soon as available. These schedules are reasonable. Procurement Procedures 46. When tendering for power plant equipment in India, it is customary to specify that the tenderer should include the maximum amount of component parts that can be made in India and that the foreign currency requirement should be as small as possible. This involves extensive reviews by various government agencies and causes considerable delay in placing orders. Because the lowest bid may not contain the minimum proportion of foreign currency, it is often difficult to reach a decision on awards. 47. In view of the great urgency of this project, the Board has eliminated the limitation on foreign currency content in the tendering of main equipment for the Kothagudem Station at the suggestion of the Association and with the agreement of the Central Government. -9- Cost Estimates 48. Cost estimates for the project are summarized below; for more details see Annex 7. Foreign Local CMurr,ency Currency Total " -'n-millions of rupees) Estimated Cost Power Station (incl. Switchyard) 70.84 65.42 136.26 Kinnerasani Dam 3.20 13.90 17.10 Transmission Facilities 1.99 17.91 19.90 Sub-Total 76.03 97.23 173.26 Contingencies 4.82 6.30 11.12 Engineering and Supervision 2.00 11.70 13.70 Total Cost 2.85 115.23 198.00 ($17.4 mill) ($24.2 mill) ($41.6 mill) 49. Estimates on the power station were prepared by the consultants. Estimates on the Kinnerasani Dam and the transmission lines were prepared by the Irrigation Branch and the Electricity Department respectively. 50. Costs of mechanieal and electrical plants are largely based on actual tenders received. The overall contingency allowance shown in the sum- mary above amounts to 6.5% of the estimated cost; this is adequate under the circumstances. 51. Construction cost per kw of the power station would be $272 which is high compared to similar stations in India. Based on the tenders received for main equipment some savings may be achieved but it was found prudent at the present stage not to reduce the estimates. The high cost is partly a result of the inclusion of staff quarter- and facilities made necessary by the isolated location of the station and the construction of coal handling, cooling water and other installations designed to serve an installation of 240 14W. After com- pletion of the expansion to this capacity the estimated unit cost would be re- duced to $215 per kw. Cost of Production 52. The total cost of production, including fixed charges, per kwh gen- erated by the proposed installation of 120 MW is estimated, on a conservative basis, at 5.21 NP (10.9 US mills). This would be reduced to 4.47 NP (9.3 US mills) for a future 240 MW installation. VII. RATES 53. According to law the Board has the powers to fix its power rates. 54. Before March 1963 the Board had different rates for different areas of the State. Those rates had been in force since 1955. For 1961/1962 they yielded an average of 10.3 NP (2.2 US cents) per kwh sold. 55. In November 1962 the Board announced new rates uniform for the whole State, to be applied from April 1, 1963. A special surcharge of 15% was im- posed on all customers except the residential customers, irrigation and cottage - 10 - industries. The new rates are expected to yield an average of 13.7 NP (2.9 US cents) per kwh sold, representing an average increase of about 33%. VIII. FINANCIAL ASPECTS Past and Present Financial Position of the State Electricity Board 56. When the State Electricity Board was established in 1959, it took over only part of the responsibilities of the Electricity Department which re- mained in existence. As of March 31, 1962 accounts of both authorities were still kept separately. The available draft annual financial statements for the Electricity Department and the Board do not readily reveal the financial posi- tion of the power industry in Andhra Pradesh. Only consolidated accounts can be compared with a financial forecast for the Board in its ultimate form (i.e. when it is. responsible for construction and operation of all power facilities in the State). Therefore, the available draft annual financial statements have been consolidated in this report. The assumptions made in consolidating the accounts are listed in Annex 9. 57. The consolidated balance sheet for the Board as of March 31, 1962 is summarized below: A.P. STATE ELECTRICITY BOARD Consolidated Balance Sheet2/ as of March 31, 1962 Assets 2 (Mill, Rupees) Gross fixed assets in operation- 430.20 Assets in operation not yet transferred 237.20 Total gross fixed assets in operation 67.4° Less: accumulated depreciation on plant operated by the Board 16.30 Net fixed assets in operation 651.10 Work in progress 56.10 Work in progress not yet transferred 43.60 Total net fixed assets of the Board 750.80 Liabilities Initial capital of the Board 272.10 Net loss Reserves and surplus 26.51 Accumulated loss (29.10) (2.59) Net equity 269.51 Long-term loans 367.29 Net short-term liabilities Current liabilities 189.70 Less current assets 75.70 114.00 Total liabilities of the Board 750.80 1/ Including the accounts of the Electricity Department. y/ Including Rs. 272.10 miillion net value of plant transferred to the Board in April 1959. 58. All assets in operation which had not been transferred as of March 31, 1962 have been transferred prior to March 31, 1963 according to a recently issued order of the State Government. Construction work on one project not yet transferred is expected to be completed within the next year and the assets will then be transferred to the Board. 59.- The initial capital of Rs. 272.10 million represents the net value of plant transferred to the Board by the Government of Andhra Pradesh in April 1959 and a moratorium of ten years for the payment of 5% annual interest on this capital was granted by the Government. An amount of Rs. 136.P5 million of accrued interest is due in 1969/70. No repayment of the initial capital has been required. The final nature of the Board's capital structure has yet to be determined and this matter is now under review by the Central and State Governments. No forecast of liabilities has therefore been included in this report. 60. The accumulated loss in the accounts of the Electricity Department of R3. 29.10 million is partly due to the fact that interest during construction was not capitalized. In the financial forecasts an adjustment was therefore made to capitalize Rs. 23.90 million interest during construction. 61. The rate of return was calculated on the consolidated total net fixed assets and was 2.5% in 1959/60, 3.1% in 1960/61 and 2.6% in 1961/62. In the current year a return of only 1.4% is expected, due to increased charges for depreciation which were deferred in previous years. The average rate of return for the first four years of operation of the Board, calculated on a conso-'idated basis, was about 2.4%. This shows that electricity tariffs were inadecuate ind that the 33% increase in tariffs, appLed from April 1, 1963 was overdue. Future Financial Position of the State Electricity Board 62. With the a-s2--;tance of the Association the Board and the Electricity Department prepa2ed a forecast of capital expenditures for the remaining three years of the Third Five-Year Plan (April 1, 1963 - March 31, 1966) and for the Fourth Five-Year Plan (April 1, 1966 - March 31, 1971). The project proposed to be financed by the Association is included in the Third Five-Year Plan. All the schemes included in this plan have been sanctioned by the Central Government Water and Power Commission. The capital expenditures in the Fourth Five-Year Plan are based on an estimate by the Association of needed facilities to meet the probable future demand for electricity in Andhra Pradesh. If the actual capital expenditures to provide these facilities should fall short of these forecasts this could have a serious effect on power availability and revenue from sales. A summary of the consolidated capital expenditures, debt service requirements and sources of funds during the two plan periods is shown below: - 12 - Summary of Requirements and Sources of Funds (Fiscal years ending March 31) 1964-1966 1967-1971 1964-1971 III Five-Year IV Five-Year Requirements Plan Plan Total T mill. rupees) Capital expenditures 633.10 1872.80 2505.90 Addition to working capital 5.00 50.00 55.00 Debt service 136.77 758.86 895.63 Total requirements 774.87 2681.66 ____3 Sources of Funds Internal cash generation 227.00 1319.25 1546.25 State Government advances 470.00 1350.00 1820.00 IDA credit 80.00 15.00 95.00 Total amount of funds 777.00 2684.25 3461.25 Internal cash net of debt service 90.23 560.39 650.62 In % of capital expenditures 14% 30% 26% A detailed forecast of requirements and sources of funds is shown in Annex 1l. 63. In calculating the debt service requirements it has been assumed that State Goverrment advances would be made to the Board at present terms (5% interest, repayment after 5 years in 20 equal annual installments). The IDA Credit, however, in this calculation has been assumed to be made at Bank terms (51% interest, 3/4% commitment charge, repayment after 3 years in 34 semi-annual level payments) rather than Government terms. Under these con- ditions about 14% of capital expenditures during 196h-1966 could be financed from internal cash after providing for debt service. For the period 1967-1971 this would be about 30%. These calculations do not take into account taxes on income nor appropriations of surplus funds to the State Government. 64. The forecast of revenue from sales was based on an average rate of 13.7 NP per kwh throughout the period. This average revenue is expected to be earned through the new tariffs that would be applied from April 1, 1963. No change in the average revenue is expected since the pattern of sales is assumed to remain constant. 65. Straight-line depreciation, which until March 31, 1962 was calculated at a flat 2.5% p.a. was calculated at individual rates for various assets according to the Seventh Schedule of the Electricity (Supply) Act. The re- sulting composite rate of depreciation is about 3% p.a. which is acceptable. 66. A forecast of income statements from April 1, 1963 through March 31, 1971 is shown in Annex 11 together with comparable consolidated income state- ments for 1959-1963. The rate of return on net fixed assets including work in progress is expected to increase from the past average 2.4% to 4.1O% in - 13 - 1963/64 due to the increase in tariffs. In 1966/67 a further increase in the rate of return is expected due to commissioning of new plants which would enable the Board to sell almost twice as much power as in 1965/66 without increasing its operating costs by more than about 30% due to greater economy in its new stations. The rate of return after March 1966 would therefore be about 8.4%. It is expected to level off to about 8% in 1970/71. This is satisfactory. 67. The annual debt service coverage during the period studied would de- cline from 1.9 times in 1963/64 to about 1.5 in 1965/66 and thereafter increase to 2.6 in 1966/67 from which it would gradually decline to about 2.0 (see Annex 10). These ratios are satisfactory. 68. As an exception the payment of interest in arrears would increase the debt service in 1969/70 to an amount about equal to internal cash generation. That year marks the end of the moratorium for interest payments on the Board's initial capital. From 1970 onwards the Board would pay interest on all funds advalced by the State Government, unless other arrangements are made. Rate Covenant 69. To assure that a reasonable amount of funds for expansion is made available from the revenues of the Board, the State Government has agreed to cause the Board to maintain its rates for the sale of electricity at such levels as may be necessary to cover total operating costs including adequate maintenance and straight-line depreciation and to provide after March 31, 1966 a rate of return of 8% on the average total net fixed assets of the Board in- cluding work in progress on facilities operated or to be operated by the Board. The net internal cash generation after debt service should provide about 30% of the total capital expendit-ures estimated to be made during the Fourth Five-Year Plan (1966-1971). T'he new tariffs recently made effective are ex- pected to be adequate to achieve the objective of the rate covenant. This is satisfactory to the Association. Accounting and Audits 70. The accounting system used by the Electricity Department, and also by the Board in its first years of operation, is determined by a local Govern- ment ordinance which generally follows the Indian Electricity Rules of 1935 and prescribes a system of accounts more or less in line with accepted public utility accounting procedure. The prescribed accounts are subject to audits by the Accountant General, who is acting as the agent of the Auditor General of India. 71. From April 1, 1963 the Board would follow a commercial system of accounts recently prescribed by the State Government in consultation with the Auditor General of India in accordance with Sect. 69 of the Electricity (Supply) Act. Annual statements of accounts, including profit and loss statements and balance sheets would be submitted for aadit to the Accountant General. 72. The annual financial statements analyzed in this report are based on the accounting system mentioned in paragraph 70. Although monthly internal audits have been maintained no annual financial statements for the Electricity Department and the Board for 1959/60, 1960/61 and 1961/62 have yet been approved by the Accountant General due to matters regarding the transfer of assets from the Electricity Department to the Board. It was pointed out to the Indian authorities by the Association that, this situation is unsatisfactory. The Indian authorities agreed'that-the auditinlj'of annual financial statements of the Board should be expedited, so that in the future certified copies of the audited statements could be submitted to the Association not later than six months after the close of each financial year of the Board. IX. CONCLUSIONS 73. The project is technically sound, the estimated cost is reasonable, the construction schedules are realistic and the arrangements for engineering, supervision and construction are satisfactory. (Paragraphs 40 - 51.) 74. The project is necessary to meet the existing and expected demands for power in Andhra Pradesh and there is no alternative more favorable to meet these requirements. (Paragraphs 12, 22, 24, 25.) 75. The arrangements made by the State Government to establish the State Electricity Board as the only government agency responsible for development and operation of electric power facilities in Andhra Pradesh and to strengthen the organ-ation of the Board are satisfactory. (Paragraphs 17, 18.) 76. The prospective financial position of the Board on the basis of the present tariffs which will be adequately adjusted when necessary, would re- main sound. (Paragraphs 66 - 69.) 77. The accounting and aaditing procedures of the Board is acceptable provided that in the future there is no delay in producing annually audited financial statements as prescribed under the Electricity (Supply) Act. (Paragraph 72.) 78. The project is suitable for an IDA credit of $20.0 million equivalent on usual terms. This credit would cover the entire foreign currency require- ment as well as part of the local currency requirement of the civil works. The Central Government, in assuming the responsibility to provide the total amount of funds required for the project, would lend the proceeds of the proposed credit to the State Government and cause the State Government to relend these proceeds along with the additional funds required for the project to the State Electricity Board both on terms sa'tisfactory to the Association. INDIA STATE ELECTRICITY BOARD OF ANDHRA PRADESH ACTUAL AND FORECAST ENERGY SALES (millions of kwh) Domestic Commercial Public Industrial Industrial* Agricultural TOTAL Increase Over Lighting (Low-Tension) (Hizh-Tension) Previous Year Second 5-Year Plan 1956 -57 -- -- -- -- -- -- _ 1957-58 39.6 20.4 9.7 36.2 121.9 17.1 245 __ 1958-59 45.2 21.4 10.9 38.5 199.5 23.2 339 38.5% 1959-60 54.1 24.9 12.8 42.6 256.9 35.1 426 26.0% 1960-61 67.4 29.2 14.6 53.6 377.3 52.4 594 40.0% Av. Ann. Increase 19.4% 12.7% 14.7% 13.9% 46.0% 45.2% 34.3% Third 5-Year Plan 1961-62 78.4 34.1 15.7 60.0 446.3 63.9 698 17.5% - T 962-63 84 46 23 76 456 76 761 9.0% 1963-64 92 50 25 84 503 84 838 10.0% 1964-65 106 59 29 98 585 98 975 16.4% 1965-66 110 60 30 100 600 100 1000 2.7% Av. Ann. Increase 10.3% 15.5% 15.5% 13.3% 9.7% 13.8% 11% Fourth 5-Year Plan E- 1966-67 212 116 58 192 1150 192 1920 92.0% 1967-68 253 138 69 230 1380 230 2300 20.0% 1968-69 295 161 81 269 1615 269 2690 17.0% 1969-70 333 182 91 303 1818 303 3030 12.8% 1970-71 366 200 100 334 2000 334 3340 10.0% Av. Ann. Increase 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% 27.3% Av. Ann Increase 1961-71 18.4% 21.2% 21.2% 20.1% 18.2% 20.4% 18.8% * Includes waterworks, sewage pumping, supplies to licensees. INDIA STATE ELECTRICITY BOARD OF ANDHRA PRADESH ACTUAL & FORECAST OUTPUT, ENERGY SALES, INSTALLED AND FIRiI CAFACITY, 1'iAXIfifl DEi*-AND Gross Net Energy System Inst. Cap. Firm Cap. Maximum Output Output Sales Losses Year-End Year-End Demand Ann. L.F. m. kwh m. kwh m. kwh % ilJMW N1 % Second 5-Year Plan 1956-57 248 241 __ 112.0 _ 76.4 37 1957-58 388 376 245 34.8 181.7 __ 98.3 45 1958-59 525 511 339 33.7 195.0 120 50 1959-60 662 645 426 34.0 213.0 140 160 47 1960-61 803 783 594 24.1 213.0 140 168 55 Third 5-Year Plan 1961-62 937 913 698 23.5 213 140 180 60 1962-63 1017 990 761 23.0 213 140 187 62 1963-64 1091 1060 838 21.0 262 176 193 65 1964-65 1241 1204 975 19.0 292 202 232 61 1965-66 1241 1204 1000 17.0 592 202 232 61 E Fourth 5-Year Plan 5 1966-67 2360 2260 1920 15.0 712 567 600 45 1967-68 2820 2710 2300 15.0 780 675 700 46 1968-69 3290 3160 2690 15.0 900 795 800 47 1969_70 3710 3560 3030 15.0 1080 915 900 47 > 1970-71 4120 3930 3340 15.0 1200 1035 1000 47 tt ANNEX 3 1400 1400 I N D I A 1300 1300 State Electricity Board of Andhra Pradesh SYSTEM CAPACITY AND MAXIMUM DEMAND 1200 1200 1100 - 1100 1080 crl , 1035 1000 X1000 1- INSTALLED CAPACITY 90 915 900 900~~~~~~~~~~~~~~~~~~~~~~~0 800 - 795 800 3 r FIRM CAPACITY 712X . 700 780 700 .f ~ MAXIMUM DEMAND 600 ___592 *567 6 700 C"Z 500 _ 500 c0q 447 300 _292_ 300 262z r [I 213 .... r - 0 - Tungabhadra Hydro Station Extension 140 K - Kothagudem Thermal Station ____ -____- ____ I KL - Kothagudem B Station 500 -R - Ramagundam Thermal Station300 (-52) = 52 MW of Old Units Retired 1961-62 1962-63 1963-64 1964-65 1965-66 1966-67 1967-68 1968-69 1969-70 1970-71 JANUARY 1963 IBRD-1107 ANNEX 4 Page 1 POWER EXPANSION PROGRAMS The State of Andhra Pradesh already has completed two Five-Year Pla, in electric power development. It is now engaged in the Third Five-Year Plan and is planning the Fourth. First Plan. The First Five-Year Plan started in fiscal year 1951/52 (April 1, 1951 to March 31, 1952). The Machkund and Tungabhadra Hydroelectric Schemes were undertaken with two neighboring states, Orissa and Mysore, During this Plan period about 58 PM was added to the installed capacity of the State. Total capital expenditure amounted to about 330 millions of rupees ($70 million). Second Plan. The Second Five-Year Plan followed in 1956/57. This included additional generating units at the above inter-state hydro stations, and construction of the Ramagundam Thermal Station. The installed capacity of the State was increased by some 125 1MW. This plan cost some 400 million of rupees ($84 million). Third Plan. In spite of the substantial increase of power capacity, the State still lacks electric power. Consequently the authorities decided to speed up the power development program in the Third Plan. The original plan envisioned adding 249 MW in hydro and 212 MW in thermal generating capacity, as follows: UPper Sileru Hydro Scheme 120 MW Sxisailam - Nagarjunasagar Hydro Scheme 100 MW Tungabhadra Hydro Station Extension (A.P.ts share) 29 IfW Kothagudem Thermal Project 120 MW Ramagundam Thermal St.ation Extension 60 MW Nellore Thermal Station Extension 30 MW Small diesel units 2 MW Total 461 MW The first stage of the Upper Sileru Scheme which lies on an inter- state tributary of the Godavari River and calls for only a low weir. was con- sidered a very economical project. Some work was'already started in the Second Plan. However, due to water disputes wzith adjoining Orissa State, very little had been accomplished. Recently an agreement with Orissa was reached and the project is expected to proceed smoothly. Two 60-MW units have been ordered with Swiss credits. The Srisailam - Nagarjunasagar Scheme on the Krishna River is one of the state's major hydro projects. The original plan envisaged a 770 MW power plant at the Srisailam Dam and a 100 MW power installation at the downstream Nagarjunasagar Dam which has been under construction as part of an irrigation scheme since 1955. This combined Scheme was also beset with so many problems of inter-state water distribution that the installation of power units at Wagarjunasagar was abandoned and the separate Srisailam Scheme would be carried out at a slower pace. ANNEX 4 Page 2 With the setback in hydro developments, greater reliance will be placed on thermal generation. For financing the Kothagudem Project, IDA credit has been requested. The AID of U.S. will sponsor the Ramagundam extension by alloting one 60-MW unit out of 14 similar sets ordered for India. The State authorities themselves have secured a loan from the American Ex-Im Bank for the purchase of two 10-MW gas-turbo sets to be installed near Hyderabad for relieving the critical peak-load condition there. The revised Third Plan would, therefore, comprise three minor projects (Tungabhadra 29 MW, Nellore 30 MW and Gas-turbos 20 MW) and three major projects (Kothagudem 120 MW, Ramagundam 60 MW and Upper Sileru 120 iiW). The minor projects are expected to be completed in 1963/64 and 1964/65, but they can improve the situation only to a small extent. All the three major projects with a total of five 60-MW units are scheduled to be commissioned at about the same time towards the end of the Third Plan period. By then a big block of power of 300 MW will be available. Total investment for the Third Plan including transmission and distri- bution facilities is estimated at 840 million rupees ($177 million). Fourth Plan. In the Fourth Plan even greater emphasis would be placed on thermal power. The tentative program would include further expansion of the three major projects started in the Third Plan. The Kothagadem Station, which by virtue of its proximity to the coal fields and load centers is destined to become the most important thermal station in the State, would be expanded to a capaci-' of 480 MW by adding two more 60-MW units in the present proposed power-house and two 120-MW units in a separate building. Ramagundam would also be augmented with three more 60-mW units. The main storage dam for the Upper Sileru would be built during this Plan period as a second stage and two more 60-MW units would be installed. Together these extensions would provide 660 MW of additional capacity o the State grid. At the same time, several old thermal plants with a total capacity of 52 MWi would be retired. During this period, construction will be continued on the Srisailam Scheme and work will also start on the Lower Sileru Scheme, which is immediately below the Upper Sileru. However, completion of both these projects will fall in a later plan period. The total capital outlay for the Fourth Plan is estimated at 1,870 million rupees ($394 million). Summ First Plan Second Plan Third Plan Fourth Plan (51/52-55/56) (56/57-60/61) (61/62-65/66) (66/67-70/71) Addition of Installed Capacity, MW 56 l114 379 660 Capital Expenditure, $ million 70 84 177 394 Maximum Demand at End of Plan Period, MW 50 168 500 1,000 Energy Sales in the Last Year, mill. kwh 594 1,000 3,340 ANNEX ¶ Page 1 DETAILED DESCRIPTION OF THE PROJECT Power Station The power station would be located near the center of the coal fields utilizing the low-grade fuel. Initially, adequate supply would come from the Number Five Pit of Singareni Collieries over an aerial ropeway about six miles long. In the future, new deposits might be mined by open-cut method which would provide cheaper fuel. This coal is expected to have low heat value (6,500 btu per lb.) and high ash content (40%) and would not be of much use for other purposes. The station site is near the industrialized coastal area to the east. Power produced would supply the State capital of Hyderabad. The station would also be connected to the Ramagundam Thermal Station to the north which has already developed a number of industries in the neighborhood. Near the station itself many industries would be expected to be established including the pro- posed urea fertilizer factory for which an IBRD loan is being considered. A proposed 220-kv transmission line would link Kothagudem Station with three major hydro plants to form the backbone of the State grid. The station site chosen by the consultants occupies low-grade agri- cultural land and is far enough from the coal-bearing areas so that there would be no possibility of mining operations beneath the power station. Because of its strategic location with respect to fuel supply and load centers, the ultimate capacity of the station could be 1,000 MW or larger, but the initial installation would consist of only two sets of 60 MW each. In view of the necessity, according to the present plan, of adding two more units soon after- wards, the station would be designed for four units and many facilities, such as coal handling plant, would initially be so provided. Considering the presert magnitude of the system, the unit size of the generating sets as recommended by the consultants is appropriate. The turbines would be designed to operate with steam pressure at 1250 psig and steam temperature at 9500F. This is conservative arrangement consistent with the requirements of easy maintenance and high reliability at the present stage of development in the State. The alternators would be designed for 13.8 kv 50 cycles 60 MW at 0.85 power factor. The voltage would be stepped up to 132-kv by the main trans- formers at the outdoor switchyard. Here two auto-transformers would also be installed to step up the 132-kv voltage further to 220-kv for connection to the trunk line. In the absence of adequate supply of circulating water for the con- densers from looal sources, cooling towers would be used. At present, two towels would be installed each of 97 million gallons per day capacity. When the station would be expanded to 240 MW, another tower of same capacity would be added. Make-up water to compensate for evaporation in the towers would come from the nearby Kinnerasani River through a canal. Two balancing reservoirs would be provided at the station. AlNEX 5 Page 2 The boilers would each produce 560,000 lbs. per hour at 1275 psig and 9600F. Boiler plant would be outdoor construction for which the local climate is suitable, but the main turbine generator units would be housed in a simple building to facilitate maintenance under all weather conditions. Unit system commonly followed by modern thermal stations would be adopted, under which one boiler, one generating set and one transformer would be coupled together for simplicity of operation. Existing railway will be extended to the site for handling machinery during the construction period and for transporting fuel later, if necessary. Since the area is totally undeveloped, many facilities such as living quarters for staff and workers, schools, hospitals and other public utilities would have to be provided under the project. Kinnerasani Dam To solve the problem of make-up water, attention was first directed to the main Godavari River. The idea was later discarded becaase of: (1) great seasonal fluctuation in the river stage (over 70 feet); (2) unpre- dictable course of the river from year to year; and (3) great distance from the station site (over 20 miles). The only practical solution was found to be a reservoir on the Kinnerasani River, a tributary of the Godavari. This reservoir would also supply water to the fertilizer factory. Am earth dam would be built in the main river channel with a height of about 96 feet in the initial stage. This height is the minimum required because of the necessity of having a reservoir level high enough to permit gravity flow in the supply channel. Ultimately, the dam would be raised by some 24 feet. A spillway would be located at a saddle to be provided initially with needle shutters on ogee masonry section and with regular gates later. The storage capacity available in the initial stage would meet the needs of the power station (estimated at 6 million gallons per day for 240 MW) and the fertilizer factory (assumed to be 5 million gallons per day) with a carry-over of supply for three to four months in a bad year. When the dam is carried to its ultimate height, the storage would be sufficient to supply the water requirerLents of more than 1,000 MW. Since the Kothagudem Station would certainly be expanded in the near future, it is considered justified to put in a small extra investment in the dam initially to provide for ultimate development. Transmission Line Facilities The State Electricity Board has planned to construct during the Third Plan period, about 1080 circuit-miles of 132-kv transmission lines and about 550 miles of single-circuit 220-kv line. (See Map). These have been AlNiEX 5 Page 3 sanctioned by the Central Government and were substantially smaller in scope than were originally envisioned by the State. Two 132-kv lines would connect the three separate systems into one integrated grid. Others would either feed important load centers or improve their voltage conditions. The 220-kv line would link up the major power sources to.form the backbone of the system and would extend south to interconnect with the power system of Miadras. Some of the transmission lines would come under the Srisailam Hydro Scheme; others would be grouped under a Special Transmission and Distribution Project. Only one double-circuit 132-kv line connecting the Kothagudem and Ramagundam Stations is proposed to be covered under the Kothagudem Thermal Project. This line would be about 150 miles long and will pass through Warangal, the second largest city in the State. From Warangal to Hyderabad another double-circuit 132-kv line would be built under the Special Project, so that both .Hyderabad and Warangal could be served from either one of the stations. The Board made a network analyzer study on the proposed grid systems for the whole State in 1960 in conjunction with the Central Water and Power Commission. In view of the substantial changes in the power expansion programs, a new study would be undertaken in the near future with the assistance of the consultants. INDLA State Electricity Board of Andhra Pradesh KOTHAGUDEM THERMAL STATION CONSTRUCTION SCHEDULE 196Z 1963 1964 1965 1 966 ECONOMIC SURVEY F J M A J JI A F S |A1D MA S O N DJ FM A J J A C N D J |F |M| AIM JI J A S OI NI Di |F|A||J A |S 1|N |D ECONOMIC SURVEY --JAO DE ~ JAQQ~ PREPARE REPORT I to I PRINT AND ISSUE REPORT .b-- REPORT APPROVAL BY CLIENT _ _ WRITING SPECIFICATIONS -E E d PRINT AND ISSUE SPECS. _ __ GT- 0 FOUNDATIONS STEELWORK AND SUPERSTRUCTURE COOLING TOWERS BOILER PLANT COAL PLANT ASH AND DUST PLANT WATER TREATMENT PLANT MAIN PIPE WORK ELECTRICAL AUX. EQUIPMENT TURBO-GENERATOR PLANT }1 FEED PUMPS C. W. PUMPS TRANSFORMERS FIRE FIGHTING PLANT TURBINE HOUSE CRANE ELECTRICAL AUX. EQUIPMENT MAIN SWITCHGEAR 0- MISCELLANEOUS MECHANICAL PLANT MISCELLANEOUS ELECTRICAL PLANT LIAISON STAFF SITE TECHNICAL ADVISOR__ COMMISSIONING STAFF } Commence Specification + Issue Inquiries * Consultants' Recommendation x Place Order JANUARY 1963 0 Commence at Site IBRD - 1104 ANNEX 7 Page 1 ESTIMATED COST OF THE PROJECT Foreign Local Currency Currency Total (millions of rupees) POWER STATION (Including Switchyard) Civil Works 3.07 30.78 33.85 Access road, staff quarters, etc. - 4.oo 4.00 Boiler plant 32.50 16.08 48.58 Turbogenerator plant 24.54 7.00 31.54 Other equipment 10.13 5.16 15.29 Aerial ropeway o.60 2.4o 3.00 Plant 70.B4 65.42 136.26 Contingencies 3.83 5.30 9.13 Engineering and supervision 2.00 7.61 9.61 76.67 733 155.00 ($16.1 mill) .($16.5 mill) ($32.6 mill) ($272 per kw) KINNERASANT DAM Works (earth dam, spillway, canal, etc.) 14.53 14.53 Buildings, roads, miscellaneous - l.54 1.54 Construction equipment 3.20 6.30 9.50 3.20 2227 Less resale of construction equipment - 8.47 8.47 Net Construction Cost 3.20 13.90 17.10 Engineering and supervision (Irrigation Department) - 1.90 1.90 Total Cost 3.20 15.80 19.00 ANNEX 7 Page 2 Foreign Local Currency Currency Total (millions of rupees) TRANSMISSION FACILITIES Transmission lines 1.40 15.10 16.50 Substation extensions 0.19 1.91 2.10 33 kv feeders - 0.50 0.50 Carrier current equipment 0.40 0.10 0.50 Miscellaneous civil works 0.30 0.30 Total Construction Cost 1.99 17.91 19.90 Contingencies 0.99 1.00 1.99 Engineering and Supervision - 2.19 2.19 Total Cost 2.98 21.10 24.08 Grand Total 82.85 115.23 198.08 ($17.4 mill) ($24.2 mill) ($41T.6mill) AMNEX 8 KOTHAGUDEM POWKER STATION Estimated Cost of Production Assumptions: Plant Factor 50% Capital Cost -- Assuming 60% of Cost of Kinnerasani Dam Debited to the Power Station Rs. 1430 per kw (for 120 YiW installation) Rs. 1130 per kw (for 240 MIW installation) Coal Rate 1.4 lbs. per kwh Coal Price Rs. 26 per ton Heating Value 8500 Btu per lb. Operation and M4aintenance 3% Depreciation 3% Interest 5% Cost of Production per kwh Proposed Capacity. Future Capacity 120 MW 240 IMW Fuel Cost 1.62 NP 1.62 NP Operation and Maintenance 0.98 0.78 Depreciation 0.98 0,78 Interest 1.63 1.29 Total 5.21 NP 4h47 NP (10.9 U.S. mills) (9.4 U.S. mills) ANNEX 9 Pag~e 1 NOTES TO FINANCIAL STATEMENTS 1. The consolidated financial tables from April 1, 1959 to March 31, 1971 incorporate the financial statements of the Electricity Depart- ment and the State Electricity Board for the period 1959-1962 and forecasts for the period 1963-1971. 2. It has been assumed that all assets of the Electricity Department would be transferred to the Board prior to March 31, 1963 and that provision for an adequate amount of working capital would be made. 3. Additions to assets during 1963-1971 are based on the estimated capital expenditures of the Board. Interest during construction of 5% on average work in progress is included; in addition an adjustment of Rs. 23.90 million was made in 1963 to capitalize interest during con- s-truction which was previously charged to operations. This adjustment consequently reduces the accumulated loss of the Board as of March 31, 1963 from Rs. 36.74 million to Rs. 12.84 million, which is then carried forward. 4. No forecast of the capital structure has been made, because the Electricity (Supply) Act, which will determine the nature of the Board's capital structure as divided into equity and debt, is under review.. For cash flow purposes tentative terms for State Government advances have been assumed. 5. The initial capital of the Board of Rs. 272.10 million has been assumed to be non-repayaole. Under present arrangements interest of 5% is subject to a 10-year moratorium; a total of accrued interest of Rs. 136.05 million is due in 1970. 6. All State Government advances have been assumed to be made on the presently applied terms; i.e., interest 5%, 3/4% commitment charge, and repayment after 5 years in 20 equal annual installments. 7. A public loan of Rs. 31.0 million floated in 1960 bears interest at 4h% and is repayable in total after 10 years. A debt redemption fund has been established for this loan. 8. Other loans floated in 1961/62 of Rs. 30.0 million bear interest at 44% and are repayable after 10 years in 5 equal annual installments. 9. The proposed IDA credit of Rs. 95.0 million has been assumed to be made on Bank terms at 52% interest, repayable after 3 years in 34 semi- annual level payments. 10. Straight-line depreciation, which until March 31, 1962 was calculated at a flat 2.5% p.a. on all assets was thereafter calculated at individual rates for various assets according to the Seventh Schedule of the Electri- city (Supply) Act. The composite rate is about 3% p.a. No reallocation ANNEX 9 Page 2 of accumulated depreciation between the Electricity Department and the Board was made because the amount shown on the books of the Electricity Department as of March 31, 1962 is earmarked for interstate schemes. 11. The cost of power purchased from the interstate schemes is based on the present practice of reimbursement of all operating costs, de- preciation, interest and small amounts of annual reserve allocations. 12. Taxes on income are not included in the forecasts because no amounts could be estimated for these charges. Statement of Requirements and Sources of Funds A.P. Electricity Board (in million rupees) Tot.al Years ending March 31 1964 1965 1966 1967 1968 1969 1970 1971 1964 - 1971 REQUIREMENTS Capital Expenditures: IDA Project 28.50 56.40 69.10 44.08 - - - - 198.08 Other Projects 138.10 166.oo 175.00 269.42 391.30 417.00 405.00 346.oo 2307.82 Total capital expenditureB 166.60 222.40 244.10 313.50 391.30 417.00 405.00 346.oo 2505.90 Debt Service a) Interest on: Initial capital - - - - - - 149. 1.6Q 163.25 Existing debt 29.74 29.74 29.74 29.74 29.58 28.46 26.30 24.49 227.79 Future Government advances (5%) 3.00 10.00 18.75 28.25 39.75 53.25 69.75 83.80 306.55 IDA Credit (5i%) 1.00 2.00 3.50 5.00 4.90 4.80 4.60 4.40 30.20 b) Amortization of: Existing debt 3.10 3.10 3.10 6.30 25.26 30.26 29.76 27.16 128.o4 Future Government advances - - - - - - 6.00 14.00 20.00 (25 years, 5 years grace) IDA (20 years - 3 years grace) - - - 3.70 3.80 3.90 4.10 4.30 19.80 Total Debt Service 36.b4 44.04 55.09 72.99 103.29 120.67 290.16 171.75 695.63 Additions to working capital - - 5.00 20.00 5.00 10.0o 5.00 10.00 55.00 Total Requirements 203.44 267.24 304.19 40t49 1499.59 547.67 700.16 527.75 306.73 SOURCES OF FUNDS Net income from operations 43.80 47.80 50.20 1-47.29 177.89 212.44 239.22 256.28 1174.92 Depreciation 26.20 29.20 29.80 40.80 48.20 55.65 65.07 76.41 371.33 Total internal cash 70.00 77.00 60.00 166.09 226.09 266.09 304.29 332.69 IDA credit 15.00 30.00 35.00 15.00 - - - - 95.oo Government advances 120.00 160.00 190.00 205.00 275.00 280.00 395.00 195.00 1820.00 Total Sources of Funds 205.00 267.00 305.00 408.09 501,o0 548.o9 699 .29 527.69 3461.25 Cash surplus or deficit 1.56 (.24) .81 1.60 1.50 .42 (.87) (.06) 4.72 Cash at beginning of year - 1.56 1.32 2.13 3.73 5.23 5.65 4.78 Cash at end of year 1.56 1.32 2.13 3.73 5.23 5.65 4.78 4.72 Debt service coverage (excluding paynent of interest in arrears in 1970) 1.90 1.72 1.45 2.58 2.19 2.22 1.98 1.94 1/ Including Rs. 136.05 million interest in arrears Consolidated Income Statement A.P. State Electricity Board (in million rupees) -- A C T U A L -- - ---------------------------------- FORECAST T ------------------------------------ Yearsending March 31 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Power sales(mill kwh) 411 595 698 761 838 975 1000 1920 2300 2690 3030 3340 Average rate per kwh (in N.P) 12.0 11.0 10.29 10.29 13.7 13.7 13.7 13.7 13.7 13.7 13.7 13.7 Revenue from power sales 55.58 66.74 71.80 78.30 11h.80 133.60 137.00 263.00 315.10 368.50 415.10 457.60 Revenue from water sales - - - - - - - .09 .09 .09 .09 .09 Other revenue - - 3.60 4.60 5.00 5.20 5.30 5.40 5.50 5.60 5.70 5.80 Total Revenue 55.58 66.74 75.40 52.90 119.80 13d.80 1L2.30 268.49 320.69 374.19 420.89 463 49 Cost of power from Interstate schemes 14.68 15.45 17.60 15.00 16.00 17.00 17.00 17.00 17.00 17.00 17.00 17.00 Fuel cost ) 20-0 2921 0 90 10.30 10.30 19.10 19.10 27.30 34.80 39.90 42.70 46.70 Op., Maint., Adm. cost ) 2.5 9. 309 21.40 23.50 25.70 26.20 36.10 42.80 49.20 56.90 67.10 Depreciation 6.21 2.05 7.60 24.10 26.20 29.20 29.80 40o80 48.20 55.65 65.07 76.41 Total operating cost 40.94 46.71 56.10 70.80 76.C0 91.00 92.10 121.20 1L2.oO 161.75 181.67 207.21 Net Income from Operations 14.64 20.03 19.30 12.10 43.80 47.80 50.20 147.29 177.89 212.44 239.22 256.28 Total interest 7.73 7.82 17.30 27.24 1/ 33.74 41.74 51.99 62.99 74.23 86.51 250.3c2/ 126.29 Interest capitalized - - - 7.50- 12.60 19.30 30.50 25.80 33.80 42.70 44.60 43.20 Interest charged to operations 7.73 7.82 17.30 19.74 21.14 22.44 21.49 37.19 40.43 43.81 205.70 83.09 Net Profit 6.91 12.21 2.00 -7.6h; 22.66 25.36 28.71 110.10 137.46 168.63 33.52 173.19 Rates of Return (in %) On total net fixed assets including work in progress 2.54 3.07 2.57 1.42 4.36 3.93 3.43 8.36 8.32 8.35 8.17 7.91 1/ Excluding Rs. 23.90 million capitalized as adjustment for previous years. 2/ Including Rs. 136.05 million accrued interest on initial capital for which moratorium of 10 years was granted. Consolidated Statement of Assets A.P. State Electricity Board (in million rupees) -- A C T U A L --------- ------__----------_---------___ F O R E C A S T ------------------------------------ Years ending March 31 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Gross fixed assets in operation 302.45 360.60 430.20 743.o0 819.50 927.30 977.70 i411.20 1675.50 1957.50 2369.10 2787.30 Assets not yet transferred 225.26 227.86 237.20 - - - - - - - - - Total assets in operation 527.71 588.46 667.40 743.00 819.50 927.30 977.70 1411.20 1675.50 1957.50 2369.10 2787.30 Depreciation 6.21 8.26 16.30 4o.40 66.60 95.80 125.60 166.4o 2i4.60 270.25 335.32 411.73 Net fixed assets in operation 521.50 580.20 651.10 702.60./ 752.90 831.50 852.10 1244.80 1460.90 1687.25 2033.78 2375.57 Work in progress 37.05 46.21 56.10 149.50 252.20 386.10 610.30 516.10 676.90 854.60 892.60 863.60 Work not yet transferred 17.23 27.00 43.60 - - - - - - - - Total net fixed assets 575.78 653.41 750.80 852.10 1005.10 1217.60 1462.40 1760.90 2137.80 2541.85 2926.38 3239.17 Debt redemption fund - - - 9.80 12.90 16.00 19.10 22.20 25.30 28.40 - - Net current assets - - - 16.26 17.82 17.58 23.39 44.99 51.49 61.91 66.o4 75.98 Total assets 575.78 653.41 750.80 878.16 1035.82 1251.18 1504.89 1828.09 2214.59 2632.16 2992.42 3315.15 1/ Including Rs. 23.90 adjustment for interest previously not capitalized. k v o. -<.e_ | j 2 > ~~~~~~~~~~~~~~~~~M A D H YA 0 R IS S A L. - . , Ramagundom / L ~~~~~.. '9 ~~~~~~ Nizamsagar MADHYA PRADESH . . r PR\jOSE- .....;.....WarangE usnSa V A Satnm .=- Hyderabad 0 GaUsTbiresa /Kothagudem Location of Andhra PrHdesh,ra|adne Tu nga bhoam dr i asagar 00 <1 ~ ~~~~~~~~PROPOSED EXISTING FOR THIRD FIVE-YEAR PLAN Major Thermal Station I N D I A s i M°O Nellore ~, Major Hydro Station E] LII Iq Minor Thermal Station 09 Ql S TAT E p , \ t (- t Minor Hydro Station ELECTRICITY BOARD 220KV Transmission Line OF \ t \ \ 132 KV Transmission Line ANDHRA PRADESH )8 ,. r t 66KV Trunsmission Line -------- ANDHRA PRADESH ~~~~~~~~~~~~~~~~~~~~~~Principal Substation ELECTRIC POWER SYSTEM , ELECTRIC POWER SM / ADR AS Note Lines below 66 KV ore not shown. FEBRUARY 1963 IBRD-1108