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Folder Title: Electric Power Development Project - Denmark - Loan 0218 - P037363 - Negotiations - Volume 1

Folder ID: 1366955

Project ID: P037363

Dates: 04/01/1958 – 11/18/1958

Fonds: Records of the Europe and Central Asia Regional Vice Presidency

ISAD Reference Code: WB IBRD/IDA ECA

Digitized: 7/17/2018

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THE WORLD BANK Washington, D.C. © International Bank for Reconstruction and Development / International Development Association or The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org

DECLASSIFI WITH RESTRI ED

WBG ArchiCTIONS ves

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Electric Pow Al 136695 II /I N,g,u,u "n..,1,pm 99S-IJ2 oth 5 ons - Volume l ent Project - D er#: S B enmark- Loan 02 ox# 193294B

18 - POJ736 J -

E UARK - Loan ( 2 l bDE )

Negotiations I

Rllllln,ton Ran~ Ub!Vl Bureau Ferm Cat. No. 1153.3-6

Mr. i3. 01 en 1ini tr.r of Finance Copenh en, rk

tfo mber 18, 1958

Before leavln Coponha en, I told you th t I would t you know informally s soon a po ible how thi r:r tood on the pro o d ank loan to nmark.

Although ev !"]"t in6 I goin~ to t ell you ia still ubj ct to the usu final consideration at t he highest level in th ank, I think I can confirm to you hat l aid t o • Kampmann dur i n t ti had on ctober 22.

1 . The oank feels that a loan f or the rai lways is impractic le in t he f orthcoming operat i on. ev rthel ss t he door is still open for the uture i f teps to put the rail sys on sounder financi b ~1s are ffectively taken and if i t continue to be ri t f or nm rk to borrow broad.

2. far as po r is concerned, · ho t o a l e to reco end to the anagement a loan of around 19 million. There , ho ver, be a probl em f or the ,ity of Copenhagen ( 3.4 million) because of it too favorable financial position. All of u in the mission are :ware of t i portanc you att ch to the question of relendi to the ult_ te borro rs at a lower interest rate, but a cannot xpect a definite ans r before the appropr iate Co · tte in the ank has had a chance to consider all the facts in the prospoctiv operation. 1his means th be-

ing o camber. On the proble of int rn tional bidding I must tell you that we have b:len faced vith ome inquir ies but I hope that we will able to g t i t through.

3. With reg rd to timing, my present feeling is that tho Danish Gov, rnment wi ll invited at the boginni of cember to send repr sent tiv s to a hin•; ton f or negotiation • The ne otiations themselves might 11 take pl ce b ginnin in the econd week of December nd the i gnature of the loan round Jarru.ary 15.

• • 1 - 1, 19

ort:jrc.

Novem er 14, 1958

ar Mr. ~gaardz

I am returning to you 111'1 th maey thanks your pa.per on Danish Terms of Trad nd 5 addition 1 copies that I had d here. It is moat valuable material for us and \.e shall ke·p it in our Research Files.

In my .:f'in&l report, in order not to overstate the case, I used a conservative method of calculation to Jlli aaure the effect of post~ar changes in terms of trade on the Danish balance of payment. I assum d that prices of all exports, other than butter, bacon and e , had risen as much as i ort prices (this is a reasonable assumption since th r is no reawon for prices of manufactures which constitute 4 percent of imports an<l a similar pro~ortion or exports to have risen le s than foreign prices hile eat prices have ri en more than import pric s) and th n revalued exports of these three commouities at import pric1::s. This gives a deterioration in the terms of trad of only 10 percent bet en 1938 and 1953-.!::>7 compared with 16.6 percent on th basi · or in exes of import anc;i export prices . t.ven this more limited d terioration is sufficient to explain the postwor external ai!f'iculties since it mean that in ... teao. of a ueficit of O million p r annum c.uring 1953-57 ther "hould have been a. surplus of o 50 mil ion at the 1953-57 volum of imports { l ).

I want to thank you again for the most valuable help you gave in m;y l~rk ana I hope that we may see you so time in Washington.

Enclosure .

Mr. Ane1 rs ¢lgv.ard Lerbaekvey 12 Virum. Copenhagen, Denmark

Yours sincerely,

Rena ~firiou Department of Operations

urope, Africa and Austr lasi

•

C -VEJDIREKTORATET.

Ksbenhavn, den - 6 N O V, 1958

fJ--t - P~~ b,tA/ \l~~~ l1

J.nr. 98-18-23.01.

Holmens Kanal 7 • Tlf'. central 13.338 Brev nr. 1 t 6 _ ~

UL.

Sir, I am sorry to have to correct a misprint in the survey

of various road questions enclosed with the letter of 21st october, 1958, from the Road Directorate:

On page 2, the first 2 lines: "costs •••••• 30%" should be replaced by the following: "costs are borne by the Fund to the extent of an approximative average of 35-50% (least to the bigger cities, most to sparsely populated rural municipalities ) ".

Mr. Bang has asked me to take the opportunity of adding a few words concerning the tax basis of the road expenses, which he thought would also interest you.

The means of the Road Fund are provided through taxes on gasoline and motor vehicles, but not the total yield of the taxes is used for road purposes.

The part of the road expenses borne by the local authorities is provided through the usual municipal taxes. As far as trunk roads and main roads outside the cities are concerned, the taxes are laid upon real pFoperty within the are.as concerned only.

Toll roads or bridges have, during a considerable number of y ars, not been in existence and may only be introduced by law.

With the compliments of the Road Directorate •

.i...;_, By p-~ ~ rd Doron Neuhaus

Mr. Arthur Wubnig, ek .. p.

c/o The International Bank for Reconstruction and Development, 1818 H Street , Washington 25, D.C., U. S. A.

FORM No. 57 ( s. 48 )

TO:

FROM:

SUBJECT:

~.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM Files _ I?:,. _ A. Wubnig l);J.J" ~

DATE: November 4, 19.58

Earning Fower of Danish State Railwa~

1 . 'lllis memorandum summarizes our reasons for believing that the DSB (Danish State ailways) cannot become self- supporting soon enough to warrant an immediate Bank loan for completing their dieselization.

2. 'Ille DSB is well- run and operationally efficient . It carries a substantial traffic - 6 • .5 million tons of goods and 110 million passengers yearly. This is twice the pre-war load . Labor productivity, equipment use , and other aspects of performance are good by the appropriate standards for a estern European railroad .

J . The DSB renders i.mportant services to the Danish economy by the haulage of export , import and domestic freight , the transport of suburban workers in the Copenhagen area, and the operation of both car and train ferries . The railroad is also a vital link of international trade between the Scandinavian Peninsula and es-tern- Central h'urope. Operating costs and user tariffs are reasonable compared with those of other European railroads .

4. Nevertheless, the DSB has chronic deficits which are subsidized by the State . Operating expenses including depreciation have exceeded revenues about 10% throughout the post-war period . The annual loss after depreciation is now about Kr • .50 million a year , No interest is earned on the State capital, amounting to a pre sent book value of Kr .1 billion which is nominally entitled to 4!~· 5. 1his poor earning power is mainly due to causes beyond the DSB's control. The inherent nature of Denmark I s transport needs and capabilities tends to restrict potential railway traffic . Freight traffic density on the DSB is unavoidably light because of Denmark ' s good roads , short distances , a.~d well- developed truckins services . Little bulk freight such as coal , steel, lumber and grain needs to be carried by rail because power stations , industrial plants , silos , etc . are all located at various ocean ports . Gver .50~ of the DSB1s revenue has to be earned from passenger transport, part·cularly Copenhagen suburban services , in the face of intense , growing competition from private automobiles , motorcycles , and local bus services .

b . However , the root cause of the DSB 1 s inability to pay its way at present is the railroad ' s legal duty to keep many uneconomic br anch lines in operation for reasons of public policy. It cannot abandon these lines without the express approval of Parliament which is difficult politically and takes time even where feasible . Of the exist ing network of 2, 600 route km. in all, at least 6.50 km . are branch lines with extremely light traffic

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which have long outlived their usefulness. Their abandonment could readily save Kr.25 million a year, a sum which is equal to half the present operating loss .

7. Another important cause of the post-war deficits has been the DSB's inability to compensate fully and promptly, through rate increases, for the increased costs of its labor, fuel , rail, rolling stock, etc . Rate adjustments have lagged behind the wages and prices paid by the DSB, partly because the maximum rates for passenger and freight transport are determined by Parliament, and partly because of heavy competitive pressure on DSB rates from trucks, buses, and shipping . However, basic tariffs have been increased on several occasions since 1946, and are now 2.12x pre-war for passenger transport and 2. 2Jx pre-war for goods transport compared with a retail price index of 2.34 .

8. The DSB's management is douig what it can to reduce operating costs and improve efficiency. Some of the main steps being taken include dieselization of motive power, automation of grade crossing controls, modernized signalling facilities at main line stations, C'K! on heavy traffic main lines, replacement of freight train services by truck services on light traffic branch lines, and a gradual reduction of shop and station personnel . Broadly , plant and equipment is being modernized without increasing capacity and operating procedures are being rationalized to reduce labor requirements .

9 . Important operating economies have been realized as a result of the measures taken to date . For example, the DSB1s fuel costs have been cut back an estimated Kr .13.l million annually since 1955 by continuing dieselization to a point where 74% of all tr~in movement is now diesel hauled . The labor force has been trimmed from a monthly average of 28,600 workers in 1953/54 to 27 , 300 in 1957/58; a significant reduction in view of the fact that the DSB is a State railroad, organized as a Department of the Ministry of Public Works, about three-fourths of whose workers have civil service or other per manent status . Operating expenses were slightly less for the first 5 months of 1958/59 than a year earlier despite heavier traffic, larger revenues, and a 7-11% pay increase .

10. The DSB is planning to spend a total of Kr . 770 million in the next five years for continued modernization of plant and equipment including the complete replacement of steam by diesel traction in shunting as well as line services . As of 1963/64, when dieselization is due to be completed, working expenses apart from depreciation for a traffic equal to 1957/58 should be Kr . 61 million less t han was actually incurred in 1957/58 and Kr . 100 million less than would have to be incurred at current wages and prices . Most of this large economy represents a forecast reduction of labor f orce by 2,120 men (almost 8% of the present force) while the rest mainly reflects fuel economies arising from the replacement of steam locomoti\res by diesels.

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11. However, the DSB will be adding perhaps Kr. 500 milliory{,o the book value at cost .of its fixed assets in the next five years . Depreciation charges are due to increase in the process from Kr . 22 million as of 1957/58 t o Kr . 35 million as of 1963/64. The net operational savings after depreciation will thus be Kr . 48 million i n terms of 1957/58 unit costs and Kr . 87 million in terms of current unit costs.

12 . The DSB foresees no large growth or shrinkage of traffic in the next few years except for some increased transport of motor vehicles by car ferries. This may be over-conservative in view of the continuing growth, since the war , in the railway ' s haulage of Danish ex~orts , Danish i mports , and transit freight and some slowing, recently, in the diversion of domestic freight to trucks. However, traffic has fluctuated within narrow limits for the past 10 years and no forces are immediately apparent which might induce r apid change o

13 . Applying the DSB 1s own forecast of revenue, expense, and depreci-ation char ges and with full allowance for dieselization and other cost reducing measures , there would be a net operating loss of some Kr . 25 million annually as of 1963/64. Thi s is half the present loss, but the railway would still fall mat erially short of paying its full depreciation charges or of earning some interest on the State capital roughly equal to the net value of the fixed assets in service . This capital should increase , given the fiveyear investment program, retirement policies , and depreciation accnunting, from a present book value of Kr. l billion to a 1963/64 value of Kr . 1 . 5 billion.

14. Allowing for 4i% interest on the St ate capital , the 1963/64 loss after unearned interest charges would approximate Kr . 92 million. This is much the same order of magnitude as the 1957/58 loss of Kr . 96 million.

15 . It is clear from the DSB ' s own forecast that the enterprise can-not become self-supporting in the near future unless ther e is an all-out program of line abandonment supplemented, perhaps, by tariff increases . Neither reform is possible without the enactment of specific legislation by Parliament.

16 . As a result of its discussions with the Bank mission, t he Government seems disposed to create an int er-mini sterial committee t o explore the possibilities of making DSB self-supporting . Given proper terms of reference and personnel, such a committee might well lead to the enactment of the legislitive reforms which are needed for the DSB to become capable of paying its working expenses plus depreciation and to earn a modest return on the Government ' s investment . The Bank ' s present reluctance to consider a railway loan to Denmark need not therefore rule out possible railway lending in the foreseeable future .

17. It might take from six to nine months f or a committee such as the Government has in mind to complete its studies and prepare its recommendations and possibly another three to six momths for suitable legislation to be enacted by Parliament . The way could thus be open within a year for the Bank ' s reconsidering the practicability of a DSB loan.

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18. However, the DSB 1 s operating losses are not the only difficulty in the way of Bank lending . The DSB does not engage in competitive international bidding as the Bank understands the procedure . For example , the equipment for which a Bank loan was asked consists of (i) diesel-electric line haul engines which the DSB plans to buy through a negotiated contract with a particular Swedish supplier and (ii) diesel-hydraulic shunters which the DSB plans to buy through a negotiated contract with a particular German supplier .

19. Fortunately, the Bank 1s reluctance to lend for DSB purposes at present need not slow the planned dieselization. Considered by itself, complete dieselization of the DSB fleet is a productive, urgent project which should pay for itself in seven to eight years out of operational economies of fuel, labor, and maintenance and which will also save substantial amounts of foreign exchange by the shift from coal imports to oil imports . The whole purchase price of the i mported diesels, an estimated $15 million equivalent, can be paid from the proceeds of the public issue if the Government wishes to apply them to this purpose .

20 . Although an immediate railway loan may be impracticable, the mission regards the dieselization of the DSB a top priority use of public investment funds . We understand that the Government has the same view.

cc: Messrs . Aldewereld/Squire Ma.in: Iefort

AWubnig:mv

FORM No. 57 ( 5- 48 ) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM TO: Files DATE: October 31, 1958

FROM: Mo L. Lejeune

SUBJECT: Danish Joint Oper at ion

Mr. Necarsulmer, a partner of Kuhn Loeb & Co., was in Washington on October 29 to discuss the proposed Austrian operation and I took advantage of his presence here to talk to him about the proposed Danish issue. We discussed the following mat ters :

(a) Railroads

I told Mr. Necarsulmer that the Bank was reluctant to lend for the Danish railroads until it was sure that a rationalization program designed to bring the railroads out of the red had been worked out by the Danes and there was good prospect of its being put into opera• tion in practical terms. This meant that we were not contemplating lending for t he r ailroad now but did not exclude the possibility of considering a railroad loan in the .futureo I said, however, that the Danes were somewhat unhappy about this attitude on our pa.rt and we had been given to understand that the marlcetability of the bonds might be enhanced if a railroad project was included in our loan. I asked him for his views.

He said that in his opinion the railroads were irrelevant to the marketability of the bonds and he did not think that it would make any difference to the amount of bonds sold or the cost whether we had a railroad project or not.

(b) Timing

I said that at the time our mission had gone out to Denmark we had not envisaged a joint loan and issue before the close of 1958 but had expected it to take place early in the new year. It was only after Schaenen•s arrival in Copenhagen that an accelerated program had been suggested. I told Mr . Necarsulmer we would of course do our utmost to speed up the work on our side but that f'rankly it would not be possible to meet the December 17 issue date without departing from our normal procedures and that even if we did make such a departure we would be running serious risks in not having adequate time for negotiations with the Danes when they came over to t he States . I showed him t he tentative timetable worked out (dated October 28) to give him an idea of the problems involved.

Mr. Necarsulmer said that he fully l.lllderstood our position that he had, in fact, had a talk with Mr. Schaenen about this very problem last Friday. He had told Mr . Schaenen he did not think it wise to hustle the World Bank and that Kuhn Loeb for its part was not prepared to make an issue without the Worl d Bank's loan. Mr. Schaenen had said that it would be regrettable to miss a good opportunity in the market

and said he thought possibly some of the money could be raised without the Bank's participation. Mr. Necarsulmer had questioned this and had also said that it would look very odd if the market came out with an issue just before Christmas and the Bank came out with a loan just after New Year• So He made it quite clear to me that Kuhn Loeb were prepared to wait for the Bank and that he felt that Smith, Barney would become reconciled to doing likewise.

(c) A.mount

Mro Necarsulmer asked how much we thought we could lend for powero I said that we could not at this stage be entirely sure of the figures but that we thought it might be between, say, $16 and $19 million. Mr. Necarsulmer said that the an ount we could lend was of some importance to them as they doubted whether they could raise more than the Bank loan. He wondered whether we could raise our upper figure to $20 million so that if they could also do $20 million the amounts would be eveno I said this was unlikely in as much as we would not lend more than the power companies actually needed. He also said that if we were as low as $16 million they questioned whether they would be able to do more than say $15 million. It was clear that he attached considerable importance to the Bank's and the market's amounts being the same.

He asked me how soon we might know with a fair degree of precision how much we would be lending. I told him that I doubted whether we would know in under 2 weeks but that as soon as w.e did I would let him know.

In winding up I asked him whether he thought it necessary for me to get in touch with Mr. Schaenen on the above points and he said he thought not. Mro Schaenen knew that he was coming down to Washington that day and would try to see me, and when he got back he would call Schaenen and give him the gist of our conversation.

cc: Mr. Cope Mr. Squire Mr. Lefort (4)

MLLejeune:-wmf

• I I

• • • 1

•

II

I I

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•

•

Mr. Michael L.

P. J . quire

P,m,rlt a §tatf Rail.ways ' DieaeJ.ize.t1on Pro3eqt

03tober .30, 195

Attach dis eopy ot the ssio •s back-to-office report on the abov project. In Vi w of the fact that the ~ nt ~uhn Loeb bt brin ress on the

nk to di te loan for r lwey , 1 t would be ad-d sable to nt a clear 1 e of the Ra.ilvey • po ition.

•

• J. t?.

tallowed 1n ·• t, daya by a ole.

FORM No . 57 ( 5 . 48!

TO: Files


OFFICE MEMORANDUM DATE: October .30, 1958

FROM: Gabriel Lefort L.

SUBJECT: Denmark - Timing of the proposed joint operation

1 . A meeting of the working party on enmark was held ctober 28 , 1958 at 2. 30 p • • to consider the timetable for the anish loan operation. In attendance -were G. Le fort - chairman, '1iss V. Morsey, r . • ~iubnig, hr . c. Finne, Hr. J . Filippi, Miss R. Zafiriou. :Mr . Lefort distributed two alternative timetables (attached), one based on the assumption that normal Bank procedures would be followed, the other based on the assumption that a public offering in New York would have to take place before Christmas, as insisted upon b· .Denmark's Jew York bankers . The first time table provided for a public offering on January 14, 1959, the second for a public offering on December 17, 1958.

2. Mr . Lefort asked what were the feelings of' the working party on this subject . Mr . Finne stated that he could have his report ready f or working party purposes on November 11 at the earliest and estimated that another 7 days would be needed for comments and revisions . Hence he felt that the first timetable (distribution of documents to SLC November 28) allowed ample time and might even be some-what shortened. He excluded the possibility of meeting the second timetable (distribution of documents November 7).

3. Other members of the working party pointed out that the second time-table was based on a very tight schedule and would in fact modify established Bank procedures . The question was also raised whether this would not create a precedent tha t other countries might invoke .

4. Mr . Lefort explained that the second alternative would be resorted to only i f the management decided that a public offering should take place be£'ore Christmas and would involve submission to SLC of a brief memorandum summarizing the main conclusions and recommendations on the loan operation instead of the usual technical and other reports .

5. It was generally agreed that this was feasible but that it was a matter for the management to determine .

6. Mr. Lefort undertook to present the problem to l1r. Le jeune and request an early decision.

cc: Miss V. Morsey Jvir . C. Finne Mr . A. Wubnig

•

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lit,

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Mr. Jo lo Main

A. ubni.g

DSB Die lization Proj ect -Back- to -office port

Octo r Jo, 1958

1 . fi ld ... tudies of the Danish St.'lte Railways ( B) completed in Co nhagen last ek. Shortly before the ission• departure lr. Lefort officially informed the Governnent th t an edi.a loan for the r i l way project is impracticable , and that the Bank ~refer s to lend for the power project only. Informall y, I conveyed the s saa to • Skov, General Manager of the DSB.

2. The ! 6B •s own forecast or venue atld expense make it clear that the r ilw camot ho to beco self- supporti. in the next five year • ith full allowanc fo the conomiea due to th result from dieselization,

CTC, auto tic gates, oder nized si lling fad.ll ties, e tc. , t here uld still be an oper ting l oss after dapr ciation of kr . 25 million annually as of 1963 4 comp with present lose of kr.50 million rmually.

3 . In order far t SB to be ble to earn the depreci tion charge and pay reasonable interest on the tate c pit.al, uneconomical branch lines will have t o be b rnoned on a lar scale, unprofitable services will have to be elimi.nated, and r tee will ha to be incre sed 'Wher practicable . All such ction requires expre s ap rav lb Parl iament which would take ti e even if the Government were read to submit p ropriate l egi 1 tion at once .

4. o such legislation ha yet b n dra!ted. To hel p ep it, the GovernI!lent ha i n mind th establis nt of an inter-mini. terial camni ttee which would tudy the cause s and cures of the DSB deficit . Its stablishment w.i. th ppropriate terms of reference would be a. hel pful firs t s tep . However, the ulti ate ei'fect on the uSB 1e e rning powr wil l d nd on the s ci.fic reforms enacted.

S. A B nk decision to concentrate its loan on the powr project reed not delay di elization of the t B neet. The pr o ceeds of public issu s hould s ufficient to financ t planned imports of $15 million worth of d:1.esel.-electrics and diesel-hydraulics.

6 . This note will be follo d in a f ew days b y a bri f port on DSD oper tions and finances s a whole.

cll,v-AWubnig ;

October 23, 1958

DENMARK

The mission has recommended a power loan of about $19 .5 million, being the estimated cost of imported equipment and of materials to be fabricated in Denmark for the expansion program. of the seven power companies . In the interest of simplicity and of acceptability to the companies, the mission has recommended that the Bank's loan be disbursed not against vouchers for imports but on the percentage of total expenditures corresponding to the imported component. We consider this procedure justified.

The government would relend the krone proceeds of the Bank ' s loan to the power companies in three annual tranches. The government wishes to lend to the companies at the going market rate in Denmark since the companies would not accept a higher rate and the government is in no position to make them do so. The government would similarly pay the commitment charge and bear the exchange riske

The normal practice of the power companies is to invite bids from some or all suppliers who have representatives in Denmark. This is less than •international competitive bidding" and the British commercial attache in Copenhagen has complained to Lefort about discrimination against British suppliers . TOD is, however, not inclined to object. Bids are selected on a commercial basis and prices in fact are very low. The companies are engaged in an expansion program. and are generally well advised to go back to suppliers of types of equipment already installed. Finally, we could hardly require the companies to change a practice which appears to operate to their entire satisfaction.

Schaenen, the Smith, Barney man in Denmark, has pressed for a market issue before Christmas. It is most unlikely that the technical reports (on seven companies) could be ready for SLC before the end of November and the impression has been left with the anes and the market that the Bank could not be ready for a market issue before the middle of January. The under,T.riters have said that they would want to see the Bank's loan effective on the public offering, a desire strengthened for the moment by their continued preference for a joint project. To have a joint project, however, does not appear feasible: power alone would not offer room enough and the inclusion of a railway project in a January operation appears quite impracticable.

So long as the Bank maintains its present policy on railroads, a railway operation would not be possible without at least a positive assurance of changes in rates and the closing of uneconomic lines . The Ministry of Finance has inquired whether the Bank would be favorably inclined toward a railway loan if the government were to set up a committee of inquiry - for which the Bank would be asked to recommend a transport economist - and if the government were prepared to introduce legislation proposed by the committee . We have said that we do not consider a railway loan a practical

r

Denmark - 2- October 23 , 1958

probability in the near future in any event but we have assured the Danes that a $35 million joint operation now, with a Bank loan for power, would not necessarily preclude later consideration of a railway loan if the results of the proposed inquiry an the legislation proposed indicated that there was a reasonable basis for discussiono k added the further caveat that the Bank would have to consider at the time whether further lending to Denmark was justified.

We may be faced in due course with another gold clause protest from the French. The French Financial Counselor in Copenhagen informed Lefort, apparently unofficially, of the existence of a dispute between France and Denmark concerning five loans expressed in gold krone or gold French francs issued between 1894 and 1909. Danish officials have consistently maintained (on the Norwegian pattern) that the matter must first be presented before Danish courtso

FORM No. 57 (5. 48 )

TO: Files


OFFICE MEMORANDUM DA TE: October 27, 1958

FROM: G. lefort (;.. . L .

SUBJECT: Denmark - Proposed Joint Operation

1 . Hr . Schaenen from Smith Barney called me on the telephone today to find out where we stood on the Danish operation. I said I was just back from Copenhagen and I had not yet had the chance to talk at length about timing, but that I still had the same feeling I had in Copenhagen that it was very unlikely we could be ready for a joint operation before Christmas . I said that as soon as there is something new on this question I will call him in f ew York.

2 . Mr . Schaanen said that he would call me anyway next week to make an appointment in the Bank for Ar . Sanuels and himself .

cc : ~.r . M.L. Lejeune Hr . C. Finne Mr. A. 'Wubnig Hiss V. Horsey

Record Removal Notice Archives & Records Management

File Title Barcode No.

Electric Power Development Project - Denmark - Loan 0218 - P03 7363 - Negotiations - Volume 1 1366955

Document Date

October 21, 1958 Correspondents / Participants

To: Mr. Sommers From: Virginia Morsey

Subject/ Title

· Document Type

Memorandum

Proposed Danish Loan - Gold Clause Dispute with French Bondholders

Exception(s) Attorney-Client Privilege

Additional Comments

The item(s) identified above has/have been removed in accordance with The World Bank Policy on Access to Information or other disclosure policies of the World Bank Group.

Withdrawn by

Vlada Alekankina

Date

April 16, 2018

Archives 01 (March 2017)

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FORM No. 75 INTERNATIONAL BANK FOR (3.52) RECONSTRUCTION AND DEVELOPMENT

Date

ROUTING SLIP )~ 3o lj)') (

NAME ROOM NO. I---

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Action Note and File Approval Note and Return

Comment Prepare Reply Full Report Previous Papers --v Information Recommendation

In i tia 1 Signature Rema'"'''>

From ~ Le{r,-

I-JANS Fo BOSERU CA.ND. POLIT.

8EK 'RET.iEH. 'I FINANSMINISTEJt.IET

Speech of the Minister of Finance, Mr. Kampman, at the Danish Government's dinner for Mr. Lefort and the

members of the mission from ~he International Bank October 21, 1958.

t{L.:f .

------

1)

It is a great pleasure for me to welcome the members of the World Bank Mission to night. The preparations for a Loan Agreement have been going on for quite some time now, and to night on the eve of the departure of the Mission I think it is an appropriate time for all of us who take part in these preparations to meet. We have been glad to have you

among us these last few weeks and we hope that you feel that you have been welcome everywhere.

The background for our loan application to the World Bank is wellknown to all of you and I shall only spend a few words on that subject.

A satisfactory growth of Danish production presupposes a large and sustained expansion of our foreign trade, but the growing agricultural

protectionism in almost all countries have rendered it practically impossible to expand the exports of our agricultural products, in which

we for many years have specialised. This has stressed the urgency of a rapid and forceful expansion

of other sectors of the economy and the growth of our industrial exports

over recent years shows that considerable results have already been reached in the re-orientation required in our economy. If, however, Den

mark has to finance the necessary adaptions of the economy from its own resources alone, the growth rate of production and employment will be too slow to be satisfactory.

It would alleviate our difficulties appreciably, if funds could be

borrowed from abroad for a transitional period to finance part of the

necessary investments.

2)

We ourselves look at our need for borrowing from abroad also on

the background of recent developments in our foreign debt. By the end

of the fiscal year 1951/52 the Government's foreign long-term debt

totalled a little less than two billion kroner and today it is only

just above one billion kroner. Thus in six years the Government's for

eign long-term debt has been halfed. An achievement which we are sure

has been noticed out side Denmark too.

On this double background of an obvious need for foreign finance

and of a very small foreign debt the Government decided to approach

the World Bank and an application was sent to the Bank in May this year.

Following certain informal talks with representatives of the World

Bank the application was based upon projects for expansion of power

stations and acquisition of diesel-powered locomotives for the Danish

State Railways.

The foreign exchange outlays involved in the two projects amount

to about 250 mill.kr. or well above 35 mill. dollars.

3)

A few weeks later we received a positive and very encouraging answer from the Bank. The management of the Bank would of course make no commitments at that time, but agreed to send a mission to study the two projects and it was further stated that the Bank in view of Denmark'~ high creditstanding would consider a loan only jointly with an issue on the New York market.

The next step for us was therefore to select an investment banker and among the great number of firms who showed their confidence in us by offering their services we selected a group of four outstanding firms. We informed the Bank accordingly and I understand that a working arrangement was established between the Bank and the underwriters at an early date. It is a great pleasure for me to welcome representatives of two of the firms of the underwriting group - Kuhn, Loeb & Co. and Smith, Barney & Co. - among us to night. I understand that preparations for a public issue of Kingdom of Denmark ' Bonds on the New York market are well under way.

Mr. Lefort! you and your colleagues have now finished the first part of the Mission's task. I am aware that it may not have been an easy task, but I hope that you have found it an interesting one.

4)

You have showed such a splendid cooperation and such a very high degree of understanding of our particular situation that - if not all - then at least all major difficulties have been overcome. I have not been able to follow the work of the Mission in details, and I am fully aware that we have not yet reached the conclusion of the work. It is now for the management of the Bank to study your findings. I have, howeve~ been told that I can look with optimism on the prospects of acquiring in a near future from the Bank and from the market the amount of foreign finance, which we had in mind, when approaching the Bank 5 months ago.

The Mission has done a magnificent job of great importance to this country.

I wish to thank the members of the Mission present for their very positive approach to the Danish case and I will ask you, Mr. Lefort, to convey my thanks also to the members of the Mission, who have already left.

FORM No, 27 ( s. 58)


INTERNATIONAL FINANCE CORPORATION

OUTGOING WIBB CLASS OF SERVICE: FULL RATE DATE: OC'IDBER 21, 19.58

TO: LEFORT HOTEL ANGLETERRE COPENHAGEN

COUNTRY ( DENMARK )

TEXT:

Cable No. ~\~ rtlr

DISBURSEMENT PROCEDURE PROPOSED YOUR LEI'TER THREE AOOEPrABLE

LEJEUNE

A_UTHORIZED BY:

I

NAME: For Use bv Archives Division

DEPT: Ai'rica and Australasia

SIGNATURE: ---,r--:---:----=-=--:-:,--,:-.,..----,,-------,-,----,--~-----~ {Signature of individual authorized to approve cable).

ORIGINAL (File Copy) cc:

(IMPORT ANT: See over for guide in preparing Outgoing Wire)

Checked for Dispatch

Miss Morsey Messrs. Squire

Chang Skillings

GUIDE FOR PREPARING OUTGOING WIRES

1. Class of Service

Type in class of service desired. Each clas s is described as follows:

Letter Telegram Letter telegrams are normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minimum charge for 22 words including address and text.

Full Rate

!BF Govt.

Code

Full rate messages are normally transmitted and delivered immediately. There is a minimum charge for 5 words, including address and text.

This is a preferential rate extended by some member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available. It is at present available for the following countries:

Bolivia Cuba Honduras *Syria Brazil Dominican Republic Jordan Uruguay Burma Ecuador *Lebanon Venezuela Chile El Salvador Nicaragua Yugoslavia

*China *France Pakistan Colombia Greece Panama Costa Rica Guatemala *Peru

*In these countries the letter telegram rate is lower than IBF government rate and should be used for messages when immediate transmission is not required.

u, '· , l -w::

Code messages are transmitted at full rate {or IBF Govt.) speed and cost. This rate should be used only for confidential messages to staff members having a code with them.

I •

day Letter

C' )

.:X-eletype

' . (" .... 'oJ

c_.

2. Address

Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a minimum charge for 50 words in text.

To be used only for messages to the New York Office, United Nations, and certain commercial firms. For information, call Cable Post {Ext. 3008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New Delhi, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text

Messages to Missions and to Resident Representatives should be numbered. These numbers may be obtained by calling Ext. 3008.

Type text in capital letters and double space between lines. The text should be edited to eliminate unnecessary words and unnecessary punctuation. If punctuation is needed, spell out the words "Comma," "Stop," etc.

Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups, e.g. Airmail, Newyork, enduse.

4. Signature

Type in last name of sender. Use · INTBAFRAD or CORINTFIN as part of the signature only when addressee does not know the address of sender.

5. Authorization

Type in name of department of staff member authorizing message and have authorizing staff member sign the original (pink copy). A list of authorized signatures is kept in the ca_ble office.

Forward messages in triplicate in a cable envelope to Room Z 11 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements s Lould be made for the despatch of cables outside of these hours.

ANY QUESTIONS REGARDING INCOMING AND OUTGOING WIRES SHOULD BE REFERRED TO THE CABLE POST, 'EXT. 3008.

FORM NO. 27 ( 5- 58)

IN TERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE CORPORAT ION

OUTGOING WIBB CLASS OF SERVICE: NLT DATE: OOTOBER 201 1958


COUNTRY ( DENMARK)

TEXT:

Cable No. JB ]J

IMPRACTICABLE AFTER DISCUSSIONS WITH WR.SEY COtm:DER RAIIWAYS~n3n; AS PAfil'

PRESENT LOAN BUT JOIN!' OPERATION TorALING THIRTY FIVE MILLION

WITH BANK LOAN FOR PORER WOULD NOT NECESSARILY PRECLUDE BANK

CONSD)ERING RAIDVAY PROJECT SUBJECT TO RESERVATIONS MY ELEVEN

AS BASIS FUTURE U>AN BY BANK ALONE OR POSSIBLY AGAIN IN CONJUNCTION

MARKE!' STOP ABOVE SUBJECT TO OVERALL JUSTIFICATION FURTHER BANK

LENDING TO DENMARK UPON v7HICH NO COMMITMENT TO BE MADE NOW STOP AMMUNITION

AS.5UME YOU HAVE COLLECTED ALL AVAILABLE/Jllllltlllll TO SUPPORT CASE

FOR ACCEPl'ING COMPANIES PROOUREMENl' PRACTISFS INCLUDI?ll SPECIFIC

DESCRIPTION ACTUAL PROCEDURES FOLLOWED STOP SINCE YOU BELIEVE

FRENCH HAVE NOT OFFICIALLY NOTIFIED BANK EXISTENCE GOLD CLAUSE

IUDtt DISPUTE THINK INADVISABLE YOU DISCUSS MATTER IN PARIS BUT

CONTACT OEEC COM:>JDERED USEFUL STOP YOU MAY INDlC ATE STROID

POSSIBILITY THAT WITH RISIID INTEREST RATES BANK LENDIID RATE LIKELY

TO BE SIX PERCENT BEFORE FINAL NEGOTIATIO!t> DX START :Eil «JBUH!

A.UTHORIZED BY:

NAME: M. L . Leje

DEPT: Operations -SIGNATURE:, ....... ~ -..--,-----=-:~=--=-.,......,=---,-,---,-__,.~----~

S i gnatu re of individual authorized to approve cable ,

ORIGINAL (File Copy)


For Use bv Archives Division

Checked for Oispakh


1. Class of Service

Type in class of service desired. Each class is described as follows :

Letter Telegram Letter telegrams a re normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with II minimum charge for 22 words including address and text.

Full Rate

IBF Govt .

Code

Day Letter

Teletype

2. Address

Full rate messages ere normally transmitted and delivered immediately. There is a minimum charge for 5 words, including address and text.

This is a preferential rate extended by some me~ber countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available . It is at present available for the following countries:




Code messages are transmitted at full rate (or !BF Govt.) speed and cost. This rate should be used only for confidential messages to staff members having a code with them.


To be used only for messages to the New York Office, United Nations, and certain commercial firms. For information, call Cable Post (Ext. 3008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New Delhi, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.}

3. Text



Use common ebbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups, e.g. Airmail, Newyork, enduse.

4. Signature


5. Authorization

Type in name of department of staff member authorizing message and have authorizing staff member sign the originel (pink copy}. A list of authorized signatures is kept in the cable office.

Forward messages in triplicate in a cable envelope to Room 211 for despatch. -The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements s • .t.ld be made for the despatch of cables outside of these hours.

ANY QUESTIONS REGARDING INCOMING AND OUTGOING WIRES SHOULD BE REFERRED TO THE CABLE POST, EXT. 3008.

FORM "10, 27 ( 5. 58)

CLASS OF SERVICE:

TO:

COUNTRY (

TEXT:

Cable No.

INTERNATIONAL BANK FOR RECONSTRUCTION ANO DEVELOPMENT


OUTGOING WIBB DATE:

-2-

STOP CABLIID VIEWS DISBURSEMENT TOIDRroW

LEJEUNE

AUTHORIZED Y:

NAME:

DEPT:

SIGNATURE: --,.-:-:--..,..----=-:--:-~~--,,----,-,---,----,------~(Sign a tu re of individual authorized to appro¥e cable).


(IMPORT ANT: See over for guide in prepcring Outgoing Wire)




1. Class of Service

Type in class of service desired. Each class is described as follows:

Letter Telegram Letter telegrams are normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minimum charge for 22 words including address and text .

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address


This is a preferential rate extended by some member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available. It i s at present available for the followi ng countries:

Bolivia Cuba Honduras *Syria Brazil Dominican Republic Jordan Urug uay Burma Ecuador *Lebanon V e n ezuela Chile El Salvador Nicaragua Yugos lavia


*In these countries the letter telegram rate is lower than IBF government rate and should be used for mes~ag.=s when immediate transmission is not required.

Code messages are transmitted at full rate (or IBF Govt.) speed and cost. This rate should be used only for confidential messages to staff members having a code with them.

Day letters a re delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a minimum charge for 50 words in text.



3. Text

Messages to Missions and to Resident Representatives should be numbered. These numbers m ay be obtained by calling Ext. 3008.

Type text in capital letters and double space between lines. The text should be edited t o eliminate unnecessary words and unnecessary punctuation. If punctuation is needed, spell out the words "Comma," "Stop," etc.


4. Signature

Type in last name of sender. Use · INTBAFRAD or CORINTFIN as part of the s i gnature only when addressee does not know the address c,f sende:i1. n

5. Authorization , , I f I I I 1· 1 ,

Type m name of department of staff member 8.1 thorilz,ing message and have authorizing staff member sign the original (pink copy). A list of authorized signatures is kept in the c a ble office.

Forward messages in triplicate in a cable enve!ope1 to 'Bloom 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special hrrangementa sh uld be made for the despatch of cables outside of these hours.


FO RM No . 27 ( 5- 58)

INTERNATIONAL BANK FOR RECONS TRUCTION AND DEVELOPMENT


OUTGOING WIBB CLASS OF SER VICE: LT DATE: OCTOBER 16, 1958

TO: LEFORT HOTEL AIDLETERRE COPENHAGEN

COUNTRY ( DENMARK

TEXT:

Cable No. 11

ASSUME YOU WILL BE WASHINGTON FARLY NEXT WEEK AND WOULD THEREFORE PREFER

AWAIT YOUR ARRIVAL BEFORE GIVING FIRM RESPO?SE QUFSTI0K3 RAISED YOUR TEN

STOP HOWEVER ~uunn LOAN FOR Pcm:R AIDNE COULD A~ BANK 1S SHARE

OF LENDIOO OH THIS OCGASION AND SINCE FULL SCALE STUDY OF RAll,WAYS IS

APPARENTLY ABOUT TO BE LA.UNCHED BELIEVE EARLY LOAN FOR RAIIW A.IS PREMATURE

AND BANK UNLIKELY WISH TO ENTER ANY OOMMI:TMENr CONTEMPIATING R.A.IDVAY

FINA.IDE UN.rIL FINDINJS AND RECOMMENDATIO?B OF COMPE:rENI' STUDY OF RAll,WAY

PROBLEMS ARE AVAILABLE STOP NEVERTHELESS NATURALLY BANK WILLING TO

HELP SUCH STUDY AS MAY BE APPROPRIATE STOP AS TO PROPCGAL FOR DECEMBER

ISSUE BANK UNWILLING CUT CORNERS USUAL PROJF.CT APPBJISAL BUT PREPARED

DO ALL ~IBLE TO SPEED OPERATION STOP WE FULLY AWARE MAGNITUDE

APPRAISAI, V ORK INVOLVED AND REGARD YOU BFST JUDGES PCSSIBLE SPEED BUT

FRANKLY THINK IT WOUU> BE MISLEADING TO LEA.VE IMPRESSION BA.NK CAN

U?QUF.STIONABLY SIGN BEFORE CHRISTMAS STOP EVEN IF BANK WERE PREPARED :t

MAKE LOAN FOR RAILWAYS BEFORE STUDY WHICH DOUBTFUL QUF.STION IN VIEW OF /\

AUTHORIZED BY:

NAME: Mi,... ... ""' ...

DEPT: 0

SIGNATURE: --.=-:----,,.---=-=----:-:---:-:---:--.,..,...----,---:-~-----:-::----.--(Sign a tu re of Individual authorized to approve cable).


(IMPORTANT: See over for guide in prepcring Outgoing Wire)




l. Class of Service

Type in class of service desired. Each class is described 11s follows:

Letter Telegram Letter telegrams a re normally delivered the morning after day of despatch. The cost is h11lf the cost of full rate messages with I! minimum charge for 22 words

including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address

Full r11te messages are normally transmitted and delivered immediately. There is a minimum charge for 5 words, including address and text.

This is II preferential rate extended by some member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available. It is at present available for the following countries:

Bolivia Cuba Honduras *Syria Brazil Dominican Republic Jord11n Uruguay Burma Ecuador *Lebanon Venezuela Chile El Salvador Nicaragua Yugoslavia


*In these countries the letter telegram rate is lower than !BF government rate and should be used for messages when immediate transmission is not required.


Day letters are delivered during the d11y of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a minimum charge for 50 words in text.


Use only 111st name of 11ddressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New Delhi, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text




4. Signature

Type in last name of sender. Use .. INTBAFRAD or CORINTFIN as part of the signature only when addressee does not know the address of sender.

5. Authorization

Type in name of department of staff member authorizing message and have authorizing staff member sign the original (pink copy). A list of authorized signatures is kept in the cable office.

Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements s h uld be made for the despatch of cables outside of these hours.

ANY QUESTIONS REGARDING INCOMING AND OUTGOING WIRES SHOUL D BE REFERRED TO THE CABLE POST, EXT. 3008.

f

FORM No. 27 ( 5. 58)

CLASS OF SER VICE:

TO:

COUNTRY (

TEXT:

Cable No.


IN TERNATIONAL FINANCE CORPORATION

OUTGOING WIBB DATE:

-2-

Wl4E"n.16f.._ POLICY DECISIONS INVOLVED FOR BANK RAmfAY LOAN COULD BE SIGNED ANY

I\

SOONER THAN PORER

,. c.: ~~~~r-s.·. '=':>'U\l""<_

nC\$"\

'>ro~swoo~ N$ f'\C~

AUTHORIZED B

NAME:

DEPT:

't.J°\ \ \ \ ~ m.s

LEJEUNE

SIGNATURE: __,~-.,--- --::-:-----,-,~ .,--=---=-=-----:--~----~-.-(Sign a tu re of individual authorized to approve cable).


(IMPORTANT: See over for guide in preparing Outgoing Wire)




l. Class of Service

Type in class of service desired. Each class is des cribed as follows:


Full Rate

IBF Govt.

Code

Day Letter

Teletype

2 . Address





*In these countries the letter telegram rate is lower than IBF government rate and should be used for mesS"a~s when immediate transmission is not required.

Code messages are transmitted at full rate (or IBF Govt .) speed and cost. This rate should be used only for confidential messages to staff members having a code with them.

Day letters a re delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Ca,nada. There is a minimum charge for 50 words in text.

To be used only for messages to the New York Office, United Nations, and certain commercial firms. For information, call Cable Post (Ext. 3008) .

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New Delhi. New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.}

3. Text




4. Signature


5. Authorization

Type in name of department of staff member authorizing message and have authorizing staff member sign the original (pink copy}. A list of authorized signatures is kept in the cable office.

Forward messages in triplicate in a cable envelope to Room 211 for de patch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements s hould be made for the despatch of cables outside of these hours.


f 0 -r-e'

r

FOR~ No. 26 ( 5. 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIBB

DATE OF WIRE: OCTOBER 16, 1958 ROUTING

TO: LE JEUNE IN'l'EHNATIONAL BANK FOR RECONSTRUCTIOP ACTION COPY TO ~. & DEVELOPMEN'l'

FHOM: KOEBENHAVN INFORMATION COPY T

Decoded By

TEXT:

TEN ALPHA GOVERNMEHT RE~UESTS BANK PROCl<]ED "RA.I].,WAY ON GROmID BANK J,O,\N USF:Yul,

FOR P01,ITICAL ECONOMIC REASONS A.S GIVING OUTSIDE SUPPORT GOV.t{RNMENT ISFFORTS

RATIONALIZE AND CUT DOWN DEFICIT. GOVERNMENT PROPOS.ES IMM"~DIA'l.ELY SET UP

COMM.IT'rEE TO S'l'UDY T{A!J.MAY AND MAKF. ~ECOMMENI.JA'rIONS WITHIW S!X MON'l'HS Sfl;(UFir.

MF.A.SURES NEEDS. COMMI'l"l'E$ WOOJ..J) CONSIST 'REPRESEN'rATJ:Vi.:S FAILWAY EGBE8TSON

MINIS'1'RY OF' RJBJ,1:C WORKS ASSIS'I'ED AS ADVISER BY OUTSIDE TRANSPOR'.rA'l'ION ECONOMIST

CHOb""'EN CONSULTATION BANK . IF COMMITTEE STUDY SHOWS IEGIShA..TION NECESSARRY

GM:'-'NME~TT WOULD UNDER 'I'A.KE SUBMIT AND SUPPQRT REFORM LEGISlA'i'ION ALONG GENERAL

LINES COMMI·rT.E:E PROPOSALS . DO YOU CONSIDH:R THIS &1JFFICIENT BASES MORE SYMP.6.'00TIC BANK

CONSWERATIO'tf RAILWAY J.0A!Jq1.JERY WlJBNIG STUDIES SO FAR INDICATE AS OF DA'l'F!

COMPLETION DIESELIZA'l'ION MARGIN NEEDED .l:!:N.AJ3IB RAILWAY COVER OPERATION illCPl!:NSI':S

nrcLUDING DEPRE~IATION RElATIVELY NARROW . B~':rA CO~Y OOR EXPECTATION SMITH BAPNEY

.AND CO. PUTTING PRESSU1IB COMPLE'lli BANK LOAN IN '.CIMI.i: PUBLIC OFFERING B-:lW.RB CHRISTMAS IF

MARKF.~ SHOWS I.MPROVEMEN'P.. FINNE Y.!!:.ELS IMPOSSIBLE HA.VE POWER REPORT FOR SLC Bl!..l?ORE I I

END NOVEMBER SO THAT UNLESS BANK WII.J~ING CUT CORNERS USUAL PROi.lliC'l' APPRAISAL OR

PROCEED ONLY RAILWAY BANK MAY BE PU'.r IN POSI·rroN OF DELA.YING MARKET 'C(S&'UE

LEFORT

~~~--'Received in code.

ORIGINAL

('

T-YP£0

GP ::RN '"\'~LS co,nE ~vn•.l,::tt~,E

QC\ \6 \ \ 2S ~t\ \9J6

C ~

..J..

... ~.

Copenhagen, Dle9zn5markG'f,~ October 15, y

To: J. F. Main .,, .. / er, From: A. Wubnig Cl/Jv

Subject, DSB Dieselization Program - Progress Report ~ 1. We have just received from the Railways their preliminary estimate ~ .

of earning power on completion (say 1963/64 1 of the dieselization program. /;> 'l'he figures are unofficial, no t having been shown as yet to the General Manager. They are incomplete, lacking an estimate of the savings from abandonment of uneconomic branch lines - savings which no one mn the Rail-ways staff wishes to assess until the General Manager clears such an appraisal.

2. The GM is due back from Madrid (at long last) today or tomorrow. I have a tentative appointment with him for October 16 p.m. at which Oa) I hope to get clearance to review the estimates of particular savings with the office r s who prepared them; and (bJ I hope to have the ~M authorize his experts to prepar~ estimates of the economies which could be realized from line abandonment.

3. The tentative figures supplied to us show that the Railways cannot hope to become self-supporting in the next five years without the elimination of a large mileage of light traffic lines supplemented (perhaps) by some traffic increases. This can be seen from the following summary of the Hailways 1 forecast:

Expected revenue, 1963/64 from present traffic, at present rates, plus some additional transport of motor vehicles by car ferries

Operating expenses except depreciation if 1963/64 traffic had to be moved at present costs without dieselization and other cost-reducing £i measures

Balance

Expected annual savings by 1963/64 from dieselization and other cost-reducing measures other than line abandonment

Net operating revenue before depreciation without allowance for potential savings from line abandonment

Annual depreciation charges, 1963/64, based on 5-year investment program

Net operating loss, 1963/64, if no light traffic lines are abandoned

Present annual operating loss

Million kroner

544

58

1

+ - 35

30 (approx)

50 ( approx;

-2-

4. I expect to be starting back early next week (at latest) simultaneousiy with Lefort. The exact it timing depends on the 41 ,.A!t~

of my forthcoming discussion with the GM and his staff experts and on Lefort 1 s ~ discussion5with Dige (due back from New Delhi today) to determine the Government's willingness to authorize line abandonment, rate increases, etc.

5. Everything has been go ing smoot hly. I am gathering all the data we need regarding roads, transp ort, ports, and coastal shi pping, and have just completed a four-day field trip , (by motor car) to various productive regions in the company of Lefort, Morsey and Zafiriou, guided by Boserup ,of the Ministery of Finance).

6. Best wishes to everybody at the office. Please assure ·~ that I am not over-straining myself and that my health continues good.

,,

-S-

-lumle (Jesjsl JsJ ~eew jxsn '{.l'l.S9 ~osd ~rr.i:J'l.sje sd o joeqxs I .~ ~"' '"I srlJ no ebrrsqeb -;?,rrlm.i:.t :m jo.sxe e.d'l' • j-ro1eJ rlf.i:w '{,laJ.Joen.s;t

no bns af'laqxe 1aje elrl bns Mn edj rlJlw noleeJ.Joe1b -anlmoorlj-ro1: ~m 1o lrllsCT we'l1 mo'l1 iosd eJ.Jb) 9'8.i:a rlJ lw ~nol:eauoelb k!>.N-»~ a I J-ro1eJ

enll esl'lodJu.s o;t eaen'8n.i:lllw e'tnemnTevoD edJ entm'leJsb oJ ('{.shoJ .oJe .aeese'lorri 9J.s'l , nsmnobnsds

s · ab erlJ fls ~ni-rsrl s~ ma I .xlrlJoome '8nlo~ rrssd earl nlrlj'{.-revd ,c evnrl bns ,~olq irle ls esoo bnR eJToq ,J'loqenu~J ,eb.so'l ~nlb"Is~e-r beens evlJoubo'lq auol'l.sv o (1so ToJom ~d) ql'lf blell xsb--ruo1 s beJelqmoo Jeut

erlJ 1:oJ q!J'feaoff '{.d beblJJ'8 ,rrol'l.rlaS bn.s '{.9B"IOM ,;t-Io1eJ 1:o 'lfl.Scmoo etU n.i: arrol-se'l. .(eorrsnt~ 1o i'lsJalrrlM

~*~ e'luaas easeiq .eo.t11o erlJ J.s xood~'!eve oJ aerlalw Ja~ff .o • 000'8 ae.ur1.U .rwo rlH.s·err 'tm J sffJ riii.s - ·n eatm i?Jn.tn:ls1: 1r::-rtPlo · .t 6n - aiG~ r · srl;t

C"J I r<") I

..

• abriel Lefort otel d ' Angleterr

Copenhagen, Denmark

o. ;' 3

ar Gabriel: o~·"""<'~

October 1.3, 1958

1 . e hav ad a chance to study the memorandum enclo.sed w1 th your letter oo 4, entitled unenmark ' s eed for Foreign Borrowi.Dg. 1 e f el that in general the memorandum provide the basis tor a good. case on economic grounds :for enmark ' s borrowing abroad, but we should like to sugg st a few points wltlch you and s Zai'iriou may wish tot ke into consideration. I should say that one difficulty we have had in commenting is our lack or knowl.edge of how you inten to organiz the economic report as am.oleo Ae you know, in few economic reports has it been !'ound neces ary to dwell at length on the juati c tion for borrowing since our main concern is long- term credi twort.hine •

2. I expect for one thing, that more ttention ~ill b paid in the economic report to the rat of avings and investment, hich I believe is lower in lJenm.ark than in the rest of Scandinavia. It is not cl ar wh ther you expect the new inve tment to tak the place of consumption, or rather whether you believe it will be carried out d.th re ources th t are at present unused and so r sult in hi her to 1 inoo for Denmark. If the latter, then it ould not se to be the import content of additional investment that is r levant in judging the need to borrow (incidentally, John Adler believes that this is probably high r than JO) but rather th growth in· ort demand caus d by the expansion of tot.al income.

3 o Investment needs ar qeal t with in term of th end of the booming export market and of the esire to join the Free Trade Area . Do you mean to impl7 that the major po$twar adjustments in tructure have been ca leted? If so, it is hard to see 1V' the rate of investment needs to be increased.

4o You untion that it ha been nece sary to nforoe tight one;y '*and especially keep interest rates high, thereby discouraging productive investment ... I wonder ti' this dos not overemphasize the ro1e of interest

Mr. Lefort Octobe 1.3, 19.58

rate I which after all ha.v been lower than 1n some countrie (e.g.Jtinland) where the rate of investment has been highe than Denmark. Ar there not other factors that explain the lower rate of investment in Denmark?

5. You note that nmark 1 prewar foreign ex.change position strong and suggest that thl.s as due to favorable terms of trad • ~ a it not also in part result of heavy capital imports?

6. It see111S to unnecessary to place so much emphasis on the recent increase in foreign exchange holdin a . , hey amount even no to only six weeks imports and it sees obvious that they are not so high a to mak forei borrowing unjustified.

7. The wording of the phrase nthi masilva effort has been in part res onsible {or the country' s external di1'ficult1ee11 (re.terring to recent heavy debt repayment) could iv a misleading impression of Denmark • ability to carry t'oreign debt in the futur . I assume you will e)Q)l 1n the postwar debt .1,iolicy in some detail .

8, In the table ,t;etima.te or Neede Increase in Investment" the 0 unal.located item loo rather large. The proposed increase in this item might be questioned an it would be useful to know \hat kind of inve tments are covered under this bead.int •

9. I realize that some of these comment might have awaited your return, but l thought you might like to have them no , in case you wi h to proceed. nth the economic report . I certainly appreciated having such a succinct account of this difficult question . Please express my appreciation to

as Zafiriouo

.Best wishes .

Yours sincerely,

lichael. L . Lejeune Assistant Director of Operations

ope, Africa and Austral si

T continui of in

ucb. l

OU0!9:SI

d t,h cono.iq.

t sk o

Offi

tor dJ the rnal ter l po ition

k

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year .

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c ber o, l

fl.llion

l S5 l 56

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l 0 110

4

-3S t 00 *

J.100 77 100 ·

19 O

0 0

The ever l increase ot 13 to l. ro ab'.1¥ est ~ of t .iner in inv ent.

l in r viou: ••k•

baei c B~'t.ement

so 200

200 ..

6S 7SO

ry con ervat1ve

igure

FORM No . 27 ( 5. 58)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEN T

INTERNATIONAL FINANCE CORPORAT ION

OUTGOING WIBB

CLASS OF SERVICE: LT DATE: OCTOBER J3 , 1958


COUNTR y ( DELTMARK

TEXT:

Cable No. 10 bl-~

VWJ/ o 1 FOI..LGJING COMMENTS YOUR LETTERS 3 AND 4 STOP FIRST WOULD WELC0.11E FREEDOM TO

r o-cl.11 s-ts CIDCSE MORE NORMAL DISBURSEMENT PATTERN I F PCSSIBLE STOP AS SOOGESTED MY 7

PLEASE EXPLORE DISBURSING AGAIM3T SUBMJSSION BY COMPANTIS OF KRONER INVOICES

FOR IMPORTED GOOllS AS APPROXIMATION ACTUAL IDREIGN EXCHANGE PAIMENTS STOP

COMPANIES OR SUPPLIERS IRESUMABLY WILLING CERTIFY COIDJTRY OF ORIGIN OR CURRENCY

OF PAYMENT STOP INDIVIDUAL COMPANIES COULD THEN RIDULATE DRAWINGS ON LOAN

ACCORDING TO FINANCIAL NEEffi STOP 'W) ULD AISO AVOID NECESSITY SPECI AL A.RRAIDEMENT

TO PREVENT WITHDRAWALS BY GOVERNMENT EXCEEDING PAYMENTS TO COMPANIES SECOND

RECOONIZE SUPPLEMENTARY AGREEMENI' AND LETTER DRA.Fl'ED IN LIGHr DISBURSEMENT

PROCEDURE PROPCSED AND WOULD BE CHANGED IF ABOVE FROOEDURE FOLLOWED STOP NO

PARTICULAR COMMENT FORM OR SUBSTANCE BUT YOU MIGHT C01'5JDER TESTING GOVERNMENT

AND 001-lb.NllS REACTIOM> TO POSSIBLE REQUEST PCMER RA.TE COVENA.l\1T OR REPRESENTATION

IF APPROPRIATE THIRD INTERNATIONAL SHOPPING COULD BE EMBARASSI NG PLEASE CHECK ,_,.,.,,, ,r

o~ F.IIDS AND COUNTRTIS LOCALLY REPRESENI'ED FOUR FOLLOWING RECEIVED FROM COPE QUOTE

HAVE TOLD DANES BA.m( WILL LEND FOR PCMER ONLY TO EXTENT COMPANIES NEED CAPITAL

AND ARE WILLIID TO BORROW FROM BANK STOP CONTRARY TO MISSI015 REPORT DIGE TOLD ME

AUTHORIZED BY:

NAME:

DEPT:

SIGNATURE: --,.,;-::=-::-:;::-:-:-:~.---.-:-:;-;-~--.---;;--~--;-~--- --,....,.~ (Signature of individual authorized to approve cable),


(IMPORT ANT: See over for guide in prepcring Outgoing Wire)




1. Class of Service

Type in class of service desired, Each class is described as follows:


Full Rate

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Code

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This is a preferential rate extended by some member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available . It is at present available for the following countries:





Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada . There is a minimum charge for 50 words in text.



3. Text




4. Signature

Type in last name of sender. Use · INTBAFRAD orCORINTFINaspartofthesignatureonlywhen addressee does not know the address of sender.

5. Authorization


Forward messages in triplicate in a cable envelope to Room 211 for d espatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangement• should be made for the despatch of cables outside of these hours.


FORM No. 27 ( 5. 58)



OUTGOING WIBB CLASS OF SERVICE: DATE:

TO:

COUNTRY (

TEXT:

Cable No.

~age 2

COMPANJJ!S WJULD BORROW AT BANKB RATE STOP HAVE SAID BANK WOULD LEND roR.

RAILWAYS ONLY IF DANES ADOPT PROGRAM RATIONALISATION DESIGNED TO ELIMINATE

LC6SES OVER REASONABLE PERIOD AND DIGE SEEMED WILLING TO DISCUSS BANKS

REQUIREMENTS IN DETA.IL UNQUOTE DIGE MAY HAVE GATHERED FROM KNAPP HOWEVER THAT

BANK MIGHT NOT NECESSARJLY BE HOOTJLE TO RELENDING GOING MARKET RA.TES STOP IN

LIGHT OF ABOVE YOU MIGHT USEFULLY RECHECK DIGES PC6ITION ON REI.ENDING mrEN HE

RETURNS FIVE CAN WE A$UME GOVERNMENI' IDULD PASS ON COMMITMENT CHARGE SIX ECONOMIC

JUSTIFICATION GENERALLY ACCEPTABLE COMMEN'.LS MAINLY CONCERN EMPHASIS AND PLACE

IN ECONOMIC REPORT \iB:l:.l!iafi TOlfflUIW STOP ASSUME YOU HAVE DETAIIS LARGE UNALLOCATED

I TEM INVESTMENT TAJBiLE LETTER R>LI,(l,5 SEVEN AGREE LEFORT RETURNS WASHINGTON DIRECT

FOLLOWIID ARRIVING 15TH SCHAENEN AND O'CONNOR FROM SMITH BARNEY SAMUEIS STEVE!IBON

IID}A.R!S

LEJEUNE

AUTHORIZED BY:

NAME: M. L . Lejeune cc: Mr. Spottswood For Use by Archives Division

DEPT: Operations ij Jy• A. & A. Mr. Webb

SIGNATURE: .J41__, " · Mr. Perez {Signatur<),~~ ~ized to approve cable).

JHWilliams :lffi{'f





1. Class of Service


Letter Telegram Letter telegrams a re normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minimum charge for 22 words including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address










3. Text



I


4. Signature


5. Authorization

Type in name of department of staff member authorizing message and have authorizing staff member sign the original (pink copy). A list of author,j.zed signatures is kept in the cable office . •

. . ' Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements s hould be made for the despatch of cables outside of these hours.


FORM No . 26 ( 5 - 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL FINANCE CORPORAT I ON

INCOMING WIBB

DATE OF WIRE : ROUTING

( I

TO:

FROM:

TEXT:

DIIBIL\n<Jlli. BAB Nt ncc.aaucnar AID Dl9'ILOINlft

ACTION COPY TO 11.1.ICIIJ:BS

INFORMATION COPY TO 111.l:Al'P.P'S CffICB

Decoded By

l'Clt SCIIIIRS BAU J)1SCOISII) D.llllfAU ao.u:c_;,a nm BLACK CJI BA8D DPCft D mDt 8DitO SIVllf AID 1111 CCIIIIDIB

mA1' OOtli<Wt IIXUDDIJ A~ CUKalft DIIII\BI: MBS WWll> Bl

lJD'Dl'JiU.'f 1Ul'IRAlll 1'0 Air AUrlRJllflVIS SO J'AB P.ROPOSID.

IQ' PD80Ml, TDV 18 ~ SIS IBCCZl4JRI I8 !IICllCUDILT

WDDD D ms CASI BUT J JIAU SD VDBJ.a CCll9Dllll BAJN(lfl) •

UINfflJMDL'f D IS JfO! ACCISSDm '?Cal' AID I 11182 l&\v.l con a, mJS CAJU JUC BXN DtDDlt BlN 1'0 811D mJ iUR!IIR Ctlla'.l'B

DD DISDBI

DAPP

DUPLICATE

FORM No. 26 ( 5. 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONA L FINANCE CORPORATION

INCOMING WIRE


TO:

FROM:

TEXT:


ACTION COPY TO MR.IEJEUNE

INFORMATION COPY TO

NEWDELHI Decoded By

/ THANKS YOUR SEVEN. HA.VE TOIB DANES BANK WIIJ.. IEND FOR POWER ONLY

TO EXTENT COMPANIES NEED CAPITAL AND ARE WIIJ..IlIG TO BORROW FROM BANK.

CONTRARY TO MISSIONS REPORT DIGE TOlJ) ME COMPANIES WOOID BORROW AT

BANKS RATE. HA.VE SAID BANK WOUI.D IEND FOR RAILWAYS ONLY IF DANES

ADOPT PROORAM RATIONALISATION DESIGNED TO ELIMINATE LOSSES OVER

REASONABLE PERIOD AND DIGE SEEMED WILLING TO DISCUSS BANKS REQUIREMENTS IN \•

DETAIL. UKAY WISH TO GO AHEAD WITH COMMONWEALTH LENDING IDEA AND BI.ACK

HAS PROPOSED EARLY VISIT BY SOMMERS. HAVE INFORMED THURN ABOUT TURKEY.

AUSTRIANS, AND SAMUELS AGREE TIMETABLE ENVISIONING PUBLIC ISSUE DECEMBER

THREE. NO AMOUNT MENTIONED

COPE

) •

ORIGINAL

T'ffE.0

GEYF..Rt· l. f H_E~ co ,\tt;:,n1"•'ir.c.

OC\ \ 3 \Q 59 ~n \~St\

w

FORM No. 57 (5- 48)

TO: F.il.es


OFFICE MEMORANDUM DATE: October 10, 1958

FROM, J. H. W~~

SU BJ ECT: Mission to Demnark

Virginia Morsey, Lefort and Finne reported by telephone from Copenhagen on October 91

1. It now appears possible to justify a loan o:f 15 to $20 million on the basis of the gap between the total capital needs of the power companies and their retained earnings, assuming the whole amount to be borrowed from the Bank.

2. The Lighting Authority of Copenhagen was a somewhat special case in so far as the normal practice of the city was to set power rates high enough to provide a substantial surplus af'ter ample allowance for depreciation, to apply the surplus to finance other current municipal expenditures and to borrow as required to finance new capital expenditures. Al.though power was sold at a profit, the Authority had thus no nretained earnings 11 available to finance its expansion program. The power authorities would wish to borrow not less than about $3 million since borrowing would involve an authorization procedure which was not considered justified for a lesser amount.

3. Companies do not practice international bidding in the strict sense; they negotiate contracts according to sound coIIDllercial principles and in fact get good prices. It could be argued that this procedure was acceptable on the grounds that the Bank loan would be financing the expansion of existing facilities rather than the construction of new plant from scratch.

4. The mission had discussed a possible form of subsidiary loan agreement with the Government whereby the companies would undertake to do whatever was necessary to enable the Government to carry out its obligations to the Bank; the Government would write letters to the companies setting out what those obligations were. Copies of the agreement had been mailed to Washington and would not be shown to the companies until the Bank bad had an opportunity to coIIDllent.

51 The mission had continued to work on the railways but since the Government was apparently quite unwilling to introduce any of the legislation required to make possible a decisive improvement in the financial situation of the railways a satisfactory railway loan appeared very remote.

6. Olsen, of the Ministry o:f F.i.nance, had shown Virginia Morsey in confidence a cable from Goldman, Sachs to the Danske Landmandsbank to the effect that in view of the Bank's p:,licy of requiring the

- 2 -

Government to nominate the bankers with which it should deal, there was no prospect of getting in on the market operation unless the Danish Government were prepared to indicate to the Bank a desire to change or add to its present underwriters.

Mr. Lejeune told the mission that it was appreciated that there could be no power loan unless the Bank agreed that the proceeds were relent to the companies at going market rates. For working purposes the mission could assume this to be so, subject to a decision by the Management; the question could therefore be discussed with the Danes only ad referendum.

On the question of underwriters, Mr. Lejeune and Mr. Nurick said that the Danish Government had officially informed the Bank that its bankers were Kuhn, Loeb and Smith, Barney, and we were not assuming that any change was intended.

cc: Mr. Lejeune Mr. Nurick Mr. Spottswood Mr. V. Chang

JEWilliams :wmf

\

TO :

F OM :

SU ECT:

INTE T TIOKAL

Files

• Stevenson jyf Denmark (}J

O~ RECO ST CTIO DEVELOP JT

October 8 , 19 58

In a conversation ith .r. napp, Ir . ige raised the problem arising from the fact that the power companies to which Bank funds might be relent would be penalized if they had to pay the ank •s rate or interest since the borrowing rate in Denmark would be lower 5-5!~) th n the Bank's loan r ate . ·r . napp emphasized tha t the Bank fei t that the public utilities benefiting from its loans must be able to stand on their own feet and should not be subsidized by Government. He indicate.d , however, that he personally felt that the fact that the Danish Government would be proposing to lend to the power companies at the rate at which public utiliti es could borrow i n Denmark lent some support to the , Danish position.

AS tevenson/pnn

cc: Mr. Knapp N.r. Cope Mr . Ald ewereld · 1r . Lejeune ·

FORM No . 75 INTERNATIONAL BANK FOR (5-58) RECONSTRUCTION AND DEVELOPMENT

.Date

ROUTING SLIP

NAME ROOM NO.

~ bt:r JA • --p i"~ 9w,,!Cllf ~ r 1t ~,!_JJ % )qJ ~ / 0

r~ ~ +:-La 1 1te:~ -- --- J

-Action Note and Fi le

Appropriate Disposition Note and Return

,..._ ' pproval Prepare Reply

Comment Per Our Conversation

Ful 1 Report Recommendation

Information Si anatu re In i ti a 1 To Handle

REMARKS

-From fl/(/'

FOIIM No. 26 ( 5. 58)

DATE OF WIRE:



INCOMING WIBB

OCTOBER 8) 1958 ROUTING

TO: LEJEUNE ACTION COPY TO MR.LE~ INTERNATIONAL BANK FOR RECONSTRUCTION

FROM: 1'ID DEVELOPMENT INFORMATION COPY TO

KOEBENRA VN Decoded By

TEXT:

// SEVEN PROCEDURES OUTLIMED OUR SIX AND LETTER 'll!EREE NOT

SUGGESTED FOR PURPOSES COMMITTING BANK BUT MERB:LY TO

ENABLE US DETERMINE WHE'l.'HER BANKS REQUIRF.MEN.r SUCH THAT

POWER COMPllNIES UNWIIJ.,ING PARTICIPATE LOAN SD~CE FOR

MOST COMPANIES TERMS AND CONTEl-TT ymsIDIARY AGREF:MH!NT

CRUCIAL THEIR DECISION. YOUR SEVEN INDICATES ROOM FOR

MAN.1!."'UVER AND WE BELTh'VE POWER PROJECT BASED ON DIREC'.11

IMPORTS AND IMPORT COMPONENT .LOCALLY PRODUCI.m GOODS

NOW A POSSIBILI'l.1Y FOR FlF'l'EEN TO TWENTY MIU.ION. CLEAR

illIDERSTANDING BY DA.lfES THAT All.. DISCUSSIONS AD R.t!,'""'F.Et..'RF;NDUM

LEFORT

ORIGINAL

/

F ORM N o . 27 ( 9. 57)


OUTGO ING W I R E

CLASS OF SERVICE: LT DATE: OCTOBER 8, 1958


COUNTRY ( DENMARK

fEXT:

Cable No. 8 o..&-·cq~ v

LETTER 3 NOT YET RECEIVED RE YOUR 7 GLA.D 15 TO 20 MILLION LOAN BASED

ON DIREX::T AND INDIRECT IMPORTS NOW APPEARS PC6SIBLE STOP CAN I ASSUME

THLS AMOUNI' WOULD NOT EXCEED COM~:FS ~COVERED CAPITAL NEEnS THUS

AVOIDIID DA.IDER INDICATED YOUR 2 AND 6 THAT GOVERNMENT MIGHT COLLECT

MORE THAN PAYMENTS TO CDMPANIES STOP GRATEFUL REPLY THURSDAY ROOARIS

LEJEUNE

AUTHORIZED BY:

NAME:

DEPT:

M. L. Lejeune Operations - E. A. & A.

SIGN ATURE: tSignature of individual authorized to approve cable).

JHWilliams:wm.f cc: Messrs . Spottswood, Bateson, V. Chang ORIGINAL {File Copy)


For Use b Archives Division


GUIDE FOR PREP ARING OUTGOING WIRES

1. Class of Service


Letter Telegram Letter telegrams are normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minumum charge for 22 words including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address

Full rate messages are nonnally transmitted and delivered immediately. There is a minimum charge for 5 words, including address and text.

This is a preferential rate extended to the Bank by some of its member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available. It is at present available for the following countries:

Bolivia Brazil Burma Chile

• China Colombia Costa Rica

Cuba Dominican Republic Ecuador El Salvador

• Ethiopia • France

Greece

Guatemala Honduras Jordan

• Lebanon Nicaragua Pakistan Panama

• Peru • Syria

Uruguay Venezuela Yugoslavia

• In these countries the letter telegram rate is lower than IBF governm~nt rate and should be used for messages when immediate transmission is not required.


Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a min1mum charge for 50 words in text.

To be used only for messages to the New York Office, United Nations, and certain commercial firms. For infonnation, call Cable Post (Ext. 3008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRADn is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFINn is re~stered in New York, Paris and London. The name of the country of destination must always be added. (No charge 1s made for the name of a country.)

3. Text

Messages to Bank Missions and to Resident Representatives should be numbered. These numbers may be obtained by calling Ext. 3008.

Type text in capital letters and double space between lines. The text should be edited to eliminate unnecessary words and unnecessary punctuation. If punctuation is needed, spell out the words "Comma,• "Stop," etc.

Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups, e.g. A1rmali, Newyerk, enduse.

4. Signature

Type in last name of sender. Use INTBAFRAD as part of the signature only when addressee does not know the address of the sender.

5. Authorization

Type in name and department of staff ·member authorizing message and have authorizing staff member sign the original (pink copy). A list of authorized signatures is kept in the cable office.

Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements should be made for the despatch of of cables outside of these hours.


FORM No. 26 ( 5- 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIRB

DATE OF WIRE: ROUtING

TO:

FROM:

TEXT:

IIBRMTI<IIAL BA.II: nil BICOllt.tROCTIOI' AID~

//

ACTION COPY TO NR.S<IICIRS

INFORMATION COPY TO llt.l&DUII

Decoded By

DUR TBRD 111 BAU DISCUBBID la!BR JVRiDR WITH

lWIISB Dll.mAflOlf BID BOT Bil.DU l'DAL DICI8I<ll

<If BABD 1,QQ SB<mJ> AWArf JULt. DPCmT BY MI88I<lf

DAfP 1VRDBAB

DUPLICATE

FORM No . 26 ( 5- 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONA L FINANCE CORPORATION

INCOMING WIBB

~- - '1'


TO:

FROM:

TEXT:


NEWDELHI

~

ACTION COPY TO MR.SOMMERS

INFORMATION COPY TO MR.LEJEUNE

Decode d By

REUR THREE WE HAVE DISCUSSED MATTER FCJRTHER WITH

DANISH DELEGATION HERE BUT BELIEVE FINAL DECISION

ON BASIS LOAN SHOULD AWAIT FULL REPORT BY MISSION

KNAPP FUNDBANK

ORIGINAL

FORM No . 57 ( 5- 48)

TO: Files


OFFICE MEMORANDUM DATE: October 7, 1958

FROM: M. L . Lejeune

SUBJECT: Denmark

lo Mr . Necarsulmer, head of the Buying Lepartment of Kuhn, Loeb and Mr . Schaenen of Smith Barney, telephoned me this morning and we had a triangular conversation about Denmark. I gave them an account of the latest situation, namely that the power projects were giving us some difficulty because the power companies were so100what reluctant to borrow from the Bank and the railroad project did not appear to be capable of meeting the Bank ' s standards. I said that we were pushing ahead to explore both of these further and I was still hopeful that something would be worked out, but it woul d be misleading to suggest that we would necessarily be able to come to terms w:i. th the Danes .

2. I referred to our earlier information that the underwriters preferred that the pr oceeds of the public issue should be applied to the same projects a~ were being financed by the Bank. Mr . Schaenen promptly broke in to say that this was not necessarily so and while they would like to wait until we had finished our investigations to see where matters stood, they were quite willing to think in terms of having the proceeds of the public issue used for some purpose other than the object of the Bank's lending .

3. I said that one of our problems was that even i f we could come to terms with the power companies, it seemed unlikely that they could absorb more than ~8~10 million. The government might wish to borrow more than this from the Bank, but one could not tell how much more without knowing how much was required altogether and how much might be forthcorning from the market . Mr. Schaenen and Mr . Necarsulmer said they were unable to give any idea at present of how much could be raised .

4. r1r. Necarsulmer had opened the conversation by saying that they would be glad to have me and anyone else come up to New York to discuss the Danish problems if necessary; or alternatively, they could send some pe ople here, but perhaps we might be able to handle the question on the telephone . After we had finished I said I thought that we had covered all the questions of principle involved at this stage and there was no need to ge t toge ther in New York or Washington for t he mome nt . I t was agreed we would keep them informed.

5. Nevertheless I think that once t he problem has become sufficiently clear and the Bank ' s attitude suff iciently firm, it would be worthwhile to go to New York if only to demonstrate our desire to be helpful .

cc: Mr . D. Sommers Mr . L. Nurick Y.!l' . J . H. Williams

FORM No . 27 ( 5. 58)

INTERNATIONAL BANK FOR RECONS TRUCTION AND DEVELOPMENT

INTERNATIONAL F INANCE CORPORATION

OUTGOING WIBB


TO: GABRIEL LEFORT HOTEL ANGIETERRE COPENHAGEN

wV COUNTRY ( DENMARK

TEXT:

Cable No . 7

APPRECIATE YOUR DESIRE PREPARE SPECIFIC PROPOOAIS FOR DISCUSSION WITH DANES BEFORE

ARRIVAL UNDERWRITERS BUT MANAGEMENT WISHES DEFER AGREEING SPECIFIC PROPOSI'ITONS

UNI'IL IN POSITION VI~ \iHOLB FIELD STOP MJ:SSION SHOULD COMPLETE FULL INVESTIGATION

AIJ, POSSIBLE PCMER AND RAILWAY LOAN SET- UPS AD REFERENDUM AND AVOIDiliG COMMITMEl-JTS

SPECIFIC F®illLAE THIS STAGE STOP REUR 6 ~ING LOWER RATES NOT NECESSARILY

EXCLUDED AND YOU MAY DISCUSS IT AS SOMETHING MISSION PREPARED TO RECOMMEND THOUGH

WITHOUT COOITTTING BANK STOP LOCAL EXPENDITURE LOAN MAY BE DISCUSSED SAME BASIS

IF IMPORTS LESS THAN CAPITAL NEEDS BENEFICIARIES STO.P IF Nor OR SHOUID MANAGEMENT

fllEFER FOREIGN IDCCHANGE PCMER LOAN DAMIDAR PATTERN MIGHT BE FOLLCm:D DISBURSING xm:J{

AGAilJST KRONE INVOICES FOR IMPORTED GOODS AFTER DEDUCTING ALLGlANCE ESTIMA'l1ED C01MISSION

AND OTHER LOCAL COSTS TO ARRIVE AT APPROilM.ATION ACTUAL FOREIGN EXCHANGE EXPENDITURES

STOP PRESUMABLY COULD GEAR DISBURSEMENT TO KRCNE PAYMENTS IMPORTED GOODS WITHOUT

EXPLICIT R.EF'EflliNCE PARTICULAR GOODS IN SUPPLEMENTARY LOAN AGREiiMENTS STOP PROPOSE

MEI!.1.' WITH UNDERWRITERS LATE THIS WEEK TO BRING THEM UP TO DATE AND PER.MIT 'fHEM

ASSESS SCOPE OF THEIR ffiOPOSED VISIT STOP IF YOU 'vtlSH TO TEIEPHONE PLEASE ADVISE

TIME REGARDS lliJEUNB AUT~ZEDBY:

NAME: M.L. Lejeune

DEPT: Operations - EAA

SIGNATURE: --,~=-:.::-:--:::~.-.:::-:;-;---:-;--.-:;-;--~~-,-----~""""T-{.Si gna tu re of individual authorized to appro't'e cable).

JHWilliams:MLLejeune:amg cc: Messrs. Spottswood, Bateson, v. Chang ORIGINAL (File Copy)


For Use by Archives Division


j

1


1. Class of Service


Letter Telegram Letter telegrams a re normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minimum charge for 22 words including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address


This is a preferential rate extended by some member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available. It ·is at present available for the following countries:







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3. Text



Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups, e.g. Airmail, Newyork, endu.se.

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Type in last name of sender. Use· INTBAFRAD or CORINTFIN as part of the signature only when addressee does not know the address of sender.

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ANY QUESTIONS REGARDING INCbMlNG AND OUTGOING WIRES SHOULD BE REFERRED TO THE CABLE POST, EXT. 3008.

•

Mr . Michael Lejeune

Copenhagen , Denm rk Oc~ober 7 , 195P

Intern'ltion::il B8:r.k f'or ~econs truc or :rnd De velopment Wqshington 25 , D. C.

Dea Mike: Le er No. ,1

21 . Enclo ed is a me"lriraYJdnm in w1°ich we hsve put tenta jvelv some ideas about Jenmark 's need for foreign borrominv . It rould be very helpfnl .ror us .o have your rer1c i"n on it--.ainly w11ether you feel that «K along these lines a good case could be made on economic grounds for Denmark ' s borro1ing abroad .

22 . I saw Ripman briefly ±kiEx yesterday morning . He felt that Fuchs and Svoboda would be busy lookin~ at the woodworking companies until mid - November , and therefore he expected to come back to Finland not earlier than November 5 to 10 . I ~ink we ill have finished our work in Denmark around October 20 to 25, and I fHii feel it rould be better for me to come back directly to #ashing on , unless you have special reasons for me to eo to Finlqn at t~at tie .

23 . ~liss Zafiriou expects to co"'lplete her rnrk by October 16th, and as she mentioned to you, she is lanning o fly to thens on October 17 an~ to come bgck to Was11ington October 27 . She thinks she will hAve her report ready by ~ove~ber 10 . I see no objection , and I have agreed, unless you inf'orm us to he contrary .

·~if; Gahr'el Lefort ,.._ N

21 . PS . Due to unexpected expenses (c'lbles, telephone calls) , we \~JI'~ · are runr..ing short o:fi mo ney. -{Ii 11 you please ask Ra:nm to send me checks ...J'9 ~ ~ in the amount of DKr . 6000? Thank you . ~ ~

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Denmark ' s need for foreign borrowing

Post-war economic difficulties

ID the po&'\wa.r period Denmark has been faced ·with the task of making major adjustments in the structure of its economy.

Danish prosperity was built on the farm and was based on the export of high quality food products, supplemented by exports of specialized industrial goods such as marine engines, ships, electrical equipment, and by earnings from shipping services .

Danish exports of food products, which before the war accounted for 72 percent of total exports, have met with a double setback in the postwar period: substitution with margarine in 1he case of butter and increased agricultural protectionism in Denmark's traditional markets in the case of most livestock products.

In spite of these difficulties Denmark has succeeded, by further improving its competitive position, to increase the volume of these exports by over 50 percent . Prices, however, have been low in relation to the prices Denmark has had to pay for its imports and have been steadily declining in recent years . Thus a serious gap has been created in Denmark's ability to finance the large volume of imports required by its specialized economy. In order to fill this gap a determined effort has been made to expand the volume of industrial exports . These are at present 150 percent higher than before the war and have been rising at the rate of 15 percent per annum in recent years . Farm products, however, still account for 57 percent of the total value of exports . This illustrates the magnitude of the task of reducing the dependence on the agricultural sector .

The unfavorable postwar price relationships have meant that, although the overall volume of exports has increased by more than 80 percent since the war while the volume of imports has increased by only 60 percent, the Danish external position, which was strong before the war, has been weak in most postwar years and serious foreign exchange crises have been repeatedly experienced, especially during periods of sharp upward movements in lOC>rld commodity prices.

Under these conditions it has been necessary to enforce tight credit and fiscal policies during most of the postwar period and especially keep interest rates high, thereby discouraging productive investment . The 1~eakness of the external position has been aggravated by the smallness of the foreign exchange reserves, which in most postwar years have corresponded to a little over one month ' s imports.

Thus, while the expansion of industrial exports needed to remedy the external weakness requires large investments, the weakness of the external position has made it necessary to hold do'W?l investmento

Need for larger investments

The Danish authorities are aware that now that the world boom is over a continuing rise in industrial exports will require a considerably higher level of investment than has obtained in recent years. They are also aware that a much larger volume of investment in industry 'Will be needed if Denmark is to take

.full advantage of the opportunities which the establishment of freer trading conditions in Europe would present to a low-tariff, highly specialized economy like the Danish. Hence present policy contemplates an increase of JO to 40 percent in the volume of private industrial investment (to be achieved through the provision of various incentives and the relaxation of credit conditions which have already begun) as well as substantial increases in public investment for such basic facilities as transportation and higher education.

Desirability of foreign borrowing

As in the past, such an increase in domestic expenditures is bound to affect adversely the external position unless part of the resources needed are obtained abroad.

The above considerations have led the Danish authorities to accept the recommendation repeatedly made in OEEC reports, that a certain amount of foreign borrowing be undertaken to finance part of the increased investment needed to strengthen the Danish economy.

A conservative estimate of Danish investment requirements suggests that the increase in expenditures involved in current plans is of the order of $1..00 million per annum (see attachment). The import component of investment in Denmark is high, estimated by the Danes at some 50 percent. But even if we assume · an import component (direct and indirect) of only JO percent, the amount of foreign borrowing that would be needed in the coming years to prevent the planned increase in investment from weakening the external. position would be of the order of $JO million per annum.

The conclusion that some foreign borrowing is now called for is not affected by the remarkable improvement in the foreign exchange position which has taken place in the past twelve months.

This improvement, which has enabled the National. Bank to increase its gold and foreign exchange holdings from a level of $13 0 million in recent years to $192 million in August 1958, is due mainly to the lower import prices resulting from ihe world recession and ta the lower volume of imports resulting from the tighter financial policies and stationary industrial production of the past twelve months as well as from an exceptionally good harvest. A rise in world prices and an expansion in Danish industrial. production could., as in the past, change the picture almost overnight, especially if it coincided with a series of poor crops (this year's crop is expected to be only average)o A prolonged world recession, on the other hand., could not fail to be reflected in lower Danish foreign exchange earnings.

Thus it is probable that the present strength of the balance of payments will not be maintained beyond the current yearo There are al.ready indications that the period of surpluses is coming to an end.

Ability to undertake foreign exchange obligations

De:ama.rk has ample borrowing capacity. During 1950-1958 some $200 million of external. debt were repaid and, incidentally, this masive effort has been in

-3 ..

part responsible for the country's external difficulties . At present the prewar dollar debt has been virtually repaid and the total service of the existing debt, at less than JO million per annum (exclusive of EPU debts which are due to be repaid in the next few years) compares with current foreign exchange earnings of $1,600 million per annum.

Foreign loans in moderate amounts, used for productive purposes, would both ease the strain that would be imposed by a higher rate of investment on the external position and lay the foundations for future increases in production.

Assurance that consumption will not rise excessively

The Danish authorities are f'ully aware that the recent improvement in reserves and any strengthening of the external. position through foreign borrowing should serve to increase investment, not consumption. There is no intention to reduce taxes or increase public expenditures in order to stimulate domestic demand. On the contrary, it is expected that greater wage restraint will slow do'Wll the rise in consumption which has been taking place in recent years o

Thus it is unlikely that the objective ct'increasing investment without weakening the external position will be .frustrated by excessive increases in consumption.

CopenhaFI\ October 6th, 1958

RZafiriou:sma October 10, 1958

Attachment

Estimate of needed increases in investment

Million Kroner

1955 1956 Proposed increases ** per annum

Gross fixed investment

~iculture 305 350 50 ufacturing 590 600 * 200

Power 200 200 * Transportation 1080 1100 * 200 Housing 770 770 Public administration 100 100 * Unallocated 1840 1960 * 200-300

Total 4885 5080 650-750

The overall increase of 13 to 15 percent is probably a very conservative estimate of the proposed increases in investmento

* roughly est:imated on the basis of level in previous years. Actual figures will be made available to us this week.

** roughly estimated on the basis of statements made by Danish officials

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• RECC ST ,UCTIO AND D . OP T

.OIQJ36»PWl ctober 8 , 195

1'01 Files

F t . A. tevenson

SU CTs Denmark

In a conversation w:tt.h r . Knapp ,_ r . Oige raised the problem a.ri.~ing tro the tact that the pow(rr comp3llies to hich .funds might be relent ould be penalize if ti1 y

ha.a to pay the a.nk • s ra. te of interest since t.he borro ing rate in el El" ould be lo er (. 5 .. 51") t.ba.n t.b llt ' s loan rate. r. na.pp mpbasize t the feit tbo.t. the publi.c utilities benefiting from its loa.ns must be able to s ~ on their own :teet and shou.ld not be s.o.b idize ey overnment. He indicated , boNever, that be p r~o.na.lly fe.t

that the fact. that. t.he Danish Gov rnment would be pro.posing to .lend to the power companies at the 1• te at lich public utilities could borrow in enmark. lent ~ome support to tbe Danish posi ti.on.

St veni1on/pnn

cc: r . Knapp ~r. Cope~

r . Ald w rel r. Lejeun

IN'I'ERNA TIONAL FOR RECONSTRUCTION AND DEVELO MENT

~ HO.Eb DlJM October 7 , 1958

TO : Files

FROM : A. Stevenson

SUBJECT: Meeting with Delegation of Denmark on October 6 , 1958

Present for Denmark: iessrs. Dige, leilsen and Viig

Present for the Bank : r . Cope and 1essrs . Stevenson and i ller part of the time

After some discussion l• r . Cope swnmarized the position as follows :

The Bank would be prepared to lend for power projects only if the power companies concerned were willing to pay the Bank ' s going rate f. ,

_.§.ilr_gad.§

The Bank would be reluctant___to lend if the railroads were no t earning an economic re t urn;IP The Danes gave va rious reasons for the unfavorable economic condition of the railroads ranging from the political difficulty of rai.sing a n er traffi c rate~ to the inability to close down ~ · lines as r apidly as V-/L.i ... ~ I wo.uld be economica lly desira le . The introduction of diesel ~~ traction would clea rly be desirable and would reduce operating costs considerably .

Mr . Cope said he was not sure if the Bank could do a railroa d loan in these circumstances . If it did , it would ask for a pro gram of reorganization involving adjustment of rates , a phased closi ng down of uneconomic branch lines a nd similar matters . The anes sa id that this was difficult politically but they felt

that it should not be i mp ossi ble to work out some t hing agreea le · to both parties . It was agreed t ha t t his would be discussed after the Bank miss ion reported .

In clbsing, Lr . Cope emphasized that the Bank woula l ike to lend to .Denmark , par ticula rly since i t would there by be '1elping t he Danes to go to the l ew York arket.

..

FULL RTE

D ;~ SHINGTO J, DC , USA

REUR THREE WE II VE DISCU GED TTER FURTHER /ITH A I H DELEGATION

HERE BUT BELIEVE FINAL DECISIO ON B SIS OF LOA HOULD AWAIT FULL

EPO T BY I ~SION NAPP

FUNDBANK

J. Burke Knapp , Vice President , -International Bank for Reconstruction and evelopment

v c .c. ~ ssrs . Cope , Broches, Al dewerel

)

FORM NO. 27 ( 9- 57)


OUTGOING WIRE

CLASS OF SERVICE: :FULL RATE DATE: OCTOBER 7, 1958

TO: ... LEFORT HOTEL AN GLETRRRE COPENHAGEN

COUNTRY ( DENMl\RK

fEXT:

Cable No. 6

;/ THANKS YOUR 6 REPLYING NIGHT LETTER STOP YOU MA.Y WISH TELEPHONE

WEDNESDAY AFTER RECEIPT

LEJEUNE

AUTHORIZED BY:

NAME: M. L. Lejeune For Use bv Archives Division

DEPT: Operations - E. A. & A. Checked for Dispatch

SIGNATURE:-~ - ----- · (Signature of individual authorized to approve cable).

JHWilliams :MLLejeune :wmf ORIGINAL (Fil e Copy)


I


1. Class of Service


Letter Telegram Letter telegrams are normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minumum charge for 22 words includi~g address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address







Greece



*Peru • Syria


• In these countries the letter telegram rate is lower than IBF government rate and should be used for messages when immediate transmission is not required.


Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a mimmum charge for 50 words in text.


Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is re~stered in New York, Paris and London. The name of the country of destination must always be added. (No charge 1s made for the name of a country.)

3. Text



Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups, e.g. A1rma1l, Newyork, enduse.

4. Signature


5. Authorization

Type in name and department of staff member authorizing message and have authorizing staff member sign the original (pink copy). A list of authorized signatures is kept in the cable office.



0 0 0

8S61 l·Jd 1 i GI l 180

03481 '.'dSIJ

I •

11\TTERNATIONAL BANK FOR /

TELEPHON E EXECUTIVE 3 · 6360

RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N . W.

WASHINGTON 25, D. C. CABLE AODRESS-INTBAFRAD

Copenhagen, Denmark October f;, 1958

Messrs . Le.~eune, 'fori~k qnd Spottswood InternationRl Bark -f'or Rec ,nstruction R.nrJ Develonrner:t N~shir~ton 25 , J . C.

Le tte-r No_._J_

Je·1.r .. ike, Les ani Snotty :

l? . ThiP will confirm the fol 1 0.in 7 cab e ser:t today :

STX FC'~ : '.:TT:rri, U>tISf ..) (; ""'S '()('_ H'T RS,.., usr.L acsT ~ss ryRA~P~~E T LOST

CO r._,TIT rn

' T"{ PO ~.: .:18 'IT

J 1ViS':'J

'.'..'ATIVES TlfEY

:JOT

r:,oTCA'l' ·s co::Ts ,.,c co LJ. IT~~ TOD 'LIV~RY r.

o:. •,IGN ..., ,CHA1~G~ RI.m OF c:::i ?ANI.w-:i ALl, t'AY~fuNTS AH..: D....: L .1:.t..Jl '}~LY

A Y. AR.I!: SO ...,LY ; ~Ol'l! .. R OBLIG -}. i .IBCO J /ULl I G ARRAr GE-

O rC'LLOW-JNG (a) A."OU!' FOR.:.:.iIG- J

XCHA r;E co PC~ ... 'rs O E. co 'PAHI S lfaED 'l'O "<ORRO.V O:l S.c;Cl'ND ALSO R •.CO • .IBND VT q A~L P1 CEDUR_s BY ~o, ~- EN,.., s I r:,1 KLR L LOCAL X6E!DITURE PROCEDUR£S,

1 A!. LY N J. SIS P ~RCr..N i' /\u S TOTAL E ·1E "DITtTRES ON fu!iSP~CTIVE PFC JEC':1S , ST.:PJ-ORTED PY C 1'1'T~TC\1'~0~S RO l ~A.fH,S , BU~ lLOUNr ADVA.UC J TO GOT!E:{. T ::::1 iJO ::,V l{T 'l'O BE GR <'AT~R THAN COUNTL.tPART \ 'OU :JT 01i' LE) •• '.:.1 IE>ll!:TOFORE CR SI !UL'l'ANBOUSLY , DVi..l' CED BY 'OVERrP.:~NT TO RE POhT.!::i'IC CO 1PA:NY . TRJRD IF RCCCU EJrnED PROCEDURES AC:.c;PTABL T: B.1.HK , SURSfIJI\. t LOAI~ A1P1'E.1ili, 1TS cnu1D BE SD'PLJTt'~.8D ~Y RV::MOV.'i.L PrtOVlSIJ S R!!iLr\.'r'I~G SPECI IC C:OODS Al 1 JN ,..,H'..T OR , 0 :LD 3.r. A•~CBPTABL.u ALL CO PA!HiS . li'Ql,RTJ L VT . O"'.?t/.0, LOCALLY NO AT !\.BOUT FlVB AF Excqt\.JGE

q I\ VE l C ~.IE /1,.. ~3v ~ \Rn:

S1IB::Y.:::JV . r '":S':' l'{ Tfl, OULD

/ 3 . It <tppears th:it~n_ 2_!:_llrn comp_1?-nies was bcised Jarg_e)Y.~,pon our requirements that they place contracts ir the currency of country of origin of the goods ctr.d t\.ia i'lej'' ·urnis receipted invoices, bills , etc ., showing paymert in such c rrency , t D_rm~rk has a much more sophisticatPd and highly developed coml'lerci 1 comrnuni ty than the majority of countries in .rnich we h.ove made loans to cover d~rect foreign Pxch~nrle expenditures . In the electrical equipment field, t ere are branch offices or loc~l representatives o~ ~up~liers fron numerous

l

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I U'rf ta II Of 1.30

03Al333~

-2 -

countries . The power company merely lets it be known generally that it wants to buy equipment. and there is keen competition among the representatives o the foreign suppliers to obtain the order . ~his amounts to international shoppine rather than internqtional bidding , but the results have been good. The installed cost of thermal plants of the companies examined is unusually low.

14 . In a few instances (probably not ~ore than 5 or 10% by value), the companies enter into ~irect c0n+racts in foreign exchan~e with +he supnlier abroad . Ne have aclvisea -'-hat, even if the Bank were f.n accer1- the propres8 payment procedur s, it mi{!ht wish to reserve the rjg}it in spec'fic instanc"'R involving lArge contracts placed abroad djrectly to make payments on the basis of such contracts. In fact , we do not believe that it w0u d be worth while for the Bank to ~ry to sinale out these contracts . Ne shall in any event investig~te the situation of ea~h company in resnect o~ rnntracts placed dir ctly with foreign supdiers ,

15 . Al though in forrn, +.he r1i sbiirsemeri+ procedure T"'COml'lended in our c;;i.ble would be that arplicRhle to local exrendi+ure lo~ns, in feet the loan should be justifieri solely as a forei~n exchan~e financing . The foreign exchange estimatAs woulrl bA based nn estimates of dirPct imports and of ~he import component of locally produced goods . For reasons a~plicable solely to Denmark , the loan woulrl bP rlisbursed on a basis different from usuq loans to cover forei~n exrhl'irt;e rosts.

l(. '11:lle p:overnment_and the cOT11uanies both r1c:quest that t.he amount of the , loans fr0m t E' - '.;£:yernment nor. be !'eq1.d red to cqj ricfO:e. wJt1:i clraw:i ng'S' unde-r the·' Bank ' s loan . 'l'he reason for· tlni<:'; j:=; il1at 'the cor1J,anies' individ'U~J nbeds for 'f:"tfrii evary denendi ne" upor the amount~ o""' ret:=i i?1eri i11.rn · r,rrs available to +,hem from tim to time . S'nce, from their pnjnt o~ ,iew. ~~eir oblip~tirins ~re all in ',rovJer, it · s (\nly the 1:;0vern'Ilerii I- i rl" is · n neeri of the fqr<>iP'n t?X"!'l"'l.n1e 8.t q ... e nate of payment to a -Po,.·ei'.:n sun,JiPr . i\s indi.c1+eri {YJ. our c~b1e, -be ~orei?n exchanpe risk of the cnmpqniPR is l'm 1 te~ tr the perin~ o_,, delivery of the ~nrAiP,'11 ea111pmAnt. ~'hAi"" C"rtr. ctq iH ~he )rnl renre"'entatives of the 0 "prlie,..c:; rrovine +'"r p8.y...,E-c:rt, ir ~1p·1iR k-rorAr o~ 8.n amount eo11iv~lent ~o d

speci-F'ied su~ in ro.,..ejpn eYcha'1ge. ,s soon q9 paymert under +he corilr~Gt is due, · the powor corno:=iny rrakes its nriymi:,rt in kronA,.. gnd hnc, di <>cbarp:is it~, f'on~ign

e'i.changA ob1 i vat ion . I+ 1i 11 h·1vP ob+ai ned th0se kroner ei tJ.ier from its own retained e1.,..:ri11gs or from J~nish "eYJ.aers on +be loc~l mRrket. Its 1nng-+prm ohliga ion , -';lfl'ff)re, ici only ir trrms of k.,..oner . .,....The rate at w\-:ich tl~ rower co111pa'1ies cc.uJu borrow in thE 8'mis'1 market ·1t tre: Jresent time i-, in th neighborhood of 5~~- T~e co~r~n~es apparently feel tnat it may go even lower and hence may wish t o be abJe to dr"'w clown rnnu'cll tranches o+' thejr 2oa!1 f:orn •1'""" ~'"~nnert

j' • ''ec ),'l J fa Le of n:t·· Nine·. U:1 the other r-1md., they ma.y ol-itaLn the _)in "1t ::i.001 1 tle rre8ent rn9.rket r<J.-i;e 9.l'plicg1~1>:l i-o '1~] .._r~n~ "'S, Miss Zafi-ir111's gi1As:, ia +hat rates ,;irP 1 ( rP 1:1<'8~,v +o :::o 1 i.:i +han 1 '.)wr,, hut o r:ourse 1') )nP c-in be c:ure. 'Ne :feel +"i"lt in the ,;ircu,s1ll""CfS 1 the _nvPr1mPnt ' s TJroposal for r' ... ler'ii •1 ·ire rP::i<i ,n::i.~ le i>1,l ',ottl 1 b 0 ·:tcceptw:l by the . .3ank. 1¥e ·.lso recommend, ~0~ev1~, t~qt t1~ g0vern~ent's bor~~·~~ f.,..nn the Bark R~n1l not exceed +he rate '3,+ wlicJ- j+ rn•'\<•s 103.Y-S tC ~he "0'111)'LniPS , Or ~le r1tP ~l1, ~'l.inr. the p1.rtt"UlA.r ro 't:'.1a11y " - 5 "' 0° - rer d' tures o ·· s p1'.·oject, 111hicriPvAr ,,~ ::ese. In t'1e i'i rst _:.ns.,_.q"'ce, t·1P to+.ql 1rnour.._ Jf the .hrt" 's lor1n for •JWPr 1i')111 hP. tLe srrA.llAst of the threP items mertinned in pRrAg~aoh Pirrt o~ our cable. Phe perc8'1t'1ees of t.ot><l experJctit ires "r. t 1e rPspectivP projPcts whir', wnr1ld form tlJB h<i!':lis for the B·:n1¥ 1 .... lo,,n w11:!.i vanr ':l.mcr,7 t>-ie di-t~fereYJ.t projects.

•

-3-

17. 1-" r.o? <•

of ,.,uh<>. ·i· ry r i 11 to ~r.cept +he re,...

pc• ve r !omr ry "' pr 1o r. apreel"' 11 4· i. +-o

n-1 co•l lrn ;-r;e

'.) tt::: · tors, j-' "'o 'Tl [) .; j sr pos::--.:ble--h•nce "l.s ""lo"+ 'lA the -;i,rryp1_;'1E rt l l •1 ve ' ir. Lh,., ri 1 u. errtP.r1t.

f Lhe I"( q .

'"U ~ i ,.. r> T' ~ n , be satisf~ctory tote 3ank .

Wt::>,

"8 . ... n na.ratr nh 3 or u'le 'lr8.f Subc:,·· ,.·qry Loan Agre r1ent. it ·y be p ·eferable, if' y01 rtve no ol:i~ecHor. o de::.ete the words betwe .'"' bra k ts . Tne provis·on is coverei iri tl1p le+tec f'r'l'"'l the ··niAtry o Fi'1 he powe co'"'lp nies. Appqrent y + ansla+-;on into :)a iRP of "due

f iciency" has ri rathPr l•1r ic o·rn co rot<i ion, SO'II w'rta'" 'llon rioi11R' ,you Boy 3 out dE'Pd ore l y. A1 t1-ou.rr1 he Subsidi ry 1011 t ill b in Dan·sh, he"'; e l8tiP.r c~ul 1' :n ~..,~ · h <Jrri ,...oull +h

the tran sla 1. · on d · ""ficu 1 y.

Jq, If disbursements <ire -:,de P1. +h 11 ~ jree 1 1pon Lhe ,...nr'l"encies t-o tP hs1'u,..seri . 'Ni.is

ferences in this respect qrd wouli be w:"lina to or EPU cnrrencies .

rec0m~P.nded, e oul~ h ve o Mini. try hqs no art·cu"nr preaccept 'lry +'-y,pe]y c rv r~ible

20 . Three copies of tl-iis letter are being sP.nt to .1ou, but ori: one t;or,y o: the SulJsidi.ary Lo·n Agreement A.rid draft 1ettE.:r from the inistry of Fin'lnce . fill vou uleR~e h~ve copies of the lat er two docu~A ts made for t1 irterested part·es? Norman Jones may h~ve com~e" bcu+ 'he p-ooosed dis urse er

S · r 'u rely y > 1 l"S,

roce ure /

;,

' b1•ie1 lrl"or+

c . P. ci.- ri 8' i ;ir li'inne

tL .. Vir ~ rsey

'.::nC' osur A - i+~ ~on~ 1 0 ~ r. T ~~unn

DRAFT SUBJECT TO CHANGE October 6 , 1958

SUBSIDIARY LOAN AGREEMENT

AGREEMENT dated , 1 58, between the Ministry of Fi nance and ------( t he "Enterprise").

Interna tional Bank for Reconstruction and Deve lopment ~the "World Bank")

has ageeed to grant a loan (the "Wo rld Bank Loan") to the Kingdom of Denmark

of an amount in va rious currencies equivalent to United States dollars,

under a loan agreement (the "World Bank Loan Agreement") dated ____ , 1958,

between the Kingdom of Denmark and the World Bank . A copy of the World Bank

Loan Agreement , together with Loan Regulat i ons No . 3 of the World Bank, dated

June 15 , 1956, has been furnished to t he Ente rprise . The proceeds of the World

Bank Loan are to be applied to carrying out projects described in Schedule 2

to the World Bank Loan Agreement , and the project described in paragraph ___ _

of such Schedule ( t he "Project") is to be carried out by the Ente r pri se .

The Mini stry of Finance has agreed to :rJU(lend to t he En t e r pr ise i n Danish

kroner tk2xx~±Ixiwl'J.txm~ a portion of t he . money s itiiiixiixiii~iix.iilm~iferprise

iixiitil~jiiki~mtii~iiit , on the following terms and conditions:

1 . (Terms and conditions of lo an to be inserted . The fol l owing i s merely

illustrative.) The Mi nis try of Finance hereby agrees to lend to the Enterprise

Danish Itroner, to be disbursed to the Enterprise as follows:

DKr on ' 1959 DKr on , 1960 DKr on ' 1961 DKr on ' 1962

The moan shall bear interest at the rate of % per annum , payable on the

amount of the loan outstanding from time to time . Payments of principal and

i nteres t shall be made on~-----~ in each year . The loan shall be re paid

in twenty equal annual instalments of principal, the first such i nstalment being

due on -----' 19 __ •

Draft Subsiui~ry Loan Agreement

-2-

2. The Enterprise agrees to take all action and furnish all documents and

informat i on which the Ministry of Finance or the World Bank may reasonably reques t

in order to enable the Kingdom of Denmark to perform its obligations under the

World Bank loan Agreement and to withdraw the proceeds of the World Bank Loan.

3. The Enterprise shall apply the proceeds of the loan exclusively to

expenditures on the Projec t . The Enterprise agrees to Lcontinue ti]··car~y out

the Project lwith due diligency and efficiency and in conformity with sound

engineering practice~ and to continue to operate its properties and maintain

its financial position in accordance with sound business and public utility

practices .

4. If the right of the Kingdom of Denmark under the World Bank Loan Agreement

to make withdrawals from the Loan Account with the World Bank shall not have

become effective, or if it shall have been suspended or terminated, regardless

of the reason therefor, then the loan to the Enterprise by the Ministry of

Finance shall likewise and simultaneously~. cease to be effective or be suspended

for a like period, or terminated as the case may be.

5. The obligations of the Enterprise under paragraphs 2 and 3 hereof

shall continue in force as long as the orld Bank Loan Agreement shall continue

in force, regardless of whether the loan to the Enterprise hereunder shall be

outstanding.

6. If the Enterprise shall be in default for a period of more than 14 days

in the payment of principal or interest on the loan, or if it shall fail to carry

out any of its other obligations under this agreement, or if it shall become

bankrupt or be dissolved, voluntarily or involuntarily, or shall cease to produce

and sell power, then upon request of the Ministry of Finance, the Enterprise shall

i mmedi a t ely pay in ful l the ent i re unpaid amount of t he loan.

Draft - Letter from Ministry of Finance to Power Enterprises Subje c t to Change October 6, 1958

(Name of Enterprise) (Addres)

Gentlemen:

Certain obligations which will be contained in the Loan Agreement to be

entered into between the Kingdom of Denmark and the Internat i onal Bank for

Reconstruction and Development can be carried out only with the cooperation of

the electric power enterprises which are to construct and operate the projects

to be described in the agreement. We have therefore included in the draft

Subsidiary Loan Agreement to be signed by the Ministry of Finance and (name

of Enterprise) provision whereby y ou agree to take action and furnish documents

which may be required. The principal types of action, documents and informa

tion which will be requested from you in respect of the Loan Agreement with

the Bank are the following:

1. The Enterprise is to carry out the Project described in paragraph

of Schedule 2 to the Bank's Loan Agreement with due diligence and

efficiency and in accordance with sound engineering practices .

2. The Enterprise is to furnish to the Bank the plans and specifications

for the Project and any material modifications thereof, i n such detail

as the Bank shall reasonably request.

3. The Enterprise is to maintain kmmk records adequate to show the

applicat i on of the proceeds of the loan provided for in the Subsidiary

Loan Agreement, to record the progress of the Project (including the

cost thereof) and to reflect in accordance with consistently maintained

sound accounting practices the operations and financial condition of

the Enterprise; is to enable the Bank's representatives to inspect

t he Proj ect, t he prope rti es of the Enterprise and any relevant records

and documents ; and i s t o f urnish , or cause to be furnished, to the

Bank al l such i nf ormation a s t he Bank shall reasonably request concerning

Draft letter

- 2-

the expenditure of the proceeds of the loan from the Ministry of Finance,

the Project and the operations and financial condition of the Enterprise .

4. We understand that the principal types of information and documents

which will be required i~IMiiiii±!ijiiiitt£~dt~ial of the proceeds of

the Bank 's loan and to enable the Bank to follow progress of the Projec t

are the followings

(a) The Bank would like to be advi sed of contracts of substantial

size which have been or are to be entered into directly with

foreign suppliers in foreign currencies. If the Bank so requests,

copies of the countracts should be furnished to the Bank, together

with invoices, receipted bills or si ·~ ilar documents showing payment s

made under the contracts.

(b) Quarterly reports, certified by an appropriate officer of

the Enterprise, shouchxi be submitted to the Ministry of Finance

for transmission to the Bank, showing the total expenditures

on the Project during the reporting period and showing the total

amount of the loan from the Ministry of Finance to the Enterprise

which has been or is being drawn down as of the reporting date .

(c) Brief quarterly reports should be sent directly to the Bank

showing the status of physical progress on the Project.

(d) Copies of annual reports m1xtkaxEmiar~riz• and of annual financial

statements of the Ente rprise should be sent to the Bank.

Very truly yours,

~'lRM No. 26 { 5- 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


.,

INCOMING WIRE


TO: INTERN\TIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

ACTION COPY TO MR.1.J!:J.tl:UNE MR ,NURICK

INFORMATION COPY TO TECH . OP

Decoded By

FHOM:

KOEBENBAVN

TEXT:

SIX FOR LEJEUNE NURICK SPOTTSWOOD FIRST DISCUSSIONS WITH POWER COMPANIES -INDICATE USUAL BUSINESS .PRACTICE TO PIACE AI.MOST ALL CONTRACTS WITH DANISH

, REPRESENTATIVES FOREIGN SUPPLIERS ~ Dtt WISH BE~NTATIVJ!:S FQBEIGN

SH~S ITT ID.ANISH ~KRONER EQUIVALENT CURRENCY COUNTRY OF 01HGIN . TREY

IJ.'HEREFORE DO NOT HAVE FOREIGN INVOICES AND LOCAL IN'TERMEDIAP.IES INVOICES i---------

NOT Riw:lILY AVAILABLE POWER COMPANIES OR GOVERNMENT SINCE NO IMPORT LICENSES

REQUIRE$ , COMPETITION KEEN AMONG LOCAL REPRESENTATIVES SUPPLIERS A.Tiffi OUR

INVESTIGATION INDICATES COSTS TO COMPANIES REMARKABLY LCM. FOR.lUGN EXCHANGE

RISK OF COMPANIES LIMITED TO DELIVERY TIME FOR EQUIPMENT SINCE ALL PAYMENTS <.. t__ ...,~~ .!l tf l'r+JY /t,l • .,.._, •t vUJrtJU., El•'-':,"';, ...,5.

ARE MADE IMMEDIATELY WHEN DUE . :WNG 1'KRM OBLIGATIONSZ TO DANISH LENDERS.

IN THESE CIRClJMSTANCES WE RECOMMEND FOLLOWING ARRANGEMENTS FOR BANK LOAN :

LOAN AMOUNT TO BE BASED ON AGGREGATE OF SMALLEST OF l:i'OLLOWIWG ALPHA AMOUNT

~ WHICH INDIVIDUAL COMPANIES WITH TO BORROW BETA ESTIMATF,D FOREIGN EXCHA.NGE ~

COMPONENTS OF INDIVIDUAL PROJECTS ~ AMOUNT WHICH WE DETERMINE COMPANIES NEED

TO BORROW ON BASIS ESTD1ATES THEIR RETAINED EARNINGS . SECOND ALSO HECOMMEND:¢.lj

WITEDRAWAL PROOEDURES BY GOVERNMENT BE SIMILAR NORMAL LOCAL EXPENDITURE

PROCEDURES NAMELY ON BASIS PERCENTAGES TOTAL EXPENDITURES ON RESPECTIVE

PROJECTS SUPPORTED BY CERTIFICATIONS FROM COMPANIES BUT AMOUNT .ADVANCED TO TO

GOVERNMENT IN NO EVENT TO BE GREATER THAH COUNTERPART AMOll"N'r OF LOAN THKRr~ORE

OR SIMULTANEOUSLY ADVANCED BY GOVERNMENT TO REPOR'l1IliG COMPANY , THIRD IF -RECOMMENDED PROCEDURES ACCEPr.A.BLE TO BANK SUBSIDIARY LOAN AGREEMENTS COULD

ORIGINAL

FORM No . 26 ( 5. 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIRE

DATE OF WIRE: ROUTING

TO:

FROM:

ACTION COPY TO

INFORMATION COPY TO

Decoded By

TEXT:

- 2 -

BE SIMPLIFIED BY REMOVAL PROVISIONS RELATING SPECIFIC GOODS AND

IN THAT FORM WOULD BE ACCEP.rABLE ALL COMPANIES . FOURTH IN VIEW ----ABOVE FACTS AND ABILITY COMPANIES TO BORROW LOO.ALLY NOW AT ABCUT

FIVE AND HALF PERCENT GOVERNMENT PROPOSAL NOT TO PASS ON FOREIGN

EXCHANGE RISK AND TO RELEND AT DANISH MARKET RATE SEEMS REASONABLE .

FINANCIAL POSITION AND PERCENTAGE RETAINED EARNINGS OF COMPANIES

GOOD AND REASONS FOR GIVING MARKET INTEREST RATE AND NO EXCHANGE

RISK HAVE NO ELEMENT SUBS!DY. FIFTH PIEASE ADVISE BANKS VIEWS .

DISAPPROVAL DANISH MARKET HlTEREST RATE WOULD .RLIMINATE ALL POWER

PROJECTS

LEFORT FINNE MORSEY

ORIGINAL

-' /

TELEP HON E EXECUTIVE 3- 6 3 6 0

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT 1818 H STREET,N.W.

WASHINGTON 25, D, C.

October 3 , 19 58

Dear Raymond:

CA B L E ADDRESS-INT BAFRAD

Let me amplify my cables on Denmark. We got off to a somewhat crooked start because whereas the government proposed a power loan based on imports of equipment - about $20 million worth including material to be worked up in Denmark - the companies themselves, for the most pa.rt municipal owned, either have large retained earnings and little need to borrow or else have access to cheaper funds locally. As an additional complication, disbursements of a Bank loan to the government against imports of power equipment would bear no particular relationship to the government's transfer of funds to the power companies, which are normally allocated in annual tranches; under some circumstances the government could collect from the Bank more than it would be paying over to the companies.

I felt strongly that we should start with the intention of making a straightforward project loan and put the onus on the Danes to show good cause why we should do otherwise. I therefore suggested to Gabriel that he treat possible disbursement techniques as a secondary question for the moment and concentrate on the capital needs of the power companies .

This line of attack showed that we could possibly justify loans on the basis of a genuine need for funds for up to $8 to $1.0 million. Even to do that, however, would require that we authorize the government to relend the proceeds at the going market rate at the time of drawdown, since to do otherwise would be to penalize companies receiving Bank fundst The government would bear the exchange risk for the same reason. Since this might stand in the way of even an $8 to $10 million loan, we asked for your views in Sommers' cable of September 25.

We are still le.rt with the major question as to whether an $8 to $10 million loan would be large enough to sup}X)rt a joint operation. We do not know form.ally how much the government wants - it seems to be $35 million in all - or how much the market might be prepared to take. But if we felt obliged to make a larger loan, rather than to

- 2 -

make no loan at all we would face some unpalatable choices . We might lend against power equipment imports as the Danes request . As I have explained, that would be sheer window dressing . We might make a general purpose loan on the Norwegian or Australian pattern, which would cause all sorts of trouble with other people . We might explore the possibility of making a nonnal loan to the railways . In that case we would have to admit that the project itself had a number of unwelcome features . Even if we were prepared to accept the deficit we would have to face the fact that any action likely to improve the future position of the railways decisively, for example , closing uneconomic lines, would require parliamentary action and would therefore be dependent on a number of unpredictable political factors . Nevertheless, if forced to choose among these three, I would favor the last, finding it perhaps easier to envisage with a good conscience if the Bank turned out to be definitely the junior partner in a market issue .

The underwriters initially favored lending for the same project as the Bank. I have explained quite firmly that it is extremely unlikely that we could come up with any project in which there would be room for both of us . r would strongly favor keeping the Bank loan and the market issue separate, because if we get involved in a common project it would be much more difficult to dissuade the underwriters from requiring that the Bank loan be effective at the time of closing . People from K'llh;l., Loeb and Smith, Barney are due in Copenhagen on the 15th. r shall probably go to New York this week to see how their thoughts are shaping; they have been rather cagey up to now.

Mr. S. R. Cope Vigyan Bhavan P.O. No . 600 New Del hi, India

Yours sincerely,

IR/ 12

GOVERNMENT OP INDIA ./

OVERSEAS COMMUNICATIONS SERVICE \ s WP .. 1557 19000:r200 5-58

N ,,B.-.AU enguiriH regarding thsa ~elegram ahould h. made to th, Government 'l!elegraph Deptl, acoompanwd by tltN /ornt. ~ THE FIRST LINE OP' THIS TEtEGRAM OONTAJNS t · · -

~HE FOLLOWING PARTIOULARS 1N THE ORDER. N..4,MED. • t Prejla: Lettera and Number of Mesaagr.. Office of . O~igin ~otl!~~ Number of Word,. Date. Tims filed., and Official lnatruction ·

NEW DELHI at :-

P.'· 12 2o --- ... . DR 022

B 469/w ···ifz'4s ~ _ 1Ri4·9f-WN~K 267 c-r" /

fL,e9 '"))">

~o·

------ "A·;;.

L.T { APP COPE· - - - - -ii

-,.._..... __ - - .,,._ ~. ; D AF I MISSIO ' ADVISES . ~ - . .. -.:.:·.

. ~

l· AlTS TREASURY REA 6Y

_. R. E S E ~ V E CU S H I ON . 6 ~ l N S T---~ U T U R E E X P AN S I Or ~·· ..

;. - - _ __..r

L:DUSTRIAt SECT OR WHEREAS NI Et, S N - -~.. ·~ .,,.,. -- - .. - -- ~ " ~·· ;'""

~ ·-----PR I VA TE y U~RECONCI ED -

-.;; ...... -·· · . ~" ..

-ABROAD THIS YEA

... ,t-• - -J' - - - .• S 'f 0

l, 0 A_t ~ I , ~ I C U T B E C A U S E CO M P A ~ I E S . - .. . ... .... .

iNWARO CCT NBR

---·-~ ... - ---OST OF. ~U lDS RE U I RED ,•. -..... -·~ ~... . . ..

EVE 8 TO • > • - .... '· ,r-•• •

INITIALS lrIME fRECD

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iNWARD CCT NBR

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INITIALS

-

DR Ai DOH~ ,--= ~~ .

B A . { .- P R E P AR ED --= 4 ...,._, ..._

TIME R£CD

£ AG EED

ltDUSTRY

!'HEF<>~i"owiNa"i'.taT1<fuias ·iiim-oRDER NAlij;p. 1 Received at NEW DEL Prejlf& Letter• and Number of Meaaaf?ll: Office ~J · O~igsn. Number of Worda. Datil. Time ftletl, and Official Inatrucnon-ij any ·

iNWARD OCT NBR

--,ie. _r--

READY STOP

INITIALS TIME RECD

.,;o• • • r

STOP

THE FIRST LINE OF THIS TELEGRAM CONTAINS

ILHI 'J'BE FOLLOWING PARTICULARS 'JN THE ORDER NAM_Ep. Received at NEW DE at:-

PreJlu; Lettera and Number of Mesaage. Office of Origin.

Number of Word,. Date. Time filed,, and Official lnatrucrion-if any

iNWARD

OCT

NBR

\TIME RECD

...

INITIALS

to r , 9.58

r I

n .. r t. r . * The mission said the companies would not borrow f'rom the Bank if it meant paying the Bank ' s full rate, especially if local rates had fallen by the time they needed to draw the money.

• s. . Cope l B V n

• No . 600 e l .lh ·_, India

Michael L. Lejeune

..

FORM No. 75 INTERNATIONAL BANK FOR (5.58) RECONSTRUCTION AND DEVELOPMENT

Date ROUTING SLIP

ROOM NO.

100$

Action Note and File f-----1-----------+---+------------l

Appropriate Disposit ion Note an d Return Prepare Repl Per Our Conversation Re comm en da ti on Si nature To Handle

From

FORM No. 26 ( 5- 58) INTERNATIONAL BANK FOR RECONSTRU CTION AND DEVELOPMENT


INCOMING WIRE


TO:

FROM:

TEXT:


KOEBENHAVN

ACTION COPY TO

INFORMATION COPY TO

Decoded By

FIVE FOB LEJEUNE GOVERNMENT ASSUMES EXCHANGE RISK

LEFORT

ORIGINAL

/

lmd..Use Mission Report.

(Copy of handwritten letter to Mr. van Helden from Mr. Main)

No. 3

Copenhagen, Denmark Octooor 3, 1958

Dear Hank:

Thank yo~ for your cable about the unliklihood of Iran Government's views being in your hands early next week. I'll stick to the arrangement and shall be at the Doelan (.Amsterdam) on Wednesday night.

A.W. and I have sent you a field report which is also my back-to-the office report. I have had an interesting two days up the line. Yesterday I had an illuminating talk with Saxild and other Kampsax people about Iran.

Looking forward to seeing you next week,

Yours aye,

s/ Jim

TELEGRAMS

ANGLETERRE

GIRO 76<l60

C O P E N H A G E N

DENMARK

TELEPHONE

CENTRAL 911

TELEX 11877

To: }fr . H. van Helden

From: J . F . Main and Arthur Wubnig

Subject: Danish State Railways . .

COPY

MEMORANDUM

October 2, 1958

Progress Report

1. As reported in JFN1s letter of September 28 to Mr . Squire, the Railways and the Ministry of Finance were informed from the outset that unless the Railways' deficits could be corrected in short order, this might well preclude a Bank loan for the dieselization project. The Danes now understand that the ability of the Railways t o become self -supporting in the next few years is a sine qua non of any Bank lending .

2 . We have arranged for the Railways to prepare official estimates of their earning power upon completion of the dieselization project .which is being carried out concurrently with other cost reducing measures such as CTC, mechanization of track repairs and replacement of rail by truck service on light traffic lines . The operational, engineering, economic and accounting departments of the Railways are now making studies of the economies due to result from these measures. We expect the first results of these studies to be ready in a few days .

3. We believe that the Railways will be able to reduce costs and improve efficiency consi derably in the next few years . This will materially cut back the operating deficit, now about Kr . 50,000,000 a Y~ttt(equal to $7,000,000 annually) after depreciation but before interest on the/capira1 . The present operating deficit is somewhat less than 10 per cent of the operating revenue .

4. Despite the measures to reduce costs and improve efficiency now in progress, we consider it unlikely that the Railways can be turned into a profitable operation in sufficient time to warrant a loan for the dieselization project .

5. In order to q:>erate profitably, basic policy action must be taken in fields which require parliamentary approval. In particular, the Railways must be given a much freer hand than they now have to abandon branch lines and reduce services on branch lines, to fix passenger tariffs and freight rates more realistically, and to trim down redundant labor more freely . However, the Railways will be unable to obtain the powers they need without the enactment of appropriate laws to that end. This is bound to be a s l ow, laborious process .

6. Even if the way were now clear for inunediate lending to a profitable railway operation, some other difficulties mi ght arise . The contracts which the Railways propose to make for the diesel-electricsin Sweden and for the dieselhydraulics in Germany will both be negotiated contracts without benefit of international competitive bidding as the Bank understands the idea . Although the Railways may be well justified in their proposed procurement, this could easily create difficulties within the Bank .

: gg

- 2 -

7. The basic problem of the Danish Railways is that the network was built before the motor age, so that much of it is now functionally obsolete . The Government recognizes this and has therefore set up a committee to coordinate transport investment as between roads and railways . We are in touch with this committ ee which is not likely to come up with useful recommendation for some time .

8. JFM has completed a brief inspection of a cross section of the Ra·lways' properties , oper ation and management . It is clear that the RaiJways are efficiently run, that the technical and administrative personnel is competent and that the modernization plans are well conceived and are being soundly executed.

9. It is also clear that the financial problems of the Railways are basically a matter of public policy outside the control of the railway management .

10 . JFM is leaving tomorrow while AW will remain here to complete the railway studies and to gather some needed data on roads, coastal shipping and ports .

11 . Please consider this memo as JF.t1 ' s back- to- the-office report as well as our joint progress report .

CO : Mr . Squire Mr . Lejeune

.MEMORANDUM

October 2, 1958

'Mr . H. van H~n ~ J . F . Mai~thur Wubni g

To:

FromJ:

Sub ject: Danish State Railways -- Progres s Report

1 . As reported in JFM' s letter of September 28 to Mr . Squire, the ailways and the Ministry of Finance were informed from the outset that unless the &_ailwats deficits could be corrected in short order, this might well preclude a Bank loan for the dieselization project . The Danes now understand that the ability of the ~ilways to become selfsupporting in the next few yeare is a sine qua non of any Bank lending .

2 . We have arranged for the Railways to i prepare official estimate.~ ~~!.. their earning power upon completion of the dieselization project~s is being carried out concurrently with other cost reducing measures such as CTC, mechanization of track repsirs and replacement of rails by truck service on light traffic lines. The operational, engineering, economic and accounting departments of the H:ailways are now making studies of the economies due to result from these measures . We expect the first results of these studies to be ready in a few days .

3. We believe that the ~ilways will be able to reduce costs and improve efficiency considerably in the next few years . This will materially cut back the operating deficit , now about Kr. 50,000,000 a year(equal to~~ ~7,000,000 annually) after deprfciation but before interest on the sM1sd:~'ht capital. The present operating deficit is ~m•±xiamx~zrx somewhat less than 10 pe r cent of the operating revenue.

4. fkH Despite the measures to reduce costs and i mprove efficiency now in progr ess, we consider it unlikely that the ~ilways can be turned into a profitable operation in sufficient time to warrant a loan for the dieselization project.

5. In order to operate profitably, basic policy action must b~t~ which require# parliamentary approval . In particular, the ~ailways must be given a much freer hand than they now have to abandon branch lines and reduce services on branch lines, to fix passenger tarrffs and fremght rates more realistically and to trim down redundant labor more freely . How~ ever, the railways1will be unable to obtain the powers they need without the enactment of appropriate laws to that end . This is bound to be a slow, laborious process.

6. Even if the way were now clear f;~ · immediate . lending to a profitable railway ops~ati-0n, some o her di~fi c~lties might arise . The · contracts

TELEPHONE E X E C UTIVE 3 · 6360

INTERNATIONAL FINANCE CORPORATION 1818 H STREET, N. W

WASHINGTON 25, D . C. C ABLE AOORESS-CORINTFIN

1 ,:, -2-

which the :Railway~ propose# to make for the dieselt3lectrics in i• Sweden and for the diesel hydraulics in Germany will both be negotiated contracts without benefit of inter~ational competitive bidding as the Bank understands the i dea. Although the ~ilways may be well justified in their proposed procurement, this could easily llZ.X create difficulties within the Bank ,

7. The basic problem of the Danish railways is tha! ,Jhe, _n~.tY.9rk ±s was built before the motor age, so that much of it is no~oiete:T The government recognizes this and has therefore set up a committee to coordinate transport investment as between roads and ra ilways . We are in touc h with this c ommittee which is not likely to come up with useful re commendations for some time .

8 . JF.M has comple ted a brief inspection of a cross section of the railway~s propert ies, operation and management. It is clear that the rail ays are efficiently run, that the technical and administrati~e personnel is competent and that the modernization plans are well conceived and are being soundly executed .

9. It is also clear that the financial problems of the ~ilways are basically a matter of public pol icy outside the control of the railway management .

IQ . JFM is l eaving tomorrow while AW will remain here to complete the railway studies and to gather some needed data on raods, costal shipping snd ports .

11 . Please consi der t his memo as JFM 1 s back-to-the-office report as well as our joint progress report .

PS Please have copi es made and c i rculate to Squire and Lejeune~

TELEPHONE EXECUTIVE 3 · 6300

INTERNATIONAL FINANCE CORPORATION 1818 H STREET, N . W.

WASHINGTON 25, D . C .

t

CABLE ADORESS- COAINTF'IN



INCOMING WIBB

DATE OF WIRE: OCTOBER 3, l.958 ROUTING

TO:

FROM:

TEXT:

INTERNATIC!QJ. .BA?7K FOR RECONSTRUCTION A!ID DEVELOPM!n1T

KCEB:IMAVJJ

DUPLICATE

ACTION COPY TO

INFORMATION COPY TO

Decoded By

K JO,

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ll'l!'IA'rlff'i t r I 11

tober , 1958

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of 15, 1958. I have info our

of arri 1 .

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ch el •• Lejeune t ctnr o ... o r tiona

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FORM No. 27 ( 9- 57)


OUTGOING WIRE


TO: MR. G. LE.FORT HOTEL ANGLETERRE COPENHAGEN

COUNTRY ( DENMARK

Cable No. S-HAVE YOU RAISED QUESTION WHO BEARS EXCHANGE RISK

LF,JEUNE

AUTHORIZED BY:

NAME:

DEPT:

M. L. Lejeune Operations - E.A. & A.

SIGNATURE: ,...~~~-----(Signature of individual authorized to approve cable).

cc : Mr. Nurick

J liams :wmf'






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2.


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address and text. •




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Greece


* Lebanon Nicaragua Pakistan Panama

* Peru * Syria


* In these countries the letter telegram rate is lower than IBF government rate and should be used for messages when immediate transmission is not required.

Code messages are transmitted at full rate (or IBF Govt.) speed and cost. This rate:... should be used only for confidential messages to staff members having a code wi.itS them. C ---1

Day letters are delivered during the day of transmission and should be used only f&I,.;) messages in the United States and to Mexico and Canada. There is a mimmum charge for 50 words in text.

To be used only for messages to the New York Office, United commercial firms. For information, call Cable Post (Ext. 3008).

N . o d c,n auons, an certain ~ .~

=:JZ Use only last name of addressee and cable address whenever possible. The Bank cable address "ilOBAFRAD""!s registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. r.[he International Finance Coiporation cable address "CORINTFIN" is re,gistered in New York, Paris and London. ~ e name of the country of destination must always be added. (No charge 1s made for the name of a country.) o:)

3. Text



Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups, e.g. A1tma1l, Newyork, enduse.

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Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:4 5 p.m. on working days. Special arrangements should be made for the despatch of of cables outside of these hours.


FORM No , 27 ( 5- 58)

INTERNATIONA L BANK FOR RECON STRUCTION AN D DEVELOPMENT

IN TERNATIONAL FIN AN CE CORPORATION

OUTGOING WIBB CLASS OF SER VICE: LT DATE: OCTOBER 2, 1958

TO: KNAPP, COPE, AI.DEWER.EID FUND-BANK NEtr DELHI

COUNTRY ( INDIA

TEXT:

Cable No. 3

(page 1 of 2)

DANISH MISSION ADVISF.s Tru:ASURY REALLY WANTS RESIBVE CUSHION AGAINS'r FUTURE EXPANSION

MAINLY INDUSTRIAL SECTOR WHEREAS NIELSEN BELIEVED STILL PRIVATELY UNRECONCILED BORRCWING

ABROAD THIS YE.AR STOP NORMAL P<MER LOAN DIFFICULT BECAIBE CCJ.WANIES COULD FIND MOST OF

FUNDS REQUIRED CHl!:APIB !/XAJ.ll STOP EVEN 8 TO 10 MILLION DOLLAR PCJ,IER LOAN POSSIBLE

ONLY IF WE AGREED GOVERNMENT BEAR EXCHANGE RISK AND RELEND PROCEEDS AT GODJG RATE TIME

OF DRAWDOAN AS IN DAMODAR LOANS STOP THAT -W OOLD MEAN ABOUr 5 ONE HALF PERCENT N<M AND

POSSIBLY .LaoJER LATER STOP RAIIMAY IROJECT POSSIBLE IF BANK PREPARED SWALLOil PRESENT

DEFICIT Bur ANY MAJOH. STEP F.sS1!:NTIAL FUNDAMENTAL IMP'ROVD1ENT FOB. EXAMPIE CLOSING UNECONOMIC

LIN.l!S WOULD REQUIRE PROBLEMATICAL PARLIAMENTARY ACTION STO.P INDUSTRIAL CREDIT INSTITtr.rION

AS INTER.MlIDIARY BANK LOAN FOR INDUS'l'RY APPAR.BNTLY NOT YET READY STOP POSSIBLE SIZE

MARKET ISSUE NOT KNCMN BUT DANISH PRESS MENTIONS 35 MILLION TOTAL OPERATION STOP

UNDER'WltITERS INITIALLY FAVORED LENDING FOR SAME PROJECT AS BANK Bur HAVE INFORMED THEM

SUITABIE PROJECT LARGE ENOUGH ACCCMMODATE BOTH EXTREMELY UNLIKELY STOP EVEN IF WE AGREED

REI.ENDING AT GOING INTEREST RATE 10 MILLION PQ.'lli.a LOAN PROBABLY ·roo SMALL STOP OULU

THEN FACE FOLI.Ol.ING CHOICES STOP FIRST INDOdDRESS LARGER PCMER LOAN BASED ON EQUIJ:l:ME:NT

AUTHORIZED BY:

NAME:

DEPT:

SIGNATURE: ""t~::-:-:i~=--=:.--.::-:;-;-:~-:-:-.-:-~ ~--;--;-------:-:--.-( Sign a tu re of individual author i zed to approve cable).






I. Class of Service


Letter Telegram Letter telegrams are normally delivered the morning after day of despatch. The cost is half the cost of full rate messages w ith II minimum charge for 22 words including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address

Full rate messages are normally transmitted and delivered immediately. There is a minimum charge for 5 words, including address and text. t

This is a preferential rate extended by some member countries. Messages are sent at full rate speed and at about half the cost. This rate normally should be used whenever available. It is at present available for the following countries :






To be used only for messages to the NewYork Office, United Nations,andcertain commercial firms. For information, call Cable Post (Ext. 3008).


3. Text




4. Signature


5. Authorization


Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cableserviceisopen from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements s uuld be made for the despatch of cables outside of these hours.

ANY QUESTIONS REGARDING INCOMING AND OUTGOING WIRES SHOULD BE REFERRED TO THE CABLE POST, EXT. 3008,

FORM No . 27 ( 9. 57)


OUTGO I NG WIBB

CLASS OF SERVICE: DATE:

TO: (page 2 of 2)

COUNTRY (

fEXT:

Cable No .

IMPORTS GREATER THAN PGJER COMPANIES CAPITAL NEEDS SECOND CONSIDER UNPROMISING RAIIWAY

PROJECT THREE GENERAL IMPORT Lo.AN AUSTRAIJ:A NORWAY PATTERN FOUR DO NOTIIING PRESENT TIME

STOP 1181 F BELIEVE BANK MIGHT PREFER RAIWAY TO OTHER THREE AND PRESUME IT WOULD BE

MORE PALATABLE IF BANK TURNS OUT TO BE DEFINITELY JUNIOR PARTNER MARKE.r ISSUE STOP

NOT READY MAKE RECOMMENDATION BUT GRATEFUL YOUR vn.·ws PARTICULARLY ABOUT WdER REI.ENDING

RATES

SOMMERS

AUTHORIZED BY:

NAME: ML Lejeune

DEPT: Operations - EAA

SIGNATURE: ---,,=-:---,---·-c--.,--~,------ ------( Sign a tu re of individual authorized to approve cable).

JHWilliams:MLLejeune:PJSquire:amg O RIG IN AL (Fi 1 e Co PY)





1. Class of Service



Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address







Greece

Guatemala Hone.Juras Jordan


• Peru • Syria



Code messages are transmitted at full rate (or IBF Govt.) speed and cost. This rate should be used only for confidential messages to staff members having a code· with them.

Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a min1mum charge for 50 words in text.

To be used only for messages to the New York Office, United Nations, and ce;:~~ ·• commercial firms. For information, call Cable Post (Ext. 3008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text



Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-wore! groups, e.g. Atrmall, Newyork, enduse.

4. Signature


5. Authorization




FORM No, 27 ( s. 58)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMEN T

INTERNAT IONAL F INAN CE CORPORATION

OUTGOING WIBB RCA


TO:

COUNTRY (

TEXT:

Cable No.

AJJTHORIZED BY:

G. lEFORT HOTEL ANGLETERRE COPENHA~

DENMARK

4

v (_

REFERENCE TODAYS CONVERSATION FIRST POSSIBILITY OF LadERING PROJECT

STANDARDS IF BANK ONLY JUNIOR PA1i'1'NER WAS FOR YOUR INFORMATION OOLY

AND SHOULD NOT BE RAISED WI 'rH GOVERNMENT STOP IF PROPOSED PROJEC'.1.'S JUSTIFICATION

POOR/FOR LENDING FOR THEM OR ALTER ATIVELY ~THOUT THEM MUST REST

EVEN MCRE HEAVILY 00 GENERAL CASE FOR FOREIGN BORRCWING NCW STOP

COMBINATION OF POOR PROJECTS AND 'WEAK GENERAL CASE UNLIKELY BE

ACCEPI'ABLE

NAME: JHWilli For Use bv Archives Division

DEPT:

SIGNATURE: -rsTi,iiih~tf~~~~~ ~ nFitnrffi'~'ra;ifel~

cc: M~fir~-.. Nurick, Skl.llings OHlU1NAL (File Copy)




l. Class of Service



Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address

Full rate messages are normally transmitted and delivered immediately. There is a minimum charge for 5 words, including address and text. •








Use only last name of addressee and cable address whenever possible . The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New Delhi, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text




4. Signature


5. Authorization


Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements al ot.ld be made for the despatch of cables outside of these hours.


r

FORM No . 57 ( s. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM TO: Files DATE: October l, 1958

FROM : M. L. Lejeune

SUBJECT: Denmark

V A~er receiving telegram No. 2 from the mission in Demnark and a~er

discussion of the problems of a loan for power development there, I called Mr. John Stevenson of Sullivcn and Cromwell . I asked him how seriously the bankers wished the proceeds of the public issue to be used for a project for which the Bank itself was lending. I told him that our initial informat·on was that there might not be room for both the Bank's money and the market ' s money in the same project.

Mr, .Stevenson said that, by preference, the market would wish to be associated with the same project as the Bank but that if this were not possible they could consider having their money used for some other project or for general purposes. He would, however, like to discuss this question with Mr. Schiff of Kuhn, Loeb and Mr. Schanen of Smith, Barney.

I then raised with Mr. Stevenson the question of simultaneous effectiveness of the Bank ' s loan and the public issue. I pointed out how difficult this might be if the market were ready to go but there were matters still outstanding which the Danes had to do to make our loan effective, and I said that, as a general matter, we would prefer not to have the effectiveness of our loan so rigidly tied to the public issue as far as timing was concerned. ~.r. Stevenson replied that if the market money were being used for the same project as the Bank's he thought the bankers would want effectiveness to be simultaneous, but that clearly if the market's money were not to be used for the same projects as the Bank's there seemed little reason to require simultaneous effectiveness.

I then raised with Mr. Stevenson the question of the Bank's subscribing to part of the public issue and I referred to his conversation with Miss Morsey, which was recorded in her memorandum of September 22 . I said that the same question had come up on Austria and that we had decided that the Bank would not lend its portion of a joint operation by meais of subscribing to the public issue of bonds. We would, therefore, have to envisage a Bank loan made jointly with a market issue each being separate as to form.

On the other hand, there might be a question of a "standby" if the bankers wished the Bank to provide a "standby" for part of the public issue. In such case we "Were prepared to consider subscribing to publicly issued bonds up to the amount of our "standby". In these circumstances there would be three parts to the lending, i . e.:

(a) a Bank loan

(b) a public issue, which, in effect, consisted of two parts -(i) a part firmly underwritten and sold to the public by the bankers and (ii) a part for which the Bank stood by, which would be taken up by the Bank to the extent that other buyers would not be found .

- 2 -

Mr. Stevenson said he was glad to have this clarification.

Mr. Stevenson called me back on September 29. He said he had discussed the first matter with Mr . Schiff and Mr. Schanen. He said he understood that the Bank was not seeking to have a firm answer from the bankers at this point; it merely wished to know whether it needed to be precluded from considering an operation in which the Bank's loan and the proceeds of the issue were used for separate purposes . I agreed that this was so . He then said that we need not be so precluded, but that the bankers would like to address themselves to the question .fully at a time when we knew better what the situation was likely to be .

cc: Mr. Williams Mr. Skillings Mr. Lefort Mr . Nurick/Morsey

MI.Lejeune :wmf

KUHN , LOEB Sc CO.

~~$ceet q}~~Ats

S. R. Cope, Esq. Director of Operations Europe, Africa and Australasia International Bank for Reconstruction and Development 1818 H Street, N. W. Washington 25, D. C.

Re: Kingdom of Denmark

Dear S.irt

October 1, 1958

V With reference to our letter of September 16, 1958,

please be advised that representatives of our firm and Messrs. Smith, Barney & Co., together with Mr. John R. Stevenson of Messrs. Sullivan & Cromwell, counsel for the underwriters, will be in Copenhagen on the morning of Wednesday, October 15, 1958. Their arrival is planned for that date in order that they will be in Copenhagen before departure of your Bank's mission.

We have advised the Ministry of Finance of the Kingdom of these plans.

Very truly yours,

Dar G briel r

~ rou for y-our lot No . 2 of pt r 2.5 and

i

Sept r 30, 1.958

/ C bl

things r going and hav pas on your i , I upp:>so, rel etant to l t t Bank

·•--•anaury ha!t Chan e hi lo "" ta ...

Yours incerely,

!ch~ • uabriol L fort

Hotel n. J.etcrr c-,penha&;on J

cc: Mr. Skillings JJlW~:wmf

() \ 0

( ti

TELE GR.A.MS

ANGLETERRE

GIRO 76460

-- ~<---~ ~ . . ~~,

TELEPHONE

CENTRAL 9:5

TELEX 11877

TELEGRAMS ANGLETERR~ GIR 7 '460

TELElHfONE CEN'.CRA_L 9/i '.CE:t.'.Ex G877


RECONSTRUCTION AND DEVELOPMENT 1818 H STRE ET, N . W.

TELEPHONE EXECUTIVE 3 -6360 WASHINGTON 2 5 , D. C, CABLE ADDRESS-INTBAFRAD

Mr. Michael Lejeune Mr. Lester Nurick

Copenhagen, Denmark September 28, 1958

Dear Mike and Les: Letter No . 2

5. Th~_ railroad picture is still unclear. Arthur Wubm.ig and Jim u..... ..vui J 1-r,..,,.,t-t ,L ""'

Main :ha~ agt ~et finishea their examination; but prospects for a favorable i__ ...... t... '-" I,,, o,,...

outcome were notY'"im.proved by the fact that the General }'lana.2er and ..e:3:±- depa,:;t-Owt- Q.""' \ ... ""1-tA..._u.."'" .. ~ i.~-~Q) t..tJ I t.4...t ... (..£.

ment heads of the railroad administration left for a month's stayAin Spain

the day before Main arrived here. They left behind only a diesel man,

apparently on ±JI the assumption that since the project is dieselization,

he should be able to answer everything.

6. Monday there is• to be an economic discussion, and we intend to

put the question, "Why do you (i.e. Denmark) want to borrow'?" We certainly

seem to be faeed with the case of the reluctant borrowers. At the moment

it looks as tho'Sh the Ministry of Finance wants to borrow, but they almost

stand alone. til The power companies apparently don't, and the people in

the Ministry seem deathly afraid that if we ask almost anything at all of

the power companies, u they will simply say, "Goodbye 9 We don't need or

want your loan anyhow." The power companies {most of which are municipalities)

can at~resent borrow ink the Danish market at rates which are lower than

those under an IBRD loan. Hence the government will re-lend at the market

rate; if the IBRD rate were lower the government might be in a better position

As things stand, the companies

government obtain an IBRD loan.

to cajole the companies into cooperating.

have no part~cular incentive to help the

As a result t, governent is reluctant to ask xk the companies to agree

formally that they will do mubh of anything beyond what they would have to

do if they borrowed in the local market. Apparently in that case they

wouldn(t have to do anything except, essentially, agree to repay.

7o For purposes of discussion, we prepared a draft of subsidiary

loan agreement which we gave to the Ministry people together with copies of

some outstanding IBRD loan agreements for power loans. A copy is enclosed.

The Ministry people say If. that if we give anything like this to the power

Letter No. 2 p. 2

companies, ~ the companies wil l refuse ..lJ to have anything to do with an IBRD

loan. It is possible, of course, that this might not~e so; we have not had

discussions wihh Ji the companies directly. A meeting is now scheduled for Th da ft ,L._ /kf , •. ,~J l..11..., ••• }- ye.I /..u.,l ... ~ l.,..J......,.,, ... ..._, vi t'/-. aw ... ....,,1-l.. 1- ...... U"'-r"-""--"'LI

urs y a ernoon. , 1 .,.. , . n k' 1 t t.\.Aru"'-,- I J'C.. /~4.."\., J UJ \,,(.A,.,\«.~, J _

8. The Ministry people say that the Government is quite prepared to

undertake all these obligations as between themselves and the Bank. But they

want to take their chances of being able to persuade the companies to cooperate

voluntarily; and they do not want to ask the companies to enter int o unfamiliar

looking agreements. Hence ~ they have submitted an alternative draft of

agreement with im the companies. A copy is enclosed. It is their contention

that our differences are merely procedural. We feel that in fact they are

substantive, id; although we recognize that probably if Denmark undertook the

obligations in the loan agreement with the Bank, it would be able to persuade

the companies to cooperate, whether or not t hey had legally agreed beforehand

to do soo We suggested as an alternative possibility that the government

might in its agreements with the companies merely obtain general agreement

that the companies would do what was KM necessary to enable the government

to perform. its obligations under the !~R£h!8fulrAifii!~§tj. 0 i~e¥!figaffi.ict~~;·)

the companies would write letters to the Bank stating in substance that

they would carry out the project, keep books and records, perm.it inspection,

etc., more or less as outl ined i n our draft of subsidiary loan agreement.

This, too, was unacceptable.

9. In most recent loans the Bank has t ried to have fairly close relation-

h · withd t 't lt . t b f. . ' Th TOD . t. f th s ips;an access o 1 s u ima e ene 1c1ar1es. e exa.:mina ion o e

power projett rs jJI has not yet been made, and there is of course the possibility

that fter that exam.inti.on we may want to require other difficult covenants.

Normal ly we would probably i nsist that the companies should agree to something

approaching•• our draft. If they were not prepared to do so, we would

break off negotaations. In the present case, however, k there is another

factor to be considered, a namely the market issue. If our requirements and IBRD therefQre made no loan at an causedthe power companies to pull ou~ or~our Loant, that presumaoiy wouia'

upset the market issue. How far do we want to go in trying to avoid that?

10. Essentially, what the government wants is that we should view the

power projeot as a project of the government to supply foreign exchange to

the power se"btor of the economy. Are we prepared if necessary to go that

far in order to tmixxxk engage in a joint operation with the market? We

Letter No. 2 p. 3

might be able* m to dress it up in th~,~an agreement to look like a norm.al

project loan, in lightof h the govermment's willingness to undertake obliga

tions on its own, as idd.icated above in paragraph 8. We should not, however,

expect a great deal at the mIJal beneficiary level. We Iiul should appreciate

your giving us some gildance; if possible, by cable before our meeting with

the power companies IKk next Thursday, October 2.

11. The Ministry would like to have about 15 copies of Loan Regulations

No. 3 for distribution among the companies and m to Parliament Will you

please send kthem to us at k the Hotel d'Angleterre.

Best

Gabriel Lefort vt.. ' . ~

Virginia Morsey

C 0

y

f

Ji I J .

6, 19

:

•

CCI

. b

• Bat on • SpottS"WO

Skillings

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A

FO RM No . 75 INTERNAT ION AL BAN K FOR (3-52 ) RECONSTRUCTION AND DEVELOPMENT

Date

R OUTING S LIP /o ,

ROOM NO.

Action Note and File Approva 1 Note and Return

Comment Prep,are Repl Fu 11 Report Previous Papers I nformation Recommendation

In it ia 1 Signature Remarks

From

THIS I S A SAMPLE FORM C .F A TYPE OF AORE I N A NO L TYPE Cw WORLD .BANK LOAN OPE BMENT WRICH MIGH BE IIPP T ICA.BLE MIGHT NOT BE APPLI CI\.BLE I N THE CA 'E • R J. I ! . , sr {B . THE PP(VISIONS IT I S POSS I BLE THAT IN CASE suet LOAr wiREO UE TO UIDlMLRK. s JILARLY

Draft Subject to change Sept. 25, 1958

' • GR\NTED OTHER RCVISICNS MIGHT BE EWIRJD

SUDSIDIARY LOAN AGREE~filNT

AGREE~U· T, date • 1958, bet een t he Trea ury an

(hereina fter called the Co npany) .

·nEREAS ,

1. Kingdom of Denmark. lhere1naft r called t he Ki n doin) h s entered

i to a Loan Agreement with Internut·o1 1 Bank for Reco struction and Develop-

nt (here ina fter cal l ed the Bank} dated , 1058 (hereir, fter cal led th

World Ban' Loan Agreement! providing for a loan to be used i carrying out

certain power projects described in Sehedule 2 the1~eof , one of •hich (her -

i nafter called t he Project) is to be carried ut by the Co ,pany;

2 . Copies of the orld BanK Loan Agreem nt and 01" Loan Regu l a tions

No. 3 referred to therein• h.ave been furnished to the Co .. p nya_;

3. The Treasury, acting on behalf of the Kingdom, h s ag:reed to lend

t o the Company in kroner amounts needed by the Company to enable it to

carry out the Project• j

4. The undersigned r presentatives of ~~~~~-' accord ing to the

byl ws of the Company a r c the authori zed repr scntativcs of t h Co1 ny;

Nm , THERE.FOR ·, t e parties hereto Iler by agrc: a s follows:

Aiit cle I

~hcrever used in this Subs i diary Loan Agree cnt, unless t h context

sh 11 other i e r .equire, the sev ral terms defined ia th 'orld Ban Loan

A~rcement n in the LoaP Regulut l ons {as so defined ) sh 11 hn v th

11 eanint_i;s th reil set forth, e). ce pt that in thi s Subsdiary Loan fgrce1. ent t e

ter1 1 orl d Bank Lo n shal l I ean the Loan provided for i n the \rnrld Bank Loan

Agre m nt and the term loan s hal l mean th loQn provi ed for in this Subs idiary

Loan A~~~ement •

Article II

{~~nifl:LittCflJBtltir~.,mder the World Bqnk: L be permi t t ed t o exceed amount s whi· h h d . · oan woul d not

. o a previously be 11 di b d or were simultaneously being disbursed t . . s urse, in kroner. ) ' 0 the beneficiary enterpris e

?

- 2 -

Article III

1 . The Company agrees to take all action and xx furnish all documents and

info ation which the Treasury may rea sonably request in order to enable

the Kingdo to perform it s obligations under the World Bank Loan Agreement

and to withdraw the proceeds of the World Bank Loan.

2 . The Company shall adv ise theTifil~'' from t i me to time of goods , supplies

and services which the Company wishes to obtain abroad for use in the Project ,

together with estimates of the cost thereof and a statement of the probable

source of supply. The Company shall furnish the x Treasury quarterly

during the period of construction of the Project ~k• with information as to any

changes in such n eds, estimates or probable sources of supply.

3. Except as the Treasury shall otherwise agree , the Company shall purchase

imported goods to be used in the Project on the basis of international com+

petit i ve bidding .

4 . The Company shall use rea sonable efforts to assure that payment for

goods , supplies and services which are to be financed by the ingdom out of

the proc eds of the World Bank Loan is made in the currencies of the countries

from which such goods are acquired.

5 . Promptly in relation to the delivery of goods (or in the case of

advance and progress payments to suµ liers, in relation to such payments) which

are to be financed o~t of the proceeds of the ,orld Bank Loan, the Company shall

furnish to the Treasury such information and documents as may be requ ired to

enable the Kingdom to ke application for withdrawal of funds 1x111D1x:tka

under the lorld Bank Loan.

Art icle IV

1. The Company shall carry out the Project with due diligence and

efficiency and in conformity with sound engineering standards and shall

ma intain its financial position in accordance with sound business and public

utility practices.

2 . The Company shall apply the proceeds of the loan e xclusively to

expenditures on the Projectx.

3 . The Cot pany shall furnish to the Dank and the Treasury, pro,optly

upon their preparatLon, the plans and specifications for the Project and any

material modifications subsequently made therein, in such detail as the

Bank and the Treasury shall from time to time request.

Article V

1. Th Co pany shall intain records a equate to sho th applic,tion

of th proc ed of th loan, to identify th i ported good financed out of

th prvceeds of the orld Dt:1nk Loan, to disllosc th us thereof in the Pro

j ct, tor cord the lat progr ss of the Proj ct (inclu ing th cot thereof)

nd tor !l ct in accord nee ith consistently lilai1 tined ound acco nting

practic th :ti:Kaari op rations and fin ncial conditi n of the Co1 a.y ;

s all enabl th orld Thnk- s re entatives to insp ct

the Proj~ct , t Co pany ' s propcrti , the i µorted oods, and any r levant

record ad documents; and shall furnish, or o us to be f nis o th

orld Bonk all uch infor ation as th \orld an.:

t cone rnin th xµenditur of the

i.ported goods, and th op rations

shall r aso bly r qu

proceed of th lo n , th roj ct, h

ad fin nci 1 condition of the Company.

2. 'l'he \'orld Bani<., the Tre aur and t c Compciny shall cooperate fully

to ensure that t e (poses of the loan and the orld D ~ Loan ,ill be

cco l is. d. To that end, each of t1 m hall furnish to the other all

such infor 1ation a s any one of them sh 11 rcason· bly requ at it1 regard

to the general status oft loan und t Loan.

3 . The \ 'orld Bank, th re sury and t e Company shall from time to

tim xchange views through their r prosentative ith r ard t matters ~

r l a t in to the iurposes of th loan nd th \\orld D nu Lonn n the other

m tt r covered by this Subs.diary Loan ~rec, nt. The Co , pan shall

ro, 1 t ly inform the 'orld Dai nd t e re sury o f ny condi t .i. on ,vhich

inter! rs ith , or threat ns to inter£ r ,ith , the accomplish! ent of the

purpos of tbe lean or th perfo ance by the Company of its obligat.1ons

under thi ubs idiary Loan Ar ment.

Article VI

Th Con ny shall insure or caus to b insured t i i ported ood

1ich ar to be financed out of the proceeds oft te \orld Ban Loan against

ris incident tot eir purcha e and i,portation. Such insura ce shall be

consistent ith sound com ercial practice and shall be p yabl in dollar or

in th currency in which th cost of the goods shall be yable.

Article VII

(. The Co11 any shall at all ti. es take nll stops n cess ry to maintain

Article VIII

If the Kingdom's right under the World B~nk Loan A"Teement to make

ithdra als from the Loan Account with the orld Bank shall have been

suspended or terminated, regardless of the re~son therefor, then the

lo~n to the Co~pany by the Treasury shall likewise and simult ne usly be

suspended for a like period, or terminat ed as the case may be.

•

- 4 -

its corporate existence and rig1t to carry on operat ions and shall ta·e all

steps necessary to ma intain and renew all rights, po ers, privileges and

franchises which are necessary or useful in the conduct of its business.

2 . The Company shall carry on its operations and conduct its affairs in

a ccordance, it sound business and financial practices and shall operate, int ain ,

rene and repair its plants, machinery , equipment and property as r quired in

accordance, ith sound engineering pract ices .

t h is

Article VIII

be inctud8,(l concerning su pension ~

Ban ~Lo·n is sus -t{nded or ,

Article IX

cancellation of

If any of the events specified below shall occur and be continuing,

then at any subsequent time during the continuance thereof, the Treasury,

at it option, may declare the principa l of the loan then outstanding to

be due and paytble immedia tely, and upon any such declaration such principal

shall become due and payable imc ediately, anyth L gin this Subsidiary Loan

Agreement to the cont rary notwithstand ing:

(a) A default shall have occurred i t he payment o ' principal or

interest or any other payment required under this Subsidiary

Loan Agree ent ( and such default shall have continued for a

period of days)

(bi A default sh 11 have occurred in the performance by the Co 1pany

of any covenant or condition ( ot1er than in respect of the due

payment of moneys) contained in this Subsidiary Loan Agreement

and such default shall continue for a per iod of daysafter

notice thereof shall have been given by the Treasury to the

Company ;

((c) The Co any shall hav taken or permitted to be taten ary action

or proceeding whereby any of its property shall or m y be as, i gned

or in any nner transferred or del ivered to any r cciver, assignee.

liquidator or other person , whether appoLnted by the Company or by a

court or by authority of any l a w, whereby such property shall or may be

distributed among the creditors of the Company ;

(d) Any governmental authority having jurisdiction shall have taken action

for the di solution or diaestabiishment of the Compa1y or for the sus

pension of its operations.

-5-

Article X

Except with t he written approv~l of t he Bank, no provi ion of t hi s

Subsidiary Loan Agreement sh~l l be assigned, amended or abrogated, nor shall

any provision thereof k be waived. The obligations of the Company under

Articles III, IV, V, VI and VII hereof s hall ointinue i n force a s l ong as

the World Bank Loan Agreement shall continue in force, r egardl ess of whether

the loan t o the Company hereunder s hall~ be outstanding.

Article XI Any notice, demand or request required or permitted t o be given or

made under this Subsi diary Loan Agreement shal l be in writing and shall be

deemed to"';have been duly given or made when it shall be delivered in writing

or by telegram , cable or r adiogram t o the party to which such notice, demand

or reque s t is required or permitted to be given or made at its address

hereinafter specified, or a t such other address a s such paxty shall have

Jhm±paid designated by notice:;xli:!rm11Jm:xm:n:xmpr'&rl:x to the IB,rty giving such

notice or making such r equest~.

( a ) For the Treasury:

The addresses so specified are:

(Q) For the Company:

Article XII

This Subsidiary Loan Agreement shall become ef fective upon signature .

If the World B1nk Loan Agreement shall not have become effective within

sixty days after such signature, the Treasury may at any time thereafter s o l ong

as the World Bank Lo an Agreement shall not have become effective, notify the

Ccmpany of its cancellation of this Subsidiary Loan Agreement, and upon the

giving of such notice, this Subsidiary Lo an Agreement and all obligations of

the parties hereunder s hall fort hwith termina te.

I N 1ITNESS WHERE0F this document ha s been duly executed mrx:tJnf a s of

the day and ·-ear first above written.

(T he Treasury) By __________ _

(!he Company)

By ---------

Danish Alteraative Draft of Subsidiary Loan Agreement

1. On the basis of the projects prepared by the CD!!Il.pany and similar

:mm.pa~ projets of seven oher companies, for construction of (description)

the Minister of Finance has made an agreement wih t he IBRD about a loan

the proceeds of wfuch in Danish kroner will be re-lent t o the eight power

companies in question and of this amount kroner to the power company

in question for he financing of t he project in question and on the conditions

a%±p stipulated in the following paragraphs.

2. Under Article of Loan Regulaions No. 3 the Minister of

Finance can onlyJ! wihhdraw amounts from the loan account with the IBRD

against documents that equipment of foreign ori~n necessary for construc

tion of the projet have been duly paid. The Company agrees to the extent

thatit is necessary for the Minister of Finance to wit hdraw amounts from

the loan account/to supply~ necessary documents for payments without

unnecessary delay.

3. In1he Loan Agreement wit h IBRD and Loan Regulations No. 3 a number

of condiions for h witlirawal from t he loan acount have been stipulated

among which are to inform about changes in the project and to give quarterly

reports on th progress of t h work, t o let representaives from the IBRD

fo l low the pro~ess of he work atthe premises andt8 letthem have access to

accounts of Jlxk the Company. The Company agrees not to delay the Minister

of Finance"'( s possibilities for withdrawing from the loan by not fulfil l ing

the conditions stipulated in the loan agreement and Loan Regulat ions No. 3. 4. The Minister of Finance and the power company in questipn estimate

that the projects meuoned in paragraph 1 wll be completed in~ (specified

periodX and the documens for the payments in connection herewihh will be

presented i n ihe same period1· The Miil.ister of Finance in the same period

will withdraw from & loan account11ia~part of the total loan which is based

on the project of the power company i~uestion, namely~ specified amount).

The Minister of Finance will re-lend to the Company the amount p mentioned

plus another amount~ (to be specified) which is a part of the proeeeds

of the loan issued on1'he market in New York. Disbursements of the loan

)k~~ from t he Min:i!ter of · to the power company will take place according to

the f ollowingschdule:

DK.r

DKr

DKr ------

DKr ---

on _____ , 1959

on , 196~ ------on , 1961 ------on , 1962. ------

Danish alternative

Po 2

xxxxxjx I:nlilrest onihe loan is % per annum. Interest shall be paid ----on the am.ountm:fkximx of the loan outstanding xk at any time, annually in

each ye~r on h the (date noted above for disbursement). The loan will be

repaid in twentyeq_ual instalments beginning at a date after disbursement of

the four insalments has been completed.

So If the IBRD for reasons on the side of he Company suspends with

drawal from he loan account as far as that part is concerned which is based

on the project mentioned in paragraph 1 above, the Ministry may stop dist he

bursement to theCompa~ ~mx:ldudr of that part of kI loan mentioned in paragraph

4 above Jdrik which h has not been disbursed at the time of default.

FORM NO , 27 ( s. 58)


INTERNATIONAL FINANCE CORPORATI ON MRT -

OUTGOING WIBB CLASS OF SERVICE: LT DATE: SEPI'EMBER 25, 1958

TO: GABRIEL LEFORT IMPERIAL HOTEL COPENHAGEN

(page 1 of' 2)

COUNTRY ( DENMARK ~< TEXT: _!\\\ \

Cable No. 2 ~..,

V REUR TWO AGREE THAT NEED FOR FOREIGN EXCHANGE DUE HIGllliR TOTAL INVF.sTMENT WOULD MAKE

PRIMA FACIE CASE FOR BANK LENDING STO PROBLEM IS TO FIND RESFECTABLE AND CLEARLY

IDENTIFIED PROJECT AS BASIS FCR BANK LOAN STOP SUGGEST YOU CONCmTRATE ATTENTION

FI.RS'f ON CAPITAL NEED.S OF POWER SECTOR RATHER THAN ANY PARTICULAR IMPORT REQUIREMENTS

SINCE IF NECESSARY AND CONVENIENT WE COULD ENVISAGE LOCAL EXPENDITURE LOAN STOP

FINW:~.i FILIPPI WILL STUDY HOW MUCH CAPITAL IS NEEDED BY POdER COMPANIES COI-1MA HCl>l

MUCH '.l'HEY CAN EXPECT FROM DEPRECIATION AND REI'AINED EARNINGS AND OTHER SOURCES AND

HENCE HOW MUCH IF ANlTHJNG OULD BE NEEDED FROM THE BANK STOP IF UNCOVERED CAPITAL

NEEDS OF PCNJER COMPANIES TOO SMALL TO SERVE AS BASIS BANK LOAN AND IF RAILWAYS J:.IKEJX

TO PROVE UNSUITABLE FOR REASONS DISCUSSED KNAPP OFFICE PRIOR YOUR DE!'ARTURE CG-IMA

YOU MAY WISH TO EXPLORE BANK LOAN BASED ON CAPITAL NEEDS OF INDUSTRY ON FINNISH OR

ITALIAN PATTERN '\-lI 'lH APPROPRIATE INTERMEDIARY STO.P SUBJECT TO ABOVE FOLLCUING ARE

SPECIFIC AN~ YOUR QUESTIONS FIRST ll5 NO TYPE LOAN UNACCEPTABLE SECOND YES

PROVIDED WE HAVE PROPER PROJECT IN FIRS'r PLACE THI.RD COULD ACCE.PT BORR~ rlELENDING

PROCfil:DS AT HIGHER RATE Bur HOST UNWILLING ACCEP.r SITUATION WHERE OORROtIBR 1'ITGHT DRAW

AUTHORIZED BY:

NAME:

DEPT:

SIGNATURE: ---,--:-;----;:--- =-=---:-:--=-:---=---o-:---=-~-,------~( Sign a tu re of ind ividual authori zed to approve cable).






l. Class of Service



Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address



Bolivia Cuba Honduras *Syria Brazil Dominican Republic Jordan Uruguay Burma Ecuador *Lebanon Venezue la Chile El Salvador Nicaragua Yugoslavia





To be used only for messages to the New York Office, United Nations, and certain commercial firms. For information, call Cable Post (Ext. 3008) .

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi , Lima, London, New Delhi, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text




4. Signature

Type in last name of sender. Use· INTBAFRAD or CORINTFIN as part of the signature only when addressee does not know the address of sender.

5. Authorization


Forward messages in triplicate in a cable envelope to Room 211 for d e spatch. The cableserviceisopen from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements shollld be made for the despatch of cables outside of these hours.


FORM NO. 27 ( 5. 58)

CLASS OF SER VICE:

INTERNATIONAL BANK FOR RECONSTRUCTION ANO DEVELOPMENT


OUTGOING WIBB DATE:

TO: (page 2 of 2)

COUNTRY (

TEXT:

Cable No.

DGlN GREATER AMOUNT THAN PAID ro BENEFICIARIES STOP FOURTH AND FIFTH IN vnw

EVIDENT COMPLICATIONS 'WE vJILL TRY TO DISSUADE MARKEr FROM CLOSE ASSOCIATION WITH

BANK PROJECT

IBJEUNE

AJJTHORIZED BY: ll,tJ.»m:-tJu with Messrs. Aldewer eld, Spottswr=o-~........,~'----------Archives Division NAME: M. L. Le eune cc: Messrs. Aldewereld

DEPT: Operations - EAA Spot tswood

SIGNATURE: -,~~:;:-;;;~~:-:r:::::.-:::.-~ u:-::.::-:-;---.--:-~NurSIQJ.iJ.;cki.Dii~.----.Sign a tu re of individual authorized e •

JHWilliams:MLLe j eune: amg ORIGINAL (File Copy)



('I


1. Cl11ss of Service

Type in cl11ss of service desired. E11ch cl11ss is described 11s follows:

Letter Telegr11m Letter telegrams are normally delivered the morning after day of despatch. The cost is h111f the cost of full rate messages with a minimum charge for 22 words including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address



Bolivia Cuba Honduras *Syria Brazil Dominican Republic Jordan Uruguay Burma Ecuador *Lebanon Venezu(;la Chile El Salvador Nicaragua Yugoslavia




Day letters a re delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is 1:1 minimum charge for 50 words in text.


Use only last name of addressee and cable address whenever possible . The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima , London, New Delhi, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is registered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text


Type text in capita.I letters and double space between lines. The text should be edited to eliminate unnecessary words and unnecessary punctuation. If punctuation is needed, spell out the words "Comma," "Stop," etc.


4. Signature


5. Authorization

Type in name of depaittment of staff member authorizing message and have authorizing staff member sign the original (pink copy). A list of authorized signatures is kept in the cable office ••

Forward messages in triplicate in a cable envelope to Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special arrangements should be made for the despatch of cables outside of these hours.


Record Removal Notice Archives & Records Management


Electric Power Development Project - Denmark - Loan 0218 - P03 7363 - Negotiations - Volume I 1366955

Document Date

September 25, 1958 Correspondents I Participants

To: Michael Lejeune From: Gabriel Lefort

Subject / Title

Proposed Danish Loan

Exception(s)

Document Type

Letter

Information Provided by Member Countries or Third Parties in Confidence

Additional Comments


Withdrawn by

Vlada Alekankina

Date

April 16, 2018


ROTTERDAM,

')

"" J PAR HOTEL NV. WESTERSINGEL 70 DIR H. FRISCH 0

BANKREKE.N NG AMSTERD BANK N V

ROTTERDAM 0

POSTGIRO 2 0 18 8 7 0

TEI EFOON 1 0 LIJNEN 0·1800· 135450

, ADMINISTR 13 56 5 3

23 Sk 0

E EX NO. 22020

• 0 i t

• 0 '

• •

'

h

r

'

2 • 195 •

17 •

•

1 •

FORM l'J. 'l . 26 ( 5 . 58) INTERNATIONAL BANK FOR RECONSTRU CTION AND DEVELOPMEN T


INCOMING WIBB

DATE OF WIRE: SEPTEMBER 23, 1958 2052 ROUTING

TO :

FROM:

TEXT:


KOEBENHAVN

ACTION COPY TO MR. LEJEUNE TECH. OF.

INFORMATION COPY TO HR. .lJRICK

Decoded By

TID GEORGION h'OR LEJEUNE NURICK SPOTTSIDOD FINNE FIRST REAL NEED FOR

BORROWING APPEARS NOT RELATED ESPECIALLY TO POWER SINCE IIMSTMENT PROGRAH NOT

BEING ACCELERATED AND COHP ANIES COULD OBTAIN FUNDS NEEDED FROM LOCAL MARKET

AND Bui EXCHANGE FROM CENTRAL BANK. GOVERNMENT NEEDS EXCHANGE TO PERMIT

HIGHER RATE INVESTHENT ESPECIALLY IN CAPITAL G00:00 FOR INIDSTRY. GOODS RELATE

TO MANY SMALL PRIVATE PROJECTS AND to NOT FORM BASIS FOR BANK PROJECT EXCEPT

ONE SIMI1.A.1t TO LOAN 115NO. ARE WE CORRECT IN ASSUMING BANK \'IDULD PREFER

NOT REPEAT THAT TYPE LOAN SECOND APPEARS APPROXIMATELY TWELVE MILLION OOLLAR.S --POWER LOAN AS PRESENTED ·.oULD BE FOR IMPORTED EQJIPMENT AND TEN MILLION FOR

IMPORT COMPONENTS LOCALLY MM1JFACTURED EQUIPMENT . GOVERNMENT PREFERS

DISBURSMENTS RELATED PERCENTAGE TOTAL EXPENDITURES REGARDLESS WHETHER

LOCAL OR FOREIGN. ARE WE CORRECT IN ASSUMING BANK PREFERS LIST OF GOODS

AND NORMAL DISBURSIJ1ENT PROCEOORES COVERING IMPORTS BUT IDULD BE Wil..LING

DISBURSE ON PERCENTAGE TOTAL EXPENDITURES ON PROJECT IN RESPECT lMPORT

COI1PONENT THIRD PLEASE ADVISE REACTION TO SECOND PARGRAPH FINNE MEMO

AUGUST 22 ESPECIALLY IN LIGHT FOLLOWING ADDITIONAL FACTS LOANS TO BEN-

EFICIARIES WILL BE ENTIRELY IN KRONER AND MAY BE ADVANCED EITHER BEFORE

OR AJ:1--r'ER DATE OF DRAWINGS FROM BANK AND POSSIBLY IN LESS THAN AMOUNT

GOVERNMENT IDULD DRAW FROM BANK SINCE COMPANIES THEMSELVES MAY BE ABLE

FINANCE PART OF NEEDS FROM RETAINED EARNINGS OR OTHER EAR1JING. FOURTH -I -")

ORIGINAL

I)

FORM No. 2 6 ( 5. 56) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIBB

DATE OF WIRE: ROUTING

TO:

FROM:

TEXT:

' \)

( CONTINUED)

ACTION COPY TO

INFORMATION COPY TO

Decoded By

IDULD PERCENTAGE OF TOTAL LOAN WHICH BANK IS PREPARED FINANCE BE - +t-,-,-,-,

REIDCED BY .AMOUNT OF MARKET LOAN IF AS INDICATED TO MORSEY MARKET

PREFERS TIE IN WITH BANK LOAN FIFTH IF SO AND IF ON ASSUMPTION BANK

UNWILLING PROCEED RAILWAY1 0NLY AVAILABLE LOAN IF POWER IDULD BANK

OBJECT FICTION OF DESCRIBING LOAN FOR PURPOSES OF MARKET LOAN TO

INCLUDE SUBSTANTIAL AMOUNT PRIOR EXPENDITURES MADE SINCE 1957 ON

THIS ASSUMPTION BANK IDULD FINANCE ONLY FUTURE EXPENDITURES BUT

MARKET LOAN IDULD BE USED IN THOORY TO REil-IBURSE PRIOR EXPENDITURES.

WE :00 NOT KNOW MARLON MATTHEW REACTION SINCE NO REPRESENTATIVES HERE.

SINCE LGC!L OPINION EXPECTS 35 • . .., ••• LOAN GOVERNMENT FEELS -STRONGLY REDUCTION IDULD CREATE UNFAVORABLE IMPRESSION. SIXTH FOR

FINNE IS WEDNESDAY OCTOBER ONE CONVENIENT DATE FOR MEETING WITH

MANAGERS .ALL~ COMPANIES SEVENTH ENTIRE MISSION MOVING HOTEL

ANGLETERRE HONDAY SEPTEMBER 29

LEFORT MORSEY WUBNIG ZAFIRIOU

* underlined words received in code /. I '

ORIGINAL

~

TYPED

c:·::11~~ /, :s CC1Rf~PC~·r::-•icE

SEP 24 11 14 Atl 1958

v 0

Record Removal Notice The World Bantf. Group

Archives & Records Management


Electric Power Development Project - Denmark - Loan 0218 - P03 7363 - Negotiations - Volume I 1366955

Document Date

September 22, 1958 Correspondents I Participants

To: Files From: Virg inia Morsey

Subject/ Title

Proposed Danish Loan

Exception(s) Attorney-Client Privilege

Additional Comments

Document Type

Memorandum


Withdrawn by

Vlada Alekankina

Date

April 16, 2018


quire: jg

Dear Jim:

You will o:f course 'be explor· ec wi the ion.

• J •• c/o International. Copenhagen, Dcmnar·.IC

'ith best re AI' ,

Sincere yours,

• C. Squir sisto.,:~t. . Dir ctor

Technical Ope:ratio Depar nt

tl.ssion

tor

KUHN, LOEB St CO.

S. R. Cope, Esq. Director of Operations Europe, Africa and Australasia International Bank for Reconstruction 1818 H Street, N. W. Washington 25, D. C.

Dear Sir:

September 16, 1958

and Development

P" This is to acknowledge receipt of your letter dated September 10,

1958, enclosing a copy of a letter which you had sent to Mr. E. Dige, Permanent Secretary in the Ministry of Finance in Copenhagen, concerning the Bank mission to Denmark.

We appreciate your advising us of the Bank's plans and we will connnunicate with you shortly regarding the timing of the visit to Copenhagen of our representatives.

Very truly yours,

. ~ '"' •

, 19S8

n or in

8880 t 'l!'T•

C t d that

all

ne an nt 0 • 1

•

I

FORM No. 209 ( 6- 58)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVE LOPMENT

INCOMING MAIL Dat'SEP , 1 8 1958 ROUTING SLIP

Mr, Black 10211, Personne l Di V,

Mr, Broch es 1113 Mr, Poo r e

Mr. Cargi 11 6111, Mr, Reamy

Mr, Clark 1113 Research Fi 1 es ,· '

"" -V

,. / ' ¥¥,., .. 1/ ffl 813 Mr, Riley

Mr. Demuth V 506 Mr, Rist

Mr, Doucet 1009 Mr, Rosen

E. D, I, Mr, Rucinski

Mr, Goor 705 Mr, Schmidt

Mr, Howel 1 801 Mr, Sommers

Mr, 11 i ff 1003 Technical Op,

Mr, Knapp 10211, Trans 1 ati on

" ~ Lejeune 813 Travel & Trans. -

l'lr, Mendels 1009 Mr, Worthington

Mr, Muri ck 1121

Office of Info, 221

Office Services 111

Mr, Perry 600

Re111arks:

From: General Files & Correspondence Sec tion

207

801

A318

822

700C

716

6111,

600

513

1003

309

8011,

IOI

A316

Mr. S. R. Cope Director of Operations Europe, Africa and Australasia International Bank for Reconstruction and Development 1818 H Street, Washington 25, D.C.

Dear Mr. Cope:

Copenhagen, September 15, 1958.

/

// Thank you very much for your letter of September lo, 1958

regarding the arrival and composition of the Bank Mission. We are looking ~orward to seeing Mr. Lefort and his col

leagues on Monday September 22 in the morning and hope to start business right away.

I shall also be looking forward to seeing you in New Delhi the more so as the possibility of your comming to Copenhagen in person at this stage seems very slight.

Sincerely yours,

3:JN :i:(!Nou ' 3~1:JO:, s:rtrJ l\/1:J1u39

03/il]J:,~

FORM o. 75 INTERNATIONAL BANK FOR (s.s l RECONSTRUCTION AND DEVELOPMENT

Date

ROUTING SLIP 9cQJ, . /~. NAME

, ROOM NO.

iu1. . A, IJ ~ · - ~ )1 A / fl5 -

I -v

. Action Note and Fi le Appropriate Disposition Note and Return

- 'pp rova 1 Prepare Reply .,omment Per Our Conversat ion Ful I Report Recommendation Information Si anatu re In i ti a 1 To Handle

REMARKS

A

From .J· ~ At-~ V

I

•

•

ntle. n: V letter

Attention Mr . Samuels .

I am ple ed to nclo h rewi th copy- of

have nt t od to • •• Di '

e nt ' ecretary i n t

li.nistr of in Copenha n, concern.i tho ank

i on to

ince rely your ,

S . • Cope rector oI r tions

urope, ric and u tr ia

nclosure

e York, • Y •

. C.-.,L. .

GLefort : jrc o

GLefort: jrd..

t '

C t

cc: Mr. J .F . ~n ' Mro A. D. Spottswf~ M' ss V. Morsev

o cl coo r tion wit

ince y

~

uro ,

Cleared with Mr . Main.

l.r L .

September 12# 1958

Dear Mr. Governor:

I thought I should let you have a personal. line to say

that we have now completed arr oments f ,or a mission which

will be arriving in nJ:l)ark on September 21. I naed not trouble

you wlth the details , which we are taking up with Mr. Dige .

I am looking forward to seein you in ~ew Delhi .

Mr . Svend Nielsen Governor Danmarks Nati onal.bank Copenhagen, Denmark

Yours s'incerely,

S . • Cope Director of O:perations

Europe, Afr.tea and Australasia

GLefort/SRCope:jrc.

, • •

Q.uv -

C-L. GLefortr jre.

· ptember 12 • 19,8

ar • 1 t

lam aokno$itled-ging your letter of

Nr. Co nclosing ¢opies

vi sVhn

it w1 in

hold dis ssion

t aDi b.111 let you kn our

Looking torw: t o tin ou,

l1r. E, Di r nt Secr'Q ta:ry F..inist "' '111naace Copenh · -n, k

You s ncer ly •

. ton i~ r nt or .r t ons

, r<> , .Urica end ,uatral 1a

o, 19$

•

'

•

FORM No. 82 ( 10. 57)


DEPARTMENTAL Date~ L ,,I. ROUTING SLIP - .

DEPARTMENT oF OPERAT1Ktrn EUROPE, AFRICA AND AUSTRALASIA

Roan No.

Mr. Barnerias Mr. Wheelock

Mr. Calika Mr. Wi 11 iams

.

Mr. Collier ~ Miss Zafiriou

./ Mr, ~e~ ttE r-f_ jJ "./.2~ - ,, Mr. Fajans

Mr. Jentgen

Mr, Kamarck

r 1Lefort ,::

,_Mr. ~eJJn~ ~1/ "' .. Mr. Paterson

Mr, Ross

Mr, Ski 11 ings

Mr, Stevenson

Mr. Weimar

tj .

Roon No.

, lu

DETACH THIS SLIP AFTER CIRCULATION AS SHOWN ABOVE.

FORM No . 58 ( 5- .48,) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM TO: Mr . S. R. Cope

FROM : Go Lefort ~. l ·

SUBJECT: Loan to Denmark

DATE: September 8, 1958

Attached herewith in translation is a report published in the

Neue ZUrcher Zeitung August 29, 1958 on the loan to Denmarko

Attachmento

RZafir~sma

Neue Z!rcher Zeitung, August 29, 1958

Credits for Denmark

Stockholm, August 26.

In the autumn Denmark will obtain American loans equivalent t o

some 200 to 250 million kroner . These sums are needed to finance

extensive imports of capital goods for the development and modernization

of the electric power industry and of the railraods . The Government,

already some months ago, addressed itself to the World Bank. Denmark

has been asked by the competent authorities in ashington to seek at

least half the desired credit through an issue in the New York capital

market . The remaining sum will be provided by the World Bank on the

usual conditions . Meanwhile the Ministry of Finance has already taken

all necessary steps and made arrangements with an American investment

consortium. In September representatives of this consortium will visit

Denmark in order to prepare for the government the necessary documents

for the issue . In addition Copenhagen expects the arrival of World

Bank experts whose task will be to study the economic situation of the

country and conduct the final negotiations . The rate of interest of

the planned loan in the New York market may be between~ and 6 per cent

for a maturity of 15 to 18 years o

FORM No. 27 ( 9. 57)


OUTGO I N G WIRE

~ ./ CLASS OF SERVICE: -!:I' l, ' DATE: September 4, 1958

TO:

COUNTRY (

fEXT:

DIGE

MINISTRY OF FINANCE

COPENHAGEN

DENMARK

· Cable No. MISSION WILL ARRIVE COPENHAGEN O.N SUNDAY SEPTEMBER 21

READY TO BEGIN DISCUSSIONS MONDAY STOP IET'IER FOLLOWS

REGARDS

COPE

AUTHORIZED BY:

NAME: S. R. Cope For Use by Archives Division

DEPT: Europe, Africa an A stralasia Checked for Dispatch

SI GN A TU RE: ~ :--:-----::---:---:-·c-,----:,-~.,..,------c----:--- ----~-.--, Sign a tu re of individual authorized to approve cable). GLefort:jrc . L._ ___________ _____,

~-. L., LC- /J'1,v.. ~~o(_

,'/ ~




1. Class of Service


Letter Telegram Letter telegrams are normally delivered the morning after day of de spat.ch. The cost is half the cost of full rate messages with a minumum charge for 22 words including address and text.

Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address


This is a preferential rate extended to the Bank by some of its member countries. Messages are sent at full race speed and at about half the cost. This rate normally should be used whenever available. It is at present available for the following countries:


• China Colombia Cosca Rica



Greece



*Peru • Syria


* In these countries the letter telegram race is lower than IBF government rate and should be used for messages when immediate transmission is not required.


Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a mi01mum charge for 50 words in text.

To be used only for messages to the New York Office, United Nations, and certain commercial firms. For information, call Cable Post (Exe. 3008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. The lntemacional Finance Corporation cable address "C:ORINTFIN" is re,gistered in New York, Paris and London. The name of the country of destination must always be added. (No charge 1s made for the name of a country.)

3. Text

Messages to Bank Missions and to Resident Representativ~s should be numbered. These numbers may be obtained by calling Exe. 3008.



4. Signature


5. Authorization


Forward messages in triplicate in a cable envelope co Room 211 for despatch. The cable service is open from 9:00 a.m. to 5:45 p.m. on working days. Special accangements should be made for the despatch of of cables outside of these hours.


3~N3ot

. I Wd St 9 tr d3S

FORM NO . 57 (5 - 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM TO: Files

FROM : S. R. Cope

SUBJECT: Denmark

DAT E : September 3, 1958

Mr. Stevenson, of Sullivan and Cromwell, telephoned me today. He said that he was proposing to go to Denmark on September 8 as originally planned and asked whether we had any objections o I said we had none. I told him that the main body of our mission was expected to get to Copen-hagen on September 22 and will probably stay a month. He said that it had not yet been decided who would go on behalf of the bankers z he thought it would be Mr. No Samuels and Mr. Whitman, of Kuhn, Loeb & Company, and Messrs. Schanen and O'Connor, of Smith, Barney & Company. In response to my question, he told me that it was proposed to have two other bankers in addition - Harriman, Ripley & Company and Lazard Freres & Company. Negotiations would be handled by Kuhn, Loeb and Smith, Barney on behalf of the group and Kuhn, Loeb & Company• s name would appear on the left-hand side of the prospectus and they would keep the books.

SR.Cope:mmr

cc: Mr. D. Sommers Mr. A. Broches Mro M. L. Lejeune Mr. G. Lefort

FORM ·NO. 26 ( 5- 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIRB

DATE OF WIRE: SEPTEMBER 2,, 1958 ROUTING

TO:

FHOM:

TEXT:

IN"rERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

KOEBENHAVN

ACTION COPY TO

INFORMATION COPY TO

Decoded By

/ FOR MR COPE FURTHER TO MY C.ABl.E AUGUST 30 I WOULD LIKE TO

POINT CUT THAT LOAN DISCUSSIONS STARTED LATE SEPTEMBER

NEED NOT BE INTERRUPrED BY NEW DELHI AS FAR AS WE ARE

CONCERNED

DIGE

ORIGINAL

-

_ ... c:- I·~.: I L

FORM No . 26 ( 5- 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING. WIBB

DATE OF WIRE: AUGUST 30, 1958

COPE

ROUTING

ACTION COPY TO Ivm.COPE TO: INTERNATIONAL BANK FOR RECONSTRUCTION

AND DEVELOPMENT INFORMATION COPY TO -::;::::::--FHOM:

TEXT:

KOEBENHAVN lo"" 11'\. ""., Decoded By

THANK YOU FOR CABLE AND PROMISE TO LET US KNOW AS SOON AS

POSSIBLE PLANS FOR ARRIVAL MISSION STOP SH001..J) LIKE DISCUSSIONS

WITH IBRD TO TAKE PLACE BEFORE NEW DELHI STOP I LEA.VE COPENHAGEN

OOTOBER l AND RETURN OOTaBER 15 STOP GOVERNOR NIELSEN AND ALTERNATE

GOVERNOR JESPERSEN LEA.VE SEPTEMBER 27 AND OCTOBER l RESPECTIVELY AND

RETURN OCTOBER 19 AND 25 RESPECTIVELY REGARDS

DIGE

ORIGINAL

FORM No. 27 ( 9- 57 l


OUTGOING WIBB

CLASS OF SERVICE: LT DATE: August 29, 1958

TO: DIGE

MINISTRY OF FINANCE

COPENHAGEN

COUNTRY ( DENMARK

/ .1E XT:

Cabl e No.

THANK YOU FOR roUR CABU AUGUST 29 STOP REGRET INCONVENlliNCE STOP

WE WILL LET YOU KNOW AS SOON AS l'OSSIBIE PLANS FOR MRIV AL OF '!HE

MISSION STOP ASSUME YOU ARE GOING TO NEW DtLlll AND WILL WISH HAVE

DISCUSSION WITH MISSION BEFORE LEAVING STOP TO DECIDE ON MISSION

PLANS IT WOULD BE HELPFUL TO KNOW WHEN YOU IN'I'END ·ro LEAVE COPENHAGEN

AND WHEN YOU RE11URN STOP 'l'HE SAME FOR OTHER OFFICIALS WITH WHOM

MISSION IS LIKELY TO BE WORKING REGARDS

COPE

AUTHORIZED BY:

NAME: S. R. Cope DEPT: Europe, Africa and Austr SIGNATURE:~---·--

\Si gnature of to approve cabl er:-

GLefort: jrc . ORIGINAL (File Copy)

(IMPORT ANT: See over for guide in preporing Outgoing Wire)




1. Class:.of Service



Full Rate

!BF Govt.

Code

Day Letter

Teletype

2. Address







Greece



• Peru • Syria





To be used only for messages to the New York Office, United Nations, and certain commercial firms. For infom1ation, call Cable Post (Ext. 3008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is re~stered in New York, Paris and London. The name of the country of destination must always be added. (No charge is made for the name of a country.)

3. Text

Messages to Bank Missions and to Resident Representativ:s should be numbered. These numbers may be obtained by calling Ext. 3008.

Type text in capital letters and double space between lines. The text should be edited to elin,inate unnecessary words and unnecessary punctuation. If punctuation is needed, spell out the words "Comma,• "Stop," etc.

Use common abbreviations whenever possible, i.e. reourlet, reurfive, etc. Write as one word hyphenated words, hyphenated names, and certain two-word groups , e.g. A1rma1J, Newyork, enduse.

4. Signature


5. Authorization




S:,-,,,.., ... . ., , 1, • ··~ • 1-.,

, ,.,.j .. ; \ "'*!D

a:11-10.t'tt. s.a

FORM NO. 26 ( 5. 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIRE

DATE OF WIRE: AUGUST 29, 1958 ROUTING

TO:

FROM:

TEXT:

COPE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

KOEBENHAVN

ACTION COPY TO MR .COPE

INFORMATION COPY TO

Decoded By

MUST YIELD TO REASON BEYOND CONTROL STOP UNDERSTAND THAT A MISSION

LESS THAN FUIJ... CAN ARRIVE EARLIER STOP WOULD .APPBECIA'l'I!: A

DOWNSCALED MISSION TO ARRIVE IN ADVANCE OF FULL MISSION Jl 'l'HIS

WOUl.D EXPEDI'IB MAT'IERS

DIGE

ORIGINAL

C"") ~ !-"> C)

en .. ;c '$

-,,. :.J . ' -I ~· .-1::

~ I -·r-.,

-..:: i\-: C

g :ul -•

2, --0 ~- .. '

::3 r··· ~

U)

C"') ~ fT'\ a::>

FORM No. 57 (5. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUM TO: Files

FROM : s. R. Cope

SU BJ ECT: Derunark

DATE: August 29, 1958

Mr. John Stevenson, of Sullivan and Cromwell, telephoned me this mrning to ask whether there had been aey change in the Bank's plans to send a mission to Denmark on September 8. I told him that we were finding difficulty in getting all the technical people there on that date and it was possible that the mission might be delayed a week or so; however, the matter was still under discussion and I promised to telephone him on Tuesday.

He asked how long it would take the Bank before it was ready to sign a loan agreement. I told him that it was impossible to foresee 1'hat problems would come up in the course of the operation which we had barely begun, but it was not unrealistic to count on less than three months -- one month for the mission, one month for report writing and shaping""Up the operation, and one :roonth for negotiations and final processing.

Mr. Whitman, of First National City Bank, also telephoned me this :roorning about the Danish operation, asking whether it was correct that the Bank was working on a loan jointly with the market operation and said that an amount of $40 million had been mentioned, divided equally between the market and the Bank. I said that it was true such an operation was under contemplation, but that we were only just beginning to get into it and that it was far too early to say ,what would come out in the end. I told him that we had not yet sent a mission to Denmark and that only after that would the position become clearer.

SRCopezmmr

cc: Mr. S. Aldewereld Mr. • Broches Mr. H. N. Graves Mr. M. L. Lejeune Mr. G. Lefort

~

F ORM N O. 27 ( 9. 57)


OUTGOING WIRE

CLASS OF SE RVICE: LT DATE: August 28., 1958

TO: DIGE

MINISTRY OF FnrANCE

COPENHAGEN

COUNTRY( DENMARK)

J. 'EXT:

Cable No.

FOR REASON BEYOND OUR CON'ffiOL IT IS HIGHLY IMPROBABLE FULL BANK

MISSION CAN ARRIVE IN COPENHAGEN UNTIL LAST vlEEK OF SEPTEMBER STOP

WE IDULD BE GRATEFUL TO HAVE CONFIRMATION THIS W)l[J) BE ACCEPTABLE

TO YOU STOP IF YOU WISH YOU MAY CALL ME ON TELEPHONE TOMORROW

cc : Messrs. Main Spottswood Bass Lefort

Miss Zafiriou

GLefort : sma. t. . L .

AUTHORIZED BY:

NAME: s. R. Cope., Director of Operatio DEPT: Europe., Africa and Austral.asia

SIGNATURE: ~ ,--,---~ :---:-:,--,-;--;- --;-;--1~~~~~~~ \ S i gn a tu re of

COPE



For Use b Archives Division


GUIDE FOR PREP ARING OUTGOING WIRES

1. Clas~ of Service



Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address







Greece



*Peru • Syria


• In these countries the letter telegram rate is lower than IBF governmt!nt rate and should be used for messages when immediate transmission is not required.


Day letters are delivered during the day of transmission and should be used only for messages in the United States and to Mexico and Canada. There is a mi01mum charge for 50 words in text.


Use only last name of addressee and cable address whenever possible. The Banlc cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quiro, Tegucigalpa and Tehran. The International Finance Corporation cable address "CDRINTFIN" is reJlistered in New York, Paris and London. The name of the country of destination must always be added. (No charge 1s made for the name of a country.)

3. Text

Messages to Banlc Missions and to Resident Representativ-~s should be numbered. These numbers may be obtained by calling Ext. 3008.



4. Signature


5, Authorization




FORM NO. 26 ( 5. 58) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT


INCOMING WIBB

DATE OF WIRE: AUGUST'/ 28, 1958 ROUTING

TO: INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

ACTION COPY TO MR .COPE

FROM: INFORMATION COPY TO

TEXT:

WIEN Decoded By

SEVEN F<lR COPE SAMUEI.S HAS NO UNDERSTANDING WI'f.If m.N8S ON

TIMING THEIR OPERATION BUT SAID ONLY HIS PEOPLE WOUIJ) COORDINATE

WITH BANKS AND THAT PREPARATION OF LOAN PRCXJEED WI'mOUT DELAY STOP

HE SUGGESTS BANK 0 -BTA.IN VD..'WS OF DANES ON URGENCY THEIR ISSUE STOP

~NSTEIN SAYS COMPLETION AUSTRIAN OPERATION BEFORE DECEMBER 31

URGENT WHICH MIGHT BE DIF.l!'ICULT TO MEET IF TECIDUCAL REPORT CANNOT

BE COMPLETED UNTIL AF'l"1l REWRN DANISH MlSSIO!I J COLLIER

ORIGINAL

DlSPATCHED

G- ~.q:.,·r• \L ,...IJ C" •tlll ·.!\/., r: .... L:.:>

AUG 28 10 g1 AM 1958

CO RRESPONDLNCE

. I.

Copenhagen, August 25, 1958.

Dear Mr. Cope •

I beg to enclose lo copies of a memorandum on The Danish State Railways, dated August 1958. In this memorandum it is attempted briefly to explain the general background on which the financial results of the railways should be viewed as well as the present trend of their development.

Mr • S • R • Cope , Director of Operations - Europe, Africa and Australasia, International Bank for Reconstruction and Development, Washington 25, D.C. U.S. A.

Economic Secretariat of the Government of Denma rk

August , 19 58

M E M ORANDU M

on

T H E D A N I S H S T A T E R A I L W A Y S

1 . The Danish State Ra i l way s, which operate the vast majority of the domestic rail and f erry s ervic es, belong to the State . I nve stment capital and working cap i tal are made available to the Ra i l way s by t he State . In r eturn, t he Ra i l ways make provision, in the i r annual Operating Accounts, fo r amortization of inve s ted capital and for interest, at the rate of 4 1/2 per cent . per annum , on part of their debt to the State . Any profit made by the Railways is pai d to the Treasury and similarly losses, if any , are borne by t he Treasury .

Hence, the r eturn on the State's investments in the Railway s cannot be seen from t he annua l acc ounts of the Railways becau se the profit or loss made in any one year will include the all ocat i ons made for repayment of debt and for payment of interest to the Stat e . The annual amounts paid to the State as interest on and amortizat i on of the invest ed capit a l plus the profit or less the l oss give a better picture of the actual return on the invested capital . These amounts have been recapitulated below for the last 33 years:

Million Fi sca l years: kroner 1925/26 - 1929/30 7 . 2 1930/31 - 1934/35 -29 . 8 1935/36 - 1939/40 3 . 5 1940/41 - 1944/45 285 . 5 1945/46 - 1949/50 -36 . 3 19 50/ 51 - 1954/55 -125 . 3 1955/ 56 - 195 7/58 -78 . 3

·-·-----192 5/26 - 19 57/58 26 . 5

2 . Apart from t he bi e amount ear ned during the war year s, tlle Rai lways have gener a l l y been operating at a los s . However, i n vi ew

- 2 -

of the circumstances under which the whole railway syst e~ was built up and the obliGations imposed on t he State Ra i l ways by the Danish Pa rliament , it will not be justifiable to re gard the Railway a s a purely commercial venture .

The first State railways were built before the middle of the 19th century. By the turn of the century the network amount ed to 67 per cent . and by 1930 to 9 5 per cent . of the present netwo rk. Mos t of the State Railways ' n etwork was t hus b~ilt during a per iod wh ~n railways were t he only r:i.od ern means of t r ansport . Hence the bnildi ng of r ailways wa s plann ed with a vi ew to ser ving the inter est s of t he community in general and t he development of indust r ie s and other sectors of the economy in particular . These considerations l ed t o the construction of railways in areas tha t were so s pa r s el y populated that rai lway s ervices would not have been warrantable if t hey we r e to have been provided for commercial r easons alone . Thi s situa t i on is reflected by the f ollowing table wh ere lines have been gr oup ed according to annual t r affic measured in terms of axl e s per l i :>:1.c / :c;.10- · metre

l , ooo per line/ km . per year

---------·--- -·-·-·-----·- ·-0 - 100

100 - 500

500 - 1 , 500

1 , 500

Percentage share of: total axle/ km .

4.5 32 . 4

52 . 0

11 . 1

total length of network

23 . 9

53 . 8

20 . 3

2 . 0 ~---------- - - ·- _ .. _

1 00 . 0 100 . 0 ~--~---~--·~---- ~ - ~ . - - ·-------

It will be seen t hat on one fourth of the network t he an:nua1 tra ffic is under loo , ooo axles and about 80 per cent . has an annua l traff ic of les s t han 50 0 , 000 axles while almost two thirds of t he traff ic i s being handl ed in the remaining 22 per cent . · of t he nP .J..

work which carrie s more than 5 0 0 , 000 axles . It should a l s o be borne in mind tha t an obliga tion ha s been

i mpos ed on the State Railways to carry passenger traff ic and go ods traff ic and that the tariff s char ged for such servic e s must be a p

proved by Parliament. In general, t ari f fs are fi xed a ccoru i ng t o t he principle of uni f orm t ariff s appl i cable to the whole cou.nt r ;y . D.1i s

means that the State Railways cannot adjust their t ariffs eit~er

- 3 -

according to the cost of operating individua l lines or according to the comp etition inflicted on rail transport by other means of transport.

3. The following table illustrates trends in the passenger and goods traffic carr ied by the Danish State Railways since 1925/26 .

192 5/26 - 1929/30 1930/31 - 1934/35 1935/36 - 1939/40 1940/41 - 1944/45 1945/46 - 1949/50 1950/51 - 1954/55 1955/56 - 1956/57

Average annual pass enger/km. ton/km. in millions in millions

1,091 1,167 1,514 2,458 2,977 3,o39 2,977

591 551 630

1,488 1,223 1,272

1,325

In the 'thirties the Railways began to feel the impact of competition from road t r ansport. During the Second World War, when road transport wa s virtually stopped, both passenger and goods traff ic almost doubl ed. Up to 19 53 the importation of motor vehicles wa s severely restricted, and the railway pas s enger traffic continued to rise while goods traff ic declined slightly. During the last few years the volume of traffic carried by the State Railways has stagnated as a result of the growing competition with motor vehicles. The traff ic carried by ferries and on some of the commuting services in the Copenhagen area is still mounting while the other forms of rail traffic i s declining. Rail transport is, however, still so important t hat the above-ment ioned considerations of industrial and social development are still taken into account in the planning of the Railways' investments and operations and in their tariff policy.

Ta '.{ing a longer view, commercial criteria may come to play a great er part but thi s trend can only be a long-term one .

The operations of the Danish Sta te Railways thus consist of two main el ements ~ (i) commercial operations, and (ii) certain transport f a c il itie s made available to the population by the State through the Stat e Railways a t a subsidised price in the same manner as t he State provides roads, schools, hospitals and t he like, free

- 4 -

of charge or at prices that meet only part of the cost involved by operating these services. The payment of the State Railways' deficit must be regarded as a cost met by the State for the purpose of furthering this social and industrial development of the country as a whole.

4. Action has been initiated to reduce the deficit of the State Rail.ways, partly through long-term plans for the closing down of t ~e least remunerative lines and partly through a general rationalization of the operation of the railway system. The effects of these endeavours are illustrated by the following table:

Fiscal year

1952/53 1953/54 1954/55 1955/56 1956/57 1957/58

Total personnel

29,ol7 28,811 28,685 28,383 27,907 27,296

Total length of network in krns.

2,643 2,651 2,574 2,554 2,554 2,554

5. The plan for acquisition of the diesel-powered locomotives, a s outlined in the loan application, is a link in these endeavours. Calculations reveal that the transition from steam-powered to diesel-powered locomotives is in itself a very profitable investment which will contribute materially towards reducing the deficit of the State Railways .

The total project covered by the loan application will require an investment of 156 million Danish kroner. The annual debt services will amount to approx. 11 million kroner if the investment is to be amortized over 25 years and interest is charged at the rate of 4 1/2 per cent . per annum. The investment is estimated to result in economies representing about 29 million kroner a year; the annual cost of operation will thus be reduced by 18 million kroner net . In these fi gures no account has been taken of the amortization of the existing steam-d_riven locomotives. Expressed in another way, the annual reduction of opera ting costs by 29 million kroner will pay interest and amortize the 156 million kroner at the rate of appr. 18 per cent, assuming t hat the diesel-powered locomotives will have a useful lifetime of 25 years.

FOR1,< No. 26 ( 5. 58) INTERNATIONAL BAN K FO R RECONSTRU CT ION AND DEVELOPMENT

IN TERNAT IONAL F INANCE CORPORATION

INCOMING WIBB

DATE OF WIRE: AUGUST 23, 1958 ROUTING ~-

TO:

FROM:

TEXT:


KOEBENHAVN

ACTION COPY TO MR .co~

INFORMATION COPY TO

De c oded By

FOR MR COPE MEMO ON RAILWAY FINANCES WI'.GL BE SENT BY Arn.MA.IL

MONDAY AUGUST 25

DIGE

ORIGINAL

GEM R, Lt .LES

8 25 II i• RI 1B

-CORRESPONOt:NCE

FORM • ( 5.

-INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMEN T

Date

ROUTING SLIP

NAME /') ROOM NO.

~- '-~· n '3-oR VO

Action Mote and Fi le Appropriate Disposition Note and Return

'---App rova 1 Prepare Reply Comment Per Our Conversation Full Report Recommendation Information Si anatu re In i ti a I To Handle

REMARKS

From Q_ Q. Soc /r;5~ "2 -

_., J

I'

a 0

p y

I / Vienna, ugust 22, 1958

Letter o. l

I enclose orandum on the power projects in k. e had only contact With the peop]J in th Ministry of nanc and the Director of the As soda ti.on of the Power Compan1es and did not therefor g · t any firsthand impression of the operations of' any- of the companies. A_ you see from our pa.per, ther are ome probl a on which we certainly would like to have s dvice betore we return to Copenhagen. We went through the questionnaire we s nt th and mad cl ar the type 0£ inf tion w would 11 to have and were tol<i th t they would ha no d.U'ficul ty in having it r ady by the middle of pt.ember.

We re very ll reoei d b re in ienna. The ther i per• feet and cation would he ore appropriate than trying to unr vel the mysteries of V. G. •s opel'ations. As you warned ua., the tinancing ot th 1r proposed rogram seems to have aane gaps. In particular the German credit are flidently' not very £1:rm.1 to say the le st. The key man ia a • Mwm who according to Stahl ia prepared to gi him loan of D. Mk. 200 million at 4!% . w1 th a tel"m of 30 years . It ounds pretty unbelievable . Stahl lelt for today an<;[ xpeo~ -to be abli to gi . us or int0l'Dl9+-ion next week.

In the meantim they have agreed to prepare reduc d progr more in line with available r sources- and which Joe can use for his tinaneial forecasts . The .ABehach projeet looks pretty good. The h d is S

ter higher than tor Ibbs. s a result it hould produces .30% more power while the cost is only 15% higher. I have not een the d tailed e ti•

t&s yet, but with the experience trca the Ybbs project they should b tairly reliabl •

Our ntative plan are as f'ollaws1 We hope to be finished here by Sept. 2 and I would o on a 2-3 day' field trip nding in Innsbru.ck and then go by train to ne'Va provided I would hav rough draft of report r ady by then. If not I would turn her to Vienna. Joe ia planning to be back in Washington on pt mber 5.. It not advis d otherwise, I would go back to Copenhagen on Septrm~ 'I O and should be able to compl.e te my work there in bout 2 weeks and be ck in Washington again l-).:>ut September 26.

With best regards tr both of us,

Yours,

/ signed/

airistian Finne

1 .

The t llow 1 t1o is on di cu ion w1 h

• , BoMl"Up and •n f niatry ot Fi, •

Dir ctOl" ot th As ooiatton of · lectricity Umer

T repnsen tive t. . tollowi propos Ll.a r ding

nk l nt to be lllf1de to t om or De rk . The Gc,v; n,.

nt will ae th uc k • . be r l•nd.ina will

inance . The inter teni ot t loa to th netici r-r

C DJ.ea would t b rela 1 n bu'h ould equal to the current

1rn..ortEHi\ r a tor o 1 T • interest

o bo dee about

in 1957 t bot 6 •• t. pre n . tur1t7 ia 20 ye • t e

tote 1 1vidual ticiarie would • •

1n ra be, e cb tr ncbe ro bl.y to c r th

be follovi year . s

1b]T th t for c t nche would pro bly te and

it C 8 OD he bond ket.

T o for the propo 1 t t

old 1rtng

di d an will not atf'eot t ot

1.11 be l st or projects 1

ti J ry t th ndert-.ugu

duri

und ts , t int

i C t t t 1ned 1 1

er uir for

int re t

rr in ccor,,__,._

to a

th proj ct

195 1.

2

._. ... _ to capital ta ~1 tbe r llowi 7eu- . ID t • ot

ti. rel nd race s tro th• loan a ptri or thre• tov.:r 7e

would ilffolY •

of U rtak:1

sio

0 t

n place we tbe nietq

the arriw.l t t Dk

t on,, a t Mtnia~ry would 11k• to n t ank • a op1nion b•to p . .. di

Uf' further in the d1 c stone with tbe ndertak • a to br tbe

aala t the ' • attentio ao they eoulcl be dhows in sOJII d•tail

sion l•v•e for Co nbapn. Our onq co nt.e t t th pro-

p nts v r different tr bo • 1n connecti n v th otbel"

that the ank

sid rr 1 a uld lover

n ••• m ............. t t the in

tb inter et ra •

alt loan.

he GOTe.r nt does tint to c1f1 a cur1:,.

•

Legie tion is uired th tort

ll nt meets a in during the f1ra v or s.ay,..,_M1"""'•

jortt7 and no ifflcult7 w e:xpectecl to

It vaa 1 icatAd tba t hole procedure o\lld nl7 require 1 o WM •

) .

• a tollow 1

a . Xpbe •17• It 1 a

City t Cope n.

eneeen (Cop a•n L1 bu ti

AP.tborit7)

cipe.l. a e oy, a• It al o nut'a.cture Dd i tri tea aa•

te •

er in be

o rat ia-

3

• the reco tructton t part of th ex11t .c.

dp D • Old t w 11 be di a boilers (350 t/h)

will be tall 50 b .,, co tur. ine and

0 36 h pres baok-pre turbine . In dition a sys control

RU.ll]·R,:.Jlti n will be co truot •t ellabp j in Copenba n.

b.

Exllans1 n t an e.x1 ti ~ l>~ 5o M....../ O' ~

c1 l Eleotricit7 ork)

the l plant 1n Aalbor 1th

lation of a 200 t/h b 11 r a 6) turbo ne tor. Co :truction t 140 ka -or 150 kV tr 111 ion 11.DI vi b sub tio •

• Il.s dt ft

w ,z ls old whole e

jeot 1 lude th \fr) .

ot a 170 ~/ boiler a

i1tr!ot

d. n •

t -ce rator.

•• e ktrioit

istri

70

op rte on th 1

ly at

t Isetjol'dva kt

T

arhue 1 tall~tion

vllalob old£

n. r will ex nd a

fa 300 t/b iler a

tor di tr1ct b ti

It opera 01 to in plants in th northern r th 1 lA £

plant

lundbor b7 the inst tin ot 400 t/h b Uer e.nd a 135

ator. of 1:;,o ion l , 28 ot 120 cable,

0 vill 0 truct •

t. ktrict • /, ( ) (Sout est Z•el. ny)

C UT p nt t 1

4

n by 1 talle.t on of

o truotion or-~·~~

50 t/h boil

aLU-1:>Ji&.1-ROiO lill •

• !r rt rt

Oper te

oj

h.

rr ;L.11Cl\11:1L.t.J.Atio

c la, 35 kll ot 120

Thi i

bionhl

lla io

of ornh • Th p

di stri tio n t rk 'Wi b 45

a st io •

4.

t.ur,~

tst.Ntden.

c~>ante • 't

uw.i.u,.a,.r.ug 10

•xi

11

' 0 e l enti i , 1 a corpo ti ,

on i re Int , 0 • , t e

or indi nioipaltt es r d atr ct.

,. 1th ti no l d ta i t unde

f

!1 ctie • t C •• te

t t

inco anc 8 ble h

t 1r i •

1 cat in d t 11 th Di

D lectrioit7 or r1 c1al

r tb. b !' told that tbi

the dl r end •

8 0 l f

holder

wer v

11 ri C

a tit ot

or e d

r

r

•

urn on

or

7

6,

tJ

lr ftitlport

o:rnbo

nt

and • •

To 1

5

19.8

.9 10.0 1 ,.i

66.7 "9 .1 ]Q.!l

45 .0 1.9

, .9 I .'.3,6

35.0 14.9

6 . 7 2 .7

50. 0 1 . 2

91. , 39.l

5 .o ~ .9

3 .o ( 55. 5 . _ )

J.l 157. 7

will al o

to lain 1.h low cot of of th , gen ti •

u

rt d ut

tore ui nt

about 5 or t tore

C

tl7 tot

rtly to th co t of

d cot ot imported teri l to

XC

roug

• eo te co r dir ct

or und r

nt f rr · ported

that

rt •

eriala to be

de

6

Into ti • b en a ut th a wrt, involv adt r

We l 0 v.1 ed bow r ture • t need td b tbe · cee a f 1 •

pr tio t ec1f1 t1 a

in tr

and v r10U8

7.

roj wt a corr -

th r in1

~ n with •• ance. ho h ~

it ot 8 eet o th ojoo'b.

SRCope:mmr

oul I. , Loeb a l&Wye to "9l~lol,A

I trust yo rece~ved t want.ed.

cc: Mr. M. L. Lejeune Miss Rena Zafiriou

't 22, 19$8

you r me1111DeL1"8

inc ~ yours,

FORM No. 27 ( 9 - 57)


OUTGOING WIRE

CLASS OF SE RVICE: LT DATE: August 22., 1958

TO: DIGE

MINISTRY OF FINANCE

COPENHAGEN

COUNTRY ( DENMARK )

.cXT:

Cable No.

;/ RE LAST PARAGRAPH YOUR LETTFE AUGUST 2 WOULD APPRECIATE YOUR

CABLING ~~~ON RAILWAY FINANCES~ 7 l'~f,;ff ~~S /v'Jlf ll /? ()

COPE

AUTHORIZED BY:

NAME: S.R. Cope., Directo o Operations For Use b Archives Division

DEPT: Europe , Africa an Checked for Dispatch

SIGNATURE: -rs"ignature of individual authorized to approve cabl e ).

Cleared and cc to: Mr. J .F.Main U ORIGINAL (File Copy)

RZafiriouisma. (IMPORT ANT: See over for guide in preparing Outgoing Wire)

1.

DISPATCHED

GEff;-{/.L ·;p ES GUIDE FOR PREP ARING OUTGOING WIRES

Class of Service OM IQ';R Type in class of service desired. £UGi 22.ss 6 JlLc lil:i\:ed 'ts''follows:

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Full Rate

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Code

Day Letter

Teletype

Letter telegrams are normally delivered the morning after day of despatch. The cost is half the cost of full rate messages with a minumum charge for 22 words including

address and text. r E C-Jn ' · i 'CE f"n J •'·' . ,. . . Full rate messa~ la e n<i a fy transmuted and delivered immediately. There is a minimum charge for 5 words, including address and text.





• Ethiopia * France

Greece



* Peru • Syria






2. Address

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Bogota, Canal Zone, Karachi, Lima, London, New York, Quito, Tegucigalpa and Tehran. The International Finance Corporation cable address "CORINTFIN" is re,'listered in New York, Paris and London. The name of the country of destination must always be added. (No charge 1s made for the name of a country.)

3. Text




4. Signature


5. Authorization




Mr. • Co •

s R. Zafiriou

DECLASSIFIED

APR f 6 2018

Danish borrowing from the Bank.

A ust 22, 1958

tract .from R. uarterly Review, o. 51, Jlat July-, 1958

Private and Confidential

• •••• it is mot interestin to note th t the Finance ster has r ently taken step to obtain siz able loan (JS to 40 million dollars hav been m ntion ) from the IBRD, probably in conjunction with a. ublic off ri 1n e ork. he immediate purpo e of uch a loan ould be to fin.an e power plant n railro quipment . his is very definite dep t ur from pr vious official ani h policy hich h s for many years b en o o ~d to tori n borro-wing, r ther imin ta reduction of the orei n debt. In i te of the r p a ted bal c of payment dif .. fie lties, re uction of th e xter fun ed Dani h ooverrunent debt ha.a

en achieved to th tun o 700 million.er kroner ur the last five It no ounts to no mor than 1.050 million kron r, a comparatively ount n pro ortion to the fore n tr ct oft country. If it co.me•

of£, then w loc.n will not be contracted before tober, wen Parliament reconvene • It may ound contradictory, but th r is little doubt that the improv ment of the extern position has -d good deal to do with the vol ce o the official attitu to ar foreign borro ing, it being felt that now we have set our own hou e in order, a mor constructive olicy 1n thi r spect 1 warranted. It i definitely v ry w leoJl18 news and the loan if it m teriallze, will go a long ay towar solving the difficulties of financing a future expan ion oft anish industries as the foreign financing of these necessary project will set like amowit of our own savings fr e to inve tin oth r airec tione .•

RZ~r·. a iriou:sma

1\.9-C'

•

Files August 12, 1958

s . R. Cope

Austria and Denmark I

'

FORM No . 57 (5. 48)

TO:

FROM:

SUBJECT:


OFFICE MEMORANDUM Files

S . R. Cope

Denmark

DATE: August 7 , 1958

Mr. Samuels of Kuhn , Loeb and Co., who are to handle the public issue to be ma.de at the same time as the Bank ' s loan, mentioned to me this morning that Mr. Stevenson of Sullivan and Cromwell would handle the legal aspects of the registration statement and other legal matters .

SRCope/pnn

cc : Mr . D. Sommers Mr . A. Broches Mr . G. Lefort

FORM No. 57 (5. 48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OF CE MEMORANDUM TO: Mro S. R. Cope DA TE: August 7, 19 58

FROM : Miss R. Zafiriou a--SUBJECT: Denmark - Electrical Equipment .

Attached herewith is a list of Danish imports and exports of

electrical. equipment etc . in 1955 and 19560 The foreign exchange cost of

the power projects under discussion, which are expected to be completed in

1962, is 22 million. This means that the annual rate of expenditures

will be of the order of $5 to $6 million. This should be compared with

total imports for electrical equipment of $12 to $15 million per annlD'llo

Attachment.

C

DENMARK

000 $ ~orts

19~ 1956 ~ 956

Electric generators, motors, transformers 4.,050 5,100 4,600 6,050

Electrothermic apparatus 730 800 450 460

Apparatus for measuring and controlling electric energy, signalling apparatus, bells 1.,230 1.,350 1.,660 2,550

Cables and wires for electricity 600 940 2,100 2.,000

Other electric machinery, etc. 5,100 5.,400 10,600 12.,600

Steam generating boilers 160 160 130 60

Boiler house plant 300 210 150 10

Steam turbines for electric power plants 500 11130 JOO 585

12.,670 15,090 19.,990 24,315

•

7,

ar • ., ~

tor 2 •

l iv d I

•

l 00

po i n .1' circ

1 •

' our,

FORM No. 26 ( 1. 50)

-


INCOMING WIRE

DATE OF WIRE: AUGU~ 2, 1958.

TO: DITERIATIONAL BAIK FCli RECONSTRtJC'rION & DIVELCJFti!DT

FROM: ICl:BENHAVI

TEXT:

/ '\~-:.: ~-

1310 ROUTING

ACTION COPY TO MR. con

INFORMATION COPY TO

Decoded By

RE YOUR CABLE MESSRS. FINNE AND FILIPPI WELCCME AUGmT 1.3 to 16.

PLEASE INFORM 0, ARRIVAL.

DIGE

DUPLICATE

i ' . ('\'

J•

.. ,, '•

Copenhagen, August 2nd, 1958.

Mr. S. R. Cope, Director of Operations - Europe, Africa and Australasia, International Bank for Reconstruction and Development, Washington 25, D.C., U. S. A.

Dear Mr. Cope,

;/ I thank you for your letter of 25th July. The Bank's mission shall certainly be welcome here in

September, and if possible Mrs. Dige and I shall look forward to see you in person once more here in Copenhagen on this occasion.

Awaiting the mission's arrival, we shall prepare information on the subjects mentioned in your letter and its enclosure. I think it might be very helpful if your .Bank engineer who is to visit Austria in the middle of August would come through Copenhagen and have conversations with us on the material that you will need.

I have especially noticed your remarks on the financial position of the State Railways. We would like as soon as possible in a memorandum to explain the special circumstances prevailing in Denmark with regard hereto.

•

• • J . '

FORM No, 27 (8- 55)

INTERNATlfli.tAL BANK FOR RECONSTRUCTION AND Dt"c LOPMENT

OUTGOING WIBB

CLASS OF SERVICE: c(

DATE: AUGUST 1, 1958

TO: DIGE MINISTRY OF FINANCE COPENHAGEN

COUNTRY ( DENMARK

.. EXT:

Cable No .

?,.'6 ~ REOURLET JULY 21:i.NNE AND FILIPPI OF BANK STAFF COULD

VISIT COPENHAGEN AUGUST 13 TO 16 TO DISCUSS INFORMATION

NEEDED ON POWER PROJECTS STOP PLEASE CABLE WHETHER

CONVENIENT

Signed: COPE

AUTHORIZED BY:

r1 L,./)

NAME: S.R. For Use bv Archives Division

DEPT: Europe, Africa & Checked for Dispatch

SIGNATURE: pl,, SRCope/vhn cc: Mr. Finne


(IMPORTANT: See over for guide in prei:1aring Outgoing Wire)


1. Class of Service



Full Rate

IBF Govt.

Code

Day Letter

Teletype

2. Address




*China · Colombia Costa Rica

Cuba Dominican Republi c Ecuador E l Sa lvador


Greece


• Lebanon Nicara gua Pakistan Panama

• Peru • Syria



Code messages are transmitted at full rate lor IBF Govt.) speed and cost. This rate should be used only for confidential messages to staff members having a code with them.

Day letters are delivered during the day of transmission and should be used o_nly foe messages in the United States and to Mexico and Canada. The.re is a nuntmum charge for 50 words in text.

To be used only for messages to the New York Office, United Nations, and certain commercial firms. For information, call Cable P ost (Ext. 2008).

Use only last name of addressee and cable address whenever possible. The Bank cable address "INTBAFRAD" is registered in Paris, Beirut, Rio de Janeiro, Bogota, and Guatemala City. The name of the country of destination must always be added. (No charge is made for the name of a country).

3. Text


Type text in capital letters and double space between lines. The text should be edited to eli rrinate unnecessary words and unnecessary punctuation . If punctuation is needed, spell out the words "Comma, " "Stop," etc.

Use common abbreviations whenever possible, i . e. reourlet, reurfive, etc. Write as one word hyphenated wo,rds , hyphenated names, and certa in two-word groups, e.g. A1rma1J , Newyork, enduse.

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Type in last name of sender. Use INTBAFRAD as part of the si gna ture only when addressee does not know the address of the sender.

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Economic Secretariat of the Govern.ment of Denmark

August, 1958

M E M O R A N D U M

on

T H E D A N I S H S T A T E R A I L W A Y S

1. The Danish State Rail , ays, which operate the vast majority of the domestic rail and :ferry s ervices, belong to the State . I nve s tment capital and wor king capital are made available to the Railway s by the State. In return, t h e Ra i l way s make provision, in their a r .

nual Operating Accounts, for amortization of invested capit a l an~ for interest, at t he rate of 4 1/2 per cent . per annum, on pa r t of their clebt to the State . Any profit ma de by the Railways i s ps..i. d to the Treasury and simila rly losses, if any, are borne by t he Treasury.

Henc e , the return on the State's investments in the Railways cannot be seen from the annual accounts of the Railways because t ... 1P

profit or loss made in any one year will include the allocations made for r epayment of debt a:ad for payment of interest to the St a t 20 The annua l amounts paid t o the State as interest on and arn.0 1~tizat i ~J::.1 of the investe d capit a l plus the profit or less the loss giv e a better picture of the actual r eturn on the invested capital. Th8 s c amounts hav e been recapitulated below for the last 33 years:

Fi s ca l years:

1925/26 - 1929/30 1930/31 - 1934/35 1935/36 - 1939/40 1940/41 - 1944/45 1945/46 - 19 49/50 1950/51 - 1954/55 19 55/56 - 1957/58

Million kroner

7. 2 -29 . 8

3.5 285 . 5 -36 . 3

-125 . 3 -78.3

--·--------·-------1925/26 - 19 57/58 26.5

2. Apart fro .::n the b i 0 amount earned during the war years, the Railways have generally been operating at a loss. However 9 in view

- 2 -

of the circumstances under which the whole railway syst em vms buiJ.t

up and the oblications imposed on the State rlailways by the Danish

Pa rliament, it will not be justifiable to regard the Rai lway as a

purely com..me rcial venture . The first State railways were built before the middle of .he

19th century . By the turn of the century the network amounted to 67

per cent . and oy 1930 to 95 per cent . of the present networku t 1.os ~:

of the State Railways ' network was thus b-u..il t during a pericd. v.rh :-'! r.

railways were the only modern means of transport . Ilence the buildin~ of railways wa s planned with a view to serving the interests of t:'..1.e

community in general and t he development of industric ··· and other

sectors of the economy in particular . These considerations led to

the construction of railways in areas tha t were so spar sely po pu 1 Gt ed

that railway se~C'vices would not have bee:1 warrantable if tl1<:.•y werr)

to have be en provided for com;-ncrc ial reasons alone . Tliis sit Ll& tio:;:~.

is re f lect ed by the foll owing table where lines have b een grtu,cd

accordine to annual traffic measure d in terms of axles pe::r li!l..c/c.--:. o-

metre

1 , 000 per line/km. per year

0 - 100

100 - 50 0

500 - 1 , 500

1 , 500

Percentage share of:

total total lengt h axle/km . of network

4.5

32 . 4

52 . 0

11 . 1

23 . 9

53 . 8 20 . 3

2 . 0 ··--------------------- · --- -- --

100 . 0 100 . 0 ----- ·-----·- .. --------· .. ·----·------·- ··------·----··---

It will be seen that on one fourth of the network the :.in:nuaJ.

traffic is under loo , oo o axles and about 80 per cent . has an annual

traffic of les s than 500 , 000 axles while almost two thirds of the traff ic is being handled in the remaining 22 per cent . of th0 r~~

work which carries more than 500 , 000 axles.

It shoulu a l s o be borne in mind tha t an obliga tion has uce~

imposed on the State Ilai l ways to carry passenger traff ic and goods

traff ic and that the tariff s chareed for such services rm1s~ be ap

proved by Parliament. In general, tariffs are fix ocl. ace or ding to the

principle of uniform tariffs applicable to the whole cou.n try . lhis

means that the State Rai l ways cannot adjust their tarif'f3 e it lier·

- 3 -

according to the cost of operating individual lines or according to the competition inflicted on rail transport by other means of transport.

3. The following table illustrates trends in the passenger and goods traffic carried by the Danish State Railways since 1925/26.

Average annual passenger/km. ton/km. in millions in millions

1925/26 - 1929/30 1,091 591 1930/31 - 1934/35 1,167 551 1935/36 - 1939/40 1,514 630 1940/41 - 1944/45 2,458 1,488

1945/46 - 1949/50 2,977 1,223 1950/51 - 1954/55 3,o39 1,272

1955/56 - 1956/57 2,977 1,325

In the 'thirties the Railways began to feel the impact of com-petition from road t r ansport. During the Second World War, when road transport was virtually stopped, both passenger and goods traff ic almost doubled. Up to 1953 the importation of motor vehicles was severely restricted, and the railway passenger traffic continued to rise while goods traff ic declined slightly. During the last few years the volume of traffic carried by the State Railways has stagnated as a result of the growing competition with motor vehicles. The traff ic carried by ferries and on some of the commuting services in the Copenhagen area is still mounting while the other forms of rail traffic is declining. Rail transport is, however, still so important that the above-mentioned considerations of industrial and social development are still taken into account in the planning of the Railways' investments and operations and in their tariff policy.

Ta~ing a longer view, con@ercial criteria may come to play a greater part but thi s trend can only be a long-term one.

The operations of the Danish Stata ~ailways thus consist of two main elements: (i) cornncrcial oper ations, and (ii) certain trans port facilities made available to the population by the State through the Stat e Rai lways at a sub sidised price in the same manner as the State provides roads 1 schools, hospitals and the like, free

- 4 -

of charge or at prices that meet only part of the cost involved by operating these services. The payment of the State Railways' deficit must be regarded as a co s t . met by the State for the purpose of furthering this social and industrial development of the country as a whole.

4. Action has been initiated to reduce the deficit of the State Ra:il.ways, partly through long-term plans for the closing down of t ~e least remunerative lines anc partly through a general rationalization of t he operation of the r ailway system. The effects of thes e endeavours are illustrated by the following table:

Fiscal year

1952/53 1953/54 1954/55 1955/56 1956/57 1957/58

Total personnel

29,ol7 28,811

28,685

28,383 27,907 27,296

Total length of network in lans .

2,643 2,651

2,574 2,554 2,554 2,554

5. The plan for acquisition of the diesel-powered locomotive s ,

a s outlined in the loan appl ication, is a link in these endeavours . Calculations reveal that the transition from steam-powered to diesel-powered locomotives is in itself a very profitable investment whic h will contribute materially towards reducing the deficit of the State Rai l ways.

The total project covered by the loan application will require an investment of 156 million Danish kroner . The annual debt services will amount to approx. 11 million kroner if the investment is to be amortized over 25 years and interest is charged at the rate of 4 1/2 per cent . per annum . The investment is estimated to result in economie s represent ing about 29 million kroner a year; the annual cost of operation will thus be reduced by 18 million kroner net . In these fi gures no account has been taken of the amortization of the existing steam-driven locomotives. Expressed in another way, the annual reduction of operating costs by 29 million kroner will pay interest and amortize the 156 mill ion kroner at the rate of appr . 18 per cent , assuming t hat the diesel- powered locomotives will have a useful life

time of 25 years.

I '

II

T

•

• • -

•

-

•

FORM No. 75 INTERNATIONAL BANK FOR (5-58) RECONSTRUCTION AND DEVELOPMENT

Date

ROUTING SLIP

NAME ROOM NO.

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. Action Note and Fi le Appropriate Disposition Note and Return App rova 1 Prepare Reply Comment Per Our Conve rsation Ful I Report Recommendation Information Si anatu re In i ti a I To Handle

REMARKS

... From !VVf../

PRIVATBANKEN I KJ0BENHAVN AK TI E S E LS KAB

lp

Mr . Davidson Sommers, Vice President, International Bank for Reconstruction and Development, Head Office, 1818 H Street, N.W., Washington , D .C., U. S. A.

Dear Mr . Sommers,

Copenhagen, Denmark,

July 11, 1958.

Having now returned home from my interesting visit to the United States, where I was greatly charmed by your very beautiful Capital, I feel impelled to tender you and Mr . Lejeune my most cordial thanks for your kind reception.

It was very interesti~g for me to have this opportunity of discussing financial circumstances, and it was a special pleasure for me to be privileged to elucidate to you the present position in Denmark, which vrill be of current interest to your institution in view of the loan application of the Danish Government.

As you know, your advice has been followed that the greatest possible portion of the loan be sought in the open market in New York, but undoubtedly some time will yet elapse before the matter becomes quite actual, as the ordinary parliamentary session here in Denmark in October is first to adopt a definite stand on the subject.

With kindest personal regards, also to our fellow-countryman Peter Ramm, I beg to be, dear Sir, (,,,,-----,

Yo~i'~ sincerely,

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1 • Green, G · eral :rtanager .

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Mr. M. L. Lejeune

Miss R. Zafiriou

Danish Loan Applicat ion

July 2, 1958

tta.ched herewith in translation is a report from Stockholm published u

1n the Neu .Zurcher Zei tung of June 21, 19 .58, Commercial Section.

a ttachment

RZaf/;t;u: sma

YU R EFFORT TO OBTAIN iIU,D BA. rK LO

Th Dani h overnment is at present eeeking a long- term loan fr the orld Bank 1n th amount of 2 0-250 million kroner with whose help n w inves nt in th lectric pow r industry and extensive modernization of th r 11 y will b financed. The total financing requirements for tb carryi out of the e inve ents in the next fin year may be est t d at o Sex> million kroner . tensive purchases abroad ( turbin , n rator , tran ion linee, dies 1 loco tive ) 'Will, ho ver, be r uired an will, for a while , place an increased burden on the D nib lane of paym. nts . It i beli v d that or egian, British, ,c t German .ind -wi s firms will be particularJ.¥ interested in theae ora r • In th se cir cum nc e the r cuest for a l orld ank loan appears to nish opinion justi.f'ied. In shington th Danish end avor are b 11 ve to h ve met 'with a posit1v re poruJ • A fin 1 deci ion by the

a hin&ton authoritie is, however, exp ct d only by the end of the year. first tep 1s for n rt mis ion of th orld Bank to tudy on th

pot th tecnnical and conomic aspect of the pl nned in'V1 a nta. At 1 ter st n botiati Jn will tak place on the fin.an ial term of the

In nm rk it is expected t t the rat of interest will be around

Th Mini ter of th conomy Dahlgaard explained a fe day o, in relation to thee plans, t t during the l st t n y ars LJenmark had considerably re uced its external debt throu~h annual rti&ation payment of 100 million kroner and mor • Thu , in vi w of th great need of capital for the financin of productive inv a entJthe raising of larger for ign credit 1s at present juetifi d. Such borl'<>wi ould also ea• th f orei n xchange position for ~hile •••••

FORM No, 57 (5 . 48)

TO:


OFFICE MEMORANDUM Files DATE: July 1, 1958

FROM: M. L. Lejeune

Denmark SUBJECT:

Mr. Samuels of Kuhn, Loeb and Company, visited the Bank on Friday, June 27 , and saw Mr . Black and me before lunch (Mr. Sommers joined the conversation to~ds the end) and he came back to see me again Jater in the day.

Mr. Samuels said that Kuhn, Loeb had been appointed financial advisers by the Government of Denmark and that they were actively considering a public issue in the autumn which would be joint with lending by the Banko He asked whether the Bank ' s cooperation in such a joint lending could take the form of buying part of the public issue, and he explained that he did not mean that the Bank would do this as a "stand by11 but as an alternative to making a separate but simultaneous loan of its owno He appreciated that the Bank might also be willing to enter into a "stand by11 agreement but that was a separate question. Mr . Black said that there were a number of things which the Bank would have to think about in connection with such a proposal but that in principle it was a way of lending jointly which could be considered further . Mr . Samuels said he quite understood that the Bank would have to have a project upon which the proceeds of its lending would have to be used.

The timing of a mission to Denmark was discussed and '1r . Samuels was told that the Bank could not put a mission into the field until late September or early October.

Mr. Black commented that as far as we knew the Danish railways, which had been suggested as the basis of the Bank loan, habitually ran at a loss and he was not partj.cularly happy with the thought that the Bank should finance a railway of this kind . It might, therefore , be that the railways would prove unattractive to the Bank but that it was too early to say for sure . Moreover, the investment in the power industry which had also been suggested as the basis for Bank lending would require considerable examination and all this might take time . Assuming that Denmark proves creditworthy and that the Bank was prepared to lend , it was unlikely that the Bank could ·be ready to lend in Denmark until the end of the year or possibly even early in the new year.

MLLe j eune/pnn

cc: Mr . G. Lefort Mr . J . F . Main Mr • • D. Spottswood Miss R. Zafiriou

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A.D. Spottswood

Mario P!ccagli

June 26, 1958

\UIJPP@tk - Pqwer Lgan lpp11cat1op

The intormation contained in the emoralld bmitted with th1 application coneiat of some tatistice and ot an overall review of the power situation in the country. It do not co 1n 8.IJ1 pecific in!'ormation about market requirement tor the agencie or companies which are

poa1Dg to co truct new plant nor does it giv n:, or the needed engineering or financial information which represents tb basis tor projot appraisal.

I would sa.7 tundamentall7 what v ne d 1n th wv of 1'\lrther inrormat1on i the folloving a

1 • A natio de review of the PQll(er it tion vi th oompl te tatistica and oae elaboration ot the fundamental proble

or the paver 1ndust17 which in this case e to be very lov load factor (lee than 3~). Th elaboration should be aocoape.nied bJ intormation ·on the r percu sio which this feature uat ·have on both the e.ngir..eering of new power plants and their conomic .

2. A number of project report on th propo ed. expe.n iona or trans:mi ion line which th Bank 1 eked to finance. I would think that of uch reports we might po ibly wish to have one for ach e t compan, or authority involv • Each report should co--ver the paver situation and market r uir nt int ar s M'ed by the com ny or geDC7J the ritual information on ba 1c ngineeri of the facili-ties proposed on the cot or power to b generated s compared to pres nt power cost and power ratesJ a summary bi tor, of the organis tion including it financial structure nd status; specific detail de t ima.te ot cost of the works propoeed Dd source ot euppl7 for the equipment; whether the iroject would be carried out entirely b7 the organisation itself or outside a !stance would be required .

It 1e diff icult in the light or the very general nature of the pa.per b fore u to arr1Te at a aurticient under tandiDg of the ituation that would enable me to came up with more detailed nd tinal list ot requirements. I believe, however, t tit we could get the information liated in 1 and 2 we would probab1y be in position to arriv at such understanding.

MPiccagli&ab

• M. L . jeune

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economic justif i.c t1.on f or borrow tl.8 docu n t

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ho two project for which ' nk fin ncin is crit ria.

June 26, 1958

orters

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Th tail B."f proj ct involv th purchas ro d (mainly in n and y) of L6 diesel-electric lin locomotiv s of 1,425 hp. each and of 83

3-axled die 1-shunt in , locomoti s at n est· d total co t of o mill.ion . Calculations pr sented in i c that this -onditur may be recover d

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It is clear from the bove (1) that th~ purchases f or which Bank financin is bo ng uested f orm part of a progr ich s well umer way and which i s unlikely to be held up by financial consid rations and (ii) that the rate o .• : expenditure · lie in the compl tion of U e oro ram during the next 3 to 5 a.rs is onl slightly higher than dur ng 19.56•58. (The cost of the 42 locomotives acquired during 1956-58 was probably 75 million kroner and the cost of th hun rs ac uired in that period ma have be n anoth r 10 to 15 million kroner. If tl e 1S7 million kroner required to com, l ta the probr!!I!1 a s pread ov r 4 ars the a al rate o expenditure would be 4 million kron r compared wit h some 3 million k oner d ring 1956- 58. f they ar SJ, d o r S · · ara the rate of pend ture would be exactly the same) .

'Ihus it doe not appe investme t in rl above th loan ap1 lic tion to be

conolll3 and to const tuto t o ign loans .

Pow r rroject

r t h t the jJroject will increa · tho rate o recent le l , an increas whic · s stated in cess or the t r n theni 01 th u nish

h princj.pal j "'tjf cation for recours to

fore t e war he D·nish pow rs ste was on a highly cc tralize • : 19)6 th re r L81i public po r st tions '"1th a total output o only 662 million kwh. or 1.4 mil ion kw • r Sl,ation.

iz;e of 25-3 I1 • w· .i mos+ ust;.al for mw units. l re re only local s s tems and there was l1t t1 interconnection:--·1nce thew· t· ere n c nsld r -bl rationalizavion a 11 as e nsion of pow r pr uction. y an. 11

stations h v been closed down and th arger station grea ye rur!d d. un pril l, 1956 thA ~rP. 30v public po, r stat· ons , with th~ major 15 ccount-

in for 96 r ce t of total cap city. Most or th new plants lave been of 5C-60 ? capacity. I n addition two id svste ere d ru ~1 one of t.he sy tems is inter-connected with the lwedish hydroelectric supply t1 t-wor •

The pos twar power program has increased the installed ca · city f rom ome 300 b" 'or th0 r to 1,350 r-w at present and o r saJ.!.1 from 700

million kwh. t o 3,Soo million. ?oreov r, the modernization of tho pl ts as made po ~iblt.: subs ntial rnel econo · s (from 4 500 to 3,Soc.., kcal r kwh. )

dditions to in talled ca. city <lnrin"' 1sr·3 ... 195e will total 764 or an aver e oi 127 per annum. The proposed p ogr f or 196v.1962 calls for new c ,aci ty o_ 4J5 . or av .t" of I 5 11 1 r nnum. us t oro-gr implies only a modest increase in t r ate O.L power ve opment oi cent

ars .

similar com rison annot of the material submitted to us .

m de or tran mission lines on the basis

There c be no questi on s to the innor t ce 0 1.' this pro r to runark. In spit of rece,t e c~nsion, 1 r caFita po r consur.iption in nmark 1 well below uropean levels (870 kwh. in 1955 compared wlth , 4V in r nee , l , h70 in G~ 1y nd l,26u in lai ) an addition~ o~ n capac1ty at th rte of 9 per ce 1t r annum are eessary to keep pace w th thee cted rowth in demand .

RZafiriou: jrc.

Mr. J . F. Main June 18 , 19 SB

J;)anish State Railwv:s/Flnan:cial JlesUlt• of Qijeratione,

l . 'l!he account · -Qt the Dtnish Stat ·· Railwa,ye fom p ,-rt of the Go-wruent 'bu..ag,et, a.ad show N1 almost eontuiuou aeries of an.nual deficits since th tirat World ar . Prio;r to \hat period. th State Railways we:re operated wt.th &nnWll :pl'ofittt .

2 . Altho~ a tmall net surplus reeulted in the two- year period l946/14fJ , rather he&'f'1 d f'1c:1ts vet>e ine11r!'ed ln each of the tollo.w:tng .nine ye n up to l.9 56/ 'J'l (fable l). !he ord.er of magn1 tude of Government contribution• (or de~ici\a) throlJ€b theae 7eara ra:nged from 13$ to 16~ of grote expendi\ut'ea 1ne'.J.ud1'.08 deprec,iation allowance, and 1nter•uit on invested oap1 \al. .

J. In 19$6/57 gross revenua to\aled S07 milliQll Xr. 86Ainst groea expenditures o~ S96 million Kr~. i.e . ~esulting in a deficit of 89 illion Ir·. !he latter refle(}t depreotat1on -:llowancee tota.ltng 19 mil.Hon Er . (,oi, -•bout ) . 2~ of gros11 expend.Utu.,ea) ., and 1ntere$t on lnvested capital totaling 41 m.Ul.1on Kr. the bat1a for the computatton of depreciation and lntei-es\ eharges is not known.

4. Mate:ria.la aupplied to the Bank th.ow the.t the .Railway• expeot i!lnnul as.rtng o.f a.bout 29 mill1on Kr. ·to matel"ial1•e by the proposed aequalti.on of diesel eleetrioa attd ehunterll., Al.lowing for ca:pi'tal oo'St on the new equipment, the net ea.rtnga would probably 'be about 25 m.llion :Kr.

,5. '11.e :f'inanci.al Nsul. ta over po11t- wa,- ¥•a.rw ratlec't a pl'etty stagnant TOl'WB.e ot t.!te.fflc (fable 2} . Presum&bll.1 the Ratlwa7a are Up to heavy competition from rQad tr&Jl!pOrt. aasenger traffic, which y-1.e-lds as ma.oh .as 55'/t of gros-s r venues, 1s becOJn:tng increasingly canc,mtra\ed on shol"t d.111\ance coJ,ltllU.Un&. -ConwraelY., the average haul fer titef.ght le a\eadll.7 1ncraaaln.g.

6. Compared to other Eu.rop~an r a1lwa$"e, the charges on the Danish State .Ra1lwa:-ya are, about average for both fre1ght and paaaenger tr t'fto.

1. A ftlDIMey balance sheet (1? bl$ :,) . show that to date all capital e:a:pend1tures h ve 'been. ttnaneed by the Governttlent.

• Table 1

Danish St.ate Railwa7B Financial Results ot OJ)erationa l 220L21 - l226l2.Z

(Million r . )

Bevenuea Goods Paa enger Gro a Oper :ting total a.lance

t raffic t.raf.tic Ot.her revenues exp. Depreciation exp.

1920/21 104 71 9 234 I+ 238 - 54

1925/26 68 60 10 138 ]J8 9 19 166 - 28

19-20/31 52 52 10 114 ll? 9 19 145 - 31

1935/36 41 60 l3 114 113 7 11 lJl - 17

1940/41 97 76 lJ+ 187 159 37 16 212 - 25

1946/47 113 174 22 309 290 s 10 305 + 4 1947/48 121 195 25 341 325 6 11 342 - 1 194 /49 114 199 26 .339 367 7 13 387 - 48 1949/50 109 199 .30 338 379 9 16 404 - 66 1950/51 1.31 215 30 376 393 10 19 422 - 46 1951/52 168 224 3A 426 452 13 22 4frl - 61 1952/53 150 24) 37 430 471 15 27 512 - 82 1953/54 162 256 41 459 479 17 29 525 - 66 1954/55 170 266 40 476 497 19 32 548 - 72 1955/56 169 278 47 494 515 21 37 573 - 79 1956/57 179 272 56 507 536 19 41 596 - 89

Table 2

Danish State Railwqs Ir fie Developmen1f l920f 2l - 1256f 57

Goo<h, Traf!ic • nger ra.tf ic ( llion t! kml (Jld.lllon 2as . l

1920/21 757 1,163

1925/26 571 1,161

1930/31 625 1,159

1935/36 51+5 1,426

1940/41 l,l.62 1,580

194'>/47 l,l 2,986 19l+7/48 1, 283 3, 090 1948/49 1,240 J , 121 1949/50 1,175 .3 ;105 1950/51 1, 260 3,027 1951/52 l , .390 2,923 1952/53 1, 240 J ,086 1953/54 1, 212 3,069 1954/55 1,260 3,,091 1955/56 1,262 '.3 , 038 1956/57 1,389 2, 914

te: Fiscal ye rs 1 April - 31 rch

h l• J

C'Urrent "-••'•• Ca l&h and l>&Dk: de oel t• 2eoe1ftblea

lnvenlort••

Cu.J'rent Liab111ti •~ et vorldnc capital

fixed. .b•et, ~ Plant & equ1paent at coat, L••• de eoiatioa Xe\ plant cl -.,ulpaent

on.-de eotabl e ••••'• lo\al tis.4 ••••'•

fo'-1 !l•t &He,,

lourcee ot n.t ••••t•t Go'Nrmt•t oap1\al Nv.nicilJa]. oap1'*l Stat~\or., reael"Y81 tor matntenanc of Jor bridget

1, 0:,2. 6 o.,

129.4 ,,.1 94. ,

. 245.2 1,0)9. ,



IN CONING WIBB

DATE OF WIRE: J1JNE 18 1958 ROUTING

TO:

FHOM:

TEXT:

ACTION COPY TO MR . COPE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INFORMATION COPY TO KEEBE:NHAVN

Decoded By

I / MR COPES LETTER JUNE 4 1958 TO MR DIGE STOP

MESSRS KUHN LCEB AND CO WILL ACT AS INVESTMENT

BANKERS FOR DANISH MINISTRY OF FINANCE

FIN.ANS

ORIGINAL

f

Mr. S. R. Cope Director of Operations Europe, Africa and Australasia, International Bank for Reconstruction and Development.

Dear Mr. Cope.

Copenhagen, June 18, 1958.

/ Thank you very much for your letter of June 4, 1958, con

-~ cerning our request for a loan from the Bank.

We understand fully that the Bank prefers lending jointly with an issue in the New York market as has been done for Norway and Belgium, and we are grateful that you will assist us with this part of the project too.

It would be much welcome, if you, already at this stage, are able to give us some indication of the attitude of the market towards a new Danish issue, in particular regarding the maximum amount obtainable at a reasonable rate of interest and the length of maturity.

As you will know from our cable of today we have arranged with Mears. Kuhn, Loeb & Co. that they will act as investment bankers for the Ministry of Fin~ce. We have also taken the liberty of advising them to get into touch with the Bank.

Yours r •

v ......

..

B5Fi l!' 9i 6 oc Nnr <:· . '-' .. I -, , , i. ,

~" r" -J ·l.:.J.J

FORM No. 76A (·3- 58)


RESEARCH FILES Date ROUTING SLIP

Mr, A 11 ard ice 309 Mr, Richards

Mr. Alter 523 Mr. Riley

Mr. Beevor 1013 Mr. Rist

Mr. Bennett 21f Miss Scanlon

Mr. Black I 02q Mr, Symonds

Mr. Camacho 218A Mr, Hauenstein

Mr. Cancio 1121 C Mf , Woolley

Mr. Curtin 112 ) Mr. Young

Mr. Demuth q21 IV General Files

Mrs. Eliason 227 I, F, C, Library

Mr. Graves 22q Mai 1 Room

Mr. 11 iff 1003 Office of Info, -

Ar, Johnston A31S Periodical s-J. L.

Mr. Loftus J. L. Print. & Draft.

Mr. Lopez-Herrarte q21

Mr. Mende ls 1009

Mrs. Pendleton 215

Mrs. Pol lock 1008 Research Fi 1 es

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J. L.

218A

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221

P. B,

102

112q

FORM No, 209 (6. 58)


RECONSTRUCTION AND DEVELOPMENT


IN COM I NG MA I L Date JUN .151958 ROUTING SLIP

Mr, Beevor 900 Office of lnfor.

Mr, Black 102~ Office Services

Mr. Broch es 1113 Mr. Perry

Mr. Cargi 11 61~ Personnel Div.

~ Consolo 521 Mr. Poore

/. A / "').

'f f,13 Mr. Reamy V - . -I'"' / lf\.i kJ.'lJ.M·: J V

Mr. Demuth ~21 Research Fi Jes

Mr. Doucet 1009 Mr, R i 1 ey

E. D, I, Mr. Rist

Mr, Garner 900 Mr, Rosen

Mr Goor 705 Mr • Rucinski ....._ -

Mr. Ham i 1 ton 806 Mr, Schmidt

Mr, Howel 1 801 Mr. Sommers

Mr, 11 i ff 1003 Techn i ca 1 Op,

Mr. Johnston A318 Translation

Mr, Knapp 102~ Travel & Trans.

Mr, Lejeune 813 Mr. Woolley

Mr. Mende ls 1009 Mr, Wo r th i n g ton

221

111

600

207

801

A318

822

700C

716

61~

600

521

1003

308

80~

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1007

A316

Remarks:

~ ~ - ~ ~~~ "'V"'-~

From: Genera 1 Files & Correspondence Section ~

•:• •,;. •:• :z • ~ J7 ·. I\ ~ .>. ~ ,,ONr,..\,tc

DIREKTIONENS

FORMAND

Mr. S. R. Cope, Director of Operations Europe, Africa and Australasia,

Copenhagen., June 12, 1958.

International Bank for Reconstruction and Development, Washington 25, D. c.

Dear Mr. Cope,

Thank you very much for your letter of June 4 regarding the

timing of a mission to Denmark to study the background of the Danish

loan application and the projects involved.

I understand that the early autumn would be the time most

convenient to the Bank, and I am glad to inform you that this is also

perfectly acceptable to my Government. We shall expect your advice

in due course of the date of arrival; personally I think that any date after

August 15 or so will suit us very well.

Looking forward to close cooperation with you and your associates

during the negotiations ahead, I remain,

Yours sincerely,

~{/v~ (Svend Nielsen )

;.ti I

•

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srl:t gnlb'l£~9'l !- s .ut lo 'lsHsl 'liJO'{ 'lOl 1b.um '{'I9V .lJO'{ nsrl

riain.sG srH lo bII.lJO'I~pbsd srl:t u:ta o:t · 'l.smnsa oj .aoioa ·m .s lo ~n.i:m.i::t

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• .M. L. Lejeune

s . R. Cope ~.

' nma.rk

June 5, 1958

l . In the course of lunching with Mr. Brinch I ntione the anish r quest . He asked whet her the Bank would be pr pa.red to lend to the Danish .:>tate 11 ys, in view of the fact that their arnings were low. I said that I thought this as a real problem and that if after investigation the railrays proved to b in bad financial shape or badly run, could rot ler¥i unless they re put right . Mr. Brinch said he ould be interested to see ho we handled this problem, becau e orway had state railways hich might like to borrow.

2 . The Danish rail rays may well pr sent a problem. Should rot start to look into tbe matter n,w, sending them a question

naire so that OD can start a. study?

SRCopeu

cc : Mr. Lefort Mr. n

I FORM NO. 75 INTERNATI ON AL BANK FOR

(3.52) RECON ST RUCTI ON AND DEVELOP MENT

Date

ROUTING SLIP

NAME ROOM NO.

Action Note and File Approval Note and Return

Comment Prepare Repl Full Report Previous Papers I n formation Recommendation

Initial Signature Remarks

1 ~ ~ ~ '~ ~ ~ ~ ._,,,

~U.. r "'i 'j

1.: ~ ~e_k.

From

~ -

FORM No. 209 INTERNATIONAL BANK FOR

( 6 - 58) RECONSTRUCTION AND DEVELOPMENT ............ INTERNATIONAL FINANCE CORPORATION

IN COM I NG MA I L Date ROUTING SLIP JU ' .., -

Mr, Beevor 900 Office of I nfor. 221

Mr, Black 102~ Office Services 111

Mr. Broches 1113 Mr. Perry 600

Mr. Cargi 11 61~ Personnel Div. 207

}Ir. Con so 1 o 521 I Mr. Poore 801

/ Gop~ - /. ' I Mt, - Mr, Reamy A318 - .-,~ , C: V

Mr. Demuth ~21 Research Fi Jes 822

Mr. Doucet 1009 Mr, Ri I ey 700C

E. D, I, Mr. Rist 716

Mr. Garner 900 Mr. Rosen 61~

Mr, Goor 705 Mr, Rucinski 600

M lami I ton 806 Mr. Schmidt 521

Mr, Howe! I 801 Mr. Sommers 1003

Mr, 11 i ff 1003 Techn i ca 1 Op, 308

Mr. Johnston A318 Translation 80~

Mr, Knapp 102~ Travel & Trans. IOI

Mr. Lejeune 813 Mr. Wool I ey 1007

Mr. Mende ls 1009 Mr, Worthington A316

Remarks:

From: Genera I Files & Correspondence Section

DIREKTIONENS

FORMAND

Mr. Eugene R. Black, President,

Copenhagen, June 12, 1958.

International Bank for Recons t ruction and Development, Washington 25, D. C .

My dear President, y I was grateful to receive your letter of June 4 in reply to our

request for IBRD-Consideration of a loan to Denmark to help finance the

expansion of power plants and the acquisition of Diesel locomotives.

We shall of course be glad to receive a m i ssion from the Bank

to examine the projects in question and to discuss the general background

of the Danish enquiry, and I have written Mr. Cope to that effect, accept

ing his suggestion for the mission to arrive in the early autumn.

I have noted that the Bank is of the opinion that our borrowing

should be a combination of a loan from the IBRD and a Danish issue in the

market, and we thankfully accept your kind offer to assist in arranging

such a joint operation. I refer in this context to our conversation in Basle

a few days ago, when I promised to indicate our preference for the issue

house to be approached. The finance minister is abroad at present, but

upon his return early next week I s h all take the matter up with him and

h~pe then to be able to write you on this point.

Yours sincerely..,

a~rtd~ (Svend Nielsen)

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K0BENHAVN K (COPENHAGEN K) June 12th, 1958. 17, Holmens Kanai . Telephone : Central 1411 . Telegraph: Nationalbanken

In replying please refer to: AB/ EP

Mr. S. R. Cop/ Director of Operations - Europe , Africa, and Australasia, International Bank for Reconstruction and Development, Washington 25, D. c: Dear Mr. Cope, /

With reference to governor Svend Ni elsen's letter of May 23 , 1958to

president Eugene R . Black regarding possible IBRD-financing of certain

Danish projects the Secretariate hereby inform you that we have to-day

separately airmailed 10 copies of Annex 2 to memorandum I - "Ecmomic

Survey of Denmark 1958" - listed in the schedule of documentation r eferr ed

to in the above mentioned letter.

. ' .. =.i ,

, , I

Yours sincerely

DANMARKS NA ilONALBANK Sek r etariatet

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Demnark - . quest

June ll, 1958

~.u.a,.i.~k as basis for a ciate your react ion t o

ormation is ne ded at this s ta.go .

I also for your info :'lation copies of t e letters e changed bet en .....,,u,,...rk and the Bank.

ttachroants:

morandurn (III ) and Annex Corr esporxience .

cc: iss • Zafi riou

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C, . G~forttjrc.

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o. Lefort

June u , 1958

Denmark - quest for a loan v'\ ~~

ttached is a morandum subll1:itted to us by :::.enmark a basis for request :for a loan ro the an • e would appreciate your reaction to it and in part icular w ther more information i needed t this st e .

I attach also f or your inlormation copies of t t e between nmark and the .Bank •

cct • Zafiriou

f

tter exchanged

•

L,. L .

June 4, 1958

ar • " ovarnor:

r. Bl ck has sked to et touch with you bout t timing of a mi sion to nmark in connection · th your enquiry about loan f ro the ank.

e hav receiv d the documentation on ._1:w~uk's conomic position and on th po rand diesel locomotiv s proj cts . e shall study -them c fully i n t xt r e ks d 'Will let you lcno if e n ed ad.di tional intormati on.

you.

g of t we C uld

ople to runark d should heth r t his would be a eable to

look forw rd to this opportunity o r win our acquaintance econ of r count r y with om f or over dee

had such h ppy relati o s .

Your sincere~,

• • Cope Director of 0per tions

uro , Af'ric and ustral sia

• Vind ielsen ov rnor

Danma.rks ationalbank Copenh en, nm k

GLefort/MLl.,ejeune:jrco

ar • iget

Tha:k you £or your lett r o de by your over nt for a lo

to help ... inance the xpansion of power of die el locomotiv s .

Mr. Bl ck has re replied that r ls the issue in the Belgium and be for you to find

us like

e oul •

June 4, 1958

j cerni the re t

rnatio al Bank nd th acquisitio

n his letter to • ~1 1 ck al o said th· t for considerin y ue t for , th customarily sends a mi sion to the count seeking lo to review th economic situ-ation and to examine the projects for which the fin c is o ht .

s far c see now it does not ee os ible to hav a mission go to r k befor arly t • I have written to • iels n ccordi ly, and would be 1 to know beth r this ulct be uitable.

• • Diga P rmanent eeret inist 0£ Fin ce

ours inc rely,

s. . Cope Director of rations

Europe , Africa and Austral sia

, Copenh n , runark b-. L.

Glef ort/MLLe jeune: jrc .

Jun 4, 1958

o 1 let vill

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(}~~hs

(, (

May 29, 1958

Eugene R. Black, Es~., President International Bank for Reconstruction

and Development 1818 H Street, N.W. Washington 25, D. C.

Dear Mr. Black :

At Mr. Young's request, I am sending you herewith

copies of two letters relative to the Kingdom of Denmark.

Very truly yours,

Secretary to Mr. John M. Young

Enclosures

DANISH EMBASSY OP'P'ICII: Otr THE

P'INANCIAL COUNell:LLOR

ROOM 1814, 4.Z 8ROADWAY,

NIEW YORK 4. N . Y .

January 12 , 1949

CAaLII: ADDRUe : P'ICODALII:

TallPHONII::

aOWLING GllltllN •.• 7811

~essrs Morgan Stanley & Co. 2 Wall Street

Ne~ York 5, N. Y.

Attention; John M. Yoy.ng~

Dear Sirs:

Referring to our recent conversations I be5 to er.close

a copy of a letter, addressed on 4th inst by the Danish Minister

of Finance, Mons. H. c. Hansen, to John J. McCloy, President of

the International Bank f or Recor,struction and Development. As

yo~ will observe, this letter contains a request by the Danish

Government to the Intern~tional Bank to use your services in the

marketing of Danish securities held by the International Bank.

'Enclosure

Faithfully yours,

~ -~ B. Ahlefeldt Financial Counsellor

THE MINISTRY OF FINANCE SECRETARIATE FOR THE NATIONAL DEBT

C~ble Address : FINAN S

Code: A. B. C., 6th Ed. - T dephone: Central 15360, Extension H6

eo/'M'~n, '~- Jamar., 4, 1949

In replying pleas~ quote : S. G. N~- l29bI MP/JIT

Dear llrl

I \&D4entan4 that at •om 1'uture date oons1deraUon -¥ be ai•• b7 the International Bank to the poaaible aale to priYate 1nat1tutioaal 1nYeatora ot obl1ga t1on• ot Yariou• goTernmenta held ~ the BaDJt

and bearing the guarantee ot tba Bank.

It la alao rq un4eratand.1q tbat the International Banlt would oon

f•r with rq GoYernment it the Banlt ahould propoH to diapoae of oblip

Uon• ot the lingdom of Denmark held b7 the Banlt in 1 ta portfolio.

Aa 7ou are aware, Daniah OoYernment ottioiala ha Ye tor ••••ral ,ear• bffn a4Yia1na with Meaan. Jloraan Stanle7 & co., relat1Ye to the

poaa1b111'T of J>aalah-OoYel"Dllll9nt f1nano1na in the United Statea aarkati 1n thia oonnexlon a aubatant1al U10unt of work baa been 4on• on prepar

iq a Regiatration Btatuant, ln ant1o1patiou ot t.ha time when lt IIQ'

N poaaibl• to proceed w1 th nob 1"1nanolq. It 1a therefore requeat-

e4 that, ahould th• Inwrnational Bank pJ10poa• to -rit•I Daniah Oo•ernaent ol>liptlona bald b7 lt, the NrTioea ot Ma••ra. Morp.n 8tanle7 A Co., ono• ~ pJ'IOpoaed tranaaot1on baa been d1aouaaed with the otti

oiala or th• Daniah OoYernment, be uaed in the aal"ket1q of t.M ••cul"-

1 Uea.

John J. J100lo7, Esq., President International Ban& ~or Reoon

atruction and DeYelopaent 1818 H Street

Waabington 25, D. o. u. s.>...

Paitbt'ull;r 7oura,

H.C. lWiSD .Danillh M1n1eter ot Finance

• : • _ '. 1-\ __ _ ES

JU 2 9 04 11 1958

I.

Schedule

of

documentation x) referred to in letter of May 23, 1958 from Mr. Svend Nielsen, Danish Member of the Board of Governors, to Mr. Eugene R. Black, President of the International Bank for Reconstruction and Development.

Memorandum on Denmark's economic position with the v ";' ........... ~J>,. f-»<- )_ I o I:.

following enclosures:

(1) Extracts from the chapter on Denmark in OEEC's Ninth Annual Report;

J) .. C "'" ' 1,1

(2) Economic Survey of Denmark, dated Ma rch 1958, (3) Denmark's forei gn assets and liabilities during

the post-wa r years (Statistiske Eft erretninger (Statistical Reports) No. 17 of April 9, 1958);

(4) Denmark's public for ei gn debt s e rvice 1945-57; (5) Installments and interest payable on Denmark's

public foreign debts, 1958-85.

II. Memorandum on expansion of power stations with the ./ L ...... ;2,r pc

following enclosures: .Yor ,.Vo ,.,_

(1) Investments covered by the loan a pplication; (2) Total output and net imports of electric energy,

1939/40, 1956/57; (3) Sales of electric energy, breakdown by uses,

1921-57; (4) Fuel consumption of power stations, 1938-56.

III. Memorandum on acquisition of diesel locomotives for the Danish St a te Railways with the following enclosure:

~'-~-

(1) Danish Sta te Railways, Dieselisation Project, l~r"'l""~ Draft Project, September 1957. Y,c JJ, tf

x) Airmailed separately in lo copi es May 23, 1958. Annex 2 to Memorandum I, Economic Survey of Denmark 1958, follows shortly.

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Mr . S. Raymond Cope , Director of Operations -

Europe , Africa and Australasia, The International Bank for Reconstruction and Development, Washington 25 , D. C.

Dear Mr. Cope.

Copenhagen , May 23, l95B.

During the Annual Meeting in Washington last September we had a very pleasant conversation about the possibilities of a loan from the International Bank to Denmark and you kindly suggested that I wrote you when our plans had taken a more definite shape.

During the winter people from the administration together with technicians have been preparing material for a possible loan application and a few days ago the government decided to seek a loan from the Bank for partial financing of an expansion of power stations and for acquisition of imported diesel powered locomotives for the Danish State Railways. The investments involved by these two projects amount to about 500 ·million kroner (about $7o mill.) of which one half will represent direct outlays in foreign exchange . Mr . Svend Nielsen, in his capacity as Danish Member of the Board of Governors, ·has been instructed to ask the Bank to take the request up for consideration and he has written Mr.

Black today. These lines are just to inform you of the official ap

proach . Details of the two prdjects have also been airmailed to the Bank today . I would appreciate it very much if you at an early date would kindly let us know informally your initial reac tion to the application . I would also be glad to receive your advice regarding the further steps to be taken in the matter, a . o . whether yo~ would find it preferable to combine a loan from you with a loan on the New York market .

Yours

*~-•fJ. _ ---...,,.,.,Jrf'-C"'~~ J. I g

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S 47 6 00 1 0 55

Copenhagen, May 23rd, 1958

Mr. Eugene R. Black, President, International Bank for Reconstruction and Development, Washington 25, D. C. U.S.A.

Dear Mr. Black,

The Danish Government has decided to seek a

\

loan from the International Bank for Reconstruction and Development

for the purposes mentioned below, and instructed me, in my capacity

as Governor for Denmark, to ask you to take this request up for

consideration.

The loan is intended for financing an expansion of

power stations and for acquisition of imported diesel-powered

locomotives for the Danish State Railways. The cost involved by the

expansion of power stations is estimated at slightly less than 400 million

Danish kroner of which some 1,50 million kroner represent direct outlays

in foreign exchange. The diesel locomotives will cost some

100 million kroner, .~11 of w1?-ich will be payable in foreign exchange • .

The investments invol v~d by these two projects thus amount to about

500 million krone:r (about $ 70 million) of which one half (about

$35 million) will re pre sent direct outlays in foreign exchange. I

The power project involves expansions of six power

stations, which are scheduled for completion in 1960, 1961 and 1962,

and inter-connecting grid systems and main supply lines which will

reduce the need for total installed capacity by enabling the power stations

to pool their reserve capacity.

The locomotive project involves the completion of

a programme under which the Danish State Railways have started a

transition from steam engines to diesel locomotives. This modernizat

ion programme will improve the operating efficiency of the Danish State

Railways and result in substantial economies in labour and fuel; the

entire cost of fuel has to be paid in foreign exchange.

Both these projects must be regarded as measures

of high priority. Their implementation is an important factor in the

economic development of Denmark, and they will result in long-term

economies in foreign exchange. In the short run, however., these

investments imply an out~ in foreign exchange, and in view of the

structural problems which confront the Danish economy, it is thought

natural to cover this initial burden on the balance of payments with a

loan from the IBRD.

-2-

A satisfactory growth of Danish production

presupposes a large and sustained expansion of Denmark's foreign trade

in goods and services, but the obstacles which increasingly have

hampered the international trade in agricultural products have rendered

it practically impossible to expand the exports of Danish agricultural

products. As rapid progress has been achieved in other exports, the

share of agricultural products has gradually declined, but nevertheless

still constitutes about one half of D·enmark 's total export earnings.

The clamping down of Danish agricultural exports

to their present level has had two important consequences: Firstly,

it has stressed the urgency of expanding other sectors of the economy

in order to achieve a growth of total production that will pave the way

for increasing prosperity and provide employment opportunities for a

growing population and for the manpower leaving agriculture as a

result of the progressive mechanization and modernization of that

sector. Secondly, it has prevented total export earnings from being

expanded at a sufficiently fast rate to enable Denmark to sustain even

a mode st economic growth.

These circumstances largely explain why the Danish

economic development since the post-war reconstruction was completed

about 1950, has been unsatisfactory in relation to the desired progress

as well as to the progress made in other countries.

The growth of Denmark's industrial exports shows

that considerable results have been reached in the re-orientation

required in Danish economy to expand the volume of non-agricultural

production and employment with a view to gradually widening the basis

on which Denmark relies for her earnings of foreign exchange. But if

Denmark has to finance such adaptations from its own economic

resources alone, the growth rate of production and employment will

be too slow to be satisfactory. It would alleviate the difficulties

appreciably, and the above-mentioned re-orientation would be easier

for Denmark to undertake, if funds could be borrowed abroad for a

transitional period to finance part of the necessary investments.

The Danish authorities see no objection to borrowing

a certain amount of capital from foreign sources for the financing of

productive investments. After the substantial repayments made on

foreign debts during the last few years, Denmark's foreign long-term

debt, public and private, does not to-day exceed the pre-war amount

in Danish kroner. In real terms the foreign debt is thus considerably

lower than before the war, representing only the value of about two

months' exports.

-3-

Views similar to those outlined above have been

expressed in international appraisals of Denmark's economic sit uation,

for instance in the chapters on Denmark in OEEC .'s annual reports.

• / • ~ ~~ 4 · I enclose a list of material submitted simultaneously

with this letter, and giving details regarding the economic position of

Denmark as well as regarding the projects for which IBRD-·financing is

sought.

I would appreciate it, if you would let me know your

initial reaction to this letter, and inform me of your suggestions for the

further procedure in the matter.

Yours sincerely,

(Svend Nielsen)

f •

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April 1958

MEMORANDUM (III)

on

acquisition of diesel locomotives for the Danish State Railways

Summary

This Memorandum describes the conversion from steam to diesel

locomotives in the Danish State Railways. The pu~pose of this change

is to save fuel costs, which for Denmark represent foreign-exchange

outlays, and also to reduce the cost of manpower. Conversion from

steam to diesel operation has already been effected in those fields

where the expenditure on new locomotives could be most speedily re

couped by economies in operational expenses: large diesel-electric

locomotives have been acquired for the main lines operated by the

Danish State Railways and diesel articulated trains have been bought

for branch lines operated either by the Danish State Railways or by

independent companies.

The project submitted here will complete the conversion to diesel

operation in the Danish State Railways. After the conversion,steam

locomotives will only be used to cope with peak loads of rail traffic.

The plans are to purchase another 20 large diesel-electric locomotives

during the coming 3 to 5 years, as well as 46 diesel locomotives of

a somewhat smaller type and 26 4-axled and 83 3-axled diesel shunting

locomotives. It is expected that the two smaller series of locomotives,

i.e. the 20 for line service and the 26 for shunting, can be manufac

tured in Denmark whilst the other locomotives would have to be pur

chased abroad. The foreign-exchange outlay for the locomotives to be

bought abroad is estimated at kr. 100 million. Calculations show that

this foreign-exchange expenditure may be recovered through fuel savings

in the course of 10-15 years.

- 2 -

1. The total length of Danish line service is about 4,500 kilometres,

equivalent to about 100 km per 1,000 knf of area and about 1 km per

1,000 inhabitants. This railway system was largely developed before

the First World War . In recent years the tendency has been to abandon

certain branch lines and to improve the service on the main lines,

e.g. by laying double tracks and improving signals and safety devices.

During the inter-war years, combined highway and railway bridges

were built to join Funen with Jutland and Lolland-Falster with Zealand.

The islands of Zealand-Falster-Lolland are connected by rail ferries

on three sides: across the Great Belt via Funen and Jutland to the

European Continent, across the Sound to Sweden and across the Baltic

to both West and East Germany. In conjunction with the Danish main

line service, these ferry routes carry international passenger and

goods traffic between Scandinavia and Central Europe . The ferry ser

vice across the Great Belt, located a t the Danish arterial traffic

route, is maintained by 7 triple-track diesel ferries in addition to

the ferries for motor vehicles .

2. The Danish State Railways (DSB) operate 2,550 kilometres of rail

ways , whilst about 2,000 km are run by companies in which local authori

ties (and in some cases the State) are shareholders. The following

table gives a survey of the DSB line service which includes all the

main lines:

km:

Single track

Double track

Total distance operated

Length of track operated

Sidings

Total length of track

Table 1

DSB total Of whiq~h-=~--~---Main lines Electrified

1,850 735 10

_.19S}__ ___ ---··· 66'--'0 _____ _.5;_0_

_..8.55..9 ___ ~~1~·-3-95 __ ~~-~~60

3,250 2 ,055 110

_Ll.5.Q. __

==4i800===================================

Only the Copenhagen suburban lines are electrified. Branch lines

operated by companies (private railways) almost exclusively employ

diesel motive power installed either in railcars, diesel articulated

trains or diesel-electric locomotives of up to 750 h.p . Diesel articu

lated units are also used for minor train services on DSB main and

branch lines. Until recently, however, the major passenger and goods

- 3 -

trains on these lines have chiefly employed steam locomotives. These

steam locomotives are now being replaced by diesel locomotives under

a project started a few years ago.

3. In 1951, at the request of the DSB, the Academy of Technical

Sciences appointed a committee to study the replacement of steam by

dieselisation or electrification. A minority of the committee, which

presented a report in 1956, recommended that railways east of the

Great Belt should be electrified immediately, whilst diesel motive

power could be used west of the Great Belt for a transitional period.

But the majority of the committee found that although the future elec

trification of the railways should be borne in mind at all times,

diesel motive power should be introduced for the time being, both

west and east of the Great Belt.

In accordance with the findings of the majority group of the

Commission, diesel locomotives are being introduced all over the

country. This should be regarded in the light of the fact that dieseli

sation involves less capital expenditure than electrification and also

that each steam locomotive replaced brings immediate returns without

affecting the rest of the service; finally, the cost of a diesel loco

motive is recovered in a few years through the fuel economies achieved

by conversion from steam to diesel traction. In 1954, DSB put 4 diesel

electric locomotives into service, 20 in 1956, 13 in 1957, and delivery

of another 9 diesel locomotives is expected in 1958. All these loco

motives are of the series MY with 1,700-2,000 h .p. In addition , 30

diesel tractors were purchased duri ng the period from 1947 to 1955 to

replace small steam shunters.

The Danish State Railways plan to use diesel traction for all

year-round traffic while, at least f or the time being, steam locomo

tives will be held in reserve for extra train services during week

ends, public holidays and the summer vacation. According to DSB's

plans 20 MY units of 1,700-1,900 h.p. will still remain to be purchased

after the acquisition of the above-mentioned locomotives. These 20

units are intended for hauling heavy go ods trains and expresses on

main lines. In addition, the plan provides for acquisition of 46 loco

motives of similar type, but of 1,425 h.p., for hauling passenger

trains of medium size and medium and small goods trains, chiefly on

branch lines. These locomotives must be usable for multiple unit opera

tion with larger :MY locomotives on the main lines. Finally, most of

the shunting service is to be dieselised by acquisition of 26 4-axled

diesel locomotives for shunting service at ferries and other places

- 4 -

where large sections of trains have to be moved, and 83 3-axled diesel

locomotives for other shunting. If the acquisition of these units can

be accelerated, economies in foreign-exchange expenditure on fuel im

ports can be achieved.

4. DSB's rolling stock as of March 31, 1957 and its operation in the

fiscal year of 1956/57 are sbown in the following table.

Table 2

March 31, 1257 1226-21

Number Seating goods Numbers Millions Millions of axle-km

Line locomotives 311

Shunting loco-motives 246

.,rticulated diesel 268

"Lightning" express 8

Passenger carriagis 1,496

Luggage and mail vans 520

capacity capacity in tons

14,530

1,614

94,264

8

265

12

116

4 , 547

of axles

5,272

1,461

of by motive by type loco-km power of stock

16.4 619

7.6

29.7 301 135

4.7 28 23

290

70

Goods waggons

Total

12,626 202....9.24 25,236 " - _____ : --·- ·- 435?

The number of axle-km (948 million km) corresponds to 370,000

axle-km per train-km. The total rail haulage was 38.6 million train-km,

of which passenger trains accounted for 30.1 million km and goods trains

for 8.5 million train-km. The seating capacity hauled was 6,695 million

seat-km; the goods capaci ty hauled was 3,867 million ton-km. Seating

utilised was 2,914 million passenger-km, representing an average utilisa

tion of about 40 per cent. Goods capacity utilisation was 1,309 million

ton-km, equivalent to an average utilisation of about 30 per cent. A

total of 6.7 million tons of goods and livestock was transported. The

total weight hauled on the railways in 1956/57, including rolling stock,

was distributed according to motive power as follows:

Tab_lLl_

Train Articulated "Lightning" Total locomotives trains express

- - ---- _________ ,,,_ train~--

Including motive power 7,020 3,124 417 10,561

Exel uding " " 5,408 2,491 324 8,223

- 5 -

Utilisation of motive power in 1956/57 was distributed as follows :

Table 4

Millions of locomotive-km

In line service Motive unit Other motive at head of units

Steam locomotives

Diesel 11

train

9.9 4.6

Diesel articulated 17.6

"Lightning" express 2.4

Electric trains 4.1

Shunters

38.6

0.1

1.3 2.3

5.1

8.8

Shunting

1.0

0.3

1.6

o.o

10.5

Idling, standby

0.5

o.o

0.5

The number of locomotive-km in line service for motive units at

head of train will be found also in the previously mentioned total

number of train-km of rail haulage.

Total

11.5

4.9

20.5

4.7

9.2

7.6

The "lightning" express trains in the above table are diesel-electric

articulated trains consisting of 3-4 carriages of which both the first

and the last are powered. The 8 "lightning" expresses in the first column

of Table 2 are regular permanently coupled trains built between 1935 and

1939. The performance listed in the tables for "lightning" expresses also

includes peak-load extra trains consisting of ordinary diesel motive units

and passenger carriages. Both the "lightning" trains proper and the extra

trains make the daily trip and return between Copenhagen and north, south

or west Jutland, the entire motor train being ferried across the Great

Belt.

Utilisation of motive power stock in 1956/57 is shown an the fol

lowing table of locomotive-km per year per loco-in-service.

Table 5

Steam line service locomotives

Diesel locomotives ........... Diesel articulated ........... "Lightning" expresses ••••••••

Diesel-electric locomotives ••

Steam shunters •••••••••••••••

48,289 km

208,220 " 141,189 II

279,449 " 96,146 " 45 ,497 "

For steam shunting locomotives, 1 shunting hour equals 10 km.

- 6 -

5. Developments in recent years which have led to the distribution

shown for 1956/57 over the various categories of motive power for train-km

(Table 4, column 1), for axle-km (Table 2, second last column), and for

gross ton- lan ( 'rable 3), are shown in the following

Train-km

Steam locomotives

Diesel If

Diesel articulated trains

"Lightning" expresses

El ec tr ic trains

Petrol motor trains

Total

Axle-km

Steam locomotives

Diesel "



Electric trains

Petrol motor trains

Total

Gross ton-km

1952/53

Table 6

1953/54 1954/55 1955/56 Million train-bu (per cent)

17 . 5 (49)

0.5 ( 1)

11.8 (33)

2. 2 ( 6)

3. 5 (10)

0 . 4 ( 1)

35 . 9(100)

667 (73) 6 ( 1)

148 (16)

25 ( 3)

61 ( 7)

2 ( -)

16.8 (45) 15.1 (40) 13.6 (36)

0.4 ( 1) 0 . 9 (2) 1.2 ( 3)

13 . 5 (36 ) 15.4 (41) 16.9 (44)

2. 2 ( 6) 2.3 ( 6) 2.3 ( 6)

4.0 (11) 4.2 (11) 4. 2 (11)

0. 4 ( 1) 0.2 ( -)

37 . 3(100) 38.1(100) 38 . 2(100)

Million axle-km (per cent)

657 (70)

5 ( 1)

173 ( 19)

25 ( 3)

71 ( 7)

2 ( -)

604 (64)

37 ( 4)

205 (21)

25 ( 3)

74 ( 8)

1 ( -)

553 (59)

52 ( 6)

226 (24)

27 ( 3)

73 ( 8)

1956/57

9.9 (26)

4.6 (12)

17 . 6 (45)

2. 4 ( 6)

4.1 (11)

38 . 6(100)

390 (41)

229 (24)

227 (24)

28 ( 3)

74 ( 8)

909 (100) 933 (100) 946 (100) 931 (100) 948 (100)

including motive power Millions gross ton-km (per cent)

Steam locomotives 7,505 (74) 7,415 (71) 6,775 (64) 6,296 (60) 4,448 (42)

Diesel " 78 ( 1) 76 ( 1) 439 ( 4) 601 ( 6) 2,571 (24)

Diesel articulated trains 1,528 (15) 1,780 (17) 2,103 (20) 2,323 (22) 2,321 (22)

'Lightning" expresses 388 ( 4) 386 ( 4) 385 ( 4) 396 ( 4) 417 ( 4)

El ec tr ic trains 665 ( 6) 772 ( 7) 801 ( 8) 786 ( 8) 804 ( 8)

Petrol motor trains 16 ( -) 14 ( -) 5 ( -)

Total 10,180(100)10,443(100)10,508(100)10,402(100)10,561(100)

The table illustrates how the use of steam has fallen to about one

half in the course of 5 years, whilst the use of diesel-electric ar

ticulated trains has increased and the employment of diesel-electric

- 7 -

locomotives has gone up sharply in the last couple of years. The table

further shows - chiefly in the percentage figures - tha t steam and

diesel locomotives are used for the heavi er hauls. The average f igures

for 1956/57 of train weight including motive power, distributed according

to motive power, were as follows:

Steam locomotives

Diesel "



Electric trains

Table 7

Gross ton-km per train-km

446

559

133

174

194 All types of motive power 274

The following table gives the number of motive power units at the

close of the fiscal years of 1952/53 - 1956/57:

Number of ste_?.ID locomotives

2-coupled axles 3-coupled " 4-coupled " 5-eoupled "

Steam shunjers

2-coupled axles 3-coupled 11

4-coupled 11

Diesel-electric lOC.9.!l!.Oti Ve~.

Shunting tr_?.Ctors

Art t.9ula ted

Diesel-electric Diesel-mechanical Electrical Petrol


Table 8

1952/53 1953/54 1954/55 1955/56 1956/21

155 136 108 80 66 218 210 196 191 183

22 22 22 22 22 6 _ ._ 10 ____ 19_ ____ 10 ___ lQ_

401 ill_. ______ 336 303 281

47 44 40 33 30 128 128 128 128 128

15 15 15 15 15

190 187 183 176 173

__ 8 _ __ 9 11 _].A_ _ __ _ _J.Q_

51 .5.L 66 73 73

114 136 153 166 164 8 8 7 7 2

102 102 102 102 102 17 15 15 14

241 261_ 277 289 . 268

8 8 8 8 8

- 8 -

The table shows that in the first stage the most important feature

was the replacement of steam locomotives with 2-coupled axles and a

minor reduction of locomotives with 3-coupled axles, whilst locomotives

with 4 and 5-coupled axles were retained. For the steam shunters the

initial step was the replacement of locomotives wi th 2-coupled axles.

Petrol driven engines are no longer used and diesel mechanically driven

articulated trains have been almost discontinued.

The number of electrical motive units in the Copenhagen suburban

railways and the number of diesel-electric trains ("lightning" expresses)

have remained unchanged during the five-year period.

The number of diesel-electric motive units has been increased by

50 during the last five years. Out of the total of 164 on March 31, 1957,

there were 138 of 2 x 250 h.p. or more,acquired since 1932. Five of the

138 units were 2 x 500 h.p. (series MK-FK), whilst the others were of

series MO (2 x 250 h.p.). Of the MO units 84 were put into service in

the period 1951-56 and 6 are to be delivered in 1957/58.

The number of shunting tractors was increased by 22 during the

5-year period, replacing small steam shunters.

The 26 newly acquired tractors of 167 h.p. are diesel-powered. A

further 20 are on order for delivery in 1958/59.

Out of the 30 diesel-electric locomotives in service on March 31,

1957, 6 dated from 1930-32 whilst 4 were put into operation in 1954 and

20 in 1956. As mentioned above, a further 13 diesel locomotives were put

intc service in 1957, whilst 9 are on order for delivery in 1958. DSB

will by then have acquired 46 MY engines with 1, 700-2, 000 h. p.

Of the lfiY engines purchased up to the close of 1957, 36 were built

in Sweden under American licence wi th some sub-contracting done by Danish

firms, whilst one was built in Denmark. Of the units received subsequent

ly or still on order, 8 are from Sweden and one from Denmark.

6. As described above, DSB plans for the coming years involve acquisi

tion of a further 20 r/i'f locomotives, 46 diesel-electric locomotives of

1,425 h.p., 26 4-axled and 83 3-axled diesel shunters.

In September 1957 the purchase price of these locomotives was

estimated at:

- 9 -

Million kroner

20 line locomotives (1,700-1,900 h. p.) at 1.8 mill i on kroner = 36.0

46 II II (1,425 h.p.) ti 1.43 II II = 65.8

26 shunters (4-axled) ft 0.7 II II = 18.2

83 ti (3-axled) II 0.44 II II "" 36.5

112=locomotives=== =12~e":~=

The two smaller series (the 20 MY locomotives and the 26 4-axled

shunters) are to be built in Denmark. It is an obvious advantage for

Denmark to build up a production of modern locomotives. As regards the

MY locomotives the Danish firm of Frichs in Arhus has already gained

experience with the first two Danish-built locomotives.

There has not so far been any chance of gathering experience of

diesel-electric line locomotives of 1 , 425 h.p. in Denmark, but this

type has been tried out in Sweden. Wi th a maximum axle load of 16 tons .

it is considered well suited for use on DSB branch lines, and it is

also usable for hauling medium-sized trains on main lines and for

operation in multiple unit with MY locomotives as and when loads and

speeds increase on main line services while certain branch lines may

be abandoned as a result of the growing motor vehicle traffic on the

roads. The above price of 46 locomotives of this type i s based upon a

quotation made in September 1957 by the firm of Nydqvist och Holm A/B

(NOH.AB), Trollhattan, Sweden, who are licensed by General Motors Corpora

tion, Electromotive Division (EMD), La Grange, Ill., U.S . A. The quota

tion is based on the assumption of delivery within 3 years of about 15

locomotives annually. About one half of the purchase price is payable

in U.S. dollars and the other half in Swedish kroner.

At the present time, DSB has a 3-axled shunter on trial from

Me ssrs. Henschel und Sohn, Kassel, West Germany, and has placed orders

for another two shunters of this type. As mentioned above DSB plans to

purchase a total of 83 shunters of this type which has been tried out

in Germany. The above-mentioned price was paid for the two engines bought

in December 1957 . The entire foreign-exchange outlay will have to be

made in D-mark.

The total foreign-exchange expenditure for the purchase of the two

larger series of diesel locomotives from abroad will be about kr . 100

million.

DSB, in co-operation wi th the European Railways' joint research

institute, Office de Recherches e t d'Essais (ORE) a t Utrecht, Nether-

- 10 -

lands, has made a calculation to determine how soon the investment re

quired for the planned acquisition of the diesel locomotives will be

regained through savings in operating costs.

These calculations, which are contained in the enclosed Draft

Project of September 1957, show that the annual savings in operating

costs (fuel, lubricants, water, operating personnel, servicing and

maintenance) will amount to almost lcr. 30 million, equal to about

18 per cent of the investment expenditure of 156.5 million lcroner.

This means that the outlay will be earned by the railways in the course

of 6 years. Nearly lcr. 20 million of the annual savings in operating

cos ts will represent fuel expenses. This item, which is the most important

saving on foreign-exchange expenditure, is estimated at 12.5 per cent of

the investment expenditure involved.

The Draft Project also shows that the 66 diesel line service loco

motives are intended to replace 93 steam locomotives, of which 2 have

2-coupled axles, 80 have 3-coupled and 11 have 4-coupled axles. The 109

diesel shunters are to replace 120 steam shunting locomotives, of which

105 are 3-axled and 15 are 4-axled.

The following table shows the consumption of fuel and lubricants

for DSB steam and diesel locomotives during the last three fiscal years:

Table 9

Stea.rr.i loco~..9tives 1224L22 15222L26 l:J5f?ill l(a) On line service

l(b)

2.

1.

2.

Fuel: kg/1, 000 gross ton-km Lubricants: kg/1,000 gross ton-km

On shunting service Fuel: kg/shunting-km Lubricants: kg/100 shunting-km

On line service Fuel: 0re/1,ooo gross ton-lan Lubricants: 0re/1,ooo gross ton-km

Diesel locomo_tives

Fuel: 1/1,000 gross ton-km Lubricants = kg/1,000 gross ton-km

Fuel t 0re/1,ooo gross ton-km Lubricants: 0re/1,ooo gross ton-km

hauled hauled

42.7 kg 0.14 II

8. 6 kg. 1. 78 11

495 5.9

0re 11

6. 63 1. 0.07 kg

137 0re 6.2 11

41.6 kg 0.14"

8.6 kg 1. 73 II

530 6.2

0re II

6. 79 1. 0.05 kg

144 0re 4.9 11

43.3 kg 0.14 II

8.6 kg 1, 71 II

6.33 1. 0.04 kg

154 0re 4.3 II

The comparison between the cost of the fuel (in 0re) required to haul

1,000 gross ton-km - i.e. to move 1,000 tons 1 kilometre - which was 640

0re for s team locomotives and 154 0re for diesel locomotives in 1956/57,

clearly reflects the amount saved in imported fuels by replacing steam

locomotives by diesel motive power.

Ministry of Finance

April 1958

M E M O R A N D U M (II)

on

Expansion of Power Stations

This Memorandum is an account of developments in Denmark's pro

duction of electric energy.

Sales of electricity have gone up by about 200 GWhx), equal to

8 per cent annually. This has necessitated an annual expansion of the

productive capacity by about 100 1£V, The expansion has been concentrated

on a few (12-15) major steam plants which account for about 96 per cent

of the total output. They are owned by individual municipalities or by

several in combination. In order to economise on reserve capacity the

major plants in each of the two parts of Denmark (east and west of the

Great Belt) are inter-connected or in process of inter-connection through

120-150 kV grid systems . The power s tations east of the Great Belt

also exchange energy with the Swedish hydro-electrical plants.

The project submitted in this Memorandum comprises expansion of

six power stations. By arrangement between the stations these extensions

are scheduled for completion in 1960, 1961 and 1962. In addition, the

project involves construction of inter-connecting grids and main distri

bution lines. Three of the power stations west of the Great Belt will

be expanded by 60 1/fN each, while the three extensions east of the Great

Belt are planned at 40, 80 and 135 r:rw. The fuel consumption of the

plant planned is calculated to be 2,600-3,000 kcal/kWh. The total cost

of expansion has been calculated at approx. kr. 320 million of which

kr. 125 million will be payable in foreign currency. The projected

transmi ssion lines a.re estimated to cost kr. 70 million of which lcr. 30

million will be payable in foreign exchange. The lines comprise an ex

pansion of the inter-connecting grids which are under construction

between the major power stations west of the Great Belt and four trans

mission systems which, in connection with the extensions on Sealand,

x) one Giga Watt hour: one million kWh.

ii

- 2 -

will increase the capacity of the existing integrated sys tems (including

the connection with Sweden); finally, the project envisages construction

of a main transmission system on the island of Bornholm.

1. The first major public power station began to operate in the

centre of Copenhagen in 1892. It was a D.C. plant with an installed

capacity of about 1,000 kW. The first major A.C. plant was built in

the northern suburbs of Copenhagen; it was put into operation in 1907.

Just after the First World War, the Danish power stations sold

about 150 GWh annually; the sales reached approx. 700 GWh before the

Second World War. By 1946/47 the yearly sales amounted to some 1,000 GWh

and have since gone up by approx. 200 GWh every yea:r to about 3,000 GWh

in 1956/57. Public power stations now produce about 3,500 GWh a yea:r.

This output is supplied by plants having a continuous capacity rating

of approx. 1,350 MN of which the major stations account for about

1,200 "MN . The average annual load factor i s about 30 per cent:

1,350 MN x 0.3 x 8,760 hours per year = about 3,500,000 1/lWh .

2. The yearly rise in sales by about 200 ~Nh - equal to 7-9 per cent

a year during the last few yea.rs - necessitates annual production in

creases of about 250 GWh in order to make up for distribution losses.

At the same average utilization of the installed capacity, an annual

production increase of that order will necessitate an annual expansion

of the generating capacity of about 100 ],T/7 . Construction of power

stations costs about 800, 000 Danish kroner per MN . The investment in

construction of power plants or expansion of existing plants will

therefore appr oach kr. 100 million annually and reach about kr. 100

million when the corresponding extensions of main transmissi on lines

and inter-connecting lines to other plants a.re taken into account.

Extensions of distribution lines from primary substations and the pro

gressive conversion from D.C. to A.O. entail additional investments

estimated at another kr. 100 million annually.

- 3 -

3. Electricity sold in 1955 was supplied t o the foll owing ca tegories

of consumers z

Manufac turing industries, builders and repair s ervices ......................•.

Cons true tion .............•.............•••

Service trades ..........................•.

Waterworks .... . ..... " •..................•.

Farming and market gardening ••••••••••••••

Railways and t ramways •••••••••••••••••••••

Street and highway lighting •••••••••••••••

Lighting, household consumption and prof essions .............. .. ........ . ... .

Of t he total output in 1952/53

per cent went into power

" " " " traction II II II II lighting

Per cent :

38

1

1

2

21

4 2

21

Total 100

48

4 20

_?.§_

100

II " ti II heating and other purposes

4. Denmark has about 300 power stations selling elec tricity. Fifteen

big plants account for 96 per cent of the production. On April 1, 1956

the distribution of power stations by number and size was as f ollowst

Number Share of outEut

Major stations 15 95.s per cent

Smaller stations 94 2.4 II II

Small public stations 197 1.8 11 II ..------=~2~= 100.o=Eer;cent==

The following table shows the number, rated capacity and produc t ion

of the power stations, grouped according to plant capacity

Size : Number Capacity Pro duction in per cent i n per cent

Under 1 JlNf 260 7. 4 2.5

1 - 10 MN 33 5.2 2. 0

11- 50 Mi7 3 4.5 4. 0

51-100 MN 6 32. 9 34.4

over 100 MN _4__ so.o ..2L.L Total 306 100.0 100.0

- 4 -

5. In addition to the public power stations, which now have a total

capacity of about 1,500 MN , many private industrial enterprises generate

electricity for their own use. There are about 2,000 of such private

stations with a total capacity of about 125 MN and a combined output

of some 300 GWh . A little over 300 of these plants aggregate nearly

100 MN whilst the remainder are very small units.

6. Capacity and output for the 306 publicly owned stations, as of

April 1, 1956, was distributed over the various types of prime movers

as follows:

Number _ _ ..Qa:ea_ci ty Output

M{y per cent GWh per cent

Steam turbines 67 1,251.1 87.6 3,316.1 95.3 Diesel motors 723 166.2 11.6 134.0 3.9 Gas engines 3 0.3 o.o Water turbines 69 11.0 o.8 29. 2 o.8 Wind powered motors 21 o.6 o.o 0.3 o.o

------ ·---· - - -----·- -883 1,429.2 100.0 3,479.6 100.0

Steam turbines are found chiefly in major stationsJ the other sta

tions generally use diesel motors.

On Aprill, 1956 the following prime movers were installed in the

major power stations~

Number Capacity Average cap~q_i__1x.

MN Wv

Steam turbines below 30 atm.pressure 28 339.6 12.1

30-49 ft ft 13 325 .0 25.0 50-99 ft " 12 439,0 36,6 100 ft ft and

above llQd.. 27.6 Total 57 1,214.0 21.3

Diesel motors 6 28.9 4.8 Water turbines 2 4:.0 1. 2

Total 66 1,246.9 18.9

These prime movers were distributed as follows according to size

and age ,

- 5 -

Numbers according to ca.P_aci t.;L. in 1TN Total

below 6 6-15 16-25 26-A.9.. a b9yJL.4Q. number

1951-55 2 3 11 4 20

1946-50 2 l 2 3 1 9 1941-45 4 4 1936- 40 3 1 3 2 9 1931-35 5 4 2 11 Before 1931 __..2. 2 2 - 13 _____ .._.._. __ ------ -·--·-

Totals 23 10 10 18 5 66

During the 'thirties and in the years immediately after the Second

World War, a size of 25-30 MN was most usual for new units. In the

latest new plants and extensions a size of 50-60 NNI has been adopted.

In one new station, at Asnres, which is expected to be in operation in

1958, a 135 MW turbine is to be installed; it will be fed by a boiler

built for a pressure of 125 atmospheres.

7. The majority of the smaller public power stations are to the

west of the Great Belt that separates Zealand from Funen. This is

shown below (as of April 1, 1956):

Number of stations

Output

Steam

Diesel

Water power

Wind power

Total

West of East of Bornholm Total Great Belt _ __ G:_.j3_!_ - - --- __ _

_ lli_ _______ _ 56 ______ 3_ ___ • ___ .3.96

GWh GWh GWh GWh

1,262.5 2,027 . 0 26.6 3,316.1 115.9 17.4 0.7 134.0 29.2 29.2

- --~ --·---· - ------- - ·-- 0.3

1,407.9 2,044.4 27.3 3,479.6

As mentioned before, an A.C. power station was built in Zealand

in 1907. Before the First World War two more such plants were put into

opera tion on Zealand and one on t he island of Falster. In the early

'twenties the four stations were inter-connected by a 50 kV transmission

line, and the H.C. 0rsted Station in Copenhagen was linked to this grid

later. Up to the outbreak of the Second World Was t his grid was the

largest supplier of electricity to Zealand. In 1940 the Kyndby Station

at Isefjord came into operation. At the same time the Masned0 Station

was erected in South Zealand. These s t ati ons are now inter-connected

with each other and with the Swedish hydro-electric supply network

- 6 -

through 120 kV mains. In 1953 a new station in Copenhagen came into

operation, the Svanem0lle Station. As stated above, the Asnres Station

near Kalundborg is expected to be in operation in 1958.

D.C. power stations (the first of which was opened in Copenhagen

in 1892) were gradually built in provincial towns all over the country.

The number rose to about 400, but this figure has been falling for

several years.

The transition to alternating current has taken a different course

in Jutland and Funen than it has east of the Great Belt. West of the

Great Belt, the town D.C. stations were re-constructed for A.C. opera

tion but in general they maintained their separate supply areas. Not

until 1935 was some degree of co-operation established between four

east Jutland towns over a 60 kV transmission network. After the Second

World War, during which the smaller diesel-powered stations suffered

from oil shortages, steam power stations were erected in partnership

to replace older small plants, and these jointly operated power stations

were inter-connected. Thus, Vestkraft was established in EsbjergJ

Midtkraft in Arhus; the Skrerbrek Station by Kolding Fjord, and the

Funen Station near Odense. No joint power station has been set up in

north Jutland, but the Municipal Power Station of Alborg supplies a

large hinterland both south and north of the Lim Fjord. The municipal

Power Station of Randers is also considered to be a primary station

as it covers a large district around that town.

South Jutland holds a special position west of the Great Belt.

When this region had been restored to Denmark by the Treaty of Ver

sailles, a joint power station was built at Abenra to serve the entire

area. In 1958 another station, at Ensted, was put into operation in

South Jutland.

Bornholm has a joint station at R0nne.

8. The new plants erected and the extensions made of primary power

stations since 1950 as well as the extensions programmed for the imme

diate future are shown in the following table:

c--

0

.Alborg

Randers

Midtkraft

Skrerbrek

Vestkraft

lbenra

:Jpsted

Fyn

H.C . 0rsted

SvaneID0lle

Kyndby

Asnres

l':riasned0

Eornholm

Growth Status at

year-end

----··--------- - - ·--·----- - - - - --- - -- -- - --·- _+ __ ______ _

Put int..Q_J)R~ra:_tion ----·-----""-"'-"---==

1950 1951 195L

40

2.9 63

27 83

1953 · 1954 1955

30 18

56 60

36

__ E192..ected in ..QE_eration

1956 1957 1958 1959 1960 1961

40

60§

60

60

1962

60§

__ 27 _____________________ 72 _______________________________________________________________ 60§

lU 30 40§

48 54 38

90 60 60 60

135 135§

56 40 80§

__ 5"'-- . --~_7 __ _ _,_ __ Total growth 112 (., J 30~

17 84 1

138 7 233 100 140 175 120

Shut ~d~own~------~· --·--· Status at year-end 673 7,3 1,018 1,087 1,225 1,225 1,232 1,465 1,565 1,705 1,880 2,000

Copenhagen stations with a capacity of 21 'NN{ which are only used for supply of

district heating are "".ot included.

- 8 -

It is proposed that the extensions marked(§) in the table - scheduled

for completion in 1960, 1961 and 1962 - be partly financed with loans

from the International Bank for Reconstruction and Development. The total

investment required for these extensions is estimated at kr. 320 million.

This amount consists of the following items:

Boilers •••••••••••••••••••••••••

Turbines and alternators ••••••••

A-uxiliaries .•.................•.

Transformers •••..••.•.•..••...••

Outdoor substations •••••••••••••

Buildings ...................... .

Storage depots and tanks••••••••

Planning and design, interest,

Mill ion kroner

115. 7 66.9 33.2 6.4

13.2 4s.9 2.2

miscellaneous................ 32.8

Of this total about kr. 125 million will be payable in foreign

exchange. That part of the installations which is not financed with

a loan from the International Bank will be covered partly by self

financing and partly by funds to be borrowed in Denmark.

Annex l contains a brief description of the extensions to the

individual power stations. Table A in the Annex shows a breakdown of

total costs and foreign-exchange expenditure involved by the various

elements of the new plant.

9. The above-mentioned 306 power stations in operation on April 1,

1956 are owned by 286 concerns, of which 237 were located west of the

Great Belt, 44 east of the Great Belt and 5 on Bornholm. The stations

are classified below according to ownership:

Number of power stations

Municipal

Corporations

Co-operatives, partnerships

Private

Total

Primary or secondary

50 5

4 5 34 168

__ 1 ____________ 1 __ _

89 197

Among the primary power sta tions, the plants in Copenhagen, Alborg

and Randers are municipal, whilst the Masned0 Station is owned by the

SEAS Corporation. Besides generating electricity these plants also

- 9 -

distribute direct to consumers. The other power stations are owned

by partnerships or co-operatives. (The Asnros Station is being put up

by the Isefjord Station which owns the Kyndby Station. The Ensted

Station is being built by the Corporation which owns the station at

Abenra). The shares in these corporations are held by municipalities

and consumer federations (normally organized as co-opera tive societies)

which purchase supplies in bulk from the primary substations of the

power stations and handle the distribution to the consumers. These

municipalities and co-operative societies are usually former producers

which used to generate electricity in their own small plants that have

now been shut down in connection with the progressive centralization

of the production of electric energy.

10. By concentrating the generation of electricity on large power

stations and by installing the most efficient boilers, a better economy

of energy supply is being achieved. In 1939 the steam stations required

an average of 4,500 kcal for the generation of -one kWh. The average

fuel consumption is now 3,500 kcal per kWh generated. The fuel consump

tion of the new stations planned will be 2,900-3,000 kcal per kWh,

except the Asnres Station, which is expected to produce 1 kWh with a

fuel consumption of 2,600-2,700 kcal.

11. Some of the primary stations are loca ted in or near large towns .

It has therefore been natural to incorporate supplies of district

heating to the towns in the operat ions of these stations. The Copen

hagen stations and the municipal stations in Alberg and Randers supply

district heating to their respective tovms, the Funen Station supplies

Odense; the Midtkraft supplies Arhus amd the Vestkraft supplies Esbjerg

with district heating. The total amount of district heating supplied

by these stations is about 1.6 Gcal annually.

12. In recent years, the price situation has led to a growing consump

tion of fuel oil and Danish lignite while the consumption of ordinary

coal has declined. In the calendar years of 1952 and 1956 the fuels

consumed at the primary power stations were as follows:

Thousand tons

1952 pct.cal

1956 pct. cal

Ordinary coal

462 21%

Inferior coal

616 25%

650 20-X,

Coke ~

195 12%

157 7%

Lignite

430 g'/o

1,211 19%

Fuel .ill....

140 14%

535 33%

- 10 -

13. Economies are achieved by inter-connecting the transmission systems

of the power sta tions, thereby reducing the reserve capacity needed by

individual stations for peak l oads and breakdowns. At the same time,

the generation has been co-ordinated so t hat units opera ting at the

lowest cost can be run conti nuousl y whilst l ess economical sets are

only started up when needed.

As mentioned, inter-connection of power stations has been practi sed

east of the Great Belt for many years . West of the Grea t Belt, co-opera

tion on a large scale was begun i n 1957 when the primary stations estab

lished ELS.AM to operate the grid system.

There is still no connection between Danish stations west and east

of the Great Belt but plans for such a connection are being considered.

Inter-connection of supply is eff ected through the primary high

voltage transmission system; east of the Great Belt a 50 kV network has

been used, but recently 120 kV lines have been built. West of the Great

Belt 60 kV lines are in use, but an east-west 150 kV connection (Odense

Skrerbrek-Esbjerg) and a north-south 150 kV connection (Alborg-Randers

Arhus-Skrerbrek-Abenra) are being installed to mee t at a distribution sub

station at the Skrerbrek Station.

14. The Zealand stations a.re linked with the Swedish hydro-electric

stations by two 120 kV cables, installed and owned by a partnership,

I/S Kraftimport, formed by eas t Danish power s tat i ons . It has been

agreed recently that a third 120 kV cable i s to be l aid by Swedish

interests. When there is a surplus i n Sweden , this connection supplies

Danish stations with the more cheaply gener a ted Swedish electricity.

In return, Sweden can draw on t he Danish s team power stations when

Swedish water power is scarce. During the yea.rs before 1955 Denmark

was a net importer of 100-150 GWh each year (300 GWh in 1953/54); but

in 1955 and 1956 Denmark was a net exporter on account of low rainfall

in Sweden. In 1956 Denmark exported 113 GWh net; the Danish output of

electricity in that year was 3,636 GWh, of which 3,523 was consumed in

Denmark. In 1957 Denmark imported 370 GWh; though the domestic consump

tion rose to 3,740 GWh it was possible to reduce the amount genera ted

in Denmark to 3,370 GWh.

Co-opera tion across the Dani sh-German border has been established

between the power stations in Abenra and Flensburg. This connection

has been provided to take care of emergencies; normally there are no

sales of current through it.

- 11 -

15. The primary transmiss ion and inter-connection lines proposed to

be partly financed with loans from the International Bank are as follows:

Station

Kraft import

Copenhagen

Isefjord

Masned0

Alborg

Eornholm

Ins tal_la tj...2n.

Inter-connection lines

Grid control station

Inter-connection and primary distribution lines

Inter-connection lines

Primary distribution and inter-connection lines

Primary distribution lines

__1.2..tal _g_~ 1\f,.ill ion kroner

12 .3

11.9

24.8

5.0

10.1

4.6

Total==============68.7=

The foreign-exchange outlay for these installations will amount

to some kr. 30 million. A description of the individual lines and a

breakdown of total cost and foreign-exchange outlays for the individual

parts of the installations are given in Annex land in Table B of that

Annex.

16. Annexes 2-4 give t abular surveys of electricity genera ted by power

stations, sales of current and f uel consumed by stations over a number

of years.

Annex 1

to Memorandum ( Ill

Investments covered by the application ·---·-· --·-·----------

The application covers investments in power plant and primary

transmission lines planned to be completed in 1960, 1961 and 1962;

the primary transmission system for Bornholm may be completed already

in 1959.

Investments in power station plant to be completed in the above

mentioned years are estimated to entail capital outlays for the in-as

dividual projects and the parts of the installationsLshown in Table A.

The proportion of the expenditure that will be payable in foreign ex

change is shown below.

In Copenhagen, electricity is generated at the H.C. 0rsted Station

(now 171 Nm) and the Svanelll0lle Station (now 102 1W{). In 1958 the capaci

ty of the Svanelll0lle Station will be increased by 38 1:W{ through the in

stallation of a high-pressure condensing turbine . When, finally, in 1959

a spreader-stoker boiler is installed in the Svanem0lle Station with

an output of 175 tons of steam per hour (t/h), this station will have

been fully expanded. The following plant extensions will be effected

at the H.C. 0rsted Station, where dismantling of obsolete boilers and

turbines will make room for the installation of boiler plant having a

total capacity of 700 t/h with a high-pressure back-pressure turbine

and a condensing turbine having a combined capacity of about 90 'NNI. The

high pressure condensing turbine with a capacity of 50-55 1/Nf is not ex

pected in operation until 1966 . The expenditures in Table A include a

boiler plant of 350 t/h to be put into operation in 1962 together with

a high pressure back-pressure turbine of 36-40 Miv capacity, and another

boiler plant also of 350 t/h capacity to come into operation in 1963.

The boilers will either be pulverized-coal-fired of 350 t /h or

spreader-stoker-fired of 175 t/h each . The steam pressure and steam

temperature of these boilers - as well as those mentioned below with

the exception of the boiler planned for Alborg - will be respectively

120 kg/cnf' and 540°c. Energy consumption for the generation of electricity

in the projected installations is estimated a t an annual average of

2,900-3,000 kcal/kVvh except for the plant at the Asnres Station where

units as large as 135 Miv are used; this station has an energy consump

tion of only 2,600-2,700 kcal/kWh.

T ab 1 e A

Power station installation~ t otal cost and f~;--~chan~ ou~

Llillion kroner H.C. 0rsted AsncBs Fun.en n

11idtkraft Alborg Masned.0 Grand _:totals

·1) 2) 1) 2) 1) 2) 1) 2) 1) 2) 1) 2) 1) 2)

Boilers 34.0 12 .0 21. 7 7. 8 15 . 0 7.0 16.0 7. 3 9.0 2.5 20.0 8.0 115. 7 44 .6 Turbines , alter nators 3.8 3.5 17.1 14.0 11. 0 6. 0 11. 7 11. 7 9.3 6.o 14.0 10. 9 66 . 9 52 . 1 Auxiliaries 9.v 3.5 8. 4 5. 1 5. 0 3.0 8.8 3.4 2.0 2.0 33.2 17.0 '.i.'ransformers 0.8 0.4 2.1 2.1 1.0 1.0 0.8 0.8 0.7 0.7 1.0 1.0 6.4 6. 0

N Outdoor

3.5x) substations 6.1 0 . 4 1.1 0 . 1 0.5 2.3 2.0 0.8 13 . 2 3 . 6 3uildings 9;0 13.2 8.0 1.0 10.7 1.2 8.0 48.9 2. 2 Storage depots 0.4 1.3 0 . 5 0.2 2.2 0.2 Planning and design, interest, miscellaneot's 6.9 1.8 9.0 11.2 3.9 32.8 - --·--·--....

=12~2===12~~===~~~1==~2~~===22~2==~§~~===§~~1==~§~z===~1~2 __ 1g~g __ =12~Q~~~1~2~""""21~.~--~~2~1-

1) Total cost

2) Foreign-exchc~ge outla;y

x) Cable outlet

- 3 -

The Asnms Station near Kalundborg, which is being built by the

Isefjord Station Company, will come into operation in 1958 when a

135 MN unit will be started up. The next unit - of identical size -

is expected in operation in 1961. The boiler being installed in the

second power unit will have a capacity of 400 tons of steam per hour.

At the Fun.en Station near Odense, prime movers developing 60 MN

plus 80 Gcal per hour for district heating (capacity about 78 MN when

not supplying district heating) will come into operation in 1962. In

addition, a boiler is to be put into operation with a capacity of

300 t/h.

Prime movers with a similar capacity (60 NUN and 80 Gcal/h) will

be put into operation in 1960 a t the Midtkraft Station near Arhus.

The additional boiler capacity required for this expansion will amount

to 170 t/h.

The Alborg Municipal Power Station will put into operation in

1962 prime movers of 60 MW and boilers having a capacity of 175-200 t/h

and a steam pressure of 93 kg/crrf.

The Masned0 Station near Vordingborg, owned by the SEAS Company,

will put into operation an 80 Mn unit in 1960. This will be accompanied

by an increase in boiler capacity of 250 t/h.

Investments in primary transmission systems planned to be com

pleted in the next few years are estimated to entail expenditures,

including foreign-exchange outlay, for the individual projects and

items of plant as shown in Table B.

The Kraftimport Company operates the Danish side of the exchange

of electricity with Sweden. At present there are two 120 kV 3-phase

cables under the Sound. In 1958 another 120 kV cable is to be laid.

In 1961-62 the inter-connection system is to be expanded so that the

capacity of the tie-up will be increased from 140 NM to 280 l~V. This

will require an expansion of t he Danish transmission lines leading to

the interconnector cables. Thus, a new 35 kilometre 120 kV overhead

line must be installed from subs tati ons north of Copenhagen to Helsing0r

(Elsinore) and about 18 kilometres of underground cable connections in

Elsinore and in the densely populated areas north of Copenhagen. The

overhead line will have 3 x 593 rnrrf, 3-phase conductors of steel alu

minium and 2 x 95 rnrrf steel earthed conductors.

In conjunction with this expansion of the tie-up to the Swedish

transmission network, two phase compensators of 30 1JW.A:r (mega-volt

am~re reactive) must be installed.

~

T a b 1 e B

Transmjssion installations, total cost and for~ign-exchange outlay

Kraft-:Million kroner imnort

1) 2)

Mas ts 2.1 0.1

Lines 1.8 1.5 Cables 4.5 L•6

Transformers

Transformer sub-station equipment 0.4 Phase compen-sators 3.5 3.0 Buildings

Planning and design, interest, miscellaneous

1) Total cost

2) Foreign-exchange outlay

Bellah0j popenhagen)

1) 2)

0.9 c.6

0.9 C.9

3.5 £.3

1.1

0

Isef ,jord Alborg

1) 2) 1) 2)

4.6 1.9 7. 4 0. 4

1.9 1.6 2.7 2.2 6.5 5.0 o.6 0.4 4.7 2.3 o.6 o.6 1.6 0.8 2.0 2.0

1.5 0.5 4.2 0.3

1.2

:W~ned0 Grand totals

1) 2) 1) 2)

14.1 2.4 5.0 3.0 17.9 13.3

10.7 5.9 5.1 4.3

8.1 3.1

3.5 3.0

4.9

- 5 -

The Copenhagen stations and the other stations in Zealand are

linked with Sweden and with each other through the transformer sub

stations north of Copenhagen. To improve the inter-connection and the

distribution between between the Copenhagen stations themselves and

between the latter and the other stations in Zealand i t would be ad

vantageous to set up a Copenhagen system control substation at Bella

h0j. Such a substation is being planned for completion in 1961. Primary

supply lines at 120 kV from the Copenhagen power stations and from the

transformer substations north of Copenhagen will be ccnnected here to

distribution lines at 30 kV through a transformer installation of 60 11NA.

Cables to the transformer substations outside Copenhagen will be of a

dimension of 3 x 185 mm2 and an inter-connection capacity of 80 MVA.

Bornholm has hitherto used 10 kV transmission lines from the power

station at R0nne. To reduce line losses, two primary transmission lines

at a tension of 60 kV will now be installed. These will comprise 45 kilometres of 130 mm2 steel aluminium overhead lines and 5 kilometres

of 95 rmrf' underground cable. In conjunction with this installation

four 4 NNA transformer substations will have to be built. Inter-connec

tion capacity will be 15 !INA on each primary transmission line. The in

stallation is to be completed in 1959.

In conjunction with the installation of the second unit in the

Asn~s Station, the inter-connection lines between Asnres and the other

Zealand stations are to be expanded in 1961. To achieve this, 138 kilo

metres of 3 x 593 rnr/ steel aluminium 120 kV overhead lines will have

to be put up, and in the densely built-up areas north of Copenhagen,

where the lines converge, 28 kilometres of 3 x 150 - 240 mrn.2 120 kV

underground cable must be laid. Two primary transformer substations of 75 tlNA

are to be built on the transmission line from Asnres near Kalundborg

to Copenhagen to take care of distribution, from which 50 kV lines

will emanate. The construction of these substations is included in

the expenditure shown in Table B.

0

Alborg Municipal Power Station is connected southward by 150 kV

lines to other stations in Jutland. To improve the distribution over

north western Jutland, a 150 kV line is planned to be run from Alborg

to either Thisted or Nyk0bing Mors; this line must later be connected

by 150 kV lines to Midtkraft and Vestkraf't. The overhead line will be

initially 100-140 kilometres in length, depending on the exact route

which has not yet been fixed. At the terminus in Thisted or Nyk0bing

Mors, a 150/60 kV transformer substation with a capacity of 45 NNA

will be set up for inter-connection with the small local power stations.

- 6 -

The inter-connection capaci ty of the l i nes will be 110 "!iWA. The con

nection is planned to be completed in 1960.

The expansion of the Masned.0 Sta tion i n 1960 will necessitate

an increase of the capacity of t he primary supply lines from this

station. The cost of this is incl uded i n the above survey of expendi

ture on transmission installations .

-'

Annex 2

_io Mem9r andWJ!.Jlli.

Total _q_utpu~d net imports .of_.Jtl~c_tri~-e~_]._9..3.9/ AQ.::_ l.35_9ill

Generated Generated Net intake in public in private from abroa.d Total stations __§j;.§. tions ------ ---

GWh GWh GWh GWh

1939/40 762 303 44 .1,109 1940/41 613 260 75 948 1941/42 789 212 33 1,034 1942/43 874 217 45 1~136 1943/44 911 222 85 1,218 1944/45 904 243 130 1,277 1945/46 797 183 201 1,181 1946/47 1,141 241 106 1,488 1947/48 1,440 239 13 1,692 1948/49 1,576 267 91 1,934 1949/50 1,689 294 140 2,123 1950/51 1,905 313 140 2,358 1951/52 2,231 315 82 2,628 1952/53 2,384 312 138 2,834 1953/54 2,459 326 316 3,101 1954/55 2,912 341 122 3,375 1955/56 3,480 342 -168 3,654 1956/57 3,681 346 -150 3,877

1 GWh = 1 million kWh

Anne1£.__i

to Memorandum (II)

Sales of el ectri c energyJ breakdown bi uses 1221-~1 Index -Lighting Power Traction Heating Total Total Total Total Total

and other sales sales sales sales sales purposes per per

head of head of popula- popula-tion tion --·

1,000 1921-22=100 GWh GWh GWh GWh GWh kWh Gcal

1921-22 55. 1 90. 3 145 . 4 44. 1 125 100 100 1922- 23 65 . 0 96. 9 161.9 47. 8 139 111 108 1923-24 74. 9 95 . 3 17.0 187 . 2 54. 6 161 129 124 1924- 25 86 . o 108. 2 17.1 211. 3 61 .0 182 145 138 1925-26 95 . 0 115 .1 17 . 9 228 .0 65.1 196 157 148 1926- 27 101. 2 123. 6 18. 4 243 . 2 70. 3 209 167 159 1927- 28 no. 3 136.2 20.8 267. 3 76.8 230 184 174 1928- 29 117. 4 142 . 6 21.4 281.4 80. 3 242 194 182 _929-30 131.4 164. 6 21. 9 317. 9 90.1 273 219 204 1930- 31 145 . 5 183. 4 24.1 7.1 360.1 101.4 310 248 230 1931- 32 155. 9 191.3 25.7 9.8 382 . 7 106 . 9 329 263 242 1932- 33 161. 9 197 . 5 24.7 12 . l 396 . 2 109. 7 341 272 249 1933- 34 171. 5 220. 2 25. 6 13 . 7 431.0 118 . 4 371 296 268 1934- 35 185. 2 258 . 2 38. 2 13 . 0 494. 6 135 . 8 425 340 308 1935-36 199. 5 286 .1 45 . 9 17 . 5 549. 0 148.1 472 378 336 1936- 37 214. 0 314.0 58 . 6 24 . 6 611 . 2 164. 0 526 420 372 1937-38 230. 2 344. 0 60.6 33. 5 668 . 3 177. 3 575 460 402 1938- 39 252 . 7 369. 5 60. 3 47 . 3 729.8 193 . 2 628 502 438 1939- 40 206 . 0 394.1 59. 3 48 . 2 707.6 186. 0 609 487 422 _940-41 142. 5 364. 5 49. 0 41.2 597.2 155. 4 514 411 352 1941- 42 163 .3 423 . 5 55. 4 46 . 4 688 . 6 177 . 9 592 474 403 1942- 43 181 . 3 493.7 56. 6 54. 5 786 .1 204. 4 676 541 463 1943- 44 202 . 2 533 . 5 56 .8 62 . 2 854. 7 222 . 3 735 588 504 1944-45 214. 5 541. 7 60. 6 72.4 889. 2 221 .7 765 612 503 1945- 46 174.1 512 . 3 52. 6 76.2 815 . 2 200. 7 701 561 455 1946-47 254.2 610. 9 78 .6 124. 5 1,068 . 2 257.8 919 735 585 1947- 48 295 . 5 702.7 75 . 5 174. 2 1 ,247. 9 300. 3 1 ,073 858 681 1948-49 333 .0 759. 2 70. 9 237 . 4 1,400. 5 334. 2 1,204 963 758 1949-50 267 . 2 808 . 6 73 . 1 315 . 0 1,563 . 9 369. 6 1,345 1,076 838 1950-51 407 . 5 903 . 7 90 . 7 388.7 1,790. 6 419.2 1,540 1,231 951 1951-52 424. 3 992 . 7 91.8 479.4 1 ,988 . 2 462 . 0 1,710 1,367 1,048 1952-53 444. 4 1,041 .0 94.8 589.0 2,169. 2 500.5 1,866 1,492 1,135 1953-54 91 .0 2,343 . 5 536.0 2,015 1, 612 1 , 215 1954-55 106 . 0 2,640.5 595. 0 2, 271 1,816 1,349 1955- 56 2,848. 0 640. 2 2,449 1 ,959 1,452 1956-57 3,063.0 688 . 6 2, 634 2,lo7 1 , 561

Annex.A.

to _Jemorandum (II) Fuel consumption of __power stations :J:_9_38-56

Coal Inferior Coke Lignite Peat Waste Fuel Diesel Town gas unspecified coal fuel oil oil

---·-·---- ---· tons tons tons tons tons tons tons tons 1,000 m3

1,006 -1938/39 3l9,118 143,372 6,400 44,519 1939/40 272,601 122,474 24 7,685 .49,737 473 1940/41 242,926 109,140 36,260 93,797 12,952 6,134 30,475 1,501 1941/42 271,867 122,143 91,469 211,031 20,600 4,800 3,478 1,393 1942/43 272,040 122,221 359,858 233,024 14,844 679 1,861 1,399 1943/ 44 226,395 1(1,714 590,429 298,362 12,882 570 1,855 1,456 1944/45 247,189 - 111,056 530,197 234,745 12,525 91 870 1,351 1945/46 203 ,.04.8 51,224 476,423 188,470 12,386 10,764 24,949 7_69 1946/47 378,393 170,002 182,520 64 ,796 249 59,240 62,374 730 1947/48 380,363 140,000 296,937 18,739 157 107,605 69,335 792 1948/ 49 452,544 168,000 638,427 20,441 24 51,321 60,291 329 1949/50 533,594 2c9,840 456,924 16,316 62,236 65,291 322 1950/51 680,.362 354,785 117,913 2,503 625 57,482 61,975 240 1951/52 785,321 223,073 184,098 328,038 3,245 352 131,846 63,308 225 1952/53 589,922 503,825 188,644 332,343 8,250 8 125,155 59,567 181 1953/54 554,645 478,017 307,635 221,865 9,465 118,018 52,600 1954/55 404,036 c22,556 237,686 347,590 3,770 184,155 43,000 1955/56 402,552 752, C.37 160,294 522,007 11,673 432,083 40,000 71 1956 X) 463,000 t-50,000 157,000 1,211,000 24,000 535,000

x) Provisionu.L figures for the calendar year.

Ministry of Finance April 1958.

MEMORANDUM (I)

on

Denmark's economic position

,r

1. This memorandum contains a brief survey of Denmark's economic position in general with special reference to the relationship between investment needs and the balance of payments. The purpose of the Memorandum is to illustrate the desirability of financing foreign-exchange outlays forcertain productive investments with borrowed capital from international sources. With respect to the imm.ediate situation in the Danish economy, reference is made to the Economic Survey of Denmark, 1958.

2. In the general industrialization of Western Europe in the last part of the 19th century the course of the Danish economy was determined very largely by the fact that Danish agriculture was able to take up new lines of production and adopt modern methods of produc·tion, Land ownership had been transferred to the cultivators long ago, the consolidation of fragmented holdings had been practically completed, and Denmark had a class of independent and enterprising farmers with a high level of education, owning holdings of very uniform size.

In that period Denmark•s farming industry built up a production of animal products for which growing markets were found in her neighbouring countries,. especially Germany and the United Kingdom, as a result of the progressive industrialization of those countries. Denmark's geographic position was favourable for export to those countries, and their markets were open.

- 2 -

By virtue of this favourable initial position and of propitious external conditions, Danish agriculture entered upon a phase of vigorous expansion towards the end of the 19th century. In particular the Danish f a rmers were able to increase Denmark's foreign-exchange earnings sufficiently to enable the Danish community a s a whole to share in the substantial economic growth in that period.

3. In these circumstances the development of manufactur-ing industries came to play a secondary role. Unlike such non-agricultural sectors as shipping and commerce, Danish manufacturing industries had no basis on which an expansion could be built on the same scale as the modern farming industry in this phase of European industrialization. There were no resources for development of those basic industries which require ample local supplies of raw materials and power and which accelerated the general industrial development in other countries.

At a later stage of the European industrial development Denmark began to develop processing industries on a considerable scale. This development was based mainly on the presence of skilled manpower and on a favourable location in relation to sources of raw materials and to outlets for finished products. Manufacturing indus trie s came to play an increasingly important role in production and employment; in the late 'thirties the contribution of the industrial sector to the gross national product was almost equal to that of agriculture. But the industrial contribution to Denmark's foreignexchange earnings was much smaller: industrial exports accounted for 24 per cent of total commodity exports in 1938 while agricultural exports represented 7o pe r c ent.

4. The agricultural protectionism - initiated during the depression of the 'thirties and by now almost universal -marked the beginning of the third phase of Denmark's recent

economic history.

- 3 -

The general post-war liberalization of international trade has been a consequence of and also a condition for the vigorous economic expansion achieved in the post-war period, but it has bypassed the agricultural sector entirely. Most countries have maintained and extended the scope of the various schemes which they introduced in the 'thirties in order to protect their farming industries. Agricultural protectionism takes different forms from country to country, but high tariff rates, subsidies to domestic farmi~~d/quantitative import restrictions are in general use. Through these and other measures import policies have been subordinated entirely to the agricultural policies adopted by the various countries to ensure that imports a re admitted only at such times and in such quantities as a re compatible with the interests of domestic agricultural production.

The policy thus pursued by other countrie s has not only prevented Denmark from expanding its agricultural exports in step with the general economic growth, but exporters have been ousted from their traditional outlets to an increasing extent. There have been numerous examples of subsidized agricultural p~oducts not only conquering domectic markets from Danish ex

ports but even being "dumped" on to other markets to the detriment of agricultural exports from this country.

The significance of these developments may be illustrated by the fact that it has been literally impossible to increase Denmark's exports of her traditional agricultural products during the last four years. In 1953, total Danish exports represented kr. 6 billion of which bacon, butter, eggs and meat accounted for kr. 3 billion. In 1957, the export value of these important Danish export commodities still represented only kr. 3 billion while total exports had increased to kr. 8 billion. This means that for one half of Denmark's total exports there was no possibility of expansion whatever during t;trat period.

- 4 -

5. This situation, where agricultural production and ex

ports have been clamped down to their present level, should

be seen in the light of Denmark's heavy dependence of international division of l abour. Imports and exports of goods and

services eaeh represent one third of the gross national pro

duct . Danish production cannot grow at a satisfactory rate unless imports can be increased; this 1 in t urn, depends on

possibilities for Denmark to achieve a considerable and sustained expansion of exports.

On one hand, the diffeculties encountered by Denmark 's

agricultural exports have impaired th e efforts t o expand t otal exports at a suffici ently rapid tempo to earn the f oreign ex

change needed even for a modest economic expansion. On the

other hand, there has b een a special need f or economic growth that could pave the way for an expansion of non-agricu_tural

production in order to wj_den the basis of Denmark ' s ability

to earn foreign exchange and to provide employment opportuni

ties for the growing population as well R S f or th e manpower

leaving the agricultural sector as a cons.e g_uenc e of me chani zation and the general rise in productivity.

6. In spite of these difficulties, considerable results

have been achieved in the expansion of exports of commodities other than traditional agricultural products. Agricultura l

exports, however, still account for one half of Denmark ' s total commodity exports and thus her economy is still affected ve ry

appreciably by the difficulties experienced in expanding t h e

Danish export trade in the se commodities.

Distribution of exports g commodi_!,y _ _ ~_9__£P. s _

Per cent 1938 1950 1953 1955 J. 9 57 ______ ,,_

Agricultural products 7o 63 63 ~'7 . ' 5o

Canned goods 2 5 7 r:· , l 7

Manufactures 24 2 4 25 32 36 Other 4 8 .:-

".) 5 7 ·- - ·-·--·---

Total lo c l oo loo loo lo o ----- ·------ .. ··-·----·---

1953 1954 1955 1956 1957

- 5 -

The biggest and most consistent rise has been recorded for the export volume of manufactures, expecially since 1953, but even this increase - almost a doubling in four years -has not been sufficient to compensate for the unfavourable trend of agricultural exports, because industrial exports have so far represented only a minor share of total exports.

Exports by commodity groups. Million kr. at current prices Indices at 1949-pric es

Agricultural products

Million kroner

3,825 3,926 4,118

4,o53 4,oo4

Index

loo lo2 106 loo lo4

Canned goods

Million Index kroner

4o4 427 448 436 562

loo 106 118 113

143

Manufactures

Million kroner

1,555 1,811 2,288 2,662 2,898

Index

loo 12c

155 176 190

Other

Million kroner

315 386

344 412 518

Index

lo o 129 l o7 125 151

7. The result has been that Denmark's total receipts of foreign exchange have not been sufficient to f orm a basis for an expansive economic policy, and the limited holdings of liquid foreign assets have repeatedly - in 1950, in 1954 and in 1957 - necessitated significant changes in economic policy i~ order to slow down the expansion of economic activity. Thi s is the reason why the growth of production has been unsatis fac tory in Denmark since about 1950 when the period of post-war reconstruction came to an end. Since 1950, industrial output has been increasing by an average of 2-3 per cent annually . This growth rate is lower than that of the 'thirties. Considerable differences have been record ed from year to year : in 19~, and again in 1954, production was about lo per cent gre ater than in the respective previous yea rs, but it remaine d a lmost constant during the periods 1950 through 1953 and again in 1954 through 1956, following ~ tightening of economic policy .

- 6 -

8. There is, however, a marked difference between the in-dustrial expansion seen in the post-war period and the expansion achieved in the 'thirties. Under the influence of t he trade barriers and the policy of self-sufficiency which prevailed in the ~thirties, the industrial production established in Denmark during this period catered mainly to the home market, while the industrial expansion achieved in recent years has been based entirely on increas ed s ales in foreign markets~

Since 1949, industria l output has grown by almost 3o per cent. Home-market s a les to-d ay are unchanged from 1949 while export sales have almost trebled.

The external conditions preva iling in the 'thirties compelled Denmark to pursue an industrial policy which aimed primarily at securing employment for Danish workers. In the postwar period, Denmark has taken advantage of the favourable international conditions to build up industries which can compete successfully in world markets and which, therefore , will gradually become able to make a substantial contribution towards building up the higher level of foreign-exchange earnings needed in the Danish economy.

9. Past events stresa the need for Denmark to seek a solution to its structural problems in an expansion of industrial production and exports, including the production and export of highly processed foods made from agricultural products. But experience from the last few years also reveals that it is extremely difficult to speed up this diversion of production at the rate necessitat ed by the stagnation of traditional agricultural exports.

Availabilities of manpowe r will not gener ally be a restrictive factor in the development of a mod ern industrial production. The Danish worker ha s usually had a good general education and technical training. In the l as t f ew years steps have been taken to ext end the facilities for education and

training of technicians a t all levels in order to overcome such shortages of manpower as may arise for cert8in specialized categories of technicians.

- 7 -

The main difficulty is to expand the productive equipment at a sufficiently rapid tempo. Gross investments have been much higher in the post-war period than they were before the war. In recent years they represent 24-27 per cent of the gross national product as against 18 percent in 1938. But an expansion of manufacturing industries at the necessary rate and at a sufficiently high technical level presupposes investments of a much greater order than in the 'thirties. The marginal investment required per imployed worker in industrial plants operating at a technical level that enables them to meet competition in world markets is much greater than the investments required per employed worker in the protected industries catering to the home market in the 'thirties.

A special problem is posed by the "bulge" (the big age classes born during the war and in the first ye a rs after the war) which will result in an extraordinarily large supply of manpower in the coming ye a rs. It is es s ential that jobs for this influx of young persons should be provided in conjunction with the development of a production which can stand up to international competition and thereby strengthen the Danish currency reserves. This means that Denmark's investment needs will be particularly large in the next few ye ars.

lo. Hence, the basic problem of Denmark's economic policy is that in order to build up a foreign-exchange basis which, in the long run, will ensure productive employment for her growing population, investments must be made in new production facilities that can find export markets or compete with imported commodities in the home market because the big unutilized export capacity of the Danish farming industry cannot be brought into play. In the short run, however, such investments involve outlays of foreign exchange which - likewise on account of the difficulties encountered by the farming industry - cannot b e financed entirely by an increase of her exports or by drawing upon her very small foreign- exchange rese r ves.

Every time when an expansion of production has gathered momentum - as was the case in 1950, in 1954, and again in early 1957 - Denmark has run into foreign-exchange difficulties. In

- 8 -

order to overcome these difficulties it ha s been necessary to restrict domestic consumption. Action ha s been taken, and will continue to be taken, to exempt investments from such intervention to the widest possible extent. Rec ent experience ha s demonstrated, however, that under the unfavourable conditions facing the traditional Danish export commodities, there is little possibility for Denmark - with its large foreign trade, an economy based on free enterprise and a market that is wide open to imports from other countries - to protect its liquid reserves of foreign currency by imposing restrictions on domestic consumption without also inhibiting the formation of productive capital.

The necessa ry conversion of Danish economy will take a long time in any case, but the difficulties may be alleviated appreciably if for a transitional period foreign capital can be borrowed to finance part of the investments.

partly/ 11. In the early post-wa r ye a rs the l a rge import need~ wer~ met with loans from the IBRD and the EXIMBANK, with Marshall Aid, and with bilateral debts to Western European countries.

Apart from Ma rshall Aid and drawings from the International Monetary Fund, Denmark ha s not obta ined any foreign loan since 1947. On the contrary: considerable amounts have been paid off on Denmark's foreign debts during the last few years.

Million kroner Net foreign debts Of which: Year-end figures total Public long-term

net debts

1950 2,895 2,262

1951 2,601 2,052 1952 2,184 1,810

1953 l,802 1,514

1954 2,282 1,406

1955 2,083 1,352

1956 2,163 1,262

- 9 -

At the end of the German occupation in 1945 Denmark was in arrears with the servicing of its foreign debts, especially installments but also interest payments on certain European loans. The servicing of European loans was, however, soon brought up to date, mainly by means of a loan which the Danish Government obtained from Sweden in 1947. The servicing of the Goverment dollar loans were brought up to date in 1953 and of Municipal dollar loans in 1955.

Since 1950, Denmark has paid ordinary installments on loans in dollars and European currencies and made repayments on the bilateral debts to European countries incurred before 1950 and consolidated in connection with the establishment of the European Payments Union and as a consequence the public long-term net debts decreased from 2262 mill.kr. by the end of 1950 to 1262 mill.kr. by the end of 1956. In early 1957 the liquid reserves of foreign exchange declined to an extent which necessitated a drawing on the International Monetary Fund of $34 million in June 1957. An amount of $lo million was repaid on that loan in March 1958.

12. The Danish authorities find it desirable to accelerate the conversion of Danish industries by means of foreign fi~ancing of the necessary investments. They do not find it unwarrantable to borrow a certain amount of foreign capital for this conversion which is already making good progress. · After the large amounts paid off on foreign debts during the last few years, Denmark's long-term net foreign debts, public as well as private, are no greater than they were before the war. This means that in real terms they are considerably smaller, representing only two months' exports, and the ordinary annua l debt service represents only between one and two per cent of total export earnings.

- lo -

13. As explained above, Denmark covers by far the greater

part of her eonsumption of energy by imported fuel. These imports involve considerable outlays of foreign exchange.

Year

1949 1950 1951 1952 1953 1954 1955 1956

1957

Imports of solid and liquid fuel

Million kroner

675 l,ol6 1,280 1.281 1,186 1,248 1,572 1,722 1,720

Per cent of total imports

16

17 18

19 17

15 19 19 18

In the field of energy supply, it is essential for Denmark to ensure adequate supplies of fuel for development of manufacturing industries and to attain optimal efficiency in the utilization of imported energy so as to keep the burden of fuel imports at the necessary minimum, both as a foreignexchange expenditure nnd as a cost of production.

In the two fields covered by the loan projects - expan

sion of power stations nnd introduction of diesel power in the Danish State Railways - considerable progress has already been made in the direction of efficient utilization of energy.

An expansion of industrial production presupposes a

sustained growth of electricity production. Denmark 's need for electric energy can only be met by generation in thermal power stations. The most e conomical operation can be attained by building big stations. While the capacity of the latter is being extended, smaller and less efficient older stations are closed down.

- ll -

A transition from steam power to diesel-powered locomotives in the Danish State Railways involves considerable economies in fuel expenditure. The acquisition of diesel locomotives has been going on for several years. The cost of each of the first die sel lacomotives was recovered through fuel economies in the course of a few years. For every new locomotive acquired, the currency expenditure is estimated to be recovered through fuel economi es in lo-15 years. In this respect the aim is not primarily to expand the transport capacity but rather to achieve a better utilization of

energy, thereby attaining considerable economies in foreign exchange as soon as possible.

Seeing that the expansion of power stations has a significant bearing on industrial expansion, the investment r e quired for this purpose is so urgent that it will be warrant able to meet the necessary foreign-exchange expenditure with funds borrowed from foreign sources. Similarly, the urgency of saving foreign exchange on fuel imports indicates that it would be an obvious advantage to accelerate the conversion from steam to diesel operation of the railways by borrowing the foreign currency needed for this investment.

Memorandum (I) Annex (1)

Extracts from the Chapter on Denmark in OEEC's Ninth Annual Report.

III. Conclusions

15. 1956 saw some increase in production. But higher demand, together with certain temporary factors of a different nature (a deterioration of the terms of trade and some bunching together of imports of capital goods) led to an appreciable rise of imports and to balance of payments difficulties. ·Although the fall of reserves has not been large in relation to the total trade turnover, the fact that foreign currency holdings were very low at the start necessitated, in 1957, rather prompt measures to arrest the growth of domestic demand. 16. Thus the past year has again demonstrated the difficulty experienced by Denmark in raising the level of economic activity without upsetting the foreign balance. Throughout rec~nt years, Denmark has repeatedly had to restrict domestic demand to protect her foreign exchange reserves, which have remained at a low level. Production has risen more slowly in Denmark than in most other Member countries, even in respect of industrial output. There has been only a modest improvement of living standards, and a rather limited growth of fixed investment, while unemployment has generally been comparatively high. Costs and prices have shown a steady rise. 17. Denmark's balance of payments problem can to an important extent be ascribed to the fact that great difficulty is being experienced in developing foreign markets for agricultural prcducts, which account for more than half of total merchandise exports; in 1956 the volume of animal food exports was lower than in 1953 and their value had risen by only 5 pe rcent. World consumption of food, particularly the products in which Denmark specialises, is rising only slowly, and international trade in t~is field is hampered by protectionist policies which form a serious obstacle to Danish exports. It should be noted in this connection that Denmark's total agricultural exports represent only 1 to 2 per cent of total consumption of foodstuffs in Western Europe. Action by Member countries to reduce barriers to trade in agricultural products would

- 2 -

ease Denmark's balance of payments difficulties and facilitate the industrial expansion necessary for the attainment of a high level of employment. Denmark might give more active consideration to changes in her production and marketing policies for agricultural products, concentrating as much as possibl e on h ighly processed products , for which trade barriers might be more ea s ily reduced and meeting demands for more refined foodstuffs resulting from increasing living standards in Member and associat ed countri e s. 18. But the continuous disequilibrium in the economy is also due to factors inside Denmark. Imports tend to rise rapidly when home demand is rising. As external factors make a rise in agricultural exports extremely difficult, a considerable incroose in industrial exports is needed to carry the main burden of providing adequate foreign exchange. Industrial exports have risen over recent years, but not sufficiently to solve the balance of payments problem, and Danish industries' sales on the home market have remained stable. An _important element in this problem is that domestic costs may have risen more in relation to productivity than in most other Member countries. One major reason for this is undoubtedly that industrial investments have remained a t a low level over recent years and have declined during the past two years. The expansion of Danish industry has probably been hampered by t he restrictive fisc a l and monetary policies pursued over recent years, and, in pa rticular, a restrictive credit policy has discourage d i ndustria l ca pit a l formation. 19. A primary object of Dani sh economic policy must be to ensure that industrial costs in relation to productivity in Denmark are not out of line with those prevailing abroad. Greater flexibility in the relationship between wages and the cost of living may prove to be of great importance to the achievement of a balanced process of expansion. And a faster rat e of industrial growth will require vigorous policies to provide technicians and skilled l abour, to promote research and to improve the mobility of labour. 2o. Denmark needs an immediate strengthening of its foreign ex-change reserves. Otherwise, even minor changes in external conditions will continue to require rather substantial tightening of economic policy. But there is a danger that the very measures taken in the field of domestic policy to r a ise the foreign reserves in the

- 3 ~

immediate future through restrictions on home demand, may run counter to the solution of Denmark's longer term problem, which lies in a substantial expansion of industry. The restrictive part of the measures taken by the Danish authorities in June this year illustrate the dilemma clearly enough. By restricting consumers' demand they will serve to discourage an expansiona ry attitude on the part of private industry, while Denmark's need is to encoura ge fixed productive investment. 21. Insofar aa balance of payments reasons require the continued restraint of domestric demand in total, every effort should be made to minimise the impact of the restrictions on industrial investment. From this point of view, it is obviously desirable that the present monetary stringency should be relaxed. To make available a maximum of capital for productive investment, it may also be necessary to develop new forms of industrial financing. It is understood that measures to facilitate a more rapid industrial expansion are being consi4ered by the Danish authorities. 22. The dilemma can also partly be avoided by foreign borrowing. The recent drawing on the International Monetary Fund constitutes a valuable addition to the reserves, and it should be considered whether, as a supplement to appropriate policies at home, further loans could be obtained. Denmark's foreign debt is small, and it might be reasonable at least to re~finance those parts of the debt falling due in the near future, thus keeping the foreign debt more or less constant. Such a policy would not overburden the foreign balance with interest payments, and it would help to rebuild reserves without hampering economic expansion. And while it is desirable that investment should be financed by domestic savings, greater efforts might be made to attract foreign capital~ Certain measures were, in fact, taken in 1956 to stimulate foreign investment in Denmark - conditions for repatriation were eased and the formalities governing the establishment of affiliated companies were simplified . It might be considered whether the Government should not take a more active part in helping to solve the financial problems arising from industrial expansion by negotiating foreign loans.

(Translation of Statistiske Efterretninger No 17 of April 9, 1958.)

Annex 3 to Memorandum (I)

Denmark 1s_foreign_assets_and_liabilities

during_the_Eost-war_iears.

1. The first post-war statement of the capital account on Denmark's

balance of payments at year- end 1945 showed foreign liabilities of

kr. 2.4 billion and foreign assets of kr. 1 . 4 billion. The net debt

of approx. kr. 1 billion was some kr . 200 million less than the pre-war

debt.

Foreign assets ~nd liabilities

Million Liabilities Assets Net debt kroner

Year-end

1938 2,173 934 1,239

1945 2,431 1,425 1,006

1946 3,241 1,473 1,768

1947 3,743 1,813 1,930

1948 4,088 1,897 2,191

1949 4,749 2,356 2,393

1950 5,405 2,510 2,895

1951 5,138 2,537 2,601

1952 4,981 2,797 2,184

1953 5,230 3 , 428 1,802

1954 5,530 3,248 2,282

1955 5,514 3 , 431 2,083

1956 6,028 3,865 2,163

The assets do not include the substantial amount (about kr. 7.6

billion) used for the financing of goods supplied to Germany and for

supplies to the German Wehrmacht in Denmark. The claims of Danish ship-

owners in respect of freight earned in foreign service and of Danish

ships lost in Allied service during the war are also excluded from the

table; they represented kr. 550 million at the end of 1945, but they

hatl not yet been recognized by the debtors when the statement was pre

pared.

V

- 2 -

During the period of reconstruction the net debt rose appreciably.

In spite of the gifts received under the European Recovery Programme

(l/Iarshall Aid) in 1948-50 - totalling about kr. 1 billion - the debt

had increased to kr. 2.9 billion at year-end 1950 from kr. 1 billion

at the end of 1945. Since the individual items of the capital account

are affected by changes in exchange rates and in Stock Exchange prices

of securities, and by corrections made according to more detailed or

more corr~ct information and the like, this increase of kr. 1.9 billion

is not an accurate indication of the r eal amount by which Denmark's

foreign debt went up in that period. The depreciation of the Danish

krone in September 1949 resulted in an increase of the net foreign

debt by some kr. 400 million, and various corrections and changes in

exchange rates and in market prices of securities were responsible

for a further increase of kr. 300 million, while the shipovmers' claims

for compensation recognized in those years reduced the net debt by

kr . 475 million, These adjustments accounted for about kr. 200 million

of the total increase of kr . 1. 9 billion in Denmark's foreign debt.

The net capital receipts shown in the balance of payments amounted to

kr. 1.7 billion.

During the period 1951 through 1953 the net debt fell by kr . 1.1 billion from kr . 2.9 billion to kr. 1.8 billion. Of this decline an

amount of kr. 1 billion derived from the large installments paid by

the State on its foreign debt and from increases in the currency assets

held by commercial banks. In this period Marshall Aid was only a signifi

cant factor in the year 1951.

Million kroner

1938 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1946-56

Table 2

Chan.f@§.._in t he net foreign debt

Net debt Rise in Net capital receipts at year-end net debt according to the

balance of payments

1 2 3 ____ _.. .. -.... - ---------·--- ... -- _,._._ - - .. -1,239 1,006 1,768 762 973 1,930 162 352 2,191 261 183 2,393 202 -194 2,895 502 356 2,601 -294 -207 2,184 -417 -453 1,802 -382 -349 2,282 480 502 2,083 -199 -297 21163 80 - 44

1,157 822

Difference (column 2 - column 3) due to changes in market prices of securities, etc . 4

-211 -1 90

78 396 146

- 87 36

- 33 - 22

98 ____ 12.4..

335

- 3 -

Sinc~..12.2.i, the net debt has gone up again. At the end of 1956 it

amounted to almost kr . 2. 2 billion. More than one half of this increase

of nearly kr. 400 million was due t o changes in the market prices of

securities - notably foreign-owned Danish shares - and to other correc

tions .

This increase of the net debt should be seen in the light of such

factors as the rise in price l evels and the population figure .

Net debt per head of population of the age Wholesale price index

grou~ 15-6~~F-lL._ Kr. Index Index

1938=100 1938=100

1938 481 100 100

1945 370 77 190

1955 735 153 314 1956 761 158 323

Since 1938, the net debt per head of population of the age group

15-64 years has gone up by about 60 per cent, but the wholesale price

index has increased by more than 200 per cent . A c omparison of the net

debt with exports of goods and services shows that the net debt at

year-end 1938 was equal to almost two thirds of Denmark ' s exports in

1938 while the net debt at year- end 1956 only represented about one

fifth of Danish exports in that year.

In real terms , Denmark has increased its foreign debt by kr . 800

million since the war. For the pe1·iod 1947 through 1956 the amount used

for gross investments in this country - building and construction,

acquisition of machinery, etc . - is estimated at kr . 60 billion of

which the share invested by central and local government authorities

and by public utilities has been calculated at kr . 14 billion. Even

if housing construction is disregarded, the investments made during

this period may be estimated at more than kr . 50 billion.

2. As explained in the preceding paragraph, Denmark's net foreign

debt rose from kr . 1 billion to kr . 2.9 billion during the .~riod .l~§

through 1950. At the beginning of the period - year-end 1945 - the net

debt owed by the State and Danmarks Nationalbank accounted for kr. 0.8 billion of the total net debt of kr . 1 billion. The State and Danmarks

Nationalbank were responsible for almost kr . 1. 5 billion of the kr . 1. 9 billion by which the debt increased from 1945 to 1950 - see Table 3, As the net foreign debt of local governments showed no change from the

- 4 -

beginning to the end of the period, the remaining kr. 0.4 billion of

the rise in the net debt must be ascribed to the group "Other debtors"

which comprises industrial and commercial undertakings, shipowners,

commercial banks, insurance companies, mortgage credit institutions,

etc.

In this period, the State borrowed nearly kr. 600 million abroad

but paid installments totalling some kr. 300 million. Furthermore, the

Million kroner

Year-end

1945

1946

1947

1948

1949

1950

1951

1952

1953

1954 1955 1956

State1) etc.

Table 3 Den.!!l§Fk~s net foreign debt

Breakdown l-x_iiebto.!.§.

Nationalbank Total Local Other

govern- debtors ments

----------.. ---·-·-··-·· - ---- - ------ - --- - ~---· 1,001

1,054

989

1,223

1,644

2,082

1,887

1,724 1,365

1,192

1,060

1,009

-202

483 588

498

375

178

- 21

-334 -330

168

235

228

799

1,537

1,577

1,721

2,019 2,260

1,866

1,390

1,035

1,360 1,295

1,237

366

347 322

309

396 363

338 315 248

228

134

119

-159

-116

31

161

- 22 272

397

479

519

694

654

807

1) including the Mortgage Bank of the Kingdom of Denmark and the State Housing Fund

Total

1,006

1,768 1,930

2,191

2,393

2,895

2,601

2,184

1,802

2,282

2,083 2,163

State took over some kr. 500 million of Dan.marks Nationalba.nk ' s short

term debts to various Member countries of the European Payments Union

in connection with consolidation agreements concluded when EPU was

established in 1950; this consolidated debt was then included in the

State's long-term foreign debt. Added up, these transactions increased

the State's net foreign debt by kr. 0.8 billion. The capital account

of the balance of payments shows a net increase of the State's net

foreign debt of kr. 1.1 billion; the discrepancy derives mainly from

the devaluation in 1949 which increased the State's net foreign debt

by approx. kr. 300 million.

- 5 -

During the period 1951 through 1956, the total net foreign debt

was reduced by kr . 0 . 7 billion from kr . 2. 9 billion to kr . 2. 2 billion.

The State and Danma.rks Nationalbank reduced their debt by some kr. 1

billion and local government deb~ fell by kr. 250 million, but the

group "Other debtors" increased its foreign debt by kr. 550 million .

Nearly all of the reduction of the State's net foreign debt by

almost kr. 1 . 1 billion derived fr om the big installments paid on the

State's foreign debts in those years . Together with a reduction of

the debts to the International Monetary Fund and the International

Bank for Reconstruction and Development by kr . 100 million, these in

stallments represented over kr. 1 billion. The net debt was further

reduced by an asset of kr . 132 million which Denmark obtained in 1953

through an agreement with the Federal Republic of Germany by which the

latter undertook to compensate Denmark for the expenses involved by

German refugees who came to Denmark in the period when the end of the

war was drawing near. Kr . 49 million of this amount was outstanding

at the end of 1956. The only State loan obtained in that period was

a small Marshall loan of kr . 16 million (from 1952).

Local governments paid off about kr . 200 million on their debts .

The remainder of the decline in the net debts of local government

authorities was due to corrections .

Duri_n_g_j;he whole ..J?.Qst-!_ar R~:r_i od 1..942.:.5.2. taken together the total

net debt rose from kr. 1 billion to kr . 2. 2 billion. At the close of

1956 the State's net debt was prac tically unchanged from the end of

1945 (year- end 1956: kr . 1,009 mi: lion; year-end 1945: kr . 1,001 million).

Danmarks Nationalbank's position was reversed from assets of kr . 202

million in 1945 to a debt of kr . 228 million in 19561 ) . Of the total

increase in foreign debts from 1945 to 1956 of kr . 1,150 million the

State and Dan.marks Nationalbank taken together thus accounted for

kr . 450 million. Local governments reduced their foreign debts by al

most kr . 250 million. The group 11 0ther debtors" increased its debt by

kr. 950 million: at year-end 1945 it held assets of kr. 150 million;

on December 31 , 1956 the group owed about kr . 800 million to foreign

creditors.

1) In the course of 1957 the State increased its net foreign debt by

kr . 140 million to kr . 1,150 million on December 31, 1957. Danmarks

Nationalbank improved its foreign-exchange position by kr. 339 million

in 1957 and held net foreign as se +. s of kr. 110 mil lion at year-end

1957.

- 6 -

The position at the end of 1956 may thus be summed up as follows=

Of Denmark's total net debt of about kr . 2,150 million the State and

Dan.marks Nationalbank taken together accounted for about kr. 1,250

million, local governments for some kr . 100 million, and the group 11 0ther debtors 11 for about Jr...r. 800 million.

The group "Other debtors" thus shows the biggest change in net

foreign debts during the post-war period. From the specification given

in Table 4 it will be seen that "Industrial and commercial undertakings"

account for almost all of the increase recorded for "Other debtors".

Table 4

Net debt of 11 0J.her_ debtors"

Million Industrial Mortgage Banks Ship-

kroner and credit except owners commercial institu- Danmarks Other Total

Year-end undertakings tions National -bank

----------- -~-·--1945 - 39 135 - 94 - 90 - 71 -159

1946 49 135 - 39 -160 -101 -116

1947 178 135 - 29 -174 - 79 31

1948 303 135 - 54 -166 - 57 161

1949 178 130 - 24 -269 - 37 - 22

1950 365 128 - 38 -169 - 14 272

1951 414 123 38 -184 6 397 1952 462 121 51 -150 5 479 1953 427 126 54 - 87 1 519

1954 610 118 76 - 95 - 15 694

1955 627 119 19 - 87 - 24 654

1956 910 112 - 41 -146 - 28 807

Most of the increase in the net debt of these undertakings has occurred

during the 'fifties. Of the rise of kr. 550 million from year-end 1950

to year-end 1956 about kr. 100 million was due to changes in market

prices of securities and the like.

On December 31, 1956 the gToss foreign debt of industrial and com

mercial undertakings amounted to kr. 2,014 million while their foreign

assets represented kr. 1,104 million , leaving a net debt of kr. 910

million. About one half (kr. 459 million) of this net debt consisted

- 7 -

of direct investments. 1)

Reference is made to the specifications given in Enclosure 1.

3. Statements prepared of the capital account of Denmark 's balance

of payments in the 'thirties illustrate the marked prevalence of long

term commitments in the foreign debt of those years. Danish securities

- mostly bonds - held by foreign owners averaged kr. 1,700 million in

1930-39 while Danish-owned foreign securities represented only kr. 300

million. Commercial liabilities averaged only kr. 400 million and com-

mercial assets represented an amount of almost the same order.

Table 5

Distribution of assets and liabilities

over short and long-term ij;ems

Million Short-term Long-term Net debt kroner liabili- assets liabili- assets short- long- Total Year-end ties ties term term

1938 404 568 1,769 366 -164 1,403 1,239

1945 768 1,025 1,663 400 -257 1,263 1,006

1946 1,585 1,027 1,656 446 558 1,210 1,768

1947 1,895 863 1,848 950 1,032 898 1,930

1948 1,977 962 2,111 935 1,015 1,176 2,191

1949 2,196 1,241 2,553 1,115 955 1,438 2 ,393

1950 2,241 1,380 3,164 1,130 861 2,034 2,895

1951 2,157 1,374 2,981 1,163 783 1,818 2,601

1952 2,214 1,660 2,767 1,137 554 1,630 2,184

1953 2,588 2,134 2,642 1,294 454 1,348 1,802

1954 2,925 1,913 2,605 1,335 1,012 1,270 2,282

1955 2,836 2,107 2,678 1,324 729 1,354 2,083

1956 3,260 2,452 2,768 1,413 808 1,355 2,163

Table 5 illustrates the relationship between short-term and l ong-

term debts in 1938 and during the period 1945-56. Short-term assets and

liabilities include all items for which payment may be claimed within

one yea:r, while all other items are regarded as long-term assets and

------------1) Defined as: any investment made by an undertaking in affilia t ed com

panies or branches. It i s immaterial whether such inves tments consist of shares or bond holdings , of net capital invested in branches or of other claims, even in current accounts of a purely commercial nature.

- 8 -

liabilities with the exception, however, that all accounts between

parent companies and affiliated companies and between parent under

takings and branches have been classified as long-term items since

1947.

In 1945, there was still no change from the pre-war relationship

between long-term and short-term items. The debt was long-term, and

short-term items even showed a net asset. The long-term debt consisted

almost entirely of Danish bonds held by foreign owners. At the end of

1956 short-term items represented kr. 800 million while long-term items

accounted for kr. 1,350 million of the total net debt of nearly kr. 2.2

billion.

1/hen comparing the present position with the situation just before

and immediately after the war, account should be taken of the trans

actions made with the international institutions that were established

after the war~ the entry of such accounts in the capital balance has

resulted in a considerable shift in the relationship between net long

term and net short-term debts. In Denmark's accounts with the Interna

tional Bank for Reconstruction and Development and the International

Monetary Fund, which began to opera te in 1946 and 1947, the entire

initial payments from Denmark (the whole quota of the IMF and 20 per

cent of the quota in the IBRD) are included in the capital balance as

lqng-term assets in the same category as Danish-owned foreign bonds

and shares. Since the greater part of the~e initial payments were made non-nego~iable State notes payabie

by means ~:fton demand and by means of a krone account opened with

Danmarks Nationalbank, the resulting formal debt was regarded as a

short-term liability and included as such in the capital account of

the balance of payments. At year-end 1956 Denmark's assets in these

institutions totalled kr. 569 million of which kr. 86 million had been

paid in gold or dollars - see Table 6 - while the balance (regarded

as a short-term debt) had been made available in Danish kroner, viz. the above-.mentioned

kr. 476 million in/State notes and kr. 7 million in a krone account

with Danmarks Nationalbank.

The short-term items also include Denmark's debt to the European

Payments Union. At the end of 1956 the debt to EPU was kr. 644 million

of which kr. 414 million had been consolidated (under agreements with

the individual creditor nations for amortization of the debt over a term

of years). In the event of liquidation of EPU, the unconsolidated part

of the debt will fall due for payment over three years. The period

allowed for repayment of the debt to EPU is thus considerably longer

than for ordinary short-term liab i lities.

- 9 -

It should be borne in mind that in conformity with internationally

applied rules Denmark's Statistical Department began in 1947 to classify

direct investments (i.e. all accounts between parent companies and

their affiliated companies and between parent undertakings and their

branch establishments) as long-term items, even if such items consisted

of current accounts of a purely commercial nature. This procedure was

adopted because a distribution of these accounts over short-term and

long-term items would be more or. less arbitrary.

Million kroner

Year-end

IBRD and IMF

Table 6

Net foreign debt

Breakdown by ~JL9f._.liabili ty

EPU Direct investments

Other short-term

debts

Other long-term

debts Total

- - --------·--·-----·-- ----1938 ... -164 1,403 1,239

1945 ... -257 1,263 1,006

1946 5 ... 532 1,241 1,768

1947 - 17 ... 659 1,288 1,930

1948 17 30 608 1,536 2,191

1949 22 - 16 372 2,015 2,393

1950 22 265 3 13 2,592 2,895

1951 18 266 5 - 65 2,387 2,601

1952 15 223 47 -248 2,147 2,184

195j 12 432 66 -554 1,846 1,802

1954 7 673 98 -232 1,736 2,282

1955 - 69 732 183 -498 1,735 2,083

1956 - 86 644 276 -319 1,648 2,163

Note: The State's bond loan from the IBRD (year-end 1956: kr. 259 million) is not included in the column headed "IBRD and IMF" but - like the other State loans - in "Other long-term debts".

Table 6 has separate headings for Denmark's accounts with inter

national institutions and for direct investments which may be difficult

to distribute over short-term and long-term items.

Table 7 shows the distribution of net short-term and net long-term

debts over main groups of debtors, disregarding i nternational institu

tions. At year-end 1956, the short-term assets exceeded the short-term

liabilities; the net debt was thus a long-term liability. Further break

downs of the long-term net debt - again excluding international institu-

Table 1 Net foreign debt, eY.c3pting accounts with certain internati9J1al institutions

Short-term net dett Direct Other long:term net debt

Sta te;) invest-

Million National- Local Other ments State, Na.tional- Local Other Total Total (Other etc. bank debtors kroner etc. bank vn,r~rn- debtors govern-

Year-end ments debtors) 1) 2) m~nts

1938 - 84 - 80 -164 ... 972 422 9 1,403 1945 211 -202 43 -309 -257 790 323 150 1,263 1946 246 483 29 -226 532 813 318 110 1,241 1947 136 619 17 -113 659 ... 918 - 79 305 144 1,288 1948 133 471 13 - 9 608 30 1,155 - 55 296 140 1,536

0 r-i 1949 194 319 18 -159 372 - 16 1,509 - 25 378 153 2,015

1950 166 -106 15 - 62 13 3 1,914 - 1 348 331 2,592 1951 164 _-3oe 13 66 - 65 - 5 1,727 - 1 325 336 2,387 1952 140 -577 96 93 -248 47 1,591 - 2 219 339 2,147 1953 11 -780 98 117 -554 66 1,364 - 4 150 336 1,846 1954 - 57 -523 86 262 -232 98 1,264 - 4 142 334 1,736 1955 - 81 :-501 84 -498 183 1,218 - 4 134 387 1,735 1956 - 41 -419 141 -319 276 1,143 - 4 119 390 1,648

1) including the Mortgage na.nk of the Kingdom of Denmark and the State Housing Funl

2) including the State's bc.ni loa.r, from IBRD

- 11 -

tions - are given in Table 8 for the St ate, Danmarks Nationalbank and

local governments and in Table 10 for "Other debtors". These two tables

illustrate the form and composition of the long-term assets and liabili

ties. Public loans consisted of fairly equal parts of bonded debts

(kr. 685 million) and other long-term loans (kr. 626 million) including

Marshall loans. A more detailed specification of the State's long-term

debt is given in Table 9.

Form an..d composition of the long-term assets and liabilities

of the State, Danmarks Nationalbank and local governments,

excepting accounts with certain international ins.ti tutions.

Year-end J:.25..2.

Million Liabilities Assets

kroner Bonds Other Total Shares

State, etc. 566 6261) 1,192

National bank 4 Local governments 119 119

---- ---- ---· Total 685 626 1,311 4

1) Loans for which no bonds were i n circulation

2) Refugee Debt of Western Germany

Table 9

Lon~term foreign debt of the State, the Mortgage Bank and the State Housing Fund

Year-end 1956

Other

492)

49

Total

49

4

53

I. State Million Million

A. Bon9- loans

$: Loan.. of 1928 ..•.•...................••. $: Loan from IBRD (1947) •••••••••••••••••• £ : Loans of 1900, 1901, 1909 and 1946 ••••• Swedish kronor: Loans of 1936, 1938 and 1946 Dutch florinst Loan of 1936 ••••••••••••••• Swiss frcs.s Loans of 1912 and 1938 ••••••• Dan. kr.: Loan of 1894 and domestic loans.

B. Other loans

$: Credit from Export-Import Bank (1945) •• $: Marshall loans (1948-49 and 1952) •••••• £ : Consolidated debt (1951) •••.••••••••.•• Swedish kronor: Loan from Swedi sh Government (1 949)

kroner kroner

55 259

53 24 12 52

--45.... 500

88 228 131 1li_

Sta te, total

626

1,126

II. Mort.ii§.!.~ Bank of the Kingdom oj DeJ.l:!!.lark

Sundry bonded loans III. State Housing Fund

Dutch florins: Bond loan of 1938

Total: State..1.. Mort_gg~ Bank and Housin_g_ F ..... un .......... d ____ .

48

18

----- _ l 1..l-2£

Note: Multiple-currency bonds are included under the currency yielding the highest redemption value.

(\J .-I

Table 10

Lorig-term f 01 eign assets and liabilities of "Other debtorsn

Breakdown by types

Year-end 1956

Million kroner

c~..unerci,l Mortgage Insurance banks credit companies

institu-

Industrial and com- Shipowners

Other Other debtors,

total

(1)

(2)

(3)

Long-term debts

Direct investme~ts Bonds, other Shares, other Real property Other

Total

Long-Jerm assets

Direct investments Bonds, other Shares, other Real property Other

Total

Long-term net Qo::ut

2 18

20

tions

112

112

mercial undertakings

2 640 3 645 2 8 124

7 137 259 86 507 1 5 6

-··· _ 6j__ _______ 55L _____ ____ 14.. 32 .ill_

73 ~---- 2,Jj_ 141 1:illl.

1 181 183 4 369 86 2 23 50 161 15 43 8 44 110

2 1 7 10 43 88 6 4 141

145 316 221 109 721

Direct investm,nts 1 459 -183 l 276 Bonds, other 2 112 - 86 - 23 - 42 - 37 Shares, other 18 - 8 94 251 42 397 Real property - l - 1 2 - 4

__ o_ther 21 - ~Q ____ [} ____ . 35 34

!~~~!_{}l_=_{!l_:_{~l~ _______ gQ __ =-====112=========-=71-=~•e====2i2======%======52====== ===32======666=

- l~ -

The long-term foreign debts of 11 0ther debtors" - except for foreign

direct investments in Danish undertakings (kr. 645 million) - consisted

mainly of Danish shares held by foreign owners · (kr. 507 million).

In addition to Denmark's financial transactions with international

institutions, it has been a characteristic feature of the capital account

of Denmark's post-war balance of payments that private debts have assumed

great significance, especially foreign investments in Danish industrial

and commercial undertakings - consisting partly of direct investments in

branches and affiliated companies and partly of shares owned in Danish

companies.

Table 11

Marshall Aid

Million 1948 1949 1950 1951 1952 1953 1954 Total kroner

F.o.b. value of commodity imports, etc. under Marshall Aid 182 500 436 443 65 53 1 1,686

Denmark's utilization of drawing rights 27 100 57 184

Other countries' utilization of drawing rights on Denmark(-) - 21 - 34 - 55

Additions to ECA 5 per cent deposits(•) (10 per cent de)osits from June 1954 - 29 - 23 - 22 5 .. .5 - 2 - 86 ___ _____ ,._

Total 209 550 436 421 60 48 5 1,729 Of which, loans 83 66 16 165 II II gifts 126 484 436 421 44 48 5 1,564

In further elucidation of the details given above concerning develop

ments in Denmark's foreign debts, Table 11 contains a specification of the

amounts which Denmark received under the Marshall Aid, both as gifts and as

loans. While the gifts have not been included in any of the preceding tables,

Marshall loans have been taken into account both as net capital receipts on

the balance of payments and as net debts.

Gross liabilities and gross assets, distributed over short-term and

long-term items, have been specified for each of the major groups of debtors

and creditors in Enclosure 1.

EEclosure 1 ----·- -Fore j...fil.L§.S sets and liaj:lili ties, breakdown by groups~9-.4.2.:22.

Year-end figures

Gross assets - .

Million kroner

Danmarks Mortgage credit State 2 etc. Local governr.en ts National bank Commercial banks institutions

Year-end Long- Short- Long- Short- Total Long- Short- Total Long- Short- Total Long- Short- Total term term Total term term term term term term term term --_____ ,.. _________ __________ --- ·---

1949 561 35 596 25 380 405 2 219 221 1950 604 36 640 1 472 473 7 220 227 1951 582 22 604 ._ 1 460 461 7 176 183 1952 564 32 5·96 2 724 726 4 156 160-1953 688 50 738 4 894 898 1 189 190 1954 680 58 738 4 733 737 1 211 212 1955 638 84 722 4 716 720 361 361 1956 618 47 665 4 700 704 467 467

I::!dustrial and commercial

Insurance com12anies ,,nno:r:takine_:€ Shi12owners Other Total

Long- Short- Total Lo:...t:>- Jhort- Total Long- Short- Total Long- Short- Total Long- Short- Total term term term term term term term term term term ---- -·

1949 76 81 157 166 303 ~69 151 178 329 134 45 179 1,115 1,241 2,356 1950 81 89 170 168 :16 ~84 160 212 372 109 35 144 1,130 1,380 2,510 1951 88 100 188 176 3;10 ~66 205 201 406 104 25 129 1,163 1,374 2,537 1952 96 118 214 192 429 E21 186 180 366 93 21 114 1,137 1,660 2,797 1953 113 106 219 207 712 ~19 182 159 341 99 24 123 1,294 2,134 3,428 1954 130 109 239 239 594 E 33 179 186 365 102 22 124 1,335 1,913 3,248 1955 134 109 243 258 581 f 39 188 220 408 102 36 138 1,324 2,107 3,431 1956 145 112 257 316 788 l,J 04 221 308 529 109 30 139 1,413 2,452 3,865

Enclosure 1

Foreign assets_ and liabilj.. ties, breakdown J?y_ groups, l:149-56

Year-.§..11.d fi.fil)l:es_

Gross liabilities

Million kroner

Dan.marks M:ortgage credit St a te'--~~-- Local governmeJ"I ts National bank Commercial bariks institutions

Year-end Long- Short- Long- Short- ·.1.·otal Long- Short- Total Long- Short- Total Long- Short- Total rrotal term term term term term term term term term term

1949 1, 509 731 2,240 378 18 ·396 780 780 5 192 197 130 130 1950 1, 957 765 2,722 348 15 363 651 651 17 172 189 128 128 1951 1,745 746 2 ,491 325 13 338 440 440 15 206 221 123 123 1952 1, 591 729 2,320 215 96 315 392 392 17 194 211 121 121 1953 1,488 615 2,103 15c 98 248 568 568 18 226 244 126 126 1954 1, 380 550 1,930 142 86 228 905 905 18 270 288 118 118 1955 1, 292 490 1,782 134 134 955 955 19 361 380 119 119 1956 1,192 482 1,674 119 119 932 932 20 406 426 112 112

Industrial anci commercial

Insuranc_fL.£ OJ!l.R?!l.i-~ undertakings Shipowners Other !9.J9-.L_ __ Long- Short- Total Jong- Shari.- Total Long- Short- Total Long- Short- Total Long- Short- Total term term tt:.nu term term term term t erm term term

... - ·----------- ... - ----- ---·· - -------·-----·------~--- .. -·~---.. - ---·-·- - - ------1949 49 82 131 ] 18 329 647 42 18 60 122 46 168 2,553 2,196 4,749 1950 52 91 143 421 428 849 115 88 203 126 31 157 3,164 2,241 5,405 1951 54 107 161 468 512 980 129 93 222 122 40 162 2,981 2,157 5,138 1952 55 113 168 494 5a9 1,083 144 72 216 126 29 155 2,767 2,214 4,981 1953 69 118 187 514 832 1,346 150 104 254 127 27 154 2,642 2,588 5,230 1954 71 122 193 581 %2 1,443 163 107 270 132 23 155 2,605 2,925 5,530 1955 72 1-25 197 685 781 1,466 221 100 321 136 24 160 2,678 2,836 5,514 1956 73 134 207 835 1,176 2:014 273 110 383 141 20 161 2,768 3, 260 6,028

Annex 4 to Memorandum I

Denmark's public foreign debt service 1945-57

At the end of the German occupation in 1945 Denmark was in arrears with the servicing of its foreign debts, especially installments but also interest payments on certain European loans. The servicing of European loans was, however, soon brought up to date, mainly by means of a loan which the Danish Government obtained from Sweden in 1947.

The trend of dollar debts will by seen from the following t able:

Inter-war debt Post-war Total Million dollars Tot a l Overdue debt

At the end of the war 1945 lol 34 lol Year-end 1949 89 32 91 180

1950 82 3o 91 173 1951 74 27 9o 164 1952 65 37 91 156

1953 38 22 89 127 1954 28 12 87 115 1955 13 0 85 98 1956 lo 0 83 93 1957 7 0 80 87

When the war ended in 1945, the principa l outstanding on the public dollar loans raised during the inter-war years amounted to $ lol million of which$ 34 million was overdue. In order to reduc e the overdue dollar debt, Denmark obtained a short-term loan in Switzerland of 8 7 million repayable in Swiss francs. By redemption of certain bonds held by Danish own ers in the s ame period the principal outstanding on the inter-war loans was reduced to$ 89 million by the end of 1949, Owing to the insta llments which had fallen due for payment in the meantime, the overdue pa rt of the dollar loans had only been reduced by $ 2 million to$ 32 million.

- 2 -

In the same period the Danish Government obtained the following dollar loans:

1945-48 Export-Import Bank loan $ 2o million

1947 IBRD loan . . . . . . . . . . . . $ 4o million

1948 Marshall loan . . . . . . . s 31 million

Total $ 91 million ~=================; ___

At year-end 1949 public dollar debts thus totalled $180 million.

In the following years considerable efforts were made to carry the servicing of dollar debts up to date, and the last arrears were paid in 1955.

In that period only one new loan, a Marshall loan of$ 2 million, was obtained (in 1952).

At the end of 1957, the principal outstanding on public dollar loans totalled$ 87 million of which the above-mentioned post-war loans represented$ 80 million.

Installments paid and loans obtained during the whole period 1945 through 1957 will be seen from the following table:

Dollar debts at the end of the war

New dollar loans 1945-57 •••••••. Total

Installments paid 1945-57 . . . . . . . . Dollar debt at year-end 1957 ••.•.

$lol million $ 93 million $194 million $lo7 million

S 87 million ------------------------

The dollars repaid on debts since the war thus exceed the proceeds from the new dollar loans considerably. Moreover, these loans -apart from the small Marshall loan in 1952 - were obtained in the early post-war years, while the dollar debt has been reduced very substantially since 1949.

- 3 -

As of March 31, 1958 the principal outstanding of the foreign loans of the Danish government were:

4t% Gold Bonds 1928/1962 x) $

2!, 3, 3!% Export-Import Bank Credit 1945/66 -3t + 1% IBRD-lean 1947/72

5,373,ooo 11,333,333 36,280,000 30,440,000 2t% Marshall-loan 1947/83

2t% Marshall-loan 1952/86 2,300,000

}t% 3t%

3t%

3t% 1%

31% 3% 4%

Total $ 85,726,333 =========----------=----

Multiple Currency Bonds 19oo/6n £ 33,270 II " II of 19ol,

Perpetual 1,703,147

" II II of 1909, Perpetual 2,217,600

Sterling Bonds 1946/72 514,200

Consolidated pre-EPU Debt, due 1960 4,032,752

Total £ 8,500' 969 ------------------------------------------------

Swedish kronor Bonds 1938/58 Swedish War Settlement Loan 1945/83 Swedish kronor Bonds 1947/67

Swedish kronor 2,522,ooo

130,053,250 11,937,ooo

Total Swedish kronorl44,512,25o ----------------------------------------------------------------

4% Multiple Currency Bonds 1912/71 Swissfrcs. 23,184,ooo 3t% Swiss frcs Bonds 1938/64 8,121,ooo

Total Swiss frcs. 31, 3o5, ooo

4% Dutch florin Bonds 1938/68 Dutch florins 6,390,000

3% Multiple Ourrency Bonds of 1894, Perpetual Danish kroner 66,326,ooo

x) All Bonds called for redemption on October 15, 1~58.

Annex 5 to Memorandum I

Installments and interest payable on Denmark's public foreign debts, including the debt to the European Payments Union

(Million kroner based on the exchange rates in force on March 31, 1958)

Installments

1958 1959 : - So ..1..., 01 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 Jq76

77 1978 1979 1980 1981 1982 1983 1984 1985

Loans in Dollar (b) Consol. Other ( ) European() loans EPU debt EPU debt 0

currency a

74 71 31 28 27 26 26 22 22 22 18 14 14

9 8 7 7 8 8 8 8 8 9 9 9 5

123 61 61 61 61 31 32 35 3o 26 27 28 29 29 3o

5 17 17 17 17 17 17 17 17 17 17

1

91 91 91 53 13

19 38 38 19

Total

3o7 261 221 161 lol

57 58 57 52 48 45 42 43 38 38 12 24 25 25 25 25 25 26 26 26 22

1

Interest Total debt services.

54 52 49 4o 32 29 28 24 22 2o 18 16 15 13 11 lo lo

9 8 8 7 6 6 5 4 4 3 3

361 313 270 2ol 133

86 86 81 74 68 63 58 58 51 49 22 34 34 33 33 32 31 32 31 3o 26

4 3

(a) excluding estimated Danish holdings of bonds of the individual loans. (b) including kr. 235 million drawn on the International Monetary Fund

in 1957. Kr. 69 million of that loan was paid off in 1958; it is assumed that the balance, kr. 166 million, will be repaid in four equal annual installments in 1959 through 1962.

(c) computed on the assumption tha t EPU will be dissolved on June 3o, 1958 and that Denmark's current account with EPU will be in equilibrium as from March 31, 1958.

D RA FT

P . . R O J E C T.

Annex to Memorandum (III) concerning acquisition

September 1957. of diesel powered locomotives for the Danish State Railways.

D A N I S H S T A T E R A I L W A Y S

Dieselisation project.

Remaining constant all-year-round traffic now on steam locomotives, both divisions.

- 1 -

Dieselisation Project.

Danish State Railways.

I. Line service.

The major part of the line service on the Danish State

Railways is already carried out with diesel motive power.

Passenger trains on branch lines and not electrified

suburban lines are hauled by diesel railcars, and diesel

articulated trains and diesel railcars are used in fast long

distance trains in such numbers that purchase of diesel rail

cars and articulated trains is not considered at the moment.

Diesel-electric locomotives with 1700-1900 hp are used

for a number of heavy freight trains and large passenger and

express trains, and when locomotives already on order are

delivered, 46 locomotives of 1700-1900 hp will be in service

to haul the major part of said trains.

The study considers the introduction of diesel locomotives

in the remaining part of the constant all-year-round traffic

which is now on steam locomotives. Extra holiday traffic and

other peak traffic is considered for a number of years to be

worked by steam locomotives.

The steam locomotives considered in the study are mainly

older locomotives (more than 3o years old) of rather small

horsepower, The diesel locomotives are of superior horsepower

and superior max. speed, and besides the savings in economy

obtained by the dieseli e a .tion, a considerable and necessary

p.t.r.

- 2 -

modernisation of the traffic on the Danish State Railways

will be obtained.

A substantial part of the savings will be s avings on

imported fuel and therefore savings of foreign currency o

The steam locomotives to be replaced are mainly branch

line locomotives and the new diesel locomotives for the

branch lines must have sufficiently low axle load to ope

rate on those lines. They are however planned to have the

same max. speed as the main line locomotives and to be able

to be operated in multiple unit with said locomotives.

If branch linee are closed for traffic the locomotives

can be removed for service to the main lines and eventually,

coupled in multiple unit with the main line locomotives,

p~ovide added speed and capacity of main line trains.

The study is made separately for each of the two divisions

of the Danish State Railways .

- 3 -


Danish State Railways. Line Service.

Characteristics of Locomotives.

Class

Type

Make

1. Division.

Steam

E s D

2-C-l l-C-0 l-C-0

Frichs Frichs Bald .etc etc. (1927) (1962-2q

(1914-47)

Weight (in service

Max. rating, hp

Tractive effort (start), t Max. speed, km/h

Numbers of

Locomotives.

t

Operational stock

Total

Total in service

143 99 75

1370 920 640

8,6 7,8 5,9

llo 9o 7o

6 16 9

33

28

C

2-B-O

Esslin-gen

( 1903)

?o

525

4,3

loo

2

Diesel

I II

AlA-AlA AlA-AlA

lo2 84

1900 1425

18 16

120 120

5 2o

25

22

- 4 -

Performance.

(1 year = 360 days).

St eam Diesel

Train-km per year 2.100.000 2.100.000

per looo per yea r 64.ooo 84.ooo

per loco per day 180 230

Loco-km pe,r ·year 2.350.000 2.300.000

per loco per year 71.ooo 92.ooo

per loco-in-service 230 290 per day-in-service


looo gross per year 588.ooo 588.ooo ton-km hld.

per loco per year 18.ooo 24,ooo

per loco per day 5o 65

Tons :eer train 280 280

- 5 -

Driving Personnel.

Train-km per crew-in-s er vice:!

per month

per year

Number of crews-in-service

Hours per crew per month

Hours per crew per year

Total crew-hours per year

Steam

3 .ooo

36.ooo

58

180

2 .160

125.280

Driver Fireman I

Diesel

3.500

4 2.ooo

5o

180

2.160

108.000

II

Net salary per year 14.oo2 11.961 15.565 14.oo2

Extra payment 2.150 l.600 2.400 2.150

Pension and uniform 5.161 4.367 5.492 5.161

Gross salary per year (D 1) 21,313 17.928 23.457 21.313

Effective working days pe r man per year (N) 264 276 261 264

Hours per man per day (h) 6,9 6,9 6,9 6,9

Gross rate per man-hour(~xif) 11,70 9,4o 13,o5 11,70

Gross rate per crew-hour 21,lo

Total costs per year, d.kr. 2.640.000

Steam locomotives: 1 driver+ 1 fireman.

Diesel locomotives: 1 driver only.

11,95

1.290.000

- 6 -

Power.

Steam

Consumption per year, t. 34.700

Consumption per train-km, kg 16, 5

Consumption per loco-km, kg

Price per t, d.kr.

Total costs per ;year 2 d.kr.

Lubricants and Water.

Costs per train-km: Lubr.

Water

Total

Total costs per ;year, d.kr.

Servicing.

Costs per train-km

Total costs per ;year 2 d.kr.

14,8

165

5.730.000

0,02

o,o7

o,o9

190.000

o,48

l.olo.ooo

Diesel

5.ooo

2,4

2,2

271

1.360.000

0,02

o,oo

0,02

40.000

0,20

420.000

- 7 -

Maintenance and Repairs.

Costs per km with overh. and epuipm. shop incl.

Total costs per year, d.kr.

Investment Diesel Locos.

Numbers

Price per loco

Total value, d.kr.

Total Costs per Year.

(Capital costs not incl.)

Driving personnel

Power

Maintenance, Servicing, Lubr, and Water

Total, d.kr.

Annual savings, d.kr.

Steam

0' 60

1.260.000

Steam

2.640.000

5.730.000

2.460.000

lo. 830. ooo

Diesel

o,47

990.000

I II 5 2o

1,800.000 1.430.000

37.600.000

6.730.000

Diesel

1,290.000

1.360.000

1.450.000

4.loo.ooo

,-,)18% return on the investment of 37.600.000 d.kr.

- 8 -


Danish Sta t e Railways. Line service.

Characteristics

of Locomotives.

Class

Type

Make

Weight ( in s e rvi c e ) , t

Max. rating, hp

Tractive effort (start), t Max. speed, km/h

Numb ers

of Locomotives.

Operational stock

Total

Total in service

2. Division.

E

2-0-1

Frichs etc.

0.914-47)

143

1370

8,6

llo

E

9

Steam

R H

2-C-O 1-D-O

Borsig Frichs etc. (1926-41)

(1912-a1-)

118 136

1160 1185

7,9 11,5

loo Bo

R and PR H and N

6

60

5o

11

D

l-C-0

Ba ldw. etc.

(1902-2:>)

75

640

5,9

7o

D

34

Diesel

I

AlA-AlA

lo2

1900

18

120

I

15

41

37

II

AlA-AlA

84

1425

16

120

II

26

- 9 -

Performance.

(1 year= 360 days)

Steam Diesel

Train-km per yea r 3.100.000 3.100.000



Loco-km per year 3.400.000 3.300.000


per loco-in-service 190 250 per day-in-service


looo gross per year 980.000 980.000 ton-km hld



Tons Eer train 315 315

- lo -

Driving Personnel.

Train-km per crew-in-service

per month

per year





Net salary per year

Extra payment

Pension and uniform

Gross salary per year (D 1)

Effective working days per man per year (N)

Hours pe r man per day (h)

Gross rate per man (D 1) hour (Nxh)

Gross rate per crew hour

Total costs Eer iear 2 d .kr.

Steam

2.500

30.000

lo3

180

2.160

222.500

Driver Fireman

14.oo2 11.961

2.150 1.600

5.161 4.367

21.313 17.928

264

6,9

11,70

21,lo

4.690.000

276

6,9

9,4o

Steam locomotives: 1 driver+ 1 fireman.

Diesel locomotives: 1 driver only.

Diesel

3.500

42.ooo

74

180

2.160

160.000

I II

15.565 14.oo2

2.400 2.150

5.492 5.161

23.457 21.313

261

6,9

13,o5

12,20

264

6,9

11,70

1.950.000

- 11 -

Power.

Consumption per year, t

Consumption per train-km, kg

Consumption per loco-km, kg

Price pert, d.kr.

Total costs Eer year 2 d .kr.


Costs per train-km: Lubr.

Water

Total

Total costs per year 2 d.kr.

Servicing.

Costs per train-km


Steam

54.500

17,5

16,1

165

8.990.000

0,02

o,o7

o,o9

280.000

o,48

1.490.000

Diesel

?.800

2,5

2,4

271

2.110.000

0,02

o,oo

0,02

60.000

0,20

620.000

- 12 -


Costs per km with overh. and equipm. shop incl.



Numbers

Price per loco

Total value, d.kr.

Total Costs per Year. (Capital costs not included)

Driving Personnel

Power

Maintenance, Servicing Lubr. and Water

Total, d.kr.


Steam

·o, 60

l.860.000

Steam

4.690.000

8.990.000

3.630.000

17.310.000

Diesel

o,47

1.460.000

I 15

II 26

l.800.000 1.430.000

64.180.000

Diesel

1.950.000

2.110.000

2.140.000

6.200.000

11.110.000

l""vl7% return on the investment of 64.180.000 d.kr.

- 13 -

II. Shunt i ng service.

Until now a sma ll er number of steam shunting locomotives

have been replaced by die s el-mechanica l shunters and 2o diesel

mechanical shµnters are on order for delivery in 1958-1959.

Larger di esel shunters have only been introduced as proto

types, and the ess ential part of the shunting on the Danish State

Railways is carried out with steam locomotives.

The study considers the replacement of all steam shunting

locomotives by diesel shunting locomotives, except such steam

locomotives tha t are used for service a few days of the year only.

The dieselisation of the shunting service will. besides the

economy obtained and the s avings on foreign currency also give

better service and the very important result of elimination of

smoke in city areas.

The study is made separa tely for each of the two divisions

of the Danish State Railways.

- 14 -


Danish State Railways. Shunting Service.

1. Division.

Characteristics of Locomotives.

Class

Type

Make

Weight (in service),

Max. rating, hp

t

Tractive effort (start),

Max. speed, km/h

Numbers of Locomotives.

Operational stock

Total

Total in service

t

Steam

Q F

D C

Frichs Frichs 0.930-45) etc.

(1903-49.

56 37

500 270

7,5 5,5

45 5o

5 46

51

44

Diesel

A B

B-Bor D C

min.48t min.4o t

12 lo

7o 60

13 33

4o

Performance.

1 year= 360 days 1 hour= lo km

Loco-km per year

per loco per year

per loco per day

Driving Personnel.

- 15 -

Loco-km per crew per month

Loco-km per crew per year





Net salary per year

Extra payment

Pension and uniform

Gross salary per year (D 1)

Eff . working days per man per year (N)

Hours per crew per day (h)

Gross rate per crew-hour f~~~


Steam

2.800.000

55.ooo

150

1.500

18.ooo

156

180

2.160

336.960

14.oo2

2.150

5.161

21.313

264

6,9

11,70

3.940.000

Diesel

2.800.000

61. 000

170

1 . 570

18.900

149

180

2.160

321.120

14.oo2

2.150

5.161

21. 313

264

6,9

11,70

3.760.000

- 16 -

Power.

Consumption per year, t.

Consumption per km, kg

Consumption per hour, kg

Price per t, d. kr.

Total costs Eer ;year 2 d.kr.


Costs per km: Lubr.

Water

Total

Total costs 12er ;year, d.kr.

Servicing.

Costs per km


Steam

23.700

8,5

85

165

3.910.000

o,ol

o,o3

o,o4

llo.ooo

o,27

760.000

Diesel

2.200

o,79

7,9

271

600.000

o,ol

o,oo

o,ol

30.000

0,06

170.000

- 17 -





Numbers

Price per loco

Total value, d.kr.

Total Costs per Year (Capital costs not incl.)

Driving personnel

Power

Maintenance, Servicing, Lubr. and Water

Total, d.kr.


Steam

o,37

1.040.000

Steam

3.940.000

3.910.000

1.910.000

9.760.000

Diesel

o,27

760.000

A 13

B 33

700.000 440.000

23.600.000

Diesel

3.760.000

600.000

960.000

5.320.000

4.440.000

,-v 19% return on the investment of 23.600.000 d,kr,

- 18 -


Danish State Railways , Shunting Service.

2. Division.

Caracteristics of Locomotives.

Class

Type

Make

Weight (in service),

Max. rating, hp

t

Tractive effort (start),

Max. speed,

Numbers of Locomotives.

km/h

Operational stock

Total

Total in service

t

Steam

Q F

D C

Frichs Frichs (1930-45) etc.

(1903-49)

56

500

7,5

45

lo

69

58

37

270

5,5

5o

59

Diesel

A

B-B ,or D

. min. 48 t

12

?o

13

63

56

B

C

min. 4o t

lo

60

5o

Performance.

1 year= 360 days 1 hour= lo km

Loco-km per year

per loco per year

per loco per day

Driving Personnel.

Loco-km per crew per

Loco-km per crew per

- 19 -

month

year

Numbers of crews-in-service




Gross rate per crew-hour

Total costs :12er iear 2 d.kr.

Steam

4.loo.ooo

60.000

170

1. 600

19.200

214

180

2.160

462. 000

11.70

5.410.000

Diesel

4.100.000

65.ooo

188

1.670

2o.o4o

2o5

180

2.160

443.ooo

11.?o

5.180.000

Power.

Consumption per year,

Consumption per km, kg

Consumption p e r hour,

Price pert, d.kr.

Tota l costs 12er ;yeart


Costs per km: Lubr.

Water

Total

t

kg

d.kr.


Servicing.

Costs per km

- 2o -


Steam

36 . 500

8, 9

89

165

6.020.000

o,ol

o,o3

o,o4

160.000

o, 27

1.110.000

Diesel

3 .300

o,82

8,2

271

890. 000

o,ol

o,oo

o,ol

40.000

0,06

250.000

- 21 -




Investment Diesel locos.

Numbers

Price per loco

Total value, d.kr.

Total Costs per Year. (Capital costs not incl.)

Driving personnel

Power

Maintenance, Servicing, Lubr. and Water

Total, d.kr.

Annual savings, d. kr.

Steam

o,37

1.520.000

Steam

5.410.000

6.020.000

2.790.000

14.220.000

Diesel

o,27

1.110.000

B 5o 13

700.000 440.000

31.100.000

Diesel

5.180.000

890.000

1.400.000

7.470.000

6 . 750.000

('J 22 % return on the investment of 31.loo.ooo d.kr.

Documents

Folder ID: 1366955 Project ID: Dates: Fonds - Pubdocs