RETFrURN TO \ C0PY RESTRICTEDlEPORTS NESK FILE COI?N Report No. TO-637a

WITHINONE WEEK

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility,for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF THE

THIRD EXPANSION PROGRAM

EMPRESA DE ENERGIA ELECTRICA DE BOGOTA

COLOMBIA

May 9, 1968

Projects Department

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CURRENCY EQUIVALENTS

U.S. $1 = Col$ 16. 3(unless otherwise stated)

Col$ 1 = U.S. $0. 061Col$ 1 million = U.S. $61, 350

Empresa's fiscal year ends December 3.1

MEASURES EQUIVALENTS

One meter (m) = 3. 28 feetOne kilometer (km) = 0. 6214 miles

APPRAISAL OF THE THIRDEXPAN-SION PriOG:bI.i

EMPRESA LE ENERGIA EIECTR-ICA DE BOGOTA

COLOMBIA

TABI.E OF CONTENTS

Page

SUMMARY i

1. INTRODUCTION 1

2. INTERCCNNECTION WITH OTElR MAJOR SYSTEMS 1

3. THE BORROWER 3Existing Facilities 4

4. THE PROJECT 4El Colegio 4Canoas 5Transmission and Distribution 6Summarized Cost Estimate 6Procurement 7Method of Financing 8Engineering and Supervision of Construction 8

5. POWER MARKET 9Justification for the Project 10

6. FINANCIAL ASPECTS 10Past Performance 10The Tariff Situation 12Present Financial Position 12Revaluation of Assets 14Construction and Investment Programs 1968-1974 14Financial Plan 15Estimated Future Performance 17

7. CONCLUSIONS 18

This report was prepared by E. B. Arnold, Paul Geli and I. A. Menezesfrom information obtained during investigations and discussions in Bogotain February 1967 and revised by Messrs. Arnold and Vigie in January 1968.

LIST OF ANNEXES

1. System Sales and Demand

2. Load and Capability Development

3. Project Cost Estimate

4. Comparative Schedules of Rates

5. Actual and Forecast Income Statements 1963 - 1974

6. Sources and Applications of Funds 1968 - 1974

7. Actual and Forecast Balance Sheets 1963 - 1974

Map - Colombia, Proposed Expansion Program for the Empresa deEnergia Electrica de Bogota

APPRAISAL OFTHE THIRD EPAd1'3SION PROGRAM

EMPRESA D1E ENERGIA EL'CTEiZCA DE -30G0TA

COLOMBIA

SUNvARY

i. Empresa de Energia Electrica de Bogota requires the equivalentof US$25.o million to complete the financing of a project consisting ofthe installation of the final three 50 MW units of El Colegio hydro plant,the construction of the Canoas hydro plant with one 50 NW unit installedand normal distribution and transmission expansion. The cost of the project,estimated at the equivalent of US$h3.7 million including interest duringconstruction of about US$4.4 million equivalent, represents about 87 percentof Empresa's planned construction investments during the project constructionperiod. The external financing is required to cover the foreign exchangecost of imported goods necessary for the project. This would be providedby the Bank and major industrialized countries under arrangements describedherein if the proposed loan is approved.

ii. The additional generating capacity is needed to meet reasonableload growth estimates for the Bogota area and comprises generating plantadditions approved for early construction in anticipation of electricalinterconnection of the Bogota, IIedellin and Cali power systems.

iii. A loan for this program has been under discussion for more thana year but processing of the application was delayed until satisfactoryarrangements were made to proceed with the Interconnection Project.

iv. This would be the Bank's third loan to Empresa. The first wasmade in 1960 (246-CO) and the second in 1962 (313-CO); the two Loans totalledUS$67.6 million equivalent. Work under both Loans has been completed andboth Loans have been fully disbursed.

v. There should be no unusual problems in carrying out the proposedprogram. Similar and more difficult work has been successfully completedin the past by Empresa and its consultants. The cost estimates containprovisions for local price increases and contingencies and should provereliable.

vi. Empresa's financial position has been difficult during the pastthree years due to increases in operating and construction costs and delaysin applying for and obtaining needed tariff adjustments. However, it isnow much improved, and the financial plan provides for payment of currentobligations resulting from recent cash difficulties and for a substantialincrease in working capital. It is intended to be conservative and formsa satisfactory basis for financing the proposed project.

vii. The project would be suitable for a Bank loan of US$18.0 millionequivalent, for a term of 20 years including about 3½ years of grace onamortization payments. Under the proposed joint financing arrangements, thebalance of the foreign exchange required for the project of US$7.0 millionequivalent would be provided through credits to be arranged between Empresaand major supplier countries.

APPRAISAL OFTHE THIRD EXPANSION PROGRAM4

EiPREaA DE ENEIGIA ELECTRICA DE BOGOTA

COLOMBIA

1. INTRODUCTION

1.01 Empresa de Energia Electrica de Bogota applied for a loan ofUS$34.4 million equivalent late in 1966 toward the cost of system expansionduring the period 1967-71. However, during appraisal the required externalfinancing was found to be US$25.o million equivalent, the estimated foreignexchange cost of imported equipment, supplies and services. The total costof the project is estimated to be US$43.7 million equivalent includinginterest charges on borrowed funds of about US$4.4 million equivalent. Theexternal financing proposed would represent about 57 percent of the total.

1.02 The project would include the installation of three 50 IW unitsto complete El Colegio hydro plant and the construction of the new Canoashydro plant with one 50 INW unit, together with the necessary expansion oftransmission line and distribution system facilities to meet load growthduring 1968-71. The cost of the project wculd represent about 87 percentof the cost of new planned construction investments during the period1968-71. Procurement is well advanced and major contracts have been awardedfollowing procedures approved by the Bank. The Bank would reimburse up tothe equivalent of US$2.5 million from the proposed loan to cover down pay-ments providing reimbursements would not cover payments made more than fourmonths prior to the date of loan approval.

1.03 This would be the third loan to Empresa. The first (246-CO)was rmade in January 1960 and the second (313-CO) was made in Nlay 1962.Both Loans have been fully disbursed. Amortization of the first Loanstarted in 1963 and the second in 1966. The work financed by the firstLoan was completed in 1963 and work under the second Loan, though delayedby problems described in paragraph 4.02, was substantially completed inmid-1967. Included were hydro and thermal generating capacity additionsof about 300 PM, one major reservoir plus improvements to another andtransmission line and distribution system extensions.

1.04 This report was prepared by E. B. Arnold, Paul Geli andI. A. Menezes from information obtained during investigations and dis-cussions in Bogota in February 1967 and revised by Messrs. Arnold andJ. P. Vigie in January 1968. The delay of approximately one year inprocessing the loan request was necessary to complete institutional arrange-ments for the electrical interconnection of the Bogota, Medellin and Calipower systems (see paragraph 2.02) and because Empresa's financial plan wasaffected by interconnection arrangements.

2. INTERCONNECTION WITH OTHER MAJOR SYSTEMS

2.01 The Bank has been participating in financing power developmentin Colombia for more than 15 years. While Bank operations have been con-centrated in the three systems serving the major cities of Bogota, Cali

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and Medellin, a substantial contribution has also been made to the expansionof the Manizales system, which is roughly in the center of the triangleformed by the other three. All told, 12 Loans with an aggregate initialamount of nearly US$200 million have been made to these four systems, whichin 1966 produced some 65 percent of all the electric power generated in thenation.

2.02 Potential benefits to be gained from interconnecting these powersystems became apparent to Bank staff several years ago and these werediscussed extensively in Colombia early in 1963. Later that year, economicstudies were made in Colombia which confirmed beyond doubt that very signifi-cant savings could indeed be realized and the Bank made it known that furtherpower loans for generating plant additions in the area to be served by theinterconnection would not be considered unless they were for facilitiesclearly compatible with interconnection and until satisfactory progress hadbeen made toward carrying out the interconnection.

2.03 In spite of the Bank's efforts, progress toward organizing acompany to own and properly operate the interconnection facilities has beendisappointing. However, it was agreed that a new company would be formed,owned jointly by the local systems serving Bogota, Cali and Medellin and bythe national Government which controls the IManizales system. During 1967statutes were drafted and a new company, Interconexion Electrica, S.A.(Interconexion) was incorporated. Engineering has progressed to the pointwhere bid invitations for the transmission lines and substations have beenissued. The estimated cost of facilities to connect the four systems isequivalent to about US$32 million, of which about US$24 million would bein foreign currencies.

2.04 The benefits of the proposed interconnection accrue througheconomies of scale: for example, larger generating plants will be justifiedfor the interconnected system with capital costs significantly lower thanthe sum of similar investments required if the component systems wereoperated independently. Reserve capacity requirements would also be muchlower and operational savings attained by taking advantage of differinghydrological conditions between areas within the interconnected system.Interconexion's initial task will be to construct and operate a transmissionsystem by which power transfers between the component systems, its sponsors,can take place. Following this, with the exception of a few generatingprojects reserved for construction by the sponsors, Interconexion will fi-nance, construct and own major new generating stations. The formula forfinancing this work is complicated but, in essence, the local costs areexpected to be financed through equity and debt investments by the sponsorsand the foreign costs through foreign loans. Operating costs and debtservice on foreign loans incurred for the initial interconnection facilitieswill be borne by the sponsors. Interconexion would operate initially ona break-even cash basis and later, when it owms generating facilities, wouldbe expected to generate revenues sufficient to cover all its cash require-ments including dividend payments to the sponsors.

2.05 To determine the most economic addition of generating capacityin the interconnected system, various construction programs were prepared

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and examined several years ago in Colombia and all included the capacityfor Bogota included in the project appraised in this report. A conditionof paragraph 2.02 above, that generating facilities considered for loansmust be compatible with interconnected operations is therefore met.However, the condition that satisfactory progress be made in the carryingout of the interconnection itself was met only late in 1967. A loanrequest for the interconnection project is being processed.

3. THE BORROWER

3.01 The Borrower would be Empresa de Energia Electrica de Bogota(Empresa), an autonomous municipally-owned public utility which serves thecapital city of Bogota and Vicinity. The Bogota area has a population ofabout two million.

3.02 Empresa is a juridical entity with legal capacity to borrow fromthe Bank. It is an autonomous enterprise under the direction of a Board ofDirectors who appoint a manager responsible for day-to-day operations. Theappointment must be approved by the lMayor of Bogota. The manager in officesince 1951 retired at the end of 1967 and a new manager with past utilityexperience has been recently appointed.

3.03 The present Board consists of seven members, including the Mayorof Bogota or his representative. Two members are selected by the BogotaMunicipal Council and four are chosen by a consortium of Bogota banks underthe authority of a trust agreement with the Municipality of Bogota. Thisagreement was executed in 1951 w¢hen a consortium of four local banks fi-nanced the acquisition by the Yiunicipality of the outstanding stock of aprivate corporation, Empresas Unidas de Energia Electrica de Bogota, S.A.,the predecessor of Empresa de Energia Electrica. This trust agreement willexpire in mid-1968.

3.04 In connection with the first Bank Loan (246-CO) the Municipalityagreed that, after the expiration of the trust agreement, the seven membersof the Board would be: the M4ayor of Bogota, two members elected by theMunicipal Council, three members chosen by the Council from lists submittedby associations representative of banks, commerce and industry of Bogota,and one member chosen by the President of the Republic (Acuerdo No. 129 of1959). During negotiations the 11unicipality agreed to continue this under-taking in connection with the proposed loan.

3.05 Erapresa's management includes a General Auditor, appointed bythe 1Mbyor of Bogota from a list of candidates nominated by the Banco de laRepublica. The auditor reports directly to the Board, is on Empresa'spayroll, and mainly performs the functions of an internal auditor. Conse-quently, in connection with the previous Loans, Empresa agreed to an annualaudit by independent auditors satisfactory to the Bank. During negotiations,Erapresa agreed to continue this undertaking for the duration of the proposedloan.

3.06 The management and staff of Empresa, with the assistance ofconsultants, are capable of satisfactorily carrying out the proposed project.

Existing Facilities

3.07 Empresa's generating facilities include 361 MW of hydro and 75 NWof thermal capability. As will be seen from the HIap, the hydroelectricgenerating facilities consist of a series of plants located along a 25 kmstretch of the Bogota River a short distance downstream from Bogota. Thesteam plant, with two 33 PnW units, is located at Zipaquira, about 44 kmnorth of Bogota. In addition, Empresa owns and maintains a very old thermalplant capable of about 20 MW for short periods. This plant is used only forreserve and emergencies.

3.08 Empresa also owns two important reservoirs. The Tomine reservoiron the Siecha River, an irmportant tributary of the Bogota River, is thelargest storage reservoir in the Bogota River watershed and is used forannual regulation of river flow. The i*iuna reservoir provides daily regu-lation and is essential in the operation of the system since it providesthe close control of water releases necessary for the correct seriesoperation of the generating facilities. Both reservoirs have facilitiesfor pumping storage wiater from the Bogota River.

3.09 Empresa also owns the transmission and distribution facilitiesnecessary to interconnect its various generating plants and properly deliverpower to its customers in the city of Bogota and vicinity. Empresa's plantfacilities are modern and well maintained.

3.10 The Bogota system is presently linked with a relatively smallthermal power installation near Paipa which serves the department of Boyacaand the Paz del Rio steel rill. The connecting transmission line, about115 km long, is owmed by the Instituto de Aprovechaniento de Aguas y FomentoElectrico, a government agency, which in addition to other functions, isresponsible for general power development in Colombia.

4. THE PROJECT

4.01 The proposed project includes the completion of the existingEl Colegio hydroelectric plant, the construction of the Canoas hydro plantneeded for system control as well as for the energy it will provide, andnormal expansion of transmission and distribution system facilitiesscheduled during the period 1968 through 1970 and required to meet themarket development and to provide the necessary outlet for planned generatingcapacity additions. On a cost basis, the project represents about 87 percentof the scheduled new construction during the period 1968-71.

El Colegio

4.02 The existing El Colegio hydro plant would be completed, by theaddition of three 50 FITW units, to its final 300 IIW capacity. The first

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stage with a capacity of 150 MgW was put into operation in February 1967after five full years of construction, about 18 months more than originallyscheduled because of problems encountered in tunneling and in stabilizinga vast soil mass affecting both the penstocI and powerhouse. The problemswere severe and successful completion of the work is to the credit of Empresaand its engineering consultants and contractors.

4.03 It is difficult to compare estimated and final costs of thefirst stage because of deteriorating exchange rates during the constructionperiod. But conversion of pesos to dollars at the average prevailing ratesduring the construction period leads to the following comparison (excludingengineering and financial charges):

---------------------- -Lillions ----------------------Foreign Cost Local Costs TotalUS Dollars Col$ Ex. Rate US Dollars

1961 estimate 20.7 84 6.7:1 33.3

Final 22.5 172 Varied 9:1 - 17:1 35.2

Adding engineering costs of about US$2.5 million leads to a final cost ofabout US$37.7 million before financial charges. This is equivalent to aboutUS$250 per kilowatt which is an attractive price for hydro power, particu-larly as completion of the plant will reduce the unit costs for the total300 IEW installation to about US$158 per installed kilowatt.

4.04 Completion of the plant involves a second penstock, three 50 MWturbines and generators and associated transformers, switchgear and otheritems. There would be only minor civil works. The cost is estimated atUS$7.5 million and Col$37.8 million or the equivalent of US$9.8 million.This would average about US$65 per kilowatt for the second stage 150 MWinstallation. The second stage installation should be completed by theend of 1971.

Canoas

4.05 Operation of a series system of hydro plants requires the releaseof the precise amount of water required to meet ever changing system powerdemands. Full use of water is rarely attainable but the present Bogotasystem is particularly wasteful of water and difficult to control becausereleases from the Ituna reservoir at the head of the series of plantspresently require about 1½ hours to reach the intake of the Salto plant.Canoas, upstream of Salto, is required to complete the series of plants andto eliminate the 1¼ hour time lag. It was scheduled for construction at thetime of both previous loans, but postponed because of the need to use avail-able funds for other higher priority construction.

4.06 The Canoas plant would include a 2,740 m long pressure tunnel,892 m long penstock and a surface powerhouse with one 50 NW unit. The nethead is about 141 m and average annual generation would be about 226 Gwh.Canoas would discharge directly into the Salto intake, the next downstreamplant.

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4.07 The cost is estimated at US$5.8 million and Col$105 million, orthe equivalent of about US$245 per kilowatt. Construction would requireabout 3½ years.

Transmission and Distribution

4.08 Expansion of Empresa's 115 kv and 57.5 kv primary substations andtransmission lines would be continued to meet the growing demands of thesystem as would the installation of new distribution facilities and streetlighting in Bogota to meet the rapidly expanding urban area's needs.

Summarized Cost Estimate

4.09 The project is estimated to cost the equivalent of about US$39.3million before interest charged during construction. The direct foreignexchange cost would be equivalent to about Us$25.0 million. The estimateis summarized below and shown in more detail in Annex 3.

in Col$ in US$Local Foreign Total Local Foreign Total--------------------- million ---------------------

El Colegio:Equipment & Erection 3.42 110.51 113.93 0.21 6.78 6.99Civil Works 20.54 - 20.54 1.26 - 1.26Price Increase 4.08 - 4.08 0.25 - 0.25Contingencies 2.28 9.94 12.22 0.14 0.61 0.75Engineering 7.50 0.98 8.48 o.46 0.06 0.52

37.82 121.43 159.25 2.32 7.45 9.77

Canoas:Equipment & Erection 6.52 44.17 50.69 0.40 2.71 3.11Civil Works 57.38 35.86 93.24 3.52 2.20 5.72Price Increase 14.83 - 14.83 0.91 - 0.91Contingencies 12.88 13.53 26.41 0.79 0.83 1.62Engineering 13.20 1.30 14.50 0.81 0.08 o.89

104.81 94.86 199.67 6.43 5.82 12.25

Transmission andDistribution:

Lines 28.53 78.57 107.10 1.75 4.82 6.57Substations 11.41 58.35 69.76 0.70 3.58 4.28Secondary trans-

formers etc. 4.73 46.13 50.86 0.29 2.83 3.12Miscellaneous 16.14 - 16.14 0.99 - 0.99Price Increase 9.13 - 9.13 0.56 - 0.56Contingencies 3.42 7.34 10.76 0.21 0.45 o.66Engineering 16.79 0.81 17.60 1.03 0.05 1.08

90.15 191.20 281.35 5.53 11.73 17.26

Total 232.78 407.49 640.27 14.28 25.00 39.28

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Method of Financing

4.15 During the past year the Bank has taken the lead in arrangingwith major industrialized countries for the joint financing of threeColombian public utility projects--the proposed project covered by thisreport, the Power Interconnection project and the Bogota Water Supplyproject. Substantial agreement on a financing formula was reached at ameeting in Paris on October 26, 1967 of interested countries. Financingwould be provided on a 50/50 basis between the Bank and the country inwhich contracts are placed, provided that:

(i) Individual contracts amount to at least the equivalentof US$200,000 to qualify for joint financing; and

(ii) The country must receive qualifying contracts aggre-gating at least the equivalent of US$1 million beforebeing called on to participate in joint financing.

4.16 The value of contracts awarded and bid evaluations completedindicates that joint financing can be expected with the following countries:

Value ofQualifying Contracts

Country (US$ millions)

Germany 1.2Italy 5.8Japan 1.0

Total 8.0

In addition, of contracts yet to be awarded totalling about US$11 million,it can be assumed that about US$6 million will qualify under the financingformula. Thus, of the estimated US$25 million equivalent total foreignexchange costs of the project, financing for 50 percent of the value ofqualifying contracts or about US$7 million equivalent, can be expected fromthe supplier countries. This leaves US$18.0 million equivalent to befinanced by the proposed Bank loan. However, as results of further biddingbecome known and if more than the assumed value of contracts qualify forjoint financing, the amount of financing required from the Bank would bereduced and a corresponding amount of the proposed loan would be cancelled.

Engineering and Supervision of Construction

4.17 Empresa satisfactorily carries out engineering activities inconnection with general system operation, maintenance and distributionexpansion. It relies heavily on its consultant, Ingetec Ltda. of Bogota,for assistance in long-range planning as well as detailed project design,procurement assistance and supervision of construction. Ingetec in turnengages consultants in specialized fields when necessary. These arrange-ments, are generally acceptable, and an allowance for modest foreignexpenditures on engineering has been included in the cost of the project.

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5. POI!UR MPRKET

5.01 The city of Bogota and its suburbs presently account for thegreater part of Empresa's sales although wholesale sales to other utilitieswill become increasingly important in the future. W4hile the Bogota markethas good potential, past restrictions in supply have prevented its normaldevelopment and it was only with the completion of the 150 MW first stageof El Colegio in February 1967 that Empresa management felt free to begina modest promotional campaign.

5.02 Annex 1 gives past market statistics and estimates for the future.During the period 1961-67 average annual growth rates for the residential,commercial and industrial sectors were respectively 13.8, 8.2 and 12.0 per-cent with total sales increasing at an average of 11.7 percent. While thesegrowth rates were lower during the last three of the six year period,Empresa, in view of general forecasts of improved economic performance forthe country as a whole, has based its system and financial planning on a10.7 percent growth rate beyond 1967. This rate approximately averages the1961-67 and 1964-67 results, which is reasonable for planning purposes.Empresa's forecast has been therefore accepted with only minor adjustmentsfor this report.

5.03 Wholesale sales to small utilities serving towns outside of theBogota system can be expected to increase rapidly as a result of recenttransmission line extensions and improvements in the distribution systemsin some of these towns. The principal agency of this type in the regionis Corporacion Autonoma Regional de La Sabana de Bogota y Valles de Ubatey Chiquinquira (CAR) which received as a sub-borrower of Empresa US$1.7million under the last Bank Loan for expansion of its rural sub-transmissionsystem. Sales to this category of the market were about 73 Gwh in 1967 andcan be reasonably expected to increase to 275 Gwh by 1974. In addition,sales to the Cali region are expected in 1971, 1972 and 1973 through thefacilities of the proposed BogotaMvledellin/Cali interconnection.

5.04 System losses have shown a decreasing trend during the past fewyears reducing from 12.2 to 8.9 percent between 1961 and 1966 while systemload factor has varied between about 52 and 56 percent. Since there arepractical limits beyond which neither losses nor load factor will improve,losses of about 8.5 percent of gross generation and an annual load factorof 55 percent have been assumed for this report. On this basis the systempeak demand is expected to increase from 295 MW in 1967 to 610 14W in 1974.

5.05 Annex 2 gives a graphical representation of expected load growthand system capability. It can be seen that existing system capacity willbecome inadequate during the first half of 1971 but the deficiency will bemade up by power purchases from Paipa (paragraph 3.10). Canoas and ElColegio II are scheduled to come into operation during the second half of1971 as is the proposed interconnection. Although Empresa's own generationsources would become inadequate again within the period of the forecast,other new generation sources in other parts of the interconnected system areexpected to make up the deficiency.

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Justification for the Project

5.o6 As discussed above, the capacity to be provided by Canoas andEl Colegio II is needed to meet market conditions and this need exists forthe Bogota system considered either in isolation or interconnected. Thesetwo installations will complete the planned development of the Bogota Riverand the only reasonable short-range alternative to either one would be athermal development. Competent studies made in Colombia and agreed to bythe parties to the interconnection include the construction of both plantsas scheduled in every alternative system development program examined. Thereason for this is easily seen for El Colegio II,considering that 150 Nwcan be added to the system at the low unit cost of about US$65 per kw.

5.07 The present undeveloped section of river between the Muna reservoiroutlet and Salto intake should be controlled to save water and improve systemresponse (paragraph 4.05). This would be accomplished by the Canoas develop-ment with water savings estimated equivalent to about 60 Gwh annually in thedownstream plants. In addition, Canoas would produce about 226 Gwh annually.The cost of this energy (286 Gwh annually) if it could be produced byEmpresa's existing modern Zipaquira thermal plant would be about 12 centavos/kwh with interest and depreciation charged at 6½2 percent and 3 1/3 percentrespectively. However, the alternative to Canoas would be a new thermalplant. A 50 SW unit with the same interest and depreciation rates and withcapital costs assumed 25 percent less than those for Zipaquira would produceenergy at about 7.8 centavos/kwh. Again, at the same interest rate but withdepreciation at 2 percent to reflect the longer life of hydro plants, thesame amount of energy from Canoas would cost about 6.5 centavos/kwh. Thissaving in unit production cost of about 17 percent provides ample justifi-cation for the Canoas investment.

6. FINANCIAL ASPECTS

Past Performance

6.01 The seven years during which the Bank has enjoyed close relationswith Empresa have been characterized by almost continuously increasingdomestic price levels, and periodic devaluations of the peso. At the sametime, Empresa has tripled its generating capacity. Thus, the primary taskof Empresa's financial management has been to assure the timely availabilityof funds adequate to acquire assets at a very rapid rate in the face ofrapidly increasing costs. The two Bank Loans defrayed only the foreign ex-change costs of the expansion programs, and Empresa has had to finance thelocal currency costs, as well as operating expenses and debt service. Localsources of capital are quite limited, and Empresa has never obtained fi-nancial support from the National Government or the lHfunicipality. Itsprincipal recourse when funds from operations have been inadequate has beento the local commercial banking system. Local credits, however, aregenerally available only on relatively short terms, are frequently difficultto arrange quickly, and in any event have provided only about 10 percent ofexpansion requirements.

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6.02 The importance of Empresa's. ability to contribute substantiallyall the local currency component of its expansion was recognized in bothprevious Loans which contain as a principal performance criterion a re-quirement that Empresa contribute 40 percent of its expenditures on newpower facilities, but which also provided that compliance be measured overrolling four-year periods starting in 1963. This has proven impractical tomeasure quickly, and has been difficult to enforce for two principal reasons:Empresa was unwilling to request adjustments when needed, and the Governmentsubsequently did not live up to its undertakings to permit Empresa to swiftlyadjust its tariffs to the changing conditions in the economy. As a conse-quence, Empresa's current position has in the past deteriorated, and certaininvestments which would otherwise have been made were postponed because ofinadequate financial resources. Empresa's contribution to its expansion hasfallen short of the target, both as measured over rolling four-year periodsor in any given year except 1967, when there was a sharp fall in constructionexpenditures. The average contribution during 1963-66 was about 23 percent.

6.03 Empresa, as an instrumentality of the Municipality, has been re-quired to make investments in, and to operate and maintain, a public streetlighting system in Bogota, as well as provide electric power service tocertain municipal offices. The amount of Empresa's contribution through 1967was fixed at a level equal to 10 percent of Empresa's income calculated beforecrediting interest charged to construction. Expenditures above this level werein theory to be reimbursed to Empresa by the Municipality, but in practicewere not. In an arrangement approved by Empresa's Board of Directors in 1967,the costs of operating and maintaining the public lighting system, theelectric energy associated with it, and that furnished to the city's officeswill be defrayed by Empresa and charged as an operating expense. The invest-ments to be made in expanding the public lighting system will be equal to 10percent of the net income (before crediting interest charged to construction)of the prior year.

6.o4 The rate of return on the investment could not realistically beapplied to Empresa as a measure of performance because the local currencycomponent of its investment is stated at historic cost which greatly under-estimates its value. The rate of return on net fixed assets in operationduring the last five years has been of the order of 20 percent, which wouldappear high excepting that this level of earnings on historically-valuedassets has failed to generate adequate cash. The debt/equity ratio hasbeen about 60/40, but this, of course, is distorted by the effect of currencydevaluations. As already noted, Empresa's contribution to construction hasbeen considerably short of the targets agreed in connection with the previousLoans. Thus it must be concluded that financial performance in the past hasbeen far from ideal. However, there have been significant improvementsrecently and, there are reasonable expectations that performance will improvefurther. Among these are the presence of a competent financial manager, anda realistic attitude towards tariff adjustments on the part of the Government.Condensed Income Statements and Balance Sheets for 1963-67 are included inAnnexes 5 and 7.

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The Tariff Situation

6.05 The tariffs charged by all public service enterprises in Colombia,including Empresa, can be changed only with the approval of the Superin-tendencia de Regulacion Economica, an agency of the central Government underthe direction of the Ministry of Development. At the present time there isno uniform policy and adjustments have frequently been conditioned by otherthan financial considerations. In a number of instances in the electricpower field, serious and persistent financial difficulties have been causedby inadequate and/or tardy approval of badly-needed tariff adjustments.

6.06 Tariff regulation in Colombia should be simplified. A mechanismshould be established for periodic rate review, say once a year, and adjust-ments based on objective criteria should follow, if required, within a reason-able period. For determining the adequacy of tariffs, a realistic rate ofreturn criterion should be used, since it provides a satisfactory measure ofperformance and can be easily applied. This implies, however, that arrange-ments would be made for periodic revaluation of assets with an objectivemechanism for doing so, and for uniformity in accounting and the institutionof national standards to that purpose.

6.07 The subject of public utility regulation has been discussed atlength between the Bank and officials of the Government. The Governmentagreed to study modifications along the above lines with a view to formulatingby mid-1969 a new national public utility tariff policy. Bearing in mind thatit will take at least until that time before a suitable policy is adopted thatincludes provisions for the revaluation of assets and other factors indicatedabove, the loan documents contain a rate covenant based on a minimum rate ofreturn on reasonably valued assets, and an agreed method for periodic review.

6.08 Empresats tariffs have been increased four times in the past eightyears a total of 151 percent to the present level of 18.6 centavos. Thislevel appears to be adequate for the foreseeable future (see paragraph 6.22).Annex 4 gives details of the past and present tariff structures.

Present Financial Position

6.09 The present foreign exchange system, introduced on March 22, 1967provides for a fixed rate of Col$16.30 = US$1 for capital transactions,including debt service payments, and a floating exchange certificate ratefor imports and exports. The certificate rate applicable to Empresa's trans-actions was CoI$15.61 at the end of 1967; for purposes of preparing theforecasts in this report a rate of Col$16 .30 = US$1 has been used throughoutfor 1968 and later years.

6.10 In presenting its situation as of December 31, 1967 Empresa hasstated its outstanding foreign debts at the rate of Col$15.61 = US$1 andcommensurately increased the value of the corresponding assets. Empresa'sadjustments still leave the assets undervalued because of increases indomestic price levels which have affected the reproduction cost of the localcurrency component of assets. Empresa's year-end position, adjusted asdiscussed, is presented on the next page.

- 13 -

Actual Balance Sheet as of December 31, 1967

Col$ millions

ASSETS

Gross Plant in Service 1,526.4Depreciation Reserve 159.0

Net Plant in Service 1,367.4Work in Progress 113.7

Net Fixed Assets 1,481.1

Cash 41.hReceivables 25.0Materials & Supplies 37.0Other Current Assets 1.0

104.4

Investment in Interconexion 1.0Due from CAR 28.1Loans to Employees 4.9Other Assets 3.4

37.4

TOTAL 1,622.9

LIABILITIES

EquityCapital 100.0Surplus 358.0Reserves 53.8

511.8

Long-term DebtIBRD Loans (2) 950.6Venezuelan Banlk 24.4Colombian Banks 52.1

1,027.1

Current Maturities 37.0Payables 30.1Other Current Liabilities 2.6

60.7

Obligation to expand street lighting 14.3

TOTAL 1,622.9

114 -

6.11 Empresa's current position has improved greatly from the precarioussituation which had developed in 1964-66 when Empresa was forced to borrowon short-term finance for the construction of the first stage of El Colegiohydroelectric development. This had resulted from failure to anticipate theneed for and make timely application for a tariff increase. Empresa'scurrent ratio was 1.00, 0.64, and 0.93 in 1964, 1965, and 1966, respectively.Its cash positions for the same years were Col$4.1, 4J4, and 5.5 millions.At the end of 1967, the current ratio had improved to 1.5 and cash toCol$41.4 million. These satisfactory levels reflect not only the betterfinancial management Empresa has enjoyed in the last two years, but alsothe slackening of construction expenditures in 1967 with the completion ofEl Colegio.

6.12 As the table on page 13 shows, Empresa's debt consists mainly ofthe two Bank Loans, both of which have been fully disbursed and are beingrepaid. The loans with Colombian banks and with the Venezuelan bank wereinitially incurred to complete the financing plan in connection with thesecond Bank Loan, and subsequently to finance increased construction costs.All local loans were to have been repaid by 1969, but have been extended to1971. The Venezuelan loan will be repaid in 1969.

6.13 Empresa's equity accounts include accumulated retained earnings,and reserves which arose principally from obligations to employees forbenefits associated with service. The debt/equity ratio at the end of 1967was 67/33 on the basis of the book-value of Empresa's accounts and is over-stated because of distortions introduced by various exchange rates and pricelevels.

6.14 As a result of the arrangements concluded in 1967 for provision ofstreet lighting and other services to the Municipality, Empresa assumed futureobligations amounting to Col$14.3 million at the end of that year. Empresawill account for these separately and charge them against income as an opera-ting expense.

Revaluation of Assets

6.15 Before the formulation of the policy discussed in paragraph 6.07,and in order to estimate future performance and determine broadly whethertariff adjustments appeared to be needed in the near future it was agreedit would be reasonable to increase net asset values by about 30 percent overthe year-end figures determined by Empresa (see paragraph 6.10) and to stateforeign debts at Col$16.30 = US$1. These adjustments are incorporated inthe Balance Sheet for 1967 presented in Annex 7, which forms the basis ofthe projections through 1974.

Construction and Investment Programs 1968-1974

6.16 During 1968-74 Empresa will be carrying out the Project describedin Chapter 4, further expanding its transmission, distribution and streetlighting systems; engineering in connection with these activities, andfuture planning. In addition, it will be required to invest in the trans-mission, and later generation, facilities of Interconexion. The total ex-penditures on all these accounts are estimated at the equivalent of about

- 15 -

US$78 million during the next seven years. This represents an increase inEmpresa's investments of somewhat more than 50 percent as compared to 1967year-end, an annual average rate of increase of 61 percent. This compareswith the increase of nearly 16 percent per annum during the last four yearsand indicates why a rate of return concept can be realistically applied asa measure of performance now that capital requirements are leveling off.The total investment needs during the seven-year period, 1968-74., are shownbelow.

Col$ million1968-71 1972-74 Total

The Project * 701.3 - 701.3Additional Transmission and

Distribution 75.3 88.9 164.2Street Lighting 29.1 53.0 82.1Engineering Planning 15.5 - 15.5

821.2 1l .9 -963.1

Investment in Interconexion 63.7 242.2 305.9

884.9 384.1 1,269-0

* Includes interest charged to construction.

Financial Plan

6.17 Based upon the income projections of Annex 5 and estimated invest*ments discussed in paragraph 6.16 above, a seven-year forecast of Ehmpresa'ssources and uses of funds is given in Annex 6, and summarized in the followingtable immediately below. The results of these projections are shown in theestimated balance sheets of Annex 7. As can be seen, the preponderance offund requirements will be met from operations.

- 16 -

Financial PlanCondensed Sources and Application of Funds

(Col$ million)

1968-71 % 1968-74 %

Sources

Cash generated from operations 970.8 2,072.9Debt service 2 (l471.7) (862.0)

499.1 55.1 12210.9 74.8

Proposed foreign financings 407.5 44.9 407.5 25.2

906.6 100.0 1,618.h 100.0

Applications

Construction & Engineering 821.2 90.6 963.1 59.5Investment in Interconexion 63.7 7.0 305.9 18.9Increase in current assets

Cash 8.4 0.9 328.8 20.3Others 13.3 1.5 20.6 1.3

906.6 100.0 1,618.4 100.0

1/ Exccludes and 2/ Includes interest charged to construction

The apparently large amount of cash shown generated in the last three yearscovered by the projections must be viewed in context. For example, growthin the interconnected market greater than assumed would require increasedinvestment expenditures. Moreover, the projections are based upon assumedexchange rates and price levels which may prove unrealistic. As with allprojections, the earlier years can be viewed with more confidence than thelater.

6.18 It has been assumed that present tariff levels will be continuedthroughout the period covered by the projections, although the averagerealization on sales will fall somewhat as the mix of sales to differentcategories of customer varies. The proposed foreign financing of US$25million equivalent has been assumed to be for 20 years including 32 yearsgrace on repayments, at 6&4 percent interest. The cost of providing streetlighting and electric power service to the Municipality is included as anoperating expense of Empresa, and amounts to 7 percent of all expenses in

- 17 -

the period. Empresa will, as a sponsor of the interconnecting transmissionsystem, contribute to its operation amounts which over the period totalabout 1 percent of all Empresa's operating expenses; Empresa will also haveto make payments in behalf of Interconexion for debt service. These latteramounts are included in Empresals investments in the interconnection.

6.19 In brief, the financial plan consists of only the proposed long-term foreign financing, and reinvested retained earnings and depreciation.It is satisfactory.

Estimated Future Performance

6.20 As can be seen from the Sources and Applications of Funds (Annex 6)and the Balance Sheets (Annex 7) Empresa wiU operate with cash deficitsduring 1968 and 1969, relying upon drawing down the substantial cash-on-handat the beginning of 1968. There would seem to be no difficulty for 1968;if during 1969 a need for short-term borrowing arises, there is no reasonit should not be undertaken provided repayment could be arranged for noearlier than 1971. Empresa should contribute 56 percent of all its expendi-tures on construction and investment in Interconexion from net internalsources during 1968-71.

6.21 In connection with the last Bank Loan, Empresa covenanted not toincur debt without the Bank's agreement unless net revenues at incurrencewere 1.3 times the maximum debt service in any future year. This covenantwill be continued in connection with the proposed loan. Under the terms ofthe assumed financings Empresa would meet this requirement. Annual debtservice coverage should be 1.7 times in 1968, and increase to nearly 3.0times in 1974.

6.22 On the basis of the approximate asset revaluation discussed inparagraph 6.15, during 1968-71 Empresa should earn an average of 9.4 percenton its net plant in service. Annual rates of return would be 7.4 percentfor 1968, increasing to over 12 percent in 1974. This level of earningsis satisfactory and tariffs are also satisfactory subject to confirmationduring periodic review to be undertaken by Empresa. Empresa agreed duringnegotiations to earn a rate of return of at least 9 percent measured againstassets reasonably valued. Earnings at the level forecast, together with theproposed borrowings should result in satisfactory debt/equity ratios: 54/46in 1968, decreasing year by year to 34/66 in 1974.

- 18 -

7. CONCLTJSIOS

7.01 The proposed project is well planned and the cost estimate isreasonably firm. The power and energy to result from the generating plantadditions would be needed by the Bogota system alone and also form part ofthe agreed plan of system expansion required for interconnection of theBogota, Medellin and Cali areas.

7.02 Empresa's management is capable of carrying out the project andcontinuing the day-by-day activities of the company.

7.03 Past financial results have not been as good as expected at thetime of earlier Loans, in large part because of increased construction costs.Empresals past cash position has consequently been tight and tariff adjust-ments were clearly called for earlier than made. That there were delays isdue in part to failure of the management and Board to take appropriateaction when required and by an inadequate system on the national level forhandling tariff matters. However, the present situation is much improved asregards Empresa's current position, and the Government has undertaken tostudy the tariff regulation situation with a view toward formulating a newnational policy.

7.04 The proposed financing plan is sound and includes provisions for asignificant increase in working capital. Debt service would be satisfactorilycovered, and the earnings test required in connection with past Loans would bemet.

7.05 The project would be partially financed by supplier countries underarrangements satisfactory to the Bank. Based on the results of bidding re-viewed to date and on the value of individual contracts yet to be awarded, itappears that financing of about US$7.0 million equivalent will be availablefrom the supplier countries, leaving US$18.0 million equivalent to be financedby the proposed Bank loan. However, as further contracts are awarded it ispossible that more of them will qualify for supplier country financing and ifthat should happen the Bank loan would be reduced by cancellation of acorresponding amount.

7.06 During negotiations in April 1968:

(i) the Municipality agreed to continue the undertaking ofLoan Agreement 2h6-CO regarding the manner of selectingBoard members (paragraph 3.04);

(ii) Empresa agreed to continue the use of independent auditorssatisfactory to the Bank for preparation of annual audits(paragraph 3.05);

(iii) the Government and Empresa agreed to a redefined earningstest of at least 9 percent rate of return on currentlyvalued assets, and to an interim procedure for asset re-valuation (paragraphs 6.07 and 6.22); and

(iv) Empresa agreed to continue the present debt limitationcovenant (paragraph 6.21).

- 19 -

7.07 The project would be suitable for a loan of up to US$18.0 millionfor a period of 20 years including about 3½,2 years grace on amortization.

May 9, 1968

EMPRESA DE ENERGIA ELEC-TRIGA DE BOGOTA

System Sales and Demand(Megawatts and Kwh Nlillions)

Average IncreaseActual 1961-67 1964-67

1961 1962 1963 9641 1965 1966 1967 (Percent) (Percent)

Sales:Residential 175 191 228 262 307 337 380 13.8 13.3

Commercial 148 157 176 200 218 229 238 8.2 6.0

Industrial 194 216 253 300 343 370 382 12.0 8.5

Official 55 65 74 84 90 91 119 13.7 12.3

Street lighting 29 31 35 40 42 44 46 8.0 4.8

601 660 766 886 1,000 1,071 1,165 11.7 9.6

Wholesale 24 15 17 22 28 47 73 n.a. n.a.

Total 625 675 783 908 1,028 1,118 1,2,38

Gross Generation 723 776 906 1,028 1,143 1,272 1,427

Annual Peak Demand 148 158 200 225 243 268 295

Annual Load Factor 56.o 56.2 51.6 52.2 53.8 54.2 55.0

1967-774Forecast Average Increase

1968 1969 1970 19T71 1972 1973 1974 (Percent)Sales:

Residential 422 475 533 589 649 717 791 11.1Commercial 260 288 319 347 378 409 442 9.2Industrial 422 476 537 594 660 733 813 11.4Official 130 144 161 175 189 205 226 9.6Street lighting 52 60 67 74 81 89 98 11.4

1,286 1,443 1,617 1,779 1,957 2,153 2,370 10.7

Wholesale 144 280 317 223 234 255 275Interconnection - - - 251 412 317 _

Total 1,430 1,723 1,934 2,253 2,603 2,725 2,645

Company Use 50 50 50 50 50 50 50

Losses 1140 167 196 217 247 255 245

Gross Generation 1,620 1,940 2,180 2,520 2,900 3,030 2,940

Annual Load Factor 55 55 55 55 55 55 55

Annual Peak Demand 336 403 452 523 602 629 610

Hydro generation 1,492 1,503 1,717 2,099 2,400 2,600 2,540

Thermal generation 128 337 363 321 400 430 400Purchase energy - 100 100 100 100 - -

1,620 1,940 2,180 2,520 2,900 3,030 2,940n.a. - not applicable

Yay 6, 1968.

COLOMBIA: EMPRESA DE ENERGIA ELECTRICA DE BOGOTALOAD AND CAPABILITY DEVELOPMENT

800 F

PROPOSED PROJECT

700

PREVIOUS BANK PROJECTS t 8

600 4) I i ! j /< BULK POWER

500 _ o ,

0

O 400 ¢ X I - h < = YSIEM40

1 ~ ~~~ ~~~ I O - 'I:LF AE

0~~~~~~~~

,r _ r4 STEM LOAD< ESRSEV PWR

500 _______ ( LEFT SCALE) __ ._z

200 __ J <_--__-__,00:

300~~~~~~~F 0

100 1,000

U,0

1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 972 1973 1974

< ACTUAL :; L PROJECTEDSL zIBRD- 3700

ANNEX 3Page 1

EMPRESA DE ENERGIA ELRCTRICA DE BOGOTA

PROJECT COST ESTDMATE

Equivalent US$ Thousand

(ex. rate 16.3:1)

Foreign Local Total

A - EL COLEGIO - UNITS , 5,

Equipment:

Penstock 3,274 - 3,274Turbines and generators 2,038 - 2,038Transformers 310 _ 310Switchyard and control 220 - 220Other equipment 658 - 658Erection 276 92 368Shipping and insurance - 120 120

Civil WATorks:

Penstock 799 799Powerhouse and switchyard - 456 456

Sub-Total 6,776 1,467 8,243

Provision for price increase - 252 252

Contingencies 614 138 752

Engineering 60 461 521

Total 7,45o 2,318 9,768

ANNEX 3Page 2

Foreign Local Total

B - CANOAS

Equipment:

Penstock and gates 800 - 800Turbine and generator 1,050 _ 1,050Transformers 110 - 110Switchyard and control 90 - 90Other equipment 300 - 300Erection 360 257 617Shipping and insurance - 141 141

Civil Works:

Intake and tunnel 2,200 1,765 3,965Penstock - 606 606Powerhouse and switchyard - 583 583Roads, camps, etc. - 566 566

Sub-Total 4t,910 3,918 8,828

Provision for price increase - 913 913

Contingencies 830 789 1,619

Engineering 80 809 889

Total 5,820 6,429 12,249

ANNEX 3Page 3

Foreign Local Total

C - TRANSMISSION AND DISTRIBUTION:

Transmission lines 2,415 1,449 3,864Transmission substations 3,575 698 4,273Primary distribution lines 855 214 1,069Secondary distribution lines 1,550 84 1,634Transformers, protection,

misc. 2,830 291 3,121Misc. Equipment - 995 995

Sub-Total 11,225 3,731 14,956

Provision for price increase - 563 563

Contingencies 455 206 661

Engineering 50 1,034 1,084

Total 11,730 5,534 17,264

SUMIARY

Total Construction 22,911 9,116 32,027

Provisions for Price Increase - 1,728 1,728

Contingencies 1,899 1,133 3,032

Engineering 190 2,304 2,494

Total 25,000 14,281 39,281

May 6, 1968

EMPRESA DE EIMRGIA ELECTRICA DE BOGOTA

Comparative Schedules of Rates(in centavos)

From 12/1/59 From 6/1/60 From 3/1/1962 From 2/1/65 Since Nov.1to 5/30/60 to 2/27/1962 to 1/31/1965 to 10/31/66 1966

Power Sales

Average rate per kwh- 7.42 7.82 10.37 13.12 18.63

Residential: per,kwhiA

the first 29 kwh, 9.00 9.00 9.00 9.00 11.00the following 60 kwh 6.oo 7.00 9.00 9.00 11.00in excess of 89 kwi:',but less than 200 kwh 4.50 5.50 9.00 9.00 11.00in excess of 200 kwh 4.50 5.50 9.00 12.50 14.50

additional minimum monthly charge 50.00 50.00 50.00 60.00 60.00

Commercial - per kwh

Single tariff 12.50 lh.00 18.00 22.50 28.00Double tariff - night 13.50 14.00 18.oo 22.50 28.00Double tariff - day 4.50 6.oo 7.50 11.00 28.00Ectraordinary (construction, circuses, etc.) 10.00 10.00 15.00 19.00 28.00

Industrial - per kwh

Radio Stations 6.oo 6.00 8.oo 10.00 1h.00Small industries 3.00 4.00 4.00 6.oo 8.50Double tariff - night 13.50 14.00 19.00 25.00 30.00Double tariff - day 4.50 6.oo 8.50 12.00 19.00

Domestic heating - per kwh

the first 200 kwh 4.50 5.50 9.00 9.00 11.00in excess of 200 kwh 4.50 5.50 9.00 12.50 14.50Official -per kwh 6.oo 7.00 8.50 10.00 12.50Street Lighting -per kwh 3.00 4.oo 6.50 9.00 11.50Wholesale - per kwh 5.50 6.oo 7.00 9.00 11.00

April 11, 1967

EHPRESA DE ENERGIA ELETRICA DE BOGO

Actual and Forecast Income Statements 1963-1974

(In Col $ millions)

- A C T U A L - - - - - - - - - - - - - - -- - - - - - - - - F O R E C A S T - - - - - - - - - - - -- - -Fiscal Year Ending December 31 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 17 1974

Sales - HlMions kwhBogota System 783 908 1,028 1,118 1,238 1,430 1,723 1,934 2,002 2,191 2,408 2,645Interconexion - - - - - - - - 251 412 317 -Average Revenue per kwh- CentavosBogota System 10.4 10.3 13.1 14.2 18.3 18.0 17.5 17.5 17.9 18.0 17.9 17.9Interconexion - - - - - - - - 11.0 9.6 9.1 -

Operating Revenues

Sales in Bogota 81.2 93.9 134.8 159.1 226.0 257.7 301.5 337.9 358.4 394.2 431.5 473.7Sales to Interconexion - - - - - - - - 27.5 39.4 28.7 -Other Revenues 12.7 14.9 15.1 15.3 11.3 3.0 2.0 - - - - -

p3.9 108.8 149.9 174.4 237.3 260.7 303.5 337.9 385.9 1433.6 460.2 473.7

Operating Expenses

Operation and Yaintenance 26.9 37.4 47.0 56.3 70.5 62.4 73.3 77.9 79.9 85.7 91.4 95.4Services to City - - - - 19.8 15.3 7.8 8.7 9.6 10.6 11.6 12.8Purchased Power _- - 13.5 13.5 13.5 13.5 -Operation of Interconexion - - - - - 0.5 0.5 0.5 3.2 3.6 3.4 3.0Depreciation 12.8 13.7 19.8 20.3 47.8 49.3 50.7 52.6 58.2 66.o 70.7 72.2

39.7 1.1 66.8 76.6 138.1 227.5 145.8 153,2 164.4 179.4 177.1 183.4Operating Income 54.2 57.7 83.1 97.8 99.2 133.2 157.7 184.7 221.5 254.2 283.1 290.3Other Incese (Net) 0.8 o.6 (0o.4) (2.8) 2. 2 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Gross Income 55.0 58.3 .821 5.0 101.4 134.2 158.7 185.7 222.5 255.2 284.1 291.3

Interest 26.3 29.1 35.2 41.0 47.1 77.2 81.4 83.0 82.2 76.3 73.0 69.6Interest Charged toConstruction 11.8 15-8 16.1 16.0 4.6 7.4 16.0 22.9 2$.5 -

Interest Expense 14.5 13.3 19.1 25.0 42.5 69.8 65.4 60.1 56.7 76.3 73.0 69.6Net Income 40.5 45.0 63.6 70.0 58.9 64.4 93.3 125.6 165.8 178.9 211.1 221.7

Appropriation for Expansionof Public Lighting 2.9 2.9 4.7 5.4 5.4 5.7 7.7 10.3 14.0 17.9 21.1 22.2

Rate of Return on AverageNet Plant in Service 24.0 13.0 19.0 18.0 7.2 7.5 8.8 10.2 11.1 11.4 12.0 12.4

May 6, 1968

ANNEX 6EMPRESA DE 3N3GIA ELECTRICA DE BOGOTA

Sources and Applications of Fu)ds 1968 - 1974fLol million)

F O R 3 C A S TSOURCES 126_ 1969 1970 1971 2

InternalGross income 134.2 158.7 185.7 222.5 255.2 284.1 291.3Depreciation 49.3 50.7 52.6 58.2 66.o 70.7 72.2Non-cash charges 12.4 13.6 15.7 17.2 18.9 20.8 22.9

195.9 223.0 254.0 297.9 340.1 375.6 386.4

External;posed foreign financings 158.6 154.6 94.3

TOTAL SOURCES 35, _7.6 34375.6

APPLICATIONS

ConstructionThird program F/E 158.6 154.6 94.3 - - _ _

L/C l/ 67.4 74-5 64.4 15.7 _ - -

226.0 229.1 158.7 15.7

General transmission and distribution - 6.3 23.3 45.7 33.6 27.8 27.5Public lighting expansion 5.4 5.7 7.7 10.3 14.0 17.8 21.1Engineering planning S....25 I -3.

10.4 15.5 34.5 59.5 45.7 48.6

Total Construrtion 236.4 244.6 193.2 75.2 47.6 45.7 48.6

Investment in InterconexionCommon stock

Transmission 13.3 17.2 3.3 - - - -Generation - - - 3.7 11.4 13.1 13.6Debt service - - - 8.9 8.9 8.9 8.9

13.3 17.2 3.3 12.6 20.3 22.0 22.5Bonds-Generation - - _ 17.3 53.1 61.0 63.3

13.3 17.2 3.3 29.9 73.4 83.0 85.8

Debt ServiceInterest

Loan 246-CO 14.9 14.4 13.8 13.2 12.6 11.9 11.2Loan 313-CO 44.2 42.9 41.5 40.0 38.5 36.8 35.1Venezuelan Bank 4.0 2.0 - - -Colombian Banks 6.7 6.1 4.8 3.5 - -

Proposed foreign financings 7.4 16.o 22.9 25.5 25.2 223.3

77.2 81.4 83.0 82.2 76.3 73.0 69.6

AmortizationLoan 246-co 8.8 9.3 9.9 10.5 11.1 11.8 12.5Loan 313-CO 22.3 23.6 25.0 26.5 28.0 29.7 31.4Venezuelan Bank - 24.5 - -Colombian Banks 7.3 0.2 25.0 26.8 - -ProDosed foreign financings - - - - 14.7 15.6 16.6

38.4 57.6 59.9 63.8 _.8 57.1 60.5

Total Debt Service 115.6 139.0 142.9 146.0 130.1 130.1 130.1

Increase in Working Capital 2.6 3.7 3.0 4.0 4.0 2.2 1.1

TOTAL APPLICATIONS 362 1. 31424 261.0

Annual Increase (Decrease) in Cash (13.4) (26.9) 5.9 42.8 85.0 114.6 120.8

Cash-on-Hand Year End 28.0 1.1 7.0 49.8 134,8 249.4 370.2

1/ Col$10.7 million spent in 1967

May 6, 1968.

BEPRESA DE ENERIA ELECTRICA DE BOOTA

Actual and Forecast Balance Sheets 1963 - 1974

(Col$ millions)

A c t u a I F o r e c a s t

AEI6 1964 165 1966 19671/ 1966 1969 1970 1971 1972 1973 197ASSETSGross plant in service 378.8 397.1. 637.5 652.4 2,038.2 2,125.1 2,145.1 2,276.5 2,593.6 2,905.4 2,969.1 3,024.0

Reserve for depreciation 57.5 71.2 91.0 n1l.3 259.4 308.7 359.4 412.0 470.2 536.2 606. 679.1Net plant in service 321.3 325.9 5 5 541 1,7 14 1,7785.7 1,864.5 2,123.4 2,369.2 2,362.2 2,344.9Work in progress 310.6 483.1 392.7 507.0 205.9 362.8 603.4 688.1 471.7 207.5 189.5 183.2

Net Fixed Assets 631.9 809.0 939.2 1,048.1 1,984.7 2,179.2 2,389.1 2,552.6 2,595.1 2,576.7 2,557.7 2,528.1

Current AssetsCash 12.6 4.1 4.4 5.5 41.4 28.0 1.1 7.0 49.8 134.8 249.4 370.2

Other 36.7 41.2 54.5 58.o 63.o 68.6 75.3 81.389.3 98.3 106.5 114.649.3 51.73 389 7 I04. 4 vZ -76.4 -88.3 139.1 233.1 355-9 4

Investment in Interconexion - - - - 1.0 14.3 31.5 34.8 64.7 138.1 221.1 306.9

Other Assets 5.o 12.0 14.4 23.6 33.7 33.7 33.7 33.7 33.7 33.7 33.7 33.7

TOTAL ASSETS 686.2 872.3 L.012.5 1,135.2 2,123.8 2,323.8 2,530.7 709, 2,832.6 2,981.6 3,162.4

LIABILITIES

Capital and surplus 247.9 290.0 348.9 409.4 473.8 538.2 631.5 757.1 922.9 1,101.8 1,312.9 1,543.6Reserve for employees 23.1 29.1 37.6 51.4 53.8 66.2 79.8 5 U2.7 6 152 175.3Reserve for revaluation _ - - _ 441.6 441.6 441.6 4416 4416 441.6

271.0 319.1 3 6. 969.2 1,1052.9 1,294.2 1,477.2 1,675.0 1,906.9 2,151.5

Long Term Debt -Loane Debt 350.0 146.9 142.6 138.0 241.2 231.9 222.0 211.5 200.4 188.6 176.1 162.8

Loan 313-CO 161.4 283.0 351.0 406.4 751.5 727.9 702.9 676.9 648.4 618.7 587.3 554.0Venezuelan Bank - - - - 24.5 - - - - - - -

Colombian Banks 66.4 72.2 40.0 61.8 52.0 51.8 26.8 -

Pmposed foreign financings - - - - - 158.6 313.2 407. 392.8 -77.2 36o.6 343.o

377.6 5 0 2 . 1 = . 6 6 06.2 1,706.2 1,295.9 1,9 4 1 .6 1,1 4.0 1,1.0

Current LiZbXlities__SUrrent, maturities 11.9 18.8 55.0 29.9 38.4 57.6 59.9 63.8 53.8 57.1 60.5 64.2

Other 25. 2.3 37.4 38.3 47.0 So.0 53.0 56.o 60.0 65.0 71.0 78.0374 51.1 92.4 66.2 85.4 107.6 U2.9 U9.6 -112.1 131.5 &.2

TOTAL LIABIlITIES 686.2 872.3 1.012.5 2 .135.27 2123.6 2.3 23 2Z0. 2.832. 2,981.6 3,162.4 353.5

Debt/Equity Ratio 59/41 62/38 60/40 58/42 53/47 54/46 53/47 51/49 47/53 43/57 38/62 34/66

I/ Revalued See paragraph 6.15

May 6, 1968..,

FACATATIVA ~ ~~~~~Eo'sting and Under ConstructionTransmission Lines

5020,0 | /SOhtAvErzsxr7g 1 ac;soc _ Reservoir AProposed IBRD projects Reserioir(No, o.d bn

SALTOfl 72iLACUNErMwUIVETA ZMPAOU/RA TwEl MAL )

SALTOr,54 CU S, 50MW

Reservoir A5W SurioN

o~~ ~ ~ ~ ~ Uaqis L£EASUR ,O6RIE

OOT A Tgi

PLA A L

-N~~~~~~~,,sv~~~~~~~ ~ 3RD -- 1R

3000 -- …eev, ig

Tomtine Resro

Rio Sagely2500

2500-- .CAN/A

-I ISALrO

2000 -… ~ - '0T- 100~~~~~~~~~~~s ISO ZOO ZOOiONTAL DISTANCES Is KILOMETERS________________MEA'SU REO ALONG RIVER BED

o ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PANAMA-i 501 -

COLOMBIA

EL CAL LOW ~~~~~~~~~PROPOSED EXPANSION PROGRAM ,

- - - of the A... a

EMPRESA DE ENERGI A ELECTRICA DE BOGOTA

- - ~~~PROFILE -!~P E RU 4

0 ~~~~~~~50

MAT 1967 IBRD 914R12