World Bank Documentdocuments.worldbank.org/curated/en/492061468309568437/pdf/multi... · Docume;.t of The World Bank FOR OFFICIAL USE ONLY At 2Gs s-u Report No. 5774-TU TURKEY ELBI

Docume;.t of

The World Bank

FOR OFFICIAL USE ONLY

At 2Gs s-u

Report No. 5774-TU

TURKEY

ELBI STAN OPERATION & MAINTENANCE ASSISTANCE PROJECT

STAFF APPRAISAL REPORT

Decembar 31, 1985

Projects DepartmentEurope, Middle East and North Africa

Regional Office

Tbis document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Turkish Lira (TL)TL 1 = 100 Kurus (krs)US$l = TL 500TL 1 = US$.002

Currency equivalents are those effective June 1, 1985, unless otherwiseindicated.

WEIGHTS AND MEASURES

kVA = kilovolt amperekl = kilowattkWh = kilowatt hourGWh (Gigawatt hour) = 1,000,000 kWhHV = High VoltagekV (kilovolt) = 1,000 voltsMW (Megawatt) = 1,000 kWMVA (Megavolt-ampere) - 1,000 kVAMVAR (Megavolt-ampere reactive) = 1,000 kVAROne meter (m) - 3.28 feetOne kilometer (km) = 0.624 milesOne kilogram (kg) (1,000 grams) = 2.2 poundsone ton (metric ton) (1,000 kg) = 2,205 poundsOne kilocalorie (kcal) (1,000 calories) = 3.968 BTUtoe - ton oil equivalenttce = ton coal equivalent

GLOSSARY AND ABBREVIATIONS

AGMs - Assistant General ManagersCEAS - Cukurova Elektrik A.S. (Cukurova Power Company)DSI - Devlet Su Isleri (State Hydraulic Works)DYB - Devlet Yatirim Bankasi (State Investment Bank)ELTEM-TEK - Elektrik Tesisleri Mishen Dislik Hizmetteri ve Ticaret

Anonim SirketiEdF - Electricite de FranceEIB - European Investment BankFRG - Federal Republic of GermanyICB - International Competitive BiddingIDA - International Development AssociationKEPEZ A.S. - Kepez Electric CompanyKfW - Kreditanstalt fur WiederaufbauLRMC - Long-Run Marginal CostMANTRUST - Manufacturers Hanover Trust Co.MENR - Ministry of Energy and Natural ResourcesMTA - Mineral Research InstitutePEE - Public Economic EstablishmentPPAR - Project Performance Audit ReportSAL - Stnrctural Adjustment LoanSEE - State Economic EnterrriseSEI - Southern Electric InternationalSPO - State Planning OrganizationTEK - Turkiye Elektrik Kurumu (Turkish Electricity Authority)TKII - Turkiye Komur Isletmeleri Kurumu (Turkish Coal Enterprise)TPAO - Turkiye Petrollerei Anonim Ortakligi (Turkish Petroleum

Corporation)

Fiscal Year - January 1 to December 31

FOR OMCIAL USE ONLY

TURKEY

ELBISTAN OPERATION & NAINTENANCE ASSISTANCE PROJECT


Table of Contents

Page No.

I. INTRODUCTION .... 1...................................... 1

The 1974 Elbistan Thermal Cower Project ............ 1Preparation and Appraisal 3f the Original

(1974) Elbistan Project .................. 1Loan Effectiveness, Loan 1023-TU ................ 2Description of the Original (1974)

Elbistan Project ..................... 2Implementation Problems ................... 3Changes in Project Scope .................. 3Past Procurement and Disbursements ................ . 3Adverse Project Cost Factors ................. 4Status and Operating Performance of the

Original (1974) Elbistan Project ................ 4Rationale for Continued Bank Involvement ........... 5

II. THE ENERGY SECTOR .................................... 6

Sectoral Context ................................... 6Role of the Bank and Past Lending Experience in the

Power Subsector ................................. 6

III. THE PROJECT ENTITIES ................................. 8

Legal Context ....................................... 8Organization and Management of TEK . . 9Manpower Development and Training .................. 10General Characteristics of the TEK Power System 10TER's Power System Operation Performance .... ....... 11

Following a mission in Turkey in April/May 1985, the report was prepared by

A. Roa (Engineer), E. Baranshamaje (Financial Analyst), C. Warren (FinancialAnalyst), P. Kotschwar (Engineer), T. B. Russell (Consultant), and D. Bateman(Consulcant).

LThis dounmnt has a xrstrid distrbution and may be used by recipients only n fthe performan oftheir offcl duties Its contents may not otherwac be disclosed without World Bank authorizaion

Page No.IV. THE PW ECT ............................................. 12

Project Objectives ....... ............................ 12Project Description .............. .................... 12Project Cost Estimate ...... .......................... 12Project Financing Plan and Lending Arrangement .... ... 14Project Implementation ............................... 15Procurement .......................................... 16Disbursement .......................................... 18Special Account ...................................... 18Environmental Aspects ................................ 19Project Risks ........................................ 19

V. FINANCIAL ASPECTS ............ .......................... 20

Financial Performance of TEK ......................... 20Audits ........... .................................... 21

VI. PROJECT JUSTIFICATION .................................. 22

Growth of TEK System ................................. 22Least-Cost Analysis .................................. 22Rate of Return on the Project ......................... 22Recalculation of the Rate of Return on

the Original Elbistan Project ....................... 23Rate of Return on the Overall TEK/DSIExpansion Program ................................... 24

VII. AGREEMENTS TO BE REACHED AND RECOMMfENDATIONS .... ....... 25

ANNEXES

1.1 Summary of Cofinancing Plan for the 1974 (Original)Elbistan Thermal Power Project, Loan 1023-TU .... ......... 26

1.2 Sunnary of Contracts Financed under Loan 1023-TU .... ...... 271.3 Cumulative, Estimated and Actual Disbursements

Under Loan 1023-TU .281.4 Revised Elbistan Project Cost Estimate .................... 291.5 Elbistan Operating Data

- September 1985 ........................................... 30

2.1 The Energy Sector ......................................... 33

3.1 TEK Organization Chart .................................... 38

3.2 Personnel Statistics of TEK as of October 31, 1985 .... .... 39

4.1 Detailed Cost Estimated by Nature and Purpose ofExpenditure .40

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ANNEXES (cont'd)

4.2 Elbistan O&M Assistance Project Cost Estimates(in local currency units) ................................ 41

4.3 Major Issues Faced by the Turkish Authorities in EstablishingAppropriate Long-Term Arrangements at Elbistan ........... 44

4.4 Implementation Milestones-Power Station .................. 464.5 Estimated Disbursement Schedule .474.6 Comparison of Disbursement Profiles ....................... 48

5.1 Financial Statements (1981-1990) .49

6.1 Economic Justification .566.2 Rate of Return on TEK/DSI 1985-1990

Expansion Program .656.3 Rate of Return on Original Elbistan Project .68

7.1 Selected Reports and Data Available in the Project File ... 69

MAPS

IBRD 19045 TEK's Main Generation and Transmission System--1985IBRD 19081 Elbistan Plant Site

TUJRKEY


ELBISTAN OPERATION & MAINTENANCE (O & M) ASSISTANCE PROJECT

I. INTRODUCTION

The 1974 Elbistan Thermal Power Project

1.01 Lignite and hydro are Turkey's most significant indigenous energyresources. With about three billion tons of proven reserves, Afsin-Elbistanis by far the most important lignite deposit in Turkey. Even before the oilcrisis of 1973, the development of Afsin-Elbistan was the centerpiece ofTurkey's energy development program. Success or failure of Turkey's energyself-sufficiency policy depends largely on the successful utilization ofAfsin-Elbistan lignite. The 1974 integrated Elbistan Thermal Power Project (a4x300-MW power station-and a 20 million ton/a (Mt/a) associated lignite mine)is the first attempt to exploit Afsin-Elbistan. It accounts for a substantialshare of Turkish investment (36% and 132 of investments in the power sectorduring 1975-1980 and 1981-1985 respectively) and is a highly visible operation.

Preparation and Appraisal of the original (1974) Elbistan Project

1.02 The first contacts regarding Elbistan were made in August 1969. Theoriginal Project was appraised in October 1973 and subsequent missions visitedTurkey again in February and March 1974 to follow up the appraisal and preparenegotiations. Bank representatives also attended meetings of potentialmultilateral and bilateral financing agencies in Paris in January and March1974 and in Frankfurt in April 1974 to discuss financing and procurementarrangements. Further discussions on the financing arrangements, followed bynegotiations, took place in Mav in Washington. The Bank provided about 24% ofthe foreign financing through a loan approved on June 27, 1974 (Loan 1023-TU)for US$148 million (US$123 million for the power station to TurkishElectricity Authority (TEK) and US$25 million to Turkish Coal Enterprises(TKI) for the lignite mine). Annex 1.1 shows the total cofinancing package atthe time of appraisal, which consisted also of German Aid (KfW), EuropeanInvestment Bank (EIB), US EXIMBANK, Japanese EXIMBANK, Italy and France.

1.03 During the early stages of preparation of the 1974 Project, a mineoutput of up to 15 Mt/a and a 600-MW power plant (4 x 150 MW) wereconsidered. In an effort to achieve economies of scale--a necessary move toreach the economic threshold of acceptability at a time when fuel oil priceprojections were only a fraction of present levels-TEK, with support of itsconsultants, decided to increase the power plant rating to 1200 MW (4x3OO MW)and the mine design output to 20 Mt/a, with most of the lignite intended forpower generation.

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1.04 Because of its size and conplexity, anl intensive scrutiny of thetechnical aspects of the Project was completed before appraisal. Theappraisal concentrated on organizational, managerial, financial and economicaspects. The preappraisal work included, inter alia, engineering studies

subject to independent technical opinion by a Bank consultant, additionalgeological and hydrological investigations and lignite burnability tests, andendorsement by independent consultants of methods of excavation recommended bythe engineering consultants. The boiler design was based on solid experiencegained elsewhere with low grade lignite.

Loan Effectiveness, Loan 1023-TU

1.05 The loan was signed on June 28, 1974. Loan effectiveness was delayed

by about two years (from the original date of November 1, 1974 to June 1,1976) on account of non-compliance with conditions of effectiveness whichrelated to (i) improving TEK's finances (revaluation of TEK's assets, increasein tariffs); (ii) establishment of satisfactory project coordinationarrangements; (iii) cross-effectiveness clauses because of joint financing ofdiscrete project components with other agencies; and (iv) submission of legalopinion. Of all these, the tariff issue held up the effectiveness conditionthe longest, followed by the cross-effectiveness clause. After muchdeliberation, a tariff increase was eventually enacted in May 1976 and, afterextending the deadline six times, the loan was declared effective June 1, 1976.

Description of the original (1974) Elbistan Project

1.06 The 1974 Elbistan Thermal Power Project was designed to supplyelectric power using low grade lignite from the Kislakoy mine inAfsin-Elbistan as part of a balanced program of power development utilizingTurkey's fuel and hydropower resources. It also provided an opportunity forthe Bank's first involvement in the mining sector. Other project objectiveswere to address institutional problems (organization, management, personneland finances) that were apparent in TEK and TKI and which proved to be themain causes of delays in the execution of the Project. The original Projectincluded the following components-.

(a) a thermal power station with four 30e-MI lignite-fired unitsdelivering, after meeting the pno;er station and mine loads, anestimated 1,048 MW and 7,030 ,Wh p.a. to TEK's interconnected system;

(b) 380-kV transmission lines, about 540 km long, connecting Elbistanwith Kayseri and Ankara by 1978 and 1979 respectively;

(c) an open-cast lignite mine with a planned capacity of 20.7 Mt/a, 17.9Mt/a for the power station and 2.8 Mt/a for processing for sale asdomestic fuel; the Project included the cost of land and restorationof the worked-out mining area;

(d) separate pennanent housing for power station and mine staff and roadsbetween these and the works as well as Afsin-Elbistan towns; and

(e) consultancy services.

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The domestic fuel drying plant estimated to cost about US$75 million in 1974,intended for processing lignite for sale as domestic fuel, was excluded frcuthe Project at appraisal for lack of sufficient engineering information.

Implementation Problems

1.07 Several agencies were involved in the execution of the supportinginfrastructure, e.g., roads, telecommunications, etc. Since each of theinvolved agencies had its own identity, commitments and priorities, thecoordination required to successfully implement a project as large and complexas Elbistan, probably the largest single project in Turkey, became difficultto achieve. The coordinating committee set up by Government to coordinateactivities of all organizations associated with the Project proved to beineffective.

1.08 TEK and TKI had difficulties in recruiting and retaining sufficientnumbers of suitably qualified and experienced salaried personnfl for theexecution of the Project because of the remoteness and poor living conditionsof the site and the low and rigid civil service salary structure. Projectsite supervision ran into difficulties due to inexperience of the site staffof TEK and TKI, their limited executive authority, since the projectmanagement remained essentially in the hands of headquarter's staff in Ankara,and poor coordination between the two entities. These root problems led totechnical and administrative problems such as delavs in procurement ofequipment for the lignite mine and in payment to contractors for work carriedout, lack of supervision and control of civil works, and failure to developand implement dewatering procedures.

1.09 Moreover, delays in the provision of local funds by the Governmenthave seriously affected implementation of the Projezt. This state of affairswas a result of both shortage of funds and unsatisfactory disbursementarrangements.

Changes in Project Scope

1.10 Aside from increasing the nameplate rating of the power units from300 MW to 340 MW to accommodate a standard design and adding a 30-km watersupply pipeline, no major changes were made in project scope. However, in1981 TEK agreed to increase expatriate support for: (i) constructionsupervision, (ii) project management, and (iii) startup, operation andmaintenance (0 & M) activities. Lately there have been slight designmodifications to the boiler and ash handling plants to reflect operatingexperience with Units 1 and 2.

Past Procurement and Disbursements

1.11 All procurement under the Bank loan (Loan 1023-TU) took place throughICB in accordance with the Bank's Guidelines for Procurement. No majorprocurement issues arose. Annex 1.2 shows a summary of the contracts financedunder the loan and Annex 1.3 compares the actual disbursements with theappraisal estimate. Due to delays in loan effectiveness and projectimplementation, actual disbursements lagged behind estimates by about threeyears. The loan Closing Date was June 30, 1983. The Loan Account was kept

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open to permit TEK and TKI to complete disbursements against contracts awardedbefore the closing date. The loan was fully disbursed by September 15, 1983.Ongoing contracts have been financed in 1983-1985 by KfW, EIB and theGovernment.

Adverse Project Cost Factors

1.12 The severe delays in the execution of the Project (para. 1.13) are ingreat part attributable to labor disputes and periods of political and socialunrest during 1977-1980, particularly in the remote Kahramanmaras provincewhere the Project is located. The delays resulted in cost overruns, more thandoubling the original cost estimate. A revised cost estimate is shown inAnnex 1.4. The following factors also contributed:

(a) Exchange Rate Variation: The bulk of equipment was procured fromcountries whose currencies appreciated substantially during projectimplementation: DM during the late 70's and Yen in the 80's.

(b) Increased Cost of Engineering and Administration: When the projectran into difficulties, additional expatriate technical assistance wasbrought in starting in 1981 (para. 1.10); actual man months ofengineering and administration are more than double the appraisalestimate. This is further reflected in the relatively large amountestimated for Engineering and Administration in Table 4.1.

(c) Interest During Construction: The length of the execution period forthe Project coupled with massive borrowings to cover the financinggap substantially increased the amount of interest duringconstruction.

Status and Operating Performance of -he Original (1974) Elbistan Project

1.13 The Project is about seven years behind schedule but there has beenno slippage since 1983. The present situ.tion can be summarized as follows:

(a) Power Station; All the main plant and equipment for the four 340-MWunits are procured and on site. The cooling towers, chimney and thebulk of the civil works are complete. Since July 1982, erection workhas been proceeding satisfactorily. Unit 1 went into commercialoperation in January 1985. Unit 2 went into trial operation in May1985 and is going into commercial operation in January 1986. Units 3and 4 are to follow at one year intervals. Operating performancedata for Units 1 and 2 in September 1985 is given in Annex 1.5.

(b) Lignite Mine: The mine is fully operational, but the quantities ofmaterial moved at the mine over the past three years have been wellbelow planned levels. However, by March 1985, the mine hadthoroughly uncovered the lignite seam for the first time, with aninventory of about 4.3 Mt available for immediate mining. Datagained from the seam showed improved geological conditions comparedto those previously assumed from exploration results, resulting inmore lignite available within power station specifications and alower overall stripping ratio. Although no mine planning based on

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the new parameters has been done as yet and further verification isrequired, the Bank is satisfied that the design of the existing mainequipment is adequate to handle the required quantities of materialwithout major overburden backlogs over the next two-three yearsprovided, however, that corrective action is taken to renmve thefollowing major operational constraints: insufficient numbers ofmanagerial and skilled personnel, lack of training personnel andprograms, insufficient spare and wear parts, inadequate maintenancearrangements, and inefficient removal of hard strata.

(c) Domestic Fuel Drying Plant: In the light of the problems encounteredto supply lignite for the power station, TKI has decided not toproceed with the lignite drying plant associated with the originalProject (para. 1.06(c)). The Bank has agreed to this decision.

(d) Transmission Lines; Of the two 380-kV lines under the originalProject, Elbistan-Kayseri has been in operation since 1983. Theother, Elbistan-Ankara, is under construction and scheduled forcompletion in time to accommodate commercial operation of Unit 3starting in January 1987 (see Map IBRD 19045).

Rationale for Continued Bank Involvement

1.14 The Elbistan Project is almost complete. Project implementation isunder control and progressing well. The mine is fully operational andconstruction on the fourth and last unit in the power station is scheduled forcompletion by the end of 1986. Moreover, in line with the agreed energysector strategy (para. 2.01), the government is committed to introducingadequate measures at the lignite mine to ensure the long term availability ofsufficient lignite for efficient operation of the power plant (para. 4.14).

1.15 Throughout the implementation of Elbistan, starting in 1974, thethree major cofinanciers, KfW, EIB and IBRD, have acted in close coordination,always maintaining a common, unified position. A great deal of the recentfavorable turn of events can be attributed to the persistent, concertedefforts of the Bank, KfW and EIB. In addition to participating with the Bankin the proposed project, KfW and EIB also plan to fund a parallel project toassist TKI carry out operation and maintenance improvements at the lignitemine (para. 4.06). Now that a solution to Elbistan's long standing technicaland institutional problems is, at last, in sight, it would be highly desirablefor the Bank to stay on with KfW and EIB to see the project through. Althoughmodest in financial terms (US$10 million), the proposed project would providefor the Bank's continued presence in this key thermal power project in Turkey,consistent with the ongoing effective sector dialogue (para. 2.05).

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II. THE ENERGY SECTOR

Sectoral Context

2.01 The importance of Elbistan to Turkey's energy development is stillhigh in spite of the severe delays experienced in the Project. Furthermore,present Bank strategy in the energy sector is to focus on projects that can bebrought on stream rapidly. The proposed Project fits in well with the energypolicy of the current Five-Year Development Plan. Turkey's present energypolicy, as endorsed by the Bank, establishes, inter alia, that priority is tobe given to development of domestic sources of energy, especially hydro andlignite, provided that they are economically justified. The magnitude ofthe looming energy supply gap dictates that priority be given to completion ofprojects at an advanced stage of construction, such as Elbistan Units 3 and4. An in-depth discussion of the Turkish energy s :ctor and the current Bankstrategy for energy lending is given in Annex 2.1.

Role of the Bank and Past Lending Experience in the Power Subsector

2.02 The proposed Project would be the eighteenth Bank operation in thepower subsector in Turkey. The Bank has made thirteen loans and a technicalassistance grant (total US$921.7 million), and IDA has granted three credits(total US$55.7 million). These comprise loans/credits for four hydroelectricprojects; two thermal power stations (oil- and lignite-fired); a lignite mine;and several for transmission and distribution networks. The technicalassistance grant helped reorganize Turkey's power subsector. The first fiveloans/credits were for projects in the Cukurova Electric Company (CEAS)concession area. The Bank has made six previous loans to TEK, for the First,Second Third and Faurth Power Transmission Projects, for System OperationsAssistance, and for the 1974 Elbistan Thermal Power Project (Loan 1023-TU).

2.03 A Project Performance Audit Report (PPAR), distributed to the Boardin November 1981, on the Keban Transmission (Loan 568-TU) and the first TEKPower Transmission (Loan 763-TU) projects found that these projects had mettheir physical objectives despite implementation delays and cost overruns. AProject Completion Report on the Istanbul Power Distribution Project (Loan892-TU), distributed to the Board in December 1982, also reported physicalcompletion of the Project after considerable delay. Major constraints totimely project completion were identified as shortage of local counterpartfinance and, in the case of Loan 892-TU, late preparation of biddingdocuments. A major conclusion of the TEK II (Loan 1194-TU) Project CompletionReport circulated to the Executive Directors on October 29, 1984 was the clearneed for a single project management unit within TEK to be accountable forproject implementation. Such a monitoring unit has now become a feature ofproject design in Bank-financed power projects in Turkey. For example,ELTEM-TEK, a Turkish consultant assisted by foreign specialists, was hired byTEK to assist in monitoring all aspects of the Third TEK Transmission Project(Loan 2232-TU). Procurement and physical implementation of this project, whichincludes about 1500 km of 380-kV lines, are proceeding with only minor delays.

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2.04 The Bank played a major role in the consolidation of the power sectorand in the creation of TEK. The Bank has since then continued to advocateneeded institutional reforms and has met with some success in its endeavors toassist in strengthening the institutional capabilities of the subsector.Substantial progress has been made in some areas, e.g., improvements in TEK'saccounting system, in system planning, and in procurement procedures.Furthermore, the Bank has assisted in attracting funds from other bilateraland international financing agencies (e.g., EIB, US EXIMBANK).

2.05 The Bank has, through its sector work program, provided guidance andassistance in sector planning and pricing policy, including discussions withthe Government and energy sector agencies (e.g., TEK). These have provided auseful forum for a policy dialogue on the issues and constraints facing thesubsector. Policy level discussions with MENR, TEK and State PlanningOrganization (SPO) have continued to increase the awareness of those problems;and Bank guidance and advice have frequently been sought on a number ofoperational and policy questions.

2.06 Since it is not possible to address the full range of issues facingthe subsector it was recommended that attention be given to a selected numberof high priority issues where the Bank could have an appreciable impact. T.iestrategy for assisting the power subsector is in line with the overall plannedstrategy for the energy sector as outlined in Annex 2.1 (para. 15) andincludes focusing resources on investments which yield quick returns (e.g.,completion of priority ongoing investments, upgrading of existing facilities,reduction in losses, improvements in efficiency etc.); ensuring a balancedelectric power development program with respect to adequate investment ingeneration, transmission, distribution and general plant; strengthening,through technical assistance, capabilities in planning, financial managementand manpower development; investment in new generation options such as thosebased upon imported coal and natural gas; and increasing the role of theprivate sector in the production of electricity.

2.07 The Bank has made a major effort at defining jointly with Government aseries of potential investments which would address the above medium-termissues. In particular the Bank proposes to finance, inter alia, an urbandistribution component of a proposed Energy Policy Loan, a project (Sir Hydro)with a private utility, Cukurova Elektrik A.S. (CEAS), and a high priorityhydropower pr-cW: (Kayraktepe). Project lending aimed at alleviating themedium-term' problems faced by the subsector will be supported judiciously bytechnical assistance and sector work in a number of key areas such as planningand financial management.

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III. THE PROJECT ENTITY:TEK

3.01 TEK has primary responsibility in Turkey for design andconstruction of thermal generating plants, for operation of both thermal andhydroelectric generating plants, and for design, construction and operationof the national transmission system and distribution systems. Theorganization and scope of responsibilities of TEK have been altered recentlyby a number of significant legal changes. TEK is now authorized to investin and operate lignite mines and geothermal fields to supply its powerplants; previously TKI was the only public enterprise authorized to own andoperate lignite mines. In parallel, the opportunities for private sectorinvestment in electric power have been expanded, removing TEK's previousnear monopoly on electricity generation and sales. TEK will continue torequire the Bank's assistance in institution-building. TEK is presentlyreceiving technical assistance in four areas as part of Loan 2322-TU (TEKTransmission III), as follows: demand management and load analysis;administration and standardization of distribution operations; manpowerplanning and training; and, improvements in accounting and managementinformation systems.

Legal Context

3.02 TEK presently operates as a Public Economic Establishment (PEE)defined under Law 233 as a venture owned entirely by the Government which is"public service-oriented and founded to produce and market basic goods andservices of a monopoly nature". As part of the reform in publicenterprises, TEK's legal structure and organization were redefinedeffective January 1, 1985. TEK was originally established in 1970 with itscurrent mandate, but excluding urban electricity distribution, which hadbeen the respousibility of the municipalities. Urban distribution was thenlegally transferred to TEK in 1982, with actual operation and control ofthese distribution facilities being assumed in stages during 1983 and 1984.The objective of public enterprise reform in Turkey has been to permitgreater aut.miomy and improved productivity, and in fact the Government hasrecently been taking significant steps toward increasing TEK's financialself-sufficiency. However, TEK continues to be subject to the StatePersonnel Law (No. 657), which restricts management decisions on hiring,firing, salaries, and internal transfer of staff. Revised legislation forgovernment employees is being drafted but the timing for implementation isuncertain.

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Organization and Management of TEK

3.03 Notwithstanding the recent reforms affecting public enterprises,important managerial and organizational decisions continue to requireGovernment approval, and thus are not dealt with as quickly as would be thecase in a more autonomous utility. Furthermore, there are no board membersfrom the private sector who could represent the concerns of TEK's industrialand private consumers. In the past fifteen years, TEK has had seven generalmanagers, normally appointed from within the company. The Board of Directorsof TEX is chaired by the General Manager, and includes five members; twonominated by the MENR, one nominated by the Minister of Finance and twonominated from among the six Assistant General Managers (AGMs) of TEK by theMinister of Energy. The present organization of TEK is shown in Annex 3.1.The responsibilities of the six AGMs were shifted in early 1985, and arecurrently divided as follows:

(a) Operations: Generation, Transmission and Distribution;(b) Design and Construction of Generating Plants;(c) Design and Installation of Transmission Lines and Substations;(d) General Administration and Distribution Studies;(e) Planning, Training and Data Processing; and(f) Finance.

3.04 Some of the activities reporting to the AGM for Operations haverecently been classified as part of an "Operations Enterprise" within TEK,which is to include generation and transmission operations and responsibilityfor wholesale electricity sales to high voltage customers and to TEK'sdistribution enterprises. It is too soon to determine whether this recentchange will have a visible impact on TEK's operations.

3.05 Having historically emphasized centralized operations andconstruction of new generating facilities in particular, the management of TFKis still adjusting to the new requirements of overseeing distribution wherehighly centralized decision-making is not desirable. Eighteen regionalelectricity distribution enterprises were created in 1983 as separatedepartments of TEK after the takeover of distribution from therunicipalities. While, officially, each enterprise manager reports directlyto the General Manager, in practice they are required to report to two AGMs,to one with regard to operations and to the other with regard to distributionstudies and project design. It would be advantageous to reallocate theresponsibilities of the AGMs so that one would be fully responsible forcoordinating distribution activities.

3.06 TEK's central office provides continuous monitoring and inspectionof the distribution caterprises, approves all personnel decisions, anddetermines the allocation of investment resources among the regions. Thedistribution enterprises are presently not authorized to seek outsidefinancing. They are charged by the parent company for electricity purchasedat wholesale tariff rates and for part of the overhead headquarters expensesassociated with distribution. Each enterpri-e is responsible for preparationof its annual operating budget, drafting annual and long-term investment andplans, and preparation of annual financial statements. Full responsibility forthe design, execution and control of urban distribution and rural

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3.07 A number of distribution enterprises are presently receivingtechnical assistance on a pilot basis. A master plan for reduction of lossesand network expansion is being developed for the. te Enterprise (Izmir);improvement of the customer billing system is being introduced in one districtof the Bosphorus Enterprise (Istanbul); and, improvements in stock control,general and customer accounting are being introduced to two enterprises, Egeand Central Anatolia (Ankara).

Manpower Development and Training

3.08 The rapid expansion of electricity supply in Turkey has beenaccompanied by an almost equally rapid increase in the number of peopleemployed by TEK. The total number of staff as of October 1984, was just over55,000, of which 33,000 worked for TEK's Distribution Enterprises. Thisrepresents an increase in staff of 15,000 over a two-year period, of which11,000 were new distribution staff and 4,000 were added to other departmentsof the utility. After distribution the next largest group, about 13,500, workin operations. A breakdown of TEK's staff by department and by level oftraining is shown in Annex 3.2.

3.09 Manpower planning for TEK as a whole is presently carried out onlyone year at a time, although staffing requirements for new generating plantsare identified further in advance. The Personnel Department and the TrainingDepartment do not report to the same ACM, which complicates coordination. TEKhas three technical training centers, the largest of which is located in Somaand has extensive laboratory capacity and models related to thermalelectricity generation. However, much of the equipment is out of date and thetraining center is used at less than full capacity largely due to the shortageof instructors. Training materials dealing with transmission, distributionand overall system reliability are lacking.

3.10 Some of these weaknesses are being addressed under TEK TransmissionIII (Loan 2322-TU) which includes a thirty-four man-month contract withOntario Hydro. This technical assistance component is addressing: mnwpowerplanning for generation, overseas training of master instructors (in operation

of generating plants, transmission and control), training on plantcommissioning; Lnd improvement of t':e equipment at the Soma training center.

General Characteristics of the TEK Power System

3.11. The large magnitude of the TEK power system can be appreciated byconsidering the volume of the electric load supplied and the extension andsize of its physical facilities. In 1984 the peak load in TEX power systemreached 5,450 MW and gross generation was 26,000 GWh (net 23,600 GWh). In thesame year TEK imported 2,500 GWh from Bulgaria and the USSR which gave a totalelectric energy delivered to the TEK power transmission grid of 26,100 CWh.Total rated capacity of TEK power plants in commercial operation in 1984amounted to 6,330 MW. Adding the peak supply from Bulgaria and the USSR -

285 MW - the total capacity available reached 6,615 MW, to meet a systemconstrained peak demand of 5,450 MW.

(2728P) - 11 -

3.12 TEK's bulk transport system consists of a 380-kV National GridSystem that feeds into 154-kV grids. These 154-kV grids supply major powerusers and feed into 66-kV, 35-kV, and 15-kV subtransmission grids. In 1984there was a total of 46,135 km of transmission and subtransmission lines.TEK's substation plant in the transmission grids consists in 1984 of 368transformer substations with 593 transformers, having an aggregated capacityof 15,798 MVA. Besides power transformers, in these substations there were in1984 a total of 34,569 major switchgear apparatus.

3.13 Low voltage distribution throughout Turkey is done at 50 Hz220/380 V three-phase with neutral grounded. Primary distribution voltagesare 35 kV, 15 kV, 6 kV and 3 kV. In the 18 regional distribution enterprisesunder TEK, the distribution systems consisted in 1984 of: 19,500 km ofprimary distribution feeders at 35 kV, 15 kV and 6 kV; 64,000 km ofsecondarLes at 220/380 V; and 6,289 distribution transformers with anaggregated capacity of 4 730 MVA (more than half of this distributiontransformer capacity is installed in the Bogazici Distribution Enterprise,which includes the city of Istanbul with 1,600,000 consumers).

3.14 The level of technical losses in distribution is between 12% and15%, which is high by modern standards 1/. These losses can be reduced byincreasing the capacity of the distribution facilities, particularlydistribution transformer and feeders. Preparation of master plans is underwayfor reduction of losses and expansion of the distribution systems. It isconsidered economically feasible to reduce losses to about half of wnat theyare now, but this will require considerable investment in the coming years.TEK is already programming substantial investments in this area in the nextfive years.

TEK's Power System Operation Performance

3.15 During the last ten years, TEK's transmission system provedstable in spite of the long transmission distance; voltage and reactivepower were satisfactory. Operation experience with the substationsequipment has been satisfactory, although maintenance problems have led to aconsiderable number of outages. A major problem was in connection with thelightning arresters but TEK has taken measures to improve insulationcoordination and lightning protection in the subst-tions. With regard totransmission lines, TEK faced a more serious problems of mechanical failureduring the first 5-year operation of the 380-kV system, due to insufficientknowledge of the very severe weather conditions in certain areas where therewas no prior experience of transmission line operation. Since then, TEK hasintroduced more adequate mechanical design for the lines, as well as thereinforcement of the existing lines exposed to heavy ice and wind loads inwinter.

1/ In most developed countries, the level of technical losses in the welloperated distribution systems is about 6%.

(2728P) - 12 -

IV. THE PROJECT

Project Objectives

4.01 The proposed Project would provide for the Bank's continuedsupervision oZ Elbistan. The main objectives of the proposed Project would beto complete the Elbistan power station (4 x 340 MW) and to ensure thestation's adequate operating availability and efficient operation.

Project Description

4.02 The proposed Project includes:

(a) completion of construction and commissioning of Elbistan's Units 3and 4; and

(b) improvement in the Borrower's project management and operation andmaintenance capabilities at Elbistan.

Project Cost Estimate

4.03 The total cost of the proposed Project, including physical and pricecontingencies but excluding interest during construction, is about TL 152.7billion (US$237.8 million), of which US$87.6 million is in foreign exchange.Details of the project cost estimate are given in Annex 4.1 and a sumnary isshown in Table 4.1. The project cost estimate is based on early 1985 pricesfrom detailed data provided by TEK, TKI and their consultants. The resultingfigures were reviewed and found reasonable by the Bank. Total physicalcontingencies are about 3.0% of base cost. This is reasonable given theadvanced state of construction of the power plant. Price contingencies havebeen calculated assuming a three-year implementation period (1985-1987)consistent with the latest estimates of TEK and their consultants as reviewedand found reasonable by the Bank. Specific annual increases in domestic andinternational prices were applied as follows:

1985 1986 1987

Domestic (Z) 35 30 25International (Z) 5 7.5 8

The resulting price contingency expressed in US$ equivalent is about 5.7% ofthe total base cost plus physical contingencies and reflects the relativelylarge expenditures projected for 1985 compared to the last two years, 1986 and1987. Annex 4.2 shows details of the price contingency calculations.

(2728P) - 13

Table 4.1Summary-o-f roject Cost

Foreignas x

Local Foreign Total Local Foreign Total of Total--- TL Biilion- ---- UUS Million----

Plant and equipment(incl-uding spare parts) 3.9 16.6 20.5 7.9 33.1 41.0 80.7Civil Works 5.9 - 5.9 11.9 - 11.9 0.0General Erection

Contract 31.2 16.3 47.5 62.3 32.7 95.0 34.4Engineering 0.2 6.9 7.1 0.4 13.7 14.1 97.2Administration 28.3 - 28.3 56.6 - 56.6 0.0

Base Cost (early1985 prices) 69.5 39.8 109.3 139.1 79.5 218.6 36.4

Physical Contingencies 1.9 1.3 3.2 3.7 2.7 6.4 42.2Price Contingencies 23.6 16.6 40.2 7.4 5.4 12.8 42.2

Total Project Cost 95.0 57.7 152.7 150.2 87.6 237.8 36.8

Interest DuringConstruction on

- Bank Loan - 0.5 0.5 - 1.0 1.0 100.0- Other Loans - 4.5 4.5 9.0 9.0 100.0

Total FinancingRequired 95.0 62.7 157.7 150.2 97.6 247.8 39.4

4.04 Identifiable taxes and duties are about TL 28.3 billion and the totalProject cost, net of taxes, is TL 124.4 billion (US$193.7 million). As indicatedin para. 1.10, Engineering and Administration was increased considerably tostrengthen the site organization starting in 1981. Table 4.2 shows the largenumber of expatriate and local Engineering and Admainistration personnel required atthe job site to ensure adequate implementation p'ogress.

(2728P) - 14 -

Table 4.2Engineering & Ad-winistration Manpower at

Elbistan Power Plant Job Site

End of End ofSecond Quarter First Quarter Increase/

1985 1985 (Decrease)

TEK Site Management 440 445 (5)STEAG 1/ 31 38 (7)ESO 2/ 15 17 (2)

Total 486 500 (14)

1/ Management Assistance Team (MAT) and Operations and Maintenance AssistanceTeam (OMAT)

2-/ Engineering Site Organization--The Engineer of Record, a consortium of thefollowing consulting firms: Fichtner (FRG), Sofrelec (France) and Gemas(Turkey).

Although the reduction indicated above will continue gradually a number ofEngineering and Administration personnel will stay on right to the end ofconstruction and commissioning.

Project Financing Plan and Lending Arrangement

4.05 The proposed Bank loan of US$10 million would be made to TEK with theguarantee of the Republic of Turkey on standard Bank terms. The proposed loanwould finance about 4% of the total financing required (US$247.8 million) andabout 102 of the foreign exchange portion (US$97.6 million). The remainingUS$87.6 million would be covered from loans and credits being provided by EIB,KfW, MANTRUST, and own resources from TEK and Government. A summary of theProject financing plan is shown in Table 4.3. The foreign exchange risk onthe Bank loan would be borne by TEK.

(2728P) - 15 -

Table 4.3Project Financing Plan

(US$ Million)

Local ForeignCurrency Currency Total

Proposed IBRD Loan - 10.0 10.0EIB - 14.5/1 14.5KfW 30 772 30.7MANTRUST - 30.oZ! 30.0TEK 35.0 - 35.0Government 115.2 12.4/4 127.6Total 150.2 97.6 247.8

/1 Released from blocked ECU 45 million loan./2 From remaining DU 25 million in Loan No. 5 and DM 50 million in Loan No. 6.73 From available Manufacturers Hanover Trust facility.7Z Includes US$10 million interest during construction.

Given the recent improvements in TEK's financial performance (para. 5.04), nodifficulties are foreseen in TEK's meeting its share of the local currencycosts of the Project. The Goverment is deeply committed to completeElbistan. No shortages of Government funds for the Project are anticipated.During negotiations, the Government gave adequate assurances that localcurrency funds will be made available to TEK as required.

Project Implementation

4.06 Success of the proposed Project depends on the availability ofadequate supply of lignite to the power station from the Kislakoy mine atAfsin-Elbistan. To this effect, TKI is carrying out during 1985 certainimprovements at the mine with financial assistance from KfW and EIB. A costestimate of the KI project is shown in Table 4.4. EIB and KfW areco-financing the foreign exchange requirements. Now that the mine is fullyoperational (para. 1.13), TKI should have no problem meeting the relativelymodest local currency (TL4.2 billion) required.

2728P - 16 -

Table 4.4Cost Estimate of TKI 1985ihslakoy Mine Improvement Project

Local Foreign Total Local Foreign Total--TLBi:llion--- ---- US S Mi on =

Main Mining Equipment - 2.9 2.9 - 5.8 5.8Maintenance Contracts 0.5 2.2 2.7 1.0 4.4 5.4Spare Parts 2.5 2.8 5.3 5.0 5.5 10.5Consultants 0.5 4.1 4.6 1.0 8.2 9.2Base Cost (early1985 prices) 3.5 12.0 15.5 7.0 23.9 30.9Contingencies 0.7 2.7 3.4 0.4 1.7 1.8

Total 4.2 14.7 18.9 7.4 25.6 32.7

4.07 TEK would continue to implement the construction and commissioning ofthe Power Station and has agreed to continue to employ project managementconsultants (STEAG, FRG) under terms and conditions acceptable to the Bank upto commercial operation of Unit 4, or December 31, 1987, whichever comeslater, to assist in the construction and conuissioning of Units 3 and 4 and totrain the operation and maintenance crews. The Turkish authorities haveindicated to the Bank their intention to involve the private sector to providea permanent eolution to Elbistan's technical and institutional problems.Major issues faced by the Turkish authorities in establishing appropriatelong-term arrangements at Elbistan are outlined in Annex 4.3. The Projectwould be implemented over three years (1985-1987) and is expected to becompleted by December 31, 1987. Annex 4.4 shows an estimated implementatior.schedule.

Procurement

4.08 Procurement arrangements are summarized in Table 4.5.

(2728P) - 17 -

Table 4.5Procurement Arrangements

(USS millions)

Procurement MethodProject Element ICB LCB Other NA Total Cost

Plant & Equipment 0.5 45.6 46.1including spares (0.5) (2.5) (3.0)

Civil Works - 12.7 12.7

Installation & - 103.4 103.4Erection - (5.0) (5.0)

Engineering - 15.4 15.4(2.0) (2.0)

Administration - 60.2 60.2

Total 0.5 237.3 237.8(0.5) (9.5) (10.0)

Notet Figures in parentheses are the respective amountsfinanced by the Bank.

Plant and Equipment up to an amount of US$ 45.6 million equivalent will beco-financed by KfW and EIB and procured through extension of existingcontracts with eligible suppliers under KfW and EIB rules. Spare parts (US$2.5 million) are proprietary items obtainable only from one source and will beprocured through direct contracting with each applicable supplier, inaccordance with procedures satisfactory to the Bank in accordance with Bankguidelines. Installation and Erection services (US$103.4 million) will beprocured through extension of existing contracts awarded through ICB inaccordance with Bank guidelines. Civil works (US$ 12.7 million) will beprocured as extension of existing local contracts. Contracts formiscellaneous items costing the equivalent of US$ 50,000 or less, up to anaggregate of US$ 1,000,000 equivalent may be procured under contracts awardedon the basis of comparison of price quotations solicited from a list of atleast three suppliers eligible under the Bank's guidelines, in accordance withprocedures acceptable to the Bank. Engineering services (US$15.4 million)will be procured through extension of existing consultancy contracts awardedunder the Bank's guidelines. Administration will be done by force account.All bidding packages for goods over US$ 250,000 equivalent would be subject tothe Bank's prior review of procurement documents, resulting in about 90%coverage of goods contracts. The balance of contracts would be subject toselective post review by the Bank after contract award. No retroactivefinancing will be required.

2728P - 18 -

Disbursement

4.09 Disbursement of proceeds of the proposed Bank loan would be made for:

Z of ExpendituresCategory to be Financed

(a) Goods 100% of foreign expendi-tures and 100% of localexpenditures (ex-factorycost)

(b) Installation & Erection Services 100% of foreign expenditures

(c) Consulting services 100% of foreign expenditures

An estimated disbursement schedule is shown in Annex 4.5. This profile takesinto consideration the special nature of the proposed Project. Given thespecific nature of the Project, no significant comparison with power projectprofiles in EMENA as a whole is possible (Annex 4.6).

Special Account

4.10 The establishment of a Special Account in the Central Bank willpermit payment of Bank-financed expenditures with a minimum administrativedelay. This Special Account would be replenished in the same currency, andwould have a ceiling of US$2.0 million, which is equivalent to a four-monthaverage of the total expenditures to be financed out of the proceeds of theBank loan. The procedure for withdrawal of funds from the Special Account wasagreed during negotiations. Central Bank statements showing the transactionsin the Special Account will be submitted to the Bank. Applications forreplenishment will be accompanied by appropriate documentation or Statementsof Expenditures. Replenishment will be made in the amount equal to paymentsmade out of the Special Acco'mt for eligible expenditures, but only to theextent that the amount of any such deposit together with any amount remainingon the deposit in the Special Account as of the date of such request, does notexceed the equivalent of the agreed ceiling.

2728P - 19 -

Environmental Aspects

4.11 The Elbistan power station is located in a sparsely inhabited area(see Map IBRD 19081). The power plant provides for ash removal from fluegases by means of electrostatic precipitators designed for 992 removalefficiencies. At this level, fly ash emissions are in compliance with WorldBank Guidelines for Dust and Electrostatic Precipitators. In addition, theplant will meet Bank Guidelines for Sulfur Dioxide and Nitrogen Oxides. UnderLoan 1023-TU, TEX has agreed to establish pollution monitoring stations and toinform the Bank of recorded pollution levels and any corrective actions takenshould they be necessary. The covenant is being complied with and theGovernment has agreed to take measures to ensure the continued application ofthese pollution controls.

4.12 The mine site area is treeless and at best sparsely cultivated. Itaffords no shelter to wildlife such as would need to be conserved, and TKIunder Loan 1023-TU is carrying out necessary reclamation to allow resettlementand reuse.

4.13 The lowering of the water table in the mining activity has producedno ill effects and extracted water is used for irrigation. Sewage is beingtreated appropriately. Noise pollution does not arise.

Project Risks

4.14 Except for uncertainty as to the mine's ability to meet the ligniteneeds of the power station beyond 1986, no major project risks remain.Although the lignite supply situation is at present satisfactory and likely toremain so at least through end-1986, continued satisfactory supply beyond thatdate will be dependent a great deal upon the improvements being made in themining operation in parallel with the proposed project (para. 4.06).Moreover, the Government confirmed during negotiations that it will take allmeasures necessary to ensure that minimum requirements acceptable to the Bankfor the supply of lignite to the Borrower are fulfilled.

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V. FINANCIAL ASPECTS

Financial Performance of TEK

5.01 At the time of the Elbistan Project in 1973, TEK had been inexistence only a few years, having been formed in 1970 to centralize planningand operation of Turkey's power generation and transmission facilities. Atthat time TEK's financial position was weak, due, inter alia, to: theGovernment's decision not to approve adequate tariff increases, less thanexpected load growth and delays in the completion of a major hydroeLectricstation (Keban). Earning about a 3Z return on revalued assets in 1973, TEKwas far from meeting the 8% return set out in its law and agreed to inprevious Bank loans. Furthermore, TEK had begun to encounter difficulties incollecting payments from municipalities and from Government enterprises, andreceivables were equivalent to four months of sales revenues.

5.02 Establishment of TEK's financial viability was one of the goals ofthe Elbistan Project. With this in mind, the following financial objectiveswere agreed upon during negotiations for Loan 1023-TU: (i) two tariffincreases of 22% in nominal terms in 1974 (a condition of loan effectiveness)and 31% in 1975; (ii) an 8% rate of return on revalued assets from 1976onwards; (iii) reduction of accounts receivable from municipalities. TheGovernment was to cause municipalities and its own agencies to pay outstandingdebts to TEK promptly in order to ease the working capital shortfall. It wasestimated at the time that fulfillment of these objectives would have enabledTEK to cover 56% of its capital expansion requirements--of which Elbistanrepresented a major share (67%)-from internal sources after taxes, on averageover the project implementation period. Adding the State Hydraulic Works(DSI) construction program for hydroelectric plants to TEK'S forecastinvestments, power subsector self-financing was expected to average 39% forthe period 1973-1981. Debt service coverage was forecast to increase from 1.3in 1973 to 3.2 by 1981. The anticipated level of internal cash generationwould also have eliminated the need for direct Government transfers to TEK tofinance the investment program after 1975.

5.03 During the 1970's, TEK's actual financial performance was far frommeeting these targets. This period was characterized by dramatically risinginternational fuel prices, higher than expected inflation in Turkey rising toa peak of over 10OX in 1980, and an unstable political situation which made itdifficult for the Government to implement tariff increases. From 1973-1981,tariffs increased only 11Z in real terms as compared with the appraisalestimate of 47%. Although the Bank ultimately agreed to lower return onassets targets in the light of the Government's economic stabilizationprogram, the return on revalued assets averaged less than 3Z during the1970's. TEK continued to rely on injections of Government equity to meet itsexpanding construction requirements, with the Government contribution reaching50% of TEK's investments by 1981. The municipalities continued the practiceof retaining revenues from retail electricity customers to divert to otherpublic services, and TEK's receivables reached a high of nine months ofsalesat the end of 1982. In the face of a serious cash shortage, TEK had fewoptions but to postpone payments to its own suppliers, including TKI.

(2728P) - 21 -

5.04 A two-stage turnaround in TEK's deteriorating financial situationstarted in 1982. First, to resolve the problem of arrears frommunicipalities, the Government transferred electricity distribution to TEK,allowing it to collect directly from retail customers. TEK's working capitalsituation did not immediately improve however. Electricity tariffs dropped inreal terms by almost 20Z in 1983, and TEK continued to divert available cashto its investment program instead of paying its fuel suppliers. Then, in1984-85, the Government launched a program of regular real tariff increases,which more than offset the preceding drop in electricity prices. By April1985, the average bulk electricity tariff was estimated to have reached about85-90Z of the long-run marginal cost of supply. Debts between TEK and otherState Economic Enterprises (SEEs) including TKI, were converted to equity bythe Government in mid-1984, clearing up TEK's balance sheet, and TEK beganpaying for lignite and fuel oil on a timely basis. The self-financing levelfor power subsector investments (including both TEK and DSI) is estimated toreach about 162 in 1984 and over 35% in 1985. Annex 5.1 gives a su! ry ofTEK's most recent financial forecasts

Audits

5.05 As with other public enterprises, TEK's financial statements followthe Uniform Chart of Accounts, and are audited by tue High Control Boardconnected with the Prime Ministry. TEK is required by Law 233 to submit itsbalance sheets and final accounts to the Prime Ministry for auditing no laterthan the third month following the year to which they pertain. TEK is thenmeant to submit its annual audited accounts to the Bank no later than fivemonths after the close of the year. However, there are shortcomings with boththe scope and the timing of the present audit reports. The auditors rarelycoimment on the reliability of the presentation of the accounts, or onsignificant events which occurred during the year. The audit reportsconcerning 1981 and 1982 were received more than a year after the close of thefiscal year. Similarly, the audit report for 1983 had not yet been receivedas of April 1985.

5.06 Most likely it will not be possible to meet the five month target forsubmission of the audit report, until the 1987 report. Under Loan 2322-TU,TEK consultants are giving priority to improving the timeliness and accuracyof TEK's financial statements. Furthermore, an upgrading of TEX's computercenter, presently being studied, should improve TEK's ability to prepare andcorrect the annual financial reports. During negotiations agreement wasreached on a gradual schedule of improvement for submitting audit reports,with the 1985 and 1986 audit reports being expected within 10 and 8 months,respectively, after the end of the given fiscal year, and within 5 months for1987 and afterwards.

I/ For a detailed assessment of TEK's recent financial performance and offinancial issues affecting the power subsector, see: Turkey- FourthTransmission Project Staff Appraisal Report, May 20, 1985, Report No.5571-TU.

(2728P) - 22 -

VI. PROJECT JUSTIFICATION

Growth of TEK's System

6.01 The proposed Project would form part of the interconnected powersystem operated by TEK. TEK's system is projected to expand rapidly over thenext ten years in order to meet a fast-growing demand and close the stillprevailing electrical energy deficit. In connection with Bank sector work, aset of demand projections was prepared for discussions with TEK. Theseprojections were updated for the purpose of this appraisal. A base case wasderived assuaing that a limited demand management program would be implementedby TEK through direct load management and tariff increases. Results for the1985-1995 period indicated an annual growth in peak demand and energy of 6.5Zand 8.5Z respectively. A low-demand case was also considered assuming a moredramatic improvement in energy efficiency (through reduction in losses) andresulted in an overall growth of 5.9Z p.a. in peak demand and 7.9% p.a. inenergy.

6.02 The latter scenario was used to develop TEK's balance of energy andcapacity (Annex 6.1, Attachment 1). It is very unlikely that the projectedgeneration expansion to 1990, which includes Elbistan units 3 and 4, will beable to meet the system's energy requirements (GWh), even under averagehydrological conditions and with continued imports from Bulgaria and theUSSR. Any delay in commissioning of Elbistan 3 and 4 would therefore increasethe projected supply gap. The proposed Project is thus justified as necessaryto meet projected incremental demand on TEK system.

Least-Cost Analysis

6.03 The remaining question is whether any other type of plant could meetthe projected requirements at less cost than the Project. Of the availablealternatives, only combustion turbines could conceivably be installed in timeto avoid the energy deficits which would prevail in 1988 and later yearswithout the Project. Adoption of one of the other feasible options would bejustified, therefore, only if it showed sufficient economic advantage over theProject to offset the costs to the economy in terms of unserved demand whichits longer completion time would involve. Evaluation of all the alternativesshowed that, on the contrary, both the capital and operating costs of theProject were lower than those of any alternative (Annex 6.1, Attachment 2).Sensitivity testing confirmed that the Project would still be the least-costoption on the TEK projection of system growth, and even on the highlyimprobable assumption of a doubling of all its costs (capital, fuel, O&M),without any change in the costs of the alternatives.

Rate oc Return on the Overall Sector TEK/DSI Expansion Program

6.04 The overall TEK/DSI expansion program for 1985-1990 (Annex 6.2),which includes the proposed Project, was evaluated in conjunction with theappraisal of the Fourth TEK Transmission and the Power System OperationsAssistance projects (Loans 2586-TU and 2602-TU respectively) and indicated arate of return of 11.3%, marginally below the estimated opportunity cost ofcapital of 12Z; reflecting the fact that electricit;- tariffs are slightlybelow the economic cost of supply as measured by the loig-run marginal cost.

(2728P) - 23 -

However, it understated the real economic return on the program since themeasurement of benefits underestimated the willingness to pay for electricity(para. 6.06).

Recalculation of the Rate of Return on the 1974 Elbistan Project

6.05 The rate of return on the Elbistan project was recalculated. Theperiod used for the calculation was 1973-2014, covering the start ofconstruction of the power station and mine and their estimated economic livesof 30 years from the start of commercial operation in 1985. The costs are thecapital and operating costs of the mine and power station together with theassociated transmission facilities. The benefits comprise the revenues fromthe incremental bulk sales of electricity attributable to the power station.

6.06 Incremental sales were valued at the average prices projected forbulk consumers (at 1985 prices), which are as follows:

1985 1986 1987 1988 1989 1990 onwards

TL/kWh 26.87 28.21 29.62 31.10 33.10 36.83

Electricity tariffs were assumed to increase at regular intervals to reach andmaintain LRMC, and to ensure an adequate level of self-financing for the powersubsector, reflecting the Government's commitment to reduce publicexpenditures. Since the tariffs used in the calculation were estimated as aproxy for consumers' willingness to pay, all taxes±' were included. Giventhe large unmet demand, the willingness to pay for electricity is likely to behigher than the current average tariff, but it cannot be readily quantified.

1/ VAT presents some difficulties, since it is repaid to industries, whichuse electricity as an intermediate good. However, repayment may take upto a year, and the "effective price" co industrial consumers is thereforetaken as including VAT. Excluding VAT in these cases would slightlyreduce the rate of return.

(2728P) - 24 -

6.07 A comparison of the Elbistan's costs and benefits results in a rateof return of about 6% (see Annex 6.3). This compares with an estimate ofnearly 18% in the original (1974) appraisal. This is well above therecalculated rate of return of 6%, again mainly because of the great delayexperienced in completing Elbistan and the resulting lengthy period of timewhich has elapsed between incurring its heavy investment costs and reaping thebenefits of its output. Nevertheless, Elbistan is worth completing as therate of return calculated on the proposed Project is over 40% (see Annex 6.1,paras 4-6 and Attachment 3), which reflects the fact that a large part of thecosts related to Elbistan units 3 and 4 were incurred prior to 1985.

(2728P) - 25 -

VII. AGREEMENTS REACHED AND RECOMENDATIONS

7.01 During negotiations the Government agreed to make available localcurrency funds to TEK in a timely manner (para. 4.05).

7.02 During negotiations, TEK agreed (a) to continue to employ projectmanagement consultants up to commercial operation of Unit 4, or December 31,1987, whichever comes later (para. 4.07); and (b) to submit the 1985 and 1986audit reports within 10 and 8 months respectively after the end of the givenyear, and within 5 months for 1987 and afterwards (para. 5.06).

7.03 Subject to the above, the proposed Project would be suitable for aBank loan of US$10 million to TEK with the guarantee of the Republic ofTurkey, for a term of 17 years at the standard variable interest rate,including a four-year grace period.

December 1985(2728P)

-26 - ANNEX l.l

TURKEY

ELBISTAN 0 & M ASSISTANCE PROJECT

Summary of Cofinancing Plan for the1974 (Original) Elbistan Thermal Power Project,

Loan 1023-TU(US$ Million Equivalent)

Power Plant Lignite Mine Total

IBRD 123.0 25.0 148.0KfW Loan-Concessionary 30.0 - - 30.0KfW Loan-Suppliers' Credits 29.0 70.0 99.0EIB Loan 78.0 14.0 92.0EIB Bilaterals 121.0 - - 121.0Other Foreign Funds 110.0 22.0 132.0

Total 49. 13TG5 67

Source: SAR for Elbistan Thermal Power Project, Report No. 342a-TU,dated June 13, 1974


- 27 - ANNEX 1.2

TURKEY

ELBISTAN 0 & N ASSISTANCE PROJECT

Summary of Contracts Financed Under Loan 1023-TU

TotalLoan Category US$ Equivalent

1A TEK Boiler Plant 80,299,691.21

1B TEK Other Plant 4,901,247.44

IC TEK Erection Equipment 14,742,128.44

1D TEK Consulting Services 17,133,924.91

1E TEK Erection Services 16,194,186.38

133 ,27 1,178.38

2A TRI Equipment 14,728,821.62

148,000 ,000 .00


- 28 - AIMEX 1.3

TUKEY

ELBISTAN 0 & N ASSISTANCE PROJECT

Cumulative Estimated and Actual Disbursements Under Loan 1023-TU(US$ Million)

As of June 30: 1976 1977 1978 1979 1980 1981 1982 1983 1984

(i) AppraisalEstimate 13.6 81.9 111.3 128.6 139.1 148.0 - - -

(ii) Actual - - 55.3 81.8 90.4 112.8 127.3 145.4 148.0

(ii) asZ of (i) 50 64 65 76 86 98 100


ANNEX 1.4

TURKEY


Revised Elbistan Project Cost Estimate

l/ Work in Progress 2/ 3/Appraisal Estimate (1974) as of December 31, 1984 Revised Elbistan Cost-US3 Million Equivalent-- --UBS Million Equivalent-- --USS Miltion Equivalent--Local Foreign Total Local Foreign Total Local Foreign Total

Power Stntion

Plant and Equipment 52.0 298.3 350.3 20.0 437.0 457.0 27.9 470.1 498.0Civil Works 28.2 4.5 32.7 453.0 4.0 457.0 464.9 4.0 468.9General Erection Contract 28.5 20.9 49.4 406.0 147.0 553.0 468.3 179.7 648.0Engineering & Administration 4.1 3.4 7.5 7.0 52.0 59.0 64.0 65.7 129.7Physical Contingencies 10.7 19.4 30.1 - - - - -Price Contingencies 56.5 131.7 188.2 - - - - - _interest DuringConstruction 25.8 83.8 109.6 - - - - - -

Subtotal 205.8 562.0 767.8 886.0 640.0 1,526.0 1,025.1 719.5 1,744.6

Transmission Lines 16.7 14.8 31.5 7.6 22.3 29.9 17.1 50.0 67.1

Lignite Mine 98.9 238.8 337.7 265.4 297.9 563.3 272.4 321.8 594.2

Total 321.4 815.6 1137.0 1,159.0 960.2 2,119.2 1,314.6 1,091.3 2,405.9

Sources:'I SAR Report No. 342a - TU; June 13, 1974.2/ TEK & TKI.

December 1985 3/ TEK, TRI and mission estimates.(2729P)

30 - oANNEX 1.5Page 1 of 3

TURKEY


Operating Data - September 1985

Indicator Unit 1 Unit 2 TOTAL

Generator output (MWh) 156,900 166,780 323,680Generator operation (Hours) 603 687Time availability (%) 85.5 95.5Capacity utiliz. factor (Z) 63.3 67.3

Operating hours (hours) 602.4 687.3Average load range (MW) 260.5 242.7outage time (hours) 118.6 33.7Number of shutdowns 8 4

Lignite consumption (ton) 357,354 387,861 745,215Light fuel oil consumption (ton) 117 11 128Heavy fuel oil consumption (ton) 661 495 1,156

Calorific lignite (Gcal) 442,404 48L,172 922,576Heat fuel oil (Gcal) 7,456 4,872 12,338

Source; Monthly Report, 9/85, Afsin/Elbistan Project, MAT/ONAT,September 1985.


ANNEX 1.5.TURKEY - 31- Page2 f 3

ELDISTAN 0 & M ASSISTANCE PROJECT

Generator Output

3IEPTEMBER 2 985 c H)m

s 35022000

sese 9004)750&

300ce

1 _ 13 _ I 25 30,

! FlNH. (P1"114 ! .1 S.. .,)4

35&, 5985

361D

_~~~~oTt _ . iiH so

I 4.r Itr.

145

I 7¶

i }F 1

&E f w | W w w w w I 0

-IC-

ri ri.

F I.l F 11 .. t J *i s s; f' IJ C

Source: Honthly Report, 9i85, Afsin/Elbistan Project, MAT/OMAT, September 1985

AC(:tlfllfl AJEla (fl5flI N j9~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,9)~~

TURKEY - 32 - ANNEX 1.5TURREY ~~~~~~Page 3 of 3


Lignite Consmtptl n

SEPTEnBER 1985 <TONS l00o>

4C+

7- c1% 6

12Ž

4-

s~~~~~~~~~~ 1h9 11 3

* O"TH (<TONS 1 0S0>

$'-"->1 985

4|I

4

Il'D ; [ I I I .* tJU

C.~~~ r1>r1 18j* "e r

4 '.1.;

4 . . 1 . 1 -Its

4

_, t,1 - -_

I~~~~ . I -

I F 11 A U1 I1 l A S ; al i

Source: Monthly Report. 9/85, Afsin/Elbistan Project, MAT/OMAT, September 1965

- 33 -

ANNEX 2.1Page 1 of 5

TURKEY


THE ENERGY SECTOR

The Role of the Energy Sector in the Economy

1. In 1977, four years after the first of the major oil price increases,Turkey's oil import bill was equivalent to 84% of its merchandise exportearnings. By 1980, the situation was even more precarious: oil imports stoodat 124Z of total merchandise export earnings. As a result of remedial actionsthat the Government implemented as part of its structural adjustment program,the situation had, by 1984, improved and the above ratio had declined to 53%.

The improvement was a resuit of both strong performance of merchandise exportsas well as a policy of holding the growth in imports of crude oil and oilproducts to a more moderate level (oil imports grew by an average annual rateof 3.6% between 1981 and 1984). However, despite this improvement the need tomove away from an excessive reliance on oil imports remains crucial toTurkey's medium-term development strategy, as the latter is dependent on theeconomy's ability to mobilize foreign exchange.

2. High priority was assigned to the energy sector by Government duringthe 1980-83 period of structural adjustment. Energy policy was geared toincreasing the domestic supply of energy, primarily through increased capitalinvestment to about 35Z of total public investment compared to about 20Zduring the 1970's. In parallel, greater attention was given by Government toenergy pricing policy as a means of restraining demand and mobilizingresources. In particular Government has ensured that petroleum productsreflect economic costs as reflected by world prices, and electricity tariffshave increased in real terms over the period. Although lignite pricesdeclined slightly in real terms in 1981-83 a turnaround in lignite pricingpolicy during 1984 resulted in a 30% increase in April 1984 and a further29.6% in January 1985 thus exceeding inflation over the 12-month period.

The Resource Base

3. Turkey has substantial untapped lignite and hydropower resources, aswell as more limited, but still important, oil, gas and coal resources andgeothermal potential. Hydropower with potential economic viability isestimated at about 29,500 MW under average hydrological conditions andcorresponds to an annual production of about 100,000 GWh. Only 15% has beendeveloped so far, but this is projected to rise to about 30% by 1990. Provenrecoverable reserves of oil are about 16 million tons. However, potentialreserves that may become economically recoverable using enhanced oil recoverytechniques currently being tested could be as high as 30 million tons. Oilproduction has been declining over the last decade, as few discoveries have

- 34 -ANNEX 2.1Page 2 of 5

been made in recent years; in 1983 production was about 3 million tons.Proven recoverable gas reserves are about 400 billion standard cubic feet.Domestic gas will, however, be supplemented, beginning in 1987, by large scaleimports of natural gab from the USSR. Total known reserves of hard coal areestimated at about 1 billion tons, all located in the north of Turkey(Zonguldak). Coal production has been declining as operations move to deeper,less accessible seams; in 1983 production was about 3.5 million tons,equivalent to 2.2 million tons of oil equivalent (toe). Proven and probablelignite reserves are about 8 billion tons, but about half of this is ofextremely low quality (950-1,000 kcal/kg). Lignite production in 1983 wasabout 20 million tons, equivalent to about 4.6 million toe. The economiccosts of domestic lignite appears to be very high, and, in some mines, notcompetitive with imported coal. There is potential for geothermaldevelopment, for both space heating and electricity generation. A foreigncompany with extensive experience in geothermal power has recently undertakena technical review of a number of promising geothermal sites, and discussionswith the Government on possible terms and conditions for developing one ofthese sites are currently in progress.

Main Agencies

4. The energy sector in Turkey is characterized by the dominance ofgovernment-owned enterprises and agencies. The Ministry of Energy and NaturalResources (MENR) is responsible for the development of energy resources inTurkey. Under MENR, the Turkish Lignite Enterprise (TKI), the Turkish HardCoal Enterprise (TTK), the Turkish Petroleum Company (TPAO), and the MineralResearch Institute (MTA) have responsibility for the extraction of fossilfuels and radioactive minerals. Identification, design and construction ofhydro projects is entrusted to the State Hydraulics Works (DSI). The TurkishElectricity Authority (TEK) is responsible for the generation, transmissionand, since November 1982, the distribution of almost all the electricity soldin Turkey. TEK is also responsible for the implementation of the Government'sprogram for rural electrification and the construction of all generating andtransmission facilities, with the exception of hydroelectric plants for whichDSI has responsibility.

5. Private sector participation in the supply of electricity was until1983, confined to two small semi-private utilities (CEAS and KEPEZ) andindustrial companies which generated power for their own use, often inconjunction with the production of steam for process heat. However, recentshifts in government energy policy now give greater encouragement to privatesector participation in the development and production of energy.

Demand and Supply

6. Total gross energy consumption was about 38 million toe in 1983, ofwhich commercial energy consumption amounted to about '0 million toe.Petroleum made up the most significant share of primary commercial energy(60%) with the balance made up of lignite (18O), hydropower (11%), coal (10%)and imported electricity (1%). About 24% of final commercial energy

- 35 -


consumption was in the form of electricity. Non-commercial energy production(primarily fuelwood, but also other biomass) was an important energy source,accounting for 232 of total energy consumption. Imported energy (petroleum,hard coal and electricity) represents about 452 of total energy supply.

7. The most notable change in the pattern of energy consumption over thepast two decades has been the decrease in the relative share of hard coal intotal energy. This was accompanied by a rapid growth in consumption ofpetroleum until the mid-1970s, peaking at over 50% in 1977/78; and a rapidrise in the share of lignite (primarily for thermal power production) andhydroelectric power consumption starting in the second half of the 1970's.During this period, hard coal consumption stayed relatively constant inabsolute terms, while traditional biomass energy sources increased slightly inabsolute terms, but decreased steadily as a percentage of total energyconsumed.

8. The most important factors in the growth of energy demand will be thegrowth rate of the economy as a whole, the growth rate of the energy-intensiveindustrial sector of the economy, and the extent to which Governmentimplements an energy conservation and demand management program. Bankestimates indicate that the growth rate of the economy would average about5.6% per annum during the 1980s and that the industrial sector would growslightly faster at about 7%. Under these projections and in the absence of avigorous demand management program, electricity demand is expected to grow byover 200% between 1980 and 1990 to about 60,000 GWh; lignite demand forthermal power plants would grow by almost tenfold to about 50 million tons;and petroleum products demand would grow by 110% to 30 million tons of oilequivalent. In total this would represent approximately 58 million toe, anincrease of over 8% per annum from 1983 (38 million toe). However supplyconstraints, especially in the lignite sector, will result in demand not beingmet, at least to 1990. The energy deficit is estimated by 1990 to be ;-i theregion of 7-8 million toe.

9. There is, however, considerable scope for conservation of energyparticularly in the industrial sector which currently accounts for 40% oftotal energy consumption and this is expected to rise to 45% by 1990. heindustrial sector also consumes 64% of total electricity supplied.Furthermore eight industries 21 account for 40% of total industrial ene ;yconsumption, from which it has been estimated that almost 1 million toe couldbe saved through investment in conservation. The total estimated potentialenergy savings in the industrial sector, including a large number ofenergy-inefficient small industries, is about 2.4 million to!. There istherefore an urgent requirement for an energy conservation program in Turkey.

10. The Government is in the process of developing a program for theconservation of energy by encouraging efficient use in existing and newindustrial enterprises. Energy efficiency programs and legislation have been

1/ Iron and steel, cement, fertilizer, pulp and paper, glass, brick,aluminum, copper.

- 36 -


evaluated by both the MENR and the SPO, and legislation has already beenpassed which allows for tax credits for various types of investments in energyefficiency improvements. The Government has initiated programs to assistindustrial firms to learn how to improve their energy efficiency in existingoperations. The Bank included technical assistance for energy audits inselected manufacturing facilities as part of the assistance to the Governmentuntder Loan 1916-TU. These audits have now been completed and the Bank iscurrently reviewing their findings with a view to financing a conservationproject. TEK has also hired consultants to assist in the development of anenergy conservation and load management program.

Energy Policy

11. To meet its energy requirements Turkey launched a massive program inthe late 1970's to increase the domestic production of electricity andlignite. This program tended to stretch the implementation capabilities ofthe state energy agencies, and spread the resources available too thinly overtoo many projects, with resulting long delays in completion schedules. Thishas, in turn, resulted in an energy deficit which is likely to remain afeature of the Turkish economy at least through the 1980's. MENR and TEK arecurrently in the process of improving their energy planning capabilities andMENR has produced Turkey's first energy policy paper. T.e recent Five-YearDevelopment Plan!' contains the following energy sector objectives:

- priority is to be given to domestic sources of energy, especially,hydro and lignite, provided that they are economically justified;

- imported energy including, but not limited to oil, will be considered;

- renewable and nonconventional resources such as geothermal, solar andbiogas are to be supported; and

- private sector financing, both local and foreign, will be sought forparticipation in energy development.

12. One feature of Government which represents a departure from previousenergy policy concerns the expanded role of the private sector in thedevelopment and production of energy. Government policy is now quite clearlyto encoura',e private sector participation in the energy sector. There are nowno legal constraints to private sector generation, and private utilities(KEPEZ and CEAS) have plans to increase their capacities. In addition, theState Planning Organization (SPO) is currently undertaking, with assistancefrom consultants, preliminary studies to assess whether private financierrcould be sought to construct and operate thermal plants based upon imported

11 V. Bes Yillik Kalkinma Plani 1985-1989, State Planning Organization, June1984


fuels (coal, nuclear) and geothermal. Over the long term this could have afundamental bearing on the financing, staffing and planning of the subsector.

Bank Strategy

13. The Bank has prepared and discussed with Govermnent an EnergyAssessment Study as well as subsector studies on electricity and lignite. Inaddition, under SAL V Government agreed to develop and discuss with the Bankan energy action plan and MENR has instructed the individual energyinstitutions to prepare detailed medium term action programs. As an ongoingpart of our policy dialogue the Bank prepared an energy sector strategy paperon strategy and actions required in the energy sector. In discussions of thispaper agreement was reached with the Government and related energyinstitutions on the content, analysis and scope of the issues facing theenergy sector.

14. The strategy for Bank lending and operational work in the energysector is to focus on selected key issues in the medium term in order thatprojects may be brought on stream as rapidly as possible and the efficiency ofexisting energy producing fa^ilities be maximized. The magnitude of thelooming energy supply gap is such that priority should be accorded to projectsaimed at reducing the deficit as soon as possible. Projects with relativelyshort gestation periods such as improvement of efficiency within existingfacilities, industrial conservation, reduction of energy losses, andutilization of energy resources which can be brought on stream rapidly, shouldhave priority. Furthermore the private sector may well offer opportunitiesfor developing energy resources more rapidly than the public sector, andemphasis will be given to investments which may increase private sectorparticipation.

15. In conjunction with the strategy to -4ddress the key medium termissues the Bank will also emphasize the stre:'gthening of the various energyinstitutions through technical assistance in training, manpower developnent,technical, economic and financial planning and project management. Final'y,the open and constructive policy discussions between Government and the Bankundertaken in conjunction with SAL V will be continued on a regular andsustained basis and should provide a continuing policy framework within whichboth project lending and the development of a robust project pipeline canproceed.


. Wk m-,-

LZF. r-"-r

%M*JWMI-00%~~~~~~~~~~~[;..

a-Go" -Pw" rwwwwm~~~~~~- - I

------ ------ ------- --------- l-------i------1-------1------1----1-------------------

^~~~~~~~~~~~~~~~~~~~~4.wt~ Sm g -'-'- u-,,

^~~~~~~~~~~~~~~~~~~~- I , , . 'r

_ _ .. . I

i ^-2 q *~~~~ -m e9q Sww ... [X-}

m~~~~~~~~~~~~. .tm {g- :A. mfi. .wj g

r _]I ~ ~~ I

1F!lZWCS,~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~zl __r -a.-, 4

I * .adS..mlWl

39 A_EX 3.2

Pr1n a 2tat4t1;e nf lr fl. tlr,epS. iulqpt,, a af ~et,ah* 13 1914

£ ~ 1 t= Iteitrpr h±zZ1 Tot-

I . G al Management - 14 - - S 5 1 i

2.

Gnerl Secretariat 21 - - 1 23 25 Ise0efsas Secretariat - - 7 S 1iControl VW Audit C_ittee - 4 - 4 45 54Pracurit Cntte - 3 4 I aAemntstpatce Services 443 1 2 292 ZN 21 IS?Persaivil 0eartawen 3 - 39 SI 4U 134.Iqaical Oseartmt - - - S J 33 24Accounting Ota t * - 3 110 90 Z54

Legal oe96tnt - - S 1 17 3IJ'ocur~t OeDa umnt Zs 1I 5 17 so 20 114Crcial Office mm

Subttal I42 & i III a.i i444

Th6SI lan"ts S.44 17S 29 311 14S 91 9.122Gas rur,ine Plants 244 la - 27 *00SeGU*rfl P*14ants as 7 - 6 - 2 100Cetral nrhems Srvices 31 44 9 6 17 4 104Hydre plnlts 991 * 7 43 1U 52 29 1.344.:V Trrns esion r cS 3.319 176 23 969 259 Is 4.s73Otner Services Z105 ' 2S 46 4Z I 526O"Sottnig 90 42 19 14 1a 9 192rrain%ng LS _a _a _4 _4 __In

Subtotal IA..S6A 1*d ]A ii U l2L5Z

4. 1mrln.r n DIMGwr an

PlSitng and Coroination a so a J 17 16 102Coastruction "a11gnt 4 7 - 2 I - 14Osn smCastructn .ZS1 29 64 1 6 122 44 1.944Mucletar Plant Oe-o mmConstruct3an .. j.1 .. 2 . .A

Subtotal LJ.1 iL .2S £12 it .2..

S. -,3i1ain Piai.nitne

annl t~ItfUt!t 1

P1eavsne aft ossigo 3 73 14 !Il 19 5 359Construction 51 1 5 m in 51 - 4

Subtotal 1.=1 u2 l LU LU u _

Central 03 stribuLicA'Sers.ices 171 91 51 42 35 431

Aegwonal Olstri m.tionEnteror'ses 187Z 914 1;.5U a.?"1 L1U 5.2 2-711

Sanotal .. M&4 L222 L-ID L-Z2 .UI IA0 Z.LA9

7. Assi-leid to m"nsStryaf Energy - 12 7 A11 7

W~0AL 3.L.U2 '11 U.1-AlXLI L±I2 L=~ I.21

a UB to cinlotton of Seceno>r7 saio.l.Ul Sm POest-secoiwry trainins.£; unW rsity gree.4g Ilclu aowating saftf If SMI erwtIl 'lans.i Esoecially staff of :imutor center.

maren 1. 19

TURKEY

Elbistan n N Ai fi stance ProjectOrtalIed Lost EsLi,ate by Mature and lurpose ol Eipenditure

(IL MilIlonl

UJS I HilliornFower Stkti.o, PhYIsEIal CnIfIlnenclIs Pr-ct Contingriwcte Iota) 8rojrtt Cost Equivaltnt

............................................. ...................... .............................------.............---------------.......... _. ..........----------..... .. ...

Lot.ol Fortiqn Total Local Foreoin Itdl Ltocal Fortign Total Local Fareign lotal

Pn,lqr Pi;.L s i,1!8 5,4Ii a '.3 ''12 104 2,175 2,21 48le 1,551 7,915 12.40

,Jrbl;e CoterzZor l'i 1,34't 1,i8a 2 ~~~~~5'l St 2i 550 517 I'J l01141 2,01,; 3.10.lAn FJbapi 13 418 5(10 0 1' II 4 204 208 17 710 127 1.10Water ;r(at.ent C' 5 0 3 0 32 32 0 110 110 0.20sk.it;hyard I 9 10 0 0 o 0 4 4 I 13 14 uo.1

I)tl5i0lit 4 13 I 1! I I 1 6 7 5 20 25 0.10

LV Equliprerit '5 461 484 1 18 1' 8 a 14 202 32 613 105 1.10LonlrtI Lquipsenr !vb (I,e8 3,8,i I Igo 146 ICl 112961 I401 4118 41502 4,`17 7.70C'il t rs0! Plant S IU Ov I05 0 4 4 2 42 44 1 146 15 0.20Spart PF1rti 3.213 5,80' 9,o3 81 2ii 320 1,QD8 2,454 3,547 4,309 8,527 12,915 2'u.l0

ijb1lol,,d S,'95o1 lb,5b0 2'i,50I; 16 Z66 71668 I',38 6,'51 9.295 5,3'i4 24,11 2' 'A I. 0

Ci:il Forks t,95u 0 5,950 IbI 1 161 2,1,15 0 2,uI5 8,12b 0 8,126 12.70

5Qn I Coantractor 1I6C 2[,625 14,022 42,'17 1i; 55; 1,330 9,6b5 5,392 15,587 31,09' 20,471 59,564 92.10 0

5uppli% !or UL ',4b 8:4 3,298 11 33 104 836 350 1,14 3,371 1,217 4,5a9 7.10Erectimn I'pparl. 61 1,494 1,555 2 &6J 62 21 628 649 84 2,182 2,266 3.50

St'n-lotal k1,150 16,551, 41,500 816 650 1,496 10,552 6,10 141,42 42,5l4 23,810 66,418 Ii'3.40

tc.rsjltmins 103 6,350 7,033 0 0 0 60 2,168 2,828 243 1,610 15.40

iidrinistratici, 2,3117 0 28,311 1b' 0 765 9,512 0 9,592 39,674 0 38,614 60.20

Fat Cost learly 1985 prices) 6i,550 ,i50 IO;10;JOO ,;8 1;3ii 3,iiU 23,55i 1b;595 40,15i 1i4sH5 5i,657i 15.,S2 237.80STE= saga llA sagas asreS ,wwa masax §glss eggs-a Ilepte

Physical Coantingenctee 1,811 1,312 3,190Price :onlangqricies 25,5:7 16,515 40,152

IIAIL PROJE:T 1:1091 S4 i85 51,57 152,642

UJS dillon equivalent 151S.21i VA.u 231.90

Il Inctl;cs IL 2A.3 billion in 1l*es.

(ala n 1r. ~Ii fllilt nMtt A1l,,,,bAbiobL t

TIW

awr mrna (IN I=L Oma Leum) mL Nil1^

L X;CL a!IY ODM a tCI 8 ODM

WAM 1985 198 1967 1985 1906 1987 1/C 1/C Elawr rm

Plat & E tippu 2,560.0 1,185.0 205.0 8,556.0 6,157.0 1,897.0 3,9S0.0 16,550.0 20,50.0Civil Ibxii 3,856.0 1,785.0 3X9.0 0.0 0.0 0.0 5,950.0 0.0 5,950.0cGerl Erection 0untract 20,185.0 9,345.0 1,620.0 8,454,0 6,012,0 1,914.0 31.150,0 16,35D.0 47,500.0

RinedMr A Ad&dl.istntin 18,468.0 8,550.0 1,41.20 3,542.0 2,54.0 760.0 28,500.0 6,850.0 35,350.0WAb.otal 45,069.0 20,865.0 3,616.0 20,552.0 14,787.0 4,411.0 69,550.0 39,150.0 109,30D.0

Rhyuical Qitiency 1,216.9 563.4 97.6 678.2 489.0 145.6 1,877.9 1,311.8 3,189.7Price oitfrmcy 8,100.0 11,919.2 3,618.5 3,715.3 8,439.4 4,440.0 23,557.7 16,59%.7 40,152.4

Ibtal Cmthtimcies 9,316.9 12,402.6 3,716.1 4,393.5 8,927.4 4,58S.6 25,435.6 17,906.5 43,342.17mL wmuicr cxOr 54,385.9 33,267.6 7,332.1 24,945.5 23,714.4 8,996.6 94,985.6 57,656.5 152,642.1

Total Baueline Oot 45,069.0 20,865.0 3,616.0 20,552.0 14,787.0 4,411.0 69,550.0 39,750.0 109,300.0huicul 0mtibgmy 1,216.9 563.4 97.6 678.2 486.0 145.6 1,877.9 1,311.8 3,189.7

Price 0ztizsicy 8,100.0 11,919.2 3,618.5 3,715.3 8,439.4 4,440.0 23,557.7 16,594.7 40,152.4

IUUML PRr (Ol 54,385.9 33,267.6 7,332.1 24,945.5 23,714.4 8,996.6 94.,8.6 57,656.5 152,642.1

Io 0.

BLUM oU AMR== mINr

aoor cnrumT (nr Ra awn= u) U 6 mi1iin

W=L aimE am u1u ac O0rs

YWR 1985 1986 1987 1985 1966 197 L/C /C gm

mme 6 Uquiptt 5.1 2.4 0.4 17.1 12.3 3.7 7.9 33.1 41.0Civil L'WES 7.7 3.6 0.6 0.0 0.0 0.0 11.9 0.0 11.9cua1I tectim ontract 40.4 18.7 3.2 16.9 12.2 3.6 62.3 32.7 9f.0

qinserw 6A &uLinistraticn 36.9 17.1 3.0 7.1 5.1 1.5 57.0 13.7 70.7abA.btal 90.1 41.8 7.2 41.1 29.6 8.8 139.1 79.5 216.6

cntimcies:Physica1 Omtienmcy 2.4 1.1 0.2 1.4 1.0 0.3 3.7 2.7 6.4Price xIbtraircy 2.3 3.8 1.3 1.1 2.7 1.6 7.4 S.4 12.8

Total mt*riencies 4.7 4.9 1.5 2.5 3.7 1.9 11.1 6.1 19.21MUL OMRW.C1ONT 94.8 46.7 8.7 43.6 33.3 10.7 150.2 3.6 237.8

lbtal %elin Cost 90.1 41.6 7.2 41.1 29.6 6.6 139.1 79.5 218.6PhiLI Om,tirtmcy 2.4 1.1 0.2 iA 1.0 0.3 3.7 2.7 6.Price oiitlribmn.y 2.3 3.8 1.3 1.1 2.7 1.6 7.4 SA 12.8

TMAL EUR Oai 94.8 46.7 8.7 43.6 33.3 10.7 150.2 67.6 2)7.8

lift

Ib

o .0b.

ax.wrt UZEBUN osun o AWIW W

WE CV %aRE FmmTIG 11/13/65 FM MR: 1965 EN41FLOL OawX Ua : nL "illin wr MR: 19wEIt aQr in: .uts $ KlliEm UE: 5CO (local awy per nit of fore1si amm )

MAR 1985 196 196IN:IATEM 1ATh1C : 0.35 0.3 0.23nWIATIGN KnZ t-IEflcA: 0.1750 0.525 0.9744

L.o00o 1.3500 1.7550 2.19m

WR 198 196 196nnTIN LATE-11Ua : 0.05 0.075 o0nUVATIUI RzIIMM-KIM: 0.0250 o.6A% 0.1740

.OWO 1.0500 1.126 1.2191

mw m mrwomcsvai

UXXL a 0080 al 0s

WARS 1985 1966 1967 1985 1906 1967OaT 11U4

PlAt & swivmt 0.6481 0.3000 0.0519 0.5170 0.372 0.1110Civil IWb*t 0.64U1 0.3200 0.0519 0.0000 0.0000 O.m000Q.ur1 Egection Otsract 0.6U0 0.3000 0.052 0.5171 0.31 0.11"0kinwri.j b hAdniatrntion 0.6480 0.3000 0.0530 0.5171 0.372 0.1109 w

VUVUIIIL amluuEcT 0.0270 0.0270 0.02,0 0.0330 0.033 0.0330

10.

Iw

- 44 -

ANNEX 4.3Page of 2

TURKEY

ELBISTAN 0 & H ASSISTANCE PROJECT

Major Issues Faced by the Turkish Authorities inEstablishing Appropriate Long-Term Arrangements at Elbistan

Background

1. The Turkish authorities have indicated to the Bank their intention toinvolve the private sector in the operation of Elbistan to provide a permanentsolution to the technical and institutional problems of this project. TheGovernment would seek a lease/joint venture arrangement including TEX and TKIparticipation. Other joint venture partners, including foreign participants,would be selected preferably through a competitive process.

objective

2. The primary objective of a lease joint venture arrangement would beto ensure a smooth and more efficient management and operation of the mine andthe power plant, through technology transfer and effective utilization of theexisting plant and proven coal deposits.

Issues

3. The following issues, among others, will need to be addressed in theprocess of leasing Elbistan to a joint venture:

(i) Legislation. The legislative framework within which theproposed leasing arrangement would be effected.

(ii) Proportional Participation. The level of participation inthe joint venture by TEK and TKI in relation to the domesticand foreign joint venture partners.

(iii) Joint Venture Framework. Selection procedure of privatesector partners (i.e., competitive or non-competitive);Criteria for eligibility (financial responsibility andtechnical know-how); Qualifications, Objectives,Capitalization, Voting Rights, Financing Plan, etc.

(iv) Lessing Conditions. Asset Ownership, Leasehold Coverage(Plant and Equipment, Period, Areas, etc.); Tax LawProvisions; Investment Code Advantages; Operation andMaintenance Standards; Safety and Pollution Regulations;Disposition of Existing TEK and TKI Personnel; Lease (Rent)Payments Due TEK, TKI, etc.

- 45 - ANNEX 4.3Page 2 of 2

(v) Terms and Conditions of Power Supply Contract Between JointVenture and TEg. rrice/Iwh; Supply Schedule tDlDspatch);Reciprocal Penalty Clauses (Take-or-Pay, Supply-or-Pay); etc.

4. Another issue is whether the Joint Venture will include both thepower plant and the mine from the start or whether the takeover will be donein two stages: first, the mine and then the power plant.

December 1985C2729P)

TIpf C


Xloptoontation nflhemtoooo-oiboo station 14 o 340 AN)

~~~~~~~~~~~~~~~~~~~...................... 9)............ ........... 1................ .......... 9 ........ ... .. ....... 1%............ .......... _

---- 3 . -. ta- -- ---- 1955.----- *-- - SCI .5* IU- v wS-Unit (ctivitil 1tO 20 so 99 t9 29 so 99 19 29 31 49 tO 29 39 99 19 2e 31 40

..- . .......... ........ ... ... ... ... ... ... ... ...

I Erectiern ItttttIlIItttII ttIJlIlI I ttltIlIltI Completene MaIcllth t111.

Coamiotlonius Itt ltiJtIIiZI teeCoopletld July 1111.

trial kun Comp1 1ten da OtcoLer I9l.

Eoumnrcial Operation Starltd lJnuary 1185 IlIlIIliI tIl tTtItI ttI ttlIl ZtI ZttItIIIl ulflhltltItil ltlt liIIIlllIlIl

7 Erection lllt ltItlIIlt tltIIttliIlI Comptot loJ bea r IM1.

Oono legn\ illitiliUU lhiu ll toepletel pay Im.

Irill hn l1111Is bi omplstelie InI hIeohwr IMI

toueorcial Opration To dtart Jimvary 18till lIlIIIIt I lltlIllIIlI tII ZII NhIIIIIlIIIN

J Erection tIlIotelclltItItIttltII tI tttttttttII tii il lttttttttttItillIttIIIItItIZIttIttItIllt Iltlt 10lhe t e let hcoer llrS.

r.ene,saieeis Z1111 Cs ho cumplstZ My 1931.

Iritl Run 111T o111 T o te cooleted I rnO 11U.

Loooprc,al Operation To Otvt l Jovvy 19I7 1111111111111111111111111111111

9 fraction to he noplu~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Tod i ovmtel to931.41

frial Rut Ts tI eu l to 1jq het*w M91.

Cameoeril OperatIoa to liNt Jiasar lYE

June 29, 1i95Filen ilUt I'LI

- 47 - ANNEX 4.5

TURKEY


Estimated Disbursement Schedule

Bank Fiscal Year Cumulative Disbursements Disbursementand Semester at End of Semester Profile

(US$ Million) ProiL

1986

June 30, 1986 2.0 2.0

1987

December 31, 1986 4.1 41June 30, 1987 6.2 62

1988

December 31, 1987 8.1 81June 30, 1988 10.0 100


- 48 - ANNEX 4.6

TURKEY


Comparison of Disbursement Profiles

Year From Date of Board Approval1 2 3 4 5 6 7 8

Proposed Loan 37% 79% 100%

Typical PowerProject inEMENA Region /1 3% 18% 42% 65% 82% 93% 99% 100%

/1 Source: Updated disbursement profiles for use in appraisal reports,March 9, 1984.


- 49 -


TUE

TUtIIISH ELECTRItITY AUTIIHORI7Y 1EK)

Statmnt of Incor and Expusu (1991-101

Millions of TL in carrot prices

-Aetual---- * --- -- hru-Estd-1991 1982 1983 1984 1995 1986 1987 1999 I939 I"o3221. c22 3.. S... east 23 2 22= 2232 222M 322

Electricity SalesIGUhi 20,060 22,516 21,291 24,2S6 25,461 29,602 36,266 42,916 46,916 49,292Aerage Tariff(krslkNhl 491 731 1,098 1,692 2,692 3,556 4,566 5,66 6,593 7,358

OPiRATING REVEIUES

Total Electricity Sal" 9B,495 164,611 233,614 410,203 685,47B 1,052,719 1,6U5,963 2,432,686 3,093,097 3,626,660

OPERATINS EXPENSES.Fuelcoal 3,858 5,626 5,770 6,770 14,466 18,906 5,647 22,98B 31,905 44,954Lignite 9,932 12,201 25,297 42,782 75,967 124,067 195,987 285,138 371,148 434,602Gas Dil 9,912 14,044 29,999 9,U2 8,712 11,325 14,156 16,937 19,536 21,489Fuel Oil 21,039 33,860 48,773 64,687 130,5"6 169,735 212,169 251,603 292,794 322,073Natural Gas 0 0 0 0 0 15,015 46,457 73,991 9B,903 97,683

Total Fuel Costs 44,741 65,730 1091,92 124,101 229,710 339,948 474,416 653,698 804,095 920,901Pu'chase Pager 5,819 12,05e 29,137 37,973 55,783 60,906 69,407 75,248 90,891 B,936

Materials 2,339 3,024 5,1-i 5,069 6,319 8,638 12,078 15,980 19,752 20,734Labor I Personnel 7,009 9,89 27,477 35,831 44,65 61,057 95,373 112,253 132,551 146,563Mist. Ee nuse 968 2,149 15,121 15,871 19,794 27,045 37,815 49,721 58,712 64,919Depreitioln 5,635 6,233 17,304 23,384 42,890 64,003 98,722 116,546 148,878 186,36BIndirect Taxes 79 79 268 312 367 422 474 522 561 589Keban Payents 0 80,192 109,462 143,6E8 191,022 212,339 239,244

Total Operating Expnses 66,5B7 S9,171 203,266 242,541 399,508 560,917 767,294 1,023,869 1,24,430 1,424,910322222 32s23 22=32 - -32 2 22 .3-2322 2222zZ2 :32222 32-3= = 2

OPERATIN INCDIE 31,908 65,440 30,348 167,662 295,971 491,802 899,579 1,409,817 1,8,t667 2,201,750

Non-operg 1-cte (Expenusl e 1,7321 11,5211 2,013 5,000 11,5001 11,7251 11,941) 12,1351 12,2951 (2,410)G11S0 INCOME 30,176 63,919 32,361 172,662 294,471 490,077 96,638 1,406,682 1,846,372 2,199,341

Incom Deductions:Total Interest Expense 15,223 38,453 59,724 37,300 42,550 105,897 176,08B 300,977 413,390 538,502les:lntarest During 4,269 16,645 12,995 27,630 25,000 59,244 6,948 165,539 227,364 296,17T

ConstructionNet Interest Expense 10,954 21,908 46,929 9,670 17,55C 47,65 79,240 135,440 184,025 242,326

NET INCOME (pre-tax) 19,222 42,111 114,4681 162,992 246,921 442,423 907,398 1,271,243 1,660,346 1,957,015less:lncome Taxes 9,592 19,181 0 0 65,197 106,768 176,969 322,959 508,497 664,139

=:=_= 2=2==2 223222322 2= _ 22= _-3233=3 -23= U233 2s=2223 3322232

NET INCOME (after taxI 10,640 22,930 (14,468) 162,992 201,724 335,655 630,429 949,293 1,151,849 1,292,976222 22 22232=2= = s--2==== = = r - - 2== 22222222 s2 :2s33

4ilename: income Date: 14-Ray-BS

- 50 -


Tll

TUIS XIECTICIT UIOIIT C7EK2

laance ment (1911-190)

Nili*an Dm TL Is current prics

-ktul - a~~Et- t - ----- h fr K&t- -199 1912 193 1114 195 l1u 1My1 191 11 M9D0

AISETI .* .s _ *- *..= ..-- mE

Long-Urn huetsFlrnd bAts in Btryice 14,101 170,24 50,439 945,44 1,504,814 2,152,454 2,917,333 3,742,459 4,764,15 5,994,737Ins: kcnd eprKciat1 37,"95 45,041 120,00 t9,392 234,272 29,275 34,997 503,543 152,421 938,7"

NIt FLad kanets in Servlce 110,106 125,203 410,431 754,102 1,270,544 1,954,209 2,530,336 3,231,916 4,112,434 5,045,941

Ibrk is Prgrns 203,579 419,701 557,2 790,341 122,597 1,221,207 1,994,391 3,220,293 4,443,116 3,791,495Othr Long-two buts 764 L,429 2,203 3,000 3,525 4,*13 5,729 6,174 7,905 9,695

Total Long-ter, tnwts 34,749 546,3 969,923 1,547,443 2,096,65& 3,079,999 4,530,455 6,46b,003 9,94,054 10,146,a12Curret Ants

Cash in Baks 3,242 5,060 15,242 20,742 24,372 71,613 9,604 107,525 123,654 136,019ikccowts Recuivable 52,921 122,B47 170,67 2g,u419 240,000 317,255 45,h61 59,540 762,U9l 194,245atnrial I Shpplies 12,573 13,H0t 24,727 3,029 41,159 53,505 66,992 e0,259 92,297 101,52

Prpay ts 391 52 444 so0 900 900 900 900 90 00

Total Carrot ksts 69,127 142,290 210,91 264,759 306,430 643,344 411,047 780,523 97,532 1,132,690

Dhmtd lbits 419 444 119 1,000 600 750 975 1,170 1,346 1,490

TUTIL ASETS 434,294 619,047 1,151,792 1,913,202 2,403,696 3,524,125 5,142,477 7,2s5,776 9,544,932 11,910,299=_ .u su3 sim .. mu. mum .. u .U.. i... m..mu ..

CIITAL L LIAIILITIES

Capital unrvsn Surpluscapital 76,370 143,072 219,509 623,509 193,907 542,107 1,090,997 1,379,661 1,401,932 1,943,991

tainmed EarIngs 16,191 33,233 11,765 1B1,757 313,401 719,136 1,349,515 2,297,94 3,449,691 4,7Q,574

Tota Paid-in-Capatal 92,541 176,35 237,274 905,26t 1,077,291 1,561,243 2,440,552 3,476,50 5,051,529 6,50,464s.re 6,975 13,067 23,417 13,000 15,000 15,000 15,000 15,000 15,000 15,000

Oilag £l1ctrnfica i Fund 19,570 19,911 I9,96 17,815 16,925 15,834 L4,U44 13,89I 12,9 11,172Unvallati. buery 54,672 54,6 209,005 3S7,196 357,194 357,19 357,194 357,196 357,14 357,196

Total Capital and Raern 173,779 263,549 417,502 1,193,277 1,466,309 1,94,2n 2,927,592 4,062,59 5,4s,51 6,970,532

Lw9g-tm IdtLuoal tdt 42,936 59,541 6,791 5,124 71,79 94,769 94,552 109,829 116,547 113,77Far.ipn let 112,500 191,955 295,472 420,112 431,112 1,100,826 1,711,611 2,541,144 3,440,91 4,27,534

155,436 240,494 362,253 475,236 702,901 1,194,595 1,96,143 2,677,9n 3,557,409 4,390,307lessahu in I Yur (10,556) 114,1411 (19,499 35,000) 111,0002 (141,5932 1212,0231 (306,0242 (Q25,1051 1310,000Total LUq-twrn hIt 144,810 225,655 342,754 4U,236 421,906 1,053,002 I,45S,240 7,371,14 3,131,604 4,090,307

Current Usbaliti,sIckants Payable 71,915 132,242 202,1 00,000 125,000 132,500 149,04 143,969 176,266 195,090Tom kccrud 11,556 24,194 10,301 12,176 45,000 176,969 221,2L1 215,454 305,272 335,7917 kht dun in I yar 10,554 14, tl 19,499 35,000 91,000 141,593 212,023 306,924 425,905 300,000Gtthr Currnnt Liabilitin 6,642 9,545 5,169 6,000 12,050 13,851 25,590 17,149 11,435 19,357

Total Currnt LaliilItkn 100,719 190,514 317,949 133,974 263,050 464,919 597,07 753,395 9,779 40,235

Other LiabilitinsCertoer Dopositulldvincen 6,617 9,954 21,330 2D,000 30,323 31,939 34,595 36,32 30,141 40,049SRl Inf rcrnlRmnrvns 4,041 4,934 6,239 7,000 11,645 13,403 15,079 16,597 17,931 19,722blirred Credits 2,209 5,059 6,019 7,312 10,440 11,69 14,185 15,763 14,99 20,453

Tatl Other Uabilities 14,917 29,749 33,97 42,12 52,41B 56,930 63,959 49,674 70,962 79,224mum _t 3as_ mm. .. u m. mm. -sam. *...m ... m sm.

TTAL CPITiAL & UAUILITIES 43,294 699,047 1,152,792 1,913,252 2,403,41 3,524,125 5,142,477 7,255,776 9,164,932 11,910,291filmam:uS m . _t. m . __. mu14

Oalmm: balane Oat. 14-NyI

- 51 -


TWO

lUKII I ELECTRICITY RMITYV lEII

burese ad Usn of Funds (191-19901

HIllimns of TL in erent pricne

---- Actual-- -- -Est- --- ----- omcst----- … Total1991 1992 1993 19U4 1935 1916 1917 1991 1989 1990 1995-40 (2)

NIECES IF FUM s a us. s.. us. us u uss msm - sum,

(IL billion)Gras Inc 30,17 63,919 32,341 172,642 284,471 490,077 914,639 1,401,482 1,46,372 2,19,341 7,114 712plnt mprKctation 5,435 6,233 17,304 23,334 42,910 44,003 S1,722 114,546 141,978 134,361 647 42

Urms Internal Cash enwBtmn 35,911 70,152 4,465 196,046 327,352 554,0U0 975,340 1,523,229 12,995,50 2,355,708 7,761 77Zes:t Omt Servtce

frmiscipal Paysnts 3,000 8,313 13,093 90,130 10,321 109,227 141,5 212,023 304,124 425,105 1,276 132Intermst Payments 10,954 21,9Ot 44,99 1,670 17,550 47,654 79,240 135,440 14,025 242,326 709 l2

Total Debt Service 13,954 30,121 59,917 9,900 97,971 154,911 220,1132 347,463 492,B49 648,130 1,994 20S

Nut lntorul Cash soratamn 21,157 40,031 110,5Z2 94,244 229,474 397,129 754,527 1,175,716 1,502,401 1,717,571 5,777 592

Incr in Lg-tero hhbtLouca 12,000 15,605 9,55 7,473 35,000 29,50 25,000 35,000 40,250 44,275 179 22Foreigp 19,000 69,455 125,219 19,440 29s,000 392,090 509,704 434,111 740,799 370,342 3,459 341

Total Borromi 31,000 85,060 134,945 206,113 305,000 411,590 534,704 672,111 31,039 914,417 3,439 362

Equity Contrib.tiuns 39,000 46,702 64,497 345,000 50,000 67,400 97,100 109,474 131,170 150,059 596 4SIncrtmeoerl in Other Liabil. 37,000 13,403 24,153 12,1931 10,415 3,522 5,939 3,925 1,299 7,271 32 02

amo, ua. S.. =z mm- . nsuas usmuss *u-mssnu *35UU 55 3335lf --3*2*5 a530

TOTAL SOURCES IF FUINDS 127,357 205,394 213,273 465,174 595,0Y9 979,901 1,393,049 1,940,374 2,435,907 2,739,524 20,044 1002

135 OF FUS

Thrmal Poer Seneatimn B4,000 129,044 173,719 252,571 279,063 341,191 511,460 707,53 399,792 90,919 3,799 392Tranissimn 41,000 36,955 43,99 77,747 134,023 11,489 193,529 244,901 316,924 365,694 1,465 157than Distributicn 0 2,170 34,494 33,03b 73,438 114,954 152,012 319,103 393,222 424,479 2,479 151Villen I Other 15,000 20,097 20,216 47,542 94,747 130,529 172,572 227V,04 179,75 230,271 1,025 101

Total Capital Epeoditar 140,000 137,971 M,426 410,916 571,270 776,254 1,099,577 2,519,306 1,799,59 2,011,545 7,767 772

Incrilecrl in Other hats 275 492 4,1U 9oP 125 1,239 1,341 1,341 1,207 925 & 02

Jnce Taem 9,512 19,152 0 0 65,197 106,749 174,969 322,959 509,497 444,139 1,945 19t

Incrllcrl in Marking Capital (21,0001 12,647) 163,7971 253,353 (41,503) 14,3$01 105,164 116,749 137,407 122,994 427 42

uu.u uss-nss uss ,=muu oms-sus wusasmas msuuu :u.ususu O m faufss- uMusIsua ago "3TOTAL IESB OF FIENDS 127,957 205,19 213,273 45,176 595,099 179,901 1,313,049 1,960,376 2,435,907 2,799,524 10,044 I100

usu_Ws- sms., u sans usuuug rtnasusu mass sumuus swuuuuu MuaMus unscuZs ,sunE

filnae: saucs Date: 14-Hay-I

- 52 -ANNEX 5 . 1Attachment IPage 1 of 4

TURKEY

ELBISTAN REHABILITATION PROJECT

Assumptions Used in Financial Forecasts

General '..sum1tions

1. Starting in 1983, the financial statements show the situation ofTEK as a consolidated utility selling electricity to customers on both thewholesale and retail level, therefore, including the eignteen newdistribution companies. However, the value of distribution assets in servicehas not been included, because it has not yet been determined by theconcerned authorities.

2. The forecasts were made in Turkish Lira in current orices applyingthe following inflation rates:

1985 1986 1987 L988 L989 L990(2 ) -- ______

Local Inflation 35 30 25 20 15 10

International Inflation 5 7.5 8 8 8 8

The exchange rate prevailing in January 1985 (TL 450 = US$1) was used as abase rate. In order not to understate the TL cost of the foreign componentOf expenditures. however, it was assumed that depreciation of the TurkishLira would occur, equivalent to the differential bet-ween forecast local andinternational inflation rates.

income Statement

3. The forecast for sales of electricity was derived from themiscion's forecasts of capacity available for electricity generation. Giventhe expectation that an electricity deficit will continue, and that TEE willnot be able to meet forecast demand in 1985-1989, the sales forecast was notbased on the demand forecast in Annex 2.L. Available high voLtage supplvwould be sold 50Z to EV industrial customers, and 502 to TEK's distributionenterprises for on-sale at the LV Level. The resulting growth rates ia totalelectricity sales (HV and Li) are as follows:

1985 1986 L987 1;88 1989

3 16 13 L8 9

- 53 -ANNEX 5.1Attachment IPage 2 of 4

4. Tariffs were increased as needed to meet financing requirements,and so as to reach LaMC by L989. The actual average tariffs effective1/1/85 are assumed to be TL L9/kWh on the bulk level, and TL 27/kWh on theretail level, resulting in an average tariff for HV and LV combined of aboutTL 23/kWh. Adjustment of tarif's to reflect any real changes in fuel priceshas not been included in the forecasts, but would be assumed to occurautomacically.

5. The forecast income statements do not reflect the value-added taxof LOZ which was introduced effective January 1, 1985. While TEK's -customers will pay 10Z more for electricity, the VAT is expected to have nonet financial impact on TEK, as TEK will transfer to the Government the netcf value added taxes collected and paid. Similarly, the 3.SZ chargecollected by TEX on behalf of Turkish Radio and Television starting March 1,1985 has been omitted from the forecasts.

6. Fuel expenses were projected by applying che expected price paid byTEK for fuel to the average specific consumption rates and :he number orkilowatt hours to be generated by thermal plants with each tvpe of fuel asshown below.

Earlv L985 Fuel Prices(IL/ton) 3iton

Coal 36,000 80Limnite 6bCO0 13Diesel L75.000 389.uel-Oil 107,000 ^-NaturaL Gas (per '000 m 3 ) 55,000 122

Generation Plan (GW0)

1985 1986 L987 1988 1989 1990

Hydra 2.2262 13,766 17.193 20,503 22j425 Z3,c53

Thermal - Coal 562 5b2 L35 4,9 551 708- Lignite 10,551 13,255 16b751 20.309 22,987 24,470- Gas Oil 131 131 131 131 131 L131- Fuel Oil 4,353 &,358 4,358 !,.358 4,358 4,358- Natural Gas 0 1,050 2.599 3.449 3.600 3.600

Total Thermal 15,602 19,356 23,97& -8.705 31,627 33,S.5

rotal -ross Generation 27,864 33.122 2 1,L167 :9,2O8 z,05' 56.920

- 54 -

ANNEX 5.1Attachment IPage 3 of 4

7. The cost of imDorted power was estimated by applying the early 1985rate of US$.04/kWh, increasing with domestic inflation, to annual importsfrom Bulgaria and the USSR of 2,500 GWh.

8. Depreciation of fixed assets is calculated at 2.5% for hvdro plants,4.0% for thermal plants, and 3.11 for transmission lines and relatedassets. The overall average for TEK is 3.5%.

9. Other exoenses, including material other than fuel, wages andsalaries and miscellaneous expenses. are asswned to increase at the samerate as unit sales growth, plus the local inflation rate. As a result ofthe Power System Operations Assistance Project, a reduction in T-EK'smaintenance and operating costs is expected, resulting in financial savings;however, these benefits would not be apparent until about L990-91.

10. Income taxes are 40% of the net income of previous year. afterdeducting all operating expenses and net interest expense.

II. TEK's payments to the PPF in conjunction with the Kebanrevenue-sharing certificates are included as an operating expense, based onannual generation of the Keban Hvdro Plant of 5647 GWh multiplied bv a priceoer kWh which is 604 of the average wholesale electricity tariff. TEK'spresent obligations to make these pavments cease in L989, but it is !ikelythat TEK will continue these oavments arterward :or addit:onal revenuesharing certificates.

Balance Sheet

12. Additions to work in progress and to fixed assets in service aremade at current prices. Assets in service have not been revalued in the.orecast. because of lack of adequate information on age and composition ofassets. However, asset revaluation. and the corresponding additions to therevaluation reserve, which were included in TEK'5 past audited financials:atements are reflected.

13. Transfers .rom DSI: Hvdroelectric pro,ects, once comDleted bv DSI,are transferred to TEK through a government equity contribution and addeddirectly to fixed assets in service. (The Bank requested under Loan 1844-TUthat the Government consider a change in accounting procedures, such thatthe asset %'aLue of completed hycroelectric power olants transferred from DS:to TEK would be offset by a combination of both eau.ity and the relateddebt. This change in procedures has noc vet occurred, however, and theforecasts assume tne current practices will continue.) The forecast assumes-ransfers of DSI assets valued as 'ollows (in bil'ions of TL):

1985 1986 !.987 L998 1989

20 3i Lbi 178 97

- 55 -ANNEX 5. 1Attachment 1Page 4 of 4

14. The interest rate on new borrowings is estimaced at 301% for localcredits and 9Z for foreign credits, with repayment periods of 3 and 8 years,respectively.

1. Outstanding foreign debt and related debt service have beenrestated in line with the expected devaluation of the Turkish Lira. Thecounterpart of the adjustment to long-ter.n debt has been added towork-in-progress.

Incernal Cash Generation

L5. The calculation of inteEnal cash generation is shown in Annex 5.6:

(a) Treatment of Taxes

Income taxes payable by TEK out of its profits are added back aspart of sector internal cash generacion, according to the definitionsagreed in 1980. Nwo other types of taxes or charges introduced in early1985 - the value added -"AT) and the Turkish Radio and Television(TRT) charge - have not been included in the caiculation of internalcash generaticn. The Bank's understanding is thac both will be passedthrough without having a direct financial impact on TEK. In the case ofthe TRT charge, these funds are specifically earmarked for use outsidethe power subsector. rn the case of the VAAT, information is aot vetavailable to est-mace the net difference between the amount of VATollected by IEK from its customers and the amount paid bv TEK on itspurchases.

(b) Treatment of Debt Ser-vice

For purposes of estimation of subsector internal cash generation,the debt service associated with DSI's investments in hvdroelectricplants has been shown as an indicative amount otvly. (Because theseborrowings .or DS! oroj'ec:s are aggregaced with other public borrowing,and many DSI projects are mulci-purpose, .: has been difFicult toisolate the amounts related to DSI energy investments only.)

Julv 1985(2729P)

- 56 - ANNEX 6.1Page 1ff 2

TURKEY

Turkish Electricity Authority (TEK)


Economic Justification

Least-cost Analysis

1. Without the proposed Project, alternative generating capacity wouldhave to be installed to meet the projected demand. The question is whetherany of the available technical alternatives could do this at lower cost thanthe Project. These technical alternatives comprise combustion turbines,combined cycle plants and steam generating plants utilizing fuel oil, hardcoal, lignite or uranium fuel. None of these could be available on the sametimescale as Elbistan units 3 and 4, which are expected to be in fullcommercial operation at the beginning of 1987 and 1988 respectively. Onlycombustion turbines, with a lead time of about two years, could conceivably beinstalled in time to reduce the energy deficits which would prevail withoutthe two Elbistan units. For combined cycle plant a three to four yearconstruction period would be necessary, for conventional steam plant (fueloil, coal or lignite) five years and for a nuclear power plant about 10years. Adoption of any of these options in preference to the completion ofElbistan 3 and 4 would be justified, therefore, only if they showed sufficienteconomic advantage over the Proiect to offset the costs to the economy interms of unserved demand which their longer completion time would involve.

2. Evaluation of the alternatives showed that none of them would havesuch an economic advantage. The method adopted was to calculate for eachoption, on the basis of its capital, fuel and operating costs, the cost ofgeneration per kWh over a wide range of plant factors (20% to 90%). As shownat Attachment 2, the Project hcs the lowest generation cost per kWhirrespective of the plant factor assumed. This is not surprising, since bothits capital and operating costs (including fuel) are lower than those of anyof the alternatives.

3. To allow for uncertainty, the comparison of the Project with thealternatives was tested for sensitivity to changes in the values of the mainvariables of capital costs and fuel costs. It was found that, even on thehighly improbable hypothesis that all the costs associated with the Project(capital, fuel and 0 & M) were twice as high as currently estimated, while thecosts of all the alternatives were the same as assumed in the base case, theproject would still be the least-cost solution at all plant factors except20%, when it would be fractionally more expensive than combustion turbines (TL38.62/kWh against TL 38.34/kWh).

ANNEX 6.1~ 57 - Page 2 of 2

Rate of Return

4. Having established that the Project is the least-cost means ofmeeting the projected power requirements the next step in the analysis was todetermine whether the Project showed an acceptable rate of return. The costsare the incremental investment and operating costs of completing Elbistanunits 3 and 4, including fuel costs, calculated on the basis of the averageincremental cost of lignite (TL 4.4/kwh).

5. The benefit is taken as the value of bulk sales attributable to theProject. Assuming 10% station use and 3% transmission losses, these amount to3,405 GWh out of the Project's gross annual generation of 3,900 GWh (at 65%plant factor). These sales were valued at the price projected for TEK's bulkconsumers (at 1985 prices, including the TRT tax of 3.5% collected by TEK forTurkish radio and television and V.A.T. at 10), as follows;

1985 1986 1987 1988 1989 1990 onwardsTL/kWh 2.7 28.21 2V:&r 31.10 33.10 36.83

6. The streams of costs and benefits are shown at Attachment 3 andresult in a rate of return on the Project of over 4O0. This high returnreflects the fact that most of the costs associated with Elbistan units 3 and4, and for development of the lignite to supply them, were incurred prior to1985, and are therefore regarded as sunk costs for the purpose of the economicevaluation. Sensitivity tests indicated that, even if the power station costsare increased by 20%, and the lignite mine costs, which are subject to greateruncertainty, by 100l, the rate of return is still 31%.

(2729P)December 1985

4J

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as. a lll,WUSlki

-62--ANNEX 6.1Attachment 1Page 5 of 5

1-0ft-45 2mU DN

A. in*nM 1981 195 195 19W 196 198 1990

Mr; am*im 56,68 25,72 56,777 26,177 2,177 26,177 ,177B 12,259 12,170 12,975 12,975 12,975 12,975 12,975

mmemi l1424 13,802 13,98 13,2 13 13,in 13,m22st_tiam bm I/ 1,632 1,380 1,38 1,320 It 1,320 1,3O0

n kIStin G_im 2S,051 24,492 25,39 21857 237 21,7 24,857

Nm Qmmtiam 0 2,350 7,728 17,018 25,39 30,965 33,474NYdo 0 - 1,004 4,3318 8478 10,39 12,0-1omel 0 2,350 6,724 12,70D 17,89 20,026 21,471tuioM wwku 11 0 235 672 1,90 1,789 2,003 2,147

r NW tim 0 2,11 7,056 15,748 24,58D 28,962 31,3mm 2M QT W 0 507 32,452 40,605 49,437 53,59 56,18

-9arts 2,638 2. 2,50 2,50 2,50 2,50 500-2duml 266 1i5 - - - - -

UL W MUM 2,955 29.277 34,952 40,105 51,37 56,319 58,68

T~. b_om (51) 1,578 1,464 1,748 2,155 2,5 2,816 2,934lOWf wry 5,377 2,83 33,2D5 40,950 49,340 53,503 55,75D

B. sum

-Dizc RV (Ulm 13,906 16,6M 20,475 24,670 5,752 27,895

-Dia.;iam - (W) 13,906 16,6Z 20,475 24,670 25,752 2V,895s1_ bm 21,6 ,05 2,490 3,071 3,700 4,013 4,181Nt ds;iu eim Sol" U,8Z 14,112 17,401 20,969 22,739 23,696

lML Sim 25,727 30,714 37,878 45,639 49,49D 51,568

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~01g -tS eM1@ I IU-Sill Pug fl-itasi eul-aiim sij"811 :lJ'IJUSA i a SWIW% WI* I 02 ISJVIA Ii * *I3'3 PNU1SN3

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ii'ii iii ibm ii's tim is' sm's mt's is's Oi mus *inisuqm ssifla

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lz;aOvd HDxNYJIISSV H 9 0 NylSIRla

- 64

ANNEX 6.1Attacbment 3

1fSB -XM XmBM (TE)

0UMi 0& N A991IZ MOlE?

hte of Debz Anal7.is

6iilims of 7L at J1my 1. 1985 )prim)

Cpital lizid Vhrimble miman Fbel Total Sals NetYmr nto O & M O&M Total 0&N cost costs ReveMie Iae its

1965 35.92D 0 0 35.92) 0 0 35,92D 0 (35.92D)1986 24,608 0 0 24,608 0 0 24,608 0 (24,608)1967 6,311 3.740 1.755 11,8D6 1,106 0 12,912 0 (12,912)1988 0 7,480 3.510 10.990 1.941 6,2)6 19.137 43,571 24,4341989 0 7,48D 3,510 10,990 2,14 8,816 21,951 65,869 43,918190D 0 7.48D 3.510 10.990 2,281 9,821 23,092 81,652 58,5601991 0 7,48D 3.510 10.99D 2,281 15,084 28,355 125,406 97,0511992 0 7,48D 3.510 10.990 2.281 15.084 28.355 125.406 97,0511993 0 7,48D 3,510 10,990 2,281 15,084 28,355 125,406 97,0511994 0 7,480 3.510 10,990 2.281 15,084 28,355 125,406 97,0511995 0 7,40D 3,510 10,99D 2,281 15.084 28,355 125.406 97,051196 0 7,48D 3,510 10.990 2,281 15,084 28,355 125,406 97,0511997 0 7,480 3,510 10,990 2,281 15,084 28,355 125,406 97,0511998 0 7,48D 3,510 10,990 2,281 15,084 28,355 125,406 97,0511999 0 7,48D 3,510 10,990 2,28 15,084 28,355 125,406 97,0512D00 0 7,48D 3,510 10.990 2.281 15,084 28,355 125,406 97,0512001 0 7,48D 3,510 10.990 2,281 15,064 28,355 125.406 97,0512002 0 7.48D 3,510 10.990 2,281 15,084 28,355 125,406 97,0512003 0 7,48D 3,510 10.990 2,281 15,084 28,355 15,406 97,0512004 0 7,480 3,510 10.990 2,28 15,084 28,355 125,406 97,05120D5 0 7,48D 3.510 10,990 2.281 15.084 28,355 125,406 97,0512006 0 7,48D 3.510 10.990 2.281 15,084 28,355 125,406 97.05120D7 0 7,48D 3,510 10.99D 2.,2 15,084 28,355 125,406 97.0512W08 0 7,48D 3.510 10,990 2,281 15.084 28.355 125,406 97,05120D9 0 7,48D 3,510 10,990 2.281 15.064 28,355 125.406 97,0512010 0 7,48D 3.510 10.990 2,281 15,064 28.355 125,406 97.0512D11 0 7,48D 3,510 10.99D 2,281 15,084 28.355 125,406 97,0512D12 0 7.48D 3,510 10.990 2,281 15,084 28,355 125,406 97,0512)13 0 7.48D 3.510 10.99D 2,28 15,084 28,355 15,406 97,0512D14 0 7,48D 3,510 10,990 2,281 15,084 28,355 125,406 97,0512D15 0 7,48D 3,510 10.99D 2,281 15,084 2B,355 1S.406 97,0512116 0 7,48D 3,510 10.990 2.28 15.084 28,355 15,406 97,051

lilm:elbl Rate of r-tW- 45.7

- 65 -


TURKEY


Rate of Return on TEK/DSI 1985-1990 Expansion Program

Introduction

1. The rate of return analysis on page 3 of this annex was carried outon the basis that the project forms an integral part of TEK/DSI's 1985-1990expansion program. The program is estimated to have an economic rate ofreturn of 11.9%, compared to an opportunity cost of capital of 12X. Keyassumptions are presented below.

Benefits

2. Incremental revenues plup net fuel savings derived from investment inimproved efficiency of thermal plants were taken as the benefits of theprogram. Electricity tariffs were assumed to increase at regular intervals toensure an adequate level of self-financing for the power subsector, reflectingthe Government's commitment to reduce public expenditures. Tariffs includetaxes to reflect the prices faced by consumers. 1/ The average revenue (in1985 prices) would be as follows:

1985 1986 1987 1988 1989 1990 & onwardsTLIkWh 30.55 31.04 31.8 3Y735 3373 33.82

New fuel savings were calculated on the basis that investment in improvedefficiency of existing thermal plants (Tuncbilek A a-d B, Anbarli, Seyitomer,Soma B and Yatagan) would increase their average efficiency by one percentagepoint as a minimum and result in an annual net fuel savings of TL 5.9 billionstarting in 1991. Given the fact that these plants would be retired atdifferent dates, net fuel savings would progressively diminish over the entire30-year period considered for the life of the entire program.

1/ This includes VAT (10%) and a television tax (3.5X). VAT presents somedifficulties for economic analysis since for industries (which useelectricity as an intermediate good) a tax rebate will be given. However,since such rebates may take upwards of one year, the "effective price"faced by these consumers is estimated to include VAT. Excluding VAT inthe analysis results in a rate of return of about lOZ.


Capital and Operating Costs

3. The capital costs of TEK/DSI's discussed expansion program were takenfrom the 1985-1990 investment program presented in the Staff Appraisal Reportfor the Fourth TEK Transmission Project (Loan 2586-TU) 1/ and updated toJaniary 1985 prices. Operation and maintenance costs were estimated at IZ ofcumilative capital costs for generation and transmission, and at 2Z fordistribution.

Fuel Costs

4. The incremental generation from thermal plants was taken from theprojected balance of energy and capacity for TEK (Annex 6.1, Attachment 1).The cost of fuel was estimated on the basis of the following assumptions:

(a) specifiz consumption (ton/GWh):

- lignite-fired steam plants: 1,450 (for a lignite with an averagecalorific value of 1,725 kcal/kg);

- coal-fired steam plants: 700 (for a coal with an averagecalorific value of 4,200 kcal/kg);

- gas-fired combustion turbines: 302;- gas-fired combined cycle plants: 226.

(b) Economic cost of fuels (US$/ton):

- lignite: 20(equal to the weighted average long-run marginalcost of lignite in Turkey);

- coal: 60 (equal to the estimated CIF price of imported coal);- natural gas: 180 (equal to 9O0 of the border price of fuel oil).

5. All benefits and costs were expressed in January 1985 prices, with anexchange rate of TL 450/US$. The life of the program was taken at 30 years.

1/ Report 5571-TU, May 20, 1985.C272 9P)

ELRISTAN7 - 0 A. M ASSTSTANCE PROJECT"to of twacn TllNI 1965-1990 Taesn Vcpm

(milli1 of IL)

cfIts- - - --- ---- ------ .cSates Fiel obtal -c-- ital ant - -m mtIS ml at a- Ue1 Total a

Tear 8Fwiw -aviqp dits Ceaticn Trima.ls Distributim HisI. O*im TXisaic Distrlhbmtim Co on" v ka

IM6 37,302 0 37,302 448,824 101,563 96,125 49,ao0 4,48 1,016 1,963 23,488 726,468 (691,166)1966 192.593 0 192,696 SSS,54 140,3Q0 118,750 59,091 10,064 2,419 2,169 85,637 914,037 (7an,31)191 426,433 0 426,4 506.115 127,309 143,.70 64,M 15,105 3,693 3,606 151.996 1,016,345 (50,912)1966 697,178 0 697,178 505.441 142,168 181,250 48,290 20,159 5.114 5,419 217,548 1,125,389 (425211)1989 833,466 0 833,466 463,553 185,764 225,000 51.135 24,798 6,912 7,669 259,YA 1,234,430 (3M0,964)1990 916,319 0 916,319 489,048 196,008 237,375 53,948 29,685 8,932 10,043 27,331 1,332366 (386,609)1991 916.319 5,393 922,212 0 0 0 0 29,685 8,932 10.063 277.331 325,991 s50,m1992 916,319 5,893 922,212 0 0 0 0 29,685 8.932 10.043 217.331 325.991 Sf6,2221993 916,319 5,893 922.212 0 0 0 0 29,63S 8,932 10,043 277,331 325,991 5s6,m199. 916,319 5.893 922.212 0 0 0 0 29,685 8,932 10,043 27,331 325,991 596,222 2199S 916,319 5,893 922,212 0 0 0 0 29,685 8.932 10,043 27?.331 32S.991 S*6,1996 916,319 5,893 922,212 0 0 0 0 29.685 8,932 10,043 211.331 32S,991 56,221991 916,319 5,736 922,056 0 0 0 0 29,685 8.932 10.043 27.331 325,991 S36,0651999 916,319 5,.36 922,056 0 0 0 0 29,655 8.932 10,043 2W,331 325.99l 596,0651999 916,319 5,736 922,056 0 0 0 0 29,685 8,932 10,043 27,331 325,991 596,0652000 916,319 5.736 922.056 0 0 0 0 29,685 8,932 10,043 V1,331 325,991 596,0652001 916,319 3,367 919,687 0 0 0 0 29,685 8,932 10,043 277,331 32S.991 93,6%2002 916,319 3,367 919,68 0 0 0 0 29,685 6.932 10.043 277.331 325,991 53,6962003 916,319 3.367 919.687 0 0 0 0 29,655 8,932 10.043 217,331 325,991 M3.6962004 916,319 3,367 919,687 0 0 0 0 29,685 8,932 10.043 217,331 325,991 S39,6962005 916,319 3,367 919,687 0 0 0 0 29.685 8,932 10.043 277,331 325,991 593,M62006 916,319 2,247 918,567 0 0 0 0 29,685 8,932 10,043 Vm,331 325,991 592,576 . _

2007 916,319 2,247 918,567 0 0 0 0 29,685 8,932 10.04' 271.331 325,991 592.5762008 916,319 2,247 918.,67 0 0 0 0 29,685 8,932 10,043 27,331 32S,991 592.SJ6

09 916,319 2,247 918,567 0 0 0 0 29,655 8,932 10,043 277,331 325,991 59Z.576 W2010 916,319 2,247 918,567 0 0 0 0 29.685 8,932 10.043 2W.331 325.991 592,576 02011 916,319 1,5M 917,865 0 0 0 0 29,605 8.932 10.043 27,331 325.991 591,D8 52D12 916,319 1,546 917,865 0 0 0 0 29,685 8,932 10,043 2J7,331 325.,9l 591,0852013 916,319 1,S46 917,865 0 0 0 0 29.685 8,932 10,043 277,331 325,991 591,8S2014 916,319 1,546 917,865 0 0 0 0 29,685 8,932 10.043 27,331 325.991 591.885

Flenme:rcrtek4 la"e of Tatuz ()s 11.917-Oct45-

,1'

- 68 -

TUIRKY------ ANNEX 6.3

TUZEISE RLKCTRICITY AUTIOIITY (TIE)


late of leturn es Original ilbietas Project(Poe-r Station &ad Liguite Niue)

(uillioess of TS at Jas-ary 1, 1985 prices)

----eese......Costs --- e--------- -- lesfit.----Power Lignite Trams- Total Sa1es not

Year statios size misuijo Costs levemue Benefits____ ------- ------- ------- ----- ------- --------

1973 3,942 1,350 0 5.292 0 (5,292)1974 29,759 4.350 0 34.109 0 (34.109)1975 23,079 14.700 0 37.779 0 (37,779)1976 65,967 15,450 50 82,467 0 (82,47)1977 136.724 13,050 200 149,974 0 (149,974)1976 163.933 51,150 1,000 215,083 0 (215,083)1979 275.456 62.650 1.250 339,356 0 (339.356)1980 1665.70 56.500 1,700 225,070 0 (225,070)1961 137,737 62,950 4,100 204,787 0 (204,787)1982 126.557 35;500 3.242 156,299 0 (165,299)1963 94,060 15.650 3.528 113.238 0 (113.235)1984 45,415 11.800 3.500 51,715 0 (61,715)1965 41,415 41,500 2.438 85,353 45,733 (39.620)19:6 35.596 43,600 2.521 61.719 95,027 14,3061ts7 22,796 37.550 2.018 62,364 151.240 66,676196U 21.960 41.400 2.63? 6.017 211.729 145,7121939 21.980 35.350 3.339 50.669 225.345 164.6761990 21.,90 34.350 3,652 59,992 250.739 190,7471991 21,980 35,750 4,552 52,292 250,739 186,4471992 21,980 31.700 4,552 !3.242 250.739 192,4971993 21.980 31,200 4,562 57,742 250,739 192.9971994 21.,90 286,00 4,552 55, 42 250,739 195.3971995 21,980 34,150 4,562 60..'. 250,739 190.0471996 21,980 30,400 4,562 56 942 250,739 193,7971997 21,980 32,250 4,562 56,792 250,739 191,9471998 21,980 35,850 4,562 62,392 250,739 186,3471999 21.960 36,450 4,562 62,992 250,739 187,7472000 21,9J0 37.800 4,552 64,342 250,739 186,3972001 21,980 31,800 4,552 58,342 250,739 192,3972002 21.980 34,150 4,562 60.692 250,739 190,0472003 21,960 30,300 4,552 56,642 250,739 193,6972004 21,980 32,100 4,552 58,542 250,739 192,0972005 21.980 34.500 4,562 51.042 250,739 169.6972006 21.980 31.700 4,562 58,242 250,739 192,4972007 21.960 31.200 4,562 57.742 250,739 192.9972008 21.960 28.800 4,562 55,342 250,739 195,3972009 21,960 34,150 4,552 60,592 250,739 190,0472010 21,980 30,300 4,562 55.,42 230,739 193,6972011 21.980 28,600 4,562 55,342 250.739 195.3972012 21.960 286,00 4,552 55,342 250,73 195.3972013 21.980 28,800 4,562 55,342 250,739 195.3972014 21.980 2.800 4.562 55,342 230,739 195.397

Filesame: *11 late of returu(C): 5.917-Oct-85

- 69 -

ANNEX 7.1

TURKEY


Selected Reports and Data Available in the Project File

A. Selected Reports and Studies Related to the Project

A.1 "A Management and Organization Review of TKI's Afsin-Elbistan LigniteEstablishment", Hill & Associates, Inc., November 1982.

A.2 Report on "Kislakoy Lignite Nine Component, Coal Quality Review",Northwest Resource Consultants LCd., December 1982.

A.3 Reports on Kislakoy/Elbistan Lignite Open-Cut Mine by H.C.G. Rodgers,July 1984 and January 1985.

A.4 Reports on Kislakoy Mine Component by D. Bateman, May 1984, January1985 and May 1985.

A.5 Report on Progress of the Afsin-Elbistan Opencast Lignite MiningProject, Maras State, Turkey, KfW/MINROH, May 1985.

A.6 "Progress Report of Lignite Mine Elbistan and TKI/AEL", KfW/OttoGold, May 1985.

B. Selected Working Papers

B.1 Working Papers for Economic Re-evaluation of Elbistan Thermal PowerProject, May-June 1985.

B.2 Working Papers for Economic Evaluation and Project Cost Estimates,Elbistan Rehabilitation Project, May-June 1985.


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;-~~~~~~~~~~~~~~~~ ~ ~ ~~~ m In operotion 0 In operoticnl

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0 1 2cr 233 million tons

Bolfkol KILOMETERS

<A:9 5.27:1

Documents

World Bank Documentdocuments.worldbank.org/curated/en/492061468309568437/pdf/multi... · Docume;.t of The World Bank FOR OFFICIAL USE ONLY At 2Gs s-u Report No. 5774-TU TURKEY ELBI