RESTRICTED Report No

RESTRICTED Report No. TO-398c Public Disclosure Authorized

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 They do not accept responsibility for its accuracyor completeness.The report may not be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized

APPRAISAL OF

THE KAINJI MULTIPURPOSE PROJECT

THE NIGER DAMS AUTHORITY

Public Disclosure Authorized NIGERIA

June 3, 1964 Public Disclosure Authorized

Department of Technical Operations CURRENCY EQUIVALENTS

One 6N = U.S. $2.80 = 1 E Sterling = 1, 743 Lire = 10. 1 Guilders NIGERIA

APPRAISAL OF THE KA.INJI MULTIPURPOSEPROJ7CT

TTHENIGETR DAMS AUTHCRTTY

TALE OF CONTENTS

Page No. SUM!4ARY

I. INTRODUCT-ON 1

II. BACIGROUND 1

III. THE BORROWER 2

IV. THE PROJECT 3

V. POWERASPECTS 9

VI, TRANSPORTATION 12

VII. AGRICULTUNEANID FISHERIES 13

VIII. ECONOTI,ECEVALUATIOiON 14

IX. FINANCIAL ASPECTS 16

X. CONCLUSIO:IS 22

ANITEXES

1. Estimated Foreign and Local Costs of the Project 2. Economic Evaluation 3. Assumed !Amounts and Terms of Project Loans 4. Kainji Project - Forecast Income Statements 5. Kainji Project - Forecast Sources and Applications of Funds Statements 6. Kainji Project - Forecast Balance Sheet's 7. Forecast Consolidated Income Statements 8. Forecast Consolidated Sources and Applications of Funds Statements 9. Forecast Consolidated Balance Sheets 10. Assumptions for Financial Projections

MAP 1 - Niger River Dasin MAP 2 - Electricit-y Undertakings NIGERIA

APPRAISAL OF THE KAINJI IiULTIPURPOSEPROJECT

TIlE NIGER DA1ISAUTHORITY

MI%ARY i. The Government of Nigeria has applied to the Bank for a loan to finance part of the foreign exchange costs of the Kainji Project. This Project is the first stage of a multipurposedevelopment scheme on the Niger River. It consists of: a dam; a power station with an initial capacity of 320 14Wdl;a system of locks and canals to accommodateriver transportation; and a transmissionsystem which would be connectedwith facilities of the Electricity Corporationof Nigeria (ECN), thus forming a national grid. ii. The borrower would be the Niger Dans Authority (NDA), a statutory governmentalcorporation created by the Niger Dams Act of September13, 1962 and presently in the process of organization. iii. The estimated total cost of the Project excluding iworkingcapital but including capitalizedinterest during constructionis equivalent to US$207.8 million (tN74.2 million). The foreign exchange component is estimated to be US$ 134.6 million equivalent. The funds required by NDA for the Project during the constructionperiod, includingworking capital and interest paid, total EN 69.8 million of which the Government would provide fI 24.! million. The balance of EN 45.4 million equivalent will consist of loans from the Bank and foreign governments. The Government wzillalso be required to provide an estimated EN 100,000 equivalent of interest on the U.S.-AID loan during the constructionperiod. iv. The only imnediate, substantialbenefit from the Project would be power. However, under proper development and management, additional benefits should materialize in the areas of agriculture,fisheries and navigation. v. The Project is well planned and would meet the forecast powTergrowith in Nigeria. It is expected that the Project uill be completed by the end of 1968. Additional generatingunits wjillbe installedperiodically during the subsequent twelve years thereby increasing the total capacity to 960 14vWby 1981. This additional power %ould be sufficient to meet the expected load requirementsthroughout this period. vi. The organizationand operation of the power sector upon the completion of the Project is being consideredby the Government. Regardless uf the ultimate arrangement,rates will be set so as to produce a minimum annual return of 8% on the net fixed assets of the sector. vii. NDA would be a suitable borrower for a Bank loan of US$82 million with a term of 35 years including a grace period of 5 years. A condition of effectivenessof the Bank loan is that agreements shall have been completed for a minimum of USjp45million equivalent in other foreign loans. NIGERIA

APPRAISAL OF ThE KAINJT WMJLTTPUT?OSEPROJECT

THE 1'NIGERDAMS AUTHORITY

I. INTRODUCTION

1. The Goverunent of Nigeria has decided to corstruct, a multipurpose dam on the Niger River at Kainji (see Map 1) and has asked the Bank to assist in financing part of the foreign exchange cost. The est-.ratedcost of the first stage of the developmcnt is equivalent to US$207.8 million,of which the foreign currency comoonentwould be US$13h.6 million equivalent.

2. The Project as presented to the Dankc iwould con,sist of a dan across Kainji Island 260 miles north of Lagos and about 600 miles above the mouth of the Niger; a hydroelectric plant tith 320 NW of installed capacity; high voltage transmission li-nes to Oshogbo and Kaduna -.hich -would connect with the facilities of the Electricity Coipoiation of Nigeria (ECN); a two stage navigation locks system at the dara; a canal with loc.cs at ATurli, 11 miles below the da1; river ohannel excavation between Kainji _and Jebba; relocation of eidst ng roads; and protection or resettlementof emisting tow-ins.

3. Planning and design of tlheProject has 'seendone by Balfour, Beatty & Company Ltd. and the Netherlands EngineeringConsultants (NEDECO) as Joint Consultants. The Project wRillbe carried out by the recently created -liger Dams Authority CIDA). Constructionof the Project has commenced. A contract for the constructionof an all -eather access road from the town of 7'arato the Kainji site and the erection of tuo ',emporarybridges over the Niger River was a Jarded to Sir Lindsay Parlcinson C Co. Ltd. in April 1963. Follol- ing international competitive bidding, a ]etter of intent was issued to Impregilo in February 1954 for the main civil works ccntract.

4. This report presents an appraisal of the proposed Project. It is based on: information contained in a comprehensivereport prepared by the Joint Consultantsin 1561 which concluded a feasibility studlypartially financed by the United Nations Special Furd; two reports prepared by Cooper Brothers and Company in 1962; market surveys prepared by Merz & McLeellanin 1959 and 1962; data obtained from Stone & Webster vho were retained by the Bank as Consultants;and field visits to Nigeria 'byBank missions in 1902 and 1963.

II. BACKGROUND

5. In the past decade several studies of the INigerRiver and its tributaries have been performed by specialized organizations. The first of these wa,s a hydrological investigation of the Niger and Beniue Rivers conducted by IZEDECOin 1953, particularly to determinie means of improving navigation. In March nf 1958 ECN commissioned Balfour, Beatty & Co. Ltd. to determine the hydroelrctric potential of the Jebba site on the Niger. Soon after Balf our, Deatty had been retained, discussions were hold betwecn EC14 and the Federal Government, as a result of which it was agreed that a com- prehensiveinvestigation of the Niger should be carrI.edout by Balfour, I3eatty and NEDECO, as Joint Consultants. At about t;-eCame time, acting on - 2 -

the suggestion of the Northern Region Government,ECIH commissioned Sir Alex- ander Gibb and Partners to investigatetie hydroelectricpossibilities of the7ShiroroGorge site on the Kaduna River. In 1960, the Stanford Research Institute undertook an economic analysis of Nigerian transport, including river transport on the lNiger,in order to assist the Government in providing an orderly developmentand coordinationof all modes of transport:rail, road, water and air.

6. A wzorkingparty of officials representingthe Federal Government, the Regional Governments,and ECINwas set up early in 1959 to study the Joint Consultants'report and the Gibb's report. In June 1959, a unamimous recommendation was made for a long range hydro development programl- which would utilize the iKur-iasa site on the !1iger River (near Kainji) as the first step. The iligerian working party also recorzmended, and the National Econo- mic Council concurred, that the Joint Consultantsproceed with the next stages of the investigations.

7. In December 1959, the United Nations Special Fund approved a grent of US41700000 eouivalent to the Government of Nigeria to conduct additional envineering investigationsof the Niger River which vwouldprovide the information necessary to determine the desirabilityof the constructionof a multipurPosedam on the Niger. The Bank acted as Executing Agency and the sar.eJoint Consultantswere retained to carry out the study. The study was completed in June 1961 with a report which concluded that the most economic method of producing the future pO?er requirementsof Nigeria was the development of the hydroelectric potential of the NIiger River and reco-miended that a site across Kainji Island be developed immediately by the construction of a daii- including navigation locks and a hydroelectricstation with an ini.tiil installation of four 70 N1Wunits (since changed to 80 NW'units).

8. A Bank re-ort on the "EcononU of Nigeria" completed in October 1961 conclulded from a preliminary analysis that the Kainji Project was sufficient- ly attractive to warrant a formal appraisal if it was requested. A ligerian Governm-rent delegation to the Bank at that time asked for assistance in financ.ing the Project and in July 1962 a Bank mission visited N\igeria to make the appraisal. The Bank mission was assisted by two consultantsfrom Stone ant 7ebster who investigatedalternative means of power generation.

9. In January/February1963 a second Bank mission to Nigeria arpraised the exp;l.Jicn progra.a of ECHTand concluded in Report No. TO 380a "Arpraisal of the Tlr..m-ission Project" that ECN's transmission lines would be suitable

for a Uk loan of US%$3O.0million equivalent. The transmissionproject would forr, the nucleus of a national grid as a prerequisite for the Kainji Projiect Loan 372 UNI was signed on liarch 12, 1964.

III. THE BO.RROIER

10, The Niger Dams A.uthority,the borrower, was created by Act Mot.23 Or 2eptelaber 13, 1962 of the Legislature of the Federation of NTigeria. The '.u-lahol-itywas estabAished as a corporate botr of five menmbers to be ap- pointed NJ the Prime 1-iinisterfor such periods and on such terms as he spect- fies. The Chairman is to be a person with outstanding ability in the crgani- zation and. management of comrparable projects. One of the inerlbers is to be -3.-

an engineer experienced in the construction and maintenance of dams and the generation of electricityr. Another mernber is to be qualified in the fields of finance and managemnent. The present view of the Governmenti is that these three men would be expatriates and that the remaining, tw-Tomembers would be Iligeriar±s.

11. hir. Jasper T. Ings, a Canadia,n engineer with extensive ex.Jerience, has been arpointed Chairman of the Atuthorituyand has already taken up re- sidence in Lagos. On September 1, 1963, the Prime Minister anprointedtwo Nigerians,hir. S.0. Wey and Ai.haji AhL11aduDanbaba to the Authority; and in liarch1964 Ihr.Gordon iilillows,also a Ca;nadian, was appoirnteda herber and Chief En-ineer. At present, the appointment of a financiaa men,oer tc the Authority is necessary to help com.rletethe financing arrangements as discussed later in Cl.apter IX and to assume the financial nanagemrnnt of the iJuthority. Tihe Bank bas beern helning to find a suitable candic 1ate for this position and tne Authority nowi has thrae prospects under active consideration. 12. The Auth-ority'sprincipal functions are to construict,ooerate, and maintainthe KainjiDan and a,ssocia'-edworks; to acouireand maintainsluch generating stations of EC5Jas shall be eareedu-won betw!een the tuo organizations; to construct,operate, and maintain transmissionlines; to suFply electricit-in bulk to BCNT;and to orenare schYemes for additiontl dev7elor- ments on the iger River and its tributaries.The IDTAcan borro-wimoney, in-- cur expenditure, or dispose of rropert:rbut only with the geeneralor srecial approval of the Prime !hinister. The Prime ihinister must also approve the pcr'ice of electricit7r sales of the Authori-k or any charges for tl-he uGse of its facilil,ies or services. 13. The Act also providesfor an AdvisoryirCouncil of up uo twelvemen- bers, four of whom are to be arpointedby the Primeilinister; one each by the RegionalGoverners; one by tlheilinister of mlinesand Po,fer;and fouirex- officiomembers includ'ing thle Chairman of 11DA,the GeneralAIanager of ECIPH, the Director of thc Inland Waterways Department, and the Chairman of the Niger Delta Development Boarzd, The Couancil would advise the 1-rime hinister on new river development projects, the terms of INPA'selectricity sales to EC1N,the regl'lation of navigation, and the operation of irrigation schemes.

14. At the present time, NDA has no staff except the Secretary. As soon as nossible it will have to engag:e construction and accounting persorrel but it il-1l1 have no need for operating personnel for at least the next four years. The Authority plans to make arrargerents for recruiting and training sufficientlyin advanceof startupso that fully trainedstaff to o,er--te the power stationand tihenavigatio.n locks will be on duty by 1968. IV. TIIEIROJVCT

15. The Project would comprise the followringa, major eleinents:

(i) 'he main dam iw,hich hao a concrete gravity center section 1,600 feet long across Kainji Island connected to eartif.ill e,xibankments on each end. The center portion consists of an intake section with the po-erhorse isrnedi- atoly dc-nstream, and a spillway section which dischaqrg..es into tlhe left - 4 -

channel of the river. The spillway would be controlled by four 50 foot by 50 foot tainter gates. The maxiimumheight of the main dam would be about 215 feet above the founidationlevel, and the crest length about 14,000 feet,

(ii) The power station at the toe of the dam would contain four generators driven by Kaplan type turbines. Nominal rating of-the generating units would be 30 MW at a head of 97 feet. The initial civil works would also provide the foundationsfor the ultimate installationof eight additional units.

(iii) An earthfill saddle dam on the left bank about 14,500 feet long with a maximum height of about 50 feet. The extreme left end of the saddle dam would contain an emergency spillway consisting of a breaching channel which would erode in the event of water exceeding the maximum storage level.

(iv) A two-stage navigationlock and canal system on the left bank. Eazh lock, as presently designed (see paragraph 49), would be 40 feet aide by 650 feet long. The upper lock would have a normal lift of 80 feet and the lower lock would have a normal lift of 42 feet. At Kpatachi, 4 miles below Kainji, the river bed would require excavation to improve the channel; and at Awuru, 11 miles downstream of the dam, a series of rapids would be by-passed by a canal and lock on the right bank of the river.

(v) A swTitchyardlocated on Hainji Island downstream of the power house and a 330 kv transmissionline to Jebba and thence branching to Oshcgbo and Kaduna where conrmectionwould be made to ECN's facilities.

(vi) A construction camp which would provide temporary quarters for constructionpersonnel and permanent quarters for the operators of the hydro station. The camp will contain a hospital, school, residentialclub, shops, fire station, police stations, post office, recreationalfacilities, and will be provided with water supply, sewage treatment, and electric.l distributionsystems. The Project will also include the constructionof an airstrip and control facilities.

16. The total volume of concrete to be placed in the dam, powjerhouse, and locks -ill exceed 860,000 cubic meters; the volume of excavationwill be about 7,300,0C0 cubic meters; and the total amount of fill to be placed in the earthfill embanIloentswill be about 6,900,000 cubic meters.

17. The creation of the reservoir will lead to the displacement of some 140,000 persons and will result in the towm of Bussa being totally sub- merged. The township of New Bussa will be constructed adjacent to the construction camp as part of the Froject. All of the facilities constructed for the camp will be available for the relocated inhabitants of the new tolwn.

Geolo7,y

18. The rock at the Kainji site consists of a complex series of crys- talline igneous and metamorphic rocks of the pre-cambrian age comprising gneiss, granodiorite, and lauco-amphibolite all of which are extrenel2rhard, The sub-surface exploration involved extensive diamond drilling during the -- 5--

period from November 1959 until l'arch1961, and frorrL October 1261 to Janua-y 1962. Altogether 147 vertical arnd inclined borehoaes wTere drilled with an aggregate total length of some 14,600 feet. The seismaic method and electrical resistivity meth,od of geophysical in-vestigation were also enployed to locate the depth of bedrock.

19. The nest irportant features disclosed by the exploration program were the great depths of alluvium in many stretches of the river and the preserce of two faults, one in each channel At the damsite where the river is divided into two channels, bedrock was found between 20 and 80 feet below low waterlevel and at some points wvTascovered by up to 30 feet of sand. The two faults consist of soft zcnes containing clay gouge and broken rock and vary from about 10 feet to 70 feet in thickness. The fault zone in the right channel is considerably vider than that in the left channel and for this reason the fill darm has beon located in the right channel with the concrete spillway in the left. Precise planning for the treatment of the faults carnot be made until the bedrcck is exposed, but both of the faults will have to be excavated to some extent and filled with concrete. The main civi'l works' contract provides for this work.

Hydrology

20. The .iger River rises in the Fouta Djallon mountain rarne wThere Guinea borders Sierra Leone and Liberia (see map 1). From there it flows rortheasterlyto the center of the plains in I'aliard then turns to the southeast w?here it flows through N±1'4gerand Nigeria. 6ome 2,500 miles from its source it forms a delta and empties into the Atlantic. The climate in the Niger Basin is deterrianed by the annual cycle of two air masses. Humid ocean air wThich is the main source of rainfall roves in from the south during the first half of the year and dry air from the Sahara Desert raoves from the north in the latter part of the year. In the upper part of the basin tihe rean annual rainfall is as low as 10 inches; in the area between l,Jiamey and Kainji the average is about 38 Inches, varying during the last twenty-five years from 32 inches to 143 inches.

21. The run-off fror,c the rains in the Fouta Djallon Highlands travels about 1,7CO miles before reaching tlieINigerian border six months later. On its way the flow passes th;ough the swarqp area southwest cf Timbuctu, where it loses some 65 percent of its iTaterby evaporationand infiltration. Be- cause of the retarding effcct of the lakes and the long distance between the upper reaches and the 4lige:ian border, the size of the Niger discharge in NIigeria during ?iarch can b- forecast from the size of the upstream flow in the preceding No,rember. Tl'lewater fromn the upper catchment area is corripara- tively clean when it reac'-hes Nigeria, having deposited its silt in the swampy areas, and for tniis reason is called by the local inhabitants, the Black Flood. The second drairag,- area cortributing to the run-off starts downstreem of Niamey, where tributari cs in Dahomey f'ow north into t he Nijer. Tn Higaria, the Sokoto River and the oi,,hertributaries contribute to a local flood. T3is local flood is more milkv -'-lanthe clean black Flood ard is called the T,hiLte Flood. The tvo floods on W,ieNiger are always separated by a time interval ot 5 to 6 months. - 6 -

22. Dischargesat Jebba (about 65 miles below Kainji) calculatedfrom reliable observed waterlevels are available only since 1954. At Kainji no waterlevelswere read before 1959, but based upon the Jebba discharges and estimates of the lateral inflowfbetween the two roints ten rears of record are now available. The Joint Consultantshave constructedhydrographs at Jebba for the years 1941 through 1953 based upon rainfall records. Al- though these hydrographs have only a limited value they indicate that during that period both the maximum and minirnum flows were less than during the past ten years. The river flow is very regular as regards its timing. From Decembserto March the flow (BlackFlood) is generally between 1,700 and 2,000 cubic meters per second; the flo-isin the months of llayand June are always the least, as low as 500 cubic meters per second; and the peak flow (WA.hiteFlood) occurs close to the end of September almost every -ear. The maximum flow of record at Kainji is 6,500 cubic meters per second.

Reservoir

23. The reservoir is intended to serve the multiple purposes of ener- production, navigation and flood control. Because of the regular pattern of run-off it will be possible for the reservoir to meet the power reouirements and at the same time to provide dowmstreamflood protection. The reservoir has a gross storage of 15 billion cubic meters and a useable storage of about 11.5 billion. These figures compare with the average annual run-off at Kainji of about 62 billion. At the maximum storage level the reservoir has a length of 85 miles, covers an area of approximately500 square miles, and almost completely inundates Foge Island.

24. The dam has been designed to discharge a total of 13,580 cubic meters per second over the main and emergency spillways and throueh the turbines. Due to the regulating effect of the reservoir, a discharge of this magnitude is equivalentto an infloTwflood of about 16,300 cubic meters rer second. The maximum flood which could be safely bypassed is therefore so.;ne two end one-half times the maximum recorded flood; because of the regular regimte of the Higer this capacity is considered sufficiert.

25. The Joint Consultantshave performed tests on sediment and evanora- tion which indicate thet neither will cause serious problems. The total annual silt transport at Kainji is of the order of magnitude of 6 million cubic reters. Even if all the silt were to settle in the reservoir the annulla depletion in gross storage wsouldbe less than 0.05%, or about 51 in one hun- dred years. hvaporationfrom the surface of the reservoir is expected to average abouit 63 inches per year w1hich is equivalent to a loss of inrflow of about 60 cubic meters per second or about 3% of the average floi-w.

Status of Engineering

26. The final design of the Project is being carried out by the Joint Consultants (Balfour,Beatty and NEDECO) under a contract wUiththe -ligerian Government signed on April 13, 1963. The contract provides for the design and supervisionof constructionof the works, except the transmissionfacilities which are needed to connect the project with ECNUs substationsat Oshogho and Kaduna. N4a is currently consideringproposals from electrical engineering consultants to perform this work and expects to com-flete con- tractual arrangements writh the selected engineers by the end of 196L. 27. In preparing the final design of the civil works, the Joint Con- sultants have utilized the services of expert advisers to analyze the geolog1cal findings and to review the plans for the eartlfill embankment sections. liydraulic model studies of the river, the spillway and the intake -were conducted at TIallingford in England and at the de Voorst Lab- oratory at Delft in the Netherlands. Structural model studies of the irntakeswere carried out at the Imperial College, London.

ConstructionSchedule and ProcurementProcedures

28. The Project iwTouldbe constructedin steges during the next five years by initially diverting the river flow into the right channel and sub- sequently into the left. The present target date for completion of the Project is December 1968. In order to meet it several intermediatedates are critical;the most important deadline is the completion of the left channel coffer dam before the %hite Flood in the summer of 1964. Other key dates are the completion of the first stage powerhouse concretingby December 1966, the completionof the right channel coffer dam by August 1967, and the completionof the spillway and right fill dam by August 1968. The five-year constructionschedule appears reasonable and progress to date is satisfactory.

29. Prequalificationof prospective bidders for the main civil w.orks contract was completed in May 1963 and the tender documentswere released on June 29, 1963. The bids for this contract, which includes the construction camp and a connecting road to the railhead at HIoka, were opened on October 31, 1963 in Lagos. Of the thirteen prequialifiedfirms, five consor- tia submitted tenders. The maxirnum spread in the tenders was 15% and the difference between the two lowest was only 1.0%. After an analysis of the tenders by the Joint Consultants,NDA awarded the contract to Impregilo. A similar bidding procedure has been followed for the electrical and mechanical equipment and these contracts are expected to be awarded in the next few months.

Cost Estimates

30. A cost estimate of the Project was prepared by the Joint Consultants. At the Bank's suggestion, the Government in 1962 engaged Cooper Bros. to examine the estimate and to perform an independentreview. The Cooper Bros. review resulted in an increase of the original estimate of about 151. Ihen the tenders for the main civil wv1orkscontract were opened, it was found that even the increased estimate was too low. The present cost estimate, based on actual tender prices for most of the large contracts and giving the required disbursement by years, is sho-vm in Annex 1. It is sumrarized below: - 8 -

Total Local Foreign Equivalent Cost Cost' Cost Foreign Cost LIT million EN million EN millior US$ million

Civil] -works 35,33 11.69 23.64 66.19 Electrical & mechanical equipmentv 6.82 0.43 6.39 17.89 Transmission 8.78 2.65 6.13 17.16 Resettlementand reservoir clearance 3.95 3.50 0°-45 1.26 Engineeringcosts 2.70 0.90 1.80 5.04 Contingencies 5.i8 2.'4 304 8.51 Administration 0.-0 0.50 - _

Sub Total 63.26 21.81 41-45 116.05

Capitalized Interest and other charges during construction 10.9h 4.31 6.63 18.57

Total 74.20 26.12 48.08 13h.62

31. The estimate includes the cost of the navigation locks and doun- stream channal improvement as well as the civil engineering works for the remaining eight units. It excludes customs dut.ies as these have been waived by Governlnent. The separate contingency allowarnce amounting to just over IM0% of the cost of' civil' works, electrical and mechanical equipment, and the transmission is i.n addition to some allowances already included in these categories. The overall ccntingency allowance is about 14% of these costs.

32. For the initial installation of 320 MI, the estimated unit cost of the Project is about LN 230/kw. The incremosetal cost of the remaining units, including additional transmission is estimated to be about i'kl 30/kw installcd. This would bring the unit cost of the complete development to about ST 97/ku. In view of the relatively high plant factor of 55% at which the ultimate installation should operate, the estimated cost of the crmplete developmeat in 1981 compares favorably wirth possible alternative power developmenits.

33. The consultaints have estimated that scme 500,000 tons of material and equipment would have to be moved to the construction site, most of which would be imported. Some arall portion may came into Nigeria through the delta ports and be tranEported up the river by barge but the greatest amount of the material and equipi:.enlt will be off-loaded at Lagos and transported either by road directly to the site or by rail to Hokwa, and thence by road to Kainji. Coordination among the Ports Authority, the Nigerian Railway Corporation, the Federal and Regional Public lorks Departments and the river transport ccxnpanr:s will be required to assure that sufficient storage facilities, rolling stock, barges, etc., would be available and that the roads are adequately maintained. During negotiations with NDA and the Government, satisfactory assurances were received that the necessary priority would be given to providing adequate facilities for the Projcct. -9-

InternationalA,pects

34. Use of the Niger River has been governedby the C-encralAct of Berlin of 1865, the General Act and Declaration of Brussels of 1889, and the Convention of Saint Germain en Laye of 19190 Because of the accession to independenceof the territories in the Basin and technical progress, the present riparian countries consid_redthat th.esetreatties were obsolcte or had to be abrogated. For the purpose of drawin.g a new comnirehen!,ive international regime for the Niger Pasin a conference of the riparian States w7as convened in Fe'bruarr,1963 at Niancy,,Niger. Of the nine rinarian countr4esW Chad, Dahomey, Guinea, Ivory Coast,, Miger, Ni-eria and Uprer Volta attended the conference. The Camoroons and .- ali were absent. TJnited Nations of fi- cials and the Bank's General Counsel attended as observers0 The conference adopted 2 draft coniventionard a statute for submnission to a second conference of the riparian States. These draft irstrumentsdccribcci regula- tions for the exploitationof the rescurces of the Niger R'LverBasirn and provided for a Commission to implerentthe regulrtionsand coordinatethe prograrisof the riparian co-untries.

35. The second conference held at ITiameyin October, 1963 .Jas attended by delegates or all nine riparian States and by observers from the 7United Nations and the Bank. The conference adopted, subject to the ratifictaion by each State, the Act of Niamey vvhichabrogates the Act of Berlin, the Act and Declaration of Brussels and the Convention of Saint Gerrain en Laye mentioned above to the ex.tent thiat they concern the NiTiger River Basir.. The Act reaffirms the principle of free navigation on the River itself, its tributaries and sub-tributaries, and establishes the principle of close cooperation among the riparian States in the use of the resources of the portion of the Basin lying in each State's territory. In the Act the conitractirg States have also undertaken to est7blish, at a future date, an inter-governmental organization for the promotion and cooperation of Studies and progrqns for the exploitation of the resources of the Basin. 1. fPrther conferenceof the rinarian States to e-tablish the proposed inter-governmentalorgani..at-'on is scheduled to take place -his year.

36. Durinr 1962 Italconsult, an Italian firm, carried out under Jnited Nations' sponsorship an investigation. of the effect that projects expected to be executed within the next 30 to 50 years in the Niger Fiver basin xould have on the resime of the river, The stu.dy concluded tl-.atthe constructicn of the Kainji Dam wculd have no effect on the use of the river by any of the upstream countries and tVat the planned present and future river projects in these countrieswould havreno material effect on the uses of the river in connection with the KainJi Dam.

37. The ripnrian States have been infcrrnedof Nligericts irtention to go ahead with the Kainji Project and of the Bank's intention to make a loan for the Throject.

V. PO04,T ASPTCTS

38. The KainjiProjectts yrrdroelectricstation is planned to supply tne major lord center, in Nigeria, all of wfhichare presently served bv ECIT(see map 2). These areas are now being interconnectedby EC7 into three systerus- - 10 -

one each in the Northern arxidBaste-rn regions, and one for the West and Mid- west regions. In 1967 the East and Yid-west regions will be conmected by a transmission line from Benin to Onitsha. When the dam is completed in 1968, the high voltage transmission facilities to be constructed by IDA between Kainji-Jebba-Oshogbo and Jebba-Kaduna will effectively create a national gri d. Many smaller to-owns and villages will still renain isolated because it will not be economdcal to build transmission lines to them. 'These areas will con- tinue to be supplied by small thermal plants.

39. The initial imstallation of four 80 14Wgenerating units at Kainji should be sufficient to meet the expected 1968-69 interconnected maximum demand of 303 11W. The larger units of the exi-sting thermal capacity wiill be placed on reserve and the increase in demand would b3 met by installing units at Kcainji as required. The fifth and sixth Kainji units are plained to be installed in 1969-7C and the six remairing units would go into operationl respectively in 1972, 197h, 1976, 1977, 1979 and 1980. Agreement has been reached with the Authority that no other generating plant for the interconnected system would be u&idertaken before Kainji is fully developed wiithout the approval of the Bank.

LO. By about 1982/83 new generating capacity will be required. The Joint Consultants have reccmmended that the Jebba site downstream of Kainji be developed as t.he next step. In view of the possible changes in fuel, labor and construction costs, a thorough reviewz of the various moans of expansion should be made in the mid-1970's.

The Power IHarket

41. The demand for electricity in Nigeria has been increasing rapidly. Durinop the last five years the annual increase in sales of e.rerzr has averaged better than 235. IMlarket studies on a nationwide basis were carried out by the consulting engineering firm of 1ierz & MicLellan in 1959 and 1962. A summary of their latter forecast for the period through lar-h 31, 1978 is griven beloaw. The figures for the first six years from March 31, 1964 are aggregates of the individual loads at the centers to be connected. Summary of Load Estimates - National Grid Year Ended DPeak Load Energy Requirement March 31 (Ql, Generated) % Increase (Million InTh Generated) % Increase 196 15 - 773 - 1965 181 17.5 915 18. 1966 208 14.9 1,057 15.5 1967- 238 14.4 1,213 15.2 1968 269 13.0 1,383 14.0 1969 303 12.6 1,570 13.5 1970 3h0 12.2 1,776 12.7 1971 378 11.2 1,976 11.2 1972 W18 10.6 2,190 10.8 1973 461 10.3 2,410 10.0 1974 505 9.5 2,640 9.6 1975 548 8.5 2,860 8.3 1976 592 8.0 3,090 8.0 1977 639 8.0 3,340 8.0 1978 690 8.0 3,610 8.0 - 11 -

< This page is missing from the original document> - 12 -

Since both the Autherity and the ElectricityCorporation are Covernmen4o.ned organizationsit aould seem thrt a consolidation could be effected without difficulty. HowTever,the Governmentis unwilling at this time to provide for a complete consolidation. During negotiationsagreemrent was reached with the Goverrmentthat the neces-.rnr steps would be taken with respect to the organization and operation of both 'CM ard NDA to ensure mcxi!rumeffic 4ency of operation. Prosent Nigerian thinking would delegate responsibility for all generation and 132 kv or higher transmission (in the interconnected grid) to NDA, and rould restrict the operations of ECiT.to sub-transmission -nd dis- tribution. During the construction period of the Project, the governnent will submit to the Bank, for agreement, plans for the future operation cf the powVer sector.

46. The present Chairman of NDBA,hr. Ings, is expected to retain the position for a-tleast the dluration of the construction period. It has been agreed with the Government that the oualificaticns and experience of ary future Chief Executive world have to be accepLable to the Bank beforethe appoi ntmnent is made.

VI. TYPI:JS?OPFT•TTON

47. The Joint Consultants,basing their judgment on a river traffic forecast to 1972 prepared in 1960 by the Stanford Research Institute,made an estimate of the navigaticnbenefits tc be o'tained from the Kainji Project. These benefits are of several kinds. First of all, the lale formed hy the darawill improve navigation up to about Yelwa. Secondly, all-year navigation w,illbecome poscible fror Onitsha up to the dam (w!hereastoday thre stretch from Onitsha to Lokcoa lhas less than three feet cf water hriefly in llay,that from Lokoja to Jebl-a is navigable for only eight months an, T.at from JebWa to Kainji is not suitable for any craft e-cept canoes). Thirdly, there will be an increase in the minimnun draft in the river belowvthe dam. According to the Joint Consl1tants' calculations, the value of th"ese beneflts (discounted at 6%) v.ouldbe in the ranEe between EY 5.8 and EN 13.8 mill.ion (dependi.ng upon the ass-mn-tions made for the annual rise in traffic forecast up to 1992, wqith a constant flow of traffic thereafter).

lh8. The Bank has review.ed the Joint Consultants' traffic forecas+ and their report, and concluded that in view of delrelopmentss-nce 1958/59in river traffic and since 1960 in other areas, the traffic forecasts appear over-optimistic. On the as-umption that the Nigerian Government carries out its announced policy to coord 2nate the country's transportaticn system in rucha manner that each :ormii of transnort will concentrate on the ty-pe of service for which it is best suited in terms of r2al co7ts and service consider-tions; and taking into accomnt not only the possiLle savings in the cost of river transoDort, but also the savings on highway transport made possible bvrthe bridge across the river which is part of the Kainji Project; the Bank's ccnclusion is that the total present worth of the net tr2nsporta- tion benefits at seven per cent over a 60 year period wJould be about S1 !.3 million at the time of initial operation.

!9. The Bank's estimrate of transoortation benefits is based in part upon locks with an annual capacity of Loo,000 tons which should be sufficient _ 13 - to handle the traffic until 1998. The size of the loch,s as originally proposed would provide for a capacity of about twice this tonna7e. At the suggestion of the Bank the design has been revised with a resultant saving in the Project's capital cost of LN L.0 million.

VII. AGRICULTUREAED FISHERIES

50. The Joint Consultants have estimated that agricultural benefits attributableto the Kainji Dam would have a capitalizedvalue of between El 5 million and EN 20 million depending on various assumptionsand have adopted a value of El 7 million in their report. They have estimated that the annual fish catch from the reservoir would have a market value of IhT 1 million writhinfive to ten years from completion. Field investigationsand study by the Bank of all available data have led to the concluLsionthat while both agriculturaland fisheriesbenefits have been over-estimatedby the Joint Consultants,some smaller amouintcould reasonably be attributed to these aspects of the Project.

Agriculture

51. The reservoir would inundate about 500 square miles of which 36,000 acres or about 11 are currentlyunder cultivationor are productive grazing lands. The Project cost estimates provide IN 2.8 nmillionfor com- pensation and resettlementof the existing population of about 40,000. No increase in agriculturalprodluction can be foreseen over the mid-term followring resettlement. Alternativeupland areas for crop production and livestock grazinghave not been delineated. There would be only limited possibilities in the future for production of such crops as rice and onions whiichare at present being growm on the alluvial soils of the river banks and islands that would be inundated. Grains and ground nlutswhlich would be grown on the up- land soils wiould give a lower return per acre than onions or rice. It will be difficult to obtain alternative areas for grazlng as good as the present areas wyhere annual inundation produces excellent pasturage. At best, the current level would be maintained only with the assistance of considerable technical training for the displaced persons.

52. The Kainji Dam would not give gravity command to the Niger plain which stretches from Jebba do-;Jnstream to Lokoja. The only significant in- fluence of the dam on agricultural development of this plain would be to provide partial reduction of flooding and to increase the dry season flow.

53. l0ost of the pot'ential agricultural lands downstream of the dam are below the estimated future flood level and flood protection bunds would be necessary. Pum,pirrigation development, which would have to includesubstan- tial flood protection, drainage and land clearanceworks, would be very cost- ly. The reduction in pump irrigation costs, directly attributableto the dam, would be but a small proportion of total costs of irrigation development.

54. The area of the plain is sparsely inhabited and any spontaneous newisettlement is most improbableuntil population pressure in other areas forces emigration to the plain. There are no present plans for settlement or for irrigation development in the area; no doubt, in recognition that more favorable opportunitiesfor agriculturaldevelopment exist elsewhlerein Nigeria. Similarly, thlere are no definite plans for any.new estate develop- mnent and if it were to occur the savings in cost attributable to the dam. would be small.

Fisheries

55. The amount of EN 750,000 has been included in the cost estimates for reservoir clearance to permit exploitation of fisheri3s. The Joint Con- sultants' estimate of an aniual yield potential of 6,coo tons of fish gradually increasing to 12,000 tons with a market value of rlJ670,000 and EN 1,3h0,000 respectivelyappears reasonable as a possible order of magnitude. -Ualdngallowance for the fishing potential of the river in its present state, the additional benefit attributable to the dam wjould appear to have an annual market value of the order of flU0.5 million increasing gradually to EN 1 million.

56. The Joint Consultantshave assumed that this full potentialwuould be exploited within fiv-e to ten years from completion of the dam. This does not appear realistic. The local inhabitants have had no special interest in, or aptitude for, fishing, and the proposed provisions for developing their interest and for t'heir trainiLng and equipment appear to be most modest. There would also be other difficult problems to be overcome in organizing an efficient fishing and marketing opmration. It would therefore seem more realistic to assume that there wculd be relatively little development before, say, the tenth year followed by gradual expansion.

Estimate of Agricultural and Fisheries Benefits

57. No reasonably accurate estimate can be made of the likely agricultural benefits w-hich could be attributed to construction of the dam but it is clear that no significant benefits would result for the near future. Etren over the longer ter-m the agricultural benefits attributable to the dam uould be relatively small. The estimate of additional fisheries potential is also very approximate and the tirming of attainment of this benefit is conjectural. However, it would seem not unreasonable to assume that sore benefits fror the agriculturaland fisheries potential would begin to be received from about the tenth year onwards. On.the assumption that the net value of the agricultural and fisheries benefits will reach about EN 2CO,000in the tenth year rising gradually to a net value of EN 1.5 million by the thirtiethyear, the cumulativepresent worth of such net benefitsat 7%, over a 60 year period, would be approximatelyEN 6.5 millionat the time of initialoperation.

VIII. ECO'IIOraCEVALU1ATICN 58. The principalbenefit of the Projectis power and the review of the Project'seconomic justification has been made by comparingthe cost of Kainji with the most practicalalternative thermal power development(see Annex 2). The JointConsultants had investigateda number of schemes involving tile various hydro and thermal possibilities with different starting dates and found that the major load centers should be interconmected and that Kainji shouldbe built as the first large new power development.In 1962, the Baxik's coasulting engineers, Stone & Webster Engineering Corporatio.n, comp-.lel basic data on capital and op:'ating costs of thermal plants and transmAissoo.n Lines - 15 - in Nigeria which were used in investigating alternative e::pansion programs. Based on these data it wras concluCled that: (1) there would be no advaitage to a continued expansion of generatIng facilities at the major load centers;Cna (2) the rost economical alternative to Kainji would be a large gas-fired steam plant located in the Niger delta.

59. In the Bank's evaluation no attempt was made to allocate either the separable or the joint costs of the Project to the respective irndividual benefits. Instead, the benefits attribjutable to the features of the Project other than potTer iere capitalf zed at 7/ and -,ere credited to the total cost of the Project during the first year of operation. This credit consisted of fN 6.5 rnillion for agriculture and fisheries and Li 4.3 mill-Lon for transportation, a combined figure of ST 10.8 million.

60. For the purpose of the economic evaluation only (zcnrpariscn with a theoretical t'nermal alternat-ive) an additional deduction of ZEU2.0 million wias made from the cost of the town of K\ewBussa as an allowance for the permanent tow,nship facilities remaaining after tuhe construction period of the Project.

61. The present wcrth of the annual investments and operating costs associated vith each of the twJo alternatives was then compared over the assumed 60-year physical life of the Project. The economic yield on the additional investment required lby the Kainji development over t'-e amount required by the alternative thermal developiment is 6.5%. A1though this percentage is marginal, the projected rate of load growth is consIdered to be ccnservative&for this stage of development of Nigeria, hence any 7rc2ease in the actual consumption of electricity, for example new power inten'sive industries, wihich could utilize KainjiIs energy potential sooner would raise the indicated yield. - 16 -

IX. FINPA'CTfL AS'PECTS

Financinc the Project

62. It has been assumed that the f nar.cirg for the project would come from the sources listed in the table below. The Italian, U.K.,U.S. and possibly the Netherlandsloans will be tied to goods and scrvices procured in the respective coiuitriesaft.er international competitive bidding. The de- tails of the maximum amounts and terns of the proposed loans are shown in Annex 3. The drawdowus listed below for the U.K., U.S. and Netherlands loans are less than the total of these loans because it is assumed that nob all of these funds would be useable in view of the probable distribut5ono2 contracts,

.,ourcesof Projact Funds

ProposedSource Amount Percentage (in millions c_ equia1lent)

IBED loan 29.3 42.0 Italian loan 8.9 12.7 U.K. loan 3.2 4.6 U.S.-AID loan (to the Government - reloaned to NDA.) 3,6 5.2 Nletherlandsloani 0.4 o.6 Nigerian-Governmentloan 240 h 3h.9

lotal 69.8 100,0 in addition to the EN 24.h, million which the Nigerian Goverrment will make available to NDA for the Project, the Government -ill pay to U.SO-AID £EN100,000 equivalert in interest during the construction period.

63. The total of £N 69.8 million borrowed funds covers the following estimated costs:

(in millions of EN)

Direct cost of the Project 63 2 Working capital o.5 Interest paid by NDA during construction 6.1

Total 69.8

7/Th-e apitalized interest and otner charges as shownl in thletable of par'?- graph 30 total EN 10.9 million. The differenceof LI] 4.8 riiillionrepre- sents interest on the Nigerian lean, interest from' UDD 'to the Federal Governrmenton the 'U.S.-AIDloan, and an insurance premium on the Italian lnan, none of which are paid during construction. - 17 -

The proposed IBRD loan would includc interest during construction. Interest on the Italian, U.K. and Netherlands-loansduring this period has been assumed to be paid by NDA from the Nigerian Government loan. The Government loan would also provide all the required local funds.

6h. The proposed loans would provide all the requirementsfor the Pro- ject, but none of thieseloans has yet been signed. During negotiationsit was agreed that, as a condition of effectivenessof the Bank loan, at least ! US$ 45 million equivalent of other foreign loans would have to be signed. The governmenthas also agreed to provide any additionalfunds necessary to complete the Project.

65. The Italian loan is assumed to cover all the procurement costs in Italy. The U.K. loan is assumed to be useable for 50% of procurement from the U.K. under the main civil works contract and for th-ewhole of the contract for turbines to be supolied by a British manufacturer. The U.S.-AID loan can be used to cover only 50% of the American procurement. Conditions of procurement under the Netherlands loan have not yet been settled. The Bank loan would be used to pay all remaining eligible foreign costs not co-ered by the other loans.

66. During negotiationsit was agreed that the terms and conditionsof the Government contributionto the Project must be satisfactoryto the Bank. An understandingwas also reached that the debt service on the proposed Nigerian loan would be subordinatedto service on all foreign loans.

67. Financial projections of the Kainji Project during 1963/64 and the rermainderof the constructionperiod 1964/65-1968/69are showvnin Arnexes 5 and 6, Sources and Applicationsof Funds Statements and Balance Sheets, respectively.

68. Following completion of the first stage of the Kainji Development, eight additional generating units are planned to be installed bet,cen 1970 and 1981. The first two additionalunits (numbers 5 and 6) are scheduled for com issioning in 1970 and would require a nerrloan of about IN 3.1 million in fiscal year 1967/68 before the Project is revenue producing. Of this amount about EN 1.8 million would be spent by 1iarch 31, 1969. The balance would be required dur-ng the first year the plant is in operation. NDA could not borrow these funds under the debt li;nitation covenant of the Loan Agreement (see paragraph 77b); hence it will be necessary to obtain Bank approval in order to incur this debt.

Financial Projectionsof Future Operations

69. As discussed in paragraph 45, the actual organizationof the power sector after the Kainji Dam is cormsissioned in 1969 has still not been decided. In the absence of a firm plan for the organization, it has been assumcd for purposes of this projection that NDA would owTnand operate the hydro station and the transmission faciiities as far as Gshogbo and Kaduna. In this case ECN would purchase energy in bulk from NDa' and resell it to the consamers. Because t'leonly source of revenue for NDA (except for tne locks) i-ll be the payments from ECN, and since NDA's annual financa.l ob2igaticns are pract.i0aiLy fixed and independent cf the quantity of energy sold, it woould be nereessary - 18 -

for ECN t pay NDA a bulk rate sufficientfor the Authority to meet its costs and to earn a reasonablereturn. Other assumptionsused in the financial projections are showm in Annex 10O

70. The estimatedincome statementsfor the Kainji Project for the nine- year operating per-od through fiscal year 1977/73 are sho-m in Annex 4. It is based upon NDA earning an arnual net income from operations of 8% on its average net fi;.ed assets in operation. The energy sales to ECN are projected from the estimates of load growth prepared by r;1erz and i.cLellan in 1962. Operating expenses are those estimatedby Cooper Bros. in November 1962 and include extra arounts the first twio years to provide for training of Nigerian staff. The ainual bulk power charge varies from EN 8.2 million to EN 8.4 million and averages about bN 8.3 million., The net income transferredto surplus each year varies between ON 1.6 million and Li 109 million; averaging about iN 1.7 million.

71. The projected sources and applicationsof funds statementsfor the operating period are included in Annex 5. As shown in these statements all souirces of funds after the initial commissionirn and until 1978 are from internal cash genieration except for the final drawdc.wn of IN 1,3 million in 1969/70 from the proposed future loan for units 5 and 6. Internal cash generation is sufficient to meet construction expenditures for units 7 through 10 and related transmission?to pay all debt service, and to provide a total of EN.5 million in funds toward future construction. Tne final two generating units to complete the develop.ment are scheduled fcr installation after the period covered in the statement but their cost will also be covered by these funds. Some borrowing, however, would probaoly be required after Iarch 31, 1978, for the next generatingstation if NLD were to build it,

72. Annual debt service is covered 1.3 times each year by internal cash generation. This coverage is satisfactory in view of the fact th.at all of NDA's financing is by means of long-term debt. WNithdebt service on the federal government loan excluded, the annual coverage is about 2.1 times through 1978.

73. A summary of cash flow for the nine-year operating period 1969/70 through 1977/78 is presented below:

9 Year Period - March 31, 1970 throlgh harch 31, 1978

1ifllionsof MJ

Internal Cash Generation 70.3 Borraoings 1,3 Total 71.b Less: Debt Service: Amortization 15.8 Interest charged to operations 36.7 Total debt service 52.5 Balance 1W91 Less: Constructionexpenditures 13.5 Interest capitalizedduring construction .2 13.7 Increase in Funds - 19 -

74. NDA, unless exempted by the President of Nigeria, would be subject to income taxes. Urder the present income tax law, liberal deductionsare permitted for capital expenditureallowances in lieu of depreciationcharges. Such allowances offset taxable income, and any unused portion may be carried for-wardand offset against future taxable earnings. It is estlmated no income tax would become payable during the first nine-year operating period.

Financial Position

75. Projected balance sheets at the end of fiscal 1963/64 through 1977/78 are shown in Annex 6. The following is a comparativesurmary of the condensed balance sheets at the end of the first year of operation,MIarch 31, 1970, and at March 31, 1978.

(in millions of £N)

Increase or (Decrease) 1970 1978 1978 over 1970 Earch 31 A Amount _'otAu

Assets

I-letfixed assets 76.6 97 71.8 92 (4-8) Net current assets .5 1 .5 1 - Additional assets 1.7 2 5.4 7 3.7

Total assets 78.8 100 77.7 100 (1.1)

Equity and Liabilities

Surplus 1.7 2 15.0 19 13.3 Liabilities Long-term debt 75.5 96 6o.6 78 (14.9) Debt due within one year 1.6 2 2.1 3 .5

Total equity and liabilities 78.8 100 77.7 100 (1.1)

76. Due to annual increases in surplus from profitable operations, decreases in long-term debt (through amortization) amounting to Li! 14.9 million, and the fact that no new borrowing vould have to be incurred, the equity percentage of the total capitalization increases from 25 to 19%. There is also a marked improvement in the ratio of long-term debt to fixed assets; in 1969/70, long-term debt would represent 99% of the total net fixed assets and by 1977/78 this ratio would be reduced to 84b.

Financial Agreements

77. In order to ensure that the Borrower will maintain a sound financial condition throughout the life of the proposed loan, protective arrangements have been included in the loan documents. The following provisions, - 20 - which are similar to those in the recent Bank loan to ECN, were agreed upon during negotiations:

(a) Revenues

Revenues wrill be maintained at such levels as to produce funds suffizient to cover all operating expense, including adequate maintenance, depreciation and taxes, if any, and to provide for an 8% return on the average net fixed assets in operation.

(b) Debt Limitation

During the construction period no debt wTill be incurred without the prior consent cf the Bank. After January 1, 1969, no new debt wjouldbe incurred without the agreement of the Bank unless thle net revenue for the fiscal year next preceding sucnh incurrence would be at least 1.5times the maximum future annual debt service requirement, including service on the debt to be incurred. For the purposes of this test NDA wnill be permitted to exclude loans frocr the Government as debt.

Annual audits of the accounts will be made at the end of each fiscal year by independentpublic accountantsacceptable to the Bank.

Projectionsof ConsolidatedPower Sector

78. In view of the fact that the Government has not proposed a definite plan for the organizationof the power sector after Kainji is commissioned, consolidatedfinancial projectionshave been prepared. Annexes 7, 8 and 9 have been included to show the results of operation and the financial condition of the consolidated power sector for the nine-year operating period ending M4arch 31, 1978.

79. Present retail rates for power in Nigeria are high compared to industrializedcountries, principally because of the number of small isolated generatingplants. The average revenue per kwh in 1963 was 3.65 pence and it is expected to decrease gradually to 3.4A2pence by 1969 due to interconnec- tion of the major load centers with new gas turbine installations in the Niger River delta. After the Kainji Project goes into operation, retail rates could be decreasedmore rapidly and at the same time provide an 8% annual return on the sector's overall net fixed assets. The table below showrsthe periodic average rate reductions which could be made: - 21 -

Retail sales Average Revenue of energy per kwh Percenta-e of Decrease Year Ending March 31 (million kwh) (in pence) from previous year

1970 1,h71 3.h0 - 1971 1,639 3.33 2.1 1972 1,817 3.02 9.3 1973 2,O004 2.77 8.3 1974 2,193 2.58 6.9 1975 2,380 2.41 6.6 1976 2,567 2.29 5.0 1977 2,785 2.17 5.2 1978 3,001 2.07 4.6

80. The income statements, Annex 7, show that gross revenue from electricity sales would increase from EN 20.8 million in 1969/70 to IN25.9 million irn1977/78, or an increase of approximately 257%. Annual net income transferred to surplus, with the e;:ception of the first year, averages about IEN3.4mill-ion.

81. The cash-flow statements, Annex 8, siow a cumulative internal cash generation of about rN152.6 million. After providing for all construct-on expenditures, debt service and payments on the Governmient's investment in ECN, about ElN7.6 million of funds would be available for the future expansion programs. Annual debt service coverage for the conso'idatedsector would increase from 1.6 times in 1969/70 to 2.2 times in 1977/78. With debt service on the Federal Government loan excludedntheannual coverage increases from 2.1 times in 1969/70 to 2.9 times in 1977/78.

82. The balance sheets, Annex 9, indicate a steadily improving debt/ equity ratio from 83/17 in 1969,/70to 63/37 in 1977/78.

83. Based on the assumptionsmade in this report, the consolidatedpro- Jectionsindicate that no matter how the power sector is organized after 1970 it should be viable and retail rates could graduallybe lowered. - 22 -

X. CONCLUSIONS

84. The Kainji Project has been adequatelyplanned and the arrangements for carrying out the constructionare satisfactory. The cost estimates include reasonable contingencyallowances and the constructionschedule is realistic.

85. There are no irLmediatebenefits to be expected from agriculture and fisheries, although it is reasonable to conclude that some benefits would accrue in future years provided agricultural extension services are initiated and that research and traininigfor a cormercial fishing industry are fostered. With regard to navigation aspects, the magnitude of the benefits to be obtained from the improved use of the Niger River as an inland waterway, followqingthe completion of Kainji, would depend especially on continuing efforts by the Government to attain substantial coordination of transport to the end that each type of transportation is developed -inthe national interest.

B6. The economic evaluationof the Project, made by comparing the cost of Kainji writh the cost of thermal plants over a 60 year period, indicates that the Project benefits represent an acceptable, though marginal, justification for bui'lding it at this time. When the hydro station is fully developed and loaded the cost of generation -will compare favorably lith that available from alternative sources.

87. The power station at Kainji, with an installed capacity of oOur 80 liZ generating units by the beginning of 1969, with the additional planned eight units by 1981, and with the existing theraal capacity in "lhe systems should be capable of meeting the projected load demands of the national grid until about 1982.

88. In the interest of Nigeria a consolidationof the entire power sector into a single organizationis advisable. A consolidationwould result in such benefits as centralized ]ianageiiient and administration, unification of planning, economies in operation, and elimination of inter-abency transactions.

89. On the basis of the projected retail sales and with assumed reductions in rates, sufficient revenues would be obtained by each entity to maintain a satisfactoryfinancial position. Consolidated power sector projections, on the basis of an annual overal] return of 8% on the net fixed assets in operation indicate that it would be possible to gradually reduce the average retail rate from 3.33 pence per kwihin 1971 to 2.07 pence per kwh in 1978. Further rate adjustments wfould depend upon the capital requirementsof the next generating station and the cost of expansion of transmissionand dis- tribution.

90. Negotiationsare substantiallycompleted for the loans wihichmake up the financing plan. A condition of effectivenessof the proposed Bank loan is that agreen,ients acceptable to the Bank shall be entered into for the equivalent of Us`;45 million in other foreign loans. The Government would supply all local currency and provide the funds for the interest during consuiruction on the foreign loans other than the proposed Bank loan. Nigeria would provide _ 23 -

about 35% of the total required funds. With the exception of a relatively small future foreign loan of iN 3.1 million required in 1967 for the fifth and sixth generating units, all new capital requirements until 1978 should be met from internally generated cash.

91. The riparian States have been informed of Nigeria1s decision to build the dam and locks and of the Bankts intention to make a loan for the Project (para. 37).

92. The Kainji Project is suitable for a Bank loan to NDA of UsP82 million, including irnterestduring constraction,for 35 years with a grace period of 5 years. The Government and the Borrower have agreed tnat:

(a) The necessary steps would be taken with respect to the organization and operation of the power sector to ensure maximum efficiency of operation (para. 45).

(b) The appointmentof the chief executive of NDA would be subject to prior approval by the Bank of his qualificationsand experience. (para. 46). (c) Until the completionof the Kainji development,no new generating facilities for the interconnected system would be undertaken without the Bank's approval (para. 39).

(d) Debt oervice on the proposed Nigerian Government loan to NDA would be subordinatedto service on all foreign loans (para. 66).

(e) No long-term debt ou'ldbe incurred by NDA during the construction period without the Bank's agreement. From 1969 onward no new long- term debt would be incurred unless the debt service coverage meets the renuirementsspecified in para. 77b.

(f) Revenues from operationswould be maintained at such levels as to produce a return of not less than 8% on the average net fixed assets in operation (para. 77a).

(g) Annual audits would be made by independentpublic accountantssatis- factory to the Bank (para. 77c).

(h) The necessarypriority would be given to ensure that adequate transportation facilities are available to carry out the project (para. 33).

June 3, 1964 KAINJI PROJECT

ESTIMATED FOREIGN AND LOCAL COSTS OF THE PROJECTY (in millions of Nigerian Ls)

1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 Total

Foreign Costs Civil Contracts .16 5.30 4.28 5.99 4.47 3.44 23.64 Electrical and Mechanical Contracts .72 i.41 1.74 1.09 1.43 6.39 Transmission .11 .88 3.27 1.87 6.13 Resettlement and Reservoir Clearance .45 .45 Engineering 1.00 .20 .20 .10 .30 1.80 Contingencies .48 .84 .70 .47 .55 3o04 Total Foreign Costs .16 7.50 6.14 9.51 9.40 1.04 41.45

Local Costs Civil Contracts .26 2.35 2.86 2.81 2.19 1.22 11.69 Electrical & Mechanical Contracts .02 .03 .38 .43 Transmission .33 1.00 1.32 2.65 Resettlement and Reservoir Clearance .30 .30 2.90 3.50 Engineering .10 .20 .20 .20 .20 .90 Contingencies .03 .16 .31 .55 .58 .51 2.14 Administration 001 .06 .08 .10 10 .15 50

Total Local Cost .30 2,67 3.45 4.31 4.40 6.68 21.81

Total Costs .46 10.17 10.29 13.82 13.80 14.72 63.26

g/ Excludinginterest during construction.

5/13/64 Page 1

ECONOMICEVALUATION

Thieeconomic evaluationof the Xainji project was based on a com- parison of the total costs - capital and operating - of alternativepower systems to supply the major load centers of Nigeria. The first alternative, referred to as the hydro scheme, utili7.edthe proposed generatingplants in the present six-year program of ECN ending March 31, 1969, the proposed Kainji project, and a national grid interconnecting all the major plants and load centers. The second alternative,called the thermal scheme, used the proposed generatingplarts in the first three years of the ECN program, gradual interconnectionof the southern part of the country, a large new gas fired steam-turbineplant in the Delta, and an intercox.nectionwith the Northern Region in 1969 which in effect, created a similar national grid (see Table 1).

For the purposes of this evaluation, the system plarznig has been projected to 1983/84 when the load forecasts indicate that the ultimate 960 1W capacity of Kainji plus the then existing thermal capacity would be fully loaded. The load forecasts used were from the revised Nerz & McLellan report of 1962. The system planning for the first six years of each scheme and for the remainder of the thermal scheme was based on the Stone & Webster study made for the Bank. The system planning for the hydro scheme after 1969/70 was based on the Niger Dams report of 1961, prepared by the Joint Consultants. In each alternative the present thermal capacity at Afam, Oji River, and Lagos has been assumed to remain in service. In the thermal scheme these stations will be used for peaking purposes throughout the period. In the hydro scheme this capacity will be used for standby or emergency use until 1S80/81, after which it will then be required for peak-- ing as in the thermal alternative.

The Hivdro Scheme

This plan assumed that Kainji would be authorized and that the f5-st four units (320 NW4)wculd be in operation at the beginning of 1969 to meet the 1968/69 pealk load and would have full energy availability for the year 1969/70. The following listed facilities would be installed in the succeed- ing years:

1963/64 - Three-5 INWgas turbines (two at Lagos and one at Port Harcourt); 330 kv single circuit line from Aba to Onitsha; a 132 ktr single circ-it line from Zaria to Kano; the 66 kv Onitsha-Oji River line would be rebuilt for 132 kv operation.

196h/65 - Two-20 NSWgas turbines at Ughelli; one-20 NW gas turbine at Afam; tw-o-3 Wlislow-speed diesels at Kaduna; a 132 kv double circuit line from Ughelli to Benin; a 132 kv single circuit line from Zaria to Kaduna.

1965/66 - One-6.6 Fi slow-speed diesel at Kaduna.

1966/67 - Two-20 1W gas turbines at Afam; one-20 PN gas turbine at Ughelli; a 330 kv single circuit line from Onitsha to Benin. ANWNEX2 Page 2

1967/68 - One-6.6 MN slow-speeddiesel at Kaduna.

1968/69 - A 330 kv single circuit line from Oshogbo to Lagos; the initial four-GO W0 units at Kainji; a 330 kv transriission line from Hainji to Cshogbo via Jebba; a 330 kv transmission line from Jebba to Kaduna.

1969/70 - Twyo-80 NWunits at Hainji.

1971/72 - One-8O 1IWunit at Kainji; additional substation capacity at Kainji, Jebba and Oshogbo.

1972/73 - A 330 kv sing-le circuit line from Aba to Port Harcourt.

1973/7b - One-CO 117PTunit at Kainji,

1974/75 - Additional substation capacity a-'Port Harcourt.

1975 76 - One-80 N'W,1unit at Kainji.

1976/77 - An additional 330 kv single circuit line from Kainji-Jebba- Oshogbo; one-80 ITWunit at Kainji.

1977/78 - An additional 330 kv single circuit line from Oshogbo to lagos.

1978/79 - One-80 O41 unit at Kainji.

1979/80 - The 12th and last-80 MWunit at IKainji; a 330 kv sin-le circuit line fromi Bida to Cnitsha.

1980/81 - No system additions.

1981/82 - Additional substation capacity at Lokoja.

1982/83 - Additional substation capacity at Kano.

1983/8): - No system additions.

The new capacity from 1963/64 tlarough 1983/3I in: thermal 15b.2 1i'IV and hydro 960 141;T;total is 1,114.2iJil.

The Thermal Scheme

This plan assumed that the system load growth from 1966/67 onward would be met by large stearm units at Imo RLiver in the eastern part of the Niger Delta. The assumed schedule of installationis as follows:

1963/64 ) 1%V6E5 ) Same as hydro scheme. 1965/66 ) ANIEX 2 Pago 3

1966/67 - Gne-60 14Wgas fired steam turbine unit at rmoRiver (Afam); a 330 kv single circuit traismILssionline from CQitsha to Benxin.

1967/68 - O.ne-6.6iviW slow-speed diesel at Nadana.

1968/69 - Cne-90 NW4steam unit at Imo River; a 330 kv s-ng'e circuit transmission line from Oshogbo to La-os; a 330 kv transmissionline from, Oritsha to Kaduna.

1969/70 - No system additions.

1970/71- One-100 N steam unit at Imo River.

1971/72 - No system addibion.as.

1972/73 - One-lOC 14Wsteam unit at Imo River; a second 330 kv single circuit transmissionline from Aba to Qnitsia.

1973/7. - A second 330 kv single z.ircuit transmission line fram Benin to Oshogbo; additional transfoimer^s at Berin, Oshogbo and Lagos.

197h/75 - One-'OC 1*1 steam unit at Imo River.

1975/76 - Additional transformer capacity at Lagos.

1976/77 - One-100 i,Wsteam mnit at I.noRiver; an additior±al 330 kv single circuit line frcm Cnitsha to Benin and from Imo River to Aba with externsion of substations.

3977/78 - Additional transformer capacity at Lagos and Oshogbo.

1978/79 - One-100 145steam unit at Imo River; a second 330 kv single circui-t between Lagos and Oshogbo.

979/80 - Additional transformer capacity at Lagos.

1980/81 - One-12,5 I1 steam unit at Imo River.

1981/82 - Yo additions to the system.

1982/83 - Cne-125 101 stenzm unit at Imo River.

1983/84 - Cne-125 M1Wsteam unit at Imo River.

At the ccnclusion of this scheme the total new capacity i.nstalled since 1963/68 amounrts to 1,119.2 MW1. ANINEX2

BASIC DATAFOR THE ALTERNATIVES

Capital Costs

The estimates of construction costs for the Kainji project and its associated transmissionfacilities are based on actual tender prices for most of the importarntcontracts to be let in constructingthe Project. The capital costs of the Imo River alternativetherral plant were based on a preliminary design by Stone and W;Jebsterwhlich assumned that maJor equipment would be obtained in hurope and that the work would be performed in accordancewith European practices. Unit costs, excluding interest during constructionvaried from 72.5 E/Kw for the 60 11Wunit dovm to 51 f/Ikal for the 125 MW units. Costs for the gas turbines and diesel units were based on figures fro, reports prepared by Preece, Cardew and Rider and varied from 85 £/K'ddown to 65 E/K,'A.Transmission line costs including substationsand transformerswere based on Preece, Cardow and Thiderfigures which in turn were verified by Stone and Webster. The 330 KV single circuitnines were estimratedat 9,650 E/;iiileand the 132 TV double circuit lines at 7,900 I/Mile. All costs contain adequate allowances for engineeringand contingencies. Interest during construction was not included in the economic comparisonbecause the cornstruction costs for all facilities were charged annually as incurred.

Operating Costs

The basis for the estimates of operating costs of the thermal plant was prepared by Stone and WIebster. Annual load duration curves were derived for the various plans under consideration to match the peak load and energy requirements forecast in the Merz-MllcLellan1962 report. Using these curves, the total energy was allocated to the available units on the basis of their generating efficiency. An allowancewas made for outages to provide inspection of the major steam units annually, and for a complete overhaul at the end of the first year of operation and every two years thereafter. An allowTancewas also made for annual overhaul of gas turbine units run on base load. No attempt wJasmade to schedule outages of units operated less than about 50 per cent of the time, as maintenance of these units was assumed to be scheduled as recluired.

Fuel costs and heat rates for the eYisting thermal plants were obtained from OCN. In calculating the cost of generation,allowances were included in proportion to unit and station sizes for water, lubri- cating oil, and miscellaneousoperating supplies. For the years when the 30 r!?Hand 12.5 PNWunits at Lagos are used only in peaking service, fuel costs were developed by estimating the number of starts required and allowing t20 per start for the fuel burned to restore boilers to full pressure and to bring the unit on to the line. Total fuel cost was taken as the cost for starting-up,plus fuel cost for the energy produced based ANNEX 2 P-age5- on the full load heat rate. Appropriate correctionswere made for both steam turbines and gas turbines to allow for poorer thermal efficiency for continuousoperation at partial loada.

The estimate of fuel costs for the ne; steam turbine plant was based on a.-sunpti.ons mad.Pby the Baiik. Up until the time of the mission's second visit to Nigeria in January of 1963, little information was available on the gas reserves in Nligeriaor on the cost of production. The only company producing oil was the Shell-BP Petroleum DevelopmentCo. A contract had been negotiatedbetween Shell-BP and ECN for the supply of gas at Affam(includirg a royalty to the Government)for a price of 15d per million BTU. The Petroleum Company had also indicated that it would supply gas in the western part of the Delta near Ughelli for the same price. For the relatively small quantitiesof gas required at Afam and Ughelli (25 to 30 million cubic feet per day) the quoted price seems reasonable. However, for the greater quantitiesof gas required at a large station such as Ino Hiver, the mission found it necessary to assume more realistic figures. The approximatequantities and the delivered costs, net of royalties,assumed by the mission for the economic com- parison are listed below:

Approximate Gas Year Requlirements Assumed Cost Fillion cu.ft/day Pence per million BTU

1963/64 5 13.125 1968/69 44 12.0 1971/72 58 11.0 1974/75 75 100 1978/79 100 9.0

Heat rates for the Iho River plant were taken as 11,000 BeU per kuh generatedfor the 60 I&I unit and 10,200 BTU per kwh for the larger units.

Maintenance costs for the existing ECNIunits were projected from annual report figures. The maintenance costs for the new steam units at Imo RiRverwere based upon Federal Power Commnissionfigures for gas fired U.S. utilities plus 50% for the increased cost of performing this work in Nigeria.

Operating labor costs were based upon labor classificationsand rates furnished by ECIUfor both local and expatriatepersonnel. For existing stations, annual labor costs were adjusted to reflect changes due to the type of operation. For stations in peaking service, labor costs for one shift operationwere taken as approximatelyone half of the figure for continuous3-shift operation;for 2-shift operation,three quartcrs of this figure was used. For the new Ughelli Station, the staff was assumed to be the same as that presently assigned by ECN at Afam, since the plants are similar. For the proposed Imo River thermal station, 10 senior and 76 junior staff personnel were assumed for the first unit, ANITZX2 PaL,e7

including expatriate oncrating supervisors on each shift at all times and twro expatriate mnaintenance supervisors. It is believed that this expatriate supervision -ould be essential for the pleant to operate success- fully. For the second unit, 16 junior staff wiere added ard, for the third unit, 13 junior staff uecre adeed. SimLilar additions were made with later units.

The Kair±ji Station operating costs were based on estimates by Cooper Bros. which provided for thirteen expatriate senior engineers and eighty-three Nigerians. The costs a'lso included expendables and maintenance and -£'150,000 for training during the first two years of operation.

The operating costs for tie electrical systems included both transmission line and substaticn oneratinng and m-aaintenance costs. For all portions of the trans.-ission systems e;cept the lines which forn part of the .ainji project, the costs were determ.ied by Stone and Ifebster. The transmission line costs included clearin- of the right of way four times per year in rain forest areas and twjice per year in other areas, operating supervision and load dispatching, line patrols, and maintenance of towers, conductors and insulators. The total costs were as followTs:

Annual Cost, r. Der ITile 330 kv 132 kv

Lines in rair forest areas 203 188 Lines in other areas 153 138

Substationonerating and maintenancecosts were taken as 0.5 per cent per year of the capital cost of the facilities. The operating costs for the Iainji project transmission systemi were determined bv the Joint Consultants and are included with the operating cost of the station.

For the two schemes adninistrative costs and working capital were not included because they were asstumed to be approximLiately the sane. Comm.oncosts sach as capital charges oni existing plant were also excluded.

C914PARTSOIT OF TIE 1ALTrR`Jr.TI`TES

The economic justification for the i-hmediate comstruction of Kainji vcrsus the thermal development of the system to serve the sare markot was assessed by -the present wor-th m-lethod. The present worth of all annual ca-;.ital invcstments and arnual operating expenses associated with each alternative was comnpared over the full physical life of the Kainji project in the following mnnmer:

(a) In each scheme ne.w gener^ating and transmission plant were brought into operation to serve thie forecast loads, as outlined above, for the period 1963-1983. AM1NEX2 Page 7

(b) A year-by-year total cash flow calculation was carried out for the same period whlich included the investment cost of new plant and the operating expenses of all plant in service which were not comaon to both schemes.

(c) The Kainji project uiasassumed to have a 60-year life, i.e. until 2028/29, The steam units -wereassuiimed to have 30-year lives and were replaced with identical units as they became obsolete; residual values at the end of the period were calculatedby using straight- line depreciation. For the period after 1993/84 it was assumed that either scheme would be expandid by the addition of the sam-eproject or projects,

(d) The future benefits of the Kainji Project attributable to agricultureand transportwere capitalized at 75J (total = £IT10"8million) and were credited to the Hydro Scheme in 1969, the first year of operation, as negative costs.

The discount rate at w-Thich the total present worth of the annual investments and operating costs of the tw-oalternatives became equal was 6,5'. This rate is in effect equivalent to the economic yield on the additional investment in the Kainji Project as compared to the therial alternative. N IO ER IA - KAI NJ I PRO JR CT

SYSTEM DIVELOPMFENT- DEMAND, CAPACm. AND COSTS (lN1000)

April 1 to M,oth 31 1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1076/77 1977/79 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 Totl-r

ITt.=ooor=ot4d Syot. MA.oo De,r (It) 303 310 37B 418 461 505 548 592 63e 690 746 805 870 940 1,015 1,097 Reqoired Ge..ration (GWH) 1,576 1,776 1,976 2,190 2,410 2,640 2,860 3,090 3,340 3,610 3,905 4,210 1,560 4,910 5,300 5,720 1Py0roS:h,,

Gen--tin,g F,p--C^rsity Sch-~ ~ (W)~ ~ ~ -- p

mxiating scyte. 155Z- 170 236 242 302 309 629 789 789 869 869 949 949 1,029 1,109 1,109 1,189 1,269 1,269 1,269 1,269 NeMtherDl 15 66 6.6 60 6.6 NMr boro 320 160 80 80 80 8o 80 80 Tottal lotalled 170 236 242 302 309 629 789 789 869 869 949 949 1,029 1,099 1,109 1,189 1,269 1,269 1,269 1,269 1.269 CUttl C..ts

Ther,el plnt 3,775 2,191 2,420 2,082 270 10,741 7iro pl-ot 460 9,570 9,180 12,2102 9,9 139 1,500 741 81O 750 830 770 1,290 1,170 720 1,170 780 64,730 Tr-nivxion 4.824 2 379 2.184 2 126 3,477 3,13.9 380 78t 180 2t0 240 1,130 2,320 1,370 1,530 1,90 710 300 500 30,109 TotAl 9,059 21,113 13,784 16,41t 13,637 16,309 1,500 1,120 1,590 1,230 1,110 1,010 2,420 3,490 2,090 2,700 2,760 710 300 500 105,3n0

Op.ting Colto

Therl g-ter.r tD 2,672 2,881 2,588 2,821 2,949 2,743 189 189 189 189 189 189 189 189 189 189 189 189 627 1,01. 1,429 21,995 RHdro g-neretion 80 420 390 361 383 406 430 456 483 511 571 603 603 603 603 603 7,So6 Tr.nsxl..loo 17 49 82 90 1l1 112 210 210 215 220 220 222 238 238 248 2h8 258 266 266 266 266 4 081 Tot-1 2,609 2,932 2,670 2,911 3,060 2,965 819 789 765 792 815 841 883 910 918 1,008 1,050 1,058 1,496 1,883 2,298 33,582 To.tl C.pit.l & Opertig Cot. 11,748 17,075 16,145. 19,329 16,697 19,274 2,319 1,909 2,355 2,022 1,925 1,851 3,303 4,400 3,038 3,708 3,810 1,768 1,796 2,383 2,298 139.462 Tbe,ol Sol,, G-ser.ting Capeoity (14)

Ea.tL 6 *y.t 159L1 170 236 242 302 309 399 399 199 499 599 599 699 699 799 799 899 9 1,024 1,024 1,149 N!e th -al 15 66 6.6 60 6.6 90 100 100 100 100 100 125 125 125 Totl Inatalled 170 236 242 302 309 399 399 499 499 599 599 699 699 799 799 899 899 1,024 1,024 1,119 1,274 Capita1 Co,ta Thoroal pl.t 3,775 2,759 1,790 3,272 2,080 3,380 1,865 3,460 1,865 3,460 1,865 3,460 1,865 3,160 1,865 3,600 2,230 4,150 3,060 5,550 3,320 62,131 Trinens:l,iion b.824 2,379 14948 1.890 1.888 h.o52 1.192 2.h30 260 2,541 682 2.017 260 26,363 Total 8,599 5,138 3,738 5,162 3,968 7,432 1,865 3,460 1,865 4,652 4,295 3,720 4,406 4,312 3,882 3,860 2,230 4,150 3,060 5,550 3,320 88,491 Opeting Coot. Th.eoa1 geeratimo 2,672 2,881 2,588 2,839 2,860 2,989 1,792 1,934 1,760 1,939 1,912 1,982 2,090 2,195 2,290 2,316 2,115 2,557 2,833 3,010 3,222 51,110 Tr..o.eleeloo 17 h8 02 89 109 120 184 184 184 187 204 225 232 251 262 286 286 286 286 286 _286 1O94 Tot.l 2,689 2,932 2,670 2,928 2,969 3,109 1,976 2,118 1,944 2,126 2,117 2,207 2,322 2,446 2,552 2,602 2,731 2,813 3,119 3,296 3,5o8 55.204 Total C pit.l & Opetjog Costs 11,288 8,070 6,108 7,090 6,937 1O,5h1 3,8h1 5,578 3,809 6,778 6,112 5,927 6,728 6,588 6,434 6,462 4,961 6,993 6,179 8,846 6,828 143,698

Zl Zxiatig o-P oity "..ed to itolod,s IAgoo etea, 85 M8; Oji River stear,, 30 It; Arf g.. t-rbi.eo, 20 28; K no fr.e piton, 6 W1 cnd misoellan..o dieses,, 14W.

5h3/6G ANN.EX3

NIGER DAMS AUTHORITY

KAINJI PROJECT

ASSUMEDAM4OUNTS AND TERMSO& PROJECT LOANS

1. IBRD Loan - US$ 82.0 million (MX 29.3 million equivalent);5]-% interest rate; 3/4% commitmentcharge on undrawn loan balance; interest during constructionincluded in amount of loan; 30 year amortizationperiod comrencing in August 1969 with semi-annuallevel debt service payments.

2. Italian Loan - Lire 15-57 billion (EN 8.9 million equivalent);5.45% interest rate; 20 year amortizationperiod commencingin June 1969 with semi-annualpayments consistingof 1/40 of loan amount plus interest; an additional charge of Lire 778Q5 million representingan ins-urancepremium which is prorated over the drawdowrnperiod is to be added to the principal amount of the loan. (The 5.45%interest on the principal and the prenium charge is equivalentto a rate of interest of approximately6% on the amount received.)

3. UcK. Loan - ;St 5.0 million; 6% interest rate; 20 year amortizationperiod commencing in M4ay1969 with semi-annualpayments consisting of 1/40 of loan amount plus interest.

4. U.S.-AID Loan - US3$l1e0 million (I1N5.0 million equivalent);- to be reloaned by Nigerian Governmentto MAD A. Terms payable by Government to AID: 3/4% interest rate during first ten years, 2% interest rate thereafter;30 year amortizationperiod commencingin 1974 with semi-annuallevel debt service payments.

B. Terms payable by KDA to Government: 5%b interest; interest during constructionadded to amount of loan; 30 year amortizationperiod cormencingin 1969 with semi-annuallevel debt service payments.

5. NetherlandsLoan - Guilders 20.0 million (EN 200 million equivalent); 6; interest rate; 20 year amortizationperiod commencingin September 1969 with semi-annualpayments consisting of 1/40 of loan amount plus interest.

6. Nigerian GovernmentLoan - EN 24.4 million plus interest and other charges; 6X interest rate; 30 year amortization period corrmencing at the date of completion of Project with annual level debt service payments 0 Such annual payments are subordinate to service on other debt. Interest during construction amount,ingto bN 3.5 million to be added to the loan. A charge of IN 777,000 previously spent for developmentexpenses is to be added to the loan.

7. In addition to the loans mentioned above for the initial stage of the Kainji Project, a future loan will be required in 1967 to finance the fifth and sixth generating units. Terms of this loan have been assumed as follows: LN 3.1 million; 6% interest rate; interest during construction included in amount of loan; 20 year amortization period commencing in 1970 with semi-annuallevel debt service payments. NIGER DAMS AUTHORITY

KAINJI PROJECT

FORECAST INCOME STATEMENTS (in thousands of Ls Nigerian)

Year Ending March 31 1970 1971 1922 1973 1974 1975 1976 1977 1978

Units generated - millionkwh 1,776 1,976 2,190 2,410 2,640 2,860 3,090 3,34o 3,610 Sales to ECN - Million kwh 1,690 1,e8o 2,080 2,300 2,510 2,730 2,949 3,180 3,430 Average revenueper kwh (in pence) 1.19 1.08 .96 .87 .80 .72 .67 .62 .58

Revenue Electricitysales 8,390 8,447 8,333 8,360 8,367 8,245 8,175 8,222 8,338 Lock toll revenue 28 29 31 32 33 3.34 35 36 38

Gross operatingrevenue 8.418 8.476 8,364 8.392 8.400 8.279 8.210 8,258 8.376

Cost of Orerations Operatingexpenses 535 505 476 498 521 545 571 598 626 Depreciationand amortizationof developmentcosts 1.896 2.009 2,019 2.081 2.124 2.077 2.077 2.131 2.184

Total cost of operations 2.L31 2.514 2.495 2.579 2.645 2.622 2,648 2.729 2,810

Net Incomefrom Operations 5.987 5.962 5.869 5,813 5.755 5,657 5.562 5.529 5.566

Less InterestExpense on ProposedLoans IDRD loan 1,605 1,584 1,562 1,538 1,512 1,485 1,457 1,427 1,396 Italianloan 505 479 454 428 403 377 351 326 301 U. K. loan 190 181 171 162 152 142 133 123 114 U.S. - AID loan 245 241 238 236 231 227 223 219 213 Netherlandsloan 21 20 19 18 17 16 14 14 12 NigerianGovernment loan 1,724 1,702 1,679 1,655 1,629 1,601 1,572 1,541 1,508 Futureloan 186 181 176 171 165 159 152 145

Total interestexpense 4,290 4,393 4,304 4,213 4,115 4,013 3,909 3,802 3,689

Net Income to Surplus 1,697 1,569 1,565 1,60o 1,6h0 1,644 1,653 ;.,727 1,877

1/ Based on Merz-McLellan's "tSupplementary Report on Market for Electricity," May 1962. Based on "Report by Cooper Brothers & Co. on Niger Dams Project - Revenue Estimate,"November 1962.

5/22/64 NIGERDAVs AhmdoRITr

KAI0JI PROJECT

078AST0O00078 AND AFPLICATIO'JSOF FUNDSSTAT6EhEN (in ttoua,ade of i'0 1igerrin)

Tear !niing Y:hob 31 C O N 5 17RUCIO2AE 1990 6d WOYr 1 197/1i70 19(~ 67S3 197( 12C5 (TRUCTIONPERIOD 9 erF 1964-1969 1970-1978

500RCI!5 Or FUSDS otErZ,.nn Coh OenGr-tion Net Itcoon frg ofpratione 5,987 5,962 9,869 5,813 9,755 S,697 9,562 59529 59566 51,700 flepreojation ______1.896 2,009 2,019 2,081 2.12h 2.877 2,077 2,131 2.184 18.598

Totl internal oC)h generation 7.883 7,971 7,889 7.891 7,879 7.73b 7,639 7.660 7.750 70,29?

]5gD lmen 3937 2.451 6,433 8,2.0 8,225 29,286 Itali-n loan 1,519 2,901 2,11. 1,519 1,250 8,933 P. lon 696 1,018 857 613 3.21h 0.S.-A") lonn 1,607 1,250 71i 3,577 NetOerlande loan 71 108 71 71 36 357 Xig-r,!n Goon-rnent Ion 170 2,796 3,758 4,833 5,077 7,508 21,142 Polorn 10,0 ~~~~~~~~~~1.126 ~~~~~~1./78 ~~~~~~~~~~~~372 1.3081 1 308 TotAborroeingn b70 10,06. 3o.006 1?.02 16 922 Ol, 1,1 3 i .308 '

TOTAL SOUPCESOF FUtND5 470 10,626 31,086 15.052 15,922 18,145 71,601 9,191 7,971 7,888 7,89h 7,879 7.73h 7.639 7,660 7.750 71,606

AFFLCATIONS OF FU.N.9D ioflllrugtloo -o-oditoro, (eronluding inlornet dut-iog oooe iroolion) lnitiEl d-a prgJeot (h genrting -nit.) 460 10,170 10,290 13,820 13,970 14,720 63,260 Addition,2 inot.ti-nn6 gention -d trnaomisiona / 360 1.360 1,720 l,55O 1,170 1.1h00 870 870 820 2,4hO 3,080L 1.250 13.51

Total -oatr-.ti-n e-p-ndit-ee (en. 01,Wing inter-et doring oonstro-tio-) 160 10.170 10,290 13.820 0h1.60 16.080 6h,9BO 1,5O 1.170 1,hOO 870 890 820 2,44O 3,080 1.290 13,510

D.bt Sor-ier on Pro-oe-d Lo.n. interest Capittli-rd 330 178 009 1,003 1,171 4,071 Ch-rged to eop-.n 1,605 1,581 1,562 1,538 1,9512 1,195 1,457 1,427 1,396 13,566 Italian 10.01 /.opitalied 43 158 291 396 475 1,363 Cbarogd to eoonos 505 179 45h 128 103 377 351 326 301 3,621 7 K Ionn: Tapioli.od 21 72 129 171 193 589 Otag.d to op-enee 190 181 171 162 152 1h2 133 123 li, 1,368 Chargd to .rpI 24nS 241 238 236 231 227 223 219 213 2,073 Neto-olanIn 10,-, Copitaliaed 2 8 13 17 20 60 ltargnd to e-p-ose 21 20 19 18 17 16 14 14 12 191 itertaOon orr-nent lon, Cbarged to £0oense 1,721 1,702 1,679 1,655 1,629 1,601 1,572 1,541 1,508 lb,611 Future. loan, Clpitali-ed 12 66 78 118 118 Chargod to -en 186 181 176 171 165 159 152 3hS 1.335 Total ijtOre-t 390 72c .112 1.672 2.225 6,1S1 1.1438 4393 64304!421 4T 17 013 3 802-3,b89 36.8716

A-0rti-tIon IBRO Igkn 387 408 430 454 180 507 535 565 596 4,362 Italiao loan 469 469 169 169 469 169 169 169 469 1,221 K. Ina 160 160 160 160 160 160 160 160 160 1.141 0.5.-lbD lo- 57 61 61 60 71 75 79 83 89619 Neth-ronan loan 18 18 18 18 18 18 18 18 18 162 Nignria- GOoro-enot loan 364 386 ho0 133 459 187 516 547 580 1,181 Futu.o ln _ 82 87 92 97 1,07 10 116 123 809 T ota1 A -ootlantlon ______1 092 5 9.

Total debt -errioc 316 726 1 1h2 1.672 2.22 66 5,893 5,977 5,91l 5,905 5,869 5,832 5,795 5.760 :,721 52,696 ar- it Wo,king G.pital 10 60 70 90 90 140 160 _ _ TOTALAFPPIZATION5 CY FUNDS h70 10,626 31,086 15,052 19,922 18,145 71,601 7,413 7,147 7,341 6,775 6,759 6,652 8,235 8,840 7,0141

{-rom-, gr (droase) in food, 1,748 824. 57 1,319 1,120 1,082 (596) (1,080) 73A 5,1O0 B.a.-e t bogin-ing oT yenr 0 1,71. 2,572 3,119 41,383 ,358 6,4o0 .51841 4,664 bloooe t end nf year 1,748 2,972 3,119 1,238 5,358 61o.0 5,814 1,664 5,400 Tine ann-al debt -orI-ce -o-,red by Internal -oh g-eoroti-n 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 Tier, -,ol debt enroie -o-ered by int-rpal -aeh an-eration, eooltdtng debt -eorn-o on Ni-nrlan 9o,evront lma 2.1 2.0 2.0 2.1 2.1 2.1 2.1 2.1 2.1

' Ilnplud 50 -n-ll I ron 1970 ibmoogh 1970 'or oehle o enintnnoo ono nt NIMlER DAMS AUTHORITY

KAINJI PROJECT

FORECAST BALAtNCE SHEETS (in thousands of Ls Nigerian)

March 31 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

ASSETS

Fixed Assets Fixed assets in operation 77,252 77,202 78,702 79,642 81,182 81,182 82,812 84,402 87,882 Less allowance for depreciation 1,765 3^643' 5531 7.481 9,1h74 11.1470 13.466 15,516 17,619 Net fixed assets in operation 75,487 73,559 73,171 72,161 71,70l 69,712 69,3146 68,886 70,263

Work in progress 521 11,378 23,033 38,951 56,o44 75,994 3140 1,460 1,260 1,090 340 1,110 1,870 3,310 1,070

Deferred development costs 777 777 777 777 777 777 746 715 684 653 622 591 560 529 498 Total fixed assets 1,298 12,155 23,810 39,726 56,821 76,771 76,573 75,73ii 75,115 73,904 72,670 71,L413 71,776 72,725 71.d31

Net Current Assets 10 70 1140 230 320 460 460 460 460 460 460 1460 160 460 460

Additional Assets -1, 748 2,572 3,119 4,238 5,358 6,440 5,814 4,664 5;4OO

Total Assets 1,308 12,225 23,950 39,958 57,141 77,231 78,781 78,766 78,694 78,602 78,488 78,313 78,080 77,849 77,691

CAPITAL ANM LIABILITIES

Capital Surplus 1,697 3,266 4,831 6,431 8,071 9,715 11,368 13,095 14,972

Proposed Long-Term Liabilities IBE loan 3,937 6,388 12,821 21,061 28,899 28,491 28,061 27,607 27,127 26,620 26,o85 25,520 24,924 24,2914 -Italian loan 1,595 4,221 6,472 8,067 8,911 814142 7,973 7,504 7,035 6,566 6,097 5,628 5,159 4,690 U.K. boaa 696 1,7114 2,571 3,2114 3,0514 2,8914 2,7314 2,5714 2,14114 2,2514 2,0914 1,9314 1,7714 1,62114 U.S.-AI loan 1,660 3,09 3,987 4,2214 4,144 4,313 14,279 4,213 4,142 4,067 3,988 3,905 3,816 3,723 Netherlands loan 71 179 250 321 339 321 303 285 267 249 231 213 195 177 2 Nigerian Government loan 1,308 4,266 8,389 13,857 19,882 28,371 27,985 27,576 7,143 26,684 26,197 25,681 25,134 24,554 23,939 Future loan 372 1.798 3,024 2,937 2,845 2,718 2,645 2,536 2,1420 2,297 2,167

Total long-term liabilities 1,308 12,225 23,950 39,958 57,141 75,776 75,500 73,863 72,171 70,417 68,598 66,712 64,754 62,719 60,604

Lon-Term Debt Payrients Due Within One Year 1,455 1,584 1,637 1,692 1,754 1.819 1,886 1,958 2,C35 2,115

Total Liabilities 1,308 12,225 23,950 39,958 57,141 77,231 77,o84 75,500 73.863 72,171 70,417 68,598 66,712 64,754 62,719

Total Capital and Liabilities 1,308 12,225 23,950 39,958 57,141 77,231 78,781 78,766 78,694 78,602 78,488 78,313 78.080 77.S49 77.691 |

Debt/EoquAty Ratio (including payments due within one year) 1oo/O 1oo/o 1oo/o 0oo/o 1oo/o loo/o 98/2 96/4 914/6 92/8 90/10 83/12 85/15 83/17 81/19 Net Income fram Operations to Average Net Fixed Assets in Operation 8% 8% 8% 8% 8% 8% 8% 8% 8%

5/22/64 NIGER DAMS AUTHORITYAND ELECTRICITY CORPORATIONOF NIGERIA

FORECAST CONSOLIDATEDIiiCOMS STATL 4E:NTS (in thousands of Es Nigerian)

Years Ending March 31 1970 1971 1972 1973 1974 1975 1976 1977 1978

Units generated- . million kwh 1/ / 1,870 2,082 2,303 2,545 2,778 3,021 3,254 3,529 3,803 Units sold - million kwh 1,1471 1,639 1,817 2,004 2,193 2,380 2,567 2,785 3,001 Average revenueper kwh (in pence) 3.40 3.33 3.02 2.77 2.58 2.141 2.29 2.17 2.07

Gross Revenue Electricitysales 20,839 22,775 22,8140 23,158 23,593 23,942 21,1464 25,140 25,910 Other operating revenue 1431)/ 149 156 162 173 184 200 221 2143 Total operating revenute 20,982 22,9214 22,996 23,320 23,766 214,126 214,664 25,361 26,153

Cost of Operations Operatingcost 5,820 5,965 6,121 6,433 6,761 7,105 7,461 7,8143 8,226 Depreciation_ 6,896 7,109 7,219 7,381 7,624 7,777 8,o77 8,431 8,78)4 Total cost of operations 12,7i16 13,0714 13,3140 13,81h 14,385 llt,862 15,538 16,2714 17,010

Met Incomefrom Operations 8,266 9, 5,c 9,656 9,506 9,381 9,244 0,126 9,087 9,143

Less InterestEx-pense 6,059 6,o86 5,926 51765 5,602 5,430 5,256 5,077 4h900

Net Incomeafter interostexpense 2,207 3,764 3,730 3,7h11 3,779 3,814 3,870 4,010 4,243

Less 4}% Paymnenton WederalGovernment Investment in ECN 421 421 1421 421 421 421 421 421 421

Net Incometo Surplws 1,786 3,343 3,309 3,320 3,358 3,393 3,1449 3,589 3,822 k

1/ Based on Merz-McLellan's"Supplementary Report on Market for Electricity,"May 1962. 2/ Includes units purchasedat Jos Plateau. T/Tncludes revenue from operating locks at Kainji Dam. E Includesamortization of deferreddevelopment costs of KainjiMultipurpose Project.

5/22/64 NIGER DAMS AUTHORITY AND ELZCTRICITY CORPORATION OF NIGERIA

FORECAST CONSOLIDATEDSOURCES ArI APPLICATIONS OF F'JNDS STATFM1ENTS (in thousandsof ElsNigerian) Suirmary 9 Years Years Ending March31 1970 1971 1972 1973 1974 1975 1976 1977 1978 1970-1979

SOTJRCESOF FTUDS

Internal Cash Generation Net incomefrom operations 8,266 9,850 9,656 9,506 9,381 9,22hl 9,126 9,087 9,1h3 83,259 Depreciation 6,896 7,109 7 219 7,381 7,624 7,777 8,077 8,431 8,784s 69 298 Total internal cash generation 15,162 16,959 16.815 16,87 17,005 17,021 17,203 17 515 17927.

Dorrowings- 1,308 1,308

TOTAL SOURCES OF FUNDS 16,470 16,959 16,375 16,887 17,005 17.021 17,203 17,518 17,927 153,865

APPLICATIONS OF FMNDS

Construction Expenditures (excluding interest during construction) Niger Dams Authority 1,550 1,170 l,hOO 870 890 820 2,h4O 3,080 1,290 13,510 Electricity Corporation of Nigeria 3,810 3,900 3,935 4h560 5,185 5,510 6o061 6,667 8, 34 4s7862 Total construction expenditures 5,360 5,070 5,335 5,430 6,075 6,330 .01 9,7b7 9,5274 61.372 Debt Service Interest Capitalized 148 148 Charged to expense 6,059 6,086 5,926 .c;765 5J602 5,430 5,256 5,077 4J90O 50 101 Total interest 6,207 6,066 5,926 5,765 5;602 5,430 5,256 4,96i 05j,0

Amortization 3,062 3,096 3,o22 3,326 3,238 3 331 3,366 3.399 3,1432 29 072 Total debt service 9,269 9,182 8,98 5691 5,0 U;7bl tS,22 o,h70 U,332 7Y

I1j Return on Federal Government Investment in ECN 421 421 421 h21 421 421 421 421 1421 3,789

Increase in Working Capital 163 172 183 191 201 213 223 236 2419 1,831

TOTAL APPLICATIONS OF FUNDS 15,213 lh,685 14,887 14,933 15,537 15,725 17,767 18,880 18,526 h6,313 Ia

Increase or (decrease) in funds 1,257 2,11 1,988 1,954 1,468 1,296 ( 564) (1,362) ( 599) 7,552

Balance at beginning of year 2,5140 3,797 5,911 7,899 9,853 11,321 12,617 12,053 10,691

Balanceat end of year 3,797 5,911 7,899 9,853 11,321 12,617 12,053 10,691 10,092

Timcs annual debt service covered by internal cash generation 1.6 1.8 1.9 1.9 1.9 1.9 2.0 2.1 Z.2

Times annual debt service covered by internal cash generatioe excluding debt service on Nigerian Government loan. 2.1 2.4 2.5 2.5 2.5 2.6 2.6 2.7 2.9

5/22/64 NIGER DAMSAJTHORITY ANDFLECTRICITY CORPO'.tTION OF NIGERIA

FORECAST CONSOLIDATEDBALANCE ShIEETS (in thoisands of Is Nigerian)

March 31 1970 1971 1972 1973 19714 1975 1976 1977 1978

ASSETS Fixed Assets Fixed assets in operation 161,440 165,045 170,263 175,250 181,063 186,61o 193,826 201,580 211,860 Less allowance for depreciation 36,735 43,513 50,o01 57,b51 6h,744 72,240 80,036 88,186 96,689 Net fixed assets in operation 124,705 121,532 119,862 117,799 116,719 114,370 113,790 113,394 115,171 Work in progress 2,245 3,410 3,227 3,370 2,932 3,865 4,900 6,643 5,637 Deferred development costs 746 715 684 653 622 591 560 529 h98 Total fixed assets 127,696 125,657 123,773 121,622 120,273 118,826 119,250 120,566 121,306

Net Current Assets (excludingdebt payments due within one year) 3,645 3,817 4,ooo 4,191 4,392 4,605 4,828 5,o64 5,313

Due from Cameroon for Assets Transferred from ECN 426 426 .426 426 426 426 426 426 426

Additional Assets 3,797 5,911 7,899 9,853 11,321 12,617 12,053 10,691 10,092

TOTALASSETS 135 564 135,811 136,098 136,292 136,412 136,474 136,557 136,747 137,137

CAPITAL AND LIABILITIES CapitaL Federal Government Investment (ECN) 9,350 9,350 9,350 9,350 9,350 9,350 9,350 9,350 9,35c Capital Reserve 400 400 400 400 400 1400 400 4oo 400 General Reserve 2,500 2,500 2.500 2,500 2,500 2.5oo 2, 00 2 500 2 500 Surplus 11,287 14,630 17,939 21,259 24,617 28,010 31,h59 35,048 38,870 Total Capital 23,537 26,8B0 30,189 33,509 36,867 Lo,260 43,7090 7,296 51,120

Long-Term Debt 108,931 105,909 102,783 99,545 96,214 92,848 89,449 86,017 82,438

Long-Term Debt Payments Due Within One Year 3,096 3,022 3,126 3,238 3,331 3,366 3,399 3,1132 3,579

TOTAL CAPITAL AND LIABILITIES 1/ 135,564 135,811 136,098 136,292 136,412 136,474 136,557 136,747 137,137

Debt/Equity Ratio (including payments due within one year) 83/17 80/20 78/22 75/25 73/27 70/30 68/32 65/35 63/37

Rate of Return (net income from operations to average net fixed assets in operation) 6.6% 8% 8% 8, 8% 8% 8% 8% 8% \0

1/ Excluding current liabilities which have been included in the net current assets. AMNEX10 Page 1

ASSUIPTIONS FOR.FINANCIAL PROJE TIONS

I. NDA - Kainji Project - Annexes 4, 5 and 6

1. Working capi ual requirements for NDA during the construction period were assumed to increase eacih year up to a total of EN 460,000. After lainji is commissioned it has been assuned that additional working capital would not be required and therefore the amount was rmiaintained at the EN 460,OCO level throughout the operating period.

2. During loan negotiations a proposed depreciation schedule was established covering the classificatior.s of all fixed asset3 and their estimated useful lives. Straight-line deDreciatLon rates, computed from this schedule, were applied to NDA's assets during the nine-year operating period. The overall annual depreciation charge for the Project amounted to abcut 2.5% of the total cost of the fixed assets in operation.

3. Fixed assets having a short estimateduseful life, averaging about five years, such as vehicles and workshop maintenance equipmlent,have been assumed to be retired at the rate of kN 100,000 each year during the first five years of operation. Since the major constructionwork will have been completed at the tirnieX-Iainji is commissionedthe need for such assets will be greatly reduced. It was therefore assumed that replacements for these assets would be made at the rate of kN 50,COO annually.

4. During the constructionperiod a total of E-NL.8 million consisting of 71 3.5 rmillion interest on the Government loan, EN 0.9 million on the US-AID loan and TN 0.4 million insurance premium on the Italian loan was not paid but was capitalized and recorded as increases in the long-term obligations of NDA.

II. NDA-EC- ConsolidatedStatements - Annexes 7, 8 and 9

5. In the consolidatedbalance sheets, Annex 9, an amount of EN 426,000 was included as a receivable from Cameroon for assets transferred by ECN. It has been carried in the statements as such throughout the period because of the uncertainty of the final settlement of this account.

6. Depreciationon EC;l'sfixed assets in operation was computed on the same basis as that indicated in TO-380a Report covering the Bank's loan for the ECN TransmissionProject. A 6.7Jorate of depreciationwas applied to ECN's assets as of March 31, 1963 and an average rate of 5% was used for assets acquired subsequent to this date. These rates are in accordancewith a revised depreciationschedule establishedby ECINon April 1 1961, and which were acceptable to the Bank.

7. Retirement of ECO's fixed assets was estimated at EN 200,000 each year. ANIlEX10 Page 2

8. ECNf'soperating expenses were computed by extrapolating from thle costs slhovn in the TO-380a ReDort, taking into account the decrease in generaticn because of poT;,er supplied by NDA.

9. Annual increases in ECM's wiorking capital followcd the pattern establislhed previously; that is, esti.raating receivables as equivalen±t to sixty days revenue, stores increasing at an annual rate of 3j, and cur-rent liabilities maintaining a level thLat results in a 1.7 to 1 current ratio.

10. The fixed 4h1%annual pavment on the Federal Government investment in ECEiwas established bcr law in 1957 and therefore it has been assmzned that this rate would nrevail through 1277/78, 4- . ..

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