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Document of "-W l l The World Bank HX cA)U FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 3185-IND Public Disclosure Authorized STAFF APPRAISAL REPORT INDONESIA PERUSAHAAN UMUM LISTRIK NEGARA TENTH POWER PROJECT Public Disclosure Authorized January 16, 1981 Public Disclosure Authorized Projects Department East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit - Indonesian Rupiah US$1 = Rp 625 Rp 100 = US$0.16 Rp 1 million = US$1,600 WEIGHITSAND MEASURES 1 metric ton = 1,000 kilograms (kg) 1 liter (1) = 0.0063 barrels 1 kilometer (km) = 0.6215 miles (mi) 1 kilovolt (kV) = 1,000 volts (V) 1 megavolt-ampere = 1,000 kilovolt-amperes (kVA) 1 kilovolt-ampere = 1,000 volt-ampere (VA) 1 megawatt (MWl7) = 1,000 kilowatts (kW) 1 gigawatt hour (GWh) = 1 million kilowatt hours (kWh) ABBREVIATIONS BAPPENAS - National Planning Agency BATUBARA - National Coal Entity DGEP - Directorate-General Electric Power, Ministry of Mines and Energy DPMIA - Institute of Hydraulic Engineering, Bandung COI - Government of Indonesia LE UNPAD - Institute of Ecology, Padjadjaran University, Bandung LNG - Liquified natural gas NINE - M.linistryof Nines and Energy Newjec - New Japan Engineering Consultants, Japan NI.RA-ENEL- Italian Nuclear and Electricity Agencies OECF - Overseas Economic Cooperation Fund (Japan) PCR - Preece, Cardew and Rider, UK PERTANINA - National Oil Company PLN - National Power Authority REPELITA - Five-Year Development Plan SBC - Special Board of Consultants GOVERNMENT OF INDONESIA FISCAL YEAR April 1 - March 31 FOR OFFICIALUSE ONLY INDONESIA PERUSAHAAN UMUM LISTRIK-NEGARA TENTH POWER PROJECT Table of Contents Page No. 1. THE-ENERGY SECTOR . 1 Energy Resources and Status of Development . .. 1 Petroleum .... .. 1 Natural Gas .... .. 2 Coal .............. 2 'Hydroelectric Resources ... .. 3 Geothermal Resources ... .. 4 Nuclear Power .... 4 Non-Commercial Sources ... .. 4 Growth of Energy Consumption ... .. 5 Organization of the Energy Sector . .. 5 Problems in the Energy Sector, Policy and Pricing . .. 6 The Electricity Subsector ... .. 6 DGEP .............. 7 PLN ........................... 7 Captive Plants .... .. 7 Rural Electrification ... .. 8 2. THE POWER MARKET AND THE DEVELOPMENT PROGRAM . 8 Status of Surveys .... 8 Demand Projections . 9 Access to Service . 10 Connection Programs . 10 Development Program . 11 Overview of the Program . 12 3. THEBENEFICIARY ....................... 13 Legal Status and ResponsibilitiesP.. .. .... 13 Organization and Management ... ..... 14 Present Facilities . ... 16 Manpower and Training . ...... ..... 17 Research .... ...... 17 Accounting and Audit . ... ..... 18 Insurance .... ...... 18 Peformance Under Earlier Bank Operations . 18 This document has a restricteddistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. -2 Page No. 4. THE PROJECT ......................... 19 Objectives of the Project ... 19 Project Description ... 20 Investigations and Suitability of the Saguling Site . 21 Dam Site and Other Features ... 22 Optimization of Project Features . 22 Geology .... ...... 23 Seismology .... ...... 23 Allied Structures .... ...... 23 Reservoir Area .... ..... 23 Siesmology .... ...... 24 Hydrology .... ..... 24 Sedimentation .... ...... 25 Construction Materials . 25 Engineering and Design ... ..... 26 Environmental Aspects ... ... 26 Construction Equipment for PLN Task Force . 29 Engineering of Cirata Hydroelectric Project . 29 Project Cost Estimate ... ...... 30 Contingencies .... ...... 31 Consulting Services ... ..... 31 Financing .... ..... 32 Construction . 32 Implementation Program ... ..... 33 Procurement .... ...... 33 Disbursement .... ...... 33 Maintenance for Dam Safety ... .... 34 5. FINANCIAL ANALYSIS . 34 Past Results .... ...... 34 Present Financial Position ... .... 35 Future Financial Performance . 36 6. JUSTIFICATION .... 37 Demand .... ..... 37 Least Cost Solution ... ..... 38 Internal Economic Rate of Return . 38 Risks .39 7. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS . 39 ANNEXES 1. Organization Chart of the Ministry of Mines and Energy 2. Forecast of Future Generation Requirements 3. Growth of Generating Capacity, Sales and Peak Demand in Java 4. PLN-s Organization Chart 5. Principal Features of Saguling Hydroelectric Project 6. Citarum River Development Plan 7. Salient Features of Cirata Hydroelectric Project 8. Project Cost Estimate 9. Summary of Financing for the Saguling Project 10. Implementation Schedule of the Saguling Project 11. Milestone Schedule for Main Civil Works and Penstocks 12. Estimated Schedule of Disbursements 13. PLN Past Financial Results 14. PLN Financial Forecasts 15. Assumptions for the Financial Forecast 16. Cost and Benefit Streams for IERR Calculations 17. Information Available in the Project Files MAPS Public Generating Facilities by Areas Java Power System Saguling Power Project General Site Arrangement This report was prepared by Messrs. C.K. Chandran and B. Keith Thomas, who appraised the project in August/September1980. 1. THE ENERGY AND ELECTRICITY SECTORS Energy Resources and Status of Development 1.01 Data on energy resources in Indonesia are incomplete and the coverage is uneven, varying from fairly good documentation on oil reserves to very little on geothermal resources or nuclear fuels; data on existing and potential energy consumption patterns is similarly incomplete. Energy policy formulation is thus rendered difficult and is presently limited to broad generalities. In the past the Bank has agreed to finance a number of studies designed specifically to rectify statistical deficiencies (e.g., hydropower surveys - Power VI Loan 1365). Recently, however, the Minister of Mines and Energy has asked the Bank to undertake a more comprehensive survey of the energy sector with a view to systematizing the data currently avail- able, identifying the major deficiencies and assisting the Government of Indonesia (GOI) to determine the best method of proceeding with sector documentation and policy formulation. A Bank mission to initiate this work visited Indonesia in November 1980. Available information on the energy sector and the main issues are summarized in the following paragraphs. 1.02 Indonesia is endowed with abundant energy resources and has large as yet underdeveloped natural gas, coal, hydroelectric power and geothermal sources. Petroleum reserves have been exploited for some time. The availability of indigenous oil caused Indonesia to develop a petroleum-based energy sector rather than exploiting other available energy resources. Prior to independence, the country relied on coal and hydroelectric energy to a large extent for its commercial energy but now petroleum accounts for 90% of total commercial energy consumption. Steps are being taken by the Government to increase the shares of coal, hydroelectric power and geo- thermal energy as rapidly as possible. Petroleum 1.03 Petroleum reserves are estimated at about 50 billion barrels, but proven resources are between 10-15 billion barrels. The figure has not in- creased significantly since 1970. Present production is about 1.6 million barrels per day, and it is expected to increase to 1.8 million barrels per day by 1984. The government assessment is that with virtually static reserves and constant production, and the rapid increases in domestic demand (about 14% per year), surpluses available for export would steadily decline, seriously undermining the economy. GOI has therefore adopted a policy of developing other indigenous energy sources such as coal, hydroelectricity, natural gas and geothermal for internal consumption. As a result of these policies and due to expected increases in oil prices the annual growth of domestic consumption of oil is expected to decrease to about 8.5% in 1983. Liquified natural gas (LNG) and condensate exports are expected to increase - 2 - rapidly and will compensate partially for the slowdown in oil exports. In the above context, it is imperative that detailed plans be drawn up urgently for well-coordinated development of the energy sector and its various subsector_. Natural Gas 1.04 The estimated natural gas reserve is about 34 trillion cu ft, of which 5 trillion cu ft represents gas associated with oil production. The present production level is about 80 billion cu ft per year. Pipelines have recently been laid to steel and fertilizer factories and consumption is expected to increase at the rate of 15% per year during the next five years. Following agreement reached with Japan a few years ago, export of natural gas in the liquid form (LNG) has commenced and is expected to grow rapidly. A study of natural gas pricing and utilization has been agreed under Credit 451-IND to determine the potential usage of gas in Indonesia and the resources available. GOI policy is to use surpluses, where available, for electricity production. In Java, where some thermal stations have been designed for dual firing (oil and gas), no surpluses are now available. Natural gas is being used however in Java and Sumatra. Coal 1.05 Indonesia-s coal reserves are conservatively estimated at 1.2 billion tons, 86% of which are in Sumatra and the balance in Kalimantan. Some estimates place the total reserves at 15.0 billion tons.