Document of The World Bank

FOR OFFICIAL USE ONLY j £(WY Public Disclosure Authorized Report No. 3337-TUN Public Disclosure Authorized

POWER III PROJECT

STAFF APPRAISAL REPORT Public Disclosure Authorized

April 22, 1981

Public Disclosure Authorized Projects Department Europe, Middle East and North 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 = Tunisian Dinar (TD) Tunisian milliemes 1,000 = TD 1.000 US$2.50 = TD 1.000 US$1.0o = TD 0.400

WEIGHT AND MEASURES

I square kilometer (km2) = 0.3861 square mile (sq mi) 1 cubic meter (m 3) = 35.315 cubic foot (cu ft) 1 kilogram = 2.206 pound (lb) 1 metric ton (t) (1,000 kg) = 1.10 short ton (sh ton) = 0.985 long ton (lg ton) 1 kilowatt (kW) = 1,000 watts I Megawatt (MW) = 1,000 KW I Megavoltampere = 1,000 kilovoltampere (KVA) I kilowatthour (kWh) = 1,000 watthours 1 Gigawatthour (GWh) = 1 million kWh I kilovolt (kV) = 1,000 volts 1 keal (kilocalorie) = 3.968 Btu (British thermal unit) 1 toe = 1 ton of oil equivalent (10.200 x 103 kcal)

GLOSSARY OF ABBREVIATIONS

ICB - International Competitive Bidding DP - Development Program (STEG) DGM - Deputy General Manager EdF - Electricite de ETAP - Entreprise Tunisienne d'Activites Petrolieres NASA - National Aeronautics and Space Administration NESDP - National Economic and Social Development Plan PGM - President General Manager SOTEMI - Societe Tunisienne d'Expansion Miniere SNDP - Societe Nationale de Distribution de Petrole STEG - Societe Tunisienne de l'Electricite et du Gaz STIR - Societe Tunisienne des Industries de Raftinage

Societe Tunisienne de l'Electricite et du Gaz

Fiscal Year

January 1 to December 31 FOR OFFICIAL USE ONLY

TUNISIA

POWER III PROJECT

Table of Contents

Page No.

I. THE ENERGY SECTOR ...... 1

A. Energy Resources ...... 1 Overview ...... I Oil and Gas ...... 1 Hydropower ...... 1 Coal and Geothermal ...... 1 Renewable Energy Resources ...... 2 Nuclear ...... 2 Studies for the Development of Energy Resources ...... 2

B. Sectoral Organization ...... 2

C. Energy Demand and Supply ...... 3 Energy Balance ...... 3 Historical Trends ...... - 3 Future Developments ...... 5 Trends in the Consumption of Electricity supplied by STEG ...... 5 Historical Trends ...... 5 Future Developments ...... 6

D. Energy Pricing ...... 6 Petroleum Products ...... 6 Electricity Tariffs ...... 7 Future Pricing of Electricity ...... 8

E. The Beneficiary: STEG ...... 9 Historical Development ...... 9 Management ...... 9 Existing Facilities and Equipment ...... 9 Development Program ...... 9 Manpower and Training ...... 11

The report was prepared by Messrs. C. Christofides (Engineer), E. Baranshamaje (Financial Analyst), and I. Elwan (Economist).

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. Table of Contents (Continued) Page No.

F. The Past and Future Involvement of the Bank in the Energy 6ector ...... 12

II. THE PROJECT ...... 13

The betting ...... 13 Project Description ...... 14 Project Scope, Beneficiaries and Location ...... 14 Objectives ...... 15 Project Cost Estimates ...... 15 Project Financing ...... 17 Project Preparation, and Engineering ...... 17 Status of Project Preparation ...... 17 Engineering ...... 18 Project Implementation and Construction supervision ...... 18 Project Implementation ...... 18 Construction Supervision ...... 19 Procurement ...... 19 Disbursement ...... 19 Retroactive Financing and Advanced Contracting ... 19 Environmental Aspects ...... 19 Risks ...... 20

III. FINANCE ...... 20

Accounts ...... 20 Audits ...... 20 Revaluation of Assets ...... 20 Past Performance ...... 21 Collection of Receivables ...... 22 Financing Plan ...... 22 Future Financial Performance ...... 24 Debt Service Covenant ...... 25 Insurance ...... 25 Lending-Arrangement ...... 25

IV. PROJECT JUSTIFICATION ...... 25

A. Load Forecast ...... 25

B. Least Cost Alternative ...... 27

C. Return on Investment ...... 27

V. AGREEMENTS REACHED AND RECOMMENDATION ...... 28

MAP - IBRD 15545 TUNISIA

POWER III PROJECT

I. THE ENERGY SECTOR

A. Energy Resources

1.01 Overview: Tunisia's presently known indigenous energy resources con- sist of oil, non-associated and associated gas, and a relatively small hydro- power potential. Recently, some coal deposits were discovered but their extent has not yet been determined. Geothermal springs are also known to exist, and the potential for their exploitation is currently being assessed in a study financed by USAID (para. 1.07). In addition, Tunisia has a good solar regime with insolation varying between 2,800 and 3,600 hours per year. Pilot projects for demonstrating the possible uses of solar energy are currently underway financed from bilateral aid agencies (para. 1.05).

1.02 Oil and Gas: The remaining proven recoverable oil reserves are presently estimated to be about 58 million tons. These reserves are expected to sustain the future annual production of oil at its present level of about 5.8 million tons until 1985 (para. 1.09). The remaining proven recoverable reserves of associated and non-associated gas are estimated to be about 36 billion cubic meters (38 million toe). About 83% of these reserves are located offshore at the Gulf of Gabes in the form of natural gas; principally at the undeveloped Miskar field. Associated gas is produced from three fields of which the most significant is the El-Borma oil field near the Algerian border. In 1980, domestic gas production was about 0.39 million toe of which El-Borma contributed more than half. However, the contribution of El-Borma gas to the total supply of energy is declining and is expected to cease by the late 1980s. Tunisia will also have a gas supply of 0.2 million toe in 1982 increasing to 0.8 million toe per year by 1987, as a transit fee for natural gas transported from Algeria to Italy, via Tunisia, through the trans- continental pipeline.

1.03 Hydropower; Tunisia's Hydropower potential is relatively small amounting to only 65 MW of which 29 MW (El Aroussia, Kasseb, and ) has already been developed and the rest would be exploited when the multipurpose dam at Sidi Salem is completed (see map). Presently no informa- tion is available on whether there are sites suitable for mini-hydro schemes. This shortcoming would be addressed in the energy assessment study financed by the USAID (para. 1.07).

1.04 Coal and Geothermal: Small deposits of lignite (brown coal) are known to exist at Cap Bon, in the north eastern part of Tunisia. New deposits (1.5 m thick) have also been recently discovered at Sabria about 140 km South- west of the city of Gabes. Hot water springs exist at several locations in Tunisia of which the most important is at about 20 km West of the city of Gabes. This spring gives about 2,000 liters of water per minute with a low surface temperature (about 850C). The extent of the newly discovered coal deposits and potential for the exploitation of the geothermal springs would be determined in conjunction with the energy assessment study financed by the USAID (para. 1.07). -2-

1.05 Renewable Energy Resources: USAID and the US Department of Energy in collaboration with the U.S. National Aeronautics and Space Administration (NASA) have initiated a demonstration project for the exploitation of solar energy in providing power for lighting in a small village of about 500 inhabitants (Haman Biada). NASA has issued tender documents for the supply of equipment and materials. The European Economic Community (EEC) is also expected to finance renewable energy related demonstration projects for solar pumping, windmills, and reforestation for fuel wood. In anticipation of greater use of the solar energy potential in the future, STEG has completed a study of the market for solar water heaters which concluded that by 1986, about 200,000 units could be installed provided a public information and 4 education campaign is undertaken. Gordian Associates (UK firm) under financing from the Government is in the process of completing a study for the development and pricing of renewable and non-renewable energy resources. This study together with the studies financed by USAID would provide the Government with the data and tools needed for formulating a comprehensive plan for the development of all energy resources (para. 1.07).

1.06 Nuclear: Although no uranium deposits are known to exist in Tunisia, the Government with the assistance of the International Atomic Energy Agency, is working on a preliminary economic and technical study which would examine the viability of a possible nuclear power plant.

1.07 Studies for the Development of Energy Resources: Under Loan 1355-TUN, the Government agreed to finance an energy pricing study the com- pletion of which has been delayed by about one year. In 1979, Gordian Associates were selected to undertake this study which involved the formulation of a comprehensive plan for the development and pricing of all energy resources, including renewable energy. The approach adopted by Gordian Associates for the study relies heavily on computer modeling. The Government has been concerned about the preliminary recommendations of the study because the data used was highly aggregated (consumption of energy by sector was not available). In an effort to remedy this shortcoming, the Government has requested USAID and the US Energy Department to undertake an energy assessment study, and the construction and compilation of an extensive energy data base which would be used in conjunction with the model developed by Gordian. The energy assessment study has started and is expected to be completed by the end of 1981. It is divided into a number of independent small studies each focusing on one of the major energy consuming sectors of the economy. The findings of the small studies would then be integrated and used to outline several scenarios for developing and managing the energy sector; however, it will be up to the Tunisian Government to formulate its own policies on the basis of the information provided.

B. Sectoral Organization

1.08 Tunisia's energy sector is managed by the Ministry of National Economy through a number of state-owned enterprises. ETAP (Entreprise - 3 -

Tunisienne d'Activites Petrolieres), a Government-owned enterprise, is respon- sible for coordinating oil imports and the exploration and oil production activities of the multinational firms and three other small enterprises which are each 50% Government-owned. STIR (Societe Tunisienne des Industries de Raffinage), also a Government-owned enterprise, owns and operates the only oil refinery. Distribution of petroleum products is divided between the Government-owned SNDP (Societe Nationale de Distribution de Petrole) which distributes about 40% of the refined products, and several private firms with more limited markets. The Societe Tunisienne de l'Electricite et du Gaz (STEG), a Government-owned enterprise was created in 1962 to take over the operation of six privately-owned electric utilities which were nationalized at that time. STEG is also responsible for gathering, transporting and distri- buting associated and non-associated gas, and manufacturing and distributing town gas in the city of . Since 1963 STEG has been the sole utility in Tunisia responsible for the public production, transmission and distribution of electricity and gas. In addition, several industries generate their own electricity. In 1979 private generation accounted for about 14% of the total electricity produced in Tunisia.

C. Energy Demand and Supply

Energy Balance

1.09 Historical Trends: Tunisia is almost totally dependent on oil and gas for meeting its demand for commercial energy. In 1978 the per capita consumption of energy was 543 kilograms of coal equivalent (kgce) compared to 285 kgce for Morocco, 463 kgce for Egypt, and 687 kgce for Algeria. In 1980, oil comprised 82% of the commercial energy consumed, associated, non- associated and town gas another 14%, and the remaining 4% was met by hydro (0.5%) and imported coal and coke (3.5%). Between 1971 and 1980, production of crude oil and gas increased from about 4.1 million toe to 6.1 million toe representing an average annual rate of growth of about 4.5%, while hydropower production remained unchanged at about 12 thousand toe. During the same period, commercial energy consumption increased from 1.2 million toe to 2.8 million toe, representing an average annual rate of growth of about 9.9%. Up to the present time Tunisia remains a net exporter of crude oil (3 million tons in 1971 and 3.5 million tons in 1980) and the Government continues to depend on the foreign exchange provided by these exports in order to sustain the growth of the economy. In 1980 the petroleum products consumed had the following mix: LPG 3.7%; gasoline 7.4%; jet fuel 4.8%; kerosene 5%; gas oil 36.1%; and fuel oil 43.0% 1/. However, because of the limited local refinery

1/ Tunisia's consumption of fuel oil is disproportionately high. The USAID study (para. 1.07) would investigate the reasons for this relatively high consumption and the efficiency by which this fuel is used. - 4 - throughput (1.1 million tons per year) and the continued growth in demand, Tunisia's imports of oil products since 1974 have been increasing steadily, reaching 1.2 million tons in 1980. Jet kerosene (0.11 million tons) is totally imported, and more than 50% of the gas oil, and 30% of the fuel oil is also imported 1/. The energy balance for Tunisia is summarized below:

ENERGY BALANCE Thousand Tons of Oil Equivalent

Supply 1971 1975 1980 1985

Production:

Oil 4,097 4,611 5,750 5,800 Gas 3 231 390 190 Hydro /1 12 12 12 25

Royalty Gas 620

Imports:

Crude Oil 700 1,027 1,125 4,500

Oil Products 383 1,205 60 Coal and coke 100 98 100 100 Less: exports & stock changes 3,601 4,629 5,795 7,320

Net Total 1,211 1,733 2,787 3,975

Proportion by Source Demand 1971 1975 1980 1985 in 1980

Oil 1,096 1,392 2,285 3,040 82.0% Gas 3 231 390 810 14.0% Hydro 12 12 12 25 0.5% Coal and Coke 100 98 100 100 3.5%

Total 1,211 1,733 2,787 3,975 100.0%

/1 46 GWh converted at 0.25 toe/1,000 kWh.

1/ Tunisia sells its yearly output of crude oil at a premium price because of its superior quality (low sulfur content) and imports lower quality crude for its domestic needs. Exports of crude oil in 1980 provided about 25% of Tunisia's foreign exchange needs. -5 -

1.10 Future Developments: It is believed that the two major oil fields which currently contribute about 92% of the total output, would continue to produce substantial but declining quantities after the mid-1980's, while the remaining small fields would cease production between the mid-1980's and mid-1990's. However, a number of small new fields are expected to be brought on stream within the next two years which will delay the decline of the overall production to at least the mid-1980's. Although the associated gas of the El-Borma field is expected to cease by the late 1980's, the replacement of natural gas for associated gas would be possible if Tunisia's presently known gas reserves are developed.

1.11 Natural gas is expected to play a major role in meeting Tunisia's future energy requirements. In addition to the gas received as transit fee and its probable increase as the demand in Europe for Algerian gas increases, the Government has two options for meeting the future energy demand of the country: (a) develop the Miskar gas reserves which is associated with heavy capital investment; and (b) purchase gas from Algeria by tapping the trans- continental pipeline. Presently the Government is 'examining the two options and a decision is not expected until the USAID eneAngy assessment study is completed (para 1.07).

1.12 Apart from the total energy consumed in Tunisia, and the energy used by the power subsector and large-scale industry, no historic information is available regarding the energy consumption by subsector. The UbAID energy assessment study would remedy this shortcoming (para. 1.07). The available data for 1980 shows that the power subsector and large industries used all of the hydro, gas and coal, 94% of the fuel oil and 28% of the gas oil; all together representing 56% of the entire energy consumed in the country. In particular, the power subsector used 26% of the total energy, large industries 30%, transport 34%, and the commercial and domestic subsectors 10%.

1.13 Between 1980 and 1985 the mix of petroleum products consumed is expected to remain practically unchanged. During this period, associated and natural gas is expected to meet both the incremental increase in demand and any shortfall in the domestic supply of oil by supplying 20% of the total commercial energy demand by 1985, compared to 14% in 1980. The Government is planning to expand the capacity of the refinery to meet the domestic demand for petroleum products and as a result their imports would be reduced to only 0.06 million tons in 1985. However, by the same year, the increased domestic demand for petroleum products would reduce Tunisia's export of crude oil to about 2.7 million tons.

Trends in the Consumption of Electricity Supplied by bTEG

1.14 Historical Trends: Between 1970 and 1980, 6TEG's peak demand in- creased at an annual rate of 13% (from 142 MW to 490 MW), generation of elec- tricity at 14% (from 680 GWh to 2,524 GWh), electricity sales at 14% (from 576 GWh to 2,120 GWh), and number of consumers at 9% (from 284,000 to 689,000) while transmission and distribution losses, which are still high, decreased from 18% to 16%. In 1980, high-voltage consumers accounted for 21% of STEG's total sales, medium-voltage consumers 46%, and low-voltage consumers the -6- remaining 33%, of which domestic consumers accounted for 27%. During the same year, low-voltage consumers amounted to 685,000 of which 88% (603,000) were domestic, 2% (14,000) irrigation pumping and the remaining 10% (68,000) commercial, small industrial and others. Of the domestic consumers 87% (525,000) lived in urban areas, 11% (66,000) in rural conglomerations and the remaining 2% (12,000) in rural dispersed areas (Annexes 1.1, 1.2, 1.3 and 1.4).

1.15 Future Developments: During the period 1980-1985 forecast of the trends in the consumption of electricity supplied by STEG indicates that peak demand would continue to increase at the historic rate of 13% (from 490 MW to 910 MW), while generation, sales of electricity, and number of consumers would continue to increase, but at a slower rate. In particular, generation is forecast to increase at 12% (from 2,524 GWh to 4,370 GWh), sales at 11% (from 2,120 GWh to 3,650 GWh), and number of consumers at 8% (from 689,000 to 993,000). After rehabilitation of the urban distribution systems and the reinforcement of the transmission network (paras. 1.27 and 1.28), transmission and distribution losses are expected to be reduced from 16% to 12%.

D. Energy Pricing

1.16 Petroleum Products: Retail prices of petroleum products are set by the Government. Lighter products (LPG and gasoline) are taxed while middle distillates and fuel oil are subsidized. In September 1980, the weighted average price of lighter products was 182% of their weighted average border price (US$610/ ton compared to US$335/ton), middle distillates and fuel oil was 56% (US$130/ ton compared to US$232/ton), and all petroleum products was 76% (US$185/ton compared to US$244/ton). A summary of domestic prices and taxes (or subsidies) is presented in Table 1 below:

Table 1: PETROLEUM PRODUCT PRICES, TAXES AND SUBSIDIES /1

Bulk Domestic Border /2 Retail Taxes and Products Price/ton Price/ton Consumption /4 (Subsidies) (US$(U SU$ ('000 tons) (US$ Million) LPG 340 /3 358 85 1.5 Premium Gasoline 337 743 90 36.5 Regular Gasoline 327 726 80 31.9 Kerosene 307 /3 153 115 (17.7) Gas Oil 280 208 825 (59.4) Fuel Oil 182 60 980 (119.6) Weighted Average 244 185

/1 September 1980 prices. /2 Italian spot market prices excluding transport costs (FOB prices). /3 Estimated. /4 Consumption in 1980. It was used as a factor in deriving the weighted average prices. - 7 -

In 1980, the net economic subsidy extended to the consumers of petroleum products amounted to US$127 million. The retail prices of middle distillates and fuel oil in Tunisia are kept low in order to foster agriculture and industry, and maintain the prices of products consumed by the low income families at an affordable level. However, with the anticipated decline in the exports of crude oil due to the increase in the domestic demand for petroleum products, it would be difficult for Tunisia to maintain these subsidies at their present level for long.

1.17 In spite of the absence of information on both the sectoral con- sumption of energy (para 1.12) and a measure of the impact of increased prices of petroleum products on the economy, the Government has taken the first step towards rationalizing the pricing of petroleum products. In January 1981, the price of gas oil was increased by 20% (from 83 TD to 100 TD per ton), fuel oil by 46% (from 24 TD to 35 TD per ton), premium gasoline by 14% (from 220 milliemes to 250 milliemes per liter), and regular gasoline by 9% (from 215 milliemes to 235 milliemes per liter). As a result of these increases the weighted average of domestic prices of petroleum products increased from US$185 to US$221/ton representing 81% of their January 5, 1981 weighted average border price. If the average annual growth in the consumption of petroleum products continues at its historical rate of 10% and the mix of products consumed remains unchanged, and if the international prices during 1981 are maintained at their January 5, 1981, level, the total economic sub- sidies extended to the consumers of petroleum products would be about US$120 million in 1981 compared to US$127 million in 1980. The Government intends to reexamine its overall oil pricing policy when the USAID study is completed (para. 1.07).

1.18 Electricity Tariffs: Electricity tariffs in Tunisia are set by STEG and implemented after Government approval. The current tariff structure classifies STEG's customers under three main categories: High Voltage; Medium Voltage; and Low Voltage. For the high and medium voltage, the tariffs are based on time of day pricing (peak/off peak). Sales at the low voltage are classified according to the end use of electricity such as residential, small commercial and industrial, agricultural, etc. All low voltage consumption is charged at a uniform tariff, with the exception of water pumping and water heating which have a time of day tariff, and public lighting which has a declining block tariff (Annex 1.5).

1.19 The average tariff at each voltage level is below the economic cost of supply. Table 2 summarizes the difference between the average tariff at each voltage level and the long run average incremental cost of supply (LRAIC). -8-

Table 2

EXISTING TARIFFS AND THE ECONOMIC COST OF SUPPLY

…------Milliemes/kWh…------Economic Cost /1 (LRAIC) Prevailing Tariffs

High Voltage 26.29 15.88 Medium Voltage 37.18 32.26 Low Voltage 64.54 47.05

/1 Fuel valued at its border price.

In 1980, the total economic subsidy extended to the consumers of electricity in Tunisia amounted to about TD 21.5 million (US$53.7 million). Of this subsidy, 23% accrued to the high voltage consumers, 22% to the medium voltage consumers, and the remaining 55% was extended to the low voltage consumers. This subsidy was passed on to STEG's consumers through the low prices paid by STEG for its fuels, particularly the associated gas from El-Borma which the corporation collects almost free of charge. However, the subsidy to the con- sumers of electricity is expected to be gradually eliminated since; (i) the Government's stated objective is to increase the domestic prices of petroleum products so as to reach parity with international prices by 1987 (although no specific timetable has been set); and (ii) the supply of associated gas from El-Borma will practically cease to be available for power generation by 1987.

1.20 Future Pricing of Electricity: The Government is reluctant to intro- duce a fuel adjustment clause that would transmit automatically to consumers of electricity any future increases in the prices paid by STEG for petroleum products. Its objection stems from the automaticity of the proposed clause. The argument is that such a clause would deprive the Government of the right to determine which group of customers should bear what portion of the total burden of each case of tariff increase. In addition, it was argued that such a clause would set a precedent for indexation in other sectors of the economy, something which the Government is unwilling to accept. In the past the Government has adjusted electricity tariffs to account for increases in the domestic prices of petroleum products. These adjustments, however, have usually lagged between four to seven months imposing a financial burden on STEG. For the first time the Government has increased, as of February 1, 1981, electricity tariffs by an average of 8% to fully compensate STEG for the increased fuel bill resulting from the fuel increases of January 1981. In order to ensure that STEG's financial standing will not suffer in the future from lags which may occur between adjustments of fuel prices and electricity tariffs, the Government has agreed to revise electricity tariffs promptly, and in any case not later than two months after the fuel price increases, to enable STEG to recover the total increases in its fuel cost. - 9 -

E. The Beneficiary: STEG

1.21 Historical Development: Since its creation in 1962, STEG concen- trated on integrating into a single national power system the six separate systems it had taken over (para. 1.08). By 1970, the corporation was able to start a systematic expansion of the integrated national system and within ten years it was able to increase its installed generating capacity seven-fold, the production of electricity eight-fold, and the number of its customers two and one half-fold, while improving its management and financial position.

. 1.22 Management: STEG is governed by a Board consisting of eight members and headed by a President General Manager (PGM). All members of the Board are appointed by the President of the Republic. The daily management of the corporation is the responsibility of the PGM, assisted by a Deputy General Manager (DGM), and 14 Departmental Managers who report to the DGM. STEG's operations are managed through 14 Departments from the Head Office in Tunis (Annex 1.6). For administrative and operational purposes, the country is divided into 23 Districts (another 3 will be created during 1981; see Annex 1.7) with their managers reporting to the DGM. The Districts are responsible for the operation and maintenance of the system in their jurisdiction, customer relations, planning and studies, stores and transport, surveys and preparation of detail engineering of new distribution projects, supervision of contractors, and data collection and planning for future expansions of their local systems (Annex 1.8). The Head Office staff of the 14 Departments, in addition to providing technical support to the Districts, supervises and coordinates the activities of all Districts. Although STEG's present organi- zation is adequate for the fulfillment of its tasks, a further decentrali- zation is currently underway. This involves the creation :f local agencies in the framework of the Districts, in the larger demand centers; the decentralization of the District of Tunis has already taken place and the rest will follow.

1.23 Existing Facilities and Equipment: STEG currently operates four steam power plants (550 MW), four hydro plants (29 MW), seven combustion turbine plants (320 MW) and some small diesel plants amounting to a total of 15 MW (Annex 1.1). Except for some of the diesel stations located in isolated areas, the generating stations are interconnected (see map).

1.24 The main transmission system operates at 225-kV with a 150-kV ring around Tunis, and 150-kV and 90-kV secondary branches. The total length of this system is about 2,210 km (see map). The medium-voltage lines (10-kV, 15-kV and 30-kV) have a length of about 9,960 km, and low tension distribution lines and cables (220-V and 100-V) about 12,000 km (see Annex 1.4).

Development Program

1.25 STEG's five-year (1982-1986) least cost development program (DP) coincides with, and forms part of, the sixth National Economic and Social - 10 -

Development Plan (NESDP). The DP involves expansion of generation, reinforce- ment and extension of both transmission and distribution, the construction of a load dispatching center, extension of the gas distribution system, construc- tion of a testing and measurement laboratory, training of staff, and miscella- neous works at an estimated total cost of US$1,057 million, of which US$739 million would be in foreign exchange. Financing of this program is not yet complete (para. 3.10).

1.26 Expansion of the generating facilities involves: (a) installation of 154 MW of combustion turbines to be commissioned by the end of 1983 at a cost of US$60 million 1/; and (b) erection of a new 600-MW steam power plant (Rades) at a cost of US$528 million 2/, to be commissioned in 1985-1986. In the short-term, the combustion turbines would meet the demand up to 1985, when the first unit of Rades is expected to be commissioned, and in the medium term, would replace the old steam units of Goulette I and combustion turbines of which would be retired. The new combustion turbines would be installed at Korba (2x22 MW), (3x22 MW), Robbana (1x22 MW), and (3x22 MW) 3/. At Korba and Kasserine the units would be fired with natural gas received as transit fee (para. 1.02), while the units at Robbana and Tajerouine would be fired with gas oil. The steam plant would be erected at Rades, 3 km Northeast of Tunis, and would consist of dual fired (fuel oil, or bituminous coal) 4x150 MW units. If the plant is fired with coal, 1.2 million tons per year would have to be imported.

1.27 Extension and reinforcement of the transmission system would be implemented in three stages; (a) construction of a new 150-kV line (5 km) to connect Kasserine to the grid, reinforcement of the 30-kV line around Tunis, and erection of a 225/30-kV substation at . This stage is estimated to cost US$20 million and would be ready by 1983; (b) construction of 2 double-circuit 225-kV lines (one from Rades to M'nihla, and the other from Rades to Naassen). These lines would be ready by 1984 at a cost of US$20 mil- lion and would complete the 225-kV loop around Tunis; and (c) reinforcement of existing 90/30-kV transformer stations and the construction of new 225/30-kV and 150/30-kV transformer stations by 1986. This stage is not yet well defined but its cost is estimated at about US$65 million. Tender documents for the first two stages would be ready by mid-1981.

1/ It includes substations associated with the plants, spares for at least 3 years of operation, and training of 5 engineers and 15 technicians.

2/ Including the plant substation and coal-handling facilities on the plant site. Of the US$528 million, US$60 million would be disbursed in 1987.

3/ It is not yet decided whether 4x22 MW units would be installed at Kasserine, or 3x22 MW at Kasserine and 1x22 MW at Tajerouine. - 11 -

1.28 Extension and reinforcement of the distribution system, estimated to cost US$250 million involves four activities and woald affect all Gover- norates: (a) electrification of rural Tunisia; (b) rehabilitation of the urban distribution systemts;(c) extension of the urban distribution systems; and (d) extension of medium voltage system to supply new industries. The first constitutes an indispensable part of the NESDP which aims at the reduc- tion of migration of rural inhabitants to urban areas by: creating new jobs and consolidating the existing by granting loans to small and middle size producers and entrepreneurs involved in agriculture, fisheries and traditional crafts; trJining in farming, traditional craftsmanship and other trades; and improving living conditions by providing farming equipment, potable water, health services, access roads, electricity, and social services. This acti- vity is estimated to cost a total of Ub$94 million and involves the connection of 65,000 new domestic consumers living in 1,650 villages, the connection of 4,600 new surface and deep well pumps for potable water and irrigation, and the connection of 500 small industrial and commercial consumers. Since STEG will continue to be the executing agency of the rural electrification program of the NEsDP, and in view of the corporation's past performance and manpower, this program can be realized satisfactorily. The Government, realizing the financial burden imposed on STEG to electrify so many villages in the short period of five years, has agreed to contribute about 60% of the total cost associated with the electrification of rural Tunisia (para. 2.08). The second activity estimated to cost US$60 million constitutes a necessary measure that STEG has to take in order to improve its quality of service and its revenues by reducing the present distribution losses by about 33% (paras. 2.02 and 2.04). The beneficiaries of this activity are estimated at 150,000 existing consumers. The last two activities reflect the Government's decision to extend electricity service to almost all inhabitants living in the main urban centers (about 60 cities and large towns) and promote industrialization of the country. Extension of the urban distribution system would provide access to electricity to about 170,000 new consumers at an estimated total cost of U6$83 million. On the other hand, STEG's revenues would improve because the capital investment required to capture the existing high demand for energy is relatively small.

Manpower and Training

1.29 Manpower: At the end of 1979 STEG's total number of regular staff was 5,730 of which 1,700 were professional, 2,360 skilled technical and administrative, and the remaining 1,670 unskilled. This staff is considered adequate and capable to conduct STEG's current activities. However, to meet the staffing requirements of its development program, sTEG plans to recruit the necessary personnel and to create three new District offices; two in the Governorate of (Jebiniana and ); and one in the Governorate of (Metlaoui). STEG is very conscious of productivity gains which, on the average, increased by 7% per year. In 1979, the ratio of energy sold per employee was 320 MWh, which compares favorably with the ratios achieved in other countries of the region (260 MWh for Egypt and 399 MWh for Algeria). - 12 -

1.30 Training; During its early years, STEG concentrated on filling the gaps in supervisory and skilled manpower created when the expatriate personnel of the privately-owned electric companies left Tunisia. Electricite de France (EdF) assisted materially in this program by seconding personnel to STEG and conducting training courses in France. At present the output of the National Polytechnic (Ecole Nationale d'Ingenieurs) is adequate to cover STEG's needs in engineers and those of the rest of the economy. The Bank has also assisted STEG in its training needs. Under Loans 815-TUN and 1431-TUN, financing was provided for training staff in accounting, inventory control, billing and data processing. In addition, various suppliers of electromechanical works provided training to STEG's personnel.

1.31 In 1976, the corporation constructed a training center at Khledia (20 km from Tunis) staffed with 70 instructors of which 30 are permanent training staff. The center offers basic training courses to middle level technical and administrative personnel lasting from 6 to 11 months. The basic training received in the center is followed by training on-the-job which takes place in STEG's plant or abroad 1/. In addition to the basic training, the center offers seminars and upgrading courses lasting from 1 day to 3 weeks. In 1980, 218 staff members had received basic training and 1,140 had attended upgrading courses. STEG's 1982-1986 development program includes a training component which consists of: (a) extension of the training center by con- structing 3 new living quarters and the allied classrooms and other facili- ties; (b) construction of a laboratory for tests and measurements; and (c) erection of a full size medium tension network for training of personnel on live lines (lines fed with voltage). The expansion of STEG's training facili- ties is reasonable and the Government and the corporation have requested Bank assistance in its financing. The proposed Project contains a training component (para. 2.04). STEG has agreed to furnish to the Bank for its approval the proposed training program.

F. The Past and Future Involvement of the Bank in the Energy Sector

1.32 Since 1971, the Bank has been involved in the development of Tunisia's energy resources, through lending in the energy sector. The first loan of US$7.5 million (Loan 724-TUN) was made in 1971 to finance a gas pipe- line. The second loan of US$12 million (Loan 815-TUN) was made in 1972 to finance the supply and installation of 2x30 MW combustion turbines, expansion of the transmission and distribution systems, consulting services, and training. The third loan of US$14.5 million (Loan 1355-TUN) was made in 1977 to cover about 50% of the foreign exchange cost of 7 additional combustion turbines. In 1978, a loan of US$42.0 million (Loan 1431-TUN) for an irriga- tion project involved the multipurpose Sidi Salem dam which would tap a hydro- power potential of 36 MW. In June 1980, the Bank approved another loan of

1/ In 1980, 124 staff members were trained abroad at a foreign exchange cost of US$625,000. - 13 -

US$37.0 million (Loan 1864-TUN) which would finance the foreign component of the first phase of a gas distribution pipeline.

1.33 The Bank's continued involvement in the power subsector has been res- ponsible for strengthening all aspects of STEG's operations and management. Since 1972, the corporation has consolidated its control over the sector and developed its technical capabilities and practices to reach levels that are comparable to those of similar institutions in developed countries. In addition, STEG has been able to achieve in the past a satisfactory financial position. However, STEG's financial performance and much of the institution building work fostered by the Bank is likely to be eroded, if the Government continues its present policy of using STEG's healthy financial position to relieve some of the burden on the national budget. The continuation of the Bank's involvement in the energy sector by lending in both the oil and gas subsector, and the electricity subsector, would strenghthen the existing institution building efforts, improve technical standards and achieve overall coordination of energy pricing. It would also induce the growth of the sub- sectors along a least-cost path.

II. THE PROJECT

2.01 The setting: In 1980 Tunisia's population was 6.25 million (1,150,000 families) of which 52% lived in urban areas, 21% in rural con- glomerations 1/ and the remaining 27% in dispersed rural areas 2/. STEG's low voltage consumers increased by 63,000 in 1980 of which, about 85% were domes- tic. Thus, by the end of the same year, the level of electrification was: urban 87%; rural conglomerations 31%; rural dispersed 4%; and country as a whole 54%. The aim of the Government's sixth NESDP is to double, by 1986, the level of electrification of rural conglomerations (from 31% to 60%) and to extend electricity service to almost all inhabitants living in large urban centers.

2.02 Between 1976-1980, the number of new low-voltage consumers connected in the urban areas averaged 48,000 per year. During the same period, their average consumption increased by 12% per year (from 600 kWh/year to 940 kWh/year). These high rates of growth were beyond STEG's forecast for the fifth plan (1977-1981), and consequently funds allocated in its budget for the reinforcement of the distribution network were inadequate for providing the required equipment and materials. This shortfall coupled with the higher priority given to generation and transmission, has rendered the urban distri- bution system inadequate to cope with the demand. On average, the voltage

I/ A conglomeration is defined by the Tunisian Government as a cluster of not less than 10 solid wall (brick) houses with a maximum of 100 meters between any two adjacent structures.

2/ On the basis of the 1975 census after adjustment for natural increase (2.36%) and immigration. - 14 - drop in the urban areas is double the maximum permissible level (20% as com- pared to 10%), and in certain lines it reaches as high as 40%. Rehabilitation of the distribution system is expected to reduce distribution losses by about 33% (from 12% to 8%). In addition, power failures in most urban load centers is the rule rather than the exception. This low quality of service and the substantial energy losses incurred by STEG (which can be reduced in value by about US$0.2 million in 1982, and US$1.9 million per year by 1986) have forced the corporation to give top priority to a rehabilitation program of the urban distribution systems, see Annex 4.5 11.

2.03 Project Description: The Project consists of the supply, construc- tion and erection of about 870 km of medium voltage three-phase lines, about 2,260 km of medium voltage single-phase lines, about 2,840 km of low voltage single-phase lines, about 1,000 (single phase) and 290 (3-phase) distribution transformers (total capacity about 62 MVA). It would also provide for con- struction and erection equipment, testing and training equipment, tools, consultants' services, and training of staff abroad. Details are found in Annexes 2.1, 2.2 and 2.3.

2.04 Project Scope, Beneficiaries and Location: The Project consists of the first three years (1982-1984) of STEG's five-year program (1982-1986) for the development of the urban and rural distribution systems (para. 1.28). It consists of three components: (a) rural electrification component; (b) urban rehabilitation component; and (c) a component covering the foreign cost of equipment, tools, training and consulting services. The rural electrification component would affect 15 Governorates by extending electricity service to about 30,400 new domestic customers, 2,100 pumping stations and 300 commercial and small industrial consumers situated in about 990 villages 2/. It involves the supply, construction and erection of about: 200 km of threephase medium voltage lines; 2,260 km of single-phase medium voltage lines; 2,060 km of single-phase low voltage lines; and 1,140 distribution transformers (3-phase and single phase) with a total capacity of 32 MVA (Annex 2.1). The cost of material and installation of public (street) lighting is borne by the budget of the Governorates and is therefore excluded from the Project. The urban rehabilitation component would encompass the entire country, and would improve the quality of service to more than 150,000 existing customers by rehabilitat- ing the distribution systems of about 60 cities and large towns. It involves the supply, construction and erection of about: 670 km of three-phase medium voltage lines; 780 km of single-phase low voltage lines; and 150 transformers with an estimated total capacity of 30 MVA (Annex 2.2). The third component would provide the necessary construction and erection equipment for the realization of the second component, testing equipment, tools and training (about 70 persons for a total of about 130 man-months) which would assist STEG

1/ Savings from system losses assume that the average voltage drop would be reduced to 10%.

2/ Of the 18 Governorates, the Governorates of Gafsa, Gabes and Medenine would not be affected by the proposed Project (see map). - 15 - in improving its technical capabilities. In addition, it irncludes a study of tile distribution system of Tunis. Details of this component are given in Annex 2.3.

2.05 Objectives: The Project when completed would extend electricity service to the beneficiaries at least cost by implementing the long-term program for rural electrification, reducing system losses, improving sales of electricity and operating efficiency of the system, and continuing the Bank's efforts in assisting STEG to expand its training program. In addition, the proposed Project would follow up in the efforts started by a previous Bank loan (TUN-1864) in rationalizing the energy pricing by having STEG pass on to its consumers the increased cost of fuels used for generation.

2.06 Project Cost Estimates: The estimated cost of the Project, excluding interest during construction, is TD 35.9 million (US$89.6 million), of which TD 16.6 million (US$41.5 million) would be in foreign exchange. Customs duties and taxes, estimated at US$5.1 million, would be met by STEG. The approximate breakdown of the Project cost is summarized below while Annex 2.4 gives the yearly Project cost estimates. - 16 -

TD Million uS$ Million Local Foreign Total Local Foreign Total a. Rural Electrification Equipment & material for electrical plant 1.45 5.73 7.18 3.63 14.32 17.95 Installation & erection, insurance & transport 3.73 0.13 3.86 9.33 0.33 9.66 Engineering 0.40 - 0.40 1.00 - 1.00 Construction supervision & overhead 1.27 - 1.27 3.19 - 3.19 Base Cost 6.85 5.86 12.71 17.15 14.65 31.80 Physical contingencies 1.03 0.88 1.91 2.56 2.20 4.76 Subtotal 7.88 6.74 14.62 19.71 16.85 36.56 Customs and taxes 1.10 - 1.10 2.75 - 2.75 Subtotal 8.98 6.74 15.72 22.46 16.85 39.31 Price contingencies 1.69 1.41 3.10 4.22 3.52 7.74 Total 10.67 8.15 18.82 26.68 20.37 47.05 b. Urban Rehabilitation Equipment & material for electrical plant 0.95 3.74 4.69 2.37 9.36 11.73 Installation & erection, insurance & transport 2.31 0.10 2.41 5.78 0.23 6.01 Engineering 0.28 - 0.28 0.70 - 0.70 Construction supervision & overhead 0.86 - 0.86 2.17 - 2.17 Base Cost 4.40 3.84 8.24 11.02 9.59 20.61 Physical contingencies 0.66 0.58 1.24 1.65 1.43 3.08 Subtotal 5.06 4.42 9.48 12.67 11.02 23.69 Customs and taxes 0.71 - 0.71 1.76 - 1.76 Subtotal 5.77 4.42 10.19 14.43 11.02 25.45 Price contingencies 1.09 0.94 2.03 2.72 2.34 5.06 Total 6.86 5.36 12.22 17.15 13.36 30.51

c. Equipment, Tools, Training, and Study Construction & erection equipment 0.46 0.90 1.36 1.14 2.26 3.40 Testing equipment, laboratory and workshop 0.33 0.62 0.95 0.83 1.54 2.37 Tools 0.32 0.99 .1.31 0.80 2.48 3.28 Training 0.03 0.14 0.17 0.08 0.35 0.43 Study of distribution system of Tunis 0.03 0.20 0.23 0.08 0.50 0.58 Base Cost 1.17 2.85 4.02 2.93 7.13 10.06 Physical contingencies 0.17 - 0.17 0.43 - 0.43 Subtotal 1.34 2.85 4.19 3.36 7.13 10.49 Customs and taxes 0.21 - 0.21 0.52 - 0.52 Subtotal 1.55 2.85 4.40 3.88 7.13 11.01 Price contingencies 0.17 0.25 0.42 0.42 0.65 1.07 Subtotal . 1.72 3.10 4.82 4.30 7.78 12.08 TOTAL 19.25 16.61 35.86 48.13 41.51 89.64 - 17 -

2.07 The Project base cost estimates are expressed in terms of anticipated rid-1981 prices. These estimates were developed by STEG and reviewed by the consultant and the Bank. Physical contingencies of 15% are considered appropriate due to the dispersion of the Project area. Price contingencies for the local cost components have been calculated at 8% per year for the period 1981-1984. Price contingencies for the foreign cost components have been calculated at 9.0% for 1981, 8.5% for 1982, and 7.5% for 1983-1984.

2.08 Project Financing: The proposed loan of US$41.5 million would finance 100% of the foreign exchange costs of the Project, excluding interest during construcion. Local costs would be met by customers' contributions, STEG's internal cash generation, and Government's contribution towards the cost of rural electrification. The proposed financing plan of the project is summarized below.

US$ million equivalent

Local Foreign Total

Proposed IBRD Loan -- 41.5 41.5 Customers' Contribution 4.7 -- 4.7 STEC''s Internal Cash Generation 15.2 -1 lj.2

Government's Contribution 28.2 -- 28.2 48.1 41.5 89.6

Project Preparation, and Engineering

2.09 Status of Project Preparation: During 1979-1980 and in anticipation of the sixth NESDP, STEG through its district offices, compiled information relating to rural Tunisia. Thus, by mid 1980, more than 2,000 villages had been surveyed and information pertinent to the electrification of each of those villages was collected. On the basis of this information and following the methodology used by TECSULT International Limited (Canadian consultants) who prepared a rural electrification study for the previous (fifth) NESDP, and suggestions made by the Bank, STEG has prepared a program for the development of the rural distribution system. The methodology used for the formulation of the plan has been reviewed by the Bank and the program is considered to represent the least-cost scheme for extending electricity service to the beneficiaries.

2.10 The physical quantities of equipment and material required (Annex 2.1) and the costs associated with the implementation of the rural electrification component of the Project, were derived from the information collected by STEG (para. 2.09). However, in the case of the urban rehabilita- tion component, since it was not possible to perform measurements on each line of the system, a representative sample of 60 lines situated in Tunis and its suburbs was selected. Measurements were performed on the sample lines and their average values were used to estimate the physical quantities of mate- rials (Annex 2.2) and associated costs for implementing the rehabilitation of the system. Finally, on the basis of the available stock and the volume of - 18 - works involved in the second component of the Project, the necessary construc- tion and erection equipment was determined by STEG and reviewed by the con- sultants and the Bank. The type and quantities of equipment required have been found to be reasonable, see Annex 2.3.

2.11 Engineering: The distribution equipment and materials used by STEG, as well as typical construction designs of distribution facilities are standardized. However, as new equipment and materials become available on the market, this standardization is revised. Consequently, technical specifica- tions for the equipment and materials needed to implement the Project are already available. In addition, STEG's procurement procedures call for inter- national competitive bidding and therefore specimens of tender documents are ready for review by the Bank. STEG's District offices, supported by the Head Office, have already started detailed Project design including topographic survey. In view of the volume of works involved, this task would continue to end-1983 with assistance provided by local engineering firms (see Implementa- tion Schedule, Annex 2.5). The detailed design relating to the portion of the Project which would be implemented in 1982, would be completed by July 1981. In the aggregate, contracts for detailed engineering to be awarded to local firms would provide for about 320 man-months of consultants' services. The study of the distribution system of Tunis would be a lump sum contract esti- mated at a foreign exchange cost of US$500,000 and would be awarded to a foreign firm. Terms of reference for this study have been cleared by the mission during appraisal and the contract is currently being negotiated. For the study of the distribution system of Tunis, STEG has agreed to employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank.

Project Implementation and Construction Supervision

2.12 Project Implementation: The Project would be implemented over four years, including one year (1981) for the preparation of detailed design and tender documents for the procurement of goods and works (Annex 2.5). Installation and erection of Project facilities would start in January 1982, and is expected to be completed by June 1985. In view of STEG's ability in the past to connect about 63,000 new rural and urban consumers per year (para. 2.01), implementation of the proposed Project in parallel with the extension of the urban distribution systems (representing on average 56,000 new connec- tions of rural and urban customers per year) is considered to be within STEG's capabilities. Upon commissioning, all facilities would be owned, operated and maintained by STEG.

2.13 For the rural component, installation and erection contracts and civil works associated with them would be awarded entirely to local contrac- tors on the basis of competitive bidding advertized locally. The installation and erection of the facilities of the urban component which involve work on live lines would be undertaken by STEG, while new extensions of the urban system would be awarded (as above) to local contractors. Due to the geo- graphical dispersion of the areas affected by the Project, individual con- struction and erection contracts would be small (not expected to exceed - 19 -

US$10,000) and it is therefore unlikely that foreign contractors would be interested in bidding for these contracts.

2.14 Construction Supervision: STEG would be responsible for the execu- tion of the entire Project. To that end it would prepare detailed Project implementation schedules, supervise installation and erection of Project facilities and handling of equipment and materials, monitor progress imple- me-tnt-inn -nd Trr -2r- quarte'1 -rngrcss r-oprt- for th- IBRD.

2.15 Procurement: Except as indicated below, contracts financed under the proposed loan for the supply of equipment and materials for electrical plant, construction and erection equipment, testing equipment, and tools, would be let by international competitive bidding in accordance with the Bank Group Guidelines for Procurement. since local manufacturers are expected to bid for about 40% of the distribution equipment and materials, for purposes of bid comparison, a preference limited to 15% of the c.i.f. price of imported goods, or the customs duty, whichever is lower, would be extended to responsive local manufacturers. Minor quantities of standard distribution equipment and materials, testing equipment, and tools, not exceeding Us$700,000 equivalent in total, would be procured in accordance with international shopping, after inviting quotations from at least three manufacturers. Meters and poles purchased locally will not be financed from the proceeds of the proposed loan.

2.16 In the interest of economy and efficiency, sTEG procures its yearly needs of distribution equipment and materials, once a year. In June of each year, bids are obtained for goods to be used during the following year. After award of contracts, and not later than December, STEG makes use of its option to revise upwards the ordered quantities, valued at the agreed unit price of the contract. In view of the soundness of this approach, procurement of equipment and materials for the electrical plant to be used in the Project will follow the same procedures.

2.17 Disbursement: Disbursements from the proceeds of the proposed Bank loan would be made for: (a) 100% of the foreign expenditures of directly imported equipment and materials for the electrical plant, or 80% of local expenditures of locally manufactured equipment and materials for the elec- trical plant; (b) 100% of the foreign cost of consultants' services; (c) 100% of the foreign expenditures of directly imported, or 80% of local expenditures of imported and locally supplied construction and erection equipment, testing equipment, and tools; and (d) 100% of the foreign cost of training. The esti- mated closing date would be December 31, 1985, six months after the estimated completion of the Project, to allow for payment of retention monies.

2.18 Retroactive Financing and Advanced Contracting; No retroactive financing or advanced contracting is involved in the proposed Project.

2.19 Environmental Aspects: The Project has no adverse pollution effects on the environment. Possible adverse aesthetic effects would be kept to a minimum by suitable routing of overhead lines. - 20 -

2.20 Risks: No special risks are foreseen, and no major implementation problems are expected.

III. FINANCE

3.01 Accounts: STEG has a well organized accounting department and an efficient computerized accounting and management information system. However, present computing facilities are saturated and STEG is considering expansion of these facilities in 1982 by creating a regional computer center at Sfax for billing customers in the central and southern regions of the country. Most accounting work is decentralized in the districts, whose performance is ade- quate. Tight control is exercised over all expenses by the Inspection Depart- ment and performance is monitored through a system of key performance indi- cators that has been in effect. for the past year. Computer applications have been extended to accommodate formulation of technical design, rural electrifi- cation and economic studies. In accordance with the National System of Accounts, interest during construction is not capitalized. Income taxes are recorded as charges and liability until formal exemption is given, usually the following year. STEG, being in a period of heavy investment, has been granted exemption from income taxes for 5 years (1977-1981), and this exemption is expected to be extended for another 5 years. Accordingly, income taxes have been eliminated from the financial statements.

3.02 Audit: Under the existing loan agreement (1355-TUN), STEG's financial statements are to be audited by independent auditors acceptable to the Bank and submitted within 5 months after the end of each fiscal year. In the past, STEG has not submitted the audited accounts within the agreed time limit; the audited accounts for 1979 were received only in September 1980. The delay in closing the accounts was attributed to the heavy workload of the Computing Department which gives priority to billing. Efforts are being made to allocate sufficient computer time for accounting work and it is expected that the 5-month period would be adhered to in the future. Since 1974, STEG's accounts were audited by an expatriate firm of chartered accountants, Nawar & Co., who were accepted by the Bank. STEG is now considering the appointment of another firm of auditors from a short list of auditing firms agreed with the Bank. The existing audit covenant would be repeated in the proposed loan.

3.03 Revaluation of Assets: Under Loan 1355-TUN, STEG is required to earn an annual rate of return of at least 8% on the current net value of its average fixed assets in service, valued from time to time with consistently applied methods of valuation or revaluation acceptable to the Bank. In the past, revaluation methods were not discussed or agreed with the Bank. The Bank did not also push for revaluation of STEG's assets since a high proportion of these assets have been added in the recent past. However, in view of the increasing inflation, STEG should now be required to revalue its assets and to compute the rate of return on such revalued assets. During appraisal, STEG agreed to revalue its electricity assets on a proforma basis for the purpose of calculating the rate of return. In the Second Natural Gas - 21 -

Pipeline Project (Loan 1864-TUN) STEG agreed to revalue its gas assets each year using the wholesale price index for Tunisia. In order to ensure consistency, the same index would be used in revaluing STEG's electricity assets. STEG has agreed to revalue its electricity assets each year using the Tunisian official wholesale price index.

3.04 Past Performance: STEG achieved a rate of return on unrevalued assets of 7.5% in 1977, 7.4% in~ 1978 and 8.5% in 1979 compared to the covenanted 8X (para 3.03); the riLLe of return in 1980 is estimated to be 7.9% on unrevalued assets, although tariffs were raised an av6rage 15% in October 1980 (see STEG's income statements for 1977-1980 in Annex 3.1). The corresponding rate of return on revalued assets was 5.6%, 5.4%, 6.6% and 5.0% in the years 1977 through 1980.

3.05 STEG's average tariff was increased by 20% in June 1977, 12% in December 1978, 15% in October 1980, and 8% in February 1981 to meet the increase in the cost of fuels and to finance a reasonable portion of its ambitious development program. With these tariff increases, STEG was able to finance from internally generated funds (after debt service and providing for working capital requirement) 28.0% of its investment program for the period 1977-1980. Including customers contribution, the self-financing level during the period was 47.2% (see STEG's Sources and Applications of Funds for 1977-1980 in Annex 3.3). Loan 1355-TUN also requires that STEG would not incur any debt without the approval of the Bank, except for financing the Project, if the principal amount of such debt would raise the aggregate principal amount of its debt to more than 45% of the sum of its equity plus the aggregate principal amount of its debt (including the principal amount of the debt to be incurred). So far, STEG has been able to maintain its debt below the above agreed percentage (40% in 1977, 38% in 1978, 44% in 1979 and 43% in 1980).

3.06 STEG's current liabilities have consistently exceeded current assets for the period 1977 through 1980 reflecting a tight liquidity position. The current ratio was 0.83, 0.80, 0.73, and 0.75 for the years 1977, 1978, 1979 and 1980 respectively. In the past, STEG has borrowed rather imprudently on a short-term basis to finance long-term investments. However, STEG's management has addressed the problem by requesting the appropriate authorities to convert some short-term loans into medium-term loans (TD 6 million in 1980 and TD 6.15 million in 1981) which would improve the current ratio. Of the current assets at the end of 1980, 75% consisted of accounts receivable for electricity supply and loans for watery heaters. Receivables on accounts of electricity bills alone represented 94 days of electricity sales at the end of 1979 (see para. 3.08).

3.07 In view of its tight working capital position, STEG has recently decided to change its policy of promoting electricity consumption by selling water heaters to domestic consumers on credit, repayable over 2 years. STEG's balance Sheets as of December 31, 1977-1980 are given in Annex 3.2. - 22 -

3.08 Collection of Receivables: As mentioned in para. 3.06, STEG's accounts receivable for electricity supply represented revenues equivalent to 94 days of sales at the end of 1979. Accounts receivable have in the past increased at a yearly average of 29% which indicates a deterioration in the collection work. The bulk of the accounts receivable are dues owed by state enterprises (30.9%), and Government offices and municipalities (27%). One state enterprise, SOTEMI, with an overdue amount of TD 3.2 million at the end of 1979, has suspended all payments since 1977 and diverted for other purposes Government subsidies granted to it to settle electricity bills. The Govern- ment departments operating under centralized state budget pay in advance 80% of the year's estimated bills. However, since their budget estimates for electricity consumption are unrealistic and do not reflect increases both in consumption and power rates, and since they do not make further monthly pay- ments in the course of the year, they too keep accumulating overdue amounts to STEG.

3.09 The question of overdue electricity bills by state enterprises (SOTEMI in particular) and Government departments has been seriously addressed by STEG's management and is being considered by the Government. With effect from June 1980, the heads of STEG's districts were empowered to cut off supply to delinquent consumers (domestic consumers, and private industrial), to follow-up very closely payments due by municipalities, and to participate in preparing the annual budget of Government departments in respect of elec- tricity consumption. STEG has agreed that at no time its receivables for electricity shall exceed the equivalent of three months' sales. Government has also agreed to take all measures necessary on its part to enable STEG always to maintain its receivables for electricity at no more than three months' sales. As recorded in the minutes of negotiations, Government and STEG would take all necessary measures to ensure that arrears owed by State enterprises through December 31, 1980 are settled by the end of 1982.

3.10 Financing Plan: The following table summarizes the sources and applications of funds of STEG for 1981-1986 assuming: (i) equal annual increases in fuel prices so that domestic prices reach parity with inter- national prices by 1987; and (ii) average tariff increases of 3.6%, 21.2%, 24.2%, 18.7% and 15.7% in each of the years 1982-1986, so as to secure for STEG a return on revalued assets of 8% in 1981 and 6% in 1982 through 1986 (Annex 3.4). STEG's investment program for 1981-1986 amounts to US$1,141 million which will be financed 35.5% from STEG's internal cash generation excluding customers' contributions, 6.2% from Government contributions, 10.2% from customers contributions, 3.3% from customers' deposits (net of other requirements), and 44.8% from borrowings. - 23 -

-19811986- - Amount (Thousands) % of Capital TD US$ Expenditure

Capital Expenditure Requirements

The Project 35,860 89,650 7.9 Other Investment Program Components 420,644 1,051,610 92.1 Total 456,504 1,141,260 100.0 Source of Funds

Internal Cash Generation 322,543 806,358 70.7 Customers' Contributions 46,670 116,675 10.2 Less Debt Service (150,309) (375,773) (32.9)

218,904 547,260 48.0

Less Working Capital Increase (10,649) (26,623) (2.3)

Total Net Internal Cash Generation 208,255 520,638 45.7

Government Contributions 28,240 70,600 6.2 Customers' Deposits (net of other requirements) 15,199 37,997 3.3

Borrowings

Proposed IBRD Loan 16,600 41,500 3.6 Existing Loans 7,913 19,783 1.7 Other Loans 180,297 450,743 39.5

Total Borrowings 204,810 512,025 44.8

Total Sources 456,504 1,141,260 100.0

3.11 Of the total borrowing requirements estimated at US$512.0 million equivalent, US$41.5 million would be from the proposed IBRD loan, US$19.8 million from existing loans and US$450.7 million from other loans (mainly supplier's credits) to be secured. In the past, STEG has successfully obtained suppliers' credits which, coupled with bilateral assistance at concessional terms, resulted in very favorable credit terms (average of 7% interest rate, 15 years repayment period after 3 to 5 years of grace). It is reasonable to expect this trend to continue especially in view of the type of equipment for which supplier's credits will be sought (generation, transmission and dispatching center). In addition, STEG's investment program allows for flexibility in its implementation without jeopardizing the Project. By postponing the realization of some components of its development program (two of the four units of Rades and the completion of the 225-kV loop around Tunis) STEG can curtail its financing needs by about US$250 million. - 24 -

3.12 The proposed Bank loan would finance about 3.6% of the construc- tion requirements of the 1981-86 program and the full foreign exchange cost of the Project. The Government would cover any shortfall in the funds required to complete the Project including cost overruns.

3.13 Future Financial Performance: Any target for STEG's future finan- cial performance should take account of the Government's stated objective to gradually eliminate subsidies extended to petroleum products by 1987 (para. 1.19), and the following:

(a) the need to reach an appropriate rate of return after recovering all increased operating costs from year to year arising from inflation and otherwise;

(b) the need to maintain a satisfactory self-financing level; and

(c) the feasibility of the tariff increases necessary to secure the above objectives.

Assuming equal annual fuel price increases (31% for fuel oil and gas, and 17% for diesel oil) beginning in 1982 so that domestic prices reach parity with international prices by 1987 (para. 1.19), and reasonable rates of inflation in other operating expenses, it is estimated that STEG could earn a return of 8% on revalued assets in 1981 without any tariff increase. However, it would need much higher increases than have been realized in the past to earn the convenanted return of 8% on revalued assets in the years from 1982 onwards. In order to avoid abrupt and drastic price adjustments that would be disruptive socially and economically and at the same time move the entire economy to a better system of pricing policies, the rate of return required will be reduced to 6% in any year in which the prices of fuels used by STEG are increased by at least 20%. Even with a lower rate of return of 6% from 1982, STEG's internal cash generation during the period 1981-1986, including customer contributions, would be a healthy 45.7%. During this period STEG would also have a satisfactory debt/equity ratio (ranging from 31/69 to 36/64) and a satisfactory debt service cover- age (above 1.7). Government has agreed to progressively raise the domestic selling prices of petroleum products to international levels within a period of five years from January 1, 1982. Government and STEG have also agreed to take all necessary measures, including tariff increases, if necessary, to enable STEG to meet the rate of return of a minimum 8%. However, from 1982, the rate of return to be achieved by STEG would be 6% in any year in which fuel prices are increased as above. In order that the Bank may be aware of STEG's earnings prospects in good time, STEG has agreed to prepare and submit to the Bank and the Government, by October 31 each year, financial forecasts for the current and following years indicat- ing the underlying assumptions, the changes in tariffs, if any, required, and the measures proposed to produce the annual rate of return. - 25 -

3.14 As a result of the proposed tariff increases (see para. 3.13) and of revaluation reserves, STEG's debt/equity ratio would improve from 43/57 at the end of 1980 to 35/65 at the end of 1986. STEG's current ratio which was 0.75 at the end of 1980 would improve to slightly above 0.9 during 1981-1986 reflecting an improving liquidity position.

3.15 Debt Service Covenant: In response to STEG's request, and to be consistent with Loan Agreement 1864-TUN (Second National Gas Pipeline project) the debt limitation covenant under Loan 1355-TUN (see para. 3.05) would be superseded by a more conventional debt service covenant, under which STEG would obtain the Bank's prior approval for any new long-term borrowing unless the net revenue for each year during the term of the debt (before depreciation and interest) is at least equal to 1.5 times the projected debt service requirement for such year, on all its debt, includ- ing the debt to be incurred.

3.16 Insurance: STEG's insurance arrangements are satisfactory. It has insured its assets with a national company against risks of fire, explosion, mechanical and electrical damage at all generating plants and substations of 90 kV and over and against only fire in the head office, district offices, storage depots and warehouses. It carries its own risks in respect of transmission and distribution lines, and distribution sub- stations. This arrangement is satisfactory, considering STEG's high opera- tion and maintenance standards.

3.17 Lending Arrangement: In accordance with normal Bank policy, the entire loan would be made to STEG, the beneficiary, with the guarantee of the Government on standard Bank terms (17 years including 4 years of grace). The foreign exchange risk will be borne by the borrower.

IV. PROJECT JUSTIFICATION

A. Load Forecast

4.01 The forecast of electricity sales in Tunisia between 1981 and 1986 was estimated by STEG. Both the assumptions and the methodology used for forecasting were reviewed by the Bank and were found to be acceptable. Electricity sales are expected to grow at an average annual rate of about 15%, compared to an average annual rate of 16%(from 1,010 GWh to 2,120 GWh) for the period 1975-1980. The growth of sales is expected to almost remain at its historical level because of the Government's intensified efforts in industrializing the country, and expanding the rural and urban distribution networks which would result (during 1982-1986) in the connection of about 56,000 new low voltage consumers per year. Details of the forecast of sales by voltage level of service are summarized in Annex 4.1.

4.02 A very conservative forecast of sales for the rural electrifica- tion component of the Project, disaggregated by customer category such as - 26 - domestic, pumping, commercial and small industrials, was derived by the mission on the basis of information extracted from STEG's records and data collected by visiting 36 villages. The data collected was used to derive three parameters which were used to forecast the demand by the bene- ficiaries: (a) initial connection rates; (b) consumption during the first year of service; and (c) rate of growth of consumption. The initial con- nection rate refers to the number of consumers that would be connected to STEG's system in the first three years, once service is made available. They were estimated to be about 23% for the first year, 34% for the second, and 43% for the third. The consumption during the first year of service was estimated to be 300 kWh per domestic connection; 2,500 kWh per shallow pumping installation; 150,000 kWh per deep-well pump; and 1,200 kWh per small industrial consumer. Very conservative rates of growth have been used in calculating the consumption of the rural beneficiaries and are summarized below:

(%) RATES OF GROWTH OF CONSUMPTION FOR THE RURAL BENEFICIARIES

Domestic Surface Pumping Deep Wells Other

First 5 Years 10.0 2.5 2.5 10.0 6-10 Years 8.0 2.5 2.5 6.0 10-15 Years 7.0 2.5 2.5 6.0 Thereon 6.0 2.5 2.5 4.0

4.03 The forecast of the demand for electricity by the urban beneficiaries was derived by STEG's distribution department based on the historical data maintained by the corporation. The assumptions used in forecasting were reviewed by the Bank and found to be reasonable. The average consumption per urban domestic connection during the first year of service was estimated to be about 600 kWh, and per small commercial and industrial consumer was 1,000 KWh. In this case also, very conservative rates of growth have been used in calculating the consumption of the urban beneficiaries and are summarized below:

(%) RATES OF GROWTH FOR THE CONSUMPTION OF THE URBAN BENEFICIARIES

Domestic Other

First 5 Years 8.0 6.0 6-10 Years 6.0 5.0 10-15 Years 5.0 4.0 15-20 Years 5.0 3.0 20-25 Years 5.0 2.0 Thereon .5.0 1.0 - 27 -

B. Least Cost Alternative

4.04 The Project consists of the first three years (1989-1984) of 6TEG's five-year program for the extension of electricity service to the rural consumers and the rehabilitation of the urban distribution system. During preparation of the long-term program for the extension of the rural distribu- tion network, the Bank discussed with sTEG the elements to be taken into consideration to ensure that the program is least cost. After its completion, the Bank reviewed the program and found the basis used for its formulation to be consistent with the methodology accepted by the Bank for designing such programs.

4.05 bTEG has had at least 10 years experience in formulating its own least cost program for the extension and rehabilitation of its urban distribu- tion network. During its early years of development, iTEG worked closely with EdF in strengthening its capabilities for planning and implementing urban distribution projects. sTEG's program for the development of its urban dis- tribution network between 1982-1986 was reviewed by the Bank and found to be acceptable, both conceptually and technically.

C. Return on Investment

4.06 The Project consists of three components: (i) the electrification of about 990 villages; (ii) the rehabilitation of the distribution systems in about 60 cities and large towns; and (iii) equipment, tools, training and consulting services (para. 2.04). The calculation of the economic rate of return on the Project is not possible because the quantification of the bene- fits associated with the urban distribution component and the component cover- ing the tools, training, and consulting services is not possible. Instead, the return on STEG's 1982-1984 program for the development of its low voltage distribution networks (urban and rural) is calculated as a proxy for the return on the Project. The return on the rural electrification component on the Project is also calculated to ascertain its economic merit.

4.07 The economic return on STEG's distribution program is 11.6%. It is based on benefits comprised of; the incremental revenues associated with the sale of electricity to the urban and rural consumers; the connection and meter charges; the consumers' net fuel savings; and the fuel savings that would accrue from the reduction of distribution losses (Annex 4.4). The long run average incremental cost for the electricity delivered to the low voltage urban and rural distribution networks is taken as a proxy for the economic cost associated with the program. Although the return on bTEG's distribution program compares favorably with the opportunity cost of capital of about 11%, it nevertheless underestimates the real return on the program because the entire surplus accruing to the consumers could not be estimated. - 28 -

4.08 The return on the rural electrification component of the Project is 8.3%. This is based on benefits which include the revenues generated from the sale of electricity to the beneficiaries, the connection and service charges, and the net fuel savings to the beneficiaries (Annex 4.4). The long run average incremental cost of electricity delivered to the rural distribution network is taken as a proxy for the economic cost of electricity supplied to the beneficiaries. The assumptions used in calculating the rate of return are summarized in Annex 4.4.

V. AGREEMENTS REACHED AND RECOMMENDATION

5.01 Government and STEG will take all necessary measures, including tariff increases, to ensure that sTEG achieves a rate of return on revalued assets of not less than 8% (as described in para. 3.10). However, from 1982 the rate of return to be achieved by STEG would be 6% in any year in which the prices of fuels used by STEG are increased by at least 20% (para. 3.13).

5.02 Government will:

(a) implement revised electricity tariffs promptly, and in any case not later than 2 months after the fuel price increases, so that STEG recovers the total increases in its fuel cost (para. 1.20);

(b) take all measures necessary to enable STEG always to maintain its receivables for electricity at no more than three months' sales (para. 3.09);

(c) cover any shortfalls in the financing plan of the Project (para 3.12); and

(d) progressively raise the domestic selling price of petroleum products to international levels within a period of 5 years from January 1, 1982 (para. 3.13).

5.03 STEG will:

(a) furnish to the Bank for its approval a detailed description of the proposed training program (para. 1.31);

(b) employ, for the study of the distribution system of Tunis, consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank (para. 2.11);

(c) revalue each year the fixed assets that relate to its power activity, using as revaluation factor the wholesale price index for Tunisia (para. 3.03);

(d) ensure that its receivables for electricity supply shall at no time exceed the equivalent of three months' sales (para 3.09); - 29 -

(e) prepare and submit to the Bank and the Government, by October 31 each year, financial forecasts for the current and following years, indi- cating the underlying assumptions, the changes in tariffs, if any, required, and the measures proposed to produce the annual rate of return (para. 3.l3); and

(f) not incur any debt, without Bank approval, if its debt service cover- age ratio is less than 1.5 in each year. This covenant would replace the existing debt limitation covenant of the becond Power Project (para 3.15).

5.04 The audit provisions under Loan 1355-TUN would be extended to the proposed loan.

5.05 In view of the agreement on the matters set forth in this report, the Project is suitable for a loan of U6$41.5 million on the usual terms. There are no special conditions of loan effectivenss. The loan is expected to become effective within 3 months of loan signing.

April 22, 1981 TUNISIA

POWER III PROJECT

STEG's Installed Generating Capacity

Name of Station 1970 1971 1972 1973 1974 1975 1976 1977 1978 1973 1980 1981 1982 1983 1984 1985 1986

Steam oTiette I 58.0 58.0 58.0 58.0 58,0 s 58.0 58.0 58.0 58.0 58.0 58.0 58.o 58.0 58.0 58.0 58.0 Goulette II 110.0 110.0 110 .0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 110.0 l10.0 110 0 110.0 110.0 Ghannouch (A) - - 60.0 60.0 600 60.o 60.0 60.0 60.0 60.0 60.o 60.o 60.o 60.0 6o.o 60o. 60.o (A) 320.0 320.0 320.0 320.0 320.0 320.0 320.0 Rnades (A) _ 160.0 320.0

Total Steam 168.0 168.o 228.0 228.0 228.0 223.0 228.0 228.0 228.0 228.0 548.o 548.0 548.o s48.o s48.o 708.0 868.o

Hydro El Aroussia 4.6 4.6 4.9 14.9 4.9 4.9 4.9 4.9 4.5 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 Nebeur 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 13.0 FeTnana 10.3 10.3 10.2 10.2 10,2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 10.2 Kasseb 0.7 0.7 0.7 0.3 0.7 0.7o.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 Sidi Salem_ 36.0 36.0 36.o 36.o 36.0

Tttal Hydro 28.6 28.6 28.8 28.8 28,8 28.8 28.8 28.8 28.8 28.8 28.8 28.8 64.8 64.8 64.8 64.8 64.8

Combustion Turbine Tunis - Sud 44.o 44.0 44.o 66.o 66,o 66.o 66.o 66.o 66.o 66.o 66.o 66.o Sfax 44.o 44.o 44.o 44 o 44.o 44.o 44.o 44 o 44.o 44 o Korba 22.0 22.0 22.0 22.0 22.0 22.0 414.o 44.o 44.o Yetlaou 22.0 22.0 22.0 22.0 22.0 22.0 22.0 22.0 22.0 Senzel Bourguiba 44.0 441.0 44.0 144.0 44.,,) 44.0 44.o 44.0 44.0 Ghannouch 15.0 15.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 44.0 Bouchemma 62.0 62.0 62.0 62.0 62.0 62.0 62.o 62.0 62.0 62.0 Kasserine 110.0 110.0 110.0 110.0 Robbana ______22.0 22.0 22.0

Total Combustion Turbine 15.0 15.0 59.0 59.0 103.0 103. 0 209.0 319.0 319.0 319,0 319.0 319.0 1423.0o 473.0 14730 1458.0

Diesel

Total Diesel 18.6 18.6 15.6 15.6 15.6 15,2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2

System Total 215.0 230.0 287.4 331.4 331.4 375.0 375.0 1481.0 59.0 591.0 911.0 911. 947.0 1057.0 1101.0 1261.0 1406.o

February 1981 TUNISIA

POWER III PROJECT

STE'ROs Available Generating Capacity

Name of Station 197O 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Steam Goulette I 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 Goulette II 96.o 96.o 96.o 96.0 96.o 96.o 96.0 96.o 96. 56.0 960o 96.o 96.o 96.o 96.o 96.o 96.0 Ghannach (A) _ _ 58.0 58.o 58.o 58.0 58.0 58.0 58.0 s8.o 58.0 58.0 58.0 58.0 58.o 58.o 58.0 Sousse (A) _- - - - 300.0 300.0 300.0 300.0 300.0 300.0 300.0 Rades (A) _ _ _ 150.0 300.0

Total Steam 121.0 121.0 179.0 179.0 179.0 179.0 179.0 179.0 179.0 179.0 479.0 479.0 479.0 479.o 479.0 629.0 779.0

Hydro Stations El Aroussia 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 Nebeur 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 .10.0 10.0 10.0 10.0 Fernana 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 Kasseb 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Sidi Salem - - - -- 28.0 28.0 28.0 28.0 28.0

Total Hydro 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 23.0 51.0 51.0 51.0 53.0 51.0

Combustion Turbines Tunis-Sud - - - - - 41.0 41.0 41.0 63.o 63.0 63.0 63.0 63.0 63.0 63.0 63.0 63.o Sfax ------41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 H Korba ______- 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 Metlaoui .------20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 Menzel Bourgiba ------41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.0 41.o Ghannouch - 14.0 14.0 56.0 56.o 56.o s6,.o 56.o s6.o 56.o 56.o 56.0 56.0 56.o 56.o 56.0 42.0 Bouchemma - 58.0 58.0 s8.o 58.0 58.0 58.0 58.0 58.0 58.0 58.0 Kasserine ------_ ------100.0 100.0 100.0 100.0 Robbana - 20.0 20.0 20.0

Total Combustion Turbine - i4.o 14.0 56.0 56.o 97.0 97.0 196.0 299.0 299.0 299.0 299.0 299.0 399.0 419.0 419.0 385.0

Diesel

Total Diesel 18.4 18.4 15.6 15.6 15.6 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2

Total Available 162.4 176.4 231.6 273.6 273.6 314.2 314.2 413.2 516.2 516.2 816.2 816.2 844.2 944.2 964.2 1,114.2 1,230.2

Peak load 142.0 162.0 175.0 192.0 225.0 247.0 272.0 320.0 374.0 437.0 490.0 560.0 640.o 720.0 810.0 910.0 1,020.0

Reserve NW 20.4 14.4 56.6 81.6 48.6 67.2 42.2 93.2 142.2 79.2 326.2 256.2 204.2 224.2 154.2 204.2 210.0

As % of Load 14% 9% 32% 43% 22% 27% 16% 29% 38% 18% 67% 46% 32% 31% 19% 22% 21%

Load Factor (%0 54% 54%1 56% 57% 55% 55% 56% 54% 541 55% 55% 55% 55% 55% 55% 55% 55%

February 1981 TUNISIA

POWER III PROJECT

STEG's Available Net Generation (GWh)

1982 1983 1984 1985 1986 1973 1974 1975 1976 1977 1978 1979 1980 1981 Name of Station 1970 1971 1972

Steam /I 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 150 576 576 Goulette I 576 576 576 576 576 576 576 576 576 576 576 Goulette I 576 576 576 576 348 348 348 348 348 348 348 348 348 348 348 348 348 348 348 Ghannouch (A) 300 1,800 1,800 1,800 1,800 1,800 1,800 Sousse (A) ____go 1,350 Rades (A) 2,874 3,324 4,224 1,074 1,074 1,074 1,074 1,074 1,374 2,874 2,874 2,874 Total Steam 726 726 1,074 1,074 1,074

Hydro Stations 2 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 El Aroussia 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Nebeur 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 Fernana 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Kasseb 28 56 56 56 56 Sidi-Salem _ 102 102 102 46 46 46 46 46 46 46 46 46 74 102 Total IHydro 46 46 46 , 208* Combustion Turbines 164* 208* 208* 208* 126 126 208* 208* 208* 82 82 82 T5ins-Hud 82 164* 164* 164* 82 82 164* 164* 164* 40 Sfax 40 80* 80* 40 40 80* 80* 8O* Korba 40 80* 80* 40 40 80* 80* 4o 40 Yetlaoui 82 164* 164* 82 82 164* 164* 82 82 Bourgiba 112 84 Menzel 112 112 112 224* 224* 112 112 112 112 28 28 112 112 112 112 116 116 Ghannouch 116 116 116 232* 232* 116 116 116 116 Bouchemma 200 400* 400* Kasserine 40 80* 80* Robbana _ _ _ _ 924 1,164 1,282 1,132 112 194 310 474 762 1,152 1,152 598 598 Total Combustion Turbine 28 28 112 112

Diesel A 31 31 31 31 31 31 31 31 31 31 31 31 31 Total Diesel 37 37 31 31 4,171 4,739 5,489 1,345 1,461 1,625 1,913 2,303 185 3,549 3,577 3,931 Total Available 837 837 1,263 1,263 1,263 3,890 4,370 4,9o0 1,204 1,339 1,518 1,786 2,082 2,524 2,833 3,070 3,460 Required Generation 680 769 869 963 1,099 471 281 369 589 164 141 122 107 127 221 2,709 716 507 Margin (Deficit) 157 68 394 300 13.6% 7.2% 8.4% 12.0% 14. % 11.7% 9.1% 7.0% 7.1% 10.6% 7.4% 25.3% 16.5% As a % of Required Generation 23.1% 8.8% 45.3% 31.2%

Based on 6,000 hour average yearly operation. retirement of old plant. Z Based on 2,000 hour average yearly operation. Seductions reflect scheduled * Based on 4,ooo hour average yearly operation. /3 Based on 2,000 hour average yearly operation.

February 1981 TUNISIA

POWER III PROJECT

STEG's TranEsission & Distribution Syetems

1970 1971 1972 1973 19714 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Transmission Network Lines 25 kV (7ko) - - 100 150 220 431 546 546 622 727 727 727 727 767 767 Lines 150 kV (km) 745 745 745 745 936 936 960 1,028 937* 970 1,006 1,006 1,006 1,006 1,028 1,056 1,188 Lines 90 kV (km) 378 442 442 442 442 442 442 500 578 581 581 594 604 604 604 714 730 Lines 30 & 15 & 10 kV (km) - - 4,280 4,880 5,490 6,092 6,550 7,140 7,730 8,892 9,960 1l,loo 12,600 13,800 15,800 16,300 17,600 Lines 220 & 100 V (km - - 4,ooo 4,920 5,850 6,770 7,675 8,585 9,500 13,916 12,000 13,200 14,200 15,300 16,500 17,700 19,000

Transformer Stations Prinary voltage 225 kV (units) ------3 3 3 6 6 6 7 7 8 8 Primary voltage 150 kV (units) 7 7 8 8 9 9 9 10 10 11 11 12 12 12 12 13 14 Primary voltage 90 kV (units 3 4 5 5 5 5 5 5 5 6 6 6 6 6 6 8 9 Primary voltage 30 or 15 or 10 kV (units) - - - - - 3,511 3,886 4,o64 5,308 6,o66 6,600 7,250 7,950 8,750 9,600 10,550 11,550

Installed Transformer Capacity Primary voltage 225 kV (MVA) ------330 330 630 860 860 860 940 940 1,040 1,040 Primary voltage 150 kV (MVA) 235 235 260 260 310 310 310 400 480 660 700 700 700 700 700 780 940 Primary voltage 90 kV (MVA) 340 370 390 390 490 490 49o 490 490 640 680 680 680 790 790 930 1,070

Nunber of Customers At 150 kV level 1 1 1 1 1 2 2 3 3 4 4 5 5 6 6 6 6 At 90 kV level 1 I 1 1 1 1 1 2 3 3 3 3 3 3 3 3 3 At 30, 15 and 10 kV level 1,244 1,319 1,412 1,5,40 1,728 1,934 2,304 2,682 3,023 3,452 4,0oo ------At 380, 220 and 100 V level 283,100 302,392 327,870 352,430 382,540 400,290 441,390 494,530 547,740 622,000 685,000 753,300 820,100 877,900 933,800 984,500 1,035,000

Electrification Level Urban (% 66 69 74 78 84 87 92 94 96 98 99 100 Rural (%) - - - - - 4 6 7 10 26 31 35 39 43 47 51 54 Country total (4) 29 30 31 32 33 34 37 4o 44 49 54 56 62 65 68 71 73

April 1981

l~~~~~~~~~~~~~~~~~~~~~a 34 - ANNEX 1,5

TUNISIA

POWER III PROJECT

STEG's Tariffs (October1, 1980)

Equipment Capacity ----Energy Charge---- Category Rent Charge Day Night Peak (TD/month) (TD/kW month) (milliems/kWh)

High Voltage

(a) General - 0.5 17 12 25

(b) Second Feeder 30.0 0.1 25 12 45

Medium Voltage

(a) General 15.0 1.5 23 13 35

(b) Off-Peak Operation 2.5 0.1 34 34 -

(c) Agricultural(Off-Peak) 2.5 1.5 23 13 _

(d) Second Feeder 15.0 0.5 32 15 47

Low Voltage

(a) Industrial& Commercial - 0.1 50 50 50 (3 kVA and over)

(b) Lighting (1 to 2 kVA) 0.1 - 50 50 50

(c) Agricultural(Off-Peak) 0.7 - 23 13 _

(d) Water Heaters 0.4 - 24 24 _

(e) Heating & Air Conditioning 0.2 - 40 40 40

(f) Grain Mills 0.3 0.1 36 36 36

(g) Public Lighting 0.5 Declining two block (From 0 to 30 kWh/KVA: 50 milliems/kWh) From 30 upwards kWh/KVA: 32 milliems/kWh)

February 1981 - 35 - ANNEX 1.6

TUNISIA POWERIII PROJECT STEG'sOrganzation

Board of Directors

President General Manager

Deputy General Manager

Financial Department Clericaland Support Services y 1Department

: InspectionDepartment ,VGeneration Department -

j ~~LegalDepartment J -| General Affairs Department |-

Data Processing Department - | Administrative Department i

_ Procurement and Stores Department Transmission Department |-

_ Planning and Studies Department Distribution Departmenit _

A System Maintenance Departmer Customer Department _

February 1981 VVorld Bank -22564 - 36 - ANNEX 1.7

TUNISIA

POWER III PROJECT

STEG's AdministrativeRegionalization of Tunisia

Governorate Region Districts of STEG

Tunis Tunis Tunis Ville Zaghouan Ariana Le,Kram Zaghouan

Bizerte Northern Bizarte Nabeul Beja Beja Siliana El Kef Jendouba

Sousse Central Sousse .Monastir Monastir Mahdia Kairouan Kasserine Kasserine

Sfax Southern Sfax Jebiniana* Mahres* Sidi Bouzid Cafsa Gafsa Metlaoui* Gabes Gabes Medenine

* New districts under creation.

February 1981 TUNISIA POWER III PROJECT DistrictOrganization

District

Clerical and Support Services

Operations Customer Relations Planning and Studies

1 SystemMaintenance l -1 Sales 2 -| Engineering

_Construction _ | Customer Service Budget and Supplies

_ Und~erground Cables _Data Col1lection _Planning

_Meter and Measurement Lab. _ Accounting Storesand Transport

-F~ Metering |Administrative Services

Area Offices

February 1981 World Bank -22565 tx TUNISIA

POWER III PROJECT

Rural Electrification Component

List of Equipment and Materials

M. Voltage No. of No. of Domestic Pumping Stations Other Lines (km) L. Voltage Transformers (kVA) L Governorate Villages Customers Surface Deep Customers 3-Phase 1-Phase Lines (kn) 3-Phase 1-Phase

Tunis 28 3,400 18 - 6.1 4.5 37.0 443 1,047 Zaghouan 31 700 6 - - 1.0 93.7 43.8 120 1,490 Siliana 52 1,150 2 3 16 7.8 138.6 80.4 828 247 103 2,400 62 - 16 10.0 213.4 176.5 630 1,818 Beja 50 1,350 31 - - 31.3 52.1 92.8 552 411 Jendouba 85 3,300 26 - - - 156.6 179.4 - 2,110 Le Kef 52 1,450 35 - 4 - 146.6 109.2 - 1,380 Nabeul 62 2,000 390 - 30 12.5 90.8 85.2 1,233 1,025 Monastir 37 1,100 - - - 16.0 33.2 49.4 494 435 Mahdia 65 1,600 - - - - 154.2 115.2 - 1,071 Sousse 31 1,000 41 - - 4.8 51.5 36.7 394 615 Kairouan 65 3,100 422 2 130 50.0 163.3 230.3 1,742 1,795 Kasserine 40 1,350 17 1 6 9.6 154.2 152.4 99 1,337 Sfax 135 3,500 - - 98 - 391.2 331.2 - 2,000 Sidi Bouzid 154 3,000 1,050 20 - 51.0 418.2 342.6 2,256 6,800

TOTAL 990 30,400 2,100 26 300 200.1 2,262.1 2,062.1 8,791 23,581

March 1981 _ 39 - ANNEX 2.2

TUNISIA

POWER III PROJECT

Urban Rt.habilitation

List of Equipment and Materials

Lines (km) Transformers District M. Voltage L. Voltage (kVA)

Tunis Center - 118 270 Tunis North 17 17 270 Tunis South - 53 990 Tunis (Special) 116 - - Tunis East 1 7 1,080 Tunis West 7 20 3,600 Zaghouan 52 28 360 Siliana - Bizerte 90 108 2,340 Beja 69 10 270 Jendouba 3 24 450 El Kef 22 37 900 Nabeul 70 68 4,500 Monastir 33 4 720 Mahdia 65 28 1,260 Sousse 22 30 990 Moknine 5 17 1,620 Kairouan 1 21 900 Kasserine 34 7 450 Jebeniana - - - Mahres 1 270 Sidi Bouzid - _ _ Sfax 6 96 1,800 Gabes 44 23 3,420 Gafsa 5 5 720 Zarzis 10 60 2,700

TOTAL 672 782 29,880

February 1981 - 40 - ANNEX 2.3

TUNISIA

POWER III PROJECT

Estimated Cost of Equipment, Tools, Training and Study (TD'OOO)

Units Local Foreign Total a. Construction& Erection Equipment Hydraulic platformsand drills 20 210 448 658 Forklifts 14 68 124 192 Concrete mixers 26 30 55 85 Stands for unwinding cables 12 16 28 44 Trucks 5 19 35 54 Crew cars 40 118 214 332

Subtotal 461 904 1,365 b. Testing Equipment,Laboratory and Workshop Civil works 30 - 30 Laboratory & workshop testing equipment 20 56 76 Vans equiped with cable testing facilities 278 560 838

Subtotal 328 616 944 c. Tools Security tools (gloves,belts, etc.) 54 468 522 Hand and bench tools 244 491 735 High tension tools 16 33 49

Subtotal 314 992 1,306 d. Training Training simulatornetwork 25 33 58 Training media 4 17 21 Training of staff 3 90 93

Subtotal -32 140 172 e. Study of DistributionSystem of Tunis

Subtotal 32 200 232

TOTAL 1,167 2,852 4,019

April 1981 41 - ANNEX2.4

TUNISIA

POER III PROJECT

Yearly Project Cost Estimates (U3$ Million)

~982 1983 E984 1984 L/C /C L/C F/C L/C F/C Total

A. Rural Electrification

Equipment & material for electrical plant 0.81 3.22 1.19 5.17 1.63 5.93 17.95 Installation& erection, insurance and transport 2.28 - 3.30 - 3.75 0.33 9.66 Engineering 0.34 - 0.52 - 0.14 - 1.00 Construction supervision and overhead 0.87 - 1.22 - 1.10 - 3.19

Base Cost 4.30 3.22 6.23 5.17 6.62 6.26 31.80

Physical contingencies o.64 o.48 0.93 0.78 0.99 o.94 4.76

Subtotal 4.94 3.70 7.16 5,95 7.61 7.20 36.56

Customs and taxes o.69 - 1.00 - 1.06 - 2.75

Subtotal 5.63 3.70 8.16 5.95 8.67 7.20 39.31

Price contingencies 0.51 0.42 1.40 1.08 2.31 2.02 7.74

Total 6.14 4.12 9.56 7.03 10.98 9.22 47.05

B. Urban Rehabilitation

Equipment & material for electrical plant 0.53 2.06 0.78 3.48 1.06 3.82 11.73 Installation & erection, insurance and transport 1.41 - 2.03 - 2.34 0.23 6.01 Engineering 0.24 - 0.36 - 0.1o - 0.70 Engineering, construction supervision and overhead 0.59 - 0.83 - 0.75 - 2.17

Base Cost 2.77 2.06 4.oo 3.48 4.25 4.05 20.61

physical contingencies 0.41 0.31 o.60 0.52 o.64 o.61 3.08

Subtotal 3.18 2.37 4.6o 4.oo 4.89 4.65 23.69

Customs and taxes o.44 - o.64 - o.68 - 1.76

Subtotal 3.62 2.37 5.24 4.00 5.57 4.65 25.45

Price contingencies 0.33 0.30 0.90 0.72 1.49 1.32 5.06

Total 3.95 2.67 6.14 4.72 7.06 5.97 30.51

C. Equipment, Tools, Training, and Study

Construction and erection equipment 1.14 2.26 - - 3.40 Testing equipment, laboratory & workshop 0.83 1.54 2.37 Tools 0.80 2.48 3.28 Training 0.05 0.20 0.03 0.15 - - 0.43 Study of distribution system of Tunis 0.08 0.50 - - - _ 0.58

Base Cost 2.90 6.98 0.03 0.15 - - 10.06

Physical contingencies 0.42 - 0.01 - 0o.43

Subtotal 3.32 6.98 o.o4 0.15 10.49

Customs and taxes 0.52 - 0.52

Subtotal 3.84 6.98 o.o4 0.15 11.01

Price contingencies 0.41 o.62 0.01 0.03 1.07

Subtotal 4.25 7.60 0.05 0.18 - _ 12.08

TOTAL 14.34 14.39 15.75 11.93 18.o4 15.19 89.64

April 1981 TUNISIA POWERIII PROJECT EstimatedImplementation Schedule

1981 1982 1983 1984 1985 CalendarYears _- - Quarters 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 P 1 TE IT TT T T T rTT 7 T I 1 TT PA R D T EC - Engineeringof Rural Distribution Systems V v v v t v v - - - P AR D T E C - Engineeringof Urban Distribution Systems V V V V TV V C - - - --

- Detailed Engineering(conducted by STEG) P R O T E C - Civil Works v v I T v v= P R D T E C - Installation and Erection Contracts v V V v PAR D T E C - Construction and Erection Equipment V V V V V PAdR D T E - TestingEquipment vo T Vtv VVocu PA R D T E C - Tools V V RTE

- Study of Distribution System of Tunis 7V

A - Advertisementfor intent to tender P- Preparationof tender documents R - Reviewof tender documentsof IBRD D - Tenderdocuments issued T - Tenderdocuments received E - Bid evaluation and recommendation C - Contract awarded - - - Fabrication, transportation and delivery on site/ contractor mobilization - Construction and erection/preparation of study World Bank - 22566

April 1981 - 43 - ANNEX 2.6

TUNISIA

POWER III PROJECT

EstimatedDisbursement Schedule (US$ Million)

Bank Fiscal Year CumulativeDisbursement and Quarter at the End of Qujarter

1982

December 31, 1981 0.05 March 31, 1982 0.48 June 30, 1982 4.04

1983

September30, 1982 7.90 December 31, 1982 10.37 March 31, 1983 14.53 June 30, 1983 17.16

1984

September 30, 1983 19.90 December 31, 1983 23.01 March 31, 1984 26.12 June 30, 1984 29.00

1985

September 30, 1984 32.00 December 31, 1984 36.00 March 31, 1985 37.00 June 30, 1985 38.00

1986

September 30, 1985 39.00 December 31, 1985 41.50

April 1981 -44- ANNEX 3.1

TrUNISIA S(,lCI(:'lETETUNISIENNE DiE I... ELECTRICITE ET DULGAZ TH:FIRD POWER PROJECT INCOME STATEMENr 1977-1.980 YE:hARENXiING DE:CEMBER31PTLJ.#Dv THOUSANDS

1977 1978 1979 1980

OCFERATINGREVENUES

SAL.ES OF ELECTRICITY 31'287 39,005 50,378 61,740 SALES OF' GAZ 1,69?4 2,103 2,874 3,600 SALES OF GAZ ElL BORMA 3P399 4Y099 5,116 6,220 OTHER REVENUES 5,769 6,811 8,278 7,940

GROSS OPERATING PROFITS 42,149 52,O18 66,646 79,500

OPERATING EXPENSES

FUEL OIL 9,216 13Y289 21,142 24,590 MATERIEL AND SERVICES 11,104 11,140 12,614 14,850 SALARIES ANDi WAGES 8,473 10,199 11,882 149100 OTHER OPERATING EXPENSES 5,840 6,669 6,878 9,429 DEPRECIATIONS- 9,082 10,850 12,239 15,300

PROVISIONS FOR RENEWAL 500 577 662 -

TOTAL OF'ERATING EXPENSES 449215 52,724 65,417 78J269 LESS CHARGED TO CAPITAL 8,585 8,677 10,355 11,400

35Y630 44,047 55Y062 66P869 NET OFPERATING INCOME 6,519 7,971 11,584 12P631

ADJUSTMENT FOR PAST YEARS (594) (1,004) 2,091 - INTEREST EXPENSES 3F555 4P423 6Y330 6,040

NET INCOME 2,370 -2,544 7,345 6,591

RATE OF RETURN 7,50 7,40 8.48 7.90

1980: PROBABLE

March 1981 - 45 - ANNEX 3.2

TULNISIA SOCIETE TUNISEJT NE PE L ELErPTRITTE ET DU rl7 THITRD POWFER P'O_ECrT YEAR ENfDITN rDECEMPER 31?TUHflDTHOUSAS'5 PALANrE SHEET 1977-1980

19?7? 1979 19?79 990

ASSETS nR0q5 FIYEr ASSETS 193F097 222r610 242r!99 342rOO1

LESS -ACCUMULATED 'EPRECIATIONS A4rOO2 74pA.7 85F696 100A78A

MET FIXED ASSETS 119?095 149r24_ 157r205 241F25 l,lORK IN PROGRESS 41p99f O3003, 95,f7gA; 19543

TOTAL FIXEt ASSETS 16qT97S 87e9279 242-940o 26i7'5

OTHER NON CURRENT ASSETS

.!NllESTMEMT 2!8051 2!9 2!4 ! LONN TERM RECEIVA BLE 5!13A 5!837 9 00? 9r5_ A FORMATION E PENSES 7.o9? 699 924 724

'TOTAL M~ON CURRENT A5

CURRENT ETSSETS

ClSH ANFh PN7 3r320.LpNCE QAQ 9AAA 20

ACCOUNT RECEIA.OLE 14!097 1r!27A 22!221 24 !490 OTHER RECEIVABLE 7P73' 64760 13!5 17 106249 :?MYENTORIES 12r340 12r!139 lo,rw9 11?500

TOTAL CURRENT ASSETS 37?459 40rA43 497 191 46r248

TOTAL ASSETTT 207r!5? 22__7.A 304?A42 319?61

CAF'IT.L ANDT LI08ILITIES

EOLUTTY 1.0r237 1O.491 i-.,d9i 15!4AQ RETAINED EARMNI58- IA14lQ IA-8 24PO28 30r619 REVALUATIO.N RESERVlES 24?!725 24r?40 24,?40 24,740 OTHER RESERVlES 9 !00 6 9r!58 10 !245 10?!245 CLUSTOMERS CONTRsIBUTIONS 3649,4R2 45r516 52 ! A77 61!747

TOTA.L EOUTITY 94!599 10?!013 127!181 142!94? pQRRo!qiMc18

LONG TEF'm 9PORRn1JtTNrq A2P.750f AA4,A40 n) '!;QA oAA. i'.) f'1QTnME7R, DEPOSITS 4 r?95* '_A 35 7V5tr9 9rO24

CURRENT L IABILITIES

ACCrOUNT F'AY4RLE 27r,397 29r267 38r572 41r291 OTHER' CLRRENT LIABILITIES 17v126 20e!E3 29e?77 20!690

TOTAL CURRENT LI4bILITIES 45!021 50!080 67r349 61r971

'TOT.4L EQUITY AND LIAEpILITIEc 207r!57 227r.368 304P-42 319v961

CURRENT RATIO 0 83 0 80 0 ?a 0:?5

1980? PROP^PLE - 46 - ANNEX 3.3

TUNISIA SOCIETE TUNISIENNE DE L ELECTRICITE ET DtU GAZ THIRD POWER PROJECT SOfURCES AND APPLICATIONS OF FUNDS 1977-1980 YEAR ENDING DECEMBER 31lTU.D THOUSANDS

1977 1978 1979 1980

SOURCES OF FUNDS

OPERATING INCOME 6.519 7,971 119584 12,631 IDEPRECIATION 9,O82 10,850 12,239 15,300 ADJUSTMENT FOR F'AST YEARS (594) (1,004) 2,091 -

INTERNAL CASH GENERATION 15,0.7 17,817 25,914 27,931 CUSTOMERS CONTRIBUTIONS B,434 9Y034 7.161 9,070 CUSTOMERS DEPOSITS 924 - 840 1Y883 1,506

24,119 27,443 33,737 37,001 BORROWINGS 18,749 4,725 42,719 19,317 CAFITAL INCREASE - 254 5,000 - INCREASE IN RESERVES 678 592 662 -

TOTAL SOURCES 43,792 33,262 83,339 57,824

APPLICATIONS OF FUNDS

CONSTRUCTIONS 37,386 28,158 76,901 33,118 DEBT SERVICE

AMORTIZATION 3,479 2,835 4,765 15,787 INTEREST EXPENSES 3,555 4,423 6,330 6P040

TOTAL DEBT SERVICE 7,034 7,258 11,095 21,827 DECREASE/INCREASE IN INVESTMENT 318 (91) 177 100 INCREASE/DECREASE IN FORMATION EXPENSES 105 (391) 225 (200)

INCREASE/DECREASE IN LONG TERM RECEIVABLE 823 701 3,172 534 CHANGE IN WORKING CAPITAL (1,874) (2,373) (8,231) 2,445

TOTAL APPLICATIONS 43,792 33,262 83Y339 57,824

1980 : PROBABLE

March 1981 _ 47 - ANNEX3.4

TUNISIA SOCIETE TllNISIENNE DE L ELECTRICITE E'T DlU GAZ THIRD POWER PROJECT ESTIMATED INCOME STATEMENT 1981-1986 YEAR ENDING DECEMBER 31y TU.D THOUSANDS

1981 1982 1983 1984 1985 :L?86

ELEECTRICIT'Y SALES OWH 2,430 2v730 3,070 37440 3Y850 4Y310 AVERAGE REVENUE PER KWH MILLIMES 34.77 36.01 4T.64 54.19 64.33 74.40

OPERATING REVENUES

...... SALES OF EL-ECTRICITY 84Y483 98Y300 133J973 16Y6408 247y683 320Y67<9

SALES OF GAZ-TLJNIS 1Y380 - 1Y450 1Y520 1.L600 1:36fi0 i,760 SALES OF GAZ-El..kORMA 11,900 12,648 13t112 J.3Y418 L3.Y44O 14,960 REVENUJES FROM WORKS AND SERVICES 2,900 3,200 37500 3Y890 4,150 4,500 OlTHER INCO'ME- 5,130 5690 6Y550 7,790 8,280 8. 61 0

TOTAL OPERATING REVENUES 105,793 121Y488 158Y685 213Y016 273Y233 350Y509 . . . _ . _ ...... _._......

OPERATING EXPENSES

FUEL. OIL.. 31,517 42,969 680752 110,258 151,440 207,244

MATERIAL AND SERVICES 1B8800 21Y500 24Y300 27,700 31,300 35Y700) SfLAFLARIES AND WAGES 1.5i,714 1.8071 20Y782 23,899 27,484 31,607 O'rHER OPERf,'ATINGEXFENSES 10,190 11Y380 12,910 1.4v540 16,670 18Y840 DEFPRECIATIONS 22,317 25,140 28,789 32,807 39,311 46Y653 F'ROVISIONS FOR FORMATION EXPENSES 124 118 118 l1e 1L8 1L8

TOTAL OPERATING EXPENSES 98Y662 119,178 155Y651 209Y322 266v323 340,162 LESS CHARGED TO CAPITAL. 12,300 13,500 14,O00 1.6Y200 17,800 19Y500

86,362 105,678 140,851 93,122 248,5523 3207662 OPERATING INCOME 19,431 15,S8O 17,834 19,894 24Y710 29,8f:47 ~~~~~~~~~~~~~~~~~~~~~...... _.._...... _... - - - ...-...... _ INTEREST EXPENSES 7,675 7Y817 BS719 1 1. 3 7 .1.3933 1.4, 972

NET INCOME 11Y756 7,993 9,115 BY527 OY,777 1 48Th

RATE OF RETURN 8.00 6.00 6.00 6.00 6.00 6.00

April 1981 -48- ANNEX 3.5

I'UNNISIA SOCIETE TUNISIENNE. DE L E-L..1C!:TRICITE T DU 17AZ THIRD FOWER FROJECT ESTI'MATED BAL-ANCE SHEE'r g981-g986i YEAR ENDING DECEMBER 31 Tl1.0: THOUSANDS

19ts3. 19E32 3.9E3 1.59I4 1 90119S6

ASSET S

1:3F:E3SS;FIXE.: ASSEiTS IN OPERATIONS 526,724 590 595 600,937 769r163 978!004 1. 095 464

LESS ACCUMULATED DEPRECIATIONS 1.34 sEi64 2''2 y944 267 339 3 1 C860 380 491 453 778

NE'T FIXED ASSETS 341. v0860 367 65.1 421.7598 450?303 597 513 641 686 WORl1kIH FPROGRESS 26.773 44 054 6075C6 132r547 69,247 127,O47

TOTAL. FIXED ASSETS 36E8v633 411 .705 482 . 1-84 582,850 666Y760 763, 7:33

OTlHERF;NON CURRENT ASSETS

:1:NV E'S'M EN'T' 2,8EE88 3 0E088 3Y188 3,55 8 3,788 3,888 LONG TERM RECEIVABLE 7! 11.2 7,060 7,664 8.048 8,468 8"928 FORMATION EXPENSES 600 48. 364 246 128 10

TOTAL. NON CRRENT1ASSE.TS 10 600 10Y630 I1 21.6 11.3.l82 12,384 12,826

CUFRRENT ASSETS

CASH AND BANK BALANCES 2 4 278.49 2,991 3 14 1 3,298 3,462 ACCOUNT RECEIVABLE 25g320 26Y700 28,250 29,850 31.,700 33,600 OTHER RECE.IVABLE' AND PREFPAYMENT 1O0668 O1590 11,496 1.2,0'077 1.2,702 13Y392 I NVENTORIES 12,300 13,400 14 '00 167200 17,850 19?650

TOTAL CURRENT ASSETS 91?002 53,539 57,437 61,263 65,550 70,104

TOTAL ASSETS 430,235 475S£74 550,837 655,995 744,694 851r663

CAPIT'AL. A ND1 L IABILITIES

iQITIY 15,-491 159491 I5,491 I5"':1. 1.5,491. 15,491 RETAINED EARH:IN'fNS 42r375 50,368 59,483 687010 78,787 93,662 REVALUATION RESERVES 11F8,702 1.42,633 168,369 1.9,881 229,402 271,228 OTHER RESERVE*-RENF.JAL .. 1. 245 1.0,245 10,245p I.OP245 10,245 10,245 GOVERNMENT CONTRIBUJTIONS FOFR RUR ELEC 7,86E8 1 . 1.) 3.51 v,66E8 20r468 25,868 31 , 868

TOTAL EQUIT'Y 3194,681 230,205 2.69,256 312,095 359,7.-:3 422,494 CUSTOMERS CONTRIBUTIONS 64r479 70,049 758829 83.629 91,4.49 J.04v78 9

BORROWINGS

LONG TERM BORROWINGS .04s :990 105Y780 130,152 1.77,282 203,<009 225,108 CUSTOMERS DEPOSITS 1091.4 1.3,014 1.5r364 17,934 20,834 24,094 CURJ-RENTLIABILITIES

ACCOUN-T PAYABLE 36, 281 39,546 43 1305 46, 9 4 51 ,212 55,8 E22 OTHER CURRENT LIABILITIES :.8E;90 17,280 177131 18,071 1.8,397 19,356

TOTAL. CURRENT LIABILITIES 585t I -7I 56s926 60,236 65,055 69,609 75, 178

TOTAL CAPITAL AND LIABILITIES 430,235 .475,874 550,837 6`5 995 7 4469'4 851 , 663

CUJRREN'T RATIO 0.92 0.94 0.95 0,94 0.94 0 "

Debt/Equity Ratio 35/65 31/69 33/67 36/f64 36/64 35/65

April 1981 49 ANNEX3.6

J-.NISTIA SOCIETE TUNISIENNE DE L ELECTRICITE ET DU GAZ THIRD POWER PROJECT ESTIMATED SOURCES AND APPLICATIONS OF FUNDS 1981-1986 YEAR ENDING DECEMBER 31, TU.D THOUSANDS

1981 1982 1983 1984 1985 1986

SOURCES OF FlJND.S

J OPMRATING PROFIT 19Y431 i.5SIO £7,834 -i99894 '24,71 29,847 I)IEPRECIATION 22,317 25,140 28,789 32,807 39,311 46,653

INTERNAL CASH GENERATION 41,748 4()95() 46,623 52,701 64,021 76Y500 GOVERNMENTCONTRIBUJTIONS 41240 3v600 4,200 47800 5,400 6,000 OTHER CUSTOMERSCONTRIBUTIONS 6Y360 5,570 S5780 7,800 7,820 13r340 CIJSTOMERS DEPOSITS 1,890 2,100 2,35U 2'y70 ' 2Y900 37260 DECREASE IN FORMATION EXPENSES 124 118 118 118 1L8 118

54,362 52,338 59,071 67,989 80Y259 99,218

'BORRFOWINGiS' ' '

EXISTING LOANS 7,913 - -- -

PrOPOSED IBTFD LOAN 20 4,128 5,056 5,408 1,988 DISBURSMENT OTHER LOANS 623 5Y952 29,496 52,042 45,577 46,607

TOTAL BORROWINGS 8,556 10,080 34,552 57,450 47,565 46,607

TOT'AL SOURCES OF FLJNDS 62,918 62Y418 93,623 125,439 127,824 145Y825

APPLICATIONS OF FUNDS

PROJECT REQUhIREMENT -- 11.550 1OP940 13r370 - OlTHlERCOlNSTR'l'UFCTIONS 36,230 32,731 62,592 90,591 91,700 106,800 TOTAL. CONSTRU(CTION REOUI REMENT 36,230 44P281 73,532 103,961 91,700 106,800 DEBT SERVICE

AMORTIZATION 9,690 9,290 10,180 1O0320 21,838 24Y508 INTERtEST EXPENSES 7,675 7Y817 8,719 li1367 13,933 14,972 17Y365 17Y107 18Y899 2LY687 35,771 39,480 INVESTMENT' 200 200 100 400 200 100 INCGREASE IN LONG3 TEfRM REkCE7IVABfLE (2y431) (52) 604 384 420 460 CHANGE IN WORKING CAPITAL 1i1554 882 488 (993) (267) (1Y015)

TOTAL APPLICATIONS 62,91S 62Y418 93Y623 125,439 L27,824 145P825 DEBT SERVICE COVERAGE 2.40 2.39 2,47 2.43 1.79 1.94

April 1981 ANNEX 3.7 - 50- _ Page 1 of 2

TUNISIA

POWER III PROJECT

Notes and Assumptions for Financial Forecasts

A. Income Statement

1. Sales of electricity are based on STEG's estimated load growth. The forecasts assume annual energy sales growth of 14.6% in 1981, 12.3% in 1982, 12.4% in 1983, 12% in 1984, 11.9% in 1985, and 11.9% in 1986. Average tariff increases of 3.6% from January 1, 1982, 21.2% from January 1, 1983, 24.2% from January 1, 1984, 18.7% from January 1, 1985, and 15.7% from January 1, 1986 are assumed.

2. Prices of heavy fuel oil are assumed to increase an average 31% each year from January 1, 1982, and prices of gas oil are assumed to increase an average 17% during the same period.

3. Operating and maintenance costs are assumed to increase by 14.3% in 1982, 15% in 1983 and 1984 and 17% in 1985 and 1986.

4. Depreciation is computed at an average annual rate of 4.5% per annum of the average gross fixed assets.

5. Interest charges are based on STEG's actual calculations. New borrowings are assumed to be at the following interest rates: IBRD loan at 9.6%, other loans (suppliers' credit) at 7.5% with maturities of 15 years including 4 years of grace. Interest during construction has been charged to operations in accordance with the Tunisia National System of Accounts.

B. Balance Sheet

6. Gross fixed assets are revalued at the end of 1981. Thereafter, they have been revalued at the end of each subsequent year assuming an average inflation rate of 7% each year.

7. Inventories are assumed to increase during 1981-1986 in keeping up with operating requirements.

8. The rate of return is calculated on the average net revalued fixed assets. ANNEX 3.7 - 51 - Page 2 of 2

C. Sources and Applicationsof Funds

9. Constructionrequirements based on STEG's estimatesamount to

1981 1982 1983 1984 1985 1986

TD million 36.2 44.3 73.5 104.0 91.7 106.8

April 1981 TUNISIA

POWER III PROJECT

Sales Available Generating Capacity - Peak Demand - Actual and Forecast

High Voltage Medium Voltage Low Voltage Year Available Capacity Peak Demand Load Factor (GWh) (G) (MW) (MW) () (GWh)

Actual 97 510 287 1974 274 225 55 341 314 247 55 94 575 1975 567 387 1976 314 272 56 175 238 644 449 1977 413 320 54 294 728 515 1978 516 374 54 390 842 577 1979 516 437 55

Estimate 480 970 670 1980 816 490 55

Forecast 520 1,130 780 1981 816 560 55 590 1,250 890 1982 844 640 55 660 1,400 1,010 1983 944 720 55 810 55 720 1,580 1,140 1984 964 1,280 1,114 910 55 790 1,780 1985 2,000 1,450 1986 1,230 1,020 55 860

February 1981 TUNISIA

POWER III PROJECT

Rural Electrification

Rate of Return

COST BENEFIT ------(TD Mil lion) ------(TD Million) ------Oales Power Connection Year (GWh) Capital 0 & M Delivered Fuel Total Sales Service Fuel Total

1982 4.13 3.56 0.07 0.11 0.08 3.82 0.16 0.42 0.19 0.77 1983 11.38 5.20 0.18 0.31 0.23 5.92 0.43 o.67 0.56 1.66 1984 22.20 5.97 0.29 0.63 o.48 7.37 0.85 0.91 1.17 2.93 1985 25.80 - 0.29 0.75 0.58 1.62 1.02 0.26 1.31 2.59 1986 30.31 - 0.29 0.92 0.73 1.94 1.23 0.30 1.48 3.01 1987 35.14 - 0.29 L.10 0.89 2.28 1.45 0.27 1.64 3.36 1988 40.48 - 0.29 1.27 1.08 2.64 1.70 0.31 1.82 3.83 1989 45.50 - 0.29 1.46 1.26 3.01 1.94 0.22 2.01 4.17 1ggo 49.68 - 0.29 1.60 1.43 3.32 2.13 0.10 2.22 4.45 1991 54.29 - 0.29 1.76 1.59 3.64 2.35 0.11 2.37 4.83 1992 59.29 - 0.29 1.94 1.74 3.97 2.57 0.11 2.55 5.23 1993 64.76 - 0.29 2.13 1.92 4.34 2.83 0.11 2.74 5.68 1994 70.34 - 0.29 2.34 2.09 4.72 3.o8 0.12 2.91 6.11 1995 76.38 - 0.29 2.54 2.28 5.11 3.37 0.12 3.11 6.60 1996 82.87 - 0.29 2.78 2.49 5.56 3.67 0.12 3.31 7.10 1997 90.09 - 0.29 3.o4 2.72 6.05 4.01 0.13 3.53 7.67 1998 97.81 - 0.29 3.31 2.98 6.58 4.37 0.12 3.76 8.25 1999 106.41 - 0.29 3.62 3.24 7.15 4.78 0.14 4.01 8.93 2000 114.76 3.00 0.35 3.93 3.52 10.80 5.16 0.13 4.23 9.52 2001 123.92 4.oo 0.43 4.25 3.81 12.49 5.60 0.14 4.48 10.22 2002 133.68 5.00 0.53 4.6o 4.13 14.26 6.o6 o.14 4.73 10.93 2003 144.24 - 0.53 4.98 4.47 9.98 6.56 0.14 5.00 11.70 2004 155.79 - 0.53 5.40 4.85 10.78 7.10 0.15 5.28 12.53 2005 168.00 - 0.53 5.85 5.25 11.63 7.69 0.15 5.59 13.43 2006 181.45 - 0.53 6.34 5.69 12.56 8.33 0.16 5.91 14.40 2007 195.76 - 0.53 6.87 6.17 13.57 9.02 0.16 6.25 15.43 2008 211.92 - 0.53 7.45 6.69 14.67 9.78 0.17 6.61 16.56 2009 228.89 - 0.53 8.o8 7.25 15.86 10.59 0.17 6.98 17.74 2010 247.25 - 0.53 8.76 7.85 17.14 11.47 0.17 7.40 19.04 2011 267.25 -(8.07) 0.53 9.49 8.51 10.46 12.43 0.18 7.82 20.43

March 1981 TUNISIA

POWER III PROJECT

Program for the Rehabilitation and Extension of Distribution System

Rate of Return

COST BENEFITS -- (TD Million) ------(TD Million) ------Sales Power Connection Net Fuel Fuel Savings Year (GWh) Capital 0 & M Delivered Fuel Total Sales Service Savings from Losses Total

1982 19.77 17.26 0.76 0.72 0.51 19.25 0.94 1.73 0.21 o.o6 2.94 1983 54.77 19.24 1.57 1.99 1.45 24.25 2.6Q 2.77 3.75 0.13 9.25 1984 104.07 22.25 2.49 3.80 2.86 31.40 4.94 3.78 7.37 0.32 16.41 1985 126.40 - 2.49 4.65 3.59 10.73 6.05 1.00 8.49 0.53 16.07 1986 149.28 - 2.49 5.53 4.40 12.42 7.18 1.12 9.47 0.76 18.53 1987 175.89 - 2.149 6.55 5.36 14.40 8.49 1.16 10.53 0.76 2o.94\ 1988 200.86 - 2.49 7.48 6.33 16.30 9.72 1.15 11.51 0.76 23.14 4r 1989 224.1o - 2.49 8.38 7.28 18.15 10.87 o.88 12.59 o.76 25.10 1990 242.87 - 2.49 9.08 8.13 19.70 11.79 0.52 13.78 o.76 26.85 1991 262.58 - 2.49 9.82 8.82 21.13 12.76 0.51 14.59 0.76 28.62 1992 285.06 5.00 2.74 10.68 9.57 27.99 13.86 0.55 15.52 0.76 30.69 1993 306.70 7.40 3.11 11.50 10.32 32.33 14.93 0.53 16.38 0.76 32.60 1994 317.64 7.40 3.48 12,36 11.08 34.32 15.45 0.58 17.20 o.76 33.99 1995 352.45 - 3.48 13.23 11.86 28.57 17.17 0.56 18.06 0.76 36.55 1996 378.80 - 3.48 14.24 12.76 30.48 18.47 0.59 19.02 0.76 38.84 1997 406.68 - 3.48 15.30 13.71 32.49 19.84 0.59 20.01 0.76 41.20 1998 437.67 - 3.48 16.47 14.77 34.72 21.36 0.61 21.10 0.76 43.83 1999 470.38 - 3.48 17.71 15.87 37.o6 22.98 0.62 22.23 0.76 46.59 2000 503.68 3.00 3.54 18.99 17,02 42.55 24.61 o.64 23.31 o.76 49.32 2001 540.86 4.oo 3.62 20.39 18.28 46.29 26.45 o.63 24.54 0.76 52.38 2002 579.59 10.00 3.97 21.87 19.60 55.44 28.36 o.67 25.77 o.76 55.56 2003 620.00 7.40 4.34 23.40 20.98 56.12 30.35 o.66 27.01 0.76 58.78 2004 666.99 7.40 4.71 25.19 22.59 59.89 32.66 0.71 28.47 a.76 62.60 2005 713.56 - 4.71 26.97 24.18 55.86 34.97 o.69 29.86 0.76 66.28 2006 764.94 - 4.71 28.93 25.94 59.58 37.50 o.74 31.37 0.76 70.37 2007 820.90 - 4.71 31.08 27.86 63.65 40.28 0.72 33.00 0.76 74.76 2008 880.01 - 4.71 33.32 29.87 67.90 43.18 0.78 34.65 0.76 79.37 2009 943.92 - 4.71 35.77 32.06 72.54 46.34 0.76 36.41 0.76 84.27 L 2010 1,013.42 - 4.71 38.43 34.44 77.58 49.78 0.77 38.34 0.76 89.65 2011 1,091.68 (30.66) 4.71 41.41 37.12 52.58 53.65 0.83 41.48 o.76 96.72

March 1981

h - 55 - ANNEX 4.4 Page 1 of 2

TUNISIA

POWER III PROJECT

Assumptionsfor Rate of Return Calculation

Consumers'Willingness to Pay -/

1. About 60% of the rural families are presentlyusing a single kerosene lamp for lighting purposes at an estimated cost of TD30.5 per year (including equipment, maintenance,and fuel). The same service, namely lighting,could be met with a 60 W lamp (130 kWh/year).

2. About 40% of the rural families are presentlyusing battery operated tele- vision and radio sets at an estimated cost of TD 80 per year (battery purchase, charging,and replacement). The same service could be met by using 110 kWh per year.

3. Under the present conditions (withoutelectricity service) the weighted average cost for both service is estimatedat TD 62.5 per year. These services could be met by consumingon the average 175 kWh per year, if electricitywas available.

4. Presently, the cost of connection of a domestic consumer is TD 50, and the electricalinstallation for a rural house is estimatedat TD 100. Therefore,the discountedyearly cost (at 10% over 40 years) of a rural family to obtain electricity service is TD 17 per year. The electricitybill for consuming175 kWh per year would be TD 8.7 (50 milliemes/kWh). The total cost of having electricityservice is thereforeTD 2 6 per year.

5. The average consumers' surplus is the difference between what consumers are paying for alternateenergy to meet their lighting needs and the power needed to operate their televisionand radio sets, less the cost of electricityneeded to provide the same service. This is estimated to be TD 36.5 (based on the domestic prices of fuels and the prevailingtariffs for electricity)which is equivalentto 200 milliemesper kWh (TD 36.5/175 kWh). The savings to consumers (proxy for consumers'surplus) tabulatedbelow are assumed to be only 60% of the estimated 200 milliemes per kWh.

Savings to Consumers (Milliemes/kWh)

Domestic Surface Pumps Deep Pumps Other

Rural Customers 120 44 37 81

Urban Customers 120 - - 85

1/ For other customer classes, please see Mr. L. Maistre'sreport which is available. - 56- ANNEX 4.4 Page 2 of 2

Average IncrementalMarginal Cost of Power Delivered (Milliemes/kWh)/1

Domestic Surface Pumps Seep Pumps Other

Rural Customers 64.5 26.4 19.8 64.5

Urban Customers 64.5 - - 64.5

Connectionand Service Charges

Domestic Surface Pumps Deep Wells Other Conn. Serv. Conn. Conn. Serv. Conn./2 Serv. (TD) (TD/Yr) (TD) (TD/Yr) (TD) (TD/Yr) (TD) (TD/Yr)

Rural Customers 50.0 1.2 80.0 8.4 2,000 1,100 65.0 3.1

UrbanCustomers 50.0 1.2 - - - - 65.0 3.1

/1 It includes generation,transmission, distribution, 13% system losses, and fuels valued at their border prices. - /2 About 50% would be single-phaseconnections (TD 50.0) and 50% three-phase connections (TD 80.0).

Fuel Cost and Fuel Savings

(a) Fuel Cost: About-40% of the total cost of deliveringpower to the con- sumers was assumed to represent the fuel cost of generation,including system losses. Fuels were valued at their border prices which were inflated at 3% per year for the first 10 years.

(b) Fuel Savings: The yearly consumptionof only the new consumers that would be connectedto the grid during implementationof the Project (1982-1984),valued at 58% (70 milliemes/kWhcompared to 120 milliemes/kWh,for the domestic customers) of their savings, was taken as a proxy for fuel savings. Thus, the fuel savingsused in calculatingthe rate of return reflect, at least, the savings that would have accrued from the displaced alternativesources of energy that would have been consumed, if the Project was not implemented. Fuel savings have also been inflated at 3% per year for the first 10 years.

March 1981 - 57 - ANNEX 4.5 Page 1 of 2

TUNISIA

POWER III PROJECT

Benefits Accruing from the Rehabilitationof Urban DistributionNetwork

Data

Losses before rehabilitation : (a) 16% (transmissionand distribution) of which, (b) 12% (distribution)

Number of domestic consumers in 1980 : (a) 603,000 (urban and rural) of which, (b) 525,000 (urban)

STEG's total sales in 1980 (a) 2,120 GWh of which, (b) 570 GWh to domestic consumers (urban and rural).

Assumptions

1. Consumptionof urban domestic customersis taken to be double the consumption of rural domestic customers.

2. All energy losses are assumed to be generatedfrom a fuel oil fired plant with an efficiency of 0.26 kgoe/kWh (includinggeneration losses).

3. Benefits accruing from the rehabilitationof the distributionsystem are assumed to be only from fuel savings (valued at its border price, $182 per ton).

4. Annual growth of sales to domestic customersup to the end of STEG's urban rehabilitationprogram (1986), is assumed to be 12% per year.

5. Losses after rehabilitationare assumed to be 8%'(distribution).

Computation x = Yearly consumption (kWh) per urban domestic customer

Consumptionof domestic customers= 525,000 x + 78,000 E = 570,000,000 kWh, and

x = 1,010 kWh, rounded x = 1,000 kWh, and therefore Sales to urban domestic customers in 1980 = 525 GWh - 58 - ANNEX 4.5 Page 2 of 2

Benefits of Urban Rehabilitation

Losses Benefits Sales After Before After Year (GWh) (M) (GWh) ($ Million) (TD Million)

1980 525 12.0 63 - - _

1981 588 12.0 70 - - -

1982 659 11.5 79 76 3 0.15 0.06

1983 737 11.0 88 81 7 0.33 0.13

1984 826 10.0 99 82 17 0.80 0.32

1985 925 9.0 111 83 28 1.33 0.53

1986 1,000 8.0 120 80 40 1.89 0.76

Thereon to

2011 1,000 8.0 120 80 40 1.89 0.76

April 1981 - 59 - ANNEX 5.1

TUNISIA

POWER III PROJECT

Selected Documents Available in the Project File

1. STEG - Audited Accounts as of December 31, 1979.

2. STEG - Annual Report 1979.

3. STEG - Electricity Tariff.

4. STEG - Key Performance Indicators.

5. STEG - Statistics 1962-1979.

6. STEG - Status of Account Receivable (June 1980).

7. STEG - Review of 10 Years Activities (October 1980).

8. STEG - Maps of existing and programmed distribution network.

19. STEG - Tender documents for consultancy services relating to the study of the distribution system of Tunis.

10. STEG - Typical engineering designs of distribution network.

11. R. Dujon - Consultant's report on Technical Aspects of Proposed Project.

12. L. Maistre - Consultant's report on Economic Aspects of Proposed Project.

13. Quarterly Project Costs (local and foreign).

14. Tables used in the calculation of the rate of return of the proposed Project.

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