World Bank Document

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. P-2034a-EGT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Public Disclosure Authorized TO THE EXECDTIVE DIRECTORS ON A PROPOSED LOAN TO THE EGYPTIAN ELECTRICITY AUTHORITY Public Disclosure Authorized WITH THE GUARANTEE OF THE ARAB REPUBLIC OF EGYPT FOR A REGIONAL ELECTRIFICATION PROJECT May 27, 1977 Public Disclosure Authorized 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 Official Rate 1 Egyptian Pound (LE) US$2.56 or SDR 2.118 1 US Dollar LE 0.391 Parallel Market Rate Until February 1976: 1 Egyptian Pound (LE) US$1.70 1 US Dollar LE 0.59 From February to May 1976: 1 Egyptian Pound (LE) US$1.56 1 US Dollar LE 0.64 From May 21, 1976: 1 Egyptian Pound (LE) US$1.47 1 US Dollar LE 0.68 From December 1, 1976: 1 Egyptian Pound (LE) US$1.43 1 US Dollar LE 0.70 GLOSSARY OF ABBREVIATIONS GODE - Gulf Organization for Development of Egypt M & LT - Medium and Long Term EEA - Egyptian Electricity Authority MEE - Ministry of Electricity and Energy REA - Rural Electrification Authority km - 1 kilometer of 1,000 meters kW - 1 kilowatt or 1,000 watts MW - 1 megawatt or 1,000 kw kWh - 1 kilowatt hour or 1,000 watt hours GWh - 1 gigawatt hour or 1,000,000 kWh kVA - 1 kilovolt ampere or 1,000 volt amperes MVA - 1 megavolt ampere or 1,000 kVA FISCAL YEAR January 1 to December 31 ARAB REPUBLIC OF EGYPT FOR OFFICIAL USE ONLY REGIONAL ELECTRIFICATION PROJECT Loan and Project Summary Borrower: Egyptian Electricity Authority (EEA) Guarantor: Arab Republic of Egypt Executing Rural Electrification Authority (REA) Agency: Amount: US$48 million equivalent Terms: 20 years, including 4-1/2 years of grace, at 8.2 percent interest. Project The project is to (i) improve and expand, as part of REA's Description: ongoing program, electric power distribution systems in and around the cities of El-Mansoura, El-Fayum, Assyout, Sohag, Fuwa, Damietta, El-Mahalla, Tanta, El-Minya, Aswan, Kafr El-Sheikh, Ras El-Bar, and Kafr El-Dawar and in 19 rural zones; and (ii) assist in building up the institutions of the power sector through technical assistance to EEA and REA and improvement of EEA's training facilities. In detail, the project would consist of: (a) about 100 km of 66-kV and 33-kV sub-transmission lines; 230 MVA of sub-station and distribution transformer capacity, and 3400 km of 11-kV and 380/220 V distribution lines; (b) an economic review of REA's program, improvement of its planning and evaluation procedures and detailed engineering and construction supervision of project facilities requiring about 264 man-months of consulting services; (c) improvements of EEA's financial administration and accounting systems, a review of its safety and inspec- tion practices, and a review of electricity tariffs requiring about 132 man-months of consulting services; and (d) dormitory-type accommodations and audio visual and other didactic material for EEA's Institute of Engineers south of Cairo and its Training Center for Mechanical/ Electrical Skilled Workers and Technicians north of Cairo; 18 man-months of overseas training for teachers of these institutions; a training advisor to EEA, a specialist instructor trainer and a specialist for training in commercial and financial subjects, each for about 3 years. Thi document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Project Cost: 1/ Local Foreign Total …--- (US$ Million------ 1. Sub-station equipment and distribution transformers (installed) 3.4 9.3 12.7 2. Transmission and distribution lines (installed) 8.7 23.5 32.2 3. Consulting Services for REA 0.9 2.2 3.1 4. Consulting Services for EEA 0.6 1.1 1.7 5. Training 0.6 1.1 1.7 Project Cost excluding contingencies 14.2 37.2 51.4 6. Contingencies (physical and price) 6.4 12.8 19.2 Total Project Cost 20.6 50.0 70.6 1/ Based on parallel market exchange rate in November 1976 of about $1.50 = LE 1. Financing Plan: Bank Loan - 48.0 48.0 Government 19.0 2.0 21.0 EEA 1.6 - 1.6 Total 20.6 50.0 70.6 Procurement All contracts for equipment and materials and for building Arrangements: works at the training centers would be awarded in accordance with Bank Group guidelines for procurement on the basis of international competitive bidding. For the purpose of comparing foreign and local bids, Egyptian manufacturers who participate would be allowed a margin of preference equal to the existing rate of custom duties applicable to competing imports or 15 percent of CIF price whichever is lower. Audio-visual and other didactic materials (about $50,000) for the training component, because of their specialized nature, and meters, relays, and other electrical equipment not susceptible to international competitive bidding may be purchased on the basis of quotations from 3 suppliers provided that the total value of those contracts does not exceed $1.0 million equivalent. Contracts for installa- tion and erection works will be Government financed and would be awarded under local bidding procedures. - iii - Disbursement Disbursement would be made on the basis of (i) 100 percent of Arrangement: the foreign expenditures for imported equipment and materials, and 100 percent of ex-factory cost of locally manufactured items; (ii) 100 percent of foreign expenditures for expatriate consultants, advisors and overseas training and 70 percent of the cost of local experts; and (iii) 40 percent of the cost of dormitory type facilities including equipment. Retroactive financing would be provided for the consulting services to REA in an amount not exceeding $150,000 for expenditures incurred after May 1, 1977. Estimated Disbursements of Bank Loan: Fiscal 1978 1979 1980 1981 Year --------- (US$ Million)-------- Annual 8.0 24.0 14.0 2.0 Cumulative 8.0 32.0 46.0 48.0 Consulting A total of 504 man-months of consulting and advisory services Services: would be provided by suitably qualified firms and individuals on terms and conditions satisfactory to the Bank. The foreign costs of these services are estimated to average about $7,800 per man-month. REA has already selected a firm for its consulting services under the Project. Estimated Com- pletion Date: December 31, 1980. Economic Rate At least 10 percent of Return: Appraisal Appraisal of a Regional Electrification Project, Egypt Report: (No. 1517a-EGT of May 18, 1977). INTERNATIONAL BANK FOR RECONSTRUCTION AMID DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE EGYPTIAN ELECTRICITY AUTHORITY WITH THE GUARANTEE OF THE ARAB REPUBLIC OF EGYPT 1. I submit the following report and recommendation on a proposed loan for the equivalent of US$48 million to the Egyptian Electricity Authority with the guarantee of the Arab Republic of Egypt to help finance the foreign exchange costs of a regional electrification project. The loan would have a term of 20 years, including 4 1/2 years of grace, with interest at 8.2 percent per annum. PART I - TIHE ECONOMY 1/ 2. An Economic Report on the Arab Republic of Egypt (No. 870a-EGT), dated January 5, 1976, has been distributed to the Executive Directors. A basic economic mission visited Egypt in May/June 1976 and its report is under preparation. Updating missions visited Egypt in October 1976 and January 1977; the findings of these missions are incorporated in this report. Country data sheets are attached as Annex I. Background 3. From 1960 to 1966 Egypt experienced rapid growth (around 6 percent a year in real terms) under fairly rigid centralized planning and control. This system came under increasing pressure in the second half of the decade following bad harvests and increased defense expenditures, particularly as a result of the civil war in Yemen. It deteriorated further after the war of 1967, with the loss of the Sinai oil fields, the closure of the Suez Canal, the abandonment of the Canal cities and the cost of resettling the population of about a million, and the virtual cessation of Western economic assistance. With the continuing military confrontation in the Middle East, Egypt further increased defense spending at the expense of other types of consumption and of its development program. Thus, in 1973 the economic picture was one of rigorously curtailed private consumption and inadequate investment, with a deteriorating capital stock of infrastructure and productive facilities. Real GDP growth for 1967-73 averaged only 3.5 percent a year. 4. The changed political situation after October 1973 laid the ground- work for a new "open-door" policy enunciated by President Sadat and approved in a national referendum in May 1974. This policy reflects a major effort to accelerate economic development through modernization and making Egypt's largely publicly owned and centrally controlled economy more market-oriented. Specifically, the policy envisaged (i) decentralization of decision-making in 1/ All currency conversions are at the official rate of $2.56 = LE 1. - 2 - state-owned enterprises, (ii) liberalization of the private sector, (iii) in- centives for private foreign investment, and (iv) expanded economic coopera- tion with Arab countries. Since 1974 Egypt has initiated a number of steps which are expected to lead to a significant restructuring of the economy.

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