Latin'Amnerica and the Caaribbean -- Technical Department

I . o Regionat Studies Program Public Disclosure Authorized

Report No. 7

The Evolution, Situation, and Prospects of the Electric Power Sector in the

Public Disclosure Authorized Latin American and Caribbean Countries

Volume 11

Descriptionsof IndividualPower Sectors

by Public Disclosure Authorized

Infrastructure& Energy Division and LatinAmerican Energy Organization (OLADE)

August 1991 Public Disclosure Authorized

Papers in this series are not formal publications of the World Bank. They present preliminary and unpolished results of country analysis or research that is circulated to encourage discussion and comment; citation and the use of such a paper should take account of its provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its afftliated organizations, or to members of its Board of Executive Directors or the countries they represent. This document was prepared by World Bank and OLADE teams on the basis of data provided by the electric power sectors of the LAC region and data available in World Bank and OLADE files. VOLUME 11

TABLE OF C(OMTENTS

PREFACE

INDIVIDUAL COUNTRY REPORTS PAGES

1. Argentina ARG-1 - 11 2. Barbados BAR-1 - 10 3. Belize BEZ-1 - 9 4. Bolivia BOL-1 - 9 5. Brazil BRA-I - 11 6. Chie CHL-1 - 9 7. Colombia CLM-1 - 10 8. Costa Rica COS-1 - 10 9. Dominica DMC-1- 9 10. Dominican Republic DOM-1- 10 11. Ecuador ECU-I - 10 12. El Salvador ESL-1 - 10 13. Grenada GRD-1 - 2 14. Guatemala GUA-1 - 10 15. Guyana GUY-1 - 10 16. Haiti HAI- 1 - 9 17. Honduras HDS-1 - 11 18. Jamaica JAM-1 - 9 19. Mexico Cr,X.1 - 10 20. Nicaragua NIC-1 - 10 21. Panama PAN-1 - 10 22. Paraguay PAR-1 - 9 23. Peru PER-1 - 10 24. St. Lucia STL-I - 2 25. St. Vincent STV-1 - 8 26. Suriname SRM-1 - 8 27. Trinidad & Tobago TRI-1 - 10 28. Uruguay URU-I - 11 29. Venezuela VEN-I - 11

ANNEXES

Annex No.1 Country Data Samples

Annex No.2 Definitions of Indicators A-inex No.3 Region Summary Tables

TABLE 1 The Sector and the Economy TABLE 2 Service Coverage TABLE 3 Labor Productivity Indicators TABLE 4 Sector Profitability TABLE 5 Sector Funding TABLE 6 Installed Capacity TABLE 7 Gross Generation TABL.E 8 Installed Capacity and Demand TABLE 9 Eiectricity Sales TABLE 10 Electricity Losses

Annex No.4 Country Maps

Argentiria Barbados Belize Bolivia Brazil Chile Colombia Costa Rica Dominica Dominican Republic Ecuador El Salvador Guatemala Guyana Haiti Honduras Jamaica Mexico Panama Paraguay Peru St. Lucia St. Vincent Trinidad & Tobago Uruguay Venezuela REFACE

This study analyzes the evolution, situation, and prospects of the public electric power sectors! in the Latin American and the Caribbean (LAC) region. At present, they constitute a serious burden on fiscal resources and foreign debt and could become a constraint on development, as the current situation will eventually cause reliability and availabilityof service to deteriorate.

The main objectives of the study are to (i) promote awareness among the decision makers in the region and the international organizations of the main issues facing the electricity supply industry in LAC and (ii) to encourage individual countries to search for options to solve the main problems of their respective power sectors thus reducing their consequent burden on government finances. The study analyzes the institutional evolution of the sectors as well as patterns and trends for key economic, operational, fiscal, and financial indicators. It is based on data pertaining to the power sectors of 29 countries in the region (Annex No.1) and focuses on the causes of the present crisis. It identifies the key issues that must be addressed and presents a series of options for reforming the sectors. The options available to the sectors fall into three categories. The first concerns ways to improve efficiency in order to reduce investment needs. The second deals with methods that can be utilized to mobilize resources to increase funding sources. The third deals with the regulatory and corporate aspects of the legal framework. The study was prepared by the World Bank in a joint effort with the Latin American Energy Organization (OLADE). The output of the study is contained in two volumes. Vo!ume I is the regional report. Volume II contains the descriptions of each individual country pow, sector which support the general conclusionsin the regional report and show the unique conditi_..s of each sector. Most of the sector data was provic'- by the individualcountries of the region. In cases where it was not provided by the countries, data available in World Bank or OLADE files was used. The source for economic and social data was the World Bank's Bank Economic and Social Database (BESD). Energy consumption per capita figures for 1988 were obtained from the World Bank's World Development Report 1990 Poverty. Electricity service coverage was estimated using data on residential customers, household density, and population.

The financial data was provided in many currencies, both in constant and current monetary units. In order to make comparisons among countries meaningful and to obtain regional totals, all monetary units were converted into 1989 US$, as this year was chosen as the cut-off between the historical and projected data. A two step approach was used for this purpose. First, all figures were transformed into constant 1989 local currency using the GDP deflator obtained from BESD data. Second, the figures were transformed to 1989 US$ using the 1989 exchange rates from BESD. Because of the inherent deficienciesresulting from any conversion of monetary units and from the differences in the accounting systems of power utilities in the region, the study makes extensive use of patterns and trends which obviate to a certa.n extent said deficiencies. A quality control process has also been carried out through officials of each individual country, appointed as responsible coordinators for the data collection process. A greater emphasis has been placed on reliability than on accounting accuracy of the data.

Definitions of the indicators and variables contained in the study can be found in Annex No. 2. Annex No. 3 contains summary tables for key variables for all the countries in the region. Annex No. 4 contains the latest country maps available in the World Bank's files.

1J1hisstudy excludesdata and analysis of the captive generation and private supplies although this might be significant in a few countries. ARGENTINA

ELECTRIC POWER SECTOR ARGENTINA POWER SECTOR DATA SUMMARY SHEET 1989

Electric power in Argentina is supplied by national, provincial,and municipal utilities. The main utilities, which are included in this study and account for nearly 90% of the country's installed capacity, are Servicios El1ctricosdel Gran Buenos Aires (SEGBA), Agua y Energfa El1ctr.ca (AyE), HidroEl6ctricaNorpatagonica S.A. (HIDRONOR), Comisi6n Nacional de Energfa At6mica (CNEA), the binational (Uruguay) Comisi6n T6cnica Mixta de Salto Grande (CTMSG), Direcci6n dc Energfa de Buenos Aires (DEBA), Empresa Provincial de Energfa de Cordoba (EPEC), Empresa Provincial de Energ(a de Santa Fe (EPE), and Energfa de Mendoza S.A. (EMSA). The binational (Paraguay) Ente Binacional Yacyreta (EBY) project is also included.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 31,883 CAPACITY ENERGY AREA '000 SQKM 2,767 (MW) (GWh) POPULATION PER SQKM 12 AUSTRALES PER US$ 423.34 THERMAL 7,613 28,038 GDP, millions of US$ 59,246 HYDRO 6,620 14,208 GDP PER CAPITA, US$ 1,858 NUCLEAR 1,018 6,113 GDP GROWTH RATE, % * 0.0 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oal equiv.) 1,523 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 3.1 PURCHASES 0 ELEC. CONSUMP.PER CAPITA, kWh 1,162 TOTAL 15.251 48.359 1989 ELEC. SERVICE COVERAGE, % 95 POWERRXPENDITURES/GDP, % * 4.2 RESERVE MARGIN NA NA

ELECTRIC POWER SYSTEMDATA ELECTRICITY SALES 1987 DATA CUSTOMERS'000 8,835 GWh % EMPLOYEES 54,404 CUSTOMERSPER EMPLOYEE 162 RESIDENTIAL 10,959 30 TOTAL SALES PER EMPLOYEE, MWh 699 COMMERCIAL 4,136 11 INDUSTRIAL 17,277 47 BULK SALES # 0 0 OTHER 4,689 12 DOMESTIC SALES 37.061 100

SECTOR FINANCES EXPORTS 0 TOTAL 37,061 AVERAGERATE (US$IMhW) 34 OPERATINGMARGIN (WIO DEPR), Z -38 SYSTEM LOSSES 9,537 ## 20 OPERATING MARGIN (WI DEPR), 1 -18 RATE OF RETVRN, % -10.8 INDEBTNESS, S 41 DEBT SERVICE COVERAGE, times * -0.2 * - average per year since 1985 SELF-FINANCING RATIO, Z * -86 # - to other utilities not In the study ##C- as a percentage of available energy ARGENTINA

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

Electricity in Argentina is supplied by four national utilities, one binational agency, 19 provincial utilities, and several cooperatives. Tne national utilities are: Agua y Energla Eldctrica Sociedad del Estado (SEGBA S.A.), Hidroeldctrica Norpatag6nica Sociedad An6rima (HIDRONOR S.A.), and the Comisi6n Nacional de Energfa At6mica (CNEA). The binational agency is the Comisi6n Tilcnica Mixta del Salto Grande (CTMSG).

National utilities with the exception of CNEA report to the Ministry of Economy through the Under Secretamyof Electric Energy (SE). SE has overall responsibility for planning and operations at the national level and for collection and distribution of electricity funds. CNEA falls under the authority of the Executive Branch while CTMSG reports to the Ministry of Foreign Affairs.

AyEE is responsible for generation and transmission nationwide. It also distributes electricity in four provinces. A national dispatch center (DUC), operated by AyEE, is in charge of coordinating the operations of the larger electricity producers to ensure the economic use of generation facilities. SEGBA generates, distributes, and transmits to the Greater Buenos Aires area. HIDRONOR is responsible for developing the hydro resources o. the North Patagonia regior.. It generates ana transmits energy to DUC and other distributors in La Pampa and Comahue. CTIMSGis another government owned utility in charge of the binational (Argentine/Uruguay) Salto Grande hydro project. CNEA develops nuclear energy and constructs and operates power plants.

Electricity services in ihe provinces are the responsibility of the 19 provincial utilities. They are under the jurisdiction of either the Ministry of Economics, Finance, or Public Works of each province. The remaining four provinces are served by AyEE and/or private electric cooperatives. Cooperatives partially provide services to 16 provinces, which represent 10% of the total electricity consumed in the country. Some of the provincial utilities, such as Empresa de Servicios Electricos de Buenos Aires (ESEBA), Empresa Provincial de Energla de C6rdoba (EPEC), and Servicios Electricos de San Luis Empresa Provincial (SESLEP), are integrated into the National Interconnected System. Provincial utilities set financial rules and tariffs which subsequently have to be approved by sector authorities.

To achieve efficiency,the government has begun conversion to privately owned electric utilities. In 1990, by Law No. 2074, the govemment established that SEGBA's dis~.ibution and commercialization be privatized. Recently, Law No. 634 of April 12, 1991, established that SEGBA and AyEE should develop a decentralization program to ultimately transfer to private companies their thermal and hydro generation operations. At present, the Argentinian govemment is preparing a new legal framework for the sector based on modern principles among which will be strong incentives for private investor participation.

ARG-2 ARGENTINA

i.1!E§IC POWFR SECTOR

VOJV ION. SITUJA'TON. AND PROSPECTS

Summary The Sectorand the Economy

1. ThIeiinancial situation of the electric power 2. Tne sector is affected by, and in turn affects, sector of Argcntina is critical due to the negative economic factors. This association is evident from evolution of the operating income of sector the relationship between the behavior of economic enterprises which does not allow for sufficient fund growth and electricity demand. Although the generation to meet investment requirements and growth rates of the economy and electricity sales debt service obligations. Tariff increases were followed similar trends, a comparison of the two delayed to control inflation. The accumulated shows negative performance by the former in many sector funding deficit during the 1980s had a years of the past decade, while growth of the latter significant impact on public finances, as large was generally positive and greater during the same amounts from the federal budget were injected into period. Both variables declined during 1988 and the sector, further compounding the fiscal crises of 1989 because of the global economic stagnation the country. During 1988, the sector faced a and the inability of the system to meet market critical energy crisis, as a serious drought coincided demand during drought conditions. The spread with several problems related to the operation and between the electricity sales growth rate and the maintenance of the system which created a high GDP growth rate was 5.2% p.a. in the 1970s and level of unavailabilityof thermal capacity,technical 3.8% p.a. in the 1980s (Figure 1). deficiencies in the generating facilities, and the lack of resources to cover costs and expavd service Figure 1 in line with demand growth. The effects of the GROWTHRATES energy crisis prevailed until early 1989, and if the present financial situation of the sector is not a overcome, they could once again reappear with Lx ...... grave consequences for the economy and the population. Lax ...... I

IxX. .- I - . .-..-......

1971 197 1 1M £19 I W" HiS118 1985 [18X 189

-MLCW -al - 3.CSJIcII LU

ARG-3 3. The positive contribution of the sector to The Electrici Market:Demand and Supply economic and social development can be seen by the growth in electricity consumption per capita. 5. In 1989, total electricity uses were 48 TWh, Cotnsumption per capita maintained an upwara which is about 2.5 times the level of 1971 trend during the past two decades, as it increased (19 TWh). They are expected to grow to 71 TWh 3.5% p.a., from 625 kWh in 1971 to 1,162 kWh in by 1995, i.e., about 4 times the level of 1971 or at 1989. During the same period, GDP per capita a late of growth of 6.7% p.a., versus 5.3% p.a. for declined 0.9% p.a., as it fell from US$2,193million tl1- historical period. Between 1971 and 1989, to US$1,858 million (Figure 2). ei -. icity sales grew 5.1% p.a., from 15 TWh to 37 TWh, because of more rapidly increasing Figure 2 electricity losses. In the future, electricity sales are expected to increase 6.5% p.a. and reach 54 TM'h PER CAPITAINDICE8 in 1995. Electric power stands out as one of the

1" II09 usf M6 LW country's most important energy sources. During ,_5 9 | 1the last two decades, residential sales increased 2ft_ from 5,253 GWh in 1971 to 11,152 GWh in 1988 (4.5% p.a.) while industrial sales increased from mu9 elW 5,825 GWhito 18,491GWh (7.0% p.a.' during the same period. The reasons for that increase include the expansion of the system in its various phases, urban growth and larger service coverage, an U ,,increase in the electricity content of industrial * , I, I,j.I,I, I, * . -r value added, and a rate policy that generally s17 7n3 1757 1 7 111X77 913 :7 19 induces consumption. In 1989, the composition of

aiCStfis cezm -t*1= sass i ctotalt electricity uses was 23% residential sales, 9% commercial sales, 36% industrial sales, 10%oother sales, and the rest losses and own consumption 4. Another indicator of the positive (Figure 3). contribution of the sector to development is the degree of electrification. Electricity service igure 3 coverage in Argentina increased from 70% in 1971 ELECTRICITYUSES to 95% in 1989. The total number of customers increased 1.7 times between 1971 and 1987, from - 5.2 million so 8.8 maillion.This substantial increase in clientele mainly came from the residential ...-... sector, as residential customers increased from 4.4 million to 7.4 million.

1511 1C3ltP 1515z 52 j,5 15 E: 53 1555 155

me ,05t 0 cm CM *5UsA

155-1"9: PRSJSCfvlts

ARG4 6. To meet such electricity demand, 7. The electric energy available to the grid was Argez'tina's power secto)r has seen an increase in generated by an installed capacity of 5.3 - V in hydro generation during the last two decades. 1971 that increased to 15.3 GW by 1989 (aearly 3 Becai

ARG-5 9. The sector's labor productivity has been Figum 7 satisfactory. In the late 1980s,the customers per COLLECTIONPERIOD employee ratio was around 160, and tne sales per employee ratio was around 710 MWh. While both indicators exceed the respective averages for the region, both are still substantially lower than those. ---.------.-- found in more developed countries.

10. During the laat two decades, electricity losses have shown in unfavorable trend. Taken as -.--. a percentage of gross energy available, they increased from 14% in 1971 to 20% in 1989. ------.---- ...---. Sector authorities expect them to remain around . . . I 19% in the early 1990s. level is too high and . This 10t 1974 1977 1St" 1943 1996 1-19 1943 1991 1913 costly for the sector and needs attention (Figure 190-1999: 6).

Figure6 Profraabiy LOSSES/ENERGYAVAILABLE 12. The financial difficulties of the sector can be seen in its financial return indicators. The rate of return on assets was negative throughout most Ab I...... ~.- of the historical period. The interest coverage ratio followed a similar pattern. It has been less 11. *..-.-. .-...-...... than one, and in many years negative, since 1972. Furthermore, the future does not look any better, ,81 as both indicators are projected to be negative through 1995 (Figure 8).

______Figure 8

|197 11 1977 1 I1*tG 9n4 199 199 191 1 [n RETURNSUMMARY

4X

11. The sector's collection period shows high a. levels and frequent swings,reflecting poor revenue -ax management and great instability because of high -.. inflation; both factors have a negative effect on -fi-4 sector finances. The collection period deteriorated -ox from 149 days in 1971 to 224 in 1989 after showing -4 -1o1 major improvements in 1973 (70 days) and 1981 (76 days). In the 1990s,sector authorities expect 1971 1974 1977 119S 19#3 1996 1939 *993 1915 19l9 the collection period to remain at about 75 days s 970! CCI 'll-- 30ta mum (Figure 7). ______l"9,D _T_O_

ARG-6 13. The poor financial return of the sector is a 14. The operating income of the sector as a direct result of its tariff policy. The margin percentage of operating revenues was negative between the unit price and the unit cost of during most of the historical period. In fact, since electricity routinely shows an increasing deficit 1984, even the cash operating margin (the share beginning in 1982 because of the continuous for operating income plus the share for increase in the unit cost and a slowdown in the depreciation) has been negative. In the 1990s, growth of the unit price. The fact that this came sector authorities project a positive cash operating about despite rising sales underscores the impact margin but do not forecast a positive operating of the electricity price lag. The application of margin. The composition of operating costs sectoral policies with anti-inflation objectives in indicates that expenditures on personnel, fuel, and almost every year of the historical period reveals electricity purchases (from the binational entities) that unessential electricity consumption was constitute the largest percentage of total revenues encouraged because of lack of appropriate (about 84% in 1989). The share of electricity electricitv price adjustments. Shrinking proceeds purchases shows an increasing trend during the from salks revenues are thus explained by the past decade, as it increased from 14% in 1980 to decline in real unit prices. Between 1980 and 26% in 1989. By 1995, the composition of 1989, they declined 1.2% p.a. (from US$38/MWh operating costs is projected to be: electricity to US$34/MWh) while unit costs, including purchases 34%, depreciation 22%, personnel 19%, depreciation, grew at a rate of 2.7% p.a. (from materials and services 14%, fuel 8%, taxes 10%, US$37/MWh to US$47/MWh). According to other exptnses 1%, and operating income -8% calculations based on applying the 1980 rate (Figure 10). (US$57/MWh) to the volumes of electricity sold each year of the 1980-89 period, and on the Figure 10 respective annual differentials relative to the actual COMPOSITIONOFOPERATINO COSTS proceeds of sales, the sector had close to US$2.9 billion in foregone revenues between 1980 to 1989 (Figure 9).

Figure9 . . . UNITPRICES AND COSTS

1tY, 1174 177 191 1463 1941 1949 1442 1993 ISM

29 ._....._____._ ....__,__,k,_...... - mOPENE./_ INC..... _-iFR c19Cc__IRU cmMM fatls...... SMSo.THER... run _ 8S C o W- > W- -- -- . -- EWIC...... S949 . D ...... ISIIER IX0110E961019£91. .... a V C . uz

LO … ------**

0 . .1 I I i I i .I i I ..I I .I . .i i 1971 154 151' it" 13 1I66 196 ISHI 19"9 1966

-4-- COSTU4SI'S 00163 -I- COSTO 1U 3CC -_- fRI U4/I TAnS _- PRSI W' 594

1"8-1195: PIMCT1OII

ARG-7 The Sector and Countey Resources Figure 12

15. The sector's financial situation was strongly SECTOREXPENDITURE/GDP affected by an adverse economic climate marked by .. x high inflation, sizeable exchange rate fluetuations, macroeconomic adjustment programs, and institutional changes. That situation gave rise to regular reductions in public spending programs, thus affecting investment programs and some times causing their postponement for long periods. The investments of the electric power sector are an important part of public investments, and their ,,,, 99471-74 1975-" I9|FS I-9 share rose during the last two decades, from an PTOt average of 4.5% p.a. in the 1970s to 8.8% p.a. in (xor the 1980s (Figure 11). The amount of the sector's maCwea u IWuZSTwt EjIIMuI operating, financial and investment expenditures gradually increased as a percentage of GDP, from around 1.6% in the eariy 1970s to 4% in the late Figure 13 1980s (Figure 12). Furthermore, the public nature SECTORDEFICIT/GDP of the electric companies' financial deficit affects the size of the national budget deficit, given the . X amount of Treasury funds devoted to financing the . - sector. The sector's contribution to fiscal deficit as a percentage of GDP increased from 0.1% in the early 1970s to 0.6% in the late 1980s (Figure 13). .. Both sector debt and debt service as a percentage of country debt and debt service have generally remained between 4% and 11%. The sector's debt during the 1970s averaged 5% of total country debt /1 while servicing it accounted for 6% of public debt service. In the 1980s,those figures rose to 6% and 91f

8%, respectively (Figure 14). _ 1__i_ 1-74 _ _ m_-_ _ _ _

Figure 11 l SECTORINVESTMENT/COUNTRYINVESTMENT| Fiure 14 DEBTAND DEBT SERVICE INDICES

ANNUALAVERAGE 5...... 1971-79 ANNUALAVERAGE 1986-89 lax .

1971 1973 1n7 1977 197 1961 1913 L995 1997 1989 0 p_9dZ ~~~~ ~ ~~4.5\ /, l_ l !~~~~~~~~~~~~~~~~ee _ I | -a

| *:~~~~~~P#dEROBETt'oioi Ot | ~PO:RIK CtST simtiorThI OIT SERVOCE

ARG-8 FundingRequirements and Sources 17. The unrestrained use of external credit from private commercial sources to cover operating 16. The sector's investment program shows a shortfalls, together with the negative trend in net cyclical pattern during the last two decades. It operating receipts, contributed to the steady increased in the 1970s (average of US$614 million deterioration of the electric power sector's funding p.a.) and after reaching a peak in 1980 (US$1.2 position. The effects of those borrowingswere felt billion), decreased until 1984 at which time it later in the heavy debt service burden, with started increasing once again. In the early and late increasing interest rates and shorter terms of 1980s,the sector invested US$773 million p.a. and payment, which combined to markedly reduce the US$838 million p.a., respectively. The increasing sector's creditworthiness and its self-financing trend that was started in the late 1980sis expected ratio. Therefore, only under an optimistic scenario to continue into the 1990s. It is estimated that the would the sector be able to carry out its power sector will require about US$5.4 billion, or investment program during the 1990s. The debt US$894 million p.a., between 1990 and 1995 to service coverage and self-financing ratios were fund its investment program with a peak of below one and negative, respectively, during US$1.4 billion in 1991 (Figure 15). practically the entire historical period. This had serious implications with respect to meeting Figure 15 financial obligations and investment requirements, INVESTMENT as it caused arrears to accumulate and affected the INVESTMEIt" completion of several projects. The sector's

g42I.L1014100' us.0 financial situation was further strained by the

- ----.. *-_---.- ._...... negative net flow of the long-term debt when the L ... - ._.._. __...... debt service burden increased while the volume of .- -...... external loans shrank as a result of the country's e _...... financial crisis and process of renegotiating its *, ...... _ external debt. During the early 1990s,no major

4.0 _ -. .... improvements are expected in the debt service coverage or self-financing ratios (Figure 16).

101 174 1 1 47 ties 164 1ill 1"9 1s" L08 Figure 16 m nlw FUNDINGSU4MMARY

TI1 (K)

G-z-407

*~~~~~~IF9§ 20JE74 -3 -007

-4 -106

1071 1974 V 1977140 1901 1404 il 1904 04 1997 1000

DM $01IICE coo. ...- SIM-NN Ahto

ARG-9 18. The composition of uses of funds shows a Figure 18 trend away from investments towards debt service COMPOSITONOF SOURCESOF FUNDS payments. The share for investments decreased from 82% in the late 1970s to 66% in the late 1980s while the share for debt service increased from 18% to 34% during the same period. This unfavorable trend is expected to persist during the 1990s (Figure 17).

Figure 17 r __ COMPOSITIONOF USESOF FUNDS --

S _ITERN ruM [0 cus. CoSIIF W GOa' COKTEI

fOWS o FIM?VITA OR,IM _ 1N CAPOECRE

ftc

20. Should average 1988 tariffs remain in real terms during the 1990s, the funding position of the sector will be unsatisfactory. Projections show that the financing gap for the first six years of this Pauoo decade would reach US$11.5 billion, or more than i al wnistaUEMa1n7z 03u! a cz 2 times the investment program, as internal

I"1___ _"__CTIO__N funding would be negative every year. Under such condition, the sector would not be able to attract resources external to the sector in the form of 19. The composition of sources of funds shows borrowings or equity capital, and continuous that the sector has had to rely almost exclusively government contributions would be required if the on external funding sources. Because of sector is not to become a constraint on economic inadequate tariff levels, the share for internal activities. To rectify the situation, the sector needs funding, which was already low in the late 1970s to increase electricity prices in real terms to (10%), fell to -7% in the late 1980s. In the 1970s, increase revenues from sales and thus, increase the the sector relied on external credit. However, as sector's creditworthiness. Together with other debt the sector's creditworthiness declined in the 1980s, relief measures, this would allow adequate funding so did the share for borrowings. It went from 54% of future investments (Figure 19). in the late 1970s to 36% in the late 1980s. Therefore, government contributions, which have Figure 19 traditionally played a significant role in the sector OOMPOSITONOFSOURCES OF FUNDS funding mix, increased to 27% in the late 1980s. CTIOR IF O80RS OF UD The sector shows substantial decreases in working | 19*, 3i;, capital which basically resulted from short-term borrowings that were necessary to keep the sectorl operating. No significant increases in internal funding are expected in the 1990s (Figure 18). | l

ills 1991 1I5 I95 1997 1899

| LNtL Fm3 EU) CUSTCo01oxs8l | PmaUIStF -OiOET SEREC!

ARG-10 Capital Structure

21. Historically, the sector's financial losses and inability to generate intcrnally enough resources for development increased its reliance on debt, in spite of significant government equity contributions. During the last two decades, the sector's debt/equity ratio went from about 30/70 in 1971 to 10/90 in 1976 before deteriorating to 40/60 in 1989. Reliance on debt is forecast to continue in the 1990s, as the debt/equity ratio is forecast to reach 70/30 by 1995 (Figure 20).

Figure 20 CAPITALSTRUCTURE

Sax

taUx In

1971 1974 1977 1188 1983 19CC 1090 1003 1190 1998

1992.1999:PROJ?ICRSG11

ARG-11 BARBADOS

ELECTRIC POWER SECTOR BARBADOS POWER SECTOR DATA SUMMARY SHEET 1989

Barbados Light & Power Company is responsible for generating and distributing all electric power on the island. The company is almost completely privately owned. The distribution system functions at 24 and 11 kV, and frequency is 50 Hz.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 255 CAPACITY ENERGY AREA CoooSQKM 0.4 (MW) (GWh) POPULATION PER SQKM 638 BARBADOS$ PER US$ 2.01 THERMAL 132 509 GDP, millions of US$ 1,715 HYDRO 0 0 GDP PER CAPITA, US$ 6,733 NUCLEAR 0 0 GDP GROWTH RATE, % * 5.0 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 ELEC. SALES GROWTH RATE, % * 7.2 PURCHASES 2 ELEC. CONSUMP. PER CAPITA, kWh 1,731 TOTAL 132 511 1989 ELEC. SERVICE COVERAGE, % 98 POWER EXPENDITURES/GDP, % * 3.8 RESERVE MARGIN 48 57%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 84 GWh 2 EMPLOYEES 493 CUSTOBERSPER EMPLOYEE 170 RESIDENTIAL 135 31 TOTAL SALES PER EMPLOYEE, MWh 895 COMMERCIAL 150 34 INDUSTRIAL 150 34 .______BULKSALES #0 0 OTHER 6 1 DOMESTIC SALES 441 100 |1~~ ~ ~ ~ = SECTOR FINANCES EXPORTS 41

AVERAGERATE (US$IMWh) 139 SYSTEM LOSSES 41 8 OPERATING MARGIN (WIO DEPR), % 12 OPERATING MARGIN (WI DEPR), X 30 l_l RATE OF RETURN, Z 4.4 INDEBTNESS, % 18 DEBT SERVICE COVERAGE, times * 2.0 *- average per year since 1985 SELF-FINANCING RATIO, % * 69 - to other utilities not in the study - as a percentage of available energy BARBADOS

ELECTRIC POWER SECTOR

INSTITUTIONALASPECTS

Barbados Light and Power Company Limited is the sole electric utility on the Island. The Company generates and distributes electricity and provides ancillaty services to some 85,000 domestic, industrial, and commercial users. It operates under a non-exclusive franchise which is embodied in the Electric Light and Power Act of the Laws of Barbados.

Barbados Light and Power Company Limited is an investor owned electric utility with 63% of its shares held by some 2,500 Barbadian investors.

Electricity rates are regulated by the Public Utilities Board in accordancewith the Public Utilities Act. Barbados is a fair value jurisdiction, and the utility is allowed to earn a fair rate of return on the fair value of its assets.

Electricity is generated by oil-fired plants, and the electricity tariffs include a fuel adjustment charge. This is adjusted monthly to reflect current oil prices and enables the utility to collect appropriate fuel revenues for its fuel expenses.

BAR-2 BARBADOS

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Summary Figure i

1. During the last two decades, the power GROWTHRATES sector of Barbados has performed satisfactorily IM. from a financial point of view. The sector's pricing 15X- ...... _ - _ .__-__-._-_._ policy has allowed electricity prices to remain above the level of general consumer prices and lox ------resulted in a positive operating margin, strong .x internal funding, and strong working capital. This situation has also been possible because of efficient operal ons, a low level of losses, and high , , .. .. . productivity and is expected to continue through

the 1990s. In addition, the sector's debt service l -, l l I . I I coverage has been at an adequate level reflecting 171 1973 q735 19?7 1979 I9t1 1963 il95 It$? i9t

a good degree of solvency. -A ,,, +L- ICThIUClTV

The Sector and the Economy 3. An indication of the positive contribution 2. The pattern of growth in electricity sales of the sector to economic and social development has followed closely that of real GDP growth. is growth in electricity consumption per capita. Except for 1974, it has always been positive. In Despite swings in the economy, electricity the 1970s, when real GDP grew 2.7% p.a., consumption per capita has shown continued electricity sales grew 7.7% p.a.. In the early 1980s, growth since 1971. It grew from 604 kWh in 1971 when real GDP declined 0.9% p.a., electricity sales to 1,731 kWh in 1989, or 6% p.a., while GDP per growth was lower but still positive at 3.4% p.a.. In capita only grew 1.9% p.a. during the same period the late 1980s, when GDP grew 5.0% p.a., (Figure 2). electricity sales growth increased to 7.2% p.a.. The spread between the electricity demand growth rate Figure 2 and the real GDP growth rate was 5.0% p.a. in the PERCAPITA INDICES 1970s and 3.4% p.a. in the 1980s (Figure 1).

DAN

1971 1973 1677 197 1979 1961 1962 1985 197 2909

oCP ?f Ta SIUM PIP CAPITA_

BAR-3 4. The positive contribution of the sector to 6. To meet electricity demand, Barbado3 has economic and social development can be seen in relied exclusively on thermal generation (Figure 4). the growth of electricity service coverage. Electricity service coverage increased from 70% in Figure 4 1971 to 98% in 1989. Between 1971 and 1989, ELECTRICITYSOURCES total customers of electricity service increased from 48 thousand to 84 thousand. Most of the growth I $41o occurred in the residential sector, as residential customers increased from 42 thousand to . ....--. - 74 thousand.

The ElecrincityMarket: Demand and Supply

5. Total electricity uses grew from 166 GWh in 1971 to 511 GWh in 1989, 3.1 times, while sales grew from 145 GWh to 441 GWh, 3 times or In M 1374 197? 1938 193.. 1916 119 1992 199" 1I9 6.4% p.a.. In the future, sales are expected to ?K.U.L E= PURCHASES I grow 3.1% p.a.. The composition of uses of 1.9.-1999: PROJECT03 electricity has not changed dramatically over time and is not expected to change in future. In 1989, residential sales accounted for 27%, commercial 7. The electric energy available to the grid sales 29%, industrial sales 29%, other sales 1%, was generated by an installed capacity in 1989 of and losses and own consumption 14% (Figure 3). 132 MW, all thermal. This level was 2.8 times that of 1971, 48 MW, and the forecasted level of Figure 3 183 MW in 1999 is 1.4 times the 1989 level ELECTRICATYUSE (Figue 5).

-u b'Figure 5 On INSTALLED CAPACITY

_._ ~ ~ .... _._...... :: ._,.

I97I 1974 19.7 116 94 194M 3E 1S"192 1995 109

15999199: P2G.CC8IO¶5

BAR-4 OperationalPerformance 10. Electricity losses as a percentage of gross energy available have historicallybeen between 89: 8. Because of investments ir the early 1970s, and 10%. This level is among the lowest in the the sector's reserve margin increAsedtremendously region, and this trend is expected to continue reaching a peak of 150% in 19'6. After a decline through 1999 (Figure 7). in the late 1970s, it reachee' a second peak of 104% in 1982. However, it has been declining Figure7 since then, thus reflectin'- ai better utilizqtion of LOS8ES/ENERGYAVAILABLE existing capacity. It is expected to remain I.etween 58% and 76% during the 1990s which is still on the high side even for a thermal system. INK

9. Labor productivity in the sector has shown x . positive signs of improvement. The ratio of customers per employee is among the highest in £...... the Caribbean; it grew from 145 in 1971 to 171 in ix _....-_.-.-...- 1989 and is expected to reach 190 in 1999. The ratio of electricity sales per employee is also ax...... among the highest in the region; it grew from 437 MWh in 1971 to 895 MWh in 1989 and is x 1971 . 1974 1O9V M0,1 £1 10a4 Isa$ 1991 1991 1918 expected to reach 1,163 MWh in 1999 (Figure 6). __e_ECn__1_9_-19 _S______

Figure6 11. The collection practices of the sector are EFFICIENCYINDICES also quite good. The sector's collection period of

[email protected] ll. I just over 30 days is among the lowest in the region (Figure 8).

Figure 8 COLLECTIONPFRiOD

1971 1914 117 1910 113 11 111 1992 1991 1998

_ tn~~~~~~119199s:9IQJltCl10l

as _._.. ,...... -...... ,......

197l 1974 i17 t199 199 is" 199 199 1s9m BAR519-1919: PRIJICi9l

BAR-S ProfitabiiY Figure 10

12. The sector's sound financial position is UNITPRICES ND COSTS reflected in its financial return indicators. Since ISO,,1 1971, the sector's rate of return on assets has been between 4% and 8%, for the most part, which is less than the cost of capital. However, the sector ** ...... has had to rely very little on borrowings and has not had difficulty meeting its interest payments, as its interest coverage ratio has been strong, i.e...... greater than 1. These trends should continue ._,,,_._l_l,____._l,,_l_.,l,,_l,,_ during the early 1990s; however, both indicators iS7 9 t?? IS9S lit? 191 1I Its 1s9 it"t are projected to deteriorate slightly in the late -4- COt4IWI* itc STacs^t , 1990s (Figure 9). _" wi TAcos **-tW TAXES

19SO-1999:PIVACIIOlIS Figure9 RETURNSUMMARY 14. The composition of operating revenues ,,n (x,,,, shows a fairly constant pattern. In 1989, residential sales accounted for 28% of operating revenues, commercial sales 36%, industrial sales 41 A v v .33%,and other sales 3%. The respective shares are expected to remain fairly constant during the ax / 1990s (Figure 11).

igure 11

in i!1fint IS7; ins ins 1s1, ins i9s ino COMPOSITIONOF OPERATINGREVENUES

-1 ? f CW -4-t Sox :: '.' i'.

ins-it,,: PU~~~~~~~~~~~~~~~~~C1O55...... ~~......

13. The sector's pricing policy has allowed the price of electricity to remain consistently greater than the cost of electricity, both with and without depreciation, thus leaving a positive operating o margin since 1971. In 1989, the price of 1 MWh i9,1 ItSM I"?1 0134t? 15t1 SIS Ins i9s of electricity was US$139, and the cost with enIIO?it M CSUCITL Q Ttf eepreciation was US$122 leaving an operating cm* .^ts en OThI WORTS margin of US$17. However, the sector's operating im-,t ne*csioo margin is forecast to decline to US$9 in 1999 (Figure 10).

BAR-6 15. The sector has shown positive operating 271eSector and CountryResources income throughout the last two decades. The share has ranged between 7% and 25% of 16. The sector has had a claim on country and operating revenues. The composition of operating government resources. Sector investments as a costs shows that fuel costs as a percentage of percentage of country investments were 4.9% in operating revenues increased from 22% in 1971 to the 1970s and 5.2% in the 1980s (Figure 13). 62% in 1981 and then declined to 33% in 1989. The share for fuel costs is projected to increase to Figure 13 44% by 1999. Considering the sector's reliance onSETRNEMiiT/OTYIVTET thermal generation, it is not surprising that fuel SECTORINVESTMENT/CONTRY INVEENT costs peaked following the energy crisis of the late 1970s. A cost component which is uncommon to most power sectors is taxes which in 1989 constituted 11% of total revenues (Figure 12). ANNUALAVERAGE ANNUALAVERAGE

Figure 12 COMPOSITIONOF OPERATINGCOSTS

4S.'exC w.

SIX Sector expenditures as a percentage of GDP ...... increased from 3.4% in the early 1970s to 5.3% in "I" 1974 I"? I 19 9 1"Ia1 95St" the early 1980s before falling to 3.8% in the late cmOit F OPttE C TAXIS 9 fSEL 1980s (Figure 14). E EC FUl = MITEWlAS cm IERSoIEt l OfHEREX?0SES

1998-19": s Figure14 SECTOREXPENDITURE/GDP

0.SI

711e-74 IL"S-" 1116-14 I9S-8

(BAor GM)

BAR-7 The sector deficit as a percentage of GDP was FundingRequiremenus and Sources 0.1% in both the late 1970s and early 1980s (Figure i5). 07. From 1990 to 1999, the sector is expected to require US$178 million, equivalent to about Figure 15 US$18 million per year. During the 1971-1989 SECTORDEFICIT/0DP period, it only required an average of SECTOR______US$14 million per year (Figure 17).

Figure 17 INVESTMENT

NiLloH i961 as

IS......

to4......

m;971- 197-I 19H-*4 84.5-I

1971 1074 17? 19IS 1,13 L?#6 1737 170 1997 LSOl Sector debt as a percentage of total country debt - sT'im' declinied from a peak of 72% in 1972 to 4% in I19-19 PQUECTMS 1988reflecting the strong financial condition of the sector. Sector debt service as a percentage of total country debt service, although more erratic, also declined. It went from 61% in 1973 to 10% in 1989 (Figure 16).

Figure 16 DEBTAND DEBT SERVICE INDICES

x~~~~~~~~~~~~~~~~..0......

1971 1072 1975 9M 1979 1991 1983 1962 1907 1909

-A -4- 5

WU1E1T4?tAL CCT S; POIiI CEOISOOIICLTOIAL OU5T SEVICE

BAR-8 18. The sector's funding position has been Figure 19 strong. Its self-financingratio was erratic over the COMPOSITIONO USES OF FUNDS last two decades, though favorable. It was generally between 20% and 90%. This trend is expected to continue in the future. The sector's .el debt service coverage ratio was also somewhat erratic. However,despite peaks and valleys in this . : indi. tor, it remained greater than 1 for most of the last two decades and is expected to remain greater than 1 for most of the 1990s (Figure 18).

Figure 18 1 19.79 FUNDING SUMMARY

I | :lh | ~~~~~~~~~~~~~~~~~~~~Pt!OJ(CTIOIl_ ~ ~ ~~~~~~~~~~~~1998-1999:

20. Internal funding has historically constituted a significant portion of sources of l ,funds,l l l p between 49% and 82%. As a result, the | 9 * ll p-1sP%| sector has had to rely very little on external -| ,, resources. In the future, internal funding is .l,.l ,, l .. ,, , -, expected to constitute about 90% of sources of 1971 1974 1M 1988 1S43 1906 1989 1993 1993 198h funds leaving the sector in a very strong financial -. tS3 siotCeCO. -4--- siF-vzNFtO position (Figure 20).

| ~~~~~~~1s991.1999:POJECCi(5 ! Figure 20 I COMPOSlTONOF SOURCES OF FUNDS l 19. The main use of funds has been for l l investments. The share of investments in the composition of uses of funds has historically been |eI between 50% and 66%. The share for debt service ...... has historically been between 23% and 42% with substantial increases in working capital completing ax the composition. From the early t late 1990s,the UN share for investments is expected to increase from 49% to 67% while the share for debt service ox 1- 1 1 5 1 1 decreases from 51% to 33% (Figure 19). taMlON

9 7(7ERM f1499 0 CUlTCIIIG g Z 9St1 Dtf teCu le |gQfullbmw 71991111 6L,P (4W9 CAP BICUAII

w191-19"I:PlOJtcTIO8

BAR-9 21. If 1988 tariffs are maintained in real terms, CapitalStructure internal funding is expected to be able to cover debt service payments in most years and still 22. The sector's capital structure has been provide substantial funds for the sector's strong. Its debt/equity ratio went from 30/70 in investment program (Figure 21). Since the 1971 to 60/40 in 1981 and then fell to 20/80 in Barbados utility has a rather low rate of return on 1989. It is expected to increase to 40/60 by 1999 investment (about 4.4% in 1989), it may have some (Figure 22). difficulty raising the remaining funding. In the past, though, the low rate of return was not a Flgure22 problem. CAPITAL STRUCTURE

Figure21 COMPOSITIONOF SOURCESOF FUNDS IF 111Tait" WIlN CUIMTO

IWILLION19199 1

48

39 197U 1974 18'7 1958 1113 1186 1939 1192 1995 1198

as I1-unv a1w

is 9-19 8JCO8

1954 1981 L993 9S1 1A"7 1994

M INEBlAIF181S C CUSTCOBTRIUTIOIS 6 FIMElhO8? OttT SERVICE

BAR-10 BELIZE

ELECTRIC POWER SECTOR BELIZE POWER SECTOR DATA SUMMARY SHEET 1989

I'lhcBclizc Eiledi icity Board (BEB), a government owned corporation, is the sole authority rcsponsible for gencrating. Irarismt-ilting,and distributing electricity for public and private purposes. Initially, BEB was primaril) responsible for supplying electricity to Belize City only, while supply to the districts was provided by the respective town Councils from 6 pm to 10 pm. Later, this was amended to place all the districts in the country undcr BEB's responsibility. The sample for this study consists of BEB only.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 184 CAPACITY ENERGY AREA '000 SQKM 23 (MW) (GWh) POPULATION PER SQKM 8 BELIZE$ PER USS 2.00 THERMAL NA 90 GDP, millions of US$ 311 HYDRO NA 0 GDP PER CAPITA, US$ 1,686 NUCLEAR NA 0 GD'PGROWTH RATE, z * 7.2 GEOTHERMAL NA 0 1988 ENERGY CONSUMPTION OTHER NA 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 ELEC. SALES GROWTH RATE, % * 9.2 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 399 TOTAL NA 90 1989 ELEC. SERVICE COVERAGE, % 70 POWER EXPENDITURES/GDP, % * 4.6 RESERVE MARGIN NA NA

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 24 GWh % EMPLOYEES 420 CUSTOMERS PER EMPLOYEE 57 RESIDENTIAL 28 39 TOTAL SALES PER EMPLOYEE, MNh 170 COMMERCIAL & INDUSTRIAL 45 61 BULK SALES #0 0 OTHER 0 0 DOMESTIC SALES 73 100

SECTOR FINANCES EXPORTS O

AVERAGE RATE (US$IMWh) 206 SYSTEM LOSSES 13 ## 15 OPEPATINGMARGIN (W/O DEPR), % 15 OPERATINGMARGIN (WI DEPR), % 25 RATE OF RETURN, % 15.8 INDEBTNESS, % 28 DEBT SERVICE COVERAGE, times * 0. 8 * - average per year since 1985 SELF-FINANCING RATIO, % * -15 - to other utilities not in the study - as a percentage of available energy BELIZE

ELECTRIC POWER SECTOR

INSTITUTIONALASPECTS

The Belize Electricity Board (BEB) was established under the BEB ordinance of 1950. BEB is the sole authority for generating, distributing, supplying,and sellingenergy for both public and private use in areas decreed by the Minister of Energy who can declare a supply area. It is estimated that BEB supplies a little more than 70% of the population with electricity.

The BEB also manages a Rural Electrification Unit on behalf of the Government of Belize. This unit's main role is to ensure that communities outside BEB's area of supply obtain electricity and to assist them in managing their own resources. The Government's manifesto is to provide electricity to all communities throughout the country.

Some large companies, including those in the citrus, rice, lumber, and sugar industries, have self- generation capabilities but do not sell to any other entities or consumers. There are also entities outside of BEB who generate, distribute, and sell energy to small communities outside of BEB's area of supply. The BEB has had success in selling power to some of these entities.

At present, the BEB generates all of its electricity using diesel powered engines. The Government of Belize has decided to construct a run-of-the-river hydro plant Macal River, commencing in the early 1990s.

The tariff structure is inverted with the highest consumption having a higher charge. The existing rate is the same for all classes of consumers.

BEZ-2 BELIZE

ELECTRIC POWER SECTOR

EVOLUTION. SIlVATION. AND PROSPECTS

Summary TheSector and TheEconomy

1. Most electric power iu Belize is produced 2. The annual growth pattern of electric by small generating units which are inherently power sales in Belize does not follow that of GDP inefficient. Furthermore, all electric power is (Figure 1). The apparent independence between thermally generated, and as a result, Belize relies the two variables can be explained by the mostly on inported oil for its power requirements. irregularity and sometimes insufficiency of power Power generation has accounted for about 23% of supply. However, over the long run electricity the country's petroleum bill. Because of this, sales have grown 6.5% p.a. while GDP has grown electricity production costs are high, and 5.1%, which implies a ratio between the electricity inadequate tariff levels during the early 1980s led demand growth rate and the real GDP growth rate to significant financial losses for the sector. of 1.4% p.a.. Between 1979 and 1984, when the Increased tariffs together with lower fuel costs, Belizean economy declined because of the sharp reduced power outages, improved plant deterioration of the country's terms of trade and performance, and a reduction in administrative an inadequate domestic policy response, average costs led to positive financial results in the late consumption per customer decreased by about 4% 1980s. The sector reduced losses as a percentage while the number of customers increased by 12% gross available energy from 25% in 1984 to 15% in and the population grew by 14%. 1989. However, since electricity tariffs have been kept at an adequate and relatively constant level Figure I since 1986 and are planned to remain at that level until 1994, substantial resources from outside the GROWTHRATES sector, either public or private, will be required to 'ix T carry out planned investments of about US$63 ,... - million from 1990 to 1994.

s ,., , I ,, *, I., . 1971 1973 175 1"? 1979 IWI 19)2 195 1957 19)

- 3KMCP -4- =Cc,aCI,r gitn

BEZ-3 3. An indication of the positive contribution mainly attributed to the success of the metering of the sector to economic and social development program and line improvements to reduce non- is growth in electricity consumption per capita. technical losses. After 1989, sales are expected to Between 1971and 1989,electricity sales per capita grow 7.0% p.a.. In 1989, residential sales grew 4.1% p.a., from 195 kWh to 399 kWh, while accounted for 32% of total electricity uses, GDP per capita grew 2.7% p.a., from US$1,036to commercial sales 50%, and losses and own US$1,686(Figure 2). consumption 18% (Figure 3).

Figure 2 Figure 3 PER CAPITAINDICES ELECTRICATYUSES

I------.

197L 1174 19177 IT4 11791 1911 19" 1911 IS9 1991

ST' I . @ , | , II l | l ,nI T1SO)ENTLAL EC6WERCAL m OtR,; 1971 1173 1575 1977 111979 1 981j 1915 1980 1191 C EXPOR15 C:l= WC Cs LOSSES

_ ctr m Carl?,% _ Ln M CAPITA S19"-1999:P4OJECTOII3

4. Another indication of the sector's positive 6. Belize relies completely on thermal power contribution to the country's development is the to supply the country's electricity demand. Power rate of electrification. In Belize, electricity service is generated by isolated diesel sets which depend coverage grew from 45% in 1971 to 70% in 1989 on imported fuel. A substantial share of power is showing that although the country has made generated by private industries because of high progress it still faces a challenge in making service tariffs and to allow for the use of sugar cane available to the rest of the population. Between bagasse (Figure 4'. 1972and 1988,total customers of electricity service nearly doubled, from 13 thousand to 23 thousand. Figure4 Most of the growth occurred in the residential ELECTRICiTY80URCES sector, as residential customers increased from 10c

thousand to 20 thousand. La-

The E.lectricityMarket: Demand and Supply .

5. Total electricity uses in 1989 (90 GWh) were 1.9 times those of 1978 (48 GWh). Domestic .4...... - . sales of electricity in 1989were 1.8 times those of 1978, as they grew from 40 GWh to 73 GWh. *6 However, the pattern of growth was very irregular. .

It had a low of -5% in 1984and a high of 17% in 1971 1974 It" ,"B 1981 1916 198 8192 1S1 1998

1986. However,sales increased significantlyduring tiiL the late 1980s (9.2% p.a. from 1985 to 1989), and 19"-1919: PI0JECTIOKS this trend is projected to continue. This growth is

BEZ-4 OperationalPerformance 9. Electricity losses have been declining. Taken as a percentage of gross available energy, 7. In the early 1980s, generating facilities they decreased from 25% in 1984 to 15% in 1989. were unreliable due to poor preventive This is one of the most successful improvements maintenance, and technical and non-technical seen in the region, and the sector's goal is to losses cost millions of dollars in the form of reduce losses to around 13% (Figure 6). unserved demand and forgone revenues. However, substantial progress has been made during the last Figure 6 two years through new investments for the LOSSEWSENERGYAVAILABLE extension of distribution and transmission lines, generation units, rural electrification, and appropriate metering and accounting systems. nx ...... -....

8. Labor productivity in the sector is ..-...... significantly below that of other countries in the region as well as developing and developed ,,1 . r countries of the world. There is substantial room . x---.-_-M for improvement. Between 1982 and 1988, the number of customers and MWh of electricity sold sx.- _-_-_- per employee increased from 55 and 126 to 66 and 189, respectively. Both indicators declined in 1989a ,, . I I I I I I 1971 1974 lo"19 A IN I 19Ms11 191 1*9 199 199 because of a substantial increase in the number of crn,199: MtJECvccS employees. The electricity sales per employee ratio is expected to increase to 229 MWh in 1994; however, this level is still very low (Figure 5). 10. Since the mid-1980s, the collections practices of the sector have been good. The Figure 5 collection period has ranged between 40 and 60 EFFICIENCYINDICES days and is expected to remain at about 40 days in the 1990s (Figure 7).

Figure 7 '; *sCOLLECTION PERIOD

39.~~~~~~~~~~~~~~~~~~~~~~~~~39

1971 1974 It" AIN 19132 16 IS19" 1991 1M 19M9

IIIII-Is"!~~~~ FO CM .. 1,I... 1.1.1...... 1...

ASIA nM 1117 AIN Ign 1916 It 199 1991 AmI 199t-1999: PROJ-ECINsC

BEZ-5 ProfitabiOty Figure 9

11. The sector's financial recuperation can be UNITPRICES AND OSTS seen in its financial return indicators. Its rate of I"'n" " ret,srn on assets has been positive since 1985. It As. .. .. peaked at 44% in 198/. Likewise, the sector's interest coverage ratio was several times greater ...... than 1 in the late 1980s. In the future, the sector - - ... is expected to maintain a strong financial position, l-... .. as the rate of return is expected to be between 7% and 12%, though decreasing (Figure 8). . -.

Fsigurue8 JII 14 191 191t IM L 995 1 115 £MI6

ICUT WO WRtC -*- COttS W 311]"= RETURNSUMMARY __* rttcz We X^Tim

6~~~~~~~~~~~~~~~~~~9

.4 / 13. Electricity production costs in Belize are 4/ \ 2ttx high, mainly because of the use of small generating units which are inherently inefficient, use costly VA -. diesel oil, and have low oil efficiencystandards and . o s D ineffective maintenance procedures. Fuel costs represent more than 50% of operating costs. ..- e.He From 1977 to 1984,sector revenues did not cover 19?1 19?4 X977 1"t§1983 1956 196 1SS 1"59 19 operating costs. The corresponding financial losses

-Irnlaxu co -.- tV: at mm reached a peak in 1984, an exceptionallypoor year. __ 1991-1919:PaOgCiu In 1985, the pattern changed, and the sector achieved a positive operating income brought about by reduced power outages, improved plant 12. Between 1979 and 1984, electricity rates performance,an increase in tariffs,and a reduction were increased as a result of a fuel surcharge in administrative costs. Sector earnings have also introduced in 1979. After 1984,the surcharge was benefitted from reduced oil prices in the late abolished, and a flat charge was introduced which 1980s. A positive operating margin is projected increased average revenues by about 15%. In through 1994. 1986, rates were reduced to partially reflect reductions in oil prices, and they have remained around that level ever since. The result has been an operating margin of around 30 US$/MWhsince 1985 that is expected to continue through 1994. The present price of electricity to the consumer averages about US$206 per MWh, one of the highest in the region (Figure 9).

BEZ-6 The Sectorand CountryResources The sector deficit as a percentage of GDP increased from 0% in the late 1970sto 1.6% in the 14. The sector absorbed a substantial amount late 1980s (Figure 12). of country and government resources. Sector investments as a percentage of country investments Figure 12 were 4.2% in the 1980s (Figure 10). SECTORDEFIaT/GDP

Figure10 SECTORINVESTMENT/COUNTRY INVESTMENT I..51(

ANNUALAVERAGE

L071-74 19f730 1496-4 1943-st

Before a conversionof debt into equity in the mid- 1980s resulting from an agreement with the Government (para. 16), sector debt was close to Sector expenditures as a percentage of GDP 20% of the country's debt. In 1987, it constituted increased from 3.8% in the, late 1970s to 8.1% in only 2%. Sector debt service as a percentage of the early 1980s before falling to 4.6% in the late country debt service followed a similar pattern; it 1980s. An increase in cash operating expenses was peaked at 50% in 1985 before falling to 2% in the major reason for the increase in the early 1988 (Figure 13). 1980s (Figure 11). Figure 13 Figure 11 DEBTAND DEBT SERVICE INDICES SECTOREXPENDITURE/

18.04 ¶0 - .-...-.. _.---.-...-..._...-. - ..-.-. .

t u t " ~~k.--A-----XW S

1W087 ion 1771 In?S is?11777l 1771 ISO ot U17 1na

107-04 1070-70 1604 1080-so -a. -4--+

sx~~~~~~~~~~~~~~~~~~~~~~P~ofT Iet}I. . DTOIALOtOT05AC

BEZ-7 Funding Requirements and Sources Figure 15

15. Initial sector projections estimate that FUNDINGSUMMARY about US$63 million will be required for investments between 1990 and 1994. This average . of US$13 million per year is significantly more . X than the US$2 million per year that was required 41 WA between 1985 and 1989 (Figure 14)..

Figure 14 -, X INVESTMENT .-- IIILLIOHNo.1040 1#, ,, i ., 1$ i,,i . ,, l, .9105 f,. L9

-m SUNllICI COO. -+_ stIJ-llt Milo

IS __ ... _ _1It9f1991: _ ____ PWiJCTaONS__.__ .. ______.__ ... _.__._ . .. __ _._

17. Investments are once again expected to be ,, _- ....-.... l the major use of funds in the 1990s. Investments iIiiiuipiiu.ryid had a peak of 8G% of total uses of funds in the ,,-1 | r wrr1980s . . but$ . then| . |earlydeclined to 20% in the late Ml19?1 1$7,Lf 1903 S IOU 13" 1*92 1093 L99# 1980swhile debt service payments peaked at 48%. -IIIi,t, In the early 1990s, the composition of uses of

PROICWT funds is expected to be 86% investments and 14% debt service (Figure 16).

16. The sector's financial recuperation can be Figure 16 summarized by the sector's debt service coverage COMPOSITIONOF USESOF FUNDS and self-financing ratios. Because of an agreement with the Government under which the Government I._. paid the sector's outstanding medium and long- term debt in March 1986 against electricity sales to the Government, the sector's capacity to respond to debt service obligations, using its own resources, has eased significantly. The sector's debt service coverage ratio has been increasing since then and . is expectedto be on the strong side, i.e. greater than 1, in the future. Likewise, the sector's self- 7 1n-n 10TwU 185-00 99tl-9 100--l financing ratio has been greater than 30% since 1987 and is expected to remain greater than 30% IIIIIIIuipcauaz M 3iwT rn. in 1990 and 1991 before falling to 5% in 1994. 1 PROJCW5 Although both indicators are presently favorable, the forecasted negative trend in both may be a causefor concern(Figure 15).

BEZ-8 18. The sector relied on significant Figure 18 government contributions in several years to meet OOMPOSITIONOF SOURCESOF FUNDS its financial requirements. In the early and late 'u main i c . 1980s, government contributions were 28% and * iO±,x 51% of total sources of funds, respectively. Since ,,I substantial investments are envisaged during the ae 1990-94 period and the level of tariffs, which is already considered high, is planned to remain relatively constant, it is likely that resources external to the sector, either public or private, will have to be made available in order to accomplish the planned cxpansions and improvements in the system under the planned time span, as interral 19si ,,n .,., ,,17 funding is expected to constitute around 30% of = MTEAL FMWlh i CUSTCOlTliQtlONS sources of funl' in the early 1990s (Figure 17). S5 FMI W -WOEt?T SERCE

Figure 17CaiaStuur COMPOSITIONOF SOURCESOF FUNDS Capital Structure

,l| ...... t ...... ' -._ 20. After severe problems in the late 1970s and early 1980s, the sector's debt/equity ratio improved to 20/80 in the late 1980s; however, sector authorities expect it to deteriorate to 70130

l""",.@*11. - l by ...... 1994 (Figurel l 19).

20

1971-74 1957-75 Me-" 19118249 109W4 1995-69 CAPITALSTRUCTURE

m onu" Fu,m, cm 6-T7 COTOT CM looo F1005 M OAP5'N CAP01CROOSE UnE,w" ~19*n1:Pa*CUOJU B= s| six

19. If 1988 tariffs are maintained in real terms, _ . internal funding will not be sufficient to cover debt SIX service payments resulting in a significant financing lap. If external resources are unable to fill this . . . . gap, Government resources will have to be used if 1671 1.74 1? 190 1183 1566 1938 1192 19" 1I' . quality of service is not to be affected because of w u5T5 MOOT lack of adequate investment (Figure 18). 1990-1I"9:PROEted

BEZ-9 BOLIVIA

ELECTRIC POWER SECTOR BOLIVIA POWER SECTOR DATA SUMMARY SHEET 1988

EmprWsa Nacional de Electricidad (ENDE) is responsiblc for power generation and transmission in Bolivia; it supplies electricity to eight regional companies. Compafifa Boliviana de Energfa Eldctrica (COBEE) and Empresa de Luz y Fuerza El1ctrica dc Oruro (ELFEO) aic the two privately owned companies responsible for supplying power to La Paz and Oruro. The other six companies are Empresa de Luz y Fuerza Eldctrica Cochabamba S.AM. (ELFECSAM), Cooperativa Rural de Electrificaci6n, Ltda. (CRE), Cooperativa El6ctrica Sucre S.A. (CESSA), Servicos Eldctricos dc Potosf S.A. (SEPSA), Servicos Eldctricos de Tarija (SETAR), and Cooperativa de Servicios Eldctricos Trinidad, Ltda. (COSERELEC). While this study includes all nine companies, it only has data on COBEE and ELIEO until 1988.

GENERALECONOMIC DATA ELECTRICITYSOURCES

i-OPULATION '000 6,917 CAPACITY ENERGY AREA '000 SQKM 1,099 (MW) (GWh) POPULATION PER SQRM 6 BOLIVIANOS PER US$ 2.35 THERMAL 192 476 GDP, millions of US$ 4,354 HYDRO 269 1,137 GDP PER CAPITA, US$ 629 NUCLEAR 0 0 GDP GROWTH RATE, % * 0.6 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 249 IMPORTS 0 ELEC. SALES GROWTH RATE, 2 * 4.0 PURCHASES 30 ELEC. CONSUMP. PER CAPITA, kWh 198 TOTAL 461 1.643 1989 ELEC. SERVICE COVERAGE, % 25 POWER EXPENDITURESIGDP, % * NA RE3ERVE MARGIN 81 21%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 420 GWh Y EMPLOYEES 1,999 CUSTOMERS PER EMPLOYEE 210 RESIDENTIAL 689 50 TOTAL SALES PER EMPLOYEE, MWh 684 COMMERCIAL 189 14 ____1-____1.____1____.___,___-___I____ INDUSTRIAL 171 13 BULK SALES # 184 13 OTHER 135 10 ______,______-____ -______DOMESTIC SALES 1t 368 100 SECTORFINANCES EXPORTS 0 TOTAL 1,368 AVERAGE RATE (US$SMWh) 50 OPERATING MARGIN (W/O DEPR), % 12 SYSTEM LOSSES 269 #6 16 OPERATING MARGIN(WI DEPR), % 41 RATE OF RETURN, Z 1.9 INDEBTNESS, % 17 * - average per year since 1985 DEBT SERVICE COVERAGE, eimes * 1.4 - to other utilities not in the study SELF-FINANCING RATIO, % * 41 - as a percentage of available energy BOLIVIA

ELECTRIC POWER SECTOR

INSTITUTIONALASPECTS

In 1962, the Bolivian Government modified the structure of the electric power sector. Decree No. 5997 of February 9, 1962 created the Direcci6n Nacional de Electricidad (DINE) as part of a national plan to stimulate economic and social development. DINE was authorized to set tariffs and coordinate and control the electric power sector in the country.

Through decree No. 5999 of February 9, 1962, Empresa Nacional de Electricidad (ENDE) was founded as a state-owned utility. ENDE is responsible for the generation and transmission of electricity while regional power companies are responsible for distribution. ENDE is in charge of planning the expansion of the electric power sector and developing,constructing, and operating new generation and transmission facilities throughout the country except in the cities of La Paz and Oruro. The sector is under the jurisdiction of the Ministry of Energy and Hydrocarbons (MEH). The National Electricity Code of 1968 established the MEH as the regulatory agency for the electric power sector with the responsibility of authorizing the installation of power plants, regulating the operation of the companies, and approving tariffs through DINE.

In 1970, the Instituto de Electrificaci6n Rural (INER) was organized to promote electricity services in the country's rural areas. In the mid-1970s, ENDE interconnected the main electric power systems (Cochabamba, Oruro, Potosi, and Chuquisaca) and implemented a broad rural electrification program. Later in the 1970s,the La Paz electricity system was interconnected to the national grid. In 1984, Corporaci6n de Fomento Energdtico Rural (COFER) replaced INER. COFER's mission was to perform the functions assigned to INER in addition to developing non conventional energy sources. In 1989, the Santa Cruz system was added to the national grid thus gathering within the system the utilities that provide electricity to 80% of the total demand.

The main systems that provide electricity services in Bolivia are Compafifa Boliviana de Energla Electrica (COBEE) and Empresa Nacional de Electricidad (ENDE) which account for 78% of the country's installed capacity and 87% of the country's available capacity. Within ENDE is the National Interconnected System which sells energy to the mining and industrial sectors and to other utilities for redistribution. The largest of these companies are: Empresa de Luz y Fuerza Eldctrica Cochabamba S.A.M. (ELFECSAM) in which ENDE owns 68% of the stock; Servicios Electricos de Potosi S.A. (SEPSA) in which it holds 2%; Cooperativa Electrica Sucre in which it holds 18%;and Cooperativa Rural de Electrificaci6n Rural Ltd (CRE) of Santa Cruz which is owned completely by the end-users. COBEE, the largest distribution company, is a privatelyowned foreign company responsible for generation and distribution in the city of La Paz and through its subsidiary, ELFEO, in the city of Oruro.

BOL-2 BOLIVIA

ELECTRIC POWER SECTOR

EVOLUTION.SITUATION. AND PROSPECTS

Sumnumy 2. The growth of power consumption in Bolivia during the last two decades lias followed 1. Despite Bolivia's severe economic that of GDP at a faster rate. During the 1971-80 difficulties in the early 1980s, the electric power period, power consumption grew 9.0% p.a. while sector performed satisfactorily from a financial real GDP grew 4.7% p.a.. When real GDP point of view. With the exception of 1984, the declined 1.8% p.a. during the 1980-88period, total sector set a unit price for electricity that was able power consumption still continued to grow, albeit to cover, with excess, the unit cost. As a result, at the diminished average rate of 2.9% p.a.. This the sector, for the most part, showed positive implies that the spread between the electricity operating income and strong internal funding. demand growth rate and the real GDP growth rate Additionally, it had to rely very little on was 4.3% p.a. in the 1970s and 4.7% p.a. in the government contributions. However,if 1988 tariffs 1980s (Figure 1). are maintained in real terms in the future, the result will not be as favorable, as the sector will 3. An indication of the positive contribution have difficulty attracting funding sources external of the sector to economic and social development to the sector because of its low return on is growth in electricity consumption per capita. In investment. A major challenge remaining for the Bolivia between 1971 and 1981, electricity sector is to increase service coverage in a country consumption per capita increased steadilyfrom 113 with a low population density and a low degree of kWh to 209 kWh, 6.3% p.a., while GDP per capita development. grew 1.1% p.a., from US$750 to US$839. After 1981, consumption per capita remained fairly TheSector and the Economy constant in spite of the country's economic crisis reflected by permanently decreasing GDP per Flgure 1 capita. In 1988,electricity consumption per capita GROWTHRATES amounted to 198 kWh (Figure 2). to F~~~~~~~~~~~~~igure2

~____ PERCAPITA INDICES

lox ...... - ......

-Ix A ...... -

MItss lVn 1m979 218t 1983 943 191 l t"IS*"-*s I IS I I * I r I . I .

?971 1M£ 1171 IS"1 19 1713 1B I 1M11987 19O9

DCOP tP -I-Tu -"tol m CAPITA

BOL-3 4. Another indication of the sector's positive 6. To meet these elec.tric energy needs, the contribution to economic and social development sector has relied basically on hydro generation. is the rate of electrification. During the last two However, the share of thermal generation has been decades, important progress has been achieved in growing and will continue to grow for sometime as increasing the electricity service coverage of the the country makes use of its rich natural gas population, as service coverage increased from resources. It increased from 7% in 1971 to 29% in 15% in 1971 to 25% in 1989. However, much 1988. On the other hand, the share for hydro remains to be done, as this level is one of the generation decreased from 93% in 1971 to 69% in lowest in the region. Between 1971 and 1988, total 1988 (Figure 4). customers of electricity service almost tripled, from 142 thousand in 1971 to 420 thousand in 1988. Figure 4 Most of the growth was in the residential sector, as ELECTRICiTYSOURCES residential customers increased from 118 thousand to 366 thousand during the period. GM

7he Electricty Market: Supply and Demand

5. Electricity uses in 1988 were 2.9 times .. ------. X those of 1971, as they grew from 572 GWh to ...... 1,643 GWh. Electricity sales grew 6% per year during this same period, as they increased from 499 GWh to 1,368 GWh. However, electricity uses ,.. ... in 1988 were only 1.2 times those of 1981, and 1A71 1f4 117 1$80 LII3 1H 199 192II 5 1O l sales only grew 2% per year during the period. - "ffl =3LAIEUIm,FOTs This stagnation is mainly the result of a reduction in industrial and mining activity resulting from the country's economic crisis. In the 1990s, sales are expected to P-nw 9.3% p.a.. In 1988, residential 7. The electric energy available to the grid sales accounted for 42% of total electricity uses, was generated by an installed capacity that commercial sales 12%, industrial sales 10%, bulk increased 2.5 times, from 179 MW in 1971 to 460 sales 11%, other sales 8%, and losses and own MW in 1988. In 1988, the composit n was 58% consumption 17%. The drop that occurs in the hydro and 42% thermal (Figure 5). composition of electricity uses in 1989 is the result of a change in the study sample (Figure 3). Figure S INSTALLED CAPACITY Figure33Y ELECTRICITYUSES

^ ....., ...... aw1

...... SlS417LUnn"" 1911 1974 LS?? L910 1983 1906 IM1 1992 1195 LIII ItJ 114 11X7 low 988 1196 19J 1192 19IIT: LIml TIUML - ClmeIIDDNTDIOW

m IISUwLiL ES CGmIICOALE WlU C t1 ED 1 Ill-99Il999:PROJECtIOJS m oTOEc C 009s C: 0WCI cons 1O310

1111-1191: PRMC910

BOL-4 Operational Performance Figure7 |

8. The sector's reserve margin as a OY percentage of maximum coincident demand was high. It was 53% in 1983, but decreased to more normal levels, 21% in 1988. Availability of -...... -. generating plant has remained in the 90% range which is considered good.

9. The sector's labor productivity is high compared with other countries in the region. ,...... Productivity, as measured by the customers per employee ratio, increased from 146 in 1980 to 210 in 198 and after declining in the early 1990s, is ";,, ,1,,, 4* ,,a, ,,, 19 9 199 Is 1 expected to increase to 225 in 1999. The nos electricity sales per employee ratio increased throughout the historical period. It went from 553 MWh in 1980 to 684 MWh in 1988 and is expected Prqjitability to reach 1,173 MWh in 1999 (Figure 6). 11. The satisfactory performance of the sector Figure 6 is reflected in its financial return indicators. Its EFFICIENCYINtMCES rate of return on assets has been positive since 1981, with the exception of 1984, and is forecast to ... l .,-, remain positive in the 1990s. However, the level .1 ,2mm,- has been low and is not expected to exceed 4.5% in the 1990s (Figure 8).

'3,. o~.3,.,,, Figure 8 *,,e,.m, RETURN SUMMARY 511 *~~~~~~~~ ~ ~~~lEltet4titf 1*4

it l, , l, (,, :,, I.,,t.f . . s S gX 1t71 1?44 It7 If3 1983 134 150X 1l42 I44 14\4

i918J?-1199:A PtZJCT IL/11 4 l2 . \/6x ax

10. The sector's level of electricity losses -2X increased significantly in the late 1980s. Taken as , . l. l 4 a percentage of gross available energy, electricity 1,71 .,,, . I1f0 14t" 1946 13 IM14 1995 1994 losses increased from around 10% in 1983 to 16% -X- *E oB in 1988 (Figure 7). 1 FROJE4tfS

BOL-*. 12. The unit prices and costs graph illustrates Figure 10 the failure of electricity prices to keep pace with COMPITION OF OPERATINGREVENUES inflation during the early 1980s. From 1981 to 1984, the real price of 1 MWh of electricity ...... declined from US$47 to US$29 while the cost, vwth ,. depreciation, went from US$27 to US$41. Since

1985, however, a positive operating margin has .. . been maintained and is expected to remain in the , future at about 10 US$/MWh (Figure 9). .--....

Figure9 UNIT PRICESAND COSTS CM fESMEIITIRL _ CO?lEICm rac KST IWd M"I tXwSlALES CM: OThERY EXPORN

s .1...... ; .. ._...... iss191: PROACTIOII8

Z ------14. The ss=tor'soperating income was positive throughout the 1980s, except for 1984. The composition of operating costs as a percentage of l. ~ ...... _ revenues_ . .operating shows that operating income

* ., , ...... i . . ; . .-. t-I fell to -42% in 1984,as power prices did not keep 1911 1174 If"? 19K 1S 16 IS I I"S 99 pace with the severe inflation that was burdening WISTwo DSmC v4- cT w u -.-- MCIu i.xSA the country. In that same year, personnel costs as

9-e999s: RoJICTIOWS a percentage of operating revenues peaked at an uncharacteristic 43%. As the sector's rehabilitation continues, operating income is 13. The composition of operating revenues of expected to increase to around 20% in the 1990s. the sector shows that the shares for residential, Historically, depreciation has comprised the commercial, and industrial revenues declined greatest portion of operating costs. In 1988, the during the early 1980s and then increased during composition of operating costs was 29% the late 1980s until they reached a pattern similar depreciation, 13% personnel, 13% fuel, 7% to that of the pre-crisis period. In 1988, the materials and services, 1% taxes, 25% other composition of operating revenues was 38% expenses, and 12% operating income (Figure 11). residential sales, 21% commercial sales, 17% industrial sales, 18% bulk sales, and the rest other Figure 11 sales (Figure 10). COMPOSITIONOF OPERATINGCOSTS

t ?1 1914 I?7 LIN 1913 19M 1989 193 It" 11991

-W tlt OES99(fc tXTim i9EL [EEt PRW =) ITESAMS S PEK911ll X OTNE1EXSE15ES |

199B1199: PtOJCT104

BOL-6 7te Sector and Country Resources from 2% in the early 1980s to 13% in 1986 before falling to 6% in 1988 (Figure 14). 15. The sector has had a moderate claim on government and country resources. In the 1980s, Fligure 14 power sector investments as a percentage of DEBTAND DEBT SERVICE INDICES country investments were 4.6% (Figure 12). ,_

sax...... Figure 12 .-.-. . SECTORINVESUMENT/COUNTRYINVESTMENT | | | ......

ax . .-......

ANNUALAVERAGE _

1971 1973 197, 197 19.,5 146119 i3 1list "9

ANNUALAVERAGE m 1971-?9 _ '^i oo,raoilena l IRT_ 4.6 ! P1:R4tBT SER0t'TOIT9 OEBTSERtE

Funding Requiremenatand Sources

16. After substantial investments in the early 1980s, there was a slow down of sector investments The sector has relied very little on fiscal resources; during the 1984-86 period because of country the sector's deficit as a percentage of GDP was economic conditions. However, sector investments around 0% in the early 1980s and 0.1% in the late are expected to increase in the future. Between 1980s (Figure 13). 1980 and 1989, the sector required US$249 million for its investment program. From 1990 to 1999, igure 13 the sector is expected to require US$664 million SECTORDEFICIT/GO1 for investments (Figure 15).

6.43 Figure 15 INVESTMENT

PILLIONI1919 I56

1911N 4 11 *S IN 19- IM 199 1 -5 1 .s7...... Hsnss1

debthad peaks-7 of7 n .% inS."2an

198S, respectively, before falling to around 2% in the late 1980s. Power sector debt service as a percentage of total country debt service increased

BOL-7 17. The sector has generally maintained a Figure 17 solid funding mix. With the exceptions of 1983 and 1984, the sector has maintained a debt service COMPOSITIONOF USESOF FUNDS coverage ratio greater than 1. This trend is lox projected to continue in the future, as sector authorities expect the sector's debt service coverage ratio to remain between 1 and 2 throughout the 1990s. Likewise, with the exception of the 1983-85 4x - period, the sector's self-financing has been positive, generally between 40% and 50%, and this trend is aft also expected to continue throughout the 1990s ox-I OA!R loo _ i_ (Figure 16). L971-74 197;-79 19_-19 'talon

igure 16 -. IW lWUlTn -AI 1

FUNDINGSUMMAWY l990n, 9 Pot OelE

.a | ru Historically,|19. the sector has shown strong MA % 1 jtiX internal funding. It was 56% and 75% of total WA § | Y1 a sources of funds in the early and late 1980s, IX . t 1 F-2#a respectively,and this trend is forecast to continue -4 in the 1990s. As a result, the sector has had to rely | 4-t \| @--x| very little on government contributions, 4% and |a | | Y F 10% in the early and late 1980s, respectively, and -4 lux been able to satisfy the rest of its funding 1971 1974 1977 1968 193NS 196 19 1991 1991 1991 requirements through borrowings (Figure 18).

-410T SUIIcI COs. -4- An-FINMfT10

& 1999:1"8tRQJECTIGllS Fiigure 18 COMPOSITIONOF SOURCESOF FUNDS 18. Investments have comprised a major oft. l portion of uses of funds. Their share was 56% of Box l total uses of funds in the early 1980s and 38% in the late 1980s. It is expected to be 68% and 53% in the early and late 1990s, respectively. Debt 4 service is the other major use of funds. Debt tla service as a percentage of total uses of funds was 40IODTA IN DATA 40% in the early 1980s and 50% in the late 1980s. ft] I 1i 7 E 1-64 1996-4 £145.1 | Forecasts expect it to be 31% and 46% in the early F OS and late 1990s, respectively. Working capital, wIInEA"V Fuolo CWSTCOAT1Ai CO GM', CONTISi which represents to a degree the financial solvency O| r-I FUTAACM _ WORICAP ECRCTASE of the sector, shows increases during the 1980s and 1l99-19l: PROACTOA3 is projected to show small increases throughout the 1990s (Figure 17).

BOL-8 20. If 1988 tariffs are maintained in real terms, Capital Structure internal funding will just be sufficient to covcr debt service payments. This will result in a financing 21. The sector's capital structure has been gap that may require significant government sound. Its debt/equity ratio improved from around contributions, as with a low rate of return (about 40/60 in the early 1980s to 20/80 in the late 1980s 2% in 1988), it would be difficult to obtain sources but is expected to increase to 40/60 once again in of funding external to the sector, either in the form the 1990s (Figure 20). of borrowing or private equity participation (Figure 19). Figure 20 CAPITAL STRUCTURE Figure19 COMPOSIllIONOF SOURCESOF FUNDS

514

snt 1"~~~r '1St:rr ini c swrn 19

*3 mERKAlLFUWS = CGLICOMTRISUTlOlS so rFlltc CAP6S - SEviE

BOLh9 BRAZIL

ELECTRIC POWER SECTOR BRAZIL POWER SECTOR DATA SUMMARY SHEET 1988

T'he Brazilian powcr scctor consists of a large group of companies that are diverse in size and ownership. The federal government is the main sharleholder, through its holding company (ELETROBRAS), of four regional generation and transmission utilities and two distribution companies. In general, the state governments are the main sharehiolders of the distribution utilities in their respective states. Small municipal, private, and self- generators constitute, the rest of the sector. The Brazilian sample for this study constitutes nearly 90% of the country's installied capacity and does not include Itaipu, a binational project with Paraguay and the world's largest hydroelectric plani (12,60() MW).

GENERALECONOMIC DIA ELECTRICITYSOURCES

POPULATION '000 144,369 CAPACITY ENERGY AREA '000 SQKMI 8,512 (MW) (GWh) POPULATION PER SQKM 17 OLD CRUZADOS PER US$ 262.38 THERMAL 4,014 7,726 GDP, millions of US$ 463,653 HYDRO 37,029 176,328 GDP PER CAPITA, US$ 3,212 NUCLEAR 657 608 GDP GROWTH RATE, Z * 3.6 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 813 IMPORTS (Itaipu) 37,085 ELEC. SALES GROWTHRATE, % * 5.6 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 1,336 TOTAL 41.700 221.747 1989 ELEC. SERVICE COVERAGE, % 70 POWER EXPENDITURES/GDP, x * 4.3 RESERVE MARGIN NA NA

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS o000 28,344 GWh EMPLOYEES 197,859 CUSTOMERS PER EMPLOYEE 143 RESIDENTIAL 40,571 21 TOTAL SALES PER EMPLOYEE, MWh 975 COMMERCIAL 21,356 11 INDUSTRIAL 103,710 54 BULK SALES ,0 0 OTHER 27,254 14 DOMESTIC SALES 192 100

EXPORTS 8 SECTOR FINANCES TOTAL 192.899

AVERAGE RATE (US$IMWh) 63 SYSTEM LOSSES 27,925 f# 13 OPERATING MARGIN (W/O DEPR), % 22 _ OPERATINGMARGIN (WI DEPR), % 36 RATE OF RETURN, % 3.8 INDEBTNESS, % 60 * - average per year since 1985 DEBT SERVICE CO7ERAGE, times * 0.3 - to other utilities not in the study SELF-FINANCING RATIO, % * -174 - as a percentage of available energy BRAZIL

ELECTRIC POWER SECTOR

INSTITUTTONAL ASPECTS

The institutional development of the Brazilian power sector over the last 50 years has been characterized by progressivenationalization and growingcentralization, resulting in the consolidation of a few large and hundreds of small utilities into a relatively compact structure of state and federally-ownedutilities. The power sector is now under the jurisdiction of the Ministry of Infrastructure (MINFRA). Since 1960, there has been a trend towards increasingsector coordination with the establishment of Centrais Eletricas Brazileiras S.A. (ELETROBRAS) in 1962, %ndthe strengthening of the Departamento Nacional de Aguas e Energia Eletrica (DNAEE), within the MWi.stry of Mines and Energy (MME) which had jurisdiction over the sector until 1990, as a regulatory agency. The aim has been to combine, as much as possible, regionalization of operations with a country-wide optimization of resources.

Though complex, and one of the largest in the world, the electric power sector is well organized. Decree 60,824 of June 7, 1967, established the current sector organization under which DNAEE performs regulatory functions, grants licenses for generating plants, assigns concessions, approves expansion plans, and sets tariffs, after approval by the Ministry of Planning, under the principle of service-at-costplus an adequate return on capital. ELETROBRAS serves as a holding company and as a sector development bank. It also analyzes expansion plans for major generating and transmission facilities and coordinates and supervises the public power system.

Four ELETROBRAS subsidiaries (FURNAS, CHESF, ELETROSUL, and ELETRONORTE) are responsible primarily for regional generation and high-voltagetransmission systems. They act as bulk suppliers to state and municipal utility companies which generally are responsible for sub-transmission and electricity distribution. In addition to the four regional subsidiaries, ELETROBRAS also owns ESCELSA (Espirito Santo Centrais Eletricas), the power distributor for the State of Espirito Santo in the Southeast, and LIGHT - Servicos de Eletricidade S.A, servicing the metropolitan area of Rio de Janeiro. Eletrobras also holds the Brazilian Government's 50% interest in the Itaipu Binacional, the binational agency set up in April 1973 by the governments of Brazil and Paraguay to build jointly the 12,600MW Itaipu hydroelectric facility on the Parana river.

Since 1967, the Government's policy has been to consolidate public electricity service in the individual states into single state-owned utilities primarily responsible for distribution activities, although some of them also have generation and transmission. This policy has resulted in the absorption of many municipal and privately owned utilities by the major state-owned companies and in the gradual transfer to the state-owned utilities of ELETROBRAS' ownership in distribution utilities. Privatelyowned utilities only constitute a small fraction of the sector's installed capacity.

Brazilian electricity revenues have two components: the basic tariff and the compulsory loan. Tariffs for each class of consumer and rate of remuneration for the utilities are equalized on a nationwide basis. The equalization scheme for tariffs and rate of remuneration is implemented through a mechanism by which companies with a rate of remuneration higher than the sector average make payments, and companies with a rate of remuneration lower than the sector average receive funds.

BRA-2 BRAZIL

ELECTRIC IDOWER SECTOR

EVOLUTION, SITUATION, AND PROSPECTS

Summary 7TeSector and the Economy

1. Public sector deficit, high inflation, and 2. The sector is affected by, and in turn external debt were major concerns of the Brazilian affects, economic indicators. This association is Government during the 1980s and continue to evident from the relationship between the behavior dominate macroeconomic policy at the opening of of economic growth and electricity demand. In the 1990s. Financing the resource requirements of Brazil during the last two decades, electricity the power sector aggravate these concerns. Thus, demand growth has had a pattern which follows as a result of the sound economic policies applied GDF growth at a faster rate: significant increases to the sector and the economy in the early 1960s, in the 1970s, a drop in the early 1980s, a steady the sector reached a peak of financial soundness in recuperation in the mid-1980s,and another drop in the mid-1970s. At this time, the sector started the late 1980s. During 1972 and 1973, electricity implementing an aggressive policy of major sales growth was lower than economic growth investments to reduce the country's dependence on mainly because of the sector's inability to serve foreign energy sources which was particularly market demand. The close association seems to evidenced after the oil crises. During most of the break in 1980, 1983, 1988, and 1989when the rate 1980s, the sector faced serious difficulties in of electricity sales increases, despite a drop in the financing such major investments. The cost of real growth of GDP. While the opposite effect in capital increased substantially, and the 1980can be attributed to the 1979oil price shock, Government applied a policy of keeping down later breaks suggest that energy consumption is electricity prices in the belief that inflation would less income-elastic to short-term downward be curbed. In pratice, this policy prevented adjustments characterized by negative or very low financial stability and economic efficiency of the GDP growth rates. The spread between the sector and resulted in a heavy fiscal burden, as the electricity sales growth rate and the GDP growth sector required significant government rate was 3.9% p.a. in the 1970s and 4.7% p.a. in contributions to meet its increasing debt service the 1980s (Figure 1). payments. Sector authorities estimate that about US$45 billion will be required for investment in Flgure i the sector between 1990 and 1994, unless efforts GROWTHRATES are made to implement conservation measures, including realistic prices. Under present conditions, the sector would not have the capability to finance such investment with an ....-...-. .-- adequate mix of internally generated funds and borrowing and would require significant equity -x--- .- ---.- - --- contributions, either public or private. However, since government contributions would not be forthcoming under the ongoing macroeconomic I adjustment program and private inflowsof capital cannot be expected because of the low return on 1m7L II" £112 1q7" 1f 1121 1942 I19 197? 1N investment, pricing policies need to be changed to -M +i. --- ensure the bector's financial rehabilitation.

BRA-3 3. The positive contribution of the sector to The Electricity arket:Demand and Supply economic and social development can be seen by the growth in electricity consumption per capita. 5. In 1989, total elcctricity uses were 233 It maintained a steady upward trend during the TWh, which is about 5 times the '.,vel of 1971 (48 past two decades, as it increased 6.9% p.a., from TWh). They are expected to grow to 397 TWh by 417 kWh in 1971 to 1,375 kWh in 1989. This level 1999, i.e., about 8.3 times the level of 1971 or at is one of the highest in the Latin American and a rate of growth of 5.5% p.a. versus 9.2% p.a. for Caribbean region. During the same period, GDP the historical period. Between 1971 and 1989, per capita grew moderately, as it increased from electricity sales grew 9.3% p.a., from 41 TWh to US$1,982 million to US$3,258 million (2.8% p.a) 203 TWh. In the future, they are expected to (Figure 2). increase 5.5% p.a. and reach 348 TWh in 1999. This future slowdown will be a result of Brazil's Figure 2 curre.at economic constraints, high coverage of the PER CAPITAINDICES power market in relatively more developed parts of the country. such as the South and Southeast, and I"S electricity savings derived from the implementation

_144r of various electricity demand management and S!Z * f _conservationprograms. The composition of S4.116- 1 electricity uses during the 1980s reflects the -on process of industrialization and the fact that the ," p *industrial sector, faced with increased oil prices 1 41"3' and underpriced domestic electricity, found power

1479 1419 147? 1914 £481 £462 jgg£ an attractive substitute for fuel. The share for the , l l, . l, l ., l . l, l -t industrial sector increased from 40% in 1971 to 197L1SOI 1473 1971 I"? Lg L981 1913 19t7 194 46% in 1989 and is expected to remain constant to

,,,wit cav:.* - saus m the year 2000. In 1989, the composition of total electricity uses was 19% residential sales, 10% commercial sales, 46% industrial sales, 12% other 4. Another indicator of the positive sales, and the rest losses and own consumption contribution of the sector to development is the (Figure 3). degree of electrification. Electricity service coverage in Brazil increased from 40% in 1971 to Figure 3 70% in 1989. The total number of customers ELECTRICITYUSES increased more than three times between 1971 and 1989, from 8.6 million to 29.9 million. This substantial increase in clientele mainly came from ...... _ ... the residential sector. "

......

197 1974 1977 A168 116) 191£ £t" Li la 14 S9£

OMIDM C E4fl comns 7emI .. 1OUITBZ 101K*ar9S

199tT -19W : PROJECTIO"S

BRA-4 6. To meet such electricity demand, Brazil Figure 5 has relied mainly on hydroelectric power with INSTALLEDCAPACITY some support from thermal generation. Since the TL | mid-1980s, Brazil has relied on imports from the binational projects of the Parana Basin, such as Itaipu, to supply an increasing share of its total - ...... sources of electricity. The sector is considering alternative sources for generation, such as coal, natural gas, nuclear power, and imports, through ------its investment program for the 1990s. However, sector authorities project that the Brazilian system will remain predominantly hydro. The hydro share lol 1974 1977 logo 19831 Is" Al" 19t1 It" l91 of total sources of electricity is forecast to decline _n E.L mwLu5 slightly from 77% in 1989 to 73% in 1999 while IMAM pioXX"D the thermal share increases from 4% to 5%, the nuclear share increases from 0% to 3%, and imports remain at about 19% (Figure 4). Operational Performance

Figure 4 - 8. Summarizing the operating performance of ELECTRICITY SOURCES the Brazilian power utilities is difficult because of .wh their number and diversity. Regarding operational '5e efficiency indicators related to labor productivity, .. _...... __as absolute levels a! e high compared to other

sJ8 |countries in the region. In the last two decades, the number of customers per employee increased from 81 in 1971 to 143 in 1988, and sales of electiicity per employee grew from 388 MWh to 975 MWh (Figure 6).

lttl 1914 1977 29*0ea 199) 1986 198968 191 iFigure 6

_"YDMD 00211EM!, rQMCUMB EMIWORIB |EFFICiENCY INDICES

L990 ,941: PllOJECTIORSl . , ., ,, ,. I ~~~~cum be I

L - -1I,MM" 7. The electric energy available to the grid | t - was generated by an installed capacity of 12 GW in 1971 that increased to 43 GW by 1989 (nearly 3.6 - m times) and is expected to reach 73 GW in 1999

(1.7 times the 1989 level). In 1989, the sector's - . installed capacity was 89% hydro and 9% thermal. , . I . ,,, , |. Both are expected to increase during the 1990-99 I7 1963 .,l4 194 11., 1915 199l period: hydro by 4.8% p.a. (to 62 GW in 1999) - auoutt

BRA-5 9. Another encouraging trend is the decline Figure 8 in electricity losses. Sector losses decreased from COLLECTION PEFdOO 13.8% in 1971 to 12.6% in 1989, a drop of around 0.5% p.a.. They are expected to increase to 12% in 1999 after dropping to 10.9% in 1990 (Figure

7). .

Figure 7 LOSSES/ENERGY AVAILABLE

____...... __. __ ___. ___._ _._ _ _a q -.-.....---_ _ _ .... _ _ _ _. . . _ _' - - - --.-.----

s4"~~~~~~~~~~ A 1 . I . . I. . . I . . I4.. I . . 8917* *974 II?? IllS *) 94191 lst98 1199 1993 1890

±1 \ r = _ Z _ s "I99: M

------...... Profitabi ty

11. The financial decline of the sector can be 1e12 1974 1971 1980 1903 9 1 9 M seen in its financial return indicators. The rate of .. 109-,99.PR,ACT 1 return on assets has been positive in all years but has had a decreasing trend since the late 1970s, as it moved from about 14% in 1973 to 4% in 1988 10. Collection practices during the 1980s with a peak of 17% in 1975. The interest coverage were inconsistent. Before the collection period ratio followed a similar pattern. It moved from a moved from 75 days in 1980 to 64 days in 1986, it high of 6.6 times in 1973 to 0.5 times in 1982 and became abnormally high and reached a level of 133 remained a, about that level throughout the 1980s. days in 1984. The late 1980s also shows a This deteriorating trend is expected to improve deteriorating trend (Note: This indicator should be slightly under a financial rehabilitation plan yet to interpreted with caution and does not reflect the be implemented (Figure 9). actual collection period, as it is difficult to accurately measure inflation which distorts the Figure 9 ratio between accounts receivable (December RETURN SUMMARY prices) and operating revenues (average prices) (Figure 8).

. \ I Lbx

4

1971 1974 1977 19051989 196 1989 1994 1992 1998

- IwKTZI co -MIS- 45of WniDE

£1- l99s: PROIsCUI9

BRA-6 12. The positive financial rate of return has 13. As a result of the prevailing tariff policy, been a result of operating revenue and cost levels the operating income of the sector, as a percentage which have left a positive, but declining, margin in of operating revenues, decreased from 53% in 1972 all years. The unit price of electricity declined to 22% in 1988. As a response to a temporary from 90 LTS$/MWh in 1972 to 63 US$/MWh in excess of power in 1979/80, the sector offered very 1988. After the mid-1970s, it started falling low tariffs to encourage the industrial sector to because prices did not keep pace with inflation. substitute power for oil. During most of the Most of the time, the unit cost of electricity was 1970s, costs as a percentage of operating revenues between 30 and 40 US$/MWh. Since unit prices remained close to their 1972 levels: personnel declined while unit costs remained fairly constant, 17%, materials and services 12%, depreciation the operating margin of the sector decreased from 11%, and fuel 3%. Beyond 1979 and into the 48 US$,MWh in 1972 to 14 US$/MWh in 1988. In 1980s, the composition changed significantly. the future, the unit price of electricity is expected Personnel costs increased from 23% in 1979 to to remain around 65 US$/MWh while the unit cost around 31% in 1988. After this, the component remains around 48 US$/MWh leaving a margin of that showed the most significant increase was 17 USS/MWh (Figure 10). imported electricity, as the binational Itaipu project with Paraguay became operational; it Figure 10 increased from 0% in 1979 to 11% in 1988. By UNIT PRICES AND COSTS 1994, the composition of operating costs is projected to be: personnel 25%, depreciation 17%, imported electricity 11%, materials and services ,*0 ;s;~-- fuel- --2%, -and----- other --- expenses-7%, 12%. Operating 186_ --.--.-- ,-..--..--....-.....-.....-...-..-..--_ _ -. income is expected to increase to 26% (Figure 11).

Ba_.-.-. .-....--...-... -..-..-...... ~ " = ...... Figure 11 " _.-..---. _.__... . COMPOSITION OF COERATINaCOSTS

191 93 LOT. I19t" 9s" 19Ls 1999 1993 1991 199

-- COST040 CIoIC -U- Coll W, SITBICse P9F1tCCW'O140 TAUS iceTwJ TAML

IM19" . RO. CI9 ......

1931 0194 1973 1140 10963 1986 I9IS 1992 19S6 1996

199-3-9991 P0O5CTI01_

BRA-7 The Sectorand CoantryResources Figure 13 SECTOR EXPENDITURE/GDP 14. The electric power sector of Brazil absorbed a significant amount of country and government resources during the last two decades. Sector investments as a percentage of country investments wcre 8.7% and 9.0% in the 1970sand_ ESi 9 19 8 0 s, respectively (Figure in12). t SectorO .ectorandl expenditures, which were close to 3% of GDP during the 1970s,reached 3.6% in the early 1980s and increased to 4.3% in the late 1980sbecause of x9?3-1 .19"i ates-69 an increase in operating costs and interest >]0S payments (Figure 13). The sector has been (xOf M dependent on government assistance during the I C*I wFi2xi M IJIst6W4T L2 last two decades, more so in the late 1980s. The sector's contribution to the fiscal deficit decreased from 0.3% of GDP in the 1970s to 0.2% in the igure 14 early 1980s before increasing to 0.4% in the late SECTOR DEFICIT/GDP 19&is. This transfer of government resources to the power ve-or has had a substantial effect on the countrys macroeconomic problems (Figure l1 14). In the 1980s, sector debt was generally between 20% aT!d30LY'v of country debt. At the l / same time, secto* debt rm;ice PCa percentage of l country debt service increas'ad substantially from its |.bx / respective level in the 197N C('-igure 15).

Figure121 SECTORINVE-STMENT/COUNTRY INVESTMENT I- 16-7

ANNUALAVERAGE ANNUALAVERAGE gF DI L2713-3DET AD'NDDEBT SERVICE INDir-ES

BRA.---

42 ------'---

197L m1 1991977 1919 1901 1902 1905 1967 1909

Al P9..i1 001U1"10. DEII 0: Pl0.X DE0T MA0,CE,T00101. ElY SEA,C

BRA-8 Funding Requirementsand Sources 16. Prior to 1973,the electricity sector enjoyed a long period of robust financial performance. The 15. Sector investments were immense during governmentprovided adequateequitycontributions the last two decades. They show an increasing and implemented a realistic tariff policy. After trend during the 1970s (average of US$6.0 billion 1973, the Government, faced with difficult policy p.a.). Despite some exceptional years, they show a choices and complex macroeconomic decreasing pattern in the 1980s (US$7.2 billion circumstances, such as the oil crisis and high p.a.). The peak that occurred in 1982 was the inflation, undermined the financial health of the result of the oil price shocks of the 1970sand the sector by initiating a major investment program implementation of the national strategy for greater that relied increasinglyon borrowingswhile energy energy self-sufficiency.Electricity has traditionally prices were held down to contain inflation. Since absorbed double the investment of the petroleum Brazil is the largest net importer of petroleum subsector and will continue to account for a among the oil importing countries, the major oil significant part of public investment, as it is price increases had a serious impact on Brazil's estimated by sector authorities that the power economy, especially on its balance of payments sector will require about US$45 billion between position. The funding of the sector was 1990 and 1994. This is substantially more than the significantlyaffected by macroeconomicconditions, US$36 billion invested during 1984 and 1988. heavy investments, and the corresponding debt About 53% would go to generation, 23% to service burden resulting from borrowings. Thus, transmission, 16% to distribution, and the rest to both the debt service coverage ratio and the self- general investments. These estimates are financing ratio show similar patterns (Figure 17). optimistic, as the sector's ability to generate funds Both declined steadily during the 1970s. After is severely impeded by the low level of tariffs, and 1981, the self-financingratio became increasingly only under an optimistic scenario would the sector negative and the debt service coverage ratio be able to carry out such an ambitious investment dropped from 1.1 times in 1981 to 0.2 times in program. These investment needs could be 1988. The speed of the deterioration of the debt reduced substantially by effective energy service coverage ratio has been mitigated by the conservation measures, mainly through pricing,and significantassumptions of debt and debt service by better load management practices (Figure 16). the federal government, including portions for the compensation of the deficits in remuneration Figure 16 accumulated over the years. Since Government INVESTMENT contributions are not expected in the future, the NiLuAio 1999Mreversal of this trend requires a significant increase ,.2 . ., ". in electricity prices.

I...... S *.....--......

. - ... . Figure17 _ -- nn...... FUNDINGSMMARY

4~~w915:POIt0l ...... \ S 1911 1*74 1911 t90 19$3 it" 19*9 197 1995 12 -4

.... ~ ~..... ~ ~ - ... |.2 , .I. _4

1N9-1999; P*O5CTIWIG P1ElI

BRA-9 -19~~~~~~~~~~~~~~~~~1e

*971 1914 I911 IllS I*96 lf* llg1* 1 *9M *918 199*

DM? IU?aCo c96. - sxu-r.~ins*o

I909-I"9:9 PEIACTIOIII

BRA-9 17. The composition of uses of funds shows IFigure 19 a trend away from investment toward debt service COMPO)SITIONOF SOURCES OF FUNDS payments. The share for investments in the funding composition decreased from about 75% in .. _ .. i ... the early 1970s to about 33% in the late 1980s...... Except for minor working capital changes, the main use of funds was for debt service payments which have had an increasing share of the sector's .

fund;ng requirements, from 18% during the 1971- ,< . O

74 period to 67% during the 1985-89 period. This ._ L

trend is expected to be reversed in the future, as I- IOI

the share for investments is cxpected to reach 61% cmm 3 cov coh UOI CO ox-, CoT2.0

in the early 1990s, while the share for debt scrvice c= .0tr3; , = FI.,YIA. t-'O Co, Ale'

payments falls to 38% (Figure 18). 0m-Ml: PROJET,03K

igure 18 OF USES OF FUND 19. Should average 1988 tariffs remain in real COMPOSITIONOF USES OF FUNDS terms during the 1990s, the funding mix of the sector would be unsatisfactory. Under this scenario, internal funding would be slightly below debt service requirements, and the sector would have to rely heavily on external financing to fund its investment program (Figure 20). Under such conditions, it would be difficult, if not impossible, n iOJA for the sector to obtain sufficient inflows from the

1971-74| kAf-197s-7 9LAIB- 1H85--6 S70-O 1X | capital market, either as loans or as equity Pall4#" | contributions, because cf the poor return on

_umcapgmcmsz mim"mm =aMmung investment, only 3.8% in 1988 (see para 11), unless

______19_9-1_9_ FROJE_T_O__ _ S adequate prices are fully implemented.

18. The pattern in debt service reflects, in a |Fi oMPooN OF SOURCESOF FUNDS

deferred manner, the share cf borrowing in the mix ir as T*Xrr WU*ll S tAaa l used to fund the investment program. Borrowings |to 19i2 Us$ moved from around 27% in the early 1970s to almost 45% in the early 1980s. Increased 1l borrowings were necessary because internal funding declined from 34% in the ea-ly 1970s to 22% in the late 1980s. Government contributions were 12% and 8% in the early 1970s and late 1980s, respectively. If actions to correct prices, improve efficiency, and restructure debt are fully 19" 1991 1992 1995 s"m implemented, the financial prospects of the sector = TEmAIL FUWI CVSTCt1Rl8U!t5S for the 1990s would be strong enough to correct l m MAWi UP _ OE SEW,CE the serious distortions, especially the high debt service, and improve internal funding (Figure 19).

BRA-10 Capial Strcture

20. The sector's capital structure has been dominated by debt. The significant equity contributions and assumption of debt by the Federal Government allowed the sector to maintain a debt/equity ratio of 60/40 in the 1980s despite an Increase in debt during the period (Figure 21).

Figure 21 CAPITAL STRUCTURE

SIM

BRA-i CHILE

ELECTRIC POWER SECTOR CHILE POWER SECTOR DATA SUMMARY SHEET 1989

Chile has four major generating companies (ENDESA, CHILECTRA GENERACION, COLBUN S.A., and PEHUENCHE) out of which only COLBUN S.A. remains owned by the government after an aggressive privatization process. Several companies which purchase bulk encrgy from the generating companies are responsible tor thc distribution of electricity. The Chilean sample for the operational data for this study consists of the entire public sector while the sample for the financial data only consists of ENDESA, CIIILECTRA- GENERACION, and the distribution company EDELAYSEN S.A..

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 12,980 CAPACITY ENERGY AREA '000 SQKM 757 (MW) (GWh) POPULATION PER SQKM 17 PESOS PER US$ 267.16 THERMAL 910 4,753 GDP, millions of US$ 25,248 HYDRO 2,200 8,911 GDP PER CAPITA, US$ 1,945 NUCLEAR 0 0 GDP GROWTH RATE, % 7r 7.2 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 832 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 7.1 PURCHASES 357 ELEC. CONSUMP. PER CAPITA, kWh 918 TOTAL 3_110 14,021 1989 ELEC. SERKICE COVERAGE, Z 91 POWER EXPENDITURES/GDP, Z * 3.4 RESERVE MARGIN 840 37%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 NA Ght Z EMPLOYEES NA CUSTOMERS PER EMPLOYEE NA RESIDENTIAL 2,472 21 TOTAL SALES PER EMPLOYEE, MW NA COMMERCIAL 1,168 10 INDUSTRIAL 6,961 58 BULK SALES I0 0 OTHER 1,309 11 DOMESTIC SALES 11.910 100

SECTOR FINANCES EXPORTS TOTAL 11-L9100

AVERAGE RATE (USS/MWh) 65 SYSTEM LOSSES 1,817 ## 13 OPERATING MARGIN (WIO DEPR), % 19 OPERATING MARGIN (WI DEPR), % 28 _ RATE OF RETURN, Z 7.4 INDEBTNESS, % 31 DEBT SERVICE COVERAGE, times * 1.0 * - average per year since 1985 SELF-FINANCING RATIO, % * 2 # to other utilities not in the study - as a percentage of available energy CHILE

ELECTRIC POWER SECTOR

INSTITtJTIONAI, ASPECTS

The General Law of Electricity Services (Decree Law No. 1, 1982) set up the basic principles that regulate the sector, particularly regarding concessions and rights, operations and supply, consumer contributions to stock capital, and tariffs. The Comisi6n Nacional de Encrgia (CNE), created in 1978, is the regulatory agency for the electric power sector.

As a result of the Government's decentralization and privatization policies, the power sector of Chile now has three major privately owned generation companies: ENDESA, CHILECTRA-GENERATION, PEHUENCHE S.A.,and one government-owned: COLBUN S.A.. Electricity distribution is done by privately owned companies that purchase bulk electricity from the generation companies.

The Economic Dispatch Center for the Central Interconnected System (CDEC-SIC), created in May 1985, is responsible for the coordination of the systernwith the purposes of: preserving reliability, ensuring least-cost operations, and establishing access to the transmission system, independently of ownership, and setting up the corresponding charges. It is formed by representatives of the most important electric generation companies.

ENDESA is by far the largest public utility in Chile. At the end of 1985, its installed capacity of 2,466 MW represented about 80% of the public utilities' total. All of its subsidiaries were sold in the process of implementing the Government's policy of privatization: in 1986, the distribution companies of Coqitimbo (EMEC), Melipilla (EMEL) and Atacama (EMELAT) and a small generation company (PILMAIQUEN); and later on, another small generation company (PULLINQUE).

CHILECTRA-GENERACION is the generation company that resulted from the break-up of CHILECTrRA, a private company through the late 1960s. The other spin offs of this company are CHILECTRA-METROPOLITANA and CHILECTRA-V REGION, the distribution companies serving the Santiago and Vifta-Valparaiso Metropolitan areas, respectively. COLBUN S.A. was created in 1986 to operate the Colbdin Machicura Hydroelectric Plants, built by ENDESA and in operation since March 1985. PEHUENCHE S.A. was also created in 1986 for the implementation of the Pehuenche Hydroelectric Project. Several smaller distribution companiesand self-generation companiesconstitute the rest of the Chilean electric power sector.

The price of electricity supply to major consumers is set through bargaining between consumers and suppliers who must compete for that portion of the market. In the case of distribution tariffs, where a natural monopoly exists, tariffs are regulated and set on the basis of marginal cost principles by the Ministry of Economy on the basis of recommendations made by CNE.

CHL-2 CHILE

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Note The Sector and The Economy

1. The financial data provided for Chile for 3. The pattern of electricity demand growth this study shows significant variations which are in Chile over the past two decades has followed due to the major structural changes in the sector closely that of real GDP growth (Figure 1). during the last two decades which had an effect on During periods of economic growth, power sales the study sample. It appears that the sample up to responded positively. When the economy had i982 includes only generation companies; the difficulties, as in 1971-1975and in 1982 when the sample from 1982 to 1989 includes generation Chilean economy suffered its largest contraction companies and some distribution companies; and since the 1930s, power demand growth suffered the sample for the 1990sonce again only includes downswings,though not as drastic as those in GDP generation companies. The results shown in this growth. Exceptionally,in the late 1970sGDP grew description of the sector are the result of such data faster than electricity sales in the public service and should be considered in that light. system. The spread between the electricity demand growth rate and the real GDP growth rate was Summary 3.0% p.a. in the 1970s and 2.6% p.a. in the 1980s.

2. Chile enjoys one of the highest levels of Figure 1 access to electricity in the region, and the sector's GROWTHRATES investment program, which has constituted an important share of domestic investment, has permitted a reliable supply of electricity service. *cx*_.*....-*--***...**- As a result, the power sector has been an ,x important contributor to the country's economic and social development. The sector has had a x positive influence on the efficient allocation of *, ...... resources via the adequate application of least-cost principles for investment selection and the strict . -.-----.. ..-...-- application of marginal cost principles for price -n I l l l l v l determinationwhich have also resultedin a sound 9?L L,, 915 1977 1119 IWL 1143 Ills 1%7 lisn financial situation during most of the historical - Y, au -c=iuciT period. However, emphasis needs to be placed on reducing the level of losses through which significant savings for the sector and the country can be obtained. During the early 1980s, the sector changed ownership, from mostly public to mostly private, and had significant success in achieving a fast and orderly transition.

CHL-3 4. An indication of the positive contribution Figure 3 of the sector to economic and social development ELECTRICITYUSES is growth in electricity consumption per capita. In E R Y Chile, it has becn increasing steadily with only minor declines during periods of significant GDP per capita deterioration. From 1971 to 1989, electricity consumption per capita increased from 498 kWh to 918 kWh, or 3.5% p.a., while GDP per capita grew only 0.7% p.a., from US$1,711 to

US$1,945 (Figure 2). 3

Figure 2 .97L1 9 ,s,,,,.6 It" 199,297 19 " EIOENIIIALS 3 COW0~CIAL MU PER CAPITAINDICES _ E, E LOSIEI

199 it9 I_1 -199: PROJEnos

7. Chile relies mainly on hydroelectric power to meet the country's demand for electricity. For L- 40 public utilities, hydro power has traditionally supplied between 75% and 90% of total sources of ,,su am electricity. In 1988, thermal generation reached 18% of total sources of electricity. This level 1971 1973 1915 1977 1979 1991 1913 1985 1907 1989 increased to 34% in 1989 and almost surmounted

- CD7 7tRFIR C.arErUlPlt its previous peak of 35% in 1971 because of serious drought conditions. Projections show a more permanent share of around 20% for thermal generation in the 1990s (Figure 4). 5. Another indication of the sector's positive contribution to economic and social development Figure 4 is the rate of electrification. Chile has one of the ELECTRICITYSOURCES highest rates of access to electricity service in Latin . America; 96% of the urban population and 91% of the total population are served by the electricity service. ... _.

LI The ElectricityMarket: Demand and Supply

6. Total electricity uses of 14,021 GWh in 1989 were 2.4 times those of 1971, 5,798 GWh. Electricity sales increased from 4,822 GWh in 1971 l. ,,,,,,,,, . , to 11,910 GWh in 1989. 5.2% p.a.. In the 1990s, 1971 1974 1977 1999 1993 19K 19" 199 It" 19" electricity sales are expected to grow at the same HYIR0 =. IIUUL .....r rate and reach 19,865 GWh in 1999. The 1,99019,9:"9fesC composition of total uses of electricity in 1989 was 18% residential sales, 8% commercial sales, 50% industrial sales, 9% other sales, and the rest losses and own consumption (Figure 3).

CHL-4 8. The electric energy available to the Figure 6 Central Interconnected System was generated by LOSSS/ENERGYAVAILABLE public utilities with an installed capacity of 3,110 LOSSES_ENEROY AVAILABLE MW in 1989. This level is 2.2 times the 1971 level of 1,435 MW, and its composition was 71% hydro and 29% thermal. In the future, the sector's ... v...... installed capacity is expected to increase another 1.6 times and reach 5,011 MW in 1999. Its composition is expected to be 73% hydro and 27% thermal (Figure 5).

ox . , ...... ,...... Figure 5

INSTALLED CAPACITY OK ___.__,__..__..__.._,___.__i.__

GM J91 1984 1977 19A 1183 186 1981 t1993 1 99 191 *190-1999: PROJECII15

. .I.I. l 11. With the exception of the early 1970s, the sector's collection practices have been good. Since 1975, the sector's collection period has been between 30 and 45 days. Projections indicate that it should remain around 36 days in the 1990s

1971 1914 1971 1:1 1983 1916 19S 1992 183 1998

1900 E15M P76LJ C01NC15D4T Figure 7

1999-1991: P91J1CTIOMS COLLECTIONPERIOD

OperationalPerformance

9. Reliability of supply has traditionally been good. Reserve margins (a result of optimizing

capacityexpansion) ran high in the early 1970s due t --. . ...- to lower than expected demand levels; the margins decreased to normal levels during the 1980s. r.....-.-. -.-. -.

10. Electricity losses have not been a

particularly bad problem for the sector; however, U"7 1974 1917 191 19L6 1sl I" 1995 I s

a reduction of a few percentage points could result In l19: OJECTIOS in significant savings for the sector. Taken as a percentage of gross available electricity, they were generally in the vicinity of 15% during the past two decades. In the 1990s, they are proje..ted to be in the vicinity of 13% (Figure 6).

CHL-5 Profj abilily Figure 9

12. During the last two decades, the sector's UNIT PRICESAND COSTS financia: performance has been positive but on the low side regardinig profitability as measured by ,,.... return on net fixed assets. For the most part since t-

1976, the sector's rate of return on assets has been 4-. - . -- .. between 4% and 9%. Likewise, the sector's interest coverage ratio has been greater than 1. This trend is expected to continue into the 1990s. . .. with the rate of return hovering around 5% and ...... the interest coverage ratio between 1 and 2.4 .

(Figure 8). 1971 1S74 1977 1180 113 190 191 10912 1"S 0109

'- tOSt 8/ 3010 -1- COtT W/ 308 *41tE WOIC 8/8181

Figure 8 1991 1999: PROJECT_OllS RETURNSUMMARY 14. The operating income of the sector as a 6 - percentage of operating revenues has been positive 4 llt X - x since 1975. It has generally been around 25%, with a neak of 70% in 1975 and a valley of 4% in .: i 1978.il r The-- cost.x composition of the sector has been relatively stable since 1982. Depreciation had a peak of 49% of revenues in 1978and has remained ,,,, an important cost component reflecting the -6 . . 2 . , * *, .. § . | . ,, . , r .capital-intensive hydro system that dominated 1071 1914 IS77 1980 1913 148 108S 190t ln 1998 power generation until recent years (Figure 10).

I1T11T CCI *+- 3418 Of 1118 Figure 10 COMPOSITIONOF OPERATINGCOSTS

13. The sector's financial performance has 1X been steady, even during the critical period for the oft Chilean economy between 1982and 1985, mainly ...... because of the sector's tariff policy. It was only I . *.** . **.. during 1973-1974,when electricity tariffswere kept below unit operating costs, that operating income was negative. The rest of the time, the unit price UrX has exceeded the unit cost leaving a positive T A operating margin (Figure 9). 1071 1074 1n7 L1083 1t 1048 1180 1883 100 100

OPEilTc Ft D|OE C : TWNS 1 FII ElEC" PURCH [= MieliaS mum go8S1811 OThER EXPLOSES

1910-199: PROJEtTIONS

CHL-6 Sector and Country Resources The sector deficit, which was 0.7% of GDP in the early 1970s, rose from 0.1% in the late 1970s to 15. The power sector has had a significant 0.6% in the late 1980s (Figure 13). claim on country and government resources. Power sector investments, as a percentage of Figure 13 country investments, increased from 5.0% in the SECTORDEFICIT/GDP 1970s to 7.3% in the 1980s (Figure 11).

Figure II SECTORINVESTMENT/COUNTRY INVESTMENT 6.5x1

ANNUALAVERAG, ANNUALAVERAGE *at

0.10 -P

am-St 1910-89 1971-74 1979-7, 1990-4 1905-0l

The sector's debt during the 1980s became relatively more important with respect to the rest of the country's, as the sector relied on borrowings to carry out its investment program. Sector debt Sector expenditures, which were 1.1% of GDP in as a percentage of country debt peaked at 9.4% in the early 1970s, increased to 3.8% in the early 1982; this level is reasonable considering the high 1980s before falling to 3.4% in the late 1980s external component of the hydro expansion (Figure 12). program. Sector debt service as a percentage of country debt service had peaks of 9.2% in 1983 Figure 12 and 11.7% 1987 (Figure 14). SECTOREXPENDITURE/GDP Figure 14 DEBTAND DEBT SERVICE INDICES

lx8 ...... ---.. ._.'_...... ----.- ......

I@91_ -X-. ...

1971-74 1975-79 1990-04 1985-_9 x. . . _...... PIRIODS e

fX or CDP) IS71 1973 1S75 L977 1779 9801 0198t7 " 1917 JS99

6: POW,ERDE8ToTO1U; cloy CHL-7lIOMA? £FRLIC%/7

CHL-7 Fundirg Requirements and Sources Figure 16

16. 1aesector's investment program amountpd FUNDING SUMMARY to US$1.0 billion (about US$117 million p.a.) in TIM ___' (_ the 1970sand US$2.4billion (US$242million p.a.).

in the 1980s (Figure 15). &A

Figure 1- 4' INVESTMENT .4

14ILLIO110" US9$l 5

4 - _ 1p71 1974 1977 1915 1913 1991 1919 1113 195 199t

iU I ______-19: *goAc

1i jjJlf ||||J IX.18iIi With working capital increases in most .!$XWILL#W I L years,le f cctor shows it has liquid assets available S1~1 9314 99131911 1)53 194'994) £1 13 1s '.0 respond (t short term obligations. However,

I|It10k the trend in the composition of uses of funds i_t :w ~ tshowsan increasitng share for debt service. The sharc for debt service increasuid from 21% in the earlv 197G&to 38% in the late 1980s while the 7. TheIIc lor's funding con.diton can be. share for investment' de6niinedfrom 79% to 42% Suzis:.aFli7e lan,,Cilg gi it', dokt somZe c.veW (F'ig>)re1?). and a c-financingratios. Witi2 the excepdiors of tha t aryv 1970s and 1987, tMO.debt se.rvice coverage raic It asbeen greater than i and indicates that th4 COMIPCTTONt t;V-A OF I-UNDS seoc,.r has been able to niceet is debt service ob;it ziions must of the timc. Likeaise, with a f' -- ex,c4oistnal years. the sector's sclf-fir.ancingratio , i H 'w%i !ten positive. generally greater than 20% e r"-? tiei:a16). >A4~~~~~-;

| -x> 6EBtt 1*- ; 1 492. +4 11)3-99

CHL-8 19. In the late 1970s and the 1980s, the sector Capital Structure maintained a solid funding composition. Internal funding was between 40% and 50% of total 20. The sector has maintained a strong capital sources of fund:;, and the level of borrowings was structure. It had a debt/equity ratio of 30/70 adequate to maintain a comfortable level of debt during most of the last two decades. When the service coverage. Government contributions to the ratio increased to about 60/40 in 1986, the sector were not significant. However, they did Government assumed a significant portion of the reach 26% of to,al sources of funds in the late sector's debt (para. 18), and the ratio fell back to 1980s when the Government assumed a significant 30/70 (Figure 19). portion of the sector's debt to strengthen its capital structure so as to make it more attractive Figure 19 to private investors. Considering that the legal CAPITALSTRUCTURE framework of the sector a3lows for the free inflow of new priv-atecapital for sector expansion, such l scheme is still in a testing period as future fox investments will require substantial amounts of fresh capital (Figure 18). mm

Figure 18 COMPOSITION OF SOURCES OF FUNDS lox

.t1_, , t~~~~~~~::::::i, t , ~~~~~... ::::t::::::4,, j,..... ex l -| sex 4971 l9 1974 19?? 1909 t913 198 1989 1992 L995

199FIRIOD:P5OECTIO8S aox

295

| 91699ERNFU9 CJCONT15 l C9 SARE10OERC0KTR5 l 60990AIMICII ISP 08C CAP0 59

CHL-9 COLOMBIA

ELECTRIC POWER SECTOR COLOMBIA IPOWER SECTOR DATA SUMMARY ShIEET 1989

Almost all cleccric power in Colombia is generatcd, transmitted, and distributed by seven cornpanies. They include the municipal companies in thc, ma-n cities, Empresa de Energfa Eldctrica de BogotA, Empresas Municipales de Mcdcllfii (EPM). and Empresas Municipales de Cali (EMCALI), tlle govcrnment owned entities, Corporaci6n Aui6noma (J.I \Valle de Cauca (CVC). Corporaci6n ElOctrica de la Costa AtlAntica (CORELCA), and Instituto C0oloinlhiarn1(IC In(crgfa(ICEL), and Interconexi6n Eldctrica SA (ISA), a company owned by the other utilities of the scctor

GENERAL LCQNDMIC DATA ELECTRICITYSOURCES

POPULATION '000 32,335 CAPACITY ENERGY AREA '000 SQI 1,139 (MW) (GWh) POPULATION PER SQQV 28 PESOS PER US$ 382.90 THERKAL 1,883 NA GDP, millions of US,S 399407 HYDRO 6,590 NA GDP PER CAPITA, US,S 1,219 NUCLEAR 0 0 GDP GROWTHRATE, 4 * 4*5 GEOTHERMAL 0 0 1988 ENERGY CONSUM.PIffTION OTHER 0 0 PEERCAPITA (kg oi-L equiv.) 755 IMPORTS 0 ELEC. SALES GROWTHRA21-, l: * 7.6 PURCI14SES 0 ELEC. CONSUfP. PER CAPITA 9 kWh 792 TOTAL 8, 4 73 33,_865 1989 ELEC. SERVICE COVERTAGE, % 64 POWER EXPENDI TURLESj,'DP. * 3.8 RESERVE M&.AGIN 2,824 50%

ELECTRiC POViER SYSTEM DATA ELECTRICITY SALES

CUSTOMERS '000 4,140 CWh EMPLOYEES 25,011 CUSTOMERS ) F4114R ' P 166 RESIDENTIAL 12,075 47 TOTAL SALES P E 1?JAOYEFt,MAhrh 1,023 COMMERCIAL 2,835 11 INDUSTRIAL 6,742 26 ______BULK SALES II2,417 10 OTHER 1,526 6 DOMESTIC SALES 25.595 100

SiEfCi5t7t5R;1-llRffi!JNANQ;ES EXPORTS 0 S~ThV~ .[~CES TOTAL 25s595

AVERAGE RATE (US5'MU2J 41 SYSTEfMJLOSSES 7,563 11 22 OPERATING MAR(L)I tN DE.}I)rPR), Z 34 OPERATING MARGN .' I P59PR,v S95 RATE OF RETURI'. 4.7 INDEBTNESS, 48

DEB3T SE:RVICE K-'llsf 1. ifi] tunc.yo7es^ 0. 7 - average pcr ycar since 1985 SELF-FINANCJ11. J' r - to other utilities noi ini tihe study - as a percentage of availabc energ, COLOMBIA

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

In Colombia, the electric power sector was created during the last decade of the Nineteenth Century when private shareholders installed the country's first generation plants in the principal cities of the country. Government intervention s.arted in 1928,and in 1936,the Department of Public Serviceswas created and gave the government control over electricity tariffs. Two years later, utilities controlled by the government were authorized to provide electricity service.

Gradually, the government acquired private utilities and created municipal companies in the main cities (Bogota, Cali, Medellin, Pereira and others). In 1946, the Instituto de Aprovechamiento de Aguas y Fomento Eldctrico (Electraguas) was founded. Subsequently,Electraguas was restructured and became the Instituto Colombiano de Energfa (ICEL) which is responsible for the creation of departmental electric utilities.

In 1967,the main utilities established Interconexi6nEldctrica S.A. (ISA) with the mission to build large generating plants that the individual utilities themselves could not build and interconnect the main cities country-wide. To serve the northern region, the Corporacion Electrica de la Costa Atlantica (CORELCA) was founded in 1968. In 1976, Corelca became ISA's partner, thus interconnecting the main electric markets in the country.

Currently, the Colombian electric power sector consists of 31 companies out of which four are municipal utilities (EPM, EEB, EMCALI and EPP), three are national (ICEL, CORELCA and CVC), 15 are affiliated with ICEL, eight are subsidiaries of CORELCA, and one is a company owned by the other utilities of the sector (ISA). The power sector is under the jurisdiction of the Ministry of Mines and Energy which is in charge of defining the sector's policies and conducting and guiding the public power system. These duties are carried out with the collaboration of other government agencies, such as Comisi6n Nacional de Energfa, Financiera Energdtica Nacional, Ministry of Hacienda y Crddito Publico, and the Departmento Nacional de Planeaci6n. These entities constitute the Consejo Superior del Sector Eldctrico.

Since 1989, the Comisi6n Nacional de Energla (CNE), jointly with the Ministry of Mines and Energy, has been responsible for approving generation and transmission projects and coordinating these programs in areas that are not interconnected. It also recommends standards to the Junta Nacional de Tarifas for setting service tariffs throughout the country. Junta Nacional de Tarifas de Servicios Pdblicos calculates tariffs that reflect real costs and assure adequate revenues to the utilities providing the service. Investment and refinancing programs for the electric power sector are the sole responsibility of the Financiera Energetica Nacional S.A (FEN).

CLM-2 COLOMBIA

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION, AND PROSPECTS

Summary Figure 1

1. In spite of the efforts made since the middle GROWTHRATES of the 1980sto improve its financial situation, the ,4x

Colombian electric power sector is still showing I .K ...-..-...-.---..-...... signs of deterioration. Persistent negative factors ...... include problems related to the growing debt -Ix- . service burden, which has been compounded by currency devaluation and shrinking State budget ---. A-l . allocations due to macroeconomic constraints .. }.-. .. -.-.. associated with the country's external borrowing V . capacity and the level of the fiscal deficit. Sector debt has constituted a large portion of country , lI . l l debt, as insufficientinternal funding has driven the 17 1973 1, Mn s9 M 198m 1987 191 sector to resort to credit fairly regularly to cover _MLW +1UTRICIIVVS38S its funding requirements. Needed, therefore, are new approaches to financial problems aimed at increasing internal funding to levels that permit 3. An indication of the positive contribution of adequate servicingof debt and proper attention to the sector to economic and social development is the system's operating and expansion costs. growth in electricity consumption per capita. Between 1971 and 1989, consumption per capita TheSector and the Economy grew 5.4% p.a., from 307 kWh to 792 kWh. During the same period, GDP per capita only grew 2. During the 1970s, the sector expanded 2.1% p.a., from US$837 to US$1,219 (Figure 2). considerably; in the 1980s, its rate of growth diminished, as the average increase in the annual Figure2 demand for electricity dropped from 9.4% in the PERCAPITA INDICES 1970sto 6.0% in the 1980s. Nevertheless, growth in electricity sales during the last two decades it" L exceeded that experienced by the economy in . l general, as measured by growth in real GDP. The in spread between the electricity demand growth rate * and the real GDP growth rate was 3.9% in the , 1970sand 2.7% in the 1980s (Figure 1). do .,

1971 117 1975 1777 1979 1981 193 1985 1907 1909

- D? U CWAITA - SA3 1 CPITA

CLM-3 4. Another indication of the positive 6. To meet electricity demand, thc sector relies contribution of the sector to development is the mostly on hydro generation. In the late 1980s, the rate of electrification. In Colombia, electricity composition of total elcctricity sources was about service coverage inicreased from 30% in 1971 to 80% hydro and 20' thermal while in the early 64% in 1989 revealing that while the sector has 1970s it was about 75%,, hvdro and 25% thermal made progress, it still has much to do in the years (Figure 4). ahead. Total power sector customers increased from 1.3 million in 1971 to 4.1 million in 1989. The residential sector accounted for most of the gE4 growth, as residential customers increased from 1.2 million to 3.8 million during the same period. l-

The ElectricetyMarket: Supply and Demand -

5. From 1971 to 1989, total electricity uses - increased 4.1 times, from 8,192 GWh to 33,86'5 GWh. During the same period, total - - electricity sales increased 3.8 times, from . 6,708 GWh to 25,595 GWh. because of more ...... ,, rapidly increasing electricity losses. In the future, L971 1974 1977 1980 19C3 19C9 1919 1992 1995 1 99 electricity sales are forecast to increase 6.7% p.a. h !91i0AAL X IlRlS and reach 40,212 GWh in 1996. This rate of - F growth is slightly less than the 7.7% p.a. experienced between 1971 and 1989. In 1989, the composition of total electricity uses was 36% 7. The electric energy available to the grid was residential sales, 8% commercial sales, 20%b generated by an installed capacity of 8,473 MW in industrial sales, 7% bulk sales, 5% other sales, ind 1989. This level is more than 4 times the 1971 the rest losses and own consumption. The share level of 2,012 MW. In the 1980s, it grew 8.2% p.a. for industrial sales is down considerably from its making service more widely available in the 1971 level of 28% (Figure 3). country. In 1989, the composition of installed capacity was 78% hydro and 22% thermal Figure 3 1 (Figure 5). ELECTRICITYUSES Te ~~Figure5 INSTALLEDCAPACITY

40~~~~~8

1971 1974 1977 19S9 1993 1980. 1999 sm199J 19 9 RES1I8oTI01 E C3COMIUER1L ED0 80GU$%:a S0s1ES 8,019OE C-i 81PP~T8 0 CllS LOW

1971 1974 197ISSS'8 697' 1986 1909 8991 1995 1990

CLM-4919!MACBGP97

CLM-4 OperationalPerformance transporters; meters out of order, tampered with, or damaged; and illegal hookups. In the 1990s, 8. The data show that a mismatch between losses are expected to decline because of better power supply and demand developed in the 1980s, operations and management in the companies of as electricity demand growth lagged that of the sector (Figure 7). capacity, 5.6% p.a. vs. 8.2% p.a.. Consequently, the sector's reserve margin as a percentage of Figure 7 coincident peak demand rose from 24% in 1971 to LOSSES/ENERGYAVAILABLE 50% in 1989. Because demand is expected to grow fastcr than capacity in the future, the reserve margin is expected to fall to 26% in 1994.

9. The labor productivity of the sector is quite good in comparison with other countries of the ...... _._ region. The customers per employee ratio increased from 137 in 1981 to 166 in 1989. The 1k electricity sales per employee ratio increased from 766 M 1,023Wh MWht o the duringsame period...... -...... Despite the above average figures, there is still as both indicators are still x , I I I I I room for improvement, 1911 1974 ±977 IM9 1942 AW6l 197 1992 1995 019 substantially below those found in more developed ______countries (Figure 6).

Figure 6 11. The length of the sector's collection period, EFFICIENCYINDICES in contrast, shows a steady decrease, which UEIE INDE indicates a significant improvement in collection management by the companies. In 1982, the collection period had a duratior' of almost 220 days while in 1989 it was down to 89 days. Sector

U UB authorities expect this trend to continue, as in 1996, it is projected to be 53 days (Figure 8).

Figure8. COLLECTIONPERIOD

197± 1??4 2m 1e9 3 19412 129*9994 1992 I5 19 030

call I Ini/UW1MU DIC12=*CIfIDFWY

1998 199: PPR CTIO,_

Is...... *...... I...... 10. Electricity losses have been a permanent problem for the sector. Taken as a percentage of ...... gross energy available, they increased from 18% in 1977 to 24% in 1988. Until 1977, losses were held ...... at about 17%, but in the late 1970s, they began to reaching 24% in 1987, for the grow rapidly, 1971 1974 1977 1910 196 1961AM I 1$992 1991 1990 following reasons: problems in transmission and 1998-199S: ltOJEtP1 subtransmission lines; the poor condition of

CLM-5 ProftabOy 13. The margin between unit prices and unit costs has been positive in every year since 1976, 12. The financial performance of the sector thanks to Colombia's electricity price-setting policy deteriorated in the 1980s. While the rate of return whereby rates must cover costs and only low- remained positive in every year, its 1989 level of income families are eligible for subsidies in 4.7% was significantly less than its 1981 level of connection with service provided by the State. In 14.9%. The decline in the late 1980s resulted 1989, the unit price of 1 MWh of electricity was because the considerable increase in net plant in US$41, and the sector had a unit operating margin service was disproportionate to that of revenues. of US$18. This favorable pattern is expected to The interest coverage ratio shows a negative trend. continue and improve in the future, as the unit It decreased from 3.2 in 1979 to 0.9 in 1989. Both price of electricity is forecast to remain relatively indicators are expected to improve somewhat in constant while the unit cost declines slightly the future (Figure 9). (Figure 10).

Figure 9 Figure 10 RETURNSUMMARY UNITPRICES AND COSTS t12 (4) 1189lUtaNO

4 ...... ,...... ~......

......

189 1974 1977 1416 1953 1LSS 19Oi19 1995 1941 1971 t14 147 1948 1913 1906 1949 1u92 1995 1954

- lIWIIS cm + TR OF mitmI CO-TWO I/05 -,4-M ot DRIC -eI- P4RIA WO 1ix0

I1N-1999:F81R tO114 1910-199):POOACTIO9S

14. Consequently, the operating income of the sector as a percentage of operating revenues has always been positive. However, it has been decreasing, as operating costs grew 13.4% p.a. between 1980 and 1989, mainly as a result of the increase in depreciation expenses, while operating revenues only grew 10.7% p.a.. In 1989, operating income was 34% of total operating revenues.

CLM-6 The Sector and Country Resources Figure 11

15. The sector has had a substantial claim on SECTOR INVESTMENT/COlJNTRYINVESTMENT country and fiscal resources. During the past decade, the power sector executed, on average, 12.1% of total gross domestic investment per annum, which represented an increase over the ANNUALAVERAGE ANNIAL AVERAGE 6.7% level registered during the preceding decade. 1171- Nevertheless, in 1985 the ratio started to diminish, and in 1989, the sector's share of gross domestic investment (6.6%) was less than it had been 10 years earlier. This was a result of the sector's financial difficulties and also policy decisions 6.7x 12.1 relative to the reorientation of public spending (Figure 11). Sector expenditures as a percentage of GDP increased from 1.8% in the late 1970s to 4.0% in the early 1980s and 3.8% in the late 1980s (Figure 12). Strapped for internally generated Figure 12 funds to meet investment needs and obligations SECTOREXPENDITURE/GDP stemming from external debt, the sector constantly produced deficits. These were recorded as part of s.MrI the consolidated public sector deficit and as such, affected overall macroeconomic indicators. In the late 1970s, the sector's deficit was 0.3% of GDP, on average, but it rose to 0.7% in the early 1980s . - before falling back to 0.3% in the late 1980s (Figure 13). III ITA

19C1--4 1975-79 1966-8

Figure13 SECTORDEFICIT/GDP

6.411

8.111 110DATA

9191-74 1973-79 91"6-4 MAD-6

CLM-7 Sector debt as a permcntage of country debt rose Figure 15 considerably in the 1980s. It increased from 19% _ _ in 1980 to 30% in 1989. Assuming that the sector's future financial shortfall will be covered m .tx' basically with external credit, a rise in that ...... percentage is foreseeable in the 1990s. Meanwhile,

sector debt service as a percentage of country debt - ....-...... service, though more erratic, increased from 20% ...... in 1976 to 33% in 1989. Unlike other countries in ..l.| ...... the region in which the government assumed a significant portion of the power sector's debt, the ...... Government of Colombia opted to keep the sector * I

responsible for debt service obligations, 1,11 1974, t1 1S*9 1MS0 191 1MS MIi cooperating indirectly through equity contributions -_ Mff and internal refinancing (Figure 14). _ 19"-1799: PNJCCTWO0S

Figure14 DEBTAND DEBT SERVICE 17. The sector's funding condition can be summarized by its debt service coverage and self- 35x ^ . financing ratios. Both indicators show unfavorable * ...... -...... * . . results. The debt service coverage ratio was less

asx / . /<- <\ 1 l than 1 and the self-financing ratio was negative A...... -.. during the 1976-78 period, 1981, and the 1987-89

.,x- ...... *..Y period, and in spite of an improving trend, the IAI....0...... unfavorable pattern of the late 1980s is expected to 5 - . .... c ontinue 1996. Eventhrough when the debt

IPx .I I I, a I . , * ., service coverage ratio was greater than 1 and the I971 1973 1"S 1777 1979 1071 1988 1987 1987 1978 self-financing ratio was positive, levels were .4fl § Bextremely low (Figure 16).

A! PWI0ROET8TOT1 0801 B: PIWI C00TItBUICC'IOTAL 0M01 SR6ACE igure 16 FUNDINGSUMMARY FundingRequirements and Sources

16. From 1976 to 1989, the sector required , ' US$9.3 billion, or US$662 million p.a., to fund its .. 9? investment program. From 1990 to 1996, the sector will require US$4.8 billion, or US$683-16 million p.a., to meet its investment needs (Figure 15).

1*71 1174 1777 91#7 10.. 1.. 17 1992 1705 1900

- DIII s717CRC04. - SViLf-VIO0l070

C1L9M- P0UCT1014

CLM-8 18. Borrowings in foreign currency have been 19. Gross internal funding has been positive an important source of funding for investments, since 1976. However,since 1987 its level has been and the corresponding debt service constitutes a less than that required to meet debt service factor that seriously affects the funding mix of the obligations arising from the high level of external sector. Its effect arises both from the large borrowings that were required to fund the sector's amounts to be serviced and from the fact that rate previous investment programs. Besides changes failed to keep pace with those amounts. borrowings, the sector has also relied on The devaluation of the dollar in relation to other government contributions to meet funding currencies of industrialized nations hit the sector requirements. In the late 1980s,the composition particularly hard because a high percentage of its of sources of funds was 37% internal funding, 49% external debt was dominated by currencies other borrowings,7% government contributions, and 7% than the dollar. The share for debt service in the decreases in working capital. While internal composition of uses of funds went from 31% in the funding is forecast to increase in the future, it will late 1970s to 50% in the late 1980s and is still not be sufficient to produce a favorable projected to increase to 62% in the early 1990s. funding mix, i.e. one with a positive,and reasonable Investments show exactly the opposite pattern, as level of net internal funding (Figure 18). they have been the other main use of funds (Figure 17). Figure 18 COMPOSITIONOF SOURCESOF FUNDS Figure 17 COMPOSITIONOF USESOF FUNDS

lUx~~~~~~~~~~~~~~~~~~~~~~~o

tax POTON~~~~~~~~~~~a

IS71-74JAW64 1975-191913-89 M1-74 lfl.fl 190-04 100-%I 105-04 100.0 _O tUlS E llJ =*. IJC oxII L-

19U-19: P 5191995 PTIA

CLM-9 20. The central problem of the sector is how to CapitalStructure guarantee financial resources that will bridge the gap between funding sources and uses, which will 21. The capital structure of the sector reflects be substantial in the 1990s if 1988 tariffs remain a substantial increase of debt in relation to equity constant in real terms (Figure 19). The raising of capital beginning in 1983, attributable to the public savings that can be transferred through the intensive use of external credit in the financing of Financiera Energetica Nacional S.A. (FEN) investments. Debt serviceobligations amounted to (organization created in 1982 with the purpose of US$1.2 billion in 1989. This affects not only the financing power sector investment projects and sector's financial balance sheet but also the transformed recently to extend its actions equilibrium of the country's public finances and throughout the energy sector as a whole and to balance of payments (Figure 20). finance other expenses like debt service) constitutes an important and innovativemechanism Figure20 for channeling financial resources to the sector. CAPITALSTRUCTURE Equally important are the mechanismswhich make it possible to capitalize ISA member companies. Lowever, these measures are not sufficient given the size of the gap, so borrowings in foreign currencies will continue to be an important i l alternative means for expanding the sector and given the situation of the international capital market in terms of supply and demand of resources, will increase the vulnerability of the - sector. ex,,,,,, , . ., . . ...,,, . 1... 0f71 L74 1977 L9w 1913 1n" 19ii 19n 1ii! L9ii Figure 19 |auI-y Mom

COMPOSITIONOF SOURCESOF FUNDS |m-IM! PLONS ri 'a uuuti mil cauTaiX

aim

; li tLii L9i is" Lis? 199I

- AnNI Uva = CUPCOlTOWIWS l 6m rW w -en aEIci

CLM-10 COSTA RICA

ELECTRIC POWER SECTOR COMSA WJCA e . )>CT-OR DATA SUM\ii .VPBYSHEE;T i9S

Almost all eecotr/c e' i' (sia Rica is suppl 2d b-y the Jr i uto Costarricense de Electricidad (ICE) and its subsidiary Copai Nackionald..- Fucrza y Luz 'CNFL). sf PEis responsible for the generation and transmission of electralty, and li sells eh-ciricity toCNrL which is re, onsible for distribution in San Jose City. ICE also sells electricity to ..c; mvauxicipalitlc an I four rural-electi dl-cation cooperatives for distribution. The sample for this study includes iCP.j and CNV-L.

GENERALECONOMIC DATA L.LECTRICITYSOURCES

POPULATION '000 2, 670 CAPACITY ENERGY ARIA '000 SQKM 51 (MW) (GWh) POPULATIONPER SQKII 52 C0O.,0NESPER US$ 75.81 THERMAL 143 95 GD.7, millions of US$ 5,011 HYDRO iO9 2,958

GD.1 PER CAPITA, US$ 1,877 NUCLEAR 0 0 GD1 GROWTHRATE, % * 4.7 GEOTHERMAL 0 0 19t,v ENERGY CONSUMPTION OTHER 0 0 P1s8CAPITA (kg oil equiv.) 557 IMPORTS 274 ELLE. SALES GROWTH RATE, % * 6.4 PURCHASES 0 ELBA. CONSUMP.PER CAPITA, kWh 1,099 TOTAL 852 3.327 198'iELEC. SERVICE COVERAGE, % 90 POWhk EXPENDITUIRES/GDP,Z * 3.6 RESERVE MARGIN 253 42Z

.VLECTRICPOWER SYSTEM DATA ELECTRICITYSALES

vUS2OMERS '000 476 GWh % EMPIX)YEES 5,614 CUS2. MRS PER EMPLOYEE 85 RES2ASNTIAL 1,174 40 TOTA' SALES PER EMPLOYEE, MWh 523 COMMERC7At 596 20 INDUSTRIAL 719 24 ______BULK SALES # 371 13 OTHER 75 3 DOMESTIC SALES 2,935 100

EXPORTS SECTORFINANCES TOTAL 3,01984

AVER4GE RATE (US$IMWh; 48 SYSTEM LOSSES 288 9 OPERATING MARGIN (WIO DEPR), % 41 OPERATING MARGIN(WI DEPR), % 58 _ RATE OF RETURN, % 5.5 INDFBTNESS, Z 54 DEBT SERVICE COVERAGE, tlmes * 1. 0 * - average per year since 1985 SELF-FINANCING RATIO, % * - to other utilities not in the study - as a percentarc of available energy COSTA RICA

ELECTRIC POWER SECTOR

INSTIffUONAL ASPECTS

In Costa Rica, tne Energy Sector is under the jurisdiction of the Ministry of Recursos Naturales, Energia y Minas (MIRENEM). Within the Energy Sector, there is the electricity subsector that encompasses the Instituto Costairicense de Electricidad (ICE); ICE's subsidiary: Compafiia Nacional de Fuerza y Luz (CNFL); two municipal utilities: Servicio Eldctrico de Cartago (JASEC) and Empresa de Servicios Publicos de Heredia (ESPH); and four rural cooperatives: Coopeguanacasta, Coopelesca, Coopesantos, and Coopealfaro.

Instituto Costarricense de Electricidad (ICE) was founded by decree No. 449 in 1949, as an autonomous, government-owned legal entity, to develop energy resources. Law No. 3226 of 1963 and 3293 of 19,4 authorized ICE to operate the telecommunication services. In 1976, Law No. 5961 entitled ICE to do research on, explore, as d run the country's geothermal resources.

'The organizational structure includes three sectors: Power, Telecommunications, and Finances & Administration which provides support to the other sectors. They report to the General Manager and to the Board of Directors, the latter one being in charge of high level management decision making. This Board consists of seven members appointed by the Government Council.

The General Comptroller's office monitors budget and contracting issues. ICE works closelywith the Minister of Planning and Economic Policy to obtain approval on investment and financial matters, and with the Government Council to resolve conflicts concerning human resources and wages. ICE regulates electricity tariffs in coordination with the National Electricity Service.

Costa Rica is interconnected with Nicaragua, Honduras, and Panama and performs short-term interchanges of secondary energy on an emergency basis.

COS-2 COSTA RICA

ELECTRIC POWER SECTOR

EVOLUTION, SITUATION. AND PROSPECTS

Summaiy Figure 1

1. During the past two decades, the electric GROWTHRATES power sector of Costa Rica performed 15,,

satisfactorily. Throughout the period, the sector L X ,-- - - posted positive operating income and a reasonable rate of return while at the same time, it executed S--.. an ambitious investment program that increased the electricity service coverage of the population VA from 35% in 1971 to 90% in 1989. Additionally, the sector reduced an already low level of

electricity losses and improved its collection ______I,______

period. However, because the sector relied heavily 1171 1W3 1975 1'77 197? L983"5 I "57 19

on credit to meet its funding requirements, it did - SA O -o+Lctt!CI SLES have difficulty meeting its debt service obligations and its investment requirements during some years. The sector could also improve its labor productivity,as its labor productivity indicators are 3. The contribution of the sector to economic below the region's averages. and social development can be seen by the growth in electricity consumption per capita. This The Sectorand the Economy indicator maintained steadygrowth during the past two decades, as it increased from 483 kWh in 1971 2. The sector is affected by, and in turn to 1,099 kWh in 1988 (5.0% p.a.). During the affects, the country's economy. This association is same period, GDP per capita growth was evident from the relationship between the behavior moderate, as it increased from US$1,494million in of economic growth and electricity demand growth. 1971 to US$1,877 million in 1988 (1.4% p.a.) Throughout most of the last two decades, (Figure 2). electricity demand growth follows GDP growth at a faster rate. The close association seems to break Figure2 in 1974, 1978, and 1980 when the rate of growth of PER CAPITAINDICES electricity sales increases, despite a drop in the real growth of GDP. Historically, the evolution shows "" u'' Wh 1I9L three phases: from 1971 to 1979, high electricity demand growth rates resulting from a vigorous electrification campaign; from 1980 to 1982, declining GDP and saturation of the electricity market, which grew at reduced rates; and from 4- 1983 on, recuperating GDP and electricity demand growth. The spread between the electricity demand and GDP growth rates was 3.5% p.a. in .___. ______. ____I, _I,_I._I_._E_ the 1970sand 1.7% p.a. in the 1980s (Figure 1)...... 073 ,9 19 *7? 19 1911 1fi|2 IM* 1997 19

r- OSD a3* - LE Pa arTA

COS-3 4. Another indicator of the positive 6. To meet electricity demand, Costa Rica contribution of the sector to development is the has relied mainly on hydroelectric power. In 1988, degree of electrification. In Costa Rica, electricity the composition of total electricity sources was service coverage increased from 35% in 1971 to 89% hydro, 3% thermal, and 8% imports; however, 90% in 1989. The total number of customers in many years of the 1980s, practically all increased 3.8 times between 1971 to 1988, from generation was of hydro origin. Total gross 126 thousand to 476 thousand. The residential generation, driven by the encouragement given to sector accounted for most of the increase, as the production of electricity in response to growing residential customers increased from 111 thousand demand, grew 8.1% p.a. in the 1970s. However, to 418 thousand during the period. because of the decline in economic activity in the early 1980s,the rate fell to 5% p.a. in the 1980s. The Electrcity Market: Supply and Demand The predominance of hydro generation is forecast to continue in the 1990swith some support from 5. Between 1971 and 1988, total electricity thermal and geothermal generation (Figure 4). uses increased 3.4 times, from 986 GWh to 3,327 GWh. During the same period, electricity sales Figure4 also increased 3.4 times, o. 7.5% p.a. on average, ELECTRICITYSOURCES from 858 GWh to 2,935 GWh. In the 1990s, electricity sales are forecast to grow 5.9% p.a. and reach 5,539 GWh in 1999. In 1988, the _ .------composition of total electricity uses was 35% . . - residential sales, 18% commercial sales, 22% _ . ._ .. industrial sales, 11% bulk sales, 2% other sales, ------3 3% exports, and the rest losses and own consumption. The share for residential sales was down from 42% in 1971 while the share for commercial sales was up from 13%. In the future, £,, ,9... 977 M,a 19..s 1as6 i9 1992 9925 19m the composition is expected to remain fairly III MO TA1552MEOTlEMM constant (Figure 3). C pMcAR OE41

jj91.-91 P3OJECMIO" Figure 3 ELECTRIOTYUSES

71b

1971 1974 1917 1060 1063 1IS 1S9 HS2 0995 19W

0 ES1Mmk10 F=: CegCMWiA [= OOUSTRIAL M onM SALES FM OTHER = ErPlS = am' C035 L05E5S

COS-4 7. The electric energy available to the grid in customers per employee and sales per employee was generated by an installed capacity of 1% MW ratios of 156 and 982 MWh, resreciively, by 1999 in 1971 that increased more than 4 times to 852 (Figure 6). MW in 1988 and is expected to reach 1,425 MW in 1999 (7 times 'he 1971 level). In 1988, the Figure 6 composition of the sector's installed capacity was EFFICENCYINDICES 83% hydro and 17% thermal. In 1999, the composition is expected to be 71% hydro, 17% . -,, thermal, 7% geothermal, and 5% other (Figure 5). ... .-

Figure 5 INSTALLEDCAPACITY

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

...... - -______------... ______....i'.I..I.... ------1911 1l1 ST 1948 L 190 194 199 191 19an4 s~~~~------. ...- g0 a

Rl ll;1;l | !I I 1 11 1999~~~~~~~~~~~~~~I-1999:PROJECTIhS

1971 197t 1)77 19W 1953 1JIb 195 5992 193 191 10. The sector has done a supcrior job

m EHER/IMCR C3 AtO controlling electricity losses. Taken as a LSDIIXLSR OR ~Oi~= - U:1ODEMD percentage of gross energy available, they

190I)199: 4oJEcllioS decreased from 12% in 1971 to 9% in 1988 with a low of 7% in 1985. An efficient system is expected to have a level between 7% and 10%. Sector OperationalPerformance authorities expect their rate of growth, which was 4.1% p.a. in the 1980s (from 209 GWh in 1980 to 8. A noteworthy aspect of the operation of 288 GWh in 1988), to diminish in the 1990s and the system is the increase in the reserve margin as their level to fall to 6% of gross available energy a percentage of coincident demand. It increased (Figure 7). from a low of 14% in 1972 to 42% in 1988 and was as high as 75% in 1982. This situation may Figure 7 have been the result of over capacity stemming LOSSES/ENERGYAVAILABLE from several factors: the failure of forecasted demand growth to materialize, the system's predominantly hydro structure, and the sector's '-- -* *----- equipment selection criteria. The reserve margin Lc. -----.---.- l is forecast to decrease to about 26% during the 1990sbecause of the expected rise in demand. ex -

92- -~~~------.--- 9. The sector's labor productivity could be improved. The customers per employee ratio only 4. increased from 64 in 1980Jto 85 in 1988, and the electricity sales per employee ratio only increased from 383 MWh in 1980 to 523 MWh in 1988. .;,.1911974 to" 1193 *9 _in 9 9 9 live Both indicators arc below the respective averages Isn-ms: F^O,EIIE for the region and significantly below levels found in developed countracs of the world. The forecast for the 1990s is optimistic, as efficiency improvements in the sector are expected to result

COS-5 11. The sector also improved its collection Figure 9 practices in the 1980s. After the collection period deteriorated from 45 days in 1971 to a record high RETURNSUMMARY of 111 days in 1983, sector management initiated lax improvements that reduced the level to 68 days in 1988. This trend is expected to continue in the SU 1990s, as the collection period is forecast to fall to and remain at 49 days in the 1990s (Figure 8).

Figure 8 ,1-- COLLECTIONPERIOD IS.,,.I..,.R..,. -- ,x 2441 1971 1974 197? 198 1982 1986 1159 1992 195 1148

1l8A - IB1T=T C19 -+* 111 07of,1MUM

la" ...... ______.___...... _X ...... _.....______1919-1"9! PIOJECTIO9S

-1 -. - ----... , -I -- ......

6------.13. The ratio between the unit price and the 42 / __ cost____ of.______.. el ^ctricity,--,-...... unit has been favorable, as the unit price was able to cover the unit operating cost -....-.-..-.-- during every year of the historical period. l ,l , ,l l.However, during the past decade the spread 1971 1...19. between the unit price and the unit cost narrowed. 1971 L974 lVm L"o 194 1*1 918 292 IM L"sF ______9__I_: _O__t__ _ Beginning in 1984, the unit price declined while the unit cost remi,ained fairly constant, and the sector's operating margin decreased from 45 Profitabilty US$/MWh in 1983 to 20 US$/MWh in 1988. This trend is expected to reverse itself in 1990 and 1991, 12. The sector's financial performance has but then resume in 1992 and continue through been favorable, though it did decline some in the 1999. In 1999, the operating margin is forecast to late 1980s. The sector's rate of return on assets be 17 US$.'MWh (Figure 10). was positive in all years of the historical period; however, it has been decreasing. It declined from lFigure10 9.6% in 1984 to 5.5% in 1988. The favorable level of net operating income ensured positive rates of UNT RCE1ADCOT return in the sector, although in the 1980s, 'a operating income declined from the levels it registered in the preceding decade, as operating de------costs and net plant in service increased at rates exceeding the growth rate of receipts from ------.- operations. The interest coverage ratio was several times greater than i in the 1970s but only slightly greater than I during two years of the 1980s *_,, ______._I, ______because of increased outlays for interest payments. 281± 1874 1M m93 182 9.88 119| 1992 1895 It" According to the forecasts, the rate of return COST,WDEFREC - CST3--DEAI shotild fluctuate between 5% and 10% in the 1990s + i TAXES -X-. P1CCEIWI TAXES while the interest coverage ratio becomes several I119-119:PI8OC7I0i0 times greater than 1 (Figure 9).

COS-6 14. Unlike other power sectors in the region, Fiure 12 Costa Rica's had a fairly volatile composition of COMPOSITIONOF OPERATINGCOSTS operating revenues The composition of operating revenues in 1988 compares with that of 1971 as follows: residential, 29% vs. 46%; commercial, 28% 4k vs. 19%; industrial, 22% vs. 22%; bulk sales, 13% vs. 6%; and other, 8% vs. 7%. The current mix is expected to remain fairly constant in the 1990s ,_ (Figure 11).

'igure 11 ......

COMPOSITIONOF OPERATINGREVENUES 1 Lf4 £917 1"41 11413 It" IM131 1I 1916 _ 0R McC DEPtEC TAXES X FuEL L.._ EMCP rAI MAIERWI PE3RSONN3EL N O533 IIEXENSES .WA 1989-1919:4QJ£C.lQ!S

WA The Sector and Country Resources

WA ~~~~~~~~~~~~16.The electric power sector of Costa Rica du 1k11absorbed a significant amount of country and

1171 L974 L977 131M6 1971138s LO 199 129's 191 government resourcos during the last two decades.

20 3E(16151AL m sictR 'UsirsAt Sector investments as a percentage of country Em BULKSILLS = DINER LPDOIS investments were 7.9% and 7% in the 1970s and

e _Ittt-ltttvRDJXt - S the 1980s, respectively. The share was as high as 11% in 1977 and 1982 (Figure 13).

15. Historically, operating income has Figure 13 comprised a significant portion of operating gECTORINVESTMENT/C13NTRYINVESTMF;qi revenues. However, the share has been declining. It went from 62% in 1984 to 41% in 1988. In 1988, the composition of operating costs as a percentage of operating revenues was 17% ANNUALAVERAGE ANNUALAVERAGE depreciation, 10%opersonnel, 5% materials and £388-1' services, 5% fuel, 5% imported electricity, 17% other expenses, and 41% operating income. Because of the sector's development of hydro resources, the share for depreciation increased inB the 1980s while the share for fuel decreased. By the end of the 1990s, the composition of operating costs is expected to be 27% personnel, 22% depreciation, 5% materials and services, 2% fuel, 5% other expenses, and 39% operating income (Figure 12).

COS-7 Sector expenditures, which were around 2.7% of Figure 14 GDP during the early 1970s,reached about 4.8% SECTOREXPENDITUREJG3P in early 1980s after an increase in interest payments. In the late 1980s, smaller investment and interest outlays brought the level down to CM about 4% (Figure 14). The sector's deficit as a percentage of GDP increased from 0.4% in the early 1970s to 0.7% in the early 1980s when the YAX sector's hydro plants where under construction. , K The level fell to 0.3% in the late 1980s (Figure

15). Because of the large amount of borrowings v X7 n79 contracted by the sector, its debt formed a sizable share of the nation's public external debt, "' W , especially in the 1970s when it averaged around m_iCSorc= M IiJUI I I lW 22%. During the 1980s, the sector's debt as a percentage of country debt fell to 15%, as the sector's deteriorating credit rating resulted in fewer Figure 15 loans. Even though the share for sector debt SECTORDEFIT/GDP declined, the sector's accumulation of debt caused its share of country debt service to increase from 13% in the 1970s to 23% in the 1980s (Figure 16). ,A-

S.',

0.4K *I ',

0.5C

337l1.4 1971-79 1090-04 &985-19

Figure 16 DEBT AND DEBT SERVICE INDICES

4x------

_ ._ . ._.._.....

1,7 1173I 1979 197 1979 t091 II5 0115 1907 10989

-~~~~~ a - CS #3089 1iO DElI 0110117Et ! e9C"TAi0E97 61EME

COS-8 Fundng Requirements and Sourcs Figure 18

17. The sector's investment program shows an FUNDINGSUMMAPY increasing trend during the 1971-82 period (US$76 ., W^, million p.a.). With some exceptional years, it remained relatively flat during the 1983-88 period (US$66 million p.a.), as the availability of financial A resources declined. In absolute terms, the peak of investments occurred in 1981 (US$117 million). . Sector authorities foresee an ambitious investment program in the 1990s, as they forecast that the sector will invest about US$1.7 billion, or US$169 , , -i million p.a. on average (Figure 17). 171 194 17 19,, 193 list 1,,9 199, 1993 1is

_ gm 155-CK C-, +- SU-lirIl TIO

Figure 17 1909-1999: PROJCEOTM INVESTMENT

300I," ,,., us 19. The composition of uses of funds shows an

.- - -- - .increasing share for debt service payments and a decreasing share for investments. The situation -- .created -.-. . --. in the 1970s had marked repercussions on

130 _ _------___...... -- ...... _____ the composition of uses of funds in the 1980s,for lli@... . ____._____.|..... --- as a result of the borrowings that took place, the share for debt service increased from 36% in the 30 ---. 1 11 lil lil ll l l early 1970sto 61% in the late 1980s. At the same B " time,t t .the share for investments decreased from 197& A74 197T 1900 1903 1946 1900 1903 1m 1M6 59% to 39%. However, the projections for the -II uotmn 1990s paint a brighter picture, as the composition

_ 09-1099: 9OJECt5-S of uses of funds in the early 1990s is forecast to be 65% investments, 32% debt service payme its, and 3% increases in working capital (Figure 19). 18. Both the debt service coverage ratio and the self-financing ratio reveal that the sector had Figure 19 some difficulty meeting its debt service obligations COMPOSITIONOF USESOF FUNDS and funding its investment program in some years of the late 1970s, early 1980s, and in 1988. During some years, the sector's internal funding was not | . : sufficient to handle its increasing debt service burden and meet its investment needs. However, - in the 1990s, both indicators are expected to maintain extremely favorable levels (Figure 18).

COS-9 20. The composition of sources of funds shows Figure 21 the sector's reliance on borrowings to meet its COMPOSITIONOF SOURCES OF FUNDS funding requirements. The share for borrowings IS, OF 80URCESOF FUND was 53% and 62% in the early and late 1970s, *a J, 'U respectively, but then, declined to 22% in the late 3 1980s because of greater restrictions imposed by ,, lending institutions. As a result, the share for an government contributions was 16% in the early to 1980s and 7% in the late 1980s. Throughout the is. historical period, internal funding increased. Its share went from 32% in the early 1970sto 62% in the late 1980s. However, despite the increase in internal funding, the sector still had some 1l. 1991 1993 1993 1s7 ISI difficulties meeting its funding requirements (para. 5M FWK"W zDETOSrelE 18) because of the accumulation of debt. In addition, working capital, which reveals the sector's ability to meet its short-term obligations and therefore its financial health, shows decreases in Capital Structure both the early and late 1980s. In the 1O'vs, the share for internal funding is expected to maintain 22. During the last two decades, the sector's a favorable level of about 60% (Figure 20). debt/equity ratio remained relatively constant at a level of about 50/50. However, sector authorities Figure 20 expect it to improve to about 40/60 by the late COMPOSITIONOF SOURCESOF FUNDS 1990s (Figure 22).

Figure 22 CAPITALSTRUCTURE

I a,1 i'aF '

1971-14 1973-79 1 14 1913-839 89911-94 II _I9

I MT1A5F7M13 CM CustC09Th3 90 D4'T CONTI|

|591 's|89 f911'tIS 7157,8 .79 I49 , I*IIISIISI MV5-1999:99M7171 a 1971 1174 1977 LS9S 1983 191 1939 1992 1ISS 1998

21. If 1988 tariffs remain constant in real 1 9SO497'1143 terms during the 1990s, the funding mix of the sector would not be as favorable. Under this scenario, the share for internal funding would fall to 44% in the early 1990s. Given that the sector's rate of return was only 5.5% in 1988, the sector may have some difficulty attracting external resources to meet its funding requirements, especially its ambitious investment program (Figure 21).

COS-10 DOMINICA

ELECTRIC POWER SECTOR DOMINICA POWER SECTOR DATA SUMMARYSHEET 1988

Dominica Electricity Services Ltd (DOMLEC) is the public utility responsible for the generation ard distribution of electricity on the island. The sector consists of three interconnected systems (North, North-East, and West).

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 82 CAPACITY ENERGY AREA '000 SQKM I (MW) (GWh) POPULATION PER SQKM 82 EAST CARIBBEAN $ PER US$ 2.70 THERMAL 5 14 GDP, millions of 1988 US$ 141 HYDRO 3 16 GDP PER CAPITA, 1988 US$ 1,722 NUCLEAR 0 0 GDP GROWTH RATE, % * 7.7 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 ELEC. SALES GROWTH RATE, % * 11.6 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 301 TOTAL 8 30 1989 ELEC. SERVICE COVERAGE, Z 55 POWER EXPENDITURES/GDP, % * 4.6 RESERVE MARGIN 2 28%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 17 GWh % EMPLOYEES 14..' CUSTOMERS PER EMPLOYEE 119 RESIDENTIAL 15 60 TOTAL SALES PER EMPLOYFF, MWh 172 COMMERCIAL 6 24 INDUSTRIAL 1 4 I______I I f ,BULK SALES # 0 0 OTHER 3 12 DOMESTIC SALES 25 100

SECTOR FINANCES EXPORTS 0 TOTAL 25

AVERAGE RATE (1988 USSIMWh) 198 SYSTEM LOSSES 4 ## 15 OPERATING MARGIN (WIO DEPR), % 17 OPERATING MARGIN (WI DEPR), % 29 RATE OF RETURN, Z 12.4 INDEBTNESS, % 18 DEBT SERVICE COVERAGE, times * 2.9 * - average per year since 1985 SELF-FINANCING RATIO, Z * 26 - to other utilities not in the study - as a percentage of available energy DOMINICA

ELECTRIC POWER SECTOR

INSTITUTIONALASPECTS

Dominica Electricity Se-rvicesLtd. (DOMLEC) is incorporated as a public limited liability company under the laws of the Commonwealth of Dominica. It is responsible for the generation, distribution, and sale of electricity throughout Lhe island of Dominica under an exclusive franchise embodied in the Electricity Supply Act No. 7 of 1976. The utilitywas previouslyowned and operated by the Commonwealth Development Corporation from 1951. In 1976, 49% of the Company's shares were sold to the Government of Dominica, and in 1983, the Government purchased the remainingshares, 60% of which were offered for sale to the public in 1985. At present, there are 1,315 shareholders.

The Company has an issued share capital of 2 million ordinary shares of EC$1.00 each and an authorized share capital of 3 million shares. DOMLEC is controlled by a five-member Board of Directors and headed by a General Manager who had a staff of 142 in 1988.

Under the Electricity Supply Act, DOMLEC is authorized to changes its electricity rate with the approval of the Minister responsible for electricity. There are provisions in the Act that allow changes not approved by the Minister to be referred to a Public Utility Commission for determination.

DMC-2 DOMINICA

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION, AND PROSPECTS

Summary Figure I

1. The performance of Dominica's power GROWTHRATES sector has be-:i satisfactory, despite the burden of . reconstruction during the post-hurricane period in the 1980s. The finances have been good during

most of the period, as the sector has been able to - t . - --. meet its operational and financial obligations using its own resources and a reasonable level of borrowing. However, there is need to improve lo--.-.--_ -...-.... working capital conditions, as the speed of spending has weakened the sector's liquid position. In the future, the development of new hydro ,E., facilities will result in lower unit costs and tariffs 197L 173 L975 1997 19179 1I 19813 195 197 1189 and significantly reduce the country's expense on - + imported oil. However, the required borrowings necessary to finance these investments will substantially reduce an historically strong debt 3. The sector's contribution to economic and service coverage ratio. social development can be seen in the growth of electricity consumption per capita. Between 1980 The Sector and The Economy and 1988, consumption per capita grew 22.1% p.a., from 61 kWh to 301 kWh, while GDP per capita 2. During the 1980s, electricity sales growth only grew 4.7% p.a., from US$1,192 (1988 US$) to followed that of real GDP growth at a faster rate. US$1,722 (Figure 2). Electricity sales growth was significantly greater in the early 1980s, as the country was recovering from Figure 2 the effects of Hurricane David which hit the PER CAPITAINDICES economy of Dominica extremely hard in 1979. In the 1980s, .he spread between the electricity am H M Wrl demand growth rate and the real GDP growth rate was 17.4% p.a. (Figure 1). IX V

1971 1972 1975 1971 19?9 L981 L982 1981 1987 1989

dr litm CdPlT - SAMD MPITA

DMC-3 4. Another indicator of the sector's influence hydro and 7% thermal. In 1989, hydro generation on economic and social developmcnt is the rate ef accounted for about 46% of the total whilc electrification. In Dominica, electricity service thermal generation accounted for 54%. In thc coverage reached 55% in 1989. Total customers of 1990s, the utility intends to reversc this mix and electricity service increased from 4 thousand in achieve levels attained in the carly 1980s by 1980 to 18 thousand in 1989. Most of the growth developing the substantial hydro resources with occurred in the residential sector, as residential which the country is endowed (Figure 4). customers increased from 3 thousand to 16 thousand during the 1980s. Figure 4

77TeElectricity Market: Supply and Denwnd ELECTRICITYSOURCES

S. Electricity consumption grew 1 1% p.a. ... 4.1 ...... between 1983 and 1989, reaching 27 GWh in 1989. Thbis rate is high considering that the sector- achieved its pre-hurricane consumption level in 1983. Residential consumption has traditionally I accounted for the largest share of sales, usually at least half. In 1989, the composition of total . electricity uses was 46% for residential sales (56% 1914it71 19?7 ile 1187 J14 199 L997 1993 1998 of total sales), 19% for commercial sales, 5% for M woao E rKEtHn 6E014SS kE`.£EC industrial sales, 4% for bulk sales, 10% for other P1I0±SLS G19±2IPORTS sales, and the rest for losses and own consumption. POOJ±CTlIS Based on the prospects of increasing service coverage, it is expected that total consumption will reach about 38 GWh in 1994, representing an 7. The electric energy available to the grid average increase of 7% per year (Figure 3). was generated by an installed capacity that increased from 6 MW in 1982 to 9 MW in 1989. Figure 3 The composition changed from 42% hydro and ELECTRICITYUSES 55% thermial to 30% hydro and 70% thermal. In 1994, the sector is expected to have an installed capacity of 15 MW; about 50% will be hydro and ..X...... about 50% will be thermal (Figure 5).

...... _.... Figure5 INSTALLEDCAPACITY

16 l-~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~1-- 16 ------

1971 1974 1977 1960 1993 1994 1999 1m 195 n9s _

m IESrOEfIMIAL ES COrMERCtL a 9t9uib L 6±LKSALES __ EM 01TER [7l 1 C: GXPOuI5o CIII CW LOSSES ......

19le-1119: PROJECoS ......

6. To meet electricity demand in the 1980s, 1971 1974 1977 1918 1907 Ol16 1±99 1992 1995 1996 the sector relied on generation sources that were _ 9yO90 W TW6RMAL [ET 6Cq91'.: predominantly, but decreasingly, hydro. in 1982, 6 CM)OIKEK - CC.CLEA7X;:FFy oE914c the composition of electricity sources was 93% 991-1999: PRo,7Jers

DMC-4 Operational Pr7formance Figure 7

8. The sector s reserve margins appear LOSES/ENERGYAVAILABLE excessive in 1982-83, as actual available capacity .,

was about 70% of installed capacity. However, , ...... they have decreased and maintained a reasonable A

level since 1986. -

9. Labor productivity in the sector can be .,x .. . . . improved. The sector's number of employees(152 in 1989) increased following a reasonable trend in K.6......

relation to number of customers. Thus, efficiency, ...... as measured by customers per employee and

electricity sales per employee, improved from 73 . I . * X 1971 1974 I97" 1900 191 963 1is 9 199 193 1199 and 112 MWh in 1982, respectively,to 118and 175 , { MWh in 1989. However, the electricity sales per employee indicator is significantlybelow that found in other countries in the region, and neither 11. Th_ sector's collection practices are indicator is expected to improve dramatically by satisfactory. 1s collection period decreased from 1994 (Figure 6). 111 days in 1982 to 72 days in 1989 and is projected to reach 50 days in 1994 (Figure 8). Figure 6 EFFICIENCYINDICES Figure 8 816.840 COLLECTIONPERIOD

607. 1..1"4.bn ...... SU s @l 1slS s9$ssst ...1"...... _...... ,,......

4U...... -..- . . ..-...... *r ...... I...... I......

I9W-4l P8JcIaS 1171 174 177 193 13 16 199 191 1993 1996

1999-i9":9 PROJCCTI

10. Elestricity losses as a percentage of gross available energy were high, about 29% in 1980. However, they decreased to 15% in 1989 because of the implementation cf better control measures and the installation of capacitor banks. The continuation of this trend should decrease losses to 12% in 1994 (Figure 7).

DMC-5 Profiabilty Figure 10 UNIT PRICESAND COSTS 12. The sound financial position of the sector can be seen in its financial return indicators. The m g. " sector's rate of return on assets has declined from . \ its post-hurricane peak of 26% in 1982 but is ,... projected to be between 6% and 9% in the early 1990s. The sector's interest coverage ratio has ------been greater than 1 since 1981 and is expected to In x remain so during most of the early 1990s . (Figure 9). * l . S"tI 1914 LI1" 19 13 AM8 1419 L 192 A1AM

Figure9 | t0osr oeIfcOf -*- MSt W. *uptM _gure 9 -C.- PtCt"4 1 ftEi. *TAXES1wt1is RETURNSUMMARY 1191-144:AtOftCIlC4S

14. A majority of the sector's revenues now ./lN I l\At^\ .su comes from the residential sector. In the 1980s, * f \IN v \ \~ the share of operating revenues coming from | \\ ~ . . commercialcustomers decreased from 40% to 22% -lox while the share from residential customers -a ~~~~~~~~~~~~~~~~~~~~increasedfrom 47% to 55%. In 1989, the , l ,l lIl, l, , l,, X ,, -aix composition of operating revenues was 55% from ASIA 1974 ,II? ,0.9,3 1916 ,949isla ,93 9.... residential sales, 23% from commercial sales, 6% - IfInlU CO' IIIITWE mum from industrial sales, 4% from builk sales, and 12% uS-rms:PRoACnom from other sales (Figure 11).

13. The sector's positive rate of return has Figure O1 been the result of the sector's tariff policy. COMPOSITIONOF OPEERATING REVENUES Although real tariffs have been maintained above . real costs, they declined between 1980 and 1983 and grew very little between 1983 and 1988. After 1988, they are expected to decline steadily through . . _ _. 1994. From 1982 to 1987, the unit cost increased -. rapidly reducing the sector's operating margin. However,costs have been declining since 1987,and even though prices are expected to decline, the sector's operating margin should increase (Figure 1971 1474 17 191 143 1946 9118 192 119 m9 10)- El IEsioEnTc M CORtlK M P.-JStllt c 1. SME$ C 0*O1ER r EXPORTS

1918-14n: PROAtT8101

DMC-6 15. Operating income as a percentage of Figure13 operating revenues has been positive since 1981. SECTOREXPENDITURE/GDP It had a peak of 28% in 1982 and then, decreased until 1986 when it reached 9%. Since then, this declining trend has been reversed, and operating income is expected to settle at about 28% during the 1991-1994period. The share of fuel costs in the sector's operating cost composition increased . from a low of 7% in 1982 to a high of 35% in 1986 and settled at 28% in 1989 because of W l- K A increased thermal generation. This trend will be reversed when new hydro facilities come into 191044 0",-a, operation and eventually reduce electricity prices. In 1989, the composition of operating costs was

Lou . _ t .amounting to US$13 million are envisaged ,0,.....-_.....~ between 1990 and 1994 for the development of new hydro facilities. Frc:i 1985 to 1989, the sector required US$14 million (Figure 14).

aft...... _ ...... Figure 14 INVESTMENT . I I ~~~~~NILtlce19n uss I7S 1974 197? 1966 191 1914 AI 199mt 1991 199 1

W PER17 Ea cEPREC [ TAX1S Q FUEL CLECPUI = M9rERIALS Co MEWI G 01114 EXPE9SIS t ......

l996-1999: PROJEC-I-- _......

The Sector and Country Resources

16. Since the sector has been able to carry out its investment plans and meet its operational and 1991 197 1977 1969 1161 186 116 1993 1791 3999 financial obligations using its own resources and mluut borrowings, the need for transferring fiscal 1"0-1999: PROECTS resources has been minimal. Sector expenditures as a percentage of GDP increased from 2.5% in the early 1980s to 4.6% in the late 1980s because of an increase in investment activity (Figure 13).

DMC-7 18. Sector funding has been strong. The Figure 16 sector has been able to cover its funding needs COMPOSTIONOFUSES OF FUNDS with internal funding and a reasonable level of borrowings. During periods of heavy fuel use, a .i fuel surcharge was introduced to help respond to operational and financial obligations. As a result, a more than satisfactorydebt servicecoverage ratio has been maintained until now, in particular in. : 1988 and 1989, when a significant improvement in internal funding took place in face of low * X indebtedness. The borrowings for new investments No CAl M C01 presently being carried out will result in a lower ,,.,-74 M7- 198W-'4 1993-9 debt service coverage ratio, but one that is still ,W0 greater than 1. Likewise,the sector has been able M c*,l"l = lMI$SWIT a rsr SICE to maintain a favorable self-financingratio, usually ,9, ,99 Ftoxcfift greater than 25%, and this trend is expected to continue in the future (Figure 15). 20. Because most of the sector's funding was Figure 15 absorbed by capital spending, the sector was left FUNDING3SUMMARY with a weak liquid posit.on that forced decreases in working capital during most of the early 1980s. I (X)-sa>However,i'M strong internal funding reduced the sector's dependence on external resources. Internal funding is expected to constitute 55% of

.- I \ h I ,§,, sources of funds in the early 1990s,but given the sector's projected rate of return which is in the ..1 vicinity of 7%, the sector may have some difficulty /V 1 /attracting aox external resources to meet its funding tequirements (Figure 17).

Itll 1974 19?7 1990 1903 1996 19*9 1992 1992 199 Figure17

-a 9KM 900Cr C0O9. *+ tELl-VIM 90110 COMPOSITIONOF SOURCESOF FUNDS 1795-19?9: P9tJCCT,Cis .t ::::::: ~~~~::::::35 19. The sector has used a significant amount .I l of total funding for investments, 86% in the late 1980s. In the early 1990s,the share of investments X in total funding should decline to 61% while the aox share for debt service increases to 39%, as the ex DAT NO DAT| sector will have to meet debt service obligations 1 1 1213-,4 _ F - 1191-99 arising from the borrowings it contracted in the FtRIODS

1980s (Figure 16). M 9IR" FuliCFS C3 CU ST COh s lR1 C::l 0RRO1eo t=f fMomo G9IA' W. (A BECktASE

I| IY99-1991t P9OOCT0IO1

DMC-8 21. However, if tariffs are not reduced as CapitalStuture planned and 1988 tariffs are maintained in real terms, a much mcre optimistic financial outlook 22. The sector's capital structure has results for the projection period. Under this undergune drastic changes since 1978, as its scenario, the sector's net internal funding would be debt/equity ratio has been erratic. It went from able to make a significant contribution to its 100% debt in the early 1980sto 20/80 in 1988 and investment program (Figure 18). is expected to increase to around 60/40by the mid- 1990s (Figure 19). Figure 18 COMPOSI1lONOF SOURCESOF FUNDS Figure 19 I, 'US 7*31W WINScCUlMff CAPITALSTRtUCTURE wuaaomi.e sii

1959 s 1991 1991 1995 1997 it"

E mI¶E.U FU E3 CUSTCOT99TiMIS 1971 1974 97" 1l 1953 199 1919 1991 191 17s

DMC-9: NOACTIS

DMC-9 DOMINICAN REPUBLIC

ELECTRIC POWER SECTOR DOMINICAN REPUBLIC POWER SECTOR DATA SUMMARY SHEET 1988

Corporaci6n Dominicana de Electricidad (CDE) is tule government utility responsible for clectric power in the Dominican Republic. The utility's activities arc supervised by the Office of the President. CDE operates around 75%scof the country's installed capacity; thc Falconbridgc Mining Comparny and several sugar mills supply the rcst. The sample for this study includes CDE only.

GENERAL ECONOMIC DATA ELECTRICITY SOURCES

POPULATION '000 6,859 CAPACITY ENERGY AREA '000 SQKM 49 (MW) (GWh) POPULATION PER SQKM 140 PESOS PER US$ 6.34 THERMAL 615a 2,605 GDP, millions of US$ 6,407 HYDRO 207a 842 GDP PER CAPITA, US$ 934 NUCLEAR Oa 0 GDP GROWTH RATE, % * 3.8 GEOTHERMAL Oa 0 1988 ENERGY CONSUMPTION OTHER Oa 0 PER CAPITA (kg oil equiv.) 332 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 4.2 PURCHASES 396 ELEC. CONSUMP. PER CAPITA, kWh 382 TOTAL 822a 3,843 1989 ELEC. SERVICE COVERAGE, % 38 POWER EXPENDITURES/GDP, % * 4.5 RESERVE MARGIN 137a 20%a a - 1987 DATA

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 565 GWh g EMPLOYEES 5,934 CUSTOMERS PER, EMPLOYEE 95 RESIDENTIAL 1,059 40 TOTAL SALES PER EMPLOYEE, MWh 441 COMMERCIAL 297 11 INDUSTRIAL 749 29 BULK SALES #0 0 OTHER 513 20 DOMESTIC SALES 2,618 100

D- - | EXPORTS 0 SECTOR FINANCES TOTAL 2,618

AVERAGE RATE (US$/MWh) 60 SYSTEM LOSSES 1,022 ## 27 OPERATING MARGIN (WIO DEPR), % -19 OPERATING MARGIN (WI DEPR), % 0 ______. RATE OF RETURN, % -3.2 INDEBTNESS, f 33 DEBT SERVICE 'C-VERAGE, times * -0.1 *- average per year since 1985 SELF-FINANCING PATIO, % * -213 # to other utilities not in the study - as a percentage of available energy DOMINICAN REPUBLIC

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

Corporacion Dominicana de Electricidad (CDE), established by Law No. 4115 of April 21, 1955, is an autonomous, government-owned agency whose sole responsibility is the generation, transmission, and distribution of public electricity service in the Dominican Republic. It initiated operations in 1955 by taking over the privately owned Compalia Electrica de Santo Domingo, a former subsidiary of Stone & Webster Corporation (U.S.A.). Since then, it has gradually taken over all public electricity services in the c-untry.

By Law No. 6 of September 8, 1965, the National Institute of Hydraulic Resources (INDRHI) was created to study, plan, and program all hydraulic and hydroelectric work. INDRHI's first mission was to formulate the plan for the Yaque del Norte, Yaque del Sur, and Yuna rivers and to collect the hydrological data for these rivers and others throughout the country for CDE's hydroelectric planning.

CDE is administered by a seven-member Board of Directorn; six are appointed by the Government and one by -DE's labor union. CDE reports to the President of the Republic, who appoints the President of the Board and the General Administrator; the latter is CDE's Chief Executive Officer. The Board regulates and approves major ii,.vestmentplans, borrowings, and broad policies, and recommends electric power rate schedules to the President of the Republic.

By CDE Board's resolution of May 15, 1988,and with the approval of .hc President of the Republic, CDE established new rates and a new tariff structure. These new rates considered an increase across the board of 30% for 24 months. In September 1990,CDE began applying automatic fuel and exchange rate adjustments formulated to maintain the real value of tariffs.

DOM-2 DOMINICAN REPUBLIC

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPE( FS

Summary Figure I

1. The electric power sector of the GROWTHRATES Dominican Republic has been subject to a . protracted crisis basically because of institutional

weakness, as reflected in poor operational and - - .------. managerial practices and the lack of an adequate

pricing policy. Under such: conditions, the sector - - - .- ...... has shown permanent operational losses, and internal fund generation has not been enough to finance debt service and investment needs making NV the sector heavily dependent on Government V contributions. Efforts to reverse this trend are 1 17 191 1979 I9SL 1913 1915 1997 199" being implemented under a rehabilitation plan. - U. However, this plan has been unsuccessful so far because of iack of substantial reforms in the sector. Rehabilitation of the sector is key to ensuring its contribution to the econcmy and eliminating the 3. In spite of its financial and operational heavy burden of the sector on fiscal resources. difficulties, the electric power sector has Options being pursued include a loss reduction contributed positively to the economic and social program and private sector participation in futurc development of the country as evidenced by the investments. significant growth in electricity consumption per capita. Between 1971 and 1988, consumption per The Sectorand the Economy capita grew 4.9% p.a., from 170 kWh to 382 kWh, while GDP per capita grew 2.1% p.a., from 2. The pattern of growth of electricity sales US$662 to US$934 (Figure 2). has followed closely that of real GDP growth with two significant exceptions: (i) in 1977, a high Figure 2 growth of electricity sales because of repressed PERCAPITA INDICES demand in previous years that resulted from unavailability of generating facilities and (ii) in ls ," 1982, a significant drop in electricity sales growth basically due to the lack of available capacity to meet market demand. Such pattern, therefore, is subject to the availability of electricity which has been so poor that it has prompted the installation 4. of many self-generating units by unsatisfied customers. The spread between the electricity 2as demand growth rate and the real GDP growth rate was 4.1% p.a. in the 1970s and 1.6% p.a. in the 97,973 1975 197 1979 1981 1903 1915 1997 1989 1980s (Figure 1). -

DOM-3 4. Another indication of the contribution of Figure 3 the electric powcr sector to economic and social development is the rate of electrification. In the ELECTRICTY USES Dorn'.- !tR'cnublic,electricity service coverage increased from 20% in 1971 to 38% in 1989 revealing that significant work remains to be done in making electricity service available to the population. Total customers more than doubled . . . between 1971and 1988,as they increased from 210 thousand to 565 thousand. The residential sector accounted for the increase, as residential customers ...... ,- , increased from 186 thousand to almost 520 " 1. 1017 1IV3 tM6 1t8I 1912 1S1S 191" thousand. Mfl oK* = o" css Lotus

7he Electriiy Marka: Demand and Supply 91-191 POJCT9

5. Electricity uses grew from 1,060 GWh in 1971 to 3,843 GWh in 1988 while sales grew from 6. To meet those electricity uses, CDE relies 772 GWh to 2,618 GWh, the difference being mostly on thermal generation. However, the share losses (including own consumption) which grew for thermal generation in total electricity sources from 288 GWh to 1,225 GWh. The faster growth decreased from 93% in 1971 to 68% in 1988 while of losses (4.3 times) compared to that of sales (3.4 the share for hydro generation increased from 6% times) constitutes one example of the deteriorating to 22%. The remaining requirements are filled by trend in sector operations which has become domestically purchased energy which grew from critical for the sector and the economy, as such 1% to 10% because of the mere lack of reliable losses constitute aimost 27% of total uses. Sales generating facilities at CDE and the absence of a are forecast to increase 7.9% p.a. in the 1990s, sound policy governing private generating facilities from 3,252 GWh in 1989 to 5,964 GWh in 1997. (Figure 4). In 1988, the composition of electricity uses was 28% residential sales, 8% commercial sales, 20% Figure 4 industrial sales, 13% other sales, and the rest ELECTRICITYSORCES losses and own consumption (Figure 3).

1911 1914 L977 1I94 9 913 1191 Agog MS9 1991 1551

1DO194: 991JTt

DOM-4 7. The electric energy available to the grid Figure 6 was generated by an installed capacity that increased 3.5 times, from 233 MW in 1971 to 822 EFFCIECY INDCES MW in 1987. The composition of installed T capacity changed from 7% hydro and 93% thermal 0m, in 1971 to 25% hydro and 75% thermal in 1987 ,.S (Note: in the case of the Dominican Republic, installed capacity refers to available capacity) .. ' an (Figure 5). -,.

Figure 5 .1.i ., .. -.. , . .,,,.

INSTALLED CARPCITY *... .. ? I"lS... IWI I?5 il. IHI

1 . . . t"s~~~~~~~~~~~~~~~~~~~~~~~~~~~16-IgI,:P.7JtCtiCI

Lam ...... -. ---- *-*--''------'*--'-'----'-'*-.'--*''- --' --- .d'' -

..-... _.._._.--...--.---...--I- ...... ---......

." ...... , ...... _ ...-.. 10. The main operational problem of the ...... sector is the high level of electricity losses. Taken as a ptrcentage of gross available energy, they increased from 22% in 1971 to 36% in 1983 before

1171 1974 11 196.* 1 §621j] LO 1,, falling to 27% in 1988. Though technical losses are deemed high, the main contributing factors to the level of losses are electricity theft and fraud, 109-1959!PIOAto.S? which evidences improper operations and commercial practices (Figure 7).

Operational Performance Figure 7 AVAILABLE

8. Because f a significant investment program for generating facilities, the sector's reserve margin, which had reached a low of 10% in 1972-73, increased to a maximum of 75% in 1976...... However, it has been decreasing since then and now is theoretically 20% but, in fact, non-existent ------due to the low availability of thermal facilities, thus showing the critical situation of the sector's generating facilities.

9. The above notwithstanding, the * .- , , , . ,, * ,. productivity of labor in the sector has shown ... 1,. 1177 190 1am3 I191 009 LIU LsSIma9I permanent signs of improvement. However, both indicators are below the region's averages. The customers per employee ratio grew from 70 in 1979 to 95 in 1988 and is expected to reach 158 in 1997. The sales per employee ratio grew from 347 MWh in 1979 to 441 MWh in 1988 and is expected to reach 1,000 MWh by 1997 (Figure 6).

DOM-5 11. The sector's collection practices have been pIgure 9 poor. Its crllection period d;tMriorated from 72 RETURNSUMMARY days in 1984 to 2M days in 1988. However, projections expect it to improve to around 60 days . . in the 1990s (Figuse 8).

Figure8 COLLECTIONP-SROD |3.

.a a ...... - A ,. ... , . , 1atr 1the 1uni 1prc 1waots95 a 1A IM M6 1 I74 1X7X ofly 191n

139 _,__, , _ ,__.,__._, I *- _IHTZUSItC4S -- ~-MTR9G7UUl

13. Since 1977,the unit price of electricity has .- . . i ,.l.l I . l . ~,-- ,- not covered the UaiitCCstStwith depreciation. Ina aln' an tess ma ma us ii., 1992 ma am number of years, the unit price was not sufficient to cover the unit cost without depreciation. However, in the 1990s, the unit price is expected to improve and leav. an operating margin between 10 and 20 US$/MWh (Figure 10). Profitabyi

12. The poor financial health of the sector is Figu AN reflected in its financial return indicatr -s. Its rate of return on assets has historically been ncgative. It had a low of -11% in 1980 and 1985. Likewise, ... . . *.-...... -. the sector's interest coverage ratio has been poor. _ _._ . . It was less than 1 throughout the 1980s and reached a low of -6 in 1985. Forecasts expect the sector's rate of return to improve and be in the vicinity of 5% in the 1990s. Howe-er, this level is -...... I. ... . still too low to attract new investors to the sector . I . l (Figure 9). as7, L974 OEPl Sl, 1t3; 19i6 139 12 MI9 t, *. CTRST o SO -9- PCOTWI' EsROC

DOM-6 14. The operating revenues of the sector show an almost constant pattern (with a different Figure 12 composition from that of electricity sales because COMPOSITIONOF OPERATINGCOSTS of different tariff levels). In 1988, 27% of operating revenues came from residcitial customers, 14% from commercial customers, 37% . . ... from industrial customers, and 22% from other customers (Figure 11).

Figure11 OOMPO8JTIONOF OPERATINGREVENUES ex ..... ~~~~~~~~~~~~~~~~~~~~~~O ...... '...... 1171 1914 1917 191141 M 1947161 1949 tol II 1991 1118

Off1 I&C Fq wi t949 71 ...... ,, , , ,, , .... ,

4m --.. . ~ ~ ~ ~ ~~~~.....------1911-1999! 013AVIVIS

TheSector and Cour.;y Resources

1971 1914 9977 198 1112 191 .. * j,,2 199 ISn 1971 i 1974 137 IOU L1413 L"t'h .; ii'l It"t 11116. The sector has absorbed a significant

n uSAlC = o089( ccro amount of country and government resources. 11-17": FIOXCT*A Sector investments as a percentage of country [ investments increased from 3.0% in the 1970s to 4.9% in the 1980s (Figure 13).

15. The sector has had operating losses in Figure13 each year since 1977, except for 1986 when it SECTORINVESTMENT/COUNTRYINVESTMENT broke even. The nerating cost composition has followed a similar pattern over the years. In 1988, it showed that operating revenues were barely sufficient to cover cash operating expenses, as the operating loss was almost equal to the depreciation ANNUALAVERAGE ANNUALAVERAGE charge (19% of operating revenues). Because of arn-19 1*149 the prevalence of thermal generation, fuel constitutes the most important shaTeof operating costs (60% of operating revenues). Under the financial rehabilitation plan being implemented, 3. 4.1 the operating income of the sector should experience a continuous recuperation until it reaches 20% in 1994 (Figure 12).

DOM-7 In the 1980s, sector expenditures accounted for Figure 16 4.5% of GDP (Figure 14). In the late 1980s, the DEBTAND DEST SERVICE INDICES share for investments decreased while the share for debt service increased.

Figure 14 M.-- SECTOREXPENDITURE/GDP lix

3.~~~~ ~ ~ WX 1971 IIII 14n 1477 Isslist I 1 tsl "s 1667 Is"§ SAN- .

7.e TA~ 1!0I DATA

S."~1$71-74 ~~~t0 1$7;-10 is e4 IUI3-I9 FundingRequirements and Sources (1 OF CM) 17. From 1990 to 1997, the sector is expected to require US$2.1 billion (US$259 million p.a.) for investment. From 1981 to 1988, the sector Because of poor financial performance, the sector invested only US$756 million (US$95 million p.a.) could not meet its financial requiiements and had (Figure 17). to rely on government contributions. The sector deficit as a percentage of GDP increased from Figure 17 0.1% in the late 1970s to 0.4% in the late 1980s gV17 (Figure 15). Sector debt as a p.2rcentageof total ML , INVESTMENT country debt grew from a low of 4% in 1979-80 to .sO a high of 17% in 1984 and has been decreasing a. -...... - since then, as it reached 5% in 1988. Sector debt *,. ..-...... -. l service as a percentage of total country debt . service has been more erratic and, in general, , l l-... , . higher than the debt curve (Figure 16).

igure 15 ______

i SECTORDEFIC4T/GDP 171 1£74 1977 In 9 1n'n 0 1 LOS'" 1"

* . SY I *lt-, ttt~~~~~~~~~~~~~~~~~~~~~M.[9:Pta )£tl S

S.. 1011-74 19-11-19 1911-84 1W51 DM9

DOM-8 18. The sector's poor funding mix can be summarized by its debt service coverage and self- Figure 19 financing ratios. Since 1977, the debt service COMPOSITION OF USES OF FUNDS coverage ratio has been less than 1, except for 1985-1986. Likewise, the sector's self-financing ratio has been negative, for the most part. six However, projections show that the debt service coverage ratio should be greater than 1 for most of the 1990s and that the self-financing ratio should .. t - be around 15% in most years (Figure 18).

Figure 18 1fl1-71 197I-79 191094 1995-89 ",_9, | FUNDINGSUMMARY lulobs

|rnS (95 MM CAP INCRUSt IN K I ZT919IUII CZ

I 19 9A9"9: FROXC27t

.A v)- 20. The composition of sources of funds shows -lax that internal funding has been extremely poor since -'1W V the late 1970s. As a result, the sector has been -4 forced to rely on borrowings a.ud government il'ril974 , . r i . . i , .l- 396- 9 contributions to meet its funding requirements. 1911t 1174 H?1 169 1943 1998 1989* 1918 1913 19,9 am Co. --4- 11MI-PINPATIO lmicz Government contributions increased from 7% of sources of funds in the late 1970s to 31% in the 119991099:VRo.CTCP_ late 1980s while borrowings plus decreases in working capital went from 89% to 69%. It is expected that this trend will be reversed in the 19. The composition of uses of funds over future on the basis cf the financial rehabilitation time has been fairly constant. Debt service plan being implemented and that internal funding payments have ranged between 30% and 40% of will reach 45% of total funding requirements in uses of funds while investments have constituted the late 1990s. (Figure 20). the rest. For the projection period, it is expected that this trend will continue (Figure 19). Flgure 20 COMPOSITIONOF SOURCESOF FUNDS

I-IA

1971-74 9715-71 1990-94 1941-09 H19-24 193-.99 | F~~~~~~~~~EIKODSl

IXNTERM FUteleG C CU9T CONTRWutO comrtOiTa | O99ORR0nO 140 9FtAI 1o 4 WO0RKCO ceZcsW1

1. z"s199-l:PIO.ECTIO9S

DOM-9 21. If 1988 tariffs are maintained in real terms Capital Structure and the provisions of the rehabihtation plan are not implemented, the sector would basically have 22. The sector's debt/equity ratio has been almost no contribution to Its funding needs from deteriorating and is expected to continue so in the internally generated funds and woula depend future. It went from 10/90 in 1979 to 50/50 in entirely on borrowings and government 1986 before improving to 30/7() in 1988. It is contributions. Under such conditions, it can be expected to increase to 60/40 by 1997 (Figure 22). expected that borrowings would be difficult to obtain and that the sector would continue to be a Figure 22 heavy burden on fiscal resources (Figure 21). The CAPITAL STRUCTURE option to solve the sector crisis is the adequate implementation of the sector rehabilitation plan, 7 - - - 5 with urgency in the areas of tariff and efficiency ~- improvements, particularly reduction of losses. In 7 the medium-term, improvements in the investment . i selection process will be critical, and participation 4i of the private sector will be important to reduce the investment burden on CDE. .

Figure 21 17 t I4 1vn7 ,Ia L13 &i" 19U9 I alS 19" COMPOSIIIONOF SOURCESOF FUNDS -i In: PIR Ir 'OS 1*ll11 MMINSCMT?IHT

HIL1Gl 1988 Lii s89

4-

1188 L991 1982 19,5 1,97 1999

(?IER89L F1188 c stCIcoltfRaUTIOas FUU81MtW 889 - SASuEt8E

DOM-10 ECUADOR

ELECTRIC POWER SECTOR ECUADOR POWER SECTOR DATA SUMMARY SHEET 1988

In Ecuador, clectricity generation and transmission is the responsitility of the national utility Instituto Ecuatoriano de Electrificaci6n (INECEL). INECEL sells electricity to 18 r..gional utilities for distribution. The largest of the regional utilities is thc privately owned EMELEC in Guavaquil.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 10,074 CAPACITY ENERGY AREA '000 SQKtI 284 (MW) (GWh) POPULATIONPER SQKM 35 SUCRES PER US$ 301.61 THERMAL 879 813 GDP, millions of US$ 10,366 HYDRO 913 4,791 GDP PER CAPITA, US$ 1,029 NUCLEAR 0 0 GDP GROWTH RATE, % * 2.5 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 573 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 6.8 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 430 TOTAL 1.792 5.604 1989 ELEC. SERVICE COVERAGE, Z 65 POWER EXPENDITURES/GDP,% * 3.1 RESERVE MARGIN 751 72%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 1,218 GWh % EMPLOYEES 7,000 CUSTOMERSPER EMPLOYEE 174 RESIDENTIAL 1,680 39 TOTAL SALES PER EMPLOYEE, MWh 618 COMMERCIAL 673 16 INDUSTRIAL 1,402 32 BULK SALES #0 0 OTHER 573 13 DOMESTIC SALES 4,328 100

SECTORFINANCES EXPTOTAL3S

AVERAGE RATE (US$IMWh) 24 SYSTEM LOSSES 1,248 ## 22 OPERATING MARGIN (WIO DEPR), % 10 OPERATING MARGIN (WI DEPR), % 60 RATE OF RETVRN, X 0.5 INDEBTNESS, Z 49 DEBT SERVICE COVERAGE, times * 1.4 *- average per year since 1985 SELF-FINANCING RATIO, % * 20 - to other utilities not in the study - as a percentage of available energy ECUADOR

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

The Instituto Ecuatoriano de Electrificacidn, INECEL, was created by decree No. 24 dated May 23, 1961. INECEL is the national entity responsible for planning, coordinatior, operation, and supervision of the Ecuadorian Electric Power Sector.

In the 1960s, 22 regional power companies operated either independently or with minimal interconnections, and generation was inainly thermal. INECEL acted mainly as a Government regulatory agency, with the power to set tariffs. It has become the major supplier of bulk power, and today, it operates as a planning agencyas well as a bulk generation and transmission utility. Additionally, INECEL has majority control in 16 of the 17 regional power companies which are responsible for distribution and owned by municipalities and Individual private shareholders.

The Ley B.sica de Electrificacidn, issued through decree No. 1042 of September 10th, 1973, reformed INECEL's legal framework. It modIfiecits legal nature, declaring INECEL a public..legalentity with its own assets, resources, and economic and administrative autonomy. INECEL is under the jurisdiction of the Ministry of Natural Resources and Energy with central offices In the country's capital.

Royalties from the oil industry, in the form of income tax paid by Texaco Petroleum Company and revenues from direct exports of Petrocomercializaci6nwhich is a subsidiaryof Petroecuador, are a main source of income for the sector.

Electricity tariffs are approved by INECEL's Board. The present tariff regulatory principle was approved in December 1983,and its main objective is to establish a tariff that provides the utlities with an adequate contribution to investment. The tariff regulatory principle is based entirely on accounting costs. However, in the past few years tariffs have been established based upon political considerations, and they are set at a level which is half of what is required for an adequate financial rate of return. Furthermore, existing tariff regulations are not applied.

ECU-2 ECUADOR

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Summary 3. An indication of the positive contribution of the sector to economic and social development is 1. The financial performance of Ecuador's growth in electricity consumption per capita. electric power sector was part of the overall Between 1971 and 1989, consumption per capita unfavorable movement of the economy during the increased more than 3 times; it grew from 140 1980s. The impact of economic measures and the kWh to 428 kWh, or 6.4% p.a.. During the same general situation of the country caused the sector's period, GDP per capita only grew 2.6% in real rate of return to be less than satisfactory. Cost terms. In fact, it declined 1.5% in the 1980s while increases resulting from inflation took a toll on consumption per capita continued to grow (Figure sector finances. Coupled with other factors such as 2). the sector's tariff policy and a high level of external debt and debt service, these cost increases Figure 2 prevented the sector from financing projects to PERCAPITA INDICES meet service demand adequately. PE CI i,

The Sector and the Economy

2. The electric power sector is affected by, and in turn affects, the economy. This association is evidenced by the relationship between electricity demand growth and real GDP growth. In Ecuador, 4-. electricity demand growth has generally followed real GDP growth at a faster rate. The spread between the electricity demand growth rate and the I I I . I real GDP growth rate was 3.7% p.a. in the 1970s 1971 1972 1975 1971 1979 1981 1983 198 1987 1989 and 4.3% p.a. in the 1980s(Figure 1). - *- CPUPPIT LET PaSCAPIta

igure~ 4. Another indication of the positive GROWTHRATES contribution of the sector to development is the

'85- rate of electrification. In Ecuador, electricity s ...... service coverage increased from 22% in 1971 to 65% in 1989; 84.5% of the urban population and 28. -...... --- ;7;;;...------43% of the rural population had access to .185 t ...... electricity Z\ .. ^in 1989. Total customers increased from 282 thousand in 1971 to 1.3 million in 1989. The residential sector accounted for most of the ----- ...... -. *...... growth, as residential customers increased from 229 thousand to 1.1 million during tne same

1971 1973 197l5 IM7 1979 191 1 1 M IM 191 period.

- UiL cm 4 fLECtIlCITt $AL.

ECU-3 The Elctricity Mark: Supp and Demand Figur 4

5. Between 1971 and 1988, total electricity ELECTRICITYSOURCES uses increased more than 5 times, from 1,049GWh to 5,604 GWh. During the same period, electricity sales increased just under 5 times, or 9.9% p.a., 7 ..,M because of more rapidly increasing electricity losses. In the futuire, sales are expected to grow . . 7_- 6.7% p.a. and reach 6,379 GWh in 1994. In 1988, the composition of total electricity uses was 30% ..- *_. residential sales, 12% commercial sales, 25% industrial sales, 10% other sales, and the rest losses and own consumption. The share for .,,. L9?4 1977 1"9 199 19" 1939 1992 1199 19" industrial sales was down substantially from its - .947 T EHL =rUICHASU 1971 level of 34% (Figure 3). 1 sa-0s PRe'Etl,S I

Figure3 ELECTRICITYUSES 7. The electric energy available to the grid was ELECTRICITYUSES generated bv an installed capacity that increased 5.5 times, from 328 MW in 1971 to 1.792 MW in 1988. The sector's installed capacity is forecast to ...... $. . ------increase to 2,155 MW in 1994. The composition changed from 32% hydro and 68% thermal in 1971 to 51% hydro and 49% thermal in 1988 and is expected to become 65% hydro and 35% thermal in 1994 (Figure 5).

19 1 1974 1977 1988 LS9S 119 1891 1992 1995 199 Figure S M 8TtsER4 r COW14CI M LG489uSTtS ES3 19 INSTALLEDCAPACWTY

1999-194: pIoJLeCioS *560

6. To meet electricity demand, the sector now .1 ...... relies mainly on hydro generation and only uses thermal sources in emergencysituations. The shift ...... to hydro generation came from the first national 'WI electrification plan that was developed in the early 1970s. The composition of total sources of electricity changed from 42% hydro and 58% 1971 1,14 1177 1990 1913 1986 1937 1991 1791 1990 thermal in 1971 to 86% hydro and 14% thermal in _MYDRO 3THU,EL -COINCIDE"5 D1X1D 1988 (Figure 4). 19781999:

ECU-4 Operational Performance Figure 7

8. Because installed capacity grew faster than LOSSES/ENERGYAVAILABLE demand, the sector's reserve margin asis

percentage of coincident demand increasec; is- .- peaked at 117% in 1983 but then declined to 72%/AJ in 1988. The high reserve margin in the late 1980s -.-- ...... could havc been the result of unfavorable climatical conditions that affected the availability 11 .. .. - of plants, most of which were hydroelectric .

9. The labor productivity of the sector is x ...... satisfactory. The customers per employee ratio increased from113 in 1971to 174in 1988,and the .1 .77 I..I I. I.. £171 1174 I9"7 I98# lo8s A94 1989 189* 1895 3998 sales per employee ratio increased from 350 MWh . rlom to 618 MWh during the same period. Despite the sector's significant improvement in labor productivity, it is still substantially lower than that 11. Historical data concerning the sector's achieved in developed countries of the world collection practices is not available. However, (Figure 6). forecasts indicate substantial improvement in this area, as the sector's collection period is expected to Figure 6 decrease from around 70 days in 1990 to around 40 EFFICIENCYINDICES days in 1994 (Figure 8).

*@@ - . 7S@._ ~~~~~~~Figure8 16,409igure8 COLLECTIONPERIOD

59~~~~~~~~~~~~~~506

19n1 1974 L977 Alig 0s13 116 19$9 1s12 1"S 192

1918-1119: FROJCIIII

58 7L 174 1u77 HSO 0 r11 n"1 "S am 10. Electricity losses show an increasing trend ,99t1999FROJttIliiS during the historical period and is an area that the sector needs to improve. Taken as a percentage of gross energy available, they increased from less than 10% in 1976 to more than 22% in 1988. Sector authorities expect losses to decrease significantly (to around 10%) in the 1990s which may be too optimistic (Figure 7).

ECU-5 Profitabilt Figure 10

12. The poor financial perforrnance of the UNITPRICES AND COSTS sector can be seen in its financial return indicators. a's .

The rate of return was less than 1% between 1983 ,. . and 1988, and the interest coverage ratio was less 2, . than 1 during the same period. Sector authorities a*.. .. . cxpect only slight improvement in the future, as , ...... the rate of return is not expected to exceed 3% _ .... before 1994 (Figure 9). ;..;.;.;.

Figure 9 171 I"77574 1772U 98 ISU 96 L9919 2 178 -4- COStWI' 019ECC-- COSTWI 0080Ce RETURNSUM.MARY PE.E I'S SAVEs - fE W' I-XIS

4 ax 119-i97fl PROJSCIISIS

a* A t 14. The sector's composition of operating revenues remained fairly constant in the 1980s. In 1988, the composition was 28% resiaential sales, * 12% commercial sales, 26% industrial sales, 20% bulk sales, and the rest other sales (Figure 11).

1971 1974 1977 1916 1903 1994 1989 Isl 1995 1l0 Figure 11

- IKIOT. Coo @ Mfg or rmum COMPOSITION OF OPERATING REVENUES

19"9.199: POOJCCTIOSIS

13. This poor performance is the result of tariff levels that were not sufficient to produce a 'ex . reasonable operating margin. The sector's - _ ------operating margin had a peak of only about 4 US$/MWh in 1987. In 1988, the tariff was 24 ...... US$/MWh; this level is lower than the 1983 level despite the sector's greater funding needs. Sector 197L 1974 17O 1966 1913 LOSS 1989 1992 199* 1 authorities expect the operating margin to increase = RESIENTIAL m cOC^ C 3 ISUSITRI to around 9 US$/MWh in 1994; however, this = Lt SAES = OIrER =1 fXlRTs increase will not produce a substantial change in 99-19, OOACt the sector's financial performance (Figure 10).

ECU-6 15. The sector's operating income as a igure 13 percentage of operating revenues ir,creasedslightly in the late 1980s. It had a low of -18% in 1984 SECTORINVESTMENT/NTRY INVESTMENT and a high of 14% in 1987. In the future, it is expected to increase to about 26% in 1994. The composition of operating costs reveals that the sector's main cost component is depreciation which ANNJAL AVERAGE is not surprising given the sector's reliance on 1989-8, hydro generation. In 1988, the composition of operating costs was 51% depreciation, 17% personnel, 14% materials and services, 4% fuel, ANNUA4LAVERAGE 4% other cxpcnscs, and 10% operating income 1971-79 (Figure 12). NOTA* 1

Figure 12 COMPOSITIONOF OPERATINGCOSTS Sector expenditures as a percentage of GDP . - ...... increased from 2.4% in the early 1980sto 3.1% in the late 1980s (Figure 14).

41%...... ----l------...... Figure14

.. .~..t - " ... _ EXPENDITURE/GDP= § ' 5SECTOR

ex~ . _!... a.. tc ,,|.~,Er, , .,, . 1971 1974 A"? 17U 11S IK6 11969 1997 1993 19" 3.7X

OPE7 E ovate O TPA$ P5C SAXt E1ECPURNCW -3 PMtJL Co FE61C"tta1 OrKISIx,V,qsS I.AX

1991-ICI: fIIICTIOIU.3

TheSector and Counray Resources S"X - O DATAhDT

16. The sector had a substanitial claim on country and government resources in the 9IZs. (Xor UP') Sector investments as a percentage of country . M investments were 9.2% in the 1980s. Most of the investments were for projects to expand hydro generation. However, according to statistics, the percentage fell considerably during the last few years of the decade when the sector found itself in a critical financial situation (Figure 13).

ECU-7 The sector's deficit as a percentage of CYDP Funding Requirements and Sources declined from 1.6% in the early 1980s to 0.6% in the late 1980s (Figure 15). The indiscriminate use 17. The amount of money invested in the sector of credit to meet the obligations of investment fell appreciable in 1987 and 1988 because of projects, without considering the current and d'fficulties in generating funds internally and potential capacity of the sector to pay the resulting reduced government contributions. In 1989, there debt service, caused the sector's debt as a was a considerable increase, primarily from higher percentage of the country's to increase in the disbursements of credit and improved internal 1980s. It went from 9% in 1984 to 16% in 1988. funding. Nonetheless, the expectation is that At the same time, sector debt -ervive as a investments will decline during the first half of the percentage of country debt service increased from 1990s. From 1990 to 1994, the sector is expected 2% in 1983 to 17% in 1988 with a peak of 22% in to require USS654 million, or around US$131 1987 (Figure 16). million p.a., to fund its investment program (Figure 17). Figure 15 SECTORDEFICIT/GDP Figure 17 * ______.INVESTMENT KILLICO1989 115 7U1E

1.39 ------

rL:1 " A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~."......

11(71I"I 1914 1991 1998 1993 11(99: 1t" 199 3 1OL999 L911-14 19(79-79 1936.94 1995-09

(19919(9: P9OJECI(095

Figure 16 DEBTAND DEBTSERVICE INDICES

lsx ---

ax , .. -...... -....-. -..-..

1971e 1975 ±97 1 87? 1979a 191 1933 199 199 1939

0: OiR OtOTEU3 1AC1f'TOAT 031 SCOWUC

ECU-8 18. The debt servicecoverage and self-financing 19. The composition of uses of funds shows an ratios show the critical funding condition of the increasing trend in debt service payments because sector. The debt service coverage ratio was less of the borrowingscontracted to finance the sector's than 1 and the self-financing ratio was negative hydro projects. The share for debt service throughout the 1983-88period. Sector authorities increased from 24% in the early 1980s to 35% in expect both ratios to improve in the 1990s,as in the late 1980s. The share for investments 1994the debt service coverage ratio is projected to increased from 58% in the early 1980s to 65% in be 2, and the self-financingratio is projected to be 'Vie late 1980s with increases in working capita! 40% (Figure 18). completing the compositiorts. In the early 1990s, the composition is projected to be 33% debt Figure 18 service, 64% investments, and 3% increases ii FUNDINGSUMMARY working capital (Figure 19). *- azes Figure19 .m ACOMPOSITIONOF USES OF FUNDS 4.4- -1- -- Si -4~~~~~~~~~~~~~~~~~34

1971 1t14 aml iN 198A IWt k9nASU 0S9 19u

- Sg JIUC CC. -_ - E1J-TINM*IO K4 DATA n CATO DATAla

IStnLW* SUACIClS ISYI-14 LflS-71 IB-64 ILlS-49 19W9S4 1995-9

" wa>F 15 - aFlrat O at *21

i n-lI: PAoxcT:om

ECU-9 20. The composition of sources of funds reveals However,because of the sector's low projected rate that the sector has relied heavily on government of return, these resources may not be forthcoming. contributions. The share for government Thereforc, such a situation makes it necessary to contributions was 64% in the early 1980sand 19% build an adequate framework for meeting the in the late 1980s. In the case of Ecuador, local objectives of the sector and managing it more capital contributions consist, among others, of the efficiently. This means giving priority to projects National Electrification Fund (it is used to allocate on the basis of forecasts of financial availabilities a high percentage of oil royalties to INECEL), and rethinking the sector's tariff policy. national government commitments, and the Rural Electrification Fund, plus contributions from Figure 21 agencies and users. The utilities have become COMPSITIO OF SOURCESOF FUNDS highly dependent on these sources, not only in a. terms of amount but also in terms of regularity. IILLOT L gtlg This has also affected the Fnancial discipline of the companies. However, since these funds together d with internal fundingwere generally insufficientto

cover operating and investment deficits, the sector __ had to seek credit constantly. The share of borrowings in the composition of sources of funds was 22% and 31% in the early and late l9POs, respectively. The financial situation of the electric powersector was also worsened by the frozen Ll 9 1 :~~~~~~~~~~~~~~~~~~~1 3DTERMLt NAVIN QCIUST fO4114004OX exchange rate in effect for state budget CMFlhAICT6 OAP -OT stta X contributions drawn from petroleum earnings and by lower disbursements from external sources. Both factors were the result of the country's critical debt situation (Figure 20). CapitalStructure

Figure 20 22. Despite the sector's heavy reliance on COMPOSITIONOF SOURCESOF FUNDS borrowings, the sector's debt/equity ratio remained around 40/60 throughout the 1980s. The main reason for this was that government contributions t. iiiiiimade* borrowings substantially less than they could have been (Figure 22).

Figure 22 Lm _ s _ X l, _ =i CAPITALSTRUCTURE As _ t A 11I

I198a-74 1iffsa9 1 mW14 t985-8a 1e10-94 rae11s

e mor UtrnaM s CUoTCbeM w go soy,Tconme meeo ivstmuen nee FsC and WaRi CAl Cigaios ECU- 1094-1919:PROAC'IAns

21, If 1988 tariffs are maintained in real terms, internal fundingwill just be sufficient to cover debt 1s71 1o7. ti77 Iu Sa 1109wLl ii service payments leaving no contribution to the - uv 91 sector's investment program (Figure 21). By 1994, £9I7:P0CI9 the financing gap would reach US$154million, and even more extemnalresources would be required to meet investment needs and flnancial obligations.

ECU-10 EL SALVADOR

ELECTRIC POWER SECTOR EL SALVADOR POWER SECTOR DATA SUMMARY SHEET 1988

Almost all electric powcr in El Salvador is gcnerated by the Comisi6n Ejecutiva Ilidrocl6ctrica dcl Rio Lempa (CEL) which was created in 1945 by the govcrnment. CF.I sells the bulk of its clcctricitx' to private distribution companies. The largest distributi' company is Comnpanfade Alumbrado Eloctrico decSan Salvador (CAESS). In this study, operational data for 1989 was estimated by sector authorities.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 5,032 CAPACITY ENERGY AREA '000 SQKM 21 (MW) (GWh) POPULATION PER SQKM 240 COLONIES PER US$ 5.00 THERMAL 168 250 GDP, millions of US$ 6,394 HYDRO 388 1,303 GDP PER CAPITA, US$ 1,271 NUCLEAR 0 0 GDP GROWTH RATE, % * 1.7 GEOTHERMAL 95 430 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 215 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 4.9 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 330 TOTAL 651 1,983 1989 ELEC. SERVICE COVERAGE, % 48 POWER EXPENDITURES/GDP 2 * 1.5 RESERVE MARGIN 272 72%

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 523 GWh 2 EMPLOYEES 2,807 CUSTOMERS PER EMPLOYEE 186 RESIDENTIAL 592 35 TOTAL SALES PER EMPLOYEE, MWh 592 COMMERCIAL 245 15 INDUSTRIAL 527 32

______- ______,BULK SALES # 0 0 OTHER 298 18 DOMESTIC SALES 1_.662 100

SECTOR FINANCES EXPORTS 1662

AVERAGE RATE (US$f1Wh) 43 SYSTEM LOSSES 304 I# 15 OPERATINGMARGIN (WIO DEPR), % 42 OPERATING MARGIN (WI DEPR), % 63 RATE OF RETURN, t 6.0 INDEBTNESS, Z 28 DEBT SERVICE COVERAGE, times * 1.0 * - average per year since 1985 SELF-FINANCING RATIO, % * -1 - to other utilities not in the study - as a percentage of available energy EL SALVADOR

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

The Comisl6n Ejecutiva del Rio Lempa (CEL) is a government-owned autonomous institution responsible for bulk electricity supply throughout El Salvador and for retail distribution in rural areas not served by other distributors, CEL's Board of Directors is composed of representatives from Government ministries, private banks, and industrial and agricultural associations. The Board sets policies and appoints an Executive Director who is responsible for all management functions. CEL supplies electricity to seven private distribution companies. The Minister of Planning is responsible for the approval of the expansion plans of the sector's public utilities. CEL also runs hydrocarbons exploitation according to the hydrocarbons law. The Ministry of Agriculture, CEL, and other public and private companies are responsible for the country's environmental policies.

The legal and institutional framework of the sector does not encourage private participation in the sector. Because there is no integrated planning process for the sector, current planning is carried-out by several ministries, autonomous agencies,and private companies resulting in a decentralized operating system. Pricing, taxes, and subsidies for the sector do not respond to economic criteria and as a consequence, do not promote the efficient use of energy or encourage private investment in the sector. Electricity tariffs are set t low costs, and fuel prices do not reflect worldwidetrends.

ESL-2 EL SALVADOR

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Summary 2. The sector is affected by, and in turn affects, economic conditions. This relationship is 1. A steep decline in major economic illustrated by the close association between the indicators and unyielding stagnation due to behavior of economic growth and electricity structural limitations in the economy and the demand growth. In El Salvador during the last two widening of the political-military conflict in the decades, electricity demand growth has had a country characterized the economic situation of El pattern which follows real GDP growth at a faster Salvador during the 1980s. The electric power rate. It shows a gradual decline in the early 1970s, sector could not keep itself apart from this state of a sharp increase in the late 1970s, a sharp decline affairs and in fact, was heavily affected by the in the early 1980s, and a recuperation starting prevailing situation. In addition, the sector's midway through the 1980s. The spread between accumulated debt and the present shortage of the electricity demand and GDP growth rates was financial resources poses a problem for 5.7% p.a. in the 1970s and 3.2% p.a. in the 1980s maintaining electricity facilities and making (Figure 1). investments to expand the system and improve its service, even though a key aspect of the country's 3. The contribution of the sector to economic energy policy is to increase the production and and social development can be seen in the growth supply of electric power. of electricity consumption per capita, even under unfavorable country economic conditions. the Sector and the Economy Consumption per capita in El Salvador is still low compared with other countries in the region. Figure 1 However, barring the 1979-82 period, it showed steady growth during the last two decades, as it QROWTHRATES increased from 163 kWh in 1971 to 330 kWh in 1988, or 4.2% p.a. on average, while GDP per . ------capita declined. It went from US$1,402 in 1971 to JGZ \/US$1,271 in 1988, or grew -0.6% p.a. (Figure 2).

sxt ---- t---. rFlgure2

PERCAPITA INDICES

97? it" 1971 1977 199 1991 INS 191 3 7 Iit141 Is

1971 1913 L9 n71979 7 I'l I 190X3 1i7 Li"

- C- C7lTC -Ut i..t tTII9171T M

ESL-3 4. Another indication of the positive Figure 3 contribution of the sector to development is the degree of electrification. In El Salvador, electricity ELECTRICITYUSES service coverage increased from 23% in 1971 to , 48% in 1989. While service coverage in urban areas is better, only about 17% of the rural

population has access to electricity. The total . -. - number of customers increased almost 3 times between 1971 and 1988, from 178 thousand to 523

thousand. The residential sector accounted for _ - most of the growth, as residential customers increased from 149 thousand to 462 thousand k'71 1"'4 iM HIW S 1ts 1iln113 1112 1199 19u during the period. M pEarot, E3 cCtolKl GLRK STRa. EXO1RTS C: 0., cO's Co *lSStS

The Electrcity Market: Demand and Supply ,,,,,_,,, ______

5. In 1988, total electricity uses amounted to 2,018 GWh, which is a little more than 3 times the 6. To meet electricity demand, the sector relies 1971 level (656 GWh). They are expected to considerably on hydroelectric power. In the 1980s, increase to 4,517 GWh by 1999, i.e. about 7 times the share for thermal generation declined, as the the level of 1971 and about 2.2 times the level of sector emphasized hydro and geothermal 1988. Between 1971 and 1988, electricity sales generation because of rising oil prices in the 1970s. increased about 2.8 times, from 593 GWh to 1,662 The sector has relied on geothermal sources to GWh or 6.3% p.a., because of more rapidly meet an increasing share of total energy increasing electricity losses. Electricity sales are requirements since the mid-1970s. In 1988, the expected to grow 7.2% p.a. in the 1990s and reach composition of total electricity sources was 65% 3,863 GWh in 1999. In 1988, the composition of hydro, 12% thermal, 21% geothermal, and 2% total electricity uses was 29% residential sales, imports. In 1999, the composition is forecast to be 12% commercial sales, 26% industrial sales, 15% 51% hydro, 8% thermal, and 41% geothermal other sales, and the rest losses and own (Figure 4). consumption. The share for industrial sales was down from 37% in 1971, and it had a peak of 43% Figure 4 in 1977 and 1978. The share for residential sales ELECTRICITYSOURCES ia forerast to increase to 36% by 1999 (Figure 3).

I

tH?1 1974 1177 LII 19t8 1106 it" 1992 1195 19"

m i{mi2 E TIII COm GEOTk±M NXLEA2 c OThU o PU¢IVUS GM mntis

ES9-949: PREENC

ES'-4 7. The electric energy available to the grid was second half. In 1988, the customers per employee generated by an installed capacity of 166 MW in ratio was 186, and the sales per employee ratio was 1971 that increased about 4 times, or 8.4% p.a., to 592 MWh. While both indicators are both the 651 MW in 1988. It is forecast to increase 4.2% respective averages for the region, their levels are p.a. in the 1990s and reach 983 MW in 1999. In below those found in developed countries of the 1988, the composition of installed capacity was world (Figure 6). 60% hydro, 25% thermal, and 15% geothermal. All components are expected to increase in the Figure6 1990s: hydro by 2.2% p.a. (to 470 MW in 1999), EFFICIENCYINDICES thermal by 5.6% p.a. (to 258 MW in 1999), and geothermal by 10.3% p.a. (to 255 MW in 1999) as sum. (Figure 5).

Figure5 .11 IN8TALLEDCAFCITY ,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a,4

19I1 1974 1177 19N ISS 1156 1991 1912 ISS5 19W

4- toJ1?Deoi$911 -EZCC 1&15SAD109MEt

1981991: PROJICTMII

1971 1974 19? LtS 152 1ISS 1ti9 192 1£97 10. The deteriorating trend in electricity losses

- IlllO 3 tlRlL O Ot1rrXl warrants attention. Taken as a percentage of gross mm91N1 = OTuls - COf"OCfX 00,8 energy available, they increased from 6% in 1971

19-1999: PROJEC?IOI to 15% in 1988, a rise of around 12% p.a.. In the future, after peaking at 18% in 1991, they are expected to decrease until they reach 11% in 1999 OperationalPerformance (Figure 7).

8. Since the end of 1970s, the growth of the Figure7 sector's installed capacity has exceeded that of LOSSES/ENERGYAVAILABLE demand, fundamentally because of the increase in hydro installed capacity, and resulted in an increasing reserve margin. The sector's reserve margin as a percentage of peak coincident demand 1-2 ----.------increased from 32% in 1973 to 72% in 1988 with a peak of 108% in 1984. In the 1990s, it is expected to decline, to 17% in 1999, primarily as 1 x.. - a result of the expected increase in demand. sx.V ~~~~~~~~~~~~~~~~~~~~------9. The labor productivity of the sector is not bad compared with other sectors in the region.

Both the customers per employee and sales per 11 1974 1977 INS INS 1936 L919 19*9 Is"1 2" employee ratios have followed cyclical patterns ______during the last two decades, i.e. falling during the last half of each decade and rising during the

ESL-5 11. The sector's collectior practices Figure9 deteriorated during the last two decades. The RETURNSUMMARY length of its collection period in 1989, which was 283 days, was 4.6 and 2.5 times greater than its ,,) 1971 and 1980 levels, respectively. Forecasts expect the collection period to fall graduallyto 143 days by 1995. However, this level is more than twice what could be considered an acceptable level IX (Figure 8).

Fgiure 8 COLLECTIONPERiOD ,X s.in...... i is&, 19 74 19?? 19_4 113 194 IR711T 1OIS 191E1

AI9-19"9:PRO*EtXC1C

13. The ratio between the unit price and unit cost of electricity was positive during the last two de-cadesbecause the unit price, even though it fell La ...... steadily beginning in the late 1970s, was sufficient to cover the unit cost. The unit price fluctuated between 69 and 100 US$/MWh in the 1970s. In . l . . .. I .fl- .. I, .,..Il . l the 1980s, i fell, because (f inflation, to 43 1911. 1914 1797 1044 AIAS LIW6O " LISA1991 19 1979th 1_9_-1979:P_O__t__ US$/MWh in 1988. Except )r the mid-1970s, the unit cost was around 18 US$/MWh. Since the unit price declined while the unit cost remained fairly Proftabity constant, the operating margin of the sector decreased from 42 US$/MWh in 1977 to 18 12. The decline in the sector's net operating US$/MWh in 1988. Since this trend is expected to income that started in the mid-1980scoupled with continue into the 1990s, the operating margin is the increase in net plant in service brought about expected to become negative starting in 1992 a decline in its financial return. The rate of return (Figure 10). on assets declined from 17% in 1980 to 5% in 1989, and the projections for the sector show a Figure lO continuation of this trend. The interest coverage UNITPRICES AND COSTS ratio decreased from 4.1 in 1980 to 1.0 in 1989 and is projected to decline even more n the 1990s. .. The decline in this ratio was caused Dy lower net ...... operating income and higher interest payments ...... (Figure 9).

1. .- -......

1971 1974 1171 14 1993 1930 1 1"99 ss 11,14

--- COSTW10 0E1REC 4- COSTU1 OFREC *9 - 9 E U45I 99919 .- PRICEWI TfXES

1990-19": PRtJECTIU

ESL-6 14. Historically, the composition of the sector's Figure 12 operating revenues shows a uniform pattern. In 1989, the composition was 35% residential, 15% COMPOSiTIONOF OPRATINGCOS commercial, 32% industrial, 16% bulk sales, and 2% other. In the future, the residential share is ...... expected to increase to 39% in 1995 while the industrial share falls to 28% (Figure 11). __

Figure11 COMPOSITIONOF OPERATINGREVENUES

1171 M4 _1 _l 1? 11EW 19I 9 s 1"S 913S 9" ...... O~~~~~~~~~~~PENK04K PR tEPRECL."ION CM !AX

6f :s ...... -sI|...... ------BrPlEIAItfg ...... I...... 9l~I99 PEJCTI. ]...... l2l...... r.....9nPo ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

------vThe Sector and Country Resources

1971 14 1177 19s 13 L986 L9n M 1S IM 16. The electric power sector absorbed a - "ATEmIAl m IXERCWL O ITtESTIW. substantial amount of fiscal and country resources MWAC ME$E( OTIER OEltlORls| during the last two decades. Sector investments as l199§-,"9 rR0E¢.,0| l a percentage of country investments were 9.3% and 10.2% in the 1970s and 1980s, respectively. In 1981, the share was 23% (Figure 13). 15. The operating income share of operating revenues has been positive since 1971. It Figure 13 decreased in the mid-1970s because of the oil SECTORINVESTMENT/COUNTRYINVESTMENT crises and the sector's significant reliance on thermal generation. The.t, it recuperated and reached a peak of 76% in 1980. However, it has shown a decreasing trend throughout the 1980s and is projected to be negative starting in 1992. ANNUALAVERAGE The composition of operating costs shows the 1t71 ANNUALAVERAGE sector's dependence on thermal generation in the 1970s, as the share for fuel increased from 7% in 1971 to 59% in 1975. Since the use of thermal generation declined in the 1980s,the share for fuel _ .t _ .21 was not as significant as the share for depreciation. The share for depreciation increased from 17% in 1971 to 22% in 1989 with a peak of 36% in 1985. In 1989, the composition of operating costs was 22% depreciation, 12% fuel, 28% other expenses which includes personnel and materials and services, and 38% operating income (Figure 12).

ESL-7 Sector expenditures as a percentage of GDP Figure IS increased from close to 2% in the early 1970s to SECTORDEFICIT/GDP 2.8% in the late 1970s and early 1980s because of the sector's large investment program. When investments fell in the late 1980s, the share declined to 1.5% even though outlays for interest rose in ahsolute terms (Figure 14). The sector's deficit as a percentage of GDP was 0.1% in the late 1970s ard 0.2% in the late 1980s. The only significant disbursements to the sector from the government were made in 1985 (Figure 15). The external debt of the sector increased to US$147 million in 1989. Between 1975 and 1981, the ' .. .. -l4 sector's share of country debt was between 20% and 35%. Since then, it has been declining, and in 1989, it was 9%. Since sector debt increased sharply in the mid-1970s, the sector's share of country debt service increased sharply in 1976 and Figure 16 1977 and has remained high since then. In 1989, DESTAND DEBTSERVICE INDICES the share was 28% (Figure 16). ,

Figure 14 ------SECTOR EXPENDITURE/GOP ------... ---

8.*

111 1471 1913 I"? 1919 11491 1993 1 94 1913 1969 &Ax

I: PhIR OuSITIlOt99,11 MN ~ ~ a 1971.14 LM197 9 1966-44 91

McasHoew""ColCbEL

ESL-8 Funding Requirements and Sources negative during almost all of the 1990-95 peri.-d (Figure 18). 17. The sector's investment program required large outlays during the late 1970s and the early Figure 18 1980s (US$150 million p.a. during the 1974-83 period). This ambitious program was the result of FUNDINGSUMMARY major works started to develop more hydroelectric I power. Between 1974and 1983. the sector's hydro . installed capacity increased 3.2 times. However, since the mid-1980s, investments have decreased *1 substantially. During the 1984-89 period, total 1 sector investments only amounted to US$240 l lA million, or US$40 million p.a.. During the 1990-95 period, the sector is expected to invest US$289 million, or US$48 million p.a. (Figure 17). 1491 L974 19?7? i 19891 1WMS 1199 1199* 1991 11,91

Figure 17 -DM imiec Cog. + SWU-FimPTIO

INVESTMENT 1990-1999:PFlOJECTTIS

9IIt^O 2989 919 19. The composition of uses of funds also reveals the sector's debt problem. The ->, _ composition...... shows a declining share for investments and an increasing share for debt t | -,,tD service payments, as the share for investments declined from 83% in the early 1970s to 38% in the late 1980s while the share for debt service payments increased from 17% to 62%. However, 1911 1974 1 1 I7 9"98 1984 1M9 19M 199M 19" this trend is expected to change in the early 1990s - amm.i when the share for investments increases to 49% 1M-l"9: PROJECT9 and the share for debt service payments decreases to 51% (Figure 19).

18. The sizable sector investments from 1974on Figure19 were made possible largely by engaging in COMPOSTON OFUSES OF FUNDS substantial borrowings, approximately US$1.1 billion between 1974and 1982. There was a strong correlation between the investment growth rate and the rate of loans received. In that way, the sector built a large sum of bank obligations which, in turn, required an outlay of resources for . principal and interest payments. The deficit of internal funding resources to meet debt obligations and investments rose as a result of lower net earnings and the considerable sum of resources f 19,1-74 1-74 1MO4 1991-69 141 194 - that had to be used to pay debt service obligations. Floni Consequently, the sector's debt service coverage men caniieUsz DU11Tit9 I and self-financing ratios were poor during many m.-,".______years of the last two decades, and in the future, they are expected to be even worse. The debt service coverage ratio is forecast to be less than 1, and the self-financing ratio is forecast to be

ESL-9 20. Likewise,the composition of sources funds igure 21 shows how much the sector has relied on COMPOSJTIONOFSOURCES OF FUNDS borrowings to meet funding requirements. In the CO UiOF 1970s,external credit, primarily from international IaLez .*, NS lending agencies, accounted for 62% of total funding sources. The share fell to 52% and 21% t in the early and late 1980s, respectively, mainly because of declining disbursements from 1983 on ISO due to the regional debt crisis and tighter credit standards by lenders. During the period, ,he share for internal funding increased from 25% in the early 1970s to 62% in the late 1980s and helped prevent disastrous financial results, as external 1991 LISS LISS 1iS7 199 resources were in very short supply. However, the C MT1N9LFV9K.6 Ct cUSrvOaTiM share for internal funding is expected to fall I= FTWhM AP OEBTWM17tt substantially in the early 1990s. Given the sector's poor projected rate of return, it will not be able to secure external resources to meet its funding needs CapilalStructure (Figure 20). 22. Because of the amount of debt used by the Figure 20 sector to finance investments in the late 1970s and COMPOSITIONOF SOURCES OF FUNDS early 1980s, the sector's debt/equity ratio has been dominated by debt since the mid-1970s. It improved in the late 1980sbecause the government made significant contributions to the sector in 1985. However,it is expected to deteriorate again in the 1990s due an increase in borrowings (Figure 4ft ~~~~~~~~~~~~~22).

Figure 22

1911-74 19s79 HSI-4 1999-391994 1s9.n CAPoTALSTRUCTURE

m on"1111160 CM Mr?C6111 COOcy MN "IUIUIAFEW,= 6?W101 woOCAP KUIMSS

21. However, if 1988 tariffs remain constant in OK real terms, the outlook for the sector is much better. Under this scenario, the share of internal funding in the composition of sources of funds x,, ,-,,, .,, l. would be 72% for the early 1990s,and the sector's 1971 1974 6977 111 1M 1910Lg 199 2 1391±19 rate of return would be 4.2% in 1995. Even |- COY E=l though the rate of return would still be on the low side, the sector would have a better chapce of securing external resources to meet its funding requirements (Figure 21).

ESL-10 I

GRENADA

ELECTRIC POWER SECTOR GRENADA POWER SECTOR DATA SUMMARY SHEET 1988

On the island of Grenada, all clectric powcr is supplied by a single diesel plant, under the responsibility of Grenada Electricity Services LTD., locatcd in thc country's Capital, St. Georgc's. The island's power svstcm is designed to British standards.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 94 CAPACITY ENERGY AREA '000 SQKM 0.3 (MW) (GWh) POPULATIONPER SQKM 313 EAST CARIBBEAN $ PER US$ 2.70 THERMAL 13 46 GDP, millions of US$ 178 HYDRO 0 0 GDP PER CAPITA, US$ 1,888 NUCLEAR 0 0 GDP GROWTH RATE, % * 6.1 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 ELEC. SALES GROWTH RATE, % * 17.6 PURCHASES 0 ELEC. CONSUP. PER CAPITA, kWh 413 TOTAL 13 46 1989 ELEC. SERVICE COVERAGE, S NA POWEREXPENDITURESIGDP, % * NA RESERVE MARGIN 6 69%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 15 GWh I EMPLOYEES 226 CUSTOMERSPER EMPLOYEE 68 RESIDENTIAL 17 44 TOTAL SALES PER EMPLOYEE, Mh 173 COMMERCIAL 18 46 INDUSTRIAL 4 10 BULK SALES #0 0 OTHER 0 0 DOMESTIC SALES 39 100

EXPORTS 0 SECTORFINANCES TOTAL 39

AVERAGE RATE (US$/MWh) NA SYSTEM LOSSES 5 ## 11 OPERATING MARGIN (W/O DEPR), S NA OPERATINGMARGIN (WI DEPR), I NA RATE OF RETURN, Z NA INDEBTNESS, S NA DEBT SERVICE COVERAGE, times * Ni. *- average per year since 1985 SELF-FINANCING RATIO, I * NA - to other utilities not in the study - as a percentage of available energy GRENADA

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

The Grenada Electricity Services Limited (GRENLEC) is the sole provider of electricity service on the Islapd of Grenada. Electricity is generated by oil fired high speed generating diesel units.

Annual electricity demand has been increasingsignificantly. This growth has been stimulated, in part, by an internally funded rural electrification program on the island. In addition, a number of hotel projects are under consideration.

GRENLEC is fully owned by the Government of Grenada. However, the Government is currently entertaining discussions with interested parties for the privatization of the company.

GRD-2 GUATEMALA

ELECTRIC POWER SECTOR GUATEMALA POWER SECTOR DATA SUMMARYSHEET 1989

Instituto Nacional de Electrificaci6n(INDE) and Empresa de Energta de Guatemala (EEG) are the main entities responsible for electric power in Guatemala. INDE is responsible for power generation and transmission and rural electrification. EEG is responsible for the distribution of electricity in Guatemala City. Eleven small, municipal utilities are responsible for the distribution of electricity in their respective regions. The sample for this study consists of INDE and EEG.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 8,946 CAPACITY ENERGY AREA '000 SQKkI 109 (MW) (GWh) POPULATION PER SQKI 82 QUETZALES PER US$ 2.82 THERMAL 303 130 GDP, mlllIons of US$ 8,543 HYDRO 438 2,089 GDP PER CAPITA, US$ 955 NUCLEAR 0 0 GDP GROWTH RATE, % * 2.7 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 168 IMPORTS 0 ELEC. SALES GROWTHRATE, Z * 10.3 PURCHASES 0 ELEC. CONSUMP.PER CAPITA, kWh 205 TOTAL 741 2.219 1989 ELEC. SERVICE COVERAGE, 2 31 POWEREXPENDITURESIGDP, % * 1.4 RESERVE MARGIN 296 67%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 604 GWh EMPLOYEES 8,672 CUSTOMERSPER EMPLOYEE 70 RESIDENTIAL 541 29 TO-AL SALES PER EMPLOYEE, MWh 212 COMMERCIAl 409 22 INDUSTRIAL 621 34 ______| XBULK SALES # 87 5 OTHER 177 10 DOMESTIC SALES 1.835 100

SECTOR FINANCES ETAORTS 1

AVERAGERATE (US$/M) 71 SYSTEM LOSSES 375 #1 17 OPERATING MARGIN (WIO DEPR), x 53 OPERATING MARGIN (WI DEPR), Z 64 RATE OF RETURN, Z 14.6 a INDEBTNESS, % 54 DEBT SERVICE COVERAGE, times * 1.4 b * - average per year since 1985 SELF-FINANCING RATIO, S * 34 b - to other utilities not in the study - as a percentage of available energy a - on non-revalued assets b - debt service calculated on a cash basis GUATEMALA

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

Public Electricity Service in Guatemala is provided by Instituto Nacional de Electrificacion (INDE), Empresa Electrica de Guatemala S.A. (EEG), and ten small municipal utilities. INDE was created in 1959 as a government-owned institution responsible for power generation and transmission, rural electrification, the supply of bulk electricity, and retail distributlon outside the area of the capital city. EEG, a former subsidiary of Boise Cascade (USA), became a mixed public and private enterprise in 1977, with 92% of its shares owned by the Government and the remainder by private shareholders.

Until the early 1980s,lack of coordination and institutional weakness of INDE were major problems in the energy sector. EEG operated thermal generation and electricity distribution in Guatemala city and environs, thus originating a significant part of the sector's financial resources. For many years, INDE was unable to obtain an adequate share of the sector's cash generation for expansion of generation capacity and provision of service to remote, low income rural areas.

Over the past years, the Government has taken a number of significant steps to improve coordination and develop INDE's institutional capacity. First, the Ministry of Energy and Mines (MEM) was created in 1983 to formulate the country's energy policies, coordinate planning activities, and take executive responsibilities for the development of hydrocarbons. Second, the Government transferred to INDE its shares in EEG, completed a number of studies to strengthen INDE and EEG, and created a joint INDE-EEG committee to coordinate system operations. Lastly, in 1985 the Government established a commission, presided by the Minister of Energy and Mines and comprising the Minister of Economy, the Secretary General of Planning, and the President of INDE, to formulate policies for the power sector, including development strategies, investment plans, and tariffs. The responsibility for overall supervision of INDE was shifted from the Ministry of Communications, Transport, and Public Works to MEM.

The tariff structures and levels of INDE and EEG are not uniform. INDE's rate for bulk sales to EEG is established under a private agreement.

GUA-2 GUATEMAIA

ELECTRIC POWER SECTOR

EVOLUTION, SITUATION. AND PROSPECT'S

Summuary The Sector and The Economy

1. Bccausc of tlhc negative impact of the 2. The growth of electricity sales in energy crises of iic 1970s on the country economy, Guatemala has, in general, followed closely GDP the electric power sector implemented an growth, albeit, at a faster rate. However, aggressive hydro investment plan that increased the exceptionally, this relationship was reversed during hydro share of total installed capacity from 30% in the first half of the 1980s when the Guatemalan 1977 to 60% in 1985. During the early 1980s, such economy declined and significant constraints on investment program required significant the supply of electricity resulting from the poor Government contributions, in spite of a soiund condition of thermal plants and delays with the electricity pricing policy. During the late 1980s, Chixoy plant did not allow the sector to meet its the financial situation of the sector deteriorated, as demand requirements. Additionally, demand from tariff levels eroded in real terms, and the debt the industrial sector declined because of the service corresponding to the borrowings for the reduction in economic activity and a fuel charge major investments of the past became a heavy that made electricity expensive. Because of the burden on sector funding. The situation price of electricity, many industries opted for self- deteriorated to the point where internal funding generation. In 1985, electricity demand started a was not sufficient to cover debt service obligations rapid recovery following a slower macroeconomic resulting in accumulated arrears. Even when recuperation mainly because Chixoy was now able considering only amounts paid --not accrued-- debt to meet demand previously met by self-generation. service coverage has shown a negative trend that The spread between the electricity demand growth will continue in the future if the present financial rate and the real GDP growth rate was 3.2% p.a. conditions of the sector remain unchanged. Under in the 1970s and 3.8% p.a. in the 1980s (Figure 1). these circumstances, it will be difficult for the sector to finance future investments with resources Figur 1 external to the sector, as it would not be likely to GROWTHRATES attract either borrowings or equity capital, and the sector would return to having a large claim on .'- fiscal resources if the economy is not to be affected .x...... _. by lower quality of service. The critical financial situation is further compounded by a decrease in x...... -. efficiency, especially represented by higher , x..=.._.. electricity losses and poor maintenance. VA

J97L 1973 L975 1977 1I9 HOt 1912 1895 '997 19"

-ITL OD -+- =CYIUCITV SOLn

GUA-3 3. An indication of the positive contribution 7he Electricity Market: Supply and Demand of the sector to economic and social development is growth in electricity consumption per capita. 5. Total electricity uses in 1989 were about During the last two decades, with the exception of 1.8 times their 1977 level, as they grew from 1,214 the early 1980s when supply was not able to meet GWh to 2,220 GWh, or 5.2% p.a., during that demand, electricity consumption per capita period. Sales increased 4.9% p.a., from 1,036 increased despite decreases in GDP per capita. GWh in 1977 to 1,835 GWh in 1989. Total Between 1971 and 1989, consumption per capita consumption of electricity increased hetween 1985 grew 3.7% p.a., from 107 kWh to 205 kWh, while and 1989 after a period of stagnation between 1980 GDP per capita grew only 0.2% p.a., from US$917 and 1985. While residential and commercial uses to US$955 (Figure 2). increased all the time, industrial demnand fell sharply in the early 1980s; between 1979 and 1983, Figure 2 industrial demand declined 11.1% p.a.. If future PERCAPITA INDICES sales increase at an annual rate of 7.5%, as projected by sector authorities, total consumption 148 , kw will reach 2,827 GWh in 1995. In 1989, the LIN composition of total uses of electricity was 24% n1|1 ___-residential sales, 18% commercial sales, 28% industrial sales, 4% bulk sales, 8% other sales, and the rest losses and own consumption (Figure 3).

.a- Figure 3

'U ELECTRICITYUSES

a* , I . I . I , 1 * - t- -- _9 -XT_ I. . 3W 1971 1973 1975 1977 1979 1991 1983 1995 1997 19B94

cm P CPItTA - *LU P CAPIC _._......

- ...... - - - is"-- 4. The positive contribution of the sector to the economy can also be seen in the growth of service coverage which increased from around 13% 1 l , 8 , , 1T ' 91 ' ' in 1971 to 31% in 1989; however, this indicator 1971 1974 ITY 1180 1403 19" 1929 1992 1993 1999 E- aE ak EOCf co?QIuI8CIM llOUSfmL SIA $AU also reveals the great challenge before the sector, O_TKU tXPOTS = owT cSw LMLOSES as it is one of the lowest in the region. Total customers more than doubled between 1977 and I IW9.199. PROJICTIOS 1989, from 257 thousand to 604 thousand. Most of the growth occurred in the residential sector, as residential customers increased from 212 thousand to 497 thousand.

GUA-4 6. To meet such electricity demand, the Operational Performance sector underwent a substantial transformation, as it moved fr3m a predominately thermal system to 8. This shift in installed capacity resulted in a predominately hydro system with the a substantial excess of installed capacity, as the commissioningof the Aguacapa and Chixoy hydro sector's reserve margin peaked at 166% in 1984. plants in the early 1980s. In 1977, the composition However, the availability of plants has been low of total sources of electricity was 19% hydro and because of inadequate maintenance. 81% thermal while in 1989 it was 94% hydro and 6% thermal (Figure 4). 9. Labor productivity, as measured by the customers per employee and sales per employee Figure 4 indicators, shows a positive trend. Customers per E-LECTRICITYSOURCES employee increased from 45 in 1980 to 70 in 1989, and electricity sales per employee increased from -. ll around 165 MWh to 212 MWh. However, these X . figures are significantly lower than the respective averages for the region, mainly because of the low ...... level of service coverage, and indicate that the .k. , sectors has much to do in the years ahead to bring labor productivity to a reasonable level (Figure 6)...... Figure 6

1971 1174 1977 1199 1913 1934 1919 112 1993 1990 EFFICIENCY INDICES

ev" ?AMMivoL a,S?ceM kim

1990-1999: PROJiC714Se is

60~~~~~~~~~~~~~~~~~~.4

7. As a result of the previously mentioned U hydro projects, the country more than doubled its ., installed capacity, from 318 MW in 1977 to 742 .. MW in 1988. During the period, the composition .. of installed capacitychanged from 30% hydro and 9* .*, 1977 1969 1983 191I. 1992 191 I90 70% thermal to 60% hydro and 40% thermal CL1C - $4118/0MfER (Figure 5).

Figure 5 INSTALLEDCAPACITY

S

171 1974 19717 1903 1931 1906 1989 1992 199 199L

- 3900 ?fulUtCHIICISI -ow

1994-1999: PIJAt9IOHS

GUA-5 10. Another area in need of attention is losses. Profaabiiy Tak-n as a percentage of gross energy available, electricity losses increased from 11% in 1977 to 12. The rate of return on assets has been 17%; in 1989 because of low investment in positive in every year since 1978. For the most distribution, lack of control on electricity theft, part, it has been in the vicinity of 6%. Likewise, deficient commercial practices, and inefficient the interest coverage ratio showsa positive pattern equipment. Service to the East and West systems with a level several times greater than 1. In is supplied using a 69 kV line which is actuality, the level was probably lower, as the data inappropriate for this purpose (Figure 7). only includes interest paid. The interest coverage ratio is forecast to decline to 0.7 by 1995 while the Figure 7 rate of return remains in the 10% to 15% range LOSSES/ENERGYAVAILABLE for the most part (Figure 9). The apparent contradiction between these two indicators is due Sal to the non-revaluation of assets in the calculation of the rate of return which would be much lower

-.. -.-.-. if properly revalued.

*, ...... -...-... Figure 9 RETURN SUMMARY

Is~~~~~~~~~~~~~~~~~~~~X .K.. - l, .. ., , ., S N XlX LIX

1971 1974 1977 18I9 119S 1994 1989 197" 199! 11 lL

4

11. The collection practices of the sector have , been erratic over the years. After falling to 82 .; , , , ., ., .M L , , 1S" days in 1980,the collection period increased to 140 -NT,.,. cou PAT , Ma days in the mid-1980sbefore falling to 73 days in 1988 (Figure 8). 19941999.

Figure 8 COLLECTIONPEFROD

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

19 ...... -'......

U_-.- .. - .. _... _...... _ _.___ .._ .. _ _ _ __- __ _\ ...... _

1971 1174 19? 0196 I9SO 19816 1999 1993 1993 919* 10141-19199:P9OAC1IC9I

GUA-6 13. The pricing policy of the sector has been Figure 11 such that for most years, real unit prices have COMPOSITIONOF OPERATINGREVENUS exceeded real unit costs, resulting in positive operating margins. The shift to hydropower .. reduced unit costs and mitigated the effect of ... inflation on unit prices. However, if the unit price . .. remains constant after 1990, it will result in a decreasing operating margin, from 37 US$/MWh in .et _._. j_...... _ _ _,._ _,-_, 1989 to 18 US$IMWh in 1995, as unit costs are ...... expected to increase steadily (Figure 10).

1471 1174 1177 118 1183 1911 1888 1842 153 1918 Figure 10 § atEaSi(tl C9CIAIL O hIlUSrA9L

UNIT PRICES AND COSTS sut SALES ElHEt (T 15EPORS

l99L1989...... 119911 PltJl;tWlll

1I __.______.______,______in -- '------ZS- ...... -- --- _____... ,

15. The ol erational performance of the sector, 4f \t as measured ty the operating income share of

\.\...... _operating- .-.venues, has been satisfactory and

, . . ___. . improving throughout the period analyzed. Some deterioration occurred between 1977 and 1981, as 0 . . l ., . , . l . . l ., . . l . l , substantial increases in fuel costs were not fully 1971 1974 197? 105 1183 1964 1169 IU 1993 1"" offset by tariff increases. The situation improved -I- 004? Wo NW -i- 001? WU 8Su -4 RICesWOA Te starting in 1982 when fuel oil prices decreased and generation started to shift from thermal to hydro. However, the share of fuel costs in total costs is expected to increase again beginning in 1991 14. The composition of operating revenues by because of an increasing need for thermal type of customer has maintained a relatively stable generation. This will result in a decreasing share pattern except for a period of decreasing share for for operating income (Figure 12). the industrial sector in the early 1980s when many industries self-generated because the public sen ice Figure 12 was not able to meet their needs. In 1988, the COMPOSITIONOF OPERATING COSTS composition was 25% residential, 26% commercial, 39% industrial, and 10% other which includes bulk sales(Figure 11). W ------

1971 1974 SI77 194w 19143 1986 1989 1998 1913 ills

m OPEUtIc B E16Et*Two 5011. Q EXtPU9tt =MUR co 't"°"' gm °Te'w{'

1210d19"9 PROJItCiII

GUA-7 The Sector and Country Resources The sector's deficit as a percentage of GDP was 1.2% in the late 1970s and 1.4% in the early 1980s 16. Because of projects such as Aguacapa and (Figure 15). To finance the large investment Chixoy, the sector consumed a substantial amount program, the scctor borrowed heavily and of country and govcrnment resources. Scctor increasingly until 1982 when sector debt as a investments as a percentage of country investments percentage of country debt peaked at 27%. Sector were 10% and 11.3% in the 1970s and 1980s, debt service as a percentage of country debt service respectively (Figure 13). As a result of the peaked the following year at 19% (Figure 16). tremendous investment, sector expenditures as a percentage of GDP werc 3.7% in the late 1970s Figure 15 and early 1980s before falling to 1.4% ii: the late SECTORDEFICIT/GDP 1980s (Figure 14). 1,61

Figure 13 l.1 SECTORINVESTMENT/COUNTRYINVESTMENT 1x Lax

SAX -~~ ~

ANNUALAVERAGE ANNUALAVERAGE , o -

ax

1911-74 1073-79 1999-94 17903-8 P181OD1

Figure 16 DEBT AND DEBT SERVICE INDICES

Figure 14 SECTOREXPENDITURE/MDP 4.b x

l b11- ......

lb ~~~~~~~~~~8971 ~~~~~1975 ~~~~~1977 ~~~~~19711971 1981 LISS 1941 too? 1og9 I tA L l;~~~~ I ' ; IK 11 Ir'

|O: POWEROiOFIITOIAL OE9I C 0x 18 : 'OWE, COSTSIAUICC'TIIAL O-11 SlRUICk

1971-74 L97-79 1II"*4 1905-69 nMOX

(1 or UP)

- CIor W nI UWnEI6U9T I3TNIT

GUA-8 Funding Requirementsand Sources Figure 18 FUNDINGSUMMARY 17. The US$254 million (US$51 million p.a.) required for investment during the 1985-89 period . (') was substantially less than the US$939 (US$188 .A million p.a.) required during the 1980-84 period

when the sector's major hydro projects were being , - - executed. The need to add capacity to meet -sox

growing demand will increase the investment 4.3 program for the 1990-95 period, as the sector will require US$794 million (US$132 million p.a.). . , I

About 58% of this program is for transmission and . 39,,,. 1938 13 176 19 I2793 distribution which includes a rural electrification program designed to increase the number of rural customers by 40% (Figure 17).

igure 17 INVESTMENT 19. Debt service has become an increasingly INVESTMENT important use of funds. Its share increased from -rLuLIOIs" 4$$ 7% in the late 1970s to 43% in the late 1980s and no ._._ ...... is expected to increase to around 50% in the - - --.-. ____.1990s. ____.--_-__This drastic change is the result of significant increases in external borrowings ...... ----...... required to complement internal funding and .-.... 1...... government contributions for the sector's *,,- ...... investmentX l |program ...... of the past...... Projected.. increases in working capital are small and may not 1971 1974 1977 1g0 183 1946 1909 1993 199* 19N be enough to improve the liquidity of the sector intsIKmf during the 1990s (Figure 19).

1999-299: PIOI?093t Figure 19 COMPOSITIONOF USESOF FUNDS 18. Historically, the sector has had favorable debt service coverage and self-financing ratios. The debt service coverage ratio has been greater than 1 and the self-financing ratio has been .. . . positive, though relatively small. However, since ,ft the debt service was calculated on a cash basis, these ratios do not show the significant sox accumulated arrears of the late 1980s. Forecasts 1. R _ 1 - indicate that the debt service coverage ratio will be

less than 1 and the self-financing ratio negative NCP IWNIUIE 0I47TIE= l ? InVICg during the 1990-95 period. These conditions would make the accumulated arrears problem even more critical (Figure 18).

GUA-9 20. During the late 1980s, the sector's inteinal igure 21 funding financed an increasing portion of funding COMPOSMONOF SOURCESOF F- NDS needs. This was possible only after a substantial talltu MIAit reduction in the vety large investments of the early I i,,,., 1980s, undertaken to reduce the country's dependence on fuel oil, at which time internal funding was relatively small and significant aD govcrnment contributions werc required (Figure i | 20). I so Figur-e20 COMPOS1TIONOF SOURCESOF FUNDS I| in in, LS~~~~~~~~~~~~~C~ ~ ~ ~~ ~ ~ ~ ~ ~ ~ m W?AflJLFUWN CT,ScCIRustr GO FINAAAUSGAP - KS'l SMAct

|ft |ml"K |-""| -""' | ll | l 3CapitalStructure

281 ex| 22. Because of the significant equity L971-74 I-117 iS'a-N 19S-43 194-94s inso- contributions and the assumption of debt by the I ' | Government, the sector has been able to maintain

| Uh1UJtRIFOUf CHOStRCCtII cot^S| a debt/equity ratio of 30/70, with the exceptions of 1988 and 1989. Forecasts indicate that the sector 19i'.'19:PRti11 | will take on more debt and that the debt/equity ratio will settle around 45/55 in the 1990s (Figure 22). 21. If 1988 tariffs are maintained in real terms, the sector will be able to generate about 20% of its Figure 22 financing requirements internally. The remaining CAPITALSTRUCTURE 80% will have to be met through resources external to the sector (Figure 21). Since such percentage would be too high to be financed solely by borrowings or private equity, and in view of the low return on investment (about 9% on non- l1 /l revalued net assets projected for 1995), the pricing policy for the future should include substantial increases if government funds are not to be affected.

| 97. 1974 117 19BE L93 194 1919 1912 1915 199"

I -Mt9 P2MOJTC?91S

GUA-10 GUYANA

ELECTRIC POWER SECTOR GUYANA POWER SECTOR DATA SUMMARY SHEET 1988

Almost all elcetric power in Guyana is supplicd by thc Guyana Electricity Corporation (GEC), which is an operating subsidiary of thc Guyana State Corporation (GUYSTAC), a Governmcnt corporation which supervises and controls the statc interest in public corporations. Ilowcvcr, other sourccs account for a small portion. Small rcgional cntitics supply electricity in the hintcrland arcas and Guyminc (bauxitc) and Guysuco (sugar) handle thc clectric power necds of their rcspectivc industries. T'he sanplc for this studv onlv inklude GEC.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 799 CAPACITY ENERGY AREA '000 SQRM 215 (MW) (GWh) POPULATION PER SQKM 4 GUYANA DOLLARS PER US$ 10.00 THERMAL 86 218 GDP, millions of US$ 277 HYDRO 0 0 GDP PER CAPITA, US$ 347 NUCLEAR 0 0 GDP GROWTH RATE, % * 0.1 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 ELEC. SALES GROWTH RATE, % * 2.5 PURCHASES 27 ELEC. CONSUMP. PER CAPITA, kWh 228 TOTAL 86 245 1989 ELEC. SERVICE COVERAGE, Z NA POWER EXPENDITURES/GDP, % * 7.2 RESEPVE MARGIN 42 97%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 88 GWh % EMPLOYEES 1,482 CUSTOMERS PER EMPLOYEE 59 RESIDENTIAL 95 52 TOTAL SALES PER EMPLOYEE, MWh 123 COMMERCIAL 38 21 INDUSTRIAL 44 24 BULK SALES I0 0 OTSHER 6 3 DOMESTIC SALES 183 100

SERCTOC)Rl FIHNA/UNCNES SECTORFINANCES EXPORTS~~~~TOTAL 1830

AVERAGE RATE (US$IMWh) 89 SYSTEM LOSSES 51 ## 21 OPERATING MARGIN (WIO DEPR), % -1

OPERATING MARGIN (WI DEPR), % 12 ___,11______RATE OF RETURN, r -0.9 INDEBTNESS, Z 5 DEBT SERVICE COVERAGE, times * 0.3 * - average per year since 1985 SELF-FINANCING RATIO, 2 * -81 - to other utilities not in the study - as a percentage of available energy GUYANA

E'l,ECT'RICPOWER SE,CTOR

INSTITUTIONAl, ASPECTS

The Demerara Electric Company, a local private company, was the main electricity generating facility in Guyana prior to 1960. In 1960, the Demerara Electric Company became the British Guiana Electricity Corporation. In 1966, the state-owned Guyana Electricity Corporation (GEC) was formed under the Electricity Act, Chapter 56:01of the Laws of Guyana, and has dominated the electric power sector since that time.

While GEC is the largest producer and distributor of electricity in Guyana, there are other agencies which generate electricity main'l, or their own industrial purposes, but also for distribution to other users. These agencies include the Guyana Mining Enterprise (GUYMINE), Guyana Sugar Corporation Limited (GUYSUCO), and the Guyana Rice Milling and Marketing Authority (GRMMA).

As the main electricity generating facility in Guyana, GEC operates an interconnected system and isolated systems in three locations. The interconnected system forms the National Grid Systemwhich provides electricity in both urban and rural areas along the coast and up the rivers in Demerara and Berbice. The isolated systems supply electricity to Anna Regina, Wakenaam and Bartica, all in the Essequibo area. In general, under the Electricity Act, the GEC has the responsibility to develop and maintain an efficient system of electricity supply for all parts of Guyana, and to generate, transmit, transform, distribute, and sell energy to those areas. This mandate is only partly achieved.

GEC operates under the management umbrella of the Guyana State Corporation (GUYSTAC) which is a government corporation. The Deputy Prime Minister within the Ministry of Public Works, Communicaiions and Regional Development has responsibility for policy affecting GEC and for supervising, controlling, and regulating the operations of GEC.

The GEC electricity tariff structure differentiatesamong various categories of electricity consumers and aims at providing adequate levels of revenue to cover operating costs and to enable the corporation to maintain its viability as a generator and distributor of electricity.

Electricity power supply in Guyana is based principallyon thermal generation using imported petroleum fuels. The GEC uses only such imported fuels. However,in the sugar industry, bagasse is used to supplement imported petroleum fuels while the rice husk is used in a similar manner in the rice industry. Guyana possesses substantial hydropower potential, but apart from the very small hydropower facility of 1.5 MW at Tumatumari, hydropower resources have not been developed due largely to the need for large capital investments (beyond the normal and present capability of the local economy) required for establishing viable hydropower facilities.

The Guyana Natural Resources Agency (GNRA), which was established under the Guyana Natural Resources Agency Order 1986, replaced the Ministry of Energy and Mines in that year as the agency responsible for advising Government on energy policy. Among the policy issues under serious consideration are the question of cogeneration, an increasing role for the private sector especially in power generation, and the more extensive use of alternative energy sources especially non-conventional and renewable sources. Further, the privatization of GEC itself is being examined.

GUY-2 ( UY'ANA

FLECTRIC POWERISlE'CTOR

EVOLUTION,SITUATION, AND PROSIP'ECT'S

Summary Figure 1

1. Like the overall ccono.ny of the country, GROWTHRATES the clectric power sector (if Guyana performed - __ __ unfavorably. This poor performance resulted from -...... - ...... several operational and financial factors. In the 1970s, the short supply of domestic resources led to reliance on borrowings and a large amount ofa sector debt. As a result, the Guyana Electricity ---...... Corporation (GEC) was unable to meet its debt _...... serviceobligations with internally generated funds, 3...... I fundamentally because of low electricity prices and 1 . - .--. sluggish demand growth. Consequently, .1, ,,, ,,, I I I investments declined and system expansion 1971 1973 1975 1977 1979 1981 1993 1905 197 199 depended heavily on government contributions to - X =x n the sector in the 1980s. The sector's problems were further compounded by ineffective management as reflected in poor system reliability 3. An indication of the sector's contribution to and a high level of electricity losses. economic and social development can be seen in the growth of electricity consumption per capita. the Sectorand the Economy In Guyana, the sector has not been a major contributor to development. Between 1972 and 2. The national economy, as measured by real 1989, electricity consumption per capita declined growth in GDP, did not perform favorably during 1.8% p.a., from 208 kWh in 1972 to 152 kWh in the last two decades. In the 1970s,real GDP grew 1989 while GDP per capita only declined 1.3% 1.2% p.a. on average, and in the 1980s,it declined p.a., from US$416 to US$334 (Figure 2). 2.4% p.a. on average. The 1989 figure for GDP was 80% of the 1980 figure. The electric power Figure 2 sector, for its part, also failed to perform favorably. In the 1970s,electricity demand grew 3.3% p.a. on PERCAPITA INDICES average, and in the 1980s, it declined 4.7% p.a. on see u __98 _ _i__ _ _ IIS average. A substantial decline in electricity sales occurred in 1989, as the 1989 figure was 67% of .- the 1988 figure. Neverthe;ess, even though these measures of performance were similar for a few years of the last two decades, the power se:ctor showed signs of recovery while the economy as a whole remained at a standstill. The spread 160 between electricity demand growth and real GDP growth was 2.1% p.a. in the 1970sand -2.3% p.a. 1.71 1973 975 1977 19" 1911 1912 191 19"? 1999 in the 1980s(Figure 1). * c* w.TCDP - P C0PT

GUY-3 4. Another indication of the sector's 6. To mect the demand for electricity, the contribution to development is the degree of sector relies completely on thermal generation and electricity service coverage. While data on service purchases from Guymine which started in 1982. In coverage was unavailable for Guyana, it probably 1989, gross generation accounted for 159 GWh, or declined during some years of the 1980s, as the 83% of total electricity sources, , purchases total number of customers increased from 74 accounted for 33 GWh, or 17%. In t.. mmediate thousand in 1974 to 95 thousand in 1981, declined future, the sector expects to rely almost completely to 83 thousand in 1983, increased to 101 thousand on thermal generation (Figure 4). in 1987, and then, declined again to 88 thousand in 1988. Throughout the period, the country's Figure 4 population maintained steady growth. ELECTRICITYSOURCES

The Electricity Market: Supply and Demand SN

5. Total electricity uses remained fairly...... S constant between 1975 and 1989, as they declined ...... slightiy, from 208 GWh to 192 GWh or 0.6% p.a.. The main reason for this was the sector's inability . to meet system demand. At the same time, electricity sales declined 2.1% p.a. because of more rapidly increasing electricity losses. However, in the 1990s,total uses are forecast to increase 5.7% 1971 1974 1977 1988 1983 1K I9S13 1993 1999 ISM p.a., from 254 GWh in 1990 to 395 GWh in 1998, IND23TRElL jncusu while sales increase 6.6% p.a.. In 1989, the 1990-1999:PROJECTIONS composition of total electricity uses was 32% residential sales, 11% commercial sales, 18% industrial sales, 2% other sales, and the rest losses 7. The electric energy available to the grid was and own consumption. In 1998, the composition generated by an installed capacity that more than is forecast to be 35% residential sales, 18% doubled between 1974 and 1989, from 38 MW to commercial sales, 22% industrial sales, 2% other 96 MW ,r 6.4% p.a.. All of the installed capacity sales, and the rest losses and own consumption in 1989 was thermal (30 MW steam, 66 MW (Figure 3). diesel) (Figure 5).

Figure 3 Figure5 ELECTRICITYUSES INSTALLEDCAPACITY

I~~~~~~ I ~~~~~~~I 8"9...... -.rrrr ,,, - ,1I . ~r-.. |~

1|71 1974 1977 1938 1983 16S 1989 1992 1995 ItN 1771 1974 I$77 1968 1923 I8 1909 1982 1193 1970

| Rs1 lAt ES tomc0N8t9 = INDUSTRIALEM OTHER | Kyoto TTHERML G4EOt1a90l cmn EXPORTS M l3J CI08 C LOSSES lNDUCEAR __ C: OTlER C0OINCIDENT 1E90 l

|19O-19919:POJECTINJS 1998-1199: PtOJECTIIl

GUY-4 Operational Performance Figure 6

8. The spread that developed between the EFFICIENCYINDICES growth of installed capacity and the demand for an "ia, electricity during the last two decades led to considerable reserve margins. Between 1978 and * 1984, the reserve margin of the sector as a percentage of peak coincident demand was - between 104% and 121%. Between 1985and 1988, it was between 74% and 97%, and in 1989, it was - 177%. The high margins resulted from the effects of the unfavorable national economic situation on . i , l l l Il I demand and lack of maintenance of existing 1971 1174 1l fss 11 M II" It" 1911 1ll 1176 thermal plants and the distribution system which CUS:OMM/ImeNtF -.- zucs.wm.,e

made the public system unreliable and expensive. _99__19_ _ _o_ct__ _ Because of its own economic and political difficulties and a deteriorating international economic situation, the Government of Guyana 10. Electricity losses have also been a problem was unable to secure the foreign exchange for the sector. Taken as a percentage of energy necessary to finance the purchase of spare parts available, they increased from 16% in 1974 to 34% essential to the technical rehabilitation of the in 1986 and showed some improvement in 1987 sector. and 1988 before increasingto 32% in 1989. Billing problems contributed significantlyto the high level, 9. The labor productivity of the sector is as the failure of the sector's computerized billing extremely poor. In the 1980s,both the customers system led to several thousand unbilled customers. per employee and sales per employee ratios Electricity theft as well as tampering with meters dcclined. The customers per employee ratio went and metering equipment has also been responsible. from 71 in 1984 to 63 in 1989. The sales per Corrective measures, such as capacitor banks and emplovye ratio went from 139 MWh to 82 MWh electricity theft investigation programs, are during tie- sarce period. Both indicators are expected to reduce losses in the future (Figure 7). significantly b-iAowlevels found in other countries of the region as well as in other countries of the Figure 7 world. Because of its national wage policy, the LOSSES/ENERGYAVAILABLE Government of Guyana did not introduce sufficient pay incentives to hold qualificd mranagementstaff * . in the sector. As a result, the technical and t - A - -. *--.------managerial rehabilitation of the sector failed to of ..-- ...... -... materialize. In the 1990s,the sales per employee nx * . *.-. - ...... ratio is expected to improve. However, even if the sector's sales forecast materializes, this indicator -. _,*. _ will still be poor (Figure 6)......

IX ... ,,_..,__._...... ___.. _._._..... __...... __ sx . ,...... I...... I . . I...... § . . I .

1971 1974 1971 1ife 0113 it" 19,7 111* 11,99 1786 178-19": PJACtIOIIS

GUY-5 11. Another result of ineffective management 13. The negative rate of return for the sector was the significant deterioration of the sector's has been a result of unit price and cost levels that commercial practices. The sector's collection have left a negative margin in almost everyyear of period increased from 68 days in 1972 to 320 days the last two decades. In 1988, the unit price of 1 in 1988. Improvements in commercial practices MWh of electricity was US$89. In the future, the are expected to reduce the collection period to unit price of electricity is forecast to be around around 80 days by the late 1990s (Figure 8). US$132 while the unit cost remains around US$115 (Figure 10). Figure 8 COLLECTIONPERIOD Figure 10 Ms _ UNIT PRICESAND COSTS

1949 MIS*I&

40 ------...... t ...... 9 ._...... - - - .--- -. --- ~. .L..::: "

,I ......

43.. .. ~~~~~~~...... ~......

*9. ~ ~ ~~ ~~~~~~...... -..-...... -...... 0 ~ ~ ~ I I I I I. 1971 197 15? 1999 1983 198 1599 1952 ISS isi

1971 1974 1977 1t@@ 1995 IllS 1935 1952 1991 1599 11711974 1977 1*80 OSS1999 j9scLSStsL989 -+-COST 91/ DD'RIC -** COST 9/ 989FC * SlICier 9/0 ? l llS9-l9S9: PROJEttW119 + eot7 UzO DSPRECT9 SonECwT1

19a9-19m: PIOJECTMol

Profitabilty 14. The sector's composition of operating 12. The poor financial performance of the revenues has remained fairly constant since 1984. sector is reflected in its financial return indicators. In 1988,the composition was 32% residential, 27% The sector's rate of return on assets has been commercial, 39% industrial, and 2% other. A negative since 1978. Likewise, the interest slight increase in the revenues from commercial coverage ratio has been less than 1 since 1976. sales is expected in the future (Figure 11). Improvements are forecast for the future, as in the 1990s, the rate of return is forecast to be around Figure 11 5% for the most part (Figure 9). COMPOSITIONOF OPERATINGREVENUES

InX . . . ..'. Figure 9 RETURNSUMMARY ...... |- .~~ .... ~ ~...... ~~~: ::.:::::::: : 51918 (8) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~44X-...... - 'IX

S IITI~~~~~~~~~~~~~~~~~~~~~~~~~~~~69 RCIN 17 197 l4 1 1 1974 1917 190 1999 19 1969 1993 9I1 19I 51 | | ~~~ ~~4a5 9(8879 - eKacO3CtES9h98CIO NSTIM 4 Y -- $lix 6m ur~~~~~~~~~~~~~~~~~~LKStaEs C::l 9 ElfXPORTS

| | . , 1-. . | . . | . . j . . § . . § . . | . . @ ^ sh,, ~~~~~~1999-1999:P90.JIC?IEts 1571 1974 1917 19W9 199 194 1949 1591 1m5 I"@9

- Itgllt CR -9- Rll01 of 9m1

199-1999: PIOJIcnons

GUY-6 15. Because unit costs have exceeded unit 7he Sector and Country Resourmes prices, the operating income share of operating revenues has been negative since the late 1970s. In 16. The sector has had a significant claim on 1986, it was -28%. In the future, the share is country and fiscal resources during the last two expected to increase sub7tantially. The structure of decades. Power sector investments as a percentage operating costs shows the sector's reliance on of total country investments decreased from imported fuel because of its thermal generating around 6% in the 1970s to 1.2% in the 1980s. capacity. In the 1970sand early 1980s,the share Investments in the sector came to a virtual halt in for fuel increased because of the oil crises. the 1980snot only because of the internal financial Midway through the 1980s, the share started to situation of the sector but also because of the decline, as world oil prices fell. In 1988, the downturn in the economy as a whole (Figure 13). composition of operating costs was 52% fuel, 24% personnel, 13% materials and services, 12% Figure 13 depreciation, and -1% operating income. In the future, the share for personnel and materials and 8ECTORINVESTMENT/COUNTRY INVESTMENT services is forecast to fall substantially while the share for depreciation increases. In 1998, the composition is forecast to be 46% fuel, 24% depreciation, 8% personnel, 5% materials and ANNUALAVERAGE ANNUALAVERAGE services, 2% other expenses, and 15% operating 1971-79A BIhVPG income (Figure 12).

Figure 12

COMPOSITIONOF OPERATINGCOSTS in

However, the ratio of sector expenditures to GDP rose because associated operating expenses were higher, mainly due to fuel purchases for ex^7 F 4 f l iwgene.ration.The share increased from 3.1% in the 1911 1974 1977 L980 1£91 19*4 L9 19no 199s L99 early 1970s to a high of 7.2% in the late 1980s M OPERINC Ea OEPRIC : TAXIS g FUEL (Figure 14). ELIICPURC1 H ATERIALS9 PERSO'I"L g OThEREXPE19S

I9S901999: PROJUCTIONS Figure 14 SECTOREXPENDITURE/GDP

4.0X

Ito DATA 6.60 1971-74 1975-79 19"914 1915-69 r1moK

(x OF UP) IIS o1 0?Ma_ iotsTIw = imnuR

GUY-7 In addition, because the sector was unable to Figure 15 generate internal funds to meet its funding SECTORDEFIC4T/GDP requirements, the sector received large transfers from the govcrnmcnt beginning in 1985. These transfers contributed to the fiscal deficit, as the 7 sector's contribution was close to 3% of GDP in 7 the late 1980s (Figure 15). During the 1970s, the I 7. sector's debt level rose. Taken as a percentage of L . country debt, it incrcased from 1.1% in 1972 to 8.1% in 1975 and remained around 7% through L the 1970s. In the late 1980s, it fell to less than 2% because the loans that it did receive were much j smaller as a consequence of the sector's poor .l DATA

financial condition. Sector debt service as a 19u7-74 1975-n 1988-84 194_-89

percentage of country debt service, which was less - than 5% in the early 1970s, increased substantially in the 1980s. It had a peak of 95% in 1986 and then, decreased to less the 3% because of Figure 16 government contributions to the sector (Figure DEBTAND DEBTSERVICE INDICES 16). lox_, _ _

Funding Requirements and Sources , . -.--.-- - -. - -. ....-

17. Sector investments were erratic during the 6 I last two decades. They rose by large amounts in -. the 1970s and then stood relatively still in the , . 1980s. The investments that were made from 1973 on were possible because of external loans. These ., 31 .4.4 1983 19-5 884 loans went to execute works having an approximate value of US$40 million, or an average of US$5.7 _, + million p.a., between 1973 and 1979. In contrast, , FM#,I'TM ° U between 1984 and 1988, total investments only 0PWt 81aC1'lOTa KlA amounted to US$5 million, or US$1 million p.a.. Because of this underinvestment, significant investments will have to be made in the future. Figure 17 Between 1990 and 1998, the sector is expected to require US$165 million, or a little more than INVESTMENT

US$18 million p.a., to fund its investment 4 LLI91" 8 program. This will come from loan disbursements ,, and government contributions (Figure 17)......

......

......

...... 1... * " - 1 - ";; , - MP v A971 1974 L977 low tis 14 1969 119* It" ... SW! A

8919-144: P40J8C110,4

G7JY-8 18. Both the debt service coverage and self- Figure19 financing ratios show the difficultiesthe sector had in generating resources to cover its deaf service COMPOSITIONQF USESOF FUNDS and finance its investments. The debt service ox coverage ratio was less than 1 for much of the last two decades. The self-financing ratio was extremely erratic, fundamentally because of the sector's investment program. High levels resulted ,,, . because of low investments and not strong internal funding. Forecasts expect the debt service ,ft coverage ratio to be several times greater than 1 in the 1990sand the self-financing ratio to be greater ax .. 14-S - - than 20% beginning in 1991 (Figure 18). ,.IO - NU IaS! ls mtZ8tIWI OW t1ila

Figure 18 10-199: PROCTOIlS FUNDINGSUMMARY

35 SWA s 20.Y} The composition of sources of funds shows I 1g Apasex the origin of the sector's financial problems. In 20.X IWA \ t A / I Fa the 1970s,the sector relied on immense borrowings }.1 §} X 1 to meet its funding shortfalls. The share for IWA 1 \11 1 8borrowingswas 66% and 63% in the early and late 1970s, respectively. In the 1980s, credit sources became scarce, and the sector had to rely on public

-| , \ resources to meet its funding requirements. In the |.-1 | late 1980s,the composition of sources of finds was 1971 l174 1977080 Ii? 1999 1098 1019 19E 19t 14% internal funding, 83% government -DM sWICE Com. -+- $1S-FINnu0o contributions, and 3% borrowings. Internal | ______!_ funding is expected to improve in the 1990s. However,since the forecasted rate of return is less than 5% in most years, the sector may have 19. The composition of uses of funds reflects difficulties attracting capital sources (Figure 20). the substantial increase in debt service paymentsin the 1980sand the drop in investments. The share Figure20 for debt service payments increased from 8% in COMPOSIMONOFSOURCES OF FUNDS the early 1970s to 53% in the late 1980s with a peak of 87% in the early 1980swhile the share for ll x investments decreased from 84% to 11%. Because mx investments were extremely poor in the 1980s,the share for investments is expected to be significant in the 1990s. It is forecast to be 83% and 55% in ax l the early and late 1990s, respectively (Figure 19). |b

9171-74 1973-" 18W-4 1901-89 1104-04 1"5-"

- INTE1R1F881 r CStSTCOTSI C W' COITIS ____C:l |1 Wi 0 CF wICIS@oP _ t CAP88t04l8 l

| 19191: PRO.JCTTI

GUY-9 21. If 1988 tariffs are maintained in real terms, Capital Structure the sector's funding situation will be even worse. Under this scenario, the sector would face a 22. The sector's debt/equity ratio recorded financing gap of around US$226 million during the major swings during the last two decades. It 1990-98 period. Surely, borrowings alone would deteriorated from 15/85 in 1972 to 99/1 in 1979. not be able to finance this gap, and significant Then, midway through the 1980s, the sector's debt government contributions would be necessary to level started to drop because of government maintain the country's current degree of contributions, and the ratio improved to 5/95 in development (Figure 21). 1988. In the 1990s, debt is not expected to exceed 30% of the sector's net worth (Figure 22). Figure 21 COMPOSITIONOF SOURCESOF FUNDS Figure 22 CAPITALSTRUCTURE

4.~~~~~~~~~~~~~~~~~~~~~~~f

to" 196± 1991 los 1667 019

W FtAISIMP FUCT i tUCIIC:ttiUlti1l nn 167 16? 1 nui1 116 1666 16ny 161$ 1

198#-1991:FtMtW¢Illt

GUY-10 HAITI

ELECTRIC POWER SECTOR HAITI POWER SECTOR DATA SUMMARY SHEET 1987

Electric per generation, transmission, and distribution in Haiti is the responsibility of the govcrnment- owned utility, Elcetricite d'Haiti (EdH). EdH has opcrated as an clcctric utility with a country-wide legal monopoly sinice 1971.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 6,142 CAPACITY ENERGY AREA '000 SQKM 28 (MW) (GWh) POPULATION PER SQKM 219 GOURDES PER US$ 5.00 THERMAL 126 NA GDP, millions of US$ 2,476 HYDRO 54 NA GDP PER CAPITA, US$ 403 NUCLEAR 0 NA GDP GROWTH RATE, % * 0.6 GEOTHERMAL 0 NA 1988 ENERGY CONSUMPTION OTHER 0 NA PER CAPITA (kg oil equiv.) 57 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 2.4 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 50 TOTAL 180 466 1989 ELEC. SERVICE COVERAGE, Z 10 POWER EXPENDITURES/GDP, % * 2.8 RESERVE MARGIN NA NA

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 96 GWh Z F'iPLOYEES 1,681 CUSTOMERS PER EMPLOYEE 57 RESIDENTIAL TOTAL SALES PER EMPLOYEE, MWh 182 & COMMERCIAL 150 49 INDUSTRIAL 117 38 ______.______,______.______BULK SALES # 0 0 OTHER 39 13 DOMESTIC SALES 306 100

EXPORTS 0 SECTORFINANCES TOTAL 306

AVERAGE RATE (US$IMWh) 167 SYSTEM LOSSES 146 ## 31 OPERATING MARGIN (W/O DEPR), % 7 OPERATING MARGIN (WI DEPR), % 26 RATE OF RETURN, % 1.4 INDEDTNESS, % 54 DEBT SERVICE COVERAGE, times * 1.4 *-average per year since 1985 SELF-FINANCING RATIO, % * 17 # to other utilities not in the study - as a percentage of available energy HAITI

ELECTRIC POWER SECTOR

INSTITUTIONAI, ASPECTS

Electric power generation, transmission, and distribution is the responsibility of Electricite D'Haiti (EdH), a government-ownedpublic utility created in 1971. EdH began its operations in 1971 by taking over the government-ownedPeligre hydro plant and the privatelyowned Compagnie d'Eclairage Electrique of Port- au-Prince and Cap Haitien; since then, it has gradually taken control of all electric services in the provinces.

EdH's original bylawswere approved on July 29, 1971 and amended on April 9, 1977 to modify the composition and scope of the Board. The president of EdH is the President of the Republic, who delegates authority on a permanent basis to the Minister of PublicWorks, Communications, and Transport, who, in turn, acts as the Chairman of the Board of Directors. Other members of the Board are the Minister of Finance and Economy, the Minister of Commerce and Industry, the Governor of the Central Bank, the Commisaire a la Promotion National et a l'Administration Public, and EdH's General Manager. Policy directives are set by EdH's President; the board regulates and approves tariffs modifications,major investment plans, borrowings, and broad policies.

According to EdH's current organization, the General Manager, appointed by the President of the Republic, has reasonable autonomy and is assisted by four Directors. Responsibilities for administrative and financial management is divided between two directors as the workload is excessivefor a single director.

In 1976,a tariff structure was put into effect; it was revised in 1982. The structure is based on marginal costing but is modified to allow social pricing for low-income families. The tariff includes a fuel surcharge which contains a provision for quarterly adjustments for incorporation into the basic tariff at the end of each fiscal year.

HAI-2 HArrl

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION, AND PROSPECTS

Summary Figure 1 GROWTHRATES 1. Despite the adverse economic conditions besetting the country in the 1980s, the electric power sector posted positive growth rates, though .. . . not to the extent necessary to increase service to the population. The political turmoil in the .. -. L. country in the late 1980s seriously effected the sector, as a large number of consumers seized this ------.-----.--. opportunity to connect themselves to the grid illegally or postpone paying their bills. This resulted in an extremely high level of non-technical losses and a reduced level of internal funding 1l ,.1 1.1 .71 I L.143 , .1 ,. , . which worsened the sector's financial health since its ability to respond to debt service obligations .Ub_ -+ U 11,t1Cv11 worsened. Assuming a successful loss reduction program, the sector's financial health is expected to improve substantially in the future. 3. An indication of the positive contribution of the sector to economic and social development is The Sector and the Economy growth in electricity consumption per capita. Between 1971 and 1989, consumption per capita 2. During the last two decades, electricity increased from 12 kWh to 54 kWh, or 8.7% p.a.. demand growth followed real GDP growth at a This growth is significant, as GDP per capita faster rate. In the 1970s, electricity sales grew remained fairly constant during the period. 16.1% p.a. while in the 1980s they only grew 5.2% However, despite the improvement, the 1989 figure p.a.. The second period corresponds to a decline for consumption per capita was the lowest in the in economic activity, an Increase in electricity theft region (Figure 2). and power restrictions due to "dry" conditions, and limited capacity to meet demand. The spread Figure 2 between the electricity demand growth rate and the PER CAPITAINDICES real GDP growth rate was 12.2% p.a. in the 1970s and 4.5% p.a. in the 1980s (Figure 1).

Jn1 18I1 7 S7 1978 1881 1881 1881 1987 1869

HA IP3 WITA -Mf P aPItA

HAI-3 4. Another indication of the positive 6. The electric energy available to the grid was contribution of the sector to development is the generated by an installed capacity that increased rate of electrification. In Haiti, electricity service 4.3 times, from 43 MW in 1971 to 186 MW in coverage increased from 3% in 1971 to 10% in 1989. Its composition went from 43% hydro and 1989 revealing that the sector still has much to do 57% thermal in 1972 to 29% hydro and 71% in the years ahead. This level of service coverage thermal in 1989 (Figure 4). ic the lowest in the region. Total customers of electricity service increased from 24 thousand in Figure 4 1971 to 112 thousand in 1989. INSTALLEDCAPACITY The ElectriciryMarket: Supply and Demand sI

5. Total electricity uses in 1989 were 485 GWh -,,------...-.-.- ..- which is 5.6 times the 1971 level of 87 GWh. Between 1971and 1989,electricity sales increased ... ,t .. .. _._... nearly 6 times, or 10.4% p.a., because of more rapidly increasing electricity losses. In the future, ...... sales are forecast to increase 7.8% p.a., from 341 GWh in 1989 to 623 GWh in 1997. In 1989, the . composition of total electricity uses was 35% LS4 9W"m4,,. a l 1 M ` 091W 19SI residential and commercial sales, 27% industrial Itm ,tmzW - XINCoDzmauff sales, 9% other sales, and the rest losses and own IM-19": PIOJECtX consumption. Because of the decline in economic activity, the share for industrial sales declined substantially in the 1980s from its peak of 40% in Operational Performance 1980 (Figure 3). 7. The sector's labor productivity is poor. As Figure 3 measured by the customers per employee and sales ELECTRICITYUSES per employee ratios, it has remained constant since ELECRICmYSSS1976. In 1989, the customers per employee ratio ! Z . was 67, and the sales per employee ratio was 204 MWh. Both indicators are substantially below ...... -. .-. . . " ...those ". ". found ". ... in other" .", countries.... in the region and in

______need of corrective action (Figure 5).

,, ,,; , I; tillC ~~~~Figure5 _... ,,,,,,,,,,,, ,,,,EFFICIENCY INDICES AI7L £174 It71" hll £993 19" 909 1tw mS 1991 - I1IMWTlU = co19t1e1 = tUilIL Iliu177 m OtHNt C3 tlHI cont1 om E521iOltgs al.m

11111 £941 TO 291?, N~~~~~~~~~~~~~~~~~~~~~~~~~SO

*7til1~ ~ ~ ~ ~~~~~~~~~17~ tC" 19t 1*110 19113§ 1soze6 It 1"I 19

a7s -m- n.a. M .UM

HA1-4 8. Electricity losses have been high for some Figure7 time. Because of the political turmoil in the COLLECTIONPERIOD country resulting from the end of the country's thirty year old dictatorship in 1986, EdH i.e experienced many problems. One of these was a .. - ......

large leve' of non-technical losses arising because ...... a largo number of consumers from all categories ...... seized this opportunity to connect themselves to ...... the electric grid illegally. As a result, after falling ......

to 24% in 1984, electricity losses as a percentage ...... -. of gros, ;vailable energy increased to 35% in 1988...... Because of a loss reduction program that began in 1988, losses are expected to fall substantially in the . _. 1990s (Figure 6). . 1§71 LIM 10771 t " 193 10 1919 1992 1213 191 19_11909: pto4vcn Figure 6 LOSSES/ENERGYAVAILABLE ProfitabiUty

10. The financial performance of the sector has ------...... been erratic. The sector's rate of return was low, though positive, except for 1983 when "dry" .- . -...... conditions limited sales and in turn effected operating revenues and the late 1980swhen illegal connections allowed consumers to use electricity without paying for the service. Likewise, the ,.....----- ...... sector's interest coverage ratio was generally greater than 1 except for the same years and 1901 1l74 . fl 1l66 1.,7 .~~ 1669 1l62 1.65 1 , i reasons previously mentioned. Assuming a 197L LIM^ LM7 119 193 tell 1*69 192 1995 199 1990-*i9: ROX¢t successfulloss reduction program, both indicators are expected to improve in the future. However, the projected rate of return may still be too low to 9. The political turmoil also negativelyeffected attract new investors to the sector (Figure 8). the sector's collection practices. Because of the political uncertainties, customers relaxed their Figure8 payment standards, and EdH found it difficult to RETURNSUMMARY collect billings from regular customers. As a result, the sector's collection period increased from . , 100 days in 1986 to 113 days in 1987 after ox improving from its peak of 135 days in 1983. In the future, the collection period is expected to be between 70 and 75 days (Figure 7). ,,

8 ~~~~~~~~~~~~~~~~~~~21

1671 1974 177 19*6 16. 1t" 1665 16692 196 1666

- 191?m cogl -4- mix30orfNMI"

16016": PROACIIONS

HAI-S 11. The financial performance just mentioned Figure 10 is the result of real tariffs that allowed the unit COMPOSITIONOF OPERATINGCOSTS price of electricity to exceed the unit cost in almost every year of the last two decadus. However, the increased fuel costs because of the "dry" conditions..... in 1983 catused the opposite to result. In 1987, the unit price of 1 MWh of electricity was US$167. This level is one of the highest in the region. In ,., the 1990s, the unit price is expected to increase ' . - from 153 US$/MWh in 1990 to 185 US5/MWh in , 1996 while the unit cost remains between 120 and e . . 125 US$/MWh(Figure 9). .171 1974 1977 IU 19 194 199 19" 19 ,, _ OtER C E3POEC = TtXES 9 FUEL

Figure 9 o= lteC PSrc. [=1 MATSEIALS PERSOM EL GOt9R EXPOMSSE

UNITPRICES AND COSTS 19"-'99n: pR0JtJs

Iz Tlhe} 1>^ Sector/ and Country Resources

J\ ,, to',, ' \.s, 9s ^ 13. During the last two decades, the sector -"6 -, 4;._\' wy...../ _.9G.;consumed ; _ a, substantial amount of country and government resources. Sector investments as a ,^ . - .. .-"...... - percentage of country investments were 6.9% in the 1970s and 7.8% ;n the 1980s (Figure 11).

I *"7 IX sz ,m ¶sss -4 '"--S 5l- d I97 L774 CtW O CO 1W4, -A ss 155Ng S I"*

____ IETSCNT INVESTMENT

12. As a resuft of the tariff levetls. opc i income as a percentage of operating revenues, was | .',l< AGE ANNUALAVERAGE positive except for 1983 when fuel costs increased - 1i substauatially. nTe main cst components are persoonnel and Ien.1n1987, the wompositier' it_ operating costs was 34% personnel. ?eN-2i ,k V9I depreciation, 12% materials and serce, and operating income, Irn 19%6, #,z c o.pD,ii 4 * 6 expected to be 22% fuel, 18% deprwi,10tSA,.I4 personnel, 9%, mateiaLs asil -. icc 1. . 5 ___ _ operating inteme (Figure 10).

HAT-6 Sector expenditures as a percentage of GDP Sector debt as a percentage of country debt increased from 1.6% in the late 1970s to 2.8% in increased for 10% in 1974 to 18% in 1987. During the late 1980s (Figure 12). Thc:sector's deficit as the same period, sector debt service as a a percentage of C0DPwas 0.4% in the late 1970s percentage of country debt serviceshows an erratic and 0.1% in the 1980s (Figure 13). but increasingtrend. It had a peak of 45% in 1987 (Figure 14). Figure 12 SEC1OREXPENDITURE/GDP Figure 14

3.ex DEBTAND DEBT SERVICE INDICES

1§ -x4 tat ...... Itl4 Ex ...... I . . i.I.. ..

IC' -74 11109-14III -79 L915-09 ex~~~~~~~~~P65 PSTIEUII.105L51? SRIC

FigurSCTReDFI1T3OPFunding Requirementsand Sources t5,ttWttl 14. Between1977 and 1987,the sectorrequired US$326 million, US$30 million p.a., to fund Its ~~~~~~~~~~~investmentprogram.Between 1990 and 1996,the I- sector is expected to require US$300 million, or us" ~~~~~~~~~~~~US$43million p.a., to meet its investmentneeds (Figure 15).

Figure IS I.x . v- investment...... program. INVESTMENTBetween 1990 and 1996, the~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...

MIELLIONit"5 III,

1971-74 1915-79 141.1-4To Between 1181014 ...... -.....-...... ~~ ~ ~~~~~~~~~~~~~~~~~~~~~....

g...... ~- -... .

XOU 1954 1 111955 1144 It" 19_5 I55_ _I9T

1911-1598: P5ROJlCtTOSS

HAI-7 15. The funding condition of the sector has Figure 17 been sound and can be summarized by the sector's COMPOSITIONOF USES OF FUNDS debt service coverage and self-financing ratios. Generally, the debt servicecoverage ratio has been several times greater than 1, though decreasing, and the self-financingratio has been between 20% and 40%. The exception was 1987 when the country's political turmoil caused the debt service 4 | coverage ratio to fall 1 and the self-financing ratio to fall to -1.1%. With a successfu! loss reduction program, both indicators are expected to be strong , DATA

in the 1990s(Figure 16). t'-l14 1-14 t97O- - 9n mioa

Figure 16 lo _iIswcoHS IcrRU OW Cs FUNDINGSUMMARY lIEt-I T

| Tt I~~~~~~~~~~~~~~~~~~XII

La laxttF17. The composition of sources of funds shows a an increasing share for borrowings. The share for 6 - 1 1 \ sf t-A | borrowings increased from 44% in the late 1970s to 61% in the late 1980s. At the same time, the 4 1 share/r\ for1> internal/ LtPA | ... funding has been erratic. It went from 34% in the late 1970s to 40% in the early U ] 1..1980sto 35% in the late 1980s. When borrowings |l-| l l , ,- -and internal funding have not been sufficient to 1971 1174 1977 1lK 198I 1-c s tt I"S L"l meet funding needs, the se4lor has had to rely on - oD? gimCl Co. -+- sI8L.-r[N STic government contributions. The share for |______9___m_MC._ = government co,itributions was it% in the late 1970s. In the future, internal funding is expected to improve tremendously (Figure 18). 16. Debt service payments have constituted an increasing portion of uses of funds. The share for Figure 18 debt service payments increased from 8% in the COMPOSMIONOF SOURCESOF FUNDS late 1970s to 29% in the late 1980s. As a result, the share for investments decreased from 85% to 71% during the same period. In the 1990s, the l |.. composition is expected to be about 70% investments and 30% debt service payments (Figure 17). 9

1971-74 1973-79 19110-41l 1HIS-I 19 0- 199194 199-5

| 0i17T11Ftt0DMO CUSITCm O-7TTR4 CONT l | C t301W5 filscueGAP Wion CAP DECREASE

195t-Mt: PtOECTIIS

HAI-8 Capital Structu

18. Because of the increased level of borrowings, the sector's debt/equity ratio increased du-ing the last two decades. It went from 15/85in 1974 to 55/45 in 1987. It is expected to improve to 40/60 by the late 1990s (Figure 19).

Figure 19 CAPITALSTRUCTURE

'ox

ex 1971 1974 77I 1 ii 1906 1931 1m 191 1196

IIIUIIYv 1bT

I9-19U9: ROJECTIOHS

HAI-9 HONDURAS

ELECTRIC POWER SECTOR HONDURAS POWER SECTOR DATA SUMMARY SHEET 1989

Except for a few inunicipal utilities which operate isolated systems and a privately owned utility serving the Island of Guanaja, the public electricity service in Honduras is the responsibilityof Empresa Nacional de Energia El6ctrica (ENEE), created in 1957. The interconnected system consists of the main transmission network that spans thc country from the Atlantic coast to the southern border and is linked through a 230 kV line with Nicaragua, Costa Rica, and Panama.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPVLATION '000 4,981 CAPACITY ENERGY AREA '000 SQKgM 112 (MW) (GWh) POPULATION PER SQKM 44 LEMPIRAS PER US$ 2.00 THERMAL 137 32 GDP, millions of US$ 4,885 HYDRO 424 2,002 GDP PER CAPITA, US$ 981 NUCLEAR 0 0 GDP GROWTH RATE, X * 3.7 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHIR 0 0 PER CAPITA (kg oil equiv.) 203 IIP(ORTS 5 ELEC. SALES GROWTH RATE, % * 6.1 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 271 TOTAL 561 2. 039 1989 ELEC. SERVICE COVERAGE, % 34 POWER EXPENDITURES/GDP, 2 * 3.1 RESERVE MARGIN 245 78%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 289 GWh % EMPLOYEES 3,653 CUSTOMERS PER EMPLOYEE 79 RESIDENTIAL 436 32 TOTAL SALES PER EMPLOYEE, MWh 370 COMMERCIAL 267 20 INIDUSTRIAL 504 37 ______.______.____ BULK SALES #0 0 OTHER 145 11 DOMESTIC SALES 1.352 100

SECTOR FINANCES EPORTSTOTAL 1 5221 73

AVERAGE RATE (US$IMWh) 81 SYSTEM LOSSES 455 ## 25 OPERATINGMARGIN (W/O DEPR), % 41 OPERATING MARGIN (WI DEPR), % 68 RATE OF RETURN, % 4.8 INDEBTNESS, % 76 DEBT SERVICE COVERAGE, tiJmes * 1.1 * - average per year since 1985 SELF-FINANCING RATIO, % * 6 # to other utilities not in the study - as a percentage of available energy HONDURAS

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

In Honduras, the present structure of the electric power sector started with the creation of Empresa Nacional de Energla Eldetrica (ENEE) in 1957. Since then, the majority of private and municipal utilities have been acquired by ENEE. ENEE is responsible for the generation, transmission, and distribution of electricity. The sector is under the jurisdiction of the Ministry of Communication, Public Works, and Transportation.

ENEE has become one of the largest companies in the country and delivers an adequate supply of energy. Its legal framework defines its objectives, functions, and the company's resources as well as the managerial branches, specifyingresponsibilities and roles at every level. The objectives of ENEE encompass the study, operation, and management of every project or electric work owned by the Government. Its Board of Directors has the authority to put working plans into effect and discusses them with the rest of the Government's entities engaged in country economic development. It is ENEE's responsibility to establish tariffs for electricity sales and for related services. Tariffs are based on marginal costs and are automatically modified to reflect variations in fuel supply and prices.

HDS-2 HONDURAS

ELECTRIC POWER SECTOR

EVOLUTION, SlTUATION. AND PROSPECTS

Sunmary The Sector and the Economy

1. The electric power sector of Honduras 2. The sector is affected by, and in turn faces serious financial problems because of high affects, economic conditions. This relationship is levels of debt and debt service that resulted from illustrated by the close association between the the financing of an ambitious investment program behavior of economic growth and electricity in the early 1980s which included the El Caj6n demand. In Honduras during the last two decades, hydro plant. This plant more than doubled the electricity sales growth had a pattern which follows installed capacity of the country, and it has affected GDP growth at a faster rate: significant increases all sector, as well as many country, indicators. The in the 1970s, a drop in the early 1980s, and a sector's high debt service obligations are out of modest recuperation in thc late 1980s (Figure 1). line with the useful life of the assets that they During some years in the late 1970s, financed. They became unsustainable after the onset of the debt crisis and the political problems IFigure I of Central America, as Honduras' access to GROWTHRATES external financial markets was cut. The financial problems were compounded by the devaluation of ,x the US dollar to which the local currency is m.* pegged, by lower than expected growth in electricity demand due to the social and political ,t turmoil in the region (which particularly affected . - ....- ... electricity exports), as well as by low operational performance reflected in high electricity losses, and .t /. poor collection practices. Tariff levels, which had ex been adequate until March 1990 when the local are now below long-run -1, l l l l 19l1 l IMl l l currency was devalued, H?1 1971 Ill H?% 7 15?5§ H§ II 15* *85 155 L marginal costs. In the past, although said tariffs provided a l.ositive rate of return, internal funding -3L +35 was not sufficient io cover debt service obligations. In the recent past, successful negotiations with creditors have led to restructure debt in order to electricity sales growth was lower than economic match debt service obligations with internal growth mainly because of the sector's inability to funding. At present, efforts are being made to serve market demand due to insufficient facilities, restore real tariff levels. If these actions are fully but once El Caj6n was commissioned, the pattern implemented, and operational efficiency is attained, became more clear. Because of the particular the financial prospects of the sector would be conditions of the country regarding degree of satisfactory and it should be able to fund its economic and sector development, the spread investments without financial assistance from the between the electricity demand growth rate and the Government. GDP growth rate has been significant: 7.4% p.a. in the 1970s and 4.3% p.a. in the 1980s.

HDS-3 3. The contribution of the sector to The ElectricityMarket: Supply and Denand economic and social development can be seen by the growth of consumption per capita, even under 5. In 1989, total electricity usage was 2,041 unfavorable country economic conditions. GWh, which is about 6.9 times the level of 1971 Electricity consumption per capita in Honduras is (296 GWh). It is expected to grow to 2,874 GWh still low compared with other countries in the by 1999, i.e., about 9.7 times the level of 1971 region. However, during the last two decades it (Figure 3). This impressive growtlhis, of course, showed steady growth, as it increased from 93 kWh in 1971 to 271 kWh in 1989 (6.1% p.a), while Figure 3 GDP per capita had only minor growth, as it ELECTRICJTYUSES increased from 902 US$ to 981 US$ (0.5% p.a.) (Figure 2).

Figure2 2 PER CAPITAINDICES ......

IfL 1 974 1977 l989 1963 1998 196 1793 If.5 171

RESIOTIITII!S 8 C*9tAttlCi r OUI!ul. CM SUL* S9.6 iss e E w E vEXt15 OrS lHER C CO9S SS L0SSES

4" _1 -1/1 t990-1599: PRCJECirIS

* , , e . . 5 . S , | , I| . | , -,I in part due to the low levels of consumption at the 1771 1973 175 1977 1079 19H1 183 ISS 1387 1989 beginning of the period analyzed, but it also shows

OF Piz CrPaT - SALOm cAPI the significant efforts made to provide increased service to the economy and the population. In 1989, the composition of internal sales of 4. Another indicator of the positive electricity was: 32% residential, 20% commercial, contribution of the sector to development. is the 37% industrial, and the rest other. The most degree of electrification which, although low, has impressive growth is that of residential sales, as its increased significantlyfrom 12% in 1971 to 34% in share in 1971 was only 23%. The secior made a 1989. While 80% to 90% of urban areas receive contribution to the country's current account, electricity, only about 15% of rural areas have through exports of electricity to neighboring access to it. The total number of customers countries during the 1984-1990period because of increased nearly five times between 1971 to 1989, the availability of surplus energy from El Caj6n. from 60 thousand to 289 thousand. Albeit lower than expected and with serious problems of collection, these exports have helped Honduras by providing foreign exchange. However, because of the continuous increase in local demand, such excessof energy is not expected to be available after 1993.

HDS-4 6. To meet electricity demand, since 1982 Figure 5 the sector has relied fundamentally on hydro INSTALLEDCAPACITY generation with a small share of thermal generation for the isolated systems. The sector shows a short period of imports before the ...... commissioning of El Caj6n and a minimum of

thermal generation for the isolated svstems 4' , ._.__.. afterwards (Figure 4). -

Figure 4 i

ELECTRCITY SOURCES17417 O1)714L 1319 19 Cllb ~~~~19711974 1177 190 IMS *1U 1$0 t1;1 1993 *921 - I_YWO 3 740ml EOTEEI4LK

ii ass-~~~~~~~~~~~~~~~~~~OlElnmCEhIt 9IQ

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

OperationalPerformance

8 The sector's installed capacity, as 19111974 117 1)91 1993 11)6 lis ssa 191 191 compared with domestic demand, resulted in an l WfOROG ThEUIL M StHElIdt = lES excessive reserve margin in 1985 (160%). OIto C nWmSS ISM PrUTs However, it is continuously being reduced by 199811S99:PROJECT10hS increasing demand (78% in 1989). The sector investment program includes only small thermal plants in 1995and 1998. 7. Such electric energy available to the grid was generated by an installed electric capacity 9. Particularly worrisome are the which was about 50% hydro until the maintenance practices of the sector. Difficultiesin commissioning of El Cajdn in 1984 and 76% meeting market demand in the late 1970swere in aftervwards. With all four units of El Caj6n (4x73 part caused by the unavailability of thermal MW), ENEE's total installed capacity reached 561 capacity which since 1976 has been in the vicinity MW, of which 547 MW (97%) belong to the of 40%, a critical level in view of the rapidly interconnected system and the rest to isolated increasing demand. This has, of course, affected systems. As the hydroelectricinstallations are fully the availabilityof total capacity. utilized, the sector is expected to have to rely on additional thermal generation starting in 1995 (Figure 5).

HDS-5 10. Regarding operational efficiency Figure 7 indicators related to labor productivity, absolute LOSSES/ENERGYAVAILABLE levels are still low compared with similar countries, and there is much room for improvement in spite of an improving trend until a few years ago. The n x ...... number of customers per employee increased from 42 in 1971 to 79 in 1989, and MWh sales of AK...... electricity per employee increased from 178 to 370 during the same years (Figure 6). . ..

______lb~~~~~~ ...... ~ ...... -~~~~~~~~~~~~~~~~~~~~...... I...... Figure 6 EFFICIENCYINDICES _... x .._......

. 71 1974 1971 1986li ls1" IM9 199a lns AM

1" Jo -~~~~~~~~~~~~so.an 199-IM: PIDOJECTOS

Go Sao..o 12. Collections have also shown a clear 4."" deterioration during the 1980s. The collection period moved from 108 billing days in 1986 to 200 166,,,,,.,6, days in 1988. This is both because of poor

lil. liii .,-~-,-,-+-,- . , | E practices,collection and government interference, 1971 1974 snslii is 196 1§898s"a172 sj as often the Government does not allow the

Oz11W, 'UiAiU n S.I,TUIU disconnection of clients that do not pay their

I991199:NOJCOS_ accounts on time (Figure 8).

11. Another factor of concern is the increase Figure 8 in electricity losses. They reached 25% of the COLLECTIONPERIOD gross energy available to the grid in 1989, with ;s growth of about 8% p.a. during the 1980s. The .-.. high level of losses is in part due to deterioration of the distribution grid, as available resources were -...... -- --. allocated to investment in generation in the early ...... 1980s and to debt service payments and questionable rural electrification programs in the late 1980s. A series of corrective measures in the *_ areas of investment and commercial practices is ...... expected to reduce losses to 14% by 1996 (Figure 7). ,. 1; lilt 199) 196 199 sii 199 . 1.

199i-It99: PROJECTIUS

HDS-6 Profitabiliy Lompira as the exchange rate moved from 2 to 4 Lps/US$ in March and it reached 5.3 at the end 13. The weakening financial position of the of that year. An increase of about 60% in nominal sector can be seen in its financial return indicators. terms in September was not enough to recuperate The rate of return on assets has been positive in the level of tariffs in real terms. all years but has had a steadily decreasing trend since the early 1970s, as it moved from about 9.6% Figure 10 in 1972, with an almost flat plateau of about 10% UNITPRICES AND TS in the late 1970s, to a low of 4% in 1986. With some exceptional years, the interest coverage ratio w ,,| " followed a similar pattern to the rate of return ±,, ...... with the most critical years occurring in the late 1980s. One of the reasons for this was that on .o *...... ~**.-.. -. -... -.- ....-....-...-... ..-.-.-...... average interest rates were higher than the rate of 0 \

return (7.5% vs. 4.8%, in 1988) resulting in a -. ; negative leverage that led to a further deterioration 4i ...

of sector finances. This negative trend is expected a,......

to be reversed under a financial rehabilitation plan a I .I I . I I . . . I . I .I e . about to be implemented (Figure 9). 197 ,4 19,7 1936 1983 1916 1999 1992 1991

-4- COST wo Soc -i- en w IITI]PREC -*- PRcC wo Tla

Figure 9 IN2-19N: PRIJTCIITS RETURN SUMMARY

TIRRA c"' a( x 15. The composition of operating revenues has had a stable pattern except for the revenues .. /\ ,,x from exports of electricity during the second half , -iOAV ~ 1 l tx of the 1980s. The composition of operating revenues in 1971 compares with that of 1988 as , .x 2 Vt .^follows:residential, 38% vs. 33%; commercial, 23% vs. 20%; industrial, 33% vs. 27%; and exports, 0% vs. 8% (Figure 11).

±971 1974 L9?? 1909 1993 1996 1989 1992 1993 1999 Figure 11

- INnl CCU I- RATE oF RETURN COMPOSITIONOF OPERATINGREVENUES 1996-1999: PROJSCTIOIIS

14. The unit price of electricity has : . :: ... fluctuated between 80 and 120 US$/MWh. After __ - the early 1980s, it started falling because of ...... inflation, as no nominal adjustments were made until 1990. Most of the time, unit costs have been ._. - between 40 and 80 US$/MWh, following a pattern close to that of prices (Figure 10). One factor 17 1914 1A"? 1916 1993 MSE 199 L992 191 1S9 negativelyaffecting sector operating revenuessince mIIE_t C994ETTK tl 1985 has be-en the free electricity service to the X .w(S2ES 2=25 (07R20 government and its agencies, a situation which will 2sn-1n9: PNOCTIO9S be corrected starting in 1991. In 1990 the average tariff level was affected by the devaluation of the

HDS-7 16. The composition of operating costs Figure 13 reflects the changing supply conditions of the SECTORINVESTMENT/COUNTRY INVESTMENT sector. Fuel costs as a percentage of operating revenues increased from 7% in 1971 to around 20% in 1982, at which time, electricity imports complemented local generation until 1985. After ANNUALAVERAGE ANNUALAVERAGE this, the component which showed the most ANNUA AN L G significant increase was depreciation, as it moved from 14% in 1985 to 27% in 1986 as a result of the commissioning of El Caj6n (Figure 12).

Figure 12 x 7.1. COMPOSITiONOF OPERATINGCOSTS

_- * Figure' - ~14- _ SECTOREXPENDITURE/GDP

1971 1914 197 IU 118 199 liOU 1911ME 199 199

- IPit iC Es OWIC M TANS M FUlL DWICC : W CITEFILS M ornwLs am aTkit EXPENSE * . OX

919991 :1 11CC PtIOtT10111199?1h 09919 1S. aX

IAs

The Sector and CountiyResources QA i , . 1 7-, 19-64 1991-n

17. The electric power sector of Honduras .x orCM absorbed a significant amount of country and 1111111mImWU iorMIMU.M, r 19199 government resources, especially during the 1980s with the construction of El Caj6n. Thus, while sector investments as a percentage of country Figure 15 investments were about 6% in the 1970s, they SECTORDEFICT/0G1DP reached about 18% in the 1980s (Figure 13); Sector expenditures, which were close to 2% of .. GDP during the 1970s, reached 6% in the early 1980s and dropped to 3% in the late 1980s after the commissioning of El Caj6n (Figure 14). While not requiring any government assistance during the SA. 1970s, the sector's contribution to the fiscal dei.cit became about 0.8% of GDP in the early 1980s and *. 0.2% during the late 1980s (Figure 15).

1971-74 1971-7 M 19044 1911-It

HDS-8 Sector debt, which was about 20% of country debt Figure17 in the early 1970s, reached about 25% in 1988 INVESTMENT (Figure 16).

Figure 16 . MT AM OT SERVICEINDICES am

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...__...... f......

at. ------1

I"Is 193 im Is" In"191 I"i INS 1" 987 s"

_, ---. 19. The funding of the sector was significantlyaffected by such investment program A:M ' SttfLoil. "t and by the corresponding debt service burden resulting from the borrowingsthat were c ,ntracted. Thus, both the debt service coverage ratio and the Funding Requirmnts and Sources self-financing ratio show similar patterns. i.e., steadily decreasing since the early 1970s until the 18. The significant effect of El Caj6n on the mid 1980s,hitting bottom in 1986, and since then, sector's funding requirements deserves to be showing spurts of recuperation which reflect the highlighted. The sector investment program,which efforts made to reverse the historical trend had been low during the 1970s (average of US$38 (Figure 18). million p.a.), moved to a high level during the early 1980s (US$188 million p.a.) before dropping Figure18 substantially in the late 1980s(US$62 million p.a.). FUNDING MM Y It is expected to decrease in the 1990s (US$42 million p.a.) (Figure 17). 4lt

-s a

1IT1 lan It" IM 191l1 19 St 199 L992lS9t ISIl

-H a.sICz COO. -4- - 11- MliO

499*-Ilt: PiiJ(CTlOil

HDS-9 Trie comptisition of uses *f fund..... Th:)vs 21. The pattern in debt service reflects, in a E,,e change-beginnihig in the lase 198&.. 'V13- 4ef.Z.rredmanner, the share of borrowings in the -wesrmaenl whiJ had reached abtc:6 -:-.A. mix used to fund the investment program. It i T W}., *r \ has decreased since then, a>;i ': moved from a little over 50% in the 1970s to CxTc;4I. e So iTI the t ture unuO it almost 61% in the early 1980s. If actions to react;es . the 0t ils.A Except for mir : r correct prices, restructure debt, and improve 'A'dfing cap.it. increases, thc niain funCwj, efficiency are fully implemented, the financial rc£;uiremnents arise hom debt serv:ice paymra! prospects of the sector for the 1990s would be which have had. aeid will continue to have, mi, strong enough to correct the serious distortions of increasing share ox the sector's fundi) . the past (Figure 20). This is especially significant requirements (Figuw.e19). I he apparently healtl y regarding the problem of accumulated arrears on increase in workin-: capitai registered in the la. debt service which has been resolved to a great 1980Sreflec.s. .n fact, ptior itnancialmanagemew, intent thanks to an agreement with the Paris Club as the principdsl factci is the increase in tc e creditors and also by the assumption of debt collection period (see para. 12). service by the government.

Figure 19 1 Figure20 COMPOSITIONOF USES OF FUNDS j COMPOSiTIONOF SOURCESOF FUNDS

4H0 IOtA ~ ~~~lRID IOtA E!FIIF6 0tS tNia Cf *UTtNI;

tax

.. . . .~~~~~~~~~~~~~~~...... L171-74 197i-79...... 1980-84 L885-89 1990-94 195-199 1971-74 M197-79 1988-t4 1915-89 1998-94 1"5995-88D OfnjoDs INTERNFUcMBN ED cosiComeO COS T COSTESB

Moni car ____s umf =IT m I = BOAToWtile = FI9McCU¶84.4 - It CAPDECREASE

I I~~~~~~~~998-1999:PROACT.31S J 94199019.PSOACTIO.18

HDS-10 22. Under the above ccnditions the funding Capital Structure prospects of the sector lock reasonably sound except for the first two years when a major funding 23. The inability of the sector to generate gap w;!! require substantial government enough internal funding to cover debt service contributions, US$105 million, in current US$, obligations has resulted in accumulated arrears on originating in: an IBRD/IDA adjustment operation debt service which at the end of 1989 were close to of US$50 million and the adjustment portion US$175 million, i.e., about 75% of the country's (US$55 million) of an IDB hydrib operation of arrears, reflecting the impact of the sector on fiscal US$90 million. After this period the funding r"sourcvs aad the balance of payments of the prospects of the sector improve significantly thanks country. It has also negatively affected the capital to the restructured debt service profile and a low structure of the sector, as the debt/equity ratio investment program which result in adequate increased from 44/56 in 1979 to 76/24 in 1989. self-funding of about 50% during the mid 1990s. The prospects of the sector's capital structure, However, such situation might be worse depending however, look brighter as the arrears problem has on the terms and conditions obtained to finance been solved (see para.21), the government makes the gap. In any case, at the end of the decade it is its significant equity contributions (see para.22), expected to deteriorate as the investment and the profitability of the sector improves requirements increase significantly (Figure 21). (para.13) (Figure 22).

Figure 21 Figure 22 FUNDINGPROSECTS CAPITALaTRUCTURE

1Wl OIP4jL93 094 1S7L 1D7? 191U 119392 19 199II £1t" M

EM IUTERjLFUa'INS c onsCOltUTIOIS D AlJ1 DEBT I= ~I5MVBOAF Not? SIC 19901"-91:PAOECTIOI

HDS-11 JAMAICA

ELECTRIC POWER SECTOR JAMAICA POWER SECTOR DATA SUMMARY SHEET 1988

Electric power on thc island of Jamaica comes from two principal sources: the Jamaica Public Service Company, Limited (JPSC) and power plants located at the country's bauxite, sugar, and cement manufacturing plants. JPSC is responsible for around 67% of all electric power consumed on the island. The sample for this study consists solelv of JPSC.

GENE 4AL ECONOMICDATA ELECTRICITYSOURCES

POPULATION '000 2,379 CAPACITY ENERGY AREA '000 SQKM 11 (MW) (GWh) POPULATION PER SQKMA 216 JAMAICAN $ PER USS 5.49 T1EERHAL 4629 1,582 GDP, millions of US$ 3,624 HYDRO 20a 129 GDPPER CAPITA, US$ 1,524 NUCLEAR Oa 0 GDP GROWTHRATE, % * 2.6 GEOTHERMAL Os 0 1988 ENERGY CONSUMPTION OTHER Oa 0 PER CAPITA (kg oil equdv.) 855 IMPORTS O ELEC. SALES GROWTH RATE, x * 6.1 PURCHASES 11 ELEC. CONSUIP. PER CAPITA, kWh 576 TOTAL 482a 1.722 1989 ELEC. SERVICE COVERAGE, % 58 POWEREXPENDITURESIGDP, 2 * 5.5 RESERVE MARGIN 211a 78%a a - 1987 DATA

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 271 GWh EMPLOYEES 1,610 CUSTOMERSPER EMPLOYEE 168 RESIDENTIAL 426 31 TOTAL SALES PER EMPLOYEE, MWh 852 COMMERCIAL & INDUSTRIAL 821 60 BULKSALES I0 0 OTHER 124 9 DOMESTIC SALES 1 100

SECTOR FINANCES EXPORTS 0 TOTAL 1 371

AVERAGE RATE US$IMWh) 121 SYSTEM LOSSES 344 ## 20 OPERATINGMARGIN (WIO DEPR), Z 16 OPERATING MARGLI (WI DEPR), % 36 RATE OF RETURN, 2 6.2 INDEBTNESS, Z 39 DEBT SERVICE COVERAGE, times * 1.5 *average per year since 1985 SELF-FINANCING RATIO, % * 49 # - to other utilitiesnot in the study - as a percentage of available energy JAMAICA

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

The main institutions responsible for electricity supply in Jamaica are: Jamaica Public Service Company (JPS) which is in charge of electric power generation, transmission, and distribuLion;the Ministry or Public Utilities and Transport (MIPUT) which is in charge of rate regulation and financial supervision; and the Ministry of Mining, Energy, and Tourism (MMET) which sets energy policies and fuel prices and performs conservation and fuel supply studies.

The Electricity Authority holds the Government's shares in JPS. Prior to 1975, regulatory functions for the power sector were entrusted to the Public Utiiities Commission, a statutory body. Following its acquisition of a majority of JPS's shares, the Government transferred responsibility for regulating the sector to the MPUT. A close relationship exists between the two entities. JPS provides monthly financial reports to the Advisory and Monitoring Unit of the Ministry, which is closely involved in financial and investment planning for JPS. While JPS's license (as amended in April 1977) vests authority for the setting of electricity rates in the MPUT, the actual procedure has been that JPS fiies proposals for rate adjustment with the MPUT which then analyzes them and submits them to the full Cabinet for approval. This arrangement for rate setting, not uncommon in countries where the utilities are essentially government-owned,has been functioning satisfactorily.

JAM-2 JAMAICA

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

SummWay Figure I

1. After a critical financial period when GROWTHRATES significant government contributions were needed

for operations and other funding needs, a strong 15X.- ._.- ..-....-- _- -- policy of physical and financial rehabilitation has made the Jamaican power sector a solvent lax.-

organization that now provides significant A\ i.. . . \ contributions to the economy and government revenues. In addition, this rehabilitation plan ex allowed the sector to overcome the negative effects . V / \\ .1.\l which hurricane Gilbert (Sept.12, 1988) inflicted on its technical and financial operations. - .l Nevertheless, some improvements in operational 194 1913 L975 1977 1979 11 LO983 1965 1987 1iSt efficiency are still necessary to ensure increasec -RAL CDP - UCT-- YSL sector contributions to the government ano minimal sector investments. 3. An indication of the positive contribution The Sector and the Economy of the sector to economic and social development is growth in electricity consumption per capita. In 2. Except for years when the supply of Jamaica, it increased slightly, from 436 kWh in electricity was restricted because of constraints on 1971 to 576 kWh in 1988 or 1.7% p.a.. However, generating facilities, the pattern of elactricity sales such growth is notable considering that GDP per growth in Jamaica followed that of real GDP capita declined 1.5% p.a., from US$1,973 in 1971 growth at a faster rate. During the last two to US$1,524 in 1988 (Figure 2). decades, GDP remained fairly constant while electricity sales grew at an average rate of 3.0% F:1vure2 p.a.. The spread betwern the electricity demand P growth rate and the rea! GDP growth rate was PERCAPII INDICES 3.6% p.a. in the 1970s and 2.7% p.a. in the 1980sS L98 (Figure 1).

I,,

171 1973 197 1977 19?9 1981 19812 191 1987 1908

+.& OF Po CAPITa - SLD m CatITA

JAM-3 4. Another indication of the positive Figure 4 contribution of the sector to economic and social ELECTRICITYSOURCES development is reflected in the significant increase in the rate of electrification. Electricity service _ ama coverage increased from 30% in 1971 to 58% in 1989. Total customers mere than doubled between . d ...... 1971 and 1989, as they increased from 125 thousand to 274 thousand. The residential sector ll .... tn.. accounted for most of the growth. as residential customers increased from 104 thousand to almost -.....-... .-.-...... 250 thousand.

The ElectricayMarket: Supply and Demand 117M L9741917 199 12 199 1s99 1913 1"I

5. Electricity salcs grew from 827 GWh in 1971 to 1,371 GWh in 1988 (3.0% p.a.) while total electricity uses grew from 985 GWh to 1,722 GWh (3.3% p.a.). The composition of total electricity 7. The electric energy available to the grid uses in 1988 was 25% residential sales, 48% was generated by an installed capacity of 482 MW commercial and industrial sales, 7% other sales, in 1987. About 20 MW, or 4%, were hydro while and the rest losses and own consumption. 462 MW, or 96%, were thermal. This level is 2.3 Commercialandindustrialconsumptionconstitutes times the 1971 level of 212 MW, but forecasts the most important, albeit decreasing (down from indicate this level will fall to around 400 MW in 52% in 197;), component of electricity uses. 1994 because of the retirement of old plants. In Electricity sales are expected to increase from the 1990s, the composition of installed capacity is 1,395 GWh in 1990 to 1,555 GWh in 1994; this expected to be around 5% hydro and 95% thermal implies an average rate of growth of 2.8% p.a. (Figure 5). which is less than that of the historical period (Figure 3). Figure 5 INSTALLEDCAPACITY Figure 3 l ELECTRICTYUSES Sm-..-...-.-.-...- --~~~~..-...-...... -.

- 11111 1971 1974 1977 1919 1952 19091 999 1t992 L1997 1999

...... 1. 00 I

1971 1974 197 t1I9 1993 194 1191 1999 L199 1990

|KIIDC9 =CCO9 6* MO, 0390WI I OWN CONS SO L0O l

I ;Im: PROJECTIONS

6. To meet electricity demand, the sector relies fundamentally on thermal generation. Hydro generation in Jamaica is relatively small, and its share of total electricitv sources decreased from 13% in 1972 to about 8% in 1988 (Figure 4).

JAM-4 Operational Perormae Figure 7

LOSSES/ENERGY AVAILABLE 8. The sector's reserve margin as a percentage of coincident demand increased from 22% in 1971 to over 100% for the late 1970s and much of the 1980s. The apparently high reserve . - . - - margin in the mid-1980s was necessary because of low plant availability which has been improved .- .. - ...... since then because of a successful rehabilitation plan. The reserve margin is expected to decline to . ..-...... - 32% in 1994.

9. Labor productivity, as measured by the customers per employee and sales per employee v 1971 1974 1977 S9t" 193 1986 1989 it 1993 1 1I"9 ratios, is high when considering other countries in 1396-1999:P9EJCTIIS the region but still below that of developed countries. Customers per employee increased from 102 in 1975 to 161 in 1989. Sales of electricity per 11. The collection practices of the sector have employee fell from 657 MWh in 1975 to around been satisfactory. The collection period 537 MWh in 1981 but rebounded and peaked at deteriorated slightly during the 1970s but then 852 MWh in 1988. Both indicators are expected to improved during the 1980s; it increased from 79 remain constant through 1994 (Figure 6). days in 1973 to 89 days in 1981 before falling to about 52 days in 1988. Sector authorities expect Figure 6 the collection period to remain around 67 days EFFICIENCY INDICES during the early 1990s (Figure 8).

Figure 8

:,2"/N~- 'U... COLLECTIONPERIOD

. _~~~~~~~~~~~~~~~~~~~~~'9

488,0GB . I .- .. I, .I .I, I..i..I..I 197i L74 19X7 MGez L982st 1"S M9 L952a IM 19------~ ~

_

1119-1999:~ PtOACfIC ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 111-9MP"ECMM 1777 1714 1777 19 * 1l9S ties 1391 1912 L86 1 92 9 199S.1999 PIOJIC986 10. Electricity losses have been a problem for the sector. Taken as a percentage of gross energy available, they were in the vicinity of 15% in the 1970s, increased to 20% in 1980, and remained around that level throughout the 1980s. Attention should be given to reducing this level in the 1990s (Figure 7).

JAM-5 ProfstabiULy Figure 10

12. The financial recuperation of the sector is UNIT PRICESAND COSTS reflected in its financial return indicators. The rate of return on assets was positive in all years except duaing the early 1980s. Between 1983 and 1988, it was between 6% and 8%. The interest coverage .. .- _.-.- ratio followed a similar pattern, as it exceeded 1 every year during the last 20 years except for . .

during the 1980-82 period. Both trends are *.-W .. expected to continue through 1994 (Figure 9). ._l,_,___.__._,____t.--.____l__l_l_

1971 1*74 Is" 1*98 11*3 1911 1981 1992 1993 9I9

Figure9 CT I* OM=C -8-COSt W I1IPR)C - FRICK WOTA8

RETURN SUMMARY 1999-1999' PWt&tcO,S

Ti9n (<) 9 ~~~~~~~~~~~~~~~~~1471 e3X ,,14. As a consequence of the above factors, the . X 1 l . operating income of the sector as a percentage of .-x/e\ A operating revenues became negative during the 1x t I9X1980-1982 period. After 1982, the sector had a 2 _ 2X steadyI recuperation which has been maintained since then and is expected to continue in the .- , ,,, ., l, ,,, . ., . -.x1 future. Operating income is expected to increase 11 1 9 1 1from 16% in 1988 to about 18% in 1994. The 197* 1974 j977 198 29*3 29*1 19*9 2992 1913 *99* - I NTO,T CM WTI or, mom main factor affecting this pattern has been the share of fuel in operating 'osts, as it reached a peak of 67% in 1982, decreased to 41% in 1988, and is expected to reach 36% in 1994. This development is a reflection of the significant 13. The unit price of electricity was sufficient improvements in plant efficiency (Figure 11). to cover unit cash costs during each year of the period analyzed; however, during 1980-1982, it was Figure I1 not sufficient to produce a positive operating COMPOSITIO.OF OPERATiNGCOSTS margin, as it covered only part of the depreciation cost. In the 1990s, tariff increases in real terms resulting from the government's policy changes of -x ...... ,. April 1990 (both in the level and structure of ] x,X electricity prices) are expected to firm up the financial recuperation of the sector (Figure 10). _

8971 1974 I977 t9* i983 19*6 1989 1992 1995 *99*

m ff89 I"C E3 *12*11 :3 TMES IEC *ElEE CM) = 0ES31hS9S

199t.1"9: P1SRC1t198

JAM-6 7he Sector and Coantry Resources The sector's contribution to the fiscal deficit has historically been rather small. It moved from 0.2% 15. Power sector investments as a percentage of GDP in the late 1970s to 0.1% in the early of total country investments were 3.5% and 4.8% 1980s and then back to 0.2% in the late 1980s in the 1970s and the 1980s, respectively. These (Figure 14). low levels of investment indicate that substantially higher investments will be required in the future Figure 14 (Figure 12). SECTORDEFICIT/0OP

Figure 12

SECTORINVESTMENT/COJNTRY INVESTMENT .. x

ANNUALAVER4GE ANNUALAVERAGE 901

1971-74 101(0SB-84 lOSS3-19

I~ ~~ ~~35 ______Ul______Sector debt and debt service in relation to the country's have decreased, from highs in 1977-78 and 1983 of 10% and 14%, respectively (Figure Sector expenditures, which were 3.3% of GDP 15). during the late 1970s, reached 5.8% and 5.5% in the early and late 1980s, respectively, after an Figure 15 increase in operating costs (Figure 13). DEBTAN DEBTSERVICE INDICES

Figure 13 .4x _......

SECTOREXPENDITURE/O1P 3 13 --......

- - QX . _6K, ... -......

.: o ......

M.W 4t 1 ' 1. *= . _ I J £871 1£97 1075 1177 1,99 1'' II 1915 l1i 2101

1.51

0.Y. A: POII SEMATOTEL017(B 1071-74 107-70 11(14 17T-OT Dl I ITTAI. O1( U.I tw -7:- -RIDIC Pullo

tV or COr _ Chi9 or flUDl E IISUIUElA C3 11JA7

JAM-7 The sector is already making positive contributions Figure 17 to fiscal resources through a schemc which has established a minimum price (US$20/bbl) for the FUNDINGSUMMARY fuel clause billed to non-residential customers TIIIU (xi creating a differential which goes to the government. As the sector starts having taxable , income, it will also make contributions to fiscal revenues like any other industry. Therefore, the ,A Government is now collecting the fruits of sound sector policies. V -l5,,

Funding Requirementsand Sources ., 197L 1174 1177 14. 143 1,11 1989 1992 1915 191189

16. From 1990 to 1994, the sector is expected _ $M +I,CIFCo. -4- In.Y-1.Nw T to require investments of US$441 million (US$88 I$W199: PROJECTIONS million p.a.). Such investments, which had been reduced significantly because of the rehabilitation plan during the 1977-88 period (US$35 million 18. A contributing factor to the financial p.a.), show a sharp increase because of increases in recuperation of the sector has been the decreasing market demand (Figure 16). share of debt service in the composition of uses of funds. It decreased from 50% during the 1975-79 igure 16 period to 46% during the 1985-89 period and is INVESTMENT expected to decline to 32% during the 1990-94 period. Except for significant working capital 146- al 9| Il.schanges in the late 1970s, the main use of funds in __.._._. .._...... __.. _ ....-...... other periods has been for investments. The share for investments increased from 26% in the late 1970s to about 55% in the late 1980s and is expected to reach 64% in the early 1990s ------. .-.-.-...-.. - (Figure 18).

; -llli- | ;]t | 1;>~...... Figure 18l

11974 1177, 1n 14265" 119 a1 91 16" COMPOSITIONOF USES OF FUNDS

111-199: P90401146 -1::.l:

17. The funding condition of the sector over time is reflected by the evolution of the debt service coverage ratio and the self-financing ratio. ,s Both indicators show unfavorable patterns during m1XNo noOlTr the early 1980s. At this time, the sector faced a 1971-74 1n- 1 5-I 10-94 financial crisis and required significant government contributions amounting to US$12 million in 1981. _ 11 ,i1cauW lwnnw *onauicsl

However, the debt service coverage ratio has been IM-1": PIOACTIOMl between 1 and 3 since 1983 and is expected to remain within that range through 1994. Likewise, the self-financing ratio has been greater than 20%, for the most part, since 1983 and is expected to remain so through 1994 (Figure 17).

JAM-8 19. The Jamaican power sector must continue Figure 20 to finn up its successful rehabilitation and start ONF20 preparations for the significantinvestment program COMPOSlONOF SOURCES OF FUNDS envisioned for the near future. The demand for ILWt L18U public funds is expected to become zero as the present Government implements its policy if private participation in sector activities. Internal 159l funding shows an increase during the 1985-89 period. Such financial recuperation is due L fundamentally to the sound pricing policy and the : improved operational efficiencyof the sector. This strong financial position aliowed the sector to, rapidly overcome the negative effects which *11S1 hurricane Gilbert (September 12, 1988) inflicted en tERML FUNOBS a CfSTCOEIjRlUT

on its facilities and operations (Figure 19). 9 Frecu ON _ MT SERYCE

Figure 19 OOMPOSITIONOF SOURCESOF FUNDS S 21. Except for the early 1970s,the sector has maintained a debt/equity ratio between 30/70 and 45/55 thanks to significant equity contributions l1l . 1 1 1 1 from the government. Forecasts indicate that this lm X ratio will increase to about 50/50 by 1994which is adequate. No government equity contributions are lTOesT m 0^" expectedW in the future (Figure 21).

171S-74 9?19-71 L985f4 114S-I 19 SI-94 iws-_9_ l p;; igure 21 MM .t11 FruOs C COUTTLOhTRI go sADA33U'T nE G AWAS Cl FTIMIACIG6AP _ 90I CAPODtECDE CAPITALSTRUCTURE

20. If 1988 tariffs are maintained in real terms 'l_ during the 1990s,internal funding will be unable to cover debt service obligations. The resulting financing gap of 8B1%oduring the 1990-94 period will need external financing and private p,ticipation would be required to cover at least part of such gap if the sector is not to claim fiscal 19P1 1974 1577 19S L13S 1AVI L91 19S9 19f 1"I5 resources; however, it may be difficult to obtain - mulv Mo sm private sector participation, as the projected rate | 11-1,: P13JEtTI01 of return is only 8% while the return on other investments in Jamaica is higher (Figure 20).

JAM-9 MEXICO

ELECTRIC POWER SECTOR MEXICO POWER SECTOR DATA SUMMARY SHEET 1989

The electric power sector in Mexico is dominated by Comisidn Federal de Electricidad (CFE) which, along with its distribution subsidiaryCompafifa de Luz y Fuerza del Centro, produces and distributes almost 100% of the power consumed. The majorityof CFE's installed capacity is supplied by oil-, gas-, and coal-fired facilities. The transmission and distribution network functions at 400, 230, 115, and 14.2 kV, and system frequenicyis 60 Hz, 220/127 V.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 85,440 CAPACITY ENERGY AREA '000 SQKM 1,973 (MW) (GWh) POPULATION PER SQKM 43 PESOS PER US$ 2,461.47 THERMAL 14,779 73,577 GDP, milllons of US$ 195,069 HYDRO 7,760 24,030 GDP PER CAPITA, US$ 2,283 NUCLEAR 0 0 GDP GROWTH RATE, % * 0.5 GEOThERMAL 700 4,650 1988 ENERGY CONSUMPTION OTHER 1,200 7,845 PER CAPITA (kg oil equiv.) 1,305 IMPORTS 624 ELEC. SALES GROWTHRATE, % * 5.8 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 1,035 TOTAL 24.439 110.726 1989 ELEC. SERVICE COVERAGE, 2 86 POWEREXPENDITURES/GDP, % * 2.5 RESERVE MARGIN NA NA

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 15,000 GWh 2 EMPLOY'EES 79,888 CUSTOMERSPER EMPLOYEE 188 RESIDENTIAL 18,813 21 TOTAL SALES PER EMPLOYEE, MWh 1,107 COMMERCIAL 7,781 9 INDUSTRIAL 50,234 57 BULK SALES #0 0 OTHER 11,528 13 DOMESTIC SALES 88.406 100

EXPORTS 1,932 SECTOR FINANCES TOTAL 9

AVERAGE RATE (USS/MWh) 44 SYSTEM LOSSES 15,112 ## 14 OPERATING MARGIN (WIO DEPR), 2 12 OPERATING MGIN (WI DEPR), % 30 RATE OF RETURN, 2 2e1 INDEBTNESS,% 3 DEBT SERVICE COVERAGE, times * 0.8 * - average per year since 1985 SELF-FINANCING RATIO, 7 * -23 - to other utilities not in the study - as a percentage of available energy MEXICO

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

Electricity service in Mexico is under the responsibility of one public utility: Comisi6n Federal de Electricidad (CFE) which has been in operation since 1937. It generates transmits, and distributes electricity on a country-widebasis, except for distribution in the area of Mexico City and environs which are served by Compaflia de Luz y Fuerza eel Centro (CFLC), a former private utility that is now wholly-owned by CFE. CFE is under the jurisdiction of the Ministry of Energy, Mines, and State Enterprises (SEMIP) which supervisef energy-related activities. The Ministry of Finance and Public Credit (SHCP) regulates electricity prices and the financial operations of .tate enterprises while the Ministry of Planning and Budget (S?P) supervises the budget and regulates the contracting and procurement activities of the sector. Finally, the Ministry of Agriculture and Hydro Resources (SARH) is concerned with the regulation of water resources.

As established by the General Law of the Electricity Service, amended in December 1983,CFE has an Administrative Council (Junta de Gobierno) as the governing unit in its organizational structure, with overall corporate responsibiPty for company affairs. Its Chairman is the Minister of SEMIP, and its other members are the Ministers of SHCP, SARH, SPP, the General Director of the National Government Oil Company (PEMEX), and three labor delegates.

During its 50 years of existence, CFE has extended electricity service across the entire country, reaching high rates of electrification. CFE's distribution activities are carried out by 14 geographical regional offices with a limited degree of autonomy. Since the early '70s, an important issue confronting the Mexican power sector has been the Government's policy of subsidizingelectricity rates. The electricity price issue refers not only to rate levels but also to the tariff structure, as rates are not in line with the cost of supplying electricity to each class of consumer. MEXICO

ELECTLIC POWER SECTOR

EVOLUTION. SITUATION, AND PROSPECTS

Summary During the 1972-82 period, power consumption grew 8.9% p.a. while GDP grew 6.1% p.a.. During 1. The correlation between the power sector the 1982-88period when GDP grew only 0.2% p.a., and the economy is particularly significant in the power consumption grew at the diminished rate of case of Mexico. The power sector has been an 4.9% p.a.. When the economy has been growing important contributing factor to economic and smoothly, power sales have also shown positive social development. However, it has also been a signs, and when the economy has slowed, power heavy burden on the economy, as it has had a sales have responded according;y;the most difficult significant share of the country's debt and the fiscal years for the sector coincided with the extreme deficit, basically because of the need to serve a macroeconomic uncertainties of the early 1980s, growing market demand while electricity prices especially after the foreign exchange gap of have been held below general consumer prices. 1981/1982. The spread between the electricity The 1982 debt crisis of the country clearly affected demand growth rate and the real GDP growth rate sector results as shown by peaks or valleys in the was 2.4% p.a. in the 1970s and 4.8% p.a. in the main performance indicators during the 1982-1984 1980s. period. The sector's contribution to the fiscal deficit will continue to be significant in the future 3. The positive contribution of the sector to if distortions in electricity prices are not corrected. economic and social development can be seen by the growth in electricity consumption per capita. T7heSector and the Economy In Mexico, it has always been significant despite the negative fir.ancial indicators and the 2. Electricity demand in Mexico over the last unfavorable economic conditions. It maintained two decades has followed closely that of real GDP at a faster rate. Both show significant increases in Figure 2 the 1970s,a significant drop in the early 1980s,and PERCAPITA INDICES a recuperation since the mid-1980s (Figure 1).

Figure 1 ,n11 GROWTHRATES

ISX~~~~~~~~~~~~~~~~~S 1'; '~~~~~~~~~~~~~~~aI - M'

197 1 973 9195 $977 1979 1981 191$ 1965 1997 1989

-9117 9S17 99 it11 9519 " ased padteddrigteps w eae 1971 1972 1979 1977 1979 1961 1963 1981 1,87 198 a steady upward trend during the past two decades -ML OlF + 1W?ICI1 'MI even during periods of econonmic crisis; it increased from 428 kWh in 1971 to 1,035 kWh in 1989 (5% p.a.). During the same period, GDP per capita

MXC-3 had moderate overall growth, as it incrersed from Figure 3 US$1,751 million to US$2,283 million in 1989 ELECTRICJTY USES (1.5% p.a.). However, the GDP per capita indicator demonstrated different trends in each . decade. It increased +.1% p.a. during the 1970s until it peaked at USS2,622 million in 1981; then, ... it decreased 1.7% p.a. during the rest of the 1980s (Figure ').

4. Another indicator of the positive contribution of the sector to economic and social

development is the degree of electrification. 1l 7 917

Electricity service coverage in Mexico increased * IS$CETIAL P=1 CCMC41 Cs'r E5 owk

from 50% in 1971 to 86% ii; 1989. The total O C C OSSU number of customers increased nearly three times 1 C between 1971 ano 1989, from 5.7 million to 15 million. This substantial increase in clientele primarily came from the residential sector, which 6. To meet these electric energy needs, accounted for 88% of total customers in 1989. Mexico has relied mainly on thermal generation with support from hydroelectric power. Sector 7TheElectricity Market: Suppvy and Demcnd authorities project that the Mexican system will remain predominantly thermal. The thermal share 5. In 1989, total electricity usage was 111 of total sources of electricity is forecast to increase TWh, which is about 3.8 times the level of 1971 from 67% in 1989 to 79% in 1997 while the share (29 TWh). It is expected to grow to 179 TWh by for hydro decreases fro, - 22% to 17% (Figure 4). 1997, i.e., about 6.2 times the level of 1971 or at a rate of growth of 4.9% p.a. versus 7.7% p.a. for the Fi,ure 4 historical period. However, sales are projected to accelerate in the future, as they would grow 6.7% ELECTRICITYSOURCES p.a. between 1989 and 1999, from 88 TWh to 168 TWh. This rapid future growth will be a result of Mexico's aggressive industrialization plan and significant efforts to provide increased service to the population. The composition of electricity consumption reflects industrialization. The share for the industrial sector increased from 44% in 1971 to 45% in 1989 and is expected to increase to 49% in 1997. In 1989, the composition of total 1971 1974 9197 190 1983 1 95i1i992 1985 1992 electricity uses was 17% residential sales, 7% - SY07DR ThEI1 ES!NsOth8R. commercial, 45% industrial, 10% other, and the Cl OI51 Imp"Is rest losses and own consumption (Figure 3). 1998-1I9 PRCJECTIO4S

MXC-4 7. The electric energy available to the grid Figure 6 was generated by an installed capacity of 6 GW in 1971 that increased to 24 GW in 1989 (4 times) EFFICIENCYINUCE8 and is expected to reach 39 GW in 19 '1.6 times a5@*U-TOM IN the 1989 level). During the 1990s, the composition ., U , of installed capacity is expected to change from 32% hydro, 60% thermal, and 8% other in 1989 to 27% hydlro, 70% thermal, and '% other in 1997 (Figure 5).

Figure S INSTALLEDCAPACITY 1, . .i . . .. 1 ...... 1z1~~~~~~~~~~~~~~~~~~~17 1974 19V a"*4 'Lss' '11 141 Lots m19 19,9 * -4-- CUIIOI/UDLOSZI -DIC SItU IHA5Z

...... ---...... ,, ,, C

10. During the last two decades, electricity losses as a percentage of gross available energy remained within the 11% to 15% range. However, the favorable trend of the 1970s was reversed X97: 174 9s7 s918 1983L9* 1li9 1991 Ls's 1 during the 1980s, as losses increased from 12% in

- HyOIO 3t ISWA '4IO0TERMAL 1980 to 14% in 1989. Electricity losses are SSD H GOtHtZ _ NEWClEtOilMM expected to decrease to 11% by 1998 (Figure 7).

ISlI-I59S: PI£.,1C71911 Figure 7 OperationalPerformance LOSSESENERGYAVLABLE

8. The sector's reserve margin as a ......

percentage of maximum coincident peak demand six.. . . was relatively high for a predominately thermal ...... system. It moved from a low of 16% in 1974 to a peak of 54% in 1983. It is expected to decrease to ...... around 30% in the late 1990s. x.

9. Labor productivity, as measured by the1 t customer, per employee ratio and the electricity sales per employee ratio, is high compared with t .. E..i..E..I..I..E..fl.I..I other countries in the Latin America and the 1X7: 194- P19J7CSl-XS Caribbean region. After dropping from 180 in 1971 to 156 in 1981, the customers per employee indicator increased to 188 in 1989. The electricity sales per employee indicator increased from 743 MWh in 1971 to 1,107 MWh in 1989. Both indicators are expected to continue their positive trends, as the customers per employee ratio is expected to reach 206 in 1994, and the electricity sales per employee ratio is expected to reach 1,346 MWh (Figure 6).

MXC-5 11. The collection period shows that the Figure 9 sector has made an effort to improve its collection RETURNSUMMARY practices in the 1980s. The collection period deteriorated from 93 days in 1971 to 135 days in 1979 before falling to 83 days in 1985. It has remained between 70 and 90 days since then and is .m expected to improve to 60 days during the early 1990s (Figure 8). ,X

Figure 8 S. COLLECTIONPERIOD

1911 174 1977 1*44 1993 191*6' 19 * IM 1997 1118

- K471:11t CCU - 144 or UTIU4 *10-., . , ~-~*-....-.-..-...-...-...l-1IE5C4 Yen :W t i1-19)9: PPUOJECTIO1S

I. v -*~v . - -- -. t------13. Historically, unit prices were greater than unit costs for the most part; however, in the 1980s,

4...... the operating margin was reduced considerably. The unit price of electricity declined from 47 US$/MWh in 1971 to 28 US$/MWh in 1982 and

* . . . I . i .| . , .§ s | then increased to 44 US$/MWh in 1989. At the l 91£14 191?7 19l 1912 L4I4 1984 Lou3 191s *99 1991-1999:PROAMOJRCIS same time, the unit cost of electricity fluctuated very little. In the future, the operating margin is expected to increase, as the unit price is expected Profitability to reach a level of around 62 US$/MWh by 1996 while the unit cost increases to only 45 US$/MWh 12. The poor financial performance of the (Figure 10). sector is reflected in its financial return indicators. The rate of return on assets was positive except for Figure 10 1976, 1982/83, and 1987. However, it decreased UNITPRiCES AND COSTS from 5% in the early 1970s to 2% in 1980 and NIPCS DCT remained around 0% throughout the 1980s. The .s 1 lowest rate of return on assets recorded was -1% in _ Go . .- --.--- - 1976. In the future the rate of return is expected ...... to increase to around 8% by 1996. The interest ...... coverage ratio was less than 1 throughout the last two decades but is expected to be several times .. greater than 1in the 1990s(Figure 9). ------I--.--

£71 174 1977 *114 193 £m 1IM ME 1s9 1t"

COOTwo DURCse * coal w41 36710- PRICEOW* 1*1

MXC-996 PJOCTI

MXC-6 14. The percentage of operating revenues respectively, in 1987. In the future, the sector's coming from residential customers has been operating cost composition is expected to be: declining while the percentage from industrial personnel 15%, materials and services 8%, fuel customers has been increasing. The composition 33%, depreciation 16%, and operating income of operating revenues in 1989 compares with that 28% (Figure 12). of 1971 as follows: residential, 17% vs. 28%; commercial, 17% vs. 25%; industrial, 56% vs. 39%; Figure 12 other, 8% vs. 8%; and cxports, 2% vs. 0% (Figure COMPOSITIONOF OPERATINGCOSTS

Figure I1Iso

COMPOSITION OF OPERATING REVENUES c ,

2St

ux . .... I... I...... I...... s1l71j1 @1 1e1s1 n imc af -Pg ...... 3 gkt9UE

G |X ...... ;;:rEe E b*ttlE S IEIDE 171 1974 1977 1980 9193 11419 1939 us9a 1995 11 INI O 7 9RC E~ D1P8EC MJ TAXES ROFE IMP 7EC rEI MeTESAI = PERSCMEIer OfPEIEXPOSES

ex 1S958-799 pIGJeCIOtas 1971 MR7 1911 1933 19113 1986 1985 199? 1995 1,998

i stx SALES Cl Orkle 0 ErOFIS The Sectorand CountryResources

19909-9S9:PROJECTION 16. The power sector has been a tremendous burden on country and government resources. 15. The operating income of the sector fell Power sector investments, as a percentage of considerably over the last two decades. Operating country investments, were 4.5% and 4.4% in the income as a percentage of total operating revenues 1970s and the 1980s, respectively (Figure 13). was 2% in the early 1980s and 5% in the late 1980s. These levels are significantly less than the Figure 13 19% the sector averaged in the early 1970s. SECTORINVESTMENT/COUNTRY INVESTMENT However, it is expected that the positive trend started in the late 1980s will increase the share for operating income to 28% in 1996. Because of increased thermal generation and a government ANNUALAVERAGE policy to phase out all fuel subsidies, fuel costs as ANNUALAVERAGE a percentage of total operating revenues has been increasing since 1981 when it was 12%. It reached 35% in 1989. Until 1982, the most significant component of operating costs was personnel, as it * 4.5 4.4 t reached 61% in that year after a period of \W Y constantly increasing share which started as 40% in 1971. Other costs maintained an almost constant pattern until 1983 when fuel and depreciation costs started to grow reaching peaks of 36% and 32%,

MXC-7 Sector expenditures, which were 2.5% of GDP Figure 15 during the second half of the i970s, reached 2.8% SECTORDEFICIT/00P in the early 1980s before decreasing to 2.5% in the later part of the decade after a drop in investments 1.4x and interest payments (Figure 14). I.1

Figure 14 SECTOREXPENDITURE/GO1P

1.1w 1411-74 1%75-74 198*84 1941.818

1971.74 i97-P 1.1-1 110-11 The pattern in power sector debt as a percentage of country debt shows a favorable trend because of msmopwo x o ND n the l--ge government contributions and the significant conversion of debt into equity in the 1980s. Sector debt as a percentage of country debt decreased from 24% in 1971 to 1% in 1989. Since the sector has been dependent on During the same period, sector debt service, which government assistance during the last two decad ,s, was about 18% of country debt service in 1971, especially in the mid-1980s, the sector's increased to 54% in 1980 and then decreased to contribution to the fiscal deficit as a percentage of 7% in 1989 (Figure 16). GDP increased fiom 0.1% in the early 1970s to 1.2% in the early 198., before falling to 0.6% in Figure 16 the late 1980s. The rapid increase in the sector's DEBTAND DEBTSERVICE INDICES contribution to the fi: .±: deficit in the early 1980s was due to the indirect subsidv of fuel added to * such deficit; this subsidy constituted 1.2% of GDP '"-...... in 1979 and 2.3% in 1983 (Figure 15). .--... . .

I.. .. -...... - ; ;.

ox 1971 1973 1975 1777 1979 1981 1983 1985 1977 198

M4 -- 8

8: POWER8CM87'107L lOOT 8: 80118 1489 8884C8'OMO 0187 8E01CE

MXC-8 FundingRequirements and Sources Figure 18

17. The sector investment program displays FUNDNG SUMMARY two distinct patterns. It shows an increasingtrend Timn during the 1970s (average of US$1.3 billion p.a.). and after reaching a peak in 1981(US$2.7 billion), it shows a decreasing trend for the remainder of the 1980s(US$1.6 billion p.a.). It is estimated that the power sector will require about US$24.8billion (US$3.5 billion p.a.) between 1990 and 1996 to . fund its investment program (Figure 17). .- -4W

Figure 17 1171 174 1177 11i 118 11U 1813 1135 IsS i *981Sla3II~ Col. +- SUI-FI1 PATIO INVESTMENT ijlt9119 #3lJECT,C1S I>XII..119'9 113_ _

4 19. The composition of uses of funds shows I.~ - ...... a decreasing share for investments and an increasing share for debt service. The share for . . .--.--...... _ .... investments decreased from 50% in the early 1970s to 33% in the early 1980s and then increased to 49% in the late 1980s. The increasinigtrend of the .13111.74 11?? 1.46 1,5 s . . . .late 1980s is expected to continue into the 1990s, L911 X174 1St7 &9JMe A 19| § &b96i It" ltMA as investments are expected to constitute 84% of -IIXIIETWq uses of funds. Except for minor working capital

__9___"_ _j__c_ _ _ .. changes, the main use of funds was for debt service which increased from 50% during the 1971-74 period to 67% during the 1980-84 period. Debt 18. Both the debt service coverage ratio and service payments fell to 48% during the 1985-89 the self-financingratio show the sector's problems. period and are expected to fall to 14% during the 'Te self-financing ratio shows a decreasing trend 1990s (Figure 19). during the 1970s and an increasing trend during the 1980s with rapid drops and spurts of Figure 19 recuperation. However, it remained negative, COMPOSITIONOF USES OF FUNDS throughout most of the last two decades. The self- financing ratio is expected to increase and remain around 60% during the 1990s. As regards the | sector's debt servicecoverage ratio, except for 1986

and 1989, it was less than 1. It is expected to . ' increase from 2.9 in 1989 to 4.2 in 1996 after peaking at 7.1 in 1993 (Figure 18). l

MXC-9 20. The pattern in debt service reflects, in a Figure 21 deferred manner, the share for borrowings plus COMPOSMONOF SOURCESOF FUNDS decreases in working capital in the mix used to ', TRAMa,Iu iM14 fund sector tieeds. This share moved from around BILO 1,9,, 73% in the ear'y 1970s to almost 81% in the early . 1980s and then decrcased to 23% during the late c 1980s. With positive internal funding again in the late 1980s, the finv.ncial prospects of the sector are 4 strong given the implementation of correct 3 electricity prices (Figure 20).

Figure20 COV,POSMnONOF SOURCESOF FUNDS l M 1993 it" 097 Im I iPrlERALF_9S C- CIII l1RSUIMS I 1.C 1 o- Il P -0I _I I IMICE

Capital Structure

,b 1 11 Thet:::'::X significant 1:::::::1 assumption iQ I 122. of debt by the 29A 1 1g 1 1Wl11 | Government has allowed the sector to have a

1971-74 1975-79 A19-0-4 191-8i 194-94 9 reasonable debt/equity ratio of around 60/40during PF--4OS 0 the 1970s and the early 1980s. During the late CO INTERNFuMING C3 CuSItcoxtSI, Co 9WT cOrnm 1 1980s, the debt/equity ratio registered a sharp IABORR.iOhA I= FAMCMtUGAP WU"R CAPTICUSE decline due to abnormally high government

1995-199''.9ftT10NS | contributions (Figure 22).

21. Should average 1988 tariffs remain in real Figure 22 terms during the 1990s, the funding mix of the I I sector would not be satisfactory. Internal funding of US$8.1 billion will cover the debt service requirements; however, it will leave a substantial financing gap of around 81% in 1996 requiring financial sources external to the sector. Under such conditions, it would be difficult for the sector _ f- to obtain sufficient funds from capital markets because of the poor return on investment, only 2.1% in 1989 (see para. 11), unless price O . . . . . adjustments are fully implemented (Figure 21). 1971 1 1977"74 LSOO 1983 1MA 199 1099 1t 19I |~~~~~ ~M_ UITv Em onT

mx o999-1991: PSAJETA39T

MXC-l0 NICARAGUA

ELECTRIC POWER SECTOR NICARAGUA POWER .SEC'FORDATA SWAMARY SHIEE'T 1988

In Nicaragua, thc hi.,iitu(o Nicaraguense de Energfa (INE) is the governrncnt utilil ik-.S-ponsiblcfor clectricity gcncration, ilniwoiksion, and distribuLtion. Nicaragua is connectCel to I-nodf(lulaS a ( "iai( 1ica via 230 kV' lincm

GENERAL ECONOMIC DATA ELECTRICITYSOURCES

POPULATION 9000 3,623 CAPACITY ENERGY AREA '000 SQKM 120 (MW) (G1l'h) POPULATIONPER SQ1? 30 NEW CORDOBASPER USS 191.67 THERMAL 198 387 GDP, milIlorns of US$ 1,227 HYDRO 100 543 GDP PER GAPITA, US$ 339 NUCLEAR 0 0 GDP GROWTH RATE, % * -4.3 GEOTHERMAL 35 190 1988 ENERGY CONSURPTION OTHER 0 0 PER CAPITA (kg oll equiv.) 252 IMPORTS 84 ELEC. SALES GROWTH RATE, X * -1.0 PURCHASES 12 ELEC. CONStJMP. PER CAPITA, kkh 263 TOTAL 333 1.216 1989 ELEC. SERVICE COVERAGE, % 43 POWEPEXPENDITURES/GDP, % w NA RESERVEMARGIN 94 39%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOM_FRS'000 276 GWh % EMPLOYEES 3,651 CUSTOMERSPER EMPLOYEE 76 RESIDENTIAL 330 35 TOTAL SALES PER EMPLOYEE, MfWh 261 COIffRCIAL 188 20 INDUSTRIAL 256 27 BULK SALES #0 0 OTHER 178 18 DOMESTIC SALES 952 100

SECTOR FINANCES EXPORTSTOTAL 9542

AVERAGE RATE (USfMfWh) 50 SYSTEM LOSSES 207 ## 17 OPERATINGMARGIN (WIO DEPR), Z 47 OPERATINGMARGIN (WI DEPR), % 47 _ _,__ RATE O.' RETURN, % 70.2a INDEBTNESS, 7, 46 DEBT SERVICE COVERAGE, times * 2.4 * - average per year since 1985 SELF-FIVANCING RATIO, % * 25 - to other utilities not in the studx - as a percentage of available enlet p- a - on non-revalued assets NICARAGUA

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

Before 1958,electric power in Nicaraguawas provided by several private and municipal diesel generated utilities that were established in the main cities. In 1958, the government, by means of Empresa Nacional de Luz y Fuerza (ENALUF), initiated an e:e. trification program throughout the pacific coast, and two thermal plants were installed in the city of Mana-ua. The first transmission lines were also installed in the main cities along the pacific coast.

During the late 1960s and early 1970s, the country constructed the national interconnected system, which linked the north and northwest areas of the country. By 1979, electricity was generated by Empresa Nacional de Luz y Fuerza (ENALUF), a government-owned utility, and distributed by 12 cooperatives and municipal companies.

In 1979, all electricity services were nationalized, and the Instituto Nicaraguense de Energia (INE) was created as the autonomous government-ownedagency responsible Jorthe formulation and planning of energy policies and generation, transmission, and distribution of energy in Nicaragua. INE reports directly to the President of the Republic and is under the authority of a Ministry-Director, who is the institution's legal representative.

INE follows a two level organizational structure. The first is institutional and provides technical and admininistrative staff support to the decision making process. The second is managerial and responsible for the operation of the utility.

Tariffs do no conform to a marginal cost approach. During this last decade, tariff increases were less than inflation, thus 'egatively affecting the utility's financial position.

NIC-2 NICARAGUA

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Summary The Sectorand the Economy

1. The status of Nicaragua's electric power 2. During the last two decades, growtl in secto; was greatly influences; by tne country's electricity sales has followed growth in real GDP adverse economic situation, as evidenced by thc at a faster rate. When GDP declined significantly downturn in demand for electricity from the in 1979 because of the war which inflicted severe various sectors of the economy. Wl'hilethe number damage on the country, especially the industrial of industrial customers increased nearly 4 time in sector, electricity sales followed. The economic the 1980s, the absolute level of sales to the woes that followed in the 1980s triggered a cutback industrial sector remained fairly constant. The in energy consumption that caused electricity sales inflow of borrowings to the sector, which had beer, to grow at an average rate of 2.8% p.a. between rising steadily during the 1970's, began to decline 1980 and 1989. In the 1970s, sales grew 5.8% p.a.. in 1981 when international lenders, alarmed by the The substantial decline in sales in 1973 was the debt crisis, made sharp cuts in loan disbursements. result of the earthquake that leveled Managua in Over the past decade the sector's financial Decer, iber 1972 and inflicted severe damage on the situation worsened due to the burden of debt sector's distribution system and temporarily service payments which absorbed a considerable disconnected 38,000 subscribers. The spread share of internally generated funds and left a between the electricity demand growth rate and the declining contribution for investment. Internal real GDP growth ra,d was 5.4% p.a. in the 1970s funding fell in the late 1980s, as real t.ariffs and 4.8% p.a. in the 1980s (Figure 1). declined substantially. The sector is aiso f iced with poor labor productivity and an increasing Figure I level of electricity losses. GROWTHRATES

.-...... a...... , , ...... ,I......

1 971 I Y73 1975 1979 19<11 993 19195 9e? 1919

- RI*. up - 4- IC.I1CITY ISL

NIC-3 3. The positive contribution of thc sector to 241%residential salcs, 15a,' commercial sales, 21% economic and social development can be seen in industrial sales, 16%' other sales, 2% exports, and growth in electricity consumption per capita. the rest losses and own consumption. Despite the Between 1971 and 1978, consumption per capita growth in the number of industrial customers, the increased from 220 kWh to 339 kWh, or 6.4% p.a., share for industrial sales dcclinec from a peak of while GDP per capita rcmained rclatively constant. 40% in 1973 (Figure 3). In the 1980s, consumption per capita remained relatively constant; however, this is significant F"igure 3 considering that GDP per capita declined from ELECTRIOTY UeES US$516 in 1980 to USS318 in 1989, or 5.2% p.a. (Figure 2).

Figure 2 PER CAPITAINDICES

'N ~~~~~~~~~4~ ~

-571 1974 1977 199 1909 1161l 1799 1192 L995 1990

* RES2EIrI E3E CC' 4EIILCZ 'OJ1 4SIMt BX t's'LES IN~~~~~~ ID~ O-Z1t~~~~~~~~^ 1X'B2-Sf 7_"~CtS 1tOSS ZN ~~~ ~ ~~~~~~~~~~e tiNl * - lW IS~~~~~~~~~~~~~~~~~~~~~~~~~~17-1999:PU4Ctt 192

s9 s* § 2 r I | I l | | I w I X I | { | b 6. To meet such electricity demand, the sector 1971 1972 1971 1977 1979 9991 1992 199S I L999 relies on a hydro-thermal-geothermal mix. The composition of total sources of electricity changed from 28% hydro and 72% thermal in 1971 to 41% hydro, 28% tliermal, 29% geothermal, 1% 4. Another indication of the positive purchascs, and 1% imports from Honduras and contribution of the sector to economic and social Costa Rica in 1989. Nicaragua began using its development is tihe rate of electrification. In considerable geothermal potential in 1981. In Nicaragua, electricity service coverage increased 1977, the share for hydro fell to 11% because of from 30% in 1971 to 43% in 1989 and indicates unfavorable hydrological conditions (Figure 4). that much remains to be done, as this level is one of the lowest in the region. Total customers of Figure 4 electricity service increased from 104 thousand in ELECTRICITY SOURCES 1971 to almost 285 thousand in 1989. The greatest increase came from the industrial sector, as industrial customers increased from 651 in 1971 to.-.-. 2,300 in 1989......

The ElectricityMarket: Demand and Supply

5. In 1989, total electricity uses were 1,312 ," GWII which is 2.4 times the 1971 level of 541 - 91 GWh. Electricity sales increased only 2.1 times, or 1971 1974 1977 1999 1993 1919 1919 1 199n99 .999 4.3% p.a., during the same period because of more - "Yoko M IERM^ S 9SEOTHE99M C UCLEt rapidly increasing electricity losses. In the future, OfHER C) PtR;.ASES sS lMORIS electricity sales are forecast to increase an average of 5.5% p.a. and reach 1,707 GWh in 1999. In 1989, the composition of total electricity uses was

NIC-4 7. The electric cuerg!y availablc to the grid was Figure 6 gencrated by an installcd capacity of 369 MW in EFFIGIENCYINDICES 1989. This level is almost 2 times the level of 1971, 188 MW, and is forecast to increase to 595 .U -. ,d_ MW in 1999, i.e. 1.6 times the 1989 level. In 1989, 100 MW (27%) were hydro, 199 MW (54%) were thermal, and 70 MW (19%) were geothiermal (Figure 5).

Figure 5 , 1. INSTALLEDCAPACITY

7W-l- _ 1974 1l77 1960 1909 19fl 1909 1W? 1999 1918

6i ...... _ r CTO9_ S MLO?U II1C IIALU/13f I

Su - .,.., ...... ,_...... 1 ..19918-lt9: ., | CJICTQION

*"I5S P 10. Electricity losses have shown an increasing

1971197419771999198611891993ig~ o,.available, they grew from 9% in 1971 to 19% In 1971 19?4 L97? 190e D1,83 &gogto" 1992 1993 L998 1989. This increase resulted because the lack of _ IIYDIO M th9IRMM tf 3ECRI access to financing sources obstructed replacement 9mmnaw n I2!I _ (W-01IOEIP 3 and maintenance of transmission lines. In

199a-:119: PI)^tO" _addition, the lack of adequate maintenance, obsolete lines, fraud, and illegal connections to the grid adversely affected distribution. In the 1990s, Operational Performance losses are expected to be around 15%; this level is still too high and in need of corrective action 8. The sector's reserve margin as a percentage (Figure 7). of maximum coincident peak demand was high in the early 1970s, between 65% and 104%. Figure 7 However, it has decreased since then and is LOSSES/ENERGYAVAILABLE expected to remain at 59% in the 1990s.

9. Labor productivity in the sector has been poor. After the customers per employee and sales .. f...... per employee indicators increased from 65 and 291 MWh in 1971, respectively, to 92 and 464 MWh in 1977, the sector increased its number of employees . . faster than its customers and sales increased. This resulted because the electric power sector was x ...... nationalized after the armed conflict of 1979. As a consequence, all employees of rural cooperatives ex ,,4 and municipal utilities became INE's employees. 7 1 I i I I , 1971 1974 19X7 1960 1969 1W" 191 1092 1915 19 In addition, INE also absorbed combatants who 199-1919: did not immediately become part of the army. As a result, both indicators fell substantially, to 70 and 261 MWh respectively, in 1981. Since 1981, both indicators have been relatively constant. The 1989 levels of 83 and 292 MWh are substantially below those of other countries in the region (Figure 6).

NIC-5 11. Because of the civil strife in 1979, the Figure 9 sector's collection period lengthened considerably. RETURNSUMMARY It increased from 76 days in 1978 to 167 days in RETURN UMA 1979, remained high for 3 years, and then,

decreased to 69 days in 1983. as the sector - improved the efficiency of its collection practices. Although data for the 1990s is unavailable, sector VA authorities expect the collection period to decrease because of the elimination of distortions in energy prices, the recovery of real salaries, and inflation - control measures (Figure 8). ,.. .,>. . .1.. l

Figure 8 1911 1974 197 1996 1903 17S 1909 1913 19S5 19"

COLLECTIONPERIOD - I9I1MT CO -4- SI WI OIIYC lttt ~~~~~~~~~~~~~~~~~~~~~~~~~~~19-1399PIOACTIOKS

...... 13. The finaincial performance of the sector is further explained by the fact that electricity tariffs were sufficient to cover costs and generate a 193 .. -. - - ...... - --- positive-- operating margin in every year except 1987. However, the sector's operating margin se- ...... declined from 24 US$/MWh in 1981 to -8 US$/MWh in 1987 before increasing to 24 US$/MWh once again in 1988. In 1988, the price I l . l . , l . , . ,.one ,, MWh. ,of of electricity was US$50 (Figure 10). 1971 1974 1977 1999 1O S1 191 1tol 1SO 1994 1993-1i9l: 9tOJ1CTOSS Figure 10

Profitability UNITPRICES ANDCOSTS 1999 tt# 12. The financial condition of the sector was sound in the 1970s but deteriorated in the 1980s. .t -- With the exception of 1987, the sector's rate of return was positive, though erratic in the late 4 - .-..- 1980s because revaluation of assets and operating income did not follow inflation patterns. ------Generally, the rate of return in the 1980s was lower than in the 1970s. From 1972 to 1983, the ,, ,,l, . l . I . sector's interest coverage ratio was between 1.3 and 1971 1974 1977 199 4983 1994 L1SS 1992 IS9 19"

3.8 (Figure 9). -4- COSTWOl/ vIDC -4- COO?W me -+- t3St Il/I

1994-1199: PROJECI91S

NIC-6 14. The composition of the sector's operating Figure 12 revenues in the 1980s was fairly constant. In 1988, 28% came from residential sales, 13% came from COMPOSITIONOF OPERATINGCOTS commercial sales, 30% came from industrial sales, and the rest came from other sales. Despite the increase of 3.8 times in the number of industrial customers between 1980 and 1988, its share of . .^. revenues only increased 1% (Figure 11). ," .

Figure 11 COMPOSITIONOF OPERATINGREVENUES e,,,,,,,,,,,,,,,,,,,,.; ._ 1971 07 19131 1169 £11 mo'ce IN( EuaDE c TAXjS soFE lox - ...... ,

t %- I999:FPJECTIOIS lox ._. .".. ., ..l._._, '.._f8:'...... _._.._.....,, ...... --. . The Sectorand CountryResources

16. The sector has had a significant claim on

I7O 1977 1983 19819 119 fiscal and country resources. Sector investments as m RfSOEh"vAL I COMECAL r IIUSTIAL a percentage of country investments were 6.5% in MM 81kK SATES = OIHER r WxpotlS the 1970s and 5.0% in the 1980s (Figure 13).

1 99-1999: FROJECTOSS Figure 13 15. As a result of tariff levels, the operating SECTORINVESTMENT/COUNTRY INVESTMENT income share of operating revenues declined substantially in the 1980s, though remained positive except for 1987. After remaining between 18% and 38% in tie 1970s, it fell to 3% in 1985 ANNUALAVERAGE ANNUALAVERAGE and after increasing in 1986, fell to -90% in 1987. The main reason for the drop from 38% to 18% from 1976 to 1977 was the increased fuel costs because of unfavorable hydrological conditions. Fuel and personnel are the main cost components. In 1988, the composition of operating costs was 29% fuel, 11 % personnel, 11% other expenses, 2% electricity purchases, and 47% operating income (Figure 12).

NIC-7 Scioi c.xApenditues as a percentage of GDP witlh lie 1970U. It liad a 1wal, of 44" i: 1985 increa;'d from 2.50/S in the late 1970s to 3.3% in (Figure 16). lhl.ceaily 198Xsheeausc of a substantial incrcasc in ce-sli operating expenses (Figure 14). Figure 16

______0EBf ANO L)DU SEi1VWCir-.INtICIL.S Figure 14 .c. SECTOREXPENDITURE/GDP

3 v.. 2~ 30>-91 TTf 29 ,! \

tt SK1 ~~~~~~~~~~~~~~~~~~19711973 1973 lIT? 1971 199s A9J 199n 1997 JS1 HO - 91't ~M-. tl '1s,J9{i-74f op LxmL 1975-79 mxsu199asG4 99GS-89 I t; %d ,, o- rtE 9M119t0£9fl931 9? 19118151' tiP S99711t;'7J^

Funding Requirements anid Sources

The sector's deficit as a percentage of GDP 17. A total of USS274 iiiillion was iinvested in increased to 0.5% in the late 1980s, as internal the sector between 1972 and 1987. 'Phis level is funding required to meet investment and debt equivalent to 138%Xof interinal funding. While service needs declined (Figure 15). investment levels show an increasing trend in the 1980s, the maximum level of IJSS21 m.illionin Figure 1S 1985 fell short of expenditures on construction SECTORDEFICIT/GI1P recorded in 1974, 1975, and 1978 (Figure 17).

Figure 17

5Ki 4 INVESTMENT

9] 419ILLION 1999 us-

8.3/.ad .

J.- 22

1971 1974 1177 1199 1909 11996 1811 1993 I99 1999

M I WES'"9ll

Sector debt as a percentage of country debt , l9WC1I7,3 declined from 21% in 1972 to a little more than 1% in 1988. This occurred because international lenders, alar med by the debt crisis, made sharp cuts in loan disbursements in the 1980s. However, sector debt service as a percentage of country debt service increased somewhat in the 1980s compared

NIC-8 18. fIhcfun(Jing condition of the sector cant be FIgure 19 summarizcd by thc debt service coverage and self- financing ratios. Aftef favorable levels in the late 1970s and carlv 1980s, both indicators began a marked deteriorationi in 1984 that coincides with increascd dehb scAvicc payments and decrcasing 1 intcrnal funding resulting from the decline in real tariffs. TIlc negative indicators in 1973 and 1974 J resulted becatisc of damage from the December -7 1972 carthquake that temsporarily disconnected tx many custonlers and reduced internal funding ex X ae oA

(Figure 18). K x71-4 1 1-71 198"@4 1985_1 isto-4 1993-_ PERIOe

Figure 18 _W CP L8cIAIC l184rE?a =s 8KEWRUIW

FUJNDING SUMMARY 1 PROJ£;1 1lfiU (K) ______-r-______- 88.x 20. Internal funding as a share of total sources l ; of funds decreased substantially in the late 1980s. WA , 42wxAfter increasing from 32% in the early 1970s to

X I +< > P / 91 - la 60% in the early 1980s, it decreased to 29% in the late 1980s. The share for borrowings followed an ! t \ I opposite pattern, as it decreased from 62% in the e 5 + -2a early 1970s to 33% in the early 1980s and then,

-1 ...... 149 I *.., increased to 46% in the late 1980s. However, even 1971 1974 1177 1989 1983 1981 1999 1"92 G95 191 with this level of borrowings, there was still a

-D"t SR'JICK COU. - SEL8YYl-FINO9 significant gap in the late 1980s that required .9______<, government contributions amounting to 23% of total sources of funds (Figure 20).

19. Investments have comprised the main use of Figure 20 funds. The share for investments in the COMPOSITIONOF SOURCES OF FUNDS composition of uscs of funds decreased from 68% in the early 1970s to 44% in the early 1980s when the share for increases in working capital grew : : substantially to 2-8%. In the late 1980s, the share for investments increased to 78%. The debt service share, whiclh lhad been around 30% through 4" - the early 1980s, decreased to 15% in the late 1980s. This composition of uses of funds with a X979 XOAt No NO large share for investments and a small share for 197-74 195-9 198-84 J.9-19 99 L9-9 debt service is, in general, good. In the particular P>IOK case of Nicaragua's power sector, this was possible 03 ITERNF9UO,0D O CUSTtCXTAII GoryO0T9798 because actual debt service payments were lower Bn990w'4 C- FI1A9CIM9GAP _W( CAPO80E88 l than the accrued obligations resulting in 199,-1999: JEC4t807s9l accumulated arrears (Figure 19).

NIC-9 Capilal Structure

21. Thc increased indebtedness of Nicaragua's electric power sector changed its capital structure during the 1970s. Tnc sector's debt/equity ratio rose from 54/46 in 1972 to 75/25 in 1980. During the 1980s, the ratio returned to levels similar to those of the early 1970s basically because of the revaluation of existing assets and the low level of borrowings available for the sector (Figure 21).

Figure21 CAPITALSTRUCTURE

'ax

ix

eax

IOU L974 1977 1ang 1981 1908 1989 1492 1995 1998

t 1~~~~~~~~991-1999:MAMJECT1I

NIC-10 PANAMA

ELECTRIC POWER SECTOR PANAMA POWER SECTOR DATA SUMMARY SHEET 1989

The Instituto de Recursos Hidraulicos y Electrificaci6n (IRHE) is the cntity responsible for electricity generation, transmission, and distribution in Panama. Thc Panamanian system is connectcd to Costa Rica and the rest of Central America via a 230 kV transmission line.

1~~~~~~~~~~~-_ _ - _ -- GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 2,370 CAPACITY ENERGY AREA '000 SQKM 77 (MW) (GWh) POPULATIONPER SQKM 31 BALBOAS PER bS$ 1.00 THERMAL 328 399 GDP, mllilons of US$ 4,563 HYDRO 551 2,181 GDP PER CAPITA, US$ 1,925 NUCLEAR 0 0 GDP GROWTH RATE, % * -3.2 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 1,627 IMPORTS 172 ELEC. SALES GROWTH RATE, % * 0.5 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 833 TOTAL 879 2,752 1989 ELEC. SERVICE COVERAGE, % 58 POWER EXPENDITURES/CDP, % * 3.9 RESERVE MARGIN 433 97%

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 312 GWh % EMPLOYEES 5,228 CUSTOMERS PER EMPLOYEE 60 RESIDENTIAL 614 31 TOTAL SALES PER EMPLOYEE, MWh 378 COMMERCIAL 609 31 INDUSTRIAL 243 12 BULK SALES # 81 4 OTHER 427 22 DOMESTIC SALES 1.974 100

EXPORTS 99 SECTOR FINANCES TOTAL 2.073

AVERAGE RATE (US$IMWh) 112 SYSTEM LOSSES 652 ## 25 OPERATING MARGIN (W/O DEPR), % 38

OPERATING MARGIN (WI DEPR), % 61 ______RATE OF RETURN, % 6.3 INDEBTNESS, % 24 DEBT SERVICE COVERAGE, times * 1.0 *- average per year since 1985 SELF-FINANCING RATIO, % * 4- to other utilities not in the study - as a percentage of available energy PANAMA

ELECTRIC POWER SECTOR

INSTITU!OiNA.L ASPECTS

Instituto de Recursos Hidraulicosy Electrificaci6n(IRHE) wascreated by Law No. 37 o'lJanuary 31st, 1961 and in accordance with Cabinet Decree N. 235 of July 30, 1969. As an autonomous legal entity of the Government of Panama, its mission is to coordinate energy expansion plans to ensure an adequate energy supply and the proper use of hydraulic power.

Since September 1961, IRHE has been responsible for the operation and maintenance of generation transmission, and distribution facilities throughout the country's rural areas. The Panamanian Power and Light Company (CompafliaPanamefla de Fuerza y Luz, S.A), a private company,had responsibility for transmission and distribution in the major population centers of Panama City and Col6n until 1972. In 1972, the government nationalized Compafiia Panameflade Fuerza y Luz, and it became part of IRHE, which was now responsible for 88.6% of the electricity supply in Panama.

Electricity tariffs constitute IRHE's only source of revenues. Tariffs are set by IRHE and approved by its Board of Directors and subsequently by the Executive Branch. The current tariff structure is equalized on a nationwide basis. The equalization scheme for tariffs established in 1977 followed an accounting approach. Later on, new tariffs, based on marginalcosts studies, were promulgated, especially in the industrial sector.

As a result of the last tariff review in May 1984, the price of electricity decreased an average of 7% to all customers. In 1985, nighttime tariffs were established to the industrial sector only, taking into consideration incentives for high demand customers. In 1987, according to Law No.2 of 1986,farming tariffs were added to the structure, and a 25% subsidywas granted to retired and disabled residential customers. This structure included dispositions to cushion the effects of the equalized tariff on low income residential customers. Tariffs are automatically modified to reflect variations in fuel supply and prices as well as changes in the country's hydrological conditions.

IRHE is governed by a seven-member Board of Directors composed of ministers from the Government of Panama and representatives from the private sector. The Director General is responsible for the administration and management of IRHE. The Board of Directors and the Director General ultimately report to the Minister of Planning and Economic Policy who is President of the Board of Directors and responsible for approving the budget of IRHE. Additionally, by law, the Controller General of Panama, who acts independently from the Ministry of Planning and Economic Policy and the IRHE Board of Directors, is responsible for financial management of all state agencies, including IRHE.

PAN-2 PANAMA

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION, AND PROSPECTS

Sumnvry The Sectorand TheEconomy

1. Panama relies on imported oil to meet 2. With the exception o the late 1970s when most of its energy requirements. The main source electricity supply restrictions existed, the pattern of of indigenous commercial energy is hydro energy; electricity demand growth in Panama has followed however, thermal plants provide support during that of real GDP growth at a faster rate. When peak demand or dry conditions. During the last the economy has grown, electricity sales have two decades, the financial performance of the increased faster, and when the economy has power sector in Panama has been satisfactory. The contracted, the rate of growth of electricity sales sector has been able to operate without support of has decreased, though generally not as much as the fiscal resources, as it has carried out major economy. When the rate of growth of real GDP investment projects required to meet increasing diminished during the 1982-84 period, electricity power demand using internal funding and sales fell (growth of -1.9% p.a. in 1984). Likewise, borrowings. This has been achieved thanks to a when economic and political turmoil in the late sound tariff policy and in spite of operational 1980s caused a severe contraction in the country's inefficiencies which include a high level of losses. economy, electricity sales also fell substantially Improvements could be achieved by establishing (growth of -7.6% p.a. in 1988). However, the cost control systems and improving the spread between the electricity demand growth rate maintenance of thermal facilities. Under these and the real GDP growth rate has always been circumstances, the sector could become a positive. It was 3.0% p.a. in the 1970s and 3.3% significant contributor to fiscal resources and an p.a. in the 1980s (Figure 1). attractive candidate for private sector participation. Figure 1 GROWTHRATES

-ox ----.------.------.------

loxI ......

-l3X ...... - - . . . - ......

1971 1971 1975 1*7 1979 19*1 1913 1915 1187 19t"

- IUL OP -.+ ZCTRICItYSiLZI

PAN-3 3. An indication of the sector's contribution while total electricity uses grow 3.3% p.a., implying to economic and social development is growth in a reduction in electricity losscs. In 1989, thie electricity consumption per capita. With the composition of electricity uses was 22% residential exception of the late 1980s, consumption per sales, 22% commercial sales, 9a/, industrial sales, capita increased steadily during the last two 3% bulk sales, 15% other sales, 4%s cxports, and decades while GDP per capita was close to 25% losses and own consumption (Figurc 3). constant in each: around US$1,900 in the 1970s and US$2,400 in the 1980s. Between 1971 and Figure 3 1989, consumption per capita grew 3.4% p.a., from ELECTRICITY USES 460 kWh to 833 kWh, while GDP per capita grew 0.2% p.a., from US$1,&1 to TJS$ 1,925 (Figure 2). _ __

Figure2 PER CAPITAINDICES

197i L974 1977 1946 917 1MG 1999 1193 1995 191

ORS61lTAL Fq coIMERc,A, a 5M9SITA1 D 9LK SALES Logo E THE C :] EXPORTS G n 10o55IES

t ~~~~~~~~~~~4M LM~1W ~ ~ ~ ~ ~ ~ ~ 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~996-19".sW PROJECT.CiIO

I ,. ,e,I , ; . .X, . 6. To meet electricity demand, the sector has 1971 1972 1975 1977 1979 1991 1992 1957 1997 199 relied increasingly on hydro generation. The +ccPaUl -19995a4atlzF1919composition of total electricity sources changed from 9% hydro, 90% thermal, and 1% imports in 1971 to 79% hydro, 15% thermal, and 6% imports 4. Another indication of the posiiive from Costa Rica and Honduras in 1989. The sharp contribution of the sector to economic and social increase in the share of hydro generation following development is the rate of electrification. In 1983 corresponds to the commissioning of the Panama, electricity service coverage increased from Fortuna project. The projections fot the sector 45% in 1971 to 58% in 1989. However, this show an incrt asing share of hydro generation in indicator also shows that there is still much to be the future (Figure 4). done to reach adequate levels of service coverage. Total customers more than doubled between 1971 Flgure 4 and 1989, as they increased from 146 thousand to ELECTRICITYSOURCES 312 thousand. The residential sector accounted for most of the growth, as residential customers r 4 increased from 126 thousand to 273 thousand.

The ElectricityMarket: Supply and Demand

5. Total electricity uses in 1989 were about 3 times those of 1971, as they grew from 904 GWh to 2,752 GWh. Electricity sales grew 8.1% in the 1970s and 3.4% in the 1980s while electricity uses. , grew about 8.0% and 4.7%. The different rates in 1971 1974 17 19M3 1993 1NS 1969 L992 199 1991 the 1980s were because of more rapidly increasing , , - to aw ..1g1013 A E 9l electricity losses. After 1989, electricity sales are expected to grow at an average annual rate of 4.9%

PAN-4 7. The electric energy available to the gna among the lowest in the region. The customers per was generated by an installed capacity that employee ratio is forecast to increase to 83 by increased 5.4 times between 1971 and 1989, from 1999;however, this level is still significantly below 163 MW to 879 MW. In 1989, 551 MW or 63% that found in other developing and developed were hydro while 328 MW or 37% were thermal. countries of the world (Figure 6). This is a substantial change from the composition of installed capacity in 1971 which was 9% hydro and 91% thermal (Figure 5). EFFICIENCYINDICES

Figure 5 INSTALLEDCAPACITY

NW~~~~~~~~~~~~~~~~~~~~~

1971 17? 11 1 171 1 1a2 11 1 "a

i1971 1974 17*77 1996 ~I1J199 199 1&XX 171 179I 97160C~~~~~UGC19W? ~~~~9971FRMCOSIKUNAL _Xi ESnUL, - crNllcTlf noo(

l?il- n PROJrtn4 10. Electricity losses have been a problem for the sector. Losses as a percentage of gross energy available increased significantly from a low of 10% Operatonal Performance in 1971 to about 25% in 1989. This is an area where great improvement is required. It is 8. While hydro capacity and the sector's estimated that had Panama been able to maintain reserve margin increased in the 1980s,a decrease its losses at about 10%, it would have reduced its in the availabilityof thermal facilities,from 53% in operating costs by 6% (Figure 7). 1980 to 37% in 1989, resulted because of the lack of preventive maintenance. Unless a special effort Figure 7 is made to increase thermal availability to LOSSES/ENERGYAVAILABLE acceptable limits, the sector's thermal plants may not be able to provide support to the system when increased demand and/or dry conditions occur.....

9. Efficiency in operations is less than * ...... satisfactory. Labor productivity, as measured by electricity sales per employee, rose only 0.8% p.a. . -.- . ,, .., .... between 1972 and 1989, from 331 MWh to 378 MWh. It is forecast to reach 612 MWh in 1999. The customers per employee ratio had its sx .. maximum level of 62 in 1972 and then started decreasing until it reached its lowest level of 46 in 1971 1974 19?? 1730 1It" 1989 1919 1991 1991 M9I 1981and 1982. The ratio has improvedsince then, M pll"9cJECIM as it reached 60 in 1989. However, it is still

PAN-S 11. The sector's collection practices Figure 9 deteriorated rapidly in the late 1980s. The RETURNSUMMARY collection period increased from 85 days in 1976to U M 215 days in 1989. Forecasts expect the collection .. SIX period to improve to 60 days by the late 1990s (Figure 8). 17

Figure 8 / COLLECTIONPERdOD

...... - .... 1113a1971 19.7.1. 1 19 aM it" 19

- INTVIc T -*- bWTINW uiU

13. The sound pricing policy of the sector ,,, ...... during the last two decades has allowed the unit price of electricity to constantly exceed the unit

. I * I i E , I , . cost.-. z The sector's operating margin increased from 7 n11 Ill? It,. 11 1199 sinC jlln j95 1 7 US$/MWh in 1976 to 42 US$/MWh in 1989. Sector authorities expect the operating margin to remain around that level during the 1990s (Figure Profaability 10).

12. Throughout the last two decades, the rate Figure10 of return on assets remained positive, though UNITPRICES AND COSTS slightly lower than the sector's average interest paid which was in the vicinity of 10%. The rate of ,ss return increased from 6.8% in 1977 to 9.2% in 14- 1981 before decreasing to 6.3% in 1989. In the as ------. 7'i'=. 1990s,it is still expected to be on the low side, I. -**------.- *--****-- - --...... around 7%. The sector's interest coverage ratio .t..---. has been favorable; it remained between 1 and 2, _.-...-.-.-. _*__. for the most part, between 1976 and 1989 and is *.- . expected to increase to several times 1 in the 1990s . ----.-. thanks to a strong debt/equity ratio, as the sector . . ,...... i has not had to rely on excessive borrowings m £174 17 ? Ills 11963 1 IS 1 InU19191 tm (Figure 9). -4-COIT WO DE= 4-Il!CUT 9MG C niwo

tttSm-I: PcT01

PAN-6 14. The composition of operating revenues by Figure 12 type of customer has maintained a relativelystable COMPOSITIONOFOPERATINO COSTS composition since 1976. In 1989, about 34% of revenues came from residential sales, 32% from commercial sales, 12% from industrial sales, and 22% from other sales which include bulk sales (Figure I11).

FigureI1I OOMP08TIONOF OPERATINGREVENLUES

...... ,, ,,...... 1971 1974 1£77 1l £93 W 619 £99 £19 19 1 ...... -...... III t'EWPC E3 O GCcCZ) I^YEt FU1 tI t ___ C::l {~~~~~~~~~~~~~~LECKW r-7 Pt1EtJLS EZI PEISeXMEL CEM OINERUM'ESES

ox 7 The Sector and Country Resources £971 194 1771 9 IS39 119 1 I 17 i977 1979 g .Ti L -i_C63 MUSTif 16. The sector has had a substantial claim on &W SALEI9M.!SBUU £741 1countryMOAJ resources. Sector investments as a

FES-199,ROJECT.W percentage of country investments decreased from 10.9%in the 1970sduring the La Estrella and Los Valles projects to 7.9% in the 1980s (Figure 13). 15. Despite the 1988-89period of political and economic turmoil in the country, the sector has Figure 13 had positive operating income since 1976. Operating income as a percentage of operating ECTORINVESTMENTJCOUNTRYINVESTMENT revenues had a low of 7% in 1976 and a high of 40% in 1988. During 1982 and 1983, the financial performance of the sector deteriorated slightlydue to unusually dry seasons which demanded higher ANNUALAVERAGE ANNUALAVERAGE thermal generation. The additional fuel costs were ANNUALA9NULV G not entirely recouped by tariff increases and resulted in smaller operating margins during that periou. The fuel cost share, which has traditionally maintained a high level, decreased to 4% .n 1989 because of increased hydro generation and lower 1169% sales. This reduction in the share for fuel costs gave way to an increase in the shares for depreciation and labor. The share for labor costs increased significantly,from 15% in 1983 to about 21% in 1989. During the same period, depreciation became more important in absolute and relative terms, is the new hydroelectricplants became operational (Figure 12).

PAN-7 Because of the decrease in investments, sector Figure 15 expenditures as a percentage of GDP decreased DEBT AND DEBTSERVICE INDICES from 6.2% and 6.0% in the latc 1970s and early 1980s, respectively, to 3.9% in the late 1980s (Figure 14). .. x a.K Figure 14 SECTOREXPENDITURE/ODPx

;~~~~~~~~~~~~~~~~~~~~~~~~~~~~. I,,_

X tk " Xbt 1A71II?) 1' ? I,,1 I9tt 0$] a'W7ta is"

4.8k A 4-

?"11- tS5-IlD Funding Requirementsand Scurces (" GT CO)~~~~~~~~~~~~~~U YZ ~H~Uf~$ rR rc

(x' Il IDE _mcli ta" E@311N?zIIDIU 0} 7! 17. From 1990 to 1999, initial sector projections estimate that US$877 million, or an average of about US$88 million per year, will be required for investment with a peak of US$157 Furthermore, since the sector has been able to million in 1992. Such investments seem to be on carry out all its investment plans and meet its the low side, as they show only a slight increase operational and financial obligations using its own when compared with investments carried out from resources and borrowings, fiscal resources have not 1980 to 1989 when the sector required US$747 been necessary. However, sector debt service as a million, or about US$75 million per year (Figure percentage of country debt service increased 16). rapidly from 8% in 1982 to 25% in 1987. Sector debt as a percentage of country debt has Figure 16 traditionally been around 10% (Figure 15). INVESTMENT

15...... ------. ....

1 -......

1"91 1914 L141 1941 1913 1"6 1"4 191 19135 L198

1PAN-1448:99149C119S

PAN--8 18. The sector has generally maintained a Figure 18 solid funding mix, allowing a satisfactory level of COMPOMTIONOFUSES OF FUNDS debt service coverage, as internal funding has, in general, been higher than debt service obligations. Since no major borrowings for investments are envisioned after 1992, the sector is projecting a significant increase in its capacity to respon to debt service obligations using internal funding. In the past, the sector's self-financing ratio has, for the most part, been between 20% and 30%. Forecasts show that the self-financingratio should IN l _| increase significantly by the end of the 1990s . . ?A?4 MI-,T AtO4 .m-. LHis 1m,, (Figure 17). nium - VOWCE I&MUA E iwIZSIff [=K mi C Figure~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 171 C17MllCt 2 tletC olm lT

igure 17 FUNDING8JARY|

lT 1%x15 20. Because of a sound pricing policy, the l. 1 r|sector has been able to maintain a strong funding mix. Internal funding ha. ranged between 44% I, '1 S and 72% of total sources of funds, and the sector lE ,| g 7 has relied on borrowings to fill the rest of its 7`l1Y | \ \ V L ,,,funding requirements. In spite of the significant l-sq \| 1- 1 increase in the collection period (para. 11), the sector had decreases in working capital which were .13.,I.I. J r w.,r,,I,;,, |- }XI r. -l | the result of unpaid short-term obligations. In the 1171 1974 IM IS 19 196 1"S9 I" 1913 19 | future, the funding mix is expected to be even

&WStIMOW, L-r utO| stronger, as internal funding should account for I,,,l".V nolaCTt | more than 70% of total sources of funds (Figure 19).

19. After a period of major investments in the Figure 19 early 1980s,such as that for the Fortuna project, COMPSITONOF SOURCESOF FUNDS an increasing portion of available sector funds was ll used to cover debt service obligations while a decreasing portion was used for investments. Debt .1.| service as a percentage of uses of funds went from ...... 32% in the late 1970s to 71% in the late 1980s1 while the share for investments declined from 68% 4i to 29% during the same period. A reversal of this 81 trend is expected in the 1990s,as the composition | OATA of uses of funds in the late 1990s is forecast to be &E19174W8tiL4 100540 1 I*. 1003W-ES 37% increases in working capital, 44% I w investments, and 19% debt service (Figure 18). I eu"w'r CCCMAT cCI Tm COIIT V11 | IfN_ O FWEICB W WuI CAP olcEu l

IA 11-19N9: N-CT9

PAN-9 21. If 1988tariffs are maintained in real terms, CapitalStructure the result is almost identical, and the savings resulting from a mt.e efficient utilization of 22. Because of the sector's strong funding existing facilities will make the sector a positive position, it has been able to maintain a reasonable contributing factor to the economic adjustment debt/equity ratio between 30/70 and 40/60. The program of the country, as it could pay taxes like sector's debt/equity ratio is expected to improve to any commercial enterprise. Under such conditions, about 10/90by the late 1990s(Figure 21). the sector will also become attractive to funding from sources cxternal to the sector in the form of Figure 21 private sector equity and borrowing (Figure 20). CAPITALSTRUCTURE

Figure 20 COMPOSiTIONOF SOURCESOF FUNDS -

NILLION Lit IUS ge

4S(-

iss ~~~~~~~~~~~~~~~~~~~~~19711174 197? 19IS 1ii3 1966 lIft 1992 1tt? 1199

1t89 191 199S 1995 1997 IS"

M VATERYL FU¶I86 0 cs COMIff?UM7S SWF1NRM5IM8 OAP - MAT SE0CE

PAN-10 PARAGUAY

ELECTRIC POWER SECTOR PARAGUAY POWER SECTOR DATA SUMMARY SHEET 1988

In Plaraguay, almost all clectricity is provided by the government entity Administraci6n Nacional de Electricidad(AN DL-). A fc-wsmall systems which operate in the interior of thc country account for the rest of the secioI, The samnple foi this study consists of ANDE and includes Paraguay's share of Itaipu, a binational hydroelectric povwer pr-ojcct with Brazil.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 4,042 CAPACITY ENERGY AREA '000 SQKM 407 (MW) (GWh) POPULATION PER SQKM 10 GUARANIS PER US$ 550.00 THERMAL 82 3 GDP, millions of US$ 4,127 HYDRO 4,390 677 GDP PER CAPITA, US$ 1,021 NUCLEAR 0 0 GDP GROWTH RATE, * 3.5 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPIZTA(kg oil equiv.) 224 IMPORTS 1,417 ELEC. SALES GROWTH RATE, % * 14.7 PURCHASES 0 ELEC. CONSUMP.PER CAPITA, kWh 374 TOTAL 4 471 2 097 1989 ELEC. SERVICE COVERAGE, % 46 POWEREXPENDITURESICDP, Z * 2.2 RESERVE MARGIN 4,076 1,032%

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 347 GWb % EMPLWYE.!.S 2,590 CUSTOMERSPER EMPLOYEE 134 RESIDENTIAL 567 38 TOTAL SALES PER EMPLOYEE, MWh 583 COMMERCIAL 232 15 INDUSTRIAL 393 26 ,______BULK SALES # 0 0 OTHER 318 21 DOMESTIC SALES 1.510 100

SECTOR FINANCES EXPORTSTOT4L 1.819309

AVERAGE RATE (US$IMWh) 34 SYSTEM LOSSES 276 ## 15 OPERATINGMARGIN (WIO DEPR), % 29 OPERATING MARGIN (WI DEPR), % 51 RATE OF RETURN, % 4.6 INDEBTNESS, Z 30 DEBT SERVICE COVERAGE, times * 6.0 * - average per year since 1985 SELF-FINANCING RATIO, % * 46 - to other utilities not in the study - as a percentage of available energy PARAGUAY

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

The electric power sector in Paraguay is run exclusivelyby the Administracion Nacional de Electricidad (ANDE). This company was created by Law No. 966 of August 12, 1964 and is an autonomous, decentralized public utility. It has its own legal identity and financial independence and maintains relations with the government through the Ministry of Public Works and Communications(MPWC). ANDE's primary objective is to provide an adcquate energy supply throughout the country.

ANDE holds the Paraguayan Governments's 50%interest in Itaipu Binacional, the Binational agency set up in April 1973 by the governments of Brazil and Paraguay to build jointly the 12,600 MW Itaipu hydroelectric facilityon the Parana river. Itaipu's first generating unit started operations in December 1983 and will reach full capacity in May 1991 when the last unit is put to work.

In December 1973,tne government of Paraguay signed an agreement with the government of Argentina to constitute YacyretABinacional, a binational agencyto develop a hydro project over the Parana river. This project is under construction and is expected to provide 3,100 MW of electric power. Given the prospects of abundant availability of energy from Itaipu and Yacyreta, ANDE's expansion program does not require additional domestic generating capacity and therefore, is limited to transmission and distribution.

Electricity tariffs are established by ANDE on the basis of its operating budget with a view to obtaining a sound financial rate of return. According to ANDE's Organic Law, changes in tariffs must be approved by the Administrative Council of the Company and submitted, through MPWC, to the National Council on Economic Coordination for final approval.

PAR-2 PARAGUAY

ELECTRIC POWER SECTOR

EVOLUTION, SITUATION. AND PROSPECTS

Summary of Itaipu was at its height, gross internal capital formation grew from 20% in 1974 to over 30% in 1. Paraguay's great electric, power capability 1981, unprecedented growth occurred in the makes electricity the potential driving force of construction sector and in basic services for the economic development through the creation of population, and an average of 18,000 jobs were power-intensive industries. However, to fulfill the created. As a result, when the construction was in country's growth potential, significant changes are its final stages, negative effects began to be felt in needed in the organization of production in the economy, which was also undergoing a difficult Paraguay which is presently fundamentally period due to the international economic agrarian. Industrial development, which is highly recession, and GDP growth rates fell to negative dependent on electricity, must be given high levels in several years. During the last two priority. The electric power sector experienced decades, there was also a strong expansion in strong development over the last two decades electricity sales due to the increase of consumption based on a change from thermal generation to in the residential and commercial sectors, and hydro generation, the adoption of appropriate electricity sales growth ge werally followed real institutional and pricing policies, and the GDP growth at a faster rate. The basic factors establishment of prudent criteria for expansion. contributing to this behavior were the rapid TIhe financial situation is positive, and the sector development of the public service electricity grid, has the stability needed to cover its operational increases in the population's standard of living, and obligations and funding requirements, without expansion of trade and services (Figure 1). having to resort to excessive borrowings. Paraguay shares the development of hydroelectric resources Figure 1 with bordering countries, and this fact -- in addition to rising generation leve:s that will permit GROWTHRATES improved service in the future -- makes the country .- one of the greatest per capita producers and exporters of electricity in the world. - .

The Sectorand the Economy

lo ...... 2. The sector's impact on the economy has been noteworthy, particularly since construction of OK the Itaipu project began in 1974, which, due to its size, actually became the most significant project , l l lI l for the country's economy in 50 years and had 11 13 I"S 19797 n 11119" IN 1 SS in 1919

important macroeconomic ramifications during its -ML --- =ClAl construction phase. For example, GDP growth exceeded 10% during the period when construction

PAR-3 3. An i1idicationof the positive contribution of TheElecricity Market: Supply and Denand the sector to economic and social development is growth in electricity consumption per capita. 5. Between 1980 aiid 1988, total electricity Between 1971 and 1988, consumption per capita uses increased almost 2.5 times, from 851 GWh to increased from 58 kWh to 374 kWh, or 11.6% p.a., 2,097 GWh. At the same time, electricity sales while GDP per capita increased from US$640 to increased 2.6 times, or 13% p.a., from 577 GWh to US$1,021, or only 2.8% p.a.. Notably, 1,510 GWh. In 1988, the composition of total consumption per capita grew 8.7% p.a. on average electricity uses was 27% residential sales, 11% between 1981 and 1988 while GDP per capita commercial sales, 19% industrial sales, 15% other declined 1.6% p.a.. Despite the tremendous sales, 15% exports, and the rest losses and own growth in electricity consumption per capita, consumption. It is believed that because of the Paraguay is one of the lowest electricity consumers low rate of electrification in the early 1970s,sector in the world (Figure 2). policies favored exporting energy and power surpluses, basically to Argentina and Brazil. This Figure 2 development is expected to continue in the future, PERCAPITA INDICES as exports are expected to constitute a major source of income because of the iilcrease in production from Itaipu (Figure 3).

Flgure 3 ELECTRICTYUSES

e e ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~......

CDP70CAP1Sn Y - §SAL PO819A IT ...... 50

1971 194 1971 1960 1913 1901 1969 Li9U 1995 1918

4. Another indication of the positive M RoSsEYtIsL Ea com91tiMAL 3IzIOtRLm OLS SALES contribution of the sector to development is the OTKER5 EXPORTS owo05 CIS LS *lSS1S rate of electrification. In Paraguay, electricity _ 9,-099: POJECTiONS service coverage increased from 18% in 1971 to 46% in 1989 indicating that the sector still has much to do in the years ahead. The low levels of service coverage and consumption per capita in the early 1970sresulted because electric power service was limited to Asuncion until 1968. Total customers of electricity increased from 184 thousand in 1980 to 347 thousand in 1988 because of the extension of lines in the suburban areas of cities already served as well as the extension of electricity service in rural areas that were previously unserved. The number of communities interconnected increased from 95 in 1980to 293 in 1988.

PAR.4 6. The increase in power supply that occurred 7. The electric energy available to the grid was beginning in 1984 basically corresponded to the generated by an installed capacity that increased commissioning of Itaipu's first turbines in more than 16 times between 1980 and 1988, from December of 1983. As a result, total sources of 273 MW to 4,471 MW. Itaipu accounts for most electricity grew at a rate of 12% p.a between 1980 of the increase. The composition of installed and 1988. It should be pointed out that because capacity was 98% hydro and 2% thermal in 1988. Itaipu is beyond the boundaries of the countries Historically, the level of investment was of such involved (Paraguay and Brazil), the power it magnitude and the power supply increased so geiierates tmust be purchased in equal amounts by much that it is believed the country will not need both countries, and accordingly, it is considered to to invest in new generating plants for another 30 be an import. Therefore, 68% of Paraguay's power or 40 years (Figure 5). supply in 1988 is listed under this heading. Almost 100% of Paraguay's clectric power is Figure S hydroelectrically generated. In the future, the INSTALLEDCAPAgY binational Yacyreta project currently being Em constructed in cooperation with Argentina will , enter into operation and increase the sector's hydroelectric potential; the mechanisms that will 4...... govern the purchases of power by both countries ...... will be similar to those of Itaipu, as Yacvreta Binacionalis considered to be the owner of the ...... project (Figure 4)..,......

Figure 4 , l IE F g X~~~~~~~~~~~~~~~~~~~,?711S74 I"? 1SlD 1903 I"1 ,4sn 1 ISSJ. 13 LSSS ELECTRICITYSOURCES IIIII III NBM L COIHCIVDD?IHV

a -l5at8 n193-Im9:PAOJtCT10,3

... _._...... _._._.._.... ._,_.. . _._...... _..._._._ ...... a m

_... . __ , ; ...... _ - ,.,s Operational Performance

...... 8. Because the sector's installed capacity = _ ...... _...... ~~~~~~~~~increasedi c e s d ttremendously, m n ou l, especillyespecially iin cocomparison p rson with demand, the sector's reserve margin as a a l lrpercentage of coincident demand increased 1I77Uflt 1ti88I74 1L83 tt 19j 1st} l@s X990substantially. It went from 26% in 1980 to over 01D30 MIami MPURf0CHAIY 1 017)81 1000% in 1988.

PAR-5 9. Labor productivity, as measured by the 11. The sector's collection practices have been customers per employee and sales of electricity per good. In the 1980s, the collection period gradually employee ratios has been satisfactory. This infers decreased, after an increase in 1982 and 1983, from that management has, in general, been efficient, 75 days in 1980 to 53 days in 1988 (Figure 8). even though the customers per employee ratio remained fairly constant in the late 1980s at a level Figure 8 of around 133. The sales per employee ratio increased from 386 MWh in 1980 to 618 MWh in COLLECTIONPERIOD 1988. Whilc both indicators are above the ,, respective averages for the region, in comparison with other countries in the world, there is room so... . for improvement (Figure 6). Figure6"...... ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~......

EFFICIENCYINDICES

1i1 ) S"T._ IS71 1S74 Li?? 1910 1583 1951L4 1993 1 9 ilt

199S-1919: PROJECTISU

59 mIsstaft

n9 swis * , l,,. l, . l, . l . l . . l, . l,, l, . l ., 12. The favorable financial performance of the 1971 1974 L977 1938 193 1986 1989 192 199 1"1 sector can be seen in its financial return indicators. nIcU _"WWW The rate of return was between 5% and 8% in the

1990-IS9S: MOJECTIOS 1980s, and the interest coverage ratio was several times greater than 1. Nevertheless, beginning in 1985, both indicators fell somewhat because of the 10. Electricity losses could be improved greater growth in operating expenses and interest somewhat. Taken as a percentage of gross energy payments as a percentage of income (Figure 9). available, they ranged between 15% and 18% in the 1980s with the exception of 1986 when they Figure 9 were 31% (Figure 7). RETURNSUiMMARY

Figure7~13 LOSSES/ENERGYAVAILABLE UN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' Li

Sm------...... - { nx ...... I...... nx-~~~~~ ~--~ ------t------

I"Tt 1974 IM 19$9$ 1tlA INS J19 199J 195 1991 taX - ---- ..._____..__._ .__.__.______..... -Inu IITlCCU | MIXof nuSm

Ins1 19?4 119 im II to It" is"in it "e li99-1l§S: P eJECTOS

PAR6 13. The sound financial performance of the Figure Il1 sector has been the result of unit price and cost COMPOSTION OF OPERATING REVENUES levels that have produced positive operating Mx O margins. While the sector's operating margin was positive every year of the 1980s, it declined from ...... 36 US$/MWh in 1980 to 10 US$/MWh in 1988. If this situation continues and tariffs are not brought ' - -. into line with the price of Itaipu's electricity, _ ...... financial problems could result for the sector (Figure 10).

Figure 10 I". 1974 1117 198 1963 1ns 1949 1992 1913 19 UNIT PFRCES AND COSTS OICR

1916-1991:PtOJlCTlS

.6 ...... -. ... -......

...... _...... 15. Operating income constituted a significant, though decreasing, portion of operating revenues 4< ...... in the 1980s. The share of operating income in the operating cost composition declined from 45% z _. _. .... in 198029% in 1988.to Depreciation and

* . . l ., . l. l . l I . . personnelexpensesarethemajorcostcomponents.2 . l l .,, l l S . . | ... 1971 1974 1977 1"S 194 IM 1919 199 195 L99 In 1988, the composition of operating costs was C+0TWO 3C -i-- cOmw +Ns -.- nics wo . . 23% personnel, 22% depreciation, 12% materials ,,,, ,,,, FIOJEC _ _and services, 11% imported electricity, 1% fuel, 2% other expenses, and 29% operating income (Figure 12). 14. The composition of operating revenues shows that the commercial sector has become an Figure 12 important part of sector revenues. Its share COMPOSITIONOF OPERATINGCOSTS increased from 0% in 1980 to around 20% in the late 1980s. In 1988, the composition of operating . revenues was 36% residential sales, 19% ...... commercial sales, 19% industrial sales, 17% other sales, and 9% exports (Figure 11).

" I ...... I.._ ..

SU1 1974 197 198 1965 1966 169 1199 1995 1994

_1 OPENIKC CWREC O TM1 = FUl IMP ELEC C MAERIMS M PRIIIRIL MM OIMEREXPilS

199-1999: PROJECtlO91

PAR-7 The Sectorand Country Resources service show a decreasing trend in the 1980s. This is particularly the case of sector debt which 16. Despitc the construction of Itaipu, the declined from 19% in 1980 to only 8% in 1988. In sector has not had a substantial claim on country the 1980s, sector debt service generally constituted and government resourees. In fact, the sector did between 3% and 8% of country debt service not contribute to the fiscal deficit in the 1980s. (Figure 15). Sector investments as a percentage of country investments averaged 5.3% p.a. in the 1980s Figure 15 (Figure 13). DEBT AND DEBT SERVICEINDICES

Figure 13 \ SECTORINVESTMENT/COUNTRY INVESTMENT lsx------

ANNUALAVERAGE 19u-9. I I , I I 1.I. MIn 19f3 1 S 19??7 1979 1981 L983 1lA 1 997 ,s

ANNUALAVERAGE _ We, 1971-79 _: Ca SiMC

HODATA P Fwding Requirements and Sources

17. Between 1980 and 1988, the sector required Sector expenditures as a percentage of GDP US$432 million, or US$48 million p.a., to meet its increased from 1.7% in the early 1980s to 2.2% in investment program with a considerable increase the late 1980s. This increase basically resulted during the 1986-88 period, about US$70 million from an increase in investments (Figure 14). p.a.. Annual investments increased in the early 1980s because of the country's raral electrification Figure 14 plans (Figure 16). SECTOREXPENDITURE/GDP 2.5x t~~~~~~~~~~~iguff^16 - ...... INVESTMENT - i .:::::::::-:::-:::'111:::'::::::::::::::NILLIONI1

HODAtA NA DATA -

1971-74 1975-79 998E-84 ......

197I 194 1917 1M O1913 1901 1939 1991 199J 1998

In contrast to the slight increase in sector investments and expenditures, sector debt and debt service as a percentage of country debt and debt

PAR-8 18. The sector's fuinding condition can be 20. The composition of sources of funds is categorized as favorable,and this is principally due dominated by the share for internal lunding, as to the tariff policy that hias been applied in the tariffs are reviewed regularly to cnsurc that sector as well as the low level of indebtedness. In appropriate levels are maintained, lowever, this the 1980s. thc sector's selffinancing ratio was share decreased from 63%) in the carly 198Osto generally betweccn 35% and 75%, and its debt 51% in the late 1980s. The conmposition is service coverage ratio was several times greater completed by a comfortablc level of' borrowings. than I (Figure 17). The share for borrowings was 33% in the carly 1980sand 47% in the latc 1980s (Figure 19). Figi'i-e 17 FUNDINGSUMMARY Figure 19 sY)(81n COMPO0SMONOF SOURCES OF FUNDS

7 s .618

-41 4U,

I I 18 181-.74 017-19 116"4 19lS-39 0898.94 198£-99 1971 1174 1177 1918 1181 1 98I 112 11 1998 PI0lION Co InT878IWOIO CM CWT COWtElt S5:1 COIt* - Da1y SI8ICs Ct4. *-8- IU7 I10 10 0.8 rl. FWA£88C.hSAP L CiP OEC£EASI 1198-1t19:P8Q41C11088 I I ~~~~~~~~998-1118:PIOJEct080s

19. The share for investments dominates the composition of uses of funds. The composition Capital Structure changed from 88% investments and 12% debt service payments in the early 1980s to 83% 24. The sector's low level of indebtedness, even investments, 9% debt service payments, and 8% after obtaining huge sums to finance Itaipu increases in working capital in the late 1980s through various lenders, is due to the fact that (Figure 18). these loans were backed only by the national treasury of Brazil. Therefore, the debt/equity ratio Figure 18 stayed low, about 30/70, in the 1980s (Figure 20). COMPOSITIONOF USESOF FUNDS - ~~~~~~~~~~igure20 CAPITALSTRUCTURE

811o.4X 401t HtODATA8 s0 0878 no DATA n0 DATA

oxlt -0780110 19111m1m1- 9041 - Lq*...

.~~ .. 1808371801?8117 1~~~I18 117£ 1974 19fl £196 8181 106£ 1181 181£ 191£ 11988 _19981991: POtIJONSIUS 1u81 M DS17

PAR1-99: POACTIT.4

PAR-9 PERU

ELECTRIC POWER SECTOR PERU POWER SECTOR DATA SY SHIEET 1989

Public electricity scrvice in Peru is supplied by a national utility, 17lectroperu (EP) and ten regional utilities which are: Electrolima (EL). eight ELECTROS (Norte, Nor-Ocste, Norte Medio (ex- Hidrandina), Centro, Sur Medio, Sur-Este, Oriente, Sur) and the Socicdad Eldctrica del Sur-Oestc (ex-SEAL). The largest of the regional utilities is Electrolima which accounts for more thdn half of the country's customers. The sample for this study consists of the entirc public sector which accounted for about 69% of the country's installed capacity in 1989.

GENERAL ECONOMIC DATA ELECTRICITYSOURCES

POPULATION 9000 21,142 CAPACITY ENERGY AREA '000 SQFf 14,285 (MW) (GWb) POPULATION PER SQKM 16 GtARANIS PER US$ 4,024.56 THERMAL 718 773 GDP, millions of US$ 28,611 HYDRO 2,092 8,696 GDP PER CAPITA, US$ 1,353 NUCLEAR 0 0 GDP GROWTH RATE, % * -0.9 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 a PER CAPITA (kg oil equiv.) 478 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 2.7 PURCASES 23 Tr-C. CONSUMP. PER CAPITA, kWh 359 TOTAL 2.810 9.492 1989 ELEC. SERVICE COVERAGE, % 38 POWER EXPENDITURESIGDP,% 2.3 RESERVE MARGIN 875 45%

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 1,759 GWh % EMPLOYEES 14,489 CUSTOMERSPER EMPLOYEE 121 RESIDENTIAL 2,532 33 TOTAL SALES PER EMPLOYEE, MWh 523 COMMERCIAL 413 5 INDUSTRIAL 3,541 47 ,______BULK SALES # 0 0 OTHER 1,097 15 DOMESTIC SALES 7,583 100

SECTOR FINANCES EXPORTSTOTAL758 0

AVERAGE RATE (US$/MWh) 21 SYSTEM LOSSES 1,784 ## 19 OPERATINGMARGIN (WIO DEPR), % -153 OPERATINGMARGIN (WI DEPR), % -93 RATE OF RETURN, Z -7.4 INDEBTNESS, % 45 DEBT SERVICE COVERAGE, times * 0.1 - average per year since 1985 SELF-FINANCING RATIO, Z * -80 - to other utilities not in the study a- a percentage of available energy PERU

ELECTRIC POWER SECTOR

INSTITUTONAL ASPECTS

The Ministry of Energy and Mines (MEM) is responsible for policy formulation and supervision of state-owned enterprises in the electric power sector. During the last two decades, the electric power sector has been under strong State control regulated by two la; iamely: the Normative Law for the Electricity Subsector of 1972 (No. 19521)and the current General Law for Elec:ricity of 1982 (N. 23406). More recently, the country's political regionalization has set legal measures which modify some aspects o.- the sector's institutional framework, particularly as regards the property of the regional power utilities and the role of Electroperu (EP).

The 1972 law abolished the then existing system of private concessionaires, among other things, under the argument that it did not allow for the integration of the power grids. This law nationalized all electricity services and created EP as a state-owned enterprise, responsible for all activities related to the public electricity service in areas not served by existing utilities (Electrolima, Sociedad Eldctrica de Arequipa Ltda., and others), granting it nationwide exclusiverights for generation expansion. EP took over responsibility for such diverse activities as construction and operation of large generating plants, centralized power system planning, and the electricity service of hundreds of small isolated towns and villages. All these re- ionsibilities proved to be excessive. In practice, EP was not able to perform as the law provided for, and concentrated most of its efforts on the service of major loads (in particular the North-Central System) through a highly centralized organization.

The 1982 law had the main objective of establishing a new decentralized structure, while maintaining basicallya public management of the power subsector. This law established a decentralized systemwith several regional power utilities and EP acting as a holding enterprise responsible for national power system planning, execution of large generation and transmission projects, and the operation of inter-regional transmission systems.

The 1982law also created the Electric Tariffs Commission (TC), an entity designed to be autonomous with the objectives of regulating electricity tariffs for the whole sector and managing a compensation mechanism between utilities (the Generation Compensation Fund, GCF), as tariffs are set uniformly nationwide while there are regional differences in generation costs. However, during the last five years the TC had almost no autonomy. Highly subsidizedtariffs were imposed for political reasons, creating a financial paralysis of the power sector and energy waste. On the other hand, the use of the GCF became more an instrument for hiding inefficienciesrather than a mechanism for a fair distribution of resources among regions.

PER-2 PERU

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Summary Figure 1

1. The inadequacy of internal funding in the GROWTHRATES electric power sector of Peru during the 1980s,a .,x result of an inadequate tariff policy and inefficient C -... ------operations, led to a strong reliance on external sources of financing, principally government a < ---. ; contributions and borrowings. In this way, the XA sector's investment needs were partially satisfied, but significant obligations to foreign creditors ------\ ------accumulated and as a consequence, resources were redirected to debt service needs. This explains the critical financial situation currently besetting the - . I I I . . I I I sector. This situation, together with the decreasing l imI m m197 Ln3 191 HAS u"S 1987 10s9 availability of external resources in the 1980s and - r-4- - cTAIcs the general deterioration of the Peruvian economy, affected the process of sectoral expansion because of the reduction in investments and the 3. An indication of the positive contribution of postponement of several planned electrification the sector to economic and social development is projects. In 1989, Peru's rate of electrification was growth in electricity consumption per capita. only 38%, and its per capita consumption was Between 1976 and 1989, consumption per capita 359 kWh, placing Peru in the bottom third of LAC grew 1.6% p.a., from 291 kWh to 359 kWh. countries for both indicators. However, such growth is significant, as GDP per capita declined 2% p.a. during the same period The Sectorand the Economy because of the deterioration of the Peruvian economy in the 1980s (Figure 2). 2. Over the last two decades, electricity demand growth has generatllyfollowed real GDP Figure 2 growth at a faster rate. When the economy has PERCAPITA INDICES expanded, electricity sales have expanded more, and when the economy has contracted, electricity , a , in sales have declined, though not as much as the economy. Between 1976 and 1989, the spread ,' between the electricity demand growth rate and the real GDP growth rate was 3.6% p.a. (Figure 1).

137L 1973 1 31 1377 1373 1911 1983 1315 198i £138

-or M cn5 -W "La MCAPITA

PER-3 4. Another indication of the positive Figure 4 contribution of the sector to development is the rate of electrification. In Peru, electricity service ELECTRIOI]Y COURGLS coverage increased from 30%kin 1971 to 38% in to 1989 indicating that thcrc i9 still much to do in the years ahead. Between 1976 and 1989, total ...... customers incrcased from 1.2 million to 1.8 million.

The ElectricityMarket: Demandand Supply

5. Between 1979 and 1989,total public service electricity uses increased 1.6 times, from 5,960 1971 1974 18977 ItI In 11 GWh to 9,492 GWhi. At the same time, electricity _ Kim ISSIL r PI3lASU -- -cD19S sales increased only 1.5 times, or 3.8% p.a., from 5,201 GWh to 7,583 GWh because of increasing electricity losses. In the future, sales are forecast to grow 6.6% p.a. and reach 14,322OWh in 1999. 7. The electric energy availaole to the grid was In 1989, the composition of total electricity uses generated by an installed capacity that increased was 27% residential sales, 4% commercial sales, 1.6 times in the 1980s,from 1,754 MW in 1979 to 37% industrial sales, 12% other sales, and tbe rest 2,810 MW in 1989. In 1989, 2,092 MW, or 74%, losses and own consumption (Figure 3). were hydro, and 718 MW, or 26%, were thermal. The sector's installed capacity is forecast to Figure 3 increase another 1.4 times and reach 4,045 MW in ELECTRICITYUSES 1999. The projected composition of installed capacity is expected to be 64% hydro and 36% thermal (Figure 5).

Figure5 ...... INSTALLED CAPACITY

.....~~~~~~...... ,

1971 1974 197? 1SIS 1983 MS5 1911 L599 1595 116_

mi RESIOEMIIAL E3 tO8CIAL z iINUSTPRAL t Bgg SAtES OTIER S on -OS - LOSSI SAES __......

L995-1999: PROJECTIIO#S

6. To meet electricity demand, the sector relies m9,7 157 7i5I6 1983 16 196IsiS 199 3, 3IM predominately on hydro generation. In 1989, the _HYM =I111U3L -COlKClfDDIID composition of total electricity sources was 92% 1996-199:PIOJEt O.S hydro and 8% thermal. Sector authorities expect the sector to rely slightly more on thermal generation in the future, as the projected composition for 1999 is 84% hydro and 16% thermal (Figure 4).

PER-4 OperationalPerfornance Figure7

8. Since installed capacity grew at a pace LO_SES_LOSSES/ENERG3YENER_Y_AVAILABLE AVAILABLE similar to that of electricity demand, the sector's reserve margin as a percentage of coincident demand remained fairly constant in the 1980s, ...... usually between 40% and 45%. lsX .._.>, _...... __...... __ , _.__._.__ 9. The sector's labor productivity is on the low side. In 1989, the customers per employee ratio . - was 121, and the electricity sales per employee ratio was 523 MWh (Figure 6). Both levels were close to the averages for the region. However, in comparison to other countries of the world, there x l . .. I. l . l. is substantial room for improvement. , ,IACt1t I

Figure6 EFFICENCYINDICES 11. The sector's collection practices improved in the 1980s. The collection period shows a 4la-CUM=¢

U20 - .t 1989, as it decreased from 141 days to 65 days. in. vSu9 Between 1987 and 1988, it increased from 78 days to 117 days. Sector anthorities expect the collection period to be around 60 days in the 1990s .mm . (Figure 8).

19i ,mm. i,, . . ,, I,,I,, I, -,, IFigure I,, 8

e s COLLECTIONPERIOD 197 1974 1977 1934 1913 198$ 1999 1992 1$99 1194

19-1119:, PROjEtC1US La -.- _.-...._. -.. _._.._._..-. - . .

1*9 ... *- ...... -.. __.-_.___._.--_....-..______.__..___.__.. _...... __

10. Electricity losses were a problem for the ...... - sector in the 1980s. Taken as a percentage of ...... - gross energy available, they increased from a ------reasonable level of 11% in 1979 to 19% in 1989, . . _...... _. -.. and a level of around 20% is forecast for the 1990s. The factors that explain such a high level of losses are the deterioration of the distribution 0 1971 1974 1977 198 I1N 1946 I9 19 A995 1999 grids, defective meters, and the continuing P9OJECTOS sabotage of transmission and distribution lines in the late 1980s (Figure 7).

PER-5 Profitabilty Figure 10

12. The deterioration of the sector's financial UNITPRICES ANDCOSTS condition can be seen in its financial return indicators. The rate of return declined from 5% in 1979 to 2% in 1985 and has been between -4% and -8% since then. Likewise, the interest coverage , , ...... -... ratio, which was several times greater than 1 in the ...... late 1970s, has been less than 1 since 1980. It had a low of -5.5 in 1989. In the future, sector ...... authorities expect the rate of return to increase . I I t I. b constantly and reach 5% in 1999 and the interest ,071 14 L 11S 19Z3 MNt 1969 1s109 M coverage ratio to remain in the vicinity of 1 -, COIWuo Ott[C -*- COSTW, cuC (Figure 9). -S- "aWO TAX*$ PO3Ct TAS

199S-til: POOJXCTCIIS Figure 9 RETURNSUMMARY 14. The composition of operating revenues has .IK, (X) .x remained fairly constant over time with the industrial sector accounting for the largest share. i .a/\ X g -.x In 1989, the composition was 19% residential sales, ! ,\ Al t * _ 15% commercial sales, 52% industrial sales, and . _ > g - x 14% other sales (Figure 11). -ax *410 -. J/\V Figure... 11 , YO...... COMPOSITIONOF OPERATINaREVENUES -ax 19OU 1074 L?77 IM 1W3 1016 110 Im 1005 LtS1

- li0T cO - MU+T or M O.l.. - ......

l"2l-lOn: POJcOlCsO:

41X -._...

13. The poor financial performance in the late

1980s occurred because the severe inflation that .- was gripping the country caused real electricity ax prices to decline substantially. The unit price of 1IO 1000LO L 1" 19`9, electricity declined from 68 US$/MWh in 1985 to l _cunl I CIIEI C3iAL M

21 US$/MWh in 1989. At the same time, the unit ns 11EI = OTHER C)WO0S cost of electricity only declined from 62 US$/M Wh 199- ,: PROJCTMos to 54 US$/MWh. This resulted in a negative operating margin. In the 1990s, the unit cost of electricity is expected to remain around 60 US$/MWh while the unit price increases from 66 US$/MWh in 1990 to 85 US$/MWh in 1999 (Figure 10).

PER-6 15. The operating income share of operating 7he Sector and Country Resources revenues declined substantially over the last two decades. It fell from 29% in 1978 to 8% in 1985 16. The sector has had a substantial claim on and has been negative since then. It is expected to country and government resources. Sector increase in the 1990s and reach 26% in 1999. The investments as a percentage of country investments composition of operating costs reveals that the were 2.9% in the 1970s and 3.9% in the 1980s sector's main expenses arc for personnel and (Figure 13). Sector expenditures as a percentage depreciation. Because 1989 was such a poor year of GDP increased from 1.5% in the late 1970s to for the sector, salaries accounted for close to 85% 2.8% in the early 1980s and then fell to 2.3% in of operating revenues In 1989, the composition of the late 1980s because of a decrease in investment operating costs was 85% personnel, 60% activity (Figure 14). depreciation, 7% materials and services, 14% fuel, 2% electricity purchases, 11% taxes, 73% other Figure 13 expenses, and -152%operating income (Figure 12). SECTORINVESTMENT/COUNTRYINVESTMENT

Figure 12 COMPOSITIONOF OPERATINGCOSTS ANNUALAVERAGE ANNUALAVERAGE 9" Box ~~~~~~~~~~~~~~~~~~~~~~~1971-79

tEX ~~~~~~~~~~~~~~~~~~~~~~~~~~2.9t3.9%

197L 1974 197a 1938 L933 II '1989 1992 1915 19 *" .t m091R a F== OEfREC C TA1S 1S fUEE L:EECPtlStH rEnEPsM CO FEtstME SZI CIR ["UEISE

09991-199: 3OJECTlOS Figure 14 SECTOREXPENDITURE/GDP

9.98

IlAx~~~~~~

Ill NO~~~~Ftllt L971-74 1998-7 919344 IW1S-39

IIIIICan- e M7 1 "

PER-7 The sector's contribution to the fiscal deficit Funding Requirementsand Sources increased from 0.9% in the early 1980sto 1.3% in the late 1980s. It decreased in the late 1980s 17. Beginning in 1983, sector investments fell because of the government's decision to assume substantially; in 1989, they were only 23% of the the sector's debt (Figure 15). Sector debt and debt amount invested six years earlier due to the limited service as a percentage of country debt and debt availability of funds to the sector. In the 1980s, service show an increasing trend over the last two the sector required just over US$3 billion, or decades. Sector debt decreased to 3% of country US$303 million p.a., to fund its investment debt in 1978 and then increased to 16% in 1989. program. In the 1990s, the sector is expected to Sector debt service decreased to 2% of country require about US$6.4 billion, or US$638 million debt service in 1978 and then increased; it had p.a. (Figure 17). peaks of 23% in 1984 and 92% in 1988 (Figure 16). Figure17 INVESTMENT Figure 15 _959 list us$ SECTORDEFICIT/GOP

I..4X em - . .-. -......

± El E4M -7 ---.--.

.9AX

L971-747011 I&55 11li ,6 11 9 15 6

Figure 16 DEBTAND DEBT SERVICEINDICES

bex ....

ft...... 445. - - -_- ......

1971 1973 1 975 167? 1679 1l8 15913 155 1W? AW

A;51POWEREBIT'IS7L KST 5: POW,lEltX1C t8596'T1CL NOT sOt

PER-8 18. The deterioration of the sector's funding * 19 condition can be seen in its debt service coverage and self-financing ratios. The debt service CMPOITION OFUSE80FFUNDS coverage ratio declined from a peak of 3.7 in 1978 to a low of -1.3 in 1989. During the same time period, the self-financingratio declined from 78% to -159%. In the 1990s, both ratios are expected to improve and become slightly favorable before falling at the end of the decade (Figure 18). Figure18 ox1

FUNDING SUMMAY l LSt7U-? 13 I1-Sn 131-1 1335-1

4 ISOll:PRO.J(CTIOUS

i' of internal funding in the composition of sources l ., \ l l l of funds shows a decreasing trend. It fell from . 1S3K 44% in the late 1970s to 4% in the late 1980s. In 1.,, ., ... , I ,, ., -, order to meeting funding requirements, the sector 19?1 1974 IVn 17t94 1"3IM 918 I992 i19935 19£3 had to rely increasingly on borrowings and

- ntICZCo". -+A- wi-v3J TtO government contributions. In the late 1980s,the

g1M-0t": PMOJECTICS share for borrowings was 18% and the share for government contributions was 79%. In the future, internal funding is expected to improve, as its 19. In addition to the decline in real tariffs, the share is forecast to be between 30% and 35% deterioration of sector finances was caused by (Figure 20). increasing amounts of borrowingsin the late 1970s and early 1980swhich caused a significant increase Figure20 in debt service payments. The share for debt COMPOSITIONOF SOURCESOF FUNDS service in the composition of uses of funds l I increased from 30% in the early 1980s to 47% in the late 1980s. At the same time, the share for lox : . investments declined from 59% to 39%. Delays in external debt service payments due to the need to use internal resources for the financing of works l a1 came to a crisis point in the mid-1980s. At this time, the government assumed a significantportion of the sector's overdue, unpaid debt, refinancing it | | 14 t 5 £ 1 1595-1l 19I71-74 L9135-" ITS69 LIS85-69 1990-94 1S95-99 over a 20 year period beginning in 1990 without |MIOn. interest. In accordance with this agreement, the m AMATERNF" Or CUTCOmTRo RM A'T COSTRIB entrepreneurial system of public electricity service § C:J FlINRCHIOA? _- R CAPECREAP E must make a series of payments to service the IM11999:POJICTIONS refinanced debt, with expiration dates between 1987 and 1996,and will nonetheless maintain debt agreements made with national entities that were not assumed by the government (Figure 19).

PER-9 21. If 1988 tariffs are kept constant in real Capitl Structure terms, the sector will experience grave difficulties. Internal funding will be negative, and the sector 22. The sector's debt/cquity ratio increased from would have to rely 100% on external resources to 25/75 in 1978 to 90/10 in 1987 before the meet debt service obligations and to fund its significant assumption of debt by the government investment program. Given the low rate of return (para. 19). Then, it declined to 45/55 in 198°. (para. 12), these resources would probably not be However, according to the projections for the forthcoming (Figure 21). 1990s, the capital structure will be 100% debt in 1990 and then decline to 66/34 in 1999 (Figure Figure 21 22). COMPOSITIONOF SOURCESOF FUNDS If 8s I*fni Holm$ CcOWf1 Figure 22

MILLIONIfig ,$ "CAPITAL STRUCTURE

am as~~~~~~~~~~~~~~~~~~~~~~~t

1489 1911 1991 1991 1947 14994e n prSm, GAP - sr SIIYIC 1971 1W74 1977 19SiINIMUItY 197 19S6ESXB 198 193 194 15990 19991999: 090JtCTIOkS

PER-10 ST. LUCIA

ELECTRIC POWER SECTOR ST. LUCIA `1PTVR SECTOR DATA SUMMARY SHEWFrT 1988

1.ihfip5vi e) geellenaioll, t1aismission, and distribution on St. Lucia is tlic responsihil i, (oi t1 lational utility Sl. I .vwia IIk tlt Iicily SnC,i'iccs, l imited (LUCELEC). The utility operates two separatc nci woi 1;-(iorthern and smuitwihi,1 ad adi-vl i ,, I stations, one for each network, generate thle powet

GENERAL.ECONOMIC DATA ELECTRICITYSOURCES

POPULATION 'OW) 147 CAPACITY ENERGY AREA '000 SQ.Kl' 0.6 (NW) (GWfih) POPULATION PER SQK4 245 EAST CARIBBEAN $ PER US$ 2. 70 THERMAL 19 104 GDP, millions of US$ 237 MYDRO 0 0 GDP PER CAPX.TA,US$ 1,638 NUCLEAR 0 0 GDP GROWTH RATE, % * 7.1 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 ELEC. SALES GROrTH RATE, % * 14.0 PURCHASES 0 ELEC. CONSUMP.PER CAPITA, kWTh 597 TOTAL ,19 104 1989 ELEC. SERVICE COVERAGE, % NA POWER EXPENJDIlTURESIC.DP, * NA RESERVE MARGIN NA NA

ELECTRI POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS'000 24 GWh EMPLOYEES 206 CUSTOMER'SPrER JMIPLOYEE 116 RESIDENTIAL 29 34 TOTAL SALES PER EMPLOYEE, MWh 417 COMMERCIAL 45 52 INDUSTRIAL 11 13 BULK SALES # 0 0 OTHER 1 1 DOMESTIC SALES 86 100

5JEC EXPORTS 0 ~~~~~~~~~~~~TOTAL 86

AVERAGE RATE (US$1MN) NA SYSTEM LOSSES 13 It 12 OPERATING MARGIN (W/O DEPR), 2 NA OPERATING MLARGIN(W/ DEPR),9 NA RATE OF RETURN, % NA INDEBTNESS, ' NA DEBT SERVICE COVERAGE, times * NA * - average per year since 1985 SELFFINACJ'NG RATIO, % * NA - to other utilities not in the study - as a percentage of available eeriegy ST. LUCIA

ELECTRICPOWER SECTOR

INSTITUTIONALASPECTS

Electric power on the island is the responsibility of St. Lucia Electricity Servies Ltd. (LUCILEC) which operates two physicallyseparated systems. Union Power Station serves the north end of the island,and View Fort Power Station supplies power in the South. Both systems are entirely diesel-based. Electricity demand has been increasing because of a healthy tourist sector.

LUCILEC is jointly owned by the Government of St. Lucia and private investors. The price of electricity is regulated by a public utility commissionwhich is appointed by the Government.

STL-2 ST. VINCENT

ELECTRIC POWER SECTOR ST. VINCENT & THE GRENADINES POWER SECTOR DATA SUMMARY SHEET 1988

St. Vincent Electricity Service, Limited (VINLEC) is the only entity responsible for electric power generation and distribution on St. Vincent and on the Grenadines islands of Bequia and Union. The sector is supervised by the Ministry of Public Works and thc Ministry of Agriculture and Trade.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPUiLATION'000 112 CAPACITY ENERGY AREA '000 SQKI 0.4 (MW) (GTh) POPULATIONPER SQKM 280 EAST CARIBBEAN $ PER US$ 2. 70 THERMAL 8 22.5 GDP, millons of 1988 USS 136 WYRO 5 22.S GDP PER CAPITA, 1988 US$ 1,206 NUCLEAR 0 0 GDP GROWTHRATE, Z * 5.1 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IMPORTS 0 RLEC. SALES GROWTHRATE, % * 10.1 PURCHASES 0 ELEC. CONSUMP.PER CAPITA, kWh 323 TOTAL 13 4,5 1939 ELEC. SERVICE COVERAGE, Z 75 POWER EXPENqDITURESIGDP,% * NA RESERVE MARGIN 5 62%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 15 GWh 2 EMPLOYEES 245 CUSTOMERS PER EMPLOYEE 61 RESIDENTIAL 16 44 TOTAL SALES PER EMPLOYEE, Mh 147 COMMERCIAL 13 36 INDUSTRIAL 6 17 ______.BULK SALES #0 0 OTHER 1 3 DOMESTIC SALES 36 100

SECTOR FINANCES TOTAL 36

AVERAGE RATE (1988 US$IMWh) 216 SYSTEM LOSSES 7 ## 16 OPERATING MARGIN (WIO DEPR), 2 13

OPERATING MARGIN (WI DEPR), 5 30 ______. RATE OF RETURN, Z 4.2 INDEETNESS, % 68 DEBT SERVICE COVERAGE, times * 9.6 * average per year since 1985 SELF-FINANCING RATIO, 2 * 44 - to other utilities not in the study - as a percentage of available energy ST. VINCENT & THE GRENADINES

ELECTRIC POWER SECTOR

INSTITUTIONALASPECTS

St. Vincent Electricity ServicesLimited (VINLEC) is responsible for the generation, transmission,and distribution of electricity on the islands of St. Vincent, Bequia, and Union. VINLEC operates, under contract, the government-owned power system on Union Island.

Prior to 1972, the electricity systemon St. Vincent waswholly owned by CommonwealthDevelopment Corporation (CDC), and the electricity system on Bequia was wholly owned by the Government. The two existing systems were merged into the new VINLEC in 1972, and the Government of St. Vincent and the Grenadines and CDC obtained 59% and 51% of the shares of VINLEC, respectively.

Tn 1973, CDC signed a management agreement with VINLEC to render advice in connection with managerial, operational, and financial matters as well as procurement of goods and services from abroad. Similar arrangements were made by CDC with five other countres in the Caribbean.

In 1982, CDC formally sold its equity shares of VINLEC to the Government and relinquished its management responsibilities under a management agreement with VINLEC.

In 1990, the Government further transferred ownership of Union Island Electricity Services to VINLEC. However, the Government has retained until now 100% of the share capital and in effect, is the de facto owner of St. Vincent Electricity Services Ltd..

The company's Board of Directors is comprised of the Chairman, five nominated directors, and the General Manager. Its business is conducted through the Company Secretary whose substantive position in the company is Financial Controller.

VINLEC's revenues are entirely derived from the sale of electricity. Tariffs for each class of consumer are equalized on a nationwide basis whereby loss-profitable areas, such as the Grenadines islands of Bequia and Union, are subsidized by revenues received from the main island of St. Vincent.

STV-2 ST. VINCENT & THE GRENADINES

ELECTRIC POWER SECTOR

EVOLUTION, SITUATION. AND PROSPECTS

Summary TheSector and the Economy

1. After tremendous difficulties in the early 2. Since 1983, electricity demand growth has 1980s, especially operational losses, the power followed, at a faster rate, the pattern of real GDP sector of St. Vincent and the Grenadines initiated growth. Electricity demand grew 11.4% p.a. while changes that led to significant improvements. Since GDP grew 5.5% p.a.. Therefore, the spread 1983 when the sector adopted more efficient billing between the electricity demand growth rate and the and metering systems, the sector has shown real GDP growth rate was 5.9% p.a.. Prior to 1983, excellent improverments in electricity demand the rate of growth of electricity demand was less growth and electricity consumption per capita while than the rate of growth of real GDP. However, reducing operational losses. From 1983 to 1989, these statistics can be misleading, as before 1983, electricity sales doubled. At the same time, losses records for the power sector of St. Vincent were as a percentage of gross available energy were cut extremely poor. In the early 1980s, the sector was in half In the late 1980s, the sector focused on still recovering from the effects of Hurricane Allen generation and invested heavily in the Cumberland (1980) and a fire in 1980 which destroyed the River hydro project. As a result, investment as a commercial office of St. Vincent Electricity Service percentage of gross domestic investment, debt as a Ltd. and all consumer and meter records. As a percntage of country debt, and debt service as a result, some consumers, who were connected to the percentage of country debt service increased system, were not identified in the official records substantially. The sector's labor productivity and therefore, were not billed. Additionally, others indicators are among the lowest in the region and seized this opportunity to connect themselves are in heed of sx- irectiveaction. illegally to the system. In addition, the computer billing system was inefficient and meters were inaccurate prior to 1983 (Figure 1).

Figure I GROWTHRATES

LWX- ......

.::X .- U ...... ------I......

k71 1nn3 1f95 It" 99 1181 19#3 1961 1987 1909

LV. -UL + 3ICTV UL

S1TV-3 3. An indiicator of the positive contribution Fig,ure 3 of the sector to economic and social development . .. is electricity consumption pcr capita. Between 1983 and 1988, electricity consumption per capita grew at _ a rate of 1(.0% p.a., from 201 kWh to 323 kWh. During the saein time, GDP per capita grew 4.3% Pr.a,from US$977 (1988 US$) to US$1,206. Prior

to 1983, elextricity consumption per capita was - relatively constant. However, in reelity, the case . may l:a different for the same reasons stated ...... previously (Figure 2). ,- t- 1071 1St4 1477 ISSO 19SI 118 1459 141R 1SSJ 149

. aa 0~~~~~~~~~~~~~~~THEt CO0. i, s 3~ssi PER CAPITAINDICES

Igno U;, 1*~~~~~~~~~~~~~~~~~~~~~~~~~~~J~~~~~~I.2I),l -Si

' 4-w6. To Mrci clccii,ity &wa.iidi, thl sector relied on an installed capjacift of 14 MkV in 1989. T,his level was twice that of 1980, 'i MW, and forecasts expect it to increase anuother 1.8 times by 4iSJ ...... 1999 and reachLiS ...... 25 MW (Figure 4).

c ;----,< g ~~~~~~~~~~Figture 4

197J 1973 I97e 197? 1979 1901 1S_933 as1__ _87 Iure INSIALLED CAPACLI -

CDP 1 CCPIYD - 1AL331 M CAPITA 5C WA*

83 ._...... _ __......

4. Total customers of electricity increased . ... from II thousand in 1980 to 16 thousand in 1989. -s------The residential -ector accounted for most of the . . f-. r..lU. - growth, as residential customers increased from 10 . . . -e j thousand to 15 thousand during the period. . --- ... ..

'1e Electricity Market: D1eniu7ndand Supply 1971 1974 1977 Mg8 1983 19i4 1939 199a 5 199

COll:CIlil oa,11Ai L-1- mYLsmI;3 owily1 5. Electricity uses in 1989 were 1.8 times those of 1980, as they grew from 26 GWh to 47 GWh. Electricity sales were 2 times, as they grew from 20 GWh to 40 GWh, an annual rate of about Operational Performance 8%. Electricity sales are expected to continue to grow at a rate of 8% p.a. and reach 87 GWh in 7. In the 198(1s, the sector's reserve margin 1999. In 1989, the composition of electricity uses as a percentage of maximum cmincident peak was 37% residential sales, 31% commercial sales, demand remained relatively constant. It ranged 15% industrial sales, 2% other sales, and the rest between 57% and 67%. Because of erratic rainfall, losses and own consumption (Figure 3). the hydroelectric facilities cannot be relied on year- round; hence the reserve margin is in fact considerably lower than previously indicated. It is not anticipated that a real positive reserve margin will be evident until 1991.

STV-4 8 Because of the varied mix of generating Figure 6 facilities resulting from available fuel sources and geographic locations, the sector's labor productivity R SUMMARY appears to be poor. In 1989, the sector's customers per employee ratio was 62, and its sales per employee ratio was 151 MWh. Both indicators are significantly below those found in other countries in 4 the region.

9. The sector has made progress in reducing ex electricity losses. Electricity losses as a percentage . of gross available energy increased from 21% in I . I . . ._-, *a 1980 to 26% in 1983 and then fell to 12% in 1989. L71 L174 17l ,1 It1S 198I 192 1i1tti19 1199

They are expected to remain at 12% in the 1990s. - INaamzm -+- of ut|e, In comparison with other countries in the region, ______St. Vincent is one of the few that has had a significant reduction in terms of losses (Figure 5). 11. For the most part since 1980, the unit Figure S price of electricity has exceeded the unit cost. LOSSES/ENERGYAVAILABLE From 1983 to 1987, the sector's operating margin increased tremendously because of more reliable billing and metering systems and peaked at about

nxJ -.- - - .... -...... 81 US$/MWh (1988 US$) in 1987. However, it has declined considerably since 1987 and in the 1990s, ux .. . -...... -...... is expected to be low. Given the low expected rate of return, tariff policy is an area that deserves x ...... careful review by sector authorities (Figure 7).

l x ...... Figure 7 1)x . __._ -..-.-.-...... UNIT PRICES AND COSTS

ex .,S I I..X..I.. SAGOur - 1971 1914 1977 119 1919 L9IS 19i9 199 199X 1990 1$4-19999PROCIit-S

...... Proftabiy In ------_. _..._...... ,...... 10. The sector's deteriorating financial ...... position is reflected in its financial return indicators. Thesector's rateof return on assets has . , I I I I I i been declining since it peaked at 54% in 1984 and ,711 17. .. , 19 1 . 1 15 9 is expected to be in the vicinity of 0% in the early wo m -'-cest u/ smaC + -cI 1990s. Given this low level, it is unlikely that the 19.0-1999:RO.CTIAS sector will be able to attract resources external to the sector (Figure 6).

STV.5 The Sector and Country Resources wigure9 12. The sector absorbed a significant amount DEuT A T V of country and government resources in the 1980s. Sector investments as a percentage of country investments were 15.7% in the 1980s (Figure 8). ax Since the sector has been able to carry out its investment plans and meet its operational and financial obligations using its own resources and borrowing, the need for transferring fiscal resources has been minimal. However, sector debt as a -" --..--- .- X percentage of country debt and sector debt service . I as a percentage of total country debt service .7 L97"1" 7S 19?7'9u 1979 19a3 19s5 a117 IM increased significantly in the late 1980s. In 1987, -^ .. sector debt hit a peak of 46% while sector debt service hit a second peak of 23% (Figure 9). ,______OE31______

Figure8 SECTOR INVESTMENT/COUNTRYINVESTMENT Funding Requirements and Sources 13. From 1990 to 1995, the sector is expected to require US$27 million (1988 USS) for ANNUALAVERAGE investment,or US$4.5 million per year. From 1983 1i99-B, to 1989, the sector required US$36 million, or US$5 million per year. Because of the Cumberland ANNUALAVERAGE River project, a system of three power stations in a cascade arrangement on the Cumberland River, IISOSTh .71 sector investment peaked at US$12 million in 1986 (Figure 10).

Figure 10 INVESTMENT

NILLIn 1999 uu

1e.

------. ------.------.- ,...... l......

1971 1974 197A 1189 1901 1966 1989 1992 1995 1998

1998-1999:PROJECTIONS

STV-6 14. The sector's funding position has been 16. The sector has historicallyhad an internal strong and can be summarized by the debt service funding level of about 50% of total sources of coverage and self-financingratios. The debt service funds. As a result, it has been able to fill its coverage ratio was several times greater than 1 in remaining funding requirements with a comfortable the 1980s and is expected to fall substantially, level of borrowing. Internal funding is expected to though remain greater than 1 in the future. The increase to 58% in the early 1990s, but given the self-financing ratio was between 20% and 70% in low projected rate of return on assets (see para. the 1980sand is expected to remain in that vicinity 10), the sector may have difficulty attracting in the future (Figure 11). external resources to fund its investment program (Figure 13). Figure 11 FUNDINGSUMMARY Figure13 .,1

16 ot

' .... 41 38'A 14M~~~~5

1";sn-741900- l§W9t4 193-99 1l 1974 1 LS" 1 .-+.4ox 197n-7917175-t 1s13819ml- lsE"t1 5-S 112 19

-DT t191c1 00. - 111-116 3t10 0TERI PI U tJT CONTOT C GIV'T CONTUS M 1l SUt0 A110195lAP _ Wm CAP OEtMt 'I-1999: FUJC lIS

I It15190-19: p5041111111

15. In the past, a majority of the sector's available funds were used for investments. In the 17. However, if tariffs are maintained at their early 1990s,the share for investments is expectedto 1988 level in real terms, the outlook of the sector fall to 62%, as the sector will have to meet debt is much better. Under this scenario, internal service obligations arising from the borrowings it funding will be able to cover debt service contracted in the 1980s (Figure 12). obligations and still leave substantial funds for the sector's investment program (Figure 14). Figure 12 COMPOSITIONOF USESOF FUNDS Figure14 .8-1 _ _ ...... COOMPOSITION . . . _ OF SOURCESOF FUNDS If In8 1fell" noi CONhAIAS

, _'__NIL= 4 1i1, M18

1961IM: P OJETS 81 THl fUm EnE CU5TtQOTNUTM GM 8 P - tRU

STV-7 CapitalStrurw

18. Since the sector has historically relied on borrowings to fill its funding requirements, its debt/equity ratio has been high. It was between 60/40 and 70/30 for much of the 1980s and is expected to remain in that range in the future (Figure 15).

Figure 1S OAPITALSTRUCTURE low

IN . . l . . l , I I I I . . . 19Y11l4 1971 19W IM9 HS9 1991 31 1997 1

i99-I*"91 P0OACT10SV

STV-8 SURINAME

ELECTRIC POWER SECTOR SURINAME POWER SECTOR DATA SUMMARY SHEET 1988

Electric power in Suriname is supplied by Energie Bcdrijvcn Suriname (EBS); however, EBS purchases a substantial amount ol its electricity from a private company, the Suriname Aluminum Company (SURALCO). SURALCO rclies mainly on the 189 MW Afobakka hydroelectric plant located on the Suriname River to supply its electric power. The sample for this study consists solely of EBS.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 427 CAPACITY ENERGY AREA '000 SQKII 163 (MW) (GWh) POPULATION PER SQKM 3 GUILDERS PER US$ 1.79 THERMAL 60 89 GDP, millions of US$ 1,297 HYDRO 0 0 GDP PER CAPITA, US$ 3,040 NUCLEAR 0 0 GDP GROWTH RATE, % * -4.1 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) NA IlPORTS 0 ELEC. SALES GROWTH RATE, Z * 3.8 PURCHASES 237 ELEC. CONSUMP. PER CAPITA, kWh 669 TOTAL 60 326 1989 ELEC. SERVICE COVERAGE, % NA POWER EXPENDITURES/GDP, % * NA RESERVE MARGIN 6 12%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 61 GW& % EMPLOYEES 600 CUSTOMERS PER EMPLOYEE 102 RESIDENTIAL 112 39 TOTAL SALES PER EMPLOYEE, MAI 475 COMIMERCIAL 49 17 INDUSTRIAL 83 29 BULK SALES I0 0 OTHER 41 15 DOMESTIC SALES 285 100

SECTORFINANCES TOTAL 285

AVERAGE RATE (US$lMWh) 149 SYSTEM LOSSES 36 ## 11 OPERATING MARGIN (WIO DEPR), 2 15 OPERATING MARGIN (WI DEPR), % 25 __._ _ RATE OF RETURN, Z 7.8 INDEBTNESS, % NA DEBT SERVICE COVERAGE, times * NA * - average per year since 1985 SELF-FINANCINGRATIO, Z * NA - to other utilities not in the study - as a percentage of available energy SURINAME

ELECTRIC POWFR SECTOR

INSTITUTIONAL ASPECTS

The Public Power Sector in Suriname consists of one state owned public power corporation, Energie Bedrijven Suriname (E.B.S.), which is under the jurisdiction of the Ministry of Natural Resources.

Nationalization of the electric power sector started in 1968when the Government of Suriname decided to acquire 90% of the then Dutch-owned private company. In 1981, the companywas fully nationalized when the Government, by decree E-32, took over the remaining 60% of the company's shares.

E.B.S. is responsible for the supply of electricity in Parainaribo and areas in the coastal region and has one 50 MW thermal power plant in Paramaribo and several smaller power plants in the Northern part of Suriname. Part of the electric power distributed by E.B.S. is purchased from SURALCO (Suriname Aluminum Company), the largest self producer of electric power and owner of a 189 hydro power plant.

By the so called Brokopondo agreement (agreement on the Construction of the hydro power plant in 1958), tue Government purchases 80 GWh per year of hydro power from SURALCO. Additionally, the Government has a "system-energy"agreement with SURALCO which allows the Government to purchase approximately 175 GWh of electric power from SURALCO. The Government sells this electric power to E.B.S..

Electricity is sold by E.B.S. under a number of tariff schedules applicable to different consumer groups. The applicable tariffs include a fuel adjustment clause.

SRM-2 SURINAME

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION, AND PROSPECTS

Summary supply (para. 6). The spread between the electricity demand growth rate and the real GDP 1. The available information suggeststhat one growth rate was 5,6% p.a. in the 1970s and 6.3% of the sector's basic objectives in the 1990swill be p.a. in the 1980s (Figure 1). to expand generation capabilities and increase service coverage. This will require investments 3. An indication of the vositive contribution of surpassing the sector's own financial capability. the sector to economic and social development is While rates are forecast to increase slightly from growth in electricity consumption per capita. already high levels, thus increasing internal Between 1971 and 1988, consumption per capita funding, it is fair to expect a comfortable increase inicreasedfrom 310 kWh to 669 kWh, or 4.6% p.a., in borrowings to meet funding requirements. while GDP per capita declined from US$3,788to Historically, the limited information indicates that US$3,040,or 1.3% p.a.. Between 1978 and 1988 the sector has performed satisfactorily. when GDP per capita declined 4.9% p.a., consumption per capita grew 2.3% p.a. (Figure 2). TheSector and the Economy ______F_- lgure2 Figure 1 PERCAPITA INDICES GROWTHRATES i,, u

6K .-.-- ,. tt . .,- C~.1..~.L. --.

1911 1973 195 1977 1979 L961 1993 1995 1917 19m9

1971 1973 1915 1977 1979 1911 1983 19815 19 19i, 4 OP PU Capita - $ALII P CaPita

4. Total customers of electricity service grew 2. In Suriname, electricity demand growth has from 48 thousand in 1978 to 61 thousand in 1988. generally followed real GDP growth at a faster The residential sector accounted for most of the rate. The 1980swas a notably inauspicious decade growth, as residential customers increased from 44 for the economy, as real GDP shows negative thousand to 55 thousand during the period. growth in almost every year. However,despite the negativegrowth in the economy,electricity demand generally shows positive growth. In 1987, demand failed to grow because of significantconstraints on

SRM-3 The ElectricityMarket: Supply and Demand hydro plant to Paramaribo was then replaced by electricity from the thermal plant of SURALCO. 5. Total electricity uses increased 1.4 times On August 1, 1987, the supply from the hydro between 1979 and 1988, from 239 GWh to 326 plant was recovered. (Figure 4). GWh. At the same time, electricity sales only increased 1.3 times because of slightly increasing Figure 4 electricity losses. Sales increased from 212 GWh ELECTFCITYSURES in, 1979 to 285 GWh in 1988,or 3.3% p.a.. In the future, sales are expected to grow 3.5% p.a. and , 3" reach 417 GWh in 1999. In 1988, the composition ...... of total electricity uses was 35% residential sales, ...... in

15% commercial sales, 25% industrial sales, 13% . . other sales, and the rest losses and own consumption (Figure 3)......

ELECTRICITYUSES l -- ; 4 - LOIS -;- ;-- S

...... _...... _._._...... 1I197?-1 1 19:PR 1JECTIONS

_ ...... _._._ ...... an

...... - .. -. t -- -- - 1-...... u...... 7. The electric energy available to the grid was ...... ,...... * generated,,,. by an installed capacity that increased ...... _.4 ._...... * nearly 3 times between 1971 and 1988, from 21 .. ~ 1989 1I,8 * MW. to{ .60... MW. All of the sector's installed 1571 1914 19 856 193 1986 Sli 1993S capacity is thermal (Figure 5). The sector is m Rts@tltUt CESq C3 sltml supported by the Suriname Aluminum Company em O 108C0=19conUllS (SURALCO) which owns and operates a 189 MW ______I _ _ hydroelectric facility at Afobaka as well as several steam and gas turbine units.

6. To meet electricity demand, the sector has Figure 5 relied increasinglyon purchases from the Suriname INSTALLEDCAPACITY Aluminum Company (SURALCO). In 1988, the composition of total sources of electricitywas 73% NM domestic purchases and 27% thermal generation. This is a substantial change from the composition . in 1979 which was 34% purchases and 66% ...... thermalgeneration. The supplyof electricityfailed to increase in 1987 for several reasons. On ...... -9 January25, 1987,two transmissionpoles from the main transmission-line coming from SURALCO's hydro power plant were damagedwith explosives by compulsory groups. The electricity supply from I9l 194 111 9915 1998 1 6 I 19t3" 1995 19s the hydro power plant to the Alumina plant and -C cO:sCsMR5 Paramaribo was cut-off. The crisis caused by this 195,-sm: ended on March 9, 1987, when the transmission- line was partly repaired. On May 3, 1987,another transmission pole was damaged with explosivesand caused a cut-off of the transmission of electricity to Paramaribo. Part of the electricity supply from the

SRM4 Operating Perormance 7 L Egure

8. The public sector's reserve margin as a LOWES/ENERGY AVAILABLE percentage of maximum coincident demand was on _ the low side in the 1980s, generally around 30% ...... but only 12% in 1988. The main reason for the low levels is the sector's electricity purchases from .x ...... SURALCO which has an installed capacity of more than 3 times the public sector's. In the ...... 1990s,the declining trend in the reserve margin is . 4 ...... expected to continue. ax -...... 9. The labor productivity of the sector could beimproved. In 1988, thecustomers peremployee . X I I I l 4 £911 1974 1977 1ife 1901 1999 1Ito 1992 1493 1999 ratio was 101,and the sales per employee ratio was ,,-irn: PROJECTmS 475 MWh. Both indicators are slightly below the respective averages for the region (Figure 6). 11. The sector's collection practices have been Figure 6 good. Its collection period improved from 141 EFFICIENCYINDICES days in 1984 to 65 daysin 1985 and then continued to decline to 44 days in 1988. In the future, the It SWI M. collection period is projected to be 48 days (Figure

199 9 -Z."8).

,, Figure 8 COLLECTIONPERIOD

48~~~~~~~~~~~~~~~~~~~~~~~~4 atf .,,I,I.,I,Vf.I.

1071 1974 1977 1999aXs 1ISS1z7* 1999sb77 19t" 1ssz 1991 s|a 1995ms AM9s~~~~~~~~~~~~~~~~~to m a . . ... __...... -1-----...... ~

aI9?99E/WWIAZ: t11z n,LW. -- -- . -t - - --. ------

:: --..--.-- . ~ ...... --

10. Electricity losses have not been a problem for the sector. Taken as a percentage of gross energy available, they increased from 9% in 1979 . to 11% in 1988 (Figure 7). 114 1989-lb4: £O9C10 119

SRM-5 Profaabily Figure 10

12. The sector's rate of return hge been positive UNIT PRICES AND COSTS with an increasing trend since 1985. Between 1985 iso 19691s/166 and 1988, it ranged between 3% and 8%. In the future, it is expected to be between 6% and 8% - which may be too low to attract investors to the sector (Figure 9).

Figure 9 .... RETURNSUMMARY

5 filat #^}- l19 t71 14 L9779 t 19983 1906 1919 19l 1Is 1910

---- COtT /O DEb -4-- - cost 5WC DVIC 4 PICE WO IAMB5

4- -AaJECa99s L la9-19W 3 A 14. The operating income share of operating 2 9 D revenues in the operating cost composition has been positive since 1984. It had a peak of 15% in

.-- ¢v-s > F--, --- --.- ,---.-..-;.--~-- 41988 and a low of 5% in 1987. It is expected to t¢1y4S12% ;Wn OMC11 MS 119 1*tl MS I-Pla increase to 20% by the late 1990s. The main cost

-;-4Rb4!d51t1 {r e.components arc personncl and electricity

______tc______^, n.. ______purchases. In 1988, the composition of operating coits was 33% personnel, 27% electricity purchases, 10% fuel, 10% depreciation, 5% 13. The posizive rae of return has bcer the materials and services, -9% taxes, 9% other T*ut'T of Unit price.s aId Coststhat ha.ci r ultel ill expenses, and 15% operating income. The share P.),;AAsVV,peiaiting margins since 084 despime an tf3. clectricity purchases is forceast to decrease ~a-.gisa£dec,in of I rl p.a- 11 the rla pr.c o I sstanzially in she late 1990s indi.eating that the NMWI of e61xf icirv. In t£hefuture, the uni; prihe 3w Fs'xhr plans to Y03Yless on purchases and more on expeAned to renuai± ian Ghe Viei'ity of 150 itso<'. e -atio,i capabilities (Figure 11). UIS$/M'Wh wh4l the unit cost decreeses ,liglhtly (Figzure10). i3x C.~J'.Si (ION OF OPERATING COSTS

.f* 1 ' t' Ill-i 19I' ±996 1999 1g99 1993 1993

i 1: _ , 19'-jSt =Taxi S P1

97 5;- P'.ACTONS

SRM-6 Funding Requiremeatsand Sources 17. The composition of uses of funds in the 1990sshows a decreasingshare for investments and 15. In the 1990s, the sector is expected to an increasingshare for debt service. The share for require US$178 million, or about US$18 million investments is projected to decrease from around p.a., to fund its investment program. The majority 59% in the early 1990s to 39% in the late 1990s of the investments will be made in 1994 (30%) and while the share for debt service increases from 7% 1996 (26%) (Figure 12). to 24%. The compositions are completed by substantial increases in working capital (Figure Figure 12 14). INVESTMENT OfILwLON9"nUS$ Figure14 COMPOSITIONOF USESOF FUNDS .b' ...... l

...... ,, ...... ,_.. ,,.. __,,,,,...... 4 s

;ITS AflA 01 1888188LISS88 fie10310$TOATH NOOATH O O0No HAO DATA

_ slwninl lty-74 OA7S-lA 19ASS-IA NS1-01 &tH-1 1891-98

111901"9! PROJECTOIS PIIIIOO MIIUM CIIP IlcUOSh IHEHUUIT ODART StDICS

198-1919: UouCTnOn 16. The forecasts for the 1990sindicate that the funding condition of the sector will be quite good. The debt service coverage ratio is expected to be 18. The composition of sources of funds shows several times greater than 1, with a decline in the an increasing share for internal funding in the late 1990s,and the self-financingratio is expected 1990s. It is forecast to increase from 42% in the to exceed 20% in every year (F.gure 13). early 1990s to 62% in the late 1990s (Figure 15).

Figure 13 Figure 15 FUNDINGSUMMARY COMPOSITIONOF SOURCESOF FUNDS

Al Al'x -1,i

HRA M- 883~~~~f

I D4ATH NOOIAT NOOATA HOOATA %VA ~~~~~1911-741HOS-ZI O1tQ4-B 1885-80 1806-04 1895-HA

1971 1014 107 OH1M 1983 1986 18809 190 1805 1999 91[R FVOODOO CD11 CUS CO83R C00048TBOOTI00110

- OUT8117418 1010001 RATIO 088. ~~~- HAHAOooHO P01000108~~F H4IAP Wmk CAPOSCICASO

1TA9-IH9H:PHolTJTiToI 198H-19H9:PROJCTIOHS

SRM-7 19. If 1988 tariffs are maintained in real terms, Capia Structure internal funding will be sufficient to cover debt service obligations and still leave a substantial 20. The absence of loans in the 1980s explains amount of funds for the sector's investment why during those years equity constituted 100% of program. However, significant financing gaps capital. In the 1990s, the sector is expected to requiring resources external to the sector will have to borrow to meet its funding requirements. result in the mid-1990s because of the As a result, its debt/equity ratio is forecast to concentration of investments in those years. Given deteriorate from 12/88 in 1991 to 65/35 in 1999 the sector's projected rate of return (see para. 11), (Figure 17). these resources may not be forthcoming (Figure 16). Figure 17 CAPITALSTRUCTURE Figure 16______COMPOSITIONOF SOURCESOF FUNDS If 4l1 ThREWF UZIM CCZiJIT ZX X

NILLIC 1988 M .

42~ ~ ~ ~~~~~~~~~~M

P091MM FUW1MS M CUSTCMTMITIOUTI .MUE8 AfC _ MT JCC

SRM-8 TRINIDAD & TOBAGO

ELECTRIC POWER SECTOR TRINIDAD & TOBAGO POWER SECTOR DATA SUMMARY SHEET 1989

On the islands of Trinidad and Tobago, the generation, transmission,and distribution of electricity is the responsibility of the Trinidad and Tobago Electricity Commission(T&TEC).

9GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 1,261 CAPACITY ENERGY AREA '000 SQKII 5 (MW) (CWh) POPULATIONPER SQKM 252 TT DOLLARS PER US$ 4.25 THER1AL 1,189 3,403 GDP, millions of US$ 4,050 HYDRO 0 0 GDPPER CAPITA,US$ 3,214 NUCLEA 0 0 GDP GROWTH RATE, % * -4.1 GEOTHERMiAL 0 0 1988 EEGY CONSUNPTW0N OTHER 0 0 PER CAPITA (kg oil equiv.) 5,255 IMPORTS 0 ELEC. SALES GROWT1RATE, % * 4.5 PURCHASES 0 ELEC. CONSUMP. PER CAPITA, kWh 2,361 TOTAL 1.189 3,403 1989 ELEC. SERVICE COVERAGE, % 97 POWER EXPENDITURESIGDP,% * 2.3 RESERVE MARGIN 654 122%

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 300 GWh Z EMPLOYEES 3,227 CUSTOMERS PER EMPLOYEE 93 RESIDENTIAL 885 30 TOTAL SALES PER EMPLOYEE, MWh 922 COMMERCIAL 329 11 INDUSTRIAL 1,747 59 - ______| ,BULK _ SALES 10 0 OTHER 14 0 DOMESTIC SALES 2,975 100

SECTOR FINANCES EXPORTS 2.975

AVERAGE RATE (US$IMWh) 29 SYSTEM LOSSES 362 # 11 OPERATINGMARGIN (W/O DEPR), % -10 OPERATING MARGIN (WI DEPR), % 5 RATE OF RETURN, % -4.2 INDEBTNESS, 2 24 DEBT SERVICE COVERAGE, times * 0.4 *average per year since 1985 SELF-FINANCINGRATIO, Z * -300 # to other utilities not in the study - as a percentage of available energy TRINIDAD & TOBAGO

ELECTRIC POWER SECTOR

INSTITUTIONAL ASPECTS

The Trinidad and Tobago Electricity Commissionwas established by an Act of Parliament in 1945 and is responsible for the generation, transmission, and distribution of power throughout the country. It is responsible to the Ministry of Settlements and Public Utilities.

The Commission is a Statutory Body appointed by the President consisting of no fewer than five members and no more than nine. The Act requires the Board to consist of the following disciplines: Engineering, Accountancy, Law, and Economics or Business Management.

The Board is non-executiveand sets the policies for the organization. The organization is run by the Executive Management which is headed by the General Manager. Management is responsible for carryingout the policies set by the Board and all aspects of managing the organization.

The electric power sector is well organized. It operates three major power stations in Trinidad that are fuelled by natural gas. The stations are interconnected and have a high voltage transmission system.

For administrative purposes, the country is divided into five distribution areas, each with its own administrative and engineering staff. Each distribution area reports to the Central Executive through divisional heads.

Tariffs for the organization are set by a regulatory body, the Public Utilities Commission. Present tariffs are about the lowest in the world. Because of ever increasing generation and distribution costs, the organization has been operating under severe financial constraints. At the present time, it has applied for a review of the tariffs.

TRI-2 TRINIDAD & TOBAGO

ELECTRIC POWER SECTOR

EVOLUTION. SITUATION. AND PROSPECTS

Summary Figure 1

1. Because of the decline of the oil industry GROWTHRATES in the 1980s,the economy of Trinidad & Tobago .5X A has deteriorated rapidly, and the country has had za. X - .. ..-...... to deal with many problems such as unemployment 15X - ...... and a strained financial system. Today, the government's main objective is to revitalize the lox economy, and this cannot be achieved without 5X -- .. .. considering the power sector. Because the cost of _ Y\ electricity exceeded the price charged for it during most of the past two decades, the sector performed 5 f ...... poorly and had to rely on government -lax contributions to cover its tremendous losses. L± 197? 1975 1977 m?79 1 196L 1965 I"? 1949 However, if prices are aligned with costs, including | _ L CD - Zc?61C1? a reasonable return on capital, the perspectives for the sector are good. 3. The contribution of the sector to the 'the Sectorand the Economy country's economic and social development can be seen by the growth of electricity consumption per 2. Power sector finances are fundamentally capita which has shown a positive trend in both 'Iffectedby the behavior of the market. In the case good and bad economic times. It grew from 845 of Trinidad & Tobago, in almost every year kWh in 1971 to 2,361 kWh in 1989. Despite a electricity demand growth was greater than GDP decline in GDP per capita between 1981 and 1989 growth and remained positive even when GDP of 6.4% p.a., consumption per capita increased growth became negative. Since the country's main 3.9% p.a. (Figure 2). source of revenue comes from the petroleum sector, the oil crises in 1970sresulted in significant Figure 2 revenue inflows for the country. Thus, industry PERCAPITA INDICES and commerce flourished resulting in a rapid increase in the demand for electricity which lasted 6KS _ _ . M& until the early 1980s. However, at that time when oil prices fell, economic growth decreased, and electricity sales slowed remarkably. The spread - between the electricity demand growth rate and the real GDP growth rate was 1.7% p.a. in the 1970s , and 11.0% p.a. in the 1980s (Figure 1). , L,

791 1973 1975 It" 1959 1981 1961 6*5 19M* 9I9

T 3 wilt -I t CITA3

T'RI-3 4. Another measure of the sector's 6. Since Trinidad & Tobago lacks contribution to economic and social development hydroelectricresources, all of the country's electric is the rate of electrification. In Trinidad & energy results from thermal generation (Figure 4). Tobago, electricity servicecoverage increased from 75% in 1971 to 97% in 1989. Total customers Figure4 nearly doubled between 1971 and 1989, from 161 ELECTRICITYSOURCES thousand to 300 thousand. Residential customers increased from 143 thousand to 268 thousand 4 during the period.

The Electricity Market: Demandand Suppb ~~~~~~~~~~...... , The ElectricityMarket: Demandand Supply

5. Electricity uses in 1989 were 3.6 times those of 1971, as they grew from 956 GWii to 3,403 GWh, or 7.3% p.a.. Over the same period, electricity sales grew 7.4% p.a.. In the 1990s, sales are expected to grow 4.0% p.a. and reach 4,223 1 1174 1911 ,1, 118. 11, 1989 1993 15 1S1 GWh in 1998. In 1989, the composition of total E nnEtiL = Ua>Os electricity uses was 26% residential sales, 10% 198-19":PROJECRICS commercial sales, 51% industrial sales, and the rest losses and own consumption (Figure 3). 7. The electric energy available to the grid igure 3 was generated by an installed capacity of 1,189 ELECTRICITYUSES MW, of which 100% is thermal. This is more than ELECTRIC4TYUSES 4 times the level of 1971, 284 MW. The sector's installed capacity is forecast to increase to 1,289 MW in 1998 (Figure 5).

INSTALLEDCAPACITY

1171 1114 1'77 118 1983 1986 1 9 19 IL99 111

I 16MUM E COIMMERICiALc oh s cm -MO1T1 =~ CHEco01OSS1

k9WR-199t PROJCCTIOO

1971 174' 1977 1960 1182 1986 1989 1902 199 198

- _-EKOW CIECIRWIR D8Dl

![ -I9RlN RPROACtlfOIS

TRI-4 OperationalPerformance 10. Electricity losses have not been a significant problem for the sector. Taken as a 8. The sector's reserve margin as a percentage of gross available energy, they were percentage of maximumcoincident demand is high. generally around 10% between 1971 and 1989. It increased from 86% in 1971 to a peak of 153% Technical losses constituted about 7% while theft in 1985 and then decreased to 122% in 1989. The accounted for about 3%. In the future, losses are high reserve margin indicates a need to study the expected to be around 12% of gross available issue of plant availability through better energy (Figure 7). maintenance and/or improved operating procedures, especially because of the high reliance Figure7 on gas turbines (presently 61% of generating LOSSES/ENERGYAVAILABLE capacity). In the future, the reserve margin is expected to fall until it reaches a low of 77% in 1996. ,tx ----. A-A-----e_.

9. Labor productivity shows mixed results during the past two decades. Historically, .x.-..-.. productivity, as measured by the customers per .V ...... employee ratio, has been below the region's average. This indicator increased from 67 in 1971 4x to 82 in 1977, fell to 72 in 1980, and then ..- . ..-. . increased to 93 in 1989. On the other hand, productivity, as measured by the electricity sales ex I 197L 1874 it"7 lose 1$2 Loll 1ol It" 1999 11*94 per employee ratio, showed significant 1990-1*99:PROJECIVIS improvement during the period. It increased from 342 MWh in 1971 to 923 MWh in 1989. This level is one of the highest in the region (Figure 6). 11. The sector's collection practices have been improving. After deteriorating from 70 days Figure6 in 1975 to 171 days in 1982, the sector's collection EFFICIENCYINDICES period improved to 95 days in 1988 (Figure 8).

13 ~~~~~~~~~~~~~~~~~~~~.M igure8 as spurn.w COLLECTIONPERIOD

4 4M6U.

* h-s.. \

1 L*4m71 1*7 1940 1913 21s 1969 1992 3*92 1V9\

-4- aI?0A61/Uelmf mCLV8IMAX/Vel

1998-19*9:PIIJCICAS3 so . .1...... 1.1.1

1*7t 1*14 1917 t198 13 1936 194* 1*92 loss 1198 19" 1919: PR: CIIO

TRI-5 ProftabiLy igure 10

12. The poor financial health of the sector is UNIT PRICESAND COSTS reflected in its financial return indicators. The rate of return on assets has been negative almost every year since 1976. It had a bottom of -36% in 1983...... Likewise, the sector's interest coverage ratio has been less than 1 since 1974. However, after tariff adjustments, the sector's financial return is - ....-- . - expected to improve. The rate of return is forecast 3. to remain positive throughout the 1990-94period and have a peak of 8% in 1992and 1993 (Figure .

-4- COStI Wo 8@TC -*- Cot? I 91Pc -- nICZ WO TISXC

Figure 9 ______RETURNSUMMARY

11119 -.ie.,, 14. The sector's composition of operating revenues shows an almost constant pattern over time. In 1989, the composition was 38% residential sales, 12% commercial sales, 48% ,a \ 11industrial sales, and 2% other sales (Figure 11).

Figure 11 -, OOMPOSTIONOF OPERATINGREVENUES -4111 1971 1914 191? 1M LS3 9I 16 1192 199S 1:91

-INiffl31 cog WE of1 mumIN

19111-l191 PtOCT22 991.~~~~~...... -......

13. Since 1974, the cost of electricity, including depreciation, has been greater than its ...... price. The greatest difference occued in 1983 _ when the price of 1 MWh of electricity was $13 19.1 1974 1971 1U5 1983 1986 1989 1992 199 19" while the cost with depreciation was $31. Since X -SUNIW_ COMMECIIC O IUTRW 1984, the unit price has covered the unit cost M AM1U 51 1 QTER1EwoRTs without depreciation, and in the 1990s, it is 199|-199: PROACTIIOS expected to cover the full unit cost and leave a positive margin if the price proposal to be submitted by the national utility is approved (Figure 10).

TRI-6 15. However, the composition of operating 77e Sector and Country Resources costs as a percentage of opetating revenues does not show a constant pattern. The operating 16. The sector has absorbed a substantial income of the sector fell from 31% of operating amount of country and government resources. revenues in 1972 to -128% in 1983. The most Sector investments as a percentage of country significant factor in the composition of operating investments were 2.3% and 2.4% in the 1970s and costs has been the share of materials and services 1980s, respectively (Figure 13). which reached a peak of 75% in 1983. With forecasted demand growth and a price increase, the Fgure 13 cost of materials and services is expected to be around 27% in the early i990s while operating SECTORINVESTMENT/CONTRYINESTMENT iicome is expected to become positive thus showing the expected financial recuperation of the sector. However, a cause for concern is the fact that the cost of personnel in real terms increased ANNUALAVERAGE ANNUALAVERAGE 4.4 times while the number of personnel increased AV G-L G only 1.3 times. In 1989, the composition of operating costs was 40% personnel, 31% materials and services, 24% fuel, 15% depreciation, and -10% operating income (Figure 12). S 52.4_ 2A2 Figure 12 COMPOSITIONOF OPERATINGCOSTS

. M | Sector| | expenditures as a percentage of GDP increased from 1.6% in the late 1970s to 2.3% in i - . r the late 1980s because of an increase in cash 4MA ...... operating costs (Figure 14).

Figure14 8ISECTOR EXPENDITURE/GOP 1911 194 1971 1 9 1983 94 1989 1992 iti 19s

- OPERMc E3 0NtC 13 TAXS M FUEL 5.9X = l ECPORCH 1 MIE9 CO PERSW mm OTHS.EXPE91-:1 ' 2.AX

1.119l 1

654

1971-74 1975-" 1988-4 IW5-69 FIRtODS

(X9or co) m 9?et3 go 11583U9 CM= 1X

'TRI-7 However,the sector deficit as a percentage of GDP FandirgReqpirements and Sources decreased from 1.0% in the early 1980sto 0.2% in the late 1980s (Figure 15). 17. After significant investments in the late 1970s and early 1980s, there was a sharp slow Figure 15 down of sector investments in the late 1980s IECTORDEFICITIG3P because of countiy economic conditions and sector financial conditions. However, this trend is expected to be reversed in the early 1990s. From 1990 to 1994, the sector is expected to require US$129 million for investment. From 1985 to 1989, the sector only required US$77 million (Figure 17).

Figure17 INVESTMENT

.... _...... _......

During the difficult economic conditions of the ...... country in the 1970s, power sector debt as a i t*. . percentage of total country debt reached a peak of .- ...... 64%. Likewise, power debt service as a percentage , usit,i,it t. of country debt service peaked at 66%. Since then, 1911 ,11 0n IIN Il Les It I"I 01 IM both indicators have fallen to around 4% (Figure -iwJU?ti

igure 16 OEBIAM OEBTSERVICE INDICES

{'+------0-A--W------~~-......

i$LI Itt,t 8itt, ~~~-I-7- Arnta --i .ai 1sts 153s HIt

J: ARWtO017Th1AL D915 5 tbg 5t U5lA 'TO7iK 5101S|E

TRI-8 18. The funding problems of the sector can Figu 19 be summarized by its debt service coverage and COMPOSITIONOFUSES OF FUNDS self-financing ratios. The debt service coverage ratio has been less than 1 every year since 1974.

Likewise, the sector's self-financing ratio has been : . : poor. It was negative every year between 1975 and 1987. However, with the tariff adjustments, both ., ... indicators are expected to improve significantly in the early 1990s (Figure 18). 4_

Figure 18 ~DT FUNDINGSUMMARY | .9-- I1554 99-6 in9-n

20. The decreases in working capital I I i_/IIexperienced by the sector are a clear sign of liquidity difficulties which resulted in a heavy reliance on short-term borrowings. The forecast I,-awx| shows a strengthening of working capital as a 19U11974 IM m W) 1906 1999 1992 1995 199 reflection of better financial perspectives. Internal am s-uusaC09. -4- SW-FiNS Mio funding as a percentage of sources of funds fell |t1§FI999-99 PtAJEtSS ! from a peak of 62% in good economic times In the early 1970sto -33% in the early 1980s. As a result of the sector's poor performance, it was forced to 19. Investments have comprised a major rely on government contributions which increased portion of uses of funds. The share for from 0% In the early 1970s to 103% in the early investments had a peak of 74% of total uses of 1980s. In the early 1990s, if the envisaged tariff funds in the early 1980s and a low of 48% in the actions are duly implemented, internal funding is late 1980s. It is forecast to be 59% in the early forecast to increase to 79% (Figure 20). 1990s. The other use of funds has been for debt service. The share for debt service had a peak of Figure 20 52% in the late 1980s and a low of 26% in the COMPOSIlnONOF SOURCESOF FUNDS early 1980s. Forecasts expect the share for debt service to be 26% in the early 1990s (Figure 19).

14W'W

- 611A196F29iO COSTCONIRIT 69 9OT COATRIl NAB591 F?IC9D $AP maxS CAPDEiCUASI

1i10-1919: PBUciTiOI

T'RI-9 21. If the envisaged tariff adjustments are not CapitalShucture implemented as forecast and if 1988 tariffs are maintained in real terms, the sector would face a 22. The large government contributions have difficult funding situation, as internal funding strengthened the sector's capital structure. Since would just be sufficient to cover debt service 1986, the sector's debt/equity ratio has been payments. The resulting financing gap would be around 25n75,and it is expected to improve to difficult to finance with sources external to the around 10/90by 1994 (Figure 22). sector, such as borrowing or private sector equity contributions. This would create a serious strain Figure22 on fiscal resources for investment and diminish the CAPITALSTRUCTURE sector's influence on thp mr.nomic and social development of the country 'Pigure 21).

Figure21

COMPOSITIONOF SOURCESOF FUNDS o IF la TNI"W i11u1'116T 1T

aim

uI 1114 117 lii 198* 1906 lug 1992 1m 1996

19TR-I99 PROACTI9

1599 1991 1913 Lots I"? it"9

-?wF391 W U?YW85111

TRI-10 a

UR UGUAY

ELECTRIC POWER SECTOR URUGUAY POWER SECTOR DATA SUMMARY SHEET 1988

The ge.neratien, transmission, and distribution of electricity in Uruguay is the responsibility of the government entity Administracion Nacionalde Usinas y TransmisionesElectricas (UTE). Electric power policies are determined by the Government through UTE, and electricity rates are approved by Presidential decree with input from the Ministry of Economy and Finance and the Planning and Budgeting Office.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 3,060 CAPACITY ENERGY AREA '000 SQKM 176 (MW) (GWh) POPULATION PER SQKM 17 NEW PESOS PER US$ 359.44 THERMAL 370 1,496 GDP, millions of US$ 8,294 HYDRO 566 2,522 GDP PER CAPITA, US$ 2,710 NUCLEAR 0 0 GDP GROWTH RATE, % * 4.6 GEOTHERMAL 0 a 1988 ENERGY CONSUMPTION OTHER 473a 0 PER CAPIrA (kg oil equiv.) 769 IMPORTS 0 ELEC. SALES GROWTH RATE, % * 5.9 PURCHASES 1,411 ELEC. CONSUMP. PER CAPITA, kWh 1,204 TOTAL 1.4_09 5.429 1989 ELEC. SERVICE COVERAGE, Z 87 POWER EXPENDITURESIGDP,% * 3.1 RESERVE MARGIN 404 40Z a - Salto Grande

ELECTRICPOWER SYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 938 GWh % EMPLOYEES 11,617 CUSTOMERS PER EMPLOYEE 81 RESIDENTIAL 1,710 46 TOTAL SALES PER EMPLOYEE, MWh 317 COMMERClAL 586 16 INDUSTRIAL 1,308 36 ______BULKSALES # 0 0 OTHER 79 2 DOMESTIC SALES 3 100

SECTOR FINANCES TOTAL 4.679

AVERAGE RATE (S$/MWh) 62 SYSTEM LOSSES 967 ## 20 OPERATTNG MARGIN (W/O DEPR), % 17 OPERATING MARGIN (WI DEPR), % 40 _ RATE OF REfVRN, % 2.5 INDEBTNESS, % 48 DEBT SERVICE COVERAGE, times ,* 0 * - average p.-r year since 1985 SELF-FINANCING RATIO, % * 4# - to other v. lities not in the study - as a percentage of available energy URUGUAY

ELECTRIC POWER SECrOR

INSTITUTIONALASPECTS

Admistracion Nacional de Usinas y Transmisiones Electricas (UTE), a government institution, has been responsible for the generation, transmission, and distribution of electricity in Uruguay since 1912.

Because of the 1973 oil crisis, a new era of hydroelectric power began in the country. At that time, Comisidn Mixta del Palmar was created to build the El Palmar hydroelectric plant. In 1983, this commission transferred the El Palmar Plant and its liabilities to UTE. By then, after years of study, the construction of the Binational (Argentina - Uruguay) Salto Grande hydro plant was initiated. This power station began operations during the 1979 - 1982 period. Salto Grande sells electricity to UTE in Uruguay and to Agua y Energla in Argentina.

The National Electric Power System is composed of the following hydro plants. Salto Grande, El Palmar, Baigorria, and Terra; the thermal plants of Central Jose Batile and Ordofiez (with six groups) and of Calgano and Maldonado (with two gas turbines); and their corresponding transmission lines. At present, Central Termica de la Tablada, with two gas turbines, is under construction.

Although UTE is an autonomous entity, the Ministry of Industry and Energy, through the National Energy Division, formulates, schedules, and directs the national policywith regards to energy resources. The sector is regulated according to National Electricity Law No. 14.694dated September 1st, 1977 and Law No. 15.031 dated July 31st 1980. This National Electricity Law put a iormal end to UTE's monopoly over the Electric Public Services; however, monopolistic practices still exist.

URU-2 URUGUAY

ELECTRIC POWER SECTOR

EVOLUTION, SITUATION. AND PROSPECTS

Summary The Sector and the Economy

1. Uruguay, with no known oil or gas 2. During the past two decades, electricity reserves, was one of the Latin American countries demand growth has paralleled that of GDP growth. hardest hit by the oil crises of the 1970s. As a When the economy has grown, the demand for result, the sector devoted its resources to the electricity has increased at a faster pace. When the development of hydroelectric p.ants to reduce the economy has performed poorly, such as during the country's heavy reliance on imported fuel. Since recession at the beginning of the 1980s when the the commissioning of the El Palmar plant in 1982, government tried to quickly reduce inflation, the sector has performed satisfactorily but is not electricity demand growth has decreased but without problems, especially regarding heavy debt generally remained positive. The spread between service obligations resulting from the transfer of the electricity demand grouwh rate and the real that plant to the sector from another government GDP growth rate was 0.8% p.a. in the 1970s and agency. Since neither El Palmar nor Salto Grande, 3.9% p.a. in the 1980s (Figure 1). a binational project with Argentina, has enough regulating storage capacity, the electrical system Figure 1 faces the risk of supply deficits during dry periods. The sector experienced problems in 1988-89 GROWTHRATES because tariff levels were not sufficient to cover ,,X increased fuel consumption resulting from drought conditions, albeit the reduction in fuel prices in __ the 1980s made thermal generation more competitive. The sector's devotion to developing hydroelectric facilities has curtailed funding to reinforce the distribution system. As a consequence, high electricity losses resulting from -s- ..- . .. -. inadequate distribution facilities as well as theft and lack of metering have prevented fulfilling all -a'. II I IX the power needs of some customers. In the future, 197L 1973 1973 1977 1979 IW 1983 8IS 19$7 1P" improvements to the distribution system are - L ? -ZCT1JCIItIC8TVL0S expected to reduce system losses and satisfy new service demand. A sound pricing policy is expected to result in strong internal funding that till be s: fficient to cover the sector's substantial debt service and leave a positive contribution to investment.

URU-3 3. An indicationi of the positive contribution The E.ctricily Market: Demand and Supply of the sector to economic and social development is growth in electricity consumption per capita. In 5. Total electricity uses in 1988 were more Uruguay, electricity consumnptionper capita has than double those of 1971,as they grew from 2,323 shown an increasing trend in both good and bad GWh to 5,429 GWh. They are expected to reach economic times. It grew steadily from 668 kWh in 7,373 GWh in 1999. Electricity sales increased 1971 to 1,204 kWh in 1988, or 3.5% p.a.. Even from 1,881 GWh in 1971 to 3,683 GWh in 1988 during the 1981-88period when GDP per capita and are expected to reach 5,753 GWh in 1999. fell from US$2,932 to US$2,710, electricity This means sales should continue to grow at an consumption per capita continued to grow, from average of 4% per year. In 1988, the composition 989 kWh to 1,204 kWh or 2.9% p.a. (Figure 2). of electricity uses was 32% residential sales, 11% commercial sales, 24% industrial sales, 12% Figure 2 exports, 2% other sales, and the rest losses and PERCAPITA INDICES own consumption. The significantjump in exports (679 GWh) in 1988 was due to the support given S'9uu_ _ __ _-_we to the Argentine power sector which was in a state

.-1t20 of emergency because of drought conditions (Figure 3).

." ." ~~~~~~~~~~~Figure 3 1Xz w _ -sxe ELECTRICITYUSES

1171 1873 1875 1)77 1070 180l 1083 1905 108?1 Stil

GDP PERc l IU CDCPIt,

4. Another indicator of the positive r contribution of the sector to the economyis the , 1914 TTiT?1B 196 1909 199J 1795 1998 rate of electrification. In Uruguay, electricity MOtsuhym F3 commWtcTtO ltImS8tE*t to O11Ei service coverage increased from 80% in 1971 to I: OoXPROIS o cos ml iCISSE 87% in 1989. Between 1971 and 1988, total customers increased from 708 thousand to 938 thousand.

URU-4 6. The country's energy resources are limited, Figure 5 and thus, the country suffered from the oil crises INSTALLEDCARPACTY of the 1970s. Since then the government has tried to reduce the country's dependence on imported * fuel by substituting hydro generation for thermal generation. As a result of this strategy, hydro generation as a percentage of total sources of .56. -. .. . --- . electricity increased from 63% in 1971 to 95% in 1987. This figure includes purchases from the Salto Grande binational hydro plant. During the i same time period, thermal generation decreased from 35% to 5%. However, since 1988 this trend ,"71 1114 17? 18 USS1?14 stag1T 8 A 1 has been reversed. Because 1988 and 1989 were _ m 9e TKEHAI C gOD5tMU "dry"years, Uruguay had to rely more on thermal =m OtE5 -COrCK"t D1U generation. In the future, hydro generation is 1.10-19. .|0Xc. expected to account for a major portion of production while thermal generation accounts for 10% to 15% (Figure 4). OperationalPerformance

Figure 4 8. The sector's reserve margin as a ELECTRICITYSOURCES percentage of maximum coincident peak demand l l increased significantly after the opening of the Salto Grande and El Palmar hydro plants in the early 1980s. Prior to 1982, the reserve margin .....--...... ranged between 12% and 50%. From 1982 to 1988, it ranged between 40% and 75%. In the I I..... 4 future, it is expected to range between 58% and j | _= l0%, a high, though reasonable level considering that the sector has no storage capacity and must be ,lI prepared for unfavorable hydrological conditions. 1L71 1974 1977 1160 1983 1986 1909 19 19" I90 Also, the Uruguayan electricity grid, particularly | HYDRO el tHlAL Cm *tEhlM XLS^ the Salto Grande hydro plant, is interconnected to | OTHER O PU2ClMSES e; 00PR0S the Argentine system to which it has provided

| 199I p501ls9 G support in the past.

7. The electric energy available to the grid was supplied by an installed capacity that increased from 553 MW in 1971 (4.6% hydro, 54% thermal) to 1,409 MW in 1989 (40% hydro, 26% thermal, and 34% other). By 1999, the sector should have an installed capacity of 2,286 MW (25% hydro, 34% thermal, and 41% other) (Other basically corresponds to Salto Grande) (Figure 5).

URU-5 9. During the 1980s, labor productivity Figure 7 indicators, such as customers per employee and LOSSES/ENERGYAVAILABLE sales per employee, remained fairly constant at vcry low levels. Sector authorities expect labor x productivity to improve in the future, as the xlI\ customers per employee ratio is expected to increase from 84 in 1990 to 100 in 1999, and the sales per employee ratio is expected to increase -. .;;...... from 333 MWh to 543 MWh. However, these levels are still significantly below those of other lo...... developed and developing countries in the world (Figure 6). .x ......

igure 6 391 ISIS 1977 1s 1i,. 19,s 9 19921i

EFFICIENCYINDICES n RAOJECTIs

11. The sector's collection period over the last two decades has been erratic with an increasing @trend.00 It had a low of 52 days in 1978 and a high [email protected] of around 120 days in 1988. IHowever, sector Ril 2@@9." forecasts expect the collection period to fall to, and remain at, 72 days in the 1990s (Figure 8). 29

1971 1974 1977 1960 1903 1406 1949 1992 1 LS9 Figure8 __cuslammmmmizd- UJDCtoLwtwmmn I COLLECTIONPERiOD

I94-199 P9O!FROC'SION

10. Electricity losses have been a problem for ---- - the sector. Taken as a percentage of gross energy ...... available, they have been around 20% since 1986.

This high level of losses is due to technical losses .- .l _ . in the distribution system and inadequate. . ..-. commercial procedures. With improvements to . . _ . facilities, losses are expected to fall to 17% by the late 1990s. This level is still too high and in need , .,. .1.. .1,1 I. I 1971 1674 147? 1460 *163 9100 1909 1992 1699 1948 of corrective action (Figure 7). 16,.-L999:PRIJECTIONS

URU-6 Profitability Figure 10 UNIT PRICES AND COSTS 12. The sector's financial health declined in

the 1980s. Its rate of return in the 1980s was i 1- positive for most years, though low and ...... significantly less than that experienced in the 1970s. However forecasts expect the rate of...... return to improve and approach 10% by 1999 ...... _...... making the sector more attractive lo private investors and less dependent on fiscal resources ......

The sector's interest coverage ratio has historically B , i .. ; I, I, , I I

been less than 1 but is expected to improve and 17 i74 1977 1980 1983 1998 1969 1IU 199i 1991

become greater than 1 by the mid-1990s (Figure 9). - COSTWVO DEPEC -4- COSTiW OSPREC - PRICE8'S TAXES -*- PRICE8' trs

Figure 9 19981999: OJEtTOs_ RETURNSUMMARY T1~~~~~~~~~~~S ~~~~~~(X) 7118S 12l 14. The sector's composition of operating ,X6 revenues shows a fairly constant pattern. In 1988, . /-\ .ax 36% of opcrating revenues came from residential sales, 23% from commercial sales, 17% from 4 1 \ / 42 industrial sales, 8% from exports, and 16% from 2 ax other sales. The revenues from exports in 1987 \\ft x and 1988 correspond with the support given to the -a,I ,i i I . . Argentine power sector (Figure 11).

1971 1974 1977 1980 1983 1966 1989 109a 1995 199 Figure 11

- llitRZUY Ct +4 III Or 55I1U8 COMPOSITION OF OPERATING REVENUES

[999-b19: PROJlC1O,S

13. For the most part during the last two decades, he unit price of electricity has exceeded 'x_ the unit cost by a reasonable margin. The .*_ l exceptions were in 1982, when the country was in a severe recession, and in 1989 (data for 1989 was estimated by sector authorities), when prices fell in real terms and costs increased because of the larger 571 1974 1977 1"9 1983 11f6 14 199 si 1t"Im share of thermal generation. In the future, the 1 18s88E93T CO91^,7. = 191UST8ML unit price of electricity is expected to cover the MM otUSAES C 0899 £s8E unit cost and leave a reasonable operating margin 9-99. not8CTio91 around 20 US$/MWh (Figure 10).

URU-7 15. The operating income of the sector as a 7TeSector and CountryResources percentage of operating revenues has been positive for the most part during the last two decades. It 16. Because of the sector's commitment to grew steadily after the oil crises of the 1970sfrom hydroelectric projects in the early 1980s, it 9% in 1974 to 27% in 1978. In 1982,it fell to -5% absorbed a significant amount of country and but then rebounded and peaked at 28% in 1986. government resources. Power sector investments One reason for this increasc is that fuel costs as a were 14.1% of total country investments in the percentage of total operating revenues fell to 2% 1980s (Figure 13). Sector expenditures as a in 1986 after the commissioningof the new hydro percentage of GDP were 4.7% in the early 1980s. plants. Fuel costs had been around 30% during With a decline in investments, they fell to 3.1% in the 1970s. In 1988, which was a "dry" year, fuel the late 1980s(Figure 14). costs increased to 20%, and as a result, operating income fell to 17%. Operating income is expected Flgure 13 to range between 25% and 30% starting in 1991, as fuel costs are expected to range between 3% 8ECTORINVESTMENT/COJNTRY INVESTMENT and 6%. In 1988, the composition of operating costs was 23% depreciation, 20% fuel, 20% personnel, 11% electricity purchased domestically, 9% materials and services, and 17% operating ANNUALAVERAGE income (Figure 12). 1

Figure12 ANNUALAVERAGE COMP'STIONOF OPERATINGCOST8

Figure 14 SECTOREXPENOITURE/0OP

1971 1974 1977 lifi IN SII 1S9 1992M S 1M 191 1 m OPE'EE Ea OEc Q TIIXES = FUEL 4., . =:3ELEC PURlJi*IS FERIOhhEIMM Pffll E OTHER11IPI16I 1

1959-lit9s -- 1WEV191S1

LOXc-

l "09ll O0F " IITI9179

1971-74 1975-79 188-4 1"5-69

tK 07 Of- m VH ePo WWIUIYS IW5DTE 193l7Dmr

URU-8 Uncharacteristically, the Uruguayan power sector FundingRequirements and Sources required government assistance amounting to 0.2% of GDP in the early 1980s (Figure 15). Power 17. Because the sector invested heavily in debt as a percentage of total country debt hydro generaticn projects in the early 1980s,there increased from 4% in 1980 to around 25% in the was a significant slow down of investments in the second half of the 1980s,and power debt service as late 1980s. This slow down, together with a percentage of country debt serviceincreased from neglected distribution facilities, has created a need around 3% in 1980 to 21% in 1987 with a peak of for increased investments in the 1990s. From 1990 30% in 1983 because of the transfer of the El to 1999, the sector is expected to require US$976 Palmar plant to UTE from an executing agency million, or an average of US$98 million per year. (Figure 16). From 1985 to 1988, the sector only required an average of US$43 million per year (Figure 17). Figure 15 SECTORDEFIOT/0IGP Figure 17 INVESTMENT

IN ------i

.117-74 19lt4 *---9

F:ure 16 DEBTAND DEBT SERVICE INsDICES

7tN ------*- ----..-..---- -...... ------_-_._-

.61 - - - .-- ..-......

616 I . I I.,l, l,I.{.I . 1171 1972 1975 1977 1971 11(1 191(3 193 191(7 11

A- P a815 -+'O-tali S: P0(4*0110T 900(I'fThOTL Et tlRUltE

URU-9 18. The sector's debt service coverage and self- Figure 19 financing ratios reilect the decision to develop COMPOSITIONOF USESOFFUNDS hydroelectric projects with a significant share of borrowings in the early 1980s. Since 1983, the lux sector's debt service coverage ratio has been hovering around 1, and the sector's self-financing ra,'io has been around 0%. However, both indicators are expected to improve in the future, as by 1999, the debt service coverage ratio is expected to be around 2, and the self-financing ratio is 21114 expected to increase from 15% in 1991 to 37% in RoDATA FIO01lA

1996 (Figure 18). A971-74 1,75-7, 1901- 1i'-09 1110-94 105-99 FIOJOMS

Figure18 _ 1 UTT *ICt CAPIITE =

FUNDINGSUMMARY 199t-1"1POS*ICTIOt5

20. The sector's internal funding has been 4 strong. It was 31% and 57% of total sources of funds in the early and late 1980s, respectively. I 4* \ 1/\ _< l Because of the sector's substantial funding VA requirements in the early 1980s, the sector had to rely on borrowings and government contributions, -a, Y I61%1- and 6% of sources of funds, respectively. |071l . lW3.WO177 l055.901 .001 WO 119- Furthermore, the sector's debt service coverage 1971 1974 19 l t90 I5t, L9 L99a 1s9 1s9 ratio remained around 1 (para. 18) despite -_w SuICX COO. -4-- m-uN aUO increases in internal funding, as the large share of

1__ _19": ____J__T__ _ _ _ borrowings resultmd in increased debt service payments. Forecasts prepared by sector authorities show that internal funding is expected to be 19. Because of obligations arising from between 60% and 85% in the 1990s and that the sector's investment program of the 1980s and the sector should be able to obtain the rest of its transfer of assets (investment of 1983) and of funding needs through borrowings without liabilities (debt of 1984) corresponding to the El requiring government contributions (Figure 20). Palmar plant, debt service has become an important share of uses of funds. Debt service Figure 20 payments increased from 21% of total funding COMPOSITiONOF SOURCESOF FUNDS requirements in the early 1980s to 55% in the late l l 1980s. Their share is expected to remain between 50% and 60% during the 1990s. The share of |x ...... investments in total sector funding peaked at 68%.m in the early 1980s and then fell to 26% in the late I ...... 1980s. It is expected to remain between 40% and axd 45% during the 1990s (Figure 19). lox

1971-74 1075-TO 1SW-4 I9S3-It 11-04 199S-99

W FTl C3I (MT COMIR C 000'T CONTASI 30500500 = rIssnC[,o GAP

*99-4901 PROJECTIONS

URU-10 21. The sector's tariff policy is the key element Capital Structure for identifying future funding requirements from sources external to the sector. Thus, if 1988 tariffs 22. The sector's capital structure has been are held constant in real terms, prior to 1996, satisfactory. Prior to the transfer of the El Palmar internal funding will just be sufficient to cover debt plant, the sector had a debt/equity ratio around service payments, and the sector will require a 20/80. After the transfer, the ratio increased to significantly larger portion of resources external to around 50/50. ForecastE expect the sector's the sector (borrowings and equity participation) to debt/equity ratio to reach its pre-EI Fialmar level by fund its investment program. However, under 1999 (Figure 22). these circumstances those resources may not be forthcoming, as the financial condition of the Figure 22 sector would not be attractive to investors (Figure CAPITALSTRUCTURE 21).

Figure21 COMPOSlITONOF SOURCESOF FUNDS it Is8TAIFf 101* CO*ITIPt'9

NILUO4 i9it I-SIF

UR 1 1OX

8*71 is74 1*77 1*80 1*83 IM8 1*89 1192 19*5 15*0

1*5 1*5991*19911*PROJECTIONS

19119 0 191110 199 CLtSCO 99IIU?I

Em FIlIIIOII 889 1E8TU1R2CE

URU- I1 VENEZUELA

ELECTRIC POWER SECTOR VENEZUELA POWER SECTOR DATA SUMMARY SHEET 1988

The Venezuclan powcr sector consists of four national utilites (ComrrpafifaAn6nima de Administracidn y Fomento EI6ctrico - CADAFE, Electrificaci6n de Caroni - EDELCA, Energfa Elctrica de Venezuela - ENELVEN, and Energfa E1lctrica de Barquisimcto - ENELBAR) and seven private utilities. Of the private companies, Electricidad de Caracas, EdC, is the most important. It supplies electricity to the greater Caracas area and is the parent of three othcr private utilities. For this study, the sample for the historical period includes CADAFE, EDELCA, ENELBAR, and EdC while the sample for the projection period includes only CADAFL, EDELCA, and ENELBAR.

GENERALECONOMIC DATA ELECTRICITYSOURCES

POPULATION '000 18,751 CAPACITY ENERGY AREA '000 SQKM 912 (krW) (GWh) POPULATION PER SQKM 21 BOLIVARES PER US$ 14.50 THERMAL 6,280 13,462 GDP, millions of US$ 47,819 HYDRO 10,581 34,203 GDP PER CAPITA, US$ 2,550 NUCLEAR 0 0 GDP GROWTH RATE, % * 5.3 GEOTHERMAL 0 0 1988 ENERGY CONSUMPTION OTHER 0 0 PER CAPITA (kg oil equiv.) 2,354 IMPORTS 1 ELEC. SALES GROWTH RATE, Z * 9.5 PURCHASES 2,946 ELEC. CONSUMP. PER CAPITA, kWh 2,218 . TOTAL 16.861 50.612 1989 ELEC. SERVICE COVERAGE, % 85 POWER EXPENDITURESIGDP,% * 5.6 RESERVE MARGIN 6,911 69%

ELECTRIC POWERSYSTEM DATA ELECTRICITYSALES

CUSTOMERS '000 2,361 GWh % EMPLOYEES 22,008 CUSTOMERSPER EMPLOYEE 107 RESIDENTIAL 5,486 13 TOTAL SALES PER EMPLOYEE, MWh 1,889 COMMERCIAL 3,409 8 INDUSTRIAL 24,917 60 BULK SALES #0 0 OTHER 7,769 19 DOMESTIC SALES 41 581 100

SECTORFINANCES EXPORTS 178 SECTORFINANCES TOTAL 41.759

AVERAGE RATE (USSIM'Wh) 20 SYSTEM LOSSES 8,097 ## 16

OPERATING MARGIN (WIO DEPR), Z 18 ______. OPERATING MARGIN (WI DEPR), Z 35 RATE OF RETURN. 2 3.4 INDEBTNESS, Z 12 * - average per year since 1985 DEBT SERVICE COVERAGE, times * 6.3 - to other utilities not in the study SELF-FINANCINGRATIO, Z * 48 - as a percentage of available energy ...... VENEZUElA

ELECTRIC POWFR SECTOR

INSTITUTIONALASPECTS

In Venezuela, the electric power sector was created during the late Nineteenth Oentuxywhen private shareholders installed the country's first generation plants in Maracaibo and Caracas. Government intervention started in 1945, and in 1958, it consolidated its strong participation in the sector with the creation of Corporaci6n Venezolana de Fomento as the controlling government agency for the electric sector. In 1958,C.A. de Administraci6ny Fomento Eldectrico(CEDAFE) was founded, and years later in 1963, Electrificaci6n del Caroni C.A. (EDELCA) was established.

In 1976, the Government acquired CA. Energia Electrica de Venezuela (ENELVEN) and C.A Energla Electrica de Barquisimeto (ENELBAR). This acquisition was carried-out through the Fondo de Inversiones de Venezuela (FIV) which is the main stockholder of the government-ownedcompanies. In addition to these four national utilities, there are seven private utilities, of which the most important is EdC which supplies electricity to the greater Caracas area.

There are several government institutions in charge of controlling the sector, many of which have unclear responsibilities and at times conflictingsupersisory roles, as there is no electricity law and the country lacks fundamental regulation for the industry. The Ministry of Mines and Energy (MEM) is in theory the regulatory agency in charge of defining energy policies, but it lacks the power to perform its role. The Ministry of Development (MOF) reviews and makes decisions on tariffs with little regard to supply cost analysis. Tariffs for inter-company sales of electricity, and from EDELCA to industrial consumers in Guyana, are fixedthrough bilateral agreements. MOF consults MEM before approving changer in electricity tariffs. The Ministry of Coordination and Planning (CORDIPLAN) is in charge of preparing national development policies and plans but does not, in practice, have any significant influence on the formulation of the sector's development plan. Finally, Congress has participation in the sector's financial matters, and it may also enact laws governing other matters affecting the sector such as tariff policies and administrative responsibilities.

The institutional framework has improved recently as a result of: (i) the implementation of a new interconnection contract which includes CADAFE, EDELCA, EdC, and ENELVEN; (ii) a more direct and close coordination of the national utilities and EdC through the National Dispatch Center (OPSIS)'s Planning Committee for the preparation of the sector's expansion plan; (iii) the issuance of a decree which provides basic rules for tariff setting and creates a Tariff Committee; and (iv) actions to support this Committee with the assistance of a technical advisory staff. The government is also taking actions to reorganize CADAFE. However,the definition of authority over the national utilities remains loose.

VEN-2 V,NEZUELA

El,ECTRIC POWER SECTOR

EVOLUTION, SITUATION. AND PROSPECTS

Summaty The Sectorand the Economy

1. The Venezuelan power sector has played an 2. Unlike most countries in the Latin America important role in the country's development during and the Caribbear region, the pattern of growth in the last 20 years. Substantial achievements have electricity demand does not follow that of GDP been reached in providing reliable service to growth very closel-. While electricity demand industry and in increasing electrification coverage growth does follow that of GDP growth, at a faster in the country. However, this has been rate, during the early 1970s and early 1980s, the accomplished at a very high cost, as the sector has same cannot be said for the later part of thase two consumed a large portion of the country's financial decades. During the late 1970s, electricity sales resources. The sector faces important problems increased significantlydfspite slower GDP growth. arising from lack of consistent planning, Howe.ver, throughout the last two decades, unsatisfactory pricing policies, and a weak financial cectricity demand growth remained positive even situation. Because of the economic difficultiesnow when GDP growth was negative. The spread facing the country, the Government'^ efforts are between the electricity demand growth rate and the aimed at increasing the efficiency of sector real GDP growth rate was 10.6% p.a. in the 1970s operations by improving the planning process, and 5.1% p.a. .n the 1980s (Figure 1). improving the operational efficiency of existing facilities, reducing technical losses and electricity Figure 1 theft, establishing and implementing adequate GROWTHRATES pricing policies, improving sector finances, improving the power sector regulatory framework, .x and restructuring the organization of some of the . ...--. .-. public utilities. . .;......

-It t t97 193 1975 I? L979 11*l 1983 IlS 1917 jt"

- IL OF 4 ElCRIICITV San

VEN-3 3. An indication of the positive contribution of The Electricity Market: Demand and Supply thc sector to economic and social development is growth in electricity consumption per capita. In 5. The development of the electricity narket in Venezuela, it has been increasing steadily since Venezuela has been impressive during the last two 1971, despite a decline in GDP per capita between decades. Electricity sales grew from 8 TWh in 1977 and 1985 because of declining oil prices. It 1971 to 42 TWh in 1988 (10.2% p.a.) while total grew from 738 kWh in 1971 to 2,218 kWh in 1988 electricity uses grew from 9 TWh to 51 TWh (6.7% p.a.) while GDP per capita decreased from (10.7% p.a.) because of more rapidly increasing US53,040 in 1971 to US$2,550 in 1988 (-1.0% p.a.) electricity losses. In the 1990s, total electricity (Figure 2). The per capita residential electricity uses are forecast to grow 8.1% p.a., from 54 TWh consumption level is one of the highest in the to 101 TWh, while electricity sales grow 8.0% p.a., region and increased steadily from 205 MWh per from 46 TWh to 85 Tl'h. The domestic market month in 1977 to 457 MWh per month in 1988. compositkon in 1988 was 11% residential sales, This increase shows a high level of energy waste, 49% industrial sales, 7% commercial sales, 15% fostered by very low electricity rate levels. other sales, and the rest losses and own consumption (Figure 3). Figure 2 PERCAPITA INDICES Figure 3 1919Ih ELECTRICITYUSES

,,"~~~~~~~~~~~~~~~~~~~~g ------......

S2W

...... ,,,,.r . . I - ---- to

@-| @ * * 5 i . . 2 , 5 . | . | , b 1~~~~~LM97t 74 0h77 1"9@ 198X3 19@* I 1 s§ XM09993 1991 1971 1973 197S7 IM 071 19U 19i3 1925 1987 1949 = I'Io:: ES C9MIERCPA5 3' 5E o 'Ee

GDP m caPit -$ALD FZR CAPSHG NOR5 onTs LSE

0199-ln: PROJECTIOIS

4. The contribution of the sector to economic and social development can also be seen in the degree of electrification. Service coverage in Venezuela increased from 60% in 1971 to 85% in 1989, reaching one of the highest levels attained by a country in the region. The total number of customers more than doubled between 1971 and 1988, from 1 million to 2.4 million.

VEN-4 6. The sector has relied mainly on Figure! hydroelectric power to meet electricity demand. The hydro share of total sources of electricity INSTALLEDCAPACITY increased from 57% in 1971 to 68% In 1988 with n a low of 49% in the early 1980s. Thermal generation, using oil products at prices ..... considerably below international prices, was used ...... to supply the remaining electricitv requirements. Sector authorities project that the Venezuelan ...... system will remain predominantly hydro. The sample for the project-ionperiod, which is different from that of I' - historical period, indicates that the composition of total sources of eleutricity in L2U? 1974 AM 1941 1914 191"in 199 ts8 1998should be about 86% hydro and 14% thermal IM =tmL !FM MI -COINCIxf IWO (Figure 4). 1949-l9: PROACIMS

Figure 4 ELECTRICITYSOURCES OperationalPerformance ".8.us * The sector's reserv;emargin as a percentage of maximum coincident peak demand was very high during the 1980s.It moved from a low of 44% in 1980 to about 70% in 1988 with a peak of 126% in _. _._. _.._.--.--- _ _ ,,1986. Under projections which do not include .. _....,thermal capacity, the rescrve margin for hydro capacity is expected to improve to between 10% and 15% during the late 1990s. The unnecessary high reserve margin built up by the system during 19?1 19?4 IM "Im 1198 ING 1949 1991 1M 14"8 the 1980smarks a period of over investment due Ihl2RO EfTII1 SOTU9R =FPURSlE2 MpDTa to the uncoordinated expansion programs of the iom-i:" 0JUTs national utilities and one privately owned company. At the same time, maintenance of thermal installations was less than that which is 7. The electric energy available to the grid was necessary to maintain efficiency and plant generdted by an installed capacity that grew from availability at reasonable levels. The global 2 GW in 1971 to about 17 GW in 1988. The efficiency of thermal plants in the country is low composition of installed capacity was 63% hydro (26%) when compared with international standards and 37% thermal in 1988 (Figure 5). (30 to 40%). This may be because of the lack of sufficient preventive maintenance and the lack of incentives for improving plant efflciency, as fuel prices are low. The reliability of thermal plants is much lower than international standards due to lack of adequate maintenance.

VEN-S 9. There is room for improvement in the ure 7 operational efficiency of the sector. Labor I productivity, measured by the customers per LOS8ES/ENERGY AVAILABLE employee ratio, decreased from 116 in 1972 to 107 in 1988 and is expected to remain around 109 during the 1990s. This level is slightly below the .. - - region's average. However, during the 1971-88 period, electricity sales per employee increased from 900 MWh to 1,900 MWh, basically due to the _.... .- increase in per household consumption. While this level is the highest In the region, it is .. significantly below that of other developed and developing countries in the world. The electricity sales per employee indicator is expected to MA , M?, 4 , m 9 AM is" 093 1is,, increase to 3,600 MWh in 1998 (Figure 6). ______I

Figure6 11. The collection period deteriorated rapidly EFFIOIENCYINDICES during the 1974-88 period. It increased from 33 Ise 11$t - ,.. days in 1971 to about 352 dayb in 1986 before falling to 199 days in 1988. The collection period 'mm . .is expected to improve to about 65 days in the 1990s (Figure 8). ~~~~~~~~~~~~m... Figure 8 1W - COLLECTIONPERIOD

1971 1974 I"? 190 9S3 104 1969 1*99 *M 19*9

in. ------

10. During the last two decades, electricity losses as a percentage of gross energy available ...... - .... . were high. They ranged between 11% and 17% and are expected to remain at that level during the 1990s. The problem is especially serious in some *- ,1 ., l, , .,l . l l , 1971 1974 1917 1ilt, am 1911 199 99 199 199 areas of the country where distribution losses were ,,,, ,,, OAC1I estimated to be 27% for 1987. Probably half were due to electricity theft. A continuous and well planned effort to control and reduce losses progressively merits high priority (Figure 7).

VEN-6 Profitability Figure 10

12. The weakening financial position of the UNiTPRICES AND COSTS sector can be seen in its financial return indicators. I ,",s ._ During the last 20 years, the rate of return on assets was positive. However, it decreased from about 24% in 1972 to between 2% and 5% for n-.--... much of the 1975-88period. The interest coverage -- -- ratio followeda similar pattern during the period, decreasing from a peak of 27 times In 1973 to ...

between 0 and 2 times for much of the 1975-88 * ,__,_____.. ,.__ _ t__ _ . . period. However, forecasts indicate that both the aimJ is7nIM i LOO SO It/" m} t11111 rate of return and the interest coverage ratio will ColOl 'Q OMc COSTw outtc improve significantly in the 1990s (Figure 9). ,. T/0 *

, lE~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~94191: PttJICTOIJ Figure 9 RETURN SUMMARY U4. Over the last 20 years, the percentage of ,s """ ex,."operating revenues coming from residential customers has been declining while the percentage

t4ft from industrial customers has been increasing. During this period, the composition of operating ,. 1 revenues1 > changed from 32% to 18% residential .5 >\l saies, from 12% to 19% commercial sales, from 33% to 34% industrial sales, from 11% to 14% * -" bulk sales, and from 12% to 15% other sales. This . I . i .,, i . . . . | , .,,, . | .i n.. . S trend is expected to continue into the 1990s,as in 711 1974 1X77 1119 1982 1186 1181 S1S1ISIS 1S11 1998, he composition of operating revenues is

- amu co -- SWISof wIt expected to be 14% residential sales, 12% 191IM PiO^tt commercial sales, 39% industrial sales, 20% bulk sales, and 15% other sales (Figure 11).

13. Despite recently important tariff F igr11 adjustments prompted by the economic crisis, COMPOSITIONOF OPERATING REVENUES current prices do not reflect the cost of service. Recent Government efforts to increase the :: . electricity prices of the national utilities by lox increasing tariffs to consumers have been helpful, although the real value of the increases has been eroded to a high degree by subsequent inflation. Between 1971 and 1988, the unit price of electricity in real terms declined from 46 |S| 1 11 US$/MWh to about 20 US$/MWh while the unit cost of electricity only declined from 19 US$/MWh £171 1174 7? 1180 1L1U 1986 1989 LOI S1 n11 to 16 US$/MWh. As a result, the operating X .f.u. - eOa'CxL O Tuc margin decreased from 26 US$/MWh to 4 Kutis : OTUR XMtt US$/MWh. In the future, the unit price of i819 PRoJICTINo electricity is expected to increase while the unit cost of electricity remains fairly constant and leave a margin of 10 to 18 US$/MWh (Figure 10).

VEN-7 15. Operating costs have al-ays left a positive the Sector a! Counfry Resources operating margin out of total revenues; however, such margin, as reflected by opcrating income, had 16. The power sector has been a tremendous a significant drop between 1974 and 1975, from burden on country and governrnent resources. 58% to 12%, and has remained below 23% since Power sector investments as a percentage of then with a minimum of 2% in 1980. The main country investments increased significantly, from contributing factor for the drop in 1975 was the 8.7% in the 1970s to 22% in the 1980s (Figure 13). drop in real tariffs (see para. 13) and a parallel Sector expenditures, which were 2.1% of GDP increase in personnel clsts, from 12% to 35%. In during the early 1970s, reached close to 7% in the 1988, the composition of operating costs as a early 1981s before decreasing to 5.6% in the later percentage of operating revenues was 27% half of the decade (Figure 14). personnel, 18% depreciation, 15% materials and scrvices, 6% fuel, 6% purchased electricity, 5% Figure 13 taxes, and 5% other expenses. The cost of fuel does not represent its opportunity cost, as it has SECTORINVESTMENT/COUNTR INVESTMENT been subsidized in order to partially compensate for low real tariffs to customers. Forecasts indicate that the level of operating income will improve significantlyin the future (Figure 12). ANNUALAVERAGE ANNUALAVERAGE

Figure 12 - *8 COMPOSITIONOF OPERATINGCOSTS

_ - ___ . igure 14 SECTOREXPENDITURE/GDP

I I TPUbs:SxC it

t~~p CI.tC mitaks~ r~tEDMS I olft~~~~~~~~~~91-4IS1-7CttrttIIU fS-9 1909*SClitIt

4.1K~ ~ ~ ne

(x or r} cm ot r,l I Wgloant GNTt

VEN-8 The sector's contribution to the fiscal deficit Fnding Requiements and Sources increased continuously during the last two decades, from 0.1% of GDP during the early 1970sto 1.9% 17. The sector invested heavily during the past during the late 1980s (Figure 15). The pattern of two decades. Between 1971 and 1988,81% *' 98% power sector debt as a percentage of country debt of total available funds was used for construction shows a favorable trend primarily due to the large and equipment. The tremendous sector government contributions. Sector debt as a investments of past years (US$19 billion from 1980 percentage of country debt, after a sharp increase to 1988)were several times the increase in demand in the early 1970s,decreased from 13% in 1975 to and will result in a significant slowdown of about 3% in 1988. Since 1980, sector debt semice investments in future years (US$12 billion from as a percentage of country debt service has 1990 to 1998) (Figure 17). remained between 2% and 6% (Figure 16). Figure 17 Figure 15 INVESTMENT SECTORDEFICIT/GOP 8uam 1I, ".

LIeg

1.9*~~~~~~~~~~~~~~~s

1971 1974 IV"7 199 1983 1996 1959 1993 1991 19388

-~~~~~~~~

Figure 16 DEBT ANO DEBTSERVICE INOICES

1 -----f-t~~~~~~...... -.----

ex ...... -

4x

1971 1973 1979 197 199 1991 1883 1985 I97 1919

8 : mm)?P n99 041 M7 8: nwe out st4ote BT tNWC

VEN-9 18. Both the debt service coverageratio and the Figure 19 self-financing ratio show sound, though slightly COMPOATIONOF USES OF FUNDB deteriorating, financial results. With the exception of 1988, the self-financing ratio was greater than 33%. Despite a drop in the later part of the - 1980s,it is expected to remain greater than 50% in the 1990s. Low debt service payments resulting from the sector's low reliance on borrowing have !I resulted in a strong debt service coverage ratio which, albeit decreasing, has been several times greater than 1. A debt service coverage ratio several times greater than 1 is expected in the 19-1n4 M 111-1 £161-1 1190-14 1991-11 future (Figure 18). .W l _tm CapIIICUS1 11g1fl.qn C I Itd11ts1a Figure 18 l ____ n______l FUNDINGSUMMARY 20. The sector's internal funding has always been significant. However, it decreased as a share of \tx '/ t sources of funds, from a high of 92% in the early I. \ \ / <"3 1' 1970s to a low of 50% in the la.c 1980s,basically SI | J >\ _becauseof the devaluation of local currency and inadequate tariff levels. Internal funding is l, l l l p expected to Increase to 83% in the late 1990s.

i Because the sector has relied very littlc on I i. . 1 1 .1,,1,...... ,-- ,,|411st| ..... boffowing, significant government contributionsl 11M7 1974 197n £191 1913 L1* 1116 111£ 011 £111 have been used to fill remaining funding D amtz1IE civ. I SM.'.i antOn requirements. Alarmingly, the share for

IlIl-s119:PRIJICTWkS government contributions increased from 4% in the early 1970s to 41% in the late 1980s (Figure 20). 19. The composition of uses of funds shows that investments have been a major use of Figure 20 available funds during the last two decades. The | COMPION OF80RCE OFFUNDS share for investments wasaround 95% in the 1970s and the early 1980s. It decreased to 89% in the late 1980s but is expected to remain around 87% | in the early 1990sbefore decreasing to 81% in the late 1990s(Figure 19). " 4"

H1U1-74 1171-79 190-04 £114 11694 1"S9"-1

| T1111662m31 U CulStCorn1 m 67 IT TRF l l | ~~~~=| -o FomGRP _ sonCID aicu l

19W-Ill P10OACT2

VEN-10 21. Adequate internal fund generation is heavily CapitalStructure deperdent on tariff levels. If tariffs remain at their 1988 level, internal funding will fall below 22. Since Government contributions to the sector historical levels, and the sector will require have been a very important source of financing,the substantial external financing. Thc sector needs to sector does not appear to be a heavy burden to the continue its tariff increase program in order to economy from the debt point of view. During the achieve finanrial self-sufficiency. A systematic last two decades, the debt/equity ratio has planning program to examine options to satisfy remained strong, around 20/80, and this pattern is future demand increaseswhile keeping investments expected to continue into the 1990s (Figures 22). at a minimum, through such measures as improved operational efficiencyand conservation, should also Figure 22 be considered (Figure 21). CAPITALSTRUCULtRE

Figure21 COMPOSITIONOF SOURCE?;OF FUNDS of*II$ 332W26CWi 1*NT

4kt

ex

193 1114 1977 kIM 13*3 11416 lIl99 HS 1992 " 7

1989-lIl: F1RONCTIO

§ blWFI591FUSW4 E= ustC3*TRAIISIWIS L5 F IMO W9 O1 51AC1

VEN-l I ANNEX NO.1

COUNTRY DATA SAMPLES Annex No. I Page I of 2

COUNTRYDATA SAMPULS

Cowury btUijy.Source AvailableData

Argentina ServiciosEldetricos del * i Buenos Aires (SEGBA) Financialand Operational 1971-1995 Agua y Energfa ElectrHcaaAyE) HidroElctrica Norpatag6nica SA (HIDRONOR) Comision Nacional de ErnergiaAt6imca (CNEA) Comisi6nT&cnica Mixta de SaltrcGrande (CTMSG) Direcci6n de Energia de Buenos Aires (DEBA) Empresa Provincial de Energia de Cordoba (EPEC) Empresa Provincial de Energfa de Santa Fe (EPE) Eneri de 14endozaSA (EMSA) Ente Binacional Yacyreti (EBY)

Barbados Barbados Light & Power Company Financial and Operational 1971-99

Belize Belize Electricity Board Financial 1977-94;Operational 1978-89

Bolivia Empresa Nacional de Electricidad (ENDE) Financial 1980-99;Operational 1971-99 Empresa de Luz y Fuerza Eldctrica Cochabamba SAM (ELFECSAM) Cooperativa Rural de Eiectrificaci6n,Ltda. (CRE) Cooperativa Eldctrica Sucre SA (CESSA) Servicos Electricos de Potosi SA (SEPSA) Servicos Eletricos de Tarija (SETAR) Cooperatfva de ServiciosTrinidad, Ltda. (COSERELEC) Compafia Bolivianade Energla Electrica (COBEE) Data untU 1988 only Empresa de Luz y Fuerza Eldctrica de Oruro (ELFEO) Data until 1988 only

Brazil Centrais Eldt-icas Brasileiras SA (ELECIROBRAS) Financial 1972-94;Operational 1971-99 Centrais E1itricas do None do Brasil S.A. (ELECTRONORTE) Espfrito Santo Centrals El6tric&aSA (ESCELSA) Cia. Hidro Eldtrica de Sio Francisco (CHESF) Centrais Eldtricas S.A. (FURNAS) Centrais El6tricas do Sul do Brasil S.A. (ELETROSUL) Servicosde Eletricidade S.A.(LIGHT) 26 Associated Companies

Chile ENDESA Financial and Operational 1971-99 CHILGENER S.A EDELAYSEN S.A Remainder of Public Sector Operational 1971-99

Colombia Empresa de EnergSaEidctrica de Bogota Financial 1976-96;Operational 1971-96 Empresas Municipalesde Medellfn (EPM) Empresas Municipalesde Cali (EMCALI) Corporaci6n Aut6noma del Valle del Cauca (CVC) Corporaci6n Eldctrica de la CAstaAtlintica (CORELCA) Instituto Colombianode Energfa (ICEL) Interconexion SA (ISA)

Costa Rica Instituto Costarricense de Electricidad (ICE) Finanial and Operational 1971-99 Companfa Nacional de Fuerza y Luz (CNFL)

Dominica Dominica ElectricityServices Ltd (DOMLEC) Financial and Operational 1980-94

Dominican Corporaci6n Dominicana de Electricidad(CDE) Fmancial and Operational 1971-97 Republic Annex No. I Page 2 of 2

Couniy Udlily/Source Available Data

Ecuador Ecuatoriano de Electrificacion(INECEL) Financial 1983-94;Operational 1971-94 18 Regional Distribution Utilities

El Salvador Comiti6n Ejecutiva Hidroelectrica del Rio Lempa (CEL) Financial 1971.95; Operational 1971-97 Alumbrado ElWutricode San Salvador (CAESS) Other Private D)istmibutiojCompanies

Grenada Grenada Electricity ServicesLtd. Operational 1980-88

Guatemala Instituto Nacional de Flectrificaci6n IINDE) Financial 1977-95;Operational 1977-89 Empresa dc Energla c e Guatemila (EEG)

Guyana Guyana Electricity Corporation (GEC) Financial and Operational 1972-98

Haiti Electricite d'Haiti Financial 1972-87,90-96;Operational 1971-96

Honduras Empiusa Naclonal de Energfa El6ctrica (ENEE) Financia, 1971-95;Operational 1971'99

Jamaica Jamaica Public Service CompanyLimited (JPSC) Financial 1973-94;Operational 1971-94

Mexico Comisi6nFederal de Electricidad (CFE) Financial 1971-95;Operational 1971-97 Distribution Company

Nicaragua Instituto Nicaragienee de E....gfa 'INE) Financial 1972-88;Operational 1971-99

Panama Instituto de Recursos IHiidriulicosy Electrificaci6n (IRHE) Financial 1976-99;Operational 1971-99

Paraguay Administraci6nNacional de Electricidad (ANDE) Financial and Operational 1980-88 Itaipdi

Peru Electroperd (EP) Financial and Operational 1976-99 Electrolima (El.) ELECTROS-Nore, Nor-Oeste, Norte Medio, Centro, Sur Medio, Sur-Este, Oriente,Sur Sociedad Eli'-rica del Sur-Oeste

St. Lucia St. Lucia ElectricityServices Limited (LUCELEC) Operational 1971-8

St. Vincent St. Vincent Electricit' Service Limited (VINLEC) Financial and Operational 1980-95

Suriname Energie Bedriiven Suriname (EBS) Financial 1984-99;Operational 1971-99

T & Tobago Trinidad and Tobago Electricity Commission Financial 1971-94;Operational 1971-98

Uruguay Administracion Nacional de Usinas y Transrnisiones- Financial 1974-99;Operational 1971-99 Eldctricas (UrE)

Venezuela ComntaffaAndnima de Administraci6ny Fomento- Financial and Operational 1971-99 Eldctrico (CADAFE) Electrificaci6n de Caroni (EDELCA) Energta Eletrica de Barquisimeto (ENELBAR) Electricidad de Caracas (Edc) Data until 1988 only ANNEX NO.2

DEFINITIONS OF INDICATORS Annex No. 2 Page I of 3

Definitions of Indicators

1. Asset Turnover Ratio = Net Average Plant in Service divided by Total Operating Revenues.

2. Average Interest - Interest Paid divided by Average Long Term Debt.

3. Average Maturity - Average Long Term Debt divided by Principal Repayment.

4. Cash Operating Costs = Operating Costs excludingDepreciation.

5. Coincident Demand = MaximumAnnual Coincident Demand of an Interconnected System. For Extension, the Sum of Annual Peak Demands for two or more Non-Interconnected Systems.

6. Collection Period = Customer Accounts Receivable divided by Operating Revenues times 365.

7. Customer Contributions = includes Third Party Contributions, Earmarked Sector Taxes (included in the bill), and Similar Contributions.

8. Debt Service = Principal Repayment + Interest Repayment.

9. Debt Service Coverage Ratio = Gross Internal Funding divided by Debt Service.

10. Electricity Losses = Net Energy Available - Total Sales or Technical Losses + Non- Technical Losses.

11. Electricity Sales Per Capita (Consumption Per Capita) = Total Sales divided by Total Population.

12. Electricity Sales Per Employee = Total Sales divided by number of Employees.

13. Electricity Service Coverage = Residential Customers times Household Density divided by Total Population.

14. Gross Energy Available = Total Electricity Sources - Exports.

15. Gross Generation = Hydro Generation + Thermal Generation + Geothermal Generation + Nuclear Generation + Other Generation.

15. Gross Internal Funding = Total Funding Originating from Operations, i.e. before Debt Service Payments and excludingDepreciation.

17. Household Density = Average Household Size. Annex No. 2 Page 2 of 3

18. Indebtness = Debt divided by Debt plus Equity.

19. Installed Capacity = Hydro Capacity + Thermal Capacity + Geothermal Capacity + Nuclear Capacity + Other Capacity.

20. Interest Coverage Ratio = Operating Income divided by Interest Payments.

21. Net Energy Available = Gross Energy Available - Own Consumption.

22. Net Generation = Gross Generation - Own Consumption.

23. Net Internal Funding = Gross Internal Funding - Debt Service.

24. Net Plant in Service = Total Plant in Service - Accumulated Depreciation.

25. Non-Technical Losses = Unregistered Consumption due to Theft or Inadequate Billing.

26. Operating Costs (Operating Expenses) = Personnel + Materials and Services + Fuel + Domestic Electricity Purchase + Imported Electricity + Taxes + Depreciation + Other Expenses.

27. Operating Income = Operating Revenues - Operating Expenses.

28. Operating Margin with depreciation (Cash Operating Margin) = Operating Revenues - Operating Costs divided by Operating Revenues + Depreciation divided by Operating Revenues.

29. Operating Margin without depreciation = Operating Revenues - Operating Costs divided by Operating Revenues.

30. Operating Revenues = Revenues from Electricity Sales and Other Revenues such as Re- connection Fees.

31. Own Consumption = Electricity used by Generating Plants.

32. Power Expenditures/GDP (Sector Expenditures/GDP) = Cash Operating Costs + Investments + Interest divided by Gross Domestic Product.

33. Rate of Return = Operating Income divided by Average Net Plant in Service.

34. Reserve Margin = Installed Capacity minus Coincident demand.

35. Sector Deficit = Sector's Contribution to the Fiscal Deficit estimated by Government Equity Contributions. Annex No. 2 Page 3 of 3

36. Self-Financing Ratio (Self-Funding Ratio) = Net Internal Funding divided by Investments plus Increases in Working Capital minus Decreases in Working Capital.

37. Sources of Funds = Gross Internal Funding + Customer Contributions + Shareholder Contributions + BorrowingsContracted + Financing Gap + Decreases in Working Capital.

38. Spread between Electricity Sales and GDP = Electricity Sales growth rate - GDP growth rate.

39. Technical Losses = Electricity Losses Originating in the Transmission/DistributionProcess.

40. Total Customers = Residential Customers + Commercial Customers + Industrial Customers + Other Customers.

41. Total Electricity Sources = Gross Generation + Domestic Purchases + Imports.

42. Total Electricity Uses = Total Sales + Exports + Ow,nConsumption + Electricity Losses.

43. Total Sales = Residential Sales + Commercial Sales + Industrial Sales + Bulk Sales + Other Sales.

44. Unit Cost (with depreciation) = Operating Expenses divided by Total Sales + Exports.

45. Unit Cost (without depreciation) = Operating Expenses - Depreciation divided by Total Sales + Exports.

46. Unit Price (Average Rate) = Gross Operating Revenues divided by Total Sales + Exports.

47. Uses of Funds = Increases in Working Capital + Investments + Debt Service.

48. Working Capital = Cash + Inventories + Customer Accounts Receivable - Accounts Payable + Other Net Current Assets. ANNEX NO.3

REGION SUMMARY TABLES TABLE 1

THE SECTOR AND THE ECONOMY (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

country GDP Per Capita | Consumption Per Capita (Millions US$) L (kWh)

Argentina * 1,858 1,162

Barbados * 6,733 1,731

Belize * 1,686 399

Bolivia 629 198

Brazil 3,212 1,336

Chile * 1,945 918

Colombia * 1,219 792

Costs Rica 1,877 1,099

Dominica 1,722 # 301

Doinincaa RepubIlc 934 382

Ecuador 1,029 430

E1 Salvador 1,271 330

Grenada 1,888 413

Guatemala * 955 205

Guyana 347 228

Haiti ** 403 _0

Honduras * 981 271

Jamaica 1,524 576

Mexico * 2,283 1,035

Nicaragua 339 263

Panama * 1,925 833

Paraguay 1,021 374

Peru * 1,353 359

St. Lucia 1,638 597

St. Vincent 1,206 323

Suriname 3,040 669

Trinidad & Tobago * 3,214 2,361

Uruguy 2,710 1,204

Venezuela 2,550 2,218

* 1989 data ** 1987 data # 1988 US$ TABLE 2

SERVICE COVERAGE (%) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country 1971 1989

Argentina 70 95

Barbados 70 98

Belize 45 70

Bolivia 15 25

Brazil 40 70

Chile 50 91

Colombia 30 64

Costa Rica 35 90

Dominica NA 55

Dominican Republic 20 38

Ecuador 22 65

El Salvador 23 48

Grenada NA NA

Guatemala 13 31

Guyana NA NA

Ealti 3 10

Honduras 12 34

Jamwaica 30 58

Mexico 50 86

Nicaragua 25 38

Panama 45 58

Paraguay 18 46

Peru 30 38

St. Lucia NA NA

St. Vincent NA 75

Surin NA NA

Trinidad & Tobago 75 97

Uruguay 80 87

Venezuela 60 85 TABLE 3

LABOR PRODUCTIVITY INDICATORS (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country Customers per Employee Sales per Employee (MWh)

Argentina ** 162 699

Barbados * 170 895

Belize * 57 170

Bolivia 210 684

Brazil 143 975

Chile * NA NA

Colombia * 166 1,023

Costa Rica 85 523

Dominica 119 172

Dominican Repubi Lc 95 441

Ecuador 174 618

EL Salvador 186 592

Grenada 68 173

Guatemala 70 212

Guyana 59 123

Haiti ** 57 182

; Honduras *79 370

* Jamaica 168 852

Hexlco * 188 1,107

Nicaragua 76 261

Panama * 60 37&

Paraguay 134 583

Peru * 121 523

St. Lucia 116 417

St. Vincent 61 147

Surinam 102 475

Trinidad & Tobago * 93 922

Uruguay 81- 317

Venezuela _ 107 1,889 * ddata 19 81Y/ data TABIE 4

SECTOR PROFITABILITY (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country, Average Operating Operating Rate of Rate Margin vlo Margin Return (US$/MWh) depreciation w/depreciation (U) (8) (8)

Argentina * 34 -38 -18 -10.8

Bbados * 139 12 30 4.4

BeLize * 206 15 25 15.8

BolivLa s0 12 41 1.9

Brazil 63 22 36 3.8

Chile * 65 19 28 7.4

|Colombia * 41 34 59 4.7

Costa Rica 48 41 58 5.5

DominLca 198 17 29 12.4

Domiticain Republic 60 -19 0 -3.2

Ecuador 24 10 60 0.5

El Salvador 43 42 63 6.0

Grenada NA NA NA NA

Guatemala * 71 53 64 14.6 a

Guyana 89 -1 12 -0.9

Haiti. * 167 7 26 1.4

Honduras * 81 41 68 4.8

Jamaica 121 16 36 6.2

Mexico * 44 12 30 2.1

Nicaragua 50 47 47 70.2 a

Panama * 112 38 61 6.3

Paraguay 34 29 51 4.6

Peru * 21 -153 -93 -7.4

St. LucLa NA NA NA NA

St. Vincent 216 13 30 4.2

Suriname 149 15 25 7.8

rrinidnd & Tobago * 29 -10 5 -4.2

Uruguy 62 17 . . .. 2.5

I I1 1R I A TABLE 5

SECTOR FUNL*ING (Late 1980s) LATIN AMERICA AND TU!E CARIBBEAN - POWER SECTOR

Country Indebtness Debt Self. ()| Service Financing 1988 Coverage Ratio (times) | ()

Argentina 41 * -0.2 -86

Barbados 18 * 2.0 69

Bellze 28 * 0.8 -15

|Bolivia 17 1.4 41

Brazil 60 0.3 -174

Chile 31 * 1.0 2

Colomaba 48 * 0.7 -33

Cost& RLca 54 1.0 2

Dominica 18 2.9 26

|Damnican Republic 33 -0.1 -213

Ecuador 49 1.& 20

El Salvador 28 1.0 -1

Grenada NA NA NA

Guatemala 54 1.4 a 34 a

Guyana 5 0.3 -81

8aiti 54** 1.4 17

Bonduraa 76 * 1.1 6

Jamaica 39 1.5 49

Micao 3 * 0.8 -23

Nicaragua 46 2.4 25

Panama 24* 1.0 4

Paraguay 30 6.0 46

Peru 45 * 0.1 -80

St. Lucia NA NA NhA

St. Vincent 68 9.6 44

Surinam NA NA NA

Trinidad & Tobago 24 0O.4 -300

Uruguay 48 1.0 4

Venezuela 12 6.3 48

.W n _- TABLE 6

INSTALLED CAPACITY (MW) (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country Total Hydro Thermal Geothermal Nuclear Other

Argentlna * 15,251 6,620 7,613 0 1,018 | 0

BarbAADS 132 0 132 0 0 _ 0

Belize * NA NA NA NA NA NA

BOtiVia 461 269 192 0 0 0

Brazll 41,700 37,029 4,014 0 657 0

Chle * 3,110 2,200 910 a 0 0

Colombia * 8,473 6,590 1,883 0 0 0

Costa RI.% 852 709 143 0 0 0

Doninlca 8 3 5 0 0 0

Dominican Pepublic ** 822 207 615 0 0 0

Ecuador 1,792 913 879 0 0 0

El Salvador 651 388 168 95 0 0

Grenada 13 LI 13 O 0 0

Guatemla* 741 438 303 0 0 0

Guyana 86 0 86 0 0 0

att ISO 1180 54 126 0 0 0

Honduras* 561 424 137 0 0 0 jan"tca ** 482 20 462 0 0 0

Mesico * 24,439 7,760 14,779 700 0 1,200 lilcaragua 333 100 198 35 0 0

P * .a. . 879 551 328 0 0 0

Paraguay 4,471 4,390 S1 0 0 0

Peru * 2,810O 2,092 718 0 0 0

St. Lucla 19 a 19 0 0 a

St. Vincent 13 5 8 0 0 0

Suriname 60 0 60 0 0 0

Trinidad A Tobago * 1,189 0 1,189 0 0 0

Uruguay 1, 409 566 370 0 0 473

Vene_ la _ 16,861 10,581 6,280 0 0 0

_199data *'197T dta - - 'XAnLL I

GROSS GENERATION (GWh) (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country

Argetna * 48,359 14,208 28,038 6,113 0 0

Barbadoa* 5;1 0 509 a 0 2

Jelie * 90 O 90 0 0 0

|Bolivi 1,643 1,137 476 0 0 30

|Br*zil 221,747 176,328 7,726 608 37,085 0

Qxas-* 14,021 8,911 4,753 0 0 357

ColubLa * 33,865 NA NA NA NA 0

Cost& Rica 3,327 2,958 95 0 274 0

Daminica 30 16 14 0 0 0

DominLc n Republic 3,843 842 2,605 0 a 396

Ecuador 5,604 4,791 813 0 0 0

El Salvador 1,983 1,Z03 250 430 0 0

GrcAdA 46 0 4. 0 U 0

G at-__1a *2,219 2,089 130 0 0 0

GuA s 245 0 218 0 0 27

iatit** 466 NA NA NA NA 0

Handur" t *2,039 2,002 32 0 5 0

JamaLa 1 ,722 129 1, S82 0 11

Nezico * 110,726 24,030 73,577 12,495 624 0

Nicaraga 1,216 543 387 190 84 12

Panama * 2,752 2,181 399 a 172 0

Praguay 2,097 677 3 0 1.417 0

Peru * 9,492 8,696 773 0 0 23

St. LncLa 104 0 104 0 0 0

St. Vincent 45 22.5 22.5 0 0 0

SuriIas 326 0 a9 a a 237

Trinidad & Tobago * 3,403 0 3,403 0 0 0

Bruaua, 5,429 2,522 1.496 J 0 1,411

Venesuela 50,612 34,203 13,462 0 1 2,946

* 1989 data * 1987 data TABLE 8

INSTAlLED CAPACITY AND DEMAND (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Counetryr Installed Coincident Demand Reserve Margin Capacity (())(9) (MW)

Arentia * 15,251 NA NA

Barbados * 132 84 57

sells. * NA NA NA

soivLA 461 380 21

BrazLl 41,700 NA NA

Cll- * 3,110 2,270 37

ColbLa * 8,473 5.649 50

Costa Rica 852 599 42

Dominica 8 6 28

Dominican Republic ** 822 685 20

Ecuad r 1,792 1,041 72

El Salvador 651 379 72

Grenaa 13 7 69

Guate la * 741 44d5 67

Guyana 86 44 97

Raiti ** 180 NA NA

Honduras a 561 31b 78

Jamaica a* 482 271 78

Mexico a 24,439 NA NA

Nicaragua 333 239 39

Panama * 879 446 97

Paraguay 4,471 395 1,0!)2

Peru * 2,810 1,935 45

St. Lucia 19 KA NA

St. Vincit 13 a 62

SurLnam 60 54 12

Triridad 6 Tobago a 1,189 535 122

Uruguy 1,409 1,005 40

Venezuela 16, 861 9,950 69 * 1989 data ** 1987 data TABLE 9

ELECTRICITY SALES (GWh) (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country ____

Argentina * 37,061 10,959 4,136 17,277 0 4,689

Barbados* 441 135 150 150 0 6

Bellea* 73 28 450 - 0 0

Doivia 1,368 689 189 171 184 135

Brazil 192,891 40,571 21,356 103,710 0 27,254

Cll. * 11,910 2,472 1,168 6,961 O 1,309

Colombia 25,595 12,075 2,835 6,742 2,417 1,526

Conta MAoa 2,935 1,174 596 719 371 75

Dominlca 25 15 6 1 0 3

Dominican Republic 2,618 1,059 297 749 0 513

Ecuador 4,328 1,680 673 1,402 0 573

El Salvador 1,662 592 245 527 0 298

Gra-nAd 39 17 18 4 0 0

Guatmala * 1,835 541 409 621 87 177

Guyan 183 95 38 44 0 6

HaitL ** 306 150 e- 117 0 39

foanduras * 1,352 436 267 504 0 145

Jamaica 1371 426 821 8 0 0 124

Mexico * 88,406 18,813 7,781 50,284 0 11,528

Nlcaragu 952 330 1B8 256 0 178

Panama * 1,974 614 609 243 81 427

Paraguay 1,510 567 232 393 0 318

Peru * 7,583 2,532 413 3,541 0 1,097

St. Lucia 86 29 45 11 0 1

St. VLnVAnt 36 16 13 6 0 1

SUuminm 285 112 69 83 0 41

TrLnldad & Tobago * 2,975 885 329 1,747 0 14

UruguY 5,683 1,,?0 586 1,308 a 79

Vnzauala 41,581 5,486 3,409 24,917 0 7,769 * 1989 data ** 1987 data @ includes commercial # includes industrial TABLE 10

ELECTRICITY LOSSES (1988) LATIN AMERICA AND THE CARIBBEAN - POWER SECTOR

Country Losses Percentage of (GWh) Available Energy (8)

Aruenzina * 9,537 20

8.113. * 13 15

3oiM 269 16

I-asil 27,925 13

Cbiie * 1,817 13

Cole bia * 7,563 22

Cost Ra, a 288 9

Domineic A 15

Dominican Republic 1,022 27

Ecuador 1,248 22

AJ1 Salvador 304 15

Grenad 5 11

Guatemala * 375 17

GbAna 51 21

Haiti 146 31

E_ u_ _ 455 25

Jamaica 3*4 20

Nezico * 15,112 14

*lear .u _ 207 17

Panaeg* 652 25

Paraguoy 276 15

Peru^ 1,784 19

St. 1AIdC1t is 12

St. Vin_"e 7 16 ... ~~~~~~~~3 . .. s1S" a~~~~~~~~~6 41X

Tri-lid d ETSebgoa *362 11

BrUDoty 967 20

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500 45rt 40' FUNIL350 MARCH 19 RTLAOf ClMENfO4 __D______PQR7W4DIBRDS 22232- - - r -___ AD CMMNTO JCATIN ec NIQLI 45' 35 _ A CASCA11. S$A DAME)A C NtOUELTOCAN BAHIA tv\ A I '' ' "E', C.wobo ,'! I AX' CIOADtALTA 2 BARROA,TOGMOCAAA9;N0O 409qBREOI)UEO VARZEAGRANDEOT *CfRES cox6 L COEU'4BAE g*ANAUIA BRAZIL POCONE RON3ONEPOVVS PORA 0 ' ENERGY STRATEGYAND

!ICOUTO3 MAGAioAE', Go16, OPITESCLAROS / ISSUES STUDY -N. Z -INPARACATU / DNTES * VAROSTACUAI SOUTH-SOUTHEASTTRANSMISSION NETWORK

- ~~~~~~~~~~9 ~ ~~~~~~~~~~~~~~~~~~~~PIRAPORAO *OCAJVVA R 0RDL JOAOPPINEAAP9 qPADREPARAIS 0 AtA',JAEPN~EO DAPALMA 9-0 VtRDZ" GOAS4911Ltos NAIN A S TFO%O~~~~~~~~~~~~~~~~~~~~~TO~Transmission Lines: 2) LCATALAO*CACO MARIAS *DSAAANTINA t 41,GA D.C +600kV RO ~~~tROSGIJIRINOPOLI,,- ~~~'A750B kV g RiDBf~~~~~~~~~~ERDE CNIRINOPOtl50"Stm I A 02CALAO *COJIINTO 3 SAO51MA0 Jp I PATOSDE MINAS (GFR A IS NOVAVENECIA 2,OkVU/A tc< UaG8UtDETS1ERLAINDIA *A2CN0GOVEFNADOR VAL4AAEi ESR T 00 kV EGAS q~~~~~~~~~~~IpAGABRIELWOWSO *' I PATRGCINIO PIm m 5

N ) ^ i_ > °wv \ JAGUARAE AtO A A 345 kV M R ~ OS rW ~MAPASMIRANDA --- -- SAOGsAAAI CSO1T SNOPoelat:2

AOUICIAVANA URAO40 &6 oQzoe 41jICAMPTAIAAEATi LAASJ PRE-CIAABEVENRA TOE ALCRN-EAk MENiZA OUROP REOOTAS.----A1 8 k JSED0*kPEIaFuNAL-, PRETO IARAPE RNE CNORC GUARAPARICRAIN AMOXARCUBARAITAD .- MIGUEL~~GRND -,PoE ~~~~IfIMV G1DdeSCOT M4CJkNA _EADE0RADMORAE9\ 4bI64 NEV PAdvverlectrN23 kVH IV,NRIEMA~ ~~ C IVARA ASSIS 5ANICONSLHER PNT NOubttin i DCJU ~~~~~~~~~*PLOOAPALC'5 - ZA\tI G - zI WA, O LAVRTRS9'9 AACAEES JU D~BEBF02A Hyrecri _,>gu^iv asst0Es / mx@° D j~AARAiSO 9| / Theirmal AL® State ecri MARINGASAi~~~~~~~~~~~~~~~(O 1 NE IURG2 04 BARBACENA *FLONEN TINGA kW E LARRi"A'rs Captals ~~ARAGUAY~~~~~DURDO \ LIS*Ap G B A Q- VIRGINNO TRt$ c4AXT CAfANOLALPwr.---

A R A GU AY>a./ CAVPOMOURAO = 0 0 0 0 oo~0 00 _~ 00 9 0

ASCAVa 0 P A R A G PARI?OT^1 _ _ InternationalBoundaries FOZDS I PONTEGROSSA NOR; DESOUZA IGLAU * 0NR~ , .TAIPU - | POWAGROSSASt aUt FOZDO IGUACU ..d0 - -~ CurIli

S } SitTOOSO~P RIRNO oov j PATO GNVLE NRANGCON IV r /: CANotNHAs-- . BRocHAsIErrtZRl* a W 25< ' MIGUELD'OESTER qpfl*PINNALZINNO ACD NG JOIn

8 IERE1l OVIDEIRA EMENATI ENAU He D!S *IILURNA CANTARNS WAHERDOESTE RIODOSUt V * IOTA

--.. -~ ',- .'', PTASSOFUNDO~t .MPO PEOVS %TAGLiG BL&4ENAIJGARCIA 1 RERRIMNI * 1~ Florion6polis *Z- kROA , I'VALtRAMOSJUNIOR PFORIANOPOulS

EN TI NA CE AL S MARTA VFRLI1A 'N sioJO vUIM ,IMBITUBA _ - , COLOmBI ISAO 80RJA ' ' VACARIA V W* LtACERDAA (~~/?SiC)BORGAFIA SIROOI LACTRITAB LMI N8 . j MdACAMPARA PASSOREA CJ D ( SACUIA CAXIASDTO SiI*% / \ J Ulv FARROUPILHA*O _l AIEGRERt ITAU#A,VENACIO AIRES &CANASTPA URUGUAJANAUEUGUAIANA~./ - -_ - A.-'~~ 1-* II SACUANASA - ' AAEGRE-11111- *S MARIA*TAOUREA sAojERO AlegrIeAeNIMO Area ofAip

I | r 51 'NMINAS DO CO ERE C AMAOUA I BOLIVIA l- @Brasil,o

| ~~~~~~~~PRESI(ENTE,AEDI,5xCII D< EtTA l) CASDr PEt105 S 30'- N- bASEIOA PLOTASI ° 100 200 300 \ \ -VQUINTA I KItOhlETERS 1 7 1 S t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~KLOEER

URUGUAY IAGUARAO*M &":::e;:: the BanE. afaf GnCiumV_R toite CmI1 f/_RGENINA_J._ So Th reeda~sed 0 V.I.'s Wito Re,enEO O8~1of The Wcdd Sank ad VW ,maRna RETN

55 50, 450 00. 35' IBRD22392

p f ~~~~l'oQflCl-)Anrofocqosh Interconnected Syte A ?Fs Hua-.ad Sst"..O System.) o

I~~~~~~~~~~~~~I ,. g ,u, .,, l -. 4 II s ,, , . :: I ..i. (..wy,A 1" |~~~~~~~~~~~~~ .. |4 ItI

A 0~~~~~~~~~~~~~~~

. H I L E |-t. R> 2 .@: *S) CHiLE: i~~ ~ ~~~~~~~~iu //Ji "' K' I ' 5 1 . ''2X-. try ~ ELECTRICGENERATING AND !* -9//J> | TRANSMISSIONSYSTEM te~~~~~~~~~~~~~~~~~~~~~P0,~Insol 4 4/1*I / 4 a:' ,~ * ' " H;dr-ol Plants

/*500kV ('Se -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~20k I.' ) I - 220sokv 'nes ¼ .- .- Iv 5 kV *^ *As; * ^{t\j ! 4 R 0 GA 'A .4 , - 10kVi nes 7As ,6 6 kV lInes

I,"~~~~~~~~~-

/ A~~~A

. . Bu,d,e j,.s~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ineatoo . 2. + , s , L

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1 2,.'r P-^-5c...... p- s /~~~~~~~~~~~~ ! 2i,~~~~~~~~.

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46. H A..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6 ii'.,. S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~MY19 _ IBRD 17690Q <

Sous 'r H A M E R I CA I ''"' /

- -e ,1 / ' '\~~~~~A~--0 ;.PANAN\A o.^r-e J r / l vog Nf ZeU E LA 0~~~~~~~~~~~~ c~~~~~~~~~~~~~~~'d.u .. ?; So

s.-.el a D, Aoz:u

s Ar- -,1 .. rv _: ...... d- o u

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f /gA-¢erz 1o3Je . T A~~~~T

Ae-h ra,o ff

/ ~~~~~~COlOMBIA Popp3rByo,o ELECTRIC POWER SYSTEMS

T,,s n ss.,-r I -es f E F 6 ; ,ee^: z '- 2 SO K w ~~~~~~~~~~~~eP M _ ~~~~23"' w.C .~ ~~ ~ ~ ~ ~ ~~~~~~~~~~~~Hc-, _ Ha, r e, o. .-CORF,."A A Thernol power plan's iCEt \1 ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~G *oo Subsoat,ors ' ~~~~~~~~~~Mo-ors RUve,s

\ ~~~~~~~~~~~~~~~~~~~~~~~Department,intendenciaand Comisario boundaries

E C UA D O R l: -- .niernoelor f bo.Jnder.es ~~~~~~~~~~~~JULY1988 IBRD 17336R 860 85° 840 GUAT. N IC ARAGUA C HONDURAS_

/ '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ SALVADOR -11° | _n *\ 11°-o- NICARAGUA

Mirovolles * .-

\L i ber ioa\ Liberia ~~~~~~~~~~~~~~~~~ CC3STA ~PANAMAR I C A

orobici Arenot

830 8120

100~ 1 10

Pu tcr nc~;Iiue Hered-a Pta Lim6n -|o Puntarenas@

. aGrtanos .h

COSTA RICA POWERSUPPLY SYSTEM r UNDER \ CONSTRUCTION EXISTING Transmission Lines: 220 kv. Single Circuit -90 - - 220 kv. Double Circuit go- 138 kv. Single Circuit 138 kv. Double Circuit \ Power Plants: Rio Claro P A N A M A . " Hydro * Thermal Geothermal * Substations

Service Areas

Province Capitals 0 20 40 60 Miles

Province Boundaries 0 50 1lo -* International Boundariesj This map has been prepared by The World Bank s staff exclusively for the convenience of 80 he readers antd is exclusively for the internal use of The World Bank and the International Finance Corporahon The denominations used and the boundaries shown on this map do not imrpty,on the part of The World Bank and the InternationalFinance Corporation, any judgment on the legal status of any terrtory or any endorsement or acceptance of such boundares 860 850 840 830 828 JULY1991 IUKV A JJ,

61.30 61½0' CUSA SU5. 0.C,PUERTO RCO O OAUNICANFE2O,( 5/TTTSND

)A0A~CA 'AOO DN'SE0A I GUAOEtOUPf IS 40- Nll0t(llANOSANO((IS ' ,DO$o.IICAi KII (%10911C

/v S IUC,A SaAErxS St5 V-NCENJ AND0~ /o! G0iNA) N'S GRfNADA

l.a Hoal ~~~~~~~~~~~~~~~~~~~~~~~~~~~AND Capyi CoPvn~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t UT3,5 ER| 0

SOuTH AMERICA

>to- Q ~~~~~~~~~~~~~~~~~~~~~~~61.15'

PORTSMOUTH (

l~~~~~~~~~~~~~~~~~~~~~~~~~~~~IO*0001000- C00 0 to 000 oJ' 01 00 "WO 0

POWER ~PROJET&tTSMOUTH 15035 t Xikr : t 15'30' -15'30' k-f~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~100

DOMINICA C. POWERPROJECT 3N~ 1 1 kV TRANSMISSIOIN ANSDa, PRIMARY DISTRIBUTION ( NETWORK '-J- 1525' 15B25 ~~PROJECTS.N New TronsmissionLines J ph ReconducluringTronsmiss.on Lines °

Hyd Plant Layou*;es t Dams

EXISTING __e-.- TTOrOnsmissiontines, exisling oarunde, Ra*el,. construchIonto be completedJune 1987 *0 DieselPower POA,tlt * Hydra Plants

0 Not,onol Capital o Selected Towns102 Rrresrs -'>}) Is20'15 1520' --- Internalional Baundaroes Ceto.Iisld Elev.,eonsno Metes PADU RAFA.La FlamH

L000 20000 2000 ROSEAUcatdefiel l ;aDX4b

KILOMETERSefoeu0Been

610'30' 61025' 61020- 16'15' I 19 UNlTETD SSDAII orAAMi Q hA 271 70- DOt. -A. AINS O Monte Cristi , t; y I.i } sPuerto Plato ELECTRICSA A ONS

" ':T, p * | | ~~~MonteLlono \

il N ' \ - a, O {]p ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l~ _ (8 1 i * i i P°O'l< J \ g / *-( ~~~~~~IEsparanza 0 6ri~r- AAOr - 0 r'varette Sni~ enne |- ;..-A Dalobon Dulobon4 MooOM < 5t1@ \ /~mo Hernlandez J . RoJrnguez . . .r-A

*Sabanadel Mar ° SCanobocoo ; ' ' ' POY.a*:o - 'I t 9 ' ,\ N , / E,12 1 !. , * i ~~~~Mocoa,o. e 69 Lop\Sant.090~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~aai aneOuz oS:*cedo)oSS lslogua 0~~~~~~~~~~~~~~~~~~~~~~~~~~~

Rio Blancoo \\ 0~~~E1os IPfla I\ .j U A N El Sebo Sana Juan ~ Sab ~ ~ ~ ~ ~ ~ ~ ~ Sn Deracic Mocont .Maor Rincon Mlc e 6 ~~~~~~~~\i SobonetaiNRlco ) C~~~~~~~~~~~~~~orsbocoo / J. ~~~~~~~~~~~~~~~~~~~~~~~~~~00

\\~~~CQntra Los Ilanos AL~~~~~~~~~~ Cansuelo Hrguey~lloRIV j' ~~ ~ ~~ ~~ Jimenoo Sobotunetobon d a cionar * { , z > i z \ | W A p dge / Oza * °i

eE 0 Neiba O 0

an ssksOn\(20f~~~~~~~~~~~Las j LiDuerRiIobnJu n- Sab BlancoRo CentrSl Rbnet En/os A

0 .Iab l 0 0~~~~~~~~ai0

A.~~~~~~~~~~~~~~~~~~

'\ @/ Central Pr zarrete OR PLANNEDv IN OPERATION TRANSMISSION LINES: t -> v<1_ , Borhon@Bo'hon S Lin~Jos, ~ ~~~~~~~~~~~~~~GsTubn >BARAHONA ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~69kV (1)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~p'o h ol Sn s ' 'IC 0 Neiba nkv OPedernales P3 urgnn o h egtSRU imony- V ldesia V e Al+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~n UNrvER~~~~~~~~~~~~~~~~~~~~~~~~~0PCONNSD IN OPERATION POWER PLANTS:1 9

P 51)F rXI'il /v. 1. E() s- s o " ~ ~~~~~~~~~~~~Hydro * Diesel

Juan o) B A C* R Um@ Cr@ GasCruce Turbine CentraheSaneref Sone rn~~~~~~~~~~~~~~~~~srnap has been p'epaseo re.aler and S erher VC;)io l- 0oron20 40 60 Self Producers and the Irerria,sral f,'re KILOMETERS I I f I 0 SUBSTATIONS Corodoalr Thedinmrnr'rr MILESI T- lnap nnor or ti's rodrov oA In: 0 20 40 Rivers

- ProvinceBoundaries ,lrrernatonar(Cnoe Co'n,'ahr. -\- InternationalBoundaries Cenurnor of any or any

6 n such boi/ndaybs 71° 700 9 JANUSAkY ' er IBRD19042 16 d-. io- .]9....

C O L O M B I A

E C U A D O R E,Eq.,alasb NATIONAL INTERCONNECTED SYSTEM

_- 230 kV TRANSMISSION LINES .-.--- 138 kV TRANSMISSION LINES -*-o*- DOUBLE CIRCUIT LINES /0 HHYDRO POWER PLANTS o * THERMAL POWER PLANTS CooDSEL GANGOPOLO 31W2MW Vcen~na GS QUITO * SUBSTATIONS 51 M W ,.QUITO 8 MWj

MAIN ROADS 9 Mohhach E.EQUITO 87 M W. RIVERS A

monto1L PISAY;MBO PUCARA

tSonto Ana <,{ Ambolo,{ 692 MW KILOMETER$0 20 , , 0 , 100 | MILES0 20 io 0o 804Os

os ubohoyo- Rioboabo

) PascPoales2 SaIinos G

IE.SALADO 172 M.WI,f |EMELEC163.5 M.W | S_ Naramol Z~~~~~~IPAUTE A 8 . 7, P0 0 Azogoe, 1 500 MW.

{ / ~~~~~~C.e.co'f Ano of Map

Machlo I'ECUADOR

'4)' Posoo SO U T H me WA M e R I C A

fidw- F~~~~~~~~~~~~~~ftw -Oa. ~~~~~~Lola 4~

.W do M I. P E R U ,

er Io* \._.o 79

AUGUST 1985 I ~ ~I .1 I I °RO °° 3,, r ) O8 -( A89~C.A

sU ,, 0M-tap6fl"R -o-_EL SALVADOR -a *UAT EMe,an*COMISION MAL, A> EJECUTIVAHIDROELECTRICA

G U DELA rRIO E M LEMPA A L A(CEL) 8> | ( L G}U A T E M A L AMAIN ELECTRICSYSTEM ^ ANAMA

GUAJOYO A z /HYDRO PLANT - _ '

/4 N*\ /\ -

s >o ° t_ _ { o~~~ElSinguil | Cotnng> oc lalenango HO D R S - og wy ~~~~~~~~~~ a _ S y r~~~~~~~~~~~ H ON D U R A S &Chfipiop Chalchoapa I JoboA T Sont Ana CERRONGRANDE / .~\oEl tiono HYDROPLANT I E JocooiDque

Ahuo hopen GEOTHERMAL XHYDRO PLANT

etzalrepequ / Sensuntepeque ) _J 0 CwudodBor,os 1*LoHachadura SAN SLD\ ,e /u. 'Xi Franosco Gotera

? \ / ~~~~~~~~~~~~~~~~~~SonAntono Neiopo 5tAC>b Abnsoroti -, Rafaelo5Ca Cedros ~~~~~~~ ~~~~~SANSALVADR Chopyopongoe SontoTecloo 15 DESETIEMBRE 0 Ckapique ScntoRoso MIRAVALLETHERMAL PLANT SOYA N SonVicentePLANT Montecrito d 0 SnmlaGASTURBINE Olcit a iene otcib Acoj01a°{.4.cojuqa O~~~~~~~~~~~Son 0 Emilio ~~~~~~~~~~PLANTP OlocuiltoLN | ___ 0 ACAJUTLATHERMAL PLANT El Triunfo

0 La Libertod La Herroduro Zacotecoluca SonMigutel

PROJECTEDeXIT\

- - 115 kVTRANSMISSION UNES Uni6n 46 kV TRANSMISSIONLINES Ia * POWERPLANTS Jiquilisco 0El Deliria A SUBSTATIONS RIVERS 6 NATIONALCAPITAL

-- - INTERNATIONALBOUNDARIES

-*r13'00' 0 10 20 30 40 50 KILOMETERS on. no.c o.. wn . ewr.c u n. n.o.-. a

0 10 20 30 MILES r 7 ,, ca .. - 0 81_ t t.0 NJ

9^00e00, 8r30 as 0no r0.Oc _0 CUBA 91-00 10-30'

MBO,CO .,I SIUATE1I1AL' 1 ,,/1 HONDURAS

NC CA obe tOntc

PANAMA d, o 'COIOMEIA d . o A Al'-

GUATEMALA I CITY POWERDISTRIBUTION PROJECT San Loc'

EEG's 69kV Subtransmission 'Candeala. ExpansionProgram, ,______1987-1993 \;OAua 6 / -14-30- n C.lS

L ff .Luc-a San Luisr / // > ~~~~Szt/tB VYari 8 Wa"eR D t

toSa,nSobosr-,,n'..,~ ~ ~ ~ ~ ~ ~ ~ uacopo~UNDER NON-BANK (1,U t c b b PROJECT CONSTRUCTION NPROJECT EXISTING > Obispo scu n ;8 69/138Iv SuBSTATION

La quaocraciarritos e#/e ° " 730/69UV2 SUBSTATION

Ma vagGfNERATING STATION Ceiba Amelia9 XkV LINf

1-3RoV LINE

220kV LINE La G om era ¢ / / f NUMBEROF CIRCUITS

DEPARTMENTBOUNDAR'ES Acacias |ObCro 0 BJ: ' UP ARIAS

14-00\

?._ INAtUNAI 8RONJOARIES

> Slpacato San JRRCPrt ~~~~~~~~~~~~~Pto. elPPllG No reliable scale aoadlable "' _- -< 1I a5 a noww.naOon,?n.erffi R* seetne_ rn*0 an.'A_ pa O 'nwo CrAe'fl?. 10,eOOCfSIIl two e.aos dn.. eZ MTw Ea tCOWut

ao .. P\ aM ,to alwu KoI FMMnO ant.ontl rotoon 0'rs tsanTTrOa ontttTrr am o t.a k~~~~~ C UTf-N)rwPa(. o3 RU. Lat.GUYANA , >-t^,' (' ; HYDROPOWERDEVELOPMENT

MatthewsRidge PORTI$AITUMA Kumaka

MMotthews " / . A; 7- ,>/ Kwabana r.CHARITY

L4J , t>TOWAKAIMA * ANNA REGINA

A`6VENTURE // SUPENAAM ,' -

Mokapa . ,EPARIKd-' ORGETOWN Versailles

.WALESaG MAHAICA GardeŽ. VREEDENSTEINQ ot EdenF Penol Settlement C-ES0YKE

LUJ Upper KARTABUPOINT O EARTwCA.AgT Mazarijrfi BARTICA N~~~~~~~~~~~~~WAMASTERDAM 9 . Mazaruni Nepe,0 A/lb,o Teperu~ne P OSI NOL Roe'; Z ~~~~~~~~~~~~~~~~~~Qoasry0 y t*iIER v ~~~~~~~~~~~~~~~~~~E'RTN\0 w-CEROr5^lVtd .ChIfstlonbuug ROAD CORENTYNE Tiboku WISARIN LINDEN ARASeABeWoD on

o Kamarang -SSANO Mc Kenzlgi CRAEwDOE LIJ\ oSSANOI |T/Ige CREEK g \J t// ,BiN, )

> \ P A K A R AI| MIA TUNI PARADiSE MOUNTAINS AmoIlas Lotro Kbbre (

1AKARAIMumaA o'

Kaieteur u I -

} HoImngog /

B R A Z I L o 1 Kurupuk( a Rinduik Mapr 0~-- 4c j <} >\ Kato / Landing i PROPOSED /V._/ Large Hydro Sites (Optimization Study) j SURINAM E Small Hydro Sites (Feasibility Study) S U EXISTING (I

* Thermal Plants . t b p rie / h, tr 4 -- * @ *69 kv TransmissionLines r I/ d Balk I 5;,c'0xclos.ely f! for 'N ~~~~~~~thleWeporto 'Wdrch It Is OStached ThedcO-'" or Or's used sod the UNDER CONSTRUCTION Kararr- oo bt a O ts,sf'I'sn rh,lo -mp

-@* - 69 kv TransmissionLines o ranornbo Wrold6ana aord,rsc f,, ates ,nk

I OOi'~~~~~~~~~~~~~~~~~~~~~~~~alt-r to,, a, 3"p eodo,se-r,'r? Main Roads (etnem Or ce of°uchtrtudores Secondary Roads L HEM Tracks / E Railroads A N U K U MOUNTAINS

- - Internotionol Boundaries Rivers Wichabao

0 20 40 60 80 Rahdllon KILOMETERS 2 4 0\_bA_sholton MILES y 0ILESOr10 o0 30 40 50

60°O' O Lumidpou

|OGEORGETOWN I i-

SOUTH AMERICA > "_ >

Ki ILOMETERSL22% 0 _)B R A Z I L KILOAAETERS,° 400 800 ( .o .|

L~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -______-______, ______,, . ______I IBRD 2 04 3 1R

USA 30I. 19 7

20 200

'Pr

CUEA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_9 vtit b PA.)( CUBA

DOOAINICAN( REPUBLIC . 4* I74,

JAMAICA PUE TO MRIt Si NCOL AS

l~~ __b_ ' J--p ' 74030 740 A H A I T I r FIFTHPOWER PROJECT K 19030_ *Q°30 ELECTRICITED'HAITI (EdH)

Project: , dv * Thermol Plant TransmissionLine TransmissionLines: ------Planned - . - Existing ThermalPlants: o Planned * Existing Hydro Plants: Planned

*l Existing 0

-19 Asphalt Roads ( \ 19 - -Grove) Roads 0 DepartmentBoundaries 6.ii,A4l

-. - - InternationalBoundaries

Ries0 10 20 30

KILOMETERS

REHABiLITATIONOF DEIMAS STATION z

JtRtiAlE ~~~~~~~~~~~~~~~INSTALLATIONOF GAS TUBBINEtS _c OSEAujx CAYEMITFS ISLANDS DAMS-MARIE OON

A8030 ANSE <'S- -Ji°0 D'HAJNAULT

O THUINT MA TI/SlAiN i, 'C K.'

CAMP PlRRIN MANICHE C C

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°Ufero CORrES

' ' ' ' Flart~~~~PeoCorzes t Tela LA C 'e14

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> . 0 , , s u r AX ttF',\al .) :

4- t . apa zs4,vA /*,,AV,;E.AGUlCAR -

V'---'/~~\ ~~~~~ 2 \t / .' O ,~~~A

o / YuS°'anO ; l ' r l 's >!!D = K~~~~~~ AtEL SAVAO 5fl vis4

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_~~~~~~~~~~~~~~~E A. Z SIV4 -k NICR U IBRD 1936 7677 30 78°000 770 30 ' JAMAICA FOURTH POWER PROJECT Under Pr ceiec Proicl t FutureFture construction Existing

-=--- . 138kV *ronsmission lines 69kV transmission lines CD O*0 Substations Power plants 83 18030' fHydro 1803c Luce0' Montego Bay Rio Bueno Cardiff Hall Diesel Lue UNCAN AteamAb DUNCANS\aOBOGUE 0uce t R ==G Ocho

IiRos White River Glasgow Roaring R.ver aC Lower 0 *\Upper ORACABESSA BELLEVUE

0 Negril Boy AVeRril f/:AvANNALA MAR \ \ t \oBuff -Bockstoredge

\ Ewjva,tcn - nPort Antonio

Maggotty

\ \^~~~~~~Kendal 1

0 White House < ta~~~1andevillecmfcX<,'q9ttKNSO GSTON 0Blcjck River 18*000 18-00'M:lPen ,\e°p\\ W H WH-<7>NRd 18'00

\7 \ / ,-

~~~~~~~~~~~~~~~~~~~~~~~~ Ol~~~~~~~~~~~Prassd Moront Bay AMA MAS ~~~~~~~~~~~~~~~~~~~~~~~~~Harbour

CUBA DOMINICANMOYu AEXICO I RER 1 .- iY' BELIZE jAMAI(CAq* HAITI

HONDURAS 10 20 30 40 50 i. ,-' ~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 1V. NICARAGUA 0 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~KILOMETERS r 20 30 ~~~~~~COSTAi N ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 10 COSRIA vENEZUELAMIS 114 PANAMA 7-710 76030' COLOMBIA 7000 770301 700 OCTOBER 198 _ _IARDa~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ik - ._. .,_ I, . 0 2i MR;coIi jia 100 lliO ®26 MW snn luis R-oCnInsrodo nJuANAw 60MW 62MW

AMERICA 55 MW UNITED STATES OF Son V,cenfe - Pto Pednswo =C ,,Cd Juse

\SonFebpc NCgolet Ago0Prio 320MW

102MW /M/ \ Nto \ °SanC7u-nlP.n 6 cl. A\,nin br" Ano Ncnnnr, cL os.Soni

Plo Lsbeso.d&3'M MoClot.ttt

/ WLASCAlLF5.S t

'Hermosillo | o64WMYV O S IAUAHUA A3 MEXICO I ~~~~~~~~~~~~ChibuchuosIh)Sea MW G5LfJ,2AYMhAS4 Cuuhtec H=-J, It0CO5 TRANSMISSIONAND DISTRIBUTIONPROJECT ContiWnO~ F O VI 100M %n CFE'sMAIN GENERATIONAND

(DoveRRERc 30 NEGULRF^CO RCdObeilo,, C390MW EleitPni TRANSMISSIONFACILITIES

FlbENANCEOA JUNE 1989 / \ M9YNC ) 1/OVA0 35rAST45. A8a 2RO@ 78MW(D mw ~~~~~~~~~~~~~~~~~~~UNDER ME EXISTING TransmissionLines: \Snt-o1rjigot,( \ 9t,loloPRC)ECT 3083 400 kV _ 230 kV or lower otoetop 0 59MW g t0 \ tt \ R.o TOPOLO&MO /xo Mo' S Generating Plants: A/mV4t0 Cnnn,~n ~ MW ( to M>Clii 92 BACURATO G c 32MW Anilols.o.onie3 AON39E 373 MW 0VLACONSTITLICINM PALCI 0 E Hydroelectric o u0 Gu mni Ej COMEOERO S9a,on,, p 943MSVMW (n) Steom(conventional) \ \,isCullcsisrs S / \ \ \ t5 ~~~~~~~~HtMAYA \/ GasLlwresSTurbines\ ° ...... 90biW\e \ / Geothermol \t3 Mw \ La Pcz\ m48/v ereno ,t D Cool-Fired LaPAZWAZAtAN M gudod C V,o,o i~61mw() Nucleatr \ \ oOSombrerese \2\ tMztn 3So. Jose Notional Copitol Cabo Son s de) Cowo Zo otects

Selected Cities and Towns \ h SAN\ LUIS ftc>1<>sxPoTosi A nmoo0

Aguascai7tesMW*1 A InternationalBoundaries

MERIDA

/ Geada~~~~~~tojoratrnpnn Celoyno urtr oid ong,

t.- ~l'tlEardinoJSC>INFfESAU | MW *920kImono M4ZArEPEC ~~~~~~~~~~~~Campeche~

Slnitnfoenlton[ORcPAfA,S FE39d A C n Nf /, t nMr_ MANJZ4NILLOPinnllnnn AhtWRyS MnC Oc25 mw xco ~~~~~~~~~~~~~~~~~~~CDOft CARMFN | h stPASOCh 135D MW T I - 1 ___O BOCASq CCHcisa Mon~~~~~~~~~~~~~~~~iflo~~~~~~~~~~~~~~~~~Cd C.rni .PcA ChA,aaNAg a /V\ R \ ?0EPnANns uneoAS~4 LAV11LItA Zlhuntnrwlo ~ ~ OTR4S~~~~ncoProo

Ctncoosnim~~~20 I MW5 398 MWCNTRL r * 000000 MALPASO

032 MW )din ont PEN!~~~~~~~Soo90M

c otz ulc n Sn(no2JuchisMW1080 N ANGtloGoSTINRA 15 0 100 200 300/NIE5SA

\J 51)0 wocuom~~~~~~~~~~~~~~~7n msamPlo lion bnn P,lOOrndny Tne t'cvydBanks 511 rsinetntnnI iOnmoConveAencn- oft El CARACOZ 1ulk

is encrks.nely vs ol rOn kVniid Bonnand Ihe fnlrnlenutoOI ioe,nndnsn onhi (or Anensevnv Pin Chcndcdo 420' FAo,nr.iCo,BoiOiOii my dcnOtiyiOI0 u and melAIOnbOsncLanls nhOnn nor lion oap do nol GUATEMALiA/ nSOjp on IOncaPflf mnnP/e odd Bantl on he tIenntt,llPhal,Oll f edwCoitpniainn fnop ,yndn,aocull on Inelegal SladtUS01 any.in/mins or ay aoosenonenl or a. ceolasco of SIJcOt,a,,M'eS

ito0 100° 90o I _- - ______, . _ _ . . ------39 MW NOVfMB NICARAGUA RAINFALL,WATERSHEDS, IRRIGATION lR 39 AND ELECTRIFICATION CB RAINFALL A MECUBA H 0 N D U R A S WOni togcoi' > /BLZ Mainrainfall recording stations lsohyets(in millimeters) 2 o~...B ikrnoRi~~o.OAEAA ,bo Watershed boundaries c~ I i)OA~- ~i -'7AAU Rivers 14%. . 0 IRRIGATIONR.t "ZCAPAGUA~~~~~~~Rai g,.. Proposedirrigation areas ~JExisting irrigation areas CO'tAerA, (approxlocation and undefinedshapes) I ~caoa O ClIAR~ PAIiAMA ELECTRIICATION 4 - EXISTING 138 KV transmission lines 69 KV transmission lines 0 P4o- A Substations/ FUTURE:J1 230 KV transmissionlines 138 KV transmissionlines 0'0 4' 69 ~~~~~~~~~~KVtrnsmission lines P.eaooiCcbezos A Suibstations .ono0Perooeos...., 'v ,,. Id La Rosaa R'~~~~~~~~~~~~~~.Oroto Itrainlboundaries I 05goo,

Ocotal 0 Sunca5,~~~~~. - RVcnal Wountalogoon iL .1 SoioCIo% a LoVigio ,/ \Somoio-, '~~~~ ~ n, - .*. a01 L.mboico5ea AD'Valaguino Seg 0 , Condego 0 Pr,n.r0 , PuertolIsobel

e,,d r 0 1''r l iaect Efno0 fonu,eca n ,0

3' ~~~~~~~~~~~~~~~~~~~~~.n,O.~~~~~~~~~~~~~~~~~~~~~~~~~~~ISon Pedro 131

P,~ ~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~,, t uetos ,za ~aBo~ de[Norte Bono 00105lo sn ia Nmi( 3 q~~~~~~~ . Muy u9o4~,

C~~~~~~~~Irl-0, !~~~~~~~~~~~~~~~~~~~~~,~ abra,.,

Per/as ~~~~PROPOSEDIRRIGATION PROJECTS

lagoon &Ngogrote - Lo Paz Centro &"e Managua' ~~~~~~~~~~~~~( I-P ~~~~~~~~~~~~~i'necopo (g)~~~~~~~~~~~~~~~~~~~KVillaSolvorclorto

ro \ \ Rit La Libertod 1"I I oniaSoni Nn doimen Roso Puerto Sandino kI 'GUA (a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Brsllei;iChiliepe

or . 0 14 Bu¶felds*~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~EI C~asCosorod Bluff E Loke Plain - . Ny0 12' . . vTitI d Acoyapo~~~~Oeo 12sBoidr Pa c O iSjMoto If c e nA ilsaito Grapodo de CoIn, Blelils YMoto Pclo .Ii Jinote8 N

Masackopr ,aATBBA. .~. -. '~~~~~~~~~~~~~~~~~~~~~oiGuineaZA EXISTING IRRIGATION PROJECTS / ~ 1 ~ ~ ~ ~ ~ ~ ~ ~~fll~~~Unginio Son Antonio

taraCio *n~~~~~~~~~~~ool A - / ~~~~lg~ rE21 Prayecto de R.ego de Leon* ~ ~ ~ ~ ~ ~ ~~~14 ~ o /GrS Hacinda Lake Alienirra EIAstillero M. I~~~~~~~~'ng6:io Doloris 1 Stondo,d Fruit Co METEPE' ~Pa."" / Gordo 17 Ingincio Moniel-ar San Msgveli i' Ba~~~~~~~~~~~~~~~~~8Y IT lng6n,o Monterosa NVicaragua LjP/J 0 Ing6n,o Aa, SaJodelS ~~~~~~~~Bloncas /10 Proyecto de R.eqo de RB as 0 ScinJuondelSur~_ SOLEN 5n 6\ l// nginio Ponso 5 p I / 4 --.-.. " CatIon <'~~~~~d.e ~~~~~~~~~~~~~~~~~~~IQ'-~~~~~ /2 Ing~~~~~~~~~ntoSanto Ritagn,oSofo.t O 20 40 60 80 100 120 140 160 *, L e ~ ~ ~ ~ ~~6 0 -- ~ ~AAi*87 ha ondp,, d1sperseod/cat.ons Ab loo ~~~~~~~Slia 4-' I .. fo io 60 80 tqay of Sohnas ~ at und/NN a IVoNt sho..'r, localed near At/an fc 'So~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~nJuandelftt Nore

Sources: Direcci6n General de Cartogrofia, Managua, Nicaragua. . ' 9 1 " Emepresa Naciono: de Lux y Fuerto. C O S T A R I C A

87' a6S BC 813' 5-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~UY19 IBRD 1629

82 8 u 79- 78.

PANAMA ! ~ Ter.be . Bocs de SEVENTH POWER PROJECT ITsorove Instituto de Recursos Hidraulicos y Electrificacion (IRHE)

" ^i'-^nol\

9 N \> \ \ ; >.,J^5 NA' AM

CerroPur toS or. (wC SrrC ( p"rEtel fS Chor;ero ~Arros1on Volcrin Los 0S e A 0NOELA Boaue

1;2IIrSM N o.

oc C,onCepc' Dolego 'Peor,omC

rogresod4<\ v t > <> Tcs~~~~~~~TbosaroI ^ /DAregD Hydroelectric Proiects SAN MIGUELI 1/ Podegol Ba buena\ilbuenodN-eS<,, 7 _ DAMS and RESERVOIRS muelles guadulce j -stng > 2^,~~~~~~~~~~~~~~~~~~~~~~~~~~ono'onchez gtne oseclo Chorco Azul Unde, const*vct.on ga />~~~~~~~~~~X~~~~\\ | ~~~~~~~~~Futuee A 5orn I EuS P ioec Area lneso ) ~~~~~~~~~bosaraSono A~~~ ~ ~~Ocu(ht UNDER Ms lo, Ch,treFUTURE CONSTRUCTION PROJECT EXISTING Pto Mutis Pete S 0 P,o)ect area

Lfas Tablas Transaaission lines:s K ______~~~~~~~~~~~~~~230kV or more Moa'a ______~~~~~~~~~~~~~115kV ( CUB IBA ' 35 kv or less r h CREP Generating plants HAITI 0 Thermal

CEBACOCI l1m Hydro BELIZE JAMAICA Substations r o * HONDuRAS ~~~~~.HONDURAS ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0cC AItA /' *- * SmallHydro Plants j C O LOMB IHA COLOMBIA SALVADOR-NICARAGUA PAtv^DoR NANICARAGuA g-Rivers Province Boundaries / CTANIA M VA( - - InternationaolEoundaries COSTARICA .IIOMFTERS CVENEZUELA0 20 40 6Q 80 l00

COLOMBIA ., ., .,,.,.- o NI. ' MILLS 1O 20 7 40 50 60 82- 81. 80' 79- 7B. JULY199 POWER SYSTEM AND BO I POTENTIALAREAS FOR ELECTRIFICATION BOLIVIA -220 \ 220 _ R Sn B R A Z I LI

PedroJuan Cabolle o

Paso ' A co >Bafreta / ' ARGENTINA

Loreto 0/ 0 ~~~~~~~~~Capitan.Badloo

S1laladiVO5< G 9taw !URUGUAY \ Concepci'n .. ... 0 C, I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~540 . 7 .. .fen

'4 ~~~~~~~~~~~~~~~~~Salto 240 5 deE Iu,~.1 4

I . 0 ~~~~~~~~~~~Corpus Cristi

VolendariJ . . 0 Catuete

Rosof .GraP-fizar(do Acuwno Curuguaty K__ ° *~.5 Cur_gu N

Fri&slnnd °~~_ i' -,A 25de° 4 Dicien'bye .. lerir I '.

Juan de Mena 0 tU Mbutuy

Aroyos y Esteros I -hu

S.5Anton io toessnerp _ _o ~e

Z~~~~~/ Pouqrguo. S s r M kuse Troche( ve/ It a/li aI / ' / Carapegua. LaYbtyYma [VNItrrca.. /-. l ColmenaO Itope° \ 0 NumtyI o;Il S to

26° 2 . ~ , Valle Apua° \o° 0Taval 2° ,.'oVilla Obiva Macil } Caoazpa Lo. Mbuy apey BuenoS VstaJuqn Nepomuceno Her°d it alia Cerr laria .Alberdi Ctapucu o Ouyquyo . .. S/s.

V- \iWVallaFlorida - / ~~i:i' Guazucua .~~~~lurb \.At ~o eiMJ ~ eI*i

San Juan Bautistl Santa / Neembucu \Morot San Pedro del Parna

CaropeguSan Ignocl S. Francisco / Obligpi oSrPton Meza Colme- Santa Rosa IsIbCNurn't olan Q.

N.~~yar oCerra to Yb~~byr~l ras Crr

.. 600 mbu Valle ApuO 'Yby ,I 0 Santiag,ad . Hum~,a Oi . Lurnlem- (*Patfka OLaure . | .^ San O_> BVruente Mateauda

(g:.. d Ae' - -o-erit A* Coli,byreta

.. Mbr~gp,~...~ .*** 4.....c..e..

280 FT Agro-lIndustrial Plants San d Pr kv 5r80 L1 Potential Agro-Industrial Plants San in Bdel23kev er;rbucu p"J 37e.u-r

..Potential Areas for Electrification '"7'7tetot LI.8,';5J >F SubstatIons: Mezt" i.ir-.~ I.^ RIvers <3220 kv .',> j'.>*-h ;7.7 '2i2.-*

-*-* InternationalBoundaries S.nIa * 66Skv [!o . ;31; .' ,

o 50 100 to Roso \ t C Dams"a r .'': ", t,p

0 50 r 100I I 150I Jm ~~~~~~~~~~~~~~~~~~I' *'v'"'."'' ~ ~ ~~~~~''' Z7 i_ KLOMETERSC TUMBES P E RU / CENTRAL- NORTH INTERCONNECTEDSYSTEM V EXISTINGAND MAIN PROPOSEDHYDROPLANTS PECHOS.l sr. N.0, A' ? CARi-i AQEOK

CHAC APOYAS A

CHICLAYO - / CAJAMARCA K 0

TRUJ,Lt\tW A ~~~~~~BR AZIl TRUJILIC PUALLPAO

\ f ' f t2" '{'P-)PCAAC DEL 'APO

Chimbote dl- K j

Cosino HUARAZ , 0 Z HUANUCO -

CAHUAW,2

._'- C IF !Cr I)¢/t~X o CERRODf PAS(O

-CJAr ¢ , HuachoT

1 MOYOPAM HUINCO ,HW Y 4A"1.4 \ ' -, HUAMPANA/\ CCallao0U MATUCA aHUY LIMA LCAlAHUANCA - ANTAPO \

AYACLJCHC -- 9.LOAO

t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~iAC EYr 0

ABANrAY ( > I~~~~~~~~ Ao

PROPOSEDEXISTtNG Marc non

_e-e- 220 kV TransmissionLines I ( 132 kV TransmissionLines p m.- Hydro Plonts ) U -16' 0 * Substations f_.\i Power Sector Regions 4AREQUA

DeportmentBoundaries ) - \

-*- Internationol Boundaries Rivers r *.

0

lr'VETEP°, 50 '00 150 200

SD , 50 75 1\0 12\ SDs.pt co5" aoN90 6... ~'...7 ha

ST. LUCIA POWER SYSTEM

Cop Estate

,4,5 Grs Islet 0 Cas En Bcs 14'05

Gro let Monchy

Choc U ~~~~~~~~~~PowerStations MaruisTransmission Lines / ,f Marquis ~11 kv Circuit

Contries ±X f Bal$q.~ 80guis~ 6.6 kv Circuit B,oguis... 6.35 kv Circvit

M archand ;' iJ> - , Geothermal Potential 14OO ,Goodland, . Chasin ® Oil Transhipment Terminal

ofd Delosf/ Forestier6 0 Retail Gas Stations

0 Margot BreMajor Town MarigfX °8Dcirr8 _ _ *~~~~~~~~~~~~~~~~Airports rniere R,viere ~~Roods

Parish Boundaries Anse La Raye Baptste Vanar . Riche

-13' 55

CaJnaries K Mlillet St Joseph ennery

u - ' ~~~~~~~~~~~~Prohn< Anse Chostanet

SCa C ! t: k c(s ) Mahaut tSO~~~~~~~LaPointe

Malgretoute A, FondSt Jaccues' Maha_ 0 13'501P!al5al / < > , ffi . ., ; 13'50

l + * \ - *- *2 9,~~~~~Micoud

:alt-busi-Q\ - S 7

0 La ~~sPge&inte PorcE sata t i seGer LaPoint o7S\ ) reuil B5leue °7 8oor 604: ace USA Choiseu l ; . . rs

. ' \) S l Urbain45t

-13'45 Lob i3IACA-

-13MS 3 O 1 2 <~~~~~~~~~~~~ XfOUSelOUt CU3A p~~~~~~~~~~~~~DOMINICAN MILES0 1 2 3 H~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A.1REPUftuC JAMAICA KILOMETERS i ica 4 Veu Fart ^( hONDURAS GUiAOEianP

Wrra- by F.-s tv.h Wm IVL2r,WN - 8#Iv- Ih c re ot in rnades-d- a nncn.,r mIn t n-srn?o/ in rhe fmd 9S* end na Aiknlnbn INiARAGUA 51 VINCENT th ngiSinS o soyinnieonyrOs anb .ndr2o-ansn orncegLn,O Ds,n medo GRENADA on rbtI,s? O i 0o, 1eco7 I-h b-k. . 'S TRINIDADicPIs-n & 61 05 61.00 60'55' COSTAiC COIGMCEn VESEZAEiA maR.00 IBRD 17614 56110 61'05 NOVEMSER1983 ST.VINCENT AND THE GRENADINES FIRST POWERPROJECT MAIN POWER SYSTEM Fancy

eXISTING PROPOSED Owia a a Hydroelectric Plants A Diesel Engine Plants 33 kv Transmission Lines e S y 11kv TransmissionLines VlSange 6 Lv TransmissionLines

-13-20 1IZZ Main Towns Overlan 13'20

0 Townsand Villages VIllage Roads 4 Airport Orn - - - Parish Boundaries R Waterloo R chmond Beach '\8Wtro

Richmond Uj Basin Hole Langley Pork Chtaubelair °BO'Briens atecubelair ~~~~0Bequia Troumaki CI Georgeiown

Westwoodd Z Cumberlan fRseHall'i t Cumberlan - . Chester Collage

Spring'Village -- ' - - ByereVillage

13i15 alilabo 61-05' *SiS Grove , Soulh Rivers artons Cabver,/,d Aov / I 6130 o6ise Barrouallie

A . _ . - 8 \ P ST VINCENT Peter's Hope -n ouct

9 \~~~~~ ,' s SaLIns Souci8oua 3 Lovimans rt~~hUnion .lye0 SEBRUIA .3s0ye

MUSTIQUR -\ - ~ ~ 8 ,'/ Montreol reiggs edars enisn VemontCAON Layou rhmand CANOUAN

SXTAQ - sxS / p CARRIACOU S AGEORME ntagu Spring Clare Valley Cauncey GEORGE C Are Park Cc'lins Estat - -Pruvian Vale

Dauph3n10yr54 < Peruvian Vale 13-10- GRENADA -13-10 ~~~~~~~~~~~~~Dauphsin.' y ill 10i Edinboro" Mur srw

-Kingsown tubbs USelUSA

eathedrghton CLIA

o 1 2 3 4 5 Callioqua rospect I K,ivmir f A. - | - UAI o 2 3RPICCI HONDURAS GUADIftO' 00MIAAICA iv. .v..' AII v.*Mw byi. nt.vvvy 11i , m. am ea-,* ..' i. SIv.LUCIA rh- Ct,p. ha. fls. m y _ iy ma- n m iv, vi NICARAGCUA .s.r i.. .ViAiTh. Woa v.0kP.hv./Dv F-V. Cy.aan U,, $-, rn-Wrne a"u cr y -crU -IiV-vrr 1, - itANSAD A Lils AilO' 1 COStARICA COLOMBIA/ 6D°30' IBRD 19373 62_00 62'00 ~~~~~~~~~~~~~~~~~~~~~~~61'30'ot

) TOBAGO ELECTRI 1D0MMSSION TRANSMISSIONAND SUB-TRANSMISSION TOBAGO

- 132 kV Lines SCARfOIOUGOi

66 kV Lines MILFORDR4Y 33 kV Lines Area Boundary

------International Boundaries

11I00'.10 I

TOCO

NORTF'ERNAREA BOUNDARY RMNIA

'ii IYFA,idT2 .~ MATAVAL AET ic °APEA EASTE RN AREA SALEA

A ,6 Ak 1* A:c DC ANTMATUPtA VENEZUjEiA 14 74ORVANT VALENCIA, bt ,JAI CiiAMPSFLEUIR$

1,')i>V;-sa *l 4 t *A ASUGUST'NE "'PINTO RD

I 6PERCLbt* SANTA ROSA 8ARON' ARENA SANGREGRANDE SAN RAFAEt

CELAGUANASFASTTRINIDAD 03 * ,4 CHAGUANA$EAST

? ~~CENTRAL| tC!rWi sS lot,i .. OIJA AREA

20 MILES // *~~~~TABAQUiTE 010

|v UA / 10 20 30 KltOMETERS

"ai Viis L4 a - ir ,,or, | 94}'O)NY W' , j* RIC CLAROCa, hi iAYAiO ,i MAYARO Pe,eCCifViLi i -aiaijadLi tiid,~ bi t) ,

IOEINTF'6H0 SOUTHERN AREA L, PHIIL[IPNE /0CURA

51 MARYS - CU A J I jAIL ~C-C-PEROR,OUDdCAN PUL~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~tORiCO U S~~~~~~~~~~~~A GUAVAGULAYARE FEUi. j - . 4-'a. - ' PENALPOWER STATION JAMAICA

-. I~s~-& -. ita RB EDWARDSTRACE

- ~~~~~~TRiiS'DAO& TOBAG~O

i0~0O COOMA/ _ I?f A i

OCTOBER1985 -z ''-:\\\k\LHALa

I ,, .0 .

2 I

j O t 'w'- ' iE } . Y __ __P_\ IAItaAFA \ \..^ne.( \ ~~~~~~~B RA ZIL

4t \ < ''d,"A,/ '<"">N t n X I~~~~~~~~~~~~~~~N

<~~~~~~~~~~~~~~~~~~~~~~~~,u Nf, / <''.

A--l H

01 ______~~~~I- -.

-3-AR GE N T INA - @MONTEVIDEO .^dlFE

S-tRCA T--

-e- DlepOned Rood,

f'rhemaches89dme'tus,rt,, fortOb ' nthernadascuotThe Wofld Banknd he I'ternut,irnt,i pI~ ~ ~~~~~~~~~~~~~~~~~'o * P.'od 'snanhetoparatl 's he Wrd Ban.'OTTOr5the tttsrn9^t,''aJ F.1n.?nceC'srs's,aIm's anYs,uvrprrv f NiIzoa's' Chsrreel >~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~a TRGhr YEolegs, STSs 'hsoany tenorr, or airy rnrd'ssement or sCcr ,ta'sce 0) hUtShbouza.r.. mtre Dc( IOts,rsI'ca A ....posr-s > , 0 50 I00 1,50 290 4, R.e or D KlLObffTEPS [';?,oOr - ows Rns. de ...... ren~~K OMI 7 P11

0 ~. yi' Sc . , . 0h 72' 71' ;0. IBRO 1, 201 69' 12, W M-t' VENEZUELA 6'5' 6-

ELECTRIFICATION 12' PLAN 1986-1990 4, 1'q- EXISTINGTRANSMISSION .1 GUYANA ESQUEMA DE TRANSMISIONSYSTEM - 198.5- 1985 VENEZUELA COLOMBIA C- BRAZIL

613' F r.w,,z F A I C CJ N

P.. P,M,.,

J L C-- A P.1- S--- Caracas* Moi- TRINIDAD F' G.,d- ji*-, ow Okd. 4ULIA ------I ARA N'fi la 'y 67 71-?_ A 1\'AN

C-.. Ad,

f T,

V, AU ItLo C.,.,10 Oi L- L 4D 'PORTUGUESA

U A R)

0 V Vqm Md..MFRIDA ------""vv 91 N f 0,

0 B A R I N A S

10) o, .1.C41d el

A F t) A IR 67, W 65, 64' 0 CARACAS 63, 50 K. AREA IF 62, GURI AREA VOLTAGE:i TENSION f

765 kV 0 01 j_l f'/A 400 kV 6 115 kV Q 230 kV OT, r. P! Substation Sub-Estacion 0 43 100 e b,- pwvld 200 4, 1', b, T,Wk) &IM fr Kdoete,s State Boundariesitimites jh, C--', de Estados I lnterncitionctiBoundaries/Lfmites Internocioncites th, IW4 m, N, Th Ww W -0 I"

73; C U 41, 50 Km 72' C 0 7)' 70- ,j 69' AUGUST1985 68)