_,, r ° Document of 9 -
\\~~~~~~~~~~~~C- u O
%ic ,; Q w ..... -
... .. - [; v e 6 > --O -t7~~~~~~~~~~~~~~~ g "'9
Public Disclosure Authorized 13~~~~~~~~0
5 9F ' Doumn of( - ';0 K9
* t; ;3rs il ~~~~~~~~~~~~~~~~Report,No.698t-IN
L, I, 99* ) C STAFFAPPRA1AIS REPORT Cb Public Disclosure Authorized "9~~~~ 9' '' :' '. , 0kd
9; '0 ;R
S . '; ', ' 2p
t a~~~~~~~~~~~~~~~~~~~~~~~~~~~' ' 'j O '9 Public Disclosure Authorized
. - ~~~~~~~* 9 .j o -
9 ,;. .. ,,- o . ., o . ' V99?
0~~~~~~
lb / ntowws be ..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.their~ Ibtns'a W a,Mk~~~~~~~~~~~~~~~~~~~~~~~~- Public Disclosure Authorized
Asial C t De artment 1 (Lidig) .Q-9 Ti!ansport t ThSdoqxna~~refl tk4eodcddktrbM * adn"y be used thoiEeperkrsu wof . '~~ ~~ 'D lo~~~~ n- - - 'N >CURRENCYOEQUIVALENS; -.Z CurrencyUnit - Rupees(Rs) =il;Rs Y 1,00 - ,Paisa100 j U/g;.00....tS$1+O =/-' Rs 13.00- sR1.00 US$0.077L Rs 1,000,000 US$76,923 MEASURES AND EQUIVALEMtS 1 Cubic;,Meter * 1.31 cubic yar4'i(cuyd)Y 35.35 cubic feet (cu ft) 1 Hectare(ha) " 10,000 squarbAters - 2.471 acres (ac) 1 Ton (t) - 1 metric ton = 2,200.,lbs 1 Kilocalorie(kcal) - 3,97BritishThermal units,(BTU) 1 Kilovolt(kV) 1,ooo volts (V) 1 Kilovoltampere (kVA) = 1,000 volt-ampefes(VA) 1 Megawatt(MW) = 1,000kilowatts (kW) 1 millionwatts 1 Gigawatt-hour(GWh) = 1,000,000kilowatt-hours'- 1 Horse Power (HP) 0.75 kilowatts (W) ABBREVIATIONSAND ACRONYMS AG - AccountantGeneral of Karnataka' i' CAS - Commercial Accoutfifiig System CEA - CentralElectricity Authority CIF - Cost Insurance Freight cWC - Central Water Commission DOPW - Department.of-Forestsand Wildlife GO1 -, -Governwent of.Incdia, GOK - Governmentof Xarnataka GOKDF - Government of Karnataka Department of Forests IBRD. - InternationalBank for Reconstructionand Development ICB - InternationalCompetitive Bidding ' 'IDA - InternationalDevelopment Association KEB - KarnatakaElectricity Board KPC - Karnataka Power torporation LCB - Local CompetitiveBidding LIB - Limited InternationalBidding LRMC - Long Run MarginalCost MIS - ManagementInformation System NHPC - NationalHydro ElectricPower Corporation NPP - NationalPorr Plan P.. NTPC - NationalThermal Power Corporation 06M - Operation and Maintenance , PFC - Power Finance Corporation 7 POE - Panel of Experts REB - Regional Electricity Board REC - Rural ElectrificationCorporation SCADA - System Control and Data Acquisition SEB - State ElectricityBoard SOE - Statement of Expenditures SREB - SouthernRegibnal Electricity Board STRS - Sharavathi Tailrace Scheme Beneficiari,isfinancial year ends March 31 - -S D 'I, ...... FOROrFcIAL US ONLY INDIA SECONDKARNATAKA POWER PROJECT Loan and ProjectSummary Borrower: India,acting by its President. Beneficiaries: KarnatakaPower Corporation(KPC)s and KarnatakaEleptricity Board (KES). Amount: US$260million equivalent. Terms: Twentyyears, including a five-yeargrace period, at the-Bank'sstandard variable interest rate. OnlendingTerms: Governmentof. India (GOI) to Governmentof Karnataka (GOK): As part of Centralassistance to Karnataka for developmentprojects on terms and conditions applicableat the time. 0OK to KPC: About US$130million. Repaymentover twentyyears, including a five-yeargrace period,at GOK's interestrate applicableat tfi time for its lendingto KPC, but not less than ll.51 per unnum. CDK to KEB: About US$130million. Repaymentover twentyyears, includinga five-yeargrace period,at COK's interettrate applicableat the time for its lendingto KEB, but not less than ll.5S per annum. -I will bear the foreignexchange and interestrate risks. ProjectDescriptiont The Project'smain objectivesare to: (a) alleviate,the acute shortageof generatingcapacity in Karnatakaand the SouthernRegion by dovelopingthe 240 MW Sharavathi .Tailrace(STRS) Hydroelectric Station; (b) provide adequatetransmission capacity to evacuatepower from the STRS; (c) reduceenergy losses to economiclevels and improveservice quality by strengtheningthe State'stransmission grid and Bangalore'sdistribution system;(d) reducedistribution system capital and operatingcosts by introducingnew technologies;and (e) reduce indtallation,operation, and maittenance costsby providingmodern training,tools, and equipment. With the exceptionof those risks pertainingto the Talakalatle dam, there are no unusual technicalrisks associatedwith the project, Geologicalinvestigations have confirmedgood rock Th dAmumntbo' naM disutfibbnndmube md tin0*stns onb[a f pefoenue| ofttoflkdufblm Is ontntsmy t oftewibbeticsoud _houWodd Oankauc"w j ) -i i- -formationin the area of the hydroelectricscheme. The risks relatedto the Talakalaledam are being minimised by the use of specialisedconsultants. KPC and K83 ha*A sufficientstaff who ate experiencedin supervisingand executingactivities similar to those includedin the propose4.Project.Consultants will be used in all areas in which their in-houseexpertise is lac14king. 8etimatedCostt 1/ -Itim. . Loeal Foreign Total .. . ~--(U8$-- Million)- PreparatoryWorks - 6.0 0.1 6.1 Afforestation 0.5 - 0.5 Civil Works 43.7 8.6 52.3 t'owerMouse Equipment 36.3 53.4 89.7 Repairof Talakalale aum 7.4 3.0 10.4 TransmissionLines 51.9 9.4 61.3 Substations 29.2 27.9 57.1 DiltributionEquipment 31.9 20.5 52.4 InLtitutionalDevelopment 3.3 3.4 6.7 Engineeringand Administration 33.3 1.0 34.3 TotalBase Costs 243.5 127.3 370.8 PhysicalContingencies 20.2 9.6 29.8 Price Contingencies 43.2 23.3 66.5 Tot'alProject Cost 306.9 160;2 T467.1 Interestduring Construction: 68.0 35.0 103.0 Total FinancingRequirSments 374.9 195.2 570.1 1/ Includingabout WS$82million in taxes and duties. IBItD 10159.'O. .*2 0. 0,, ' 5 -i ii- ' ' F fi c,in,4,- PlanS, . " > - ^ .0 ' 2 ° - O ~~~~~~~(US,$Million) ?, 8outaeKP,i-- notat Loca39, ours 39.6 ~37.9192571 IUBD 82 101.0 ' 159.0 260.0 *1 Cm . i 5OK 159.8 36.2 ,. 196.0 -oKPCt ou 39.6b ;2 39.6 - KU r A 5 74.~5 - 374.9 195.2 "5S70.1 I- . istimatedDisbursements: , _USU Milli3n) la:nkFT ,FY89 F"Y90 FY91 FY92 FY93 FY94- FY95 FY96 FY97 - Annual 26.4 28.8 4.8.2 52.0 62.4 30.6 7.8 3.0 0.A C^umulative 26.4 55.2 103.4 155.4 217.8 248.4 256.2 259.23260.0 lateof ieturftZAbout. 12X. 21O' -0 ' '2 .0 O~~~~~''( O' .9~~~~~~~~ f ,.,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2 )~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I '21~~~~~~~~~~ INDIA SECONDKARNTAXA POWER PROJECT STAPPAPPRAISAL REPORT - Table of Contents Page No. I. SECTORALCONTEXT ...... CoaercialEnergy Resources ... ,...... 1 ElectricitySupply and Demand- 2 Organizationof the Powe 8ubsector ...... 3 Financeand Pricing*...... 4 PowerSubsector Plauning , ...... Managementand Operations ...... S5..... OOI's Strategyin the Power Subsector...... 6 Bank CroupStrategy in the PowerSubsector .8 a... Bank Group Participationo...... *...... 10 II. THE BENEFICIARIES 11 Introduion 1 ARANATAKEPOWER CORPORATION ...... 11 Background 11 Organization**e**,*.. 0* o ...... e* 12 P ersonneland Staffing ...... * * ...*...*.. .*o..... l i00* Planning*e-Oooooooo,0e9000006e;00-00..- ..-.... 12 ProjectImplementation ., 13 Operation and Maintenance 13 Training* ...... 0...... 13 KAINATAKAELECTRICITY BOARD o...... * ....0 14 ,'Background** ***** * o...... *...... 14 Organization oo*o*oo.oo.o0o0000******** 14 Personneland Staffing .*000o00000**o*0* 15 Planning 15 Operation and Maintenance ...... 16 Load Dispatch ...... 16 MaterialsManagement ...... 17 Training00000 0 .**..*... . 17 Thisreport which is basedon the findingsof an appraisalmission to India in May/June1987, was preparedby Messrs.A. Guletone(Power Engineer), W. Jones(Senior Economist), R. Sharma(Financial Analyst), COK. Teng (FinancialAnalyst), and A. Posada(Consulting Engineer). -I PaLe no III. THE PROJECT ...... , 17 ` ProjectSetting ...... e.g...... 17 ProjectObjectives *co.... oece.e- *c..e.e...ecgcoe ogce 19 ProjectDescription ...... 19 ProjectEngineering 20...... 0 ProjectImplementation and ConstructionSchedule 21 ProjectCosts 222...... ProjectFinancing ...... 25 Procurement 26 Disbursements 27 -ProjectOperation and Maintenance 28 ProjectMonitorini ... 28 ProjectRi$ks ...... o 29 WaterRights ... 29 Rese$tlementegece ... ge....eggggoc*c ecceo .* eg... ,**.g. 29 Forestryand EnvironmentalAspects ...... e...ge.. . 29 IV. FINANCE .. 31 KARPATAKAPCtOW CORPORATION ...... oe.. 31 Background ...... g 31 AccountingSystems and FinancialOrganization ..g...... e 32 Audit Arrangementsce..c..... 32 FixedAsset Accountingc3...... e...... e eec... 33 Insurancea ...... ,,...... ,, eec.... 33 AccountsReceivable ... , 33 Tariffse 33 PastFinancial Performance cccee..egggegg*og. ecoe.ce.o.c 34 PresentFinancial Position oee.egeeee.geee*egceoe.eoge7*ioooo 36 FinancialRecovery Program ... -c .cecoeog 37 ForecastInvestment and FinancingPlans ...... o 37 IncomeTaxes cg 39 ForecastFinancial Pev£ormance ' 39 FinancialReporting and Monitoring 40 KABNATAKAELECTRICITY BOARD geggo.g...... c.cc...... ;41 Background -, 41 AccountingSystems and FinancialOrganization ...... 41 Audit Arrangements ...... g 42 FixedAsset Accounting .... c.. ococegoc. oc.....cc.egg...... 43 Insurance ...... e . 44 Meteringand Billing.. occc.geo.cceoco.gccoc.ggeceeoeeoeoe 44 AccountsRecivable ceeee..geeeceeggegg..e.c.c...c...... c....e. 44 AccountsPayable .co..e...... *0 ...... c 45 Tariffs...... c....c..ccocccgecCcceecec.cgceegegc.eecccoe 46 Past PiinancialPerformance gocccocecogoggoo...... gg 46 PresentFinancial Position o.gcccecoeoceccgeececcececoeeee 48 FinancialRecovery Program .. e.... eec ...... 49 ForecastInvestment and Financing'Plans .4.....9...... 49 - \ -iii- PageNo. IncomeTaxes ...... e*,*e 50s6.....e.....e..... Forecast Financial Performance ...... 51 FinancialReporting and Monitoring 52 V. PROJECT JUSTIFICATION AND ECONOMICANALYSIS 53 Least Cost Analysis *eeeqee.oe..*e...... eOee...e*.*..eeeeee 53 Internal EconomicRate of Return.. o...... 53 Justification for Bank Involvement ...... 54 VI. AGREENTS AND RECOMMENDATIONSS.....**.. 55 Agreementsion ... . * ...... * ..... *...... ,...... 56 Recoammedation ..... '56 1.1 ElectricityGeneration, Sale and Patternof HoeogyConsumption - All India 1.2 Forecastof RegionalPower Demand,1987/18 - 1996/97 1.3 PreviousLoans and Creditsto IndianPower Sector(March 31, 1988) 2.1 Organization Chart of RC 2.2 OrganizationChart of US 3.1 DetailedProject Description 3.2 ConstructionSchedules If KED and KPC ProjectComponents 3.3 ProjectCost Estimates 3.4 Procurement Timetable 3.5 Schedule of Dank Disbursements 4.1 Method for Computationof Rate of Returnon Assets 4.2 KPC FinancialProjections 4.3 KEB FinancialProjections 5.1 InternalEconomic Rate of Return 6.1 Documentsand Data Availablein ProjectFile MAPS IBRD Nos. 20892 and 20893 INDIA 9EC0U KARtNATAKAPOEPROJCT STAFFAPPRAISAL REPOT I BECTORAL CONTEX Commercial Energy Resources 1.01 India'sprincipal cormmercial energy sources consist of coalp,oil, gas,hy4ro and nuclearenergy. Of thenonrenewable resources, coal is the most~~ reome' ~ - of thes most abundant. Reserves of thermal coal hive been estimated at slighttj more than 100 billiontons, of which25 billionare proven.Although reserves are ample,most of the coalproduced is of poorand deterioratingquality. The highash content,,up to 502j,increases the capitaland operatingcosts of power st:ati6rsand has exacerbated problems of coal transpoit. cOI'(, emphasison concentrateddevelopment of pitheadstations helps to alleviate transportproblems but willnoat reduce the othercosts associated with poor, coalquality. -Moreover, pithead&,development willbe constraiWiedby pollution problemsand-,the avai1ibility of waterfor coalwashing and condenser cooling. . 1.02~ GOI appointed the Fasal Commit,teeto examine the problems of coal ,supplyto thermalpower stations. Thiscommittee, which reported in October 1983,made several recommnendations affecting all aspectsof supply,,from coal preparationto raiwape =tions (para1.19)~ AlthoughGOI has' accqpted mostthee reomue~~n~f t,has beenslow to implmnttem owever, 00I has agreed, under tbeC~\Mining and Coal Quality'Improveomet Project (Loan 2796-IN),to provid:e"k Bankwith a timetablefor implementingthe FasalCommittee recommendati(' a by March 31, 1988. 1.03 Proven and probable petroleum reserves consist of approximately 510 Million tons of oil and 390 million too of naturalgas. Despiterecent increassesin domestic production, India still imports aWgut one-third of its oil -requirements,which in FY84cost'the equivalent of 402 of itsmerchandise exporti'.With domestic-bil production likely to startdeclining towards the ,endof the decade,exploration for new hydrocarbonresources is of the utumst importanceto India;in thiscontext, the Governmenthas recentlyinvited the internationaloil industryinto the higher~rilik, 'offshore areas to compleomet the exploration'beingundertaken by Inidia'stwo nationaloij, companies. At the same time,, it-has imolemented measures, including economic' pricing,--to restrain -the rapidly growing demand for oil products, particularlymiddle distillates. Nevertheless, the oil supply-demanddeficit is likelyto increaseagaibi over the mediumterm unless significant-new hydrocarbon resources are brought onstream quickly. In the meantime, some of the deficit can be reduced by substituting natural gas for liquid, petroleu'm produicts.In the pastg 001 has limited natural gas to premium markets such as petrochemicaliand fertilizer;however, delays in the constructionof gas infrastructurehave resultedin substantialvolumes of gas being flared. The Bank has encouragedGOO to developthe necessaryinfrastructure and to allow other economicuses of gas, includingpower generation. In response,GOI has begun to investin pipelinesand has recentlyrevised its policyon the use of gas for power generation(paras 1.19 and 1.20). 1.04 India'shydroelectric potential is equivalentto about 100,000Mv. At presentonly 14,000MW have been developed,4,700 MW are under construction,and a further23,000 MW are being studiedfor future development.The prominentrole of hydro generationin regionalleast-cost power developmentplans has led GOI to emphasizethe need to acceleratehydro development;however, progress has been slow due to the lack of financial resourcesin stateswith the greatesthydro potential,the time requiredto resolvewater rightsand environmentalissues, and the li"Atedtechnical resourcesavailable for the simultaneouspreparation of a large numberof hydro schemes. Attemptsto addressthese 'ssuesthrough increased central sectorinvolvement so far have met with limitedsuccess (para 1.10). 1.05 The country'suranium reserves could supporta modest nuclearprogram (8,000- lO,OOOMW), and thoriumreserves are enough-to support a large fast breederprogram. India currentlyhas 1,095 MW of nuclearpower generating capacity. ElectricitySupply and Demand 1.06 In PY86, gross power generationin the utilitiesamounted to approximately188,000 CWh from an installedcapacity of just over 50,000MS. Almost601 of generationcame from coal, 34Z from hydro,and the rest from oil, nuclearenergy, and naturalgas. Electricitylosses have risen slowly but steadilyover the last few years and now exceed261 of gross 3eneration. Station-use,now about 101 of gross generation,has increasedbecause of the deterioratingquality of coal, and systemlosses hate increasedbecause of the large expansionin very low load densityrural-ilectrification together with otherwiseinadequate investment in transmissionand distribution facilities.The Bank has stressedthe importanceof balancedinvestment to reduce systemlosses and improveservice quality and will continueto support transmissionand distributioninvestments designed to achievethese objectives. 1.07 Over the past two decades,the consumptionof electricityhas grown approximatelytwice as fast as total co"mercialenergy consumption and now accountsfor more than 301 of the latter. Even thoughthe power subsector receives20-25X of total publicinvestment, electricity supply has not kept pace with demandand shortageshave been prevalentthroughout the country. Total consumptionhas grown at an averageannual rate of 8Z, althoughthe increassngseverity-of power shortagesshows that potentialdemand has grown more rapidly. The CentralElectricity Authority (CEA) has forecastdemand growthin the range of 9-10X per year between1987/88 and 1996/97 -3- (Annex1.2). However,actual growth will continueto be constrainedby supplyt The principalsectoral shares of electricityconsumption are: industrial,571; agricultural,181; and domestic,131. Agriculture'sshare has grown steadilydue to increasedelectrical irrigation pumping made possibleby rural electrificationand encouragedby heavy subsidies. Organizationof the Power Subsector 1.08 The Centraland State Governmentsshate the responsibilityfor supplyingelectricity. The CentralGovernment controls the CIA, the National ThermalPower Corporation(NTPC), the NationalHydro-Ilectric Power Corporation(NHPC), and the Rural ElectrificationCorporation (REC). The Statescontrol the State ElectricityBoards (SEBs)and the Regional ElectricityBoards (REBs). CEA is part of the Departmentof Power within the Ministryof Energy. NTPC, NHPC and REC are publiccorporations reporting to the Departmentof Power. SEBeswere institutedunder the Electricity(Supply) - Act, 1948 (the Act), to promotethe developmentof the power subsectorand to regulateprivate licensees such as the Tata ElectricCompanies. Although SEBs are pupposedto be autonomousin managingtheir day-to-dayoperations, in-practicethey are under the controlof StateGovernments in such matters as capitalinvestment, tariffs, borrowings, pay scales,and personnel policies. As a fir.t step towardsnational integration, the SEBeshave been groupedinLto five regionalsystems, each coordinatedby an REB. The REB's coordinationresponsibilities include overhaul and maintenanceprograms, generationschedules, interstate power transfer'and concomitant.tariffs. 1.09 CIA was createdin 1950 to developa nationalpower policyand to coordinatethe variousagencies involved in supplyingelectricity. It is formallyresponsible for vettinginvestment proposals, providing consulting supportto BEBs,assisting in the integrationof supplysystems, training of personnel,and researchand devielopment.However, in its executionof these responsibilitiestCEA has been severelylimited by shortagesof skilledstaff and other resources. Withoutany directresponsibility for providing financetit has not been able to assumea very positiverole in the developmentof the subsector. In view of this, OOI formedthe Power Finance Corporation(PFC) in April 1986 to complementCEA in fosteringdevelopment of the subsector(para 1.20). 1.10 NTPC and NHPC were formedin 1975 to constructand operatelarge power stationsand-associated transmission facilities. They -sellbulk power to the SEBs for distribution.NTPC has had marked successsince the covuissioningof its first unit in 1982. At present,it contributesaround 101 of the country'sinstalled cepacity and is growingrapidly. In contrast, UHPC is still strugglingto establishaixole for itself;the statescontrol water rightsand are reluctantto relinquishhydro sites to the Center. This has promptedGOI to explorejoint ventureswith the statesto develophydro schemes. RBC was establishedin 1969 to coordinaterural electrificationand providefinancial and technicalexpertise for SEB schemes. Currently,REC finaces more than 701 of the total investmentin rural electrification.At -4- presentthere is no organisationresponsible for developinga national transmissiongrid, althoughGOI is contemplatingthe formationof such a body (para 1.21). iace nd Pricis 1.11 Althoughfour SEBs made a profitin FY84, the SEBs as a whole incurreda combinedloss in that year of approximatelyRs 11,230million (US$935million) exclusive of subsidies. This correspondsto a returnof 2.31 on historicallyvalued net fixed assetsbefore interest and -8.1% after interest. Internalcash generation,which was equivalentto only about 2.71 of capitalexpenditure in FY84, has been correspondinglypoor. Almostall SEB capitalexpenditure is financedby dett - primarilyloans from state governments.Recognizing the unsatisfactorystate of SEB finances,GOI has amendedthe Act in April 1985 to requireeach SEB to earn an annualreturn of at least 3% on its historicallyvalued net fixed assetsafter meeting operatingexpenses, taxes, depreciation and interest(GOI does-notaccept the principleof revaluationof assets). The Bank supportsthis initiativeby OI and has changedthe form of its financialcovenant to reflectthis. Althoughthe Bank'sconventional method of calculationmakes the return specifiedin the Act, correspondingin some cases to 4 to 6% on revalued assets,appears modest, this returnnevertheless represents a very - substantialimprovement on past performance.Many SEBs, particularlythose of the poorerstates, are experiencingconsiderable diffi-cultr .n' achieving this level of performance. 1.12 AlthoughMTPC's tariffs are approximatelyequal to its long-run marginalcosts (LRMC),there are deficienciesin its tariffstructure. GOI has agreedto commission,in close cooperatIonwith the Bank, a study to addressthese deficiencies. A recentanalysis of SEB tariffssuggests that they are now 60-702of LRMC, which representsa significantimprovement over their502 level in 1981. The averageratio will continueto improveas rates are increasedto achievethe stipulatedrate of return. However,the structureof tariffsremains unsatisfactory. -Tariffs frequently are excessivelycomplex, and very littlehas been done throughtariffs either to achieveload managementor, to selectivelytap consumers'willingpess to pay, which in many cases substantiallyexceeds existing tariff levels. Although they have espousedenergy prices "which reflect true costs"in both their Sixth and SeventhPlans, 001 and the statescontinue to resisteconomic pricingof poweras this conflictswith socialand agriculturalobjectives. 1.13 In lendingto individualSUB's, the Bank will continueto address state-specifi.programs to improveresource mobilization, for example,by developingfin ncialprograms capable at least of achievingthe rate of returnspecified in the Act. Where higherreturns are both feasibleand desirablethe Bank will press stategovernments to use their discretionunder the Act to requirea higherrate of return. As far as tariffstructure is concerned,the Bank will continueto requireSEBs to carry out tariffstudies wherevertariff structures appear to be badlydistorted, in order to impress -5- on the relevantauthorities the true costs of cross-subsidization.However, resistanceto economicpricing is likelyto inhibitprogress in pricing reform (para 1.22). Power SubsectorPlanning 1.14 The Bank has consistentlyencouraged GO to pursue integrated planningand coordinatedoperation of the country'selectricity supply systems. In response,GOI has prepareda set of regionalleast cost developmentplans, published as the NationalPower Plan (NPP) in 1983. Althoughthe NPP representsa good first step towardsintegrated planning, it needs furtherrefinement and regularupdating. In addition,such a plan can only lead to effectiveimprovements if complementedby measuresto bring about coordinatedsystem operation. At presentonly the NorthernRegion is approachingthis. GOI is encouragingstates to reach the necessary agreementson operatingparameters, but progressis likelytt, be slow as long as severepower shortagesexist. Even if coordinatedintra-regional operationis achieved,inter-regional tranafers will be very difficult withoutthe use of directcurrent facilities to overcomeproblems of frequencycontrol. The first such facility,a link betweenNorthern and WesternRegions, is a componentof the CentralPower TransmissionProject (Loan 2283-IN). A seconddirect current link has been includedin the Rihand Power TransmissionProject (Loan 2535-IN). To facilitatefurther integration OI has agreed,under the latterproject, to undertakea study of the long-termdevelopment of a nationaltransmission system and to examine relatedir-stitutional and commercialissues. 1415 Substantiaildisparities exist betweenthe long-termNPP, national five-yearplans, short-term budgets, and actualperformance. Due to a lack of resources,fewer projectshave been includedin the five-yearplans than in the NPP and, becauseadequate allowance was not made for escalationand delaysin projectimplementationt still fewerhave been executed. The resultingpower deficithas underminedrational planning by necessitatlng- raMid expansionof supplyrather than long-termleast-cost development. For example,shorter gestation thermal plants have be4n favoredat the expenseof lower cost hydro plants. Furthermore,the power deficithas prompted overinvestmentin captiveplant, a second-bestmeasure leading to excessive use of high value petroleumproducts for power generation. In additionto supporting001's effortsto increasethe supplyof power,the Bank will continueto stressto GOI the role of pricingand load managementin eliminatingthe deO.,cit,and the importanceof integratingplanning and pricing. Managementand Operations 1.16 In contrastto the good performanceof NTPC,the SEBs' managementand operationalcapabilities have not kept pace with the expansionof supply. In general,SEBs have adequatelyqualified engineering staff but lack experiencedpersonnel in financialplanning and control. The significantpay -6- differentialbetween the publicand privatesectors makes it difficultto recruitcompetent staff. ManagementpractiCeb are generallyoutmoded and inadequate.Accounts have been maintainedprincipally to track cash receipts and ezpenditures,and therehas been littleuse of accountinginformation for managerialpurposes. Consequently,the Bank has encouragedGOI to developa new uniformaccounting system for SEBs. After initialdelays, implementation is now proceeding.The Bank will continueto supportinstitutional developmentprograms through lending to individualSEBs. 1.17 The operationsof many SEBs are hamperedby the poor conditionof their plantand equipment.Factors that have contributedto the poor state of thermalplant include inadequate maintenance (in pixt due to capacity shortages),deficiencies in manufacture,lack of spares,and the poor quality of coal. In gener41,these problemshave been recognizedby the relevant authoritiesand correctivesteps are being taken. Distributionsystems have sufferedfrom inadequatemaintenance, overloading owing to inadequate investment,and deficienciesin the manufactureof equipment. Rehabilitation,particularly of thermalplant and distributionnetworks, appearsto be a very cost-affectiveway to improveefficiency and augment -system capacity. COX recentlyinitiated a rehabilitationprogram for thermal plant but is less able to effectimprovements in distribution.Whenever appropriate,the Bank will continueto includerehabilitation components under its loans. suI'sStrategy in the PowerSubsector 1.18 The Five-YearPlan constitutesthe only formalstatement of GOI's energyand power policies. Althoughthe formalizationof power policy,in particular.is made difficultby the constitutionalarrangement in which responsibilityfor power is sharedbetween central and state governments (para1.08), the SeventhPlan reflectsa broad consensusof the objectives of energyand powerpolicies,i The principalobjectives of GOI's energy policy are to: (a) developenergy supplies economically, at a rate commensuratewith growthin the economyand socialneeds; (b) substitute indigenousenergy resources for importedpetroleum wherever this is economicallyfeasible; and (c) encouragethe rationaland efficientuse of energyresources. Power policyis governedby essentiallythe same objectives,although GOI's short-termstrategy focuses on alleviatingthe acute powershortages suffered nationwide. Over the longerterm, achieving least-costdevelopment assumes greater importance. In additionto the initialsteps of its long-termstrategy, GOI's short-termstrategy provides for a numberof specificmeasures to addresspower shortages,including: (a) rehabilitatingthermal plant - a programinvolving some 30 plants is currentlybeing implemented(para 1.17); (b) acceleratingthe implementationof ongoingprojects - a recent reorganizationof Governmentcreated a new ministryspecifically to monitorand improvethe implementationof public sectorprojects; -7- (c) adoptinga more liberalattitude towards captive generation;- (d) permittingthe constructionof shortergestation gas or oil-fired plants(para 1.03); and (a) improvingth and reliability'ualitof coal suppliesby implementingthe majorityof the Fazal Committee'srecommendations (para1.02). 1.19 GOI's long-termstrategy requires a blend of policiesdesigned to addressinvestment, organizational, institutional and financial'issues. The amountef investmentavailable-to the power subsectoris limited. The SeventhPlan allocationis about half the sum soughtby the WorkingGroup on Power,a sum whichwas itselfinadequate to elimina'tepower shortages. L-ong-term investment priorities ares (a) acceleratedhydro development (para 1.04); (b) an increasedproportion of investmentin transmissionand distribution(para 1.06); :c' the formationof a nationalgrid (pira L1JO); 5d) coal beneficiationto improveboth qualityand homogeneity _I°-para1.01); (e) diversificati#sof the modes for transportingcoal used in power generation,such as the introductionof coastalshipping or slurry pipelines; (f) diversification.ofthe fuelsused for power generationsGOI now recognizes that gas-firedplant, especially combined cycle, has an economic role to.play in system development (para 1.03); and (g) steadygrowth in the. developumet of nuclear power (para 1.05). 1.20 Long-termorgatiizational/institutional. and financial issues are more controversialand OI stillneeds clearlydefined strategies in theseareas. 0G1recognizes the institutional and financial weakness of many of the SEBs but constitutional constraints limitthe rate at which it can bring about improvement.QOI is making use of the following measures: (a) increasingthe role of efficient(central sector) institutions, particularlyNTPC Cpara1.10); -8- (b) implementing a uniform system of commercial accounting for all SUBs (para 1.16); (c) requiring,through recent amendment of the Act, that SUBs earn a rate of returnof not less than 3X after all expensesand interest(par. 1.11),a significantlymore stringentfinancial requirement than hithertQgand (d) givingmore favorabletreotment to privatesector proposals for power generation,particularly When such developmentscan be demonstrated to be mobilizingresources that would not otherwisebe availableto the publicsector. In addition,as noted,GOT has formedthe PPC as a financialintermediary to serve the subsector(para 1.09). It is expectedt)'at funds lent by the PFC would be attractiveto SUBs because,at least in part, they would be additionalto agreedplan outlays. However,loans would be subjectto conditionalitydesigned to improvethe efficiencyand financialstrength of beneficiaries. - 1.21 GOI recognizesthat the developmentand operationof an integrated nationalgrid will be difficultto achievewith the presentorganization of thi subsector. Therefore,GOI is contemplatingthe Vormationof a separate body with responsibilityfor the grid (para 1.10). Nevertheless,many coamercialand institutionalproblems remain. As yet, GOI has no strategy for solvingthem, although,under the Rihand Power TransmissionProject, it has acknowledgedthat these problems of grid development need to be addressed (para 1.14). Bank Group Strategyin th! Power Subsector 1.22 The Bank supportsthe elementsof 0 's strategyidentified above but believes that, while these elements are desirable in themselves, they do not address all of the serious deficiencies in the subsector. Additional efforts are needed particularly to address problems in the areas of planning, pricing/load managementtinstitutional development, and finance. The prevalent nature of these problems suggests that a sector-wide approach should be sought. However, the comparative autonomy of the states/SUBs from the Center makes it difficult to implement such an approach. Except for the introduction of unifolrm comercial accounting in SUB.,few improvements at the state level have been realized throughumbrella projects coordinated by C&Aor REC, primarily because these institutions lack control over SUBs. Consequently, the BaAkis changing the mix of its lending away from umbrella projects towards a moredirect involvement with individual SBes,where state-specific programs can be designedto address areas of deficiency. Initial experience with individual SUBssuggests that the prospects for improvement are encouraging. Pricing and finance are the most problemtic -9- areas (para 1.11)and the Bank has indicatedthat it will only work with those snBs that are preparedto improvetheir financialperformance. 1.23 In parallelwith lendingto individualSEBs, the Bank proposes continuedsupport for expansionof the centralsector, beceise: (a) increasedreliance of the stateson centralsector gen%uation appears to be the best way to encouragedecisions at the state level consistentwith the nationalinterest; and (b) a highernroportion of total generationprovided at economictariffs by the centralsector will help to improvetariff levels for final consumers. The difficultiesthat GOI has experiencedin bringing hydro projectsinto the centralsector mean that NTPC will continueto be the main vehiclefor the Bank'ssupport of the centralsector. NTPC'srecord to date is impressive.However, it is still far from being a mature institution and, owing to its rapid-development,it will continueto face problemsin which it could benefitfrom Bank support. In the wider context,the Bank believesthat an institutionalreview of the power subsectoris neededand shouldinclude a reviewof the organizationand functionsof CEA. The Bank also will pursuewith GOI the possibilityof Bank-financedtechnical assistanceto improveCEA's capabilities. 1.24 In gdditionto identifyingnew aspectsof GOI's strategy,it is appropriatethat the Bank also focus on existingaspects of the strategy where it can do the most to catalyzeprogress. In this respect,the Bank has identifiedthe following: (a) integrationof power supplyincluding the formationof the national grid -- the Bank will continueto supportprojects such as the Centraland RihandPower Transmission Projects; the latterwill allow the Bank to be activelyinvolved in studiesof long-termtransmission development(para 1.14); (b) acceleratedhydro development- by broadeninglending operations to encompassindividual SEBs, the Bank is able to supporthydro projects and, where Bank funds are a crucialsupplement to plan outlays,it is able to bring about developmentsthat might not otherwisetake place; (c) elementsof strategythat involveconcerted action by organizations, both insideand outsidethe power subsector- the Bank can \ coordinateits own lendingoperations within the differentsubsectors in order to improveintersectoral cooperation. Priority examples concernimprovements in coal qualityand transportation,and the use of naturalgas for power generation;and - (d) supportof privatesector power generation. -10- Bank Croup Participation 1.25 The Bank has made 25 loans (US$4.384billion) and 17 IDA Credits (US$2.424billion) for Indianpower projects(Annex 1.3). Twenty-one projectshave been completed:15 for generation,4 for transmission,and 2 for rural electrification.Projects currently under implementationincludet 11 for generation,2 of which are hydro, 2 for transmission,1 for rural electrification,and the Kerala,Karnataka and NationalCapital Phase I Projectswhich includea mix of generation,transmission and distribution. With respectto NTPC projects,the first-phaseprojects at Singrauli,Korba, and Ramagundamwere commissionedon or ahead of scheduleand the plantshave been operatingat high efficiency.The second-phaseextensions at these sites,the Farakka,the RihandPower Transmission,and the CombinedCycle Projectstare proceedingsatisfactorily. The Third Rural Electrification Project,which has sufferedsignificant procurement problems, is about three years behindschedule. 1.26 Throughits participationin the sectorin recentyears, the Bank has contributedto the creationand developmentof NTPC which,with 2,500 MW commissionedin the last five years and around3,000 NW under construction, is becominga large and efficientgenerating company by international standards.The Bank also has assistedone of the few privateutilities in the country,the Tata ElectricCompanies, in supportingthe constructionof the first 500-MWthermal unit in India at Trombay. Similarly,the Bank promoted-- throughtwo transmissionprojects, the Centraland RihandPower TransmissionProjects - the introductionof high voltage,direct current technology.In additionto contributingin a substantiveway to the supply of power,the projectsfinanced by the Bank also have promotedthe developmentin India of a large publicand privatemanufacturing sector for the constructionof the requiredequipment (e.g. steam generators, turbo-generators,auxiliary and transmissionequipment). While these industriesstill lack the qualityand efficiencyof theirinternational counterparts,the competitionresulting from internationalcompetitive biddingwill encouragefurther improvements in the qualityand technology employedin the equipmentthey produce. 1.27 A performanceaudit conduczedin 1980 for the SecondPower TransmissionProject (Credit 242-IN) concluded that the projectsucceeded in helpingthe nine beneficiarySEBs extendtheir transmissionsystems to meet theirgrowing power requirements.Utilization of generatingcapacity in these SEBs exceededthe appraisalforecast. However,the audit highlighted the difficultiesof effectinginstitutional improvements in the absenceof a closeworking relationship between the Bank and beneficiarySEBs. -Another performanceaudit, conducted in 1985 for the First and SecondRural ElectrificationProjects (Credits 572-IN and 911-IN),concluded that India's rural electrificationprogram, of which the projectswere a part, has helped the countryto achievefood self-sufficiency,alleviate poverty, and transformthe rural economy. In commonwith the previousaudit, this one -11- also emphasizedthat the Bank shoulddevote resources to deal with the 8BBs individually. II. THE BENEFICIARISS Introduction 2.01 Two entitiesare responsiblefor electricityoperations in the State of Karnatakatthe Karnataka Powar Corporation (KPC) and the Karnataka ElectricityBoard (KEB). Both are whollyowned by the Governmentof Karnataka (GOK) and reportto the State'sMinistry of Power. KPC is responsiblefor generationand KEB is responsiblefor transmissionand distribution.The Ministryof Power is responsiblefor overallpolicy. To ensurecoordination between the two entitiesin policyimplementation, KEB's Chairmanis a directorof KPC, and KPC's NanagingDirector is a member of KED's Board of Management. KCARNATAKAPOWER CORPORATION Background 2.02 The KarnatakaPower Corporationwas incorporatedin 1971 as a limited companyunder the CompaniesAct.l/ KPC, being the successorto COK's Hydro Electric Construction Departmenet received the assets-;under construction of the Sharavathi Hydroelectric Project. Initially the Corporation was conceived as a constructioncompany, but its activitieshave expandedinto the operation and maintenance of hydro stations,as well as into the construction, operation and maintenance of thermal stations. The Corporation curreptly owns and operates six power stations,with a total generating capacity of 2,309 MS, of which 420 MS is thermal. KPC's investment program from 1988/89 to 1996/97(Annex 4.2) comprises2,522 MW of hydroelectric capacity and 840 MVof thermal capacity. The Companies Act stipulates,inter aliat that the affairsof the Corporationbe governedby a Board of Directors. The Chief Minist2rof Karnatakais the Chairmanof Board with the Ministerof Power as the Vice-Chairman.Thereforep although KPC is not a statutorybodyt 00Kexerts considerable influence on the Corporation's affairs,particularly in the areas of tariffs,planning, and capital expenditure. 1/ Originallyknown as Mysore Power Corpooation,it was renamedin 1974 following the change in the State'i name from Mysore to Karnataka. ,; -12- Organization 2.03 KPC's organizationchart is presentedin Annex 2.1. Its Board of Directorscurrently consists of 17 directorstincluding the Chairmanand Vice-Chairman.Day-to-day management is the responsibilityof the Managing Director,usually a seniorofficer from the IndianAdministrative Service, who servesfull-time. He is supportedby two other full-timedirectors, the FinanceDirector and the TechnicalDirector. Two of GOK's secretariesare part-timeDirectors, as is KEB's Chairman. The remainingnine part-time directorsare technicalexperts: five are membersof the ElectricalCommittee and four are membersof the Civil Committee. The Committecs,which together form the Joint Committee,advise the ManagingDirector and other membersof the Board on technicalmatters relating to their respectivedisciplines. Personneland Staffing 2.04 Personnelmanagement is the responsibilityof the CompanySecretary who reportsto the ManagingDirector. KPC's personnelat the time of formationconsisted of staff deputedfrom KEB and COK's PublicWorks Departmentin additionto the erstwhileHydro ElectricConstruction Department'sstaff. KPC's staffing as of October31, 1987, is given in Table 2.1. Table 2.1: KPC's Staffing No. of Personnel X Executives 187 2 Supervisors 1,743 22 workmen 6,055 76 7,985 100 Of the 7,985persons employed by KPC, 4,975 (621) were engagedin constructionactivities, 1,998 (251) in operationand maintenance,and 1,012 (132) in other activities.Most of the deputedstaff have stayedon a permanentbasis. Furtherrecruitment, dictated by growthin hydropower activities,was predominantlyat juniorlevels. In contrast,KPC's recent expansioninto thermalgeneration has necessitatedrecruitment of senior staff. This has been complementedby the extensiveuse of consultantsand re-training of staff. Planning 2.05 KPC's planningactivities are of three main types:generation expansionplanning to meet the demandthat is forecastjointly by CMA and KES; projectplanning from prefeasibilitythrough commissioning and operationand maintenanceplanning for the existinggenerating plants. In view of the sub&tautialincrease in its activities,and the resulting -13- complexitiesin planning,the Corporationis introducingcomputevs to aid in some of its planningactivities. Specificatinshave been preparedfor the necessaryhardware, software, and technicalassistance which are financed under the first KarnatakaPower Project. ProjectImplementation 2.06 KPC has satisfactoryproject implementation capabilities, particularlyfor hydroelectricprojects. The Corporationdesigns its hydroelectricprojects in-house and has recentlyacquired the same capabilitiesfor thermalpower. plants with the help of Tata Consulting Engineers. KPC uses its own personnelto erect and commission electra-mechanicalequipment but uses contractorsfor major civil works. The Corporationis guided in the implementationof its hydroelectricprojects by a Panel of Experts(POE) which currentlyincludes experts in dam design,.,dam safetygeology, foundation engineering, and hydroelectricplant operation. Opirationand Maintenance 2.07 KPC has competentpersonnel to operateand maintainits hydro stationsand its methodsand proceduresfor operationand maintenanceof individualhydro schemesare generallysatisfactory. The Corporation, however,lacks experiencein the modernmethods available for optimizingthe operationof tomplexinterdependent hydro schemessuch as therewill be in the Kalinadibasin. Therefore,in order to optimizeplant operationin the RalinadiHydro Power Complex,a computerizedGeneration Management System is being financedunder the first KarnatakaPower Project. KPC has prepared a shortlistof consultingfirms to specifythe systemand is finalizingthe terms of reference. As yet, KPC also lacks sufficientexperience in operationand maintenanceof thermalplants since RaichurThermal Power Stationis its first thermalpower station. Accordingly,the Corporation has hired Tata ConsultingEngineers to assistin the operationof the Raichur units and to train KPC personnelin operationand maintenanceof thermal plant. Training 2.08 KPC has establishedextensive in-house training for hydroelectric plant operationsand maintenancebut also makes regularuse of external trainingboth in India and abroad. Trainingin thermalplant operationand maintenanceis entirelyexternal and has includedextensive use of oOI's Power EngineersTraining Institute, deputation to other SEBesoperating thermalplants and to manufacturer'sfacilities, and use of the 500 MM simulatorowned by the Tata ElectricCompanies. In addition,Tata Power Projects'Chief TrainingOfficer is on a two-yeardeputation to KPC. In contrastwith technicaltraining, the trainingof financestaff is inadequate,particularly, in relationto financialreporting, monitoring, and planning. To supportKPC's effortsto keep abreastof technicaldevelopments and to rectifythe deficienciesin financialtraining, the Bank is financing -14- "an appropriatetraining program as a componentof the firstKarnataka Power Project. XPC has preparedthe trainingprogram and wilt shortlyinvite proposalsfrom institutionsto implementit. KARNATAKAELECTRICITY BOARD Background 2.09 The Karnataka llectricityBoard was formedin 1957 in accordancewith the provisionsof the Electricity(Supply) Act, 1948. After KPC was formed in 1971, KEB'smain functionhas been to transmitand distributeelectricity generatedeither by KPC or importedfrom other Statesand centrally-opArated power stations. However,the Board also owns and operatesfour smallhydro electricgenerating stations with a total capacityof 2% MW. KEB's rYstem comprisesabout 17,000km of transmissionlines and aliout279,000 km of distributionlines. As of August31, 1987,KEB servedabout 4.1 million connectionscomprising: 2.4 milliondomestitc; 0.4 millioncommercial; 0.2 millionindustrial; 0.5 millionpublic lighting; and 0.6 million agricultural.Legally, KEB is an autonomousentity reporting to QOK's Ministryof Power. However,although KEB enjoysconsiderable independence in managingits day-to-dayaffairsp GOK stronglyinfluences decisions relating to pricing,planning, capital expenditure, and staffing. Organization 2.10 KU'1s Board of Managementis reiponsiblefor establishinginternal policies. The Board of Managementconsists of sevenofficial memberst three of whom - the Chairman,Member (Finance),and ember (Technical) serve full time. The four part-timemembers comprise three secretariesto GOX and the ManagingDirector of KPC. Additionally,'theleader of KEB's largest labourunion is an unofficialmember. Sevenchief engineers,the Chief- VigilanceOfficer, the Directorof Research,and the FinancialAdviser/Chief AccountsOfficer are responsiblefor implementingthe Boardpolicies. Four of the chief engineersare zonal chief engineersin chargeof operation, maintenanceand capitalworks (exceptrural electrification)in the four zones into which the State is divided.-h!eChief Engineer (Rural Electrification)is responsiblefor the preparationand implementationof ruralelectrification schemes throughout the State. The remainingtwo chief engineersare the ChiefEngineer Electricity (General) And the ChiefEngineer MaterialsManagement,* 2.11 In 1984, KE was reorganizedto: (a)-facilitatedecentralized decisionmaking; (b) improvecontrol of criticalareas of opr2oation,e.g. materialsmanagement; and (c) broadenthe responsibilitiesof the zonal chief engineersto includecapital works (priorto reorganization,their responsibilitieswere limitedto operationand maintenance).The Btard's revisedorganization chait is presentedin Annex 2.2. Althoughthe benefits of the reorganizationare yet to be fully realize4psome progresscan be …~~ ~~ ~ ~ ~ ~~ ~ ~~ ~ ~~ ~ ~ -15- seen,particularly in materialsmanagement. However, one impedimentto realizingthe full benefitsof reorganizationand the recentlyintroduced commercialaccounting system is the absenceof a modernmanagement informationsystem (MIS). An M18, tailoredto the new organizational structure,is neededto establishappropriate reporting arrangements and streamlineinformation flows within the Board. COK agreed,during negotiationsof the first KarnatakaPower Project, to cause KEB to engage consultants,by June 30, 1988,to developand implementa modernManagement InformationSystem for the Board,in accordancewith termsof referenceand a timetablesatisfactory to the Bank. KEB is preparingthe termsof referencefor this study. Personr,.iland Staffing 2.12 KEB's staffingas of September30, 1987,distributed according to skills,is presentedin Table 2.2. Table 2.2: KEB8taffing NUN-of Employees % - Engineersand Professionals 2,503 6 Technicians 8,250 19 Clericaland TechnicalSupport 33 480 75 Total 44,233 100 Of the 44,233persons employed by the Board,about 36,000are regular employeesand the remainderare contractedfor particularconstruction works. In addition,-KEU employsabout 1,066casual labourers for constructionworks. eMB'sconsumer to employeeratio in September1987 stood at 93:1,which is at improvementover 79:1 in March 1985. This improvementis primarilyy attributableto the generalhiring freezeimposed by OK in 1981. Since 1981, the Board'sconsumer base has increasedat an averagerate of 300,000 per year. Althoughthe biring f-reezehAs been fairlystrict, the policyis flexibleenough to enableKEB to hire key personnelwhere necessary, particularlyin areasof finance,accounting and materialsmanagement. Planing 2.13 The ChiefEngineer Electricity (General) is responsiblefor 128's planning. The PlanningCell is headedby a superintendingengineer. KEB's planningactivities have primarilyfocussed on high voltagetransmission linesand substations.While transmissionplanning has been generally satisfactoryKEU would benefitfrom periodicspecialist-advice in the areas of protectionand reactivecompensation. The firstKarnataka Power Project includesconsulting services for this purpose. K(B'sdistribution planning, currentlycarried out manually,would benefitgreatly from the introduction of computerizedplanning techniques. This will be achievedunder the first---- ...... * -~~~~~~~~~~~~~~. -16- KarnatakaPower Projectthrough training provided by consultantsengaged to preparea DistributionMaster Plan for Bangaloreand to providesupervisory. assistancefiSr the preparationof similarplans for other citiesin Karnataka. KID has signeda contractwith BritishElectricity International" Ltd. of the UnitedKingdom to performthe DistributionPlanning Study. Operationand Maintenance 2.14 Eight O01 circles(two per zone) each'headedby a superintending engineerare responsiblefor operationand maintenance.KEB's operationand correctivemaintenance of its transmissionsystem are generallysatisfactory. It also has adequateprocedures for preventivemaintenance of its transmissionsystem. In contrast,only correctivemaintenance is done on the distributionsystem. Plannedpreventive maintenance is virtuallyimpossible since KEB's net*orkmaps and relateddata are incomplete.The first KarnatakaPower Projectincludes a componentto correctthe deficiencyby establishingor updatingtechnical data for the distributionsystem. 2.15 The productivityof KEB's work crews that build and maintainits transmissionand distributionsystems could be improvedconsiderably by introducingimproved work and materialsplanning along with moderntools and equipment. Improvementsin productivityand workmanshipare essentialto enableKEB to cppe,withthe additionalwork load of rehabilitatingits distributionsystem while avoidingexcessive staff increases. GOK agreed duringnegotiations to caust KEB to engagethe'services of an electric, utilityor consultingfirm by December31, 1988, under terms of reference satisfactoryto th' Bank, to reviewKEB's work planningand procedures, introducenew tools and equipment,'and train KEB's staff in their use. Load Dispatch 2.16 IA additionto operationof the transmissionand distribution networksK1B is also responsiblefor load dispatchin the State. In priroiiple,the SouthernRegion Electricity Board (SRED)is responsiblefor co,rdinatingload dispatchamong the Statesin the SouthernRegion (K4#rnataka,Andhra Pradesh,'Tamil Nadu and Kerala). However,none of the Statesnor the SREB has adequatefacilities to,9ptimie load dispatch. Dispatchcentres are old and ill-equippedand telemeteringand communication systemsare inadequate.Modern compatible load dispatchfacilities are neededto rectifythese deficienciesand facilitateintegrated operation of power stationsin the SouthernRegion. The BREB, with the technicalsupport of CIA, has recentlycompleted"a prefeasibility study for such facilities. This has been reviewedby the Bank and found satisfactory.The next step is a full designstudy. The Bank is financingconsulting se'rvices for the designstudy as part of the first Karnataka,PowerProject. CEA is preparing terms of referencefor the necessarrstudy., .. -17- Materials Management 2.17 Priorto reorganization,the ChiefEngineer, Electricity (General) was in chargeof materialsmanagement in additionto planning,commercial, 'andadministrative activities. Under this arrangementp materials management receivedinadequate attention, resulting in unsatisfactorymaterials supply whichin turnnecessitated field offices making local purchases. The proceduresfor making these purchases and the equipmentbought were often unsatisfactory.KEB's reorganization assigned responsibility for materials managementsto thenewly created position of ChiefEngineer, Electricity (MaterialsManagement and Purchases).This position is responsiblenot only for procurementbut aloefor the distributionof materials.The revised arrangementshave resulted in improvementsto boththe supplyand qualityof materials.More recently, KEB has startedto computerizeits inventory control,initially with transmission and distributionline materials, constitutingabout SOX of totalpurchases. In parallel,it has established codesfor all inventoryitems with a viewto totalcomputerization of inventorycontrol. Training 2.18 KBB trainsits lowerlevel staff, i.e. technicians, meter readers, operatorsetc., at its own trainingcenters. Two of the trainingcenters are situatedia Bangaloreand one eachin Hubli,Mangalore and Gulbarga. Engineersare trainedon entryto the Boardbut, prior to 1983,received almostno subsequenttraining. In 1983about 150 engineersattended a 5-week trainingprogram on technicalaspects of electricityutility management, sponsoredby GOI'sMinistry of Power,at the IndianInstitute of J4anagement, Bangalore. mEDis currently makingarrangements to repeatthis program on a regular basis. As noted (para 2.13), training in distribution planning will be provided by the consultants responsiblefor preparationof the Bangalore DistributionMaster Plan. Trainingof financialpersonnel has been inadequatebut thisshortcoming is beingaddressed under the firstKarnataka PowerProject. III. THE PROJECT Project Setting 3.01 Karnataka has no indigenous coal resources and so, apart from imports from the National Thermal Power Corporation or neighboring states, the supply- of power in the Statedepends primarily on the development of local hydroelectric resources. The potentially exploitable resources are sizable (equivalentto about7750 MN) and economicallyattractive but lengthyproject-.-: preparation,primarily caused by theneed to obtainenvironmental clearancfs, have left the State with chronic power shortages. -18- 3.02 The KarnatakaElectricity Board (KES) has tried to cope with thei shortagesby imposingrestrictions on the use of electricityby its large consumers. The level of these restrictionshas been increasingso that large consumersnow are allowedto use only 40Z of their contracteddemand and 80X of their historicalenergy consumption. Industries have reactedto these restrictionsby installi:igthair own generatingcapacity, usually in the form of dieselgenerators. Although industries should be permittedto investin captiveplants as a secondbest solution,the use of diesel-- a high value importedfuel -- is sn expensiveway to meet thcoState's power requirement. It thereforeis vital that developmentof the State'slow cost hydroelectric resourcesbe acceleratedto meet the power demand. In this regard,the SharavathiTailrace Scheme (STRS), a componentof the proposedProject, is particularlyattractive sinc6 it benefitsfrom the regulationprovided by upstreamreservoirs and involvesno resettlementand minimalsubmergence of forestland. 3.03 Karnatakais a large state with an area of 191,800sq. km. Over 1,900MW of its 2,300 MW of generatingcapacity is locatedin the southwest of the State,while its major demandcenters such as Bangaloreare locatedin the southeast,400 km away. Over 1,700 kW of transmissionlines at voltages of 220 kV, 66 kV and 33 kV form the transmissiongrid. About 279,000km of Al kV and 400/230volt distributionlines and 350 MVA of distribution transformerscomplete the link with the final consumers. Underinvestmentin both the transmissionand distributionnetworks has led to two problems:poor qualityelectrical service and high energylosses. Outagesare frequentand large voltagefluctuations are widespread.The outagesresult in a loss of production,and the voltagefluctuations impose a substantialcost on consumersin the form of equipmentdaAage and the expenseof installing voltagestabilizers. Energy losses, which averageabout 222 of net generation,also representa substantialcost to the economy. Althoughsome of these lossesare due to non-technicalproblems involving metering and billing,others are clearlytechnical in naiture.Technical losses could be reducedby at least 52, savingthe economyabout US$27 millionper year. 3.04 The first KarnatakaPower Projectis making it possiblefor the State to developthe secondstage of the Kalinadihydroelectric complex (270 MW) and reinforcepart of the transmissionnetwork by addinga 400 kV link from Kaiga in the northwestto Bangalorein the southeast,and about 300 km of 220 kV lines. The first projectalso includes:a study to determinean effectivetreatment for the leak in the Talakalaledam, upstreamof the StRS; a reactivecompensation study of the transmissionsystem; and preparationof, a 20-yeirdistribution master plan for a=ngalore,the largestcity in the State. The proposed Second Karnataka Power Projectis designedto complement the first one by assistingthe State in developingatu additional 240 MW of hydroelectricplant and repairingthe seriousand potentiallydangerous leak in the Talakalaledam, and, in parallel,increasing the emphasis on needed ihvestmentin transmissionand distribution.The transmissioncomponent is intendedto improvereliability and reduceenergy losses in the bulk power system;it is based on studiesrecently completed by KES. The distributiin -19- componentaddresqes needs in the Bangaloresystem that are so criticalthey are justifiedindependently of the long-termmaster plan about to be prepared. Distributionimprovements will help KEB avoid further deteriorationin service,especially in the commarcial2and industrialareas of the city, and preventdamage to equipment. In addition,the proposed SupervisoryControl and Data Acquisition(SCADA) system will allow KEB to respondmore quicklyto systemdisturbances, thereby reducing outage times. The Projectwill also introduceto Karnatakacost-effective new technologies such as mobiletransformers. 3.05 In terms of institutionaldevelopment, the first KarnatakaPower Projectfocuses primarily on the managementand financialperformance of KEB and KPC. The proposedSecond Project complements this initiativeby emphasizingimprovement of KEB'soperational efficiency. KEB's procedures, equipmentand tools for buildingand maintainingits transmissionand distributionsystems have not kept pace with moderndevelopments. The Projectincludes a provisionto obtainassistance from a modernelectric utilityto revisethese procedures,specify the necessarytools and equipment and train KEB personnelin their use. ProjectObjectives 3.06 The main objectivesof the proposedproject are tos (a) alleviatethe acute shortageof generatingcapacity in Karnatakaand the SouthernRegion by developing-theSTRS, a low cost indigenous hydroelectricresource; - (b) provideadequate transmission capacity to evacuatepower from the STR; (c) reduceenergy losses to economiclevels and improveservice quality by strengtheningthe State'stransmission grid and Bangalore's -' distributionsystem; (d) reducedistribution system capital and operatingcosts by introducing new technologies;and (e) reduceinstallation, operation and maintenancecosts by providing modern training,tools, and equipment. ProjectDescription 3.07 The main features,of the p'roposedproject, being implementedby KPC are: (a) constructionof the 240 MS SharavathiTailrace Hydroelectric Scheme (STRB)at Gersoppa; -20- (b) compensatoryafforestation associated with the STRS; and (c) repairof the Talakalaledam which is leakingand is locatedupstream of the STRS. 3.08 The main features,of' the proposedproject, being implementedby KEB are: (a) constructionof about 2SO km of doublecircuit 400 kV, 250 km of doubleand singlecircuit 220 kV transmissionlines, and 225 km of singlecircuit 220 kV transmissionlines on existingtowers, together with the associatedsubstations;--- (b) layingof about 6 km of 66 kV undergroundcable togetherwith constructonof the associatedsubstations; (c) reinforcementof the 11 kV primarydistribution grid in Bangalore; (d) implementationof a computerizeddistribution system control center; (e) acquisitionof tools and equipmentand trainingin their use for transmissionand distributionconstruction and maintenance;and (f) consultingservices for designand constructionsupervision of 400 kV - lines and substations. Annex 3.1 describa the project'scomponents in detail. ProjectEngineering 3.09 KPC has completedfinal designand has prepareddraft bid documents for the SharavathiTail!ace hydroelectric scheme. 3.10 The rock conditionsat thi site of the hydroeltctticscheme are good and do not presentunusual features beyond KPC's experienceand established competence.However, given the size of the Gersoppadam, KPC agreed,during negotiations,to retainthe servicesof the Panel of Xperts (POE),appointed under the first Karnatak4Power Projectforr,Kadra and"Kodasalli, to review the designof the STRE dam and monitorits construction,including any design modificationsduring construction. Since the integrity'ofthe STRS depends on the safetyof upstreamstructures, KPC agreedthat the terms of reference for the POw-willinclude a periodicreview of the safetyof, and therefore maintenanceprograms relating to, upstreamstructures.s 3.11 WKPCis investigatingthe internalconditions of the Talakalaledam to find an effectiveway of eliminatingthe leak throughthis 6E0m high masonry -21- structurewhich is a criticalcomponent of the Sharavathihydroelectric complex. The Corporation,under the first KarnatakaPower Project,has agreedto supplementits in-houseengineering capabilityby retainingthe servicesof a consultingfirm, with experiencein this highly specialized area of engineering.It has evaluatedproposals from three consultingfirms. [PC expectsto award a contractto the winningfirm by June 5, 1988 with a schedulethat will lead to the preparationof bid documentsfor the remedial work by June 30, 1989. Annex 3.1 gives more detailsof the leak throughthe Talakalaledam and the proposedremedial measures recozended from the preliminarydiagnostic work undertakento date. 3.12 KEB has completedfeasibility studies for the transmission components. It will completedetailed route surveysfor all of the lines by December1988, and bid documentsfor the steel transmissiontowers and other transmissionitems by March 1989. 3.13 KEB's staff has adequateexperience in the designand constructionof 220 kV transmissionlines and substations,but it does not have adequate experiencewith 400 kV facilities.To remedythis deficiency,KEB has agreed to employconsultants to designa&. superviseconstruction of the 400 kV facilities. 'I 3.14 [EB's staff has completedthe designand specificationof most of the distributionequipment. Exceptionsare items,such as mobiletransformers and gas-insulatedsubstations,.which are being introducedinto Karnatakafor the first time. KEB has agreedto amend the terms of referenceof British ElectricityInternational Ltd4t engagedunder the first KarnatakaPower Projectto preparea distributionmaster-plan for Bangalore,to-include the preparationof specificationsfor these items. About 501 of the bid documentsfor the distributionequipment have been completedand the remainderwill be completedby June 1988. The engineeringand detailed specificationof the proposedSupervisory Control and Data Acquisition (SCADA)system for Bangalore'sdistribution network are includedin the terms of referenceof the same consultants.Bid documentsfor this componentof the projectwill be completedby December31, 1988. ProjectImplementation and ConstructionSchedule 3.15 KPC will managethe constructionof the ST7R and the repairof the Talakalaledam. It has successfullycompleted more complexhydroelectric schemesthan the STRS, for example,KalinAdi Stage I. KPC's project organizationfor the proposedproject is similarto that used for Kalinadi stage I. The Bank is satisfiedthat [PC is capableof completingthe project accordingto the plannedimplementation schedule. 3.16 KPC will retainthe Centralwater Commission(CWC) to provide engineeringsupport during const'uction of the STRS. It has also agreedto hire a specialistconsulting firm to formulatea procedurefor repairingthe Talakalaledam and supervisethe remedialwork (para 3.11). The Bank has -22- clearedKCC's reportevaluating the consultants'proposals, for formulating and supervisinga repairprocedure for the Talakalaledam, and recommendinga contractaward. 3.17 Preparatorywork for the M$TRincluding access roads to quarriesand a temporaryconstruction camp was startedin October1987. The contractfor river diversionwas also awardedand work has startedin October1987. Work on the diversionwill be suspendedduring the monsoon. Very heavy rainfall at the projectsite duringthe monsoon-- about 4,400 mm 'n four months limitsconstruction work to the eightmonths per year betweenmonsoon seasons. 3.18 Work on the dam will begin in October1989 once the river has been diverted. Accordingto the detailedimplementation schedule given in Table I of Annex 3.2, the first generatingunit will be commissionedby April 1994 and the fourthand final unit by October1994. 3.19 The schedulefor the Talakalaledam repairwill be finalizedafter the field investigationsare completedand the scope of the remedialwork is betterdefined. Based on the availableinformation, it is anticipatedthat two stagesof groutingwill be required:an initialgrouting program lasting 6 to 8 monthsstarting in October1989, followedby regroutingone year later to eliminate any remainingseepage. To ensurethe safetyof the Talakalale dam beforesignificant construction is done on the STRS, duringnegotiations, KPC agreedto presentto the Bank a satisfactoryplan for repairingthe Talakalaledam and sign a contractwith a qualifiedfirm ,y October31, 1989 to performthe necessarywork. 3.20 KEB will managethe implementationof the transmissionand distributioncomponents of the proposedproject. The Bank is satisfiedthat KXi's projectorganization, with the help of consultants(paras 3.13 and 3.14),is adequateto completethe projectaccording to the proposedschedule (Table2, Annex 3.2). The work on the transmissionand distribution components,including the remainingdesign activities, will span a periodof about five years. All lines and substationswill be commissionedby June 1993. ProjectCosts 3.21 Table 3.1 shows a summaryof projectcosts. The total cost of the Projectincluding physical and price contingencies(but excludingabout US$82million equ^valent of taxesand duties)is US$385million equivalent, of which US$160million (421) represents the foreignexchange costs. Interestduring construction adds US$103million to the financingrequired. The Projectcosts are basedon March 1988 priceswhich are derivedfrom: (a) recentquotations for the civilworks of the Kadraand Kodasalli hydroelectricschemes of the Kalinadicomplex; (b) recentquotations for works and equipmentsimilar to other projectcomponents; and (c) manufacturers'proforma quotations. US$12 million(net of taxes and -23- duties)is allowedfor the repairof the Talakalaledam. This figure reflectsthe assumption,based on the adviceof a geotechnicalexpert, that the remedialaction will comprisia two-stagegrouting program. Designsfor the hydroelectricscheme and the distributioncomponents are in sufficient detailto providea reliablebasis for cost estimates. The cost of consultingservices is based on an estimatedtotal of 300 manmonthatof which about 40 manmonthsare expectedto be from expatriateexperts. Averagecosts for consultingservices are estimatedat US$14,000per expatriatemanmonth and US$2,000per-local manmonth inclusive of fees, overheadsand expenses. An allowanceis also made for non-timebased services. Engineeringand administrationis assumedto be 10 of base cost. 3.22 Physicalcontingencies of 10% on civil works and 400 kV transmission facilities,8X on transmissionfacilities of 200 kV and below and 5% on mechanicaland electricalequipment are allowed. These resultin overall physicalcontingencies of about 8% of the base cost. Physicalcontingencies for civilworks are in line with the degreeof knowledgeof site geology,the currentstatus of designand the relativelysimple nature of the works to be executed. Physicalcontingencies for the transmissionlines are consistent with the relativelyflat and open terrainthey will traverse. 3.23 Price contingencies,which amountto about 18% of the US$371million base cost plus physicalcontingencies, are based on annualinflation rates for local costsof 8X for 1988/89,7% for 1989/90and 6% thereafter,and annualinflation rates for foreigncosts of 4X. The exchangerate used for the base year 1988/89 is 13.0 Rupeesper US$. Interestduring construction is calculatedon the basis that loan financefor the Projectwill bear an interestrate of 11.5%per azuum,which is the currentinterest rate for QOK loans to KPC and KEB. Annex 3.3 presentsdetailed project cost estimates. -24- Table 3.1: ProjectCosts 8ua_ary -Rupess Million------US$ Hillion- "Inesetmentcosts Local, Foreign Total Local Foreign Total PreparatoryWorks 78 -1- 79 6.0 0.1 6.1 Afforestation 7 - 7 0.5 - 0.5 Civil Works 581 115 696 43.7 8.6 52.3 Turbine-Generat9rSets 320 620 940 24.0 46.6 70.6 MechanicalEquipment 79 78 157 5.9 5.9 11.8 ElectricalEquipment 73 8 8Z -5.5 0.6 6.1 Field and Office Equipmeat 11- 4 15 0.9 0.3 1.11 Repairof Talakalale DItY 98 . 41 139 7.4 3.0 10.4 TransmissionLines 400 kV 463 92 555 34.8 6.9 41.7 Substations400 kV 167 138 305 12.6 10.4 23.0 TransmissionLines 220 kV -O8 17, 225 15.6 1.2 16.8 Substations220 kV 197 207 404 - 14.8 15.6 30.4 Transmission Cables66 kV 20 17 37 1.5 1.3 2.8 Substations& Mobile Transformers66 kV 24 25 49 1.8 1.9 3.7 Distribution Equipment11 kV 409 256 665 30.7 19.2 49.9 Tools & Equipment 33 35 68 2.5 2.6 5.1 DistributionSCADA- system 17 18 35 1.2 1.3 2.5 Training - 7 7 - 0.5 0.5 Consultancy 11 4 15 0.8 0.3 1.1 Engineeringand Administration 443 13 456 33.3 1.0 34.3 Total Base Costs 3239 1696 4935 243.5 127.3 370.8 PhysicalContingencies 268 128 396 2ft.2 9.6 29.8 Price Contingencies 956 526 1482 43.2 23.3 66.5 Total ProjectCosts 4463 2350 6813 306.9 160.2 467.1 InterestDuring Construction 884 455 1339 68.0 35.0 103.0 Total FinancingRequired 5347 2805 8152 374.9 195.2 570.1 ur _m m, mam a -25- ProjectFinancing 3.24 The proposedBank loan of US$260million equivalent amounts to about 531 of the total projectcost, net of dutiesand taxes,and is equivalentto the estimatedforeign exchange component of US$160million plus US$100million of the local cost component. The loan will be to the Governmentof India (GOI) and GOI will onlendit to the Governmentof Karnataka(00K), which will in turn onlendapproximately US$130 million to KPC and US$130million to KEB. The onlendingterms from COI to GOK will be those applicableto Centralassistance to Karnatakafor developmentprojects. The onlending terms from GOK to KPC and KEB will be repaymentover twenty years, including a five-year grace period, at an interest rate of not less than 11.5% p.a. GOI will bear the exchangeand interestrate risks. The Projectfinancing plan is given in Table 3.2. GOI may considersuppliers' or exportcredits for the major equipmentpackages if a successfulbidder or otheragency provides an acceptablefinancing proposal for the lowest evaluatedbid in cash terms. In this event,the Bank would consider reallocatingthe funds no longerneeded for financingthese items to other items in the project,as appropriate. Table 3.2: ProjectFinancing Plan (US$ Millionequivalent) I of Component Source Local Foreign Total Financing (a) KPC Component: IBRD 47.0 83.0 130.0 46 KPC 39.6 - 39.6 14 0OK 91.4 22.6 114.0 40 Subtotal 178.0 105.6 283.6 100 (b) KED Component: IBRD 54.0 76.0 130.0 63 KU 74.5 - 74.5 - 26 GOK 68.4 13.6 82.0 29 Subtotal 196.9 89.6 286.5 100 Total Financed 374.9-- 195.2 570.1 ,_ 2=U=- Any cost overrunswill be financedinitially by GOK, but will ultimatelybe borne by KPC and/orKRB, as applicable. -26- Procurement 3.25 The procurementarrangements for the proposedproject are sumoarized in Table 3.3. All contractsfor civil works estimatedto cost tUS$5million or more, and all contractsfor the supplyof goods estimatedto cost US$200,000or more, will be procuredby internationalcompetitive bidding (ICB). Biddersfor civil works contractswill be prequalified.ICB contractsrepresent about 92% of all projectprocurement. The contractsfor civil works are expectedto attractbids from local firms;the contractsfor the supplyof goods are expectedto attractbids from firms manufacturing such goods in India. In these cases,the Bank'sstandard domestic preference provisionswill be appliedin the evaluationand comparisonof bids for contractsprocured by ICB. 3.26 Only US$ 28.1 millionworth of works,goods, and serviceswill not be procuredby ICB, consistingof: (a) US$ 25.1 millionof miscellaneouscivil works and switchyards,and officeand field equipmentwhich will be procuredby local competitivebidding (LCB) proceduresthat have been reviewedby the Bank and are consideredacceptable (foreign contractors and suppliers will not be precludedfrom participatingin LB); (b) US$0.8million of equipmentfor limitingfault currentat existing 11 kV substationswhich is proprietaryand will theseforebe procured by directcontracting; (c) Us$ 1.6 millionof trainingand consultingservices which will be procuredfollowing the Bank'sGuidelines for the Use of Consultants; and ^(d) US$ 0.6 millionof compensatoryafforestation which will consistof plantingand maintainingtrees on an area equivalentto that submergedby the projectand will be executedby GOKDF using Force Account,the most economicway of implementingthe compensatory afforestation. 3.27 Bank financingwill cover approximately30 packages. Vorks contracts worth US$5 millionor more and goods contractsworth US$1 millionor more, representingmore than 901 of the amountto be financedby the Bank, will be subjectto prior reviewby the Bank. The remainderwill be subjectto selectivepost-award review. -27- Table 3.3 Summaryof Procurement ranento (Us$Million) al Procurement Method ICB b/ LCB Other c/ Total STk8 Dam and Powert-4use 68.6 7.1 75.7 (44.6) (-) (44.6) Afforestation .. 0.6 0.6 (0.4) (0.4) Turbogenerators . 90.3 90*3 (59.6) (59.6) MechanicalEquipment 14.7- 14.7 (9-9) (9.9) ElectricalEquipment .. 7.2 0.5 - ' 7.7 (6.3) (?6)' (6.3) TalakalaleDam 13.6 13.6 (8.0) (8.0) TransmissionLines and 131.5 16.3 147.8 Substations (90.4) (-) (90.4) Distribution Equipment 68.2 __ 68.2 (36.9- ~(35.9) SCADA 3.2 -3.2 (2.1) (2.1) Field,Office, and Lab Equipment 0.2 1.2 1.4 (0.2) (-) . (0.21 Trainingand Consulting 1.6 1.6 * (1.6) (1.6)- Engineeringand Administration 42.3 42.3 (.) .(-)- 397.5 25.1 44.5 467.1 (258.0) (2.0) (260.0) at Amolptsinclude taxes an4 duties(US$82 million), and figuresin bracketsindicate the Bank-financedportion. b/ IncludingUS$0.8 million procured by directcontracting. e/ Others:Force accountand administrativeoverheads. Disbursements 3.28 Bank fundswill be disbursed against: (a) 100Zj1a-f the CIP (ex-factory if manufacturedin India)cost of equipmentand materialsprocured under ICB;. (b) 701 of the cost of repairof the Talakalaledam which will be subject to ICR; (c) 651 of the cost of other civil works4ubject. to ICR; (d) 80 'ofthe costs of compensatoryafforestation; and (d) 1001 of the total cost of . ] ,~~~~~~~~~ -28- consultants'and trainingservices. Disbursementwill be fully documented ezceptfor paymentsagainst civil works,training, equipment, materials, consultant,and compensatoryafforestation contracts each less than US$20o0000equivalent. Such disbursementswill made againststatements of expenditures(80Es), the documentationof which will not be sent to the Bank but will be retained,by KPC or KEB as appropriate,for inspectionby supervisionmissions. Standardprocedures for auditingSOBs will apply. To facilitatedisbursements a specialaccount will be establishedwith an authorisedallocation of US$20 million. Annex 3.5 shows the estimated disbursementschedule as derivedfrom the standard profilefor power projects in India. The closingdtte will be December31, 1996. ProjectOperation and Maintenance 3.29 The SharavathiTailrace Hydroelectric Scheme will form an integral part of the Sharavathihydroelectric complex. The total catchmentarea of .theSharavathi river upstreamof the STRS is about 2,143 sq km, including 151 sq km of free catchmentarea downstreamof the existingSharavathi hydroelectricstation. About 93Z of the annual inflowinto the STRS reservoiris fully regulatedupstream by the head reservoirat Linganmakki. This reservoirhas a live storageof 4,294 millioncubic meters,equivalent to 941 of the averageannual flow at that point in the river. The major hydroelectricstations in Karnatakaare designedfor annualload factorsin excessof 601. Other hydroelectricstations have limitedstorage capacity or power generationis conditionedby water use for irrigationpurposes. The Karnatakapower systemis thus short of peakingcapacity. The STRS is ideallysuited for peakingduty since the availableflow is fully regulated upstreamand headraceconduits would be extremelyshort (80 m). Optimization studieshave confirmedthat the optimuminstalled capacity should be 240 MS with an annualload, factor of 301. On the basis of operationstudies for the existinggenerating stations and reservoirson the Sharavathiriver and the proposedSTRS, annualfirm generationat Gersoppawill be 622 GWh with, on average,about 32.6 GWh per year of secondaryenergy. With respectto maintenanceof the STRS, KPC agreed,during negotiations, to send to the Rank, no later than one year beforethe expectedcompletion of the svtructures,details of its arrangementsfor inspectingand maintainingthe STRS dam and associatedstructures to ensure their continuedsafety. Given the dependenceof the dam on upstreamstructures the maintenanceprogram will also encompassthese. Proje,tMonitori-ng 3.30 Duringnegotiations, GOK agreedto cause KEB, and KPC agreedto send to the Bank quarterlyprogress reports covering physical works, consultants' work, costs,disbursements, and administrataiveaspects of the Project,the firstof which shouldbe for the quarterending December 31, 1988. In addition,KID and KPC agreedto prepareand send to the Bank annual financial,statistical, and administrativereports. -29- ProJectRisks 3.31 Exceptfor those risks pertainingto the Talakalaledamp there are no unusualtechnical risks associatedwith the Project. The risks relatedto the Talakalaledam are being minimizedby the use of specializedconsultants to investigateand supervisethe repairsneeded. There is a risk that those consultantswill find that more extensiverepairs are requiredthan the two-stagegrouting program currently envisaged. However,if *Nis occurs neitherthe rationalefor nor appropriatetiming of the STR, will be affecte4. The geologicaland geotechnicalinformation relating to the STRS is adequateand indicatesgood foundationconditions. KPC and KEB have sufficientstaff availableto carry out the work who are experiencedin supervisingand executingactivities similar to those of the project. Consultantswill be used in all areas in which their in-houseexpertise is lacking. Water Rights 3.32 The Sharavathiriver lies entirelywithin the State of Karnataka. GOK owns the water rightsand there are no pendingwater rightsdisputes that couldaffect the Project'sconstruction or operation. Resettlement 3.33 The STRS involvesno resettlementsince there are no human settlementsin the area that will be inundatedby the reservoir,or in the areas earmarkedfor compensatoryafforestation. This has been confirmedby a forestryconsultant who visitedall the sites and Bank staffwho visitedthe dam site. Furthermore,there is no indicationthat the residentsof the sparsesettlements surrounding the proposedreservoir are in any way using the area to be inundated. 3.34 One small Hindu templecontaining a Hero Stone is the only existing structurein the area to be inundated. KPC will relocatethe templeprior to completion of the dam. Forestry and EnvironmentalAspects 3.35 About 700 ha of forestwill be lost as a resultof the construction of projectinfrastructure and submergenceby the reservoir. The loss of forest,equivalent to about 3 ha per MW, is low for a hydroelectricproject. GOI's Departmentof Forestsand Wildlife(DOFW) has clearedthe STRS in accordancewith the Forest(Conservation) Act, 1980. The principalcondition of DOWF'sclearance is a requirement for compensatory afforestation and the necessary provision for this has been made in the proposedProject (pars 3.07). KPC intendsto eniage the services of the Governmentof Karnataka's Departmentof Forests(GOKDF) to performthe compensatoryafforestation. -30- 3.36 GOKDF has alreadyprepared a c.kmpensatoryafforestation plan complete with cost estimates. The Bank is satisfiedthat the plan, budget,and institutionalarrangements are adequateto cultivatean area of new forest plantationsequivalent to the area of forestlost"due to constructionof the STRS.1/The non-forestland requiredfor the compensatory'afforestationhas been transferredto GOKDF. Forestsplanted on this land will be protected under the Forest(Conservation) Act, 1980, of the Governmentof India. 3.37 Between50 and 70 ha of forestwill be lost as a resultof the constructionof the 35 km of transmissionline from the STES to Talaguppa. A relativelysmall loss is expectedfrom the constructionof the other transmissionlines which cross terrainlargely devoid of forest. Although DOFW clearancefor the STRS constitutes"in princlple"clearance for the associatedtransmission line from the STRS to Talaguppa,formal clearances for this and certainother lines includedin the proposedproject are still required. Duringnegotiations, GQK agreedto causeKEB to completethe detailedroute surveysand make formalapplications for~'DOFW 'clearance for-- all transmissionlines in the proposedproject requiring such clearance,by December31, 1988. J 3.38 The STRS has been clearedby GOI's Departmentof Savironmentand the lank is satisfiedthat the projectposes no seriousenvironmental problems. The dam site is locatedon the edge of the SharavathiValley Wildlife Sanctuaryand only about 100 hectaresof the area to be inundatedare within the wildlifesanctuary'. Furthermore, there is nothingto suggestthat the forestthat will be lost is more valuableas a wildlifehAbitat than the remainderof the forestthat will be left intact. The loss of 100 hectires of the sanctuarymay resultin the loss of about 0.25X of the wildlife however,exhaustive studies of the wildlifereserves in the WesternChats indicatethat rare speciesof wildlifesuch as panthers,tigers,bison and elephantsinhabit higher elevations, typically above 450 m. Therefore, submergence,which will be at an elevationof 55 m, will have no significant impacton these species,especially since there -isno naturalcorridor across the river in the projectarea. The compensatoryforests which are in small patcheswill be usefulprimarily in meetingbasic hulmn needs becausethey are locatednear villagesand will containa wide varietyof commercially valuabletree species. 3.39 Vectorand water borne diseasessuch as malaria,filaria and Japanese encephalitiscould potentiallyincrease in the area ofjthe STRS. KPC will take the appropriatepreventative and containmetntmeasures, one of which is to establisha healthunit at the constructionsite. There are-no industries 1/ COI s Department of Environment requires that forestland lost to a hydroelectric project be compensated by either: afforestation of an equivalentarea of non-forestland; or forestimprovement-on two times the area of degradedforest land. -31- or urban areas upstreamwith effluentsto affectthe qualityof the water in the STUS reservoir. 3.40 Forestcover aroundthe reservoiris good and GOR's watershed conservationmeasures are good since the entirewatershed is a forestand wildlifereserve. Erosionand sedimentationare not expectedto be problems given the thick forestcover over almostthe entirecatmhment area of the Sharavathiriver. 3.41 After the STRS reservoiris filled,there will be minimalchange from the presentriver flow conditionsdownstream. At presentthe water flow followsthe daily cycle of electticitydemand with a low flow at night,a higherflow duringthe day, and two peaks around7 AM and 7 PM. While the reservoiris being filled,there will be a reductionin the downstreamflow. KPC is preparinga diagramof downstreamflow as a functionof reservoir fillingand is performingan analysi;of the effectsof the interruptionof downstreamflow on the potintialfor salt water intrusion. This study will enebteKPC to fl l -th1reservairin a-way to_mtimize adverseenvironmental effects. GOK has formeda committee,chaired by the Chie"tSectaty,vtth-- the responsibilityof ensuringthat environmentalsafeguards are respected. -IV. ~FINANCE- KARNATAKAPOWER CORPORATION Background 4.01 The financialfiairs of KPC are governedprigaritr by the Companies Act-=of1956. However,as a generatingcompany, KPC is also subjectto the Electricity(Supply) Act of 1948. The Electricity(Supply) Act requires State ElectricityBoards to earn a minimum,returnof 31 after interest,and generatingcompanies to earn a minimumrett1rn as specifiedby the promoting governments.The Act also permitState Governmentsto legislatea higher -returnwhen appropriate.For KPC, a minimumreturn of 31 after interestis requiredby OOK. 4.02 From 1981t82to 1985/86,KPC expandedits capitalinvestment by about 401. 'Despiteits high growth,KPC was able to earn a satisfactoryrate of return(after interest), averaging 3.41 per annum for the period,on its eet fixed assets (Annex4.2). While this performanceweakened in 1986187,du_, primarilyto high interestcharges cnd the failureof the monsoon,it is forecastto recoverslightly in 1987/88as a resultof an averagetariff increaseof about 331. Assumingnormal hydrologic conditions' resulting inca more favorablehydro-thermal power mix, KPC's revenue-in1988/89 is expected to improveto a level sufficientto earn the requiredminimum-return of 3X after interest. Becausethe financialviability of both KEB and KPC is heavilydependent on the successor 'failureof the monsoon,KRB has agreedto includein a tariffstudy (para 4.09 and 4.32),being carriedout under the -32- first Karnataka Power Project (Loan 2827-IX), a component to examine the feasibility of establishing a Hydroelectric Stabilization fund. The study will investigatethe role of GOK, KPC and KEB, the sourcesfor creatingthe initialcash reserves,the tarifflevels required to supportthe fund, the methodof operation,and analysesof watershedhydrology. The following paragraphsreview the financesof KPC. Severalactions proposed under the first KarnatakaPower Projectto enableKPC, inter alia, to achievethe minimum3X rate of returnstipulated by COY in accordancewith the Electricity(Supply) Act are reaffirmedun 4er the proposedsecond Karnataka Power Project. - Accounting8ystems and FinancialOrganization 4.03 KPC's financedivision is headedby a FinanceDirector who is a seniormember of the IndianAudit and AccountsService. The daily management of the financialoperations is the responsibilityof the FinancialController and his supportingstaff. In general,KPC's financialpersonnel have adequatequalifications and experience.However, it lacks staff trainedin usmig computersoftware and hardwarefor financialreporting and pLanning. The largelymanual reporting and planning systems-result in delaysin fixed asset reconciliationand delayain effectinginternal financial controls. KPC practicesan accrual-based,double entry accountingsystem with well-definedeight-digft code of accountssuitable for computerization.In view of KPC's rapid growthin investmentsover the next decade,its manual financialreporting and planningsystems would no longeraccommodate its needs efficiently.The first KarnatakaPower Projectincludes financing for appropriatecomputer hardware and software,technical assistance, and - trainingto improveKPC's performancein financialreporting, monitoring, and planning. KPC is now in the processof-acquiring computer systems for its Teebnicaland FinanceDivisions. Audit Arrangements 4.04 InternalAudit. KPC's organizationincludes an internalaudit unit headedby a DeputyController of Accountsreporting to the Financial Director. The unit is responsiblefor auditingall divisiobsof the Corporation,and preparingmanuals detailing appropriate internal audit procedures.Recently, KPC strengthenedits internalaudit unit by having qualified,accounts personnel working full-time in the unit. Previously, the staff of the unit had several unrelated responsibilities. With full-time staff,and the computerizationof KPC's accounts,the unit is expected to operatemore effectivelyin the future. However,in view of KPC s rapid , expansionof its investmentprogram, additional staff will be needed in the near future. / 4.05 ExternalAudit. KPC's accountsare audited,in accordancewith guidelinesissued by the AccountantGeneral of India (AC), by Chartered.x Accountantsappointed by the CompanyLaw Board (constituted by GOI) for a periodof one year renewableup to three years. The audit is 2reviewedby -33- the AG. The guidelinesissued by the AG and the qualityof past auditsare satisfactory.The Corporationis requiredby the CompaniesAct to finalise its accountsand have them auditedwithin six monthsof the end of the financialyear. XPC has generillybeen able to adhereto this time schedule althoughminor delayshave arisen,particularly when new auditorshave been appointed. XPC agreed, under the first KarnatakaPower Project,to furnish its auditedaccounts together with the auditor'sand AG's reportsto the Bank withinseven months of the end of each financialyear. Its 1986/87accounts were auditedand sent to the'Bank on schedule. This agreementhas been repeatedfor the proposedLoan. PixedAsset Accounting 4.06 KPC maintainsits fixed asset registersat historical-cost, as requiredby GOI.. In order to reconcilefixed asset registerswith actual assets,RPC conductsa physicalverifiv4tion of fixed assetsonce every three years. However,the subsequentreconciliation and concomitantadjustment of accountshas frequentlytaken too long. The April 1983 physicalverification of fixed assetsexercise is nearingcompletion. The next physicalfixed assetsverification is scheduledfor 1989. KPC agreed,under the first KarnatakaPower Project,that its reconciliationand adjustmentof fixed asset accountswill in futurebe completedwithin six months of the date of the verification.The Bank will monitorKPC's efforts-inmaintaining proper fixed asset accountsduring implementation of the proposedloani; Insurance 4.07 During construction,KPC's assetsare insuredagainst risk of damage due to fire, explosion,etc. by contractors.After commissioning,-KPCholds insurancepolicies which conformto acceptedutility standards in India. AccountsReceivable 4.08 KPC bills its sole customer,ReB, monthlyand paymentis due within, 30 days. However,despite concerted eff arts by KPC, accountsreceivable at the end of 1986/87were Rs 1,237million representing about 8.1 months' sales. KBB has been unableto settleits bills promptlybecause it in turn, has been unableto collectreceivables owed by severalpublic sector - customers(para 4.30). As noted in para 4.30, throughthe adjustmentsof accountsamong GOK, KPC and KRB, KPC's receivablesis expectedto be cleared by 1989/90as agreedupon under the first KarnatakaPower Project. Tariffs 4.09 KPC's tariffs,like KID's,are de facto set by GOK in the lightof the recommendationsof a tariffcommittii which includesrepresentatives of GOK, XS, KPC, the Karnataka Chamber of Commerce & Industryand the Karnataka Consumers Association. KPC's-tariffs have generallybeen flat rate and have been set on a station specific basis to cover the relevant historic costs. -34- Historicallyttariffs have generallybeen such as to allow KPC to complywith GOK's directivein accordancewith the Electricity(Supply) Act although, prior to a recentamendmentt the financialperformance requirement was only looselyspecified. Average revenue has increasedfrom 7.1 paisa/kWhin 1980/81to an estimated33.9 paisa/kVhin 1987/88(Annex 4.2), representing an annualaverage increase of 26X, well above the prevailingrate of inflation.Compliance with the amendedElectricity (Supply) Act (para4.01) would increasethe averagetariff in constant1987 price terms from 24.6 paisa/kWhin 1988/89to 38.9 paisa/kWhin 1995/96,representing an increase of 582 in real terms. Although,in general,flat rate-tariffswill fail to give appropriateeconomi-c signals to KEB which is responsiblefor load dispatchtthe prevailingshortages of power in Karnatakaand the Southern Regionare such that this is unlikelyto be causingsignificant distortion currently.However, further study is necessaryto derivea tariffstructure which would reflectas closelyas possiblethe long run marginalcosts of electricitysupply. This exerciseis includedin the terms of referencefor the tariffstudy beingcarried out under the first KarnatakaPower Project (para4.32). Past FinancialPerformance 4.10 Detailedfinancial statements for 1982/83- 1986/87are presentedin Annex 4.2. Key dota and financialratios are summarizedin Table 4.1. -35.. TAb1i64.13 Sumary of KPC's Performance1982/83 - 1986/87 1982/83 1983/84 1984185 1985/86 1986/87 Generation(CMb) 7,326 7,316 7,927- 7,222 7,465 Sales of Blectricity(0Mb) 7,175 7,159 7,741 7,016 7t169 Ave. Revenue(Paisa/kWh) 9.9 14.0 f 15.8 17.8 25.4 Total Revenue(Rs M) 718 1,021 1,233 1,330 1,936 OperatingExpenses (Rs M) 405 544 >784 792 1,174 OperatingIncome (Rs M) 313 476 450 538 762 OperatingRatio (Z),' 56 53 64 60 61 Net.Income (Rs K) 1/ 56 192 155 205 19 Rat4 of Return as per Covenant2/ 1.6 4.9 3.8 5.2 0.3 Rate of Return BeforeInterest 3/ 8.3 11,8 11.2 9.3 9.3 Debt ServiceCoverage Ratio 0.6 1.7 1.7, 1.1 0.9 Contributionto Investment - Program(2) 4/ 4 13 5 '5 -26 1/ After interest. i=i 2/ Incomeafter interestas a percentof historicallyvalued net f assets.'2 - !MJIncoaie before interest as a percentof historicallyvalued average net fixed assets. 41 Based on 3-yearmoving average., Kc's finuancialperformance during the period19833/84-19,85/86, as measured by' -thereturn on assets(after int rest)',met 'therequirement 'of- the-Electricity - (Supply)Act '(para.4.01).In , 82/83,its returnon,assets (after interest) fell shortof the Act's requireaipntdue largelyto higheprinterest payments duringthe year. 11,1986/87,despite of a 431 increasein the average tariff,the-return on assets (afterinterest) was 'only0.3Z due to the interestcharged to operatippsduring that year. In the periodfrom' 19"2/83-1986/870KPC's contributionto investmentwas low'primarilyd4ie to: (i) a heavy debt serviceburden as a resultof the practiceof financing investment mostly through debt, exacerbated by GOK's conversionof it& loans (since 1984/85) from 30 -td 15, yearn repayment terms with no grace;and (ii) low tariff levels. To help alleviatethis situation,OOK agreed under the first KarnatakaPower Projecttot (i)'reduce the debt-service burden of KWPC by lengtbening the loan repayment terms of all new loans to KPC; and (ii) assist kPC ip recovering its receivables. Vith respectto the low tariff, under the Electricity(Supply) Act, GMK can legislate highertariff levels to enableKPC to earn the required31 rate of return(after interest). The Bank will monitorclosely COK's actionin rehabilitatingKPC's finances (pare4.12) and KPC's compliancewith the Bank'sfinancial covenants. -36- - PresentFinancial 4osition 4.11 KPC's BalanceSheet (budget)at the end of 1987/88is presentedin Annex 4.3 and summarizedin Table 4.2., 'Table4.2: KPC'- BalanceSheet (Budget),March 31,-1988- (Re Million) Assets Gross Fixed Assets 10,480 Less: AccumulatedDepreciation 1,975 Net Fixed Assets 8,505 Work-in-Progress 3,622 12,127 CurrentAssets 2,280 Lesst CurrentLiabilities 684 Net WorkingCapitalE 1,596 Total Assets 13,124 Equityand Liabilities wOK Equity 560 Generaland Other Reserves 931 - Total Equity 1,491 Long Term Debt 12 233 Total Equityand Liabilities 13,724 COK's equitycontribution of Rs 560 millionwas made at the tite of formation of the Corporationin 1071 (para2.02). SubsequentcapIta-expeaditure has been financedprimarily by debt, resiultingin an estimateddebt/equity ratio at the end of 1987/88of 89/11..The Corporation'sdebt servicecoverage is estimatedto improveto-1.5 in 1987/88,due to GOK's'action(pare 4.30) in offsettingaccounts among GOK, KPC and KEB in accordancewith an action ,programaimed at reducingKPC*s and K8B's receivables.Despite a 332 increasein the averagetariff, the Corporation'srate of return (after interest)in 1987/88is estimatedto be marginallybelow the 32 stipulatedby the glectricity (Supply) Act, due to the large Aount of.interest chatged to operations during the year. KPC's substantialdebt serviceand the seivere drought conditions experienced at the same time continuedto impede'its financialperformance, and overshadowedits achievementsin: (i) recovering its receivables'(para 4.30); (ii) revisingsignificantly its tarifflevels (pare 4.09); and (iii) str'engtheningits8institutional capabilities (para4.03-4.05). OOK has recently formed a comittee comprising high level representatives..from,OK KPC and KRB to addressthe weak fitancialpositions of KPC'andKU,# and to evaluate actions needed to rehabilitate the finances -37- of these electricutilities (pare 4.12). The Bank, under the proposed project,will monitorthe progressof the committee'swork. FinancialRecovery Program 4.12 [PC's and [E8's financialrecovery is dependenton: (i) the occurrenceof good monsoons;and (ii) the progressof the committeein rehabilitatingthe financesof both organizations.With respectto the impactof the drought,a HydroelectricStabilization Fund study has been includedas a componentof a tariffstudy (para4.02) to examinethe feasibilityof creatingfinancial reserves and using the reservesto safeguardthe financialperformances of KPC and KEB in the event of future droughts. The methodsof creatingand operatingthe Fund will be investigatedunder the study. Aside from the droughteffect, other financial difficultiesfaced by KPC and [RB isclude: ti) high debt/equityratio representinginadequate equity contributions and/or substantial debt burden as a resultof financinginvestments mainly by debt; (ii) excessivelyhigh receivablelevels; and (iii)COK loans with onerousrepayment terms, of 15 years with no grace,which are not commensuratewith the natureof the assets being financed. GOK has formeda tripartitecommittee involving high level representativesfrom GOK [PC and KEB to'address [PC's and KER's financial difficulties.To restore[PC's and KEB's financialposition, the committee is expectedto addressthe followingspecific issues and recommend appropriateactions to improvethem shortly:(i) level of accounts receivable;(ii) tarifflevels; (iii) loan repaymentterms on all newORK loans;(iv) equitycontribution through cash infusion;(v) equity contributionthrough conversion of outstandingGOK loans to equity; (vi) adjustmentof investmentprograms in line with availablefinancial resources;(vii) cost reductionmeasures; and (viii)recovery of losses incurredby KESBin rural electrification.Under the first KarnatakaPower Project,the entitieshave agreed to: (i) maintainacceptable levels of accountsreceivable; and (ii) revisethe tariffssufficiently to complywith the minimum3X rate of return(after interest). G0K has agreedto make all new loans to KPC and KEB with repaymentterms of 20 years including5 years' grace. The Bank will monitor closely the progress of the committee in addressing the needed financialrecovery program described above, and those actionsagreed under the first project,during supervision of the proposed project. The progressin restoringa strongfinancial position to both institutionsis expectedto be gradual,particularly in the case of KER whose financialperformance has been most severelyaffected by the recentdrought. ForecastInvestment and FinancingPlans 4.13 KPC's investmentplan for 1988/89to 1995/96is presentedin Annex 4.2. The Corporationplans to investabout Rs 32.9 billion (US$2,533million) over the period. About Rs 12.4 billion(US$950 million) will be investedin thermalcapacity and about Rs 20.5 billion (US$1,583million) in hydro capacity. -38- 4.14 KPC's financingplan for the investmentprogram is summarizedin Table 4.3. Table 4.3:t KPC's FinancingPlan 1988/89- 1995/96 Is Million US Million X Requirements CapitalInvestie,nt i/ 44,t37 3'395q 95 Working.Capital Increase 2 319 178 5 Total Requiremekts -3,573 TO7 8OuEces. Iroes InternalCash Generation i8,690 1,438 - fesss Debt Service 14.906 1,147 Net InternalCash Generation 3,78,4 291 t) 8 Borrowings, Proposed Loan 1,690 130 4 "OtherBorrowings. 3,24 ,, 286 - 8 auKLoan, 37258. 2 866 8Q0 TotalBorrowings- 4,62 3,282 92 Total Sources 46,456 3,573 100 1/ Includesinterest 4&ring construction. Duringthe investmentperiod from 1988/89to 1995/96J,the requiirementfor funds is estimatedat Rs 46,456million (US$3,573 million). Net internal cash generationis expectedto accountfor Rs 3,784million (US$291 million) representing82 of the total requirements.The remaining922, amountingto Rs 42,672million (US$3,282 million) will be financedthrough borrovings includingITCs9 shareof the proposedloan, Rs '1,690million(US$90 million). Given past experience,it is expected that the financing requirementswill be adequatelymet in a timelymannebf/ 4.15r 001 wilt be the recipientof the proposedloan of US$260million and will onlendthe proceedsto GOK as per standardterms of centralassistance to 'arnataka. GOK proposesto relendabout US$130million of the proceedsto the Corporationat its normalinterest rate for loans to KPC, which currently iV 11.51. 00I will carry the fooeignexchange, interest rate and-guarantee risks. The conclusionof a SubsidiaryLoan Agreementbetween 001 and KPC, satisfactoryto the Bank, specifying(a) an interestrate of not less than 11.5Zpa; and (b) a repaymentterm of 20 years including5 years'grace, will be a conditionof effectivenessof the proposedloan. . . . .~~~~~~~~~~~~~~ -39- IncomeTaxes 4.16 KPC is liable for income tax. However,its investmentprogram, the accelerateddepreciation allowed for tax purposes,and its past tax ldses are such that tax reliefis provided well beyondthe periodi)f the financial projections.A tax equalisation reserve is, therefore,not necessary. Forecast Financial Performance 4.17 KPC's projectedfinancial statements for the period 1988/89- 1995/96 and the assumptionson which these are based are presentedin Annex 4.2. The Corporation'sprojected operating results are summarizedin Table4.4. Table 4.4: KPC's PROJECTEDOPERATING RESULTS 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 Generation (GWh) 9940 12847 13554 14272 15218 16731 19197 22322 Sales (GMh) 9552 12472 13116 13766 14652 16058 18366 21276 Ave. Revenue (Paisa/kfh) 28.4 .29.1 30.7 32.2 38.1 43.4 56.6 67.7 Total Revenue(Rs M) 2775 3682 3945 4564 5742 7157 10584 14603 Operating Expenses(Rs M) 1858 2293 2786 3416 4235 5562 7892 11224 Operating Income (Re M) 917 1389 1160 1148 \1507 1596 2692 3379 Net Income (Rs M)1/ 253 362 344 341 419 502 838 1000 Rate of Return (Z) As per Covenant2/ 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Rate of Return(Z)- BeforeInterest3/ 9.0 11.8 10.0 51.0 9.9 7.2 8.8 8.4 Debt Service CoverageRatio 1.1. 1.7 1.3 1.2 1.f 1.2 1.3 1.2 Contri.to Invest- ment Program(X)4/ 5 37 8 2 3 0 8 5 1/ AfterInterest'. 2/ Incomeafter interestas a percentof historicallyvalued net fixed assets. 3/ Incomebefore interestas a percentof historicallyvalued average net fixedassets. : - +.-. 4/ Based on 3-year moving average. The financialproJections are based on normalhydrologic conditions, loan repayment terms of 20 years with 5 years' grace, and reflect tariff increases -40- drivenby compliancewith the requiredminimu 3Z rate of returnafter interest(para 4.01). The tariffincreases would be slightin the initial years and more significantin the lateryears of the period. Duringthe periodfrom 1988/89to 1995/96,it is estimatedthat KPC's tariffwould have to be increasedat an averageannual rate of 14X in currentterms, almost 81 in real terms given averageprojected inflation of about 6S per annum. 4.18 As noted in para 4.14, internalcash generationwill finance approximately81 of total capitalinvestment and workingcapital requirements.However, the time profileof internalcash generationneeds clarification.The relativelygood performancein 1989/90is partly attributableto GOIC'saction in offsettingoutstanding accounts between GOK, KPC and KEB. Contributionto investmentsin the otheryears are low due to the heavy investmenttaking place at that time (Annex4.2) and the impactof the heavydebt-service burden resulting from the practiceof financing investmentalmost exclusively through debt. As a consequence,the debt/equityratio is expectedto remainon the high side at about90/10 from 1988/89to 1995/96. The bulk of the debt is owed to COR. GOK is now looking into ways to correctthis situation(para 4.12). The Corporation'sprojected debt servicecoverage ratio is expectedto remainabowe 1.1, an improvement over the performanceof the most recentyears. FinancialReporting and Monitoring. 4.19 Under the first KarnatakaPower Project,KPC agreedto: (i) furnish to the Dankt by December31 of eath year, a reportof [PC's forecast operational and financial performance for the ensuing finaneial year, specifyingthe t4tionsthat will be takento strengthenthe financial positionof KPC to enableit to complywith the financialcovenants; (ii) furnishits auditedaccounts together with the auditor'sand AG's reportsto the Dank within sevenmonths of the end of each financialyear (para 4.05); and (iii)take all measuresnecessary including adjustment of tariffsto enableit to earn the minimumrate of return(after interest) of 31 per annum (para4.01). Duringnegotiations, an understandingwas reachedthat [PC would continueto send to the Bank its forecastoperational and financial performancefor the ensuingyear by December31 of each year. The other agreements have been repeated under the proposed loan. Under the proposed project, in addition to monitoring the above agreements and those under the firstKarnataka Power Project,the Bank will monitorclosely the progressof the committeein its effortsto rehabilitatethe financesof [PC and KID (para4.12). -41- KARNATARAELECTRICITY BOARD Background 4.20 KEB's financialactivities-are governed by the Electricity(Supply) Act of 1948. The Act stipulates,among other things,the classificationof assetsfor depreciationpurposes, audit proceduresand the financial performancecriterion for the Board. The Act requireselectricity entities to earn a minimumreturn of 3Z after interest(para 4.01). KEB was a profitableutility until 1984/85. However,KEB has incurredlosses from 1985/86owing to: the burdenof intereston accumulateddebt; losses incurredin rural electrification;its failureto increasetariffs sufficientlyin a periodof risingcosts; insufficient power availablefor sale; and high technicaland non-technicallosses. Consequently,under the first KarnatakaPower Project,several actions designed to complementK[E's own initiatives-- e.g. in the areas of accountingsystems (para 4.21), internalaudit (para4.23), tariffmeasures (para 4.32)-- were agreedupon with the Bank to assistthe Board'sfinancial recovery and thereafterimprove its financialviability. [SB has consistentlyincreased its tariffsst an averageannual rate of 131, the latestof which was in May 1987 with a 161 increase. In additionto the tariffincrease, the other actionssre currentlybeing implemented.However, the severityof the recentdrought in Karnatakabas furtherweakened the financialposition of [E8 and it is estimatedthat in 1987/88[EB's rate of returnof net fixed assetswill be at its lowestlevel for more than a decade. A periodof gradualfinancial recoveryis nee4ed,which will be closelymonitored under the proposed project,before KEB's financialposition is restored. To this effect,GOK recentlyestablished a committeethat will make recommendationson the actionsthat need to be taken to assistKEB's financialrecovery (para 4.12). To mitigatethe impactof futuredrought conditions on [EB's finances,a study to examinethe feasibilityof establishinga Hydroelectric stabilizationfund is being financedunder the first KarnatakaPower Project (para4.02). K[B'-sfinances are discussedin the followingparagraphs. AccountingSystems and FinancialOrganization 4.21 Under the Third Rural ElectrificationProject (Loan 2165-IN), GOI* agreedto cause all SEBs to introducea uniformCommercial Accounting System (CAS). Accordingly,KRB introducedthe CAS with the help of consultantsin 1984/85,thus makingit the first SEB in India to do so. The Board has had about three full years operationunder the CA8 and is currentlycompiling the accountsfor 1987/88in accordancewith the new system. Accountingstaff have been trainedin the operationof the CAS and a specialunit, headedby a DeputyController of Accounts,has been set up for troubleshooting. Initially,capitalization of interestduring construction had been optional under the CAS. However,GOI has issueda notificationto all 8EBE, including KEB, requiringcapitalization of interestduring construction. -42- 4.22 KID's financefunction is headedby the FinanceMember (para 2.10) who i; a seniormember of the IndianAudit and AccountsService. A Pinancial MAvisor/ChiefAccounts Officer is responsiblefor day-to-daymanagement of financialoperations; he, in turn, is assistedby threeControllers of Accounts,one each for the finance,accounts and commercialfunctions, and their supportingstaff. The qualificationsand experienceof KIB's financial staff is generallysatisfactory. However, in order to: (a) facilitatethe smoothoperation of the CAS; (b) defineclearly the dutiesand responsibilitiesof accountingand internalaudit staff;and (c) assistKEB in establishinga financialplanning unit, the Board needs an organization and managementstudy of its FinanceWing. Under the firstKarnataka Power Project,GOK agreedto cause KEB to engageconsu'ltants, by December31, 1987, to carryout this study. KIE subsequentlyrequested that this study also incorporatethe objectivesof the Fixed Asset AccountingStudy (para4.26) whichwas agreedto, largelybecause it involvedthe same financefunction. KEB is currentlyfinalizing the termsof referencefor the combined Organization/Managementand FixedAsset AccountingStudy, which is now expectedto get underwayby June 30, 1988. Audit Arrangements 4.23 InternalAudit. KEB has an internalaudit unit headedby a controllerof Accountswho reportsdirectly to the FinanceMember. The unit'sresponsibilities include audit of all monetarytransactions, I.e. capitalexpenditure, stores purchases, billing and collection,among others. The Board on its own initiativeengaged consultants to undertake a study of its internalaudit unit with a view to increasingits effectivenessand consisterdywith the CAB. The Bank has reviewedthe resultsand recommendatioasof the studyand foundthem to be satisfactory. The internalaudit will be quickerand more effectiveonce the implementation of the study'srecommendations, currently in progress,is completed. - 4.24 ExternalAudit. The Comptrollerand AuditorGeneral of India, throughhis representative,the AccountantGeneral of Karnataka(AG), is responsiblefor audit of U8B'saccounts. The AG has his staffresident at KUB, engagedin concurrentaudit of the Board'saccounts. The qualityof the audit is satisfactory.The Board is requiredby the Electricity(Supply) Act to finalizeits accountsand have them auditedwithin six months of the end of the financialyear. In the three years priorto 1981/82,KES had its accountsaudited in about eight to nine months. In 1981/82,however, owing primarilyto a disputeover workloadtnorms for clericalstaff, the finalizationof that year'saccounts was substantiallydelayed, resulting in delaysin finalizingthe accountsof subsequentyears. The disputeover workload norms has largelybeen resolvedand UEB has made substantial progressin clearingthe backlogas evidencedby the recentcompletion of the 1986/87audit. UEB is currentlypreparing the 1987/88accounts. 00K agreed, under the first KarnatakaPower Project, to causeUEB to furnishto the Bank its auditedaccounts, together with the Auditor'sReport within nine months -43- of the end of the financialyear under considerationbeginning with 1986/87. This covenanthas been repeatedfor the proposedLoan. 4.25 In its auditedacccunts for 1984/85,KEB was carryingabout-Re 690 millionin Inter-UnitAccounts, which were used to recordtransactions betweendivisions until the accountsdepartment received supporting documentation.However, incomplete documentation has been a chronicproblem and many items in this accountshould have been reallocatedto other accounts.*KEB estimatesthat about 60% of the assetsrecorded in the Inter-UnitAccount have been used in capitalworks and thereforeshould have been reallocatedto work-in-progressor gross fixed assets. The balanceis believedto have been used for operationand maintenancepurposes and hence shouldhave been expensed. KEB also carriesa 'StockIncidentals Account' which amountedto Rs 135 millionas of March 31, 1984. This accountwhich was used for maintenanceworks, needs to be expensedentirely. Accordingly, KEB has expensedabout Rs 51 z'illionin its accountsfor 1984/85leaving a balanceof Rs 84 millionin its Stock IncidentalsAccount as of March 31, 1985. The CAS requiresall transactionsto be chargeddirectly to the relevanthead of accounti.e., capitalworks, maintenance, etc. and thereforesuspense accounts would cease to exist once those mentionedabove are cleared. In order to ensuretheir promptclearance in a mannerwhich wi-llnot jeopardiseKEB's abilityto meet the rate of returnrequirement in futureyears (para4.20), the Board would need to make the necessary adjustmentsto its accountsfor 1985/86. GOK agreed,under the first KarnatakaPower Project,to cause KRE to (a) make an extraordinarywrite-off of the balanceof the Stock IncidentalsAccount as of March 31, 1985 in the accountsfor 1985/86;and (b) clear,by March 31, b988,the balanceof the Inter-UnitAccount as of March 31, 1985,by appropriatelycapitalizing or expensing-thecontents of the account. KEB has written-offthe balanceof Rs 84 millionin its Stock IncidentalsAccount, and to date has reducedthe Inter-UnitAccount to Rs 432 million. This amountis expectedto be cleared by 1988/89. FixedAsset Accounting 4.26 KEB's fixed asset registersreflect historical costs as requiredby COI. These registersdo not accuratelyreflect the value of the Board's plant an4 equipment. The value of some assetsis understatedowing to anomaliesin recording(para 4.27). Under the first KarnatakaPower Project, the Board agreedto undertakea FixedAsset Accountingstudy in order to establish:(a) a physicalinventory of its fixed assets;(b) appropriate depreciationcharges; and (c) fixed asset registersat the divisionlevel as requiredby the CAS. FollowingREB discussionswith the Bank, the Bank agreedthat the FixedAsset Accountingstudy be combinedwith the Organizationand Managementof'its Finance Wing (para4.22) since both studiesinvolved the financefunction. As noted in para 4.22, KRB is currentlyfinalizing the terms of referencefor the combinedstudy. -44- 4.27 -The investmentsand intangiblesaccownt on KBB's balancesheet previouslyincluded the cost of a submergeddam at the town of Hirebhaskar, the book value of which amountedto Rs 19 millionat the andof 1984/85. KID in line with an agreementunder the first KarnatakaPower Project,has now written-offthe book value of the submergeddam. Insurance 4.28 Duringconstruction KEB's assetsare insureda8ainst risk of damage due to fire, explosion,etc. by contractors.After commissioning,KEB holds insurancepolicies which conformto acceptableutility standards in India. Meteringand Billin; 4.29 KEI bills all of its consumersmonthly except those in the domestic -lightingand agriculturalcategories. Domestic lighting consumers are billed bionthly and agriculturalconsumers having irrigationpumps above 10 HP are billedquarterly. Those with pumps 10,.AP or below are billedsemi-annually. With the exceptionof this last group,'all of the:Board's consumers are supposedto be metered. However,o*ing partlyto the lack of adequatefunds, many new connectionsthat should,havehad meterswere made withoutthem. Furthermore,many faultymeters' were not replaced. Imputingbills for these connectionsis problematicand has resultedin a substantialunderstatement of revenue. To address-thi, the Board issueda directivethat, beginning April 1, 1985,no new coAsumers,who shouldbe metered,will be connected Y withouta meter. At tit time, to meter all connectionsthat shouldbe metered,t1e Board neededto procureand connectabout 400,000meters. Under the first Karnataka'PowerProject, GOK agreedto cause Ml, by March 31, - 1989: (a) to prpoidemeters for' all connectionsthat shoildbe inetered;and (b) reduce,an4"maintain thereafter the numberof 'faultymeters at less than 1.5X of the total numberof meteredconnections,, in accordancewith a monitorable"actionprogram acceptable to the Bank. Since 1985/86,in e*es of 430,000'metershave been connected,however as of December1987, th% numberof faultymeters exceeded 2.2X of the totalnumber of metei`e4<- connections.The Bank will continueto monitorKEB's effortsin rducing the numberof faultymeters-to-less than 1.5ZTofmetered connections/4 AccountsReceivable 4.30 In collectingagainst electricity bills, KUS is aidedby the Karn=takaElectricity Board (Recoveryof dues) Act, 1976, a progressivepiece of legislationthat enablesKEI to collectoverdue ariears owed to it with the assistanceof COK revenueofficials who ensure'.tecovery by attachmentof, the propertyof defauLters,iif necessary. The Board'scollection procedures requireSall bills are to be paid within15 daye of their presentationwith defaultingcone-mers paying penalties at the,Fate of 22 per month. Chronic defaultersare being systematicallydisconnected and reconnectioncharges are high. With such measures,KmB has been able to maintaingood controlof accountsreceivale from the vast majorityof its consumers. However, -45- collectionfrom the publicsector has stillproved problematic. A limited numberof publicsector debtors accounted for more than 752 of the Boards receivablesof Rs 1,142 million,representing 3.1 months'sales as of March 31, 1987. The principaldebtors includet 5 COX industrial undertakings,10 water supplyboardst 12 municipalitiesand severalvillage authorities.A consequenceof thesearrears is that RI8Bhas itselfbeen unableto pay all that it owes to KPC (paras4.08 and 4.31). GOK agreed, under the firstKarnataka Power Project,to cause the Board to collect,by April 1, 1990, its accountsreceivable from its principaldebtors, as of March 31, 1987, in accordancewith a monitorableaction program satisfactory to the Bank. Duringnegotiations, GOK presenteda satisfactoryaction programinvolving the adjustmentsof aecountsamong GNK, KPC and KEB which would reduceKEB's receivablesfrom its principaldebtors (as of March 31, i987),and in turn would reduceKPC's receivablesby 1989/90. However,a siseableamount of KEB's receivablesfrom its non-principaldebtors, totallingapproximately Rs. 709 millionremain in arrears. A high level committeehas recentlybeen formedto addressthe receivablessituation of both KEB and KPC (para4.12). The Bank will monitorKEB's receivable situationand the progressof the committeeclosely under the proposed project. To preventKEB from accumulatingexcessive new receivables,OK also agreed,under the first KarnatakaPower Project,to cause KEB to maintainits accountsreceivable with respectto sales after March 31, 1987, at no more than the equivalentof the preceding2 months'sales. This covenant has been repeatedunder the proposedLoan. Accounts Payable 4.31 KIB'saccounts payable to KPC, its main supplierof electricity, stoodat Rs 1,237million as of March 31, 1987,almost exactly equal to the amountowed to the Board by its principaldebtors (para 4.30). As noted in para 4.30, GOK has takenaction to resolvethe receivablesof both KPC and KEB, and clear the amountoutstanding as of March 31, 1987 by 1989/90. In order to ensurethat the problemof high accountspayable on accountof electricitypurchases from KPC, the converseof which are KPC's receivables, does not re-occur(para 4.08), GOK also agreedto causeKEB to: (a) open a revolvingletter of credittbeginning October 1, 1981, in favourof KPC for an amountequivalent to one month'sestimated purchases from KPC; and (b) clear any sums owed to KPC with respectto sales after April 1, 1987, not coveredby the letterof credit,within 30 days. KEB has made progress in openinga revolvingletter of creditwhich now coversabout 801 of the estimatedelectricity purchases from KPC. However,due to the severityof the droughtwhich createda significantrevenue shortfall, and increasedcost of power purchasesfrom neighboringstates, KEB is currentlyunable to pay off the 201 shortfallnot coveredby the letterof creditwithin the 30 days timeframe.The proposedproject will closelymonitor KEB's effortsin reducingits arrears. -46- Tariff, 4.32 As noted in para 4.09,KEB's tariffsare in effectset bt GOK in the light of recommendationsof a TariffCommittee. Includinga 271 tariff increasein October1985 and a 161 increasein May 1987,KEB's averagetariff has increasedfrom 27.1 paisa/kWhin 1980/81to an estimated63.2 paisa/kMh in 1987/88,an averageannual increase of 131. Compliancewith the Electricity(Supply) Act would raise the averagetariff in constantprice terms to over 88 paisa/kWhby 1995/96. Althoughthe trend in the average tariffis encouraging,structural aspects of KEB's tariffsalso need to be considered.A tariffstudy is needed,in particular,-to: (a) analysethe economiccosts (marginalcosts) of supplyto the various differentclasses of consumer,taking into accouttthe voltageof supplyand the particulartime profilesof demand; (b) examinethPe case for introducingtime-of-day tariffs for large consumersiparticularly industrial -- at present,industrial consumersface energyand demandcharges which are independentof time of use; and (c) examinetariff/metering arrangements for agriculturalconsumers includinga cost benefitanalysis of the policywhereby consumers with pumps of 10 HP or less are offeredunmetered supplies (para4.29). A study to addressthese and other issuesis to be carriedoat under the first KarnatakaPower Project. As noted in para 4.09,a study is also required'of KPC's tariffsand, given the interdependencyof the tariff studiesand the Hydro StabilizationFund studies(para 4.02), they will be combinedinto one study. A steeringgroup includingrepresentatives from KEB, KPC and OOKwill be formedto overseethe combinedstudy. Past FinancialPerformance 4.33 KIB's financialstatements for the years 1981/82- 1986/87are given in Annex 4.3 and summarizedin Table-4.5. -47- Table4.51 KIB's SummaEryOperating Results 1981/82 - 1986/87 i 1981/82 1982/83 1983/84 1984/85 1985/861986/87 EnergyAvailable to 7,896 8,112 8,234 9,213 9,619 1,015 KEB (GVh) Losses(X) 21.6 22.3 21.4 22.8 21.3 22.9 8nergySales (GWh) 6,193 6,299 6,475 7,114 7,573 7,831 AverageRevenue/kvh (Paisa) 31.1 32.0 34.2 41.3 49.5 57.3 Total Revenue(Re M) 2,142 2,376 2,825 .3,601 4,328 5,134 OperatingExpenses (Re M) 1,803 1,915 2,489 3,239 4,182 5,312 OperatingIncome (Rs M) 339 461 336 362 146 -178 OperatingRatio (Z) 84 81 .88 90 97 103 Net Income(Rs M) 1/ 178 285 132 109 -267 *> -739 Rate of Return (X) as per Covenant2/ 7.1 10.2 4.2 3.1 -6.8 -17.1 Rate of Return (X) BeforeInterest 3/ 16.9 21.7- 14.6 13.9 4.7 -4.3 Debt ServiceCoverage Ratio 1.5 2.1 1.4 0.9 0.4 0 Contributionto Investment Program(X) 4/ 61 28 15 3 5 -81 1/ Afterinterest. 21 Incomeafter interestas a percentof bistoricallyvalued net fixed assets. 31 Incomebefore interest as a percentof histovicallyvalued average net fixed assets. V/ Based on 3-yearmoving average. 4.34 XEB's.financialperformance from 1981/82to 1982/83was satisfactory but deterioratedsignificantly during 1983/84 to 1986/87. In the period 1983/84to 1986/87,REB had to purchasea much greaterproportion of its energyat high cost-fromneighboring states, which resultedin the Board's operatingcosts/kWh sold increasingby 75X duringthose years. Duringthe same periodKEB's averagerevenue/kWh sold increasedonly by 50X 1/. Consequently,the Board'soperating ratio, which averagedabout 831 during 1981/82-1982/83,deteriorated to an averageof 95% during1983/84 to 198$/86. Similarly,unsatisfactory trends were exhibitedby other financial indicators:return on,assets, debt servicecoverage and-internal cash 1/ -Tariff rates were on averageincteased by 501 duringthis periodbut the mis of consumptionwas adverselyaffected by disproportionatetbad sheddingof industrialand commercialconsumers who pay the highest rates. . 0~~~ -48- generation.In 1986/87,KEB's returnon net fizedassets (afterinterest) was -17X due largelyto high interestcharges, the impactof the recent drought,and insufficienttariff to cover risingcost. To alleviatethis situation,under the first KarnatakaPower Project,GOK agreedto: (i) reducethe debt-serviceburden of KEB by lengtheningthe loan repayment terms of all new loans to KEB; and (ii) assistKEB in recoveringits, receivables.With respectto the tariff,under the Electricity(Supply) Act, COK can legislatehigher tariff levels to enableKID to complywith the financialcovenant. The Bank will monitorclosely GOK's action in rehabilitatingKEB's finances(para 4.12) and its compliancewith the Bank's financialcovenants. PresentFinancial Position 4.35 KEB's BalanceSheet (Budget)as of March 31, 1988 is presentedin Annex 4.4 and summarizedin Table 4.6. Table 4.6: KEB's BalanceSheet (Budget),March 31, 1988 (Re Million) Assets Gross Fixed Assets 7,930 Less: AccumulatedDepreciation 2,001 Net Fixed Assets 5,929 Work-in-Progress 2,941 Total Fixed Assets 8,870 Investments& Intangibles 19 Inter Unit Accounts 282 CurrentAssets 3,267 12,438 Equityand Liabilities CapitalContribution 363 Generaland Other Reserves -1,010 Total Equity -647 StMffSuperannuation Fund 530 SecurityDeposits 1,023 Long Term Debt 7,417 CurrentLiabilities 4,115 Total Equityand Liabilities 12,438 KaD'sestimated rate of return(after interest) in 1987/88is about -281 due principallyto the impactof the severedrought ad high interestcharges. As a consequenceof the accumulatedlosses incurred during the -last three years,and the fact that'KE has not receivedadditional equity from COK -49- exceptat formation,its equityis estimatedto be negativein 1987/88. Por the same reasons,the Board'scurrent ratio, debt-service coverage and contributionto investmentdeteriorated to the lowestlevels of the past decade. Despitea 1OX averagetariff increase and reductionin its receivablesof aboutRs 790 million,KEB's substantialdebt-service and its revenuelosses as a resultof the droughtcontinued to impedeits financial performance. O0Khas recentlyformed a committeeto addressboth KPC's and RBB'sfinancial difficulties (para 4.12). FinancialRecovery Program 4.36 The financialdifficulties of REB are similarto thoseof KPC except for theirmagnitude. As noted in para 4.35, it is estimatedthat in 1987/88, its equitywill be negativeand its rate of return(after interest) will be at its lowestin a decade. While the financialrecovery period would probablybe somewhatlonger than that of KPC, the actionsneeded to rehabilitateits financesremain essentially the same of those requiredof RPC (para4.12). Forecast Investment and Financing Plans 4.37 RIB's investment plan for the period 1988/89 to 1995/96 is presented in Annex 4.3. The Board plansto investabout Rs 16.5 billion (US$1,269 million)over the period. About Rs 3.1 billion (US$239 million) will be investedto counstruct400 kV and 220 kV transmissionlines and Rs 2.8 billion (US$213million) to erect relatedsubstations. In addition,KEB plans to investRs 4.1 billion(US$318 million) in distributionimprovement and development,s 1.9 billion(U$144. million) in rural electrification schemes,and the remainderRs 4.6 billion(US$355 million) for non-Plan projects. 4.38 REB's financingplan for the above investmentprogram and increased workingcapital requirements are summarizedin Table4.7. Table 4.7: KXB's FinancingPlan 1988/89- 1995/96' Re' Million MU$ Million5-', Reuirements CapitalInvestment 1/ 19,456 '1,497 83 WorkingCapital Increase 440g 314 17 Total Requirements .3,S4 . 1,811 80urces Gross InternalSources 2/ .14,780 1,137 -Lest._ Debt,Service 109094 776 Net InternalSources .. 4,686 ". 361 20- Borrowings ProposedLoan 1,690 130 7 O0KLoans 1,320 73 TotalBorrowings 18,856 so__' Total Sources . 23,542 1,811 100 I/ Includes interest duringconstructiqo. ,it Includesinternal cash generation,capittl contribution,' staff :perennuPtsonfund and securitydeposits. During,the 1988/89 to 1995/96period, "the total requirementfor funds is estimatedat about Rs\'24billion (US$1,811 million). Net internalsources wouldaccountfor 201 of'thetotal requirements.The remaining80X, would be' financed though borrowings includingKM's share of the propoeedloan. It is expected that tbh financingrequirement will e adequately;metin a timely manner, asbais been the practice in palt years. 4.39 /OI will be the recipientof the proposedloan of U 260 millionand will #ilena the proceeds:to OOKas pei'standard terms of centralassistance to Karnataka. OK proposes to relend.`about US$130 mi)ison ofAthe proceeds to KXB at its normal interest rate fot loans to KEB, witch cutrently is 1l.SZ. Under the proposedloan, ONK.greed to onlendthe proceedsto KmDat an interestrate of not less than lliZ per annum with a repayment period of 20 year including 5 years' grace. 00K will"carry the foreign exchange, interest ratehand guarantee risks. Income Taxes 4.40 KRB is liable for income tax. Mowever,its investmentprogram, the .ac.c4elratdAdpreciAtion,allowed.for-taxputrposes, AndAit- pasttax l2osses--, - = > .e q ~~~~~~~~~~~~~- * , *. -'- *V -51- are such that tax reliefis providedwell beyondthe periodof financial projections.A tax equalisationreserve is, therefore,not necessary. ForecastFinancial Performance 4.41 KEBls projectedfinancial statements for the period 1988/89- 1995/96 and assumptionson which these are based oe presentedin Annex 4.4. The Board'sprojected operating results are gumarized in Table 4.8. Table 4.8: KEB's ProjectedOperating Results 88/89 89/90 90/91 91/92 92/93 93/94 94/95 95/96 Electricity Available (GWh) 13717 16672 17316 17966 18852 20258 23116 26026 ElectricitySales (GWh) 10905 13254 13766 14373 15082 16308 18608 20951 Ave. Revenue/O4h- (Paisa) 68.6 68.6 71.3 78.2 91.3 104.3 127.1 153.5 Operating 7 Revenue(Rs M) 8268 9965 10715 12191 14771 18099 24879 33552 Operating Expenses(Rs M) 8016 9215 10022 11347 13605 16648 23219 31133 Operating Income(Re N) 252 750 693 -845 1166 1451 1660 2419 Net Income(as M) 1/ -646 423 264 290 347 382 434 526 Rate of Return(Z) as per Covenant2/ -11.6 6.7 3.0 3.0 3.0 3.0 3.0 3.0 Rate of Return(2) BeforeInterest 3/ 3.3 8.0 6.4 7.1 8.8 10.1 10.1 14.2 Equity- Z of Debt/Equity Debt Service Coverage Ratio 0.4 2.7 1.5 1.4 1.4 1.4 1.3 1.2 CurrentRatio Contributionto Investment Progra (X) 4/ -48 32 5 3 4 28 32 33 1/ After interest 2/ Incomeafter interestas a percentof historicallyvalued net fixed assets. 3/ Incomebefore interest as a percentof historicallyvalued average net fixedassets. 4/ Basedon 3-yearmoving average -52- The projectionsare based on projectedKPC sales (para4.17), and? loan repaymentperiod of 20 years with 5 years'grace, and futuretariff increases drivenby compliancewith the requirementto earn a minimum32 rate of return. Assumingnormal hydrologic conditions, to satisfythe minimum32 rate of return,K[B's tariffsare expectedto be revisedafter 1989/90at an average annualrate of about 152 in currentterms, or about 92 per annum in real terms assumingan averageprojected inflation rate of 62. 4.42 KEB's gross fixed assetsin operationare projectedto increasefrom Rs 9 billionin 1988/89to Re 23 billionin 1995/96,representing an increase of about 1602. Over the same period,the rate of return(before interest) on historicallyvalued assets will average8.52, and internalcash generationas a percentageof its investmentprogram will average20%. The capital structureis expectedto improvefrom a negativeequity of Rs 1,263million in 1988/89to a positiveposition of R,-1,716 million in 1995/96. The Board'sprojected debt servicecoverage ratio is estimatedto improvefrom 0.4 in 1988/89to 1.2 in 1995/96. The good financialperformance projected in 1989/90is in part due to GOK's plan of offsettingaccounts among GOK, KPC and KERB(para 4.30) duringthe year. GOK along with [PC and KEB have formed a committeeto study ways to rehabilitatethe financesof both KPC and KEB (para 4.12).The Bank will monitorclosely the progressof the committee. FinancialReporting and Monitoring 4.43 Under the first KarnatakaPower Project,GOK agreedto cause KEB to: (i) furnishto the Bank, by December31 of each year, a reportof KEB's forecastoperational and financialperformance for the ensuingfinancial year, specifyingthe actionsthat will be takento strengthenthe financial positionof [EB to enableit to complywith the financialcovenants; (ii) furnishits auditedaccounts together with the auditor'sand AG's reportsto the Bank withinnine monthsof the end of each financialyear (para4.24); and (iii)take all measuresnecessary including adjustment of tariffsto earn a minimumrate of return(after interest) of 32 per annum (para 4.20). Duringnegotiations, an understandingwas reachedthat [EB would continueto send to the Bank forecastoperational and financialperformance £or the ensuingyear by December31 of each year. The other agreementshave been repeatedunder the proposedloan. Under the proposedproject, aside from monitoringthe aboveagreements and thoseunder the first KarnatakaPower Project,the Bank will monitorclosely the progressof the committeein its effortsto rehabilitatethe financesof KPC and KEB (para4.12). -53- V. PROJECTJUSTIFICATION AND ECOOMIC ANALYSIS Least Cost Analysis 5.01 The principalcomponents of the proposedProject are the STES, to be implementedby KPC, and the transmissionand distributionprogram to be implementedby KEB. Duringproject preparation, KPC and CEA carriedout studiesto determinethe optimuminstalled capacity of the SharavatiTailrace scheme,based on estimatesof the cost of alternativegeneration in the SouthernRegion. These studiesindicate that the appropriateinstalled capacityis 240 MW (i.e. 4 x 60 MW) as proposed. In addition,CIA has prepareda least cost systemexpansion plan for the SouthernRegion, based on the load forecastgiven in Annex 1.2. The earliestfeasible implementation of the STRS forms an integralpart of the least-costplan. The assumptions used, includingthe load forecast,and the resultsof the optimization modellinghave been reviewedby the Bank and found satisfactory.With regard to the transmissionand distributioncomponents, an appropriaterange of options(involving different configurations, voltage levels and timing)were analyzedwith respectto capitalcosts, operating costs and losses,and the Bank is satisfiedthat the transmissionand distributionprogram chosen constitutespart of the least cost developmentof power supplyto Karnataka and the SouthernRegion. InternalEconomic Rate of Return 5.02 Benefitsof the componentsin the proposedProject cannot readily be separatedfrom those of other investmentsin generation,transmission and distribution.Therefore, having established that these form part of the least cost expansionplan for the SouthernRegion, it is appropriateto carry out a cost-benefitanalysis of the plan as a whole in order to ensurethat the expansionenvisaged is desirable. For this purpose,a "time-slice"of the SouthernRegion's investment program has been analyzed. Capitalcosts of the investmentprogram (covering generation, transmission and distribution) togetherwith incrementaloperating and fuel costs are given in Annex 5.1. The benefitsof the investmentprogram relate mainly to the incremental consumptionwhich it makes possible.l/A minimummeasure of benefit,ignoring consumersurplus, can be derivedfrom incrementalsales revenue. In the absenceof adequateclass-specific consumption conversion factors, the standardconversion factor (estimated to be 0.8) has been appliedto convert 1/ The programmay also lead to benefitsin terms of a reductionin the cost of meetingexisting demand, particularly through fuel savings. However,the energydeficit is such that by far the greaterpart of the outputavailable from-plants in this programwill lead to increasedsales. Fuel savingsresulting from this programare likelyto be small and this elementof the benefitshas thereforebeen ignored. Ir -54- financialrevenue into a measureof economicbenefit. On this basis the minimuminternal economic rate of returnachieved by the SouthernRegion programis 4X. 5.03 However,this estimateis more a reflectionof the level of tariffs than of the economicmerit of the investmentprogram. The estimatedminimum economicrate of return,41 is less than the establishedopportunity cost of capital,and this is indicativeof the fact that retailtariffs in the SouthernRegion, particularly agricultural tariffs, are substantiallyless than LRMC (para 1.12). In reality,the programwill conferbenefits in excessof those describedabove. There will be consumersurplus associated with the incrementalconsumption; consumers' reactions to the severe shortagesof power experiencedat present,and expectedfor the foreseeable future,suggest that willingnessto pay substantiallyexceeds present tariff levels. In additionthere will typicallybe other externalbenefits. 5.04 In order to derivea more realisticinternal economic rate of return, it is usefulto estimatea measureof consumersurplus, at least for industrialand agriculturalconsumers. Their willingnessto pay will be relatedto the costs of autogenerationand dieselpumping respectively. Many consumersare presentlyobserved to find these optionseconomic when public supplyis not available. Annex 5.1 presentsan estimateof diesel autogenerationcosts at Rs 1.88/kUh. It wouldthowever, be unreasonableto assumethat all industrialconsumers would be willingto pay this price for the whole of their consumptionfrom the publicsupply system. Therefore,as a conservativemeasure, it has been assumedthat the consumersurplus attributableto incrementalsales can be derivedfrom an averageof the cost of autogenerationand the prevailingtariff. Similarly,for agricultural consumersthe equivalentcost of dieselpumping has been estimatedat Rs 2.21lkVhand averagewillingness to pay has been estimatedat halfway betweenthe averageagricultural tariff and this alternativecost. This more realisticmeasure of the benefitof consumptionresults in an internal economicrate of returnof 121 for the SouthernRegion. However,it must again be stressedthat this representsa lower bound estimateas domestic consumersurplus and other externalbenefits, have still not been included. Justificationfor Bank Involvement 5.05 This projectpresents the Bank with an opportunityto supportGOI's and GOK's efforts(para 3.05) to: (a) alleviatepower shortagesin the SouthernRegion by exploiting indigenoushydra resources;and (b) augmenttransmission and distributioncapacity, thereby reducing systemlosses aMd improvingservice quality. In additionit is an opportunityfor the Bank to: -55- (a) introduceimproved tools and work methodsin relationto construction and maintenanceof the transmistionand distributionsystems; (b) introducenew technologies,e.g. mobiletransformers, to reduce distributioncosts; (c) help Km to respondmore quicklyand more effectivelyto network disturbancesthrough the installationof a SCADA system;and (d) continueto effectinstitutional and financialimprovements, in - relation to both KPC and KEB, startedunder the first KarnatakaPower Project. VI. AGREEMENTSAND RECOMMEATION Agreements 6.01 Duringnegotiations, it was agreedthat the conclusionof a SubsidiaryLoan Agreement.between GOK and KPC, satisfactoryto the Bank, specifying:(a) an intetestrate of not less than 11.5X per annum;and (b) a repaymentterm of 20 yeazs including5 years'grace, will be a conditionof effectivenessof the proposedLosn (pats 4.15). 6.02 Duringnegotiations, GOK agreedto onlendthe proceedsof the loan applicableto KEB at an interestrate of not less than 11.5 per annum,with a repaymentterm of 20 years including5 years'grace (para4.39). 6.03 Duringnegotiations, GOX agreedto cause KXB to: (a) engagethe servicesof an electricutility or consultingfirm by December 31, 1988, under terms of reference satisfactory t.othe Bank, to reviewKEB's work planningand procedures,introduce new tools and equipment'and trainKID's staff in their use (para 2.15); -- - (b) complete'the detailed route surveysand make formalapplication for DOW clearancefor all transmissionlines in the proposedproject requiringsuch clearance,by December31, 1988 (para 3.37); (c) send to the Bank KEB's auditedaccounts together with the Auditor's Reportwithin nine monthsof the end of the financialyear under considerationbeginning with 1986187(para 4.24); (d) collect,by April 1, 1990, its accountsreceivable from its principal debtors,as of March 31, 1987, in accordancewith a monitorable actionprogram satisfactory to the Bank (pars 4.30); -56- (e) maintainits accountsreceivable, with respectto sales after March 31, 1987, at no more than the equivalentof the preceding2 months' sales (para4.30); - (f) clear any sums.,owedto KPC with respectto sales after April 1, 1987, not coveredby a letterof credit,within 30 days (para 4.31);and (g) take all measuresnecessary to ensurethat the Board shall in each financialyear eatn a rate of return,after interest,of at least 3X (para4.43). 6.04 Duringnegotiations, KPC agreedtos (a) presentto-the Bank a satisfactoryplan for repairingthe Talakalale dam and 'signa contract.forthe repairwith a qualifiedfirm, satisfactoryto the Bank, by October31, 1989 (para3.19); (b) presentto the Bank, no later than one year beforethe expected completiondate of thSestructures a comprehensivemaintenance program that,willensure the continuedsafety of the STES dam and associated structures(para 3.29); (c) send its auditedaccounts together with the Auditor'sand Accountant General'sreports to the Bank within sevenmonths of the end of each financialyear (para4.05); and (d) take all measuresnecessary to ensurethat the Corporationshall in each financialyear earn a rate of return,after interest,-of at least 3Z (para 4.19). ' 6.05 Understandingsregarding the followingitems were reached'during negotiations? (a) KEB will send to the Bank, by December31 of each year, a reportof its forecast operational and financial performanee for the ensuing financial'year, specifying the actions that will be taken to fulfill financialcovenants (para 4.43);and (b) KPC will send to the Bank, by December31 of each year, a reportof its forecastoperational and financialperformance for the ensuing financialyear, specifyingthe actionsthat will be taken to fulfill financialcovenants (para 4.19). Recommendation 6.06 The proposedProject is suitablefor a Sank loan of US$260million equivalent. S-e.tricity Geuneration. Mae and Pattern of "nrn Caugowtio, -,8n bnds, ODescrltio" 1950/5 1955/56 1960/61 19W l98/69 1970/74 1978W79 19MODE 19W/81 t951/82 MUSE 19W/SI 198U8S 1959SI 194/ Installed Capcit 1 (t) 1.835 2.886 46S3 9.02? 12.957 16.664 26.6E0 2a64u8 30.214 32.34S 35.363 3339J 42.535 46.269 4g.257 ,CItlllitina, 61ectricity Geerted S,US 9.662 16.n5 32.990 47.433 6.609 102.523. 104.627 110.621 122.101 130.264 1.177 156.59 170.322 1811000 (Wb) leceticity Cosmption 4.93 7.959 13.953 26.735 37?352 50.246 7M.23 78124 62,473 90.245 9.SOP 102344 114.068 t23.209 "a *r (Wih)(UStllitiea easy) .Pe Capita G_ ratios 20.60 30.90 U.90 73.61 97.82 126.26 159.60 160.00 166.20 175.896 18.65 193.57 216.61 235.18 A CwbAtilLt"ia nasy) Per Capita Cosaumption 12.30 20.70 31.90 53.70 7O.60 S7.15 130.48 119.40 123.70 130.00 134.67 141.33 154.27 163.26 SI Wib) (Utilities emayl Coaamtiea Pattern (|1-) Domestic Light 4 12.40 11.70 10.70 8.80 6.S0 9.20 9.80 10.76 11.28 11.57 12.65 12.93 13.59 13.89 NA commercial Light & 6.90 6.60 6.10 6.20 5.70 6.00 5.60 5.96 5.95 5*76 6.12 6.41 6.08 6.30 NA al lcwer Indstrial PC&r 63.70 66.90 69.40 70.60 69.30 64.40 61.35 L861 58.75 58.80 53.41 55.79 55.25 54.15 NA Raa.ay/VTictlon 6.90 5.10 3.30 4#.I0 340 3.00 2.83 2.95 2.82 2.78 2.75 2.0S 2.52 2.54 N *4ricultur lms 4.30 4.00 9.30 ?.10 9.30 12.60 15.56 17.3 17.48 16.84 1.64 17.81 18.38 19.20 PA Public Vater Vorha. Smage lupig Public Ligbtihs 6 Otes .SD 5.50 3.90 3.30 3.90 4.60 4.l6 4424 4.25 4.43 4.*41 4.1t 4.02 4.02 NA Total 100.00 1a0o0 100.00O t t00.00100.00O.OO t00.00 100.00i o 0.OD0 0.00 100.00 10.00 NA N - leot bilab le Source: CM a4rch 195 ll . . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. BA, : ' , ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~it SECOD ARNMTAKAPqwER PROJECT Forecast of Realonal tooer Deamnd In Indt1. 19M7u8s - 1996/97 1987/88 188/8 IseSfO 1990/91 19t1,92 t92f93 1993J94 1994f95 19Mst16 199f97 Northern 67.538 74,073 18t.086 6.216" 98.178 *0.055 118.945 130.953 *44.199 158.813 Western 64,S38 70 416 76;678 63.744 91.47 99.913 109.148 119.24S tl0.M 142.365 Southern 56.817 e9.2983.943 75.920 83.186- 91.160 99.907 109,50S 120.038 131.697 EaStern 32,440 35.650 38.869 42.631 47,194 52.021 57.366 53,267 89.646 77.122 North-Eastern 2.712 3,038 3.389 3.744 '4,135 4.563 5.03S 5.550 8.118 6.744 Andomn nd 30 33 37 41 46 '52 'GS8 5S 73 82 Nicobar Island6 9.s .24 Lakehadep3 4 5 6 9.24 All,Indla (TOTAL) ,226*076 247,157 209,3.79 295.03 324.214 35S.770 390.466 428.613 470.573 516.733 Northern 13,179 14.455 15.025 13.415 1.167 21,098 23,227 25,576 26.187 31.027 Western 11.245 1t.459112.273 14.701 1860Sl 17,542 19.165 20.938 22.879 25.003 S Southern 10.620 '1l,634 1i.40S 1.676, 14.982 16,414 17.988. 19.711 21.603 23.677 ' Eastern S,640 5 ,196 6.?S7 7.442 L 8.202 9.043 9.974 11,006 12.147 13.*S r North-Eastern 599 667 740 614 605 983 t.080 1,16S 1.302 1.428 Andeman nd 0 9 10 1i 12 14 16 18 20.2 22.6 Nicobar Islands Iakehauhwep >. 2 2 2 .. 3 3J ___ 4 4.4 5.02 All India (TOTAL) 41,293 45.136 49.27 54.060 59.319 65,097 71.451 78.438 86.123 94.576 Sourias CEA.JJuly 96? -- C~;,. ~0 'N >\- ~~~~~~~~-59. Annex 1.3 IDI& SECONDAN?I 03PRJC Pr Credt a to Idin Power Betgr lMarcb31. 1988) Approval Closing Loan Abount ( K8*illion Eulv.) India Piret DVC- Boliro- Roger 23 4/50 2/W 18.50 16,72 Complete Indio Second DVC - Kaithon -- Panchot 72 1/53 6/58 19.50 10.50 Complete Taft Trombey Poer 106 11/54 9/66 16.20 1345S Complete TStecond Trosmbey 164 5/57 9/66 9.80 9.66 Completec' Indi. ThI4 PVC - Durgapur 203 7/58 6165 23.00 22.00 Complete Iadi# soye PoweM 223 4/59 4165 25.00 18?70 Complete lAdle Power Tranudedson 416 6/65 12/70 70.00 50.00 Complote ° Indad Second totbegudem Powa J417 6165 12170 14.00 13.97 Complete ots, Third Trombsy Therml Power 1549 4/78 12/84 105.00 105.00 Complete India Isam dam Thermal Power (*) 1648 1/79 618, 50.00 45.15 Complete India Par¢ e Thermal Power (*) ' 1887 6180 12/8V 25.00 0.00 tndia Second RsmagnadamThreml Power 1*) 2076 12/81 6/88 300.00 -184.24 India Third Rural Blectrlflietion 2165 6/82 6/88 304.50 271.77 adlds Upper lSdravati Vydro 2278 5/83 6191 156.40 - 0.39 IndIa Centr:l Power Traenmisa0 (*) 2283 5183 3/89 250.70 19.79 ndia Indinr 8crovar- 2416 5164 6/92 157.40 4.82 ldie Second aerake Thermal Power (C) 2442 6164 12/91 300.80 30.71 Tate Pouib Trombey Thermal Power 2452 6/84 6/90 135.40 64.32 ladli Chandrapr Thermal Power. 2544 5185 12/92 300.00 45.25 tadis Rihad Power Tsranmision () 2555 5185 12/89 250.00 85.36 tadle Kerala State Power 2582 6/85 9/91 176.00 1.81 IndIa CombwaedCycle (*) 2674 4/86 12/91 485.00 55.93 - Indie Karnateha Power 2827 6/87 12195 330.00 tadia Natioaal Capital Power Supply (C) 2864 6/87 6/95 485.00 ladle TleboerTbermal PoTr () 2845 6/87 3/96- 3.CCLD00 Total - 4,384.20 (Total oans .for WMPC Projects) (2,511.50) -~~ - ladle Wourth PVC- Durgcpur 19 2/62 12/69 21.88 19.88 Complete tadle Second Roy"e Power 24 $/62 9170 21.10 21.10 Complete ladl, Kotbagudem POW? 3? 5/63 12/68 24,13 24.13 Complete tadse Beas Uquipmant 89 6/U 6/74 26.59 26,32 Complete tndia second Powr Tranumisso 242 4/71 3/77 75.00 72.93 CoMplele lTadl -Third-fPower trau dsiDai 377 3/73 9/78 85.00 85o00 Completet tadia Rural Blectriflcetion 572 t/75 12/80 57¢00 57*00 Complete ladl bourth Power TramdIssIo 604 1/76 6/83 150.00 149.87 CompletO India SagrouliTherml Power (C) 685 3177 6/64 150.00 150.00 Complete ladl Korbe Therml Povwer(*) 93 478 3/86 200.00 199.92 Complete Inia Rsmagundsa Thermal Power (*) 874 1/79 6/87 100.00 200.00 Complete taudl $econd Rural Blectrifiction 911 5/79 3/84 175.00 171.75 Cotplete India Second Singrauli Therma Power (C) ^102 5/80 3/88 300.00 280J5 India arIb Thermal Powr (C) :/1053 6/80 12/88 225.00 214.18 Indis Secon Korba Thermol Power (*) /1172 7/81 6 12(89 400.00 244.86 adle Uppr Snd*evetydro 1356 ''5/83 6/91 " 170.00 49.62 Inda Wifira Seroar 8P020 5/84 6/92 129.80 0.56 ladls Indira Barovyr 1613 5/86 6/92 isLZA - Totfl- 2,423.70 (Total Credltsfor 10PCProjects) . - (1,475*00) - 1110M() Projects U~~ONDKMNDIA~ Orgonhaatlonchoit o~Kamotako P~r Cospo~aonFMtKPCo conuM~~~~ Comwom ? , 2~~~~~~~~~~~~~~~~~~~~~K WPM; d .. & o a .;t- pk ,~~~~~~~~~~~~~~~~~~~~~V* . Jt*4: CliI L 2k *e * Camm_ ? b' . C attll . Gallm_-- CC . , . I~ ., jt .,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C Pk= Hycho ~~~~ThemW -61- nx . -|g~~~~~~~~~~~~~~~~~i::: - -Al] 1 W ' X ) - '~~~~~~~~~~ *;0 IJ< j.) -62- ANNEX3.1 Page I of 7 INDIA SECONDKARNATAKA POWER PROJECT DetailedProject Description I. KPC Component SharavatiiTailrace Hydroelectric Scheme PrincipalFeatures 1. T1e main featuresof the SharavathiTailrace Hydroelectric Scheme (STRS)are,as follows: AverageFlow 186.3 cu.m/s ReservoirStorage (full supplylevei) 156 millioncu.m Arei at FSL 7.11 sq.kmn- Type of Dam ,Center: ConcreteGravity -LateralDykes: Homogeneous aplledFill with Concrete Out-off SadsdleDam: Homogeneous Rolled Fill with Concrete Cut-off KNxmiumDam Heightover Foundation 0.O0 m' Crest Length Total Dam plus SaddleDam 736 m Spillway 141,m Non-overflowSection 133 m Power Dam aO,m Earth Dqkes -172;.,m, ',' Saddle'-am 190 ? Type of-Spillway CGated Overflow with Flip Bucket Numberof Radial,gates 8 Size of Gates 15 m 1 2im DesignFlood (Routed) 9,769cu.m/s ProbableNazimum Flood (PMF)Inflow 10,230cu.m/s Numberof Penstocks 4 Diameter of Penstocks 5.60 m lumber of GeneratingUnits 4 Capacityof GeneratingUnits, each 60 MN Total InstalledCapacity 240 NW Type of Turbines VerticalFrancis Power Flow, Continuous 176.00cu.m/s Power Flow per Unit at Full Load 147.25cu.m/s PeakingCapability 240 MW AverageAnnual Load Factor 3'30S AnnualGross Generation, Firm 622 GWh TransmissionLink to TalaguppaSubt. 38 km of douWle circuit220 kV line -63- ANNEX 3.1 Page 2 of 7 PowerDevelopment of the SharavathiRiver 2. The proposedSTRS would harnessthe head still available(51.4 m) in the SharavathiRiver downstreamof the existing890 MS Sharavathi Hydropowerstation. The STRS power units would use the tail water releases from the Sharavathihydropower station plus the yield from the small catch- ment area downstreamof this power station. IBRD Map No. 20893 shows the generallocation of the STRS and the existingreservoirs and hydropower stationsin the Sharavathiriver valley. Multi-annualriver regulationis providedupstream of the Sharavathihydropower station by the 4,435 million cu.m Linganamakkireservoir. A 130 millioncu.m reservoirat Talakalaleacts as a balancingreservoir between the Linganamakkireservoir and the surge tanksof the Sharavathihydropower station. Geology 3. The dam-siteexploration has been thoroughand revealssatisfactory foundationconditions for the dam and powerhouse.The foundationconsists of compacthornblend schist, which is exposedat the river bed, and with overburdenat the flanksreaching a thicknessof about 30 m. The schist permeabilityis negligiblewhile that of the flanks'overburden is low, of the order of 0.00001cm/s. Consolidationgrouting is expectedto be required as well as a grout curtainto ensurewatertightness of the dam foundation. Th reservoirbedrock is entirelyin hard stablegranite and no leakagefrom the-reservoiris expected. The proposedSTRS is locatedin a zone of moderate-seismicactivity for which the IndianStandard (IS) Code prescribes a horizontalseismic ground acceleration of 0.12 g (horizontal)and 0.06 g (vertical).These are consideredadequate in view of the rathermoderate heightof the proposeddam (60 m) for which additionalprovisions for reservoir-inducedearthquakes are not required. Hydrology 4. Rainfalldata from 12 rain gaugingstation both in and aroundthe catchmentarea have been used to determinethe long-termannual yield at the STRS damsite. Some of these rain gaugingstations have rainfalldata from as early as 1895. Inflowdata into the Linganamakkireservoir are available since 1965 and prior to the commissioningof this reservoirand since 1945, from KargalAnicut, the intakefor the 120 MW MohandasGandhi Hydropower Stationlocated downstream of Jog Falls. Long-termyields for the 35-year (1945to 1980) periodwere workedout by multivariateWcorrelationbetween rainfalland run-offfor the monsoonmonths on the basis of the Linganamakki reservoiroperation from 1965 onwards. The resultinglong-term yield is 5875 millionm3 per annum on average(186.3 cu.m/s). However,on the basis of operationstudies for the existinggenerating stations and reservoirson the Sharavathiriver, and the proposedSTRS for a 20-yearcycle - 1960 to 1980 - the streamflow usablefor firm power generationat STRS would be 176 cu.m/s. (Annual firm power gross generation would be 622 GWh and net power supplyto -64- ANNEX 3.1 Page3 of 7 the Karnatakapower systemwould be 619 GWh). The unregulatedstreamflow could produceon average33 GWh per year of secondaryenergy at the STRS. 5. Duringthe planningof the existingSharavathi hydroelectric station the design floodfor the spillwayat the Linganamakkidam (whichcontrols 901 of the total cachmentarea at the 8TR8)was assessedby the hydrometereologicalmethod at a ProbableNMaimum Flood (P1W)of 14,368 cu.m/s.The maximumrouted flood is 7,539cu.m/s. is thus computedat 10,230 cu.m/s. The inflopeak into the STRS reservoiris 10,230cu.m/s. This is computedby addingthe peaksof the routed flood,the flood from the Talakalalereservoir and the floodfrom the free catchmentof the STRS dam. To check the design,this flow was routedthiough the STRS reservoirwith one of the spillwaygates inoperative.In addition,a furthercheck was made with the extremecondition of two gates inoperativeand with a floodequivalent to the routedPMF, to ensurethat the dam would not be overtopped.Energy dissipationwould be providedat the tip of the spillwayby a conventional flip bucketarrangement. Sediments 6. The catchmentarea is well coveredby forestwhich are subjectto extensiveconservation measures. Sedimentationis thereforenot expected to cause difficultiesin projectoperation or to shortensignificantly the economiclife of the proposedhydrcpower scheme. InstalledCapacity 7. The major hydroelectricstations feeding the Karnatakapower system are designedfor annualload factorsin excessof 601. Other hydroelectric stationshave limitedstorage capacity or powergeneration is conditioned by water use for irrigationpurposes. the power systemis thus considerably shortof peakingcapacity and load sheddingmust be appliedduring peaking periods. The STRS is ideallysuited to furnishpeaking capacity since the availablestream flow is fully regulatedupstream and sincethe headrace conduitswould be extremelyshort. Optimizationstudies have confirmedthat the optimuminstalled capacity is about 240 SW for discountrates between8X and 122 and valuingthe benefitsin termsof costsavoided from combustion turbinesof equivalentrating burning light distillate priced at the interna- tionallevel. B. The TalakalaleDam 8. The Talakalaledam, completedin 1964, is a 60 m-highgravity dam built in masonry,partly with red cementmortar (cement,sand, and brick powder)and partlywith lime-surkhimortar (burnedbrick powderground with hydratedlime). The dam holdsa balancingreservoir (130/ million/ m3 capacity)between the Linganamakkireservoir and the intakestructure of the Sharavathipower station. It is a crucialcomponent of the existing900 KW -65- ANNEX3.1 Page 4 of 7 hydroelectricplant, which is the main sourceof power for the State of Karnataka. Since its completion,heavy seepagehas occurredthrough the body of the dam with leachingof the mortar,particularly of its lime constituent. Although groutipgwas resortedto on severaloccasions to reducethe seepage, the treatmenthoe only had temporaryresults and seepagehas been steadily inereasing,reaching in May 1987, about 250 litersper second. Fear for the stabilityof the structureprompted Karnataka Power Corporation(KPC) to buttressthe dam with an earthenembankment on the downstreamface of the dam. This embankment,equipped with a filter,was completedin 1979. 9. In 1986, an expertin geotechnicsvisited the dam on behalfof the Bank to evaluateits condition. He concludedthat the seepagewas a poten- tial threatto the safetyof the structuresand had to be controlled.The possibletechnical options for doing this were: (a) groutingof the dam and foundation- estimatedcost US$8-10million; (b) placingimpermeable membrane on the upstreamface of the dam - estimatedcost, if done with the reservoirfilled, US$40 million; If done with the reservoirempty, US$21 million. The expertcautioned that it was difficultto predictif groutingwould be successfuland that the best expertisein the field shouldbe used to inves- tigateand designthis procedure. The next optionwould be placingan imper- meablemembrane with the reservoirfilled since drainingthe reservoirwould cost the economyover US$200million per year (usingthe cost of the energy not generatedand ignoringthe true opportunitiescost of the energy). With these optionsin view, the missionpresented KPC with draft terms of referencefor consultantsto do detailedstudies of the conditionof the dam, designa procedurefor its repairand supervisethe implementationof the work. 10. The first KarnatakaPower Projectprovides funds for KPC to employ the consultantsand, duringnegotiations, KPC gave an undertakingto initiate the studyby July 1, 1987. A civil engineeringconsultant inspected the dam on behalfof the Bank on May 19, 1987, and found that the structureis in poor onditionand concluded that if no propertreatment is done, it may eventually collapse with catastrophic consequences for the economyof Karnatakaand, possibly,with heavy loss of lives (about10,000 people live downstreamof the dam). The conditionof the dam at this time was as follows: (a) heavy water seepage through the body of the dam; (b) serious leaching of the lime in the mortarl -66- ANNEX3.1 Page 5 of 7 (c) no apparentcracks in the drainagegallery or in the dam crest (this suggeststhat so far there has been no significant settlementof the foundation); (d) a sinkholehad developedon the secondberm of the embankment; and (e) downstreamof this sinkhole,the soundof the rushingwater underneathcould be heard, 11. Afterreviewing the conditionof the dam, the consultantsuggested that the termsof referenceproposed by the geotechnicexpert should be epanded to includethe sinkingof at least two exploratorypits on the embankmentto ascertainthe conditionof this structure.In addition,he suggestedthat surveyingbenchmarks should be establishedon the crestof the dam, on the embankment,and on the abutmentsto monitormovements of these structures. Presentsituation 12. The most recentmission found that after the Bank'slast visit in May, KPC arrangedfor the IndianNavy to send diversdown along the face of the dam to plot the locationof visibleholes and to plug as many as=possible with lead wool and epoxymortar. Preliminary measurements indicate that this treatmentreduced the seepageby one-third. Althoughplugging, the visible holes by itselfwill not lead to a satisfactorysolution, the'reduction in flow increasesthe likelihoodthat a well designedgrouting program will be successfulin controllingthe seepage. The misoionbelieves that although failureof the dam or the embankmentdoes not appearto be imminent,there is enoughuncertainty about the condition,especially of the earth-fill embankment,to requireprompt hiring of the consultantsto investigatethe problem. . . I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -67- ANNEX3.1 Page 6 of 7 13. KPC has agreedto hire the consultantsand has evaluatedproposals from three consultingfirms. The proposedschedule for furtheraction is as follows: Action Date 1. Award of contractby KPC June 5, 1988 2. Start of work by consultants July 1, 1988 a) Initiatingreport by consultants August 1, 1988 b) Submissionof draft reportand draft tender , December14, 1988 c) KPC's comments February2, 1989 d) Receiptof draft reportand draft tender March 2, 1989 by Bank e) Clearanceof draft-reportand draft tender, March 31, 1989 by Bank 3. Receiptof consultant'sfinal reportand May 31, 1989 bid documentsby KPC 4. Receiptof final *eportand bid documents June 30, 1989 by Bank 5. Issue of bid documents May 31, 1989 6. Bid opening July 1989 7. Award of contract, = Detober1989 8. Start of work on *emedial measures Noveg*ber 1989 . . ~ ~ LA .w. , '\z' ~II. K8BBCkMPinfT SaTB8Transmission Linp and einforcement of Trunk T1ansmission in Karnataka 14. The STRS power switchyard would be linked with the Karnataka power systemby means of a 38 km double circuit 220 kV transmissionline. The transmissionline would terminateat a new 220/400kV-substation to be establishedby KEB at Talaguppa. KEB is currentlybuilding a double-circuit400 kV transmissionline from Talaguppato Shimoga(to be operatedinitially at 220 kV). This line is necessaryto relievethe overloaded transmissionlines from the existing Sharavathi power station to Bangalore. Sharavathiis now connectedwith Bangalorevia two double circuit 200 kV doublecircuit lines ia-and-outof the proposed Talaguppa substation and to constructimmediately one more doublecircuit 220 kV line from the Sharavathipower stationto Talaguppa. KEB proposesalso to build a 400 kV trunk transmissionlink betweenShimoga and Bangalore (NelamangalaSubstation) to be commissionedaround 1995-96and to operatefrom that year onwardsthe whole trunk transmissionlink (Talaguppa to Nelamangala)at 400 kV. Howev0r,with-and-without load flow studies showed that the-Karnataka power systemcould not be operatedwithout the new 400 kV transmissionlink and that the annual cost of losses valued at the long-run mar;inal cost of power for Karnataka would exceed the annual cost -68- AMNEX3.1 Page 7 of 7 of investment in the proposed400 kV link in years 1994/95and 1993/94 at 401 per annum opportunitycost of capital. KEB thereforedecided to include in the Projectthe Talaguppato Nelamnangala400 kV line, to be in operation by 1993-94. The ProJectalso includesthe 220/400kV 500 NVA substationat Talaguppaand the additionof two 400 kV incominglinebays at the Nelamangala substationbeing financedunder the KarnatakaPower I Projectloan. The transmissioncomponent of the Projectis shown on IBRD Map No. 20892. -69- Annex 3.2 - m Page 1 of 2 INDIA SECONDKARNATAKA POWER PROJECT - o -- 5168 1989d -1s IS _ 190 19 1992 1993 A, t . 1 21 3 4 123_ 4 1|2| 314 1 | 2| 314 1 223 14 1 22|3|4 400kv TranhmissionLne SooNo0mongkmo 2_0km ______220kwTrarnsmlo line SRS- TOWL_p 38kM RMs- S.dcom102km Sodom- Hlufmobod66 km Yhlmo -M_a 225km UloatHou.on20kn S.Pro - NRS24 km Topto Wm km _ Topto Hgbbol km 66kv,lncergroundCob0s IVStaion - 'C Station4km AustnTovn-TStotMon 2km 400WkvSub___o__ Tdologppom - m -mmm NOomorgoIoQewnino boys) 220kvSubsta._on_ Egipxr Sekom llptur m mm HOSOf |. - m - m 0 mIk10| Hurfnnobod m mmmm 66kv Subsation 'VStotlon DC.Staton Tools C-nancl------WoddB"i-41812A -70- Annzex3.2 Page 2 of 2 INDIA SECONDKARNATAKA POWER PROJECT ConshtuctonSchedule of KPCProject Component v ~~1 2 341 2_41 21314 1 2 3 4 _ 2 3 4 _ 2 3 4 - -- L- -Eort,e aid SoddleDon______.~.. .19 99 99 9.1 _1_3_123_4123_123_41_3_4_234 ______PrepwcvuatloWdc 'PaCe_ __ cfT Gt6l | |- l l l |- l l l i ; m ; | GenatinrUni in GeneratinUnit IV Transfor_er I _m _ m _ Transt.qnhrllm m m .m Trarl8boffT1V-m-amm S9iJchgearunitoI m m mr . wthgo U. i _ _ _l _m _ _ - - &WtChg@aTunitmI a mm mm Wodd8onk-418123 Annex3.3 Page I of 2 incs m urnsuiu (R Ki.) (m 1ilioo) I .Totobl 2 Totl. I Forotln aMe I For" Ime Local FotoiugTotal Exubah Cost Lol Feo TotalEwgbm Cods :, - cons A. PRPAAORYUU RO. SITE,CM 64.6 - 64.6 - 1 4.9 .- 4.9 - 1 RWRDIRION '13.3 0.7 14,0 5 0 1.0 0.1 1. 5 0 c AI AFFTATION 7.0 - 7?0 - 0.5 - O0.S. - Subtots! PPATORYgm 64.9 0.7 65.6 1 2 6.4 o. 6*.4 1 2 I. CIvIL M m II 447.5 18.3 535.7 16 11 3. 6*.640.3 16 11 m F RM 1349£.026.4 160.4 16 3 10.1 2.0 12.1 1. 3 bTtal CIL UBI(S S.S 114.? 69.2 1 14 43.7 8.6 52.3 16 14 C6lURTM I0 WTOR s 319.5 60.2 *3 6. 19 24,0 464 7096 66 19 P950 14.5 15. 30.0 52 1 1.1 1.2 2.3 52 1 661E6 56.8 60.5 117.2 52 2 4.3 44 8.8 52 2 CRE MMoM E*)IPIT 7.9 1.9 9.7 19 0 0.6 0.1 0.7 19 0 9h-Total NCAL EEfI T . 79.1 77n. l57.0 50 3 §9 5.9 11,1 50 3 - ElECTCALMEOMIPENT SFNO M ANSD811TOIAR 42.9 4.6 47.5 10 1 3.2 0.3 3.6 1O 1 PA-ELCIL tC. 22.7 2.4 2S.2 10 1 1.7 0.2 1.9 10 1 t Y TRUM S.6 - 56 - 0 0.4 - 0.4 - 0O POOELINECA 1.3 1.4 2.? 52 -0 0.1 O.l 0.2 52 0 -ToutlELECR swim 72.6° 9.4 61.0 10 2 545' 0A 6J 10 2 F. FNU ADFFICEESM Om= No aUCvows 5.6 - 5. - 0 0.4' - 04 iiULmeC WGUTIOU ElHwE 24 1.t 4.2 32 0 0.2 0.1 0.3 32 0 WEWTTAUPSTWNPI 2.6 2.7 5.5 50 0 0.2 0.2-0.4 a0 0 SWta 1FD A WFICEEWI 11.2 4,0 152 2V 0 0.3 0.3 1.1 27 0 e. CSSlTIC 10.3 3.5 14.2 24 0 0.6 0.3 1.1 24 0 o.f DIME" a AIIN TIN 443.1 13.2 456.3 S it- 33.3 1.0 34.3 3 9 I.TtAK MA 93.1 406 131.6 29 7.4 3.0 10,4 29 3 J. AINU LINES220 IY S.pI-I 2a.3 -1t 27.6 5 1 2.0 0.1 2.1 5 1 SIRS-tI.U9PA 25.7 4.4 30.0 IS 1 1.9 0.3 2.3 15 1 RIPS- 51. 2.J 54.4 5 1 l.9 0.2 4.1 S 1 27.0 1.4 29.3 5 1 2.0 0.1 2.1 5 1 52.3 2.7 S5.0 1 t.9 0.2 4,1 5 1 UL NATISA 15.6 08 16.4 5 0 1.2 0 .1 1.2 S 0 tAP-SISIPURA S.9-5 0.3 *#3 5 0 0.4 0.0 0.5 I 0 t ML 3.1 3,0 6.l 49 0 0.2 0,2 0.5 49 0 Tol rA iUiEB 220W 207. 16. 22. 7 I U. 1.2 16. 7 5 *-72- . Aiunez3.3 K, T O Cm 'w Page 2 of 2 CO , 9. 6*.1 15.6 9 0 0.t 0.5 1.2 39 0 - HUStINTUlll 10.1 10.5 20,6 51 0 0. o.al 1.5 51 0 Sub-tal 1 NIl CAN 6 19.5 16.7 36.2 46 1 I.5 1.3 2,7 46 1 L. SNATION 66/12/KY SATION 9.8 10.3 20.1 51 0 0,7 0.6 1.S 51 0 C SATION 10.1 10.5 20.4 S1 0 0.6 0.3 1,5 !I 0 tiWbTotaS TTAttS 11Y 19.8 208 40.7 'S 1 1.5 1. 3.1 S1 1 NoNILETWOOE 4.3 4.6 8.9 52 0 0.3 0.J 0.7 52 0 NoOATtNZO/Wit a 1 STATION 31.*6 332 64,6 I1 1 2.4 2.5 4.9 51 1 LIGIPIPA 30.1 31.6 Us.7 51 1 2.3 2.4 4.6 51 1 now 33.2 44.8 67.9 51 1 2.5 2.*6 5S.1 St 1 NASSM 22.4 23.5 4s5 51 1 1.7 1.8 3.4 51 1 lhU.3 20.9 21.9 42.8 51 1 1. 1.6 3.2 51 1 TtI 19.1 20.1 39.2 51 1 1.4 1.5 2.9 S1 I am 10*9 11.5 22.4 51 0.6 091I7? 51 000 HEI33li1 29,2 30.7 59.9 51 t 212 2.3 4,5 51 1 SuTtal STAiOn 220/4/111IV 197.4 207.1 4045 51 8 148 15.6 30.4 51 8 n. DISlRIIUtIOIIEOUPET RIN6IIAIIITCIISM 30.5 32.4 U29 52 1 2t;4 2.4 4.7 52 1 DISIvTIIlZ 17149 .-164 190.1 10 4 12;M 1.4 1443 1t 4 CHlL 186*5 196.7 385,2 52 8 `140, 14.9 29.0 a2 I -ub-TotalDISTRIBTION S JU366.7 249.5 38,3 39 13 29*2 18*8 4*0 1 13 P. IStltltIIIIONNISCOLLIAN- gm amCAS5 ? 174 34.1 52 1 1,2 1.3 2.6 52 1 CAPACITl8 *15.5 1.o 17,2 10 0 1.2 0.1 1.3 10 0 lWLSIIDmmIIwIpm 32.7 34*9 6A 52 1 2*5 2,6 S.1 52 1 PMOECTIEI-EIITU 4.4 4.7 9.0 St 0 0.3 0.3 0.7 52 0 ST1 lDISlllUflONNIUCILl tUS 69*2 56l 127*9 46 3 5*2 4*4 9*6 4 3 0. 16 10AND11 51 I6* 6.6 10 0 0.5 0.5 i0 0 - M1~~~WWYW aw1 Or 668 608 100 0 - OS# O* to1 0 Sub-TtlIMNUSISTPI - 6.6 6.6 104 0 - 0.5 0.5 100 0 R. T19NUSIONLIIES 4O I' NllOM WAA__~~IE4 463#3 91.s- 15a,- - U - It 34*8- 6ht, 4167 4 - lt STotal *MIIIIUN LI 400 463.3 91.5 54.6 16 11 346 6.9 41.7 16 11 St SITATINSS400/0 KY tMAIA-A Me20.6126.7 249,4 S2 5 9.1 9.7 18.6 52 5 46.6 9,2L 55.1 1 1 3.5 0.7 4*2 1 1 Stobtl tSATION 400k220V 1.3 13 S.2 45 6 12.6 10. 22.9 45 6 tlow Lu= CAT 3t233.21,65.0 41t 100o34 2435 W17.3370.6 3 1I Piil C lMtinmmcl 268,4 18.1 3J.3 32 6 20.2 9.6 29.6 32 8 Ptiu Ctn m424 956.2 6.2t 35 30 43.2 23.3 664 35 18 _------tal tO COStsT 4462.8 2.347.24610.0 34, 1 30W.8 1684 46.0 * 126 t ou a a0 - - A,i111 1968 09S10 KAWAS ?U P 1U Procrmv t Tmetabl. Date Bid Date of Date of Date Of World Benk Dae Dvet Bti Docement sent Worid lak sale of Blid Date of Ssbsioe Acceptance of Cntrat COntract Documet No. to World 8ak Co@acuc@ p Did Opiel# to V. Back DidBDalwatin as C.,leted CIVIL WORKS DaM 1(a) 12167 O/88 03168 05/68 08o68 09/88 10188 10103 PVerhouse . (b) L2I/6 01/68 0388 05/88 0#818 09J88 10/88 0493 Gates 1tc) 02686 04/88 :-/68 10/88 01/88 02/O9 04869 9V3 Talaklele DM 04/689 4/69 04E9s 06/89 06J89 07/S9 08W9 tO/9t I TIUongiUAoS 2 0818 10/88 12188 OU89 08169 09/J9 10/89 10J93 NEANcAL DMH6. T Peato&s 3(5) 03/88 035/8 07/88 09/88 1O/U 1V/88 12/88 06/89 Crane 3(b) 1i2/8 u2V89 04/89 w0n89 10/89 11/89 01/90 1290 EUCTRICALByIPNS. Transfoners 4(a) 09/89 llJ/6 01/90 05/90 09/90 10/90 11,90 09193 Protective and Control Panels 4(b) 12/89 0290 04/90 08190 12190 01/91 02/91 08193 Xiitchgeers 4tc) o4/68 00/49 088S9 121t9 04/90 05/90 06l90 1292 ;tructures 4(d) 04S9 06/89 01W9 12V9 04/90 05/90 06/90 12192 -74- "3 . Annex 3.4 INDIA SECONDKARNATAKA POWER PROJECT A >,,\ REB CEOMPONENT ' LIST OP TENDER DOCUMENTSAND CONTRACTPACKAGES Approx. N Numberot Cost Detailsof Packages Packges (Re. in J < , ib - + - \ '~~~~~~~~~lakhs.) N.~ ~~~~~~~. 400 kV Substations A. 1. 167 MVA, 2201400kV siniglephase transformers ,and 50 MVA 400 kW shunt"reactors 1 830 2. 400 kV and 220 kV instrumenttransformeri, - - 7 -. - circuitbreakers, disconnecting switches, controlmetering, relay panels,SOT crane,t lightningarresters, battery and batterychager, D.C. panels,control cables, LT AC panelsand stationauxiliaries, PLCC equipmentand dieselgenerating sets 1 11779 3. 400 kV and 220 kVswitchyardstructures, bus bars and pedestals,insuloors, clampsand fittings, .z... 9 oil filteringequipment, air conditioningplant, firefighting equipment - 1 121 2R0 kV Substations B. 1. 100 NVA, 220/66kV ad 220/11kV 3-phase100 WVA. Star- Startransformers 2 1210 2. 220 kV, 110 kV and 66 kY instrumenttransformers, circuit breakers,disconnecting switches, control, meteringand relay pan.ls,DOT crane,lightning arresters,battery, battery charger and D.C. panels,control cables, LT AC panelsand auxiliary AC supply equipment and PLCPtequipment . 2. 13480 3. 220 kV, 110 kV and 66 kV switi-hyard structures, bus bars nd fittings, insulators, clamps and fittings,oil.filtering equipment, air conditioning,fire fightingequipment 2 ;253 , -75- Annex 3A4 Page 3 of 3 400 kV TransmissionLines C. 1. 400 kV towersand erection 1 D. 1. Conductorand groundwire 2. Hardware,conductor accessories and ground ) wire accessories ) 1 4855 3. Insulators . ) 220 kV TransmissionLines 8. 1. 220 kV DC and SC towersand erection 2 1834 2. Conductorand groundwire 3. Hardware,conductor accessories and ground wire accessories 4. Insulators Fe 66 kV 8L? cables 1 360 C. 66 kV Substationequipment 1 303, H. 110 XV 30 WAR capacitors 1 60 Ie 66 kV 30 WhAR capacitors 1 120 J. 11 kV 600 KVAR switchedcapacitors .1 175 K. Distributiontquipments i) 11 kV ring main units 1 1200 ii) 11 kV cables iii) Distributiontransformers - iv) Distributionboxes, LT cables,etc. -' . .TOTAL 19 13748 .R~~~~~~~~~~~~~~~~~~~~~~ - 76 - i ANVSX.J5 76 -~~~~~~~~~~~~' -ECOD tABATAK POVEtPROJECT . Z5chedule of Bank Disbursemets - ~Total Proi st. Cumulstive Disbi_ement IBD-financial Year & Semester US$ Nillion X 1989 81 20.0 8 82 26.4 10 1990 81 40.8 16 82 55.2 21 1991 81 79.3 - 31 52 103.4 - 40 1992 81 129.4 SO-. 82 155.4 . 60 1993 81SI186 72 92 217.8 -84 1994 -91 238. - 92 92 - 248.4 s 95 ~~~~~~~~~~~~~~~~~~~~~~~~$ ' cis. s995 S1. , 252.3 G 97 52 .256.2 98 , 1996 Si: , 258.1 99 82 259.2 99 1997 81 260.0 100 .1 - ~~~~ ~ ~ ~ -. S 5 . . 5 0~~~~~~~~~ .. .3 5 (5>~~ ~ ~ ~ ~ ~ ~~~. . i , 25 .. 77 Annex 4.1 -77- INDIA SECONDKARANTAKA POWER PROJECT Methodfor Computationof Rate of Returnon Assets As per the Electricity(Supply) Act, KPC and KEB are requiredto take all necessaryactions to ensurethat total revenuesin any financialyear shall,after meeting (i) all expensesproperly chargeable to revenues, includingoperating, maintenance and managementexpenses; (ii) taxes on incomeand profits;(iii) depreciation;and (iv) interestpayable on all debentures,bonds and loans;produce such surplusof not less than 3% or higheras notifiedby GOK, of their respectivenet fixed assetsin service at the beginningof the financialyear. Criticalterms listedabove would be definedas follows: (a) "totalrevenues" means revenuesfrom the sale of electricityand other services,and miscellaneousincome. For KE8, this would in additioninclude rural electrificationsubsidies, state electricity dutiesreceived, and such other subventionsreceived from O0K to cover extraordinarycosts which are borne by KEB and which should not reasonablybe borne by its customers; (b) "expenses"means the cost of power generated/purchased,fuel, operating,maintenance, management and administrativeexpenses, and all taxesand dutiesaccruing during the financialyear, other than taxeson incomeand profits; (c) "taxeson incomeand profits"consist of incometaxes and other leviesaccrued according to the provisionsof any applicablelegis- lationor regulation; (d) "depreciation"means a provision,based on gross fixed assets in serviceat the beginningof the year, derivedby using the straight line methodin conjunctionwith the scheduleof usefullife of assetsthat was notifiedaccording to provisionsof Section68 of the Act, on April 3, 1985; (e) "interestpayable on all debentures,bonds and loans"means all interest(whether paid or vaived),ex^luding interest during construction,accrued during the financialyear, and all other chargeson debt; and (f) "net fixed assetsin service"means the originalcost of fixed assetsreduced by the aggregateof the cumulativedepreciation taken on those assets. For R3E, this would furhterbe reducedby consumers'contribution for servicelines, also reducedby the aggregateof the cumulativedepreciation taken on that portionof the servicelines which were financedby consumercontributions. f KAREAtAKA?OUUU 3 (ER. ENDN now 31) mS. ---- MCAT------comnAlm~ ~ ~ ~ GM06 pt. NWs. 67, 1987186 196616 1969190 1990/91 1991/92 19921931993194 1994195 1995/96 eeee..ee ------~~~~~~~~~ ------Zt196emmkhLgm PON"zDsme. 122 in2 0 0 0 0 0 0 0 0 0 ~~awMb1RobsblUaLti. 477 23 25 100 106…~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 119 100k 0 0 0 0 -~~ Rv6s1.-I 340 3420 s0 0 0 0 0 0 a0 lagebLErgy"-1I 0 0 2000 1534 50 100 16 0 a 0 0 0 3.iabm Th.1" - I 21 36 sos 5 0 0 0 0 0 Awtepieab. a 0 0 a mpo"amse 31? 22 100 100 70 24 0 0 0 0 0 Batch=m ThammI - U2 (unit 2) 1941 92 250 466 430 358 335 0 0 a0 UaLIANd BY"e - it 4392 04270 720 go0 O00 Alinftt 750 70 268 a 0 Dos w r DoomRau 149211" 5 9 0 ~0, 0 206 306 477 479 Uagayatbl 2.11 3e. Ps.jet 2271 0 0 83 66 024 267 *euas.,aUBy" 638 500 11 150 - I 2170 64I 3 0 0 147 306 71 66" NahedaI. lb,", 2470 00 0 35 200 375 menagmel. 5(40 65 500 210O *A1tIiMl 8140 0 0 0 35 100 1000 1000 1000 1000 1105 XelSaej 0,4.1 Stae III 2652 0 0 0 0 0 141 ASUAWeu 294 611 79 al1 t1-(Wait 4) 2848 0 0 0 0 300 400 600 700 448 0 YsrahLU4" d 1- M7 0 0 0 0 0 0 147 SosinesWo 282 248 0 i. & osutg.13 iSO 0 0 3 39 63 36 i5 0 0 0 De.LG.aee.tog 506so 0 150 250 106 0 0 0 a 0 a lIjitat, sobm 4500 0 0 I50 s0o 300 400 500 am 600 450 0ait S&a6-UIn 12000 0 0 0 0 0 0 0 01600 Tot"al arsetmm 55112 66410 85 16 51 48 03 50 26 5756 ? UO (MM6 DiUS NARM 31) (Xs Rs NUll..) 19919.2 199219 199319 1934193 1995196 196013 196118 1962183 1963184 1964,5 196518 19361? 1967138 HUM18 13691* 1990191 700 62M 519 7640 10813 10652 Iw70 11107 11622 12679 13604 Rodst 5769 6762 7335 7316 7927 4111 s109 6518 5516 0 0 0 0 214 1262 2400 2300 22)4 210 3569 2hanal ~~~0 14272 1!=7 16731 19197 2232 5769 67M 7326, 7316 792 722* 7465 7529 9940 I24 13554 lotal 12472 13116 1376 1it bos5s MM 17 "Sas -00) SW3 440 7175 715 7741 7016 7169 722 9552 ULeetz"tolt 3.9 2.9 3.2 3.5 3 .7 4.0 4.S 4.7 (2) 2.3 2.5 2.1 2.1 2.3 2.9 4.0 4.3 Losse" 33.38 28.42 29.07 30.7- 32.18 38.08 43.38 36.62 67.67 Ave. UY.ndbS o16 (Ps) 7.10 10.00 9.93 14.03 15.78 17.77 25.42 2715 3425 83 4420 3557 66 10396 14396 of Llostzlaty 400 464 713 1004 1322 12471 1622 2440 Solo 42 40 57 107 134 163 131 1I6 205 Otbst Umma.. 6 124 6 16 12 83 114 1936 242 277 3682 3945 4564 5742 7157, 1056 14403 ltotl urMA 406 G66 71o 1021 123 1330 1897 2507 3574 523 N13 - - 69 3SU 737 310 902 1344 lug) cost ------309 489 5s5 ..------.-- 157 is7 214 214 220 263 opecatiou & Iblatesnce - - --- 663 765 204 170 195 205 234 271 325 374 430 495 594 3st*bU&sbma Zpeaes 1/ 133 174 173 445 507 552 130 226 290 251 225 205 306 425 426 425 444 bea1tyr os Generation 30 119 525 646 978 1171 ~~speeo1atL.s~~~54 31 97 115 323 261 352 314 314 428 428 440 1649 185 2293 2736 3416 4235 536 739 11224 ?ott NaPeDS.. 219 384 405 544 764 79 1174 917 1389 1160 1148 1307 1596 2692 3379 Operstis im.13 33 1 476 450 538 762 833 1995 2566 3256 4087 4810 304 371 451 578 710 837 973, 11" 122 1435 153 latetoat 416 $55 409 748 1189 1477 2162 2233 2431 LeasslIut a.t CapLtallaed 96 123 195 294 415 504, 230 73 46S12 i85 0 1059 19 84 27 Net Interest 20 4 7 24 25 333 743 90 25) 342 344 341 419 502 a38 1000 got tua.m -20 56 5o 192 155 205 19. Raft of Ustuts 21 0.3 1.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 - As per Covemast 1.66 1.56 4.89 3.76 5.22 9.9 7.2 8.5 6.4 B.69 6.30 11.84' 11.18 9.33 9.3 9.6 9.0 11.8 10.0 9.0 - Useteo Istevst 31.4 24.4 23.7 23.7 23.4 26.1 28.1 34.5 38.9 Avezage !agifg (Constant Pa1s"lMkh) '.3 ' DIA XF3AZA P -1 (AS OS NM= 31) Ases 19UI81--- 19611852---- 1962182 1965154 1904185 1965186 19864111967186 1968169 1lt990 19919 1911219919L- -7WC) 19919 1ltff9 195196 PI#6d Asset 0ars Fixed SM 41 42 487 4964 M1 108 100 142 14254 14683 17513 20601 229 3902309 t ss:Ase. DSepeisilmi 413 5U 601 .716 1os 1308 160 197 229 2717 314 W5 4110 4728 57 Nt Lmed Asse - 3366 317 392) 4121 5925 7607 820 8505 1im*4 liSS? 11538 1s928 16491 27861 5S327 47222 Capital V@xks-ia-Lznr sa 1110 1720 2814 4141 53227 200 1945 1422 2242 4532 8392 105 14358 10014 11019 4140 ___-_ _._ _ _ - _-__- __-__ - _ _ total ltmid Asts 44"8 537 J737 8262 9252 10637 10765 U21 14206 16069 1990 24864 SO89 2787 44)46 SI132 Catiest Assst* Cash-frt-land 1 28 32 21 73 1oo 55 222 257 211 S2 496 616 824 1152 1675 I Iuyeatoruis I Sao 410, 414 450 472 149 489 $14 428 426 440 525 618 9w8 ll1 162 C0 3n1triaLty Debtors 77 69 47 298 56 794 12S 1002 37 U15 320 269 4U5 581 86 1200 Oteir CgOnoet Assts -594 59 467 328 .401 421 704 741 778 817 856 901 94 993 103 1095 -y------~------fotal, Cuggot Aset 106 1104 96 0 1107 1491 14" 2487 2280 2200 16n 2011 2292 2"7 3376 4233 S592 tol Asset 546 6441 7697 969 12101 13252 14406 16506 17940 21942 275 3306 41250 48579 56956 Govt. of KAwOi*a 560 560 560 560 60 560 560 60 560 560 560 560 560 560 560 560 Geteal, & 0tt-N Besetwes 156 10 209 396 553 822 641 "1 1ift 1545 1890 2221 265 2152 2990 4990 Tot"l Equity 14 740; 769 9.56 1113 IM1) 1401 1491 1742 2103 2450 2791 2210 2712 4550 55 Long TOM Debt (LD) 4724 5578 8639 802 9161 10276 11407 2222 14072 15272 18649 2)677 2949 2652 ______42759_ 4972_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l CgetLisbitltm 96 123 289 391 469 442 44 684 690 361 601 687 794 1013 1270 167 total.~'4t UsLibi,lities 5346 641 797 96 10743 12101 13252 14406 16506 1794 21942 27155 33496 4125 48579 56956 Equity.as I of 96t+quity, 13 12 10 11 11 12 11 1:1 11 12 11 11 10 9 10 10 0* S 80 C Z 8 LI S 0S 91- S S 11 9 * - CU33*duO(S)wxa -4 o 11 11 11 ?1il ?1 t VT 5T1 CO6£ V C0 90t CO Vrt iSwSs 3qoa C4 S. 191 °10 35s001 es96 9V69 OZ9 090 15s 310Z 5t91 3Tt1 UOZ 6m0 9531 919 t1T0 InWe 1 gsu 009 OTC : 961 6 00- 951 £OC- n s S t -ts s-ff T d p we Go "t 9 SOt sN 9m- n1- *9- a- Ca Lt 101- t- 19- qs 0 0 111 ug 901 UT gt 0 aS £91 1£ tt- t n 6- ME tug £061 01£? 9t11 11T 4qt1 99 ou "it MC 1t 19 11 t 91 LU @1*303216t Team Go1-0 Tin 19" Ott ST9 a1 Ut £9 959 119 A"1 Ls f61 on1 et2 1 9131m "CT 6301 £03 Su aLO tO 19£ 1£ se Ca£6t . La 19" o0n UW o"I *V9A *ToNS U96 Sgo n "a "O Cott SLT VTt Zt9t cm t86 6SS _ d axomz _u am0 out 6069 tug NOS nuC L@1Z COZ9T t9Lt SLt t 9TtC+ gm us iS S--V tot aLt fF ObZ 9 Oft OI 06 isot - cnzt Ot1 SOOt 69 9"o OngS am Mc oti# 8 nc 8ZtZ94 uaz gSf 9UXt T"t TWD ------ ^ cSo U S"L n9 twu WCmflm gmt tzn goZtt 8 n ;ZOm T_14o T~~~~n t on c on TI a _oooe 13g 13S L30 U6 99 09£ 09 a1 at0 Ca 91 mSZ "6 9go 0 L990 000a31 06~~~ ISIML 191a" 53 £19cs ff931* VOs"X110 11tOo 96111 05 01LS 1an 361*t tot 319on 99969t% -.t9" 191 3£S1*30M, _>4 un4 sF 3 OmW Om9 *tZ cm t L St gm t Ctan tnt LO CU tZ X*T . ZG -14 Toe W u9n 96 319 Stu C o91n WV tt1 at Su mi9 A6 U p. n"cc mmffm to T COTT Go" 09n *t ML Z9L #Sv 9Lt Su c at u3ot COC mmt - -w_w ------ILIT 056136 319 099 319 319 911 911 IS St1 )6 11u1 9 01108. 119" 991 UlIfflU 131£01S6 l l 961 391119tIt 161060911 3111t £91t£6 l WAS61(it1 19£ "" 91311a"Mol 1itl301olvat 6£ C9l"t1 g0101 tt 31602380 60oli q.nu8 ------SROINM-- M AD -AZWrf OM -- --- 96116?£696691161 61161 6166116166 06631 61331 31£6' low6 316 313191311136 316 306 (211111Wxmm"nsn v ANNEX4.2 -82- o' Page 5 of 5 INDIA SECONDKARNATAICA POWER PROJECT KARNATAKAPOWER CORPORATION Assumptionsfor FinancialProjections Income Statement Generation : KPC's Generatiqp Forecast. Sales Revenue : hfriffincreases assumed to satisfythe 31 Rate of Return(after interest) Covenant. Other Revenue s Incomeon KPC's ConstructionEquipment rentals etc.,tassumedas 2,5Z of ConstructionProgram. Fuel Cost i 'Coalat Rs 411/Tonneincreasing by 151 annually; Oil at RS 3.39/literi)creasing by 10 annually. Operation4 Maintenances 1.51 of gross fixed assets in operation. EstablishmentEx#enses : 151 annualincreases except in 1989/90and 1993/94 when a 201 increaseis assumeddue to expected generalwage increases. Royaltyon Generation s Pfyment to COK for water used for electricity ;eieration,currently at 4 paisa/kWh. Depraciation s 31 of gross fixed assets in operation. Balaxkpe Sheet Cash s 2 month'scash operatingexpenses. * Inventories s 31 of gross fixed assets in operation. AccountsReceivable s Forecastin monthsof sales as follows: ;.,1987/88 to 1989/90- COK actionin reducingKPC's and KEB's receivables(pars 4.30); 1990/91and after- 1.0. , &9 Other CurrentAssets S 51 increaseannually. CurrentLiabilities s Forecastat 301 of currentassets. Sources and Applications of Funds statements Investment Program 3 KPC's 10-year investment program including interest during constructio. ; Debt kpayment I Term of 20 years, including 5 years' gracet assumed for Bank Icon and all COK loans. KMMTAKAPonm II swick KABUATAKELECTRICtTY BO8 POOSINVESINEPUOEAN (nCw om fut wittilion) MM Of Sohus art lat.Cost MOM/8 1969/90I900/1" M99M 1992/9199/9 1994/9519g5/96 400KV TR*hf1SSI11LIME ...... 7... -11sip.h.sim" spin8/9 245.2 100.1 61.5 0.0 0.0 0.0 0.0 0.0 0.0 8himgm4slmuipl~~ 93/94 77.5 51.8 123.3 325.4 207.9 65.1 0.0 0.0 0.0 Kaigm-Siral.- ~~~92/9145.2 131.1 17.9 47.0 53. "42.4 0.0 0.0 0.0 Sfrst-Osvdtmgwin 91/95 408.8 20.8 38.6 112.7 121.4 101.6 0.0 0.0 0.0 - Ia,uiwsr.4stiuigsla 90/91 58.8 171.2 179.8 70.5 0.0 0.0 0.0 0.0 0.0 k'wst..ffiudr*.d 90/91 176.6 [email protected] 50.2 24.9 0.10 0.0 0.0 0.0 0.0 sismut al40w Ir'. ie 405.1 471.1 588. 382.4 209.1 0.0 0.0 0.0~ 0 ~~~~220KYVTR*UUSISIC LIES so IraSM &Pi"/9 32.? 8.0 247 0.0 0.0 0.0 0.0 0.0 0.0 ~IThi.t~q*pm 93/94 43.1 0.0 0.0 0.0 13.2 21.? 8.2 0.0 0.0 0a~mssO-0irlaas win8 98.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 NeuJhriNmhI NAM9 64.5 1.3 20.9 22.6 14.7 3.8 0.0 0.0 0.0 NhspE.imar S9/90 45.2 1.3 28.6 0.0 0.0 0.0 0.0 0.0 0.0 jhr-KedsuMi 90/1" 41.0 11.3 15.7 3.2 0.0 0.0 0.0 0.0 0.0 o9/9 65.5 10.5 55.0 0. .0 0.0 0. 00 00 LinkLines to SutMi. Station 92/9 12.3 0.0 0.7 3.5 7.3 0.5 0.0 0.0 0.0 LILOPew-iIsp 68 0.7 -00 0.0 0.01 0.0 0.0 0.0 0.0 0.0 LO PayaISas.868 3.9 0.0 0.0 0.0 0G.0 0.0 0.0 0.0 0.0 LILO Ilw W"uU99 4.7 0.6 4.1 0.0 0.0 0.0 0.0 0.0 0.0 LO eigUstom 9219 3.2 0.0 0. 0.0 1. 1.? 0.A 0.0 0.0 Km~aSms(I(t mn DC towes)15/9 26.4 0.0 0.? 0.7 5.9 15.3 3.8 0.0 0.0 Ka*s-tu~~~eaUi~90/1" 39712.8 13.8 2.7 0.0 10.0 0.0 0.0 0.0 SILOlwaaavsoti-bAI 93/9 12.8 0.0 0.7 .1.4 1.5 7.6 1.6 0.0 0.0 - 0.0 0.0 0.0 1.9 5.0 10.1 SLO Pesao95/96 '17.0 Co 0.0 0.0 0.0 PPs~~~sui 90/91 66~~~.2 - 10.3 35.1 20.8 0.0 0.0 0.0 8hub~Cts~'d)-usWwid95/96 6.1 O'.0 0.0 0.0 0.0 0.0 0.5 0.8 6.7 C) ~ Mi4.lgmm~~ 95/94~~~~~"83.0 0.0 0.0 1t.4 22.0 22.9 36.6 0*' 0.0 Sr Jali-" IrII Stn. 96/9 35.4, 0.0' 0.0 -0.0 0.0 0.0 0.0 1.7 33.7 Ihusvati, IUPISthaavati $.$tn 93/94 40.4 0.0 3.6 3.0 4.9 25.9 3.0 0.0 0.0 1jO(-SuIgmm 94/9 79.9 -0.0 0.0 1.4 5.9 22.9 41.3 8.3 0.0 - P~sIm.Cthsu~t).uesean94/95 186.1 0.0 0.0 4.4 29.4 39.7 79.5 33.1 0.0 ~~~Sec~~~R. 9wI9 19.7 0.0 00 0.0 0.7 15.3 3.7 0.0 0.0 o - - g~~~~4miohed 90/91~~"I34.6 5.2 17.2 12.2 0.0 0.0 0.0 0.0 0.0 0thaw uors toer96 th 75.9 0.X 0.0 0.0 0.0 0.0 0.0 0.0 75.9 CmtminireiMusts i 90/ 481.4 136.1 20.0 10.0 0.0 0.0 0.0 0.0 0.0 1I.11Nissa "1/9 21.2 0.0 0.0 18.1 3.1 0.0 0.0 0.0 0.0 TapN~~~el, 91/92"i 8.1 0.0 0.0 2.4 5S.7 0.0 0.0 0.0 0.0 0 -. ~~~Ssbotm220W Trus. Lines 97.4 240.6 107.9 115.6 177.7 180.0 48.8 126.4 o Umbleta Trumissimn Linn 502.5 711.8 48.S 496.2 386.8" 180.0 "8. 126.4 KARtNATAKAPOME I I P2OJECT KAMUArMAELECTRICITY BORD ft 1 mmPROUMA (in twemnt ft mtition) Vale. of Schm Twwet Est.Cost WM/8 89/90 900/91 91/9 92/9 93/94 94/9 95/96 400 LV STATIWS 2x315nu 220/4K RI-sirel 93/94 347.2 17.9 35.9 79.0 96.2 83.8 20.8 0.0 0.0 1a315WA440A220ODavanwi 9W/9 325.2 17.0 33.9 73.6 89.S 78.0 19.6 0.0 0.0 1dUIONV400122 Nutmtinl 9019 322.6 87.5 '97.1 74.2 0.0 0.0 0.0 0.0 0.0 IU50100A2201440 at Tat VMp%919355.9 0.0 S.7 35.7 76.3 215.4 22.6 0.0 0.0 400122 ky4.lmuuta 9219 90.4 0.0 0.0 0.0 20.1 60.7 9.6 0.0 0.0 takbtata 400-k 3mststtiom 12.3 172.7 262.S 282.2 437.9 72.7- 0.0 0.0 220 LV BUTATiM4 2uiOIIIA 2ZM6 Trf.Kativatti 868 6.1 19.5 0.0 0.10 0.0 0.0 0.0 0.0 0.0 2x10SWA=0" Trf.'-VelhaNa 95/6 154. 0.0 0.7 1.4 1.5 4.6 31.8 49.6, 64.6 2al00 NO 220/110Trf.-Tiptwr 53.8 0.0 0.0 11. 35.0 7.1 0.0 0.0 0.0 ZaIOISWA220146 Trf.-Kotw 125.7 0.0 0.7 1.4 1.5 1.5 12.1 42.8 45.7 2itlO rf.WAi-IINORIIO 29.010.0 26.8 40.3 44. 7.2 0.0 0.0 0.0 O 2x100NO220/110 I'f. $ad 2B:3 0.0 11.3 17.0 0.0 0.0 0.0 0.0 0.0 21100Wa 220/46 T?f.vliura)w 0 76.1 17.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ZIxIO N WA2066Trf.-U.R.5 09 79.2 15.4 39.5 24.3 0.0 0.0 0.0 0.0 0.0 RilOGWA 206TrJv.it 49 121.5 0.0 0.0 0.7 1.5 21.9 47.7 41.3 8.4 ZaID WA 2111 r.uu /5102.6 0.0 0.0 0.0 1.5 12.2 22.3 33.1 33.7 21100WA 2/TiEf.Tumw 919 4.9 0.0 16.7 31.6 6.6 0.0 0.0 0.0 0.0 2119WA 22/TE. p. 1 81.5 0.0 6.1 54.0 21.4 0.0 0.0 0.0 0.0 1x10 A20/5r.Snua 09 29.7 0.0 0.0 29.7 0.0 0.0 0.0 0.0 0.0 1xo0W 2/6Tf.wu.'19 26.5 0.0 0.0 0.0 26.5 0.0 0.0 0.0 0.0 1X100WA 220111 TIEUd d9/332.5 0.0 0.0 0.0 #4i 0.0 32.4 0.0 0.0 1U100WA 220/4 Trf JhImogs 9/531.2 0.0 0.0 ,( 0.0 0.0 '31.2 0.0 0.0 0.0 TffUIt~~~~Sl byS 6~~2.0 10.6 4.0 0.0 ,'0.0 11.0 11.4 29.8 0.0 lwIttuuaStation at Nisan VI&/2 60.4 0.0 11.1 '2S9-- 25.4 0.0 0.0 0.0 0.0' bftshhu stationat Lfe sw 91/9 37.0 0.0 1.1 21.2 14.7 0.0 0.0 0.0 0.0 21100 WA 2201" Trf.NumimW 90/9 90.4 0.0 11.6 30.2 48.6 0.0 0.0 0.0 0.0 2ulOIWA 220/66 Tel. lubbu 91/92 78.8 0.0 5.9 - 52.0 20.9 0.0 0.0 M~ 0.0 Subtot, al -kY sabstatlem 72.9 135. 339.4 249.0 96.7 157.7 216.6 152.4 ft6totet Substations 195.2 308.1 601.9 531.2 534.6 230.4 216.6 152.4 Distribution 305.1 377.8 426.1 482.6 522.0 581. 699.4 762.3 Ruralgtctrlficatton 147.0 164.1 190.8 221.9 241.8 262.9 285.4 341.4 Ian-Pla MKt~~~~~~~~~~~ 403.6 432.0 565.3 587.9 611.4 635.9 661.3 674.3 I To"taIiwitUUt5 U155.4 1993.8 2472.6 2322.1 229.7 1891.1 1911.4 205. 8 -xl mnu, -m= Ms= m==s m suua - DIA KARNATAKAPOWER IS PROJECT KARNATAKAELECTRICITY DORD - SUT8 (TEAR =NDINGWARCH 31) (In Re iLlLiai) 1980181 1981162 1962163 1936 196185 1986 1966167 1967168 196 1989190 1990191 1991192 1992193 1993194 1994195 19951ff Enerw AvallabtUtyC (C&) MM CGenratLoe 514 464 429 396 422 382 352 309 350 Su 350 350 350 350 S30 350 Puobass -J 1C 5634 4404 7175 7159 7741 7016 7169 7202 9552 12472 13116 13766 14652 16056 16366 21276 Puoba"ss - Central Statio- 368 868 1160 156 2415 2450 2.50 2450 2450 2450 3000 3000 Purchases - nteor-State 832 626 508 679 662 135 1470 1400 1400 1400 1400 1400 1400 1400 1400 1400 Total 6960 7896 8112 i234 9213 96?9 10151 10496 13717 16672 17316 17966 18652 20258 23116 26026 Sals of IleatrLty' (Ob) 5414 6193 6299 6473, 1 TS73 t 831 8007 10905 1S254 13766 14373 1502 16308 16606 20951 Losse (X) 22.4 21.6 22.3 21.4 22.6 21.3 22.9 2S.7 20.5 20.5 20.5 20.0 20.0 19.5 19.5 19.5 AV.T?wfLUh sold (PaLs) 27.1 31.1 32.0 34.2 41.2 49.5 57.3 63.2 68.6 68.6 71.3 76.2 91.3 104.3 127.1 155.5 * Ueyw.a Sal" of 3loetrLo1ty 1465 1926 2016 2215 2934 3746 4486 5064 7486 9099 9810 11242 13770 17014 2364 32167 31.ots1ity Duty 97 166 240 265 400 42 438 484 711 769 819 655 897 970 1±07 1247 RN1tubap 12 0 46 221 121 0 0 0 0 0 0 0 0 0 0 0 Other ReVAeS 56 50 72 104 146 159 210 67 71 78 66 95 104 114 1*6 136 Totae Useemuss 1430 2142 2376 2825 3601 4326 5134 5615 6268 9965 i10715 12191 14771 18099 24679 352 Cost of Fow* PutchP_ sff 96 917 1s3s 1605 2334 3374 4124 S422 6S55 673 762 '9652 115 17731 24601 Opeation 4 2te_aae 129 65 139 164 239 271 296 329 362 268 352 389 460 510 5t7 G89 3Stsblsbse Lp&Wee 395 475 500 593 646 96O 1013 118 1230 1536 1766 2031 2336 2803 3224 3707 xLeatrieLty Duty 97 166 240 285 400 423 438k 48 71 789 819 655 897 970 1O7 1247 I>tproeeitlo 102 106 119 134 149 174 tiI 211 241 268 352 369 460 51i 57 689 ToiAl Eqses 1319 1803 i915 2489 3239 416 5312 6316 6014 9215 1022 113*7 1605 1664 23219 SUS1 Wet Enemw beftoe IresurFt 311 339 481 336 36"- -146 -176 -701 252 -70 693 845 116 1451 1660 4219 Int rjt 152 161 176 204 253 413 561 659 896 431 658 1118 1429 1776 1961 2199 Lesst lterest Duo"1 OChnt. 305 429 563 609 707 755 306 Inseam After Inteoret 159 176 285 132 109 -267 -739 -13S0 -646 423 264 290 347 382 434 526 not loam 159 178 265 132 109 -267 -739 -1360 -646 423 26 290 347 382 434 526 Rate of Return 1J - As per Cetqggnt 7.1 10.2 4.2 3.1 -6.8 -17.1 -28.3 -1A.6 6.7 3.0 3.0 3.0 3.0 3.0 3.0 - ReZone xInerest 16.9 21.7 14.6 13.9 4.7 -4.3 -12.0 3.3 6.0 6.4 7.1 8.6 10.1 10.1 0:.2 nAxse T*riff '(Csounutt)( psaIuWh) 57.3 58.6 59.4 56.0 54.9 56.8 62.6 67.5 n.s 5 . 11 Ot UatorLalIy Valuqdet Fix"P ets in U". ( d ; S ~~~~~~~0* 9 l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- G .'' . I' C.rS KAR3ta!aA POUU 1U *AJ3T BALASOs'InR' (AS on Xmasa n1 1960181 19811321962185 1965164198sAIsS 9>851841298167 1967183 1968189 19691901990191 I99192 1992193 199)194 1994195 1995195 Gioss Fixed Aissets 5500 1929 4427 495 5546 '6173 90 796930 8" 11741 2.275. IS2 1699) 19278 22950 2296 Loss sAce. D004asLtLio us6 1028 1145 1.279 1423 1602 179 2001 - 2242 2310 2652 525 s711 422 4799 549 Not Fimed Asases 258 290) 5262 548 4118 4571 .5140 5929 606 9251 10114 32074 1223 15057 2818 171491 Captal 15Iew1-M~es 1412 150 1779 2101 2630 029 2941 2726 2215 586 4417 565 5969 495) 729 total Filmed Assto 56) 4515 4786 5465 6219 729 68 60 94144 11447 1)99 2.6492 1895 21026 2146~76 esa &utam*~1Lues 21 21 21 20 20 6 1 :19 19 19 19 19 19 19 19 19 Xoter-01aft Aco.mmd Balace.s 459 10 545 641 890 555 452 i92 1)2 0 a 0 0 0 0 0 Ouarrt Assets Cash 159 201. 1)2 100 120 180 116 316 116 744 304 91 1095 1545 116 25)7 iflYOtOnlud 55 59 4 s0 55 42 59 79 9 107 150 15 170 19n 250 150 320Uotgcty Debtors 214 296 567 606 1112 19) 2599 1902 2118' 225 25144 2562, 5004 5545 445 67 0th., Ca**it Assets 67 52n 545 647 7 654 1044 1169 150 1446 .1642 26)9 206 2507 253 2694 Ttalu Cazwsft Assmetts 695 665 1086 1605 2050 233) 58 26527 5Sa2 O5M 4921 546 6329 759 955 11)10 TotiA Assets 4992 571 6440~ 7711 695 1056 12448 12456 1)19 1602 I'192 2196 2526 =2645 5248 53)7 Bqiaty a LlsItletS CasigContributions 64 107 129 155 168 251 Su6 58) 59) 426 42 A0N 548 594 648 706 Goeomi Ieset,es 4 2ugplns &42 850 111s 147 i)5 10o9 50 .1010 -to5" -I)) -9 -679 -552 so 484 1010 Total Squtsi 7)8 9)7 1244 1400 1544 1340 484 447 4265 907 506 -177 21.4 445 112 1716 Lou5 Tom Dsbt CL2D) 2226 2)92 2624 5110 SW9 4457 5737 7417 8522 10405 1296 15556 1817) 19907 21851 2554) Stanf 8syezinavm s lwm6 174 208 22) 256 252 260 480 550 S80 435 96 74 8)5 915 1004 1101 6ommtwLvDeosits 502 569 429 477 541 624 825 1025 112 12)). 1554 1467 1654 179 1972' 2106 corgent tLsam I its" 1549 1807 1921 2506 5025 566 4722 4115 444 t5 42 4590. 445 5173 8548 821 Totsal 5suty a LabuitIes 4991 5711 6440 731 695 OU58 12448 12436 39 1802 1695 21:999 236 55 52464 58557 O Debt as X of (Debt4.Zquity) 75 72 GO 69 70 77 89 110 116 106 k04 101 9 97 95 95 32~~~~~~~~~~_.~~~~~Q INDIA KARNATAXAFOUR Zr FNDJUC EARSIAAKAELUCTIRCITY BOARD SauaCES AND APPLICATIOUSOF FUNDSSUTATUN (YEARENDING MARCH 31) (to Rs MLLIII.) Sm,ms 1960161~igolf1981/2 1982135 1983184 1984165 196513 1936137 1987183 1968189 1999190 1990191 1991192 199293 199194 1994195 1995,96 -n----a--S-----s 1a. Ism oprnttms 311 339 441 336 342 146 -176 -701 252 750 493 845 1166 1451 1660 2419 Depreciation 102 106 119 134 149 174 Is$ 211 241 266 352 389 440 510 578 639 Total tatemal SoUrces 413 447 50 '470 511 320 10 -490 493 1018 1945 1*3 1614 1961 223 s1oe Capital .ontzibutLoms 17 is 22 24 35 43 85 27 so 33 36 40 448 53 so $taff Iuperinustion 1m 20 30 17 13 16 as 200 so so 355 6 67 73 31 at 9? 3.our1y Deposits 45 67 59 49 64t3#9 200 100 110 12 133 144 16I 177 194 Govt. of UsmuatahaLOS" 93 122 82 146 223 602 10o6 1292 303 1827 2452 2451 2597 199 2396 2181 0th.: 3ero.:w1 104 176 253 479 556 573 778 438 895 ftopoa Leon so 322 331 447 38 110 otal" Uzowinvws 197 296 335 625 779'. 1175 236 1720 1350 2148 2633 299 2978 209 36 28 Total, gauge" 69 365 1013 111 405 _1669 -2-356 30 20 -3-34 409 -4-372- 4367? _4342 -4953 543 OD4 UxqposodProject 211 670 to"5 60 494 327 0th.: zsvesamtsu 444 567 590 as3 903 1164 2148 92 62 1620 180 2078 241. 2271 266 234 Total Invosmat Prps.: 404 337 590 813 903 1kG 1148 912 837 229 2901 2365 M9G 259 236 236 iffvesttimunt a atsaslbl 0 0 0 -1 0 14 13 0 lotem-4bit Aooitnt alaoes" 31 71 35 96 49 -155 -103 -1i0 -150 -132 o0 a 0 0 00 Deft SaffwIao Zutasest 152~~~~~L161 178 204 253 413 541 659 s 37 429 555 no9 1069 12aw 139 Umpa~~~~~at 33~~~a 134 103 139 29 315 584 40 ass se 274 Su6 341 356 412 469 total Debt SayvLi 235 295 279 343 545 72 145 49 123 -332 70 on1 116 1425 169 2562 Cbags In Working CaPLtal, cub ~2 42 -9 -2 20 60 -a 0 630 so 1? 132 249 5S2 m5 0th.: than Cash -61 -130 178 -se -1in -114 219 45 33 186 432 496 619 69 44 6 net dohag in Workin Capital. -33 -a6 109 -70 -92 -54 155 43 33 a15 492 605 801 3no 5 714 Total Applicationh 692 6a5 1013 1131 1405 1669 236 1507 200 3364 4096 4372 4867 4342t 4953 S63 0 Debt Service C.V02z60 1.8 1.5 2.1 1.4, 0.9 0.4 0.0 -0. 7 .0.4 2.7 1.5 1.4 1.4 1.4 1.3 1.2 CasriL. to Zuwstuaat Pxopros 61 2.6 i5 3 5 -61 -9 4 32 5 3 4 26 32 33 ANNEX4.3 -88- Page6 of 6 - INDIA SECONDKARMATAKA POWER PROJECT AERMATAKAELECTRICITY BOARD Ash_ tiono for Financial Prohections IncomeStatement, Ceneretion Available for Sale *s Based on PC's 8ales Forecast and lower Purchases from VIighboring States and Central Stations. SalesRevenue i Tariff increases assumed to satisfy the 32 Rate of Return (after interest) Covenant. Electricity Duty s Collected on Behalf of COK. Assumed at an AvwrageRate of 7 Paisa/IWh on 865 of Energy Sales since Rural C6operativespPublic and Street Lighting Consumers do not pay this duty.- OtherRevenues s Incomefrom Building Rentals, Meter Rentals etc., assumedto increaseby 10 annually. Costof PowerPurchases t Baed on KPC'sAverage Revenue/kUh and forecastprices for interstate/Centr4l Station Purchases. Operation & Maintenance s 32 f gross fixed assets in oper#tion. Eetablishment Etpen*s I 152 annual increases except in 1989/90 and 1993/94 when a 202 increase is assumed due to expected general w"e increases. - Depreciation s 32 of gross fixed aasets in operation. -°Balance Sheet = Cash I m1onth'soperating expenses. Inventories 12Z of grossfixed assets in operation. AccountsReceivable s"Forecastas followss 1987/88to 1989/90- GOK actionin reducing kPC'sand KCe'sreceivables (para,4.30); thereafterabout 25 months'sales of electricity. OtherCurrent Assets s Increasesby 122 annually. CuwrenMLiabilities s Forecastas 'a ratioof currentassets,as followst 1988/89-1.291989/90-1.01 1990/91-0.81 - > andthereafter 0.7. Sourcesand Applicationsof FundsStatements tonsumedContributions a Increasesby 102 annually. 0 StaffSuperannuation Fund I Increasesby an aerage of 102 annually. iectrity Deposits s Increases by an averageof 102annually. Investment Program I MEE's10-year investment program including interest. during construction.. Debt Repayment I Teom of 20 ye&rs, including 5 years' grace assumed for Bank loan and all 0OK loans. -89- 5 > Annex 5.1 Page 1 of 3 INDIA SECONDKARNATAKA POWER PROJECT InternalEconomic Rate of Return 1. As describedin Chapter5, the proposedProject forms an integral part of the expansionprogram for tlo SouthernRegion and, therefore, cost-benefitanalysis needs to be carriedout on the programas a whole ratherthan on the Projectin isolation.A time-sliceof the Southern Region'sinvestment program has, therefore,been analyzed. Capitalcost, incrementaloperation and maintenance,incremental fuel cost and benefit streamsfor the SouthernRegion are shown in Table 1. Assumptionsunderlying these figuresare detailedbelow. Capital Costs 2. Anticipatedcipital expenditure on generatioaat financialprices has been convertedto economicprices by: (a) expressingthe importe'4content at cif prices;(b) valuingunskilled local labo'at 0.75 of the marketwage rate;and (c) applyingthe estimatedstandard conversion factor, 0.8, to localcosts. Transmissionand distributioncapital expenditures have been estimatedat 50Z of generationexpenditure. Operationand MaintenanceCosts 3. Incrementalannual operating and maintenancecosts have bee*- estimatedas the followingpercentages of capitalvalue: thermalgenerating plant 2.51, hydroelectric1.13X, and transmissionand distribution1.02. Fuel Costs 4. Averagefuel consumptionof new coal-firedplant has been estimated at 0.645kglkWh. The economiccost 2f coal at the pit head has been estimatedat Rs 164lton. The economiccost of deliveringcoal to load center stationshas been estimatedat Rs 0.54/tonmile. Case 1. Benefits 5. Case 1. benefitsare based solelyon incrementalrevenue at exist- ing tarifflevels. These allow for systemlosses which are assumedto remain constantat 211 of net generationin the SouthernRegion. The averagefinan- cial tariffin FY'85was Rs 0.56/kWh. After allowingfor (a) generalinfla- tion of approximately71 per year from FY'85 to date; and (b) a standard conversionfactor of 0.8, the correspondingaverage economic tariff at cur- rent pricesis Rs. 0.50/kWh. Case 2. Benefits 6. In Case 2, the benefitsof incrementalconsump*ion include elements of consumers'surplus for both industrialand agriculturalconsumers. Surplushas been imputedat half of the differencebetween the averagetariff for each categoryand the alternativecosts of autogenerationfor indueirial consumersand dieselpumping for agricultural. Annex 5.1 Page 2 of 3 7. The cost of i*dustrialautogeneration, at mid-PY'85prices, has been estimatedas folloiss: Purchaseprice (incl.installUtion) is 4,300/kW Life of set - 15 years Averageutilization 15, Discountrate 12% , Operationand maintenancecost' Rs 215/kwper anpnm Fuel and lubricant Rs 1.24/kWh Averagecost Rs 1.88/kWh The costof electricity'whichwould equate the cost of electrical pumpingwith that of dieseiis calculatedat mid-FY'85prices as follows: Electric Diesel Motor/enginesize, 5.0 HP 7.0 HP LifeYears 15.0 -10.0 InvestmentCost As. 4000 Rs.10250 Cost of diesel/hr- Rs. 4.82 AninualCosts ' AnnualCharges Rs. 526 Rs. 1668 r OM LRs. 890 Rs. 2500 Electricity/diesel (800 hrs/year), Electricitycosting X /kWh Rs. 2984 X - Is. 3853,, Total annualcost Rs. 1416 iRs. 8021 2984 X Marginalcost of electricity X - (8021-1416)/2984 at which dieseland electricity 4 s. 2.21/kWh are equivalent .1, 8. Averageindustrial and agriculturalfinancial tariffi; during FY'85 in the 80uthernRegion are eitimatedat Rs. 0.64/kwhand Rs. 0.20/kwhrespec- tively. After allowingfor inflationbetween did-FY'85 and end FY'86,the averageestimated willingness to pay, convertedinto economicterms at a standardconversion factor of 0.8, is Rs. 0.78/kWhfor industrialand Rs. 1.02/kWhfor agricultural.Combining these p Ah revenueestimates of the benefitsto other consumersgives an averagebieiefit of Rs. 0.70/kwhin economicterms. -' s s , . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~7 Table 1 SOUTHERNRESION WNESTENEt-PROIRAN Page 3 of 3 ECUNONICRT FRTR fin. CaP.tip. a & N fuelCap. Exp. 0 & N Total lncr.NetI Not2 Year son. Son. Cast TI&0 t I 0 Cost Salesenof it Benefit 190 192 0 0 91 0 273' 0 -273 -273 1999 4298 0 0 314 '2 944' '0- 944 -944 1999 -2413 1 0 1207 9 309 -3429 -362 1990 4502 1 0 2251* 32- 6794 0. -6786 -6796 1991 5970 1to 0 2905 77 90SO 209 -8955 -8695 1992 -7772 45 94 a90 137 '119,441252 -113721-10035 1993 49~~~675IN8 220 ;438 215 10904 2204 -9B95 -8940 1994 4120 447 447 10* . 294 7378 4636 -5254 -3244 1995 2133 707 047 1047 '325 5079 9142 -1339 21644 1994 sot0 1260 448 344 3910 1l78 150 8s647 199 0 9011 -1240 0 355- 2416 11793 2984. 041 1999 - ~~~0 801 1260, 0 355 2414 11793 2984 94 1999 0 901 1.240 0, 355 2416 11793 2904 2000 *" 0 ~801 1249 QO 355 2416 11793 2994 ~ 1 2001 0 901 1240 0 355 2416 '1179 2941 9,041 2002 0 901 1240 0 355 2414- 11793 299t,,,j M04 2003 0 901 "'1240 0 355 2416 11783 ,294 PI'8041 2005 0 901, 1240 O0 355 2416 11783 294 86041 2005 0 got1 1260' 01 35 2416 11783.2994 -8041 - 2007 0 /o001 1240 0, 355 2416 11793 2984 -8041"- 2009 0 901. 1260 0 355 2416 11793jj2984 9041" 2009 0 >01, 1260 0 355 2416 11793 204 94 20109 0 bl 1260 0 355 241.S 11-793294 9041 2010 0 '001 1240 0 355 24th811783 2984 s04l 2012 0 901 1260 0 35 2414 11783 2984 9041 2013 0 901 1260 0 355 2414 11793 2984 8041 2014 0 801 1240 0 35m 2416 11783 k94H 0041 2014 0 901"1240 0 2416 11783 2994 92041 '2016 0 901 1240 0 ~ 5 2416 11793 2994 9041 2017 0 901 1240 4 55 2416 118 29 041 - 2019 Sol9 1 260 0 355, 2416 11783 2984 0041 20198 0 01 1260 0 .. 355 2416 11793.2994 9041 220019 0 901 1260 0 355. 2416 11793,2994 9041 2 20210 0 901 1260 0 355 2416 11783 2994 0041 2022 0 901' 1240 0. 355 2416 11793 2904 8041 2023 0 901- 1260 0"' 355 2414,11783 29"4 08041 -2024 0 901 1240 0 355 2414 11793 2994 9041 2025 0 90101240 0 355 2416 11703 2904 904 2026 0 90l 1240 .0 355 2414 11703 2904 8041 2027 0 So1 1240 &. 355 2414 1179 2994 9041 2029 0'- 901 1260 0 355 2416 M79 2994 9041 PRR 42 122 -92- ANNEX 6.1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3 , \ INDIA SECONDKARNATAKA POWER PROJECT Documentsand Data Available,inProject File 1. SpecialReport on SharavathiTail Race ltydro-ElectricProject by KPC. 2. EnvironmentalAssessment Report for the SharavathiTailrace Scheme. x-. CompensatoryAfforestation Plan. 4. Ecologist'sConsultant Report - Evaluationof EnvironmentalAssessment Reportand Compens,gtoryAfforestation. 5. Reporton Tidal Effectson Tail-WaterConditions by KPC. 6. Augmentationof BangalorePower Systemto Meet the Load Demandsfor 1995-2000AD by Kp_-?- 7. TransmissionLines and SubstationsOutside Bangalore by KEB. 8. DetailedProject Cost Estimates., "9. -pporting Schedulesfor FinancialProjections. If1 I) INDIA SECONDKARNATAKA POWER PROJECT, GENERATION,TRANSMISSION AND DISTRIBUTIONCOMPONENTS .*,jew.e_ _ 'hmP u-IP IIsti * . . . awb ...... _,. O, * O *0 , 0aokA,a0 Mmsv - G -w 400Ws ' 'a- - -~~~-=4 220ww wX- lek o "OW brur okm~~~~~~~~~~~~~~~~~~ .y##/D^biS J,;. -. ue fv ...... eve F. \ ,. ANDHRA PRADESH ,,* L 9 S , X, g , o 0 * . A,rcwbic,'n' \h@ vSXt, ^ h>0 , 7 > ~.) b 2. .0 KERALA '1yQ ~- s 4* ' ;i C . IBRD20893 SECONDKARNATAKA POWER PROJECT PowAtbd Aj <\ / ' ~ ¢ { ' ^ "/ '' ijd nShoravathi TailraceProject (md Poe Hwou ;~~~~~~~~~~~~~~~~~~x2W7, MCIb3Vf ts 2=5/° \ * )1{ 0- Mkd A.Vh 3~~~~~~~~~~~~~~~ - ft-.d -- < V-1-ba AIWAM~~~~~~~~~~~~~MTEMAW~IM. ~ APIL 1988