Document of The World Bank
FOR OFFICIAL USE ONLY
| TL CPY~ Public Disclosure Authorized
Report No. 4799-TH Public Disclosure Authorized
STAFF APPRAISAL REPORT
THAILAND
SECOND MAE MOH LIGNITE PROJECT Public Disclosure Authorized
March 23, 1984
I'~~2 Public Disclosure Authorized
Industry Department
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS
Currency unit Thai baht (B) B 1.00 = 100 stang US$1.00 = B 23.05 B 1.00 = US$0.0434
WEIGHTS AND MEASURES
1 meter (m) = 3.281 feet (ft) I cubic meter (m 3 ) = 35.315 cubic feet (ft3 ) = 1.308 cubic yards (yd3 ) 1 kilometer (km) = 0.622 miles (mi) 1 bank cubic meter (bm3) = 1.308 bank cubic yards (byd3) 1 kilogram (kg) = 2.205 pounds 1 metric tonne (t) = 1.1 short tons (st) I million metric tonne (mt) = 106 tonne I metric tonne per year (tpy) = 1.1 short ton per year (stpy) 1 kilocalorie (kcal) = 3.97 British thermal units (BTU) I kilocalorie per kilogram (kcal/kg) = 1.805 British thermal units (BTU) per pound (BTU/lb) 1 kilovolt (kV) = 1,000 volts I kilowatt (kW) = 1,000 watts (W) 1 Megawatt (MW) = 1,000 kilowatts (kW) I Gigawatthour (GWh) = 1,000,000 kilowatthours
ABBREVIATIONS AND ACRONYMIS
ADAB = Australian Development Assistance Bureau ADB = Asian Development Bank DMR Department of Mineral Resources dwt = deadweight ton EGAT Electricity Generating Authority of Thailand KfW Kreditanstalt fur Wiederaufbau (F.R. Germany) NEA = Metropolitan Electricity Authority MISI = Meta Systems Incorporated NEA = National Energy Administration NESDB National Economic and Social Development Board PEA = Provincial Electricity Authority PTT = Petroleum Authority of Thailand RC = Rheinbraun Consulting GmbH (F.R. Germany)
THAI FISCAL YEAR
October 1 - September 30
Industry Department March 1984 FOR OFFICIALUSE ONLY
THAILAND
SECOND MAE MOH LIGNITE PROJECT
STAFF APPRAISAL REPORT
Table of Contents Page No.
I. INTRODUCTION ...... 1
II. THE ENERGY SECTOR ...... 1
A. Energy Consumption .1.....1 B. Energy Resources . .... 2 C. Sector Policies ..... 3 D. The Power Subsector 5...... 5 1. Institutions ...... 5 2. Generation Capacity ...... 6 3. Investment Program .. 7 E. Bank Participation in the Sector . . 7 1. Previous Loans ...... 7 2. Project Performance Audit .. .. 8 F. Lignite Resources ...... 8 1. Reserves and Production...... 8 2. Development Prospects ..... 9 3. Lignite Pricing...... 10
III. EGAT - THE BORROWER ...... 11
A. Organization and Management ... 11 B. The Lignite Mine Department .. 11 C. Manpower and Training ...... O- ...... 13 D. Financial Position...... 14 E. Accounting and Auditing .16 F. Load Forecast and Development Plan ...... 16
IV. THE PROJECT ...... 17
A. Project Scope and Objectives ... . .17 B. Project Description ...... 18 1. The Mae Moh Lignite Deposit . .. 18 2. Mine Planning ... 19 3. Technical Assistance and Training . . .20 4. Environmental Aspects ...... 21
This report has been prepared by Mrs. M. 0. Smith, Mr. P. Kotschwar, Mr. A. Leon, Mr. C. Warren, and Mrs. M. Kutcher of the Industry Department.
This document has a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contents may not otherwisebe disclosedwithout World Bank authorization. -ii-
Page No.
C. Project Management and Implementation ...... 21 1. Project Management ...... 21 2. Overburden Removal ...... 24 3. Project Implementation Schedule . . 25
V. CAPITAL COSTS, FINANCING PLAN, AND PROCUREMENT ...... 27
A. Capital Costs ...... 27 B. Financing Plan ...... 28 C. Procurement and Disbursement ...... 30
VI. FINANCIAL ANALYSIS ...... 34
A. Mine Operating Costs ...... 34 B. Financial Projections ...... 35 1. EGAT ...... 35 2. Lignite Mine Department ...... 37 C. Financial Rate of Return ...... 39 D. Project Risks ...... 41
VII. ECONOMIC ANALYSIS ...... =.,. 41
A. Economic Rate of Return ...... 41 1. Incremental Analyses ...... 42 2. Substitution Analysis .. 42 B. Foreign Exchange Savings and Other Benefits ... 44
V]:II. AGREEMENTS REACHED AND RECOMMENDATIONS.... 44
A. Agreements ...... 44 B. Recommendations .46
TABLES
Thailand - Power Generating Capacity ... 6 Lignite Production and Consumption in Thailand, 1977-82 . . 9 EGAT's Operations, 1975-82 .. 14 EGAT: Selected Financial Indicators, 1977-83 .. 16 EGAT Load Forecast: FY1983-92 ...... 17 Second Mae Moh Project: Capital Cost Estimate . .28 Financing Plan ...... 29 Project Procurement Packages ...... 31 Allocation and Disbursement of the Bank Loan .. 32 Estimated Disbursement Schedule for Bank Loan .. e.... 33 Mae Moh Production Schedule .. 34 Estimated Cost of Lignite at Mae Moh at Full Production, FY87...... 35 EGAT - Summary of Financial Projections .. 36 EGAT Lignite Production, 1984-92 ...... 37 -iii-
Page No.
EGAT Forecast Lignite Price ...... 38 Lignite Mine Department Summary of Financial Projections ... 38 Sensitivity Tests on Financial Rate of Return for Mae Moh Mine Expansion and Power Units 5-7 ...... 40 Sensitivity Test on Economic Rate of Return for the Power Units 5-7 and Related Mine Expansion ...... 43
CHARTS
3-1 Organization Chart of EGAT's Lignite Mine Department .12
4-1 Project Management Organization...... 23 4-2 Implementation Schedule ...... 26
ANNEXES:
1 EGAT Power Development Plan 1983-96 2 EGAT-Status of Bank Group Operations 3 Thailand Lignite Reserves 4 EGAT Organization Chart 5 EGAT and Lignite Mine Department Manpower 6 EGAT's Historical Financial Statements 7 Lignite Mine Department Historical Financial Statements 8 Project Capital Cost Estimate 9 Detailed Breakdown of Financing Plan 10 Detailed Procurement Schedule for Bank Loan 11 Estimated Production Costs 12 EGAT's Financial Projections 13 Financial Projections of the Lignite Mine Department 14 Incremental Financial Rate of Return 15 Incremental Economic Rate of Return. 16 Capital and Operating Costs Information on Power Plants 17 Coal Prices and Fuel Comparison 18 Economic Rate of Return on Differential Cash Flow 19 Net Foreign Exchange Savings 20 Main Documents Available in the Project File
MAP: IBRD No. 14430Rl
THAILAND
SECOND MAE MOH LIGNITE PROJECT
I. INTRODUCTION
1.01 The Government of the Kingdom of Thailand and the Electricity GeneratingAuthority of Thailand (EGAT) have requesteda Bank loan to help finance the cost of a second stage expansion of the Mae Moh open pit lignite mine, increasingproduction capacity from 2.8 to about 5.0 million tonnes per year. The first expansionwas financed in part by the Bank (Loan 1852-TH)in 1980. The proposed Project forms part of (i) a long term national developmentstrategy to develop indigenousenergy resources to reduce dependenceon oil imports, and (ii) a medium term investmentprogram to increase use of lignite for power generation from 11% in 1982 to an estimated 25% in 1990. The expansion in lignite productionwould be used to fuel three 150 MW power plants (Units 5-7) under constructionat Mae Moh, increasinglignite-fired power generationat Mae Moh from 375 MW to 825 MW. The Mae Moh mine and associated power plants are owned and operated by EGAT.
1.02 The Project's financing requirement,including escalation, contingencies,interest during constructionand working capital, is estimated at US$250 million, of which about US$153 million in foreign exchange. The proposed Bank loan of US$59.1 million would cover 24% of the financing requirements. The balance of US$190.9 million will be provided from a grant from the Australian DevelopmentAssistance Bureau (ADAB), a loan from Kreditanstaltfur Wiederaufbau(KfW), commercialborrowings, Government equity contributionsand EGAT's internal cash generation.
1.03 The Project was appraised in January, 1983 and a follow up mission was made in June, 1983. The appraisal team consistedof Mrs. M. 0. Smith, Mr. P. Kotschwar and Mr.,A. Leon.
II. THE ENERGY SECTOR
A. Energy Consumption
2.01 During the 1970s energy consumptionin Thailand grew at a rapid pace (averaging8.8% p.a.) due to growth and structural change in the economy that expanded industrialand service sectors as well as commercializedagriculture. The growth in energy consumptionwas unrestrainedby domestic energy prices, which were not adjusted in line with increases in internationaloil prices. In 1981, total commercial energy consumptionin Thailand was 16.2 million tonnes of oil equivalent (toe), compared to 5.9 million toe in 1970. -2-
2.02 The efficient development of Thailand's indigenous energy resources is of primary importance to reducing the country's import dependence, increasing its fore4gn exchange savings and promoting its industrial development. Following the two oil shocks in the 1970s, the average value of Thailand's energy imports as a share of total imports rose from 13.4% between 1970-74 to 28% between 1979-81. The average value of energy imports in the two periods rose ten-fold (from Baht 5.1 to 52.0 billion) and by 1980, the economy's export earnings required to finance energy imports reached 45%. Virtually all petroleum products, accounting for 71% of total energy, were imported or were refined from imported crude.
2.03 In response to the economic developments of the 1970s, the Government prepared the Fifth Five Year National Economic and Social Development Plan (1982-86) which addressed four interrelated basic energy sector issues: (i) development of indigenous energy resources, such as natural gas, lignite and hydroelectricity; (ii) establishment of rational energy pricing policies; (iii) promotion of energy conservation programs, and (iv) improvement of energy sector management, coordination of policies and investments.
2.04 Prospects for meeting the Plan's energy sector objectives in the 1980s are good. Since the Plan was formulated, domestic energy prices have been adjusted to reflect economic costs for most products (para. 2.14). The growth of energy consumption has been sharply reduced for most products (from an average 8.8% p.a. in the 1970s to about 2.5% p.a. since 1979), due to the steep rise in energy prices and the global recession which has slowed Thailand's economic growth.
2.05 Based on the development of natural gas and lignite resources proven to date and on the continued expansion of hydro potential, as well as energy conservation and curtailed energy demand, particularly for petroleum products, Thailand should be able to achieve a structural shift in composit±on of its energy consumption, reducing the share of energy imports in its overall energy consumption from 89% in 1981 to 38% by 1990. The share of lignite in total energy consumption is expected to increase from 4% in 1981 to 10% in 1990.
B. Energy Resources
2.06 Natural gas reserves in the Gulf of Thailand are currently estimated to amount to about 20 trillion cubic feet (tcf), of which about 4 tcf are proven. Gas production began in September 1981 in the Erawan field at a rate of 70-80 million standard cubic feet per day (MMSCFD). During 1982 and 1983 production gradually increased to about 150 MMSCFD, but remained short of the 200 to 250 MMSCFD which had originally been expected. The shortfall is attributable to technical difficulties and to the fact that the gas reserves are distributed over smaller than expected reservoirs. Proven reserves have recently been reassessed downwards. -3-
2.07 Explorationand current finds of oil in Northern Thailand have improved expectationsof increased domestic oil production. Three small oil fields in the Fang area currentlyyield about 800 barrels per day (bpd). Production at Sirikit began in 1983 at a rate of 5,000 bpd, increased to 10,000 bpd by January 1984, and is expected to increase to 17,000 bpd by 1986. Oil shale deposits in Tak province are under feasibilitystudy by the Department of Mineral Resources, with the assistance of the Government of the Federal Republic of Germany. At present oil prices, however, oil shale development is unlikely to be economicallyviable.
2.08 Substantialincreases in Thailand's lignite deposits have been indicated by recent drillings. Known reserves are 857 million tonnes of which 814 million tonnes are at Mae Moh (para. 2.28). Mae Moh's reserves are sufficientto sustain 1,725 MW in power generating capacity for at least 30 years, and are the basis for estimates that by 1990 about 25% of EGAT's total generation could be from lignite-firedthermal stations.
2.09 The total hydroelectricpotential of Thailand's rivers is estimated at about 9,300 MW, not including the internationalrivers (Mekong and Salween) whose developmentpotential of 25,000 MW is currentlybeyond reach due to major political and social obstacles. About 1,380 MW of hydropower are now in operation,2,100 MW are under construction,and about 2,500 MW in 25 projects are at various stages of identificationor feasibilitystudy. Mini-hydro potentialat over 100 sites is estimatedat about 3,290 MW. According to current plans, hydropower productionwill increase at an average annual rate of about 13% between 1981 and 1995.
2.10 Thailand's other energy resources include fuelwoodand possibly geothermal enEry. Fuelwood resources, once plentiful, are rapidly being depleted and deforestationis becoming a serious problem. Geothermal explorationis being carried out by EGAT in the northern part of Thailand near Chiangmai.
C. Sector Policies
2.11 Energy sector policy and planning functions involve the Cabinet, the National Economic and Social DevelopmentBoard (NESDB) and the National Energy Administration(NEA). In principle,NEA, which is under the Ministry of Science, Technology and Energy, is responsiblefor sector planning and coordination. NEA, however, is a relativelyweak institution and energy sector decisionsare often taken ad hoc by various Cabinet committeesand subcommittees. There are, however, limitationsin NEA's statutory power which restrain its formal authority. As part of the Government'sstructural adjustment program, an energy strategy formulation study is being initiated to provide the basis for determiningan appropriateapproach to energy sector p'lanningand for improving the institutionalpolicy framework. -4-
2.12 A number of public agencies are involved in the energy sector in Thailand. For power, three state enterprises provide the overriding share of electric services (para. 2.19). For petroleum and gas products, the Petroleum Authority of Thailand (PTT), under the Ministry of Industry,has an important role in importing, producing, and marketing, along with an active private sector. The Departmentof Mineral Resources (DMR) in the Ministry of Industry has the main jurisdictionalauthority for the oil and gas sub-sector. The DMR also exercises control over lignite mining through enforcementof mining laws and regulations,and granting of mining licenses and concessions.
2.13 Energy is now the single most important sector for public spending. For the Fifth Plan period, the NESDB projects that the energy sector will account for about 26% of total governmental spending, up from the average of 18% during the Fourth Plan period. Energy sector spending weighs even more heavily in total public investment,at 31.9% in 1981, up from 13.7% in 1977. The energy sector is expected to continue to account for more than 50% of state enterprise investment throughout the Fifth Plan period. EGAT is expected to retain its large share (55-75%)in energy spending for the Fifth Plan period, with PTT continuing to grow in importanceas it is involved in further gas and oil developmentand utilizationprojects.
2.14 Until 1979, Thailand's domestic energy prices were held substantiallybelow the average import price of oil. Since then, however, the Government has increaseddomestic energy prices (by 160-180% between 1978-82) to reflect internationalprice developments. Electricitytariffs have also been raised and broadly reflect the marginal cost of power generation,being set at levels that generate a financialrate of return of about 8% on revalued assets (para. 3.13).
2.15 Thailand has established the price levels for its commercial fuels on an individualbasis and there is no coordinatedpricing system across the energy sector. The introductionof natural gas on a large scale, the developmentof lignite and changes in petroleumproduct prices are leading to substantialchanges in energy consumptionand investment patterns. The Government recently initiatedtwo energy pricing studies to rationalizepricing policies in the energy sector and promote the efficient utilizationof energy. The first study on lignite pricing, carried out under the first Mae Moh Lignite project (Loan 1852-TH),was reviewed by EGAT and the Bank in June 1983 and is in the final stages of completion. The second study, undertaken in the context of the StructuralAdjustment Program (SAL I), covers petroleum products, and natural gas and its constituentsand is now under review.
2.16 Tariff levels were adequate throughout the late 1960s and the early 1970s, and the financial position of the power subsector remained strong. During that period, the electricitysubsector enjoyed substantial economies of scale through shifts to hydroelectricand large steam generation coupled with rapid increases in electricitydemand, allowing -5-
periodic generation coupled with rapid increases in the demand, allowing periodic tariff reductions. This trend was reversedwith the fuel crisis and economic downturn of 1973/74which necessitatedlarge increasesin tariffs. Only partial adjustments,however, were politicallyfeasible.
2.17 Severe droughts in 1977 and 1978 adversely affected the thermal/hydrogeneration mix, and in 1979 fuel oil prices increased some 115%. In an attempt to prevent higher energy costs from accelerating inflation, the Government chose to delay passing on the rising costs of electricityto consumers. By mid-1979, the Government,faced with mounting criticismof its handling of the economy, introduceddirect budgetary subsidieson electricitytariffs, costing an estimatedUS$9.0 million per month.
2.18 In 1980, however, the Government agreed to a Plan of Action to remove subsidiesand restore the sector's financialviability, in connectionwith Loan 1852-TH. This plan was implementedthrough a surchargeon heavy consumers establishedin August 1980 and tariff increases in October 1980, January 1981 and April 1981. Thus, despite a difficultpolitical climate and rapid inflation, the Government implemented overall increasesof 158% in EGAT's electricitytariff betweenFebruary 1980 and April 1981 and eliminated oil subsidies.
D. The Power Subsector
1. Institutions
2.19 Thailand has three autonomous state electricityenterprises. EGAT, under the direction of the Prime Minister's Office, is responsible for power generationand transmissionand sells bulk power to large industrialconsumers and to power distributionauthorities. EGAT, as the beneficiaryof the proposed loan, is described in more detail in Chapter III. The MetropolitanElectricity Authority (MEA) was establishedin 1958 as a wholly-ownedGovernment corporationunder the Ministry of Interior with responsibilityfor supplying electricityto the Bangkok Metropolitan Area covering the provinces of Bangkok, Thon Buri, Nonthaburiand Samut Prakon. MEA purchases all of its energy from EGAT. The Provincial ElectricityAuthority (PEA) was establishedin September 1960 as a wholly-ownedGovernment corporationunder the Ministry of Interior with responsibilityfor providing and distributingelectricity in all provinces of the country except in the areas served by MEA. PEA purchasesmost of its energy in bulk from EGAT but also generates small quantities in areas not yet connected to the grid. PEA is the Government agency responsible for implementingrural and provincial electrificationprograms.
2.20 In addition to NESDB and NEA (para. 2.11) six other Government agencies have a direct interest in the power sector: the Committee for Power Policy and Development (CPPD); the Budget Bureau; Tariff Rate Committee (TRC); Ministry of Finance (MOF); Foreign Loan Committee (FLC); and PetroleumAuthority of Thailand (PTT). These agencies review: tariff recommendations;capital project proposals and budgets for submissionto -6-
the Council of Ministers; annual financial performance; and requests for Government equity and loans. None of them has overall policy responsibility; decisions on the sector are arrived at after all the agencies including the state utilities reach a consensus. The system is designed to ensure that sector capital expenditures are rigidly controlled. PTT's interest in the sector arises from the fact that EGAT, as the utility responsible for generation, will be for some time to come, a major customer for natural gas and is the largest customer for fuel oil.
2.21 Power subsector coordination among the different government agencies concerned is achieved through (i) the operations of the Load Forecast Working Group, made up of representatives from NESDB, the NEA, EGAT, PEA and MEA; (il) the current procedure for setting electricity rates whereby attention is given to the cross-funding necessary to ensure that EGAT, PEA and MEA each generate an adequate proportion of their capital investments and to prevent cash imbalances; (iii) CPPD which was formed in 1977 to oversee the functioning and development of the subsector and to provide overall coordination; and (iv) the Ministry of Science, Energy and Technology which was established in 1979 for the development of non-conventional energy sources and new uses of existing energy sources. While coordination in the power subsector is satisfactory, possibilities for further strengthening of policy coordination 4in the energy sector as a whole are being pursued through continuing dialogue with the Government and under the Bankt s structural adjustment loans to Thailand (para. 2.11).
2. Generation Capacity
2.22 At end FY82 insitalledpower generation capacity in Thailand by source was as follows:
Thailand - Power Generation Capacity
Generating Capacity Energy Available at end FY82 during FY 82 Source MW GWh %
Hydro plants 1,384.6 30.0 3,709.9 20.9 Steam plants 2,208.2 47.8 12,346.9 69.6 Gas turbine 745.0 16.1 793.8 4.5 Diesel 282.4 6.1 192.6 1.0 Purchased a/ - - 701.9 4,0
Total 4,620.2 100.0 17,745.1 100.0
a! From Laos and Malaysia.
Source: EGAT Power System Planning Division -7-
At the end of FY82, EGAT owned 88.5% of the country's 4,620 MW power generating capacity,PEA and NEA 1.7%, and self-generatingindustries 9.8%. Steam plants representedabout 48% of installed capacity,hydro 30%, gas turbines 16%, and diesel 6%. About 71% of the electricitygenerated during FY81 relied on imported sources of energy. Total electricity consumptionwas 13,886 GWh in FY81 or 290 kWh per capita.
3. InvestmentProgram
2.23 Since FY79, power demand growth has slowed dramaticallyfrom an average annual rate of 12.5% (FY73-79)to 6.4% for the three year period ending September 1982, in response to (i) significant4-ncreases in power prices (para. 2.18); and (ii) slower overall economic growth during the period as compared with that of the 1970s. Accordingly,official power demand growth projectionshave been scaled back from 11% for the 1980-86 period to 8.5% for the 1982-92 period to reflect the economic downturn (para. 3.17).
2.24 EGAT's total investment program for the Fifth Plan period has also been reduced and rescheduled(from an estimated cost of Baht 95 billion to Baht 77 billion). Projects under constructionand which are designed largely to replace imported oil with domestic energy resourcesin the medium term (before 1988), have been retainedwithin the program including the planned power Units 5-7 and proposed lignite expansionat Mae Moh, while other projects have been deleted or postponed. Details of EGAT's power developmentplans are shown in Annex 1.
E. Bank Participationin the Sector
1. Previous Loans
2.25 The Bank has made eleven loans to EGAT and its predecessor utilities, totalling$542 million, to help finance power plants and transmissionfacilities, and another of $72 million for lignite production.1 / In addition, three loans for a total of $136.6 million were made to PEA7to help finance its AcceleratedRural ElectrificationProjects and the Provincial Power DistributionProject (Loans 1527-TH, 1871-TH and 2312-TH). Details of Bank lending to EGAT are given in Annex 2.
2.26 Since 1978, the Bank has expanded its assistance into the natural gas sector, startingwith a $4.9 million engineeringloan to the Natural Gas Organizationof Thailand (NGOT, absorbed by PTT in 1979) in 1978 (Loan S-10-TH). The loan financed the engineeringwork required for a first gas pipeline project, technical assistance to NGOT and a study of gas
1/ Loans No. 175-TH (1957), 333-TH (1963), 406-TH (1965, 489-TH (1967), 655-TH (1970), 790-TH (1971), 977-TH (1974), 1485-TH (1977), 1690-TH (1979, 1852-TH (1980),2000-TH (1981). -8-
reserves. Further loans to PTT, totaling $197 million, were made in 1979 and 1982 to finance the natural gas pipeline and a gas separationplant and marketing facilities(Loans 1773-TH and 2184-THl,respectively).
2. Project PerformanceAudits
2.27 To date, project performanceaudit reports have been prepared on three of the early loans to EGAT: the First Power Project (Loan 655-TH), the South Bangkok Thermal Unit No. 4 Project (Loan 798-TH) and the Ban Chao Nen (Srinagarind)Hydroelectric Project (Loan 977-TH). The audit reports concluded that the major objectives of the respective projects had been met. EGAT compliedwith all the covenants and its financial performance was satisfactory.
F. Lignite Resources
1. Reserves and Production
2.28 In the last two years, known lignite reserves in Thailand have increased from 750 to 857 million tonnes predominantlyat Mae Moh where reserve levels have increasedby 25% (from 650 to 814 million tonnes). EGAT has been exploring intensivelyover the last several years at Mae Moh and also in the vicinity of Krabi mine, where known reserves are limited (20 million tonnes) but where promising new outcrops have been discovered. EGAT expenditureson explorationhave been in the range of US$1.4-2.0 million p.a. Reserves have also been developedat Li (10 million tonnes) throughNEA's relativelysmall program for explorationand drilling of lignite, at Mae Tip (11 million tonnes) and at various other areas. Details of reserves are given in Annex 3. Thai lignite deposits are of medium to good quality. Heating values lie in the 2,300 to 3,000 kcal/kg range (as received). Volatile matters can be as high as 35%, ash content usually varies from 20 to 30%, and sulphur is generallyhigh.
2.29 Lignite in Thailand is used almost exclusivelyfor large-scale power generationat the mine site since its high moisture and ash content make it uneconomicalto transport, and its potential disaggregationand spontaneouscombustion characteristicsmake it unsafe to store. Power generationaccounted for over 90% of lignite use in 1982. The primary industrialuses of lignite are in tobacco curing, cement and other, minor uses such as ceramics. Most of the lignite used in industriesis produced in four small mines, two in the Li Basin (Ban Pa Kha and Li mines, managed by NEA and Ban Pu Chiang Mai Fuel Ltd.) and one each at Mae Tip (Phrae Lignite Co.) and Mae Tuen (Thai Lignite Ltd.).
2.30 Between 1978 and 1979, when the first expansion at Mae Moh mine was started, lignite productionin Thailand more than doubled (from 0.6 million tonnes to 1.3 million tonnes) and over the last five years (1977-82)has shown an average growth rate of 25% p.a. The major sources of productionare the EGAT-owned and operated mines, Mae Moh and Krabi, as shown in the table below. -9-.
LignteProduction and Ccnsunption in Thailand,1977-82 (000 tones) a/
Average p.a Mine/Consumer 1977 1978 1979 1980 1981 1982 Growth (%)
MaeMoh Mine MaeMoh Pager Plant 47.1 103.9 823.3 875.3 1,184.8 1,193.4 90.9 North Ban*okPower Plant 115.6 75.9 51.8 0.1 0.1 - (100.0) Sub-total 162.7 179.8 875.1 875.4 1,184.9 1,193.4 49.0
Krabi Mine Krabi Poer Plant 294.6 268.2 283.1 363.8 362.4 372.3 4.8
Li Mine Industries, Hosxeholds 85.7 106.7 94.1 110.5 99.6 131.6 9.0
Mae Tip and Other Mines Industries, Households 20.0 20.0 20.0 20.0 20.0 20.0 0.0
Total 563.0 574.7 1,272.3 1,369.7 1,666.9 1,717.3 25.0
_==
a/ On an air dry basis.
Source: EGAT
2. DevelopmentProspects
2.31 The major development prospects for lignite are at Mae Moh where 814 million tonnes of reserves are known. Lignite production capacity at Mae Moh is currently under expansion (under Loan 1852-TH) to 2.8 million tpy to support 375 MWpower generation capacity (Power Units 1-4); Unit 4 (150 MW) will be completed in May 1984. Under the proposed Project, the mine would be expanded to 5 million tpy to support an increased power generation capacity of 825 MW to be achieved by March 1986, through the addition of Power Units 5-7 (150 MWeach), construction of which is well advanced (para. 4.26).
2.32 Long term plans for the Mae Moh mine provide for an eventual expansion to 12 million tpy to support an ultimate power generation capacity of 1,725 MW. This will be achieved through the construction of Power Units 8, 9 and 10 (300 MWeach), to be completed in the early 1990s. No investments for the latter expansions are called for before 1986-87, at which time EGAT would review the proposed investments in light of current power load forecasts, the availability of alternative fuels and their comparative economic costs. -10-
2.33 EGAT has included in its investment plans the development of potential new reserves at Krabi (para. 2.28) in support of a new 75 MW power plant to start-up in 1988 and two additional power plants (75 MW each) in 1989 and 1990. The present mine (0.4 million tpy) and 60 MWpower plant will be retired in mid-1990. These plans are at an early stage since lignite reserves at Krabi still require delineation and development. Development of lignite by industrial and other small concerns is expected to be modest due to the relatively small size of private holdings and optimum use of lignite for power.
3. Lignite Pricing
2.34 Since Mae Moh lignite i-sproduced by EGAT exclusively to supply its Mae Moh power units, there is no market price reflecting its relati've worth. Under the first Mae Moh Lignite Project i4t was agreed with EGAT that the financial separation of the Company's mining operations from its electricity operations was required to ensure that the mines were operated in a financially viable manner and that the economic scarcity value (rent) of lignite was not being ignored in its use as a fuel for power generation. In order to establish an appropriate price for intra-company sales of lignite by the Lignite Mine Department to EGAT's electricity operations, it was also agreed that EGAT would undertake a lignite pricing study, based on opportunity cost principles. This study was contracted to Meta Systems Incorporated (MSI, United States); a draft was completed in January 1983 and, after joint review by EGAT and the Bank, is now being finalized.
2.35 The results of the pricing study indicated that the lignite transfer price of US$19.22/ton in effect during 1983 was close to the estimated lignite opportunity cost of US$18/ton. In addition, it is estimated that, under current estimates of the size of reserves, lignite demand, future mining costs and substitute fuel prices, the economic rent element, or depletion premium, of lignite would rise from US$0.52/ton in 1983 to US$3.55/ton by the year 2000. The economic rent accounts for the cost to the economy of using an exhaustible resource that deprives the economy of future welfare (by reducing the amount of lignite available in the future to generate power at a lower cost than other known energy sources).
2.36 As the opportunity cost of lignite is strongly influenced by movements in the prices of substitute fuels, particularly steam coal, and the estimated date of depletion of the lignite resource, assurances were obtained during negotiations that EGAT would carry out a lignite pricing policy review in 1985, for application in 1986, and at least every three years thereafter. In addition, EGAT agreed that the lignite transfer price would continue to be based on economic principles, while meeting the objective of ensuring the financial viability of EGAT's Lignite Mine Departments. In order that these dual objectives continue to be met pri or to the next full price review, assurances were obtained during negotiations that EGAT would increase the price by 2% each year, in real terms, in 1984 and 1985. -11-
III. EGAT - THE BORROWER
3.01 The borrower would be EGAT. EGAT is a wholly-owned Government corporation established in 1968 through merger of the Lignite, the Yanhee Electricity and the North East Electricity Authorities to provide for the efficient supply of electricity throughout the country.
A. Organization and Management
3.02 EGAT is organized and functions as modern public utility with a considerable degree of autonomy. EGAT is charged with the operation of the power generation and transmission installations under its jurisdiction and the establishment of such new facilities as required for the power grid down to transmission voltages of 115 kV and 69 kV. EGAT also owns and operates lignite mines at Mae Moh and Krabi.
3.03 EGAT is functionally organized with deputy managers for administration, technical planning and procurement, engineering and construction and hydro and thermal power plant operations. The Lignite Mine Department reports to the Deputy Manager for Construction. Details are shown in Annex 4.
B. The Lignite Mnie Department
3.04 EGAT's Lignite Mine Department consists of a headquarters office in Bangkok and two field offices, at Mae Moh and at Krabi, with direct operational responsibilities for the mines at these sites. The headquarters office has four divisions responsible for geology, short- and long-term planning, feasibility studies and technical designs and production cost analyses. The detailed organization is shown in Chart 3-1.
3.05 The Department has been reorganized and expanded in size and scope over the last three years to support EGAT's lignite development plans. Details of the new organization of the Mine Department are shown in Chart 3-1. The main changes are (i) the expansion of the Mae Moh Mines Division to include new mine planning, maintenance planning, geology and quality control, training and computer sections, and management positions (assistant superintendents) for engineering, administration and operations; and (ii) the establishment of the Mine Accounting Division under the supervision and control of the Controller's Department to handle cost control, planning and budgeting and accounting for the mine operations. EGAT transferred financial management responsibility for mine operations to the Lignite Mine Department in connection with the first Mae Moh Lignite Project. Assurances were obtained at negotiations that EGAT would continue to operate its mining activities as Mine Accounting Centers and to maintain separate accounts and financial statements for such centers. THAI LAND SECONDMAE MOH LIGNITE PROJECT Organization Chart of EGAT'S Lignite Mine Department
| Lgnite Mine | | Depa r.n
I1-i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
l l Mae Mo~~~~~~~~~~~~~~~~~~~~~~~~hMine
Solid Fuel Mine 9echnical Mice Planning1- Mine Ev luaton Krabi Mine Mine Acc-u-ting' I PsDevelopment Superintendent. Mae Moh Mine _ eology Division _ Dicisiorn l _ Division Dition Operation Dinssion Division I Dep. Superintendent, Mae Moh Mine
Dlenlogicat fstimnatiorlenE & Mining Plan |j Iehia vrudn& i rMnnetr l nnesrigatioii Poreasing Sect. Design Secliorn Dumn[ Secio Caul Winning Sect FaContrulI Snctinnl I Mine~~~~~~~~~~~~~~~~e Mnlet'
0 Drilling l -| Mining P rjject | - Appurtenance | _| Secrion | S I [ s stani Assistant . t t. Section Sectien Design SeCoalPction SeProduction Drilling tioii_Control Section I Engineering AmnistRaton Operation
Applied tSeolngnMine Coordination -Onerborden & PrncctonRe-pair & …ne t,F Getoginal e_|Miniongi - a ProductMapPion -|Mining|-| M nWork1P Mine Piog in & - Maintne Sa tinsel sc &
Entution Section Engineering Sect. | Section Record Section Section i: Section a | 1-'l C.~ ro- seCotrac 1o
Mining Equipmenitl Mine Safern l Mine Innestigation | | Krabi Mine | - -r Legr--ln |GooyQaiy|_Pou t{ i evc Sparepart Section | l Planning Section Deunloemetimi Adminimltratioii L 4 Mine Lert I Gecloion GuaCing r uremeettio
*Couitrolter DePartment Lnit Riponsible for i Mine Accounting. 2 Tan tr * Staff from Contrnller Dnpartment Working LJnder l rI Lignite Mine Department SuPervision.
ti-
Industrn Department February t983 World Hank-24697 -13-
3.06 The Department'snew mine accounting system is soundly based but not yet fully used to facilitateefficient management of mining operations. This is due to lack of familiarityof the Lignite Mine Department with the management control techniques that the system permits and inadequate communicationbetween the Mine Accounting Division, which prepares the financialdata, and Lignite Mine Department personnel. To facilitate this communication,EGAT plans to relocate the Division from the Controller to the Lignite Mine Department. The Departmentplans, also, (i) to establish quarterly planning meetings between the Mine Accounting and Mine Planning Divisions; and (ii) to include a financialtraining program, devoted specificallyto the Planning Division of the Lignite Mine Department,on the basic financialand managerial aspects of the mine accounting system.
3.07 The Department has successfullydeveloped a professionalcore of capable technical personnel that have gained experience through implementationof the first mine expansion at Mae Moh, the only large open-pit mine in Thailand. The Department lends its services on occasion to NEA, DMR and other Government agencies with mining interests.
C. Manpower and Training
3.08 Management and staff of both the Lignite Mine Department and EGAT as a whole are competentand well-qualified. EGAT had a total of 26,736 employees at the end FY82. Manpower has grown at an annual rate of 13.8% between 1978-1982to meet the needs of the increasednumbers of projects under constructionand the Mae Moh mine expansion. Lignite Mine Department staffing totals 2,023. Of the total, 1,362 are heavy equipment operators, techniciansand skilled labor mostly at the mine sites and 288 are semi-skilledlaborers. The balance comprises engineers (87), geologists (17) and supportingstaff (269). Staffing has increasedby about 60% in the last three years, primarily due to the first major expansion at Mae Moh. The Department is consciousof the implicationsof overstaffingon overhead costs and is planning no further major increases, and possible slight reductions,in manpower over the next several years. Under the Project, EGAT has taken action to limit further additions to the permanent work force (para. 4.22). Details of EGAT's and the Lignite Mine Department'smanpower are shown in Annex 5.
3.09 Training is on-going under the first Mae Moh Project, in mine planning and operationsas well as in financial forecasting,variance analysis and capital investmentevaluation. Technical assistanceis being provided in establishinga management informationreporting system that provides feedback to the Lignite Mine Department necessary for managerial decisions, and informationto relevant financialdepartments (Controller, Budget, Treasury, Internal Audit, Systems and Procedure) in a timely manner. -14-
3.10 Under the Project, EGAT has agreed to prepare a detailed definition of supplementaltraining requirements(para. 4.11) to provide the reinforcementnecessary for full implementationof the proposed Project, including the strengtheningof technical, financialand managerial functions of its Lignite Mine Department.
3.11 During the past eight years EGAT has experiencedrapid growth, with sales and peak demand doubling over the period (10.5% p.a. growth), as shown in the table below. Losses have risen slowly but, at 8.9%, are still within acceptable limits; the annual load factor has fluctuatedover the years but shown a slight improving trend. As mentionedabove (para. 3.08), employmenthas grown rapidly due to the large investmentprogram and the manpower needs of the Mae Moh mine and power plant expansions.
EGAT's Operations, 1975-82
Years ended September 30 1975 1977 1979 1981 1982
Generation,Sales and Staffing
Peak demand (MW) 1,407 1,873 2,255 2,589 2,838 Energy generation and purchases (GWh) 8,212 10,950 13,964 15,960 16,882 Energy sold (GWh) 7,642 10,149 12,933 14,545 15,385 Number of employees 12,697 15,526 17,301 23,233 26,736 Indicators
Losses (%) 6.9 7.3 7.4 8.9 8.9 Annual load factor (X) 66.6 66.7 70.7 70.4 67.9 Sales per employee (MWh) 602 563 747 626 5r75 Employees per MW installed 5.2 6.4 6.0 6.2 6.4 Average fuel consumption (liter/KWh) n.a. 0.263 0.260 0.260 0.264
Source: EGAT
D. Financial Position
3.12 During the FY77-79 period, EGAT consistentlygenerated operating surpluses, in spite of large increases in fuel costs and Government-imposed constraintson tariff adjustmentsas a part of the Government's anti-inflationarymeasures, through greater efficiency resulting from increases in hydro generation and larger steam plants. In FY80, -15-
however, EGAT's financial position deteriorated(with a loss of US$44 million equivalent in FY80). To help solve EGAT's liquidityproblems during 1980, the Government granted EGAT equity contributionsof Baht 1.2 billion (US$59 million) and also arranged a transfer of Baht 100 million (US$5 million) from MEA and PEA to EGAT. EGAT also increased its borrowings in 1980 over the previous year by about 20%, These equity and loan funds ensured that EGAT's normal operations and investment program were not affected,although EGAT was forced to reduce its working capital, eroding its current ratio.
3.13 Since then, implementationof the Plan of Action (para. 2.18) to restore EGAT's and the sector's financial soundness has been effective. EGAT's income recoveredto US$126 million equivalent in FY82 and US$154 million in FY 1983 (before the Government appropriation),and its liquidity position improved substantially. These results were better than expected mainly due to (i) the unusually high percentage of energy generated by hydro plants in place of thermal plants using heavy oil (resultingin an estimated cost savings of US$39 million); and (ii) lower than expected interest rates on borrowings. EGAT's rate of return on net revalued fixed assets, which was negative in FY80, increased to over 8% in FY81 and 11% in FY82 and FY83, meeting the existing covenant that requiresEGAT to have a rate of return of at least 8% by FY82 and thereafter. This covenant,and that requiring an 8% rate of return for the sector as a whole, are repeated in the proposed loan (para. 6.05).
3.14 EGAT's detailed historial financial statementsare shown in Annex 6 and slected financial indicators are given below. These indicators show the sharp improvement in the rate of return since 1981 (para. 3.13) as a result of a 73% rise in the average electricityprice and consequent increase in the debt service coverage, ratio from 0.6 in 1980 to 2.0 in 1983.
3.15 Under the first Mae Moh Project, the Lignite Mine Department began preparationof financial statements for the mine operations,making use of a transfer price based on production costs plus a margin. These statements (beginningin FY81) have been audited as part of EGAT's regular audit and show that the mining operations had a net operatingprofit of Baht 115.4 million (US$5.0 million) in FY1983 after covering all expenses including depreciation,interest, and apportionment of central administrationexpenses. EGAT's Lignite Mine Departmentdetailed historical income statementsand balance sheets are shown in Annex 7. - 16-
EGAT: Selected Financial Indicators, 1977-83
Years ended September 30, 1977 1978 1979 1980 1981 1982 1983 c/
Income Revemne (B billion) 4.6 6.4 7.2 10.2 18.9 22.1 24.5 Mt income before appropriations (B million) 59 232 153 (911) 1,146 2,907 3,540
Profitability Average tariff (stang/kWh) 45.79 55.98 55.34 74.79 129.78 143.55 143.01 Rate of return (%) a/ 2.4 3.4 3.1 (1.05) 8.95 11.3 10.9 Self-financing ratio (%)bI 29.2 8.0 6.2 13.3 19.3 14.0 22.4 Operatirg ratio (%) 91.1 90.7 90.7 103.9 83.5 78.2 78.9
Debt Debt as % of equity plus long-term debt 38.6 43.6 42.6 48.9 50.7 51.9 51.2 Debt service coverage 1.6 1.4 1.4 0.6 1.9 1.8 2.0
=iquidity Current ratio (times) 0.97 0.98 1.02 0.59 0.73 0.88 1.00
a/ Xn average revalued fixed assets. b/ Basedon the average capital investment for three years (past, present and following years). c/ Preliminary figures based on EGAT's no-revalued statements.
Source: EGAT
E. Accounting and Auditing
3.16 The accounting system is adequate and the staff is competent. Assurances were obtained at negotiations that EGAT will continue to submit unaudited quarterly and audited annual financial statements for the mining operations and EGAT on both an unconsolidated and consolidated basis. EGAT's audit is performed by the National Audit Council, the Government organization responsible for auditing all state enterprises. The international accounting firm, Coopers and Lybrand, is retained as financial consultants to cooperate with the National Audit Council and issue a separate report on the annual accounts. To date, reports have been submitted on time and the performance of the consultants has been satisfactory. EGAT will continue to employ independent external auditors.
F. Load Forecast and Development Plan
3.17 EGAT's development plans are based on the consolidation of detailed forecasts made by MEA, PEA and the direct consumers after taking -17-
into account the effects of load diversity, system losses and station services. The load forecasts for MEA and PEA were derived by a study of historical growth trends of different categories of consumers. The sectoral load forecast is shown below:
EGAT Load Forecast: FY1983-92
Average Actual Annual 1982 1983 1984 1986 1988 1990 1992 Growth Peak demand (MW) 2,838 3,207 3,610 4,314 5,099 5,789 6,528 8.7% Generation and Purchases (GWh) 16,882 18,632 20,813 24,864 29,501 33,659 38,153 8.5% Load factor (%) 67.9 66.3 65.8 65.8 66.0 66.4 66.7
Source: EGAT
Growth in the next few years is expected to be slightly higher than the average over the past decade, declining to about 6.5% p.a. by the early 1990s and resulting in an average demand growth of about 8.5% over the 1982-1992decade.
3.18 EGAT's installed power generating capacity at the end of FY82 was 4,088 MW, of which oil-fired steam accounted for 40%, hydro 34%, gas turbine 18%, lignite-firedsteam 7%, and diesel 1%. This compositionhas changed significantlysince 1978 when oil-fired steam accountedfor over 55% of installed capacity. EGAT's power developmentplan is based on the principle of the least-cost sequence of development,following an extensive study of alternativegeneration and transmissionprojects, using computer programs availablein-house. New additional capacity for the period 1983-1996 is estimatedat 6,837.2MW. By the end of 1996, EGAT's total installedpower generation capacity would be 11,045 MW, a 7.2% p.a. average growth. Details are shown in Annex 1.
3.19 EGAT's developmentplan also involves the constructionof transmissionlines and substationsnecessary for distributionand the extension of the network to cope with increasing load requirementsand to improve system reliabilityand efficiency.
IV. THE PROJECT
A. Project Scope and Objectives
4.01 A first lignite loan made by the Bank to EGAT (Loan No. 1852-TH) became effective in 1980. It was designed to meet the incrementaldemand of the power generating facilitiesup to and including the 150 MW Unit 4, necessitatingan increase in lignite production from 1.0 million to 2.8 million tpy. This first project has since been implementedwith only minor -18-
problems and is generally within budget. The proposed Project represents the second stage of the mine expansion, to 5.0 million tpy by 1987, when three additional power stations of 150 MW each (Units 5-7) will be constructed, increasing the total generating capacity to 825 MW.
4.02 The scope of the second stage expansion Project for the Mae Moh open pit lign4te mine includes engineering, procurement and erection of mining and related equipment (mainly conveyor belts, semi-mobile crushers, off-highway trucks, and auxiliary equipment), technical assistance, training and civil works, to increase Mae Moh mine production capacity from 2.8 to about 5.0 million tpy.
The main Project objectives are:
(i) to increase the lignite-fired electricity generation capacity of Thailand from 375 MW in 1984 to 825 MW in 1987, in order to reduce the country's dependence on imported fuel oil for power generation, in line with EGAT's least-cost development program;
(ii) to ensure the economic and financial viability of the mining operations through, inter alia, use of a lignite transfer price that reflects the opportunity cost of substitute fuel and thai: provides for financially sound operations;
(iii) to strengthen EGAT's Lignite Mine Department in technical, operational and financial aspects through the provision of technical assistance and training in specialized areas, and to strengthen its administrative capability in regard to large overburden removal contracts; and
(iv) to minimize any adverse environmental impact of lignite based electricity generation.
B., Project Description
1. The Mae Moh Lignite Deposit
4.03 The Mae Moh power and mine complex is located in North Thailan.d in Lampang Province, approximately 650 km north of Bangkok and 12 km east of the town of Lampang (Map IBRD No. 14430 RI). The main land use in the area is commercial teakwood and tobacco cultivation; there is also some limited subsistence agriculture. Population density in the basin is low and the climate is tropical, with an average annual rainfall of 1,000 to 1,500 mm. The area is adequately served by paved roads and by a railspur line which connects the site with the national rail system approximately 5 km to the south of Mae Moh. -19-
4.04 Extensive explorationcampaigns have been carried out over the Mae Moh lignite deposit. Prior to 1978, some 1,720 boreholeswere sunk. From 1979 to 1981 EGAT, assisted by Longworth CMPS Engineers (Australia), conducted some 73 km of high-resolutionseismic lines and drilled a further 454 holes, totallingsome 98,000 m. All explorationwork was carried out in a competentand professionalmanner. Fill-in drilling for detailed mine planning is continuing,well ahead of the mine face.
4.05 Lignite reserves,with an average ash content of 22% and calorificvalue of 22700 kcal/kg, were establishedat 814 million tonnes; due to restrictionson pit design as a result of slope instability, geological losses, and other factors, 451 million tonnes are presently defined as mineable reserves. A further expansion to 1,725 MW of power generating capacitywould require about 335 million tonnes of lignite over the plants' useful lifetime. Reserves, therefore,are ample and assured.
2. Mine Planning
4.06 The first feasibilitystudies and mine plans for the Power Units 1-4 were prepared by Rheinbraun Consulting (RC, FR Germany), from 1972 to 1978. Subsequently,in 1980/81, Dr. Otto Gold Consultants(FR Germany) prepared a Master Mining Plan (as covenanted under Loan 1852-TH),which was then refined by RC, and now serves as the basis of EGAT's mine planning. The Plan and subsequentfeasibility study cover all mining activities throughout the life of the Project, and take into account a possible expansion to 1,725 MW (para. 2.32), foreseeingan ultimate pit depth of 200 meters and overall stripping ratio of 5.1 bank cubic meters (bm3) per tonne. A Land ReclamationPlan has been prepared by RC (under Loan 1852-TH) based on these mining plans.
4.07 Geotechnicalwork for the determinationof pit slope stability (covenantedunder Loan 1852-TH) has been undertakenby EGAT, RC, and Longworth for the mine configurationrequired for Units 1-4. Further geotechnicalwork is required in conjunctionwith the mine expansion for Units 5-7 and will be carried out by consultantssatisfactory to the Bank under the technicalassistance program (para. 4.10). In view of the importance of this work, assuranceswere obtained at negotiationsthat EGAT would furnish to the Bank a complete report on mine slope stability required by expansionplans by January 31, 1985.
4.08 In the end-of-lifemine feasibilitystudy, EGAT examined three alternativemining methods: (i) trucks and shovels in conjunctionwith semi-mobilecrushers and conveyors; (ii) shovels, mobile crushers and conveyors for overburden removal; and (ii±) bucket wheel excavators for overburden removal in the upper benches of the pit. The shovel/truck/ semi-mobilecrusher alternative in conjunctionwith conveyor belts and stackers for both lignite and overburden transporthas been selected by EGAT. This is consideredto be a technicallysound decision as bucket wheel excavators are not suitable for work under the relatively hard rock mining conditions at Mae Moh and mobile crushers are at an experimental stage of developmentand would be technicallyrisky. -20-
3. Technical Assistance and Training
4.09 Although, over the last 10 years, EGAT's Mine Department has had a very good record in implementingmine expansions and operating open-pit mines at both Mae Moh and Krabi, the size and scope (includingmanagement of the contractualwork) of the next expansion requires training of addittionaltechnical personneland technical assistancefrom abroad.
4.10 For this purpose, EGAT is the recipientof technicalassistance totaling A$5.7 million (US$4.9 million equivalent)under an agreement between the Australian DevelopmentAssistance Bureau (ADAB) and the Government. The technicalassistance covers both the Mae Moh and Krabi mines and about US$4.2 million equivalent will relate to Mae Moh. The objective is to assist EGAT in detailed mine design, mine management and operation,geological and geotechnicalinvestigations with regard to pit: slope stability in connectionwith the extended mine configuration,and environmentalprotection. The program will be carried out over a four-year period (from mid-1983 to mid-1987), for a total of 283 man-months of consulting services. The budgeted cost per man month, excludingequipment and computing services,is approximatelyUS$13,000 including subsistence and travel, which is consideredappropriate. The scope of work of the ADAB program has been reviewed by the Bank and is considered to be satisfactory. ADAB has selected a consultant (Coleman and Assoc., Australia) consideredsatisfactory by EGAT and the Bank.
4.11 The Project includes a limited amount of specializedfollow-on assistance to the ADAB program which is considered importantto Project implementation. This assistance consists of:
(i) an estimated 100 man-months of foreign consulting services for engineering,procurement assistance and erection supervisionof the conveyor systems, at an estimated cost of US$1.3 million;
(ii) 180 man-months of short-term training for technicalpersonnel at similar mine operations abroad, in countriesother than Australia, at an estimated cost of US$0.8 million; and
(iii) about 7 man-months of on-the-job training for Mine Department personnel in financial and management aspects of mine accounting at an estimated cost of US$0.1 million.
The consultingservices would be financed out of the proposed Bank loan, while EGAT will finance the training out of its internal cash generation.
4.12 Detailed definition of the envisaged supplementaltechnical training needs will be carried out by EGAT in consultationwith the Australian experts during the course of the Australian training program. Assuranceswere obtained during negotiationsthat EGAT would present to the Bank a detailed technical training program and a detailed financial training program as follows:
- for the technical training no later than March 31, 1985, to start implementationno later than July 31, 1985; -21-
- for the financial training no later than September 30, 1984, to start implementationno later than January 31, 1985.
4. EnvironmentalAspects
4.13 EGAT is conscientiouslyseeking to minimize the negative environmentaland health impact of its operationsat Mae Moh and is now preparinga general environmentalimpact statement for submission to the Thai National EnvironmentalBoard. Mine reclamation(covenanted under Loan 1852-TH) is underway and EGAT has carried out a successful resettlement program, relocatingabout 300 families from the mining area to a new serviced village. EGAT has carried out a water sampling program for over three years and heavy metal determinationshave shown that no risk from such substancesis present.
4.14 With regard to air quality, electrostaticprecipitators with 99.5% efficiency (as compared to 95% in the previous generatingUnits 1 and 2) were installed in order to minimize fly ash dust emissions. Ash disposal is being made at disposal sites outside the excavated area according to the Master Mining Plan (para. 4.06). EGAT has commissionedan air-quality study with Simons Resources Consultants(Canada), financed by the ADB under a previous power loan and by the Bank under Loan 1852-TH, and has agreed to increase the stack height of Units 5-7, now under construction,from 120 to 150 m, in order to comply with Bank guidelines for sulphur dioxide ground-levelconcentration. The Bank has also financed environmentalmonitoring equipment in order to strengthen the program already in effect. Assurances were obtained during negotiationsthat EGAT would continue to follow environmentalstandards staisfactoryto the Bank and the Government throughout the Project life.
C. Project Management and Implementation
4.15 The Project is to be owned, implementedand operated by EGAT which is the only sponsor. Responsibilityfor overall Project execution, coordinationand monitoring lies with the Directorateof the Lignite Mine Department,which is at present successfullyimplementing the first expansion phase.
1. Project Management
4.16 Responsibilityfor overall project execution, coordinationand project monitoring lies with the Directorateof the Lignite Mine Department. Project management responsibilitiesare delegated to the Deputy Director of the Department,a civil engineer with long experiencein project implementation,both in the power sector as well as the first Mae Moh mine expansion. The Directorate is in charge of overall project scheduling and monitoring,and coordinationof project-relatedplanning and engineeringactivities. The Directorate liaises with EGAT's procurement department and monitors project progress and costs throughweekly, monthly, quarterlyand annual reports and frequent site visits, identifyingproblem -22-
areas and taking correctiveaction. The Directoratealso contracts, supervises and deploys consultantsto be used either in the technicalor financial divisionsof the Lignite Mine Department,or at the mine site. The organizationof Project management is shown ln Chart 4-1,
4.17 Physical Project implementationwill be under the responsibility of the Superintendent,Mae Moh Mine who reports directly to and is controlled by the Directorate. The Superintendency was recently restructured to direct all divisions of the mine, including management of operations as well as the implementation of the expansionProject. In this respect it has three main areas of responsibility:
- Implementationof the mine plan by the mine operatingdivision, for which technical assistancewill be provided by the ADAB program;
- Supervisionof the overburden contractor(para. 4.21), for which purpose a special unit will be created, drawing on the expertise of the engineeringand administrativedivisions; and
- Supervisionof the erection of the crusher, conveyor and stacker systems for both coal and overburden. This unit is already establishedfor the installationof the first lignite handling system for Power Units 4 and 5. Specializedconsultants, to be financed by the Bank, will assist in this task.
4.18 These three units, directly controlledby the Superintendent,are in charge of the front-lineProject supervisionand data collection required for Project mon4toring and reporting activities. They are assisted by the mine accountingunits in assembling cost control data. Mine accounting has been strengthenedby technicalassistance under Loan 1852-TH and further training, including the establishmentof a computerized management informationsystem to streamlinethe system, is included in the Project. The three Project execution units report back through the Mae Moh Superintendencyto the Directorate. -23-
Chart 4-1
Project Management Organization
Deputy Director Lignite Dept. (Bangkok)
EGAT's Procurement Dept. Mine Planning & (Bangkok) _ Engineering Div. ( )(Bangkok)
_ Prject Consultants
Mine Superintendent (Mae Moh)
Overburden Overburden and Coal Mine Divisions: Contract Crushers and Conveyor Operation Supervision Systems Erection Administration (Mae Moh) Supervision Engineering (Mae Moh) (Mae Moh)
Overburden Erection Contractors- Contractor Civil, Mechanical and (Mae Moh) Electrical (Mae Moh) -24-
4.19 In order to assure that Project monitoring and control is done in a professionalmanner, EGAT will continue to furnish to the Bank the normal quarterly and annual Project progress reports, all current critical path schedules,monitoring reports and cost control monitoring statements. In addition, assuranceswere obtained from EGAT during negotiationsthat project management arrangements including project scheduling, cost control and monitoring satisfactory to the Bank will be maintained at all times.
4.20 The Lignite Mine Department has demonstratedin the past its capability for sound project execution with the Mae Moh I project. This first project is on schedule and is expected to be completedin April 1984 in time for the first firing of the related Power Unit 4. EGAT has built up the technical and financial staff of the Department and reorganizedit in support of the first expansion of Mae Moh. With additionaltraining and technical assistanceto be provided under the proposed Project (paras. 4.10 and 4.11) the Mine Department should be fully capable of taking on the second and larger expansion. EGAT's ProcurementDepartment, which is fully familiar with Bank procurementprocedures from twelve previous Bank loans, will assist the Mine Department in procurementmatters. Project management arrangementscan be consideredadequate for successfulProject implementation.
2. OverburdenRemoval
4.21 EGAT plans to mine the lignite and to remove a portion of the overburden and intercalationthat lies in thin layers between the lignite, using equipment to be financed under the project. In addition to their own operationsof mining 10 million bm3 per year of overburdenand lignite, EGAT has contractedthe removal of 15 million bm3 annually up to a total of 90 million bm3 of overburden from the Mae Moh lignite mine, over a period of seven years (1983-90). Subsequently,when 25 million bm3 per year are required from 1990 to 1995, with stripping requirementstapering off thereafter,EGAT will re-evaluateits position and, with the Bank's concurrence,either continue contractingor carry out overburdenremoval by itself. The overburdencontract was bid only among local Thai construction firms, subsequentto a policy decision taken by EGAT's board which was fully approved by the Government at the Cabinet level. The contract will be fully financed out of EGAT's internal cash generation.
4.22 EGAT, having a long history of successfullyhandling large civil work constructioncontracts (hydroelectricdams, power stations, transmissionlines) sees several advantages resultingfrom such a contractualarrangement. By contractingmost of the required overburden removal work, it is able to minimize the initial capital investment required for the mine expansion. More importantly,EGAT, being a parastatal institution,does not wish to have considerableincreases in its labor force, during the peaks in the overburden stripping,of which it cannot divest itself later. -25-
4.23 The pre-strippingwork to be carried out from 1983 to 1986 under the overburden contract has been included in total Project costs (para. 5.01). Pre-strippingcosts account for about one half of the total contract costs. EGAT signed the overburden removal contract in August 1983 with a local joint venture between a civil works contractorand heavy equipment supply firm (SahakolEngineers Company Ltd. and Bangkok Motor Equipment Company Ltd). The Bank has reviewed and approved the contract and Bank technical support will be given to EGAT in supervisionof contract work. Assurances have been obtained from EGAT that, by July 31, 1987, three years before the expiration of the contract,EGAT will, jointly with the Bank, assess the contractor'sperformance in order to re-evaluatethe cost and benefits of the arrangementand agree on whether to:
- renew the contract,under the same or revised conditions;or
- to terminate the contract at its expiration date and have EGAT carry out the work under its own account and management.
In the latter case, EGAT will present to the Bank a satisfactory implementationschedule and financing plan, showing how EGAT intends to equip itself to do such work and the financing sources required therefore.
3. Project ImplementationSchedule
4.24 Project preparationis well underway; the Project implementation schedule is shown in Chart 4-2. Following the signing of the overburden contract in August 1983, which was necessary at that time to ensure that the contractorreach full production capacity of 15 million bm3 p.a. by the end of 1985, the one remaining project component on the critical path is the installationof equipment needed for EGAT's portion of the overburden removal. The erection of the waste conveyors and associatedsemi-mobile crushers and spreaderswill require about 18 months, and detailed engineering,manufacture and delivery will require between 14 and 16 months. Therefore, in order to complete the installationby early-1987, detailed engineeringwas begun in July 1983 and bids are to be invited no later than mid-1984.
4.25 In order to defer investmentsfor as long as feasible and to maximize utilizationof the forty one 85-ton truck fleet to be replaced by the overburden conveyor system, EGAT's constructionschedule calls for a one year gap between the commissioningof the last power plant, Unit 7, and the completionof the conveyor system. Since the mine, at that point in time, will have to be in full production and the truck fleet will be close to the end of its useful life, a shortfall in EGAT's overburden removal schedule could be anticipated. To minimize this risk EGAT plans to re-evaluatethe performanceof its trucks in 1985 and, if required,advance the procurementof the new trucks to be acquired in conjunctionwith the conveyor system, in order to reinforce the ageing fleet. THAI LAND SECONDMAE MOH LIGNITE PROJECT Implementation Schedule
1982 1983 1984 1985 1986 1987
-MF-PCAM- __~~~~~F M Al llJ JA S ON ID J IF Mr,_AM J i _ASO_ N _JIFIM A MI J I AIS|OIN DJ FM A J A JFMA ||J |SONC JF|M|ATMTJTJTATSO0 N
- Constrilction l/nit6FH4 H 417 ;1 111l1l11lFFFF ;
Unit -Construction
MAE MOH MINE EXPANSION
Main EquipmnentProcuremernt
(i) Waste Conveyor Systern (Include Crusher & Spreader)
Prequalif cat ion
Specification
Bidding & Evaluation
Conslructioni
lii 85 ton Waste Truck
(iii) 90 toe Coal Truck
WIv Auxsilliary Equipment 10 (vl 2nd Lignite Handling Systemn
OVERBURDEN REMOVAL By CONTRACTOR
Specificat ion
Bidding & EvaluationilinCon MMILOBM 2 Million 8C CM 3Milo 15 Milin C 1 ILINC 0O/B emoval - L L L -L L Legend M PlaceOrder lIndustry Department *CommercialOperation WrdBn-49 July 1983 *StartErection Wrdgn-49
Ii
4e -27-
4.26 On the power side, units 5, 6 and 7 are under construction,and in March 1984 were, respectively,65%, 19% and 12% completed. EGAT is exercising purchase options obtained while bidding for Unit 4, and procurementprocedures are well underway. The planned start-up dates of Units 5, 6 and ultimately,Unit 7 by March 1986 appear to be realisticand no major slippagesare anticipated.
V. CAPITAL COSTS, FINANCING PLAN AND PROCUREMENT
A. Capital Costs
5.01 Total installedProject cost (excludinginterest during constructionand the Bank front-end fee, but including taxes and duties of US$27.2 million equivalent)is estimated at US$231.8 million with a foreign exchange componentof US$135.0 million. Estimates are at January 1983 price levels and are based on suppliers' quotes obtained by EGAT on equipment and EGAT experience with civil works contracts. Advance overburden removal costs are based on the contract proposals received in May 1983 and review of contractor cost estimatesin June 1983 with the Bank.2/ Estimates include contingenciesamounting to US$44.0 million, or 23% of the base cost. Physical contingencieswere calculatedat 15% of the mining equipmentbase cost excluding advance overburden removal costs (where contingenciesare built into the unit cost) and equipment for which orders have already been placed. Price contingenciesare based on projected international and local price increases for (i) foreign costs of 6.5% in 1983, 9e0% in 1984, 7.5% in 1985 and 6.0% thereafter;and (ii) local costs of 3.5% in 1983, 6.5% in 1984, and 6.0% thereafter. Foreign price contingenciesreflect trends in prices of mining equipmentwhich, including equipment requirementsof pre-strippingand geologicaldrilling, account for about 95% of foreign project costs. The Project capital cost estimate is shown in Annex 8 and summarizedbelow:
2/ Overburden removal totaling 36.5 million bm3 will be required during FY1983-1986,the cost of which will be capitalizedas pre-operating expenditures. Based on a contractor stripping cost of US$2.00/bm3 and an estimatedEGAT cost that ranges from US$1.36/bm3 in FY83 to US$2.01/bi3 the average pre-strippingcost over the period is estimated at US$1.76/bm3 (January 1983 terms), for a total of US$64.2 million. This cost will begin to be amortizedwhen Project production commences. -28-
Second Mae Moh Project: Capital Cost Estimate a/ (US$ million)
Local Foreign Total % Cost
Mining Equipment b/ Waste and Coal Conveyor Systems 12.7 31.9 44.6 19.3 2nd Handling System 5.3 20.4 25.7 11.1 Off-highway Trucks 6.2 10.1 16.3 7.0 Auxiliary Equipment 2.5 2.6 5.1 2.2 Power Supply, Communications and Workshop Equipment 2.1 2.8 4.9 2.1 Total Mining Equipment 28.8 67.8 96.6 41.7
Land 1.5 - 1.5 0.6 Engineering and Training 0.6 6.1 6,7 2.9 Civil Works and River Diversion 12.4 - 12.4 5.3 Geological Drilling 2.4 2.3 4.7 2.0 Pre-stripping 32.0 32.2 64.2 27.8 Increase in Working Capital 1.2 0.5 1.7 0.7 Base Cost 78.9 108.9 187.8 81.0
Physical Contingencies 6.2 7.2 13.4 5.8 Price Contingencies 12.1 18.5 30.6 13.2 Total Installed Cost 97.2 134.6 231.8 100.0
Interest During Construction - 17.9 17.9 Bank Front End Fee 0.1 0.1 Total Financing Required 97.2 152.6 249.8 a/ Totals may not all due to rounding. bI Includes freight and erection costs, import duties and taxes, and spare parts.
B. Financing Plan
5.02 Foreign costs would be met by (i) the proposed Bank loan of US$59.1 million, which will cover 39% of direct and indirect foreign costs and 27% of total financing requirements excluding duties and taxes; (ii) a Kreditanstalt fur Wiederaufbau (KfW) loan of US$16.8 million equivalent; (iii) an ADAB grant of US$4.2 million equivalent; (iv) commercial borrowing or export credits of US$10.0 million; and (v) EGAT internal cash generation of US$62.5 million equivalent to finance the indirect foreign cost of the geological drilling and pre-stripping operations, training, interest during construction, and a small amount of equipment and engineering. Local costs would be met by Government contribution of US$14.4 million and EGAT cash generation of US$82.8 million. This financing plan is shown on an annual basis in Annex 9 and summarized below: -29-
FinancingPlan (US$ million)
Local Foreign Cost Cost Total %
Equity Government Tax Rebate Contributions 14.4 - 14.4 6 Internal Cash Generation (EGAT) 82.8 62.5 145.3 58 ADAB Grant - 4.2 4.2 2 Total Equity 97.2 66.7 163.9 66
Long-Term Debt IBRD - 59.1 59.1 23 Germany (KfW) - 16.8 16.8 7 Other - 10.0 10.0 4 Total Long Term Debt 85.9 85.9 34
Total Financing Required 97.2 152.6 249.8 100
5.03 Government tax rebate contributionswere approved on March 18, 1983 by announcementof the Ministry of Finance on tax exemptions on imported equipment for EGAT constructionprojects up to and including Power Unit 5 and the related mine expansion. The ADAB grant of A$5.7 million (US$4.9 million equivalent)for a four year technical assistance program covering both Mae Moh and Krabi mines, and of which US$4.2 million equivalent will be applied to Mae Moh, was approved in the second half of 1983. The KfW loan for DM 47.0 million was signed on August 25, 1982 and disbursementshave already started. During negotiationsEGAT indicated that, at an appropriate time to be determined in consultationwith the Government and the Bank, it would consider replacing part of the US$145.3 million internal cash generation and the US$10.0 million of commercial bank/exportcredit funds for the off-highway trucks with a possible B Loan of up to US$50 million. Such a B Loan would be sustainablewithin the financial covenants applicable to the Lignite Mine Department (para 6.12).
5.04 Following the precedent set in the first Bank loan for Mae Moh, the guarantee fee payment to Government that is normally required by the Bank for its industrial projects would be waived on an exceptionalbasis, as assuranceswere obtained that no lignite produced under the Project would be used in applicationsother than power generation, and would not enter commercialmarkets.
5.05 Assurances were obtained at negotiationsthat any funds necessary to meet cost overruns or shortfalls in financingwould be made available promptly by the Government to EGAT to complete the Project. For purposes of this covenant, Project completion is defined as (i) completion of physical constructionof all facilities included in the Project; and (ii) when the mine has produced 2.5 million tons of lignite over a 6 month period or when it has operated for a 12 month period at the production -30-
level required to provide Power Units 5-7 with sufficient lignite to sustain operations with such uniformity as not to cause a power plant shut down due to lack of lignite, whichever occurs first.
5.06 In considering the mine expansion and related Power Units 5-7 developments as one development investment package, the Bank loan would meet 6.4% of the total financing required (US$926.5 million). Co-financing would account for about 37% of the remaining financing required by mine and power developments, comprising the (the Export-Import Bank of Japan and Japanese supplier's credits (17.6%), Asian Development Bank (4.9%), KfW (Germany, 2.5%), the Economic Development Corporation (Canada, 2.0%), Government of Switzerland (1.8%), ADAB (Australia, 0.5%) and commercial banks (7.9%).
C. Procurement and Disbursement
5.07 About 91% of all equipment to be financed under the proposed Bank loan would be procured by ICB in accordance with Bank Guidelines. A preference of 15% of the c.i.f. cost of the imported goods or the prevailing custom duties and other import taxes, whichever is lower, would be extended to qualified local manufacturers. Procurement of individual equipment packages not exceeding US$250,000 would be by limited international tendering acceptable to the Bank up to an aggregate level of US$5.0 million. It has been agreed that prequalification of prospective vendors for the crusher-conveyor-stacker system will be required due to the complexity of this package. It is proposed that the Bank would subject the first 10 procurement packages, including the trucks and conveyor systems packages, constituting about 95% of the equipment base price, to prior review and that the remainder of the ICB packages would be submitted by EGAT to the Bank for post-review. A detailed list of procurement packages for the Project is shown in Annex 10 and summarized below: -31-
Project ProcurementPackages (US$ million) a/
EGAT and IBRD KfW ADAB Other Government b/ Total
Equipment Suitable for ICB 52.7 - - 10.0 22.2 84.9
Equipment Suitable for Limited International Tendering 5.0 - - - 8.8 13.8
Second Materials Handling System (already ordered) - 16.8 - - 8.9 25.7
Equipment on EGAT's Budget (already ordered) - - - - 1.5 1.5
Overburden Removal (contracted locally) - - - - 70.5 70.5
Engineering and Training 1.3 - 4.2 - 3.6 9.1
Sub-total 59.0 16.8 4.2 10.0 115.5 205.5
Civil Works and Other C/ - - - - 26.3 26.3
Total InstalledCost 59.0 16.8 4.2 10.0 141.8 231.8
IDC and Front-EndFee on Bank Loan 0.1 - - - 17.9 18.0
Total FinancingRequired 59.1 16.8 4.2 10.0 159.7 249.8 a/ Includes physical and price contingencies. h/ Includes equipmentsuitable for ICB or LIT and all duties and taxes. c/ Includes land, civil works, river diversion,geological drilling and increase in working capital.
5.08 On the basis of discussionswith EGAT it is proposed that the Bank loan of US$59.1 million be allocated as shown below: -39-
Allocation and Disbursement of the Bank Loan (US$ million)
% of Expenditures Category to be Financed 1. Equipment a/ - Waste Conveyor System 39.7 100% of foreign expenditures, - Coal Conveyor System 3.6 100% of ex-factory cost of - Power Supply Equipment 1.9 locally manufactured goods - Communications Equipment 0.3 and 70% of local expenditures - Auxiliary Equipment 3.1 for other items procured Subtotal 48.6 locally.
2. Consultants' Services 1.3 100% of foreign expenditures
3. Front-End Fee on Bank Loan 0.1 100%
4. Unallocated 9.1
59.1 a/ Package values include the cost of spares and price escalation. Physical contingencies and related price escalation are in the unallocated category.
Initial disbursements of the Bank loan will be slow, due to the long manufacturing time of the main equipment component (crusher-conveyor- stacker system). Therefore, only about 30% of the loan will be disbursed by the end of 1985 and 50% disbursement will occur only by the second quarter of 1986. The estimated disbursement schedule is shown below: -33-
Estimated DisbursementSchedule for Bank Loan a/
Estimated Cumulative Calendar Year Quarter Disbursements EstimatedDisbursements …------(US$ million)------
1984 I- - II 0.2 0.2 III 3.2 3.4 IV 1.2 4.6
1985 I 1.2 5.8 II 2.0 7.8 III 2.1 9.9 IV 8.0 17.9
1986 I 6.5 24.4 II 9.0 33.4 III 9.3 42.7 IV 8.0 50.7
1987 I 4.5 55.2 II 2.0 57.2 III 1.9 59.1 IV
a/ Disbursementestimates for equipment take into account prevailing commercialpractices. For the waste and coal conveyor systems the followingassumptions were used: 10% at time of placing the order, 65% at shipment and the remaining25% at the end of the commissioning period.
5.09 Detailed estimateddisbursements for the whole Project are shown in Annex 8. The disbursementprofile is somewhat different from the standard disbursementprofile for Bank industrial loans in the country but is similar to that being experiencedunder the first Mae Moh Lignite project, and is consideredvalid. -34-
VI. FINANCIAL ANALYSIS
A. Mine Operating Costs
6.01 The operating costs of mining lignite at Mae Moh were estimated by EGAT in January 1983 terms based on the Master Mining Plan prepared by Rheinbraun-ConsultingGmbH and EGAT's own operatingexperience. The costs consist of: (i) operating costs for the small portion of waste removal to be carried out by EGAT; (ii) operating costs for the lignitemining to be carried out by EGAT; and (iii) the full costs of overburden removal to be charged by the contractorwho will carry out the major portion of the overburdenwork. The production schedule, showing the production build-up to be achieved in full by 1987 (5 million tpy) and the portions of work to be carried out by EGAT and the contractor respectively,is given below:
Mae Moh Production Schedule
EGAT Contractor Lignite and Year Lignite Waste Removal Waste Removal (mtpy) (million bin) (million bm3) FY83 1.28 11.0 - FY84 1.64 11.3 2.0 FY85 3.03 10.0 13.0 FY86 4.43 10.0 15.0 FY87 4.86 10.0 15.0 FY88 4.87 10.0 15.0 FY89 4.91 10.0 15.0 FY90 4.93 10.0 15.0 FY91 4.97 10.0 25.0 FY92 5.01 10.0 25.0
6.02 At full production (FY87), it is estimatedthat, in 1983 terms, total operating cost per tonne for Mae Moh II will be US$9.98 of which overburden removal will account for US$8.56 (86% of the total) and lignite mining will account for US$1.42. The total production cost per tonne (1983 terms) is expected to be US$17.66 and is broken down into its component parts below. The detailed breakdown of EGAT and contractor ciDst estimates per bm3 at full production is shown in Annex 11. -35-
Estimated Cost of Lignite at Mae Moh at Full Production, FY87 (US$ per tonne)
Current Jan. 83 Terms Terms %
Operating Cost 12.55 9.98 56.5 Depreciationand Amortizationof IDC a/ 6.11 4.86 27.5 AmortizationPre-stripping 0.80 0.64 3.6 AdministrativeExpenses 0.41 0.33 1.9 Exploration 0.45 0.36 2.0 Reclamation 0.18 0.14 0.8 Financial Charges 1.54 1.23 7.0 Income Tax 0.16 0.12 0.7
Estimated ProductionCost 22.20 17.66 100.0 a/ Includes depreciationof fixed assets and amortizationof interest during construction.
6.03 In the projectionsthe operating costs have been assumed to decrease in real terms by 1% p.a from FY86 through FY90 to reflect the expected increase in Mae Moh mine productivity. After FY90 they are assumed to remain constant. Operating costs for Krabi Mine have been estimated by EGAT based on operating experienceat Krabi and are assumed to remain constant in real terms. After FY90 no productionhas been assumed for Krabi Mine since the mine is expected to be depleted,and delineation and developmentof new outcrops in the Krabi vicinity is only at a preliminarystage. In FY87 Krabi operating costs are estimated to be, in January 1983 terms, US$14.18 per ton.
B. FinancialProjections
1. EGAT
6.04 The projectionsfor EGAT, summarizedin the table below, show that the Company is expected to maintain a sound financialposition over the forecast period (1984-92)with energy sales increasingat an annual growth rate of 7.7% (from 18,832 GWh to 34,042 GWh), and revenues increasing by 12% p.a. (from US$1.2 billion to US$3.0 billion). An increasing proportion of revenues is expected to be availableto help finance capital expendituresdue to the expected continueddecrease in operating ratio (operatingexpenses as a percentageof revenues)associated primarilywith the substitutionof lower cost fuels for imported oil. The operatingratio which exceeded 90% in the late 1970's is projected to decrease from 79% in 1983 to 74% in FY92. To finance its construction program through FY90, EGAT intends to borrow about 81% of the required funds, obtain 2% from the Government as equity to cover duties and taxes and provide the remaining 17% from internal cash generation. -36-
EGAT - Summary of Financial Projections (Baht billion)
1984 1986 1988 1990 1992
Energy Sales (1,000 GWh) 18.8 22.7 26.5 30.1 34.0
Total Revenue 27.3 32.9 43.4 54.2 69.5 Operating Expenses 22.4 25.3 32.5 40.0 51.1 Net Income After Tax 2.4 2.9 4.5 6.2 7.9 Internal Cash Generation 5.4 7.6 10.5 13.7 18.3
Capital Investment 13.2 13.8 18.8 25.7 24.6 Net Fixed Assets 93.4 122.0 157.1 206.4 258.0 Long Term Debt 49.1 60.5 77.1 98.8 117.4 Equity 45.5 61.6 81.9 109.5 143.9
Ratios:
Return on Assets (%) 8.3 8.4 9.2 9.8 9.5 Debt/Equity Ratio 52:48 50:50 49:51 47:53 45:55 Debt Service Coverage (times) 1.5 1.2 1.3 1.4 1.4
6.05 As shown in the following summaries, EGAT is projected to meet tariff covenants previously established with the Bank over the forecast period and maintain a sound financial structure. Under existing covenants EGAT and the sector are required to have rates of return of a least 8% by FY82 and thereafter. In addition, EGAT is required to review the adequacy of its tariffs on a quarterly basis and maintain a fuel cost adjustment clause in its tariff schedule. The cost of lignite, at the transfer price charged to power plants, is included in the fuel cost calculations. Assurances were obtained at negotiations that EGAT would continue to meet these requirements. Assurances were obtained also that EGAT would meet existing debt control covenants limiting the ratio of long term debt to equity to no more than 60:40 and short and medium-term debt to no more than 15% of total debt.
6.06 EGAT financial projections assume tariff levels necessary for EGAT and the sector to produce a rate of return on net revalued fixed assets of at least 8%. This was done by first calculating revenues for EGAT, PEA and MEA at the level required to yield a rate of return on net revalued fixed assets of 8% each year. Calculations were then made of average tariffs at the consumer level for each one of the utilities. Next, keeping these tariffs unchanged, the excess cash in PEA and MEA was transferred to EGAT by increasing EGAT's bulk tariff to PEA and MEA, resulting in a more rational use of sector financial resources.
6.07 Capital investments assumed in the financial projections reflect the latest development program, prepared by EGAT, required to meet the demand forecast (para. 3.17). It was assumed that Government equity contributions to EGAT would be restricted to approved reimbursement of a -37-
part of the cost of multi-purposeprojects undertaken by EGAT and of duties and taxes paid by EGAT on imported equipment for approved projects under the Fifth Five Year DevelopmentPlan.
6.08 Prior to September 30, 1982 EGAT had been exempted,by a Cabinet Resolution, from remittingnet income to the Ministry of Finance. A Resolution, however, was signed in January 1983 requiringEGAT to remit Baht 190 million (5% of net income) to the Ministry for FY82. The financial projectionsassume that EGAT will continue to remit funds at the rate of 5% of net income as was the case in FY82. Domestic and internationalinflation assumptionsare the same as those used in estimating the Project capital cost (para. 5,01). Other important assumptionsunderlying the EGAT financial projectionsconcerning fuel consumptionand costs, other operating and maintenance costs, and depreciation,are shown in Annex 12.
2. Lignite Mine Department
6.09 Lignite Mine Department operations comprise the Mae Moh and Krabi mines. Each mining operation is treated as a separatemining accounting center by EGAT and overhead costs are allocated proportionately. The financialaccounts of the Department consolidate those of the respective mining operations. Production schedules for the financialprojections are based on the expectationsthat Mae Moh will reach full production in FY87 and the Krabi mine will be fully depleted after FY90.
EGAT Lignite Production,1984-92 (million tonnes)
FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 Mae Moh Mine 1.64 3.03 4.43 4.86 4.87 4.91 4.93 4.97 5.01 Krabi Mine 0.33 0.22 0.22 0.22 0.22 0.22 0.22 - -
Total 1.97 3.25 4.65 5.08 5.09 5.13 5.15 4.97 5.01 _ . _ _
6.10 Lignite Mine Department revenues were calculatedusing an actual lignite base price in FY83 of US$19.22 per tonne. This price reflects the long run marginal cost of lignite as well as its opportunitycost (based on imported coal as an economic substitute),and is in line with the dual financial and economic pricing objectivesdiscussed in Chapter I. Under the lignite pricing arrangementsagreed with EGAT (para. 2.37), the lignite price is escalated in real terms by 2% p.a. through 1985. For the purposes of financialprojections, lignite prices have been escalated at 1% p.a. in real terms after 1985. However, a review of lignite prices is to ke made by EGAT in 1985 and further adjustmentsin real prices will be determinedwith EGAT at that time. The lignite prices assumed in the projectionsin real and current terms are shown below: -38-
EGAT Forecast Lignite Price (US$/tonne)
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
Jan. 1983 terms 19.0 19.4 19,8 20.0 20.2 20.4 20.6 20.8 21.0 21.3 Current Terms 19.2 20.4 22.2 23.7 25,4 27.2 29.1 31.2 33.4 35.7
6.11 Financial projections for the Lignite Mine Department, and the assumptions on which they are based, are summarized below and detailed in Annex 13. Under the lignite pricing arrangements established for the proposed Project (para 2.38), Department revenues would cover mi-ne operating costs and other administrative expenses, (depreciationr amort4zation of advance overburden removal, administrative expenses, exploration costs, interest charges and reclamation fund expenses) over the forecast period (1984-92) and generate sufficient cash in the Department to meet debt repayment obligations (predominantly the Bank Loans for Mae Moh) and on-going capital requirements. It is also projected that the Department will meet its share of EGAT's income tax obligation (para. 6.08).
Lignite Mine Department Summary of Financial Proections (US$ million)
1984 1986 1988 1990 1992
Lignite Sales (million tonnes) 1.97 4.65 5.09 5.15 5.01
Total Revenue 40.2 110.3 138.4 160.4 179.1 Operating Expenses 12.7 49.3 67.9 76.3 84.9 Net Income After Tax 9.9 26,8 21.5 32.1 46,0 Internal Cash Generation 17.7 45.2 56.8 71.4 81.0
Capital Investments 49.0 42,9 19,4 28.1 17.3 Net Fixed Assets 153.6 204,4 260.7 269.8 282.0 Long Term Debt 120.5 135.8 130.7 105.6 80.4 Equity 114.2 204.0 315.3 404.8 520.3
Ratios: Return on Assets (%) 12.4 20.6 11,7 14.8 18.8 Debt/Equity Ratio 51:49 40:60 29:71 21:79 13:87 Debt ServIce Coverage (times) 2.7 2.4 3.0 4.5 5.2
6,12 To strengthen the financial management and disciplTne of the mining operations, assurances were obtained from EGAT during negotiations that the Lignite Mine Department will meet standard debt covenants. The covenants are (i) a debt:equity ratio of no more than 60:40; and (ii) a ,debt service coverage of at least 1.3. The Mine Department debt:equity ratio is at present within the covenanted range (58:42) and expected to -39-
improve as a consequenceof the high proportion of equity funding of the proposed Project. Together with Government tax rebate contributionsand the Australian Grant (para. 5.03), Project financingcomprises 65% equity. Financial forecasts indicate the Departments'capability to meet the debt covenants. The rate of return on net revalued fixed assets of the Mine Department ranges from 11% p.a. to 21% p.a., exceeding the minimum covenanted return with EGAT (8% p.a.) at all times.
C. FinancialRate of Return
6.13 The financial rate of return of the Project has been estimated on an incrementalbas±s, (i) for the mine expansion alone (Case 1); and (ii) for the combinedmine and power developments(Units 5-7) which have been designed as one package (Case 2). The returns have been estimatedusing cost and benefit steams developedon a "with" and "without"Project basis. The streamswere calculated in January 1983 terms taking into account the real changes in lignite prices, power tariff rates and operating costs assumed in the financial projections. The calculationsare made over a 30 year period, ending in 2010.
6.14 Case 1 - Mine Expansion Case. The rate of return calculationon the mine expansion alone assumes as the benefit stream revenues from "sale" of lignite to the power plant at the lignite transfer price. Sales revenues are calculatedusing only the sales tonnages at Mae Moh produced under the Project (shown on a yearly basis in para. 6.09); and the lignite price in real terms assumed in the financial projectionsand shown in para. 6.10.
6.15 Incrementalcapital costs for the productionincreases comprise capital costs for the Project including (i) replacementexpenditures based on schedules prepared by EGAT and reviewed by the Bank; (ii) working capital requirements;and (iii) taxes on imported mining equipment. A tax rebate stream has been added to account for the rebates on mine equipment associatedwith Power Unit 5 (para. 5.03). Operating costs comprise (i) EGAT operating costs; and (ii) the contractor costs for removal of overburden to be charged to EGAT. These costs are shown in detail in Annex 13. An expected decrease in operating costs at Mae Moh, by 1% p.a. until 1990 (para. 6.03), has been reflected in the operating cost stream. After 1990 operating costs have been assumed to be constant. The operatingcost stream includes royaltiesto be paid to the Government for lignite extraction (Baht 6.52 per tonne of lignite). The streams are shown in Annex 14.
6.16 The incrementalrate of return on the mine alone is highly dependent on the lignite transfer price. Under the assumed pricing arrangement,the rate of return on the internal investmentin the mine expansion is 9% and the rate of return on net revalued fixed assets of the Lignite Mine Department is 12% in 1984 increasingto 21% in 1986 at full Mae Moh productionbuild-up. The Mine Department'sreturn is far higher than the minimum 8% rate of return on net revalued fixed assets agreed -40-
between EGAT and the Bank (Loan 1852-TH) and demonstratesthe financial viability of the mining operations "with the Project."
6.17 Case 2 - Mine and Power. The rate of return of the combinedMine and Power Unit 5-7 developmentsassumes, as the benefit stream, revenues from incrementalpower sales arising from the mine expansion and related power unit investments. Sales revenues are based on (i) estimated incrementalenergy sales (GWh) from the additional 450 MW in generation capacity to be provided by Power Units 5-7; and (ii) tariff levels which are expected to decrease in real terms (from 6.lt/GWh in 1983 to 5.3g/GWh in 1986) through 1986 and remain constant thereafter,under assumptions described in Annex 12 and shown in the financial projectionsfor EGAT.
6.18 Cost streams comprise (i) the capital and operating costs for the mine as described above; and (ii) the capital and operating costs for Power Units 5-7. The Bank has reviewed cost estimates for the power plants with EGAT and considers them satisfactory. The cost of lignite productionis handled in the calculationas a fuel cost to the power plants. Taxes on power and mine investmentshave been included in capital costs. A tax rebate stream has been added to the cost/benefitstreams for all taxes remitted on imported mine and power equipment associatedwith the Unit 5 development (para. 5.03). The streamsare shown in Annex 14.
6.19 The incrementalfinancial return on the combined Mine and Power Unit 5-7 developmentsis a satisfactory12%, thus indicating the financial viability of the second stage of EGAT's developmentinvestments at Mae Moh.
6.20 Sensitivitytests have been carried out on the financial rate of return for the combined Power Units 5-7 and relatedMae Moh Mine expansion since they are interdependentinvestments which would not have been undertaken in isolation. The results of the sensitivitytests are shown below.
SensitivityTests on Financial Rate of Return for Mae Moh Mine Expansion and Power Units 5-7
Base 12.0 Capital cost increase +10% 10.7 Capital cost decrease -10% 13,4 Operating cost increase +10% 11.2 Operating cost decrease -10% 12.8 Tariff increase +10% 14.0 Tariff decrease -10% 9.8
6.21 The return is most sensitive to changes in electricitytariffs. No major changes, however, are expected in the tariff levels based on the requirementthat EGAT earn a minimum 8% rate of return on net revalued fixed assets. The return is also sensitive to capital cost changes. Major changes are unlikely to occur as constructionis well underway on the power units and capital cost estimates for the mine expansion are considered reliable. -41-
D. Project Risks
6.22 There is relativelylittle risk associatedwith the proposed Project. Measured lignite reserves are more than adequate. Demand for lignite as a fuel for electricitygeneration is virtually assured in light of the projectedrising demand for electricityover the medium and long-term and the lower cost of domestic lignite for electricitygeneration than imported coal. Capital and operating costs for the project are fairly straightforwardestimates, thus minimizing the possibilityof a reduction on return. Potential environmentalhazards to air and water quality have been handled well by EGAT under the first expansion and will be monitored adequately under the proposed Project to avoid undue risk (para. 4.14). There is some risk in implementationplans associatedwith the large overburden contract which EGAT has let although (i) Bank review and approval of the contract proposal; (ii) heightenedEGAT awareness of the potential contractinghazards; and (iii) technical assistanceand training under the Project, should minimize technical and financialrisks (para. 4.23). There is also risk of delay in completionof Power Units 5-7, particularlysince there is a six month delay in completionof Unit 4. However, constructionof Units 5-7 is underway and the schedule appears to be firm. Sensitivity tests show that a full year's delay, which is unlikely,would reduce the financialand economic returns only marginally since the major mine investmentsare made towards the end of the Project period in (FY86 and 87) and would not change even should a delay in power plant constructionoccur.
VII. ECONOMIC ANALYSIS
A. Economic Rate of Return
7.01 The economic rate of return on the Project has been analyzed in two separate ways. First, the return has been analyzed on an incremental ("with" and "without"Project) basis in similar manner to the financial rate of return analysis but omitting taxes, duties and royalties from the calculations. Second, the return has been analyzed on a substitution basis, where the relative benefits and costs of the proposed mine and power development are compared to a coastal power plant burning imported coal under the assumption that a 450 MW coal-fired plant would substitute for the combinedMine and Power investment in Units 5-7. In all calculations, cost and benefit streams have been made in January 1983 terms, taking into account real changes in lignite prices, electricitytariffs and operating costs. The analyses were made over a 30 year period. No shadow pricing has been carried since this is not required in Thailand at present. -42-
1. IncrementalAnalyses
7.02 Economic rate of return estimates have been made on the following basis: Case 1, for the mine expansion alone; and Case 2, for the mine and power Units 5-7 developmentstreated as one package. The same assumptions and the same cost and benefit streams as for the financial rates of ret:urn were used, (ChapterVI) with taxes, duties and royaltiesexcluded (Annex 15). On this basis the incrementaleconomic rate of return on the mine expansion alone is 17%, above the estimatedopportunity cost of capital in Thailand of 12%. 3/ The return on the mine and power developmenttogether is 14%, slightly above the opportunitycost of capital, indicatingthat. the projectedlevel of electricitytariffs (which assures an 8% rate of return on revalued assets) is close to the incrementalcost of electricity production (para. 2.14).
2. SubstitutionAnalysis
7.03 The economic rate of return on substitutionhas been made by analyzing the relative benefits and costs on a differentialcash flow basis of the proposed mine and power developmentsand a coastal power plant burning imported coal. This analysis takes into considerationthe fact that the optimum use of lignite in Thailand is in power generation,due to its constraintsrelated to transportation,handling and its physical characteristics (para. 2.29).
7.04 The benefit streams are assumed to be sales revenues: (i) for the proposed mine and power developmentfrom incrementalenergy sales generated by Power Units 5-7 (totaling450 MW); and (ii) for the coal-fired plant from incrementalenergy sales generated by the 450 MW coastal plant. The tariff rates assumed in valuing the power are the same as those used in EGAT's financial forecasts (Annex 12).
7.05 The capital and operatingcosts for the proposed mine and power developmentare the same as those used in the economic analysis of the combined investment shown in Annex 15. The capital and operating costs data for the coal-fired plant were estimatedby EGAT assuming the plant site is on the coast at Ao Phai and a 230 kV double-circuittransmission line, 97 km long, is required from Ao Phai to Min Buri Substation. The criteria and assumptions for capital and operating costs for Power Units 5-7 and the coal-firedplant and associated transmissionline are shown in Annex 16. The transmissionline requirementsfor Power Units 5-7 have also been included in the calculations. Taxes, duties and royaltieshave been excluded.
7.06 Coal to be burned in the alternative coal fired plant is assumed to be imported from Australia, the closest supply source. As shown in Annex 17, recent contract quotes establishedprices at approximately US$45-50 per tonne for thermal coal for the New South Wales area. Annual average f.o.b. export prices in currentUS$ per tonne were: US$44 in 1981 and US$48.5 in 1982. For the return analysis it was assumed that the
3/ Report No. 4366-TH, IBRD, August 31, 1983. -43-
Australian f.o.b. price will be US$48 per tonne in 1985 (January 1983 terms) and escalatedin real terms at an annual average rate of 1% through 1990. Specificationsof Australian thermal coal were assumed to be 6,000 kcal/kg, less than 1% sulfur content and about 12% ash.
7.07 Recent ocean freight quotes for coal from Australia to Thailand are in the range of US$15-20 per tonne for small spot contractsusing small vessels (30,000dwt). For the return analysis ocean freight was assumed to be US$15 per tonne (January 1983 terms) taking into considerationthat port facilities for the coal-firedalternative at Ao Phai could handle vessels in the range of 50,000-100,000dwt size. An additional inland freight and handling charge of US$7.5 per tonne for delivery of coal imports to the power plant has been assumed; this amount includes the amortizationof capital expenditures(about US$150 million) for the required port facilities,including dredging of a channel to accommodatelarger vessels.
7.08 The economic rate of return based on substitution outlined under the assumptions above is 13.7% which is only marginally above the estimated opportunitycost of capital of 12%. This confirms the results of the lignite pricing study, which show the rent element in the total lignite opportunity cost to be small, implying that lignite'scost advantage over coal, the substitutefuel, is also small (para. 2.35). The cost and benefit streams are shown in Annex 18.
7.09 Sensitivitytests have been carried out on the economic rate of return for the Power Units 5-7 and related mine expansion as compared to a coal-fired power plant, since this return is more indicativethan the incrementalrate of return of the cost to the economy of developing lignite. The results of the sensitivitytests are shown below:
SensitivityTest on Economic Rate of Return for the Power Units 5-7 and Related Mine xpnsio
Compared with a Coal-FiredPlant
Base case 13.7 Capital cost increase - 10% 10.1 Operating cost increase - 10% 11.4 Coal price increase to US$52 per tonne 16.1 Coal price decrease to US$44 per tonne 11.4
The return is particularlysensitive to changes in internationalcoal prices and increasesby 2.4 percentage points when coal prices are assumed to increase by US$4 (from US$48 to US$52 per tonne). This is 'Likelysince coal prices are expected to improve over the remaining 1980s with moderate strengtheningof the internationalcoal market.4! When coal prices are assumed to fall to US$44 per tonne the return decreases to 11.4%.
4/ Recent Bank thermal coal price projectionsassume a 1 to 2% p.a. increase in real terms, in the later half of the 1980s, with coal prices reaching in range of US$53-55 per tonne in the early 1990s. -44-
B. Foreign Exchange Savings and Other Benefits
7.10 The average net foreign exchange savings under the proposed Project have been calculated as in the economic rate of return analysis, which assumes that the combined mine and power investment in Units 5-7 would substitute for a 450 MW coal-fired plant. The net foreign exchange savings resulting from reduced coal imports under the coal-fired alternative, over the 30 year life of the Power Units 5-7, are expected to average US$42.3 million p.a. in January 1983 terms, taking into account the impact of debt service (see Annex 19).
7.11 The proposed Project would provide for technology transfer through technical assistance and training at the mine site and would strengthen the institutional aspects of the power utility through proposed managerial changes and related training. Despite its capital-intensive nature, the Project would provide some increase in economic activity in the remote northeastern region of Thailand, through the anticipated increased staffing at Mae Moh and the employment of local contractors for overburden removal. The resettlement program under the first expansion project is benefitting the area through establishment of a school, health center, water supply, electricity and other facilities which will be continued and fostered under the present Project.
VIII. AGREEMENTS REACHED AND RECOMMENDATIONS
A. Agreements
8.01 During negotiations, agreements were reached on the following:
(a) With the Government
(i) that the electricity sector should earn a rate of return on net revalued fixed assets of not less than 8% every year (paras. 3.13 and 6.05).
(il) to make available to EGAT such funds as are needed to carry out the Project (para. 5.05).
(b) With EGAT
(i) to use a price for the lignite produced and transferred to its power plants that is determined taking into account the economic costs of substitute fuels and the need to ensure the Lignite Mine Department's financial viability. Lignite pricing policy reviews are to be carried out by EGAT in FY1985 and at least every three years thereafter and the pricing methodology is to be agreed upon with the Bank. For FY1984 and FY1985 it has been agreed that EGAT will raise the transfer price by 2% p.a. in real terms (para. 2.36). -45-
(ii) to continue to maintain separate accounts for EGAT's mining activities (para. 3.05).
(iii) to continue having EGAT's accounts (consolidatedand unconsolidatedfor EGAT and its mine operations)audited by independentauditors (para. 3.16).
(iv) to continue geotechnicalwork at Mae Moh and furnish to the Bank an assessment of the geotechnicalaspects of slope stabilityat Mae Moh, by January 31, 1985 (para. 4.07).
(v) to furnish to the Bank a financialmanagement and analysis training program by September30, 1984, to be implemented not later than January 31, 1985, and a mine operations training program by March 31, 1985, to be implementednot later than July 31, 1985 (para. 4.12).
(vi) to execute and operate the Project and associatedpower plant in accordance with environmentalstandards satisfactoryto the Bank and the Government (para. 4.14).
(vii) to apply project management practices and procedures satisfactoryto the Bank during Project execution (para. 4.19).
(viii) to re-evaluatethe overburden removal contractwith the Bank, by July 31, 1987 and, with the Bank's concurrence, decide whether to renew it, draw up a new contract or undertake the removal with EGAT's own equipment. In the latter event, EGAT will provide the Bank with a satisfactory plan for acquiring the necessary equipmentand financing therefore (para. 4.23).
(ix) to use lignite produced under the Project only for power generation purposes by EGAT (para. 5.04).
(x) to achieve a rate of return on EGAT's average revalued net fixed assets of not less than 8% and provide the Bank with quarterly analyses of how this will be achieved in the current and following fiscal years (para. 6.05).
(xi) to maintain a fuel adjustment clause in its tariff, which would also reflect the cost of lignite (para. 6.05).
(xii) to maintain a debt/equityratio of no greater than 60:40 and short and medium term debt at no more than 15% of all debt (para. 6.05). -46-
(xiii) to limit borrowingrelated to lignite mining activities such that the Lignite Mine Department's debt/equity ratio is no greater than 60:40 and its debt service coverage ratio is at least 1.3 (para. 6.12).
B. Recommendations
8.02 With the agreements reached on the above, the Project forms a suitable basis for a loan to EGAT of US$59.1 million for a period of 20 years, including5 years of grace, with the guarantee of the Kingdom of Thailand. ANNEX 1 -47-
THAILAND-SECOND MAE MOE LIGNITE PROJECT
EGAT Power Development Plan, 1983-1996
Fuel Unit Rating Total Commissioning A. Under Construction: Type Number (MW) (MW) Date
Bhumibol Hydro 7 133 133 May 1983 Lan Krabu Gas Turbine 1/ Gas 2 (25) (25) May 1983 Lan Krabu Gas Turbine 1/ Gas 3 (15) (15) June 1983 Bang Pakong Steam Turbine (Block II) - 2 120 120 July 1983 Bang Pakong Thermal Oil/Gas 1 550 550 September 1983 Sirindhorn Hlydro 3 12 12 April 1984 Mae Moh Lignite 4 150 150 May 1984 Bang Pakong Thermal Oil/Gas 2 550 550 August 1984 Mae Moh Lignite 5 150 150 November 1984 Khao Laem Hydra 1-3 100 300 December 1984 Mae Moh Lignite 6 150 150 September 1985 Srinagarind 2nd Stage Hlydro 4 180 180 February 1986 Mae Moh Lignite 7 150 150 March 1986 Mae Ngat Hydro 1-2 4.5 9 May 1986 Gas Turbine Retired Oil 3-11 15 -135 June 1986 Chiew Larn Hlydro 1-3 80 240' July 1987
B. New Projects-
Krabi (2) Lignite 1 75 75 February 1988 Chao Phraya Hydro 1 16.8 16.8 June 1988 Krabi (2) Lignite 2 75 75 February 1989 Mae Moh Lignite 8 300 300 June 1989 Nam Chon Hydro 1-2 145 290 April 1990 Miscellaneous Hydro Group I Hydro - - 200 May 1990 Krabi Lignite Retired Lignite 1-3 20 -60 August 1990 Nam Chon Hydro 3-4 145 290 October 1990 Mae Moh Lignite 9 300 300 April 1991 Krabi (2) Lignite 3 75 75 June 1991 Miscellaneous Hydro Group II 'Hydro - - 300 May 1992 Ao Phai Thermal Coal 1 600 600 October 1992 R 3 Thermal Coal - 150 150 March 1993 Mae Moh Lignite 10 300 300 April 1993 Ao Phai Therrmal Coal 2 600 600 June 1995 Miscellaneous Hydro Group III Hlydro - - 200 October 1995 Ao Phai Thermal Coal 3 600 600 September 1996
Total Net Additional Capacity = 6,837.2 MW Existing Generating Capacity = 4,208.0 MW
Grand Total = 11,045.2 MW
Notes: 1/ Being transferred from the existing gas turbines at South Bangkok and Surat Thani.
Source: EGAT Power System Planning Division.
Industry Departmnent March 1984 -48- ANNEX 2 THAILAND-SECOND MAE MOH LIGNITE PROJECT
EGAT--Status of Bank Group Operations
Loan No. 175-TH Yanhee; $66.0 Million Loan of August 20, 1957. Effective Date: February 28, 1958; Closing Date: March 31, 1966.
Loan No. 333-TH Second Yanhee; $6.6 Million Loan of February 28, 1963; Effective Date: April 18, 1963; Closing Date: September 30, 1967.
Loan No. 406-TH Third Yanhee; $6.00 Million Loan of March 9, 1965; Effective Date: April 27, 1965; Closing Date: December 31, 1968.
Loan No. 489-TH Fourth Yanhee; $5.00 Million Loan of February 28, 1967; Effective Date: May 23, 1967; Closing Date: June 30, 1970.
Loan No. 655-TH First EGAT Power; $46.5 Million Loan of January 13, 1970; Effective Date: April 17, 1970; Closing Date: June 30, 1975.
Loan No. 790-TH South Bangkok Thermal Unit #4; $27.0 Million Loan of October 26, 1971; Effective Date: January 27, 1972; Closing Date: November 30, 1976.
Loan No. 977-TH Ban Chao Nen Hydroelectric; $75.00 Million Loan of April 2, 1974; Effective Date: June 14, 1974; Closing Date: December 31, 1980.
Loan No. 1485-TH Pattani Hydroelectric; $50.0 Million Loan of August 30, 1977; Effective Date: December 20, 1977; Closing Date: June 30, 1983.
Loan No. 1690-TH Bang Pakong Thermal Power; $80.00 Million Loan of April 24, 1979; Effective Date: May 23, 1980; Closing Date: June 30, 1984.
Loan No. 1770-TH Khao Laem Hydroelectric; $80.00 Million Loan of November 27, 1979; Effective Date: September 17, 1980; Closing Date: February 28, 1985.
Loan No. 1852-TH Mae Moh Lignite; $72.00 Million Loan of May 22, 1980; Effective Date: September 17, 1980; Closing Date: December 31, 1984.
Loan No. 2000-TH Power Subsector; $100.00 Million Loan of May 21, 1981; Effective Date: October 26, 1981; Closing Date: June 30, 1985.
Industry Department March 1984 -49- ANNEX 3
THAILAND-SECOND MAE MOH LIGNITE PROJECT
Thailand Lignite Reserves (million tonnes)
A. Lignite Reserves in Thailand
1980 1982 Deposit Measured Indicated Total Measured Indicated Total
Mae Moh 350.00 300.00 650.00 661.00 153.20 814.20 Krabi 5.00 95.00 100.00 10.15 10.00 20.15 Li 20.00 - - 8.00 2.00 10.00 Mae Tip - - - 1.00 10.00 11.00 Mae Tuen - - - 1.23 - 1.23 Total 375.00 395.00 750.00 681.38 175.20 856.58
B. EGAT's Geological Reserves by Ash Content Cut-Off a!
Reserve Cut-Off Category Average % Ash Measured Indicated Total In-Situ % Ash
65% 802.6 185.1 987.1 26.1 45% 661.0 153.2 814.2 22.9 35% 555.3 122.8 678.1 21.7
a/ Optimization of overburden ratio vs. ash content led to the selection of the 45% ash cut off, which satisfies power plant requirement at an average calorific value of 2,700 kcal/kg and 22.9% ash.
C. EGAT's Mineable Reserves (million tonnes)
Total Geological Reserves 814.2 Less: Reserves Sterilized by Units 1-3 (237.8) Reserves considered uneconomic (74.6) Geological losses and dilution a/ (50.2)
Total Mineable Reserves 451.6
a/ Allows for 83% recovery of in-situ and 7% dilution.
Source: EGAT and IBRD estimates.
Industry Department March 1.984 THAI LAND SECOND MAE MOH LIGNITE PROJECT Organization Chart of Electricity Generating Authority of Thailand Efficiency Control
| Boardof 1 2 Department= | - Directors M -OperatioControlm|
Office of the | i Pomrr Plaf t
General ManagerMine L CmiMalet r u r i t ~ ~ ~ ~ ~ ~~Manager, 1 aV's { Office T Ltr rment DepettrDteot
| ep. General Mr. | Dp. General Mg,. Dep. General Mgr. Dep. General |Asst. General Mg. ||Assn. Generat Mr||Asst. Greneal Mgr. | sst. Gnea gr A~, G rera Mgr. | sst. General Mgr. | sst. General Mgr.|i -wAcct.&Fnance -Project & Plan. || -Hydro L-Constructior. | -Mitemlnce | L Operation -Th.nmal u Cnrler'Wo 5 Medial & Health | rjc lnig&|JSupply & Procure- Hydroelectric | l Enginieering | |Powe, Plant & |_ystems Operatio N ago hr | Department Departme ment Dept. Co,str. DePt. Departmen Elec Mint. Dept. Department | Treasury | General ervices | |System Planning | |r,r Enrg J hrmlPantPehI I |Mcail ht.| Department| 1 Department Bubo S. Bangkok Therm.| | 1 Departmenert | eatet |1 Cnt.Dept. eeteL a Power Plant | P. l. C . r Li_ Sb 11 _m _ _ _Budget Personnel _ Public Comm~~~~~~~~~~~un- Trans Lmne& Su- T~ransmissio-nPla.nt Siri,ki,t Mee Thnetrm, _ DepartmentDepartment ~Moh 0 ~~~~~~~~~~~cationsDept._ station Cornstr. IDep. Mant.Dept.Me_ _ Da_ Pow\er Pln _{ systems 8 _ rnp & Constr. om Officetol|,] Siaaid l_ agPkn | ProcedureOffice | | E~~~~~~~~~~~~~~~~~~~~~~~_quipment Det| | System'Ofc a | |hl ovr _t Lignite Mine -| C| Deaintmenta|ce< | Departen Dop t 1 Regon I ndustry Department Reio3 February 1983 World Bank-2469S -51- ANNEX 5 THAILAND-SECOND MAE MOH LIGNITE PROJECT EGAT and Lignite Mine Department Manpower (nerBons) % p.a. A. EGAT, 1978-82 1978 1979 1980 1981 1982 Increase University graduates 1,882 2,046 2,372 2,695 3,196 14.2 Diploma and higher professional education 1,778 1,938 2,508 2,847 3,369 17.3 Higher vocational education 2,742 2,983 3,71/ 4,472 5,153 17.1 Others 9,528 10,334 11,719 13,219 15,018 12.0 Total 15,930 17,301 20,316 23,233 26,736 13.8 B. Mine Department, 1982 Mae Moh Krabi Head Office Total Engineer 52 6 29 87 Geologist 4 2 11 17 Administration 185 18 66 269 Technical 637 131 64 832 Skilled labor 401 127 2 530 Semi-skilled labor 201 87 __ 288 1,480 371 172 2,023 Source: EGAT Industry Department March 1984 ANNEX 6 -52- Page 1 of 3 THAILAND-SECOND MAE MOH LIGNITE PROJECT EGAT's Historical Financial Statements Income Statements, 1077-83 (Baht million) Years ended September 30 1977 1978 1979 1980 1981 1982 1983 - Energy sales (GWE) 10,149 11,516 12,933 13,657 14,545 15,386 17,160 Average tariffs (B/KWh) 0.458 0.560 0.553 0.748 1.298 1.435 1.43 Energy revenue 4,647 6,447 7,158 10,214 18,877 22,087 24,540 Total Revenue 4,647 6,447 7,158 10,214 18,877 22,087 24,540 Operating Expenses Fuel and purchased power 2,720 4,197 4,396 8,074 11,780 12,776 13,834 Operation and maintenance 684 758 1,011 1,251 1,840 2,424 2,916 Total Operating Expenses 3,404 4,955 5,407 9,325 13,620 15,200 16,750 Operating income before depreciation 1,243 1,492 1,751 889 5,257 6,887 7,790 Depreciation b/ 828 892 1,088 1,287 2,144 2,068 2,600 Net Income Before Interest 415 598 663 (398) 3,113 4,819 5,190 Interest charged to operations 375 429 524 633 1,702 1,937 1,670 Net Operating Income 40 169 139 (1,031) 1,411 2,882 3,520 Other income 19 63 14 120 35 25 20 Net income before appropria- tion to the Ministry of Finance 59 232 153 (911) 1,446 2,907 3,540 Appropriation ------420 Net Income after appropria- tion 59 232 153 (911) 1,446 2,907 3,120 = =~~~~------~ a/ Preliminary figures based on EGAT non-revalued statements. b/ On revalued fixed assets. Source:EGAT Industry Department March 1984 -53- ANNEX 6 Page 2 of 3 EGAT's Historical Financial Statement Funds Flow Statements,1977-83 (Baht million) a/ Years ended September 30, 1977 1978 1979 1980 1981 1982 1983 Sources Operating income and non-cash'b/ 1,289 1,506 1,769 1,210 5,682 7,239 8,765 Total Internal Generation 1,289 1,506 1,769 1,210 5,682 7,239 8,765 Equity contribution 182 2,150 462 1,205 431 1,045 2,406 Borrowings 1,097 2,599 2,124 6,060 8,225 9,857 10,068 Deferred liabilities 97 93 93 94 94 - - Total Sources 2,665 6,348 4,448 8,569 14,432 18,141 21,239 Applications Capital expenditures 2,312 4,859 2,691 7,779 10,133 11,639 14,284 Interest during construction 177 266 331 564 664 1,092 1,375 Total investment 2,489 5,125 3,022 8,343 10,797 12,731 15,659 Debt Service Interest 375 429 524 1,130 2,061 2,924 3,045 Amortization 409 623 705 797 867 1,181 1,434 Total Debt Service 784 1,052 1,229 1,927 2,928 4,105 4,479 Staff bonus 62 35 53 53 - - 335 Increase (decrease)in working capital (670) 136 144 (1,754) 707 1,305 766 Total Applications 2,665 6,348 4,448 8,569 14,432 18,141 21,239 a/ Preliminaryfigures based on EGAT's non-revaluedstatements. bt Adjusted by foreign exchange profit/loss. Source:EGAT Industry Department March 1984 -54- ANNEX 6 Page 3 of 3 EGAT's Historical Financial Statements Balance Sheets 1977-83 (Bahtmillion) Years ended September 30, 1977 1978 1979 1980 1981 1982 198 3b/ Current Assets Cash 141 553 107 61 77 999 944 Receivables-trade 1,323 1,203 1,438 1,905 3,558 3,532 4,674 Receivables-others 254 343 984 606 442 326 - Inventories 275 416 450 846 1,296 1,626 1,763 Total Current Assets 1,993 2,515 2,979 3,418 5,373 6,483 7,381 Assets Plant in service 33,377 35,467 39,324 46,651 57,116 63,954 73,567 Less: Accumulated Depreciation 14,632 15,139 15,982 17,185 16,249 19,437 22,067 Net Fixed Assets 18,745 20,330 23,342 29,466 40,867 44,517 51,500 Work in progress 5,064 6,891 7,191 10,719 12,164 18,607 26,631 Deferred lignite mining expenditure - 305 400 582 984 1,366 1,600 Insurancefund - - 20 41 197 429 971 Total Assets 25,802 30,041 33,932 44,226 59,585 71,402 88,083 Equity and Liabilities Current Liabilities Payable 1,411 1,798 1,891 4,207 4,904 5,230 4,965 Bank overdraft - - 190 706 1,257 - - Current maturities 633 762 828 906 1,198 2,131 2,443 Total Current Liabilities 2,044 2,560 2,909 5,819 7,359 7,361 7,408 Liabilities: Insurance reserve - - 20 41 197 429 971 Long-term debt (net) 8,620 11,348 12,487 17,951 25,415 31,500 39,129 Deferred liabilities 393 486 579 672 765 924 882 Equity: Paid-in capital 3,702 5,795 6,242 7,423 6,445 8,431 11,233 Retained earnings 3,369 3,922 4,447 4,027 4,628 6,309 5,727 Revaluation surplus 7,674 5,930 7,248 8,293 14,275 16,448 22,733 Total Equity 14,745 15,647 17,937 19,743 25,849 31,188 39,693 Total Equity and Liabilities 25,802 30,041 33,932 44,226 59,585 71,402 88,083 a/ Preliminary figures based on EGAT's non-revalued statements. Source: EGAT Industry Department March 1984 ANNEX 7 Page 1 of 2 TFATLAND-SECOND MAE MOH LIGNITE PROJECT Lignite Mine Department Historical Balance Sheet Statements, 1981-83 (Bahit million) 1981 1982 1983 OperatingRevenue Lignite sales 496.1 643.3 722.3 Operating Expenses Operations 66.2 58.2 55.1 Overburden removal 299.1 385.5 416.4 Preliminary development 0.6 0.8 1.2 Reclamation 6.6 6.7 8.0 Maintenance 41.2 60.8 35.3 Administration 2.1 4.6 5.0 Depreciation 11.7 13.6 19.4 Interest on long term debt 20.0 19.7 20.3 Realised loss on exchange - 0.1 0.3 Sub Total 447.5 550.0 561.0 Inventory adjustment (2.9) 0.7 (5.5) 444.6 55(.7 555.5 Apportionment of central administration expenses 51.5 36.7 37.7 496.2 587.4 593.2 Write Off Exploration Net Profit/('Loss) 55.9 115.4 Source! FGAT Industry Department March 1984 -56- ANNEX 7 Page 2 of 2 Lignite Mine Department Historical Balance Sheet Statements, 1981-83 (Baht million) A. Working Capital 1981 1982 1983 Current Assets: Materials and supplies including lignite 112.6 135.8 160.6 Accounts receivable 0.9 3.8 84.8 Sub-total 113.5 139.6 245.5 Less: Current Liabilities: Accounts payable and accured expenses 28.2 300.4 186.9 Accrued interest on long term debts 29.5 45.1 50.9 Repayments due before September 30, 1982 in respect of long term debts - 29.5 73.2 Sub-total 57.7 375.0 310.9 Total Working Capital: 55.8 (235.4) (65.4) B. Other Assets Property, plant and Ecuiiment: In service 708.4 911.2 1,069.3 Under construction 32.5 169.6 1,097.6 740.9 1,080.8 2,166.9 Net assets of the Reclamation Sinking Fund - 33.5 41.4 Deferred Assets: Development Expenditures 984.2 1,366.9 1,612.8 Total Other Assets 1,725.1 2,481.2 3,820.9 Total Net Assets 1,780.9 2,245.8 3,755.5 Financed by Equity 740.9 551.0 1,422.1 Deferred Foreign Exchange Adjust. 5.7 82.0 58.6 Reclamation Sinking Fund - 33.5 41.4 Long Term Debt 1,034.2 1,579.2 2,233.4 Total Financing 1,780.8 2,245.7 3,755.5 Source: EGAT Industry fepartirent March 1984 -57- ANNEX8 THAILAND- MAE RHLIGNIlE PRaJECI II Project Capital Cost Estimate (US$ millions) FY82 EY83 FY84 FY85 FY86 FY87 Total Total Foreign Local !2eg local Foreign Local Foreign local Foreign Local Foreign Local ForeignIocal F & L 1. dinrig Equiplnet: Min Equipmnt - - - - 3.32 0.02 4.47 0.27 24.43 0.01 15.16 6.21 47.38 6.51 53.89 Imp. Taxes & Duties - - - - .11 - 0.93 - 0.05 - 14.34 - 15.43 15.43 - - - - 3.32 0.13 4.47 1.20 24.43 0.06 15.16 20.55 47.38 21.94 69.32 2nd Handling System 2.79 - 8.24 0.51 9.34 .24 ------20.37 0.77 21.14 Inp. Taxes & Duties - - - 3.90 - .68 ------4.58 4.58 2.79 - 8.24 4.41 9.34 .94 ------20.37 5.35 25.72 Equip. Existing Budget - - - 1.53 ------1.53 1.53 Total Equipmeit 2.79 - 8.24 2.04 12.66 0.26 4.47 0.27 24.43 0.01 15.16 6.21 67.75 8.79 76.54 Imp. Taxes & Duties - - - 3.90 - 0.79 - 0.93 - 0.05 - 14.34 - 20.01 20.01 Total 2.79 - 8.24 5.94 12.66 1.05 4.47 1.20 24.43 0.06 15.16 20.55 67.75 28.80 96.55 2. Land - - - .09 - 1.41 - - - - - 1.50 1.50 3. Engineering &Training: Financial ------0.05 - 0.05 - - - 0.10 - 0.10 Technical - - 0.06 0.41 0.27 0.12 0.60 0.01 .50 .01 .33 .01 1.76 .56 2.32 ADAB - - .42 - 2.10 - 1.26 - 0.30 - 0.12 - 4.20 - 4.20 - - 0.48 0.41 2.37 0.12 1.91 0.01 0.85 .01 .45 .01 6.06 .56 6.62 4. Civil Works - - - 2.61 - 2.8 - 1.56 - 1.04 - - - 8.02 8.02 5. River Diversion ------4.40 - 4.40 4.40 6. Geological Drilling - - - - 1.85 1.82 .55 .52 - - - - 2.40 2.34 4.74 7. Working Capital - _ _ ------0.53 1.17 .53 1.17 1.70 Base Cost Excluding O/B Removal a/ 2.79 - 8.72 9.05 16.88 7.20 6.93 3.29 25.28 1.11 16.14 26.14 76.74 46.79 123.53 8. Advance Overburden (O/B) ReXmval a/ - - 5.23 5.24 7.31 7.30 13.78 13.77 5.80 5.80 - - 31.12 32.11 64.23 Total Base Cost 2.79 - 13.95 14.29 24.19 14.50 20.71 17.06 31.08 6.91 16.14 26.14 108.86 78.90 187.76 9. Physical Contingency Items 1-10 b/ - - 0.01 0.45 0.52 1.17 0.74 0.56 3.62 0.16 2.34 3.81 7.23 6.15 13.38 10. Price Contingency Items 1-10 b/ - - - 0.03 u.36 0.48 1.07 0.52 7.64 0.24 6.30 7.70 15.37 8.97 24.34 11. Price Contingency O/B Renval - - .04 .05 .38 .38 1.64 1.64 1.08 1.08 - - 3.14 3.15 6.29 fotal Project Cost 2.79 - 14.00 14.82 25.45 16.53 24.16 19.78 43.42 8.39 24.78 37.65 134.60 97.17 231.77 12. Interest D. Construction - - 0.89 - 1.23 - 3.19 - 4.83 - 7.76 - 17.90 - 17.90 13. Front-end Fee on Bank Loan - - - - 0.15 ------0.15 - 0.15 Total Financing Required 2.79 - 14.89 14.82 26.83 16.53 27.35 19.78 48.25 8.39 32.54 37.65 152.65 97.17 249.82 a/ Excluding 2nd Handling System, equip-net in existing hidget and Australian assistance. b/ Million bcm; 7.7, 8.8, 14.2, 5.8,; total 36.5 million bam. TFe indirect foreign cost coniponert of overburden renxval is shown here under foreign cost, though EGATwill pay the contractor in Baht. Inidustry Department March 1984 THAILAN- SEOt MAEMOE LIGNITE PRllJECr Detailed Breakdown of Financin Plan Financing Plan (US$miillion) EY82 FY83 FY84 FY85 FY86 FY87 Total Total Foreign Local Foreign Lc ForeignLa LForeig oreiLI cagnLocal Foreign Local Fbeig Local PF& L Equity: GovernrnEt Tax Rebate - - - 4.17 - 5.65 - 4.61 - - - - - 14.43 14.43 EGAT(For Plant & Equip. aix IDC) 2.74 - 0.92 5.36 5.17 3.20 4.21 0.31 4.78 1.51 9.47 37.65 27.29 148.03 75.32 EGATOvertirden RemDval - - 5.27 5.29 7.69 7.68 15.42 14.86 6.88 6.88 - - 35.26 34.71 69.97 Australian Grant (ADAB) - - 0.42 - 2.10 - 1.26 - 0.30 - 0.12 - 4.20 - 4.20 Total Equity 2.74 - 6.61 14.82 14.96 16.53 20.89 19.78 11.96 8.39 9.59 37.65 66.75 97.17 163.92 Loans: IBl IDIan _ - - - 3.40 - 6.46 - 32.80 - 16.44 - 59.10 - 59.10 KfW (F.R. Germany) Loan 0.05 - 8.28 - 8.47 ------16.80 - 16.80 Other 1oans ------3.49 - 6.51 - 10.00 - 10.00 co Total Borrowing 0.05 _ 8.28 - 11.87 _ 6.46 _ 36.29 - 22.95 _ 85.90 - 85.90 Total Financin 2.79 - 14.89 14.82 26.83 16.53 27.35 19.78 48.25 8.39 32.54 37.65 152.65 97.17 249.82 Irdustry Departmet March 1984 -59- ANNEX 10 THAILAND - SECOND MAE MOH LIGNITE PROJECT Detailed Procurement Schedule for Bank Loan (UJS$million) 2uantity Procurement Procurement Packages: 1. Waste-Conveyor System 1,200 mm Conveyor 2.3 km ICB 2,000 mm Conveyor 3.8 km ICB 2,500 ton/hour Crusher 2 ICB Crawler Transporter 1 ICB Spreader and Tripper Car ]L ICB Power Supply Equipment -- ICB/LIT Control Equipment ICB/LIT 2. Coal Conveyor System: 1,200 mm Conveyor 1.6 km ICB 1,000 mm Conveyor 0.4 km ICB 3. Power Supply Equipment: 115 kV Switchyard - ICB 115 kV Overhead Lines 5.0 km ICB 4. Communications Equipment: VHF/FM Radio - LIT PABX Telephone - LIT 5. Auxiliary Equipment No. 1 (Incl. spare parts): 410 HP Crawler Tractor 2 ICB 300 HP Crawler Tractor 4 ICB 250 HP Grader 1 ICB 200 HP Pipe Layer 1 ICB 6. Auxiliary Equipment No. 2 50 ton Crane 1 ICB 7. Auxiliary Equipment No. 3 (Incl. spare parts): 40 ton Flatbed Trailer 1 LIT Service Tool Truck 4x4 1 LIT 6 ton Truck with Crane 1 LIT 10,000 LT, Hot Water Cleaner 1 LIT Fire Truck 1 LIT 6 ton Flatbed Truck 1 LIT 4 ton Flatbed Truck 4 LIT 6 ton Flatbed Truck 4x4 2 LIT Industry Department March 1984 -60- ANNEX 11 THAILAND-SECOND MAE MOH LIGNITE PROJECT Estimated Production Costs Estimated EGAT Operating Costs at Full Production, FY87 (US'/bmJ in January 1983 terms Lignite Waste Removal Production Weighted Average Labor 0.350 0.350 0.350 Materials and Supplies 0.883 0.591 0.773 Fuel and Lubricants 0.552 0.364 0.482 Royalties a! - 0.368 0.137 Power Supply 0.048 0.132 0.080 Geological Works and Others 0.031 0.031 0.031 Reclamation b/ _ 0.240 0.090 1.864 2.076 1.943 Million bm 3 removed 6.26 3.74 10.00 a/ Royalties were calculated at Baht 6.52 per tonne of lignite. b/ Reclamation expenses were calculated at Baht 4.25 per tonne of lignite. Estimated Contractor Cost a/ At Full Production, FY87 (US$/bm3 January 1983 terms) Waste Removal Labor 0.34 Materials and Supplies 0.88 Fuel and Lubricants 0.53 Power and Supply 0.05 Profit and Taxes 0.20 2.00 Million bm3 Removed 15.00 a/ Contractor cost includes depreciation, financial charges and profit and taxes. Combined profit and taxes is estimated at 10% of total cost. Industry flepartment March 1984 -61- Annex 12 Page 1 of 5 THAILAND-SECONDMAE MOH LIGNITE PROJECT EGAT's FinancialProjections Assumptions Assumptionsunderlying the EGAT financialprojections concerning fuel consumptionand costs, operatingand maintenancecosts, and depreciationrates, are outlined below. Other main assumptionssuch as revenues, tariffsand capital investmentsare outlined in the main report. The projects assume foreign inflationof 6.5% in 1983, 9.0% in 1984, 7.5% in 1985 and 6.0% thereafter, and -domesticinflation of 3.5% in 1983, 6.5% in 1984 and 6.0% thereafter. EGAT Fuel ConsumptionEstimates, 1983-92 Natural Gas Heavy Oil Diesel PTT Lan Krabu Nam Pong Lignite Year (ml) (ml) (mcf/d) (mcf/d) (mcf/d) (mt) 1984 1,965 169 129.1 12.9 - 2.0 1985 1,000 31 214.1 12.9 12 3.3 1986 541 1 265.1 12.9 12 4.7 1987 1,406 1 206.1 12.9 12 5.1 1988 461 1 340.1 12.9 12 5.4 1989 1,164 1 295.1 12.9 12 6.7 1990 461 1 351.1 12.9 12 9.4 1992 449 1 356.1 12.9 12 10.7 The unit fuel costs in January 1983 terms assumed in the projectionsare shown below. The fuel cost have been escalatedat the assumed rates of 2% p.a. for the period 1983-85, 3% p.a. for 1985-90and 2% thereafterbased on Bank projected oil prices.1 / EGAT Unit Fuel Cost Estimates Unit Costs, 1983 Fuel Baht US$ Heavy oil, per litre 4.08 0.18 Diesel, per litre 6.86 0.30 Natural gas, per million BTU: PTT 85.62 3.71 Lan Krabu 29.00 1.26 Lam Pong 64.22 2.79 Lignite, per tonne 443.00 19.22 l/ Oil prices ia 1981 termat 1983 - $30.8/barrel 1990 = $37.0/barrel 1985 = $32.0/barrel 1995 = $41.0/barrel -62- Annex 12 Page 2 of 5 Operating and maintenance costs are based on EGAT experience and estimated as a percentage of the capital cost of the different types of operations, as follows: EGAT Operating and Maintenance Costs Fixed Assets % Dam and civil works 1.0 Electro-mechanical equipment 2.0 Transmission line 1.0 Substation 2.0 Coal-fired thermal unit 3.0 Lignite-fired thermal unit 3.0 Oil/gas-fired thermal unit 2.5 Depreciation has been calculated under the standard straight-line method at rates approved by the Ministry of Finance and shown below: EGAT Depreciation Rates Fixed Assets Dams 1.2-1.3 Power stations and structures 4.0 Transmission lines 2.5-4.0 Other plant and equipment 5.0-25.0 Average a/ 4.4 a/ Reflects the average life of assets of 23 years. Source: EGAT Industry Department March 1984 -63- ANNEX 12 Page 3 of 5 EGAT FINANCIAL FORECAST 1984-92 INCOME STATEMENT 1984-92 (Baht million) 1984 1985 1986 1987 1988 1989 1990 1991 1992 Energy Sales 18,832 20,744 22,681 24,577 26,452 28,253 30,119 32,050 34,042 Average Price B/KwH 1.45 1.45 1.45 1.56 1.64 1.75 1.80 1.91 2.04 Energy Revenue 27,310 30,080 32,880 38,340 43,380 49,440 54,210 61,210 69,440 Other Revenue 20 20 20 20 20 20 20 20 20 Total Revenue 27,330 30,100 32,900 38,360 43,400 49,460 54,230 61,230 69,460 Operating Expenses Fuel 14,910 14,350 14,950 17,600 19,505 22,150 23,760 26,080 29,270 Operations 4,390 5,080 5,68n 6,260 7,000 7,770 8,730 10,120 11,520 Depreciation 3,080 3,900 4,680 5,320 6,020 6,690 7,440 8,930 10,340 Total Expenses 22,380 23,330 25,310 29,180 32,525 36,610 39,930 45,130 51,130 Operating Income 4,950 6,770 7,590 9,180 10,875 12,850 14,300 16,100 18,330 Interest 2,450 3,520 4,490 5,470 6,140 6,530 7,730 8,930 9,960 Income Tax 130 160 160 190 240 320 330 360 420 Net Income After Tax 2,370 3,090 2,940 3,520 4,495 6,000 6,240 6_810 7,950 Rate Base 58,280 73,150 88,400 101,600 115,110 128,560 141,400 163,130 188,120 Rate of Return, % 8.3 9.0 8.4 8.8 9.2 9.7 9.8 9.6 9.5 Source: EGAT Planning Department and Bank Mission Estimates, Industry Department March 1984 ECAT FINANCIAI FORECAST 1984-92 FUMDS FLOW STATEMENT (Bahit million) 1984 1985 1986 1987 1988 1989 1990 1991 1992 Internal Sources of Funds Net Income After Tax 2,370 3,090 2,940 3,520 4,495 6,000 6,240 6,810 7,950 Depreciation 3,080 3,900 4,680 5,320 6,020 6,690 _7.440 8,930 10,340 Total Internal Funds 5,450 6,990 7,620 8,840 10,515 12,690 13,680 15,740 18,290 Operational Reqtuirements Increase/DecreaseWork Capital 163 -181 119 207 -151 15 -408 -666 1,718 Debt Repayment 2,920 4,820 5,492 6,340 6,960 6,483 7,781 9,692 10,652 Total Operational Requirements 3,083 4,639 5,611 6,547 6,809 6,498 7,373 9,026 12,370 Internal Funds Available for Investment 2,367 2,351 2,009 2,293 3,706 6,192 6,307 6,714 5,920 Capital Investment Total Construction 11,740 12,290 11,544 13,605 16,314 19,405 21,721 23,349 21,688 Interest During Construction 1,483 1,743 2,212 1 831 2,484 2,899 3,984 3,266 2,933 Total Capital Investment 13,223 14,033 13,756 15,436 18,798 22,304 25,705 26,615 24,621 Balance to be Financed 10,856 11,681 11,747 13,143 15,092 16,112 19,398 19,901 18,701 Financed by Borrowing 10,240 10,680 10,990 14,850 15,100 16,400 19,500 20.000 19,000 Equity 550 280 340 60 0 0 0 0 0 Short Term Borrowing 0 760 790 -1,500 -50 0 0 0 0 Total Capital Sources 10,790 11,720 12,120 13,410 15,050 16,400 19,500 20,000 19,000 Cash, Increase/Decrease -66 38 373 267 -42 288 102 99 299 Cash At Beginning of Year 418 352 390 763 1,030 988 1,276 1,378 1,477 By Year End 352 390 763 1,030 988 1,276 1,378 1,477 1,776 Debt Service Coverage 1.5 1.3 1.2 1.2 1.3 1.4 1.4 1.3 1.4 41 Source: EGAT Planning Department and Bank mfission Estimates, Industry Department March 1984 EGAT FINANCIAL FORECAST 1984-92 BALANCE SEHET (Baht million) 1990 1991 1992 1984 1985 1986 1987 1988 1989 ASSETS Fixed Assets 181,029 201,311 228,340 269,961 307,909 Plant in Service 94,216 114,416 137,306 155,319 57,536 67,675 79,176 92,859 108,769 Less: Depreciation 28,225 34,102 40,830 48,597 133,636 149,164 177,102 199,140 Operating Plant 65,991 80,314 96,476 106,722 123,493 33.635 46,515 57,270 55,967 58,836 Work in Progress 27,402 27,830 25,560 31,221 Current Assets 1,378 1,477 1,776 Cash 352 390 763 1,030 988 1,276 1,653 1,974 2,200 2,548 2,752 1,996 3,351 Inventories 1,618 1,549 4'9 4,R2 54 6,322 7J11~ __8,4 8, 10A44 11,418 Receivables 13,012 13,517 16,545 Total Current Assets 6,460 6,761 7,837 9,326 10,298 11,918 429 429 429 429 429 Other Assets 429 429 429 429 192,498 219,875 247,015 274,950 Total Assets 100,282 115,334 130,302 147,698 167,855 EQUITY & LIABILITIES Equity 10,731 10,731 10,731 10,731 10,731 Paid in Capital 10,051 10,331 10,671 10,731 31,624 37,864 44,674 52,624 l Retained Earnings 11,579 14,669 17,609 21,126 25,624 52,924 60,942 69,892 80,518 Revaluation Reserve 23,884 28,504 33,320 39,111 45,515 95,279 109,537 125,297 143,873 Total Equity 45,514 53,504 61,600 70,968 81,870 77,125 87,042 98,761 109,069 117,417 Long Term Debt 49,117 54,977 60,475 68,985 Current Liabilities 10,177 11,577 12,649 13,660 Payables 5,651 6,093 6,677 7,695 8,860 0 0 0 0 Bank Overdraft 0 760 1,550 50 0 10,177 11,577 12,649 13,660 Total Current Liabilities 5,651 6,853 8,227 7,745 8,860 192,498 219,875 247,015 274,950 Total Equity & Liabilities 100,282 115,334 130,302 147,698 167,855 49:51 48:52 47:53 47:53 45:55 Debt:Equity Ratio 52:48 51:49 50:50 49:51 1.2 1.2 1.1 1.1 1.2 Current Ratio 1.2 1.0 1.0 1.2 Source: ECAT Planning Department and Bank mission estimates. -| Industry Department March 1984 Lin -66- ANNEX 13 Page 1 of 7 THAILAND - Second Mae Moh Lignite Project Financial Projections of the Lignite Mine Department Assumptions Assumptions underlying the Mine Department financial projections concerning operating costs, depreciation schedule, projected interest charges, royalties, taxes, an working captial requirements are outlined below. Other main assumptions such as lignite production, lignite pricing and detailed mine operating costs are outlined in the main report. At full production build-up at Mae Moh in 1987, the estimated average production costs for Mae Moh and Krabi mines is US$17.72 per tonne as detailed below. Lignite production is estimated at 5.1 million tonnes in 1987, of which 4.9 million tonnes would be from Mae Moh and 0.2 million tonnes would be from Krabi. EGAT Mine Department Estimated Total Production Cost, FY87 (US$ per tonne) ---- Current Terms-- --- January 1983 Terms- Mae Mae Moh Mae Mae Moh Moh Krabi & Krabi Moh Krabi & Krabi % Operating Cost 12.55 17.82 12.76 9.98 14.98 10.15 57.3 Depreciation and Amortization IDC 6.11 1.82 5.93 4.86 1.45 4.70 26.5 Amortization Pre- stripping 0.80 - 0.78 0.64 - 0.62 3.5 Administrative Expenses 0.41 0.55 0.41 0.33 0.44 0.33 1.9 Exploration 0.45 2.27 0.53 0.36 1.80 0.42 2.4 Reclamation 0.18 0.18 0.18 0.14 0.14 0.14 0.8 Financial Charges 1.54 1.46 1.53 1.23 0.16 1.22 6.9 Income Tax 0.16 - 0.16 0.12 - 0.12 0.7 Estimated Production Cost 22.20 24.10 22.28 17.66 19.17 17.72 100.00 -67- ANNEX 13 Page 2 of 7 EGAT uses the straight-linemethod of depreciationwhich has been calculated under the followingassumptions approved by the Ministry of Finance: EGAT Mine Department Depreciationand AmortizationPeriods Equipment Years Equipment Years Trucks 6 Workshop equipment 13 Crushers 25 Power supply equipment 25 Conveyor belt systems 25 Civil works and geologicaldrilling 25 Spreader and tripper cars 25 Engineeringand training 10 Heavy duty equipment 10 Interest during construction 7 Light vehicles 5 The depreciationcalculated for Mae Moh II mine expansion (Units 5-7), Mae Moh I installations(Units 1-4), and Krabi mine fixed assets is shown below: EGAT Mine Department DepreciationSchedule (US$ million) FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 Mae Moh II 0.3 1.4 1.6 12.4 12.7 12.8 12.7 12.8 12.5 Mae Moh I 5.1 10.2 10.5 11.5 11.5 11.5 11.5 10.2 8.1 Krabi 0.3 0.3 0.3 0.3 0.1 - - - - Total 5.7 11.9 12.4 24.2 24.3 24.3 24.3 23.0 20.6 EGAT's fixed assets and depreciationare revalued on an annual basis in accordancewith tariff covenants (under Loan 1852-TH)with the Bank. The Mine Departmentis assumed to follow the same procedure. The interest chre forecasts for the Mine Department are shown below. These include interest on the proposed IBRD, KfW and commercial loans for the Project. The proposed Bank loan is for US$59.1 million at the standard interest rate and front-end fee with a grace period of 5 years and maturity of 15 years. The KfW loan is for DM 47.0 million (US$19.2 million) at 9.5% interest and 0.25% commitment fee with a grace period of 2 years and maturity of 10.5 years. Part of the KfW loan will be used for Mae Moh II (US$16.8million equivalent). The commercialloan, to be obtained by EGAT in the future, is assumed to total US$10.0 million and to have terms similar to the IBRD loan. -68- ANNEX 13 Page 3 of 7 EGAT Mine Department Projected Interest Charges (US$ million) FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 Mae Moh II 1.23 3.19 4.83 7.76 8.80 8.51 7.97 7.30 6.61 Mae Moh I 8.62 9.26 8.41 7.36 6.30 5.27 4.46 4.01 3.49 Krabi Mine 0.64 0.56 0.43 0.31 0.18 0.62 - - - Mine Department 0.25 0.23 0.19 0.14 0.09 0.03 - - - Total 10.74 13.24 23.86 15.57 15.37 14.43 12.43 11.31 10.10 Of which: Charged to IDC 5.54 3.19 4.83 7.76 8.80 8.51 7.97 7.30 6.61 Charged to Operations 5.20 10.05 9.03 7.81 6.57 5.92 4.46 4.01 3.49 Total 10.74 13.24 13.86 15.57 15.37 14.43 12.43 11.31 10.10 Royalties are paid to the Government at the rate of Baht 6.52 per tonne (US$0.823)of lignite, and have been included in the forecasts. Import duties and taxes on equipmenthave been calculatedin accordance with currentlyapplied rates which average about 30% of the cost of mining equipment to be procured under the Mae Moh II Project. Taxes on imported mining equipment associatedwith the mine expansionfor Power Unit 5 are charged, but assumed to be rebated by the Government in accordancewith the preference granted projects approved under the Fifth Five Year National Plan. The following assumptionswere used in calculatingrequirements under the Project: EGAT Mine Department Working Capital Category Assumptions Cash and Banks 15 days of EGAT and Contractor expenditures Accounts Receivable 15 days of total revenues Inventories- Fuel 60 days of fuel consumptions - Materials 4 months of EGAT operating cost - Lignite 15 days of lignite production Accounts payable 30 days of EGAT's expenditure Industry Department March 1984 -69- ANNEX 13 Page 4 of 7 Financial Projections, Mine Operations EGAT Mine Department Income Statement (US$ million) 1984 1985 1986 1987 1988 1989 1990 1991 1992 Mae Moh, mt (mill) 1.64 3.03 4.43 4.86 4.87 4.91 4.93 4.97 5.01 Krabi, mt (mill) .33 .22 .22 .22 .22 .22 .22 - - Total Production 1.97 3.25 4.65 4.08 5.09 5.13 5.15 4.97 5.01 US$ per mt 20.4 22.2 23.7 25.4 27.2 29.2 31.2 33.4 35.7 Total Revenues 40.2 72.0 110.3 129.0 138.4 149.2 160.4 166.0 179.1 Mae Moh O/B Contract - 11.8 30.9 36.9 38.7 41.1 43.5 65.6 69.8 Mae Moh Expenses O/B 5.7 2.3 6.6 15.4 16.1 17.0 18.0 3.0 3.4 Mae Moh Expenses Lignite 2.1 4.9 8.1 8.7 8.9 9.5 10.2 10.9 11.6 Krabi Expenses 4.9 3.4 3.6 3.9 4.1 4.3 4.6 - - Total Operating Expenses 12.7 22.4 49.2 64.9 67.8 71.9 76.3 79.5 84.8 Gross Profit 27.5 49.6 61.0 64.2 70.5 77.3 84.1 86.5 94.2 Revalued Depreciation 6.6 14.2 15.3 30.1 30.9 32.3 33.5 33.0 30.7 Amortization, Advance O/B 1.2 2.8 3.1 3.9 4.4 5.2 5.8 4.0 4.3 Administrative Expenses 1.5 1.7 1.9 2.1 2.2 2.3 2.5 2.6 2.8 Exploration 2.2 2.4 2.5 2.7 2.9 3.0 3.2 3.4 3.6 Interest 5.2 10.1 9.0 7.8 6.6 5.9 4.5 4.0 3.5 Reclamation .4 .6 .9 .9 .9 .9 .9 .9 .9 Income before Taxes 10.4 17.8 28.3 16.7 22.6 27.7 33.7 38.5 48.4 Income Tax .5 .9 1.4 .8 1.1 1.4 1.7 1.9 2.4 Income after Tax 9.9 16.9 26.9 15.9 21.5 26.3 32.0 36.6 46.0 Income after Tax/Revenue 24.5 23.4 24.3 12.3 15.5 17.5 20.0 22.1 25.7 Return on Assets 12.4 17.7 20.6 11,0 11.7 13.2 14.8 15.8 18.8 O/B M-BCM, Contractor - 5.4 13.0 15.0 15.0 15.0 15.0 21.1 21.2 O/B M-BCM, Amortization .7 1.3 1.3 1.6 1.7 1.9 2.0 1.3 1.3 O/B M-BCM, EGAT 3.2 1.1 2.8 6.3 6.3 6.2 6.2 1.0 1.0 Total O/B Mae Moh 3.9 7.8 17.1 22.9 23.0 23.1 23.2 23.4 23.5 Ratio O/B:TM Lignite 2.4 2.6 3.9 4.7 4.7 4.7 4.7 4.7 4.7 Price $/ton, Jan. 83 terms 19.4 19.8 20.0 20.2 20.4 20.6 20.8 21.0 21.3 Cost $/ton, Jan. 83 terms 14.7 15.2 15.2 17.7 17.3 17.0 16.7 16.4 15.8 Contract $/BCM, Jan. 83 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 EGAT $/BCM, Jan. 83 1.60 1.86 2.01 1.85 1.79 1.79 1.79 1.79 1.79 Weighted s/BCM, Jan. 83 1.67 1.95 2.00 1.96 1.94 1.94 1.94 1.96 1.96 Note: Revalued Assets and Depreciation discrepancies due to rounding. M-BCM million bank cubic meters. Industry Department March 1984 -70- ANNEX 13 Page 5 of 7 EGAT Mine Department Change in Working Capital (US$ million) 1984 1985 1986 1987 1988 1989 1990 1991 1992 Current Assets Cash and Banks 1.0 2.1 2.4 2.5 2.6 2.8 2.9 4.4 4.7 Accounts Receivable 1.6 3.0 4.5 5.3 5.7 6.1 6.6 6.8 7.3 Inventory, Lignite .8 1.5 2.5 2.8 2.9 3.1 3.3 3.4 3.7 Inventory, Fuel .7 .7 .7 .7 .8 .8 .9 .9 1.0 Inventory, Materials 2.3 2.5 3.0 2.9 3.0 3.2 3.4 3.6 3.8 Total Current Assets 6.4 9.8 13.1 14.2 15.0 16.0 17.1 19.1 20.5 Current Liabilities Accounts Payable 1.8 3.1 5.3 6.5 6.7 7.0 7.3 7.6 8.1 Change in Working Capital Working Capital 4.6 6.7 7.8 7.7 8.3 9.0 9.7 11.5 12.4 Change in Working Capital .9 2.1 1.1 ( .1) .6 .7 .8 1.8 .8 Industry Department March 1984 -7 1- ANNEX 13 Page 6 of 7 EGAT Mine Department Flow of Funds (US$ million) 1984 1985 1986 1987 1988 1989 1990 1991 1992 SOURCES Income after Tax 9.9 16.9 26.9 15.9 21.5 26.3 32.0 36.6 46.0 Revalued Depreciation 6.6 14.2 15.3 30.1 30.9 32.3 33.5 33.0 30.7 Amortization Advance O/B 1.2 2.8 3.1 3.9 4.4 5.2 5.8 4.0 4.3 Internal Cash Generation 17.7 33.9 45.3 49.9 56.8 63.8 71.3 73.6 81.0 Government Tax Rebate 5.7 4.6 ------EGAT Equity Plant, EQP 8.4 4.0 6.3 46.2 - - - - - EGAT EQ. First Mae Moh 7.2 8.6 ------Australia, ADAB Grant 2.1 1.3 .3 .1 Equity Increase 23.4 18.5 6.6 46.3 - - - - - IBRD Loan 3.4 6.5 32.8 16.4 - - - - - Germany, KfW Loans, I, II 9.8 ------Other Loans - - 3.5 7.5 - - - - - First Mae Moh Loan 14.6 ------Total Borrowing 27.8 6.5 36.3 23.9 _ _ _ _ _ Total Sources 68.9 58.9 88.2 120.0 56.8 63.8 71.3 73.6 81.0 APPLICATIONS Plant and Equipment 26.6 13.1 38.1 62.4 10.6 7.2 20.1 18.3 10.7 Interest During Construction and Front End Fee 5.5 3.1 4.8 7.8 8.8 8.5 8.0 7.3 6.6 Expenditures First Mae Moh 16.8 _ _ - _ - - _ - Total Capital Expenditures 48.9 16.2 42.9 70.2 19.4 15.7 28.1 25.6 17.3 Advance O/B Expenditures 15.4 31.0 13.8 - - - - 28.3 29.3 Repayment First Mae Moh (1-4) 3.2 6.5 12.3 12.3 12.4 10.5 5.8 5.9 5.9 Repayment Second Mae Moh (5-7) - .9 1.0 1.9 1.9 4.2 6.7 6.7 6.7 Total Repayment 3.2 7.4 13.3 14.2 14.3 14.7 12.5 12.6 12.6 Change in Working Capital .9 2.1 1.1 ( .1) .6 .7 .8 1.8 .8 Total Applications 68.4 56.7 71.1 84.3 34.3 31.1 41.4 68.3 60.0 Cash, Surplus/(Deficit) .5 2.2 17.1 35.7 22.5 32.7 29.9 5.3 21.0 Accum. Surplus/(Deficit) 1.0 3.2 20.3 56.0 78.5 111.2 141.1 146.24 167.4 Debt Service Coverage 2.7 2.5 2.4 2.6 3.0 3.4 4.5 4.7 5.2 Industry Department March 1984 -72- ANNEX 13 Page 7 of 7 EGAT Mine Department Balance Sheet (US$ million) 1984 1985 1986 1987 1988 1989 1990 1991 1992 ASSETS Cash and Banks 1.0 2.1 2.4 2.5 2.6 2.8 2.9 4.4 4.7 Accounts Receivable 1.6 3.0 4.5 5.3 5.7 6.1 6.6 6.8 7.3 Inventories 3.8 4.7 6.2 6.4 6.7 7.1 7.b 7.9 8.5 Total Current Assets 6.4 9.8 13.1 14.2 15.0 16.0 17.1 19.1 20.5 Accum. Surplus/(Deficit) 1.0 3.2 20.3 56.0 78.5 111.2 141.1 146.4 167.4 Revalued Plant and Equipment 197.6 227.7 284.7 372.0 413.7 454.2 509.5 565.7 617.0 Accumulated Depreciation 43.9 61.2 80.3 115.3 153.1 194.6 239.7 287.1 335.0 Net Fixed Assets 153.7 166.5 204.4 256.7 260.6 259.6 269.8 278.6 282.0 Advanced Overburden 83.0 111.1 121.8 117.8 113.5 108.3 102.5 126.7 151.7 Assets of Reclamation Fund 2.9 3.5 4.4 5.3 6.3 7.2 8.2 9.1 10.0 Total Assets 247.0 294.1 364.0 450.0 473.9 502.3 538.7 579.9 631.6 = = o , _ LIABILITIES AND EQUITY Accounts Payable 1.8 3.1 5.3 6.5 6.7 7.0 7.3 7.6 8.1 Current Maturities 7.4 13.3 14.2 14.3 14.7 12.5 12.6 12.6 12.6 Current Liabilities 9.2 16.4 19.5 20.8 21.4 19.5 19.9 20.2 20.7 Long Term Debt Second Mae Moh (5-7) 24.3 30.1 64.8 86.9 82.7 76.0 69.3 62.6 55.9 Long Term Debt First Mae Moh (1-4) 96.3 83.6 71.0 58.5 48.0 42.2 .36.3 30.4 24.5 Long Term Debt (Net) 120.6 113.7 135.8 145.4 130.7 118.2 105.6 93.0 80.4 Reclamation Fund 2.9 3.5 4.4 5.3 6.2 7.1 8.0 8.9 9.8 Total Liabilities 132.7 133.6 159.7 171.5 158.3 144.8 133.5 122.1 110.9 Equity 77.5 96.0 102.5 148.9 148.9 148.9 148.9 148.9 148.9 Operational Surplus 22.9 39.8 66.7 82.6 104.1 130.4 162.4 199.0 245.0 Revaluation Surplus 13.9 24.7 35.1 47.0 62.6 78.2 93.9 109.9 126.8 Total Equity 114.3 160.5 204.3 278.5 315.6 357.5 405.2 457.8 520.7 Equity and Liabilities 247.0 294.1 364.0 450.0 473.9 502.3 538.7 579.9 631.6 Current Ratio .7 .6 .7 .7 .7 .8 .9 .9 1.0 Debt/Equity Ratio 51:49 42:58 40:60 34:66 29:71 25:75 21:79 17:83 13:87 Industry Department March 1984 -73- ANNEX 14 Page 1 of 2 THAILAND-SECOND MAE MOE LIGNITE PROJECT Incremental Financial Rate of Return Mae Moh Mine Expansion - Case 1 Cash Flow Streams (US$ million, January 1983 terms) Oper. Oper. Sales Transfer Sales Capital Cost Cost Tax Net Cash Period Tonnage Price Revenues Costs EGAT Contract Rebate Flow (tons) (US$/ton) 1980 - 1981 - - 1982 - - - 2.8 - - - (2.8) 1983 - 19.0 - 18.2 .2 - 4.1 (14.3) 1984 - 19.4 - 25.7 4.1 2.3 5.4 (26.7) 1985 .9 19.8 17.2 11.5 9.7 17.6 4.1 (17.4) 1986 2.3 19.8 45.0 30.2 14.6 20.0 - (19.8) 1987 2.7 19.8 53.6 48.4 12.8 20.0 - (27.6) 1988 2.7 19.8 54.3 3.8 12.8 20.1 - 17.6 1989 2.7 19.8 55.2 2.3 12.2 20.2 - 20.5 1990 2.7 19.8 56.0 6.3 12.4 20.4 - 16.9 1991 2.7 19.8 56.4 5.4 12.6 40.7 - (2.3) 1992 2.7 19.8 57.0 2.9 13.0 40.7 - .4 1993 2.8 19.8 57.6 7.6 12.6 40.7 - (3.3) 1994 2.8 19.8 59.1 3.4 12.6 40.7 - 2.4 1995 2.9 19.8 60.1 1.2 13.1 40.7 - 5.2 1996 3.0 19.8 61.6 1.4 13.1 40.7 - 6.5 1997 3.0 19.8 61.4 3.4 13.3 19.5 - 25.2 1998 3.0 19.8 63.3 7.0 13.4 19.5 - 23.4 1999 3.1 19.8 64.1 8.1 13.6 19.5 - 22.9 2000 3.0 19.8 62.4 5.0 13.6 19.5 - 24.3 2001 2.9 19.8 60.8 7.1 13.6 19.5 - 20.6 2002 2.9 19.8 60.8 4.8 13.6 19.5 - 22.9 2003 2.9 19.8 60.8 2.1 13.6 19.5 - 25.6 2004 2.9 19.8 60.4 2.8 13.6 19.5 - 24.5 2005 2.8 19.8 59.3 7.3 13.6 19.5 - 19.0 2006 2.8 19.8 59.3 3.5 13.6 19.5 - 22.8 2007 2.8 19.8 59.3 - 13.6 19.5 - 26.3 2008 2.8 19.8 58.3 - 13.6 19.5 - 25.2 2009 2.8 19.8 58.3 (3.0) 13.6 19.5 - 28.2 Financial Rate of Return = 9.2% Industry Department March 1984 -74- ANNEX 14 Page 2 of 2 Incremental Financial Rate of Return Mae Moh Mine Expansion and Power Units (5-7) - Case 2 CASH FLOW STREAMS (US$ million, January 1983 terms) Capital Capital Oper. Oper. Net Power Power Sales Cost Cost Cost Cost Tax Cash Period Sales Tariff Revenues Mine Power Mine Power Rebates Flow (GWh) (cents/kWh) 1980 - - - - .8 - - - (.8) 1981 - - - - 15.7 - - .9 (14.8) 1982 - - - 2.8 71.0 - - 4.1 (69.7) 1983 - 6.1 - 18.2 165.1 .2 - 9.5 (174.0) 1984 - 6.0 - 25.7 132.2 6.4 - 5.8 (158.6) 1985 814.2 5.7 46.4 11.5 74.2 27.3 3.8 4.1 (65.5) 1986 2,313.8 5.3 122.6 30.2 30.7 34.6 11.1 - 16.0 1987 2,718.6 5.3 144.1 48.4 - 32.7 12.9 - 50.0 1988 2,718.6 5.3 144.1 3.8 - 32.9 12.9 - 94.5 1989 2,718.6 5.3 144.1 2.3 - 32.4 12.9 - 96.4 1990 2,718.6 5.3 144.1 6.3 - 32.8 12.9 - 92.1 1991 2,718.6 5.3 144.1 5.4 - 53.3 12.9 - 72.5 1992 2,718.6 5.3 144.1 2.9 - 53.7 12.9 - 74.6 1993 2,718.6 5.3 144.1 7.6 - 53.3 12.9 - 70.2 1994 2,718.6 5.3 144.1 3.4 - 53.3 12.9 - 74.5 1995 2,718.6 5.3 144.1 1.2 - 53.7 12.9 - 76.2 1996 2,718.6 5.3 144.1 1.4 - 53.8 12.9 - 76.0 1997 2,718.6 5.3 144.1 3.4 - 32.8 12.9 - 94.9 1998 2,718.6 5.3 144.1 7.0 - 32.8 12.9 - 91.3 1999 2,718.6 5.3 144.1 8.1 - 33.1 12.9 - 89.9 2000 2,718.6 5.3 144.1 5.0 - 33.1 12.9 - 93.1 2001 2,718.6 5.3 144.1 7.1 - 33.1 12.9 - 91.0 2002 2,718.6 5.3 144.1 4.8 - 33.1 12.9 93.3 2003 2,718.6 5.3 144.1 2.1 - 33.1 12.9 96.0 2004 2,718.6 5.3 144.1 2.8 - 33.1 12.9 95.3 2005 2,718.6 5.3 144.1 7.3 - 33.0 12.9 90.8 2006 2,718.6 5.3 144.1 3.5 - 33.0 12.9 94.6 2007 2,718.6 5.3 144.1 - - 33.0 12.9 - 98.1 2008 2,718.6 5.3 144.1 - - 33.0 12.9 - 98.1 2009 2,718.6 5.3 144.1 (3.0) (44.7) 33.0 12.9 -- 145.8 Financial Rate of Return = 12.0% Industry Department March 1984 ANNEX 15 Page 1 of 2 THAILAND-SECOND MAE MOE LIGNITE PROJECT Incremental Financial Rate of Return Mae Moh Mine Expansion - Case 1 Cash Flow Streams (US$ million, January 1983 terms) Oper. Oper. Sales Transfer Sales Capital Cost Cost Net Cash Period Tonnage Price Revenues Costs EGAT Contract Flow (t) (US$it) 1980 - 1981 - - 1982 - - - 2.8 - - (2.8) 1983 - 19O0 14.3 .2 - (14.5) 1984 - 19.4 - 24.9 3.3 1.9 (30.1) 1985 .9 19.8 17.2 10.4 7.8 14.0 (15.0) 1986 2.3 19.8 45.0 30.1 11.6 16.0 (12.7) 1987 2.7 19,8 53.6 32.0 10.1 16.0 (4.5) 1988 2.7 19.8 54.3 3.0 10.1 16.1 25.1 1989 2.7 19.8 55.2 2.2 9.7 16.2 27.2 1990 2.7 19.8 56.0 6.0 9.9 16.3 23.8 1991 2.7 19.8 56.4 3.9 10.0 32.5 9.9 1992 2.7 19.8 57.0 2.5 10.3 32.5 11.7 1993 2.8 19.8 57.6 4.9 10.0 32.5 10.2 1994 2.8 19.8 59.1 2.7 10.0 32.5 13.9 1995 2.9 19.8 60.1 .9 10.4 32.5 16.3 1996 3.0 19.8 61.6 1.2 10.4 32.5 17.5 1997 3.0 19.8 61.4 3.2 10.6 15.6 32.0 1998 3.0 19.8 63.3 5.7 10.6 15.6 31.4 1999 3.1 19.8 64.1 5.3 10.8 15.6 32.4 2000 3.0 19.8 62.4 3.7 10.8 15.6 32.4 2001 2.9 19.8 60.8 6.3 10.8 15.6 28.1 2002 2.9 19.8 60.8 3.6 10.8 15.6 30.8 2003 2.9 19.8 60.8 2.0 10.8 15.6 32.4 2004 2.9 19.8 60.4 2.2 10.8 15.6 31.8 2005 2.8 19.8 59.3 4.6 10.8 15.6 28.4 2006 2.8 19.8 59.3 2.7 10.8 15.6 30.3 2007 2.8 19.8 59.3 - 10.8 15.6 33.0 2008 2.8 19.8 58.3 - 10.8 15.6 31.9 2009 2.8 19.8 58.3 (3.0) 10.8 15.6 34.9 Economic Rate of Return = 17.2% Industry Department March 1984 -76- ANNEX 15 Page 2 of 2 Incremental Financial Rate of Return Mae Moh Mine Expansion and Power Units (5-7) - Case 2 Cash Flow Streams (US$ million, January 1983 terms) Capital Capital Oper. Oper. Net Power Power Sales Cost Cost Cost Cost Cash Period Sales Tariff Revenues Mine Power Mine Power Flow (GWh) (cents/kWh) 1980 - - - - .8 - - (.8) 1981 - - - - 13.6 - - (13.6) 1982 - - - 2.8 64.6 - - (67.4) 1983 - 6.1 - 14.3 146.7 .2 - (161.2) 1984 - 6.0 - 24.9 121.6 5.2 - (151.7) 1985 814.2 5.7 46.4 10.4 69.8 21.8 3.4 (59.0) 1986 2,313.8 5.3 122.6 30.1 28.9 27.6 10.1 25.9 1987 2,718.6 5.3 144.1 32.0 - 26.1 11.7 74.3 1988 2,718.6 5.3 144.1 3.0 - 26.2 11,7 103.2 1989 2,718.6 5.3 144.1 2.2 - 25.8 11.7 104.3 1990 2,718.6 5.3 144.1 6.0 - 26.2 11.7 100.2 1991 2,718.6 5.3 144.1 3.9 - 42.6 11.7 85.9 1992 2,718.6 5.3 144.1 2.5 - 42.9 11.7 87.0 1993 2,718.6 5.3 144.1 4.9 - 42.6 11.7 84.9 1994 2,718.6 5.3 144.1 2.7 - 42.5 11.7 87.2 1995 2,718.6 5.3 144.1 .9 - 42.9 11.7 88.6 1996 2,718.6 5.3 144.1 1.2 - 42.9 11.7 88.3 1997 2,718.6 5.3 144.1 3.2 - 26.2 11.7 103.0 1998 2,718.6 5.3 144.1 5.7 - 26.2 11.7 100.5 1999 2,718.6 5.3 144.1 5.3 - 26.4 11.7 100.7 2000 2,718.6 5.3 144.1 3.7 - 26.4 11.7 102.3 2001 2,718.6 5.3 144.1 6.3 - 26.4 11.7 99.7 2002 2,718.6 5.3 144.1 3.6 - 26.4 11.7 102.4 2003 2,718.6 5.3 144.1 2.0 - 26.4 11.7 104.0 2004 2,718.6 5.3 144.1 2.2 - 26.4 11.7 103.8 2005 2,718.6 5.3 144.1 4.6 - 26.4 11.7 101.4 2006 2,718.6 5.3 144.1 2.7 - 26.4 11.7 103.3 2007 2,718.6 5.3 144.1 - - 26.4 11.7 106.0 2008 2,718.6 5.3 144.1 - - 26.3 11.7 106.0 2009 2,718.6 5.3 144.1 (3.0) (44.7) 26.3 11.7 153.7 Economic Rate of Return = 14.3% Industry Department March 1984 ANNEX 16 P'age I of 4 THATLAND-SECOND MAE MOHI LIGNITE PROJECT Capital and Operating Costs Information on Power Plants A. Criteria and Assumptions for Capital and Operating Cost of Power Plants Mae Moh Units 5, 6 & 7 Coal-Fired Power Plant 1. Number of Units 3 1 2. Unit Size (MW) 150 450 3. Power Plant Cost (Baht Million) Unit 5 = 2,621.8 Unit 6 = 3,020.4 6,805.8 Unit 7 = 2,224.1 4. Dam 112.5 a/ - 5. Transmission System Unit 5 = 208.1 b/ 323.0 Unit 7 = 1,991.6 c/ 6. Plant Heat Rate (kcal/kWh) 2,575 2,270 7. Fuel Cost Based on costs US$71s5/tonne of mining (in Jan. 1983 expansion terms) e/ 8. Energy Cost (Baht/kWh) 0.5854 9. Operation and Maintenance Cost (%) d/ Power Plant 3.0 3.0 Transmission Line 1.0 1.0 Substation 2.0 2.0 Dam 1.0 1.0 10. Price Levels f/ 1982 1982 Except Fuel Cost 11. Economic Life (Yr) Power Plant 25 25 Transmission Line 40 40 Substation 25 25 a/ 33% of total project cost is allocated to Mae Moh Units 5-7. b/ 50% of the 230 kV Mae Moh - Phitsanulok 2 transmission system is allocated to Mae Moh Unit 5. c/ Investment for Mae Moh - Tha Tako 500 kV transmission system which will be initially operated at 230 kV is allocated to Mae Moh Unit 7. d/ As a percentage of capital investment. e/ Includes: Coal price (US$48/tonne FOB Australia), ocean freight and insurance ($15.00/tonne), port handling and inland transportation (US$7.5/tonne) and import taxes (US$1.0/tonne). f/ For return calculations, all costs have been escalated to January 1983. Source: EGAT's Energy Technology Department. Industry Department March 1984 -78- ANNEX 16 Page 2 of 4 B. Detailed Capital Cost Estimate of Mae Moh Power Units 5-7 (million) F.roe:t Compon.ents Baht uS$ Local Foreign Total Local Foreign Total Power UInit 5 666.54 1,955.23 2,621.77 28.9 84.8 113.7 Power Unit 6 625.37 2,394.99 3,020.36 27.1 103.9 131.0 Power Unit 7 509.45 1,714.65 2,224.10 22.2 74.4 96.6 Mae Chang Dam (1/3 of Cost) 66.47 46.00 112.47 2.9 2.0 4e9 Transrnission System for Units 4 & 5 (1/2 of Cost) 62.25 145.50 207.75 2.7 6,3 9.0 Transmission System for Units 6 & 7 847.0 1,145.0 1,992.0 36.7 49.7 86.4 S..b-Total a/ 2,777.08 7,401.37 10,178.45 120.5 321.1 441.6 Import Duties & Taxes 992.16 - 992.16 43.0 - 43.0 Project Base Cost 3,769.24 7,401.37 11,170.61 163.5 321.1 484.6 Price Contingencies 709.58 693.81 1,403.39 30.8 30.1 60.9 Project Installed Cost 4,478.82 8,095.18 12,574.00 194.3 351.2 545.5 Interest During Construction 3,020.80 3,020.80 131.1 - 131.1 Total Financing Required 7,499.62 8,095.18 15,594.80 325.4 351.2 676.6 a/ Includes physical contingencies. Source: EGAT's Energy Technology Departmenit Industry Department March 1984 -79- ANNEX 16 Pa-ge 3 of 4 C. Detialed Capital Cost Estimate of 450 MW Coal-Fired Power Plant (US$ Million) Foreign Local Total Local Foreign Total Turbo-Generator Plant 8.4 33.8 42.2 Boiler Plant 1,265.00 414.00 1,679.00 18.0 54.9 72.9 Control 115.00 11.50 126.50 0.5 5.0 5.5 Electrical Equipment 230.00 55.20 285.20 2.4 10.0 12.4 Water Treatment 92.00 11.50 103.50 0.5 4.0 4.5 Miscellaneous Equipment 460.00 46.00 506.00 2.0 19.9 21.9 Sub-Total I 2,940.55 733.70 3,674.25 31.8 127.6 159.4 Civil Work - 2,024.00 3,674.25 87.8 - 87.8 Land & Land Right - 13.80 13.80 0.6 - 0.6 Engineering & Administration 272.78 162.15 434.93 7.0 11Y8 18.8 Contingencies 321.31 337.41 658.72 14.7 13.9 28.6 Sub-Total II 3,534.64 3,271.06 6,805.70 141.9 153.3 295.2 Import Duties & Taxes - 439.30 439.30 19.1 - 19.1 Sub-Total III 3,534.64 3,710.36 7,245.00 161.0 153.3 314.3 Escalation 205.62 291.64 497.26 12.6 8.9 21.5 Sub-Total IV 3,740,26 4,002,00 7,742.26 173.6 162.2 335.8 Interest During Construction - 1,715.11 1,715.11 74.4 - 74.4 Total 3,740.26 5,717.11 9,457.37 248.0 162.2 410.2 Financing Required -======-=====-= =- -= - - -- Source: EGAT Energy Technology Department. a/ Exchange rate used Baht 23.05 = US$1.0. Industry Department March 1QR4 -80- ANNEX 16 Page 4 of 4 D. Cost Estimate of 230 KV Ao Phai - Min Buri Line and Substations (for co a-fired alternative) (US$ Million) Local Foreign a/ Total Local Foreign Total Transmission Line 1. 230 kV ao Phai - Min Buri Line (1272 MCMACSR, DC/ST, 97 km) 137.5 63.5 201.0 6.0 2.7 8.7 Sub-Total 137.5 63.5 201.0 6.0 2.7 8.7 Substations 2. 230 kV Ao Phai Switchyard 27.2 22.1 49.3 1.0 10.9 2.1 3. 230 kV Min Buri Substation Expansion 15.3 4.6 19.9 0.7 0.2 0.9 4. Communication System Addition 6.5 1.3 7.8 0.2 0.1 0.3 Sub-Total 49.0 28.0 77.0 2.1 1.2 3.3 Total Direct Cost 186.5 91.5 278.0 8.1 4.0 12.1 Indirect Costs 5. Engineering & Supervision - 16.0 16.0 - 0.6 0.6 6. Physical Contingencies 18.5 10.5 29.0 0.8 0.5 1.3 Total (w/o Price Escalation Duties & Taxes & IDC) b/ 205.0 118.0 323.0 8.9 5.1 14.0 7. Price Escalation .0 10.0 10.0 _ 0.4 0.4 Total (w/o Duties & Taxes & IDC) 205.0 128.0 333.0 8.9 5.5 14.4 8. Duties & Taxes - 28.0 28.0 - 1.2 1.2 Total (w/o IDC) 205.0 156.0 361.0 8.9 6.7 15.6 9. Interest During Construction - 27.0 27.0 - 1.2 1.2 Total Financing Required 205.0 183.0 388.0 8.9 7.9 16.8 a/ Exchange rate used Baht 23.05 US$1. b| Price Levels 1982. Source: EGAT Power System Planning Division Indus try Department March 1984 -81- Annex 17 Page 1 of 2 THAILAND-SECONDMAE MOH LIGNITE PROJECT Coal Prices and Fuel Comparison A. Australia - Monthly Average FOB Export Coal Prices, 1982 Thermal Coal to Japan/Korea Exchange Pacific Basin Rate A$/tonne US$/tonne US$/A$ 1982 January 44.10 48.46 1.099 February 45.00 48.33 1.074 March 46.80 49.14 1.050 April 47.20 50.07 1.061 May 46.40 48.62 1.048 June 49.00 50.07 1.022 July 47.20 45.90 0.996 August 47.60 45.90 0.964 September 52.80 50.10 0.949 October 50.40 47.20 0.937 November 51.50 49.20 0.955 December 49.30 48.30 0.981 1982 Average 48.10 48.53 1.010 Coal Specifications Thermal Coal - Average price for all thermal coal; the calorific value of a typical New South Wales thermal coal might be 6,000 to 6,700 Kcal/kg. Source: Australian Coal Report. Industry Department March 1984 -82- Annex 17 Page 2 of 2 B. Fuel Comparison Australia Mae Moh Bituminous Coal Lignite 1. Quality: Calorific Value (BTUIlb) 10,500 4,900 Heat Rate (BTU/kWh) 9,700 11,000 2. Cost: (January 1983 terms) Indicative FOB Price (US$/t) 48.0 17.7 a/ Ocean Freight (US$/t) 15.0 - Inland Freight and Handling (US$/t) 7.5 - Indicative CIF Price (US$/t) 70.5 17.7 Corresponding CIF Price per million BTU (US$) 3.0 1.6 a/ Mae Moh production cost at full production FY87. Industry Department March 1984 -83- ANNEX18 THAILAND-SECONDMAE MOE LIGNITE PROJECT Lignite Project (Mae Moh Mine Expansion and Power Units (5-7)) Compared with a Coal Fired Power Plant Economic Rate of Return on Differential Cash Flow Cash Flow Streams (US$ million, January 1983 terms) Capital Capital Oper. Oper. Revenues Revenues Cost Cost Cost Cost Coal Net Cash Period Lignite Coal Lignite Coal Lignite Coal Cost Flow W g ()5 (-5 + + 2 1980 - - .8 5.9 - - - 5.1 1981 - - 13.6 38.0 - - - 24.5 1982 - - 67.4 90.5 - - - 23.1 1983 - - 161.0 133,6 .2 - (27.6) 1984 - - 146.5 46.1 5.2 - - (105.6) 1985 46.4 129.0 80.2 1.3 25.2 8.6 77.5 (100.7) 1986 122.6 144.1 59.0 6.0 37.7 9.5 72.3 (30.4) 1987 144e1 144,1 32.0 2.0 37.8 9.3 71,6 13.1 1988 144.1 144.1 3.0 - 37.9 9.3 72.3 40.7 1989 144.1 144,1 2.2 - 37.6 9,3 73.0 42.5 1990 144.1 144.1 6.0 - 37.9 9.3 73.7 39.1 1991 144,1 144.1 3.9 - 54.3 9.3 73.7 24.8 1992 144,1 144.1 2.5 - 54.6 9.3 73.7 25.9 1993 144,1 144.1 4.9 - 54.2 9.3 73.7 23,8 1994 144.1 144.1 2.7 - 54.6 9.3 73.7 26.1 1995 144,1 144.1 .9 - 54.6 9.3 73.7 27.5 1996 144.1 144.1 1.2 - 54.6 9.3 73.7 27.2 1997 144,1 144.1 3.2 - 37.9 9.3 73.7 41.9 1998 144,1 144.1 5.7 - 37.9 9.3 73.7 39.4 1999 144.1 144.1 5.3 - 37,1 9.3 73.7 39.6 2000 144.1 144.1 3.7 - 38.1 9.3 73.7 41.2 2001 144.1 144.1 6.3 - 38.1 9.3 73.7 38.6 2002 144.1 144.1 3.6 - 38.1 9.3 73.7 41.3 2003 144,1 144.1 2.0 - 38.1 9.3 73.7 42.9 2004 144.1 144.1 2.2 - 38.1 9.3 73.7 42.7 2005 144,1 144.1 4.6 - 38.1 9.3 73.7 40.3 2006 144.1 144.1 2.7 - 38.1 9.3 73.7 42.2 2007 144.1 144.1 - - 38.1 9.3 73.7 44.9 2008 144.1 144.1 - - 38.1 9.3 73.7 44.9 2009 144.1 144.1 (47.7) (10.6) 38.1 9.3 73.7 82.0 Economic Rate of Return = 13.7% Industry Department March 1984 -84- ANNEX 19 THAILAND-SECONDMAE MOE LIGNITE PROJECT Net Foreign Exchange Savings Comparison of a Lignite with a Coal Fired Power Plant (US$ million, January 1983 terms) PERIOD A B C D E F G H I J K L 1980 - - .5 - 3.1 - - - 2.5 1981 - - - 9.9 - 19.7 - - - - - 9.8 1982 2.8 - - 47.0 - 46.9 - - .0 - - (2.8) 1983 8.7 - - 106.7 - 69.2 - - 8.1 .9 - (38.9) 1984 15.5 1.2 .7 88.4 - 23.9 - - 10.9 1.3 .1 (72.4) 1985 7.1 2.8 5.3 50.7 .7 .7 1.7 78.7 5.5 2.7 .8 16.4 1986 28.9 4.1 6.0 21.0 2.0 3.1 1.9 73.4 28.6 3.8 1.3 39.8 1987 18.5 3.5 6.0 - 2.3 1.0 1.9 72.7 17.8 5.8 1.3 55.9 1988 2.5 3.5 6.0 - 2.3 - 1.9 73.4 - 6.0 1.2 53.6 1989 1,9 3.4 6.1 - 2.3 - 1.9 73.4 - 5.6 2.7 54.1 1990 5.1 3.4 6.1 - 2.3 - 1.9 74.8 - 5.0 4.0 50.7 1991 3.3 3.5 12.2 - 2.3 - 1.9 74.8 - 4.2 3.8 47.3 1992 2.2 3.6 12.2 - 2.3 - 1.9 74.8 - 5.6 5.3 45.4 1993 4.2 3.5 12.2 - 2.3 - 1.9 74.8 - 4.8 5.0 44.6 1994 2.3 3.5 12.2 - 2.3 - 1.9 74.8 - 4.2 4.8 47.5 1995 .7 3.6 12.2 - 2.3 - 1.9 74.8 - 3.4 3.6 50.9 1996 1.0 3.6 12.2 - 2.3 - 1.9 74.8 - 2.8 3.1 51.6 1997 2.7 3.7 5.8 - 2.3 - 1,9 74.8 - 2.4 2.9 56.8 1998 4,9 3.7 5.8 - 2.3 - 1.9 74.8 - 1.9 2.8 55.2 1999 4.5 3.8 5.8 - 2.3 - 1.9 74.8 - 1.6 2.6 56.0 20Q0 3.2 3.8 5.8 - 2.3 - 1.9 74.8 - 1,2 2.5 57.9 2001 5.4 3.8 5.8 - 2.3 - 1.9 74.8 - .8 2.3 56.2 2002 3.0 3.8 5.8 - 2.3 - 1.9 74.8 - .6 2.2 59.0 2003 1.7 3.8 5.8 - 2.3 - 1.9 74.8 - .3 2.1 60.7 2004 1.9 3.8 5.8 - 2.3 - 1.9 74.8 - .1 .8 62.0 2005 3.8 3.8 5.8 - 2.3 - 1.9 74.8 - - - 61.0 2006 2.3 3.8 5.8 - 2,3 - 1.9 74.8 - - - 62.5 2007 - 3.8 5.8 - 2.3 - 1.9 74.8 - - - 64.8 2008 - 3.8 5.8 - 2.3 - 1.9 74.8 - - - 64.8 2009 - 3.8 5.8 (32.5) 2,3 - 1.9 74.8 - - - 97.2 Average Net Foreign Exchange Savings = US$42.3 million per year. Definition of Foreign Exchange Streams: A = Mine Expansion, Capital Cost B = Mine Expansion, EGAT Production Cost C = Mine Expansion, Contractor Cost D = Lignite Fired Power Plant (5-7), Capital Cost E = Lignite Fired Power Plant (5-7), Generation Cost F = Coal Fired Power Plant, Capital Cost G = Coal Fired Power Plant, Generation Cost H = Coal Fired Power Plant, Cost of Imported Coal I = Foreign Loans J = Interest on Foreign Loans K = Repayment of Foreign Loans L = Net Foreign Exchange Savings Industry Department March 1984 -85- ANNEX 20 THAILAND-SECOND MAE MOH LIGNITE PROJECT Main Documents Available in the Project File A. The Mining Sector 1. Assignment of Lignite Reserves in the Mae Moh Basin, Longworth CMPS Engineers (Australia), 1981. 2. Study on Expansion of the Mae Moh Lignite Basin, Rheinbraun Consulting (FR Germany) 1982. 3. Mine Reclamation Study, Rheinbraun Consulting (FR Germany), 1982. B. The Company 1. EGAT 1.1 EGAT Annual Exploration Reports (1982-82) 1.2 EGAT Project Progress Reports (quarterly, 1981-83) C. The Project 1. Mae Moh Project 1.1 Power 1.1.1 EGAT Preliminary Environmental Assessment of Mae Moh Power Development, 1982. 1.1.2 Mae Moh Environmental Study: Mae Moh Project Evaluation and Stack Design for Units 4-9 Air Quality, Simons Resources (Canada), 1983. 1.2 Mine 1.2.1 Report on Phase I Training Program at Mae Moh Mine, Coleman Associate (Australia), 1982. 1.2.2 Mine Accounting Procedures Manual, Coopers and Lybrand (UK), 1982. 1.2.3 Draft Report on Lignite Pricing Study and Appendices by Meta Systems Incorporated,,(USA), January and April 1983. C. Economic Analysis 1. EGAT Economic Evaluation of Imported Coal vs. Lignite Power Plant, 1983. D. Miscellaneous 1. Terms of Reference for Technical Assistance Program, Australian Technical Assistance Bureau, 1983. Industry Department March 1984 BURMA 20' ( BUD DAM ~'LAO PEPESDEMOCRATIC TALND% CerIOMW POL' \MoeHunges. 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