IRETURN TCJu~~~¶~~~ mWIV IIM PAIMfh RESTRICTED

WITWIN | I'ILI uv Report No. TO-527a

ONE WEEK I

This report was prepared for use within tlhe Bank and its affiliated organizations.They do not acc,ept responsibility for its accuracy or completeness. The report maynot Eie published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

TIT-T' TINSTITTOT NACGIONAT. DrE ELT.ETRTITGAG-TO)N

T riE JURUN- MAiRINTi *LA HYDROELEC-LrRI(C, CH.ErVIE, ISSCI,r..r1ATEDlIfl rT' AN

LINES AND OTHER GENERATING FACILITIES

GUAT EMALA

January 5, 1967

Projects Departm!ent

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(' TTD OD T-.'Tt- V Lr TTTx A T T.'iT%TrvC_.A C AN. J..lw . V s vJJ-J.4 L

U. S. $i . Qu.etzales 1Q 1 =U.S. $1Q 1, ONC), 000 :=U.S. $1, 000, 000

WEIGH'T-S AND MEASURES EQUIVALENTS

One meter (in) = 3. 28 ifeet (ft. )

One cubic meter (m ) = 35. 314 cubic feet (cu. ft. )

One kilometer = 0..622 miles

One foot = . 305 imeters

One cumic foot = 1.09 kiometers

One mi:le 1. 609 kilometer s

TABLE OF CONTENTS

Pare No.

S TTMIRWAR y

I - .Ti'1RCYfTTfTTC{1N 1

IT . TC'R0GTT.'TThm 1TTT PA nIPdOM M

Organizatio3n and Management 4

IV. POWdER MARKET 5.I-esent 'Djemank- ffForecast of Future Demand 6

V. THE PROJECT 9Estis[mated CDSt of' the ProJect 9Engineering and Supervision of Construction 11Constructio:n Schedule 11Problems As.sociated with Water Diversion at

Jurun 11Possible Alternatives to the Jurun-Marinala

Scheme 12

vI. FilWANCIaL ASPECTS 1>Tariffs 15Financial Position 17Past Earnings Record 19Proposed Financing Plan 19Estimated Future Earnings 21Future Financial Position 22

VII. CONCLUSIONS 22

ANNEXES

1. Actual and Forecast Maximum Demands and Plant InstallationProgram for Central Region

2. Actual and Forecast Maximum Demands, Energy Generation andSales in the Central Region

3. Detailed Description of the Project4[ Schematic Layout of the Jurun-Marinala Scheme5e Income Statements 1962-19716. Balance Sheet Sept. 30, 1961 - Elec. 31, 19717. Sources and Applications of Funcs 1967-19718. Estimated Cost of the Project

Map

This report has been based on irnformation supplied by theInstituto Nacional de Electrificacion (INDE) and the EmpresaElectrica de Guatemala (EEG) to a rission consisting of'Messrs. J. Beach and J. Bruen of the Bank, which visited Guatemalain May-June 1965, information subsequently supplied by INDE and EEG.and information obtained by Mr. J. Beach during a visit to Guatemalain August 1966.

GUATENILLA

THE INSTITUTO NACIONAL DE ELECTRIFICACION

THE JURUN-MARINALA HYDROELECTRIC ',CHEME, ASSOCIATED TRANSIMSSION

LINES AND OTHER GENERATING FACILITIES

SU_f'AY

i. This report covers the appraisal of a project consisting ofthe Jurun-i4arinala Hydroelectric Scheme, associated high voltage trans-mission lines, and other smaller gene:rating facilities, and specialconsultants' services for engineering planning and management reorgani-zation.

ii. A Bank loan of US$1500 million equivalent, which would includeinterest during construction, has been reauested to cover the foreignexchange cost of the project, the total cost of which is estimated to bethe equivalent of U]S$23.5 million.

iiie 'Phe FRnrrtvwr woilri hp. ths Tnst tuto Naeoinnal rde Ellectrificacion(INDE), an autonomous agency of the Government of Guatemala.

iv. The project is necessary to meet the forecast load growth ofthe TInE svstem. rt is technically sond, the estmate cost. is reason+-able and construction schedules are realistic.

vo Wdith the assistance of consultants, the management of INDEwou1il A r r'hm ~ h ^-F' nc+i,r.el~ 071,.ni ~ y.4--I _ +1-1 -r 1. ;I4 +-would becapable oE co.tut_gerdsbsequen,tl operatir.g the facilitLes

which would be provided by the project.

vi. Due to the lack of proper tariff policies and adequate regu-latior.s 1o +h Gver,er+ -r. TNDE have agee o 4the form,atl;on of. a

regulatory agency to establish and regulate future tariffs in GuatemaLa.

vii. INDE is presently negotiating with the Empresa Electrica deG,lterMa _a (EEG)l for (1) - 4-,te-a- sa'les contract frpowrgneae~ ~ \~44~4 /~. J.~ \J./ J_l.L I.ULJ. 1 L JiU.L ~~ 1 .L'..L puw ~~.& 6~~ CLU~,LL

in its existing facilities; (2) the basis of compensation to EEG forUt±L.KLV.L d .LUrio Uo. watZLr .LUJ11 Lfo i WV 11yUI0 pl.tIsU aLt Sari LJU- s and ELL Si±al.to;j

and (3) the sale of land, including water rights, required for the con-struction of thi urar.LL proJecJt. c It iLs eiset.tiL, tLia+ Ulte Lnterimf-L scdluescontract be concluded and INDE has obtained the right of access to commenceconstruction ofL the Jurun pioJect together with an agrement outlining thrlebasis of compensation for EEG's water rights before the proposed loan issigned.

viii. IMNE has agreed that during the construction period it willmaintain its existing tariffs in the isolated systems, and that it willrealize a 10% rate of return on the average net cost of those facilitiesin its central system which are necessary for the sale of power to EEG.

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INDE has also agreed that beginning with the year 1971 tariffs will bemaintained at levels which will enable it to achieve a return of at least9% on its average net fixed assets in operatione Such arrangements shouldelimlnate the need for continued government equity contributions by theend of 1969. The Government has agreed to provide all the necessary fundsto complete the construction of the proposed project.

ix. The project would be suitable for a Bank loan of US$15cO millionequivalent, for a period of 25 years including a grace period of four years,subject to the provisions of paragraph 108.

GUATEMA.LA

THE INSTITUTO NACIONAL DE ELECTRIFICACION

THE JURUN-MARI.NALA HYDROELECTRIC SCHEME, ASSOCIATED TRANSMISSION

LINES ANlD OTHER GENERATING FACILITIES

I. TNITRODUCTION

1. This report covers the appraisal of a project consisting of theAn MAI Jimn-.MarinnIn rR; hr!mo +..n hp ennstvcanctee nenr GuiiatemalaCity, associated 138 kv transmission lines, a 15 MW gas turbine generatingplnnt at EscTruinntla, and 5 NW of diesel generating plant at Puertoa tide Galvez. The location of the various sections of the project is shown onthe map accom.panying: this report.

IPI,.A T-4: 4 ,. |o VM-o; z-J ) , |bt A-n LAn ITAMV~ kn n< ckAr +.h_=AaL_ 141 ;ss u " v IV s wEL J. s ml CW "J v U _,C%1 T 11- -. szssW W|v; \|* S/ s W .-

Bank for a l.oan to finance the foreign exchange costs of the project,mi--4t4g 4tci appiro'-*r,te-1TS1v rlLo qi 'n,i.lc-g-trsduring construction, The total cost oJ the project is estimated to be

u mil].L.ionL~j ~equi.va1enti, n1±ULuu.LL1g he costs of UVosuLtnUtLUs svicesfor engineering planning and management reorganization.

3. In 1960 a grant was made from the U.N. Special Fund to coverthe foreign currency costs Of a study by Consultants of Guatemala

electric power resources, a determination of the country's power require-ments and the prepar-ation of a power development program. The Bank wasappointed as the Executing Agency by the U.N. This study was completedin 1962. In Septemdber 1964 alternativea proposals for the power develop-ment program were put forward by a second firm of consultants engaged byI1NDE and, as a resu2Lt of the recommendations made by these consultants,INDE proposes to construct the Jurun-Marinala Hydroelectric Scheme as afirst priority.

4. The entire project including the Jurun-Marinala HydroelectricScheme, which forms the major part of the program, is expected to be incommission during the latter half of 1969.

5. This report has been based on information supplied by INDEand the Empresa Electrica de Guatemala (EEG) to a mission consisting ofMessrs. J. Beach and J. Bruen, which visited Guatemala in May-June 1965,information subsequently supplied by INDE and EEG and further informa-tion obtained by Mr. J. Beach during a visit to Guatemala in August 1966.

II. BACKGROUND

6. Guatemala is mainly an agricultural country and coffee produc-tion is the mainstay of the economy th-rough its contribution to the exporttrade.

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7. Gradual structural changes in the economy are likely, however,in the form of an increasing trend towards industrialization and a rela-tive reduction in the importance of agriculture. Within the manufac-turing sector it is probable that the food, beverage and tobacco indus-tries, which are the older industries and now account for more than halfof the industrial output, will, while continuing to grow, decline inrelative imtortance as the paper. rubber. metal-working. machinery andpetroleum industries gain sharply in their share of the total industrialoutput.

8. Such industrial activitv as nresentlv exists is concentratedin the areas of Guatemala City and Escuintla (Central Region) andQuezaltenango (Western Regionn) Ther,e are few industrial nlants inother areas. In an effort to decentralize development, the Governmentis actively following a policy of encounrnging ne-w industries to develonin areas away from the capital city. It is likely, however, that for manyyars to rnome the greater par+. of tn+.mnla s industry will be I onopntrate.in or around the capital.

9. For the purposes of electricity supply, Guatemala has beenevired int+. forni' regions: Cerntral, WIestern, Eastern and Atlantic (seemap). At the present time the generating facilities in these regionsare designed to meet their own load requirements, and regional inter-connection does not exist. The Central Region includes Guatemala City

'IL The ep l ec r c t su p Iindustry - 4-4 4-- in G-ruatl-er.aLa comgmen -ed 4t 1894

with a supply to the city of Guatemala. This system was gradually expandedE^ _ AZ- A3 C' - _1 QWA 4 - 4- n - .- - - - - - - L 4_ 4 A A,a 1ul ,a -.v 3v a ; G oA ce1ss.= Divn w,as gr; aiiu I, UAJ 17 C_ CUD U bI A1P r IA r C U

Guatemala (EEG), a subsidiary of the American & Foreign Power Company.At t-xiau tiljre the installed capacity of t,he EEG planit ,Wi110-un'ted to about1.8 M'1.

11. EEG continued to extend its facilities and after extensions toexlsti-ng nydro plants, tlhell constructi.Lo1n 0 Iofnw h1yUdO plants a,-tU OSal LULis

(5 IMW) anci El Salto (5.5 MW) and two small diesel units at Laguna (7 MO.),Ilhe insti-alled capacity had increased tio 20 Mw by 956. BetLween 1956 ald1964 EEG installed a further 45 TV oI' thermal capacity which, togetherwith existing installations was able to meet the increasing demands upto that time e At all times, however, very little spare capacity wasavailable, !ND)E rias now assumed the responsibility for tne installationof future generating capacity to meet the needs of the EEG system andcommissioned a 12 5 1MD! gas turbine unit in September 1965 and a 13 11vhydro planit in August 1966. EEG now serves a number of towns adjacentto the capital city and is following a policy of extending services tothose areas where the load demand warrants the necessary transmissionand distr:Lbution ).ineso This system is the largest in the country andsupplies practically the whole of the Central Region.

12. The second largest system is in the Westorn Region. whichobtains power from generating plants lccated in the Santa Maria area.These nl ants ccmnrise diiespl and hcir-rn units with an installed canacitvof 8.7 MW. They form part of INDE's, existing generation facilities whichinclud18e the nnt q Maria svs-t.pm serv:Lng the mimici nilitv Of Of'Quezaltenangoand a number' of other small towns in the Western Region.

13. With the exception of the Rio Ilondo system in the Eastern Region,oWTned hby nThrIET ndVI h i-n-e n- 1nt- 9d capaAT Aitl of 2+p' t'i +.-cr rit nn1 spl

in the Eastern and Atlantic Regions is provided by a large number of very

114. With the commissioning -o4' e 12-) f' gT a t ivne i-t at Esu

in September 1965 and the 13 I-HJ Los Esclavos hydro station in August 1966,4the 4to4t<' int'ecpct- inuate.mnala reached about "'I5 "T. Of thi.,tiLJ V L'UQ.L .I .11 UO-LIVU. '- U.CLC1.UY 111 UU.jLI JCLJ. J. LIILI d.UU L it-_.- L..J J*l! 0 Ji. VUSJ~

total INDE accounts for 37.5 ;MW, municipalities 7.5 MW and private powercoripanies -but -4J EEG £-jr7 1 Ln ±aV T! of 1 the l gy

These figure!s do not take into account a considerable number of verysmall privately-o-wted u-its ser-ing plauitatiots, gas fillng stations,isolated houses, etc.

15. On the basis of statistics available for the period 1950through 1964, the per capita consumption for the Central Region has risenfrom 102.3 kwh in 1950 to 277.7 kwh in 1964, for the remainder of thecountry from 17.6 kwhr to 30.1 kwh, and for, the country as a whole from36.6 kwh to 85.6 kwh. These figures represent average annual increasesof aTbout 7%,, 4% and 6% respectively.

16. The distribution of consumption among categories of consumershas remained almost constant throughout the same period and is approxi-mately as follows:

Central RemainderRegion of Country

Residential 4005 56.0Industrial. 34o1 24.0Commercial 15.7 8.0Government; and

M4unicipalities 9.7 12.0

==3. =0.

III. THE BORROWER

17. The Borrower would be the Instituto Nacional de Electrificacion(INDE), an autonomous agency created by Decree No. 1287 in lœ"ay 1959 withfull authority to develop Guatemala's electric power resources "for thegeneral benefit of the nation". This decree gave IN1DE responsibility todevelop the hydraulic resources for irrigation and electric power, andregulation of the power industry in Guatemala. To this end it is per-mitted to generate, transmit, distribute, buy and sell electrical energy,and to reglaate the power industry.

l80 T'he decision to form a national power authority was made in1959 but because of' the time required to form the organization and toturn over existing generating facilit-ies, INDE did not become activeuntil 19614. Before! this date no single organization in Guatemala wasresponsible for the! control of the powrer industry. Some of the functiorsof such an organization had 'ceen carried out by the Department of NationalElectrificaLtion which formed part of the Ministry of Public Works. TheDepartment did not have any well-defined jurisdiction and in general itsactivities were confined to investigation of future hydroelectric projectsand the provision of electric generation facilities in some of the smallercommunities,

19. Decree No. 275 of September 1964 detailed the construction pro-gram which INDE was to undertake. An-art from the Los Esclavos and ElPorvenir hydro projects (in the Central and Western Regions respectively),already under construction. and the studv of the future develonment ofLake Atitlan, it included the gas turbine plant at Escuintla and theJurun-ilari-iala scheme, hoth of which Porm part of this project.

20. The decrFee further gave authorLty to the Minister of the Treasuryand Public Credits to provide such finance as was necessary for the execu-tion Or these worrks^

21. The faciities owned and operated by T\IMDR comprise hvrno n1ants atLos Esclavos (13 IMW), Santa Maria (5.3 MW), Rio Hondo (2.4 IW), Comaja(192 1w), and Santan Posnlia (150 kw); dliesel installations at San Felipe-(2.9 IW) and Tecum Uman (60 kw), which form part of the Santa Maria system,and the first gas t-urbine .nit at Escui.ntla (12I5 II).

frgantizn+ion ^ -d m---cng .+v

09. TKMnrn't Do,n-A -c _-ga .4 + A4; --n---- C

4,rA A- nrbr., ocn,

permanent, the other three being alternates. The five permanent directors-,us ,,.clu;1e 4three engners `-elayr a-; &n econorst.- All e-41ht,,. ti _L1.LC..LL'.4r_ UJ±J.L %_ U 1G.Li1UUJ. Q, LJA±U .LO.VVY%J.- .L C61 .A i CU A.l "4L~ Le I.L.L VL r U

participate in Boar-d meetings but only the five permanent directors areper,mitted to vote. In the abec of a pVl--m-,Uanenit director his powersare taken over by an alternate of the same profession. The members ofthe Board are appointed by the Chief of Government thrcwgh the iniLsterof Communications and Public Works.

-. 5-

230 The general manager, who attends all Board meetings, is thechief executive of INDE and is respon.sibLe for day-to-day operations inline with policies laid down by the Board.

24. The general manager and key personnel lack experience in theelectricity supply industry and INDE will require assistance from con-sultants qualified in system planning, engineering and design, ratestudies andi in negotiating major sales contracts. Additionally theemplovment of suitable management consultants will be required to assistINDE to develop an effective organization structure and to advise onchanges to be made in its acont tina svstem, Tt is a condition forsigning of the proposed loan that IND.] employs such engineering andmanagement o-nsnl ftnntS GrGre.m-.Ptth1 o the BRqnk andl iinret-r terms of referenceagreed upon by the Bank.

TV. POWER ML.RKET

Present Demand

25, The Cenr.tal Region is served a:lm,ost exclusvely by .epia'w-

owned EEG and no s:ignificant unsatisfied or suppressed demand exists in4thi-s sys4tems at the preser.t ti,l ollow-ing 4thIe -JXemer,n 4at4on of- DecreeWA4- LJJt 1 U i j.JJ. ~iLU i.,J4IIV* £V U±.L.UW-L LiI U1FI_± L,J C Ad.L.± U.L I.$J~

No. 1287 which charges INDE with responsibility for the installation of

IIDE power in the Central Region and proposes to continue its policy ofextending services to those parts of it6 conceion area where the loaddemand warrants the necessary transmission and distribution lines andalso pro,poses to exterld its electricity facilities to la-rge isolabedloads outside its present service area. During the period 1961-1965investments by EEG in transmission and distribution lines, substations andconsumers' services were as follows:

1961 Q. 843,379i962 Qo 9yoo4281963 Q. l03lO,3145L964 Q . 1,,298, 124

1965 Q. 1,592,267

Further details of EEGIs financial position, particularly wit?iregard to its ability to continue investing in its distribution systemare given in the Financial Section (Paras. 78,79, and 80).

26. The installed generating capacity owned by EEG totals about65 MW, and comprises 30 N44 of steam, 12.5 Mi of gas turbines, 9 MW ofdiesel and about 13 MW of hydro.

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27e.3-mlA ' h 1- gion, which accounts for0 L± %A~JjL I U_Ij L L I± V VUJU C L _L L

67% of the total consumption of electricity in the country, amounted

-. ... -X~ %S...! 1 - C 4. -- r't..-fl - 5

Do a'bo-u- 76 suwr at, 1the end ofL 197._

(b <la Maria S.y-w Xserla:inkul owiu yste (Wes err- *

28e The systiem serves 40U co]THhIuflJies in 6 Qepa-stnents a pnd plansare being made to extend the transmission network to some outlying areas.The largest load center is the munici.paiity of Quezaltenango which oILaU-±DS

its energy requirements partly from the Santa Maria system, and partlyfrom its cwn plants at Zunii (1 iVXW hydro) and Quezaltenango (500 kw diesel).

29. The present naximum demand on the Santa Maria system is about5.0 I.W. Ihe firm capacity available in the system to deal with this loadis 8.7 MW, which will be increased by a further 2.2 NJi w¢ith the commis-sioning of' the El Porvenir hydro stat.ion in 1967

(c) Other Areas

30. The Rio Hondo system is owned by INDE and is located in theEastern Region. The system is suppli-ed by the Rio Hondo hydro stationwith an installed capacity of 2.4 B.,

31. Municipalities not connected to the systems of EEG, Hidro-electrica de SantaL Maria or Rio Hondo receive their power supply fromlocal hydroelectric or diesel stations. Many of these very small sta-tions and their distribution networks are inadequate to supply thepresent demand, resulting in unsatisfactory service and considerablelosses in the distribution systems. IIDE plans to acquire, improve andinterconnect some of these isolated networks.

Forecast of Future Demand

(a) Central Region

32. The demand on the EEG system which serves the major portion ofthis region has increased from about 41 N in 1960 to 76 N in 1965, anaverage anmual increase of 13%. During the same period the sale of energyrincreased from about 155 million kwh to about 307 million kwh, an averageannual increase of about 14i%. This has been due to easing of restric-tions of supply made possible by the installation of new plant and therevision of EEG's rate structure to p?romote load growth. A major factorhas also been EEG" s expansion of the service area to connect existingisolated industrial loads.

33. INOE ts consultants forecast a load growth of 125 annuallv forthe five-year period ending 1967 and 10% for the period 1967-71. Thisforecast. was arri-red at after taking into account the effect of both t1ledirect development of industrial demand and the indirect effect of

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increased employment and the increased purchasing power of existingand potential consumers in the Guatemala City area. Estimates preparedby EEG forecast a load growth of a litt:le over 12% per annum duringthe period 1964-69. Based on these forecasts and an analysis of theincrease of load in the entire Cerntral Region over the last 10 years,a rate of growth of 12% per annum has been assumed in this report forthe period 1965-71.

34. iBased on this growth rate the sale of energy in the CentralRegion is forecast to increase from 307 million kwh in 1965 to 630 mill:ionkwh in 1971 and the system demand to increase from 76 IV to 150) M durilgthe same period.

35. ENDE has assumed responsibility for the provision of allfuture generating capacity and in order to meet the load requirementsof the Central Region commissioned a -as turbine unit of 12.5 SJ capa-citv at Escuintla in September 1965 and the 13 MI Los Esclavos hydro-electric sltation, financial assistance for which was provided by theInter-American Development Bank. in August 1966. Other planned additionsto INDE S generating capacity in the Central Region are a second gasturbine unit of l5 nil capacity at Escuintla. to be commissioned by theend of 1967 and the 60 ith Jurun-Marinala hydroelectric station, thefirst unit of whichi is expected to he nornmissioned in July 1969.

36,, Tn order to m.eet the growing de-mand of this region- the con-struction of additional generating capacity would need to be startedby the end of 1967 in order to be a'hp iThhTh to meet the le.m.nri forecaqstfor 1.971, The construction of this additional generating capacity isinrc1iieed ir! T1.TTWs l ~1ong-ter-m ev,-nv,.io- ,-o, cra;m..=

37. Annex 1 shows graphically tre forecas maximum o demand for +heCentral Region and gives details of the planned increases in generatingcanaci'tVT rli n th periodjr 10965-72 3as:d on. this plarn4g the total

11 -Jl -- e - - 4. -ifW. _

installed capacity of the Central Region would, by the end of 1972, beabout 194 NWF.>, of -wThich 138 I NW would be provided by the lADE sTM tem. Thefirm capacity in the region would be about 160 W to meet a load demandwhich is fo--re t +o bek of a out th *,,m, order-

,) . IV % x *LV.LA LJv VUVV'JIWIvu :i O~L.L Ck- 1 wS4' Ars _tI.u V4'WWXvsLA-to be the responsibility of the EEG, who would buy bulk supp:ly from INDE.

39. The maximum demand on the INDE system i.- forecast to increase.L.Lf-omI -L wa.) J-19 toU.? 100 LJ JA'U J11 iYfI. LiJi sales t L d.t I forecast

to increase from 6.4 million kwh in l1965 to 423 mEllion kwih in 1971.Anlex 2 shows the actual and forecast maxirum dlemands, energy generationand sales in the Central Region and indicates the capacity which the INDEsystem must contribute to sabisfy the requirements oI the Central Region.

(b) Santa Maria System Clesterrn Region)

4o. The limited statistics available for this area and the lackof suitable metering equipment make it difficult to determine the actualrate of growth of this system. The principal consumer is the municipalityof Quezaltenango, which has recently increased its own generating capacityby installing a 500 kw diesel plant with the result that purchases of powerfrom the I1mDE-owned Hidroelectrica de Santa Maria have declined. INDE'sconsultants have forecast that the dern-id on the Santa Maria system willgrow at a rate of 8% per annum. This iS reasonable and such an assumec!rate of gTrowth wourld result in sales of energv incrensing from 16.5 millionkwh in 1965 to 266 million kwh in 1971, and maximum demand rising from5c.n tr i; n 1965 to a -t n 8 i oMA! by 1971. The generating capacity presentlyavailable and planned for the system should be adequate to deal with theinereases durring this periodl

h'l. Th>e t,.to other teas wvhere e~leo+rie4-t nnsreopJ4-n is + >

place are the East-ern Region and the Atlantic Region (see map). TheEastern Resgion -is serv4ed pr;cipally by1- I,s Rio Hondo UAhyA'o1 c

station which has an installed capacity of 2.h ITV. The present maximrurde,.ndo +he 4- sys ;em is-abou 1.3 TAJ. ThreI' -e- 'so- a l^g n4ro'

very smal:L privately-owned generating plants, and as part of its approvedexpansL Ii±n pJrogr. r L-riINDE proposes to a4qLIIre, iUpirove duiu tnULI,ect some

of these isolated plants.

42. In the Atlantic Region INDE has no generating facilities butproposes to instaLl a diesel plant at ruerto Matia-s de Galvez, withn aninitial c,apacity of 2.5 W{, to be commissioned in 1967, with a secondinstallation of 2 15 IVW in 1969. This installation is required to providesupplies -to the port of Matias de Galvez which the Government is planningto develop.

43. For the purpose of determining a suitable rate of- growtn thesetwo adjacent regions have been combined. Very little statistical dataexist which could be of assistance in determining the rate of growth.The growth of the Rio Hondo system is likely to follow the pattern ofthe rural areas of Guatemala which have shown a development of a littleunder 6% per annum during the last 15 years. On the other hand, PuertoMatias de Galvez could develop at a much faster rate and accordingly afigure of between 8% and 9% has beern assumed for the two systems com-bined. As a result, the sale of energy by INDE in these two regions isforecast to increase from 6.6 million kwh in 1965 to 17.5 million kwhin 1971.

V. TY PROJECT

44. A detailed description of the project is given in Annex 3.Annex 4 shows the layout of the Jurun-Marinala hydroelectric schemeand the map shows the location of the various sections of the project.

45. The pro.ject would consist of:

(i) A hydroelectric station of 60 I4T capacity to be constructedabout 30 miles to the south of Guatemala City. The stationwould make use of the discharge of the waters of Lake Amatitlanalong the watercourse of the M4ichatoya River on which a regu-lating hasin will 'h rnnnstriiated at Jurun. about 10 miles fromthe lake. From the regulatling basin the water would be con-veyerd b meann. nf' n tuirnnel anrd pre..ssure pnsock throus7h ahead of approximately 2,000 feet, to a power station whichwoTuld house three iiniSv eanc orf 20 MiJ capacityj designed to

operate at an annual plant factor of about 35%0. This sectionof the project ror1'd A ivr- wae paresently being usirl bhr t.heSan Luis and El Salto hydroelectric plants, with a combined

_.6 I. A- -M.) .li.T +tn. Sl- Tr. J-J

(ii) A 138 Lnr tr-n,svmsson 1;4ze an1-iot In rAls long ands

station equipment to trans:mit the power generated atPoc,n4 . -.dA Tn...T----;-.M- a Cto ,. aG- -a (ity

(-4-4 A 4ec-nl g-a t-,4..br, uni4 t4' .--bou ,-I- ' tI c apa--c-it £1 6J -VL'.J A'4 r,O. U U. LLJ±.L., U.Jt.L LJ.L :L)J U.IAV _L...eLi VWod '~.P~.FIa.lY -V

Escuint:La, about 30 miles to the south of Guatemala City&ndA in close protidby to uthe JUrUWU-7t'iOala hydrolectristation.

(iv) A 5 1I+ diesel plant to augment the present generating

c' / Uia- U,U' aIS r JV.ELUU JU .LUt± UU'laa.LVVJ.dAJU1dL liI~Ii U .. I

cpaciv;y atPuer-o Matias de Gal-v-ez.

(v) ,on 3uit,X,ts' serv-ices foar Organizat.Lio ar,d~. rgiu-,ager.entl inaddition to those directly related to the design and super-

Estimated Cost of the Project

40. 4-The project is estimated to cost tne equivalent OI uS$2.5million. The foreign exchange component, including interest duringconstruction of US$1.5 million, is estimated to be 13S$15.O millionequivalent.

- 1C) -

47. A summary of costs is given below, detailed estimates beingshown in Anmex 8.

Estimated Cost (US$ thousands)

Foreign Local Total1. Jurun-Nlarinala

Hydro Scheme 9,100 6,660 15,7602. Escuint:la Thermal Station l. 420 220 1.64o3. Diesel J'lant at Puerto

Matias de flalve'. l1;90 LaO 1,5904. 138 kv Transmission Line 990 560 1,5505. MantcgemmJi1- andI 1norineerinsr

Services 800 660 1,460

Sub-total 13,500 8,500 22,000Interes- t drlvirg const-r-tion _l,500 - 1 500oC

Tota'l I1<000 8 500 23 500

48. The estimate of costs, prepared by INiJE assisted by theirconsultant.s, is based on reasonably reliable costs available from bidsreceived f'or the civil works and plant f'or the Jurun-Marinala HydroScheme. Additional civil works for the tunnel and penstock supports,not includled in the bids but found to be necessary after site explora-tory work have been added at the unit prices quoted. Having regard tothe above the estimates appear realistic and the comparatively smallcontingency allowance of about 7% for the Jurun-Marinala scheme shouldbe adequate. The estimate of the cost of engineeriLngservices for Juruxl-M4arinala, particularly local costs, appear high, but much of this is duteto extensive, planning, exploratory work and site testing already carri.edout by INDE.

49. For the construction of the transmission line costs are baseclon estimated quantities to which unit prices have been applied. The unitprices are based on the cost of simnLar work in neighboring El Salvadorand Hondiuas, with suitable adjustments to allow for wages and benefitsapplicable in Guatemala 0 The estimated cost of the gas turbine plant atEscuintla has been based on the cost of a gas turbine plant of similarcapacity installed at Escuintla towards the end of 1965, while the costof the diesel plant at Puerto Matias de Galvez has been based on quota'-tions received by INDE.

S0. The proposed loan covers the estimated foreign exchanze re-quirements of the project amounting to US$15.0 million equivalent. Pro-curement of materials and eauinment covered by the proposed loan wouldbe on the basis of international competitive bidding.

- 1:L -

Engine2ErnC and Supervision of Construction

51. The construction of the project would be undertaken by INDEwho would employ contractors in addition to its own labor forces.

52. A firm of Swiss consulting engineers, Electro-Watt of Zurich,has been retained by INDE to assist it with the engineerinR supervision.,Electro-Watt has a:Lso been responsible for the preparation of detaileddesigns and construction plans. specifications and bidding documents forthe Jurun-lqLrinala scheme, and is assisting INDE with the analysis of bidsreceived.

53. Snecifications and bidding documentation for the gas turbineunit at Escuintla and for the diesel plant at Puerto Matias de Galvezhave been nrenared by IT:%DE and are satis.factory to the Bank-

54. NlE,j assisted bv its consultants, woul-d be capable ofcarrying out the works covered by the Project.

Construction Schedule

55. The first unit of Jurun*-Marinala is planned to be comnissionedin July 1969, followed at three-nonth intervals by the second and thirdunits. The construction schedule, wich is based on a detailed construc-tion program prepared byhr ILTDI c silan+ CZ anvd takes tn.to acco 1 t com-pletion dates for civil construction and delivery dates for piant, availablein the bid.s submitted, is reasonable and should be achie-nTrA

56. The gas turb-a.e generatg uni.tt Esc-uintla is scheduled +be in operation by the end of 1967.

57. The installation of the first section of the diesel plant atPaerw o Ma4iat.s de Galvez i IDEv s isclated Atlantuic Region is exp-e edto be complleted in. the second half of 1967, the second section beingCO 4 3 A..J. 4.A 4.4 1 o

crutIL^oneud dur:,"UL I96, Uo cover th0 u- a.lonal power requirements ofthe port as it is developed.

58. A shortfall in generating capacity is likely to occur towardsthe end of 1968 and dur.ig the first half of 1969. ivDE has been con-sidering the action that can be taken to meet this shortfall and ispresently discussing wibh its consultants tha possibility of advancirngthe commissioning of the first unit of the second stage power development.

Problems Associated with Water Diversion at Jurun

59. The effect of the diversion of the waters of the MichatoyaRiver at Jurun has been investigated by the consulting engineers.This mainl-y concerns the reduction in output of the existing San Luisand El Salto hydro plants, the continiued availability of water to users

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downstream of the dii rsnri .n and the ef'ferct ofI tw-ring the 1 evel of LakeAmatitlan by 0.7 meter on the property around the lake. The San Luis andm qnlto hydflro plnnts are the propertyt of P.M San Luis was constrmi-tedin l925-27 and has a capacity of 5 1W.. El Salto was constructed in 1939

wiho 4r.i.+-o1 vapac+¶, ofA 2. m^J a -~, fu+e 3 vr IAr1gr b addn 193

r0. -TAME anA EV -qre-1 -preswnt:Ly neotatngte basis of -.er.sat onwo A~~.1MJJLY O ~U £LLJ.J 0.LI~ JJ P~I L Ly I~L UO-1.L tr U CL U.A.L1r UiI L'u L 'JY-

for the reduction in output of the San Luis and El Salto hydro plants andth ae fl lo. h MichUatoya E.iver. Fre'lil, nary U.DscsiLOn whichhave taken place between the two parties indicate that the basis of com-pensation will largely- be the purchase of zD's water rights Uy fJVDE.The value which each party places on the water rights differs widely andagreerment- will not be reachned untili studies, now being undertaken, havebeen completed. A figure of Q. 6 million has been suggested and although

* Ia. t 1 -1 txi±s is tentative, it has been adopted for the purposes of this reporu.Tentative agreement has been reached with regard to the purchase price ofthe land bu.t EEG has stipulated that the sale is to be contingent uponagreement being reached on compensation for its water rights. Since theremay be delay in reaching final agreement and therefore in the execution ofthe project, the Bank will be satisfied if, as a condition for the signingof the loan, MIME has obtained the right of access to commence construc-tion together with an agreement outlining the basis of compensation, witha final settlement to be reached before waters are diverted, which isexpected tc be about the middle of 1969.

61. A site investigation was carried out by the mission and it wasconcluded that no serious problems wouLLd arise for the downstream waterusers after the diversion of the Michatoya River at Jurun.

62. Certain compensation may become payable to some of the tenantsaround Lake Amatitlan but it is unlikely to be heavy.

Possible Alternatives to the Jurun--Marinala Scheme

63. During the last few years studies have been made by a number ofengineering consulting firms to determLine! the most suitable size andlocation of the hydroelectric generating plants necessary to meet thegrowing power requirements of Guatemala. The Jurun-Marinala Droject wasrecommended by the Harza Engineering Company in 1955. Electro-Watt carriedout a feasibility study for the proiect in 196L. Other nossible alterna-tive hydro projects of about the same size and cost as Jurun-Marinala werethe El Canada project, recommended for nrioritv construction bv AcresInternational Limited in 1962, and the Michatoya project. A further alter-native to the Jurun-Marinala project would be a thermal nower station locatedin the area of Lake Amatitlan. These various alternatives are discussedin the following paragraphs anr it. is eonluirei that it wouild be most.desirable to proceed with the Jurun-Marinala project.

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640 'nTe El Canada hydroelectric scheme would be constructed in thewesterni Region downstream of the existing Santa Mliaria hydro plant andwould utilize the waters of the Samala River. This scheme was recommendedfor priority construction in the U.N. Special Fund Study carried out byAcres International Limited in 1961-62. ENDE's consultants have studiedthis project and have arrived at the conclusion that the costs of con-struction and operation would be of' the same order as Jurun-Marinala.The disadvantages of5 the scheme would be -that it would be necessary toconstruct a high voLtage tranlsbmission line, approximately 100 miles long,to convey thle power to the load center, Guatemala City; it would prejudicethe future development of Lake Atitlan into which the waters of the SamalaRiver could be diverted, and an additional six months would be requiredto prepare specifications and bidding documents. INDE has shown a definitepreference for the Jurun-Marinala scheme and taking into account the advan-tages and disadvantages of the two schemes, their preference is reasonab:Le.

65. The Michatoya hydroelectric scheme would develop the waters ofthe Michato;ya River within its own watercourse instead of diverting themat Jurun. This wouLd have the advantage that the downstream hydro plantsat San Luis and El Salto would continue to operate as at the present time.The chief disadvantage of the scheme would be that it would not be able toutilize an additional head of 300 feet available to Jurun-Iarinala, with aconsequent reduction in generating capacity. INDE's consultants havestudied this alternative and consicler that although the time required forconstruction and cost ner installed kw would be of the same order for bothschemes, the cost of producing energy would be less for Jurun-Marinala.

66. The combined capacity of the Michatoya development and theixist.ins hvdirn nlant..s wnill nmouint. tn At MA, cnnnahl e. of onprntin., at anannual plant factor of about 50% provided that additional expenditure wasincurred on- -he nn-tr.-mtlon of a regulating pond uipstre a mn of the qqn T,isand El Salto plants, necessary since the hydraulic system of the lattern t nrl+.C l dI bh nrIhn1 t +absorb +Ith 1,- h.rn r- o f discharg fv'r^m theMichatoya hydro plant. After allowing for the reduction in capacity of the*q"'n TL.is andETi l anltfn nlann+.t t.he JTru4im_Marinnln hydroelec,otric nroiret.would have a net capacity of 50 MW at an annual plant factor of 35%.

67. It can be seen, therefore, that of the several other hydro-electric sch,,es studied, none offers a tec. l 1a -feas^besolutioni +oproviding increased power supply for INDE's markets. The other alternative%vu'd be a the..mal powter st at ion1

68. ~ 11 Th,.l" powe satin "T'o proven so aces oil fulels exist 111

Guatemala and an alternative thermal Istation with steam turbo-generatorsWUU±UI 4U.L..~ L~0LJUVI .U1pUV, U .L UU.L J.L± ±L0 I4±Lf1LtdUtU Udp IUa4. ~Lj U-Lwo-uld requ-iLre t'o bUurn- JI-1ported f-e o l Th et:,le UV,ta cos o

an alternative thermal plant was prepared from known costs of plant ofsimilar capacity constructed in neighboring countries and amounted toUS$200 per kw installed.

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69. Two alternative development plans to equally-well serve INDE'smarket requirements until 1971 (the time at which the proposed Projectwould be fully utilized) were devised: one based upon the immediateinitiation of the Project; and, the other based upon sequential constructionof new thermal capacity. The total costs to construct and operate eachalternative over a 50-year period (the assumed economic life of the Project)were then compared on a present value. i.e. discounted cash flow, basis.It was found that for costs of capital of' 10% per annum or less, the Project-based alternative renresents the more economic choice.

70. 1Wfhen comriared with the nossible alternatives, the construction ofthe Jurun-Marinala Hydroelectric Schemxe is therefore technically andeconomic ally illStif'ied.

Vi. FINANCIAL ASPECMs

Tariffs

71. Apart from a formal and now out-dated tariff structure, whichdiscourages load growth, and which was sanctioned by the Government in1947, the principles of a tariff policy have never been developed inGuatemala. Nor have the tariffs charged by utilities been subject to aneffective control by a regulatory agency. In IINE's two isolated systemsthe Government has in the past granted tariff privileges which includethe supply of free energy to several towns. In the central area EEG'sconcession contract allows this private company to set its own rates.

72. When INDE was organized, regulatory functions were included inits charter but so far a lack of a defined program and competent andqualified personnel have prevented INDE from performing these functions.The Government and INDE have agreed that the nucleus of a regulatoryagency will now be established within INDE although it was realized thatit may not 'be appropriate for INDE to combine indefinitely the functionof a tariff regulatory body with the generation and supply of bulk power.However, in view of the lack of any feasible alternative, INDE will haveto fulfill this role initially.

73. INDE recognizes that once it becomes the major supplier of bulkpower the regulatory activities are to be divorced from INDE and carriedout bv an indenendent agencv. As a condition of signing of the proposedloan, INDE will be required to make arrangements, acceptable to the Bank,for the serviees of a suitahly qualified exnert to organize the agencvand train the necessary personnel. The Government and INDE have agreedto the formntion of a regurlatory agenrcy to estabish anti regulate futuretariffs in Guatemala.

7Lh. One of the tasks which has been undertaken is the negotiationof sl+be taiff fo thess' ofIIin's owe to ERG. ITME _-. EEG

are presently considering the amount to be paid for the water rightsrequired for the Jurun hydro plnnt (paragrnpnh 60) nnd arp negoti2tingan interim sales contract for power from INDE's existing generatingfacilities.

f'f,r'o 3 _ -U-

purchase of' power from not only existing facilities but also thosefacilities to be ccnstructed under the -- od project would be A

It would, however, not be reasonable lor the Bank to press for such acor.tract at, thi4s t;M,Ke . Suhprsue wtafett.eneoiti. osto

ofE the parties. Furthermore, the major facility involved will not be com-'leted . - 4lti 1-, _rAddle of -n 1969. _ ,;. I --r-wul,3 thr-oe be satsfi4edUJ.e L 4ku 1.. UJIr 1.LAA.U.LU VUL ±.7UJ7 * LiI- JJOIIA WVJ~U±LL, W14ie±t-U.LUA , UU QCL0±JL .L

with the satisfactory conclusion of an interim contract generally in agree-- _ 4. 4.L - _ -4 _. . _ _ - - -- - 1- 17 __e rimen1u Wi t4 1 'IUV pt1L; D VULL ± 11 y/±d glJ dptlCt (U, VllV # U aUll V dll

sales contract is aL condition for signing of the proposed loan. INDE hasengaged conisultanits to assist in the negotiations.

76. INDE has been negotiating a sales contract with EEG on theDrincinle that a mTinimum rate of return of 1O% will be earned by INDE onthe average net value of its facilities which will be used to generateandc transmitt pnower to pointsei of de:liuvery to FEEr 'he rate ofn returnwould be calculated after charging a normal depreciation rate based onhi stomrr't-qt. wnd on the iiqef'il lives of TINnE fiynA asqqsets in onerqti on,actual cost of operation, maintenance and fuel, and a reasonable proportionof TNDREc rP -nntral efficn otvprhe-l Thea rFesti+m.atder ecinaotnion ratesu sein the forecasts have been based on various rates for diesel, gas turbine,hydro, transmission. nd disti bution Tjci lities as they are expected to beplaced in operation.. The composite rate for INDE's total facilities isexpected tc be _aboult 2-1-go.

'7'7. h basis for TNMs 4a.-ff 4to =G ls outlie in the -- Am of - 4I j . 1.iU_ UCDL ±0±L ±±'1jJJ. D UC%..L.L± ) UV A .L ~ U U.LIC.i JAL UL4 .ih

the propose!d interim sales contract wiich provide for a demand and energytype; tUar..L.f. co11sist 1ing Uo a. Ue,lld orcapacLity charge op VV jJC±

month and zan energy charge of one centavo per kwh for energy produced fromhiyudro eleclEiC unLt,S anid iln th catse 0- energy suppe1dU ±ro,M hUeillal i-,t

EEG shall pay fuel costs. The revenue projections for IMDE's CentralSystem showan in Annex 5 have been prepared using -his proposed tariff.INDE's average revenue per kwh will be governed by the number of hours ofuse of the capacity (kw) purchased; as fuller utilization of such capacl.ty-purchased is realized the average per kwh will decline. The minimumaverage per kwn woulid not however be 'Less than 1.31 centavos. It is expectedthat under such arrangements EEG, on its part, will be able to earn areasonable rate of return on its investment, without the possible need foran increase in its tariffs to its consumers.

78. EEG has during the past five years realized a rate of return onits average net fixed plant in operat:ion kless plant financed by customers'contribution in aid of construction) as follows:

PercentYear Average Plant Net Operating Revenues Rate of Return

(Thousands of Quetzales)1961 21,508 2,342 10.91962 21,809 2,759 12.71963 22,948 2,997 13.01964 24,230 3,347 13.81965 25,000 3,386 13.5

In 1964 the company made a tariff reduction in view of its increasing rateof return and large accumulated earni:ngs.

79. The company has been able to finance most of its capital exspansionfrom its oaim internal cash generation and also has been able to declarecash dividends on am average of about 12% on its common stock and 7% and 8%on its preferred stock during the period 1961-65. About 84% of earnedsurplus has been allocated to dividends during this period as follows:

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Year Earned Surplus Dividends Declared Balance

(Thousands of Quetzales)1960 - - 2281961 1,992 1,690 5301962 2,367 1,650 1,2471963 2,657 3,780 1241964 2,941 1.650 1,4151965 3,037 2,100 2,352

80. The company's debt equity ratio in 1961 was 15/85 which wasreduced to a ratio of 13/87 by the end of 1965 (Debt 03.3 million, EquitvQ22.6 million). Its long-term debt iS primarily made up of about Q2.9million of 6% mortgage bonds due and payable in Anril 1971. This is about90% of its long-term debt outstanding.. Other borrowings have recently been.qhnrt._f.Prm lonns from sunpliers Ant in the nn.ct. 1 olnns from the narentcompany.

81. In view cf the Company's satisfactory financial position it isquite evident that it will be able to fin-nce any fu+ure capit- expendi-tures*which may be required to distribute the estimated future purchases

rE*~ nw. -- t%m 11-n 5C! 0 c 1.m; n .__ Iofpoe fromw INDI as shown i' rAvme 1.

steps to eliminate from INDE's two isolated systems the free supply ofoncr%-n to sevenal 4-r.s .n a 5fli or to -ove--4nrn + -tabl -eo'mon+tso

UJ 1t V E -4 G J. fJ*L WA LL a j,_i -/0 W AJU U S 5- W'U W4UaV..JM,S fJ

Confirmation of the elimination of these privileges are to be furnishedas a condit;ion ofP -4gr -4 the propse; 'I ,a.~ I,JIiU.L .L .L J CPJ.1LLA146 La= jJ.L WUJO.L JAJO.±L.

83. To assur~e. , reasonable rt;oreu,,wlbe rea'izedU). ~~l asu 4 ~. L I.4IdA, a d.U-L U A LIU D~ U.L I t L,L.Ul Wi.L±L U~ C"J.~La

during the construction period of the project, INDE and the Government,v_.e agreed UW I'±Es ext.. ng ±±± -t , 4s slt syste - LII. _ -will be.

maintained and that it will realize a 10% minimum rate of return on theaverage net costs of those operating facilities in its central systemU1-, whiuchare necessary for the sale of power to EEG. As shown in Annex 5, it isexpectued thIat' soori afUter ',he4 OUL'ULL faLc.L.;Les are placeu ii UiUhICrL.LaJl

operation INDE's rate of return on its total system would exceed 9%.At this level internal cash generatio;n would enable INDE to finance areasonable portion of its future construction. INDE and the Governmenthave also agreed that beginning in 1971 its tariffs will be maintainedat levels which will enable it to earn at least 9% on its average netfixed assets in operation for its total system after allowing for adequatemaintenance and straight line depreciation.

Financial Position

84. I[NDE does not follow normal public utility accounting procedu.res.Its records and statements are maintained in a manner related to "fundaccounting" whereby all charges are applied against gross income irrespectiveof whether or not the charge is an operating expense or a capital expendii-ture. No depreciation has been charged except for office, transportation

* It is estimated that the annual investment in transmission and distri.-bution will average between Ql.5' million and Q2 million.

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and other miscellaneous equipment. HEnce INDE's net fixed assets arerecorved at original costs pl-us major renailitation costs. INIME' accounlubhave not been audited in the past.

85. T'he firm of management consultants which would assist INDE inreorganizing and coordinating its activities (paragraph 24) should haveto advise INDE on changes necessary to set up its accounts in accordancewith accepted commercial accounting practices. As a condition of tneproposed loan, INDE: has agreed to engage an independent auditing firm,acceptable to the Eank, to make annual audits of its books and to certifyits annual statements.

86. The financial statements of INDE have been substantially rearrangedfor the purposes of this report. INDE's revised balance sheets for 1961-65are shown in Annex 6. Adjustments include the calculation of a depreciationreserve and the capitalization of exp:Loration and planning costs which hadbeen partly charged against operating income. Corresponding adjustmentswere made in equity.

87. On this basis, INDE's posit-Lon as of December 31, 1965 wouldhave been as follows:

Thousands of Thousands ofQ and $ Q and $

ASSETS LI-ABILITIES

Gross Plant in Senrice 4,916 Government CapitalLess: Depreciation Reserve 1,558 Contributions 12,345

Government Grants 34t2Net Plant in Service 3,358 Deficit (188)Work in Progress 7,973

Total Fixed Assets 11,331 Total Equity 12,49'3

Explorationi and Planning 1,023 IDB Long-term Loan 1,343Investments 50 Current Liabilities 511;Current Assets 1.9h9

Total Assets 1L,353 Total Liabilities 14.353

Debt/Eauity Ratio 10/9()

88. The table shows that INDE's caDitalization consisted mainly ofequity contributions received from the Government. These contributionswere macie in the form of fixed assets or as cash contributions for canitalconstruction. The Government obtains the necessary funds from the Bankof GuatemaIla for such cash contributions by issuing 15-vear bonds at anannual interest rate of 3%. Although the proceeds of the bond issues havebeen eArmnrked fnr specific power projects, INME does not assume anyresponsibility for the debt service of these issues. Before bonds may be

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issued, INDEts technical renorts on the proposed nrolect have to beapproved by certain government departments and the National PlanningCounci_. The nrojects included in th npronosed eXpansion program havealready been approved. As of December 31, 1965, INDE has receivedahniit. 0Q97 miIllion of the Q15 mJIIJ-,n o%f bhonds Ahic4 were anproved andare being purchased by the Central Bank.

89. In the latter part of i96Lh, INDE incurred its first long-terndebt. It Obtanred a 20yea loan at4 anv 4 7ir.te r of 6% from theInter-American Development Bank in the amount of US$3.15 million tofinance the foreign costs of the Lot Esclavos project. After a threeyear period of grace, level semi-annual amortization payments ofTMt..: nor, +_ i-Q4 *J in U7

PDast Earr.;ngs Record

90., -)ne I Ihw pa- t 2comae s-taements as re-visefothpu-s,u. uue .s'w pasu I.I1LLwI ii ub a.o lule ±ULu±CpUpS

of this report (paragraph 86). Although INDE was officially created inJune 1959, its operations started onL SeptemDer 30, 196i when the Govern-ment transferred two existing small systems and other assets to itsownership. INDE:s Santa Yiaria system (previously a state-owned entity)has operated at a profit in spite of the fact that government establish-ments receive a 50% discount and the municipality of Quezaltenango, whichaccounts for 42% of the total energy sales, pays only a fraction of costfor its power consumption. INDME!s Rio Hondo system has operated at adeficit during 1962-6h because most of the towns served have been receivingfree energy (paragraph 82). In 1965 gross revenues for the systemincreased quite substantially because an amount of Q161,0O0 was includledas compensation to be received for free energy which was delivered to themunicipality of Zacapa during the period from June 1963 through December31, 1965. A contract between IIJDE and Zacapa was completed in October1965 covering the arrangerients f or such compensation. The retroactivecompensation distorts INDE's actual performance for this year.

91 INDE's central office overhead, which covers the planning,programing and execution of the country's power and irrigation expans:ionprogram, cannot be financed from the operating revenues of the two isolatedsystems and therefore the Government has made yearly appropriations fromits treasury to cover these central office expenses. It is expected thatthis practice of annual appropriations to cover such expenses will nolonger be necessary after 1966 as a result of INDEfs expanded operations.

Proposed Financing Plan

92 A forecast of sources and applications of funds for the 5 yearsthrough 1971 is shown in Annex 7. During the 4 years ending December 31,1970the construction period of the Jurum-Narinala project, INDEfs requirementsare expected to aggregate Q50.8 million, of which about Q30.4 million wouldbe capital expenditures on the first stage of the program including

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the Bank project; Q1]7.2 million would be initial expenditures on thesecond stage of the program, to be starteci in 1967; Q2.9 million would befor interest during construction, and QO.3 million for additions to workingcapital. Details of tnese requirements, and of the sources from whichthey are expected tc) be met, are shown in the following table:

1967 - 1970Mrillions of

Q or $ %

Required Funids* Proposed Bank Project 22.0 43.3

Acquisition of Water Rights 6.0 11.8Acquisition and Inprovements of

Isolatedl Systems 2.4 4.7Second Stage Program 17.2 33.9

Sub-total 47.6 93.7

Interest I)uring Construction 2.9 5.7Increases in Working Capital .3 .6

TotaL Requirements 50.8 100.0

Available FumdsGross Internal Cash Generation 12.0Less: Amortization of Debt 2.1

Interest Charged to Operations 1.6Net :[nternal Cash Generation -T73 16.3

LoansProposed IBRD Loan 15.0 29.5Future Foreign Loan 14.2 28.0

Total Loans 29.2 ~ 47.

Water Rii'hts Agreement 6.o 11.8Govemrnent Contributions 7.3 14h4

Tota:L Funds 50.8 100.0

* Includes Q100,000 incurred in 1966

93. During the construction period of the project the estimated ne-tcnsh generated inte:rnally wouild total ahout QB.3 million; or 16. 3N of therequirements for the period.

94. Acquisition of EEG's water rights necessary to the Jurun-N4arinalaproject has been. included as part of the construction costs. It has beenassumed that annual payments of Q667,COO to acquire such capital assetswill begin in 1969 and end nine years lazr, in 1977, on the date of finaltermination of EEG's existing concession contract. As outlined in

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paragraph 60, this assumed amount of compensation (Q6 million) may bereduced --P-r com ple-tion o- to.e ev'-" a u4- s 4 o the fA-;ar.cial' 4~~~~~~" %A C" V ,~L ~V UL~A s +- es bow ve 0 n-- a

projections include the maximum amount of compensation in order to reflectVlthe extureriie situation.

7?. ~ rmTT-S1r r' - …i .1The proposed Bank loan of uSp15.U Mion equivalent wu .,Upsent 29.5% of the requirements during the construction period of the project.It is assumed to hrave a term of 25 years, including a four-year grace pei -odand an interest rate of 6%. This loan is about 50% of the total cost ofthe wnole project. An estimated foreign loan of $19.8 million equivalent isassumed to be obtained late in 1967 under terms similar to those of theproposed Bank loan, to finance the foreign costs of the second stage of theproposed program. It is expected that $14.2 million equivalent will bedrawn down during 1967-70, or about 28.0% of the requirements of the construc-tion period of the project.

96. The Government has agreed to contribute the balance of the fun(dsrequired to complete the project. These contributions which will comefrom appropriations or by the sale of additional bonds to the Central Bank(see paragr;aph 84) are expected to total about Q7.3 million, or 14.4% of theperiod's requirements. Based on the present estimates of future borrowingsand internal cash gesneration, govermment contributions would no longer beneeded after 1969. The guarantee agreement includes a provision that allnecessary funds wil:l be provided to complete the project.

97. In view of the limited resources available, INDE has agreed that,without the Bank's prior approval during the construction period throughDecember 31, 1971 it will not acquire facilities aggregating more thanQ500,000 in any consecutive 12-month period nor carry out any expansionnot contemplated in the proposed program.

Estimated Future Earnings

98. INDE's estimated income statements for the six-year period1966-71 are shown in Annex 5. The income statements reflect futureearnings for each of the systems as follows:

(a) Because of the elimination of tariff privileges the rate ofreturn in the Santa Maria system is expected to rise from9.3% in 1965 to 12.7% in 1966. The El Porvenir hydro plant,which is exnected to be commissioned late in 1967. will causean increase in expenses and in the asset base. Accordingly,the rate of return for that year would dron to 8.2% There-after it :is expected that the growing volume of energy saleswill caulse a aradua1 rise in. the rate of return to 10,6% in 19?71

(b) The Rio H-ondo sr.stem and the Puerto Matias arvea a- shoi-^m asone system. The elimination. of tariff privileges will causethe estimated high rates of return in 1966 and 1967 . roxTever

in 1968 addition of the first Puerto Hatias diesel unit together

- 22 -

with other related new facilities will cause an increase inthe asset base thereby reducing the rate of return to a morenormal level of 12.2%. The! addition of the second unit in1969 will also affect the return in the same manner but to alesser degree. The increases in sales in 1970-71 period,however, are expected to result in a rate of return of 9.5%.

(c) Annex 2 shows the forecast demands and energy of INDE's Central.SvstpTn which are expected to he pumrchased by EEf- The timingof INDE's new facilities coming in commercial operation is acritical factor regarding i.ts ability of realiznga n ln returnon such facilities. Based on the assumptions used in Annex 2ITDE is expected to reaLize a rate of retlon on the averagenet costs of its facilities of between 10% and 10.9% during1Q67-71 TIn 1966 the retu s e ted to be orlyr 8% due to

the fact, that the Los EscliLvos plant will be in operationf or o.r ry p-nt of thi,-Js year.

99. not +eA-. A---- e5, the combi.ned -a.o I.Es tJesLT M o +nal

system beginning in 1966 will start to earn a net operating income aftercentral office overhead. The rate of return is expected to rise gra-dually from 7.8% in 1966 to 10.1% in 197'1. Net operating income is

0,1 - __ ~~~ ~ ^Zz I ~ ~ _ -1 I'.ex e *,o cover total interest 3.87 times in 1966, duclining to 1. 42times in 1.968 and rising to 2.14 times in 1971.

Future Financial Position

100. Annex 6 shows forecast 'balance sheets for the six-year periodcunder revi.ew. Total fixed assets are expected to increase from Qll.3million irn 1965 to Q68.3 million by the end of 1971. The proportion ofdebt of total capitalization will rise from 10% in 1965 to 56% in 1971.

101. During negotiations agreement was reached on a covenant limitingincurrence! of debt, after December 31., 1971 (see paragraph 97). It isproposed that INDE would not borrow or incur any debt other than in thenormal course of business without the previous permission of the Bank,unless actual inteernal cash generation for a recent 12-month period coversat least 1.h times the future maximum debt service requirements onexisting and proposed debt. Under thle present estimates this test wouldbe met beginning in 1972, when revenues are derived from the facilitiesincluded in the present program of expansion.

VII. CONCLUSIONS

102. INDE has become responsible for future power development inGuatemala. Its proposed expansion program consisting of the provisionof additional gene.rating capacity, associated substations and highvoltage transmission lines, is essential to meet the expected demandfor power in the Central Region and :in the isolated area of PuertoMatias de Galvez. The proposed installations would be the most practicaland econoimical means of meeting the demands.

103. I'he project is technically sound, the estimated cost is reason-able wand the cor.struictioan ns are re-aliStc.

I P.1 fi- TJJ. + l4 A A.J4 A O. U ;ATD11 .TT1 wo-1A L'+ v L- _ J 1 C 1 sWve sssl JjsossQV«cc 4cU vs; .L wv_ 4.w su us cy^Jwv cu

factorily undertaking and managing the! project. However, with the assistanceofP suitable cons-Atants,aseou in pararap 108p (,v)N bl -I thJ.L UL Ud.L'.L~ I~J U_LUCLU.D, eL WV U UL LIL JJd.±.I_ IL .JLII ..L'J'J 4.LV LJt-JJWV, UL4iU

project should be adequately supervise!d and satisfactory arrangements madefrisoperat-ion by the tf t: ol .(aarps2 . 2J.L or U ~ VJ dU±Lf U)V Wt:ii #UJJIIV 4.U ±;> LUIIljJLe 'Lt,. '-4 *- .d

105. During negotiations INDE agreed. tu covenaats covering a ur asonablerate of return on its average net fixed assets in operation, certainrestriction.s on its expansion program through Lecember 31, 1971 a.d alimitation on incurrence of debt after December 31, 1971 based on an earningstest of at least l.4 times future maximum debt service requirements.(paragraphs 83, 97, and 101)

106. The Government has agreed that it will provide all necessaryfunds to enable IKDE to complete the project and that it shall take allaction necessary to enable INDE's power rates to be set and maintained atsuch levels as may be required to ena1ble INDE to achieve a reasonable returnon its average net fixed assets in ope'ration. (paragraphs 83 and 96)

107. I'he Government and INDE have! confirmed their intention toestablish as soon as possible a Regulatory Agency to be responsible forregulating rates throughout Guatemala. (paragraph 73)

108 I'he project would be suitab].e for a Bank loan to INDE of US$15.0million equivalent, for a term of 25 years including a grace period offour years provided, that before signing the loan the following conditionsare met:

(i) INDE shall have received legal permission to gain accessto, and commence construction on, the land which is essen-tial to the construction of the project, and shall rEalChan agreement outlining the basis of compensation for EEG'swater rights (paragraph 60);

(ii) an interim sales contract, satisfactory to the Bank, hasbeen concluded for the sale of power to EEG from UPFE'sexisting gencrating facilities (paragraphs 75 and 76);

(iii) tariff privileges in IDME's two isolated systerns havebeen. eliminated (paragraph 82);

(iv) arrangements satisfactory to the Bank have been madeto retain:

(1) suitable manageraent ccrievItants, accerotable tothe Br-nk Ande unrher tprmsrn of itf'renr agr'sd with

the Bank, to assist in developing an effective

- 24 -

organization structure; to advise on changesreqiLred in the accounting system and to adviseon system planning, engineering and design andcontract negotiations (paragraph 24), and

(2) a suitably qualified expert for the purpose ofassisting the Government and INDE in the establishmentof a rate regulatory agency and in the training of thenecessary staff (paragraph 73).

January 5, 1967

180 _ -- I _ ____ I _ 180

I 0~~~~8

GUATEMALA |INISTITI.JTC) NACDIOPNAL DE ELECTRIFICACION

o

160 ACTUAL AND FORECAST MAXIMUM DEMANDS AND t t - - 160PLANT INSTAI-LATIION F'ROGRAM FOR

N

THE CENTRAL SYSTEIM

140 - ~ 140I~~ ~ c1

1 4l0 - | ' L .t / 0 MMAXIMUM DIEMAND

120 - s n ) / ---- '1-J

120$ o /-I L _ INSTA LED CAPACITY

100 __ __ _ _=_ _ _ 100

N 4-1 Ij- S , FIRM CAPACITY

80 8 0~~~~~0

A4 MW OVERLAD CAPACITY ON

.............. L .60 -_ ___ - - -- -- ----- ! --- -__ - --- ----- 60

|---…I r!F4T'|P EEL:b T-' LFE Bs| i , , : EMI tE: : TI! EL It.T 8'_lALC

4 0 -- -- I- - -- -- -' -- _ ----- -- 40191S1 19632 1963 1964 1965 1966 1567 1968 1969 1970 1971 1972 Z

BRD-3232 >

Institutc 1acional de ElectrifiLoacion

ActuaL and JForecast Maxirmum Demands, Energy Generation and Sales

in the Central Siystem

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

EEG System

1. Generation by:(a) Stqeaam Hwh 98,0)3 140,4o6 164,704 2031,715 216,679 245, 809 240,00 2b0,000 240,0o0 230,000 230,000 220,000(b) Hydro ?bh 79,0'59 66,665 69,546 64, 092 67,144 64,5134 68.000 o 18.ooo 68,n nO 30,000 / 3 0 33,0 00(z) Dicsol Mh 7,575 3,63u 4,761 6,166 12,923 14,046 10,000 :15,000 15,000 15,000 10,00 10,000(d) Gas Turbine - - - - 9,464 29,836 30,000 40,000 50,000 40,000 40,0DO 30,00(

2. Total Generatiorn Mwh 184,6147 210,701] 239,011 273,953 306,210 354,275 343,000 3';3,000 37 3,000 315,000 310,000 290,00(

3. Generation plus purchaae Mih 184,6147 210,701 239,011 2731,953 306,210 360,635 395,o00 4b6,ooo 500,000 568,0o0 635,0O0 713,000

4. Saies PUG 154,695 176,701 199,823 225,867 260,115 306,695 365,000 390,000 440,000 500,900 560,00o 630,000

5. System maximum demand kw 40,955 45,485 50,785 56,850 65,600 75,990 85,000 95,000 107,000 120,000 135,0D0 150,00O

6. Maximum demand generated kw 40,9.55 45,485 50,785 56,850 65,600 63,640 60,0oo 68,ooo 68,000 50,000 7/ 50,000 50,000

7. Maximum demand purchased kw - - - - - 12,5100 25,000 :27,000 39,000 70,000 85,00O 100,000

B. Units purchased(a) Firm Mwh - - - - - 6,36o 43,000 50,000 96,000 210,000 262,000 360o,00(b) Secondary wbh - - - - - - 9, 00 33,000 33,000 43,000 63, 000 63,090(c) Totbal wh- - - - - 6,360 52,000 33,000 127,000 253,000 325,00,0 423,000

INIJh Central System

9. Maximum demand I - - - - - 12,50D0 25,00,) 27,00 3i,uuu 70,00 85,o000 100,000

10. Maximum generating capacity M - - - - - 12,500 I/ 25,500 2/ 25,500 4i0,500 3/ 80,5oo 41 100,500 5/ 120,500 6/

11. Sales to EEG Mir, - - - - - . 6,360 52,000 33,000 127,000 253,000 325,000 623,000

12. Units generated (net) Sh - - - - - 6,670 54,000 O64,0o0 129,000 260,000 346,o0o 451,0aD

13. Units generated (gross) MItwb - - - - - 6,730 57,000) 30,0o0 137,000 278,000 352,000 463,00D

(a) Los Esclavos Mwh - - - - - - 14 00) 55,000 55,000 55,00o 55,000 55,0)D(b) Esc:uintla M,dh - - - - - 6,730 43,000 34,0oo 82,OO 93,000 107,000 118,00)(c) Jurun-Marinala MeSh - - - - 130,000 190,000 190,000D(d) Second Stage Project Mwl - -- - - - - . - - 100,00O

NCTEE,

1/ Escuintla Gas Turbinie No. 1 12,500 )cr September 1965I/ Los Esclavos Hydro. 13,000 kw August 19663/ Escuintla Gas Turbine No. 2 15,000 kw January 1968E/ Jurun-M"arinala Hydro. 2 x 20,COO lo July/October 19697/ Jurun-lmarinala Hydro). 1 x 20,COO kw Janua 1910E/ Second Stage Project 1 x 20,COO kw NhA 9717/ Reduced generation No. 1 Unit at El Salto and San Luis from July 1?69.

December 16, 1966

ANNEX 3Page 1

Detailed Description of the Project

The project would comprise:

1. A hydroelectric power station, of 60,000 kw capacity, designedto operate at an annual plant factor of about 35%.

2. A 138 kv transmission line conrnecting the power station to the!princinal load center. Guatemala Citv.

3. h 1_OOo kw gas tmrhine generator at. Escuint7a.

h1. A diesel installation of 5jO00 kw capacity at. Puerto Matias

de Galvez.

1. Jurun-Marinala Hydroelectric Scheme

The Jurun-Marinala scheme is designed to utilize the regulateddischarge of +he wlate+vS -f T ile. Avm+- +- nT ,,-Tl which f-IrT.T ml ron +-he Mcz.a+-oai In+n

River to an intake at Jurun about 10 miles from the lake. The head availablebet,wTeen. the intake at Jurn -nd the poer station discharge ijnto the Pa;alRiver, a tributary of the Marinala River, is approximately 2,000 feet. Theadop-ted4 de irgr .i3 -f 4hetypca high4ea te--1- comriin - _r.tak, r- gu-1

lation basin, low pressure tunnel, surge tank, penstock, and power station.

The intakce at Jurun will divert the waters of the Michatoya R-iverpresenlU±y being U>L_L6.±U Uby -uo dowtre±;i f hydroelecUtrcU±U saUoLL SnLU1i. OdL IULs

(5,000 kw) and El Salto (5,500 kw).

A description of the various parts of the scheme and their prin-cipal features is given below:

(i) Lake Amatitlan Regulation Weir

At the outlet from the lake a new weir will be constructed whichwould allow a further drawdown of the level of the lake than is at presentpossible. This would result in a maximum regulated range of 2.20 meter,3with a corresponding usable storage volume of 1,050 million cubic feet.This volume of pondage would be required only during the course of anexceptionally dry year which, from the records available, occurs about oncein 30 years. In a mean hydrological year the variation of the level of thelake will not exceed 1.50 meters which corresponds to the present variation.The rate of discharge would be remotely controlled by either a control cen-ter in Guatemala or from the power station. The weir is capable of spiLling2,600 cubic feet per second corresponding to maximum flood conditions.

ANNEX 3Page 2

(ii) Jurun Intake

The intake system will consist of an earth danm, wit!> mass concretespillway, across the Michatoya River at Jurun, an intalc dime ;sioned for amaxinum flow of 400 cubic feet per second, a sandtrap provided with an auto-matic flushing system, and a regulation basin with a storage capacity ofabout 4 million cubic feet. The crest elevation of the dam is such as toenable 500,000 cubic feet of water to be stored in the river between Jurunand Lake Amatitlan.

(iii) Tunnel

The tunnel intake would be located at the end of the regulationbasin and would be provided with a trashrack and intake gate. From theintake the 12.300 foot long concrete lined tunnel follows along and underthe mountain crest. The lining thickness would vary according to the rockqualitv and overburden thickness. Sore sections of the tunnel would be inopen cut and would 'be steel lined.

(iv) Penstock

The penstock would have a tctal length of 9,300 feet and a maximumdianmeter of 5 fte 6 ins. It Twould be of werlded stee crnstic.ti^ Afl pporte1

on rocking supports and fixed anchor blocks.

(v) Power Station

The power station would be located on the Pajal River about',,4 milesWl

4+c'nnr, abosvnn i.cle w -t-ht Marinala D.r. Annacc r.yra, A db

available by means of a road extending from the Interoceanic Highway andno- r'.' f-1ut wod be e - . , erien.ced in trnsorin .. eavy -l.n -d -cor,onerits.r±Io U.±.LJ. .L,U U± .( WUU.LU. Ut- VAj%.P L ±± L.L.L U diJLC1 jJ.L) UJL4±8 LJ.;d.VJ jJ.LCLIIU. CULU _V1JUL1LL

{sss ~ UAIJ %Nv*q^Qvs* -L% I. VAQGW Ql"," UA"fi *w<;oL %_'X wa.ss s CV V "-v

capacity with an erection space providLed at one end. The turbine intakerot ay t-yp-e v-v -es woud bue l ocate 4 , a-U ch.,.e a-i.gte ,a.;.

4. v JUL U L . LU -le tJA xA JL L,1 U )IIU4.L CLUJV LJLLLk ia JAU 111 IJ,1"II1

room provided with a 15-ton overhead crane for servicing.

The 27,500 H.P. pelton turbines would be of the two-jet typeoperating at a synchronous speed o 6cio r.p.m.

The generato-rs would have 12-pole rotor3 and a mraxinrwaLUT output, of25' MVA at a voltage of 13.2 kv. and 0.8 power factor.

A 45-ton crane would be provided in the machine room for theerection and maintenance of the turbines and generators.

The power station would be cdesigned to be operated from local con-trol panels or remotely from the control center in the city of Guatemala.

ANNEX 3Page 3

Geology

Reconnaissance investigations have been carried out by INDE's con-sultants and also the results of exmloratorv drilling. previously carriedout by EEG, have been made availabLe to INDE. Complementary deep drillingand shaft exploration are presently being carried out along the tunnel routeand at the proposed. locations of the penstock supports.

The findings of these investigations indicate that problems mayarise diup tc th spismin nactivity of the nren and ITTMtDs onnsultants madesuitable allowances in the design of all structures.

2. 138 kv Transmission Line

Ihe proposed transmission line would interconnect the proposed.thermna-l (gas turne) sta tniJon _+ at scutla r+ i.Ti+h +h1g _Tjii"i1n_Mniinnal: nmrpr

station to convey their output to Guatemala City.

Ihe line about 30 miles long, would operate at a nominal voltageo - 138 -- 'I Ad wo A'.d be dobecrut, 4three -1s,- .-.o4te onstel -tvwrs

Later the line would be extended westward from Escuintla in order to prcvidear, ir,ter-zone l-i}-il bL-et-Ween. the Ct'e nt ra andeser Reios -h construction-

of this link would not form part of this project9

3. Escuintla Gas Turbine Installation

I't is proposed to augment the capacity of the existing 12,500 kwthIer1iLgaj ( u.rb)A staTion at Escuintia Dy the adoition ofE a gas LUUrL-41e

generating unit of 15,000 kw nominal capacity.

She turbine would operate oni diesel oil at a speed of 3600 r.p.moand would be compleLTe with air inleti and exhaust ductiing, a silencer oI theindustrial type, and generator and oi:L cooling equipment. The unit would beof the packaged type housed in a steel structure and would be supplied cuoml-plete with all accessories required for normal operation and maintenance,including substation equipment ana associated control gearo In adLditior, amobile crane of 15 tons capacity and a separate light building in which over-hauls woul(d be carrled out would also be provided.

4. Puerto Matias de Galvez - Diesel Installation

The proposed diesel plant would have an initial output of 2,500 kKWand would consist of two package type units each of 1,250 kw capacity com-plete with all necessary accessories and controls. The diesel engines wouldbe of the slow speed type and would use B3unker 'IC" fuel. It is estimate:dthat an extension to this installation w.ill be required early in 1969 andthe projectl allows for an additional 2,500 kw of capacity to be installedabout that time, the precise date being determined by the rate at which theload grows.

December 16, 1966

ANNEX 4

GUATEMALAINSTITUTO NACIONAL. DE ELECTRIFICACION

TO ESCUINTLA THE JUR/I-IAI-AR11MAJA HVIYDOELEC ETRC rSC IVE

| M//\ 'ach2layo x, r/\ -

,K~ZZz~. ~'-~--2 - URUNV GUA.4TE-Nolonal ~-INAE MLA

TO SAN LU/S INrAKE

/HYDRO PLAN; Highay/

SURGEAtTANK m

I ww __>olot ~~~~~rn m U 62 X r

-f < // N)- = ADDUCr/O'N TUNN'EL10E;- Eosting Roo<J 6'-9"Dia. x /2,300 /ong

REGULArION TRAP

BAS/IN

PRESSURE PENSTOCK (4, 000,000 CU. Fr)

1 5'-6"D,o x 9,300 long

P POWER

TO Manina//l TA TION

FOR rHE PRECISE LOCATION OF rHEJURUV-MARI1VALA SEE MAP

F- 7.4ccess Road

ExIst,ng Road

SURGE JIURU'NSHAFT

IL ff ~~~~~~~~/Al'TA AEHEGULAT,wGU BFASIN

PRESSURE I 7PENFSrE;7 =7Z

EXISTING htYDRO PLANTS

SAN LUiS 5000 KW _-7 -EL SAL TO 5500 .YW

r~\/ CA 7,1 'nn W /~/0

JA J.Lfiil

POWER SrAr/ON

60,000 Kw. SCHEMArIC DIAGRAM SHOWING RELATIVE HEADSAVA/LABLE FOR JURUN-MARINALA 8 EXISTING PLANTS

AUGUST1965 IBRD 1599

ANNEX 5

GUAT]MAI.A

INSTITUITO WAICNAL DE ELECTRIFICACION

Income Statemenots 1962 - 1971(TF-ou-sand. 3_r7~~e_E_zar._sT_ Exchange Rate Q1 - US$--

------------- Actual-------=----- ------------- - Estimated -------------June 30,* June 30, June 30, Dec. 31,- Dec. 31, December 31

Year Ending 1962 1963 1964 196

.a 1965 1966 1967 1968 1969 1970 17

SANTA MAhPT& SYSTEM

Kwh Sales (Fdllions) 11.5 15.9 15.6 7.3 16.5 18.0 19.4 21.0 22.7 26.5 26.5

Average per kwh in Centavos 1.9 2.1 2.3 2.3 2.4 3.5 3.5 3.5 3.5 3.5 3.5

G'ros,s Operating Revenues 226 331 360 181 402 630 679 735 795 858 9)27less: Discounts to Government Offices 17 18 21 _________23____________________________

Net O.erating. Revenues TC9 31 3 339 10630 679 735 795 858 27

Cost of OperationsOperation and Maintenance Expenses 89 116 120 79 156 160 190 195 200 205 210Fuel - - - - - 2,. 9 ii 32 7Administrative and General Expenses 55 59 6.1 26 60 47 47 49 50 50 52Depreciation Expense 56 38 39 26 38 123 163 153 160 165 170

Total Operating Expenses T52 211 200 =3 I* 75* _33_1 _ _38 _ 406 4.23 6.60 65_9

Net Operating Income 7 102 139 39 125 299 290 327 372 L18 6,68

Rat ofP Reurn on Average,. Net P1.,t -Soanta Maria System - 12.6% 16.0% - 9.3% 12.7% 8.2% 8.3% 8.8% 9.5% l0.6%

RIO PORTDO SYSTEM and PUERTO MATIkS AREAKwh Sa-les - iRMillione) - - -- 6.6 B.0 12..3 13.2 16.3 16o.V tI .:iAverage per kwh in Centavoa - - - - 3.6 4.0 6.0 LO 4.0 6.0 L,.0Gross Operating Revenues - 10 39 26 237 320 492 528 572 660 700O

Cost of OperationsOperations and Maintenance Expenses - 7 32 19 45 50 60 65 70 80 85F'uel - - - - - 27 52 57 62 67 76Depre-iation Expense - 20 20 xo 4i 07

Total Operating Expensees 27 52 29 21 $ 199 219 5 K 0

Net Operating Income or Deficit - (17) (13) (3) 172 202 293 309 321 356 397Rate of Return on Average Net Pltnt-

Rio Rondo System - - - - 16.Z% 15.0% 16.5% 12.2% 10.0% 9.5% 9.5%

Kwh _SU_ales (M-iions)- - - 6.4 52.0 83.0 127.0 253.0 325.0 4623.0

Average per kwh in Centavos - -- - 3.16 2.11 1.98 1.87 1.62 1.77 1.70

Gross Operating Revenues - -- - 201 1,100 1,660 2,380 6,110 5,760 7,200

Cost uo' O-rtionsOperat5ion and Maintenance Expenses - - - -9 76 160 172 288 507 667Fuel - -- - 74 673 376 900 990 1,170 1,300Administrative and General Ex,penqe

(Portion of Central office Ove:rhead) - ---- 30 6.s 90 120 i50u8Depreciatlon Expe nse - - J 167 233 319 713 887 1 081

rotal Operating Expenses - IN - 74,6 507 1,461 2,111 27b 3,2

Net Operating Inccme - --- 98 354 833 899 1,999 3.046 3 972

Rate of fReturn on Average Net Plant - 8o' i oy no rrc llOs-t-ro sven.n, . - - An ~ i~1

TCTAL SYSTEM

Comoined Net Operating Income 7 85 126 36 395 855 41,36 1,535 2,692 3,518 .,8

37

Inc oo' DeductionsCentral Office Iverhead 222 273 308 192 412 220 200 180 160 160 320t,ess:Capitalized ExDense**+* 53 101 lVq 88 189 - - - - - -Net Ceottral Office Overhead !7S 172 17 -TOT220 200 _18010 lO12

Combined Net Operating: Income (169?) (87) (67) (68)1 172 635 1,216 1,355 2,532 3,678 1,717

Itierest Paid - - - 85 166 606 951 1,460 1,750 2,200Less: Capitalized Interest --- 85 29 190 660O 1,130 950 760Net Interest Expense- - - - 135 216 313090 166

Other Tntione- - 9 2 - - - ---K, ',ic-ir' Surplus or Deficit (I T F"T7 ' 1,066 2_T 2

Rote if Return on Average Net Plantin Operation of Total System '.---- 7.8% 9.1% 8.9% 9.9% 9.5% 10.1%

Times Tote], interest Paid coveredby Net Operating Income - --- 2,02 3.87 3.00 1.62 1.76 2.30 2.16

*8

-o1nth period.-s6-,nonth period.

Isle roc~aeou as ooper-ti-i o i pa- or yonsaCentral Of'fice overhead incLudes dep:-ociation expense on Miscellaneous Assets-~ during 1962 -19o5 per-d.

Note: The rates of depreciation. used is t,he fcrecast have bees calculated on a straight-line basis and thecooposi'te rate for the total oyster. will averape about e~ of rrns Iant io operation.

December 16, 1966

GUATEMAIA

INSTITU7O NACIONAL DE ELECTFLIFICAC:EON

Balance Sheet September 30, 1961 - December 31, 1971- Thousaiiai ofQuteF Le3 )

Exchange Rate Q.1 - US$1

---- - - - - - - - - - - - - Actual - - - - - - - - - - - - - - - ----------------- EstimLated - - - - - - - - - - - - - - - -Sept. 30,* June 30, June 30, Jume 30, Dec. 31, Dec. 31, As of December 31,

1961 1962 1963 1964 1964 1965 1966 1967 1968 1969 1970 1971ASSETS

rixed AssetsGross Paiiriri Oneratin 2,876 3,1 j 3,42i1 3,553 4,178 4,916 i4,719 16,139 19,609 38,609 47,602 57,702Less Depreciation ReOserve 1 190 1 255 1 321 1 391 1 438 1 558 1 889 2 352 2,921 _ 3,913 5,104 6 499Net Plant in Operation I 6 1 9 7 10C 2,7162 23 5 12 83 7 r W c

Viork in Progress 6h0 7hsO 998> 1 617 l 3917 7 973 2 162 10 592 21 272 18 472 L9,089 37 129Total Fixed Assets 2 277 137II 3 I DIF y 37,96 5 3,16

Exploration arid Plaruning 178 231 580 718 806 1,023 1,123 1,443 1,713 1,983 1,783 1,583

]Investments - - 290 4146 120 50 - - - - - -

Current Assets 6414 910 921± 1.20 2_ 209 1,949 1 f 2,054 _ 2,15 2,269 2,431 3,470

TotaIl Asset;s ~,1BL8 3.8 3 4,892 6,145 5P,272 14, 18,11i 27,876 41,827 57,420 6 5,801 73,385

LIABILITIES

35quity

Governent Contri:butions 3,093 3,6643 4,786 5,982 J,793 12,345 13,799 17,051 20,088 21,136 21,136 21,136Government Grants *(Budget k4propriatioaLs) h1 2,61 284 321 338 342 342 342 342 342 342 342SurplLks or Deficit - (1,69) (256) (294) (360) (188) 312 1 312 2 356 4 578 7 456 10 713

Total Equity 6,00912 170 2 780

oTomers Debt;i Iiers Credits 4 3 I, 17 - _ _ _ _ _ _ _

IDB Loan - - - - 193 1, 343 2.970 2,790 2,610 2,430 2,250 2,070Proposed IBFI Loan - - - - - - 5,690 9,720 13,740 lh 634 1J4 246Futurs Foreign Loan - - - - - - - - 6,020 9,170 14,260 19,345Acquisition of Water Rights - - - - - - -_ 4 666 3 999 3 332

Total Debt Less Current Matu-ities 4 3 4 l 19 3 1 ' 175YCurrent Liabilities including

Current Maturities of Debt 10 65 7b 119 308 511 691 691 691 1, 358 1, 72h 2,4201

Total Liab:ilities 38 3,833 ,89' 6,11,5 9,272 l1,353 18,111 27,876 41,827 57,420 65,801 3,385

Debt/Equity Ratio 0.1/99.9 0.1/99.9 0.1/99.9 0.3/99.7 *!/98 10/90 1B/82 32/68 45/55 54/46 56/44 56/44

Adjusted opening balance sheet.

ee Plant Facilities and Cash From SFles of Government Bonds.

December 16, 1966

ANNEX 7

GUATEMALA

INSTITUTO NACIOliAL DE: ELECTRIFICACION

Sources and Applications c£ Funds 1967 - 1971(In Tho--sands of Quetzoles) Exchange R?ate 01 - US$1

1967 15,68 1969 1970 1971 Total

SOURCES ' FUNDS

Internal Cash GenerationNet Operat4ng Tr.co 1,216 1 167B L,j717 13j49B

Depreciation 463 569 992 1,191 1,395 4 610Total 1,679 1,924 3,524 4,o69 6,112 TST0

BorrowingsProposed IBRD Loan 5,690 4,030 4,020 1,260 - 15,000Future Foreign Loan for 2ncl Stage - 6 020 3,150 5,090 5,540 19 800

Total 5,690 lO;C5- 7,170 6,350 5,540

Acquisition of Water Rights - - 6,ooo - - 6,ooo

GovernumLent Contributions I,22 LC 1,048_ 7 117

Total Sources of Funds 10,621 15,CL1 17,742 11,219 11,652 66,245

APPLICATIONS OF FUNDS

Construction Expenditures (ExcludingCapitalized Interest)Pr,:--rd +nR, ,roiect Foreign Costs 5 0 3. ovn ,

- Local Costs 3,420 2,720 1,700 660 - 8,500

Acquisition of Water Rights - - 6,000 - - 6,000

Acquisition and Improvements of

Isolated Systems - Local Costs 810 800 400 400 400 2,810

Serond Stage Program - Foreign Costs 150 5,6oo 26,60 4,500 4ROo 17,650

Local Costs 200 1,000 1,200 2,000 2,000 6,400

Total Construction Expenditures 9,19o 13,780 w40 8,460 7,200 w 549r

Debt Service

Total Interest (Including Capitalized Interest)

IDB Existing Loan 181 171 160 150 140 802

Proposed IBRD Loan 225 510 730 810 900 3,175

Future Foreign Loan - 270 550 790 1,160 2,770

Total Interest Paid 4o6 951 1,440 1,750 2,200 6,747

A.mortization

IDB Existing Loan 180 180 180 180 180 900Proposed IBRD Loan - - - - 366 366

Acquisition of Water Rights - - 667 667 667 2,001

Tot.al Amrtimation 180 1R0 SO7 A).7 1 91- 1 9A7

Total Debt Service 586 1,131 2,287 2,597 3,413 L02014

Increases in Working Capital 55 10D0 115 110 100 480

Total Expenditures 10,621 15,O:U 17,742 11,167 10.713 621

Net Increase in Cash - _ - 952 991

Total Applications of Funds 10,621 15,0L1 17,742 11,219 11,652 66,245

Times Annual Debt Service Covered by

Internal Cash Generation 2.87 1,70 1.54 1.87 1.79

* Q 100,000 were incurred in 1966 for engineering service

December 16, 1966

ANNEX 8

The Instituto Nacional de Electrificacion

Estimated Cost of' the Project

For n Local Total(equivalen-tUS$ thousand,7

1. Jurun-Marinala Hydro Sclieme(a) Civil works 3,300 44,100 7,4)00(b) Power plant and associated

equipment including penstockand tunnel lining 4,hoo 800 5,200

(c) Contingencies 550 510 1,060(d) EngineerinN services. 850 1,250 2,100

9,100 6,660 1,7 60

2. Escuintla Thermnal Station(a) Civil works 20 90 110(b) Power plant equipment 1,400 30 1,.430(RGi) Fninprin, 9ervi rGS - 10O 1TO

l,t420 220 7 140

3. Diesel Plant at Puerto Matias de Galvez( 7I n 1 rrn0lknq rn ?nn 21'.n(b) Power plant equipment 1,000 100 1,100(c) Contingenc-Ies lio 50 10n(d) Engineering Services 50 50

* 138 Trans in )nrr I on& - L _j JV "v L C"QI a sola | va - w *A-o

(a) Transmission line 570 320 890(b) Subsatior. a'L GX UVIe"a Calty 203 0

(c) Contingencies 100 60 16i0(d) Engineerin;, Services V 150 200

990 560 7 5

5. Management and Engineern.g Services 800 660 l,h60

.iAIUUVt~~i 1, L UU ±1j UV11L IuLu.U1±,U ____

m ~.-, ~r\r' Q t!nV' rfoIIr.teres dJ -ns UV cntuio 1,0 -v 1-.JV

npthmehr 16- 1966

GU4 rEM'ALA |G IA TEMAl L A ICENnl?AL AMERICA I

CENTA AM/ | INSTITUTO NACIONAL DE ELECTRIFICACIONr _: _ _ _ _ _ E-Xi'STMIG 8 PL 4AVNED GENERA TIVG CAPA CITY IA THE CENTR'AL REGION

I < < e A sTe RNw /t I GUAT EIALA EXISTING IASTALLATIONSR EG ID N CIT

NTIC INSTALLATIONS UNVDEA--- IC,-. I FELLA N CONSTRUC P/ON OR

5000 KW DIESEj PRPOFSEDWESTERNREGION RO~~'Er

MFIAS DEQUEZALTENANGO G AL OEZ(GUATEMALA J ./ EKISTIAIG 66K.(V

>s.\_ _/ \uCiTY TRAANSMISSION LINES 'I

Pacific Ocean ~ . ,~ / CENITRAL71 REGION

/"/\_ __ _ _ _ _ _ __ _ _ _ _ ___ /1 e s'\

/9 \9 L- a Lke 1mofill\

/36K TV TRAN5tSMSSION LINE '~- 69KV TRANSMISSION LINE

LAGUNA POWER STATION (E.EG.)PALI'N HYDRO (E.EG.J 30,000KW Stearm

/ // IJURUN I,632 ,KW /2,500KW Gas Turbine

SA/V LU/S HYDRO (EE.G.) ' Marina/a *' 4,COKW Diesel 5000 KW KW./) / ) rol A\

UN- MAR/VALA

H'YDRO

(GLIOCcloile) )3 X 20,000 KW

ESCIJINTLA LOS ESCLAVOSFUTURE /NTER-. _A -EL SACTO h'YDRO (EE6G: HYDROZONE LINK AT /38,KV 5,500 KW. /3000 E'W

( EE G.,EMPRESA ELECrR/CA 5 ° __ 5 10ESCUINTLA G/T a,>. DE GUATEMALA MiLES

2 X /2,500

NOVEMBER 1966 IBRD-1503R