Docmauu of

The World Bank

Foa oFnCIAL USE ONLY

3upt N. 6125

PERU

PROJECT COMPLETION REPORT

FIFTH POWER PROJECT (LOAN 1215-PE)

April 2, 1986

Latin America and the CaribbeanRegional Office

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THE WORLD BANK FOR OFCIAL USE ONL'Washington. o.c. 20433

U.S.A.

April 2, 1986

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND rHE PRESIDENT

SUBJECT: Project Completion Report on Peru - Fifth PowerProject (Loan 1215-PE)

Attached, for information, is a copy of a report entitled"Project Completion Report on Peru - Fifth Power Project (Loan 1215-PE)"prepared by the Latin America and the Carribean Regional Office.Under the modified system for project performance auditing, furtherevaluation of this project by the Operations Evaluation Departmenthas not been made.

Attachment

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OMCUL USE ONLY

PERU

PROJECT COMPLETION REPORT

FIFTH POWER PROJECT (LOAN 1215-PE)

TABLE OF CONTENTS

Preface ............ * (i)Basic Data Sheet ......... ..... ,.... (iiiHighlightsheet.................................................. (iv)

CHAPTER I: BACKGROUND ....................Bank Lending to the Electric Sector 1Organization of the Electric Power Sector 1The Beneficiary 2

CHAPTER II: PROJECT ORIGIN, APPRAISAL, PROJECT DESCRIPTION ANDNEGOTIATION 3..... ..... .... 3

Project Origin and Appraisal 3Project Description 3Negotiation 4

CHAPTER III: IMPLEMENTATION "5o ...... 05

Effectiveness and Beginning of the Works ..... 5Changes in the Project 5Project Timetable ..... 5Procurement of Goods and Selection of Consultants 6Project Cost 7..........7Performance of Consultants, Contractors and Suppliers ...... 7Participation of Other Financing Agencies ........ 8

CHAPTER IV: PROJECT JUSTIFICATION ............ 9"lectrolima's Load 9Return on Investment ....... 9

CHAPTER V: FINANCIAL PERFORMANCE 10Comparison of Actual and Forecast Data 10

CHAPTER VI: INSTITUTIONAL PERFORMANCE AND ORGANIZATION 11The Government and the Beneficiary 11The Bank 999999999999999999999999999999999999 11

CHAPTER VII: LESSONS TO BE LEARNED*.*..*.**................. ... 12

I This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authoriation.

ANNEXES Page

Annex 1: Summary of the Bank lending to the Power Sector 13-14Annex 2: Project Implementation Schedule 15-16

Annex 3: Project Cost Estimates 17Annex 4: Actual and Forecast Loan Allocation 18

Annex 5: Actual and Forecast Disbursements 19Annex 6: Rate of Return 20

Annex 7: Performance Indicators (1975-1982) 21Annex 8: Electrolima - Actual and Estimated Income Statement (1975-1982) 22

Annex 9: Electrolima - Actual and Estimated Soxnces and Applicationsof Funds (1975-1982) 23

Annex 10: Electrolima - Actual and Estimated Balance Sheetat Year-end (1975-1982) 24

Annex 11: Major Covenants of the Loan and Project Agreementfor Loan 1215-PE 25-26

(i)

PERU

PROJECT COMPLETION REPORT

FIFTH POWER PROJECT - (LOAN 1215-PE)

Preface

This is the Project Completion Report (PCR) for the Fifth PowerProject which was partially financed by Loan 1215-PE. The borrower was theGovernment of Peru which utilized US$2.6 million of the proceeds to financethe technical assistance component carried out by the Direccion General deElectricidad (DGE), a Government Agency under the Ministry of Energy andMinns. The remainder of the loan, or US$32.8 million, was reloaned by theGovernment to Electrolima, the utility serving Lima, to help to finance thedistribution project of the latter for the period 1975-79. The Project wascompleted in 1982, about three and one half years late. The PCR was preparedby the Energy Division of the Latin America and the Caribbean Regional Officebased on information in the Bank files, a final project report prepared byElectrolima, and discussions with staff of the Bank and Electrolima.

In accordance with the revised procedures for project performanceaudit reporting, this PCR was read by the Operations Evaluation Department(OED) but the project was not audited by OED staff.

Following standard procedures, OED sent copies of the draft reportto the Borrower for comments; however, no comments were received.

( ~~~~~~~~~~~~~~~(ii )

PERU

PROJECT COMPLETION REPORT BASIC DATA SHEET

FIFTH POWER PROJECT (LOAN 1215-PE)

Borrower: Government of Peru

Beneficiary: Electrolima and Ministerio de Energia y Minas

KEY PROJECT DATA

Appraisal Actual

Total project cost (US$ million) 137.3 107.9 1/

Cost overrun (or underrun) % (21.4) 1/

Loan Amount(US$ million equivalent)

Disbursed (as of April 30, 1985) 36.0 3t.4

Cancelled (as of April 30, 1985) None 0.6

Repaid (as of April 30, 1985) 7.5 7.4

Outstanding (as of April 30, 1985) 28.5 20.7 2/

Date physical components completed 6/79 12/82 3/

Return on Investment (%) 8.4 3.6 4/

Institutional performance Improving Adequate

1/ Project costs are understated due to the method of inventory valuation

employed by Electrolima (para. 3.11).2/ Exchange adjustment favorable to the borrower: US$7.3 million.

3/ Except for three 60 kV transmission lines, two 60/10 kV substations and

the control center. The delayed completion reflected a lower-than-expected demand increase, and inexperience in procurement matters and in

handling the procedures for selection of consultants (paras. 3.9 and3.10).

4/ The less-than-expected level of return is due mainly to the fact thattariff increases did not keep pace with cost increases (para. 4.2).

(iii)

MISSION DATA

Month No. of No. of Staff Date ofType of Mission Year Weeks Persons Weeks Report

Appraisal 3/73 N.A. N.A. N.A. 4/20/73 5/Preparation 5/74 1 1 1 7/02/74Preparation 12/74 1 1 1 12/16/74Reappraisal 7/75 2 3 6 2/11/76

Sn1

Supervision 5/76 1 1 1 5/21/76Supervision 10/76 1 1 1 10/29/76Supervision 4177 2 3 6 4/15/77Supervision 9/77 1 1 1 9/12/77Supervision 11/77 1 1 1 12/23/77Supervision 5/78 1 2 2 5/23/78Supervision 12/78 1 1 1 1/05/79Supervision 1/79 1 1 1 2/18/79Supervision 7/79 1 2 2 8!03/79Supervision 12/79 1 1 1 1/18/80Supervision 5/80 2 1 2 6/04/80Supervision 8/80 1 1 1 8/20/80Supervision 12/80 1 1 1 12/31/80Supervision 6/81 2 2 4 7/16/81Supervision 11/82 1 2 2 1/27/83Supervision 9/83 2 3 6 1/4/84

33

OTHER PROJECT DATA

I t e m Original Plan Revision Actual

First mention in files 02/10/72Loan application - - N.A. 6/Negotiations 4/72 11/75 01/26/76Board approval date 6/72 1/76 03/02/76Loan agreement date - - 09/18/76Effectiveness date 5/30/76 - 11/18/76Borrower - - GovernmentExecuting agency - Government/

ElectrolimaFiscal year of borrower - Calendar yearFollow-on Project Sixth Power

ProjectClosing date 12/31/79 12/31/81 12/31/82

CURRENCY EXCHANGE RATE

Name of currency Sol (S/-)

Exchange Rate

At appraisal US$1.00 S/45Intervening year average - US$1.00 S/250Completion date US$1.00 S/993

5/ A Decision Memorandum was issued. Data on this appraisal as well as on priorpreparation missions were not available in the Bank's file.

6/ Information was not availabln in the Bank files.

(iv)

PERU

PROJECT COMPLETION REPORT

FIFTH POWER PROJECT - LOAN 1215-PE

Highlights

1. The Loan 1215-PE (US$36.0 million equivalent)1/ helped to financetraining, consultant services for engineering design anU studies, anddistribution facilities, including transmission, substransmission anddistribution lines, substations, pole transformers, meters, communication andcontrol facilities. Electrolima succeeded in meeting its objectives ofproviding facilities to meet system demand and also succeeded in connectingabout 90% of the low-income consumers estimated at appraisal (para. 4.1).

2. Due to variations in the actual rates of growth of different loadcenters from the rates expected at appraisal, Electrolima, with Bankagreement, changed Part A of the Project by adding and cancelling, asnecessary, items such as substations and subtranamission lines. Likewise,there was an enlargement in the scope of the studies included in the Part Bof the Project. However, the net effect on the physical quantities of theproject was minor. The cost of the project was lower than the originalestimate by 21%, but the cost is understated due to the method of inventoryvaluation employed by Electrolima (para. 3.11).

3. The Project was completed by the end of 1982, approximately threeand a half years later than the target completion date. The delay was partlydue to the lower-than-expected demand increase, and also to inexperience inprocurement matters and in consultant-selection procedures.

4. Electrolima's financial performance during the period was weak as aresult of the Government's policy of not increasing tariffs in line withcosts. The issue of tariffs was addressed by the Bank in the processing ofPower VI and again has been raised in the context of the Engineering Loanrecently negotiated.

1/ Approximately US$0.6 million of the loan was cancelled.

PERU

FIFTH POWE-k PROJECT - LOAN 1215-Ps

I. BACKGROUND

Bank Lending to the Electric Power Sector

1.1 Since 1960 the Bank has made seven loans totalling $208.7 millionto Peru's power sector. The first four loans were to Electrolims, theutility serving metropolitan Lima. The loans helped finance 220 NW ofhydropower as well as expansions to the transmission and distributionsystems.

1.2 The fIfth loan was for the Fifth Power Project (Loan 1215-PE) whichis the subject of this report. The loan principally halped financeElectrolima's 1976-79 distributiton Program. The loan also helped to financea much smaller but important part of the project: technical assistance andtraining components to assist Government entities in strengthening sectororganization and planning.

1.3 The sixth loan, amounting to US$25 million, was made in 1981principally to finance prefeasibility and feasibility studies for 12hydroelectric plants. The beneficiaries were Electroperu, Electrolima,Hidrandina, and Centromin, a state-owned mining company, which has developedits own electric power system.

1.4 The seventh loan, amounting to US$81.2 million, was made in 1982 tohelp finance Electrolima's 1982-86 distribution program, construction of theYuracmayo dam and expansion of Huinco plant; Electroperu's final design forthe Mantaro transfer scheme which would increase its hydro production,and Hidrandina's final design for the Mayush hydro project.

Organization of the Electric Power Sector

1.5 A 1972 Electricity Law reserved to the Government theresponsibility for public service electricity supply, provided for Governmentparticipation in the ownership of existing private utilities and provided forinterconnection of power systems. The 1972 Law also created Electroperuwhich was made responsible for planning, design, construction and operationof all new generating facilities larger than 10 MW and for the developmentand construction of the transmission network. However, Electroperu wasunable to carry out efficiently its responsibilities.

1.6 In 1982 a General Electricity Law was passed. The Law called for adecentralization of the power sector. Pursuant to the Law, eight newregional utilities have been created on the basis of either existingutilities (Electrolima, Hidrandina, Coserelec, Seal) or former Electroperuregional units. Under t1ie 1982 Electricity Law, regional utilities have theresponsibility for developing regional generation works (smaller than 500 NWof installed capacity), transmission and distribution networks, and marketingelectricity. Electroperu is to be in charge of (a) the preparation

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of Power Master Plans; (o) the construction and operation of power projectsand transmission lines involving two or more regional companies and powerprojects with 500 MW or more installed capacity; and (c) supervision ofregional companies.

1.7 The Ministry of Energy and Mines through the Direccion General deElectricidad (DGE), is in charge of the regulation of the power sector in allaspects except those related to tariffs. A Tariff Commission handles tariffmatters and regulates the Compensation Fund for Generation. 1/

1.8 The sector organization is promising but still ieak. The regionalcompanies inherited deteriorated plants and networks, weak system forbilling, collection and administration, and poorly trained personnel. Lossesin some of the distribution networks are extremely high and reliabilityextremely low. Through Loan 2179-PE the Bank has already provided assistancefor training for staff of the regional utilities. A new loan undernegotiation, the Power Engineering Loan, provides assistance for studies.All these efforts are expected to help improve the efficiency of the sector.

The Beneficiaries

1.9 Electrolima was the major beneficiary of the loan. Formerly aprivately ownpd company known as Empresas Electricas Asociadas. TheGovernment controlled Electrolima since 1973. Electrolima is the bestmanaged of the regional distribution companies in Peru.

1/ The compensation Fund for Generation is a mechanism created to transferfinancial resources between regions to average-out generation andtransportation costs and allow greater uniformity in electricity tariffsto final consumers.

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II. PROJECT ORIGIN, APPRAISAL, PROJECT DESCRIPTION AND NEGOTIASIONS

Project Origin and Appraisal

2.1 The Bank staff first appraised the Project in March 1973 based onthe preparation work carried out by Electrolima's staff. The Projectoriginally covered the period 1973-77. Information on the firt appraisal hasbeen lost from the Bank files. Because of Electrolima's delay in takingactions on tariffs and on the refinancing of short-term debt (which the Banksought), the implementation period was shifted to 1976-79. The project wasreappraised in July 1975, after Electrolima had taken actions on tariffs andon the refinancing of the short-term debt mentioned above.

Project Description

2.2 The agreed Project consisted of the following:

ELECTROLIMA components (Part A)

a. Transmisson andl subtransmission:

(i) 26 circuit-km of 220 kV and 125 circuit-km of 60 kV lineextensions;

(ii) constructioti, expansion and/or improvement of six 220/60 kVsubstations and qf seventeen 60/10 kV substations.

b. Distribution:

(i) Installation of about 2,300 transformers, 10,000/220 V, with anaggregate capacity of about 233 MVA;

(ii) installation of about 1,000 circuit-km of 10 kV lines;

(iii) installation of 200,000 meters.

c. Auxiliary services:

(i) expansion of the existing communications and control center;

(ii) auxiliary equipment for the data processing center;

(iii) laboratory, shop, transportation and maintenance equipment.

d. Consultant services and training: (25 staff-months)

i. consultant services for the expansion of the communications andcontrol center, for a review of distribution planning standardsand for hot-line maintenance of overhead distribution andtransmission lines; and

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ii. training of Electrolima personnel in hot-line maintenance ofoverhead distribution and transmission lines.

Government technical assistance (Part B)

a. a power sector organization study which would attempt to suggestways of improving the division of responsibilities and coordinationbetween sector entities and identify sector training requirements(25 staff-months of consultants' effort);

b. the preparation of a master plan for future generation andtransmission additions in the north-central intercornected systemof the country (160 staff-months);

c. training of sector personnel in operation, planning andadministration of large public utility enterprises; and

d. tariff structure studies (10 staff-months).

Negoti.tion

2.3 Negotiations took place on January 26-30, 1976, without anysignificant problems. The loan was approved on March 2, 1976 and signed onSeptember 20, 1976, for a term of 20 years including three years of grace anda rate of interest at 8.5% p.a. There was a six months delay between theapproval of the Loan and its signature, due to slow authorization of the LoanAgreement by the Government.

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III - INPLEMENTATION

Effectiveness and beginMni of the works

3.1 The loan became effective on November 18, 1976 five months laterthan expected during appraisal. This delay was due to the slow authorizationof the Loan Agreement by the Government (para. 2.3).

3.2 Implementation of the Project began as planned (April 1976);however, due to inexperience there were procurement problems and delays inthe engagement of consultants. This did not allow the Project to proceed ina timely manner, specially the parts related to the studies (paras. 3.9 and3.10).

Changes in the projects

3.3 The original project was changed mainly as a result of variationsin the rate of growth at different load centers. The 60 kV linesBalneario-Jorge Chavez, Pershing-Pando, Persing-San Isidro were excluded fromthe project, and there were added Balnearios-Barranco, Moyopampa-Chosica,Barsi-Pando and Entrada Pershing. Likewise, the 60/10 kV substations, JorgeChavez, Chorrillos, San Isidro, Tacna and Mirones were excluded from theproject and Barranco and Chosica were added.

3.4 As regards the studies included in the project, Electrolimaobtained the Bank's agreement to undertake a new study on procurementpractices, which was only completed to its first phase; the second phase, forimplementing the recommendations, was cancelled by Electrolima because offinancial constraints and the desire to carry out the second phase with aforeign individual consultant, an arrangement that was considered by them tobe more effective and economical. The Bank agreed to include the secondphase in the Sixth Power Project (Loan 2179-PE), which was underconsideration at that time; however, the study has not been implemented yet.The Bank has been pressing Electrolima to fulfill its commitment.

Project Timetable

3.5 The project was completed, except for three 60 kV transmissionlines, two 60/10 kV substations, and the control center, by the end of 1982,approximately three and a half years later than the target completion date(Annex 2). The delay was partly due to the lower-than-expected demandincrease, and also to inexperience in procurement matters and in theadministrative procedures for selecting consultants (paras. 3.9 and 3.10).

3.6 The 60 kV transmission lines nct yet completed at the end of 1982were San Juan-Chorrios, Barsi-Pando and Moyopampa-Chosica and the two 60/10kV substations were Pando and Chosica. The control center was commissionedat the middle of 1983.

l

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3.7 The project included a training component for Electrolima and theDireccion General de Electricidad (DGE)2/. Electrolima's component providedfor the training of operational staff in the maintenance of hot overheadlines. Electrolima accomplished this task by sendi tg six technicians to betrained by the supplier who was awarded the contr i to supply the tools towork with hot overhead lines, and by hiring one expert from the same firm togive training courses in Lima. The Bank agreed as well to finance from theloan account the training of three engineers in software and hardware for thetelecontrol system. The project also provided for the training of sectorpersonnel in operation, planning and administration of large public utilityenterprises, but due to a lack of information from DGE and weakness in thesupervision of this project component, the Bank staff was unable to evaluatethe results.

Procurement of Goods and selection of consultant

3.8 According to the loan agreement, goods, works anc services would beprocured under international competitive bidding, and consultants would beselected "sing procedures satisfactory to the Bank. The loan also allowedretroactive financing of US$1.1 million for equipment and material thatElectrolima purchased for the project after July 1, 1975. Even though localindustry could supply some of the equipment and materials, the loan did notprovide any margin of preference for local suppliers.

3.9 Procurement was one of the causes for the delay in the execution ofthe Project. On the one hand, even though this was the fifth loan toElectrolima, the last loan had been made ten years previously and staff werenot familiar with the changes that had taken place in the Bank procurementguidelines. Frequent correspondence to clarify points related to bidinvitations and to settle matters produced by inadequate evaluation and awardreports was required. On the other hand, the Government was extremely strictin the application of regulations that protect local manufacturers, eventhough in many cases this required purchasing goods of lower quality athigher prices, and Electrolima had to finance these purchases with its ownresources. As Electrolima awarded three contracts to firms who were not thelowest evaluated bidders, the Bank considered these awards as misprocurementand cancelled US$371,421 from the loan account. Besides advising theGovernment and Electrolima on procurement matters by normal correspondanceand during routine supervision missions, in May 1977 the Bank sent aprocurement engineer to advise Electrolima on procurement matters. There wasan improvement in the handling of procurement, specifically near completionof the Project. Likewise, the Bank has continued cooperating recently instrengthening the procurement area, and to this end a seminar was organizedby the Bank in Lima in August 1984 in which high level Government officialsparticipated.

2/ The Direccion General de Electricidad is the unit of the Ministry ofEnergy and Mines that was responsible to carry out the Part B of theProject.

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3.10 The selection and engagement of consultants, especially in relationto Part B of the project, also delayed ptoject execution. This was basicallydue to lack of experience of Electrolima and the Direccion General deElectricidad (DGE) with Bank's procedures. In the case of DGE, anotherreason was the frequent changes in the management and staff (DGE had fivedifferent directors during project execution). It also appears that delaywas due to scepticism of DGE's management and staff as to the importance ofthe studies, which had been included in the project but had had theopposition of the DGE.

Project Cost

3.11 The final Project cost estimate, based on Electrolima data, isUS$107.9 million (Annex 3), 21X lower than the appraisal estimates. However,this cost is understated. Some adjustments were made to the foreign costcomponent using disbursement data, but the local cost component isunderstated due to tile method of inventory valuation employed byElectrolima.3/

3.12 The cost issue was not addressed with sufficient attention by theBank during the implementation period of the Project, and is likely to ariseagain in the projects under implementation (Power VI). The Bank shoulddiscuss this problem with Electrolima and seek changes in accounting policy.

3.13 Annex 4 shows that the actual and forecast loan allocation bycategories were close, except for consultants' services, for which the finalfigures were 83% higher than the estimates. This was mainly due toenlargement in the scope of some studies. Annex 5 shows the disbursementslagged behind the appraisal estimates, which reflects the delays in projectexecution discussed in paras. 3.9 and 3.10.

Performance of consultants, contractors and suppliers

Consultants

3.14 Electrolima's staff carried out the project engineering design andconstruction supervision, and hired consulting firms to carry out the studiesof communication and control system, procurement practices, and planning,design, operation and maintenance of the distribution system. The work ofthe consultants was generally considered satisfactory by Electrolima and theBank. However, Electrolima cancelled the second phase of the procurementpractices study (para. 3.4), and as far as the third study is concerned(planning, design, operation and maintenance of distribution system),Electrolima's staff felt that the results were not as expected because thestudy covered too many areas and there were many specialists involved,causing lack of coordination. With both consultants for the studiesmentioned above, glectrolima had to settle differences regarding billings,which were finally solved satisfactorily.

3/ Electrolima values its inventories at average cost, which due toinflation is significantly lower than the cost of the last purchase.They do not revalue their inventories to reflect inflation.

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3.15 The Bank does not have an opinion from DGE regarding theper'ormance of the consultants hired for undertaking the studies under Part Bof the Project: power market, hydropower assessment, thermal stationscatalogue, master plan, organization and tariffs. Bank staff who supervisedthe project considered the work of the consultants to be satisfactory, exceptthe work of the consultant related to the sector organization study. Thisstudy was severely criticized by DGE and the Bank and needed the issuance ofvarious draft versions in order to fulfill the requirements of both entities.

Contractor and supplier

3.16 The contractors and suppliers had a satisfactory performance, butthere were some problems with deliveries. The longest delay was experiencewith the telecontrol system. The equipment was received 10 months later thanthe original schedule. The manufacturer offered additional hardware andsoftware to compensate ElectroLima for the delay, an arrangement that wasacceptable to Electrolima and the Bank. Minor delivery problems were facedwith manufacturers who supplied the 60 kV blades, the 10 kV circuit breakers,and the measurement transformers.

Participation of Other Financing Agencies

3.17 During project implementation, the German Agency for TechnicalCooperation (GTZ) agreed to finance the optimization study included as partof the Master Plan. There was a successful cordination between GTZ and theBank in dealing with this project component.

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IV. PROJECT JUSTIFICATION

Electrolima's load

4.1 The main objective of the Project was to provide Electrolima withthe distribution facilities needed to meet the increased demands on thesystem, including the demand of a large influx of lower-income populationliving in new communities, "pueblos jovenes', in Lima's outskirts. TheProject was adequate in meeting its objectives because even though lower thanexpected economic growth was experienced during the period 1975-1979 actualenergy sales and connections to low-income consumers were approximately 90%of the target figure, and the system was capable of meeting the demandapproximately two years ahead of the original forecast. Without the Projectthe country would have faced rationing.

Return on Investment

4.2 It was not possible to estimate the return on the Project becausethe borrower did not supply the data on annual construction expenditures forthe Project. Furthermore, a rate of return on a project of this nature wouldhave little meaning, and the procedure currently followed by the Bank fordistribution projects is to focus on the investment program as a whole. Bankstaff estimated the financial rate of return on the construction program forthe period 1975-1982, and it was 3.6% (Annex 6), which is lower than thereturn estimated for the project during appraisal (8.4%). The reasons forthis low return are low incremental energy sales4 /, failure of tariffs toincrease at the same pace as costs and higher-than-expected energy purchaseprice from Electroperu. Of these, the failure of tariffs to increase at thesame pace as costs was the main cause for the lower-than-expected return oninvestment. Chapter V contains details on the Bank's effort to influenceGovernment policy in this respect during the period of project implementation(1975-82), and more recently, in the context of the Engineering Loannegotiated.

4/ At appraisal, the incremental sales forecast for the period 1975-79 were2,445 GWh, which may be compared with an actual figure of 1,279 GWh (48%lower).

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V. FINANCIAL PERFORMANCE

Comparison of Actual and Forecast Data

5.1 Annexes 7 to 10 compare the actual and appraisal forecast keyfinancial ratios, income statement, sources and application of funds andbalance sheet for the period 1975-82. Electrolima's financial performanceduring that period was weak. Actual ratios for rate of return, debt-servicecoverage, contribution to expansion and debt-equity were below expectedlevels. Likewise, energy sales were lower than foreca3ted due to economicrecession. Energy losses were higher than estimated. The rate of returnwas similar to the forecast during the period 1975-80, but deterioratedsignificantly in 1981 and 1982 (4.8% and 3.2% respectively). Contribution toexpansion ratio was lower than the covenanted 30Q for 1976 and 45% insubsequent years, showing negative actual figures for 1979 and 1980, butimproving somewhat for 1981. The deterioration of these key financialindicators was mainly due to failure by the Government to increase tariffsadequately at a pace to offset cost increases. In December 1975 prices,tariffs increased from SI. 1.35/kWh in 1975 to S/. 1.72/kWh in 1982, andoperating costs from SI. 1.12/kWh in 1974 to SI. 1.68/kWh in 1982. The rateof growth was faster for operating costs, particularly in 1981 and 1982.

5.2 Eletrolima did not comply with the revenue covenant for Loan1215-PE. During project supervision the Bank expressed to the Government andElectrolima its concern about the evolution of costs and tariffs and pressedfor higher and more systematic tariff increases. This issue was alsoaddressed in the context of Loan 2179-PE negotiated in 1982, by which theGovernment agreed to increase steadily the rate of return from 4% in 1982 to12% in 1985. The Government made reasonable efforts to accomplish this, butdue to economic and political problems it did not succed in fulfilling itscommitment.

5.3 Other aspects that contributed, though to a lesser degree, to thefinancial deterioration of Electrolima are the high system losses andincrease in the number of employees. During the Project implementation,system losses were one percent over the SAR's target of 9%, and showed atendency to increase in recent years (10.6% in 1982). The number ofemployees was about 5% higher than the SAR expectation.

5.4 Even though Electrolima's construction program lagged behind theforecast, because of lower demand, Electrolima had funding problems; and hadto cover its cash gap basically through short-term borrowings.

5.5 The issues of tariffs and efficiency in the electric sector haverecently been reviewed by the Bank in the context of an Engineering Loanrecently negotiated. There is a Government commitment to seek tariffincreases of 2% in real terms per month over a period of the next two years.

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VI. INSTITUTIONAL PERFORMANCE AND ORGANIZATION

rhe Government and the Beneficiary

6.1 Annex 11 describes the major covenants of the Loan and ProjectAgreement. Compliance with these covenants on the part of the Government,the Direccion General de Electricidad and Electrolima was generallysatisfactory, except with respect to the tariff covenants, the extreme delayin the engagement of consultants (para. 3.10) and lack of progress reports onpart B of the project.

6.2 Electrolima has enjoyed a history of good management andadministration. With respect to the project its performance wassatisfactory, except for the initial procurement problems which wereovercome.

6.3 By holding down tariffs, the Government has tended to weaken thefinancial strength of Electrolima. This issue was addressed by the Bank inthe processing of Power VI and again has been raised in the context of theEngineering Loan recently negotiated (para. 5.5). The Bank expects to reviewthe rate of return commitment on a realistic tariff policy with the newadministration of Peru after it takes office and completes its assessment ofsector finances.

The Bank

6.4 The Bank staff successfully contributed to the implementation ofthe project by responding quickly to requested changes to the project (para.3.3), by advising Electrolima and DGE on procurement matters (para. 3.9) andby pressing the Government to take actions on tariffs and other financialmatters, even though it did not fully succeed in this task. However, theBank staff failed to suggest changes in the loan agreement to provide areasonable margin of protection to local industry (para. 7.1.1) and to pressDGE to supply the quarterly reports on part B of the project (para. 6.1).

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VII. LESSONS TO BE LEARNED

7.1 Specific lessons to be learned from the Fifth Power Project are:

7.1.1 In the early stages of the project, Bank staff had detected thatlocal industry was willing to participate in the project bysupplying equipment and materials. This was not taken into accountat appraisal and negotiations, and therefore no margin ofprotection was provided. A modification of the loan agreement toallow an adequate margin of protection might have satisfied theconcern of local industry and at the same time might havediminished the procurement problems faced (as the Government mightthen have exerted less pressure on Electrolima to depart from theaward procedures agreed with the Bank), but neither the Bank norElectrolima nor the Government presented suggestions to modi4 theLoan Agreement on this ground.

7.1.2 The Bank should monitor the accounting procedures of its borrowersto ensure that Project costs are recorded in a manner that wouldallow comparison with the original estimates. Such manitoringwould allow detecting deficiencies in time and would allow theborrower to correct them. 5/

5/ OED NOTE: Energy Department staff state, however, that, "The routinedevelopment activity of a power utility as covered by the projectdescription, is always flexible and recognizes only that a certainlevel of system growth is likely and will need to be served. Whilstit is reasonable to require the project executioning agency to keepauditable records of the materials procured using Bank funds, a- todemonstrate that they were applied to the system during the courseof project execution, for projects such as this that are not based ondetailed engineering and that involve the "bread and butter" activitiesof a utility over a long period of time, it is not practical norreasonable to require that the Bank financed portion of the daily workbe identified and recorded in special accounts. Of the many projectsof this nature that the Bank has supported in the past it is not likelythat any conformed to the objective that paragraph 7.1.2 describes.Furthermore, it would be exceedingly difficult to draw an-3 validinferences from a comparison of the final costs with the originalnotional budget since only a very small part of the whole has beendefined in measurable detail."

"It is of concern that a finding such as this should lead toour insisting that our borrowers undertake an exceedingly complex taskof dubious accuracy and of doubtful benefit to them or us."

- 13 -ANNEX 1Page 1 of 2

PERU

FIFTH POWER PROJECT - LOAN 12i5-PE

ELECTROLIMA

Summary of Bank Lending to the Power Sector

Loan Loan Loan amount (in Project PrincipalNumber Date MS$ millions) Name Project Component

260-PE 1960 24 Huinco Construction of theHuinco hydro stationwith two units of60 MW each.

365-PE 1963 15 Huinco II Expansion of theHuinco station toinstall twoadditional units of60 MW each to bringtotal installedcapacity to 240 MW.

465-PE 1966 10 Power Dis- Expansion of thetribution transmission and

distribution system1966-68.

511-PE 1967 17.5 Matucana Construction of theMatucana hydrostation, with twounits of 60 MW each.

1215-PE 1976 36.0 Fifth Power Electrolima's 1975-Project 78 transmission and

distribution expan-sion program. Tech-nical assistance toGovernment andtraining for Stateentities in thepower sector.

2018-PE 1981 25.0 Power EngineeringEngineering studies forProject Electroperu,

Electrolima,Hidrandina,and Centromin.

-14- ANNEX IPage 2`of 2

Loan Loan Loan amount (in Project Principal

Number Date US$ millions) Name Project Component

2179-PE 1982 81.2 Sixth Power Electrolima's 1982-Project 86 distribution

program, construc-tion of Yuracmayodam, expansion ofHuinco plant,studies sad train-ing; Electroperu's8Mantaro transferscheme and train-ing, and Hidrandi-na's engineeringstudies of Mayushhydro project.

208.7

- 15 -

ANNEX 2FMW Pane I of 2

FIFIl 1PiI PRW=C (WAN 1215--FE)

Pro!dct IpMLntat om Schedule

A. Electrolir's 1975-78 DistribLtion Trawformr Cq)acity (MVA)/liaea Coaletion DateEpaon Progran legtb circuitt-k SL Actual

SR Actual

Tranavinison end subtranssiseion1. Lines

Ue (220 kv) lacluded in origialproject

San Jusn-alaea-Los 22 12/31/76 6/76Entrada a Barai 4 9/30/77 2/80

Total 21.4

.ins t60 kv) Included in orignalgproject

San Juan-Villa El Salvador 23.6 2/28/76 12/75San JUWn-Ato8.8 2/28/76 11/76Zapallel-Ventanilla 8.6 2/28/76 6/75lteynoeo-marai 3.2 2/28/76 3176Chavarrie-Oquendo 7.8 6/30/77 12/77Corretera-Central 8.0 6/30/77 7/80Oquendo-la Paplla 6.5 6/30/77 12/76Mgara-g&Santa Marina 10.0 12/31/77 4/84Balneario-orge Ziaves 11.0 6/30/77Peratdng-Pando 6.0 6/30/78Pershirg-San Isidro 6.0 6/30/78San Juan-Chorrios 16.0 6/30/79Sta. Roae-Tacna 5.8 - 1'6/76

Sub-total 121.3T_

Added to the origial projectBalnearios-Barranco 7/80Cable Entrada Perahing 7/80Cable Barsi-Paudo b/heyopaapa-laica _

Sub-totalTotal T T.

2. Substations2.1 Substations 220/60 kV

InCle In the original. prc etSan Juan - phese I 85 2/28/76 1/76Q uavarria c/ 2/28/76 9/76Be te 12/31/77 2/80RafineriA de Zinc 75 12/31/77 9/80San Juan - Phase II c/ 6/30179 12/82Balnearios 2T) 6/30/79 12/82

Total _6

2.2 Substations 60/10 kvIncldd in the original projectVila Maria 25 2/28/76 6/75Illla El Salvador 15 2128/76 11/75Villa Chavarria c/ 2/28/76 3/76Oqu-do cJ 6/30/76 3/76Carretera Central 75 d/ 6/30/78 6/78Puente 25 6/30/78 9/78Maag 25 6/30/78 9/84Jorge Qoavez 25 6/30/78 a/Santa marina c/ 6/30/78 5781Pando 75 12/31/78 b/

25 12/31/78 7783Orrillos 25 12/31/78 a/

San Isidro 25 6/30/79Tacno 25 6/30/79)irones 25 6/30/79

Sub-total

Added to the original projectBerramn 3/80

oasica b/Sub-totalTotal e/

- 16 - AIM4X 2NWI-f 2

Transformr Capacity (MYA)/Iines Cnpletion Datelengh circuit-km At Actu

Units 9R Actiial3. Distribution works

Included in the ortzinal proJectTraiisformers (lUU0762M2T Y)Unts 2,335 2,356 12/Mthderground cable (10 kV) km 775 773 12/81Overhead lines (10 kV) km 228 233 12/81Lou voltage lines (220 kM) 1Um 20 255 1V76House connections units 175,000 191,241 12a/)Meters acquisition units 200,000 202,677 6/30/79 12/80

4. Auiliar Senr(ces Expansionlncluded in the oriinal projectCoeaateation an control work 6/30/79 9183Conputing and Microfilming equipnent work 12/82Offtce, tr:isportation and shop

equipment work 12/52

5. ConsultantsIncluded in the original projectComanication and control:- Contract signing with consultants 12/31/76 7/77

Planning standard and hot-linemaintenance for overhead lines f/

- Sign contract with cansclltant 11/14/78 4/6/79- Discuss reports and implenentation

achedule 12/31/78 3/82

Added to the oriinal projectConsultant for the study ofprccuretesnt practices:- lig contract with consultant 12/28/78- Sibmit draft final report 10/26/79 /

6. Trai4ngIncluded In the original projectTraining in bot-line maintenance

of overhead lines 3/30/79 N.A.

B. Technical Assistance to the GovernmentIncluded in the original projectPower market study:- Sign contract with consultant 3/30/77 10/78- Subit draft final report 3/30/79 8/81Hydropower assessment study:- Sign contract with consultant 3/30/77 4/77- Submit draft final report 3/30/79 6/79Organization studies:- Sign contract with consultant 3/30/77 10/78- Submit draft final report 3/30/79 N.A.MasteT plan,Thermal station catalogue -- Sign contract with consultant 3/30/77 10/78- Submit draft final report 3/30/79 2/80Optimization -- Sign contract with consultant 3/30/77 11/78- Sulbit draft final report 3/30/79 9/80Other components -- Sign contract with consultant 3/3(i/77 6/78- Sigp draft final report 3/30/79 VA.

Tariff studies:Sign contract with consultant 1/31/77 7/81Submit draft final report 12/31/77 1/83

Training of sector personnel 3/30/79 N.A.

a/ Excluded from the project.E/ It hald not been completed by the tius Electrolm prepared its PCR.

/ Substazion expansion without addirg transforwr capacity.d/ This substation was not included in the detailed list of project conponents, at the sase tie BarsS substation

does not appear in the Isplesentation Schedule. herefore, it was assuamd that Carretera Central should appearInstead of Barsi.

e/ Electrolima did not provide information on the actual transformer capacity by substations and the lergth ofindividual lines.

fT The scope of the study expanded to include planning, 4esi8n, operation and smintenance of the distributionsystem.

g/ End of first phase. Electrolima decided to cancel second phase.

_ 17 -ANNEX 3

PERU--

FIFTH POWER PROJECT (LOAN 1215-PE)

Project Cost Estimates(US$ million)

Appraisal Estimate Current EstimateLocal Foreign Total Local Foreign Total

Part A

Transmission (220/60 kY) 17.3 10.5 27.8 12.7 11.5 24.2Distribution (10 kV andbelow) 49.2 8.5 57.7 48.5 7.8 56.3

Auxiliary services 7.8 7.4 15.2 9.8 12.1 21.9Consulting services andtraining - 0.3 0.3 - 1.4 1.4

Estimate for work underconstruction - - - 1.5 - 1.5

Total direct costs 74.3 26.7 --101.0 72.5 32.8 105.3

Physical contingencies 4.8 1.7 6.5 - - -

Price contingencies 22.8 5.0 27.8 - - -

Total Part A 101.9 33.4 135.3 72.5 32.8 105.3

Part B

Studies 0.1 1.4 1.5 -a/ 2.6 b/ 2.6Physical contingencies - 0.2 0.2 - - -

Price contingencies - 0.3 0.3 - -

Total Part B 0.1 1.9 2.0 - 2.6 2.6

Total Project Cost 102,0 35.3c/ 137.3 72.5d/ 35.4e/ 107.9

Interest during constructionPart A 6.1 3.5 9.S - - -Part B - 0.2 0.2 - - -

Total financing requirements 108.1 39.0 147.1 72.5 35.4 107.9

a/ Not available.E/ It does not include the part of the cost of the optimization study financed

by GTZ.c/ The appraisal estimates includes indirect foreign exchange costs. It was

not possible to estimate these indirect foreign cost for the currentestimates.

d/ This cost is underestimated due t. -he method of inventory valuation- employed by Electrolima (para. 3.lC,.e/ Figures supplied by Electrolina were ijusted using bank's disbursement

data. This figure includes US$3.7 m_ 'on of IDC financed from the loanproceeds.

-18- ANNEX 4

PERU

FIFTH POWER PROJECT (LOAN 1215-PE)

-Actual and Forecast Loan Allocation(in current USM)

Category Original Actual

1. Imported equipment and materials 27,100,000 27,639,123.42

2. Consultant's services for Part A.4and 5 of the project 300,000 1,478,393.70

3. Consultant's services for Part Bof the project 1,900,000 2,551,373.24

4. Interest and other charges on theloan accrued on or before April 4,1979 3,700,000 3,700,000.00

5. Unallocated 3,000,000

36,000,000 35,368,890.36

t

-19 - ANNEX 5

PERU

FIFTH POWER PROJECT (LOAN 1215-PE)

Actual and Forecast Disbursements(in millions of current US$)

IBRD Flscal Actual Appraisal Actual Disbursements

Year and Total Forecast as a percentage ofSemester Disbursements Appraisal Forecast

19771st. 0.4 3.4 12

2nd. 3.4 8.2 41

19781st. 6.4 14.1 45

2nd. 9.5 21.0 45

1979;ffi. 12.4 27.4 45

2nd. 15.3 32.0 48

19801st. 17.7 36.0 49

2nd. 21.0 - 58

19811st. 23.8 - 66

2nd. 26.8 - 74

19821st. 28.7 - 802nd. 31.0 - 86

19831st. 32.9 - 91

2nd. 35.4 - 98

- 20 -

ANNEX 6

PERU

FIFTH POIER PROJECT (LOAN 1215-PEI

RATE OF RETURN (Actuall

Investsent Increuental Incre ental Revenues Connection BenefitsM+) Rate of1/ Purchased 0 & N fron Fees 5/ Costs I-) Return

Power 2/ 3/ tariffs 4/

1 1975 759 0 0 0 0 -759 0.0342 1976 917 234 0 256 241 -6543 1977 1004 302 0 398 307 -6014 1978 905 604 0 582 310 -6175 1979 603 627 0 756 301 -1736 1980 700 770 136 1089 378 -1397 1981 867 1349 220 1915 419 -1028 1982 2183 1721 263 2385 397 -13859 1983 1721 263 2385 401

10 1984 1721 263 2385 40111 1985 1721 263 2385 40112 1986 1721 263 2385 40113 1987 1721 263 2385 40114 1988 1721 263 2385 40115 1989 1721 263 2385 40116 1990 1721 263 2385 40117 1991 1721 263 2385 40118 1992 1721 263 2385 40119 1993 1721 263 2385 40120 1994 1721 263 2385 40121 1995 1721 263 2385 40122 1996 1721 263 2385 40123 1997 1721 263 2385 40124 1998 1721 263 2385 40125 1999 1721 263 2385 401

1/ Annual construction expenditures at end 1975 prices. (Annual inilation rates used for1975-82 are, respectively: 24?, 44.7Z, 32.4?, 73.7%, 66.7?, 60.8X, 72.7X and 729Z%.

2/ Equal to increuental sales (ONhI over 1975 level adjusted for losses(l10) timesthe annual average tariff at end 1975 prices.

31 Incresental costs over 1975 level at end 1975 prices.4/ Incremantal sales times the annual average tat.f at end 1975 prices.51 Value of connection fees at end 1975 prices.

ELECTROLIMA

FITH PONER PROJECT (LOAN 1215-PE)

Performance Indicatorss (1975-1902) a/

---- 197----197 -- 19 -- - 78 - --- 19------ ---- 19 ----- --- 19t------ --- 1982----SAR Actual SAR ktual SAR Actual SAR Actual SAR Actual SAR kttual SAR kctal SAR Atual

iarket Penetration Indicators

Total number of custogersEEA concession zone Ithousands) 590 575 e20 61B 680 627 720 654 770 680 704 731 762

Pueblos ,ovenfes 74 94 100 98 135 117 182 131 220 148 1&* 172 190Percent of oonulation served in

EEA concession zone 82 N.A 83 l.A 84 82 85 0 86 I.A N.A I.A N.A

Efficiencv indicators

Muaber oi enulovees 2500 2413 2550 2733 2625 2775 2700 2867 2800 2921 2M3 3076 3113Custosers/emelovee 232 22t 243 226 259 226 267 228 275 233 235 238 245Sales (6ob) 269b.0 2663.4 2922.0 2858.5 3165.0 2962.3 342B.0 3000.9 3714.0 3147.5 4024.0 3392.7 3819.9 4047.068* soldiesplovee 1.08 1.02 1.15 1.05 1.2t 1.07 1.27 1.05 1.33 1.08 1.13 1.24 1.30Svstee losses in percent 9.0 10.3 9.0 9.5 9.0 10.1 9.0 10.5 9.0 10.1 10.5 10.3 10.6

Financial mndicators

Contrlbution to expansion ratio bt 0.30 t.A 0.32 0.11 0.45 0.49 0.44 0.26 0.41 -0.02 0.65 -0.71 0.27 0.20Rate of return (excluding oublic domain assets

from the rate base) cl 0.078 0.092 0.077 0.121 0.091 0.077 0.091 0.088 0.083 0.120 0.071 0.067 0.048 0.032Debt'eguitv ratio dl 0.47 0.61 0.43 0.68 0.38 0.54 0.34 0.63 0.30 0.55 0.25 0.40 0.22 0.35Debt service coverace 1.5 1.5 1.6 1.1 2.1 1.2 2.2 0.9 2.1 1.2 2.3 0.9 1.9 2.4Receivables fors customers at vear-end

as a percent of the vear s sales. 16.5 18.4 16.7 20.0 16.7 17.2 1.7 14.9 16.7 15.7 20.0 21.1 22.5

al Drl4inal BAR's lioures differ slaohtiv irom the ones presented here due to some chadnaes introduced intoe financial stateents $see footnote on Annex 10i.

bi Ratio of oross internal cash generation less variation of workhna capital other than cashto the averaoe construction expenditures fo the Previous. current and followina Year.

c, Ratio Ot income before interest to averaae revalue net fixed assets in operation.di Ratto oi tong-tera debt to e4uitv Plus debt.

ELECTROLIMA

FITH POIER PROJECT (LON 1215-PE)

ktual and Estimated Income Statewt (1975-t"821

(millions of current soles)

--- 1975 ---- --- 1976---- --- 1917---- --- 197 ---- --1979----- ----1J910----- --- 19911------ ---- 19812---SAP Actual SR ktual SAR Actual 9SR Actual SAR ktual SAP Actual SAR Actual BAR Actual

Energy salesl6wh) 2696.0 2663.4 2922.0 295.5 3165.0 2962.3 3429.0 3000.9 3714.0 3147.5 4024.0 3392.7 3819.9 4047.0

Average Revenue per kNh Icents of soles) 123.5 121.4 137.5 158.0 159.9 222.0 175.8 435.6 197.6 725.1 195.1 1049.9 1941.1 3492.8

Sales revenues 3329.6 3233.2 4019.0 4515.8 5060.0 6577.5 6028.0 13071.0 6968.2 22823.2 7851.6 35618.3 74146.9 141353.9Other revenues -36.6 51.0 0.0 68.4 0.0 116.2 0.0 457.7 0.0 751.9 0.0 720.5 2090.7 2663.2

Total operating revenues 3293.0 3284.2 4019.0 4584.2 5060.0 6693.7 6028.0 13529.5 6968.2 23575.1 7051.6 36330.8 76237.6 144017.1

Operating Costs

Operations and aaintenance 1452.0 1539.0 1744.9 1950.7 2024.0 2567.9 2347.8 3961.4 2676.5 7060.2 2977.1 1306.4 2739.5 4839.4Purchased power 602.0 538.8 739.5 1204.7 991.7 1819.6 1294.3 5011.4 1622.5 7471.1 2031.1 11434.3 2759.9 623328.8Tariff compensation funds 286.0 1056.8 2096.2 5=2.0 9A41.9Depreciation of company plant 333.0 340.8 418.0 422.6 540.0 725.9 633.0 1133.0 741.0 2297.2 95.0 4025.3 6673.6 11739.1DeprKiation of public domain plant 103.0 167.4 239.0 206.1 332.0 359.6 410.0 587.2 502.0 1045.2 609.0 1069.2 252.3 5012.0Contribution to expans,on 100.0 100.0 100.0 70.0 100.0 70.0 100.0 100.0 120.0 150.0 120.0 m.0 338.0 507.0other 32.2 32.2

Total operating costs 2670.0 269.0 3241.4 3754.1 3987.7 5542.9 4775.1 11085.8 S662.0 19070.5 6593.0 32456.4 704".5 137941.4

Net income before interest and taxes 623.0 598.2 M.6 930.1 1072.3 1150.0 1252.9 2443.7 1306.2 4504.6 1257.8 3692.4 5739.1 6075.7

Taxes 26.0 33.0 23.0

Net income before interest 623.0 598.2 777.6 830.1 1O46.3 1150.8 1219.9 2443.7 1203.2 4504.6 1257.9 3682.4 5739.1 6075.7

Interest payments 443.0 472.7 485.0 755.7 517.4 1139.7 552.7 2470.0 579.5 3520.9 591.0 3579.4 4274.8 3245.9Lns: Interest charged to construction 0.0 0.0 -9.0 0.0 -10.0 0.0 -12.0 -42.9 -14.0 -35.2 -16.0 -23.3 -03.3 -454.0Aortization of financing espenses 15.2 15.2 0.0 12.2 15.0 9.3 15.0 9.3 11.0 0.0 0.0 0.0 0.0 4.0lonetary losses 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 347.9 0.0 107-. 4.4 282.2

total non-operating expenses 458.2 487.9 477.0 767.9 522.4 IIU.0 555.7 2434.4 576.5 3833.6 565.0 363.9 419S.9 3074.1

Net Income 164.8 110.3 300.6 62.2 523.9 2.0 664.2 7.3 706.7 671.0 692.0 10.5 1543.2 3001.6_ ___ ____ _ __ _ ___ __ _ ___ ___ ___ ____ __ ___ ___ __.

ELECTOC LI1A

PITH PIPER P80EC3 (LOU8 1221541

Actual and Estimated Saucen and Applications of Fatl,51ds 192

(offlions of cwrrent soles)

----73- -976---- ----977 e ----- 7--- 5979--- ---2980- - -- 8---- -29 ---8 Actual 80 ActuoS BA Atual 86 Actual SAO Actual So Acrttul SO0 Actual SA Actual

ltternal cash qenm,ttnn

bRt lnuco, beorc 3aterant and tiane 623.0 598.2 77' 6 930.2 1072.3 1150.0 1252.9 2443.? 5306.2 4504.6 1257.6 368.4 5739.' 6075.7Depreciation - Coray 333.0 340.8 418.0 422.6 540.0 72.8 633.0 it $0 782.0 229. 2 856.0 40253 663.6 51738.1

PO pI I dunin 183. 167.4 239.0 206.2 332.0 359.6 450.0 587.2 502.0 1045.2 609.0 5869.2 295. 3 5012.0Contribution to emspuion 500.0 100.0 100.0 70.0 500.0 70.0 100.0 200.0 120.0 150.0 120.0 22.0i 33. 07.0

Total 6259. 5T206.4 15-4. 05-22.8. -20-44-.3 2306. 2395-,9 -4,262,3.9- 26.2 .1987.0 282. 901905105. 23332.8

Len: awiaelatton 3M.8 358.4 485.4 608.0 457.2 829.2 547.5 2074.3 682.7 328.8 671.3 7943.7 4059.1 6772,5Internt choequd to operation A43. 9 472.7 477.0 75.7 307.4 2238.7 540,7 2427.2 J 565.5 348. 7 565,0 356. 4191.5 2791.q

ToteS debt nwrice 4, 83. 6.4 13.7 946 17. 2082 40.4 528. 6755 233 12499.8 8249.6 9564.4RiMedesd 0.8 0.0 338.6 0.0 442.0 0.0 529.0 0.6 640.0 0.0 742.0 0.0 0.0 0.0Tuna, 0.0 0.0 26,0 33.0 23.0

Total financial cOape 04a 83.5 10.0 J363.7 1432,6 2967.9 1660,2 4500.4 2901.2 6775. 2978.3~ 2499.8 0249.6 9564.4

Not ant. ca9b genationasmcl.Cnn.Fmns 397.2 37.3 233,6 505.1 612.7 338.2 735.7 -237.5 758.0 12221.5 864,5 -167.9 7453.4 23768.4Conuntion fens 242.0 257.4 280.0 290.0 320.0 522.7 360.0 78.9 420.0 1291.9 460.0 2658t.2 4900.9 8079.4

Net internal camk gunuat:.n 63, .7 513.6 455.1 932.7 85.0 509. 7 541.4 5268.0 2503.4 1324 5 960.4 12360. 3 e1047.8

Isrrmauq2068 1".u 12254PE 0.0 0.0 206,0 0.0 477.0 527.3 675.0 1242.2 212.0 1473,4 0.0 1565.6 1840.7 203.2log8 Luau 20t8-ft 0,0 0.0 0.0 0.0 0.0 0.6 0.4 0.0 0.0 0.0 0.0 0.0 0.0 359.9880I80 Loa 298.0 500.0 N0.,0 200.0 200.0 200.0 550.0 500.0 2900 0.0 400.0 0.0 0.0 0.0Deutsche Oink 6.5. 0,0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 54.62. 0.0 0.0Bonds M0L. 227415 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.0 0.0 0,0 457.9 527.2 0.0Santa Ro. Thereat Plant 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.01 0.0 0.0 0.0 0.0 12463.7

Total 200.0 500.0 906. 0 300.0 677.0 717.3 825.0 1342.2 472.0 2473.4 400.0 7446.1 2387.9 5566.8

Cuaptal coutr:bationsnBovarnet contrmbustossa 50.3 28. 65.0 65.0 287.5 94.2 407.5 672.8 282.5 790.0 39.b 927.2 52.3 59.58,vlowes cnntribntsons 200.0 0.0 250.0 0.0 300.0 0.0 360.0 0.0 420,0 0.0 520.0 0.0 0.0 0.08EUCTR2WA 0.0 0.0 0.0 0.0 0.0 0,0 0.0 ,0 0.0 0.0 0.6 0.0 1297.2 2141.0

Cap2i2rtsunO cnto duies0.0 0.0 0.0 0.0 0.9 00 0.0 6.0 0.0 0.0 0.9 605.5 826.358.

tontal 22. 8.3 35. 0 65.0 587.5 94.2 767.1 672.8 172.5 790.1 9t2.6 1532.o 2176,? 7980.6

total Souce, 957.5 755.0 1734.6 Z20. 2196.2 1661.5 2187.8 2560.4 2352.5 4766.9 2637.2 "P3. : 16924.9 454892

Constrtctims npipdturn,

FP th Powt Projuct I/ 906. 0 602.0 5027.6 5240.4 2563.1 2692.7 282.6 2289.5 76. 9 2593.i 0.0 4958.8 851.6 23159.0Santa tun Tbero2l Plant 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5601.1 0.0 230.0 0.0 250. 7 25007.3lntwrest charged to cuonstruction 2/ 0.0 0.0 0.0 0.0 10.0 0.0 22.0 0.0 14.0 0.0 56.0 0.0 0.0 0.0

Total constracticn - cmpanye 906.0 602.0 2035.6 1598.0 2573.7 1693,7 103.6 2289.5 2379. 0 2593.4 22516.0 4918.8 10562.3 44166.3Construction by d.eelupemn 200.0 0,0 250.0 0.0 300.0 0.0 260.0 0.0 430.0 0.0 52.0 0.0 0.0 0.0

Total constroettuu ex,peditwes It6. 602.0 1283.6 2100.0 5873.7 56913.7 2197.6 2209.5 2809.0 2593.4 2836.0 4928.8 24102.3 44166.3

Other eanPacraun lincreasl I inuswal sec. food. -203.0 '-60.0 -00.0 -60.0 -50.0 -50.0Incream in 4on-talsh wekios capital t28.0 180.1 59.0 323.9 128.0 21.8 96.0 -34.4 101.0 255.5 167.0 323,. 0 6929.3 14679. 7San Wil.;n (deficitl -173.5 84.0 450.0 -304.0 274.5 -25.1 454.2* -845.0 -507.5 2l7.0 -M5.9 258.9 2393.0 -9602.9Others I/ 0,0 5195.3 0.0 -299.8 0.0 -28.9 0.0 1155.5 0.0 -66.8a 0.0 -2697.7 -239.7 -37539

Total othr aw -00. 690 490 -279.9 322.5S -32.2 490.2 270.9 -456.5 2173.3 -5"98, 5020.3 6762.6 t,22.9

Total uia of fondas 957.5 752.0 2734.6 820.1 2196.2 2661.5 2687.8 256. 4 2352.5 4766.9 2627.0 "9439, 30924.9 45089.2na. a. . :ftxStltatn *at;s*,Scxs. -at,; t...9- I-an ... nhai.. t."

I/ Actual figur"s inlude expenaditusres in other 41strib,utiosa works. 1~/The ectuni figure. of IDC are 1includedl in the proj¶eets./ InalCldes dividenAS, variation in social security funuds. Figures wouald

be adjnusted wben informationua sndr preparatiotn by Rlectrolimna arrivest.

ELECTROLlM~A

FITo nv10R PROJEcT ilOAfi 1215-PE)

Actual and Estj&ated Balance Sheet at vear-end I1R15-1982,

(uillions of current salens)

-- - --' -19 1---- -- 19 T---- -- 1977 ---- ---l978 ------ -- ~1979 - --- ---480---- ...9 81 ------krtual SAO Atual S4R Actual 5AR Actual SMR Actual SO? Actual SM Actual 560 Actual W8 OctaLl

ASSETS

Utllittu I'lat C.Ann 9904.0 14466.0 10150.o 62. 13479.0 17374.0 34250.5 22911.0 47645.,3 WM5920 06311.7 Z0451.0 126i244.2 30053.2 34837 2.9)PT ic domain 2977.0 4756.0 3279.0 5935.0 4566.0 7353.0 11891.6 90621.0 12521.5 11024.0 22552.5 15332.0 40161.0 19,092.9 Io0"96.4

Work in pfoqre$6 83.0 15.0 869.0 633.6 1413.0 585.1 1912.R 308.? 2292.0 56'.9 27312.7 499,q 3054.3 9618.5 45314.2

13717.0 29915.0 14290.0 2383.6 19458.0 273j223 48054.9 32819.9 62458.0 58171. 916021.9 44774,9 W40n5.5 416280,.6 502718.5

Less: accuouTated depreriation-co.panv 3338.0 500.0 3656.0 5925.0 5018.0 1057,0 12710.6 8396.0 13753.b 0977.~' 25284.6 11831.v 46622-.1 1219124 14032.1-puiblic 40amai 83.0 1419. 0 980,0 !80.0 1964.0 232.0 5107.9 293.0 5671.7, 319. 11012,T 4134.0 29560. 559L6.2 60915.6.

lotml accuauloted dreprouatono 421.0 6425.0 4554.0 7725,u a990. a 9369.0 17818.4 11349.0 19427.3 13727.0 36197. T 16365, 0 6690.8 ISM!o. 201,40.7

met ntlittn slant 949u.0 13550.0 9742.0 1548.u 2 2478.0 179413 1236.5 20832.q 43031.5 24450.9 55404n220.0 MM 42-014.7 231160,1 301542.8

IneenteentnLoan to ELECTROPERO 0.0 1280.0 1280.0 18,.,) 12264.0 1200.0 1204.0 28,10. 2264.0 I28u.u 12*4.0 i 290." li 64.0 1137.6 1312.3Security sand fixed deposits 2.0 2.0 2.0 2.0 1,0 2,0 4.6 2.0 0.1 2.0 56.2 2.,A 1.6. 18.6 31.0

Total investments 2.0 1282.0 1282,0 1282.0 1267.0 1282.0 1268.6 1282.0 12210.1 1282.0 132.1 1283.0 1280.1 1156.2 0558.3

Current assaets.Cash and banks 72.0 71.0 106.0 71.0 283.0 288.0 266.0 142.9 459.2 234.' 847.1 0.0 lIla.9 603. 5923.0Receivables 515.0 548,8 808.0 614.0 1230.0 857.0 2902.4 1020.0 3175,4 1186.0 5606.0 1342.0 8161.4 28555.2 46304.5llat..'.als and sappliet 182.0 233.0 354,0 266.0 625.0 326.0 913.8 348.0 154. 405.41 2549.5 472.0 4643.? 9552.7 275;7.?oRhKe s 0.0 0,0 4,0 0,0 282.0 0.0 A44. 0." 73.6 0.0 287.7 0.0 815.4 1745.5 84. 7

Total current aseets 78.0 85.0 1264.0 MIA1, 2M0. 2461.0 3286. 222410.2 5272.6 I825, 9286.3 1822..o 16003. n IBM0.] 70614.2

Deferred debitsIinaeortmzaed debt dascoent 9 expenesm 56.0 40.8 46.0 40.8 46.0 21.8 31.3 10.8 18.4 -0.2 16,7 -0.7 6.0 2I., 67.2

TOTAL. ASSETS 2/ 10342.0 15724.8 12334,0 11772.4 16031.0 20112.2 34822,7 24245~.9 49612.6 27558,4 6608. 7 31303.7 120364.4 268292.6 373182 5

LIAILItlIES 48 CAP25TAL

Share capital 3051.0 3821.3 3103.8 4332.3 6021,0 5198.8 15381.4 63136.9 22302.8 7529.4 16275.1 9093.0 42884.1 24828.2 I"Al3.21Public dosaun capital 2094.0 3337.0 2379,0 4235.0 2627.0 5041.0 2944.2 6209.0 359.2 1274.0 8373.9 8598.0 15410.0 37519.4 60620.5Rem ve. for exciance losses -779,0 395.0 -2392.0 89O, -4437.0 2385.0 -4200.2 1885.0 -232.8 242.0 0.0) 2906.0 0.0 0.0 0,0free reserve sad enailue 1.0 1.0 116.3 0.6 78.2 82.5 10.8 207.7 17.6 274.4 643.7 215.2 44.2 0595.1 1044.I

Total capital and resernes 4367.0 n55. 3 4207.3 9362.9 4271.2 12707.3 04242.3 24538.6 15651.7 27491.8 25292.7 20812.2 58539.2 287456.31 1956,7.8

L004-twrs debt 4998. 6412.2 6594.0 1092.8 9267.0 7312.6 16794.6 1590.2 26597.2 7379.4 5893.1 7208.2 18151.2 52457.2 207773.2Lesst current portion 399,0 485.4 533.8 457.2 842.0 547.5 2616.3, 682.7 3492.1 672.3 39r2..6 724,0 368.1 5494.9 15617.9

Piet wmq-tefs debt 4592. 6286.8 606J.0 663.6 8425.0 6765.2 25228.3 6907.4 23206.1 6700.2 26970.7 6394.1 Mt06.2 46962.3 92159.3

Current liabilities

Current pWtion of long-ter* debt 399.0 485.4 533.0 457,2 842,0 547.5 1676.3 602.7 5492.2 6'2.3 3982,6 724.0 3602.1 5494.9 15617.9Dmendeods payablf 22.0 115.8 4.0 138.2 20.0 138.2 55. 138.2 0.7 13182 0.0 88.21 0.0 0.0 0.0kccount 869162e 569.0 505.0 829.7 645.0 1384.8 710.0 2345.5 819.0 4273.8 4132.0 5234.2 1045.0 5949.6 24585.0 34745,0Overdraft 334.8 507.5 28.0 57.5 686.0 0.0 174.9 0.0 2013.2 0.0 1983.3 22.2 269.0 2070.8 114IQ3.1

total current laabalitae 21213.0 2673.1 1652.7 1257.9 2932.8 1395.1 4851.8 1639.9 "947.7 1700.5 21299.9 1818.4 98W.7 22250,1 62045.q

Deferred credits

Fends Ow public dosin naetalatiaos -202.0 34.0 129. 280.0 0.8 429.0 0.0 604.0 8.0 2096.0 0.0 1593.0 2393.5 5854,5 6689.4Tumnds for social security b80efnts 273.0 276.0 285.0 336.0 402.0 406.4 710.3 476.0 1376.1 526.0 2624.4 576. 9 4264.9 6468.8 1322.11

Total deferred credits 71.0 10t.0 414.0 560 42.0 844.0 710,3 1260.0 1316.2 1616.0t 2624.4 2169.0 1058.4 22525.3 2M2.5M

TOTAL. L08AJ1L7T118 M CAPITAL. 2 10342.0 15724.8 12334.0 27792. 1*032.0 20712.1 14822.7 24245.9 49612.6 '7558.4 6608E.' '1303,.7 112434.4 26419M. 1M702.15#n* S* - *n* f."On .- -... tnc tz..- - .... 4t-u. --. a--

The oruigu safe figre" differ slightly from1 the ones presented here. as it was juecessairyto introduce chages due to etvror In sme additions in the three statenents.

- 25- ANNEX 11Page 1 of 2

PERU

FIFTH POWEP PROJECT (LOAN 1215-PE)

PROJECT COMPLETION REPORT

Major Covenants of the Loan and Project Agreement for Loan 1215-PE

1. The Loan Agreement obliged the Government to:

(a) Take all steps necessary on its part to enable Electrolima to

adjust its tariff as specified in Section 4.05 of the Project

Agreement.

(b) Carry out Part B of the Project employing consultants whose

qualifications, experience and terms and conditions of employment

are satisfactory to the Bank (Section 3.02).

(c) Maintain records adequate to record progress of Part B of the

Project and furnish to the Bank all information the Bank shall

reasonable request (Section 3.04).

2. The Project Agreement obliged Electrolima to:

(a) Furnish the financial statements and its audited report not later

than four and six months respectively, after the end of the fiscal

year (Sections 4.02 and 4.03).

- 26 - ANNEX 11

Page 2 of 2

(h) Revalue once every fiscal year, its fixed assets in operation

(including public domain assets), in accordance with methods

acceptable to the Bank (Section 4.04).

(c) Take all such steps as shall be required to provide funds from

internal sources equivalent to not less than 30% in 1976 and 45%

thereafter, of the average annual capital expenditure during the

fiscal year concerned plus the fiscal year immediately preceding it

and the fiscal year immediately following it. Likewise,

Electrolima shall furnish, not later than April 30 in each year,

the results of applying the test stated above for the previous

fiscal year, and on February 28 and August 31 of each fiscal year,

the projected results of such test for the current fiscal year

(Section 4.05).

(d) Seek prior Bank's agreement to any long-term debt, if by such

incurrance, its gross internal cash generation is less than 1.5

time the maximum debt service requirement for any succeeding fiscal

year; and to seek the Bank's agreement as well to any short-term

debt if the aggregate of all short-term debt is larger than

one-sixth of the operating maintenance and administrative expenses,

excluding depreciation and other non-cash expenses (Section 4.06).

(e) Not to pay shareholders dividends of more than 8-1/2% per annum of

the par value of their shares.