Document of The World Bank FOR OMCIAL USE ONLY Report No. P-4020-co REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO USt171 MILLION TO EMPRESA DE ENERCIA ELECTRICA DE BOGOTA WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE BOGOTA DISTRIBUTION II PROJECT November 4, 1985 This document ha a resticted distribution ad ny be used by recipients oly in the performance of their offi dudtes. hls contebt -y not otherwise be disdosed without World Bank autbhoriatom. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank
FOR OMCIAL USE ONLY
Report No. P-4020-co
REPORT AND RECOMMENDATION
OF THE
PRESIDENT OF THE
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
TO THE
EXECUTIVE DIRECTORS
ON A PROPOSED LOAN
IN AN AMOUNT EQUIVALENT TO USt171 MILLION
TO
EMPRESA DE ENERCIA ELECTRICA DE BOGOTA
WITH THE GUARANTEE OF
THE REPUBLIC OF COLOMBIA
FOR THE
BOGOTA DISTRIBUTION II PROJECT
November 4, 1985
This document ha a resticted distribution ad ny be used by recipients oly in the performance oftheir offi dudtes. hls contebt -y not otherwise be disdosed without World Bank autbhoriatom.
1 meter = 3.281 feet (ft.)I square kilometer (km2) = 0.386 square mile (mi2)I cubic meter (m3) = 35.315 cubic feet (ft3)I barrel (bbl) = n..159 cubic meteri kilogram (kg) = 2.206 pounds (lb)I ton (t) = 1,000 kilogrami kilowatt (kW) = 1,000 watts (W)I Joule (J) = I Watt. second = I Ne-;eton. meter
= 2.3988.1I-4 kcal = 9.478.1f-4 Btu
I ton oil equivalent (toe) = 42.2.109 JI kilowatt-hour (kWh) = 3.6.ln6 J1 kilovolt (kV) = 1,000 Volt (V)1 kilovolt ampere (kVA) = 1,000 Volt ampere (103 V4)I Hertz (hz) = I cvcle per second
I/ The Sl (Systeme International) and its multiples are used wheneverpossible in this report.
_ P (Peta) - 1015 (quadrillion)E (Exa) 1018 (quintillion)
CONPES Consejo Nacional de Politica Economica y Social(National Economic and Social Policy Council)
CORELCA Corporacion Electrica de la Costa AtlanticaCVC Corporacion Autonoma Regional del CaucaDNP Departamento Nacional de Planeacion (National Planning
Department)EAAB Empresa de Acueductos y Alcantarillados de BogotaEEEB Empresa de Energia Electrica de BogotaEMCALI Empresas Municipales de CaliEPM Empresas Publicas de MedellinFEN Financiera Electrica Nacional
(National Electricity Development Bank)FONACE Fondo Nacional de DesarrolloICEL Instituto Colombiano de Energia ElectricaIDB Inter-American Development BankISA Interconexion Electrica S.A.JNT Junta Nacional de Tarifas (National Tariff Board)KfW Kreditanstalt fuer WiederaufbauUNOP United Nations Development Program
FISCAL YEAR = CALENDAR YEAR
.
| This document has a restricted distribution and may be used by recipients only in the performance oftheir ofricial duties. Its contents may not otherwise be disclosed without World Bank authorization.
COLOMBIA
BOGOTA DISTRIBUTION II PROJECT
Loan and Project Summary
Borrower: Empresa de Energia Electrica de Bogota (EEEB)
Guarantor: Republ:.c of Colombia
Amount: US$171 million equivalent
Terms: Repayment in 17 years, including 4 years grace, withinterest at the Bank's standard variable rate.
ProjectDescription: Sectoral Objective: The Bank's principal objective ln
the Colombian power sector is tc achic-ve greaterefficiency in the operation of t:he country's electricutilities. The substantial ene-rgy losses prevalentthroughout the sector constitutet cone of the majordeficiencies in the current operations of these utili-ties (EEEB's energy losses have reached almost 23X ofgross generation). Improved subtransmission/distribu-tion systems and theft prevention measures representeffective methods for reducing such losses. SinceEEEB is one of the largest power utilities inColombia, improved efficiency in EEEB's distributionsystem would have a major impact on total lossesexperienced by the sector.
Project: The principal objectives of the project areto achieve greater efficiency in EEEB's operations andto extend electric service to a larger segment ofBogota's population. The project consists mainly ofthe 1985-90 time-slice of EEEB's distribution andsubtransmission program, including the expansion andimprovement of Bogota's network, studies to improveEEEB's distribution and operational planning, atraining program for EEEB's staff and a program forreducing the system's losses. Around 240,000 newcustomers will be connected to the power service,1,100 KVA in subtransmission substations will bebuilt, and about 10 km of 230 kV and 75 km of 115 kVlines will be constructed, together with 350 MVA indistribution substations and 1,000 MVA of distributiontransformer capacity and more than 1,400 km of newprimary and secondary distribution circuits.
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Risks: No technical risks are anticipated although timelycompletion of the project will depend upon EEEB'sproject management ability. Establishment of aproject coordination unit and implementation of atraining program for the Improvement of EEEB'sorganization and management are expected to reducethis risk.
Estimated Cost: Local Foreign Total-- US$ million-
Appraisal Report: Report No. 5506-CO, dated May 28, 1985
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
REPORT AND RECOMMEI,DATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS
ON A PROPOSED LOAN TOEMPRESA DE ENERGIA ELECTRICA DE BOGOTA
WITH THE GUARANTEE OFTHE REPUBLIC OF COLOMBIA FOR THE
BOGOTA DISTRIBUTION II PROJECT
1. I submit the following report and recommendation on a proposed loanto Empresa de Energia Electrica de Bogota, with the guarantee of the Republicof Colombia for the equivalent of USS171 million to help finance the BogotaDistribution II project. The loan would have a term of 17 years, including 4years of grace, with interest at the Bank's standard variable rate.
PART I - THE ECONOMY
2. An economic mission visited Colombia in July 1982 and its report(4444-CO) was distributed to the Executive Directo.s in August 1983. Amission to review the external sector and agriculture visited Colombia duringApril/May 1983, and its report (4981-CO) was distributed to the ExecutiveDirectors in April 1984. Macroeconomic policies were also reviewed in thePresident's Report (P4055-CO) for the Trade Policy and Export DiversificationLoan of May 2, 1985. Country data sheets are presented in Annex I.
A. Background
3. The Colombian economy has made considerable progress since theearly 1950s, evolving from a largely agricultural and rural base, integratedand industrialized, into one that is more open. Tte growing economicactivity, rapid rural-urban migration, increased p.Lrticipation of women inthe labor force, and expanded public services have contributed to reductionsin poverty and improvements in income distribution. Financial and capitalmarkets have evolved pari passu with the growing needs of the economy, andthe country has become an active participant in international capitalmarkets. The state enterprises are few, follow adequate pricing policies,and many have some form of private sector participation. The country'senergy balance has been changing in recent years and the country is expectedto become a net petroleum exporter in 1986 and, increasingly, an exporter ofthermal coal.
4. Export promotion has been a concern of the Colombian authoritiesfor some time. Beginning in 1967 authorities adopted an outward-lookingdevelopment strategy, expanding and diversifying exports. Export promotionpolicies, including frequent small devaluations of the peso, export taxrebates and other incentives were introduced and the authorities began lower-
ing tariffs somewhat and relaxing capital market controls as a means ofraising efficiency and increasing the profitability and competitiveness ofColombian goods in external markets. These measures were successful inrelieving the foreign exchange constraint and stimulating growth andemployment.
B. Economic Performance During the 1970s
5. In the mid 1970's, the economy was subjected to strong inflationarypressures from a sharp increase in world coffee prices. The increasedreceipts from coffee exports, together with some official surrender offoreign exchange from illegal exports, caused a turnaround in the balance ofpayments. Incomes rose rapidly stimulating aggregate demand, and inflationaccelerated. Economic growth also rose, and unemployment fell substantiallyin rural and urban areas. Largely as a consequence of increased coffee taxrevenues, the public finances generated overall surpluses averaging about 1Xof GDP during 1976-78 and, by the end of 1979, net official internationalreserves had risen to about US$4.1 billion, equivalent to about 12 monthsimports of goods and non-factor services.
6. While beneficial in many respects, the foreign exchange boom hadsome negative effects. The rate of currency devaluation was slowed and theconversion of export receipts into pesos was delayed to moderate the growthof domestic demand, with adverse effects on non-coffee exports. TheGovernment also sought to check inflation by maintaining high reserverequirements and expanding controls over credit thereby reducing, in realterms, the financing available to the private sector through the officialcapital market.
7. The 1977-79 economic program was partially successful in restrain-ing aggregate demand growth, but relatively high inflation persisted. Inresponse to increasing restraint on aggregate demand and troublesomefinancial market distortions, the authorities began in lace 1979 to adjustthe program. The rate of peso devaluation was advanced somewhat, and inearly 1980 credit restraints were relaxed. At the same time, interest rateson certificates of deposit-and on lending therefrom-were freed fromcontrols. To offset the inflationary effects of these measures, the authori-ties further liberalized import payments and adopted the policy of notexpanding the subsidized selective credit operations of the Central Bank inexcess of the resources captured from private savings for this purpose. RealGDP growth decelerated to 4% in 1980 from an average of almost 6Z since 1960,unemployment started to creep up, and inflationary pressures continued.
C. Recent Economic Developments
8. During 1981-83 the economic situation took a turn for the worse inpart on account of external factors, with real GDP growth slowing down to2.3% in 1981 and about 1% on average in 1982-83. Agricultural output washard-hit as a result of low international prices, reduced input use andadverse weather. Industrial activity deteriorated on account of depressedaggregate demand, and unutilized capacity continued to increase, particularlyin manufacturing. Unemployment reached almost 14% of the labor force at theend of the year, up from about 7% at the end of 1981. Inflation, however,slowed down in 1983 to a 20% average for the year, down from 28% in 1981 and25% in 1982.
9. After experiencing a surplus for six years, a deficit of aboutUS$1.4 billion emerged in the resource balance in 1981 and increased toaverage about USS1.8 billion in 1982-83. These deficits resulted mainly froma drop in exports in real terms: in addition to domestic factors, majorreasons were the slowdown in world demand, major devaluations and importrestrictions in neighboring countries, and the reduction in Colombia's coffeeexports from their previous high levels. Net foreign exchange reservesdeclined by about US$1.8 billion in 1983 to about US$3.1 billion, equivalentto ioout six months of imports of goods and non-factor services. On thefiscal side, a slowdown in revenue growth, together with increased currentexpenditures resulting from a system of automatic transfers and large infra-structure investments in energy and transport led to growing deficits: theoverall Central Government cash deficit grew from 2.12 of GDP in 1980 to 4.1%in 1983, while that of the consolidated public sector rose from 3.6% to 7.0%.
10. In 1983 the Government introduced policies to stimulate aggregatedemand, and expand non-coffee exports. The rate of peso devaluation wasaccelerated; the housing construction industry was provided with incentivesto mobilize more resources; and selective credit to the productive sectorswas expanded. Temporary import restrictions were introduced for stabiliza-tion in addition to measures to reduce the fiscal deficit and ease distor-tions in the financial system. These efforts were insufficient to reversethe deteriorating trends particularly in light of the tight internationalcapital market. Colombia, unlike other Latin American countries, has not hada debt oroblen because of the high share of official debt in total debt out-standing and the term structure of such debt. Nevertheless, the LatinAmerican debt problem produced a reduction in the credit lines available toColombia and difficulties in obtaining medium-term loans needed to completeongoing projects, which contributed in turn to further declines in foreignexchange reserves and to strains in the financial system.
11. During 1984-85 Government policy began to focus increasingly on:additional revenue and expenditure measures to contain the fiscal deficit andmonetary expansion; acceleration of the exchange rate devaluations, furtherincreased incentives to exports; measures to improve the profitability of thecommercial banking and to resolve the external debt problems of the privatesector. The policy reforms began to take hold during the second half of1984. Real GDP growth increased to 3.1%, the unemployment rate fell to 13%of the labor force at year's end while inflation was brought down to 16.4% onaverage in 1984. Merchandise exports grew at over 16% in nominal termscompared to 1983; the current account deficit in the balance of payments wasreduced by about US$1 billion to 5% of GDP. The losses in foreign exchangereserves, which had accelerated during the first half of 1984, were reducedduring the second half of 1984 and reserves remained at about USS1.8 billion(four months of gncds a..d n.f.s. imports). The policies have been deepenedin 1985 and the results to date, on the whole, have beer positive. Inflationremains under control, while economic growth has picked up modestly, althoughthe unemployment rate remains higher than in recent years. The balance ofpayments position has been stabilizing.
D. Growth and Balance of Payments
12. With further adjustments during 1985-86, Colombia's growthprospects for the rest of the decade are good. The current account deficit
of the balance of payments is projected to average about UJS$1.3 billion peryear during 1985-86, equivalent to about 4% of CDP. The deficit is projectedto be financed by increasing disbursements of existing and new public andprivate sector loans and by direct foreign investment. By the end of thisperiod, net official international reserves would have been maintained at alevel of about four and a half months of imports of goods and non-factorservices. This should be sufficient to support an average growth of real GDPof 2.5% during 1985-86. Total investment will have to be maintained at over18.5% of GDP to complete energy and mining projects; and to avoid too largean increase in foreign indebtedness, gross domestic savings would need toaverage about 18% of GDP compared to 16.4% during 1981-84, with the publicsector generating a significant part of the additional savings. Beyond 1986,real GDP growth should resume at near historical rates, about 4.5% per yearon average. The current account deficit should also improve rapidly from1987 on as a result of increasing export proceeds from new non-traditionalexports (particularly crude petroleum and coal), declining to some 1.6% ofGDP by 1990.
13. Total gross external medium- and long-term capital requirements(including the private sector) are projected to total about US$5.6 billionfor the 1985-86 period. Net foreign investment is expected to account forUS$750 million during 1985-86, most of which would be to complete existingenergy projects. About USS3.9 billion is expected from multilateral,bilateral and other sources, while about US$1 billion will be the new moneyneeded from commercial banks mainly to complete petroleum and coal projectsfor export. At the end of 1984, Colombia's public and publicly guaranteedmedium- and long-term external debt, disbursed and outstanding, amounted toUS$8.0 billion (22% of GDP). The Bank/IDA share of this external debt i.e.excluding non-guaranteed private was 22.8% which is expected to reach lessthan 25% by 1986. The public debt service ratio in 1984 was 23.5% and isexpected to peak at about 30% in 1987 and then decline gradually to below 30%in 1990. The World Bank's share in M< public debt service (excluding non-guaranteed private) is expected to be less than 24% during 1985-86. Withsound economic and financial management and the development of new exportactivities, Colombia is expected to maintain its creditworthiness through andbeyond the 1985-90 period.
PART TI - BANK GROUP OPERATIONS IN COLOMBIA
14. The Droposed loan, the 115th to be made to Colombia, would bringthe total amount of Bank loans to Colombia to US$5,005.2 million (net ofcancellations). Of this amount the Bank held, as of September 30, 1985,US$3,758.3 million; IDA made one credit of US$19.5 million for highways in1961. Disbursements have been completed on 72 loans and the IDA credit.Before 1979, disbursements averaged US$86 million equivalent Per year, buthad increased to US$286 million in FY84 and to US$591 million in FY85,reflecting in part the higher level of commitments in the late 1970s andefforts to build the pipeline. While disbursements in Colombia have beenslower than those recorded in the Latin American Region for similar projects,concentrated efforts to overcome problems and to speed the initiation of
project execution have resulted in a significant increase in disbursementsduring FY84 and FY85. Improving performance of social sector institutions inthe execution of Bank-financed projects, the gradual containment of infla-tionary pressures and the effects of the recently-introduced fiscal reforms,which should improve counterpart funding, all point to a higher level ofdisbursements in the future. IFC has made investments and underwritingcommitments of US$144.2 million In 29 enterprises and as of September 30,1985, it held US$67.3 million. Annex II contains a summary statement of Bankloans, the IDA credit and IFC investments as of September 30, 1985.
15. Since the initial loan was made in 1949, Bank lending to Colombiahas become quite diversified. Although through the mid-1960s, 88% of theloans made were for power or transport, since then the Bank has broadened itsparticipation in lending for agriculture and industry, and initiated lendingfor irrigation and watershed management, education, water supply, telecommu-nications, urban development and nutrition. By the late 1970s, 53% of theloans made to Colombia were for projects other than transport and power. Ofthe loans made since 1978, 35% were for power and transport, 16% forindustry, 18% for agriculture and irrigation, 8% for water supply, 6% forurban development, 4% for telecommunications, 2% each for petroleum develop-ment and export diversification, and 8% for education, nutrition and multi-purpose projects. The diversification was indeed a desirable aim as ithelped provide close contact with a broader range of Colombia's developmentproblems. The experience gained has served to identify areas in which theBank's presence can have a meaningful impact.
16. The Bank's dialogue with the Government has focused upon the needto mobilize additional domestic resources, to diversify and expand exports,to develop rapidly the country's energy resources, and to free the economyfrom excessive controls. The discussions involved fiscal, interest rate andpricing policies, as well as incentives for exports and reduction in thelevel of effective protection. Positive results have been obtainedparticularly in the power sector, where power rates were increased sharplyand a least-cost expansion was formulated and launched. Similar results havebeen achieved in respect of some other public services, including anpropriatecharges for water for irrigation and domestic use and petroleum prices.
17. The Bank has been supporting the Government's efforts to increaseeconomic growth and exports with financial stability, raise utilization ofdomestic energy sources, provide key infrastructure, and improve the livingconditions of the poor. More recently, in response to Colombia's adjustmentprocess the thrust of the Bank's support has shifted towards loans to financedirectly productive activities, such as agriculture and industry, supportefforts to raise productivity, income and employment, increase and diversifyexports and help develop renewable sources of energy through lending forhydropower and arranging associated cofinancing. Loans recently approved bythe Board and in advanced stage of preparation reflect -he emphasis on: (i)increasing output rapidly; (ii) reorienting production towards exports andefficient import-competing goods; (iii) supporting quick-yielding infra-structure investments, particularly those that enable the use of existingfacilities more intensively; and (iv) increasing resource mobilization.
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18. The Bank's tending in FY85 consisted of loans for agriculturaldiversification, small-scale industry, petroleum, development banking, watersupply and sewerage and trade policy and export diversification totallingUS$707.5 million. The Trade Policy Project is designed to support the firstphase of trade policy adjustments in Colombia. Besides the already approvedpublic health and port rehabilitation projects, work is underway on projectsfor water supply and sewerage, irrigation rehabilitation, agricultural tech-nology transfer, and financial sector management. In infrastructure, theBank is stressing rehabilitation, modernization and a more intensive use ofthe existing facilities in ports rehabilitation, water supply and ruralfeeder roads. Finally, several projects in preparation will also support theGovernment's efforts to help the poorer segments of the population. Proposedlending for further rural development, agricultural credit, and water supplyand waste, will help improve the standard of living of the poor, while beingdesigned to make better use of existing capacity and reduce losses.
19. The operations of external lenders in Colombia are shown in AnnexI. While IBRD, IDB and bilateral sources provided about 75% of total exter-nal financing to Colombia in the 1961-72 period, their share has decreasedsince then to some 49% for the 1975-82 period and is expected to declinefurther to about 40% of external capital requirements during the eighties.IDB has given increased emphasis to energy-related projects, in addition tothose for low-cost housing, urban and rural development, agrarian reform,university education, water supply, rural electrification and land erosioncontrol, which are aimed at improving living standards of the lower-incomepopulation. In the future, it proposes to assist Colombia in developingsources of domestic energy and in expanding productive sector activities tohelp generate increased capacity utilization and employment. USAID hassupported programs in education, rural development and small farm develop-ment, but is phasing out its program in Colombia. The Governments of Canada,the Federal Republic of Germany and the Netherlands have also providedconcessional financing for basic needs and regional integration projects.
PART III - THE ENERGY SECTOR
Energy Resources and Policies
20. Colombia is rich in energy resources, particularly in hydroelec-tricity and coal. Its reserves of oil and natural gas are modest by interna-tional standards, yet significant at the national level. The country'srecoverable coal reserves are estimated at 16 billion tons (441.6 EJ) and itshydropower potential, at 100 GW, is capable of yielding about 440 TWh (4.62EJ) per year (231 EJ over 50 years). Compared to this, gas reserves are only4.07 trillion cubic feet (5.1 EJ) and oil reserves are 734 million barrels(4.3 EJ). As regards the latter, on the basis of recent success encounteredby Occidental Petroleum in its oil exploration in the Llanos area, prelimi-nary estimates now suggest that Colombia's oil pred_ction will exceed itsinternal consumption in the near future.
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Estimated Recoverable Reserves and Production (1983)
Reserves Production Reserves/ProdEJ Mtoe (Z) GJ Mtoe (X) (years)
As the table above shows, there is an imbalance between reserves and produc-tion for different sources of energy. For example, the huge reserves ofhydroelectricity and coal account for only 21.4% and 12.9% respectively ofannual production while the rather modest gas and oil reserves contribute22.5% and 43.2% respectively to annual production. Current consumption ofcommercial energy relies primarily upon oil products (41%) and less on gas(17%), coal (15%) and electricity (27%). The table below shows the distribu-tion of this consumption by sector.
21. Colombia traditionally enjoyed a positive trade balance in energybecause of its relatively rich energy endowment and modest yearly per capitaconsumption which, at about 0.7 ton of oil equivalent, is below average formiddle-income developing countries. However, in 1976 the country became anet importer of energy, and by 1981 the (net) cost of oil imports reachedalmost USS400 million. This came about because of a decline in total domes-tic energy production, resulting from a 7% annual fall in oil output between1970 and 1979. As this situation was threatening to compromise balance ofpayments prospects, the Government moved in the late 1970s to redress thenegative energy trade balance through: (i) pricing measures designed toincrease the overall cost of energy to consumers, change relative prices toencourage consumers to move away from oil, and provide incentives toproducers; and (ii) direct public sector investment and improved incentivesfor private sector investment in the energy field, particularly for petroleumexploration and secondary petroleum production, hydroelectricity and coal.
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As a result, since 1980, the previous trend has been reversed: petroleumproduction has increased, GDP has grown faster than aggregate energy consump-tion, and petroleum's share of total primary energy consumption has fallenwhile that of hydroelectricity, coal and natural gas has increased.
22. In Colombia, electricity, petroleum and natural gas prices are setby the Government; coal prices are market-set. The price levels for petro-leum products are close to international prices, while natural gas priceshave been maintained at relatively low levels as a financial incentive forconsumption. The development of an integrated energy investment program andadecuate incentives for each subsector will depend on the availability ofreliable information regarding the investment requirements of differentenergy sources, particularly coal. To this end, the Government has under-taken a major effort to improve sector knowledge through a National EnergyStudy (ENE). Its first stage was carried out during 1979-82 by the NationalPlanning Department (DNP) with the help of local consultants and technicalassistance from the Federal Republic of Germany. This study provides signif-icant information needed for energy planning, including a preliminary evalua-tion of energy demand growth and investments that could best serve suchgrowth.
23. A second stage of the ENE, consisting of several specializedstudies, is almost completel/. This current effort has elicited consider-able foreign technical assistance from official sources. The FederalRepublic of Germany is providing assistance on modeling and data gathering,France on industrial energy savings, Italy on energy studies for isolatedregions, the Organization of American States (OAS) on energy use in transpor-tation and the European Economic Community on industrial uses of energy.Several energy sector agencies provide counterpart staff and DNP coordinatesthe external assistance. The third phase of the study, concerned withenergy strategy formulation, is about to start. Work in this phase will befocused on identification and comparison of the costs and benefits of devel-oping each of the country's energy resources. Once such work has beencompleted, selection among alternative energy sources will be possible and along-term strategy for development of Colombia's energy resources can beformulated. Recently, DNP and the Ministry of Mines and En'rgy asked thatthe Bank assist in its review of these studies and in the formulation of astrategy for the energy sector. These tasks are accorded high priority inthe context of the Bank's country and economic sector work for Colombia andfunding for some studies are being envisaged under ESNAP.
Sector Financing
24. Over the past five years, Colombia has been successful in mobi-lizing external resources to finance energy development. This has beenachieved through direct foreign investment (in oil and gas first and latelyin coal) and external loans to the energy agencies, including power compa-nies. However, the current conditions in the international lending marketsare making external financing more difficult to obtain. Local financing
I/ Among others, studies on natural gas available for ammonia-urea fertilizerproduction and coal exploration studies to assess the economic potentialof several promising areas in the Atlantic and Central Regions.
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requirements are covered primarily by internally generated resources andGovernment contributions, with the incipient local capital market tradi-tionally providing only a marginal share of financing.
25. The establishment in 1982 of a financial institution for the powersector (Financiera Electrica Nacional-FEN) designed to mobilize domestic aswell as foreign funds for the sector's utilities has increased thecontribution of the domestic capital market to the sector's financing andenabled the sector to maintain a presence in the increasingly cautiousinternational capital markets. Despite its recent creation, FEN has becomeone of the largest financial institutions in the country. It has alreadyrecorded notable success in the domestic market and served as the borrowingagency for a major power development finance loan from the Bank (2401-CO) andvarious cofinanciers. By going to capital markets on behalf of theconsolidated power sector, FEN has mobilized resources which the individualutilities would not otherwise have been able to access and this institutionpromises to make a substantial contribution to the alleviation of thefinancial constraints currently confronting the sector. As regards moretraditional sources of local cost financing, in order to increase internalresource mobilization by the main energy sector agencies, prices charged toconsumers of petroleum products and electricity have been increasedsignificantly in real terms. Furthermore, in 1980, the Government createdthe National Coal Fund (FNC) which receives revenue from a tax on coalproduction valued at the mine-head. This revenue is currently allocated tofinance coal exploration (80%) and to assist small and medium-scale coalmining operations (20%).
Institutional Arrangements in the Power Sector
26. Sector Organization. At present, public electricity servicesare provided by:
(a) municipally-owned companies, of which the largest are EEEB (inBogota), EPM (in Medellin) and EMCALI (in Cali);
(b) national enterprises whose principal purpose is the distribution ofpower to particular regions (ICEL, CVC and CORELCA); and
(c) a generating and transmission company (ISA).
27. Through the 1950s, a large number of power companies were set up bylocal governmental authorities and, lacking interconnection with each other,were operated independently. Less than 20 years ago, the country's totalelectricity capacity stood at a mere 1,681 MW (equivalent to about 88 wattsper inhabitant) and reached only about 35% of the povulation. Although largehydropower sites held the potential of increasing substantially the supply ofelectricity at lower cost than otherwise possible, they were too big to betapped by any one company. With encouragement from the Bank, the Governmentpersuaded the regional power companies to break with tradition and pool theirresources in a shared effort to plan and develop the country's large hydro-electric potential. To accomplish this, Interconexion Electrica S.A. (ISA)was created as an independent, national generation and interconnectioncompany, whose shareholders now include all the largest municipal powerutilities and the Government-owned power companies. By 1984 Colombia's
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installed capacity had climbed to 5,049 MW - more than triple the pre-ISAlevel - and reached 54% of the population. The successful execution of aseries of major power generation Projects had produced an experienced andhighly-regarded local engineering/construction industry and the planningmethodologies employed in the sector had achieved an enviable level ofsophistication.
28. In addition to its planning and plant construction functions, ISAoperates the interconnected power system. Though adequately staffed andtechnically capable, ISA is burdened with a slow and complicated decision-making process. Its shareholders (EEEB, EPM, CORELCA, ICEL and CVC) areinclined to allow their regional and sometimes conflicting interests to takeprecedence over national goals. Furthermore, the financial constraints thatmost of the companies are facing have caused them to reduce their contribu-tions to ISA. The resulting arrears had reached about US$170 million equiv-alent by end-1984. In an effort to advance national interests in ISA, theGovernment has strengthened its representation on ISA's Board. In addition,the Government intends to penalize the companies that have debts to ISA, byimpeding their access to FEN loans.
29. Several other actions have been taken by the Government to improvethe sector's institutional structure and hence its prospects for efficientgrowth. It established the National Tariff Board (JNT) in DNP to approverequests from the power companies for tariff increases; and it has fosteredthe consolidation of numerous small utilities, particularly in the NorthAtlantic Region. The Government has also recognized the constraint on soundsector development and finance represented by the current organization ofICEL--a holding company which groups together twelve largely rural-basedutilities (electrificadoras)-and it has explicitly confirmed the need torestructure the ICEL group.
30. As the discussion above suggests, the current sector organizationdoes not provide for particularly effective operations. The sector lacks acentral authority to enforce planning and tariff decisions, based on anational plan. The decision-making process is tortuous and slow, anddependent on negotiations between the central government, the utilities andthe local governments. The current resource constraints have highlighted theneed for change, but the importance of the power sector in the country'seconomy, its suhstantial share in Colombia's foreign indebtedness (25Z of thepublic foreign debt) and the magnitude of its investment program clearlyrequire that any improvements in the sector's institutional organizationshould only be adopted in the context of a thorough review of overallsectoral Policy. The Government recognizes this and has requested that theBank assist in carrying out such a review. To this end, the Bank has beensupporting efforts by both the Government and ISA to develop and monitorsector-wide financial projections, more flexible investment plans and otherdata. Acknowledging the long-standing and deeply entrenched tradition ofregional autonomy that underlies the sector's existing organizational struc-ture, the Government and the Bank approached the institutional problemsthrough a workshop this June that marshalled the skills and resources ofthose familiar with the sector to consider the objectives of the power sectorand strategies that might achieve them. The outcome of this workshop led toa number of recommendations that are being further studied by the Governmentand the Bank.
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31. Planning and Coordination. The Ministry of Mines and Energy ischarged with formulating national policy for the generation, transmission anddistribution of electricity, including coordination and supervision of powersector planning. It shares with the National Social and Economic PolicyCouncil (CONPES), DNP and ISA the responsibility for defining investmentpriorities. ISA defines a generation and transmission expansion program forthe interconnected system; after approval by the Ministry, DNP and CONPES,this becomes the National Power Expansion Program. The Program is reviewedannually by ISA and revisions, if necessary, are proposed. On the basis ofrequests from the companies, JNT approves rate increases. Although theGovernment cannot enforce its policies directly with the municipally-controlled power companies, ISA is intended to provide a mechanism forreaching agreement on major issues affecting the sector. Sector planning andcoordination have improved markedly since ISA's creation and Bank lending hasstrongly supported this evolution; although, as was mentioned above (paras.28-30), some further improvements in the sector's institutional arrangementswill have to be implemented before the planning, pricing and coordinationsystem can function satisfactorily.
32. Least-Cost Power Development Program. Colombia's economic growthwas affected by the world-wide economic recession from 1981-83. Takingaccount of the consequent slowing of electricity demand growth, on May 16,1983, CONPES approved a revised National Power Expansion Program for plantsentering into service during 1987-96. In October 1984, ISA presented thelatest revised Program with a two-year deferment of all major futureprojects. The plan is based upon a gradual and phased resumption during1985-2000 of the long-term average annual economic growth rate of about 5%achieved from 1965-80; estimated fuel prices; and a projection of 6.5% growthin average gross annual electricity consumption during the 15-year periodfrom 1985-2000. To ensure that significant variations in demand are suitablytaken into account, ISA together with the Government (as provided under Loan2401-CO), will continue to review and update the Program. The Bank iscurrently reviewing with DNP and ISA the financial implications of thisrevised investppnt Program:
33. In support of ISA's efforts to strengthen its planning methodology,a UNDP-financed study, for which the Bank acted as the executing agency, wascompleted by end-1984. The study was devoted to the refinement of ISA'sexisting planning models. Another UNDP and Bank-financed study providingassistance in construction management is now underway and it is anticipatedthat its benefits will extend, through ISA, to its shareholders as well.
Power Market and Supply
34. Electric power has become the fastest-growing form of energy use inColombia. Its share of total energy consumption has risen from 6.5% in 1970to 27% in 1983. Generation increased by an average of about 10% annuallyduring 1970-1980, although it has slowed over the last years to 5.8% perannum in 1980-83. Effective installed capacity at the end of that year was5,049 MW, including self-producers, with public entities accounting for 95%of the total installed capacity and generation. Peak demand was about 4,530MW, and total electrical energy generation in 1983 amounted to 22.7 TWh.Hydroelectric plants accounted for about 65% of the total electricitygenerated.
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35. About 54% of Colombia's 27.5 million population has electric nower,compared to 26% in 1950 and 45% in 1970. The urban population, comprisingabout 65% of the population, has greater access. In 1976, for example, 90%of households in large cities (population of 50,000 or more) had electricalservice while in rural towns (population between 500 and 2,500) the corre-sponding figure was 36%; in other rural areas, 16%. Various programs,including the Bank-financed First and Second Integrated Rural DevelopmentProjects and the Village Electrification Project as well as programs financedby I10, Kreditanstalt fuer Wiederaufbau (KfW) and the Colombia Coffee GrowersAssociation, are aimed at increasing rural coverage. In 1983 there wereabout 3.3 million electricity subscribers of which 89.9% were residential and7.7% commercial. Residential consumption accounted for 48.6% of 1983electricity sales (which totalled 17.4 TWh) and industrial consumptionaccounted for 28.2%. EEEB generated 17% of the total electricity supplv, EPM22%, CORELCA 20%, CVC and ICEL 20%, ISA 19%, and others the remaining 2%.
36. During 1978-1983, gross production of electricitv increased at anaverage annual rate of about 7.3% compared with a CNP growth rate of 4.3%.However, sales increased at an annual average rate of only about 6.0% becauseenergy losses increased from 18.4% in 1978 to 22.6% in 1983. Approximatelyhalf of these losses are technical (network) losses in the distributionsystem, while the remainder are thefts. A portion of the energy thefts canbe traced to large consumers but theft by squatters tapping into lines isalso presumed to be substantial in some areas. Tn 1984, a joint DNP/ISAcommittee was established to study the issue of energy losses and to recom-mend solutions for the problem. In addition, the proposed project isdesigned to assist EEEB in reducing both technical losses and theft (para.43(f)).
Recent Developments
37. By the early 1980's, Colombia had already embarked upon anextensive investment program for the power sector, concentrated primarily onseveral large-scale generation projects requiring substantial long-termfinancial commitments. Since then, the availability of both external anddomestic financing has been severely reduced (paras. 9 and 10) and thestabilization of Colombia's external and fiscal balances has become one ofthe most urgent issues facing the country at this time. As a consequence ofthe power sector's substantial share in both Colombia's anticiDated invest-ment requirements (28% of total public investment) and its foreign indebted-ness (over 25Z of public sector foreign debt), the sector has also beenobliged to shoulder its share of the burdens imposed by the resourceconstraints that confront the country. Specifically, during the past threeyears, the sector has suffered from financial problems caused by therationing and insufficient availability of financing and by delays in rateadjustments, compounded by slower than anticipated demand growth. Localborrowings needed by the sector have outpaced the domestic banking system'slending capability. Various shareholders lacked funds to pay fully for theelectricity supplied to them by ISA and their share in the cost of ISA'sdevelopment program. As a consequence, ISA has fallen behind in itscontractual payments to suppliers and contractors and this, in turn, hascaused construction delays. In addition to similar problems, CORELCA andICEL have not received their budgeted Government contributions on schedule.Moreover, the sector has suffered because Government-related lending has been
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held back and the financing of local costs with external borrowingsauthorized only on a highly selective basis.
38. The developments described above, combined with the 1982 civildisturbances reflecting consumer discontent with Increased electricitycharges and the quality of service, have led the Government to review theinvestment program and the financing plan for the sector. Through theexercise of redefining the sectoral financing program, the Government hasfocused increasingly on the macroeconomic and institutional implications ofthe 1984-90 power investment program. In May 1983, it reviewed in detail thejustification for, and financial feasibility of, all new investments in theaforementioned program, taking account of competing demands from otherpriority sectors, and in December 1984, decided to reduce by about one-halfthe previously planned annual capital outlays for tl'e sector. In the contextof the Government's overall review of its policies for the sector, both ISAand the Government will continue to monitor the current investment program toensure that it remains consistent with the evolving sectoral strategy.
Bank Participation in the Power Sector
39. The Bank has made 29 loans since 1950 for the Colombian powersector, totalling US$1,739 million. Several OED reports have found previousBank lending to the sector to have been generally successful. One of thesereports "Power Interconnection (575-CO) and Chivor Hydroelectric Projects(681-CO)" (Report No. 2720, October 29, 1979) commented upon the Bank'sparticipation in Colombia's efforts to evolve a stronger and more efficientpower sector organization. Through the creation of ISA, in conjunction withthese projects and the steps taken to overcome financial and institutionaldifficulties, progress was made toward more coordinated sector development.Despite implementation delays and increased costs, both projects weresuccessfully executed. In the past, the bulk of Bank lending for power wasdevoted to the expansion of Colombia's generating/transmission capacity.While Bank-financed power projects have often contained distributioncomponents, the initial Bogota Distribution Project (Loan 1807-CO, 1980) wasthe first Bank loan to Colombia to support exclusively distributionexpansion. In continuing the efforts initiated through that first distribu-tion project (and expanded in subsequent rural electrification projects), theBank will be reaffirming the importance of a smoothly functioning distribu-tion system for the efficient utilization of Colombia's existing generationcapacity. Broadly stated, the Bank's objectives for the power sector are:(a) to achieve greater efficiency in the operation of Colombia's electricutilities; (b) to improve resource mobilization for the sector as a whole;and (c) to improve the sector's institutional arrangements. Until recently,the Bank sought to promote development of sector-wide strategies for thepower sector by addressing these broad sectoral issues in the context oflending operations with individual utilities. This lending strategy has,however, been evolving toward a greater focus on sectoral lending.Reflecting this evolution, the Bank has oriented its most recent effortstowards the establishment of a sector-wide financing facility (FEN) and plansto extend these efforts through a future power sector loan, to be channelledthrough FEN.
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PART IV - THE PROJECT
40. The Project was prepared by EEEB, with the assistance of consul-tants, and appraised by a Bank mission which visited Colombia in November1984. Negotiations were held in Colombia during the week of April 28, 1985with a Colombian delegation led by Mr. L. Avella, Deputy Manager of EEEB.Further background on the project is contained in Annex III. Loan documentswere approved by the authorities on November 1, 1985. A Staff AppraisalReport is being distributed separately to the Executive Directors.
EEEB's Expansion Program
41. By 1990, EEEB's system will have to be expanded to serve about940,000 customers with a peak load of 1,470 MW and an annual energy demand ofabout 7,900 GWh. This will mean an increase of 240,000 customers, 410 MW and2,200 GWih from estimated 1984 levels. The 1985-1990 expansion programdesigned by EEEB to meet these requirements .s well-balanced, with appro-priate emphasis given to generating plants, subtransmission facilities andboth rural and urban distribution. The generation expansion plan is veryambitious and represents the largest investment of EEEB's expansion program(60%). It includes construction of two major hydroelectric plants-Mesitas(600 MW) and Guavio (1.000 KW)-both with the Bank's financial support; andacquisition of two thermal plants--Zipa IV and V (132 MW) from ISA. Thedistribution expansion program is an indispensable complement to this genera-tion expansion, as the efficient delivery of generated electricity dependsheavily on the quality and reliability of the distribution network. Thedistribution program consists of the final stages of the Bogota DistributionI Project, which included EEEB's 1979-1985 subtransmission and distributionprogram (partially financed by the Bank's Loan 1807-CO), the proposedproject, and a rural electrification program for the area surrounding Bogota,partially financed by KfW and for which EEEB will seek the Bank's participa-tion. One further component of EEEB's expansion program is a control centerto be completed by mid-1988 and financed by the Bank under the Guavio Loan(No. 2008-CO). The investment program necessary to carry out this expansionprogram, with provision for future expansion which may be needed after 1991,is summarized below:
EEEB's 1985-1990 Investment Program(millions of current US$)
42. Objectives and Strategies. The project proposed for Bank financingconsists of EEEB's 1985-1990 program for the expansion and improvement of itssubtransmission and distribution system and modernization of the existingsystem for the urban areas. This project, which builds on the first BogotaDistribution Project (1979-1985), is a major component of EEEB's 1985-1990expansion program. The main objectives of the proposed project are toachieve greater efficiency in EEEB's operations and to extend electricservice to a larger segment of Bogota's population. The strategy chosen toachieve these objectives involves: (a) enhancement of the benefits derivedfrom EEEB's investments in generation and transmission by ensuring efficientdelivery of generated power; and (b) reduction of energy losses (both tech-nical losses and theft). The project will implement this strategy throughinvestments in the subtransmission and distribution system and by strength-ening EEEB's organizational structure, technical and managerial capabilities,and financial position.
43. Description. The project consists primarily of the followingphysical investments:
(a) Subtransmission: Installation of substation capacity and linesneeded to connect existing plants and substations to the proposeddistribution system;
(b) Distribution: Installation of distribution substation capacity;line extensions and improvements; installation of and improvementsto secondary circuits; installation of distribution transformercapacity, voltage regulators, capacitors, meters and publiclighting. This component has been designed both to extend serviceto 240,000 new customers and to improve the existing system.Circuits to be improved have reached the end of their economic lifeand suffer from high losses and frequent outages. Improving thesecircuits will reduce energy losses while m.proving the quality andreliability of service to all customers, including current low-income urban consumers. Addition of voltage regulators andcapacitors will also improve service; and the acquisition of metersand meter-testing equipment will permit the extension of service tonew customers and reduce thefts by equipping EEEB to connectcurrently illegal customers to its normal service;
(c) acquisition of maintenance equipment for substations, lines and hotlines; and laboratory equipment for testing low, medium and highvoltage equipment;
In addition, the project includes the following institutional developmentmeasures:
(d) consulting engineering services to improve EEEB's distribution andoperations planning, with particular emphasis on energy lossreduction through: (i) an evaluation of illegal customers by typeand location; (ii) studies on: (1) distribution system reliability;
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(2) subtransmission system operation; and (iii) losses controlsystematization.
(e) a training and technical assistance component (building on aprogram financed under Bank Loan 2008-CO) consisting of a trainingprogram for managers and professional staff to improve management,strategic planning and technical skills.
(f) a program for reduction of energy losses. This is a particularlyimportant feature of the project (see para. 51). While technicallosses will be reduced by the subtransmission expansion and dis-tribution improvements described in sections (a) and (b) above,EEEB will also assign an administrative unit to take charge ofplanning and implementing actions to reduce energy thefts. Thisunit will also monitor EEEB's progress in reaching target levelsfor loss reduction. The establishment of thts unit is a conditionof effectiveness of the proposed loan. The agreed target levelsfor losses, including both theft and technical losses, declinegradually from 23% of total generation in 1984 to 13% in 1990.
44. Project Cost and Financing. The estimated cost of the project isUS$389.6 million (inclusive of $41 million for interest during construction)of which US$189.6 million is expected to be in foreign exchange. The costestimates are outlined in the Loan and Project Summary (page ii of thisreport). These costs do not include any direct taxes or duties since EEEB isexempt from such obligations. They do, however, include the indirect taxesthat EEEB's contractors will have to pay. Because of the substantialdivergence between local and foreign inflation, different estimated inflationrates have been applied to local costs (in Colombian pesos) and to foreigncosts (in US dollars) in order to arrive at the cost estimates. Colombianpeso amounts were then converted into US dollars using forecasted exchangerates for each year. The proposed Bank loan of US$171 million would finance90% of the foreign exchange costs of the project and 44% of total projectcost. A further US$18.6 million equivalent (5% of total costs) would besought through suppliers' credits and the remaining US$200 million (51%)would be financed by EEEB. The proposed Bank loan would include thefinancing of the Bank's interest and commitment charges accrued during theconstruction period. This is warranted in view of the foreign exchangeconstraints currently facing Colombia; EEEB's own inability to generateforeign exchange; and the considerable size of Bank support for EEEB'scapital development program, when compared with the size of the borrower'sfixed assets in operation..
The Borrower
45. The proposed Borrower, Empresa de Energia Electrica de Bogota(EEEB), is an autonomous company owned by the Municipality of the SpecialDistrict of Bogota. Established by private Colombian interests, EEEB hasoperated the city's elecrtLc service for the past 85 years since 1951 undermunicipal ownership. It has an installed capacity of 1,288 MW, of which1,151 MW is hydro and the balance coal-fired thermal. EEEB served about700,000 subscribers at the beginning of 1985.
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46. EEEB is directed and administered by a seven-member Board ofDirectors headed by the Mayor of Bogota. Two members are elected by theMunicipal Council, three are chosen by the Council from lists submitted byassociations representative of banks, commerce, and industry in Bogota, andone is chosen by the President of Colombia. This composition was worked outin connection with the Bank's initial loan to EEEB (246-Ca) and has generallyproven to be satisfactory. Management of EEEB is entrusted to a GeneralManager (appointed by the Board) assisted by four Deputy Managers,responsible for: (a) Administration and Supplies; (b) Finance; (c) TechnicalFunctions; and (d) Operations. The General Manager is also supported by twostaff units: a Planning Division and a Legal Division. At the top level,the company has had a competent and stable management during most of itsassociation with the Bank and the majority of both senior and mid-levelmanagement staff are young (under 40), dynamic and able. The organization ofEEEB's almost 3,400 employees into a plethora of administrative units--roughly 270 divisions, departments and sections-has led in some cases to alack of communication and coordination among the units. This, combined withthe need to adapt the company's technical and operational structures tohandle construction of both a major hydroelectrical plant and an extensivedistribution program has spurred EEEB to undertake a program, partiallyfinanced by the Bank (Loan 2008-CO), to improve the performance of thecompany, including its organization, planning and operational practices. Inthis regard, the recommendations of a study on managerial, budgeting andaccounting systems, prepared by management consultants, were implemented byEEEB in the course of 1983/84 and consultants have been selected for thetraining and technical assistance component of this Performance improvementprogram. The proposed loan will finance part of the costs of this ongoingtraining effort (see para. 49).
47. Prior Bank Lending to EEEB. The Bank has made six loans, totallingUS$615.6 million, to EEEB. The works financed by the first three loans (allof which were made in the 1960s) were completed successfully, although withdelays ranging from one and a half to three years. More recently, disburse-ments on the fourth loan (Mesitas - 1628-CO) were delayed by two years andthe project was completed with a cost overrun of around US$150 million (55%higher than the initial estimate) as a result of a combination of factorsincluding geological problems encountered in tunnel excavation; financialdifficulties experienced by EEEB as a result of reduced power sales followinga severe drought; and the bankruptcy of a major civil works contractor. Thefifth loan (Bogota Distribution - 1807-CO), which financed the project onwhich the proposed operation is modelled, is being disbursed with two yearsdelay but no cost increase. The delay was due primarily to a lack of coordi-nation between the various units within EEEB responsible for the diverseactivities included in this type of project. Steps hare been taken indesigning the proposed project to improve EEEB's coordination capability (seepara. 48).
48. Implementation. EEEB's usual practice is to use local engineeringfirms to assist its staff as needed for detailed design, procurement, andsupervision of construction; this practice would also be followed for theproject. As EEEB has already completed basic distribution studies and designstandards, participation of local firms will be restricted to some comple-mentary designs and supervision of construction. Most of the constructionwould be performed by local contractors, including 230-kV and 115-kV substa-
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tions, 115-kV lines and primary distribution circuits. EEEB, like most utili-ties in Colombia, does not maintain a staff to implement and supervise largeconstruction projects. However, the distribtition expansion being undertakeninvolves many inter-related activities such as procurement, design, materialinventory, management of construction and consultants contracts. At thismoment, there is a certain lack of coordination among the units dealing withthese activities. It is, therefore, critical that a unit with experiencedstaff be created to monitor and coordinate all the project-related distribu-tion activities in EEEB. Such a unit should be headed by individuals posses-sing proven coordination skills in order to ensure that the distributionexpansion is executed as planned. This unit has already been established andis now being staffed. As a condition of effectiveness, EEEB has agreed toemploy staff in the unit with qualifications and experience satisfactory tothe Bank.
49. Institutional Development - Training and Technical AssistanceComponent. The project includes measures designed to improve the company'sability to handle the demands of a rapidly expanding distribution and genera-tion network and to adapt more effectively to a changing external environ-ment. This component consists of:
(i) Technical assistance for management training to facilitateimprovements in EEEB's organization, managerial skills, technical and opera-tional planning, system operation, human resources management and existinginternal training unit. This training program grew out of and Is closelyintegrated with technical assistance financed under the Guiavio project (Loan2008-CO). The Bank's share in this management training program is expectedto total US$1.4 million, of which US$.6 million is being financed under theGuavio loan and a further US$.8 million under the proposed loan. EEEB hasalready selected consultants to assist them in the training program which, ascurrently designed, uses a participatory training method to involve EEEB'sstaff fully in the assessment of the existing organizational constraints andin the formulation of measures for the improvement of the utility's organiza-tion and management. During negotiations, EEEB agreed to submit for Bankapproval by December 30, 1985 the detailed plan for the implementation ofthis training program, and to employ the consultants for the program by March31, 1985.
(ii) Specialized courses for professional staff. Training forEEEB's staff of competent professionals is being provided both in Colombiaand abroad. However, foreign exchange constraints have prevented EEES'sadministrators and engineers from benefitting from many courses, seminars andfellowships available outside the country. Since several of these foreigntraining opportunities offer exposure to technological advancements and tech-nical specializations not yet available in Colombia, the proposed loan willfinance the foreign component of the training program-about $1.0 million forfive years. The following subjects will be covered in the courses offeredthrough the training program: (a) Planning (optimum planning for distribu-tion systems, load management and energy conservation, reliability andmarginal costs for generation and distribution systems); (b) Engineering(protection, digital control and supervisory systems, load-flow management);(c) Distribution system operation (dispatch centers management and operation,optimization of urban distribution network operation, telecommunications);(d) Finance and Management (advanced finance and economics, advanced manage-
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ment, development of information mystem.). The program will provide coursesfor about 15 staff members per year from 1986 to 1990. Participants will beselected by EEEB in the context of its overall staff development program.
50. EEEB's Market/Energy Losses. EEBB's service area includes theDistrict of Bogota and the areas of influence of more than 55 municipalitieswithin the nearby departments of Cundinamarca and Meta in the central zone.EEEB's estimate of its service area's population is 5.5 million, about 20% ofthe total population of Colombia. The service area accounted for about 24%of the national gross electric energy requirements in 1983. As a consequenceof the general economic recession in Colombia, growth in power demand inEEEB's service area has slowed over the past five years from an averageannual rate of 9.7% during 1973-1978 to only 5.7% for the period from 1978-1983. Industrial and commercial consumption were the most affected by therecession and their market share decreased substantially, while that ofresidential consumption increased commensurately, due mainly to the continuedgrowth of the city of Bogota throughout the period.
51. EEEB's energy losses increased dramatically from 1978-83, risingfrom 16% to 23% of gross generation. Although the investments in thecompany's distribution system initiated under the first Bogota DistributionProject were effective in containing some technical losses, that project wasdevoted primarily to the expansion of the system and improvements in thequality of service and was not specifically designed to control energylosses. At the time the first project was undertaken, EEEB's system wassubstantially smaller than at present and energy losses were still consideredto be within an acceptable range. However, the rapid growth in the size ofthe company's generation and distribution capacity since then has engendereda steady increase in energy losses--a sizable proportion of which canprobably be traced to increasing energy theft. Energy losses result from acombination of factors whose relati've importance is rather difficult tomeasure. These include: (i) deterioration of the existing distributioncircuits; (ii) increased circuit loads and losses because of larger consumerdemand; (iii) lack of means to detect and to control energy thefts; and (iv)urban squatters illegally connected to the distribution system. A specificprogram to deal with the problem of energy losses is included in the proposedproject.
52. EEEB forecasts that demand for its production will continue to growat approximately 5.7% per year for the period 1985-1990, basing its projec-tions on the ISA forecasts described in paragraphs 37 and 38. The company'sbillings, however, are expected to grow faster than demand, achieving anaverage annual rate of 8.2%, as a result of the introduction of the proposedproject's energy theft reduction program. Industrial and commercialconsumers are expected to increase their share of the market since theforecasted GNP growth is based mainly on substantial growth in GIP (GrossIndustrial Product), while residential consumption will continue to grow atabout the same rate as during the 1978-1983 period. The number of consumersis expected to increase by about 5.0% per year, a slightly lower rate thanthe historical trend over the past five years (5.9%). This 5% takes intoaccount not only the continuing expansionary trend of the city and the incor-poration of the current illegal consumers, but also the progressive marketsaturation. Losses are expected to decrease from 22% in 1985 to 13% in 1990,as a result of the planned improvements in existing circuits and actions tobe taken to prevent thefts.
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53. EEEB's Finances. (a) Past Trends: Throughout its 25-year rela-tionship with the Bank, EEEB has maintained a reasonably sound financialposition. As a result of extra-fiscal measures taken under previous Bankloans, its financial structure has been steadily strengthened. EEEB's aver-age tariff rate has increased at an average rate of 13% per year since 1976.In past (during the period from 1969-1978), its internal cash generationcovered more than 50% of EEEB's average annual investment requirements,including substantial contributions to ISA.
54. (b) Recent Developments: Since 1979, however, EEEB's financialsituation has been adversely affected by several factors, not all of whichwere within the company's control. First, delays were encountered in obtain-ing Government authorization for tariff increases in 1980 and 1981.Secondly, the lack of local financing for EEEB's rapidly expanding investmentrequirements in the early 1980s--mainly for the Guavio and Mesitas projects--resulted in a deficit of COL$3.4 billion (US$62 million) which EEEB hasfinanced through arrears in its payments to ISA and to contractors. Thirdly,the percentage of unpaid bills in relation to the company's total annualsales showed a regressive tendency in 1979 and 1980 and these arrears furtherexacerbated the existing cash problems. Finally, in 1981 a rationing ofpower occurred in the interconnected Colombian system due to poor hydro-logical conditions and, as a consequence, EEEB's sales were approximatelyUS$40 million below the expected level. While the tariff situation improvedin 1983 and 1984 and borrowings from both local and external sources havecovered some of EEEB's most pressing financial needs, by the end of 1983 EEEBstill had accounts payable of COL$8.3 billion (US$93 million equivalent),consisting primarily of arrears to contractors (Guavio and Mesitas projects)and to ISA (EEEB's share in energy purchases and in ISA projects). Therecent devaluation of the peso promises to aggravate EEEB's financialproblems futher, and could force the company to reduce or delay its invest-ment program and adopt measures to improve its efficiency. On a morepositive note, the establishment of Financiera Electrica Nacional (FEN) willenable EEEB to obtain some of the additional long-term local currency fundsneeded to sustain its investment program.
55. Tariff Structure. There are, of course, limits to the rate atwhich tariffs can be raised. EEEB's tariff has, nonetheless, improvedsignificantly in the last few years without apparent negative repercussions.Although rate increases from 1976-83 did not keep pace with inflation, EEEB'stariffs did increase at an average rate of 131 per year during that periodand, in 1984 the company's average tariffs increased by about 32%, a ratewell above the actual inflation rate of approximately 18%. At the end of1984 EEEB's average rate (at Col$6.17/kWh) was among the highest inColombia. The tariff structure, however, lacks appropriate balance amongmajor categories of consumers and the tariff increases of recent years haveserved to accentuate this imbalance. EEEB will need to take action tocorrect this situation. The Government issued a Decree (No. 2545) onOctober 12, 1984 which established a new and nationally valid tariff struc-ture which, if adopted, would remedy the imbalances in EEEB's tariff struc-ture. This new decree, though legally in force, will be put into practicegradually, according to the particular condition of the utility involved. Asa condition of effectiveness, EEEB shall have begun to implement a new tariffstructure within the framework of this decree.
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56. Investment and Finance. During the period 1984-1991, EEEB's totalfinancial requirements will reach approximately US$4.8 billion equivalent,including US$2,242.5 million for the 1985-90 investment program outlinedabove (para. 54), as well as investments in ISA, interest during constructionand working capital requirements for the 1984-91 period. Although REEE'sself-financing capacity has been limited in recent past (as described inpara. 55 above), the projected 8.2% annual sales growth, combined withscheduled nominal tariff increases of 37% in 1985 and 1986, 23% in 1987 and18% in 1988-91 should generate internal funds adequate to finance 422 of theinvestment required for the 1984-91 period. The remaining financing require-ments are expected to be covered by contributions from ISA (22 of require-ments) and domestic and external borrowings (56%).
Financial Covenants
57. In order to ensure that EEEB continues to maintain a sound finan-cial position, the borrower has agreed: to generate funds from internalsources equivalent to at least 352 of capital expenditures; to produce a rateof return on assets of at least 12%; to limit the level of its accountsreceivable to 17X of total sales by 1986; to ensure that net revenues areequivalent to at least 1.5 times the company's estimated debt servicerequirements; to maintain tariffs at levels adequate to meet the above rateof return and internal cash generation requirements; and not to undertake anycapital expenditures beyond those required for the project, until the projecthas been completed. In addition, EEEB will make its best efforts to pay-offits arrears to ISA and its (EEEB's) contractors, in accordance with a time-table acceptable to the Bank, by December 31, 1986 and will, in any eventpay-off such arrears by December 31, 1987 at the latest.
Procurement
S8. Procurement of goods to be financed by the proposed loan, sith avalue of over $100,000 (except for vehicles for the Energy Losses ReductionProgram), will be through international competitive bidding (ICB) under Bankguidelines for procurement. Goods estimated to cost the equivalent ofUS$100,000 or less up to an aggregate amount of US$2,000,000, would beprocured through limited international bidding (LIB), to allow fasterpurchases in the case of additional goods needed for final adjustments to theproject. Goods and software (mainly spare parts, standard laboratory equip-ment, and software) estimated to cost less than US$100,000 up to an aggregateamount equivalent to US$500,000 would be procured by Direct Contracting.EEEB will procure vehicles for the Energy Losses Reduction Program throughlocal competitive bidding (LCB) to facilitate timely project execution. Thetotal cost of these vehicles would be USS100,000, less than 0.12 of the pro-posed loan. As the amount allocated to vehicles is so small, their procure-ment through LCB will not affect the project cost, while the benefitsexpected from early project start-up are important. LCB Procedures, which donot preclude foreign contractors from bidding, have been reviewed and foundacceptable to the Bank. Consultants' services to carry out the studiesincluded in the Project would be contracted under Bank guidelines. Consult-ants for technical assistance and training have already been selected withthe Bank's approval. Contracts for goods in excess of US$500,000 will besubject to prior review by the Bank. This should permit Bank review ofapproximately 80% of procurement.
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59. The goods to be financed from suppliers credits (without associatedBank cofinancing) will also be procured under international competitivebidding (ICB) limited to suppliers offering credit under ar^eptable terms andconditions. Procurement of poles and minor distribution accessories to befinanced by EEEB's internal sources will be through local competitive bidding(LCB). Costs of these local goods are competitive with foreign ones andtheir procurement by LC8 will not affect the project cost. Procurement ofcivil works to be finauced by EEEB's internal sources will also be throughLCB. Local contractors have proven to be successful and competitive forsubtransmission and distribution civil works. Procurement arrangements aresummarized in the following table:
Note: Figures in parentheses are items to be financed by Bank loan.ICB = International Competitive Bidding (for acquisition of equipment
and materials)LCB = Local Competitive Bidding (for construction works, acquisition
of poles, distribution accessories and vehicles, and contractingof local consultant services).
FA = Force Account (services to be supplied by EEEB)LIB = Limited International Bidding (for contracting consultants to
assist with EEEB's studies and losses reduction program, and for somepurchases not exceeding US$100,000.
DC = Direct Contracting (for spare parts, laboratory equipment and software)
Disbursements
60. Funds from the proposed loan will finance: (a) 100% of foreignexpenditures for imported equipment and materials; (b) 94% of the ex-factory
- 23 -
cost of locally manufactured equipment and materials; (c) 100% of foreign and50% of local expenditures for consultant's services and training; and (d)interest during construction and commitment charges for the period 1985-91.The estimated schedule of disbursements is based on the formulated procure-ment program and is in accordance with the corresponding Bank-wide standardprofile. A Special Account in dollars would be establiehed in Banco de laRepublica by EEEB, solely for the purposes of the Project. The Initialdeposit by the Bank into the Special Account would be in an amount of up toUS$9 million. This amount is adequate to cover the estimated disbursementsduring the first 120 day period after loan effectiveness. The bulk of theproject is expected to be executed by December 31, 1990, with minor works andtesting to be completed by June 30, 1991. The closing date should beDecember 31, 1991, six months after completion of the last contract, in orderto allow for payment of retention monies and unforeseen delays. All dis-bursements will be fully documented, except for contracts with values ofUS$200,000 equivalent or less, for which disbursements would be based onstatements of expenditures. Documentation for these expenditures will not besubmitted to the Bank but will be retained by EEEB for periodic review by theBank.
Benefits and Risks
61. By expanding EEEB's distribution system, the project will extendelectric service to 240,000 new customers, including a large number of low-income customers who will benefit from the systematic program of new connec-tions for consumers in marginal quarters, many of which have precarious anddangerous illegal connections at present. In addition, the proposedimprovements in the existing distribution system will increase the efficiencyof EEEB's operations (through reductions in technical losses and theft),thereby ensuring better quality and reliability of service for existingcustomers, along with improved financial prospects for EEEB and reduced needfor further investments in the sector's generating capacity. Improvements inorganization and management envisaged under the project should enhance theoverall efficiency of EEEB which would in turn assure the provision ofservices to the public at minimum cost.
62. Overall implementation depends to a large extent upon projectmanagement ability, mainly to coordinate design and procurement activitiesand there is some risk that shortcomings in this area may impede the timelycompletion of the project. However, the establishment of a project coordina-tion unit (para. 48) and actions being taken to improve EEEB's overallmanagement and organization (para. 49) should mitigate this risk to someextent.
- 24 -
PART V - RECOMMENDATION
63. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank and recommend that the Executive Directorsapprove the proposed loan.
A. W. ClausenPresident
AttachmentsNovember 4, 1985Washington, D.C.
- 25 - ANNEX I3JLA .. JA Past 1 of 6
gm~~~IIII t glealibL AnII
1auok 197A uumma LAT. A£UC31C A C& 0 namu6 (mor 53. no
TTAL 123619 1156.9 1136.9AGRICULURAL 350. 33 3J64
0 on 0wm .. .. 1430.0 1175.9 2146.3
(XILOAS W OIL *qUALR) 355.0 *93.0 00.0 903.6 L119.6
Lamm 202 OF HOURSEHLDS 2.14/[ 3.5LMST 400 O DUSROLDS 6.8 /h. 10.1 ..
ISSDATD ABSOLUTS PO?ETT IsCONLZVEL (USS PE CAPITA)
DRBA .. ... 214.0 d 286.3RomL .. .. 197.0 Id 165.3
ESTINATU RZLATrIV POVrTY Ilt3LVEL CUSS R CAPITA)
URBAN .. .. 2.7.0 /d 519.8RURAL 122.0 71 359.7
ESTINATED POP. BELOW ABSOLTp1KOYEtm INCOME LEVEL tX)
URBAN 34.0 /dRURAL
NOT AVALABLENOr APPLICABLE
NOTE S
/a The group average for each indicator are popuaatlou-aght.d aritboatic menu. Coverage of countriesmoon the indIctors depends on availabilicy of data and Is not uniform.
/b UnLearsn otborie noted. losta for 1960" ruWer to an year beten 1959 and 1961: "Data for 1970" betwen- 1969 and 1971; and data for "Mat Recent teti_te" between 1981 and 1983.
/c 1980; /d 1977; to 197A; If 1962; LL 1973; Lb 1964; /1 Including tracher trainin at the tertirrylevel; 7j Ec osoLally actTve population.
JUNE. 1985
ANNEX I-27 - Page 3 of 6
| DUEFINmONS OF SOCIAL trEDICATORS
Notes Although the dat, are drawn from sowuna geewray judmd the mon aulhorniutve and reliable. it should albo be noted that they may not be inteuonatllycomparable banue of the lick of standardized defintions end conopta uaed by different countrie n collecting the data The data are. nothelh. useful todewsne ords of mgmiude. indicate trends, nd charsetnric cermin major diltrenes hetit countre.Thr reference groups are It the sme country gtroup of he subjnt country and t2) a country group with so ht whi hgher average income than the countryxroupoufthesubject country lecept ror High Icorme Ott Exporters' group where -Middle lIcome North Arria and Middle East" incchon becu ofstrongerwslociculural affintiitl In the reference group 'lass the aveags are population weightid arithmetic means for each indiraor and rhown only when majoriyof the countrie in a group ha data for that ndator. Since the coveage orcountne anmonj the indmator depends on the availability ofdata and Is not uniform.caution muat be excied in mrelating verag of one indicator to another. Tbhec averages ar only uaeful in companng the value of one indcator at a ume amongthe countrv and reference groups
AREA (thousand sq.k-m.) Crude frth Rate (per theausa)--Numaber of livc births in the yearTrta-Total surface area comprising land area and inland waters; per thoustnd of mid-year population; 1960. 1970, and 1983 data.1960. 1970 and 1983 data. Crue Deak Rate (per ihomas)-Number of deaths in the year
Agr_wal-EEstimnate of agricultural area used temporaridy or per thoumnd or mid-year population; 1960, 1970. and 1983 data.permanently for crops. pasturers market and kitchen gardens or to Gron ARprduet Rad-Average number ordaughters a womanlie fallow. 1960, 1970 and 1982 data. will bear in her norma reproductive puiod if she experiences
pmsent ag-pecific fertility rates; usually live-year avcrages endingCNI PER CAPITA (USS)-GNP per capita estinutes at current in 1960, 1970. and 1933.market prices. calculated by -ame conversion method s World Fand P eg(t-mcasptr Ai (hadsi-AnnuaI nutn-Bank Atcas (1981-83 basis). 1983 data. berof aceptors ofbirtbh-control devices under auspices of national
ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program.consumption of commercial primary energy (coal and lignite. F lPTes f i e-Tepecen-petroleum. ntatural gas and hydra-, nuclear and geothermal dec- tage of married women of child-bearing age who are practicing ortricityl in kilograms of oil cquivalent per capita; 1960. 1970. and whose husbands are practicing any form of contraocption. Womn1982 data. of child-bearing age are generally women aed 15-49. although for
some countries conmraceptive usage is measurd for other agePOPULATION AND VITAL STATISTICS groups.
Toedl Popaiati n. Mid- Yew (thmamdf-As of July 1:1960. 1970. FOOD AND NUTRMONand 1983 data.
Index of Food hoduetillow Pr Capia (1969-71 - lift---Index of perUrban Pobpueio (peent of total) - Ratio of urban to total capita annual production of al food commoditics. Productionpopulation: different definitions of urban areas mav affect compar- excudes anim feed and seed for agriulture. Food commoditiability of data among countries 1960. 1970. and 193 dau. include primary commodities (e.g. sugarcane instead or sugar)
hprkdLnoa jroh s which are edible and contain nutrients (e.g. coffec and tea arePopulatron in rear 2000-The projection of population for 000. excluded): they comprise ccreals, root crops, pulses, oil seeds.made for each economy separately. Starting with information on vegetabls fruits. nuts, sugarcane and sugar beets, livestock, andtotal population by age and sex. fertility rates. mortality rates. and livestock products. Aggregate production of each country is basedintemational migration in the base year 1940. these parameters on national average producer price weights: 1961-65. 1970. andwere projected at five-year intervals on the basis of generalized 1982 data.assumptions until the poputation became stationary. Per Capa Suppl ofCaoris V rceotfaeaireAea)-Comput-Stanionanr' popuktion-is one in which age- and sex-specific mor- ed from calorie equivalent of net food supplies available in countrytalitv rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc-fertility rates have simultaneously remained at replacexent level tion. imports Icss exports. and changes in stock. Net suppliesInet reproduction rate = I) In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used inconstant and equal to the death rate. the age structure is also food processing. and losses in distribution. Requirements wereconstant, and the growth rate is zero The stationary population estimated by FAO based on physiological needs for normal activitysize was estimated on the basis of the projected characteristics or and health considenng environnental tcmperature. body weights.the population in the year 2000. and the race ofdecline of fertility age and sex distribution of population. and allowing 10 percent forrate to replacement level. waste at household level: 1961. 1970 and 1982 data.
Populatiom Mo mertum - Is the tendency for population growth to Per Ca'a Supply of Proein (gras per h.f)-Protein content ofcontinue beytnd the time :hat replacement-level fertility has been per capita net supphl of food per dav Net supply of food is definedachieved: that is. even after the net rep:oduction rate has reached as abone. Requirements for all countries established by USDAunity. The momentum of a population in the year t is measured as provide kIr minimum allowances of 60 grarms of total protein pera ratio of the ultimate stationary population to the population in day and 21D grams of animal and pulse protein, of which 10 gramsthe year r. given the assumption that fertility rem;ans at replace- should be animal protein. These standards are lower than those ofment level from year r onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an
pulatop De,iry average for the world. proposed by FAO in the Third World FoodPer sq.km -Mtd-year population per square kilometer I100 hec- Supply: 1961. 1970 and 1982 data.tares) of total area: 1960. 1970. and 19W3 data. Pr Capa Protein Supy From Axh.. ad Polse- -Protein supplyPer .q.km. agricultural land-Computed as above for agricultural offood derived from animalsand pulses in grams perday: 1961-65.land only. 1960. 1970. and 1982 data. 1970 and 1977 data.
PopulatioPAge Strw&ctre fperetjrr-Children (0-14 yearsi. work- Child (qes -4j) Dear Rate (per rhoasf)- -Number of deaths ofing age 115-4 years). and retired (65 years and over) as percentage childrent aged 1-4 years per thousand children in the same ageof mid-year population: 1960. 1970. and 1983 data. group in a given year. For most developing countries data derived
from life tables: 1960. 1970 and 1983 data.dopltton Growth Rate (perceufl-4ota-Annual growth races oftotal mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH
Popxfaton Growth Rate (percenr)-arbe-- Annual growth rates Life Expeteany t Birth (JyarsJ-Number of years a newbornof urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing patterns of mortality for all people
ANNEX I- 28 - Page 4 of a
at the tine of of iu birth were to stay the same throughout its Ufe; Aap-schAr aiole - prbrary. and nedry-Total students en-1960. 1970 and 1983 data roled in p ary and secondary level divid by numben orlafa Aieot Ae (pr theuadJ--Number ot infant who dle teachr In the cormpondnlg leves.before rching one yeaof ae per thousad live births In a givenyear: 1960 1970 and 1983 data. CONSUMPTIONAcme - 5 Whow ('cuft of p ad.th.-Mdt. 5 P&sseqwr Cm (pe theuuat pspmiesio-sPlsenger can com-irw-Number of people (total auban, and nrual) with reaonable pr motor car saling l than eght perona; exclud ambul-access to safe water upply (inlude tinted urface watm or ano, heses nd military vehic.untreated but uncontunaited water tuch a tha fron protcd RA A {p 'k idpeplslimutAl types of r vcrsboreholk, sprn nd ituy well) as peoentag4e a their r pee- ror radio broadcasts to genal public per thouand of populaion;dve population In -n uran am a public fountain or stanpoet cxdudes un-lcensed receives in countries ad in yeanr whenlocated not momn than 200 mess rsfromn a house may he consideord registration or radio st wa in effect data for ecent yean mayas being within reasonable asom of tha bou .irua ara not be comparable since most countries abolished licensg.reaonable acorn would imply that the housewife or n beombu othe Tmceive for bodcsthousehold do not have to sped a disproporionate part of the day toAgenera (puithousadpopaloe--TV receivs ens or Tin fctching the framily' water neds tO pnen pubc per thoue d populedon; ecdude u.U=nd 1VAeees a. E&its Eqeel (Fire'S if pepe_)_euj-raral, wArn rmeir in contries and in yea when rtration of TV eeu wassd uW--Number of peope (totaL urban, and rural) srved by effeeLexcreta disposal as pe t Ort of their respective populations. kliue a I (M t p lS ws the aver-Excmeta disposal may include the clction and disposal, with or aW OScilabuof 'd aiy widl interst newspaer," defined a awithout treatmet. of human excest and wase-water by water- peodic pubikatkni dpot primarily to recording al news.borne sytems or the use of pit privie and similar instalatonL It is considered to be dailry if it appean at bast four times a waek.Ppalsl.r pfPhydn-ftpudlaon divided by number of pr c- ClaSen Amend Araadre per Capit pe Yeer-Baed on theui ng physins qualified from a medicl school at univwnty level. number of tickets sold durng the year. including adminssons toPpuldk per Nw_iq PoWrar-Fbpulation divided by number of drive-in cinemas and mobile units.praccing male and female graduate nures. asistant nurse.praial nurses and nursing auxiii. LeOR FORCE.pall p -r IIw,E aee-eal, _m_, sa rarl-opulation Tel Laer Foce (rheas.ads-Economically active persons, in-(totaL urban, and rurl) divided by thir resPective number of cluding armed formes and unemployed but excluding houswiveshospidblbdsa*va in publica*nd prinvatcme, W d lze students, etc., covering population of all ags Definitions inhospitals eds aiablein publc ad ital ame establishmcat various countris are not comparabl 1960.1970 and 1913 data.penrmanently staffed by at least one physician. Establshments prov- Fa_Ide (pwertFecmale labor force as percentage of total laboriding principally cusodial cam amr not included Rural hospitals, form.however. indude health ad medicl centers not pennanently staffed Agrulr (pwcieaD-Labor force in farning, forestry, huningby a physi ian (but by a medical asistant, nurse. midwife. etc.) and fishing as pementage of total labor force 1960. 1970 and 1980which offei in-patient acconmnodation and provide a limited rangc data.of medical facilities. Iandaryp (perca)-Labor force in mining. construction. manu-Admsira per Heospital hi-Total number of admnissions to or facturing and eectricity. water and gas as percentage of total labordischarges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data.
Anicipse Rae (pererarj)-eo# mushn, dfemale-4artiapationHOUSING or activity rates an computed as total. male, and female labor forceAvege Sic of H.Aeh (pi- per h duakel)-,tan, sba, as percentagcs of total. malc and female population of all agesaEti-rsaL-A household consists of a group of individuals who share respectvely; 1960. 1970. and 1983 data. These ae based on ILO'sliving quarters and their main meals. A boarder or lodger may or participation rates reflecting age-sex structure of the population. andmay not be includzi in the household for statistical purposes. long tme trend. A few estimates are from national sources.Averge AN--er of Personu per Room--rotdal wham, _ad sal- Ecoenvi Dependrecy Rarie-Ratio of population under 15. andAverage number of persons per room in all urban. and rural 65 and over. to the working age population (those aged 15-64).occupied conventional dwellings. respectively Dwellings excludenon-permanent structures and unoccupied parts. INCOME DISTRIBUTIONPercentage f Dwelins wth Electricity--toral wba, and i-sal- , 'eeere of Totel Disposabl lao (both i ess cs ad kind)-Conventional dwellings with electriaty in living quarters as percen- Accruing to percentle groups of households ranked by total house-tage of total. urban. and rural dwellings respectively hold income.
EDUCATION POVERTY TARGET GROUPSA4asied Emrolueunt Rino The fotlowing estimates are very approximate measures of povertyPrnry school - total. mane aid female-Gross total. male and levels, and should be interpreted with considerable caution.female enrollrent of all ages at the primary level as percentages of Eitumred Abselmre Povery I1cme Levd IUSS per capir)-arhaurespective primary school-age populations, While many countries ad rura-Absolute poverty income level is that income levelconsider pnmarv scbool age to be 6-11 years. others do not. The below which a rpinimal nutritionally adequate diet plus essentialdifferences in country practices in the ages and duration of school non-food requirements is not affordable.are reficecd in the ratios given. For some countries with universal Esrnred Relive Poverty lc1 Levil (US per capita r-baneducation. gross enrolUment nmy exceed 100 percent since some ad rural-Rural relative poverty income level is one-third ofpupils are bdow or above the country's standard primary-school average per capita personal income of the country. Jrban level isage. derived from the rural level with adjustment for higher cost ofSecondary school - total. mak adfemale-Computed as above living in urban areassecondary education requires at least four years of approved pri- rtimed Popularw Below Absolite Povrty lacenw Level (per-mary instruction; provides general. vocational. or teacher training cria)-mrbae ad rural- Pfrcent of population turban and ruralinstructions for pupils usually of 12 to 17 years of age: correspond- who are "absolute poor."cnce courses are generally cxduded.Vocaional E,roilnen: (percent of secondon )---Vocational institu- Comparative Analysis and Data Divisiontions include technical. industriaL or other programs which operate Economic Analysis and Projections Departmentindependently or as departments of secondary institutions June 1985
ao - - 29 - r*
-U~~~~~~~~~~~ 4-) .a gm m m m n - m me
PiawO u u M i a1 W W Ab~~rAm*m a m A s5 4 w w ar w wra7 ~ ~ , MR U D 4Sw 6. U 2. zi iJ 2. 56 aa al 2.
_~~ 3.5.5 sr D,.2 U U w2 g6 3.9 57 51. 3.2 b
-mo 30 33 .M 3.2 IA is8 47 MA MA EW 2 5. 2 &&-J 7:D 7.? 7of 60 3L 36 7.2 J1 n2 D0 5 6 W NA AS9
d fd* 4*7 V4 4W * 3. .SA L7 DA iLl O1 I.J 1.3 IU VA%" cesob E a G %.1 50m 32 463 DA 9. 56 5 Mi 5. 03 5. D
am md3a so" %. _W k* 45 2 32 -A B M 2 52 3 IL6 3
4M 29 d 7a - 3 95U M V35 W -f -3 U3
3u a a% 3a - 4A -u - VA ZLI 13.2 V. 2.3 Le
--MMM 2 15 3 2i 12.3 MA SWn MO KW MO MD MOurn u, - --a -0 -v = -9
M3 a a M6 -aA. no. 41. 20 - LA 3. 123 W~ 11.IWeydqb 1.3 UR LOt 1. 52 *4.1 37 7 lA0 3.1 362 M. 3.9 D.9
aft X 2. 24 1. 19 LB S. w 3 9a 39 43. 5 J. U.
U. M3 Cl 7 -M) M2 - _ s
311 229 3. -.1 7.1 2.1 -.6 22. MA M UL Auwg - L Di 367 38 N.1 4h 173 51 J M MA
21 -m C 9 i S I10 13m1 186 3.7 MM -D5.3 MU 3.2 3.I' * XilO UR 19 3. 1. 9D j M9 122.5 I 12.2 2.9 1fl2
ment 24.8 3.41582 1978 Interconexion Electrica, S.A. Power 126.0 4.11583 1978 Colombia Power 50.0 10.41593 1978 Zona Franca Industrial y Industrial
Comercial de Cartagena Export 15.0 1.91694 1979 Colombia Urban Develop-
ment 13.5 6.21697 1979 Empresa de Acueducto y
Alcantarillado de Bogota Water Supply 27.9 0.11725 1979 Interconexion Electrica, S.A. Power 72.0 10.21726 1979 Instituto Nacional de Fomento
Municipal Water Supply 30.5 7.31737 1979 Instituto Colombiano de la
Reforma Agraria Agriculture Cr. 20.0 4.71807 1980 Empresa de Energia Electrica
de Bogota Power 84.6 32.61825 1980 Empresas Publicas de Medellin Communications 44.0 3.21857 1980 Banco de la Republica Industrial Cr. 150.0 32.41868 1980 Empresas Publicas de Medellin Power 124.9 48.51953 1981 Empresas Publicas de Medellin Power 85.0 64.91966 1981 Colombia Rural Roads 33.0 10.01996 1981 Instituto Colombiano de
Hidrologia Irrigation 37.0 13.9
1/ Includes exchange adjustment of US$4.0 million.
The status of the projects listed in Part A is described in a separate report on allBank/IDA financed projects in execution, which is updated twice yearly and circulatedto the Executive Directors on April 30 and October 31.
32 -
Annex I IPage 2 of 4
A. STATEMENT Or BANK LOANS AND IDA CREDITS (as of September 30, 1985)
Numbar Year Borrover Purpose Bank IDA Undisburmed
1"99 1981 Corporacion Electrica de laCost& Atlantica Power 36.0 15.0
2008 1981 Empreea de Energia Electric&de Bogota Power 359.0 171.7
2069 1981 Inetituto Naclonal de losRecursos NaturalesRenovables y del Medio WatershedAmbiente Management 9.0 7.2
2453 1984 Federacion Nacional de AgriculturalCafeteros de Coloubiano diversifi- 50.0 46.3
cation2464 1984 Banco de la Republica Industrial Cr. 40.0 30.4
2470 1984 Empresas Municipales Water Supply 18.5 17.3de Cucuta
2476 1984 Empresa Colonbiana de Petrol Petroleum 130.0 106.22477 1984 Banco de la Republica Development
Banking 90.0 82.7
2512 1985 Empresa Acueducto Water Supply 129.0 120.9Alcantarillo de Bogota
2551 1985 Republic of Colombia Trade Policy 300.0 185.5Export Diver-sification
26111/ 1985 Republic of Colombia Health Services
Integration 36.5 36.5
TOTAL 4,791.4 23.5Of which has been repaid 1,033.1 5.1
Total now outstanding 3,758.3 18.4
Amount sold 51.0 -Of which has been repaid 51.0 -
Total now held by Bank and IDA 3,758.3 18.4
Total undisbursed 1,593.4
1/ Not yet effective.
- 33 -
Annex IIPaxa 3 of 4
B. STATEMNT OF IFC INVESTMENTS (as of September 30, 1985)
Fiscal Type of Amount in US9 Millionyear Obligor Business Loan Equity Total
1959 Laminas del Caribe, S.A. Fiber-board .50 .501960-1965 Industrias Alimenticias
Noel, S.A. Food products 1.98 .08 2.061961 Envases Colombianos, S.A. Metal cans .70 - .701961-1968 Morfeo-Productos para el
Rogar, S.A. Home furniture .08 .09 .171961 Electromanufacturas, S.A. Electrical equipment .50 - .501962-85 Corporacion Financiera Development
Colombiana financing 6.00 2.02 8.021962-1963-85 Corporacion Financiera Development
Nacional financing 6.00 2.04 8.041963-1967 Compania Colombiana de Textiles 1.98 .15 2.131968-1969 Tejidos, S.A.1964-1970 Corporacion Financiera de Development
1984 Carbones del Caribe S.A. Mining 10.24 1.64 11.88
Total Gross Commitments 117.36 26.83 144.19Less cancellations, termina-
tions, repayments and sales 67.34 9.59 76.93
Total commitments now held by IFC 50.02 17.24 67.26
Total undisbursed (including 45.39 6.36 51.75participants) -
- 35 -
Annex IIIPage 1 of 2
COLOMBIA
BOGOTA DISTRIBUTION II PROJECT
Supplementary Project Data Sheet.
Section I: Timetable of Key Events
a) Time taken to prepare project: 18 months (from May 1983to November 1984)
b) Agency which prepared the project: EEEB
c) Date of Departure of Appraisal Mission: November 5, 1984
d) Date of Completion of Negotiations: April 30, 1985
e) Planned Date of effectiveness: March 31, 1986
Section II: Special Bank Implementation Actions
- The Bank will make its best efforts to schedule a 'Project Launch"meeting with EEEB in March 1986 to speed the commencement of projectimplementation.
- Coincident with this Project Launch meeting, the Bank *Lll review andcomment upon the detailed plan of action for the implementation of thetraining program to be undertaken by EEEB.
Section III: Special Conditions
- Establishment and entry into operation of two administi..tive units(for project coordination and energy loss reduction program) with powers andresponsibilities satisfactory to the Bank.
- EEEB to implement a restructuring of tariffs within the framework ofthe Government's Decree of October 12, 1984 in accordance with a schedulesatisfactory to the Bank.
- EEEB to take measures to reduce energy losses to specific targetlevels.
- EEEB to submit for Bank approval by December 31, 1985, the detailedplan of action for the implementation of a training program to improve EEEB'smanagement, strategic planning and technical skills; to employ consultants by
- 36 -
Annex IIIPage 2 of 2
March 31, 1986 to execute the program; and to implement the program promptly,taking the Bank's comments into account.
- EEEB to:
-maintain internal cash generation at 352 of capital expenditutes
-produce a 12Z rate of return on assets
-limit accounts reccevable to 17Z of total sales
-maintain debt coverage ratio oE at least 1.5
-maintain tariffs at levels adequate to meet rate of return andinternal cash generation requirements
-limit new investments until after project completion.
-pay-off its arrears to ISA and to its contractors byDecember 31, 1987 at the latest.
