Report No. 1054b-IND FLE COPYAppraisal of the Fifth Power ProjectPerusahaan Umum Listrik Negara Indonesia

April 30, 1976

East Asia & Pacific Projects DepartmentPower Division

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

US$1 = Indonesian Rupiah (Rp) 415Rp 100 = US$0.241

Rp 1 million US$2,410

UNITS AND EQUIVALENTS

1 liter (1) = 0.0063 barrels

1 kilovolt (kV) = 1,000 volt (V)1 megavolt-ampere (MVA) = 1,000 kilovolt-amperes (kVA)1 kilovolt-ampere (kVA) = 1,000 volt-amperes (VA)1 megawatt (MW) = 1,000 kilowatts (kW)1 gigawatt hour (GWh) = 1 million kilowatt hours (kWh)

ABBREVIATIONS AND ACRONYMS

APBN - Anggaran Pendapatan dan BelanjaNegara (Final Total Budget)

BAPPENAS - National Planning AgencyDIP - Daftar Isian Projek (Final Budget

Shares of the Various Government Departments)DUP - Daftar Usulan Projek (Budget Proposal)HSD - High Speed Diesel Oil

IDO - Industrial Diesel OilLV - Low Voltage

MV - Medium Voltage

REPELITA - 5-Year Development PlanSOFRELEC - Engineering and Management Consultants

PLN's FISCAL YEARS (FY)

1971-1973 - January 1 - December 31

1974/75 onward - April 1 - March 31

FOR OMCIAL USE ONLY

INDONESIA

PERIJSAY.AAN UCT 4L LISTRIK NEGARA

APPRAISAL OF THEFIFTH POWER PROJEtT

Table of Contents

LaZe No.

SUMMARY AND CONCLUSIONS i-ii

I. INTRODUCTION 1

II. THE POWER SECTOR 2

Existing Public Power Facilities 2

Sector Development 2

The Power Market 3

Development Plan 4

III. THE BENEFICIARY 5

Background 5

Procurement Procedures 6

Legal Status and Responsibilities 6

Organization and Management 7

Management Consulting Effort a

IV. THE PROJECT 9

Project Description 9

Cost Estimate 10

Amount of the Loan 11

Engineering and Construction 12

Procurement 12

Disbursement 12

Ecology 13

This report was prepared by Messrs. J. Carver and K. Stichenwirth andis based on information obtained during a mission to Indonesia inNovember/December 1975.

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

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Page No.

V. JUSTIFICATION 13

VI. FINANCIAL ASPECTS 14

General 14PLN's Financial Situation 15Subsidiary Loan 18Debt Service Limitation 18Tariffs 18Audit 19Billing and Collection 19Insurance 20

VII. AGREEMENTS REACHED AND RECOMMENDATION 20

ANNEXES

1. Installed Generating Capacity as of March 31, 1975

2. Peak Demand, Generation and Sales 1974/75

3. Customers, Sales and Revenues by Consumer Categories 1974/75

4. Actual and Forecast Generation (incl. Purchases) andSales 1967 - 1983/84

5. Investment Program 1974/75 - 1983/84

6. Summary of Legislation Affecting PLN and Organization Chart

7. Project Data (including Implementation Schedule and EstimatedSchedule of Disbursements)

8. Financial Data

MAP S

* IBRD - 3912 R2

TERD - 10304 RI

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PLN)

APPRAISAL OF THE FIFTH POWER PROJECT

SUMMARY AND CONCLUSIONS

i. The Fifth Power Project is part of PLN's ongoing West Java/Jakarta distribution rehabilitation and expansion program which startedwith the help of Credits 165 and 334-IND, both of which will be fullycommitted during 1976. The foreign exchange cost of the FY1977-1983portion of the program is estimated at US$244 million equivalent of whichUS$90 million equivalent (about 37%) is proposed for Bank financing.Recently the Kuwait Development Fund has expressed interest in contribut-ing about US$40 million which, should it materialize, would increase thecommitted foreign financing for the program to about 53%.

ii. The total cost of the proposed Project amounts to US$164 million.The Project scope includes part of the highest priority items necessary duringFY 1977-1980 to market the output of generating facilities already committed.

iii. The Project justification rests on the economics of having a reli-able power supply as well as uniform voltage supply levels throughout thearea, and the need for expanding service to consumers and areas presentlynot served. Given the difficulties associated with quantifying the benefitsaccruing to a slice of an ongoing distribution construction program, nointernal economic rate of return has been calculated. The internal finan-cial rate of return of PLN's development program is at least 11%.

iv. Procurement of the equipment financed from the proceeds of theproposed Loan will be in accordance with the Bank's Guidelines. With priorBank agreement, the procurement of items costing less than US$50,000 equiva-lent, up to an aggregate of US$500,000, may be permitted without internationalcompetitive bidding. Local preference in bid evaluation will apply. Sincenegotiations with the engineering consultants have not been concluded, satis-factory contractual arrangements between PLN and the consultant are a condi-tion of Loan effectiveness.

v. Since its involvement with the Indonesian power sector the BankGroup has paid particular attention to PLN's independence in procurementmatters. A recent Government decree appeared to transfer responsibility forall procurement of goods financed from the Government budget from PLN back tothe Government. This would have been undesirable in light of the importanceattached by the Bank to concentrating procurement, construction and operationof power facilities within one responsible entity. However, assurance wasobtainedduring negotiations that the Government involvement in the procurementactivities of PLN will be limited to supervision of the evaluation of bidsreceived by PLN for goods or services financed from funds of the nationalbudget.

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vi. So far PLN has adhered to the targets included in the FinancialRecovery Plan (Credit 399 and Loan 1127-IND) and prospects are good thatit will continue to do so. Consequently, the revenue/cost targets of 90%in 1976/77 and 100% in 1978/79 have been repeated in the documents of theproposed Loan. Furthermore, the Government and PLN have agreed to developa system of financial performance targets which, after concurrence by theBank, would be used after financial recovery to measure PLN's financialperformance.

vii. The proposed Loan would be made to the Government and onlent toPLN on the same terms, with Government bearing the foreign exchange riskand the interest and commitment charges.

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PLN)

APPRAISAL OF THE FIFTH POWER PROJECT

I. INTRODUCTION

1.01 The Government of Indonesia has requested financial assistancefor a distribution rehabilitation and expansion program of the West Javaand Jakarta area during the period FYs 1977-1983. The foreign exchangecost for this program is estimated at US$244 million. The proposed Projectwith an estimated total cost of US$164 million will cover the highest prior-ity requirements in the area during FYs 1977-1980. A Bank loan of US$90million is proposed to cover the foreign exchange cost, for a term of 25years including 5 years of grace. The Loan will be granted to the Governmentwhich will onlend it to Perusahaan UJmum Listrik Negara (PLN), the Beneficiary,on Bank loan terms. Recently the Kuwait Development Fund has expressedinterest in contributing about US$40 million equivalent to the program,raising the committed foreign financing to about 53% of the program.

1.02 The Loan would be the fifth Bank Group operation in the power

sector with PLN the Beneficiary in all cases. The first two credits (165and 334 IND) were made to help finance the first phase of rehabilitationand expansion of the Jakarta electric distribution system and Credit 339-INDand Loan 1127-IND contributed to the construction of units, 1, 2 and 3 ofthe Muara Karang steam plant in Jakarta.

1.03 All three Credits and the Loan provided for extensive institu-tion building aimed at making PLN a sound public utility. Funds were madeavailable for consultants in the fields of management and accounting im-provement, drafting laws and accounting systems, maintenance and operationmanuals, training of personnel as well as an organized system of activitiesaimed at leading PLN to financial recovery by fiscal year 1978/79. Addi-tional funds were provided for feasibility studies and for the Java SystemDevelopment Study which will guide the future power development of Java.

1.04 The management consulting effort has, on balance, been successfuland the progress achieved is encouraging. The FY 1975 revenue/cost ratiotarget of 80% has not only been achieved but surpassed and expectationsare that full financial recovery as required by Loan and Credit covenantswill be attained in FY 1979. During FY 1977 discussions will be held withthe Indonesian authorities on the financial targets to be reached afterfinancial recovery.

1.05 This report was prepared by Messrs. J. Carver and K. Stichenwirthand is based on information obtained during a mission to Indonesia inNovember/December 1975.

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II. THE POWER SECTOR

2.01 The public power sector is synonymous with PLN, a Governiment-ownedenterprise, responsible for generation, transmission and distribution through-out the country. It was created in 1965 through the merger of three national-ized utilities which had succeeded Dutch-owned private electricity corpora-tions.

2.02 Although PLN has the exclusive right to generate, transmit anddistribute electric power, companies or individuals are allowed to build andoperate generating stations for their own supply if PLN is unable to provideservice. In special cases, these auto-producers are allowed to distributeelectricity to consumers in surrounding areas.

2.03 Inadequate and unreliable public power supply has resulted inmany captive plant installations, representing an estimated 40% of thetotal installed capacity. These installations represent uneconomicinvestments, as small captive generating stations cannot compete incapital cost or operating efficiency with larger central stations. Also,the diversity factor is lost, so that more capacity must be installed incaptive plants than would be required in an interconnected system.

Existing Public Power Facilities

2.04 PLN's total installed capacity on March 31, 1975, was 1,047 MW(including the 125 MW Juanda hydro plant owned by the Jatiluhur Authorityfrom which PLN purchases the output). Including Juanda, it consisted of39% hydro, 24% steam, 25% diesel and 12% gas turbine capacity. These in-stallations are scattered throughout the country in small units and stations,with the largest plant, the 150 MW Tanjung Priok steam station in Jakarta,composed of 2 x 25 MW and 2 x 50 MW units. Details on installed capacity aregiven in Annex 1 and on peak demand, generation and sales in Annex 2.

2.05 Transmission and distribution facilities are inadequate. Majorload centers are not interconnected, resulting in high production costsand poor reliability. There exist approximately 3,100 km of lines rangingfrom 25 KV to 150 KV and about 1,500 MVA of transformer capacity.

Sector Development

2.06 Past sector development was largely determined by the foreignassistance available. Consequently, it was not always rational and systemstandardization suffered. An example is the distribution systems of Westand Central Java as presently under construction. West Java will have aEuropean standard of 20 KV medium voltage, three-phase distribution trans-formers and a 220/380 volt, three-phase, low voltage system. Central Javawill have an American standard of 23 KV medium voltage, single-phase distribu-tion transformers, and 220/440 volt, single-phase, low-voltage systems.The systems are not completely compatible. Further problems will occurin transmission because of differences in relaying and grounding practices ofAmerican and European standards.

2e07 With funds provided from Credit 399-IND, consultants (Preece,Cardew and Rider) were selected for a system development study for theisland of Java. They started work in November 1974 and the final report

should be ready in July 1976. Under a French credit a similar study is

being made for the island of Sumatra. The objective of these two studies

i s to provide guidelines for future power development and to establishan appropriately balanced sector investment program.

The Power Market

2.08 Power sector development has suffered both financial and imple-mentation constraints resulting in suppressed demand and power shortages.For instance, it has been estimated that for the island of Java duringFY 1975 the following condition existed:

MW % of Total

PLN Supplied 447 50*0

Voltage Restriction 110 12.3On-Peak Restriction 105 11.7Waiting List 58 6.5Self-Supplied 175 19.5

Underlying Demand La 895 100.0

/a Demand PLN would have served if its installationshad been adequate.

Above table indicates that PLN was able to supply only about 50% of

the underlying demand in 1975.

2.09 Development of electricity sales in the public sector has variedamong the supply regions. West Java, where the proposed Project is located,accounts for about 50% of the total market. Past results are summarized

below:

Total Indonesia West JavaSales (GWR) Annual Increase (%) Sales (GWI) Annual Increase (%)

1969 1,454 21 695 291970 1,589 9 773 11971 1,786 12 898 161972 1,893 6 960 71973 2,175 15 1,144 19

1974/75 2,444 10 1,281 9

The low sales increase in 1972 was caused by a low-water year for hydro-

electric power prcductcin and generation failures, and in 19714175 by systera

inability to serve the market.

2.10 On March 31, 1975, the number of customers supplied by PLN was1,086,105 of which 90% were residential. The distribution of sales bycustomer classes is shown in Annex 3.

Development Plan

2.11 The Java System Development Study presently under preparation byPreece, Cardew and Rider examines two load forecasts:

(i) growth rates of approximately 21% per year during theSecond Five-Year Development Plan FY 1975-1979 (RepelitaII) and 15% during Repelita III (FY 1980-1984) startingfrom the underlying demand level in FY 1975; and

(ii) a lower projection, assuming a three-year continuous lagin PLN's ability to satisfy the underlying demand during thedecade 1975-1984. This lag is based on the assessment ofPLN's financial and physical capabilities in implementingits expansion program.

2.12 The load forecast used in this report is based on the lower pro-jection and is assumed to apply to all of Indonesia. To meet it, the follow-ing investments would be required during Repelitas II and III (expressedin 1975 equivalent dollars - for details see Annex 4 and 5):

Repelita II Repelita III Total(FY 1975-1979) (FY 1980-1984) (FY 1975-1984)----------------- US$ million-----------------

Foreign Cost 1,136.5 2,170.4 3,306.9Local Cost 581.9 1,182.1 1,764.0

Total 1,718.4 3,352.5 5,070.9

This investment program would add 4,Z32 MW to the existing 922 MW of PLN'sgenerating capacity as well as the transmission and distribution facilitiesnecessary to market the energy.

2.13 Despite reduction of the investment program to meet the lowerprojection (para 2.11 (ii)), the forecast investments are still high. 1/ Thegeneration expansion program takes into account projects for which foreignexchange financing was arranged by December 1975, and what appears to be themost logical sequence thereafter. By end-1975, foreign financing of about 85%(US$985 million) of the investments to be executed during Repelita II wassecured. PLN's capability to raise the local funds depends largely on the

1/ PLN's own investment plan is considerably larger.

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Government priorities applied in allocating budget funds to the varioussectors of the economy. In the past the power sector was given high priorityin budget allocations and budget cutbacks were not as drastic as in othersectors. Consequently, the projected investment program for Repelita IIappears feasible. The planned investments during Repelita III will requirecontinued access to foreign exchange borrowings on reasonable terms andincreased internal cash generation.

2.14 Even after investment of US$5 billion, the level of public powerdevelopment will remain low as the following table illustrates:

Fiscal Year 1974 1979 1984

Estimated Population (million) 130 146 163Installed Capacity (MW) 917 2,404 5,155Generation (GWh) 2,932 5,970 16,410Sales (GWh) 2,175 4,500 12,900

Losses and Station Use (%) 25.8 24.6 21.4Number of Customers (thousand) 1,031 1,450 2,600Installed Capacity per Capita (watts) 7 16 32

Sales per Capita (kWh per year) 17 31 79Inhabitants per Customer 126 101 63

The very high ratio of inhabitants per customer indicates the low level ofelectrification. On a developed system with rural electrification completed,the ratio would be between 5 and 10.

III. THE BENEFICIARY

Background

3.01 Although created in 1965, PLN's corporate existence is based onthe 1972 Electricity Act which was issued as Presidential Decree No. 18/1972(Annex 6). In addition, a number of decrees interpret or amend the basic

Act. They are not only used to clarify issues not sufficiently treated in theexisting laws but also to regulate managerial and operational responsibilities.

3.02 The Electricity Act, which was drafted with the assistance ofSOFRELEC, PLN's management and distribution engineering consultant, was

originally aimed at creating an autonomous public utility which would be fullyresponsible for all its activities. This was considered important because

PLN functioned as a Government agency reporting to the Directorate General of

Eilectric Power, a Department of the Ministry of Public Works and Electric

Power. PLN's responsibilities were ill-defined and consisted in fact only

of day-to-day operations. Important matters such as system planning, con-struction, procurement and finance were the responsibility of the Directorate,

relegating PLN's management to a secondary role.

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3.03 However, during the discussions on the Act it became clear thatthe Government preferred a partially rather than fully autonomous body sincetotal autonomy would have been inconsistent with its policy of controllingimportant sectors of the economy. Consequently, it was agreed that the Govern-ment would retain responsibility for matters affecting the national economy--for instance tariffs and investment planning, and overall control--and PLNwould be charged with all aspects of power development and operation. TheDirectorate General of Electric Power was abolished.

Procurement Procedures

3.04 In reviewing the Electricity Act, the Bank Group gave particularattention to PLN's independence in procurement matters. This was essential inlight of the importance attached by the Bank to concentrating procurement,construction and operation of power facilitles within one technically qualifiedand responsible entity and also to overcoming previous inordinate delays inbid evaluation and contract award. Consequently, Article 8(b) of the 1972 Actclearly states PLN's responsibility to:

"construct and operate future generating plants and powernetworks, including the necessary procurement, in accordancewith sound commercial and industrial practices."

3.05 In the course of PLN's most recent reorganization (paras. 3.10-3.13) the Minister for Public Works and Electric Power decreed (Article 29 -Decree No. 12/PRT/1975):

"the procurement of goods and services for PLN, both from domesticand foreign suppliers, financed from funds of the Governmentbudget shall be undertaken by the Ministry through a JointCommittee consisting of representatives of PLN and the Ministry."

3.06 The new decree empowers the Government to take charge of all pro-curement for power and, if applied to the full extent, would reinstate theundesirable situation prevailing before 1972 with important responsibilitiessplit between the Government and PLN. However, during negotiations, assur-ance was obtained that the latest decree was meant to streamline and tightencontrol over Government-owned enterprises and departments, and that Govern-ment involvement in the procurement activities of PLN would be limited tosupervision of the evaluation of bids recieved by PLN for goods or servicesfinanced from funds of the national budget.

Legal Status and Responsibilities

3.07 PLN is a public enterprise (Perum). It is the executing agencyof the Ministry for power development throughout the country, carrying outits objectives within the National Development Program in accordance withGovernment policies.

3.08 The Minister of Public Works and Electric Power determines PLN'spolicy and exercises general control over its activities. He is assisted

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by an Advisory Board consisting of the Ministers of Finance, Industry, andNational Development Planning (Chairman of BAPPENAS) in deciding on import-ant matters.

?0o9 PLN is responsible for construction and operation of power facil-ities throughout the country, drafting of power development plans, drafting ofregulations on standardization' safety and licensing of captive plant, andentering into contracts for purchase or sale of electricity. It is also incharge of research activities in the field of electric power and of organizingpersonnel training. Its draft regulations must be approved and made public bythe Government to gain legal force.

Organization and Management

3.10 Effective September 9, 1975 PLN adopted a new organization scheme(Annex 6) I/ which introduced three operational levels:

(i) leadership level;

(ii) supporting services; and

(iii) execution level.

The leadership level, comprising the management together with the deputydirectorships, is responsible for overall planning and guidance, datacollection, and central accounting and budgeting. It also maintains contactwith all Government agencies. In the field of construction it reviews thebidding documents and decides on contract awards for major projects (seealso para 3.06). The supporting services consist of the power researchcenter and the training center. The executing level includes the regionaloffices for operation as well as for construction, called Special Projects.The regional offices are responsible for all activities within their respect-ive areas, including minor construction. Special project units are estab-lished as and when the need arises to carry out projects too large or tooimportant to be handled by the regional offices.

3.11 PLN's management (Board of Directors) consists of a PresidentDirector and at least two other Directors. In addition to the PresidentDirector, there are presently five, responsible for planning, operation,construction, finance and administration (including personnel). The membersof the Board are appointed and dismissed by the President of Indonesia uponrecommendation by the Minister. They normally serve a five-year term, butmay be reappointed. The President Director is responsible to the Ministerand the Directors report in their respective fields to the PresidentDirector.

3.12 PLN's middle management (deputy directors and chiefs of support-ing services as well as executing level) is appointed by the Minister upon

1i Decree No. 135PRT/1975 of the Minister of Public Works and Electric

Power.

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recommendation of the Board. The deputy directors are responsible to thedirectors in their respective fields whereas the chiefs report to theentire Board.

3.13 The new organization appears effective in transferring the respon-sibility for day to day operation and construction implementation to theregional managers. This is particularly important in light of the largearea PLN has to cover and the long distances involved. However it placesa large work load on the Board of Directors who are collectively responsiblefor solving the problems brought to their attention. Before the latest re-organization, matters of lesser importance were "filtered" through deputydirectors who could deal with them within their own sphere of influence.However, in general, the organization seems appropriate for PLN consider-ing the limited reservoir of qualified staff available.

3.14 As of March 1975 PLN had a total staff of 20,300. Although the num-ber of employees is high in comparison with its activities, a severe shortageof qualified personnel still prevails. For instance, PLN's personnel upgrad-ing program would require more civil and electro-mechanical engineers annuallythan are presently graduating from all the technical universities in the coun-try. PLN tries to overcome this problem through in-house training (trainingprograms have been developed by SOFRELEC), fellowships and overseas training(in part financed from Loan 1127). However, considering the magnitude of thetask involved, slow progress must be expected.

Management Consulting Effort

3.15 The management consulting effort financed by the Bank Group has beendescribed and evaluated in detail in a number of earlier reports 1/. Con-sequently, this report provides only information on the background and pre-sent status of the activities.

3.16 At the time of the Bank Group's first involvement in the power sector(1969) PLN was clearly in a chaotic state. Plant was inadequate, as were oper-ating and maintenance techniques; staff efficiency, pay and morale were low;plant construction as well as purchasing were outside management's control;and accounting and other records were either inadequate or nonexistent.

3.17 To remedy the situation, the Bank Group helped finance through Cred-its 165 and 334-IND a comprehensive management consulting effort, for which

1/ Appraisal Report Nos.:

- PU-18a Electricity Distribution Project, Jakarta/October 8, 1969(Credit 165-IND)

- PU-95 Second Electricity Distribution Project/June 2, 1972(Credit 334-IND)

- 87a-IND West Java Thermal Power Project/May 10, 1973(Credit 339-IND)

- 766-IND Fourth Power Project/May 20, 1975 (Loan 1127-IND)

Memorandum on Progress under the Recovery Plan/July 16, 1974 (IDA/SecM74-230).

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the French firm of SOFRELEC, assisted in accounting matters by Peat, Marwickand Mitchell of the UK, was selected. The consultants' first task was to laythe ground work on which improvement activities could be based. Records hadto be reconstructed and assets physically identified; large outstanding con-sumer accounts had to be verified and means found for their settlement; anew tariff, a charter for PLN and various manuals for plant operation andmaintenance had to be designed. This initial phase took about two years.

3.18 At the time of appraisal for Credit 399-IND in late 1972 PLN'sproblems were identified and recommendations for their solution were inhand. This, together with PLN's unfavorable financial situation, led tothe agreement on a program of measures designed to improve PLN's manage-ment capabilities and to overcome its financial weaknesses with time. Thisprogram, together with financial interim targets (para 6.01), was made apart of the documents of Credit 399-IND (Financial Recovery Plan).

3.19 The efforts made to date to turn PLN into a sound public utilityhave yielded positive results as well as temporary lack of success. Progressin the field of finance and accounting has been excellent. Good resultshave been accomplished in operations (thermal plant operation and maintenanceprocedures). Both achievements are due to the intensive training programinitiated by SOFRELEC. Progress in planning and project implementation,however, is slow. It is particularly in this field where PLN's severe shortagein qualified personnel is most apparent. PLN's management and SOFRELEC arecontinuing to pay particular attention to improving these activities.

3.20 Present plans envisage a gradual withdrawal of the management con-sultants during 1976, and replacement with about 5-7 individual advisers whowill be attached to the various departments. Financing fcr these advisershas been provided in Loan 1127-IND.

IV. THE PROJECT

4.01 Credits 165 and 334-IND were intended to help finance the first

five years of a program to rehabilitate and expand the distribution systemof Jakarta and to provide engineering services, training and management con-sulting services. Commitments under these two credits will be completedduring 1976 and with the continued rapid growth of the Jakarta area funds forfurther rehabilitation and expansion of the distribution systems are required.

Project Description

4.02 The Indonesian authorities submitted for Bank assistance a powerdistribution rehabilitation and expansion program covering PLN's require-ments in the West Java and Jakarta area between 1977-1983. The foreignexchange cost of this program is estimated at US$244 million. The proposedProject, with an estimated total cost of US$164 million, of which US$90 mil-lion is the foreign exchange cost, includes high priority items to implementpart of the program during the period FYs 1977-1980. Recently the Kuwait

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Development Fund has expressed interest in contributing about US$40 million,an amount which could be absorbed during FYs 1977-1980 through the purchase ofequally high priority items. However, decision on the Kuwait participationcannot be expected before end-1976. Consequently, the details of work to beaccomplished as included for illustration purposes in Annex 7 are shownwithout Kuwait participation. Adjustments will occur should Kuwait decide tocontribute.

4.03 Medium voltage (MV) systems will be standardized at 20 KV als the12 KV and 6 KV systems are gradually phased out. The low voltage (LV)systems will be standardized at 220/380 volts instead of the existing127/220 volt systems. These voltages were selected as the most economicalthrough studies made previously. The 150/20 KV and 70/20 KV substations re-quired for support of the Project are being provided under schemes beingfinanced from other sources.

4.04 The installed generating capacity in West Java was 445 MW with apeak demand of 292 MW for the year ending March 31, 1975. These will in-crease to 1,220 MW and approximately 755 MW for the year ending March 31,1980. Part of this increase of system peak (463 MW) will be absorbed bythe distribution systems and high tension customers, and part by the pro-posed Project.

Cost Estimate

4.05 The Project cost estimate is detailed in Annex 7 and summarizedbelow. The cost estimate and bill of materials were prepared by PLN withthe assistance of its engineering consultant SOFRELEC.

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Rupiah Billion US Dollar MillionForeign Local Total Foreign Local Total

Medium Voltage Systems (20 KV) 4.95 3.37 8.32 11.90 8.13 20.03

Distribution Substations 5.53 2.35 7.88 13.32 5.65 18.97

Low Voltage Systems(220/380 V) 3.62 0.75 4.37 8.71 1.78 10.49

Service Entrances 7.78 2.45 10.23 18.76 5.91 24.67

Voltage Changeover 0.92 2.98 3.90 2.21 7.19 9.40

Transport and Handling 2.71 0.91 3.62 6.51 2.19 8.70

Warehouse and StorageFacilities - 2.79 2.79 - 6.71 6.71

Mapping - 0.30 0.30 - 0.72 0.72

Enginieering and Overheads 1.49 1.85 3.34 3.58 4.45 8.03

Basic Project Cost 27.00 17.75 44.75 64.99 42.73 107.72

Contingencies - Physical 2.70 1.77 4.47 6.50 4.27 10.77

- Price 7.68 11.21 18.89 18.51 27.00 45.51

Subtotal Contingencies 10.38 12.98 23.36 25.01 31,27 56.28

Total Project Cost 37.38 30.73 68.11 90.00 74,00 164.00

4.06 The basic prices were determined from material and construction costsfor ongoing distribution projects during 1975. Physical contingencies of 10%are included to allow for unforeseen events. Price contingencies of 12%-8%-8%-8%per year on foreign costs and 20% per year on local costs have been includedto cover price increases during the construction period. The overall pricecontingencies amcunt to 38% of the basic cost of the project including physicalcontingencies.

Atmount of thle Loan

4.07 The proposed Loan of US$90 million equivalent will cover thie foreignexc1;.ange cos'- (55% of the total Project cost) of materials, equipmnent and en-gineering consulting services. Financing of construction costs is not propcsec.

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Engineering and Construction

4.08 The consultants (SOFRELEC) will continue to assist PLN in design,preparation of bid documents, award of contracts, supervision of constructionand further training of the PLN work forces. PLN and SOFRELEC estimate that490 man-months of field and head office time costing US$3.6 million equivalentwill be requiired by the foreign consultant and that the maximum number of per-sonriel assigned at any time will be 12. Either a new contract between PLN andSOFLRELEC will be negotiated or an extension of the existing contract wi11 bearranged. In either case, Bank approval will be required and Loan effective-ness will depend on the finalizing of the contract.

4,09 The estimated man-month cost for the foreign consultants averagesabout US$7,300 including salary, overhead and fee, which appears high for thetype of assistance required. However, even had negotations takeni placewith other consultants and a more favorable price been received, PLN judgedthat SOFRELEC's familiarity with the Project and with PLN's procedures wouldmiore than compensate any apparent savings. An allied consideration was thatSOFRELEC is to coritinue with training activities aimed at making PLN self-sufficient for normal distribution construction in the future. Nevertheless,PLN was urged during nregotiations to attempt to reduce the consultants chargeswhen the contract is discussed, Although 490 man-months have been allowed forin the cost estimate, actual requirements will be continually reviewed duringProject execution and reductions made as PLN's capabilities increase.

4.10 The Project will be constructed by PLN's force assisted by localcontractors. These forces have been trained under Credits 165 and 334 andthe proposed Project is a continuation of the same type of work. Additionalwork forces for the expansion to the other areas outside of Jakarta will re-ceive classroom training in existing training centers and on the job training.

Procurement

4.11 Equipment and materials to be financed through the proposed Loanwill be procured in accordance with the Bank Guidelines. With prior agreementof the Bank contracts with a value of less than US$50,000 each, up to anaggregate of US$500G000, may be petmitted without full international competi-tive bidding. Some participation by Indonesian manufacturers is envisaged, inwhich case a 15% preference on the c.i.f. price, or the prevailing duties, iflower, will be applicable.

Disbursement

4.12 Disbursement of the proposed Bank loan would cover:

(a) 100% of the foreign exchange cost of all imported materialand equipment or 95% of the ex-factory cost of locallymanufactured material and equipment; and

(b) 10C% of the foreign exchange cost of the consultant.

- 13 -

The estimated disbursement and implementation schedules are attached inAnnex 7.

Ecology

4.13 No ecological problems arise in connection with the Project. Incongested areas, the medium voltage system (20 KV) will be underground withtransformers located in kiosks and the low voltage system (220/380 volts)generally overhead. In less congested areas, both systems will be overheadwith the transformers mounted on poles.

V. JUSTIFICATION

5.01 Access to electricity in the Project area is very restricted and thequality of service is poor. There are about 44 persons per customer in theurban area of Jakarta and about 87 in the remainder of West Java. Accordingly,many industries, commercial establishments and even households generate theirown power in an uneconomical manner. Part of the problem has been lack ofgeneration and transmission, but the major problem has been, and remains,antiquated and inadequate distribution. Ongoing projects will eliminate theshortage of generation/transmission facilities and also have started distribu-tion rehabilitation and expansion (in particular Credits 165 and 334-IND) inJakarta. This distribution effort has to be continued to market the output ofgeneration facilities presently under construction. Rehabilitation of theexisting 6 KV and 127/220 volt systems is urgently required. They are com-pletely overloaded with voltage drops as high as 40% and with the averagecustomer receiving voltage 20% below normal.

5.02 The Project is a time slice as well as an area slice of the distri-bution system requirements of West Java. The peak load on the distributionsystems involved will increase from 234 MW (1974) to approximately 463 MW(1980), an increase of 229 MW. A total of 123,500 customers will be changedfrom 127 to 220 volt service and 140,100 new customers will be connected. Inaddition, 222 connections to private substations of large customers will havebeen provided (Annex 7).

5.03 In previous studies it was determined that distribution systemsusing 20 KV for medium voltage and 220/380 volt for low voltage were themost economical for expansion of the distribution systems in West Java.The present project continues the same trend, the only modification beingthat more overhead lines and pole-mounted transformers are involved as partsof the Project cover less congested areas.

5.04 As the Project is a time and area slice of various distributionsystems as well as being part rehabilitation and part expansion, it isimpossible to rationally allocate the increased sales and decreased lossesdirectly attributable to the Project. Part of the demand increase (229 MW)will be absorbed by the distribution expansion financed by Credits 165 and334-IND, part by customer-financed expansion and part by the present Project.Consequently, no attempt has been made to calculate an internal economic rate

- 14 -

of return for the Project. However, the internal financial rate of return ofPLN's development program is at least 11%. This return would be higherif it were possible to further reduce system losses and to increase saleswith the same investments.

VI. FINANCIAL ASPECTS

General

6.01 The objective of the Financial Recovery Plan (para 3.18) is toachieve full revenue/cost coverage 1/ in FY1979, with interim targets of 80%and 90% in FYs 1975 and 1977. Progress in meeting this objective is so fargood, with better than the 80% target met in FY 1975.

6.02 With financial recovery on schedule, the next step is to agreeon the financial targets PLN should reach after FY 1979. Therefore, duringappraisal PLN was informed of the Bank's general approach in maintaining thefinancial viability of public utilities, the targets used and the techniquesfollowed in measuring them. A summary of the Bank's policies in this respectwill be supplied to the Government and PLN.

6.03 Consequently, the Government and PLN have agreed during negotia-tions:

(i) to continue to adhere to the targets of the FinancialRecovery plan included in earlier documents (para 6.01);and

(ii) in consultation with the Bank, to develop by March 31, 1977,or such later date as the Bank may agree, a system of financialperformance targets which would be used after financialrecovery to measure PLN's financial performance.

1/ Revenues from sales of power plus other operating revenues divided byoperating expenses including expenses for operation, maintenance,administration as well as depreciation, allowance for bad debts, andinterest and similar charges on debt, if any.

- 15 -

PLN's Financial Situation

6.04 PLN's financial situation as developed over the past several yearsis summarized below (for details see Annex 8):

Fiscal Year 1971 1972 1973 1974/75 /1

Energy Sales (GWh) 1,786 1,893 2,175 2,444

Increase in Energy Sales 12.4% 6.0% /2 14.9% 10.3%

Average Revenues per kWh Sold (Rp) 8.6 9.0 11.1 /3 16.4

Operating Revenues (Rp billion) 16.5 18.7 24.5 40.3

Operating Expenses (Rp billion) /4 22.2 25.2 31.6 41.4

Operating Income (Rp billion) (5.7) (6.8) (7.1) (1.1)

Revenue/Cost Ratio 74% 73% 78% 97%

Rate of Return on Average NetFixed Assets in Operation - (7.2%) (6.3%) (0.4%)

Total Internal Sources /7(Rp billion) 8.0 6.2 9.4 /5 24.7

Investments (Rp billion) - /6 19.4 22.1 78.0

Percentage of InvestmentsFinanced through TotalInternal Sources 17 - /6 32% 43% /5 32%

/1 Until 1973 fiscal years coincided with calendar years. Since 1974/75the fiscal years extend from April 1 through March 31.

/2 Severe drought./3 Basic tariff increase effective June 12, 1973./4 Including provision for bad debts, but excluding lump sum settlement

of overdue Government accounts in 1973./5 Before lump sum settlement of overdue Government accounts./6 Investment records for FY1971 are unreliable./7 No debt service during 1971-1974/75.

6.05 Although the data used above is not fully reliable prior to 1973,it nevertheless provides an appreciation of the situation before the intro-duction of the recovery plan and the progress made in FY 1975. Operatingrevenues covered only slightly more than cash expenses and the apparentlyhigh ratio of investment financed through internal sources resulted from theabsence of any debt service and a small investment program.

- 16 --

6.06 PLN has exceeded the 80% revenue/cost target in FY 1975, reaching97%. However, this apparently favorable result was due to the followingreasons:

(i) maintenance expenses were less than they should have beenbecause of a serious shortage of trained maintenance per-sonnel; and

(ii) depreciation was less than it would have been had assetsbeen properly revalued. Since the last revaluation in 1971,assets are probably now understated by about 20% because ofinflation.

The additional operating charges because of these two factors would haveamounted to about Rp 5 billion, resulting in a revenue/cost ratio of 86%,still above the target level.

6.07 The Financial Recovery Plan concentrates on PLN reaching a break-even point, where operating revenues cover operating expenses. It does notspecify financial targets to be applied after recovery. This, together withthe lack of a domestic capital market and of government policies on powersector finanicing require more than the normal assumptions in projecting PLN'sfinancial position after the recovery period. In addition, a number offinancial parameters are not yet defined. The financing plan presented belowassumes that:

(i) operating and investment expenditures are based on 1975prices and no future escalation has been assumed. Thisis appropriate since PLN's tariff schedule permitsinflationary cost increases to be passed on throughsurcharges (para 6.13);

(ii) sales of electricity follow the low forecast basedon the Java System Study (para 2.11);

(iii) tariffs (and revenues) will be increased gradually fromthe 1975 level so as to reach a return on average netfixed assets in operation of about 7% by FY1986 topermit, on average, a net internal cash generationof about 30% of capital investments;

(iv) the foreign component of future capital investments willbe financed entirely through borrowing, on terms of 22years with a 4-year grace period, and average interestat 9% per year. During the grace period interest will befinanced; and

(v) the local component of capital investments, as far asnot covered through internal cash generation will befinanced through Government equity contributions.

- 17 -

6.08 Annex 8 shows in detail the financial results expected with theseassumptions. Following are summaries of PLN's financing plans during Repel-ita II and III:

FINANCING PLANS(US$ million equivalent)

REPELITA II REPELITA III(FYs 1975-1979) (FYs 1980-1984)

SOURCES OF FUiDS

Internal SourcesNet Internal Cash Generation 261.7 15.0% 871.8 25.4%Consumers' Contributions 180.2 10.3% 180.7 5.3%

Total Internal Sources 441.9 25.3% 1,052.5 30.7%

External SourcesGovernment Contributions 687.5 39.3% 202.2 5.9%Borrowings 620.0 35.4% 2,170.4 63.4%

Total External Sources 1,307.5 74.7% 2,372.6 69.3%

TOTAL SOURCES OF FUNDS 1,749.4 100.0% 3,425.1 100.0%

APPLICATIONS OF FUNDS

Investments /1Foreign Component 1,136.5 64.9% 2,170.4 63.4%Local Component 581.9 33.3% 1,182.1 34.5%

Total Investments 1,718.4 98.2% 3,352.5 97.9%

Variations in Working Capital 31.0 1.8% 72.6 2.1%

TOTAL APPLICATIONS OF FUNDS 1,749.4 100.0% 3,425.1 100.0%

/1 Based on 1975 prices without future escalation.

6.09 Above table and Annex 8 show that the planned investment programwould increase by 1984 PLN's total net fixed assets about 7.2 times comparedto the 1975 base. The return on average net fixed assets would rise fromabout zero to about 7%, increasing average net internal cash generation from26%-of investments during Repelita II to 31% during Repelita TII. Goverrmentassistance will be required in the form of equity investments and,lor loanswith grace periods on interest and amortization at least until FY 1979, Cor-sequently? theE existing Government undertaking to provide PLN the furms itneeds in. a form not requiring debt service during the recovery period hasbeen repeated with the pronosed Loan,

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Subsidiary Loan

6.10 As in Loan 1127-IND, the Government agreed during netogiations toonlend the proceeds of the proposed Loan to PLN on terms equivalent to thoseof the Bank Loan. In addition, the Government will finance interest andcommitment charges during Project construction to avoic debt service paymentsduring the recovery period, and bear the foreignn exchange risk during theLoan repayment period. Signing of the Subsidiary Loan Agreement will be acondition of effectiveness.

Debt Service Limitation

6.11 To avoid excessive borrowing, or borrowing on unreasonably shortterms, the debt service limitation test agreed on in Loan 1127-IND has beenrepeated in the Loan documents. The covenant allows PLN to incur debt as longas the maximum future debt service for all existing long-term debt includingthiat to be incurred, is covered by actual net revenues for the most recent12-month period. Bank concurrence is otherwise required for the borrowing.

Tariffs

6.12 PLN's revenues are based on tariffs which became effective onJune 12, 1973. The tariff structure is essentially that proposed by SOFRELECin its 1972 study as updated in September 1975. It includes low and mediumvcltage tariff classes to conform with the cost of service, and block tariffsa; e applied with decreasing unit charges for incremental consumption. Exceptfor unmetered consumers, separate demand and energy charges are being applied.

6.13 In addition PLN is permLitted to levy surcharges covering:

(i) transportaticn cost of fuel; and

(ii) increases in the price of fuel and other current expenses.

Government approval is required for adjustment of the basic tariff, butsurcharges can be levied by PLN.

6.14 In the past PLN imposed the same level of surcharges on all con-sumers, irrespective of tariff classes. While this was appropriate for thefuel c=mpcnent of the surcharge (betweeni 26% and 33%), it led to distortionsin the tar-iff structure due to the same treatment of the fixed cost component"bet:weer- 74% and 67%). Furthermore, the surcharges mentioned in paragraph6.13 (ii) vary between areas of the country due to political considerations.

6.15 At present, surchar-es represent approximately 25% of the basictariff and ideall&v ssioulld ba incorp;orated into the tariff structure. How-ever, this would se c-eer as a tariff increase and, considering that generalelections are due in 1977, wculd be difficult to agree by the Government.Durilug negotzaci,s ? in(-Anidaced that, in recognizing the deficiency inapplying the surcharges, it. already started to rectify these anomalies in thetariff lcharges Conseq;.iently, agreerrient nas been reached during negotiationsthat PLY wil , contiaue to reto rrnge its surcharges so as to restore costrelaedI pr:.ices.

- 19 -

6.16 PLN's level of tariffs plus surcharges (Annex 8) is high. Thisreflects the low system efficiency and the comparatively low proportion ofindustrial customers. It also results from the fact that PLN bases itssurcharge calculations on overstated budget estimates without later adjust-ment for actual costs at the end of the year.

6.17 To restrict load growth and also raise funds PLN imposes extreme-ly high connection fees. These result in charges from about US$120 perkVA for large customers to about US$480 per kVA for small residential cus-tomers. For the average metered residential customer, the connection chargeis approximately equivalent to 5-year billing on the basis of present tariffs.Once its capacity to serve the market improves these charges will have tobe reduced to more normal levels.

Audit

6.18 According to its Act, PLN must be audited by the Directorate Gene-ral of State Financial Supervision. This is a sub-directorate of the Govern-ment's Supreme Audit Council in charge of auditing state enterprises opera-ted on a commercial basis. A second sub-directorate deals with Governmentaccounting audits (for instance ministries and Government departments).

6.19 PLN is audited on a permanent basis with the help of localaudit offices (branches of the audit council) in the provinces and some-times sub-contracted local auditors in headquarters if sufficient auditstaff is not available. In addition to routine control, special auditsare carried out irregularly upon request of the Government.

6.20 Judging from earlier discussions with the auditor and from reportsreceived, audits are carried out competently. Although PLN would not objectto an additional audit by a private firm, such audit would not contributesubstantially to the understanding and efficiency of PLN's operations.A private firm would be particularly hampered by the long distances involvedand lack of regional offices. Consequently, the standard audit covenanthas been included in the documents of the proposed Loan with the under-standing that the Directorate General of State Financial Supervision would beacceptable to the Bank as long as it provides satisfactory audit. Auditreports will be sent to the Bank annually not later than 6 months after theclose of the fiscal year.

Billing and Collection

6.21 An earlier problem with PLN's huge arrears has been overcome andan overall three-month billing level maintained during the past three years.To ensure that billing and collection continue to be handled efficiently:

(i) the covenant requiring the Government agencies to paytheir debts to PLN promptly when due has been repeatedin the documents of the proposed Loan; and

- 20 -

(ii) PLN agreed during negotiations to continue to restrictaccounts receivable of customers other than Government agen-cies at the end of any month to not more than the amountbilled during the previous three-month period.

6.22 In the past PLN has been generally slow in settling its accountspayable and this has adversely affected its reputation with suppliers,likely resulting in higher price quotations than would have otherwisebeen the case. Consequently the covenant requiring PLN to settle itsdebt within one month after they are due has been repeated in the docu-ments of the proposed Loan. The one-month period should be sufficientfor settling disputes, if any.

Insurance

6.23 PLN does not presently insure its property in operation althoughinsurance against hazards of acquisition and transportation and deliveryof goods is regularly arranged. A recent review revealed that insurancerates are exorbitantly high in Indonesia and would be prohibitive for PLNas long as it is considered a high-risk company due to still low operationand maintenance standards. As an interim measure it was agreed in earlieroperations that the Government will provide PLN with the funds requiredto cover normally insurable damage minus a deductible amount equivalent toUS$100,000. This stipulation has been repeated in the Loan documents.

VII. AGREEMENTS REACHED AND RECOMMENDATION

7.01 During negotiations of the proposed Loan, agreement was reachedon the following principal points and appropriate covenants were includedin the documents:

(a) ministerial decree on procurement (para. 3.06);

(b) financial recovery plan and performance targets(para 6.03);

(c) tariff surcharges (para 6.15);

(d) audit (para 6.20); and

(e) maximum level of accounts receivable (para 6.21).

7.02 The following are conditions of Loan effectiveness:

(a) satisfactory contractual arrangements with the engineeringconsultants (para 4.08); and

- 21 -

(b) signing of the Subsidiary Loan Agreement betweenthe Government and PLN (para 6.10).

7.03 The proposed Project constitutes a suitable basis for a BankLoan of US$90 million, for a term of 25 years including 5 years of grace.

ANNEX I

INDONESIA

Perusahaan Umum Listrik Negara (PLN)

Fifth Power Project

Installed Generating Capacity as of March 31, 1975

Regions Hydro Steam Diesel Gas Turbine Total

Exploitasi I - 8,847 - 8,847Exploitasi II 120 _ 27,413 1)4,000 41,533Exploitasi III 70 - 22,720 - 22,790Exploitasi IV 1,320 25,000 30,601 14,000 70,921Exploitasi V - - 8,990 - 8,990Exploitasi VI 20,000 - 12,296 - 32,296Exploitasi VII 8,9h0 - 7,653 - 16,593Exploitasi VIII - 25,000 21,100 - 46,100Exploitasi IX - - 5,661 - 5,661Exploitasi X -- 11,300 - 11,300Exploitasi XI 219 - 38,869 - 39,088

Generasi I 116,432 50,000 19,387 - 185,819Generasi II 39,900 - 36,490 35,500 111,890Generasi III 91,075 1/ 150,000 1h,224 62,500 317,799

Distribution III 572 1 1,043 - 1,615Distribution IV - - 320 _ 320

Total 278,648 250,000 266,915 126,000 921,563

1/ Excluding the 125,000 kW Juanda hydro station owned and operated by theJatiluhur Authority.

INDONESIA

Perusahaan Umum Li..I: ZNearaPLN)

Fifth Power Project

Peak Demand, Generation and Sales - 1974/75

EnergyGenera- Percenttion Sales of

Energy Generation (GWh) Energy plus Losses (Gwh) EnergyPeak Pur- Pur- O n, Genera-

Demand Gas chases chases Transmission & Sales tion plua(NW) Steam Turbines Diesel Hydro Total (GWh) () Distribution (G) Purchases

Exploitasi I 4.2 - - 19.0 - 19.0 1.2 20.2 5.4 14.8 73.2%Exploitasi II 25.0 - 55.2 61.0 0.3 116.5 6.5 123.0 24.9 98.1 79.7%Exploitasi III 13.1 - - 57.6 0.2 57.8 1.2 59.0 16.4 42.6 72.2%Rxploitasi IV 28.6 75.6 14.8 42.4 9.1 141.9 3.3 145.2 49.0 96.2 66.2%Exbploitasi V 5.5 - - 29.6 _ 29.6 - 29.6 9.9 19.7 66.5%Exploitasi VI 11.9 - - 20.5 33.9 54.2 2.1 56.3 17.1 39.2 69.6%Esxploitasi VII 11.1 - - 10.2 29.3 39.5 - 39.6 8.3 31.3 79.0%RxD13itasi VIII 12.5 - - 61.7 - 61.7 - 61.7 10.9 50.8 82.3%Lxploitasi IX 2.9 - - 14.8 - 14.8 - 14.8 4.6 10.2 68.9%gxploitasi X 5.3 - - 25.2 - 25.2 - 25.2 6.8 18.4 73.0%Dxploitasi XI 11.8 - - 46.5 - 46.5 - 46.5 10.4 36.1 77.6%

Distribusi I 100.6 140.9 37.5 432.9 611.3 - 611.2 151.4 459.8 75.3%

Distrabusi II 53.6 - 48.2 84.2 201.6 334.0 - 334.0 88.3 245.7 73.6%lenerasi III, 290.9 622.6 42.5 26.4 381.7 1,073.2 700.0) 1,778.9Aistribusi III 1.1 - - 1.2 14.2 5.14 )497B 46.7 72.0%)istribusi IV - - - - - - 784.4

Total 578.1 839.0 160.8 537.4 1,093.7 2.630.9 3 3.345.2 901.1 2,114.1 73.1%

'ercent of ~hergyI,ervration plus 1erchases - 25.1% 4.8% 16.1% 32.6% 78.6% 21.4% 100.0% 26.9% 73.1% _

INDONESIAPerusahaan Umum Iistrik Negara (PLN)

Fifth Power Project

Customers, Sales and Revenues by Consumer Categories

for Fiscal Year 1974/75

Nunber of Tariff Sales % of Revenues % ofCustomers Classification (GWH) Total (Rupiah Millions) Total

Residential (Unmetered) 600,388 Al 485.3 19.9 4,787.2 11.9

Churches, Schools, etc. 10,468 A2 55.0 2.3 608.7 1.5

Residential (Metered) 358,625 B1 677.2 27.7 12,389a1 30.9

Commercial 86,407 B2 225.5 9.2 7,201.7 18.0

Industry (Small) 5,940 C1 108.3 4.4 2,031.0 5.1

Government Offices, etc. 16,690 C2 172.7 7.1 2,707.2 6.8

Street Lighting 980 D 62.5 2.6 827.0 2.1

Large Consumers 888 E 629.5 25.7 8,786.1 21.9

Temporary Connections 5,719 F 28.0 1.1 728.7 1.8.1,086,105 2,444.0 100.0 40,066.7 100.0

ANNEX 4

INDONESIA

Perusahaan Umnum Listrik Negara (PLN)Fifth Power Project

Actual and Forecast Generation (incl. Purchases) and Sales 1967-1983/84

Generation (incl. Purchases) SalesActual GWh Increase GWh Increase

1967 1,607 - 1,158 -

1968 1,766 5.7% 1,204 4.0%

1969 1,872 6.0% 1,454 20.8%

1970 2,084 11.3% 1,589 9.3%

1971 2,354 13.0% 1,786 12.4%

1972 2,498 6.1% 1,893 6.o%

1973 2,932 17.4% 2,175 14.9%

1974 (1. Quarter) 759 560 -

1974/75 3,345 - 2,444 10.3%

Forecast

1975/76 3,730 11.5% 2,750 12.5%

1976/77 4,255 14.1% 3,150 14.5%

1977/78 4,935 16.0% 3,700 17.5%

1978/79 5,970 21.0% 4,500 21.0%

1979/80 7,235 21.2% 5,500 22.2%

1980/83 8,890 23.0% 6,800 23.6%

1981/12 10,885 22.4% 8,400 23.5%

1968283 13,360 22.7% 10,400 23.8%

9(83/8 4 16,410 22.8% 12,900 2L.0%

ANNEX 5Page 1

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PLN)

FIFTH POWER PROJECT

Investment Program (,1974/75-1983/84)

1. The investment program for electric power as described in thefollowing paragraphs includes only the capital requirements of PLN. Someindustries, businesses and sometimes even domestic consumers have theirown source of supply (captive plant) but no reliable information is avail-able. A recent study by consultants estimates that 40% of PLN's demandin Java is being provided by captive plant, a figure which is likely toapply in other areas as well.

2. For years power sector development in Indonesia has suffered fromfinancial and implementation constraints, resulting in suppressed demand andpower shortages. This situation is expected to persist for some years evenwith the highest capital investment plan PLN is considered capable of imple-menting.

3. The investment program is based on the low forecast which is basedon a system study made by the consulting firm of Preece, Cardew and Rider.The study arrives at an average annual demand increase of about 20% duringthe coming decade, a figure which was assumed to apply also to the otherislands. The following summarizes PLN's investments during the Second andThird Five-Year Development Plans (Repelita II and III), details of whichare shown in the attached tables.

Fiscal Year Foreign Local Total Foreign Local Total-----(Rp billion) -------- -----(USS million) /1---

1974/75 44.0 34.0 78.0 106.0 81.9 187.91975/76 77.6 37.9 115.5 187.0 91.3 278.31976/77 113.8 57.2 171.0 274 2 137.8 412.01977/78 110.2 55.8 166.0 265.5 134.5 400.0

1978/79 126.1 56.6 182.7 303.8 136.4 440.2

Total Repelita II 471.7 241.5 713.2 1,136.5 581.9 1,718.4

/1 Rate of Exchange: US$1 = Rp 415.

ANNEX 5Page 2

Fiscal Year Foreign Local Total Foreign Local Total-----(Rp billion) -------- -----(US$ million) /L----

1979/80 127.2 62.6 189.8 306.5 150.8 457.31980/81 151.3 80.5 231.8 364.6 194.0 558.6

1981/82 185.5 103.3 288.8 447.0 248.9 695.9

1982/83 213.1 119.6 332.7 513.5 288.2 801.7

1983/84 223.6 124.6 348.2 538.8 300.2 839.0

TotalRepelita III 900.7 490.6 1,391.3 2,170.4 1,182.1 3,352.5

Total RepelitaII plus III 1,372.4 732.1 2,104.5 3,306.9 1,764.0 5,070.9

/I Rate of Exchange: US$1 = Rp 415.

These investments are based on 1975 prices; future price escalation has not

been provided. The generation expansion program takes into account projectsfor which foreign exchange financing was arranged by December 1975, and what

appears to be the most logical sequence thereafter. Investments for trans-

mission and distribution required to market the energy have been added; theseare larger than PLN's forecasts, which are considered inadequate.

4. The total foreign exchange cost of all projects to be undertakenduring Repelita II and III amounts to approximately US$3,457 million, of

which US$1,888 million is for generation and US$1,569 million for trans-

mission and distribution. By end-1975, foreign financing for about 25% ofgeneration (US$479 million) and 32% of transmission/distribution (US$506million) was secured. This leaves a total of almost US$2.5 billion to raisefrom external sources.

INDONESIA

Perusahaan Umum Listrik Negara (PLN)

Fifth Power Proiect

Investment Program

TOTAL INDONESIA

SUMMARY

1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84

Sales (GWh) 2,444 2,750 3,150 3,700 4,500 5,500 6,800 8,400 10,400 12,900

Generation (GWh) 3,345 3,730 4,255 4,935 5,970 7,235 8,890 10,885 13,360 16,410

Peak Demand (MW) 578 720 862 1,058 1,266 1,503 1,824 2,197 2,683 3,263

Installed Capacity (MW)Diesels 267 292 346 396 446 496 546 596 646 696Gas Turbines 126 191 431 631 771 771 771 771 771 771Steam 250 250 250 550 650 750 1,185 1,645 2,220 2,995Hydro 404 439 446 480 537 564 581 632 632 632Geothermal - - - _ _ 30 60 60 60 60

Total t 1_047 1_72 473 2,057 2.404 2.611 3.143 3.704 4 329 5 154

F L F L F L F L F L F L F L F L F L F L

Investment ProgramDiesel Plants 4.5 1.9 3.6 1.8 7.8 3.1 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0Gas Turbines 9.3 2.7 13.0 4.2 15.9 7.0 13.4 3.9 6.7 0.9 - - - - - - - - -Steam Plants 6.7 5.3 26.0 9.5 29.5 10.0 21.0 11.2 44.0 14.5 58.0 19.5 61.4 25.5 63.5 23.0 56.5 21.0 39.0 14.0Hydro Plants 2.3 1.3 4.0 4.1 7.9 7.6 12.0 5.5 9.3 4.0 4.8 2.5 14.5 8.0 29.6 21.3 44,2 27.6 50.2 27.6Geothermal - - 1.0 0.6 2.7 1.2 3.4 1.2 2.7 1.2 1.0 0.6 _ - _ - - - _ -

Subtotal 22.8 11.2 47.6 20.2 63.8 28.9 57.2 24.8 70.1 23.6 71.2 25.6 83.3 36.5 100.5 47.3 108.1 51.6 96.6 44.6

Transmission 9.0 9.0 14.0 6.0 31.0 13.0 32.0 14.0 31.0 12.0 24.0 11.0 28.0 12.0 36.0 16.0 45.0 20.0 58.0 25.0Distribution 12.2 12.0 16.0 11.0 19.0 13.0 21.0 14.0 25.0 17.0 32.0 21.0 40.0 26.0 49.0 33.0 60.0 40.0 69.0 46.0Supporting - 1.8 - 0.7 - 2.3 - 3.0 - 4.0 - 5.0 - 6.0 - 7.0 - 8.0 - 9.0

Subtotal 21.2 22.8 30.0 17.7 50.0 28.3 53.0 31.0 56. 3_3 0 S6.0 37 0 TS.0 44 0 5.0 56.0 105.0 68.0 127.0 80.0

Total Billion Rupiahs 44.0 34.0 77.6 37.9 113.8 57.2 110.2 55.8 126.1 56.6 127.2 62.6 151.3 80.5 185.5 103.3 213.1 119.6 223.6 124.6 x

Total Billion Rupiahs 78.0 115.5 171.0 166.0 182.7 189.9 231.8 288.8 332.7 348.2 o

Total Million Dollars 187.9 278.3 412.0 400.0 440.2 457.3 558.6 695.9 801.7 839.0

INDONESIA

Perusahaan Umum Listrik Negara (PLNHFifth Power Project

Investment Program

GT: Gas Turbine WEST JAVA

S : SteamH : Hydro Salesqenelation _Peak Demand and Installed Capacity

1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87

1. Sales (CWh) 1,281 1,390 1,590 1,850 2,250 2,800 3.400 4,000 5,000 6,150 7,200 8,500 10,100

2. Generation (GWh) 1,779 1,900 2,150 2,470 3,000 3,710 4,480 5,250 6,500 7,950 9,250 10,800 12,800

3. Peak Demand (MW) 292 330 425 520 625 755 900 1,030 1,260 1,510 1,730 2,040 2,400

4. Installed Capacity (MW)

Total Beginning of Year 405 445 465 625 890 1,090 1,220 1,420 1,620 1,920 2,220 2,520 2,820

Pulo Gadung (GT) 40 20 70 40 - - - - - - - -

Tanjung Priok (GT) - - SO 100 100 - - - - - - _ _

Cirebon (GT) - - 40 - - - - -Muara Karang (S) - - - 100 100 100 200 200 - - - _ _

Cilincing (S) - - - - - - - - 300 300 300

Cirebon (S) - - - - _ _ _ _

Saguling (H) - - - 300 300Cimanuk (H) - - - - - - 400

Jatiluhur (H) - - - 25 - - _ _ _ _ _ _ _

Kamojang (Geothermal) - - - - - 30 _ _ - - - - -

Total End of Year 445 465 625 890 1,090 1,220 1,420 1,620 1,920 2,220 2,520 2,820 3,520

'1-

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INDONESTA

Perusahian Um Listrik Nenara )Fifth_EnerL ~Pro ec~tInvestment Proaram

CENTRAL JAVAD0: DieselGT- Gas Turbine Sales. Generation Peak De nd and Installed CapacityS SteamH:[ ydra

1974/75 1975/76 1976/77 1977176 1978/79 1979/80 1980/81 1931182 1982/83 L983/84 1984/85 1985/86 1986/87

1. Sales (GWh) 246 340 390 530 600 650 700 850 1,000 1,250 1,500 1,800 2.100

2. Generation (GWh) 334 460 530 705 790 845 900 1,075 1,250 1,540 1,830 2,160 2,500

3. Peak Demand (9O) 54 81 101 145 163 174 186 222 258 318 380 450 520

4 Installed Capacity (YW)

Total Beginning of Year 92 112 118 143 245 265 265 350 405 405 605 605 785

Tegal (D) - - 5 - - - - - - - -Jogja (D) - 6 - - - - - - - _ _Semarasg (GT) 20 - 20 - -Sesaarsng (S) - - 100 - - 200Cilacap (S) - - - 55 55Sempor (S) - - - 1.5Garung (H) - - - - 20 -

Hrica (H) - - - - - - - - - - - 180 -Kaung (E) - - 170Karangs5mbang (H)Dieng (Gaothemal - - - - - - 30 - - - - -

Total End of Year 112 118 143 245 265 265 350 405 405 605 605 785 955

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INDONESIA

Perusahaan Umum Listrik Negara (PLN)Fifth Power ProjectInvestment Program

GT: Gas Turbine EAST JAVAS SteamH: Hydro Sales, Generation. Peak Demand and Installed Capacity

1974/75 1975/76 1976/77 1977)78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1B6/87

I. Sales (GWh) 460 510 580 660 820 1,000 1,300 1,750 2,200 2,750 3,350 4,050 4,800

2. Generation (GWh) 611 680' 775 880 1,080 1,300 k,670 2,220 2,750 3,400 4,100 4,900 5,700

3. Peak Demand (MW) 101 119 145 193 228 260 318 415 515 635 765 920 1,070

4. Installed Capacity (MW)

Total Beginning of Year 186 186 246 246 366 433 460 560 660 860 1,060 1,060 1,360

Surabaja (GT) - - - 20 - - - - - - - -Rungut (GT) - 25 - -Gresik (GT) - - - - 40Surabaja (S) - - - 100 - - - - -Gresik (S) - - - - - - 100 100 200 200 - 300Karang Kates (H) - 35 - - - - - - - -Wlingi (H) - - - - 27 27 - - - - - - -

Total End of Year 186 246 246 366 433 460 560 660 860 1,060 1,060 1,360 1,360

0O

*0

OQ

ffrufhmm Doug Ustolk Ngoar. (P1MFifth Power Icoloct1-.otaant Popt.r

GT Gas Turbin (in Rp billioc unlo othorwI. fnodicatd) Rat. of fachoo USS01 . Rp 415

S St_ -

0 :ydcro

TotalProjoct Coot 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 I90/8I 191/2 1982/83 1983/84 Source of

Foef n Local frnim ' l Foreign g esi-I !*i11 - a FoonLo 1g1 l oot.. 5gAj Ford an 70 Lj po7iSm T P.oc.. Lotol Fo7 Local Forof-i Loc 7 F.r0.ig Fli.-Cr

Gor tfon

Surabaja (CT Ix2O M) 1.7 0.6 1.0. 0.1 0.7 0.3 IFrac

OI.ggot (GT Is2S 1W) 2.2 0.7 1.2 0.4 1,0 0.3 - - - AID

Grulk (GT 2.0 NW) 3.4 1.1 - - - - - 1.7 0.6 1.7 0.5 - - - - _ - - - FrPcc.

qprabaja (S 2s50 IN) 17.3 7.4 1.5 1.0 7.0 3.0' 7.0 3.0 2.0 0.4 - -- - - - - - - Jop

Oraik (S 2.100 NO1) 28.0 10.0 - - - 3.5 2.0 7.0 2.0 7.0 2.0 7.0 2.0 3.5 2.0 - - -

Grcolk (S 2.200 NJ) 42.0 14.0 - - 6.0 2.0 10.0 2.3 10.0 2.5 10.0 2.5 10.0 2.5 6.0 2.0

Grodkt (S Lc30 0

O) 35.0 12.0 - -_3. 3.0 14.0 3.0

farmas tato (8 LoiS NS) 4.5 4.0 2.0 0.7 1.6 0.6 -- - - - _ JoPac

lagi (8 2i27 811) 11.7 7.2 _ _ _A _ 61 1 6 .& 14 0j. _ _ Jap-n

Total Gonrwatio. 4 7 2.1 MA12.5 id 9 1 j 5. 1t 5 17.0 13.5 m 5 20 0 5.0

INDONESIA

Perusahaan Umum Listrik Negara (PLN)Fifth Power ProiectInvestment Program

GT:,IGas Turbine OTHER AREASS SteamH Hydro Sales, Generation. Peak Demand and Installed Capacity

1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87

1. Sales (GWh) 457 510 590 660 830 1,050 1,400 1,800 2,200 2,750 3,350 4,050 4,800

2. Generation (GWh) 621 690 800 880 1,100 1,380 1,840 2,340 2,860 3,520 4,300 5,150 6,100

3. Peak Demand (Mw) 131 148 180 200 250 314 420 530 650 800 980 1,170 1,390

4. Installed Capacity (MW)

Total Beginning of Year 242 304 343 459 557 617 667 814 1,020 1,145 - - -

Diesels (Scattered) 37 19 49 50 50 50 50 50 50 50 - - -

Medan (GT) - 20 30 40 - - - - - - - _ _

Ujung Pandang (GT) - - 15 - - - - - - _ _ _ _

Palembang (GT) - - 15 - - - - - _ _ _ _ _

Medan (S) - - - - - - 55 55 _

Bukit Asam (S) - - - - - - 25 25 25 25 - - -

Ombilin (S) - - - - - - - 25 25 25 - - -

Ujung Pandang - - - - - - _ _ 25 25 - _ _

Palembang 25 - - - - - _ _ _ _ _ _ _

Batang Agam (H) - - 7 3.5 - - _ _ _ _ _ -

Tes (H) - - - 4 - - - - - - - - -

Riam Kanan (H) - - - - 10 - - - - _ _ _ _

Ayung (H) - - - - - - - - - - - - -

Sawangan (H) - - - - - - - - - - - - -

Sentani (H) - - - - - - - - - - - - -

Maninjau (H) - - - - - - 17 51 - - - _ _

Total End of Year 304 343 459 557 617 667 814 1,020 1,145 1,270 - - -

OQI'

¢~~~~~~~~~~~~~~~~~~~~~~~~~E

lNDON SlAP9r..hW% n 1 Nl&qrk N 42 (PLN)

Ftftht Por Pro1etlay., lent Pronar

(I. Sp billio. -I..a othb.... iadicat.d)

D: Dt...1OTt G-o 7r18. OTHR ARWI 8cc at 5f xaig-. US$I * Rp 415S Ste

Prfnjct Cwt 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85ro ln Lo*a1 Ioniz !t0loc Ij k2gll F2r.t Forj paobels 1t1 For10so cal Fo70d11 . P org* joj rOr10m Lo.I Io Los F." 1 00..i F-nn.

0.mttnaMthi.rl..d.,

Df_d (D) - - 4.0. 1.7 2.8 1.4 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 7.4 3.0 UK, AID, ADB)

Had= (CT 120 381) 1.7 0.6 0.8 0.3 0.9 0.3 --------- -

ID (4GT 2.3 UN) 2.6 1.0 - - 1.3 0.5 1.3 0.5 - - - - - - - CIDA

l.id= (CT 2201 8) 1.4 1.1 - - 1.7 0.6 1.7 0.5 - - - _ -

kj.mg Pft.g (ST 2x.3S) 1.3 0.5 - 0.7 0.3 0.6 0.2 - - - - - - - --_ - CI_A.. AF .

ftld_bg (Of 1.15 1U)1'. 1.3 0.S - 0.7 0.3 0.6 0.2…- - Cr……… - _ - CIBA

14d.4. (S 2253 W) 19.4 8.2 - - - 2.0 2.2 7.5 2.0 7.5 2.0 2.4 2.0 - _ - - -_ Y 2g01-i.

lkt As- (S 4x25 N 22.0 9.0 _ _-_-_ 3.0 1.0 4.0 2.0 4.0 2.0 4.0 2.0 4.0 1.0 3.0 1.0

421e (8 25531") 17.0 6.0 … … … … … … … … …1 2.0. 1.0 4.0 2.0 4.0 1.0 5.0 2.0 2.0 1.0

jm3w4 * d S (2x23 2 Yt) 11.0 4.5 - _- - 1.0 1.0 4.0 1.5 3.0 1.5 1.0 1.0

t*1mb CB Z322.5 N1O 7.0 2.5 0.7 0.3 _ _ _ _

t4 _ti Agoeft W3. 17 2.6 4.6 0.3 0.6 1.0 1.7 1.0 1.7 0.3 0.5

Illo ( 2.2 ) 0.6 0.2 - - - - 0.3 0.1 0.3 0.1 - - - - - -

862. K1, (12.I1008) 1.6 1.5 - 0.2 0.4 0.6 0.4 0.6 0.4 0.2 0.3 - - -_ -

ASih (11 IxlO 3) 1.7 1.-5------ - - - - - --- - - - --

S6.6ap (t 2x.O W) 1.9 1.53 - - - - - - - - -_ _ _ _ _

S_tmnt ( 210 UNW) 4.6 3.0-- - - --- - - -_

°Olij" (I 4m%7 911) 17.0 11.0 2.0 2.0 4.0 2.. 4.0 2 5.0 5 3.0 2.0 2.0 _ _ _ - ADD

T1tl Gma11r id id 2. 7. 4a 6.7 14.3 22.1 t. 24.9 10.0 a21.- 9-5 134

7

ANNEX 6Page 1

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PEN)

FIFTH POWER PROJECT

Summary of Legislation Affecting PLN(as of December 31, 1975)

1. The following is a summary of the Indonesian legislation as far asit affects directly PLN's legal status and activities. In particular itcomprises:

(i) Government Decree No. 18/1972 dated May 18, 1972 ofthe President of the Republic - PLN's Charter;

(ii) Decree No. 12/PRT/1975 dated September 9, 1975 of theMinister of Public Works and Electric Power - GeneralPolicy, Objective and Scope of Activities. This regula-tion revokes Decree No. 13/PRT/1972;

(iii) Decree No. 13/PRT/1975 dated September 9, 1975 of theMinister of Public Works and Electric Power - Organizationand Business Rules of PLN. This regulation revokesDecree No. 1/PRT/1973; and

(iv) various decrees on budget administration.

Status

2. PLN is a Public Enterprise (Perum). It is the executing agencyof the Ministry of Public Works and Electric Power for power developmentthroughout the country, carrying out its objectives within the NationalDevelopment Program in accordance with Government policies. All legalprovisions existing in Indonesia and not revoked or modified by abovedecrees continue to apply.

Responsibilities

3. Most of the activities mentioned below are PLN's exclusive res-ponsibility. In some cases, however, the Government retained the rightof final decision, and if so, appropriate notes have been made. PLN'sresponsibilities are:

ANNEX 6Page 2

(1) construction and operation of generation, transmissionand distribution facilities including procurement. Despite

Decree No. 12/PRT/1975, which provides the Government

with the authority for procurement of goods and services

financed from the national budget, an undertaking, was

received from the Government during negotiations that it

will restrict its involvement to bid evaluation only0

(ii) drafting of power development plans based on demand sur-Veys

and load forecasts. These programs become part of i-enational development plan and, conseque-ntly, are srbiectto Government approval;

(iii) drafting of regulations licensing power installations owned

by third parties. After approval by the Minister, adminis-

tration of the regulation becomes PLN's responsibility.

At the moment the following licensing rules apply;

(a) no registration is required for power generatorsof less than 2 kVA capacity;

(b) generators with a capacity of 2-25 kVA must be

registered with PLN;

(c) prior to installing a generator of more than25 kVA capacity, a permit must be obtained fromPLN; and

(d) installations existing before May 18, 1972 (dateof PLN's Charter) are exempt from above licensing

provisions.

(iv) entering into purchase or sales contracts of electric

power with third parties;

(v) organizing of training for its personnel; and

(vi) conducting research in the field of electric power.

In exercising its responsibilities, PLN is entitled within the framework of

existing laws and regulations to:

(i) make use of private and public roads;

(ii) enter into and/or make temporary use of public and

private property;

(iii) install wires and cables above or under public and

private property; and

(iv) dig in public as well as private roads.

ANNEX 6Page 3

Supervision by Government

4. The Minister determines PLN's policy and exercises general controlover its activities. He is advised by an Advisory Board consisting of theMinisters of Finance, Industry and National Development Planning (Chairmanof BAPPENAS) on all policy matters, including annual and long-range develop-ment programs, tariffs, audits and other issues of major importance for PLN'sactivities.

Management

5. PLN's management is in the hands of a Board of Directors consistingof a President Director and at least two Directors. At the moment there arefive Directors responsible for planning, construction, operation, financeand administration. The President Director is responsible to the Minister,the Directors report to the President Director in their respective fields.

6. In performing its management functions the Board acts as an agentof the Minister. The members of the Board are appointed by the Presidentof the Republic for a maximum period of 5 years. They are eligible for re-ap-ointment.

7. PLN's middle management consists of (see also Organization Charton page 7):

(i) Deputy Directors in headquarters;

(ii) Director Power Research Center;

(iii) Director Training Center;

(iv) Chiefs, Regional Offices; and

(v) Chiefs, Special Projects.

They are appointed by the Minister upon recommendation of the Board. Theofficials mentioned in (i) through (iv) are responsible to the Board.Concerning the Chiefs, Special Projects the decree is not clear. For allpractical purposes, however, they can also be considered as responsibleto the Board.

OKanization

8e The organization is divided into three distinct levels whichreflect the fact that PLN has to cover a huge area with largely inadequatecommunication and transportation facilities:

(i) Leadership - Board of Directors together with the deputydiractorships, all located in headquarters.Internally the leadership level is respon-

ANNEX 6Page 4

sible for overall guidance, planning andpolicy matters in coordination with the Minis-try. Externally it keeps contact with allagencies of the Government, particularly theMinistries of Public Works and Electric Power.Operationally headquarters performs all thetasks prior to implementation (for instancedrafting and review of bidding documents, bid-ding documents, budget, and operation of thecentral warehouse and workshop) and collectionand finalization of statistical and accountingdata.

(ii) SupportingServices - Power Research Center and Training Center.

(iii) ExecutingLevel - Regional Offices and Special Projects. The

regional offices are responsible for alloperational matters within their area as wellas the implementation of minor projects.Special Projects are construction implementa-tion units for projects too large or tooimportant to be handled by regional offices.

9. PLN's directorates in headquarters have the following responsi-bilities:

DirectoratePlanning - Technical as well as management planning; input

for the national development plans; designing oftechnical standards throughout the country; eval-uation of application for captive plant licenses;and bid evaluation and bid award.

DirectorateOperation - Guidance and supervision in matters of

operation and maintenance of generation,transmission and distribution facilities;construction of minor distribution facili-ties; operation of the central workshop andwarehouse; and drafting of power supply con-tracts with third parties.

DirectorateConstruction - Guidance and supervision in project implemen-

tation; research on improvement of constructionmethods; procurement of construction equipment,if required; construction contract supervision;and drafting and supervision of constructionbudget.

ANNEX 6Page 5

DirectorateFinance - Central accounting and financial management;

drafting and supervision of the revenues andexpenditures budget; and internal audit.

DirectorateAdministration - Performance of administrative services; person-

nel management; legal assistance; Board secre-tariat; and personnel safety.

Audit

10. PLN's external audit is the responsibility of the DirectorateGeneral of State Finance Control. PLN has to submit its annual accountsfor auditing not later than 6 months after the end of the fiscal year. Theaudit should normally be completed within 3 months. The Directorate main-tains staff in PLN's headquarters who are responsible for a permanent audit.

Budget

11. The budget of revenues and expenditures is within PLN's authorityand has to be submitted to the Government only for information and as sup-porting data on internal cash generation. The investment budget, however,is subject to strict Government regulations and, although PLN enjoys slight-ly more autonomy than other state enterprises, the budget process is stillcumbersome. The following paragraphs illustrate the preparation, approvaland supervision process of PLN's investment budget.

ANNEX 6Page 6

12. Budget Calendar(Fiscal Year April 1 - March 31)

SeptemberthroughDecember - After negotiations with BAPPENAS on work programs

to be performed in the coming fiscal year as well asbudget ceiling settings (this is in fact a con-tinuous process), the final budget proposal(Daftar Usulan Projek - DUP) is submitted throughthe Minister of Public Works and Electric Powerto BAPPENAS and the Ministry of Finance to beincluded in the Rencana Anggaran Pendabatan danBelanja Negara (RAPBN), the overall budget pro-posal.

January - The President of the Republic submits the overallbudget proposal to the Parliament for approval.

March - Before the end of March the Parliament has to finishits deliberations on the budget proposal which,after approval, becomes the final budget (AnggaranPendapatan dan Belanja Negara - APBN).

April - The Ministry of Finance through the Minister ofPublic Works and Power informs PLN of its shareof the final Government budget. This is calledDaftar Isian Projek (DIP).

13. For each fiscal year regulations on budget withdrawal proceduresare stipulated by Presidential Decree. They may differ somewhat from yearto year, but in principle remain unchanged. In the case of PLN the variousregional Treasury offices receive authorization to release quarterly thebudgeted amounts over which PLN then has spending authority.

INDONESIAPERUSAHAAN UMUM LISTRIK NEGARA IPLNI

FIFTH POWER PROJECT Page 7 of 7 PagesORGANIZATION CHARTIJ

BOARD OF DIRECTORS

DIRECTOR DIRECTOR DRECTOR DIRECTOR . R_ PLANNIONG _ OPRATION _ CNISTRUCTION _ FINANCE _ ADMINISTRATION

DEPUTY DIEPUTY DIRET DEPUTY DIRECTOR POWER SEARCH TRAINING_GNENERAL PLANNING CENTERAN _ GAE TUREINE R -1 PADG"_ PERSONNELCENTER

OpeEIoSn EflcrsInnIl

01tglon _Dudg SIrA-0° CR1110 AChlyRSOnO e

_Fore gn And G EW,Ron Doo.on DRICICD

ENERAL PLAnNING GASD- DIEDEL AND PLTREASURER NSNCnCNo

DEPUTY DIRECTOR DEPUTY DIRECTOR

_ P_ LOGISTICS Don_ DEPUTY DIRECTOR|

_D gccl Stallons 4GemS.dll mcutn Sdg s Admntae

DEPUTY DIRECTOR DEPUTY DIRECTOR ~ ~ GM-- D-.

_Hydm Stalront X MAINTENANCE | i NETWORKS lDvso ._NPIwGrkT |DPLANNINGCTOIRl DEPUTY DIRECTOR Le_Ll

DEPUTY DIECTR |L° tatDn gnACCOUNTING ColHv 0

ADMINISTRATION | Oth r Thern_ | Oevwn | P of t _Tnehowl

YACoISCISOh cn0,o1 0 Dboa.ll DoomR

OffBees C ntrnl _ ~~~~~CONSTRUCTION I Of AuS D EPURTY DIRCO

_Nss p9seRn9 -Wprk hOs> H ~~ADMINISTRATION ACCAg IRunIOg

EPT DIRECTO.DEPUTY DIRECTOR |

TEC.N.CAL LOGISTICS ~ ~ ~ ~ ~ ~ ~ ~ ~ INERALPSSCOS

~~~~~~U .. 4Dhwn.. L , R11-1

TW-I ~ ~ ~ ~ ~ ~ ~ ~ n Dwhm----"'Ouw

DEPUY PECTS | RECCTOS-

STnei lRRI SPm .DEISS -¢ nI.X ERRSp inl TCCrI RE o AceR Ihu.dR...t. Bla. AUlAand CERn III USA SIS P v G 2. Nonh SpmrC RhbAnlSs M.

10.05. No. 3C01KPTS/1975 At 4. SORER SOCCrI. L15*g SaRgEall ndARI. M,n,St.r CI PRhE. Work. and JvdHi IhedAOCRaC nSREEIRCrIC PoRSS ASId NoIRRC R. 1R751. s. ROSS, KSARDC.R IRS.AouIrl: PC.R NIttk

6. C mrnlD. E.S nd SOROR Kblim R

ADM_0TWEP.", 12 E n C. S/ The Orinl-nin Ch n nFlncls PLANNNG Acg,..l.nihn 9sTl;N ac mhd d by D po No D13/PRT/litS ol Inr SurnI

yn ~ ~ ~~ . Off..d ridB k150

G .M Othan S.,I.R R.-

S. ttOrAC lt..RCR D. o,Rtt

AU. d.Eat l WT NstIO

iN D-- ~ ~ ~ ~ ~~lEhSEtR O.EC.

I,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~f,

lila MInOER 0 PIIREO WOOl eRA RERIAC lyR.IIA S.p..RE.1 S.ht-7- "OI"IOSCOC fl.om.SE PloeC "S

I RESICCOI OffIceS OCIUASA IR CeRIE NE. k P- RTIIN7RS. 1OR7SR.CSl DIKE.WR hStS 8150P-lC

ye COIRRISIRA. WRIIA Saok-CRORI. .- I.E.- S-""'-

ANNEX 7Page 1

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PLN)

FIFTH POWER PROJECT

Project Description

1. The Project will supply minimum electric distribution requirementsof Jakarta, its satellite cities of Bogor, Tangerang and Bekasi, and the city

of Bandung for the three-year period 1977/78 through 1979/80. The transmis-sion lines and substations from 150/20 KV and 70/20 KV required for supportof the Project will be provided under projects either already financed orfinanced from other sources.

2. The present peak (end 1974) and the estimated peak (end 1980) onthese distribution systems are as follows:

MW Peaks

1974 1980Jakarta 180 360Bogor 10 17Tangerang 4 11Bekasi 2 5Bandung 38 70

Total 234 463

3. In brief, the proposed Project consists of the following elementswith details shown on the bill of materials:

(i) JAKARTA

Upon completion of the distribution projects financed fromCredits 165 and 334-IND, there will be 950-20 KV and580-12 KV substations in the area. The proposed Projectwill complete the low voltage changeover in the area andadd the following to the system:

ANNEX 7Page 2

(a) 20 KV substations 630

(b) conversion of 12 KV substations to 20 KV 310

(c) connections for private substations 180

(d) customers converted to 220 V 80,000

(e) connection of new customers 110,000

(ii) BOGOR

The existing 6 KV and 127/220 V system will be reducedin area and a new 20 KV and 220/380 V system substituted.The low voltage changeover will be 70% completed and theProject will add the following to the system:

(a) 20 KV substations 112

(b) conversion of 6 KV substations to 20 KV 50

(c) connections for private substations 20

(d) customers converted to 220 KV 14,000

(e) connection of new customers 3,500

(iii) TANGERANG

The existing 12 KV and 127/220 V system will be completelyreplaced with a 20 KV and 220/380 V system. The new systemwill consist of the following:

(a) 20 KV substations 33

(b) conversion of 12 KV substations to 20 KV 18

(c) connections of private substations 12

(d) customers converted to 220 V 4,000

(e) connection of new customers 2,500

(iv) BEKASI

The existing 6 KV and 127/220 V system will be completelyreplaced with a 20 KV and 220/380 V which will consistof the following:

ANNEX 7Page 3

(a) 20 KV substations 31

(b) conversion of 6 KV substations to 20 KV 0

(c) connections of private substations 10

(d) customers converted to 220 V 1,500

(e) connection of new customers 1,500

(v) BANDUNG

The existing 6 KV and 127/220 V system will be reducedin area and a new 20 KV and 220/380 V system substituted.The low voltage changeover will be about 32% completedand the following will be added to the system:

(a) 20 KV substations 100

(b) conversion of 6 KV substations to 20 KV 150

(c) connections of private substations 0

(d) customers converted to 220 V 24,000

(e) connection of new customers 22,600

4. A detailed cost estimate and bill of materials follows:

INDONESIA

PERU1M8I MM0 LISTRIEX IEGAR00 (PFi)Fifth Pover Project

P0RJECT -C03T ESTIMTE

Rate of ELootnge: US$1 R op 415

F . Forei-n GoatL . Local Coat

------- _-----__--__------------_---__ in Bp billio _--_-_-_--------------------------------- - ----------------------------.-- ............... USn $ rlllSon eq:lent --------------------------- _____

JAKARTA BOGOR TABERAN B RANDOG TOTAl JlA2rTA 80210R TrA.RAl B0T31 BANDUNG T707AL

rt x.L P L. I I I F I F L P 1. 9__

A. Material cod Erection

1. MedS Voltage Syata (20 KV) M.88 1.87 0.42 0.27 0.32 0.24 0.23 o.14 1.10 o.8a 4.95 3.37 6.94 4.50 1.01 0.66 0.76 0.57 0.55 0.35 2.64 2.05 11.90 8.13

2. DIatribotion Sobatation 3.69 1.51 0.47 0.18 0.26 0.12 0.14 0.07 0.97 0.47 5.53 2.35 8.89 3A4 1.14 0.44 0.62 0.28- 0.34 0.17 2.33 1.10 13.32 5.65

3. Loa Volteg Sy-te=o (220/380 volta) 2.14 0.42 0.44 0.10 0.18 0.03 0.16 0.03 0.70 0.17 3.62 0.75 5.15 1.00 1.06 0.23 0.43 o.08 0.38 0.07 1.69 0.40 8.71 1.78

4. Service Rtrmces 5.97 1.90 0.36 0.10 0.17 0.06 0.o8 0.03 1.20 0.36 7.78 2.45 14.38 4.58 0.87 0.24 0.42 0.15 0.20 0.08 2.89 0.86 18.76 5.91

5. Volta Changeo-r .60 1.92 0.10 0.34 0.03 0.09 0.01 0.03 0.18 o.6o 0.92 2.98 1.44 4.63 0.25 0.81 0.07 0.23 0.02 0.07 0.43 i.45 2.21 7.19

6. Tran-aprt and Hanling 1.80 0.55 0.22 0,07 0.12 o.o4 0.08 0.03 0.49 0.22 2.71 0.91 4.34 1.32 0.52 0.18 0.28 0.09 0.18 o.06 1.19 0.54 6.51 2.19

7. WarehoaWe FPailiti.a, Vahiola, etc. I.86 - 0.32 - - - - - 0.61 - 2.79 - 4.47 - 0.76 - - _ - 1.48 - 6.71

B. -Ping - - - - - 0.30 - -- - 0.72

C. Engineering -- 149 1.85 3.58 4.45

B. ProJect Coats 17.08 10.03 2.01 1.38 iL08 0.58 0.70 0.33 4,64 3.28 27.00 17.75 41.134 24.14 4.85 32 2 58 1.4o L67 0 SO 11 17 7.90 64.99 42.73

0. Conttogenciea

1, Phyaical - -_ _ _ -_ _ _ 2.70 1.77 - -- - - 6.50 4.27

2. Price -__68 1121 - - - - ' - - _ - 18,51' 27,00

TOTAL PROJECT 00CTS_ 37.38 30.73 _9000 74,00

1. Pricee of Material ad Erecto on 1975 bate.

2. ContgtnieOlal(1) Phyalcal:

a^ Foreign Coat: 10%(b) Lca l Coat : 13%

(Si) Price:

F7 1976/77 1%F7 1977/7a 8% 20%Py 1978/79 8% 20%FY 1979/80 8% 20t

Re-isad April 12, 1976

INDONESIAPerusahaan Umum Listrik Negara (PLN)

Fifth Power Project

BILL OF MATERIALS

Jakarta Bogor Tangerang Bekasi Bandung TotalMedium Voltage System (20 KV)

Underground Cables (Km) 325 40 40 20 150 575Main Overhead Lines (Kin) 270 53 25 34 60 442Branch Overhead Lines (Kin) 0OC 20 8 7 35 170

Sectionalizing Switches (Unit) 75 3 5 3 10 96Switching Stations (Unit) 10 1 1 1 1 14

Distribution SubstationsNew Substations (Unit) 160 12 20 16 30 238

fiehabilitate Existing Substations (Unit) 310 50 18 - 150 528

Transformers (250-400-630 KVA) (Unit) 470 62 38 16 180 766

Pole Mounted Transforyers (50-100 KVA)(Unit) 315 100 13 15 70 513

Riser Poles (Unit) 1,705 142 114 60 378 2,399Private Substations (Unit) 180 20 12 10 - 222

Low Voltage System (220/390 Volts)Rehabilitate Existing Lines (Km) - 46 15 10 120 191

New Twisted Cable Lines (Km) 625 80 36 35 75 851Underground Cable (Km) - - - - 3 3

Poles (Unit) 15,625 3,000 1,000 1,000 4,900 25,525

Service EntrancesService Drops (New) (Unit) 110,000 3,500 2,500 1,500 22,500 140,000

Service Drops (Rehabilitate) (Unit) 63,800 7,000 4,000 1,500 12,000 88,300Underground Services (Unit) - - - - 100 100

Consumer's Panels (Unit) 235,500 17,500 6,500 3,000 46,600 309,100

Single Phase Meters (Unit) 188,400 14,500 5,200 2,400 37,300 247,800

Three Phase Meters (Unit) 47,100 3,000 1,300 600 9,300 61,300

Voltage ChangeoverConsumers Changed 80,000 14,000 4,000 1,500 24,000 123,500

Percentage Complete of Total 100 70 100 100 32

Special Equipment t

Mobile Substations (Unit) - - - - 20 20

Revised April 12, 1976

t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t iltil I it ID iM0 ItIlAm~~~4 it X X ERgS ggWSFE X

L b T W E S W ~~~~~~~~~~~!t -14 [ i01 rI|

44W W 0$ X t t:: 0 :rm 'S F'~~~~~~~~~~~~~~11110

I % t 1 y -t 4 g 4 4 w

t1~~~~~~~~~~~4 MM T, -I--i--- 1---i-- [0; fTf ld}

ANNEX 7Page 7 of 7 pages

INDONESIAPerusahaan Umum Listrik Negara (PLN)

Fifth Power Project

ESTIMATED SCHEDULE CF DISBURSEMENTS

IBRD Fiscal Year Cunulative Disbursementand Quarter at End of Quarter

(US$1,000)

1976/77

September 30, 1976 500December 31, 1976 1,500March 31, 1977 4,500June 30, 1977 12 ,500

1977/78

September 30, 1977 20,500December 31, 1977 28,500March 31, 1978 36,500June 30, 1978 44h,500

1978/79

September 30, 1978 52,500December 31, 1978 60,500March 31, 1979 68,500June 30, 1979 76,500

1979/80

September 30, 1979 84,500December 31, 1979 87,000March 31, 1980 88,oooJune 30, 1980 89,ooo

1980/81

September 30, 1980 90,000

This schedule assumes Loan effectiveness on June 30, 1976.

Revised April 12, 1976

INDONESIAPerusahaan Umum Listrik Negara (PLN)

Fifth Power Project

Rate of Exchange: Summary of Financial Data

,US$1 - Rp 415

1971-73: FY Ending December 311975 onwards: FY Ending March 31

ACTUAL FORECAST

1stQuarter

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

(i) Revenue/Cost Ratio 74% 73% 787. 97% 111% 104% 97% 1007 108% 110% 109% 113% 114% 113% 115%

(ii) Rate of Return on Average NetFixed Assets in Operation - (7.2%) (6.3%) (0.4%) 3.4% 1.1% (0.8%) - 1.8% 2.6% 3.2% 4.8% 5.5% 5.8% 6.7%

(iii) Increase in Average Revenuesper kwh Sold - 4.2% 23.9% g 47.1% - - 5.5% 4.3% - - 4.2% - -

(iv) Total Internal Sources t2 33" 327 297 307 33! 35% 41%

sa Percent of Investments - 32% 432 32% 3/% 21% 23% 26/0

(v) Same as (iv), but 3-Year

Sliding Average - - - 39% 36% 27% 25% 24% 28Y 30% 31% 30% 31% 33' 37'

(vi) Debt/Equity Ratio 0/100 0/100 0/100 0/100 2/98 4/96 21/79 33/67 42/58 49/51 54/46 58i42 61,'39 64/36 65/35

(vii) Times Total Debt Service Covered 2.8

by Gross Internal Sources - - - - - . - - - 16.1 6.1 4.0 3.3 2.8 2.8

1/ Before luIp sum settlement of overdue Government accounts.

INDONESIAPerusahan LTmus Listrik Messrs (PLN)

Fifth Power Pioiect

Actual and Forecast Income StatementsRate of Exchange: (in Rp billion unless otherwise indicated)US$1 Rp 415

ACTUAL FORECASTlst

1971-1973: FY Ending December 31 Quarter1975 onwards: FY Ending March 31 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Generation and Purchases (Gwh) . 2,354 2,498 2.932 759 3,345 3,730 4,255 4,935 5,970 7,235 8,890 10,885 13,360 16,410 20,267 25,032

Losses and Plant Consumption (Gwh) (568) (605) (757) (199) (901) (980) (1.105) (1.235) (1.470) (1,735) (2.090) (2.485) (2.960) (3.510) (4.271) (5.197)

Sales (Gwh) 1 786 1.893 2.175 560 2.444 2.750 3.150 3.700 4.500 5,500 6.800 8.400 10,400 12.900 15.996 19,835Increase of Sales (%) 11.8% 6.0% 14.9% 7.7Z 10.3Z 12.5Z 14.5% 17.5% 21.6Z 22.27 23.67 23.5% 23.8% 24.0% 24.07. 24.0%

Averare Revenues per kwh Sold (RB) 8.62 8.98 11.13 13.21 16.37 21.8 21.8 21.8 23.0 24.0 24.0 24.0 25.0 25.0 25.0 25.0

Operating RevenuesRevenues from Sales of Power 15.4 17.0 24.2 7.4 40.0 60.0 68.7 80.7 103.5 132.0 163.2 201.6 260.0 322.5 399.9 495.9Other Operating Revenues 1.1 1.7 0.3 - 0.3 0.4 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8

Total Operating Revenues 16.5 18.7 24.5 7.4 40.3 60.4 69.1 81.1 104.0 132.5 163.8 202.2 260.7 323.2 400.7 496.7

Operating ExpensesPurchased Power 0.7 0.7 0.8 0.2 1.2 1.2 1.2 1.2 1.3 1.4 1.4 1.4 1.5 1.5 1.5 1.5Fuel 3.3 4.4 5.6 1.4 7.9 15.9 20.9 26.8 33.9 41.8 52.4 64.5 81.3 102.1 132.9 157.7Personnel Expenses ) 5.7 7.5 1.9 10.9 11.4 12.0 12.6 13.2 13.9 14.6 15.3 16.1 16.9 17.8 18.6Material for Operation Maintenance) 8.5

and Administration ) 4.7 6.0 1.8 9.0 10.4 13.5 17.6 22.8 27.4 32.8 39.4 47.3 56.8 68.1 81.7Depreciation 9.6 10.4 11.7 LI 12.4 15.4 18.9 25.5 32.8 38.3 45.4 55.0 65.7 78.2 96.3 123.3

Total Operating Expenses 22.1 25.9 31.6 8.2 41.4 54.3 66.5 83.7 104.0 122.8 146.6 175.6 211.9 255.5 316.6 382.8

Operating Income (5.6) (7.2) (7.1) (0.8) (1.1) 6.1 2.6 (2.6) - 9.7 17.2 26.6 48.8 67.7 84.1 113.9Other Income (Net) 0.4 0.4 (0.6) - (1.4) - - - - - - - - - - -

Interest - - 0.6 1.1 6.9 18.3 30.4 43.9 58.6 75.3 92.5 112.3 131.7Interest During Construction - - 1 - (0.6) (1.1) (6.9) (18.3) (30.4) (41.0) (49.5) (56.7) (65.0) (73.5) (80.8)

Interest Charged to Operation - - - - - - - - - - 2.9 9.1 18.6 27.5 38.8 50.9

ProfittLoss (Before Tax) (5.2) (6.8) (7.7) (0.8) (2.5) 6.1 2.6 (2.6) - 9,7 14.3 17.5 30.2 40.2 45.3 63.0

Other Adjustments 0.4 0.7 6.5 (0.2) 0.8 - - - - - - - - - -Corporation Tax - -…- it

Profit/Loss (After Tax) (4.8) (6.1) (1.2) (1.0) (1.7) 6.1 2.6 (2.6) - 9.7 14.3 17.5 30.2 40.2 45.3 63.0

0

gooe

INDONESIAPerusahaan Umum Listrik Negara (FLN)

Fifth Power Project

Rate of Exchange: Actual and Forecast Sources and Apnlications of Funds StatementsUS$1 - Rp 415 (in Rp billion)

ACTUAL FORECASTIet

1971-1973: FY Ending December 31 Quarter1975 onwards: FY Ending March 31 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Sources

Internal

Operating Income (5.6) (7.2) (7.1) (0.8) (1.1) 6.1 2.6 (2.6) - 9.7 17.2 26.6 48.8 67.7 84.1 113.9Other Income 0.8 0.3 5.9 (0.2) (1.4) _ _- - - - - - - -Depreciation 9.6 10.4 11.7 2,4 12.4 15.4 18.9 25.5 32.8 38.3 45.4 55.0 65.7 78.2 96.3 123-3

Gross Internal Sources 4.8 3.5 10.5 1.4 9.9 21.5 21.5 22.9 32.8 48.0 62.6 81.6 114.5 145.9 180.4 237.2Amortization - - - - - - - - - - (1.0) (4 2) (10.3) (17.2) (24.9) (34.3)Interest - - - - -_ - (2.9Y (9.1) (18-6) (27.5) (38:8) (50.9)

Net Internal Cash Generation 4.8 3.5 10.5 1.4 9.9 21.5 21.5 22.9 32.8 48.0 58.7 68.3 85.6 101.2 116.7 152.0

Consumers' Contributions 3.2 2.7 5.3 1.4 14.8 15.0 15.0 15.0 15 0 15.0 15.0 15.0 15.0 15 0 15.0 15.0

External

Government Contributions 2.2 15.0 34.1 20.3 77.1 58.0 117.5 19.9 12.8 4.7 13.8 25.0 25.0 15.4 11.0 -Sorrowings ....... 9.0 12.0 110.2 126.1 127.2 151.3 185.5 213.1 223.6 243.3 258;1

Total Externtl Sourcee 5.4 17.7 39.4 21.7 91.9 67.0 129.5 130.1 137.8 131.9 165.1 210.5 238.1 239.0 254.3 258.1

Total SoQrcaa 10.2 21.2 49.9 23.1 101.8 103.5 166.0 168.0 186.7 194 23.8. 95.8 3.7 3 2 .2

Applications

Investments (Including InterestDuring Construction)

Foreign n.a. n.a. n.a. n.a. 44.0 77.6 113.8 110.2 126,1 127.2 151.3 185.5 213.1 223.6 243.3 258.1Local n.a. n.a. n.a. n.a. 34.0 37.9 57.2 55.8 56.6 62.6 80.5 103 3 119.6 124.6 13-5'7 143.9

Total Investments 5.8 19.4 22.1 10.8 78.0 115.5 171.0 166.0 182.7 189.9 231.8 288.8 3327 348.2 37*0 402-.

Variations in Working Capital 4.4 1.8 27.8 12.3 23.8 (12.0) (5.0) 2.0 4.q 5.0 7.0 5.- 6 7.0 7,0 23.1

Total Agplications 10.2 21.2 49.9 23.1 Ol,'d103.5 0 168.0 186.7 94 293.8 .8 355 .0 425 1

n.a. not available

INDONESIAPerusahaan Umum Listrik Negara (PLN)

Fifth Power Project

Rate of Exchange: Actual and Forecast Balance Sheets

US$I - Rp 415 (in Rp billion)

ACTUAL FORECAST1971-1973: FY Ending December 31 Ist1975 onwards: FY EndinR March 31 Quarter

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

Assets

Fixed Assets

Gross Fixed Assets in Operation 109.6 133.9 166.4 171.3 198.8 294.4 403.0 589.0 736.4 861.7 1,072.8 1,322.8 1,593.9 1,918.6 2,241.5 2,673.6Accumulated Consumers' Contributions ( 5.8) ( 8.5) (13.8) (15.2) (23.5) (38.5) (53.5) (68.5) (83.5) (98.5) (113.5) (128.5) (143.5) (158.5) (173.5) (188.5)Accumulated Depreciation ( 9.6) (19.9) (31.8) (34.2) (47.0) (62.4) (81.3) (106.8) (139.6) (1779.) (223.3) (278.3) (344.0) (422.2) (518.5) (641.8)Net Fixed Assets in Operation 94.2 105.5 120.8 121.9 128.3 193.5 268.2 413.7 513.3 585.3 736.0 916.0 1,106.4 1,337.9 1,549.5 1,843.3Work in Progress 37.0 33.8 23.4 29.1 117.4 137.3 199.7 179.7 215.0 279.6 300.3 339.1 400.7 424.2 480.3 450.2

Total Fixed Assets 131.2 139.3 144.2 151.0 245.7 330.8 467.9 593.4 728.3 864.9 1,036.3 1,255.1 1,507.1 1,762.1 2,029.8 2,293.5

Current Assets 16.8 23.7 52.7 73.4 61.0 53.0 51.4 55.4 60.4 67.4 724 784 84.4 93,4 102 4..72.

Total Assets 148.0 163.0 196.9 224.4 306.7 383.8 519.3 648.8 788.7 932.3 1.138.7 1,333.5 1,591.5 1.855.5 2,132.2 2 421 0

Liabilities

Equity - ,_

Accumulated Government Contributions 146.6 167.0 207.8 k33.1 309.5 367.5 485.0 504.9 517.7 522.4 536.2 561.2 586.2 601.6 612.6 612.6Accumulated Profit (Loss) ( 6.1) (12.2) (13.4) (14.4) ( 8.2) ( 2.1) 0.5 ( 2.1) ( 2.1) 7.6 21.9 39.4 69.6 109.8 155.1 218.1

Total Equity 140.5 154.8 194.4 218.7 301.3 365.4 485.5 502.8 515.6 530.0 558.1 600.6 655.8 711.4 767.7 830.7

Long-Term Debt - - - - - 9.0 21.0 131.2 257.3 384.5 534.8 716.1 918.9 1,125.3 1,343.7 1,567.5

Current Liabilities 7.5 8.2 2.5 5.7 5.4 9.4 12.8 14.8 15.8 17.8 15.8 16.8 16.8 18.8 20.8 22.8

Total Liabilities 148.0 163.0 196.9 224.4 306.7 383.8 519.3 -648.8 788.7 932.3 1,108.7 1.333.5 1.591.5 1.855.5 2.132.2 2.421,

0'o

0l

A

ANNEX 8Page '5

INDONESIA

PERUSAHAAN UMUN LISTRIK NEG,RA (PLN)

FIFTH POWER POJECT

Notes and Assumptions on Financial Projections

The financial projections have been made on the basis of 1975prices. No future escalation has been assumed because the electricitytariff contains a cost adjustment clause. This clause has been appliedin the past so as to more than compensate for the cost increases. Further-more the attempt has been made to forecast trends in the development ofcosts and revenues after FY 1978/79 (end of the recovery period). However,these projections are tentative since agreement on PLN's financial targetsafter the Recovery Period has still to be reached.

1. Energy Sales

The electricity sales forecasts are based on the lower of twoestimates included in a system study made by the consulting firm of Preece,Cardew and Rider for Java. Similar demand increases have been assumed toprevail also in other areas of Indonesia.

2. Averages Revenues per KWh Sold

Starting from the actual level of revenues prevailing during thefirst half of FY 1975/76 (Rp. 21.8 per KWh), tariffs have been adjusted toachieve a 100% revenue/cost ratio in FY 1978/79 (financial recovery) andlater to approach gradually a level of about 7% return on investment and30% contribution to capital expenditures from internal sources.

3. Purchased Power

The bulk of the power purchases is from the Juanda hydro station(Jatilulur Authority) presently at Rp 1.47 per KWh. This expense increasesin step with PLN's tariff adjustments.

4. Fuel

Present fuel prices are:

Bunker "C" Oil : Rp 19/1High Speed Diesel (HSD) : Rp 22/1Industrial Diesel (IDO) : Rp 19/1

ANNEX 8Page 6

in addition there are surcharges for the cost of transportation which varywith the location of the power stations. On an average PLN charges Rp 1.52/1for Bunker "C" oil, Rp 0.39/1 for H§D, and Rp 2.45/1 for IDO. Fuel pricesare subsidized (for instance, the price for bunker "C" oil is equivalent toUS$7.28 per barrel).

5. Personnel Expenses

An increase of 5% per year has been assumed. This represents 3%for personnel increases and 2% for merit adjustments, promotions, upgradingdue to training and similar raises.

6. Material

For years PLN has tried to catch up with its maintenance require-ments. Lack of trained personnel as well as shortage of funds so far has pre-cluded the implementation of a proper maintenance program. It can be assumed,however, that PLN will be able to implement accelerated maintenance schedulesby 1976/77. Consequently, increases of annually 30% per year during 1976/77-1978/79 have been assumed, followed by 20% per year in step with the systemexpansion.

7. Depreciation

The depreciation rates are those prevailing in the past and appliedin other countries for similar type of plant. On an average these are 4.5%for thermal and 2.5% for hydro stations, and 3.5% for transmission and dis-tribution equipment.

8. Corporation Tax

In principle, PLN is liable to corporation tax which, accordingto the information received, amounts to about 45% of the taxable profit.However, it has been assumed that PLN will be allowed to apply, for tax pur-poses, a 20% "accelerated depreciation" on assets transferred to operation.Considering the heavy investment program PLN is unlikely to pay tax duringthe projected period.

9. Capitalization

It has been assumed that the foreign component of future invest-ments would be financed through 22-year loans (including 4 years of grace)at an interest rate of 9% per year. During the grace period interest wouldbe capitalized. PLN would not have to make any debt service payments duringthe recovery period. The local component of the investments, as far as notfinanced through internal sources, would be covered through Governmentequity contributions.

INDONESIAPOWER SYSTEMS IN JAVA

MARCH 31, 1975.... ' t 7- v e. ........................ . & v jf tt 1 . . .~~~~~~~~~~~~~~~~~~~~~~~112

lM c;anc^5C~~~~~~ilhmmq 5vt1iL 040- =$ u :,/ < ><1°Godung :- ,. .

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w t .~~il-m

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t0A?<' U' 3U8'v"'@ 'E<,,,92~~~~r' ,\Xt C9*1 > 5 -C><9-' Q

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/ndien~~7K. 4-° )ODS1

Oceen~~~~~~P Ko' 09so11-12-bi

INDONESIA

PUBLIC GENERATING FACILITIES BY AREAS (MARCH 31, 1975)

8.8 Vill 46.1ND ~~~~~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~II 41.5 IX 57

54,/m $00 ~~~~~~~~~~III 22.8 X 11.3IV 70 9 xi 39.1

v 9,0 GI~~0 185.8South Chi o So a , 1.9 '2 111-9

V, 1606 r3 444.7

[if.--.. .. .:-. .-.-............ :.- '.............................

N V~~~~~~~~~~~~~~~~~~~~~~~V

-Jambk ~ ~ ~ ~ .V smr,40 .~

o~~~mIIalIl8lB98 . ~~~~~~~~SU AWE S4 I 1ao

V . ~~~~~~~~~~~~~~~~~~~~~~~~~~IRIAN JAYA

Indian O coa of) ~ Io Java So a u3w19pi,dSng~

Q0 /: A V2 A - /rs Se ~ >IoMOW-g ~~LOMBOK~

ift* -d~~~~~~~~~ b1i ,'WA* &.t.,d lb ~ ~ ~ ~ ~ ~ ~ ~ ~ .>Jf~C

78~~~ So..b*, 4*o~~~~~. o. 4* -540W~~ZL