IRETUR- 4 TO RESTRICTED

i REPORTS QSK Report No. TO-639a

ON3E '#E -;_ I

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

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF THE

BOGOTA WATER SUPPLY PROJECT

COLOMBIA

May 6, 1968

Projects Departtnent

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CURRENCY EQUIVALENTS

US$1.00 Col$16.30Col$1.00 us$o.o6Col$1,000,000 US$61,350

ABBREVIATIONS AND EQUIVALENTS

Length

m = meter (3.28 feet)

km = kilometer (0.621 miles)

Area

m2 = square meter

ha = hectare (2.47 acres;(lOOOm2 )

Volume

1 = liter (0.264 USgallons)

m3 = cubic meter (264.0 USgallons)

Flow

m3/sec = cubic meters (22.7 millionper second US gallons

per day

FISCAL YEAR

January 1 - Decembar 31

APPRAISAL OF THE

BOGOTA WATER SUPPLY PROJECT

COLOMBIA

TABLE OF CONTENXTS

SUMMARY

1. INTRODUCTION 1

2. THE WATER SUPPLY SECTOR IN COLOMBIA 2

3. THE PROPOSED BORROWER 3

A. Organization and Management 3B. Financial Position 4C. Rate Policy 7D. Income from Rates and Other Sources 8E. Past Earnings 9F. Supply Area and Existing Facilities 9

4. THE LONG-RANGE PROGRAM 10

5. THE PROPOSED PROJECT 12

A. Description 12B. Cost Estimates 13C. Engineerinp and Supervision 14D. Construction Schedule 14E. Procurement 14

6. JUSTIFICATION 15

A. Importance of Project 15B. Demand and Suoply Projections 16C. Selection of Project 16

7. FINANCING PLAN AND PROJECTIONS 18

A. Requirements and Sources of Funds 18B. Future Earnings and Financial Position 20C. Financial Covenants Proposed for the Loan 21

8. CONCLUSIONS AND RECOMLMEDNDATIONS 22

This report is based on the findings of Bank missions, consistingof Messrs. Juergen Krombach and G.B.H. Renger who visited Bogota in July/August 1967, and to update this information, in January/February 1968.

II I I

LIST OF ANNEXES

ANNEX

1. Organization Chart of the Empresa de Acueducto y Alcantarilladode Bogota (EAAB)

2. Actual and Pro Forma Balance Sheets 1961-1973

3. Actual and Pro Forma Income Statements 1961-1973

4. Old and New Water and Sewerage Rates

5. Existing Facilities (Water Sunply and Sewerage)

6. Demand Calculations

7. Demand and Supply 1955-1985 (Graph'

8. (Paae 1) Cost Estimates and Disbursement Schedule(Page 2) Status of Procurement and Joint Financing

9. Control Network

10. Tibito II Scheme (Engineering, Basic Criteria and Detailed Discrintion)

11. Cash Flow Forecasts 1968-1973

12. Assumptions for Financial Projections

MAPS

1. Long-Range Water Su-pply Plan

2. Tibito II Scheme

3. Tibito II Scheme (Detail: Pumping and Treatment Plant Tibito)

I II I I

APPRAISAL OF THE

BOGOTA WATER SUPPLY PROJECT

COLOMBIA

SUMMARY

i. The Government of Colombia has reauested a Bank loan to assistin financing a project to improve and expand the water supply facilitiesin the city of Bogota. This report covers the apnraisal of the proposedproject.

ii. Total cost of the project is estimated to be USt35.3 millionequivalent, including interest during construction. The foreign exchangecomponent is US$17.3 million equivalent, to be covered by a proposed Bankloan of US$14.0 million equivalent and joint loans from national lendinginstitutions of supplier countries of at least US$3.0 million equivalentand up to a maximum of US$5 to 6 million equivalent. The Bank loan wouldbe reduced to the extent additional joint loans would exceed US$3.0 mil-lion equivalent. Interest during construction on the joint loans amountingto US$0.3 million equivalent would be covered 'by funds generated fromoperations.

iii. The borrower would be the Empresa de Acueducto y Alcantarilladode Bogota (EAAB), an autonomous agency operating the water supply andsewerage systems in the Bogota district.

iv. The project covers the first stage (1968-71) of a long-rangeprogram and includes construction of the first stage of the Tibito IIscheme, preparation of subsequent works and improvement of operations.The Tibito II scheme is the most economic alternative to provide addi-tional water to Bogota, sufficient to meet most requirements until majorfuture schemes come into operation aroumd 1977. The project is technicallysound, cost estimates are reasonable, and the EAAB, with the assistanceof its consultants, is canable of carrying out the work.

v. During 1967, the EAAB has undergone a major reorganization andhas improved management and administration. A new accounting system isbeing established and, for the first time, the accounts have been auditedfor the financial year ending December 31, 1967. The organizational im-provements achieved so far and required by the Bank prior to appraisalhave been satisfactory.

vi. New water rates, together with a new and improved rate structure,have been apDroved by the Government and are being put into effect. It isexpected that they will result in a 80 percent increase in the average rate,enabling the EAAB to earn a return of 6 percent during construction.

vii. Under the arrangements listed in paragraph 8.07 of this reportthe project is suitable for a Bank loan of US$14.0 million for a period of.20 years, including a four and a half year grace period.

I II

APPRAISAI OF THE

BOGOTA WATER SUPPLY PROJECT

COLOMBIA

1. INTRODUCTION

1.01 The Government of Colombia has applied for a loan from theInternational Bank for Reconstruction and Development to help finance aproject to improve and exDand the water sunply facilities in Bogota D.E. l/The Borrower would be the Empresa de Acueducto y Alcantarillado de Bogota(EAAB).

1.02 Total cost of the project is US$35.3 million eqiuivalent, includingengineering, contingencies and interest during construction. Foreign ex-change requirements are US$17.3 million (49 nercent of total project cost),out of which the proposed Bank loan would cover US$14.0 million.

1.03 The proposed project is one of the three Colombian projects (theothers being the Bogota Power and the National Power Interconnection projects)included in the joint financing arrangements between the BanX and majorpotential supplier countries. Joint loans would cover 50 percent of theforeign exchange cost of individual orders above US$200,000 provided thatthe accumulated value of such contracts placed in the country of the jointlender amounts to at least US$1.0 million. Joint loans for this projectare expected to cover at least US$3.0 million. The final amount of jointloans will be known only after completion of bidding on all contracts,exDected for early 1969. The Bank loan would be reduced below US$14.0million to the extent joint loans would exceed US$3.0 million.

1.04 Local currency cost for the project (US$18.0 million equivalent)and interest during construction on the joint loans (US$0.3 million) wouldbe financed by funds generated from internal operations, local currency loans,and some Government contributions.

1.05 The proposed project is included in a long-range master plan forthe Bogota water supply and is based on a first-stage feasibiJity study.These studies have been prepared by Ingetec Ltda., a Colombian consultingfirm. In addition to Ingetec, EAAB has retained other consulting firms forfinal design of individual portions of the project, for construction super-vision and for certain other activities, such, as data processing, reviewof meter reading and of billing procedures.

1! D.E. = Distrito Especial (the Federal District, comprising the city ofBogota and some surrounding areas).

1.06 This reDort is based on infor-matiorn obtained from the FAAB and itsconsultants during an aDpraisal mission to i3og,ota in July .Au7ust 1967 byMessrs. J. Krombach and G.B.H. Renqer of the Bank staff, and from the con-sultants' reports. Processing of the Droposed loan was postponed nendingthe outcome of bidding on the malor contract (niceline), as the costestimates were too uncertain to reasonably establish the foreign exchanperecuirements and conseqoently the amount of the Bank and joint loans.Therefore Messrs. Krombach and Renger reampraised the project in January/February 1X68. Ne7otiations took place from April 11 through 18, 1968.

2. TSIR W.ATFR SUPPLY SECTOR IN COLONBTA

2.01 Bank missions reviewed the water suoply (and sewerage) sector inColombia in 1966 and the sector is presently under a more detailed reviewfor the 1968 Economic Report.

2.02 Responsibility for the sector in Colombia is shared by variousnational, regional and local authorities whose activities are only verylooselv coordinated. Rural schemes are under the Ministry of Public Health,and communities from 2,500 to 10),000 in ponulation are under the Institutode Fomento Municipal ( IISFOFPAL) , an autonomous national authority, whichoperates through rezional branches. In most of the cities larger than100,000 in Dopulation, the water works are nart of' autonomous municipalentities, called EmDresas Municipales or Emoresas P'blicas, which providealso other services, such as sewerage, Do-er, telephone, and, in some cases,slaughterhouses, market places., etc. 3ogota is the onlv municioality wherethese functions are divided into seDarate author-ities. The water supply(and sewerage) works in Bogota are administered by the Empresa de Acueductoy Alcantarillado de Bogota (!KAAB).

2.03 The 1966 sector review identified several high priority watersupply and sewerage sector projects, of which the Bogota projects wereconsidered to be the most urgent and important. Since then US-AID has pro-vided a Col$65 million (US$4.o million ecuivailent) loan from counterpartfurnds and a foreign exchange loan of USD450,000 for the first stage of theBogota Sewerage Masternlan (1967-68).

2.04 Major exransion works for the water supply and sewerage systemsin the other large cities, namely Cali, Medellin and Baranquilla, have beenfinanced by the Inter-American Development Bank (IDB), the US-AID and theUS Export-Import Bank, Arrangements for financing of subsequent stages ofthese projects by the same lenders are under way.

2.05 The 1966 sector review also identified several high prioritywater supply and sewerage projects in medi=rn-sized cities. Subseouently,arrangements for undertaking the necessary feasibility studies have been

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negotiated between the local Emnresas, the Colombian Planning Office, andthe US-AID, which provides the financing for the studies. The Bank hasbeen in contact with these authorities and Bank missions visited most ofthe cities for which studies are under way.

3. THE PROPOSED BORROWER

A. Ormzan zation and Man agement

3.01 The first organization providing water to the city of Bogota wasa private company founded in 1886. This company was taken over by the cityof Bogota in 1914, and the sewerage department was created in the same year.The creation of the EAAL was based on a presidential decree of 1954, whichauthorized the Mayor of the District of Bogota to organize the public ser-vices of the capital. The Dresent organization, the Empresa de Acueductoy Alcantarillado de Bogota (FiAAB) was brought into existence in 1955, bya decree of the Council of the District of Bogota. The EAAB is an autono-mous rublic entity owned by the District of Bogota, and all pronertieshaving to do with water and sewerage services were transferred to it uponits creation.

3.02 The governing body of the EAAB is a board of seven members, con-sisting of the Mayor or his representative (at present the Secretalr ofPutblic Works of the District), two members appointed by the Council of theDistrict, three members amnointed bv the holders of the EAAB's bonds (theBanco de la Republica and the Banco Central Hipotecario), and, as theseventh member, the manager or sub-manager of the Banco de la Republica.After the amortization of the outstanding bonds in 1977, the three membersnow representing the bond holders will be replaced by members appointedby the District Council. The Board members are apnointed for a period offour years.

3.03 The Board does not become involved. in the day-to-day operationsof the EAAB, and its functions are limited to major decisions includingthe apDointment of the general manager and sub-managers. Presidentialapproval is required for borrowings of Col$1 million or more. Tariffincreases are subject to the apnroval of the Superintendencia de Regu-lacion Economica (see paragraph 3.23).

3.04 The general manager is the chief executive of the EAAB. Thepresent incumbent has been appointed in October 1966. In managing the EAABhe is assisted by four sub-managers (for Finance, Planning, Operations andAdministration), to whom a fair amount of resnonsibility is delegated. Thisis a considerable change from the situation existing two years ago, when, forexample, 21 persons reported directly to the general manager. With the assis-tance of a local consulting firm, the EAAB has completely revised and stream-lined its organizational structure. The present organizational chart ofthe EAAB is shown in Annex 1.

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3.05 So far, the performance of the general manager and the four sub-managers, all appointed within the Dast 18 months, has been satisfactorynotwithstanding the fact that they do not have as much experience as couldnormally be desired for their tasks.

3.o6 Personnel increased from about 800 in 1961 to about 1,150 (44percent) at present. This increase is not excessive in view of the growthof the system (paragraph 3.33). Certain sections are still understaffed,such as the water supply master plan section, the meter shop and the sectionsfor maintenance of the water distribution and sewerage systems. Assuranceshave been obtained during negotiations that the EAAB will review its staffrequirements annually with the Bank.

3.07 The general manager has complete authority to aproint and dis-charge all personnel below the rank of sub-manager. ilowever, vacancieswithin the EAAB can only be filled by outside personnel when competitiveexaminations fail to nroduce suitable candidates froml within the EAAB. Thedischarge of personniel is subject to nayment of all accumulated socialbenefits.

3.08 Central organizations of labor unions do not exist in Colombia.Usually, the personnel of each Drisvate r'd public enternrise organizesits own union, which negotiates its labor agreements with the management.Relations between management and labor union of the EAAB are good and moraleamong the employees has considerably improved since the apnointment of thenew general manaaer.

3.09 Lack of continuity in the EAA80 s management because of high turn-over in the general manager's post was ore of the maJor factors contributingto the unsatisfactory performance of the FAA_ in the past. Assurances havebeen obtained during negotiations that the Bank will be consulted on newappointments to the costs of general manager or sub-manager.

3.10 The EAAB lacks an adecuate budget control system. A great numberof statistics are being produced without coordination between the variousdepartments and without integrating the data into periodic reports thatcould serve as management tools. Assurances have been obtained that newcould sev smn-mn oos suacshv bee otinedemethat nwitibudget control and management reporting systems 'ill be implemented withinone year.

3.11 EAAB's management and staff, assisted by its consultants, shouldbe able to carry out the project satisfactorily.

B. Financial Position

Accounting and Auditing

3.12 Comparative balance sheets and income statements since 1961 areshown in Annexes 2 and 3. Through 1966, however, accounting deficienciescloud the picture emerging from these financial statements. Although anofficial with the title of Auditor Fiscal, appointed by the Council of the

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District of Bogota and charged with a pre-audit of all payments, continuallychecks the EAAB's figures, the accounts had never been audited by an externalauditing firm until the recently completed audit of the 1967 accounts. Ac-counts were mostly kept on a cash basis. Capitalization of costs, such asengineering by EAAB's staff, was arbitrary. The recently terminated physicalinventory of materials in stock was the first in the EAAB's history.

3.13 Accounting consultants have just terminated a review of the EAAB'saccounting system and a more functional system proposed by them should beintroduced shortly. Assurances have been obtained during negotiations thatthe EAAB will implement the new accounting system within one year.

3.14 The accounting consultants, Fermin Paba and Cia Ltda., have re-cently been appointed with the Bank's agreement as the EAAB's externalauditors. A meaningful external audit could only be made on the basis ofthe financial statements as of December 31, 1967. The 1967 auditors' renorthas been received by the Bank and is satisfactory. Assurances have beenobtained during negotiations that the EAAB's accounts will be audited annuallyby an auditing firm acceptable to the Bank. The function of the AuditorFiscal has to be maintained because of legal requirements.

3.15 The EAAB does not have a meaningful internal audit. Assuranceshave been obtained during negotiations that an internal audit section willbe established within one year.

Revaluation of Fixed Assets

3.16 The EAAB has recently revalued its fixed assets using thefollowing four methods:

(a) An estimated average annual depreciation in the value ofthe peso of 8 percent starting in 1959 for sewerageinvestments since that year;

(b) reproduction costs for a small part of water distributionassets, and for all sewerage assets built before 1959;

(c) the increase in the dollar exchange rate starting in1939 for all other water supply investments; and

(d) the current value for land owned by the EAAB.

3.17 This revaluation resulted in a rate base that is far more indicativeof the current value of the fixed assets than the old book value. It can beused pending the time when proper arrangements are made for revaluing theassets of public utilities in Colombia (see also paragraphs 3.25 and 3.26).

3.18 The EAAB's audited balance sheet as of December 31, 1967, beforeand after revaluation, is shown in Annex 2. This balance sheet, after re-valuation, represents adequately the EAAB's present financial position.

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Billing and Collections

3.19 The EAAB's billing and collections deteriorated markedly during1965, partly due to the difficulties encountered when changing over toelectronic data processing, and the accounts receivable for water and sewer-age services increased to more than six months billings. Procedures wereimnroved in 1966, and, at the end of 1967, gross accounts receivable fromprivate consumers had been reduced to two months billings. Other accountsreceivable increased during 1966 due to improved accounting and certain itemsformerly not accounted for were taken up in the books for the first time.The bi-monthly meter reading and billing procedures are being improved withthe assistance of an expert consulting firm. The latest figures indicatenon-revenue water (difference between total water produced and total billed)at 28 percent, comnared with 33 percent in 1Q66.

3.20 Partly due to improved cut-off' Brocedures, collections on privateaccounts are now considered good with nearly 100 nercent being collected with-in four to six months. Collections from governnment entities are a differentmatter and less than 50 percent of the anounts billed were collected during1967. However, a recent budget apnroTriation has settled the overdue debtand assurances have been obtained that the Government and deTendent entitieswill henceforth budget sufficient funds for prompt paymTent of their bills.

Canitalization

3.21 Total canitalization of the hAAE, as of December 31, 1967, afterthe revaluation discussed above, is as follows:

Million Colt

Long-Term Debt

Bonds 45Foreign exchange debt 3Instituto de Fomento Industrial (IvI) 48Other 14

Total Long-Term Debt 110

Contributions in aid of construction 206Revaluation surnlus 349Other equity and earned surDlus 322

Total Eauity 877

Total Canitalization 987

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3.22 The small foreign exchange debt consists of the balance (Col$2million equivalent) of a Japanese supplier's credit and of a US-AID loan(Col$l million equivalent) for sewerage engineering and equipment. TheEAAB's peso debt at the end of 1967 amounted to Col$107 mill-'on, less thanhalf of which consists of bonds, issued in the t'eriod 1955-65, and partlyrefinanced in recent years. These bonds, originallv amounting to Col$76million, are held by the Stabilization Fune of the Banco de la Republica,with the Banco Central Hipotecario acting as trustee. They were guaranteedby a mortgage on all the fixed assets of the EAAB existing in 1955. How-ever, in order to avoid the comDlications of subordinating this securityto the Bank or of giving the Bank pari passu treatment, the mortgaged assetshave been released with the exceDtion of a mortgage on an old treatment plantand reservoir, maintained because of legal requirements. A Col$65 millionloan of US-AID counterpart funds, channeled through the Instituto de FomentoIndustrial (ITFI), was granted in 1966 for the first stage of the seweragemasterplan works. Col$45 million of this had been drawn at the end of 1967.Col$3 million of a short-tern. IFI loan of Col$7 million for the procurementof meters had also been utilized.

C. Rate Policy

3.23 Rates of public services are subfect to the approval of the Super-intendencia de Regulacion Economica. Although the Suoerintendencia is inde-pendent by law, it is in fact an arency of the Ministry of Development. TheMinister of Development is the Chairman of the Council oP the Suuerintendencia.Increases in rates do not require previous approval of the Council of theDistrict of Bogota.

3.24 There has been no established public utility tariff policy inColombia. However, a resolution of 1°66 of the SuDerintendencia applicableto water and sewerage only formulated general criteria for rate increases.'The resolution established that water and sewerage rates should cover allcosts includingl depreciation and paivment of loans and that. according toa certain formula, reserves should be formed for future extensions an(dimprovements.

3.25 Tariff regulation in Colombia should be simplified. A mechanismshould be established for periodic rate review, say once a year, and adjust-ments based on objective criteria should follow, if required, within a re-asonable period. For determrining the adequacy of tariffs, a realisticrate of return criterion should be used, since it provides a satisfactorymeasure of nerrormance and can be easily apolied. This imnlies, however,that arrangements would be made for periodic revaluation of assets with anobjective mechanism for doing so, and for uniformity in accounting and theinstitution of national standards to that puroose.

3.26 The subject of public utility regulation has been discussed atlen7th between the Bank and officials of the Government. The Governmentagreed to study modifications along the above lines with a view to formulatingby mid-1969 a new national public utility tariff policy. Bearing in mind thatit will take at least until that time before a suitable policy is adonted thatincludes provisions for the revaluation of assets and other factors indicated

above, the loan documents contain a rate covenant based on a minimum rate ofreturn on reasonably valued assets, and aT agreed method .or period review(paragraph 7.13).

D. Income Frorn Rates and Other Sources

Water and _Sewerage Rates

3.27 Total income from sales amounted to Col$64 million in 1967. Priorto the most recent rate increase of April 1968, rates had been increasedthree times in the past 15 years: in 105h, 1961 and 1965. In 1965 a sepa-rate rate for sewerage services was eliminated and since then the rate coversboth water and sewerage services. The 1965 rate increase resulted in a 50percent increase of the average rate billed to a level of about Col$0.60/m3

(US$0o.14/1000 gallons) and the ATpril 196b iincrease is expected to yield anaverap:e rate billed of about Co1$l.l/Or,3 (US80.26/lo0o zallons), representingan increase of about 80 percent. The new rates are considered within thecapacity and willingness to pay of the di,>f'erent categories of consumersand are comDarable to rates in other cities ir Colombia. The new averageof US$0.26/100( gallons comoares with 7SC, t7/lOO gallons in Caracas andUS80.38/1000 gallons in Singanore, where the systems are more costly tooperate.

3.28 A comparison of the old and the new rates (Annex 4) shows also aconsiderable improvement and simp11ification of the rate structure. The pre-vious rate structure had an inderinite number of customer categories, denend-ing on the assessed value of the nronerty connected to the system but did notdistincguish between domestic and com_mercial-industrial customers. The newrate structure not only introduces such distinction but limits also the numberof categories depending on proDerty valuati n to five for domestic and threefor commercial-industrial custom.ers, Furthermore, it reduces the allowancefor consumption under the minlmurm.= charge thus resulting in water bills thatwill reflect more accurately the customer's consumntion. This, coupled withprogressive charges for consumption in excess of the allowance, should makethe customers more cost-conscious and should heln to reduce water wastage(paragraph 6.05). The EAAB has given assurances that it will further simplifythe system of charges as soon as :mnrovements in metering, part of the pro-posed project (paragraph 5,04-D), will nermit an even more consu-ptionoriented rate structure.

Other Sources of Income

3.29 The two most important other sources of income are the following'derechos", which increased at about the same rate as the income from watersales:

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(a) Derechos de Abastecimiento" or "Derechos de Matricula',defined as the value collected from the consumer for theright to obtain a connection to the system. This chargeis equal to 3 percent of the value of the property to beconnected or, in case of a new construction, 3 percent ofthe estimated cost: these derechos amounted to Col$23.5million during 1967, and

(b) "Derechos de Urbanizacion" or 'Derechos de Suministro"and 'Derechos de Desague", which are charges levied uponland develoners and denend on the extent of the area tobe served by the system. They amoumted to Col$5 millionin 1967.

The costumer also has to pay the cost of the connection, the meter, etc.,which is included under "contributions in aid of construction".

E. Past Earnings

3.30 It is estimated that the EAAB's real return on revalued assetsduring the neriod 1961-67 averaged about 3 percent instead of the 9 percentshown in the financial statements in Annexes 2 and 3. The return for 1967was 3 percent. Gross income, including the "derechos" (paragraph 3.2Q)increased from Col$34 million in 1Q61 to Col$95 million in 1967. Operatingcosts quadrupled in this period, mainly because of higher salaries andwaages due to inflation and increase in needed staff. Rate increases havealways been rut into effect timely enough to cone with increased operatingcosts but only a modest return was maintained.

F. ____lv Area and Existing Facilities

3.31 Bogota is situated at an altitude of 2,600 m on a plain, knownas the Sabana de Bogota, on the western slopes of the Cordillera Orientalof the Andes. It is by far the largest urban area of the country, with anopulation of about 2.0 million. The citv extends over an area of 16,000ha, resulting in a low average ponulation density of 125/ha. The averageannual rainfall is 980 mm; average temperature, almost uniform throughoutthe year, is 140c (580F).

3.32 The existing water supDly facilities (see Annexes 5 and 10 andMaps 1, 2 and 3) have a total annual average capacity of 5.5 m3/sec pro-vided by two major schemes, namely the Tibito I scheme (4.0 m3/sec) andthe Tunjuelo scheme (1.2 m3/sec), and some minor schemes (o.3 m3sec). Thelatter will be nhased out as major future schemes come into service.

3.33 The growth of the Bogota water supply system during the past30 years is illustrated in the following table:

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Service Length ofPopulation Connections Distribut'ion Pipes Water Produced

000 _000 km mil-lion m3 /year

1935 200 19 230 2019Q45 470 45 567 291055 950 74 1,009 521965 1,600 160 2,260 1221967 2,100 181- 2,710 157

3.34 The EAAB is the only water supply agency within the city limitsand does not at present supply water to areas outside the city. Only somesmall areas, mostly with unauthorized dwellings in the high lyinp southernsectors of the city, representing less than 3 percent of the total population,are not connected to the system. Rationing Is in force and the present supplydeficit is estimated to be between 15 and 20 nercent. To supnlement the EAABsupply, some customers, nainly industries. hrve individual wells. However,because of the unsatisfactory Froiundwater ouality, these wells are likely tobe abandoned as soon as the water shortage has been overcome.

4. THE LONG--ANGE PROGATi.

4.01 Since 1966, the Bank had been prenared to appraise a water supplyproject in Bogota, as soon as an acceptable feasibility study was available.A first review of the situation by a Bank mission at that time showed thatthe then pronosed projects were not suitable (naragraph 6.o6). The Bankrecommended that there first be a lon.-range master plan on which the selectionof a first-stage nroject could be based,

4.0o2 This master plan was submitted in mid-1967. Covering the perioduntil the vear 2000 it includes a demana study and identifies potentialwater supply sources in the vicinity of Bogota. The following table showsthe most suitable schemes and the tentative order and timing for theirimnlementation (see also Map 1, Demand Calculations Annex 6 and granhAnnex 7):

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Derr and atConstruction Accuymulated Coutnletion

Scheme Stage Period Yield Yield Date

…__----- m3/sec ----------

Existing Schemes 5-5

Tibito II IIA-Emergencyworks 1968-69 1.0 6.5 6.9

IIA-Main works 1968-7'l 2.0 8.5 8.2IlE 1971-73 1.0 9.5 9.8

Cantarrana 1971-75 2.0 11.5 11.7

Chingaza---Teusaca Teusaca 1973-76 1.0 12.5 12.8

Chingaza I 1973-77 3.5 16.0 14.0Chingaza II 1975-79 2.5 18.5 16.4

Sumapaz East I/II/III comiletion 1981/84/87 22.0 LO. 5 28.1West comrnletion 1994 10.0 50.5 40o.South completion after 2000 11.0 61.5 ?

Alto Suarez conmletion after 2000 10.0 71.5 ?

4.03 The studies comnleted to date show that the first order of priorityis the Tibito II scheme (paragrap)hs 6.07-6.10), but further work has still tobe done to confirm the sequence of work for the remainder of the neriod 1968-78. The program beyond the first ten years is inevitably tentative. In anycase, it has been established that there are sufficient water sources withindistances of not more than 50-75 km from Bogota. to, cover any foresseablewater demand, even with the high projected growth rates, and to supply mostof this water by gravity, in spite of the high altitude of Bogota.

4.04 Development of the Chinraza, Sumapaz and Suarez schemes wouldresult in transfers from outside river basins into the Sabana of Bogota ofup to three times the flow of the Bogota River. This would be of benefitto other sectors, such as irrigation and, especially, power generationin the Bogota region. It is expected that these beneficiaries will sharein the cost of implementing these schemes.

1/ More recent data seem to indicate a probable yield of the ChingazaTeusaca scheme of 15-20 m3 /sec, more than double the yield assume inthe 1967 master plan.

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5. THI PROPOSED PROJ..CT

A. Descriotion

5.01 TIŽ eroject would consist of (i) construction of the Tibito IIAscheme, (ii) prenaration of the subsequent project, including Tibito IIB,and of future projects; and (iii) improvement of the EAAB's oDerations.

5.02 The 'Tibito TIA scheme is basically a dulnlication of the existingTibito I scheme bv increasing its numpin,_ treatment and transmission capa-city from 4.0 m3/sec to 7.0 m3/sec, without recuiring any new catchment works,such as reservoirs. A detailed description of the scheme is given in Annex10. Its main elements are:

Stage 1 (emerRency works, to be comDleted in early 1969):

Construction of a booster naimu.nisng station at Tibito,

Stage 2 (main works, to be comsleted in 10971,):

(a) Additions to the raw wate-r Dumi ng and treatment facilitiesat Tibito.

(b) A 62 km nioeline (78-inch) from Tibito to the city andthrough the western suourbs to the southern city limits.

(c) Distribution works: two storage tanks, about 50 kmdistribution trunk lines anld partial. renovation of theexisting secondanr s:ystem.

5.03 The preparations for the suubseauent and other future Drojectswould consist of:

(ah construction of: an access road into the Chingaza area;

(b) feasibility studies of the Cantarrana and the Chingaza-Teusaca scheres;

(c) design and preparation of sT,ecifications for Tibito I-Band for the selected subsecuent scheme (Cantarrana orChingaza-Teusaca).

(d) -further investigations of- cther future schemes, such asthe Sumapaz and. the Alto Suarez schemes. and.

(e) land acquisitiop for the selected subseauent scheme.

Construction of the subsequent project is exo)ected to start in 1971, atwhich time financing for this uroject would, have to be secured. Therefore,the Bank project would cover tlese prep ar-tilons only thro,ugh 1970.

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5.04 Imnrovements of the EAAB's operations are urgently needed, especi-ally in view of the projected further growth of the system, and the followingitems would be included in the Droject:

(a) maintenance and construction enuijment, including snecialpurpose vehicles:

(b) water meters and meter rerair equirment: and

(c) various other ecuinment, such as for leak detection,communications, pressure control, drilling, etc.

B. Cost Estimates

5.05 Total cost of the project is estimated to be about Col$590 million(equivalent to about US*35.3 million), including interest durinR construc-tion on all loans. The cost estimates are summarized below. Details aregiven in Annex 8, page 1, which also shows the expenditures year by yearduring the construction and disbursement period 1968 through 1971.

in Col$ in US$Local Foreign Total Local Foreien Total------------------- umillion -------------------

Construction Tibito IIAPunping & treatment 33.3 39.2 72.5 2.1 2.4 4.5Pireline 86.3 112.9 199.2 5.3 7.0 12.3Distribution 46.4 21.5 67.9 2.9 1.3 4.2Land acouisition 3.0 - 3.0 0.2 - 0.2

Engineering 18.7 13.0 31.7 1.1 0.Y, 1.9

Sub-total 187.7 186.6 374.3 11.6 11.5 23.1

Preparation Tibito I3and future schemes 29.1 3.0 32.1 1.7 0.2 1.9

Operational Improvements 4.8 31.0 35.8 0.3 1.9 2.2Contingencies 28.4 23.7 52.1 1.7 1.4 3.1Price escalation 1/ 16.1 - 16.1 - - -

Interest duringconstruction 43.2 37.1 80.3 2.7 2.3 5.0

309.3 28,1.4 590.7 18.0 17.3 35.3

1/ Assuming an 8 percent annual cost increase, except for firm pricecontracts, on the local cost portion, not affecting the US$ equivalent.

5.o6 The cost estimates are based on the consultants' feasibilitystudy, and on additional information provided by the EAAB. They were up-dated in January 1968, after completion of bidding on the two major contracts,

- lh

(i) the pipeline manufacture and installation; and (ii) t1he pumning equip-ment sunDly. The local cost of engineering includes the work performed bythe EAAB staff related to the project. The estimated foreipn cost ofengineering is for special engineering services whaich will be provided by for-eign consultants as local firms did not have the necessary experience. Thecontingencies provide a margin of 10 nercent for items with completed bidding( except for the Dineline installation) and of 20 percent both for the re-maining items of the Tibita IIA schen.e, and for the Dipeline installation.The cost estimates and the underlying assumnotions are reasonable.

C. Engineering and Supervision

Tibito II Scheme

5.07 Ingetec Ltda. (paragraph 1.05) is in charge of coordination andprogramming of the project. Preparation of final design and sDecificationsof the various parts of the project has been, or will be, contracted withseveral local and foreign firms, includinm Inretec. A list of the firmscontracted to date is given in Annex 10.

Subsequent and Other Future Pro;ects

5.08 Feasibility studies for the Cantarrana ard the Chingaza-Teusacaschemes should be completed by early 1099 and final design of the selectedscheme by the end of 1970. These studies and further preliminary investi-gations of other potential future schemes, such as the Sumapaz and the AltoSuarez schemes will be carried out b' a consortium of Colombian consultingfirms, including and coordinated by Ingetec.

D. Constructi-on Schedule

5.09 The construction schetlule (see Control Network, Annex 9) showsfour ma,jor target dates for completion of certain portions of the Tibito IIAscheme:

Februarv 1969 Booster pur,iTinc station Tibito

February 1970 New water numpinn anrd treatment unitsJanuary 1971 P-peline (the critical work)June 1971 Distribution worsk

E. Procurement

5.10 All contracts for enuiinment suprly and civil works are beingawarded on the basis of international cornretitive bidding. With the excent-ion of bidding for construction of the storage tanks and installation of thedistribution mains, bidding should hb comoleted bv the end of l)98. Theproposed Bank and joint loans would finance the actual foreign exchangecost of imported equipment and consultinF services. and the import comnonent

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of civil works contracts. This latter import component would be agreedupon between the EAAB, the consultants and the Bank for each contract afterthe award. It would include depreciation of imnorted equioment to the ex-tent used for the project. Should there be any savings over estimatedforeIgn exchange costs, it is pronosed that the excess portion of the Bankloan would be cancelled, unless the circumstances prevailing at the timethis decision is taken justify apnlyinz these funds to additional work,;.

5.11 In view of the ur7ency of this project, and the need to havereasonably accurate figures to establish the foreign exchange requirementsand consequently the amount of the Bank and joint loans, it was agreed thatthe EAAB proceed with bidding for, and awards of, the critical contracts assoon as nossible and prior to a-proval of the loani by the Bank. The EAAB,while complying fully with the Bank's bidding procedures, was, of course,aware that it was proceeding at its own risk and that this agreement did notconstitute arny commitment by the Bank to finance. Contracts awarded to datetotal US$13.9 million equivalent: of this the Bank and joint lenders wouldfinance US$7.8 million eauivalent (Annex 8, page 2).

5.12 It is Droposed that the Bank reimburse the EAAB for foreign exchangepayments made on engineerinR contracts (Annex 10) uD to one year prior toapproval of the loan by the Bank's Executive Directors. Foreign exchangepayments by the SAAB that would become eligible for reimbursem.ent under thisprovision are about US$50,000 as of this date, but may increase because offurther payments nrior to the date of loan approval.

5.13 Originally, it had also been intended that the Bank reimburse theFAAD for foreign exchange payments made on equipment supply and civil workscontracts up to four months prior to approval of the loan. However, as ofM;ay 1, 1968 no foreign exchange payments have been made on such contractsbut downDayments on certain contracts already awarded may become due priorto the date of loan approval. It is proposed to reimburse the foreignexchaiigfe con.-Donent of any such payments but these are not expected to exceedUS$500,000.

5.14 The EAAB is exempted from the payment of import duties. Assuranceshave been obtained during negotiations that the Government will act promptlyupon all applications by the SAAB for import licenses on goods for this project.

6. JUSTIFICATION

A. Imrortance of Project

6.01 Bogota is the largest and fastest-crowing city and the main com-mercial and administrative center of the country. It has also become themost important industrial rerion. Adenuate public services are a pre-condition to cope with this rapid development. A safe water supply isan important infrastructural factor and will influence the attractivenessof Bogota for further expansion of the industrial and commercial sectors.

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6.02 The city has been suffering an increasin fl water shortage since1963. This shortage was only temnporarily reduced earl> in 1967 upon com-nletion of the Usacjuen booster numning station, the first> ~'~erencyoroject". The average annual shortagee is estimated to be between 15 and20 nercent at Dresent, but is much higher during the dry seasons of the year.Because equal rationing is dif'icult due to the structure and conditions ofthe distribution system, the shortare is felt particularly in the highly popu-latedi and industrial southern sectors of the citv.

6.03 There is a serious backlog in the development of the Bogota watersupply, not only in comparison with the situation in the other larger citiesof Colombia, but also compared with other sectors of local development(sewerage, financed by US-AID, Power - two Bank loans in 1961 and 1963;urban transportation - construction of a large program has started). Hence-the imnrovement and expansion of water supplv is not only essential forbenefits directly related to an adequate water service, such as healthasnects and fire protection, but also for the general economic developmentof the city.

B. Demanrd and Surr7v Pro,ections

6.o4 A detailed demand study has been- part of the long-range masterDlan prepared by Ingetec in 1956/67 (see Annexes 6 and 7). The oronosedproject (Tibito ITA) will increase the installed capacity fromr 5.5 m3/secto 8.5 rm3/sec; (55 percent) by 1971, While this increase is too small tocover both the already existing deficit and the assumed demand increase,it will at least keen the water shcrtag2e ,ithin certain limits (between 15and 20 percent) until l973. Thereafter, upnon completion of the subsequentschemes the shortage will be gradually reduced. Full coverage of the demandis not expected before 1977, the tentative completion date of Chingaza I.

6.05 While the demand estimates anppear reasonable, the new rates might,as intended, keep the actual demand below the estimates and thus reduce thecalculated deficit (paragraph 3.28 and Annex ). The deficit could be fur-ther reduced, and perhaps overcome, by utilizing the peak and stand-by capa-ci-ies of the Tibito I + TI schbernes whenever more water is available in theBotzota river at Tibito than 9.0 A3/sec (nominal- water right of the EAAB of8.0 m3/sec rlus 1.0 m3 /sec required for downstreeam' use; see Annex 10).

C. Selection of the Project

6,o6 Originally, the BAA Dresented to the Bank (i) a serarate develop-ment of a 1.0 m3/sec Teusaca scheme and (ii) a Neusa-Tibito nipeline asemergency projects. Neither of them, however, was considered suitable.The 'Teusaca scheme would have provided only 1.0 m3 /sec at an exorbitantcost (paragraph 6.08) and the 1N1eusa-Tibito uineline would only have savedthe cost of treating and punm-ing 1X0 m /sec, but would not have resultedin an actual increase in sunply.

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6.07 Once those schemes were discarded, the question was which schemeshould take their place. The choice fell on Tibito II for two reasons.The first reason was that Tibito II had been adequately prepared and wasready for execution. It would thus be completed in 3-4 years whereasalternative schemes would take 5-6 years for preparation and construction.This was an important consideration given the urgent need for additionalwater resources and the fact that Tibito IIb while not eliminating thewater shortage, could keep it within reasona.ble liiits.

6.o8 The second reason was that available information, while notadequate for a full economic comparison, was sufficient to suggest thatTibito II was the least cost project capable of keeping the shortage with-in limits. A comparison of the preliminary total and unit cost figures 1/shows the following:

3Yield Total Cost Cost Der m /sec

Scheme Stage m3/sec Million US$ Million UStStaae Scheme

Tibito II IIA 3.0 24.1 8.0IIB 1.0 5.4 5.4 7.3

Cantarrana 2.0 21.8 10.9

China,,aza-Teusaca Teusaca 1.0 18.0 18.0

Chingaza 6.o 53.3 8.9 10.2

1/ Excluding distribution and other works, required for all schemes.

6.o0 Differences in oneratini costs cannot be determined to date, butare expected to be small and would not alter results materially. The actualunit cost of Tibito II is even lower than indicated above because an additional4.0 m3/sec peak and stand-by canacity can and will be used from time to time(Annex 10). Other advantages of this scheme are the simplicity of its design(duplication, and utilization of spare capacity, of Tibito I), the absenceof land acquisition problems, and the elimination of the need to constructnew reservoirs and intake facilities.

6.10 On the basis of the new rates (paragraphs 3.27 and 3.28), the mini-mum internal rate of return of the Droposed project. as an increment to theexistinr system, is estimated to be 15 percent. Assuming further rate in-creases, scheduled for 1971 and 1972 in the financial projections, and thecompletion of the Tibito II scheme (by includinR Tibito ITB in 1973: para-graphs 4.02 and 6.08), the internal rate of return is estimated to ranFe from18 - 21 percent.

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7. FINANCING PLAN AND PROJECTIONS

A. Reoyirements and Sources of Funds

7.01 A forecast of requirements and sources of funds for the period1968-1973 is attached as Annex 11. The financing plan for the constructionperiod 1968-1971 is summarized below:

REQUIREMENTS Million Col$ %

CaqpitalE_endituresWater: Proposed Project 590 47.9

Subsequent Project 131 10.6Other Works 110 8.9

Sewerage 339 27.5Other 23 1.9

Total Capital Expenditures 1,193Working Capital 39 3.2

Total Requirements U232 100.0

SOURCES

Funds Generated from Operations 374 30.4Less: Debt Service 130 10.6

Net Internal Cash Generation 244 19.8

EaijLity Contributions

Government (1968 budget appropriation) 20 1,6Other Public Entities 33 2.7Contributions in Aid of Construction 87 7.1Property Improvement Tax for Sewerage Works 125 10.1

Total Equity Contributions 265 21.5

Loans

Foreign Exchange Loans for Proposed Project (Bank andJoint Loans) 276 22.4

Future Foreign Exchange Loans 62 5.0Instituto de Fomento Industrial (IFI) 319 25.9Other 66 5.4

Total Loans 723 58.7

Total Sources 132 100.0

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7.02 Net internal cash generation is expected to cover 20 percent cfthe total requirements during the construction period, which anount toaround US$75 million equivalent. This percentage takes into account therecent rate increase and a second rate increase by January 1971 (see para-graphs 3.27, 3.28 and 7.11).

7.03 Besides some contributions from the government and other publicentities (see Annex 12, paragraph 4), equity contributions would consistof contributions in aid of construction, mostly from developers, and aproperty improvement tax, called "Valorizacion"', for the cost of the sewer-age works now being executed. This tax is based on the philosonhy thatowners of real estate, whose proDerty increases in value because of publicworks benefiting them, should participate in the financing of these works.'Valorizacion' has already been an important source of funds to the Districtof Bogota for road construction. In other Colotnbian cities it has alsosuccessfully been anDlied in recovering the cost of other Dublic serviceslike sewerage.

7.04 The nronosed Bank loan of US$14 million equivalent is expected tocover about 40 percent (total external financing 49 percent) -,f total projectcost, includina interest during construction, and about 18 percent of totalrequirements during the construction period. Based on the nature of the nro-ject and the EAAB's future financial position, taking into account substantialfuture borrowings, a 20-vear term is proposed for the loan including a fourand a half year grace period. For purposes of the financial calculationsan interest rate of 6¼4 percent and a commitment charge of 3/4 of one percenton the unwithdrawn balance has been assured.

7.05 Based on the nresent status of procurement, the following jointloans may become available for contracts already awarded (paragranh 1.0-3 andAnnex 8, nage 2):

Countrv Contracts Amount Joint l,oan(IJS4 million)

U. S. A. PiDeline and Engineering 2.40U. K. Steel Wire and Valves

(sub-order for pipeline) 0.65Japan Steel Sheets

(sub-order for pipeline) 0.60Germany Pmnps and Pumping Equipment 0.55

4.20

7.06 The ultimate amount of joint loans for this project will only beknown when all contracts have been awarded and all suborders placed. Althoughpredictions are difficult at this stage, additional joint loans may increasethe total anount up to US$5-6 million. On the other hand, not all of the abovementioned joint loans for contracts already awarded are fully assured. In -determining the amount of the proposed Bank loan it was therefore consideredprudent to assume joint loans of USSi3.0 million only. The proposeAd ank loanof US$14.0 million would be reduced to the extent joint loans would exceedUSI3.0 million. For the purposes of making the financial projections, the

- 20 -

joint loans have been assumed to carry 7 percent interest with a 10-yearamortization period starting in 1970. Amortization of the pronosed Bank loanwould be adapted to the repayment requirements of the joint lenders in a waywhich would result in a repayment schedule as close as nossible to that whichwould have resulted had the Bank financed the entire amount of US$17.0 million.

7.07 The future foreign exchange loans have been assumed to cover theforeign exchange requirements of the second water supply program starting in1971.

7.08 Other loans consist of a small US-AID loan of about US$0.5 mil-lion for engineering and equipment required for the expansion of the sewer-age system, and withdrawals from a snecial revolving fund for short-termfinancing (three years) of extensions to the distribution system. With-drawals fror this fund have been assumed to amount to Col$60 million.

7.09 The balance of the requirements, arounting to Col$319 million(26 nercent of total renuirements), has been assured by the Government tobe provided either by, or through, the Instituto de Fomento Industrial (IFI)in the form of 20-year loans or from budgetary sources.

7.10 The financing plan is satisfactory. The EAAB, because of itsextremely low debt equity ratio at present, is capable of incurring sub-stantial debt. The debt equitv ratio at the end o0 the construction periodhas been project at 32:68 which is still fairly low.

B. Future Earnings and Financial Position

7.11 Under the assumptions mentioned in detail in Annex 12, the EAABis expected to earn a rate of return which would average 6 percent duringthe Deriod 1968-1970. Under the return requirerient of 9 percent (paragraph7.13) a rate increase of 30 Percent has been projected for 1971, when majorbenefits of the project should start to be felt. Another rate increase wouldbe required in the following year.

7.12 Other highlights of the Projected financial performance are asfollows:

(a.) the ratio of operating costs including depreciation togross income would vary between 63 and 71 percent during theperiod 1968-1973. The orerating costs have been projectedconservatively and take into account increases in pricelevels, as exoerienced in the past;

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(b) salaries and sages including social benefits, etc.,would continue to be about 65 percent of total operatingrcosts. This is normal in view of the fact that the EAAB'swater sunDrly system requires very little pum-ing and isconsequently labor intensive,

(c) debt service coverage, which would average 3:1 during theconstruction period, would decrease to 2:1 thereafter,which is satisfactorv: and

(d) the debt enuity ratio would increase from 10:90 in 1967to 38:62 in 1973.

C. Financial Covenants Pronosed for the Loan

7.13 Assurances have been obtained during negotiations that the EAAB'sincome from water sales and "derechos' will yield a return on average netfixed assets in oneration of 5 nercent during the construction period; there-after, when water service has improved, which is expected by 1971, the EAABshould maintain its rates and "derechos" at levels that will yield a rateof return of at least 9 percent. The adeouacy of rates will be reviewed and,if necessary, ad.justed quarterlv. Fixed assets will be revalued reriodicallyas follows:

All assets in oneration on December 31, 1967 and assetscommissioned since then and financed with local currency:

in accordance with a mutually agreed upon local costindex;

Assets commissioned since January 1, 1968 and financed withforeign currency:

in accordance with the US$ exchange rate.

7.14 Because of the heavy indebtedness which the EAAB will have to incurto finance the proDosed and future projects, a debt limitation covenant isalso reauired. Assurances have been obtained during negotiations that, with-out Bank approval, the EAAB will not incur any indebtedness unless its maxi-mnum debt service requirements on existing and pronosed new debt are coveredat least 1.5 times.

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8. CONCLUSIONS AND RECON>VENDATIONS

8.01 The pronosed project consists of:

(i) construction of the Tibito !!A scheme;

(ii) preparation of future schemes, including engineeringfor the subsequent project. and

(iii) improvement of the borrower's operations.

The Tibito IIA scheme is the first stage of a long-range master plan and isthe only feasible solution to the water supply problem until about 1973. Itwill increase the capacity of the Bogota water supnly from 5.5 to 8.5 m3/sec(55 percent) and provide the basis for future exnansions.

8.02 Total cost of the project is estimated to be US 35,3 millionequivalent with foreign exchange recuirements of UST.17 3 million. The costestimates are reasonable.

8.03 The project is technically sound; the construction program andthe financing plan are acceptable and the arrangements for design, procure-ment, construction and supervision are satisfactory.

8,o4 The proposed borrower is the Empresa de Acueducto y Alcantarilladode Bogota (EAAB). The EAAB is considered a suitable borrower, having madesatisfactory progress over the past two years in improving management andadministration. The E4AB has agreed to, and made arrangements for, an annualaudit of its accounts by an independent auditing firm acceptable to the Bank.

8.05 After the initial increase in the average water and seweraJ2e rateof about 80 percent, presently being implemented, the financial position ofthe EAAB should be satisfactory until a second rate increase in 1971, thefinal year of the construction period.

8.o6 It is pronosed that the Bank reimburse the EAAR for foreign ex-change payments made on (i engineering contracts ur to one year prior toapDroval of the loan by the Bank's Executive Directors, and (ii) for theforeign exchange component of downnayments on equipment supnly and civilworks contracts which may become due after \N.r 1, 1968 but Drior to a-pprovalof the loan.

8.07 During negotiations of the proDosed Bank loan, satisfactoryassurances have been obtained on the following:

(1) Staff requirements will be re,riewed. annually withl theBank (paragrarh 3.06).

(2) New appointments to the posts of general manager or sub-manager will not be made without consultation with theBank (paragraph 3.09).

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(3) New accounting, budaet control and management reportingsystems will be imolemented and an internal audit sectionwill be established within one year (paragraphs 3.10, 3.13and 3.15).

(4) T'he accounts of the EAAB will continue to be audited annuallyby independent auditors satisfactory to the Bank (paragraph3.114).

(5) The Government and dependent entities will henceforth budgetsufficient funds for prompt payments of their bills (para-graph 3.20).

(6) The EAAB will set and maintain rates for the sale of wateradequate to permit, coupled with certain other revenues,a rate of return of at least 5 percent during constructionof the project and of 9 percent thereafter. A method forperiodic review of the adequacy of rates and assets valuationhas been agreed to (paragraph 7.13).

(7) The EAAB will not incur indebtedness without apnroval by thethe Bank unless its maximum debt service requirements arecovered at least 1.5 times (paragraph 7.14).

8.08 Under the above arrangements the proposed project provides a suit-able basis for a Bank loan of US$14.0 million equivalent, including interestduring construction, for a neriod of 20 years, including a four and a halfyear grace period. This amount has been calculated under the assumption thatjoint lenders will provide at least US$3.0 million equivalent. The Bank loanwould be reduced to the extent joint loans would exceed US$3 million eouivalent(paragraph 7.06).

May 6, 1968

I

COLOMBIA: EMPRESA DE ACUEDUCTO Y ALCANTARILLADO BOGOTA D.E.ORGANIZATION CHART

BOARD OF DIRECTORS

E NINTERNAL AUDIT N T T A EXTERNAL AUDIT|GENERAL MANAGER

FRCDREST S IT CBCl RCOLA ITION E

SUB- MANASER SUB-MANAGER SUB-MANAGER SERE SSNNREIFOR FCNANCE FOR PLANNING FOR OPR RATIONS FOR PERSON

SL ENCONOICETUIES ARCHIVES AND |D=SOR

LIR DRTR T D R I D D DiRECTOR CORRESPONDENCE LABOR AFFAIRS

OStAbe 1I6 IBOU0

OC REMENT I FELANNIING | CNTERUCTION I MACOSTERUCTION WAT DESINR DISTRIBUTN T ION SP IY SEWRAGI PR U I I S~~W TUDERSPL WATE SUPERISONIY SEWERVISIO AND SEWERAGE SYSTEM SYISUDTEMAR FAR

-{93 0 CONSTRUCTIO~~~~~~~~~~~~~~~~"GN |TLBREATMENT .. A.UATIC

ISOLL AND SONCRETE | X PLAN! ;;71 I ME ER I I MlT DR I~~~~~~~~~~~~~~~~~~~~DMET.. I LABORATORY I I RECDRDS I I SHOP I I WORER PLANT

OcMber 1967 IBR-360N

I~ ~~~~~~~~ I

COLOMBIA - BOSETA WATER SUPPLY PROJECT

EMPBOAA DE ACUE1UCTO Y ALCANTARILIoO BE DbOGOTA

Actual end Pro Fer. B.alance Sheets

(Millions of Cl$)

Be f o Ierelo t o n A f ter eR luuti o

- - - - - -- - -- c uanudited) - - - - - - - - - - - - Actuml (Adited) - - - - - - - - - - - - - - - - - - - - - - -

1961 1 962 1 963 1964 1 965 1966 1 967 1 967 1968 1 969 1 970 1971 1 972 1973

ASSETS

Current Aesets

OABh and BEsnk 6 4 1 1 3 6 5 5 1 2 2 2 5 7Short-ter L,e-stmects 8 10 10 4 1 5 4 4 4 4 4 4 4 4Sneentorlee 6 9 11 21 14 13 19 19 19 19 19 23 26 30

Accounts RBeete-ble

Wter and Sewer Seroice. (Nest) 2 2 2 4 25 13 10 10 22 23 28 50 65 76Other 6 13 8 15 13 23 22 22 22 22 21 20 20 20

Total 8 15 10 19 38 36 32 32 44 45 49 70 85 98

Tct.l C -rrest Assets 28 38 32 45 56 60 60 60 68 70 74 99 120 139

Other Ass-t 2 3 3 4 lI1 15 15 15 15 15 15 15 15 15

FPSed Assets

Gross FiPed Assets: Water 179 189 199 210 227 296 317 583 647 696 719 1317 1347 1377Beesruge 38 48 69 97 109 170 232 632 591 655 71S 812 880 971Other 7 7 8 14 11 14 11 20 28 33 38 43 48 .32

224 266 276 321 347 690 565 1035 1266 1382 1475 2172 2275 2401Less: . epreot. ien 21 27 36 42 51 63 72 214 240 271 305 342 329 658

NBt FLIAd Assets iB Opersticn 203 217 262 279 296 627 4688 821 1026 1111 1170 1830 1876 1963

Work IA Pr-gress. Water 20 23 35 42 57 27 36 34 107 347 596 131 320 589S-eureg - -_ - 3 5 3 89 89 49 48 79 48 71 61

20 23 35 45 62 35 123 123 156 395 597 179 391 65oTotal Net 9i8ud Aseets 223 240 277 324 358 662 611 ,v4 11S2 1506 1967 2009 2267 25Y3

TOTAL ASSETS 253 281 312 373 428 537 686 1019 1265 1591 1856 2123 2402 2747

LIAiILITIES

Curreet LlabiliStSe

Aoouptsu Pynble 1 1 1 3 6 6 18 18 18 18 la i8 18 18Lsogg Tr Debt Mlsurtsg in Ocsr 8 8 6 7 12 20 9 9 16 22 34 42 51 62

Totel 9 9 7 10 18 26 27 27 32 40 52 60 69 80

Deposits and Otcer Ltbilitiee 13 17 15 15 15 9 14 16 16 14 16 14 16 16

LoDg Trr Lbt

Bonds 56 52 48 49 51 49 45 45 45 65 45 36 27 18Reoi,g Fupd Distributi.o System 2 3 8 11 11 11 12 12 21 25 25 25 25 25OtherLoans 1 1 1 1 1 1 3 3 9 9 9 9 7 5SuppIi-rs Credit - - - 7 5 4 2 2 1 -- - - -Instituto de FPometo Ldu-trial (IFI) -- - - - 48 48 1311 218 321 356 408 496I.B.R.D. - - - - - - - - 41 68 2705 227 226 210JoLot Loaders (FPreig. Eochencg) -_ _ _ _ - 10 40 44 39 34 29Future Foreigo Ec-huage Loss. - - _ _ _ _ - _ _ _ _ 62 151 269

59 56 57 68 68 65 110 110 257 485 669 756, 676 1058Lose: Next Y`r'o MaturSti-c 8 8 6 7 12 20 9 9 14 22 36 42 51 62

Tctsl Long-Term Debt sT -7 35 36 -5% 13 ToT ToT 91 3 12 65 72 5 35

Ebuity

Ccntrhibutton in Aid of Constr-ction 5 10 20 33 47 162 222 206 238 286 33 1118 492 569R-eouoti7o Surplus - - - - - - - 349 349 349 349 349 349 369Otber Equity mmd Euroed Smrplus 175 197 212 P54 292 295 322 322 309 639 _83 570 653 739

Totol Equity 180 207 239 287 339 157 546 877 976 1074 1175 1337 1494 1657

TOTAL LIABILITIES 253 281 312 373 628 537 686 1019 1265 1591 1856 2123 2402 2767

Net FLosd Assets iL Oper-tiun 203 217 242 279 296 h27 48U 821 1026 1111 1170 1830 1876 1973Loe.: CoutribuOtios IA Aid of C..str..tioc _ 10 20 33 h7 i6, 222 206 238 286 3b3 6l19 422 569 f2

RBte Base 198 207 222 266 249 265 266 615 788 825 027 11 12 1384 1374

5 RAturs us A-vrge Beate bass 7.56 8.46 6.5, 11.15 13.75 9.75 10.9% 2.95 5.65 6.35 6.1% 9.55 9.3% y.6%

Lo-g Ter. Debt/Equity Ratio 22/78 19/81 18/82 18/32 1l/86 9/91 16/8I1 10/90 20/80 30/7C 34/66 35/65 36/64 38/62

867 0, 1968

I I

COLOMBIA - BOGOTA WATER SUPPLY PROJECT

EMPRESA DE ACUEDUCTO Y ALCANTARILLADO DE BOGOTA

Actual and Pro Forma Income Statements(Millions of Col$)

Before Revaluation After Revaluation

----- _----__----- Actual (Unaudited)------------ ---- Actual (Audited) ------------- _----- Pro Forma ------- -----------1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973

Water Distributed (000,000 m3) 98 106 115 128 125 127 157 165 177 186 233 249 282

Water Sold (000,000 m3) 72 81 89 92 93 85 110 119 127 138 172 189 220

% Non-Revenue Water 27% 24% 23% 28% 25% 33% 30% 28% 28% 26% 26% 24% 22%Average Rate (Col$/m3)1/ 0.29 0.36 0.36 0.38 0.57 o.64 0.58 0.62/1.00 1.05 1.10 1.35 1.60 1.60

Income from Water Sales 21 29 32 35 53 55 64 97 133 152 232 302 352Income from "Derechos" 11 11 12 23 26 28 28 36 39 44 48 53 58Other Income 2 2 2 2 1 2 3 3 -- 3 --- 3.-- 3

Gross Income 34 42 46 60 80 85 95 136 175 199 283 358 413

Operating Costs

Salaries and Wages 11 12 15 21 25 30 44 54 70 87 109 136 170Pumping 1 1 1 1 1 3 4 6 10 12 10 10 17Chemicals 1 2 2 3 4 4 5 7 8 10 14 16 19Other Materials and Supplies 1 1 3 4 5 4 6 7 9 11 13 16 19Other Costs 1 5 6 7 7 12 11 12 15 18 22 27 334

Less: Capitalized Costs-/ 15 21 27 36 42 53 70 86 112 138 168 205 2592 2 9 6 4 114 1 59 23 28 34 40O.

13 18 25 27 36 49 56 71 93 115 140 1 71 219Depreciation 6 7 7 7 10 11 14 26 31 34 37 57 59

Total Operating Costs 19 25 32 34 46 60 70 97 124 149 177 228 278

Interest 4 4 3 4 4 3 4 15 28 43 52 61 76Less: Capitalized Interest - - - - - - 4 10 17 32 28 10 27

4 4 3 4 4 3 - 5 11 11 24 51 49

NET INCOME 11 13 11 22 30 22 25 34 40 _3 82 9 86

% Return on Average Rate Base 7.5% 8.4% 6.5% 11.1% 13.7% 9.7% 10.9%23/ 5.6% 6.3% 6.0% 9.5% 9.3% 9.8%

Ratio of Operating Costs (IncludingDepreciation)

(a) To Income from Sales 90% 86% 100% 97% 87% 109% 109% 100% 93% 98% 76% 75% 79%(b) To Gross Incone 56% 60% 70% 57% 58% 71% 74% 71% 71% 75% 63% 614% 67%

Salaries and Wages as a Percentage ofOperating Costs before Capitalization and IDepreciation: 73% 57% 56% 58% 60% 57% 63% 63% 63% 63% 65% 66% 66%

_/ Average Rate Billed: 1961-1967; Average Rate assumed collected: 1968-1973. The increase from 1.00 in 1968to 1.10 in 1970 reflects improvements in meter reading, billing and collection procedures.

/ Costs of the Technical Department such as engineering, etc. charged toconstruction.

/ On revalued basis with depreciation estimated at 25, the return would be 2.9%

COLOMBIA - BOGOTA WATER SUPPLY PROJECT

Old and New Water and Sewerage Rates

OLD RATES NEW RATES 1/

Allowance Rate for Allowance Rate for Consumption above Allowance

Assessed for Consumption Assessed forProperty Minimum Minimum Rate for above Property Minimum Minimlum Rate for 16-2X: 2 6-eo 51-200 201-2000 2001 and up

Category Value CharEehr Allowance Allowance Cate&or Value Char e_ Charge Allowance m3/month m

3/ th - /mont m

3/month m

3/month

1000 Col$ m month Col O$3.5/m3 nolTW/_ 1000 Col$ m-/month Col f - -------- Co17 m -----------------------

from - to monthly from - to monthly

1 0 - 1 20 1.7$ o.o6 0.10 I. Dosastic A 0 - l0 15 5.00 0.33 ----------- 0.75 ----------- 2,30 2.502 1- 3 20 1.70 0.08 0.203 3 - 10 25 2.50 0.10 0.30 Domestic B 15 - 50 15 10.00 0.67 ----------- 1.00 ----------- 2.30 2.504 10 - 15 25 4.50 0.18 0.35: 15 - 20 30 6.60 0.22 0.45 Industrial 0 50 15 20.00 1.33 ----------- 1.00 ----------- 2.30 2.50

6 20 - 30 40 12.50 0.31 0.5$7 30 - 40 40 17.9T0 o.44 0.708 40 - 50 40 27.30 0.68 0.85

9 co - 7$ 0 31.50 0.79 0.85 II. Domsstic A c0 - 125 25 25.00 1.00 ---- 1.50 ---- 2.30 2.5010 75 - 100 40 35.70 0.89 1.9011 100 - 125 $0 39.90 0.80 1.00 Domestic B 125 - 200 25 40.00 1.60 ---- 1.50 ---- 2.30 2.5012 125 - 150 50 44.10 0.88 1.0013 150 - 175 50 48.30 0.97 1.00 Industrial 50 - 200 25 80.00 3.20 ---- 1.50 ---- 2.30 2.50

14 175 - 200 50 52.50 1.05 1.00

15 200 - 225 50 56.70 1.13 1.00 III. Domestic above 200 50 80.00 1.60 2.00 2.30 2.5016 225 - 250 50 60.9. 1.21 1.0017 250 - 275 50 65.10 1.30 1.00 Industrial above 200 $0 160.00 3.20 2.00 2.30 2.5018 275 - 300 50 69.30 1.39 1.0019 300 - 325 50 73.50 1.47 1.0020 325 - 350 50 77.70 1.55 1.0021 350 - 375 50 81.90 1.63 1.0022 370 - 4O0 50 86.10 1.72 1.0023 400 - hOO c0 94-C0 1.89 1.0024 450 - 500 50 102.90 2.0$ 1.0025 500 - $50 60 113.30 1.89 1.0026-35 above 050 60 plus 8.40 plus 0.24 1.00and up

for each additional IV. Official 2/ ---- 50 40.00 0.80 ---- 51 m3

/month and upCol$ 50,000 property 0.70 ----value

1 / Water services will be supplied wit bout charge for buildingsoccupied by the Special District of Bogota (except decentralized agencies),for fire hydrants, public stand pipes, and irrigation of public parks.

2/ The official rate will be applied to Governmernt (includingDepartamento de Curdinamarca) and dependent entities, to decentralized agencies of theDistrict, and to hospitals, public health centers, schools, charities, churches andrelated institutions (except when operated by the District)

May 6, 1968

I

ANNEX 5Page 1

COLOMBIA - BOGOTA WATER SIJPPLY PROJECT

Existing Facilities

(Water Sunply end Sewerage)

A. WATER SUPPLY

Rio San Francisco and Other Secondary_Schemes

1. The Rio San Francisco scheme, with the San Diego treatment plant,was the first public water supply for Bogota. It was constructed in 1886and has a safe yield of 0.2 m3/sec. The Rio San Francisco originates inthe mountain slopes east of the citv and flows through the city to theBogota River. The scheme is obsolete and only conserved because of thesevere water shortage in the high pressuire zone. A number of other smallwater courses (La Vieja, La Osa, Santa Lsabel, Arzobispo) are being utilizedfor the supply of certain high-lying areas. Their total average yield isnot more than 0.1 m3/sec.

Tunjuelo Scheme (Mao 1)

2. The Tunjuelo scheme is the older of the two principal schemes.It was constructed in 1924 and later expanded to its present capacity of1.2 m3/sec. It is a gravity scheme, drawing water 25 km south of the cityfrom the Tunjuelo River. The river is partly regulated by three snall reser-voirs (Regadera, Chisaca, Tunjos), all constructed and operated by the EAAB,with a total stora7e of 11 million m3. The water is treated at the citylimits in the Vitelma plant, and supplied to the high pressure zone.

Tibito I Scheme (MaDs 1, 2, 3 and Annex 10)

3. The Tibito I scheme, construieted in 1956-59, draws water from theBogota River at Tibito, 35 km north of the city. upstream of the point whereindustrial and domestic wastes start to pollute the river. Upstream Tibitoare three reservoirs (Sisga, Guatavita, Neusa), total storage 890 milliom mi3 ,operated by the Bogota Power Company (EEEB) and the Corporacion AutonomaRegional de la Sabana (CAR) respectively. CAR is the regional authorityin charge of allocation and control of water resources. The EAAB has awater right of 6.0 m3/sec on the Bogota river at Tibito.

4. After passing through a presedimentation basin, the raw water isDumied to the treatment olant, 100 m above the river. The main elements ofthe plant are Dre-aeration, flocculation, sedimentation, and filtration.The plant was designed for an ultimate capacity of 6.0 m3/sec the existingfacilities being the first-staae with a nominal capacity of 3.0 m3/sec.

5. A 35 km transmission line (60-inch) with a gravity capacity of2.5 m3/sec conveys the water to the city. A booster Dumping station,Usaquen, at the northern city limits was comoleted in 1967 and increasedthe pipeline canacity to 4.0 m3/sec. The Tibito I scheme supplies the lowand the major part of the intermediate pressure zones.

I

ANNEX 5Page 2

Distribution System

6. The system is divided into three pressure zones. By far thelargest is the lower zone, comprising the flat central and western citysectors; the intermediate and high pressure zones extend in two narrowstretches along the mountain slones in the eastern part of the city.

7. Total length of existing mains is about 2,600 km. Only 10 per-cent of the mains have diameters equal or larger than 10-inch; only 2 9er-cent larger than 20-inch: This deficiency in the carrying capacity of themains contributes to the present sunply difficulties.

8. The total volume of the four major st6rage tanks is 250,000 m3,more than 50 percent of the average present daily supply. However, pres-sures in their feeding lines are often too low to fill these tanks andnormal operation to regulate hourly demand variations is difficult.

9. Rationing is done by dividing the system into isolated sectorswhich, following a rotating schedule, receive water during certain hoursevery day. To overcome the rationing, most of the buildings Iive individualstorage tanks, as required by the EAAB.

B. SEWERAGE

10. The sewerage system serves about 70 percent of the present cityand is inadequate. The older part of' the city has a combined sanitary andstorm sewage; the newer areas have a separated system. The situation isparticularly serious in the western sectors of the city, where the sewagefrom the central and eastern sectors is collected in open ditches andnatural water courses discharging, without prior treatment, in the Bogotariver in about 5 km distance from the city. The resulting pollution of theriver affects its downstream use (including power generation). Because oftne lack of adenuate sewerage in the western sectors, the city has spreadmainly in a north-south direction.

11. A master plan for expansion of the sewage system was prepared in1962 by Camp, Dresser & McKee, a U.S. consulting firm, followed by a first-stage feasibility study in 1964. Construction of the first stage startedin 1967 and will be completed by the end of 1968. A feasibility study forthe second stage has been prepared. Because of the simultaneous constructionof the water supply project, and unless the overall financial situation ofthe EAAB would improve above expectations, construction of the second stage,although urgentl.y needed, will be soread over a five-year period, 1969through 1973.

12. Various sewage treatment alternatives are being investigated ina small pilot plant, particularly the use of sewage lagoons instead ofstandard treatment. Construction of sewage treatment facilities is scheduledfor a later stage, after 1975. Until then, pollution of the Bogota riverwill increase substantially because of (i) the increased water supply and(ii) the improved sewage collection.

II I

ANNEX 6

COLOMBIA - BOC TA WATER S-PPLY P OJECT

Demand Calculations

Per Deficit Pro jection 1967-1973Popula- Capita Annual Average Available Installed Available

Year tion Demand Demand Demand Schemes Capacity Suply DeficitMillion TFTeW7 Millior i/sec md/se2 n3/sec m3s/ec % of

day m3 Demand

(a) Actmal Statistics

1950 C.6 178 39 1.3 Tinjuelo & other 1.5_960 7.2 216 55 3.- + Tibito I 4.51567 2.1 240 185 5.& + rooster ICsaquer 5.5 5.2 D.6 10

(b) Short-Range Projections

1968 2.2 2!)6 -99 6.3 5.5 C.? -. 1 171969 2.4 252 218 6.9 + Booster Tibito 6.5 5.6 1.3 191970 2.5 258 238 7.5 6.5 5.9 1.6 211971 2.7 265 26c 6.3 + Tibitc IIA 8.5 7'4 0. 111972 2.5 271 Ž84 9.0 3.5 7.S 1.1 121973 3.1 278 310 9.8 + Clbite lIB 9.5 8.9 C.9 9

(c) Lcng-Range Projecti,ons

1980 4.7 327 560 18.0 Chingaza-Teusaca 18.51990 7-5 385 1,035 33.5 Sumapaz East 40.520C0 10.0 410 1,500 47.5 + Sumapaz West 5C.5

Notes: 1) Per capita, annual and average demand are expressed in groEs figures, including losses estimated at 15-20%.

2) The projections are based on thr following growth rates by decades

Period Pop-la-ion Per Capita Demand Demand

1950 - 1960 100 21 1311960 - 1970 105 20 1501970 - 198C 86 26 7401980 - 199O 60 18 861990 - 2000 33 6 42

The consultants' detailed demand study includes sensitivity tests with lower and higher rates than above; however, their effect is ofa tangible magnitude only after 1973.

3) Demand variations are estimated as follows:

Peak day 1.25-1.30 (lower than normally because of cool and unifcrm olimate in Bogota).Annual average

Peak hourDaily average = 2.0 (comparable witn similar systems).

4) The old rate structure did not permit and the statistics do not shoa- a breakdown of the consumption by customer categories.The new rate structure, coupled with improved meter reading and data processing, will facilitate a better control of consumption( and losses).

5) For the deficit projections 1967-1973, the "IAvailable Supplv" has been assumed as much as 15 percent below the "Installed Capacity''zecause:

(i) additional capacities cannot be absorbed i.edietely by the distribution syaten, Ls spiLeof the water shortage;

Vii) continuous booster pumping on the transmission lines is rot possible; and

(iii) demand variations cannot be fully conoensoted bv available peak capacities.

May 1, 1968

i: t I

COLOMBIA: BOGOTA WATER SUPPLY PROJECTDEMAND AND SUPPLY-ACTUALS 1955-1967 AND PROJECTIONS 1968-1985

POPULATION PER CAPITA DEMAND(Millions) (Liters Per Day)

8.0 400 II - T- F I | T -- T I - -- -1 -r- r

7.0

6.0 300 PER CAPITA DEMAND

5.0

4.0 200

WATER POPULATION SUMAPAZ-

VOLUMES 3 -_4(Cubic Meters g

Per Second) CHINGAZA-

30 2.0 100 TEUSACA

1.0

25 - <O~~ ~ ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Co - W v 23.5 /

NCANTARRANA <

20 - -TIBITO -I -'IZj2j PROPOSED DEMAND ABOVE < o 18.

o D BANK PROJECT SUPPLY ro o . ~~~~~~~~~~~~~~IBITO-IIA 5s z c 16.0V_NTLE

15 - (99 CAPACITY0~~~~~~~~~~~~~

CL , G < 11.5 9 z -DEMAND = SUPPLY

c W \ o 9- _~~~~~~~~~9. SUPPLY BELOW DEMAND

m ° 5 ~~~~~~~~~~~~~SUPPLY DEFICIT

5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.5 _ t ~~~~~~~~~~~~~~~~i. z. _

1955 1960 1965 1970 1975 1980

0 -oACTUALS PROJECTIONS xIBRD -3708

I1

4

COLOMBA - BOGOTA WATER SUPPLY PROJECT

Cost Esiisats and Disbursement 2Scheduie

Million Col$ Million VS$

1968 1969 1910 1971 1968 - 1971 1968 - 1971

Local Foreign Local Fsroign Local Foreign Local Foreign Local Foreign Total Local Foreign Tot3al

I. CONSTRUCTION TIBITO - IT SCHEME (Stage A)

Intake, Pumping & (Equipment Supply .7 5.9 1.6 31.2 .1 2.0 - - 2.4 39.1 41.5 .2 2.4 2.6Treatment Facilities (Civil Works 15.3 - i4.5 .1 1.1 - - - 30.9 .1 31.0 1.9 - 1.9

Pipeline (IMnuiacture & Supply 9.5 24.7 24.2 48.o 11.4 13.3 2.4 4.5 47.5 90.5 138.0 2.9 5.6 8.5(Installation 4.1 2.7 23.1 12.1 9.7 6.5 1.9 1.1 38.3 22.4 61.2 2.4 1.4 3.8

Distribution System (Mains, Supply & Installation 1.2 .7 12.6 7.7 12.5 7.7 2.9 1.8 29.2 17.9 47.1 1.8 1.1 2.9(Storage Tanks - - 8.2 1.7 8.2 1.7 .8 .2 17.2 3.6 20.8 1.1 .2 1.3

Land acquisition 3-0 - - - - - - 3.0 - 3.0 .2 - .2

Enginsering 8.0 5.5 6.7 5.2 3.2 2.3 .8 - 18.7 13.0 31.7 1.1 .8 1.9

SUB-TOTAL 41.8 39.5 90.9 106.0 46.2 33.5 8.8 7.6 187.7 186.6 374.3 11.6 11.5 23.1

IT. PREPARATION TIBITO - II (Stage B) ANR FUTUiRE SCHEMES

Access Road - Chingasa 3.8 - - - - - - - 3.8 - 3.8 .2 - .2

Land acquisition 2.2 - 5.6 - 5.6 - - - 13.4 - 13.4 .8 - .8

Engineering 3.9 1.0 4.0 1.0 4.0 1.0 - - 11.9 3.0 14.9 .7 .2 .9

SUB-TOTAL 9.9 1.0 9.6 1.0 9.6 1.0 - - 29.1 3.0 32.1 1.7 .2 1.9

III. OPERATIONAL Il4PROVEDNENTS

Metering program, maintenance equipment, operation oontrol 1.4 8.4 2.2 18.9 1.2 3.7 - - 4.8 31.0 35.8 .3 1.9 2.2

IV. CONTINGiNCIES ARI PRICE ESCALATION

ConLing-nsios - .1 6.4 5.5 17.7 16.7 4.3 1.4 28.4 23.7 52.1 1.7 1.4 3.1Prioe Eisulation _ - 4.9 - - 2.3 - 16.1 - 16.1 - - -

SUB-TOTAL 53.1 49.0 114.0 131.4 83.6 54.9 15.4 9.0 266.1 244.3 510,4 15.3 15.0 30.3

V. INTEREST DURING CONSTRUCTION 3.0 2.3 9.4 7.7 18.2 14.1 12.6 13.0 43.2 37.1 80.3 2.7 2.3 5.0

TOTAL 56. 51.3 123.4 139.1 101.8 f9.D 28.0 22.0 309.3 281.4 590.7 18.0 17.3 35.3

VI. SUB-TOTAIS BY CATEGORIES OF I - V

Sqoipuent supplv and civil -orks 36.o j2 58f4 119.7 44.' 34- 9 7.C 7.6 174 ;. 5 74 2 10.8 12.6 23.4Engireering 11.9 6.5 10.7 6.9 7.3 1.3 .) - 30.6 16.6 46.6 1. 1.0 2.8Land a-quisiti-n 5.2 - 5.6 - 5.6 _ - - 16.. - 16.4 1.C - 1.0 oContingencies and price enoalarion - .1 11.3 .5 2.6 ll." C-1. 1.4 34.. 23.7 66.2 1.7 1. 3.1Instrest during constsustiou 3.0 2.3 9., 3.7 18' 1 14.3 CL.? 11.0 43.2 37.1 1 8.3 2.7 2.3 5.0

March 19, 1968

A I

ANNEXa

COLOMBIA - BOGOTA WATER SP0PLY PROJECT

Stot-s of Prorrment (as of May i,_1p3) and As-umptins on Join.t vinancing

(amounts in sillioni)

Status of Bidding and Contracting Contract Value Joint Financing-Breakdown ~f FE Contract

Foreign by SAboontracto Eligible Assumed An0Bid. Bids Contract Contract Selested Bidder Local Bmchange (if any) foe Joint Joint Lo.

Co.troot No. and Type Advertised ipenedi. Awarded Sighed Nane (Country) Total ost (M) and Count y Financing- (50% of tot

a) EQUIPMENT SUPPLY AND CIVIL WOBKS equiv. equi. equi-. equiv.a1) Contraots acarded

TII-1 Pipeline manufacture, Aug 11,67 Deo 12,67 Feb 8,68 Pending A iar Pioe & 12.0 86.3 3.7 1.2 (VSA) Yes(l) 2.1-upply & installation Cone traction Co. 13 (UK) Yes(i) 0.65

(BSA) 1.2 (Japan) Yco()i).

TII-2 Fumpe and Motorssupply - Stage 1 Sept 26,67 Jan 16,68 Mar 7,68 Pending KSB/AEG (G-rgany;) 0.3 - 0.3) 1.1 (Germany) Yes(l) .55

Stoge 2 " " Mar 26,68 Pending " C.8 - 0.8)

TII-3 Booster pumping Cct 31,67 Jan 15,68 Jan 30,68 Pending VAM Suranericana o.55 9.1 - - _ No(2)

station Tibito )Colombia)oonstruction

Acceos Road Chirgo&a Jan 66 Codeinco (Colombia) 0.2 3.8 _ - - No)Co-st-uction

Subtotal a1) 13.55(6Cf) 99.2 (57') 7,S (63%) 3.9

a2) Contra-ts ,ith awards pending 0r

biddirg under aayPiping f6r PunpingStations SeFt 26,67 Jan 16,65 Pending - - 0.2 - 0.2 ? 2

0P-1 Vehiclese euoly Mar 4,68 (May 3,68) - - - 0.3 - 0.3 ? ?

OP-2 Water seter and test Mar 1,58 (May 3,68) - - - 1.4 3.2 1.2 ? ?ben-hes supply

TII-4 Raw water penping Apr 2,63 (}:ay 17,63) - - - 0.5 7.6 - _ No(2)station- subotruct-_c

Subtotal a2) 2.4 (10%) 10.8 (6%) 1.7 (IL%)

a3) Controoto sith bidding pendr-gTII-5 la. Water Fumpoing Sti- June,OAbb C.2 3.3 - - No(2)

tion-supesrtructure

Miscellaneous equipment (Va-isou dates - - - - 1.95 13.3 1.1 ? ? ?for treatenet plant 1968-1965)

Mis.ellameIus squipnent - 0.35 1.6 0.4 ? ? ?for operationalinpronnOents

Distribution pipe supply - _ _ _ 2.9 29.2 1.1 ? ? ?and installation

Storage tank corstruction - - - - 1.3 17.2 0.2 T ? ?

Subtotal a3) 6.85(29)3 64.6 (35%) 2.8 (23%) ?

otal equipment supply and sitil works (excluding 23.lC(lCC%)17i.6(OCC.5) 12.3 (100%) 3.9+ ?contingencies aos price e-catation)

b) Eb-GIhERl.G CONTRACTSbl) Contracts suitable for joint finanoleg

Dsiribotifon studies - - Feb 5,68 Pending The P_tometer 0.2 - 0.2 (USA) Yes(2) 0.1Associates (USA)

Conetruction Supervision - - Feb 5,68 P-dtA-g Bilck&Veathb(USA) 0.45 C,4 o.4 (USA) Yes(2) C.2

Subtotal bl) C.65 ^.4 o.6 0.3

b2) Contracts not suitable for joint financing 2.15 30.2 1.4 No(2) -(various smle onutns contractsor contrasts without foreign enchangecomponent)

Total engineering 2.e 30.6 1.3 0.3

c) CONTlhGENCIES AND FRICE ESCAOATICN 3.4 4335 1.7 2 2

d) LBND ACQI=SITICN 1.C 16.4 - - No(2/3) -

e) INTEREST DURING CONSTR-CCTICN 5.0 33.2 2.3 N No(3)

Total Pro'cJt Coet 3 3C9.3 17-3 4.2

1/ Dates in ( ) tentative.l2/ ? - to be determined after award of these oo.tra-ts

3/ Eligibility for Joint Financing (aocording to formula agreed with oa,tioipating countries),

Foreign exchange conponent (FE)of contract or sub-ontract:

Yes(l) above BUS 200,000 andabove US3 1.0 million

Yes(2) above us$ 2CC,3CC bat will be added ti other contr-acts (with FE above US$ 2CC,CCC)below US$ 1,0 Billion already totaLling more tban us$ 1.0 Billion.

No(l) above us$ 2C0C,CC but could become eligible if additional ontrasts with FE abovebelow us$ 1.0 Billion JS$ 2CC,COC placed in the sane euentry vould increase totul

to US$ 1.0 uillion.

No(2) No FE orFE below 0S$ 200,000

No(3) Item not eligible forJsint Finaning,regardlese of FE

May 1, 1968

I II

COLOMBIA: BOGOTA WATER SUPPLY PROJECTCONTROL NETWORK

SUBITEM CONTRACT 1967 1968 1969 __ 1970 1971_____ ______________ JAS~~~~~~~ON ~D jIrA L I1TT F VM ASND JMAT JA S N D JTFIMIA]MI EJUALS O 0 N

TIBITO,-, SCHEME, STAGE AFS

FEASIBILITY STUDY

INTAKE-PUMPING-TREATMENT PLANTPs w B EB F S I Emergency works completed-operate Booster Pumping Tibito

BOOSTER PUMPING STATION EQUIPMENT SUPPLY additional supply I cubic meter per second

PB BEB CESCIVIL WORKS . be- ... ,

RAW WATER PUMPING STATION EQUIPMENT SUPPLY Pe B ES s(some os for Booster Pumps) PB B N c . \ \

CIVIL WORKS - SUBSTRUCTURE - - , \ \

P8 '&B EB C I ',, X~SUPERSTRUCTURE F New units ot Tibito completed

PB B EB S I /7TREATMENT PLANT EQUIPMENT SUPPLY a

PB B EB ~ C/ \ \CIVIL WORKS _ S '

PIPELINEPB B EB F+S Pipeline completed;

SUPPLY su---r- * __ N, Initial operation ofINone contrct I Tibito U Scheme,

INSTALI -rlON --:.Z>__ _ additiona l supplyDISTRIBUTION SYSTEM ,, - 2 cubic meters per

PB B EB C -- second.STORAGE TANKS CONSTRUCTION (one or two -_ --(two) contracts) PB h EB

TRUNK LINES SUPPLY ovarious contructs) t% _i -_

(and Network Analysils ) B EB I BankINSTALL-ATION (vurious contrGcts) - -Project

OPERATIONAL IMPROVEMENTS comprted

PB B EB F S _ _ _ _ -REPAIR AND MAINTENANCE EQUIPMENT _ C -

PB B EB F +S/WATER METERS AND METER REPAIR EQUIPMENT a -P a

PREPARATION FUTURE PROJECTS P

ACCESS ROAD CHINGAZA PS-E C, FS o

FEASIBILITY STUJDIES CANTARRANA AND CHINGAZA-TEUSACA t P

FINAL DESIGN AND BIDDING TIBITO Il, STAGE B (additional supply PB B EB Stort construcfi0n

I to 2.5 cubic meters per second) AND SELECTED FUTURE SCHEME ArrBnEe FSntnccgrACTUAL-~-I Arranrje Finoncog i (2R)IBRD-3709

~ACTUAL -FORECAST >ABBREVIATIONS: FS - PREPARATION FEASIBILITY STUDY F - FABRICATION SYMBOLS: *- * ACTIVITY >T ~~~~~~~~~~~~zPB-FINAL DESIGN AND PREPARATION BIDDING DOCUMENTS S - SHIPPING EQUIPMENT SUPPLY , CONSTRAINTS z

B-BIDDING I-INSTALLATIONJ X RELATED TARGETS PEB- EVALUATION BIDS AND AWARD CONTRACT C- CONSTRUCTION CIVIL WORKS - 1 COMPLETED WORKS D

I !I^

ANNEX 10Page 1

COLOMBIA - BOGOTA WATER SUPPLY PROJECT

Tibito II Scheme(See Mans 1, 2 and 3)

A. EngineerinA

As of this date, the following consulting firms have been contractedfor engineering services in connection with the Tibito II scheme:

1. Feasibility Study: Ingetec Ltda. (Colombia)

2. Final Design and Design SunervisionConstruction Supervision:

Tibito Planta) Raw water pumping Ingetec Black & Veatch (USA)/

Hidroestudios-CEI(Colombia)

b) Treatment Engineering Science(USA) "

c) Booster pumping Hidroestudios/CEI tt

Pipeline Ingetec Black & Veatch/CamachoCarrizosa & Ferro Ltda.(Colombia)

Distribution system open - pending results of the distribution study,contracted with Pitometer Associates (USA).

B. Basic Criteria

Booster Pumping

1. As an emergency measure, and the only means to increase the availablesupply to Bogota within one year, a booster pumping station would be con-structed at Tibito to operate on the existing 60-inch pipeline, increasingits eapacity from 4.0 m3/sec (with booster pumping at Usaquen, the end of thepipeline) to about 5.0 m3/sec. However, the station would be designed foroperation under the future two-pipeline system and the following transmissioncapacities in m3/sec would result under the different operating conditions:

PiDfelineI OicBooBoost eooster Booster

Gravitv Usaquen Tibito Usaquen+Tibito2.5 4.0 3.4 4.7

Pipeline II (78-inch) ----------------- + II--------------

Gravity 5.4 7.9 9.4 8.8 10.1

Booster Tibito 7.3 9.8 11.3 10.7 12.0

i I

ANNEX 10Page 2

Utilization of Spare Canac_ tin the Existing Treatment Plant

2. The existing plant, comnleted in 1959, was designed for highturbidity raw water. After comnletion of the large Guatavita reservoir(690 million m3) by the Bogota Power Comnany (EEEB) in 1962, turbiditydecreased markedly from an annual average of 200 to 55 units and furtherimprovements are expected. It has now been established that (i) theexisting facilities can be unrated without any addition from 3.15 m3/sec(original design) to at least 6.0 m3/sec, and (ii) expansion of the plantto an ultimate tapacity of 10.5 m3/sec is likely to require not more thana 50 percent expansion of the facilities. However, the uncertainty as towhat exactly will be required for this ultimate exnansion was one of themain reasons for dividing the Tibito II scheme into two stages, ITA and IIB.

H1.>_ C_,_ _M

3. The UEE's nower generation requires considerable seasonal vari-ations of the Bogota river flow at Tibito. Full requlation of the annualaverage flow of 12.5 m3/sec, while feasible with the available reservoirs,is thus impossible. Even assuming a Derfect coordination of the reservoiroperation, the minimum flow at Tibito may be as low as 9.0 m3/sec. Deducting1.0 m3/sec requirements for downstream use, 8.0 m3 /sec would remain as safeyield for the EAAB's water suDnly operation. This signifies that a large flowpotential is Dresently unused, and the nominal capacity of the EAAB's Tibitosystem (at Dresent 4.0 m3/sec) could be doubled and peak canacity (at uresenteaually 4.0 m.3/sec) tripled, withou; reouirinr new catchment works, such asreservoirs. Peak capacities could be utilized during extended periods everyyear when the river flow exceeds 9.0 m3/sec. The guaranteed minimum flow,9.0 m3/sec under the present conditions, could be substantially increasedand regulation of the river improved, as soon as transfers from outsidebasins to the Bogota river are completed (as planned under the long-rangewater supply nrogram), making the BEEB less denendent on a fixed flow patternat Tibito. Therefore, while the EAAR's water right will be increased toonly 8.0 m3/sec, the Tibito II scheme will be designed for an ultimate aver-age capacity of about 10-11 m3/sec.

l

COMMBIA1 - SOLUT SiTUPSUFPLY PSJUIT

T I S ITU I TITOUI 1U 55

TUE (lrPoono- nifr.mo-t) YES

too-g--o Works Slin Wlrks Lossdoeonry Wtorks_______ s~~tUnb -onolendibyi L9be oomrietedibylSli to tnoooplntelbyl)3

N-edsnlkaad e-k)Unpnl-t. U. (L.0) or6. 5.-0) b3's_ 7.0 (So5 8 .S (10.6) 3~,seo

U. RAW WATER SNEAK,, AND EUSOUINIntake Intake .eUr JUU3 N.tosrso-S -difo-ti-n or-yn-i-n neded.

nanbility prior to treannet; UIIIs-

tanw aster -sei.g lSt.o1 I othi 6 -sita, te~Ui-5y.t od -.4 3

nnait Coostorion StnUouls II, Sesigoed for lontallUtionof 3d stlfltai t'so Btdtltg for rasps Station ST np-iflsdtotalling 4.in-

3Iono KiIfUES; toUSnoen it , tniq--rbnnso a 8on.Lst3oo_ Ustotollationof niUioso - cUnd.OaotSlnti-n&I; --- o nteooUosn ts. -Ura-

SoI b .65;Us fUt.Uns'se-(and toontnpl inots5.Anen. aUot b.65 /snrnt itnstiUtd totaU IaUUaut~dp- rif tyItaions I oo5

-ntt5

eosoeioasdernn.y;see-iisnail-in dm501l genertor niih -p-ciyr loooo II nts

5t & I osUIS. aS/-e (iosisio . ttn os JikeUy (2 unIon IIA,

2,EU iS. USA /ee (ionUsdlng 2.S05

/ 2.5 n/on stood-by). Uaoe 1)

toole Tibitto UU.

diente 60-Un-i disoet- 1- lootfepnott nUont 545 o

3tt-Iprtrnnt S.U tao.

II. TRUATMTIE;A"Ah-h Q-~~~~On bi-at ore 0,2000 Aer-tln- U UsI ie -pesed no SUo-U6 Tor i t,1ios nonfiro, need orpoo1-orttll, se-od io,o Noi-S ed for sers-Son d-btUfal, -tpoUUy after

fapnoitr L. s3

teto Sun 0os.kUdey no b Us nieosdooted to lenU

Po-oness -arotoina d -oo ttoe,ea-toss-id-g ,f FItJisni -gtsoso boUeo po ted foot-rstio,of two adjittosa -toil fesdisgfia -esltloooe . UO-so-U design, prooodtd fordoa.UUto fsUUfls-ie L d, fio- set. Ut te -. ,o e Ub Utt ioioo.ooorsSe treseet tidoot, f-oUe odditio osoiog forlUities (doaogo-p-rity 3.2 e

3/

toLto(U12

(l deco h--Ys Uorotd,olSing ttoling tretonoorrepsri ty ttetloot U. ,oJseo

rote-ti-ntin dUom,n

_entbingn-s-ito 2.26o/oe

Utoitosoto 16drenid-d fUUt.r. (eo Entatiog, -t,st ra Ue op-etn. it So sddito-nU sloe 1Usod, sUr--etenttely 12 eddotioosU filter $a3- eab-o..lL,5ot`(elthtWDtoUo fiUe- nt Ioa LUS s

3

/-e Uy Jotbliog loSngo fiUto-s -epeotd to in ettits oUsene; So-igr-it-riaUottoess de-t,ntdpeUty fiUteoroe,Utte bosle otpe ,-e,tos op-ily in penditg fo-elr-o-oU,foorret

4. es'i (2.5 gFo/ft, (. -asd br -tn -irot-.

fio- este tents 2U,SuO N.Se 2U,QLL o3 te-d (39e.on -ddditi-nl 1-on - -~5UO nod nag, isI nUoseoreo-oo-nt ryUao4 nUU -oded.

Ut -ot-ootte as pet of Usster

fieoonUfeeiog, Uorsoetos, Seercrs See r....ro. See reonrd. -hseoUntU aty I`olte -.oos-ti,Z Ptot.t.d -oeiiroo-rdibysnretdrod-aopnent

desig-e for hUi.r flon -Ut-

T--f-bnroe tsnnoio UtUh"lns Uttlaootiooo esnr-tepnti- . Serods,taot-t,Uooo-tenr-ted; UnsesUUtsootIfediotoeoUttit,

dli. TPUSMEISSUSN UND 3ISTEH UPUIoGSIoo-eeer-op_ing (AUdio- Us-etr-bUt- Usosoe posing, - boatLloito of P ddt-,oaU -toot. Usopiog -ti 3nsod operate on pepOjiUeI

od 2.6 bo3sno)z nntinLo f oioo . -S .. /

0- (fltsto 9ro-Uty onlooity of

3 _toUt ntedUs-g 1.6 s"-'-0. pUfeUs-e U U).

Tr-Eesil. Ptpolloo I:3 lot, OS-intl Se-onE -t-oo 'sTUnts) .tll PipUln- 7iI 43 do, T6inU,Lost- DIdnotor t1-t-tUO on tse 0 --ttirMIIoUooBoosaootos9UoCaUtptts 1or - .5d- 1 tlor.-t. t

6oo (St, tool) oUtdoUrrSnattof binoneSds, sA 68", 72',

g,osotyoopn-itys2.6t/oo -t±tlot- te itrib.ti-ooy,,t- 72').

TU. UUSTIBUSISUNlitr-eitiofU oniso t-ks eeeo %U b.t-- Oi n t Itt - tanks

and 50,00 3Easod da- k,ls ils sf U) ,thl (U,UU (

p i p - 3 -- -~~t o all e . .do U,U 0 I .0)0I - ~ , l - a l 1 b i - l b U T h - : , n -- , ( , ~ e d - t , I - l t

04"L4' o5') U'

Earsi Ut, 1266 ~ ~ ~ ~ ~ ~ -I _21-0 c-

I I

COLOESIA - BOGOTA WATER SUPPY PR F3CT AMW 11

GTtRESA DE ACUEDUCTO Y AICA'MCARTCIADO DE BOGOTA

Cash Flow Forecasts(Milions of Col9

Total Total1968 1969 1970 1971 i958-1971 1972 1973 1971-1973

SOTRC3S OF 9011h

Ret Income 34 L0 39 82 195 79 86 2b7Depreciation 26 31 34 37 128 57 59 153Interest 5 11 11 21 51 51 4 124

Furnds Generated tW =2 13-. 107, 79-._

Equity Contributions: Goveronent 20 - - - 20 - -Federal District & C.A.R. 13 10 5 5 33 4 - 9

Contrihibiono in Aid of Conotruction 20 20 22 25 87 28 35 eaproperty foprovenant Tax for Seaerage Works 12 28 35 50 125 46 42 138

IB3D 41 107 57 22 227 - - 22Joint Lenders 10 30 9 - 49 - - -Future Foreign Exchange Loane - - - 62 62 89 118 269

Irstituto do Fomento Industrial (IFI) 84 90 105 4h 319 6o 100 200US-AID 6 - - - 6 - - -Revolving Fund for Eatansions Dis.rtibnio- System 5 15 15 15 60 15 15 45

TOTAL LOANS 156 242 186 139 723 164 233 536

TOTAL SOORCOS 286 302 332 362 1,362 429 504 1,295

REQUIRSBENTS FM RTIEDS

Water: Projeot 107 262 171 50 590 - - 50Future Projects - - - 131 131 189 269 589Other Worko 32 25 25 30 11C 30 30 90

Seerage: Master Plan 28 4a 79 18 273 71 61 180Other Worko 21 10 15 15 66 25 20 55

Sther Capital Outlays 8 5 5 23 15Total Ievotments 333 090 279 0,393 311 30 979

Increaoe Curre.nt Asecto 12 1 4 25 42 19 17 60

DeObt Service

ITES D _ _ - - 14 i4 28Joint Lenders _ _ - 3 3 3 2 8

Bondrs 3 3 3 12 3 2 8Inetituto de Ronento Industrial (IFI) 1 7 6 17 31 3C 30 77Other Leone 1 1 2 1 1 1

Total Intere-t 1 11 5 31 712

IBE- - - - 3 9Joint Lendrer _ _ 5 5 10 5 5 15

Bonds - - - 9 9 9 9 27Instituto de F.nento Snicetrial (IFI) 2 2 2 5 11 8 14 27Suppliero Credit 1 1 - - 2Other loans 6 11 1 5 47 17 17 4

Total Amortisation 9 17 22 3h 79 T 127

Total Debt Service t4 25 33 58 130 93 100 251

TOTAL RE 3EM¶1S 290 381 332 362 1,365 426 502 1,290

Surplus (Deficit) (4) 1 - - (3) 3 2 5Cash at the end of the Year (1967-5) 1 2 2 2 2 5 7 7

Debt Service Coverage 4.6:1 3.3:1 2.5:1 2.5:1 2.9:1 2.0:1 1.9:1 2.1:1

Apsil 30, 1968

s l s~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

ANFNEX 12Page 1

COLOMBIA - BOGOTA WATFR SUPPLY PROJECT

Assumntions for the Financial Projections 1/

1. Average Rate (See Annex )4): The new rates billed would result inan average collectable rate of Col$l.OO/m3 starting July 1968,Col$1.O5!m3 during 1969 and Col$1.lo/m3 during 1970. To achieve a 9 percent returnthereafter the collectible rate would average Col$1.35/m3 during 1971 andCol$1.60/m3 starting 1972.

2. "Derechos": (a) Derechos de Abastecimiento would increase by8 percent per annum starting from Col$23.5 million in 1967. (b) Derechosde Urbanizacion would increase, as authorized by the Superintendencia deRegulacion Economica, from Col$5/m2 of the area served in 1968 to Col$,l4.30/m2 in 1977. For the next six years the area to be develoDed would average2.3 million m2 per year.

3. Operating Costs: (a) Salaries and wages increased from Col$30million in 1966 to Col$44 million in 1967 due to increases in salaries andwages, addition of needed staff and improved accounting (e.g. an adjustmentof Col$3 million in social benefits accrued, which formerly we,e onlyaccounted for on a cash basis). The increase to Col$54 million in 1968is based on detailed budget Drovisions for new staff and so is the Col$7Cmillion for 1969. This item would increase thereafter with 25 percent Derannum. (b) Pumping costs are based on the estimated consumption of power,at a rate which would increase by 8 percent per annum; (c) Chnemicals, othermaterials and supplies are based on the estimated water production. cdi Otercosts are taken at 15 rercent of the total of the above-mentioned operat'ingcosts. (e) Depreciation has been calculated on the gross value of the fixedassets at the beginning of the year as follows:

(i) Water supply assets (after deduction of Col$40 millionfor land) at 3 percent per annum;

(ii) Sewerage assets at 2 Dercent Der annum; and

(iii) Other assets at 5 percent per annum.

4. Eoyity Contributions: (a) the national budget apnropriation ofCol$20 million for 1968 has been anproved and the amount is at the EAAB'sdisposal. (b) The contributions by the District of Bogota are based on adecision of the District Council in 196]4 the contribution by the Cor-racion Autonoma Reaional de la Sabana de Bogota (CAR) is based on an agree-ment dated October 1964.

1/ Discussing the main items of the financial statement in the followingorder: Income Statement (Annex 3), Cash Flow Forecast (Annex 11) andBalance Sheets (Annex 2).

I

ANNEX 12Page 2

5. Contributions in Aid of Const:'uction include not only payment bythe consumer for the cost of the connec:ion, the meter, etc. but alsoextensions to the water supply and sewerage system paid for by the consumersor constructed by developers and transferred to the EAAB. The counterpartin fixed assets appears in "Other Works" under Water and Sewerage.

6. ProertX ImDrovement Tax for Se_erae Works ("Valorizacion`): 70percent of the sewerage masterplan investment of one year would be recoveredin the four subsequent years.

7. Foreign Exchange Loans: (a) IBET) Loan would be repaid in 32 semi-annual payments starting December 1972; interest has been assumed at 6¼ per-cent per annum and the commitment charge on the unwithdrawn balance at 3/4percent. (b) Joint loans would be repaid in 10 years, starting 1970, andwould carry a 7 percent interest. (c) future foreign exchani-e loans wouldcarry a 7 percent interest, caDitalized during construction.

8. Instituto de Fomento Industrial (IFI) Loans: (the amount requiredeach year has been considered a separate loan) would carry a 9 percent in-terest and a 16-year amortization period after four years grac,e, conditionsecual to the IFI loan of Col$65 million granted for the first stage of t,esewerage master plan, of which the balance of Col$20 million will be utfi:`zJdin 1968. The balance of Col$4 million of a Col$7 million loan for the pro-curement of meters will also be utilized during 1968. This loan must berepaid in three years.

9. U.S. AID Loan: The first of eleven semiannual repayments on th.isloan of US$450'OOO, carrying 3o rercent interest, will start in 1972,

10. Revolving Fund Distribution System: established in 1959 to financeextensions to the distribution system of the EAAB and the Empresa de EnergF iaElectrica de Bogota in those areas of the city where construction is notbeing executed by a developer. Withdrawals are authorized only for snecifworks, must be repaid in three years and carry a 3 percent interest.

11. Increase Current Assets: Gross accounts receivable would amount tofour months income from water sales in 1968 and three months thereafter. Thenet accounts receivable appearing in the pro forma balance sheets representthe gross amount, after deduction of a provision for bad debts of Col$11 mil-lion, in existence at the end of 1967. Inventories would increase fromCol$19 million in 1967 to Col$30 million in 1973.

12. Debt Service (not discussed elsewhere): (a) Bonds: In recent yearsmaturing bonds have been refinanced for a two or three year period. Allamounts due in 1968-70 will be repaid in 1971-75. Interest will be maintainedat 6 percent. (b) A Japanese supplier's credit of US$0.5 million granted in1963 financed pumping equipm.ent for the Usaquen booster pumping station at6 percent per year, last payment due in 1969.

13. Accounts Receivable for water and sewerage services have beendiscussed in Daragranh 12 above. Other accounts receivable consist mainly

I Ifw

ANNEX 12Page 3

of amournts receivable as contributions from customers in aid of construction:the EAAB allows periods of up to one year to pay in installments. Otheraccounts receivable also include loans to employees, deposits made by theEAAB, etc.

14. Work in Progress: The emergency works (Booster Ptmning Stat'.onTibito) amounting to Col$22 million would be incorporated into the fixeidassets in 1969. Investments in the sewerage master plan are shown as workin progress during one year before being added to gross fixed assets.Investments in other works would be incorporated into fixed assets immediately.

15. Accounts Payable: The increase from Col$6 million in 1966 toCol$18 million in 1967 is due to inTroved accounting: under the concept cfcash accounting, formerly in use, accounts payable were not properly re-flected in the books.

16. Fauitv: (a) Contributions in aid of construction have never beenproperly accounted for. The amount of Col$206 million shown in the 1967balance sheet after revaluation represents those fixed assets, i-hich asfar as could be determined during the ohysical inventory of th - fixed ass--tsin the revaluation process, have been contributed in kind hay -e-relopers o0built with advances from consumers. These contributions incre:.-se9 start in;iin 1968 with the amnounts shown as such in the cash flow forecasts ar '.;the property imnDrovement tax for the sewerage works ("'Valorizacion"). e bl'The revaluation surDlus represents a 70 percent increase in net fixed assetsin operation. Gross fixed assets before depreciation increased 62 rercentbut because of a recalculation of accumulated depreciation based on more.realistic lives of the fixed assets, the accumulated depreciation after de-valuation represents 20 percent of gross fixed assets compared to 13.5 per-cent as shown in thc 1067 balance sheet before revaluation. (c} Other equi-tyand earned surDlus include the contributions by the Government and the otherzublic entities (see also paragraph 4 above).

17. Rate Base and Rate of Return: Contributions from customers in a-2of construction have been deducted from net fixed assets in o .eration in thecalculation of the rate base. The return has been calculated on the averauzerate base at the beginning and the end of the year except for 1967 when thereturn on revalued assets has been related to the rate base at the end ofthe year.

I I I

COLOMBIA

BOGOTA WATER SUPPLY PROJECrLONG RANGE MASTER PLAN

SCHEMES I6ACILITIE-

SUMAPAZ Dane 2 Dan, lake or lEguna _ Etiing (1967)

Sia Nanber (order of implementation) Treatm-nt plant Proposed Bank Project (1968-1971)

22 in3a Yield O Pumping .tatiD

Limits of exploited wat-rshed E St-rage tank - atarn projects (aLter 1971)

SRiver Transmosoon Dr pr-lCipadi.tntrb.ti.. lin

I I Tannil

. ) 5 0 r 2

S U M A P A Z SCHEMECHINGAZA REGION-' ,

'U ~4SSOAO ,... ..-:.. CHINGAZA-TEUSACA SCHEME

S "1 ::PAT .EAST t . . J / E < t - SUMAPAZ S OUTH

_ _<e e^v Da,¢ .. t t RI.O EUSACA CANTARRANA PROJECT ZA

-<'R IO BOGOTA S SCHEME E40 SUMAPAZ WEST

. * ... -- .... --. .. j frvowfvL z ........................ r ENT,1 1 .... < 72 s47, > z ., t 2..... ,...... ..

;>'~ ~ ~ ~ ~ ~~~I BOGOT m's1: 10kLM ms , 1), y* \5 ~

ALTO SUAREZ SCHEME 21

MARCH 19(8 IR-12

I I s }

COLOMBIA

-V4 BOGOTA WATER SUPPLY PROJECT B,O GmO T AV P/Las2AP/Os

TlBlTO-'TT SCHEME(PISOPOUDS B3ANS PRSOJTICT)

CHIA< Sf FNIO

EXISTING PLANNED 1

[3 Trea~T tmn Pl a ,: /-Ldt S}0 0A

O Pum~~F.piLg Station/ ./ .S>

i] / ~St-rge Tank |1 SO( 25ACHA

_ 5~~~~ranslsel6son and priotcipal/dinpro butiaa pipelitne.o &

60 Di-a--rn in inc-hn..(Dianecern oP pSanEnd diatrSbanlion _ 1/0 3 s

pipen tentative peoding ESno] denign). or,

,_ _J ~~~Irenen C build -op arean

Boads 1968

-1 g a i l r o a d * /1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~01 G >

MARCH 1968 IbRD-2175

MAP 3

COLOMBIA

BOGOTA WATER SUPPLY PROJECTTIBITO 1L SCHEME

DETAIL: PUMPING AND TREATMENT PLANT TIBITO

Pa ~-t - -e - - -, - -_'

\ , \ 'iesedl'mentrf/on Hcs"7s \/ ~,1 Sd,qe/,: o ok

\/-' ' ~~~~/ / t-r'/7rrosr ,o H gn Pressure

Aeration

Cortrot Bu,tdfr~ g\

Filter Bu,d,ng

TronsmlssionF/peiines to Bogfot

/ / 0 Existing facilities (Tibito I)

Proposed Bank project (Tibito IIA)

Possible future expansions (Tibito IIB) 0 100 200 300

60':78' Diameters in inches METERS

MARCH 1968 IBRD-2179R

I

I

I

T Z _ CITE D

MENORANDUI ON JOIJE FINANCING OF PROJECTSIN COLOMBIA iND 13XICO

I. Projects to be covered

A. This memorandum applies to the external financing of thefollowing projects:

Estimated externalfinancingl~ili on)

COLOWMIA

National Power Interconnection 26Bogota Power 25Bogota Water Supply 20-30

NVEICO

Second Power Sector Program 95

B. The International Bank for Raccnstrucioi: id De-vel' n:aent(the Bank) is ready to consider the provision of this financing ifagreement can be reached with potential joint lenders on a mutuallyacceptable basis for joint financing.

II. General Formula for Joint Financing

A. The formula for provision of external financing of the im-ported goods required for the projects would be 50 percent by thehank and 50 percent by the supplying cowntry in the case of thethree Co-lombian projects, and two-thirds by the Bank and orie-thirdby the suxpplying country in the case of the Ilexican project. Thisfinancing formula iould only apply to individual orders for im-ported goods of at least $200,000, aggregating for each individualproject at least $1 million in any one supplying country.

B. All countries with prospects of obtaining significant con-tracts under the above formula for a particular project wouldindicate their willingness to join in its f.rzancing as a pre-condition for proceeding with joint financing of that project.

C. The term to maturity of joint loans would be a minimun often years from delivery of the goods, with an appropriate graceperiod, in cases where maturity is calculated from. date of sig-nature. The interest rate and. other charges -2o'.1d be no higherthan the most favorable rate and charges which rhe country other-wise provides with respect to long-term1 export credit. The goodsto be imported for the project with financing provided under thejoint financi.ng arrangements would be procured on the bsis4S of

-2 -

international competitive bidding in accordancc wiith th-e practicesusually followed for Bank projects, without referencc to creditterms including interest raues and asiortization schedules.

III. The Role of the Bank

A. The Bank dwill appraise each of the projects arid, providedthey conform to the Bankts standards, will recomn.end to its Boardof Executive Directors loans to cover its share of the financingof imported goods under the formula outlined in II A. above, aswell as some other items in the project.

B. In order to facilitate the arrangements to be made by thejoint lenders, the Bank will advise them on the progress of itsown project appraisal, and of the status of procurement and awardof contracts for the projects concerned.

C. The Bpnk loan for each project wiil. becone e"fective siJmiulltaneously with joint loans. However tJhe Bak will considermaking its loan effective in advanice of the effectiveness of jointloans, should this be justified by the circ;nmstancas of the case.

D. In order to ensure tha the tot:a Linaccici pL wlichemerges is appropriate to the project and the fpna. ci nositionof the Borrower, the BanLk is prepared, wiithlin limits, to adjustthe amortization schedule of its loan to the schedtuies of jointloans, so that the total annual amortization paymen?,s required ofthe Borrower would be reasonably approAimate to those which theBorrower would have made if the entire amourn had bGeer provided 'bythe Bank.

E. The Bank would also be prepared to include ila iLs Loan Agree-ment for the project a provision stipulating that prematuring of ajoint loan because of a default by the Borrower would be an eventof default under the Bank loan.

IV. The Role of other Joint Lendcis

A. Upon the receipt of notification from the Bank, joint lenderswill promptly enter into loan negotiations with the relevant bor-rowers in Colombia or Mexico.

B. Joint loans for irQported goods will be fmade effictive simulataneously with the Bank's loan, unless the Bank, as indicated inIII C. above, decides to make the loan effective in advance of theeffectiveness of joint loans.

C. If a joint lender finds it necessary to place a ceiling onthe amount of financing to be made available, it will. be prepared

-3-

seriously to consider increasing this amount in case the flow oforders calls for additional financing by it under the joint fi-nancing formula. The Bank will consider the effect of such aceiling, and after consultation with interested joint lenders,cqill advise whether such a ceiling would, in the Bank's judgment,be adequate in relation to the orders likely to be obtained.

,st rn Lermisphere DepartmentJanuart,- 24, 1968

I

I

Country Ceilings for Joint Financing

(US$ million

Colombia Mexico

Belgium 5 10

Canada

France 10 10

Germany 10 10

Italy 10 10

Jaoan 10 10

The Netherlands

Spain

Sweden 5 5

Switzerland

United Kingdom 10 10

United States 10 8

1/ Rounded to nearest million dollars.

Trestern Hemisplere DerartmentJanuary, 2r, J928