Report No. 1504-RO

Romania: Appraisal ofBucharest Glass Fiber ProjectApril 28, 1977

Industrial Projects Department

FOR OFFICIAL USE ONLY

Document of the World Bank

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

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CURRENCY EQUIVALENTS

Except where otherwise indicated, all figuresare quoted in Romanian Lei and US Dollars.For all calculations, the following conversionrate has been used:

US$1 = Lei 20

Lei 1 = US$0.05Lei 1,000 = US$50.00

WEIGHTS AND NEASURES

All units are metric.

1 metric ton = 1,000 kilograms (kg)1 kilogram = 1,000 grams1 metric ton = 2,204.6 pounds

1 kilog,am = 2.2046 pounds1 gram (g) = 0.0353 ouncesI kilometer (km) 0.621 miles1 meter (m) = 39.37 inches1 millimeter (mm) 0.04 inch1 micron 2 0.001 mm

1 square meter ( ) = 10.76 square feet1 cubic meter (m ) = 35.31 cubic feet1 tex = 1 g per 1,000 m of yarn

PRINCIPAL ABBREVIATIONS USED

IB - Investment Bank (the Borrower)CISCF - Industrial Central for Glass and

Fine Ceramics (the Central)IPIU - Design Institute for Light IndustryROMSIT - Foreign Trade Enterprise for

Light IndustryGRP - Glass Reinforced Plastictpy - Tons Per Year

ROMANIAN FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

ROMANIA

APPRAISAL OF BUCHAREST GLASS FIBER PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS .. ........ .......... .......... . i-iii

I. INTRODUCTION * ............... so I

II. THE SECTOR AND THE BORROWER ......................... 1A. Ministry of Light Industry ......o..... .......... 1B. Industrial Central for Glass and Fine

Ceramics .......... . ..............* * *** ........... 2C. Romanian Financing System and the

Investment Bank (the Borrower) ........... 2

III. THE MARKET ........... ..................... ........... 3A. Uses of Glass Fibers ......................... 3B. World Market ......... . ........................ 5C. World Market Prices .......................... 6D. The Romanian Market ....................... .... 7E. Marketing Arrangements ................. . ...... 9

IV. THE PROJECT* ..... ............ .ooo ............... .......... 9A. Project Scope ............ ........................ 9B. Process Technology ........ .................. . 9C. Raw Materials and Utilities .................. 10D. Management and Project Execution ............. 10E. Employment and Training ...................... 11F. Ecology *.o.eo....................................... .. 12

V. CAPITAL COST AND FINANCING PLAN ..............se..... 12A. Project Cost ........ ..................................... 12B. Financing Plan ............................... 14C* Procurement .. ................................ 16D. Allocation and Disbursement of Bank Loan ..... 16

VI. FINANCIAL ANALYSIS ....... ......................... 17A. Volume and Value of Production .. *a* ........ . 17

1. Volume of Production .................... 172. Value of Production .......... ........... 18

B. Production Cost .............................. 18C. Financial Projections ......oo ... ............ 19D. Financial Rate of Return ........ so ........... 21E. Auditing and Reporting ....................... 21Fe Risks ...**..................................... 22

This report has been prepared by Messrs. G. Becher and E. Tortorelli ofthe Industrial Projects Department.

1Th document has a fetricted disrbuton and may be used by recipients only in the performanceof tr official duties. Its contents may not otherwise be disclosd without World Bank authorization.

TABLE OF CONTENTS (Continued)

Page No.

VII. ECONOMIC ANALYSIS ............................ ................ . 22A. Economic Costs and Benefits and Rate

of Return ................................. 22B. Employment and Foreign Exchange Effects ........ 23C. Transfer of Technology and

Future Possibilities *...................... 24

VIII. AGREEMENTS .......................................... 24

ANNEXES

1 Glossary of Main Technical Terms

2-1 The Ministry of Light Industry2-2 The Central for Glass and Fine Ceramics

3-1 Glass Fiber Products and Their Application3-2 World Market for Glass Fiber3-3 Romanian Market for Glass Fiber

4-1 Project Description4-2 Graphic Presentation of Production Process4-3 Plant Layout4-4 Raw Material Quantities and Sources4-5 Organization Chart of Enterprise4-6 Implementation Schedule4-7 Training Program4-8 Environmental Impact and Protection

5-1 Detailed Capital Cost Estimate5-2 Working Capital Estimate5-3 Interest on and Repayment of IBRD Loan5-4 Disbursement Schedule for IBRD Loan

6-1 Domestic Selling Prices6-2 Annual Production Cost6-3 Assumptions Used in Financial Projections6-4 Projected Income Statement6-5 Projected Cash Flow Statement6-6 Projected Balance Sheet6-7 Break-Even Chart6-8 Financial Rate of Return

7-1 Adjustment of Project Cost for Economic Evaluation7-2 Adjustment of Production Cost for Economic Evaluation7-3 Comparison of Cost of Production in 1976 Prices between Western

European and Romanian Glass Fiber Plant7-4 Price Comparison (1976)7-5 Economic Rate of Return

Map - IBRD 12652R1

ROMANIA

APPRAISAL OF BUCHAREST GLASS FIBER PROJECT

SUMMARY AND CONCLUSIONS

i. This report appraises the Bucharest Glass Fiber Project for whichthe Government of Romania has requested a Bank loan of US$18.3 million. TheProject consists of two sections. Section I, the spinning plant, will pro-duce 6,000 tons per year (tpy) of continuous glass fiber through the direct-melt process in the form of roving and yarn (glass fiber intermediates),and Section II will convert 1,270 tpy into woven roving, fabrics, tapesand braided tubes. The remainder will be sold as roving and yarn. Sec-tion I will employ sophisticated technology available only from a ratherclosely held industry, while Section II will use conventional textile tech-nology. The plant will be located in the industrial area "Militari", inthe south-western outskirts of Bucharest. It will be operated by a newlyestablished enterprise belonging to the Central for Glass and Fine Ceramicsunder the Ministry of Light Industry. Total financing required for the Proj-ect is estimated at Lei 914 million or US$45.7 million equivalent, includ-ing US$24.5 million in foreign exchange.

ii. None of the Project's glass fiber production is planned for directexport since it will substitute imports and meet rapidly expanding domesticdemand which will result from the increasing usage of glass fiber by basicindustries provided for in the current Five-Year-Plan (1976-80). Romaniaalready has a small plant for 1,000 tpy of glass fiber which uses the simplerbut less efficient marbles process based on imported marbles. It began pro-duction in 1974 and produced 516 tons in 1976 meeting 38% of demand in thatyear. Demand started to grow rapidly in Romania in the early seventies fromonly about 200 tons in 1970 to 1,345 tons in 1976. During the current Five-Year-Plan consumption is expected to increase to about 7,100 tons in 1980.This market projection does not yet take into account the effects of the re-cent earthquake which, on balance, should lead to an increase in requirementsfor glass fiber reinforced plastic needed to reconstruct Romania's severelydamaged chemical industry and general housing.

iii. Glass fiber is used internationally for reinforcing plastics andrubber in the construction, automotive and boat building industries and forelectric insulation, and to a lesser extent for fireproof fabrics. In con-trast, in Romania glass fiber so far is used primarily for electric insula-tion (33%) and in the chemical industry for reinforced plastic tanks andpipes (62%), while the building materials industry uses only a small portion(5%). The current implementation of downstream projects will substantiallychange this structure and increase the consumption of glass fiber by thebuilding materials industry to 52% of total demand, reducing the market shareof the chemical industry correspondingly.

iv. The projected increase will bring Romania's per capita glass fiberconsumption from 0.06 kg in 1976 to 0.32 kg in 1980, which corresponds to theUS per capita consumption of the late 1950's and the 1975 consumption of Spain,

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Italy and Austria. It will also bring the structure of Romania's glassfiber consumption closer to that in more industrialized countries, but fur-ther important potential applications of reinforced plastics remain, suchas applications in the boat building and automotive industry which are notyet foreseen for Romania during the current Five-Year-Plan. After a steadyincrease in world glass fiber consumption, a drop occurred in 1975, due tothe general recession in that year, but results for 1976, which are availableonly for the USA, also the world's most important producer, indicate thatworld consumption is increasing again, although it has not yet returned tothe peak level of 1973 and 1974. Therefore, there exists at present somesurplus capacity in the USA, Western Europe and Japan which is, however,expected to be absorbed by increasing demand by 1978-79.

v. The proposed Bank loan which would be for a term of 15 years, includ-ing three years of grace, at an interest rate of 8.2% p.a., would be passed onto the Project Enterprise by the Investment Bank, which controls the use ofinvestment funds in Romania and supervises the progress of projects. Theloan would provide 82% of the foreign exchange requirements (excludinginterest during construction) and would be disbursed against the supply ofknow-how, machinery and equipment, erection supervision, training and start-up assistance for the spinning plant (Section I). The Government will usebilateral credits of US$4.1 million to meet part of the foreign exchangeexpenditures for Section II, and will provide the remainder of the financingrequired to cover US$21.2 million equivalent of local costs and interestduring construction.

vi. Technically, the manufacture of glass fiber itself is part of theglass industry, its further processing (into roving, yarn and woven products)is part of the textile industry. In Romania, both these industries belongto the Ministry of Light Industry which has given responsibility for theProject to the Central for Glass and Fine Ceramics (CISCF). The Project wasoriginally planned for completion by mid-1978. However, due to the longerthan anticipated time needed for selecting the process and licensor forSection I, this schedule can no longer be met, and Section I is now expectedto start production in mid-1979; Section II, on the other hand, is stillforecast to commence operations in mid-1978 as originally scheduled. Untilthe commissioning of Section I, the weaving and finishing plant (Section II)will use imported yarn and roving.

vii. CISCF has established the Glass Fiber Yarn and Fabric Enterpriseto operate the plant, and has appointed an experienced Project manager. TheMinistry's Design Institute for Light Industry (IPIU), which also preparedthe technical-economic study for the Project, is responsible for engineering(based on the information and designs provided by the foreign licensor andsuppliers). The time-critical contract for Section I was awarded as a turn-key, lump-sum contract after international-competitive bidding and was signedin April 1977. The required down-payment of US$1.4 million is proposed to befinanced retroactively by the Bank.

viii. Practically all raw materials (sand, boric acid, dolomite, lime-stone and calcined alumina) will come from domestic sources, and utilitieswill be supplied from existing facilities in the industrial area selectedfor the Project. The Project poses no difficult environmental problems.

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ix. In Romania all prices are fixed by the State Committee for Prices.The primary responsibility of an enterprise is to meet established physicaltargets, and inputs and outputs are calculated at the fixed prices. Thereis a historical tendency for prices not to be changed over long periods oftime. The product prices for the Project have been approved by the StateCommittee on the basis of projected production costs plus a margin of 10%of production costs for profit. Although financial viability is not of pri-mary importance to Romania because of the centralized nature of its economy,achievement of profitability targets as established for each enterprise onthe basis of fixed prices is a measure of the efficiency of an enterprise'smanagement. The financial projections for the Enterprise provide for lossesduring the first two years of operation, and the profit break-even point (61%of capacity utilization) is expected to be exceeded during the third year ofoperation (1980). The Project's financial rate of return is 11%.

x. The Project faces few risks. It has been well prepared, and thelicensor/supplier for Section I guarantees the quantitative and qualitativeoutput of the plant. However, due to the tight implementation schedule, thepossibility of a minor delay exists. Furthermore, glass fiber productionrequires skilled operators. There is already some experience available fromthe small existing plant but, in addition, provision for operator trainingby the licensor/supplier has been made.

xi. The economic cost of production of the Project is comparable tothat of a similar plant in Western Europe that was recently completed. Thisis so because practically all raw materials come from Romanian sources, andthe lower Romanian labor costs offset the slightly higher cost of investmentand of maintenance materials. Both plants would need a price level of aboutUS$2 per kg of roving and yarn in order to yield a satisfactory return, andthis is also about the current price level for the same intermediates in theUSA, Western Europe and Japan. Using this price level, the Project yieldsan economic rate of return of 16.5% in real terms. The Project will employabout 1,200 persons, representing an investment of about US$38,000 per per-son. At full capacity, the Project will yield net annual foreign exchangesavings (before amortization of the Bank loan) of about US$12 million.

xii. Based on the agreements reached on the points listed in Chapter VIIIof this report, the Project is suitable for a Bank loan of US$18.3 millionequivalent for a period of 15 years, including three years of grace, at aninterest rate of 8.2%.

I. INTRODUCTION

1.01 The Government of Romania has requested a Bank loan of US$18.3 mil-lion equivalent for the construction of a plant in the outskirts of Bucharestto produce 6,000 tons per year (tpy) of continuous glass fiber, in the formof roving, yarn, woven roving and yarn fabrics, tapes and braided tubes. 1/Total financing required for the Project is estimated at Lei 914 million(US$45.7 million), including Lei 490 million (US$24.5 million) in foreignexchange. The Government will provide the remainder of the financing, usingbilateral credits to cover part of the remaining foreign exchange require-ments. The Project was approved and funds allocated by a decision of theCouncil of Ministers. Implementation of the Project has begun, and productionis scheduled to begin in mid-1978 for one section and mid-1979 for another.

1.02 The Project is part of the Government's strategy to promote rapidindustrialization and to introduce new and advanced technologies. Domesticdemand for glass fiber is projected to grow rapidly during the currentFive-Year-Plan period (1976-80), and the Project will substitute imports.Continuous glass fibers are used mainly for reinforcing plastics and rubberand for electrical insulation, and to a lesser extent for fireproof curtainsand upholstery. None of the Project's glass fiber production is plannedfor direct export but some may be exported as part of reinforced plastic orelectrical goods.

1.03 The Project was first reviewed by a Bank identification mission toRomania in April 1976, which from a list of eight industrial projects gavethis Project together with two others priority for Bank support. The Projectwas subsequently appraised in November 1976 by a mission consisting ofMessrs. G. Becher (Chief) and Eus T. Tortorelli of the Industrial ProjectsDepartment and M. Greco (consultant). The appraisal is based on the technical-economic study prepared by the Romanian Design Institute for Light Industry(IPIU).

II. THE SECTOR AND THE BORROWER

A. Ministry of Light Industry

2.01 Technically, the manufacture of glass fiber is part of the glassindustry, its processing into roving, yarn and woven products is part of thetextile industry. In Romania, both these industries belong to the Ministryof Light Industry, and this Ministry has, therefore, been assigned the taskof implementing the Project. The Ministry has, in turn, given this responsi-bility to its Industrial Central for Glass and Fine Ceramics (CISCF), whichhas established the Glass Fiber Yarn and Fabric Enterprise (the Enterprise)to implement and operate the plant. The organizational structure of thelight industry has the same three step hierarchy as all industrial sectorsin Romania, consisting of the technical ministry at the top, the industrial

1/ A glossary of the main technical terms used in this report is given inAnnex 1.

2

central in the middle, and the enterprise at the bottom. The ministry isresponsible for the planning and performance of its sector for which it alsoapproves investments for subsequent submission to the Council of Ministers,the highest authority for final approval. A list of the eight centrals underthe Ministry of Light Industry is given in Annex 2-1. The industrial centraldirects the operations of all enterprises in its particular sub-branch ofthe economy (e. g. Central for Cotton Products, Central for Glass and FineCeramics), allocates production programs and coordinates purchase of raw mate-rials and domestic sales. The Ministry of Light Industry also has under itscontrol the Design Institute for Light Industry (IPIU), which is responsiblefor the preparation of feasibility studies, 1/ and the general and detaileddesign, as well as construction and erection supervision of projects carriedout by the centrals under the Ministry. The Ministry further has two foreigntrade enterprises: ROMSIT which is responsible for the import of know-howand machinery and equipment, and ROMANOEXPORT, in charge of the export (andimport) of light industry products. IPIU has prepared the feasibility studyfor the Project and is preparing the general and detailed designs, andROMSIT, with the advice of IPIU, is responsible for the procurement ofimported goods for the Project.

B. Industrial Central for Glass and Fine Ceramics

2.02 The Central for Glass and Fine Ceramics (CISCF) is responsiblefor the planning and production of glass products, chinaware and pottery.It employs about 40,000 people in its 26 enterprises. Its seat is Bucharest.Romania has a well established glass and ceramics industry. Its growthrate since 1950 has averaged 13% p.a., very close to the average rate forthe entire industrial sector of 12.9%. In 1975 it produced 358,000 tonsof glassware. About 20% of its production is exported. CISCF also hasan institute responsible for all research in the glass industry. A moredetailed description of CISCF, including summarized financial statements,is presented in Annex 2-2.

2.03 One of the enterprises under CISCF is a small plant for continuousglass fiber with a design capacity of 1,000 tpy (300 tpy of roving and 700tpy of mat). The plant was designed by the Design Institute of the Ministryfor Building Materials with assistance from an Italian engineering firm. Itis based on the so-called marbles process (para. 4.02) and uses imported glassmarbles for conversion into fibers. Most of the equipment is manufactured inRomania. The plant started production in 1974 with 76 tons, increasing to436 tons in 1975 and 516 tons in 1976. It is to reach full capacity in 1977.The plant employs 110 people and is located right next to the site for theProject. Although its technology is much simpler, it will be very useful fortraining some of the operators for the Project.

C. Romanian Financing System and the Investment Bank (the Borrower)

2.04 Investments are financed fully with non-interest-bearing capital.The central aggregates the funds available from cash generation of its

1/ In Romania called "technical-economic study" and required prior toapproval of an investment by the Council of Ministers.

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enterprises and matches them against funds required for approved investments.Any surplus is transferred to the state budget, and any deficit is coveredfrom the state budget. After start of operation of a new plant, the funds arereturned to the State (via the central) in the form of payments by the enter-prise into several different funds (para. 6.13). All prices are fixed by theState Committee for Prices. The primary responsibility of an enterprise is tomeet established physical targets, and inputs and outputs are calculated atthe fixed prices. Financial profitability for an enterprise as related tocapital employed and output is established by the central and the achievementof the specific profitability targets is a measure of the efficiency of anenterprise's management. There is a historical tendency for prices not to bechanged over long periods of time. This implies not only that there is a lackof correlation with shifting supply and demand relations but, also, thatcost/price relationships become distorted as the industry expands, newtechnology is introduced and labor productivity increases. To remedy thesedistortions periodic price resetting is undertaken for the whole economy, atwhich each sector is reviewed separately. The last such price resetting wasin 1974-76 and the currently prevailing internal prices are expected to be inforce at least through the end of the Five-Year-Plan period (1980).

2.05 The Investment Bank (IB) controls the use of all investment funds.1/The president of IB reports to the Minister of Finance. During projectpreparation, IB reviews the technical-economic study prepared by the respon-sible design institute, before its submission to the Council of Ministers forfinal approval. During implementation, IB supervises the progress of the proj-ect and the use of funds. Therefore, as has been the case for all previousindustrial projects financed by the Bank, IB is proposed to be the Borrower ofthe Bank loan. It will be responsible for supervising on the Romanian sidethe execution of the Project and the procurement of goods and services requiredfor it; assurances in this regard have been obtained.

III. THE MARKET

A. Uses of Glass Fibers

3.01 Continuous glass fibers are used for purposes of reinforcement,insulation and fireproofing (para. 3.02). The fibers are not necessarily longor continuous when used in such applications but, when first manufactured, aredrawn as continuous filaments from molten glass. This differentiates themfrom discontinuous fibers commonly referred to as glass wool which is used forheat and sound insulation. 2/ The fibers to be produced by the Project willbe of "E" (electrical) glass, the normal type of glass used in continuousfiber production. As it is almost alkali-free, "E" glass has a high elec-trical resistance and is, therefore, ideal for electrical insulation. 3/

1/ Except those allocated to agriculture and food processing which arecontrolled by the Agricultural Bank.

2/ Romania has glass wool production facilities for about 500 tpy.3/ Other glass types are "A" glass (alkali-containing), "C" glass (chemically

resistant) and "S" glass (high strength).

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3.02 More than 85% of glass fiber currently produced in the world isused as reinforcement for plastic materials to improve their mechanicalproperties. The product obtained from the combination of polymers and glassfibers is called "Glass Reinforced Plastic" (GRP). In addition to their usein GRP, glass fibers have the following applications:

(i) reinforcement of rubber materials such as conveyorbelts and special tires. Glass fibers are used hereas a multiplicity of twisted yarns or "cord";

(ii) insultation of electric wires and cables and otherhigh voltage items;

(iii) reinforcement of paper. Yarn is inserted in the paperto impart extremely high unidirectional strength. Mainend uses are special bags and tapes; and

(iv) manufacture of fabrics for fireproof curtains, industrialfilters, upholstery and for the production of bituminoussheets for water proofing of buildings.

The main products marketed by the glass fiber producers are roving (usedas such or woven), chopped and milled fibers (as such or as a mat or veil),yarn and yarn woven into fabrics and tapes or braided into tubes. A generaldescription of these glass fiber products as well as their end uses andaverage content in GRP is given in Annex 3-1.

3.03 Since the largest share of glass fiber is used in GRP, the develop-ment trend for these products is of primary importance for future glass fiberconsumption. As the table below indicates, consumption of GRP in the differentend-use sectors varies in the main markets. Market sophistication and levelof industrial development are important factors as the consumption of GRPshifts from building materials and electrical appliances in less developedmarkets to automotive and boat building in the more advanced ones.

Consumption of Glass Reinforced Plastics (GRP)By End-Use Sectors (1975)

(Percent of Total)

W. Europe Japan USA

Building Materials, Construction 22 45 15Chemical Plants 22 14 10Automotive, Transport Sector 16 5 20Containers 9 7 10Electrical Appliances 13 8 9Boat Building 9 14 26Miscellaneous 9 7 10

Total 100 100 100

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B. World Market

3.04 The following brief discussion of the world market for glass fiberserves as background information only, since the Project will use largelylocal materials and produce only for the domestic market. Manufacturing ofglass fiber is a very sophisticated technology, and only few companies inthe world have developed original processes in this field. The secrecy andexclusiveness of this industry is such that these companies are in a posi-tion to control the international market, either through participation orlicensing agreements with most producers. 1/ In part on account of theoligopolistic structure of the industry, reliable capacity, production andconsumption statistics are difficult to obtain, and there appears to be atendency to overstate production capacity and understate capacity utiliza-tion. About 85-90% of all glass fiber used in the world are produced andconsumed in the USA, Western Europe and Japan. Some minor production capac-ity exists in Canada, Eastern Europe and Latin America. World consumptionin 1973, production capacity, actual production and consumption in 1975, andprojected demand for 1980 are summarized below, and discussed in more detailin Annex 3-2.

Production Capacity, Production and Consumptionof Glass Fiber in the Major World Markets

(1,000 tons)

1973 -------- _------- 1975 --------------- 1980 Annual GrowthConsumption Capacity Production Consumption Apparent of Consumption

Exports Demand 1973-80

USA 307 390 245 240 5 410 4

W. Europe 149 222 145 a/ 145 - 250 8

Japan 67 120 63 45 18 140 11

Other 77 a/ 48 30 a/ 53 a/ (23) a/ 150 a/

Total 600 a/ 780 483 a/ 483 a/ - 950 a/

a/ Estimated

World production capacity in 1975 was estimated at 780,000 tpy, led by the USAwith 390,000 tpy (50%), followed by Western Europe with 222,000 tpy (29%),Japan with 120,000 tpy (15%) and the remaining producing countries with 48,000tpy (6%). Estimated total world production increased steadily from about400,000 tons in 1970 to 610,000 tons in 1974 (Annex 3-2, Table 4), but fell

1/ Annex 3-2 (Table 1) shows that the six most important licensors control83% of the capacity in the three main markets (USA, Western Europe,Japan), and the three most important ones control 68%.

off sharply in 1975 to an estimated level of 483,000 tons, indicating a levelof capacity utilization of only about 60%, which was caused by the generalrecession in that year. Average capacity utilization in the USA, which wasalso only about 60% in 1975, has improved to 73% during 1976 (Annex 3-2, Table6), and is expected to return to the pre-recession level of 85-90% in 1978-79.

3.05 The projected glass fiber demand in the three main consuming areasin 1980 is based on an analysis of the GRP market by end-use sectors and theirexpected development trends. Glass fiber consumption in the USA, WesternEurope and Japan is expected to grow from about 523,000 tons in 1973 to about800,000 tons in 1980, representing an annual growth rate of 6.25%. Japan isforecast to show the highest growth rate (11% p.a.) and to more than doubleits level of consumption, from 67,000 tons in 1973 to about 140,000 tons in1980. Western Europe is expected to have a growth rate of 8% , and the USA oneof 4% p.a. Average per capita consumption in 1975 in the USA was 1.0 kg, inJapan 0.4 kg and in Western Europe about 0.5 kg, ranging from 0.3 kg in Italy,Spain and Austria to 0.7 kg in Germany and Netherlands. On the basis of theprojected increase, 1980 per capita consumption in the USA would reach 1.4 kg,Japan 1.1 kg and Europe 0.8 kg. The production capacity in the USA, WesternEurope and Japan in 1977 is indicated by the industry at 820,000 tons (Annex3-2, Table 4), and the total world production capacity is indicated at 875 to900,000 tons. A consumption level of 800,000 tons in 1980 in USA, WesternEurope and Japan would nearly fully utilize their indicated 1977 capacity.No demand projections for countries outside the USA, Western Europe and Japanare available, but total consumption in these countries is unlikely to exceed150,000 tons in 1980. This implies that additional capacity of 50 to 75,000tpy must be built between 1977 and 1980 to meet projected world demand in 1980.

C. World Market Prices

3.06 Prices of glass fiber products differ in the three largest markets,USA, Western Europe and Japan. Lowest prices are found in the USA, while inJapan and especially in Western Europe quotations for the same articles arenormally higher. The explanation is found in the lower cost of raw materialsand, in particular, natural gas in the USA. 1/ Romania is currently importingglass fiber from Japan, France, Belgium, Sweden and Czechoslovakia (CSSR).The table below compares current (1976) domestic prices in the USA, Japan andWestern Europe with current import prices of Romania. On an average, Romanianimport prices in 1976 were somewhat below domestic prices in the three mainmarkets. However, as increasing demand absorbs the existing surplus capacity,import prices are expected to gradually return to the level of domesticprices. In the past, domestic prices for glass fiber have steadily risen toreflect increasing raw material, labor and energy costs, even in times ofreduced capacity utilization such as 1975 (Annex 3-2). The high level ofconcentration in the industry most likely accounts for this resistance ofprices against downward pressure.

1/ During the recent gas curtailments, some manufacturers in the USA hadto shut down their plants or operate at reduced levels of capacity uti-lization. Other plants which were able to switch to alternative fuels,such as propane, raised their prices by a special energy surcharge ofabout US50 per kg.

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Domestic Prices in Selected Countries and Romanian Import Prices - 1976(US$ / kg)

Domestic Prices Import Prices(Ex-Factory) (Free Border)

USA Japan W . Europe Origin Price

Roving 1.20 1.25 1.30 Japan 0.75 - 0.93Woven Roving 1.55 1.60 1.60 Japan/Belgium 1.05 - 1.73Yarn 1.80 - 5.15 2-8 2.3 - 11.5 CSSR/France 2.60 - 4.65Yarn Fabric 4.40 - 11.60 3-9 3.5 - 8.7 CSSR 3.00 - 14.44

D. The Romanian Market

3.07 Romanian glass fiber consumption began in the late sixties anddeveloped at a very rapid rate (50% p.a. on an average). Local productionstarted in 1974 with the small plant near Bucharest (para. 2.03) for rovingand mat and reached about 516 tons in 1976, providing about 38% of the coun-try's glass fiber consumption in that year. Romania's production, import andconsumption of glass fiber is shown below for 1971 and 1976. A more detaileddiscussion of the Romanian glass fiber market is given in Annex 3-3.

Production, Imports and Consumptionof Glass Fiber in Romania (1971 and 1976)

(Tons)

Production Imports Consumption1971 1976 1971 1976 1971 1976

Roving and Yarn - 253.0 77.5 343.0 77.5 596.0Mat and Chopped Strand - 262.8 - 25.0 - 287.8Woven Rovings & Fabrics - - 96.5 390.0 96.5 390.0Tubes and Tapes - - 23.5 71.0 23.5 71.0

Total - 515.8 197.5 829.0 197.5 1,344.8

3.08 Until now, electrical insulation and reinforcement of plastic tanksand pipes for the chemical industry have been the main applications of glassfiber in Romania. Within the current Five-Year-Plan (1976-80), the productioncapacity of some major users of glass fiber will be expanded considerably,particularly in the field of building materials. The current structure ofconsumption by end-use sector and the anticipated change are shown below:

Structure of Glass Fiber Consumptionin Romania by End-Use in 1975 and 1980

(Percent of Total Weight)

1975 1980

Building Materials 5 52Chemical Plants 62 13Electrical Applications 33 35

100 100

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A comparison with the structure of consumption by end-use sector in themarkets of Western Europe, USA and Japan shows that in those markets thesectors of building materials, chemical plants and electrical applicationsconstitute only slightly more than one-half of the entire glass fiber con-sumption. Other important end-use sectors are the automotive and othertransport industry and the boat building industry. The latter alone usesabout one quarter of the glass fiber consumed in the USA. However, theseapplications are not yet being considered in Romania.

3.09 The projected consumption, production and import of glass fiber inRomania for the years 1978, 1980 and 1985 are shown below (for detail seeAnnex 3-3). The figures for 1980 are based on the targets of the currentFive-Year-Plan, but modified to take into account the actual status of imple-mentation of projects consuming glass fiber. This projection was prepared inNovember 1976 and does not yet take into account the effects of the recentearthquake on the economy and the market for glass fiber. However, on balance,this should lead to an increase in glass fiber requirements since largequantities of glass reinforced plastic will be needed to reconstruct Romania'sseverely damaged chemical industry and general housing. Growth of consumptionafter 1980 has been projected at 10% p.a. which is a conservative growth rateif compared with the actual rate between 1971 and 1976 OiL7% p.a.) and theplanned growth rate for the current Five-Year-Plan (35% p.a.).

Project Production, Consumption and Importof Glass Fiber in Romania (1978, 1980 and 1985)

(Tons)

Roving Mat and Woven Roving, Tubes && Yarn Chopped Strand Fabric Tapes Total

1976 (Actual)Consumption 596 288 390 71 1,345Production 253 263 - - 516Import 343 25 390 71 829

1978Consumption 3,700 749 1,216 102 5,767Production 300 700 270 44 1,314Import 3,714 a/ 49 946 57 4,767 a/

1980Consumption 4,366 764 1,791 179 7,100Production 3,530 700 1,091 179 5,500Import 836 64 700 - 1,600

1985Consumption 7,030 1,207 2,915 288 11,440Production b/ 5,030 700 1,091 179 7,000Import 2,000 507 1,824 109 4,440

a/ Includes 314 tons of roving and yarn to be imported for the Project's weavingand finishing plant.

b/ Based on capacity of small existing plant and the Project.

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3.10 Consumption of glass fiber in Romania is expected to increasefrom 1,345 tons in 1976 to about 7,100 tons in 1980 and 11,440 tons in 1985.Per capita consumption which was only 0.06 kg in 1976 would increase to 0.32kg in 1980, which corresponds to the US per capita consumption of the late1950's and the 1975 per capita consumption of Spain, Italy and Austria. Onthe basis of the projected consumption of glass fiber, Romania would continueto import glass fiber, reaching a peak of 4,767 tons in 1978. Imports wouldstill be 967 tons in 1981 when the Project is expected to reach full production.

E. Marketing Arrangements

3.11 As mentioned above, the entire production of the Project is plannedfor domestic consumption, substituting imports. The Central for Glass andFine Ceramics, under whose authority the plant will operate, will deliver theplant output to other centrals, who are the end-users of glass fibers. Therespective ministries after consultation on the needs of their enterprisessigned a protocol on the long-term quantities of glass fiber to be supplied bythe Project. After Project start-up detailed annual sales plans will beprepared and actual sales contracts signed with the glass fiber consumingenterprises. The Enterprise is expected to have about 10 such contracts.

IV. THE PROJECT

A. Project Scope

4.01 The Project consists of a spinning plant (Section I) with a capacityof 6,000 tpy of glass fiber in the form of roving and yarn and of a weavingand finishing plant (Section II) with a capacity of 6 million m2 of fabrics,10 million linear meter of tapes, and 3.3 million lin. m of braided tubes.Section II will use 1,270 tpy of yarn and roving from Section I, the balance(4,730 tpy) will be sold as roving and yarn. The plant will be located inMilitari, an industrial area in the outskirts of Bucharest, southwest of thecity. The area is being developed as a major industrial estate and providescommon facilities for power generation, steam, water and natural gas supply.A detailed description of the proposed production process and plant facilitiesis given in Annex 4-1.

B. Process Technology

4.02 The manufacture of glass fiber consists of three stages: (1) themanufacture of glass, (2) the drawing of continuous filaments, i.e. the conver-sion of molten glass into strands, and (3) the conversion of glass fibersinto saleable products. At one time, these three stages constituted separatemanufacturing activities. Glass was first produced in the form of marbles(marbles process), and the marbles were re-melted for conversion into fibers.Romania's first small plant uses this process. Some 15 years ago, the"direct-melt" process was introduced which converts the molten glass directlyinto fibers. The Project will use the direct-melt method which is moreenergy efficient, and has lower platinum/rhodium requirements and lower

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material losses. 1/ Only a limited number of companies in the world havedeveloped processes for this specialized technology. The licensor willsupply know-how, engineering, equipment, start-up assistance and training forSection I and will guarantee the performance of this plant portion. SectionI will have two furnaces with a capacity of 3,000 tpy of glass fiber each.The furnaces have an expected life of 3 to 4 years, after which they arerelined with new refractories. Having two furnaces permits relining of onefurnace while the other is in operation.

4.03 The weaving and finishing plant (Section II) will utilize conven-tional technology similar to that for other fibers in the textile industry.Although glass fiber has special handling characteristics and requires specialfinishing technology, there are a number of suppliers who have the necessaryknow-how and manufacture equipment to the required specifications. Theforeign suppliers will train Romanian operators and assist during start-up andcommissioning, and provide a performance guarantee for their respectiveequipment. A graphic presentation of the production steps in Section Iand II is shown in Annex 4-2 and a plant layout in Annex 4-3.

C. Raw Materials and Utilities

4.04 The principal raw materials are quartz sand, limestone, calcinedalumina, dolomite and boric acid. Except for a small quantity of calciumfluoride which will be imported, all raw materials are produced locally.Quartz sand is the most critical raw material since its purity and constancyof composition is an essential requirement of the direct-melt process. TheMiorcani quarries in north-east Romania can supply a suitable grade of quartzsand in sufficient quantities. Raw material requirements, sources and meansof transport are listed in Annex 4-4. Location of domestic raw materialsources are shown in Map IBRD 12652R1. The central position of Bucharest,where the plant will be located, in the Romanian highway and railroad systemswill keep the transportation costs for raw materials and finished products ata minimum.

4.05 Utility requirements will be met from external sources. Powerwill be supplied from the existing network, steam from the boiler house ofa nearby synthetic leather factory and natural gas from the 28" pipelinewhich supplies gas to the Bucharest area from the Transylvania gasfields.These arrangements are satisfactory and no bottlenecks are expected to developover the life of the Project.

D. Management and Project Execution

4.06 As noted above, the Central for Glass and Fine Ceramics (CISCF) hasalready established the Enterprise to implement and operate the plant. CISCFand the Enterprise have primary responsibility for project implementation.They also have direct responsibility for the procurement of local equipmentand raw materials and the recruitment and training of operating personnel.

1/ The unit production costs of Romania's small plant are about 40% abovethose of the Project.

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CISCF is well experienced in the implementation of new projects. It hasdelegated several areas of project execution to the following organizationswhich are well versed in their respective tasks and judged to be capable ofhandling them effectively:

- IPIU, the engineering enterprise of the Ministry of LightIndustry is responsible for the design of the entire plant(based on the information and designs provided by thelicensor and suppliers);

- ROMSIT, the foreign trade enterprise of the Ministry ofLight Industry is responsible for the procurement ofimported goods;

- The Trust for Industrial Buildings is responsible for theexecution of civil works and equipment erection.

4.07 CISFC has appointed a manager for the Enterprise. He is in theprocess of forming a team to coordinate and supervise project implementa-tion, and the same team will constitute the management of the Enterprise atthe start of operation. An organization chart of the Enterprise is givenin Annex 4-5. The appointed manager is an engineer with broad experiencein the field of glass making factories, at both the design and constructionstage as well as in production management, and is well qualified for the job.IPIU and ROMSIT have appointed senior members of their staff to the Project.The arrangements for project implementation are satisfactory.

4.08 According to the current Five-Year-Plan, the Project was scheduledfor completion by mid-1978. However, due to the longer than anticipated timeneeded for selecting the process and licensor for Section I, this schedulecan no longer be met, and Section I is now expected to start production inmid-1979; Section II, on the other hand, is still forecast to commenceoperations in mid-1978 as originally planned. Until the start of productionof Section I, the weaving and finishing plant (Section II) will use importedyarn and roving. One furnace of Section I is to be lit up in April 1979 andthe second in July 1979. The formal acceptance test for Section I is expectedat the latest for January 1980. The phased commissioning of the two sectionswill allow a quick build-up of capacity utilization for the more capital-intensive Section I. A project implementation schedule is shown in Annex 4-6.As part of the information to be provided (para. 6.15), the Enterprise willsubmit by September 30, 1977, a critical path schedule for the implementationof the Project.

E. Employment and Training

4.09 A total staff of about 1,200 (about 60% female staff), is expectedto operate the plant including about 15% maintenance personnel needed for thesophisticated machinery. Training of operators for Section I will be carriedout through:

(i) specialized plant training at the licensor's processingunits abroad;

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(ii) on-the-job training for mechanics, welders and operatorsby the licensor's supervisory staff present in Romania forplant erection and commissioning; and

(iii) operator training in the existing small glass fiber plant.

For Section II, training will be carried out in existing textile facilitiesin Romania and, if judged necessary, by machinery suppliers abroad. A totalof about 820 staff will benefit from the training program, estimated to costUS$400,000 equivalent. An outline of the training program, as currentlycontemplated, is given in Annex 4-7. Assurances have been obtained that theEnterprise will submit by December 31, 1977, a detailed training program thatis acceptable to the Bank.

F. Ecology

4.10 The Project does not pose any difficult environmental problems.Fluorine and fluoride emissions which result from the reaction taking placeduring glass melting, are subject to Romanian standards (average fluorineand fluorides concentrations of 0.2 and 2.0 mg/m3 respectively), which arein line with standards in Western Europe and the USA. The Project will bedesigned to meet these standards. The discharge of industrial effluents inRomania is regulated by standards issued jointly by the Ministries of Industryand Public Health. Liquid effluents from the plant will be treated in a wastewater treatment unit prior to discharge into the sewer system. The Projectwill produce about 2,500 tpy of waste glass fibers, which also do not posedifficult pollution problems as they are substantially inert. All equipmentwill be fitted with labor safety devices, and air conditioning will keep theconcentration of noxious elements (including fiber) below maximum admissiblelimits. The proposed pollution control facilities, as envisaged under theProject, are considered adequate, and assurances were obtained that theEnterprise will operate these pollution control facilities with due regard toecological, environmental and safety factors. A more detailed discussion ofthe environmental impact and protection is presented in Annex 4-8.

V. CAPITAL COST AND FINANCING PLAN

A. Project Cost

5.01 Total financing required for the Project (Sections I and II) isestimated at US$45.7 million equivalent, including US$24.5 million in foreignexchange. Details of capital cost estimates are given in Annex 5-1 andsummarized below:

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Summary of Capital Costs

Lei Million US$ Million %_ _

Local Foreign Total Local Foreign Total

Equipment & Spares a! 108.6 297.2 405.8 5.4 14.9 20.3 53.3Import Duties 124.0 - 124.0 6.2 - 6.2 16.3Erection 4.2 12.0 16.2 0.2 0.6 0.8 2.1Civil Works 96.8 16.6 113.4 4.9 0.8 5.7 14.9Know-How & Engineering 14.6 40.0 54.6 0.7 2.0 2.7 7.2Preoperating & Start-up

Expenses, Training 29.0 18.0 47.0 1.5 0.9 2.4 6.2

Base Cost Estimate(BCE) 377.2 383.8 761.0 18.9 19.2 38.1 100.0

Contingencies:Physical (5%) 18.8 19.2 38.0 0.9 1.0 1.9 5.0Price (6.4%) 4.0 45.0 49.0 0.2 2.2 2.4 6.4

Installed Cost 400.0 448.0 848.0 20.0 22.4 42.4 111.4Working Capital 24.0 - 24.0 1.2 - 1.2 3.2

Project Cost 424.0 448.0 872.0 21.2 22.4 43.6 114.6Interest duringConstruction - 42.0 42.0 - 2.1 2.1 5.5

Total FinancingRequired 424.0 490.0 914.0 21.2 24.5 45.7 120.1

a/ c.i.f. cost at plant site.

5.02 The capital cost estimate is based on the main fixed-price contractfor Section I which is scheduled to be signed before the end of April 1977, onthree contracts signed with suppliers for Section II and on recent quotationsobtained for the remaining contracts to be signed. Local costs have been esti-mated by IPIU on the basis of the expected volume of civil works and erection.Foreign exchange requirements excluding interest during construction forSection I are US$18.0 million and for Section II US$4.4 million. Importduties on equipment average 33%. A physical contingency of 5% of the basecost estimate has been added which is sufficient due to the advanced state ofthe Project. For foreign supplied goods and services, although supplied onthe basis of fixed-price contracts, annual price increases of 7.5% have been

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assumed in order to establish project cost in April 1977 prices. Local costsare forecast to increase 1% annually throughout the project implementation.The above cost estimates, including physical and price contingencies, areconsidered adequate.

5.03 In Romania, all financial flows in and out of industrial enterprisesare recorded in accounts held by one single bank (National Bank) and paymentterms are legally fixed at low levels. Romanian enterprises, therefore,can keep relatively small working capital, largely in the form of inven-tory. Net working capital required for the Project is estimated at Lei 24million (US$1.2 million). A detailed estimate is given in Annex 5-2.

B. Financing Plan

5.04 The Project is part of CISCF's current Five-Year-Plan. In establish-ing its investment and financing plan, the Central aggregates all approvedinvestments of its enterprises and matches them against the availability offunds from its enterprises through cash generation. If the total investmentrequirements exceed the combined availability of funds, then the Centralobtains a budget allocation. There is, therefore, no specific financing planfor this one Project alone. During the current Plan period (1976-80), thestructure of CISCF's financing plan for its investments is as follows:

Structure of CISCF's Financing PlanDuring 1976-80 Plan Period

Source of Funds %

Depreciation 69.2Benefit (= profit) 24.9Budget 5.9

100.0

5.05 The funds for the Project will be provided to the Enterprise throughthe Central and will be returned by the Enterprise to the State in the form ofcontributions to different funds (para. 6.13). Although the IBRD loan will beused for Section I and bilateral credits for the importation of machinery andequipment for Section II, these funds will not be on-lent to the Central orEnterprise. In this respect, the Investment Bank will work like a "centralbank", making available the necessary foreign exchange to the Central andEnterprise against local currency provided in accordance with CISCF's financ-ing plan. Interest during construction which does not exist under the Romaniansystem but will accrue on the IBRD loan and the bilateral credits will be bornby the Investment Bank and not charged to the Central or Enterprise.

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Bucharest Glass Fiber ProjectProposed Financing Plan

Lei Million US$ Milli-n Percent(Equivalent)

Source of Total Funds

- Central's Depreciation 604.0 30.2 66.1- Central's Benefit 216.0 10.8 23.6- State Budget 52.0 2.6 5.7

Sub-total 872.0 43.6 95.4

- Investment Bank 42.0 2.1 4.6

Total 914.0 45.7 100.0

Source of Foreign Funds

- IBRD Loan 366.0 18.3 74.7- Bilateral Credits 82.0 4.1 16.7

Sub-total 448.0 22.4 91.4

- Investment Bank 42.0 2.1 8.6

Total 490.0 24.5 100.0

5.06 The proposed Bank loan of US$18.3 million will be made to theInvestment Bank for a period of 15 years, including 3 years of grace, at aninterest rate of 8.2% p.a. The schedule of principal and interest paymentson the Bank loan is shown in Annex 5-3.

5.07 The Council of Ministers' approval of the Project includes approvalto spend funds up to the estimated cost of the Project (including foreignexchange). The organizations responsible for project implementation considerthis amount as a strict limit that is not to be exceeded, since a new decisionby the Council of Ministers would be required. The Council's decision forthe Project has established the limit of Lei 850 million for the Project'stotal cost (excluding working capital and interest during construction) andUS$24.5 million (excluding working capital, interest during construction andalso indirect foreign exchange requirements) as the limit for the Project'sforeign-exchange expenditures. Both limits exceed the latest estimate usedin this report of Lei 848 million and US$20.9 million respectively. Moreover,the standard assurances were obtained that the Government will make availablethe funds needed for the execution of the Project. The Project will beconsidered as completed when the facilities during a period of 10 consecutivedays, achieve design capacity production.

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C. Procurement

5.08 Procurement procedures for Bank financed goods and services are inaccordance with Bank guidelines. As for the main contract for Section I allknown suppliers of technology and equipment were contacted directly by ROMSITbut in addition, at the Bank's request, a letter was sent to all embassies ofBank member countries represented in Romania. Detailed technical discussionswere held during 1976 with the four qualified suppliers who had expressedinterest to participate in the bidding. Subsequently, they were invited tosubmit a final tender price in December 1976, based on the detailed technicaldocumentation agreed upon during technical discussions. Only two of the fourcompanies submitted valid bids. They were evaluated by ROMSIT and IPIU, andthe evaluation was subsequently reviewed and the recommended award acceptedby the Bank. The contract between ROMSIT and the selected bidder, a Britishengineering firm representing TBA-Bishop technology, 1/ is scheduled to besigned before the end of April 1977. It calls for the supply on a turn-keybasis of the know-how, engineering, equipment, erection supervision, trainingand start-up assistance for Section I. The related contracts for twistingequipment and bushings for which the suppliers were specified by the maincontractor and whose offers were evaluated together with the main contract,are expected to be signed in May 1977. Additional machinery and equipment forSection I not forming part of the main contract will be submitted to interna-tional competitive bidding (or international shopping for items belowUS$100,000 equivalent) in an amount of US$1.5 million. For this equipment,Romanian suppliers will be qualified to participate in the bidding, and thenormal 15% preference will be applied to Romanian bids. Imported equipmentfor Section II, which will be financed from bilateral credits, will be pur-chased in accordance with Romanian procurement procedures. There will beabout six contracts for Section II, three of which had been signed as of April1977, with the remainder expected to be signed by the end of May 1977.

D. Allocation and Disbursement of Bank Loan

5.09 The Bank loan will cover 40% of the total financing required forthe Project, and about 75% of the estimated foreign exchange requirement. Itwill be disbursed against 100% of the foreign expenditures under the contractfor the supply of know-how, engineering, machinery and equipment, erectionsupervision, training and start-up assistance for Section I and the relatedcontracts for twisting equipment and bushings. It is expected that down-pay-ments of US$1.4 million will have been made on these contracts before theBank loan is signed. It is, therefore, proposed to finance retroactivelyexpenditures made after April 15, 1977, not expected to exceed US$1.4 million.In addition the Bank loan will be disbursed against 100% of foreign expendi-tures or local ex-factory cost of contracts won after international competi-tive bidding or international shopping for other, ancillary machinery andequipment for Section I, as summarized below:

1/ See Annex 3-2, Table 1 for main licensors.

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Allocation of Bank Loan

Category Amount of Loan Allocated % of Expenditures(US$ Million) to be Financed

1. Know-how, engineering, machinery, 16.8 100% of foreignequipment, erection supervision, expenditurestraining and start-up assistance tobe supplied under the main equipmentand technology contract and twistingequipment and bushings connectedtherewith

2. Other machinery and equipment for 1.5 100% of foreignSection I expenditures and

100% of localexpenditures,limited to ex-factory cost

Total 18.3

Annex 5-4 shows the quarterly disbursement schedule for the Bank loan.

VI. FINANCIAL ANALYSIS

A. Volume and Value of Production

1. Volume of Production

6.01 The weaving and finishing plant (Section II) is expected to startproduction in July 1978 and reach 50% capacity utilization during the re-mainder of that year, 95% in 1979 and 100% in 1980. The spinning plant(Section I) is expected to start production in mid-1979, reaching 30% averagecapacity utilization in that year, 75% in 1980 and 100% in 1981. 1/ Althoughthe Project incorporates technology that is new for Romania and requiresskilled operators, the projected buildup of capacity utilization is consideredrealistic in light of the training and start-up assistance provided by theforeign suppliers. Also, since the design capacities of Sections I and IIhave been established with due allowance for downtime 2/, achievement of 100%of design capacity utilization can realistically be expected.

6.02 Since production of Section I will start about one year after thestart-up of Section II, roving and yarn will have to be imported in 1978 andyarn in 1979. There will be no difficulty in importing the required quanti-ties. The production volume and import requirements of yarn and roving inthe first four years of operation are projected as follows:

1/ Detailed projected capacity utilization and corresponding productionvolume are shown in the projected income statement in Annex 6-4.

2/ See Annex 4-1 for assumptions regarding number of operating daysfor Sections I and II.

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Production Volume and Import of Yarn and Roving for 1978-1981

1978 1979 1980 1981

Production: Section IRoving (tons) - 1,200 3,000 4,000Yarn (tons) - 600 1,500 2,000

Import: Roving (tons) 138 - - -

Yarn (tons) 176 100 - -Production: Section II

Woven Roving (1,000 m2) 270 1,015 1,070 1,070

Fabrics (1,000 m2) 1,230 4,685 4,930 4,930Tubes (1,000 m) 825 3,135 3,300 3,300Tapes (1,000 m) 2,500 9,500 10,000 10,000

6.03 The gap which derives from the different start-up times for theweaving and finishing plant on the one hand and the spinning plant on theother, provides a welcome phasing during which the Enterprise can solve anyproblems in the weaving and finishing operation using imported roving andyarn. The weaving and finishing department should be operating well in 1979(at an expected capacity utilization of 95%), allowing the gradual phasing inof roving and yarn produced in the Enterprise's own spinning department.

2. Value of Production

6.04 Prices: As is practice for new products in Romania, producerprices have been approved by the State Committee for Prices on the basisof projected production costs plus a margin of 10% of production costs forprofit (benefit). These prices, like all prices in Romania, will be subjectto only minor modifications (if at all) and will normally be fixed at leastfor the period of the current Five-Year-Plan. The detailed price list isshown in Annex 6-1.

6.05 Gross Production and Gross Product: Two important plan indicatorsof Romanian enterprises are (a) the gross production which counts the pro-duction of Section I (roving and yarn) and of Section II (woven roving,fabric, tubes and tapes) at their respective prices, and therefore, includesdouble counting of roving and yarn consumed in Section II, and (b) the grossproduct which deducts this consumption of roving and yarn. In the financialprojections which do not include changes in finished goods inventory the grossproduct is equivalent to sales revenues. At full capacity utilization, theProject will reach an annual gross production of Lei 327.2 million (US$16.4million) and a gross product (= sales revenues) of Lei 269.8 million (US$13.5million).

B. Production Cost

6.06 Detailed production costs, with quantities and unit prices, areshown in Annex 6-2. At full capacity utilization, annual costs are estimatedat Lei 187.7 million (US$9.4 million) as follows:

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Annual Production Cost at Full Capacity(Prices of 1976)

(Million Lei) (%)

Raw Materials 20.2 10.7Auxiliary Materials 35.1 18.7Maintenance Materials 17.0 9.0Power 10.8 5.8Other Utilities 3.3 1.8Labor 26.1 13.9Depreciation 67.5 36.0Reserve for Relining 4.0 2.1Contingency 3.7 2.0

187.7 100.0

6.07 All raw materials except calcium fluoride, which represents only2.3% of the raw material cost, come from local sources. Sizing materialsmake up 70% of the estimated cost of auxiliary materials. Initially, thesesizing materials will be imported, but the know-how to be made availableby the suppliers for Section I and II will include the formulation for thesizing materials, and the Enterprise and the suppliers will identify suitableRomanian enterprises to produce these sizing materials locally soon afterProject start-up.

6.08 About 68% of the production costs are fixed and 32% are variable.Maintenance materials have been calculated at 2% of fixed assets. Deprecia-tion is on a 12-year straight-line basis, in line with Romanian depreciationschedules. The life expectancy of the furnaces is about three years, afterwhich relining takes place (para. 4.02). One-third of the estimated cost ofrelining (Lei 12 million) is debited each year in the form of a "reserve forrelining".

C. Financial Projections

6.09 The projected financial statements for the Enterprise are summarizedbelow. The assumptions used are listed in Annex 6-3, the projected incomestatement in Annex 6-4, the cash flow statement in Annex 6-5, and the balancesheet statement in Annex 6-6, all for 10 years.

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Summary of Projected Financial Statementsfor the Glass Fiber Yarn and Fabric Enterprise

(Million Lei)

1977 1978 1979 1980 b/ 1981 c/

Gross Production - 29.9 175.9 275.4 327.2Gross Product (= Sales) - 29.9 121.5 218.0 269.8Production Cost - 44.8 145.3 177.2 187.7Benefit (Loss) - (14.9) (23.8) 40.8 82.1

Allocations to Funds - ( 2.9) 47.7 82.3 94.9Net Working Capital a/ - 14.0 19.1 24.2 24.4Net Fixed Assets 288.5 617.5 756.5 693.0 621.5IBRD Loan 62.0 228.0 358.0 366.0 355.4State Funds 226.5 403.5 417.5 351.0 310.1

a/ Current Assets less Payablesb/l! Full capacity utilization for weaving and finishing plant (Section II)c/ Full capacity utilization for spinning plant (Section I).

6.10 The Enterprise is expected to incur losses during the first twoyears of operation. The State will make up any resulting cash deficits.The Project's profit break-even point is estimated to be at 61% capacityutilization. A break-even chart is shown in Annex 6-7.

6.11 The financial projections do not provide for price changes sinceall prices in Romania are controlled and revised by the State Committee forPrices only after fairly lengthy intervals (para. 2.04).

6.12 As explained in para. 5.05 above, projects in Romania are financedfully on a "non-interest-bearing-capital" basis, but funds are recovered bythe State through payments from the Enterprise into several state funds. Inorder to indicate the amounts of interest and principal due to the IBRD,payments by the Enterprise equivalent to the actual payment due to the Bankare shown in the projected cash flow statement and so is a "notional" debtservice coverage, relating benefit plus depreciation to debt service on theBank loan. Since the Bank loan finances only 42% of total project cost, thisnotional debt service coverage in all years is relatively high (above 2.5times).

6.13 As mentioned previously, the capital advanced by the State todifferent enterprises for their projects is returned to the State in the form

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of payments into several funds. Firstly, an amount equivalent to the Enter-prise's annual depreciation is paid into the "depreciation fund". In thefinancial projections for this Project, principal repayment on the Bank loanhas been considered as an advance payment into this depreciation fund andcorrespondingly deducted from the payment into that fund. Secondly, an amountequivalent to 10% of the planned benefit of the Enterprise must be paid intothe State budget. Thirdly, the Enterprise can pay a bonus to workers, notexceeding 2% of total labor cost. Fourthly, the equivalent of 1% of networking capital can be retained by the Enterprise in the form of a reservefund to increase its working capital. All remaining funds are transferred tothe State budget, except for very small bank balances and petty cash. Assur-ance was obtained that in any given year after 1980 the sum of annual benefitand depreciation remitted by the Enterprise to the State shall be at leastsufficient to cover the equivalent in Lei of the interest and principal to bepaid by the Investment Bank in that same year to the Bank, except that aninterest rate of 10% shall be applied.

D. Financial Rate of Return

6.14 With an expected life after start-up of 12 years, the Projectyields a financial rate of return of 11% (Annex 6-8). The results of thesensitivity analysis of this return are as follows:

Sensitivity of Financial Rate of Return

1. Base Case 11.0%2. Production Cost up 5% 9.9%3. Production Cost up 10% 8.8%4. Project Cost up 5% 9.8%5. Delay of 6 Months in Start-up 9.0%6. Delay of 6 Months in Reaching Full Capacity 8.0%

Increases in production costs beyond the projected level are considered un-likely, since production costs have been estimated with due allowance forthe possibility of lower efficiency of plant operation in early years. Chancesof an increase in project costs are also low. However, because of the tightimplementation schedule, a delay in project start-up is possible. A six-monthdelay would reduce the rate of return to 9.0%. There is also a certainprobability that the attainment of full capacity utilization might be somewhatdelayed due to operator inexperience; as one such (extreme) case, the possibil-ity of a 6-month delay has been considered which would reduce the project'sfinancial return by 3 percentage points.

E. Auditing and Reporting

6.15 Romania has an elaborate audit system under which enterprisessubmit periodic operational and financial reports to their Central, Ministryand Investment and National Banks. These reports serve to ensure achievementof plan targets and proper use of funds. Though the contents and presentation

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of these reports differ from those normally received by the Bank, it ispossible to adjust them to provide sufficient information for the Bank toadequately monitor the progress of project implementation and operations.The Bank's reporting requirements were discussed during negotiations,and agreement was reached that the Enterprise will submit quarterly progressreports and annual financial statements, in a form satisfactory to the Bank,and that the Bank will receive within three months after the end of each yearcopies of annual audit reports of the Enterprise prepared by the Ministry ofFinance.

F. Risks

6.16 The Project faces few risks, the only important one being initialproblems in reaching full capacity utilization or high quality productionin Section I, due to operator inexperience. However, through the proposedtraining program and the guarantee from the licensor/contractor, who ensurethat the plant will achieve the specified production program quantitativelyand qualitatively, all reasonable precautions against this eventuality havebeen taken. The possibility of the actual growth rate in Romanian glassfiber consumption falling below the substantial increase provided for in thecurrent Five-Year-Plan is small because of the nature of Romania's plannedeconomy where the expansion of new production facilities is closely coordi-nated with the expansion of consuming industries. Furthermore, the expectedrapid growth of glass fiber consumption starts from a low base and thereremain important applications of GRP not yet considered (automotive industry,boat building and sporting goods), which would be introduced should this benecessary for maintaining the planned growth rate for consumption.

VII. ECONOMIC ANALYSIS

A. Economic Costs and Benefits and Rate of Return

7.01 International prices, at the conversion rate of Lei 20 per USDollar, have been used for tradable, and domestic prices for non-tradablegoods and services, for purposes of calculating the economic costs andbenefits of the Project. Project costs have been kept at their financialvalue, except for import duties which have been deleted (Annex 7-1). Pro-duction costs were adjusted as follows. For quartz sand, the potential exportprice is estimated to be 40% above the Romanian price, and for boric acid50%. For electric power, which has a Romanian price of USJ 1.5 per kwh, theeconomic price has been assumed to be USJ 2.25 per kwh (+50%). For naturalgas, for which the Romanian price is Lei 0.2 per Nm3 (USe 28 per MMSCF), theeconomic price has been estimated to be Lei 1.4 per Nm3 (US$1.96 per MMSCF)or plus 600% on the basis of the current import price of crude oil. On thisbasis, the economic production costs amount to 117% of the financial productioncosts (Annex 7-2).

7.02 As discussed earlier (para. 3.06), Romanian import prices in 1976were slightly below domestic prices in the USA, Western Europe and Japan, but

- 23 -

are expected to increase to the same level as the existing surplus productioncapacity in the three main markets disappears. In order to determine thecompetitiveness of the Project, its projected production costs for Section I(expressed in economic prices) have been compared with those of an existingplant in Western Europe which started production in 1976 (Annex 7-3), andboth have been found to be very close (see below). This is so since prac-tically all raw materials for the Project come from Romanian sources, andRomanian labor costs are below those in more developed countries and offsetslightly higher cost of investment and of maintenance materials. At fullcapacity operation, the Western European plant (which has a productioncapacity of 13,000 tpy) has average production costs, including a return oninvestment, of US$1.92 per kg of roving and yarn as compared to US$2.03 forthe Project, both in the product mix as planned for Section I (4,000 tpy ofroving and 2,000 tpy of yarn). Annex 7-4 shows that the current averageex-factory price in the USA, Western Europe and Japan is about US$2 per kgwhereas it is US$1.73 in Romania. As indicated by the cost analysis of theWestern European plant, world market prices will have to be at a level ofabout US$2.00 per kg in 1976 terms (c.i.f. Romania) in order to yield asatisfactory return on investments. Using this price level, the Projectyields an economic rate of return of 16.5% (Annex 7-5).

7.03 The sensitivity of the economic rate of return is shown below:

Sensitivity of Economic Rate of Return

Base Case 16.5Import Prices Equal Romanian Prices 10.2Production Cost up 5% 15.4Project Cost up 5% 15.5Delay of 6 Months in Start-up 14.7Delay of 6 Months in ReachingFull Capacity 14.0

As in the case of the financial rate of return, a delay in reaching fullcapacity utilization due to operator inexperience is the most likely causeof a reduction in the economic rate of return. However, during preparationof the training program by the suppliers and the Enterprise, care will betaken to minimize this risk through extensive training of Romanian staff.

B. Employment and Foreign Exchange Effects

7.04 The Project will employ about 1,200 persons representing an invest-ment of about US$38,000 per person employed. Therefore, the Project can beconsidered as relatively labor-intensive. At full capacity it will yield netannual foreign exchange savings (before amortization of the Bank loan) ofabout US$12 million.

- 24 -

C. Transfer of Technology and Future Possibilities

7.05 The Project will introduce in Romania the new technology of glassfiber production by the direct-melt process. The supplier of the technologywill also undertake to provide for a period of five years after start-up freeof additional charge information of all improvements in design or operationthat become freely available to him from the operation of his own plants orother plants using his technology. The Romanians in turn will undertake toprovide similar information to the supplier. This creates a link between theoperation of the Project and the operation of other plants using the sametechnology. The exchange of information excludes improvements which arepatented or could fundamentally change the technology or operating economyof the plant, but in the case of such latter information, the Romanians willbe notified of its existence and will have the option to purchase it.

7.06 The start of large-scale glass fiber production in Romania isonly the first step in introducing this material. As has been discussedabove (para. 3.08) there are important applications for glass fiber not yetconsidered in Romania but already very important in more developed countries,where the use of glass fiber reinforced plastic would provide superior perfor-mance or replace more expensive materials. It is, therefore, the intentionof the Romanians to build additional glass fiber production facilities soonafter completion of this important Project to meet increasing demand.

VIII. AGREEMENTS

8.01 Agreement has been reached as follows:

(i) the Investment Bank will supervise the execution ofthe Project and the procurement of goods and servicesrequired for it (para. 2.05);

(ii) the Enterprise will submit by December 31, 1977, a de-tailed training program that is acceptable to the Bank(para. 4.09);

(iii) the Enterprise will operate the pollution control facil-ities with due regard to ecological, environmental andsafety factors (para. 4.10);

(iv) the Government will make available the funds needed forthe Project (para. 5.07);

(v) the Enterprise will remit to the State in any givenyear after 1980 an amount of benefit and depreciation atleast sufficient to cover the Lei equivalent of interestand principal due in that same year on the Bank loanexcept that an interest charge of 10% shall be applied(para. 6.13);

- 25 -

(vi) the Enterprise will submit quarterly progress reports andannual financial statements in a form satisfactory to theBank, and the Ministry of Finance will submit within threemonths after the end of each year its annual audit reportof the Enterprise (para. 6.15).

8.02 With the above agreements the Project is suitable for a Bank loanto the Investment Bank, equivalent to US$18.3 million for 15 years, including3 years of grace, at an interest rate of 8.2% p.a.

Industrial Projects DepartmentApril 1977

I

ANNEX 1Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

GLOSSARY OF MAIN TECHNICAL TERMS

BUSHING Small electric furnace of platinum/rhodiumalloy, having a number of orifices in itsbottom. Fibers are obtained from the streamof glass exuding from these orifices.

CHOPPED STRAND : Strands chopped to lengths of 3 to 30 mm.

DIRECT DRAWING ORDIRECT-MELT : The process in which glass is drawn directly into

fibers and involving basically three phases:(1) weighing and blending of raw materials;(2) melting and fining of glass and(3) fiber forming.

"E" GLASS : Type of glass commonly used for glass fibers."E" stands for electrical, since the glass hashigh electrical resistance.

FIBERGLASS Sometimes used to describe glass fiber or glassreinforced plastic (GRP). In fact, it is atrademark.

FILAMENT : A fiber of indefinite length.

FINISHING Thermal, chemical and other treatment to modifyfabric and make it more capable of fulfilling itsspecific purpose.

FOREHEARTH : Channel in which molten glass is prepared forpassage to bushings and conversion into fibers.

GLASS FIBER : Proper generic term for glass that has been drawninto (continuous) glass fibers.

GLASS REINFORCEDPLASTIC (GRP) Products obtained from the combination of polymers

and glass fibers.

GLASS WOOL : Glass converted into short (discontinuous) fibersand exclusively used for sound and heat insulation.

ANNEX 1Page 2

LOOM : A machine for producing cloth by weaving.

MARBLE PROCESS ORTWO STAGES PROCESS : The process in which glass is first manufactured

in the form of marbles, which are then remeltedand fed to bushings for conversion into fibers.

MAT Chopped strands in non-woven random matting.

PACKAGE : A length of yarn or roving wound on a carrieror bobbin.

PIRN A filling package which is inserted into a shuttle.

PLYING Twisting together of several yarns.

ROVING : Rope-like bundle of continuous, untwisted strands.

SHUTTLE : A pirn carrier that is projected through the warpshed to insert the weft yarn during weaving.

SHUTTLELESS LOOM : Loom where the weft is reached through the warpby means of spears, one length of weft at a time.This type of loom is used to weave roving whichbecause of its high weight cannot be thrown forthand back with a conventional shuttle.

SIZE Solution of adequate composition to give filamentsa protection against abrasion during subsequenthandling and machining and to improve glass/resinadhesion.

SIZING : Application of size to fibers.

SPINNING (1) General: The process of making yarns orcordage from fibers, tow, or liquid materials;(2) yarn from fiber: The formation of a yarnby a combination of drawing or drafting and twist-ing operations applied to prepared fiber massessuch as rovings.

STRAND : A bundle of filament collected by means of agathering device and an adhesive, as filamentscome out of the orifices in the bushing.

TAPES Strips of fabric in varying width. Tapes ofunidirectional strength have yarn as warp androving as weft.

ANNEX 1Page 3

TEX : Unit of measure of the fineness of textile yarns,expressing the weight in grams of 1,000 meters ofyarn.

TUBES : Tubes of varying diameter made by braiding ofyarn.

TWISTING Imparting a twist onto yarn

WARP : The longitudinal yarn in woven fabric.

WEFT : Yarn which is interlaced with warp threads tomake a fabric.

WOVEN ROVING : Cloth woven from roving.

YARN Twisted strands with afterfinish.

Industrial Projects DepartmentApril 1977

ANNEX 2-1Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

THE MINISTRY OF LIGHT INDUSTRY

Introduction

1. There are ten "technical" ministries in Romania, each of themresponsible for the preparation and implementation of the annual plan, theFive-Year-Plan and the Long-term (Perspective) Plan for a major sector ofthe economy. Each ministry has under it industrial centrals which directthe operations of a group of enterprises of related activity. Centrals canbe considered as "holding companies" of all enterprises in one particularsubbranch of the economy. Besides the centrals, the ministries have spec-ialized design institutes and foreign trade enterprises for their respectivesectors.

The Centrals

2. The Ministry of Light Industry controls the following eight centrals:

(i) Central for Glass and Fine Ceramics

Production of consumer goods and technical goods made ofglass, china and ceramics, the operation of sand pits forquartz sand, and research in the field of glass and fineceramics technology. This central will be responsible forthe Bucharest Glass Fiber Project (for details see Annex2-2).

(ii) Central for Cotton Products

Production of cotton yarn, and cotton and blended fabrics.

(iii) Central for Silk, Flax and Hemp Products

Processing of silk cocoons, the production of silk, flax andhemp yarns and pure as well as blended fabrics of these.

(iv) Central for Wool Products

Production of woolen yarns and pure as well as blended fabrics.

(v) Central for Knitwear

Production of knitted goods.

ANNEX 2-1Page 2

(vi) Central for Ready-made Clothes

Production of ready-made clothes.

(vii) Central for Leather and Rubber Products and Footwear

Processing of raw skins, production of artificial leather, ofleather and rubber goods. Research in the field of leatherand rubber technology.

(viii) Central for Household Goods

Production of household goods made of metal and plastic,accessories for textile goods and footwear.

The Design Institute

3. The Design Institute for Light Industry (IPIU) is responsiblefor the preparation of feasibility studies, and the general and detaileddesign, as well as construction and erection supervision of projects carriedout by any of the centrals under the Ministry of Light Industry.

The Foreign Trade Enterprises

4. The Ministry of Light Industry has two Foreign Trade Enterprises.ROMSIT is responsible for the import of know-how and machinery and equipmentfor the centrals under the Ministry. ROMANOEXPORT is responsible for theexport and import of light industry products.

Industrial Project DepartmentApril 1977

ANNEX 2-2Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

THE CENTRAL FOR GLASS AND FINE CERAMICS

Responsibility and Organization

1. The Central for Glass and Fine Ceramics (CISCF) is responsiblefor the planning and production of glass products such as glass containers,table glass, flat glass, technical and optical glass, the production ofchinaware and pottery. It directs the operations of its constituent enter-prises. The Central prepares the development and production plan for itsindustrial branch, based on proposals from the enterprises, passing it onthrough its ministry (in the case of CISCF, the Ministry of Light Industry),to the Council of Ministers for coordination of and incorporation in thenational (five-year or annual) plan. The Central coordinates the purchaseof raw materials and the sale of products. It decides over the researchprogram of its Research Institute for the Glass and Ceramics Industry. Theseat of CISCF is Bucharest.

2. CISCF employs about 40,000 people in its 26 production enterprises,which are 16 enterprises to manufacture glass containers and table glass,4 enterprises to manufacture flatglass and flatglass products, 3 enterprisesto manufacture chinaware and pottery, 2 enterprises operating sand pits, andI semi-commercial plant for glass fiber.

3. Summarized financial statements for CISCF are shown in Table 1 for1974 and 1975 (actual) and 1976 to 1980 (the current Five-Year-Plan period).

The Semi-Commercial Plant for Glass Fiber

4. In 1974, a plant designed to produce 1,000 tpy of glass fiber wascommissioned. This plant has been designed by the Design Institute of theMinistry for Building Materials with assistance from an Italian engineeringfirm and has a design capacity for 300 tpy of roving and 700 tpy of mat.Most of the equipment is manufactured in Romania. The plant currently usesimported marbles, but these are in short supply since the marbles process isgradually being replaced by the direct-melt process (see Annex 4-1), and aunit to make marbles was recently bought from the People's Republic of Chinaand is currently being supplied for start of production in late 1977. In1974, the glass fiber plant produced a total of 76 tons, in 1975 a total of436 tons, and in 1976 about 500 tons. Lack of platinum/ rhodium, of whichthe marbles process requires about twice as much per ton of plant capacity asthe direct-melt process, kept the production at this low level of capacityutilization. It is planned to produce at full capacity in 1977. However,because of the higher energy requirements, Pt/Rh requirements and highermaterial losses, the production costs of this small plant are about 40% abovethose of the Project. The plant employs 110 people. Although the technologyof this plant is much simpler, it will be useful for the training of operatingstaff for the Project.

Industrial Projects DepartmentApril 1977

ANNEX 2-2

ROMANIA

BUCHAREST GLASS FIBER PROJECT

CENTRAL FOR GLASS AND FINE CERAMICS

SUMMARIZED FINANCIAL STATEMENTS(Million Lei)

Actual PLan1974 1975 1976 1977 1978 1979 1980

Gross Sales 2,673.6 3,465.8 3,509.6 3,691.2 3,965.5 4,423.9 4,898.4Less: Sales Tax 102.8 10.4 12.4 91.2 115.5 128.9 188.4

Net Sales (of which) 2,570.8 3,455.4 3,497.2 3,600.0 3,850.0 4,295.0 4,710.0- Household Glass ani Glass Containers, Domestic 1,012.1 1,386.6

Export 323.0 333.8- Flat Glass and Other Glass Production, Domestic 645.1 902.3

Export 225.5 258.9 )-------------------------n.a.---------------------- Chinaware, Pottery, Faience, Domestic 249.4 442.5

Export 29.8 34.3- Sand, Domestic 86.9 97.0

(Total Export in Percent) (22.5%) (18.1%)

Manufacturing Cost- Materials 882.5 1,069.1 1,042.1 1,026.8 1,082.3 1,185.3 1,268.3- Fuel 120.7 126.3 128.5 130.9 138.4 151.5 162.1

- Power and Water 73.2 82.9 86.1 90.8 95.4 104.4 111.7

- Labor 764.1 915.2 974.5 949.8 999.7 1,094.4 1,171.0- Depreciation 203.9 226.1 236.9 240.8 252.2 276.1 295.4

Total 2,044.4 2,419.6 2,468.1 2,439.1 2,568.0 2,811.7 3,008.5

Non-Operating Costs- Selling and Administrative Expenses 191.0 428.8 390.9 472.0 498.3 545.5 583.7- Research 10.7 8.3 8.6 8.7 9.8 10.1 10.8

Total 201.7 437.1 399.5 480.7 508.1 555.6 594.5

Other Income- Changes in Inventory of Finished Goods & Receivables 27.5 51.0 1.3 (8.0) (10.5) (13.0) (14.5)- income from other Activities 1.8 (1.6) (0.5) 3.0 3.5 4.0 4.5- Income from Previous Periods 4.1 (9.9) 2.8 5.0 7.0 9.0 10.0

Total 33.4 39.5 3.6 - - - _

Benefit 358.3 638.3 633.2 680.2 773.9 927.7 1,107.0

Current Assets 881.5 951.3 971.9 1,000.4 1,070.2 1,193.7 1,309.2Net Fixed Assets 3.138.7 2.969.9 3,035.8 3,125.0 3,342.3 3,728.2 4.088.5

Total Assets 4,020.2 3,921.2 4,007.7 4,125.4 4,412.5 4,921.9 5,397.7

Benefit/Total Assets (%) 8.9 16.3 15.8 16.5 17.5 18.8 20.5

Industrial Projects DepartmentDecember 1976

ANNEX 3-1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

GLASS FIBER PRODUCTS AND THEIR APPLICATION

Name of Typical Glass ContentProduct Description Applications Process in GRP

(%)

Chopped Strands cut to lengths of Electrical and Premix molding, 15-40Strand approximately 3 to 30 mm appliance parts, wet slurry pre-

sold in bulk industrial parts forming, thermo-plastic injectionmolding

Roving* Rope-like bundle of Pipe, automobile Filament winding, 25-80strands of glass fibers bodies, rod stock, continuous panels

motor cases matched die molding,sprayup, pultrusion,centrifugal casting

Mat Chopped stands, in non- Marine applica- matched die molding, 20-45woven random matting tions, translucent hand layup, centri-consolidated by means of sheets, truck and fugal castingan adhesive auto body panels

Yarn* Twisted strand (also Rods Weaving, filament 50-70plied) winding, unidirec-

tional reinforcement

Fabric* Woven cloth from yarn Used as such or 45-100for upholstery,carpet backing,electrical and highinsulation, air-craft pressurelaminating struc-tures

Woven Woven cloth from rovings Large containers, Hand layup 40-70Roving* (coarser and heavier than marine applica-

fabrics) tions

*Products to be produced by project.

SOURCE: Reinforced Plastics, 1976

Industrial Projects DepartmentApril 1977

ANNEX 3-2Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

WORLD MARKET FOR GLASS FIBER

General Outline

1. Production and consumption of continuous glass fiber is concentratedin the USA, Western Europe and Japan which account for 85 to 90% of thetotal world market. Some minor production capacity also exists in Canada,Latin America and Eastern Europe. The technology to produce continuous glassfiber was developed in the USA in the 1930's. After World War II, somecompanies in France, UK and Japan developed their own technology (startingwith licenses purchased from the USA), but today there are still only halfa dozen companies in the world with a well-established technology in thisfield. Therefore, these companies are in a position to control the interna-tional market, either through participation or licensing agreements with mostproducers (Table 1). Table 2 lists the number of glass fiber plants in eachcountry.

World Capacity, Production and Consumption

2. Table 3 shows the world capacity in 1975 at 780,000 tons per yearled by the USA with 390,000 tpy (50%), followed by Western Europe with 222,000tpy (29%), Japan with 120,000 tpy (15%) and the remaining producing countrieswith 48,000 tpy (6%). Table 4 shows the production in 1970 to 1975 formajor producing countries and their estimated production capacity in 1976 and1977. It shows that while production increased steadily from 1970 to 1974(from an estimated total world production of 400,000 tons in 1970 to 610,000tons in 1974), world production fell off sharply in 1975 to an estimated levelof 460 to 500,000 tons, indicating a level of capacity utilization of onlyabout 60%, which was caused by the general recession in the synthetic fiberindustry in that year. Total world production capacity in 1976 is estimated tohave been about 800,000 tons, and expected to increase to 875 to 900,000 tonsin 1977.

3. Consumption figures for some countries in 1975 are shown in Table 3.They show that in that year of relatively depressed consumption levels, theper capita consumption in Western Europe ranged from 0.3 kg in Italy, Spainand Austria to 0.7 kg in Western Germany and Netherlands. This compareswith a 1975 per capita consumption in Japan of 0.4 kg and the USA of 1.0 kg.The increase in per capita consumption with passage of time is indicated inTable 5 which shows shipments by US producers to the domestic and exportmarket, and US imports and estimated US consumption of glass fiber for theperiod 1960 to 1976. During that period, US per capita consumption in-creased from 0.37 kg to 1.45 kg in 1973 after which it fell off to 1.33 kgin 1974 and 1.00 kg in 1975, due to the general recession in those latteryears, but returned to 1.28 kg in 1976.

ANNEX 3-2Page 2

4. Table 6 compares US production capacity as reported by the industrywith actual production during the years 1970 to 1976. It shows that duringthat entire period, reported production capacity was in excess of actualproduction, with average capacity utilization reaching a maximum of 93% in1973, falling to only 60% in 1975 but returning to 73% in 1976.

5. Table 7 shows the actual consumption of glass fiber in the mainconsuming areas in 1973 and 1975 and the projected consumption level for1980. This projection is based on an analysis of the GRP markets by end-usesector and their development trends, as shown in Table 8. Glass fiber con-sumption in the main consuming areas is expected to grow from about 523,000tons in 1973 and about 430,000 tons in 1975 to about 800,000 tons in 1980,representing an expected annual growth rate of 6.25% over the level of 1973or 10.5% over the depressed level of 1975. Japan is expected to show thehighest growth rate in 1973 to 1980 (11% per year) and to more than doublethe level of consumption, from 67,000 tons in 1973 to about 140,000 tonsin 1980. Western Europe is expected to have a growth rate of 8% per year,versus 4% per year for the USA. Western Europe is expected to increase itslevel of consumption to about 250,000 tons and the USA to 410,000 tons in1980. Per capita consumption in 1980 will continue to be highest in theUSA, at 1.4 kg, while Japan will overtake Western Europe in per capita con-sumption, estimated to reach 1.1 kg against 0.8 kg in Western Europe. Thegrowth rates projected for 1973 to 1980 are below the rates experienced priorto 1973. They reflect the uncertainty surrounding future growth rates forthe economies in the developed world. The estimated 1977 production capacityin the USA, Western Europe and Japan is about 820,000 tons. A consumptionlevel of 800,000 tons in 1980 would, therefore, nearly fully utilize thiscapacity. No demand projections for countries outside the USA, WesternEurope and Japan are available, but total consumption in these countriesis unlikely to exceed 150,000 tons in 1980. The total world productioncapacity is estimated to be 875 to 900,000 tons in 1977, indicating thatadditional capacity of 50 to 75,000 tpy needs to be built between 1977 and1980 to meet projected world demand in 1980.

World Market Prices

6. Prices of glass fiber products differ in the three largest markets,USA, Western Europe and Japan. Lowest prices are found in USA, while inJapan and especially in Western Europe quotations for the same articles arenormally higher. The explanation is found in the lower cost of raw materialsand, in particular, natural gas in the USA. During the recent gas curtail-ments, source manufacturers in the USA had to shut down their plants oroperate at reduced levels of capacity utilization. Other plants which wereable to switch to other fuels, such as propane, raised their prices by aspecial energy surcharge of about US54 per kg. Average 1976 prices withinthe three markets are shown below:

ANNEX 3-2Page 3

Average 1976 Domestic Prices (Ex-Factory)(US$/kg)

WesternUSA Japan Europe

Roving 1.20 1.25 1.30Woven Roving 1.55 1.60 1.60Mat 1.50 1.65 1.60Yarn 1/ 1.80- 5.15 2.00-8.00 2.30-11.50Yarn Fabric 2/ 4.40-11.60 3.00-9.00 3.50- 8.70

1/ Minimum quotation for 68 micron yarn; maximum quotationfor 5 micron yarn.

2/ Minimum quotation for heavier fabrics; maximum quotationfor lighter fabrics.

7. In the past, domestic prices in the main markets have steadilyrisen to reflect increasing raw material, labor and energy costs, even intimes of reduced capacity utilization such as 1975, as shown below for twoproducts in Italy and Federal Republic of Germany. The high level of con-centration in the industry most likely accounts for this resistance ofprices against downward pressure.

Prices for Roving and Mat inItaly and Germany (F.R.) 1972-1976 (ex-factory)

Italy Germany F. R.(Lit/kg) (DM/kg)

Year Mat Roving Mat Roving

1972 980 730 3.85 2.901973 1,000 750 4.05 3.051974 1,050 790 4.40 3.251975 1,150 875 4.70 3.451976 1,400 1,060 n.a. n.a.

8. Exports prices for products originating from the three main marketareas were in 1976 below domestic prices, and, on an average, Romanian importprices have been somewhat below domestic prices in the three main markets.However, as it is projected that the current level of excess capacity willgradually be reduced through increasing demand, Romanian import prices areexpected to move towards the level of domestic prices. Romania is currentlyimporting roving, yarn, woven roving, tapes and tubes from Japan, France,Belgium, Sweden, and fabrics from Czechoslovakia (CSSR). The table belowsummarizes current import prices.

ANNEX 3-2

Page 4

Import Prices (1976) ofGlass Fiber Products into Romania

(franco border)

Product Origin Import Price(US$/kg)

Roving Japan 0.75 to 0.93Woven Roving Japan 1.05 to 1.66Woven Roving Belgium 1.73Yarn CSSR 2.60 to 3.44Yarn France 4.65Yarn Fabric CSSR 3.00 to 14.44Tapes Germany, F.R. 4.14 to 18.39Tubes France 5.76

Industrial Projects DepartmentApril 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

MAIN OWNERS AND/OR LICENSORS OFCONTINUOUS GLASS FIBER PLANTS (1975)

(Tons per year capacity)

Owens-C rning PPG St. Gobain Johns-Manville Nitto Boseki TBA-BishopCoutr Gou SA) Group (USA) roup (France) Group (USA) Group (J Other Total

Germany - - 35,000 o 5,000 40,000France 10,000 - 30,000 - _ 10,000 50,000Belgium 25,000 - - - 25,000Italy - - 20,000 - - - 20,000UK - - _ - 15,000 16,000 31,000Netherlands - 20,000 15,000 - - - 35,000Sweden 10,000 - - - - - 10,000Spain - - 3,500 - - - 3,500Finland 2,500 - - _- - 2,500Norway 3,000 - - - 3,000Switzerland , - - ___ -

2,000 2.000

Total W. Europe 50,500 20,000 103,500 - 15,000 33,000 222,000

USA 200,000 100,000 - 36,000 - - 54,000 390,000

Japan 30.000 i- 140,000 -L6 ooo 38.000 120,000

Grand Total 280,500 120,000 103,500 50,000 32,000 21,000 125,000 732,000

Percent 38 16 14 7 5 3 17 100

Source: Bank's consultant and licenwora

Industrial Projects DepartmentFebruary 1977

ANNEX 3-2Table 2

ROMAN1IA

BUCHAREST GLASS FIBER PROJECT

NUMBER AlD LOCATION OF GLASS FIBER PLANTS

Number ofCountry Plants

W. Europe

Belgium 1Finland 1France 3Germany, F.R. 2Italy 4Netherlands 2Norway 1Spain 1Sweden 1UK 4Total W. Europe 20

E. Europe

Czechoslovakia 2Germany, D.i?L 1Poland 2Romania 1Total E. Europe

Americas

Argentina 1Brazil 1Canada 1Columbia 1Mexico 1USA 13Total Americas §

Africa, Asia & Oceania

Australia 1India 1Japan 15South Africa 1Total A.,A. & 0. 17

Total World 62

Note: Information on People's Republic of China, North Korea, Bulgaria and USSRnot ailable.

Source: Textile Organon, 1976

Industrial Projects DepartmentApril 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

INSTALLED CAPACITY, PRODUCTION AND CONSUMPTION

OF GLASS FIBER IN THE WORID IN 1975( 1,000 tpy )

Installed Capacity Surplus Per CapitaCapacity Production Utilization Consumption (Deficit) Consugption

(kg)

Germany, F.R. 40.0 ) ) 45 ) 0.7Netherlands 35.0 ) 55 ) 55 9 ) (4.0) 0.7Belgium 25.0 ) ) 5 ) 0.5France 50.0 31 62 31 o.6UK 31.0 25 80 20 5.0 0.4Italy 20.0 20 100 18 2.0 0.3Spain 3.5 3.5 100 10 ( 6-5) 0.3Switzerland 2.0 2 100 3 ( 1.0) 0.5Austria - - _ 2.5 ( 2.5) 0.3

Sub-Total 206.5 136.5 66 143.5 (7.0) 0.5

Sweden 10.0 n.a. n.a. n.a. - n.a. n.a.Norway 3.0 n.a. n.a. n.a. n.a. n.a.Finland 2.5 n.a. n.a. n.a. n.a. n.a.

Total 222.0 145 2/ 65 1/ 145 -/ - 0.5

USA 390.0 245.0 63 240.0 5.0 1.0

Japan 120.0 63.0 53 45.0 18.0 0.4 C

Other 48.o 30 - 63 2.53 -! 23) 2! n.a.

Total World 780.0 483 1/ 62 -/ 483 -/ _

1/ Estimated

Source: Modern Plastics, 1976 and Textile Organon,1976

Industrial Projects Department

January 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

GLASS FIBER PRODUCTION AND PRODUCTION CAPACITY

IN CERTAIN COUNTRIES(1,000 tpy)

Country Production Production Capacity1970 1971 1972 1973 197 T 1975 1976 1977

Europe

Belgium )Germany, F.R.) 59 62 79 85 95 55 100 83Netherlands )

France 24 21 23 36 34 31 5D 50Italy 14 15 15 19 19 20 31 50

Czechoslovakia 10 15 n.a. n.a. n.a. 18 25 25Poland 1 1 1 1 1 1 1 1

Americas

Argentina 1 1 2 )Canada 10 10 12) 20 19 19 23 23Mexico 2 2 2)USA 212 212 259 312 310 247 423 477

Other

Australia 4 4 4 5 )India _ 1 1 1 ) 126 69 144 168 & wJapan 53 71 87 114 ) _ n - -

Total 1Z 390 401.5 485 593 604 460 797 8771/ Information not available for Finland, Germany D.R., Norway, Spain, Sweden, UK, USSR, Brazil, Bulgaria,

Columbia, South Africa. See Table 1 for countries that have plants for glass fiber production.Source: Textile Organon, 1976

Industrial Projects DepartmentJanuary 1977

ANNEX 3-2Table 5

ROMANIA

BUCHAPEST GLASS FIBER PROJECT

SIMNTS BY USA PRODUCERS, INPOITS AND USA CONSUMPTION(1,000 Tons)

Shipments by US Producers US CansumptionYear Danestic Export Total Import (Tons) (kg per bapita)

1960 67.2 2.9 70.1 - 67.2 0.371961 66.8 2.7 69.5 - 66.8 0.361962 80.5 3.0 83.5 - 80.5 0.431963 82.6 3.9 86.5 - 82.6 0.441964 100.1 5.4 105.5 - 100.1 0.521965 121.7 8.5 130.2 - 121.7 0.631966 142.5 3.6 146.1 0.5 143.0 0.731967 137.3 3.7 141.0 0.5 137.8 0.691968 174.0 5.5 179.5 0 174.0 0.871969 208.8 8.0 216.8 0 208.8 1.031970 183.3 13.6 196.9 0.3 183.6 0.901971 210.9 7.9 218.8 0.8 211.7 1.021972 253.9 7.9 261.8 4.3 258.2 1.231973 300.7 16.6 317.3 5.9 306.6 1.451974 280.9 17.2 298.1 5.2 286.1 1.331975 235.1 8.2 243.3 4.0 239.1 1.001976 300.9 15.9 316.7 6.5 307.4 1.28

Source: Textile Organon, 1977 (except per capita consumption)

Industrial Projects DepartmentApril 1977

ANNEX 3-2Table 6

ROMANIA

BUCHAREST GLASS FIBER PROJECT

USA PROUCTION CAPACITY, ACTUAL PRODUCTION

AND AVERAGE CAPACITY UTILIZATION

Production CapacityYear Capacity Production Utilization

(1,000 tpy) (1,000 tons) 7)

1970 298 212 711971 316 212 671972 327 259 791973 335 312 93197 372 310 831975 412 248 601976 423 307 73

Source: Textile Organon, 1976, 1977

Industrial Projects DepartmentApril 1977

ANNEX 3-2Table 7

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ACTUAL AND PROJECTED CONSUMPTION OF GLASS FIBER IN 1973, 1975, 1980

IN THE MAIN PRODUCING AREAS

AnnualConsumption Growth Rates Per Capita Consumption(1,000 tons) tkg)

1973 1975 1980 1973-75 1973-80 1973 1975 1980

F.R. Germany 48.30 45.29 80 -3 13 0.765 0.718 1.3

France 34.21 31.41 60 -4 13 0.670 0.615 1.1

UK 24.15 19.76 30 -10 9 0.430 0,352 0.5

Italy 17.71 18.44 30 2 10 0.320 0.335 0.5

Spain 6.32 10.08 20 26 14 0.180 0.288 0.5

Other W. Europe 17.83 19.77 30 5 8 n.a. n.a. n.a.

Total W. Ehrope 148.52 144.75 250 -1 8 0.502 0.486 0.8

USA 306.63 239.09 410 -12 4 1.140 0.901 1.4

Japan 67.40 45.40 140 -18 11 0.640 0.432 1.1

Total 522.55 429.24 800 -10 6.25 n.a. n.a. n.a.

Source: Modern Plastics, 1976. Bas'-d on the assumption of 35% glass fiber contentin GRP and of 85% of total glass fiber production being used for plasticsreinforcement.

Industrial Projects DepartmentJanuary 1977

TableW8

.w~~~~~~~~~A= 2

3JCNARESf GIASS FIPER PRtOJEC

XWCTID ANNUAL GROWTH RLISS BXIW 1975 AND 1980 OF GRP MNRKETS Br

IND-USE SECTOR AND LTIVS IARTET SE RM IN 1975 AND 1980()_

W. Europe USA JapanGrowth Marketshare Growth Marketshare Growth Marketshare

Rate 1975 1980 Rate 1975 1980 Rate 1975 1980

Building, Construction 9.5 22.4 19.9 4.5 15.0 13.2 12.0 45.0 30.6

Chemical Plants 14.5 22.3 24.8 10.0 10.0 11.3 18.0 14.0 12.3

Automotive, Transport 17.0 16.0 19.8 9.0 20.1 21.8 75.0 5.0 30.8

Containers 13.0 9.0 9.4 11.0 10.0 11.9 0.5 7.5 3.0

Electrical Appliances 11.5 12.6 12.3 11.0 9.4 11.1 15.0 7.5 5.8

Boat Building 10.5 9.3 8.7 4.5 26.0 22.8 21.0 14.0 14.0

Miscellaneous 1.5 8 .4 Xj 3.5 9.5 . 7.9 5.2 7.0 3.5

Total 12.1 100.0 100.0 7.3 100.0 100.0 21.0 100.0 100.0

Source: Reinforced Plastics, 1976

Industrial Projects DepartmentJanuary 1977

ANNEX 3-3Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ROMANIAN MARKET FOR GLASS FIBER

Past Consumption, Production and Import

1. Romanian glass fiber consumption, production and import in the years1971 to 1976 is shown below. Consumption began to develop in the late sixtiesat a very rapid rate (50% p.a. on an average). Local production started in1974 (with the semi-commercial plant at Bucharest for roving and mat) andreached 515.8 tons in 1976, about 38% of consumption (1,344.8 tons) in thatyear. The remainder was imported, some small quantities from Czechoslovakia,the rest from Western Europe and Japan.

Consumption, Production and Import ofContinuous Glass Fiber in Romania, 1971 to 1976

(tons)

Mat & Woven PerRoving & Chopped Roving & Tapes & CapitaYarn Strand Fabrics Tubes Total Consumption

(kg)

1971Consumption 77.5 - 96.5 23.5 197.5 0.01Production - - - -Import 77.5 - 96.5 23.5 197.5

1972Consumption 81.9 - 191.0 69.8 342.7 0.02Production - - - -Import 81.9 - 191.0 69.8 342.7

1973Consumption 117.9 1.0 287.0 39.9 445.8 0.02Production - - - - -Import 117.9 1.0 287.0 39.9 445.8

1974Consumption 570.9 85.0 400.0 90.1 1,146.0 0.05Production - 76.0 - - 76.0

Import 570.9 9.0 400.0 90.1 1,070.0

1975Consumption 620.9 301.9 600.5 52.2 1,575.5 0.07Production 188.0 247.9 - - 435.9Import 432.9 54.0 600.5 52.2 1,139.6

1976Consumption 596.0 287.8 390.0 71.0 1,344.8 0.06Production 253.0 262.8 - - 515.8Import 343.0 25.0 390.0 71.0 829.0

ANNEX 3-3Page 2

End-Use Sectors of Glass Fiber

2. Until now, electrical application (insulation) and reinforcing ofplastic tanks and pipes for the chemical industry have been the main appli-cations of glass fiber in Romania. Within the current Five-Year-Plan(1976-80), the production capacity of some major users of glass fiber will beexpanded considerably, particularly in the field of GRP building materials(para. 5 through 7). The current structure of consumption by end-use sectorand the anticipated change are shown below:

Structure of Glass Fiber Consumptionin Romania by End-Use in 1975 and 1980

(Percent of Total Weight)

1975 1980

Building Materials 5 52Chemical Plants 62 13Electrical Application 33 35

100 100

A comparison with the structure of consumption by end-use sector in the mar-kets of Western Europe, USA and Japan (see Annex 3-2 Table 8) shows that inthose three main markets the sectors of building materials, chemical plantsand electrical appliances constituted in 1975 only slightly more than one-half of the entire glass fiber consumption. Other important end-use sec-tors are the automotive and other transport industry and the boat buildingindustry (one quarter of glass fiber consumption in USA). However, theseapplications are not yet being considered in Romania.

3. Table 1 shows the projected product mix for the Project on whichthe design capacity of 6,000 tpy has been established, and the intendedend-use. This end-use is based on a protocol signed between the Ministry ofLight Industry on the one hand as supplier, and the Ministries (i) forChemical Industry, (ii) for Machine Tools and Electrotechnical Industry and(iii) for Forestry and Building Materials, on the other hand, as consumers.

Projected Consumption, Production and Import

4. The projected consumption, production and import of glass fiberin Romania for the period 1977 through 1985 are shown in Table 2. The figuresfor 1977 through 1980 are based on the targets of the current Five-Year-Plan,but modified to take into account delays in the implementation of projectsconsuming glass fiber. Consumption is expected to increase from about 1,345tons in 1976 to about 3,930 tons in 1977 (192% over 1976, but only 150%over 1975). It is expected to reach about 7,100 tons by 1980 or by about 50%p.a. over 1976. Growth of consumption after 1980 has been assumed at 10%p.a., reaching 11,440 tons in 1985. Production has been assumed to be limited

ANNEX 3-3Page 3

to the combined capacity of the semi-commercial plant (1,000 tpy) and theproject (6,000 tpy). The remainder to fully meet expected consumption hasbeen assumed to be imported.

5. The construction materials industry, for which the current Five-Year-Plan foresees a growth rate of about 10% p.a. is implementing severalprojects which will substantially increase the consumption of glass fiber:

(i) A factory in Bucharest which currently has a capacity for100 tpy of GRP items (corrugated sheet and skylights)manufactured by a discontinuous process (contact molding)will start in the second quarter of 1977 a fully automatedproduction line with a capacity of 5,000 tpy of GRP items,mainly flat and corrugated sheet and sanitary appliances.It will consume 2,200 tpy of roving;

(ii) A factory in Berceni, currently manufacturing bituminizedwater proofing sheets will adopt glass fabrics as a support.Consumption will be 500 tpy of fabric;

(iii) Two new factories in Vaslui and Simleul-Silvaniei are underimplementation for production of bituminized sheets in 1979.Their combined consumption will be 500 tpy of fabric;

(iv) Cotton currently used for carpet backing will be replaced byglass fiber because of its superior strength. This willrequire about 500 tpy of yarn.

6. In the electrotechnical industry, for which the current Five-Year-Plan foresees an average growth rate of 21% p.a., there are two main consumersof glass fiber: the enterprise ICME (Enterprise for Manufacture of Cablesand Electric Insulation Materials) in Bucharest, and the enterprise ELECTRO-PUTERE (Enterprise for Heavy Electric Engineering Goods) in Craiova. ICMEused in 1976 52 tons of yarn, 2.2 million m of fabric (about 220 tons) and 2.8million linear meter of tubes (about 15.5 tons), or a total of about 290 tons.Expansion of production capacity currently underway, will increase its fiberglass consumption in 1980 to 130 tons of yarn, 9 million m of fabrics and 4million meter of tubes, or about 1,050 tons of glass fiber. ELECTROPUTEREused 750,000 m of fabrics (97.44 tons) and 1.2 million linear meter of tapesin 1976. Its consumption is expected to increase in 1980 to about 200 tons.

7. The chemical industry, for which the current Five-Year-Plan foreseesa growth rate of 16% p.a., requires glass fiber for tank, vessel and pipereinforcing (GRP). The main producer of GRP tanks is the enterprise I.U.C.(Enterprise for Chemical Installations) in Fagaras. Its consumption ofglass fiber of about 460 tons in 1976 is expected to increase to about 915tons in 1980.

ANNEX 3-3Page 4

8. The projected consumption of glass fiber by industrial sectorsand enterprises is summarized below:

Projected Consumption of Glass Fiberin Romania in 1980, by Industrial Sector

Location of Plant Tons %

A. Construction Materials

1. Corrugated sheets, skylights,sanitary appliances Bucharest 2,200 31.0

2. Bituminized Sheets forhydro-insulation a) Berceni 500 7.0

b) Vaslui 250 3.5c) Simleul- 250 3.5

Silvaniei3. Carpet backing n.a. 500 7.0

Total 3,700 52.0

B. Electrotechnical Goods

1. Cables and electricalinsulation Bucharest 1,050 14.8

2. Heavy electricalengineering goods Craiova 200 2.8

3. Miscellaneous applications(not specified) - 1,235 17.4

Total 2,485 35.0

C. Chemical Plants

1. Chemical plants (pipesand tanks) Fagaras 915 13.0

Grand Total 7,100 100.0

9. The projected increase in glass fiber consumption, though substan-tial, would still leave the level of per capita consumption below that inother countries. Per capita consumption in Romania was 0.06 kg in 1976 andwould in increase to 0.32 kg in 1980 and 0.49 kg in 1985 on the basis of theprojected consumption. The projected per capita consumption of 1980 corres-ponds to the US per capita consumption of the late 1950's, and the 1975 percapita consumption of Spain, Italy and Austria.

Industrial Projects DepartmentFebruary 1977

A= 3-

0aA33! GUM hUh PWJU0

rLAD Pm MX (zOTIE I)

Section I win have a gmamt.. output eaposity of 6,000 f basd ca an average opration of 330 days per

yer (7,920 bows) for e predmOtim of st mds sad 306 d pwr yer (7,3U h ) for the prodnation of

reovin ed yarn, according to the prot mix lited blow.

Pre^ot Tom Per Yer Mod Use

A. Yam

tozexal orf P* ld !(qt Ltlv

1. 5.5 1 80Z 39 Copper, lead wire cabling 14.X.1.1.

2. 5.5 1 4OZ 30 COpper, lead wire cabling X.IS.I.

3. 11 1 8OZ 75 COPPer, lead wire cabling II..EI.

4. 11 1 40Z 104 Mixed wovm fabric for hydo-insulatimn X*.C.H.

5. 11 2 180S 54 " " " H LXP. .C.N6. 22 1 80Z 34 in' C " IF.HC.7. 34 1 40 Z 48P ' X.P.C.H.

8. 334 2 180S 1o10 Vaished wove fabric,lamnated plates .l^l

9. 68 1 8oZ 873 Cpt bcking LL.I.

10. 68 2 1609 61 lotor nsulation M .I.

1. 16D 1 133 Mixed wovn fabric for bydra-insulation

Total Yarn 2,000

B. Rovin

tex no, of sub

12. 2,400 60 2,607 PolYester reinforcing, silanetyp binder J.F.C.K., M.C.I.

13. 320 8 700 Polar coil in.latdcn I.I11.1..

l). 600 15 400 Pol'Ir reinforocmnt M.J.C.M.15. 1.206 30 119 Polestr tank reinforoment M.C.I.16. 735 6 Po37stOr pipe sheathing M.C I.

-and Total 6,000

3.LIL.I. - 1 1Miniuw for 1hi ?ool ua d Dectiotechnicaj lnatryILr .1. - MiniW R7 for Jore%tr and comtntactAom Yterials

ILC.I. - Ministry for Cbam l IndutayILL.I. * niutry for Light InBtz

3/ tam per eter (eithe in Z or in S direction)

Iubstrial Projects Dqertmt4ril 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

PROJECTED CONSUMPTION. PRODUCTION AND IMPORT OF

CONTINUOUS GLASS FIBER IN ROMANIA FOR 1976 TO 1985(tons)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985(Actual)Roving: Consumption 253.0 1,570.0 3,000.0 3,230.0 3,280.0 3,750.0 3,970.0 4,365.0 4,800.0 5,280.0Production 253.0 300.0 300.01/ 978.5 2,750.0 3,750.0 3,750.0 3,750.0 3,750.0 3,750.0Import - - 2,838.0- 2,251.5 530.0 - 220.0 615.0 1,050.0 1,530.0

Yarn: Consumption 343.0 700.0 700.0 1,070.0 1,086.0 1,280.0 1,315.0 1,445.0 1,590.0 1,750.0Production - - - - 780.0 1,280.0 1,280.0 1,280.0 1,280.0 1,280.0Import 343.0 700.0 8 7 6 .0/ 1 ,170.0-3/ 306.0 - 35.0 165.0 310.0 470.0

Mat & ChoppedStrand: .ansumption 287.8 700.0 749.0 749.0 764.0 800.0 906.5 997.0 1,096.5 1,206.5

Production 262.8 700.0 700.0 700.0 700.0 700.0 700.0 700.0 700.0 700.0Import 25.0 - 49.0 49.0 64.0 100.0 206.5 297.0 396.5 506.5

WovenRoving: Consumption n.a. 250.0 479.0 513.0 897.0 940.0 1,085.5 1,194.0 1,313.5 1,445.0(420g/m

2) Production _ - 113.5 426.5 450.0 450.0 450.0 450.0 450.0 450.0

Import n.a. 250.0 365.5 86.5 447.0 490.0 635.5 744.0 863.5 995.0

Fabrics: Consumption 390.0 640.o 737.0 835.0 894.0 1,000.0 1,100.0 1,210.5 1,330.0 1,470.5(130g/m2) Production - - 156.0 609.0 641.5 641.5 641.5 641.5 641.5 641.5

Import 390.0 640.0 581.0 226.0 252.5 358.5 458.5- 569.0 688.5 829.0

Tapes: Consumption 52.0 52.0 83.0 152.0 160.0 176.0 190.0 213.0 242.0 257.5(16g/m ) Production - - 40.0 152.0 160.0 160.0 160.0 160.0 160.0 160.0Import 52.0 52.0 43.0 - - 16.0 30.0 53.0 82.0 97.5

Tubes: Consumption 19.0 19.0 19.0 19.0 19.0 21.0 23.0 25.5 28.0 30.5(5.6g/m) Production - - 4.5 17.5 18.5 18.5 18.5 18.5 18.5 18.5Import 19.0 19.0 14.5 1.5 0.5 2.5 4.5 7.0 9.5 12.0

Total: Consumption 1,344.8 3,931.0 5,767.0 6,568.0 5 7,100.0 7,967.0 8,590.0 9,450.0 10,400.0 11,440.0Productiomx/ 515.8 1,000.0 1,314 .0Y 2,883.5 - 5,500.0 7,ooo.0 7,000.0 7,000.0 7,000.0 7,000.0Import 829.0 2,931.0 4,767.0 3,784.5 1,600.0 967.0 1,590.0 2,450.0 3,400.0 4,440.0

1/ Includes 138.0 tons of roving required for production of Section II of project.2/ Includes 176.0 tons of yarn required for production of Section II of project.3/ Includes 100.0 tons of yarn required for production of Section II of project.41 Includes 314.0 tons of glass fiber products from Section II of project, based on imported roving and yarn.5/ Includes 100.0 tons of glass fiber products from Section II of project, based on imported yarn.6/ Projected production assumes that no further production capacity beyond semi-commercial plant (1,000 tpy)

and project (6,000 tpy) will be built. x

Industrial Projects DepartmentApril 1977

ANNEX 4-1Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

PROJECT DESCRIPTION

I. Introduction

1. The Project will consist of two main sections. In the first section(spinning department) 6,000 tpy of roving and yarn will be produced, and inthe second section about 1,270 tpy of roving and yarn will be converted intowoven roving, yarn fabrics, tapes and braided tubes. The remainder will besold as roving and yarn. While Section I involves highly specialized tech-nology, Section II involves weaving and finishing technology similar to thatused for other fibers in the textile industry. A material flow chart ispresented in Chart 1. The plant will be located in Militari, an industrialestate in the southwestern outskirts of Bucharest. This location has beenselected in view of (a) the existing infrastructure and utilities in theindustrial estate, a section of which has been assigned to the Ministry ofLight Industry, and (b) the central position of Bucharest, which is also thelocation of the main consumers, in the Romanian highway and railroads systemswhich will keep transportation costs for raw materials and finished goods ata minimum (IBRD Map 12652RI).

II. Spinning Department (Section I)

2. The manufacturing process in Section I consists of three mainstages (i) glass manufacture, (ii) drawing of continuous fibers, (iii) theconversion of fibers into roving and yarn. Steps (i) and (ii) are continuousprocesses, but only an average operation of 330 days per year (7,920 hours)has been assumed in order to account for the relining of furnaces at the endof their campaign life (para. 7), while for step (iii) 306 days per year in 3shifts per day (7,344 hours) have been assumed. A list of the main equipmentproposed for Section I is given in Table 1.

Glass Composition

3. Commercial glass is primarily based on silica (in the form ofquartz sand) and is obtained by fusing a mixture of materials at elevatedtemperatures. To silica (Si02), other materials are added to lower itsmelting temperature. Other ingredients are added to provide the desiredbalance of finished glass properties. Electrical properties of glass aregoverned by the presence of alkali, e.g. the Na 20 and K20 conte 6s. Theresistance of,t1 he alkali - containing "A" glass per meter is 10 ohm com-pared with 10 ohm for the almost alkali-free "E" glass. 1/ Typical glass

I/ "A" glass (alkali-containing), "E" glass (electrical resistance), "C"glass (chemically resistant), "S" glass (high strength).

ANNEX 4-1Page 2

compositions are shown below. The constituents are commonly introduced incompounded forms, such as in this Project as quartz sand, limestone, dolomite,boric acid, salt cake, calcined alumina and calcium fluoride.

Typical Glass Compositions(per cent of weight)

"E" Glass "A" Glass "S" Glass "C" Glass

sio 2 54 73 64 65

Al203 14 1 24 4

B203 8 - 0-2 6

MgO 4 2 10 3

CaO 19 10 - 14

K2O 0.5 14 _ 8

F203 0.3 - -

F2 0.2

Handling, Weighing and Mixing of Raw Materials

4. All raw materials will be received in bags, which will be emptiedinto storage silos. From the silos materials will be delivered to weighingequipment and into the batch mixer. This technology is quite similar to thatapplied in other processes using batches of solid raw materials as feedstock.Homogeneous composition of the glass is of primary importance and requiressuitable weighing equipment (with an accuracy of at least +0.5%), accuratemixing equipment, and conveying of the batch to the furnace batch charger insuch a manner that no segregation of raw materials occurs. The batch plantwill be sized to produce approximately 35 tons of mixed batch per day.

The Furnace Melter and Forehearth

5. The batch is fed into the melting section of the furnace for conver-sion into molten glass. Batch feeding is usually done at one end of the fur-nace, by double or single screw feeders. The project will have two furnaces.Each furnace comprises a melter, fired with natural gas, and a set of fore-hearth, also fired with natural gas, which feed molten glass to a numberof filament forming bushings attached to the underside of the forehearth.Details of the furnace equipment are presented in Chart 2. The capacity ofeach furnace has been designed so that full production in downstream facil-ities can be maintained even in the year refractory relining takes place,through the prior stockpiling of strands.

ANNEX 4-1Page 3

6. The temperature above the glass surface is generally around 1,600 C.The glass depth in the tank must be carefully controlled and set in everyzone of the furnace so that, despite the negative downwards temperaturegradient, the glass at the bottom is always over the devitrifiL.tion tempera-ture (1,130-1,140C) which would cause crystalline inclusions in the glass.Owing to the high temperature and the fact that at these temperatures "E"glass is very corrosive on most refractories, the choice of refractory mate-rials giving reasonable life and good quality of glass is of the utmost im-portance and represents a major component of the know-how. The temperatureand corrosion effects are highly variable in the different zones of thefurnace, and protective materials must be chosen accordingly.

7. The manufacture of glass from the mixed batch materials is a con-tinuous process during the whole life of the furnace. A campaign life willlast 3-4 years at a maximum, at the end of which the furnace is dismantledand remade with new refractories. The time needed for this is around 12weeks.

Fiber Drawing

8. Continuous glass fibers are currently produced by either of twoprocesses: the marbles or the direct-melt process. In the marbles process,glass spheres (marbles) having a diameter of about 20 mm are made from thefurnace and later re-melted for spinning. Spinning can either be performedin the same plant producing the marbles, or in another plant which purchasesthe marbles. The marbles process is generally used when small productionsare involved.

9. In the "direct-melt process", molten glass is drawn directly intofibers. The filament forming bushings are attached to the underside of theforehearth. They are made of platinum/rhodium alloy and are individuallyelectrical-resistence heated in order to bring the glass to a convenientdegree of viscosity for spinning. Glass fibers are produced by drawingfilaments from each stream of molten glass as it drops from the orifices inthe base of the bushings. Streams are pulled into desired diameters by highspeed winders. The combination of temperature, configuration of the orificesin the bushings and the winder speed control the diameter of the filament. Anumber of filaments are formed simultaneously, gathered into a bundle calleda "strand" and treated with a protective binder. The strand is wound ontoforming tubes, or "packages", for drying and curing in ovens before conver-sion to other forms.

Surface Treatment or Sizing

10. Because glass filaments abrade each other easily, protective surfacetreatment is applied immediately after the filaments are formed and beforethey are wound. This treatment also bonds the filaments into a strand so theycan be handled, and includes a coupling agent which later improves glass-resinadhesion. Sizing material formulations are of two types: (a) a complexstarch-oil emulsion applied on yarn intended for glass fiber textile material

ANNEX 4-1Page 4

(twisting, plying, or weaving) and (b) a chemical mixture, mostly composedof an organic, resinous film former, a wetting agent, and a surface activeagent, and applied to glass fiber intended for direct GRP utilization.

11. Glass fiber manufacturers for yarn are more concerned with filamentprotection than with coupling capability during the production of fibrousglass materials for woven fabrics, because of the great degree of glassabrasion encountered in weaving. For these materials, the protective bindermust be burned off yarns and fabrics (heat cleaned) after weaving and acoupling agent or finish applied to improve glass-resin adhesion. Duringsize application, a considerable amount of sizes are wasted, i.e. are notpicked up by the fiber, however efficient the applicators may be designed.Sizes can only partially be recirculated, thus representing a problem ofwaste water treatment, although the volumes involved are of relatively lowmagnitude.

Manufacture of Roving and Twisted Yarn

12. After being dried and cured, the packages of strands are readyfor the manufacture of roving and twisted yarn. Rovings are obtained bywinding up a number of strands (6 to 60) to produce a bonded package. Yarnsare single strands which have been given a definite twist (measured inturns per meter or inch) in order to impart them with specific mechanicalstrength and properties in view of their subsequent utilization, mainly forweaving. Plied yarns are obtained by twisting several strands togethersimultaneously. After being twisted, yarns are wound onto bobbins of variousshapes and dimensions.

Production Losses

13. During the different production steps, from batch preparationuntil the obtainment of roving and yarn, considerable material losses arelikely to be encountered that must be taken into account in establishing theprocess material balance and in calculating total raw material requirement.Losses are mainly in relation with chemical modifications and volatility ofsome raw materials during melting and with events such as fiber breakageduring attenuation or during winding operations. Average losses in thedifferent steps of Section I are shown in the table below. A material flowchart is attached to this annex.

Average Losses in Section I

Step Expected Material Losses(%)

Batch to Molten Glass 28Glass to Strand 19Strand to Yarn 15Strand to Roving 10

ANNEX 4-.Page 5

III. Weaving and Finishing Department (Section II)

14. This department is similar in its conception to those in conven-tional textile industry. Machinery is also similar with some modificationsin order to meet special requirements for the weaving and finishing of glassfibers which are inelastic and abrasive. The capacity of Section II is basedon 306 operating days per year in 3 shifts per day (7,344 hours). A list ofthe equipment foreseen for Section II is in the attached Table 2.

Preparation of Yarn and Roving for Weaving,or Braiding

15. Packages of roving and yarn (single and plied) will be preparedon a number of machines in order to get them ready for weaving and braiding.These machines are the following:

(i) Beam warpers: a multitude of warp yarns are wound on acylindrical body so as to permit removal of these yarnas a warp sheet;

(ii) Warp sizing machines: application of size to yarns,normally through the immersion of the yarns into thesize solution, followed by squeezing and drying. Thistreatment is applied to warp yarn in order to reduce thenumber of broken filaments which result from mechanicalabrasion during weaving;

(iii) Reaching and drawing-in machines: entering the ends ofthe warp yarns into the loom;

(iv) Pirn winders: winding of weft yarn on pirns for insertioninto the shuttles.

Weaving and Braiding

16. Weaving of yarn fabrics is performed on shuttle looms and of rovingon shuttleless looms. Braiding machines are used for the manufacture oftubes:

(i) Shuttle looms: conventional looms to weave yarns. Twosets of yarns (warp and weft) are interlaced. The weftis inserted during weaving by projecting a pirn carrieror shuttle through the warp shed.

(ii) Shuttleless looms: In shuttleless looms the weft is fedfrom one or both sides of the loom by means of spears whichinsert the weft roving in the warp. As a spear reaches theend of its stroke a peg located at the edge of the clothholds the roving while the spear withdraws, and the rovingis cut. These looms are used for weaving roving because ofthe weight of the weft that would have to be thrown forth andback if a shuttle were used.

ANNEX 4-1Page 6

(iii) Braiding machines: round braided tubes are made of yarn thatis interlaced by a process similar to that of conventionalbraiding.

Finishing

17. Chemical and other treatment is used to make the fabrics morecapable of fulfilling their specific function. Therefore, the treatmentis quite different according to the end use of the fabric, i.e. whetherit will be used for industrial purposes (for example, in the manufacturingof GRP articles) or for upholstery.

(i) Finishing of industrial fabrics: the sizing applied tothe yarns in order to make them more suitable for weavingwould jeopardize good adhesion of glass fibers with resinsor insulating laquers during subsequent utilization. There-fore, this size must be removed by means of a chemical orthermal treatment (at a temperature of about 4000 C), andnew sizes of suitable formulation for each specific end-use are applied.

(ii) Finishing of fabrics for upholstery: a "coronization"treatment is usually applied. This consists of a numberof treatments which give a glass fabric the same softness,lightness and anti-crease properties as any other fabricfor upholstery. First a thermal treatment is applied, inorder to burn off the size from the filaments and toeliminate, by annealing the glass, any tension which mighthave been generated in the fiber during weaving. As aconsequence, fabrics will gain in softness and have theappearance of a silk cloth. Subsequently, a chemicaltreatment is made with a finishing agent which will improveabrasion resistance, water-proof properties, washabilityand color resistance.

Material Losses in Section II

18. Weaving and braiding operations imply a material loss of about5% in the case of yarn and 8% in the case of roving, referred to the weightof yarn or roving packages feedstock.

Industrial Projects DepartmentFebruary 1977

ANNEX 4-1Table 1

UDMANIA

BUCHAREST GLASS FIBER PROJECT

MAIN MACHINERY PROPOSED FOR SPINNING DEPARMNDT (SECTION I)

Tnpe of Machine No.

Sand grinding and classification 2Batch preparation 2Furnace plant 2Bushings 80Filament production stations 68Air conditioning and refrigeration plant 1Forehearth cooling panels 2Bilsion pumps 16nuulsion tanks 21Roving winding machines 56Rove windex adaptor 56Twisting frames 39Special laboratory equipment 1Platinum asseably equipnent 1Maintenance equipment 1Cooling water unit 2Standby diesel generator unit 1

Industrial Projects DepartmentApril 1977

ANNEX 4-1Table 2

ROHLNIA

BUCHAREST GLASS FIBER PROJECT

Yif'I MACHINERY PROPOSED FOR WIVTG &

FINISHING DEPARTMENT (SECTION II)

Type of Machine No.

F'irn winders (for weaving fabric) 6Beam warper 1Wary) sizing machine 1Reaching-in machines 2Drawing-in machine 1Looms (for weaving yarr, fabric) 114Shuttleless Looms (for weaving roving) 12Pirn winders (for weaving tapes) 3Looms (for weaving tapes) 92Pirn winders (for braiding) 2Braiding machines 34Grey cloth roiling machine 1Heat cleaning oven 2Finishing range 1Cloth inspection frames 2Tape measuring and rolling machine 1Tube measuring and rolling machine 1

Industrial Irojects Depart,mentApril 1977

ROMAN IABUCHAREST GLASS FIBER PROJECT

MATERIAL FLOW CHART

LOSSES 19% LOSSES 15% WAIGDP

550 tpy 350 tpy " 720 tpy

BATCH HIL 72 LS

11,551 tp _ sb tp

LOSSES 28%3201 tpy DRC A

3,450 tpy

5450 tp N IELD 90% OIGSRN YEOV

LOSSES 19% LOSSES 10% WAIGDP

1000 tpy 450 tpy .EAV550tpy

Industrial Projects DepartmentDecember, 1976

World Bank-168 2 4

ROMANIABUCHAREST GLASS FIBER PROJECTDETAILS OF FURNACE EQUIPMENT

BUSHING

LEVEL CONTROLSENSOR

-A~~~~~~~ "~ __ SKIMMER BLOCKCOVERED WITH

PLATINUM ALLOY TO FOREHEARTHSSHEET

BATCH CHARGER

GLASS LEVEL FOROF

MELTER SKIMMER BLOCKS

DOGHOUSE BATCH (elvation)FEEDER THROAT OF FURNACE (elevation)

FOREHEARTH Iplan)GLASS IN FOREHEARTH

BUSHING

World Bank-16825

SECTION 1 SECTION 2

~~~~LE YARJ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~YR

X1 S@CONAR TWISTE a _ I A SC LFAYTWCSJIGHING MIXING GLASS MELTiNG YARN

PRIMARYTWISTER I L ±ARW

I ~~~~~~~~~~~~~~~FABRIC

A PP.ICATO / I

77 w E 1 I Li-LOOM | L| LTAPE

,ALL _~~~ ~~~~~~~~~~~~~~~~~~~~~~~~_________ ____________

TAKE-UP WIN..R ROVING WINOER j ROVING LO ._____

ROMANIABUCHAREST GLASS FIBER PROJECT

GRAPHIC PRESENTATION OF PRODUCTION PROCESS

Industrial Project1 Oepartment

DeceN,er 1976

World Bank 16826

ROMANIABUCHARESTRGLASS FIBER PROJECT LAL0

PLANT LAYOUT

A

B MELTING FURNACE BUILDING

C SIZE PREPARATION

o AIR CONDITIONING PLANT

i ROVING 'WINDING, TISSING. BRAIDING N STORAGE

F LABORATORY

G SOCIAL ANNEXES

AIR CONDITIONING PLANT_ WEAVING

J PINISRINGL ELECTRICAL DISTR9BUTION POINT

_ 05*7WAE STATION

N SLECTRIC POWER STATIONO WITER TREATIMIENT

n CODLING PLANTROOM

_~~~~ IWAVN

RWRS.F I

.

MG

A.4EX 4-4

BTuC;HARiST GLASS FIBER PROJ'ECT

RA4i MATE'ILAL QUANUTITIES ArID SOURCES

Annual Consumption 1/ Distance from Means of.^At Full Capacity Sources- Pro ect Site Transportation

(tpy (km)

Quartz Sand 4,908 Local (Miorcani 600 RailQuarries)

Calcined Alumina 1,214 Local (Slatina) 180 Rail

Limestone 1, 582 Local (Vascau 600 RailQuaarri es)

Dolomite 1,720 Local (Miercurea 270 RailCiuc)

Boric Acid 1,736 Local (Bucharest) 10 Truck

Calcium Fluoride 359 Thmported _ Rail

Salt Cake 32 Local (Ploiesti) 80 Truck

Total 11,551

U/ For local sources, see Map IBRD 12652R1

Industria' rrojects DepartmentFebruary 1-.77

ROMAN IABUCHAREST GLASS FIBER PROJECT

ORGANIZATION CHART OF ENTERPRISE

Centralfor Glass and Fine

Ceramics

;rchIns;itut~ ;;--------PotManagnr

Ftr Prjet Comm ercial

Chief Engineer Chief Engineer| Sining X Weaving and Finishing _

txj

World Bank-i16822

Industrial Projects DepartmentDecember 1976

ROMANIABUCHAREST GLASS FIBER PROJECT

IMPLEMENTATION SCHEDULE

1975 1~~~976 1977 1978 1979 1980IJF M 1 ~J|IA|S!O| NJ DPJ IFIN !M! JIJ AIS! !! IDJIFIMArIJ1JASISO|N! C JIF1M| A JIJ jA|S|qND CJ IF|M|A| qJJI~IJAsjdN| [KLJIMIFII A+JA.sj olN1D

PROJECT APPROVAL BY COUNCIL OF MINISTERS _IIIIIrTIIIIITIIT T 111IITTTIT TECHNICAL DISCUSSIONS VWITH SUPPLIERS__ IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII

BID EVALUATION AND CONTRACT SIGNING l ;<| 1t 4 BASIC DESIGNDETAILED ENGINEERING, SECTION I

DETAI LED ENGINEERING. SECTION 11CIVIL WORKS FT

EQUIPMENT DELIVERY, ERECTION. MECHANICALTESTS, SECTION I, FIRST LINE

SECOND LINEEQUIPMENT DELIVERY, ERECTION. MECHANICALTESTS, SECTION II

TRAINING. SECTION I

TRAINING. SECTION 11LIGHT-UP AND ACCEPTANCE TEST SECTION I

FIRST LINESECOND LINE

START-UP, SECTION 11

World Bank-16823 O'

ANNEX 4-7

ROMANIA

BUCHAREST GLASS FIBER PROJECT

TRAINING PROGRAM

The outline of the training program, as currently foreseen, is shownbelow. By December 31, 1977, a detailed training program will be sub-mitted to the Bank.

No. of Staff No. of Months Each Total Man-Months

A. Training in Romania

1. Spinning Department 63 4 252321 6 1,926

76 9 6842. Weaving Department 67 3 201

172 5 86041 12 492

3. Finishing Department 10 3 3036 6 216

6 12 724. Other

Foremen 9 12 108Technological Engineers 2 4 8Foremen Assistants 6 4 24

Total 809 4,873

B. Training Outside RomaniaSpinning Department (only) 14 2 28

Industrial Projects DepartmentApril 1977

ANNEX 4-8

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ENVIRONMENTAL IMPACT AND PROTECTION

General

1. The principal sources of pollution produced from the technologyemployed in the project are the emission of fluorine and fluorides in theexhaust gases from the furnaces and the discharge of process water. Theproject will also produce solid waste in the form of glass fiber scraps,which do, however, not involve difficult pollution problems as they aresubstantially inert.

Air Emissions

2. The main source of air pollution are the furnaces in which a largeamount (about 60x) of the fluorine added to the batch of raw materials as CaF2decomposes during the melting process and is discharged to the atmosphere.Most industrialized countries have very strict emission limits for fluorineand its compounds as shown in Table 1. In particular in the case of similarplants located in the proximity of populated areas or of buildings higherthan the maximum level of the plant, gaseous effluent treatment facilitieshave been installed. Romanian standards for fluorine and fluoride emissionsare similar to USA and Western European regulations. For the Project, theclimatic conditions and its location in a flat non-residential area are suchthat all suppliers guaranteed that the provision of a stack of suitable height(25 to 30 m) will be sufficient to meet the Romanian standards. The Romanianair pollution standards and the climatic conditions prevailing at the projectsite are presented in Tables 2 and 3.

Waste Water

3. Waste waters are primarily dilute fiber sizing material, and will,after a single step biological treatment, followed by a chemical treatmentbe discharged into the sewage system of the Municipality of Bucharest.Waste water specifications for that system are quite similar to USA andWestern European specifications and are shown in Table 4. The Militariindustrial area has already the facilities necessary for pre-treatmentprior to discharge into the municipal system.

Solid Waste

4. The project will produce about 2,500 tpy of waste glass fiber.To date, no method for recycling has been developed, and the waste fiberwill, therefore, be dumped in a sanitary landfill of the municipality ofBucharest. A research program is planned by the Research Institute forthe Glass and Ceramics Industry with the objective of finding some profit-able application for these waste fibers.

Industrial Projects DepartmentFebruary 1977

ANNEX 4-8Tables 1-2

ROMANIA

BUCHAREST GIASS FIBER PROJECT

TABLE 1: MAXIMUM LIMITS ALLOWED FOR FLUORINE AND HYDROFLUORIC ACID(.g/m 3 )

Fluoride (as F) Hydrofluoric Acid

USA 2.5 2.0Germany 1974 2.5 2.0Sweden 1975 2.5 2.0CSSR 1969 1.0 1.0USSR 1972 1.0 0.5Romania 2.0 2.0

TABE 2: ROMANIAN STANDARDS FOR ATMOSPHERIC EMISSIONS (1975)MAXIMUM ALLOWED CONTENT AT GROUND LEVEL

(mg/rn3 )

Hydrofluoric Acid 2.0Fluorine 0.2Fluoride (as F) 2.0Carbon Monoxide 50Sulphur Dioxide 15Nitrogen Oxides (as N02) 10Solids with % free SiO2 10% % SiO2 + 50

2* (% si 2F(%SiO2)

Solids with % free SiO2 6 - lo% 6Solids with 2% SiO2 8Coal or Graphite Dust 10Other Dusts 15

Industrial Projects DepartmentApril 1977

AM= 4-8Tables 3-4

BUCHAREST GLASS FIBER PROJECT

TABLE: 3: CLIMTIC COIDITIONS AT PROJECT SITE

Air ZMRraturo Rol. Hwidlity(OC) (%

Wi,nter -i5 min. 90 max.Sumer +33 max. 40 din.Wind Direction N, NE, EAverage Wind Velocity 4 x/sec.

TABLE 4: STMIDAWS FOR WASTE WATER FOR DISPOSAL TOSEWAGE SrSTEM OF MlNICIPALITY OF BUCHAREST

pH 6.5 - 1Temperature ma. 40°

CN la". i g/iCl (free) max. 1 .gAH2 S and Sulphides max. 1 mgAi

Organic Compounds max. 30 uglSolids max. 300 giBD 5 max. 500 mg/i504 max. 400 mg/

Cl- max. 40 mgA

Total Salts max. 1,000 mg/i

Industrial Projects DepartmentDecember 1976

ANNEX 5-1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

DETAILED CAPITAL COST ESTIMATE

Lei Million US$ MillionLocal Forei Total Local Foreign Total

Site Preparation 2.8 - 2.8 0.14 - 0.14Civil Works 94.0 16.6 110.6 4.70 0.83 9

Sub-total (Site and Civil Works) 96.8 16.6 113.4 4.84 0.83 5.67

Equipment and SparesSection I 55.0 192.8 247.8 2.75 9.64 12.39Section II 10.0 70.0 80.0 0.50 3.50 4.ooUtilities and Auxiliary Equipment 16.8 3.6 20.4 0.84 0.18 1.02Offsites 1/ 3.2 - 3.2 0.16 - 0.16Miscellaneous Equipment 2/ 15.0 2.0 17.0 0.75 0.10 o.85Spares - 16.8 16.8 - o.84 o.84

Wear and Tear Parts, Initial Materials - 12.0 12.0 - o.60 0.60

Freight and Insurance 8.6 - 8.6 0.43 - 0.43Import Duties and Taxes 124.0 - 124.0 6.20 - 6.20

Sub-total (Equipment and Spares) 232.6 297.2 529.8 11.63 14.86 26.49

Erection 4.2 12.0 16.2 0.21 o.60 0.81

Know-How and Engineering 14.6 40.0 54.6 0.73 2.00 2.73Preoperating & Start-up Expenses, Training 29.0 18.0 47.0 1.45 0.90 2.35

Base Cost Estimate (BCL) 377.2 383.8 761.0 18.86 19.19 38.o5

Physical Contingency (5%) 18.8 19.2 38.0 0.94 o.96 1.90Price Escalation (6.4%) 3/ 4.0 45.0 49.0 0.20 2.25 2.45

Installed Cost 400.0 448.o 848.0 20.00 22.40 42.40

Working Capital 24.0 - 24.0 1.20 - 1.20

Total Project Cost 424.0 448.o 872.0 21.20 22.40 43.60

Interest during Construction 4/ - 42.0 42.0 - 2.10 2.10

Total Financing Required 424.o 490.0 914.0 21.20 24.50 45.70

1/ Branch connections for utilities.2/ Office, laboratory and handling equipment.3/ Local costs have been assumed to increase by 1% p.a. Foreign contracts for the

supply of machinery and equipment are concluded on a fixed price basis. A notionalprice escalation of 7.5% p.a. during the implementation period has been deductedfrom the actual or expected contract values in order to arrive at project costs inprices of April 1977.

4/ Interest on IBRD Loan only, since interest on bilateral credits for Section II notknown.

Industrial Projects DepartmentApril 1977

ANNEX 5-2

H)XANIA

BUCHAREST GIASS FIBER PKDJECT

WORKING CAPITAL ESTIMATE(At Full Capacity)

Item Period Amount-- (Million Lei)

A. Inventory

1. Raw Materials- imported 2 months 0.1- local 3 weeks 1.1

2. Auxiliary Materials- local 3 weeks 2.0

3. Finished Products 2 weeks 6.7

4. Goods in Process 2 weeks 2.2

Total Inventory 12.1

B. Receivables 3 weeks 15.6

C. Payables (Less) 2 weeks 5.7

D. Bank & Petty Cash 2.0

Net Working Capital 24.0

Industrial Projects DepartmentApril 1977

ROHANIA

BUCHARST GIASS FIBER PROJECT

INTEREST ON AND REPAYIRT OF IB)D WAN(US$1,00O)

Calender Year Aatumt Amount Amount Cinitment Interestand Quarter Undisbursed Disbursed Repaid Feei/ InterestZ/ During Ccmstruction

1977III 16,900 1,400 - 32 29 61IV 15,200 3,100 - 29 64 931978I 15,200 3,100 - 29 64 93II 14, 800 3,500 - 28 72 100III 13,100 5,200 - 25 107 132IV 6,900 11,400 - 13 234 1471979I 1,900 l6,4Oo - 4 336 340II 800 17,500 - 2 359 361III 500 17,800 - 1 365 366IV 400 17,900 - 1 367 3681980 _ 18,300 - 1,500 Z,6

1981 1,530 1,14071982 3,060 1,2821983 4,590 1,157 say 2,1001984 6,120 1,0321985 7,650 9071986 9,180 7821987 10,710 6571988 12,240 5321989 13,770 4071990 15,300 2821991 16,830 1571992 18,300 32

1 0.75% on amount undisbursed.g/ 8.2% on amount disbursed and not yet repaid.

Industrial Projects DepartmentApril 1977

ANNEX 5-4

ROMANIA

BUCHAREST GLASS FIBER PROJECT

DISBURSEMENT SCHEDULE FOR IBRD LOAN(US$ Million)

IBRD Fiscal Year Quarterly Cuuulatedand Quarter Disbursement Disbursement

Pr 1978

I 1.4 1.4II 1.7 3.1III - 3.1IV 0.4 3.5

FY 1979

I 1.7 5.2fT 6.2 114'II 5.0 16.4IV 1.1 17.5

F! 1980

I 0.3 17.8II 0.1 17.9III 0.4 18.3

Industrial Projects DepartmentApril 1977

ANNEX 6-1Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

DO.MESTIC SELLIN PRICES /(ExC-Factory)

Sazinary

Product Price Range We hted Averae 2/(Lei) (Li (US$) (US$/kg)

1. Roving (kg) 17.64-26.00 18.92 0.95 0.95

2. Yarn (kg) 50.18-12h.1h 65.51 3.28 3.28

3. Woven Roving (m2 ) 11.75 11.75 0.59 1.h0

L Fabric (m2 ) 13.95-21.70 19.55 0.98 7.5h

5. Tubes (linear meter) 0.20-1.55 0.72 0.036 6.25

6. Tapes (linear meter)- of Yarn 0.30-0.72 0.h8 0.02L 7.38

- of Yarn and Roving 3.15 3.15 0.16 1.62

2/ Approved by State Cammittee for Prices in 1975 and not likely to bechanged during current Five-Year-Plan (1976-80).

Used in financial projections.

Industrial Projects DepartmentDecember 1976

~~UfANIAAM=6- Page=2

BUII? o&M FUIE PP)JOCT

D(DSTIC MZLIEG PRICKS

Detailed List of Pricesl/

ag (Lot/u%)

1. 160 tex. 9-10 mic. 26,0002. 24 tex. 10 microns 24,5003. 320 tex. 9-10 microns 23,4504. 480 tex. 10 isrons 20,5005. 600 tex. 10 microns 19,6006. 740 tex. 13 microns 18,6207. 1200 tex. 10 microns 18,4108. 2400 tex. 9-14 microns 17,640

YAM (Lei/ton)

1. 5 microns - 5.5 x 1 tex 124,1402. 5 microno - 11 x 1tex 90,6303. 7 microns - 11 x 1 tex 78,2404. 7 microns - 11 x 2 tex 116,5405. 9 microns - 34 x 1 tex 57,7306. 9 microns - 34 x 2 tex 65,4807. 9 microns - 68 x2 2tx 50,180

FABRICS (Lsi/j 2 )

1. E 27/0.03 13.952. E 31/0.04 17.953. E 70/0.08 18.304. E 82/0.11 16.605. E 165/0.14 19.906. E 200/0.20 21.70

IWVENI ROVINIG (Lei/o 2 ) 11.75

TKS (Lei/a)

1. E 0.5 0.202. E 1.0 0.233. E 1.5 0.334. E 2.0 0.385. E 2.5 0.466. E 3.0 . 507. * 3.5 0.598. 3 4.0 0, 9. t5° O.77

10. 3 690 O."11. 3 7.0 1.1312. K 8.0 1.2513. 1 10.0 1.55

TAPS (Lei/)

1. 1 15/0.1 0.302. R 20/O008 0.4o3. K 20/0.1 0.404. E 20/0.2 0.495. K 30/0.1 o.646. E 30/0.2 0.727. 1160 x 2/0.4.2/ 3.15

y1 red by Itate Citt. for Prio in V75 uA ast likay to-b b.gd Eing curmt 3tw-l.ar-P1Aq (30")D.V o of ioctional .t_tht wurp to et yarn and waft of

£eta'ia1 Preje Dspartmt3m*r 1976

ANNEX 6-2Page 1

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ANNUAL PRODUCTION COST(at Full Capacity)

&uuaaryItem Value Fixed Variable

(Mlllion Lei) (' ) (Million Lei) (%) (Million Lei)

Raw Materials (see page 2) 20.2 - - 100 20.2Auxiliary Materials

(see page 3) 35.1 _ - 100 35.1Maintenance Materials

(2% of fixed assets) 17.0 100 17.0Power (see page 4) 10.8 70 7.5 30 3.3Other Utilities(see page 4) 3.3 80 2.7 20 0.6

Labor (see page 5) 26.1 100 26.1 - -Depreciation (see page 6) 67.5 100 67.5 _ _Reserve for Relining(see page 6) 4.0 100 4.0 - -

Contingency (2%) 3.7 70 2.6 11

Total 187.7 68 127.4 32 60.3

Industrial Projects DepartmentFebruary 1977

ANNEX 6-2Fage 2

ROMONIA

BUCHAREST GLASS FIBER PROJECT

FPRODUCTInN COST

RAW MATERIALS

Annual ConsumptionItem At Fall Capacity Unit Price Value

(tons) (US$) (Lei) (1,000 Lei)

Quartz Sand 4,908 21.85 437 2,145

Limestone 1,582 31.45 629 995

Dolomite 1,720 14.35 287 49

Calcined Alumina 1,214 147.50 2,950 3,581

Boric Acid 1,736 359.00 7,180 12,464

Calcium Fluoride 359 66.10 1,0322 475

Salt Cake 32 93.00 1,860 60

Total 11,551 20, 2l14

Industrial Projects DepartmentFebruary 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

PRODUCTION COST

AUXILIARY MATERIALS

Annual Consumtion Unit Price Value(At Full Capacity) (US$) (Le7i (1,000 Lei)

A. Section I

Sizing Materials 7,6971-t/Rh Alloy (kg) 6.071 6,750.00 135,000 820Faper Sleeves (1,000 pieces) 330 350.00 7,000 2,310Cardboard Boxes (1,000 pieces) 385 285.00 5,700 2,195Polyethylene Foil (tons) 46 61o.oo 12,200 561Bobbins (1,000 pieces) 68 462.50 9,250 629Plastic Sleeves (1,000 pieces) 16 612.50 12,250 196Miscellaneous -_ 3,311

Sub-total 17,719

B. Section II

Sizing Materials 17,000Miscellaneous 339

Grand Total 35,058

I N

Industrial Projects DepartmentFebruary 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

PRDDUCT3DN COST

UTILITIES

Amnual ConsuptionIteui At Full Capacity Unit Price Value Fixed Variable

(US$) (Lei) (Million Lei) (%) (Million Lei) (7) (NillUon LeiI. PoverI.-Section I (MWh) 31,500 15.00 300.00 9.5 75 7.1 25 2.4B. Section II (Mwh) 4370 15.00 300.00 1.3 33 0.4i 67 CW9

Total 35,870 10.8 7.5 3.3

II. Methane GasA. Section I (1,000 Nu3 } ll,0o0 10.00 200.00 2.2 80 1.8 20 0.4B. Section II (1,000 Nu) 705 10.00 200.00 0.1 100 0.1 - _

Total 1.7

0.4III. Hot Water & Steam

A. Section I (Goal) 154 2.77 55.45 0 75 0 25 0B. Section II (Gcal) 9,638 2.77 55.45 0.5 75 0.4 25 0.1

9,792 0.5 0.4 0.1

IV. WaterA. Section I ( 3Ž 392,500 0.05 o.98 0.4 75 0.3 25 0.1B. Section II (mJ) 108.000 0.05 0.98 0.1 75 0.1 25

Total 5°°,500 0.5 0.4 0.1

TOTAL UTILITIES 14.1 72 10.2 28 3.9

Industrial Projects DepartmentFebruary 1977

ANNEX 6-2Page 5

ROMANIA

BUCHAREST GLASS FIBER PROJECT

PRODUCTION COST

LABOR

Item No. Annual Cost(Million Lei)

Spining (Section I)- Workers 453 8.6- Supervisors 28 0.7

Weaving & Finishing (Section II)- Workers 398 5.9- .apervisors 14 0.3

Ancillary Facilities 231 4.8

Administration 83 2.4

_ 22.7Social Taxes (15%) 3.4

1,9207 26.1=

Industrial Projects DepartmentFebruary 1977

ANNEX 6-2Page 6

ROMANIA

BUCHAREST GLASS FIBER PROJECT

PRODUCTION COST

DEPRECIATION AND RESERVE FOR REIINING

A. Depreciation

Gross Fixed Assets(Million Lei)

Plant 733.0Know-how & Engineering 6o.oPre-operating Expenses 55.0

Sub-total 848.oLess Recoverable Pt+/Rh Alloy 38.o

810.0 : 12 years average life

67.5 annual depreciation

B. Reserve for Relining

Estimated cost of refractories and other items required for relining:

US$6D0,Ooo (Leil2 million)

Estimated life of furnace

3 years

Average annual cost

Lei 4.0 million

Industrial Projects DepartmentApril 1977

ANNEX 6-3

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ASSUMPTIONS USED IN FINANCIAL PROJECTIONS

1. Capacity Utilization: See Annex 6-4

2. Production Volume: See Annex 6-4

3. Specific Consumption of Roving and Yarn:

(a) Woven Roving 420g of roving/m2

(b) Fabrics 130g of yarn/m2

(c) Tapes lOg of roving/lin.m6g of yarn/lin.m

(d) Tubes 5.6g of yarn/lin.m

h. Domestic Selling Prices: See Annex 6-1

5. Production Cost: See Annex 6-2

6. Disbursement of IBRD Loan: See Annex 5-4

7. Interest on and Repayment of IBED Loan: See Annex 5-3

8. Allocation to Funds:

(a) Depreciation Fund Annual depreciation less repayment(if any) of IBRD loan

(b) State Budget (Compulsory) 10% of planned benefit

(c) Workers Bonus 2% of labor cost if planned benefitis achieved

(d) Reserve Fund 1% of Net Working Capital

(e) Remainder to State Budget

Industrial Projects DepartmentDecember 1976

ROMANIABUCHAREST GLASS FIBER PROJECT

PROJECTED FINANCIAL STATEMENTS(MILLION LEI)

1976 1977 1978 1979 1980 1981 1982 1983 1984 19n5

INCOME STATEMENT________________

CAPACITY UTILIZATION (2)SPINNING (SECTION I) - - - 30.0 75.0 100.0 100.0 100.0 100.0 1000*-FURNACE 1 - - - 40.0 80.0 100.0 100.0 100.0 100.0 100.0-FURNACE 2 - - - 20.0 70.0 100.0 100.0 100.0 100.0 100.0WEAVING I FINISHING (SECTION II) - - 25.0 95.0 100.0 100.0 100.0 100.0 100.0 100.0

PRODUCTION VOLUMEROVING(TONS) - - - 1,200 3,000 4,000 4,000 4,000 4,000 4,000YARN(TONS) - - - 600 1,500 2.000 2,000 2,000 2,000 2,000WOVEN ROVING(1,OOOM2) - - 270 1,015 1,070 1,070 1,070 1,070 1,070 1,070FABRICS(1.000M2) - - 1,230 4,685 4,930 4,930 4,930 4.930 4,930 4,930TUBES(1000M) - - 825 3,135 3,300 3,300 3,300 3,300 3,300 3,300TAPES(1,OOOM) - - 2,500 9,500 10,000 10,000 10,000 10,000 10,000 10.000

GROSS VALUE OF PRODUCTIONROVING - - - 23.3 58.3 77.7 77.7 77.7 77.7 77.7YARN - - - 38.9 97.3 129.7 129.7 129.7 129.7 129.7WOVEN ROVING - - 3.2 11.9 12.6 12.6 12.6 12.6 12.6 12.6FABRICS - - 24.0 91.6 96.4 96.4 96.4 96.4 96.4 6*.4TUBES - - 0.6 2.2 2.4 2.4 2.4 2.4 2.4 t.4TAPES - - 2.1 8.0 8.4 8.4 8.4 8.4 8.4 6.4

TOTAL - - 29.9 175.9 275.4 327.2 327.2 327.2 327.2 327.2

LESS:VALUE OF ROVING CONSUMED - - - 10.1 10.7 10.7 10.7 10.7 10.7 10.7LESS:VALUE OF YARN CONSUMED - - - 44.3 46.7 46.7 46.7 46.7 46.7 46.7

SALES REVENUE - - 29.9 121.5 218.0 269.8 269.8 269.8 269.8 269.8

PRODUCTION COSTIMPORTED ROVING AND YARN - - 16.1 7.5 - - - - - -RAW MATERIALS - - - 6.1 15.2 20.2 20.2 20.2 20.2 20.2AUXILIARY MATERIALS - - 4.3 21.8 30.6 35.1 35.1 35.1 35.1 35.1MAINTENANCE MATERIALS - - 2.5 8.5 17.0 17.0 17.0 17.0 17.0 17.0POWER - - 0.5 5.5 10.2 10.8 10.8 10.8 10.8 10.8OTHER UTILITIES - - 0.4 1.7 3.1 3.3 3.3 3.3 3.3 3.3LABOR - - 8.4 20.0 26.1 26.1 26.1 26.1 26.1 26.1DEPRECIATION - - 12.0 67.5 67.5 67.5 67.5 67.5 67.5 67.SRESERVE FOR RELINING - - - 4.0 4.0 4.0 4.0 4.0 4.0 4.0CONTINGENCY - - 0.6 2.7 3.5 3.7 3.7 3.7 3.7 3.7

TOTAL - - 44.8 145.3 177.2 187.7 187,7 187.7 187.7 187.7 ?

BENEFIT - - (14.9) (23.8) 40.8 82.1 82.1 82.1 82.1 82.1

Inditktrial Projecta DepartawtApril 1977

ROMANIABUCHAREST GLASS FIBER PROJECT

PROJECTED FINANCIAL STATEMENTS(MILLION LEI)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

CASH FLOW STATEMENT___________________

CASH GENERATIONBENEFIT - - (14.9) (23,8) 40.8 82.1 82.1 82.1 82.1 82.1DEPRECIATION - - 12.0 67.5 67.5 67.5 67.5 67.5 67.5 67.5RESERVE FOR RELINING - - - 4.0 4.0 4.0 4.0 4.0 4.0 4.0

TOTAL - - (2.9) 47.7 112.3 153.6 153.6 153.6 153.6 153.6

CAPITAL FUNDSSTATE FUNDS-FOR FIXED ASSETS 12.5 214.0 175.0 80.5 - - 12.0 - - 12.0-FOR WORKING CAPITAL - - 14.0 5,0 5.0 - - - - -

IBRD LOAN - 62.0 166.0 130.0 8.0 - - - - -

TOTAL 12.5 276.0 355.0 215.5 13.0 - 12.0 - - 12.0

FUNDS FOR INTEREST D. CONSTRUCTION - 3.1 9.4 29.5 - - - - - -

TOTAL CASH AVAILABLE 12.5 279.1 361.5 292,7 125.3 153.6 165.6 153.6 153.6 165.6

CAPITAL EXPENDITURESPLANT 10.0 235.0 300.0 188.0 - - - - - -

WORKING CAPITAL (EXCL.CASH) - - 12.0 5.0 5.0 - - - - -KNOW-HOW S ENGINEERING - 30.0 25.0 2,5 2.5 - - - - -PRE-OP. EXPENSES S TRAINING 2.5 11.0 16.0 20.0 5.5 - - - - -RELINING - - - - - - 12.0 - - 12.0

TOTAL 12.5 276.0 353.0 215.5 13.0 - 12.0 - - 12.0

DEBT SERVICE IDRD LOANINTEREST - 3.1 9.4 29.5 30-0 28.1 25.6 23.1 20.6 18.1PRINCIPAL - - - - - 30.6 30.6 30.6 30.6 30.6

TOTAL - 3.1 9.4 29.5 30.0 58.7 56.2 53.7 51,2 48.7

ALLOCATION TO FUNDSDEPRECIATION FUND - - 12.0 67.5 67.5 36.9 36.9 36.9 36.9 36.9STATE BUDGETvCOMPULSORY - - - - 4.1 8.2 8.2 8.2 8.2 8.2WORKERS BONUS - - 0.2 0,4 0.5 0.5 0.5 0.5 0.5 0.5RESERVE FUND - - - - 0.2 0.2 0.2 0.2 0.2 0.2

STATE BUDGET,REMAINDER - - (15.1) (20.2) 10.0 49.1 51.6 54.1 56.6 59.1

TOTAL - - (2.9) 47.7 82.3 94.9 97.4 99,9 102,4 104.9

TOTAL CASH REQUIRED 12.5 279.1 359.5 292.7 125.3 153.6 165.6 153.6 153.6 165,6

ANNUAL CASH SURPLUS - - 2.0 - - - - - - -CUMULATIVE CASH SURPLUS - - 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

DEBT SERV. COVERAGE(NOTIONAL) - - - 3.7 2.6 2.7 2.9 3.0 3.2

Industrl Proj ect DprUtintApril 1977

ROMANIABUCHAREST GLASS FIBER PROJECT

PROJECTED FINANCIAL STATEMENTS(MILLION LEI)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

_____________

BALANCE SHEET

ASSETSCURRENT ASSETSCASH - - 2.0 2.0 2.0 2.0 2.0. 2.0 2.0 2.0RECEIVABLES - - 8.5 12.1 15.6 15.6 15.6 15.6 15.6 15.6INVENTORY - - 6.6 9.4 12.1 12.1 12.1 12.1 1261 12.1RESERVE FUND - - - - 0.2 0.4 0.6 0.8 1.0 1.2

TOTAL - - 17.1 23.5 29.9 30.1 30.3 30.5 30.7 30.9

FIXED ASSETSPLANT 10.0 245.0 545.0 733.0 733.0 733.0 733.0 733.0 733.0 733.0KNOW-HOW A ENGINEERING - 30.0 55.0 57.5 60.0 60.0 60.0 60.0 60.0 60.0PRE-OP. EXPENSES 2.5 13.5 29.5 49.5 55.0 55.0 55.0 55.0 55.0 55.0RELINING - - - - - - 12.0 12.0 12.0 24.0

GROSS FIXED ASSETS 12.5 288,5 629.5 840.0 848.0 848.0 860.0 860.0 860.0 872.0LESS:ACC.DEPRECIATION - - 12.0 83.5 155.0 226.5 298.0 369.5 441.0 512.5

NET FIXED ASSETS 12.5 288.5 617.5 756.5 693.0 621.5 562.0 490.5 419.0 359.5

TOTAL ASSETS 12,5 288.5 634.6 780.0 722.9 651*6 592*3 521.0 449.7 390.4*=t= ===l;*= ====111 =w=5= ZUflUC S*W,== flsqZ **=S*, U,==g= =S==Mu

LIABILITIESCURRENT LIABILITIESPAYABLES - - 3.1 4.4 5.7 5.7 5.7 5.7 5*7 5.7IBRD LOAN CURRENT PORTION -- - 30.6 30.6 30.6 30.6 30.6 30*6

TOTAL - - 3.1 4.4 36.3 36.3 36,3 36.3 36.3 36.3

LONG-TERM FUNDSIBRD LOAN - 62.0 228.0 358.0 335.4 304.8 274.2 243.6 213.0 182.4STATE FUNDS 12.5 226.5 403.5 417.5 351.0 310.1 281.2 240.3 199.4 170.5RESERVE FUND - - - - 0.2 0.4 0.6 0.8 1.0 1.2

TOTAL 12.5 288.5 631.5 775.5 686.6 615.3 556.0 484.7 413.4 354*1

TOTAL LIABILITIES 12.5 288,5 634.6 779.9 722.9 651.6 592.3 521.0 449,7 390.4

CURRENT RATIO (1) - 5 Sv5 5.3 5r 2 5.3 5s3 555n 4 5*4 5.4I9RD LOAN/STATE AND RESERVE FUND - 0.21 0.36 0.46 0.49 0.50 0.49 0.50 0.52 0.52

(1) CURRENT ASSETS/PAYABLES

Ianu1trI9 P7o7 s tAprl 1977

ANNEX 6-7

ROMANIABUCHAREST GLASS FIBER PROJECT

BREAK-EVEN CHART

269.8 Sales

260

240 ~~~~~~~~~~~~~~~~~~~~Benefit(74.6)

220 -

200 -187.7

180 - VariableProduction

Cost_i60 1 127.4 (60.3)

i210 I ~~~~~~127.4

Other FixedE Production

100 - Cost(55.9)

80 -| 71.5 Reserve for

--- -- -- -- --- --- -- --- -- -- -- --- -- -- -- --- -- -- -- --- -- -- -- --67.5 ."Relining (4.0)

60 _

lI40 I Depreciation

I (67.5)

20 _

I 1 1 ,1 i 1 I 0 10 20 30 40 50 60 70 80 90 100

PERCENT CAPACITY UTILIZATION

World Bank- 16857

ANNEX 6-8

RW4ANIA

BUCHAREST GLASS PIBER PROJECT

PINANCIAL RATE OF RETUIN(Prices of April 1977)

----------------- Data Table ----------------------(Million Lei)

15 Years, 2 Cost Streams, 1 Benefit Stream

Year c 1z/ C 2?/ B 1

1 12.00 0.00 0.002 388.50 0.00 0.003 370.00 32.J0 29.904s 148.50 73.80 121.505 4.00 105.70 218.006 0.00 116.20 269.807 12.00 116.20 269.80

8-9 0.00 116.20 269.8010 12.00 116.20 269.80

11-12 0.00 116,20 269.8013 12.00 116.20 269.80-'}14 0.00 116.20 269.8015 0.00 116.20 33l.8oQ

Rate of Return - 11.0 percent

I/ Investamnt Cost (see Projected Cash Flow Statement), Less Price Escalation ofLei 149 vdllion.

g/ Production Cost, Less Depreciation and Reserve for Relining (see ProjectedIncome Statement).

3/ Sles Revenue (see Projected Income Statenut)Residial Value is: (i) Net Working Capital Lei 2 4.0 million

(ii) Recoverable Pt/Rh Alloys, Valued at Lei 38.0 millionTotal Lei 62.0 million

Industrial Projects DepartmentApril 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ECONOMIC ANALYSIS

ADJUSTMENT CF PROJECT COST FOR ECONOMIC EVAWATION(Million Lei)

Financial EconomicValue Value Remarks

Site Preparation 3.0 3.0Civil Works 112.0 112.0Machinery and Equipment- Local 87.0 87.0- Imported 360.0 360.0Utilities 22.0 22.0Off-Sites 4.0 4.0Local Freight and Insurance 10.0 10.0Import Duties 135.0 - Transfer paymentKnow-How and Engineering 60.0 60.0Pre-operating Expenses 55.0 55.0Working Capital 24.0 24.0

872.0 737.0

Econmic value in percent of financial value: 84.5%

Industrial Projects DepartmentApril 1977

ROMANIA

BUCHAREST GLASS FIBER PROJECT

ECONOMIC ANALYSIS

ADJUSTMENT OF PRODUCTION COST FOR ECONOMIC EVALUATION4(Thousand Lei)

Financial EconomicValue!/ Value Remarks

Raw Materials

- Quartz Sand 2,145 3,003 Potential export price 40% above domestic price- Boric Acid 12,464 12,464- Other 5,605 5,605

20,214 21,072

Auxiliary Materials 35,058 35,058Maintenance Materials 17,000 17,000Power 10,800 16,200 Economic price 50S above domestic priceNatural Gas 2,300 16,100 Economic price 600% above domestic priceOther Utilities 1,000 1,000Labor 26,1,00 26,100Contingency 3,700 3,700

Total 116,172 136,230=W- -

Economic value in percent of financial value: 117%

1',

For details see Annex 6-2

inrT %S W Projects Department

ANN-EX 7-3

ROMANIA

BUCHAREST GLASS FIBER PROJECT

COMP.IRISON OF COST OF PRODUCTION IN 1976 PRICES

BETWEEN WESTERN EUROPEAN AND ROMANIAN GLASS FIBER PLANT(At Full Capacity)

W. European Plant Romannan PlantA. Production Cost Annual Cost Unit Cost Annual Cost1! Unit Coswl

(US$ Million) (US$/k on) (US$/kg)'/

1. Raw Materials &Auxiliary Materials 4.4 0.34 10.9 0.32

2. Maintenance Materials2/ 1.2 0.09 0.7 0.12

3. Fower and Other Utilities 2.6 0.20 1.5 0.25

4. Labor 3.1 0.24 0.9 0.15

5. Capital Charge 13.7 1.05 7.2 1.20

Total 25.0 1.92 12.2 2.03

B. Project Data

1. Total Project Cost(US$ Million) 47.0 24.5

2. Capacity (tpy) 13,000.0 6,ooo.o

3. Investment cost perunit of capacity ($)5/ 3,615.0 4,083.o

4. Project life (years) 12.0 12.0

1/ Production costs expressed in economic prices.2/ Unit Cost per kg of roving and yarn in the mix as proposed for the project.3/ Including reserve for relining.ij/ Capital charge yielding 25% before tax on total investment.J In glass fiber production facilities economies of scale are limited.

Source: Bank's consultant (for W. European plant) and Bank estimate (for Project)

Industrial Projects DepartmentFebruary 1977

ROMANIA

BJCHAREST GLASS FIBER PROJECT

PRICE COMPARISON(1976)

Tons Produced Percent of Romanian Prices Domestic Prices Import Pricesby Project Total Weight (Ex-factory) (Ux-factory) (Free Romanian Border)

(tons) (.) Price Range Weighted Average USA Japan a . Europe Origin US$/kg(US$/kg) (US$/kg) (US$/kg) (US7/kg) (US$/kg)

Roving 4,000 66.7 0.88-1.30 0.95 1.20 1.25 1.30 Japan 0.75-0.93Yarn 2,000 33.3 2.51-6.21 3.28 1.80-5.15 2.00-8.00 2.30-11.50 CSSR 2.60-3.44

6.000 100.0 1.73 1.801/ 2.0O / 2.203/ France 4.65

Woven Roving 450 7.5 1.40 1.40 1.55 1.60 1.60 Japan 1.05-1.66Belgium 1.73

Yarn Fabric 641.5 10.7 5.42-25.83 7.54 4.40-11.60 3.00-9.00 3.50-8.70 CSSR 3.00-1#.44Tapes 30 0.5 4.38-16.00 7.38 Germany,FR 4.14-18.39Tapes (Unidirectional) 130 2.2 1.62 1.62 N.A. Sweden 2.30

Japan 1.75Tubes 18.5 0.3 N.A. 6.25k/ France 5.76

1,270 21.2

/ Assumes weighted average price for US yarn of US$3 per kg.

2/ Assumes weighted average price for Japanese yarn of US$3.50 per kg.

3/ Assumes weighted average price for European yarn of US$4 per kg.

4/ Unweighted average.

Industrial Projects DepartmentFebruary 1977

ANNEX 7-5

ROMANIA

BUCHAREST GIASS FIBER PROJECT

ECONOMIC RATE OF RETURN(Prices of April 1977)

------- _--------Data Table---- -------------(Million Lei)

15 Years, 2 Cost Streams 1 Benefit Stream

Year C 1l/ C 2?/ B 1

1 10.14 0.00 0.002 328.28 0.00 0.003 312.65 38.38 34.394 40.98 86.35 139.735 3.38 123.67 250.706 0.00 135.95 310.277 1C.1 135.95 310.27

.8-9 0.00 135.95 310.2710 10.14 135.95 310.27

U-12 0.00 135.95 310.2713 10.14 135.95 310.2714 0.00 135.95 310.2715 0.00 135.95 3 72 .27W

Rate of Return = 16.5 percent

v/ Adjusted Investaent Cost (see Annex 6-8 and 7-1).v/ Adjusted Production Cost, Less Depreciation and Reserve for Relining

(see Annex 6-8 and 7-2).Adjusted Sales Revenue (see Annex 6-8 and 7-4).Residual Value is: (i) Net Working Capital Lei 24.0 million

(ii) Recoverable Pt/Rh Alloys, Valued at Lei 38.0 millionTotal Lei 62.0 million

Industrial Projects DepartmentApril 1977

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