Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 3592b-HA

STAFF APPRAISAL REPORT

HAITI

THIRD POWER PROJECT

June 14, 1982

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

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Currency Equivalents(June 1981)

Currency = Gourde (G)

GI = 100 centimes (c)

G5 = US$1

G1,000 = US$200G1,000,000 (MG1) = US$200,000MUS$ = US$1,000,000 (MUS$1)Can$1,000 = US$830DM1,000 = US$417Fr. fr. 1,000 = US$187

Weights and Measures

1 meter (m) 3 3.281 feet (ft) 3

1 cubic meter (m ) = 35.32 cubic feet (ft )= 264.2 gallon (gal)

= 6.290 barrels (bbl)1 kg = 2.206 pounds (lb)

1 ton (t. metric; 1,000 kg) = 1.100 short tons (sh.ton)1 kilowatt (kW) = 1,000 watts o10 W)1 megawatt (MW) = 1,000 kW (10 W) 31 kilowatt-hour (kWh) = 1,000 watt-hours (10 Wh)1 gigawatt-hour (GWh) = 1,000 MWh 3

1 kilovolt (kV) = 1,000 volts (10 V)1 kilovolt.ampere (kVA) = 1,000 volt. agperes (10 VA)1 megavolt.ampere (MVA) = 1,000 kVA (10 VA)1 kilocalorie = 3.968 British thermal units (Btu)I hertz (Hz) 1 cycle/second,..per ..-.. .... per second; ... per hour =/s. ./h

... per day; ....per year =/d. ./amillion cubic meters 3per year = Mm /a

Glossary of Abbreviations

EdH = Electricite d' HaitiEEC = Member States of the European Economic CommunityCIDA Canadian International Development AgencyKfW = Kreditanstalt fuer Wiederaufbau

(Federal Republic of Germany)UNDP = United Nations Development ProgramsONA Office Nationale d'AssuranceHQI = Hydro Quebec InternationalSOFRELEC = Societe Francaise d'Etude et de Realisation

d'Equipements Electriques

Fiscal Year

October 1 - September 30

FOR OFFICIAL USE ONLY

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

TABLE OF CONTENTS

Page No.

1. THE SECTOR ........... 0,., , ..*.............. 1Indigenous Sources of Energy ............................. 1Sector Organlzation and Regulation ..................... 6. 2IDA's Participation in the Sector ................... 3Network Standardization ........................ .* .* 5Power Market ...................... ............... . 6Captive Plant ................... . 7Electrification of Provincial Towns and Areas. . 7Sector Investment Program.... . . 7Tariffs and Rates .............. .. .... o....... .... *... 8

20 THE BENEFICIARY ..................................... . 9Institutional Framework . ....................... 9Organization and Management .............................. 9Training ........................... 10Provincial Operations ....................... 11Management Systems, Accounting and Audit . .11

3. THE POWER MARKET ..................... 12Historical Data and Existing Power Facilities .12Forecasts ................. ......... o. ....... 15

4. THE DEVELOPMENT PROGRAM AND THE PROJECT . . .17Development Program ............................. 17The Project ........................................ 18Objectives ........ ................................. 18Description .................. ................ . ........ 18Cost Estimate ............................. .. .. . 20Financing ..................................... .... 21Retroactive Financing . . ................................. 22Engineering, Construction, Management . . .22Implementation .............. .. . 22Training ................ ................ . .... . 22Procurement and Disbursement ... . ......... 23Environment .................. ..... 23Project Risks.. . .............. 23Project File ............ ................... 23

This report is based on the findings of an appraisal mission which visitedHaiti in July 1981. The mission comprised Messrs. A. Barbu (Financial Analyst),L. Luzuriaga (Power Engineer), and W.F. Kupper (Consultant).

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

TABLE OF CONTENTS (Continued) - 2 -Page No.

5. FINANCES .................... ... .... ........ * * * * 24Financial History and Current Position 24Prospects for FY82. ........ ..... .......... 24Financing Plan ........ , ........... .*** ..................... 25Future Finances . 26Performance Indicators and Reporting....................... 27

6. ECONOMIC ANALYSIS ... ...................... . ...... 28Network Evaluation e ...... .. .......... ..o.# ...... ...... 28Comparison of Generating Developments ................. 28Internal Economic Rate of Return on the 1981-86 InvestmentProgram ... so....a. ......... ee. 31

7. AGREEMENTS REACHED AND RECOMMENDATION 33

ANNEXES

1.1 Electricity Tariffs as of May 1, 1982 35

2.1 Organization Chart . ... .. ................... 36

3.1 Historical Power Data ....... . .. ..... 373.2 Distribution of Electricity Consumption in Port-au-Prince,

Estimates for 1981 . .... . 383.3 Existing Generating Facilities as of July 1981 393.4 Forecast Energy Balances .. 40

4.1 1981-86 Development Program Expenditures Schedule s 414.2 Project Cost Estimate ..... ... . ... .... . .......... 434.3 Project Implementation Schedule ..................... so. 444.4 Credit Disbursement Schedule ........................... 454.5 Contents of Project File... .... .......... .. 46

5.1 Actual and Forecast Income Statements 1978-86 475.2 Estimated and Forecast Funds Statements 1981-86 485.3 Actual and Forecast Balance Sheets 1978-86 . .495.4 Estimated Performance and Monitoring Indicators .. 505.5 Actual and Forecast Rate Base 1978-86 515.6 Statement of Changes in Work-in Progress .. .525.7 Terms of Existing and Future Loans . . .53

5.8 Forecast Debt Statements 1981-86 ........ 545.9 Fuel Cost Forecasts..... ... 55

6.1 Energy Balance for Planting-up Purposes . .566.2 Capacity Balance for Planting-up Purposes. 576.3 Comparison of Alternatives . 586.4 Rate of Return on the 1981-86 Investment Program .64

MAPS

1 - Third Power Project, General Description2 - Third Power Project, Port-au-Prince System

1. THE SECTOR

Indigenous Sources of Energy

1.01 Haiti's indigenous energy resources are limited to hydro powerand some coal (lignite). Four sites suitable for hydro developments havebeen identified 1/ on the Artibonite river downstream from the existing 47 MWPeligre plant, Electricite d'Haiti's (EdH) only larger hydro station. On theGuayamouc river, a tributary to the Artibonite, additional potential couldbe developed at two small dams that would be constructed to decrease siltationof the Peligre reservoir 1/. The aggregate installed capacity of these newdevelopments would be about 90 MW, generating about 550 GWh/a.

1.02 Small lignite fields have been identified 1/ at Maissade and CampPerrin. A preliminary investigation of Maissade initially indicated reservessufficient for development of a steam power station, but subsequent moredetailed surveys financed by the Federal Republic of Germany, have cast somedoubts on this conclusion. The lignite deposits now appear smaller and moreexploration is needed to reach a final conclusion.

1.03 Charcoal is used extensively for domestic and small industrialpurposes; highly valued trees, e.g. mahogany, are still felled for itsproduction. A Bank energy mission which visited the country in 1980 2/estimates that, in 1979, wood accounted for about 72% of Haiti's gross energyuse of some 69 x 1012 Btu, bagasse (sugarcane waste) for 8%, petroleum productsfor 17%, and hydro power for 3%. Due to the high use of wood, much of thecountry has been denuded of trees; land erosion is progressing rapidly andconsiderable areas of once fertile land have been stripped of soil.

1.04 Various public institutions in Haiti are at present engaged inevaluating solar energy technologies, windpower, ethanol production fromsweet sorghum, etc. Although some of these technologies have been economi-cally proven in specific instances, they are unlikely to have a substantialimpact on the energy supply situation; furthermore, they divert the scarcetechnical and managerial capability from more urgent development objectives,and in the case of the ethanol project, implies sub-optimal use of alreadyscarce land.

1.05 Haiti's large agricultural sector offers opportunities for con-verting agro-industrial waste products into usable forms of energy. However,further investigation 1s required to determine the volumes and geographiclocation of potential materials (besides sugar bagasse which is alreadybeing used (1.03)), such as those derived from coffee, cotton, vetiver,urban waste, etc., before alternative technologies and demonstration plantscan be considered.

1/ See Annex 4.5: Project File information.

2/ Report No. 3672-HA.

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1.06 The siltation of the multipurpose Peligr s reservoir has increasedmarkedly from the original estimate of some 3.3 Mm /a in 196 to 6.5 Mmn3/ain 1980 and its useful volume has declined from about 470 Mm 2to 375 MmAnnual silk carried by the river increased from some 280 t/km .a to1,500 t/km .a; the reservoir may be complet2ly filled around the year 2020.It is estimated that presently about 2.6 km of agricultural and forest landsis los each year of the upstream Thomonde and Samana basins (total area343 km ). Siltation could be decreased by about 30% by the construction oftwo small dams on the Guayamouc river. A further decrease of some 40% couldbe made, should it be feasible to construct a dam in the region of the borderwith the Dominican Republic. Finally, embankment improvements, reforestationand improvement of land use would allow an extention of the useful life of thereservoir still more. Because the irrigated area fed by the Artibonite riveris relatively small (24,000 ha) it would be largely unaffected in the mediumterm (some 20 years) by the siltation problem. The main beneficiary of anyreduction in siltation during this period would be hydro power since anypower plant would, to a large extend, be converted from the regulated typeof generation to the run of the river type. The design of any new plant,therefore, depends on the timing of upstream actions to be taken todecrease siltation. First priority has been given to plans to close theGuayamouc river, i.e., to impound silt in an additional reservoir. TheGovernment is also planning to create a special agency to follow-up onconsultants' recommendations for improved land use and contacts have beenmade with the Dominican Republic to investigate the feasibility of construct-ing a further dam on either side of the border. The proposed third creditwould finance the Guayamouc surveys and detailed study. A dam alignment studyand an optimization study of future dams and power facilities in the basin isbeing financed by the Association's second credit (895-HA).

1.07 Haiti is wholly dependent on imported oil derivates since the countryneither has local petroleum sources nor a refinery. The estimated 1979consumption was 1.79 Mbbl, of which 15% was consumed by the cement factory, 3%by bauxite production, 9% by EdH, 38% by road transport, 10% by aviation, andthe remaining 25% by others, including some 2% in gas and 3% in kerosene forhousehold purposes. Although surveys have indicated the possibility of someoff-shore oil, exploratory efforts have, so far, been unsuccessful. However,it is possible that oil fields of some significance could be found in theforeseeable future, once more exploration is carried out.

Sector Organization and Regulation

1.08 EdH, an autonomous Government agency, is the sole entity responsiblefor power supply in Haiti. It was established in 1971 to take over theGovernment-owned Peligre hydro plant and the privately owned Compagnied'Eclairage Electrique of Port-au-Prince and Cap Haitien, whose concessionexpired that year. In 1974, it was also entrusted with the operation ofvarious isolated power facilities in the provinces, mostly Government-owned.

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1.09 The authority to regulate the power sector is vested in the Presidentof the Republic of Haiti and exercised through key officials who also formEdH's Board of Directors (2.03). There is no separate regulatory body as such,and EdH's 1971 decree, as amended in 1977, states that tariffs, as well asinvestment programs and borrowings, are to be approved by the President ofthe Republic with the advice of the Board.

IDAs Participation in the Sector

1.10 In 1976, the Association made its first credit (645-HA, MUS$16.0)for power development in Haiti, covering investments for 1976-78. The benefi-ciary was EdH. The Association made its second credit (895-HA, MUS$16.5)in 1979 covering 1979-82, complemented by funds from the European EconomicCommunity (EEC, Special Action Credit 4-HA of MUS$6; with IDA acting asAdministrator) and by a grant (MCan$17.1) from the Canadian InternationalDevelopment Agency (CIDA). Further assistance, on an annual basis is providedby the Federal Republic of Germany through the Kreditanstalt fuer Wiederaufbau(KfW). These international financing agencies meet annually in Port-au-Princewith EdH to discuss future financing possibilities for the power sector. Themost recent meeting, in March 1980, also included the Inter-American DevelopmentBank (IDB) which is now financing the la Chapelle hydro development study(the next largest hydro developent after Peligre) and may assist in financingthis plant located downstream from Peligre. At the time of the first credit,the Association recommended carrying out a five-year program (now effectively7 years) in two stages, in view of financial constraints on both externaland counterpart funds and the need to strengthen EdH institutionally before itundertook larger investments. The first and second projects overlapped andin most respects constitute a single program.

111 The main objectives of the IDA-assisted projects were technical andinstitutional, to provide a sound basis for long-term development. Haitihad a history of power shortages, obsolete facilities and lack of managerial,technical and administrative skills. Technically, the first project addressedthe need to promptly install 21 MW additional diesel generating capacity in anew powerstation (Varreux), followed by another 21 MW in the same station underthe second project. Institutionally, EdH was to be reorganized and freed fromunnecessary government interference while technical assistance was to be providedFor engineering, supervision and training. In these respects, the first andsecond project covered the same objectives and can hardly be distinguished.

1.12 A Project Performance Audit Report on the first power project, 1/concluded that the project's institutional objectives were largely fulfilled,whereas the technical ones were only partly fulfilled due to substantialcontractors' delays in the colmissioning of the Varreux power station.The realization of the second project's associated technical and institutionalobjectives suffered a setback in early 1979 when, due to internal controversiesin EdH concerning the IDA financed contract for the Varreux station, work wasdelayed for about one year. When a new cabinet was formed at that time, thenew minister responsible for the sector dismissed the General Manager, theTechnical Director and the consultants whom he deemed responsible for thedelays, without prior consultation with IDA. These occurrences caused serious

1/ Sec. M80-948 of December 30, 1980.

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repercussions in EdH, a delay of about one year in effectiveness of the secondcredit and delays up to one and a half years in both the institutional andtechnical aspects. Cost increased commensurately which, in turn, forced a cutin the project, mainly in distribution, in order to remain within the fundsavailable. By allowing overlapping consulting services, the Association hasendeavoured to minimize the effect of these occurrencies. The new generalconsultants (Hydro-Quebec International, Canada), as could be expected,differed in opinion from the previous consultants on how to reach objectivesand needed time to adjust to the particular situations in EdH. The consultantsfor improving EdH's administration (Price Waterhouse of Canada) were engagedwith several months delay. Similarly, CIDA's consultants for the secondproject (BELT of Canada) were engaged 8 months late; in total the CIDA program'smain component, transmission, is expected to be about 12 months late. Theonly component that was not delayed by more than 3 months was the main techni-cal item in the IDA/EEC project: the extension of the Varreux power'.station.The contractor was able to decrease the estimated completion time of 27 monthsto about 20 months. Renovation of the Port-au-Prince network, however, hasnot even started due to design changes and because of the mobilization timeneeded by the new consultants.

1.13 The present situation is as follows:

(a) EdH has implemented substantial organizational changes and is inthe process of introducing further important steps, particularlyin the financial departments, as suggested by Price Waterhouse.Experienced staff is still largely lacking, but on-the-jobtraining has markedly improved administrative capabilities.

(b) A number of engineers, accountants and technicians were trainedsubstantially as envisioned under the first project. A trainingcenter for lower level technicians, financed by the first credit,was opened in March 1980. A similar center for diesel stationoperators would be ready in August 1982 under the second project.After a delay of about one year, training of specialists startedagain and local training by experts from the general consultants isunder way. A subsequent program which would be financed by thethird project, has been designed to ensure continuity.

(c) A new tariff structure and rates were instituted under the firstproject. This, coupled with improvements in operating efficiency,has resulted in the present satisfactory financial situation ofEdH. The latter, however, is also in part the result of lower thananticipated investments, due to the technical delays referred toabove (1.12).

(d) The first phase (21 MW gross) of the power station at Varreux,financed by the first credit, was completed (15 months late) in June1978. Due to cooling system deficiencies, the station cannot beoperated at more than 90% of capacity and it has suffered manyunscheduled outages due to poor contractor performance and lack ofexperience in maintenance procedures. However, actions to improvethe situation have been taken since the new consultants have beenappointed. A team of diesel experts have evaluated the technicalconditions at Varreux, identifying as the main problems unsatisfactory

erection-workmenship of the auxiliaries and underdimensioning of thelub-oil heat exchangers. This is expected to be corrected after theVarreux extension (see below) is operational, i.e. in 1982. Adiesel expert/operator from the consultants was assigned to trainpersonnel at Varreux. A two-year maintenance sub-contract wasincluded in the contract for the Varreux extension, as well as atraining component for the initial period of operation. Negotiationsare underway with a brewery to allow access to an ample source ofcooling water rather than the municipal potable water system. Thecooling system for the Varreux extension is of the radiator, air-cooled,type. The 21 MW (net) extension, financed under the second project,was commissioned by the end of 1981, just prior to the beginning ofthe dry season.

(e) The main transmission lines and substations (first project) werecompleted substantially on schedule. For the second project (CIDAfinancing) the consultants have redesigned the system, requiringchanges in the present layout. Completion (lines will be doubled,some added, together with the extension of some existing substation)is now expected by about September 1983, except for the IDA financedextension of the substation which connected Varreux to the networkin September 1981.

1.14 The Bank acted as executing agency for two UNDP-financed studies: asector study, completed in 1979 and the study of the siltation of the Peligrereservoir 1/. These studies, together with the CIDA-financed study of thecountry's hydro resources, provided the necessary basic information for theformulation of the development program under the second project and theproposed project; in fact, these studies largely outline required sectordevelopment until about 1990, subject to timely adjustments in the light ofnew and updated information.

Network Standardization

1.15 The existing supply system in Haiti is largely based on Americanstandards and practices. The frequency is 60 Hz and the supply voltages are:

- High voltage: 115 kV (Peligre - Port-au-Prince);- Medium voltage: 12.47/7.2 kV and 4.16/2.4 kV;- Low voltage: 120/240 V - 3 wire, single phase and some

120/208 - 4 wire, three phase.

Under KfW financing, EdH had introduced the European type of network at CapHaitian and in the Gonaives-St. Marc-Drouet area (medium voltage 23 kV, lowvoltage 120/208 V - 4 wire; 60 Hz). During the March 1981 Sector Meeting, EdHand the external financing institutions agreed that the further extensions inthe country would be based on American standards. The general consultants arepresently designing the construction standard for networks, which would applythroughout the country, for submission to a coordinating committee comprisingEdH and the consultants financed by the various financing institutions.

1/ See Annex 4.5: Project File information.

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Power Market

1.16 Historical consumption and supply data is available only forPort-au-Prince as shown below; data has been collected for the provinces onlysince 1977 (3.01).

1972 1977 1980Port-au-Prince 1/ GWh % GWh % GWh

Residential 19.9 34.0 ( 57 44.5 69.5 35.2Commercial 12.9 22.0 ( 5 * 10.7 5.4Industrial 17.9 30.6 60.0 45.5 100.8 51.1Public Lighting 2.7 4.6 6.5 4.9 7.1 3.6Others 5.1 8.8 6.7 5.1 9.2 4.7

Total Sales: 58.5 100.0 131.9 100.0 197.3 100.0

Losses 2/ 32.9 36 41.0 24 74.0 27

Generation (GWh) 91.4 172.9 271.3

Maximum Demand (MW) 21.4 37.2 54.0

1/ Data has been reanalyzed and differ from previous information.2/ In GWh and % of generation.

The notable features of this development are that (a) industry's share in themarket increased from about 31% to about 51%; (b) losses declined from 36%in 1972 to 24% in 1977, but again increased to 27% in 1980 in the aftermathof EdH's internal difficulties (1.12). It should be noted that generationin the provinces (3.01), about 27 GWh in 1980, accounts for only about 10% oftotal generation.

1.17 The proportion of Haiti's population with access to electricity isextremely low. By the end of 1980, EdH had about 69,000 consumers, of whomabout 15,000 (18% of total, consuming 9% of total sales) were in the provinces.Assuming five persons per family among the about 800,000 inhabitants ofPort-au-Prince, connection density in this city would be about 34%, comparedwith some 29% in 1977. Access to electricity in the country as a whole(some 5 million inhabitants) is only 7% compared with about 5% in 1977.The distribution of energy consumption is very uneven; in Port-au-Princenearby half of EdH's residential consumers are presently estimated toaccount for only 2.5% of total consumption (3.05), whereas industrial andcommercial consumers together account for about 60%. The average per capitageneration in the city is about 28 kWh/m. The low level of connectiondensity and of consumption may be attributed to the extreme poverty of thepopulation: with a per capita GDP of US$270 in 1980, Haiti is the poorestnation in the Western Hemisphere and one of the 30 poorest in the world.

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Captive Plant

1.18 Little is known about captive plant capacities and generation. Thelargest plants are owned by Ciment d'Haiti (6,250 kW, and an additional 4,000kW planned), the HASCO sugar factory (2,250 kW) and the Minoteric d'Haiti(1,000 kW). Some 6,000 kW in small units were imported during the record dryyear 1977 and a large number of small units have been installed all over thecountry (e.g., many hotels have their emergency units) but no informationis available on their locations and capacities. A rough estimate sets captiveplant capacity at some 20-25 MW, all thermal type.

Electrification of Provincial Towns and Areas

1.19 Because of financial and planning constraints, EdH has not yet beenable to define a program for rural and village electrification. A modestprogram of rehabilitation in the provinces financed by KfW has virtually beencompleted. A new power station was built at Cap Haitien, Haiti's secondlargest city. Of the six 850 kW diesel units installed, 4 were financed bythe Government and 2 by the Association. CIDA will finance another 2 unitsunder the second project. The networks were completely renovated. Additionally,KfW financed a 3,000 kW hydro plant at Drouet and the renovation of networksin the St. Marc and Gonaives areas. The Government, mostly on an ad-hocbasis, has instructed EdH in the last few years to electrify a number of smallvillages, for which programs were not included in EdH's annual budgets. Since1977, this has increased the number of villages with electric service from 12 to26. A comprehensive village electrification program is desirable and is beingdeveloped by CIDA, which is considering the possibility of further assistancein financing socially beneficial projects (e.g., rural electrification).

1.20 Although village electrification should be encouraged, EdH's financialposition at present should not be endangered by unscheduled expenditures.Also, early planning is an obvious requirement for sound development. Forthese reasons, the investment limitation covenant under the second project,stipulating that any single EdH investment in the power sector which exceeds1% of its net fixed assets requires IDA's agreement, has been expanded toinclude the requirement that the aggregate annual amount of unbudgeted invest-ments in village and rural electrification should not exceed 0.2% of net fixedassets, unless IDA otherwise agrees.

Sector investment Proram

1.21 Power sector development in Haiti and the sector expansion programof which the proposed project is part, are based on an elaborate UNDP-financed"Long-term Pre-investment Study of the Power Sector", executed by the Frenchconsulting firms SOFREMINES and SOFRELEC during 1976-78, and supervised by IDA.This study has been updated and complemented under the second IDA power projectby a Canadian consortium of consultants led by Hydro-Quebec International (HQI),who since 1980 have been retained as general consultants to the Haitian nationalpower company. The conclusion of both studies is that the economic and socialsituation of Haiti make it necessary to develop immediately an expansion programand to invest in the power sector without delay, in order to supply the mainurban centers with electricity. The 1981-86 development program is describedin paras. 4.01-4.02, The immediate needs (up to about 1984) would be metlargely by the proposed IDA credit, some continuing KfW contributions and thepossible 1DB assistance for EdH's next hydro plant at La Chapelle (about 30 MW).

In essence, possibilities for financial resources for EdH's other future hydroplants and some additional thermal plant have not yet been identified except tothe extent of EdH's own internal contribution of about 34% (5.05). EdH investmentpriorities would be (a) a further increase in generating capacity in Port-au-Princein 1984, 1985 and 1987; (b) completion of the La Chapelle hydro plant; (c) comple-tion of the Guayamouc I hydro plant (as the first high priority step to decreasesiltation); (d) continuation of the renovation of the Port-au-Prince networks;(e) expansion in the provinces; (f) initiation of construction of the remaininghydro plants on the Artibonite river; and (g) preparation for a larger thermalplant addition by the end of this decade or early in the next decade (largecapacity diesel or coal fired steam plant).

Tariffs and Rates

1.22 In 1976, EdH implemented a new tariff structure in Port-au-Prince,which was later extended to the country as a whole, based on the principleof marginal costing, but modified to allow social pricing below a certainlevel of consumption for low income families and small artisan workshops.A fuel cost adjustment clause was implemented at the same time to compensatefor fuel cost changes as well as an adjustment clause to take account ofvariations in the cost of salaries and materials. The latter clause, however,was never applied and now appears redundant because the relevant cost increasesare adequately covered under the minimum 8% rate of return covenant includedin the IDA Credit agreements. The frequency of fuel clause adjustments waschanged in late 1979 from a yearly to a quarterly basis, following IDA'ssuggestions. Current tariff levels (include fuel surcharge) are about in linewith EdH's long-run marginal cost. The general consultants, as a routinematter, are reviewing the adequacy of the tariff structure, 5 years after imple-mentation; this study should be completed no later than September 30, 1982.

1.23 The social part of the rates (Annex 1.1) is reflected in the residentialcharge (including fuel adjustment) of USI10.8/kWh for consumption below 30 kWh/m.The next 170 kWh/m are charged at USJ12.9 and any excess at USJ14.4/kWh.The minimum monthly bill is US$2.97. Because 43% of EdH's consumers have amonthly consumption below 30 kWh, a strong social cross subsidization isapparent (3.05). Cross-subsidization is also strong for the provinces, sincev rage revenues do not even cover the cost of fuel (estimated at USll/kWh).Although since 1979 the electricity supply in the provinces rose from about 7%to 10% of the total country supply, the subsidy does not yet pose an unduefinancial burden of EdH. However, the company will have to monitor carefullythe revenues-versus-cost situation in the provinces as compared with that ofPort-au-Prince, because of the higher growth in the provinces. A reasonablebalance of relative cross subsidization should be maintained; the forthcomingupdating tariff study (1.22) would provide information on the current andfuture level of the cross-subsidy.

2. THE BENEFICIARY

Institutional Framework

2.01 The beneficiary of the proposed IDA credit of MUS$26 would be EdH,an autonomous Government-owned agency, established by presidential decree in1971 (1.08) as a corporate entity whose president is the President of theRepublic. The decree specifies that, for ordinary transactions ("travauxordinaires"), the president delegates his authority to the Minister of PublicWo* ks Communications and Transport who is the chairman of EdH's Board ofDirectors

2.02 The 1971 decree establishing EdH, and subsequent amendments thereto,state that the generation, transmission and distribution of electricityconstitute a State monopoly to be exercised through EdH. Notwithstandingthese broad powers, EdH's activities until 1974 were confined to the operationof the Peligre hydroelectric complex and the diesel facilities and networksin Port-au-Prince and Cap Haitien because any additional activity would haveovertaxed the company's administrative and technical capacity. Facilitiesin the provinces continued to be constructed and operated by private entities,municipalities and other government agencies (primarily the Institute forAgricultural and Industrial Development and the Ministry of Public Works5Communications and Transport). In 1974, EdH began systematically to assumecontrol of all the public service facilities in the country.

2.03 Policy directives at EdH are set by its (ex-officio) President andexercised through EdH's Board, comprising the Minister of Public Works,Communications and Transport (Chairman); the Minister of Finance and EconomicAffairs; the Minister of Commerce and Industry and the governor of the CentralBank and EdH's General Manager. No sector regulatory agency exists as such;therefore, as is the case for policy formulation, authority for regulatingEdH is vested in the Presidency and exercised through the key officials on itsBoard of Directors. The strong governmental representation in the regulationand direction of EdH has on the whole, worked reasonably well. The Board hasconfined itself to approval of EdH's major investment plans, tariffs, borrowingsand broad policies, and the General Manager has had, in practice, a reasonabledegree of autonomy in directing the company's daily operations.

Organization and Management

2.04 EdH has been organized along functional lines (Annex 2.1) sinceabout 1977. The company's chief operating officer is the General Manager, whois appointed by the President of the Republic. He is assisted by threedirectors for operations, planning end administration, all of whom are appointedby the President on the recommendation of the Board of Directors. EdH hasbeen streamlining its operations and is expected to soon formalize the majorchanges introduced in the administrative department in recent months. A newChief Internal Auditor was appointed (2.13). Clear lines of responsibilitieshave been defined for department heads. Accounting and administrative procedureshave been improved markedly and are expected to continue improving graduallywhile on the job training takes place. To this end, the administrativeconsulting services would continue to be provided, and financed, under the

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proposed credit. Courses have been initiated to prepare EdH personnel forthe installation of an in house mini-computer, because dependence on outsidefacilities for billing has been unsatisfactory (many delays have occurredresulting in substantial delays in the preparation of financial statements).Warehouse facilities and administration have been upgraded to adequate levels.A continuing problem is the constraint imposed by the extremely cramped headoffice, located in two buildings. This would be solved by construction ofa new single head office building, to be financed by the proposed credit(4.05).

2.05 Because the present general consultants were contracted only in July1980, further improvements in EdH's technical departments and sections couldnot be initiated concurrently with those of its administrative services.With the start of renovations of the Port-au-Prince networks in the nearfuture, chiefs and crews will be trained and procedures clearly defined,in accordance with methods that are now being designed for the distributionsystem by the general consultants. Operation and maintenance procedures havebeen improved at Varreux. Similar actions are expected to be introducedgradually in the provinces in the near future.

2.06 EdH, in mid-1981, employed about 1,050 people (about 1 employee per65 consumers), of which about 230 are in the provinces. In general, itcontinues to lack sufficient depth in managerial, technical and administrativeskills and it is not expected that EdH's onerously high dependency on consul-tants can be diminished significantly during the execution of the proposed thirdproject because of EdH's rapid growth, which outstrips training capabilities.This lack typifies the country's scarcity of personnel with sufficient trainingand experience in the power sector. EdH's salaries are modest, ranging fromUS$535/m for a recently graduated engineer to US$950 for a department head orwell qualified accountant. At present EdH has 41 graduate engineers (i.e.,they constitute about 4% of its work force). Although training programsfinanced by the IDA credits have provided specific training to engineers, anumber still do not fill positions commensurately with their education, partlybecause they could not - in the past - obtain the necessary experience (underguidance of experts) in EdH. With the changes to be introduced in the nearfuture (2.05) this situation should be rectified.

Training

2.07 Under the first project, 20 engineers and technicians were trainedabroad; on the job training was provided for administrative personnel andEdH constructed a training center for which the equipment was also financedunder the credit. Although training being financed by the second creditsuffered delays (only a senior storekeeper was trained abroad and presently afew people are being trained by Hydro Quebec in Canada), the program is nowbeing implemented. Senior staff (e.g., chiefs of the transmission, dispatch,and meters departments, personnel manager, etc.) will be trained abroad for atotal of 15 m.m. A training specialist will assist the general training centerfor about 3 months and other experts will be provided by the consultants asneeded. The program was revised in July 1981 with the assistance of an IDAtraining expert. At the same time a program was defined to be carried outunder the third project in order to assure continuity (4.18).

Ii -

Provincial Operations

2.08 Until recently the provincial branches largely operated ratherindependently from the head-office except that billing and accounting was doneat Port-au-Prince where requisitions were also processed. Under the secondproject, a study was financed to modify the system and the consultants'recommendations are now being implemented. The objective is to decentralizeactivities (except centralized billing and main accounting) as much as possible,while still maintaining close head-office supervision in the application ofthe common rules and regulations. For this purpose, an assistant director("coordinateur des provinces") was attached to the office of the technicaldirector, with the responsibilities similar to those of the technical directorfor Port-au-Prince but restricted to the provinces. He would also report tothe financial and planning directors, depending on the nature of the activities.Once enough diesel operator and maintenance people have been trained, a teamwould be formed to allow for improved maintenance of diesels in the provinces,which is still inadequate (to the extent possible small diesel groups arecurrently being repaired in Port-au-Prince).

Mana ement Systems, Accounting and Audit

2.09 During preparation of the first power project, consultants (Howell &Co., USA) had been engaged to train EdH's accounting staff and help set up anew accounting system (based on the Federal Power Commission Class A system).Further assistance in the financial and administrative areas has been providedby Price Waterhouse (Canada) from November 1979 to August 1981, under thesecond IDA credit; their program encompassed a wide range of tasks including,inter alia, the setting up of systems for management reporting, inventorycontrol and budgetary control, and the drafting of procedural manuals for theprovinces and headquarters. Additional assistance by Price Waterhouse over a30-month period is included in the proposed project: it provides mainly forthe continuation of the on-going assistance for inventory control and personnelmanagement as well as training of financial and administrative staff, assistancein setting up data and filing systems, and services of a data processing expert.

2.10 Upon EdH's request, Price Waterhouse undertook an analysis of thecosts and benefits of acquiring an in-house computer. The study recommendedin favor of such a computer, mainly in view of the unsatisfactory servicescurrently provided by an external service bureau for EdH's residential billing,and the low cost of currently available hardware (a mini-computer with amemory size of 520 kB, at a cost of US$220,000, is deemed sufficient to coverEdH's needs for the next five years). In addition to billing, priority appli-cations would be for customers' accounts, inventory control, payroll andaccounting. EdH has hired a data processing specialist who is supervising thesetting up of EdH's data processing systems and ultimately would head a newdata processing department. He would be assisted, over an 18-month period, bya Price Waterhouse expert, under financing from the proposed credit. Thecomputer itself is being financed by IDA Credit 895-HA.

2.11 Since 1976, EdH's accounts have been audited by Price Waterhouse& Co. (Puerto Rico), an independent auditing firm acceptable to IDA, albeitwith some delays caused primarily by EdH's own delays in the preparation ofits internal financial statements. As in previous agreements, EdH should

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continue to have its accounts audited annually by external auditors acceptableto the Association, and to send their reports within four months of the end ofeach fiscal year.

2.12 EdH recently reorganized, with the help of Price Waterhouse (Canada),its internal audit department and appointed as its head a well-qualifiedindividual recruited from outside, who reports directly to the General Manager.The new department has already started to perform effectively and its role ingradually rectifying unsatisfactory practices in EdH will be crucial. Forthis reason, and because of the sensitivity attached to his function, theposition of Chief Internal Auditor has been added to those of General Managerand Directors, that are, under the second credit, to be filled at all timeswith competent and experience persons, whose qualifications shall be satis-factory to IDA.

3. THE POWER MARKET

Historical Data and Existing Power Facilities

3.01 Since the Peligre hydro station was completed in 1971, sales inPort-au-Prince have grown at an average of 16.4% per year, from 58.5 GWh in1972 to 197.3 GWh in 1980 (Annex 3.1). Sales in the provinces are presentlyabout 10% of those in the Port-au-Prince area. Information for the provincescontinues to be unreliable, due to the lack of meters, however the situationis improving, particularly because the network renovation at Cap Haitien (whichconstitutes about one-third of total sales in provinces) has been completed.Approximate data in the provinces for the last 3 fiscal years is as follows:

Sales in the Provinces

Sales (GWh) 1978 1979 1980

Residential 7.2 9.0 11.2Commercial 0.3 0.4 1.0Industrial 3.7 4.0 4.5Public Lighting 1.4 1.5 1.6Others 1.0 1.1 1.2

Total 13.6 16.0 19.5Losses 4.9 6.0 7.8

Generation 18.5 22.0 27.2Number of consumers (1,000) 10.4 12.4 14.9(Losses %) (26.2) (27.1) (28.5)

3.02 Because of the lack of reliable data for the provinces and theirsmall share in EdH's sales, the discussion below will concentrate onPort-au-Prince.

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3.03 The sales growth figures for the various consumer categories hasbeen very erratic, as shown in the following:

Port-au-Prince Growth in Sales (X)

1976 1977 1978 1979 1980

Residential and Commercial 28.3 9.7 10.4 11.1 11.4Industrial 24.3 6.6 35.0 6.3 22.9Public Lighting 16.7 -7X1 -3.1 3.0 9.2Others -1.5 4.7 17.9 -3.8 21.0Overall Growth 23.8 7.1 21.3 8.1 14.0

The low growth rate in fiscal 1977 was due to the lack of capacity during oneof the driest years on record, which caused extremely severe curtailments,especially during the dry season (November to April). In the same year, asharp increase in rates was implemented, which also may have had some effecton demand. The relatively low growth rate for 1979 has no obvious explanation,except the downturn in Haiti's economy during that year. However, althoughthe economy has not improved, electricity sales increased by 14.0% in 1980.

3.04 System losses and thefts have also been erratic and consistentlyhigh, peaking at 33% of generation in 1973 (as an indication of the unreliabilityof the data, it should be noted that under the second project the estimate for1973 was 42%, whereas a recent re-analysis decreased this figure to 33%). EdHperformance in reducing losses through policing of unregistered connectionsand checking of meters has been similarly erratic. Under the first project, atarget was set of reducing losses to 28%. EdH passed the target easily throughvigorous action and reached about 24% in 1976 and 1977. However, the programran out of steam and losses reached 31% in 1979, compared with the 1981 targetof 20% set under the second project. Because of the changes in managementand consultants (1.12), policing stagnated and network renovations were notexecuted as planned. Due to improper conductor size, excessively long linesand continued poor maintenance practices, the network is still in a badcondition. Consequently, the proportion of line losses and thefts is difficultto estimate. During negotiations, EdH agreed to include in its performanceindicators for Port-au-Prince a loss target of 27% for fiscal year 1982 anddecrease losses by not less than 2% in each subsequent year compared with theresults of the previous year, until a more normal level of 15% is reached.

3.05 As an indication of the poverty of the population, it should benoted that about 50% (24,000) of the residential consumers in Port-au-Princeare classified under the so called "social rate" (for consumptions up to30 kWh per month). They represent 43% of EdH's 55,800 consumers and consumean average of 20 kWh per month, while contributing only 3.5% of total revenue(Annex 3.2). Because the minimum monthly charge is US$2.85 this group barelycovers amortization of the capital cost of the house connection and meter (letalone cost of the network, generating plant and operating cost), and a largecross subsidization by the richer part of the population--expressed in termsof electricity consumption--is apparent. 1/

I/ However, because the social group, on average, consumes 20 kWh/m, theconsumers, in effect, pay USfl4.2/kWh, i.e. almost as much as thehighest block of consumers.

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3.06 As of July 1981 EdH had 121 MW of installed capacity. The effectivecapacity during the wet season is about 101 MW and about 79 MW during thedry season; of this, hydro plant represents 46% during the wet season andonly 30% during the dry season. EdH's plants and their capacities (Annex3.3) are summarized as follows:

Installed EffectiveMW % MW %

Port-au-Prince

Hydro: Peligre 47.0 1/ 44.0/21.6 (wet/dryThermal: Old Station (Janvier) 15.2 11.9 season)

Delmas 10.0 8.0Varreux 20.9 18.0

Sub-Total 93.1 (81) 81.9/59.5 (wet/dry)

Provinces

Hydro: Drouet and Jacmel 3.2 2.2Thermal: Various plants 19.4 17.1Sub-Total 22.6 (19) 19.3

Total EdH

Hydro 50.2 (46) 46.2/23.8 (46/30) (wet/dry)Thermal 65.5 (54) 55.0/55.0 (54/70)

115.7 (100) 101.2/78.8 (100) (wet/dry)

1/ Derated to 44 MW for technical reasons.

3.07 Comparing EdH's present capacity with its 1979 capacity, as reportedunder the second project, the following should be noted:

(i) No additions have been made in the Port-au-Prince area; in factgenerating capacity decreased because three of the 2,000 kW emergencygroups in the Janvier station, installed in 1977, have been ruinedbeyond repair, and two ancient groups have been retired. The causeis partly lack of adequate maintenance and partly inadequacy of theJanvier emergency groups (each unit consists of 2 high speed dieselsdriving a single generator) for the type of sustained service towhich they were subjected. This issue was raised by the Associationat the time they were acquired by the Government as emergency groupsduring the 1977 drought.

(ii) The installation of 3 x 7.6 MW (gross) additional units in Varreuxfinanced under the second project was completed in December 1981.

(iii) The installed capacity in the provinces doubled in this period from11.2 MW to 22.6 MW; the main additions were a hydro plant (Drouet,3.0 MW), diesel plant (6 x 0.825 MW) at Cap Haitien, and severalsmall diesel units installed by EdH in newly electrified villages oras larger replacements in villages with existing service (3.4 MW).

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3,08 Supply in the provinces continues to be unreliable, due to lack oftrained personnel. Although a training program was started in 1978, it wasonly partially effective due to EdH's difficulties that developed in 1979-80(2.08). The training program is being re-initiated and is expected to improvethe situation in the near future.

Forecasts

3.09 EdH's general consultants have used two models for forecasting futureelectricity requirements: trend and econometric. The first investigates thehistoric use of electricity (for categories of consumers and overall) over timeand the second assesses the historic relationship between the use of electricityand one or more socio-economic variables such as gross domestic product (GDP),population, commercial or industrial data. For overall requirements, theexponential trend model shows an average annual growth rate of 14.8% for thenext 6 years. Only the relation between electricity production and GDPprovided a meaningful econometric model with an average growth of 15.0%, i.e.,in close parallel with the trend model. The assumption of a GDP growth 4.0%/afor the period 1976-83 and 4.3%/a for 1983-90 appears reasonable for basicforecasts although this is slightly higher than the Government's most recentshort-term target of 3.5%. For residential/commercial consumption, GDP wasagain found to be the most significant variable; for street lighting andGovernment requirements only the trend model appears appropriate. Due to lackof data no reasonable reliable forecast could be made for the provinces.Demand in the provinces has been rising rapidly (in excess of 20%) due to thefact that in 1977 the Port-au-Prince rates were applied throughout the country,reducing cost of electricity by a factor 2 or more, depending on the area.

3s10 Among the different scenarios indicated above, two have been retainedfor planning purposes for Port-au-Prince. They correspond to the followingeconomic forecasts:

GDP Growth Forecast1981-83 1983-86

For planting-up 4.0% 4.3%For financial planning 4.0% 3.5%

EdHKs available generating capacity has been perennially weak and the assump-tion of a relatively strong economic growth appears appropriate in orderto avoid underinvestments in power as an important basis for such growth.A conservative forecast should be retained for financial planning in view ofthe inherent weaknesses of the Haitian economy. This would also take accountof some elasticity with respect to rate levels that may develop in the mediumterm; thermal generation will continue to increase rapidly in the next fewyears and rates in current terms are expected to rise commensurately withhigher fuel prices. No historic data is available which could serve as abasis to estimate the elasticity of consumption in relation to price. Mediumterm forecasts will be made annually, to adjust the development program asclosely as possible to real growth.

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3.11 Annex 3.4 shows the resulting financial planning forecast forsales and gross generation. Because of the delay in network renovationslosses have been conservatively assumed to decrease to 27% in 1982 andby 2%/a in the subsequent years.

3.12 Energy and capacity balances for planting-up purposes were prepared,using the higher rate of growth (3.09), both for an average hydrological yearand for a dry year, supposed to occur once every 5 years (Chapter 6). Theadditions planned for the system would adequately cover market requirementsthrough 1990, with a reserve equal to the dry year capacity of one unit atPeligre--which is equal to two larger diesel units out of service--plus 5% ofmaximum demand. The additions are the following:

(a) Varreux diesel plant (3 x 7 MW net) under IDA financing (second powerproject); commissioning during November/December 1981;

(b) Carrefour diesel plant, first stage (2 x 7 MW net) proposed forIDA financing under the third project, for operation in 1983-84,and a second stage of 3 x 7 MW net for 1984-1985. In addition, newthermal generation (diesel units, gas turbines or coal firedplants) would be required as follows: 21 MW in 1987, 7 MW in 1988,28 MW in 1989 and 14 MW in 1990.

(c) Guayamouc I hydroelectric station (3 x 3 MW) for operation in 1986;

(d) La Chapelle hydroelectric station (2 x 15 MW) for operation in 1986,with possible IDB financing (subject to the usual caveats offeasibility and approval);

(e) Verrettes hydroelectric station (2 x 11 MW); operational in 1988,and hydroelectric station sites code-named A-177 (2 x 8 MW) andA-166 (2 x 6 MW) scheduled for operation in 1990; and

(f) new thermal plant (possibly coal-fired), 50-60 MW in the earlynineties.

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4. THE DEVELOPMENT PROGRAM AND THE PROJECT

Development Program

4.01 EdH's 1981-86 development program (Annex 4.1) is expected to costabout MUS$309 in current prices, excluding interest during construction:

Local Foreign Total % of Total- MUS$------------------

Generation 35.2 174.7 209.9 68Transmission 9.4 16.3 25.7 8Distribution 3.7 13.5 17.2 6Various 30.0 3.7 33.7 11

Total Construction 78.3 208.2 286.5 93

Consultants, studies and training 1.8 20.2 22.0 7

TOTAL 80.1 228.4 308.5 100

The high cost of the generation component is mainly due to the construction planfor relatively expensive hydro plants, which either would be completed during theperiod (La Chapelle, Guayamouc I) or of which construction would start (3 plants).Expenditures during 1981-86 for hydro plants amounts to about MUS$137 or about45% of total cost (66% of the cost of generating plant). The remaininggeneration component is largely diesel plants required in Port-au-Prince; by1987 about 60 MW thermal plant would have to be added. The transmissioncomponent is substantially the work still to be completed under the CIDA partof the second project in Port-au-Prince (about MUS$11) and the balance consti-tutes the 115-kV facilities which would connect the La Chapelle hydro plant toPeligre and Port-au-Prince by 1985-86. Distribution development would largelycomprise rehabilitation and expansion in Port-au-Prince; development in theprovinces (probably about MUS$2 in 1981, rising 10%/a in subsequent years, in1981 prices) and other routine investments such as consumer connections andsmall extensions have been included under "various" development.

4.02 The inclusion of some 90 MW in 5 future hydro plants, costing aboutMUS$220 in 1981 prices, or an average of about US$2,500 kW, is defined by theleast-cost development program (6.05). In fact, because Peligre, EdH's onlyhydro station, is already operating at full energy capability and the incrementin energy demand would have to be generated thermally, the least cost develop-ment program requires that all hydro plants should be operational as early as1987/88. In view of expected physical and financing problems it was assumedthat the hydro development scheme would be completed by about 1990. Even thismay be rather optimistic in view of the large sums to be financed. An allthermal development, however, would require in 1990 some MUS$40 in foreignexpenditures for fuel alone at 1981 prices, increasing 15-18% annually,depending on the growth rate.

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4.03 The project (4.05) would comprise the next step in generation, anew 14 MW (net) diesel power station at Carrefour in the western part ofPort-au-Prince, continuation of renovation and a modest extension of thedistribution network, mainly in Port-au-Prince, consulting services andtraining. Ongoing works comprise largely the second power project; KfWfinanced works in the provinces has practically been completed. KfW willprobably continue to finance two small hydro stations (Saut Mathurine, Caracol)in the provinces, and the renovation of the network of Jacmel, but no loanshave yet been made. The IDB final feasibility study, including the preparationof bid documents, for La Chapelle, is expected to be completed by the end of1982. EdH hopes that IDB also would finance construction and include in itsfinancing the studies required for Verrettes, the next hydro plant in thedevelopment program after la Chapelle and Guayamouc I. The geologicalsurvey and study of the Guayamouc I hydro plant, considered of the highestpriority in view of its role in decreasing siltation in the Peligre reservoir,have been included in the consulting services to be financed by the proposedcredit.

The Project

4.04 Objectives. During execution of the proposed project, IDA wouldcontinue to emphasize the sector and project objectives initiated under thefirst project. These are:

(a) rationalize sector development and promote the use of indigenousresources;

(b) provide access to electricity to a greater number of households;

(c) accelerate connection of labor-intensive industries;

(d) meet electricity demand in Port-au-Prince with adequate andreliable facilities;

(e) establish a continuous training program for EdH personnel;

(f) determine the nature of the presently high energy losses, andestablish a program to reduce them to acceptable levels;

(g) achieve EdH's financial independence through emphasizing adequatepricing and reduction in losses and thefts; and

(h) increase the institutional and managerial efficiency at EdH.

4.05 Description. The proposed third project would consist of:

(a) Installation of two diesel generating units rated 7.0 MW neteach, in a new power station to be constructed at Carrefour inPort-au-Prince. The power station would be build to accommodate5 units (as required by 1985).

(b) Rehabilitation of about 10 km2 of the Port-au-Prince distributionnetwork. Normal extensions either in Port-au-Prince and theprovinces would be financed with Ed'H own funds.

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(c) The survey, feasibility study and preparation of bid documents forthe Guayamouc I hydro plant (Guayamouc II is a second site, upstream,that could be developed). The study would assess whether it wouldbe economically feasible to construct Guayamouc I in several stages.Its main function would be to impound silt (the power componentwould be small) and this can be done also with a low dam having alimited life time (say 5-10 years), but which could be raised undera next stage once this is required by the amount of silt impounded.Funds saved could, in the meantime, be applied to other hydro plantwith higher energy capabilities.

(d) Construction of a new head office. Under the second project apreliminar- -,sign haci alraady been prepared by SOFRELEC, EdH'sformer consultants; it is now being updated by the generalconsultant.

(e) General and administrative consulting services would continue asin progress under the second project. They cover all managerialoperational aspects of EdH and minor studies (e.g. under the secondproject, a study for dam and power station optimization is underway).

(f) Repair of the Peligre hydro facilities. Several hydro mechanicalcomponents have to be replaced or repaired and extensive concreterepairs are required particularly in the stilling basin.

(g) Training, to continue programs financed by the second project.

4.06 With the completion of the Varreux power station under the secondproject at the end of 1981, Port-au-Prince has an available thermal capacityof 54 MW of which 42 MW (77%) operates on Bunker C oil. To meet futurerequirements, another 14 MW net capacity is required in 1983/84 at thebeginning of the dry season (November through April of the next year), 21 MWone year later and another 21 MW in 1987. The proposed credit would financethe 14 MW in capacity required in 1983/84. Because the Varreux station cannotbe extended beyond 7 units, a new site has been planned in the western part ofthe city, near Carrefour. In order to avoid controversies as referred toabove (1.12), during negotiations it was agreed as a condition of effectivenessthat the contract for the supply of the two generating unit for Carrefourwould have to be signed.

4.07 The renovation of the Port-au-Prince network, which stagnated foralmost 2 years, is urgently required. The urban area of Port-au-Prince andsuburbs is about 35 km2 and at least three-fourths of the network is in verypoor condition. Many lines have been extended indiscriminately; conductorsare undersized and much of the equipment is obsolete. It is hoped thatstarting with renovations covering about 2 km2 in 1982, an annual objective of4 to 5 km2 can be reached in 1983, using both EdH's crews and local contractors.This appears the limit, taking into account financial and physical constraints.Credit 895-HA will finance approximately 4 km2 in 1982-83, and the third projectwould cover 10 km2 overlapping the period 1983-85; therefore, by the end of1985, about 40% of the network at Port-au-Prince would have been renovated.

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Normal extensions, of course, would continue, for which material and equipmentis being financed under Credit 895-HA. Under the second project, agreementwas reached between EdH and the telephone and television companies, that thesecompanies would renovate their networks (poles are used in common) concurrentlywith EdH.

4.08 The present head office can not adequately house EdH's personnel andserve the public. A new head office, designed to meet EdH's future require-ments is urgently needed; it should be suitable to absorb about 5 years ofmanpower growth and should be expandable to meet requirements under a nextstage. The general consultants are now finalizing the preliminary design,while final design would be executed by a local architect under supervision ofthe consultants and financed by EdH. The head office is expected to belocated on or near the premises of the old power station, near the center ofthe city. A manpower study, which inter alia, determined the size of thenew head office, was completed by the general consultant.

4.09 Since 1971, when the power facilities were completed at thePeligre dam, no inspection took place of the waterworks until recently,under the second project. Deterioration of concrete was observed in manyplaces as well as extensive damage to the floor of the stilling basin.Except for the immediate -- and already completed -- repair of an emergencygate, the safety of the structures is not in immediate danger, but theconsultants (TAMS of the USA) proposed a three-year repair program becausemost of the works can only be carried out during the dry season. A seismicstudy would also be made to determine whether or not the structures meetpresent day requirements (which appears likely, but should be confirmed).In view of the importance of facilities, the repair works have been includedin the project, provided the Government - which is responsible for irrigation,also regulated at Peligre - finances 50% of foreign costs. The consultantservices would be financed by the proposed credit to the extent that theyexceed the amount still available (about US$270,000) in the funds allocated tothe Government for the Peligre study under Credit 895-HA (US$450,000). Duringnegotiations EdH agreed that starting in 1986, periodic inspections to the damwould be conducted, in order to certify its safety, in accordance with BankGroup regulations. In addition, the Government agreed to finance 50% of theforeign construction cost required for the repair of the dam, and EdH thefull local cost.

4.10 The services of the general consultants and the administrativeconsultants would continue under the third project. Their assistance relatesto all of EdH operational, planning and construction aspects, with the objectivethat the assistance would gradually decrease, commensurately with EdH's growingcapabilities. In this respect, EdH created in 1979 a planning section which withthe help of 2 or 3 technicians/draughtsmen from the consultant, would form thenucleus of a future proper planning department which would train local staff.

4.11 Cost Estimate. The project cost estimate is shown in Annex 4.2(which also provides the revised cost estimate for the second project) andis summarized as follows:

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Local Cost Foreign Cost Total Cost------- -------US$1000…

ConstructionCarrefour diesel plant 2,477 12,093 14,570Distribution networks 700 2,800 3,500Head office 1,000 800 1,800Peligre repairs 300 1,500 1,800Sub-Total 4,477 17,193 21,670

ConsultantsCarrefour engineering 280 1,170 1,450Guayamouc surveys, design 190 727 917Peligre repairs 70 330 400General 130 1,740 1,870Administration 60 370 430

Sub-Totai 730 4,337 5,067

Training 32 200 232Total Base Cost 5,239 21,730 26,969

ContingenciesPhysical 378 1,439 1,817Price 1,333 3,831 5,164Sub-Total 1,711 5,270 6,981

TOTAL PROJECT COST 6,950 27,000 33,950

4.12 The original cost estimate was prepared during appraisal on thebasis of information provided by EdH and the consultants, and was updatedwith recent estimates submitted by HQI in December 1981; it reflectsJanuary 1982 prices and expected inflation. It excludes interest duringconstruction and import duties and taxes from which EdH is exempted. Aphysical contingency, considered reasonable, of 10% was assumed for construc-tion, except distribution networks for which zero percent was used, becausethe uncertainty factor already had been taken into account by slightly overestimating the work that probably can be performed. A price contingency hasbeen added using the following assumed inflation rates: local cost 1982onward - 10%; foreign cost 1982 - 8.5%, 1983 through 1985 - 7.5%, 1986

onward - 6%.

4.13 Financing. The total foreign exchange requirement for the projectis MUS$27.0, the foreign cost represents 79.4% of the total cost of MUS$34.0.The proposed credit would amount to MUS$26 and the financing plan is thefollowing (rounded):

Local Cost Foreign Cost Total

Government - 1.0 1.0EdH 7.0 - 7.0IDA - 26.0 26.0

Total 7.0 27.0 34.0

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The Government contribution of MUS$1 represents the estimate for the 50%portion of foreign cost for the Peligre repairs to be financed by the Govern-ment (4.09). Early in 1981 CIDA expressed interest in co-financing aboutMUS$3.5 of the project, amount which could have financed a third dieselgenerating group of 7.0 MW at the new Carrefour power plant, however, nofirm commitment has been confirmed. If in the near future, CIDA or anyother bilateral or international agency should decide to co-finance theproject, its scope could be expanded to include the third generator foroperation in 1984, at an estimated cost of MUS$3.5 (January 1982 prices;of which 86% are foreign cost), and the renovation of some additional 5 km2

of distribution network in Port-au-Prince, now planned for after 1985 at acost of US$2.0 (of which 80% are foreign costs). The bidding documents forthe project have provisions for EdH to take an option for the third generator,and for increasing the orders for distribution materials.

4.14 Retroactive Financing. Retroactive financing not exceeding MUS$0.8is proposed for consulting services since July 1, 1981 for the final designand preparation of bid documents for the Carrefour diesel plant, and for thesurveys, feasibility study, final design and preparation of bid documents ofthe Guayamouc I dam and the power station (4.05(c)).

4.15 Engineering, Construction and Management. HQI and Price Waterhousewould continue as EdH's general and administrative consultants for the projectand for management and operational matters respectively. HQI would also carryout the Guayamouc I study, because one of the partners (LGL of Canada) in theconsortium forming HQI has carried out the Peligre siltation study; on thebasis of data already available the high priority study can therefore proceedwithout delay. Final design and bid documents for the new head-office wouldbe prepared by an experienced local architect, assisted and supervised by HQI.The estimated cost of consultant services to be financed by the project isabout MUS$5.1 in 1981 prices of which about 17% constitutes the reimbursablepart (i.e. travel, per diem expenses, etc). About 470 mm of services wouldbe provided at an average cost of about US$9,000/mm (1981 prices). Duringnegotiations, EdH agreed to continue employing consultants satisfactoryto IDA, as under previous credits.

4.16 In view of the above arrangements, no particular difficulties areexpected in the execution of the third project. Local contractors' capabilitieshave increased markedly during construction of the first and second projects andthese contractors will continue to be requested to bid, mainly for civilworks. In view of the limited number of artisans available to EdH, contractorsmay also have to be engaged for renovation works in Port-au-Prince. Employmentand training of technicians for distribution works are expected to increasegradually during execution of EdH's long-term renovation program.

4.17 Implementation. During negotiations EdH agreed with the key datesfor implementing the project which are shown in Annex 4.3. These dates would beused to monitor progress during the project's execution period. The project isexpected to be completed by June 30, 1985.

4.18 Training. For the third project a modest 1983-84 fellowship program hasbeen designed by EdH's training committee in consultation with an IDA trainingadvisor as a follow-up to training under the second project. Training abroadwill be given to 13 engineers and technicians (11 in Canada, 2 in France).As before, the program to be followed would be presented in detail to IDA

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before the participants leave. The major training effort, however, takingadvantage of the expertise of consultants to provide counsel, improve curriculaand training, will be made to improve the technical capacity and productivityof the training center to meet EdH's needs at the middle level. Although thereis a lack of expertise in EdH for on-the-job training of young engineers whohave joined (and will join) the company, a more systematic approach is beingplanned, which would gradually improve the situation. For administration, theapproach is largely through on-the-job training by the consultants who havealso set up a series of courses and seminars addressing specific subjects, soas to increase managerial skills and to give a better understanding of therationale of the reorganization and modernization. A course has also beeninitiated to prepare staff for the use of a computer. An allocation ofMUS$0.2 has been included in the proposed credit to meet the training require-ments for 1983-84. As under the previous credits, EdH should carry out thetraining in accordance with a satisfactory program in consultation with IDA.

4.19 Procurement and Disbursement. Procurement of goods and servicesto be financed by the proposed credit, other than those of consultants, wouldbe procured by international competitive bidding, in accordance with the BankGroup Guidelines for Procurement. Although presently none of the projectequipment is being manufactured in Haiti, local manufacturers, if any were toemerge, would receive a preference of 15% or applicable duties, whichever isthe lower, for purpose of bid evaluation. Similarly a preference of 7.5%would be given to local civil work contractors. Disbursements would be madefor 100% of the foreign expenditures for IDA financed contracts, or IDAfinanced portion of contracts (Peligre), awarded for equipment and materialsand associated services (e.g. erection services of diesel plant) and forconsulting services and similarly for 60% of expenditures under civil workscontracts; the latter percentage represents the estimated foreign cost of suchcontracts; disbursements would be made against fully documented withdrawalapplications. Estimated credit disbursements are shown in Annex 4.4 1/. Theclosing date would be June 30, 1986 to allow for payment of retention moneyand for unforeseen delays.

4.20 Environment. As for the first and second project, specificationsconcerning maximum sulfur dioxide emission, maximum noise level and thermalpolution, as suggested by the Association, are being required for generatingfacilities. Lines will be routed to minimize visual impact.

4.21 Project Risks. Because the second project's objective of higherself-sufficiency has only been partially met, minimal risks in execution ofthe project are still not ensured, as is obvious from occurrences in 1979-80(1.12). To a large extent, EdH will depend on its consultants, who willcontinually supervise contract execution and assist EdH's staff in assuminggreater responsibilities. Up to now, participation of EdH's staff in theexecution of IDA-financed projects has been disappointingly small, in partdue to the lapse resulting from the change in consultants. This situationis expected to improve under the proposed project.

4.22 Project File. Reference is made to Annex 4.5 for the contentsof the project file.

1/ The forecast disbursement profile is based on detailed constructionprograms recently prepared by the consultant HQI, based on the expe-rience with the two previous IDA power credits to Haiti. For thisreason, the Bank's standard profiles are not applicable. The closingdate was assumed to be 9 months after project completion date.

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5. FINANCES

Financial History and Current Position

5.01 The financial condition of EdH was weak from its inception in 1971up to the time of its involvement with the Association in 1975, mostly becauseof inadequate tariffs, excessively high energy losses, non-payment of electri-city bills by the public sector, and excessive reliance on short-term debts.However, starting in 1976, and particularly since 1978, EdH's financesimproved gradually as a result of increased operating efficiency and thechange in tariff structure coupled with increased rates, including the fuelsurcharge (which, since 1979, is adjusted on a quarterly basis), EdH's averagerevenue per kWh rose from USg6.5 in 1978 to an estimated US11.2 in 1981, i.e.an increase of about 20%/a. In spite of rates of return on revalued assetslower than the covenanted figures in 1979 and 1980 (4.4% and 5% instead of 7%and 7.5% respectively), EdH was able to self-finance about 54 % of its invest-ment program in those two years, due both to lower-than-expected constructionexpenditures following delays in the second project (1.12) and to low debtservice charges: although concessionary power loans or grants to the Govern-ment from IDA, CIDA and KfW are on-lent to EdH on commercial terms, relatedinterest charges are capitalized and deferred during project construction.The Association agreed to grant waivers of the rate of return covenant forboth years, as further rate increases would only have inflated EdH's alreadycomfortable cash position.

5.02 Estimated results for 1981 show a rate of return of 7.4%, i.e.,slightly lower than the covenanted 8%, and a substantial cash surplus (MUS$9estimated), as a result of rate increases (18% in August 1980 plus subsequentquarterly fuel surcharge adjustments), a low debt service burden and animproved working capital position (5.09). These cash surpluses, however, areonly temporary and will be absorbed as EdH's investment requirements riserapidy from 1983 onwards. As of end-1981, EdH's debt-equity ratio was esti-mated at a healthy 32:68.

Prospects for FY82

5.03 According to EdH's latest financial forecasts (Annexes 5.1-5.3) andin order to reach the minimum 8% rate of return covenanted under Credit 895-HA,the company raised its basic tariff rate by about 10%, effective May 1, 1982,in line with the expected rate of local inflation. This would enable EdH toself-finance about 50% of its investment program for 1982 (estimated atMUS$27.5).

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Financing Plan

5.04 EdH's financing plan for 1982-86 is summarized below (Annex 5.2):

Financial Requirements MUSs

Construction Expenditures (excl. IDC):

On-going works 25.9 9P -posed Third Project 34.0 11Other future works 231.6 79

Total construction expenditures 291.5 99

Changes in working capital 1.9 1

Total financial requirements 293.4 100

Sources of Financing

Gross internal cash generation 129.7 44Less: net debt service (29.2) (10)

Net internal cash generation 100.5 34

Borrowings:Existing loans 20.1 6Proposed IDA Credit 26.0 10Other future loans 1/ 137.5 47

183.6 63

Government contributions 9.3 3

Total sources of financing 293.4 100

5.05 Financial forecasts show that, for EdH to earn 8% on its revaluedassets during 1982-86, its average revenue per kWh (including fuel surcharge 2/)need only be raised by about 10%/a on average, i.e. maintained constant inreal terms vis a vis local inflation (assumed at 10%/a in the forecast). Thecorresponding revenues would enable EdH to contribute internally about 34%towards its investment program during the period, i.e., not only cover all ofthe program's local component (estimated at 23%), but some portion of theforeign component as well; the latter is subject, however, to macro-economicvariables, since it involves conversion of local to foreign currencies. Duringnegotiations, the Government and EdH agreed to maintain the minimum 8% rate ofreturn covenant under the proposed credit. The average tariff forecast at distri-bution levels for the period 1982-86, in 1981 constant prices, including fuelsurcharge, is approximately 13 USO/kWh, about equal to the long run marginal cost.

1/ Including possible future loans from KfW and IDB.

2/ Assuming fuel prices will increase by 3%/a in real terms (aboveinternational inflation).

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5.06 Most of the remainder of EdH's financing requirements would befinanced by borrowings: existing loans--mostly the undisbursed portions ofIDA Credit 895-HA and the on-lent proceeds of the CIDA grant--will cover theforeign component of on-going works (mainly the second project), while theproposed third IDA Credit would cover the foreign component of the thirdproject. Other future loans include (i) possible future KfW financing,totalling about MUS$ll between 1982 and 1984 mainly for small hydro stations(Caracol and Saut Mathurine) and associated distribution; (ii) a possible IDBloan in 1983, of some MUS$52 to finance the foreign cost of the la Chapellehydro project; and (iii) unidentified future foreign loans from 1984 onwards,of some MUS$75, to finance the foreign component of other future generationprojects (excluding Guayamouc I) 1/ and the transmission line from La Chapelleto Peligre. The Association's involvement is expected to be instrumental inthe mobilization of such other future financing; processing of the proposedthird Credit should thus not be made contingent on the formalization of otherfuture loans. About 3% of EdH's total financing requirements would be coveredby Government contributions (estimated at about MUS$9 over the 5-year period)which would consist mainly of the reimbursement by the Government of most ofthe interest charges paid by EdH on the on-lent proceeds from the CIDA grantand the KfW loans 2/, as agreed under the respective subsidiary loan agreements,plus the Government's contribution towards the cost of the Peligre repairs(4.09).

5.07 The proposed third IDA Credit of MUS$26 would be made to the Govern-ment of Haiti on standard IDA terms and on-lent to EdH at the Bank rate pre-vailing at the time of Board presentation 3/ 4/ and a maturity of 20 years,including a 4-year grace period. A subsidiary loan agreement, acceptable to IDA,would have to be signed as a condition of effectiveness for the proposed credit.An additional loan is assumed for an amount of MUS$3, on similar terms, tofinance part of the foreign cost of the third generating set at Carrefour(4.13). Assumed terms and conditions for other future loans are shown inAnnex 5.7.

Future Finances

5.08 EdH's financial situation is expected to remain healthy during theforecast period. Both its annual debt service coverage and debt/equity ratioswould remain within a comfortable range (respectively 3.1 and 51:49 by 1986).

1/ Essentially, 42 MW in extra diesel capacity at Carrefour (1984, 1985 and1987), Verrettes, and Sites A177 and A166.

2/ 100% for CIDA and 95% for KfW, to be used to finance rural electrificationprojects.

3/ Interest charges would be capitalized during construction; financialprojections assume a rate of 11.6%.

4/ Local inflation was estimated at 15% in 1981 and is expected to average10% p.a. between 1982 and 1986. The Banque de la Republique d'Haiti(Central Bank) charges interest at a rate of 8% p.a. on EdH's revolvingaccount.

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To provide the Association with the opportunity to review the terms of anyfuture borrowings, the provision under previous credits that EdH would notincur any long-term debt without the Association's agreement, unless itsinternal cash generation covers its maximum future debt service at least 1.5times, would be repeated under the proposed credit. Similarly the short-termdebt limitation (to one-sixth of annual cash operating expenses) covenantunder Credit 895-HA has been maintained.

5.09 In spite of the government's obligation, under Credit 895-HA, toensure prompt payment of electricity bills by its Departments and agencies,public sector arrears stayed at a very high level during 1979, 1980 and 1981,reaching over MUS$2.0 (equivalent to more than one year of public billings)in December, 1981. To ensure continued prompt payment of governmentelectricity bills, the provision under Credit 895-HA that the governmentshould take all measures to ensure prompt payment of government electricitybills under arrangements satisfactory to the Association, has been main-tained under the proposed credit. EdH's total accounts receivables, whichwere equivalent to 90 and 110 days of total billings at end-1979, 1980 and1981 respectively, mainly because of large public sector arrears, are thusexpected to decrease to 60 days by 1982, a level in line with EdH's billingcycle and collection procedures.

5.10 To ensure that only technically, economically and financially soundprojects are undertaken in the power sector, the current major expansionlimitation to 1% of net fixed assets in operation stipulated under Credit895-HA has been maintained under the proposed credit; however, it also hasbeen complemented by a limit on unbudgeted village electrification (to anaggregate annual amount not exceeding 0.2% of net fixed assets) in order toavoid an excessive strain on EdH's financial resources (1.20).

5.11 Finally, it is essential that EdH follow a sound cash managementprogram and devote all of its financial resources to the development of thesector, if it is to self-finance a satisfactory proportion of its investmentprogram. The current provision, under Credit 895-HA, that EdH's resourcesshould not be put to any use other than for the execution of its constructionprogram, the payment of its debt service, and its operations, has been maintainedunder the proposed Credit. Furthermore, in light of EdH's expected substantialtemporary cash balances in the next three years, during negotiations assuranceswere received that EdH would be allowed to maintain its liquid funds in interest-bearing accounts or in investment accounts not exceeding six months maturity.

Performance Indicators and Reporting

5.12 During negotiations EdH agreed with the performance indicators shownin Annex 5.4 which define targets for improvement in EdH's operations andwould be used to monitor EdH's performance during project execution. EdHalso agreed to prepare and send to the Association quarterly progress reportsand such other reports as the Association may reasonably request, includinga project completion report.

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6. ECONOMIC ANALYSIS

Network Evaluation

6.01 Similar to the first and second project, the third project is amixture of renovations, replacements and extension. The network is of theradial type, relay protected at higher voltages (12.47 kV and 69 kV) andgenerally fused below this level. Some reclosers are used for principal linesand medium-sized industries. Although some KfW-financed networks in theprovinces are of the European type, the bulk of the networks are in accordancewith American standards. During the March 1981 sector meeting it was agreedthat future networks will be designed according to American standards, butconstruction would be adjusted in certain respects to allow for more laborintensive construction methods in order to decrease the imported components,reduce cost and create opportunities for local inputs. This assures that thenetwork renovations and extensions would be at least cost to the Haitianeconomy.

Comparison of Generating Developments

6.02 KfW continues to develop a number of small hydro sites, comparingthem with diesel alternatives using the discounted cash method of analysis.In view of the high diesel oil prices (US$47/bbl in Haiti), the cost of smallhydro stations (500-2000 kW), up to US$4,OOO-5,000/kW--and even higher,depending on the plant factor, i.e., availability of water--can now bejustified.

6.03 The CIDA-financed study of Haiti's hydro resources (1977) hasidentified the Artibonite river basin as the only river where additional hydrosites of reasonable size can be developed. The UNDP-financed siltation studyof this river, and in particular the multipurpose Peligre reservoir (irrigationand power), has shown, however, that siltation will remain a major problem inthe basin unless adequate counter measures are taken. The recommended measureswould extend the storage life of the Peligre reservoir, but in the longer term(20-30 years) any power development can be expected to convert from theregulated type to the run of the river type, requiring increasingly morethermal plant. Another possibility of further extending the useful life ofthe reservoir would be to reach agreement with the Dominican Republic on theconstruction of a dam (with or without a power station) in the region of theborder. Reforestation, improvement of embankments and similar conservationactions, even if executed on a large scale, would alleviate, but not overcomethe problem.

6.04 It is obvious from the above that the optimization of least costgeneration developments on the Artibonite river is difficult because of theuncertainties inherent in the future estimates of the degr-ee of siltation.Because none of the hydro plants identified can be completed before 1986,no other alternative than extending EdH thermal generating capacity can beconsidered up to that time.

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6.05 The consultants, using diesel developments as the base case, havecompared 7 alternative hydro developments by mutating the six identifiedhydro developments to obtain least cost. Because the estimated 1981 hydroplant costs are relatively low, ranging from some US$2,000/kW to US$3,500/kW,in comparison with any thermal development the conclusion was obvious: allhydro stations should be completed as soon as possible, but the last plant notlater than 1988. In view of the total cost of some MUS$230 for an installedhydro capacity of about 90 MW, expenditures averaging about MUS$30/a for hydroalone (i.e., not taking into account the thermal back-up capacity), are beyondthe short term financial capacity of Haiti. For this reason it was reasonablyassumed that the last plant would be completed by 1990.

6.06 The forecast of required generation and expected maximum demand tobe used for planting-up purposes, in accordance with the econometric modelwith a GDP growth of 4.0% for 1981-83 and 4.3% for 1983-86 (3.10), indicatesan average 1981-90 growth of 13.1%. As can also be observed (Annex 6.1), thethermal plant would annually, on average, not exceed 3,000 hours of operation.As a consequence, it is obvious that low capital cost thermal plant is requiredfor the least cost development scheme. The capacity balance (Annex 6.2) hasbeen prepared--similar to the first and second project assumptions--for aone-in-five (20% probability) dry year. It appears improbable --until at leastthe early nineties--that Haiti could financially afford to invest in generatingplant to obtain a reliability of supply meeting, say, 93-95% of requirements(in such case it would only once in 20 years not meet requirements, should allreserve plant be inoperable). The forecast, of course, has an implicitreserve component because of the relatively high assumption for the GDP growth;this requires annual review of the forecast ts adl"jt development as closelyas possible to real growth (3.10). On this basis about 100 MW additionalthermal plant would be required by 1990, mainly for capacity reasons. Thethermal plant would only reach, on average, a plant factor of some 50% duringthe dry season of an extremely dry year (some 3,000 hours during the 7 monthsof the longer than normal dry period).

6.07 The least cost development as defined above (6.05; Annex 6.2) hasthree sub-alternatives i.e., whether to meet thermal generation requirementsby medium speed, low speed, or gas turbine plant (or any combination); thehydro development being common to any of the alternatives, can be omitted fromthe comparison. Special circumstances rule the present case:

(a) Operating hours of thermal plant, on average, is expected to below, i.e., not exceeding some 3,000 h/a.

(b) The development program, although defined in accordance with leastcost, is not assured until financing had been obtained for theplanned hydro plants.

(c) In any event, hydro resources are limited and later this decade orearly in the next decade a larger thermal plant has to be introduced,e.i. either large diesels (20 MW and up) or steam-electric coalfired plant (probably having a unit size of not less than 50 MW).Consequently, older plant would move practically permanently to astand-by position. In the event, operating hours of the old thermalplant would continue to be very low.

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Id) Demand up to 1985 would probably be too low (less than 100 MW) towarrant the intro:luction of gas turbines, but it is more importantto note that no new technology should be introduced before operatorshave been thoroughly trained in operating and maintaining dieselplant.

6.08 The comparison of medium speed and slow -.eed diesels, as alterna-tives for the new thermal plant, to be added untii i90, carried out by HQIand discussed with EdH showis (Annex 6.3) that up to ac least a discount rateof 16%, the medium speed diesels would constitute the lower cost alterna-tive. Although slow speed diesels are expected to be more reliable thanmedium speed diesels, it would not be warranted--in view of the low averageannual hours of operations--to install for this reason more medium dieselcapacity than slow speed diesel capacity; sufficient time for repair andoverhaul would be available. In order to leave no doubt as to the neec toinstall medium speed diesels, rather than slow speed diesels, the comparisonwas sLanted in favor of slow speed diesels, assuming that fuel cost of slowspeed diesels would be 95% of similar cost of mediuii speed diesels -- whileonly 97-98% appears, in practice, normally attainabie. Lub-oli consumptionwas set at 80% -- although in practice 85-90' appears more probable. Operationand maintenance cost was set at 70% -- whether this would be attainable at all,in the light of maintenance problems experienced up to now in Haiti, appearsrather doubtful. Finally, in view of probable differences in economic life,15 years was assumed for medium speed diesels and 20 years for slow speeddiesels. Because larger thermal plant will have to be introduced early in thenext decade, largely replacing existing plant, the development program beyond1990 would substantially be common to any of the alternative developmentsprior to 1990 and, for this reason can be ommitted from the comparison.However, so as to take account of uncertainties in this assumption, systemeffects were considered equivalent to replacement of the medium speed dieselsevery 15 years and every 20 years of the slow speed diesels, for 60 years (thecommon multiple), while 1990 operational cost would remain constant at the1990 level for a period of 10 years -- thus further slanting the comparisonin favor of slow speed diesels.

6.09 On this basis, a sensitivity analysis shows that, at the opportunitycost of capital, estimated to be 12% in Haiti, and with a total fuel andoperating and maintenance cost of slow speed diesels of about 95% of those ofmedium speed diesels, the capital cost of slow speed diesels should not exceedabout 120% of the capital cost of medium speed diesels; in practice cost isexpected to be in the order of 150-160%. Conversely, should the capital costof slow speed diesels be 50% higher than those of medium speed diesels, itstotal fuel, operation and maintenance cost should not exceed some 77% of thoseof medium speed diesels, which is impossible.

6.10 As indicated above (6.07), gas turbines can be considered as analternative for plant to be installed during 1986-1990. The hours of operationof existing plant could be increased to, say, an average of 5,000 h/a forenergy reasons, the gas turbines providing the capacity reserves (they areexpensive to operate, but would not be required to generate electricity inany substantial amounts). By 1985, a total of 77 MW of Bunker C oil plantwould be available; operated at 5,000 h/a, its production would be 385 GWh/a.This is well in excess of the required thermal generation during an average

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wet year rising to 225 GWh for 1990, and about equal to the 400 GWh required,should 1990 (or any previous year) be a dry year. The 84 MW capacity in gasturbines required would cost about MUS$34 (at $400/kW), compared with 70 MWin diesel plant costing about MUS$53 ($750/kW). The comparison (Annex 6.3)shows that also in this case, the combination of medium speed diesels, followedby gas turbines, would be the most economical solution for discount rates upto at least 16% although the difference in present values declines. 1/ Withtotal fuel, operating and maintenance cost of slow speed diesels of about95% of those of medium speed diesels, the capital cost of slow speed dieselsshould not exceed about 125% of the capital cost of medium speed diesels (inpractice expected to be some 150-160%). Conversely, would capital cost ofslow speed diesel be 50% higher than those of medium speed diesels, its totaloperational cost, including fuel should, not exceed 87% of those of mediumspeed diesels.

6.11 In view of the above considerations and taking into account theuncertainties in Haiti's hydro developments, as well as the forecast relativelyhigh growth of requirements, it is concluded:

(a) EdH's thermal generation requirements should be met by Bunker C oilfired diesel plant until about 1985. A new diesel plant should beconstructed to accommodate 5 units, each of of about 7 MW net.

(b) The least cost development indicates that gas turbine plant shouldbe introduced. However, no technological concept new to Haitishould be introduced before operation and maintenance of existingplant has been improved adequately, reaffirming about 1985 as theyear after which gas turbine plant can be considered. However,financing of new hydro plant is by no means assured and, shoulddelays occur, generation of existing and new thermal plant wouldmarkedly increase and continued addition of diesel plant may berequired to meet energy requirements, rather than capacity require-ments.

(c) The least cost development plan should be reassessed annuallyto adjust development as closely to real growth and to the paceof actual construction of new hydro plants.

Internal Economic Rate of Return on the 1981-86 Investment Program

6.12 As the proposed project consists of several components of EdH invest-ment program, components to which it is not possible to allocate benefitsseparately, the internal rate of return has been calculated for the investmentprogram as a whole.

1/ Assuming that oil prices would rise 3%/a in real terms, does not changethis conclusion.

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6.13 The cost streams (Annex 6.4) consists of EdH's investment programexpenditures (Annex 4.1) and the related fuel, operating and administrativecosts, expressed in 1981 constant prices. It is not possible to make directestimates of the benefits resulting from the increased availability of elec-tricity supply, such as its effects on the expansion of industrial and commer-cial activity, the increased employment opportunities generated and the socialbenefits of public lighting and domestic supply. Consequently, the incre-mental revenues attributable to the investments are used as a minimum estimateof benefits, since it is known that the public will pay at least this much topurchase electricity. The benefit stream in 1981 and subsequent years is theincrease in EdH sales above their 1980 level, valued at the deflated price perkWh, ranging from the 1982 rate of USU13.2/kWh to USJ13.0/kWh by 1986, afterwhich the rate is assumed to remain constant in real terms.

6.14 On the above basis, the return on investment is 13.5% (Annex 6.4),compared with the opportunity cost of capital for Haiti, estimated to be 12%.

6.15 A sensitivity analysis was carried out to measure the impact ofmajor uncertainties underlying the return calculation. Should fuel costincrease by 3%/a, or should the average rates, in real terms, remain at the1981 level of about USll/kWh, the rate of return would be 10%. With respectto percentage changes in cost and benefits, the analysis shows the following:

Parameters

---------- Change from Base (%) -----------20 -10 0 +10 +20----------- Rate of Return (%) -----------

Benefits (Revenues) 9.0 11.2 13.5 15.6 17.8Capital Cost 16.1 14.6 13.5 12.4 11.4Operation and Maintenance(including fuel) 15.6 14.6 13.6 12.5 11.5

Total Cost 18.7 15.8 13.6 11.4 9.7

Only in the extreme case of benefits (revenues) decreasing by some 15-20%, ortotal cost (capital, fuel maintenance and operations) similarly increasing,would cause the rate of return to drop to 1.5-2 percentage points below theopportunity cost of capital.

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7. AGREEMENTS REACHED AND RECOMMENDATION

Conditions of Effectiveness

7.01 (i) The contract for the supply of two generating units for Carrefourwould have to be signed (4.06);

(ii) A subsidiary loan agreement satisfactory to IDA would have to besigned between the Government and EdH (5.07).

Other Conditions

7.02 During negotiations, assurances have been received on the following:

(i) EdH investment limitation covenant (Credit Agreement Section 4.01,Joint Project Agreement Section 4.06) would be expanded to stipulatethat the aggregate annual amount of unbudgeted village and ruralelectrifications be limited to 0.2% of net revalued assets, unlessIDA otherwise agrees (1.20);

(ii) A review study of EdH's tariff structure and rates would be completedby September 30, 1982 (1.22);

(iii) The provisions under Credit 895-HA for the annual audit of EdH'saccounts and financial statements including the timely furnishingof the information to IDA (Joint Project Agreement Section 4.02)would be applicable to the proposed project (2.11);

(iv) The position of Internal Auditor would be added to the positionsof General Manager and Directors (Joint Project AgreementSection 3.01), whose qualifications are subject to acceptance byIDA (2.12);

(v) The undertaking in the agreement for Credit 895-HA (Joint ProjectAgreement Section 3.02) with respect to losses would be repeatedfor the proposed project; the performance in this respect should bea loss target of 27% by December 1982, decreasing by not less than2% in each subsequent year (as referred to the result during theprevious year), until a level of 15% is reached (3.04);

(vi) The study of the Guayamouc Hydro Station would be executed underterms of reference acceptable to IDA (4.05(c));

(vii) The Government would finance 50% of the foreign construction costrequired for the repair of the Peligre facilities and EdH the fulllocal cost (4.09);

(viii) EdH would continue to employ consultants satisfactory to IDA (JointProject Agreement Section 2.02) (4.15);

(ix) EdH would monitor execution of project in accordance with anagreed schedule of key dates (4.17);

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(x) A rate of return of 8% should be reached for 1982 andonwards (5.05);

(xi) The provisions under Credit 895-HA (Joint Project Agreement Section4.05) for long-term and short-term debt limitation would alsoapply to the proposed project (5.08);

(xii) The provision under Credit 895-HA (Credit Agreement Section 4.03)for the prompt payment of all Government Departments' currentbills, would also apply (5.09);

(xiii) EdH would be allowed to maintain its liquid funds in interest-bearing accounts or in investments not exceeding six months tomaturity (5.11);

(xiv) EdH would agree to an acceptable set of targets to improve itsoperations (5.12); and

(xv) EdH would make satisfactory arrangements for periodic inspectionsof the Peligre dam, starting in 1986, in order to certify its safety,in accordance with Bank Group regulations (4.09).

Recommendation

7.03 With the above assurances, the project would be suitable for anIDA Credit of MUS$26 equivalent, to the Republic of Haiti, to be on-lent toEdH for a period of 20 years, including a 4 year grace period, at the annualinterest rate of standard Bank loans.

June 14, 1982

ANNEX 1.135

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Electricity Tariffs as of May 1, 1982

Basic Tariff Fuel Surcharge Total

Residential/Commercial customersand Government

First 30 kWh USi 10.66 USU0.17 USi 10.83Next 170 kWh 12.66 0.20 12.86Above 200 kWh 14.15 0.22 14.37

Industrial customers

Low voltage (load <45 kW) 9.55 0.15 9.70(Fixed charge: US$1 kW)

Medium voltage (load <45 kW)- peak hours 1/ 10.51 0.17 10.68- off hours and Sundays 4.28 0.78 5.06(Fixed charge: US$1.1/kW)

High voltage- peak hours l/ 9.55 0.15 9.70- off hours and Sundays 3.79 0.70 4.49(Fixed charge: US$0.771kw)

Public Lighting 16.98 0.27 17.25

1/ Between 7 am and 9 pm.

May 21, 1982

HAITIELECTRICITY D-HAITIORGANIZATION CHART

PRESIDENT OFTHE REPUBLIC

BOARD OFDIRECTORS

I

GENERALMANAGER

ASSISTANT . INTERNALTO MANAGER AUDITOR

INSPECTOR

GENERAL

PLANNING TECHNsIICAL ADMINISTRATIVE

DIRECTOR DIRECTOR DIRECTOR

_______________________ _ lLEGAL

[ I l ~~~~~~~~~~~COUNSELOR______PLANNING______________________ CETNPROTECTION AND PERSONNEL COMMERCIAL _

SUPERVISI NJ MAINTENANCE COMPTROLLER PURCHASING

J GENERAL | _lPPROVINCESR SWORKSHOPS B - 3

World Bank 23140

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Historical Power Data 1/

(Port-au-Prince)

Fiscal Year 1972 1973 1974 1975 1976 1977 1978 1979 1980

SALES (GWh)

Residential 19.9 24.3 28.2 31.8 41.9 58.7 2/ 64.82-' 72.0 2/ 69.5Commercial 12.9 12.7 10.6 9.9 11.6 10.7Industrial 17.9 26.3 36.9 45.3 56.3 60.0 81.0 86.9 100.8Public Lighting 2.7 3.3 4.8 6.0 7.0 6.5 6.3 6.5 7.1Others 5.1 5.6 5.9 6.5 6.4 6.7 7.9 7.6 9.2TOTAL 58.5 72.2 86.4 99.5 123.2 131.9 160.0 173.0 197.3

Losses (GWh) 32.9 35.6 42.6 48.3 40.6 41.0 58.0 77.1 74.0Losses % 36.1 33.1 33.1 32.7 24.8 23.7 26.6 30.8 27.3 -

Generation (GWh) net 91.4 107.8 129.0 147.8 163.8 172.9 218.0 250.1 271.3Gross Maximum Demand (MW) 21.4 24.9 27.9 32.4 35.3 37.2 43.5 51.0 54.0Number of Consumers (1,000) 27.7 30.1 32.6 34.0 36.6 39.6 43.4 46.8 48.3

GROWTH DATA (%/a)

Residential - 22.1 16.0 12.8 31.8 9.7 10.4 11.1 11.4Commercial - -1.6 -16.5 -6.6 17.2Industrial - 46.9 40.3 22.8 24.3 6.6 35.0 6.3 22.9Public Lighting - 22.2 45.5 25.0 16.7 -7.1 -3.1 3.0 9.2Others - 9.8 5.4 10.2 -1.5 4.7 17.9 -3.8 21.0

TOTAL - 23.4 19.7 15.2 23.8 7.1 21.3 8.1 14.0

Losses - 8.2 19.7 13.4 -15.9 1.0 41.5 32.9 -4.2Generation - 17.9 19.7 14.6 10.8 5.6 26.0 14.7 8.4Maximum Demand - 16.4 12.0 16.1 9.0 5.4 16.9 17.2 5.9Consumers - 8.7 8.3 4.3 7.6 8.2 9.6 7.8 3.2

SOURCE: Facturation EdH.

1/ Data before 1977 has been reanalyzed and adjusted since the appraisal of the second project. H2/ No breakdown available for these years.

August 18. 1981

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Distribution of Electricity Consumption in Port-au-Prince.. Estimates for 1981

kWh/m per Annual Class Consumption Annual Class Revenue Revenue

Numbers % Connection GWh % 103 US$ % USt/kWh

Residential

0-29 kWh/m 24,000 43.0 20 5,760 2.5 819 3.5 14.2

30-499 kWh/m 24,455 43.9 192 56,327 24.9 6,249 26.3 11.1

500 kWh/m and up 2,244 4.0 617 16,615 7.4 2,003 8.5 12.1

Sub-Total 50,699 90.9 129 78.702 34.8 9,071 38.3 11.5

Commercial

Light only 2,407 4.3 190 5,488 2.4 603 2.5 11.0

Light and power 982 1.8 575 6,776 3.0 815 3.5 12.0

Sub-Total 3,389 6.1 302 12,264 5.4 1,418 6.0 11.6

Industry

Pumping 59 0.1 7,310 5,175 2.3 412 1.7 8.0 OD

0-44 kW 736 1.3 9,070 80,106 35.5 6,809 28.7 8.5 1

45 kW and up 184 0.3 14,109 31,153 13.8 3,464 14.6 11.1

Sub-Total 979 1.7 30,489 116,434 51.6 10,685 45.0 9.2

Government, etc.

Light only 520 0.9 730 4,555 2.0 553 2.3 12.1

Light and power 236 0.4 1,990 5,636 2.5 699 3.0 12.4

Sub-Total 756 1.3 1,123 10,191 4.5 1,252 5.3 12.3

Street lighting - - - 8,407 3.7 1,269 5.4 15.1

TOTAL: 55,823 100.0 225,998 100.0 23,695 100.0 10.5

SOURCE: Budget EdH (FY80/81); recently revised estimates (Annex 5.1) are based

on a higher fuel surcharge

August 15, 19o1l

- 39 -

HAITI ANNEX 3.3

ELECTRICITE D'RAITI

THIRD POWER PROJECT

Existing Generating Facilities as of July 1981

Year of Capacity kW

Location Construction Nameplate Effective R.P.M.

1. Port-au-Prince

Hydro

Peligre 1972-74 47,000 44121.6 MW 240(wet/dry)

Thermal (Diesel-Oil)

Old Power Station

Units 5-6 1942-56 2,000 1,400 720

Unit 8 1937 850 700 257

Unit 9 1937 790 700 257

Unit 10 1949 1,980 1,600 225

Units 11, B1, B2 1942-55 3,000 2,250 720

Unit B4 1970 2,500 2,000 900

2 Emergency groups 1977 4,000 3,200 1,800

Sub-Total 15,120 11,850

Delmas

4 Units 1977 10,000 8,000 900

Varreux 1/

Units 1-2 1977 5,500 4,700 600

Units 3-4 1977 15,400 13,300 600

Sub-Total 20,900 18,000

Total Port-au-Prince area 98,520 81,850 (wet)59,450 (dry)

2. Provinces

Cap. Haitien 2/ 1955-81 6,675 6,675 450 to 1,800

Gonaives 1940-75 2,700 1,750 720 to 1,800

Saint Marc 1960-74 1,150 900 1,200 to 1,800

Drowet Hydro 3/ 1978 3,000 2,000 n.a.

Les Cayes 1975-80 1,780 1,500 1,200 to 1,800

Petit Goave 4/ 1974-81 1,280 1,200 1,200 to 1,800

Port de Paix 4/ 1,000 900 1,200 to 1,800

Jacmel Hydro n.a. 204 150 n.a.

Thermal 5/ 1977-81 1,350 1,230 1,200 tp 1,800

Jeremie 4/ 1,310 1,100 1,200 to 1,800

Thomonde n.a. 30 30 n.a.

Hinche 1977-80 335 250 1,800

Arcahaie 1978 225 200 1,800

Other towns 6/ 1979-81 1,580 1,400 1,800

Total Provinces 22,619 19,285

TOTAL COUNTRY: 121,139 101,135 (wet)

78,735 (dry)

1/ Varreux operates on Bunker C fuel.2/ Cap Haitien: Includes 4 x 850 kW units to be operational in October 1981, and

2 x 825 kW mobile units to be moved to Gonaive and Les Cayes in October 1981.

3/ Drouet hydro serves Conaives and Saint Marc.

4/ Includes new 400 kW units to be operational in October 1981.

5/ Inclues new 480 kW unit to be operational in October 1981.

6/ (Mirebalais connected to Peligre) Includes St. Louis (110 kW), St. Michel (200 kW),

Quanaminthe (200 kW), Trou du Nord (110 kW), Marchand (130 kW), Duvallier Ville

(250 kW), Belle-Anse (30 kW), Thiotte (60 kW), Thomazeau (110 kW), Ennery (30 kW),

Aquin (200 kW), Grand Goave (90 kW), Bainet (60 kW).

October 9, 1981

- 4o -

HAITI ANNEX 3.4

ELZCTRICITR D' HAITI

THIRD POWER PROJECT

Forecast Eneray Balances (QWh)

Actual -------------------- Forecast -------------- -1980 1981 1982 1983 1984 1985 1986

I. Port-au-Prince Areaa. Avra5e Hydrologieal Year

(i) salesResidential and Coiuercia1 80.2 92.1 103.5 116.3 131.8 149.4 169.3Industrial 100.9 113.0 130.0 149.6 173.9 202.2 2351Public Lighting 7.1 8.5 9.0 9.5 10.1 10.6 11.1.overnment and Others 9.2 9.5 10.1 10.9 11.6 12.5 13.4

Total Sales 1/ 197.3 223.1 252.6 286.3 327.4 374.8 428.9LossesTfor.cast X) (27.3) (27.0) (27.0 (25.0) (23.0) (21.0) (19.0)Losses (Distribution, trans-

mission and station supply) 74.0 82,5 93.4 95.4 97.8 99.6 100.6jG,sration R":uired (Gross) 1/ 271.3 305.6 346.0 381.7 425.2 474.4 539.5To T. Suppli :

In Wet Season 52X 158.9 179.9 198.5 221.1 246.7 275.3In Dry Season 48X 146.7 166.1 183.2 204.1 227.7 254.2

Hydro-GoenerationWet Season 60X 126.0 133.0 133.0 133.0 133.0 165.0Dry Season 40X 108,0 89.0 89.0 89.0 89.0 110.0Total Hydro 220.1 234,0 4/ 222. 222.0 222.0 222,0 275.0

Thermal GenerationWet Season 31.9 46.9 65.5 88.1 113.7 110.3Dry Season 38,2 77.1 94.2 116.0 138.7 144.2Total Thermal =2 7 5 19.7 =204.1 232.4 -23-TI

Thermal Generation SchedulePlants Fired with Diasel Oil 2/ 26.6 39.7 38.4 34.7 25.2 25.5Plants Fired with Runker-C 3F 45.0 84.3 121.3 169.4 227.2 229.0

(ii) Maximum DamandRequired Generation (CWh) 1/ 271.3 305.6 346.0 381.7 425.2 474.4 529.5Load Factor X 61 61 60 60 59 58 57Maximum Demand (MW) 51 57 66 73 82 93 106

Available Capacity (MW) S/ 84 84 84 98 105 119 135

System Reserve (MW) 33 27 is 25 23 26 29(Minimum Required Reserve, MW) 6/ (18) (18) (18) (18) (19) (19) (20)Reserve as X of Demand - 47 27 34 28 28 27

b. Dry Years (1 in 5)Generation Required (Groca) 305.6 346.0 381.7 425.2 474.4 529.5To be SuppGied

In Wet Season (5 months - 441) 134.5 152.2 167.9 187.1 208.7 233.0In Dry Season (7 months - 569) 171.1 193.8 213.8 238.1 265.7 296.5

Hydro GenerationWet Season 609 118.0 118.0 118.0 118.0 118.0 118.0Dry Season 409 79.0 79.0 79.0 79.0 79,0 79.0Total Hydro 197.0 197.0 197.0 197.0 197.0 197.0

Thermal GenerationWet Season (5 months) 16.5 34.2 49.9 69.1 90.7 115.0Dry S.ason (7 months) 92.1 114.8 134.8 159.1 186.7 217.5Total Thermal 108.6 149.0 184.7 228.2 277.4 332.5

Thermal Plant FactorWet Season (%) (7.3) (15.1) (18.0) (22.8) (25.6) (32.5)Dry Season (X) (29.0) (36.2) (34.7) (37.5) (37.7) (43.9)Overall (X) (20.0) (27.4) (27.7) (31.4) (32.6) (39.1)

2. ProvincesSalesResidential and Commercial 12.2 15,8 19.0 21.8 23.9 26.5 29.0Industrial 4.5 5.8 6.9 8.0 8.7 9.6 10.6Public Lighting 1.6 1.8 2.1 2.4 2.7 2.9 3.3Government and Others 1.2 1.7 2.1 2.4 2.7 2.9 3,2Total Sales 19.5 25.1 30.1 34.6 36.0 41.9 4641Losses

(Forecast X) (2b.5) (28.0) (28.0) (26.0) (24.0) (22.0) (20.0)Losses 7.7 9.8 11.7 12.2 12.0 11.8 11.5Generation Required (Gross) 27.2 34.9 41.8 46.8 50.0 53.7 57.6To be Supplied by:

Hydro 8.2 8.2 8.2 8.2 24.2 24.2 24.2Thermal 19.0 26.7 33.6 38.6 25.8 29.5 33.4

3. Total EdH3 ales 216.8 248.2 282.7 320.9 365.4 416.7 475.0Losses 81.7 92.3 105.1 107.6 109.8 111,4 112.1Gross Generation 298.5 340.5 387.8 428.5 475.2 52891 587.1(Losses %) (27.4) (27.1) (27.1) (25.1) (23.1) (21.1) (19.1)

1/ Sales and gross generation forecast for financial analysis.2/ Includes old power station (Janvier) and Dalmos.2/ Includes Varreux and future sew plants.7/ Peligre generation for 1981 estimated on actual operation up to June 1981. This year has boon

a especially wet one.5/ Total installed capacity, see Annex 3.36/ Minimum required reserve: largest unit (Peligre) + 5% derand.

October 9. 1981

- 1 -

HAITI ANNEX 4.1

ELECIR2CIE I1~~~~~~~~ HAITI ~~~Page 2 of 2ELECTRICTE D' HAITIT2_j -.

THIRD P0OWE PROjECT

1981-86 De-elop-,tt Progrs' E4pendirures Schndsle (letain)

Work inProgres ------ 198SI----- ------ 1982 ------ ------ 1983 ------ ------ 1984 ------- ------- 1985 ------ ------ 1986 ------- ------ To-I 1981-86 ----------

1980 LC FC LC 7.C LC FC tC FC tC TC LC FC LC FC Total

Cenerat ionPort -au-PrinceVarreux 1 2,097 390 8,495 480 2,240 870 10,735 l1.605Carrnfour 94' i0 40 460 1620 1,6w0 7,100 I,2O0 6,400 360 1,570 3.630 16,730 20,360Carrefour - 3rd leit 100 2.640 300 1,600 200 660 600 4,900 S,500

La Chapelle 200 2,l50 2,170 11,110 4,150 16,850 4,560 20,110 11,120 52,220 63,340loov5000c 1 300 800 1,160 6,150 1,270 6.600 800 4,0400 3,530 17,590 21,120Future Diesel 1985 110 900 280 3,840 930 5,550 150 1,150 1.470 11,440 12,90P_rrett_o 480 1,400 2,150 10,720 3,550 19,650 6,180 31,770 37,95"Sitn A 177 400 1,290 1,030 9.660 2,230 10,950 13,180010e A 166 300 1,290 300 1,290 1,670Future Di66el 1907 240 1.,720 550 7,260 790 8,980 9,770

Sub-total 2,097 4i00 0,535 940 3,860 2,300 13,590 1,590 30,500 9,700 46,960 11,820 63,160 30,800 066,601 197,405

Cap H8iLie0 9 556 50 530 50 150 100 1,236 1.336Caracul 470 810 350 600 820 1,410 2,230Purr-d.-Paio 4 40 390 50 110 90 703 590Saut-Kathurine 260 720 1,730 3,380 950 600 2,940 4,790 7,640Mirag-ane 7 200 260 230 70 0430 330 760

Sub-total 55t 30- 7,900 2,530 7,520 1,300 1,20D 4,380 8,176 12,556

Teta GCeneration 2.097 400 9.091 1,490 5,760 4,880 28,210 6,89 32,700 9,700 66,980 11.820 63.040 33,180 174,781 209,961

TransmissionCngoing Port-

a-Prince 3,660 3,640 2,680 980 6,340 4,620 10,960Future Port-a--Prince 50 140 260 530 250 770 560 1,440 2,000Ettenuion Varroax

Sbst. 11 34 50 520 20 40 70 560 630PrLig,e-La Chapella-

Port-tu-Prince 300 660 ,570 6,370 12,920 7.030 8,950L.o Chapel le-lerretten

and Subst. 80 190 450 1,950 530 2,140 2,670C ton,nnlrotions' 1130 390 30 70 490 490

T ittl Transmission 164 390 300 3.716 2,6 0.0 56 02,750 91,090 9,420 16,280 25.700

D itributionOngoing Port-au-

Prince 9 190 1,010 400 1,610 590 2,620 3,200Put ur, Port-au-

Prin-e !1 290 420 320 1,490 350 1,600 380 1,700 1,340 5,210 6,550Poert-de-Paix 1 180 250 200 60 380 310 690Alucel 40 420 190 790 230 1,210 1,4405boo MathOrion 210 140 530 1,300 740 1,449 2,160C.traconl 60 40 460 220 500 720Polo Ore-iuunvanoo 30 200 160 360 190 560 750Cop Hnileo OngcDlog 3,917 560 560 560Cup Haitieo Rural 500 250 750 750D-ons-Conai-, 364 342-5 -00 -8 ~ _0 __14 364

Dr tt Iltoorihotin 3,917 61474 440 2,130 1,000 3,400 1,010 3,250 350 1.600 300 0,700 3,690 13,54

Studie-l. Chaptll 30 100 330 500 250 370 610 1,050 1,660Guayamouc 1 S4 100 040 90 600 200 740 q41Artibonite

Optimiati-n 11 70 70 70Verretten 1,800 970 2,770 2,770Sitn A 177 730 910 1,640 ;,640Site A 166 1,550 830 2,250 2,380Caracol 80 00 80Sica- Pnstnr Statint 70 170 80 560 150 730 300Small Hyden Stations 190 1,080 110 520 50 220 350 1,820 2,170Dag Al inmetn 1 40 4 _ _40

Tetal Stndi-a 140 320 680 2,540 440 3,250 50 192 4630 1,317 11,320 12,60

Foniuoltunts1.000 2,000C0DA 2nd Projct 1! 200 1,200 6C0 2,000 2,00010A 2,,d Proiot.

l-enert)I I 1,706 60 1,035 8S 1,060 40 450 lEn _5's 2,725IDA 2nd ProIe1 I

andminimtrativel)1 85 30 275 30 210 10 60 70 545 615IDA Ird Peoe.t

(Inerral ) 1' 30 450 70 850 70 850 50 560 270 2,7120 2,931OA 3rd Project

(admi,tlstrs niply 11114_4_ _ _ _ 30 170 40 240 10 30 83 _440 520TotFI C-nseltaets 7391 90 1,510 -,l 2,470 110 1.130 1106 17 o 880 50 560 550 8,240 8,790

Training

CIIA 2nd Prulect 1 40 30 70 70IDA 2nd Projen 11 9 90 10 100 10 190 200lOg 3rd Pro-ect vi 40 20 140 20 40 40 220 260

Total T-i5ig 9 90 10 180 20 170 20 40 50 480 530

H,td Ofire 11 8220 0860 63Q 290 1,4S0 1,150 7,600Pe_lgre Rnair 114t 180 50 240 240 1,150 130 670 427 2,060 2,480Routine 2,674 3,000 3,3450 500 3,680 _ 4650 __ 523 7,382 2310 .d20 2.540Totrs Vanusi. 2,824 3,01n1 3,500 740 4,740 2,010 5,410 9Eo 5,950 7,380 29,997 3,710 33,690

Total 30a80 36 L2a3g5 2a210 ±2o53 7 79a230 7354 -23 , 3a290 21,400 225340 40.190 22331 3084574_

= Se-ond Project."1= Proposed Third Proje-c (2 g,n,ratig snits).

Janugry 13, 1982

HAITI - 42 -ELECTRICITE D' HAITI O~~~~~~~~~~~~ANEX 4.1

RLEOTRIEICT 0D hAIT: Pag. of I of 2

Th7DD POWER PROJECT

1981-86 DOo1sPo.nt Progr-a Etopoditurs. Hohbdol. (8omerF)

US0 '000

Work i ------- 1981 ------- ------- 1982----- ----- 193 ----- ----- 1984 ------ ----- 1985 ------- ----- 1986 ------- ------ Totl 1981-86-

Progr.Ls 1L81 t.E PC O ye to PC LC rc LCC PC to PC LC FC TotalToto1 Coot of Dov-loomot C _

Pronra,n 1981-86Ooration 2,097 400 9.090 1,490 5,780 4,880 19,110 6,890 31,700 9,700 4f,960 11,820 63,160 35,190 174,781 209,961trtazno siono 164 50 910 3,680 3,710 2,680 1,050 50 140 690 1,380 2,270 9,090 9,420 16,280 25,700OkorrLbutiao 3,917 1,420 440 2,130 1,510 3,420 1,010 3,250 350 1,600 380 1,700 3,690 13,524 17,218otodio 140 320 4U0 2,540 440 3,250 50 1,920 2,460 830 1,310 11,32D 12,630Ca-oult-t. 1,791 90 1,510 110 2,470 110 1,730 110 1,090 A0 880 50 560 550 9240 8,790Training 9 90 10 180 20 170 20 40 50 480 530Vurt... 2.824 3,000 3.500 740 Mao0 2 Ow 0109.0 _ 4113 90_7380 29 980 310 3670

Tital Curr-nt Coot OUR21 JailS 2N112 Ra 2a &2. 2i it2f22 LL1;,611452 IAaZG 212 1i2°.22°. 21

Inflation FPctor 1,050 1,043 1,155 1,126 1,271 1,210 1,398 1,301 1,537 1,388

Total 1981 Pelon. 1&24122i aIN 1iJtS 242 !L h .il° i2 2i.41 U2aRIS 11°12 1A.325 2 Sia llS .iaZiS iAiaZ0 12.112 lit°i2i

Work in Progres

status of Cost of 1981So-ond Projeot LC FC895-. 4; 4-HA CIDAGeertion,2 1.7

vCon C.aonirtlo bD/bC 252 1,045 390 7,390 480 2,240 1,12Z 11.475 12,097

Vorre u Tr-ininS/Na lonooaooo IDA 440 500 940 940Cop Roitlon 704DA 4778 78 478

C-p H-itien ~~CIDA 50 530 SO ISO10 6S 7OCop Ooitlor 0 DA 50 1333 10 900 480 7900Port do Polo CIOA 40 30 030 110 90 000 190Mirg.o.no CIDA 200 280 230 70 43Q 330 760

Sub-teain 252 2,323 T90 7,390 770 3,860 330 830 1,742 14,403 16,149

Troans nionnLInac andSab.batlan CZDA 3,660 3,640 2,680 980 6,540 4,620 10.960

V_rroun Sabtlon 104/EEC 04 50 450 20 40 70 524 594C-anonlnoti-no CIA/EEC 130 340 30 70 370 577

Sob-lottl 164 5o 790 3.680 3,710 2I68 1.050 6,410 T flTThs

OitribueitnPort-an-Pri-ne IDA 190 1,010 400 1,610 590 2,620 3,210Port do Polo 10A 180 250 200 60 380 310 690

Slb-tntal 370 1,260 600 1,670 97C 2,930 09

Stmd Ai±6--tani IOA 40 40 40Art Ibonlto

Apreib aiton IDA 73 70 70Wood Offor 4IDA 10 100 10 100 110Pal Igro Repair?

ointonanoo IDA 91 6 S9 160Sub-totol 91 1 189 110 10 390 400

Consultants0FREL0EC IDA/EEC 1,706 1,3704 1,2706

HQI IDA SO SOO SO 1,060 40 450 170 2,010 2,480Pri-o Waterhoaee IDA/EEC 10 75 30 240 30 210 10 60 80 585 465Delt CIDA0_0_4_ 200 _ 1,200 600 _ 2,000 _,COO

Sub-ettl1 10 0,781 SO 1,240 110 2,470 50 1,110 250 4,601 6,951

Tr-biningIDA 9 90 10 100 10 189 199CIDA 40 30 _70 70

Sob-tonal 9 S0 10 140 30 10 259 269

Various 5 7 2Pnlin- Repair IDA 50 240 30 50 200 220

Total 12,2 4.225 ,30 52.2 222Q 14222 2.222 2.2 2 442 .2 _6-7 402002

Of 21 205 21TDA 262 4,368 530 9,469 860 5,480 450 2,720 2,102 22,057 24,159CIDA 200 4,130 6,310 3,210 2,000 7,340 8,510 15,850

Thind Projojt Erponditures

Carorfo.r Dioool Plant 10 40 460 1,620 1,600 7,100 1,200 6,400 360 1,570 3,630 16,730 20,360

ntnovRibion 290 420 320 1,490 350 1,600 960 3,510 4,470

Studies20 7494Goayanouc I 110 140 94 6400 70 740 94a

Co-nultant, 180 2,150 2,320Gnral 30 450 70 850 70 850 80 440 00DAdrninistbatlon 30 170 40 240 10 30 - - -

Sub-eotal 60 620 110 1,090 80 880T 250 2,590 2,840

T rainingGeneal 40 20 140 20 40 220 260

Veorious5oead o pair0 370 960 630 290 1,450 1,150 2,600

Soligre b- patal50 240 240 1,150 2130 670 420 2,04 2,480Sub-total TO 50 240 1,060 2,010 760 960 1,r70 3,r2 soon

To-al 120 180 600 QOJ 030 10,290 2,400 9,960 790 4,050 rob 3W

ian-ary 13, 1982

- 4 ANNEX 4.2

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Project Cost Estimate

Local Foreign TotalCost Cost Cost

…____------- US$' OO

Carreiuur Diesel Power PlantElectro-Mechanical WorksTwo diesel groups and auxiliaries, including

fuel treatment, chimneys, spare parts,erection, two-year maintenance and training 778 7,752 8,530

Electrical equipment including step-upsubstation, structures, auxiliary genera-tor and erection 209 1,881 2,090

Fuel reserve tanks for 1.1 million gallons 90 360 450

Sub-total 1,077 9,993 11,070

Civil WorksSite preparation, access roads, cooling

water systems, fire protection, fuelpipelines and buildings 1,400 2,100 3,500

Sub-total Carrefour 2,477 12,093 14,570

DistributionRenovations 700 2,800 3,500

VariousHead Office 1,000 800 1,800

Peligre Repairs 300 1,500 1,800

Sub-total 1,300 2,300 3,600

Total Base Cost Construction 4,477 17,193 21,670

Consulting ServicesCarrefour Engineering 280 1,170 1,450

Guayamouc Survey, Design 190 727 917

Peligre Repairs 70 330 400

General 130 1,740 1,870

Administration 60 370 430

Total Base Cost Consultants 730 4,337 5,067

TrainingGeneral EdH personnel 32 200 232

Total Base Cost 5,239 21,730 26,969

ContingenciesPhysical 378 1,439 1,817

Price 1,333 3,831 5,164

Sub-total 1,711 5,270 6,981

Total Project Cost 6,950 27,000 33,950

January 12, 1982

- 44-

ANNEX 4.3

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Project Implementation Schedule

Loan ActionCredit Approval 7/82Effectiveness 10/82

Engagement of ConsultantsGeneral Services 1/ 3/82Carrefour 12/81Guayamouc I 9/81Peligre Repairs 7/82

ProcurementCarrefour, Call for Bids 2/82

Award 7/82Distribution, Call for Bids 12/82

Award 4/83Head Office, Call for Bids 1/83

Award 5/83Peligre Repairs, Call for Bids 10/82

Award 1/83

Completion of Cor±structionCarrefour (2 groups) 6/84Distribution 6/85Head Office 12/84Peligre Repairs 3/85

1/ Consultant's general services up to 2/83 to be financed byCredit 895-HA (Second Project).

May 21, 1982

- 45 -HAITI ANNEX 4.4

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Credit Disbursement Schedule

AssumptionsCredit Signing: July 1982Effective Date: July 1982Cibsing Date: June 1986

Fiscal Year Disbursements Cumulativeand Semester During Semester Disbursements

-------- MUS$--

1983December 31, 1982 2.7 2.7June 30, 1983 4.2 6.9

1984December 31, 1983 6.4 13.3June 30, 1984 4.6 17.9

1985December 31, 1984 3.5 21.4June 30, 1985 2.7 24.1

1986December 31, 1985 1.9 26.0

January 12, 1982

- 46 - ANNEX 4.5

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Contents of ProJect File

Items 1 and 2, which form part of the project file of the SecondProject (Credit 895-HA) also apply to the Third Project.

1. Projet d'Inventaire des Ressources Hidrauliques; Lalonde, Girouard,Letendre et Associes Lt6e, Montreal,Canada (for CIDA).

(a) Rapport de synthase - Avril 1977(b) La riviare Artibonite - Juin 1976(c) La rivigre Grande Anse - Juillet 1976(d) La riviare Guayamouc - AoQt 1976(e) La riviere Grise - Septembre 1976(f) Micro-centrales - Novembre 1976(g) Sites marginaux - Novembre 1976(h) Etudes sgdimentologiques - Novembre 1977

2. UNDP Long Term Preinvestment Study of the Power Sector (texts inFrench); SOFRELEC/SOFREMINES, Paris, France.

(a) Volume I: Power Market - August 1977(b) Volume II: Lignite - October 1977(c) Volume III/1: Power expansion and

tarification - No date(d) Volume III/2: Ditto

3. Etude Sgdimentologique du Reservoir Peligre

0 - Synthese1 - Rapport final - Texte, photographies2 - Rapport final - Tableaux, figures, annexes3 - Rapport final - Dessins (1)4 - Rapport final - Dessins (2)5 - Rapport final - Dessins (3)

Rapport d'Execution

4. (a) Working papers Volume 1 - Various reports Hydro QuebecInternational

(b) Working papers Volume 2 - Various information(c) Working papers Volume 3 - Investment program, cost estimates(d) Working papers Volume 4 - Financial information

October 9, 1981

- 4'r - ANNEX 5.1

HAITI

ELECTRICITE D'HAITI

THIR POWER PROJECT

Actual and Forecast Income Statements 1978-1986

(us$103

)

----- Actual …------ (Est.) ------- …---------Forecast…-- -------------Fiscal Year: 1978 1979 1980 1981 1982 1983 1984 1985 1986 1982-86

TOTAL.

INCOME ST-ATEMENT05$1'000

SAL.ES IN GWF4

'OTAL... 71173.6 195.2 216.1 248.2 282.7 320.9 365.4 416.7 475.0 1860.7

REVEANLF/KWH SOLD

B SIC TAR I FF hi/ _O._063 ~0.062 __0.022 --O.O8Z -- 0.87 __0082 _.~.O087 ._0.082 0.02 ..~O0Q

FUFEL SURCHARGE/KWHc/ 0.002 0,009 0.013 0.025 0.042 0.051 0.053 0.062 0,061 0.000

OPERA I NS' REVENUES

DAI IC IARIFF 10850o 12135 16680 21717 24736 28079 31972 36461 41562 162810FUEL. SURCHARGf- ___..426 __1758 __822 _~618A __11252 _16230 __12246 _25624 -- 28806 _A01733

TOTAL SALES REV 11276 13893 19509 27901 36493 44309 51218 62155 70368 264543DMEHE OP. REEV d/ ....... 102 ---- I8 .~1ll ____22 A---..- 1A 16" 1l22 _.. .245

0TUiAL . 1328__13227 .-.. 2622 _28012 _36615 --.. 44443 __51366 __62317 --20547 -265288

OPEPrTING EXPE.NSES

SAL_AR1r-S e/ 1804 21.77 2685 3692 4194 4968 5725 6555 7550 28991FLhEL_f 2175 3036 4968 8319 14188 18990 22388 29278 32891 117735L.UFs IOT[. 710 0 312 380 664 911 1219 1622 1810 6226OP." AND NAINrEN. hI 907 1410 1740 2161 2716 3303 3990 4910 5987 20906GEN. I LIINST i/ 1045 1365 1840 1804 2120 2561 3085 3720 4493 15979SUBTTOTAL- 5931 79B8 11545 16356 23882 30733 36407 46085 52731 1898:38DEER EC1IATION 1-/ .... -1651 _._.2643 --. 3428 ___3853 --- 5221 --- -64 _8224 _._ 2222 _11 466 _ 416S2

ITOrAh, -. ,-2582 - 03 _15023 _ .20202 -- 2Tl53 _32325 -- 44201 -- 56064 -6A122 --231420

TARIFF INCREASE k/ 0 0 0 0 3222 6528 10430 14228 16828 51236TOTAL_ REVENUE'S 11328 ...- 3222 1_2622 -- 8012 -32832 _50221 __61226 __26545 _~82325 _.316524

OP"ERATING INCOME 3796 3346 4604 7803 10684 13596 17095 210481 23178 85034

TO'TAL_ INTFREST,'f 1/ 1676 1976 2017 2595 4009 5991 8426 11691 16631 46748L.El.SSUOlC I/ l43..31 A2 5 .-.- 216Z --- 4107 -- 3626 _._6513 --- 8228 -.- 24Z11iwNT i CA RSE OP or- _243 1 61 5 __.1824 ...... 1642 -.- 1842 __~1884 __4230 ___5128 __8403 22032.

NET I NCOME. 3553 1731 2780 6161 8842 11712 12365 15303 14775 62997

AVG. T'ARIFF (US1 cents)-INCh. FUEL. CLAUSE 6,6 7.2 9.1 11.3 14.1 15.9 16.9 18.4 18,4Acum INUL~.4G i 25 56 76 87 103 104

--BASIC' TARIFF 6,4 6.3 7,8 8.8 9.9 10,8 11,6 12.2 12.3Aceum. itsAS(E4J.I 14 29 40 51 58 60

a/ See Annex 3.4.b/ Basic tariff as of July 1, 1981.c/ Forecasts based on EdH's fuel clause formula under which any increase in fuel cost per kWh sold is compensated by a similar

increase in the fuel surcharge.dI Assumned to increase with local inflation from 1981 onwards.e/ Average wage cost per employee was assumed to increase by 2% /a above local inflation from 1981 onwards (See Annex 5.4 for

projections of number of employees).fl See Annex 5.9.a/ Average cost per kWh of thermal generation was assumed to increase at 3% /a above international inflation fromn 1981 onwards.hi Average cost per kWh of total generation was assumed to increase with local inflation.i/ Includes sales-related expenses; average cost per customer assumed to increase with local inflation (see Annex 5.4 for

projections of number of customers).~/Based on straight-line method. Weighted average annual depreciation rate was assumed at 2.75% in 1981 and 3% from 1982 onwards.

k/ Over and above basic tariff effective July 1, 1981, in order to reach minimum 8% rate of return from 1982 onwards.1!' See Annex 5.8ml/ Frorn 1980 average level.

October 9, 1981

- 48 -

ANNEX 5.2HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Estimated and Forecast Funds Statements 1981-1986 (US$103)

(EstJ --------------- Forecast-----------------

Fiscal Year: 1981 1982 1983 1984 1985 1986 1982-86TOTAL

.. .... ... ............... .......... ............. .........._

INTERNAL SOURCESNE:T INCOME BEf:' INr. 7803 10684 13596 17095 20481 23178 85034'DEPFREC'IATION 3853 5271 6642 8294 9979 11466 41652(:'ONSIJMER CONTRIB.a/_._....450 ...... 4 25 _ ._ __5 .... ._ ....22... .22

rorAL 12106 16450 20782 259T8 31119 35369 129708

LEESS: DEBT SERV.b/ .. 5.6.... .... 5604 ........... 2212 ..- 2286 ._.6028 _2..._212 -- 11321 22121NE'T' INT; CA1SH SiEN. 6502 14233 18496 19890 23900 23998 100517

O'T'ER OP . RE()UIRIEMENTS;WOR:K:ING C'APITAL *...... 226 .......-..25Q1 _ . ...2Z SQ .- 4313 ._4342... 12442

'T'OT A L. =2 026 ... 25 ... .3531 .__2250 .... 43137.93 Z..1442NE:'T' AVAILABLE'l:ROM OPERATIONS 8528 11732 14965 17140 19587 19651 83075

C ON '; TRLC TI O NR ElJCUl REMEN TC;: c/

-ONGOING WORK'S 16129 17670 8210 0 0 0 25880-PROPOSED PROECT G 300 3100 13320 12390 4840 0 33950'F'uTURE PROJECTS -.. .9.52 .Q. ..12_S .AQ25D166 *2Q .231660

TOTAL -122.4 ...... 22440 ... 44120 __52640 ...-20050 ..-_.2240 2291490

BALANC.E TO FINANCE 8496 1.5708 29155 35500 50463 77589 208415

FINAWINCE'D fBY:'

BORROWINGS: d/EXISTING KFW LOANS 1420 250 0 0 0 0 250IDA EEC (895-4--HA) 11816 5290 580 0 0 0 5870CIDA 200 10010 3983 0 0 0 13993P:RFOPOSED:. IDA 0 2770 10678 8123 4429 0 26000Loan 3rd. unit 0 320 1232 937 511 0 3000FUTURE KFW 0 1303 5428 4305 0 0 11036FUTURE IDB 0 0 2150 11110 18710 20000 51970FUT. UNIDENTIF. - _ . 20 0 __5200 ._1280 456 ... 00 ..... 71500TOTAl... BORROWINGS 13436 19943 24951 29675 43450 656.00 183619

E:(.'4 .U IrY YG O VT. CON'TRIB. e ___ 4020 ........ . 1284 .. _1663 _2086 .._2161 2 118 .. 2312

TO 1T AL t17526 21227 26614 31761 45611 67718 192931

S`UJRFPL U..JS (DEF'IC IT')0F F`U N ND S 9030 5519 2541 3739 4852 -9871 -15484ACCUMULATED 11169 16688 14147 10408 5556 -4315 -4315

a/ Assumed to increase with local inflation from 1981 onwards.b/ Excluding interest capitalized during construction; see Annex 5.8.c/ See Annex 4.1.d/ See Annex 5.8.e Represents retrocession of all of interest paid on on-lent CIDA grant and most (95%) of interest

paid on KfW loans, plus Government contributions towards the cost of Peligre repairs; 1981figure also include assumption of ONA loan (US$3,612,000).

june 4, l9du

- 49 - ANNEX 5.3

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Actual and Forecast Balance Sheets 1978-1986

(US$ 103)

---------Actual--------- (Est.) ------------------Forecast-----------------

FISCAL YEAR: 1978 1979 1980 1981 1982 1983 1984 1985 19B6

BALANCE SHEET1SUJS$ '000

fASS CT S- - ..... ..... .. ... ... .

PLANT IN OPERATION a/85715 111876 128679 151505 199896 242921 310020 355261 409137

LESS: DEPRECIATION aL12573 _2424Q __31292 .372nz 4640Q -._56522 __62055 -- 84213 _10Q232

NET 1:PL.ANT 66142 87136 97437 113598 153496 186399 240965 271048 308405

WORK IN PROGRE:SS b/ 7 _2622 __.9.822B2 ..1L26B8 _12Q Q 11224 ..-. 3I98S _32444 .24012 -166225

TOTAl. FIXED' AiSElTS 73814 89925 108405 131298 165290 218387 280409 365065 475330

C U R RREN'T ASSE'T'SCASII AND BfANKSi

OPERATIONAL REOQLI. 247 333 481 682 996 1282 1518 1922 2199

'rTEMF'O RARY SUJRR 1520 2167 2139 11169 16688 14147 10408 5556 0

ACCOL!NrTS REC d/ 2322 3462 5873 5322 6641 8497 10301 12760 14565

MATERIALS AND SULPF:ie/ 3501 3891 4764 4256 6860 11030 13160 17512 24310

OTHER C . .........-- _ _ . 382 B--382 32 ._ - -382 _.7 382 _3a2 ._382

r oT Al .. 7903 10170 13644 21816 31572 35343 35774 38137 41461

TOT AL. 81717 100095 122049 153114 196862 253730 316183 403202 516791

L..) ABII... I:T:I E-S..... .... .... ._

EU- ( .lI TY-CAPITAL.. 33439 35253 36308 36308 36308 36308 36308 36308 36308

*-RETAINED EARNINGS 10529 13323 16840 23001 31843 43555 55920 71223 85998

-uGOVT. CONTRIP. 0 0 0 4090 5374 7037 9123 11284 13402

-REVAL.UA'T'ION RE'SER.-S&L..28i5 .-_6212 .__22130 __3582 .. 45555 __52Q62 --21(42 ..--82112 .105382TOTAL. 51783 65288 80278 99298 119080 143967 172398 207934 241090

lONG 'TERM DEEIT(GROSSh/21688 27551 35522 45950 67685 96341 128343 176265 247125

CUR'NT LIABILITIESACC'TS.. FPAY. (CONTR.)i/ 2078 1031 1670 2838 4574 7355 8775 11677 16210

OTHER C-L + f/ 4010 3696 1645 1645 1645 1645 1645 1645 1645

O2ER'DRAFTrS ___ ... ____ ____ Q ____ 0___ ____ .___.____ __315

TOTAL 6088 4727 3315 4483 6219 9000 10420 13322 22170

CONSUMER C:) NTRIBUT-. .Ia3 ._.__2522 ..-- 2234 ....... 33.. _ 381 __42 .502 --- 568I _64Q.6

TOTAL. 81717 100095 122049 153114 196862 253730 316183 403202 516791

a/ See Annex 5.5.b/ See Annex 5.6c/ Mfinimum operational cash requirements were estimated at 15 days of cash operating expenses.

d/ Assumed at 60 days of total operating revenues, from 1982 onward.

e/ Assumed at 25% of annual investment expenditures.

f/ Kept constant at end-1980 level./ See Annex 5.5h/ See Annex 5.8.i/ Accounts payable to contractors were assumed at 60 days of annual investment expenditures.

October 13, 1981

HAITI

ELECTRICITE D'HAITI

TIIIRD POWER PROJECT-

Performance and Monitoring Indicators 1979-1986

-- Actual------ (Est.) ------------------------Forecast---Fiscal Year 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

1. Market Penetration

Sales in P.au P. (GWh) 173 197 223 253 286 327 375 429Sales in Provinces (GWh) 16 20 25 30 35 38 42 46Number of customers, P.au P.(1,000) 47 48 56 60 66 71 77 83Number of customers, Provinces(1,000) 12 15 18 20 21 25 28 32

2. Efficiency Indicators

Number of Employees P.au P. 687 775 820 830 877 895 906 930 f

Number of Employees Provinces 214 209 240 245 260 275 290 300 n

System Losses P.au P. (%) 31 27 27 27 25 23 21 19System Losses Provinces (%) 27 29 28 28 26 24 22 20 1Customer/employee P.au P. 68 62 68 72 75 79 85 89NWhI sold/employee P.au P. 252 254 272 305 326 365 414 461MWhi sold/consumers/a - P. au P. 3.7 4.1 4.0 4.2 4.3 4.6 4.9 5.2MlWh sold/consumer/a - Provinces 1.3 1.3 1.4 1.5 1.6 1.5 1.5 1.4

3. Financial Indicators

Rate of return (%) 4.4 5.0 7.4 7.7 8.0 8.0 8.0 8.0Self-financing ratio (X) 47 60 59 1/ 52 42 38 34 25Debt service coverage ratio(times) 3.4 4.1 5.7 1/ 7.4 9.1 4.3 4.3 3.1Debt/equity ratio 30:70 31:69 32:68 36:64 40:60 43:57 46:54 51:49Accounts receivable (days) 90 110 69 60 60 60 60 60Current ratio 2.2 4.1 4.9 5.1 3.9 3.4 2.9 1.9Average cost of borrowings (% p.a.) 8.0 7.6 6.4 7.1 7.3 7.5 7.7 7.9

1/ Excluding amortization of ONA loan from debt service.

41

October 13, 1981

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Actual and Forecast Fate Base 1978-1986

(US$ 103)

Actual---------- (Est.) -------------------Forecast--------------------Fiscal Year: 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

Gross fixed assets (beg.year) 57,119 85,715 111,876 128,679 151,505 199,896 242,921 310,020 355,261Annual revaluation 3,960 11,708 14,215 11,581 12,878 14,992 18,219 23,251 21,316Annual capitalization 24,636 14,453 2,588 11,245 35,513 28,033 48,880 21,990 32,560

Gross fixed assets (end-year) 85,715 111,876 128,679 151,505 199,896 242,921 310,020 355,261 409,137

Average gross fixed assets 71,417 98,796 120,278 140,092 175,700 221,409 276,471 332,640 382,199

Acc. depreciation (beg.year) 16,860 19,573 24,740 31,242 37,906 46,399 56,521 69,054 84,212Annual revaluation 1,062 2,524 3,024 2,812 3,222 3,480 4,239 5,179 5,053Annual depreciation 1,651 2,643 3,478 3,852 5,271 6,642 8,294 9,979 11,466

Acc. depreciation (end-year) 19,573 24,740 31,242 37,906 46,399 56,521 69,054 84,212 100,731 1

Average acc. depreciation 18,217 22,157 27,991 34,574 42,152 51,460 62,787 76,633 92,472

Average net fixed assets 53,200 76,639 92,287 105,518 133,547 169,949 213,683 256,007 289,727

Net Operating Income 3,796 3,345 4,603 7,801 10,271 13,596 17,095 20,481 23,178

Rate of Return (%) 7.1 4.4 5.0 7.4 7.7 8.0 8.0 8.0 8.0

Depreciation Rate (%) 1.96 2.72 2.74 2.75 3.0 3.0 3.0 3.0 3.0Revaluation Rate (%) 7.0 13.75 12.8 9.0 8.5 7.5 7.5 7.5 6.0

August 13, 1981 Li

HAITI

ELECTRICITE D' HAITI

THIRD POW'ER PROJECT

Statement of Changes in Work in Progress(thousands of US$)

FISCAL YEAR: 1981/81 1981/82 1982.'83 1983 84 1984/85 1985/86Balance as of Fiscal Year: Oct. 1 10,968 17,700 11,794 31,98S 39,444 94,017,

Plus: Additions during the year 17,025 27,440 44,120 52,640 70,050 97,240Capitalized interest 952 2,167 4,107 3,696 6,513 3,228

Less: Transfers to plant in operation:

Varreux extension 1/ 23.943Carrefour thermal plant (3 units) 7,673 15,347Carrefour extension (2 units) 12,910Guavamouc I 21,120Cap Haitien diesels 780Caracol 2,930Port-de-Paix 590St. Mathurine 8,140Miragoane 760Transmission P.au.P. (2nd Project) 3.650 7,310Future transmission P.au.P. 980 1,020Varreux substation 594Communications equipment 570Distribution 4,977 2,570 4,690 4,620 1,950 2,080Studies 2/ 1,310 630 270Gen. Consult. and Training(3rd P.) 2,220Head-office 2,270Peligre repairs - 2,950Routine investments 5,674 3,470 4,200 5,100 6,150 7,380Capitalized interest 3/ 1,400 5,313

Total transfers to plant 11,245 35,513 28,033 48,880 21,990 32,560

Balance as of September 30 17,700 11,794 31,988 39,444 94,017 166,925

1/ Including Consultants, Training and Capitalized interest on 2nd IDA Credit.2/ Guayamouc, Caracol, mini-hvdros and dam alignment.3/ On CIDA credit, 3rd IDA credit, and future KfW loans.

August 13, 1981

HAITI

ELECTRICITE D' HA.ITI

THIRD POWER PROJECT

Terms of Existing and Phture Loans

Amount Grace(currency Amount period Maturity Interest

Lender Loan No. Purpose Date of origin) Currency (US$) (yrs) (yrs) Rate(%)

Existing LoansOn-lent by Govt.of Haiti:KfW 76-65-252/278 Drouet-

Gonaives 1976/77 DM 8,141,560 7 30 5.0 1/

IDA 645-HA 1st Power P. 1976 16,000,000 US$ equiv. 16,000,000 2 25 8.85 11KfW 76-65-839 Cap Haitien 1978 2,500,000 DM 10 30 5.0 1/

IDA 895-HA 2nd Power P. 1979 16,050,000 US$ equiv. 16,050,000 4 20 8.0 1/

EEC 4-HA 2nd Power P. 1979 6,000,000 US$ equiv. 6,000,000 4 20 8.0 1/

CIDA 2nd Power P. 1980 17,100,000 Can$ 14,193,000 4 20 8.0 Tv

KfW 80-65-369 Cap Haitien(Rural) 1980 1,800,000 DM 750,000 10 30 8.0 1/

Future LoansOn-lent:IDA ProposedCredit 3rd Power P. 1982 26,000,000 US$ equiv. 26,000,000 4 20 11.6 1/

Loan for ThirdGenerator at Carrefour 3rd Power P. 1982 3,000,000 US$ 3,000,000 4 20 11.6 1/

KfW Caracol,St.Mathurine,Jac mel aboutdistr. 1982 26,500,000 DM 11,036,000 10 30 5.0 1/

IDB La Chapelle 1983 52,000,000 US$ 52,000,000 5 25 8.0 1/

Unidentified Other future 1984/ 71,500,000 US$ 71,500,000 4 20 10.0 1/Generation 85/86and LaChapelletrans.

1/ Capitalized during project construction.

January 18, 1982

- 54 - ANNEX 5.8

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Forecast Debt Statements 1981-1986 (US$10 3

(Est.) -____---------------Forecast---------------

FISCAL YEAR: 1981 1982 1983 1984 1985 1986 1981-86TOTAL

IDA-EEC (895 4-HA)-BORROWINOS 11816 5290 580 0 0 0 17686-AMORTIZATION 0 0 0 360 750 810 1920

- EtfAL.ANCE 16180 21470 22050 21690 20940 20130 0-INTEREST 822 1506 1741 1750 1705 1643 9166-- IDC-% 100 100 100 0 0 0 0~IDC 822 1506 1741 0 0 0 4069

CI DABBORROWINGS 200 10010 3983 0 0 0 14193AMORTIZATION 0 0 0 232 483 521 1236

-BALANCE 200 10210 14193 13961 13478 12957 0-INTEREST 8 416 976 1126 1098 1057 4682-IDLC Z 100 100 100 0 0 0 0IDC 8 416 976 0 0 0 1401

INT .CAPIT. ON EXIST.L.1/BOIRROW.1:NOS 954 1953 2716 0 0 0 5623AMORIIZATIION 75 75 75 420 420 432 1497BAALANCE 3188 5066 7707 7287 6867 6435 0

INr. CAF:T. ON F:LTT.L.-BtORROWINGS 0 214 1391 3695 6513 8228 20041AMORTlIZATION 0 0 0 0 0 133 133BAL ANCE t 0 214 1605 5300 lt813 19908 O

OTHER LXIST. LOANS 2/BORROWINOS 1420 250 0 0 0 0 1670

-AMORrIZATION 3887 300 327 356 388 599 5B57BAL.ANCE 26382 26332 :16005 25649 25261 24662 0TNERE isr 1765 1873 1884 1855 1823 1786 0111/ % 7 2 0 0 0 0 0II 11: C 124 31 0 0 0 0 155

PROP)O3E I:lA-PROW:INOSE 0 2770 10678 8123 4429 0 26000ONt:lR" fZATI':[(IN 0 0 0 0 0 424 424BAtLANCE 0 2'770 13448 21571. 26000 25576 0[NI 'ERES I 0 162 949 2049 2783 :3017 B960fIIJ(T % 0 100 1(0 100 100 0 0:I1:C : 162 949 2049 2783 0 S942

PROFPOTSEED 3RD OERlATORBO RRJWIN(;S 0 320 12.32 937 511 0 3000

-AMOR'1'.TZATrI TTN 0 0 0 0 0 49 49BALANCE 0 320 1502 2489 3000 2951 0INr'E.IRE:'S T 0 19 110 236 321 348 1034IDC-% 0 100 100 100 100 0 0IDC 0 19 110 236 321 0 686

'tUTURE NFW-BORROWINGS 0 1303 5428 4305 0 0 11036-BALA^NCE ' . 0 1303 6731 11036 11036 11036 0-INEfREST 0 33 201 444 552 552 1781

ID( % 0 100 100 100 0 0 0* ID['O0 33 201 444 0 0 67H

l-J[1(.1 E. IDBPOTTRROWIN0S 0 0 2150 11110 18710 20000 51970.BAA ANCE 0 0 2150 13260 31970 51970 0:[NTE:RETT 0 E16 616 1809 3:358 5869IL. % 0 100 100 100 100 01 El C 0 0 86 616 1809 3358 5869

FlITURE tNIDE NTIFIE'BORROWNGSE 0 0 900 5200 19e00 45600 71500EBAI ANCE 0 0 900 6100 25900 71500 0RINTIERESI' 0 0 45 350 1600 4870 6865

-IIE(' / 0 0 100 100 100 100 0ll:lC 0 0 45 320 1600 4870 6865

DE-BT SUMMARYBORREOWINGS 14390 22110 29058 33370 49963 73828 222719

-REPAYMENTS 3962 375 402 1368 2041 2968 11116BALANCE 45950 67685 96341 128343 176265 247125 247125INTEREST 2595 4009 5991 8426 11691 16631 49343INrEREsTr CF 2595 4009 5991 8426 11691 16631 49343DEPT SE'RVICE 6557 4384 6393 9794 13732 19599 60459T0DC 953 2167 4107 3696 6513 83228 25664

T(TAL OPFENING 35522 0 0 0 0 0 0

AVE ITNT % 6.37 7.06 7.30 7,50 7.68 2.86 7.29

I/ Including IDA-EEC (895-4-FA) and CIDA.2/ IDA (645-lLA) and three eaisting fI Wooans.

January 18, 1982

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Fuel Cost Forecasts

(US$103)

Fiscal Year: 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

BUNKER C

Generation (GWh) 1/ 45.0 84.3 121.3 169.4 227.2 229.0

Consumption (15 kWh/gal.) 3,000 5,620 8,087 11,293 15,147 15,267

Unit price (US$/gal) 2/ 0.90 1.00 1.11 1.23 1.35 1.47

Total Cost Bunker C 2,700 5,632 8,967 13,864 20,534 22,512

DIESEL OIL

Provinces Generation (GWh) 1/ 26.7 33.6 38.6 25.8 29.5 33.4

Provinces Consumption (9.5 kWh/gal) 2,800 3,537 4,063 2,716 3,105 3,516

Unit price (US$/gal) 2/ 1.12 1.25 1.38 1.52 1.68 1.84

Subtotal Provinces 3,136 4,421 5,607 4,128 5,216 6,469

P.au P. Generation (GWh) 1/ 26.6 39.7 38.4 34.7 25.2 25.5

P.au P. Consumption (12 kWh/gal) 2,217 3,308 3,200 2,892 2,100 2,125

Unit price (US$/gal) 2/ 1.12 1.25 1.38 1.52 1.68 1.84

Subtotal P.au.P. 2,483 4,135 4,416 4,396 3,528 3,910

Total Cost Diesel Oil 5,619 8,556 10,023 8,524 8,744 10,379

TOTAL FUEL COST 8,319 14,188 18,990 22,388 29,278 32,891

1/ Based on EdH's future energy balance (average year; see Annex 3.4).2/ Assumed to increase by 3% p.a. above international inflation, from 1981 onwards.

August 13, 1981

HAITI

ELECTRICITE D' HAITI

THIRD PROJECT PROJECT

Energy Balance for Planting-Up Purposes

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

1. Port-au-Prince AreaGross Generation Required 318 360 409 461 521 588 664 751 850 963Generation (GWh);Hydro (Average Year)

Peligre 222 222 222 222 222 222 222 222 222 222Guayamouc 1 11 43 43 43 43La Chapelle 42 168 168 168 168La Verette 33 133 133Site A 177 25Site A 166 18

Sub-total Hydro 222 222 2222 222 222 275 433 466 566 609Thermal (Average)

Diesel-Oil Plants 38 44 45 41 30 25 16 17 14 18Bunker C Plants 58 94 142 198 269 288 215 268 270 336

Sub-total Thermal 96 138 187 239 299 313 231 285 284 354

Total Generation 318 360 409 461 521 588 664 751 850 963

Plant Factor (%):Diesel-oil Fired 22 25 26 23 17 14 9 10 8 10Bunker C Fired 16 25 29 36 40 43 26 29 23 26Overall 18 25 28 33 35 37 22 26 21 24(Hours/Year) (1,550) (2,225) (2,460) (2,880) (3,085) (3,225) (1,995) (2,275) (1,850) (2,120)

2. ProvincesNot sufficient data available to xcalculate the energy balance foreach of the supply centers. M

August 5, 1981

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Capacity Balance for Planting-Up Purposes

(Dry Year 1 in 5)

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

1. Port-au-Prince Area

RequirementsGeneration (GWh) 318 360 409 461 521 588 604 751 850 963

Load Factor (%) 61 60 60 59 58 57 57 56 55 54

Maximum Demand (MW) 60 68 78 89 102 117 134 153 176 202

Available Capacity (MW)Eisting:

Thermal: Varreux 42 42 42 42 42. 42 42 42 42 42

Tanvier 12 12 12 12 12 12 12 12 12 12

Delmas 8 8 8 8 8 8 8 8 8 8

Hydro: Peligre 22 22 22 22 22 22 22 22 22 22

Sub-total Existing 84 84 84 84 84 84 84 84 84 84

Additions:Hydro: Guayamouc 1 3 3 3 3 3

La Chapelle 13 13 13 13 13

Verrettes 10 10 10

Site A177 5

Site A166 8

Sub-total Hydro 16 16 26 26 39

Thermal: Carrefour 14 21 35 35 56 56 56 56

New Site 7 35 49

Sub-total Thermal 14 21 35 35 56 63 91 105

Total Additions 14 21 35 51 72 89 117 144

Total Gross Available Capacity 84 84 98 105 119 135 156 173 201 228

Required Reserves 1/ (18) (18) (18) (19) (19) (20) (21) (22) (23) (25)

Net Available Capacity 66 66 80 86 100 115 135 151 178 203

Capacity Balance

Surplus/(Deficit) 6 (2) 2 (3) (2) (2) 1 (2) 2 1

Plant Margin:MW 2/ 24 16 20 16 17 18 22 20 25 26

% 3/ 40 24 26 18 17 15 16 13 14 13

1/ Largest unit (Peligre) + 5% of demand.

2/ Available capacity less maximum demand.

3/ Plant margin as % of maximum demand.

October 13, 1981

HAITI

ELECTRICITE D' HAITI

THIRD POER PRJECT

C4mparison of Alteruatives

Mediu- Speed and Slov Speed Diesel Plant

Total Total------- Capacity------ ---------------------- Year of Co_issioning-- --- Capital Fuel Lub-Oil 081 Operational Total

Year of Additions Total 1983 1984 1985 1986 1987 1988 1989 1990 Cost Generation Cost Cost Cost Cost CoWtCommissioning MW MW ------------------------------ Expenditures (MUS$) 1/ - Illlf GWh 2/ YAUS$ 3/ MUS$ 4/ IIUSS 51 1015$ !TE

($62,000/GWh) (62 of fuel(19.232 See Pr See PVSee PV cost) of fuel

see PT Cost)See PT

Diesels,Medium Speed; Economic Life 15 Years; US$750/kW

1981 0 01982 5.8 5.81983 14 14 4.7 2.9 7.6 91984 7 21 2.4 5.8 8.2 531985 14 35 4.7 4.7 971986 35 8.7 8.7 1301987 21 56 7.1 2.9 10.0 1031988 7 63 2.4 11.6 14.0 1541989 18 91 9.5 5.8 15.3 1731990 14 105 4.7 4.7 225

1 - - -------…------Repeated Every 15 Years --

2000 2 5

DiscountRate Repeat Factors

% Capital Cost 6/ ---------------------- - Present Values- --

8 1.446 13.59 6.35 11.65 15.03 4.67 17.21 7.93 76.43 1,326 82.21 4.93 t5.81 102.95 180.1210 1.310 12.00 5.50 9.91 12.33 3.76 13.60 6.16 63.26 1.094 67.83 4.07 13.04 84.94 148.1312 1.222 10.91 4.91 8.69 10.43 3.12 11.10 4.93 54.09 912 56.54 3.39 10.87 70.80 124.8114 1.162 10.11 4.48 7.78 9.01 2.65 9.26 4.04 47.33 767 47.55 2.85 9.14 59.54 106.7916 1.121 9.52 4.14 7.08 7.91 2.29 7.85 3.37 42.16 651 40.36 2.42 7.76 50.54 92.65

Diesels, Slow Speed; Economic Life 20 Years; US$1,125/kW (1.5 Times Cost of Nedi . Speed Diesels)Fuel cost 95% of medium speed, lub-oil cost 80% and 0&M 70Z of medium speed.

DiscountRate ReDeat Factors

% Capital Cost -------------- -Present Valnes- - --. ----- _______________-_ _ _

8 1.270 6/ 7/ 17.90 8.37 15.35 19.80 6.15 22.67 10.45 lw4.69 1.326 78.10 4.69 15.02 97.81 19115010 1.174 16.13 7.39 13.32 16.58 5.05 18.28 8.28 R5.n3 1.094 64.44 3.87 12.39 80.70 165.7312 1.122 15.03 6.76 11.97 14.37 4.30 15.28 6.79 74.50 912 53.71 3.22 10.32 67.25 141.7514 1.078 14.07 6.23 10.83 12.54 3.69 12.89 5.62 65.87 767 45.17 2.71 8.69 56.57 122.U16 1.054 13.43 5.84 9.98 11.16 3.23 11.07 4.75 59.44 651 38.34 2.30 7.37 48.01 107.45

For Notes see pages 3, 4 and 5.

August 14, 1981 a

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Comparison of Alternatives

Medium Speed, Slow Speed and Gas Turbine Plant 8/

Total Total----- Capacity---- ------------------- Year of Commissioning----------------------------- Capital Fuel Lub-Oil O&M Operational T)talYear of Additions Total 1983 1984 1985 1986 1987 1988 1989 1900 Cost Generation Cost Cost Cost Cost Costommissioning MW MW…---_------------------------Expenditures (MUs$)M---------------------- _ $ GWh MUs$ _US$ MUS$ __MS$ MS$

(US$62,000) (6% of (19.23% See PV See PVGWh fuel of fuel

See PV cost) cost)See PV See PV

Diesels 7 MW 1983-85, Medium Speed. Economic Life 15 Years, US$750/kW;Gas Turbines 1987-90, Economic Life 15 Years, US$400/kW: 20-21 MW

GasDiesel Turbine

19811982 5.8 5.81983 14 14 4.7 2.9 7.6 91984 7 21 2.4 5.8 8.1 531985 14 25 4.7 4.7 971986 35 4.5 4.5 1301987 21 56 3.6 4.5 8.1 1031988 21 77 3.6 4.5 8.1 1541989 21 98 3.6 4.5 8.1 1731990 21 110 3.6 3.6 225

l l2000 225

DiscountRate Repeat Factors

% for Capital Cost

8 1.446 13.59 6.35 11.65 7.71 7.14 6.61 6.12 59.17 1,326 82.21 4.93 15.84 102.95 If2.12 '010 1.310 12.00 5.50 9.91 6.32 5.75 5.20 4.75 49.46 1,094 67.83 4.07 13.04 84.94 1:14.4012 1.222 10.91 4.91 8.69 5.35 4.78 4.26 3.81 42.71 912 56.54 3.39 10.87 70.80 113.5114 1.162 10.11 4.48 7.78 4.62 4.05 3.56 3.12 37.72 767 47.55 2.85 9.14 59.54 97.2616 1.121 9.52 4.14 7.08 4.06 3.50 3.02 2.60 33.92 651 40.36 2.42 7.76 50.54 84.46

Diesels 7 MW 1983-85, Slow Speed. Economic Life 20 Years, US$1,125/kW;Gas Turbines 1987-90, Economic Life 15 Years, US$400/kW

DiscountRate

%

8 1.270 1.446 17.90 8.37 15.35 7.71 7.14 6.61 6.12 69.20 1,326 78.10 4.69 15.02 97.81 167.0110 1.174 1.310 16.13 7.39 13.32 6.32 5.75 5.23 4.75 58.89 1.094 64.44 3.87 12.39 80.70 139.5912 1.122 1.222 15.03 6.76 11.97 5.35 4.78 4.26 3.81 51.96 912 53.71 3.22 10.32 67.25 119.2114 1.078 1.162 14.07 6.23 10.83 4.62 4.05 3.56 3.12 46.48 767 45.17 2.71 8.69 56.57 1(3.0516 1.054 1.121 13.43 5.84 9.98 4.06 3.50 3.02 2.60 42.43 651 38.34 2.30 7.37 48.01 S0.44

For Note 8/ see page 6.

August 17, 1981

0.

IHAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Comparison of Alternatives

Medium Speed, Slow Speed Diesel Plant and Gas Turbine Plant

1/ Expenditures. Assumed: 55Z of expenditures for new additions in the first year of construction; 45% in the second year.

2/ Generation: See Annex 6. 1 - Hours of operation and required generation of Bunker C fired plant. Example calculationfor 1985 with h = 3,085 hours of operation; generation of Bunker C fired plant is G 269 GWh; existingcapacity = 42 MW. Assume: additions to be commissioned each year in September (h = 0.25 h).GWh (1985) = A + B (G - A) = A + B1

A - 0.25 x lhL x MW (of the addition) = 0.25 x 3.085 x 14 = 111000

B = MW (total installed end last year) x ( -A) = 21 (269 - 11) - 8642 + MW (total installed last year) 42 + 21

A 1

3/ Efficiency: Estimated at 2,600 kcal/kWh; 10% diesel oil of 10 x 103 kcal/kg at 3.846 kWh/kg or 0.306 1/kWh (specificgravity 0.85); US$47/bbl (159 1) or US49.06/kWh; 90% Bunker C oil of 9.8 x 103 kcal/kg at 3.69 kWh/kg or0.249 1/kWh (spec. gravity 0.94); US$37.80/bbl (159 1) or USO5.33/kWh. Total 10Z/90% mix cost USO6.24/kWh(US$62,400/GWh).

4/ Lub-oil Cost. Estimated at 6% of fuel cost.

5/ 0 and M Cost. Estimated at US$U1.20/kWh (US$12,000/GWh), or 19.232 of fuel cost.

6/ Capital cost, repeat factor: If the present value of expenditures over a number of years is p, and the cost stream isrepeated every n years, total PV will be, at discount rate i

PV = p (I + I n + I 2m+ +(I +i) (1+ i))

Consequently, the equivalent pv factor (F) for PV = pF will be:

1F1=+ 1 +L- + +o+ I1((1 + i)n)o (( + )n)l (( + i)n) 2 (+i - (1 + i)

Example: i =0.08, n = 15 o-(1.08)15 = 1 + 2.172169; i = 217.2169 %

Use i in stream of expenditures 1 in each year during, say, 60 years

(the first cmwm _ mltirpl of 10 and 1S years). i.e. 4 periods of 15 years.

October 13, 1981

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Comparison of Alternatives

Medium Speed, Slow Speed Diesel Plant and Gas Turbin.Ž Plant

Result: i (%) n F F20 IF15

8 15 1.446 08720 1.270 0.879

10 15 1.310 0.89620 1.174 086

12 15 1.221 0.913

20 1.116

14 15 1.162 09220 1.078 0.928

16 15 1.121 09420 1.054 0.940

Calculation for medium speed diesels: Compute basic present value of capital cost (BPVC)ms

and multiply by repeat factor F(PVC)ms = Present Value = (BPVC)ms x F

Calculation for low speed diesels: if slow speed diesels cost F times per kW the cost of medium speed diesels, their ,

present value, taking into account the repeat factors F15 (medium speed) and F20 (slow speed),

is:

(PVC)Ss 2 (F20 / F 1 5 ) (PVC)M x FC

7/ General Case (Medium Speed vs. Slow Speed Diesels)

(a) The capital cost relation of medium speed and slow speed diesels is (see above)

(PVC)S = (F20/F15) (PVC)Ms x Fc

(b) Assume that the present value of operational cost of medium speed diesels to be (PVO) and those of slow speed diesels a

fraction of this:(PVO/ (PV)MS X Fc

(c) Consequently, the net present value of capital and operating cost is defined by

(NPV) = (PVC) M (PVC)s + (PVO) Ms (PVO)s

October 13, 1981

D .

O0.0%

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Comparison of Alternatives

Medium Speed, Slow Speed Diesel Plant and Gas Turbine Plant

For equal present value (NPV) = o

(PVC) - (F 2 0 /F 1 5 ) (PVC)ms x Fc + (PVO) F (No) = 0

(PVC) (F /F Fc) + (PVO) (1-FMs( 20 15 M) s o

or

B ~F -l F C VC(PVC B 0 or o = I+ l1(F 2 /FT F( PVC - ms

P A 1 - (F 2 0 /F 5 )F c

(d) Using the present values for capital and operating cost as shown on page 1 for medium speed diesels and the F 2 0 /F 1 5 factors

calculated above in note (b), the following results for F (fraction of medium speed operating cost to be used for

estimating slow speed operating cost) as a function of the F (multiplication factor to be used to calculate capital

cost of slow speed diesels on the basis of cost of the medium speed diesels).

DiscountRate F

8 1.742 - 0.659 F10 1.744 - 0.668 Fc12 1.764 - 0.697 Fc14 1.795 - 0.734 Fc16 1.834 - 0.783 Fc

C

(e) For a discount rate of 12Z, the estimated opportunity cost of capital in Haiti,the result is:

Highest operationalcost (incl. fuel) of

Cost of slow speed slow speed dieselsdiesels times cost as fraction of thoseof medium speed for medium speeddiesels (F ) diesels (F )

1.1 0.9961.2 0.92,71.3 0.8571.4 0.787 0 M

1.5 0.718i.6 *0.648 1-7 0.578 0 La

HAITI

ELECTRICITE D'HAITI

THIRD POWER PROJECT

Comparison of Alternatives

Medium Speed, Slow Speed Diesel Plant and Gas Turbine Plant

8. Medium Speed or Slow Speed Diesels Followed by Gas Turbines

a) A balance of capacities, adding 20-21 MW gas turbine units as of 1987 shows that one unit is required in each year 1987

through 1990. Capital cost are assumed at US$400/kW.

b) Capital cost of medium speed and slow speed diesels and their present values are equal to those stated (page 1) for the various

years. The cost of a 20-21 MW gas turbine would be, at US$400/kW, an assumed MUS$8.1, with 55% of expenditures in the

first year and 45% in the second year. Although the capital cost are irrelevant since they are common to both alternativpn,

they have been included, together with their present values, in order to make total present values comparable with the

base case (page 1).

c) Operational cost are equal to those stated on page 1, because gas turbine operation is not required, except in emergency

cases, up to 1990:

Required thermal 77 MW bunker - C OilGeneration/GWh) Fired Diesels at 5000h/a (GWh)

1987 215 3851988 268 3851989 270 3851990 336 385

Only during an extremely dry year 1990 would gas turbine operation be required.

d) To repeat the calculation for the general case (Section 7 on pages 4 and 5), capital cost of gas turbine plant has to X

be excluded and tables 7(d) and 7(e) would become:

Discount Rate (%)

8 1.307 - 0.270 F

10 1.323 - 0.289 F0

12 1.346 - 0.316 Fc

19 1.376 - 0.349 F0

16 1.410 - 0.385 Fcc

At a discount rate of 12%

Cost of slow speed diesels Highest operational cost (incl. fuel) oftimes cost of medium speed slow speed diesels as a fraction of those

diesels (F) of medium speed diesels (F )

1.1 0.9981.2 0.9671.3 0.9351.4 0.9041.5 0.8721.6 0.840

1.7 0.809 a,

October 13, 1981

HAITI

ELECTRICITE D1' HAITI

THIRD POWER PROJECT

Rate of Return on the 1981-86 Investment Program

Benefits

----------------- Capital Cost /O--------------------_---- --------- Operational Cost 2/ 3/----------- Total Incremental Revenues Less

Year Generation Transmission Distribution Various Total Fuel O&M Administration Total Costs Sales Revenues (Benefits) CostsNo. Calendar …---U8---------- S(GWh) 4/ (GWh) 4/ -- S-/kWh MUS& _U MC-

1 1981 9.9 1.0 2.4 3.7 See PV 2.5 1.0 See PV See PV 32 11.00 3.5 See PV2 1982 10.5 7.1 3.7 5.0 7.7 2.0 0.1 67 13.21 8.93 1983 23.4 3.3 6.2 6.0 11.0 3.0 0.2 105 13.67 14.44 1984 32.8 0.2 5.3 4.7 13.2 3.7 0.4 149 13.15 19.65 1985 44.6 1.5 3.0 3.9 17.3 3.8 0.6 201 13.00 26.16 1986 53.8 8.0 3.1 3.6 17.8 4.2 0.9 259 13.00 33.77 1987 19.4 5.1 1.1 411 13.00 53.48 1988 19.4 5.3 1.1 431 13.00 56.09 1989 19.4 5.8 1.2 491 13.00 63.8

10 1990 19.4 6.0 1.3 515 13.00 67.011 1991 19.4 6.0 1.3 564 13.00 73.3

35 2015 5/ 19.4 6.0 1.3 564 13.00 73.3

DiscountRate

% -----------------------------------------------------------------------…Present Values (MUS)---------------------------------------------------------------------------------

8 135.1 17.1 19.9 22.5 194.4 201.7 58.5 11.2 271.4 465.8 607.5 141.710 127.3 16.3 18.8 21.6 184.0 164.2 47.2 8.8 220.2 404.2 476.2 72.012 120.2 15.6 18.1 20.8 174.7 136.9 39.1 7.1 183.1 357.8 382.2 24.414 113.6 15.0 17.4 20.1 166.1 116.5 33.0 5.8 155.3 321.4 313.2 -8.216 107.6 14.3 16.7 19.4 158.0 100.8 28.4 4.9 134.1 292.1 261.2 -30.9 118 102.1 13.8 16.1 18.7 150.7 88.3 24.7 4.1 117.1 267.8 221.3 -46.5 ol

Rate of Return 14%

…----------------------------------------------------------------Sen------Sensitivities 6/ 7…/------------------------------------------_-_ _ -_ _ _ _(% Change Required to Make Rate of Return Equal to the Discount Rate in the First Column)

10 +39.1 +17.8 -15.112 +14.0 +17.8 +13.3 +6.8 -6.414 -4.9 -7.0 -5.3 -2.6 +2.616 -19.6 -30.7 -23.0 -10.6 +11.818 -29.5 -17.4 +21.0

For Notes see pages 2, 3, 4 and 5.

August 11, 1981 ,

ANNEX 6.4-65- Page 2 of 5

HAITI

ELECTRICITE D' HAITI

THIRD POWER PROJECT

Rate of Return on the 1981-86 Investment Program

Notes

1. Capital Cost. See Annex 4.1. Capital cost is deflated by the inflation factorsas shown below (para. 2). Cost of studies was allocated to Generation. Onethird of "Various" was allocated to distribution and subsequently ConsultantCost and Training was included in "Various".

2. Operation and Administration Cost. Derived from the details pertaining to theIncome Statements. Inflation indexes and factors were assumed as follows:

Local Inflation Foreign Inflation Fuel InflationX Factor % Factor % Factor

1980 17.9 0.911 12.5 0.938 15.5 0.9231981 15.0 1.000 9.0 1.000 12.0 1.0001982 10.0 1.050 8.5 1.043 11.5 1.0581983 10.0 1.155 7.5 1.126 10.5 1.1741984 10.0 1.271 7.5 1.210 10.5 1.2971985 10.0 1.398 7.5 1.301 10.5 1.4331986 10.0 1.537 6.o 1.388 9.0 1.5721987 10.0 1.691 6.o 1.472 9.0 1.713

3. Additional Operation and Administration Cost

3.1 Because for benefits additional sales will be taken into account reflectingthe portion of investments made during 1981-86 in generating plant, a similarportion of operating and administration cost has also to be taken into accountfor 1987 and subsequent years (MUS$).

-Fuel- - -- 0 and M--------------------------Base Addition Total Base Addition Addition Addition Addition Total

(a) (b) (c) (d) (e)

1986 17.8 17.8 14.2 4.21987 17.8 1.6 19.4 4.2 0.9 5.11988 17.8 1.6 19.4 4.2 0.9 0.2 5.31989 17.8 1.6 19.4 4.2 0.9 0.2 0.5 5.81990 17.8 1.6 19.14 4.2 0.9 0.2 0.5 0.2 6.o

(a) Fuel cost added for three diesels to be commissioned in 1987; 58% of investmentis spent before 1987 (see Note 4.2) and 58% of fuel cost for three units has tobe allocated (21 MW of the 98 MW in thermal plant available in 1987, or about 20%;generation of Bunker C oil fired plant is 269 GWh in 1985) or (rounded)0.5 x 0.2 x 269 = 26 GWh, at a cost of USU6.24/kWh, costing US$1,620.

ANNEX 6.4Page 3 of 5

(b) 0 and M for La Chapelle and Guayamouc proportionally added: about 85% of 1%of investments (see Note 4.2) or kUS$280.

(c) 0 and M for three diesels 1987 proportionally added: 58% of 2% of investment(see Note 4.2) or kUS$280.

(d) 0 and M for Verrettes proportionally added: 53% of 1% of investments (seeNote 4.2) or kUS$430.

(e) 0 and M for hydro plant at sites A177 and A166 proportinally added: 23%of 1% for investments for Site A177 and 6% of 1% for Site A166 (see Note4.2) or kUS$200.

3.2 In 1986 administration cost is about 20% of total 0 and M cost; incrementalcost is assumed to rise similarly.

4. Incremental Sales

4.1 In accordance with the financial forecasts, sales (and incremental sales)will be the following:

Sales Incremental SalesYear (GWh) (GWh)

1980 216 01981 248 321982 283 671983 321 1051984 365 1491985 417 2011986 475 2591987 541 3251988 616 4oo1989 702 4851990 799 583

4.2 The incremental sales for 1987-90 for projects to be completed during thoseyears and for which expenditures are to be made before 1987, are in part dueto these projects. They are calculated as follows:

-67- ANNEX 6.4Pages 4 of 5

IncrementalSales

Total Net Total Expenditures AttributableEnergy Losses Energy Cost to 1986 these to

Project Year GWh % GWh MUS$ MUS$ % of Cost Expenditures

La Chapelle 1986 168 17 139 76.5 63.3 83 116Guayamouc 1986 43 17 36 21.1 21.1 100 36Three Diesels 1987 63 15 55 24.5 14.1 58 26Verrettes 1988 133 15 113 81.3 43.3 53 60A177 1989 101 15 86 69.8 15.8 23 20A166 1990 75 15 64 67.7 4.1 6 4

4.3 Incremental sales attributable to projects on which construction starts before1987 but which will be completed before 1991, are the following:

ProjectsCompletedBefore La Gross Attri-1987 Chapelle Guayamouc Diesels Verretes A177 A166 Total butable

Year ---------------------------------------Sales----------------------------------------------

1981 32 32 321982 67 67 671983 105 105 1051984 149 149 1491985 201 201 2011986 259 116 36 259 2591987 259 116 36 442 a/ 4111988 259 116 36 26 466 a/ 4311989 259 116 36 26 60 536 B/ 4911990 259 116 36 26 60 20 4 564 a! 51519g9 564 - 564

a/ Total gross GWh cannot be used, because the incremental consumption is lower than the newenergy capability (fuel savings could be assumed, but his was neglected).

5. Discount Period. The discount period beyond 1990 was set at 25 years (for atotal of 35) as a reasonable estimate of the average economic life of the plantinvolved. Individually, economic life would be:

Type of Plant Economic Life (Years)

Diesel 15Hydro 40Transmission 30Distribution 25Various 5

- 68- ANNEX 6.4Page 5 of 5

6. Sensitivity to the Rise in Fuel Prices. Should fuel prices rise on average3% each year, equivalent discount rates have to be used as follows(example for i = 12%)

1.03 = 1 iR 7(1.12 1.087 eq

The equivalent discount rates are then to be used for discounting fuel cost.This gives the following present values for fuel cost and the resulting netbenefits:

ii eq PV of Fuel Cost Net Benefits% % MUS$ MUS$

8 4.9 293.4 50.010 6.8 231.2 5.012 8.7 187.2 -25.914 10.7 153.7 -45.416 12.6 130.2 -60.318 14.6 111.3 -69.5

Rate of Return 10.3%

7. Sensitivity to Rates. At the present average rate of about US1l1/kWh,the presentvalue of sales, revenues and the resulting net benefits, would be thefollowing:

i PV of Sales Revenue (MUS$) Net Benefits% GWh at MUS$0.11/GWh MUS$

8 4,672 513.9 48.110 3,662 402.8 -1.412 2,939 323.3 -34.514 2,408 264.9 -56.516 2,oo8 220.9 -71.218 1,701 187.1 -80.7

Rate of Return 10%

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