Document of

The World Bank

FOR OFFICIAL USE ONLY FIL p

Report No. 1850a-CO

STAFF APPRAISAL REPORT

COLOMBIA

SAN CARLOS I HYDRO POWER AND

500-KV INTERCONNECTION PROJECTS

May 17, 1978

Projects DepartmentLatin America and the Caribbean Regional Office

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.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Currency Unit = Colombian Peso (Col$)('o$1 = 100 Centavos (ctv)C:ol$36.985 (1977 average) = US$1Col$1,000 = US$27.04 (1977 average)Col$1,000,000 (MCol$) = US$27,038 (1977 average)MlS$ US$1,000,000

WEIGHTS AND MEASURES

1 meter (m) = 3.281 feet (ft) 21 square kilometer (km2) = 0.386 square mile (mi )1 cubic meter (m3) = 35.315 cubic feet (ft3)

= 264.2 gallon (gal)

= 6.290 barrels (bbl)

1 kilogram (kg) = 2.206 pounds (lb)1 ton (t; metric; 1,000 kg) = 1,100 short tons (sh. tons)1 kilowatt (kW) = 1,000 Watts (103 W) 61 Megawatt (MW) = 1,000 kW (103 kW = 10 W)1 Gigawatt (GW) = 1,000 MW (106 kW = 109 W)1 kilowatt-hour (kWi) = 1,QOO Watt-hours (103 Wh)

= 830.3 kilocalories (kcal)1 Gigawatt-hour (GWh) = 1,000,000 kWh (106 kWh)1 Terawatt-hour (TWh) = 1,000 GWh (109 kWh)1 kilovolt (kV) = 1,000 Volts (V) 31 kilovolt ampere (kVA) = 1,000 Volt amperes (10 VA)I Megavolt ampere (MVA) = 1,000 kVA (106 VA)1 Megavolt ampere reac- = 1 Megavolt ampere reactivetive (MVAr) power (COS 0 = 00)

1 kilocalorie (kcal) = 3.968 British thermal units (Btu)1 Hertz (Hz) = 1 cycle/second... per..= .. /.... per second; ... per hour = ... /s; .../h...per day; ... per year = ... /d; ... /a

GLOSSARY OF ABBREVIATIONS

ISA = Interconexi6n Electrica S.A.EEEB = Empresa de Energia Electrica de Bogota

EMCALI = Empresas Municipales de Cali

E]'M = Empresas Publicas de MedellinCHEC = Central HidroeIectrica de CaldasCIIIDRAL = Central Hidroelectrica del Rio Anchicaya S.A.CORELCA = Corporaci6n Electrica de la Costa AtlanticaCVC = Corporaci6n Aut6noma Regional de el Valle

del Rio CaucaICEL = Instituto Colombiano de Energfa ElectricaNPD = National Planning DepartmentII)B = Inter-American Development BankKi-W = Kreditanstalt fur Wiederaufbau

Fiscal Year = Calendar Year

FM O FflAL US ONLY

COLOMBIA

SAN CARLOS I HYDRO POWER AND 500-KV INTERCONNECTION PROJECTS

TABLE OF CONTENTS

Page No.

1. THE SECTOR ......................... 1......................

Energy resources ...... .............. 1................ Power supply .................................... . 3Regulation .......................................... 4World Bank participation in the sector .. ............ 5Power market .................................... . 6Rural electrification .... ...................... . 7Sector investment program and studies .. ............. 8Finances and tariffs ........... ......................... 9Constraints on sector development ................... 11

2. ISA AND ITS SHAREHOLDERS ................ .. ............... 13

The Borrowers ....................................... 13ISA ................................................. 13Bylaws ............................................ 13Organization and administration ................. .. 14Employment and training ............. .. ........... 14Accounting and auditing ............. .. ............ 14Insurance ............ ............................. 14Prior Bank lending ................. ............... 14

ISA's Shareholders ... ............................... 15

3. THE POWER MARKET ......................................... 18

Historic ............................................ 18Forecasts ........................................... 19Balances of capacities and energies .............. ... 19Operation of the interconnected system - Loaddispatching ....................................... 21

4. THE NATIONAL DEVELOPMENT PROGRAM AND THE SAN CARLOS IHYDRO POWER PROJECT ...................................... 22

The program ......................................... 22The Project ......................................... 23Objectives ........................................ 23Construction and location ..... .................... 23Description ..... 24

This report was prepared by Messrs. C. A. Besse, J. Cavallotti and W. F. Kupperon the basis of an appraisal conducted in Colombia in April 1977 and follow-upmissions in August and September 1977.

This desumi hm a rstfrictod distribution and may be usd by recipients only in the performanceof their dkial dute. Its contents may not otherwise be disckneWd without World Dank authoriation

TABLE OF CONTENTS (Continued)

Page No.

Estimated cost .................................... 25Financing ..... .................................... 26

Engineering and construction schedule, studies ...... 27Procurement .......................................... 27Disbursements ....................................... 28Environmental aspects ...... ..................... .... 28Project Risks ....................................... 29Climatic conditions ................ . .... .............. . 29Geology ........................................... 29Seaismicity ................................... 0 .............. 30

5. THE 500-kV INTERCONNECTION PROJECT ....................... 31

Objectives .......................................... 31Description ......................................... 31Transmission line ................................... 31Substations ......................................... 32Terminal substations ........................... ... 32Intermediate substations .......................... 32Shunt compensation ............................. ... 32

Voltage selection ....... ......................... ... 32Project cost .............. .................. ........ 33Finaincing ........................................... 33Engineering and construction program ....... .. ....... 34Procurement ............ ; ............................. 35Disbursements ....................................... 35Environment ......................................... 35Project risks ...................................... 36

6. FINANCES ................................................ 37

Introduction ..................... .................. 37ISA's performance and financial position ........... 37Financing plan .................... ................. 39Future finances ...... .. ............................ 42Financial outlook of ISA's shareholders .. .......... 43

EEiEB ........................ ..................... 43EP'M .............................................. 44C\'C ......................... ..................... 45IC:EL ........................ ..................... 45CCiRELCA ...................... ................... 45

Performance indicators and reporting ....... ........ 46Attachment 6/1 ISA: Income Statements 1975-1984 47Attachment 6/2 ISA: Balance Sheets 1975-1984 48Attachment 6/3 ISA: Sources and application of

funds 1976-1984 497. ECONOMIC ANALYSIS ................................... .... 50

Comparison of alternatives ..... ................ .... 50Return on investments .......................... .... 50Risks .......................................... .... 51

8. AGREEMENTS REACHED AND RECOMMENDATION ................... 53

TABLE OF CONTENTS (Continued)

Page No.

San Carlos I Hydro Power Project ..................... 53Studies ............................................ 53General ............................................ 53Project ..... 54Financial .......................................... 54

500-kV Interconnection Project ....................... 55

ANNEXES

1.1 IBRD power loans1.2 1976 Sector installed capacity and generation

2.1 ISA's organizational chart2.2 Description of ISA's shareholders

3.1 Electricity supply data 1972-19763.2 Capacity and energy balances3.3 ISA's sales and energy interchanges between the Central and

Atlantic systems3.4 Operation of interconnected system - Load dispatching

4.1 Hydro developments on the Nare, Guatape and Samana rivers4.2 Summary Project cost estimate4.3 Project implementation schedule - Key dates4.4 Loan disbursement schedule

5.1 Transmission line details5.2 Summary Project cost5.3 Project implementation schedule - Key dates5.4 Loan disbursement schedule

6.1 ISA: Schedule of existing and proposed long-term debt6.2 ISA: Estimated capital and bond contribution 1977-19846.3 ISA: Forecast amortization 1977-19846.4 ISA: Forecast interest schedule6.5 EEEB: Sources and application of funds 1976-19846.6 EPM: Sources and application of funds 1976-19846.7 CVC: Sources and application of funds 1976-19846.8 CORELCA: Sources and application of funds 1976-19846.9 Forecast performance indicators

7 Economic analysis7.1 Comparison of alternatives7.2 Rates of return on investments

8 Contents of Project File

MAPS

IBRD 3948R1 - ISA's Electric Power SystemIBRD 13005R1 - San Carlos Hydro Power and 500 kV-Interconnection Projects

1. THE SECTOR 1/

Energy Resources

1.01 Colombia's main indigenous commercial energy resources are hydro-power, coal, gas and oil. Potential hydropower appears to be the most promis-ing at some 100 GW of capacity and 250-300 TWh of annual energy capability,as shown by the preliminary investigations made by the Government withtechnical assistance from the Federal Republic of Germany.

1.02 Colombia is also endowed with very large coal and gas deposits.Crude oil output has declined since 1971 at an average rate of 7.5%/a.Over the same period, consumption has increased by 7%/a. As a result, Colombiais now a net importer of crude oil (it was a net exporter until 1976) and pros-pects are for these imports to rise sharply to onerous levels by the early 1980sunless additional reserves are discovered and developed quickly. Measures arebeing taken (1.05) to deal with this problem and to develop alternative energysources. In the case of coal, there have been various obstacles to more adequateutilization of the existing potential: prices as low as one-fifth of thoseprevailing on international markets, the competition of low-priced petroleum,fragmentation of production among a large number of very small mines with lowoutput and productivity levels, and lack of efficient marketing and transportinfrastructure. However, the Government is currently taking action to addressthese problems, and large-scale development of coal reserves is planned (1.04).With respect to natural gas, a previous decline in known reserves and output hasbeen dramatically reversed with the discovery of large deposit5 in the AtlanticCoast region. These reserves (estimated at over 5 trillion ft ) will provideenergy and petrochemical feedstock to this rapidly industrializing region.

1.03 Output of primary energy during 1965-75 has not kept pace withoverall economic expansion. It increased only 1.7%/a during 1965-70 when itreached its peak at 657 trillion Btu, and declined since then to 625 trillionBtu in 1975, mainly due to falling crude oil output:

1/ Preparation of this chapter has been greatly assisted by two recentstudies of the power sector: "La Electrificacion en Colombia" -Documentos Nueva Frontera No. 5 - Bogota, June 1977; and "El SectorElectrico Colombiano - Problemas y Desarrollo" - Asociacion Nacional deInstituciones Financieras - mimeo, no date.

-2-

---------------- Primary Energy Output I/ ----------------1965 1970 1975

Heat Heat HeatEquiva- Equiva- Equiva-

lint 2/ lint 2/ lint 2/Unit Quantitv 10 Btu Quantity 10 Btu Quantity 10 Btu

Hyclro power (,Wh 3,649 38.3 6,212 65.2 9,940 104.4

Crude oil 10 bbl 73.2 410.0 80.1 448.3 57.3 320.7

Natural gas 10 ft 65.7 65.7 71.8 71.8 90.5 90.5

Coal 1]06t 3,100 88.9 2,500 71.7 3,800 109.0

Total 602.9 657.0 624.6

--------------- Final Energy Consumption 1/ --------------1965 1970 1975

Heat Heat HeatEquiva- Equiva- Equiva-}2nt 2/ Int 2/ lint 2/

Unit Quantity 10 Btu Quantity 10 Btu Quantity 10 Btu

Electricity C;Wh 4,790 50.3 7,538 79.1 11,069 116.2Petroleum 6IProducts 10 bbl 23.5 131.6 33.8 189.3 42.5 238.0

Natural gas 10 ft 12.1 12.1 23.1 23.1 35.8 35.8

Coal 10 t 2.7 76.9 2.1 61.6 3.4 98.5

Total 270.9 353.3 488.5

In contrast to the declining energy output, domestic consumption has grown by5.4%/a during 1965-70, and 8.5%/a during 1971-73, when economic growth washigh and energy prices declined sharply in real terms. During 1974-76, theeconomic down-turn and increase in real energy prices had a dampening effecton consumption, which now has settled at a growth of about 4.5%/a comparedwith a GDP growth of some 6% in recent years.

1/ The difference between primary energy output and final energy consumption,expressed in heat equivalent, constitutes the approximate sum of totallosses and exports.

2/ Calculated at: 11,100 Itu/kWh for power, 5.6 MBtu/bbl for oil and itsproducts, 1 MBtu/10 ft for gas and its products and 28.69 MBtu/t forcoal and coke.

-3-

1.04 The Government's development strategy is aimed at achieving a morefavorable balance between domestic energy supply and use, thus utilizing morefully those energy sources which are in abundant supply, i.e., hydropower,natural gas and coal. The Government is planning a large-scale development ofcoal deposits by state entities in association with foreign investors. Forthat purpose, a new enterprise, CARBOCOL, has recently been created and islikely to emerge as the Government's chief agency in coal-related matters.The Government attaches high priority to developing the thermal coal depositsat El Cerrejon (near Riohacha in the department of La Guajira on the Atlanticcoast) under CARBOCOL's responsibility. An exploration contract has beenconcluded with the Exxon subsidiary INTERCOR, covering part of the coal field;the remaining section is planned to be developed by CARBOCOL itself or byforeign companies on the basis of special contracts. Reserves are believedto be as high as 600 million tons and the combined capacity of both venturesis estimated at about 10 Mt/a. On the other hand, small private firms whichown coal mines are pursuing plans to expand output in order to supply fuelfor heat intensive industrial processes and in-plant power generation. Inorder to expand potentially viable mines, a well-coordinated Governmentprogram is needed to provide a more rational price structure and improvemine safety, credit facilities and support for marketing and infrastructure.Such a program would need substantial technical and capital assistance fromabroad.

1.05 In the hydrocarbon sector, the Government has taken action to stimu-late investment in exploration and field development, which had declined after1971 because of unrealistically low prices applied to domestic sales. TheGovernment is encouraging foreign participation in exploration and developmenton the basis of association contracts with ECOPETROL (the Government oilagency). The prices paid for oil produced by increasing yields from existingfields and from new fields have been raised, the latter now being close toworld market levels, and the discriminatory exchange rate for petroleum hasbeen eliminated. As a result, interest among foreign petroleum companies toexpand or start operations in Colombia has been intensified and a significantup-turn in exploration is expected. In order to explore more adequatelyColombia's sedimentary basins, outlays of close to US$1 billion appear to benecessary through the early 1980s, with another US$2 billion required fordeveloping possible fields. ECOPETROL is also studying the possibility ofincreasing the output of existing fields through secondary recovery techniques.

1.06 Plans are underway to explore the country's uranium potential andthe Government has concluded an exploration contract with the French Minatomegroup. The development of any uranium potential that might exist wouldprovide the country with another long-term energy option.

Power Supply

1.07 Electricity is the fastest growing form of energy use in Colombia;its share in overall energy consumption has grown from 14% in 1960 to 24% in1975. This process has been assisted by the gradual consolidation of isolatedfacilities into regional systems and the interconnection of these systems tofacilitate development of Colombia's low-cost hydro resources. The mainsystems are (see Map 3948) the Central System, covering the interior and the

- 4 -

Pacific coast, and the Atlantic (or Northern) System covering the northernpart of the country. The proposed San Carlos Hydro Project will be locatedin the Central Sytem; the 500-kV Interconnection Project will interconnectthese systems. Public electricity service is presently provided by:

(a) municipally-owned companies, independent of the CentralGovernment, of which the largest are Empresa de EnergiaElectrica de Bogota (EEEB), Empresas Publicas de Medellin(EPM) and Empresas Municipales de Cali (EMCALI);

(b) national enterprises such as Instituto Colombiano de EnergiaElectrica (ICEL), the Corporacion Autonoma Regional delCauca (CVC), and the Corporacion Electrica de la CostaAtlantica (CORELCA);

(c) a large number of local subsidiaries of ICEL, CORELCA andCVC 1/; and

(d) a generating and transmission company, InterconnexionElectrica S.A. (ISA).

E]EEB, EPM, ICEL, CVC and CORELCA are the major shareholders of ISA which wouldbe the borrower for the San Carlos I Project and would construct, own andoperate the 500-kV Interconnection Project to be financed by the Government(which would be the borrower for the latter project). Colombia has a numbero:E public entities known as Regional Autonomous Corporations with a range offunctions relaited to development of the regions under their jurisdiction,including legaL capacity to generate, transmit and distribute electricity.CVIC is the largest of these entities. IBRD Map 3948 shows the service areasof the major retailers; further details on the major utilities are given inChapter 2.

Regulation

1.08 Through its Electric Energy Division, the Ministry of Mines andEnergy is charged with formulating a national policy for the generation,transmission and distribution of electricity. This division, which is beingorganized, was also given the responsibility for coordinating and supervisingpower sector planning. However, it does not have the powers assigned tosimilar agencies in other countries (issuance of licenses, regulation oftariffs, approval of expansion programs) to enforce its policies and program.

1.09 The Ministry of Mines and Energy owns a part of the sector directly(through ICEL and CORELCA). EEEB and EPM (presently the largest power utilities)are controlled by autonomous municipal governments. CVC reports to theNational Planning Department (NPD) as do other regional development corporationswhich may, as already noted, undertake power projects.

1/ In most cases the ownership of these subsidiaries is shared with localgovernments.

- 5 -

1.10 Public utility retail tariffs (including those for electricity) are

regulated by the Junta Nacional de Tarifas de Servicios Publicos in the NPD,

which has customarily approved requests for rate increases. However, utilities

are free to set tariffs at levels lower than those approved by the Junta and

have done so in the past.

1.11 ISA was established to provide a rational framework for sector

expansion by interconnecting the systems of its shareholders, thus creating

a national grid capable of sustaining large hydroelectric developments. By

pooling their financial resources through ISA, its shareholders have been able

to undertake much larger and more economical projects than would have been

feasible under the previous arrangements. However, ISA is still in the process

of growing into a strong national utility. The municipal utilities have been

reluctant to relinquish their role in generation and have experienced severe

financial constraints which reduced the availability of funds to ISA. Decisions

on system expansion have required protracted negotiations among the shareholders

and the Government, further complicated by the original shareholders' reluctance

to allow the incorporation of CORELCA into ISA. Throughout these

negotiations, the Bank continued to support the concept of centralized planning,

construction and operation of the national grid and has resisted proposals that

would weaken ISA. Because of the time required by the shareholders to arrive

at decisions on these fundamental issues, Bank consideration of San Carlos I,

the 500-kV Interconnection and EEEB's proposed Mesitas hydroelectric project,

all of them urgently needed to avoid power rationing in Colombia (3.07)

suffered considerable delays. A compromise solution was evolved in extensive

discussions between Bank staff, the Government and the shareholders over the

past eighteen months. In addition to the financial measures detailed in

Chapter 6, revisions have been introduced into ISA bylaws which specify that ISA

would define the future generation expansion program in the interconnected system.

ISA would own plants requiring the joint effort of all its shareholders. Plants

of regional interest may be built by one or several shareholders, subject to ISA

approval of such regional plants. Under this arrangement, ISA would, in effect,

be responsible for an important part of sector regulation and planning; only

utilities which do not participate directly in ISA and the regional development

corporations other than CVC, would not be covered by its decisions. Voting

arrangements in ISA have been restructured to require the concurrence of four

of its five major shareholders in all important decisions, thus protecting the

interests of the municipal utilities and encouraging a more positive participa-

tion in its deliberations.

World Bank Participation in the Sector

1.12 Since 1950, the Bank has made 18 loans to Colombia's power sector,

totalling MUS$350 (see Annex 1.1). Sixteen loans have assisted the expansion

of capacity in the systems of Bogota, Medellin, Cali, Cartagena, Bucaramanga,

and Manizales. The most recent loan (874 CO, 1973) included expansion of

of electricity distribution in low income areas and the Bank is currently

supporting rural electrification under the Integrated Rural Development

Project (1352-CO, 1977). The general reviews of Bank lending in the power

- 6 -

sector and in Colombia prepared by the Operations Evaluation Division (OED)of the Programming and Budgeting Department 1/ contained a detailed analysisof early Bank activities in the Colombian power sector. The main findingsof Lhese reports were _ddressed to general issues of Bank policy in thepower sector. A further report of OED 2/ has summarized the actions takenby the Bank on these recommendations.

1.13 The recommendations specifically addressed to further loans in theColombian power sector include the need to give greater attention to powerdistribution; the improvement of financial recording and financial planningcapabilities; and the need to give more attention to public utility tariffstructures. These concerns have influenced the Bank's work in the sector(1.16, 1.20, 1.30, 6.05, 6.13, 6.18). However, priority attention has had tobe given to 3 issues on which satisfactory progress was expected when the lastloan was made: sector planning, organization and financing (1.11, 1.26-1.34).Performance uncer recent loans for power in Colombia (which have all been madeto ISA and its shareholders) is discussed in Chapter 2.

1.14 The two proposed loans, totalling MUS$176 (one to ISA, amounting toMUS$126 million for construction of the first stage of the San Carlos hydrostation and one to the Government amounting to MUS$50 for the 500-kV Intercon-nection system) are urgently needed to avoid possible energy rationing inColombia from 1981 onward, which would have serious consequences for thecountry's economy. These projects would increase ISA's role substantiallysince it would control the national interconnection system and, upon completionof the second stage of San Carlos (1984), would own 35% of the country's totalgenerating capacity.

Power Market

1.15 Electricity generation in Colombia expanded by an average of 9.7%/aover the period 1960-70 and then decreased to about 8.6% on average until theend of 1976 due to the slackening in industrial growth after 1974 (industrialconsumption decreased to 7.4%/a compared with 9.5%/a during the sixties).Present per capita electricity generation is estimated at about 600 kWh, whichis below average for Latin America. Installed capacity at the end of 1976 was3,300 MW, including self-production. Hydro stations accounted for 68% of totalenergy generation.

1/ "Operations Evaluation Report: Electric Power" (Report No. Z-17 ofMarch 10, 1972); and "Bank Operations in Colombia - An Evaluation"(Report No. Z-18 of May 25, 1972).

2/ "Closing Report on Actions Relating to the Electric Power EvaluationReport of March 1972" (Report No. 690 of April 11, 1975).

-7-

1.16 Colombia has about 1.84 million electricity subscribers in an esti-mated total population of 24.2 million; 87% of these subscribers are residen-tial, and electricity service reaches 60% of the population. Studies by theBank's Development Policy Staff indicate that Colombia has been able toprovide electriciLy service to a very high proportion of its urban population(85%, with the connection rate exceeding 98% in the larger cities). However,only 16% of rural families had service in 1974. Of the electrified municipal-ities, 88% have continuous service, while the other 12% have service onlyduring certain hours of the day. Also, in many towns the quality of theservice is unsatisfactory because of lack of maintenance.

1.17 Residential consumers were responsible for the largest share ofelectricity sales by the major utilities in 1976, followed by industry:

Category Sales ClientsGWh % No. %

Residential 4,384 41.6 1,590,000 86.5Industrial 3,656 34.7 26,002 1.4Commercial 1,385 13.1 202,295 11.0Others 1,397 10.6 20,075 1.1

Total 10,542 100.0 1,838,372 100.0

1.18 Public utilities accounted for 93% of total electricity supply; therest was provided by self-production. EEEB generated 26%, EPM 25% and CVC,ICEL and CORELCA about 13% each. Self-suppliers (mainly oil refineries,petro-chemical plants, steel mills and cement works) owned 5.8% of the country'sinstalled capacity; these plants are also connected to the public electricityservice. The public-service labor force totalled 13,358 at the end of 1976,including 6,663 manual workers; this gives ratios of 233 kW/employee and 138subscribers/employee, which compare favorably with the average for LatinAmerica. The following table summarizes (Annex 1.2) installed capacity andenergy generated in Colombia in 1976:

Public Service Self Producers TotalNW % GWh % MW % GWh % MW % GWh %

Hydro, Subtotal 2,221 67 9,874 68 4 - 11 - 2,225 67 9,885 68

Steam 524 16 2,215 15 127 4 696 5 651 20 2,911 20Gas turbine 224 7 923 6 34 1 168 2 258 8 1,091 8Diesel 141 4 573 4 26 1 88 - 167 5 661 4Thermal, Subtotal 889 27 3,711 25 187 6 952 7 1,076 33 4,663 32

Total 3,110 94 13,585 93 191 6 963 7 3,301 100 14,548 100

Rural Electrification

1.19 About 30% of the population live in areas classified as rural.Most of the rural villages with electricity service are close to the urban

centers. In 1974 only 16% of the rural population had electricity service.It is estimated that the cost of a rural electrification network, for thecountry as a whole, would be about US$500 per household and that over ap. iod of six years electricity could be brought to about 20% of the ruralpopulation presently without service (about 40,000 dwellings a year) at acost of some MUS$120.

1.20 Rural electrification programs are currently under way in a numberof regions in the country. Among the most important are (a) the electrifica-tion subproject of the 1977-79 Integrated Rural Development Program supportedby IDB, Canadian International Developement Agency and Bank financing(Loan 1352-CO); (b) the electrification program in the department of Chocofinanced by the Netherlands Government); and (c) the electrification programin the coffee-growing areas, financed by coffee sector resources.

Sector Investment Program and Studies

1.21 Investment in generation and transmission facilities during 1977-84is expected to amount to about Col$250 billion in current prices (about US$5billion in 1976 prices), some 60% of which would be in foreign exchange. Theinvestments in distribution are only partially known (for EEEB and EPM amount-ing to some Col$22 billion) because details are not available for the subsi-diaries of CVC, CORELCA, ICEL and the smaller entities. A master plan forpower development to be prepared by ISA (1.24) would provide such information.

1.22 The jprogram of investments in generation and transmission includes,im addition to the projects already decided upon by the Government and ISA'sshareholders (4.01), the start of construction of projects that will form partof the 1984-90 expansion program. ISA has recently submitted to the Banka study 1/ indicating that the 1984-88 portion of this program would be theleast-cost alternative for system expansion. Thermal plant should be analyzedin detail to establish location, unit sizes, fuels and other technical aspects.In addition, since additional thermal plant will be required mainly to provider-eserves for the interconnected system, thus benefitting all utilities connectedto the grid, proposals for sharing investment and operating costs and agreementoni dispatch responsibilities must be worked out soon (3.09 and 4.02). TheBank expects to review these issues with ISA in the course of the preparationof- the generation projects which would follow San Carlos I and Mesitas.

1.23 The study described above was undertaken by ISA in view of thedelays encountered in the execution of a more comprehensive study which theGovernment decided to carry out when the Bank made its last loan for power inColombia (874-CO for the Guatape II project - 1973). ISA is cooperating inthe comprehensiLve survey of hydro resources included in the study (1.32) and

1/' Programa cle Expansion del Sistema Interconectado-Periodo 1984-1988 (ISA,Junio 197,7).

- 9 -

a long-term expansion program based on the survey's findings is expected tobe available in mid-1979. The Government agreed to present this portionof the study to the Bank for review not later than September 30, 1979.

1.24 In order to improve the allocation of resources between the variouscategories of investment which the power sector will have to carry out,ISA and its shareholders agreed to prepare and present to the Government andthe Bank for comments by December 31, 1979, a Power Sector Development MasterPlan. This plan would cover the period 1980-90 in detail and 1991-2000 ingeneral terms and consolidate the programs for generation and transmission.Similarly ISA's shareholders have agreed, under coordination of the Ministryof Mines and Energy, to prepare and present, as part of ISA's, Master Plan, tothe Government and the Bank for comments, by December 31, 1979 a SectorDevelopment Master Plan for Distribution for the period 1980-2000, which wouldconsolidate all existing and future programs for distribution; the period1980-85 would be covered in detail. The Master Plan would overall provide avaluable framework for long-range decisions on sector financing, pricing andrural electrification which are presently being based on partial anduncoordinated information.

1.25 The generation investment program will impose a heavy financialburden on ISA and its shareholders. To ensure that only sound projects areundertaken, assurances have been obtained that ISA and its shareholders wouldnot undertake construction of any generating plant or combination of plantsof more than respectively 200 MW (ISA) and 100 MW (shareholders) capacityprior to completion of the proposed San Carlos I Project unless satisfactoryevidence has been presented to the Bank that it is economically justified andthat adequate financing is available to carry it out without jeopardizing theproposed Project.

Finances and Tariffs

1.26 The power sector has relied heavily on borrowings and budgetarycontributions to finance its investments. EEEB and EPM, which operate low-cost systems, have received a large share of the borrowings and have been ableto charge low rates in their service areas, which cover the most affluentmarkets in the country. CVC, ICEL and CORELCA, which operate high-cost systems,have had to rely on budgetary contributions from the Government and subsidies,despite their higher rates.

1.27 Rate adjustments have lagged considerably behind yearly inflation;for 1971-1976 the developments were the following:

- 10 -

----Average Rates---Col$/kWh Average Ratesat Current Average Col$/kWh

Year Prices % Change Inflation at 1970 Prices

(%)

1971 0.205 1.6 11.8 0.1831972 0.220 7.1 13.8 0.1731973 0.243 10.2 22.0 0.1571974i 0.277 14.2 25.2 0.143

1975 0.355 28.2 23.6 0.148

1976 0.423 19.2 20.0 0.147

Over the period, average rates increased only by about 13%/a, while inflation

averaged 19%. Thus, the 1976 average revenue - at prices of 1970 - was equiva-lent to only Col$0.147/kWh (73% of the 1970 average revenue of Col$0.202/kWh).Despite recent increases the current rates are among the lowest in the world.Residential consumers in Medellin pay from one-tenth to one-fifth of the price

charged to the average consumers in the rest of Latin America. This is theprincipal reason for the per capita residential consumption in that city being

among the highest in the region.

1.28 The lag of adequate rate. increases, particularly until 1975 (as can

be observed in the above table, rate increases in 1975-77 have about kept pacewith inflation), appears to have been attributable mainly to the Government's

concern with the impact of energy prices on overall cost of living and thepressures of local and regional interests. In view, however, of its extremelylow cost to the average consumer, the price of electricity is a marginal con-tributor to the cost of living and the problem appears to have been mainlypolitical. The favorable trend in rate setting which began in 1975, isexpected to continue with gradual increases in real terms (see Chapter 6 for

the agreements reached with ISA and its shareholders). In view of theimportance to economic growth of adequate electricity service, the Governmenthas adopted a policy calling for adequate rates in order to ensure that

the sector generates internally a reasonable portion of the funds required.

1.29 In order to increase the contribution of power sector consumers tothe financing of its investment program, the Minister of Mines and Energysubmitted legislation to Congress in late 1976 creating a National Energy Fund.The Fund would be financed by a surcharge on power tariffs and would be usedto finance rural electrification (25%) and projects approved by ISA and the

Ministry of Mines and Energy (75%). The Fund was expected to raise a modestamount of resources for the sector (on the order of US$25 million annually)

and to increase the role of the Ministry of Mines and Energy in shapingsector development. However, largely as a result of opposition from municipal

authorities to the basic objectives of the legislation, its enactment appearsdoubtful at this time.

- 11 -

1.30 As pointed out by OED, 1/ the greatest distortion in retail tariffsresults from the low level of residential rates noted above. To address thisproblem, ISA's shareholders agreed to carry out, coordinated by the Ministryof Mines and Energy, a study of the cost of service to final consumers and itsimplications fr_- power pricing, in the following major markets: Bogota,Medellin, Cali and Barranquilla, under conditions and terms of referencesatisfactory to the Bank. The study, which also includes the area covered bythe rural electrification component of Loan 1352-CO, would be completed notlater than December 31, 1978 and its recommendations (together with the viewsof the Ministry) would be discussed with the Bank not later than June 30,1979.

1.31 The implementation of the agreed recommendations of the tariffstructure study would be a major objective of further Bank lending in thesector.

Constraints on Sector Development

1.32 In the past, the large number of entities associated with the powersector, the lack of adequate regulation, coordination and planning at thenational level and low electricity rates have contributed to the poor perform-ance of the sector in making rational use of Colombia's abundant hydroelectricresources. The regionalized nature of the sector, reflecting the politicaland economic decentralization of Colombia, led to a lack of technical coopera-tion and difficulties in coordinating investment allocation; decisions weremade on a local basis without due regard to overall country planning for powerdevelopment. This, together with the lack of funds, resulted in uneconomicuse of fuel and caused recurring power shortages, a problem that will not besolved before well into the early eighties, provided the agreed developmentprogram is implemented expeditiously (the latter in turn, being largelydependent on adequate rate setting). In an effort to address the sectorproblems, the Government indicated in 1973, when the Bank made its previousloan for power (Guatape II, Loan 874-CO), that it planned to carry out withthe assistance of consultants a study of the sector covering its institutionaland financial problems and its long-term expansion program. The study, forwhich assistance was obtained from the Federal Republic of Germany, is beingexecuted by two groups of German consultants. The first of these, workingwith NPD, concentrated on sector institutions and financing. The Governmentwould present this report to the Bank by June 30, 1978. The second group ofconsultants is working with ISA on a hydro survey and long-term expansion plan(1.23).

1.33 The Government has recently taken a number of positive measuresto address the sector's institutional constraints. In 1975 it eliminated thejurisdictional overlap between ICEL and CORELCA on the Atlantic Coast bytransferring control over the electricity distribution companies in thatregion to CORELCA. Another positive measure was the reorientation of ICEL,

1/ Report No. Z-17, pages 59-63 (1.12) contains an analysis of tariff structureproblems in Bogota.

- 12 -

which in future will be responsible basically for electricity development inrural and semi-rural areas, where the Government will continue to subsidizethe service since it cannot be financially self-supporting in those areas. 1/

-order to remedy Lhe problems that exist between the generating and dis-tributing companies in the Cauca Valley as a consequence of the complexorganization of electricity service in that region, the Government hassupported the establishment of a regional power company whose basic functionw:ill be to consolidate that region's electricity sector in a single enterprise(2.14). With the incorporation of CORELCA into ISA, most of the sector isrepresented directly or indirectly 2/ in ISA's Board and a better coordina-t:ion of power sector planning in Colombia will now be possible. ISA's effec-tiveness in achieving this coordination, however, will depend on its abilityto sustain the consensus developed over the past 2 years among its shareholders.

1/ The sector's organization fragmentation has to date precluded the usualpractice of deriving resources from well-developed urban markets tosupport service in rural areas (1.26). The proposed National Energy Fund(1.29) would, if approved, make this type of cross-subsidization feasible.

2/ Through ICEL, CORELCA and CVC.

- 13 -

2. ISA AND ITS SHAREHOLDERS

The Borrowers

2.01 The borrower for the San Carlos I Hydro Power Project would beInterconexion Electrica S.A. (ISA). ISA would also construct, own and operatethe 500-kV Interconnection Project; this is highly desirable to ensure cen-tralized operation of the national grid. Because of the high priority whichit attached to the fuel savings arising from the project and in view of thefact that CORELCA would be the principal initial beneficiary, the Governmentdecided to finance the entire local cost of the project (CORELCA has alwaysrelied on the Government for such financing) and proposed that CORELCA shouldopwn the facilities. Te Bank suggested, for the reasons noted above, that IDAbe the owner. This was accepted by the Government; however, it did not wishto reverse its prior decision that it should be the borrower for the foreignloans (including the proposed Bank and KFW loans) for the project and thatISA and its shareholders should not be required to assume any financialobligations in connection with it. The Bank agreed, in view of the measuresadopted by CORELCA and other ISA shareholders to strengthen their finances andcarry out their large investment program while reducing CORELCA and CVC'sdependence on budgetary resources in the future. The Republic of Colombiawould thus be the borrower for the 500-kV Interconnection Project.

ISA

2.02 Bylaws. ISA is a public corporation established in 1967. Its share-holders (with their holdings as of March 1978) are:

Utility Shares

EEEB 4,868 28EPM 3,775 22CVC 3,422 20CHIDRAL /1 66 -ICEL 2,561 15CHEC /2 67 -CORELCA 2,577 15

17,336 100

/1 A CVC subsidiary - see 2.14./2 Central Hidroelectrica de Caldas, an ICEL

subsidiary.

As already noted in 1.11, ISA's bylaws give it many regulatory and planningfunctions. They also contain important provisions with regard to the financingof the major generation projects entrusted to ISA which are detailed inChapter 6. The bylaws are consistent with the decentralized structure ofthe power sector; when taken together with the agreements for the proposedloans, they would provide a basis for improved sector performance. ISAhas agreed to secure the assent of the Bank before amendments are introducedin the bylaws.

- 14 -

2.03 Organization and Administration. ISA is administered by itsShareholder Assembly, a 5-member Board of Directors and a General Manager.The Assembly must act on all major issues, and decision-making is slow asthe interests of the various shareholders may differ. To ensure that decisionsare based on a consensus, ISA's bylaws specify that the decisions of the Share-holders Assembly require the concurrence of 75% of the shares.

2.04 The General Manager, who is appointed by the Board of Directors fora 2-year term, renewable indefinitely, is in charge of the day-to-day manage-ment of the company. He is assisted by the chiefs of four departments(Technical, Operations, Finance and Administration). ISA's organizationis adequate (Aknnex 2.1). With the help of consultants, it has handled wellthe technical and administrative aspects of the 230-kV interconnection andChivor I, and is not expected to encounter problems in implementing theproposed projects. ISA's transmission facilities are being operated satis-factorily and operation of Chivor I is proceeding smoothly. Financial planningis expected to improve following the recent creation of the Finance Department.[SA's main off-ice has recently been transferred from Bogota to Medellin, aconsequence of the Government's decentralization policy. The transfer shouldprove generally advantageous, as ISA 's major projects for the foreseeablefuture will be closer to Medellin than to Bogota.

2.05 Employment and Training. ISA's staff is sufficiently large (about500 people) and experienced to handle its responsibilities and its pay levelsare satisfactory. ISA has a satisfactory training program at various nationalinstitutions (technical schools) offering different levels of training.

2.06 Accounting and Auditing. ISA's accounting and data processingsystems are good. Its monthly financial statements are produced promptly andcontain the required data. ISA is reorganizing its internal auditing officeto ensure that its auditing procedures keep pace with the company's growth.

2.07 Until 1975, ISA's annual financial statements were audited byindependent external auditors acceptable to the Bank. In compliance withGovernment regulations, ISA's financial statements for 1976 and subsequentyears will be audited by the Office of the Comptroller of the Republic.However, because this audit does not satisfy the Bank's requirements, thefinancial statements for 1976 have also been audited by an independent auditor,Cuellar, Feged & Co., which is satisfactory. ISA agreed that independentauditors acceptable to the Bank, will continue to be used and that auditedfinancial statements, together with a detailed auditor's report, will besubmitted to the Bank within 4 months of the end of each financial year.

2.08 Insurance. ISA's transmission facilities are insured in accordancewith normal utility practice. ISA agreed to take out appropriate insurancefor the Chivor I project by June 30, 1978.

2.09 Prior Bank Lending. ISA has received two Bank loans totallingMUS$70.3. The first (Loan 575-CO for MUS$18) was made. in 1968 to finance partof the foreign cost of the 230-kV interconnection project, which linked ISA'soriginal shareholders, and a series of hydroelectric studies. The intercon-nection was completed in 1972 at a cost below the appraisal estimate and theBank agreed that the savings could be used to finance the 230-kV Guatape-Barrancabermeja transmission line. Studies of the Cauca and Saldana rivers

- 15 -

were respectively completed by Integral (Colombia) and Compania de Estudiose Interventorias (CEI, Colombia); a feasibility study of the Sogamoso hydro-electric project was carried out by the consortium Hidroestudios (Colombia)-Harza (US); a prefeasibility study of projects on the Guavio river was carriedout by Ingetec 'Colombia); similarly a study of projects in the Rio Sinu basinin the Atlantic region was completed by the Consorcio Alto Sinu (Colombia)-Chas. T. Main (US). As a result of these studies a project on the Guavioriver (1,300 MW) and 2 on the Rio Sinu (Urra I, 340 MW; Urra II, 710 MW) havebeen identified and included in ISA's long term development program.

2.10 The second loan (681-CO for MUS$52.3) was made in 1970 to financepart of the foreign cost of the 500-MW Chivor I hydroelectric project, ISA'sfirst power station. The Inter-American Development Bank (IDB) made a MUS$35loan for the project, and is providing MUS$48.5 in financing for Chivor II,which would add a further 500 MW capacity for operation in 1980. Chivor I wascompleted in mid-1977, two years behind schedule, with a cost overrun of approx-imately MUS$86 (75%). The delay was due mainly to a contractor defaulting oLnconstruction targets (and being replaced) and to geological problems encoun-tered during construction of the project's dam and tunnel. The cost overrunsresulted from these problems and from higher-than-expected bids and Colombianand foreign inflation.

2.11 In connection with the above loans, ISA agreed to review its bylawswith the assistance of consultants. The review was carried out by MotorColumbus of Switzerland and completed in 1974, two years later than the agreedschedule. After delays resulting from the negotiations referred to in 1.11,the most important of Motor Columbus' recommendations are reflected in ISA'sbylaws or in the proposed loan documents. The experience gained in theimplementation of these projects has influenced the technical, financial andinstitutional arrangements for the proposed San Carlos I Project:

(a) To reduce the risk of unexpected geological problems (such asthose encountered with Chivor I) the appraisal mission includeda consulting geologist (4.28);

(b) To prevent a recurrence of the financial problems ofISA's shareholders during implementation of the first twoprojects and the resultant difficulties in meeting theircommitments to ISA in a timely manner, financial targets wereagreed with four of the five major shareholders and programsof rate increases have been initiated which should ensureavailability of adequate funds to ISA (6.19-29); and

(c) Finally, agreement was secured on various amendments toISA's bylaws to establish a clear basis for the utility'sfuture operations and its relations with its shareholders.

ISA's Shareholders

2.12 ISA's shareholders fall into two categories:

(a) The two major municipal utilities, EEEB and EPM, which own50% of ISA shares; and

- 16 -

(b) The t:hree National Government utilities, CVC, ICEL andCORELCA, which, together with their subsidiaries, ownthe balance.

2.13 The municipal utilities have been generally successful andrelatively well-managed. Both serve concentrated urban markets in Colombia'stwo largest urban areas and have access to low-cost source of power. In1974-75, EPM encountered some difficulties as a result of political inter-ference in management and both utilities' finances were adversely affected bylow power rates. These problems are now being corrected and EEEB and EPM'sperformance is expected to improve. The other three major shareholders of ISAhave in the past been less successful than EEEB and EPM as a result of thenature of the mlarkets they serve and the complexity of their organization,briefly summarized below. Annex 2.2 contains additional details on the fivemajor shareholders and Chapter 6 reviews their financial outlook.

2.14 CVC is an autonomous corporation which, together with other regionaldevelopment corporations, reports to NPD. It is responsible for multipurposedevelopment of the Cauca Valley. It is active in the fields of power, coalmining, irrigation, rural development and hotel operation. The largest cityin the Cauca VaLlley, Cali, is served by a municipally-owned utility, EMCALI.Most of the othier important communities in the area are served by CVC directlyor through 26 subsidiaries. CVC owns 65% of the shares of CHIDRAL, theprincipal bulk power supplier in the area; the balance of the shares are ownedby EMCALI and the Municipality of Cali. CVC and EMCALI have agreed to set upa new regional power company to take charge of power generation and transmissionin the Cauca Valley. They have expressed their intention of consulting theircreditors (among which the Bank is included as a result of its early powerloans to CVC and CHIDRAL - Annex 1.1 - and its more recent loans to EMCALI forwa,ter supply: 682-CO and 1523-CO in 1970 and 1978, respectively) on thisproposal.

2.15 ICEL is a government institute reporting to the Ministry of Minesand Energy. Through 11 subsidiaries, ICEL is responsible for power developmentin most of the country, with the exception of the areas covered by CVC,CORELCA and the various municipal utilities. ICEL's subsidiaries will be majorusers of the output of the San Carlos I project. To enhance their efficiency,ICEL agreed to take all necessary action to strengthen the management, planning,operations and finances of its subsidiaries. To formulate an improvement program,ICEL's central staff would conduct a study of at least five of its subsidiaries.ICEL would present the study to the Bank, together with its proposals forimtplementation, by December 31, 1979. Implementation of the proposals, with anymodifications resulting from the comments of the Bank, would be completed byDecember 31, 1981.

2.16 CORELCA is a government-owned corporation reporting to the Ministryof Mines and Energy. It is responsible for generation, bulk supply and thecoordination of power development in Colombia's Atlantic Coast region. Thenewest of ISA's shareholders, it has been functioning since 1972 and in 1975took over ICEL's controlling interest in the 7 local utilities serving thearea. In order to increase its effectiveness in handling its rapidly growing

- 17 -

operations, CORELCA agreed to strengthen its management and finances. Tothis end, it would carry out a study with the assistance of consultants actingunder terms of reference to be furnished to the Bank for comment by September30, 1978. The study's conclusions would be presented to the Bank for commentby June 30, 1979, together with CORELCA's proposals for implementation. ByDecember 31, 1980, CORELCA would carry out an improvement program based on itsproposals and the Bank's comments thereon.

- 18 -

3. THE POWER MARKET

HisLoric

3.01 In 1976 total electricity requirements in the country were about14.6 TWh (1.18). Of this, the Central Market system (serving the PacificCoast and the interior), with the main utilities EEEB, EPM, EMCALI and varioussubsidiaries of CVC and ICEL accounted for about 76% (11.1 TWh), the AtlanticCoast system (CORELCA and subsidiaries) about 14% (2 TWh) and numerous isolatedpublic utilities about 3% (0.5 TWh). The remainder (7% or about 1 TWh) wasgenerated by industrial plant for its own purposes.

3.02 The overall 1972-77 power data for ISA's shareholders (Annex 3.1)is summarized as follows:

Average1972 1974 1976 Growth

Generation (Gross) (GWh) 8,868 10,719 13,087 10.2Maximum demand (MW) 1,740 2,010 2,460 9.0Sales (total) (GWh) 7,405 (100%) 8,862 10,542 (100%) 9.2Residential 3,018 ( .41%) 3,650 4,384 ( 42%) 9.8Industrial 2,612 ( 35%) 3,056 3,656 ( 35%) 8.8Commercial 940 ( 13%) 1,176 1,385 ( 13%) 10.2Others 835 ( 11%) 980 1,117 ( 11%) 7.5

Losses (%) 16.5 17.3 19.4 14.8 /1

/1 For losses expressed in GWh.

In 1967-1976 the country's growth rate of electricity production was about10.5% compared with a growth rate of GNP of 6%/a. Growth of sales, whichaveraged 9.2%/a, varied from a low 6.1%/a for the CVC-CHIDRAL system to a highof 11.7% for ICEL's system. The pattern of supply and demand has not changedmaterially: the share of each system in the market hardly varied and thedistribution among the various consumer categories was the same in 1972 and1976. The rather large difference in the 5-year growth pattern of generationcompared with maximum demand and sales appears to be due to the combinationof the rationing in 1976 (suppressing maximum demand) and the increases inlosses. Losses increased considerably in the three largest systems (probablydue to the rapid expansion of urban networks and an increase in theft). Forthe CORELCA system, where generation is practically all thermal, losses arecomparatively low (taking into account that these losses include plant use).In view of the importance of reducing losses to a minimum, ISA agreed to carryout, with the assistance of consultants satisfactory to the Bank, a study of

the nature, size and occurrence of losses in its own system and those of itsshareholders. The study is expected to make recommendations for reduction oflosses and (if required) improved metering systems. The report would be

- 19 -

completed and submitted to the Bank for review and discussion not later thanJune 30, 1979. This study would be financed by the proposed San Carlos I loan(4.14) and ISA's shareholders agreed to assist in its execution.

3.03 During late 1976 and early 1977 supply was seriously rationed (about5-10% of requirements could not be met during the 5-month dry season dependingon the supply area) in the Central Interconnected System, principally in theareas served by CVC and CHEC. The 1976/77 rainy season was unusually dry,and commissioning of Chivor I hydro and the thermal plant at Barranca weredelayed. Supply was also rationed in the Atlantic system due to the gasshortage resulting from delayed completion of a gas pipeline to Barranquilla.

Forecasts

3.04 Projected demand and energy requirements are based on ISA's detailedanalysis of past consumption trends in the market served by each of ISA'sshareholders and on a study of the correlation between power sector growthand growth of GNP at rates of 6%, 6.5% and 7%. During appraisal some adjust-ments have been made in the industrial forecast in order to reflect possibleconstruction delays for new factories and their ability to reach full produc-tion. From 1981 onward the Central and Atlantic systems are considered asintegrated in view of the completion of the 500-kV Interconnection Project(Chapter 5).

3.05 The 1977-85 electricity requirements in the interconnected systemare expected to grow at an average of 10.6%/a, approximately in accordancewith historic trends. As a result, gross energy requirements of the utilitieswould be the following:

CoincidentYear EEEB EPM CVC ICEL CORELCA Total /1 Maximum Demand---------------------------(GWh)------------------------------- (MW)

1977 4,079 3,514 2,126 2,971 2,076 14,766 2,8431980 5,600 5,072 2,690 4,590 2,814 20,766 3,8981983 7,689 6,314 3,402 6,022 4,224 27,651 5,1231985 9,273 7,337 3,979 7,164 5,030 32,783 6,068

/1 The differences between these totals and the total generation shown inAnnex 3.2 represent the losses in ISA's system.

This forecast appears reasonable.

Balances of Capacities and Energies

3.06 In accordance with information obtained during appraisal, in orderto meet the forecast power requirements in the national interconnected systemby 1984, about 4,200 MW in effective generating capacity would have to beadded to the 3,250 NW (2,970 MW effective) installed at the end of 1976. The1976-85 balances for energies and capacities are shown in Annex 3.2 foraverage water availability. Summarized they show the following:

- 20 -

1976 1979 1982 1985

RequirementsMaximum Demand (MW) 2,478 3,500 4,680 6,068Gross Generation (TWh) 13.1 18.5 25.4 33.3

Effective Capacities (MW) 2,970 4,133 5,564 7,019% Hydro 74 71 76 81% Thermal 26 29 24 19

Capacity Margin (MW/%)Central System 470/18 524/15 - -CORELCA System 22/6 109/19 - -Interconnected System - - 492/10 951/14

Generation (TWh) 13.1 18.5 25.4 33.3% Hydro 75 70 71 77% Thermal 25 30 29 23

Due to delays in hydro plant construction the capacity margin in the centralsystem is expected to decrease to 16% until interconnection. This is low,because in dry years the effective capacity of the hydro stations could bereduced by some 20-25% due to the lower water head above the turbines.Even after interconnection, the overall capacity margin is not expected toimprove (although reserves would be shared) before 1984. The average for1981-85 would be 15%, which appears to be lower than the minimum requiredin view of the large hydro share.

3.07 Because the proposed San Carlos I and Mesitas projects, originallyscheduled for 1980, are not expected to be commissioned before 1982, andbecause certain reservoirs may not have reached the normal water-level,energy rationing may be required during 1982 to 1985 if hydrology conditionsare below average. The energy shortfalls in any of the years (1 in 5 yearsprobability) could be as follows:

Dry Year Shortage(GWh/%)

1982 797/3.11983 672/2.41984 705/2.31985 1,662/5.0

To avoid this situation ISA has recently introduced some changes in its program(4.02).

3.08 With the commissioning of Chivor I (Loan 681-CO) in September 1977,ISA for the first time generated energy in the interconnected system. Itsgeneration is expected to rise rapidly from 1.2 TWh in 1977 to some 11 TWh in1985 when it would meet about 35% of total requirements:

- 21 -

-------Isolated-------- -----------Interconnected-----------1977 1979 1981 1983 1985

TWh % TWh % TWh % TWh % TWh %

Generation (GWh)

ISA 1.2 8 3.1 17 4.4 19 7.6 27 11.5 35

EEEB 3.4 23 4.1 22 4.6 20 6.0 22 5.8 17

EPM 3.5 23 3.0 16 5.3 23 4.3 15 5.7 17

CVC-CHIDRAL 2.0 14 2.5 14 2.6 11 2.6 9 2.6 8

ICEL-CHEC 2.7 18 3.3 18 3.6 16 3.7 13 3.8 11

CORELCA 2.0 14 2.5 13 2.5 11 3.8 14 3.9 12

14.8 100 18.5 100 23.0 100 28.0 100 33.3 100

ISA's sales to its shareholders for 1977-85 are shown in Annex 3.3; the energy

to be transferred from the Central system to the Atlantic system (by means of

the 500-kV Interconnection Line, see Chapter 5) would be in the order of 1.1-1.3

TWh by 1984/85, representing an average capacity of 125-150 MW.

Operation of the Interconnected System - Load Dispatching

3.09 ISA's bylaws give it the function of coordinating the operation of

the systems of its shareholders in order to use the available resources

economically. Its activity in this area has been limited due to lack ofadequate control facilities; a national dispatch center in Bogota and2 regional dispatch centers (Medellin, Manizales) are scheduled for completion

by 1981 under a project expanding Chivor II project, financed by IDB. It is

expected that by that time agreements will be reached on the responsibilities

to be assigned to ISA and the entities operating in the interconnected system,

with a view to efficient operation of all facilities, optimum reliability of

the system and the creation of an intersystem power sale and purchase pool

(Annex 3.4).

- 22 -

4. THE NATIONAL DEVELOPMENT PROGRAM ANDTHE SAN CARLOS I HYDRO POWER PROJECT

The Program

4.01 The 620-MW first stage of the hydro plant at San Carlos (and the500-kV Interconnection--see Chapter 5--of the Central and Atlantic Coastsystems) forms part of the 1977-84 national expansion program. At the time of

appraisal the program comprised the following:

Expansion Program 1977-1984

Year Entity Location Type /1 Capacity/MW

1. Under Construction

1977 ISA Chivor I H 500CORELCA Barranquilla GT 42

1978 CORELCA Cartagena I, II S 132ICEL Barranca S 66CORELCA Ballenas GT 25EPM Guatape II H 280

1979 CHEC Insula H 12

1980 ISAk Chivor II H 5001,557

2. New Projects

1981 ISA 500-kV Inter-connection /2

CORELCA Barranquilla III /2Cartagena III /2 S 132

EPM Ayura /3 H 19EPM Troneras /3 H 26

1982 EEEB Mesitas /2 H 520ISA San Carlos I /2 H 620

1983 EPM Guadalupe I /3 H 100ISA Jaguas /3 H 120ISA San Carlos II /2 H 930

2,467

/1 Plant Types: H-Hydro; GT-Gas Turbine; S-Steam./2 Detailed engineering completed./3 Feasibility study completed.

The sequence of completion of the above plants is in accordance with theireconomic merit order (7.03).

- 23 -

4.02 The plants assigned to specific shareholders have been approved

by ISA's Board, as has the 180 MW power component of CVC's Salvajina multi-

purpose project 1/. Construction of Mesitas is underway, and ISA has intro-

duced some revisions to avoid shortages in the event of a dry year during

1982-85. These include diversion of additional water into the Chivor reservoir

to increase its average generation from 3.7 TWh to 4.5 TWh and addition of 200

MW of steam plant in 1980-81.

The Project

4.03 The San Carlos hydro plant will be located in northwest Colombia

at an elevation of 775 m above sea level. The inlet to the plant would be

at the confluence of the San Carlos and Guatape rivers, downstream of the

outlet of EPM's existing Guatape hydro plant (Annex 4.1). The output of both

Guatape and San Carlos would be regulated by the large Santa Rita reservoir

(which is being expanded under Loan 874-CO to EPM). As reported in Annex 2.2

filling of this reservoir has been delayed, and action is being taken to

ensure that it commences in mid-1978.

4.04 Objectives. The San Carlos Project will considerably increase

ISA's capacity in generating plant and, together with the 500-kV Inter-

connection system (Chapter 5), enhance ISA's role'as the agency, operating

throughout the country on behalf of the main utilities, to harness the

larger hydro potentials for meeting future power requirements. One of the

principal objectives would be to strengthen ISA's role as coordinator of

sector development and as dispatch agency in the interconnected system.

ISA, through the Project, would meet incremental power requirements in the

Central system and would additionally supply firm and secondary energy to the

CORELCA system in order to replace part of its expensive thermal generation.

4.05 Construction and Location. The San Carlos plant will be built in

two stages. San Carlos I (4.07) comprises the Punchina dam on the Guatape

River, inlet and discharge tunnels and an underground power station suitable

for ten 155 MW generating units (and their transformers) of which four will

be installed initially (620 MW). San Carlos II comprises construction of

a second inlet and discharge tunnel, some civil engineering works (main

excavation will be completed during Stage I) for the power station and the

installation of six 155 MW generating units, increasing the total installed

capacity to 1,550 MW.

4.06 The project area is at a distance of 150 km from the city of

Medellin by a road of which 60 km are paved; the remaining 90 km correspond

to a serviceable all-weather road. The Project design takes into account

the weight limit (60 tons) and volume limit imposed by the existing roads.

1/ Not included in the program examined in Chapter 7 because its generation

will be subordinated to irrigation requirements and the construction

schedule has not yet been defined.

- 24 -

In 1979, ISA will begin constructing the San Lorenzo dam and the Jagual power

station (120 M!W) on the Nare river, to harness additional waters (39 m Is onaverage) whiclh will be discharged into the Guatape river upstream of theSan Carlos plant, thereby providing for additional generation at San Carlos.

4.07 Description. The San Carlos I Project will use an average dischargeof 98 m /s supplied by the Guatape River and the flow diverted from theNare River via the Guatape power station and regulated by the Santa Ritareservoir, with a useful capacity of 1,200 million , for generating an averageof 3.7 TWh/a. The Project comprises:

3(a) An iearth dam 70 m high with a volume of 6 Mm , 1/ a cut and

cover double diversion conduit later serving as bottom outleton the right abutment, 413 m long, and a concrete lined chutespillway, 125 m wide at the apogee and 304 m long;

(b) Two concrete intake towers, 54 m high, for both the firstand second stage connected to two lined vertical shafts149 m deep;

(c) A power tunnel, concrete lined, 4,530 m long and 6.10 m indiameter; a surge tank of the restricted-orifice type; aconcrete lined pressure tunnel inclined at 450, bifurcatingin itwo steel lined penstocks (total length 276.7 m, withdiameters ranging from 5.50 m to 3.30 m;

(d) Two caverns, one for turbine-generators and one for trans2formers, Iach 203 m long and with cross-sections of 510 mand 190 m respectively, interconnected by a number ofgalleries. Both caverns will be excavated completely toaccommodate final development of the power station, butconcrete structures would only be built for the powerhouseand for the first four generating units at this stage;

(e) A two-lane, concrete-paved access tunnel 2to the powerhouse.802 m long, with a cross-section of 39 m ;

(f) A dLschirge tunnel, 1,471 m long, with a horseshoe cross-sectionof 74 m , which will not be lined except at the terminals andin fault zones;

3 3I/ The reservoir will have a total storage of 72 Mm , of which 50 Mm are

useful storage for power generation. The dam will serve both the firstand second phase of construction.

- 25 -

(g) Four 6-jet vertical shaft Pelton turbines operating undera gross head of 595 m with single runner, 300 rpm, and fourvertical shaft 60-Hz generators rated 183 MVA at 800 C and85% power factor;

(h) Two 3-phase banks of single-phase transformers, each 122 MVA,16/230 kV, water-cooled. Two generating sets will be connectedto each bank;

(i) Underground, the connections of the generators and transformersand to the outside will be by oil-insulated 230-kV cables;230-kV switchyard;

(j) A control building for operation of the power station and thesubstation;

(k) A 34 km double circuit 230-kV transmission line between the Guatapeand San Carlos power plants and a 210 km double circuit 230-kVtransmission line between San Carlos and Torca (near Bogota) andrelated terminal substations;

(1) A study of losses in the systems of ISA and its shareholders (3.02).

4.08 Estimated Cost. The Project is estimated to cost MUS$367, with aforeign component of MUS$204. The costs, which are detailed in Annex 4.2, aresummarized as follows:

Local Foreign Total Local Foreign Total-------- MCol$ -------- --------- MUS$ --------

Engineering, study 547 62 609 15.0 1.7 16.7Civil works 2,183 2,793 4,976 59.7 76.5 136.2Electrical equipment 101 781 882 2.8 21.4 24.2Mechanical equipment 153 996 1,149 4.2 27.3 31.5Transmission system 234 555 789 6.4 15.2 21.6Subtotal 3,218 5,187 8,405 88.1 142.1 230.2ContingenciesPhysical 297 540 837 8.1 14.8 22.9Price escalation 3,415 2,952 6,367 67.1 47.0 114.1

3,712 3,492 7,204 75.2 61.8 137.0Total project cost 6,930 8,679 15,609 163.3 203.9 367.2

4.09 A first cost estimate was made by ISA's consultant (Integral-Colombia) in 1972. In 1973, the US firm of Jacobs Associates (financedby loan 575-CO) reviewed both the construction program and the estimate.Integral later introduced a number of changes in the project as surveysand final design advanced (4.13), and prepared the final estimates.

4.10 The cost estimate of the civil works is based on the cost of similarwork being carried out in Colombia (Chivor II, Guatape II); the bids receivedby ISA for the major civil works correspond closely to the total estimated

- 26 -

base cost for these works (4.08). The equipment estimates are based on the

prices quoted at the end of 1976, in response to an international call for

bids on similar equipment for the Chivor II power station. The physical

conwingencies have bee'n estimated to average 15% for the power station, 10%

for the remaining civil works and 8% for equipment. These percentages are

considered appropriate, having regard to the status of detailed design. The

base estimated cost is in prices calculated for the end 1976, to which a price

contingency has been added; the following percentages have been used for

external inflation:

Year Civil Works Equipment Consultants

1977 10 8 101978 9 7.5 10

1979 9 7.5 10

1980 8 7.5 8

1981 8 7 81982 8 7 8

1983 8 7 8

1984 8 7 8

Internal inflation was assumed to decrease gradually from 36% in 1977 to 8% by

1982, remaining constant thereafter. The exchange rate (Col$ 36.50 per US$ in

1977) has assumed to increase to Col$ 58.58 per US$ by 1984. Construction

equipment accounts for about 56% of the foreign cost component of the civil

works.

4.11 Financing. Including financial charges on loans and credits, the

total foreign exchange requirements are estimated at MUS$258. A Bank loan of

MUS$126 is proposed, representing 49% of these requirements, which would

finance part (MUS$99.2) of the foreign cost of the Project and the financial

charges on the Bank loan during construction, as follows:

MIUS $

a) Engineering and studies 1.7

b) Underground civil works 60.5

c) Electrical equipment (miscellaneous) 8.4

d) Mechanical equipment (miscellaneous) 4.4

e) Mechanical equipment (dam) 3.3

f) Transmission: Lines 16.8g) Substations 2.6h) Control and communication equipment 1.5

Subtotal 99.2

i) Financial charges during construction 26.8

Total 126.0

4.12 The remaining foreign exchange costs are expected to be met by IDB(MUS$70) which would finance the Punchina Dam, some equipment including the

penstock and financing charges on the IDB loan; supplier's credits (MUS$40)

and ISA's shareholders (MUS$22, mainly for the access tunnels, financing

- 27 -

charges, down payments and price adjustments). The local costs would be

financed by equity contributions and bonds to be subscribed by ISA's

shareholders (6.10).

Engineering ard Construction Schedule, Studies

4.13 With the assistance of Integral, ISA completed a study of the

hydroelectric potential of the Nare-Guatape-Samana river complex in 1971.

This study identified the projects of San Carlos, Jaguas apd Las Playas.

Subsequently (1972) ISA engaged Integral for final design of San Carlos and

with the Bank's agreement, ISA has retained the services of these consultants

for all phases of the project. Integral will engage outside expertise for

specialized tasks during construction, as needed.

4.14 IDB will finance the services of a group of international experts to

advise ISA on specific technical aspects and problems during construction.

The estimated cost of these services (excluding price contingency) is MUS$0.5.

The proposed Bank loan will finance the remaining foreign cost (MUS$1.2 base

cost) of (a) the purchase of laboratory equipment (MUS$0.25) and vehicles

(MUS$0.40); (b) factory inspection (MUS$0.25) and testing of equipment

(MUS$0.10); and (c) study of losses (3.02; MUS$0.25). Contingencies on these

items amount to MUS$0.5. About 70 man-months of consulting services is

required at an average base cost of US$7,000/man-month.

4.15 The access tunnel is being constructed, for completion in 1978, by

the Brazilian firm Mendes Junior. The contract amounts to MUS$4.6 equivalent

and ISA is financing the works with its own funds.

4.16 The main underground works, which are expected to be started during

the second quarter of 1978, would be concluded by mid-1982. The critical path

of construction is the excavation of the caverns for the generating units and

transformers. The Project implementation schedule of which key dates are

shown in Annex 4.3 would be used to monitor progress during the project

construction period; this schedule also covers the transmission lines to

connect San Carlos to the system and the study of losses (3.02).

Procurement

4.17 Procurement of goods and services to be financed by the proposed

Bank loan (other than those of consultants) would be in accordance with

international competitive bidding consistent with the Bank's Guidelines

for Procurement. Colombian manufacturers would receive a preference of

15% or applicable duties, whichever is the lesser, for purposes of bid

evaluation. The cost estimate assumes that local manufacturers would supply

conductors, towers and certain miscellaneous electromechanical equipment, with

an estimated cost of about MUS$10, the ex-factory cost (net of taxes) of which

would be financed by the proposed loan. In view of legal freight preferences

for Colombian ships, satisfactory evidence is to be provided to the Bank for

the purpose of financing, that freight cost are in accordance with

international levels.

- 28 -

4.18 A total of 14 firms were perqualified for the major civil work

contract in accordance with procedures acceptable to the Bank and ISA called

bids in June 1977. Bids were opened in November 1977 to permit award ofs_ntract in early kpril 1978 because major construction activity is limited to

the dry season (November/December to April/May of the following year (see also4.24)). This would provide the contractor 6 months for mobilizing all required

construction equipment, construction of the workers' village and clearing of

sites during the wet season of 1978. Any delay beyond April 1978 for award of

contract would cause a delay in Project completion (and give rise to severerationing of electricity in Colombia during the period of delay). The Bank

therefore concurred with ISA's proposal to award the contract to the lowestevaluated bidder, a consortium comprising Ingenieros Civiles Asociades (ICA)of Mexico and GRANDICON of Colombia. Retroactive financing is proposed forthe downpayment of this contract, expected to be signed in the near futurel(MUS$ 4.0) and for consulting services for the preparation of the Projectsubsequent to January 1, 1977, estimated to amount to MUS$ 0.2.

4.19 Bid documents for the remaining components to be financed by the

proposed loan are being prepared by Integral in accordance with the implemen-tation schedu:Le for Bank review. The recommendations for award of the various

contracts wou:Ld be prepared by ISA with the assistance of Integral.

Disbursements

4.20 Funds from the proposed loan would finance 100% of (a) the foreign

expenditures iEor underground civil works; (b) the foreign expenditures forimported equipment and materials; (c) the foreign expenditures for erection ofworks; (d) the foreign expenditures for consultants' services or 50% of total;and (e) 94% ofE the ex-factory cost of locally produced materials and equipment;and (f) interest and other charges on the Bank loan accrued up to March 14, 1983.Annex 4.4 shows the estimated loan disbursements, assuming loan effectivenessin September 1978. The first unit is expected to be operational in September1982 and the Project is expected to be completed by June 30, 1983. Theclosing date would be June 30, 1984 to allow for the payment of retentionmoneys.

Environmental Aspects 1/

4.21 The project area is characterized by extremely hilly topography,lpoor soils and high rainfall, making the entire area unsuitable for farming or

stockraising. A small village in the reservoir area with about 70 familieswill be displaced by the Project. An adequate program for acquiring allproperties in the area and the evacuation of people has been communicated tothe Bank. Evacuation would be completed by June 1979 and implementation ofthe first part of the agreed program would be a condition of effectiveness, inorder to assure that construction is not affected by delays. The constructionof San Carlos I and the other power plants (San Carlos II, Jaguas and Playas)to be built in the area would create new sources of income for the local

1/ Estudio Ecologico Proyecto Hidroelectrico de San Carlos; Cesar PerezFigueroa for Integral Ltda., September 1976.

- 29 -

population during the respective construction periods. Thereafter, employmentopportunities would arise in connection with the control of the land use inthe area (4.22).

4.22 ISA will have to take adequate measures to control development ofwater hyacinth (Eichhornia crassipes) in the reservoir area; conditionsthere are favorable to its development, and it has already caused problemsin Colombia in hydroelectric and irrigation projects. Before December 31,1980, ISA would, in consultation with the Bank, formulate a satisfactorymedium-range program for rational use of the Project basins, includingreforestation. ISA also agreed to organize a unit with adequate funding,staffing and facilities to carry out the program not later than December 31,1981.

Project Risks

4.23 The Project is subject to the risks normally associated with largecivil works in difficult terrain as summarized in the following paragraphs.

4.24 Climatic Conditions. Climatic conditions will not greatly affectthe underground works except that landslides on the access roads couldtemporarily hold up the work. Heavy rains may affect dam construction,although this should be mitigated by careful selection of materials and maxi-mum utilization of construction equipment during the dry season. Anotherfactor that could affect the Project is the flooding of the Guatape andSamana rivers. In view of this, the cofferdams have been designed to bebuilt in two stages. The first stage (to be started at the beginning ofthe 1978 dry season) will protect the works against a dry-season floodoccuring once in 25 years and the second stage (to be completed beforethe end of the 1978 dry season) against a 25-year wet-season flood. Thewater level in the Samana River can rise by more than 12 meters within afew hours, but the discharge tunnel outlet has been located above themaximum recorded cresting elevation, in order to avoid interruption ofoperations during floods.

4.25 Geology. The Punchina dam, the intakes and the greater partof the pressure tunnels (80-85%) are located on and in sound igneousrocks, not requiring any kind of support. The remaining part of thepressure tunnels, the power house and the discharge tunnels are located inmetamorphic rock requiring rock bolts or shotcrete and possibly some steelrib supports. A small portion (5-8%) of tunnelling would be done acrossfault zones, where metal supports will be used in combination with shotcrete.

4.26 Before the first stage of San Carlos is completed, the adductiontunnel for the second phase will be under construction. The consultanttherefore recommended concrete lining throughout, to avoid water leaks tothe works under construction through faults and to better protect the SanCarlos I works against the effects of blasting of the San Carlos II tunnel.This measure has been shown to be advisable by recent experience with Chivor Iand II which have similar parallel tunnels.

- 30 -

4.27 Although excavation of the caverns is not expected to present anymajor problems, unforeseen situations may arise having regard to the volumeof the excavation work and the width of the galleries. To minimize thisri k, once the acce-- tnnel now under construction is completed, twoexploratory tunnels will be built for the length of the caverns in order toascertain the rock conditions at the powerhouse site more precisely and todefine the final orientation of the caverns. The bidding documents allow forthis contingency and indicate the maximum permissible limits for locations ofthe powerhouse.

4.28 In order to review the Project's geological aspects, the Bankengaged Dr. A. Merritt, a U.S. engineering geologist, to participate in theappraisal. Dr. Merritt agreed with the design recommendations of INTEGRALand additionally recommended that the method of supporting the cavern roofsand walls should be restudied as and when more information on geologic condi-tions becomes available once the access tunnel and the exploratory tunnels arecompleted.

4.29 Seismicity. There are a number of faults in the zone located withina radius of 15-20 km around the project area. Two of them (the Mulato andJetudo faults) are classified as probably active (though there is littleevidence). The others are regarded as inactive. However, the works have beendesigned for a seismic acceleration of 0.4 g (3.9 m/s2) with its epicenter inone of the faults and with a spectrum similar to that recorded at Lima, Peru,during the earthquake of October 1966. The dam is provided with an imperviouscore and a clhimney-type filter of adequate thickness to be self-sealing in theevent of rupture due to an earthquake. The dam will be adequately instrumentedto continuously monitor its soundness. ISA agreed to engage qualified expertsfor annual inspections of its dams and related facilities in accordance withsound engineiering practices.

^ 31 -

5. THE 500-kV INTERCONNECTION PROJECT

Objectives

5.01 The 500-kV Power Interconnection Project will interconnect thecountry's two largest electricity systems: the Central System, which ispredominantly hydro, and the Atlantic Coast (CORELCA) System, which istotally thermal. The Project will result in more economical developmentand operation of the national power system, by substituting some hydrofor thermal generation and obtaining substantial savings on equipment throughreduced capacity reserve requirements. ISA would construct all facilities onbehalf of the Government in accordance with an agreement on Project financingand execution satisfactory to the Bank to be signed between the Governmentand ISA before effectiveness of the proposed loan. The Government agreedthat, by December 31, 1981 ISA will operate and own the 500-kV Interconnection.

Description

5.02 The Interconnection Project comprises:

(a) a single-circuit 500-kV transmission line, 523 km long,between San Carlos in the central region and the Sabanalargasubstation in the Atlantic (Northern) region;

(b) two 500/230/34.5-kV terminal substations, each with an initialcapacity of 450 MVA, one at San Carlos and the other atSabanalarga;

(c) two intermediate 500/115/34.5-kV substations, each with anindividual capacity of 150 MVA, one at Cerromatoso and oneat Chinu;

(d) A shunt compensation system with a capacity of 600 MVAr.

Transmission Line

5.03 The southern section of the transmission line between San Carlosand Cerromatoso, which is 210 km long, crosses a mountainous region atelevations of up to 2,000 m over its first 130 km. On this section latticetowers will be used carrying four bundl2d conductors per phase of 740.8 MCMaluminum alloy, shielded by two 46.5 mm Alumoweld wires. Over the313-km northern section between Cerromatoso and Sabanalarga the terrain isslightly rolling as far as the Chinu substation (km 342 from San Carlos).The line then continues over similar terrain to a marshy area (at DiqueCanal) which it crosses for a distance of 15 km until about 43 km from theterminal point. The last part of the line is on solid and flat terrain.Over most of the northern section the line will be on guyed V-type towerssupporting sour bundled conductors per phase of 559.5-MCM aluminum alloy and

two 46.4-mm Alumoweld shield wires. The profile of the line, a single linediagram and some details of construction are shown in Annex 5.1.

- 32 -

5.04 The diameter of the conductors was selected so as to limit theradio interference level to obtain a signal-to-noise ratio of not leFs than22 db for 90% of the time at a distance of 80 m from the axis of the line.The arrangement of quad bundles was adopted because it offers a lower imped-ance and lower conductor, structure and foundation cost for a given radiointerference level, low Corona losses and minimal wind vibration. Theinsulator strings will be V-strung, consisting of 24-29 units per string,depending on the elevation and the level of saline pollution (which occurs onthe northern section in the vicinity of the Sabanalarga substation and in someintermediate areas). The total weight of the structures will be approximately9,700 t. Where the line crosses marshy areas, prefabricated piles will beused; for most of the rest of the line conventional foundations will beused.

Substations

5.05 Terminal Substations. The initial layout of the 500/230/34.5/kV-San Carlos and Sabanalarga substations will be a ring arrangement using adouble-circuit-breaker scheme. Owing to the transport limitations, theSan Carlos substation will have a transformer bank consisting of six 75-MVAsingle-phase units connected in groups of two parallel units per phase,with a 75-MVA reserve unit. At Sabanalarga the transformer bank consistsof three autotransformers of 150 MVA and one reserve unit. The transformercapacity can be doubled in a later stage in both substations for full utiliza-tion of the transmission capacity of the line (900 MVA).

5.06 Intermediate Substations. A three phase autotransformer of 150 MVA(500/115/34.5 kV) will be installed in the Cerromatoso and Chinu substationswith a breaker-and-a-half scheme for the outgoing lines.

5.07