Public Disclosure Authorized

Documentof
The World Bank
FOR OFFICIAL USE ONLY

A-A' L3/4i-7- Pkk

ReportNo. 8006-PAK
Public Disclosure Authorized

STAFF APPRAISAL REPORT

PAKISTAN

TRANSMISSION EXTENSION AND REINFORCEMENT PROJECT

Public Disclosure Authorized

NOVEMBER 27, 1989

Public Disclosure Authorized

Energy Operations Division

Country Department I
Europe, Middle East and North Africa Regional Office

TIisdocument has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
 CURRENCYEOUIVA=NT

Currency Unit - Pakistan Rupee (Rs)

US$1.00 - Rs 21.6 (October 1989)

IIEASURES AND E QgVAMr

Barrel of oil (bbl) - O159 cubic meters

i Hetric Ton of Oil (mtoe) - 7.4 bbl
- IC million kilocalories
I Million cubic feet of gas - 24.3 toe
1 Kilometer (km) - 0.6214 miles (mi)
'Ton (t) - 1,000 kilograms
1 Kilovolt (kW) - 1,000 volts (V)
1 Megawatt (M3W) - 1,000 kilowatt (kW)
1 Megavolt-ampere (MVA) - 1,000 kilovolt-amperes (kVA)
1 Kilowatt hour (kWh) - 1,000 watt-hours (wh)
I Gilawatt hour (CWh) - 1,000.000 kilowatt hours
1 Kilocalories (Kc.l) - 3.97 British Thermal Units

ABBREVIATIONS AND ARNH

ADB - Asian Development Ban.:

AEB - Area Electricity Boards
AG - Auditor General of Pakistan
ANL - Argonne National Laboratories
ARL - Attock Refinery Limited
BHC Basic Health Centres
CDWP - Central Development Working Party
CIDA - Canadian International Development Agency
CIP - Care Investment Program
DDP - Distribution Development Program
DOFMA - Department of Forestry in the Ministry of Agriculture
ECC - Economic Coordination Committee
ECtlEC - Executive Committee of the National Economic Council
ERG - Energy Review Group
ESL I Energy Sector Loan I
ESL 11 Energy Sector Loan 11
ENERPLAN National Energy Planning Office
ENERGON - National Energy Conservation Centre
FAS - Fuel Adjustment-Surcharge
FXtIP Financial Management Improvement Plan
FY Fiscal Year
CDP - Gross Domestic Product
GOP Government of Pakistan
HPC - Hab Power Complex
ICB - International Competitive Bidding
IC - Internal cash Generation
IERR - Internal Economic Rate of Return
KESC - Karachi Electric Supply Company
LES - Long-Term Energy Strategy
LIB - Limited International Bidding
LCB - Local Competitive Bidding
LRHC - Long Run Marginal Cost
IAED - Model for the Analysis of the Energy Demand
MOP - Ministry of Production
MPNR - Ministry of Petroleum and Natural Resources
NPD - Ministry of Planning and Development
MWP - Hinistry of Water and Power
NDFC - National Development Finance Corporation
NEPC - National Energy Policy Committee
NESPAIC - National Engineering Services Pakistan Pvt. Limited
NPL - National Petroleum Limited
NRL - National Refinery Limited
OGDC - Oil and Gas Development Corporation
PARCO - Pak-Arab Refining Company
PERAC - Petroleum Refinery and Petrochemicals Corporation
PFP - Policy Framework Paper
PCR - Project Completion Report
PLC * Power Line Carrier
PlDC - Pakistan Mineral Development Corporation
POL - Pakistan Oilfields Limited
PPAR - Project Performance Audit Report
PPL - Pakistan Pecroleum Limited
PRL - Pakistan Refinery Limited
PS - Private Sector
PSEDF - Private Sector Energy Development Fund
PTAT - Principal Technical Assistance Team
RE - Rural Electrification
REFKP . Rural Electrification Master Plan
PSO - Pakistan State Oil Limited
SAL - Sructural Adjustment Loan
SCADA - System Control and Data Acquisition
SNOPL Sui Northern Gas Pipelines Limited
SOE - Statement of Expenditures
SSGC - Sui Southern Gas Company
USAID - United Stated Agency for International Development
WAPDA - Water and Pover Development Authority
WASP - Wein Automatic System Planning

GOP's FISCAL YEAR (PY)

 -. ~ II AL , .aY

!AKISAN
TRANSNISSIONEXTENSIONANDREINFORCEMENT
PROJECT

LOANANDPROJECT SUMMARY

Aorrower: Water and Power DevelopmentAuthority

Guarantor: Islamic Republicof Pakistan

Amount: US$162 million

Terms: Twenty years, includinga five-yeargrace period,at the Bank's

standardvariable interestrate.

Proiect Description: The proposed Projectwould comprise:

(a) installationof two single 500-kV circuit transmissionlines,

about 200 km each, connectingHPC and Jamshoro;

(b) installationof a third single-circuit500-kV line, about 312

km between Guddu and Hultan, and a second single-circuit
500-kV line of about 300 km, between Multan and Lahore via
Gatti;

(c) extensionand reinforcementof existing500-kV substationsat

Lahore, Gatti, Multan, Guddu with associated facilities
includingreactivecompensation,telecommunications
and control
equipment;and

(d) consultingservicesto assist and train WAPDA's staff in the

design, construction,operation,and maintenanceof the
500-kV network.

Benefits: The benefitsassociatedwith the proposedProject are expected from

incrementalsales of electricityand from the improvementsin the
overalloperatingefficiencyof power plants and reductionin losses
in networks. The inten._leconomicrate of return for the proposed
Project is about 14X based on incrementalsales of electricitywhich
were valued on the basis of the projected increases in tariffs
requiredto achievethe 40X self-financingratio agreed to under the
Second Energy Sector Loan (Loan 3107-PAK).

This document has a mestricted distributionandmaybe used by recipientsonlyin the performance

of their officialduties.Its contents may not otherwisebe disclosedwithoutWorld Bankauthoriztion.
 - ii -

Risks: The Project consists of normal electric utility work entailing no

unusual risks, and no particular difficulty is foreseen in its
execution. The Project cost estimates and implementationschedule
are based on similarwork currentlyin progress in the country and
on contracts let out in the Second and Third Quarter of 1989, so
thern should be little risk of substantial cost overrun or of
extended slippage. There is, however, the risk that the Hab Power
Complex would slip by six months because of delays in financial
closure. The potential for this delay is being minimized by
arranginginterimfinancingwhile the negotiationsof the commercial
loans are under way to cover the initial payments for equipment
requiringlong lead time to manufactcreand commence civil works.

Project linancingPlan

Local FrgO.iM Total

(US$ Million)

ProposedIBRD Loan 0.0 162.0 162.0

WAPDA 189.4 0.0 189.4
Local Borrowings 111.7 0.0 111.7

TOTAL 301.1 162.0 463.1

Disbursements

EstimatedDisbursementSchedule

FY 1990 1991 1992 Ja2 1994 1995

Annual 2.6 23.6 40.0 43.0 36.8 16.0

Cumulative 2.6 26.2 66.2 109.2 146.0 162.0
 - iii

P.^lSTA^N

TRANSMISSIONEMTENSIONAND REINFRCEMENT ?ROJEQt

DRAFT YELLOW COVER

STAF ARISALU
Table of Contents

Pase No.

I. ENERGY SECTOR................................................. 1

A. Introduction........................................... 1
B. SectoralSetting ..................................... 2
C. Developmentsin the Sector, FY79-FY88.................. 3
D. Implementationof LES: Progressunder ESL I
and the Program for ESL II........................... 3
E. Bank Group's Role in the Energy Sector and
E.xperiencewith Past Lending......................... 8

II. BORROVER......................................................9

III. THE PROJECT...................................................

12

IV. FINANCES.......................... ......... 21

V. ECONOMICJUSTIFICATION
.............
............................ 29

A. UAPDA's Actual and Forecastof ElectricitySales.29

B. Least Cost Alternative.30
C. InternalEconomicRate of Return.30

VI. AGREEMENTSREACHED (ND RCOMMNDATION..31

This report ia based on the findings of an appraisal mission to Pakiste.a in

June 1989, consistingof M. Sharma (Economist), A. Adamantiades (Senior
Engineer), C. Gavino (Financial Analyst) and S. Kondziolka (Consultant).
Messrs. A. Oduolowu (SoeiorPetroleumSpecialist)and Rashid Aziz (Economist
Resident Mission) also contributed to the preparation of this report.
Secretarial assistance was provided by MNes. Anne Haldar, Hannah Pratt and
Young Ok bsog.
 - iv -

ANREXS .............................. Page No.

1.1 - Organization Chart - Energy Sector..................... 33

2.1 - Organization Chart - UAPDA ............................ 34
3.1 - Project Description ................................... 35
3.2 - Project Cost Estimate ................................. 40
3.3 - Project Implementation Schedule ....................... 41
3.4 - Disbursement Schedule ................................. 43
4.1 - WAPDA's Financial Statements .......................... 44
4.2 - UAPDA's Capital Expenditure Program (FY89-FY98) ....... 51
4.3 - WAPDA's Generation Forecast ........................... 54
4.4 - Organization Chart - UAPDA's Finance Function .... ..... 55
5.1 - Assumptions for and Calculations of IERR .... .......... 56

Map No. IBRD 21855

 PAKIAI

TRANSMISSION EXTENSION AND REINFORCEMENTPROJECT

STAFF APPRAISAL REPORT

I. ENERGY SECTOR

A. Introduction

1.01 Pakistan'seconomicperformanceduring the Fifth and Sixth Plans (FY79-FY88)

was impressive. Growth in GDP averaged about 6.5X annually, and was spread across
virtuallyall sectorsof the economy. The overall improvementin econom1cperformance
was fostered by prudent economic management and structural reforms, including the
deregulationof controls over investment,import liberalizationand the adoption of
a flexible exchange rate policy; rationalization of prices, particularly of
agriculturaland petroleum products; and directing public development expenditures
toward priority sectors.

1.02 Despite these acLievements,macroeconomicimbalanceswere concern by FY88.

In the 1980s, public sector expendituresincreasedfaster than revenues,resultingin
a high fiscal deficit, which reached 8.71 of GDP in FY88 compared to 5X in FY80.
Inflationbegan to increasein FY88, reachingabout 101 in FY89. While the merchandise
export volume continuedto grow, a deteriorationin the terms of trade and generally
accommodativedomesticcredit contributedto an overall increasein tbe trade deficit.
These developmentstogetherwith the continuingerosion in remittancesfrom Pakistanis
abroad brought the current account deficit to about US$1.7 billion or 4.11 of GDP in
FY88. More critically,the Central Bank's gross foreign reserves in September 1988
were equivalent to less than two and a half weeks of annual imports of goods and
services, and less than the external short-termliabilitiesof the banking system.
These imbalancestogetherwith the low rates of savingsand investment,which averaged
between 12.51 and 15.9X in relationto historicalGDP growth, are unlikelyto support
future economic growth of the order of 5.51 and above annuallyon a sustainedbasis,
especiallyin view of the continuedneglect of the physicalinfrastructureand, until
recently,low levels of investmentin social sectors.

1.03 In FY89, GOP adopteda medium-termmacroeconomicadjustmentprogram to address

.heseimbalances. The program was set forth in a Policy FrameworkPaper (PFP), which
was reconfirmedby the new Governmentheaded by Prime Minister Benazir Bhutto. The
Bank's Executive Directors consideredthe PFP on December 19, 1988, and the Fund's
Board approved a 15-munth Standby Arrangement and a StructuralAdjustmentFacility
(FY89-91),supportedby the PFP, on December 28, 1988. The key policy requirements
of PFP are: (a) a reductionof the fiscal deficit, throughan enlarged sales ta.-and
other measures to broaden the tax base and the substantialcontainmentof the growth
of expenditures;(b) additionaltrade policy reformswith significantliberalization
of non-tariffbarriers; and (c) financialsector reformswith a view to improvingthe
efficiencyof the banking system and to strengtheningmanagtmentof domestic public
debt, money and credit according to market principles. Review of the first year's
performanceindicates that GOP is in general compliancewith the program.
 - 2 -

B. Sectoralsetting

1.04 Energy Resources. Pakistan's commercially exploitable energy resources

consist of hydropower, natural gas, oil and coal. The hydropower potential is
estimated at about 30,000 MW. Proven and probable reserves of natural gas are
estimated at about 16 trillion cubic feet (TCF) and 3.3 TCF, respectively. Oil
reserves,both probableand proven, are estimatedat about 58 million tons. Coal and
lignite deposits are estimated at about 900 million tons, of which 175 million tons
are proven. In addition,the countryhas a largebase of traditionalfuels in the form
of fuelwoodand agriculturaland animal waste, which provide a major share of rural
consumers' energy needs. Despite its endowment of energy resources, Pakistan's
dependenceon importedliquidhydrocarbonsis expectedto continueover the fo.eseeable
future, particularlyin light of the long lead time and vast financial resources
requiredfor the impiementationof the major hydro sites. This dependence,however,
can be reduced by: acc3leratingthe developmentof the smallerhydro sites, and also
oil, gas and coal, and encouraging the latter's substitutionas well as that of
importedcoal for higher value petroleum products; restrainingthe growth of demard
for energy through price and non-price measures, including rehabilitation and
retrofittingof power plants, refineriesand energy-intensiveindustries;expanding
and reinforcingthe infrastructurefor the transportand deliveryof energy products;
and strengtheningthe implementationcapabilitiesof the entities involved in the
sector.

1.05 InstitutionalSetting. Four ministries share the responsibilityfor the

energy sector: the Ministry of Petroleum and Natural Resources (MPNR), the Ministry
of Water and Power (MW?), the Ministry of Production (MOP), and the Ministry of
Planningand Development(MPD). Coordinationbetween the ministrieson energy matters
is provided by the Energy Wing of MPD, which acts as a secretariatfor the National
Energy Policy Committee (NEPC) and Energy Review Group (ERG). NEPC is responsiblefor
the formulationof GOP's overall energy policy. The review of the investmentplans
of the sector and the approvalof energy pricing proposals is under the jurisdiction
of the EconomicCoordinationCommittee(ECC). The ExecutiveCommitteeof the National
Economic Council (ECNEC) and Central DevelopmentWorking Party (CDWP) review and
approve major proposals and projects for all sectors,includingenergy.

1.06 The managementof aay-to-dayoperationsin the energy sector is vested in a

number of public and private sector entities. The public sect-orentities are: the
Water and Power DevelopmentAuthori_y (WAPDA),which is responsible for developing
Pakistan'swater resourcesand for the construction,operationand maintenanceof power
generation,transmissionand distributionfacilitiesthroughoutthe country, except
the Karachi area; the Oil and Gas DevelopmentCorporation(OGDC) for explorationand
developmentof oil and gas; the PakistanMineral DevelopmentCorporation (PMDC) for
the explorationand developmentof mineralresources;the State PetroleumRefineryand
Petrochemical Corporation (PERAC) and the ..ational Refinery Limited (NRL) for
processingcrude oil; and NationalPetroleumLimited (NPL) for a proposedhydrocracker
project. Also involvedin the energy sector are a number of semi-autonomousentities
in which GOP has, either directly or through public inqtitutions,a controlling
interest. These are: KarachiElectricSupplyCorporation(KESC),which is responsible
for the construction,operationand maintenanceof generationfacilities,as well as
the transmissionand distributionof electricityin the Karachi area; Sui NorthernGas
PipelinesLimited (SNGPL)and Sui SouthernGas (Corporation (SSGC)for the transmission
and distributionof natural gas; and Pakistan State Oil Limited (PSO) for marketing
and distributionof petroleumproducts. PrivateSector (PS) entitiesinclude: a large
number of Pakistanicoal mining companies;two refineries,the Attock RefineryLimited
.. (ARL)and PakistanRefineryLimited (PRL);and five oil and gas developmentcompanies,
 3 -

namely Pakistan PetroleumLimited (PPL), PakistanOilfields Limited (POL), the Fauji

Foundation,Union Texas and OccidentalPetroleumLimited. As shown in the organization
chart (Annex1.1), all operationalentities(publicand semi-autoniomous) are under the
jurisdictionof MPNR, except for WAPDA, KESC, NRL and PRL. NWPthasjurisdictionover
WAPDA and KESC and MOP over NRL and NPL. In addition, the Dv.partLent of Forestry,
Kinistryof Agriculture(DOPMA),is responsiblefor afforestationand the Environment
and Urban Affairs Division,.4inistryof Housing and Works, for the implementationof
GOP's environmentalpolicies.

C. Develogents in the Sector. FY79-FY88

1.07 The Fifth Plan (FY79-FY83)emphasizedthe accelerateddevelopmentof domestic

energy resources and rationalizationof energy prices. However, financial ard
implementation constraints impeded the achievement of the supply targets for all energy
productsexcept natural gas. The largestshortfallwas in the oil and power subsectors
where only 64X and 501 of the output targets, respectively,were achieved. These
shortfallstogetherwith the rapid growth of consumption,precipitatedby GOP's policy
of underpricingenergy to stimulate growth, increased the country's dependenceon
importedenergy. In recognitionof the growingsupply gap, GOP accordedhigh priority
to restructuringthe sector during the Sixth Plan (FY84-FY88). Its objectiveswere
to accelerateand rationalizethe developmentof energy,correctdistortionsin energy
pricing,streamlinethe institutionsand agenciesin the sector, and increaseprivate
sector involvementin the development,productionand delivery of energy. As these
objectiveswere not translatedinto concretepolicies and programs, in the first two
years of the Plan only one-halfof the planned investmentprogrsm for the sector was
implemented,energy prices were allowedto declinein real terms, and the institutions
in the sector remained unresponsive to the pressing needs of the economy. These
setbacks prompted GOP to formulate a Long-Term Energy Strategy (LES), covering the
period 1986-2010. It calls for the implementation
of integratedprogramsof structural
reformsover five-yearintervals,correspondingto the planningcycle in the areas of:
resourcedevelopmentand energy investments;pricing,resourcemobilizationand demand
management;and institutionaldevelopment.

1.08 To assist GOP in implementingthe reforms called for by LES, a series of

sector loans were envisagedby the Bank, each in supportof a monitorablecore program
of policy actions and priority investments,which would form the umbrella for the
Bank's lendingfor specificenergy investmentsand for the more effectivecoordination
of externalfinancingfor the sector. The firstphase of those reformswas implemented
successfullyunder ESL I during the last three years (FY86-FY88)of the Sixth Plan.
Support for implementingthe second phase, which constitutesan integralpart of the
medium-termmacroeconomicadjustmentprogram (para1.03), is being providedunder ESL,
which covers the first three years (FY89-FY91)of the Seventh Plan. A review of the
progress made under ESL I and of the measures to be implementedunder ESL II is
presentedbelow.

D. Imnlementationof LES: Progressunder ESL I and the Progran for ESL II

1.09 Energy Investments. As a first step towards rationalizinginvestmentsand

minimizingthe shortfallsin energy supply,a Core InvestmentProgram (CIP)of priority
projects was agreed to under ESL I, including the sources of financing for its
implementationsuch as the contributionof GOP through the Annual Development Plan
and that of the sector entitiesfrom their internally-generated
funds. In keepingwith
this agreement,GOP to4,kall necessaryactions requiredto mobilize resourcesfor the
implementationof the priorityprojects. As a result, actual investmentsbetween FY86
and FY88 were only 8X lower than envisaged,Rs 46 billion compared to Rs 50 billion.
 -4 -

This representsa substantialimprovementrelativeto the past, when actual investments

were as much as 50X lower than planned.

I 10 To ensure consistency between the sectoral and the medium-term policy

f.axeworktargets,a detailedforecastof demand for energy for the Seventh and Eighth
Plans (FY89-98)was prepared based on tLe projected rates of growth for the main
sectors of the economy and increasesin the domesticprices of energy products. The
ongoingand new projectsrequiredto meet the forecastdemandwere identifiedand their
financial requirements were matched with the implementation and self-finane.ng
capabilitiesof the public sector and semi-autonomous entities. Projectswhich c'uld
not for financialor other reasonsbe undertakenby the public entitieswere earma-ked
for implementationty PS to reduce potentialshortagesin energy supply. The CIP for
ESL II comprises ongoing and new projects to be implementedby both the public and
private sectors during the first three years (FY89-91)of the Seventh Plan (FY89-93).
Implementationof this CIP, includingthe measuresto mobilizeresourcesfrom both the
public and private sectors,would be monitoredby the Bank and reviewed with GOP on
an annual basis.

1.11 Resource Development. In keeping with the objectivesof LES of developing

8,700 MW of new hydropowerpotential by the year 2010, GOP agreed, under ESL I, to
initiateby December,1986, a feasibilitystudy for Basha (2,40C MW), which was to be
implementedafter Kalabagh (2,400 MW). This study, however, could not be initiated
because WAPDA's views concerningthe scope and timing of the work to be undertaken
differedmarkedly from those of the consultantswho had prepared the prefeasibility
study for Basha. To resolve these differences,an internationalpanel of expertswas
appointed by GOP in 1988 at the behest of the Bank. Based on a review of the
prefeasibilitystudy, the panel outlined a work plan which has been approvedby GOP
and the Bank. The appointmentof consultantsfor the preparationof the feasibility
study for Basha has been set as a conditionof release of the second tranche of ESL
I. Moreover, as the implementationof Kalabagh has also been delayed because of
unresolvedissues concerningthe allocationof water and compensationfor land to be
inundated,detailed studies for the development of the sites at Chashma (240 MI),
Taunsa (110 NW), Jinnah (110 MW) and Ghazi Ghariala (1,000 MW) would be accelerated
under ESL II to offset, at least rirtially,the 2,400 MW shortfall in hydrocapacity
resultingfrom this delay.

1.12 Under ESL I, two studul. were completed on issues relating to the coal
subsector. The first identified the main operational constraints impeding the
developmentof coal and outlined a comprehensiveprogram to assess the reserves at
Lakhra and Sonda Thatta. The assessmentof PMDC's lease area at Lakhra was completed
in 1986 and proven reserves sufficient to produce 4 million tons annually were
identified. The second study outlined a strategyfor restructuringPMDC to promote
the more efficient operationof mines in the public sector, and provided a basis for
reviewing the role of the public sector in coal mining. The recommendationsof this
study would be reviewedunder ESL II with the view to separatingPMDC's coal and salt
mining activities and establishinga Mineral DevelopmentBoard. As a condition of
effectivenessof ESL II, GOP would also be required to approve, in principle, the
developmentof the proven reservesat Lakhra througha joint venture between PMDC and
PS. Finally,GOP has agreed to completea study which would review the institutional
arrangementsfor grantingcoal concessionsand the existingfiscal incentiveframework
for investmentsin coal developmentwith a view to encouraginginvestmentsby PS.

1.13 In keeping with the objectivesof LES -f acceleratingthe explorationand

developmentof oil and gas, a new gas producerpricingformulawas adopted (para 1.16)
and a nationalpolicy aimed at increasingthe levelof foreignand localprivate equity
investment and balancing the involvement of public and private sectors in the
explorationand developmentof oil and gas was outlinedunder ESL I. As a result,new
oil and gas fields were discoveredand a number of already discoveredoil fields and
non-associatedgas fieldswere developed. In addition,a detailedH.ydrocarbon Habitat
Study of all onshore basins in the countrywas completedand a concessionpromotion
map of the high priority and accessibleareas was prepared. Areas where exploration
would be undertakenby OGDC and PS were identifiedand successfullypromotedto PS in
December1988. Under ESL II, GOP has agreed to furtheracceleratethe developmentof
already discovered fields and review the progress made in explorationby both the
private and public sectors.

1.14 Householdsare the single largestconsumersof energy in Pakistan,accounting,

in 1987, for approximately45X of total energy consumed. The decline in firewooduse
by households,togetherwith the increasein the use of other biomass fuels suggests
that the forest cover is being rapidly depletedwith attendant adverse environmental
consequences.However,the existingdata are inadequatefor formulatinga policy aimed
at optimizingthe mix of biomass and modern fuels for household consumpticn. Under
ESL II, GOP has agreed to develop a comprehensivedatabase on household energy use
patterns and formulatea householdenergy strategyas well as a monitorabletimetable
for its implementation;and review the ongoing work on forestry inventory,identify
gaps in the work program and formulatea long-termreforestationprogram.

1.15 Pricing. Resource Mobilizationand Demand Management. In order to enable

WAPDA to finance40Z of its investmentprogram from internalsources, as was agreed
under ESL I, the level and structure of tariffs was adjusted and measures were
initiatedto promote the integratedoperationof WAPDA and KESC. Details relatingto
the adjustmentsin tariffs implementedunder ESL I and those on which agreementhas
been reached under ESL II are discussed in paras 4.03 and 4.04.

1.16 To increase the participationof PS in gas exploration,a new gas producer

Rrice formula was introducedunder ESL 1 It links the producer price of gas to
two-thirds the border price of fuel oil, less a negotiated discount, based on
geologicalconditionsof the concessioninvolved. PS, both local and foreign,has
responded favorably and on the basis of this formula contractshave been signed for
thirteen new concessions and negotiations for several others are under way. To
maintain this momentum, GOP expanded the application of this formula to already
discoveredfields,providedthe concessionaires are willingto renegotiatetheirentire
contracts. Despite these efforts, the recent downturnin the internationalprice of
oil has dampened the interest of oil companies in undertaking new exploration
activities,particularlyin high cost offshoreareas in Pakistan. Therefore,with the
objective of providing additionalstimulus for private sector exploration,GOP has
agreed under ESL II to adopt a revised gas producerprice formula for new concessions
in offshoreareas, which would link the price of non-associatedgas to full parity with
the border price of fuel oil, less a negotiateddiscount.

1.17 The consumer price of gas, which until 1981 was maintained at low levels
relative to that of its stbstitutes,has since been increased six times, averaging
about 23X annually in nominal terms. With the introductionof a 331 increasein the
consumerprice of gas to households,effectiveDecember1, 1988, the weightedaverage
consumerprice of gas is now slightlyhigher than the border price of fuel oil
(Rs 41.6/MCF compared to Rs 40.7/MCF), which is well above the target of 661
originallyagreed to under SAL I, and reaffirmedunder ESL I. Despite this progress,
distortions persist in the structure of the consumer price of gas. As these
distortionsare resulting in the uneconomicuse of gas, GOP has agreed under ESL II
to: (a) maintain the consumerprice of gas to industrialand commercialsectors et
full parity with the domesticprice of fuel oil; (b) increase the price of gas to:
(i) the power subsector to reach full parity with the domesticprice of fuel oil by
June 30, 1994, with appropriatediscountsfor the power subsector'sinvestmentin gas
transmission;and (ii) householdsto reachparity with the border price of fuel by June
30, 1993; (c) assess the impact of higher gas prices on the ex-factoryfertilizerprice
and identifyinvestmentsin retrofittingand substitutionthat would allow the industry
to absorbhigher gas prices; and (d) undertakea study to assoss the potentialfor peak
shaving and establishing a tariff structure which would promote operational and
allocativeefficiency.

1.18 In order to provide incentivesto refineriesto improve their product-mix

and efficiency,a new formula for ex-refinerynricing was introducedin 1988 for the
two refineriesin Karachi. This formula,however,was not appropriatefor the Attock
refinery,as it has access to only locally-producedcrude oil, the productionof which
varies from year to year leading to widely fluctuatingcosts of refiningper unit of
output, since most of the costs of the refineryare fixed. This, in turn, results in
widely fluctuatingprofit levels. Under ESL II, GOP has agreed to develop and install
a detailed refineryprocessingsimulationmodel within the DirectorateGeneral Oil,
NPNR, with assistancefrom consultants,to review the experienceof the two Karachi
refinerieswith the new pricing formulaand on a basis of this review, revise the new
pricing formula for ex-refineryproductsfor the Attock refinery.

1.19 In 1981, GOP adopted the policy of passing on the higher cost of Retroleum
groductsto fival consumers. This policy, and the fact that domestic retail prices
were reduced only marginallyin responseto the decline in the internati--.alprice of
oil has enabled the petroleum subsector to become th. principal contributor to the
nationalbudget. The weightedaverage retail price in June 1988 was about 170l of the
weightedaverageborder price. The Bank supportsGOP's pricing policy, except for the
fact that domestic prices of industrialfuels should be maintained at parity with
border prices to avoid any adverse impact on the competitivenessof the Pakistani
economy. Therefore,with the objectivesof mobilizingresourcesand preservingthe
competitivenessof industry, under ESL II, GOP has agreed to maintain: (a) the
domesticprices for higher value products,such as gasoline,and naphtha,above border
prices to mobilize resources,and adjust them in line with any movement in border
prices; and (b) the domesticprices of fuel oil, diesel, and kerosene at parity with
averageborder prices plus inland handling charges.

1.20 Unlike electricity,gas and oil, the price of coal is not regulatedby GOP,
but determinedby market forces. On a price basis alone, coal is competitivewith
fuel oil (and also with wood and charcoal). Accordingly,no action on coal pricing
policy is being sougks under ESL II.

1.21 UnlderESL I, a NationalEnergy ConservationCentre (ENERCON)was established

to serve as the focal point for all conservationactivities. In keeping with its
mandate, ENERCON has initiatedtraining and outreachprograms, and completedaudits
in 43 private sector and 27 public sector industrialplants. In addition,a Building
Energy Code has been drafted and a program to audit 300 tubewellsand retrofit100 of
them has also been launched. Under ESL II, GOP has agreed to undertake detailed
engineeringand feasibilitystudies in 40 of the largest industrialenergy consuming
plants in the country;prepareself-standingenergyconservationprojects;and complete
a study with assistancefrom consultants,to identifythe constraintsto conservation
arising from tax, industrial and trade legislatUon and formulate a package of
incentivesto promote energy conservation.
 - 7 -

1.22 Institutional Development.In order to streamlinethe decision-making process

and improvethe operatingefficiencyof the power subsector,under ESL I, a study aimed
at reorganizingWAPDA was completedby GOP with the assistanceof consultantsfinanced
by USAID. The study recommendedthe separationof WAPDA's distributionfunctionfrom
generationand transmission.This recommendation has been accepted,in principle,and,
under ESL II, GOP has agreed to establish,in accordancewith a dated and monitorable
actionplan, a distinctand self-containeddistributionwing within WAPDA with its own
accounts, investmentprogram, t.ommercial arrangementsfor the purchase of power from
WAPDA's generation/transmission wing, as well as, an agreed financial performance
criteria.

1.23 GOP has also reviewedwi4.ththe Bank, the implicationsof WAPDA taking over
the generationand high voltage facilitiesof KESC and restrictingthe activitiesof
the latter to the bulk purchaseof power from WAPDA for distributionin the Karachi
area. The Bank has ascertainedthat in order for this plan to be realized,a financial
restructuringprogram for KESC would have to be implemented,given its precarious
financialsituation. Presently,KESC is not in a positionto mobilizethe large amount
of resources required to rehabilitateits distributionsystem, where losses are in
excess of 30X of gross generationand the quality of service is poor and eroding. In
order to address these problems, under ESL II, GOP would develop a financial and
organizationalrestructuringplan for KESC.

1.24 In the oil and gas subsector,as OGDC was expectedto assume an expandedrole
in exploration and development during the Sixth Plan, GOP agreed under ESL I to
strengthen its managerial capabilitiesand move towards financial self-refinance.
Accordingly,the corporation'sinvestmentprogram for FY86-88 was rationalizedand,
more recently, a decisionwas made to remove OGDC from the budget and reorient its
operationsalong commerciallines. As this decisionwould require strengtheningthe
Cori ration's financial capabilities,GOP has agreed under ESL II to implement a
financialrestructuringplan for OGDC, increasethe wellheadprice of gas to OGDC to
enable the Corporationto achieve agreed internalcash generationtargets and, as an
interimmeasure,provide in the form of loans, resourcesrequiredfor OGDC's investment
program.

1.25 The office of Energy Planning (ENERPLAN)was establishedunder ESL I with

USAID financing. In 1986, ENERPLANwas merged with the existing Energy Wing in MPD.
Since its establishment,the EnergyWing has been involvedin all aspects of planning,
including the preparation of the energy chapter of the Seventh Plan. It has also
successfullyserved as the main interlocutorbetween the Bank and GOP under ESL I as
well as coordinatorof all energy sector entitiesunder that operation,a fu.action it
would retain under ESL II. Despite the significantprogress the Energy Wing has made
in developingexpertise in plan formulation,project appraisal,and in establishing
data bases, it continues to remain weak in the areas of financial and economic
analysis. There are also uncertaintiessurroundingthe status of its existing staff
as they were hired as contractpersonnel rather than full time regular employeesof
GOP, a situationwhich could impair future continuityin terms of its staff and its
role. Therefore,under ESL II, GOP would be requiredto: (a) absorb the suitable
existing contract personnel of the Energy Wing as regular employees of GOP on a
permanent basis; and (b) create additionalpositions within the Energy Wing for a
Financeand EconomicSectionheaded by a Chief and supportedby at least two positions
each for financialanalystsand economists.

1.26 EnvironmentalAsRects. Followingthe approvalof the PakistanEnvironmental

ProtectionOrdinance in 1983, GOP establishedthe office of Environmentaland Urban
Affairs Division in the Ministry of Housing and Works. Similar provincialagen.ies
have been established in Punjab and Sind, and steps are currently being taken to
establish these in Baluchistan and North West Frontier Province. Despite this
progress, actions need to be initiated to address the prevailing environmental
problems. Therefore, under ESL II, GOP would develop a monitorable ongoing
Environmental Action Plan which would include: (a) adoption of selected environmental
standards for energy projects; (b) adoption of environmental impact assessment
guidelines; (c) further development of environmental capacity in key institutions in
the sector; and (d) adoption of improved health and safety and emergency management
standards. In the meantime, the standards consistent with Bank guidelines are being
followed.

E. Bank GranD's Role in the Energj Sector and ESperience with Past Lending

1.27 The Bank Group's involvement in Pakistan's energy sector started in 1955,
with a loan to KESC for the construction of a thermal power station. Since then, it
has assisted in the implementation of projects in all energy subsectors. Prior to
1985, the Bank Group had made 16 loans/credits to Pakistan for energy projects. In
the power subsector, the Bank had participateC in the Indus Basin Development Frojects,
and provided a series of four credits/loans to KESC and three to WAPDA. In the
petroleum subsector, the Bank's involvement included five loans to Sui Northern Gas
Pipeline Ltd. (SNG:L)for the expansion of the infrastructure for the transmission and
distribution of gas, three to OGDCfor exploration and development of oil and gas and
one to the National Refineries Ltd. (NRL) for improving its energy efficiency. All
of these loans/credits have been completed, except for SNGPLV (Loan 2324-PAK) and the
Petroleum Exploration Promotion Project (Loan 2351-PAK), both of which are being
implemented satisfactorily despite an initial delay in startup.

1.28 In addition to ESL I and ESL II, the Bank has made seven new loans in the
energy sector. These include: WAPDAIV and V (Loans 2499-PAK and 2556-PAK) for the
least cost expansion and reinforcement of the secondary and high voltage transmission
grid. The Petroleum Resource Joint Venture Project (Loan 2553-PAK) to assist GOP in
mobilizing PS involvement in exploration and development of oil and gas; the Kot Addu
Combined Cycle Power Project (Loan 2698-PAK) to add another 250 MW of generating
capacity through the conversion of combustion turbines to combined cycle operation;
the Power Plant Efficiency Improvement Project (Loan 2792-PAK) for the rehabilitation
of existing power plants and conversion of combustion turbines to combined cycle
operation; the Refinery Engineering and Energy Efficiency Project (Loan 2218-PAK) for
restructuring product output and streamline existing systems; and the Private Sector
Energy Development Project (Loan 2982-PAK), the first of its kind to be approved by
the Bank (FY88).

1.29 The proposed Project would be the Bank's ninth operation with WAPDAincluding
the proposed Rural Electrification Project (RE) which is expected to be presented to
the Board concurrently in FY90. The first three operations have been completed and
the remaining four are being implemented satisfactorily. The Project Performance Audit
Report (PPAR) and the Project Completion Report (PCR) for the Third Power Project (Loan
968-PAK and SAC 39-PAK) was distributed to the Executive Directors in April 1989. The
PPAR concluded that the project not only improved the supply of electricity, but also
all aspects of WAPDA's operations including administration, technical and financial.
Despite these achievements, the project was completed three years behind schedule.
Similar delays also were experienced in the two previous projects. These are
attributable to delays in the appointment of consultants, the award of contracts and
clearance of PC-1 documents, as well as the periodic scarcity of local funds. In order
to minimize delays in start-up, the Bank, under subsequent operations, has assisted
WAPDAin preparing standard bidding documents and has provided training to its staff
 -9-

in the Bank's procurement procedures. Moreover, through the sectoral approach to

lending which was initiated under ESL I, the Bank has also been able to reduce
slippages in project implementationstemming from resourceconstraints (para 1.09).
This approach is being continuedunder ESL II.

II. THE BORROWER

Organizaticn

2.01 WAPDA, the Borrowerof the proposedLoan, was establishedin 1958 as a semi-
autonomous agency to coordinate the development of Pakistan's water and power
resources. It is divided into two largely independent'wings':one for Power and the
other for Water. The Power Wing is responsiblefor the planning, constructionand
operationof power generation,transmissionand distributionfacilitiesthroughoutthe
country, except the Karachi area which is served by KESC. The Water Wing is
responsiblefor the overall planning and investigationof water resources,and the
design and constructionof surfaceand groundwaterdevelopmentprojectsfor the federal
and provincialgovernments. WAPDA's governingbody, referredto as the "Authority",
consistsof a chairmanand threememberswho are in charge of power, water and finance,
and are designatedMember (Power),Member (Water)and Member (Finance),respectively.
The members of WAPDA's governingbody are appointedby the Government.

2.02 The organizationof the Power Wing of WAPDA, which for convenienceis herein
referred to as WAPDA, is shown in Annex 2.1. Member (Power) is assisted by seven
general managers in charge of thermal generation,hydel generation,transmissionand
grid stations,distribution,finance,coordinationand planning,system operationand
load dispatchand inventorycontrol. AlthoughWAPDA is highly centralizedwith respect
to decision-making, its distributiondepartmentis divided into eight Area Electricity
Boards (AEBs),which were establishedin 1981 to take over the responsibilityfor local
electricityservice. Each AEB has a chairman,who is the chief engineerfor the area,
appointed by WAPDA for a five-year term; three full-time members, who are also
directors in charge of departments;and three part-time members representinglocal
interes:s,one of whom is normallya representativeof the ProvincialGovernment. The
members of AEBs are appointedfor a period of three years.

2.03 In October 1988, WAPDA had about 150,300 employees; 4,320 engineers, 980
other professionals,11,230 technical and other staff, 28,030 administrativeand
accounts staff, 69,430 skilled workers and about 36,310 other employees including
unskilled workers. The number of consumers served by WAPDA in 1988 was about 5.7
million, representing about 38 consumers per employee. The relatively low
consumer/employee ratio reflectsthe overstaffingof the distributiondepartment. The
inefficienciesresulting from this overstaffing,together with the relativelyhigh
level of losses in distribution,stemmingfrom inadequateinvestmentsin the past, are
contributing to substantial leakages in revenues and denying WAPDA the resources
requiredfor implementingan expandedinvestmentprogram. The agreementreachedunder
ESL II on the establishmentof a self-containeddistribution wing within WAPDA
supportedby comprehensivetechnical assistance,financedby USAID, in the areas of
finance, billing, collections, data processing, servicing and operations and
maintenance,is designedto address these issues (para 4.16).

ExistinaFacilities

2.04 In January 1989, WAPDA's total installed generatingcapacitywas 6,149 MW.

About one-third of this capacity (1,710 MW) was commissionedduring the last three
years of the Sixth Plan (FY86-FY88)when slippages in project implementationwere
minimizedthroughagreementon a CIP. The existinggeneratingsystem consistsof 2,897
 - 10 -

MW (471) of hydel capacityand 3,252 MW (531) of thermalcapacitybased mainly on fuel

oil and gas. WAPDA's primary transmissionsystem consistsof 1,614 km of 500-kV lines
and 4 grid stations whose aggregate capacity is about 3,600 MVA. The secondary
transmissionsystem consistsof 20,116 km of 220-kV, 132-kV and 66-kV lines and 822
grid stations,with a total capacity of soout 15,881 MVA. The distributionsystem
consists of 33-kV, ll-kV and 0.4-kV lines.

Load Xanagement

2.05 Despite the substantial increase in generating capacity between FY86 and
FY89, load-sheddingcnntinues. In June 1988, the shortfall between demand and
generating capability was about 1,000 MW. Although load shedding is expected to
continuewell into the mid 1990s, the projected increasein the installedcapacityby
the private and public sectors (para 2.09) and better management of demand through
price and non-pricemeasuresare expectedto reduce the capacityshortagesduring the
dry season to about 600 MW by FY93. In the area of pricing,GOP has agreed under ESL
II on the adjustmentsin the level and structure of tariffs and on the introduction
of peak/off-peakpricing for 300 of the largest industrialconsumers of electricity
(paras 4.03 and 4.04). As for non-price measures, GOP plans to continue direct
curtailmentof supply to major industrialand agriculturalconsumerson the basis of
an agreed schedule to allow consumers to adjust their activitiesand rotate load-
shedding to household consumers. In addition, under the Bank's Private Tubewell
DevelopmentProject,WAPDA is implementinga pilot program to assess the technicaland
economicviability of restricting tubewell operationsthrough ripple control, time
switches and splitting and controlling residential and tubewell load by phases.
Provision has been made under the proposed RE Project which is being processed
concurrentlywith the proposed Project, for the installationof: (a) specially
designedmeters requiredto introducepeak/off-peakpricing for 300 industrialand bulk
consumers; and (b) the equipment proven viable for restricting the operations of
tubewells.

Power Planning

2.06 Power system planning is carried out in-houseby WAPDA's staff. The first
nationalleast-costgenerationexpansionprogramwas formulatedunder the Fourth Power
Project (Loan 2499-PAK)with the assistanceof Argonne NationalLaboratory(ANL, a US
agency)under financingfrom UNDP with the Bank as the executingagency. In addition,
trainingwas providedto WAPDA's staff by ANL, under the auspicesof the International
Atomic Energy Agency, in the use of the Model for the Analysis of the Energy Demand
(MAED) and the Wein Automatic System Planning (WASP) computer models, which were
installed on WAPDA's computer in early 1986. This ha; enabled WAPDA to revise the
least cost program, as and when needed, to incorporatethe updated informationon the
operation of the subsector includinghydruljgy,water managementand pattern of the
electricityconsumption. Transmissionand distributionplanning is also carried out
on an ongoing basis by WAPDA's staff and consultantsrecruited as and when needed.
CIDA has assistedWAPDA since 1974 in developingin-housecapabilitiesfor the 500-kV
network and, under a Distribution Development Program (DDP), USAID is presently
strengtheningthe distributionplanning function.

Training

2.07 Training in WAPDA is a separateactivityand is well-supported. Each of the

main functions,generation,transmissionand distributionoperate technical training
schools in a number of locations,which are efficientlyrun. There is a Management
Training Centre located in Tarbela which provides a comprehensivelist of training
 - 11 -

courses. For training in specializedareas, support has been provided to WAPDA by

bilateral and multilateral agencies. In particular, CIDA has provided extensive
training to WAPDA's staff in planning, design, construction,and operation and
maintenanceof the 500-kV network,USAID in the area of distribution;and the Bank in
the areas of generation planning, maintenance and spare-parts management and in
financialand commercialareas.

DevelopmentProgrxa.m

2.08 WAPDA's generation,transmissionand distributiondevelopmentprograms for

the Seventhand Eighth Plan periodswere reviewedby the Bank under ESL II with respect
to size relative to the availability of resources, composition and status of
preparationof projects, and implementationcapabilitiesof WAPDA. On the basis of
this review, a CIP, coveringthe period FY89-FY93,was outlined,which representsthe
maxit=m program to be implementedduring this period (para 1.10). Based on the
availabilityof financial resources, the projects to be implementedby WAPDA were
identifiedand the balance was earmarked for implementationby PS. This CIP would
receive priority in terms of resources and its implementationwould be monitored on
an annual basis by the Bank.

2.09 Generation Program. Based on the long-term least cost developmentplan,

WAPDA's generatingcapacityis forecastto increaseby nearly 68X during the Seventh
Plan period,from 6,149 MW in January 1989 to about 10,308 MW in 1993. During the same
period, an additional2,300 MW (approximately) capacity is expected to be installed
by PS. The units that are scheduledto come on stream by 1994 are as follows:

Additions to CaRacitvDuring The Seventh Plan Period (FY89-FY93)

Unit Total
Capacity Capacity
Plant Name Plart Tyne Comm.Date Unit Number (NW) (NW)

1. Public Sector

WAPDA
Tarbela Hydro 1993 11 through 14 432 1728
Manglt Hydro 1993 9 and 10 100 200
Chashma Hydro 1994 1 through 22 12.3 271
Jamshoro Steam 1990 1 through 3 210 630
Jamsharo Steam 1991 4 250 250
Muzaffargarh Steam 1992-93 1 through 3 210 630
Ouddu Combined Cycle 1993 1 300 300
Lakhra FBC 1992 3 50 150

Subtotal 4159

KESC
Ben Qasim 1989 3 through 5 210 630
Subtotal 630
II. Private Seetor

Nab River Steam 1993 4 323 1292

Habibullah1 Steam 1993 2 16.5 33
Habibullah 2 Steam 1993 2 16.5 33
Intrag FBC 1992 1ad 2 45 90
Nooriabad Diesel 1991-92 1 through 6 21 126
Paktand FBC 1992 1 through 3 44 132
Deutsche Babcock Steam 1993 1 88 88
Hadson Steam 1993 1 55 55
Nab Chauki Steam 1993 1 120 120
FsuJi Steam 1993 1 300 300
Subtotal 2269
Total
 - 12 -

2.10 Distributionand Rural ElectrificationProgram. WAPDA'soriginaldistribution

developmentplan had called for investmentsin loss reduction,load managementand the
expansionand reinforcementof the low voltagenetworks in urban and rural areas. In
addition to the urban distributionsystem, the program called for connecting15,000
new villages and 35,000 tubewellsduring the Seventh Plan period. In the context of
ESL II, these targets were reviewed and found to be large relative to available
resources. As a result, the targets were reduced to 11,700 villages and 27,000
tubewells and the phasing of expenditure associated with these was realigned by
extending the period required to implement the revised program from five to seven
years. The xvtised program constitutesthe CIP for RE.

2.11 TransmissionProgram. Major hydro resources are located in the north and
thermal facilities and load centers are concentratedin the center and the south.
Hence, for the efficientevacuationof electricityover long distances,in the early
1970s WAPDA initiated the implementationof a least cost national program for the
developmentof an extra high voltage (EHV) network to connect the major generating
plants to the main load centers in the country with the 500-kV grid. The first EHV
line between Tarbela and Faisalabad,was completed in 1977. Since then, further
sectionshave been successivelybuilt southwardswith assistancefrom CIDA and the Bank
(Loans 1208T-PAK and 2556-PAK). Presently, three EHV lines are in operation and
anothertwo are under implementation.The 500-kV lines in operationincludetwo routes
between Tarbela and Faisalabadand one between Faisalabadand Jamshorovia Multan and
Guddu. Those under implementationincludetwo additional500-kV linesbetween Tarbela
and Lahore and between Lahore and Jamshorovia Sahiwal,Multan, Guddu and Dadu. The
Tarbela-Lahoreand Lahore-Jamshorolines are expectedto be completedby 1991 and 1992
respectively.

2.12 WAPDA has recentlyupdated its least cost program for the developmentof the
EHV network,which takes into account the forecastexpansionof generatingcapacity.
In addition to completingthe ongoing projects includingthe 500-kV lines as well as
the expansionand reinforcementof the secondarytransmissiongrid, the program calls
for the installationof: two single circuit 500-kV lines between Hab Power Complex
(HPC) locatedin Baluchistan,and Jamshoro;a third single circuit 500-kV line between
Guddu and Multan; and a second single circuit 500-kV line between Multan and Lahore.
This transmissionexpansionprogram constitutesthe CIP for the Seventh Plan period.

III. THE PROJECT

Proiect Setting

3.01 One of the objectives of the medium-term macroeconomicframework is the

reductionof fiscal deficitand inflationarypressures. This is to be achievedthrough
the curtailmentof expendituresby the public sector; the mobilizationof resources
through improved taxation; better pricing and phasing out of subsidies; and the
enhancement of the role of PS in the development of key sectors such as energy,
industry,includingfinancialintermediation, and transportation.In order to support
GOP's effort in implementingthis framework,a package of policies to support the
structuraladjustmentof the energy sector,and a CIP for the Seventh Plan was agreed
with the Government. The CIP is comprisedof investments,private and public,critical
to achievingthe objectivesof the SeventhPlan,while ensuringthat outlays for energy
remain within the overall investmentand credit ceilings set under the medium-term
framework. The CIP for the power subsectorfor FY89-93,calls for the developmentof
7,058 MW of generationcapacity,of which 4,789 MW would be implementedby WAPDA and
KESC, and the remaining 2,269 MW by PS (para 2.09). The financing for WAPDA's and
 13 -

KESC's power generationdevelopmentprogram is identified,and the financingfor the

distributionis either secured or is about to be secured through financingby USAID,
Japan and the Bank for the rural electrification;and the United Kingdom, the Asian
DevelopmentBank and Japan for urban distribution. By contrast, the financing for
transmissionis still incomplete.

3.02 During the Fifth Plan and Sixth Plan,WAPDA experiencedshortagesof financial
resources which forced it to concentrateits resources on generation and, to much
lesser extent, distribution. As a result, transmissionwas developed on an ad hoc
basis, dictatedby the need to evacuatepower. ESL I and WAPDA IV and V have rectified
some of this imbalance; however,additionalinvestmentsat the 500-kV level are still
required,if the network is to develop in step with the generationdevelopmentprogram
agreed under CIP. In fact, the inadequacyof this network is increasinglybecoming
a constrainton WAPDA's ability to efficientlydispatchpower to meet the demand for
electricityat least cost.

3.03 In anticipation of the increased role PS is expected to play in the

developmentof energy, GOP created the Private Sector Energy DevelopmentFund (PSEDF)
under financing from the Bank (Loan 2982-PAK),cofinancedwith bilateral agencies.
The Fund would cover 30X of the total cost of PS investmentsfor the developmentof
energy, through loans at the prevailingdomesticmarket interest rates and repayment
over 23 years, including 8 years grace. The remaining70X of the financingis to be
secured through equity (25%) and commercialloans (451) extended without sovereign
guarantee. So far, GOP has received several proposals which would provide 2,100 MW
of the projected 2,300 MW called for under CIP for 1989-1993. The Hab Power Complex
(HPC), the first and largestproposalto be financed,constructedand operatedby PS,
would provide 1,292 MW of oil-basedthermal power generation. The power plant would
be located in Baluchistan,30 miles north west of Karachi. The feasibilitystudy for
the complex has been completed. Negotiationsof the securitypackage, comprised of
a set of interrelatedagreements,designedto safeguardthe interestsof the lenders,
Government and investors, is expected to be initialledbefore December 31, 1989.
Financialclosure is expectedby early 1990 and the commencementof the implementation
of the complex shortly thereafter.

3.04 Under the securitypackage,the investorsassume completionand operational

risks while GOP guaranteesthe performanceof its agencies in terms of the purchaee
of power by WAPDA and the supply of fuel oil by either PSO or PARCO. Failure by
investorsto complete the power station as agreed, or to supply the power contracted,
would reduce the returnsof the investorsand, in extremecases, diminishtheir equity.
On the other hand, failureby WAPDA to purchasepower in the agreed quantitieswould
requireGOP to pay for the power contractedfor with HPC. The evacuationof power from
HPC would requireinterconnection between the complexand the nationalgrid at the 500-
kV level. Moreover, in view of the requirementthat PS investmentsbe financedunder
limited recourse, the security of lenders, in terms of repayment, hinges on the
revenuesto be generatedby the project. Unless concretesteps are taken by WAPDA to
implement the transmission link, necessary for HPC generation of revenue, the
internationalfinancial communitywould be reluctant to move to financial closure.
This would delay the implementationof CIP for FY89-93 and in turn undermine GOP
initiativein mobilizingPS investmentsfor the developmentof energy.

Proiect Obiectives

3.05 The proposed Projectwould: (a) contributeto the implementationof CIP for
FY89-93 for transmissionthrough: (i) extension and reinforcementof the 500-kV
network to ensure adequate and effective evacuationof power from the main thermal
 - 14 -

power generationcenters at Guddu and Multan to the major load centers in the middle
and northernregion of the country;and (ii) extensionof the transmissionlink between
the HPC (1,300 MW), the first major power project to be financed, constructed and
operatedby PS, and the national500-kVnetwork;and (b) continueinstitutionbuilding
efforts initiatedunder the Bank's earlierlendingoperationsby strengtheningWAPDA's
capabilitiesin implementing,operating and maintaining an efficient and economic
transmissionsystem.

Proiect Descrition

3.06 The proposed Projectwould comprise:

(a) installationof two single circuit 500-kV transmissionlines, about 200 km

each, connectingthe Hab Power Complex and Jamshoro;

(b) installationof a third single-circuit500-kV line, about 312 km between

Guddu and Multan, and a second single-circuit500-kV line of about 300 km,
between Multan and Lahore via Gatti;

(e.) extensionand reinforcementof existing500-kV substationsat Lahore,Gatti,

Multan and Guddu with associatedfanilitiesincludingreactivecompensation,
telecommunication and control equipment;and

(d) consulting services to assist and train WAPDA's staff in the design,
construction,operationand mainteianceof the 500-kV network.

Details of the proposedProject are describedin Annex 3.1.

Prolect Cost

3.07 The total cost of the proposed Project, including price and physical
contingenciesand customsduties,is estimatedat US$393.0million equivalent,of which
taxes and duties amount to about US$153,.7million equivalent. The total financing
requiredfor the proposedProject, includinginterestduring constructionof US$70.1
million equivalent, is about US$463.1 million. Of the total financing required,
US$162.0 million would be in foreign exchange, and the remaining US$301.1 million
equivalentwould be in local costs. The cost estimates are based on quotations
receivedby WAPDA over the past 12 months for similar equipment,servicesand works,
updated to June 1989 prices. A provision of 51 of the base cost has been made for
physicalcontingencies,based on the experiencewith similarprojectscurrentlyunder
implementation.Escalationof foreigncosts was assumed to be 7.2% for FY90, 6.51 for
FY91, 5.01 for FY92, and 4.51 per annum thereafter. Escalationof local costs was
assumed at 10.01 for FY90, 8.0X for FY91, 7X for FY92, and 6.51 per annum thereafter.
Total price escalationamountsto 24.91 of the base cost plus physical contingencies.
A summary of project cost is presented in Table 3.1 below and details are given in
Annex 3.2.
 - 15 -

Table 3.1 Summary of Project C08t

(Rs Million) (US$ Million)

Local Foreign Total Local Foreign Total

A. HPC - JamshoroTransmissionLine 1,171.3 933.1 2,104.5 54.1 43.1 97.2

B. Guddu-LahoreTransmissionLine 1,555.4 1,034.2 2,589.6 71.8 47.8 119.6
C. Substations 602.2 671.9 1,274.0 27.8 31.0 58.8
D. Consultingand Training 448.6 78.0 526.6 20.7 3.6 24.3

Total Base Cost a/ 3,777.9 2,717.1 6,494.7 174.5 125.5 300.0

PhysicalContingencies 181.1 153.2 316.3 8.4 6.2 14.6
Price Contingencies 1,042.5 654.7 1,697.1 48.2 30.2 78.4

Total Project Costs 5.001.1

,3507.3 B.508.4 231.0 162.0 393.0

InterestDuring Constr. (IDC) 1.517.7 0.0 1.517.7 70.1 0.0 70.1

Total FinancingRequired 6,518.8 3,507.3 10,026.1 301.1 162.0 463.1

a/ Base costs in FY90 constantprices.

Prolect Financing

3.08 The proposed Loan of US$162 million would be made to WAPDA with GOP as the
guarantor. WAPDA would bear the interestrate risk and any cost overruns. GOP would
bear the foreign exchangerisk and provide repaymentguaranteeto the Bank, for which
WAPDA would annuallypay 3-1/21 on the outstandingloan amount to GOP, representing
the foreign exchange insurance premium which is collected by the State Bank of
Pakistan. The proposedLoan would cover 100X of the foreign exchange requirement and
representsabout 35Z of total financingrequired. Of the localcost requirement,about
US$189.4million equivalentwould be financedby WAPDA from internalsources,and the
balance amounting to US$111.7 million equivalent through local borrowings. The
financingplan for the proposedProject is summarizedin Table 3.2 below.

Table 3.2: Project FinancingPlan

------
Rs Million------- ------
US$ Million------
Local Foreign Total Local Foreign Total

IBRD Loan 0.0 3,507.3 3,507.3 0.0 162.0 162.0

WAPDA 4,100.2 0.0 4,100.2 189.4 0.0 189.4
Local Borrowings 2,418.6 0.0 2,418.6 111.7 0.0 111.7

TOTAL 6,518.8 3,507.3 10,026.1 301.1 162.0 463.1

The financing requirementsof the proposed Project are within the limits agreed to
under ESL II to contain the growth of expenditureswith a view to reducing the fiscal
 - 16 -

deficit and dampening the potential for inflation. For the period FY90-FY93, the
expendit-ines to be incurredunder the proposed Project amount to US$ 216.0 million
equivalent, compared to the agreed target of US$ 192.0 million equivalent. The
increasein expendituresis attributableto higher inflationthan was envisagedat the
time of the appraisalof ESL II. It is importantto note that as the proposedProject
is part of WAPDA's CIP for FY89-93,the local borrowingsfor the proposedProject are
part of WAPDA's overall borrowingprogram for the FY89-93period.

Proiect Preparation

3.09 Technicaland economicjustification,load flow and stabilitystudies,design

criteria, environmentalconsiderations,cost estimates and implemertationschedules
for the proposedlines and substationshave been completed. Substationextensionwill
requireno additionalland, and the equipment,materials and civil works requiredfor
the completionof this component,have been identified. The project document (PC-1)
for the HPC-Jamshoroline, summarizingthe technicaland economicjustification,cost
estimatesand financingplan, has been submitted to GOP for approval. The PC-1 was
reviewedby the Bank and found satisfactory. The PC-1 for the Guddu-Lahoreline and
associatedsubstationextensionsis under preparationand will be submittedto GOP in
November1989 for approval. However, to ensure timely implementationof the pronosed
Proiect.auprovalby ECNEC of the PC-ls for all comRonentsof the pronosedProiect is
set as a conditionof effectiveness(gara 6.02(a)).

Design and Engineering

3.10 The national 500-kV network, been planned to withstand faults without
system separation,line overloading,cascade trippingor loss of load. To ascertain
adequatedesign for each new extensionof the 500-kV network, includingthe proposed
Project, specific studies were carried out in the following areas: load flows for
normal and emergencyconditionsand in typical cases of generationduring low water
and high water seasons;short circuits;transientand steady state stability;reactive
power management for improvementof system power factor; mechanical and electrical
design for the conductorselection,tower.structure
and substationlayout;and control,
metering and relaying scheme in associationwith telecommunicationrequirementsand
integration into the system control and data acquisition (SCADA) network. These
studieshave been reviewedby the Bank and found satisfactory.

3.11 The detailedengineeringfor the HPC-Jamshorolines were prelaradby NESPAK,

a local consultingfirm. Route alignmentand most of the detailed survey has been
completed. Site investigationwould commence in December 1989. Based on past
experiencewith similarinvestigations, no difficultiesare envisaged. Detailedsurvey
and alignmentof the Lahore-Gattisegment of the proposedProjecthas been completed.
The Multan-Gattisegmentwill be constructedparallel to the existing 500-kV line and
soil investigationfor this componentwill be initiated in Jan'wry 1990. The line
design, including tower design, cable configurationand othe- aspects have been
completedby NESPAK (Detailsare presented in Annex 3.1). Design and engineeringof
the Guddu-Lahoreline and its associated substations is under preparation and is
expected to be completedby January 31, 1990. The proposed date for the completion
of the design is reasonablein v4 ew of the fact that it representsa repeat of work
already performed on lines which are currently either in operation or under
implementation. The Bank has reviewedNESPAK's past experienceand performance in
design and administrationof 500-kV lines as well as its workloadand staff resources
assigned to the proposed Project and is satisfied that it has the capability for
completingthe engineeringand design of the proposed Project in a timely fashion.
 - 17 -

3.12 Since the HPC-Jamshoroline is to be constructedin a coastal area of high

moisturewith relativelyhigh salt and dust content,and in view of NESPAK's limited
experience in this area, specializedtechnical expertisewould be needed to review
the design and implementation.The cost of these consultingserviceswould be covered
under the proposedProject. A preliminarydraft of the TORs for the consultantswere
reviewed during negotiationsand the recruitmentand appointmentof the consultants
would be in accordancewith Bank guidelines. It is estimatedthat these serviceswould
require about 80 man-months. In order to ensure the timely completionof the design
and implementationof the proposed Project, the appointment of internationally
experiencedconsultantsto assist and advise WAPDA in the design and implementation
of lines in areas of high moisturewith salt and dust content is set as a condition
of effectivenessfor the proRosed Loan (Rara 6.02(b)).

Proiect ImRlementation

3.13 The supervisionof construetionof the proposed Project would be performed

by WAPDA with assistance from consultants. Delays were experienced in the
implementationof the Jamshoro-Lahoreline, financedunder WAPDA V (Loan 2556-PAK).
These were attributableto delays in preparing bidding documents acceptable to the
Bank. Some delay was also caused by changes in WAPDA's generationexpansionprogram
stemmingfrom the need to reduce expenditureby the utility to maintain its investment
program within CIP for FY86-86,agreed wi..hBank under ESL I. Since then, agreement
has been reached on standardbidding documents,and the generationdevelopmentprogram
coveringthe Seventhand Eighth Plan periods (FY89-FY98)has been firmed up. Moreover,
the preparationof the bidding documents are a repeat of those prep.r':i-'orsimilar
equipment,materials,and works financedunder WAPDA V (Loan2556-PAK). Consequently,
no delays are anticipatedin the preparationof bidding documents. Nevertheless,in
order to ensure the timely implementationof the proposed Project, the issuance of
bidding documents for the supply of towers. which regui.rea long lead time to
manufacture.and earthing materials is set as a condition of effectivenessof the
proposedLoan (para 6.02(c)).

3.14 WAPDA has established two regional offices, one in Hyderabad and one in
Lahore, headed by Chief Engineers, to supervise the implementationof the 500-kV
network in the northernand southernareas, respectively. Each office is adequately
staffed with experiencedpersontnelin transmissionline constructionsupervisionand
management. The Bank reviewed the capabilitiesof these offices and found them
satisfactory.

3.15 Completionof the first 500-kV HPC-Jamshoroline is scheduledfor September

1992 and the second for June 30, 1993, in time for the expectedcommissioningof HPC
units. The schedule for the Guddu-Lahore line is as follows: Lahore-Gatti,
January 31, 1994; Gatti-Multan,June 30, 1994; and Multan-Guddu,December 31, 1994.
This schedule is consistent with the scheduled commissioning of the generating
capacities. Taking also inco accountpost-commissioning item3, the proposed Project
is scheduledto be completedby June 30, 1995. Details of the implementationschedule
are shown in Annex 3.3.

3.16 Since the HPC-Jamshoroline would be dedicated to the evacuationof power

rrom PS power plants, the generation and transmission projects are closely
interdependent.Therefore,assuranceof timely completionof HPC is essentialfor the
utilizationof HPC-Jamshoroline. The implementationagreementbetween GOP and HPC
consortium and the power purchase agreement between WAPDA and HPC consortium are
scheduled for signature before the end of November 1989. To ensure integrated
developmentof HPC and the HPC to Jamshorocom=onentof the proposedProject.evidence
 - is -

to secure
from the Borrower satisfactoryto the Bank that all necessary_jrangeements
Rreliminaryfinancialcommitmentshave been completedfor the gonstAuctionof HPC is
set as a condition of disbursementof expendituresfor the HPG component.under-the
orooosedProiect (para 6.03).

Procuremenmt

3.17 WAPDA is currently implementing,with the assistanceof contractors, the

second 500-kV Jamshoro-Lahoreline und - WAPDA V (Loan 2556-PAK). The procurement
arrangementsagreed under the above project would be followed under the proposed
Project. Most of the transmissionline equipmentand materials (towers,conductor,
ground wire, insulatorsand hardware)and substation,representingan amount of about
US$296.3million,would be procuredunder Bank guidelinesfor InternationalCompe.itive
Bidding (ICB). Local suppliersand manufacturerscompetingfor supply of goods under
ICB would have a preference of 15X or the applicable duty, whichever is less.
Similarly,most of the control, auxiliaryand miscellaneousequipment, representing
about US$20.5 million, would also be procured through ICB. Smaller amounts, not
exceedingUS$200,000each and representingaboutUS$8.0 million in the aggregate,would
be procuredin accordancewith Bank guidelinesfor Limited InternationalBidding (LIB)
by invitingbids from a list of potentialsuppliers,broad enough to assure competitive
prices. Materials and tools valued at US$6.4 million would be procuree by local
proceduresand would not be financedby the Bank. A portion of the constructionwork
(erection of towers, stringing of conductor and shield wires and civil works),
representingan amount of about US$25.0millionwould be procuredunder ICB consistent
with Bank guidelines. These contractswould be eligiblefor financingunder the Bank
loan providedthat erectionand works packageswould be floatedfor whole line segments
as defined by substationsline terminationsand that no segment would be subdivided
int3 smaller lots unless the segment was equal or longer than 300 km as was the
practice under WAPDA V. Discountingfor more than one lot in the same procurement
package would be allowed. This arrangementwould ensure that each contractwould be
of a size that would attract foreign bidders. Accordingly, it was agreed during
negotiationsthat financingof civil works and line erectioncontractswould be done
up to 80X of each ICB contract,accordingto the followingschedule: Tender I. HPC-
Jamshoro first line; Tender II: HPC-Jamshorosecond line; Tender III: Guddu-Multan
transmissionline, Lots I and II; Tender IV: Lot I, Multan-Gatti,and Lot II, Gatti-
Lahore transmissionlines; TenderV: 500-kVJamshoroand Guddu substations;and tender
VI: Multan, Gatti and Lahore substations. The remainingconstructionwork and the
engineeringand administrationwork, estimated at a total of US$36.0 million, would
be carried out under local proceduresand would not be financedby the Bank. Se-eral
local contractorshave already gained ample experiencein the constructionof 500-kV
lives. Table 3.3 summarizesthe status of procurementarrangements.
 - 19 -

Table 3.3: ProcurementArrangementsI/

(US$ Million)

team ICB LIB Other L Total

---- --- --- .... ~~ ~~~~~~~~~~~~~~~~~~~.
.. .
1 Land and Rights of Way - - .6 2.6
2 TransmissionLine equipment 218.3 - 218.3
and Materials (91.2) - (91.2)
3 Substationequipment 78.0 - - 78.0
(32.4) (32.4)
4 Capacitorsand Control Equipment 15.6 - 15.6
(6.8) - - (6.8)
5 General Ecuipment 4.9 8.0 6.4 12.9
(2.0) (5.0) - (7.0)
6 Line Erection and Civil Works 25.0 - 8.3 33.3
(20.0) - - (20.0)
7 Engineeringand Administration - - 27.7 27.7

8 Corsultingand Training - - 4.6 4.6

- - (4.6) (4.6)

TOTAL 341.8 8.0 43.2 393.0

(Bank) (152.4) (5.0) ( 4.6) (162.0)

ICB: InternationalCompetitiveBidding
LIB: Limited InternationalBidding
Other: Other Procurement Arrangements

a/ The figures in parenthesisare the respectiveamountswhich would be financedby

the Bank.
Lb/ Includes civil works contractedlocally,and technical services for which Bank
guidelines for consultants use would apply.

3.18 Bidding documents and recommendations for each contract, exceeding the
equivalentof US$1,000,000to be financedunder the proposed Loan, would be subject
to prior approvalby the Bank. This would amount to Bank review of more than 70% of
the total contracts financedunder the proposedLoan. Other Bank-financedcontracts
would be subject to post-award review. Consultants for studies and technical
assistancewould be selected in accordancewith Bank guidelinesand employed under
terms and conditionssatisfactoryto the Bank.

Disbursement

3.19 The proceeds of the proposed Loan would be disbursed against: (a) 100% of
the CIF cost of imported goods and services; or (b) 100% of ex-factory costs of locally
manufacturedgoods, both being subject to ICB. Eighty percent of the erectioncosts
up to a total of US$20.0 million would also be financed under the proposed Project,
subject to ICB. Disbursementswould also be made against 100l of the foreign exchange
cost of consultancyand trainingservices.Disbursementsup to US$5 millionwould also
be made against the CIF cost of goods procured through LIB. To facilitate
disbursements,a SpecialAccount shall be establishedby WAPDA with a commercialbank
in Pakistan. The Special Account would cover about four months of average loan
expenditures,equivalentto US$6.0million,replenishedand operatedin accordancewith
 - 20 -

Bank pracedures. Disbursementswould be fully documented except for payments not

exceeding US$100,000. Such disbursementswould be made against statements of
expenditures(SOE), the documentationof which would not be submittedto the Bank, but
retained for inspectionby the Bank's supervisionmissions. Standardproceduresfor
auditingSOEs would apply. The audit reports requiredto be submitted in accordance
with the Bank's audit covenants (paras 4.18 and 4.19) would include a statement
verifyingthat the amounts disbursedagainst SOEs have been used for the purpose they
were intended. A scheduleof disbursementsis given in Annex 3.4. The closing date
for the proposed Loan would be December31, 1995. This is about 18 months less than
the Bank-wide average for power ..ransmission and distributionprojects, which is
reasonable in view of the experiencegained under similar ongoing projects.

Training

3.20 A training program has been institutedby WAPDA for the last 15 years to
develop the necessary personnel for the planning, operation and maintenance of the
generation, transmission and distribution systems (para 2.07). In the area of
transmission,special emphasiswas on the trainingof staff to operate and maintain
the 500-kV lines and grid stations. Canadianutilities,under CIDA financing,have
providedsubstantialassistanceto WAPDA. The initialphase of the trainingstarted
in 1974 when the first team of WAPDA engineers were trained in Canada using the
servicesof BritishColumbiaHydro. In 1981, a more comprehensiveprogramstartedwith
the establishmentof a specializedtrainingcenter at Tarbela, and over a period of
two years Ontario Hydro has provided experts to train WAPDA's staff and instructors
in the areas of line maintenance, grid station operation and maintenance, and
associated protection and instrumentation. A follow-on, five-year program was
institutedby WAPDA with supportfrom CIDA and with participationof Ontario Hydro to
provide on-the-jobtrainingfor the staff after their initial trainingat the Tarbela
school and to assist in the developmentof a head office team of technical support
within the Transmissionand Grid Department. The program includedalso the training
of WAPDA's staff overseas .wdthe purchaseof equipmentand tools and essentialspares
for the conduct of the field training. WAPDA has also installedat the Faisalabad
Training Institute a grid simulatorwhich enables its staff to be trained regularly
in the operationof the system.

3.21 Under the ongoing CIDA sponsoredtrainingprogram considerableprogresshas

been made in line maintenance. However, this program is to be concludedwithin one
year, and WAPDA and the Bank are of the view that the program needs to be continued
to improvethe utility'scapabilityto maintainthe transmissionline at a high degree
of reliability. The proposed Loan would finance the continuationof training in the
areas of line maintenanceand computerizedinventorycontroland ztores systems,etc..
The training program would require about 180 man-months of training overseas plus
travel and subsistenceand trainingfees,amountingto about US$2.3 million,and would
be covered under the proposed Project.

3.22 The developmentof power projectsby PS would attract skilledpersonnel from

WAPDA. This would not significantlyaffectWAPDA's capabilitiesbecause the absorptive
capacityof PS is less than the availablepool of trainedpersonneland the fact that
PS is presentlyconcentratingon generation.

Environment and Safetv

3.23 As in the case of previous Bank-financed WAPDA projects, design and

constructionof the transmissionlineswill minimizeany adverseenvironmentaleffects
on public health and safety. The line would be routed to ensure a distance of about
 - 21 -

200 meters from habitation. Tower designwould incorporateadequateprovisionto avoid

electrocutionof birds and animals. The use of 500-kVlines would also minimizeright-
of-way requirements. The conductorselectionhas been carried out to minimizecorona
discharge and hence the possibility of radio and television interference,audible
noise, and ozone generation.

Risks

3 24 The proposed Project consistsof normal electric utility work entailing no

unusualrisks, and no particulardifficultyis foreseenin its execution. The project
cost estimates and implementationschedule are based on similar work currently in
progress in the country and on contracts let out during the Second and Third Quarter
of 1989, so there should be little risk of substantialcost overrun or of extended
slippage. In addition, provisionhas been made for extra heavy design of insulator
strings and towers near the sea coast. There is, however,the risk that HPC would slip
by at most six months because of delays in financialclosure. The potentialfor this
delay is being minimizedby arranginginterim financingwhile the negotiationsof the
commercial loans are under way to cover the initial payments for the equipment
requiring long lead time to manufacture and commence civil works, and hence
implementationof the HPC would be maintainedin line with the forecasttimetable.

Project Monitoring

3.25 WAPDA will submit to the Bank quarterly reports, covering the work of
consultants,physicalprogress,projectcosts,disbursementsand administrative aspects
of the Project. In addition, it would also submit quarterly and annual financial
reports and other pertinent informationto the Bank. WAPDA would also undertake to
prepare and furnish to the Bank, within three months after the closing date, or such
later date, as will be agreed for this purpose, a Project CompletionReport of such
scope and detail, as the Bank shall reasonablyrequest.

IV. FINANCES

Introduction

4.01 WAPDA's financial affairs are governedby the WAPDA Act which requiresthe
utility to generate sufficientrevenues from electricity sales to cover operating
costs, includingdepreciationand debt service, and achieve a reasonable return on
investment. Under the First WAPDA Power Project (Credit 213-PAK),WAPDA agreed to
achieve a rate of return of 8% on revaluedaveragenet fixed assets in use. However,
because of GOP's reluctanceto revalue assets, this covenant was replaced in FY76,
under the Second WAPDA Power Project (Loan 1208-PAK),by an internalcash generation
(ICG) covenant. It requiredWAPDA to generateannuallyfrom internalsources,30% of
the capital expenditures,averagedover the previous two years and the current year
without taking into account the changes in working capital. In order to ensure that
adequate local funds were available for the implementationof WAPDA's expanding
investmentprogram,the ICG requirementwas raised to 40% in FY80 under the Third WAPDA
Power Project (Credit968-PAK). In each of the followingsix years, except FY85, WAPDA
was able to comply with this covenant. This compliancewas achieved at the expense
of substantialslippages in WAPDA's investmentprogram facilitated,in part, by the
retrospective nature of the ICG formula which encouraged the postponement of
investmentswhen tariff increasesto comply with ICG covenantwere deemed politically
unacceptable. 'twas in the contextof these slippagesand the accompanyingshortfalls
in generatingcapacity that agreementwas reachedwith GOP and WAPDA under ESL I on
 - 22 -

a Rs 30 billion CIP for the period FY86-88. The purpose for agreeing on a CIP for
each year over a three year period, clearly allocating resources to generation,
transmissionand distribution,was to eliminatethe option of postponing investments
in order to avoid tariff increasesto meet the ICG covenant. Furthermore,begin.'Ing
FY89, the formulafor computingICG was changed,to considerthe averageof investments
over the revious,current and ensuingyear as well as the changes in working capital
other than cash. The new formula changed the requirementsfor calculatingICG from
retrospectiveto a prospectivebasis which togetherwith the agreed CIP ensures that
the revenuesneeded for the new agreed investmentprogram are generated.

4.02 To financeWAPDA's investmentprograms,GOP has, in the past extendedrupee

loans to WAPDA. In a move to enhance the Authority's autonomy in managing its
financialaffairs,GOP has stipulatedthat effectiveFY89, WAPDA would not receiveany
rupee loans from GOP's budget. Rather, WAPDA would borrow from the local financial
markets on the strengthof its financialperformance. In view of the limits on the
amounts that WAPDA could borrow and given that the size of the local financialmarkets
is small relativeto the requirementsof the utility,WAPDA would, under the proposed
Rural ElectrificationProject, implement a Financial Management Improvement Plan
(FMIP), includingactions in the areas of consumercontributions,security deposits
and accounts receivables,that would increasethe utility's ICG with moderate tariff
increases. In addition,in order to manage expandinginvestwentsand operationsand
accommodatethe separationof the distributionfunction,the FMIP for WAPDA includes
the strengtheningof its accountingsystemsand redefiningits financialorganization
(para4.17). These actions are discussedunder the relevantheadingsin this chapter.

Electricitv Pricing

4.03 WAPDA's average revenue includes a fuel adjustmentsurcharge (FAS) which is

calculated on the basis of the average fuel cost incurred in the 12-month period ending
two months prior to the month of billing. Prior to FY87, the fuel surcharge was
applicable to all consumer categories other than residential and agricultural
consumers,which account for 351 of total sales. As a result, WAPDA was unable to
fully recover the cost incurred in meeting the demand for electricity. Recognizing
that this adversely affected the availabilityof local resources for the CIP, GOP
extended the applicabilityof the fuel surcharge clause to residential consumers
consumingmore than 300 kWh/month. In order to comply with ICG covenant (para4.06),
WAPDA's tariffswere increasedin each of the years FY86-89by an average of 6.5X per
year in nominal terms, which, togetherwith the increase in revenues from the fuel
surchargehas increasedthe average revenue/kWhfrom Rs 0.74 in FY86 to Rs 0.94 in
FY89. Furthermore,the Bank's projections show that in order to comply with the
financialcovenantduring FY89-93,WAPDA's tariffs need to be increased annuallyby
an average of about 9.4% in nominal terms, representingan annual increaseof 1.8% in
real terms based on an annual average inflationof about 7.6X. In July 1988, GOP
unified the tariffs of WAPDA and KESC as a first step toward fully integratingthe
operations of the two systems and ensuring equity among consumers of electricity
throughoutthe country. The projectedincreasesin average revenueswould raise the
average tariff level for KESC and WAPDA's integratedsystem from 741 of LRMC in FY89
to about 901 in FY93 ard to full parity by FY95, instead of FY92 as was originally
projectedduring the appraisalof ESL II. The delay in achievingparity with LRMC is
largely due to the fact that inflationin FY88 and FY89 was higher than projected.
Actual inflation was 81 and 121 in FY88 and FY89, respectively,compared to the
projected rates of 6.11 and 9.1. Consequently,the levels of real tariffs achieved
in FY88 and FY89 were lower than projected. The Bank's forecastshows that in order
to meet the 401 cash generationtarget for FY90, tariffs should be increasedby 15X
effectiveJuly 1, 1989, in addition to any changes needed to recover nearly 1001 of
 - 23 -

the fuel cost to be incurredin FY90. To this end, GOP has changed,effectiveJuly 1,
1989, the fuel surcharge recoveryformula to enable WAPDA to recover nearly 100% of
the fuel cost. In view of the criticalneed to mobilize revenuesin a timely manner
for CIP, GOP and WAPDA have agreed to implement all necessary actions, including
increasingin electricitytariffs,to enableWAPDA to complywith the 40X ICG covenant
for FY90 as a condition of effectivenessof ESL II (Ln. 3107-PAK). Accordingly,
failure to comply with this conditionof effectivenessof ESL II would result in all
future Bank lending in energy to Pakistanbeing held in abeyance. However, GOP has
increasedWAPDA's electricitytariffsby an averageof 161 effectiveSeptember1, 1989,
which would result in an average increasein tariffs for the whole of FY90 of about
121. Although further details are awaited,preliminaryestimates indicate that the
recent tariff increases,togetherwith the enhancedrecoveryof the fuel cost for FY90
through the change in FAS, would enable UAPDA to comply with the 401 ICG covenantfor
FY90.

4.04 Since the initiation of ESL I, GOP, WAPDA and KESC have taken steps to
rationalizethe structureof electricitytariffs such as broadeningthe applicability
of the fuel surcharge clause (para 4.03), and increasingthe tariff for agricultural
and household consumersby 211 comparedwith an 11 increasefor industrialand bulk
consumers in FY89. As a result, residential consumers who account for 79% of
connectionsand consume 351 of electricitysold, accountedfor 291 of the revenuesin
FY89 compared to 251 in FY88. Similarly,agriculturalconsumerswho account for just
over 201 of the connectionsand consume 211 of electricitysold, accountedfor 151 of
the revenuesin FY89 comparedto 111 in FY88. In contrast,industrial,commercialand
bulk consumerswho account for just over 161 of the connectionsand consume42% of the
electricitysold, accountedfor 481 of revenue in FY89 compared to just over 571 in
FY88. Despite these improvements,there is still, however, a need for an overall
rationalizationof the tariff structure. Therefore,under ESL II, GOP has agreed to
increasethe agriculturaltariffs at a higher rate than for other consumers in FY90
and FY91. Accordingly,during the recent tariff increaseseffectedin September1989
(para 4.03), the tariffs for agriculturalconsumerswere increasedby more than 27%
compared to 141 for resident consumers, 91 for industrialand 151 for commercial
consumers. Furthermore,as a componentof the proposedRural ElectrificationProject,
peak/off-peakpricing would be introducedto the 300 largest industrialconsumers,
which account for about 201 of electricitysales, by providing them with specially
designed m-nters. This would contributesignificantlyto rationalizingelectricity
consumptionduring seasonaland daily peak demanctperiods.

Past Operations

4.05 Financial statementsshowing WAPDA's performanceduring the period FY85-89

are presented in Annex 4.1 and summarizedin Table 4.1.

Tabte4.1: WiPMAs zsratfto Results.

FY85-FY09

FY85 FY86 FY87 FY8 FY89

kWh Generation (N) 18,780 21.055 23,630 27,451 29,084
kWh Sold (M) 13,756 15,504 17,745 20,702 22,221
SystemLosses (t) 27 26 25 25 24
Ave. Revenueper kWh
Sotd(inct.FAS)(Paisa) 64 74 70 83 94
OperatingRev.(RsN) 8,992 11,760 12,588 17,623 21,314
OperatingExp.(RsN) 6,473 7,816 8,800 11,732 13,113
NetOptng.1ncome(Rsh) 1,085 2,213 1,577 2,818 4,394
Int.CashGen.Ratfo (X 37 50 35 44 33
RateofReturnonHist.
j ValuedAssets(X) 12.0 14.8 11.5 14.4 17.3
 - 24 -

WAPDA's electricitygenerationincreasedfrom 18,780GWh in FY85 to 29,084 GWh in FY89,

averagingabout 11.6% annually,as a result of increasesin generatingcapacity from
4,339 MW in FY85 to 6,149 MW in FY89, all of which were thermal.WAPDA's electricity
sales during the period FY85-89 followed a pattern similar to that of generation,
increasingat an annual average rate of 12.71. The higher rate of increase in sales
than in generationwas due to the fact that WAPDA was able to reduce system losses from
27% in FY85 to 241 in FY89 by extendingand upgrading the transmissionnetwork, and
by establishingthe new thermal capacitycloser to load centers. WAPDA's operating
revenues increased from Rs 8,992 million in FY85 to Rs 21,314 million in FY89
representingan average annual increaseof 241, while operatingcosts increasedat an
average annual rate of only 19.31 during the same period. While the greater reliance
on thermal capacity and increases in the prices of fuels caused the fuel costs to
increasefrom 371 of total operatingcosts in FY85 to 481 in FY89, the steps initiated
in FY87 to recover a higher proportionof the fuel costs incurred(para 4.03) was the
major reason for operating revenues increasingat a higher rate than costs. The
proportionof fuel costs recoveredaveraged82X in the period FY87-89compared to 62X
in FY86.

4.06 Comparedwith the 401 ICG covenantagreed with the Bank under the Third WAPDA
Power Project (para4.01), the ICG levelwas 371 in FY85 as a result of actual capital
expendituresbeing larger than planned without correspondingtariff increases. In
FY86, however, in accordancewith the agreementreached under ESL I, initiationof
measures to ensure compliancewith the ICG covenant,includinga 9% across-the-board
increasein tariffsfor all categoriesof consumers,resulted in an ICG level of 501,
but in FY87, the ICG level dropped to 351 despite the broadeningof FAS (para 4.03),
primarilybecauseof a decline in revenuesdue to the introductionof flat rate tariffs
for agriculturalconsumers'/and a lower hydel generationthan forecast. In FY88,
followinga 13.41 tariff increase,the ICG level reached44X. However,for FY89,WAPDA
achievedan ICG level of 331 despitea tariff increaseof 12.81 effectiveJuly 1, 1988.
The primary reason for the shortfallin ICG from the covenantedlevel of 40% is due
to the switchoverfrom the retrospectiveto the prospectiveICG formula (para 4.01).
Under the retrospectiveformula,the average 12.81 tariff increasewould have resulted
in an ICG level of 441 for FY89. In view of the fact that asset commissioningclosely
followedthe CIP, variationsin operatingincomewere the main cause for fluctuations
in the utility's return on historicallyvalued net fixed assets in use, from 121 in
FY85 to a low of 11.51 in FY87 and improvingto 17.31 in FY89.

Consumer Contributions

4.07 During FY89, capital contributionscollected from new consumers to defray

the cost of connectingthem to the system amountedto Rs 1,297 million.The full cost
of connections is recovered from residential,commercial and industrialconsumers.
However,from agriculturalconsumersonly connectionc sts in excess of Rs 30,000, if
any, are recovered. Based on the 27,000 agriculturalconsumersto be connectedto the
systemunder theproposedRuralElectrification Project,WAPDA's unrecoveredconnection
chargesare estimatedat Rs 1.1 billion. WAPDA shouldbe authorizedto annuallyborrow
either from GOP or from a GOP designatedfinancial intermediary,an amount equal to
the cost of connecting tubewells. Thereafter, these connection costs should be
amortized and collected from the consumer over the economic life of the tubewells,

Prlor to the Introduction of flat rate tariffs for agricultural consumers in FY87, the expected
average rvenue per kWh, including FAS,from this category of consumers was 61 paisas in Punjab/Sind provinces
and 47.4 in NWMP/Baluchistanprovinces. Following the introduction o,fflat rate tariffs. the corresponding
average revenue/kWi realised, wa 27.1 palsas and 11.8 paisas, respectively, resulting in a revenue reduction
of about Rs 550 millon.
 - 25 -

which is about seven years. Such a measure would: (a) not be a burden on the
agriculturalconsumer; (b) provide necessary funds to WAPDA to in fact carry out the
tubewellelectrification;and (c) eliminate the financialburden on WAPDA. GOP and
WAPDA have agreed under the proposedRural ElectrificationProject to be presented to
the Board in FY90, to take, by July 1, 1990 the necessarymeasures to enable UAPDA to
recoverthe connectioncosts from agriculturalconsumersover the economiclife of the
tubewell.

CustomerSecurityDeposits

4.08 Customersecuritydeposits should be r-lated to the current average billing

rates for each categoryof consumers. WAPDA's securitydeposits,which had not changed
since 1969, were adjusted in 1988. Despite this adjustment,the levels of security
deposits do not reflect current rates of billing. If the security deposits were
adjusted to reflect the current average billing, the incrementalcash flow to WAPDA
would be about Rs 500 million during the SeventhPlan at the projected tariff levels.
WAPDA has agreed, as a part of the FMIP, under the proposed Rural Electrification
Project to be presentedto the Board in FY90, to review the securitydeposit rates at
the end of each financialyear and adjust them to reflect the ensuing year's average
billing for each category of consumers.

AccountsReceivable

4.09 Accounts receivableas of March 31, 1989, amounted to Rs 4,510 million and
Rs 3,285 million of these are consideredoverdue, i.e. they are outstandingfor more
than three months. Of the overdue amounts,Rs 1,568 million are from GOP departments
and agencies and the balance of Rs 1,717 million are from private consumers.
Receivablesfrom private consumersrepresentabout two months' average sales and from
GOP departmentsand agencies,2.7 months'average sales. Under the Fourth WAPDA Power
Project (Loan 2499-PAK),GOP is to ensure that receivablesfrom its departmentsand
agencies are not more than three months' average sales to them. Overall, accounts
receivablerepresent2.2 months' sales which is satisfactory,but a large portion of
the outstandingaccounts is overdue and may be uncollectibleas summarizedin Table
4.2.

Table 4.2: WAPDA's Aping of Receivablesas of March 31. 1989

Up to 3-6 6 mos. 1-3 over

3 mos. mos. 1 year years 3 years Total

Rs Million 1,225 725 757 878 925 4,510

Z of total 27 16 17 19 21 100

WAPDA should identify and write-off the receivablesdeemed uncollectibleand those

receivablesoutstandingfor more than three years. WAPDA has agreed, as part of the
FMIP under the proposedRural ElectrificationProject to be presented to the Board in
FY90, to carry out, by December31, 1990 a comprehensiveaging analysisof its account,
receivablesand by June 30, 1991, adjust its AccountsReceivableon its Balance Sheet
to reflect only those receivablesthat are outstandingfor less than three years and
those deemed collectible. In addition.GOP agreed to cause all federal and provincial
governmentalagenciesand departmentsto settleall bills for the supply of electricity
by WAPDA within three months of receipt of bills (para 6.04(a)).
 - 26 -

4.10 At the end of FY89, WAPDA's debt/equityratio was 58/42 comparedto 52/48 at
the end of FY85 due to large investmentsduring the per'od FY85-89being financedfrom
debt.Despite the deteriorationin the debt/equityratio, the capitalstructureremains
satisfactory.Since FY88, WAPDA's local debt 4-s comprisedfundsborrowed throughthe
issuanceof bonds in the local financialmarkets with five-yearmaturities. Through
such bond issues, WAPDA was able to raise about Rs 3.1 billion in FY88 and Rs 5.7
billion in FY89. As these bonds can be encashedprematurelyand WAPDA had not set up
a sinking fund to retire these bonds, the National DevelopmentFinance Corporation
(NDFC), the manager of the FY89 Bond Issue, has retained Rs 500 million from the
proceedsof these bonds. These funds are being utilizedby NDFC to discount the bonds
for any bondholder that wishes to encash the bonds prematurely. Such a mechanism
providesliquidityto the l-ndholders,giving hope to the possibilityof a longer term
maturity for any future instrument issued on the domestic financial markets. In
addition,WAPDA has now set up a sinking fund to avoid steep increases in tariffs in
the year of retiring the bonds, since the repayment of bonds is a part of the debt
service for that year. Nevertheless, in view of the fact that bonds worth
approximatelyRs 8.8 billion are outstanding,the funds set aside for carrying out
discountingof bonds could become insufficient. In addition, in order to improve
WAPDA's financialdisciplineand mitigate the need for sharp tariff increases,there
is a need for regular monitoringof the amountsset aside in the sinking fund. WAPDA
has agreed, as part of the FMIP under the proposedRural ElectrificationProject to
be presentedto the Board in FY90, agreed to review with the Bank, not later than June
30 of each year beginning with 1990, the arrangementsfor setting aside annually,
amounts in a sinking fund to be used to retire the bonds issued by WAPDA in FY88 and
FY89.

Capital Expenditure Proxram and Financina Plan

4.11 WAPDA's capital expenditureprogram for the period FY90-95, covering the
project implementationperiod together with the annual phasing of expendituresfor
ongoingand new projectsis presentedin Annex 4.2. The program and proposedfinancing
plan are summarized in Table 4.3 below. The first three years of this program
constituteCIP agreed to under ESL II.

Table 4.3: WADAs Cmital ExmenditumPruri mid Fimcim Reminmnts CFT90- FY95)

Rs Million Us#Mition X
Recuirements
Capitat Investment:
Generation 75,639 3.494 52
Transmission 21,377 987 15
Distribution 32.U4 1.498 22
Subtotal 129,U0 5,979 89
WorkingCapital Increase , 706 1
Total Requirements t44.727 6.685 100
Sources
Gross Intemal Sources 14,067 6,654
Less: DebtServiceL 79.292 3662
Net Internal CashGeneration 64,775 2.992 45
Borrowings:
Local Loans 28,615 1t322 20
ForeignLoans 47,830 2,209 33
ProposedLoan 3.51 62 2
Total Borrowings 79,952 3,693 55
Total Sources M.= 68 100
/a Includes interest during construction ard an aljt payment
of Rs 20 million paymentto GOP
for assets earlier transferred to WAPDA.
 - 27 -

4.12 The Bank has reviewedthe investmentand financingplan for its content,size
and allocationand found it satisfactory. However, there is a need for an annual
reviewwith the Bank of WAPDA's investmentprogramduring the SeventhPlan. Therefore.
WAPDA agreed to review before May 15 of each year. its capital expenditureorogram and
financingplan for the ongoing and the ensuingyear and agree with the Bank on steps
necessarv for implementation(Rara 6.01).

Future Finances

4.13 Forecastbalance sheets, income statementsand sources and applicationsof

funds statementsfor the period FY90-95are shown in Annex 4.1. A summary of forecast
operatingresults for this period are presentedin Table 4.4.
Table 4.4: VAPDA's Forecast ocrtins Results Fr90-95

FY90 FY91 FY92 FY93 FY94 FY95

Generation (GMh) 33.806 33.711 38,293 43,294 50,151 53.767

Sales(G01h) 26,030 25,957 29,486 33,336 38,616 41,401
Ave. Revenueper
kWhSold (poise) 112.8 120.5 129.8 150.9 165.5 172.9
OperatingRev.(RsN) 29,914 31,905 38,963 51.045 64,720 72,496
operatingExp. (RsN) 17,442 18,035 24,193 33,635 42,231 49,215
Net Income(RsN) 8,175 8,887 9,742 12.459 17,726 18,287
Int.Cash Gen.RatioCX) 40.8 40.0 40.0 40.0 40.0 40.0
Rateof Returnon Hist.
ValuedAssets(X) 22.0 20.7 19.0 19.5 21.9 19.3
Debt/Equity Ratio 55/45 52/48 49/51 45/55 44/56 43/57
DebtServiceCoverage 1.6 1.5 1.5 1.6 1.9 1.8

4.14 UAPDA's financialprojectionsare based on forecastincreasesin electricity

generation together with purchases from private sector power plants (Annex 4.3).
Electricitygenerationand sales are forecastto increaseat an average annual rate
of 10.5%. Under the ongoing Bank Group operations,WAPDA had agreed that it would
generateeach year from internalresources40% of its average capital expenditures.
Therefore,in order to ensure that sufficientresources are available to implement
WAPDA's capital investmentprogram,this covenantwould be repeatedunder the proposed
Project,which providesfor WAPDA to generatefor each year from internalsources 40%
of its capital expendituresaveragedover the Rrevious.ongoing and one ensuing year
(Rara 6.04(b)).

4.15 In order to ensure that coverageof WAPDA's debt service by gross internal
cash generation continues to be satisfactory,the debt limitation covenant under
ongoing Bank Group operationswould be repeatedunder the proposed Project, which
provides that WAPDA would consult with the Bank. should it incur new debt that would
result in its gross internal cash generationbefore debt service (includingpayment
to GOP) fallingbelow 1.5 times the debt service requirement(Para 6.04(c)).

Accountingftstams

4.16 WAPDA has about 400 accountingunits distributedover a wide geographical

area. To cater to this large number of accounting units, WAPDA has adopted a
K decentralized,accrual-basedaccountingsystem, designedand implementedduring FY82-
84 by consultantsunder the Second and Third WAPDA Power Projects (Loan 1208-PAKand
Credit 968-PAK). While the accountingsystem is sound in structure,the utility is
not derivingfull benefits from the system primarilydue to: (a) non-availabilityof
trained accounting personnel required to maintain the decentralized system,
 - 28-

particularlyin the distribucionareas; and (b) the manual system of maintainingthe

accountswhich causes significantdelays in the flow of accountinginformationthrough
WAPDA's hierarchy. In order to address the lack of trained accountingpersonnel in
the distributionarea, WAPDA is implementinga comprehensivetraining program under
the USAID-financedDDP (para 2.07) with the help of a consortiumof US consultants
referred to as Principal Technical AssistanceTeam (PTAT). Furthermore,under the
ongoing Fifth WAPDA Power Project (Loan 2556-PAK),WAPDA is implementinga training
program for the remaining accounts personnel in Generation, Transmission and
Headquarterswith the assistanceof ElectricitySupply Board of Ireland under Bank
financing. As regards automationof the accounting system, the USAID-financedDDP
would provide the necessary assistance to automate the accounting and financial
informationsystem in the distributionarea. The automation of the accountingand
financialinformationsystem for the generation,transmissionand other functionsat
headquartersis a part of the FMIP under the proposed Rural ElectrificationProject
to be presented to the Board in FY90. Under this proposed Project,WAPDA agreed to:
(a) recruit by September 30, 1990, consultantswhose qualification,experienceand
terms of referenceare satisfactoryto the Bank Group, to exist WAPDA in the design
of the automatedaccountingand fisancialinformationsystems;(b) completei.ndfurnish
to the Bank Group, by September30, 1991, the design of the automatedaccoux.tingand
financialinformationsystems;and (c) implementthe automatedaccountingand financial
informationsystems by September 30, 1992.

FinancialOrganization

4.17 The organizationchart of the financial function of WAPDA is presented in

Annex 4.4. WAPDA's financialfunctionis headed by Member Finance,while the day-to-
day management of the financial function is the responsibilityof General Manager
(Finance),assistedby 10 senior finance managers and their staff. The appointment
of a GeneralManager (Finance)in compliancewith a conditionof effectivenessfor the
Fourth WAPDA Power Project (Loan 2499-PAK),has enhanced the role of the Finance
functionwithin the organization.However, there is a need for a detailed review of
the financial organization in order to: (a) accommodate the separation of the
Distributionfunctionwhich would entailenteringinto commercialarrangementsfor the
sale of electricitybetweenthe Generation/Transmissionand the Distributionfunctions;
(b) address the problem of an excessivenumber of senior managers (10) reporting to
the GeneralManager (Finance)which has reducedfinancialcontrol in general;and (c)
segregate the complex tasks of accounting and financial management (including
managementof cash, short and long-termdebt and financialplanning),particularlyin
light of the recent mandate from GOP that WAPDA should mobilize all local resources
on its own for development. WAPDA has furnished a proposal for reorganizingthe
finance functionwhich was reviewedby the Bank and found satisfactory. In view of
the need to have an appropriatefinancialmanagementstructure in place and operate
more autonomously,WAPDA agreed, as a part of the FMIP of the proposed Rural
ElectrificationProject to be presented to the Board in FY90, to implement the
reorganizationplan for the finance functionby December 31, 1990.

InternalAudit

4.18 Although WAPDA has a large Internal Audit Department, its systems and
proceduresare outdated and its responsibilities have not been enhanced to suit the
utility'srecent growth in size and complexity. In recognitionof this, WAPDA, under
financingfrom USAID, has engaged consultantsto develop a modern internalauditing
system. The consultantshave completedtheir work and the draft final report is under
review by WAPDA and the Bank. In order to strengthen the internal audit function,
which is fundamentalto the evaluationof the utility's internal control system as
 - 29 -

well as to the finalization of the external audit of WAPDA within a reasonable

timefran. WAPDA has agreed, as part of the FNIP of the proposed Rural Electrification
Project to be presented to the Board in FY90, to furnish to the Bank by June 30. 1990,
a datei and monitorable action plan to implement by June 30, 1991, the agreed
recommendationsof the Internal Audit Study.

xternal Audit

4.19 The responsibility for auditing WAPDA's accounts rests with the Auditor
General of Pakistan (AG) who dischargesthis responsibilitythrougha DirectorGeneral.
The Director General, WAPDA Audit, is assigned to WAPDA on a permanent basis together
with a staff of about 400. WAPDA is required by the WAPDA Act, which mirrors the
Bank's audit requirements,to finalize the annual accountsand have them auditedwithin
six months of the end of the financial year. However, the inordinate delays in the
flow of financial informationand the absence of an effective internal audit system
which is needed to support the external audit in view of the geographicalspread and
magnitudeof WAPDA's operations,precludethe fulfillmentof the WAPDA Act stipulation.
At present, the AG's PreliminaryAudit Observationsare issued within six months of
the end of the financial year, together with the utility's certified financial
statements. With the improvement envisaged in the flow of financial information
through the automation of its accounts system and financial information (para 4.16)
and the strengtheningof the internalaudit function, it is expected that WAPDA would
be in a position,beginning FY92 to have its finalizedannual accounts audited within
six months of the end of the financialyear. Nevertheless,in order for the Bank to
preserve the right to request an audit of WAPDA's finalizedaccountswithir.six months
of the end of the financialyear, the Bank's standardaudit covenantwhich is included
under all ongoing WAPDA Power Projects is repeated under the proposed Project.
Therefore. WAPDA has ag-reedto have its finalized accounts audited and furnished to
the Bank as soon as available,but in any case not later than six months after the end
of each such yea. (gara 6.04(d)).

Insurance

4.20 Prior to 1977, WAPDA placed its insurance with the National Insurance
Corporation of Pakistan, a Government-ownedinsurance company. Due to difficulties
in settling its claims with this agency, WAPDA elected to insure its assets under a
self-insurancescheme. This scheme was established in 1981 with the assistance of
actuarial consultants,and covers substations,power houses, machinery and workshops
against loss from fire and machinery breakdown. Since that time, WAPDA's assets have
increased f,urfold, and therefore there is a need for a new actuarial study to be
conducted to determine rates of annual contributionsto the self-insurancescheme in
order to set aside sufficient funds for covering losses from fire and machinery
breakdown. As part of the FMIP under the proposed Rural ElectrificationProject to
be presentedto the Board in FY90. WAPDA agreed to: (a) appoint,by no later than June
30, 1990, consultants whose qualifications,terms of reference and experience are
satisfactoryto the Bank to complete an actuarial study for the utility by March 30,
1991; and (b) implement the recommendationsof the study by June 30, 1991.

V. ECONOMIC JUSTIFICATION

A. VAPDA's Actual and Fogecast ElectricitySales

5.01 WAPDA's electricity sales increasedover the past decade at an average annual
rate of about 12X, from 6,490 GWh in FY78 to 20,702 GWh in FY88. This relativelyhigh
rate of growth is attributable to: (a) the unprecedented growth in demand for
 - 30 -

electricityby the industrialsector, particularlythe newly establishedelectricity

intensiveindustries;(b) the continued,albeit declining,worker's remittancesfrom
the Gulf countries,whicn supporteda buoyant demand for electricityby the household
and conmercialconsumers;(c) the rapid conversionof tubewellsfor irrigationpumping
from diesel to electricity;and (d) until recently, the inadequateadjustments in
tariffsrelativeto the increasesin the generalprice level, which further stimulated
the demand for electricity. A summary of the actual and projected electricitysales
for the period FY78-9b is presented in Table 5.1 below.
Tabte 5.1: MM$'. Actil d Forecnt Electricity Sales f -S

Actuat FarlAt
vAaae AnnualGrowthRate (X} Averae AnnualGrowthRate (1)
F178-88 F-"
Energy Sold 12.3 10.5
Residentlot 20.1 14.1
Cmwercal 13.2 12.7
Induatrial 9.1 9.2
AgrIculture 9.9 5.6

5.02 The forecast of electricity sales is based on a projected growth of the

economy. GDP is projected to increaseat an average annual rate of about 5.51 up to
FY92, 61 between FY93 and FY95 and then resuming its historicaltrend of about 6.51.
As a result,WAPDA's sales are expectedto increaseat an averageannual rate of 10.51
between FY89 and FY98 which is lower than the 12.31 experiencedbetween FY78 and FY88.
Moreover, as generatingcapacityconstraintsare likely to persist until the end of
the Eighth Plan (FY94-FY98),GOP intends to minimize their adverse impact through
better demand management,includingdirect curtailmentof supply to various cons-1mer
categories and introductionof load management devices to rationalize consumption
during peak periods and implement measures to reduce transmissionlosses. These
measures,togetherwith the rationalizationof the level and structureof tariffs,as
well as the implementationof conservationmeasuresagreed to under ESL II are expected
to bring about a reductionin the rates of growth of electricityconsumptionby the
variousconsumercategories,with the exceptionof the industrialconsumerswhose rate
of growth would remain at its historicallevel of 9.21.

B. Least Cost Alternative

5.03 The proposed Project has been prepared by WAPDA with the assistance of
consultants, NESPAK. The options considered by WAPDA for the HPC-Jamshoro and
Jamshoro-Lahorelinesincludedalternativerouting,voltagelevels,line configuration,
etc. The analysis,which was reviewedby the Bank and found satisfactory,showed that
the selectedlines would effect evacuationof power at least cost in terms of capital
and operatingcoste and would minimize transmissionlosses.

C. InternalEconomicRate of Return

5.04 Although the proposedProject is essential for the optimal operationof the
power system, its benefits cannot be isolated from those required for the overall
development of the subsector. Consequently,the return on the investments to be
undertakenby both WA2DA and PS during the period FY90-95, is taken as a proxy for
the return on the proposedProject. The internaleconomicrate of return (IERR) for
the investmentprogram is about 81, based on measurable costs and benefits. The
measurablecosts include: (a) capital costs of the generation,transmissionand
 - 31 -

distribution development program to be implemented by WAPDAand the new generating

capacities to be brought onstream by PS, both of which constitute the CIP for the
Seventh Plan and the first two years of the Eighth Plan; (b) operationand maintenance
costs, which were estimated about 3X of the capital costs; and (c) incrementalfuel
costs,which were valued at theirrespectiveborder prices. Local costswere expressed
in theirequivalentborder prices using appropriateconversionfactors. The measurable
benefits attributableto the investmentprogram are expected from incrementalsales
of electricitywhich were valued at WAPDA'sprevailingaverage revenueof Rs 1.07/kWh,
which is taken as a proxy for the consumers'willingnessto pay. The benefits were
expressed in economic terms by using the standardconversionfactor of 0.85.

5.05 The IERR of 8X which was based on the prevailing tariff is lower than the
opportunity cost of capital of about 10. This is a reflection of the deviation
between the prevailing tariff and the economic cost of supply (LRMC) rather than a
measure of the economic merit of the proposed Project. WAPDI.'sprevailing average
revenue reflectssustainedincreasesin tariffswhich were initiatedunder ESL I, and
reinforcedthroughproject lendingthereafter. These increaseshave raised the average
revenue from 521 of LRMC in FY85 to 741 in FY89. Under ESL II, GOP has agreed to
continue the adjustmentof tariffs in order for WAPDA to meet from internal sources
40X of CIP for FY89-93. These increaseswould amount to an average annual rate of
about 10, which would raise the average revenue to about 90% of the LRMC by FY93.
If the average revenue resultingfrom tariff increasesagreed under ESL II are taken
as a proxy for the consumers'willingness to pay and hence, the estimationof the
measurablebenefits associatedwith the proposed Project,the IERR would increaseto
142 which is a better measure of the economicmerit of the proposedProject. Details
relating to the assumptionsand calculatignsof the IERR are presented in Annex 5.1.

Rationale for Bank Involvement

5.06 The proposedProjectis an integralpart of the ESL II program,which provides

the umbrella of priority investments and policy reforms to be impleriented during the
period FY89-93. ESL II is aimed at assisting GOP in implementing LES and achieving
a crucial objective of a medium-termmac;oeconomicframeworkagreed to with the Fund
and the Bank, that of reducing the fiscal deficit to sustain the economy's growth
momentum and control inflation. The Bank's support of this project is to be viewed
in the context of its continuingrole in both promotingprivare sector involvementin
energy developmentand rationalizinginvestmentsin the public sector.

VI. AGREEMENTSREACHED AND RECOMMENDATION

6.01 During negotiations,WAPDA has agreed to review,before May 15 of each year,

its capitalexpenditureprogramand financialplan for the ongoingand the ensuingyear
and agree with the Bank on steps necessary for implementation(para 4.12);

6.02 The followinghave been set as conditionsof effectivenessof the proposed

Loan:

(a) approval by ECNEC of the PC-Is for all componentsof the proposed Project
(para 3.09);

(b) appointmentof internationally experiencedconsultantsto assist and advise

WAPDA in the design and implementationof lines in areas of high moisture
with salt and dust content (para 3.12); and
 - 32 -

(c) issuanceof bidding documentsfor the supply of at least 25X of requirements

for towers and earthingmaterials (para 3.13).

6.03 Furthermore,submissionby theborrowerof evidence,satisfactoryto the Bank,

that all necessary arrangementsto secure preliminary financialcommitmentsfor the
constructionof HPC have been completedis set as a conditionof disbursementfor the
HPC component (para 3.16).

6.04 In addition,the followingcovenantswhich are in effect in ongoing projects

have been agreed to under the proposedProject:

(a) GOP to cause all Federalat.dProvincialGovernmentalAgenciesand Departments

to pay all bills for the supply of electricityby WAPDA within three months
of the receipt of such bills (para 4.09);

(b) WAPDA to take all necessary actions to generate each year from internal
sources 401 of its capital expenditaresaveragedover the previous, ongoing
and one ensuing year as stipulatedunder Loan 2499-PAK (para 4.14);

(c) WAPDA to consult the Bank should it seek to incur new debt that would result
in WAPDA's internalcash generationbefore debt service and payment to GOP
falling below 1.5 times the debt service requirement(para 4.15); and

(d) WAPDA to submit to the Bank its finalizedaccountswithin six months of the
end of the financialyear (para 4.19).

6.05 On the basis of the projectjustificationand the agreementsrexchedwith GOP

and WAPDA, it is recommendedthat the Bank support the proposed Project with a loan
of US$162 million to WAPDA with GOP as the Guarantor,for a term of 20 years, including
a five-yeargrace period.
 PAKISTAN'
PROJECT
EXTENSIONANDREINFPORCEMENT
TRANSMTSSION
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 -34- Annex 2.1

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 -35-
Annex 3.1
Page 1 of 4

PAKISTAN

TRANSMISgIONEXTENSIONANp REINFORCEMENT
PROJECT

ProjectDescrintion

1. The Projectconsistsof four components: (a) two 500-kVtransmission

lines from HPC to Jamshoro; (b) a third 500-kV transmissionline from Guddu to
Multan and a second 500-kV line from Multan to Lahore via Gatti; (c) substation
extensionson the third Guddu to Lahore line; and (d) consultingand training
services. A single-linediagram indicatingthe major physicalcomponentsof the
transmissionsystem and the Project are shown at the end of this Annex.

A. HPC to JamshoroTransmissionLines

2. This componentwill includetwo single-circuit500-kV transmission

lines, 200 km cach, from HPC, which is to be built ar4 operatedby the private
sector, to the existing500-kV substationat Jamshoro. The lines would provide
servicewith the single failurereliabilitycriterionappliedto the entire 500-
kV transmissionsystem. The averagespan between towerswill be 350 meters, and
the conductorconfigurationhas been selectedas a 4-conductorbundle per phase,
with an appropriatespacing between phases noted below and clearance between
conductorsand tower steel members of 4.00 meters. High density and mild steel
will be used in the fabricationof the towers (with a yield strengthof 55,000
and 44,000 psi respectively). The two HPC to Jamshoro lines will require the
erectionof about 1150 towers divided into suspensionand angle-typetowers in
proportionof 92X and 8Z respectively,and the installationof about 3500 strings
of insulators. Due to the humid and salty conditionsin the first 140 km of the
line that lies near the ocean, special considerationhas been given to the
requireddesign of the insulatorstringsto prevent flashovers. Whereas a creep
path length of 3.94 cm per kV is allowed under normal air conditions,a higher
creep distanceis requiredunder heavy pollutionas encounteredin desert areas
near the sea. Thus, for the first 140 km from HPC, 52 fog-type insulators(54
when required) will be used per string instead of the normal 29 fog-type
insulatorsor 38 standardinsulators. Similarly,in the remaining60 km segment
of the line, where pollutionis lower but still higher than normal, 41 fog-type
insulators (43 when required)will be installed. This leads to the necessity
of heavier towers to sustain the longer and hence heavier insulator strings.
In the first line segment of 140 km the phase spacing is about 13.5 meters and
the average weight of a suspensiontower is about 10.5 tons and of an average
angle tower 18.0 tons. In the second line segment of 60 km the phase spacing
is about 11.2 meters and the towers will weigh about 10.0 tons and 17.0 tons
respectively.

3. These figures are about 20X higher than normal weight towers. In
addition,in order to minimizethe corrosionand erosioneffect of the pollution-
carryingwinds specialprovisionfor rubber paint coating on the towershas been
made. V-stringswere choren as theirperformanceunder contaminatedconditions
is superior to that of vertical strings for the followingreasons: (a) tests
have shown that the amount of contaminationdeposit is 80X of that of a vertical
string; (b) higher washing performancecan be achieved; and (c) slurry spray
tests have demonstrateda higher flashover withstand capability. Although
 -36-
Annex 3.1
Page 2 of 4

material-wise,the V-string configurationrequirestwice as many insulatorsas

the vertical string configuration,t-hisadditional cost is partly offset by
savings in structureheight, spread of x-arms and right-of-waywidth.

4. The selectionof the line routewas made after a series of analytical

studieswere performedto examineload flow, angulardisplacement,and stability
studies of the 500-kV transmissionsystem under a variety of fault conditions
for two alternatives. AlternativeI consistedof a connectionHPC to Jamshoro;
Alternative II consistedof a direct connectionHPC to Dadu. A review of the
technical studies shows that alternativeI generallycauses a smaller angular
displacementbetween HPC and Tarbela, leads to line overloads that are within
the thermal limits of the unbroken line, and causes a smaller swing in the
generatorsunder fault conditionsthan alternativeII. In addition,Alternativei
I is shorter and less expensive than Alternative II. As a result of thes.e
studiesAlternativeI was selected.

B. Third Guddu to Multan and Second Multan to Lahore TransmissionLine

5. The expansion of the 500-kV transmission system north of Guddu

provides for an additional500-kV transmissionline as follows:

(a) The Guddu - Multan segment will follow approximatelythe existing

path of the two 500-kV lines Guddu-Multanon the west bank of the
Indus river, crossing the Indus and Jhelum river before reaching
Multar&. It will be about 312 km in length, and would require the
installationof about 910 steel towers, (4-bundleper phase) Drake-
type conductorand associatedhardware,insulatorsand communication
equipment.

(b) The Multan - Gatti - Lahore segment will follow the route of the
first 500-kV line to Gatti on the north side of the Ravi river,
where a major 500-kV substationexists connecting to the Tarbela
hydrostation. This segment,which creates a 500-kV ring with the
second 500-kV line through Sahiwal for greater reliability and
economy, would be about 300 km in length. It would require the
installationof about 875 steel towers and associatedhardware, (4-
bundle per phase)Drake-typeconductors,insulatorsand communication
equipment.

C. Substationson the Guddu to Lahore Line

6. The 500-kV substationfacilitiesof the Project consist mainly of

the equipmentshown in the Table 3.1 below.
 -37-
Anngx 3.1
Page 3 of 4

Table 3.1: 500-kV SubstationExtensionEguip-ment

No. of No. No. of

Lines to be of No. of Shunt Circuit
Substations Terminated Bays Reactors^/ Breakers

Guddu Extension 1 1 1 3
Multan Extension 2 1 1 3
Gatti Extension 2 1/3 1 1
Lahore Extension 1 1 3

will be establishedafter
al Tentativerequirement. Actual requirement/rating
detailed studies.

7. Extensionof existingsubstationsat Guddu,Multan,Gatti and Lahorewill

take advantageof existinginfrastructurefacilitiesand will add the necessary
additionalworks and equipmentto accommodateconnectionswith the third line,
500/200-kV transformers and 220-kV facilities, compensation reactors, and
monitoringand control equipment. The 500/200-kVtransformerswould consist of
three single-phase150-MVAunits, making a bank of 450 MVA. Similarly,the 500-
kV reactors would consist of single-phase shunt reactors. The 500/220-kV
facilitiesat Guddu, Multan, and Lahore are provided under the ongoing WAPDA-V
transmissionproject (Lr..2556-PAK). The protectionscheme for the lines would
be based on two main protection systems and one back-up. Fault location and
oscillograph facilities would be provided for analyzing the faults. The
telecommunicationssystem would use power line carrier (PLC) using up-to-date
solid state and integratedcircuit technologywith a frequency range of 50 to
500 kHz.

8. The selectionof the third Jamshoro-Dadu-Guddu-Multanline of which the

proposed Project is part, was made after an alternativeroute was considered.
In a study dated June 1988, WAPDA consideredthe technicalmerits of utilizing
an alternative route from Hab Chauki to Multan via Khuzdar and Quetta. The
analysisof this proposalconsistedof load flow studiesto determinepower flows
from this diversion of the 500-kV line from the main stream of 500-kV network
planned from Jamshoro to Guddu to Multan. This study concludedthat there are
no technical gains in diverting the 500-kV line from the mainstream. An
additionalargumentagainst this alternativeroute was the difficultyof access
during constructionand during operationand maintenanceof the line.

D. ConsultancvServicesand Training

9. This component will be required to: (a) assist WAPDA in the design,
engineering and construction of the transmission lines and substations;
(b) provide an independent review of line design by expert consultants;
(c) provide consultingservicesrequiredto solve difficult or unique problems
such as the high pollution levels in the Karachi area; (d) assist WAPDA to
install and operate up-to-datemonitoring systems of the transmissionsystem
includingthe use of advancedsensors,displayand recordingsystems;(e) assist
 -38-
&nnx 3. 1!
Page 4 of 4

WAPDA to acquire from the internationaland local markets and implementup-tc-

date computer-based methods of transmission system analysis operation, fault
detection,protectionand maintenance,thus reducing line downtime and losses
and leading to higher reliability,efficiency and economy; (f) train WAPDA
personnel in modern methods of transmissionsystem planning, operation and
maintenancein foreign facilities;and (g) continueWAPDA's trainingprogram in
maintenancewith live line workingequipmentand proceduresin foreignfacilities
having the requiredexperienceand equipment,in order to minimizemaintenance
outages.

;
 PAKISTAN
PROJECT
TRANSMISSIONEXTENSIONAND REINFORCEMENT
SIngll Une Diagram

LAHORE SAHIWAL HAS RIVERSITE

TAREELA A4180 NW

482 17 178 I7T 17T 482 43

iw
mw mw
N @W
mw h
| dw am

~~~
4m ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ S

4a *nI
t Q
_ ExEdt~w ct8zder

i
44 4 r v=evrvfii " Rf p*

~~
x xx ~ ~ ~ ~ ~ ~ ~ ~ m~0

' GUDDU DADU ' |w

~~~GATT-ASsALA.SAD
J
THEPROJECT
X

...
~~~~~~~~~~~~~~~~~~~~~~~~~
 1111S113
7iiislISSIOI111115101
130miIIocmllt PROJICt
CostEstiute 1/
Project

(IslIllios. (US$llio)
-----------------------------------.- .. ... .... .... .................. ................................. .........
..............
.....

IC- oeldd-kltua- Isg'g,Coault IPC- Guidu-Iltu- bgma,Couelt

Costllemeat t.L. Lakor t.L. Substatiousaut TralloI
Jamhoro Total Jamehoro
t.L. Lahore
?.L. SubstatiosoldTraiagls Total
...----- -----.. ::::::::
::: :::: ::::::::::: :
I. ladA1cqulatlot 21.3 30.6 5l.9 1.0 1.1 0.0 0.0 2.4
3. Iquipast 0.0 0.0 0.0 0.0 0.6
Iqlpat
Coaatructo"m 1,615.2 2,123.4 1,241.0 5,042.6 77.4 98.1 51.5 0.0 232.0
Cean)ltulpet U3.0 134.5 0.0 217.5 3.8 6.2 0.6 0.0 10.0
. ................ -- - - -- - - -- --.- - - - - - - - . . .. - - - - - - . . . . . .

SubtotalCIqip
et 1,156.2 2,257.9 1,244.0 0.0 5,260.1 81.2 104.3 57.5 0.0 213.0
C. Ereetiom
madClivilorkt 2U.? 221.1 30.0 539.8 13.3 10.2 1.4 6.0 24.0
9
3.Ilmerilg aiddubolatrtlot 6.0 0.0 0.0 448.6 448.6 0.0 0.0 0.0 20.7 21.1
1. Tran
lulg 78.0 7J.O 0.0 0.0 0.0 3.6 3.6
I.Other
kpiig 31.3 60.0 0.0 116.3 1.7 3.? 6.0 0.1 5.4
.... .. ..... .... ...... .... ... --- ... --- ... ---

14e Cost
Total 2,101.5 21,589.6 1,214.0 526.8 6,914.1 91.2 119.6 53.1 24.3 361.0
.............. ---- --- --- ... --- -- ---- .... ---- .... ....
6.hpiwcal Comtiegeaosiu 102.3 123.9 63.1 26.3 316.2 4.1 5.7 2.9 1.2 14.6
t. trlie Ctoaitgemoisa 405.7 199.6 344.1 141.1 1,697.1 16.1 36.9 15.5 6.1 11.4
------------ ----- ...... ...... ..... ..... ..... ... .. . ... ..
TOTAL COSt
mmOJICT 2,612.53,513.1 1,632.4 700.0 1,508.0 120.1 162.3 77.1 32.3 313.1
T?as 1,11l.6 1.397:1 751.1 3,321.3 54.3 64.6 31.8 0.0 153.7
1oreigkcbage 1,135.0 1,3714.4 835.2 99.4 3,494.0 52.4 63.5 40.9 4.6 111.1

1/ Izhebme
nrt: 21.?.h/ItS
3owe.ber3. 1,9
w
 PAKISTAN
TRANSIMSSION EXTENSIONAND REINFORCEMENTPROJECT
HPC - Jamshoro 500 KV TransmwlaslonLines (LUh I & U)
nImplementation Schcdul
_ 1989 1990 199&1 1992 19.

ROUTE SLuCTION&SURVEY LAND LIE I 1.O.W I

ACQIIS TON., SO IUVEST & FDO DESIGN I I F

TOWER DESIGN AND TESTING

STEEL TOWERS T

CONDOUCTOR.
S#eLWWM a
ASCESSORES& NPO I

GENERALFELD EQUFKGEtdT.

LIE COE4STMRJCTIO
a SOE SSININ LIE

ILTNA
LI
TERNJAnmASHORO)

ENDOF ATMTY UNEI so 90 OPEO FBN 50f POOUNIO

LI ENDOF AClVETY
L IEI VAAFO E wR
19 - -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~KW59
TD AV C RA11A81R3BW40l
Tr IDW@ OEAQTM PAOMAUACt CM000OKO
BP eM)mao&e BSUPAAFN S MMWE QPMN RCFAT
 PAKISTAN
TRANSMISSIONEXTENSIONAND REINFORCEMENTPROJECT
Ouddu - Mudtan - Gatti - Lahor* Lhw
_hkUo entation Schedu_
1990 11991t 1992 1993 1964
ACTMrY JIFIM4A^M|JIJI
DESCRTION 180N
a0 IDJ|F||MIA
|l|^810NlXJ
IJi IF
|M|A
|A|^||0N"XJ
MJ|J IFMA
|"^"|J
J|^8a
HE |J AlS|O|N
mJ ~IF|AMSJ

AOCA.TIC
GMalW
INVESTIi!i:ION H E l1
PRCFIEIDEN T j 68A$ MM tl I ___ _1_ FI 1

-LTA GATTIW

TOWWERO
SOOTEE
I_ 11VI1Y
LIE IOOF lllllllSFl. I SIRT FOWQ11ON

GENRA t
FEW QlOCI ET AW 8EPE I _F

ROUT SELE tK SURVE

T R.OD 81EEANWDW a
ACQLNSFTr SO NET14O nA
TT CMl W
18mGR W MM?11 1 111 0 1CM Z .OOfi 1 1 0.

111111111 llllll~~~~ lltl I N

 -43-

ANNEX 3.4

PAKISTA^N

TRANMISSIONEXTENSIONANDREINFORCEMENT
PROJECT

Estimated Scheduleof Disbursemenits

(US$ million)

Bank Fiscal Year Disbursements Cumulative

and Semester in Semester Disbursements CumulativeX

1990
June 30, 1990 2.6 2.6 1.6

1991
December 31, 1990 9.6 12.2 7.5
June 30, 1991 14.0 26.2 16.2

1992
December 31, 1991 17.0 43.2 26.7
June 30, 1992 23.0 66.2 41.0

1993
December 31, 1992 21.0 87.2 54.0
June 30, 1993 22.0 109.2 67.4

1994
December 31, 1993 22.0 131.2 81.0
June 30,1994 14.8 146.0 90.0

1995
December 31, 1994 8.0 154.0 95.0
June 30, 1995 8.0 162.0 100.0
 PAKISTAN
EXTENSION
TRANSMISSION PROJECT
ANDREINFORCEPENT
ANDPOWER
WATER AUTHORITY
DEVELOPMENT
ACTUALANDFORECAST STATEMENT
INCOME
............ ................................

(RUPEES MILLION)
(Unaud) -.........................
Actual----------
---------- -.................-------
FORECAST
FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 ----.. ... ..... ........ ....... ..... .........
----. ...... ..... ---- ----. ---- ----. ----
.... ---- .---- ----. ----

18780 21055 23630 27451 29084 33806 33711 37718 43919 51208 54824 60004 66950 73972
KWh GENERATED(MILLIONS)
13756 15504 17745 20702 22221 26030 25957 29043 33818 39430 42214 46203 51552 56958
KUh SOLD(MILLIONS) 77 77 77
Klh SOLD/KWhGENERATEDCX) 73 74 75 75 76 77 77 77 77 77 77
SOLD(PAISA) 63.83 74.39 69.61 82.89 93.6 112.8 120.5 129.0 151.9 166.8 174.0 187.6 185.6 187.5
AVE. REVENUE/KWh 4.3 7.8 -1.1 1.0
X INCREASEIN AVE. REVENUE 1.7 16.6 -6.4 19.1 12.9 20.4 6.9 7.0 17.7 9.8
SOLDCPAISA) 52.9 57.6 55.4 59.9 67.6 77.7 89.3 90.2 103.2 113.0 114.1 121.6 121.6 121.6
AVE. TARIFF/Kih -0.0 -0.0
IN AVE. TARIFF -0.5 8.8 -3.7 8.1 12.8 15.0 14.9 0.9 14.4 9.6 0.9 6.6
X INCREASE
(RS MILLION)
REVENUE
OPERATING
.... ....... .... ... ......

SALESOF ELECTRICITY 7280 8925 9836 12406 15021 20236 23192 26192 34886 44565 48163 56199 62705 69282
FUELS2RCHARGE 1500 2609 2517 4753 5782 9116 8094 11276 16475 21206 25307 30500 32962 37517
REVENUES
OPERATING 212 226 235 464 511 562 618 680 748 823 905 996 1095 1205
OTHER ............... .... .. .. .. . ....... ....... .......
.... ..... .... .... .. .. ... .........

REVENUES
TOTALOPERATING 8992 11760 12588 17623 21314 29914 31905 38148 52109 66594 74376 87696 96762108003

MILLION)
EXPENSES(RS
OPERATING
.................. ............................

OF POWER(w/oFuel) 491 388 143 91 8 0 0 374 4466 6873 7202 7391 7626 7861
PURCHASE 31347 33876 38558
FUELCOST 2406 3200 3714 5465 6300 9116 8319 11589 16932 21794 26010
708 769 872 1037 1230 1834 2147 2479 2868 3365 3975 4721 5587 3021
MAINTENANCE
& ADMINISTRATION 1758 2096 2370 3100 3169 3644 4191 5029 5784 6651 7649 9179 10555 12139
OPERATION 6198 7322 8696 10292
DEPRECIATION 1110 1363 1701 2039 2406 2847 3379 3955 4566 5284
........... ....................... ....
..........
.....................................
.... .................. . ..........
.................................

EXPENSES
TOTALOPERATING 6473 7816 8800 11732 13113 17442 18035 23426 34616 43966 51033 59958 66340 71870

INCOME
NETOPERATING 2519 3944 3788 5891 8201 12472 13869 14722 17493 22627 23342 27737 30422 36133
210 206 333 182 200 220 242 266 293 322 355 390 429 472
INCOME
OTHER
FOR FIXED 2729
NET INCOMEAVAILABLE 4150 4121 607 8401 12693 14111 14989 17786 22950 23697 28127 308S1 36605
CHARGES
FIXEDCHARGES
.... .........

INTEREST 1897 2302 3171 3948 5386 6413 7016 7256 7310 7560 8520 9593 10703 11783
CHARGEDCONSTN. 273
LESS:INTEREST 385 647 713 1399 1915 1811 1981 2097 2478 3168 3888 4751 5504

CHARGEDOPERATIONS
INTEREST 1624 1917 2524 3235 3987 4498 5204 5274 5213 5082 5352 5705 5952 6279

INCOME 1105 2233 1597 2838 4414 8195 8907 9714 12573 17868 18345 22422 24898 30326
20 20 20 20 20 20 20 20 20 20 20 20 20
TOGOVERNMENT 20
LESS:PAYMENT x
....... ....
........... ....... ............. ........ ........... ............................................................

NETPROFIT 1085 2213 1577 2818 4394 8175 8887 9694 12553 17848 18325 22402 24878 30306
.h F
ONFIXEDASSETS
RATEOF RETURN -I
...... C V..........ALD 12.___
VALUED
HISTORICALLY 12.0 14.8 11.5 14.4 17.3 22.0 20.7 18.9 19.6 22.0 19.4 19.4 17.7 17.7
 PAKISTAN
EXTENSION
TRANSMISSION PROJECT
ANDREINFORCEMENT
WATERANDPOWER AUTHORITY
DEVELOPMENT
ACTUAL BALANCE
ANDFORECAST SHEET
............................................................. .............

(RupeesMillion)

---------- Actual--------- (Unaud) ......-................... FORECAST-----------------------

ASSETS FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98
.... ..... .... ..... .... ..... .... ... ..... .......... ..... ..
.... .....
___........ .. .... .... ..... .... .....

FIXEDASSETS
............

IN OPERATION
FIXEDASSETS 34288 43531 54723 62238 74088 88609104453121534139373162555191610226790270119 317990
RESERVE
LESS:DEPRECIATION 7817 9171 10928 12965 15371 18218 21597 25552 30117 35401 41599 48921 57617 67909
26471 34360 43795 49273 58717 70390 82856 95983 109255127154150011177S69212502250081
IN OPERATION
NETFIXEDASSETS
WORKIN PROGRESS 10181 10062 9389 14184 17775 21009 23388 25167 26235 34508 43144 52153 64297 70611
.... ...... .................... ..................................
.........
.....
......
_.. ...........
................. ...............................

TOTALFIXEDASSETS 36652 46422 53184 63457 76492 91400 106245121150135490161662193155230021276798320692

ASSETS
CURRENT
..............

CASH 433 504 470 775 2006 1678 1686 2239 3456 4448 5156 6053 6629 7082
INVENTORIES 1895 2092 3135 3957 3704 3987 5223 6077 6969 8128 9581 11339 13506 15899
RECEIVABLE
ACCOUNTS 1770 2270 2502 2858 3873 565 5424 64?5 8859 11321 12644 14908 16450 18361
WATERWINGACCOUNTS 304 311 284 496 .521 547 574 603 633 665 698 733 770 808
OTHER ASSETS
CURRENT 1459 847 1018 2267 2516 2831 3184 3582 4030 4534 5101 5738 6456 7262
....................................................................................................................... _ _ _......
_ .................................................................................
ASSETS
TOTALCURRENT 5861 6024 7409 10353 12620 14129 16091 18987 23946 29096 33179 38M 43810 49412 b
.....................................................................................................
.......... ................................................. _
.. ,,....................................
,.......
........ ..............
TOTALASSETS 42513 50446 60593 73810 89112 105529122335140137159437190758226334268793320608370104

CAPITALANDLIABILITIES
EQUITY
INVESTMENT
GOVERNMENT 2437 2437 2437 2437 2437 2437 2437' 2437 2437 2437 2437 2437 2437 2437
2901 3304
EQUITYCONTRIBUTION
GOVERNMENT 3574 3813 3813 3813 3813 -813 3813 3813 3813 3813 3813 3813
CAPITALCONTRIBUTION 2027 2750 3781 4907 6204 7666 9269 11030 12961 15079 17403 19952 22748 25813
RETAINEDEARNINGS 11632 13760 15319 17952 22346 30521 39408 49102 61655 79503 97828 120230145109175415
.............................................. ........................................
_.......... ......... .....................

TOTALEQUITY 18997 22251 25111 29109 34800 44436 54927 66381 808S5100832121481146433174106r'7477

LONG TERMDEBT 20349 24740 31412 38457 47400 53424 58787 63795 66431 78422 91893 107468129818143952

DEPOSITS
CONSUMER 299 325 358 395 494 568 653 751 864 994 1143 1314 1511 1738
ACCRUED
INTEREST 1034 1117 1200 1283 1366 1449 1532 1615 1698 1781 1864 1947 2030 2113
LIABILITIES
CURRENT 1834 2013 2512 4566 5052 5651 6436 7595 9579 8729 9954 11632 13143 14824
.............. ........... .......... ................... ............................................
ANDLIABILITIES 42513 50445 60593 73810 89112 105528122335140136159436190757226334268793320608370104
TOTALCAPITAL

DEBTAS% OFDEBT+EOUITY 52 53 56 57 58 55 52 49 45 44 43 42 43 41 0
>
.
AS% OF DEBT+EQUITY
EQUJITY 48 47 44 43 42 45 48 51 55 56 57 58 57 59 ,,
 PAKISTAN
EXTENSION
TRANSHISSION PROJECT
AND REINFORCEMENT
WATERANDPOWER AUTHORITY
DEVELOPMENT
ACTUAL SOURCES
ANDFORECAST ANDUSESOr FUNDS
.....
__.............................. ..... ......... ___

NILLION)
(RUPEES
FORECAST---------------------------
Actual---------(UnaU) --------------------------.
----------
OF FUNDS
SOURCES FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 . ..... ..._.. ....... .... ..... .... .....
...... .... ......... .... ..... .... .....
..... ....... ...... .... ..... ....

FROM
FUNDS OPERATIONS
2729
FORFIXEDCHARGES
NETINCOME 4150 4121 6073 8401 12693 14111 14989 17786 22950 23697 28127 30851 36605
DEPRECIATION 1110 1422 1764 2126 2406 2847 3379 3955 4566 5284 6198 7322 8696 10292 _
............................................ ...................................
__.............. .....................

SUBTOTALFUNDSFROM 3839
OPERATIONS 5572 5885 8199 10807 15540 17490 18943 22352 28234 29895 35449 39547 46897
403 274 0 0 0 0 0 0 0 U 0 0 0
GOVERNMENTGRANT
CAPITALCONTRIBUTIONS 449 723 1030 1126 1297 1462 1604 1760 1931 2119 2324 2549 2795 3065
24 26 33 37 99 74 85 98 113 130 149 171 197 227
SECURITYDEPOSITS
BORROWINGS
RUPEE LOANS 2115 2547 3628 3361 5700 3665 2796 3838 3273 7671 7581 6168 7442 1846
FORCIGH LOANS 2854 2571 3991 4665 5000 5497 6561 6049 5466 10794 13463 18290 24495 22625
0 0 0 0 0 56 511 866 931 797 346 0 0 0
PROPOSED IBRDLOAN
BORROWINGS
SUBTOTAL 4969 5118 7619 8026 10700 9218 9868 10753 9670 19262 21391 24458 31937 24471 .__
._. .. .. .. .. .. .. .. .. . ..............................
.. ._. . ......... .... ._. ..
_._________. . .. ....... .... __..... .. ..

OF FUNDS
TOTALSOURCES 9281 11841 14841 17388 22903 26293 29047 31554 34066 49744 53759 62627 74476 74660

OF FUNDS
APPLICATIONS
_._......----... .
PROGRAM
CONSTRUCTION 0 0 0
PROJECT
PROPOSED 0 0 0 0 0 81 1032 2248 1824 2583 2258
CONSTRUCTION
OTHER 6768 8739 9872 11597 14042 15759 15380 14631 14985 26394 32265 40300 so57 48681 _._.
.............. ........... ..................... ............................................
........

6768
PROGRAM
CONSTRUCTION
SUBTOTAL 8739 9872 11597 14042 15840 16412 16879 16809 28977 34523 40300 507M 48681

DEBTSERVICE
INTEREST 1897 2302 3171 3948 5386 6413 7016 756 7310 7560 8520 9593 10703 11783
83 83 83 83 83 83 83 83 83 83 83 83 83 83
ACCRUED
LESS:INTEREST
AMORTIZATION 599 725 919 981 1757 3194 4505 5745 7034 7270 7920 8882 9587 10337
_.......... .......
.... ...... _.__.... __.... .............. .............................
.,... ........ .................

DEBTSERVICE
SUBTOTAL 2413 2944 4007 4846 7060 9524 11438 12917 14261 14747 16357 18392 20208 22037
20 P0 20 20 20 20 20 20 20 20 20 20 20 20
TO GOVERVNENT
PAYMENT
CHANGE CAPITAL
IN WORKING 576 452
-68 71 -34 305 1231 -328 7 554 1217 993 708 897
CASH 2950 3469
OTHERTHANCASH 149 67 976 620 550 1237 1170 1184 1759 5007 2151 3018

CAPITAL 81 138 942 925 1781 909 1177 1738 2976 5999 2858 3915 3526 3922
IN WORKING
NETCHANGE ... .. __......................................................................
....
...
................. .........................

OF FUNDS
TOTALAPPLICATIONS 9282 11841 14841 17388 22903 26293 29047 31554 34066 49744 53759 62627 74476 74660

1.7 1.5 1.6 1.5 1.5 1.6 1.9 1.8 1.9 2.0 2.1 a
DEBTSERVICECOVERAGERATIO 1.6 1.9 1.5
44.7 33.1 40.8 40.0 40.0 40.0 40.0 40.0 40.0 41.6 49.6 .
RkTIO-3 Yr. AVE 36.6
SELF FINANCING 50.0 34.5
 -47- Page 4 of 7

PAKISTAN
TRANSHISSIONEXTENSIONAID REINFORCEMENT
PROJECT
WATERAND POWERDEVELOPMENT AUTHORITY
NOTES ANDASSUMPTIONSFOR FINANCIALFORECASTS

Income Statement
Salesof Electricity
1. The forecast sale of electricityis based on projected generation from
WAPDA's plants presented in Annex 4.1, together with purchases from private
sector power plants as follows:
FY90 FY91 FY92 FYn9 FY94 nY95 FY96 FY97 FY98
Private Sector Gen. (GME) 0 0 490 5421 7885 7885 7885 7885 7885
Fuel Cost (Res HlUozn) 0 0 290 3464 5330 5586 5732 5914 6097
0GI Debt Service and ROE
Costs (Rs tllion) 0 0 375 4466 6873 7202 7390 7626 7861
Total Power Purch.Cost (Ra M) 0 0 665 7930 12203 12788 13122 13540 13958

Details of WAPDA's power purchases from the Private Sector are shown in Annex
4.1, page 7.

Average Revenue ner kWh Sold

2. The average revenue per kWh sold reflectsthe fuel adjustmentsurcharge,

as well as tariff increasenecessary to meet the 40X Internal Cash Generation
Covenantand the Debt Service CoverageRatio Covenant.

Other ODeratingRevenue

3. Other operatingrevenueconsistsprincipallycf miscellaneousservicessuch

as transfer/replacement of meters, applicationfees, reconnectionof service,
etc. These revenuesare shown to increaseby 10 per year based on the increase
of the number of consumers.

Fuel Cost

4. The projectedconsumptionby type of fuel is shown below:

FY90 FY01 FY92 FY93 FY94 FY95
Gas (MCF) 113651 96772 SI565 90611 101955 108979
ElSD (H Lit) 704 331 360 293 387 639
Fuel Oil (Nr) 1732 2061 2781 2542 2774 4165
Coal (MT) 26 62 70 458 673 1387

MaintenanceExpenses

5. Maintenanceexpenseis related to plant in serviceand is forecastat 1.9X

taking into account past experience and the increasingproportion of thermal
plant in the system.

a: income
 -48- Anx A.
Page 5 of 7

Operation and AdministrationExpense

6. Operationand maintenanceexpense is forecastto increaseby 151 annually,

taking into account system expansion, inflation and also past experience.
However,every fourth year, the increaseis assumedto be 20X to account fot the
general wage increase.

7. WAPDA is applyinga compositerate of depreciationof 3.51. This rate is

realisticand has been used in the forecasts.

Other Income

8. Other income includesinterest,sales of scrap and rental of office space,

and is shown to increaseby 101 annually.

Payment to Government

9. WAPDA has been remittingRs 20 million annuallyto Governmentfor assets

earlier transferredto WAPDA. Forecastsshow this payment continuing.

BALANCE SHEET
Cash

1. 'ashbalancesare projectedon the basis of about six weeks cash operating

expense.

Inventories

2. Inventoriesare forecastat 51 of gross fixed assets in operation.

AccountsReceivables

3. WAPDA's accountsreceivablesare forecastto be equivalentto two months'

billings.

Other Current Assets

4. Other current assets include miscellaneous receivables, advances and

clearingaccounts. Forecastsassume a 51 annual increase.

Current Liabilities

5. Current liabilitiesinclude accounts payable, depositi.for works to be

carried out for other agencies,contractordeposits,duties payable and accrued
salaries. Based on past experience,current liabilitiesare forecastat between
25X and 401 of current assets.

a: tncw-e
 Amex 4.1
Page 6 of 7

SecurityDeDosits

6. Securitydepositsare forecastto increaseat 15 per annum.

Capital Contributions

7. Consumers'capital contributionassumed to increaseby 10 annually.

! a: Inco
 PAKISTAN
TRANSMISSIONEXTENSION
ANDREINFORCEMENTPROJECT
WATERAND POWERDEVELOPMENT
AUTHORITY
ESTIMATEDENERGYPURCHASESFROMPRIVATESECTOR

FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98

Inflation Estimates 12.00Q 10.00Q 8.00X 7.002 6.50X 6.50X 6.50X 6.502 6.50X 6.502
Escalation Factors 1.18 1.24 1.28 1.38 1.46 1.53 1.57 1.62 1.67

Generation
Nab River Complex 0 0 392 4337 6308 6308 6308 6308 6308
FauJi Fourdation 0 0 98 1084 1577 1577 1577 1S77 1577
, ... ... .... . .... ...................... .......

Total Generation 0 0 490 5421 7885 7885 7885 7885 7885

Tariffs (Constant 1989 Rs)

Hab River corpLex 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06
FauJi Foundation 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06 1.06

Tariffs (NominalRs)
Nab River complex 1.25 1.31 1.36 1.46 1.55 1.62 1.66 1.72 1.77
Fauji Fourdation 1.25 1.31 1.36 1.46 1.55 1.62 1.66 1.72 1.77

Fuel Costs/kWh (Constant 1989 Rs)

Nab River Complex 0.463 0.463 0.463 0.463 0.463 0.463 0.463 0.463 0.463
Fauji Foundation 0.463 0.463 0.463 0.463 0.463 0.463 0.463 0.463 0.463

Fuel Costs/kWh (Nominal Rs) 0.546 0.574 0.593 0.639 0.676 0.708 0.727 0.750 0.773
Nab River Complex 0.546 0.574 0.593 0.639 0.676 0.708 0.727 0.750 o.m
Fauji Foundation

Fuel Costs (NominalRe Million)

Nab River Complex 0 0 232 2771 4264 4469 4585 4731 4877
Fauji Foundation 0 0 58 693 1066 1117 1146 1183 1219

Total Fuel Costs 0 0 290 3464 5330 5586 5732 5914 6097

O & M, Debt Serv.& ROECosts/kWh (Constant 1989 Rs)

Nab River CompLex 0.597 0.597 0.597 0.597 0.597 0.597 0.597 0.597 0.597
Fauji Foundation 0.597 0.597 0.597 0.597 0.597 0.597 0.597 0.597 0.597

0 N, Debt Serv.& ROE Costs/kWh(NominalRs)

Nab River Complex 0.704 0.740 0.764 0.824 0.872 0.913 0.937 0.967 0.997
Fauji Foundation 0.704 0.740 0.764 0.824 0.872 0.913 0.937 0.967 0.997

0 M, Debt Service & ROE Costs (Nominal Rs Million) Q

Nab Rfver Complex 0 0 300 3573 5498 5762 5912 6101 6289 (Dg
Fauji Foundation 0 0 75 893 1375 1440 1478 1525 1572
... ... ... .... .... ... .... .... .... 0-*--
Total O&N, Debt Ser.& ROE Costs 0 0 374 4466 6873 7202 7391 7626 7861
Total Power Purchase Costs (Nominal Rs Million)
Nab River Complex 0 0 532 6344 9762 10230 10498 10832 11166
Fauji Foundation a 0 133 1586 2441 2558 2624 2708 2792

Grand Total 0 C 665 7930 12203 12788 13122 13540 13958

 PAKISTAN
TRANSNISSION EXTENSION ANDREINFORCEMENT PROJECT
WATERANDPOWER DEVELOPMENT AUTHORITY
CAPITAL EXPENDITURE PROGRANFY89 - FY98
................................................
(RS NILLION)

Generation FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98
....... .............. .... . ...... .... . ...... .... . ...... .... . ...... .... . ...... ...........
..............
..

ongofng Investments
GudxuCC 83 272 0 0 0 0 0 0 0 0
uzuaffararh (1 - 3) 781 2239 1400 1800 2000 0 0 0 0 0
Muzaffargarh (4 - 6 0 0 0 0 0 1000 2050 3000 4000 2358
Kot Addu Ccmb. Tur. (5 - 8) 1243 366 0 0 0 0 0 0 0 0
Kot AdckaCC (9 &10) 1178 1086 500 294 0 0 0 0 0 0
Kot Adau CC (11 &12) 0 0 0 0 0 1000 1000 1000 1500 360
Jaashoro Olt 1 1174 1139 264 0 0 0 0 0 0 0
Jaishoro II-IY 129N 2175 1337 1006 27n 0 0 0 0 0
GSlgit Diesel Sets 15 10 1 0 0 0 0 0 0 0
GudduCC 0 160 1200 500 400 0 0 0 0 0
Thenal Rehab. 465 385 800 311 0 0 0 0 0 0
Iaport. Coal Engr. 10 22 0 0 0 0 0 0 0 0
Centr. Test Lab. 25 12 32 0 0 0 0 0 0 0
Tarbela 11-14 993 1480 1400 1900 2200 802 0 0 0 0 1
mangla 9 & 10 64 180 150 350 560 0 0 0 0 0 Un
P& Low Nead Nydel 30 9 0 0 0 0 0 0 0 0 F
ev. of Hirpur 25 5 0 0 0 0 0 0 0 0
..... ..... _.. ..... ...... ..... ..... ..... ..... .....
Stbtotal (Ongoing) 7381 9540 7084 6161 5432 2802 3050 4000 5500 2718

UM JnfestnAefts
Coal F.B. 120 160 800 900 330 0 0 0 0 0
Lakhra Coal F.B. t4 - 6) 0 0 0 0 0 105 500 1000 1500 295
Lakhra Coal F.B. C7 - 9) 0 0 0 0 0 790 1500 2000 2600 760
Jamh. 5-7 Engr. 0 7 0 20 32 0 0 0 0 0
Iworted Coal (Unit 1) 0 0 0 0 0 1258 2358 3000 3530 2247
1I orted Coo (tUnit 2) 0 0 0 0 0 1700 2500 3000 4000 2281
Iwported Coal (Unit 3) 0 0 0 0 0 1000 2000 2400 3200 6162
iqported Coat (Unft 4) 0 0 0 0 0 1000 1500 2400 3200 5081
Imported Coal (Unit 5) 0 0 0 0 0 0 500 1000 2500 4481
imported Coal (Unft 6) 0 0 0 0 0 0 0 0 1000 3581
Sorida (Unit 1) 0 0 0 0 0 2900 3500 3800 835 0
Others 0 88 0 610 870 0 0 0 0 0
Chasins 30 30 250 550 1050 477 0 0 0 0
BashaEngfneering 8 35 50 100 700 232 0 0 0 0
Gaz Ghar. Engr. 10 15 40 70 90 21 0 0 0 0
Chazf Ghar. (Units 1-2) 0 0 0 50 100 1332 2300 2400 4820 8157
Ghaz Ghar. (Units3-4) 0 0 0 0 0 0 0 900 1000 2681
Taunisa 8 0 50 100 300 1700 1700 1800 587 0 Fdt1
Jinnab 0 0 0 100 500 1250 1450 1800 3000 742 o00

SthtotaL mv.)176
335 Noa190 2500 972 1376 19808 2500 31772 36468 p.
Total (Generation) 7557 9875 8274 8661 9404 16567 22858 29500 37272 39186
== mS; === == ~sX === c== E=S U-SX St5;
 PAKISTAN
TRANSMISSION
EXTENSIONANDREINFORCEMENT
PROJECT
WATERANDPOWER DEVELOPMENT
AUTHORITY
CAPITALEXPEIIDITURE
PROGRAM
FY89- FY98
.....
........ ................ _................ ........

(RS NILLION)

Traumlssion FY89 FY90 FY91 FY92 FY93 FY94, FY9 FY9 FY97 FY96
............ .... . .....
.... ....... . ..... .... .... . .... .... . ..... ... .....................

OngoingInvestmnt
F/abud-Mutt-Kar.chf
Tarbeta-Falstldbed
Fafselabad-Sahhigt
MerdmnPbamer
Dack-Khudmr
Nodor.DeepatchiCan.
A.C Network Nodern.
Tarbeta-Lahore
Lahore-Jinmhoro
.....
95 0 0 0 0 0 0 0 0 0
3 0 0 0 0 0 0 0 0 0
I 1 0 0 0 0 0 0 0 0
39 177 125 0 0 0 .0 0 0 0
96 100 230 0 0 0 0 0 0 0
398 250 200 182 0 0 0 0 0 0
22 8 0 0 0 0 0 0 0 0
91 400 400 282 0 0 0 0 0 0
1228 1312 500 1000 668 0 0 0 0 0
..... . ..... ..... ..... . ...... ..... . ...... ...... ...........................

Sub-total (Ownopi) 1973 2248 1455 1464 668 0 0 0 0 0

NewIn estient
Trm PC I1 41 0 58 0 0 0 0 0 0 0
Lsdmmla-Dadi.le 0 2 600 138 0 0 0 0 0 0
Ptmn. St. (PC-11) 9 0 0 0 0 0 0 0 0 0
Guda-sibi-ltta 4 80 400 136 0 0 0 0 0 0 1
T/L Losd I tels. 0 0 0 0 70 225 175 0 0 0 U
Karachl-Jamboro 0 0 500 300 142 0 0 0 0 0
Jdhboro-mult.n 0 0 600 1000 400 0 0 0 0 0
Nuttn-Labore 0 0 0 0 300 0 0 0 0 0
m tffarghar-Nut'ton 0 0 50 60 35 0 0 0 0 0
muaffarfrar-Nultan 0 0 75 20 0 0 0 0 0 0
Sande 0 0 0 0 0 300 400 400 100 0
2ndSOOKV Leor-Nultan 0 0 0 0 0 700 0 0 0 0
Kot Addu-Lorslai 0 0 100 200 240 0 0 0 0 0
1stSOOKV Kot Addu - Lorela 0 0 0 0 0 1100 1250 100 0 0
3rd SO0v Dau-mNuttUn 0 0 0 0 0 500 600 900 1600 250
Lakhra-Dadu 0 0 0 0 0 150 300 400 75 0
Ludmista-Gatti 0 0 0 0 0 100 300 300 400 100
Ludemia-Daudkhel 0 0 0 0 0 75 150 150 250 50
Peshaw.r-G Gharfate 0 0 0 0 0 0 0 200 400 700
SOKV 2nd C. Tarbeta-Lahore 0 0 0 0 0 0 0 400 900 1400
Chass-iulttan 0 0 0 0 0 0 0 0 400 600
Basha-Rmaat 0 0 0 0 0 0 0 0 0 500
Guddu-Sibbi 0 0 0 0 0 150 300 400 700 100
Tarbela-Rewat-Lahore 0 0 0 0 0 175 200 200 0 0
muttan-Gudmu 0 0 0 0 0 100 300 500 750 250
KoLabsch-multtn 0 0 0 0 0 100 450 800 1000 250
Daudchal-Kalabegh 0 0 0 0 0 2S 100 200 125 50
2nd 200KVKatabogh-Kchat 0 0 0 0 0 25 100 200 400 9f DI
2nd 220KVKot Addu-Loratal 0 0 0 0 0 10 40 150 250 50 OF i
SOOKVtine to Dadu 0 0 0 0 0 400 800 1200 1600 400 0
Tarbtela -Gattf 0 0 0 0 0 375 0 0 0 0 'J
Others 0 61 0 0 0 0 0 0 0 0 O
Sub-total (New Irw.) 54 143 2383 1854 1187 4S10 5465 6500 89S0 47947
... ........ . .... ... .... ... .... .... .... ...... ..... .... ....

Total (Transr ssion) 2027 2391 3838 3318 1855 4510 5465 6500 8950 4795
U~ 3f _3~ 22 U3 Uu U:3 3U33
 PAKISTAN
TRANSNISSIONEXTENSIONAND REINFORCEMENTPROJECT
WATER AND POWER DEVELOPMENTAUTHORITY
CAPITAL EXPENDITURE FY89 - FY98
PROGRAM
................................................
(RS MILLION)

FY93 FY94 FY95 FY96 FY97 FY98

FY89 FY90 FY91 FY92 .... ....... ....
...... .... .......
.... ----. .. ----
........
........
....
......

Suory
9404 16567 22858 29500 3727 39186
7557 9875 8274 8661
Generstion 1855 4510 5465 6500 8950 4795
2027 2391 3838 3318
Trafmission 2200 3500 3100 2700 2800 2900
1560 1574 1800 2000
Sec. T/L & Grid Stn. 2000 2200 200 200 200 200 200
1237 1238 1800
Rural Electr. 800 4200 2900 1400 1500 1600
1299 340 600 700
Distrib. of Power 350 0 0 0 0 0
8 400 100 200
Loss Reduct.& Ld. Mgt. 0 0 0 0 0 0 0
Rehab. 354 0 0 0
Distribution 0 0 0 0 0 0
0 22 0
Others .. ..... ... ... ..... ..... ..... ..... ..... .....

16809 28977 34523 40300 50722 48681

14042 15840 16412 16879
Grsnd Total 3333 33 33= 333 33 33 33
3= 333 3=m

I*l
 PAKISTAN
TRANSMISSIONEXTENSIONAND REINFORCEMENT
PROJECT
WATERANDPOWER DEVELOPMENTAUTHORITY
GENERATION FORECAST
................................................

(Gwh)
Thermat Generatfon
...... ...........

Power Station FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98
,.................. .... .... . ...... .... . ...... .... . ...... .... . ...... ...... ..............
..............
..

Gutdu 3671 3418 3599 3290 2861 3063 3193 3499 3395 2975
Nultan 760 1255 605 872 815 915 942 1023 931 905
SPS Faisatlbad 664 706 640 543 421 460 475 512 463 450
GTPS FaisaLabod 632 776 283 112 16 12 12 22 12 12
Sukkur 249 266 176 149 115 125 129 139 126 125
Hyderabad 149 175 61 51 41 40 41 45 43 43
Kotri 361 573 156 54 1 0 1 4 0 1
Shahdara 129 62 87 48 11 12 12 17 12 12
Quetta 388 398 135 90 51 52 53 61 55 55
REPCO/NESCO 91 84 61 51 41 40 41 45 43 43
ImportedCoat 0 0 0 0 g0 0 0 0 747 5166
Guddu GT 2504 0 0 86 22 0 0 0 0 0
Kot Addu GT 1672 1806 616 323 66 27 0 0 0 0
Guddu CS 1098 4240 3471 3164 3686 4516 4707 5157 5019 4399
Jaeshoro oil 0 3156 3107 4130 3263 3537 3661 3965 3602 3492
Kot Addu CS 0 591 3784 3136 2733 4684 6271 6655 6474 5678
Faisalabed CS 0 0 0 523 691 735 766 837 817 716
Kotri CS 0 0 0 469 539 735 766 837 817 716
Lakhra Coat 0 0 0 22 520 781 1345 1647 2659 2465
Muzaffargarh 0 0 836 2887 3356 2496 3188 5698 5086 4933
Sands Coal 0 0 0 0 0 0 0 245 1388 1232
..... ..... . ...... ..... . ...... ..... . ...... ..... . ...... ...........
........................

Subtotal Thermal 12368 17506 17617 20000 19249 22230 25603 30408 31689 33418

Hydel ion
oenerat
................

Tarbela 9826 9471 9357 10119 11880 12845 13028 12930 13037 13149
Mangle 5648 5393 4934 5306 5589 5685 5727 5727 5727 5722
Warsak 733 931 1270 1270 1234 1259 1270 1270 1270 1269
Sall Hydel 49; 505 533 533 521 530 533 533 533 533
Chastma 0 0 0 0 25 774 778 780 775 773
T unsa 0 0 0 0 0 0 0 471 479 479
Jinnah 0 0 0 0 0 0 0 0 546 500
Kalabi 0 0 0 0 0 0 0 0 5009 9139
Gazi Gharfyala 0 0 0 0 0 0 0 0 0 1105
..... ..... . ...... ..... . ...... ..... . ...... .............................................

Subtotal Hydet 16700 16300 16094 17228 19249 21093 21336 21711 27376 32669
0e
Iports (Xenel/Hspel) 851 4318 6308 6308 6308 6308 6308
CNandpur/Panjpir) 214 478 520 520 520 520 520
..... ....... ..... ..... ..... ..... ..... ..... ..... ..... . 0

Total Generation 29068 33806 33711 38293 43294 50151 53767 58947 65893 72915
.3=3= 3c=3 c==3= c=33 ccc3 c3=3 ===c3 3cc3 c=3 =3cc=
 AUTHORITY(WAPDA)
WATERAND POWER DEVELOPMENT
- FINANCE (POWER)
ORGANIZATIONCHARTOF GENERALMANAGER

ID (a I
POWER}

Gt t* FtV O,I .Rfult 1

SI igi
01 05.1
SN.? iwuil ~ ~ I s-n

I
.~~~~~~~~~~~~ I*s

Iifl~.)191iI IUS l'lU 9o wIES iM U.S m

*5*0.tlff 5
5tPS1

I I S = Amon
I lM" O qIMIIAu
AS
F-Af I 1* CGs=UAIS ICI , I&WMMli SS II I ._
Al.INS. *t4AIs. oil,,1.. .

-1ft% I* I
_su._.! 2

.e1r S_La l_ .
 -56-

ANNEX 5.1
Page 1 of 6

PAKISTANI
TRNMISSIONEXTESION AnD REINOCEETPROJECT

Assumtions for the Internal Economic Rate of Return

Costs
1. Capital Costs: Investmentexpendituresincurred by WAPDA on its generation,
transmission
and distribution
developmentprogramandby the privatesectorduringtheperiod
is presentedin Attachment1.
FY90-95. Detailsrelatingto the phasingof expenditures
2. Local Costs: These are expressedin equivalentborder prices using the following
conversionfactors: capitalgoodsat 0.81 of theirdomesticprices;and labor at 0.77 of
the domesticwage rate.
3. AnnualOperation-andMaintenanceCosts(O&M): Theseare estimatedat 3X of thecapital
costsassociatedwith the investmentexpenditures
incurredby both VAPDA and PS.
4. Incremental Fuel Costsassociatedwith the incremental
generationwere valued on the
followingborder prices:
June 1989 BorderPrices(CIF)

! Stlxl-lvFu
Dl
e USS/TOE
Fuel Oil 77.3
Diesel 169.7
Coal 50.0
Gas 77.3
Detailsrelatingto fuel consumption
are presentedin Attachment2.

Benefits
5. Two cases were considered: Case 1: takes the averagerevenueof Rs 1.07/kWhas a
proxy for the consumers'willingnessto pay; and Case 2: takes into accountthe projected
annualincreasein revenuesof 1.8X in real termsrequiredto achievea self-financing ratio
of 402 for VAPDA whichresultsin an estimatedconsumers'willingnessto pay of Rs 1.3/kWh.

0: \wSpOX iui.|*n\er,5-
 Case 1
PAKISTAN
t
PREVAILING TAR FF LEVELS TRANSMISSION
EXTENSION
ANDREINFORCEMENT
PROJECT
AT CONSTANT FY90AVG. REV. WATERANDPOWER
DEVELOPMENTAUTHORITY
...---------............... INTERNAL
ECONOMIC
RATEOF RETURN
.... ........ _.......... .................... .......

FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97FY98-FYI5

.... .... .... .... ......... .........

CONSTANT
(1989) INVESTMENTS
(Re Nil.) 1/
.....................................
PUBLICSECTOR 12148 11660 10809 10160 7419 11940 --- ... ...
PRIVATESECTOR 4783 7255 7252 10094 10608 11149 --- ... ...
- - . . . .......
..... ----- ..... ..... --- ... ......

TOTAL 16930 18916 18061 20254 18028 23090 --- --- ...

CONSTANT
(1989) PRICES(Rs Mil.)
.............. ....................... _........._...

TOTALINVESTMENT
COSTS 16930 18916 18061 20254 18028 23090 --- --- ...
LOCALCOSTS 6999 6108 5691 5782 5603 6689 --- --. ---
MATERIAL 5249 4581 4269 4336 4202 5017 - --- .---
SKILLEDLABR 350 305 285 289 280 334 --- ... ---
tISKILLEDLABOR 1400 1222 1138 1156 1121 1338 ... ... ...
FOREIGNCOSTS 9931 12808 12370 14472 12425 16400 --- .. .
IN U0RDER(1989) PRICES(Re Nil.) 2/ VI
...................... ............................... __..

TOTALINVESTMENT
COSTS 15979 18085 17287 19467 17266 22180 --- -- -.-.
LOCALCOSTS 6047 5277 4917 4996 4841 S780 --- ... ...
MATERIAL 4462 3894 3528 3686 3Sr72 4iMb --- -- -.--
SKILLED LABOR 339 296 276 280 272 324 --- --- -..
iNSKILLED LABOR 1246 1087 1013 1029 997 1191 --- --- ...
FOREIGNCOSTS 9931 12808 12370 14472 12425 16400 --- ---
.-.

ECONONIC
COSTS(RsNiL.)
.........................

TOTALINVESTMENT
COSTS 15979 18085 17287 19467 17266 22180 --- ... ...
O & N COSTS 479 1022 1541 2125 2643 3308 3308 3308 3308
FIEL COSTS 1842 3028 4507 7431 11652 13590 15896 18202 205O8
,,,,....... ....... ....... __....... ..... ....... ..... ....... .... ....

TOTALCOSTS 18300 22135 23335 29023 31560 39078 19204 21510 23816
AVERAGEREVENUE/kJh
(CONSTANT
Re. 1.07 1.07 1.07 1.07 1.07 1.07 1.07 1.07 1.07
INCREMENTAL
SALES(MILLIONkWh) 3809 3905 7648 11765 16395 19180 23168 28517 33924
TOTALKENEFITS(RSNit.) 4092 4195 8216 12639 17613 20605 24889 30635 36444
NET BENEFITS
INTERNAL
ECOMIC RATEOF RETU2N
-14208 -17940 -15119-16384 -13947 -18473 5685
BX
9125 12628

'a
ANDDUTIES
1/ NETOF TAXES U'
2/ CONIVERSION
FACTORS
- CAPITAL
GOCOS:
0.85; SKILLEDLABOR:0.97; UNSKILLED
LABOR:
0.89.
0'
 PAKISTAN
EXTENSION
TRANSNISSION PROJECT
ANDREINFORCENENT
WATERANDPOWERDEVELOPMENTAUTHORITY
ECONOMIC
INTERNAL RATEOF RETURN

FY92 FY93 FY94 FY95 FY96 FY97 FY98-FY15

Case 2 FY90
---
FY91
.. .. . ... .. .. .... ..... .... ..... .........

(6 Nil.)
(1989) INVESTMENTS
CONSTANT 1/
............. ......................... __.........

12148 11660 10809 10160 7419 11940 --- --- ...

PUBLICSECTOR
SCTOR
PRItVATE 4783 7255 72 10094 1060 11149 ---

14910 18916 16061 20254 1602 M----

23090 -
TOTAL
(1969) PRICES(Re NIL.)
CONSTANT
............ ............................... _..........

COSTS
TOTALINVESTMENT 16930 18916 18061 20254 18028 230 ---
LOCALCOSTS 6999 6108 5691 5782 5603 6689 --- -- ---

NATERIAL 5249 4581 4269 4336 4202 5017 --- --- ---

SKILLEDLABOR 350 305 285 289 280 334 ---

UNStILLEDLA8aR 1400 1222 1138 1156 1121 1338 ---
COSTS 9931 1280 12370 14472 12425 16400.. --- ..
FOREIGN
(1989) PRICES(Re Nit.) 2I
IN SONDER
TOTAL INVESTNENT
COSTS 15979 18085 17287 19467 17266 22180 --- --- --

LOCALCOSTS 6047 5277 4917 4996 4841 5780 --- --- -

MATERIAL 4462 3894 3628 3686 3572 4265 -- -- ---

SKILLEDLAWR 339 296 276 280 272 324 ---

LABOR
UNSKILLED 1246 1087 1013 1029 997 1191 ...
COSTS
FOREIGN 9931 12808 12370 14472 12425 16400 ---

(R8 NiL.)
COSTS
ECONOMIC
.......... ................. _..._

COSTS
TOTALINVSTNENT 15979 18085 17287 19467 17266 22180 --- ...
0 & N COSTS 479 1022 1541 2125 2643 3308 3308 3308 3308
FUELCOSTS 1842 3028 4507 7431 11652 13590 15896 18202 20508
....... ..... ....... ..... ....... .....
_._.. .__.......
....... .....

TOTALCOSTS 18300 22135 23335 29023 31560 39078 19204 21510 23816

REVENUE/kWh
AVERAGE Re.)
(CONSTANT 1.07 1.20 1.29 1.30 1.30 1.30 1.30 1.30 1.30
SALES(MILLIONkWh)
INCREMENTAL 3809 3905 7648 11765 16395 19180 23168 28517 33924
(Rs Nil.)
TOTALBENEFITS 4076 4686 9866 15295 21314 24934 30118 37072 44101

NETBENEFITS -14224 -17449 -13469 -13728 -10247 -14144 10914 15562 20285

EMONIC RATEOF RETURN

INTERVAL 14O
La
........... .................

1/ NETOFTAXESANDDUTIES 1-'
- CAPITAL
FACTORS
2/ COWERSION LABOR:0.89.
GOODS:0.85; SKILLEDLABOR:0.97; UNSKILLED
08

_____ . *
 PAKISTAN
EXTENSION
TRANSMISSION PRWECT
ANDREINFORCEMENT
WATERANDPOWER AUTHRItY
DEVELOPMENT
INTERNAL RATEOF RETULN
ECONOMIC
CALCULATIONS
NETINVESTMENT

FY90 FY91 FY92 FY93 FY94 FY95 Total

INVESTMENTS ...---- ..............
(Nminal Rpees Million) Local ForeignTotal Local ForeignTotal Local ForeignTotal Local ForeignTotal Local ForeignTotal Local ForeignTotal Locel Foreign Total
..... ........
.. ..... . ............ .... ............ .. . ... .... .. . ..........
................ ..... ............ .. . .......

CIP
WAMDA 10287 5553 15840 940 7072 16412 99t4 6915 16879 10412 6397 16809 9406 3439 12845 13294 O229 2S23 62703 37605 10030
0 0 0
Less: Taxes & Duties 3160 0 3160 3310 0 3310 3939 0 3939 3927 0 3927 2788 0 2788 4671 0 4671 21795 0 21795
..... ....... ..... ....... ..... ....... . ....... ..... ....... ..... ....... ..... ....... ..... ....... .....
-- ... ---- i;.
... ----- ......

Public Sector Net Inv. 7127 5553 12680 6030 7072 13102 6025 6915 12940 6485 6397 12882 6618 3439 10057 8M2 8229 16852 40908 37605 78513

Private Sector CIP 312 4736 5048 1104 7104 8208 i128 7561 86S9 1330 11342 12671 1463 12476 13938 1609 13723 15332 6945 561 636

Les: Taxes & Duties 90 0 90 146 0 146 155 0 155 226 0 226 249 0 249 274 0 274 1140 0 1140
..... ...... ........ ... ... ... ... ..... ...... ........ .. ... . ........ ..... ....... ..... ....... .... .... ..
..... ....... ........ ... ... ..... .......

Private Sector Net Inv. 222 4736 4958 958 7104 8062 973 7561 8534 1103 11342 12445 1214 12476 13690 1335 13723 15059 5805 56941 62746
~~~~~~~~~~~~~~.....
. i;;; ..... .......... ..... ... i -- -- -- . ..... ... .. ..... ..... ..... ..... ..... .....

Totat Net Investments 7349 10289 17638 6988 14176 21164 6996 14476 21474 7588 1739 2537 7132 15915 23747 9958 21952 31911 46713 9456 141259
D 15 :11M 1mnww *:= U21 =:tc arms_
n85- --- a# --- --- --- -_an =_=, #=, a---- m= MM=

.... ..... ___.... .. . .... ..... _..__ .. . ... . _ ..... ..... __-- ***_*_*__
, ____________ -- --
... ._ ..... . . . . . . . . . . . . . . . . . . . ..

Total Net Inrvestments 6999 9931 16930 6108 12808 18916 5691 12370 18061 5782 14472 20254 603 12425 18028 6689 16400 23090 3673 78406 115279
3.3=a 3= 3 3333 3 3 3 33 3
(1969 Prices) 333 3 3333 3 33 333 333333 3332 3

INETINVESTMENTS
(Constant (1989) Rs Nit.)
........................

PU2LIC SECTOR 6788 5360 12148 5271 6389 11660 4900 5909 10809 4941 5219 10160 4735 2685 7419 5793 6148 11940 32427 31710 64137

PtIVATE SECTOR 211 4571 4783 837 6418 7255 791 641 7252 841 9253 10094 U8 9740 10608 897 10253 11149 4446 46696 51142
..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... ..... .....
-- ... .... ..... .....

TOTAL 6999 9931 16930 6108 12808 18916 5691 12370 18061 5782 1"472 20254 5603 12425 18028 6689 16400 23090 36873 406 115279

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 PAMISTAW
DEVELOPMENT
WATERAND POWER (WAPDA)
AUTHORITY
PROJECT
TRANSMISSION
PROJECTCOSTASSUMPTIONS
............................... ....................................... ......

Price Contingency Calculation

1990 1991 1992 1993 1994 1995
.... .... ... . ... .... .... . .... .. .......

Local Inflation 10.0X 8.0X 7.02 6.5X 6.5X 6.5X

Local Escalation Factor 1.0500 1.1440 1.2296 1.3125 1.3978 1.4886

Foreiwi Inflation 7.22 6.5X 5.02 4.5X 4.52 4.5X

ForeignEscalation Factor 1.0360 1.1417 1.1988 1.2527 1.3091 1.3680

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 PAKISTAN
TRANSMISSIONEXTENSIONAND REINFORCEMENTPROJECT
UATER AND POUEROEVELOPMENTAUTHORITY
INTERNALECONOMICRATE OF RETURN
FUEL COST COMPUTATIONS
.
.. ........ ........................
.......................................

FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98-FY1S

FUEL TYPE

INCREMENTALCONSUMPTION
(TOE)
0 0 0 0 0 0 1 1 1
HSD 0 0 0
0 0 196 993 1451 0
FUEL OIL 1124 1124 1124
1107 708 685 680 958 954
GAS 394 394
-6 4 7 121 184 320 394
COAL
FUEL PRICES
(USV/TOE)

169.7 169.7 169.7 169.7 169.7 169.7 169.7 169.7

HSD 169.7
77.3 77.3 77.3 77.3 77.3 77.3 77.3 77.3 77.3
FUELOIL 77.3 77.3 77.3 77.3
77.3 77.3 77.3 77.3 77.3
GAS 50.0 50.0 50.0
50.0 50.0 50.0 50.0 50.0 50.0
COAL
FUELPRICES
(Rs/TOE)

3666 3666 3666 3666 3666 3666 3666 3666

HSD 3666
1670 1670 1670 1670 1670 1670 1670 1670 1670
FUEL OIL 1670 1670 1670
1670 1670 1670 1670 1670 1670
GAS 1080 1080
1080 1080 1080 1080 1080 1080 1080
COAL

FUEL COSTS (Rs MNi.)

0 0 0 0 0 0 4 4 4
HSD 0 0 0
0 0 327 1658 2423 0
FUELOIL 1877 1877 1877
1848 1182 1144 1135 1600 1593
GAS 426 426 426
-6 4 8 131 199 346
COAL ... -- ... .... .... . ... .... . ... ....

1186 1479 2924 4221 1938 2306 2306 2306

Total 1842

FUEL COSTS(CUMULATIVE)(RS Nit.)

. .... .... ... . . . . . . . . .

0 0 0 0 0 0 4 7 11
HSD 4408 4408 4408
0 0 327 1985 4408 4408
FUEL OIL 10379 12255 14132
1848 3030 4174 5310 6909 8502
GAS 680 1106 1531 1957
-6 -2 5 136 335 0
COAL .... .... .... ---- ---- ---
.... ---- ----
11652 13590 15896 18202 20508 a .
Totat 1842 3028 4507 7431
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