RESTRICTED

Report No. PU-4b

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

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF POWER

TRANSMISSION AND DISTRIBUTION PROJECT

TRINIDAD AND TOBAGO

May 13, 1969

Public Utilities Projects Department

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CURRENCY EQUIVALENTS

Currency Unit = Trinidad dollar (TT$)TT$l = 100 TT cents = US$0.50TT$2 = US$1TT$1000 = US$500TT$l million = US$500,000

MEASURES AND EQUIVALENTS

kw = kilowatt = 1000 wattsMw = Megawatt = 1000 kwkwh = kilowatthour = 1000 watt hourskv = kilovolts = 1000 voltsLoad factor = kwh generated in year

maximum demand x 8760mcf = thousand cubic feet

ABBREVIATIONS AND ACRONYMS

Government = Government of Trinidad and TobagoT&TEC = Trinidad & Tobago Electricity

CommissionPUC = Public Utilities CommissionEximbank = Export-Import Bank of Washington

T&TBC's Financial year is January 1 - December 31.

TRINIDAD & TOBAGO

Appraisal of Power Transmission and Distribution Project

Table of Contents

Page No.

SUIXMIARY i - ii

1. INTRODUCTION 1

2. THE ELECTRIC POWER SECTOR 2Existing Facilities of T&TEC 2Other Electricity Supplies 3

3. THE BORROWER - TRINIDAD & TOBAGOELECTRICITY CO0EISSION 4

Organization and Management 4Statutory Authorities Act No. 16 of 1966 4Power Rates 5Present Financial Position 6Past Operating Results and Financing 8

4. THE PROJECT 9Estimated Cost of Project 10Status of Engineering & Procurement U1Disbursement 11

5. JUSTIFICATION OF THE PROJECT 11The Power Market 11The Development Program 12Rate of Return 13

6. FUTURE FINANCES 13Proposed Financing Plan 13Estimated Future Operating Results and

Financial Position 15Modification of Interest Rate on

Permanent Government Advances 16

7. CONCLUSIONS 17

This report has been prepared by Messrs. A.E. Bailey and S. Gishman.

LIST OF ANNEXES

1. Schedule of Tariffs

2. Actual and Forecast Balance Sheets 1963/67 - 1968/72

3. Details of Long-Term Debt as at December 31, 1967

4. Actual and Forecast Income Statements 1963/67 - 1968/72

5. Actual and Forecast Sources and Applications of Funds1967 - 1968/72

6. Transmission and Distribution Program 1968/72

7. Description of Project

8. Details of Project

9. Actual and Estimated Unit Sales 1961/67 - 1968/78

10. Estimate of Plajor Additional Demands for Connection by 1972

1. Actual and Estimated kwh Generation and Sales; Mlaximum Demand;Firm Generating Capacity; Annual Load Factor;System Losses: 1961/67 - 1968/78

12. Demand Forecast and Program of Capacity Additions

13. Method of Calculating Rate of Return on Project

14. Future Fuel Supply and Costs

Slap of T&TEC's System

TRINIDAD & TOBAGO

Appraisal of Power Transmission and Distribution Project

SUMMARY

i. This report covers the appraisal of a project of the Trinidad &Tobago Electricity commission (T&TEC) which has asked the Bank for a loanof US.t2 million to finance the foreign exchange required for a part of itstransmission and distribution development program for the two years 1969and 1970.

ii. The borrower would be T&TEC and the guarantor would be the Govern-ment of Trinidad & Tobago.

iii. The Project comprises the whole of T&TEC's 66 kv and 33 kvdevelopment program and part of the lower voltage development program forthe years 1969 and 1970.

iv. The Project is technically sound and cost estimates are realistic.Retroactive financing of expenditures incurred after January 1, 1969, ofabout US$300,000 is proposed (see paragraphs 4.06 through 4.08).

v. T&TEC is under sound management, and its organization is capableof carrying out the Project. The Statutory Authorities Service Commission,established under Act No. 16 of 1966, could restrict T&TEC's authority overits personnel policies. Assurances were obtained from the Government duringnegotiations that T&TEC's freedom in that area will not be impaired, andalso that continuity of sound management will be ensured (see paragraph 3.06).

vi. The anticipated growth of demand, due partly to the expecteddevelopment of the tourist industry, justifies T&TEC's estimated capitalexpenditure during the two years covered by the Project, and a 12.5% incre-mental rate of return is expected on the development program expenditurefor these two years (see paragraph 5.09).

vii. T&TEC's financial position is sound. The recent approval of a10% tariff increase should provide adequate earnings, satisfactory debtservice coverage, and net internal cash generation to cover a substantialportion of construction requirements in the five years 1968 through 1972.The average rate of return on net fixed assets in operation is expected torange between 8.7% and 11.4% in that five-year period. The present operatingratio covenant will be replaced by a rate of return provision which wasagreed during negotiations.

viii. The cash position will be somewhat strained through 1969, requir-ing temporary use of bank overdraft facilities or similar short-termaccommodation. The cash position should improve steadily thereafter with asubstantial surplus indicated by 1972, which is expected to be available forthe next stage of substantial construction involving additional generatingcapacity.

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ix. In accordance with the Government's request, the interest rateceiling on permanent Government advances to T&TEC will be increased from thepresent 5% per annum to 8% per annum (see paragraph 6.10).

x. The Project is suitable for a Bank loan of US$2 million, for aperiod of 15 years including a grace period of two years.

TRINIDAD & TOBAGO

Appraisal of Power Transmission and Distribution Project

1. INTRODUCTION

1.01 This report covers the appraisal of a project which forms apart of the transmission and distribution development program to be carriedout by the Trinidad and Tobago Electricity Commission (T&TEC) for theperiod 1968 through 1972. The estimated cost of the program is TT$29.5 mil-lion (US$14.75 million) and the Bank has been asked to make a loan equivalentto US$2.0 million to cover part of the foreign exchange cost of the programduring the two years 1969 and 1970.

1.02 The borrower would be T&TEC and the guarantor would be the Govern-ment of Trinidad & Tobago.

1.03 The Bank made a loan (No. 293-TR) of US$23.5 million for powerto Trinidad in August 1961, to cover the foreign exchange cost of a projectcomprising:

(a) the construction of the Port-of-Spain 'B' thermal powerstation with an installed capacity of 100 Mw;

(b) a pipeline of approximately 41 miles in length to supplynatural gas to both the Port-of-Spain 'A' and 'B' powerstations; and

(c) the expansion of transmission and distribution facilities.

The Port-of-Spain 'Bt thermal power station and the pipeline were completedsatisfactorily and on schedule, but the transmission and distribution workswere delayed owing to:

(a) a shortage of experienced staff; and

(b) T&TEC's insistence that it could handle the developmentprogram without the assistance of consultants.

The closing date of December 31, 1965, had first to be postponed untilDecember 31, 1967, and then later to March 31, 1968, to facilitate thecompletion of the transmission and distribution work. An unutilizedbalance of US$2.1 million was cancelled at March 31, 1968. T&TEC had hopedthat the Bank would agree to a continuance of expenditure under LoanNo. 293-TR on transmission and distribution development until this was fullydisbursed. This could not be agreed to, as it would have entailed ex-penditure on works which had not been appraised and which should properlybe the subject of a further loan. The possibility of a further loan toassist in T&TEC's transmission and distribution development program was dis-cussed during a supervision mission in December 1967, and the applicationfor the loan now proposed was received in May 1968.

1.04 This report was prepared by Messrs. A.E. Bailey and S. Gishmanfollowing an appraisal of the transmission and distribution developmentprogram and the financial position of T&TEC in August 1968.

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2. THE ELECTRIC POWER SECTOR

2.01 Trinidad & Tobago is a country consisting of two small islandssituated in the southern Caribbean just off the Venezuelan coast. Morethan half Trinidad's area of about 1,860 square miles is covered by forestsand mountains, and most of the population of about one million, together witha major proportion of the industrial and commercial development, is con-centrated in the low-lying area along the western side of the island. Tobago,with an area of 116 square miles and a population of some 30,000, is mainlydependent on tropical agriculture. However, this small island offers thegreater potential for the development of tourism and whilst its demand forpower is at present a very small proportion of T&TEC's total demand, it islikely to increase considerably if the many hotels planned are establishedon the island.

2.02 The economy of the country is now substantially dependent uponpetroleum extraction and refining, with agriculture contributing less than10% to its gross domestic product. Commerce and local manufacturing outputhave developed at an increasing rate during the last few years, and annualper capita national income is currently estimated at slightly over US$600.

2.03 The preponderance of the petroleum sector in the economy has givenrise to concern and this has stimulated the Government's efforts to diversifythe economy. Thus the main load growth is more likely to occur in sectorssuch as tourism and manufacturing than in the petroleum sector.

2.o4 Despite the mountainous nature of a substantial proportion of theland area, there is little potential for hydroelectric generation. Thecountry is fortunate, however, in its resources of natural gas and fuel oil.Natural gas has been used as a fuel for power generation since 1964 and isat the present time being piped from the Penal oil field in southwestTrinidad. Some additional resources have recently become available from theSoldado oil field which is located off the southwest coast of Trinidad in theGulf of Paria.

2.05 T&TEC was established by the Government on January 1, 1946, and onApril 20, 1961, the assets and liabilities of the two other supply authorities,the Port-of-Spain Corporation Electricity Board and the San Fernando BoroughCouncil Electricity Department, were transferred to T&TEC, which then becamethe sole public generating and distributing authority in Trinidad and Tobago.

Ecisting Facilities of T&TEC

2.06 T&TEC installed generating capacity totals 207.85 Mw. Thiscomprises 180 Mw of steam plant and 25 Mw of gas turbine plant in Trinidad,and 2.85 Mw of diesel plant in Tobago.

2.07 There are four thermal stations in Trinidad. Two, known asPort-of-Spain 'A' and 'B' stations with installed capacities of 10 Mw

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and 100 14w respectively, are located adjacent to each other in the capitalcity of Port-of-Spain. The third station of 70 1s4w is located at Penaladjacent to the oil fields, and the fourth of 25 14iw at Point Lisas (seemap). The plants at the first three stations mentioned above are allsteam plants with gas fired boilers. The Point Lisas plant consists ofgas turbines which are currently available for standby purposes, but willbe used for peaking purposes as the load develops. The capacity of thePort-of-Spain 'B' station will be increased by 80 M4w when a unit of thissize, at present under construction, is broughlt into service in the latterpart of 1969

2.08 The main transmission system consists of twio single circuit 66kv lines between Port-of-Spain and Penal from which the 33 kv primarydistribution is supplied from two substations located in the northwestand southwest of the island respectively. The Port-of-Spain and Penalpower stations are interconnected by means of a 132 kv single circuittransmission line. The routes of the principal transmission lines areshown on the map attached to this report.

2.09 The more highly industrialized western side of Trinidad is servedby a 33 kv primary distribution system. This system has been extendedprogressively to the southeast and northeast sections of the island wherefuture development is expected (see map). Secondary distribution is carriedout at 12 kv, and localized areas (in tomnships and villages) are suppliedby low tension lines operated at 1)5/230 volts 60 cycles single phase tosupply residential and other small miscellaneous consumers.

2.10 Tobago is situated about 19 miles northeast of Trinidad. Itsdistribution system is connected to the Trinidad system by means of a 33kv submarine cable from Toco in Trinidad to Piilford Bay in Tobago. T&TECmaintains a small diesel station at Scarborough on Tobago for standby pur-poses with an aggregate capacity of 2.85 Elw. A further 1.4 Mw of second-hand diesel plant has been acquired from the U.S. naval establishment re-cently handed over to the Government, and is to be installed in this statiom.

2.11 A 33 kv single circuit line has been extended from the submarinecable termination point at Milford Bay to Scarborough, the principal town-ship on the island. The southern part of the island has a 12 kv secon-dary distribution system which has been progressively extended to otherpopulation centers north of Scarborough, and, as in the case of Trinidad,the townships and locally populated areas have a 115/230 volts 60 cyclessingle phase supply for residential and other small miscellaneous con-sumers.

Other Electricity Supplies

2.12 A number of large industrial concerns, principally in the southernand western areas of Trinidad, operate their own generating plant. Mostof these commenced operations before a public supply became available,and the Ordinance governing T&TEC's operations provides for the automaticreneval of such licenses. Since 1946, licenses for new private generatingplant have only been granted in circumstances where it can be shown that

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T&TEC cannot prov-ide an adequate supply on reasonable terms. There are some92 private generating installations aggregating about 65 Mw presentlyoperating under license. Approximately 52 Mw of this total representsprivate plant operated by the Shell and Texaco oil companies.

3. THE BORROVWE - TRINIDAD & TOBAGO ELECTRICITY COMMISSION

3.01 T&TEC is a statutory corporation of the Government of Trinidad andTobago which was established by the Trinidad and Tobago Electricity Commis-sion Ordinance No. 42 of 1945. This was amended by Ordinance No. 8 of 1961to meet the requirements of the Bank before negotiations for Loan No. 293-TRcould proceed. The amendments gave the Commission greater freedom to run itsaffairs in accordance with sound business practice, and also unified allpublic electricity supplies in Trinidad and Tobago making T&TEC the solepublic generating and distributing autlhority.

Organization and Management

3.02 The Board of T&TEC consists of a Chairman, a Deputy Chairman, andnot less than five or more than eight other members. The members are appointedby the Governor-General from persons qualified and/or experienced in mattersrelating to electricity supply or other utilities, industry, trade, financeand science, normally for periods not exceeding five years. The presentBoard consists of a Chairman, Deputy Chairman and eight members.

3.03 The Chief Mxecutive Officer and General Manager is appointed by theBoard, and the present holder of this appointment is a well-qualified andexperienced Trinidad engineer who has held the appointment since 1963. Allthe senior posts in T&TEC are held by local officers who are well qualifiedin their respective spheres. T&TEC is presently under sound management;however, the General Manager and the Deputy General Manager are due to retirewithin the next few years. During negotiations assurances were obtained thatthe Bank will continue to be consulted prior to any proposed appointment toor removal from the positions of General Manager, Deputy General Manager,Financial Comptroller and Engineering Controller.

Statutory Authorities Act No. 16 of 1966

3.04 During the negotiations for Loan 293-TR, a Government proposalto extend the authority of the Public Service Commission to cover appoint-ments, etc. of personnel of statutory corporations was discussed. TheGovernment representatives gave an undertaking that in the event of anyarrangements being contemplated which would have the effect of reducing thepowers of T&TEC in that area, the Government would consult the Bank inample time for it to make comments.

3.05 Subsequently without consultation with the Bank, the Governmentenacted Act No. 16 of 1966, called the Statutory Authorities Act, creatinga Statutory Authorities Service Commission with power to appoint, transfer,promote, remove and exercise control over persons in Statutory Authorities.Although the said Commission has not so far exercised its powers in a waydetrimental to the sound management of T&TEC, these powers could have anundesirable effect on T&TEC.

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3.06 During negotiations assurances have been obtained from the Govern-ment that the Statutory Authorities Service Commission will not initiate anyaction with regard to staff of the T&TEC but will promptly approve anyproposed action initiated by the T&TEC with regard to appointment, transfer,removal or discipline of T&TEC personnel.

Power Rates

3.07 Power rates are regulated by the Public Utilities Commission (PUC)which was established under Act 15 of 1966. The PUC consists of fiveCommissioners appointed by the Governor-General to serve for a period notexceeding five years subject to reappointment. Three of the five appointeesmust qualify by reason of experience in trade, law, finance, engineeringor accounting; the other two are representative of the gemeral public. Ratechanges may be initiated by the public utility, by motion of the PUC, or atthe instance of the Minister of Public Utilities. The PUC is empowered tohold hearings, conduct investigations, make final determinations and, atits discretion, to authorize temporary rate changes pending final action.The Act requires that in promulgating regulations for the rate-makingprocess the PUC shall have regard to -

(a) the "original capital cost expended by therelevant public utility";

(b) "annual depreciation based on such originalcost";

(c) operating expenses;

(d) "returns on the depreciated original costrate base."

The Act's listed criterion of "returns on the depreciated original costrate base" is suitable only in the context of a continuous relativelystable price level; it does not explicitly recognize the possible futurenecessity of revaluation of fixed assets in the event of pronouncedinflation and/or currency revaluation. The contingency of possible assetrevaluation, however, would be covered as part of the rate-of-returncovenant agreed to in the negotiations (paragraph 3.08). Should the PUCfail to permit full compliance with that covenant, the Minister responsiblefor Finance is empowered under legislation assented to on May 29, 1968 toorder T&TEC to take all necessary steps to comply with the covenant,"notwithstanding any provision contained in any other statute."

3.08 Under the provisions of Loan 293-TR, T&TEC agreed to maintaintariffs such that the operating ratio, computed on a three-year movingaverage commencing January 1, 1962, would not exceed 70%. The "operatingratio" is the ratio which the total of operating expenses (includingannual depreciation of not less than 4% of fixed assets in operation)bears to total operating revenues. Initial performance was poor, butas a result of the rate increase of 1964 the three-year moving average

improved gradually to 71.4% in 1965 and to 66.6% in 1966. It has sinceremained well below the 70% limitation. However, so as to conform withthe criterion embodied in the Public Utilities Act of 1966 under whichT&TEC must now operate (paragraph 3.07) it was agreed during negotiationsthat the operating ratio covenant would be replaced by a rate of returnprovision under which T&TEC would be required to earn not less than 8%per annum on its fixed assets in operation valued or revalued on a basissatisfactory to the Bank, less adequate depreciation.

3.09 The present level of rates, resulting from a 10% rate increasewhich has been in effect since March 1, 1968 but was finally approved bythe PUC only on March 28, 1969,is sufficient to yield the required 8%return. It was further agreed during negotiations that no rate changewould be made during the construction period of the project, 1969 and 1970,without prior consultation with the Bank.

3.10 T&TEC has established four basic consumer categories, fromresidential through large industrial users. Its rate structure (seeAnnex 1) is well suited to promote the growth of electric energyconsumption on a sound basis.

Present Financial Position

3.11 T&TEC's accounting system is sound and all work is current.Its books are audited by Pannell Fitzpatrick & Co., who are fullycompetent and acceptable. Assurances were obtained during negotiationsthat independent auditors satisfactory to the Bank will continue tobe employed, and that certified copies of the annual audited financialstatements will be forwarded within four months after the end ofeach financial year.

3.12 T&TEC's financial position is sound. Its audited balance sheetsfor the years 1963 through 1967 are shmon in Annex 2; a balance sheet atOctober 31, 1968 is also shown there, but the figurtes are preliminary andunaudited. The latest audited balance sheet, as of December 31, 1967, issummarized below.

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TT$ US$Tin thousandsT

ASSThTS

Fixed assets in operation 133,617 66,808Less: Accumulated depreciation 33,906 16 953

Net fixed assets in operation 99,711 49,855llork in progress 2)258 1,129

TotaJ. net plant 101,969 50,984

Current Assets 11,935 5,968Other assets 124 62Deferred debits 5,525 2,762

ToLal Assets 119,553 59,776

LJ.A1ILITIES & EQUITY

Equity:General revenun rsserve

(earned surp]us) 18,125 9,062Other revenue reserves 1h0 70

1T2G 9,132

Long-term debt:IBRD Loan 293-T`1 37,476 18,738Permanent Government Advances 45,415 22,707Other 13,036 6,518

95,927 47,963Less current nortion 4,913 2,456

91,o14 45,507

Current liabilities 10,274 5,137

Total Liabilities & Equity 119,553 59,776

3.13. The Trinidad dollar was devalued in November 1967 from 1.7 =US$1 to 2 = US$1. To reflect the consequent increase in its foreignloan obligations in terms of local currency, T&TEC has written up on itsbooks the December 31, 1967 balances of IBRD Loan 293-TR and the smallCanadian Development Loan. The aggregate amount of tha write-up isTT$5.3 million (US;2.65 million). This item, which comprises the bulk ofthe deferred debits shown on the above balance sheet, will be amortizedbeginning with 1963 by annual charges to operating expense over the lifeof the related foreign loans. This treatment is acceptable.

3.14 Fixed assets are stated at cost. The bulk of T&TEC's fixedassets of foreign origin were purchased in Great Britain, the currency ofwhich was devalued at the same time and in approximately the same pro-portion as Trinidad and Tobago's. In the 1ioit of t.he fact thatC T,TCIs

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accounts have been adjusted to the extent of its outstanding foreign loans(paragraph 3.13) arnd that internal prices have had only a relatively mode-rate rise in recent years, a revaluation of the fixed assets does notappear necessary at this time. Should a need for revaluation arise inthe future, this could be accomplished under the rate-of-return covenantagreed to in negotiations (paragraph 3.08).

3.15 Depreciation is charged on a straight line basis, at a compositerate of 4% per annum on gross fixed assets. This rate of depreciation issatisfactory. Accumulated depreciation at December 31, 1967, was 25% ofgross fixed assets in operation. Considering that almost half of thegross fixed assets in operation at the end of 1967 were added within thepast five years, the present reserve appears adequate.

3.16 Details of long-term debt at December 31, 1967, are shown inAnnex 3. The permanent Government advances totaling TT$45.4 million(US$22.7 million) were made from time to time for capital improvementsand expansion. The total is comprised of two categories:

(a) TT$10.5 million advanced prior to April 1, 1956,bearing fixed interest rates of 2% to 5%; and

(b) TT$34.9 million, advanced between April 1, 1956,and the end of 1962 at a variable interest rate.

The Government of Trinidad and Tobago regards all of these advances aspermanent capital of T&TEC, and has heretofore covenanted that during thelife of Loan 293-TR no repayments of principal shall be required of T&TEC.The present covenant prohibiting repayment of the permanent Governmentadvances without the consent of the Bank is. Jinzle kinthe gVarat*ee--agreement for the proposed loan.

3.17 The present covenant also limits the interest payable on theTT$34.9 million second-category permanent Government advances to thelesser of 5% per annum or the rate prevailing from time to time at whichthe Government can borrow from commercial banks. Interest on theseadvances is currently being paid at 5% per annum. The Government has re-qAs4wed that the interest ceiling on these advances be increased to 8%per annunm (paragraph 6.10).

3.18 Under the terms and conditions of IBRD Loan 293-TR, long-termdebt may not be incurred if the resulting proportion of T&TEC's long-termdebt to total equity wjould exceed a ratio of 60/40; and for purposes ofcomputation, the outstanding permanent Government advances are deemed tobe equity. On that basis, T&TEC's debt-equity ratio at December 31, 1967,was 44,/56. The same debt limitation covenant .is. included in theproposed loan agreement.

Past Operating Riesults and Financing

3.19 Audited incone statements for the fiv,e-rear period 1963 through1967 and prali,aimry unaudited results for thc 10 -montdi ended October 31,1968 are shoun on Annex 4. The sharp improvement in operating results in LO(%

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reflected a 10% tariff increase and, more importantly, the addition ofthe large Federated Chemical Ltd. industrial load, causing an 87% increasethat year in unit sales to the industrial customer category. Over thefive-year period, total sales of electric energy increased 133% - from269 million kwh to 629 million kwh. The bulk of the increase occurredin the industrial category, and this accounts for the decrease in ave-rage revenue per kilowatt hour of sales from TT4.51 cents in 1963 to TT3.64cents in 1967. Total energy sales are still heavily concentrated in theindustrial category which, in 1967, was 71% of total sales and produced46% of total revenues. Over the period, total revenues increased 75%,from TT$13.4 million to TT$23.5 million. Operating expenses (includingdepreciation) have in general held to a reasonable level, increasing by42% over the same period.

3.2D The return on net fixed assets in operation improved from 4.4%in 1963 to 8.1% in 1967. Except for 1963, the rate of return may beconsidered satisfactory, averaging about 8% over the four-year period1964-67.

3.21 In the five years through 1967, about 30% of capital cons-truction expenditures was covered by net internal cash generation (afterdebt service requirements). The balance of construction expenditures wasfinanced by IBRD Loan 293-TR, by temporary Government loans, and by medium-term loans from commercial banks. The commercial bank loans aggregatedTT$9.5 million, of which TT$4 million remained outstanding at the end of1967, repayable in equal installments in 1968 and 1969. The balance ofthe temporary Government loans was TT$0.95 miUion at December 31, 1967,repayable through 1978.

3,22 T&TEC's use of commercial bank loans on relatively short termto help finance capital expenditures in the recent past has tended tocompress its debt service requirements, resulting in something of a drainon internally generated cash. With part of the current constructionprogram being financed through an additional short-term bank loan a rathertight cash position will persist through 1969, necessitating the temporaryuse of bankc overdraft facilities to cover cash deficits. However, basedon the income projections, the cash position would thereafter improverapidly, as sh6x3n in Jhe forecast Sourc6s and Applications of Funds(Annex 5).

4. THE PROJECT

4.01 The estimated cost of T&TEC's transmission and distributionprogram for the period 1968 through 1972 is TT$29.5 million. The estima-ted cost of the principal features is shown in Annex 6. In addition,expenditure on the completion of the Port-of-Spain 'B' power station80 Mw extension which is still under construction will amount to TT$17.3million. Additional generating capacity will be required in 1975/76 andthe Port-of-Spain 'B' station has been designed for an extension of onefurther 80 Mw unit. However with the concentration of industrial loadtowards the southwest of Trinidad, the possibility that the next extension

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of generating capacity might require a new power station in the Point Lisasarea (see map) is currently under consideration.

4.02 The proposed Project would consist of the wthle of T&JEC's 66kv and 33 kv development program and part of the lower voltage program forthe years 1969 and 1970.

4.03 The 66 kv and 33 kv development program will comprise the follow-ing. princlpal items:

(a) The erection of about 30 miles of 66 kv and 44 milesof 33 kv transmission lines.

(b) Rehabilitation and reconstruction of existing 66 kvtransmission lines.

(c) Installation of eight nea 33 kv substations andexpansion of facilities at three existing 33 kvsubstations.

4.04 A more detailed description of the worlcs which form the Projectis given in Annex 7.

Estimated Cost of Project

4.05 The following table shows the total estimated cost of the Projetand its principal features. A more detailed breakdown of cost is givenin Annex 8.

Estimated Cost of Project

Foreign Local Total Foreign Local Total--- TT$ millions ---- ---- US$ millions ---

Transmission 66 kv 1.04 .43 1.47 .52 .22 .74Distribution 33 kv .69 .45 1.14 .34 .23 .57Substations 66 kv .28 .12 .40 .14 .06 .20Substations 33 kv 1.09 .41 2.50 .55 .20 .75Distribution,

12 kv and un-der plus con-tingencies 0.90 .59 1.49 .45 .29 .74

Total 4.00 2.00 6.00 2.00 1.00 3.00

4.06 The cost estimates are realistic. Foreign exclange expendituresof the Project are approximately 75$1 of the total anticipated foreign ex-penditure on tha transmission and distribution expansion program duringthe years 1969 and 1970. The estimates include reasonable provision for

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contingencies of about 10%, but do not include interest during construction.

Status of Engineering & Procurement

4.07 The planning and design of the transmission and distributiondevelopment program are being carried out by T&TEC's planning and designsection. This section is now adequately staffed by qualified and ex-perienced engineers. The Project comprises part of T&TEC's annual programfor the development of the transmission and distribution systemns andconsists of work with which the present staff is familiar. There are nosophisticated technical features, and the work is within the competence ofthe staff who are responsible for its execution.

Disbursement

4.08 The Project includes the wbole of the 66 kv and 33 kv developmentprogram in 1969 and 1970. To satisfy the 1969 requirements of a continuallygrowing system it was necessary to order some US$500,000 of equipment in1968. Provided T&TEC can show that the Bank's Guidelines on Procurementhave been complied with, it is recommended that payments coming due afterJanuary 1, 1969 but before the loan is signed, estimated to amount to aboutUS$300,000, should be eligible for disbursement from the loan. This gould beappropriate in view of the urgency of T&TEC's development program and itstight cash position in 1969 (paragraphs 3.22 and 6.02).

4.09 Assurances were obtained during negotiations that the "GuidelinesRelating to Procurement under World Bank Loans and IDA Credits" will becomplied with in regard to materials which are still to be ordered andfinanced out of the proceeds of the loan.

5. JUSTIFICATION OF THE PROJECT

The Power Market

5.01 The market for power comprises the domestic, industrial andcommercial sectors and street lighting (Annex 9). The number of consumershas increased from 7,965 in 1946 to 215,432 in 1968 (October).

5.02 T&TEC enjoyed a consistently high annual rate of growth until1965. Sales to industry increased rapidly and are now 71% of total salescompared with less than 60% in 1961/62. This is principally due to thegrowth in sales to the larger companies such as the oil companies andFederation Chemicals Ltd. Sales increased from 30 million kwh during1946, the first year of operation, to 629 million kwh during 1967. Theaverage annual rate of increase was about 15% during the first few yearsof operation; this improved to 25% per annum in the period 1953 through1955, then fell to an average rate of about 17% through 1962. The trendis distorted after 1962 with the connection of Federation Chemicals Ltd.in 1964, and the supply of a substantial block of temporary power toTexaco in 1966 due to the failure of one of their generating sets.

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5.03 Sales in 1967 were only 2.4% higher than in 1966. The reasonfor this is that the temporary supply to Texaco mentioned in paragraph 5.02above ceased at the end of 1966 when the unit which had failed was againin service, and the resultant fall in demand was reflected in a fall in salesfor 1967. To allow for this, it is necessary to view the load growth overthe two-year period 1966-1967, which averaged 10% per annum. This is in linewith the forecast which shows the annual growth rate falling to about 8% by1971 (see paragraph 5.05). The latest figures available show that in thefirst ten months of 1968 sales of kwh increased by 11% over the same periodof 1967.

5.04 Reference to Annex 9 will show that growth was low in all categoriesin 1967 and not just in the industrial category, which was explained in theprevious paragraph. This was not due to an actual slow-down in the rate ofgrowth in categories other than industrial, but to an extensive reclassifi-cation of consumers from the domestic to the commercial category and from thecommercial to the industrial category to rectify anomalies.

5.05 Based on the foreseeable development projects scheduled withinthe next five years (see Annex 10), the annual increase in sales has beenestimated at about 8% until 1971 after which it is expected to drop re-latively quickly to about 5% per annum (see Annex 9). These estimatesdo not include sales to a proposed iron and steel project, consisting ofa small furnace based on scrap and various rolling facilities, about wzhichuncertainty currently exists regarding the construction schedule and themaximum demand and load factor. The estimates are reasonable and, ifanything, somewhat conservative.

5.06 Annex 11 shows that the maximum demand on the system has increasedfrom 52.5 Mw in 1961 to just under 122 Mw by 1966, and with the growth of thepower market described above is expected to almost double to a figure in theneighborhood of 238 Mw by 1978. The firm and installed capacity of thegenerating plant and the annual increase in maximum demand are shown ingraph form in Annex 12. The annual system load factor increased to 71.0%in 1967. This was principally due to the improving load factor of thelarger industrial consumers and the diversity of the industrial loadrelative to the domestic load.

The Development Program

5.07 Expansion of the 66 kv and 33 kv transmission systems together withthe installation of new substations, and the upgrading of some of the existingsubstations, is necessary to meet the anticipated load growth in the areaswhich are scheduled for the development of tourism. It is also necessary tomeet the load growth in the main industrial development areas in the southof Trinidad, and to transmit the increased output from the Port-of-Spain'B' power station when the 80 Mw unit at present under construction iscommissioned in the latter part of 1969. Expansion of the distributiondevelopment program (12 kv and under) is necessary to meet the normal systemload growth.

- 13 -

Rate of Return

5.08 Since the Project comprises only a part of T&TEC's transmissionand distribution development program for the years 1969 and 1970, it is notpracticable to calculate a rate of return for the Project as such. Insteada calculation has been made on the whole program. The method adopted andthe assumptions made to determine the flows of costs and benefits for theprogram are shown in Annex 13.

5.09 Since it was not possible to quantify the total benefits accurately,calculations were limited to measuring the increment in net revenues, valuingoutput at current tariffs, attributable to the proposed program. On thisbasis the rate of return on the capital cost of the transmission and dis-tribution program for the years 1969 and 1970 is expected to be about 12.5%with a range of 10.5% to 14.5%. Details of the calculations are given inAnnex 13.

6. FUTURE FINANCES

Proposed Financing Plan

6.01 A forecast of the Sources and Applications of Funds for the five-year period 1968-72 is shown in Annex 5. This forecast reflects approvalof the 10P tariff increase (paragraph 3.09) and also gives effect to an agreedincrease in interest to 8% per annum on the nonrepayable Government advances(see paragraphs 3.17 and 6.10). The proposed financing plan for the three-year period 1968 through 1970 is summarized below. The forecast cash re-quirement for that period includes, in addition to the project, the estimatedcapital expenditures for the 80 Mw addition to the Port-of-Spain 'B' gener-ating station plus scheduled other construction and provision for additionalworking capital.

- 14 -

In thousandsCash Requirements TT$ US$

Construction expenditures:Proposed IBRD project 6,000 3,000New 80 M generating unit 17,318 8,659Other construction 12,436 6,218

Subtotal 35,754 17,877

Additions to Working Capital 1,416 708

Total Cash Requirements 37.170 18,585

SourcesInternal cash generation 49,747 24,873Less: Debt service 33,656 16,828Net internal cash generation 16,091 8,045

Borrowings:Balance of IBRD Loan 293-TR 1,348 674Proposed IBRD Loan 4,000 2,000Eximbank 13,200 6,600Commercial Bank 2,000 1,000Bank overdrafts 1,630 815

Total Borrowings 22,178 11,089

Total Sources 38,269 19,134

Cash surplus 1,099 549

Net internal cash generation asper cent of total cash require-ments 43%

6.02 For the period 1968-70, about 43% of construction expendituresplus additional working capital will be covered by net internal cashgeneration. Heavy cash requirements are concentrated in the period through1969, and to cover cash deficits in that period provision is made for thetemporary use of bank overdraft facilities. This is shown in Annex 5,which also show^Js that a 1968 overdraft would be rolled over in 1969 andfinally terminated in 1970, still leaving a substantial cash balance atthe end of that year. Construction requirements for the following twoyears 1971-72, which will not involve any additional generating plant,would be considerably lower resulting in a further cash accumulation toTT.$5.7 million by the end of 1972. This cash accumulation is expected to'se av7^-lable or the ne:.t, St'ge o" substL,-ntal construction in-volving the additional generating capacity which, under the load-growthforecasts, will be required by 1975/76 (see paragraph 4.01 and Annex 12).The proposed financing plan is satisfactory.

- 15 -

6.03 The proposed borrowings are assumed to have the following terms:

(a) An interest rate of 6.5% on the proposed IBRD loanof TT$4 million (US$2 million) with a repayment termof 15 years including a grace,period of two years.This term of repayment is reasonable in light ofT&TEC's forecast financial position and the natureof the project.

(b) The TT$13.2 million (US$6.6 million) Eximbank loan(which is to cover the foreign cost of the new 80Mw generating unit now under construction) hasalready been arranged; it bears an interest rateof 6% per annum on unpaid balances, with repaymentsscheduled in 30 approximately equal semiannual in-stallments commencing January 15, 1970 and ending in1985.

(c) The TT$2 million commercial bank loan will bearinterest at the prevailing local prime rate(presently 7.5% per annum), and be repaid intwo installments, TT$0.9 million in 1968 andTT$l.l million in 1969.

(d) Banlc overdrafts of TT$1.5 million in 1968would be rolled over to TT$1.63 million in1969 and paid off in 1970; an interest rateof 8% per annum has been assumed.

Estimated Future Operating Results and Financial Position

6.04 Forecast income statements of T&TEC for the years 1968-72 areshown in Annex 4. The forecasts are based on the following assumptions.

(a) Sales: An overall increase of 46% in energysales is assumed during the five-year forecastperiod or an average annual increase of 7.8%.This compares with an actual increase of 133%in the preceding five-year period, and an ave-rage compounded annual growth of 18.5%. Theearlier period, however, reflects an unusualjump in the industrial load as previously noted.

(b) Rates: The forecasts assume that the presenttariffs will continue through the forecastperiod.

(c) Fuel Cost: A cost of TT27.5 cents per thou-sand cubic feet of natural gas has beenassumed, as against the present cost of TT21.5cents. T&TEC's fuel supply situation and the

- 16 -

background for the assumed price increaseare discussed in Annex 14.

(d) Labor Costs: The present labor contractexpires in 1969, and negotiations for a newcontract will get under way in the summer ofthat year. The forecasts assume a 10% increasein labor costs commencing January 1, 1970. Thisassumption, iwhich is based on awards in privatesector labor disputes made recently by the IndustrialCourt (to which, in absence of agreement at the con-ference table, such disputes are referred by theCommission of Labor) appears reasonable for presentpurposes.

6.05 Reflecting the tariff increase of March 1, 1968, the averagerevenue per kwh sold increases from TT3.64 cents in 1967 to TT3.89 centsin 1968, and is expected to be maintained at about that level throughoutthe forecast period. Over the same period, operating revenues are forecastto increase by 53%, operating expenses (including depreciation) by 46%, andnet income by 108%.

6.06 Debt service coverage is relatively low in 1968 and 1969 at 1.3times, but improves to 2.0 times by 1972. Computed exclusive of intereston the permanent Government advances, the coverages would range from 1.7times in 1968 to 3.1 times in 1972.

6.07 An operating ratio of 67.7% is indicated for 1968, thereafterimproving to 62.9% in 1972. The three-year moving average would be wellbelow the 70% limitation specified under the operating-ratio covenant ofLoan 293-TR, which is to be replaced by a rate of return covenant (para.3.0-4

6.o8 Rates of return on annual average net fixed assets in operationare expected to inprove from 8.7% in 1968 to 11.4% in 1972. The rela-tively high returns in the last two years (about 10-11%) will probablydecline somewhat when additional investments are added to the rate basein subsequent years.

6.09 Forecast balance sheets for the period 1968 through 1972 areshown on Annex 2. Counting the permanent Government advances as capitalin accordance with the provisions of the debt limitation covenant of Loan293-TR, a debt-equity ratio of 46/54 is indicated at the end of 1968,declining to 34/66 by the end of 1972.

Modification of Interest Rate on Permanent Government Advances

6.10 The Government of Trinidad and Tobago has requested that theinterest ceiling of 5% provided for under Loan 293-TR on the "secondcategory" permanent advances to T&TEC (paragraph 3.17) be increased to8% per annum commencing January 1, 1969. However, to avoid burdeningT&TEC over the near term with the additional interest - amounting toTT&1.O4 million (US$520,000) annually - the Government proposes further

- 17 -

that for the years 1969 and 1970 the interest increment shall not be paidor compounded but added to the principal of the "second category" advances,and that cash interest payments at the increased rate shall commenceJanuary 1, 1971, on the principal as so augmented. The Government'srequest is reasonable, and was agreed to in the negotiations. The permanentadvances are in effect equity capital entitled to a more adequate returnthan the 5% ceiling fixed at a time of considerably lower interest rates.Furthermore, the proposal will not impose any increased cash burden onT&TEC during the project construction years 1969 and 1970; and as shownby the financial forecasts (which assume the proposed 8% interest rate)T&TEC's longer-term financial position will remain satisfactory.

7. CONCLUSIONS

7.01 The Project, which constitutes approximately 75% of the anticipatedforeign expenditure for the transmission and distribution development programfor the years 1969 and 1970, is technically sound and estimated costs arereasonable (paragraph 4.0 6 ).

7.02 The development program which includes the Project is necessaryto meet the expected load growth on the system (paragraph 5.07).

7.03 T&TEC is under sound management and is capable of constructingthe Project (paragraphs 3.03 and 4.07).

7.o4 The increase in sales during the next five years is expected toaverage about 8% per annum and the rate of return on the transmission anddistribution development program for 1969 and 1970 is expected to be about12.5% (paragraphs 5.05 and 5.09).

7.05 The possibility of problems arising from the recently establishedStatutory Authorities Service Commission has been satisfactorily overcomeunder the assurances obtained in the negotiations (paragraphs 3.03 through3.o6).

7.o6 T&TEC's financial position is sound and, following the recentapproval of the 10% tariff increase, its long-range earnings positionshould be satisfactory (paragraphs. 6.05 through 6.09).

7.07 The proposed financing plan for the period through 1970 duringwhich the Bank Project will be carried out is satisfactory (paragraph 6.02).T&TEC should realize a satisfactory return, achieve an adequate debt ser-vice coverage, and may be expected to generate a substantial proportion ofits new capital requirements (paragraph 6.02, 6.06 and 6.08).

7.08 The Government's request-that the interest limitation on itsexisting permanent advances to T&TEC be raised from the present 5% to 8%is reasonable and has been agreed (paragraph 6.10).

7.09 The propoeed Project is suitable for a Bank loan of US$2 millionrepayable over 15 years including a grace period of 2 years.

- 18 -

7.10 During negotiations, further assurances were obtained asfollows:

(a) T&TEC will consult with the Bank prior to appointments toor removals from the positions of General Manager, DeputyGeneral Manager, Financial Comptroller and EngineeringController (see paragraph 3.03);

(b) The present operating ratio covenant will be replacedby a rate-of-return covenant requiring T&TEC to earn notless than 8% per annum on its net fixed assets in operationrealistically valued (see paragraph 3.08);

(c) The debt-limitation covenant, together with the prohibitionagainst repayment of the permanent Government advances, is,as provided in the previous loan agreement, repeated in theproposed loan documents.

M4ay 13, 1969

ANEX 1Page 1 of 3 pages

TRINIDAD & TOBAGO ELECTRICITY CO ilv1ISSION

Schedule of Tariffs

The new rates given final approval by the PUC in March 1969 aresubstantially the same as those which it had permitted T&TEC to instituteon a temporary basis on March 1, 1968, designed to produce an increase of10% in revenues. The rates are conventional in design.

The domestic and general rates are both variable block tariffs,and the large load rates which provide for supplies to large commercialand industrial consumers incorporate a monthly maximum demand chargetogether with a low kwh charge. There are also two "off peak" tariffs,each of which provides for a reduction in the monthly maximum demandcharge to recognize the extent to which the maximum demand can be reducedduring the peak period. A third off pealc tariff is available for supplieswhich are entirely off peak.

All the rates (except large load D3) incorporate minimum billingsand the large load and off peak rates also incorporate a fuel cost variationcharge. An additional fixed charge where T&TEC reserves excess transmissioncapacity at the consumer's request is also included in the case of largeload rates DL, D2 and D3 and off peak rates F2 and F3.

Basic Details of the new rates are shown hereunder. Monetaryunits are expressed in TT currency.

(a) Domestic Rate "A" (Lbillin)

First 50 I;wh @ 13 cents per kwhNex-t 50t kwh @ 10 cents per kwhNext 250 kwnh @ 6 cents per kwhNext 900 lkwh @ 3.5 cents per kwhAll kwh in excess of

1250 @ 2.5 cents per kwh

Minimum bill $3.00 for two months or part thereof.

(b) General Rate B (Two monthly billing)

First 60 kwh i 15 cents per unitNext 210 kwh @ 10 cents per tIitNext 1730 kwh @ 6 cents per unitNext 3000 kwh h 4 cents per unitNext 10,000 kwh @ 3 cents per unitAll kwh in excess

of 15,000 kwh @ 2.5 cents per unit

Minimum bill $5.00 for two months or part thereof.

ANNEX 1Page 2 of 3 pages

(c) Large Load (Low Voltage) Rate DI (monthly billing)

Standing Charge - $7.15 per kva of i4aximum Demand in the month.Energy Charge - 1.6 cents per kwh for first 30,000 kwh per

month.1.3 cents per kwh for all in excess of 30,000

kwh per month.

Minimum bill $150 per month.

(d) Large Load (High Voltage Supply) Rate D2 (monthly billing)

Standing Charge - $7.15 per kva of Maximum Demand per month.Energy Charge - 1.5 cents per kwh for first 50,000 kwh per

month.1.2 cents per kwh for next 200,000 kwh1.0 " It t " 250,000 lkwh0.75 " " " " each kwh in excess

of 500,000 kwh per month.

Minimum bill $150.00 per month.

(e) Large Load (High Voltage Supply) Rate D3 (monthly billing)

Standing Charge: For demands of -

4,000 kva to 9,999 kva - $6.90 per kva10,000 " " 14,999 " - 5.65 It15,000 " " 19,999 " - 4.90 "20,000 " and over - 4.15 "

Energy Charge:

1.5 cents per kwh for first 50,000 kwh1.2 " " "1 ' next 200,000 kwh1.0 " it " "1 250,000 "0.75 tt n n t 500,0000.6 toit " " each kwh in excess of 1,000,000 per month

(f) Off Peak Tariffs F2 & F3 (monthly billing)

Rate as for tariffs DI & D2 respectively except that thestanding charge is reduced to $4.40 per kva of maximumdemand in a month plus $2.75 per kva of maximum demandin a month as measured only during T&TEC's peak periods.

Minimum bill $100 per month.

ANMNEX 1Page 3 of 3 pages

(g) Off Peak Tariff (who1 lo eak) Rate Fl (monthly billing)

Standing Charge - $15.00 per month.Energy Charge - All kwh at 2.1 cents per kwh.

Minimum bill $15.00 per month.

(h) Other Charges

The following additional charges are applicable in the case oflarge load rates Dl & D2 and off peak rates F2 & F3. The fuel charge onlyis applicable to off peak rate Fl.

(i) Fuel Charge

For every one cent increase above 21.5 centsin the average gross price per 975,000 BTU offuel used in a month, the charge per kwh forthe following month will be increased by.014 cents

(ii) Reserve Charge

Where T&TEC reserves transmission and distri-bution capacity at the customer's request ex-ceeding 1.3 times the monthly maximum demand,the difference between the reserve capacity andthe maximum demand for the month will be chargedat the rate of $3.30 per kva.

Trinidad and Tobago Electricity Cosmmission

Balance Sheets: Actual At December 31, 1963-67 and October 31, 1968Forecast at December 31, 1968-72

(Expressed in thousands of TT$)

Actual ForecastASSETS December 31 October 31 December 311963 1964 1965 1966 1967 1968 1-968 169 1970 1971 17Fixed assets in operation (excluding

customers contributicomi) 80,466 92,925 120,858 127,585 133,617 133,518 1640,494 163,871 170,84. 176,899 183,652Accumulated depreciation 7y 21,968 23 892 28,676 33,906 38,127 39 970 66 529 53 366 60 446 67,796Net fixed assets in operation 1,93 70~,95i899 9,1 95,9 1,7 I~ 1,5Work in progress .13,686 21hO 247 101 2,258 16,136 13,928 2,000 1,535 2,935 3,935Total net Plant Account 75.37 92,365 97,213 99,010 101,969 111,527 11L,452 129,342 119,013 119,388 119,791

Investments 113 113 126 126 126 126 126 124 126 124 126Current Assets:

Cash 12 225 1,235 1,612 661 2,158 500 537 1,760 3,108 5,721Accounts receivable 3,85 5,338 6,504 8,016 6,020 6,815 6,652 7,085 7,636 7,769 8,086Other 5,636 h,41L 4,515 5,035 5,254 6,632 5,254 5,254 5,256 5,256 5,254Total current assets 9,693 9,977 12,256 16,661 11,935 15,605 12,606 12,876 16,650 16,131 19,061

Debt discount and expense 623 372 322 271 221 179 171 121 71 21 -Devaluation difference on foreign loans - -53 06 4,978 -5,1003 7,6771 ______-171 3,610Total Assets 85,408 102,928 109,913 113,866 i19,553 132,613 132,156 137,158 138,062 139,779 1162,786

LIABILITIES and EQUITY

Long and medium term debt:IBND Loan 293-TR 16,173 24,753 29,990 30,599 37,676 36,733 36,766 36,695 32,753 30,829 28,793Proposed IBBD Loan - - - - - - 3,000 6,000 3,90D 3,680Exmbank - Washington---

- - 7,929 10,000 13,200 12,300 11,600 10,500Canadian Development Loan - - 759 1,202 1,202 1,202 1,202 1,202 1,202 1,202Government Ordinary Loans 1,637 1,266 1,125 1,016 950 901 875 B00 760 685 625Governmnent Permanent Advances 62,567 66,505 45,915 65,915 65,415 45,615 65,415 6 ,6L5 5 67,695 47,495 47,495Port of Spain - C.E.B. 316 316 316 316 316 316 316 316 316 316 316r~Banko,of Nova Scotia 3,500 9,5oo 7,250 5,000 4,000 6,000 2,000 - - - -San Fernando debentures 186 178 170 161 150 162 160 130 120 110 100Sinking Fund Loans (net ofcontributions to sinking fund) 9,605 8,727 7,954 7,195 6,618 6.187 5,668 6,913 4,173 3,433 2,693-Total 73,586 89,245 92,700 90,959 95,927 102,825 102,362 106,711 103,099 99,370 95,606

Less, current portion 586 2 805 6 375 6,066 4 913 6 80 6,891 3 652 3,729 31966 6,096Net long and medium term debt T73,000 d-i- dlit__ 86,91 _9_____ ____ 787 ___ 99,370 _____ 91,308TCurrent Liabilities:

Current portion of long andmedium term debt 586 2,805 6,375 6,066 4,913 6,800 h6,91 3,652 3,729 3,966 6,096.-Bank of Nova Scotia -short term - - -- 1,100 - - --Bank overdraft- - - - - 1,500 1,630 - - -Other 6,6 ,155 6,703 7,666 5,361 7,072 5,361 5,361 5,361 5,361 5,361Total current liabilities 5,368 6,960 9,078 11,692 10,27 1,87 12,82 10,663 9,090 L2Lu

Equity:

Earned surplus 6,920 9,283 12,350 15,121 18,125 22,261 21,693 25,316 29,662 36,908 41,od1Other revenue reserves 160 165 160 160 160 255 160o 160 160 160 1640Total equity 17,060 9,b28 12,490 15,261 18,265 22156 23656 9,60 3,068 62,02

Total Liabilities and Equity 85,608 102,928 109,913 113,866 119,553 132,613 132,156 137,158 138,062 139,779 142,786

Dlebt-Equity Natio:Treating Governiment advances as debt 91/9 90/10 88/12 86/1-6 86/16 82/18 82/18 80/20 77/23 73/27 68/32Treating Government advances as capital 38/62 65/55 45155 43/57 44/56 46/56 46/54 U./56 41/59 38/62 34/66

* Unaudited

Trinidad and Tobago Electricity Commission

Long Term Debt Outstanding December 31, 1967

Interest Currency Outstanding CurrentRate of 12/31/67 Portion

Per Cent Maturity Payment (TT$000) (TT$OOO)IBRD 293 TR 5.75 1981 US 37,476 2,070

Government Loans:Ordinary loan #6 5.00 1978 IrT 841

#7 4.25 1972 TT 5#8 4.25 1974 TT 104

Subtotal 950 75

P.O.S. - Corp. ELec. Board 1/ 3.50 - - 316Permanent advances:Prior to 4/l/56 2-5 _ _ 10,500After 4/1/56 5.00 - 34,9915

Total Government Loans 46,681

Canadian Development Loan 0.75 2,015 Can. 1,202 3/Bank of Nova Scotia 2/ 1969 TT 40OO 2,000San Fernando debentures 3.j0 1985 TT 150 10Sinking Fund Loans ( 5 loans) 4/ 3-4 1969-83 Sterling 6,418 750

Total 95,927 4,913

1/ Assumed by T&TEC in 1961 merger. No repayments of principal are being made pending response of Governmentto T&TEC's request to waive repayment.

2/ Interest at prevailing prime rate (presently 7 3/4% per annum).3/ Repayment period 40 years, commencing in 1975.I~/ Government bonds sold in U.K., assumed by T&TEC in 1961 merger. Payable in pounds sterling on the sinkingfund method. In addition to interest, T&TEC pays to Government fixed amounts which are invested in London

and the income therefrom added to the contribution to date. Amount outstanding at 12/31/67 is net ofsinking fund contributions to that date. "Current portion" includes estimated 1968 income on the sinkingfund.

November 13, 1968

Trinidad and Tobago Electricity Commission

Income Statementsa Actual, 1963-67 and 10 months to October 31, 1968Forecast. 1968-72

(Expressed in thousands of TT$)

Actual Forecast

Years ended December 31 10 mos. ended Years ended December 31

Years ended December 31 1963 1964 1965 1966 1967 Oct. 31, 1968* 1968 I969 1970 1971 1972

Energy Sales (million kwh) 2914 .4519 524 6547 629 574 685 7442 802 8674 916Average revenue per kwh sold () 14.51. 3.71 3.66 3.57 3.614 3.79 3.89 3.95 3.92 3.87 3.86Revenue from sale of energY 13,274 17,011 19,203 21,931 22,919 21,791 26,667 29,307 31,404 33,420 35,341Other operating income 104 387 503 590 539 382 410 420 420 450 450

Total operating income 13,378 17,398 19,706 22,521 23.458 22,173 27.077 29,727 31,824 33,870 35,791

Operating expenses:Fuel 1,333 1,767 1,797 1,874 1,903 1,735 2,397 2,638 2,872 3T080 3,260Maintenance 2,552 2,566 2,630 2,943 3,162 2,459 3,698 3,876 14,425 4,477 4,581Administrative and General 1,124 1,243 1,148 1,155 1,223 1,223 1,419 1,510 1,642 1,648 1,653Other 2,975 3.320 3,247 3,581 3,910 3,943 4,454 4,839 5.291 5.340 5,372

Total operating expenses 7,984 8,896 8,822 9,553 10,198 9,360 11,968 12,863 14,230 14.545 14,866

Net receipts from operations 5,394 8,502 10,884 12,968 13,260 12,813 15,109 16,864 17,594 19,325 20,925Depreciation 2,823 3,300 4,201 4,938 5,181h 4,518 6,064 6,559 6,837 7,080 7,350Amcrtization of exchange difference-- - - 250 301 308 291 289 305

Net income from operations 2,571 5,202 6,683 8,030 8,076 8,045 B'744 9,997 10,466 11,956 13,270

Interest paid and accrued 3,573 4,113 4,242 4,742 4,687 5,533 6,619 6,498 6,460 6,276Interest chargged to construction (cr.) 1s1469 1 453 1 583 - - 1407 295 228 5Interest charged to operations 2,6 .5 474 465516631 6,27Amortization of debt discount end expense0 - 5 o 21

Total income deductions 2,154 2,710 2,709 4,792 4,737 4,725 5,176 6,374 6,320 6,510 6,297Net Income 417 2,1492 3,974 3,238 3,339 3,320 3,568 3,623 4,146 5,446 6,973

Operating Ratio - Anmual (%) 80.8 70.1 66.1 614.3 65.6 63.6 67.7 66.14 67.1 614.7 62.9- 3 year moving average ()71.4 66.6 65.3 65.1 66. 66.6 67.0 66. 64.8

Average net fixed assets in operation 58,ooo 66,325 83,961 97,937 99,310 100,117 108,933 117,1410 116,965 116,155

Rate of Return ()4.4 7.8 8.o 8.2 8.1 8.7 9.2 8.9 10.2 11.4

*Unaudited

Nay 8, 1969

ANNEX e

Trinidad and Tobago Electricity Commission

Sources and Applications of Funds 1967 - 1972

(Expressed in thousands of TT$)

Actual Forecast Total_r 196d 1969 1970 1971 1972 Forecast 1968-72

SOURCES OF FUNDS

Net receipts from operations 13,260 15,109 16,864 17,594 19,325 20,925 89,817Custoers capital contributions 107 60 60 60 70 70 320

Total Internal Generation 13.367 15.169 16924, 17,654 19.395 ?20.99 90.137

Long term borrovings:

IBRD Loan 293-TR 3,430 1,348 - _ _ _ 1,348Canadian Development Loan 282 - - -Eximbank - Washington - 10,000 3,200 - - - 13,200Proposed IBRD Loan _ 3OCO 1,000 4,000

Subtotal 3,712 11,348 6,200 1,000 _ _ 18,548

Short term Bank Credit - 2,000 - - - - 2,000Bank overdraft - 1500 130 _ _ _ 1,630

Total BorrTuings 3.712 14.848 6,330 1.000 - _ 22,178

Total Sources of Funds 17.079 30.017 23,254 18654 19395 2.995 112,315

APPLICATION OF FUNDS

Construction (excluding interest)

Eximbank financed generation - 12,350 4,968 - - - 17,318Proposed IBRD project - - 4,OOO 2,000 - - 6,000

Other construction 8,478 5.850 2.246 b.340 7,525 7,823 27,784

Total Construction 8,41,3 L8200 11.214 6,340 7LA25 7,823 $102

Interest

IBRD Loan 293-TR 1,845 2,374 2,128 1,922 1,809 1,693 9, 926Proposed IBRD Loan - - - 228 256 243 727Eximbank - Washington - 150 593 765 715 660 2,883Camdian Development Loan - 8 8 8 8 8 40S.F. and Ordinary Government Loans 219 240 235 220 215 220 1,130San Fernando debentures 10 10 10 10 10 5 45Short team Bank Credit 327 452 247 - - - 699Bank overdmrft - 59 118 65 - - 242

Total Interest on non-permanent debt 2,401 3,293 3,339 3,218 3,013 2,829 15,692

Interest on permanent Government advances 2,286 2,240 2.240 2,240 3,447 3.447 13.614

Total Interest 4,687 5,533 5.S7 5.4$8 6,460 6.276 29,306

Amortization of Loans

IERD Loan 293-TR 1,696 2,078 2,051 1,942 1,924 2,036 10,031Propond IBRD Loan - - - - 100 220 320

Eximbank - Washington - - - 900 900 900 2,700S.F. and ordinary Government Loans 1,340 825 830 800 795 800 4,050San Fernando debentures 10 10 10 10 10 10 50Short tonm Bank Credit 1,000 2,900 3,100 - - - 6,oooBank overdraft - - 1.630 -1,6

Total Amortization 4 C46 5,813 5,991 5,282 3,729 3,966 24,781

Total Debt Service 8.733 11.346 11,570 1074,0 10,189 10,242 54,087

Total Application of Funds 17.211 29,546 22,784 17,080 17.714 18.065 105,189

Cash surplus (or deficit) for the year (132) 471 470 1,574 1,681 2,930Cash at beginning of year 1412 661 500 537 1 760 3,108Increase in Accounts Receivable (cash effect) (619) (632) (433) (351) (333) (317)Cash at end of year 661 500 537 1,760 3,108 5,721

Debt Service Coverage 1.5 1.3 1.3 1.6 1.9 2.0Debt Service Coverage (excluding interest

on permanent Government advances) 2.0 1.7 1.6 2.1 2.9 3.1

November 26, 1968

TRINIDAD & TOBAGO ELECTRICITY COMNISSION

Transmission & Distribution Expansion Program 1968 - 1972

(in TT$ millions)

1968 1969 1970 1971 1972 Total

Transmission

Land .021 .015 .010 .020 .010 .076Substation structures .056 .050 .040 .050 .040 .236Transformers .550 .350 .300 .500 .400 2.100O/H lines .255 .730 .430 .300 .380 2.095Underground mains .300 .300 .100 .400 .320 1.420Oil circuit breakers .225 .350 .300 .400 .400 1.675

Distribution

Land .018 .020 .020 .025 .025 .108Substation structures .169 .170 .180 .185 .185 .889Transformers .612 .700 .700 .800 .800 3.612O/H lines 1.914 1.900 2.020 2.025 2.045 9.904Underground mains .211 .195 .195 .190 .190 .981Oil circuit breakers .338 .400 .500 .400 .400 2.038Consumer installations .406 .400 .500 .500 .500 2.306Street lighting .421 .400 .400 .400 .400 2.021Miscellaneous .004 .020 .005 .005 .005 .039

Total 5.5 6.00 5.7. 6.2 6.1 29.500

November 13, 1968

ANNEX ?Page lof 2 pages

DESCRIPT.ION OF THE PROJECT

The projiwt pPIIW,ed for Bank financing consists of the 66 kvand 33 kv expansion Pmagram togehr with a part of the distribution ex-pansion pr5gram 12 kv and under ftir the years 1969 and 1970c

The 66 kv and 33 kv expansizon program will consist of thefollcring items:

(a) the ersertir>n of a new 66 kv dotible circuit trans-mission line aPprox3ately 30 miles L>g frFm theterminal point on the oYatskirts of Pcr.l-£f,-Spainwhich is cuavv-&1ytl tnder o.st.r.;ti.on to Hayiiz.ronyHall s3ub and switchJig stati.-n. The vork ino'Itidesthe opply and installation of a 66 kv oil circuitbreaker and eAtensi>.x n Ha z,n.y Hall, but excludesthe 33 kv cable lead out from Purt_<.t-_Spain pfjwerstation, the constrirction of the terminal point,and the 25 Mt step-up trawsformer all fof which col-prises work currently in prrss. This d&ubl-circuit line will replace one of the existing two66 kV sing .- circuit aeq fro,m Bavataria substation toHarmny Hall which is of substandard e-onstructim ardis scheduled fr?r dismantling. after 1970.

(b) Rehabiltta4iq nf the seond 66 kv sin c citline betwee Bxatari .and 66. kHngl sub and

switching stations. T'he work involves th& supplyand installation qf -s bstatio sture oil cin-cuit breaker and transformers at each of threeexisting 'Feed OiVff points..alag-this line.

(c) The di erui-n-of the twAg existing 66 kv singl&-circuit lines and the 132 kv single--cirfvAit linedue to the construct±m.-gf--tJe.-propsed ,lbrcbill/Rgoswel .dual highway. The-work. includes theerection of aPProx±ma±ely, twa wmiles of new linerfor each of these-three main transmission lines.

(d) The installat.of-nw-66-k-sastati s at thePhill-ipine and Texaco -sites. The work wi lI-com-prise a switching structure-and a 66 kv oil cir-cuit breaker with two 6 Mva transfomers at Philli-pine. Also twxr miles of 66 .kcv single-circuit linewith a switchizng struc*ure; a 66 kv.-il.circuitbreaker-and three 5 Mva transiwmers-at the Texacosite.

(e) Renlf`0eMent-of the 33 kvr suppl-on tba island ofTnlbago. The work ini.v - Includes the extensim-ofthe mwtcingtatIon at the -u narina eahl., t-ermi -

ANTIEX 7Page 2 of 2 pages

nation to provide for a local stubstation anda second 33 kv line, together with approxi-mately five miles of 33 kv single-circuit lineand provrision for the ultimate installation oftwo 33 kv stepdown substations.

(f) The erection of new 33 kv lines as follows:

(i) A double circuit line approximately 8 mileslong from Pt. Cumana substation to Mt. Plea-sant substation. This will replace an exist-ing single-circuit line which is sulbstandard,and scheduled for dismantling.

(ii) A single-circuit line approxinmately 8 mileslong from Pinto Road substation to Valenciasubstation.

(iii) A single-circuit line approximately 20 mileslong from Morvant substation to Blanchisseusewhere a new substation is to be erected (notincluded in this program).

(iv) A single circuit line approximately 3 mileslong from Cascade substation to Morvant sub-station. This constitutes part of the 33 kvreinforcement between Port-of-Spain powerstation and Barataria. The other part isnot included in this project.

(g) The installation of new 33 kv substations at Mt.Pleasant, St. Mary's Milford Bay, Mayero, Rio-Claro,Maracas, Blanchisseuse and Scotland Bay. The workincludes the supply and erection of 33 kv oil cir-cuit breakers, transformers, and a 12 kv switch-board together with ancillary equipment at eachsubstation.

(h) The expansion of facilities at existing 33 kv sub-stations at Point Cumana, Mt. Pleasant and Frzabad.The work includes the replacement of existing 3 lqvatransformers with 6 lva units at each of these sub-stations.

lovemoer 14, 1968

TRINIDAD & TOBAGO EIECTRICITY OXMMISSION

Details of Pr1ject

Description TT$ (Xillion) US$ (Million)

Foreign Local Total Foreign Local Total

TransDission Development 66 kv

1. 66 kv D.C. Line P.O.S. to Honwny Hall(excluding 33 kv cable, transformer &switching structure) .83 .28 1,11 .42 .14 .56

2. Diversions due Churchill/Roosevelthighway .21 .15 .36 .10 .08 .18

Distribution Development 33 kv

1. Tobago 33 kv extension & substation .23 .15 .38 .12 .07 .19

2. 33 kv D.C. line - Pt. Cumana - Mt. Pleasant .11 .06 .17 .C5 .03 .08

3. 33 kvy D.C. line - Morvant - Blanchisseuse .23 .16 .39 .12 .08 .20

4. 33 kv D.C. line - Valencia - Pinto Road .o8 .o6 ,14 .o4 .03 .07

5. 33 kr D.C. lin - Cascade - M1rvant .04 .02 .06 .02 .01 .03

Substation Development 66 kv

1. Texaco .15 .06 .21 .07 .03 .10

2. Phillipine .13 .05 .19 .07 .03 .10

Substation Development 33 kv

New Substations

1. St. Mary's 5. Maracas

2. Milford Bay 6. Scotland Bay

3. Mayaro 7. Blanchisseuse

4. Rio Claro .78 .30 1.08 .39 .15 .54

Reconstructed Substations

1. Mt. Pleasant

2. Pt. Cumana

3. Fyzabad .31 .11 .42 .16 .05 .21

Distribution 12 kv and under & contingencies .91 .29 .74

2,00 6.00 2.00 1.00 3.00

December 19, 1968

TRINIDAD AND TOBAGO ELECTRICITY CONMISSION

Actual and Estimated Sale 1961 - 19F78(million of Wh)

General Industrial, Off Peak &Domestic & Sm1ll Comoercial Special Agreement Street ing Total

Year r %kwh Increase of kwh Increase of kwh Increase of kwh Increase of kwh Increase

per annum Total per annum Total per annum Total per annum Total per annum

Actual

1961 57.0 - 24.6 30.0 - 13.6 139.7 - 60.7 4.0 - 1.7 230.7 -

1962 68.6 20.3 25.5 37.0 23.4 13.9 159.4 14.1 59.1 4.0 - 1.5 269.0 16.5

1963 77.9 13.6 26.5 40.4 7.0 13.7 169.9 12.9 57.8 5.5 37.5'' 1.9 293.7 9.4

1964 87.9 12.8 19.2 48.3 19.8 10.5 316.8 86.5 69.0 5x9 7.3 1.3 459.2 56.2

1965 97.7 11.2 18.6 56.2 16.4 10.8 363.8 15.0 69.4 6.2 5.1 1.2 523.9 14.2

1966 111.5 14.0 18.2 63.1 12.4 10.3 432.4 18.8 70.4 6.5 :4.8 1.1 613.6 17.1

1967 115.5 3.6 18.4 60.8 -4.3 9.7 445.9 3.1 .70.8 6.8 4.6 1.1 628.9 2.4

Estimated

1968 123.9 7.5 18.0 67.4 10.9 9.9 486.5 9.1 71.0 7.2 5.9 1.1 685.0 8.9

1969 135.0 9.0 18.2 72.1 7.0 9.8 527.3 8.4 71.0 7.6 5.6 1.0 742.0 8.3

1970 146.o 8.2 18.0 78.0 8.2 9.7 569.7 8.0 71.3 8.3 9.7 1.0 802.0 8.1

1971 157.0 7.6 18.2 88.4 12.3 10.2 609.5 7.0 70.6 9.1 9.6 1.0 864.0 7.7

1972 169.5 8.0 18.6 95.1 7.6 10.4 641.5 5.3 70.0 9.9 8.8 1.0 916.0 6.o

1973 181.6 7.2 18.8 101.4 6.7 10.2 671.3 4.7 70.0 10.7 8.1 1.0 965.0 5.2

1974 194.0 6.9 19.1 107.9 6.4 10.6 701.7 4.6 69.2 11.4 6.6 1.1 1015.0 5.2

1975 207.3 6.9 19.5 114.8 6.4 10.8 732.8 4.5 68.6 12.1 6.1 1.1 1067.0 5.1

1976 220.9 6.6 19.6 121.8 6.1 11.0 764.4 4.3 68.2 12.9 6.6 1.2- 1120.0 5.0

1977 235.6 6.4 20.0 129.5 6.2 11.0 796.2 4.2 67.8 13.7 6.2 1.2 1175.0 4.9

1978 251.8 6.8 20.4 137.6 6.2 11.2 826.0 3.8 67.2 14.6 6.6 1.2 1230.0 4.7

November 13, 1968

ANNEX 10

TRINIDAD & TOBAGO ELECTRICITY COMMISSION

Estimate of Major Additional Demands in kw which are Scheduled forconnection by 1972

Firm Demands 1969 1970 1971 1972

Chaconia Inn, Maraval, Trinidad 50Holiday Inns, Port of Spain 600Extension to Hilton, Port of Spain 300Kapok Hotel, Port of Spain 100Turtle Beach Hotel, Tobago 400Tobago Golf Hotel, Tobago 100Balihoo Hotel, Tobago 500Carnbee Motel, Tobago 100Motel, Tobago 100Tobago Motels, Tobago 100Brewery - 500Pumping Load 1.000

Sub-total 750 2,700 400

Probable Demands

Tyrico Bay Hotel, Trinidad 500Chaguaramas Village, Trinidad 300Chaguaramas Resort Hotel, Trinidad 500Scotland Bay, Trinidad 1,000Hilton Rocky Point, Trinidad 1,000Bacolet Hotel, Tobago 1,000Dunlop Factory Additional Demand 500 1,000 1,000Texaco Additional Demand 2,000 2,000Dockyard Additional Demand 250 250Iron & Steel Industry /L_

Grand Total 3,000 5,750 5,700 1,000

l No firm information is presently available concerning the timingand magnitude of load of the proposed iron and steel industry.

November 13, 1968

TRINDAD AND TOAG0 ELTRICErY COMMSIDN

Actual and Estimated kwh Generated and Said - System MD. Installed and Firm Generating Capacity,

Annral Load Factor and System Losses

Year kwh Gen. kwh Sold System Losses Maximum Demand Installed Capacily Firm Capacity System Annualmilions millions ,8 Mv 161 Load Factor %

Actual

1961 290 231 25.7 52.5 108 88 63.1

1962 335 269 24.5 59.5 108 88 64.2

1963 371 294 26.2 65.0 108 88 64/9

1964 540 459 17.6 96.7 158 108 63.5 P.O.S.No.1 Set(501b)Commissioned

1965 609 524 16.2 105.0 208 158 66.2 N No.2 Set(50 Mb)Commissioned

1966 701 614 14.2 121.8 208 158 65.7

1967 731 629 14.8 117.5 208 158 71.0

Estimated

1968 787 685 14.9 126.0 208 158 71.3

1969 852 742 14.9 138.0 209 159 71.0

1970 922 802 15.0 149.0 289 209 72.0 P.O.S.'B' No.3 Set (8 0NV)Commissioned

1971 996 864 15.2 159.0 289 209 72.2

1972 1058 916 15.3 170.0 289 209 71.9

1973 1113 965 15.3 180.0 289 209 71.3

1974 1170 1015 15.5 190.0 289 209 71.1

1975 1236 1067 15.6 200.0 289 209 70.9 P.O.S.'B'No. 4 Set(80Mw)

Comzd.saioned 1976 1292 1120 15.7 212.0 369 289 70.5

1977 1360 1175 15.8 225.0 369 289 69.9

1978 1425 1230 15.9 238.0 369 289 69.0

November 13, 1968

TRINIDAD AND TOBAGO ELECTRICITY COMMISSIONSYSTEM DEMAND AND CAPACITY(MEGAWATTS)

400 1 I , i I I I E 400

369

350 350

300 289 289 __300

INSTALLED CAPACITY 28 3

250 250FIRM CAPACITY

208 209 209

200 200

150 150815815150 - -__ - - - -- -150l ~~~~~~_~ MAXIMUM DEMAN D

100 100

50 50

0 l l l I , O1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978

ACTUAL D PROJECTED Z Dzm

(R) I BRD -4131 _

ANNEX 13Page 1 of 2 pages

TRINIDAD AND TOBAGO EL.ECTRICITY CO109CLSSION

Method and Assumptions iMiade to Determine the Rate of Returnon the Transmission and Distribution Development Program for

the years 1969 and 1970

1. The total capital cost of the transmission and distributiondevelopment program for the years 1969 and 1970 is estimated to aggregateTT.$11.7 million with a 10% probability that expenditure will be 10% lessthan that estimated and a 5% probability that it will exceed the estimateby 5%.

2. To arrive at the incremental increase in revenue attributable tothe work carried out in 1969 and 1970, the total estimated increase perannum for tlese two years was accepted as base. It was then assumed thatabout 10% of the first years (1969) increase would be attributed to the newwork, this proportion increasing to about 25% of the total estimated increaseduring 1969 and 1970 for each of the next t;io years, about 40h of this totalestimated increase in the fourth year and 50% of this total estimated in-crease in succeeding years. Revenues were subject to an annual increase of2% after the fifth year to recognize the proportion of future increased

sales of kwh tnd revenue which can be attributed to the project.

3. The calculation was done over the period of the life of thetwo-year program which was taken as 30 years.

4. It is also necessary to consider the contribution which the trans-mission and distribution system would need to make towards the revenue re-quirements of assoc'iated generating plant. A separate generating authoritywould charge a bulk supply price for kwh sold to the transmission anddistribution authority of such a level as to meet its own financial target(8% in this case). On the other hand if the generating authority were tosupply a large single consumer at high voltage, then it would charge asomewhat higher bulk supply price e.g. to cover loss of diversity. The twoappropriate bulk supply prices in the case being considered are very broadlyestimated to be'0.8 cents per kwh and 1.1 cents per kwh respectively. Thevalue to use for a contribution to generation expenses has been takenbetween these two figures at 0.9 cents per kwh sold.

5. A tolerance on the total estimated revenues of plus or minus 5%corresponding to degrees of probability of 15% and 10% respectively wereapplied.

6. Related operating costs were calculated and from the fifth yearonwards were subject to an annual increase of 3% to recognize increases inoperation and maintenance costs during the life of the equipment. The samevariations and degrees of probability itemized in the preceding paragraph

ss were applied to fuel costs, and a tolerance of plus or minus 1G% corresponridEto a degree of probability of 10% was applied to maintenance costs (seeattached table).

7. The income per kwh was held steady throughout the period on theassumption that the natural tendency to fall would be offset by routinetariff increases.

ANINEX 13Page 2 of 2 pages

8. Taking account of the time stream of capital and relatedoperating costs of the two-year program, the attributable revenues togetherwith their tolerances, and combining their probabilities gives a meanvalue of the rate of return of 12.5% with a range of 10.5% to 14.5%.

ASSUTED COSTS AND REMvUMESTT$ Thousands

TABLE 1 - CAPITAL COSTS

Degree of Probability 10 85 5

Year 1 5,400 6,000 6,300Year 2 5,100 5,700 6,000

TABLE 2 - FUEL COSTS

Degree of Probability 10 15 50 15 10

Year 1 103 109 115 121 127Year 2 285 301 317 333 349Year 3 301 318 335 352 369Year 4 391 413 435 457 479Year 5 423 447 470 493 517

Increase 3% per annum to year 30.

TABLE 3 - MAINTENAICE COSTS

Degree of Probability 10 80 10

Year 1 63 70 77

Increase 3T per annum to year 30.

TABLE 4 - REVUES

Degree of Probability 10 15 L 15 10

Year 1 188 193 198 210 220Year 2 950 1,000 1,050 1,100 1,155Year 3 990 1,045 1,100 1,155 1,210Year 4 1,410 1,485 1,560 1,640 1,720Year 5 1,800 1,900 2,000 2,100 2,200

Increase 2,' per annum to year 30.

ANNEX 14

TRINIDAD AND TOBAGO ELECTRICITY COM4ISSION

FUTURE FUEL SUPPLY AND COSTS

T&TEC's plants are fired with natural gas supplied from the Penaloil field under a contract, due for renegotiation in 1971, with Shell OilCo. Because of the greater than expected expansion of electric energy sales,caused in large part by the Federation Chemicals load added in 1964, theamount of gas taken by T&TEC has substantially exceeded the guaranteedamount covered by the agreement with Shell Oil Co. Negotiations withShell have been under way for some time to replace the existing contractwith a new one under which:

i) the more prolific offshore Soldado gas field, already inproduction, would be substituted as a source of supplyfor the relatively limited Penal oil field;

ii) Shell would bear the expense of connecting the Soldadofield with T&TEC's pipeline;

iii) the guaranteed supply to T&TEC would be increased; and

iv) the contractual relationship with Shell would be extendedfrom 1971 to 1978.

Under the existing contract T&TEC pays TT21.5 cents (includingTT1.5 cents royalty) per thousand cubic feet. Shell's asking price underthe proposed new contract is TT6 cents per mcf higher - or TT27.5 cents.Although T&TEC anticipates that a more favorable final price than 27.5 centsmay well come out of the negotiations with Shell, this price has beenassumed in the projected income statements.

/ = < ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ' X ~~~~~~~~~~~E...gS tz .d S at 12 KY. ne .d.ppli.d f- 12 KV..tR -k eyde

0 CP;orco D~~~~~~~~~~~Songro Gronde \SBry U G H U 0H

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TRINIDAD and TOBAGO FA/ASOVC> RE- o,pp

ARIMA ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ AAIA ltfl3 '

TRANSMISSION NETWORK /cuo ,l4"l^<tzs.i tEXISTING 8~ FUTURE tl TABUouITE cor,, beon Sac -

t I ..................... a\ST

0~~~~~~~~~~~WE0~~~~1

j PrOp0.0IgPOoRlrSI0tIon J 7. 1 .0L r sES TO BAGO

TRINIDAD and TOBAGO (DO.OREE A P E HA LL RPoTCloo oA 0TRINIDAD

TRANSMISSIONANETWORK N ... .JAMAIC VE

~~~~~~~~ / /// Exi~~~~~~~~~~~~~~~~~~~~~~~~osClog Proposed Puture

J ^ PHILLIPINW ~~~~~~~~~~~~~~~~~~~~~~~~~~32 KV_

POaNT FORTINR- 0 -/y!7 ,, ° ~~~~~~~~~~~~~~~~~~~~~~Pocer plant a

o A ' ) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Sub Statlon 0

~~~ z * , ~~~~~~~~~~~o 20 40 60 aoMILES

NOVEMBER 196S IURI)-2399R