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RETURN TOREPORTS E R E S T R I C T E D
NEeEReport No. TO-156a
This report was prepared for use within the Bank. In making itavailable to others, the Bank assumes no responsibility to them forthe accuracy of completeness of the information contained herein.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
APPRAISAL OF THE BINGA HYDROELECTRIC PROJECT
LUZON, PHILIPPINES
November 5, 1957
Department of Technical Operations
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CURRENCY EQUIVALENTS
$1.00 = 2 pesos
1 peso = U.S. $ .50
I million pesos = U.S. $500,000
CONTENTS
PAGE
SUMEARY
I. INTRODUCTION 1
II. THE POWER IviARKET 3
Area to be served by Binga 3The Manila System 3The Provincial System 4Luzon Grid System 6Mindanao 6
III. DEVELOPIEEIT OF GENERATION RESOURCES 7
Existing plant on Luzon 7Program of new plant on Luzon 8Mindanao 9
IV. THF, BINGA PROJECT 9
Descriptiorn of project 9Cons-truct,o n Grganization 10Progress to date on Project 11Schedule cf Construction 11Operation of the Project 12Cost of the Project 12Financing the Project 13Comparison of Binga with thermal alternatives 13Estimated costs of production and revenues 14
V. FINANCIAL ASPECTS 16
Present Capitalization and earnings record 16Forecast of future earnings and cash flow 17Suggested alternative 17Rates 18
VI. CONCLUSIONS 18
ATTACPMENTS
Map of Luzon Island and Luzon Grid System . . . . Frontispiece
ANNEX 1 Manila - data on past electricity supplies
AMIEX 2 Luzon Provinces - data on past electricity supplies
AFINEX 3 Construction Expenditure Schedule
ATNMEX 4 Comparison of Binga with thermal i ternative
ANNEX 5 Estimated costs of production at Asmbuklaoand Binga
ANNEx 6 Income stataments for past six years
ATlh\EX 7 Balance sheets for past six years
AItJLX 8 List of loans outstanding
APTIEX 9 Forecast of income and cash flow statements,1958/1967
ANNMBEXK 10 Estimated Balance Sheets, 1958/1967
ANN3X 11 F'orecast of income and cash flow statements -power operations only
MNTEX 12 Revised condensed cash flow forecast -power operations only
DIAGR.AM 1 Demand forecasts - MENALCO and Luzon Grid
DIACGRM 2 Demand forecasts - Provincial utilities
DIAGblAI 3 Demand and plant forecasts - Mindanao
DIAGRPLM 4 Plant requirements - Luzon Grid
PHILIPPINESLUZON GRID SYSTEM
CEPOC EXISTING 230 KV TRANSMISSION LINE
PROPOSED 230 KV TRANSMISSION LINE -_____SAN FERNANDO | OTHER EXISTING TRANSMISSION LINES
OTHER PROPOSED TRANSMISSION LINES ---------69 Kn AG(OSINGA AUKLAO
URDANETA
R. v X Wt LUZON
TARLAC, AREA*
STA. ROSAI BYMA
MAGALAN X
OCTOBEAR 157A I G MR\N0A
NASSC M N
/ C~~~~~~~ALIRAY
0 20 40 60 80 MILES ^
OCTOBER 1957 IBRD-390
i
S UL JA RY
Power development in the Philippines, with the exception of the Manilametropolitan area, is the responsibility of the National Dower Corporation(N;IPC). In ilanila the responsibility for electricity supply rests with the1.anila Electric Uompany (;I.RALCO), a subsidiary of the General Public UtilitiesCorporation of ETew York.
The Government of the Philippines, on behalf of NBJC, has asked theBank for a loan to finance the foreign exchange requirements for the construct-ion of the Binga hydroelectric project on Luzon Island. Tne estimated totalcost of the project is equivalent to $52.8 rmillion of which $21 million isrequired in foreign exclhange. The local currency expenditures rrill be financedby 30 year iP1C bonds issued through the Central Bank.
'The project will have a capacity of 100 1.1i and is already under con-struction. It should come into service in the spring of 1960 and is the secondof wix projects contenpla-ted for the development of the hydro-power potentialof the Agno and Toboy rivers, 110 to 135 miles north cf imanila. The firstproject of the scheme, Ambulclao (75 i.0W) was brought into service in Decenber1956. The estimated ultimate capacityr of the scheme is 420 11V.
The scheime incluides 230 1GV transmission lines, for delivery of powerto l.'L.LC0 at .aniila, together witlh lower voltage transmission to supply someof the Provincial towns and iAnes. Part of this transmission system was pro-vided wimth Ambuklao and further major transmission work is included in theestimated costs of Binga.
The project is being constructed entirely by contract and most of theorders have been placed, folloxing satisfactory procedure. Ihe constructionis being supervised and coordirated by JPC which has retained as consultantsTippetts-hbbott-i.fcCarthy-Strat-ton (Ti SlO) of New York in association with theEngineering Development Corporation of the Philippines. This arrangement isconsidered satisfactory subject to si.mall augmentation of the TilS residentstaff.
From the engineering point of view the project is sourcd. It is ex-pensive, costing $528 per kilowratt of nameplate rating, including transmaission.Compared with an alternative oil fired steam station, however, the saving inannual operating costs would represent a return of 8.9% on the additional cap-ital investrmaent. This is considered adequate to justify the project in pref-erence to the thermal alternative.
The power market study for the area covered by the Luzon grid system,to which Binga will contribute, indicates that the prospects of load growthare good. The demand and energy estimiates adopted .would require the installa-tion of some 300 i,;W of new plant in addition to Binga over the next ten years1957/8 to 1966/67. These estim.iates may well prove to be conservative.
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The development of the provincial supplies to be connected to the system wvilldepend to a large extent on the availability of foreign currency for distribu-tion expansion. Arrangements have been made that this aspect, together iw'iththe provision of technical advice and some central coordination of developmentwill be given special attention.
In addition to the power development on Luzon, NPC has plans for de-veloping the 4gus river hydro schemze on Llindanao. The first station in thisscheme, Miaria Cristina, at present has an installed capacity of 50 113V whichsupplies a steelworks, a carbide plant and a fertilizer plant, the last ownedand operated by IPC. Farther industrial development, including major ex_.tensions to the steelworks and additional fertilizer plants, is contemplatedwhich wrould require the installation of 250 idllV of additional hydroelectricplant on the Agus river by 1962.
M'1PC also has constructed a number of small isolated hydro stations onthe various islands to mieet local demands and has plans for extending thisdevelopment.
A program of power development and financial forecasts has been pre-pared covering all the projected operations of UPC over the next ten years1957/58 to 1966/67, including the existing and projected fertilizer plants onlMTindanao. Tne financial forecasts in.dicate that the net receipts fromn IPC'so-oerations will little more than cover debt service. The Goverrnment has in-dicated its readiness to seek legislation transferring the fertilizer plantsto a separate Government Agency but apart froam this the electricity supplyoperations of 1hiPC should be run on sound financial lines. Some substantialincrease in revenues from the sale of electricity would be necessary to ensurethis.
A study has been prepared on this subject, making certain reasonableassumptions regarding NPC's future development program. This study has slhownthat an increase of 25%, in the revenues of sales from. electricity would in-crease the debt service coverage on the powrer business to 1.5 from 1959/60 to1963/64, rising to more than 1.8 by 1966/67. This would also enable NqPC tomeet out of its own resources about 30% of the capital required for its powerexpansion program between 1959/60, wvhen Binga should be commissioned, and1966/67. This would be considered a satisfactory position and NPC has under-taken to adjust its tariffs to secure an increase in its electricity revenuesof this magnitude.
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I. INTRODUCTION
1. With the exception of the Mlanila Netropolitan Area, power developmentin the Philippines is the responsibility of the National Power Corporation(NEC). Electricity supplies in Manila are the responsibility of the Mianila
Electric Company (EIERALCO) which is a subsidiary of the General Public Utili-ties Corporation, a holding Company with headquarters in New York.
2. NPC was constituted by Act of Congress in 1937. It is governed by aBoard of Directors composed of a chairman, vice-chairman and three othermembers, all appointed by the President of the Philippines with the consentof the Conmission on Appoi±atments. The members hold office for three yearsand cannot serve the Corporation in any other capacity. The general manager,the assistant general manager and the treasurer are appointed by the Boardwith the approval of the administrator of Economic Coordination.
3. NPC is entitled to borrow money and issue bonds within a present limitof 500 million pesos (W$250 millon) subject to the approval of the PresidenZron the recon3rendation of the Nstional Economic Council. Its borrowing frominternational finance institutions is at present limited to M5O million orthe eaoiivalent in other currencies. All borrowings and interest thereon areguaratteed lby the Government. The interest is free of income tax. NPC is anon-st-ck Cor;ora&ion a_td its capital cons.sts eiltirely of long ter; debtamoLnting at the prasen; time to abo-at 155 million Pesos. It is exempt fromall taxes other than real property tax.
4. Executive Order No. 399, dated January 5, 1951, put a term of 25 yearsto the existence of all Government owned or controlled corporations. NFCt scharter therefore expires on January 5, 1976. The Government has expressedits readiness to introduce legislation to extend this beyond the proposed loanperiod.
5. Charged with the development of the bydro electric resources of theislands NEC has o;nducted extensive hydro surveys and, so far, has constructedthree major hvdro electric projects, Csliraya (36 MW) and Ambuklao (7514W)on Luzon eand ivaria Cristina (50 All) on Mvlindanao. It has also completed sixother small hydro plants on these and other islands with a total capacity of3 14W.
6. At the present time NEC has three further major projects under immediateconsic.eration an exteni.on of Miar-ia Cristina on Klindanao, Iviarikina on thePlarikina River close to lManila, and Binga, the subject of this report.
7. The extension to the Maria Cristina station will have a capacity of50 MW and is intended to meet new industrial demand. The project should beexceptionally cheap and should precent no undue engineering difficulties-
8. Marikina will be a multipurpose project with a capacity of 50 14W andonly one-third of its cost will be borne by NPC, the remaining two-thirdsbeing borne by the Government (irrigation and flood control) and by the Manila
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water supply authority. It is expected that the plant and equipment will beprovided by the Japanese as part of their war reparations. The site is adifficult one and likely to be costly. Design and geological study are at anearly stage and it is unlikely that construction will be started for at leastanother year.
8. Binga will have a capacity of 100 MW and is already under construction.It is the second of six hydroelectric projects which will comprise the "AgnoRiver Scheme'" in Miountain Province. The first project in the scheme, Ambuklao,was brought into commission in December 1956. The ultimate capacity of thewhole scheme will be about 420 SW.
9. The Agno river is shown, together with the locations of Ambuklao andPinga, on the accompanying map of Luzon island. Also shown are the existingand proposed transmission lines associated with these two stations. Thetransmission work which would be covered by the proposed Bank loan for Bingais indicated in red.
10. The power operations of NPC in the Philippines fall into three cate-gories:
(i) The integrated system on Luzon Island, to which Binga will beconnected.
(ii) The Aguis river hydro scheme, associated with large industrialdevelopment on hiidanao island, and
(iii) Small isolated hydro plants on the various islands to meetlocal demands.
11. In the power market survey which follows, load development over thenext ten years in the area served by the Luzon grid system is considered indetail.
12. In the second category, the future increases in the generating plantcapacity on Mindanao will depend entirely on the rate of growth of industrialdevelopment. It is assumed for the appraisal of NEC's future position thatthe present plans go ahead.
13. NPC also has tentative plans for further projects in the third category.This category represents only a small rart of the Corporation's operations,however, and the rate of development of this type of business, which could notbe expected to be profitable in its early stages, will depend to a large extenton NFC's future financial position. Individual power market studies for theseisolated projects have therefore not been attempted and the Corporation'spresent tentative plans for development in this category have been accepted andthe associated estimates of costs and revenues included in the financial fore-casts.
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II. THF POWER PIARKET
Area to be served by Ringa
14. Working in conjunction with Ambuklao, Binga will contribute to theelectricity requirements in an area of some 18,400 square miles, 44% of Luzon.The area has about 7 million inhabitants, equivalent to some 69% of the Luzonpopulation and to about 33% of the total population of the Philippines. Thearea is outlined on the accompanying map of Luzon.
15. The northern part of the area, containing the project under review, ismountainous and relatively thinly populated. The chief industrial activityin this region is gold mining for which some supplies are already being afford-ed from Pmbuklao. In the Province of Zambales, the western region of centralLuzon, chromite ore is mined but the main industrial and commercial activityof the area is concentrated around 1hanila. The central plain of Luzon andthe area south-and':softh east of iviesnla are mainly agricultural, producingrice, sujar, cocenut and bananas.
The IKanila Svstem
16. The main development of electricity supply on Luzon has been in themetrorolitan area of iLanila which is served by NERALCO. Full records areavailable of past goad experience and this is summarized for the last 8 years(1949--1956) in Annex 1,
17. The main points from this experience are as follows:-
Average AnnualIncrease
Annual maximum demand 12.9%Annual energy requirement 11.8%Domestic sales 10.6%Comrercial sales 11.2%Industrial sales 25.4%Other sales (mainly municipal) 15.0%
18. in 1956 the make-up of ivERALCOts energy sales was:
Kwh(millions)
Domestic 268.8 36.0%Commercial 204.3 27.5%Industrial 170.0 22.8%Others 101.6 13.7%
72L.7 100.0
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19. Auxiliary consumption and lcsses amounted in 1949 to nearly 28% of thetotal energy generated and purchased. This decreased over the period to about19% in 1956. Further reduction in this percentage may be expected in futureyears. The annual load factor of generation and purchases combined fluctuatedaround 50%, with no definite trend away from this figure.
20. VERALC0 are energetic and efficient in their operations and are con-fident that at least the present high rate of growth will continue for as farahead as can be foreseen. Hlaving regard to the national economic position,however, it seems protable that there will be a gradual tightening up ofmoney supplies and that the present exceptionally high rate of industrialdevelopment will slow down. This in turn will affect the rate of growth ofnon-industrial consumption of electricity, although the slowing down of growthin this category might be partially offset by further air conditioning forwhich there is clearly a large potential market. The effect of the lattershould not be overrated, however, since its development will probably belimited by the availability of foreign exchange.
21. In the circumstances it seems likely that the present high rate ofload growth on the iERALC0 system will gradually diminish over the years. Inthe forecast it is assumed that the energy requirements will grow at annualrates of 11.8% in 1956/7 (the average for the last seven years) diminishingsteadily to 8% in 1966/67. It has also been assumed that the annual loadfactor remains at 50%0. The resulting forecasts of the kilowatt demands areplotted on diagram 1. On this basis the NEFRALCO demand would increase by310 hW from 210 in 1956 to 520 MfW in 1967. It is probable that this estimatewill prove to be conservative rather than optimistic.
The Provincial System
22. Except for the small supply (about 2 MIW) recently started in the Northfrom Ambuklao to Baguio, San Fernando and the gold mines, together with smallsupplies afforded by MERALCO and NEC in the neighborhood of Lanila, the pro-vincial loads are still supplied by some 120 small independent utilitiesowning mainly diesel plant with capacities averaging about 230 kw.
23. NFC obtains details of annual costs, sales and revenues from all theseutilities but these details take a long time to come in and 1955 is the lastyear for which complete returns are available. The aggregate (non-simultaneous)demand of these utilities in 1955/56 was about 22 NW. No records exist of thesales in consumer categories but the bulk of the business is domestic andcommercial. Existing industry is limited mainly to rice, sugar and lumbermills, some of which will continue to generate their own power requirements,and small industries to serve local needs. Bearing in mind the high cost oftransport the future industrial development seems likely to be confined tothese categories, at least for the period under review. The available in-formation relating to load growth in the 8 years 1948 to 1955 is given inAnnex 2. It will be seen that most of this information is incomplete, or partestimated, and therefore questionable. Development has undoubtedly beenerratic, probably due mainly to the sporadic release of foreign exchange, andmay well have been held back for the same reason.
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24. The most reliable figures are the generat4.on returns and these showaverage compound rates of growth over the eight year period of 11% for thenon-simultaneous maximum demand and 12% for the energy requirements.
25. Six of the utilities in mid Luzon were visited by the Bank's represen-tative - Paniqui, Tarlac, Angeles, San Fernando, Guagua and Santa Rita. Thesewill be among the utilities which will be connected during 1959 to the NECsystem centred on IvIagalang 230 kv substation. Their demands are in the rangefrom 75 kw to 1300 kw and the efficiency of their operations varies widely.At Paniqui, for eyample, all the generating plant had broken down, no spareparts were available and supplies had been shut down for more than a month.At Angeles and San Fernando on the other hand the plants were well maintainedand distribution extensions were in hand, though the latter were held up forlack of mater-als. All these six utilities are family owned and all wereconfident that they could borrow Pesos without difficulty. The main obstacleto expansion was the difficulty of obtaining any foreign exchange. On theassumption of adequate supplies of electricity from NFC and of materials fordistribution extensions, they all were able to list new loads which woulddouble or treble their present demands as soon as the new connections and re-inforcements could be completed.
26. Costs of production in the provincial utilities are very high. Theaverage cost per unit in 1956 for 45 utilities which had sent in informat .cnwas 0,128 -2/unit ('e4 US mills) and the costs ranged from 0.044, to 0.7410/unit (22 to 370 US mills). 1Yost of the utilities sell energy under twotariffs; a flat rate jer month, covering unlimited use of lamps up to a givencapacity, and a block tariff for metered supplies. Very few offer industrialtariffs. The average revenue per unit sold by the utilities in the Provincesin which NFC plans to supply amounted in 1956 to P 0.21 per kwh (10.5 US centsper kwh). The purchase of supplies from NFC would result in substantial savingsin nearly all the provincial utilities, in some cases more than half theirpresent production costs, and in most cases it should be possible to reducethe retail rates. Several of the utilities visited announced their intentionof doing this. Fortyone utilities have already signed contracts with NPC forsupplies amounting in aggregate to 6.8 MW.
27. From the foregoing it is evident that electricity supply in the Provincesis in its infancy and it seems probable that, without any major changes inconsumer income or electricity utilization, at least the present rate of loadgrowth could continue for the next ten years, given adequate supplies ofmaterials and an energetic sales policy. Essentials to the future provincialdevelopment are:
i. Availability of foreign exchange for distribution reinforcement.ii. Availability of technical advice.
iii. Some critical supervision to ensure that the future is approachedeffic ently and energetically.
The second requirement will be provided by NPC. The other two will be reviewedby the Government.
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28. In estimating the future provincial electricity requirements for usein the financial forecasts the rather conservative assumption has been madethat the rate of growth of the energy requirements in the Provinces willdiminish from the past rate of 12% per annum to 10% by 1965 and continue at10% thereafter. A conservative approach here seemed advisable because whilethese supplies will undoubtedly be the most profitable business which NFChas undertaken on Luzon their growth depends on developments in provincialmanagerial outlook and in facilities for expansion which cannot be guaranteedat this stage.
29. NPC's present plans contemplate the connection to the Luzon Grid systemof only a proportion of the provincial utilities. On diagram 2 are shown theforecasts over the next ten years of the total provincial demands and alsothe demands of those utilities which will be connected to the system. Thetotal provincial demand is shown to increase by 50 hW from 22 1IW in 1955/56to 72 iJlW in 1966/67. The demand of the few provincial utilities at presentsupplied by NPC is little more than 2 hW but over the next four years a con-siderable number of the other utilities will be connected to the NFC systemand by the end cf 1961 the provincial demand on the system is expected toreach 30 ivJ. No further connections are et present contemplated during theten year period under review but the demand of the utilities connected isexpected to grow to 46 NW by 1966/67.
Luzon Grid system
30. The above estimates are brought together in diagram 1 (already referredto) which shows the past and estimated future demands on the Luzon Grid system.The total demand on the system is expected to grow from 210 14W in 1956/57 to570 M.W in 1966/67, an increase of 360 !'4W. The small demand shown for the minesat the top of the curve represents the 1.5 IW capacity of a hydro plant ownedby the Eenguet Consolidated l4ining Company. This plant will shut down perma-nrently as soon as the Company is connected to the local transmission systembased on Ambuklao. Other mining companies are also being connected to thissystem but their supplies will be unfirm and they will need to run theircaptive plants at ti mes of water shortage.
1Viindanao
31. Electricity supply on Iviindanao is, of course, quite separate physicallyfrom that on Luzon but must be included in any overall assessment of NFC'sfuture financial position.
The demands in 1956/57 were as follows:
14W
National Shipyards and Steel Corporation (NASSCO) 4.0Fertilizer plant (owned by NFC) 22.6haria Cristina Chemical Industries 5.6Iligan City o.6
32.8
7
NASECO, a Government Corporation, has major plans for expansion whichwould bring its total demand to 150 viW by 1963 and has already placed ordersfor part of the first stage of this expansion. In addition to the existingfertilizer plant two more ammonium sulphate plants and an amronium nitrateplant are contemplated by 1964. The demand of these new plants and the exist-ing plant would then amount to 87.6 NW. Furthermore, a Spanish Company, theCompania General de Tabacos de Filipinas, proposes to build a Urea plant onlhindanao and estimates that its demand for electricity will amount to 22 MWby 1962.
The resulting estimates of demand are shown in diagram 3 and indicatea total increase of some 234 M4W over the next seven years.
III. DEVELOFiEPIT OF GENERATION FACITLITIFS
Exising lnt on Luzon
32. MERALCO own the only steam plants in the Philippines, other than a fewsmall captive plants owned mainly by the sugar mills which burn bagasse.iYERALCO have two oil buirning steam stations, Blaisdell and Rockwell, and onesma'll hydro plant at Botocan. The capabilities of their existing plants atthe present time are as follows:
iNW
Rockwell 108Blaisdell 35Botocan _15
158
The Blaisdell plant includes two prewar sets, one of which (4 NW) is in badcondition and ready for scrap. It is assumed that this set will be removedfrom service when Binga is commissioned. (1960).
33. NPC have two hydro plants in operation in the Luzon Grid area, Calirayaand Ambuklao. Their capabilities are as follows:
Y1J
Caliraya 36Ambuklao 86
122
34. In the provinces there are some 22.4 MW of small diesel plant and3.8 N,W of small hydro plant owned by public utilities. It can be assumedthat the diesel plant in all systems will be scrapped, most of it immediately,when supplies are available from NPC. As already mentioned, the NPC programof connection by no means covers the whole of the provincial areas tander review.
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As a basis for forward planning it has been assumed that no provincial plantwill be available to assist in meeting the provincial demand connected tothe NPC system. This may not prove entirely true, since some utilities mayrun their plants for peaking purposes for a few years. Any over-assessmentor provincial demand on this score would be negligible, however, in com-parison with the conservatism followed in making the load estimates.
35. As a starting point (1957) for forward planning therefore, an exist-ing plant capability of 280 MW has been assumed.
Program of new plant on Luzon
36. The new plant requirements are shown superimposed on the estimatedsystem demand on diagram 4. The plan assumes that additions will be made tothe generating resources of the area as requir--d to maintain a 15% marginand that a reasonable balance between hydro and thermal capacity will be pre-served.
37. The new hydro plants would comprise:
Nameplate Rating Max capability
Binga 1960 100 MW 115 MWMarikina 1963 50 MlW 57 MWAngat 1964 110 MW 126 -mw
Angat, on the Angat river about 30 miles north of Manila, would be a multi-purpose project like Marikina. It has been programmed in advance of Lurtherplant on the Agno river because in the construction of Tabu, the next Agnoriver project, there will be a significant rehabilitation problem for thefamilies at present living on land which will be flooded when the reservoirfills and it is expected that this will take some time to solve.
38. Of the thermal additions to the capacity, the first increase, a fifth25 Ml unit at Rockwell, is already under construction by MERALCO. The nextthermal installation (60 MW) would be required in 1961/62. MERALCO has al-ready applied for dollars to install a 60 MW unit of advanced design at Rock-well. NPC also has plans to install an equivalent capacity of less ambitiousplant (steam conditions probably 900 Psi and 9000 F); the equipment for thisplant would be obtained from Japanese reparations and its value treated asa Government loan to NPC carrying 3% inter-st.
39. It is understood however that the Government is p-epared to permitVI,ERALCO to construct the first 60 MW thermal plant provided that the Com-pany is willing either to utilize equipment obtained from Japanese reparationsor to import the equipment on such terms as will make no immediate call uponthe foreign exchange reserves of the Central Bank.
9 -
4o. If ME71ALC0 built the future thermal plants, it would be in a positionto utilize their capacity fully before accepting additional hydro suppliesfrom NPC, which might find itself with more than its fair share of idlecapacity. To avoid this, much closer association of NBC and ME?.ALC0 in for-ward planning would be necessary and NEFLALCO would have to accept appropriatecontractual obligations in advance. The Government has undertaken to reviewthe procedure for giving consents for the installation of additional generatingplant on Luzon to ensure full consultation and coordination.
Mindanao
41. The existing plant owned by NPC on Mindanao comprises two 25 MAIR hydrounits installed at Maria Cristina on the Agus river. The additional plantestimated to be required in the next ten years is shown in diagram 3 togetherwith the expected growth of demand. All of this plant would be constructedon the Agus river on which seven hydro stations are contemplated. The totalultimate capacity of the Agus scheme would be about 750 MW.
IV. TiE PROJECT
Description of the Project
42. The power plant at Binga will comprise four 25 MI generators drivenby vertical 3;ranc-.s turbines, each unit hdving a continuous maximum capa-bility of 26875 1H1TV. The maximnum net head on the turbines will be 152 meters.A rockfill dam with a compacted earth core will provide a usable r-servoirstorage capacity of 48,2Co,000 cubic meters with a maximum drawdown of 20meters. The maxinum dam height will be 103 meters and the length of crest214 meters. A 90 meter wic.e spillway will be excavated from the left abutment,whnere the rock is fairly sound, 'to handle flood water which might reach a maxi-mum of 10,000 cubic meters per second. The spoil from the spillway excavationwill be more than s-fficient to provide the rock for the dam.
)43. The power house will be underground and underground surge chamberswill be provided on each side. The pressure tunrel will be 6 meters in dia-meter and 1050 meters long with the intake on the right baic some 400 metersupstream of the dam. The tailtunnel will also be 6 meters in diameter andits length will be about 2000 meters, twice crossing under successive loopsof the river and discharging about 9000 meters downstream from the dam. ThePowerhouse and tunnels will be concrete lined.
44. The rock at the site is not good, being intersected by faults andfractures, but nevertheless is considerably better than at Ambuklao. The sitehas been extensively surveyed by borings and the location of the powerhousetogether with the tunnel routing have been selected to avoid as far as prac-ticable major faults and bad rock. Even so there must inevitably be consider-able uncertainty regarding the rock conditions which will be encounterA-d under-groLmd and a liberal allowance for contingencies has therefore been includedin the cost estimates for the civil works.
1n
45. Working in conjunction with Ambuklao, (11i miles upstream), the averageannual energy output of Binga is expected to be 516 million kwh. In the driestyear 400 million kwh could be relied on, equivalent to about 45% annual loadfactor on the nameplate rating (100 Kd). This assessment is based on 45 yearsriver flow measurement at San Mianuel where the Agno river flows into thecentral plain in Pangasinan Province. In the absence of local records on theupper Agno, where the Binga project will be located, the proportion of theflow to be expected at Binga was calculated from the relative catchment areas.This method was shown to be reliable by actual measurements at Ambuklao andBinga over the last eight years.
46. As -art of the Ambuklao project, a 230 kv transmission line was cons-tructed to a new substation at Balintawak (Manila), about 135 miles distant,to make supplies available to YERALCO. A 69 kv line was also constructedfrom Ambuklao westwards to substations at Beckel and San Fernando with lowervoltage systems to supply local towns and gold mines. With Dinga, a second230 kv line will be constructed to Balintawak and 230 kv substations will bebuilt at Binga and at lvagalang, together with 69 kv and 13.F8 kv systems todeliver sirn-clies from 1fiagalang to provincial towns in mid Luzon. The 230 k7lines will be adeauate for transmitting the outputs of the future Tabu andTayum stations in addition to the output of Anrbuklao and Binga. Plans for themore distant future include a 230 kv loop in northern Luzon.
Con st-uctin . Orgn-ni7atio
47. The ranagement of NBC is of high caliber and a full design section inManila together with a strong construction section in the field have been es-tablished. NPC has behind it the experience of constructing Caliraya, MlariaCristina and Ambuklao and is fully capable of progressing and coordinatingthe work on site with the advice of the New York consultants, TPNMS., (Tippetts,Abbett, McCarthy, Stratton) in association with the Engineering DevelopmentCorporation of the Philippines. Cn the design side NPC experience must beaugmented by that of the consultants to achieve the necessary flexibility ofapproach. During the visit of the mission only one TANS engineer, a designman, was available for consultation and at the middle of August NPC moved himto site as resident consultant. This left no consulting advice readily avail-able in Manila, where the design work is being done. This deficiency was dis-cussed with NBC and with iMr. Lovell, one of the TAMS partners, and it wasagreed that an additional TAiX4S engineer with good construction experienceshould be brought out to take over the consulting work at site. It may benecessary to augment the site consulting service further as construction pro-ceeds.
48. Apart from the site access roads and some of the early excavation, whichNBC did with direct labor, all work in connection with the project is beingdone under contracts. A local firm of contractors, the Philippine EngineersSvndicate Incorporated (PFESI), did the underground excavation at Ambuklao andhas been awarded the main civil contract at Binga. The firm has Swedishassociates, Messrs. WIDvARK and PLATZER, and eight Swedish engineers were onsite to help in the organization of the work. They have extensive experiencein hydro construction in Sweden, including experience of bad rock conditions.
11
Progress to date on Proict
49. The only geological exploration remaining to be done consists of boringsto determine the best route for the last 400 meters of the tailrace tunnel.This work was proceeding during the visit of the Bankts representative. Rathermore than 50% of the detailed working drawings for construction had been compl-eted and the main contradts let following receipt of international bids. Themain access road and a network of site service roads were completed by the endof 1956. The civil contractors, FESI, started work at Binga in April, 1957.The construction camp facilities are completed and at end August PESI hadabout 900 men on site, in addition to 200 men employed by a subcontractor inclearing the overburden on the spillway site on the left abutment. Work wasproceeding well on the two diversion tunnels, one of which should be throughby the third week in September,2/and the head-houses of the two access shaftsto the powerhouse were ready to receive the hots. Delivery of the hoistsand underground mucking equipment was overdue.- In the meantime work was pro-ceeding on these two shafts with temporary, lower capacity equipment and thework was very little behind schedule.
50. Curtain boring and grouting round the powerhouse and valve house wasabout 60% complete. This work also was being handled by a subcontractor toPESI0 A considerable quantity of overburden must be removed from the rightabutmerd' to *che darn and this work was proceeding with the object of gettingthe spoil down into the river by the end of September when the floods could berelied on to remove it2/ Work had also begun on an access shaft halfway alongthe route of the tailrace tunnel which will be excavated in each directionfrom this point as well as from the powerhouse access shaft.
51. In general the work was proceeding to schedule.
Schedule of Construction
52. The working schedule of construction aims at commissioning the first ofthe four generating sets in July 1959. This is a tight program and would behard to achieve even if all went well and there were no delays in delivery ofequipment and materials and no setbacks underground.
53. Regarding the dam and spillway, the crucial time will be the flood seasonbeginning September 1958. By then the dam must be above spillway channel leveland part of the spillway excavated to final elevation so that with the twodiversion tunnels, the floods can be handled without damage to the dam. Fail-ure in this would mean a year's delay in completing the project and this is
1/ The break-through took Dlace on 13th September.2/ These arrived end September.31 This has been achieved.
12
fully appreciated by the contractors who may be expected to bring the work tothis stage by the required time. The program for the underground work alsoallows no margin for delays, which could well occur if unexpected bad rock,involving a lot of timbering, were encountered. A more realistic date forthe commissioning of the first unit would be Iarch 1960. The other threeunits should follow quickly so that the station could be fully commissionedby July 1960.
Operation of the Project
54. NPC has been operating Caliraya for a number of years and Ambuklaosince December 1956. A central operational section exists in lanila to co-ordinate the operation of the plants and issue daily operating programs.These prog2ams are based on the maintenance of seasonal reservoir levelswhich have been established with the help of consultants as necessary to en-sure adequate energy generation in the minimum rainfall conditions which mightfollow. Binga must, of course, be operated as one with Ambuklao since anywater which passes through the Ambuklao turbines must also pass through theFinga turbines. It is proposed that the Binga reservoir, which has only 19%of the usable storage at Ambuklao, should normally be kept full and the draw-down reserved for emergencies.
55. This operational approach is sound.
Cost of the ProZct
56. The estimated costs of the project, subdivided into the main categories,are showr. in the following table. The expected rate of expenditure is givenin Annex 3.
Foreign Curren= Locnl Currenp Total(millions of U. S. dollars)
Civil works 5.8O 20.10 25.90Mechanical plant 2.36 0.74 3.10Electrical plant 1.75 0.34 2.09Transmission 6.85 1.81 8.66
16.76 22.99 39.75
Contingencies 1.75 4.60 6.35Engineering 0.52 2.04 2.56Interest during constructionand other charges 1.95 2.17 4.12
20,98 31.80 52.78
13
57. These costs are based mainly on contract prices. The civil works con-tract, let to PESI, is on a target price basis with reductions in fee withincreases in cost above the target and vice versa. The maximum fee would be14%, the fee corresponding to achievement of target would be lG% and theminimum fee 4%. The target corresponding to the PESI bid (the lowest of nine)is slightly under 30 million pesos. This does not include cement, steel andconstruction equipment which are being supplied by NPC, the last mainly second-hand from Ambuklao. In the above estimate, however, 43 million pesos are in-cluded for the civil works (exclusive of cement etc) covered by the PESI con-tract and in addition an allowrrance for contingencies of 20% is made on allPeso expenditure as already mentioned. The generator contract has been letto Swiss Cerlikon and the turbines, governor gear and main valves to ItalianRiva. These are firm contracts but subject to reasonable escalator clauses.The contingencies item includes 7% on these contract prices corresponding tothe ceiling of the escalator clauses. Contracts have also been let for thetwo 62.5 MVA generator transformers (13.8/230 kv) and the step down trans-former at the LYanila end of the new 230 kv line. Contracts have yet to beplaced for the Milagalang substation, the transmission towers and the highvoltage switchgear.
58. The above estimates are realistic and reasonable. The correspondingcost per kw, based on nameplate ratings, is $528. As the units will have amaximum continuous capability of 115 L?; the cost per kw could be morecorrectly stated as $460. Of this latter figure $90 per kw represents thecosts of the transmission equipment. As stated earlier, the transmissi-onlines will be more than sufficient to handle the combined output of Binga andAmbuklao and will be capable of transmitting the output of the next twostations in the scheme.
Financing the Project
59. It is intended that, following past procedure, Binga will be entirelyfinanced by loans. The peso expenditure wil be met by 30 year NPC bondsissued through the Central Bank. In the past all but one of the bond issueshave carried )4%interest but the new issues may carry 4% and this latter ratehas been assumed for all future peso requirements. In accordance with theNPC Act a sinking fund must be established for repayment of peso loans anddeposited with the Treasury. The interest on the sinking fund is fixed by thesame Act at 321.
60. All foreign currency required for Binga is to be covered by the loanfrom the Bank; for this a 25 year loan period has been assumed with a 3 yeargrace period on amortization payments. Interest has been taken at 6% and itis assumed that level debt service payments would be made.
Comparison of Binga with Thermal Alternative
61. The output of Ambuklao will be more than sufficient to supply theProvincial loads connected to the System. The output of Binga, therefore, willbe required entirely for the IMIanila load and any thermal alternative to
14
Binga would clearly be sited at Nianila and connected directly into the IvERALCOsystem. It follows that, if a thermal plant were substituted for Binga, thecosts of both Binga and the associated transmission equipment would be saved.The 1iagalang 230 kv substation, which initially will be tee-connected to theexisting 230 kv line, and the local lower voltage system in Central Luzonwould be required in either case and so can be excluded from the comparison.
62. The comparison of Binga with a thermal alternative is shown in Annex 4.The operating costs which would be associated with 100 IMW of thermal planthave been assessed from the actual costs at IERALCO's Rockwell station, withadjustments to allow for improved thermal efficiency and increased size ofunit. The operating costs at Binga have been assessed from NFC experience withAmbuklao, Caliraya &nd Maria Cristina. The estimated capital costs of Bingaand its transmission exceed those of the thermal alternative by F63.5 million.The estimated operational savings with Binga would represent a return of 8.9%on this additional investment.
63. This is not an impressively large return but is considered adequate tojustify the additional expenditure.
Estimated Costs of Production and Revenues
64. As already explained, Ambuklao and Binga must operate together and mustbe considered as one combined station. Any economic appraisal should thereforecover the costa and revenues associated with both stations. Depreciationallowances fall short of the amortization payments and in the estimated costsof production set out in Annex 5 amortization has therefore been substitutedfor depreciation to give the estimated annual expenditure. These estimates,expressed in costs per kwh delivered, are:
Ambuklao 1-0.0275 per kwh (US mills 13.75)Binga P-0.0202 per kwh (us mills 10.1)Combined a 0.0235 per kwh (US mills 11.75)
65. Allowing for losses, the firm kw and average annual energy sold from theprojects in full production should be as follows:
Firm kw kwh (millions)
Provinces 30,000 100E.ines - 82IM.BRALCO 120o,no 600
Total 150n000 782
66. PERALCO has so far contracted to take only 41 MId of the total Ambuklaocapacity at the following tariff:
Annual demand charge a 61.2 per kw ($30.6)Energy charge a 0.0085 per kw (US mills 4.25)With a minimum annual payment of ^ 4,077,450 ($2,0 3 8,725)
15
If this tariff were applied to future sales to MERALCO from Binga and Ambuk-lao (viz - 120 Ml and 600 million kwh per annum), the all-in-price per kwhwould then be P 0.0208 (US mills 10.4) which is a C.0027 (US mills 1.35)lower than the estimated annual cost of production at Ambuklao and Bingacor! bined.
67. The tariff fixed by NPC for supplies to the Provinces is as follows:
Annual demand charge a 120 per kw (1$6C)Energy charge P 0.013 per kwh (US mills 6.5)
The total revenue per kwh at this tariff would be a 0.0490 (US mills 24.5).For the mines, which do not require firm supplies, the following tariffhas been fixed:
Annual demand charge nilEnergy charge P 0.035 per kwh (US mills 17.5)
The construction of Binga will deprive one mine of the use of its small hydroplant, generating about 13 million kwh per annum, and as ccmpensation thissupply will be afforded at the special charge of P 0.0054 per kwh (USS mills2.7).
68. Summarizing, the supplies to MEFRALC0 would result in a loss to NFCof about 2 1.6 million (4;o.S million) per annum if the present contract wereextended to cover the total allocation of power and energy from Ambuklaoand Binga to MEPEALCO. This would be more than offset by the revenues fromsupplies to the Provirces and to the mines, which together would show amar&in of about P 3.1 million (41.55 million) per annum (1961). In effect,therefore, the sales to the Provirices and mines would be subsidizing thesales to Manila.
69. An approximate assessment of the contribution of the Ambuklao andBinga earnings towards the cost of future expansion can be made by allocat-ing to the stations their "shareT" of the expected annual increase ingenerating capacity and seeing what proportion of this could be provided -from their revenue. Assuming an annual growth of 12%, in the generatingresources, (see Section II - power Market) the allocation to Ambuklaoand Binga would be 21 MW of new plant per annum (12', of their combinedrating of 175 PI,!). Maintaining the proposed balance of thermal and hydrodevelopment, the average cost per kilowatt would be about P 720 and the21 NiW would cost P 15.1 million. The net margin of P 1.5 million peranrum associated with AmbulUao and Binga would represent only 105k of this.
16
70. The position indicated here cannot be regarded es satisfactory and therectification of this is part of the action which NFC would undertqke in theLoan Agreement to increase its revenues to a level which will ensure that itsfuture financial position will be sound.
V. FINANCIAL ASPECTS
Present Capitalization and Earnings Record
71. Income statements and balance sheets of NEC for the last 6 fiscalyears are sumarized in Annexes 6 and 7. The Fresent capital of theCorporation consists exclusively of interest-bearing long-term debt, inthe form of 15 different loans, listed in Annex 8, which totalled 193.45million pesos as of June 30, 1957. About 18% of the debt is represented bya foreign loan of $20,000,CG0, made in 1954 by the Export-Import Bank ofWashington for the construction of the Ambuklao project. The remaining 82%of the debt is made up of 14 local currency loans, ten of which are 4%,30-year loans, evidenced by bonds. Sinking fund payments for these loans aredeposited with the Treasury, where they are credited with interest at 3,i-0 pc rannum,
72. There is no conventional share capital equity. The surplus as ofJune 30, 1957, amounted to 11.03 million pesos. Thus, in effect, NPC hadlong-term debt of 94.6%O and equity of 5.4%o.
73. The income statements show that, while gross revenues went up from 2.96million pesos in 1951/52 to 10.14 mill_on pesos in 1956/57, an increase of243%, net income (before interest) increased by only 108% from 2.13 to 4.44million pesos, and net profit actually went down from 1.49 million pesos toonly 210,000 pesos. The low profit figure for 1956/57 is largely due to theintroduction of supplies from Ambuklao, which are at present sold to PfERALC0at a loss.
74. Non-capitalized interest on the long-term debt was covered about 3.5times by net income from 1952 to 1954, but this coverage was reduced to 1.9in 1955, 2.3 in 1956 and 1.0 in 1957. The coverage would, of course, be muchless favorable if capitalized interest on loans for projects under construct-ion had been taken into account. In 1956/57, for example, interest duringconstruction amounted to over 4 million pesos, in addition to 4.23 millionpesos for non-capitalized interest. It should also be noted that the interestcoverage would be substantially lower if, instead of paying only 4% on most ofthe local currency loans, NEC had to pay interest at the prevailing Philippinemarket rate of 7 to 8%.
17
Forecast of Future Earnings and Cash Flow
75. A forecast of income and cash flow statements for the period 1958-1967based on revenues and cost estimates prepared by NPC is given in Annex 9. Theforecast covers the whole of NFCts operations, including an existing fertilizerplant on Mindanao and three further fertilizer plants to be constructed in thesame area between 1959 and 1963, and assumes that NFC will construct futurethermal plants as well as hydro plants. Estimated balance sheets for the 10-year period have been prepared and are given in Annex 10.
76. The financial position shown by these forecasts cannot be consideredsatisfactory. In spite of low interest rates, net receipts from operationswould cover debt service only 1.2 times, on the average, and the trend wouldbe towErd a decrease in the coverage in later years. The full cost of thecorporationts large future expansion program would have to be met entirelyby borrowings. Interest charges would be covered by net income about 1.4 timeson the average during the 10-year period.
77. It seems desirable, and the Philippine Government agrees, that NEC'sactivities should be restricted to power operations and that the fertilizerbusiness sh3uld be transferred to a separate agency. A separate forecast efincome and cash flow statements for NFCts power operatione only (exclvfi4ngthe fertilizer plants) has therefore been prepared and is given in Arin'x li,It shows that the debt service coverage for electric po-zer operations woull.be even less favorable than for NFC as a whole, averaging only 1,03 over theperiod from 1959/60 k;vhen Binga should come into commission) to 1966/'67.
78. A substantial increase in revenues from sales of electricity is clearlyneeded to ensure satisfactory financial results for the Corporation.
§ufgr~sted Alternat ive
79. UTntil 1961/62, when the first 60 YiW thermal plant would be required,all the supplies afforded by NFC will be generated by hydro plant. It is notcertain whether NFC or MFRALC0 will build the future thermal plants but, apartfrom this aspect, the structure of any tariff framed to cover supplies fromthe hydro stations to MERALCO should provide incentive for IAERALCO to take themaximum amount of energy and so would not be appropriate for supplies fromthermal stations burning costly imported oil. A revised condensed cash flowforecast of NFCls electric power operations has therefore been prepared whichexcludes the thermal plants as well as the fertilizer plants. It also ex-cludes the projected 45 1AW project on Negros island (1964/5) which NFC pro-poses to defer until there is some prospect of full utilization of its capa-city.
80. The revised forecast, which is shown in Annex 12, assumes increasesin revenues from sales of electricity of 10% in 1957/58 and 25% thereafter.With these increases the debt service coverage would be about 1.5 from 1959/60to 1963/4, rising to more than l.8 by 1966/7, and NPC would be able to meet
- 18 -
out of retained earnings about 30% of the cost of future expansion after thecompletion of the Binga Pro4ect in 1960. This would be considered a satis-factory position and NPC has undertakcen to adjust its tariffs to secure anincrease in its electricity r-venues of this order.
Rates
81. The necessary adjustment of incividual tariffs is, of course, amatter for discussion between NPC and the interested parties. An examinationof present electricity rates indicates, however, that some of the tariffs areabnormal'LY 'Low. 14PC sell electricity at five main tariffs:
Tariff A B C D E
Demand Charge P/kw 30(a) 50.7(a) 61.2 120.0 -Energy Charge P/kTh 0.003 0.006 0.0085 0.013 0.035
Approx. all-in price P/kwh 0.008 0.015 0.021 0.049 0.035
(a) approximate average
82. These tariffs apply to the following sales:
Tariff A - Supplies to industry on Mindanao.Tariff B - Supplies to MNRALCO from the Calirrava plant.Tariff C - Supplies to NEPRALCO other than from Caliraya and
future supplies on Negros Island from the pro-jected Ilog plant (45 .NW capacity).
Tariff D - Supplies to the provincial towns on Luzon andother islands.
Tariff E - Supplies (not firm) to mines.
83. It is understood that NPC Dropose to obtain the required revenue in-creases by adjusting tariffs A, B and C.
VI. CONTCLUSIONS
84. The Project is soundly engineered and is required to meet the rapidlygrowing demand on Luzon island. NPC's future financial position would be un-satisfactory with its present rate structure, however, and a 25% increase inrevenues would be necessary to remedy this. NPC has uncertaken to adjust itselectricity tariffs to obtain an increase of this order. With this under-taking the Project is considered suitable for a Bank loan of 421 million.A loan period of 25 years would be appropriate with repayment starting after3 ivears.
- 19 -
85. In the negotiations the following additional matters were discussedand action agreed as indicated.
1. Arrangements have been made to employ an additional resident TAMSengineer on the Binga site. NBC has agreed that the resident con-sulting service will be kept under review as the work progressesand the consulting staff further augmented if necessary.
2. With the object of encouraging sound and energetic development ofthe provincial utilities, NPC has agreed to provide technical con-sulting service and the Government will review the existing arrange-ments for granting approval to and making funds available for ex-pansion of the distrlbution facilities of these utilities.
3. The Government recognises the desirability of confining NPC'sactivities to electricity supply and will introduce legislationin the 1958 session of Congress to transfer the fertilizer basi-ness from NPC to a separate Government agency. In the meantimeNPC will segregate the accoumts of the fertilizer plant.
AIT X i
UAiI ILk ELECTRIC COIiPANY
DATA 2.'T PAST DETTAINIDS AlUD EI:TGY REQUIRBTMITS
BnerZr generated AnnualIla,iirmmn and purchased Load energyDemand Kiwh factor gromrth
_____ _____ _____ _l r lions $
194!.9 90.0 2 .5 5395* ~~~9.0
1950 106.5 L58.6 •02- ~~~8.4
1951 ii.4.1 b97.2 h9.812.1
1952 125.0 557.5 51.018.1
1953 11L7.6 658.3 51.06.6
1954 16!4.0 70'1.8 48.711.5
1955 183.0 782.8 B8.815.8
1956 210.0 916.7 50.0
SAM S OF 2E1GY IN COM'S-CI-IR CATTEGORIESI~~~ _
,millIons of Kwh)
OtherDo-riestic Commercial Indistrial I1Tun cipal Utilities Total
1949 133.2 97.3 34.9 34.2 1.1 303.7
1950 147.1 112.6 li2.2 39.3 3.3 344.5
1951 i61.h 126.1 47.1 1o0.5 3.7 378.8
1952 176.8 137.2 60.9 144.4 3.6 L422.9
1953 195.0 1L8.2 S'.o 51.8 6.1 l85.1
195h 215.7 161.7 107.14 60.5 3.7 554.o
19,5 239.3 181.9 126.2 69.4 10.8 627.6
1956 268.8 2oL.3 170.0 83.9 17.7 7LJ4.7
ANNEX 2
LUZON GRID ARE&
PRDVI\CIAL SYSTEM
DAT'A ON PAST DE,MANDS AND ENERGY REQUIRUMHNTS
1948 1949 1950 1951 1952 1953 1954 1955
1. Number of Systems 87 110 110 112 118 123 131 123(Percent change from preceding year) +26.43% 0% +1.82% +5.36% +4.24% +6.50% -6.10%
2. Population of towns served (1000) (Estimate) 2,214 2,696 2,737 2,930 3,124 3,235 3,399 3,423(Percent change from preceding year) +21.77% +1.52% +7.07% +6.63% +3.55% +5.08% +0.707%
3. Number of Customers (Incomplete) 49,557 45,8L2 56,560 62,593 65,004 71,875 78,893 80,458(Percent change from preceding year) -7.48% +1.57% +10.65% +3.85% +10.55% +9.75% +1.99%
4. Customers per 1000 population (Estimate) 22.4 17 20.66 21.36 20.8 22.2 23.21 23.5(Percent change from preceding year) -24.1% +21.56% +3.39% -2.63% +6.73% +4.55% +1.25%
5. Total requirements (MiJ)* 32,416 314,190 3h,560 40,910 43,610 49 800 53,940 71,859(Percent clange from preceding year) +5.47% +1.08% +18.40% +6.60% +14.20% +8.32% +33.25%
6. KWH per Customer, Annual 654 745 611 653 670.8 692 683 895(Percent change from preceding year) +13.90% -18.00% +6.88% +2.73% +3.16% -1.30% +31.01%
7. Non-coincident Peak (KW) 10,559 11,312 12,470 15,228 15,843 18,152 19,373 21,750(Percent change from preceding year) +7.141% +10.22% +22.01% +4.o4% +14.59% +6.73% +12.25%
* Energy onerated and purchased.
Ail .~E~ 3
C0UISTRUC7IMT iEXPETDI TE SCHEDUE
Forei-n Currency Local Ciwrency Total(milliorns of U.S.Dollars)
Prior to Jul:4 i957 0o53 1.97 2650
1957/58 1st half 6.89 7.19 14.08
2nd half 4.46 7.84 12.30
1958/9 lst half 5.17 7,27 12.U4
2nd half 1.75 5.58 7.33
1959/60 1st half 1.07 1.95 3,02
Pinal payment 1.11 _ J1.
20.98 31.80 52, 18
AT TE~X 4
CO; 0P.ARISOIT OF BIi'GA WITH TIIDRi§-A5L LT:R;\IAT'JLS
(Costs expressed in thousands of Pesos)
Dinga Thermal Difference
Capacity 100 iCO
Estimated canital costs, excludingtransmission development inmid-Luzon 102,000 141, 000
Add constr-uCct-on equipmrent secon-d-hand from Atmibuklao 5,500
Total capital costs 107,500 1,000 63,500 (A)
Fuel cost _ 5,350Operation and r:a'ntenance 500 6coA6linistrat ion and general expenses 190 190Taxes (Property) 306 132Insurance 123 1110
Sub total 1,119 6,5802
Iepreciation 913 784
T'OTAL 2,032 7,666 5,634 (B)
Return on additional investr..ent in Bingfla = 8.95
AIbEX 5
AlHBUK1AO A' 1 BIJGA - OPERATIFG COSTS Ai'D DEBT SERVICE
(Costs expressed in thousands of Pesos)
Ambuklao Binga Total
Estimated capital costs, includingmain transmissioi. 129,000 105,600 234,600
Local 69 kv and 13.8 kv transmission 3,200 3,200 6,40p
TOTAL 132,200 108,800 241,000
Operation and rmiaintenance 40O 520 920Administration and general expenses 144 190 334Taxes 396 326 722Insurance 158 130 288
TOTAL operating expenses 1,098 1,166 2,26'
Foreign currency loansInterest 1,600 2,416 4,0l6Amortization 1,344 924 2,268
Domestic loans -Interest 3,688 3,006 6;694Amortization 1,788 1,296 3,084
TOTAL debt service 8,)20 7 6112 16,062
Total arnual outgoings 9,518 8,808 18,326Sales of energy - million kwh 346 )436 - 782Annual expenditure per kwh sold R o.o275 P 0.0202 0 o.o235
Nat`ional Pox;sr Corporation
Condensed Income Statements for the years 1952-19577in7, 7nilions of Philippine Pesos)
Fiscal Years Ending June 30 1952 1953 1954 1955 1956 1957
Electric Power
Revenues from Sales of Power 2.96 3.32 3.98 4.03 4.56 6.68Cost of Operation, HvJaint.and Administration .60 .64 .86 .88 .69 .90Depreciation .23 .23 .36 .38 e39 1.34
Operating Income 2.13 2.45 2.76 2.77 3.44 .44
Fertilizer
Sales and Cther Revenues - - 1.04 5.89 3.11 3.46Cost of Sales & Gen. Expenses - - .27 4.98 1.75 1.99Depreciation - - .71 .88 1.13 1.18
Operating Income - - .06 .03 .23 .29
Totals (Electric Pmower & Fertilizer)
Operating Revenues 2.96 3.32 5.02 9.92 7.67 10X14Cost of Operations & GeneralExpenses .60 .64 1.13 5.86 2.44 2.89
Depreciation .23 .23 1.07 1.26 1.52 2.52Operating Incorme 2.13 2.45 2.,2 280 3.71 4.73Other Income - 3 .27 .18 .10 .13Total Income before taxes 2.13 2.48 3.09 2.98 3.81 4. 6Less: Real Estate taxes _- .08 .16 .42 5
Met Income 2.13 2.48 3.09 2.90 3.65 4.44 ONLess: Interest (other
than capitalized) .64 .72 .. 88 1.52 1.55 4.23
Net Profit 1..Q49 1,76 2.21 1.38 2.10 .21
Times Interest Earned 3.3 3.4 3.5 1.9 2.3 1.0
National Power CorporationCondensed Balance Sheets as of June 30, 1952-1957
(in millions of Pesos)
ASSETS 1952 1953 1954 1955 1956 1957
Fixed hssets and 'forks in Progress
Electric plant in service at cost 15.13 21.39 22.78 23.89 24.92 162.77Less: depreciation reserve 1.09 1.31 1.60 1.98 2.37 3.X71
14n09 20.08 21.13 21.91 2? .55 159.06Fertilizer Plant, at cost - 12.94 15.02 15.43 13.19 18.34Less: depreciation reserve .01 .73 161 2.74 3.91
_ 12.93 14,29 13.g2 15.45 14.43Investigation Survey & workin prog,ress 22,09 23.09 59.69 100,58 129.83 10.67
Total Fixed Assets 36.13 6 1e T5. 1 136.31 167.83 384;16Current AssetsCash 30 70 17.26 17,21 7.53 5.87 1O040Other current assets 30.50 42,37 36.13 21.64 16.93 15.82
61.20 60.13 53.34 29.17 22.80 26.22Sinking Fund 1.45 1.74 ?.03 2.47 3.14 4.l44
Total Assets 93.33 122e97 150.53 167.95 193.77 214432
LIABILMITIS AND SURD LUSLong-term DebtLoansExport-Import Bank 4% dur 1956/75 - 21,20 4000 40.00 38.62 3658-Rehabilitation Finance Corp. 4% 1.06 1.01 .96 .91 .86 .81Philippine Governmnent Advances .67 .67 .67 .67 .67 .67
BondsUS Bonds held by Central Bank 82.00 82.00 85.00 104.40 127.80 -146.894 1/2% Bonds 8.50 8.50 8.50 3.50 3.50 3.50
Total Debt 92.23 113.38 135.13 154.48 176,45 193.45
Current & Accrued Liabilities 3.01 4.21 7.83 4e57 6.40 10.34Surplus 33.59 5.38 7.62 .90 10.92 11.03
Total Liabilities & Surplus 98.83 122.97 150.58 167.95 193,77 214.2
ANNEX 8
NATIONAL POWER CORPORATION
LONG-TER1i DEBT
As of June 30. 1957
Amount OutstandingLin thousands of Pesos)
A) ForZein __Ur v
Export-Import Bank loan$20PCO,000 b 4% due 1956/1975 36,583
B) Local_ Currencv
Advances from the Philinpine Goverrment (nointerest, no fixed maturity)For organization and development expenses 533For Maria Cristina Project investigation 140
Loan from the Rehabilitation Finance Corporation@ 4%, due 1°47/1977 8264j-%o 30-year Bonds for the Caliraya Project, due 1970 8,5004%, 30-year Bondc for other projects:
For Lumot Diversion Project, due 1980 5,000For Agusan Project, due 1986 1,500For Ambuklao Project, due 1980 92, O'For Central Luzon Electrification Project, due 1985 8,532For haria Cristina Fertilizer and Hydro Plant
Projects, due 1980 21,000For Maria Cristina Hydro Project, 2nd Unit,
due 1983 6,o00For Barit Project, due 1985 2,400For Binga Project, due 1986 8,400For Laguna-Batangas Transmission Line, due 1986 705For Loboc River Project, due 1985 1.350
TOTAL 193,449
ANNEX 9
NATICUAL PMR CORPORATICN
Estimated Jnsc se and Cash Flow Statmentasfor NPCaO Combined Ectric and Fertiliser Q,eraticns
(in illions of Pesos)
Fiscal year ending June 30 1958 M 1960 161 62 19643 1964 1965 1966 196
IOCHE sTTM(ENT13S
Operating Revenues 17.64 22.92 34.20 46.15 53.51 61.40 72.30 84.80 88.26 90.85Cost of Operatimns and CGereal Expenses 7.42 7.35 9.67 12.70 15.11 19.08 24.01 27.87 27.75 28.81Depreciation 3.62 3.67 5.20 7.08 8.17 9.12 10.00 11.78 12.63 12.68
Operating Income 6.60 21.90 19.33 26.37 30.23 33.20 38.29 45.15 47.88 49.36Interest earned on cinking Fwd .15 .27 .40 .61 .82 1.07 1. 1.73 2.20 2.57Total Incose before taxes 6.75 12.17 19.73 26.98 31.05 34.27 39.68 46.88 50.08 51.93
Less: Real Estate Taxes .53 .64 .78 1.01 1.34 1.72 1.89 2.52 3.33 4-79Other Income Deductions .09 .09 .09 .09 .09 .09 .09 .09 .09 .09
Net Ineome 6.13 11.44 18.86 25.88 29.62 32.46 37.70 44.27 46.66 47.05
Deduct: Interest 12.10 15.96 20.49 22.74 27.49 31.47 33.33 33.58 36.02 37.46less: Capitalized Interest 5.05 8.94 9.40 5.12 7.69 9.64 9.83 3.56 2.85 4.63Interest, other than capitalized 7.05 7.02 11.09 17.62 19.80 2183 23.50 30.02 33.17 32.83
Net Profit (Loss) (_ .92) 4.42 7.77 8.26 9.82 10.63 14.20 14.25 13.49 14.22
Cumulative ourplus 10.11 14.53 22.30 30.56 40.38 51.01 65.21 79.46 92.95 107.17
Times Interest earned - 1.63 1.70 1.47 1.49 1.49 1.60 1.48 1.41 1.43
CASH FIA bTATEKN1
sources of Funds
Net Income, as above 6.13 11.44 18.86 25.88 29.62 32.46 37.70 44.27 46.66 47.05Deduct: Non-cash incme a/ .15 .27 .40 .61 .82 1.07 1.39 1.73 2.20 2.57
5.98 11.17 1846 25.-27 28.80 31.39 36.31 42.54 44.46 44.48Add: Depreciaticn accruals 3.62 3.67 5.20 7.08 8.17 9.12 10.00 11.78 12.63 12.68Receipts from Operatimns 9.60 14.84 23.66 32.35 36.97 40.51 46.31 54.32 57.09 57.16
BorrowingsProposed I3RD Loan 23.76 13.86 4.38 - _ _ _ _ _ _Other Borrcwings 59.22 56.63 88.43 49.48 87.50 89.64 46.10 11.95 48.65 40.25
Total Borrowings 82.98 70.49 92.81 49.48 87.50 89.64 46.10 11.95 48.65 40.25
Total Receipts 92.58 85.33 116.47 81.83 124.47 130.15 92.41 66.27 105.74 97.41
Application of Funds
Capital ExpendituresBina ProJect 52.76 39.56 8.28 - - - - - - -Other Construction 30.43 39.26 86.47 47.77 874 88.01 37.49 18.65 49.03 40.13
Total Capital Expenditures 83.19 78.82 94.75 47.77 87.47 81 37.49 18.5 49.03 40.13
Interest (other than capitalized) 7.05 7.02 11.09 17.62 19.80 21.83 23.50 30.02 33.17 32.83Repayment of Capital Debt (principal)
Proposed I8RD Loan - - - .92 .98 1.04 1.10 1.17 1.24 1.32Amortization of loans, other than I8RD 2.09 2.09 2.09 2.59 3.19 4.62 4.76 5.21 7.51 7.81sinking Fund payments 2.24 3.08 4.15 6.15 6.98 8.18 8.88 9.12 9.46 9.92
Total Debt barvies (incl. interest) 11.38 12.19 17.33 27.28 30.95 35.67 38.24 45.52 51.38 51.88
Total Expenditures 94.57 91.01 112.08 75.05 118.42 123.68 75.73 64.17 100.41 92.01
Cash Accrual for year (-1.99) (-5.68) 4.39 6.78 6.05 6.47 16.68 2.10 5.33 5.40Cash Balance at beginning of year 15.88 13.89 8.21 12.60 19.38 25.43 31.90 48.58 50.68 56.01Cash Balance at end of year 13.89 8.21 12.60 19.38 25.43 31.90 48.58 50.68 56.01 61.41
Tines debt service covered byreceipts from cperatiom - 1.22 1.37 1.29 1.19 1.14 1.21 1.19 1.11 1.10
aJ Interest earned on binking Fund
October 14, 1957
Annex 10
National l9ower CorPooIration
Estimated Balance Sheets
Based on NPC's revised financial forecast(in millions of resos)
As at June 30 6 1958 1 1960 1961 12 1963 1964 1965 1966 196Z(actual)
ASSETSFixed Assets and WJorks inProgress at cost 191.78 274.97 353.79 448.54 496.31 583.78 671.79 709.28 727.93 776.96 817.39Net Current Assets 15.88 13.89 8.21 12.60 19.38 25.43 31.90 48.58 50.68 56.01 61.41
Sinking Fund Acco.unt 4.44 6.8.3 10.18 14.73 21.49 29,29 38.54 48.81 59.66 7i.,L2 . 83.81
Total hasets 212.10 29S.69 372.18 42.87 la 638.50 742.23 806.6? 838.27 904.29 962.31
LIABIIISANDSUPS
Lon=-Term DebtPronosed IBRD Loan - 23.76 37.62 42.00 41.08 40.10 39.o6 37.96 36.79 35.55 34.23
Export-Import Bank Loan 36.58 34.55 32.52 30.49 a8.46 26.43 24.40 22.37 20.34 18.31 16.28Other debt 156.87 216.03 272.60 360.97 4G9.89 496.23 583.28 626.65 635.42 678.59 713.06
Total Debt 193.45 274.34 342.74 433.46 479.43 562.76 646.74 686.98 692.55 732.45 763.57
Depreciation Reserve 7.62 11.24 14.91 20.11 27.19 35.36 44.48 54.48 66.26 78.89 91.57
pr%lus 11,03 10,11 14.53 22.30 30.6 40.38 51.01 65.21 79.46 .92.9 107.17
Total Liabilities& Suzrpns 212.10 295.9 622.18 47Z.87 S32.18 638.5o 742.23 806.67 838.27 904.29 962.31
Debt/(iuity Ratio 95/5 96/4 9515 95/5 94/6 93/? 92/8 91/9 89/11 88/12 86/14
NATIONAL PO0TdR CORPORATION AIPEX 11
Estimated Income and Cash Flow StatementsFor Electric Power Operations
(in millions of Peoe
Fiscal years ending June 30 1958 1 1960 1961 1962 1963 1 1965 1966
INCOME bTAZEbRNTS
Revenues from bales of Electricity 10.96 15.52 23.09 31.07 36.08 40.81 47.54 55.91 59.38 61.89Cost of Operation, Maint. and Adm. 1.88 2.02 2.69 3.13 4.58 6.78 9.37 10.24 10.07 11.00Depreciation 2.44 2.49 33 4.92 5.46 S88 6.27 7.55 845
Operating Income 664 II11.0 23.02 204 28.3.5 31.90 38.12 40.91 42.44Interest earned on Sinking Fund .10 .21 .30 --. 5 .70 94 1.24 1,55 2.01 2.38Total Income before Taxes 6.7 11.23 17.17 23.53 26.74 29.09 33.14 39.67 42.92 44.82
Less: Real Estate taxes .50 .50 .55 .76 1.07 1.42 1.57 2.19 2.82 4.23Other Income deductions 09 .09 09 .09 .09 ,0 .09 ,09 . ..9 09
Net Income 6.15 10.63 16.53 22.68 25.58 27.58 31.48 37.39 40.01 40.50
Deduct, Interest 10.79 14.50 18.28 20.21 24.57 28.48 30.30 30.59 33.09 34.60Less: Capitalized interest 4 8.12 8.24 4.25 6.66 8.94 9.44 3.56 2.85 4.63Interest, other than capitalized 6.41 2038 10.04 16.16 17.91 19.54 27.03 30.24 29.97
Net Profit (-.26) 4.25 6.49 6.52 7.67 8.04 10.62 10.36 9.77 10.53
Times interest earned - 1.66 1.65 1.40 1.43 1.41 1.51 1.38 1.32 1.35
CASH FLGAh STATEMENTS
Sources of Fonds
Net Income, as above 6.15 10.63 16.53 22.68 25.58 27.58 31.48 37.39 40.01 40.50Deduct: Non-cash income a/ .10 .21 . .51 .70 94 1.24 1.55 2.01 2.38
6.05 10.42 16.23 22.17 24.85 26.64 30.24 35.84 38.00 38.12Add back: Depreciation accruals 2 2.49 3, 5.46 5.88 6.2 7 B 8.4Receipts from Operations 8.49 12.91 19.76 30.34 32.52 3 6.51 43.39 46.40 46.57
BorrowingsProposed IBRD Loan 23.76 13.86 4.38 - - - - - - -Other borrowings 47.31 53.54 75.53 46.88 77.29 86.55 44.40 11.95 48.65 40.
25
Total borrowings 71.07 7.4O 79.91 468.8 77.29 86.55 44.40 11.95 48.65 40.25
Total Receipts 79.56 80.31 99.67 73.97 107.63 119.07 80.91 55.34 95.05 86.82
Application of Funds
Capital ExpendituresBinga Project 52.76 39.56 8.28 - - - - - - -Other Construction 18.57 37.26 72.64 46.13 76.21 .7 62 18.40 .73 39.83
Total Capital Expenditures 71.33 7. 80.92 476.3 .21 84.78 35.62 18.40 48.73 39.83
Interest (other than capitalized) 6.41 6.38 10.04 16.16 17.91 19.54 20.86 27.03 30.24 29.97Repayment of Capital Debt (principal)
Proposed IBRD Loan - - - .92 .98 1.04 1.10 1.17 1.24 1.32Amortization of Loans (other than IBRD) 2.09 2.09 2.09 2.30 2.88 3.94 4.04 4.16 6.40 6.64Sinking Fund Payments 2 99 4 4 5.69 6.51 7.66 83 8.58 892 9
Total Debt Service (interest & principal) i 11.46 117 25.07 28.28 32.18 34.34 40.94 +460 47.31
Total Expenditures 82.02 88.28 97.09 71.20 104.49 116.96 69.96 59.34 95.53 87.14
Cash Accrual for year (-2.46) (-7.97) 2.58 2.77 3.24 2.11 10.95 (-4.00) (- .48) (-.32)
Times debt service covered by receipts from operations - 1.13 1.22 1.08 1.07 1.01 1.06 1.06 .99 .. 98
a/ Interest earned on sinking Fund and credited to WPC's sinking fund account at the Treasury
ANNEX 12
NATIONAL POWER CORPORATION
Condensed Cash Flow Forecastfor electric power operations excluding the 2 steam plants and Negros hydroelectric plant
(adjusted for rate increases)(in millions of Pesos)
Fiscal year ending June 30: 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967
Sources of Funds
Receipts from Operations 8.49 12.91 19.76 27.09 28.93 31.16 36.34 41.22 43.05 44.50
Additional revenues from rate increases (1) 1.10 3.88 5.77 7.77 8.34 9.05 10.50 11.79 12.61 13.34
Adjusted receipts from operations 1.79 25.53 T4.86 37.27 40.21 46.84 53.01 55.72 57.84
BorrowingsProposed IBPD Loan 23.76 13.86 4.38Other borrowings 47.31 53.54 66.00 24.00 42.00 40.00 5.00 - 9.00 9.00
Total borrovings 71.07 67.40 70.38 24.00 42.00 5.00 - 9.00 9.00
Total Receipts 80.66 84.19 95.91 58.86 79.27 80.21 51.84 53.01 64.72 66.84
Applications of Funds
Capital ExpmndituresBinga Project 52.76 39.56 8.28Otler Constructions 18.57 37.26 63.23 33.50 52.57 50.79 21.42 8.93 29.92 33,38
Total Capital Expenditures 71.33.0 71ST 527 50.79 21.42 29.92 33.38
Interest (other than capitalized) 6.41 6.38 10.04 15.06 16.65 17.04 19.22 19.45 19.25 19.45
Repayment of Capital DebtProposed IBND Loan .92 .98 1.04 1.10 1.17 1.24 1.32
Amortization ¢ loais (other than IBRD) 2.09 2.09 2.09 2.30 2.88 3.143 3.51 3.60 3.69 3.78
Sinking Fund Payjmants 2.19 2.99 4.04 5.56 6.07 6.60 6 6 6.88 6.88 7.05
Total Debt Service 09 11.46 161 23.84 3 .59 31.10 31.06
Total FExperditures 82.02 88.28 87.68 57.34 79.15 78.90 52.01 40.03 60.98 64.98
Cash accrual for year (-1.36) (-4.09) 8.23 1.52 .12 1.31 (- .17) 12.98 3.74 1.86
Times debt service covered by receiptsfrom operations - 1.46 1.58 1.46 1.40 1.43 1.53 1.70 1.79 1.83
(1) Increases in revenues from sales of electricity have been assumed as follows: 10% in 1957/5825% thereafter
DIAGRAM I
FORECAST OF POWER DEMAND800 LUZON GRID 800
1957-1967
700 L _ _ _ _0700
PROVINCIAL LOADS CONNEC TRiEDTO LUZON GRID
600 ' - 600
100 > . l l -t-T10 LUZON GRID 5 |00
uo400 MIE OD__400
300 (LNLA INTEGRATED SYSTEMI B 300
2-00 _ _ __ _ __ __ _ __ -200
PR VIINC/A L LOADS CONNVECTED100 r 90_ LUO -D~ - GRD________
01949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967CALENDAR YEAR IBRO -378
DIAGRAM 2
100 I 100
FORECAST OF PROVINCIAL POWER DEMAND90 AND 90
CONTRIBUTION OF LUZON GRID80 + W , l -1 _-1- 1 1 1-01957-1967
70 ___- 70
60 ___- __ __ 60
20 L------ ----- e-Xq - 2
I- T~~~~~~~~~~~~~~~~~~~~~~~OTFA L PROV/ C/AL NDP
5 0 ~~~~~~~~~~~~~~~~~~~~~~~~__ _____ _____50
50 305 195 195 195 195 195 199CALENDAR VINEARL D- 376
40 2_ _ _ _ _ _ _ _ - _ _ 0
0 0~~~~~~~~~~~~~~~~~~~~~~~~
CALENDA YEAR IBRD- 37
DIAGRAM 3
400 MINDANAO____ ___ 0 400
AGUS RIVER DEVELOPMENT
300 300MC lo. 4 a9 5
(I)
m
z
o o~
z < ~~~~~~~~~~~~~~~~~~0
cn k~~AXIMUM PLANr CAPABILIrY c0200 -200 >
E z~~~~~~~~YA
IBRD-381
z AGtIS No. 2 2 ND~~~~~~~~
100 100
MC NO. 3
MC No. /182
0l 1957 1958 1959 1960 1961 1962 1963 1-1964 1965 1966 1967
YEAR IR-8
DIAGRAM 4
SCHEDULE OF PROJECTS800 -LAID ON FORECAST OF REQUIRED PLANT OUTPUT- _ 800
IN DECEMBERLUZON GRID
700 ____- 700
REQuIRED CAPACITY T OcPR IE15Z RESERVE,-
600 1 D 7:NGAT - - 600
s 500 .E: l A _o ^4RIKINA _ _ 500I- FORECAST OF REOUIRED POWER .,
PLANIT OUTU IN DECEMBER
BINGA> 400
AM8UK1LAO300 t _ ___300
____ _____ _ AMBU_LA O _ CAL/RIYA-BOrOCAAMBUKLAO M8UK AMBULA TOCA
200 J| | -C-8C-B -ADDIIrONAL STEAM PLAN TS- 200CALIRAYA-BOrOCAN
100 ___ __ 100CALIRAYA- C- C-- -__ ____ __ __10
80.rOCAN ~~~~~~~~ROCKWELL 8 BLA/SDELL STEAM PLANTS
1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967CALENDAR YEAR
I BRD-380
Note: "IMPEDANCE", a 30 MW floating steam plant, was loanedto MERALCO by the U. S. Army between 1947 and 1951.