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Document of

The World Bank

FOR OMCAL USE ONLY

Report No. 13625

PROJECT COMPLETION REPORT

CHILE

ALTO JAHUEL - POLPAICO TRANSMISSION PROJECT(LOAN 2833-CH)

OCTOBER 24, 1994

Infrastructure and Energy Operations DivisionCountry Department IVLatin America and the Caribbean Regional Office

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

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Fiscal Year

January 1 - December 31

Currency Equivalents

Currency Unit Peso (CH$)US$1.00 CH$ 204.73 (12/31/1986)US$1.00 CH$ 410.83 (09/30/1993)

Units of Wei2hts and Measures

ton metric ton 1,000 kgkgoe kilogram of oil equivalent 0.0102 GcalkW kilowatt 1,000 wattsMW megawatt 1,000,000 wattskWh kilowatt hour 1,000 watt hourMWh megawatt hour 1,000,000 watts hourGWh gigawatt hour 1,000,000,000 watts hourkV kilovolt 1,000 voltsMVA megavolt ampere 1,000,000 volt-ampere

Abbreviations and Acronyms

CHILECTRA Empresa Chilena de Electricidad S.A.CHILECTRA

METROPOLITANA Distribuidora Chilectra MetropolitanaCHILGENER Chilectra GeneracionCHILQUINTA Distribuidora Chilectra Quinta RegionCNE Comision Nacional de EnergiaCORFO Corporacion de Fomento de la ProduccionENDESA Empresa Nacional de Electricidad S.A.EDESUR Empresa de Distribucion del Sur S.A.E.E. Pangue S.A. Empresa Electrica Pangue S.A.E.E. Pehuenche S.A. Empresa Electrica Pehuenche S.A.ENIGESA Endesa Inversiones Generales S.A.GDP Gross Domestic ProductGoCh Government of ChileINGENDESA Empresa de Ingenieria Ingendesa S.A.ISPEN Institucion de Salud Previsional Endesa Ltda.SAR Staff Appraisal ReportSEC Superintendencia de Electricidad y CombustiblesSIC Sistema Interconectado CentralSING Sistema Interconectado del Norte GrandeTRANSELEC Compafiia Nacional de Transmision Electrica S.A.

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation

October 24, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on ChileAlto Jahuel - Polpaico Transmission Project (Loan 2833-CH)

Attached is the Project Completion Report on Chile: Alto Jahuel - Polpaico Transmission Project(Loan 2833-CH), prepared by the Latin America and the Caribbean Region. The Borrower contributedPart II of the PCR.

Power sector policies and institutions in Chile are among the most effective in the developingworld. The main project objective was to provide low cost and reliable electric energy with minimumnegative impact on the environment by expanding the high voltage transmission and switching systemof ENDESA, the Borrower, and providing the associated training.

This objective was fully met and the US$21.5 million loan was fully disbursed in 35 monthsor 19 months before schedule. Actual cost was US$47.8 million. The 26% cost overrun, fully financedby ENDESA's cash generation was caused by the need to build a two-circuit 500kV transmission lineinstead of a single-circuit one, in order to meet a power demand growing at a faster rate than estimatedat appraisal.

The project was implemented when a new legal and regulatory framework and a regulatoryagency -- the National Energy Commission -- were already in place in the country, and in the midst ofpower sector privatization. ENDESA was Government-owned when the project was initiated. It wastransformed into a private company. Remarkably, this did not disrupt project implementation butnecessitated a change of focus of its training program from engineering to commercial and managementmatters.

The outcome of the project is rated as highly satisfactory and its institutional developmentimpact as modest. Since the Borrower is fully committed to the project, met all loan covenants, hasan excellent record in its operations and maintenance, and enjoys a healthy financial situation withina very favorable macroeconomic environment, the project sustainability is rated likely.

The PCR provides a satisfactory and concise account on the project implementation and results.The project may be audited together with the Pehuenche Hydroelectric Project (Loan 2832-CH) toextract lessons form the privatization process and its impact on sector operations.

Attachmentn

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

FOR OFFICIAL USE ONLY


CHILEALTO JAHUEL - POLPAICO TRANSMISSION PROJECT

(LOAN 2833-CH)

Table of ContentsPage No.

PREFACE . .......................................

EVALUATION SUMMARY ............................

PART I - PROJECT REVIEW FROM BANK'S PERSPECTIVE ..... 1

1. Project Identity ................ 12. Background ................. 13. Project Objectives and Description .... . . 34. Project Design ................ 45. Project Implementation ....... . . . 46. Project Results ......... . .. 57. Project Sustainability ........ . . 88. Bank Performance .. 89. Borrower Performance ......... .. 910. Bank-Borrower Relationship ....... . . . . . . .. . . . . ... 911. Consulting Services .......... . .. .. . .. . .. .. . .. . 912. Project Documentation and Data ...... . . . . . . . . . . . .. 9

PART II - PROJECT REVIEW FROMBORROWER'S PERSPECTIVE . . . . . . . . . . . . . 10

PART III - STATISTICAL INTFORMATION ...... . . . . . . . . . . . 11

1. Bank Lending for Other Power Projects in Chile ....... . . 122. Project Timetable ............. ............... 133. Forecast and Actual Disbursements of Loan Proceeds ...... 144. Project Implementation Schedule and Procurement Method . . 155. Project Scope .............. ................ 166. Project Cost and Financing ........ .. ............ 177. Capacity and Energy Balance for the SIC ..... ........ 188. Consolidated Financial Statements of ENDESA ... ...... 209. Performance and Monitoring Indicators of ENDESA ...... 2310. Status of Covenants ......... .. . ............. . 2411. Use of Bank Resources ........ . .. ............ . 25

MAPIBRD 25335

s docwment has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.


CHILE


PREFACE

This is the Project Completion Report (PCR) for the Alto Jahuel-Polpaico Transmission Project in Chile, for which Loan 2833-CH in theamount of US$21.5 million was approved on June 9, 1987. The loan wasfully disbursed, the last disbursement being made on December 18, 1992,eighteen months ahead of the Closing Date of June 30, 1994.

This PCR was prepared by the Infrastructure and Energy OperationsDivision of the Latin America and Caribbean Country Department IV(Preface, Evaluation Summary, Parts I and III). It was sent to the BorrowerENDESA whose comments are included as Part II.

This PCR is based, inter alia, on the Staff Appraisal Report, the LoanAgreement, progress, project conclusion, and annual reports by theBorrower, audit reports by the external auditors, supervision reports by theBank, correspondence between the Bank and the Borrower, and internal Bankdocuments.

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CHILE


EVALUATION SUMMARY

Project Objectives and Description

1. The Alto Jahuel-Polpaico Transmission Project was an integral part ofthe Bank's strategy for Chile at the time of appraisal and approval to increaseefficiency in the delivery of public services and strengthen theimplementation of a financial policy based on long run marginal cost ofsystem expansion at least cost. As the previous six power projects, it aimedat providing low cost and reliable electrical energy for the production ofgoods and services and final consumption with minimum negative impact onthe environment. For that purpose, the project comprised: (i) theconstruction of 80 km, single circuit transmission lines as part of a ringaround Santiago and leading to the north; (ii) one switching station and theenlargement of 3 substations; as well as (iii) training for ENDESA's staff inthe operation of high voltage systems.

Project Implementation

2. The loan was approved on June 9, 1987, signed on December 16,1987, and declared effective on February 19, 1988. Initiation of the projectwas delayed by approximately one year because ENDESA decided toredesign the project from single circuit to double circuit due to a morepositive perception about the future growth of the Chilean economy. Oncethis obstacle was overcome, implementation of components (i) and (ii)proceeded swiftly and was completed in May 1991, eighteen months ahead ofschedule. At the same time, staff received the described training, although ata somewhat reduced level due to a cost reduction policy put in place at thetime.

3. Actual net cost in real terms of the goods and services originallyincluded in the project amounted to US$28.1 million as compared toUS$24.7 million in the SAR, an increase of 14%. It was caused mainly byan underestimation of the cost of land and rights of way, and the cost ofsupervision by consulting engineers. Total current cost for the project withthe expanded scope including taxes, import duties, and interest duringconstruction came out at US$47.8 million, US$9.9 million above the SARestimate. ENDESA financed the cost increase out of its internally generatedfunds.

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Project Results

4. Average peak demand growth in the five year period 1987-92 for theCentral Interconnected System reached 6.7%, well above the forecast of4.3% in the staff appraisal report, due to a more rapid development of theeconomy. When the positive outlook for the Chilean economy is added, thecapacity increase from single to double circuit appears fully justified.

5. Project implementation coincided with the restructuring of the Chileanpower sector and its subsequent privatization. ENDESA, as a publiccompany, had extensive participation in distribution companies. As a resultof the restructuring of the power sector, ENDESA was reduced to a companydedicated exclusively to generation and transmission. Privatization made itthe most widely held company on the Santiago Stock Exchange. Thecompany's policy is determined by its two principal shareholders, theconglomerates Enersis and Luksic. While as a publicly owned companyENDESA was recognized for its technical expertise, after privatization theissues of cost control and financial performance also became paramount. Asa result, ENDESA has increasingly become a holding company leaving theoperation of facilities to its subsidiaries. In the face of opposition to furtherexpansion within Chile and to reduce risk, the company began searchingoutside Chile for investment opportunities and now has become an importantpower generator and distributor in Argentina. It has also succeeded inobtaining a triple B rating from Standard and Poor's.

Project Sustainability

6. Given ENDESA's excellent record in maintenance, the benefits of theinstallations are expected to be sustained throughout their service life.Experience with operation so far has been above average, with only minorrepairs required. While more important threats have come from vandalismand terrorist attacks, no permanent damage was inflicted.

Lessons Learned

7. On balance, the Alto Jahuel-Polpaico Transmission Project should bejudged highly successful based on its technical, financial, and institutionalresults.

8. The Borrower was fully committed to the project, as shown by itsreaction in adjusting the project design to changed circumstances, absorbingwith its own funds the resulting cost increase, and assigning the necessarymanpower to assure its implementation. ENDESA has a long history ofexperience in implementing projects with Bank financing and was thereforefully aware of procurement requirements.

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9. The project was kept simple, with no features attached to make it lookmore attractive. The macroeconomic and sector environment supported theexecution of the project, as the economy was developing rapidly, tariff policywas already sound at appraisal, and the restructuring and privatization, whichoccurred simultaneously with project execution, further improved theperformance of the executing agency. However, some features of theresulting market structure are suboptimal, and almost impossible to changeafter the transfer of ownership. As an institution, ENDESA can beconsidered "graduated" and-after the Bank fulfilled its role-has become aclient of IFC.

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PROJECr COMPLETION REPORT

CHILE


PART I - PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity

Project Name: Alto Jahuel - Polpaico TransmissionProject

Loan Number: 2833-CHLoan Amount: US$21.5 millionRVP Unit: Latin America and Caribbean Regional OfficeCountry: ChileSector : EnergySub-Sector: Power

2. Background

2.1 The Energy Sector. The country's hydro potential is its mosteconomic and abundant energy resource, followed by coal and petroleum.Chile's primary energy demand (326,000 barrels of oil equivalent per day)and overall energy intensity (0.79 kgoe/US$GDP) are low compared to othercountries in the region, especially considering the importance of energyintensive consumers like mines and smelters for the economy. In the 12years, between 1979 and 1990, when GDP growth averaged 3.7% p.a.,primary energy demand increased only slightly higher at 3.9% p.a.However, in the same period, power consumption grew at 4.8% p.a.,resulting in an elasticity of power-demand-to-GDP of 1.3. Thus, energyintensity in the economy expanded by only 0.2% p.a., whereas for powerintensity the growth rate was 1.1%.

2.2 Power Sector Objectives. The Alto Jahuel-Polpaico TransmissionProject as the previous power projects aimed at promoting social andeconomic development by providing low cost and reliable electrical energyfor the production of goods and services and final consumption, withminimum negative impact on the environment.

2.3 Power Sector Strategy. The project was an integral part of theBank's strategy for Chile to increase efficiency in the delivery of publicservices and strengthen the implementation of a financial policy based on thelong-nin marginal cost of system expansion at least cost.

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2.4 Bank Power Lending. At the time of project approval, the Bank hadfinanced six power projects in Chile between 1948 and 1976 for a loan totalof US$144 million, mostly for power generation.

2.5 Power Demand and Supply. Due to the rapidly expanding economy,with a GDP growth rate averaging 7.1 % in the last 5 years, power demandgrew by 6.6% p.a. To satisfy these additional energy requirements,efficiency gains on the supply and demand side should be implemented first,as long as their cost are below those of system expansion and because oftheir additional environmental benefits. The remaining gap has to be coveredby added capacity. While the production, transmission, and distributionsystems have reached a high degree of efficiency, a considerable potential foradditional efficiency gains remains on the end-user side. However, even ifthe remaining savings potential is being realized, capacity additions will benecessary. As the hydropower plants close to the population centers havealready been constructed, additional capacity has to be built by exploiting thepotential further south in the country. This in turn requires increasedinvestment in transmission lines and substations to transport the electricity tothe centers of consumption. The incremental demand also creates a need forenforcing the existing transmission systems within and around the centers ofconsumption, and to expand the distribution systems.

2.6 Pbwer Sector Organization. In the early eighties, the Governmentof Chile (GoCh) started the modernization of the power sector with devisinga new tariff based on long run marginal cost. Two regulators, the NationalEnergy Commission, CNE, and the Superintendency for Power and Fuel,SEC, were created. The tariff system has generally performed well, butsome alterations are being prepared to facilitate sales by cogenerators andmake the system more transparent. One disadvantage is its lack of incentivesfor end-user energy conservation.

2.7 As a next step, the structure of the sector was changed. In theCentral Interconnected System (SIC), where about 95% of total electricity isconsumed, the two biggest companies ENDESA and CHILECTRA, which asvertically integrated entities performed the functions of generation,transmission, and distribution, were limited to generation and transmission.ENDESA's shareholdings in distribution companies were terminated, and twodistribution companies for Santiago (CHILECTRA METROPOLITANA) andthe Fifth Region (CHILQUINTA) formed. To make the package moreinteresting for later sale, no separate transmission company was established,despite the recognized disadvantages for market structure. Also, by notdepositing the water rights for future projects in an entity different fromENDESA, its dominance in expansion programs for hydropower wassafeguarded. In the second most important part, the Great NorthernInterconnected System (SING), the separation of the functions of generationand transmission is underway and is completed for distribution.

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2.8 After the restructuring in the SIC was completed, the GoCh startedwith the privatization of the state-owned compar.ies. Corporacion deFomento de la Produccion, CORFO, a state owned development bank whichacted as the holding company for the government in the power sector, wasentrusted with the sale. Four big companies were successfully sold to thepublic, consisting of local and foreign financial institutions, local privatecompanies inside and outside the sector, and individuals some of themcompany employees. Only Colbun, a 490 MW hydroproject, still remainspublicly owned. In the SING, public ownership of generation andtransmission still prevails but its majority is being reduced. By notseparating generation from transmission and permitting cross holdings, theprivatization of the power sector failed to create a market structure composedof a great number of economically and financially independent producers anddistributors.

2.9 Once privatized, the entities undertook their own restructuring byestablishing new companies to perform certain functions that were previouslydone inside, by outsourcing other functions, by strengthening the financingdepartment, and by reducing staffing in other parts of the company. Theyalso started to look outside to acquire ownership of companies already in thesector or recently created to implement new projects.

3. Project Objectives and Description

3.1 Project Objectives. The objective of the tangible components of theproject was to provide expanded transmission capacity for the powergenerated in new power plants in the South of the country to the load centersin Santiago and the North. The training component aimed at upgrading theknowledge of ENDESA's staff in areas related to high voltage transmissiontechnologies and daily systems operations.

3.2 Project Description. The project included three components:(a) Construction of two transmission lines, consisting of the

following subcomponents:(i) 500 kV single circuit transmission line of 63 kmn length

between Polpaico and El Rodeo;(ii) 220 kV single circuit transmission line of 17 km length

between El Rodeo and Alto Jahuel;(b) Expansion of substations, consisting of the following

subcomponents:(i) Construction of a new 220 kV switching station with

seven bays at Polpaico;(ii) Enlargement of the following substations: San Isidro

(150 MVA), Alto Jahuel (two extra bays), and Colbun(two additional bays).

(c) A training program for around 50 of ENDESA's professionalsfor a total of 135 staff-months, in the following fields:

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(i) design, operation, and maintenance of extra-highvoltage transmission systems;

(ii) design and operation of encapsulated (SF6) typesubstations;

(iii) environmental impact of extra-high voltage transmissionsystems;

(iv) applications of direct current transmission systems;(v) use of new computer technologies for the design and

control of high-voltage transmission systems;(vi) new instruments in international financial markets.

4. Project Design

4.1 Conceptual Framework. Although the economy started to growmore rapidly in the mid 1980s, the project design was still based on the pastmodest growth rates experienced by the economy. When after projectapproval ENDESA became convinced that the acceleration of the growth rateof the national economy was sustainable, it decided to adjust the assumptionsfor the calculation of the transmission system requirements and redesign theproject.

4.2 Project Preparation. Feasibility studies and engineering designswere available. Training requirements were defined with a more generousapproach and to a great extent directed at the engineering department ofENDESA, in line with the prevailing thinking at the time.

5. Project Implementation

5.1 Changes in Project Scope. ENDESA had initially designed thetransmission system as a single circuit 500 kV transmission line betweenPolpaico and El Rodeo to be operated in the earlier years at 220 kV, and asingle circuit 220 kV transmission line between El Rodeo and Alto Jahuel.With the change in assumptions described above, ENDESA decided tochange the design to double circuit instead of single circuit. After Bankapproval, bids were issued with this enlarged scope. When ENDESA wasprivatized during project execution and the engineering departmenttransformed into the separate consulting company INGENDESA, theinclination to spend substantial amounts on training diminished and theamount allocated to the training component was reduced; part of this trainingwas then provided by suppliers.

5.2 Project Implementation Schedule and Procurement.Implementation of the physical components of the project according to theSAR was scheduled to start in June 1987 and take five and a half years untilDecember 1992. Due to the redesigning of the transmission lines, invitationsto bid were issued one year later. Thanks to its vast experience and buoyantfinancial situation, ENDESA was able to recover this delay and complete the

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project in May 1991, eighteen months ahead of schedule. Goods andservices and civil works for the transmission lines and substations wereprocured through ICB. The purchase of PCs, which was included in thetraining component, was done on a local basis and had to be excluded fromBank financing. As planned from the beginning, the engineering serviceswere provided by ENDESA, first by its own engineering department andlater by its affiliate INGENDESA, and were therefore not eligible for Bankfinancing.

5.3 Project Cost. The actual investment cost at current prices includingfinancial cost amounted to US$47.8 (+26%) for the revised scope of theproject as compared to US$37.9 million estimated in the SAR for the originalscope. When only the physical components of the original single circuit areconsidered, the actual cost in real terms of US$28.1 million represented a14% increase compared to the SAR estimate of US$24.7 million. This wascaused mainly by an underestimation of the cost of land and rights of way,and cost of supervision by consulting engineers. Also noteworthy is the 60%reduction in the financial cost, due to the shorter implementation period.

5.4 Project Financing. Financing the project presented no problem asENDESA's cash flow was more than sufficient to absorb the additionalUS$9.9 million. The Bank's financing share was consequently reduced to50% of the total cost at current prices net of taxes and import duties ascompared to the initial ratio of 66/34 between the Bank and ENDESA.Allocation of loan proceeds and disbursements were slightly altered in favorof civil works to adjust to contractual arrangements. While loandisbursements were slow to start, they picked up once the redesigning of theproject was concluded. The last disbursement was made in December 1992,eighteen months ahead of the closing date.

6. Project Results

6.1 Project Objectives. The original project of a single circuit of 80 kmwas implemented in concept and detail as foreseen at appraisal. To this wasadded a second circuit of the same length. Therefore, not only was theoriginal objective achieved but with the second circuit the available capacitywas doubled. The Central Interconnected System is therefore easily able tomeet increased demand.

6.2 ENDESA's Institutional Performance. In 1986, CORFO hadalready sold several former ENDESA subsidiaries: the distribution companiesof Coquimbo (EMEC), Melipilla (EMEL), and Atacama (EMELAT), and asmall generation company (Pilmaiquen). Pullinque, another small generationcompany and former subsidiary of ENDESA, was sold to private investors in1987. Between 1988 and 1990, the distribution companies of Antofagastaand Tarapaca were sold to the private sector and ENDESA maintained only aparticipation of 8% in the generation/transmission company EDELNOR,responsible for the SING. In addition, the ownership of ENDESA in the

companies that serve the southern regions of Aysen and Magallanes,EDELAYSEN and EDELMAG, was terminated. ENDESAs role wastherefore limited to generation and transmission in the CIS.

6.3 The privatization of ENDESA created an ownership structurecomposed of private pension funds, companies belonging to one of the bigfinancial conglomerates of Chile, insurance companies and investments funds,employees, and other private shareholders. At the end of 1992, ENDESAhad 60,389 shareholders, with individual investors holding 30% of its capital,pension funds 29%, non-financial sector companies 28%, local investmentbanks 6%, foreign investment funds 4%, employees 2%, and insurancecompanies 1 %. However, the main influence is exercised by two financialconglomerates, Enersis and Luksic.

6.4 Privatization brought about a new management at ENDESA. It soonstarted reorganizing the company. The functions of engineering, real estatemanagement, and health services were spun-off into separate, at least 90%owned companies called INGENDESA, ENIGESA, and ISPEN. Dataprocessing is provided by IDESSA in which ENDESA owns 50.1 % of theshares. It streamlined the remaining organization, and reduced staffing in allbut the financial area which now plays a much more important role.

6.5 Recently, ENDESA increasingly has become a holding companyleaving the operation of the facilities to its subsidiaries. While the internalconsolidation was being implemented, ENDESA also began searching foradditional possibilities to invest in the Chilean power sector. When in 1989CORFO offered the shares of Pehuenche for sale, ENDESA presented thehighest bid. Since then, it has created a new subsidiary in charge of buildingthe 450MW hydropower station Pangue, and has transferred the transmissionbusiness to a fully owned subsidiary called TRANSELEC. Moreover, sinceENDESA faced opposition to its expansion in Chile and to reduce risk, itstarted to look outside for investment opportunities. When the Argentinepower sector was privatized in 1992/93, ENDESA founded a subsidiary there(ENDESA Argentina S.A.) and acquired as a member of various consortiawith different degrees of participation shares in thermal (Costanera) andhydroelectric (El Chocon) plants and power distribution companies (Edesur),thereby returning to the business of retail power sales it had abandoned inChile the previous decade.

6.6 To facilitate its financial operations it established Endesa-ChileOverseas in the Cayman Islands. It has received a triple B rating fromStandard and Poor's for its external debt, the first Latin American companyclassified as "Investment Grade."

6.7 ENDESA's Financial Performance. When comparing the financialresults forecast in the SAR and their actual value it is important to note thatthese numbers refer to two very different organizations, since the dynamicsof the above changes in ENDESA were clearly not anticipated in the SAR.

Financial statements are fully consolidated for those going concerns whereENDESA's holdings are over 50%, i.e., ENIGESA, INGENDESA, ISPEN,E.E. Pehuenche, ENDESA Argentina, Endesa Chile Overseas, and IDESSA.Investments in other companies are incorporated proportionally according toENDESA's participation in their capital including accrued net income.

6.8 Average rates and sales revenues remained below forecast becausethey no longer include sales at the distribution level. Except for 1989 and1990, which were years with below average rainfall and therefore requiredheavy expenditures for fuel, operating ratios (1992:44%) were well belowforecasts, confirming the expectation of increased efficiency due toprivatization. The average financial rate of return for the five-year period1988 to 1992 reached 8.6%, only modestly above the long term bond yield inChile, thus reflecting the relatively low risk involved in the power business.The return on equity at 9.7% was higher, demonstrating a successfulmanagement of financial resources and assets. However, only 12% of thetotal capital investment program of US$555 million was financed with ownresources, mainly caused by an average dividend payout for the same periodof 118% of net income excluding adjustments for inflation. This is indicativeof a dividend policy that is not sustainable over the long run, especially whenseen in connection with the lack of additional paid-in capital.

6.9 Economic Reassessment. At appraisal Bank staff and Chilean powerauthorities expected the Project to contribute to the economic growth of thearea affected, mostly related to industrial growth, and to the improvement ofthe standard of living of the population. To reach these objectives and toprovide for expected load growth, the Project was designed as part of a least-cost generation/transmission program.

6.10 During the period up to 1990, the actual level of peak demand in theSIC (2,326 MW) remained very close to the forecast. In 1991, because of adrought, it was below SAR estimates, only to exceed them by circa 8% at2,778 MW in 1992. Overall, growth of peak demand averaged 6.7% p.a.compared to 4.3% p.a. anticipated in the SAR. Development of energygeneration was similar to peak demand (11,866 GWh in 1987, 16,302 GWhin 1992 or 6.6% p.a.). The increase in transmission capacity of the Projecttherefore seems justified.

6.11 The current forecast for peak demand of 4,316 MW in 2000 is basedon a 5.7% growth rate, in accordance with a 5% growth rate of theeconomy. In view of the strong growth of the Chilean economy in the lastthree years, which was inconceivable in the mid 1980s at the time ofappraisal, the current forecast appears rather conservative. Only ifconsiderable efficiency increases in production and end-use are realizedand/or economic growth rates are substantially reduced will peak demandexpand at this rate.

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6.12 As the project was part of the least-cost expansion program for thepower sector, an isolated economic evaluation of the project was not made,because it was not meaningful to allocate benefits to the various componentsof the whole program. Instead, the internal rate of return for the overall1986-95 investment program for the SIC was calculated at 11.2%, based ondata provided by CNE, which in turn drew on information made availablefrom the state owned power companies. Since privatization, CNE no longerobtains this type of data. It is therefore not possible to recalculate the actualrate of return of the investment program. This would not only require dataon past performance of the many companies involved in the SIC, but alsoknowledge of their future plans, which as private companies they have littleinterest in providing. However, the information given in previous paragraphson demand development, investment costs, and time of commissioningdemonstrates that actual developments exceeded those of the appraisalforecast. It thus seems safe to assume that the cost effectiveness was actuallybetter than estimated in the SAR, and possibly the internal rate of return aswell.

7. Project Sustainability

7.1 Benefits of the installations are expected to be sustained throughouttheir service life given ENDESA's excellent maintenance record. Experiencewith the equipment so far has been above average. The only problemdetected was that 25 % of the transformers showed some minor oil leakagewhich the supplier still has to repair. The major risk has been the exposureof the transmission line to vandalism (11 cases) and terrorism (4 cases). Nopermanent damage resulted.

8. Bank Performance

8.1 Only 63 staffdays were spent in the field for project preparation andappraisal, and 53 staffdays for supervision. This low level of staff inputrepresents the economies of scale made possible through the managing of twopower projects that advanced basically at the same speed (the other being thePehuenche Hydroelectric Project), the straightforwardness of the project, andthe experience of the implementing agency. In retrospect, staff was tooconservative in assessing the potential for dynamic changes caused byprivatization. The continuation of the guarantee of the Republic of Chile inthe case of privatization of ENDESA should have been stipulated. Financialcovenants were also not tailored sufficiently to ENDESA's future characteras a private company. At least a dividend cap related to actual cashgeneration should have been covenanted. During implementation, Bank staffshowed flexibility when ENDESA decided to redesign the project within arelatively brief period after Board approval. Supervision was adequate withno delays in project execution attributable to slow response by the Bank.

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9. Borrower Performance

9.1 The performance of ENDESA in managing the project was highlysatisfactory, and was given high marks by Bank staff. ENDESA is adisciplined entity, which was reflected in its active participation in thepreparation of the project, its attention to detail during supervision, theexacting standards it set for its contractors, and its periodic reports on projectimplementation. It continues to be a large organization with a high degree ofspecialization requiring a great amount of coordination. Its transformationfrom a publicly to a privately owned corporation primarily affected itsapproach to cost and financial management, but in no way has implied alowering of technical standards.

10. Bank-Borrower Relationship

10.1 The relationship between ENDESA and the Bank was a close onecharacterized by considerable continuity in the staff and managers workingon the project both in Chile and in the Bank (with the exception of changesbrought about by the Bank's reorganization in 1987). Perhaps the only areain which the Bank could not exercise a positive influence on the course ofevents was the restructuring of the power sector prior to privatization, aswell as the modalities of the sale of the public power companies in generaland ENDESA in particular.

11. Consulting Services

11. 1 ENDESA preferred to use first its engineering department andafterwards its affiliate INGENDESA as consultants instead of hiring outsideconsultants through Bank-approved procedures. Overall, they performedwell. Engineering costs as a percentage of project costs were relatively high,which in part can be explained by the need to redesign the project.

12. Project Documentation and Data

12.1 Project documentation and data include the SAR, the legal documents,the progress and final reports by the Borrower, supervision reports by theBank, correspondence, financial statements, annual and audit reports. TheSAR and legal documents were adequately prepared and generallycomprehensive and did provide a useful framework of reference duringproject implementation. Semi-annual progress reports were preparedregularly informing on project implementation, status, and the financialsituation of the Borrower. Audit reports were comprehensive and submittedon time, all auditor's opinions were unqualified. The final project report washelpful in preparing this report. Bank records were well kept andinformation retrieval was easy.

- 10-

PART II - PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

Letter from ENDESA, dated November 11, 1993 (translation)

From the analysis of the content of Part I it can be deduced that itinterprets faithfully the objectives that were taken into account when theproject was developed, as well as its implementation and results. Also ofinterest is the description given about the evolution of ENDESA during therecent years. It allows the reader to understand the level of developmentwhich the company has achieved.

In addition, the relationship with the analysts of the Bank should bespecially highlighted, as well as their flexibility to face the changes in theproject when necessary. For example, at the time when the studies andanalysis indicated that it was convenient to change from single to doublecircuit.

The flexibility and extent of judgement shown by the technical andfinancial staff of the Bank made it possible to develop the project, therebymaking compatible the aspirations of the lender and borrower.

We consider the flexibility shown by the parties a point worthhighlighting. This should serve as an objective for future projects.

Moreover, given the experience of the Bank and ENDESA in thistype of projects, there were no frictions between officials of the two entities.Relations were conducted at a cordial, honest and professional level. Thisdeserves to be emphasized, and was the reason for great effectiveness duringthe evolution and execution of the project.

- 11 -

PART HI - STATISTICAL INFORMATION

- 12 -

Table 1: Bank Lending for Other Power Projects in Chile

Loan Amount ApprovalProject Name Number US$ million Year Status

Power and Irrigation 0005-0 13.50 1948 Fully repaid

ENDESA Expansion 0153-0 15.00 1956 Fully repaid

Rapel and Huasco 0244-0 32.50 1959 Fully repaid

Interim Power Program 0402-0 4.40 1965 Fully repaid

Fifth Power 0479-1 60.00 1966 Fully disbursed B-loan

Fifth Power 0479-2 6.41 1974 Fully disbursed B-loan

Sixth Power 1351-0 12.00 1976 Fully disbursed B-loan

Pehuenche Hydroelec. 2832-CH 40.62 1987 Power plant in operation

Total 184.43

BANKLEN

- 13-

Table 2: Project Timetable

Date ActualPlanned Date

Identification N.A. 08/1986

Preparation 11/1986 11/1986

Appraisal 02/1987 01/1987

Loan Negotiations (end) 04/1987 04/1987

Board Approval 06/1987 06/1987

Loan Signature N.A. 12/1987

Loan Effectiveness 03/1988 02/1988

Loan Closing 06/1994 12/1992

Last Disbursement 06/1994 12/1992

Project Completion 12/1992 05/1991

TIMETABLE

- 14 -

Table 3: Forecast and Actual Disbursements of Loan Proceeds

CY Cumulative DisbursementsSemesbtr Forecast Actual Actual/Forecast

USS million %

1988 1 0.2 0.0 0

1988 11 1.3 0.0 01989 1 2.6 0.0 0

1989 11 4.5 0.0 019901 6.6 4.5 68

199011 8.9 12.8 1441991 1 11.3 19.1 169

1991 11 13.6 20.5 1511992 1 15.6 20.5 131

199211 17.5 21.5 12319931 18.7

1993 11 20.21994 1 21.5

DISBURSE

- 15 -

Table 4: Project Implementation Schedule and Procurement Method

Planned Actual

Engineering and AdministrationBid Invitation 06/1986Contract Award 06/1986Completion Date 12/1992 06/1991Procurement Method Other Other

SubstationsBid Invitation 06/1987 07/1988 - 05/1989Contract Award 03/1988 01/1989 - 11/1989Completion Date 12/1992 05/1991Procurement Method ICB ICB

Transmission UnesBid Invitation 06/1987 07/1988 - 09/1989Contract Award 03/1988 01/1989 - 12/1989Completion Date 12/1992 05/1991Procurement Method ICB ICB

Professional Training ProgramBid InvitationContract Award _ _Completion Date 03/1991 06/1991Procurement Method Other Other

IMPLEMENT

- 16 -

Table 5: Proiect Scope

SAR Scope Actual Scope

63 km single circui 500 kV line 63 km double circui 500 kV linebetween Polpaico and El Rodeo between Polpaico and El Rodeoto be operated initially at 220 kV. to be operated initially at 220 kV.

17 km single circui 220 kV line 17 km double circui 220 kV linebetween El Rodeo and Alto Jahuel. between El Rodeo and Alto Jahuel.

Construction of 220 kV substation Construction of 220 kV substationat Polpaico, expansion of substations at Polpaico, expansion of substationsat San Isidro, Alto Jahuel, Colbun. at San Isidro, Alto Jahuel, Colbun;

at San Isidro an addiional 220/115/13.8 kV trans-former with 1501150/30 MVA capacity wa installed.

Training for 50 professionals, including Training for 20 professionals andabout 135 man-months of fellowsNps participation of 70 professionals in seminars;and courses abroad and in local universities; acquisition of PCs and software.acquiskion of PCs and software.

SCOPE

- 17 -

Table 6: Prolect Cost and Financins

USS million

Proiect Cost SAR Estimate Actual % Change

Local Foreign Total Local Foreign Total

Engineering and Adminitratlon 2.06 0.48 2.54 5.15 0.11 5.26 107Land and RoW 0.79 0.00 0.79 1.74 0.00 1.74 120Substations

SingleCircuit 3.33 10.72 14.05 3.51 7.65 11.16 (21)Double Circuit 0.57 1.16 1.73 -

Subtotai Substations 3.33 10.72 14.05 4.08 8.81 12.89 (8)Transmission Unes

Single Circuit 2.43 4.91 7.34 2.95 6.95 9.90 35Double Circuit 1.74 4.06 5.80 -Subtotal Transmission Unes 2.43 4.91 7.34 4.69 11.01 15.70 114

Goods and ServicesS;ngle Circuit 8.61 16.11 24.72 13.35 14.71 28.06 14Double Circuit 2.31 5.22 7.53 -

Subtotal Goods and Services 8.61 16.11 24.72 15.66 19.93 35.59 44Professional Training and PCs 0.22 0.56 0.78 0.05 0.25 0.30 (62)Total Base Cost at 01/01/87 Prices Am 83 1L82 SOLI.7 &Q1I L.im 41Contingencies

Physical Contingencies 1.03 1.61 2.64 0.00 0.00 0.00 (100)Price Escalabon 1.76 2.71 4.47 4.44 2.99 7.43 66

Total Net Cost Current Prices 11 62 2099 321 3.17 laTaxes and Import Dutles 1.60 0.00 1.60 2.94 0.00 2.94 84Total Gross Cost at Current Prices 132 2099 34.21 L22I 23.1Z 46.2 Financial Cost 0.00 3.72 3.72 0.00 1.50 1.50 (60)Total Project Cost 13l Li22 24.7 37.9 L4.UZ 4.l7 2I

Proiect Financino SAR Estimate Actual % ChangeTotal Total

IBRD LoanCivil Works 2.10 6.09 190Goods 18.80 15.20 (19)Training and PCs 0.60 0.21 (65)Subtotal IBRD Loan 21.50 21.50 0

END ESA 16.43 26.26 60TOTAL 37.9 47.76

INVCOST

pa1 dl

-Yw lmi l*2 16 13 4 | IM 1NS 1967 | 1 1 |I

MAR Ac.d arm AWlj VA D43. EA A8Mr "A Ad V PA u Fi_

ENROVYIEGUIME&ErSIGM 11.66 II. 12.475 12.8 1mm668 13.30 13,753 13641 14,441 14733 15,152 1.3s. 17.3 1M 19.37 20.445 21.56 22.75 24.007 2saa7

AVA8AOLE ENEaY 10866

E8d. 464s 6.964 e,45 6.907 65845 5,520 6645 4,845 6,645 4.67 6.845 6,156 8.156 156 I .156 I ,156 8.156 6,156 8.156 6.156

ChcUa - Gw. 545 574 545 458 545 466 545 544 545 443 545 671 671 671 871 071 671 671 671 671

C.a-,-M.d,ho. 3.500 26350 3.50 2,511 3.500 2.006 3500 INS3 3.500 2.818 3.500 3.258 3.258 3,258 3,258 3,258 3.258 3,258 3.258 3,25804hpt.n-^ 242 87 242 736 2420 779C 2420 8^93 242o 878 24 3o 03,25 1.,03a7 1,3+7 13.o37 13,37 l603a7 1037 ,3,03a7 1.03e

SublIaI.m.*VftydrpbMls 11,132 11.086 11.132 108614 11.132 8.781 11,132 8.178 11,132 8.128 11.132 11.122 11.122 11.122 li.122 11.122 11.122 11,122 11.122 11.122

F.*-hyd.opWf (M.8 1667)Endm.-CAM. 697 750 964 40 840 40 840 840 840 840 840 40

Pe.m.h. 2,067 712 3,022 2.758 2.788 2.788 2,766 2756 2766 2.786 2.786

CWhcl,.-A.I. 516 842 340 842 685 a5 ee5 885 865 685 885 885 865

A.-W. 182 25! 255 412 412 412 412Cu,.M,.qL. ~~~~~~~ ~~~~~~~ ~~~~~~~~~~~~~~~488 828 828 628 828 828 826

P., 1,907 1.907 1.90? 1.907

0t..,S.IlW o 4.. hydpM8t. 518 0 1,538 3.177 2.518 4.727 4.491 5.121 5,374 5.374 7.438 7,438 7,438 7.438

S.btothVydropWt. 11.132 11,088 11.132 10,814 11,132 8.781 1 1.6e 8.178 12.671 12303 13850 155846 15.613 18,243 18,466 18,496 168,0 18,580 18.560 18,560

Thl. pln4tE..Mqt-Wpll..18t(19I87) 4,100 800 4,100 2.277 4.100 4.5281 4.100 5.483 4.100 2.430 4.100 453 4.100 4.100 4.100 4.100 4,100 4,100 4.100 4.100 00

Fu*o.M pll (&W 1967) 1.061 1.091 1.091 1,994

Subl.W W..o l1p1im, 4,100 60o 4,100 2,277 4,100 4.529 4.100 5.483 4.100 2,430 4.100 453 4.100 4.100 5,191 5.191 6.19 6.084 4.100 4,100

TohW. gy Wa8loblE..MgpM.U (1s87) 15.232 11888s 15.232 12.881 15.232 13.320 15,232 13,641 15.232 11.868 15.232 11.575 5222 15222 i2 15222 1s22 15,222 15,2 IS,5

F..ko.p11u(.*w 1087) 518~~~~~~~~~~~~~~~~~~~~si 1.538 3.177 2,5l8 4.727 4 491 5,121 8485 645 528 8432 7.43 7,438

Tow l 15.232 11688 15232 126861 15.232 13,320 15,750 13,841 8,7 14. 733 17.750 18.302 10,713 20543 2187 21887 23751 2e485 22.88 22,60

?EINERGY8AL- (GWAI4 3,353 0 2Z757 0 2134 0 1S97 0 2330 0 2t58 0 2,364 1,.74

2 ,30r 242 2,182 1 8 t, t28

n p- Vwd PU1*1.. P*Mu 9 n, Los N.,Fb"8 IC4. Mow y El S.

DA30613

P002 of 2

Ti 7: Cm0vt 0.W. w tCa,9aiv6.cwmocod

f_67 106s low9 1910 l6. 1902 1903 1 1094 1905 I IG0 1097 1 low 10 1 2000

am A. S AK am A m ACM WA Aew ewt ACL. PMM F_NS

PEr p ( MMAND nMtOU2.083 2.00c 2.1U3 2.147 2.247 2.272 2,335 2.22 2.451 2375 2574 2.778 2,53 3.10 3,302 3,464 3,670 3,870 4.001 4.316

AVAAOtE GENEPATION CAPAcIrY I

Hyd.*,NwtaEddng Wdrphn_t (geW)

End. 1.541 1,456 1,541 1,450 1.541 1,456 1,541 1,456 1.541 1.4,6 1.S4 1.450 1.456 1,456 1,406 1.456 1.456 1,456 1.458 1,456anhmO .Gnan U2 63 63 54 8 72 83 72 63 83 83 83 83 63 83 83 u3 83 83 83

Cobwi-M.dh . 490 460 400 400 460 490 490 490 400 490 4s0 490 490 490 400 490 490 400 490 490O0wpmic.t- 50 133 50 133 so 129 s0 129 sO 133 so 133 133 133 133 133 133 133 133 133s.*6oI.Is8 hy wopin 2,104 2.164 t164 2.135 2.104 2,149 2,104 2.14 2,104 2,104 2.104 2.164 2.104 2.104 2.104 2,104 2.1a4 2.104 2.104 2,164

F.b.mhypl.f6 (OM 1901)End.-C.u4r 144 145 144 145 145 145 145 145 145 145 145 145P.h..n. 501 500500 500 50 00 500 500 500 500 S0 S0 500ah eu-.-AAI 10o 1 10 140 100 140 140 140 140 140 140 140 4 4

A.-C." 40 46 46 72 72 72 72C 05 05 85 65 as 05 05Polpa.e 450 450 450 450

Su hkAW K*M hyd bift 160 0 304 763 604 785 765 914 016 Ol 1.392 1.302 1,302 1.302S bkl hydmpt.b 2.164 2.164 2.164 2.135 2.104 2,14g 2,324 2.149 2,460 2,040 2,968 2.949 2.040 3,000 3,080 3.060 3.556 3.556 3.55 3.556

ThwsM p6.6Emsong0wMapt.6(l"n) 773 770 773 770 773 770 773 no n73 770 773 770 770 770 770 770 770 770 n70 770Fuk*a.Vwmd pbs (.1w 1007) 0a 06 IS IS 5s 165 l5 290 200 6s0S.bwW tat plu 7 770 773 70o 773 770 773 86 773 8s 773 656 785 765 935 035 035 I.00o 1,050 1,460

E.".fgpih(187( 2.037 2.634 2.937 2.90o 2.937 2.919 2.937 2.919 2,937 2,934 2,937 2.934 2.934 2,34 2.934 2,934 2.934 2,934 2.934 2.934FA. ph

6J(_. 1907) 1GO 0 304 873 004 73 000 931 1.001 1.061 1,557 1.662 1.612 2.002

TM" 2.837 2.034 2.837 2.905 2.937 2.919 3,0s7 3.007 3.241 3,07 3.741 3,07 3,734 3.,0s 4.015 4,015 4,491 4,616 4.610 5.015

CAPACffY SA CEM(MM 854 25 774 756 0so 047 702 "I1 700 1.432 1.167 1,029 70i 735 713 531 815 730 525 700

LAfGEST LOW (MvW 210 216 216 216 216 218 216 211 210 250 210 250 250 250 250 250 250 250 200 250

_6.w hpq,aw.6 :P P , PI8Udq_ bLa osb6F L. M . yEl

of 3

Table 3: sadea'a C .... Ud.td Inoe St.t-st.

- &LILU.. of .ed 1938 US$ -

Tea .eding D-.omb 31 1987 1938 1939 1990 1991 1 992 193 I 94 i1995 I 1998 I 299-7

Sam, ACT BAR ACT Sax ACT XAAN ACT OAR ACT SAX ACT PXOSKET r~CALCST

sleot.ioity "Il.. 346.6 260.4 389.2 294.0 430.8 301.1 418.4 323.4 428.4 303.5 446.6 289.7 290.5 322.5 340.7 355.8 392.3Otk.r 2.1 1.5 3.3 2.3 3.3 3.4 3.5 15.1 3.8 14.9 3 .3 17.8 20.2 20.3 20 .4 21.7 21.5

Total oPerting r. ..... 350.3 282.0 392.5 296.3 433.9 304.9 420.1 2386.5 432.0 310.4 449.9 29 7 .5 300.7 352.9 381.1 375.5 413.0

Labor (22.4) (17.8 (23.4) (15.8 (24.0) (22.2 (24.9) (25.3 (27.5) ( 24 .3 (23.7) (21.2 (22.0 (21.9 (23.0 (22.0 (21.5TonI (19.1) (3.3 (18.5) (7.7 (10.7) (30.8 (22.3) (52.3 (25.2) (20.7 (17.0) (0.1 0.0 (10.8 (12.2 (15.8 (15.3soergy peroh..ed (93.2) (85.3 (114.0) (86.8 (130.2) (75.7 (131 .0) (91.0 (133.3) (44.3 (141.4) (13.0 (1.9 (25.7 (23.1 (27.5 (34.8

Otk.r operating eapenen (17.2) (11.1 (18.9) (11.3 (17.1) (18.1 (17.2) (12.1 (17.7) (0.1 (19.0) (3.2 (7.5 (7.7 (8.8 (7.4 (3.7Oeprmintioa ~~~~~~~ ~~~~~(73.4) (49.5 (75.7) (49.6 (78.0) (43.9 (78.4) (50.5 (30.5) (80.0 (84.8) (64.9 (84.3 (84.7 (64.8 (83.3 (67.9

Total Operating eapenaee (223.4) (144.8 (246.5) (151.2 (287.0) (193.7 (272.2) (221.2 (234.3) (157.4 (309.7) (107.4 (101.7 (130.8 (131.5 (138.5 (147.0

G.oa. operting inoe124.7 115.2 145.9 145.1 188.9 111.2 147.9 105.4 147.7 181.0 14 0 .2 100.1 199.0 222.2 229.8 259.0 268.3

Adninietrnti ~~~~~~~ ~~~~~(10.4) (11.4 (10.8) (7.7 (10.8) (10.9 (11.0) (10.8 (11.2) (12.1 (11.5) (19.1 (18.7 (13.3 (18.8 (13.8 (10.5

OS.t operting Lace 114.3 103.8 135.3 137.4 158.1 100.3 138.9 94.8 138.5 143.9 123.7 181.0 130.3 203.4 211.0 220.4 248.3

Con-op-ting ieoe (ant) 10.3 29.0 11.9 21.8 12.0 18.8 11.9 10.9 10.4 11.2 3.3 12.7 12.5 12.8 14.5 10.1 10.1

In-~ bnfor internet 124.8 132.8 147.2 159.0 148.9 118.9 143.3 113.7 148.9 180.1 137.0 1 73 .7 192.8 218.0 225.5 230.5 253.4

intareet on dbt (70.5) (65.3 (83.3) (53.1 (87.2) (44.9 (88.3) (56.0 (83.9) (01.5 (59.3) (57.3 (65.5 (80.8 (80.4 (82.7 (59.0Internet doing oon.trntios 5.3 2.8 3.8 1.8 7.4 4.9 12.0 0.8 10.0 3.5 4.5 2.0 10.8 3.4 12.0 14.4 11.5

intereat keogd to op-rti.ne (84.2) (63.2 (84.8) (51.5~ (59.3) (40.0 (54.2) (49.2 (53.9) (53.0 (55.3) (55.3 (54.9 (52.2 (438.4 (89.3 (47.5

I-M.e before nostary oorreotios 80.4 89.7 82.7 107.5 109.1 79.9 94.5 84.5 93.1 10 2 .2 31.3 113.0 133.0 183.9 177.2 131.3 211.0

No...tary ooroin23.9 (10.1 24.2 50.1 22.7 15.9 24.3 18.8 24.4 30.2 23.2 4 7.0 (10.1 11.2 10.5 9.5 7.4

xno- before t... 34.2 59.8 108.9 157.8 131.8 9 2 .3 119.3 31.1 117.5 132.4 105.0 185.0 127.9 175.1 187.7 189.8 214.4Inatan (1.7) 0.0 (2.1) (0.1 (2.2) (0.2 (2.3) (0.2 (3.1) )2.0 (4.0) (3.3 (0.7 (3.8 (6.2 (23.8 (24.7

Net inoe after teen. (02.5 59.0 104.8 157.5 129.4 92.0 117.0 30.9 11 4.4 130.4 101.0 181.7 127.2 171.5 131.5 188.2 191.7

leotri-.ty a.I.. (OUb) 9,303 10,209 9.778 9.531 10,270 8.353 10,200 9,503 10.980 9.521 12.023 11,037 10,314 11,165 11,340 11,443 13,181Av-rag .&I.. pruce (GO-C/kUb) 3.53 2.53 3.48 3.08 4.19 3.81 4.08 2.30s 5.91 3.19 3.71 2.43 2.59 2.03 5.00 3.09 2.96

,~~~erating r.tio 8~~~~~_ 7.-4 680 .4 85.5 53.8 84.0 867.-1 87.4 71.3 68.4 53. 71.4 44.0 40.0 4 2 .3 41.6 41.3 40.0

Pate 2 of 3

YT. -i4W .q 31 1997 1990 199 999 1991ito 1992 1993 I 1994 1 1999 s 1994 lo199

mm A" "A ACT "a ACT SM ACT am ACT "a help 969t F*.X-Ims

9.t .u9 ti.9 ft.4 114.3 103.8 135.) 137.4 154.1 i6.e. ijo., 94.9 1)4.5 149.9 120.7 141.0 186.5 243.4 211.4 220.4 346 .3D~~~...1.L16. 1~~~~~~~~3.6 53.2 15.7 49.0 74.9 4#.9 76.4 59.5 96.) 49.9 94.4 44.9 44.3 44.7 44.0 03.6 47.9

5.19 of f1..1..1J L... 1t. 9.9 14.,7 49 .4 .9 .0 1. 94 4. 53 464 2. 1.4 15.5 39.2 7.2 9.9ot... 21.4 03.7 3.5 331 I 2.8 4S.4 16 1. 41 3. 22 3. 3 9.9 22.1 21.9 19.6 41.5

T.t.1 go.. 4s v.o.ti1 269.3 295.4 234.4 256.1 254.9 197.4 5506. 223.9 235.3 267.7 246.1 236.3 2615.2 205.4 334.1 316.4 340.7

3q.ity .o6 ~~~ t... ~~~~~~~~~~~(2.4) 9.6 (3.4) 9.6 (5.7) 0.9 (3.4) 9.0 (3.7) 0.9 (3.9) 0.5 40.9 1.1 (1.7 (2.6 (23.4DI.idd. 6.6 (26.4 (53.4)~~~~~~~~~~~~~I (80.6 (74.8) IS, ( I6. (16.1) (58.2 (67.2) I(12.-2: (5.4) (144.4 (145.4: (151.6 (1716.8 (176. 4161.6

T.t.1 qity 6.-i.. (2 .9) 436.4 (54.6) (86.6 (69.5) (90.5 (164.7) (59 .2 (91.9) ( 120.2 (99.2) (144.2 (144.) (149.9 (130.5 (179. 1 (205.2

a.... 1.t...1 t.dlov 207 .3 243.4 171 .8 139 .) 174.4 167.1 140.1 105.4 144 .3 147.53 114 .9 144.-2 138 .9 135.5 156.2 131.3 141.5

D.bt r,e&.v t ~~~~~~(23.7) (1:4.4 (25$.6) (59 .3 (24.3) (46. (45.4) (4.5k- (:9. 1) (77.53 (117.3) ( 53.1 15(:1.7 64. (16 .6 (49 .2; (250.4 1.

(74 .3) (14 (43) (34.1 (7.2 (.5 (.) (40 (3.9) 5. (59.6) (35.5~ (4.3 (.2 (57.s4 (06.6 (55.6

Y.t..1 d.bt 6.4... (94.2) (146.9 (93.3) (193.2 (93.5) (266.6 (166.7) (60.5 (123.4) (137.2 (147.1) (148.64 (1160. (123.4 (127.0 (130.01 (192.4

R.1 it.t*.1 h.dh.o 113.1 97.6 84.5 (53.9~ 60.9 6.3 36.4 49.1 21.3 19.2 29.6 33.4 22.9 32.)1 29.4 1.3 (3.

sqoity 6-tib9ti1 3.5 9.6 5.5 2.9 G., 1.4 4.9 5.1 5.4 4.1 6.9 0.7 9.9 6.4 1.16. 00

?.t.1 .-- b.o..-. 4..Ji. 114.4 97.0 99.9 (51.4 67.6 7.9 41.3 14.2 20.9 14.4 36.7 30.3 23.6 32.5 39.7 1.9 (30.9

z.i.tL.q ~~~~~41.2 13.8 31.4 11.6 24.7 32,.1 191,.2 1~12.6 4.5 1. 0.726 66 6. . . .

MD 1.- 2233 . . . . 2.6 9.I. 64 41 54 34 . . . . . .191.4 . 0 .9 4.3 1101.2 34.7 151.4 39'.3 6.6 27.5 9.4 39.1 7.5 56.2 56.3 864. 67.4 74.'2

TOtOIb.o.14 56.5 13.6 57.1 122.7 02.3 563.5 51.5 122.9 3.6. 47.1 42.1 59.2 59 .2 36.3 94.0 01.0 79.2

TOTAL SOUCE5 167.1 11.6. 127.1 71.2 159 .1 191.4 92.8 190.2 45.5 41.5 61.4 64.5 74.0 42 110 3 49.5 45.5

A.PPLICATIONS

phy.i..1 99:.4 59.5 41.4 44.9 166.5 179.4 92.4 124.4~ 04. 53.1 81.7 37.5l 44.5 53.1 167, 6 0.4 32.3

£1999 1.0 4.6 11.7 .3 13 09 12.2 49. 1.4 9.0 4.3 38.4 0.4 0. 6 .6 9.0

,.t..1 .. Pit.1 L ... t.1. 109.4 44.3 163.1 53.2 121.4 1719.4 194.9 193.7 75.3 53.5 860. 75.7 40.5 53.1 101. S 4.4 32.3

110-i.1 1.-.t..ts 43.1 9.0 43.1 18.6 37.0 39.0 .0. 9.6 6.6 9.4 9.0 9.9 0.9 6.9 9.9 9.0 .6.

ch-9 L. O9k09 .91t1 (5.4) 40.9 391 0.5 (9.3) (18.3 (12.6) 2.5 (9.6) 8.4 (4.6) 16.6 7.5 9.7 9.5 9.1 13.0

TOTAL. AI9LXCATII6S 597.1 116.6 121. 2. 5.1 191.4i 92.9 190.21 45.5 415 61 .4 64.5 74.6 42.6, 114. 09.5 45.3

"it I1.9i.4 x9.11 to) 193.4 159.9 01.9 2191.31 96.4 3.51 34.7 35.71 26.3 19.41 34.7 47.61 34.41 90.6 24.51 2.21 (95.7

of 3

Tabl. U: dc.&*'. Co..olid.t.d 8 ISY-. Sk.-t

- illio of .d 1986 US$ -

YTr .. disg Dc_b. 31 1987 1943 1989 1990 1981 1993 1993 1994 I 1595 | 1994 1997

BAR ACT saN ACT SAt ACT SAM ACT &AR Ac SAR ACT P8ss58T rOlSCAST

ASSETS

Curr.st .... tSC..h cd b..k. 12.2 2.5 12.4 2.0 13.2 2.1 13.7 0.5 15.4 5.4 15.4 0.5 1.0 1.2 1.4 1.7 0.5Aoo..t. r-c.iv.bl. 31.0 24.4 34.6 31.4 38.1 34.0 37.1 34.9 38.2 29.2 39.8 26.4 27.0 31.0 31.4 33.2 36.6

Ixoe-tot-.. 2.4 3.4 2.4 4.0 2.4 4.6 2.4 3.9 2.4 7.4 2.4 7.4 7.4 7.4 7.4 7.4 7.4

Otl 1 2 .0 15.7 12 5.0 12.0 16.4 12.0 48.2 12.0 49.5 12.0 46.6 29._ 29. __4 27. __3 50_._ 4 20.7

Total crr..t ....* t 57.6 50.0 61.4 42.8 65.7 111.2 65.2 87.5 63.0 111.5 70.0 31.3 65.0 89.0 67.9 92.1 65.2

ri..Ci.l L-.o*..t. 185.7 113.0 205.4 103.1 228.5 151.2 194.7 94.1 174.3 48.1 120.0 73.8 71.9 57.4 19.2 10.9 5.5

rix d A.C.tm0ro. Plast ia -via 2,501.9 2,217.7 2,509.2 2,166.9 2,520.6 2,176.2 2,531.5 2,242.1 2,412.0 2,621.5 1,945.3 2,039.0 2,844.4 2,906.6 2,909.3 2,924.7 3,204.2

6091atud d.pr ci.tioe (904.7) (787.9 (980.7) (314.1 (1,056.7) (858.1 (1,132.9) (919.2 (1,213.5) (067.7 .) 1.031.7 (1,096.1 (1,160.7 (1,225.4 (1_289.3 (1,357 0]

mat pl..t L. 3. io. 1,597.2 1,429.8 1,528.5 1,352.3 1,463.9 1,318.1 1,394.6 1,323.0 1,598.5 1,653.9 1,547.2 1,907.3 1,748.3 1,745.9 1,644.4 1,635.5 1,447.2Wook i. pog... 99.3 112.1 165.3 152.8 263.0 438.3 349 321.7 138.5 79.5 147.6 12B.9 17.9 192.7 3_2.9 355.1 112.4

Tot.l ..t fied .... t. 1,697.0 1,541.9 1,694.3 1,505.6 1,726.9 1,756.4 1,747.9 1,644.7 1,735.0 1,933.2 1,734.7 1,936.1 1,946.1 1,938.5 1,987.2 1,990.5 1,959.

otk. Aa..t. 145.7 300.7 155.9 304.7 149.2 149.5 149.3 253.4 152.9 109.2 151.0 147.6 139.6 129.1 122.3 39.9 38.0

TOTAL ASSETS 2,046.0 2,005.6 2,117.0 1,961.2 2,170.3 2,168.3 2,157.1 2,079.6 2,130.2 2,222.0 2,075.7 2,234.3 2,222.6 2,194.0 2,197.1 2,184.0 2,118.6

1A8X1XXT88 &ED *QUSIT

C-errat liabilitiacSk-ot-t po-tios of debt 26.1 35.3 27.2 32.5 44.3 63.7 63.9 77.3 92.1 79.1 48.4 51.4 65.9 70.9 70.1 138.9 79.4

XI.o tax psy-bl. 0.0 0.0 02. 0.0 0.4 0.0 0.0 0.2 0.0 0.0 0.4 3.3 0.7 .6 6.2 23.6 26 .7

otls r 4 44.6 43.9 44.9 4 77 45.2 37. 44.3 3_.9 46 .1 43.9 4_ .3 3_23 .1 31.3 32_.6 31.6 3 2 .4

Totl .cOOSEt libiliti.6 70.7 79.2 72.1 80.2 90.0 101.3 108.2 116.3 136.2 123.0 123.7 36.6 98.4 107.1 107.9 193.3 135.7

Loeq-tt debtC-dit. cud lo.. 722.2 687.0 697.7 581.1 677.4 715.2 631.6 615.7 546.9 732.7 474.5 727.7 716.1 655.3 651.1 559.6 539.2

Otkr 67.0 24.0 69.1 23.5 71.3 32.8 73.6 26.1 76.7 29.2 40.7 49.8 49.4 49.8 49.6 49.8 49.8

totl lomq-t.r debt 749.2 711.0 766.3 605.4 743.7 766.8 705.2 641.8 673.6 761.9 555.2 777.5 765.9 705.1 700.9 609.4 589.0Ki.olitary Equity 0.0 4.0 9.0 0.0 4.0 43. 0.0 0.0 0.0 11.5 0.0 11.5 12.6 13. 15.2 16.3 16.5

EquityCapital .ud rOCCo. aS 1,143.5 1,155.3 1,173.2 1,118.1 1,202.1 1,132.2 1,228.7 1,240.5 1,254.0 1,195.2 1,282.5 1,201.3 1,218.5 1,196.5 1,191.5 1,198.S 1,135.7

mat io_. 72.6 59.6 104.9 157.5 129.5 92.5 117.9 40.9 114.4 130.4 100.9 161.7 127.2 171.5 141.5 166.2 191.7

Total eqity 1,226.1 1,215.4 1,278.1 1,275.6 1,331.6 1,274.7 1,343.7 1,321.5 1,368.4 1,325.6 1,303.8 1,363.0 1,345.7 1,363.0 1,373.0 1,365.0 1,377.4

TOTAL L28XILITIES AND EQUITY 2,084.0 2,005.6 2,117.0 1,983.2 2,170.3 2,188.3 2,157.1 2,079.6 2,130.2 2,222.4 2,075.7 2,2_38. 2,222.6 2,194.0 2,197.1 2,184.0 2,118.6

D.bt-9quity-R.tio 40/40 38/62 38/62 33/47 37/63 39/61 34/44 35/65 34/66 39/61 32/68 38/63 38/62 36/64 36/64 35/65 33/67Rat-r ox Equity 6.7 4.9 4.4 12.3 9.9 7.3 8.7 6.2 2.4 9.9 7.3 12.0 9.4 12.4 13.2 12.1 14.0

*--1. I r re.t9mefoo.p- no*Atoeog l oiUtere ot ZD0a4

_- dila Dq,00bAr 31 1997 1000 1959 1t90 1991 1992 1003 | 1904 | 1995 199 | 1297

CAR ACT BAR ACT am ACT aIR AC? am ACT SAR ACT I?RU? *OZCS"Y

.rlket *tr-tie

Own -Atio0 (09k) 6.929 7,081 6,528 7,066 6,943 6,650 6,924 6,606 7,644 0,522 6,747 10,023 10,271 10,29 11,223 11,492 12,827

?.o.k.... {(aU) 3.920 3,753 3,906 3,192 4,100 2,322 4,109 2,465 4,139 1,626 6,161 1,996 1,544 1,315 1,069 ag9 1,459

Tot.1 (SU.- *d o b.ldiL.i.) 10,54S 10,034 10,514 10,258 11,043 0,972 11,032 9,073 11,705 10,140 12,920 11,919 11,912 12,143 12,292 12,394 14,204

*tfioi..y iSdi0atOA

*b_ of -l Nd Z .o 3,020 2,920 3,040 2,963 3,050 2,990 3,071 2,051 3,271 1,764 3,295 1,671 001 001 *01 *01 S0l

0 obdie.ri 742 579 752 0 757 0 757 992 768 527 769 792 1,525 1,555 1,570 1,595 1.605

Total 3,770 3,507 2,690 2,903 3,007 2,80 3,.29 2,943 4,039 2,201 4,064 2,463 2,326 2,356 2,371 2,396 2,406

u "ld pr S lo y" 2.60 2.93 2.57 3.20 2.70 2.00 2.60 2.69 2.71 4.16 2.96 4.50 4.65 4.74 4.70 4.76 5.46

3ajr log.- () 7.0 5.0 7.0 7.1 7.0 6.0 7.0 6.2 7.0 6.2 7.0 7.0 0.5 6.1 7.7 7.7 7.7

F1.miL. I ioaiLeteoRAtA of -*trm, (0) 7.2 7.3 *.7 9.9 10.4 7.5 9.6 7.2 9.1 ..4 0.2 *.8 10.1 11.6 12.3 13.3 14.3

D ot ioAR 0eWZ6g (tiAm.) 2.2 1.4 1.0 1.4 1.6 1.1 1.2 1.3 1.0 1.4 1.2 1.2 1.1 1.2 1.7 0.7 0.0

D.bt.qity ratio (0) 40/60 38/62 30/62 33/67 37/63 30/61 36/64 35/65 34/66 39161 32/s 32/62 38/62 36/64 34/04 35/65 33/67

I'1193

viii's ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~t'

- 24 -

Table 10: Status of Covenants

Agreement Section Status Original Revised Description of Covenant Comments

_____ _____ Date Date

Loan 2.03 OK 6/30/94 Closing Date No extensionrequired

3.01 OK ENDESA's comuitment to the

objectives of the Project andto carry it out with duediligence and efficiency.

3.02 OK Procurement of goods and works ALL procurementby Bank's Guidelines. is completed.

4.01 OK ENDESA to carry out itsoperations and conduct itsaffairs with soundadministrative, financiaL andpublic utility practices.

4.02 OK ENDESA to operate and maintainits plants, machinery,equipment and other propertyin accordance with soundengineering, financial, andpublic utiLity practices.

4.03 OK ENDESA to mintain insurance

____________ _ of instaLlations.

5.01 OK May 31 each ENDESA to furnish to the Bank No SpeciaLyear audit report on audited Account.

financial statements andSpecial Account.

5.02 OK ENDESA to m_intain debt/equity Ratio was 38/62

ratio of not greater than at 12/31/92.______________ ____________ 60/40.

5.03 OK ENDESA to maintain debt Ratio was 1.24service coverage ratio of at for 1992.

_____________ __________t_ least 1.3.

Guarantee 2.02 OK Republic of Chile to providenecessary funds if ENDESA'sfunds would be inadequate tomeet expenitures for project.

2.03 OK Republic of Chile to ensure

that CORFO will enable ENDESA=___________ ___________to carry out the project.

KEY:oK * Covenant compLied with.SOON * Compliance expected In reasonably short time.NYD * Not yet due.ACT X Needs use of formal remedies to bring about compliance.RNS * Needs to be revised.

COVENANT

- 25 -

Page 1 of 2

Table 11: Use of Bank Resources: Staff Weeks

BoardAppraisal Approval

Through Through Board ThroughFY Appraisal Approval Effectiveness Supervision

1987 12.2 9.5 0.7 0.11988 6.41989 8.31990 8.11991 7.11992 6.51993 5.3

Total 12.2 9.5 0.7 41.8

RESOURCES

- 26 -

Page 2 of 2

Table 11: Use of Bank Resources: Missions

Stage of Month Number of Days Specialization Performance Rating Types ofProject Cycle Year Staff in Field Represented Status Problems

ThroughAppraisal

08/1986 2 17.0 Eng., Fin. An. N.A. N.A.09/1986 1 7.0 Eng. N.A. N.A.10/1986 1 6.0 Environ. Sp. N.A. N.A.11/1986 2 18.0 Eng., Fin. An. N.A. N.A.

AppraisalThrough Board

Approval01/1987 2 15.0 Eng., Fin. An. N.A. N.A.

BoardApprovalThrough

EffectivenessN.a.

Subtotal to Effectiveness 63.0

Supervision01/1988 3 15.0 2 Eng., Fin. An. 1 None08/1988 1 5.0 1 Eng. 1 None01/1989 3 13.5 Eng., Fin. An., Env. 1 None07/1989 1 3.0 Eng. 1 None03/1990 2 7.0 Eng., Fin. An. 1 None06/1991 2 9.0 Eng., Fin. An. 1 None

Subtotal Supervision 52.5

Total 115.5

MISSIONS

IBRD 2533572 TOr 7'1 7'n

Los Vdos

C H I L E ALTO JAHUEL - POLPAICO SAN S

TRANSMISSION PROJECT 33LA

-33' °Valpris POLPAICO

Project:

1x500 kV Transmission Line

- 2x220 kV Transmission Line

1x220 kV Transmission Line SANTIAGO* Substation5s/ Co NAVIA

O Substations to be enlarged 0 Son Antonio J

_ Power Plants El Rod o °

Existing ALTO JAHUEL

/ 2x500 kV Transmission Lines

-#- 2x220 kV Transmission Lines

H- 2x154 kV Transmission Lines

* Substations

340 Power Plants RAPEL 34-350 MW

Rivers Rancogua 0o Selected Towns

- - - International Boundary /3

o 10 20 30 4,0 5,0

Kilometers

7 ARGENTINA

350 Curic 0 / 35

ITAH UE This mop lhas been preparedJ by The World Bank s staff

exlUsi,vely tar the onvenincof readers and is for th.intenl use of The IWorld BankGroup The denominations usedand' te boundorew shownon this maop do not i-pIy on theConstituci6n poto ordSnGop

0 ToIa a' ony ju.diment on the legalOTalca / ^\ vo~~~~~~~~~~~~~~~fts of any mteritry or onyoTalca ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I ndorsement or acceptance uh ondre

f \ ~~~~~~~~~~~~~~~~~uch boundaries

CIPRESES (COLBU 01 MW

PUENCH

MACHICURA 4 (0

90 COLBUN ISL SOUTH

Linares 40 W6 MW AMERICA0/ ( CHILE~.

-36° A (36o

From Charrvv substot,on . .72° I 7,1° 1993

NOVE"MBER 199

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