Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 5555-ET

STAFF APPRAISAL REPORT

ETHIOPIA

ENERGY PROJECT

May 1, 1986

Eastern and Southern Africa Projects DepartmentEnergy Division

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

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CURRENCY EQUIVALENTS

Currency Unit - BirrUS$1.0 - Birr 2.07

(as of March 7, 1985)

WEIGHTS AND MEASURES

1 kilometer (km) 0.621 miles1 square kilometer (kb 2 ) 0.386 square miles1 kilovolt (kV) 1,000 volts1 megawatt (MW) = 1,000 kilowatts1 megavolt ampere (MVA) = 1,000 kilovolt amperesI gigawate hour (Gwh) 1 million kilowatt hoursI ton of oil equivalent (toe) 10,500,000 kilocalories

bbl = barrel -J megajouleGDP ? Gross Domestic Product Hm3 million cubic metersGW I gigawatt m3 = cubic meterha - hectare KWh = megawatt hourkWh = kilowatt hour od - oven drykW = kilowatt sv - solid volumeLPG - lij-aified petroleum gas t = tonneM miiiion TCF trillion cubic feetMc moisture content tpa, tpy tonnes per annum, per yearmcwb moist;re content

wet basis

GLOSSARY OF ABBREVIATIONS

ASC Audit Service CorporationEELPA Ethiopian Electric Light and Pow,er AuthorityCONIEL Compania Nazionale Impresse ElectricheDRK Democratic Republic of KoreaENEC Ethiopian National Energy CommitteeEPC Ethiopian Petroleum CorporationERESA Eritrea Region Electric Supply AuthorityESMAP Energy Sector Management Assistance ProgramFAWCDA Forestry and Wildlife Conservation and

Development AuthorityWCPPME Wood and Charcoal Production, Processing and Marketing

EnterpriseGOE Government of EthiopiaIL0 International Labour OrganizationICS Main Interconnected SystemMME Ministry of Mines and EnergyNCCP National Committee for Central PlanningOMDP Organizational and Manpower Development ProgramPUJ Project Management UnitPIU Project Implementation UnitPSIP Power Subsector Investment ProgramSEDAO Societa Electrica del'Africa OrientaleSCS Self-contained SystemSWCD Soil and Water Conservation Department

Ethiopia Financial Year = July 8 to July 7

NOTE: Minor differences in tables totals throughout the report is due tocomputer rounding.

FOR OFFICIAL USE ONLYETE.OPIA

ENERGY PROJECT

Credit and Project Summary

Borrower: Ethiopia

Amount: SOR 53.7 million (US$62.0 million equivalent)

Beneficiaries: The Ethiopian Electric Light and Power Authority(EELPA), the Ethiopian Petroleum Corporation (EPC); theMinistries of Agriculture, State Farms, Tea and CoffeeDevelopment, Mines and Energy, and Industry.

Terms: Standard 1/

Project The proposed project would help the Government toObjectives: establish a least-cost expansion program for the power

subsector and implement its highest priority projects.It would assist the power subsector to attain greaterefficiency through the improvement of its organizationand management, the strengthening of its planning andde.Mgn capability and operational practices, and theimprovement of its financial performance. It wouldassist the Government to develop and implement integratedleast-cost plans to expand the supply of household energyproducts and correct imbalances In their prices.Final ly, it would aim to stimulate, to the extentpossible, an increased, more diversified, and coordinatedaid flow from other donors towards the power and thehousehold fuels subsectors.

ProjectDescription: The project would comprise for the power subsector: the

implementation of the highest priority projects includedin EELPA's investment program for the period 1987-1991, acomprehensive manpower and organizational improvementprogram for EELPA, and the studies urgently needed tosupport sound future expansion and operation of theEthiopian power subsector, including the feasibility of apossible interconnection with Sudan.

For the energy sector it would comprise: commercialscale production and end-use trials of novel agriculturalresidue fuel briquettes and modern industrial scalecharcoal production systems; cooking efficiency studiesand technology dissemination; strengthening energy

1/ Onlending terms are 9% interest rate, repayment periods of 5 to 20years after grace period of 2 to 5 years.

I do boc m en staiced disutioi n an ay be uud by recienton aly in the perfoaace|Of cr dlead dubmdtiet lls ontents may not othetnm be dcaud wibout Word Bank auoition.

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planning centrally and in each sub-sector with emphasison woody biomass strategic planning; and studies andpreinvestuent work on petroleum supply, industrial energyefficiency, and biomass fuel supply and marketingarF mgements.

Project Risks: Power sub-sector components would face normal risksassociated with transmission and distribution works.However, EELPA has a good safety record, and experiencesuggests that design and construction delays would beunlikely. Some household energy components would beapplying technologies previously untested on this scale.Benefits arising from fuel briquette components may bereduced by unfavorable seasonal factors and delayedequipment causing a harvest to be missed. New householdfuel techniques may take longer to acquire thanexpected. Such risks would be acceptable in view of thepilot nature of the household energy components, and thehigh benefits to be expected from the successfuldevelopment of new cooking fuels from waste.

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Table 5.2Project Cost Sury

Base CostL F T L F T

Civil Worxe, Equipent, -Mllion Uirr lilion USS$Materials. Instalatil

Generation ehbabilitation 0.5 10.6 11.2 0.3 5.1 5.4Tranmaission lines 3.0 5.2 8.1 1.4 2.5 3.9Substations 4.3 1C.0 18.3 2.1 6.8 8.9Distribution Rehab. and Expansion 10.0 28.1 38.0 4.8 13.6 18.4General Plant 0.2 4.4 4.6 0.1 2.1 2.2

Total 18.0 62.3 80.2 8.7 30.1 38.8Institution Building and Studies

Manpower and Orgaizational Dev. 2.Z 9.5 11.7 1.1 4.6 5.7Studies 0.6 3.2 3.9 0.3 1.6 1.9

Total 2.8 12.8 15.6 1.4 6.2 7.6Enginering and Administration 4.5 1.8 6.3 2.1 0.8 2.9

Total Base Cast 25.3 76.7 102.1 12.2 37.1 49.3Contingencies

Physical 1.4 3.9 5.3 0.7 1.9 2.6Price 5.7 11.5 17.2 2.7 5.5 8.2

Total Contingencies 7.1 15.4 22.5 3.4 7.4 10.8Project Preparation - 2.0 2.0 - 1.0 1.0Duties and Taxes 13.1 - 13.1 6.4 - 6.4Total Cost 45.6 94.2 139.7 22.0 45.5 67.5

Interest DurIng Construction 14.5 - 14.5 7.0 - 7.0Financing Required 60.1 94.2 154.3 29.0 45.5 74.5

ENRG COMPONERMTBase CostCivil Works, Equipwent, Materials, Installation

Crop Residue Briquettes 1.9 7.0 8.9 0.9 3.4 4.3Charcoal Products 4.7 9.3 13.9 2.2 4.5 6.7

Total 6.6 16.3 22.8 3.1 7.9 11.0Institution Building and Studies

Cooking Efficiency Program 0.5 2.9 3.4 0.2 1.4 1.6Institutional Strengthening 4.9 10.4 15.2 2.4 5.0 7.4Energy Studies 0.0 3.0 3.1 0.0 1.5 1.5

Total 5.4 16.3 21.7 2.6 7.9 10.5Engineering Administration 0.9 5.3 6.2 0.5 2.5 3.0

Total Base Cost 12.8 37.9 50.7 6.2 18.3 24.5Contingencies

Physical 1.6 3.8 5.4 0.8 1.8 2.6Price 2.2 4.5 6.7 1.0 2.2 3.2

Total Contingencies 3.8 8.3 12.1 1.8 4.0 5.8Duties and Taxes 3.4 - 3.4 1.7 - 1.7Total Cost 20.0 46.2 66.2 9.7 22.3 32.0

Interest During Construction - .6 .6 - .3 .3Financing Required 20.0 46.8 66.8 9.7 22.6 32.3

TOTAL PRaUECTBase Cost 38.1 114.6 152.8 18.4 55.4 73.8Project Preparation a/ - 2.0 2.0 - 1.0 1.0Contingencies

Physical 3.0 7.7 10.7 1.5 3.7 5.2Price 7.9 16.0 23.9 3.7 7.7 11.4

Total 10.9 23.7 34.6 5.2 11.4 16.6Duties and Taxes 16.5 - 16.5 8.1 - 8.1Total Project Cost 65.5 140.3 205.8 31.7 67.8 99.5

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Interest During Construction 14.5 0.6 15.1 7.0 0.3 7.3

Total Financing Required 80.0 140.9 220.9 38.7 68.1 106.8

a/ Financed with funds advanced under PPFs of February 4, 1982 and June 15, 1983(para. 5.6)

ETHIOPIA

ENERGY PROJECT

STAFF APPRAISAL REPORT

Table of Contents

I. ENERGY SECTOR Page No

Country/Sector Background Ioe.......... .............. e... 1Bank Participation in the Sector .............................. 2Reasons for IDA Involvement in the Sector...................... 3Energy Resources .......................... ***.......*....... 3

Hydropower ........................ 3Petroleum ................. **.. .... 000.06....... 000 4Geothermal Resources ........ 4see .................... 4Forest and Biomass Resources ............................... 4Other Energy Resources .................. ............. 5

Energy Demand ......................................... **.. 5Energy Supply . *............ ......................... 6

Electricity 6...................... .................. 6Petroleum and Petroleum Products ......................... 6Biomass Fuels ........................ 6

II. THE POWER SUBSECTOR

Organization ...--. *........* ...**.* *...0 .. o.o..........*.* - 7Sector Facilities .... 8Access to Service .......................... 0000 ............. 8Pattern of Electricity Consumption ............................ 9Power Subsector Planning ........... *... ... *........*. .... 9Power Subsector Objectives . *............* s............o. 10Power Subsector Strategy *...........*. ........................ 11Aid Inflow and Coordination in the Subsector ..... .............. 11

III. THE BORROWER AND THE IMPLEMENTING AGENCIES

The Borrower ........................ 11The Implementing Agencies ........... .......................... 12

EELPA .. 12OranzaAo andoe.* 660s0sge0 ent..... 0.06.***........... .... 12Organization and Managemen.t ......................... 12

This report is based on the findings of an appraisal mission, which visitedEthiopia in November 1984, consisting of M. Aguilar (Mission Leader),A. Alberti (Senior Training Specialist), E. Bundi (Financial Analyst),K. Newcombe (Energy Specialist) and G. Schraum (Senior Economist). Theproject was further discussed during a post-appraisal mission in April1985. The technical, financial and economic chapters of the report wereupdated in April 1986 prior to negotiations to reflect recent changes.

Page No.

Engineering and Design ........ ..... s......e...... 13Operation and Maintenance ................ o........... 13Information and Data Processing ..................... 13Billing and Collection .... .... .......*.......... ...0 13Accounting and Audit 0 00 0...........0..... ... e.e. 00.... 14Insurance and Taxes ...........oo...................o... 15Personnel and Personnel Administration ......... o..... 15

Training * ............. .****e*.*.*.*.****. 15Organizational and Manpower Development Program (OMDP) 15Management Information System (MIS) and Performance

Indicators .....00.......00..0...000......................... 17Project Management Unit (PHU) and ProjectImplementation Units (PIU) ................00............. 17

Accounting and Auditing .......... *....*.*............ 17

IV. THE MARKET

Electricity Market ....................................... *.... 18Historical Market ..... .......................... *.... 18

Demand Forecast for Electricity in the Main ICS ........... 18Generation and Capacity Balances in the Main ICS ........ . 18Demand Forecast for Electricity in the EELPA SCS ......... 19Demand Forecast for Electricity in the Eritrea

Region ICS ................................ 19Forecast for Electricity Demand in the Eritrea Region SCS 20

Household Fuels Market ........................................ 20Supply/Demand Forecast for Household Fuels ............... 21Household Fuels Marketing ....... 0. .. .. .... .... ... ... . .... 21

V. PROGRAM AND PROJECT

Power Subsector Investment Program (PSIP) .................... 22Taekgroundg ... ............................................ 22The Prorrakin Progress..................................... 23

Works in Progress ....................... 23Future Projects ...................... *....................24

The Project o........ ...................... 24

Project Objectives .... O*.............................*.. 24Project Preparation ............. . 24

Project Description .g ............................... 25Power Components ...................... ............. 25

Energy Components ............ **********............. 28Project Cost .......... ......................... 28Project Implementation .......... O.. 30

Implementation of Power Components .................. 30Implementation of Energy Components ...se.............. 31

Consulting Services ... .............. 31

Procurement ................ .. 31Financing Plan .................. 33

Advance Contracting; Retroactive Financing .......... 33Disbursement ...0....................................... 34

Page No.

Special Accounts .................................. c..... 34Environmental Aspects ......... e..0...... .. *............... 34Project Risks ...................... 35

VI. FINANCIAL ASPECTS AND COST RECOVERY

Introduction ................................................ 36Financial Position and Past Operating Results .................. 36Tariffs ............ . ............................... 38Future Financial Position and Operations ...... 0................ 39Proposed Financing Plan ........... . ........................... 40

VII. ECONOMIC ANALYSIS

Electric Power ............. ee.....*........ee.... .......... 42Average Incremental Costs (AIC) ...... .................... 42Return on Power Investment ......................... e 42Economic Analysis of 66 kV Transmission Line Extensions .. 43Internal Economic Rate of Return ......................... 43Criteria for Distribution Rehabilitation ................. 44

Household Energy Production Projects .......................... 44Introduction ..................................... **...* 44Charcoal Projects ...... e.......e...g.e...... ece...... 45Crop Residue Briquettes ................... ... ese... 45

VIII. AGREEMENTS TO BE REACHED AND RECOMMENDATION

Agreements ............................................... 46Conditions of Effectiveness ........ .......................... 48Recommendation ..... e..ee........e.e.e.e ....... e.ee.. 48

LIST OF ANNEXES

1.1 Energy Sector Agencies Organization Chart1.2 Historic and Forecast Final Energy Consumption2.1 Generating Capacity Existing in Ethiopia in 19853.1 EELPA Organization Chart3.2 Selected Performance Indicators3.3 Organization and Functions of the PHU4.1 Assumptions for Load Forecast4.2 EELPA ICS Sales and Generation, Actual and Projected, FY80-954.3 EELPA ICS, Peak Demand, Actual and Projected, FY80-954.4 EELPA ICS Generation Capacity Balances, FY80-954.5 Self-Coutained System: Actual and Forecast Sales FY84-954.6 Eritrea Region Interconnected System:

Actual and Forecast Sales and Generation4.7 Eritrea Region Self-Contained System Sales Forecast4.8 Supply and Demand of Cooking Fuels for Addis Ababa

As the Prime Target Market of the Southern Region4.9 Supply and Sales of Charcoal to Addis Ababa Market by Fuelwood

and Charcoal Production, Processing and Marketing Enterprise5.1 Power Subsector Investment Program for FY86 through FY925.2 Cost Estimate5.3 Summary of Project Implementation Schedule5.4 Estimated Schedule of Disbursement5.5 Summary of Costs and Annual Savings of Action Programs5.6 Distribution Expansion and Rehabilitation - Estimated Costs and

Quantities of Equipment and Materials6.1 EELPA Income Statement for the Years Ended July 7, 1983-19926.2 EELPA Sources and Application of Funds Statement for the

Years Ending July 7, 1983-19926.3 EELPA Balance Sheet for the Years Ending July 7, 1983-19926.4 Notes and Assumptions for Financial Statements6.5 Electricity Tariff Structure7.1 Economic Cost of Electricity7.2 Economic Rate of Return of Electric Power Sector Expansion Program7.3 66 kV Transmission Line Sabatta to Wolliso: Least-Cost Analysis7.4 66 kV Transmission Line Sabatta to Wolliso: Economic Analysis7.5 Economic and Financial Analysis Summary: Charcoal Pilot PiLoject7.6 Comparative Costs of Supply of Household Fuels Excluding Injera

Cooking in the Southern Region Urban Areas Using Addis Ababa as theReference Market

8.1 Selected Documents and Data Available in the Project File

MAP: IBRD 18956: Ethiopia Energy Project, May 1985

I. THE ENERGY SECTOR

Country/Sector Background

1.01 Ethiopia, with its 1.22 million square kilometers, is the, eighthlargest country in Africa. In 1982, its population was estimated at about32 million, but the recent census places the 1984 population at about 42million. In spite of a number of favorable features, Ethiopia remains oneof the poorest countries on earth. The per capita GNP was estimated to beUS$140 in 1982. The Ethiopian economy is predominantly agricultural, withsome 841 of its population living in rural areas. About three quarters ofthe population lives more than a half day's walk from all-weather roads.

1.02 Final energy consumption in 1982 totalled about 9.8 million toe,or 0.247 toe per capita, of which about 9.2 million toe, or 94Z, werebiomass fuels used almost entirely for household cooking. 1/ Total energyconsumption is forecast to attain some 13.3 milllon toe by 1992 (0.254 toeper capita) of which about 12.1 million toe, or 91X, would be householdenergy (Annex 1.2).

1.03 Ethiopia's major energy resources are hydropower, which it isbelieved could be economically developed to between 15 and 30 GW; naturalgas, in amounts important for the size of Ethiopia's modern sectorrequirements, geothermal energy, for which recent drilling has indicatedlarge reserves of high-enthalpy steam; and, despite intensivedeforestation, forest and other woody biomass resources in economicallysignificant quantities.

1.04 The Ministry of Mines and Energy (MHE) is responsible fordesigning and implementing energy policies and shares with the NationalCommittee for Central Planning (NCCP) the task of ensuring the consistencyin planning and investment programming for the various energy relatedagencies. The MME carries out its energy planning functions with theassistance of the Ethiopian National Energy Committee (ENEC), an advisorybody consisting of the heads of Ethiopian Electric Light and PowerAuthority (EELPA), Ethiopian Petroleum Corporation (EPC), and othergovernment departments and agencies. An organizational chart showing themain interrelations within the energy sector is attached as Annex 1.1.

1.05 The Forestry and Wildlife Conservation and Development Authority(FAWCDA), an agency of the Ministry of Agriculture, had until recentlyprincipal responsibility for management of existing forests, includingreforestation, although it shared responsibility for forestry protectionwith the Soil and Water Conservation Department (SWCD) in the sameministry. The Wood and Charcoal Production, Processing and MarketingEnterprise (WCPPDE) was formed in 1981 as an agency of FAWCDA, withresponsibility for firewood and charcoal production and marketing.However, to date WCPPDE has been unable to capture from private enterprisesmore than a small percentage of the total woodfuels trade, and the greatmajority of its outlets are concentrated in Addis Ababa. The Governmenthas recently reorganized the administration of forestry. It has dissolvedFAWCDA and assigned most of its functions to a new Natural Resources branch

I/ Ethiopia: Issues and Options in the Energy Sector (July 1984) andrevised population data.

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within the Ministry of Agriculture. Other functions relevant to enurgyresources and development, such as the administration of State Forests--which produce large volumes of high quality forest residues--are beingregionalized into eight regions. In addition, the Ministries of Agricul-ture, State Farms, and Coffee and Tea Development are responsible for cashcrops which produce large volumes of residues with energy potential. Forthe purpose of project implementation, understandings have been reachedwith the Government that it would establish a Project Management Unit (PMU)within the KME (para. 3.22).

1.06 In practice, energy related parastatals plan their budgets andlong-term investment programs without significant consultarion with ENEC.They raise their respective subsector concerns directly with the NCCP. Thelatter, however, is not adequately equipped to undertake an advisoryfunction for the energy sector either with respect to broad sectoral issuesor to specific subsectoral matters. As a result there is a lack of soundand integrated technical, economic and financial planning as a basis forsetting investment priorities.

1.07 In the course of its continuing dialogue with the Government, IDAhas proposed the creation of a high-level independent Energy Secretariatwhich would be responsible for establishing the necessary consistencybetween government objectives in the energy sector and subsector planning,investment programming and overall resource allocation. The Government isat present considering various options, but it has been slow in delineatingthe role and functions as well as the level of the Energy Secretariat.Because the lack of qualified experienced staff is an important constraintto achieving meaningful changes in this respect, IDA would provide underthe proposed credit financing for training, energy studies and energyplanning (para. 5.07 f, k, 1).

Bank Participation in the Sector

1.08 The Bank Group has lent for three energy operations in Ethiopia,two for power and one for petroleum exploration promotion. Loan 375-ET toEELPA in 1964 helped finance the Awash II and III hydroelectric plants andassociated transmission and distribution, and Loan 596-ET in 1969, also toEELPA, helped finance the Finchaa Hydroelectric Project. Credit 1386-ET in1983 is assisting the Government to promote the exploration of petroleumpocential, to acquire and improve seismic data, to study potential uses ofnatural gas, and to study the commercial potential of geothermal energy.The Awash II and III hydroelectric plants and associated facilities weresatisfactorily completed though with a delay of about two years due toconstruction difficulties. The Project Performance Audit Report for Loan596-ET (Report No. 1102 dated March 23, 1976), concludes that the project,which was completed with minor delays in 1973, remained economicallyjustified and that international competitive bidding permitted the purchaseof major project items at prices considerably lower than those quoted underoriginally proposed tied-financing arrangements.

1.09 Under the joint UNDP/World Bank Energy Assessment Program, and atthe request of the Government of Ethiopia, the Bank conducted in 1983 anenergy assessment for Ethiopia. The report entitled "Ethiopia: Issues andOptions in the Energy Sector" (Report No. 4741-ET), published in July 1984after detailed review by the Government, concludes that the sector issues

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which require urgent action are: (i) the increasing scarcity and high costof household cooking fuels au a result of inadequate and inefficient

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promising for hydropower development. The potential of these basinscombined has been estimated at betweeu 11 and 13 GW.

Petroleum

1.12 There appears to be a reasonable prospect of establishingcommercial oil and gas reserves in Ethiopia. In 1975, drilling by TENNECOconfirmed the existence of gas in the Ogaden desert (proven reserves1L.3 TCF). However, the gas field was abandoned because of the poor gasexport market at that time. MOBIL also found indications of gas in theRed Sea. Oil shows, though not involving significant flows, have consis-tently appeared in other drilling in the Ogaden region. As part of the IDAfinanced Petroleum Exploration Promotion Project (Credit 1386-ET), studieswere completed during 1984 which define the petroleum reserve potential,propose additional seismic work in the Red Sea, define the gas market andpropose a gas development strategy. The USSR is financing and drillingfour exploratory wells in their 10,000 km2 concession area in the Ogaden.The two wells drilled to date have been dry, resulting only in small oilshows. Exploitation of the Ogaden gas resource for power generation wouldnot be economically feasible in the short term, given the large hydropowerexcess capacity expected between 1987 and 1995. HE-wever, other potentiallyeconomic gas development optiions are currently under review. These are theproduction of fertilizers, and gas utilization as industrial, commercial,residential and transport fuel, including the construction of pipelines tothe Addis Ababa and/or Dire Dawa regions, or through wellhead developmentalternatives.

Geothermnal Resources

1.13 Recent drilling in the Rift Valley south of Addis Ababa hastapped good quality steam. However, the economic potential of geothermalpower is uncertain in the light of near term surpluses of electric powerand the prospect of cheaper large-scale hydropower and perhaps naturalgas. Further exploration is being proposed and appears justified in thenorth of the Rift Valley within transmission distance of both northernurban centres and possible potash mining where other power supply optionsmay prove more expensive.

Forest and Biomass Resources

1.14 About 2.7Z of Ethiopia's land is covered by high forest and 16Zby Acacia savannah. An important part of this forest resource is beingrapidly depleted through uncontrolled and inefficient exploitation,involving constant thinning and clear felling both for agrlculturaldevelopment and woodfuel production. Total forest clearing each year isestimated at between 150,000 and 200,000 ha. Unauthorized clearing aloneresults in the loss of an estimated 20 NO3 of woody fuel each year (theequivalent of all biomass household fuels consumed annually in Ethiopia).

1.15 Other sources of household fuels are the fuelwood plantationsestablished around several major cities in Ethiopia this century (thereare about 20,000 ha of fuelwood plantations in the vicinity of Addis Ababaalone). However, their productivity has seriously deteriorated as aconsequence of poor management and over-exploitation.

1.16 Agricultural crop residues and wood waste from forest clearingand the timber processing industry constitute an important energyresource. In 1982, unutilized crop residaes included about 320,000 t fromcereals, 240,000 t from cotton, 100,000 t from coffee and about 40,000 t ofoven-dry bagasse, equivalent to about one million t of firewood (the energyvalue of these wastes could be recovered if processed into fuelbriquettes). Wood waste recoverable from present forest logging and someof the clearing operations amounts to about 500,000 m3 per annum and isexpected to increase to about 800,000 m3 by 1992. Sawdust and slabs wastefrom sawmills would increase from the present 63,000 m3 per annum to about215,000 n3 by 1982. In addition, forest clearing by the Coffee PlantationDevelopment Corporation is expected to increase from its present annuallevel of 2,000 ha of high forest to some 6,000 ha by 1990, generating overa million m3 of recoverable waste. Finally, other forest and savannahwoodland clearing by the State Farms administration will generate some130,000 =3 of wood waste per year. Wood wastes represent a potentialannual production of about 275,u00 t of charcoal, almost twice the presentnational charcoal consumption.

Other Energy Resources

1.17 Ethiopia has some prospects for economic utilization of solarenergy for water heating and low-grade industrial process heating. Thepotential for developing other renewable sources of energy such as wind andbiogas is limited. There are also isolated outcrops of low-qualitylignite, though further exploration is required to determine if lignite orcoal exists in commercially significant quantities.

Energy Demand

1.18 Energy balances for Ethiopia for 1982 and for 1992 are includedin the energy assessment report (para. 1.09). A summary of actual andforecast final energy consumption for 1982 and 1992 respectively, isprovided in Annex 1.2. The demand for modern fuels grew rapidly betweenFY78 and FY83 with petroleum and electricity demand growing at 7.4% and13.0% per year, respectively. These high growth rates were possiblelargely because of the then existing low capacity factors in majorindustrial plants. However, in FY82 and FY84, as factory capacity becamefully utilized, growth was markedly lower. At present, more than 92Z oftotal final energy consumption is biomass household fuels, of which morethan half are agricultural residues and animal dung. The growth in biomassfuel demand over the next decade is expected to grow less rapidly thanpopulation as combustible cellulosic residues are substituted withpetroleum fuels and electricity. However, by 1992, biomass fuels are stillexpected to reptesent 91Z of total energy use. The removal of the treecover and the use of animal dung and crop wastes as household fuels arereducing the returns of nutrients to the soil and affecting agriculturalproductivity in certain regions. Soil erosion is becoming an increasinglyserious problem. As a result of massive deforestation, Ethiopia's cover ofclosed canopy forests had declined from about 40% in the early 1900's to 3%in 198Z. If the required investments are not made, or if novel biomassfuels do not prove viable within ten years, the increase in the quantity ofdung and agricultural residues used annually (an additional 7 million t)will greatly increase soil erosion and loss of food production.

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Energy Supply

Electricity

1.19 Electricity supply is discussed in detail in Chapter IV. In theperiod FY86-FY95, electricity will be supplied almost entirely fromhydroelectric plants. Existing and committed facilities are expected tocomfortably cover the demand through 1995 (para. 4.03). In the long term,the most likely options for generation of electricity are hydropower,geothermal energy and possibly natural gas.

Petroleum and Petroleum Products

1.20 Ethiopia is entirely dependent on imported crude and refinedproducts for its supply of petroleum products. The burden of petroleumpurchases on the balance of payments is now considerable and constitutes amajor constraint on economic development. Petroleum imports rose from 18%of export earnings in FY78 to 53% in FY82. From the government-owned800,000 t/year refinery at the Red Sea port of Assab, refined products aredelivered by truck to the main markets 800-100W km away in the centralhighlands. Because the existing process (simple hydroskimming) producesmore fuel oil and less refined products than demand requires, largequantities of petroleum products (about 150,000 t/year) have to be importedand excess fuel oil re-exported (about 200,000 t/year). The existingpetroleum supply solution is far from optimAl, but further studies arerequired to decide whether the appropriate solution would be to installthermal cracking facilities or to close the refinery and to import allrefined products. The construction of a product pipeline from Assab toAddis Ababa appears to be economically viable. However, this option willbe analyzed in the context of the general need to upgrade transportfacilities from the port of Assab to the Addis Ababa region. Some studieson this subject are to be undertaken as part of a proposed IDA-financedTransport Sector Project.

1.21 Petroleum prices are generally close to their economic cost. Theexceptions are motor spirit, which is priced well above, and LPG andkerosene, which are priced below this cost. The prices of the latter havebeen kept low to provide some respite for low-income families in urbanareas in view of the high cost of firewood. However, limited supply ofkerosene and kerosene stoves rather than price has restricted its use todate. Some 200,000 kerosene stoves recently imported by the Governmentwould not alleviate substantially the household cooking situation unlessthe Government increases the share of kerosene for household fuel uss. Atpresent, supplies are limited, partly due to the consumption of kerosene asaviation fuel.

Biomass Fuels

1.22 The current crisis in the supply of woody fuels is reflected inthe Addis Ababa marketplace where for the last ten years, the price ofwoodfuels has increased at an average annual rate of 9% in real terms. Itis usual for poorer urban dwellers to spend one quarter of family income oncooking fuels. Because of the rapid depletion of natural forest resourcesand of savannah land and tree stocks within reach of the urban markets, andthe declining productivity of existing perl-urban fuelwood plantations, the

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price of woodfuels will continue to increase and will reach levelsprohibitively expensive for many low-income families. 2/ The continuinghigh cost of conventional woodfuels may sake economic the exploitation ofother novel household energy sources such as crop residue fuel briquettes,as well as electricity for increased use for household cooking. The latteroption may prove particularly attractive in view of the large hydro-electric surpluses expected until the year 2000 (para. 4.03).

1.23 The demand for woodfuels in the rural areas is on average 2.5times the supply, though in some populous agricultural zones the ratio is10-20:1. Almost 60Z of the shortfall between demand and supply forwoodfuels occurs within the four northernmost, and now quite desolate,provinces of Eritrea, Wollo, Tigrai and Gondar. By contrast, there isforest production considerably in excess of demand in most parts of theless populous south-western provinces of Kaffa and Illubabor. Severedrought and famine which have recently reached calamity levels in Ethiopiaare undoubtedly linked to the loss of tree cover and decline of landproductivity (para. 1.18).

1.24 In order to satisfy tne projected 1992 demand, the equivalent of2.85 million ha of fuelwood in the form of woodlots, dispersed treeplanting in agricultural lands and plantations weold have to be establishedduring FY86-FY95 including 510,000 ha of peri-urban fuelwoodplantations.3/ Although this target cannot be met, it is estimated thatwith appropriate support and a rapid expansion in the supply of trainedmLanpower, a target of about 1.2 million ha might be achievable during thenext ten years.

II. THE P^'WER SUBSECTOR

Organization

2.01 The Ethiopian Electric Light and Power Authority (EELPA) is thesole agency responsible for public electricity generation and supply inEthiopia. The company was established in 1955 as an autonomous governmentagency and has been under the Ministry of Mines and Energy since 1976. Inthe Eritrea region, power was originally supplied by two privately ownedutilities, the Societa Electrica del'Africa Orientale (SEDAO) and theCompania Nazionale Impresse Electriche (CONIEL). These companies werenationalized in 1975 and started operating in 1976 as a single entity, theEritrean Region Electrical Supply Agency (ERESA). The main reasons forcreating FRESA were to maintain appropriate separate accounting forcompensation purposes, and to permit a smooth transition towards anintegrated power subsector organization, particularly on tariffs and onpersonnel related matters such as salaries and labor unions. ERESA,however, does not exist as a separate company and legally is EELPA'sEritrea regional office, with headquarters in Asmara. EELPA's organizationand management are discussed in detail in Chapter III.

2/ Average retail prices surveyed by IDA in Addis Ababa in April 1985 were75 US$/t for leaves and twigs, 68-100 US$/t for bundles of fuelwoodand 377-464 US$/t for charcoal.

3/ Current planting rates are estimated at about 45-50,000 ha/year ofdemonstration and protection forests, and 30 to 35 million seedlings,equivalent to about 20,000 ha/year.

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Sector Facilities

2.02 The major subsector facilities have been generally constructed tohigh standards. However the chronic lack of foreign funds has prevented atimely replacement of spare parts and appropriate maintenance and hasresulted in a reduction of the service life and reliability of manyfacilities. A number of components of the proposed project consist of therehabilitation of existing facilities including the replacement of variousitems of equipment and provision of spare parts to bring these facilitiesto their full operating capability (para. 5.07).

2.03 Electricity in Ethiopia is supplied almost entirely throughpublic service facilities. In 1985, public sector generation capacityrepresented about 98Z of total as shown in Table 2.1. In the centralhighlands and southern part of the country, electricity is supplied througha relatively large Main Interconnected System (Main ICS) and 40 smallSelf-Contained Systems (SCS), and in the Eritrea region, through a smallInterconnected System and 13 self-contained systems. The Main ICS and theEritrea region ICS are not interconnected.

Table 2.1Generation Capacity by Ownership in 1985

Hydro Thermal TotalMW Z aW X MW X

Public Service 217.5 100 93.3 93 310.8 98Privately Owned 0.1 - 6.6 7 6.7 2Total Country 217.6 100 99.9 100 317.5 100

2.04 The main subsector generation facilities are listed in Annex 2.1and summarized in Table 2.2.

Table 2.2Generating Capacity Existing in Ethiopia in 1985

-Hydro-- -Diesel- -Thermal- -Total-Units MW Units MW Units MW Units Mw

EELPA Main ICS 10 207.2 4 6.5 0 0 14 213.7SCS 8 10.3 122 26.9 0 ' 130 37.2Eritrea Region ICS 0 0 22 36.2 2 15 24 51.2SCS 0 0 20 8.7 0 0 20 8.7Privately Owned 1 0.1 74 6.6 - - 75 6.7

Total Country 19 217.6 242 84.9 2 15 263 317.5

Access to Service

2.05 The energy assessment report estimated the population with accessto electricity in Ethiopia at about 3 million in 1981 which representedabout 8Z of the total population. Based on present consumption andpopulation figures 1 average per capita electricity consumption in 1985 isestimated at about 18 kWh, which is one of the lowest in the region. Datafor a sample of other countries in Sub-Saharan Africa are shown inTable 2.3.

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Table 2.3Electricity Consummption in Sub-Saharan Africa a/

Population Annualwith access per Capita

to electricity ConsumptionCountry Year Z (kWh)

Ethiopia 1985 b/ 10 18Uganda 1982 2 23Tanzania 1980 4 44Malawi 1980 2 64Kenya 1980 6 92Zambia 1980 10 172Zimbabwe 1980 5 928

a7 Source: UNDP/World Banik Energy Assessment Reportsb/ Estimated by MME

Pattern of Electricity Consumption

2.06 Public electricity consumption in 1985 by major system andconsumer category is shown in Table 2.4. In the main ICS consumption wasabout 592 GWh, or about 77% of total.

Table 2.4Public Electricity Consumption in 1985

-- EELPA- Eritrea Region Totalmain ICS SCS ICS SCSGWh Z GWh GWh % G G

Residential 167.4 28 NA 12.8 12 NA NACommercial 59.5 10 NA 13.3 12 NA NAIndustrial 365.5 62 NA 81.6 76 Nk NA

Total 592.4 100 73.2 107.7 100 1.1 773.3Z of Total 77 9 14 1 100

Power Subsector Planning

2.07 Power expansion planning is mainly carried out by EELPA with theassistance of consultants. EELPA's proposed investments have to beapproved by the MMF and ultimately by NCCP, prior to their incorporation inthe expansion program. However, the company lacks highly qualifiedpersonnel to plan its expansion and to provide the required counterpartduring studies prepared by consultants. As a result, there has been a lackof reliable planning studies, including reasonable load forecasts. BELPA'splanning needs improvement. However, before a least-cost long-term plancan be prepared, EELPA has to complete the evaluation of its main basinsand establish their relative merit and optimum development sequence. . Theproposed project would include Technical Assistance and Training to

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strengthen EELPA's planning. EELPA has scheduled for completion within thenext few years the preparation of prefeasibility studies for four majorpromising hydro power projects and final feasibility for the most economicdevelopment within these four projects. However, these studies will not beundertaken under the proposed project, considering the limited availabilityof funds and that, with the present load forecast, the next generationexpansion would not need to be started before 1995.

2.08 Partly because of planning weaknesses in the energy sector, theGovernment has in recent years decided to undertake major projects withoutdue regard to economic merit and mostly considering favorable bilateralfinancial arrangements that had been made available. As a result ofdeficiencies in power subsector expansion planning and decision making, thepresent power expansion program does not represent the least-cost solutionfor the country, mostly be.ause of over-investment in capacity expansion.This excessive capacity will dltimately result in a heavy burden for thenational budget (para. 5.03 i) and considerable surpluses (spillover) ofavailable hydro generatic.n (para. 4.03). The decisions for suchinvestments, including the arrangements for their full financing by otherdonors, were taken at a time when IDA was not actively involved in thesubsector (para. 5.01). Power subsector expansion planning and futureinvestment additions have been addressed in detail in the proposedproject. In addition, the proposed project includes studies of a possibleinterconnection with Sudan which, if timely implemented, would utilize partof the hydroelectric surplus (para. 5.07 g). Recent technical discussionsbetween the two countries, supported by the two Governments, and anagreement to appoint the same consultants for project feasibility areencouraging results worth mentioning.

2.09 During negotiations agreements were reached on a reasonableload forecast (Annexes 4.1 through 4.7) and a Power Subsector InvestmentProgram (PSIP) for the period FY86-92. Furthermore, the agreementsestablish that: (i) EELPA should not, until the completion of the project,undertake any major expansion project not included in the Government's PSIPagreed with the Association unless EELPA shall have furnished to theAssociation evidence satisfactory to the Association that such majorproject is economically and technically justified; and (ii) the PSIP, whichwould cover at least 7 years, would be reviewed annually by March 31, or asneeded, and revised if required. However, any major changes to theprogram shall be satisfactory to IDA. Major changes would be thoserequiring capital expenditures which shall exceed 1.5X of EELPA's grossrevalued assets in operation in any fiscal year.

Power Subsector Objectives

2.10 The main objectives of the Power Subsector, as discussed byEELPA, the Government and IDA are: (a) to ensure adequate production andsupply of electricity throughout the country in accordance with plannedeconomic and social objectives; (b) to supply electricity at the least costfor the country; (c) to avoid negative impacts and mitigate possibleadverse effects of power projects on the environment; {d) to increaseaccess to electricity throughout the country; (e) to increase--whereeconomically justified--self-reliance in electricity supply by reducingdependence on imported sources of energy and by promoting the development

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of indigenous energy sources for electricity generation; and (f) to exportelectricity to neighbouring countries.

Power Subsector Strategy

2.11 The following strategy has been designed by the Government andEELPA to meet the subsector objectives, subject to verification ofeconomic, technical and financial viability: (a) to promote, whereeconomic, the development and utilization of indigenous energy resourcessuch as hydropower, natural gas and geothermal energy for electricitygeneration; (b) to interconnect the Ethiopian grid with those of itsneighbouring countries with the purpose of exporting electricity; tc) tocarry out studies to determine the feasibility of potential power projects;(d) to adequately reflect the opportunity cost of fuels used for powergeneration and other economic parameters in the determination of the powersubsector's least-cost expansion program; (e) to reduce the system lossesby improving operation and maintenance and, where economically justified,by rehabilitating existing fa,ilities; (f) to regulate electricity tariffsto meet financial and social objectives while at the same time encouragingthe efficient use of energy; (g) to expand existing regional systems andinstall generating facilities and distribution networks in remote areas;and (h) to interconnect the regional systems to the main grid.

Aid Inflow and Coordination in the Subsector

2.12 The Bank/IDA participation in the power subsector has been ratherlimited (para. 1.08). There has not been a Bank/IDA operation in thesubsector in the last 17 years since Loan 596-ET to EELPA in 1969. Duringthis period, particularly in the later years, other donors including theUSSR, the Democratic Republic of Korea (DRK), and the Governments ofFinland and Italy have been the major contributors towards financing thesubsector expansion. However, although aid inflow towards the powersubsector has been sizeable during this period, it has been inadequate tocover the subsector requirements, it has not been efficiently allocated andit has not focussed on policy formulation and institution building. As aconsequence, the subsector weaknesses have increased, particularly in keyareas such as expansion and financing planning, investment decision,organization and management and training (paras. 3.05 through 3.21), andsector investments show large imbalances with respect to the optimum mix ofmajor categories of facilities required for least-cost electricity supply(paras. 5.01 through 5.03).

III. THE BORROWER AND THE IMPLEMENTING AGENCIES

The Borrower

3.01 The Government of Ethiopia would be the borrower of the proposedIDA Credit of SDR 53.7 million (about US$62.0 million equivalent at therate of 1.15584 US$ISDR).

3.02 The proceeds of the credit would be used as follows: (a) SDR39.4 million (about US$45.5 million equivalent will be onlent to EELPA atcommercial rates (para. 5.15) to finance the foreign exchange cost of thepower components of the proposed project; and (b) SDR 14.3 million (US$16.5million equivalent), would be spent under the coordination of the PMU of

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the MME, to finance the foreign exchange costs of the energy components ofthe proposed project (para. 5.16). Of these US$983,000 equivalent will beonlent to EPC at commercial rates (para. 5.15) to finance the foreignexchange cost of the petroleum studies.

The Implementing Agencies

3.03 The implementing agencies would be EELPA for the power componentsand six Project Implementation Units (PIU) under the coordination of thePMU for the energy components of the project. The organization and mainfunctions o' these agencies are described in paras. 3.04 through 3.21, and3.22 through 3.24, respectively.

EELPA

3.04 EELPA is a state owned autonomous corporation established in 1955by General Notice No. 213 with the objective of improving the electricityservice and acting as an agent for the Government in all electricitymatters in Ethiopia except for the Eritrea region. Responsibility forelectricity matters in the latter were also assigned to EELPA in 1975(para. 2.01).

Organization and Management

3.05 EELPA's corporate powers are exercised by a Board of Directorsconsisting of six members and a Secretary. The Chairman and the ViceChairman are the Minister and the Vice Minister of Mines and Energy,respectively. The other members represent EELPA and the Ministries ofFinance, Industry, and Housing and Urban Development, respectively. TheSecretary, without voting power, is EELPA;s financial comptroller. EELPA'sGeneral Manager, who is appointed by the Government, is EELPA's ChiefExecutive and also EELPA's representative on the Board. In practice,because there is not a clear distinction between these two functions of theGeneral Manager, board meetings are seldom convened. As a consequence, theBoard does not fully exercise its functions, particularly in policy making,strategic planning and in providing an effective interface between EELPA'smanagement and the MME and other government agencies. Because of itsmanagerial weakness, EELPA requires close supervision and, though anautonomous parastatal (para. 2.01), it is in practice managed as aministerial department receiving instructions directly from the KME.EELPA's autonomy is further restricted by its strong dependence on thenational budget to finance new investments (para. 6.03). The strengtheningof EELPA's organization and management will be undertaken under anOrganizational and Manpower Development Program (para. 3.17), to befinanced under the proposed credit (para. 5.07 f). An organizational chartof EELPA is attached as Annex 3.1.

Planning

3.06 Partly because the existing information and data processingsupport are unreliable, but mostly because of the lack of staff withappropriate economic/technical expertise, EELPA is unable to preparesuitable load forecasts and least-cost expansion analyses (para. 2.07through 2.09).

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Engineering and Design

3.07 EELPA has developed satisfactory expertise in the design andconstruction of distribution and sub-transmission projects. In the lastfew years, the company has also succeeded in designing, constructing andcommissioning 132 kV substations with the assistance of personnel from themanufacturers of the major equipment and selective consulting support.However, the number of experienced personnel is insufficient to allow EELPAto undertake all the engineering work required by the distribution,transmission and substations components of the proposed project. Inconsequence, EELPA will require the assistance of consultants, particularlyfor final preparation of bidding documents and for supervision duringconstruction of the 132 kV lines and substations and the generationrehabilitation works. Also, though experienced, gELPA's engineers need toupdate their particular fields of expertise to fully take advantage oflatest technological developments in equipment and control design, as wellas in modern construction techniques. Finally, EELPA needs to developtechnical expertise in the area of feasibility studies, project evaluationand design of large civil works, to be able to establish a more productivedialogue as local counterpart in studies and designs prepared by foreignconsultants and to adequately follow-up the execution of technical studiesand construction of new power facilities. These aspects would be coveredappropriately under the the Organization and Manpower Development Programincluded in the project (paras. 3.17 through 3.19).

Operation and Maintenance

3.08 EELPA's facilities, particularly steam and diesel generatingplants, are generally not well maintained. Insufficient managerial andmaintenance staff capability as well as constraints in foreign exchangefunds have resulted in inappropriate preventive maintenance practices(para. 2.02). Training and Technical Assistance components under theproposed project (para. 5.07 f) are expected to allow EELPA to solve theseproblems.

Information and Data Processing

3.09 Information is not produced and processed appropriately acrossthe company, which makes it difficult for higher level staff and managementto monitor results and to run EELPA efficiently. The lack of adequate dataprocessing services and staff as well as up-to-date software does notpermit EELPA to prepare its accounts, financial, technical and planningstudies and management information in a timely fashion. Training andTechnical Assistance to be provided under the proposed project wouldprovide EELPA with the means to solve this problem (para. 5.07 f).

Billing and Collection

3.10 Meters are read once a month. However, the information -submittedby meter readers is not verified and may contain errors. Meter readingsare sent from the regional offices to Addis Ababa (where they arrive abouttwo weeks after the reading took place) for their centralized processing.Billing is computerized, but the process takes two to three months duemostly to computer technical problems and the lack of experienced staff(para. 3.09). As a consequence of delayed billing, at July 7, 1985,

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EELPA's accounts receivable were B 56 million. This is equivalent to aboutseven months of total sales. Effective end FY86, BELPA is aiming to issuebills 10 days after the meter readings are received for Addis Ababacustomers and two weeks later for the rest. EELPA expects that accountsreceivable will reach an acceptable level of about 90 days by end FY87.During negotiations, agreement was reached that EELPA shall reduce itsaccounts receivable to no more than 90 days of sales as of FY87. Theseappear to be reasonable targets in view of the billing system improvementsand training to be undertaken by EELPA (para. 3.18).

3.11 EELPA's collection procedures are satisfactory. Customers arepresented with their bills by EELPA's collectors and required to pay thefull amount on receipt of the bill. Customers that do not pay within sevendays are disconnected. 4/ Restoration of service requires priorsettlement of the bill, payment of the required two-month deposit and apenalty charge of B 10.

Accounting and Audit

3.12 EELPA's financial statements are prepared on an accrual basisusing the double eutry system. At present, only the payroll, billing,inventory control and financial reporting are computerized. Gradualcomputerization is planned for recording fixed assets, works orders, andaccounts with foreign agencies. To assist EELPA in updating its accounts,Coopers and Lybrand prepared in May 1984 preliminary financial statementsfor FY82 and FY83. However, EELPA is still about two years behind inclosing its accounts.

3.13 EELPA has an internal Audit and Inspection section with a staffof about 13 including the Chief Internal Auditor. However, due to lack ofqualified and experienced personnel and up to date ledger balance (sinceaccounts are not fiinalized on time) the auditing work cannot be carried outsatisfactorily. EELPA's external auditor is the Audit Service Corporation(ASC), a publicly-owned corporation created in 1977 by Proclamation 126.ASC has insufficient qualified accounting staff. However, assistancefinanced by the UNDP has provided some relief. Under the TechnicalAssistance Project (CR 1522-ET, 1984), further support is being providedfor training ASC's staff. The present auditing arrangements are acceptableto IDA. During negotiations, agreement was reached that EELPA shallcontinue to employ qualified auditors and adhere to the following tablewith respect to closing its books and forwarding reports to IDA:

Timetable(months after end of respective FY)

Closing of Drafts Accounts AuditedFY Accounts to IDA Accounts to IDA

1986 8 9 131987 5 7 91988 and onward 3 4 6

4/ Large industries and Government agencies are not disconnected.

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Insurance and Taxes

3.14 EELPA has satisfactory insurance coverage of its plant andequipment against the risks of machinery breakdown, explosion and collapseof boilers, fire, loss and damage in transit, workshops and vehicles. Italso has a workman's compensation insurance for all staff, and is in theprocess of increasing its insurance coverage for cash-handling staff.EELPA is subject to the levy of import duties on equipment and spare partsand pays corporate taxes at 50Z on its net income.

Personnel and Personnel Administration

3.15 At the end of 1985, EELPA had about 7,000 employees of which 2%were top and middle level managers, 45% technical, financial andadministrative staff, and the remaining 53% were lower-level employees.Personnel structure has a pyramidal distribution with a very broad (lowerskill) base, because since 1974 EELPA--in response to pressure from theGovernment-has been hiring more lower-level personnel than it needs.EELPA is aware of its overstaffing at lower levels and plans no new hiringsin those categories, as shown by planned performance indicators (para. 3.21and Annex 3.2). Most of EELPA's professionals are graduates from theUniversity of Addis Ababa. Of these, only a few have been trained abroad.EELPA has faced difficulties in hiring professionals, because there is ashortage of university graduates, particularly in the areas of engineeringand computer science, and because graduates are assigned to the variousindustries or agencies according to priorities established by NCCP. Underthe project, arrangements will be made with the University of Addis Ababato bring a team of lecturers for improving the graduate-level curricula andproviding training which would allow EELPA to hire at least 20 engineersper year (paras. 3.18 and 5.07 f). Personnel administration at EELPA is inaccordance with the Labor Proclamation No. 64 of 1975 which regulatesprinciples of employment, salary levels, labor unions and collectiveagreements in Ethiopia. EELPA's labor union negotiates a collectivecontract agreement once a year. The General Manager decides on promotions,disciplinary matters, labor disputes and award of scholarships, assisted bycommittees consisting of three members from management, three from thestaff and a chairman elected by the six members.

Training

3.16 EELPA has a training center, which Electricite de France (EDF)supported in the past with the preparation of course syllabi and experts toorganize and deliver courses under French Government assistance. However,present arrangements only provide training to upgrade technicians to thelevel of electro-mechanics. This training curriculum is no longerappropriate for EELPA's needs. Training aspects were reviewed in detail bythe ILO in 1984 (para. 3.17). Based on the ILO recommendations, acomprehensive training program for EELPA has been included in the project(para. 5.07 f).

Organizational and Manpower Development Program (OMDP)

3.17 Most of EELPA's weaknesses (paras. 3.04 through 3.21) have beenanalyzed in some detail in the report 'Ethiopia: Manpower and Training

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Requirements in the Electric Power Sector' recently released by the ILO.The report identlfles, among others, the following major Issues: (i)EELPA's organizatlonal structure is out-of-date with modern managementpractices, e.g. nineteen managers report directly to the General Manager;llnes of authority are not always clear; (IL) training is neither linked tothe utilization of staff nor adequate for providing the skills necessary tooperate the utility effectively; and (iii) manpower management informationsystems are virtually non-existent. The report recommends a number ofremedial actions, including changes to the organization, improvement ofmanagerial practices, redesign of training activities, and the establish-ment of appropriate information systems.

3.18 In addition to discussing In detail the ILO report with EELPA,IDA has had an extensive and fruitful exchange of views with EELPA and theGovernment concerning objectives, priorities and goals for institutionbuilding in the power subsector. As a result of this dialogue, the projectincludes an Organizational and Manpower Development Program (OMDP) forEELPA (para. 5.07 f). A detailed description of the OMDP, includingestimates of the various inputs and associated costs and implementationschedule is included in pertinent IDA documents (Annex 8.1). The OMDP willinclude: (i) providing consulting services to review in detail theorganization of EELPA including the functions and composition of its Boardand recommend measures for its improvement; during negotiations agreementwas reached that the review would be completed by October 31, 1987 and thatEELPA rill present to IDA a plan of action based on the conclusions of thestudy; (ii) implementing a program jointly designed and coordinated byEELPA and the University of Addis Ababa (UAA) to increase the number ofstudents graduating in engineering by about 50 per year, of which at least20 will be assigned to EELPA, and to provide special training to about 20EELPA engineers per year. Such program will include construction of about450 sq meters of classrooms at the Faculty of Technology of the UAA, andlaboratory and training aids. During negotiations, agreement was reachedthat EELPA and the UAK shall enter into an agreement containing the detailsof such program, and that a draft agreement will be presented to theAssociation for its review and comments by December 31, 1986; (iii)providing consulting services to redesign EELPA's training activities andto train EELPA's staff; (iv) providing Technical Assistance through a teamof experts to assist EELPA to improve its performance in its key areas ofoperation while the training program starts producing results; and (7)providing consulting services to assist BELPA in the follow-up andcoordination of the various components of the OMDP.

3.19 A timely implementation of the OMDP and a full commitment ofhigher management to the program both during its implementation andsubsequently during its application would be essential to transform EELPAinto and maintain it afterwards as a modern, dynamic and efficientinstitution. Accordingly, during negotiations agreement was reached thathiring the consultants for the component in para. 3.18 (i) will be acondition for effectiveness of the proposed credit. Terms of reference forthese consultants have already been discussed in detail with EELPA.

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Management Information System (MIS) and Performance Indicators

3.20 EELPA urgently needs an appropriate Management Information System(MIS) which, by assisting better decision making, would ultimately help toImprove the company's efficiency throughout its organization andactivities. Such system would be a part of the OMDP of ELUPA and it wouldestablish a number of performance Indicators to sonttor EELPA's technicaland financial performance.

3.21 IDA and EELPA have agreed on a set of performance indicators(Annex 3.2), which would be used while the MIS is defined and implemented.Such indicators represent only tentative targets for EELPA in view thatthey have been defined on the basis of preliminary estimates.

Project Management Unit (PMU) and Project Implementation Units (tIU)

3.22 The PMU of the MME will be responsible for coordinating andsupervising the implementation of the energy components of the proposedproject by the PLU of the Ministries and agencies concerned. The functionsand organization of the PMU are described in detail in Annex 3.3. The PMUwill have a Manager, and a Deputy Manager, both satisfactory to IDA, andsufficient staff to carry out its functions. The PMU's Manager will reportthrough the Executive Secretary of ENEC to the Vice Minister of Mines andEnergy. The PKU will be assisted by a SteerIng Committee of five memberswho will represent respectively the five ministries involved. EachMinistry concerned and the Ethiopian Petroleum Corporation would establishFIU which, under the direction of a manager would be responsible for theexecution of the respective energy components. PIUs for the execution ofthe various energy components of the proposed project would be establishedas follows: (i) Ministry of Coffee and Tea Development: Coffee residuebriquetting and carbonization; (ii) Ministry of State Farms: Cereal andcotton crop residue briquetting; (iii) Ministry of Industry: (a) Bagassebriquetting; (b) study of utilization of residue fuel briquettes in

industry; and (c) energy efficiency audits in industries; (iv) Ministry ofAgriculture: (a) charcoal products; (b) woody biomass strategic planning;and tc) forest and tree resource inventory; (v) Ministry of Mines andEnergy: (a) energy planning studies; (b) cooking efficiency andbiomass-fuels marketing studies; and (c) institutional strengthenaing forenergy agencies (excluding EELPA); and (vi) Ethiopian PetroleumCorporation: petroleum-subsector studies.

3.23 During negotiations, agreement was reached that prior to crediteffectiveness the PMU shall have been satisfactorily established in the HMEand appropriately staffed for the purpose of the project.

Accounting and Auditing

3.24 Accounting for the energy components will be carried out by thePMU and should be fully satisfactory. Annual auditing would be performedby ASC or by other satisfactory external auditors. During negotiations,agreement was reached that IDA should receive accounts audited byindependent auditors within six months after the end of each fiscal year.

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IV. IHE MARKET

Electricity Market

Historical Market

4.01 Growth of public electriclty sales in Ethiopia has been ratheruneven in the last few years (Annexes 4.1 through 4.7). During FY77 andFY78, growth exceeded 20% per year as the country recovered from the civildisturbance of the aid-seventies, the utilization of existing factorycapacity increased and power supply to the northern provincial capital ofAsura and to isolated centres throughout the country was fully restored.In FY80 and FY81, the demand for electricity stagnated and sales grew byless than 3% per annum as a result of factory capacity saturation and ofthe global economic recession caused by the impact of sharp increases inoil prices. The main EELPA ICS, which supplies about three-quarters ofpublicly-supplied power followed the same pattern. Sales in the ICS grewat 12.7% per annum during FY78-FY83. Within this period the lowest growthrate was 1.4% in FY81 which recovered sharply to 12 in FY82 and FY83. Therather large growth of electricity sales has been influenced strongly inthe latter years by the commissioning of large electric boilers. Actualgrowth in the EELPA ICS in the period FY81-FY85 was only about 8Z,substantially less than the 14% per annum estimated by EELPA'scoasultants. The lower than expected load growth was due to delays inimplementing the planned 56 MW boiler electrification program and to slowerthan expected economic growth.

Demand Forecast for Electricity in the Main ICS

4.02 In the context of the UNDP/World Bark energy assessment forEthiopia conducted in 1983, the Bank reviewed the demand for power andenergy in the EELPA ICS and projected an overall demand growth for theperiod 1983-95 of 9.3% per annum. During project appraisal IDA reviewedagain the load forecast in the light of more recent generation andconsumption statistics and also taking into account the updated industrialexpansion plan included in the Government's ten year development plan. Asa result of these analyses, IDA and the Government have agreed on a loadforecast for the period FY86-FY95, which resulted in an average annualgrowth for sales of 9.6% when including committed electric boiler loads and9.2% per annum without thea (Annex 4.1 through 4.4). Demand analysesassume that electric boilers would be connected only during periods ofbydroelectricity surplus and that consequently their loads are not used inplanning to justify system expansion. The pattern of electricityconsumption is expected to change moderately during the forecast period asshown in Table 4.1, mostly due to increases in the share of industrialconsumption.

Generation and Capacity Balances in the Main ICS

4.03 The actual and forecast peak-demnds in the period FY80-FY95 isshown in detail in Annex 4.2. Peak demand, excluding electric boilers, isexpected to grow at an average annual rate of 9.1% in the period FY86-FY95. Peak-demand growth would be mostly due to industriel expansion andto the interconnection with the ICS of presently self-contained diesel

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1a1J 4A XD 7.8 593 MD 9.6 148 1M

i b.Tn,Iz ueaipt im fim solawd oamto (S3) bdfg rmyete de t .

powered systems. To ensure a reasonable system reliability, generationcapacity requirements were determined assuming a minimum capacity reserveequivalent to 18Z of the system's peak demand or the size of the largestunit, whichever is smaUler. Firm available generation has been determinedfrom operational records for existing plants and from design studies forthe Malka Wakana and Gilgel Gibe hydroelectric plants under construction.During the FY86 through FY95 period, the gen-ration balance shows surplusesranging from 30Z to 50Z, and the capacity balance surpluses ranging from 9%to 50Z over and above the reserve margin. The projections indicate that,after the commissioning of Malka Wakana in FY88, no new capacity would berequired before 1995. The planned commissioning in FY91 of the 150 MWGilgel Gibe scheme (para. 5.01) will involve annual available capacity andgeneration surpluses, excluding boiler loads, at least until the year2000. The project seeks to promote means to utilize these surpluses(para. 2.08).

Demand Forecast for Electricity in the EELPA SCS

4.04 The smAll diesel-fueled power systems in the EELPA SCS are allcostly and difficult to m=.ntain. However, with impending surpluses ofhydropower on the EELPA SCS and regular expansion of transmission systems,it is economic to advance the interconnection of many of these systems tothe main grid. As a result, the generation and sales forecast in the EELPASCS, (Annex 4.5), indicates a substantial reduction in generation and peakdemand through interconnection, despite a historical growth of about 5% perannum. Transfers of load from the SCS to the ICS match theinterconnections shown in the EELPA ICS load forecast.

Demand Forecast for Electricity in the Eritrea Region ICS

4.05 The ICS for the Eritrea region supplies the cities of Asmara andMassawa. Historically, demand for electricity has been greatly influencedby regional hostilities and by unreliable supply. While hostilities havesubsided to some extent in recent years, economic growth and hence demandfor electricity remains constrained. Ho:-ever, the installation of

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additional capacity as well as the rehabilitation of existing plants isexpected to lift constraints on supply. Demand has been forecast on thebasis of firm commitments to connect new major loads and taking intoaccount historical growth patterns and likely elasticity of demand due toprice increases. The average annual growth rates projected for sales andpeak demand for the period FY86-FY92 are 7.5% and 7.9% respectively.

Forecast for Electricity Demand in the Eritrea Region SCS

4.06 The Eritrea region SCS is comprised of a large number of smalldiesel generation power stations (para. 2.04). Supply and demand are evenmore constrained by social and political factors than on the Eritrea regionICS, and are likely to remain so for the foreseeable future. After strongdecrease in FY85 due to drought-related problems and population movements,demand for electricity is expected to recover slowly. Interconnection ofthese small systems with the Eritrea Region ICS cannot be justified untilthe cost of generation falls significantly either through its owninterconnection with the EELPA ICS, or through exploiting cheaperindigenous sources of power, such as geothermal steam and natural gas.However, it is unlikely that these options would become economicallyjustified within the next ten years.

Household Fuels Market

4.07 Household energy represents the largest share of both energysupply and consumption in Ethiopia. In FY82, it amounted to some 94Z offinal energy consumption and in FY92, even under a scenario of steadyeconomic development, it would still exceed 90% of total final energy use.The estimated composition of household energy consumption is indicated inTable 4.2. At present, more than two-thirds of household cooking ie donewith dung and crop residue fuels (it is estimated that about half the totalproduction of cow dung in Ethiopla is collected and burnt as a cookingfuel). IDA estimates that at least 30% of dung and cror residues, as wellas the majority of firewood and all of charcoal production are traded inthe cash economy and that the cash market for dung and crop residues isexpanding rapidly.

Table 4.2Consumption of Household Fuels, 1982 a/

Share ofQuantities Tonnes of oil Finalas utilized equivalent Consumption(thousand t) (thousand toe) (Z)

Firewood bl 8,739 2,868 31.3Charcoal 150 101 1.1Animal Dung 11,697 3,775 41.3Crop Residues 6,767 2,375 26.0Electricity (GWh) 47 16 0.2Kerosene 10 11 0.1Liquefied Petroleum Gas 4 5 - c/

Total 9,151 100.0

a/ Adjusted to reflect revised population data.b/ Including twigs and leaves.c/ Negligible.

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Supply/Demand Forecast for Household Fuels

4.08 Addis Ababa is the largest urban area and the biggest cash marketfor biomass fuels. Firewood and charcoal reach Addis Ababa from forestedareas up to 650 km away. Because the output of the household fuelcomponents included in the project will be consumed primarily in AddisAbaba, the supply/demand projection has been prepared for the city (Annex4.8). The projection, which covers the period 1985-1992, is optimisticregarding the supply of new biomass and additional fuelwood and the availa-bility of modern fuels. In 1984, 87% of energy supply was in the form ofbiomass fuel, of which about one quarter was charcoal, and 14% fuelwoodfrom peri-urban plantations. Demand for cooking fuels is expected toincrease by 75Z during the decade 1983-1992, with the supply of modernfuels assumed to almost treble during this period.

Household Fuels Marketing

4.09 The Government has been unable to control the marketing ofbiomass fuels, which is mostly private; handled by tens of thousands ofsmall-to-medium-scale entrepreneurs who harvest, transport and wholesale orretail their product from the hinterland virtually on a daily basis.During negotiations, agreement was reached that fuels produced under theproposed project vill be marketed wholesale to the highest bidder from thepoint of production on State Farms, at sugar mills or coffee processingcenters in the case of crop residue briquettes or from bulk stores to beestablished near major urban markets in the case of charcoal products. Inthis way, difficulties that have been experienced in the past withGovernment control and regulation of household fuel markets will beavoided. In all, about 15,000 tons of charcoal and about 15,000 tons ofcrop-residue briquettes will be produced and marketed under the project.Crop-residue briquettes are destined mostly for industrial end-use, in thefirst instance. Trials will be conducted for their use in the householdsector under the project, and if they prove acceptable for householdcooking and are econmically and financially viable as anticipated, furtherproduction will be promoted to meet demand in that market sector. Charcoalis already a customary household fuel and demand remains strong, thus itwill be sold for whatever the market can bear for charcoal of the qualityto be produced and delivered to urban markets from the project's remoteproduction sites.

4.10 The project includes a detailed and comprehensive review ofbiomass fuel supply and marketing arrangements to be completed in the firstyear of the project. This review will establish the present operation ofmarkets under Government patronage and in the private sector for the majorurban centers, including the production and supply routes for the fuels andmarkets concerned. The review is to recommend optimal arrangements formarketing the new biomass fuels to be produced from full scale commercialproduction should the project-funded pilot projects prove commerciallyviable. Recommendations will also be made on means of improving theefficiency of present biomass fuel marketing arrangements where bothGovernment and private sector agents compete in the same marketplace.During negotiations agreements were reached that the Government willestablish appropriate marketing arrangements for biomass fuel products tomaximize the revenues to the projects concerned.

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V. PROGRAM AND PROJECT

Power Subsector Iuvestment Program (PSIP)

Background

5.01 The Association, EELPA and the Government have extensivelydiscussed the PSIP during the Energy Assessment for Ethiopia (para. 1.09)and subsequently during project preparation and appraisal. In the view ofthe Association the load forecast prepared by EELPA's consultants wasexcessively optimistic and the resulting expansion program was too large,particularly the generation aad transmission components. During thediscussions, the economic and technical viability of the subsectorexpansion program was analyzed in detail, including the methodology for thepreparation of load forecasts, and the review of the technical and economicfeasibility of all major generation and transmission projects originallyincluded in the program. During negotiations, agreements were reached on areasonable load forecast for FY86-FY95 (paras. 4.02 through 4.06) and on aPSIP (paras. 5.02, 5.03 and Annex 5.1). With respect to the constructionof the Gilgel Gibe hydroelectric plant (para. 5.03 i), the Association hadstated that the capacity and energy balances showed that no capacityaddition would be required until 1995 and that in consequence thecommissioning of Gilgel Gibe in FY91 would be a premature investment. TheGovernment indicated that a postponement of the project would not bepossible because it had already entered into final arrangements for itsconstruction with financing from the DRK. At present all the PSIP ongoingprojects are being constructed by EELPA, except for the Malka Wakana andGilgel Gibe hydroelectric plants, which are being constructed by theGovernment. The Government has indicated that it may transfer Malka Wakanato EELPA as of FY87, in which case EELPA would complete the construction ofthe plant and own and operate the facility upon its commissioning. Withrespect to Gilgel Gibe, the Government may wish not to transfer thefacility to EELPA until it is completed, but in no event before it isjustified. Because of the financial and institutional implications forEELPA of these transfers, during negotiations agreement was reached thatEELPA may acquire these projects under execation by the Government,provided the transfers do not adversely affect the financial viability andthe operations of EELPA or prevent the company from meeting any of itsobligations under the Project Agreement. During negotiations, agreementwas also reached that the Association shall be given an opportunity tocomment on the proposed terms and conditions for the transfers before suchtransfers take place.

The Program

5.02 The PSIP for the period FY86-FY92 (para. 2.07 and 2.08) isdescribed in detail in Annex 5.1 and summarized in Table 5.1.

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Table 5.1Summary Power Subsector Investment Program (FY86-FY92)

Total Expenditures in the Period a/(million Birr)

Category L F TProject 32.4 94.2 126.6Generation 318.7 552.5 871.2Transmission Lines 165.8 452.9 618.7Extensions 66 kV 29.3 39.5 68.8Substatioas 28.1 82.9 111.0Distribution 43.2 66.5 109.7General Plant 20.1 80.3 100.4Studies & Training 6.5 22.0 28.5

Total 644.1 1390.8 2034.9

a/ Includes physical and price contingencies, and excludes duties andtaxes and interest during construction.

Works in Progress

5.03 EELPA has several projects under construction in the Main ICSarea as follows:

Ci) Generation

The largest ongoing projects are the Malka Wakana and Gilgel Gibehydroelectric plants of 150 MW each. The construction of Malka Wakanastarted in 1983 with commissioning scheduled for end 1988. Financingfor the project is from the USSR and the Government. The constructionof Gilgel Gibe started in end 1984 and commissioning is scheduled for1991. Financing for the project is being provided by the DRK and bythe Government.

(ii) Transmission Lines and Substations

The 230 kV lines committed or under construction are associated to thehydroelectric plants under construction and include the Malka Wakana -Addis Ababa line and the Gilbel-Gibe Addis Ababa line. Majortransmission lines under construction at 132 kV are the Kombolsha -Desie line, financed by EEC, the Shashamana - Arbamintch line, financedby the Government of Yugoslavia, the Alaba-Jima-Agaro line, financed bythe Government of Finland, and the Finchaa-Bahar Dar line financed bythe Government of Italy. The feasibility of this line is beingreassessed as a 230 kV alternative, in view that the works to improvethe Lake Tana regulation a.d expansion of the Tis Abai hydroelectricplant have been stopped.

(iii) Other Works

Other works under construction include the 66 kV lines Malka Wakana-Robi, and Harar-Jijiga, a number of substation expansions in the ICSarea, and distribution.

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(iv) Village Electrification

EELPA has a continuous though modest program to expand electricitysupply to villages in the rural area. However, because most of thesevillage schemes are not self-financing, EELPA has limited the programto providing or improving the service in about 10 communities eachyear. Typical village installatious may cost about B 0.8 million(US$0.4 million) of which about 50% is the foreign exchange cost.Frequently, local villagers provide financing for part of the localfunds required. The criteria used to select the villages include: (a)the economic/financial justification for the replacement of existingdiesel-driven generators by supply from the Main ICS; (b) the number ofpotential consumers; and (c) in some cases, social and politicalreasons as in the case of towns close to international borders.

Future P.roects

5.04 In addition to the proposed project, other future investments inthe period FY86-FY90 include the construction of the Dera-Dire Dava 230 kVtransmission line and terminal substations, village electrification,distribution, and the construction of several mini hydro plants. A detailedlist of investments is attached as Annex 5.1.

The Project

Project Objectives

5.05 The broad objectives of the project in the energy sector are toimprove investment planning and programing, to strengthen institutions, todevelop strategies to resolve supply problems in the household energysubsector, and to arrest the declining biological productivity of keyagricultural ecosystems. More specifically, the project objectives are:Ci) to develop an in-house capability to establish and update least-costprogram for the power subsector and implement the highest priority projectswithin this program; (ii) to attain greater efficiency in the powersubsector through the improvement of its organization and management, thestrengthening of its planning and design capabilities, the upgrading of itsoperational practices, the rehabilitation of its facilities when econo-mically justified, and the improvement of its financial performance;(iii) to develop and implement least-cost plans to supply household energyproducts with substantial private sector participation through freemarketing practices; (iv) to correct imbalances in the prices of energyproducts; and (v) to stimulate to the extent possible, an increased andcoordinated aid flow from other donors towards the power and the householdfuels subsectors.

Project Preparation

5.06 The power components of the project were first formulated in1977. However, the project objectives and consequently project scopeunderwent considerable change during project preparation and appraisal.The present project scope arises substantially from the priorities forenergy sector development and management identified jointly and agreed withthe Government in the context of the Bank/UNDP energy sector assessment

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for Ethiopia in 1983-1984 and follow-up activities (para. 1.09). Part ofthe project preparation was financed through PPF funds provided by IDAamounting to about US$1 million (PPF 193 of February 4, 1982 and PPF ofJune 15, 1983). These funds, to be repaid under the credit, were used toprepare a Power Planning Study (November, 1982), the feasibility of theFinchaa-Bahar Dar transmission line and the Awash III-Dire Dawatransmission line (July 1983), and the feasibility study for the Finchaafourth unit (March 1983), reviewed in May 1983 by Lahmeyer. In addition,EELPA, with the assistance of UNDP financed consultants, preparedfeasibility studies for the rehabilitation of the Aba Samuel hydroelectricplant and for the construction of the Sor and Hoha mini hydro plants in1983. Similarly, under a cooperation agreement between Ethiopia and Italythe Cesen-Ansaldo/Finmecanica Group (Italy) completed in June, 1983, an'Assessment and Optimisation of the Electric Distribution System in AddisAbaba". Some of these projects proved to be unfeasible and others had tobe dropped because of financial constraints. Subsequent to the energysector assessment, high priority power system rehabilitation, householdenergy, institutional strengthening, and technical assistance componentswere added to the project and the feasibility of the various alternativesto supply electrlcity to the Bahar Dar-Gondar and the Dire Dawa areas wasreviewed in detail. Most of the feasibility work for the new componentswas undertaken with preinvestment resources of the Energy Sector ManagementAssistance Program (ESMAP) and the IW. In the context of this program,the ILO completed a diagnostic study of the manpower and organizationaldevelopment as well as the technical assistance requirements for EELPA, anda feasibility study for the recovery of forest residues by carbonization,and consultants financed by ESMAP completed feasibility studies foragricultural residue briquetting and improved bagasse utilization. Acomplete assessment of power system efficiency improvements andrehabilitation needs was carried out in 1984-85 under the ESMAP program. 5 /The report, which was discussed with EELPA in detail during appraisal,identified and established the estimated Costs, period of implementationand priority of the efficiency improvements and rehabilitation work neededin EELPA and the Eritrea region power systems. Most components identifiedin the report have been included in :he project following recommpndedpriorities (Annex 5.5). Also with ESMAP financing, a comprehensive cookingefficiency program was initiated in 1984, the second and larger phase ofwhich is to be executed under the project.

Project Der ription

5.07 The project consists of:

Power Components

(a) Generation

(i) Generation Rehabilitation (EELPA, ICS). Rehabilitation of theKoka, Awash II and III, Finchaa and Tis Abbay hydroelectric powerplants to bring them to their full operational condition, andprovision of spare parts.

5/ Ethiopia: Power System Efficiency Study, April 1985.

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(ii) Generation Rehabilitation (LELPA, SCS). Rehabilitation of about20 of small diesel generating plants to bring them to their fulloperational condition, and provision of spare parts.

(iii) Generation Rehabilitation Eritrea Region. Rehabilitation ofdiesel generating groups at the Gherar and Kagnew power plantsand of the water treatment and cooling system of the Belessasteam power generating plant, and provision of spare parts.

(b) Transmission

(i) Construction of about 200 km of 66 kV transmission line betweenSabatta and Wolliso and between Dessie and Woldia.

(ii) Construction of about 26 km of 132 kV transmission line betweenKaliti I and Cotobie and between Dire Dawa I and Dire Dawa II.

(c) Substations

(i) Substation Expansion 132 kV. Construction of new dubstations atKaliti II, Bole, Akaki and Dire Dawa II, expansion of existingsubstations at Cotobie, and Kaliti I. Total expansion involvesabout 100 NVA of new transformer capacity and provision of about18 MVA of spare transformers.

(ii) Substation Expansion and Rehabilitation 66 and 45 kV.Construction of new substations at Wolliso and Woldia, andexpansion and rehabilitation of existing substations at AddisSouth, Bahar Dar, Tis Abbay and Sabatta. Total works involveinstallation of about 30 MVA of new tranformer capacity andprovision of about 6 MVA of spare tranformers.

Cd) Distribution

Wi) EELPA ICS Distribution Expansion. Construction of routinedistribution expansion in the Addis Ababa area and other majorurban centers in Ethiopia involving about 1,200 km ofdistribution networks and related transformers (Annex 5.6).

Distribution Rehabilitation. Rehabilitation throughout thecountry of about 400 km of existing distribution networks,including replacement of insulators, poles and accessories,upgrading of relaying and protection in gereral, reconductoring,installation of capacitors, etc. (Annex 5.6).

(e) General Plant

(i) Vehicles for EELPA. Purchasing of about 80 vehicles and spareparts needed to partly replace EELPA's obsolete existing fleetand enable EELPA to carry out its day to day operations in anefficient manner.

(ii) Housing and Technical Assistance. Construction of about 12houses for the expatriate personnel who will be engaged for theManpower and Organizational Improvement Program for EELPA.

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(f) Organizational and Manpower Development Program

(i) EELPA Organizational Improvement Program. Carrying out adetailed Diagnostic Study of EELPA's organizational improvementneeds and implementing the recommendations of the study. Theprogram would include about 48 man-months of consulting servicesand 21 man-months of fellowships for EELPA's key managers.

(ii) Manpower Development. Provision of (i) a team of lecturers in aplan which would be designed and coordinated jointly by EELPA andthe University of Addis Ababa to (a) increase the number ofcivil, mechanical and electrical engineers graduating each yearby about 40 to 60 engineers, of which some 20 to 30 would beassigned to EELPA; md (b) to train about 20 engineers per yearas required by EELPA's needs; (ii) construction of about 450 sqmeters of classrooms at the Faculty of Technology at theUniversity; (iii) laboratory and training aids; (iv) about 210man-months of consultants to re-orient the training curricula atEELPA's training center and provide both formal and on-the-jobtraining for EELPA's staff; (v) about 16 months of fellowshipsfor EELPA's staff; and (vi) equipment and vehicles to upgradeEELPA's trainiag center.

Ciii) Technical Assistance. Provision of Technical Assistance forEELPA in the areas of Power Sector Expansion Planning, PowerSystem Studies, Operation and Maintenance, Financial andCommercial Management, Data Processing, and Design of Substationsand Transmission Lines. The program would be providedthrough:(a) about 150 man-months of experts on permanentassignment for periods ranging between 6 and 36 months each; (b)about 23 months of short-term technical assistance in selectedareas (such as water-treatment plants, relaying); and (c) about16 man-months of fellowships for EELPA's staff.

(iv) Coordination of Manpower and Organizational Development.Provision of about 50 man-months of consultancy services toassist EELPA in the follow-up and coordination of theimplementation of parts (f) (i) through (f) (iii)) the variouscomponents/consultants involved and ensure that the entireManpower and Organizational Development Program is carried out inconsistency with the objectives of the project.

(g) Power Subsector Studies

(i) Interconnection with neighboring countries. Execution of afeasibility study for a high-voltage interconnection betweenEthiopia and Sudan.

(ii) Distribution Planning and Design. Provision of a distributionplanning and design method, including the necessary computerequipment and software packages. Also, updating of existingdrawings to reflect present status of distribution systems inAddis Ababa and other major cities of Ethiopia.

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Energy Components

(h) Crop Residue Briquettes

Construction of buildings and provision of equipment, materials,vehicles, spare parts and training, monitoring and evaluation forpilot production on a quasi-commercial unit scale, of briquettingfor household and industrial fuels totaling about 15,000 tonnesper annum of coffee, cotton, wheat, barley, and sugar canebagasse residues. Review, design and modification of selectedexisting wood and oil-fired industrial plant to enable fullutilization of all briquette production.

(i) Charcoal Products

Construction of buildiugs and provision of equipment, materials,vehicles and spare parts and training for demonstration andevaluation of basic logging and carbonizatiost processes in pilotprojects of coumercial scale, comprising 15,000 tonnes of lumpcharcoal.

(j) Cooking Efficiency and New Fuels Testing

Construction of buildings and provision of equipment, materials,vehicles and spare parts and training for carrying out studies onmarket analysis, prototype development and dissemination of newcooking appliances and techniques and consumer acceptance trialson new crop residue fuels.

(k) Energy Sector Institutional Strengthening

Strengthening overall energy sector planning and coordination andplanning for the supply of woody biomass in particular. Thelatter is to be achieved through the development of a strategicplanning unit supported by a woody biomass resource inventory.

(1) Energy Sector Studies

Provision of consultancy services for: (i) detailed review ofpetroleum supply options and short-term upgrading of LPG supplyfrom the existing refinery; and (ii) a study of energy efficiencyupgrading in local industries,including preliminary designimprovements for 20 large industries.

Project Cost

5.08 Projects costs are detailed in Annex 5.2 and summarized inTable 5.2. The total cost of the project including physical and pricecontingencies and duties and taxes, but excluding interest duringconstruction, is estimated at about US$99.5 million equivalent, of whichthe foreign exchange cost would be US$67.8 million equivalent or 681.Total financing required, including interest during construction, isestimated at US$106.8 million equivalent, of which US$68.1 million

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Table 5.2Project Cast Su.ary

POWER COMPONEASBase Cost

L F T L F TCivil Works. Equlpment. MilliOn Birr Hillion USSMaterlal, Installation

Generation Rehabilitation 0.5 10.6 11.2 0.3 5.1 5.4Transmission lines 3.0 5.2. 8.1 1.4 2.5 3.9Substations 4.3 14.0 18.3 2.1 6.8 8.9Distribution Rehab. and Expansion 10.0 28.1 38.0 4.8 13.6 18.4General PLant 0.2 4.4 4.6 0.1 2.1 2.2

Total 18.0 62.3 00.2 8.7 30.1 38.8Institution Building and stuaies

Manpower and Organtzational Duv. 2.2 9.5 11.7 1.1 4.6 5.7Studies 0.6 3.2 3.9 0.3 1.6 1.9

Total 2.8 12.8 15.6 1.4 6.2 7.6Engineering and Administration 4.5 1.8 6.3 2.1 0.8 2.9

Total BDae Cbst 25.3 76.7 102.1 12.2 37.1 49.3Contingencies

Physical 1.4 3.9 5.3 0.7 1.9 2.6Price 5.7 11.5 17.2 2.7 5.5 8.2

Total Contingencies 7.1 15.4 22.5 3.4 7.4 10.8Project Preparation f - 2.0 2.0 - 1.0 1.0Duties and Taxes 13.1 - 13.1 6.4 - 6.4Total COst 45.6 94.2 139.7 22.0 45.5 67.5

Interest Duriug Construction 14.5 - 14.5 7.0 - 7.0Financing Required 60.1 94.2 154.3 29.0 45.5 74.5

ENERGY COMPONENTSBase CostCivil Works, Equipnent, Materials. Installation

Crop Residue Briquettes 1.9 7.0 8.9 0.9 3.4 4.3Charcoal Products 4.7 9.3 13.9 2.2 4.5 6.7

Total 6.6 16.3 22.8 3.1 7.9 11.0Institution Building and Studies

Cooking Efficiency Program 0.5 2.9 3.4 0.2 1.4 1.6Institutional Strengthening 4.9 10.4 15.2 2.4 5.0 7.4Energy Studies 0.0 3.0 3.1 0.0 1.5 1.5

Total 5.4 16.3 21.7 2.6 7.9 10.5Engneerig Administration 0.9 5.3 6.2 0.5 2.5 3.0

Total Base Cost 12.8 37.9 50.7 6.2 18.3 24.5Contingencies

Physical 1.6 3.8 5.4 0.8 1.8 2.6Price 2.2 4.5 6.7 1.0 2.2 3.2

Total Contingencies 3.8 8.3 12.1 1.8 4.0 5.8Duties and Taxes 3.4 - 3.4 1.7 - 1.7Total Cost 20.0 46.2 66.2 9.7 22.3 32.0

Interest During Construction - .6 .6 - .3 .3Financing Required 20.0 46.8 66.8 9.7 22.6 32.3

TOrAL PRaTJECBase Cost 38.1 114.6 152.8 18.4 55.4 73.8Project Preparation a/ - 2.0 2.0 - 1.0 1.0Co.tingencies

Physical 3.0 7.7 10.7 1.5 3.7 5.2Price 7.9 16.0 23.9 3.7 7.7 11.4

Total 10.9 23.7 34.6 5.2 11.4 16.6Duties and Taxes 16.5 - 16.5 8.1 - 8.1Total Project rAst 65.5 140.3 205.8 31.7 67.8 99.5

Interest During Costruction 14.5 0.6 15.1 7.0 0.3 7.3

Total Financing Required 80.0 140.9 220.9 38.7 68.1 106.8

a/ Financed with funds advanced under PPFs of February 4, 1982 and June 15, 1983(para. 5.6)

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equivalent or 64% would be in foreign exchange. Base costs are at December1985 price level. Physical contingencies range between 5% and 10% of basecosts for the various components, depending on the level of preparation ofthe respective subprojects. Price contingencies were computed on the basisof the best forecasts available at a post-appraisal review in March 1986and assume an annual inflation rate of 8% for the period 1985-1992 forlocal costs and an international inflation of 7.2% for 1986, 6.8% for 1987and 1988, 7.0% for 198S, 7.1% for 1990 and 4% for 1991 and thereafter.These inflation rates are considered appropriate for the kinds of works,goods and services included in the project and reflect recent experience ofthe Ethiopian authorities with similar components.

Project Implementation

5.09 Procurement activities will take place starting in the secondsemester of 1986. The physical execution of the project would start inFebruary, 1987, and would be completed in September 1991. Animplementation schedule summary is attached as Annex 5.3.

Implementation of Power Components

5.10 The power components will be implemented partly by contractorsand partly by EELPA with the assistance of consultants. In view of therather large number of components, EELPA will appoint a Project Managerunder the Planning and Programming Department to coordinate and supervisethe execution of the power components of the project. The appointment ofthe Project Manager will be a condition for effectiveness of the credit.Some of the generation rehabilitation works will require assistance frommanufacturers of particular items of equipment. Force account would be themost appropriate way of carrying out the distribution components,particularly the rehabilitation, in view of the need to coordinate theworks with planned disconnections and minimize cuts of electricity supply,a procedure which will require substantial supervision from EELPA in anycase. EELPA has enough crews and construction equipment to carry out thistask. The rehabilitation of hydroelectric plants will be carried out bycontractors with participation of EELPA. The rehabilitation of smalldiesel engines would be carried out initially for 4 to 6 plants by acontractor with the participation of EELPA. The remaining plants, aftersatisfactory training of the EELPA staff, would be rehabilitated mostly byEELPA under the general supervision of the contractor. Terms of referencefor the above works have been suggested to EELPA by IDA in the Power SystemEfficiency Study (para. 5.06). EELPA would carry out the 66 kV and 132 kVlines and substations in view that EELPA has available equipment and crewsfrom similar works completed recently. The technical assistance staff, tobe funded under the proposed project (para. 5.07 f), would provide EELPAwith required support during the execution of the project. The total costof force-account works is estimated at US$43 million equivalent, about 7%of EELPA's expansion program for the period FY86-FY90. The organizationaland manpower development program for EELPA would be carried out byconsultants and, in view of its complexity, would be coordinated by EELPAwith the assistance of independent consultants.

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Implementation of Energy Components

5.11 The energy components will be executed by various agencies underfive ministries. Final responsibility for coordination and supervisionduring implementation will rest on a Project Management Unit (PMU), to beestablished under MME. The institutional framework for the implementationof the energy components is explained in detail in Chapter 'II (paras 3.22through 3.24).

5.12 The PMU will be the local counterpart for IDA and cofinancingagencies, consultants and contractors involved in the implementatioa of theenergy components and would handle all correspondence, progress reports,requests for disbursements and procurement activities (para. 3.22 andAnnex 3.3). In the execution of the energy components, the variousministries will be assisted by experienced consultants and contractors whowill work under terms of reference or technical specifications satisfactoryto IDA.

Consulting Services

5.13 The execution of the project will require consulting services forreview of final design and preparation of bidding documents, evaluationof offers and selected supervision during construction of the powerphysical components, for the execution of the Organization and ManpowerDevelopment Program for EELPA, for preparation and supervision of implemen-tation of the physical items of the energy components, and for both thepower and energy studies.

Procurement

5.14 The materials, equipment and vehicles to be financed by IDAcredit will be purchased through international competitive bidding inaccordance with IDA guidelines for procurement, except for proprietaryitems such as the spare parts for rehabilitation of existing equipmentMargins of preference to domestic manufacturers would not apply in thiscase because equipment and materials required for the project are notproduced locally. All contracts for amounts equal or larger thanUS$ 300,000 equivalent would be subject to IDA's prior review. Consultancyservices to be financed under the proposed IDA credit would be selected orthe basis of quality of services, in accordance with IDA guidelines foxselecting consultants. Consultancy contracts would be satisfactory teIDA. Contracts for works, including construction of about 12 houses forTechnical Assistance personnel, construction of small industrial buildingsfor some of the household energy components and construction of about 450sq meters of classrooms, will be procured under competitive biddingadvertised locally (Table 5.3).

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Table 5.3Pldro ~tbod a!

cmS uiUlon)Consul- Cafi-

IB LC Other bt NA c tants d/ ng TotalPmoeet c Coo_tA tm aterials.

Spse Parts ad IntafatimGrin babli;ta 1.0 0.2 4.5 0.3 6.0

(1.0) ' 4.5 (5.5)Lines 3.0 0.7 1.5 5.2

(3.0) (3.0)Substations Epansion 8.2 1.6 2.7 12.5

(8.2) (8.2)hbab. ad Eup. 15.5 2.8 0.4 4.0 22.7

(15.5) (0.4) (15.9)Briqaette Production 3.4 1.2 0.8 1.5 6.9

(1.5) (0.2) (1.7)Cbarcoa Prodn tl 2.2 3.5 5.7

(2.2) (0.4) (2.6)S. Civi Works auI Building

P O_r 1.4 1.4(1.4) (1.4)

TA MiDg 1.0 1.0(0.8) (0.8)

BAA Dasing 0.3 0.3(0.2) (0.2)

:e3b (spaoent 0.8 0.8(0.5) (0.5)

C. vehicles

Qiarcoal Product 3.0 3.0(3.0) (3.0)

Ener 0.3 0.3(0.3) (0.3)

EEPk 1.5 1.5(1.5) (1.5)

D. institution Buildingntftuzioan auilding por 1.0 of 5.4 6.4

(0.9) eI (4.3) (5.2)fnsttutio BiWldig Enexg 2.6 eI 7.2 9.8

(2.6) .1 (4.0) (6.6)E. Cauult±z Services

Po Studies 2.4 2.4(2.0) (2.0)

Energy StuMis 1.5 1.5(1.5) (1.5)

Pouer Desig 0.8 0.8(0.8) (0.8)

Emergy Desln 0.3 0.3(0.3) (0.3)

F. Cong P' 1.8 0.3

G. PPP c 1.0 1.0(1.0) (1.0)

Total 43.5 12.4 4.9 12.5 17.6 1.5 91.6Total IDA (39.7) (2.1) (4.9) (3.2) (12.9) (0.0) (62.0)

a/ AItmrs in pcorethess are MA, financedbl Proprietary spare parts thut can only be purchased from oaufacturers of orJginal

ct Desigm and labor to be provided localy by i.plesnting age-iesdl Conuting ervic U ler delnesa! Trini ngids and ,equipint

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Financing Plan

5.15 The total foreign exchange cost of the project is USS68.1 million(B 140.9 million) of which US$45.5 million CB 94.2 million) will beexpended by EELPA and US$22.6 million (B 46.2 million) will be expended bythe Government on the energy components of the proposed project. Of thetotal foreign exchange cost, IDA will finance US$62.0 million equivalent,the DanJsh International Development Agency (DANIDA) will finance US$5.8milion equivalent and the Government US$0.3 million. Local currencyrequirements for the power components will be provided by KELPA from fundsgenerated from its operatlons and for the energy components by theGovernment.

5.16 During negotiations, agreemevt was reached that (i) theGovernment shall onlend to EELPA part of the proceeds of the proposedcredit at 9% interest rate and 20 years including 5 years of grace(para. 3.02) and to EPC at 9% interest rate and 5 years including 2 yearsof grace; the proposed onlending rate is in line with local inflation InEthiopia which is projected at a rate of 9Z per annum for the periodFY86-FY92. The actual inflation rates in FY82 through FY85 were 7.3%,3.8%, 0% and 8Z; and (ii) the execution of the onlending agreements betweenEELPA and the Government and EPC and the Government shall be a condition ofeffectiveness of the IDA credit. The local and foreign currencyrequirements for the other energy components of the project will beprovided by the Government and passed on to the various implementingagencies as grants.

Advance Contracting; Retroactive Financing

5.17 The final stage of project preparation includes updating part ofthe preliminary work which had been carried out for some of the projectcomponents including drafting of bidding documents, terms of reference andcontracts for hiring consultants. The Government and EELPA have requestedIDA to retroactively finance the foreign exchange cost of theseexpenditures. It is likely that the contracts for some project componentsmay have to be awarded prior to signing the proposed IDA Credit, in orderto avoid unnecessary delays in project implementation. Such advancecontracting would require down payments for vbich 8ELPA and the Governmentwould like to be reimbursed. The amount of retroactive financing isexpected not to exceed US$2.0 million equivalent or 3Z of the credit.

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Disbursement

5.18 The proceeds of the credit would be disbursed over a period ofabout 60 months from September 1986 through September 1991. Disbursementsfrom the credit account will be fully documented and made for 1001 offoreign expenditures for all project components except for: (a) worksunder parts (e), (f), (h) and (1) of para. 5.C7, for which disbursementswill be made for 80Z of local expenditures; and (b) consulting services,for which disbursements will be made for 80% of local expenditures forservices of consultants domiciled in Ethiopia and 1001 of foreignexpenditures for services of other consultants. The expected schedule ofdisbursements (Annex 5.4) from the proposed IDA credit is based on standardprofiles for Bank loans and IDA credits for power projects in the Easternand Southern Africa region. The closing date for the proposed credit wouldbe March 31, 1992, six months after project completion.

Special Accounts

5.19 In order to expedite project execution and give the implementingagencies rapid access to funds under the credit, the Government will opentwo Special Accounts at the Bank of Ethiopia. Account A for EELPA willhave an initial deposit of US$500,000 and Account B for the PMU an initialamount of US$300,000. Payments from the Special Accounts shall be madeexclusively for eligible expenditures. The Special Accounts will bereplenished by the Association as needed, in accordance with establishedprocedures.

Environmental Aspects

5.20 The power sub-sector components do not involve any significantnegative environmental impact. The short 132 kV transmission line sectionsand the 66 kV transmission lines involve no issues of right of way forthe line routes and their access roads. Similarly, none of the proposeddistribution expansion is expected to present any risk to the environment.The household energy production components of the proposed project areexpected to have positive environmental implications. The coffee husk andparchment briquetting projects will alleviate a serious fire and waterpollution hazard through utilizing materials which tend to spontaneouslyignite or which, when expelled into waterways, form floating pa-trescentmats. In the context of the crop residue briquetting project studies willbe conducted to determine whether removal of crop residues is deleteriousto sail fertility and structure or if the residue quantities planned to beleft in the field offer sufficient soil protection and enrichment.Measures of such variables as soil carbon, soil structure and loss will bemade before and during the pilot projects at the proposed sites. It isunlikely, however, that the implementation of the residue recoverycomponents will produce more environmental deterioration than the presentpractice of burning off all residues in the field prior to planting thenext crop and may even improve soil structure and fertility.

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Project Risks

5.21 The implementation of the power sub-sector physical componentsdoes not involve risk besides that normally associated with the construc-tion of transmission and distribution works. In both the distribution andthe generation rehabilitation components construction will involve works onalready energized systems and uight require temporary cuts of electricitysupply. Consequently, activities will be scheduled so as to ensure thatoutages are kept to a minimum. EELPA has had a good safety record inprojects it has implemented directly or has supervised. Constructionschedules for the various power subsector components of the project reflectdesign and construction methods applicable and the experience of similarprevious projects constructed in Ethiopia. Hence, no significant delay inproject implementation is anticipated. The hydroelectric plants to berehabilitated under the project are on the Awash, Finchaa and Blue NileRivers. The Awash joins a lake, which is partly in Djibouti territory.The Finchaa is part of the Blue Nile System which flows through Sudan.There will be no change in water quality or quantity as a result of theproject. No foreseeable future action by Djibouti or Sudan could adverselyaffect the viability of the hydroelectric rehabilitation compocents. TheGovernment of Ethiopia has confirmed that there are no treaties oragreements ruling the use of international waters whereby Ethiopia has toinform or seek agreements of other countries on rehabilitation or otherworks of hydroplants to be included under the proposed project.

5.22 Some of the household energy components in the project includefuel production techniques and technologies for which there is no previousexperience elsewhere on this scale. Although economic viability for thesecomponents has been demonstrated at the feasibility study stage, there aresome risks of not meeting projected costs and benefits because of uncer-tainties in start-up dates and level of production of the componentsbecause of the marked seasonality of crop or forest residue production. Inthe case of broadacre agricultural residues of stalks and stover, there isonly about a two month period for each crop in which to harvest residuesbefore replanting begins. Consequently, delays in equipment procurement oftwo months may lead to a one year delay in project start-up. Similarly, ifnew harvesting and processing techniques are not mastered quickly, residuesmay have to be disposed of to permit cultivation. Charcoal production isalso influenced by heavy seasonal rains in the forests of the south-westwhich hamper carbonization for two to three months, and by pressure fromthe agricultural development agency to plant tea or coffee, which meansburning off the forest residues remaining if they have not been carbonizedin time. However, these are pilot projects where part of the objective isto analyze the impact of delays on costs and the scale of production as away to learn the application of new basic logging and carbonizationtechnology, and work organization system. In consequence, the benefitsarising from the early development of new sources of household cookingfuels from wastes would far outweigh the higher risks faced.

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5.23 The project includes sizeable institution-building componentswhich aim at improving the organization and management of the institutionsconcerned, through organizational changes, training and technical assis-tance to support their day to day operations. Though it has beenestablished that the main constraint for successful implementation of thesecomponents would be the capability of the institutions to absorb theselarge-scale improvement programs and though all measures are being taken todesign the assistance accordingly, it may prove necessary to spread theinstitutional development over a longer period of time.

5.24 The rehabilitation components of the project in the EELPA ICSwere selected based on reliability improvements needed rather than onincreased efficiency objectives, because of the large surpluses ofavailable generation that are likely to prevail until the year 2000. Inconsequence their benefits are not likely to be affected by lower trends inlong-term oil prices. The rehabilitation of small diesel plants inisolated systems was also selected basically for supply reliabilityreasons. Although for these small systems fuel costs are an importantcomponent in the determination of their economic feasibility, the pay-offperiods encountered ranged between one and two years mainly because verylow investments in spares (as compared to new groups) are requied to bringthese plants to full operational conditions. Accordingly, the resultingbenefits are unlikely to be affected by reductions in oil prices. In thosecases where interconnection of small systems to the grid was selected asthe least-cost alternatve, the return on investment of over 30% is unlikelyto be substantially affected by lower oil prices in view of the rather highimpact of transportation costs on delivered costs of fuels.

VI. FINANCIAL ASPECTS AND COST RECOVERY

Introduction

6.01 EELPA is responsible for all public electricity operations inEthiopia. Its activities are divided into eight regions (paras. 2.01 and3.04 and Annex 3.1). EELPA keeps accounts for the activities in theEritrea region separate from the activities in the remaining seven regions.In analyzing the past and future financial performance and position of thepower sector in Ethiopia, the accounts of the activities in the Eritrearegion have been consolidated with the accounts of the electricityoperations in the rest of the country.

Financial Position and Past Operating Results

6.02 The operating results for FY84 and FY85, based on availableaccounting data which have not yet been audited (para. 3.12), aresunmmarized in Table 6.1.

6.03 EELPA achieved annual rates of return on revalued assets duringFY84 and FY85 of -4.6% and -3.7%, respectively. Excluding the Eritrearegion, the rates of return in FY84 and FY85 were -1.6% aud-0.6%, which arewell below the 7% required under Loan 596-ET of 1969. The negative ratesof return result from high operating costs and inadequate tariffs whichhave hindered EELPA in financing from its internal sources construction ofnew projects and improvement of existing facilities. Electricity tariffs

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are particularly low in the Eritrea region, where customers continue to besupplied under the same tariffs which were in force at the time of thechange of ownership twelve years ago. As a consequence, the Government hasfinanced most of that region's operational and capital requirements throughgrants. At July 7, 1985, total Government grants amounted to B 113.7million for that region. EELPA's net income over the past years hasfurther been decreased partly due to -capital charge," a levy establishedby the Government in 1979 on income of public sector organizations. EELPA,due to its low earnings, has in the past been allowed to defer payment ofth,e capital charge, which is levied at the rate of 5% on paid-in-capital,retained earnings plus grants, regardless of profits.

Table 6.1EELPA - Summary of Income Statement

1984 1985

Units sold (GWh) 779.9 774.4Average revenue (Birr/kWh) 0.12 0.12

- (Birr million)

Operating Revenues 93.9 102.5Operating Expenses 125.7 130.2Operating Income -31.8 -27.7)

Interest 8.8 8.4Capital Charge 9.7 10.0

18.5 14.6Net Income -50.3 -46.0Rate of Return (X) - 4.6 - 3.7Debt Service Coverage (times) 0.4 0.7

6.04 Proclamation No. 163 of 1979, which governs the finances ofpublic enterprises, requires EELPA to pay 1OZ of its net income each yearinto the Government's general reserve fund for EELPA until it equals 30% ofEELPA's paid-in capital. This reduces EELPA's availability of funds forfinancing its investment program. During negotiations agreements werereached that EELPA shall have at its disposal at the beginning of thefourth quarter of each preceding fiscal year sufficient funds to meet thelocal currency requirements of its investment program for the followingfiscal year.

6.05 The financial position of EELPA as of July 7, 1984 and 1985 issummarized in Table 6.2. Accounts receivable on July 7, 1984, afterproviding for doubtful accounts were equivalent to about seven months salesrevenue which indicates an unsatisfactory situation in billing (paras. 3.10and 3.11). On July 7, 1985, EELPA's inventory level was 6.2% of grossrevalued assets, which is high and reflects tha storage of several dieselgenerating groups which have since been installed. The debt/equity ratiowas 19/81, indicating that EELPA is conservatively capitalized. However,due partly to insufficient tariff levels, EELPA's debt service coverage forFY84 and FY85 was only 0.4 and 0.7, respectively. During negotiations,agreement was reached that EELPA shall not incur any debt without IDA's

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agreement unless the twelve month net revenues prior to incurring the newdebt cover at least 1.5 times future maximum debt service, including thatrelated to the new debt.

Table 6.2EELPA - Summary of Balance Sheet

FY84 FY85(Birr million)

AssetsNet Plant in Operation a/ 692.1 816.9Plant under Construction b/ 156.6 161.9

848.7 978.8Investments 0.3 0.3Current Assets

Cash 7.1 16.1Receivables 46.0 55.9Inventory 79.7 83.6Other 38.3 23.3

171.1 179.0Total Assets 1,020.0 1,158.1

Equity and LiabilitiesEquity 702.0 779.6Long-term Debt 161.1 186.5Current Liabilities 97.8 121.7Other Liabilities 59.1 70.3Total Equity and Liabilities 1,020.0 1,158.1

Current Ratio 1.5 1.3Accounts Receivable (Months) 6.4 7.2Debt Equity Ratio 19/81 19/81

a/' Based on revalued assets.hi Includes local costs of the Malka Wakana hydroelectric project.

Tariffs

6.06 Prior to the recent tariff increase approved by the Government(para. 6.08), electricity tariffs, which were put into effect in October1978 for EELPA and in April 1974 for the Eritrea region, were neitheradequate to provide sufficient funds to meet EELPA's requirements foroperating expenses, debt service and normal capital expenditures, nor tomeet the rate of return covenant of Loan 596-ET. In August 1983, Coopers &Lybrand Associates completed for EELPA a tariff study based on long-runmarginal costs which proposed major changes in tariff structure from adeclining-block tariff to the use of time-of-day peak/off-peak rates (Annex6.5). However, the study was based on an excessively optimistic loadforecast and a correspondingly large capital investment program and itsconclusions and recommendations will have to be updated (para. 6.07).

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6.07 EELPA needs to establish an in-house capability to prepare tariffstudies, including the analysis of economic costs of supplying electricityto the various consumer categories in different regions. The TechnicalAssistance Program for EELPA (paras. 3.18 and 5.07(f)) includes theappointment of an engineer/economist who would assist EELPA in analyzinglong-term power sector expansion planning and in the determination oflong-run marginal costs and the preparation of tariff studies. In viewthat the Coopers & Lybrand tariff study has become outdated, (para. 6.06)EELPA will review the conclusions of the study with particular emphasis ontariff structure. Duriiig negotiations, agreement was reached that EELPAshall review periodically the adequacy or appropriateness of its tariffstructure and furnish to IDA for its review and comment any plan of actionprior to its implementation.

6.08 On March 13, 1986, the Government approved a tariff increase of75% which would raise the average tariff per kWh from B 0.122 to B 0.213(from US$0.059 to US$0.103 per kWh). This rather high tariff level isrequired because of the high operating costs in the Eritrea region and inthe EELPA SCS, and because of the large capital investments in the periodFY87-FY92. The new electricity tariffs which will be implemented no laterthan July 8, 1986 are adequate to provide sufficient funds to meet EELPA'srequirements for operating expenses aad debt service and contribute areasonable amount towards it capital expenditures. An estimate of theeconomic cost of power has been derived based on the PSIP (para. 5.01 andpara. 7.03), as an indication of dhe appropriateness of tariff level. Suchaverage economic cost is estimated at 0.22 B/kWh expressed in end-1984price level (0.243/kWh in mid-1986 price level), which is slightly higherthan the average financial yield from tariffs after the recently approvedincrease.

Future Financial Position and Oerations

6.09 The projected financial statements of EELPA for FY86 through FY92together with notes and assumptions used in these statements are shown inAnnexes 6.1 through 6.4. Projected balance sheets for the years endingJuly 7, 1986 through 1992 show that the current ratio during thiese yearsvaries between 1.2 and 1.5. The debt/equity ratio is projected to increasefrom 20/80 for FY86 to 36/64 for FY92. These ratios are within accepteblelimits.

6.10 After the rather large recent tariff increase of 75% (para.6.08), it is estimated that EELPA would not require further tariffincreases until 1989 to meet all its financial requirements. Such tariffincreases, based on projected costs and sales, are estimated at 19% in July1989, 16% in July 1990 and 16% in July 1991. These increases are needed inpart to finance the substantial requirements of local expenditures ofEELPA's construction program and for the increasing fund requirements forpayment of capital charges to the Governme't. If these tariff increasesare implemented, electricity tariffs in real terms at the beginning ofFY92, would be slightly higher than the level in mid 1986.

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6.11 With these tariff revisions (para. 6.10), EELPA is expected togenerate internally sufficient funds to finance (after operating expenses,debt service and working capital requirements have been met) about 15X ofits investment program during FY87-89 and at least 25% thereafter. EELPA'sfinancial performance would be satisfactory for years FY87-92 based on itsprojected operations, tariff levels, sales and costs, with debt servicecoverage varying between 1.6 and 2.3 times and the working ratio decreasingfrom 0.63 to 0.55. Given the characteristics of EELPA's expansion program,to link funds generation to a stable rate of return would lead to highertariff increases than needed which would produce considerable cashaccumulation when large assets are incorporated into the rate base. Underthe proposed credit, EELPA's future financial performance would be linkedto appropriate cash-generation levels which would provide a more realisticindication for tariff increases needed and to plan investments. Inconsequence, the rate of return covenant established under Loan AgreementNo. 596-ET for the Finchaa Hydroelectric Project has been replaced by acash-generation covenant. During negotiations agreement was reached that(i) EELPA shall produce funds from internal sources equivalent to not lessthan 15% for FY88, 20Z for FY89 and 25% thereafter of EELPA's averageannual capital expenditures incurred or expected to be incurred fcr threeyears, comprising the fiscal year in question, and the ones immediatelypreceding and following such fiscal year; (1i) each fiscal year, beforeMarch 31, EELPA and the Government shall review with IDA whether EELPAwould meet the requirements set out in (i) in respect of such fiscal yearand the next following fiscal year; and (iii) in the event such reviewshows that the requirement set out in (i) will not be met, EELPA and theGovernment shall promptly take all necessary measures, includingadjustments to tariffs, in order to meet such requirements.

Proposed Financing Plan

6.12 A detailed funds flow statement for EELPA is shown in Annex 6.2.A summary financing plan for FY87-FY90 is included in Table 6.3.

6.13 During the project period FY87-FY90, EELPA's construction programis expected to cost US$507.4 million equivalent (B 1,050.3 million),including interest during construction of US$22.1 million (B 45.7 million)and duties and taxes of US$24.4 million (B 50.4 million). The proposedproject would represent about 13%, US$72.5 million equivalent(B 150.1 million), of EELPA's total requirements during FY87-FY90.

6.14 Of the total funds required by EELPA for the period FY87-FY90,about 55% will be financed from borrowings, 20% will be financed frominternal cash generation after covering debt service and capital charges,19% 6/ would be financed by grants from the Government, about 1% would befinanced by consumers' deposits, and the remaining 5% by deferment ofcapital charges to the Government (Annex 6.4, para. 7).

6/ Foreign-exchange cost expenditures by the Government on Malka Wakanaprior to FY87 are assumed to be transferred to EELPA that year asGovernment grants. The local-cost expenditures on Malka Wakana priorto FY87 are shown in EELPA's accounts under work-in-progress andgovernment grants for FY83-FY86, respectively.

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Table 6.3EELPA - Su"mary of Sources and Application of Funds FY87-FY9O

Birr US$ XApplication of Funds ---- Million--Construction Expenditures

Proposed Project a/ 122.6 59.2 11Generation 213.2 103.0 19Transmission 282.4 136.4 25other Ongoing and Future Works 122.8 59.3 11Duties and Taxes - Project 13.0 6.3 1

- Other Works 37.4 18.1 3Total 791.4 382.3 70

IDC - Project 14.5 7.0 1Other 31.2 15.1 3

Total IDC 45.7 22.1 4

Transfer of Malka Wakana b/ 213.2 103.0 18Total Construction ExpendTtures 1,050.3 507.T4 Working Capital Increase 29.7 14.3 3Capital Charge 67.0 32.4 5

Total Requirements 1,147.0 554.1 100

Sources of FundsInternal Generation 430.5 208.0 38Less: Debt Service 181.4 87.6 16

Capital Charges 25.3 12.2 2Net Internal Generation 223.8 108.2 20

Borrowings 636.9 307.6 55Grants - Transfer of Malka Wakana b/ 213.2 103.0 19Deferred Liabilities 67.0 32.4 5Consumers' Deposit 6.1 2.9 1

Total Sources 1,147.0 554.1 100

a/ Excludes B 0.4 million (US$0.2 million) and B 3.4 willion (US$1.7million) expended in FY86 and FY91, respectively.

b/ Foreign-exchange cost expended by the Government on N4alka Wakana priorto FY87 are assumed to be transferred to EELPA that year as Govermentgrants. The local-cost expenditures on Malka Wakana prior to FY87 areshown in iELPA's accounts under work-in-progress and government grantsfor FY83-86, respectively.

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VII. ECONOMIC ANALYSIS

Electric Power

Average Incremental Costs (AIC)

7.01 At present it is not possible to estimate the long-run marginalcosts for electricity in Ethiopia because a long-term least-cost powerdevelopment program has not been prepared. Therefore, the AIC of theongoing and projected total investment program between FY85 and FY92 wereestimated instead. These include all incremental generation, transmission,distribution and customer-related costs. Separate AIC estimates were madefor the EELPA system as a whole, including all isolated load centers andfor the main EELPA ICS by itself.

7.02 To provide an approximate measure of the cost penalty of over-investment, the potential AIC of the current expansion program was alsoestimated. The assumption underlying this estimate is that all surplusenergy produced by the present program could be sold. This also provides ameasure of the potential benefits from selling such surpluses elsewhere(e.g. exports).

7.03 Details of the underlying analyses of AIC are shown inAnnex 7.1. The results are as follows:

Average Incremental CostBirr/kWh (US$/kWh) at llZ Discount Rate

Projected PoteutialEELPA Total System 0.22 (0.11) 0.16 (0.08)EELPA ICS 0.19 (0.09) 0.14 (0.07)

Return on Power Investment

7.04 The calculation of the Internal Economic Rate of Return (IERR) ofthe project was based on the overall power investment program between FY85and FY92. Two rates were calculated: one for the EELPA system as a whole,including all isolated load centers, and the other for the main EELPA ICSonly.

7.05 The measure of benefits used was projected total revenues inconstant terms, based on projected tariffs (para 6.10). This under-estimates actual benefits, because it excludes the evaluation of anycons'mer surplus. Costs were based on the projected costs of the FY85 toFY92 system expansion program in constant end-1984 prices, includingphysical contingencies, with foreign costs shadow-priced at a rate of 1.33times the present exchange rate. No allowance was made for shadow-pricinglocal labor, because most of the work has to be carried out by skilledlabor which is in short supply.

7.06 The IERR for the EELPA system as a whole is 7%, while for theEELPA ICS alone it is 9%. These rates which are on the low side, but stillare acceptable, reflect the result of overinvestment in capacity. Thelower rate for the EELPA system as a whole reflects in addition the highcosts of operating the approximately 60 small isolated systems, includingthe Eritrea Region Systems.

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7.07 For illustrative purposes, the potential IERR's for both systemswere also calculated. These are based on the assumption that all surplusenergy could bo sold at average tariff levels. For the total EELPA Systemthis potential IERR is 12% while for the EELPA ICS It is 13%. Details ofthe underlying analyses have been shown in Annex 7.2.

Economic Analysis of the 66 kV Transmission Line Extensions

7.08 The proposed 66 kV transmission line from Sabatta to Wolliso hasbeen chosen to provide an indication of the likely economic benefits of atypical 66 kV line extension. These are low-voltage, wooden-pole transmis-sion links of which three are to be financed under the project. They allare designed to connect existing high-cost, diesel-powered load centerswith the low-cost EELPA interconnected system. All of them would belocally designed and installed by EELPA.

7.09 The alternatives selected for the least cost analysis are theimmediate construction of a transmission link, or the continued operationand expansion of diesel generation until such time when a transmission linebecomes more economical. The problem therefore is one of optimal timingfor the commissioning of the transmission line. A year by year approachfor replacing diesel generation by a transmission line was used for theanalysis, covering the years from FY88 to FY2000.

7.10 The results clearly show that installing the line by 1988 is theleast-cost solution for supplying electricity to the Wolliso region.Details of the analysis are shown in Annex 7.3.

Present Value of Total Costs

Transmission Line Discount Rate 11ZCommissioning Year Birr million (USS million)

1988 7.6 (3.7)1991 9.2 (4.4)1995 11.3 (5.5)2000 13.3 (6.4)Diesel only 19.3 (9.3)

Internal Economic Rate of Return

7.11 The IERR for the Sabatto-Wolliso line was estimated by measuringthe cost differential between the alternatives of completing the trans-mission line in 1988 or in later years (Annex 7.4). The years 1991 and1995 were chosen as representative years for switching from diesel genera-tion to a transmission interconnection. This methodology is appropriate touse in this case because the Government and EELPA are committed to thecontinuing supply of electricity in and around Wolliso at average, country-wide tariff levels. The resulting IERs are 32% for a line completion by1988 instead of 1991, and 33% if line completion were delayed until 1995.

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Criteria for Distribution Rehabilitation

7.12 The criteria for distribution rehabilitation would be based on:

(i) the need to replace damaged physical components, as needed,including insulators, poles, conductors and hardware, trans-formers, and other equipment and materials to bring existinginstallation to safe and reliable condition; and

(ii) the least-cost alternatives to ensure quality and relia-bility of service. Alternatives to be analyzed would includereconductoring, adding capacitors, increasing voltage levels,and, where appropriate, loss reduction taking into account AIC ofcapacity and energy.

Initially, for most urgent cases, the criteria would be based on coordi-nated recommendations from the technical assistance staff and theconsultants for the Distribution Planning Study. As the study progresses,the criteria and priorities wouid be based on the conclusions of the studyand the recommendations for each case would be obtained utilizing the newplanning methods.

Household Energy Production Projects

Introduction

7.13 The various household energy production projects are pilotprojects. They are designed to prove the technical, financial and economicfeasibility of using readily available, but presently was;ed or under-utilized biomass resources, by converting them into useful fuels and movingthem to markets. Although pilot projects, they are designed on a largeenough scale to capture most available economies of scale in production,transport and distribution.

7.14 While the technologies to be utilized are well proven elsewhere,they are new to Ethiopia. This means that they have to face the usualstart-up costs of introducing new technologies in production and marketing,and the added costs of close supervision, monitoring, training, marketing,etc. For this reason, the economic analysis can only be indicative at thistime. Nevertheless, the promise of very substantial rates of return ishigh, if the feasibility of the technical packages can be proven in theEthiopian context.

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Charcoal Projects

7.15 The charcoal pilot projects are designed to produce charcoal atrates of 15,000 tons per year, utilizing waste wood from land clearingoperations. The potential economic benefits can be measured by comparingthe estimated costs of supplying lump charcoal from the projects with thecosts of alternative fuel available in the Addis Ababa market. Thebreakeven retail price for charcoal measured in terms of the economic costsof kerosene used for household cooking is B 4541t. In terms of prevailingfree market prices for charcoal, it is B 625/t. The results of theindicative economic analysis are as follows:

Alternative Economic MarketProject Costs Fuel Value of Charcoal IERR

(Birr/ton)1. Excluding T.A. costs kerosene 454 2522. Including T.A. costs kerosene 454 16%3. As under #2, but

capital costs up 20% kerosene 454 11%4. As unde- #3 charcoal at 625 30%

current market prices

These indicative rates are very attractive and fully support the under-taking of the charcoal pilot projects. More detailed data have beenprovided in Annex 7.5.

Crop Residue Briquettes

7.16 Briquetting crop residues from large farm operations is notcommon and it has never been done at the scale envisaged for Ethiopia.Nevertheless, the components of the technical packages to be used are allcommercially available and proven. The economic justification of theproposed crop residue briquetting pilot projects is provided in Annex 7.6.It is analyzed in terms of the current economic costs of alternative fuelsin the Addis Ababa market. The results are as follows:

Economic Cost of Energy As a Percent of:Useful Eneru Kerosene Firewood

Fuel !Birr OMW) Costs CostsCfee Residue Briquettes 2.80 -6- 22Bagasse Briquettes 2.47 69 27Cotton Residue Briquettes 3.47 69 27Cereal Stover Briquettes 3.53 70 27

Comparative Fuel Costs Bt/MJKerosene 5.02Propane 7.72Firewood (market price) 13.00

Used as industrial fuels, the various crop residue briquettes promise to beas competitive as they are as household fuels (Annex 7.6). Overall, theanalysis shows that developing these new sources of fuel could be highlyadvantageous. Therefore, pilot projects proposed under the project arefully justified.

- 46 -

VIII. AGREEMENTS REACHED AND RECOWEENDATION

Agreements

8.01 During negotiations, agreements were reached by IDA, theGovernment and EELPA that:

Legal DocumentAgreement SAR para. Section

(a) GOE shall onlend to EELPA USS45.5 million 5.16 CA 3.01 (c)equivalent at 9% repayable in 20 yearsincluding 5 years of grace to finance partof the cost of the power components of theproject.

(b) GOE shall onlend to EPC US$983,000 5.16 CA 3.OL (d)equivalent at 9% repayable in 5 yearsincluding 2 years of grace, to finance theforeign exchange cost of the petroleumstudies of the project.

'e) GOE shall take all measures necessary to 6.04 CA 3.04ensure that EELPA shall timely have at itsdisposal sufficient funds to meet thelocal currency requirements of EELPA'sinvestment program.

(d) GOE shall send to IDA not later than six 3.24 CA 4.01months after the end of each fiscal yearaudited accounts on the execution of theenergy components and on the specialaccounts.

(e) GOE shall take or cause to be taken all 6.1L CA 4.02measures required to enable EELPA toadjust its tariffs and meet itsobligations under PA.

(f) GOE shalL establish appropriate marketing 4.10 Supplementalarrangements for the fuels produced under Letterthe project.

(g) GOE and EELPA agree on detailed 2.09 Supplementalcomposition of Power Subsector Investment LetterProgram for period FY86-92 and that suchprogram shall be reviewed and updatedannually by March 31.

(h) EELPA shall prior to December 31, 1986 3.18 PA 2.06 (a)prepare and furnish to IDA for its review andand comments a proposed agreement with UAA PA 2.06 (b)for carrying part of the project andimpLement such component in a mannertaking into account IDA's comments.

- 47 -

Legal DocumentAgreement SAR para. Section

(i) EELPA shall complete by October 31, 1987 3.18 PA 3.01 (b)an Organizational Improvement Study and andafter discussing the conclusion of such PA 3.01 (c)study with IDA, Implement a Plan of Actionsatisfact_ry to IDA.

(j) EELPA shall have reduced its accouuts 3.10 PA 3.04receivable to no more than 90 days ofsales by July 7, 1987.

(k) EELPA shall continue to use qualified 3.13 PA 4.01auditors and improve the closing of itsbooks following a schedule agreed withIDA.

(1) EELPA shall produce funds from internal 6.11 PA 4.02 (a)sources equivalent to not less than 15Zfor FY88, 20% for FY89 and 25% thereafterof EELPA's average annual capitalespenditures.

(m) EELPA shall review annually by March 31 6.11 PA 4.02 (b)whether it would meet its cash generation andrequirements and take any measures needed PA 4.02 (c)including without limitation adjustment ofits tariffs in order to meet suchrequirements.

(n) EELPA shall from time to time review the 6.07 PA 4.02 (e)adequacy and appropriateness of its tariffstructure and furnish any proposed plan ofaction to implement changes in suchstructure to IDA for its review andcomments.

(o) EELPA shall not incur any debt without 6.05 PA 4.03IDA's agreement unless the 12 month netrevenue prior to incurring the new debtcovers at least 1.5 times future maximumdebt service including the new debt.

(p) EELPA shall not until the completion of 2.09 PA 4.4the project undertake any major projects,which shall exceed 1.5% of EELPA's grossrevalued assets in operation and which isnot included in the PSIP agreed with GOE,unless IDA is satisfied that such projectsare economically and financially viable.

- 48 -

Legal DocumentAgreement SAR para. Section

(q) EELPA say acquire major electricity 5.01 PA 4.05projects currently under execution by GOE(Kalka Wakana and Gilgel Gibe) as long asthe terms and conditions of theacquisition do not prevent or interferewith the performance of EELPA of itsobligations under the PA. Prior to anysuch proposed transfer, EELPA shall giveIDA an cpportunity to comment on theproposed terms and conditiuns.

Conditions of Effectiveness

8.02 Following conditions of effectiveness were agreed:

(a) The Subsidiary Loan Agreements between GOE i5.16 |CA 6.01 (a)and EEPA and between GOE and EPC have I

been executed.i

(b) GOE has established PMU at MME. |3.23 CA 6.01 (b)

i^ EELPA has employed consultants for 5.10 CA 6.01 (c)carrying part (f) (i) of the project PA 2.02(para. 5.07) and has appointed a Project PA 2.02 (b)Manager.

Recommendation

8.03 With the above agreements, the Project is suitable for an IDAcredit of SDR 53.7 million, equivalent to US$62 million, to be lent toEthiopia for a term of 50 years including a period of 10 years grace.

- 49 -

ANNEX 1. 1

ETHIOPIAENERGY PROJECT

inergy Sector AgenciesOrganziation Choat

Mhies& Ef*eWg

l~~~~ l/ I 1%

_ , I r

s ~~/ I

Di / NOC B h

Div.on on om wuffet-op.

NaftResouiCes Scienc&MbL of Ag- Nechobogy

(etVFAWCDA) C/ ji f Comation

ZJ --- Meed ENEC

(i~eIy convened & 0rorcgement undef rvoen)

- fonnob Depar1ment ShuLctre rid Dorc-27183

- 50 -

AN=C 1.2

SmTDEIA

EMM P wDE

Historic and Forecast FinaL Faeg CoED t G L

EYinal Fm COwiqti ( a in 1982

(toe thuazxs)

al t blwj Eet a/ (S) 1tl b/ (Z b

Indstry 30 30 35 102 167 2.1 167 1.71Taosport 349 349 4I4 349 3.6hgrcultture 1 31 32 0.4 32 0.3luielods 7,402 9,209 16 18 7,436 92.8 9,243 94.1Cooerce/Gbyerzmnt _ 11 21 32 0.4 32 0.3

TotaL 7,432 9,239 63 521 8,016 100.0 9,823 100.0Old Share (Z) 92.7 - 0.8 6.5 100.0 100.0N Sare (Z) 94.1 0.6 5.3 10.0

Final Eargy Camdgim 1992

IndtIstry 104 104 98 198 400 3.7 400 3.0fansport 23 23 - 576 599 5.5 599 4.5Ar1gottue - 2 177 179 1.6 179 1.4buabids 9,570 11,952 42 73 9,685 88.8 12,067 90.83ouuarc/Goverment _ 13 29 42 0.4 42 0.3

Total. 9,697 12,079 155 1,053 10,905 100.0 13,287 100.0OLd ShEe (Z) 88.9 - 1.4 9.7 100.0New gSae (Z) 90.9 1.2 7.9 100.0

a/ Based al 1982 popelaca etimte of 32.0 iUlon.

b/ lBased an 1982 pciati mte revised ,z reer nte n to abma 39.7 uilll in 1982 an52.4 mrII uf an in 1992.

- 51 -

ANNEX 2.1

ETHIOPM

ENERGY PROJECT

Generating Capacity Existing in Ethiopia in 1985

No. of InstalledSystem P ant Tye Year Units Capcit

Main ICS Koka H 1960 3 43.2Awash II H 1966 2 32.0Awash III H 1971 2 32.0Finchas H 1974 3 100.0Alemays D - 2 2.0Dire Dawa D - 2 4.5

=4 213.7

SCS (excluding Eritrea) 40 Plants (D 1962-82 122 26.9(H NA-1983 8 10.3

130 37.2

Eritrea Region ICS Belesa (D 3 15.0(T 1966-84 2 15.0

Kagnew D 1966 4 6.0Gerhar D 1958-73 5 9.4Gagirat D 1979 10 5.8

24 51.2

Eritrea Region SCS 15 Plants D N.A. 20 8.7

Privately OwnedIsolated System 68 Plants (D N.A. 74 6.6

(H N.A. 1 0.175 6.7

Total Country 133 Plants 259 317.5

a! H: Hydro; D: Diesel; T: Thermal (Steam)

ETWIOPIAENERGYPROJECT

Eth4pian Ebctc Ught cnd Pvw Aufhadt*Owniaton Chad

|cc , d |Gd~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U

hb~~~~~OW

-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~9

[3~~~~~~~~~~~~~~~~~~~~~~~~~~. &1* oMicnE1E

SMS"f q"nm"IW 3 'gn

-J~ ~ ~ ~ j-cm"&~I

cAnftd~~~~~~~~~~~~~~~~~~W M 1

- 53 -

iMuM 3.2

ETHIOPIA

Ethiopia Electric Light & Power Authority(EELPA)

Energy Proj *et

Selected Perfornue Indicators

Description FY84 FY8s PY86 7187 F88 F89 FY90 7Y91 FY92-Actual- proposed Targets

Technical a/

Installed Dependable capacity, (HW) 204 204 204 204 354 354 354 504 504Peak demand, (NU) / 120.5 158.8 176.0 183.5 192.3 219.7 235.7 246.6 272.3Capacity Surplus !/, (HW) 57.7 42.4 25.1 17.6 143.3 126.7 110.7 249.8 224.1Available Generation. (GWh) 1000.0 1200.0 1180.0 1160.0 1580.0 1560.0 1560.0 2230.0 2230.0Generation required (GWh) C/ 619.2 631.5 757.8 809.2 870.8 927.3 1034.1 1110.9 1239.1Surplus. (GWh) / 380.8 568.9 422.2 350.8 709.2 632.7 525.9 1119.1 990.9System losses, (Glh) bl 76.1 106.0 124.3 132.6 143.9 120.8 131.3 139.0 151.7System losses, (Z) b/ 12.3 16.8 16.4 16.4 16.4 13.0 12.7 12.5 12.2Sales, (GWh) */ - 597.1 592.4 574.1 807.7 884.0 1029.8 1126.2 1195.3 1310.7Total EEL-PA Sales (GWIb) SJ 779.9 774.4 931.2 1000.5 1089.4 1268.4 1376.7 1460.5 1591.3

Institutional

No. of consumers (1000) 328 344 363 383 404 425 447 471 496TotaL population (min.) / 42.0 43.1 44.3 45.5 46.7 48.0 49.3 50.6 52.0Per capita consumption (kWh) 18.6 18.0 21.0 22.0 23.3 26.4 27.9 28.9 30.6Sales/Consumer (kWh) 2.327 2,689 2,906 2,907 2,939 3,230 3,343 3,313 3,357No. of consumer/emlqoyee 48 50 52 54 57 59 61 64 66

Employee breakdownProfessionals 138 140 145 150 155 180j/ 205 230 255

(i}) Supervisors 258 260 265 270 275 280 285 290 295(iii) Skilled 1,940 1,950 1,998 2,058 2.120 2.183 2,249 2.316 2,385(iv) Semi-skilled 2,097 2,100 2,100 2,100 2,100 2,100 2,100 2,100 2,100(v) Unskilled 2 467 2 470 2 470 2 470 2 470 2 470 2 470 2 470 2 470

Total Employees 6 900 ti 7LW 7Ui 7 39U

Financial

Avg. operating cost (Birr c/kWh) 8/ 11.7 10.9 9.3 8.8 8.4 7.7 7.1 6.7 6.3Working ratio 0.97 0.90 0.91 0.63 0.59 0.59 0.57 0.56 0.55Net internal cash/construction (2) -6.8 10.3 -18.8 21.5 10.7 13.1 39.3 25.7 30.9Taventories as X of grossfixed assets 6.8 6.2 3.1 3.0 3.0 3.0 3.0 3.0 3.0Debt service coverage 0.4 0.7 0.6 2.1 2.0 1.6 2.0 2.2 2.3Acets. receivable/revenues 192 216 169 90 90 90 90 90 90(days)

Accounts receivable aging listto be submitted annually andshowing amounts due between0-90, 91-120 days and over120 days

a/ Main EELPF ICS only, except if indicated otherwise.b/ Includes boiler loads.c/ Excluding boiler loads.d/ Includes main ICS, SCS and total Ericrea region sales./ as"ed on latest population count of May 1984 and annual growth rate of 2.72.

f Larger increases as of FY89 expected as a result of the OMOP program./ Excluding corporate taxes and depreciation. E-xpressed in 1989 price level.

- 54 -

ANNEX 3.3Page 1 of 2

ETHIOPIA

ENERGY PROJECT

Organization and Functions of the PNLJ

The main functions of the PMU would include the following:

(i) to be the counterpart for IDA, cofinancing agencies, consultantsand contractors;

(ii) to coordinate and supervise draw down of the IDA funds and otherfunds allocated for the execution of the energy components, andto keep the accounts for the handlirg of such funds;

(iii) to supervise the execution by the PIUs of the energy componentsand to manage ti.. monitoring and execution of pilot-projectcontract;

(iv) to submit the requests for disbursements to IDA and the variouscofinancing agencies;

(v) to be a party, jointly with the representative of each Ministryand Agency involved, to contracts to be entered into with respectto the execution of the respective energy components;

(vi) to keep appropriate files for all energy components;

(vii) to coordinate the preparation by the PIU of their respectiveprogress reports for the energy components for IDA and thevarious cofinancing agencies;

(viii) to carry out the same activities as in (vii) but with respect tothe preparation of a project Completion report once disbursementsfor the energy components have been completed; and

(ix) to handle official correspondence in respect of the energycomponents with IDA, cofinancing agencies, consultants,contractors and government agencies.

- 55 -

ANNEX 3.3Page 2 of 2

E

LU"a L z1 * 0 9

LU

C

i -a ~~~J~I U! I 1 E.

ikgh + W I IX

S~~~~~~~~~~~~~ 0 0i

- 56 -

ANNEX 4.1

ETHIOPIA

ENERGY PROJECT

EELPA ICS

Assumptions for Load Forecast

The main assumptions for the load forecast discussed with EELPAand the Government are that:

1) beyond 1986 only one half of the presently planned increment ofnew industrial loads will materialize;

2) the historic demand for existing large industry will grow throughexpansion and higher capacity utilization at no greater than 1.0%per annum;

3) electrification of cooking will be limited by the capacity of thedistribution system to about 7% until 1987 and will grow beyondthat date at 10% per annum;

4) system losses will decline from the present 15.2% to 10.4% ofgeneration over the 1985-89 period due to the program oftransmission and distribution rehabilitation being implemented,partly through the Power III project;

5) interconnection of the diesel-fueled self-contained power systemto the EELPA ICS is in accordance with the agreed 66 kVtransmission extension program;

6) commercial sector consumption of electricity will grow no morethan 7% per annum; and

7) residential general consumption will grow at 5% p.a.

D E

E1PA 13 Salsd Cwt1on., A:tol and Project., MD-95

m IC9 1980 1981 1982 1983 1964 1985 1986 1967 1968 19g 1990 1991 1992 1993 1994 199i TI

lMtitl a1neral 104.90 112.40 127.30 129.C0 138.03 142.67 165.80 174.74 18.70 20.03 210.59 226.15 242.40 259.85 278.57 298.95 7.611actritc ddm 0.00 0.00 8.0O 19.00 23.10 24.72 29.27 31.44 33.95 37.70 41.58 38.84 42.J0 47.17 51.98 55.79 8.48

S9.-btal 104.90 112.40 1335.30 4.1OD 61.1 167.33 -i. 2618 2.6 237.73 232.18 264.99- 5.1 307.02 330.55 354.74 7.0

ardel (St.UIAht, r.,Oow t) 43.10 44.90 57.40 57.50 59.50 59.46 68.44 71.45 74.99 78.74 82.10 85.69 89.28 93.02 96.93 101.10 5.45

1niutrdL9ul IrKiAtry 29.70 36.00 43.70 43.80 45.3D 55.62 57.44 61.69 66.62 71.97 77.21 82.91 89.87 95.27 102.13 109.61 7.02dating larum Tmtry 220.00 220.00 228.00 228.40 238.00 204.13 230.00 232.30 234.62 236.97 239.34 241.73 244.15 246.59 249.06 251.55 2.11

Now Imp Inrdutry O.OD 0.00 0.00 8.00 43.00 46.50 96.90 120.57 146.70 201.42 272.32 316.92 400.15 480.16 441.16 463.22 25.84silarO, 0.00 O. Q 0.00 46.39 50.16 59.35 106.21 113.52 138.43 203.01 203.01 23.01 803.01 203.01 203.01 203.01 13.0

SMtotWl: rp Iutry 20.0D 220.00 228.00 236.40 6100 3 0.63 3690 32.67 11.32 638.39 511.66 55.66 64.30 666.75 690.22 714.7 11.0 &ftotal: BoilmrsAmp Indstry 220.00 220.00 228.00 282.79 331.16 30.98 433.11 46.39 519.75 641.40 714.67 761.67 847.31 69.76 893.23 917.75 11.47Subtotal 249.70 256.0 271.70 326.59 376.46 365.60 490.55 530.08 586.37 713.37 791.8S 844.58 936.19 965.03 995.37 IQ7.39 10.89

lditti to Us fro SW 9.90 0.0 0.00 0.0o O.OD 9.77 30,97 33,88 39,36 45,27 48.92 52.92 57.27 62.02 67.20 73.20 22.31

Tbtal MA 1CW withtt IbUretSal" 407.60 413.30 464.40 485.70 546,93 533.09 647.85 692.19 745.57 826.82 923.15 992.25 1107.66 1162.06 1219.83 1230.22 9.16

aMeS 52.61 53.71 62.60 65.71 72.26 97.95 109.96 116.97 125.23 10D.46 110.99 118.68 131.43 13.17 145.32 170 4.54Total %quired Oratlnn 460.21 467.01 527.00 551.41 619.19 631.05 757.81 809.16 870.8D 927.29 1034.14 1110.93 1239.09 1300.23 M165.16 1432.92 8.55Feak Ibd 87.27 91.85 105.01 105.21 111.78 127.10 144,40 151.90 160.74 177.31 193.33 234.18 219.91 242.37 255.66 269.47 7.80

Tbtal MIA IC; ith BilmSal"s 407,60 413.30 464.40 532.09 597.09 592.44 754.06 807.71 884.01 I029.84 1126.16 1195.26 1310.67 1365.07 1422.85 1483.24 9.6ltom 52.61 53.71 62.60 69.19 76.02 105.97 124.30 132.57 143.92 120.76 131.29 138.96 151.74 158.47 165.62 173.00 5.02Total lSaquired O rarim 460.21 467.01 527.00 601.26 673.11 698.41 878,36 940.27 1027.92 1150.60 57.45 1334.24 1462.41 1323.54 1.47 1656.24 9.02 NFlas Id 87,27 91.85 105,01 112.87 130.49 15S.90 175,99 183.49 192.33 219.70 235.72 246.57 272.30 284,76 298.05 311.86 6.98

Atl*tu o.OGrall IDme as e of Oauratlon 11.4 11.5HA 11.8wg 11.51 11.25S 15.17X 14.15 14.102 14.002 IO.A 10.44S 10.42X 1031 10.402 10.42 10.43 -3.66 '

- E

EFUA IC,Pak. D=A. kcu wi PWJdW Fm-%

19iD 1981 1962 1983 1964 1985 1966 1967 1988 1989 1990 1991 1992 1993 19Y 1995 3s5

Pbsiaidtalauldmtial (mera 34.00 39.8D 41.50 41.60 45.M 46.53 48.66 51.30 54.89 57.61 60.52 64.76 69.29 74.14 79.33 8A.8 5.62Klectdc Omddr (inrrll) 0.0D 0.00 6.10 6.10 5,56 8.06 863 9,23 9.8 10.86 11.95 11.12 12.23 136 14.80 15.84 6.33Sub-TA&l 3.00 W. 39.e 47. 60 Z 47.70 5.W W.5 57.W 6.5 Wff MY 7!W 75. 81.52 87.60 MIT IMO72 5.72

Omuvlu (St.lgCt, kgr., Ovt.) 8.95 9.32 11.91 11.93 12.35 12.34 12.83 13.35 13.88 14.44 15.01 15.62 16.24 16.89 17.57 16.27 3.63

ltarlalBuil 1rdmtcy 5.65 6.85 6.31 8.33 8.62 10.56 9.87 10.57 11,31 12.10 12.91 13.85 14.82 15.85 16.97 15.15 5.03biathg Lu1 lrhtry 35.88 35.88 37.18 37.25 38.81 33.29 37.51 37.88 38.26 38.64 39.03 39.42 39.8 40.21 40.62 41.03 1.92New larp IrAtty o.00 0.00 o.00 o.00 1.40 14.06 19.64 21.83 23.53 33.29 42.70 47.34 64.43 a.65 71.01 74.59 16.35Auers 0.00 0.00 0.00 7.66 18.71 31.71 31.59 31.59 31.59 42.39 42.39 42.39 42.39 42.39 42-3 42.3 2.67

hb-Total: lArp Irztry Wt 3W I 33 Y 17 7.2 5 40.821 rM. 37.18 W271 Zi.7 71.W9 86.76 i045 1U7;1W M 1 11.65 115h61 3.45 Sibtal: BUuI/hsap bAmtry 35.98 35.88 37.18 44.91 58.92 79.06 88.73 91.30 93.38 114.33 124.12 129.15 146.64 150.26 54.04 1580 6.50 a

Sulbotal 41.53 42.73 45.50 53.24 67.54 89.64 96.61 101.87 104.69 126.43 137.07 143.00 161.46 166.11 171.01 176.16 6.33

Addltlom to ICS from SCS 2.8D 0.00 0.00 0.00 0,00 2.23 7.06 7.74 8.99 10.34 11.17 12.08 13.08 14.16 13.34 16.71 2010

Tbtal EeM 1W Ididat DtlMr 87.27 91.85 105.01 105.21 111.78 127.10 144.40 151.90 160.74 177.31 193.33 2D.18 229.91 242.37 255.66 269.47 7.07

Total EUA UWS Wth I,ilA.Si 87.27 91.85 105.01 112.87 130.49 158.80 175.99 183.49 192.33 219.70 235.72 246.57 272.30 264.76 29805 311.66 6.33

*LPA ICS EnergD mi Cap:ity aw.. V!8-95

1964 1965 1986 1987 1988 1989 1990 1991 9m 1993 199 1995Fim Emram SuPly

PlantFinchia 540.00 540.00 540.00 540.00 540.00 540.00 540.00 540.00 540.00 540.00 540.00 540.00IKok& 118.00 118.00 118.00 118.00 118.00 118.00 118.00 118.00 118.00 118.00 118.00 118.00Awah 11 169.00 169.00 169.00 169.00 169.00 169.00 169.00 169.00 169.00 169.00 169.00 169.00Ahsh 1II 173.00 173.00 173.00 173.00 173.00 173.00 173.00 173.00 173.00 173.00 173.00 173.00Amarti Diversion 0.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00 200.00wash Irrigation Diversion 0.00 0.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00

Ash Irrigation Diversion 11 0.00 0.00 0.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00AMuh Irrigation Diversion 111 0.00 0.00 0.00 0.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00I4lka Wkans 0.00 0.00 0.00 0.00 440.00 440.00 440.00 440.00 440.00 440.00 440.00 440.00Mh Irrigation Diversion tv 0.00 0.00 0.00 0.00 0.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00 -20.00

Gilgel Gibe 0.00 0.00 0.00 0.00 0.00 0.00 0.00 670.00 670.00 670.00 670.00 670.00

Annual TotaL Firm Energy 1000.00 1200.00 1180.00 1160.00 1580.00 1560.00 1560.00 2230.00 2230.00 2230.00 2230.00 2230.00Required Erergy With boilers 673.11 698.41 878.36 940.27 1027.92 1150.60 1257.45 1334.24 1462.41 1523.54 1586.47 1656.24

Surplue/lkficit 326.89 501.59 301.64 219.73 552.08 409.40 302.55 895.76 767.59 706.46 641.53 573.76Required Energy Without Boilers 619.19 631.05 757.81 809.16 870.80 927.29 1034.14 1110.93 1239.09 1300.23 1365.16 1432.92

SurpluslDeficit 380.81 568.95 422.19 350.84 709.20 632.71 525.86 1119.07 990.91 929.77 864.84 797.08

Depanmble CapacityPl,nt

Fincha IOO.W 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00Kok1 34.50 34.50 34.50 34.50 34.50 34.50 34.50 34.50 34.50 34.50 34.50 34.50Avash II 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00AMsh lII 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00 32.00Kalka Wakana 0.00 0.00 0.00 0.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00 150.00Gilgel Gibe 0.00 0.00 0.00 0.00 0.00 o.ao 0.00 150.00 150.00 150.00 150.00 150.00Alemaya Diesel 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00Dire Dsa' Diesel 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50 3.50

Annual Dependable Capacity 204.00 204.00 204.00 204.00 354.00 354.00 354.00 504.00 504.00 504.00 504.00 504.00Required System Reserve 34.50 34.50 34.50 34.50 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00SysteC Peak D sa d With Boilers 130.49 108.80 175.9 183.49 192.33 219.70 235.72 246.57 272.30 284.76 294.05 311.86 1

cSatem ty sueplus/net W tth ie 39.01 10.70 -6.49 -13." 111.67 24.30 62.27 207.43 251.70 169.27 255.95 142.1.2 19.12 5.24 -3.18 -6.86 31.55 23.81 19.29 41.16 36.05 33.58 30.94 28.20

System Peak Demand Without Boilers 111.78 127.10 144.40 151.90 160.74 177.31 193.33 204.18 229.91 242.37 255.66 269.47Required System Reserve 34.50 34.50 34.50 34.50 So.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00

Capacity Surplus/Deficit: NW 57.72 42.40 25.10 17.60 143.26 126.69 110.67 249.82 226.09 211.63 198.34 184.53X 28.30 20.79 12.31 8.63 40.47 35.79 31.26 49.57 44.46 41.99 39.35 36.61

ETHIOPIA

ENERGY PROJECT

EELPA SCS Actual and Forecast Sales

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Sales Forecast for other than Bahar-Dar Gondar 46.0 49.7 53.7 58.0 62.6 67.6 73,1 78.9 85.2 92.0 99.4Lahar Dar-Gondar Energy Demand - Sales a/ 26.6 30,6 35.2 40.5 73,6 75.1 78.8 82.7 91.3 95.8 100.6

- Losses 3.5 4.0 4,6 5,3 9,6 9.8 10,2 10.7 11.9 12.4 13.1- Generation 30.1 34.6 39.7 45.7 83.2 84.9 89.0 93.4 103.2 106.2 113.7

Losses ao X e' sales assumed as 12.8%TOT SALES 77.6 80.3 89 985 1362 1427 151,9 161,6 176.5 187.8 200,0

Transfers to ICS(other than Bahar Dar/Gondar) 9.8 31.0 33.9 39.4 45.3 48.9 53.0 57.3 62.2 67.2 73.2Transfer of Bahar Dar/Gondar 73.6 75.1 78.8 82.7 91.3 95.8 100.6

Net Sales SCS 75.3 62,8 49,3 55,0 59.1 17,3 18.7 20.1 21.6 23.0 24.8 26,2

Losses b/, 11% of Net Generation 9.3 7.8 6,1 6.8 7.3 2,1 2.3 2.5 2.7 2.8 3.1 3.2Station Use ci, 3.5% of Generation 3.1 2.6 2,0 2.2 2,4 0.7 0.8 0.8 0,9 0.9 1.0 1.1 0

Total SOS Generation (net of transfers to ICS) 87.7 73.2 57,5 64.0 68.8 20.2 21.8 23,4 25,2 26,8 28.9 30.5Total Peak Demand (KW) d/ 182 15,2 11.9 13,3 14.3 4.2 4.5 4.9 5.2 5.6 6,0 6.3

d/ Load factor of 55%

to

ETHIOPIA

ENERGY PROJECT

Eritrea ReAion Interconnectedd SystemActual and Forecast Sales and Generation (G1Wh)

Growth GrowthRate Rate

Consumer Category 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1981-84 85-92

Residential 10,0 10,5 12,8 14,0 15.1 16.2 17.4 18.7 20.1 21.7 22,7 23,9 25.1 8.8 8.2Commercial 8,4 8.8 10,7 11,7 12.6 13,6 14,6 15.7 16.9 18.1 19.0 20.0 21.0 8.7 8.2Small Industry 14.9 15,6 18.9 20.8 22.4 24.1 25,9 27.8 29.9 32.1 33,7 35.4 37.2 8.7 8.2Large Industry 49.4 51,9 62.8 69.0 74,2 77,9 81,8 85,9 90.2 94.7 99.5 104.4 109.7 8.7 7.0Street Lighting 2.1 2.2 2.6 2,8 3.0 3.1 3.2 3,3 3.4 3.5 3.6 3.7 3.8 7.8 5.0

Total Sales 84.8 89.0 107.7 1185 1277 1348 14O9 1514 160,5 170.1 178. : i9ET lT. 7,5

Loses 11.7 12,1 17.5 16,2 16.5 17,5 17.7 17,8 17.8 18.9 19.8 20.8 21.9 8.4 5.5Net Generation 96.5 101,2 125.2 134M6 143,8 152,4 160.5 169.2 178.3 189.0 198.4 208,2 218.5 8,7 7.3

Station Use 3.5 3.7 4.5 4.9 5.2 5.5 5.8 6.1 6.5 6.9 7.2 7,6 7.9 8,7 7.3Gross Generation 100.0 104.9 129.8 139.5 149.0 157,9 166.4 175,3 184,8 195.8 205.6 215.7 226.5 8.7 7.3

Peak Demand 20,4 21,0 25.9 27,9 29.8 31.7 33.4 35,4 37,4 39,7 41,7 43.8 45.9 8.1 7.4

Assumptions

Growth Rate Z 5.0 21,0 10,0 7.4 5.9 6.0 6.0 6,0 6.0 5.0 5.0 5.0Residential 5.0 21.5 10.0 7.5 7.5 7.5 7,5 7.5 7.5 5.0 5.0 5.0Commercial 5.0 21.0 10,0 7,5 7.5 7.5 7.5 7.5 7.5 5.0 5.0 5.0Small Industry 5.0 21.0 10,0 7,5 7,5 7.5 7,5 7,5 7,5 5.0 5.0 5.0Large Industry 5.0 21.0 10.0 7.5 5.0 5.0 5.0 5.0 5,0 5.0 5.0 50,Street Lighting 5,0 17.0 10.0 5.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0Special Tariff 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.O 1.0 1.O 1.0 1.0

Losses: 2 of Net Generation 12.0 14.0 12.0 11.5 11.5 11.0 10.5 10.0 10,0 10.0 10.0 10.0Station Use: % of Gross Generation 3.5 3.5 3.5 3.5 3.5 3.5 3 3.5 3,5 3.5 3.5 3.5Load Factor 1 57.1 57.1 57.1 57,1 56.9 56.8 56,6 56.4 56.3 56.3 56.3 56.3Residential 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20M0 20.0 20.0 20.0 20.0Commercial 40.0 40.0 40,0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.' 40.0Small Industrial 50.0 50.0 50.0 SO50 50.0 50.0 50,0 50.0 50.0 50.0 50.i 50.0Large Industrial 70.0 70.0 70.0 70,0 70.0 70.0 70,0 70.0 70,0 70,0 70,0 70,0Street Lighting 50.0 50.0 50.0 50.0 50.0 50.0 5. 5. 5. 50.0 50.0 50.0Special Tariff 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0

Diversity Factor % 1.0 1.0 1.0 1.0 1.0 1.O 1.0 1.0 1.O 1.O 1.O 1.0

ETHIOPIA

ENERGY PROJECT

Eritrea Region SCSSales Forecast

(GWh)

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Sales / 6.1 1.1 1,3 1.5 1.7 1.9 2.2 2.5 2.9 3.4 3.9 4.5Losses j/ 0.8 0.1 0.2 0.2 0.2 0.2 0.3 0.3 0.4 0.4 0.5 0.6Station Use .2/ 0.2 .0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0,2Total Generation 7.1 1.3 1.5 1.7 1.9 2.2 2.6 3.0 3.4 3.9 4.5 5.2Haximum Demand :/ 1.5 0.3 0.3 0.4 0.4 0.5 0.5 0.6 0.7 0,8 0.9 1.1

a/ Growth Rate - 15.00Zg/ 11X of net generation, GWh 0'c/ 3.52 of generation, GWhd/ At 55% load factor

- 63 -

AMNSK 4.8

ENERGY PROJECT

Supply md De_md of o nFu for Adds Aab.bAs the Prls Tarmet Market of the Southern ReSIon

('000 ome)_l

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992Hid-lear!Puatintou (6.52 p_a.)(thou ade) 1,542 1.643 1,750 1.863 1,984 2,113 2.251 2,397 2.553 2,719Number of Housebolds 309 329 350 373 397 423 450 479 511 5U

Pro1ected Demcid 1,126 1,191 1,277 1,360 1,448 1.542 1,643 1,769 1,863 1,986(thusands tur)

Prolected SupplyA. Nbrr4*fd Fnel

1. Kerosene 54 60 70 80 91 91 91 91 91 912. LPG 48 55 90 120 132 132 132 132 132 1323. Electricity 38 45 59 8S 107 130 136 137 138 138

Subtotal A Th 1W MTi -g U' I3! iw 3W sr Mr

S. mmr Wkod-y Fuel Sources4. Charcoal 63 157 304 532 470 485 540 615 6595. Residw Brlqette 30 73 146 269 442 684 770 IjC20

-- btot l - 63 187 377 678 739 927 1,224 1.385 1,679Subtotal B 6 3 ,7

C. Other6. City hgriumates 50 53 55 58 61 64 67 70 74 78

(factory/mill wastes,dr-g. household trees.prass, etc.)

D. Plantations7. E,dsing Urba

Plantacloos 180 169 158 147 135 130 125 120 100 1658. New Upgraded

Enriched Plantatlns_v 113 141 191 163

MIMUL SUPPLY (ACD) 370 508 619 866 1,204 1,286 1,591 1,915 2,101 2,446

E. Implied Deficit Met byLAIC%, FCFDIK and OthersLQ * woody fuels 499 5C0 525 483 244 256 52(ii) as harcoal 257 183 161 11

F. Imlied SU¢D1U 146 238 462

Deficit equivalent In 27,000 24,440 24,500 17,640 8,710 9,140 1,860hectares of Savannah PFostcleared _30 o3/ha and700 kg/u3 balc density)per year In the hinterlandof Addis Ababa

1/ twe, tonne of wood equivalet in defined as:One tonne of wood, adr dried 25Z entire otezt oo a wet bais and 20 tJ/kg ows dry. it ha a 14.3 MJloe1r heating valse when burned In stovs in coamn use In Ethlopia and tidng ilto conasderation the lowrheati value of the fuels coerned and in equivalent to:

267 kgs of dacoal141 litre of kerosee83 kgFg of LPG200 kg of suLust brquettes712 kg of cereal strew briquettes784 kg of coffee residue briqettes400 kWh (subtitutitg injera cooking at av. efficiency of 602)about one tome of dung burnd on an open fire826 kg of cereal stover (com, mor*uQ briquettes

- 64 -

AiNNEX 4.9

ENERGY PROJECT

SupplY and Sales of Charcoal to Addis Ababa Marketby Fueluood and Charcoal Production, Processing and Marketing Enterprise

(tonne)

Supply Sales1982/83 1983/84 1984/85 1982/83 1983184 1984/85

July 151.4 390.5 544.8 430.6 848.3 1,398.1August 76.6 383.5 1,217.6 375.6 389.3 1,328.6September 191.3 67.4 772.6 134.0 1,013.9 592.6October 267.3 342.4 2,800 135.1 166.4 600.0November 451.8 836.7 322.6 318.2December 244.0 1,106.5 N/A 529.3January 160.5 724.2 641.7 486.7Fe.ruary 139.7 916.3 245.3 348.3March 277.9 670.2 193.9 235.0April 363.6 1,286.2 261.2 461.3may 295.8 1,378.2 612.9 1,112.6June 55.8 1,102.8 518.8 455.4

TOTAL 2,675.7 9,204.9 5,355 3,871.7 6,564.7 3,919.3

Proportion 5Z 13Z 20Z b/ 6% 9Z 16Z b/of EstimtedAddis Supply

a/ FsPBK and mission estimatesb/ pro-rata

SDMfCE: FCPIE, UNDP/World Bank Energy Assessment

- 65 - ANNEX 5.1Pap 1 of 3

Rim= PRO3ECZ

Pour Subsector mvest Prut for FM6 tbrough F92

RY86 F87 FM88 FM9 F9 Fl F92 Y86-92mllion0 BErr

GENERATION

1. AMARTI DIVERSION 5.6 0.0 0.0 0.0 0.0 0.0 0.0 5.62. AXA TWAuA EPP 110.9 111.0 26.1 0.0 0.0 0.0 0.0 248.03. GUGEL GIBE HPP 58.7 90.0 101.9 98.9 67.5 31.2 0.0 448.24. DEN= MnM 9FP 2.5 2.0 0.0 0.0 0.0 0.0 0.0 4.55. SoR MKnU HP 22.2 23.5 10.1 0.0 0.0 0.0 0.0 55.86. EWA PMDHPP 0.0 0.6 1.3 1.3 0.0 0.0 0.0 3.27. NESO MPM 9F 1.2 1.2 0.0 0.0 0.0 0.0 0.0 2.58. GU3E KENI EPP 0.0 0.0 0.0 4.6 4.1 0.9 0.0 9.79. NM MINI EPP 0.0 0.0 0.0 4.6 4.1 5.4 4.7 18.9

10. TEPPI MMNI UFP 0.0 0.0 0.0 4.6 4.1 5.4 4.7 18.911. GEOTHEIL PP 0.0 0.0 0.0 0.0 0.0 0.0 46.3 46.312. GENEUATIO RKBABI O a/ 0.0 0.0 2.0 3.8 3.9 0.0 0.0 9.7

1. AABA-GUV GIBE 132 kV 8.6 9.3 0.0 0.0 0.0 0.0 0.0 17.92. GIllEL GIBE-JDIW-rM 132 kV 3.4 7.3 6.5 0.0 0.0 0.0 0.0 17.33. DE1AIRE DAWA 230 kV 0.0 0.0 0.4 19.7 30.0 34.0 20.1 104.14. FDIQAA-BAHAR 230 kV 12.5 27.7 29.7 0.0 0.0 0.0 0.0 69.95. YIGALL*IBAKI0 9.5 20.3 0.0 0.0 0.0 0.0 0.0 29.86. ADDIs-flBIO 0.0 3.6 7.8 0.0 0.0 0.0 0.0 11.47. K 0.0 0.0 0.0 0.0 0.0 0.0 49.6 49.68. AWASK-'WD 0.0 0.0 0.0 0.0 0.0 33.6 47.1 80.69. GHElIO-ASELTIl 230 kV 0.0 0.0 0.0 13.9 223 24.0 0.0 60.2

10. ETIPI-SDAN IN EMECTION 0.0 0.0 0.0 32.1 51.7 64.6 29.3 177.711. NAiKAWAKAN&-ADDIS b/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.012. GIIAL GIB--AMIS SI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

ErNSI0IS 66 KV

1. AWASE-AMBIBARA 0.0 4.6 1.3 0.0 0.0 0.0 0.0 5.93. SE9ATIh-4LLSSO (GIONI) 00C 0.0 0.0 0.0 0.0 0.0 0.0 0.04. GKFKSSA-FITGEE 0.0 0.0 3.3 7.0 4.6 0.0 0.0 14.95. DESIH-WWIA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.06. Nl0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.07. DEMEARDS-DJIEN 0.0 0.7 2.0 2.1 0.0 0.0 0.0 4.88. DEUE NARCDS-PFEN0E-SEMA 0.0 0.7 2.4 2.5 0.0 0.0 0.0 5.79. DML-FESSU&-GEN 0.0 0.0 0.0 0.0 0.0 1.6 5.2 6.8

10. AStARA-ADIGR4T-ml.IA 0.0 0.0 0.0 0.0 0.0 0.0 25.4 25.411. DESSIE-40ILLU 0.0 0.0 0.0 0.0 0.0 0.0 5.2 5.212. HARAR-JLIJI 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

a/ Excbxlg Energy Project9l Included in power plant cost

4/01/86

- 66 -ANE 5.1Page 2 of 3

ET1LIOPIA

EnWG PROECT

Power Subeector Iavestwm nt rgr for FY86 through FY2

FY86 E187 FY88 FY89 FY90 FlY91 FY92 F186-92mifloa Brr

SUBSTkTIONS

1. SUBSTATION EWASION132 & 45 kV ADDIS ABABA c/ 3.6 0.0 0.0 0.0 0.0 8.1 8.1 19.8

2. SUBSTATION WAINSON132 & 45 kV ADDIS ABAB d/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3. SUBSTATION EPwNSIOOrHER ICS ARMA, 132 & 66 kV e/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

4. SUBSTATN EXPANSIONOTHER ICS AREA., 132 & 66 kV f/ 2.5 0.0 0.0 0.0 0.0 19.8 18.1 40.4

5. TAPPIIG FIClIAA LNEAT CREDO, 230 kV 0.0 0.0 0.0 0.0 7.0 7.5 0.0 14.5

6. DERA 230 kV SUBSTATION fl 0.0 0.0 0.0 3.3 4.2 5.1 2.9 15.57. DIRE DAWA 230 kV SUBSTATION f/ 0.0 0.0 0.0 4.9 6.3 7.7 1.8 20.78. FINClAA 230 kY SUBSTATION g/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.09. BAHAR DAR 230 kV SUBSTAION f 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.010.NALK& WNA 230 KV SUBSTATION h/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0II.GIlEL GIBE 230 KV SUBSTATI h/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.012.ADDS ABAB. (MAM A AKANA

AND GILGEL GIBE) h/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

DISTRIBUTION

1. ICS DISTRIBuION EKPANSIONFOR FY86 AND FY90-92 ANDRESERVE PRDJECT 7.5 0.0 0.0 0.0 17.0 18.2 19.2 61.9

2. 1CS DISTRIBUION EPANSIONFOR FY87-FT89 i/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3. DISTRIBUTION REHABILI ION if 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.04. VILLAGE ELECrRIFICATTOS 2.5 5.5 6.8 8.8 7.5 8.1 8.6 47.8

c/ Investments for FY91 and FY92 included in Reserve Projectd/ Period FY87-90 included in Energy Projecte/ Period FY87-90 included in Energy Projectfl Included in Reserve ProjectL/ Included in line cost

h/ Included in power plant costi/ Included In Energy Project

4/01/86

- 67 -

AMIEX 5.1

Pap 3 of 3

KIHOPIA

DUGT FROJEGI

Pa4er Subsector Inwtsut Progrm for FY86 through FY92

Fr86 FY87 FYs8 FY89 Fm FY91 FY92 F286-92- million Brr

GrdMAL PLAr

1. HOUSW PM T.A. J/ 0.0 0.0 1.0 0.0 0.0 0.0 0.0 1.02. CONSTRUOCI0N BQUIPWM 0.0 0.0 2.3 3.7 0.0 0.0 0.0 6.03. WRiCSiP I 4.1 4.4 4.7 3.8 0.0 0.0 0.0 17.14. WORKSW II. 0.0 0.0 2.4 2.5 2.7 7.3 7.7 22.65. VfCLAS FOR ELPA 0./ 0° 0.0 0.0 9.6 0.0 0.0 0.0 9.66. LOAD DISPATCR CENR 0.0 0.0 0.0 10.4 17.6 16.2 0.0 44.1

STUDIES & TRAIN

1. ORGANIZATION & MANPOWERDEVELOPHT PROGRAM PROGRAM k/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2. LARGE HYDROPOWR STUDY 1/ 0.0 0.0 0.0 0.0 8.8 12.2 0.0 21.03. LOAD DISPATCH CMTER STIDY 1/ 0.0 1.9 1.9 0.0 0.0 0.0 0.0 3.74. STUDY OF IN1ErletPIECrl0S

WITH IGU 00RIS i/ 0.0 0.0 0.0 2.2 0.0 0.0 0.0 2.25. ENGINEN DESIGN FOR

LARGE MYDD 0.0 0.0 0.0 0.0 0.0 0.0 1.5 1.5

TAX 2/ 10.7 13.1 8.6 10.6 11.5 13.8 12.9 81.3

ENERGY PRDJECr nI 0.4 32.0 45.3 40.7 17.6 3.6 0.0 139.7

IDTAL 266.4 359.5 267.7 295.9 292.7 328.1 318.5 2129.0

J/ Part included in Reserve Projectk/ Included in Energy Project1/ Inclxde in Reserve ProjectU/ Taes for Investments other than Energy Projectn/ Includes tae

4/01/86

- 68 - M15.2P.i 1 of 4

cout /t. j(

Par Fgpoets

Total Project Go.. -Wlliam Birr mllnion US$

L F T L F T

CLvil works, Equipmt, Materila, InstallationGonratln1. Genuatiom Rabtlitatiou (ICS) 0.2 4.7 4.9 0.1 2.3 2.42. Genratioon Deibilitatlon (SCS) 0.3 1.5 1.8 0.2 0.7 0.93. General babilltatlnn (ElSSA) 0.0 4.5 4.5 0.0 2.2 2.2

ab-total 0.5 10.6 11.2 0.3 5.1 5.4

Transmissio.1. LTn 132 kV 2.5 4.1 6.6 1.2 2.0 3.22. Line. 66 kV 0.4 1.1 1.5 0.2 0.5 0.7

Sub-total 3.0 5.2 8.1 1.4 2.5 3.9

Suotations1. Substation Expansion (132 kV) 2.1 6.5 8.6 1.0 3.1 4.22. Substation Expanoion (66 WI) 2.2 7.5 9.7 1.1 3.6 4.7

Sub-total 4.3 14. K3 6.8 8. i9

Distributioc1. ICS Distributer Expaioc 5.9 16.9 22.9 2.9 8.2 11.02. Distribution Pbabilltatim 4.0 11.1 15.2 1.9 5.4 7.3

Sab-total 10.0 28.1 38.0 4.8 13.6 18.4

General Plant1. Vebheles for EA 0.0 2.9 2.9 0.0 1.4 1.42. ousing for Taehdical Asistance 0.2 1.4 1.6 0.1 0.7 0.8

Sub-totl 0.2 4.4 4.6 0.1 2.1 2.2

Lntitution Bullding and StudiesOtganizationsL and Nap.r Dwelopen (oMMP)1. O ima.-ond tlePovesunt Program 0.3 0.9 1.2 0.2 0.4 0.627 Wnploer tuvelopint 1.1 5.0 6.0 0.5 2.4 2.93. Twiuical Aasiste 0.6 2.9 3.5 0.3 1.4 1.74. coordinatim of aHDP 0.2 0.7 0.9 0.1 0.3 0.4

Sb-totl 2.2 9.5 TI- 1.1 4.6 5.7

Studies1. Intercoanectio with Sudan 0.2 2.4 2.6 0.1 1.2 1.32. Distributiom Planning 0.4 0.8 1.2 0.2 0.4 0.6

Sub-total 0.6 3.2 3.9 0.3 1.6 1.9

Eaglnerln and Supervision 4.5 1.8 6.3 2.2 0.9 3.0

Total Nae Cost 25.3 76.7 102.1 12.2 37.1 49.3

M9ti0eciesPhysical 1.4 3.9 5.3 0.7 1.9 2.6Priem 5.7 13.5 19.2 2.8 5.5 8.3

Total cotinncies 7.1 17.4 24.5 3.4 7.4 10.9

Project Preparation b/ - 2.0 2.0 - 1.0 1.0

Total Cout (excluding duties & tac) 32.4 94.2 126.6 15.7 45.5 61.2

Itles and Tas 13.' 0.0 13.1 6.3 0.0 6.3

otatL Cst (includg dutis S tax) 45.6 94.2 139.7 22.0 45.0 67.5

af eLotivgmsaes not included In each subprojectbI/ Flacead with fumd advanced under PWP of Pebruary 4,1982 and Jue 15,1983 (pra. 5.06).

- 69 -AM= 5.2Pes 2 oW 4

Cost atimtO a/

Million Jirr Million US$L F -T L F T

Generation1. Generation Rehabilitation (ICS) 0.4 6.0 6.4 0.2 2.9 3.12. Generation Rehabilitation (SCS) 0.4 2.1 2.5 0.2 1.0 1.23. General Rehabilitation (ERWSA) 0.2 6.0 6.2 0.1 2.9 3.0

Sub-total 1.0 14.1 13.1 0.5 6.8 7.3

Transmission1. Lines 66 kV 3.9 5.0 8.9 1.9 2.4 4.32. TLnes 132 kV 0.6 1.4 2.1 0.3 0.7 1.0

Sub-total 4.6 6.4 11.0 2.2 3.1 5.3

Substations1. Substation Expmlon (132 kV) 4.3 8.5 12.8 2.1 4.1 6.22. Substation Expansion (66 kV) 4.6 9.7 14.3 2.2 4.7 6.9

-total tN 18.Z 37i* tI 8.8 13.1

Distribution1. ICS Distribution Exasion 8.5 M.5 29.0 4.1 9.9 14.02. Distribution Rehabilitation 5.6 12.8 18.4 2.7 6.2 8.9

Sub-total 14.1 33.3 47.4 6.8 16.1 22.9

Gneral Plant1. Vehicles for EWLPA 0.0 3.1 3.1 0.0 1.5 1.52. Eluuing for Technical Assistance 0.4 1.7 2.1 0 2 0.8 1.0

Sub-total 0.4 4.8 5.2 0.2 2.3 2.5

EWIPA Organizational and Manp_wr Development (OKDP)1. Organzatinal ruprove.nt Program 0.4 1.0 1.4 0.2 0.5 0.72. Maper Developoent 1.4 6.0 7.5 0.7 2.9 3.63. Technical Assistance 0.6 3.5 4.1 0.3 1.7 2.04. Coordination of OHDP 0.2 0.6 0.8 0.1 0.3 0.4

Sub-total 2.7 11.2 13.9 1.3 5.4 6.7

Studies1. Interconnection with Sudan 0.4 3.1 3.5 0.2 1.5 1.72. Distribution, Planning & Design 0.4 1.0 1.4 0.2 0.5 0.7

Sub-total 0.8 4.1 5.0 0.4 2.0 2.4

Project Preparationkb 0.0 2.1 2.1 0.0 1.0 1.0

Total Power III Cost

Total Cost (excluding duties & Tax) 32.5 94.2 126.7 15.7 45.5 61.2

Duties and Tames 13.0 0.0 13.0 6.3 0.0 6.3

Total Cost (including duties & tax) 45.5 94.2 139.7 22.0 45.5 67.5

a/ Cortencies included in each sub-proJectb/ linanced with funds advanced under PIFs of February 4. 1982 and June 15,1983 (para. 5.06).

- 70 - ANNEX 5.2Page 3 of 4

Er0 PROJECT

Cost Estimte !jf

Ene!g Components Million Birr Million US DollarsL F T L F T

BASE COSTCivil Wbrks, Equipment, Materialsand Installation1. Crop Residue Briquettes

Coffee Parcbment 0.3 0.8 1.0 0.1 0.4 0.5Cotton Stalk 0.5 2.1 2.6 0.2 1.0 1.3Wheat and Barley 0.6 2.1 2.7 0.3 1.0 1.3Coffee Husk 0.2 0.6 0.8 0.1 0.3 0.4Bagasse 0.2 0.9 1.1 0.1 0.4 0.5Industrial Use and Trials 0.1 0.6 0.7 .0 0.3 0.3

2. Charcoal ProductsCharcoal Production 4.7 9.3 13.9 2.2 4.5 6.7

Istitution Building and Studies3. Cooking Efficiency Program 0.5 2.9 3.4 0.2 1.4 1.64. Institutional Strengthaning 0.0 0.0 0.0 0.0 0.0 0.0

Energy Planning Support 0.8 2.3 3.1 0.4 1.1 1.5Woody Biomass Planning 2.3 6.5 8.8 1.1 3.1 4.2Biomass Resource Inventory 1.8 1.6 3.4 0.9 .8 1.6

5. Energy Secter StudiesPetroleum Supply .0 1.7 1.8 .0 0.8 0.9Industrial Energy Audits 0.0 0.9 0.9 0.0 0.4 0.4Biomass Fuel Marketing 0.0 0.4 0.4 0.0 0.2 0.2

Enginaeering and Administration 0.9 5.3 6.2 0.4 2.5 3.0

TOTAL BASE COST 12.8 37.9 50.7 6.2 18.3 24.5

ContingenciesPhysical 1.6 3.8 5.4 0.8 1.8 2.6Price 2.2 4.5 6.7 1.0 2.2 3.2

Total Contingencies 3.8 8.3 12.1 1.8 4.0 5.8TOTAL COST excluding cont. 16.6 46.2 62.8 8.1 22.3 30.4

Duties and Tawes 3.4 0.0 3.4 1.6 0.0 1.6

TOTML COST Including cont. 20.0 46.2 66.2 9.7 22.3 32.0

5/ Contingencies, duties and taxes shown separately.

- 71 -

ANNEX 5.2Page 4 of 4

ETHIOPIA

ENERGY PROJECr

Cost Estimate V/

Energy Components Mlllion Birr Million US DollarsL F T L F T

Crop Residue BriquettesCoffee Parciment 0.4 1.2 1.7 0.2 0.6 0.8Cotton Stalk 0.8 3.4 4.2 0.4 1.6 2.0Wheat and Barley 0.9 3.4 4.3 0.4 1.6 2.1Coffee Husk 0.2 1.0 1.2 0.1 0.5 0.6Bagasse 0.2 1.6 1.8 0.1 0.8 0.9Industrial Use and Trials 0.2 1.0 1.2 0.1 0.5 0.6Subtotal Briquettes 2.7 11.7 14.4 1.3 5.7 7.0

Charcoal ProductsCharcoal Production 6.5 14.0 20.5 3.1 6.8 9.9

Cooking Efficiency Program 0.7 3.7 4.4 0.3 1.8 A.1

Institutional StrengthenDIngEnergy Planning Support 1.0 3.3 4.3 0.5 1.6 2.1Woody Biomass Planning 3.1 8.3 11.4 1.5 4.0 5.5Biomass Resource Inventory 2.4 2.1 4.5 1.2 1.0 2.2Subtotal Planning Support 6.5 13.7 20.2 3.1 6.6 9.8

Energy Sector StudiesPetroleun Supply 0.1 2.0 2.1 .0 1.0 1.0Industrial Energy Audits 0.0 1.1 1.1 0.0 0.5 0.5Subtotal Studies 0.1 3.1 3.2 .0 1.5 1.5

Total (excl. duties/taxes) 16.4 46.3 62.7 7.9 22.4 30.3

Duties and Taxes 3.4 0.0 3.4 1.6 0.0 1.6Total (inel. duties/taxes) 19.8 46.3 66.1 9.6 22.4 31.9

al Contingencies included in each subproject.

- 72 - AN= 5.3

MOPIA

GEY PRWEC?

Sumary of Proect Iuplementation Schedule

BiddingDocuments Bid Contract Implntation

Pomr Cg oents or TOR Opeang Award Beginning Completion

GeneratiomRehabilitation EMPA ICS 9/86 12/86 2/87 2/88 6/90Rehabilitation EWA SCS 9/86 12/86 2/87 2/88 6/90Rehabilitation Eritrea Region 9/86 12/86 2/87 2/88 6/90

Transmission132 kV Lines 10/86 2/87 5/87 9/87 9/9066 kV Lines 10/86 2/87 5/87 9/87 9/90

SubstationsSubstation Expsnsion 132 kV 12/86 3/87 6/87 9/87 9/90Substation Epanmsion 66 kV and 45 kV 12/86 3/87 6/87 9/87 9/90

DistributionDistribution Expansion 8/86 11/86 2/87 4/87 6/90Distribution Rehabilitation 10/86 1/87 4/87 10/87 6/91

General PlantVebicles for EWLPA 10/86 1/87 4/87 4/88 4/89Housing for Techmical Assistance 10/86 2/87 5/87 7/87 7/88

Organizational and MunpowerDevelopment Program (CMDP)

EWLPA Organizational Improvsint 10/86 1/87 5/87 6/87 12/90KELPA Manpower Develomment 10/86 1/87 5/87 6/87 12/90Techntcal Assistance for EEIPA 10/86 1/8? 5/87 6/87 12/90coordination of OMDP 10/86 1/87 S/87 6/87 12/90

Power Subsector StudiesInterconnection with Sbdan 1/86 3/86 5/86 6/86 12/87Distribution Planning and Design 10/86 1/87 4/87 5/87 12/90

Crop Pesidue Briquettes 10/86 1/87 4/87 6/87 9/91Charcoal Products 10/86 12/86 2/87 7/87 9/91Cboking Efficlency/New Fuels Testing 10/86 1/87 4/87 6/87 9/91Energy Sector Institutional

Strengthening 10/86 12/86 3/87 7/87 8/90Energy Sector Studies 10/86 12/86 3/87 7/87 8/88

- 73 -

ANNEX 5.4

ETHIOPIA

ENERGY PROJECT

Estimated Schedule of DLsbursementa/(US$ million)

IDA Fiscal Year Semester - DisbursementsSemester Ending Per Semester Cumulatlve X of Total

87-1 12/31/86 1.9 1.9 387-2 6/30/87 3.7 5.6 988-1 12/31/87 7.4 '3.0 2188-2 6/30/88 8.7 21.7 3589-1 12/31/88 9.9 31.6 5189-2 6/30/89 9.3 40.9 6690-1 12/31/89 8.1 49.4 7990-2 6/30/90 6.2 55.2 8991-1 12/31/90 3.7 58.9 9591-2 6/30/90 1.9 60.8 9892-1 12/31/91 1.2 62.0 100

Total 62.0

a/ Based on standard disbursement profiles for Bank loans and IDA creditsfor power projects in the Eastern and Southern Africa Region.

ANNE 5.574 - Page 1 of 3

T1OPIA

ENERGY PRDJECE

Sunuary of Costs and Annual Savin of Action progra a/ c/(-'S$ thousands)

Annual

Cost Savings Remarks

(a) Improvement of Analysis andPlanning Capability

Ci) Reorganize and train planning 465 NO b/ 27 uaxuonthts of engiueeriug andstaff data processing services along

with a minicomputer, softwareand reference material.

(ii) Distribution planning study 255 NO 18 *anfonths of engineering

service. Study is expected toyield significant loss reduc-

tion opportunities.

(iii) Protective relay and fuse 176 NO Study is required to reduce the

coordination study extent and duration of out-

ages, It will improve the

quality of services consider-

ably.

-iv) Transmission planning study 72 NO This planning study is required

to ensure that transmission

additions are made at the cor-

rect voltage level and at the

correct time to minimize systemexpansion cost.

Subtotal

(b) Improvement of General SupportServices

(i) Upgrading of vehicle fleet and 4,268 NO The emphasis here is on stan-

improvement of its maintenance dardizing the transport fleet

to reduce spare Dart inventory

and to establish maintenance

management.

(ii) Reorganization and training for 1,140 NO That is required to ensuredistribution department that the Distribution

Department has the capacity toimplement the loss reduction

activities. Emphasis iill be

of on-the-job training.

(iii) Study of the feasibility of 2.632 NO Wood poles of tle correctDroducing concrete poles size and quality are in short

suDply. Locally made concrete

poles nay be an alternative.

Subtotal 7.440

ANNEX 5.575 Page 2 of 3

Annual

Cost Savings Remarks

tC) Improvement of Operation and 1.560 660 Spare parts, fuel oil

Maintenance of Isolated meters, efficiency program.

Diesel Plants

ld) Rehabilitation of Plants in

ERESA ICS 3.104 2,399(i) Gherar 407 '83 Scare Darts. cooling system

rehabilitation, fuel flow

meters.

(ii) Gaggiret 608 312 Spare Parts, fuel oil meters.

(iii) Kagnew 1,374 1,353 SDare Darts, recovery of lost

-apacity, fuel oil meters.

(iv) Belesa Diesel 195 110 Fuel oil centrifuges, flowmeters upgrade exhaust valves.

Cv) Belesa Steam 520 141 Rehabilitation of water

treatment plant, acid cleaningOf boiler.

Subtotal 3.104 2,339

Ce) Rehabilitation of Some Hydroelectric

PlantsCi) Tis Abbay 1,262 605 Redesign lubricating system and

raise the diversion weir.(ii Koko (Awash 1) 695 499 Repair trash removal system,

improve generator cooling.

(iii) Finchaa 835 1,615 Replace turoine protective

paint for penstock, remove

grass from reservoir.

Subtotal 2.792 2,719

TOTAL 15,864 5J77

a/ Costs are in 1984 USS.b/ Not quanitified.

ci Source: Ethiopia. Power System Efficiency Study. ESMAP, April 1985.

- 76 - ATOM 5.5Page 3 of 3

TALE. 5.5.1

SUMMARY OF PLANT IMPROVEMENT COSTS AND BENEFITS ti/

Station Work Element Cost USS Annual Benefit USS

Gherar Spare Parts 300.000 483,000Cooling water systemrehabilitation 78.000

Fuel oil flow meters 23,000Ethiopian labor and

materials 6.407.000 483,000

Geqgiret Spare parts 540,000 312,000Fuel cil meters 60.000Ethiopian labor andmaterials 8.000

608,000 312.000

Kagnew Spare Parts 1 260,000 1.253 000Frequency conversion

power recovery 87,000 100.000Fuel oil meters 18,000Ethiopian labor and

materials 9W000 -1,374,000 1.353,000

Belesa Diesel Fuel oil waterseparator, flowmeter and analyzer 90,000 67,500Diesel exhaustsystem upgrading 99.000 43,000Ethiopian laborand materials 6,000 -

195,000 110,000

Belesa Steea Water treating plantrehabilitation 62.000Boiler acid cleaniog 102.000 96,000Cooling towerinstallation 245,000 45,000SDare Parts 63,000Ethiopian :abor

and materials 48,000 , _

520,000 141,000

Source: Mission estimates.

a/ Refereuice: Ethiopia. P';B'er System Efficiency Study ESMAP, April 1985.

- 77 -

ANNEX 5.6

ETHIOPIA

ENERGY PROJECT

Distribution Expansion and Rehabilitation

Estimated Costs and Quantities of Equipment and Materials

Item Unit Quantity Cost (N Birr)

Low-voltage Metal clad and Fuses ea 230,000 1.6kWh meters ea 30,000 3.0Instruments and relays - global 0.1Transformers ea 550 2.4Fuses and isolating links 15 kV ea 34,000 2.8Insulators ea 65,000 4.0Lightning arrestors 15 kV ea 3,500 0.2Capacitors MVAr 25 0.3Poles ea 34,000 4.4Line and substation hardware - global 0.9Tools - global 0.2Insulated wires and cables foroverhead installation - global 1.7

Cables 15 'kV and accessories forunderground distribution - global 1.1 a/

Overhead-line conductors km 5,500 2.5Voltage regulators ea 170 0.3Others - global 0.5

26.2

a/ Not to exceed 5% of total distribution components.

- 78 -

AN=11 6.1

EUIOPI ZLEC* C L6 D AM OO3 AUTRORITYINCOME SYATRNTS FM ToN TEMS ENDING JULY 7 1984-1992

(Dirr Million)

-4JIWJDrTED-- -1---------------------

1984 1985 1986 1987 1988 1989 1990 1991 1992

SALES (CVh) 779.90 774.40 931.20 1000.51 1089.43 1268.43 1376.66 1660.46 1591.57AVERAGE TARTI" (BitRIkuh) 0.122 0.122 0.122 0.213 0.213 0.213 0.254 0.294 0.343

SALES REVENUES 86.20 93.15 103.07 213.46 230.32 255.30 350.08 429.81 546.22OTHIE gEVENUES 7.65 9.33 9.57 0.49 0.56 0.60 0.68 0.77 0.58

TOTAL REVNUES 93.85 102.4 nT.9 Z1.95 30.59 10.i W= 430.58 547.10

EXPENSESPERSONNEL 28.71 32.08 33.97 35.88 38.98 43.14 47.53 51.65 56.13FUeL 37.11 37.21 38.97 41.31 44.12 47.11 50.32 53.80 57.48MATERIALS 10.73 8.82 12.06 16.91 21.23 30.42 33.34 36.64 41.45INSURANcE 3.Z2 1.54 2.46 2.84 4.13 4.53 5.00 5.66 6.91GENERAL 4.17 4.42 5.98 6.46 6.98 7.53 8.14 8.79 9.49CoRP. TAxSs 0.00 0.00 0.00 30.02 21.48 16.17 56.80 85.85 127.42DgPROCIATION 41.73 46.11 51.93 57.63 73.34 90.43 99.46 110.82 129.80

TOTAL 125.67 130.18 165.37 i91.05 210.26 239.94 300.57 353.20 428.68

OPERATING INCOME -31.82 -27.70 -32.73 22.90 20.63 15.96 50.18 77.38 118.42

INTEREST CHARGES 8.84 8.35 10.37 10.05 10.42 17.23 17.51 22.06 26.37

CAPrIAL CHARGE 9.68 9.95 12.55 15.14 26.08 25.74 25.30 26.11 28.06

NET INCOME -50.34 -46.00 -55.66 -2.29 -15.U8 -27.01 7.37 29.21 63.99_ - - - - - -_

WORKING R1h1O 0.97 0.90 0.91 0.63 0.59 0.59 0.57 0.56 0.55

RATE 0F RgTURN -4.64 -3.67 -3.83 2.47 1.62 0.97 2.90 4.11 5.26

_ 79 -

AN131 6.2

ET8IOPIAOR= PROcr

ulITOPIM ELECTRIC LICHT MD POWER AUTHORITYSOURCES AND APPLICATION OF FUNDS STATUENT POI YEARS ENDING JULY 7, 1984-1992

tBarr XlLon)

--- UNAUDrTD- -D--- FORECAST1984 1985 1986 1987 1988 1989 1990 1991 1992 1917-1990

SOURCES OF FUNDS

GENERATION FROK OPERATIONOPERATTNG INCOME -31.82 -27.70 -32.73 -22.90 -20.63 -15.96 -50.18 -77.38 -118.42 109.67DEPRECIATION 41.73 46.11 51.93 57.63 73.34 90.43 99.46 110.82 129.80 320.86

TOTAL 9.91 18.41 19.20 TOT!j9 149.64 188.-20 124.2-2 430.53

CONSUMERS' DEPOSIT 0.93 1.26 1.20 1.31 1.44 1.58 1.73 1.90 2.09 6.06

DEFeRRED LIABIL TIES 9.68 9.95 12.55 15.14 26.08 25.74 0.00 0.00 0.00 66.96

GRAInTS-GOWntRN?T 31.33 59.70 81.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00OTHER 44.95 56.27 14.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00TR1NSFER OF MALTA WAKANA 0.00 0.00 0.00 213.20 0.00 0.00 0.00 0.00 0.00 213.20TOTALT 96znnW li351nr §3(09T 4 9556 - -0 0.00 0.00 .0.00 0.00 0.00 213.20

BORROWINCS 18.41 41.88 53.36 205.93 128.20 147.78 154.95 202.11 207.48 636.86

TOTAL SOURCES 135.71 187.47 181.86 516.11 249.70 281.49 306.32 392.21 457.78 1353.62

APPLICATION OF FUNDS

CONSTRUCTION EXPENDITURESPROPOSED pRoJEcr 0.00 0.00 0.40 28.60 40.90 36.90 16.20 3.40 0.00 122.60;ENERATION 52.09 89.70 64.60 138.30 39.50 19.00 16.40 11.60 55.70 213.20TRANSrIISION 23.45 42.90 34.00 68.30 44.40 65.70 104.00 156.10 146.10 282.40DISTRIBUTICe4 14.81 11.50 11.09 6.69 8.09 10.20 26.01 27.91 29.53 50.9966 XV EITN. 8.49 5.40 0.00 6.10 8.90 11.70 4.60 1.60 35.80 31.30SOBSTATIoN EXPAN. 0.61 6.00 6.00 0.00 0.00 8.20 17.50 48.20 31.00 25.70GENERAL PLAIT & STUDIES 4.33 0.00 0.00 1.90 1.90 2.20 8.80 12.20 1.50 14.80DUTIES & TMAES 0.00 10.60 10.84 15.86 10.07 12.04 12.40 13.74 13.12 50.37lDC 1.07 2.49 1.58 5.71 11.00 10.32 18.64 24.79 31.99 45.67

TOTAL TO4f -1685 -128.;1 271.46 164.76 176.26 2235 299.54 344.74 837.03

TRANSFER OF HALrA WAKANA 0.00 0.00 0.00 213.20 0.00 0.00 0.00 0.00 0.00 0.00

DEBT SERVICEREPAYMENT 14.73 16.46 19.12 21.90 25.08 40.65 35.58 39.97 51.49 126.21INTEREST 8.84 8.35 10.37 10.05 10.42 17.23 17.51 22.06 26.37 55.21TOTAL 23.57 24.81 29.49 31.95 35.50 57.88 56.09 62.03 77.86 181.42

CAPITAL CHARGE 9.68 9.95 12.55 15.14 26.08 25.74 25.30 26.11 28.06 92.26

INCREASE IN WORKING CAPITAL -2.38 -15.88 11.31 -15.64 23.35 21.61 0.38 4.53 7.12 29.70

TOTAL APPLICATIONS 135.71 187.47 181.86 516.11 249.70 281.49 306.32 392.21 457.78 1353.62

DEBT SERVICE COVERAGE 0.4 0.7 0.6 2.1 2.0 1.6 2.0 2.2 2.3

NET CASS GENERATION/CONSTR. (Z) -6.8 10.3 -18.8 21.5 10.7 13.1 39.3 25.7 30.9

-80- AM0 6.3

EThIOPIAENERGY PROJECT

ETHIIOPIR ELECTRIC LIGllT MID POWER TEWORITYBALANCE SHEET FOM YLS ENDING JULY 7, 1984-1992

(CBrr Million)

-UIAUDITED- --- RORE1984 1985 1966 1987 1988 1989 1990 1991 1992

ASSETS

FIXED ASSETSPLANT TX OPER.T0IN 1173.51 1349.75 1503.37 1674.11 2430.94 2675.62 2941.26 3332.72 4062.72DEP1RCLAI0' 481.46 532.90 611.98 714.28 839.00 989.88 1161.65 1345.61 1545.38MeT P.. I 692.05 816.85 891.39 959.83 1591.93 1685.73 1779.61 1987.10 2517.34

IOkKS IN PROGRESS 156.58 616.90 205.57 629.24 157.63 264.30 418.60 511.93 299.97

L/T INVESTMENT 0.27 0.27 0.27 0.27 0.27 0.27 0.27 0.27 0.27

CURRENT ASSETSCASH 4 BANKS 7.05 16.14 13.95 12.34 4.44 9.41 46.66 51.06 52.35ACCOUNS RECEIVABLE 45.97 55.92 48.34 53.37 57.58 63.82 87.52 107.45 136.55INVIUSORl 79.74 83.63 46.95 50.22 72.93 80.27 88.24 99.98 121.88OTHER 38.29 23.34 24.04 24.76 25.50 26.27 27.06 27.87 28.71TOTAL 171.05 179-.04 1. T7 .69 160.46 179.78 249.50 286.37 339.49

TOTAL ASSETS 1019.95 1158.06 1230.50 1730.03 1910.29 2130.08 2447.98 2785.67 3157.07

EQUM & LIABILrrIES

EQIUITCAPITAL 85.10 85.10 85.10 85.10 85.10 85.10 85.10 85.10 85.10RETAINED EANINGS -79.95 -125.95 -181.61 -183.90 -199.78 -226.79 -219.20 -190.20 -126.21GOVEROEIT CONTRI3TION 160.61 220.31 301.37 514.57 514.57 514.57 514.57 514.57 514.57OTER CONTRIBUTION 55.16 111.43 125.93 125.93 125.93 125.93 125.93 125.93 125.93tEVALUATION RESELVE 481.10 488.74 530.37 595.45 664.52 779.16 902.24 1014.35 1117.68TOTAL T65 TX 81. 1 T 1137.14 T19.34 1277. 98 T1408-3 1549-7 1717-.

LO-T DEBT 161.06 186.48 220.71 404.74 507.86 614.99 731.35 893.49 1049.47LESS: CJURRENr KATURITIES 16.46 19.12 21.90 25.08 40.65 38.58 39.97 51.49 64.00

otOAL 144.60 167.36 198.81 379.66 467.21 576.41 691.38 842.00 985.47

DfERReD LIABILITIES 39.79 49.74 69.29 77.43 103.51 129.26 129.26 129.26 129.26

OTE DEFERRD LIABILITIES 7.78 7.78 7.78 7.78 7.78 7.78 7.78 7.78 7.78

CONSUMES DEPOSIT 11.49 12.76 13.95 15.27 16.71 18.29 20.02 21.92 24.0;

CURRINT LIAILITIESACCOUNTS PAYABLE 39.58 52.44 26.30 18.39 23.05 25.41 27.27 28.95 30.58TAlES PFLALE 10.12 4.85 0.60 30.45 21.03 15.18 56.13 84.71 125.82CAPITAL CHARGE 0.00 0.00 0.00 0.00 0.00 0.00 25.30 26.11 28.06CURET MATURITIES oa L.T. 16.46 19.12 21.90 25.08 40.65 38.58 39.97 51.49 64.00OTR 48.10 64.38 37.70 38.83 39.99 41.19 42.43 43.70 45.01

TOTAL 11.2 8.079 IMF 112.75 1i27- 120-.36 i9 1.10 4.96 247

TOTAL LIABILITIEs LOL9.95 1158.06 1230.50 1730.03 1910.29 2130.08 2447.98 2785.67 3157.07

CURRENT RATIO 1.5 1.3 1.5 1.3 1.3 1.5 1.3 1.2 1.2

RECEIVABLES (DAYS) 192 216 169 90 90 90 90 90 90

DEBT: EQUITY 17:83 18:82 19:81 25:75 28:72 31:69 33:67 35:65 36:64

- 81 - ANNEX 6.4

Page 1 of 2

ETHIOPIA

STHIOPIAN ELECTRIC LIGHT & POWER AUTHORITY

Notes and Assumptions for Financial Statements

Sales and Revenues

1. Sales for the period FY86-FY92 are calculated on the basis of thedemand forecast agreed with EELPA and the Government of Ethiopia (Annex 4.1through 4.7). The resulting average annual growth is 92 from FY86 toFY92.

2. EELPA's revenues are based on average tariff increases of 75Zeffective July 8, 1986 (approved in March 1986) and further increases of19% effective July 8, 1989, 16Z effective July 8, 1990 and 17% effectiveJuly 8, 1991.

3. From FY87, service charge which is presently included in EELPA'sother revenues, will be included in EELPA's new tariff structure. Hence,other revenues from FY87 onwards represent connection charges, only.

Operating Costs

4. Fuel costs have been estimated at Birr 0.20/kWh in the Eritreaarea and Birr 0.29/kWh for the rest of EELPA's system. These costs arebased on end-1985 c.i.f. petroleum costs and transportation charges.No adjustment to these costs has been made for the future. Increases inEELPA's personnel cost have been related to increase in installed capacityand adjusted at 9Z annually (e.g. 52 for salary increases and the remainingfor upgrading positions). In the Eritrea region, personnel cost has beenadjusted at 5% only. Materials have been calculated at 1.2% on previousyear's gross revalued assets. Insurance has been estimated at 0.17Z ofcurrent gross revalued plant in operation. Other costs have been adjustedonly for inflation.

Depreciation

5. Depreciation is charged at 3.3% and 62 of revalued gross fixedassets at the beginning of each year for EELPA and the Eritrea regionrespectively. These rates are consistent with past experience.

Taxes

6. SELPA's income is subject to 50% income tax.

Capital Charge

7. Capital charge is levied at the rate of 5% on paid-in capital,retained earnings plus Government contribution at the end of each financialyear. it has been assumed that capital charges prior to FY90 will bedeferred and that EELPA will start paying these charges from FY90 onwards.Capital charge is deductible for the purpose of calculating income tax.

- 82 - ANNEX 6.4Page 2 of 2

Fixed Assets

8. Fixed assets and accumulated depreciation have been adjusted toreflect estimated replacement values based on estimated international andlocal inflation and average foreign component of 70X and local component of30% for fixed assets.

Accounts Receivable

9. EELPA's accounts receivables are expected to be reduced to 90days by end FY87 and thereafter, as a result of improvement in billing.

Inventories

10. These are assumed to be gradually reduced to 3% of gross revaluedplant in operation by end FY87 and kept at that level thereafter.

Accounts Payable and Consumers' Deposits

I1. EELPA's liquidity position would improve as a result of decliningaccounts receivable position. Hence, accounts payable would graduallydecrease to two months inventory level by FY88. Consumers' deposits wouldincrease by 5% annually.

Long-Term Debt

12. The future foreign exchange debt would arise from grants andcredits to the Government and onlent to EELPA. Part of the proceeds of theIDA credit will be onlent to EELPA at 9Z annual interest to reflect apositive real interest rate and will be repayable in 20 years including 5years of grace. Grants to the Government have been assumed to be onlent toEELPA at 2Z interest charge while loans have been assumed to be onlent at2% above actual rates, when such rates are 4% or less, and its actual ratesfor lcaus with interest charges at 6Z and above. Government onlendingterm3 to EELPA assume repayment in 20 years including 3 to 5 years ofgrace, depending on the construction period of the works financed.

- 83 -

ANNEX 6.5Page 1 of 2

ETHIOPIA

ENERGY PROJECT

Electricity Tariff Structure

Electricity tariffs, prior to the recently approved 75Z increase,have been in force since October 1978 for the EELPA ICS and SCS and sinceApril 1974 for the Eritrea systems. Tariff structure for all the powersystems does not incorporate time-of-day factors and is based on adeclining block rate. The tariff structure comprises six categories.Details of the existing tariffs, prior to the recent increase, as well asthose proposed in Coopers & Lybrand's study of August, 1983 (para. 6.07)are presented in the table on page 2 of this Annex.

IIIOPIA

POWER III/EERGY I PROJECt

Electricity Tariff.

EM,PA ICS KELPA SCS Eritrea IC5 Eritres SCSExistin¶ Proposed Existing Proposed Existing Proposd Exisstny Proposed

Otlc irr/Wh)T Nw Tariff 2/ Tarif f 1/ Nev Tariff 2/ Tariff 1/ New Tariff 2) Tariff 1 New Tritff 2/

First 25 kWh/month 0.15 0.15 Lighting 0.24 LightLng 0.37Nust 26 to 100 kWh/month 0.17 0.18 Power, First

0.159 0.608 500 kWh/month 0.19 Power 0.25 0.608Rminder 0.12 0.13 Hassava 0.17 0.542Off-Peak 0.09 0.13 Remainder 0.15

Cconarcil (girr/kUh)First 50 kWh/month 0.15 0.19 (as for (asNust 250 kWn/Exith 0.18 0.150 0.22 0.608 domestic) 0.542 above) 0.608Reminder 0.13 0.18

Stret Lizhtizs (Birr/kWh)All cona ption 0.11 0.145 0.15 0.618 0.428 0.37 0.618mail Industrial (Uirr/kWlh)First 1,000 kUh/month 0.20 0.24 (seeNext 2,000 kWhlmonth 0.15 0.19 below)Reminder 0.10 0.14 CPeak 0.474 0.913 0.661 0.913Off-Peak 0.059 0.526 0.441 0.526

Low Voltag. Large IndustrialMaxim DOand OCarges(Birr/kWh/m,nth)

First 50 kW 12 10 10Next 200 kW 10Remainder 8 8

Energy Charge. First 200 kWh/kW 0.09 First 10,000 kWh/mDnth 0.13/kWh First 10,000 kWh/& 0.09 (as(Birr/wonth) Next 200 kWh/ky 0.08 Next 10,000 kWh/onth 0.12/kWh Remainder 0.06 above)

Remainder 0.07 Remainder 0.11/kWh(Birr/kWh) Peak 0.477 0.913 0.661 0.913

Off-Peak 0.059 0.526 0.441 0.526Niah Voltage Larne IndustrialMaxiuam Demand Charges(Sirr/kUh/month)

First 200 kW 10Next 200 kW 8Remainder 6

Energy Char8e: First 200 kWh/kW 0.075(Birr/month) Next 200 kWh/kW 0.06

Remainder 0.05(Birr/kWh) Peak 0.332 0.541

Off-Peak 0.054 0.415

1/ Prior to 752 increase to become effective July 7, 1986./ Expressed In mid-1983 price level.

P.3

- 85 - ANNEX 7.1

Page I of 4

ETHIOPIA

ENERGY PROJECT

ECONOMIC COST OF ELECTRICITY

Introduction

1. Electricity tariffs should be set at levels that adequatelyreflect the economic costs of supplying electricity to consumers asmeasured by the Long-Run Marginal Costs (LRMC) of supply. However, LRMCcannot be computed at this time because a long-term expansion program forpower has not been established for Ethiopia v However, in orderto establish a yardstick to assess the overall appropriateness of tariffs,the Average Incremental Costs (AIC), have been computed based on theinvestments in the Reference Expansion Program (REP), and the respectiveincremental operatings costs and projected sales over a 45 year timehorizon.

Definitions and Methodology

2. The AIC for the entire EELPA system represents an average valueof the AICs for the various subsystems that make up the total power utilitycomplex. These consist of the hydro-based EELPA ICS, the petroleum-fuelbased ICS in the Eritrea Region and some 60, predominantly diesel-poweredsmall isolated load centers. This system-wide AIC does not represent thespecific AIC of any one of the system's components but can serve as aglobal indication of the economic costs of producing electricity in theshort-term.

3. It should be noted that the AICs as calculated do not strictlyrepresent AIC in their conventional definition because they include thefull costs of all ongoing and comiutted projects. All other costs andexpenditures reflect those projected for the project and the overallEELPA reference investment program between FY85 and FY92. Inititalinvestments for projects which are not commissioned in the period wereexcluded from the analysis.

4. The AICs have been calculated as the ratio of Present Value ofIncremental Costs (Capital+0.&1M.+Customer+Fuel) to Present Value ofIncremental Sales. To estimate *iue economic penalty incurred fromconstructing surplus generation capacity over the forecast period,estimates were also made of the potential minimum average incremental coststhat would result if all excess power supplies could be sold as they becomeavailable. Indirectly, this difference between the AICs based on projectedloads and on potential sales represent a measure of the potentiallybeneficially effects of finding additional markets (e.g. exports) for thesesurplus supplies.

Data and Assumptions

5. The main data used for the estimates have been summarized intables 7.1.1 and 7.1.2. Details of ,he underlying assumptions and

- 86 - ANNEX 7.1

Page 2 of 4

calculations can be found in the project files. The main assumptions usedare as follows:

(i) Price level: December 1984;

(1i) Shadow price of foreign exchange: 1.33;

(iii) Discount rates 10%, 11Z, 12%;

(iv) Period of analysis: 45 years;

(v) Life expectancy of hydro components: 50 years;

(-.i) Life expectancy of diesel components: 15 years;

(vii) O.&M. costs as a X of capital costs:

a) generation: 2% p.a.b) transmission: 1* p.a.c) distribution: 5% p.ad) general plants: 2% pa.a

(viii) Marginal customer administrative costs: 50Z of current averagecuEtofer costs;

(ix) Demand growth: As per demand projections contained in Annexes,4.2 through 4.5, until full capacity utilization is reached by1997 or 1999 respectively; constant thereafter.

Average lucremenal Costs (AIC)

The estimated AICs for the overall EELPA system and for the mainEELPA ICS are as follows:

Birr/kWh (US$/kWh)Discount Rate

10% L1% 12%

Projected Actual AIC:Total RELPA System 0.21 (0.10) 0.22 (0.11) 0.24 (0.12)Main BELPA ICS 0.18 (0.08) 0.19 (0.09) 0.21 (0.10)

Projected Potential AIC:Total EEiPA System 0.15 (0.07) 0.16 (0.08) 0.17 (0.08)Main EELPA ICS 0.14 (0.07) 0.14 (0.07) 0.15 (0.07)

6. The difference in costs between the overall LELPA system and themain EELPA ICS by itself reflects the high costs of operating the dieselbased isolated load centers including the Eritrea Region ICS, which accountfor only 23% of total sales. The difference between projected actual costsand projected potential costs is a measure of the overinvestment ingenerating capacity for the EELPA ICS systenm

- 87 -ANNEX 7.1Page 3 of 4

TABLE 7.1.1

ETHIOPIAENERGY PROJECT

TOTAL EELPA/ERESA SYSTEM ACTUAL & POTENTIAL AVERAGE INCREMENTAL COSTS"Discount Rate 11 %

Overall Project 0 & M Customer Fuel Total Incre- PotentialInvestment Invest- Expenses Adm.Costs Costs Costs mental Increment-Costs with- ments Sales al Salesout Project

YELv%No. Year - ---- million Birr- … - GWh

1984 50.6 0.0 0.0 0.0 0.0 50.6 0.0 0.01 1985 237.7 0.4 0.0 0.0 1.1 239.2 209.5 558.42 1986 241.0 28.4 1.0 1.3 -1.1 270.6 298.0 603.83 1987 366.3 39.7 2.0 1.9 2.2 412.1 380.0 610.24 1988 263.3 36.7 3.8 2.4 4.8 311.0 457.0 1036.95 1989 281.2 16.0 14.5 2.9 6.7 289.5 639.2 1064.26 1990 241.1 3.6 17.1 3.5 10.4 228.1 757.0 1672.57 1991 316.7 0.0 24.8 4.2 14.2 304.5 827.6 1672.58 1992 366.2 0.0 26.6 4.8 18.2 271.4 937.6 1672.59 1993 0.0 0.0 30.2 5.5 22.0 57.7 1011.1 1672.510 1994 0.0 0.0 30.5 6.3 26.0 62.8 1089.1 1672.511 1995 0.0 0.0 31.0 7.0 29.9 67.9 1170.8 1672.512 1996 0.0 0.0 31.3 7.9 34.4 73.6 1312.0 1672.513 1997 0.0 0.0 31.7 8.7 35.7 76.1 1430.1 1672.514 1998 0.0 0.0 31.7 9.7 35.7 77.0 1558.8 1672.515 1999 0.0 0.0 31.7 9.7 35.7 77.1 1673.0 1672.516 2000 0.0 0.0 31.7 9.7 35.7 77.1 1673.0 1672.517 2001 0.0 0.0 31.7 9.7 35.7 77.1 1673.0 1672.518 2002 0.0 0.0 31.7 9.7 35.7 95.1 1673.0 1672.519 2003 0.0 0.0 31.7 9.7 35.7 77.1 1673.0 1672.5

..................................................................................................................a44 2028 0.0 0.0 31.7 9.7 35.7 77.1 1673.0 1672.5

45 2029 0.0 0.0 31.7 9.7 35.7 -147.9 1673.0 1672.5

PV 1745.6 7287.8 10500.8

- 88 -ANNEX 7. 1Page 4 of 4

TABLE 7.1.2

ETIOPAENERGY PROJECT

KELPA INTERCONNECTED SYSTEK ACTUAL & POTENTIAL INCDiscount Rate 11 Z

Total 0 & x Customer Total Incre- PotentialInvest- Expenses Ada.Costs Costs mental Increment-Ret Sales al sales

Year Costs

NO. year -- cilllon l r - GUh GWh

1984- 50.6 0.0 0.0 50.6 0.0 0.01 1985 212.7 0.0 0.0 212.7 125.2 459.42 1986 226.9 - 0.6 0.5 228.0 260.6 441.23 1987 338.8 1.6 0.8 341.2 312.2 423.14 1988 260.7 3.2 1.1 265.0 382.7 804.45 1989 234.8 12.8 1.4 249.1 565.3 786.36 1990 179.5 14.4 1.7 195.7 681.9 1394.67 1991 243.8 22.1 2.1 268.0 742.8 1394.68 1992 48.6 23.3 2.4 74.3 842.7 1394.69 1993 0.0 22.5 2.8 25.3 904.8 1394.6

10 1994 0.0 22.8 3.2 26.0 970.8 1394.611 1995 0.0 23.3 3.7 26.9 1040.0 1394.6512 1996 0.0 23.6 4.1 27.7 1198.7 1394.613 1997 0.0 24.0 4.6 28.6 1394.6 1394.614 1998 0.0 24.0 5.1 29.1 1394.6 1394.615 1999 0.0 24.0 5.6 29.6 1394.6 1394.616 2000 0.0 24.0 6.2 30.2 1394.6 1394.6

44 2028 0.0 24.0 6.2 30.2 1394.6 1394.645 2029 -225.0 24.0 6.2 -194.8 1394.6 1394.6

PV 1187.0 115.9 21.6 1324.5 6285.3 8544.2

-89 - ANNEX 7.2Page 1 of 4

ETHIOPIA

ENERGY PROJECT

ECONoMIC RATE OF RETURN OF ELECTRIC POWER SECTOR EXPANSION PROGRAM

Definition and Methodology

1. The calculation of the Internal Economic Rate of Return (IERR) ofthe electric power components of the Power III/Energy I project has beenbased on an analysis of the overall power sector investment program for theperiod FY85 - FY92. The many power sub-components represent an integralpart of the overall sector investment program. A separate rate of returnfor the sun of the project components by themselves has not been computedbecause they cannot be linked to specific increments in output or sales.Instead, two IEERRs have been computed for the overall expansion program,estimated as the discount rate which equalizes the present value of thetotal incremental capital, operating and maintenance, fuel andcustomer-administrative costs. The first is for the EELPA system as awhole (including all isolated load centers) the other for the main EELPAInterconnected System (EELPA ICS) by itself. Also, hypothetical IERR'shave been calculated for both systems, based on potential, rather thanprojected sales.

2. Projected tariffs, properly deflated to convert them into theirconstant-cost equivalents, were used as a proxy for economic benefits.Clearly, this understates the total economic benefits of the expansionprogram since tariffs represent only the lower bound of users' willingnessto pay. It was not possible to make reliable estimates of consumersurplus.

3. During the early years of the analysis a significant portion oftotal electric energy sales will be made for use in industrial boilers.Therefore, a sensitivity analysis was carried out which limited the valueof the electric energy projected to be consumed by boilers to the value ofthe fuel oil displaced. The resulting change in the IERR was less thanO.2%. Details of this analysis can be found in the project files.

4. The following methodology and assumptions were used in theanalysis:

(i) costs: based on December 1984 prices, excluding duties, taxesand price escalation, but including physical contingencies;

(ii) foreign costs: converted to Ethiopian Birr at the official rateof exchange of US$1.OO-Birr2.07 and then shadow-priced with acoefficient of 1.33 times the official rate of exchange;

(iii) tariffs: based on projected tariffs in current prices, deflatedby the estimated average annual rate of inflation of 9Z until1991, constant thereafter;

_ 90 - ANNEX 7.2Page 2 of 4

(iv) a81 other assumptions and data are those used in the calculationof AIC costs contained in Annex 7.1;

Cv) the basic data underLying the analyses have been shown inTables 7.2.1 and 7.2.2.

5. Results

Based on Projected Sales

EELPATotal System 7%

EELPA ICS only 9%

Based on Potential Sales:

EELPATotal System 12%

EELPA ICS only 13%

The results show that inspite of the projected tariffs increases theminimum internal Economic Rate of Return for the whole system (whichincludes the Eritrea Region and all isolated load centers) is relativelymodest at 7%; for the main EELPA Interconected System, the rate is 9%. Thedifference to potential rates of return (which assume sales of allavailable energy at average tariff levels) is substantial; for the totalEELPA system this potential rate is 12%, while for the EELPA ICS it is 13%.

ANNEX 7.2

-91- - Page 3 of 4

TABLE 7.2.1

TIOPIAENERGY CT

TOTAL KELPA/ERESA SYSTD( ECONOMIC RATE OF RETURN

Total Inere- Potential Pro- Total Total Net PotentialCosts mental Increment- jected Reveaue Pbtential Cash Net Cash

Sales al Sales Tariffs Revenue Flow Flow

TEAR llionNO. Yew -B- GWWhB -- i------d ion Birr--

1984 50.6 0.0 0.0 0.0 0.0 -50.6 -50.61 1985 239.2 209.5 558.4 0.122 25.7 68.4 -213.5 -170.82 1986 270.6 298.0 603.8 0.198 58.9 119.3 -211.8 -151.43 1987 412.1 380.0 610.2 0.181 68.9 110.6 -343.2 -301.54 1988 311.0 457.0 1036.9 0.166 76.0 172.4 -235.0 -138.65 1989 289.5 639.2 1064.2 0.176 112.7 187.6 -176.9 -102.06 1990 228.1 757.0 1672.5 0.162 122.4 270.5 -105.7 42.47 1991 304.5 827.6 1672.5 0.191 157.7 318.7 -146.8 14.28 1992 271.4 937.6 1672.5 0.175 163.9 292.4 -107.5 21.09 1993 57.7 1011.1 1672.5 0.175 176.8 292.4 119.1 234.710 1994 62.8 1089.1 1672.5 0.175 190.4 292.4 127.7 229.711 1995 67.9 1170.8 1672.5 0.175 204.7 292.4 136.8 224.512 1996 73.6 1312.0 1672.5 0.175 229.4 292.4 155.8 218.913 1997 76.1 1430.1 1672.5 0.175 250.0 292.4 173.9 216.314 1998 77.0 1558.8 1672.5 0.175 272.5 292.4 195.5 215.415 1999 77.1 1673.0 1672.5 0.175 292.5 292.4 215.4 215.416 2000 77.1 1673.0 1672.5 0.175 292.5 292.4 215.4 215.417 2001 77.1 1673.0 1672.5 0.175 292.5 292.4 215.4 215.418 2002 95.1 1673.0 1672.5 0.175 292.5 292.4 197.4 197.419 2003 77.1 1673.0 1672.5 0.175 292.5 292.4 215.4 215.4

44 2028 77.1 1673.0 1672.5 0.175 292.5 292.4 215.4 215.445 2029 -147.9 1673.0 1672.5 0.175 292.5 292.4 440.4 440.4

1745.6 7287.8 10500.8 1270.4 1819.5IRR 0.080 0.129

- 92 - ANNEX 7.2Page 4 of 4

TABLE 7.2.2

ETOPIAEEGY PROJECT

EELPA ID rIMMNCC SYSE( EMEG6IC RATE OF RErRN

Total Incre- Potential Pro- Total Total get PotentialCosts mnutal Increment- Jected Revenue Potential Cash Net Cash

Sales al Sales Tariffs Revenue Flar FlowYear

million.No. Year B GWh GQh B/kWh -M llion Bi r r- -

1984 50.6 0.0 0.01 1985 212.7 125.2 459.4 0.122 0.0 0.0 -50.6 -50.62 1986 228.0 260.6 441.2 0.198 15.3 56.3 -197.3 -156.43 1987 341.2 312.2 423.1 0.181 51.5 87.2 -176.6 -140.94 1988 265.0 382.7 804.4 0.166 56.6 76.7 -284.6 -264.55 1989 249.1 565.3 786.3 0.176 63.6 133.7 -201.4 -131.26 1990 195.7 681.9 1394.6 0.162 99.6 138.6 -149.4 -110.57 1991 268.0 742.8 1394.6 0.191 110.3 225.5 -85.4 29.98 1992 74.3 842.7 1394.6 0.175 141.6 265.8 -126.5 -2.29 1993 25.3 904.8 1394.6 0.175 147.3 - 243.8 73.0 169.5

10 1994 26.0 970.8 1394.6 0.175 158.2 243.8 132.9 218.611 1995 26.9 1040.0 1394.6 0.175 169.7 243.8 143.8 217.912 1996 27.7 1198.7 1394.6 0.175 181.8 243.8 154.9 216.913 1997 28.6 1394.6 1394.6 0.175 209.6 243.8 181.9 216.214 1998 29.1 1394.6 1394.6 0.175 243.8 243.8 215.3 215.315 1999 29.6 1394.6 1394.6 0.175 243.8 243.8 214.8 214.816 2000 30.2 1394.6 1394.6 0.175 243.8 243.8 214.2 214.217 2001 30.2 1394.6 1394.6 0.175 243.8 243.8 213.7 213.7

44.2028 30.2 1394.6 1394.6 0.175 243.8 243.8 213.7 213.7

45 2029 -194.8 1394.6 1394.6 0.175 243.8 243.8 213.7 213.7

PV 1324.5 6285.3 8544.2 1098.3 1479.2IRK 0.098

- 93 -

ANNEX 7.3Page 1 of 6

ETHIOPIA

ENERGY PROJECT

66 kV Transmission Line Sabatta to Wolliso; Least-Cost Analysis

Methodology

1. The proposed transmission line from Sabatta to Wolliso is one ofseveral 66 kV transmission lines that are designed to connect existing,isolated load centers currently supplied from high-cost, low-reliabilitydiesel stations to the hydro-based main ICS. All are similar in length,costs and load characteristics. Therefore, the analyais below is broadlyrepresentative for all of them. The alternatives to be evaluated arecontinued diesel operation versus the installation of a transmission line.However, because of the possibility of changing the timing of thetransmission line installation, a whole series of possible alternativesexist. The analysis, therefore, has been based on a comparison of a puretransmission line alternative with a mixed diesel/transmission programwhich would initially depend on diesel generation, but ultimately switchover to a transmission line. An exclusive, disel-only solution over theplanning horizon would cost over three times more than the otheralternatives.

Data and Basic Assumptions

2. The basic data and assumptions have been shown in Table 7.3.1.The load forecast assumes that the initial slow growth of 4Z p.a., whichreflects historical patterns, would be followed by a period of four yearsof rapid expansion at a rate of 10%, as soon as more reliable powersupply becomes available. Load growth is projected to fall later to along-term annual rate of 7%.

3. The local cost share of the line would be relatively high becauseit would be designed and installed by EELPA's own personnel. Also, thetowers would consist of wooden poles, resulting in relatively low, overallcosts.

4. The load forecast, as well as the capacity expansion program andthe cost estimates for the all-diesel alternatives are shown in Table7.5.1. The cost data for the transmission-only alternatives are shown inTable 7.5.2. Summary of present-value data for the transmission line only,and the mixed diesel/transmission line sequences for the years 1991 to 2000are shown in Table 7.5.3.

Results

5. The results of the analysis, with discount rates of 10, 11 and 12percent are shown in Table 7.5.3. In all cases, the tranamission line-onlyalternative, with completiLon of the line by 1988, is the least-costsolution by a significant margin. The present value of costs increase thelonger the completion of the line is postponed.

- 94 - ANNEX 7.3Page 2 of 6

Present Value of Total Costsmillion Birr

Transmission Initial Diesel, with TransmissionDiscount Line by line by Diesel

Rate 1988 1991 1995 2000 On.lg

10 z 8.2 10.1 12.3 14.611 Z 7.6 9.2 11.3 13.3 19.3*12 x 7.1 8.6 10.4 12.2

* Not adjusted for residual values at the end of the planning period.

6. Clearly, constructing the traasmission line, with completion by1988, is the least-cost solution of supplying electricity to the WollissoRegion.

ANNEX 7.3- 95 - Page 3 of 6

TABLE 7.3.1

ECONOMIC ANALYSIS OF THE 66 KV TRANSMISSION LINEFROM SABATTA TO WOLLISSO

DATA & ASSUNPTIONS;

Interest Rate, Z: 11Exchange Rate, B/$: 2.07Shadow Price Foreign Exch.: 1.33

Transmission Line:

Capital Costs, B millions: 5.75Foreign Exchange Costs (Z of Cap.Costs): 60Import Taxes, Z 19Cap.Costs, Shadow-priced, B millions: 6.16Construction Period, Years: 2Annual Capital Expenditures, millions: 3.08Useful Life, years: 30Depreciation, Straight Line, per Year: 0.030 & M with 50 Z Foreign Exch.Coefficient, Z 2.50

Network Energy Costs,incl.distr.loss,c/kwh 10.93

Diesel Station:

Initial Load Factor, 1985, Z 25Existing Capacity,MW: 1.086Existing Hydro, Gwh 0Existing Firm Capacity, Hydro 0.0Capital Costs per kw installed, $:Capital Costs per kw installed, B: 2250Foreign Exchange Costs, X: 75Import Taxes, Z 19Total Costs , Shadow-priced, B/kw: 2449Relocation Costs, Z of Total Sh.-pr.Costs: 0Useful Life, Years 150. & M. Fixed Costs, Z/Cap.Costs/year: 50. & M. Variable Costs, B/kwh:: 0.025Fuel Consumption, kg/kwh: 0.28Delivered Fuel Costs, B/kg: 1.10Distribution Losses, Z of Generation 10

LOAD GROWTH:Years Z

1985 Load, 1858 MWFirst period, 2 years, Z p.a. 2 4Second period, 4 years, % p.a. 4 10Third period, 26 years, X p.a. 26 7

ANNEX 7.3-96- Page 4 of 6

TA5L 7Z.3.2

ENERGY PROJECTKOOMMEiC ALYSIS OF TlM 66 KV TRANlUISRIQI LINE

FRIK SLAATT& TI OLISSOLOAD FOWAST & DIISEL SEQUIZU CMST WA

Year Yew Total Systm Net Capacity Capacity Total Capac- Fixed Variable Fuel TotalNo Geer- Load Caner- hdditio Deletions CLpac- ity 0 0 &6N osts System

atlon atlsm ity cact costs

PM NW nb I 16 NW

1985 1 1858 0.85 1858 1.091986 2 1933 0.88 1933 1.091987 3 2010 0.92 2010 1.09 0.001988 4 2211 1.01 2211 2.0 1.1 2.00 4.90 0.24 0.06 0.68 5.881989 5 2432 1.11 2432 2.00 0.00 0.24 0.06 0.75 1.051990 6 2675 1.22 2675 2.00 0.00 0.24 0.07 0.82 1.141991 7 2943 1.34 2943 2.00 0.00 0.24 0.07 0.91 1.221992 8 3149 1.4" 3149 0.5 2.50 1.22 0.31 0.08 0.97 2.581993 9 3369 1.54 3369 2.50 0.00 0.31 0.08 1.04 1.431994 10 3605 1.65 3605 2.50 0.00 0.31 0.09 1.11 1.511995 11 3858 1.76 3858 2.50 0.00 0.31 0.10 1.19 1.591996 12 4128 1.88 4128 0.8 3.30 1.96 0.40 0.10 1.27 3.74197 13 4417 2.02 4417 3.30 0.00 0.40 0.11 1.36 1.871998 14 4726 2.16 4726 3.30 0.00 0.40 0.12 1.46 1.981999 15 5057 2.31 5057 3.30 0.00 0.40 0.13 1.56 2.09200 16 5411 2.47 5411 1.0 4.30 2.45 0.53 0.14 1.67 4.782001 17 5789 2.64 5789 4.30 0.00 0.53 0.14 1.78 2.452002 18 6195 2.83 6195 4.30 0.00 0.53 0.15 1.91 2.592003 19 6628 3.03- 6628 3.4 2.0 5.70 8.33 0.70 0.17 2.04 11.232004 20 7092 3.24 7092 5.70 0.00 0.70 0.18 2.18 3.062005 21 7589 3.47 7589 5.70 0.00 0.70 0.19 2.34 3.222006 22 8120 3.71 8120 5.70 0.00 0.70 0.20 2.50 3.402007 23 8688 3.97 8688 1.8 0.5 7.00 4.41 0.86 0.22 2.68 8.162008 24 9297 4.24 9297 7.00 0.00 0.86 0.23 2.86 3.952009 25 9947 4.54 9947 7.00 0.00 0.86 0.25 3.06 4.172010 26 10644 4.86 10644 7.00 0.00 0.86 0.27 3.28 4.402011 27 11389 5.20 11389 3.0 0.8 9.20 7.35 1.13 0.28 3.51 12.262012 28 12186 5.56 12186 9.20 0.00 1.13 0.30 3.75 5.182013 29 13039 5.95 13039 9.20 0.00 1.13 0.33 4.02 5.472014 30 13952 6.37 13952 9.20 0.00 1.13 0.35 4.30 5.772015 31 14928 6.82 14928 2.2 1.0 10.40 5.39 1.27 0.37 4.60 11.632016 32 15973 7.29 15973 10.40 0.00 1.27 0.40 4.92 6.592017 33 17091 7.80 17091 10.40 0.00 1.27 0.43 5.26 6.96

- 97 - ANNEX 7.3Page 5 of 6

TABLE 7.3.3

ETHIOPIAENERGY PROJECT

ECONOMIC ANALYSIS OF TE 66 RV TANSMISSIONLIN FROM SABATTA TO VOLLISSO

TRANSMISSION COST DATA

Year Year Capital Fixed Variable Energy TotalNo Costs 0 & M O & M Costs Costs

at Load Transm.Center Line 1988

--- il 'Ilion Birr1985 11986 2 3.08 3.081987 3 3.08 3.081988 4 0.15 0.00 0.00 0.151989 5 0.15 0.00 0.00 0.151990 6 0.15 0.00 0.00 0.151991 7 0.15 0.00 0.00 0.151992 8 0.15 0.00 0.00 0.151993 9 0.15 Q.00 0.00 0.151994 10 0.15 0.00 0.00 0.151995 11 0.15 0.00 0.00 0.151996 12 0.15 0.00 0.00 0.151997 13 0.15 0.00 0.48 0.641998 14 0.15 0.00 0.52 0.671999 15 0.15 0.00 0.55 0.712000 16 0.15 0.00 0.59 0.752001 17 0.15 0.00 0.63 0.792002 18 0.15 0.00 0.68 0.832003 19 0.15 0.00 0.72 0.882004 20 0.15 0.00 0.78 0.932005 21 0.15 0.00 0.83 0.982006 22 0.15 0.00 0.89 1.042007 23 0.15 0.00 0.95 1.102008 24 0.15 0.00 1.02 1.172009 25 0.15 0.00 1.09 1.242010 26 0.15 0.00 1 '6 1.322011 27 0.15 0.00 1.,4 1.402012 28 0.15 0.00 1.33 1.492013 29 0.15 0.00 1.43 1.582014 30 0.15 0.00 1.52 1.682015 31 0.15 0.00 1.63 1.792016 32 0.15 0.00 1.75 1.902017 33 0.15 0.00 1.87 2.02

PV,i-11Z 7.58PV,1-10Z 8.20PV,i-12Z 7.06

- 98- ANNEX 7.3Page 6 of 6

TAKLE 7.3.4

ElllY{PTAENERGY PROJECT

ECONCHIC ANALYSIS OF TME 66 KY TRANSMISSION LINEFROM SABATrT TO WOLLISSO

LEAST-COST ANALYSIS OF ALTMEHNATlE SEQUENCES

MIXED DIESEL/TRANSKISSOIN SEQUENCES

Year Year TotalNo Costs Co pletion Year of 66 KV Transmission Li--

Transnb 3 4 5 6 7 8 9 10 11 12Line 1988 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000-u Birr-

1985 11986 2 3.081987 3 3.08 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001988 4 0.15 5.88 5.88 5.88 5.88 5.88 5.88 5.88 5.88 5.88 5.881989 5 0.15 4.13 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.05 1.051990 6 0.15 4.21 4.21 1.14 1.14 1.14 1.14 1.14 1.14 1.14 1.141991 7 0.15 -3.76 4.30 4.30 1.22 1.22 1.22 1.22 1.22 1.22 1.221992 8 0.15 0.15 -4.66 5.66 5.66 2.58 2.58 2.58 2.58 2.58 2.581993 9 0.15 0.15 0.15 -4.25 4.51 4.51 1.43 1.43 1.43 1.43 1.431994 10 0.15 0.15 0.15 0.15 -3.85 4.58 4.58 1.51 1.51 1.51 1.511995 11 0.15 0.15 0.15 0.15 0.15 -3.44 4.67 4.67 1.59 1.59 1.591996 12 0.15 0.15 0.15 0.15 0.15 0.15 -4.99 6.82 6.82 3.74 3.741997 13 0.64 0.64 0.64 0.64 0.64 0.64 0.64 -3.97 4.95 4.95 1.871998 14 0.67 0.67 0.67 0.67 0.67 0.67 0.67 0.67 -3.39 5.06 5.061999 15 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71 -2.82 5.172000 16 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 0.75 -2.242001 17 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.79 0.792002 18 0.83 0.83 0.83 0.83 0.83 0.83 0.83 0.83 0.83 0.83 0.832003 19 0.88 0.88 0.88 0.88 0.88 0.88 0.88 0.88 0.88 0.88 0.882004 20 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.932005 21 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.98 0.982006 22 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.04 1.042007 23 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.102008 24 1.17 1.17 1.17 1.17 1.17 1.17 1.17 1.17 1.17 1.17 1.172009 25 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.24 1.242010 26 1.32 1.32 1.32 1.32 1.32 1.32 1.32 1.32 1.32 1.32 1.322011 27 1.40 1.40 1.40 1.40 1.40 1.40 1.40 1.40 1.40 1.40 1.402012 28 1.49 1.49 1.49 1.49 1.49 1.49 1.49 1.49 1.49 1.49 1.492013 29 1.58 1.58 1.58 1.58 1.58 1.58 1.58 1.58 1.58 1.58 1.582014 30 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.682015 31 1.79 1.79 1.79 1.79 1.79 1.79 1.79 1.79 1.79 1.79 1.792016 32 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.90 1.902017 33 2.02 2.02 2.02 2.02 2.02 2.02 2.02 2.02 2.02 2.02 2.02

-1.23 -1.44 -1.64 -1.85 -2.05 -2.26 -2.46 -2.67 -2.87 -3.08

W 11% 7.58 9.21 9.18 10.28 10.81 11.29 11.19 12.29 12.66 12.99 13.30PV 10% 8.20 9.96 9.94 11.13 11.72 12.27 12.16 13.39 13.82 14.21 14.57PV 12% 7.06 8.56 8.52 9.53 10.01 10.44 10.34 11.32 11.64 11.93 12.19

- 99 -

ANNEX 7.4

ETHIOPIA

ENERGY PROJECT

66 kV Transmission Line Sabatta to Wolliso: Economic Analysis

The analysis of the IERR of completing the transmission line by1988, compared to its various higher cost alternatives, is based on anevaluation of the net savings resulting from choosing the lowest-costalternative. This methodology is justified because both the Government andEELPA are commimtted to supply electricity to the region at country-wldeuniform tariff levels. Alternative costs, therefore, represent a validmeasure of economic benefits. Two alternatives were analysed: the firscdelays completion of the line until 1991, while the second would do sountil 1995. In the former case, the resulting IERR, based on completion ofthe line by 1988, is 32%, while in the second it amounts to 33%. Theseeconomic benefits are so large that even substantial variations in terms oflower sales or increased costs are unlikely to change the favorableoutcome. Economically, completion of the line by 1988 is clearlyjustified. Summary data of the analysis are shown in in the table below.

Economic Benefits Based on Net Cost Differentials

Net Benefits Net BenefitsCompared to 1991 Compared to 1995

Year No. Year Compl Compl

1 1985 -3.08 -3.082 1986 -3.08 -3.083 1987 5.72 5.724 1988 3.98 0.905 1989 4.06 0.986 1990 -3.92 1.077 1991 0.00 2.438 1992 0.00 4.359 1993 0.00 4.4310 1994 0.00 -3.59

11.33 1995-2017 0.00 0.00

IRR - 0.315 0.330

- 100 - ANNEX 7.5

ETHIOPIA

ENERGY PROJECT

Economic and Financial Analysis SummaryCharcoal Pilot ProJect

Charcoal PriceEconomic Analysis Birr/t IERR

1. Base Case 25- Equivalent Price of Kerosene 454- No Technical Assistance includedin Project Cost

2. Base Case plus fullTechnical Assistance Costslevied against project 454 16

3. Case No. 2 plus 10% Increasein capital costs 454 13

4. Case No. 2 plus 20% increasein capital costs 454 11

5. Market Price Case

- Minimum free market price ofcharcoal of equivalent quality(B 25 per 40 kg bag) 626 52

- No TA levied on project(N.B. Charcoal prices ofB 25 per 40 kg bag have beenrecorded).

6. Market price plus TA costsand 20% increase in capital costs 625 30

Financial Analysis

1. Base Case

- Agreed FCPPME transfer price (B 18/bag) 450 20- No TA cost included

2. Base case plus TA cost and 20%increase in capital costs 450 11

ANU 7.6-101- Page of 2

ETHIOPIAENERGY PROJECT

COARATIVE COSTS OF SIPPLY OF HOUSEHOLD FUELS EXCLUDICG IWUJENA WIWSIN THE SOUTHElbREGIaO UAN AEAS USING ADIS ARM AS TIE REFENE MJARKET

iEtlolian Cents (sci and miff c1ii

Cost Per unit Energy Valvo $UJ Conversion Cost of Useful Mw quantitySold Etlcleancv (II E"rgy 9Ai Accessible

('000 Actual Tomnesi

LiQUiFIED PETNOLEUIGa. (Propancg

Official Price12.5 kg cilAInos 1.20 so 0 NJ/kg 2.80 3S 5.781.3 kg cylInders 1.30 Ag 3.00 4* 6.7

Econmic Coat 88.2 ac/lIter 25.4 NJ/liter 3.47 43 7.72Long Run Cost (19951 97.3 c/JI Itr 3.84 4 6.53

KEROSENIE

Off clal Price 65.4 ac/Ilter 30.7 NJ/liter l.75 36 4.93 44Smple Market Price 85 c/li ter 2.32 30 6.44Economic Cost

with wick stowe 13.1 ec/liter 2.2 30 6.211with primus stove 45 5.02

Long Run Os t (19951- wits wick stove 98.5 acil lte 2.68 30 7.44- with prinus stowv -- 45 95

ELECTRICITY

IEELPA-ICS)Present rariff (awl 13 ac/kWh 3.6 NJ/h 4.17 so 6.95 25 GUhLRkC (minim_) 1 ec/kEh 4.44 7.40

FREUOOWGovernment 9.1 ac/kg 16.6 NJ/kg 0.53 a a/ 6.e8 n/aSupply (awl (150 mcwb) 13 4.23Maket Price 13.8-18.2 ac/kg 1.04 (awI 8 i/ 13.00Economic cost from 15.4 NJ/kg 13 6.00

Per-urban g 23Al 3sw (203 acwS)plantations 0.27 a 2.90

(Addis AbaSe) (450 kbd) 13 2.08CHARCOAL

Governmet supply 90.39/kg in kg scks 29 NJ/kg 1.34 23 5.81Sample Market prime 81.00/kg lav)

(0.240.25kg lots) 3)45 23 12.83Economic cost

(metal kilns) 80.18/kg 0.61 23 2.65Economic cast

(aar" kilns) 80.19/kg 0.67 23 2.91COFfEE RESIOlE

friquetts 8 66/ta 3.6 NJ/kg 0.42 13 2.80 1S0In 40 kg sacks

OAGASSE

Briquettes KM/tm lest.l 17.3 NJ/kg 0.52 15 3.47 43In 40 kg SaCkS

tOTTON RESICOUEBriquettes O92/to '7.3 J/t 0.52 15 3.47 239

In 40 kg sacks- CEAEAL STRAW

Briquettas 893/l7 7 NJ/kg 0.53 15 3.53 l08In 40 kg sar*s

SAHOUST

Briquettes 99Bi/ 17 .7 NJ g 0.55 is 3.69 IIn 40 kg sacks

CEREAL STOVERBrlattes O8103/ta 15.0 a_/kg 0.68 s5 4.3 211

R .40 kg sacks

!/ With clay coaking pots. Scwb * moisture Conrent w- bass; bd * basic dens;ty: sv * solid volts: ew * enrage; at

e stimate.

Source: mission estrim-es and field seasarements.

- 102 -IANNEX 7.6Page 2 of 2

COwuATIE EWIC CST O INDUSTRIAL OILER FUELS,ADDIS Am n lss)

Ecoraicbet per EMIt

Price Plr Convesion of DelieredLmC per Unit Ergy Value Unit Eneg Efficleny Eergy

MS) UiAU CS) Ws$A)

Fuel Oil 5337/9. 42.5 WJAJg 0.79 75 1,01(feie velue)

ElectricityLarga boiler (11) 7.0 USt 3.6 NJ/kWh 1.94 S 1,.9Swll boiler (WM) per kWh 90 2.161rea Straw S45/ t 17.4 NJAg 0.26 65 0.40 -

cereal Strew S47.76/te 17.4 Ag 0.27 70 3 0

Cael Stover - 57.76/. 15.0 NJ/kg 0.39 70 0.56

cottn Stover 5.43/te 17.3 NJIg 0.5 70 036

Coffee Rsidue 53.72 15.5 NJ/kg 0.21 70 0V.3

Saguus. S43J0 16.6 NJ/k O06 70 0.37ariquettes.

Note: BoIler capital and perating costs for new cbustion equigent and fuel-hadlingsyst_ms for beled straw and briqueted residues will be AM and 251 higher,resectively, thn for oil-fired bo;lors. .evsr, the oveail costs of residuefuel Canbustion will rImain iess thn half of those for ftel oil, ad the returnon incnenthl investenrt would be high.

Souce: mision estimates.

- 103 -

ANNEX 8.1Page 1 of 2

ETHIOPIA

ENERGY PROJECT

Selected Documents and Data Available in the Project File

Legal Documents

1. Proclamation No. 213 & 1956 - Charter of the Ethiopian Electric Lightand Power.

2. Proclamation No. 163 of 1979 - Regulation and Coordination of PublicFinancial Operations.

EELPA

3. Tariff Study and Asset Revaluation, EELPA. Coopers & LybrandAssociates, August 1983.

4. Accounting and Data Processing Assistance, EELPA. Coopers & LybrandAssociates, May 1984.

5. Audited Accounts for EELPA and ERESA for FY80; and Closed Accounts forFY81-FY83.

6. Project Proposal for Power III loan from IBRD. EELPA, August 1984.

7. Extension of the Interconnected System. EELPA, August 1984.

8. Specification and Drawings of Various Distribution Materials. EELPA,December 1982.

9. Billing and Collection Status at June 30, 1984.

ESMAP

10. Project Document, Ethiopia Cooking Efficiency Program. Energy SectorManagement Assistance Program (ESMAP), December 1984.

11. Crop Residue Briquettes for Household Fuels: Economic Analysis,Technical Design and Costing and Procurement Documentation forEthiopian Pilot Projects. ESMAP, 1985.

12, Efficient Bagasse Utilization and Briquetting for Household andIndustrial Fuels in Ethiopia: Economic Analysis, Technical Design andCosting and Procurement Documentation for Ethiopian Pilot Projects.ESMAP, 1985.

13. Ethiopia: Power System Efficiency Study. ESMAP, April,1985.

- 104 -

ANNEX 8.1Page 2 of 2

Lahmeyer

14. Review Report on Feasibility Study for FINCHAA Power PlantExtension. Lahmeyer International, 1983.

15. Review Report on Feasibility Study for Abu Samuel HPP -Rehabilitation/Development. Lahmeyer International, 1S83.

Acres

16. Power Planning Study. Acres International Ltd., 1983.

17. Ethiopian-Sudan Transmission Interconnection: A Prospective onEconomic Feasibility. Acres International Limited, 1984.

18. Proposed Transmission Line Finchaa-Bahar Dar Feasibility Study.Acres International Limited, 1983.

19. Proposed Transmission Line Malkassa-Dire Dawa Feasibility Study.Acres International Limited, April 1983.

20. Manpower and Training Requirements in the Electric Power Sector,Ethiopia. IL0, April 1984.

21. Assessment of Manpower Training Requirements in the Electric PowerSector. IL0, ANgust 1984.

22. Project Proposal for Preparation and Monitoring of TechnicalAssistance services in support of an IDA-Assisted Third PowerProject. ILO, August 1984.

Miscellaneous

23. Preappraisal and Appraisal Working Papers.

24. Organization and Manpower Development Program (ONDP).Cost Estimates, Inputs and Implementation Schedules.

25. Technical Cooperation Project in Improving Financial Management inPublic Utility Corporations in Africa - Electricity Corporations ofEthiopia, Liberia, Tanzania & Zambia. African Association for PublicAdministration and Management (AAPAM), December 1983.

26. Assessment and Optimization of the Electric Distribution in AddisAbaba. Cesen-Ansaldo/Finmeccanich Group, 1983.

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ENERGY PROJECTUNDER

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