Report No. 245a-SYR

Appraisal of L CUPYMehardeh Thermal Power ProjectEtablissement Public de 1'ElectricitU SyriaFebruary 28, 1974Europe, Middle East and North Africa RegionPower and Energy Development Division

Not for Public Use

Document of International Bank for Reconstruction and DevelopmentInternational Development Association

This report was prepared for official use only by the Bank Group. It may not be published.

quoted or cited without Bank Group authorization. The Bank Group does not accept respon-

sibility for the accuracy or completeness of the report.

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CURRENCY EQUIVALENTS

Currency unit = Syrian Pound (LS)Syrian Piaster (ps) 100 = LB 1.00LBS 3.85 = US$ 1.00LS 1.00 = US$ 0.26

IS 1 million = US$ 260,000

financial year ends December 31

WEIGHTS AND MEASURES

kW = kilowatt (1,000 ittt)MW = Mbgawatt (1,000 kW)kWh = Kilowatthour 6GWt = Gigawatthour (1 million kWt = 10 kAh)kV = kilovolt (1,000 Volt)m (meter) = 3.281 foot (ft)m3 (cubic meter) = 35.315 9 ubic foot (0 u ft)bbl (barrel)=0.9 km (kilometer) - 0.6214 mile (mi)ha (hectare) = 10,000 m2 (2.471 acre)km2 (square kilometer) = 0.3861 square mile (sq mi)lb = pound (0.4536 kg)kg = kilogram (2.206 lb)t (ton) = 1,100 kgpsi (lb/sq inch) = 0.07031 at (technical atmosphere

1 kg force/cm 2

oC (degrees Centigrade) = (oF - 32) 5/9oF (degrees Fahrenheit) = 9/5 x oC + 32rpm = revolutions per minuteBTU = British Thermal Unitkcal 'kilocalory) - 3.968 BTU (1 BTU - 0.293 x 103 kWi)Hz (Hertz) = cycle/second

LIST OF ACCRONYMS

Kuwait Fund - Kuwait Fund for Arab Economic DevelopmentEPE - Etablissement Public de l'ElectriciteCDP - Caisse de la Dette PubliqueSOFRELEC - Societe francaise d'Etudes et de

Realisations d'Equipment Electrique

SYRIA

ETABLISSEMENT PUBLIC DE L'ELECTRICITE

APPRAISAL OF THE HEHARDEH THERMAL POWER PROJECT

TABIE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ........ ............. .... ... ... ... . . i-i

1. INTRODUCTION ..........................................

2. POWER SECTOR ............ . ***************************** ....... 1

General ...... ...*...*.*. . ***.. 1Energy ilesources ............ ......... . .. .. .. .. .. .. . .. .. ..2

Characteristics of the Sector ............................ 3Present Situation .....*............. *. ******* *........... 3Access to Electricity ....... ... ................. 5Future Developments ....... ... . ........................... ... . . . 6

3. THE BORROWER .*.... .......... ...... **. * ..... 7

Historical Background .................................... . 7Management and Staff ..................................... 7OPE's Organization ....................................... 7Organizational Studies 09* .......................... O ..**...... 7Operations ................................................... 8Design and Construction ..... . *.. .. ......... .......... 8Electric Power Tariffs ............ *...* ....... . ..... .... 0. 8Training ....................................................... 8

4. THE PROJECT ............. .....................*.... ..... *.......* *..* * 9

Description of Project .. 0..........0....S*. ********....**C4 9Construction Program 1972-1979.....o......... .... ..... 10Environment ... .o ................... o0..-...000 .... .... ..... ... 10Complementary Projects ... o ........ o ... oooo ............. 11Estimated Cost ...... o- ............. * . * ...... * .* ..*. * 11Basis for Estimates ......s .-........... ..o ...... 12Status of Engineering and Construction .... o ... ............ 13Procurement and Disbursements .............. .... o ... 13

This report was prepared by Mbssrs. W.F. Ktlpper (engineer) andA.J.D. Hutchins (financial analyst) from information obtained on missionsto Syria in May, 1973 and February 1974.

TABLE OF CONTENTS (Continued)

jus Tinunm . . . . . . . . . . . . . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..S..

5. JUSTIFICATION **.**. . .... .. *......................... *******

Introduction ............ .............................Forecast Power Ebquirenents ............ 3.......... 14Short-term Growth ***..................*........... 14*Forecast Sales .................................... 15Comparison of Alternatives . 15Rate of Return of Project ........ ............ .... . 17

6. FINANCIAL ASPECTS ......... *. ........................ 18

Financial Responsibility of EPE ........... 0...... 18Accounting aystem .......... ............................... 18Audit ....*...... .*****e***.e..*............e.. 19Insurance *o****** ** ............. 19Taxes, Duties, Interest on Loans, etc. ........... 19Historical Balance Sheet ......... . ... .. ... .... .. . 19Historical Operating Results ..................... 21Thawra Generation Facilities ..................... 21Forecast Operating fesults ............... ....... 22Rate Covenants 23Financing Plan ..................... 2lForecast Balance Sheets ..o... ... .. . . .

7. AGEMEENTS REACHED 26

List of Annexes

1. Sector Generating Plant, Existing and Under Construction2. Pbwer Sector Electrical Statistics3. Outline of Terms of Rebference for Organizational Study4. EPE Tariffs5. Project Description6. Project Estimated Construction Cost7. Schedule of Estimated Disbursements8. Justification of Proposed Project9. Fbrecast of Sales, Gbneration and Capacities10. Balance Sheets - Actual 1968-1971, Forecast 1972-197911. Income Statements - Actual 1968-1971, Fbrecast 1972-197912. Sources and Applications of Fmde 1971 and 1972-197913. Major Assumptions Used as Basis for Financial Forecasts14. Ezpected Gross Fixed Assets as at 12-31-1979 and Expected

Construction Program 1972-197915. Assumed Government Capital Contributions, and

Assumed Long-Term Debts at 12-31-1979

HAP

S!RTA

APPRAISAL OF THE MEHARIEH THERMAL PR PROJE CT

(F THE ET&BLISSEMENT PUBLJfl DE L'IIECTRICME

SUMMA AND 0(ICLUS IONS

i. This report cowrsthe appraisal of the 1ehardeh Thermal PowerProject of the Etablissement Public de l'Electricite (EIE), the Govern-ment owned entity established in 1965 to be responsible for generation,transmission and distribution of electric power throughout Syria. Theco-lender for the Project would be the Kuwait Fund for Arab EconomicDevelopment (Kuwait Fund).

ii. The Project comprisest the first 125-MW stage of a steam-electricpower station to be constructed on a new site at the Mehardeh reservoir onthe Orontes river, near Hama; 4 new and the expansion of 4 existing 230-kVsubstations; management and engineering consulting services and training.

iii. Total cost of the Project is estimated to be US$62.6 million, witha foreign exchange component of US$43 million equivalent which would be joint-l;y financed by the Bank (TUS$25 million) and the Kuwait Fund (TUS$18 m1illio)The Project forms a part (14%) of EFts exceptionally large (US$460 million)1973-1979 construction program.

iv. The recent Middle East war has caused extensive damage to EPE'ssteam generating facilities, the technical effects of which, however, arebeing rapidly overcome. Lebanon has increased its exports to Syria from25 MW to 40 mw; some plant has already been returned to service; and anumber of g&a turhlanes already on order in early 1973 are now being installed.A further 230 MW in gas turbine capacity, financed by a grant from other ArabStates, will be in operation by mid 1974., and most of the remaining damaged plant _

is expected to return to servceprogressively. In Ebbruary 1974 about 80% ofpower requirements were already being met and by mid 1974 all power restrictionsare expected to be removed. Repair of about 75 MW of steam-driven generatingplant appears uneconomic. This plant constituted about 27% of EPE's totalpre-war capacity.

v. SyriaLs transmission system consists of about 1480 vig4 ciruit

230-kV lines. EPE's development program is urgently needed to complete andexpand this system, and the steam-electric plant included in the proposedPro,,ect should be conatructed as soon as possible in order to reduce the highcost of operating gas turbine plant. Additional major projectsi already under-way (in addition to gas turbine plant) are the construction of 800 km of 230-kVlines, 25 small diesels (20 MW, 1973-1975) and the completion (by the Ministryfor the Buphratea)--in 1974 of the first three units, and in 1965/1966 of afurther two units, of the projected eight 100-MW units in the Thawra (Tibqa)hydro plant. This plant is located at the multipurpose Euphrates dam, whichwas closed recently and whose prinary objective is irrigation and the controlof the Euphrates waters.

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vi. Although the effects of the war are expected to cause sowetemporary reduction in growth rate, EPE's sales are forecast to increase byan average of about 22% through 1979. To meet this rapid escalation ofresponsibility the company needs to improve its existing structure which isfragmented into a number of insufficiently coordinated regional offices.For this purpose EPE proposes to employ consultants under the loan for theimprovement of its operational and accounting methods and organization, andfor assistance in the implementation of on-the-job and other training programs.EPE also intends to engage experts for the initial operation of the 1Mshardehplant and to set up a technical training center for its staff at Damascus.The loan includes US$1 .1 million to assist in financing part of the cost ofthese institutional reforms and training proposals.

vii. Operation of the Project requires the completion, by 1977, of the230-kV lines connecting M)hardeh, Hama, Homs, Aleppo and Damascus as well asthe second line from Thawra to Aleppo now under construction, and the linefrom Thawra to Hama. All these will be financed from a bilateral creditalready available, and for which a first contract (for 800 km of 230-kV lines)has already been signed. EPE has undertaken to sign a contract for constructingthe remaining lines (about 300 km) prior to July 1, 1975, and expects toccmplete all lines (1,100 km) by mid 1977.

viii. The Government will transfer to EPE the ownership and managementof the Thawra hydro-station and associated transmission facilities at theexpiry of the suppliers guarantee periods, and cause EPE to assume a shareof the cost of the Euphrates dam, the amount of which will be agreed betweenthe Government and the Bank.

ix. The average level of EPE's tariffs is adequate to provide a reason-able rate of return once the short-term effects of the war have been over-come. The Government and EPE agreed to maintain electricity tariffs at noless than their existing 1973 level through 1977, and from 1978 at levelssufficient to achieve a rate of return of 9% on the average net assets inoperation. Reduced sales due to damaged generating plant, and the subsequenthigh cost of fuel due to the need to employ substitute swans of generation,are expected to result in net operating losses for 1973 and 1974. Thefinancial afterveffects are likely to continue through 1977, but EPE's rateof return is expected to exceed 9% from 1978 onwards without any increase inthe present level of tariffs.

x. Procurement would be on the basis of International CompetitiveBidding in accordance with the Bank's Guidelines and;no local preferencehas been requested, nor would Syrian suppliers be in a position to provideequipment and materials for the proœect. Bid documents have been issuedfor substations and associated facilities and for major items of power stationequipment, including an option for the supply of a second 125-MW generatingunit at I*hardeh within sixteen months of contract signature.

xi. In view of the agreements reached as set forth in Section 7, andsubject to the signing of a loan agreement between EFE and the Kuwait Fundfor a loan of the equivalent of US$18 million, the Project would be suitablefor a Bank loan to EPE of US$25 million equivalent, repayable over 25 yearsincluding a grace period of 4 years.

SYRIA

APPRAISAL OF THEIMEHARDEH THER$AL PGWER PROJECT

OF THE ETABLISSMNT PUBLIC DE L'BIECTRICITE

1. INTRODUCTION

1.01 The Government of Syria has asked the Bank and the Kuwait Fundto help finance jointly a Project of the Etablissement Public de L'Electricite(EPE) comprising the first 125-NW stage of a steam-electric power statiom atNehardeh, eight 230-kV substationsj, training, management and engineering consult-ing services.

1.02 The Project has been delayed due to the recent Middle East war, whichcaused extensive damage to EPE's generating facilities. These difficulties arerapidly being overcome due to financial assistance in grants from variousArab States, which has enabled the rapid installation of a large number ofgas turbine units. The short term impact on the electricity supply has beensevere. The financial effects will be of a longer duration due to loss ofrevenue and the need for gas turbine generation, with its high fuel cost,which will have to replace about 75 NW of daoaged steam-electric plant eitheruneconomic to repair, or for which repairs will take about as long as theinstallation of new plant.

1.03 Wien the Project was appraised in May 1973 the proposed powr stationwas planned for location near Banias on the Mediterranean coast but, followingthe October war, the Government decided to relocate the power station.near theMehardeh reservoir on the Orontes river.

1.04 A joint loan of US$25 million from the Bank and US$18 million fromthe Kuwait Fund, would finance the foreign exchange cost of the Project, whosetotal cost ia estimated to be US$62.6 million. The Bank Group has not previouslylent for power to Syria.

1.05 The Project bas been prepared following reconnaissance and pre-appraisal missions in September 1970, March 1972 and February 1973, and afeasibility study by EPE's consultants, S(FREIEC of France. An appraisalmission comprising Messrs. W.F. K-apper (Engineer), A.J.D. Hutchins (Fin-ancial Analyst) and F. Dunn (Consultant) visited Syria in May 1973. Sub-sequent to the war Messrs. G.E* Wyatt and A.S. El Darwish visited Syria inDecember 1973 and Messrs. Kiipper and Hutchins in February 1974 for updatingthe information on the power sector in general. and EPE and the Project inparticular.

2. POdER SECTOR

General

2.01 The Syrian Arab Re blic, on the east coast of the Mediterranean,has a land area of 185,000 kmo (71,400 square miles). Most of its estimated7.0 million inhabitants are concentrated in the fertile areas on the coastand along the Euphrates. The former, covering about 25% of the country, is

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separated by mountain ranges from the predominantly desert are&. to the east,through which the Euphrates valley fonus a relatively narrar ciltivated strip.Out of about 6e0 million ha cultivated, 2.4 million ha is located in the Euph-rates basin., which also accounts for about half of the total irrigated area ofsome 0.5 milliom ha.

2.02 The Euphrates is Syria's most important resource for futureagricultural development. This river accounts for about 88% of thecountry's water resources. The first phase of a large Euphrates Basindevelopment scheme is already under way with financial assistance fromthe USSR. It comprises a reservoir at Thawra (Tabqa) with a live storagecapacity of about 7,400 million m3, a 6 0-m high earthfilled dam and apower station with an initial capacity of 3xlO0 MW and space for 5additional units.

2.03 The major irrigation developments are scheduled for epletionin the next 2 decades, A 41,000 ha. irrigation project was appraisedfor Bank/IDA financing concurrently with the present power Project* For atleast 10 years, however, the Euphrates reservoir waters will be availablemainly for the generation of power to be used in EPE's network because thedirect diversion of waters and the power requirement for irrigation pumpingwill be relatively modest. Since it is the Government's stated intentionthat irrigation will take precedence over power system supply the availabilityof power is expected to reduce gradually to an average of about 50% of theestimated 2,000-2,200 GWh average annua energy capability by about 1990. Thedam is scheduled for completion in early 1975 and reservoir filling has startedrecently.

2,04 An even larger water storage project on the Euphrates is under con-struction in Tarey at Keban. This reservoir has a live storage capacity of16,000 million m , and closing operations at the dam were started in November1973. Together the Keban and Thawra reservoirs would practically fully reg-ulate the river and therefore improve the water regime for irrigation alongits whole length.

2.05 Because of downstream water requirements, the time needed for damcompletion and the resettlemat of the population in the reservoir areas, thepossibility of dry years, and since the Thawra and Keban reservoirs may re-quire a three to four years filling period, limitations on the power avail-ability at Thawra may arise during the next few years. in this report con-servative assumptions have been made of the availability of Thawra power forEE's operations during these years i.e. 200 GWh in 197L4 600 CWh in 1975, and1,200 GWh in 1976, Full estimated capability of 2,200 (Oh would be reached in1978,

Energy Resources

2.06 The possibilities of bydro power developments in aGdASion so Thawraare small. A preliminary irrigation study envisions the constr Ict±on of a damand reservoir on the Khabour river, a tributary to the Euphrazese, but no firmplans have been prepared. Because most of the waters would be xqolzisd for

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irrigation, the power benefits would be small. A thermal station couldconceivably be constructed in the eastern tip of Syria near the Tigris,using oil field flare gas for firing and the river for cooling water pur-poses. However, due to the future excess capacity in gas turbine plantavailable (see 2.11), the company is considering relocating a number of gasturbines to Somedie, where oil-gas is available (see 2.07), once the areahas been connected to the main power system (1976/1977), It is estimatedthat up to 100 MW in cheap power could be obtained in this way. Because ofcooling water constraints, development of major thermal plant can only takeplace adjacent to the large rivers or on the coast. Power developmentsafter Thawra are expected to be predominantly thermal.

2.07 Although Syria's indigenous resources of oil and natural gas arerather limited and of poor quality due to high sulphur content, oil is ex-pected to remain the main squrce of primary fuel. Annual oil production,presently about 6 miUion in (37.7 million barrels) is expected to be doubledby 1976. Reserves amount to about 1,200 million ml of which about one quarterwould be econemically recoverable with present techniques. Tnferred reservesmay be about equal to the proven reserves. No natural gas field of any sizehas been discovered, but potential gas reserves associated with oil productionmay amount to 32,000 million m3. This gas is presently flared, but in futurepart of it will be used for firing gas turbines in this development area inthe eastern part of the country, which is too remotely located for the con-struction., in the foreseeable future, of an economically viable gas pipelineto the industrial centers in the west.

2.08 The national oil company owns and operates two pipelines. The first(constructed and owned previously by the former Iraq Petroleum Company), orig-inating in the Mosul area, transports Iraqi oil through Hems to the Baniasterminal on the Syrian coast and to Tripoli in Lebanon. The second, alsopassing through Hems, connects the Syrian oil fields in the north-east tip ofthe coimtry (near Souedie) with the sea terminal at Tartous (about 40 km southof Banias). Syria has one refinery, located at Hems, where loeal oil is blendedwith Iraq oil, which has a lower sulphur content, and processed. This refinery,vhich was severely damaged during the recent war, is expected to reach fullproduction again before the end of 1974. About two-thirds of the crude oilproduced in Syria is exported, A second refinery, either at Banias or atTartous, is under consideration to increase Syria's self-sufficiency in oilproducts, particularly diesel fuel which, to a major extent, is imported atrelatively high cost.

Characteristics of the Sector

Present Situation

2.09 EFE, established in 1965, has exclusive rights under its fundamentallam to generate, transmit and distribute power in the country. In 1968, thecompany completed a 230-kV system linking Aleppo, Hama, Homs and Damascus andin 1969 Thavra was connected to Aleppo. Also in 1969, three 30-W units wereadded to the 2x15-MW thermal station commissioned in 1964 at Kattineh nearHoms. The 15-MW units were practically undamaged during the recent war andreturned to service before the end of 1973 at reduced capacity (due to lackof transformer capacity). The first 30-MW unit is expected to return toservice by the middle of this year, and the second about one year later. It

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is doubtful whether it would be economically feasible to repair the third unit,A 25-NW steam-electric station at Aleppo (constructed 1957-1963) is operatingsatisfactorily but the 45-MW Hameh steam-electric station at Damascus has beencompletely destroyed and repair does not appear econamically justified. Of thetotal pre-war installed capacity of 190 NW in steam-electric plant, about 75 SWmay have to be written off.

2.10 Total pre-war capacity in the interconnected system including sone smalldiesel and hydro plants, which were not damaged, and incTuding Lebanon supply(25 MW) amounted to about 215 MW. Additionally a large number of diesel plantsaggregating about 60 MW were operated in isolated centerse BPF. operates about480 km of 230-kV lines, 615 km of 66-kV lines, 1,850 km of 20-kV lines and7,045 km of low-voltage distribution lines. Annex 1 gives available data onpower installations in Syria both at the end of 1972 and as forecast for 1975.The rated distribution voltage throughout the country is 127/220 V three phase,four wire, 50 Hz._

2.11 Public power supply has lagged behind the demand, particularly inthe industrial sector, and captive generating capacity -- particzllarlyfor irrigation pumping -- has proliferated and is now more than doubleEPE's installed capacity. In early 1973 the situation becaam critical andthe Government embarked on a crash program for generation, comprising eight20-MW gas turbines, of which 4 were destined for installation in EPE'ssystem and which are presently being installed. Tb overcome as rapidly aspossible the serious boxrt term effects of the war on EPE's generatingcapacity, various Arab States are financing, as a grant, ten 23-MWunits, which will be installed within the next few months. Thus, by mid1974 gas turbine capacity available in EPE's interconnected system willamount to 310 MW (350 MW including the refinery gas turbines at Hors) Whichexceeds the total pre-war installed capacity by some 80 (120) MW. Annex 9provides inter alia detailed information on capacities available at the endof 1972 and 1973, and expected capacities at the end of 1974.

2.12 Statistical data on the power sector, particularly EPE, are shownin Annex 2, covering the period 1963-1972, which can be swumarized as followsfor the last 4 years.

-5-Average AnnualGrowth Rate

1969 1970 21i7 192 1969-1972 (%)EPF (Total)Generation (GWh) 593 777 906 1,062 21.1Sales (GWh)Domestic 228 245 263 278 6.8Industry 184 243 270 359 25.0Thawra 14 81 133 144 -Others 842 0 52 8eO

Total 46 616 718 3 21.4

Maximum Demand (MW) 124 143 165 170 11.1

Installed Capacity (MW) 219 219 227 227 -

Captive PlantInstalled Capacity (MW)

Pumping 286Industry 2

Total 45

/ Suppressed.

Excluding Thawra's temporary construction requirements, the average growthrate of sales for the period 1969-1972 has been about 15%. Development inelectrification has primarily been in industry, No historical data is avail-able on the number and category breakdown of BPE consumers. In 1972 the totalnumber of consumers amounted to 494,000, including 15,300 industrial consumers.

2.13 Information on generation and sales for 1973 is not yet available,but it is estimated that production amounted to about lDOO OWh and sales to800 GWh (see Annex 9).

2.14 Even prior to the war, EMS had a shortfall of power; Lebanonprovided about 25 1W and 100 GWh through a 66-kV interconnection and succeededin increasing its supply to about 40 1w (the virtual capacity limit of the line)during the crucial last months of 1973. The contract terminates in 1974 due tolack of excess power in Lebanon.

Access to Electricity

2.15 Of the total population of 7.0 million, about 2.6 million (37%) livein towns and villages supplied from SIP's interconnected system, about 1.1 mil-lion (16%) in EBE's isolated systems, and 3 million (47%) at present have noaccess to electricity, representing about 3,000 villages with 2,000 inhabitantsor less (2/3 of which constitute villages of 500 inhabitants or less). Assum-ing about 5 persons per household, EPS's 0.5 million connections representroughly 2,5 million inhabitants, i.e. connection density in the areas havingaccess to electricity would be some 65%. Per capita consumption is low, about150 kWh annually on the basis of the present estimates.

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Future Develorments

2.16 In addition to the Bank Project (and the installation of gas turbines,see 2.11), EF will construct about 1,100 km of 230-kV lines to strengthen andexpand the existing system; financed from a general development credit madeavailable to the contrzy by the USSR.

2.17 Since 1971 EZI has been Implenting an expansion program financedby DDR (German Democratic Republic), to be cepleted substantially by 1975/76,of 66-kV and lower voltage transmission facilities to interconnect scatteredtowns and villages, thus reducing the uneconomic operation of small dieselplant to a minimum Most of these facilities will be slpplied from the 230-kVnetwork as soon as the new substations are completed under the .Frojecto Never-theless about 20 NW In new diesel plant, also financed by MDR, is scheduled tobe added to isolated systems up to 1975, after which sufficient relatively newdiesels will be available for those isolated systems too remote or small to beeconomically connected to PE' s 230-kV system. By 1980, howevir, isolatedsystems are not expected to exceed 20 MW in demand (2.5% of interconnecteddemand) and 40 CNh in sales (1% of interconnected sales), compared,with 34 NW(20%) and 79 LWh (WoC) in 1972.

2.18 EBP intends to step up its rural electrification program by about10% annually £rom the present US$2 million equivalent and by- 19?5 3E expects tostart a 10-year program to convert the present 127/220-1V distribution voltagein the maJor cities to 220/380 V.

2.19 With the completion of Thawra, the Government intends to curb thereplacement and expanBion of captive plant located near EPE facilities andcaptive plant would gradually close down in favor of more economic EF2 sup-plies. By 1976/77 EPE will also aupply from its extended 230-kV systm moostof tiLe existing loads of the national oil copszy and the oil company gener-ation plant would constitute a general reserVe to be operated as directed bySES in accordance with least-cost dispatching. It is likely that EPE wviltake over most of the oil company plan;r which is expected to exceed a totalof 80 NW in gas turbines.

2.20 Although plans have not yet been completed, Syria and Lebanon intendto further interconnect their systems by means of a 230-kV tie by 1976/77.This tie would connect Lebanon to the Tartous substation included in theProject.

2.21 After making due allowance for the necessary reserves, EFE wouldhave an excess capacity of about 150 NW in gas turbine plant until the endof the decade. In view of its long history of capacity shortages, it appearslikely that EPE will retain this safety margin, the mare so because of thelength of its 230-kV system, and because most of the capacity will berequired in Damascus to meet full demand in times of forced total outages.

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3. THE B0RRBWER

Historioal Background

3.01 The ttEtablissement Public de l'Electricite" was established in1965 by Decree Law No. 8 to consolidate and take over full responsibilityfor the entire electricity sector of Syria, most of which had been nation-alized in 1951. This law gives EPE the power to authorize other organiza-tions to generate electricity in appropriate circumstances. Prior to EPE'sestablishment, the power sector was fragmented and comprised a number ofisolated systems (112 systems, 88 municipality operated, and 24 supplied byprivate companies). Responsibility was divided between the Ministry of Pub-lic Works and the Ministry of Municipal and Rural Affairs. With the creationof the Ministry of Petroleum, Electricity, and Mineral Resources (Ministry ofPetroleum) in 1966, EPE was placed under the authority of this Minister, whoalso assumed the functions and responsibilities formerly vested in the Boardof Directors.

Management and Staff

3.02 EPE's day to day management is the responsibility of the DirectorGeneral assisted by a Management Cammittee, which meets weekly. This com-mittee is under the chairmanship of the Director General and is made up ofthe four departmental directors, one representative from the Ministry andtwo elected members from the Workers Union. The Director General is appointedby the Prime Minister and the other directors by the Minister of Petroleum.All appointments are for an unspecified period, i.e. until a new appointmentis made by the Minister.

3.03 The present Director General (who is also the Production Director)has been in office since April 1972. In 1972 EPE had 6,485 employees, givinga ratio of 76 consumers per employee, This ratio is not unreasonable in viewof Syria's extended and scattered system.

EPE's Organization

3.04 The power sector organization is still substantially regional andfragmented. This is because EFE has concentrated on the technical problemsof operating procedures and of integrating the numerous separate systems andplants into one system, particularly the construction of the first stage ofthe 230-kV network.

Organizational Studies

3.05 In order to improve EPE's organization, including administration,accounting and planning and to achieve an economical and reliable service,a combination of interrelated actions is required for institutional reformsand funds have been included in the proposed loan for this purpose. EPE hasagreed to engage management consultants by September 30, 1974 for a two-stagereorganization study (see Annex 3 for broad outline of the terms of referencefor such a study). Related assistance would include the Project consultants(see 4.10), the Damascus training center to be instituted (see 3,09), and thestudy of EPE's tariffs (see 3.08),

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Operations

3.06 Operation and maintenance of EPE's facilities require substantialimprovement which can only be achieved through a comprehensive trainingprogram. This need is apparent, for instance, in EFE's largest power station,at Kattineh near Homs, where plant availability of the three largest units(completed in 1969) had not exceeded 3,000 hours annually. Outage time ofthe 230-kV Homs/Aleppo line totalled about 500 hours in 1972 and of the Homs/Damascus line about 700 hours. This problem was discussed with EPE duringnegotiations (see 3.09).

Design and Construction

3.07 For the feasibility study, design and preparation of bid documentsof the Mehardeh Power Station and the substations EFE has engaged the servicesof SOFRELEC of France. Much of EFE's past extensions have been financedthrough the USSR and DDR credits and, as is customary with such credits,contracts are signed which include a study for the particular facilitiesto be financed. Detailed engineering of all 230-kV lines and 66-kV sub-stations (including those forming part of the 230-kV stations) is alreadyunderway in the USSR and DDR. EPE intends to expand its planning staff(presently about 20 people), and improve their training, in connection withthe implementation of the Project.

Electric Power Tariffs

3.08 The average of EPE's tariffs (see Annex 4) is adequate to providea reasonable rate of return (see 6.20) once conditions return to normal andhigh cost gas turbine generation is reduced to a minor proportion of totalgeneration. In the interim, two or three more-than-average "wet" years wouldcause marked differences in this respect due to increased hydro generation.However, EFE's tariffs still reflect those inherited from the original companiespresently combined into EFE and they differ widely from one area to another.They generally comprise flat kWh rates for domestic and general lighting-connections, block kWh rates for smaller industrial and commercial consumers,and time of the day kWh rates (whenever metering available) for the largerindustrial connections. EPE wishes to unify and modernize its tariff structureand funds have been included in the proposed loan for the engagement by notlater than September 30, 197h, of a consulting firm or expert in this fieldto study EPE's tariffs under conditions and terms of reference satisfactoryto the Bank (see Annex 4 for a broad outline of the terms of reference forthe study).

Training

3.09 Consultants would be employed under the proposed loan to examineand advise EPE on its organization and accounting and to provide substantial"on the job" and other appropriate training for the major changes necessary

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to improve EPE's management efficiency. EPE has recently received fromElectricite de France (Direction des Affair Exterieures et de la Cooperation)a comprehensive progrsm and cost estimate for the creation of a training school.The objective of the school is to train and to provide annually about 64 highertechnicians, including 16 for steam-electric plant. The details, schedule ofcompletion of the school, which will be constructed at Damascus, and finalagreement with EdF for assistance, are still under discussion, but it isE'Eas stated intention to set up a training school, substantially in agree-ment with the recommendations. For this reason the estimated cost of about £S4.5millimn has been included in EFE's investment program, and its gradually in-creasing running cost (reaching about £Sl million by the end of the decade)have been included in EFE's operational cost forecasts. The extent of poss-ible bilateral assistance is not known, but an amount of US$250,00 has beenincluded in the proposed loan to meet the cost of the training center, par-ticularly for steam-electric and gas turbine-electric training, which havethe highest priorities. It is expected that training under the program willbe initiated in early 1975, because adequate technical training of staff iscrucial to the satisfactory operation of the Mehardeh and Kattineh powerstations.

3.10 For the initial operation of the Mehardeh station, EPE will engage 4-5executives through its consultants, who will carry full responsibility for theoperation of the station for two years. The cost of this up to the closingdate of the proposed loan would be financed from the loan. The executiveswill be assisted by a number of chief operators who will be engaged, undera separate contract, through the contractor or contractors constructing thePehardeh power station. This would assure continued training of EPE staffresponsible for operating the station, which would be of the reheat type.

4. THE PROJECT

Description of Project

4.01 The Project is described in detail in Annex 5. It consists of:

(a) the first 125-MW stage of a steam electric power station;

(b) the construction of 4 new 230-kV substations and expansionof 4 existing substations; and

(c) consultants services and training.

An important objective of the Project is to achieve an improved organization,including administration, accounting and planning, to assure economical andreliable service.

4.02 The generating station is to be constructed near the M1hardehreservoir on the Orontes river. The selection of this site was based onthe availability of sufficient water in the reservoir and an abundance ofsubterranean sources; rocky substrata; and a minimum interference with

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existing irrigation and cultivated areas. The new substations are to belocated at Pama, Tartous, Raqqa, and Meskene. The existing substationsof Aleppo, Haos (power station Kettineh), and Damascus (Kaboun II and MidanII) will be extended.

Construction Program 1972-1979

4.03 The Project represents about 14% of EPE's total expected 1973-1979investment program (see Annex 12) anoiting to about US $460 million, which wouldcomprise additionally:

- some 1,300 km of 230-kV lines and four 230/66-kV substations,and further expansion in 66-kV and other subtransmissionfacilities;

- a second 125-lw unit at Mehardeh to be campleted by 1979;

- the installation of four 20-l gas turbines and additionallythe ten 23-lW gas turbines financed by a grant from ArabStates;

- the addition to Thawra of two 100-lw units, one in 1975 and onein 1976;

- construction of a new headquarter office in Damascus to be com-pleted by 1976/77;

- construction of a dispatch center in the new headquarters; and

- continuation of the normal expansion in distribution in the citiesand a stepped up rural distribution program, and initiation, by1975, of a distribution voltage conversion program.

Environment

4.04 Although the best technical location of the power station wouldprobably be inthe GhabPlain near the village of Shezar with its surfacecooling water and flat terrain, this location has been avoided for environ-mental reasons, which are: (a) the power station would be adjacent to anhistoric site, the ancient ridge castle of Shezar; (b) the siting of thepower station in the beautiful plain would be aesthetically out of keeping;and (c) the possibility of vapour and smog accumulating during atmospheric in-version. By locating the power station in the hilly and less cultivatedregion beyond the gorge of the Orontes, the impact on the environment hasbeen reduced to a minimum, although this location requires the siting ofthe power station on a rather flat hill, which will be visible from thetown of Mehardeh, about 2 km south of the site. The wind is predominantlyin an easterly direction but a 125-m chimney would assure diffusion ofparticulates. Nevertheless, sufficient space would be provided on the siteto install exhaust gas cleaning facilities if found to be necessary in thefuture. Forced draft cooling water towers, with a low profile, would ensureminiimun use of cooling water and avoid the heating of the Orontes waters.

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Complementary Projects

4.05 About US$18.8 million has been allocated from a USSR generaldevelopment credit for the construction of 230-kV lines interconnectingthe substations to be financed from the proposed loan. A study, financedfrom the credit, is underway for final design of these lines. EF envisagesthe completion by 1978 of an overlying 230-kV grid, having a total length ofabout 1,300 km, and it is expected that the USSR credit will cover the for-eign exchange cost of about 1,100 km of these lines. A contract has alreadybeen signed for 800 km of lines, which would connect Souedie and Hassakeh tothe Thawra substation, connect Thawra directly to Hama and double the linesHama-Homs and Hons-Damascus. A second contract is expected to be signedsoon for about 300 km of 230-kV lines. These lines would connect Mebardehto the substation at Hama (2 lines of 20 km each), the substation at Tartousto the main system, Lebanon to the Tartous substation, and connect Latakiaand Banias also to the Tartous substation. The latter line would, however,be operated at 66 kV until at least the end of the decade. All lines areexpected to be completed by 1977. Under the credit provided for the Euph-rates dam scheme, a second line connecting Thawra to Aleppo is presentlyunder construction. Engineering standards for these lines and future linesto be constructed, which are in accordance with those of the existing EIElines, are acceptable.

4.o6 Because the Mahardeh power station will become operational only in1978, the timing of the signing of the second transmission contract is notpresently critical. EFE has agreed to sign this contract not later thanJuly 1, 1975, ensuring completion by January 1, 1977.

4h07 The 300-MW Thawra hydro plant is expected to start operating byabout the middle of 1974 at a reduced head. The Government has decidedto transfer to EPE the ownership and management of each of the generatingunits and transmission lines to Aleppo not later than 3 months after theexpiry of the supplier's guarantee period for each of these generating unitsand transmission lines, with the exception of the existing Thawra-Aleppoline, the ownership of which is to be transferred together with the firstgenerating unit. The Government also will cause EPE to assume, not laterthan the date of transfer of the ownership of the third Thawra unit, suchreasonable share of the cost of the Euphrates dam as shall be agreed withthe Bank (see 6.17).

Estimated Cost

4eO8 The estimated cost of the project, excluding interest duringconstruction, is US$62.6 million, of which US$43 million would be in foreignexchange, based on the approximate effective parity rate at the time of theupdating of the appraisal of £SlUS$0.26. Annex 6 shows the estimated costof the project which is summarized in the following table:

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Local Foreign Total Local Foreizn To- £Sl,O000 ---- -- - -00

Power Station MehardehCivil Works 18,860 7,280 26,140 4,900 1,890 6,790Klectro-I-chanical Works 20,100 76,430 96,530 5,220 19,850 25,070

230-kV SubstationsCivil Works 8,250 1,100 9,350 2,140 260 2,400Equipment 5,970 22,470 28,,440 1,560 5,850 7,410Transformers 183Q 11840 13.670 h70 3090 3

Total Direct Cost 55,010 119,120 174,130 14 ,290 3 0,9 4 0 45,230

Engineering and Administration 4,510 6,270 10,780 1,170 1,630 2,800

Studies (YAnagement, Training,Tariffs) 2,000 4,350 6,350 520 1,130 1,650

ConIgencies(i) Pbsical: 15% of local and

7% of foreign cost 8,240 8,340 16,580 2,1140 2,170 4,310

(ii) Price 5540 27,L470 33.010 L 4O 7.130 8.S70

Total Project Cost 7L0 91J,550 2X0.O850 19.560 lA°°0° §.60

1 Foreign CostCivil works: 12% for 19714, 10% for 1975, thereafter 8%FBuipment: 9% for 1974, 7% for 1975, thereafter 5%

Local cost: total of 10%

Basis for Estimates

4.09 The above cost is based on the consultants revised estimatesas of December 1973. Physical contingencies of 15% on direct local cost and7% on direct foreign exchange cost have been added. To allow for futureprice rises, contingencies have been added in accordance with the note tothe above table. In view of the relatively stable local cost for laborand materials, only 10% has been included for local price rises, The con-tracts for Nehardsh will allow escalation up to a ceiling of 10%; the con-tracts for the substations will be for firm prices. (n the basis of theseestimates, the Mehardeh power station would cost about US$340 per kW, Thisappears high, but taking into account (a) cooling towers will be used and a20 km long oil pipe line is required; (b) construction will take place on anas yet undeveloped site; (c) facilities comon to both the first and secondunit are included; and td) import duties are relatively high, the estimateis considered realistic.

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Status on Engineering and Construction

4.10 EPE will continue to employ consultants on conditions anO underterms of reference acceptable to the Bank for final design, engineeringand supervision of the Project. The contract (or a separate contract, ifEPE so decides) would also provide for consultants to administer theconstruction and initial operation of the Project (see 3.10).

Procurement and Disbursements

4.11 All contracts to be financed from the proposed loan (except forconsulting services) would be awarded on the basis of international compet-itive bidding, consistent with the Bank/IDA Guidelines for Procurement, withwhich the Kuwait Fund has concurred. The Government has not requested localpreference for bid comparison, since Syrian industry does not manufacture therequired equipment. Bid documents have been issued for major items of powerstation equipment and suppliers additionally have been requested to quote foran option for the supply within 16 months of contract signature of a secondsimilar 125-MW generating unit and of the four remaining 230-kV substations(Souediq, Hassakeh, Detr-es-Zaor, and Kaboun I for Damascus) which are notincludea in tne Project.

4912 The Project would be jointly financed by the Bank and the KuwaitFund on the basis of a 25/18 proportion, and all requests for disbursementstogether with supporting documents would be sent to both institutions, andwith each authorizing disbursement of its proportionate share. The proceedsof the proposed loan would finance the CIF cost of imported equipment andmaterials, the foreign exchange cost of construction and erection services,the foreign exchange cost of consultant services and of training (includingequipment for this purpose), and a percentage, agreed upon, of civil workequivalent to the estimated foreign exchange component of the contractseThe estimated disbursement schedule for the proposed loan is shown in Annex 7.

4.13 Should the foreign exchange cost to complete the project be lessthan estimated, any undisbursed amount of the proposed loan should be reallo-cated to consultant services for the next stage of development or, if not re-quired for that purpose, the undisbursed amount should be cancelled at theclo3ing date. The Project is expected to be completed by mid-1978 and theclosing date would be June 30, 1979 to allow for final guarantee payments.

5. JUSTIFICATION

Introduction

5.01 At the time of the updating mission (February 1974) reinstitutionof power supply was still in its early stages, It is not likely that normallevels of sales would be reached until some time after the installation ofthe large gas turbine capacity has been completed. Based on experience inJordan in similar circumstances, for purposes of this report it has beenassumed that the level of sales and generation originally forecast duringappraisal will be regained in 1977. This assumption is considered conserva-tive; a period of 2-2.5 years being more likely. For comparison of theappraisal forecast and the present forecast see Attachment 3 to Annex 8.In view of the expected return to the forecast level of sales, the generalconsiderations of Annex 8 with respect to long term growth are still valid.

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Forecast Power Requirements

5.02 EPE's growth trend (least squares method) in sales since 1963 hasbeen high; 17.5% (13.7% excluding Thaura construction requirements, seeAnnex 2). Expansion lagged behind requirements, and the capacity of captiveplant increased accordingly. With the completion of the 300-MW Thawra bydroplant (1974) and the installation of 310 M1 in gas turbine by the middleof 1974, EIE is expected to overcome the effects of the war and to meet pent-up demand rapidly. A continued high growth rate is expected for the next 5years which, however, has been adjusted to reflect the short term effects inforecasting EFE's sales, revenues and costs (including investments).

5.03 The consultants have made two approaches in forecasting power re-quirements (see Annex 8). Firstly, correlations were investigated betweenthe use of power since 1963 and various combinations of population, GNP, andother indexes. From these, four regressions were retained and compared withvarious models for population growth, resulting in six models, which were ex-trapolated up to 1990. The most likely growth rate for 1972-1980 in accord-ance with the average forecast would be some 17-18%, about equal to the 10-year trend since 1963. Secondly, to an assumed "background" growth of 10%in the present system, they added (i) the estimated expansion of existingindustrial plant and construction of new plant in accordance with the nat-ional plan; (ii) curtailment in installation of captive plant and gradualtaking over of captive plant supply by EPE as old plant is not replaced;(iii) continued electrification of new villages and (iv) irrigation. De-pending on assumptions on firmness of plans to install certain factories,possible delay, initial and future requirements, this method results in 5forecasts, ranging from "extremely high" to "extremely low", The averageof these forecasts shows a trend roughly equal to the historic trend andthe trend assessed under the first approach, i.e. about 17.5% for EFE asa whole, and about 16.5% for the interconnected system alone. Forecasts offuture sales and required capacities are given in Annex 9, adjusted to re-flect the assumptions made for the period 1973-1976.

Short-Term Growth

5.04 Considerable annual increases would, however, occur in 1976 and1977 - when the growth rate would be respectively 50% and 38% - due to largerblocks of existing load (mainly oil company load, factories, and irrigationpumping) being connected to the EPE system. Annex 8, Attachment 2, providesthe forecast sales in the "original" interconnected systems and the regionsscheduled for interconnection. The growth trend for the forecast period inthe area served by the 230-kY system would be about 13% (about equal to the1963-1972 trend, excluding Thawra construction requirements, of 13.7%; seeAnnex 2), with an annual maximum of 23% in 1975.

5.05 The growth rates in the original interconnected system are quitenormal but the large block of industrial power to be connected creates avery high short-term growth rate. For this reason, during appraisal care-ful evaluation of the new loads was made and it was calculated that certain

- IIS

risks of i.slay6 aIn plant completion,, wer-optinistic &2nptions of ultimatedemEand, -tcc;ud not he ruled out an-d th n ost would b3obta:ied by r4tAcitx the consaltant's estimate Eor 197h k 30f, scoveringto the fovae-.v, el .ns in 19,8, to refect thesa i.ely &t. se annex 8,Attachusers 5 ticrh also ndicates the rev ied gfovecast resraKng f rc theupdating misMin) *arartheIss, as discassed, be1c*i it r.e ocnsidered pra-den4 4 tos <ha cbciaioms on the selection of the caacity of the -uits tobe .nstas,.ld Zn oh2aardeh, with respect to a farxtŽar red-tedo gzcn'ith raite.

Forcoast Saias

5.36 Th- Ja,cireasez in relative _zportace of saes to 21dcustrj d fLorlrr±gatwE is CLu&or:k bat/;ed the foflwowing f:tz-t £c. the '1.zte'I.'conneted

Syst,em (ioq stems constitute pa 'sently aovr, 1.0% of sls reus cigto some 15% by 1979):

GWIt~~~~~Y

Dntmstll. 115 52 21 9 29 360 110mv@Zer-i Sew,3nviiss 13 6 39 3Streei t igt 8 4 16 2 50idustry, OacwaeS zia. 78 36 339 2 2, 340 70Irrigatiao. era I hers 26 2 -

218 100 79 100 L320 100

2/ Tcludes .inaira construction, l45 1C:h.

Lo__ m cf..3rtives

5.07 Anmn o8, Attachment 4, shoas the appraasal forecast of max-mumdanand and generation, which after an acoeleraed growth Jn 1 15-1978 waassumd to t 8% annual3y,, together witbL the plrnt required for the periodup to 1988Q Fram 1978 onward, when den ouldb 'bse m 72st) 7 ', a spinningresert-e ha er asarmed of 100 W eua to one Thzwra 'Unit, Zhven thelack of atensat Se resources (See 2 .o)6 the onfiy reasonable tacbic.almeans of pra4.,rid-ig t1he needed additional capacity over the dednra term ismodersa, fafitcjent ctenz-electrie plant. To sel,ec, the proper =r.;t size forthe requi-ead cdzic.ons, the f o1io"ing reasonle z oidredf

Alternat1 - hsttallation of 125-W units &t 1bardeh, fofllowd hy. 250-2uinits,

Altenfattve it. - Tntallation of 63-W,vnits at Mehardah, followed by 125-1ai-t9*.~S

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To test the sensitivity of the selected program to changes in load growthrates, the comparison between Alternatives and }A was repeated but a moregradual growth was assumed. This reduced growth rate (Aniex 8, Attachments3 and 4) assumes a further reduction in 1979 generation from 1400 GWh to1300 CWh; essentially an extension of the historic trend. The reduc-tion assumes that mst of the large blocks of power to be connected to ElEwould not materialize early in the period. The probability of this reduceddevelopzent is small. For convenience, the alternative programs under thiscondition were designated Alteratives 3 and 3A. .Alternative 2, studiedin che ealier a~ppraisal, investigated the econaicj t:nŽ:;:. for interconnectionof the system. Subsequent events, including the addition of the gas turbinecapacity, render this study unneoessary).

5.08 The residual gas turbine capacity allows po'stponement of constructionof additional plant by one or more years. Ehis effect; is independent of thesize of plant to 'o9 ins-Lalled. System effects are sma:Ll and car be neglectedbecause, for capacity reasons, Mhardeh cannot be postponed by mome than oneyear. It is themefore appropriate first to lecide on the unit size and thento study the ef'fect of the gas turbine capacity.

5.09 Alternative 1 (125-M unit size at Mehareh) has been compared withAlternative 1A (63-Md unit size). The equalizing discount rate up to whichAlternative 1 would be more than economic is aboat 18%, indicating that 125-Bdunits, rather than 63-M units, should be installed in lAehardeh, There is asizable (about £620 million) difference in present value at t-he opportunitycost of capital (assumed to range from 10-12%), arLd a 10wer investmert (19741984) of £S55 million. An analysis shows this conclu,;ion to be insensitiveto variations in capital cost, thereby sustaining the conclusion.

5010 By assuming a lo-wer growth rate (see 5.07 above), tle f:irst 1Mhardehunit (either 63 YW or 125 V. Alternatives 3 ard 3A) could be postponed byabout 2 years. The equalizing discount rate up to whJich 125-V tsnit wouldbe more economic is about I5-5%. Although a-, the opportunity cast of capital.the difference fn oresent value is quite small (S2*. million. due i. prt tothe postponement) ,,he sensitivity ana].ysis shows that the decs:ion vo use 125-Piunits is insensitive to variations in cost,

5.11 A one Year delay in completing Mehardeh would require about 700 GWh(125 MW at an ass-mwed plant factor of 65%) to be generated by gas turbines atan additional cost; to EPE of about bS6.3 million for f'uel. The presentfinanciai cost of residua' oil to EPE is about US$2-2-30 per barrel, w.ichdoes not reflect -,ne cost to the econo.iy. Because at thi s time no reliableestimate can be mace wit.h _esoect to the economic costi of £uel. it was deemedappropria te to calculate trle present worth of a one-year delay in Mehardeh,and to de.ermine the break-even cos u of fuel . Zi'e present wortuh of' the delaywas calculatec aRS iS11- .mil ;lion, im.plying a break-even f'uel cost of about$6.30/bblv T'L.s Is considered to be below -he economic cost, and thereforeNehardeh should 3e conb-z.- UCted now.

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Rate of Return of Pmject

5.12 The rate of return of the Pr,jept is the discount rate whichequalizes the costs a4d benefits attributablv to the Project over itseconomic life, which has been talen at 25 years. Revenues from additionaloutput have been used as aa approximation of these benefits. These revenuesunderstate the benefits consumers receive from the Project, because it isconsidered that a tariff increase of reasonable magnitude (say 10-20%) wouldnot reduce demand significantly. The willingness of consumers to pay moreis also illustrated by the lact that a large capacity in more costly captiveplant has been ijistalled (and would be installed were the Project not ex-ecuted) to meet the electricity needs.

5.13 If a reasonable portion o; the transmisaion facilities is attributedto M$hardeh (onmmnsurate with the 125-MW capacity to be financed from theloan, see Annex 8, Sect.on E) together with a 2-year (1977/78) expansion ofthe dist7ibutioA program., the rate of return of the Project is about 17%.If all cpsts have Deep underestimated by about 10$ (conversely that benefitshave been overestimated by 10%), the rate of return would reduce to about15 %. On the other hand, assuming that facilities attributable to Mehardehhave been overestimated by about 20%, the rate of return would increase toabout 18g. Jr view of the above, the most likely range for Rate of Returnof the Projeect is 15-18%. The economic return Calc;lation was made usingMay 1973 prices. If oil prices are in1r&aOe to some $/bbl (which mayapproximate econolic levels) pnd tari{fs are increased commensurately (about20%), the results vould be 4nchange4 and are considered to be valid.

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6. FINNCIAL ASPECTS

Fina-zial Responsibility of EPE

6.00 Although ant autonus goverTmeit enity, BE has not made theaccounting progress nor reaped the benefits of the financial disiplineinherent in the exreise of financial responsibility. The respectiveMinistries of Finance and of Petroleum, Electricity and Mineral Resourceshave taken all major decisions on recmendations made by EPS for its ex-pansiom needs and, oe included in the official dewelopment planX the"Caisse de la Dette Pblic" (CDP) has arranged external financing for EPE'sprojects and has assumed responsibility for any resulting debt serwice.CDP also is required to provide any additicnal local funds as may be necess-ary for the projects.

6002 F oreign long-tem debts are only shown separately in EFE's balacesheets if the lerider requires the issuance of promissory notes. In al othercases the debts form parto f the o=nibus "CDP Current,Account" which also in-cludes all current transactions. When the central bank pays against a promis-sory note on its due date, CDP debits SPEts current account, and CDP also hasthe general right yo withdraw funds from EPE's bank account without priorreference to EIP whenever such funds are considered to be in excess of E1F'sneeds. These funds may be used by CDP for any sector of the economy. Suchwithdravals have so far been limited to relatively minor amounts. However,only with prior knowledge of uithdrawals and evaluation of the effects ofsuch withdrawals can EPE accept full financial and accounting responsibil-ities. During negotiations the Government agreed that EFE would be permittedto retain adequate funds for its expansion, operation, and debt service re-quirements. Funcds are included in the proposed loan for the employment ofconsultants to advise SiE on how to improve and modernize its accountingmethods and organization (see 3.05),

Accounting Sysisem

6.03 EFE's accounting system requires major reorganiZation, partly be-cause of its reliance on the Ministry of Finance (CDM) for all non-routinefinancial operations, but also beca-ise the accounting organization is frag-mented and records are keT i:n a nvuber of centers (Danascus, Hons, Aleppo,Deir-es-Zor, Latak.a etc.), whose procedures arn accounting principles are

not always consistent &nd whose level of e3pertise varies widely. Annuallythe infor=ratica erem all these centers is sent to Head Office in Damascus,wnaee it is co:n-olidated Into E2E's accounts. The resulting accounts aretardy and not puYlished, although they are sent to the Ministry of Finance,SEE has agreed to send audited accounts to the Bank within four manths ofthe end of the year in question.

604 Although the routine operations such as billing, stores accountingetc, seem to be effective, the level of the overall gerneral accounting and

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consolidated accounts is less satisfactor7. Head office staff are ulable toobtain from the records provided to them the additional explanatiom or furtherdetails of accomts or statistics that are needed. The consolidated accountsare therecre not necessarily complete or comparable frm- year to year and in-deed major assets and the corresponding debt or investment are excluded entirelyfrom the 1972 aecounts (see 6.08).

Audit

60co, The istry of Finance is responsible for auditing L 5:''s accounts,but in fact no e:ternal annual audit is routinely carried out and the lastauditt 4aken ias in 1969 when Ministry of Finance officials audited the ac-counts fer 719lU)53 1966 and 1967 and 1268 in one operation. Accounts for 1969through 1272 (the latest available accoLmts year) are unaudited. EPE hasagreed to have its accounts for each fiscal year audited by independentauditors acceptable to the Bank.

Isurance

6o06 LP M s.tres its major assets against the usual hazards (fire,explosion, third party etc.) through The Syrian Insurance Company, the soleGoverument isurarce agency, which in turn reinsures through the westernreinsurance marke"-t. EIE agreed to maintain such insurance coverage withresponsible insurers and against such risk as is consistent with appropriatepractice.

Taxes, Duties., Interest on Loans, etc.

6o07 EFE is liable for all corporate taxe,e (about 52u0 of taxableprofit after various adjustments for investment etc.), customs duties(varying fr^om about 614 to 27%) and social security for employees (1I% oftotal salaries and wages). Government development loans (see 6.25) aremade to ME Efree of interest" in accordance with Decree 3875 of December153 1968 so no interest has been included in ER 's historical accountsexcept as part Or the constraction cost in the case of foreign loans.

Historical Balance Sheets

6.o8 XMIs historical Balance Sheets for 1968 through 1972 are shownin .Annex 10 even though they are not entirely comparable from year toyear because consistent accounting principles have not always been applied.Up to 1972 the consolidated balance sheets do not include in the assets the8-W Rastan hydroelectric generating station nor the supply-area of Latakia'sgenerating and distribution facilities, with a net value of perhaps someLS 10-12 mlion. However, the sales and expenditures have been includedin the income statements from 1971. Latakia is "self accounting", but theavailable expertioe -is limited and no annual accounts have been preparedalthov.gh biJlling is carried out and records are kept of debtors and expanseso

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E1: has agreed that the Latakia system will be incorporated into EI:'sassets at a reasonable value acceptable to the Bank, with effect frmJanuary 1, 1975. The omission from the assets of Rastan, which belongsto the Ministry of Agriculture, is relatively uiimporbant, since it gen-erates very little energy (about 20 GWh In 1972) and the main use of thewater is for irrigation.

6.09 The recorded gross fixed assets for the 5 main cities are statedto be valued at their 1968 book values, the year when these systems wereincorporated into EIE. The other smialler systems were incorporated attheir appraised value at the date of acquisition, New assets (financedmainly from USSR or DDR credits) have been added at cost but include allinterest for the whole life of any loan or credit used to finance the assets.EPE has agreed that future interest or other charges on debt will be chargedagainst revenue of the year concerned, except for interest during construc-tion borrowed and incurred prior to cwmisioning of the asset, which rabe charged to capital.

6.10 Despite the excessive interest charges, the overaUl average grossasset value for the whole system (excluding Rastan and Latakai) is theequivalent of only about TS$320/kW installed. This is presumably mainlybecause of low USSR and DDR prices during the period of EEE's initialexpansion.

6.11 The effect of the initial low gross asset value on future averagenet fixed assets in operation will be minimal; 30% of the gross fixed assetvalue had been depreciated by 1972 and EIEVs growth is forecast to be sorapid that by the end of 1979, its gross fixed assets in operation vould beabout six times the 1972 figure (see 6.27).

6.12 Monthly electricity billing to the general consumer in the inter-connected system is prompt and cut off procedures are rapid, so that aat-standing receivables for 1972 were the equivalent of orny 10 days averagesales, By contrast the isolated systems and government, which includesmuch of industry, show outstanding receivables of about 220 dAys and 250days respectively. The above figwres are, however, aggravated bacause df

a dispute between ETE and the Beledi.yes (1mnicipaLities) of various villagesand small towns in the isolated system over the valuation of and non-pap?entby EF5 for the purchase of their local electricity systems The 'Ministerfor Belediyes" had instructed all Belediyes (whether in diapute with EPE ornot) to withhold payment of their municipal electricity bills for streetlighting or workse Since 1968, therefore, municipal bills have not bseepaid and by December 31, 1972 some £S14 million was due to EPE as againstEPE's dispute purchase price of about £S700 million, in May 1973 an agree-ment was reached with the Minister, under which the Belediyes would paytheir entire 1973 budget allocation for electricity imuediately (some£S2.5 million), They would also include realistic estimates of electricityexpenditures in their requests for the 1974 budget allocation. This agree-ment, and the intention that from 1974, electricity bils would be paid

- 21 -

pm-ptliy, -. confirmed by the Government and by MEZ during the negotiations.

ti , 1,3 The ckucastion of settlement of the 19?2/73 outstanding balances and.'elated d me.t by EPE for assets taken over is still beii4g discussed, widthe fs:>rsts aes-we these debts will be finaLized progressiv.ey through

974. Vir- n2agotietions the Government and E} informd the Bank that,.art,noug'. nei ag:nemnt had as yet been concluded with the 1"nistry of LocalAinlstratir;; it wras expected that an agreed procedure f.or liquidating

3he Outs+ U-I.nmg 4sts either by progressive paywnts from the ltrnistay' or byoLffset agr-&t W:' a aecount with the CDP, woud be daterifsd ihrti a> a

tostL t e, tben g dialo btween EPE and the inisatry.

ti*;. I EPL;_ real long-term debt is not Appartat from its 19721 balance 8heet(s 6.02 ' rA t1he £:525.6 million "Existing Government Loans (Foreiga)"merelS7 '3lects those debts covered by outstanding Promissory Notes. TheG-snvernit, 1Cu:mr<nt Account", which is really the CDP ,.ccount, i,ncludes thecher long-term. bi.rrowing for EPE and has been included urnder capital(1'ormatiort ASSedYS ';S25,4 million and "Construction Con:tributions" L:' ;)6 4:A1llion)i snce in practice, it would not be repayable unless EPE mere to

hiave evcess cash available. The debt-equity ratio of 12:88 does not there-fcr.z re'lect t correct position, but despite this, EPETs financing isstiil conservati-e. It is expected that thiese accoun3ts would be restateda- -wart of tVe consultant's work (see 3.05).

Hi.-b rical Operating Results

6.15 EE's >ncoom Statements, Annex 11 show thae its net operatin,gincoine 'has been increasing steadily from 1968 to 1972 with its rate ofr2turn rising froma 4.c0% to 8.4%. EPE's average sales price per kwh soldhas fallen from 14.4ps/kwh (USO 3.7) in 1968 -o 92,0 ps/kTh TUS¢ 3.1 ) in1972. Thz 1972 rate of return of 8.4% has been calculated after excludingthe operating surplus of Latakia (!SO.5 million) since the Latakia assetsam, -ot includad in the EPE accounts (see 6.00). Eotablisbments forreligious worshp receive free electricity by law, and the sales price ofelectricity 7 rovided to mosques and churches has been shown as an operatingexpenso., since th: equivalent amounts are included under sales.

6.16 No interest on long-term debt is included in EPE's historicalaccounits becau.se it has all been capitalized and, s1nce the CDP has acceiotdfull liability for the debt service, interest on credits not covered by pro-mi-sory notes ias been credited directly to the Government Current Account.

T, ara 3araration Facilitie s

6,17 Work on Uhe multipurpose Thawra irrigation and hydroelectricgeneration -:roject is already well advanced. The project is being constructedby the USPS under the aegis of the Ministry of the Euphrates and is beingfinanced out of a USSR credit to the Syrian Government. Preliminary estimatesof cost of t:e initial pow r component of 3 units are:

- 22 -ES (Million')

lnits 1, 2 and 3 (100 MW each), plus switchgear, civilworks for power hous8, gates, etc. approximately 17.5/t8 million Rables (about US$75 per W) -100

Thawra-Aleppo 220 kV transmission lines - 310 km- -------------- 25

Thawra and Aleppo 220 kV substations -------- 10

Portion of dam cost (in view of precedence of irrigationover power and the decreasing power benefits through time -see 2.03 - an allocation of about 10% of the estimated damcost appears reasonable) ---------------------------------------- 35

Total cost (equivalent to about US$166 per kW) ------ --------- 220

During negotiations the Government confirmed that the above assets would betaken over by EPE once construction had been completed so the above estimatedvalue has been included in EPE!s forecast balance sheet in 1976. Operationcosts have been included from 1975. The financing of the assets will be inthe form of a Government capital contribution (see 6.26).

Forecast Operating Results

6.18 EPE's forecast operating results (Annex 11) are likely to besatisfactory once the short term effect of the war has been overcome. Annex13 shows the major assumptions made in both balance sheet and operating state-ment forecasts. The costs of operating the training school (see 3.09) havebeen included progressively from 1975.

Rate Covenants

6.19 EPE's minimum tariffs are regulated by Law 8 Section 28 (seeAnnex 4) requiring tariffs to cover in addition to operational cost, a reservefor construction of 3% of gross revenue, and a return of 4% on invested capital(i.e. government contributions, CDP account, reserves and undistributed zu_lu&i.These requirements, however, can be diluted or waived by the Cabinet undezSection 30. EPE's tariffs have in fact met the requirements of Section 238 &-iare expected to exceed the minimum requirements by an increasing margin aitas %974.However, should tariffs be reduced to the minimum level required by Sec-tion 28,EPE's cash generation would be greatly reduced by 1978 (the comiplation of h.e-.ot),-wereby further increasing EPE's initial requirements for substaxntial iatiU;vernment funds (see 6.26). The Govexmment and EPE have agreed to xaint:aJn `41e-r-all alectricity tariff leve4.s at not Less than their 1973 levels threug th_)year 1977.

6.20 E?E's forecast operating results (Annex 11) are based en. e:zLstingtariffs, with the overall average sales price expected to reduce froir, the12.0 ps/kWh (US03.i) ±n 1972 to 10.2 psAfth (US02.6) by 1976 aue to the s.eepincrease in sales to industry resulting from interconnection. The ",net fixedassets in operationn" includes the 1S220 million for initial Thawra install ti-5ii

- 23 -

as from 1976 (see 6.17), but the missing Rastan and Latakia assets (see6.08) have not been included because of their still unknown values which,however, will be relatively small so that the rate of return will bevirtually unaffected.

6.21 EPE's forecast operating results for 1973 through 1975 areexpected to be severely affected by the 1973 war, which resulted in damageto its major steam generating station at Kattineh (as well as to itssmaller Hameh station) with the resulting requirement to restrict suppliesseverely from November 1972 until the lost generating capacity can berestored. This is expected to be achieved in 1974 by the installation ofgas turbines, but the operating costs for 1974/1975 (when the more expensivegas turbine fuel will be used) will be more than three times that of theequivalent steam generation. After 1975 when the reliability of the gasturbines will be less important, they are expected to operate on cheaperresidual oil, but even then their fuel cost will still be 50% higher thanthe steam generation equivalent. The reduced sales volume coupled with thehigher operating cost are expected to result in net operating losses for1973 and 1974. A positive rate of return can not be foreseen until 1975,when it is expected to reach about 5.0%. Thereafter the rate of returnshould improve and reach 9.4% for 1978 and 1979 without any increase intariffs above the present level.

6.22 The Government and EPE have agreed that, unless the 13ank shouldotherwise agree, in the year 1978 and thereafter EPE's tariffs should bemaintained at levels high enough to provide a rate of return of not lessthan 9% on its average net fixed assets in operation after transferringto EPE realistically valued Thawra generating assets. ibr the purpose ofthis rate covenant, however, the Thawra assets would be included from theyear in which Thawra first supplied 1,000 Gl4h or more for the EPE system(expected to occur in 1976).

6.23 The effects of the war on EPE's sales growth are uncertain, andthe forecasts have taken the conservative view that full recovery to theprewar forecast sales will not be achieved until 1977. At the presentlyforecast conservative estimate for availability of Thawra power in 1976and 1977 (1,200 G.ki and 1,600 GlWh respectively) EPE will still have togenerate substantial amounts of base load by gas turbines, and the ratesof return forecast for 1976 and 1977 are still only expected to reach 6.2%and 7.4% respectively. It should be observed however that EPE's asset baseis expected to include an excess generating capacity of 180 MW in 1976(see Annex 9) due to the emergency installation in 1974 of the additionalten gas turbines to counteract the war damage. This increases EPE's assetbase by some E135 million.

- 24 -

Financing Plan

6.24 EPE's Sources and Applications of Fhnds for 1972 (actual) andits Financing Plan for 1973 t,hrough 1979 is shown in Annex 12. It assumesa loan from the Kuwait Fund of US$18 million equivalent at 4% repayableover 20 years including 'I years grace period.

In sumnary the financing plan is as follows:

(ES Million)1973-1M79

Progam

Net Sources of FundsNet Cash Generation 776.5Less Change in Wbrking Capital (94.0)

6EY7.Less Debt Service (325.0)

Internal Resources after Debt Service n.7 20%

Iong-term BorrowingProposed Loan 96.2 5%Proposed Kuwait Fund Loan 69.3 4%Other External Loans assumed 1/ 496.7 28%Assumed local 3-year credit for transfer

of 7 gas turbines ex-Syrian refineries 67.5 4%

Total long-term borrowing 2/ 729.7 41%

Government Capital Contributions 2/ 735.0less assumed repayment (90.0)Net Government Financing 6UW 36%Consumers' Contributions 41. 3%

Tbtal Net Sources of Funds 1,773.4 100%

Application of Funds:Capital ConstructionThe Project 240.8 14%Other 1,5386%

Total Capital Construction 't700%

7lIicludes a possible Bank loan for ?ehardeh II.

2/ For details see Annex 15

- 25 -

6.25 Although EPE is only expecting to be able to finance 20% of its 1973through 1979 construction program from its internal resources after debtservice, EPE is not being requested to increase its existing tariff level atthis time in view of the extreme bunching of its investment program (partly dueto the war) and because, at present tariff levels, it would appear that EPEwould be able to meet the rate of return covenant (see 6.21) and to generateample funds for its re6uirements from 1978.

6.26 EPE's 1973-1979 financing plan (one year after the constructionperiod of the Project) relies heavily on government cash support (someLS 250 million in 1974-1976) to help finance its abnormally bunchedexpansion and reconstruction program, of which the Project is only 14%.The Government capital contributions include Thawra, 10 gas turbines, thetraining school and the construction of transmission lines financed underthe U.S.S.R. credit to Syria as well as "liquidity" cash grants to EPE asnecessary to enable EPE to finance its local currency construction, opera-ting costs and debt service. The Government has agreed to provide EPE withsuch liquidity contributions as may be necessary to permit EPE to retainfunds sufficient to provide reasonable working capital to meet its needsfor operating expenses, investment program and debt service. Glovernmentcapital contributions are without interest, but are termed "developmentloans" under Syrian law since they are considered to be repayable if surplusfunds are available for this purpose. EPE's financing plan includes1,S 120 million in such repayments in 1977/1979, but since the bulk of thecontributions are unlikely ever to be repaid in view of EPE's continuing needfor expansion, the Government's capital contributions have been included asgrants in the balance sheet and for the purposes of the debt service covenant(see 6.29). Annex 15 page 1 gives details of the government capital contributions.

Forecast Balance Sheets

6.27 A major feature of EPE's forecast balance sheets 1973 through 1979(see Annex 10) is the rapid growth in its gross fixed assets in operation,which are now expected to reach over iS 2.1 billion by the end of 1979as against the 1972 figure of iS 345 million. Annex 14 shows the expectedgross fixed assets as at December 31, 1979 including work in progresswhich comprises IS 75 million for a third unit at Ybhardeh.

6.28 EPE's equity is similarly expected to increase considerablyto over iS 1.4 billion by 1979 from LS 330 million in 1972, partly becauseof the net Government construction contributions (LS 645 million) but alsobecause of iS 390 million in accrued surpluses retained in reserves by EPE.

6.29 EPE's long-term debt (Annex 15 page 2) is shown as including theDDR debt for subtransmission construction, since the DDR issues promissorynotes for -which EPE is responsible to the extent that it has available funds.EPE's debt:equity ratio through 1979 is shown, but is not truly significantsince, apart from the Bank and other similar direct loans to EPE, theextent to which long-term financing is passed on by the CDP to EPE in theform of loan or capital contribution (see 6.26), will depend on theGovernment's decision at the time. The Government has agreed that allsuch financing shall be in the form of equity, grant or loan and tonotify EPE-of the nature and terms of all such financing to be provided toit by the Government. EPE agreed not to incur future long-term debt unless

- 26 -

its debt service for any succeeding year was covered at least 1.5 timesby its net cash generation.

7. AGREEMENTS REACHED

7.01 EPE has agreed:

(a) to engage consultants acceptable to the Bank by not laterthan September 30, 1974, (i) to review EPE's organization,accounts and procedures, (see 3.05), and (ii) to study andadvise on EPE's tariffs structure (see 3.08), and to discusswith the Bank the action it proposes to take as a result ofthese studies;

(b) to sign a contract not later than July 1, 1975, for theconstruction of 230-kV lines interconnecting Hehardeh withthe system by not later than January 1, 1977 (see 4.06);

(c) to continue to employ consultants acceptable to the Bank forthe further engineering design and supervision of the executionof the Project including its administration (see 4.10);

(d) to have its annual accounts audited and certified by independentauditors acceptable to the Bank (see 6.05);

(e) to include in its 1975 assets a realistic value for theelectricity system of Latakia (see 6.08);

(f) to maintain adequate records of its operation and financialcondition, in particular in terms of a supplemental letterreferring to Section 5.01 of the draft Loan Agreement, EPEhas agreed to charge all future interest or other charges ondebt against its revenue of the year concerned, except thatsuch charges on amounts borrowed for the construction of assetsmay be charged to capital if incurred prior to the date of com-mission or coming into operation of such assets (see 6.09);

(g) to maintain its overaU average electricity tariff at leastat its 1973 levels through tte year 1977 (see 6.19);

(h) that, in 1978 and thereafter, electricity tariffs would bemaintained at levels high enough to provide a rate of return of9% on its average net fixed assets in operation including a real-istic value for the Thawra generating assets transferred to EPEfroui the year in which Thawra first supplies 1,000 GWh or morefor the EPE system (see. 6.22); and

(i) that EPE shall not incur any further long term debt unlessits internal cash generation, after depreciation and taxes,but before interest, for the fiscal year before the debt isto be incurred, shall be at least 1.5 times the maximum debtservice for any succeeding fiscal year on all debt including

- 27 -

the debt to be incurred (see 6.29).

7.02 The Government has agreed:

(a) to transfer to EPE the ownership and management of each ofthe electricity generating units and transmission lines ofthe Kuphrates Den not later than 3 months after the expiryof the supplier's guarantee period for each of the saidgenerating units and transmission lines, with the exceptionof the first Thaura-Aleppo transaission line the ownershipof which shall be transferred at the time of transfer ofthe ownership of the first generating unit (see 4.07);

(b) to cause the EEE to assume not later than the date of thetransfer of the ownership of the third Thawra generatingunit, a reasonable share of the cost of the Euphrates Damas shall be agreed between the Government and the Bank(see 4.07);

(c) that EPE would be permitted to retain adequate funds forits expansion, operation, and debt service requirements(see 6.02); and

(d) to the extent that EFE is unable to finance the local orother costs of its authorized expansion program in additionto its operations and debt service, the government will makeavailable such additional funds as are necessary (see 6.26).

7.03 During negotiations the Government and EPE have informed the Bankthat the question of the pre-1974 accounts outstanding between EFS and theBeledJyes was under discussion, that a reasonable settlement was expectedshortly, and that in the future both mnicipal and government departmentsand agencies would be instructed to include realistic amounts for electricityin their requests for budget allocations so that future bills for electricitywould be paid promptly in accordance with the supply conditions (see 6.13).

7.04 In view of the above agreements and assurances and subject to thesigning of a loan agreement with the Kuwait Fund for a loan of the equiva-lent in Kuwait Dinars of US$18 million, the Project provides a suitablebasis for a Bank loan to EPE of UE$25 million equivalent to be repaid over25 years including a grace period of 4 years.

SYRIA

Etah ei-nnt Pablic de iiSe-triaite'

lihardch Thermal Power PFrojent

Sectr G.ena.ailang Piant E.isting and Under Conatrunttan

N1umber Installedoar) of of Capacity tear of Capacity (o1n)

Station -litR (974) FPel lyop Conelnooung 1972 1975 hbrrnlos

Etohlisenmert lThlique ie l'El7Eti -et_ _

Ulewe: MAi. Pm 1 6.15 -esidu.Y 11)97 12.5 12.5

Air 'rell 1 13.75 R-ialuia 1963 13 I1 13.5

m0 - un h 3 5 Reeiduel 1954_61 15 - 3 Stlo tor. leetecynd, repair occrred

came_ 2 15 R-eiddal 1Q52 30 - to be a-eooo-ic

lions Y.attineh 2 15 Residue3 1964 30 30 lllgbrl.R damnoed. reluror: i.o er -oSr e gh-ly -- r-

hIattloel 3 3O Ieoilal 1364 9O So virst Dit le -pe-ted . .e repaIred b., nOd-i27%e

131 16 n eord by eid 1975; third ,i receir eerier.:

Tlamonna Soak Sail OEmada ? 3. S 1951 7.0 !.0

iaa!:eolem bRosan 2 3.9 _ 1767 7.0 7.0

lla0 a Inezar 1 3.0 - 1971 5.0 3.0

3hsiar 1 5.0 1 1971 7.5 1.5

Ilaera (7:alr-te- I oTnawra3 100 _ 1974 - 591.0 Ie::avreem h-Ieee, od rhe eupbro. - =

22.0 322.0 3 -ooans creed to E17 Ir 19-4k77

P~~rma-no: .o atoxlo h varloce Dieel, 2II before 1953 d., 6.o

Aleppo 4alik Esi-al 8 verioua dlesnl/c:l lefore 1I59 9.n 9.0

11lyi7- eyctes. V -'are.: 0?n b-anice Di-l/Oil varion 61.0 80.0

76.0 9.5.

San TurbianeThewa- Tha-ra 1 23 Diosel 1974 . 23

Aleppo bhoik Said 2 20 Diesel/Residu.l 1974 - 40

abalah 1 23 Diesel/Residual 1974 _ 23

Onion Aic tree 1 23 Diesel 1974 - 23

Subst. Heanh 1 23 Sienol 1974 _ 23

Hmms Gdeide 1 23 Diesei/R-sidual 1974 - 23

Peneenee 1 23 Die-ee/Ra idsnl 1974 - 23

Lmnim Sant. tatakia 1 20 Diosel 1974 _ 20

Damascuso SLOan 11 1 20 Die-el/Res-dnnl 1974 - 20

Midge Ut 1 23 Diesel/R-eidual 1974 - 23

Kabn.. II 1 23 Die-el/Re-odont 1974 - 23

Deamon 2 23 Dieiel/Roeidunm 1974 - 46

31O

lnterenneotien tebnnon 1972 25 - Cepaeity -nly aeaileble d-ring 1972-1974

Total ePE T3h14 7y-3

Captive Plana

Neot onnacted tn 1Pm arlawe unlearn earawon Isnarl censou. 394 425 Ce-.us (fiet) 1971 inifr-nat-n, which dora nont for 1972:

addltilen being enbed by Governmn- t in cases There itE nopr

eould bn .more aaeanoe.

C-o-nnetd to EPE -kriana uainown melons Dies-l roas 64 75 Stnedby plant

r58 502

GsT ,brbn

eot -n-neted o EPEE-riyeh EUri-eh 1 10.5 frur 1973) - 10 Inaeran-ne tion ia 1976

Esriyei 1 20 trade 1974 20 Seaeenaogretino In 1970

ln-osok.h Onsenini 1 10.5 Cre 1971 - 10 Inr cnnec tio oa 1977

Soaedie Souedie 2 14.5 ins 1973 - 29 Inrconneotion in 1977

Souadie 1 20 ron 1974 . 20 .n.e.a t-no in 1977

Connectnd to OU 589

Homs Refina 2 20 Re-ido1l 1971 - 40

Tlti1 Cpati-e Plant 4598 29

Total toran 1772 1 172

February 1974

ANNEx 2

8S RIA

wabIsaesoeC taP-bli do 101 eatrlolte

'keLordCOh Th-rme] Power Preleet

Power eScter "iCe elsec. £veltitieo

1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 Trend 7 Obsereaeioos

A. Etabli-ae-eot Public de l'Elecricite

1/11.Ioeeroooneawwd Svstemr

a. SalesDomestic L_,1. 123.5 135.7 141.4 146.3 157.6 179.4 192.9 207.2 216.8 5.4Poi eae oIdosery 60.6 75.0 87.0 70.2 70.6 65.3 87.8 94.6 108.8 135.1 10.5Ooeerwaeow Iodootrr 16.8 19.5 32.9 55.7 53.2 57.7 69.4 84.5 88.5 139.9 25.2Goveroonet S.Loi-es 13.0 14 5 16.3 18.4 21.5 24.9 30.0 32.5 36.2 39.0 11.9llalltCass 1.2 1.1 1.0 0.9 0.8 0.8 0,6 0.6 0.5 0.5 -lorenetleehocg 8.1 8.4 9.2 10.0 9.3 10.3 11 5 13.1 12.C 16.6 8.6Naeeooel 0il wOO.aOO 14.2 50.3 56.8 64.4 13.2 e-,L enweow '1-9) welyThav 4z e 4 2 6 2e 13,6 81,3 122.7 144.8 - Owcasional topply ole

Others 4.3 4.1 2.6 2.3 2.3 2.5 0.4 0,4 0.4 0.3

lotol 218.4 246.1 284.7 '98.9 304.2 319.1 407.1 550.2 646.1 758.8 17.5 13.77 ecolodieg Th.a.tseoeo.oc-ior

b. Generation (GWh) 270 306 355 377 387 429 516 692 813 959 17.6

c aoleom Demand (MW) 68 75 83 88 92 105 124 143 165 170 10.6 1971-72 swpprtaard

d. ieseolLed Capawile (9W) 122 137 137 135 135 135 219 219 227 227 - l1-lodig 1.ebaooe waotectlw

o. Load Fa-e-e (7) 45 47 49 49 48 47 48 55 56 64 - 1972 Ietlated doe to load sperwasio

E. Plac Factor (Il) 25 25 30 32 33 36 27 36 41 48

g. Losses ( ) 19.1 19.6 19.8 20.7 21.3 25.6 21.1 20.5 20.5 20.9

2. solated Irsteos

a. SaLesDoesttiw 24.2 28.7 30.3 346. 39.4 42.2 48.2 51.7 52.1 58.9 8.5cae-et 1 allld-srre 4.9S 6.:3 7,1 8. 10.9 11.4 12.4 13.8 _16.0 19.6 15.9

Total 29.0 35.0 37.4 43.6 50.3 53.6 60.6 65.5 71.5 78.5 10.5

b. Ceoeallor (GWh) 07 51 61 67 68 68 7 85 93 103 9.0

c ow Deoand (MW) 15 17 18 21 27 22 20 28 32 34 9.4 0sHore sad woloeldet demand

d. 'nstalled Copa-iee (MW) 28 30 33 41 43 .2 45 57 59 61 -

e..ppreee.mate Toad FPato-(%) 36 34 39 36 35 35 35 35 33 35

f. Appeoes-aie Place Fa-eor (11) 19 19 21 24 18 18 20 17 18 19

g. L-OCs ('G) 38 31 39 35 26 23 21 23 23 24

4tl0 Estimateat 1000h aewoLIy

b. I-astlled CapacIty P-eliminarey Cc.usParpeog 266 IneLrft-a ... VaallabloIndustry 112 ioe 1971 Lnly

i! Data eovCr those ctoters Chat Core iterc -onn ted n 196E

Fobr--ry 1974

ANNEX 3

SYRIA

Etablissement Public de l'ElectriciteMehardeh Thermal Power Project

Outline of Terms of Reference for Organizational Study

The study shall be executed in 2 stages, the first a "diagnostic"stage, the second the "implementation" stage.

Stage 1

(i) EPE's present organization, work methods and procedures shallbe studied with the specific purpose of defining the requirements for improve-ments in the service to consumers, installing concise and modern utility ac-counting and administrative methods, improvinig planning and design of facilities,improving operational and maintenance services, and developing the organizationto achieve these objectives,

(ii) A report shall be prepared on the present conditions within EPEand retcommendations for action to be taken to achieve the objectives withina period of 2 years.

(iii) Detailed draft terms of reference for Stage 2 of the studyshall be prepared, based on the recommendations, for the implementation of therecommendations.

(iv) EPE, in consultation with the Bank, will prepare final terms ofreference (including schedule of actions) for the reorganization and Stage 2of the study.

Stage 2

EPE will institute any needed improvements in its structure andmethods with the assistance of its consultants, in accordance with the termsof reference. The consultants shall study the details of the requirementsfor changes in the organization, work methods and procedures, and preparecomprehensive reports and/or guidelines for each specific item for whichwork rules are essential. These are to serve as reference guidelines to beused in actual operations. The consultants shall assist EPE in the implemen-tation of the reorganization, providing on-the-job and other training to EPEpersonnel, and if necessary provide staff for interim heading of a departmentwhile the designated chief is being trained.

ANNEX 4Page 1 of 2

SYRIA

Etablissement Public de l'Electricite'Mehardeh TherMal Power Project

Tariffs

1. Although some efforts have been made to reach consistency in thecalculation and application of tariffs, the present tariffs still reflectthose inherited from the original companies presently forming EPE. Theyare widely diverse in the various regions. Discounts have been imposed bythe Government for Government establishments, the army, some industries, andplaces of worship have free electricity. The average level, however, appearsadequate to cover all costs, and to ensure a reasonable rate of return, once thsfinancial after-effects of the war, and the backlog of construction needed to muetdemand and to restore adequate service quality, has been overcome.

2. The basic requirements for tariffs are set forth in the 1965 lawNo. 8 creating EPE. Under Section 28 EPE is required to charge rates tocover at least:

(a) operational costs including depreciation;

(b) a reserve for construction equal to 3% of its totalgross electricity sales and other income; and

(c) a return of 4% on its invested capital (i.e. Govermentgrants, CDP account, reserves and undistributed surplus).

Section 30 of the same law stipulates that EPE cannot waive the requirementsof Section 28 without approval of the Cabinet which, however, can instructEPE to waive requirements (b) and (c) above. If, however, EPE is instructedto waive requirement (a) thereby causing a shortfall in meeting the relevantcost, the Minister of Finance must arrange such shortfall to be met fromthe Government budget.

3. In 1967 Electricite de France (EdF) completed a tariff study forEPE outlining the basic principles for calculating tariffs, which since thenhave been applied for the setting of major industrial tariffs. Subsequently,the Minister has issued draft regulations for the setting of tariffs, which,however, have never been implemented. In the outlying systems these draftregulations are generally applied, but in the interconnected system no changesof substance have been made to follow those regulations, primarily becausethey are not sufficiently detailed and flexible.

4. Although there are many digressions from the norm, Attachment 1to this Annex gives a general impression of the existing tariffs, which haveenergy charges only. The general pattern of tariffs comprises:

ANNEX 4Page 2 of 2

- Flat kWh rates for domestic and general lightingconnection

- Block kWh rates for smaller (say less than 10 kW)industrial and commercial connections in low tensionnetworks

- Time of the day kWh rates for larger industrial andcommercial connection (L.T. and H.T.), whenever metersare available.

5. in the last three years revenue per kWh averaged as follows:

ps/kWh USkWh

1970 12.7 3.21971 12.9 3.21972 11.9 3.0

A preliminary consultant's estimate indicates that short-term marginal costof supply is in the order of 5-6 ps/kWh.l/ Because variable charges are inthe order of 2-2.5 ps/kWh, even the lowest rates (see Attachment) for largeindustries appear to be on an acceptable level.

6. From the above it follows that, although the general level oftariffs appears appropriate, EPE's tariff structure is far from comprehensive.Unification, and modernization by the introduction of special industrial andthe possible introduction of a socially oriented and special domestic tarifffor the poor with low consumption, together with concise calculation andapplication of tariffs, appears appropriate.

7. EPE, on behalf of the Government, charges its customers for thefollowing taxes, which are paid together with the bills:

(a) 10% of bill, for the army;

(b) Tax stamps, graded in accordance with total bill amount;

(c) 0.5 piaster/kWh, for school construction;

(d) 10 piaster/bill, for rural development;

(e) 10% of bill, for municipalities (with exceptions, forinstance Aleppo, and the center of Damascus); and

(f) 1 piaster/kWh, for municipal services.

8. Attachment 2 to this annex gives broad outlines for terms ofreference for a proposed tariff study.

1/ This does not take into account the effect of gas turbin 4opratioa dueto war damage, which may increase short term marginal coat by aom 2.3 pu/kiih.

SRIA Annex 4Etablissement Publid de 1'Electricite' AT=JLMWT 1_ Nhardeh Thermal Pbwer Project I l

Existing Tariffs

Domestic, General Lighting, Small Commercial piaster/kWh(10ps t US¢ 2.5)

Outlying Systems

- Latakia, Tartous, El Bab, Massiaf, Deir-es-Zor 22- Banias 20- All Others 24- Government, Municipalities, Army discount: 10%

Interconnected System -… ----------ps/kWh--------

General Municipality Government A*my

- Damascus 19 13.5 17 16- Aleppo 19 Changes yearly 19 19

in accordancewith actual costs

- Homs 19 16.0 16 16- Hama 19 16.0 16 16

Streetlighting ps/kWh

Outlying Systems

- All 18

Interconnected_System

- Damascus: - 300,000 kWh yearly gratis- first 350,000 kWh, monthly 13.5- all excess kWh, monthly 12

- Aleppo: changes yearly in accordance with real cost- Homs: 7- Haina: 7

Small Industries.

Outlying Systems -----------ps/kWh ---------

LT HT

----------kWh ----------- (10 kW )1O kW All0-250 LT;0-500 HT 19 16 14251-500 LT; 501-1000 HT 16 13 11>500 LT;>1000 HT 14 11 8

If meters provided:- peak time 24 15- day time 16 11- night time 10 7Government and army discount: 10%

ANNEX 4ATTACIO=NT 1Page 2 of 3

Interconnected Systems

Damascus /--------- p/kP h -------

<3.68Kg W3.80 KW

All 12 16If meters provided:- peak time 23- day/night time 16

_----_------ps/klVh---- --

Aleppo (30 KW >30 KW

- peak time 14.5 1- day time 7.5 7- night time 5.5 7

----- -PsAwh ----- _-_

General Contractual

Homs and Hama

block size varies with supply: - first block 12- second block 8- third block 6minimum h0,000 kWh annually:- first 60,000 kWh/year 5.5- all excess kWh S

Larger Industries (5.5 kV; 20 kV)

Outlying Systems: see Small Industries

Interconnected System

The variation between the various contracts is so large that a tabulationwould indicate little, except the extreme diversity; kWh charges range asfollows:

…psAJWh--------

Minimum MaximumDamascuis 5 5-22Aleppo 6.6 15.6Homs and Hama 3.0 5.0

ANNEX 4ATTACI3NT 1Page 3 of 3

Heavy Industries (66 kV, 230 kV)-

--------------- ps/kWh --------------

Supply from:

P.S. Busbars 220 kV 66 kV

Type of Operation: Normal Continuous Normal Continuous Normal Continuous

- peak time 10 ) ll ) 13 )- day time 5 ) 5 5.5 ) 5.5 6.6 ) 6.6- night time 2.5 ) 2.8 ) 3.3 )

Army and Government, Power

Damascus ps/klih

Army and Government 13

Aleppo

Government 15Army 13

ANNEX 4Attachment 2

SYRIA

Etablissement Public de lVElectricite

Mehardeh Thermal Power Project

Outline Terms of Reference for a Tariff Study

Stage 1

EPE will prepare a plan of action for the necessary measurements,interviews of consumers, and gathering of statistical data, and shall engagea consultant to visit EPE 1-2 months after the preparation of the plan ofaction has begun, to review the plan and make recommendations for the finalplan. The consultant should also make a preliminary study of EPE's tariffsand practices and prepare a report on his findings and the proposed planof action.

Stage 2

After a suitable period (say 6 months) the consultant shall visitEPE again to review the results of the action taken during Stage 1, makerecommendations for any further action rnecessary and prepare a reportpresenting his findings. His main task shall be to review existing tariffsto determine whether they adequately reflect the structure of costs in thepresent and planned EPE system and to make recommendations on the projectobjectives for any changes in tariffs designed to align more closely therates charged with the costs of supply. He shall also assist in draftingterms of reference for the next stage, which shall be a study by a tariffexpert to determine how the proposed changes in tariff structure should beimplemented in practice, and make recommendations regarding the detailedschedule of rates to be adopted.

Stage 3

The tariff expert would assist EPE in implementing the proposedchanges in tariffs.

AN-NEX 5Page . of 3

SYRIA

Etablissement Public de l'Electricite'Yehardeh Thermal Power Project

Project-Description

1. The Project comprises a 125 MW Steam-Electric Power Station at the1ehardh reservoir on the Orontes, about 20 km north of Hama, eight 230-kVsubstations, located at Tartous, Aleppo, Hama, Homs, Damascus (two: Kaboun IIand Midan II), Raqqa and Maskene, and consulting services.

Mbhardeh Power Station

2. The proposed new thermal power station will be constructed a fewkilometers north of the town of Mbhardeh near the flood control reservoir(about 60 million m3 storage capacity) of the same name, at an eleva-tion of about 270 m, 70 m above the Orontes river and the Ghab plain.The station was originally planned to be constructed at Banias on the coast,but after the October 1973 war, the Government has decided to relocate thestation inland. The site was chosen because of: (a) the availability ofsufficient water for cooling purposes in the M1hardoh reservoir and abundantsubterranean sources to meet requirements even in extremely dry years, (b) itslocation (on a relatively flat plateau) interteres least with the irrigatedand cultivated area in the neighborhood since the site is rocky and not usedfor agricultural purposes, and (c) the amount of rock to be removed is minimal.Although the capacity of the power station is to be 125 MW initially (with anoption on a second unit ol 125 KW to be completed 12-16 monthB later), theultimate size of the power station is only limited by the availability ofwater. Development up to 500 MW appears possible depending on the availabilityof subterranean water sources. The extent of these sources is still to beinvestigated, but they are expected to be high.

3. The generating unit will consist of a semi-outdoor reheat type 125 MWboiler/turbo alternator set, together with all ancillary equipment, includingthose common to the second unit. The boiler, which will operate at 130/125 barabs. (1885/1815 psi) and 545/5450C (10050F), will be designed to burn residualoil. The fuel will be transported by railway tankers to Hama from the refineryat Homs. Between Hama and 1ehardeh a 21 km 150 m oil pipeline will be constructed,with railway reception facilities at the dispatching end. Stocking capacity atMehardeh will be subterranean, two tanks of 1o,o0o m3 each for the first unitproviding it least 30 days requirements. For starting-up and banking purposestwo 1500-mr tanks will be provided for light industrial oil. Te firing aislewill be incorporated in the building housing the turbogenerator and auxiliary

ANNEX 5Page 2 of 3

equipment. The solid state controlled hydrogen cooled generator will rateabout 150 MVA at a power factor 0.80, and operate at 3000 rpm, 50 Hz, 3 phaseThe generator will be connected to a 160-WVi outdoor transformer for step-upto 230 kV (for the generating voltage the manufacturers approved standardwill be accepted) in unit connection.

4. For standby purposes, the house service supply (5.5 kV/220/380 V)will be connected to the second 66-kV line presently under construction betweenHama and I*hardeh and the existing Shezar hydro station nearby (operation ofwhich normally depends on irrigation requirements). Additionally a standbydiesel plant will be provided. Water for boiler and drinking purposes will betaken from wells to be constructed and treatment plants will be provided forboth purposes. Except for office space, etc. required for operating the plant,all other auxiliary service rooms and buildings will be separate from the mainbuilding. A total of about 50 housing units will be provided for senior staff.Some personnel are expected to obtain housing in the nearby town of I*hardeh(15,000 inhabitants).

5. The cooling system will be of the wet type, using forced air coolingtowers, requiring about 0.3 m3 /s at full load per 125 MW unit (annual water useper unit about 5 million m3). The cooling water intake will be at two levelsin the reservoir (and, once wells have been sunk, at the appropriate groundwater level) to allow for minimum cost wet and dry season operation, near theM1hardeh dam. Two pumps will be provided at each level. Maximum pumping head isabout 60 m.

6. No means of cleaning exhaust gases would be installed because the windis predominantly to the east. A chimney 125 m high will be constructed whichensures that exhaust gases escape about 200 m above the surrounding cultivatedareas. Sufficient space will be left between boiler and chimney to allow futureinstallation of exhaust gas facilities, should they be required.

230 kV lines and Substations

7. Each of the units will be connected to the substation Hama (a distanceof about 20 km) by means of a 230 kV line, i.e. the unit connection comprisesgenerator, step-up transformer and 230 kV line up to Hama. Each substation willgenerally comprise a 230-kV double-bus bar system (part of which may alreadyexist in some locations), one or two transformers 230/66/15 kV or 230/10 or 6 kV,70, 50 or 40 MVA, metering transformers, and the necessary line bays. Allequipment, except line isolators, would be operated from a control building.A detanking building is to be provided in roost cases for maintenance and repair.The 230-kV neutral will be earthed directly, and the 66-kV neutral 'by means of aneutral reactance. Line charge compensation reactances will also be connected atthe tertiary of the transformer. Basic provision will be made for communicationfacilities and future telemetering and control (the dispatch center will beconstructed in Damascus under the next development phase).

ANNEX 5Page 3-of 3

8. The construction of the 66-kV part of new substations or theextensions to existing ones are being financed by DDR credits.

9. The Attacbment shows the main equipment to be supplied under theBank Project. Reference is made to the map for the location of the varioussubstations.

SYRIA

Etablissement Public de 1'Electricit 6

)&hardeh Thermal Power Project

Project's 230-kV Substation Main Items

BusbarTransformers Line Transformer CouEling

230/66/15kV - 230/10 or 6kV By BaDB Substation7077O975O2K 5050/ 6MfA 40/40//MVA 200_V New Extension

Tartous 2 - - 2 2 1 x

Aleppo 2 - - - 2 1 x

Hama 2 - - 7 2 1 1

Homs (Kattineh) - - - 1 - 1 x

Kaboun II (Damascus) 1 - 1 2 1 x

-Midan II (Damascus) 1 - - 1 1 - x

Raqqa - 2 - 4 2 1 x

Moskene - - 2 2 2 1 x

January 29, 1973

Ztmblioooot PUbIto t ISUotriolt.rrOed Th.ral Po. Floet

£03.85 o00sn

L-1,0 Coot Po00.ig CoSt __Co Losi Co. o sC Total CosC-0,00 ------- --- ~

A. Pov r Ototoc Wohardoh

1. Civtl Wor-k0od *nd co ... ro-d 1,560 - 1,560 405 - 405Bu1ld010 3,770 760 4,530 980 195 1,175Oo,o,d.08.oo. 2,960 330 3,020 700 85 785Chi.."7 1,350 210 1,560 350 55 405IloosiO 3,6850 1,720 7,570 1,520 445 1,965Fo *nd ot. ondu4it 3.640 4.260 7.900 945 1.110 2.055

Sobtotol 18,860 7,280 26,140 4,900 1.890 6.790

2. MOl- 'l..tBoiler 4,640 23,150 27,790 1,205 6,010 7,215Boiler oooili.el 690 3,690 4,380 180 960 1,140CooliS W. tr folltties 2,910 4,740 7,700 770 1,230 2,000W.t0r tr .t.. t f..ilitiso 1,920 4,610 6,540 500 1,200 1,700T-rbio wi.t. 2,620 13,6560 16,270 600 3,545 4,225I-birosolieo 3300 1,540 lt100 400 5(0Workshop oqoip,nsot 170 1,110 1,280 45 290 335000005 350 2,840 3,190 90 735 825Fool ,.10t0. ftoiliti.s 2.000 4.510 6.510 520 1.170 1.690

Sobtotol 15,750 59,640 75,590 4.690 15,540 19.630

ZOOH.rotor 1,560 6,160 7,720 405 1,600 2,005Cl,,ootor Avoilirie. 120 670 790 30 170 200Cpntrol boIrds 1,000 3,090 4,090 260 8DO 1,e60

ts.--or 00ilit .. 770 2,740 3,510 200 710 910Cros 340 1,300 1,640 90 340 430Spr- 40 4050 4!0 10 120 130Tr-sfor- 520 2.180 21709 135 705

S.btot1 4.350 16.590 0 1.130 43i 5440

Sobtotl Dir.t Co-t 38.960 83.710 122,670 10.120 21.740 31.860

4. E.Aio-eeioo sd Adt.i trmtion 3.310 4.770 8.080 860 1.240 2 0100

5. Coneti-l nie5Shys.i.l 152, Lo.. Coot; 7% forog ig o-t 5,850 3,000 11,730 1,520 1,530 3,050price / 3.920 19.300 23.220 1.020 5.010 6.030

S00t0t0l ContiD .c.i.s 9.770 25.180 34,950 2.540 6,540 9.080

T0t0l (Al) P-or St.tioo Mgh-rd.h 52,040 113.660 165.700 13.520 29,520 43.040

B. 230 kV Sob.t.ti-oO

1. AloDpOLond sd .. es. ro-d - - -Civil work- 300 170 470 80 40 120Eq1ip00t 540 2,100 2,640 140 550 690T Sotot-l 360 2 430 90 540

Stbtot-l 7 i00 5.540 310 1.130 1U

2, H_-L_nd _od c _cos rosd 460 _ 460 120 - 120Ctvil Works 1,890 170 2,060 490 40 530Equipnent 1,270 5,890 7,160 330 1,530 1,860T-sofOC-OO 350 2 530 00 570 660

Sobtotl 3912210 1.030 2.140 3.170

3. H-nnd and rcod s ro d

Ctvil 1,rks 120 80 200 30 20 50Zq.ipont 280 1,280 1,560 80 330 410Traoofon,rs .

Sobtotal 400 1.360 1.760 110 350 460

4. TsartusL nd sd .o.... .o.d 3oo 500 130 130Civil work 1,600 170 1,770 420 40 460EquiPOOCt 620 2,910 3,530 160 760 9n0Tr sfotor. 360 2.150 2.510 90 560 650

Sobtotl 3,080 5.230 0.310 J£ 1.36 2.160

5. n-..- (8b.5o I, Midon II)LI d -d -c0*0 roedCivil -ork 780 170 950 200 40 240Eqioi000t 860 3,820 4,680 220 990 1,210T-fqut r 360 2.180 2.540 100 570 670

S.btotl 2.000 6 170 8.170 520 1.600 2.120

6. Rs.MLoa s' d ccO-- rood 200 - 200 50 - S0Civil orko 1,200 170 1,370 310 40 350Equippent 1,400 4,080 5,480 370 1,070 1,440Tisoof.onr. 200 1.740 1.4 00 430 500

S.btot.1 3.0000 5.990 8.990 780 1.560 2.340

7. lbokep eL-rd s-d ... ss. Io.d 200 200 s0 - 50CtviI -orks 1,000 170 1,170 260 40 300Eqoiprtot 1,000 2,390 3,390 260 620 880Tr-ro-rs 200 1.520 1.720 50 400 4;0

Sobtotol 2.400 4.080 6.480 620 1 060 1,6SO

S.btotl Dir-ct Cost 16.050 35.410 51.460 4.170 9.Z00 13 372

8. ERoio-rins ad Adoiist-tiL 1,200 1,500 2,700 310 390 700

9. CortioseoriesPhy.t.sl 15% roS- ro-t; 7% for-itm ro.t 2,390 2,460 4,850 620 640 1,260Price V/ 1620 8.170 9.790 420 2.120 2 5

S.btot.l C-otimmeoci.. 4k!10 10.630 14.640 1.040 2.760 2-800

Tt1.1 (0): Sob.ttiooo 21,260 47,540 68,800 5,520 12,350 17,870

C. Studib.. tc.1. I l08oont rorooltanto 600 2,280 2,880 160 590 7502. Tor.iag 1,000 940 1,940 260 245 5053. tp-rt- 400 1.130 1.530 10 295 395

50t0l (02 St04tt 2.000 4.350 6.350 520 1130 LM

SOTAL 700.2CT I _05 75.3W5 165.550 240.850 9!250 43000 62.560

U/ Lordl Coot: 10%Froigs Coot 1974 1975 1976-1979

Civil Work. 27% 10% 0%71quip_ort 9% 7% 5%

SYRIAEstablissement Publde lElectricite"

Yehardeh Thermal Power Project

Schedule of Estimated Disbursements

DisbursementsBank Fiscal Year CumualLtive % Uadisbursed

and Quarter ----- US$ '000 equivalent---

19 7kd75December 31, 1974 2,300 91March 31, 1975 2,900 88June 30, 1975 3,500 86

1975/76September 30, 1975 4,700 8.December 31, 1975 7,000 72March 31, 1976 8,100 67June 30, 1976 9,900 60

1976/77September 30, 1976 11,600 53December 31, 1976 12,800 49March 31, 1977 14,500 42June 30, 1977 17,400 30

1977/78September 30, 1977 19,800 21December 31, 1977 20,900 16March 31, 1978 22,100 12June 30, 1978 22,700 9

1978/79September 30, 1978 23,200 7December 31, 1978 23,800 5March 31, 1979 23,800 5June 30, 1979 25,000 0

/ Assumed date of signing: Ap4J.,,;974.Assumed date of effectivenesp: October 1, 1974

2/ Represents 25/43 portion of foreign exchange cost; the co-lender(Kuwait Fund) would disburse pari passu in the ratio 18/43 to coverthe remaining foreign exchange requirements.

ANNEX 8Page 1 of 11

SYRIA

Etablissement Public de l'ElectriciteMehardeh Thermal Power Project 1/

Justification of the Proposed Project

This Annex is in 5 parts.

A. Forecast of Sales and Demand

B. Schedule of Plant Installation and of Generation

C. Comparison of Alternatives

D. Sensitivity Analysis

E. Rate of Return of Project

Attachments

1. Industrial Plant: Schedule of Installation

2. Forecast Sales (GWh) for each system

3. Graph: Historical and Forecast Generation

4. Maximum Demand, Required Generation and New GeneratingPlant Required

5. New Plant Commissioning Schedule

6. Assumptions for Operational Cost

7. Capital Expenditures and Operational Cost, and their Present Values

8. Graph: Present Values and their Sensitivities

9. Costs and Benefit Streams and their Present Values

1/ This analysis was prepared originally on the basis of the May 19,3 appraisalof the proposed Banias thermal plant. It has been modified to reflect thechange in site to Mehardeh, but is basically unchanged.

ANNEX 8Page 2 of 11

A. FORECAST OF SALES AND DEMAND

1. EPE's consultants have made two approaches in forecasting the1973-1980 power requirements. The first is based on available statisticaldata (which, for electricity, are only reasonably reliable since 1962) andthe second adds to an assumed "background" growth the requirements of new andexpanding industry and villages to be connected. They also assumed that, inorder to meet requirements at least cost to the economy, practically allelectric energy in the sector, whether government (including the oil company)or private, would be supplied by EPE, once its facilities have been improvedto provide ample and reliable service.

2. The consultants investigated correlations between the use of powersince 1963 and various combinations of population, GNP, national product inagriculture, mining and manufacturing, construction, and transport, as tabu-lated in the "Syrian Statistical Abstract". Four regressions were maintainedshowing the highest correlation for both demand and energy and these wereonce more compared in various models for population growth. Six growth modelswere retained and extrapolated up to 1990. Taking into account (a) the lowestand the highest of these forecasts, and (b) that in 1972 EPE supplied about66% of all electricity in the country and by 1980 may supply about 90%, itappears that EPE's growth trend for the period 1972-1980 would range between14% and 22%. The most likely rate would be 17-18%.

3. The consultants next divided the country into six regions andstudied growth in each of the regions separately. A "background" growthof 10% (the approximate average growth before commissioning of the 230-kVsystem) was assumed for these regions. Demand and energy were then forecaston the basis of:

(a) increase in isolated systems: 10%

(b) electrification of new villages during the period 1971-1975:110,000 inhabitants annually are expected to gain access toelectricity at an average of 15 W each (demand is presentlyabout 30 W/inhabitant), 3,000 hour annually (45 kWh), increas-ing 10% per year;

(c) electrification of new villages during the period 1975-1980:98,000 inhabitants per year under requirements similar to (b).

(d) linear replacement in the period 1976-1990 of captive plantgeneration (including oil company plants) by EPE supply; cap-tive plant expansion is assumed to be substantially prohibitedby the Government from 1974 onward, in view of the lower eco-nomic cost of public supply (with its expected fair amount ofhydro generation);

ANNEX 8Page 3 of 11

(e) estimates for expansion of existing industrial plants and con-struction of new plant in accordance with the national plan,including oil company facilities (extraction, pumping, process-ing); expansion schedules and major new factories are showr. inAttachment 1 to this Annex.

4. Possible delays in industrial plant completion were discussed bythe mission with EPE and its consultants during appraisal also with a viewnot to overestimate EPE's technical capabilities and financial position.This conservative approach resulted for instance in a reduction of forecast1974 sales from 1,600 GWh (including isolated systems and oil company) to1,170 GWh, i.e. by about 30%. The difference between original estimates andrevised estimates would gradually decrease to zero by 1978. Attachment 3 tothis Annex shows historic generation, generation as forecast by the consultants,the appraisal forecast, and a reduced forecast to be used in one aspect of thecomparison of alternatives (see Section C below). 1/

5. Annex 9, Page 1, shows inter alia the details for the resultingforecast 1972-1979 sales - both for the interconnected and isolated systems.Overall growth tread (by least squares) is expected to be 17.5% (16.5% in the230-kV interconnected system). This is in reasonable accordance with theaverage of the statistical forecast (see 2 above). Considerable annualincreases, however, would occur. In 1976 and 1977 overall growth rate wouldrespectively be 46% and 22%, mainly due to connection of oil company facilities,for which EPE would take over supply, and the connection of new factories inthe same areas. By separating forecast sales in the present interconnectedsystem and forecast sales accruing from the 230-kV system additions startingin 1976, Attachment 2 to this Annex illustrates the importance of those addi-tions; growth in the present interconnected system would not exceed 23% (1975).

6. The increase in relative importance of industrial sales is shownin the following table of consumer categories and their purchases in theinterconnected system:

1963 1972 1979Consumer Category GWh __ GWh % GWh %

Domestic 115 52 219 29 360 11Government Services 13 6 39 5 90 3Streetlighting 8 4 16 2 30 1Industry, Commercial 78 36 339 45 2,340 70Irrigation and others 4 2 146'-- 19 500 15

218 100 759 100 3,320 100

/1 Includes Thawra construction requirements (145 GWh).

1/ The graph Attachment 3 shows the estimated temporary effects of the recentwar on generation.

ANIEX 8Page 4 of 11

B. SCHEDULE OF REOUIRED PLANT INSTALLATION AND OF GENERATION

1. Annex 9 shows the 1974-1979 schedule of main generating plant to beinstalled, and likely to be taken over by EPE from the oil company. Also shownis the assumed generation schedule (Thawra, and Souedie gas turbine plant oper-ating on flared gas, would operate at the base; other gas turbines at the peak,steam meeting the remaining requirements). Up to 1978 a reserve capacity isassumed equal to the largest unit in the system, and from 1978 onward, whendemand would be some 720 MW, additionally a spinning reserve of 100 MW (oneThawra unit) is taken into account. It should be noted that up to 1978 one15-MW steam unit in Kattineh is assumed as a spinning reserve; under contractwith the oil company this unit is exclusively used for direct supply to theHoms refinery and is not available for general standby purposes. 1/

2. in view of the high plant margin for 1977, it appears that the sec-ond additional unit for Thawra (5th unit) could be postponed. F6r appraisal,however, it was assumed that the Government, having an option to install 5additional units with Rnssian financial assistance, would exercise its optionfor at least 2 additional units. These units are expected to cost aboutUSS75/kWv if the option is taken soon enough so as to allow manufacturers'continued production following the first 3 units. The forecast capacitybalance used in the comparison of alternatives (see below) does not showthe need for the 5th and further units at Thawra because additional thermalplant needed to meet energy requirements would also provide the necessarycapacity. This results from the crash program of installation of 390 MWof gas turbine plant on which the Government has embarked, and which - indue time - will constitute a considerable reserve. However, to take up theoption on unit No. 5 may be justified because of the expected low price, andwithin 10 years after commissioning it would replace the gas turbine unitswhich (except for Souedie) operate on crude and residual oil and may havea restricted life expectancy. Thus it appears likelv that the installationof more than 5 units at Thawra cannot be justified economically. 2/

C. COMPARISON OF ALTERNATIVES

1. Because Syria's hydro potential is limited and no hydro plant canbe developed in time, only steam plant, gas turbine plant and extension of-hawra can be used for designing medium-term (5-8 years) optimum development.Diesel generation cannot be considered in view of the required capacities.The questions to be raised in this respect are therefore simple:

1/ The ample capacity margin shown in Annex 9 is due to the installation of10 additional gas turbines (totalling 230 MW rated capacity) provided byvarious Arab States to alleviate the effects of war damage; part of thedamaged plant is being repaired.

2/ The Government has recently placed the order on the Thawra units 4 and 5.

ANNEX 8Page 5 of 11

(a) Should the whole country be interconnected as soon as possible,or would it have been prudent to postpone interconnection?

(b) Is a capacity of 125 MW for the first steam units appropriate,or would 63 MW be more economic?

(c) Would the selection made under (b) also be appropriate if thegrowth rate were more gradual than forecast during appraisal?

2. In view of the above, five alternatives will be considered:

Alternative 1: The whole countrv would be interconnected by 1976 andMehardeh with 125-MW units, would be constructed as soon as possible;

Alternative 2: Interconnection is deferred to 1981 and Mehardeh is postponedaccordingly; four sub-systems are assumed developing independently from theaain system. 1/

Alternative IA: Assuming that comparison will show Alternative 1 to haveleast cost it will be compared with Alternative 1A. In the latter alterna-tive, upit size would be 63 MW, all other aspects being similar to Alterna-tive 1.

Alternative 3 and 3A: The comparison between Alternative 1 and Alternative1A will be repeated; however, a more gradual growth will be assumed andplant scheduled accordingly.

3. For comparison of alternatives on a national level, oil companyrequirements (prior to interconnection) have to be added to the requirementsto be met in EPE's system after interconnection; EPE would then take over theoil company gas turbines and meet all company electricity requirements fromits network. Development of each independent sub-system would thereforediffer only from interconnected development in that no 230-kv connectionwould be provided, and that additional gas turbines would be installed ineach area. Sub-transmission and distribution developments would be the samefor all alternatives.

4. During appraisal the balances of demand versus capacity and ofenergy, prepared by the consultants, were amended to reflect the appraisalforecast for electrical requirements up to 1979 (assumirng an 8% growth ratebeyond 1979) and the revised esti-mates for equipment cost. Attachment 4,Page 1, to this annex shows for the Alternatives 1, 2 and 1A the sum of fore-cast maximum demand and generation, as well as generation plant required to

1/ This Alternative is now redundant. A contract was signed for the con-struction of 800 km of 230-kV lines, with a second contract to followsoon for about 300 km of lines. These lines will be financed from aRussian Credit.

ANNEX 8Page 6 of 11

meet both demand and generation. Reserve requirements for the main systemare s.milar to those listed in Annex 9; for the sub-systems the largest unitis assumed as a necessary reserve.

5. The reduced growth estimate (See Attachment 3 to this Annex) to beused in the comparison of Alternatives 3 and 3A, assumes a lower level of1974 generation 1,300 GWh instead of 1,400 GWh) and a 5-year steady growthrate of 22%, followed by 5 years of growth at 12%. By 1984 the differencebetween the appraisai estimate and the reduced estimate would decrease tozero. As can be observed in Attachment 3, the reduced graph practicallyconstitutes an extension of the historic graph, i.e. the reduction in effectassumes that most of the rather large blocks of then existing (isolated) powerto be connected to the EPE system would not materialize, respectively thatconnection would be more gradual. For this reason, the probability of thereduced forecast appears low. 1/

6. Attachment 4, Page 2 to this Annex shows for Alternatives 3 and 3A,the sum of forecast maximum demand and generation, and generating plant to beinstalled to meet the reduced power requirements. It should be noted, however,that - in view of the lead time to complete new plant - the decision to in-stall either 63-MW or 125-MW units (first 2 units) should be made now. Forthis reason, it can be tested only whether the selected unit size would alsoappropriate if during appraisal a reduced forecast of demand had been assumed.

7. Attachment 5 to this Annex, which provides the schedule of commis-sioning of plant required for each alternative, also shows the estimated con-struction cost of each item. Annual expenditures for construction were sche-duled as follows (in percent):

Year 1 2 3 4 5

Hydro plant 10 35 45 10Steam plant 8.5 25 40 20 6.5Gas turbine plant 10 80 10Substations 7 35 50 8Lines 7 30 55 8

8. Assumptions for the basic operational cost are shown in Attachment 6to this annex. Diesel oil is sold at a price of ES 132/ton (about US$0.83/106BTU) throughout the country. Residual oil ex-refinery is priced at ES 50/ton (about US$0.33/106BTU), to which transport cost depending on distancefrom the source have to be added. The cost of flare gas in Souedie has beenestimated at zero cost at the well head. The assumed price reflects the con-sultants cost estimate for the required gas pipe lines. In view of the largelocal (Souedie, Hassakeh) requirements for electricity (including forced oilextraction) it appears that the Government and EPE should study, as soon as

1/ This assumorion is maintained in the long term; short term war effectson generation are showr. in the graph Attachment 3.

ANNEX 8Page 7 of 11

possible, the-feasibility of constructing a thermal plant on the Tigris usingflare gas. Such plant could constitute an alternative for the 250-1W steamextention beyond the fourth 125-MW unit, or even earlier depending on oildevelopments. 1/

9. The various capital expenditures and operational cost streams forAlternatives 1, 2, and 1A are shown in Attachment 7, Page 1 to this Annex.Page 2 of this attachment provides similar information for Alternatives 3and 3A. However, in the latter case, only those plants not common to bothalternatives (see Attachment 4 Page 2) have been taken into account in orderto reduce the number of calculations. Netted cost streams are also shown,i.e. the corresponding columns of respectively Alternative 2 and Alternative1A were subtracted from those of Alternative 1 (See page 1), and those forAlternative 3A from Alternative 3 (See page 2). The investments in trans-mission lines and substations is common to Alternatives 1, 1A, 3 and 3A and,for this reason, do not appear in the relevant tables of net costs. Thepresent value of net costs are also shown in Attachment 7.

10. By positioning one of the alternatives in the horizontal axis of agraph, the present values of the net costs are shown in Attachment 8, respec-tively for:

Alternative 1 less Alternative 2; InterconnectionAlternative 1 less Alternative 1A; Unit SizeAlternative 3 less Alternative 3A; Reduced Load Forecast

Sensitivity to variations in the various cost items, which are also shown inthe graphs, will be discussed below.

Conclusions (See Tables Attachments 7 and Graphs Attachment 8)

(a) Interconnection

11. The equalizing discount rate, up to which Alternative 1 (inter-connection as soon as possible) would have less present value than Alternative2 (interconnection postponed for 5 years), is about 16%. At the opportunitycost of capital in Syria (estimated to range from 10%-12%), the present valueof Alternative 1 would be about IS 29 million, US$7.5 million) below the presentvalue of Alternative 2, mainly due to LS171 million higher investments forAlternative 2 (in gas turbine plant). In view of the large difference inpresent value at the opportunity of capital, and the lower financial burdendue to lower investments, the comparison confirms the decision to interconnectthe country as soon as possible.

1/ In view of the high availability of gasturbine plant, EPE intends tore-site several units at Souedie by 1977/78 where up to 100 MW in cheappower appears to be available in gas from oil fields, now partly beingflared if not used in the oil company gasturbine plant.

ANNEX 8Page 8 of 11

(b) Unit Size

12. Given the conclusion to interconnect as soon as possible, Alter-native 1 (125-MW unit size) is compared with Alternative 1A (63-MW unit size).The equalizing discount rate up to which Alternative 1 shows less presentvalue than Alternative 1A, is now 18%, about 2 percentage points above 16%for Alternatives 1/2. This indicates that installation of 125-MW units wouldbe more economic than installation of 63-MW units. As the opportunity costof capital, the present value of Alternative 1 would be about 6S 20 million(US$5 million) below the present value of Alternative IA, mainly due to thehigher investments (about LS 55 million) for the 63-MW units. The lowerinvestment is not highly significant in view of the size of EPE's overallinvestment program, but in view of the sizeable difference in present value,the comparison shows that 125-MW units rather than 63-MW units should beinstalled.

(c) Reduced Load Forecast

13. By assuming a lower growth rate (see C5 above and Attachment 3 tothis annex) the first unit (either 63 MW or 125 MW) could be postponed byabout 2 years, from 1977 to 1979. However, in order to meet power require-ments, plant construction would be fairly rapid; practically each year, until1984, a unit would have to be added. It is, therefore, not surprising thatthe equalizing discount rate (below which 125-MW units are more economic than63-MW units, see graph Attachment 8) is about 15.5%. At the opportunity costof capital the difference in present value would be in the order of a mereLS 2.5 million (this low figure, of course, is in part due to the postponementsin installing plant, causing a reduction in present value). However, as longas the equalizing discount rate would not be sensitive to variation in costitems (as shown below), the comparison indicates that decision on the 125-MWunit size is not sensitive to the growth rate of demand.

D. SENSITIVITY ANALYSIS

1. Attachment 8 to this Annex shows the net present value graphs of theAlternatives, one graph each for the three stages of decision-making: (1)interconnection to be postponed or not; decision: no; (2) whether to install125-MW or 63-MW units; decision: 125 MW; and (3) can this decision be maintainedif a lower growth rate would be likely; decision: yes. These decisions, how-ever, should not yet be final, without investigating their sensitivity to theuncertainties and inaccuracies of the data, i.e. possible variations in costs.The sensitivity of the equalizing discount rates with respect to cost variationsare also shown in the graphs on Attachment 8.

(a) Interconnection (Graph 1 of Attachment 8)

2. No sensitivity in any measurable degree is present for the followingcost items:

ANNEX 8Page 9 of 11

Hydro CapitalTotal CapitalTotal FuelO&M SteamO&M other than Steam or Gas Turbine

3. With the range of price variations of plus and minus 30% littlesensitivity is shown at variations in cost of all other items (includingfuel cost for steam or gas turbine, which represent efficiencies) exceptfor

Gas Turbine CapitalTotal Steam or Total Gas Turbine Cost

Gas Turbine Capital Cost:

4. A reduction of 10% in the estimated cost (of about US$185/kW), wouldreduce the equalizing discount rate to about 14%. This still appears quiteadequate for selecting Alternative 1, particularly in view of the fact thatthe gas turbine plant cost would have been overestimated, which is doubtful.

Total Steam and Total Gas Turbine Cost:

5. Sensitivity is presented in one graph because the differences innet present values are small compared with the overall present values of costfor either steam plant or gas turbine plant. Assuming that costs (capital,fuel, O&M) for steam plant have been correctly estimated, but similar costsfor gas turbine plant have all been overestimated by 20%, the equalizingdiscount rate would reduce to 10%, On the other hand, if steam costs havebeen overestimated by 20%, the equalizing discount rate would shift to 22%in favor of Alternative 1. Because the probability of the assumption appearsvery small indeed, say about 5%, that the equalizing discount rate would beless than 10% or more than 22%, the mean would be 16%, with a standard devia-tion of ±2.3%, assuming a normal distribution of errors. Therefore, the like-ly range of the equalizing discount rate up to which Alternative 1 should beselected is from 13.7% to 18.3%, i.e. above the opportunity cost of capitalin Syria,.

6. From the above, it may be concluded that sensitivity considerationswould not change the decision to interconnect the country as soon as possible.

(b) Unit Size (Graph 2 of Attachment 8)

7. The sensitivity to variations of plus and minus 30% in costs issmall. Although present values of 63-MW and 125-MW plant have not beencalculated, is obvious that no reasonable assumption of a possible error incost per kW could reduce the equalizing discount rate to the range of theopportunity cost of capital. For this reason sensitivity consideration wouldnot change the decision to install 125-iw^; units, taking into account the ap-praisal forecast of demand. Increased fuel cost (i.e. using economic costfor fuel), would further strengthen the decision to install larger units.

ANNEX 8Page 10 of 11

(c) Reduced Load Forecast

8. The equalizing discount rate is even less sensitive to variationsin cost of steam plant (because under Alternttive 3A not more than two 63-Mwunits should be installed before the first 125 MW). Conceivably, hydro plantincreasing by some 75% in price could cause the equalizing discount rateto drop to the range of opportunity cost of capital. This appears highlyunlikely, and the decision to install 125-MW units is once more sustained,even if the growth rate would be significantly below the appraisal forecast.

E. RATE OF RETURN OF PROJECT

1. The rate of return of the Project is the discount rate which equalizesthe costs and benefits attributable to the Project over its economic life, whichhas been taken at 25 years. Willingness to pay, measured mainly through therevenues, has been used as a first approximation of the attributable benefits.These revenues understate the benefits consumers receive from the Project be-cause it is considered that there is increased willingness to pay, i.e. atariff increase of reasonable magnitude (say 10-20%) would not reduce demandsignificantly. The willingness of consumers to pay more is also illustratedby the fact that a large capacity in costly captive plant has been installed(and would be installed were the Project not executed) to meet the electric-ity needs..

2. As shown in Attachment 9 to this annex, the substation and the 230-kVconnecting line to the main system, have been fully attributed to the Proj-ect. Half of the cost of substation at Hama was attributed to the Project(the remaining 50% is attributable to Thawra). The cost of all other linesand substations were attributed by 25% to the Project, assuming that the plannedexpansion is commensurate with the total in capacity of Tnawra (300 MW) andsteam units 1 and 2 (250 MW) (i.e. unit 1 constitutes about 25% of thiscapacity). An average of about 2 years is required for demand to increase by100-125 MW and for this reason 2 years of the distribution program (1977, and1978 the year of commissioning)t were attributed to the Project. Estimatedimport duties have been subtracted from the capital cost because this consti-tutes only an internal transfer to the economy. Attributable operationalcosts are based on the appraisal esti.nates and also shown in Attachment 8 toLhis annex. On the revenue side, an estimated 15% in taxes, which EPE levieson each bill on behalf of the Government, have been added to the revenues asthey are a demonstration of increased willingness of the consumers to pay.The taxes are spread unevenly (see Annex 3) and in many regions exceed 20%of the bill. An average of 15% therefore, appears acceptable.

3. The Rate of Return of the Project is about 17%. Major inaccuraciesin either the cost of capital or operational costs are improbable, but never-theless ass-uming that al- costs would have been underestimated about 10%kor conversely that revenue has been over estimated by about 10%), the rateof return would reduce to about 15%. It appears also unlikely that major

ANNEX 8Page 11 of 11

inaccuracies have been made in the attribution of other facilities (substations,lines and distribution). Nevertheless, if 20% of all other facilities shouldnot have been attributed to the first unit, equal to about 10Z of the overallcapital cost, the rate of return would increase to about 18%. In view of theabove, the most likely range of the Rate of Return of Project is 15-18%, withan average of 16.5%.

*.-',L""I U

Attachment 1

S Y.IA

Etablissement Public de l'Electricite'Theral Pbwer Project

Industrial Plant: Schedule of Installation

Location Approidmate iadxiinum Demand

DamascusCement factory 8-15 MW (1975-1977)HonsExpansion phosphate mines and refinery 15-22 MW (1974-1977)Phosphate, nitrogene, and other industrialnew plant 20-50 IW (1974-1978)Not included due to uncertainty of execution:steel plantl/ 100-150 MI (1978)HaraaRolling mills, and expansion 4-li MD; (1974-1978)Cement factory 8-15 Mi (1975-1977)Oil pumping increase 12 MW (1975)AleppoTractor and cotton factory 7-15 MW (1973-1975)Cement factory 8-15 1iW (1974-1976)Irrigation (Tabqa) 5-35 MW (1974-1980)RaggaOil pumping increase 3-8 MI (1973-1976)Salt and paper factories 8-17 1W (1974-1976)Lattakia/Banias/TartousOil pumping increase 3 14Ws (1974)New refinery 7-22 1I4 (1975-1978)SouedieOil extraction 4-25 MW (1974-1980)Oil treatment plants 30-25 MW (1976-1980)Not included due to u,ncertainty:Irrigation (Tigres)2/ 20-100 MNT (1977-1980)HassakehOil pumping increase 20-25 MW (1974-1976)Not included due to uncertainty:Irrigationr/ 13 Nd (1978)Deir-es-ZorTextile factory 6 Mi (1975)Sugar factory2/ 3 1na (1975)Oil pumping 5 ml (1975)

1/ Project in preliminary stages. Because specific generating plant wouldhave to be added to raeet steel plant requirements and the tariff can beexpected to be set at marginal cost, development programs are not expectedto materially differ "with" or "without" steel plant demand. For thesereasons steel plant requirernents have been oaitted from the forecast.

2/ Projects in preliminary stage and execution before 1980 appears highlyunlikely in view of extensive undertakings in progress in the Euphrates area.

3/ Pulp to be used for paper production.

SYRIAEtablissement Public de 1lElectricite"

Thermal Pbwr Project

Forecast Sales (GWh) for each System(excluding systems remaining isolated)

1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

Danascus, Aleppo, Homs, Hama 407 550 646 759 885 1085 1315 1610 1810 1960 209o1/% growth over preceding year (trend 13%) 35 17 17 17 20 23 22 12 8 7

Banias/Tartous refinery 50 80 170 240 260

3aqqa 1/ 80 180 190 210-6/

Hassakeh 2/ 2/ 60 80 160 17CLY

Deir-ez-Zor 3/ 60 80 120 130

Souedie ,4/ ,4/ 165 320 450 460

Total Sales 407 550 646 759 885 1065 1365 2055 2640 3120 3320

% overall growth over precedingyear 35 17 17 17 20 28 51 28 18 6

1/ Raqqa area public supply 1971 estimated at 3 GWh and 7 GWh generated in captive plant._/ Hassakeh area:10 GTvh public supply; 96 GWh captive plant (mainly irrigation pumping); 10 MWJ

oil cormpany gas turbine plant under construction for completion in 1973.3/ Deir-ez-Zor area: 16 GWh public supply and 75 GWh in captive plant (mainly irrigation pumping)e/ Present energy requirements not known, 47 MW in oil company gas turbine plant is under construction for

completion in 1973 and 1974.5/ Including about 350 GWh (by 1979) for irrigation.~/ Including about 70 GWh (by 1979) for irrigation. > 7/ Including about 50 GWh (by 1979) for irrigation. c

co

rt

,9) 1 195 1916 1917 1918 1 9 1970 1971 1972 1973 1974 19i5 1916 19779 1979 19 19 1 192 193 19 195 19k6 1997 998 0 9Booo Year -0

7000 7000

o5500 5500055000 -. '' 54500 -4500,4000 - -4

3500) 3500

.3000 25 3000

-2500 20 FeasibilitY 2500Grouth Forecast A A aradsal Forecast

{?000 15 f Reduced Forecast 200010.(to test sensitivity to growth i-ate)

.1500ot oted System On,1500

AuxiliaryGrid Revised Forecast February 1974Auxi_iary Grid -

for Assessing Growth Rates 1000

@°° t / 8~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~00-Boo

7 |Sales /7°°-(GWh) sfIA 600:

£ Interconne~ted p EtabbliSement Public de 1'Electricltj

5°° System, Historic and Forecast Generation (Gih) 500

4 lfHistoric _ ---- FCoeast 40°

300

A 200. [I

,150 gales 150

Year . .

16_ 1.979 1975 1977 1 1 19815 1987 1989

SYRIA

Etabli.sement Public dlElectrieitt-Thermal POwer Projest

Cemparison of AlternativesMaxiis Demand, Required Generation and New Generating Plant Required

Appraisl Pwer Forecast (Alternative I ,2lA)

- ------------------- .hxlrmral Demand (Mhl) _----_----------__- - - - - ------------ Generation (.Wh) ----- _ ew Plant Required (Ml)------------------------Alternat1v- I/IA Alternati,e 2 Alternative l/lA Altermati.:e 2 Alternative 1 Alternative V, ------- Alternat i. 2 --------

Interconnted iolated Interconnected Isolated Interconected Isolated Interconnected isolae Hdo Steam hydro Steam Hydro Steam .asturbine

1974 319 40 319 4o 1,400 200 1,400 2001975 363 85 363 85 1,750 440 1,750 4401976 488 393 95 2,570 2,080 490 521977 617 462 155 3,300 2,480 820 125 63 2?1978 718 488 230 3,900 2,680 ',220 100 100 721979 752 507 245 4,150 2,870 1,280 125 63 170 le1980 81? 557 255 4 480 3,140 1,340 63 125 181981 876 876 4,840 4,88o 125 63 2x1251980 946 946 5,220 5,230 125 1251983 1,020 1,020 5,650 5,-50 125 1251984 1,100 1,100 6,100 6,100 250 g 250 / 250 /

1985 1,190 1,190 6,590 6,590 _ _

1986 1,260 1,280 7,110 7,110 850 -52 1,0811987 1,390 1,390 7, 550 7,5801988 1,500 1,500 8,290 8,2901989 1,62o 1,620 8,960 8,9601990 1,750 1,750 9,680 9,680 __Coon to ______ ern____ s, __ the

Ccomnor to all altern.f-ole; furtherdevelopment equal for all alternatives

septeeber l, 1II13

SYRIA

Etablissement Public de 1'Electricit&

Thermal Power Project

Maximum Demand, Required Generation and New Generating PlantReduced Power Forecast (Alternatives 3 and 3AI

------ New Plant Required (MW)------Alternative 3 Alternative 3 A Alternative 3 less Alternative 3A

Maximum Demand Generationi Hydro Steam Hydro Steam (Plant not common to both Alternatives)MW GWh

1974 29) 1,3001975 3329 1k5901976 3 65J l,930/1977 440 2,3601978 530 2,8801979 635 3,500 125 63 + 125 MW steam - 63 MW steam1980 710 3,920 100 63 + 100 MW hydro - 63 MW steam1981 795 4,390 125 100 125 -100 MW hydro1982 890 4,920 125 1251983 1,000 5,510 125 1251984 1,100 6,100 250 2501985 1,190 6,5901986 1,280 7,110 250 2501987 1,390 7,5801988 1,500 8,2901989 1,620 8,9601990 1,750 9,680

OQ nrDm C

nX

Interconnected system only.

/ Interconnection of outlying systems starts.

September 18, 1973

x = Alternative 1+ = Alternative 2A) SYRIA

O = Alternative 2 ) Etablissement Public de l'Electricite" Attachment 5

* = Alternative 3A) Thermal Power ProjectCoipa1ts l eatives

New Plant Commissioning Schedule

CostLSl0

61974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Hydro PlantTabqa n4 32.7 - - - x+ 0 # *Steam PlantAlternative 1/3125 MW#l 153.2 - - - x - # - -

#2 130.5 - - - - - x - Y#3 130.5 - - - - - - - x#4 130.5 - - - - - - - -

250 MW#5 Comon, not requiredAlternative LA; Alternative 3A63 MW#I 63 MWK i 88.8 - - - + - *

#2 #2 75.6 - - - - - + * -#3 75.6 - - - _ - + _#4 75.6 - - - - _ - _ +

125 MW#5 125 MW#3 153.2 - - - _ _ _ * +#6 #4 130.5 - - - - - - - -

#5 130.5 - - - - - - - -250 MW#7 250 MW#6 Common, not requiredAlternative 2125 MW#1 153.2 - - - - - - 0 -

#2 130.5 - - - - - - - 0#3 130.5 - - - - - - - 0#4 130.5 - - - - - - - - 0

250 MW#5 Common, not requiredGas Turbine (Alternative 2)All units: 18 MW 13.3Deir-ez-Zor #1 - - - 0 -

#2 - - - - 0 - _ _ _#3 - - - - - 0 - - -

Latakia/Banias #1 -0 - -°#2 - - - - 0 - - - -#3 - - - - - 0 - - _#4 _ _ _ - - - - 0 -

Hassakeb #1 - -0 -o

#2 - - - - 0 _ _ _ _Souedie #1 - - - 0 - - - - -

#2,3,4 - - - - 0 - - - -Substations (Alt. 1A 3 and3A equal to Alt. 1)

Haama 15.0 - - x0Hooms (Kattineh) 2.5 - - x - - - - 0Banias (and extension) 11.9 - - x - - x - 0Raqqa 12.4 XO - - -x-Hassakeh 9.4 - - x - - - 0Souedie 8.4 - - - x - - - 0Aleppo 7.9 xO - - -x-Kaboun II (Damascus) 6.0 - - X0 - - - x 0Midan II (Damascus) 5.4 - - x0 - - - -_Deir-ez-Zor 4.7 - - - x - - - 0 - -230 kV Lines (ditto) km /Raqqa-Deir-ez-Zor 130 12.0 - - - x - - 0 0Hama-Banias 60 11.1 - - x - - - - 0Banias-Lattakia 50 5.1 - - x - - - 0Homs-Tripoli 80 8.9 - - x - - - - 0Raqqa-Souedie 300 30.4 - - x - - - 0Tabqa-Hama-Damascus 400 37.7 - - X - -x0Tabqa-Raqqa 1 50 4.8 - - x0 - - -Homs-Banias 1 100 11.1 - - x - - - - 0Tabqa-Raqqa 2 50 4.8 - - - - - x - 0Homs-Banias 2 100 11.1 - - - - - - - xo

Notes February 1974

i/ Substation Banias has been relocated to Tartous for interconnection with Lebanon at 230 kV, and supplyto the coastal area.

/ As a result of relocating the proposed power station to Mehardeh, lines have been relocated; overalllength, however, is about equal.

ANNEX 8Attachjuent 6Page 1 of 2

SYRIAEitablissement Public de l1Electricite

Therimal Pol.qer Pro.jectCompaaison of Alternatives

Assumptions for 0,perational Cost

Fuel Cost

Type of Heatrate Fuel FuelFuel Ef-iciency Fuel~ Consumption Price O-I

kcal/kWh kcal/kg kgWh - St i7/GWh

Exdisting Steam Plant Residual 3,300 9,470 0.350 54 18.90Future Steam Plant 66MW Residual 2,900 9,470 0.305 50 15.30

125FW Residual 2,650 9,470 0.280 50 i4.oo250,MW Residual 2,550 9,1470 0.270 50 13.50

Latakia G.T. Residual 4,000 9,470 0.420 54 22.70Aleppo, GT Residual 4,000 9,470 0.4420 62 26.00Damascus, GT Residual 4,000 9,470 0.420 61 25.60Horns, GT Residual 4,ooo 9,470 0.420 50 21.00Souedie, GT Gas 4,000 8,600 0.460 W 4.10Hassakeh, GT Crude 4,000 10,100 0.395 59 23.30Esriyeh, GT Crude 4,ooo 10,100 0.395 60 23.70Deir-ez-Zor, GT Residual 4,000 9,470 0.420 81 34.00Diesel Gas oil 3,000 10,000 0.300 132 39.60

/ Gas at zero values reflects annual cost of gas pipeline.

Personnel

Basic salary 1974 average W7,200/min year, increasing 5% annually (reflects aging ofNu*ber of personmel facilities)Steam Plant:

Alternative 1/2 Alternative 1& Alternative 3A

Unit # 1 150 120 1202 11J0 100 1003 90 80 904 70 60 805 906 70

Alternative 2Gas turbines Additions

1975~ ~ ~ ~~01976 30 )1977 30)1978 40 )1979 101980 1Gas turbi'nes woul.d phase out in 1990 5

ANNEX 8Attachment 6- 2 - Page 2 of 2

Stm plants 15% of fuel costGas turbim plants 40% of fuel cost (aintenane would be extevdue to

use of crude and residual oil, ecept in Souedie iwhere flare gas is used, andlower uaizensae cost is taken into account through the low fuel price)

Personnel/Ma±xzt,nance subastations and Limas

Substations 4% of ±nvestnentsLines 1% of investments

SYRIAEtablilsement RobSlde 1I'le-trtcite'

Thermal Fwer 2ro,ectCeparis- -of Alternatives

CapitaL ptndit-ree ad OperatLonaL Cost and their Present daises

Asoraisi Fewer Forecast (Altern-tirs. 1.2 od LA)

US 106

------------ -Altee -------st----r--e--1---Alterntive IA------ ---------------- Ajte-ti-e 2 -----------------_,__ ____ ____________lternoive 1-_-omt _____ ____ _____ -- _---leratv LA-____ '---------------Rt-rev ----------- _ ___-_-__ __ _-

it-- Ca.tj dit 9 -------- perati---t t ets-- Cptal --- Opesattnast C… _-Capital Thcpenktturen…Co -- mio. Cts-o.0 en tog That Operati~~~~djw-ons & M1reJ- opertions & Gasratiag Rent

,rW NO45Se shbatstloa Lines Fet AItateano-r Mitelc Feel &neratinse 1 4kd- Steam G0a turbine Subotattuen Lines hes histesee

1974 13 0 5.8 7.7 22.8 6.3 7.5 22.8 6.3 3.3 3.0 22.8 6.21975 38.3 29.3 33.0 32.3 11.2 22.2 32.3 11.2 3.8 16.3 12.9 32.3 10.31976 3.3 72.4 41.8 60.5 31.8 12.6 41.9 31.8 12.6 35.4 23.4 23.7 31.3 10.91977 11.2 63.2 6.8 9.9 27.0 11.0 43.1 27.4 11.3 3.3 13.0 51.8 3.7 3.4 28.4 11.31978 14.7 73.3 o.6 4.8 23.3 9.8 61.2 28.9 11.3 1N. 60.5 49.3 27.0 12.7195 3.3 38.7 o.8 9.6 29.2 11.4 77.1 34.7 12.4 14.7 137.6 17.3 2)7 6.6 36.8 15.91980 3. . 8 0.1 4.6 37.8 14.6 99.7 49.6 15.1 3.3 167.6 12.0 13.5 28.2 41.2 }8.51981 58.7 6.1 41.0 14.5 114.1 47.1 17.2 ii4.4 1.3 19.3 51.7 38.8 16.o1982 60.7 0.8 51.7 19.1 87.9 51.2 19.1 43.1 3.0 7.5 43.1 17.81983 26.1 55.2 19.2 36.1 56.6 20.2 8.5 51.5 19. 6198. 8.5 60.7 19.1 8.5 63.4 20.3 55.3 20.5i989 68.tI 20.7T 70.9 22.0 6i. 8 22.31986 75.0 16.0 76.8 17.2 70.6 17.81987 83.3 17.5 85.1 18.6 79.0 19.6

1988 ~~~~ ~ ~~~~ ~ ~~~~ ~~92.2 19.0 93.9 20.0 87.9 21.31988 101.8 20.8 303.6 21.3 98.6 23.21990 112.1 22.5 113.9 22.8 8___

V377 54. 7 357 3I~W ~ ¶7W 3.

_11 ydro Plont, Subtettions, Lines equal tO Altnrsatl"e 1

------------------------------ ---------------------------------------------------- Alt. ativ 1 3.s Alteatve- 2 -- _ - - - ---------------------- Net Ze.P-ditue- ------------------- ------------- Net Preset raIseeW-

Operationk & LittD rt |/ |I 1 a s Operatio n 7 Orad

HRdro Steen a. T1L-rhise SototiiLn LiMs Peel &1884ac11 hte (cu Ryro St.-/ G.e Terbelas SLbetations ans Fruel tlntenenne Fetal

1974 13.0 2.5 4.7 0.11975 38.3 -3.8 13.0 20.1 0.91976 3.3 72.4 .35.4 18.4 36.8 -0.5 1.71977 8.1 50.2 -S1.8 3.1 6.5 -1.4 -0.3 30 2.15 46.09 -317.03 13.04 24.52 C.48 -9.31 -35.061978 3.3 12.8 .49.3 o.6 4.8 -3.7 -2.9 11 2.26 s7.96 - , 38 2562 5 85 -28.611979 -11.4 -78.9 _17.3 -1.9 3.0 -7.6 -4.5 12 2.36 49.75 -111.98 t.8 26.264 3.70 _7 67 .41980 -3.3 -93.8 .12.0 .13.4 -23.6 .3.4 .3.9 1.3 2.1. 51.1.4 -2S8.t3 ih.55 27.58 2.97 .qas -IL.491981 -55.7 -1.3 -19.3 -45.6 2.2 -1.5 14. 2.A5 53.04 -3_105.b8 3.99 2.44. 2S.74 -6.69 -10.821982 17.6 -3.0 -6.7 8.6 1.3 35 2.62 A.ss -202.8 15.39 29.23 1.78 -6.1? -5.1.1983 17.6 3.t .0.4 17 2.11 57.2R -97.75 16.30 3o.59 0.86 _5.28 4.551984 8.5 5.4 -1.4 19 2.81. 59.6? -92.90 16.6S 31.70 0.1? .4.52 13.65298 4.2 -1.8 a1 2.92 41.69 48.39 17.17 32.57 -0.36 -3.89 21.73.

4.4 -1.8 23 2.97 63.40 .81h.i 17.55 33.25 -o076 3.35 28.901987 4.3 -2,11988 4 3 -2 3 f/ nesi4nal value- hbae been taken into ccount approprletl.y ia the dlitoaotinK process1989 03.2 _2.41990 . 2.2 -2.6

sti - Fto.ls for Peel Cost Dith Dt-ilg Of Oper. & tiLtsa. Cost7io.1eee Alt e tn.3le Alters. 2 Lt_teiee o Ien1,

ditmwed Sta a- Vhr. 5a T-nrb 3r Frs I lMntn

10 -31.23 ,1,.%J -4.0.00 6.87 -25.83 .0.35n .5s 1.2.83 -30.29 6.47 -U.27 0o432 -3.25 bO.39 -36&69 6.11 -l.9 0.5713 .12.21 38.3,5 -35.18 5.77 43.96 0.9411. .6.17 36.09 -33.75 5.46 -33.10 1.8615 -1.01 3. - i 7 32.17 42.88 1.531T 8." 30.80 -2.94 1 -66 2.91 1.9719 28.00 27.89 -2.n72 .23 -1.00 2.2921 25.96 25.36 -25.72 3.81 -10.26 2.5223 33.01 23.36 -23.91 3.51 -9.54 2.69

-._____________________________Alt.retle 1 lees Alterantise 1----------------------A----- lt-til IAt --L-------------et Present Vto-es------------- _s.

SteM 7-__ 1 ,l_nt W_ Si(s) S Nte aeasane l et.i 1ed ToFs ) l

1974 5.5 0 01975 16.1 0 01976 30.5 0 01977 20.1 _0.4 .0.3 10 -1.26 -17.00 -6.11 -27.37 -7.691978 12.1 -5.6 -1.5 11 -0.88 -15.99 -5.68 -22.50 -6.111979 -18.4 -5.5 _1.0 12 2.10 -14.96 -5.30 -18.12 -4.331980 -27.9 .5.8 -0.5 13 4.74 -i4.07 -4.95 -14'4 2a -2.21

1981 55.4 6.6i 2°.7 14 .7.11 .13.25 .4.63 -16.77 -0.031982 .27.2 0.5 0 15 9.25 -12.49 -4.33 -7.57 2.17 o '1983 -10.0 .1.4 -1.0 17 12.94 -11.14 -3.81 -2.01 6.36 .1984 -2.7 _i.4 19 15.99 -9.98 -3.37 2.64 11.01 . _1985 -2.8 -1.3 21 18.53 -8.99 -3.'30 4.54 13.171198867 ..1.8 -1.2 23 20.64 -8.12 .2.6B 9.64 19.06

1987 -i~~.8 -1.11988 -1.7 _1.0

Sptember 18 1973 1989 -1.8 -0.5 T Te obtain trand Total Alteenati-o IA lees Altern_ti_e 2 subtract1990 -1.8 -0.3 froa OrG-d Total of Alteranaiee I lena Alterenive 2 the

toast ofAlter-ties I lee Al-routar IA.

SYRIA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

RtabliUseemt Public tde I'llectricit&

2ber_l Power Project

C la=w of AlternativesCapital !pEE t a m16piiti8mhitsTa MUtheir Present Vslue.

Seduced Power Forecast (jAternatives 3 and 3A)6

----------------------- Alternative 3 ---------------------- Alternative 3A -------------------

Capital brrenditwey ration ni Maintenance Co.ty Caital ExtenditurewV imal and Maintenance Cost-2/Fue 8erummal T1nseae NMb t er alnel JAnte

197419751976 13.0 7.51977 38.3 28.61978 3.3 61.3 54.51979 11.4 30.6 21.9 1.1 4.1 3.3 47.9 22.7 0.9 3.91900 14.7 10.0 30.0 1.3 5.8 11.4 20.9 30.8 1.6 5.81981 3.3 37.6 2.2 7.6 14.7 5.1 38.6 2.6 7.01982 44.0 2.8 7.8 3.3 45.6 3.3 7.31983 52.3 3.6 8.5 54.1 3.3 8.31984 60.5 3.7 9.3 60.1 3.5 9.21985 68.1 i 4.1 10.4 68.6 3.7 10.41986 710.8 4.2 11.4 73.8 3.9 11.33-1 F2-.7 1w. F 3 i

g/ Inve stmlent n T s turbines, 230 V tses li Tsubstations cuomn to both maternatives (and Alternatives 1 and 1A).V 0 & 4 1974-1978 prior to emissioning of first steam plant (1979) common to both alternatives ani therefore omitted.

From 1987 onward 0 & M assumed to be equal for both alternatives.

…---------------------------------------------------- --------- Alternative 3 less Alternative 3A ----------------------------------------------------------

Not ~cpenditures Net Present Values lrdro Steam Ful p oomnel kintennece Dscouint Nte (5 dro Stee Fuel Persannel kntnmnel e ne and Total

1971419751976 5.51977 9.7 1o 1.85 -3.30 .2.67 0o.04 0.82 -3.341978 3.3 6.9 12 1.88 -- 2.11 -2.37 -0.05 0.72 -1.941979 8.1 -17.3 -o.8 0.2 0.2 114 1.95 -- 1.18 l 2.10 -0.06 o.63 -o.761980 3.3 -10.9 -o.8 -0.3 16 1.99 -0.41 -1.86 -0.07 0.56 0.211981 -11.4 -5.1 -1.0 o0.14 o.6 18 2.01 0.22 -1,66 -0.07 o.149 0.991982 -3.3 -1.6 -0.5 0.5 20 2.00 0.74 -I.48 -0.07 0.43 1.621983 -1.8 0.3 0.2 22 1.98 1.19 -1.32 -0.07 0.38 2.161984 0.4 0.2 0.1 24 1.95 1.56 -1.19 -o.06 0.34 2.601985 ~-.0.5 0.141986 1.0 0.3 0.1

/ Residual values have been taren Snto &acount appropriately in the discounting process.

September 18, 1973

- - --, - --T- - -r, - - -

IP~~~~~~~~~

S i I g N g ^ R > . S ^ $ ~ R s s s

-I- - - - -- -0- -- - - -a., 1:o4a's

-82oF

ia} ~ ~ ~ i 0.-..-40

000000n00000000.ao

U F g ev e *i r 0Ci . Slbci.5Sa.a A eo4ao Ci a

<t

-. 045 0000* *-

--Ii~~~~~~~~~~~~t - g5~ - 1 -

cX <S.nH >. ;§ii11/1.4 , 2 0

* o.i d 4 a. .laaaaaaa .ooo..o.....

a X¢eozZ<¢ g,e00_a.N. -so. ILX .

1~~~~---- 000 0055 a -, a a-j;o 00~~~~~~~~~~~~~~~~~~~~~~~~~~

fl > > x j s s ° b t~f~"2 ~~.D_ w

-. .

_~~~~~~~~ a

C~~o a

a o~woD o °CC0 f .>Cf t

ANNEX 8Attachment 9Page 2 of 2

SYRIAEtablissement Public de l'Electricit4r

Thermal Power Pro.ject

Rate of Return of ProjectAssumptions for Costs and Attribution to Costs to the Project

Capital

Steam thermal plant inclutd7ing substation and connection 230-kV linesto main system: 100% of capital cost less 6% estimated import dutiesSubstation Hama: 50% of capital cost less 6% estimated import dutiesAll other lines and substations: 25% (- approximate ratio of #1 steamunit capacity to the total of Thawra (300 MW) and #1 and #2 steam units(250 MW); overall line and substation capacity--except for transformers--exceeds 550 MW and on this basis the assumed ratio should not exeed 25%of the cost).Distribution: 1977, 1978 investment in subtransmission and distributionexpansion; demand would increase by about 100 MW during this period,somewhat less than #1 steam unit capacity, i.e. the attribution shouldnot exceed the investments for these years.

Fuel Cost

- Fuel #1 steam unit: Generation as forecast during appraisal rising to710 GWi (plant factor 65%) by 1980 and remaining level until end ofeconomic life. Price of fuel iES 50/ton resulting in ZS15,120/GWh

- Savings in fuel cost old plant: Generation 375 GWh for 3 years (1978-1980) and reducing linearly to zero by 1985.

Operating C0ot

- Personnel #1 steam unit: In accordance with cost forecast duringappraisal for 1976-1979, and kept constant until the end of economiclife

- Maintenance #1 steam unit: 20% of fuel cost (i.e. 1.25 times economiccost to reflect actual estimated cost)

- Personnel and maintenance of lines and substations: 25% of appraisalestimate until 1979 and kept constant until end of economic life

Benefits

- Sales (GWh): Generation less 20% to reflect assumed losses- evenue: In accordance with appraisal estimate for 1976-1979, increased

by 15% to reflect the mininum average of tax, for which EPE acts as theGovernment's withholding agency.

9R00 ANIIEI 9- ~~~~~Pas l of

2Z

Ettbliesecnt Pub3ic dillsotriclte

1c4hrdeh Therma Po-er Prje.t

Foremast Salesj, Ce-ratio, Desd, p.a0aitise;

Bklnoces of Ene-m ad Cap.aitica

freedHistoric 1963-1572 1973

1972 _. (!eti-te) 1974 1975 1976 1977 1978 1979 0esrvtion-Itrm copre-td System

Domestic 218 8 514 210 250 270 310 340 360Prints Ind-try 135 1 10.5 140 210 260 320 370 400Govsre,set Indu try 139 9 25.2 215 450o 00 1,D94 1,345 1,360Goer-et S-rios 39.0 11.9 4.5 1.9 38 70 77 90Eailey 0.5 - _ _ - _ - _St-eetligbtia~g 16.o 9.6 20 21 22 26 28 300il DoPaty 64.4° 13.2 50 170 360 540 560 580rhm ., Irrigetioc, Othere 145.1 - 100 120 130 280 400 500

Total 753 17.5 -037 37w 177 1,900 773 =3,120 3, 320

Lo..eae 21 22 22 20 20 20 20 20

Generotio- (GWh)Eydro: sistiag 62 14.4 50 50 50 50 50 50

Tho ro _ - 200 600 1,200 1,600 2,0 2,000Snbtootal 12 157 250 65 5 i 90 2,2505 2,050

riesel 37 4i.1 30 . .

Steam: At Tell 5 125 125 125 125 125Soe-h ) 919 ) 736.5 _ - _ _ _ _ Acriasd mnt repilrable

attioeb ) ) 180 400 470 470 170 470Mheardeb 1 310 440Yehords.e 2 310

Totol Steam 3057 35 525 5 95 595 1,220

GRa Tarbite-Th-ovo 25 30Ale.po 70 90 100 210 80 110AF 50 60 25Hoea 50 70 90 90 60 soItett tiaDmn%eoua 120 160 225 370 150 210Esrtysl B5 100 40 60 O Odl -orpepy gas torbi.e. tr-oeferredHac-Rtel 35 15 20 ) to EiE by 1976/7'; 40 KW H4R-Sovedie 230 400 400 ) rel-oated at Sooedie it 1977.

Subtotal _ 115 .15 372 s75

LebmooD 11 115 100

Total Ge.araitim (GEh) 317§ i1,0 2,370 305 T7W 4150

LiOd F-ctor (6) - 50 55 60 61 62 63

Metiro Demm-d (tW) 170 9a!/ 230 330 450 617 718 752 q/ Oqal to -voilable -apasity

Pleat ZCp-atiio (SHO)

Eydro: ecietiog 10 3 10 10 10 10 10 10Th-orm _ 103 130 270 400 500 500

Subtotal 10 *7 ¶0 190 00 7115 310 310

ste.- Aim Tell 25 25 25 29 25 25 25 25H-mebh 45 Repair aasad utecotamloDattiosb 120 20 50 90 90 90 92 90aShorOeb 1 125 125tahbardeh 2 125

Subtota1 "iT -77 i15 115 -13 -7Z 103

Diecel: Efitiog 15 10 10 10 10 10 Retire-t 19780,tljytag i0 30 20 Grad-l -oooostioo 1975_1977, retire-et 1978

Subtotl 15 10 10 20 3

100 Tarti-s

Th.r- 20 20 20 20 20 20 April 1974Aleppa 56 S6 56 56 56 56 41 Jo., 42 Feb., 3 April, 1974hf 40.40 40 #1, 2 Merch 1974; it 1973 to Sou-dieHox 40 40 LO 40 40 40 #1, 2 M5y, 1974Reriery (Hmo) #1, 2 Jam. 1974, 2o18 NU, Stmadby RfiteryLatakia 18 13 18 19 m-r0h 1974, ao-ectio J.a. 1976D-a-acea 50 9& 98 98 98 98 #1, 2, 3 Feb 1974' #4 5 Jme 1974tEr.eyh 28 28 28 28 #1 De 1973(10 13, 40 Moral 197'. (18 5);

osto iac1 Joomry 1970HOekeh 10 10 10 De- 1973, tmoectiap 1977So-cdie 84 54 84 #1, 2 A.Sm.t 193 (2o13 OW), #3 April 1974,

(18 5W); -amaeotiao it 1977; 40 He HamoSubtotal -257 -51. trelocated to Souedie in 1977Salteta1 2531 1351 190 13 57 305 -33

Lebeooo 25 40 25Tatol Avilble Cparity ()W)¶= 3 ¶ yp7 5733 5 1I130 1775

Reserve; lrg-st mait (30) (20) (301 (60) 950) (100) (125) (125)epirintog (15) - s5) :15) '15) 21i) (100) (100)

Firm Capaoity (mW) --- is 3 ¶1

Capsoity Mergin NW 25 (20) 199 174 180 177 161 232

I^lted0SYte

oieetla 358.9 70 7' 85 45 41 37 34Iodaetrial/0alcero1al 196 05 28 35 15 14 13 11

Total 7E3 53 ¶13 30 03 1 5

GOeer-tioa (GWh)Di.sel 103 125 50 Ac 80 75 65 60l bo Turliac - 0'/ 80_2 - - 1 - t/ LtAaki StJ turbine, conneted 1976

10 13¶10 >150 7C "37 ¶13=5

In01lled C0 p-ity (NW)h..-t 61 68 75L .l 70 60 50 40

aee Tutbis I _ __ .. 7 5 _, __ / Ltkisa gas mcbite, coo-ted 1976

Total EPE

1mter-o-mcnted Syat-e 758.8 707 790 1,'70 1,900 2,640 3,170 3,320IDolated oyetema 78.5 95 105 1_0 60 55 50 45

Total 8 37.3 01,390 179 2,195 3,170 37

Gaermtion (cod raroacs) ... )Sten 8'649 736.5 305 52- 595 399 905 1,220Diesel 140 166 1 120 60 S0 75 6S 63Oae T.rbire 365 495 525 1.05 741 880

utabtotl Thermal 733 n5 ¶ 1,100 1,200 1 1,715 57OEydro 62 14.4 251 65C 1,250 1,650 2,250 2,050Lebamoo 11 115.0 100

T.tol.1! 73 -1,1 1,70 2,40 3-751 -3,965 17 1-0

Thermal Partio, (1) 93 69 63 49 51 43 51

Available Cao eity (1r)Intl7eroorneo81ted ter 240 98 474 579 735 909 1,104 3,229Isolated Systi. 61 68 70 98 1,160 50 40

Total 165t5 i79 ¶110V

Fabea.y 1974

ANNEX 9Page 2 of 2

t3- '1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989

1729

1700 1700

1600 1600

1500 ,179 1500

1400 1400

1354

1300 Historic ___ 0Forecast I 1300

1229

1200 ' 1200

. 1129 _1 /

1100 110 ' 1 1100

1000 1004 1000

Installed Capacity

Largest Unit 909

900 909spinning Reserve e 900

MW _________ Firm Capacity MW

…_ 800 -j -Firm Capacity Maximum Demand 8008001'4: 0

735

700 700

'61T1

600 574 / SYRIA 600579 Etablissement Public de l'Electricite

Historic and Forecast Maximum Demand

500 3 and Generation Capacities 500

474

429-

400 400

300 300

227

200 200

1221 _ 1t2_ - ' g Tha-wra

100 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -8 Effective1078 - Capacity

.15 ", . 30 ,,60 30 90 . 125 .250 - - Largest

,1963, .1965, .1967, .1969, ,1971, ,1973, .1975 , .1977. .1979. .1981, ,1983, .19RS. .19R7 , .19R9

SYRIA

rtmblissesent Public d'Electricit6 (E.P.E.)

Balance SheetsL(S) Million ES 3.85 - US$1

1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

--------------- A cttua --------------------------------- ------------------------------- Forec ost --------------------------------- -------

ASSETS

Fixed AssetsCross Fixed Assets V 239.4 297.9 309.1 323.8 344.6 442.1 690.4 780.2 1,309.0 1,679.0 1,792.8 2,129.2

.ess Depreciation 61.6 70.0 80.4 90.9 103.6 118.3 L36.7 186.8 Z14.9 280.8 351.3 431.3

Net Fixed Assets in Operation 177.8 227.9 228.7 232.9 241.9 323.8 553.7 613.4 1,094.1 1,398.2 1,441.5 1.693.9

Work-in-Progress 6.3 9.6 15.2 24.4 31.8 2.0 50.9 154.6 113.7 86.1 199.5 75.0

Total Net Fixed Assets 184.1 237.5 243.9 257.3 272.8 325.8 604.6 768.0 1,207.8 1,484.3 1,641.0 1,768.9

nvestrents 0.2 02. 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0 0.3 0.3

Total Uon-current Assets 184.3 237.7 244.1 257.6 273.1 326.1 604.9 768.3 1,208.1 1.484,6 1.641.3 1.769.2

NET CURRENT ASSETSCurrent AssetsCash 6.0 13.7 9.0 11.1 9.3 23.7 10.8 14.7 21.1 24.4 29.4 29.8

Account, Receivable 2/ - glectriclty 21.3 24.8 31.7 37.8 40.6 35.0 35.0 43.8 52.0 61.9 74.6 84.4

Overdue Municip.l Accounts - W.rkb, etc. 2/ - - 4.4 4.4 4.4 4.4 2.7 - - - -

Inventories 3/!~ 31.4 30.8 33.3 36.2 51.2 52.0 53.0 64.7 76.3 102.0 110.0 133.0

Sundry Debit Accounts 4/ 73.7 59.4 81.7 115.6 149.7 121.0 122.0 123.0 124.0 125.0 126.0 127.0

Subtotal Current Assets 132.4 128.7 155.7 205.1 255.2 236.1 225.2 248.9 273.4 313.3 340.0 374.2

Current LiabilitiesAccounts Payable Suppliers (6.8) (11.8) (10.7) (7.4) (7.4) (9.7) (12.1) (12.4) (12.3) (14.6) (14.6) (16.7)

Tax, stc. (21.1) (37.0) (48.4) (62.7) (94.3) (65.5) (63.6) (63.0) (70.2) (85.2) (100.0) <110.5)

Credit Balances softh Reglons (20.3) (21.4) (26.7) (34.6 (0.5 (40.01 (40.01 ( (40.0) (40.01 (40.0) (40,01

Subtotal Current Liabilities (4.21 (70.2) (85.8) (103.73 (1. (115.2) (115.75 (115.4) (122.5) (139.8) 15.6 ( 1172

Net Current Assets 84.2 58:2 69.9 101.4 113.0 120.9 109.5 150.9 173.5 185.4 207.0

TOTAL NET ASSET3 268.5 29 314.0 359.0 447.0 714.4 901.8 302 t.652

EQUITY AND LONGTERK DB8T

Equi tyGoversuest LOan - Formation Assets 0/ 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4 25.4

Government Construction Grants to EFF 6/ 23.8 34.4 33.2 39.6 56.4 56.4 286.4 391.4 721.4 791.4 751.4 701.4

Con.s.ers Contributions 7/ 38.1 42.2 45.2 49.3 57.5 61.5 66.0 70.5 75.5 80.5 86.0 91.5

Specific Reserves 8/ 12.7 14.4 15.7 17.6 18.9 18.9 18.9 20.5 22.1 23.7 25.3 26.9

Genral Reserves 9/ 96.0 101.5 117.7 136.2 152.0 171.4 171.6 156.1 180.1 228.4 314.3 436.0

Profit for Year 7.0 12.7 18.5 19.5 19.4 0.2 (15.55) 24.0 48.3 85.9 121.7 126.2

Total Equity 203.0 230.6 255.7 287.6 329.6 333.8 552.8 687.9 1,0i2.8 1.235.3 1,324.1 1,407.4

LongteO)= Liability 10/Consurers Security Dep.sits 7.3 8.2 8.8 10.0 10.8 12.0 13.0 14.0 15.0 16.0 17.0 18.0

Subtotal 210.3 238.8 264.5 297.6 340.4 345.8 565.8 701.9 1.087.8 1.251.3 1,341.1 1.424

Longtes. DebtProposed IBRD Loan - - - - - 9.7 26.4 50.2 80.6 89.4 91.9

Proposed Ruvait Fund Loan - - - - _ - 7.0 19.1 36.3 58.1 63.6 64.6

Goverxnent Loans (Foreign) l/ 58.2 57.4 49.5 61.4 25.6 20.1 15.0 10.1 5.3 0.2 0.1 0.1

Future Foreign Loans 12/ - - - - 20.1 55.8 80.1 116.9 161.9 236.0 318.7 393.3

Suppliers Credits '3/ _ - - _ 25.3 24.3 14.9 7.5 1.9 1.3 0.9

Befinerien Cmsturbines (3-year pay.sent) - - - - - - 12.5 12.5 10.0 30.0 12.5 -

Total Lonotemr Debt 58.2 37'T 49.5 6L.4 45.7 101.2 148.6 199.9 271.2 46-8 4856 550.8

TOTAL VJITY AND L !TI DEBT 268.5 296.2 3m1 359.0 3661 647.0 4.4 901.8 1,359.0 1658_ 1.826.7 1.976.2

Debt:Equity RBtio 22:78 20:80 16:84 17:83 12-68 23-77 21-79 22:78 20:80 25:75 27:73 28:72

Average met Fixed Assets in Operation 1U9.5 202.8 228.3 230.8 236.9 282.4 438.7 583.5 853,7 1,246.1 1,419.8 1,567.7

1/ Includes rsce.s financed by connunors costrlbstions (1972 U57.5 milllon), which sere 1002 vritten off by F8P direct credit in their *ccosnto. Seo Annes 14 for details of assets.

2/ After write off 1972 {8300,000 nd estimated non-electricity sales to M-nicipalities of ES 4.4 million by 1971. Prior years include this in electricity.

3/ Includes is Transit.

4/ Includes Payment in advance nd Debit Accounts with regions.5/ Theoretlcally repayable witb interest end the Osearcu portion hs bean repaid out of earnings.6/ These grants from C.D.P. are repayble from surplus nash as available.

7/ Included as "Depreciation" in EPE's accounts.8/ 1972 (LS millions). Replacent reserve (8.9), Teruination Reserve (10.4).9/ 1972 (LS millions). Retained surplus (109.8), 10% Lega1 Resarve (14.1), Espansion Reserve (12.4). Repayment Reserve of tSitlal assets (10.4), "Other" Reserves (5.3).

00 Ultimately possibly refundable.It/ Prior to 1972 supplier. credits and loans were termed Notes Payable.12/ For details see Annes 15. Includes potential second Bank Loan in 1975.

13/ For details see Annex 15.

February 1974

SYRLA

Etablissement Public d'Electricite (EPE)

Itcse Statements

L(S) Million T,S3.85 * US$1

---- ------------------ Actual---------------------- ------------------------------------- Forecast-------------------------------------

1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979

Purchased Power - - - 11 115 174 - - -

Generation Thermal GWh 449 529 724 855 989 903 790 1,100 1,200 1,725 1,715 2,160

Hydroelectric GWh's 48 64 53 51 62. 14 250 650 1,250 1,650 2,250 2,050

Sales GWh's 1/ 363 468 616 718 837 802 885 1,390 1,960 2,655 3,170 3,365

Average sale price p(s)/kWh 14.4 14.3 12.7 12.9 12.0 11.5 11.0 10.5 10.2 10.6 10.7 11.4

USi/kWh 3.7 3.7 3.3 3.4 3.1 2.9 2.7 2.6 2.6 2.7 2.8 3.0

Revenue: Electricity 2/ 52.3 67.0 78.0 92.8 100.9 92.2 97.3 146.0 200.0 281.4 339.2 383.6

other 3/ 3.0 3.6 3.5 4.7 9.3 5.7 6.2 6.7 7.2 7.7 8.2 8.7

Total Operating Revenue 55.3 70.6 81.5 97.5 110.2 97.9 103.5 152.7 207.2 289.1 347.4 392.3

Expenditure: 4/Personnel 11/ 15.4 19.4 21.5 26.9 33.1 35.4 37.8 40.0 47.2 50.8 54.2 57.3

Fuel 10.0 12.6 14.7 20.0 24.3 28.2 36.8 32.5 26.0 33.5 27.8 34.1

Purchases of Energy - - - - 11.1 14.8 - - - -

Maintenance (Spares and Materials) 3.0 2.9 2.4 3.3 4.4 5.0 5.5 8.0 10.0 10.5 11.0 14.5

Water and Electricity 5/ 1.9 1.7 2.6 3.5 3.9 - - - - - - -

Administration and Transport 1.0 1.8 1.8 1.7 2.5 2.6 2.7 2.9 3.0 3.2 3.3 3.5

Incase and Other Taxes 6.6 8.2 8.0 9.0 7.6 - - 8.8 18.0 31.6 46.3 50.8

Mosques and Churches - Free Supply 12/ 1.9 1.0 0.8 1.4 2.3 1.5 1.5 1.5 1.5 1.5 1.5 1.5

Depreciation Fixed Assets 7.7 9.5 10.2 11.4 11.7 14.7 18.4 30.1 48.1 65.9 70.5 84.0

Total Expenaes 47.5 57.1 62.0 77.2 89.8 98.5 117.5 123.8 153.8 197.0 214.6 245.7

Net Operating Revenue 7.8 13.5 19.5 20.3 20.4 (0.6) (14.0) 28.9 53.4 92.1 132.8 146.6

Interest 6/ 0.1 0.2 0.2 - 0.1 0.8 5.0 8.9 12.2 19.1 25.5 28.9

Less charged to Capital - - - 0.8 2.7 4.8 7.9 13.7 15.2 9.3

Net Interest charged against Income 0.1 0.2 0.2 _ 0.1 - 2.3 4.1 4.3 5.4 10.3 19.6

Financial Income W7 W 7 7 3 74 T74 4 4

Extraordinary Income 0.2 0.8 0.2 0.5 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Net Surplus for Year 8.1 14.4 19.8 21.4 21.1 0.2 (15.5) 25.6 49.9 87.5 123.3 127.8

Allocated to Termination Reserves 7/ 0.3 0.9 0.3 0.9 0.5 - - 0.6 0.6 0.6 0.6 0.6

Replacement Reserve 8/ 0.8 0.8 1.0 1.0 1.2 - _ 1.0 1.0 1.0 1.0 1.0

Retained Surplus 9/ 7.0 12.7 18.5 19.5 19.4 0.2 Q(1.5) 24.0 48.3 85.9 121.7 126.2

Rate of Return on Average Net Fixed Assets _1 7

in Operation 4.9 6.7 8.5 8.6 IO/ 8.4 - - 5.0 6.2 7.4 9.4 9.4

1/ 1976 abnormal rise due to interconnection, including oil loads, pumping station and irrigation.

2/ Includes Latakia from 1971 (LS5.0 million in 1972) and excludes all taxes.

3/ Meter Rents, Fees, Profit on worksafor consumers.4/ Includes Latakia from 1971 (LS4.5 million in 1972).5/ From 1973 Electricity used by EPE internaUy has been deducted from Sales.

6/ Local bank interest only during 1968/1972.

7/ For terminal grants to pre-1959 employees.8/ For cost escalation of replacements.9/ Includes 10% compulsory Legal Reserve, Expansion Reserve, Reserve for repayment of initial capital and "other" Reserves.

10/ Assets exclude Latakia system so 1971 excludes Latakia surplus of bS400,000 (1971) and ES500,000 (1972)

11/ Includes training school staff from 1976.12/ Included in Sales revenue.

February 1974

StRIA

Srablism.t Public d'lleccit6 (E.P.E.ISources md Applications of Fonds

1972 1973 1974 1975 1976 1977 1978 1979 Total 1973-1979 1 of Pr.~eetActual --------- - Forecast -------- ____- 9-73-1979 Progrm Cost

SOURCES

net Cash CenerationNst operating Revenue 20.0 (0.6) (14.0) 28.9 53.4 92.1 132.8 146.6 439.2DepraeeStlon 11.7 14.7 18.4 30.1 48.1 65.9 70.5 84.0 331.7Financial Inec0e 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.4 2.8REtreordinary lnone 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.4 2.8

9et Cbsh Generation 32.5 14.9 5.2 39.9 102.3 18 204.1 231.4 776.5

CapitalDecrease (I-orease) in Working Capitsl

(;acl.ding Cash) (13.7) 6.5 (1.5) (20.1) (11.q2) (19.3) (6.9) (21.2) (73.5)Conaueers Contributions and Deposits 9.0 5.2 5.5 5.5 6.0 6.0 6.5 6.5 41.2 32Covsrnment Graetsl(RaPsyent) 1U 16.8 - 230.0 105.0 330.0 70.0 (40.0) (50.0) 645.0 3Subtotal Capital 12.I IL7 234.0 90-4 325.0 56.7 (40.4) (64.7) 612.7

loneter, Sorros4ngProponed IBRD Loan - - 9.7 16.7 23.8 30.4 10.4 5.2 96.2 57 407.Proposed Kuwait Fund Loan - - 7.0 12.1 17.2 21.8 7.4 3.8 69.3 4%SKODA _ 2.2 5.0 10.0 - - - - 17.2D.D.R. 38.1 27.4 29.1 30.5 31.6 34.7 38.1 229.5Future Foreign Loss -i - ~ - 8.2 27.5 58.6 63.4 60.0 217.7 ) 327.Supplier's Credits t1 2.5 23.9 8.4 - - - - 32.3Refineries Credit Terms - . 12.5 - 17.5 37.5 _ - 67.5 )Subtotal Lonateas Sorrowiog 2.5 64.2 70.0 76.1 116.5 179.9 115.9 107.1 729.7 412

IOTAL SollRCES 47.1 90.8 309.2 226.3 543.8 395.4 279.6 273.8

APPLICATIONS

ConstructIon Coatscoastrnction "to 2.0 21.2 40.9 59.6 73.1 30.0 14.0 240.8 147. 100%T aeftlct 30_6__3 __ __ _ __ _Otbr Y 930.6 273.3 147.8 420.4 255.6 182.0 188.6 867Subtotal Progras Construction Coot 66.9 294.5 188.7 480.0 328.7 212.0 202.6 1,773.4 1001

Debt Servicehaorti..tionProposed 7BRD2 Loan - - - - 1.6 2.7 4.3Proposed Konait Fond Los s _ - - - - 1.9 2.8 4.7Other Loneterm Debt 18.2 6.7 22.6 24.8 45.2 44.3 33.6 36.4 215.6

Subtotal Aortization 18.2 8.7 22.6 24.8 45.2 4

4.3 37.1 41.9 224.6

IsterestProposed 1BRD laoa - - 1.1 1.9 3.2 4.9 6.6 6.3 24.0proposed KusitFund Lorn - - 0.1 0.5 1.1 1.9 2.4 2.6 8.6Other Loogtera Debt 0.1 0.8 3.8 6.5 7.9 12.3 16.5 20.0 67.8

Subtotal Interest 0.1 0.8 5.0 !9 12.2 19.1 25.5 28.9 100.4

P6141 Debt 8ervice 18.3 9.5 27.6 33.7 57.4 63.4 62.6 70.8 325.0

Subiotel 46.9 76.4 322.1 222.4 537.4 392.1 274.6 273.4 2,098.4

C0emg in Cash (L.8) 14.4 (72.9) 3.9 6 3.3 L50 04 20.5

BEAL APPLSCATIoC S iul aD8 39.2 226.3 543 395.4 279.6 273.82 .118.S

Cash st start of Period 11.1 9.3 23.7 10.8 14.7 21.1 24.4 29.4 9.3Cash at end of Period 9.3 23.7 10.8 14.7 21.1 24.4 29.4 29.8 29.8Time Debt Service Coered by Net Cash Ceneration 1.8 1.6 - 1.8 1.8 2.5 3.3 3.3

I/ These are only repayble to the extent that EPF has funds surplus to its construction and vorking c-pital requireseots sod eompriss Thawra 5 units (IS 292 Illion),10 gta turbines (IS 135 aillionl. 120 kV lines (tS 114 millinm), TraininB School (iS 4.5 *illion) and liquidity r.quireaents (LS 134.5 aillion).2/ D.D.R. Credits for 1971 are included in 'fSuppliers Credits" since the detail of the change in Pronissory Note during 1971 is noc avaIlable.I/ 1972 includes SI.4 million .iscellaneo.. expeoditure charged directly against reaerves.

February 1974

ANNE X 13

ETABLISSEMENT PUBLID d' ELECTRICITE (EPE)

Mehardeh Thermal Power Project

Main Assumptions for Basis of Financial ForecasteAll LS Amounts a-re in Millions

Balance Sheets

1. Assets --------------------- See Annex 14

2. Depreciation --------------- Rates are fixed by law and are on the high side.Typical annual rates are:

Diesel genera.ors h1% (higher if over 4,000 hours in year)Thermal stations 4% (higher if over 8,000 hours in year)Hydroelectric plant 3%4Lines, substations, etc. h41Meters 51%

3. Accounts Receivables -O- Overall outstandings reducing from 147 days in 1972to 80 days by 1977 in v-jew of further interconnectionand expected improvement in Government and Belidiyeaccounts.

4. Inventories --- 7% of gross fixed assets from 1975, but excluding Thawrainitial assets and training school.

5. Accounts Payable Suppliers - 2 months fuel + 1972 increased by 3S 1.0 Annually.

6. Consumers' Deposits -------- 1972 (iS 10.4) + LS 1.0 Annually.

7. Long-Term Debt ------------- See Annex 14

Income Statement

8. Purchased Power from Lebanon -- According to existing contract averaging 9.6 p/kWh(1973) and 8.5 p/kwh (1974)

9. Revenue is based on existing tariffs with a marked abnormal increase in 1976, miena number of major oil and other industrial consumers are expected to be absorbedinto the interconnected system.

10. Personnel costs include a 1973 pay award; 69% annual escalation to cover generalincreases in numbers and salaries; and specific estimates of additional staffneeded to operate the new generating stations, interconnections and training school.

11. Fuel costs based on costs per ton varying with delivery e.g.:Residual, oil: Homs LS 50, Mehardeh LS 51, Damascus ES 61, Aleppo, LS 62Diesel: Aleppo, Damascus, Isolated systems LS 132.

12. Maintenance and spares on basis of type a.nd age of installation.

13. Income Tax estimated at existing rates of 52%g of taxable surplus.

SYRIA ANNEX 14

ETABLISSEMENT PUBLIC d' ELECTRICIE (EPE)

M3hardeh Thermal Power Project

Details of Gross Fixed Assets December 31, 1979

and Conetr-uctionrgr.a 1 972/1979

1§1 Completion BS MillionGross Fixed Assets by 1979:Construction/Acquisition:

Dam Thawra 1976* 85.0Generation Mehardeh I 125 1978 165.7

Mehardeh II 125 1979 127.6Mehardeh III 125 WIP 75.0Thawra I, II, III 300 1976* 100.0Thawra IV 100 1976 36.0Thawra V 100 1977 36.03 Gasturbines 60 1973/4 78.87 Gasturbines 156 1974/7* 67.510 Gasturbiines 230 1974 100.0Repair to Katineh 60 1973/5 21.025 Diesels 20 1974/7 18.6 826.2

TransmissionSubstations: 8x230 kV 1976/7 68.8

4Y230 kV 1979 31.0Thawra, Aleppo 1976 10.0

Lines: 230 kV - 1128 km 1976/7 114.0- 160 km 1979 20.2- 310 km(Thawra/Aleppo) 1976* 25.0

Interconnection 1973 13.2 282.2

Subtransmission Distribution System 1973/9 364.3Rural Electrification 1973/9 84.4Consumers Connections 1973/9 34.0 482.7

Other Despatching 1977 27.8Voltage Change 1975/9 53.0

Miscellaneous Head-Office Building 1974/8 15.0Miscellaneous Studies 1977/8 6.3Vehicles, etc. 1972/9 22.5Training School 1975/7 4.5 48.3

Subtotal Construction/Acquisition 1,805.2

Less Work in Progress 1979 Mehardeh III 75.01,730.2

Add Interest during construction 54.4-Existing 1972 Gross Fixed Assets 1-1-1973 344.6

Gross Fixed Assets 12-31-1979

* pTransferred from Ministry of Euphrates~* Transferred from refineries

ANNEX 15Page 1 of 2 pages

SYRIA

ETABlISSKKEMT PUELID d' ELECTRICITE (EME)

Ibhardeh Thermal Power Project

Governxnt Construction Contributions

The Government finances EPE as necessary to meet the cost of itsauthorised construction program or working capital. Such contributions areonly repayable when PE has funds surplus to its requirements aa is forecastin 1978 (B540 million) and 1979 (LS50 million). Contributions for the foreignexchange requirements of the construction program are often provided by theGovernment out of bilateral credits. The largest example of such a bilateralcredit is that from the USSR, which has provided funds for the Euphrates Dam,Thawra power station (5 units) and 1128 km of 120 kV transmission lines forinterconnection.

Various Arab States have provided 10 gas turbines to Syriato offset the affects of the war damage to Kattineh and Hameh. These willbe given by the Government to EPE on a grant basis.

A "Liquidity" grant from the Government has been assumed to enableEPE to pay local costs of the construction program, operating expenses andmaintain a minimal cash balance.

The Government Construction Contributions as at 12/31l1979 and theoriginal sources and projects are:

Year grantmade to EPE Source Project LS (million)

USSR Thawra dam and power station:1976 Units 1, 2 and 3 (assumed) 220.01976/7 Units 4 and 5 72.01976/7 1128 km 120 kV Line 114.01975 Arab States 10 Gas Turbines 135.01975/77 Training School 4.5

"Liquidity" grants (net) 134.5

Total Government Grants (net) 680.012.31.1979

Page 2 of-2 pages

SYRIk

ETABL2iSE1ENT PUBLIC DE LtEL3CGRICITE (EPE)

Assumed Long-term Debts as at December 31. 1912 and Later Borrowings

Long-term Debts

Assumed Terms -- £S Millions --Inc. Eht. 1972 or 1979

Year Lender For Years Grace I Total Loan Balance

1974 Bank I Project 25 4 7;4 96.2 91.91973 Kuwait Fund (KD 5,4 million) 20 4 4 69.3 64.61975 Bank II Potential Project

Mehardeh II, etc. 25 3 7¼ 161,2 156.71968 DDR I 21 Diesels, Distribution 12 2½ 22.2 4.61972 II 25 Diesels, Distribution 23 8 1i 106.8 106.61973 III Distribution 6 1 E 122.7 68.91973 AEG 820 SW Gas turbines 42.2 1.01977 FFL 1/ Mehardeb Unit III 12 Og 2½ 112.5 56.5

Local Credit - Syrian Refineries

The purchase of 7 gas turbines from Syrian refineries when connectedto the interconnected grid, has been assumed. The purchase price of £S67.5million was assumed to be paid over 3 years at 6%. The final repayment isexpected to be in 1979.

l

FFL - Assumed future foreign loans on Bank terms.

IBRD 10613R36 38 4C FEIPUIT '974

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