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DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL DEVELOPMENT ASSOCIATION

Not For Public Use

Report No. 150a-BR

APPRAISAL OF THE

ITUMBIARA HYDROELECTRIC POWER PROJECT

FURNAS - CENTAIS ELETRICAS, S.A. (FURNAS)

BRAZIL

May 29, 1973 FILE COPYRegional Projects DepartmentLatin America and the Caribbean Regional Office

This report was prepared for official use only by the Bank Group. It may not be published, quotedor cited without Bank Group authorization. The Bank Group does not accept responsibility for theaccuracy or completeness of the report.

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CU X ANDEQUIV4LENTS

US$1 Cr$5.63511Cr$1 r US$3.1775Cr$1 miillion w US$177,462

VNITS AND !LUIVALENTS

kW S kilowatt

MW = MegawattkWh * kilowatt hour

GTWh (Gigawatt hourTWh Terawatt hourkV * kilovoltkVA kilovolt-ampereMVA Megavolt-ampereMVAR * Megavolt-ampere-reactivekm2 kilometerkm2 Square Kilometer

ACROYMSAND) ABBREVI-ATIONS

CANAMBRA = A consortium of Canadian and Americanconsulting firms

CBSE = Companhia Brasileira de Energia Eletrica,S.A.CEB = Companhia Eletrica de Brasilia, S.A.CELF * Centrais Eletricas Fluminenses, S.A.CEMIG = Centrais Eletricas de Minas Gerais, S.A.CESP = Centrais Eletricas de Sac Paulo, 3.A.CPFL - Companhia Paulista de Forca e Luz, S.A.DAEE Departamento de Aguas e Energia Eletrica

do Estado de Sao PauloDNAEE = Departamento Nacional de Aguas e Energia

EletricaELETROBRAS 5 Centrais Eletricas Brasileiras, S.A.ELETROSUL = Centrais Eletricas do Sul do Brasil, S.A.ESCELSA Espirito Santo Centrais Eletricas, S.A.FURNAS = Furnas - Centrais Baetricas, S.A.LIGHT w Light - Servicous de Eletricidade.! S.A.

Fiscal Year Ends December 31

1/ See Annex 20.

APPRAISAL OF THE

ITUMBIARA HYDROELECTRIC PROJECT

FURNAS - CENTRAIS EILTRICAS S.A.

BRAZIL

TABLE OF CONTENTSPage

SUMMARY AND CONCLUSIONS

1. INTRDDUCTION 1

2. THE POWER SECTOR 3

Organization of the Power Sector 3The Southeast Region 4Tariffs 6

3. THE BORROWER 8

Organization 8Market 9Facilities 9Generating Expansion Program 10Insurance 10

14- THE PROJECT 11

Description 11Engineering and Construction 12Cost Estimates 13A.mount of Proposed Loan 14Procurement and Disbursement 1Environmental Aspects 15

5* JUSTIFICATION OF THE PROJECT 16

Load Growth Forecast 16Least-Cost Solution 16Return on Project Investment 17

6. FINANCIAL ASPECTS 18

Summary 18Past and Present Financial Performance 181973-82 Financing Plan 18Future Financial Situation 20Audit 21

7. A1REEMENTS REACHED AND RECOMMENDATION 22

This report is based on the findings of a Bank ission composed of Messrs. auy PrenovealRenato Salazar, and Ralph L. Bloor which visited Brazil in January/February 1973and a supplemental visit by Mr. Ralph L. Bloor in May 1973.

APPRAISAL OF THE

ITUMBIARA HYDlOELECTRIC POWER PROJECT

FURNAS - CENTRAIS ELETRICAS S.A.

BRAZIL

LIST OF ANNRXRS

1. Proposed Law - Electric Power Sector2. Tariffs3. Market Forecasts4. Power and Energy Balance Graphs5. Insurance6. Transmission Facilities7. Disbursements8. Power and Energy Balance of the Southeast Region9. Least Cost Solution

10. Cost Assumptions11. Comparison of Alternative Programs12. Effect of Fuel Oil Price on Comparison of Alternatives13. Return on Project Investment---14. Actual and Forecast Income Statements, 1971-198223. Forecast Sources and Applications of Funds Statements, 1973-198216. Actual and Forecast Balance Sheets, 1971-198217. Actual and Forecast Long-Term Debt Statements, 1971-198218. Forecast Amortization Statements, 1973-198219. Forecast Interest Payments Statements, 1973-198220. Conversion of Local Costs into Local Currency

Organization Chart - 7598

Map - IBRD 10407

APPRAISAL OF THE


FURNAS - CENTRAIS ELETRICAS, S.A.

BRAZIL

SUMMARY AND CONCUJSICNS

i. The Brazilian power sector is administratively complex. Powerfacilities are owned and operated by Federal, State and private companiesumder the control of the Ministry of Mines and Energy through itsDepartment of Water and Klectric Energy which awards concessions andapproves tariffs and Centrais Eletricas Brasileiras, S.A. (ELETROBRAS)an agency which has two functions: (a) to set up and own federal powercompanies, and (b) to coordinate the financial and technical resourcesof the sector. ELETROBRAS has not been completely effective in itscoordination role mainly because it has lacked the authority to imposeits decisions on the sector companies. However, a proposed new law presentedto the Brazilian Congress on May 15, 1973 could give ELETROBRAS the necessaryauthority to plan and control the use of the electric power sector resourceseffectively.

ii. The proposed loan would be an appropriate vehicle to help strengthenELETROBRAS' position in the power sector by committing the Government tointegrated planning and operation of sector facilities. The Government agreedduring negotiations to complete the revision of its existing Power DevelopmentPlans for the Southeast and the South Regions. At present, these regionsmake up about 87% of the sector in terms of energy produced and consumed.The proposed loan would also expose the Brazilian civil works contractors tointernational competitive bidding and would allow Furnas - Centrais Eletricas, S.A.(FURNAS), the borrower, to obtain the maximum possible amount of foreignfinancing compatible with its requirements.

iii. This report appraises a project consisting of a dam and 2,080 MWhydroelectric power station at Itumbiara on the Paranaiba River, about 520 kmof 500 kV, 350 km of 345 kV, and 890 km of 138 kV transmission lines andassociated transformer and switching stations. The project is estimated tocost US$593 million equivalent, excluding interest during construction; itwould be part of the borrower's expansion program which in the constructionperiod of the project is estimated to cost US$1,777 million equivalent.

iv. The proposed Bank loan would be for US$125 million equivalentfor a term of 30 years including 7 years of grace and would bear interestat 7-1/4%. It would be the sixth Bank loan to Furnas - Centrais Eletricas, S.A.(FURNAS), an autonomous electric utility company owned principally by theFederal Government, and would be guaranteed by the Brazilian Government. Theloan would be the twenty-sixth to the Brazilian power sector. The proposedloan would finance the estimated foreign component of the civil works for the

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dam and hydroelectric station; it would also finance about US$65 million ofequipment purchased after international competitive bidding, with a 15% marginof preference given to Brazilian manufacturers. The remainder of the equip-ment is expected to be financed under parallel financing arrangements.

v. The project is technically sound. Its estimated cost and theproposed construction schedule are reasonable. The facilities to be providedare needed by FURNAS to meet its part of the expected demand in the Southeastregion of Brazil, and are in accord with the aims of the Regional IntegratedDevelopment Plan which is currently being revised. The environmental impactof the project is expected to be small. Action required of the Borrowerwould consist mainly in the relocation of about 3,700 persons.

vi. The load forecast for the Southeast region is reasonable; theItumbiara project is the least cost solution; and the return on the projectinvestment is 22.9%.

vii. FURNAS is an acceptable borrower. It is ably managed enjoysthe benefits of favorable tariff legislation and has access to the resourcesof ELETROBRAS which administers a substantial proportion of the resourcesof the powsr sector. FURNAS' present financial performance and futureoutlook are equally good.

viii. The project forms a suitable basis for a Bank loan.

APPRAISAL OF THE

ITUIIBIARA HYDROELECTRIC PO4ER PROJECT


BRAZIL

1. INTRODUCTION

1.01 Furnas - Centrais Eletricas,S.A. (FURNAS), a corporation almostwholly-owned by the Federal Government through Centrais Eletricas BrasilairasS.A. (ELETROBRAS), has asked the Bank to help finance the Itumbiara Projectconsisting of a 2,080 MW hydroelectric power plant on the Paranaiba River andassociated 500 kV, 345 kV and 138 kV transmission systems having a totalestimated cost of US$593 million equivalent.

1.02 A loan of US$125 million equivalent is proposed to finance theestimated amount of the foreign exchange component of the civil works contract(U,;bo million) for the dam and hydroelectric station and an estimatedUS$65 million of equipment contracts for the hydroelectric station and thetransmission system. The remaining part of the external financing of US$76 millionwould be provided under parallel financing arranged by FURNAS (paragraph 4.11).

1.03 The Bank loan would represent about 7% of FURNAS' total investmentprogram of US$1,777 million equivalent for 1973-1982 - the project constructionperiod - and it is expected that the Bank's participation in the financing ofthe project would allow FURNAS to obtain the maximum possible additionalexternal financing.

1.04 The Bank has made five previous loans to FURNAS for a total ofUS$271.3 million and 25 previous loans to the Brazilian power sector for atotal of US$747.1 million. All previous loans to FURNAS have helped tofinance hydroelectric plants and/or related transmission systems, as follows:

(a) Loan 211-BR (1958) for US$73 million for the 900 MW Furnasl-/plant; these facilities are in operation;

(b) Loan 403-BR (1965) for US$57 million for the 1,050 MWEstreito plant; these facilities were completed withsubstantial cost savings and are now in operation;

(c) Loan 474-BR (1966) for US$39 million for the Estreitotransmission; the present closing date is June 30, 1974 andthe construction is on schedule;

1/ The name of the company derives from this first plant built at FurnasFalls on the Rio Grande.

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(d) Loan 565-BR (1968) for US$22.3 million for the 360 MWPorto Colombia plant. Changes in design have increasedlocal costs substantially; the closing date is December 31, 1973and construction is on schedule; and

(e) Loan 677-BR (1970) for US$80 million for the 1,400 MWMarimbondo plant and transmission system and 300 MW ofadditional capacity in the Furnas plant; there have beencost overruns due to higher than anticipated equipmentprices and additional transmission equipment. The closingdate is May 31, 1977 and construction is currently onschedule.

The Bank's experience with the Borrower has been satisfactory.

1.05 This report is based on a feasibility report prepared by FURNASwith the assistance of Companhia Internacional de Engenharia and on thefindings of a Bank mission composed of Messrs. Guy Prenoveau, Renato Salazar,and Ralph L. Bloorl/ which visited Brazil in January/February 1973 and asupplemental visit by Mr. Ralph L. Bloor in May 1973.

1/ A consultant.

2. THE POWER SECTOR

Organization of the Power Sector

2 .01 The power sector in Brazil is organized into Federal, State andprivate concessionaires. Federal and State utilities accounted for about70% of the country's total installed capacity of 13,600 MW in 1972. Theprivate segment of the power sector now consists almost entirely of onelarge company, Light-Servicos de Eletricidade, S. A. (LIGHT) - a subsidiaryof a Canadian firm - which serves the Rio de Janeiro and Sao Paulo areas.

2.02 For planning purposes there are five power regions in Brazil:South, Southeast, Central-West, Northeast and North, each having distinctivecharacteristics. The most important region is the Southeast comprising thefive states of Minas Gerais, Sao Paulo, Guanabara, Rio de Janeiro andEspirito Santo; it accounts for about 80% of the country's installed capacity.The Borrower's system accounts for about 28% of the capacity of the South-east Region.

2.03 The Ministry of Mines and Energy controls the power sector throughits Department of Water and Electric Energy (DNAEE) which performs regulatoryfunctions, including granting licenses for hydroelectric sites, assigningconcession areas, setting tariffs and approving expansion plans. DNAEE isnot a strong department, even though it has broad legal authority. It denendson the utilities themselves to carry out many of its functions and it findsit difficult to withstand political pressures from the States as regards thegranting of licenses for hydroelectric sites. In the early sixties, itpermitted what is now Centrais Eletricas de Sao Paulo, S. A. (CESP) to buildextensive 460 kV transmission facilities although it was widely known that500 kV would be the standard for the country; both voltage levels are now inuse accompanied by serious integration problems.

2.04 Financial and technical coordination within the sector is theresponsibility of ELETROBRAS, a government agency under the Ministry of Minesand Energy, which has direct control of 13 federal utilities and minorinterest in 23 state utilities. ELETROBRAS collects and allocates publicfunds used for electrification and expansion programs and plays a coordinat-ing role in the planning and operation of the country's power systems.ELETROBRAS has not been completely effective mostly because it has lackedthe legal authority to demand information from state companies and to imposeit decisions on them. A proposed new law currently under consideration bythe Brazilian Congress (Annex J would place ELETROBRAS firmly in charge ofthe technical coordination, financing and administration of the electricpower sector and make it responsible through four of its existing subsidiaries,ELETROSUL, FURNAS, CHESF and ELETRONORTE for generating schemes affecting morethan one State, for HV and EHV transmission systems aimed at integratinz statesystems, and for transmission systems related to international power projects.The proposed law would give ELETROBRAS sufficient authority to ensure theoptimum integrated planning of the secotr, an objective the Bank has beenactively supporting in Brazil. The mission feels that the proposed loan will

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help to further strengthen ELETROBRAS' position by committing theBrazilian Government to integrated planning (paragraph 2.12). Recently,ELETROBRAS' financial resources have increased (paragraph 2.14) whichwill also improve its abilitv to coordinate the sector netiirities.

The Southeast Region

2.o5 There are twelve power utilities operating interconnected in theSoutheast region. Generation and bulk transmission facilities are ownedprincipally by three government entities, FURNAS, CESP, and Centrais Electricasde Minas Gerais (CEMIG), and one privately owned company, LIGHT. FURNAS isa bulk supplier, CESP and CEMIG are responsible for both bulk and retailsupply, and LIGHT mostly for retail supply.

2.06 The generating facilities of these companies are predominantlyhydroelectric and are located mainly on the Parana River and its tributaries.Their supply areas are contiguous and have been defined by mutual agreement.FURNAS is responsible for supplies in the States of Guanabara and Rio deJaneiro and for partial supply of the city of Sao Pauloand the State ofEspirito Santo; outside of the Southeast region FURNAS supplies Brasiliaand adjacent areas. CEMIG is owned chiefly by the State of Minas Geraisand is responsible for that State's power supply; CESP is owned by theState of Sao Paulo and ib responsible for the bulk of that State's supply,the balance coming from Companhia Paul-ista de Forca e Luz (CPFL), FURNASand LIGHT.

2.07 During 1963 - 1965 a comprehensive power survey was carried outby CANAMERA 1/ to develop power supply in the Southeast region in a coordinat-ed manner. This was financed by UNDP, with the Bank as Executing Agency.This study identified a series of low-cost hydroelectric sites from whichCANAMERA drew up a program of expansion, predominantly hydroelectric, forthe period 1965-1980. Until recently, power development in the region hasfollowed the CANAMBRA report and many of the projects recommended thereinhave been built or are under construction.

2.08 The CANAMBRA study may be considered the most important step takenin Brazil to date to rationalize the development of the Southeast powerresources. Of necessity, a study of this magnitude did not go into thekind of detail necessary for the actual construction of a project, nordid it attempt to give weight to elements such as varying capacity factors,etc., for individual plants. There have been important instances - forexample Volta Grande - where the CANAMBRA study was used partly in lieuof a more detailed study with the result that major elements of a damhave had to be changed after the start of construction, with severe costoverruns. Nevertheless, the CANAMBRA study has been invaluable. With thepassing of time, load forecasts have been revised; in 1969 for instance

1/ A consortium of Canadian and American consulting firms.

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ELETROBRAS made a complete restudy of load growth in the region. Currently,it is revising this study and expects to complete it during 1973. Sincethe CANAMBRA study was made, there have been substantial changes in therelative costs of generating and transmission schemes and the order ofpriority of potential projects established by CANAMBRA car no longer beassumed to be valid. Up to now, power generation concessions have beengranted on the basis of the requirements of the individual utility.Furthermore, the concessions have been granted in such a way that morethan one utility now operates on the same river, thus making necessarythe coordination of the water management of reservoirs. The superimposi-tion of Federal power generation companies upon the State companies and theGovernment decision that LIGHT (the major distribution company in the South-east region) will not expand its power generation facilities have made largeinter-utility transfers of power a nornal mode of operation. The major bulkproducers are more mature than they were 10 years ago and are in a betterposition to cope with the existing situation and to undertake the next phaseof planning which would lay more emphasis on an optimum, integrated use ofresources.

2.09 Interconnected operation of the utilities of the Southeast regionhas been marked by gradually increasing efficiency. A Committee for theCoordination of Operations has been meeting regularly since 1969 and hasmade substantial progress in such matters as allocation of spinning andmaintenance reserve capacity. The Committee was particularly effectiveduring 1969 and 1971, critically poor water years in Sao Paulo and MinasGerais respectively, in coordinating interchanges of power and reservoiroperation to avoid power curtailment. On these occasions it was realized asnever before that the non-hydroelectric generation facilities - originallyconceived to take care of the requirements of each individual utility -should be operated for the benefit of the whole region. W1en concentratedat specific points near the load center, conventional thermal or nucleargenerating facilities can be used to take advantage of the economy of scaleand optimize the cost of the required infrastructure.

2.10 At the beginning of 1973, in a meeting of CEMG, FURNAS and CESP,arranged by ELETROBRAS, agreement was reached on the interconnection of theirSao Simao, Itumbiara and Agua Vermelha plants by a 500 kV transmission networkin which power will be transmitted in any direction without payment of wheeling./charges to the line owners (paragraph 4.04).

2.11 In the above context and in conjunction with Loan 829-BR to CEMIG,the Government agreed to authorize future generation projects in the South-east region only in accordance with a Regional Generation Development Planbased on the efficient and coordinated operation of the generating facilitiesof the region. ELETROBRAS is in the process of preparing such a DevelopmentPlan. In December 1972, an advanced copy of its report was submitted to theBank in preparation for the Itunbiara Appraisal, The report verified thatthe individual non-integrated expansion programs of the three major powerproducers of the region - FURNAS, CEMIG and CESP would cover the requirements

1/ Charge based on kWh transmitted.

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of the region until 1979 but it did not present a plan for the optimumintegrated use of sector resources. The Bank so advised ELETROBRAS whichhas since presented the necessary justification for Itumbiara (Chapter 5of this report).

2.12 The need for integrated planning and development of sector faiilitiesis not restricted to the Southeast region. Although of relatively lesserimportance in total installed capacity and kilometers of transmission, otherregions would benefit from integrated planning. For instance, recent actionstaken or under consideration in the South - the introduction of unscheduledrid apparently unnecessary generating capacity in a market where currentdemand is lower than had been forecast, the addition of costly steam powerinstead of low-cost hydro power, the obligation for Centrais Eletricas doSul do Brasil, S.A. (ELETROSUL) to operate high-cost, coal-burning thermalstations rather than to use its available hydroelectric power - point tothe need for a more rational approach. During negotiations the Governmentagreed to complete the Southeast Region and South Region Generation andMajor Transmission Development Plans and to transmit them to the Bank forcomment no later than November 1, 1973 for the Plans covering the parlod1973-81 and no later than Novsmber 1, 1974, for the period 1982-1990. TheGovernment also agreed to communicate to the Bank any proposed significantchange to these plans and give the Bank an opportunity to comment on itbefore it is adopted.

Tariffs

2.13 The Brazilian tariff policy is to provide electric utilities withsufficient funds to cover their operating expenses and to allow a reasonablereturn on their investment; it also provides for treating similar consumergroups alike, and for taking into account different load factors in settingthe tariffs. Under Brazilian legislation, a rate of return of up to 10% onremunerable investment (revalued assets in operation plus various currentassets) was in effect through 1271. As a result of changes introduced inthis legislation in May 1971,tI a rate of return of not less than 10% andnot more than 12% is mandatory beginning in 1972. Surcharges to coverincreases in operating costs and exchange losses arising out of servicingforeign debt can continue to be made automatically. The consumers alsopay ad ttional sums on their electricity bills for taxes and the compulsoryloans,J the proceeds of which are collected for ELETROBRAS which lends themto operating companies for plant expansion.

2.14 Until the end of 1971, the electric utilities had the choice torecover in their tariffs - in addition to depreciation - either "amortization"tfor amounts of up to 5% of their fixed assets in operation or "reversion"for up to 3% of the same base. Y Effective 1972, a new law has made treversion"mandatory except that funds must be turned over to ELETROBRAS which has theauthority to select borrowers. "Reversion" funds represent about 17% of thesector's own resources and hopefully the new arrangements will strengthenELETROBRAS' position in the sector.

LJ See Annex 2

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2.15 It is mandatory for the electric utilities to earn between 10%and 12% on their investment (paragraph 2.13). During negotiations FURNASagreed to continue maintaining its earnings at levels consistent withsound financial and public utility practices and in accordance with Brazilianlegislation and to apply for appropriate tariff adjustments no later thanfive months after the end of each calendar year; and the Government agreedto continue to act promptly on these tariff applications. During negotia-tions, the Government also agreed that any change in its legislation which,in the Bank's opinion, would adversely affect the Borrower's financialposition would, as in the case of previous loans, be considered an event ofdefault.

3. THE BORROWER

3.01 The Borrower would be FURNAS, an autonomous Government corporationestablished in 1957 and the largest subsidiary of ELETROBRAS. FURNAS is abulk producer and sells only to other utilities at wholesale. It is a majorsupplier for the Rio de Janeiro market through LIGHT and several smallerdistributors, for the Sao Paulo market through LIGHT and one other smallcompany, and it also sells to CEMIG and Companhia Eletrica de Brasilia, S.A.(CEB). Its source of energy comes principally from three hydroelectricplants it has constructed on the Rio Grande several hundred kilometers fromits markets; and it has built an extensive high-voltage transmission systemto reach these markets.

3.02 The share capital of FURNAS as of December 1972, was Cr$1,300 milliondivided equally between ordinary and preferred shares and held more than 95%by ELETROBRAS, the remainder being held by CEMIG, Departamento de Aguas eEnergia Eletrica do Estado de Sao Paulo (DAEE), LIGHT, CPFL and CESP.

Organization

3.03 A 12-member council appointed by the Government directs FURNAS.Six of the members are executive directors, and the other six are in Govern-ment and business. The executive directors are the President, the VicePresident (Technical), the Vice President (Operations and Planning), andthe three heads of the Departments of Administration, Finance, and Contracts.FURNAS' staff of about 4,650 employees is reasonable. It is distributedamong its major departments as follows: Technical 1,170 - of which 780 arein construction; Operations and Planning 1,910; Administration 1,050; Finance2703 and Contracts 250. FURNAS does a considerable amount of constructionwork with its own forces, such as preparatory work at construction sites whichwould be difficult to accomplish by contract. Furthermore, many of itspersonnel do work which ordinarily would be done in government bureaus(paragraph 2.03), such as coordinating the operation of all utilities in theregion, assisting in the preparation of tariff regulations and market studies,and solving other country-wide utility problems (see Organization Chart).

3.04 The organization of FURNAS has developed well -- due partly to aqualified, hard-working group of executive directors and partly to the tech-nical and financial assistance furnished by the Bank and other developmentfinancing institutions. Some 20 employees annually are sent to the UnitedStates and to European countries for graduate study and for practical train-ing in the technical and financial fields. In addition, FURNAS has convertedsome of the buildings in the construction village at the Furnas dam into atraining school for operating and maintenance technicians, who are drawn fromits own organization as well as from other utilities in Brazil. For thedesign and construction of major projects, FURNAS employs consulting engineersand hires contractors (paragraphs 4.05 to 4.08).

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Market

3.05 All power generated by FURNAS is sold under contract to otherutilities for resale to the ultimate consumers: these utilities also havegenerating facilities of their own, the largest of which is LIGHT servingthe areas of Rio de Janeiro and Sao Paulo. The utilities which purchaseFURNAS' power and their actual and projected sales and peaks are shown inAnnex 3. In 1972, FURNAS' energy sales were 11.4 TWh (1,335 average MW)and the maximum demand was 2,180 MW; total energy sales in the Southeastregion for that year were 38 TWh (provisional figures).

Facilities

3.06 As Brazil's largest Federal public utility, FURNAS has substantialgenerating facilities as shown below:

In Operation

Station T Capacity MW

1/ Furnas, Units Nos. 1 to 6 Hydro 900Santa Cruz Thermal 360Peixoto Hydro 2/ 250

1/ Estreito Hydro 1,050Funil Hydro 210

TOTAL 2,770

Under ConstructionDate of

Station Tye Installation Capacity MW

Santa Cruz Thermal 1973 2001/ Porto Colombia Hydro 1973/74 320I/ Furnas Units Nos. 7 & 8 Hydro 1973/74 300i/ Marimbondo Hydro 1975/77 1,400

Angra Nuclear 1977 630

TOTAL 2,850

3.07 The transmission system of FURNAS is shown on the attached map.In operation and under construction are 3,269 km of 345 kV and 1,795 km of500 kV transmission lines which will be partially completed in 1973 andfully completed in 1976.

1/ Partially financed by the Bank.2/ This 480 MW plant is owned by CPFL, another ELETROBRAS subsidiary;

agreement has been reached that FURNAS would market energy from 250 MWof its capacity.

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Generating Expansion Program

3.08 As shown in paragraph 3.06, FURNAS has 2,770 MW of capacity inoperation and 2,850 MW under construction to be completed by 1977. ThePorto Colombia units will come on line in 1973 and 1974; and in order toavoid a shortage in reserve capacity in those years, FURNAS plans to installunits Nos. 7 and 8 of 150 MW each in the spaces available for them in theFurnas powerhouse. The 1,400 MW of Marimbondo is scheduled to come in start-ing in1975 and to be completed early in 1977. The 2,080 NW of Itumbiara isscheduled to come in starting in late 1979 and to be completed early in 1981(see Annex 4 for energy balance graphs). FURNAS has been given the responsi-bility by the Government to construct Brazil's first nuclear plant (630 MWgross capacity); this plant, which is partly financed by the Import-ExportBank of USA is scheduled for completion in 1977, but full commercial operationis not considered likely before 1978. This later date appears to be satis-factory with respect to FURNAS' ability to meet its market requirements. Anyprogram beyond the Itumbiara plant will require further study before expendi-ture is committed for additional plant since the market requirements maydeviate somewhat from present estimates. During negotiations FURNAS agreedthat until the Project has been completed it will not carry out any majorprogram of expansion of its generation and transmission facilities withoutgiving the Bank evidence that such expansion is in accord with the SoutheastRegion and South Region Generation and Major Transmission Development Plans(paragraph 2.12) for such facilities and that adequate financial resourcesare available. For this purpose, a major expansion is one the cost of whichexceeds 2% of the gross fixed assets in operation plus work in progress.

Insurance

3.09 FURNAS' insurance program is detailed in Annex 5; it appearssatisfactory.

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THE PROJECT

Description

4.01 The principal features of the Project are:

(a) The main dam 7 km long comprising:

(i) concrete spillway, intake and transition sectionsinvolving 2.3 million m3 of concrete work; and

(ii) earth-fill embankment sections on both banks,involving 30 million m of fill, with a maximumheight of 106 m.

(b) A conventional indoor type power station with eightgenerating units rated at 260 MW each.

(c) Single-circuit 500 kV transmission lines; a 345 kV lineto Brasilia; and 138 kV system expansion in Rio de Janeiroand extending into the State of Espirito Santo (see Annex 6for details and scheduling).

(d) The corresponding 500 kV, 345 kV and 138 kV transformersubstations.

4.02 The dam and hydroelectric power station designed for 2,080 NWare located on the paranaiba River approximately 1,200 km northwest ofRio de Janeiro, about 800 km from Siao Paulo and 420 km from Brasilia;the transmission facilities consist of 523 km of single-circuit 500 kVlines to interconnect Itumbiara with the Sao Simao and Marimbondo andAgua Vermelha with Marimbondo hydroelectric plants, 350 km of single-circuit 345 kV line to transmit power from Itumbiara to Brasilia, 150 kmof single-circuit 138 kV line to interconnect the Santa Cruz thermalplant with the Angra nuclear plant and the area of Parati and two 370 km138 kV double-circuit lines to interconnect Adrianopolis in the Rioarea with Cachoeiro do Itapemirim in the State of Espirito Santo (seemap 10407). The Paranaiba River, one of the major tributaries of theParana River, drains a basin extending south from the capital city, Brasilia,with an area of 220,000 km2. The Itumbiara dam site, located at the upperend of the existing Cachoeira Dourada reservoir, is at one of the locationsproposed by CANAMBRA for the development of the potential of the ParanaibaRiver Basin in their "Power Studies of South Central Brazil' (now known asthe Southeast Region).

1.03 The Itumbiara dam would create a reservoir with a usable storagecapacity of 13,700 million cubic meters, regulating a catchment of 95,000 km2which yields a mean annual flow of approximately 1,500 cubic meters persecond. Based on flood frequency studies, the spillway is designed topass a maximum probable flood of 16,000 cubic meters per second; it hasthe same capacity as the spillway of the Cachoeira Dourada project. The

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gross capacity of the reservoir is 17,000 million cubic meters and theestimated deposition of sediment is 20 million cubic meters per year, anegligible amount compared to the capacity of the reservoir. The damwould provide an 80 m head with the reservoir at the maximum normal operatinglevel. The total average annual dependable energy production attributableto the project, would be 9.0 TWh of which 6.6 TWh would be generated atItumbiara and the remainder at plants downstream. The installed capacitywould result in a plant factor of 36% for Itumbiara and the reservoir wouldalso increase the generating capability of downstream plants.

4.04 According to the agreement reached recently (paragraph 2.10)between the three main utilities of the Region, the hydroelectric stationsof Sao Simao (CEMIG), Itumbiara (FURNAS), and partially Agua Vermelha (CESP)will deliver their power to a common 500 kV network as shown on Map 10407.The originally planned 500 kV transmission system of CEMIG's Sao Simaostation consisted of a double-circuit line between Sao Simao and BeloHorizonte; one circuit of this line, for the section between Sao Simao andJaguara,will now be replaced by a circuit between Itumbiara and Jaguara.FURNAS will build and own, as part of the Itumbiara 500 kV transmissionsystem, the lines between Itumbiara, Sao Simao and Marimbondo and betweenAgua Vermelha and Marimbondo. The system as now proposed has the minimumcapital cost of the various alternatives considered. Power flow andstability studies were carried out for the 1982-86 peak load conditionswith one circuit out of service and show that the system is stable forsuch conditions. The 500 kV system will be interconnected with CESP's460 kV system at the Agua Vermelha substation. The design characteristicsof the 500 kV, 345 kV and 115 kV lines and substations would be similar tothose of FURNAS' existing system.

Engineering and Construction

4.05 FURNAS had been granted the right to develop three consecutivehydroelectric sites on the Paranaiba river, namely Itumbiara, Tupaciguaraand Anhanguera. With the assistance of Companhia Internacional de Engenharia -

the Brazilian branch of International Engineering of San Francisco - FURNASperformed detailed computer studies of the Itumbiara dam height and powerinstallation and found it economic to increase the dam height substantially,thereby eliminating the other two planned upstream dams while increasing theItumbiara storage capacity fourfold, and making possible the installation atItumbiara of twice the capacity originally envisaged by CANAMBRA. Thesestudies have been carried out using sound methods and the new plan,which resultsin an aggregate gain of 650 MW of installed capacity over previous plans, canbe accepted as the optimum development of this segment of the Paranaiba river.FURNAS also studied the merits of installing all the units at one time, ascompared to installing them in two steps and found the former to be economicallysuperior. Consideration is now being given to using six 350 MW generatingunits instead of eight 260 MW units. If it appears that there will be sufficientcompetition in bidding for th_ larger units, they will be specified and arelatively small but worthwhile saving in cost should result.

4.o6 The dam and powerhouse form a simple layout, but they are largestructures and FURNAS has employed a consulting board of experts in geology,

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soil mechanics, concrete, and civil engineering construction to advise itsengineering firm on the design. Rock is exposed in the river where theconcrete structures will be located and it appears to be of good qualityand presents no serious problems. However, the gently sloping abutmentswhere the earth embankments are to be built are covered with overburden upto 30 meters deep, the upper part of which is highly compressible. Thisis a poor foundation for practically homogeneous clay embankments, and itwill be necessary to remove some of the overburden. The estimated amountto be removed is based on investigations completed up to May 1973 and thecost estimates (paragraph 4.09) provide ample physical contingencies toprovide for the removal of larger amounts if further investigations show theneed.

4.07 Construction of the main civil works will be done on a unit pricebasis by experienced contractors selected after international competitivebidding. Since FURNAS o-ns considerable construction equipment it will bemade available to the contractor. Installation of the generating plantand other electrical equipment will be carried out by FURNAS, as has beenits successful practice in earlier projects. The erection of the transmissionline will be done by contractors under FURNASt supervision.

4.08 Construction of preliminary work for the dam and hydroelectricplant has already been started by FURNAS under force account. As FURNASdoes not wish to start pre-qualification procedures for the civil workscontract until the Bank loan is assured, the proposed Bank loan should bemade in June 1973 in order to meet the required commissioning date. Onthis basis tenders for the main civil works would be opened around November,the contract awarded at the beginning of 1974, and work would start in thefirst quarter. The first generating unit is scheduled for commissioningin November 1979 and the remaining units at three-month intervals thereafter.Construction of transmission facilities would start in 1975 and variousportions would be completed during the period 1977 to 1982 (see Annex 6).The FURNAS organization with the assistance of consultants should be ableto carry out (or supervise) all the work satisfactorily and on schedule.During negotiations FURNAS agreed to the provisions contained in previ.ousLoan Agreements requiring the employment of consultants and contractorssatisfactory to the Bank under terms and conditions satisfactory to it.

Cost Estimates

4.09 The cost estimate was prepared in mid-1972 by FURNAS in collaborationwith the consultants and updated in May 1973 on the basis of the latestinvestigations. Both these groups have broad and recent experience buildingsimilar projects in Brazil. Based on existing designs, the estimate isreasonable. In view of the embankment design problem (paragraph 4.06), acontingency allowance of 20% has been added to the original estimated cost ofcivil works for the dam. Other physical contingency allowances have beenprovided at 10% on other parts of the dam and hydroelectric plant equipment.A physical contingency allowance of 12% has been added to the estimated costof the transmission system. Price contingencies are included at the rateof 5% per annum from the date of the estimate until the money is spentexcluding local overhead, lands, and local labor. In general, the Brazilianmonetary correction system takes care of inflation. The estimate (excludinginterest during construction) is shown below:

14 -

---- Cr$ Million ----- -----US$ Million-----

Local Foreign Total Local Foreign Total

Dam and Hydroelectric Station

Land 156.8 - 156.8 27.8 - 27.8Civri1 Works 564.0 456.8 1020.8 100.0 81.1 181.1F.ouipment 166.6 277.8 414.4 29.6 49.3 78.9-4ngineering 41.4 12.9 54.3 7.3 2.3 9.6Administration 288.8 - 288.8 51.3 - 51.3Contingencies - Physical 175.0 123.6 298.6 31.1 21.9 53.0

- Price 124.7 89.6 214.3 22.1 15.9 38.0

1,517.3 960.7 2,478.0 269.2 170.5 439.7

Transmission

Land 19.2 - 19.2 3.4 - 3.4Civil Works 116.7 12.9 129.6 20.7 2.3 23.0Equipment 210.6 190.6 h01.2 37.4 33.8 71.2Engineering 18.0 13.6 31.6 3.2 2.4 5.6Administration 100.2 - 100.2 17.8 - 17.8Contingencies - Physical 55.5 26.3 81.8 9.8 4.7 14.5

- Price 68.5 32.9 101.4 12.2 5.8 18.0

588.7 276.3 865.0 104.5 49.0 153.5

Total Project Cost 2,106.0 1,237.0 %343.0 373.7 219.5 593.2

Amount of Proposed Loan

4.10 In addition to supporting ELETROBRAS' efforts in the sector (para-graph 2.0C), the proposed Bank loan is aimed at helping FURNAS to secure themaximum possible financing outside of Brazil and at exposing the Braziliancivil works contractors to international competition. In line with theseobjectives, the Bank loan would finance both equipment and civil works fora total of US$125 million.

JI-4.1a From the total list of equipment, FURNAS has selected main generatingequipment, power transformers, switchgear and communication equipment, estimatedat UA?76 million, which it feels are most attractive for the parallel financingit is arranging (paragraph 1l.13) and which are either not made or not madeCOnlietitivlY in Brazil. The remaining equipment such as travelling crane,Scrie ptates, transmission line towers, ccnductors, insulatcrs and fittingssuitable for interrational competitive bidding would be financed by the proposedBank loan up to US$65 million regardless of whether the orders are won byforeign or local manufacturers. The other part of the proposed Bank loan,about US$60 million, would finance the bulk of the foreign component of thecivil works for tile dam and hydroelectric station.

Procurement and Disbursement

4.12 The civil works contracts for the dam and hydroelectric stationwould be awarded after international competitive bidding in accordance with

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the Bank's procurement guidelines. Disbursement from the proposed loanfor the civil works would be made against 35% of the amount billed in thecontractor's periodic invoices, to the full amount of US$60 million. Ifthe civil works contract proves more or less than the estimate, the fullUS$60 million would be disbursed, although the percentage would be modifiedto enable disbursement over the full construction period. The US$S5 millionpart of the loan would be disbursed against equipment contracts (or partsof contracts) won after international competitive bidding in accordance withthe Bankts guidelines for procurement, the Brazilian manufacturers beinggiven a 15% margin of preference or the actual amount of the duty whicheveris lower. No disbursements would be made from the proposed Bank loan forcosts incurred prior to signing. Any loan funds remaining undisbursed uponcompletion of the project would be cancelled unless their disbursement onother works associated with the project is appropriate. The schedule ofdisbursements is given in Annex 7.

4.13 The equipment selected by FURNAS for parallel financing (paragraph4.11) would be subject to international competitive bidding, the Brazilian

manufacturers being given the same 15% margin of preference as under theBank loans. FURNAS is arranging this parallel financing without assistancefrom the Bank. To be responsive, a bidder will have to offer financingterms, which will be taken into account in the bid evaluation. FURNAS hasobtained sufficient commitments from the major equipment supplying countriesto assure the success of this operation. The Bank would not supervise theprocurement of this equipment.

Environmental Aspects

4.14 At the Bank's suggestion, the environmental aspects of the projecthave been studied by a consultant specializing in this field who has prepareda comprehensive report. It is evident that the impact will be relativelysmall for such a large project because of its remoteness and the low populationdensity in its vicinity; there are 3,700 persons to be relocated includingone town of 216, a small part of another town containing about 75 persons andabout 80 farmsteads with their proprietors and farm labor. FURNAS has notcompleted its plans for the relocation of the population but is well-awareof the socio-cultural needs of the people. During negotiations FURNAS agreed to:

(a) prepare detailed plans for the resettlement of the populationnow living in the areas which will be flooded by the Itumbiarareservoir in a manner that will enable it to earn a livingunder conditions at least equal to those existing;

(b) furnish such plans to the Bank for its approval not laterthan June 30, 1974; and

(c) implement such plans in a manner satisfactory to the Bank.

4.15 The consultant also reports over-grazing within the watershed andthe resulting extensive erosion, the presence of schistosomiasis and Chagastdisease, etc. which are not normally under the control of a power company.During negotiations, the Government agreed to give due consideration to therecommendations of the Itumbiara Environmental Impact Reconnaissance Reportof November 1972.

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5. JUSTIFICATION OF THE PROJECT

5.01 For the reasons discussed in paragraphs 2.07 to 2.11, the justificationof Itumbiara has been made from the Regional point of view rather than fromthat of the concession area of the owner utility.

Load Growth Forecast

5.02 The results of thie Power and Energy Balance study made by ELETROBRASfor the Southeast Regl on appear in Annex 8 and show the actual and forecast

.iergy consumptiorn, peak demand, and power and energy generating capacity ofthe Southeast Region for the period 1969-82. The actual annual rate of growthof energy consumption for the past three years was 10.8% whereas the projectedgrowth for the Deriod 1972-82 has been assumed at 10% which is reasonable.According to this t:able, the Region's energy requirements are adequatelycovered by the proposed generating expansion program up to 1979, after whichthe Region's available peaking capacity does not provide adequate reserve.The Bank has requested ELETROBRAS to study the peaking capacity require-ments of the Region as part of the integrated planning study. Becausedelays in commissioning future projects would cause severe shortagesof energy and power in the region, the power balance study should be kept upto date so prompt action can be taken for the installation of alternativegenerating facilities, with shorter construction periods, such as conventionalsteam units or other for the steps,after Itumbiara.

Least-Cost Solu'tion

5.03 Two projects rated as high-priority in the CANAFBRA inventory wereconsidered as the most attractive alternatives to serve the power growth of theSoutheast Region irn the period 1972-82, after the completion of the projectsnow under construction; these projects are Agua Vermelha on the Rio Grande tobe built by CESP ith a final capacity of 1,380 M4W, and Itunbiara on theParanaiba to be built by FURNAS with final capacity of 2,080 MW; this secondproject is in effect an integration of three projects originally proposed byCANAYBRA (paragraph 4.05). In view of the above and the fact that no otherhydroelectric project in the Region could be developed in time to meet require-ments, the two above mentioned projects were compared with equivalent oil-fired thermal or nuclear stations, combined with additional hydroelectric peakingcapacity which could be installed at existing hydroelectric plants.

5.014 Annex 9 describes the six alternative programs and the basic assumptionsused in the determination of the least-cost solution and Annex 11 is a graphof the present worth of the cost differentials (using Itumbiara/Agua Vermelhaas reference) of the other five alternative programs plotted against discountrates. This graph shows that the least-cost solution to expand the Regiontsgener rting capacity orresponds to the programs which include Itumbiara (ascorpared to those whe-_ Ž Ituirbiara is replaced by conventional thermal ornuclear plants) for all discount rates up to 15%. Annex 12 shows the effectof the fuel price on the equalizing discount rate of the alternatives involvingconventional their3al stations.

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Return on Project Investment

5.05 For the determination of benefits of Ituibiara, it was assumed thatthe economic value of the electricity supplied is at least equal to the valuepaid, by the ultimate consumer, i.e. the tariff charge plus the sole tax(Annex 2). As shown in Annex 13, the return on the Itumbiara project investment

is 22.9%.

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6. FINANCIAL ASPECTS

Summary

6.01 FURNASt financial performance, past and present, is satisfactoryanc. its outlook is equally satisfactory. This is due to good management(Daragraph 3.04), a reasonable tariff policy (paragraph 2.13) and the`ility to borrow substantial amounts from ELETROBRAS (paragraphs 6.08 and

6.11).

Past and Present Financial Performance

6.02 Annexes 14 to 19 contain FURNAS' financial projections through 1982.In the period 1971-72, FURNAS earned 10% on its investment and after servicingdebt and paying a 10% annual cash dividend contributed about 14% of its invest-ment program from internal cash generation; the remainder was provided 44% byELETROBRAS as share capital and loans, and 42% by foreign borrowings. In thatperiod, FURNAS' debt service was covered 1.8 times by its internal cash genera-tion and at the end of 1972 its debt was the equivalent of 63.1% of its totalfixed assets.

1973-82 Financing Plan

6.03 FURNAS' financing plan is summarized below:

1973-82Ytllions of Cr$ %

Sources of FundsInternal Cash GenerationGross Internal Cash Generation 13,108.6 131Debt Service ( 7,760.9) (78)Dividends ( 3.324.4) {3)

Net Internal Cash Generation 2,023.3 20

External SourcesFederal Government Contribution 190.0 2Foreign BorrowingsExisting Loans 1,355.9 14Proposed - IBRD 704.3 7Proposed - Others 2,000.3 20

Local Borrowings:Existing Loans - ELETROBRAS 528.1 5Proposed Loans - ELETROBRAS 3,211.8 32

10,013.7 100

Applications of FundsCor:-~1ruction Program 9,846.9 98Increase in Working Capital 166.8 2

10,013.7 100

- 19 -

6.04 FURNAS' substantial gross internal cash generation is premisedon a rate of return of 12% on remunerable investments; the debt serviceresulting from its proposed financial plan would be covered more than 1.5times by internal cash generation in any year during the period 1973-82; anda 12% cash dividend would be paid each year. Thus in the period 1973-82,net internal cash generation would finance about 20% of FURNAS' constructionprogram and working capital increase. The remainder would be covered by theproposed Bank loan 7%, previous Bank loans 14%, other foreign borrowings 20%,local borrowings from ELETROBRAS 32% - of which eventually abouthalf would be converted into share capital - and Federal Government contribu-tion 2%.

6.05 It is assumed the proposed Bank loan of US$125 million would bemade to FURNAS at 7-1/4% interest for thirty years, including a seven-year graceperiod. The proposed life of the loan is consistent with the two most recentloans for hydroelectric power projects in Brazil. The Bank loan would beguaranteed by the Brazilian Government.

6.o6 Previous Bank loans - 403/474-BR, 565-BR and 677-BR - would providea total of about US$80 million in connection with the Estreito, Porto Colombiaand Marimbondo projects which are in progress (paragraph 1.04).

6.07 Foreign borrowings other than from the Bank would include:

(a) From existing loans:

(i) Joint financing for the Marimbondo project, about US$23million for a term of 15 years, including 5 years ofgrace, at about 7-1/2% interest;

(ii) AID loans for the Santa Cruz thermal plant and the Furnas-Guanabara transmission projects about US$9 million for a termof 20 years, including 5 years of grace, at 6% interest;

(iii) Eximbank loans for the Angra nuclear project, about US$123million for a term of 20 years and US$7 million for a termof 10 years, both including 5 years of grace, at 7% interest;and,

(b) From proposed new loans:

(i) Parallel financing in connection with the Itumbiara Projectamounting to about US$76 million for an assumed term of 15yearsp including 5 years of grace, at about 7-1/2% interest;FURNAS has been in touch with various interested countriesand has received letters of interest from a sufficient numberof countries to assure not only the financing success of thisoperation but also the desired competition; and

(ii) Other foreign borrowings amounting to US$278 million forprojects schedulled to start in 1975, but the bulk of whichwould only be needed from 1978 onwards. These borrowingsare expected to be for periods of between 15 and 20 years,including a grace period of 5 years, at interest of 7 - 7-1/4%.

- 20 -

6.o8 Local borrowings would comprise:

(a) Existing loans from ELETROBRAS:

(i) About US$94 million for terms of 15, 20 and 25 years,including 5 years of grace, at rates of interestvarying between 8% and 11% and subject to monetarycorrection; and,

(b) New loans from ZLETROBRAS:

(i) About US$570 million for terms of 15 and 20 years, including5 years of grace, at 11% interest and subject to monetarycorrection (see paragraph 6.11).

6.09 The Federal Government is expected to make a contribution of aboutUS$34 million towards the construction cost of the nuclear plant for whichcapital expenditures of about US$220 million are scheduled in the period1973-77.

6.10 In line with the most recelnt loan it received from the Bank,FURNAS agreed during negotiations that it will not incur debt if by suchincurrence its debt would exceed 66-2/3% of its total fixed assets; FURNASalso agreed not to incur debt with an original term of less than 10 yearsif by so doing the total outstanding principal of such debt would exceed5% of its total fixed assets.

6.1i In order for FURNAS to carry out its borrowing plan and meet thedebt limitation covenant proposed in paragraph 6.10, some of the loans obtainedfrom ELETROBRAS (paragraph 6.08) would be converted as required into sharecapital. It is estimated that for this purpose about US$282 million ofloans from BLETROBRAS would be converted into share capital in the period1973-82.

6.12 FURNAS' financing plan as detailed above is reasonable, particularlywith the support of the Federal Government through ELETROBRAS (paragraphs 6.08and 6.11). During negotiations, the Government agreed that in the event thereshould arise reasons to believe FURNAS will not have sufficient funds toassure the timely completion of the project, it will provide them, eitherdirectly or through ELETROBRAS.

Future Financial Situation

6.13 FURNAS' financial outlook is satisfactory; it depends on its abilityto continue to manage its affairs efficiently, on the maintenance of adequatetariff legislation and on its access to the sector funds administered byELETEOBRAS.

6.14 FURNAS' financial projections, Annexes 14 to 16, show that in theperiod 1973-82 sales of energy are expected to grow at a compound averageannual rate of 13.8% and, on the basis of current legislation, a 12% returnon investment has been assumed in these projections. Operating expenses,which are automatically covered by existing tariff regulations, have been

- 21 -

estimated on the basis of FURNAS' experience and, in view of this and theBrazilian monetary correction system, no provision has been made forinflationary increases. In any of the years 1973-82, FURNAS' debt serviceon an annual basis would be covered 1.5 times or more by internal cashgeneration and at the end of that period its debt would amount to about60.6% of its total fixed assets.

Audit

6.15 FURNAS' annual financial statements have been certified byArthlur Andersen and Company. Their work appears satisfactory. Duringnegotiations FURNAS agreed to continue to appoint independent auditorssatisfactory to the Bank and to submit audited financial statements andthe auditor's report within four months of the year end, each year fort'ne duration of the loan.

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7. AGREEMENTS REACHED AND RECOMMENDATION

7.01 During negotiations,

(a) FURNAS agreed:

(i) to take all necessary action to have its electricitytariffs set at levels which will produce revenuesprovided for by the legislation of the Guarantor, andsufficient to ensure FURNAS' continued operation inaccordance with sound financial and public utilitypractices. As permitted under the legislation, thetariffs should be based on assets revalued at leastonce every calendar year (paragraph 2.15);

(ii) not to carry out any major programs of expansion ofits generation and transmission facilities withoutgiving the Bank evidence that such expansion is inaccord with the Southeast Region and South RegionGeneration and Major Transmission Development Plansfor such facilities and that adequate financial re-sources are available. For this purpose, a majorexpansion is one the cost of which exceeds 2% of thegross fixed assets in operation plus work in progress(paragraph 3.08);

(iii) to retain engineering consultants and contractorssatisfactory to the Bank on terms and conditionsacceptable to it (paragraph 4.08);

(iv) to prepare detailed plans for the resettlement ofthe population now living in the areas which willbe flooded in a manner that will not lower its presentliving conditions, to furnish such plans for Bankapproval no later than June 30, 1974, and to implementthe resettlement plan in a manner satisfactory to theBank (paragraph 4.1h);

(v) not to incur debt without the Bank's concurrence ifby such incurrence its debt would exceed 66-2/3% ofits total fixed assets; and not to incur debt with anoriginal term of less than 10 years if by so doing thetotal outstanding principal of such debt would exceed5% of its total fixed assets (paragraph 6.10); and,

(vi) to retain independent auditors satisfactory to theBank and to submit audited financial statements andthe auditor's report within four months of the year endeach year for the duration of the loan (paragraph 6.15).

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(b) The Federal Government agreed:

(i) to complete the Southeast Region and South RegionGeneration and Major Transmission Development Plansand to transmit them to the Bank for corment nolater than November 1, 1973, for the plans coveringthe period 1973-81 and no later than November 1, 1974,for the period 1982-1990; communicate to the Bank anyproposed significant change to these plans; and givethe Bank an opportunity to comment on a proposed changebefore it is adopted (paragraph 2.12);

(ii) that any change in its legislation which, in theopinion of the Bank, would adversely affect the Borrower'sfinancial position would be an event of default(paragraph 2.15);

(iii) to give due consideration to the recommendations ofthe Itumbiara Environmental Impact Reconnaissance Reportof November 1972 (paragraph 4.15); and,

(iv) that in the event there arises reason to believeFURNAS will not have sufficient funds to assure thetimely completion of the project, the Governmentwill provide them (paragraph 6.12).

7.02 The project forms a suitable basis for a Bank loan of US$125million equivalent, for a term of 30 years, including a 7-year graceperiod.

May 29, 1973

ANNEX 1Page 1 of 3 pages

ITUMBIARA HYDROELECTRIC POWER PROJSCT


BRAZIL

PROPOSED LAW - ELECTRIC POWER SECTOR

Article 1 - Establishes that ELETROBRAS, as an agency in charge of technicalcoordination, financing and administration of the electric sector,will promote the construction and operation, through regionalsubsidiary companies of:

- generating stations, interesting more than one State;

- transmission s;Tstems in HV and EHV aiming at the integrationof State systems;

- transmission systems related to bi-national power projects.

Authorizes the government to expropriate and transfer toELETROBRAS transmission lines now belonging to State companiesthe main function of which is the interchange of power betweenStates.

Article 2 - Defines as regional subsidiary companies of ELETROBRAS:

I - ELETROSUL - operating in the States of Rio Grande do Sul,Santa Catarina and Parana.

II - FURNAS - operating in the States of Sao Paulo, Minas Gerais,Rio de Janeiro, Guanabara, Espirito Santo, Federal District,Goias and Mato Grosso, the two latter respectively south ofparallel 159301 and 189 .

III - CHESF - operating in the States of Bahia, Sergipe, Alagoas,Pernambuco, Paraiba, Rio Grande do Norte, Ceara, Piauiand Maranhao.

IV - ELETRONORTE - operating in the States of Para, Amazonas,Acre; Territories of Amapa, Roraima and Rondonia; and thenorthern part of States of Goias and Mato Grosso (respective-ly north of parallel 15930' and 189).

Article 3 - Establishes, under the conditions set forth in the law, that theelectric utility companies will use preferentially and in acompulsory way the electric power and energy that the governmentof Brazil agreed to take from ITAIPU as a result of the Treatysigned with Paraguay on April 26, 1973.

Article i - Establishes that ELETROBRAS' subsidiaries FURNAS and ELETROSULwill purchase all the power and energy taken by Brazil fromITAIPU.

ANNEl 1Page 2 of 3 pages

Article 5 - Establishes that the above mentioned subsidiaries, will contractwith ITAIPU the purchase of the power and energy for a periodof 20 (twenty) years, as established in Attachment C to theTreaty. For purposes of planning, generating and transmissionfacilities, and of carrying out the proration set forth inArt. 10, the division of ITAIPU power between FURNAS andELETROSUL will be estimated on the basis of 1972 power marketsin the areas where said companies operate.

Article 6 - Establishes that FURNAS and ELETROSUL will build and operatethe EHV transmission system from ITAIPU to their respectivesystems, and also the extensions in their existing transmissionsystems, as required to deliver ITAIPU power to the Southeastand South markets, including the EHV terminals and rings todeliver tha power to metropolitan areas. Part of the financialresources for this construction will come from the CompulsoryLoan (Law No. 5824, Art. 2).

Article 7 - Sets up a period of 30 days after the signature of the contractsmentioned in Art. 5, for the following utilities to sign20 (twenty) year contracts with FURNAS for the entire power andenergy supply contracted by FURNAS with ITAIPU: CESPs CEMIG,LIGHT, ESCELSA, CBEE, CELF, CEB, CELG and CEMAT; and establishesthat the FURNhS-CESP contract will include LIGHT's requirementsin Sao Paulo.

Article 8 - Sets up, likewise, a period of 30 days for signing of 20 (twenty)years' contracts between METROSUL and CENE, COPEL and CELESC.

Article 9 - Establishes that the power contracted with FURNAS and ELETROSULby the utilities mentioned in Art. 7 and 8, will be proratedin the proportion of the energy sold by said utilities to theirconsumers, and to other utilities except those referred to inthe same Articles.

Revisions of the amounts contracted by any of the utilities couldbe authorized by the Minister of Mines and Energy, providedthat such revisions could be compensated by revision of theamounts contracted by the other utilities.

Article 10 - Sets up a period of 60 days after the Treaty mentioned in Art. 3comes into force, for the above mentioned utilities to signcovenants with FURNAS and ELETROSUL regulating the contemplatedpower supplies.

In these covenants the energy will be divided in proportion tothe energy sold in 1972 by each utility, to its consumers, or toother utilities except those mentioned in Art. 7 and 8. Theamounts of contracted power and energy will be revised when theactual contracts are signed (two years before ITAIPU operationas p:c1ided in Attachment C to the Treaty).


Article 11 - Establishes that the amounts of power contracted as per Art. 7and 8 will be in addition to the highest amount of power suppliedby FURNAS and ELETROSUL to each utility, in accordance withexisting or future contracts in force by the date of ITAIPU'sinitial operation.

Article 12 - Establishes that Coordination Groups for Interconnected Operationwill be responsible in the Southeast and South Regions for thecoordination of system operation. These Groups will be organizedand directed by ELETROBRAS and will include representatives ofthe utility companies mentioned in Art. 7 and 8, and of othercompanies at ELETROBRAS' discretion.

Article 13 - Sets the main objective of system coordination, as being theefficient utilization of generating stations and transmission.Said coordination will ensure also:

I - Priority in the use of ITAIPU power;

II - Division between all utilities integrating the systems ofthe burden and benefits due to variation of hydrologicconditions in relation to those of the critical period,in accordance with criteria to be established by theGovernment;

III - Proration between all the utilities in the integratedsystems, of the burden and benefits due to fossil fuelconsumption, as required by system operation, or imposedby national interest, and in accordance with criteriato be established by the Government.

The above principles could be applied to both systems consideredjointly, at ELETROBRAS' discretion.

Article 14 - Establishes that from the date the law comes into force, anyconcession or authorization for new generating stations ortransmission lines in the Southeast and South will take intoconsideration the preferential consumption by Brazil of ITAIPUpower to be purchased by FURNAS and ELETROSUL.

Article 15 - Establishes that ELETROBRAS will submit to the Ministry of Minesand Energy:

I - By December 31, 1973, the plan for supplying the requirementsof the Southeastern and Southern Regions up to 1981.

II - By December 31, 1974, the extension of the plan up to 19903taking into account the construction of ITAIPU and thegenerating stations necessary to complement the productionof ITAIPU.

Article 16 - Within 120 days from the date this law becomes effective, theGovernment will issue regulation for Art. 12 and 13.

May 24, 1973


ITUNMBIARA HYDROELECTRIC POWJER PROJECT

FURNAS - CENTRAIS ELEUTRICAS, S.A.

BRAZIL

ELECTRICITY TARIFFS IN BRAZIL

1. Regulations governing tariffs are contained in the Water Code of1934, subsequent amendments and decrees dated February 26, 1957, andNovember 4, 1964, and Laws 5,073 enacted on August 18, 1966 and 5,655 ofMay 20, 1971 (effective January 1, 1972).

2. Prior to 1964, tariffs were based on the use of the historicvalue of investment, consequently not reflecting the substantial inflationwhich occurred in Brazil. The 1964 decree allowed utilities to revaluetheir investment in order to reflect changes in price levels; the 1966legislation made annual revaluation of assets mandatory.

3. Under the existing regulations, tariffs are reviewed and approvedby the Department of Water and Power of the Ministry of Mines and Energyevery three years or at shorter intervals at the initiative of tI>e utility.Without advance approval of that Department, between tariff revisions, theutilities may add surcharges to current tariffs to cover compulsoryincreases in wages, social benefits, costs of fuel and purchased power, andincreases in foreign debt service due to changes in foreign exchange rates.

4. Tariff adjustments on account of revaluation of balance sheetaccounts are actually obtained by FURNAS as often as the Government calculatesand publishes economic correction factors (coefficients) which reflectvariations in the price level. The coefficients are issued annually aboutone month after the end of each year for the use of industry in generalas well as the electric utilities. The coefficients are applied by theutilities to update the values of plant in service and work in progress,depreciation and amortization or reversion reserves, if any, and certainlocal currency loans of ELETROBRAS and the National Development Bank.

5. Law 5,655 of May 20, 1971, introduced various changes in theBrazilian tariff legislation which have an impact on the utilities'finances, though not altering the legislation's basic philosophy. Toshow whiich changes have been made, the following explanation on the matterof electricity tariffs is given by comparing the situation before andafter January 1, 1972, the date the new law came into force;


Applicable before Applicable afterJanuary 1, 1972 January 1, 1972

Tariffs should be set at levelsso as to provide for the followingitems:

(i) Cost of operation, main-tenance and administration Applicable Applicable

(ii) Depreciation Straight-line up to Unchanged5% for thermal in-stallations and upto 3% for hydroinstallations

(iii) Income Tax-/ 17% on income below For the period12% return, 30% 1972-1975 noton income above included in tariff12% return applications

(iv) Amortization orreversio M Either up to 5% Up to 3% for

of total fixed reversion onlyassets in operationfor amortization orup to 3% on the samebase for reversion

l/ Income Tax - During the period 1972-1975, income is taxed at a rateof 6%. Utilities are not permitted to include income tax as anexpense in the tariff applications. In its financial projections,FURNAS has assumed that the rules which applied until the end of 1971 wouldbe reinstated after 1975.

2/ Amortization or Reversion - Up to January 1, 1972, electric utilitieshad the choice of charging either rTamortizationlt (this has no connectionwith debt amortization) of up to 5% of total fixed assets in operation,or "reversion" of up to 3% on the same base. The advantage of chargingamortization was that the utilities could keep the funds derived fromsuch charges, whereas proceeds from reversion had to be paid to theGovernment and could be borrowed back by the electric utilities.Starting January 1, 1972, "amortization" was abolished and henceforthreversion must be charged. FURNAS uses 3%. In order to increasethe influence of ELETROBRAS in the Brazilian power sector, theGovernment has given it the responsibility of independently administeringthe reversion fund on its behalf. ELETROBRAS pays the Governmentinterest at a rate of 3% for the fund, and lends money out of the fundto power utilities at a rate of 10%. At its discretion, ELETROBRAS can alsouse up to 5% of the fund to indemnify owners of land flooded by reservoirs.


Applicable before Applicable afterJanuary l, 1972 January 1, 1972

(v) Rate of return on Up to 10% Minimum 10%remunerable assetsa. Uaximp 0 12,

The above-mentioned items normally are included in the power utilities'tariff applications and, with the exception of reversion, after January 1, 1972,provide the funds for their operation and internal finances. Also, theconsumers pay for three additional charges, which the utilities collect andturn over to the Government. These charges are as follows:

(i) Emprestimo compulsorioV/ Currently collected from industrial(compulsory loan) consumers at a rate of 35% of

the electricity bill. Thi-s compulsoryloan will be collected until 1983 withrates gradually going down from 35% in1973 to 10% in 1983.

Remunerable Assets - The remunerable assets, on whlch the rate ofreturn under Brazilian legislation is calculated, consist of thefollowing:

Total fixed assets in operation at the end of the yearAdd: Allowances for working capital

(a) Cash at the end of the year up to a maximum of thedepreciation reserve.

(b) Inventories as approved by the tax authorities(presently up to a maximum of 3% of gross fixed assetsin operation).

(c) Receivables up to a maximum of two months' billing.

Deduct:

(a) Depreciation reserve at the end of the year.

(b) Consumers or other contributions.

(c) Various small items specified by law.

2/ Emprestimo Compulsorio (Compulsory Loan) - Revenues from the compulsoryloan, for which customers receive 20-year obligations at 6% interest,are administered by ELETROBRAS, which invests them in power utilitieseither in the form of shares or loans at 13% interest. Proceeds from thisloan will be allotted by ELETROBRAS, 50% for the construction of hydro-electric power plants in the Parana river basin; 15% for the constructionof hydroelectric power plants in the Sao Francisco river basin; 10% to beinvested in the capital stock of £LETRTWORTE, a new company to beconstituted for the purpose of coordinating the electric power program inthe Amazon region; and 25% for thie construction of regional transmissionsystems in extra high voltage and the execution of a national pioneeringprogram of nuclear power plants.


Applicable before Applicable afterJanuary 1, 1972 January 1, 1972

(ii) Imposto Unico ~ Collected at the following rates:(Sole Tax) 47% Residential 50%

2% Industrial -22% Comerciajl 60%

*iii) Social Security Tax Collected on the electricity bill atrate of 3%.

Imposto Unico (Sole Tax) - The sole tax is calculated on the basisof the "fiscal rate for consumers". a courLtrywide average electricitycharge fixed every three months by the Department of Water and Power.The funds are collected by the Government and are distributed asfollows:

ELETROBRAS 37%Department of Water and Power 2%Staff of the Miiistry of Mines and kergy 1%Federal gtates 60%

100%

The funds returned to the States are distributed among them asfollows:

According to the State's area 20%According to the State&s population 60%According to the State's electric power

generation 2%According to the State's electric power

consumption 15According to the State's flooded area

(reservoirs) 3%

100%-r 2 1 1973

I l U3,GlAFi.A .h:-_ RnOE^TPIC PIW^ P P?OJECT

F-ANAE - CEInRA`S LETRCAS, S.A.

BPAZIL

MARKET FORRCAST OF FURNAS SYSTEM

ENERGY - AV. MW

STATE OF

YEAR SAW PAUEO LIGHT-RIO CEMIG CBEN ESCELSA CELF CEB TOTAL

1971 627 260 190 27 48 5 1,157

1972 685 405 150 55 35 5 - 1 335

1973 710 465 210 65 60 45 50 1.605

1974 735 565 225 75 20 55 65 1.740

1975 765 680 270 85 25 65 75 i,965

1976 800 795 270 95 45 75 85 2,165

1977 835 960 270 105 65 85 95 2,415

1978 875 1,095 270 115 85 95 100 2,635

1979 925 1,240 270 130 110 110 110 2,895

1980 98& 1,430 270 145 140 125 120 3,210

1981 1,470 1,555 270 160 170 140 135 3.900

1982 2,020 1,740 270 180 230 160 145 4.725

PEA - NW

1971 1,?46 7021 387 95 49 14 _ 2,493

1972 1,070 690 250 100 55 15 - 2,180

1973 1,120 780 350 U5 90 80 85 2,620

1974 1,170 950 375 130 25 100 110 2.860

1975 1,220 1,140 450 150 40 115 140 3,255

1976 1,280 1,340 45C 170 60 130 155 3,585

1977 1,34o 1,580 450 190 95 150 170 3,075

1978 1,410 1,800 450 21Q 105 170 185 4,330

1979 1,50C 2,000 45o 235. 145 195 205 4,730

1980 1,59C 2,260 450 260 195 220 225 5,200

1981 2,205 2,460 450 29Q 240 250 250 6 .145

1982 2,890 2,760 45o 32Q 295 290 275 7,280

/ Including LIGHT

March 7, 1973

16000

14000 _ _ _ _ _ _ _ _ _ _ _

BRAZILFURNAS - CENTRAIS ELETRICAS S.A.Furnas System Power and Energy Balance

1200C

1000 0 _ _ _ _ _ _ _ _ _ _ _ _

e(80009T to o z R P AYIN' CR 9 D <

< c

~~~~~~~~~NN6 omsE z ZI ,_..*

< .<\ 28000 j EEG E URMNS

0 L L

to () 0 << (N 00 Z z z w~~~u 0n 0 Z0 -JZ Z ~ ~ ~ ~ 0Z 0 M PEAKING CAPACITY DZ

19722 0 M1 1 1

LL~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~ ~ol Bank 7690

4000 0"'l i i <0

o _jc P~~~~~~~~EERKIGY REQUIREMOENTS-

0 Lo_ _ _ _ _ _ _ _ _ _ _ 1192193194175 j 19619717817918

4000 -0 - 0 0 -u- O-CL~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~ordBak 79



FURNAS - CENTRAIS ELETRICAS,S.A.

BRAZIL

INSURANCE

1. FURNAS is required, by law, to carry the following insurance:

1.1 Fire

This insurance must cover all FURNAS properties and must includeequipment in addition to buildings, at their replacement value.The following are not covered by this class of insurance: Dams,turbines, pressure shafts (i.e., any submerged or buried equipment,foundations, etc.), high voltage transmission lines, and all non-combustible materials in the open.

1.2 Transport and Shipping

FURNAS must provide for insurance, at replacement value, for alland any equipment, whether or not imported, transported by sea,air, or overland, as well as provide insurance coverage fortransportation in the event of transfer of materials or equipment.

1.3 Civil Liability - Vehicles (Recovat)

FURNAS licensed vehicles must each be provided with a policyentitled "Obligatory Civil Liability for Vehicles" to cover thirdparty personal liability, as follows:

Death - Cr$10,000.00Permanent injury - Up to Cr$10,000.00Medical treatment and supplementary expenses - Cr$2,000.00

2. In addition to insurance required by law, FURNAS holds other policiesconsidered necessary, such as:

2.1 Civil Liability - Movable Equipment

Such equipment, when self-propelled from one place to another, arecovered by an optional Civil Liability policy, proviaing for:

Material damages - Cr$25,000.00Personal damages - Cr$25,000.00

2.2 Other Risks - Movable Equipment

This insurance covers two tractors employed in transmission-linework.

2.3 Other Risks - Valuables in Safe Deposit or Transit

This insurance is secured for valuables when kept on FURNAS

ANNEAX 5Page 2 of 3 pages

premises or transferred by courier.

2.h Other Risks - Railroad Carrige

Insurance of railroad rolling-stock against risks when running, fire,lightning, explosions, elements, falling bridges, landslides,derailments, over-turning or collision (but not shocks occurringdue to coupling operations).

2.5 Other Risks - Equipment in Transit

This insurance covers equipment carried by hand such as recorders,cameras, surveyort s equipment, etc.

2.6 Boat Hulls

All FURNAS power-driven craft are insured against total loss, rescueand life-sa-ving costs, contribution for heavy damages, privateproperty damage and civil liability in case of collision.

2.7 Aircraft

This insurance covers all FURNAS aircrasft against the followingrisks: damages to fusillage, accident liability for passengersand crew, civil liability.

2.8 Civil Liability - Visitors

The purpose of this insurance is to pretect FURNAS, to the maximumlimit of the amount insured, in the event of its having to payindemnities, due to legal court order or by virtue of agreementsapproved by the insurer, for bodily h1amu or disease (includingdeath resulting therefrom), and for material damages involuntarilycaused to third parties by accidents, and due to such third parties'visit to FURNAS properties.

2.9 Civil Liability for Constructicn and Srection Operations(Under Study)

The above insurance is against damages to third parties caused byconstruction and erection operations for the Angra Nuclear PowerPlant.

3. In view of the fact that FUINAS is a mixed-economy company, all itsinsurance, with the exception of Group Life InsurAnce and Personal AccidentInsurance, is distributed among the larger Brazilian insurance companiesby the Instituto de Resseguros do Brasil (Reinsurance Institute of Brazil)by means of lottery.

4. Some of the company's properties, althoughi valuable, are not insured,since by experience it is preferable for it to be "self-insured". Thus,


transmission lines, including their towers, and also FURNAS fleet of vehicles,of which the damage/premium index during the last three years has been lessthan 10%, are in this category.

5. In some instances, particularly in respect of thermal-electric stations(including the Angra Nuclear Power Plant) individual studies have beenconducted for All Risk, Builder's Risk Insurance.

May 3, 1973




BRAZIL

TRANSMISSICN4 FACILITISSIncluded in the Itumbiara Hydroelectric Project

Transmission Lines

Completion Year

1977 - 345 kV Itumbiara-Bandeirantes-Brasilia II (1 circ. - 346 k1n)(operating in 230 kV)

1977 - 138 kV Santa Cruz-Parati (2 circ. - 147 km)

1977/78 - 138 kV Adrianopolis-Cachoeiro II (2 circ. - 369 kmn)

1979/80 - 500 kV Itumbiara-S. Simao (1 circ. - 156 kin)

1979/80 - 500 kV Marimbondo-S. Simao (1 circ. - 200 km)

1979/80 - 500 kV Agua Vermelha-Marimbondo (1 circ. - 1h0 km)

1981/82 - 138 kV Andrianopolis-Cachoeiro III (2 circ. - 369 kmn)

1982 - 345 kV Itumbiara-Bandeirantes-Brasilia II (1 circ. - 346 km)(operating in 345 kV)

Substations Additions

1977 - 138 kV Parati - 4 TL Bays

1977/78 - 138 kV Adrianopolis - 1 TL Bay

Rocha Leao - 2 TL BaysCanpos - 2 TL BaysCachoeiro - 1 TL Bay

1979/80 - 500 kV Marimbondo - 1 TL Bay- 1 Reactor (bank) 75 MVAR

1981 - 345 kV Itumbiara - 1 TL Bay- 1 Reactor (bank) 75 MVAR

1981 - Series Compenaation on Marimbondo - Guanabara trunk

1981/82 - 500 kV Campinas - 1 500/345 kV - 400 MVA Transf. andrelated bays


1981/82 - 138 kV Adrianopolis - 1 TL Bay

Rocha Leao - 2 TL BaysCampos - 2 TL BaysCachoeiro - 1 TL Bay

1982 - 345 kV Adrianopolis - 1 35A/138 kV - 225 MVA Transf. andrelated bays

1982 - 345 kV Bandeirantes - 5 345 kV bays- 1 345/230 kV - 225 MVA Transf. and

related bays

1981/82 - 345 kV Adrianopolis - 1 345/138 kV - 225 MVA Transf. andrelated bays

1981/82 - 345 kV Campinas - 1 345/138 kV - 225 MVA Transf. andrelated bays

1981/82 - 500 kV Itumbiara - 1 intertie bay- 1 500/345 kV - 40o MVA Transf. and

related bays

1982 - 345 kV Brasilia - 3 345 kV Bays- 1 345/230 kV - 225 MVA Transf. and

related bays- 1 345/138 kV - 150 MVA Transf. and

related bays

1982 - Capacitors on the system

Load Dispatch

1978 - Expansion of the FURNAS LOAD D3¢SPATCH SYSTEM

Communications

1978/79 - Micro-waves system ITUMBIARA-BRASILIASUMARE-VITORIA

Micro-waves system expansion - Sao Paulo-C. Paulista trunkBotafogo-Sumare trunkPocos de Caldas Terminal

May 2, 1973

ANNEX 7


FURNAS - CENTRAIS ELETRIOAS. S.A.

BRAZIL

ESTIMATED SCHEDULE OF DISBURSEMENTS

CUMULATIVE DISBURSEMENTIBRD FISCAL YEAR AT END OF QUARTER

(US$ millions)

1973/71wr

June 30, 1974 1.01974/75

September 30, 1974 2.0December 31, 1974 3.3March 31, 1975 7.3June 30, 1975 12.3

1975/76Septemnber 30, 1975 19.3December 31, 1975 27.3March 31, 1976 34.3June 30, 1976 41.3

1976/77September 30, 1976 46.3December 31, 1976 50.8March 31, 1977 55.5June 30, 1977 60.5


1978/79September 30, 1978 95.5December 31, 1978 103.8March 31, 1979 108.8June 30, 1979 U1 .8



1981/82September 30, 1981 124.5December 31, 1981 124.9March 31, 1982 125.0

March 7, 1973



FURNAS - CENTRAIS ELETRICAS, S. A.

BRAZIL

POWER AND ENERGY BALANCE OF THE SOUTHEAST REGION

1. ELETROBRAS presented to the Bank in December 1972 a document called"Revisao do Balan9o Energetico 1971-19851" which compares the Southeast powerand energy requirements with the present available generating capacity andthat of the plants under construction or proposed; it presents the programfor generation expansion which is shown in table on page 3 of this annex.In this program, besides the proposed schemes of Agua Vermelha and Itumbiara,which are assumed to be in full operation by 1981, four units of the 2,000 MWItaipu (Sete Quedas) scheme in the Parana River, are supposed to be installedby 1982, to be able to meet the power and energy requirements of the Regionat that date.

2. The table on page 3 shows the actual and forecast power and energybalance of the Region for the period 1969-1982. In order to determine theavailable energy from the existing and proposed generating plants, ELETROBRASmade a series of simulation studies in which the hydrological informationcorresponding to the driest 42 months (the critical period) of historicstatistical data was used as a criterion for determining the available capacity.Two types of studies have been carried out for this purpose: the so-called"static energy balance" of the system, by means of which the total firm energyis assumed to be the sum of the average generation available of each plant dur-ing critical period and the so-called "dynamic energy balance"? where the avail-able generation is determined by simulating the operation of the system basedon real-time conditions, under which the available energy of the whole systemwould depend upon the assumed starting conditions, such as actual reservoirlevels, actual avaLlability of generating units, etc. The first method hasbeen used for determining the long-range behavior of the generating system;the second method, although less conservative than the first, gives a moreaccurate answer to the question of the system energy availability in the nextcoming years and makes it possible to revise the results as changes take placein the program implementation. In this way consideration may be given to de-lays in the commissioning of generating units and other circumstantial factors,such as the effect on the system availability of the first filling of thereservoirs, which reduce the energy generation of the down-stream plants, etc.

3. As shown in the table of page 3, the Region's energy requirementsare adequately covered by the proposed generating expansion program up to1979; starting in 1979, the Region's available peaking capacity does not providethe required 12% reserve capacity to the system. The second phase of the Regionplanning study, as explained in paragraph 2.11 should determine the necessarypeaking capacity expansion to cover this deficit.

ANNEX 8

ITUMBIARA HYDROELECTRIC POWER PROJECT Page 2 of 3 pages

FURNAS - CENTRAIS ELETRICAS. S. A.

BRAZIL

GENERATING EXPANSION PROGRAM - 1972-1982

FOR SOUTHEAST REGION 1

YEAR PROJECT TYPE UNIT OWNER CapacityMW

1972 Santa Cruz T 3 & 4 FURNAS 4ooEstreito H 6 FURNAS 175Alecrim 1 & 2 72

1973 Ilha Solteira H 1, 2 & 3 CESP 48oMascarenhas H 1, 2 & 3 105.5Porto Colombia H 1 FURNAS 80Jupia H 13 CESP 100Furnas H 7 FURNAS 150Volta Grande H 1 CENIG 110

1974 Porto Colombia H 2, 3 & 4 FURNAS 240Ilha Solteira H 4 CESP 160Jupia H 14 CESP 100Furnas H 8 FURNAS 150Volta Grance H 2, 3 & 4 CEMIG 330Cachoeira Dourada H 6 CELG 80

1975 Cachoeira Dourada H 7 & 8 CELG 160Paraibuna 1 & 2 86Promissao H 1 & 2 CESP 176Ilha Solteira H 5 thr. 12 CESP 1,280Marimbondo H I & 2 FURNAS 350

1976 Narimbondo H 3, 4,5 & 6 FURNAS 700Promissao 3 CESP 88Capivara H 1 thr. 4 CESP 640Tlha Solteira H 13 thr. 16 CESP 640Igarape T 1 CEMIG 125

1977 Marimbondo H 7 & 8 FURNAS 350Angra N 1 FURNAS 600

1978 Sao Simao H 1, 2 & 3 CEMEG 7501979 Sao Simao H 4 CENIG 250

Agua Vermelha H 1 thr. 6 CESP 1,380Itumbiara H 1 FURNAS 260

1980 Itumbiara H 2, 3 & 4 FURNAS 7801981 Itumbiara H 5, 6, 7 & 8 FURNAS 1,0401982 Itaipu H 1,2,3 & 4 ITAIPU 2,000

1/ Excludes self producers



BRAZIL

FORECAST OF ENERGY AND POWER BALANCE OF THE SOUTHEAST REGION

- Actual --UNIT EROY 196 97 1972 1974 1975 1976 1977 1978 1979 1980 1982

GWh Sales / 27,771 30,272 33,971 37,906 42,194 46,609 51,276 56,081 61,418 67,262 73,583 80,511 87,897 96,667GWh losses 3,863 4,222 4,590 5,841 6,012 6,564 7,161 7,700 8,206 8,739 9,383 9,383 11,529 12,491GNh Generatiox 31,634 34,494 38,561 43,747 48,206 53,173 58,437 63,781 69,624 76,001 82,966 90,560 99,426 109,158GWh ReserveY 1,314 1,375 1,428 1,480 1,524 1,550 1,577 1,594 1,603 1,603 1,594GWh Required Gfeqeration 45,061 49,581 54,601 59,917 65,305 71,174 77,578 84,5f,n 92,163 101,029 110,752GWh Available nIGeneration 45,018 52,499 58,280 63,790 69,458 75,213 78,490 85,401 93,583 102,850 112,049

ILAD FACTOR 61.0 61.3 61.4 61.2 60.8 6o.4 60.0 59.6 58.8 58.4 58.0 58.0 58.o 58.0

powER

MW Peak Demand 2/ 5,921 6,424 7,172 8,162 9,054 10,050 11,119 12,218 13,427 14,757 16,219 17,820 19,565 22,483NW Reserve (12%) 698 771 861 979 1,086 1,206 1,334 1,466 1,611 1,771 1.946 2,138 2,348 2,578MW Required C acity 6,619 7,196 9,033 9,141 10,140 11,256 12,453 13,684 15,038 16,528 18,165 19,958 21,913 24,061HW Available TCapicity 7,645 8,255 9,185 10,051 10,539 11,393 12,825 14,45o 15,547 16,658 18,153 18,705 19,745 21,745

I Includes net exports to other Regions and consumption of self producers./ Required for imperfect operation.

3 Measured at generating end.J Includes self producers.2 Missing figures due to the model for integrated energy and power 1!

balance did not cover this period.

April 1973




BRAZIL

LEAST COST SOLUTION

1. For the reasons explained in paragraph 5.03, the economic justi-fication of the Project was done by comparing the cost of the followingalternatives to provide the electricity supply of the Southeast Region:

Alternative A: (basic alternative) Itumbiara and Agua Vermelha formpart of the generation expansion program.

Alternative B: Similar to Alternative A but Itumbiara is replaced byan oil-fired thermal plant (thermal station) andadditional hydro peaking capacity.

Alternative C: Similar to alternative A but Itumbiara is replaced bya nuclear station and additional hydro peaking capacity.

In order to measure the relative merits of the two new hydro schemes contem-plated in the expansion program: Itumbiara and Agua Vermelha, the followingalternatives were also studied:

Alternative D: Agua Vermelha is replaced by a thermal station andadditional hydro peaking capacity.

Alternative E: Itumbiara and Agua Vermelha are replaced by thermalstations and additional hydro peaking capacity.

Alternative F: Similar to alternative E but, the thermal stations arereplaced by nuclear stations.

2. The study made by ELETROBRAS for this purpose was revised by the Bank;in this revised study, the alternatives were compared by determining the PresentWorth at year 1972 of their total cost (investment, operation and maintenance),for annual discount rates of 9-14%. The time horizon was extended to 56 yearsunder the assumption that the investment components would be replaced by othersof the same cost at the end of their useful life and that the annual operatingand maintenance costs would become constant after the installations reachedfull utilization.

3. Taxes and import duties were excluded from the cost. Labor and foreignexchange costs were analyzed in the context of their macroeconomic value. As nounemployment apparently prevails at the construction sites for skilled or semi-skilled workers (no significant numbercf unskilled workers are employed in thistype of work), the labor cost component was calculated at actual salaries. On


the other hand, as the cruziero value in relation to foreign currencies hasbeen readjusted periodically in accordance with indexes reflecting itspurchasing power, the imported goods and services should be evaluated atthe current rates of exchange, but a 20% increase was considered necessaryin view of the elimination of import duties in the cost evaluation. Theabove method leads to conservative results, as it disfavors the proposedhydro schemes.

4. In order to compare the alternatives under consideration, therequired respective hydro peaking supplementary plants were determined; thiswas done by applying to the system, for each alterxnative, the followingconditions: (i) equal firm energy, and (ii) equal peaking capacity. Aseparate study was done to determine the optimum average plant factor forthe non-hydro alternatives: plant factor of 73% for the thermal stationsand 85% for the nuclear stations were obtained, the latter being the maximumavailability factor dccepted for these type of stations. The supplementaryhydro peaking capacity to mte'. condition (ii) was assumed to be provided byexpanding the generating capacity of hydro plants now in operation, some ofwhich present favorable conditions for this purpose. The table below showsthe equivalent capacity of the conventional thermal and nuclear stationsplus hydro peaking stations that were used for the comparisons:

Itumbiara Agua Vermelha

Gross capacity (MW) 2,080 1,380Net capacity (MW) 1,976 1,311Annual firm energy (Av MW) 1,030 680

Equivalent Thermal Alternative

Thermal capacity (MW) 1,500 1,000Hydro peaking capacity (MW) 593 400

Equivalent Nuclear Alternative

Nuclear capacity (MW) 1,200 800Hydro peaking (MW) 802 537

5. Commercial size units of 500 MW for the thermal stations and 800,1,000 and 1,200 MW for the nuclear stations were adopted. All the non-hydrostations were assumed to be located in the neighoornood of the main loadcenters delivering their power to the closest 500 kV substation.

6. The basic data used in the study are shown in AnnexlO. The powercost for the alternatives involving conventional thermal plants wascalculated at an international fuel oil price level of US$17.9/ton(US$2.72/barrel), which is 20% higher than the prices prevailing at thebeginning of 1972, in view of the strong tendency for world fuel prices torise relative to the other cost inputs by the time these plants would be inoper -'ion. The price at plant site, considering freight and local handlingwas estimated at US$23.60/ton.


7. The results of the study are shown in graph of Annex 21 wherethe Present Worth of the power cost differential of the five alternativesin relation to the proposed program is plotted against discount rates. Itcan be seen that all the alternatives considered in the cost comparison forthe power expansion program of the Southeast region have higher costs thanthe proposed program (Alternative A) for discount rates higher than thecountry's estimated opportunity cost of capital. The replacement ofItumbiara by a conventional thermal plant (Curve E) would be economicalonly for discount rates higher than 15%, which emphasizes the merits ofthe project.

8. For the basic parameters adopted in the study, nuclear stationsonly become more attractive than the thermal stations for discount ratesbelow the estimated opportunity cost of capital.

9. Graph of Annex 12 shows the effect of the fuel prices on theequalizing discount rate of the alternatives involving thermal stations.

May 22, 1973

ANNEX 10ITUMBIARA HYDROELECTRIC POWER PROJECT


BRAZIL

COST ASSUMPTIONS i

1. INVESTMENT COST UNIT SOURCESAlternative A 6Ituibiara 2,000 Cr x 106 FURNAS (F)Agua Vermelha 10319 Cr x 106 PROMDN-MAIN -ELETROBRAS (PME)Transmission system 640 Cr x 106 ELETROBRAS (E)

Alternative BThermal 1,500 MW 1,h63 Cr x 106 F - EHydro peaking station 593 MW 367 Cr x 106 ETransmission system 263 Cr x 106 E

Alternative CNuclear 1,200 MW 2,058 Cr x 106 BRAZILIAN ATOMIC

ENERGY COMMISSION (BAEC)Hydro peaking station 802 MW 498 Cr x 10 ETransmission system 259 Cr x lo6 E

Alternative DThermal station 1,OOO MV 1s006 Cr x 106 F - EHydro peaking station 400 247 Cr x 106 ETransmission system 222 Cr x 106 E

Alternative EThermal Station 2,500 MW 2,h77 Cr x 106 F - EHydro peaking station 992 MW 615 Cr x 106 ETransmission system 399 Cr x 106 E

Alternative FNuclear Station 2,000 MW 3s582 Cr x 106 BAECHydro peaking station 1,337 MW 829 Cr x 106 ETransmission system 400 Cr x 106 E

2. ANNUAL O&M COSTHydro stations US$1.73/kw year EThermal station 1 x 500 MW US$4.51/kw year F - E

2 x 500 MW (ormore) US$2.55/kw year F - E

Nuclear stations 800 MW US$2.55/kw year BAEC1,000 MW US$2.36/kw year BAEC1,200 MW US$2.15/kw year BAEC

Transmission system 1% investment cost E

3. USEFUL LIFEHydro stations 50 years EThermal stations 25 years F - ENuclear stations 25 years BAEC - ETransmission system 25 years E

4. FUELThermal base load: 0.227 kg/kWh @ US$20.20/ton F - E

peak load: 0.252 kg/kWh @ US$20.20/ton F - ENuclear initial inventory: included in investment cost

BAECvariable cost: 0.00141 US$/kWh BAEC

l/ Based on shadow foreign exchange 1.2 times the market value.May 29, 1973

ITUNBIARA HYD13LOECTRIC POhR PJWECT EX 11

FURNAS - CENTRAIS ELEiTRICAS S.A.

BRAZIL

COMPARISON OF ALTERNATIVE PROGRAMS

FUEL COST:AT PLANT SITE $23.60/TON

INTERNATIONAL PRICE 517.90/TON

700 (E ITUMBIARA + AGUA VERMELHA*> g XREPLACED BY THERMAL

600

O \ * ##BASIC ' ITUMBIARA + AGUA VERIELHA

uj + ^_ S IT~~~~~~~~~~~~~~~~UMBIARA REPLACED

CLL < B ULA

O F M AGUA VERMELHA REPLACED

, < ~~~~~BY TH ERMAL-

O ^^ - / ITUMBIARA REPLACED

> 4 00 "11111

z ,.£) BASIC ~ALTERNATIVE ^

<

3100

- 200

t e ~~1|0 111 ai 1 t1 ANNUAL DISCOUNT RATE (%6)

World BnkH-7745

= z,C SCENTRAIS ELETRICAS SA T

3RAZIL

OCOEFFEC-T OF FUL pIC

NCOMPARISON OF AL N AVC S

_L__ R___A_-- -ALTERNATTve

14

,2- 154

AL1,ERNA7TV

C.)C1-wos"

' I3

1?

72 000

world Bank 7746




BRAZIL

RETURN ON PROJECT INVESTMENT

1. If 12% of Itumbiara's installed capacity is considered as system'sreserve, and taking into account the energy generated at Itumbiara and atthe downstream plants due to its regulating effect, the equivalent plantfactor of this project is of the same order as the Region's load factor.In view of the above, the return calculation has been based on the costsrelated to Itumbiara alone and benefits related to the consumption of theaforesaid energy.

2. It has been assumed that the benefits derived from the electricitysupply can be valuated at least at the unit value paid for by the utili-mate consumer- which in this case is the tariff charge plus the sole tax (seeAnnex 2). Based on the above an average benefit of CR 0.176/kWh sold, wasestimated.

3. The cost was determined by computing Itumbiara generating and trans-mission cost plus the correspondent incremental distribution system cost. Thelosses of the agricultural production caused by the Itumbiara reservoir were notconsidered as an additional cost of the project (negative benefit) because thecost of land and resettlement included in the investment cost estimate exceedsthe value of said losses. On the other hand, no benefits other than the powersupplied were considered.

4. The basic assumptions made for the return determination were similarto those made for the least-cost solution comparison (see Annex 9). Detailedcalculations are shown in table of pages 2, 3 and 4. The estimated return onItumbiara project investment and associated distribution facilities, determin-ed by the above described method resulted in 23.5 , which can be consideredfar beyond the estimated opportunity cost of capital in Brazil.

ANNEX 13Page -2 of 4 pages

ITUMBIARA H!DROE CTRIC POWER PROJECT


BRAZIL

ITUMBIARA COST-BENEFIT EQUALIZING RETURN

1. Itumbiara Average Annual Generation and Sales

(1.1) Direct Itumbiara generation for critical period 755 AV MW(1.2) Indirect generation on account to Itumbiara 275 AV MW(1.3) Total generation for critical period 1,030 AV MW(1.4) Add 7.5% to convert into average generation 77 AV MW(1.5) Total average generation 1,107 AV MW(1.6) Ditto (1.5) expressed in GWh: 1,107 x 8.76 9,697 GWh(1.7) Energy transmission losses (4%) - 388 GWh(1.8) 9,309 GWkh(1.9) Distribution losses (10%) - 931 Gkh(1.10) Annual sales ,375 GWA

2. Estimated Value of Electricity for Ultimate Consumer(taken from LIGHT Co. for 1972)(2.1) Total revenue from energy sales 2,953 Cr x 106(2.2) Total revenue from Sole Tax 620 Cr x 106(2.3) Total value of electricity sold 3,57 Cr x 106(2.4) Total energy sold 20,310 GWh(2.5) Average unit value of electricty: (203) 0.176 Cr/kWh

(77)3. Itumbiara's Benefits

(3-1) (1.10) x (2.5) 1,475 Gkt

4. Distribution Cost(4.1) Itumbiara's installed capacity 2,080 MW(4.2) Contrib-ution to system reserve capacity (12%) - 250 MW(4.3) 1,830 MW(4.4) Transmission power losses (6%) - 110 MW(4 5) 1,720 MW(4.6) Distribution power losses (12%) - 206 MW(4.7) 1,514 MW(4.8) Required diversity over capacity (20%) 303 MW

(4.9) Required distribution capacity ,17 MW(4.10) Distribution incremental investment cost

(Based on LIGHT for 1972)(4.10.11) Estimated value of assets for distribution 4, 291 Cr x 106(4.10.12) LIGHT's peak demand 4,356 MW(4.10.13) Over capacity required by diversity (20%) 871 MW(4.10.14) Estimated LIGHT's distribution capacity:

(4.10.12) + (4.10.13) 5,227 MW


(4.10.15) Estimated unit average investment costfor distribution (4.10.11)= 821 Cr/kw

t4.10-.14')

(146 US$/kw) 821 Cr/kw(4.10.16) Estimated incremental investment cost

of distribution of Itumbiara0.8 x (4.10.15) x (4.9) 1,194 cr x 106

(4.11) Distribution incremental annual O&M cost(Based on LIGHT for 1972)

(4.11.1) Estimated ratio of incremental annual O&Mcost for distribution to investment cost ofdistribution o.o48

(4.11.2) Estimated incremental annual O&M cost ofdistribution for Itumbiara:

(4.11.1) x (4.10.16) 57 Cr x 106

5. Itumbiara Investment Cost for Generation and Transmission (see Annex 6)(5.1) Generation 1,900 Cr x 106(5.2) Transmission 400 Cr x 106

6. Itumbiara Annual O&M Cost for Generation and Transmission(6.1) Generation 20.3 Cr x 106(6.2) Transmission 4.o Cr x 10°

ITUIIBIARA HYDROELECTRIC POVJER PROJECT

FURNAS - CE:NTRAIS ELETRICAS 'S.A.

BRAZIL

ITUI4BIARA COST - BENEFITS

(Cr x 106 x 1972)

INVESTMENT 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 - 2003 2004 2005 - 2028

Generation 35 155 377 386 386 386 131 79 65 - -Transmission 14 16 37 151 127 32 - 377Distribution 244 624 624 1,194

Total Invest;ment Cost 35 155 377 400 402 423 526 830 721 - 1,f5n

O&M COST

Generation 20 20 20 20 20Transmission 4 4 4 4 4Distribution 12 42 57 57 57 57

Total O&M Cost 12 66 81 81 81 81

TOTAL COST 35 155 377 400 402 423 538 896 802 81 1,652 81

TOTAL BENEFITS 15 500 987 1,475 1,475 1,475

RATE OF RETURN: 22.9%

May 29, 1973

t

ITBa3AR2 bYDROBLECTRIC 92WE" PROJCT

FLWAS - 3EfTRAIS2i 2115CAS . SA.

BRAZIL

Actual An Forecast Inom Statnto 1971-1982

(Nillhtos of Crassi)

- - -------- ---- --- - -- - __ - ---- - ----- ---.- __---------_- _----_-----_ -__ ------ TOTALYear bdin5 Deceer 31 97n 1972 1974 17 1976 197 1978 1979 1S92 1932

>.1barg Sd2e (OY) 10,49? 11,399 23,795 14,690 17,213 19,017 21,1'¢ 23,083 25,36J 26,197 34,164 41,391A-.- ! Rev*=* PW iWh Sold (Centavoa) 6.1 8.1 8.9 9.5 9.8 9.5 9.8 9.1 10.2 9.3 8.8 7.6

25arat$pj Rwvwmta 645.o 927.6 1,22B.7 1,401.6 1,662.7 1,8604.9 2,067.6 2,102.9 2,596.4 2,618.9 3,021.4 3,165.5 21,690.6

169.2 194.5 375.3 396.1 38B.9 402.2 423.2 447.3 424.2 429.3 437.7 496.8 i,224.ob1oo.Artition 92.1 131.7 167.8 181.5 234.1 257.6 308.3 316.3 408.8 418.4 494.1 517.6 3,304.5T*x** 13.0 25.9 23.1 34.8 87.8 102.0 108.3 126.4 135.9 132.4 149.3 165.5 1,065.5Depreciation 875 132.7 172.4 1716. 227.2 250.0 306.8 312.6 402.4 8 4047

Total Operating erAes 361.8 -l0 7 78t8r7 II.0 1 ,11 i4.8 1,I90. 6 1;77 5;3 1 10 :

op 1nLt% imcam 263.2 442.8 490.1 612.9 744.7 793.1 923.0 900.3 1,224.1 1,227.0 1,455.1 1,475.6 9,845.9wIc (t) 12.3 4.3 2.0 1.0 1.0 1.0 1.0 1.0 1.0 2.0 1.0 1.0 12.0

Tot1 Ile -,T 2f.'T 1924.13 7C5M -7 77 -zm L 9 z -. T" -1,21tZ90,461;75 7

*T 1 Tnotea.t iL'.4 312.' S55.2 4I45.2 $5.6 631.3 684.6 707.2 796.2 847.2 859.6 788.6 6,770.7Lafe Intereot Charged to Construction 76.2 188.2 193.3 218.1 197.4 277.C 237.9 342.9 163.0 219.7 41.0 20.0 1.920.8

TIo&l inte ut hpense 107 M.-�7M2*b -3269 33t 79*7 S 6337 6278I8Y Sl. Z49.9

Ret Incom 176.8 322.4 230.2 386.8 387.5 44o.3 477._ 57-0 591-9 _6 6375 _ 708.05.003.

gete of Retum on _ rableIn" t S 11.7 12.0 9.9 12.7 12.6 12.5 12.0 12.0 12.0 12.0 12.0 12.0

f ,21~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1

:-2B3LRhi E.Z^T2 POWlEe PO.Z-I

f-WAS - 02lS8AI E=ETRICAS. S.A.

Foecast Sources and Awltoation, of ?w,de Statemtv. 1973-1962

(Iflloas of OroseiEs)

-- -- -- ----- -- ------------- ------ -- ----- -- -- -------- -- ----- ---- --------- EC^sE- - --- ---- ---- -- ---- ---- - ----- --- -- ----- - - -------- ----- - -- - - - -- TOTA

DWgr Xrlf Dsob 32 1973 194 1975 1.976 1977 1978 1979 196 V891 1952 1973-1982

asDR cr YU=

YUToW~ OpiTMa cm 412.1 613.9 745.7 71h.1 124.0 9-01.3 1,225.1 1,229.0 1,45.1 1,476.6 9,857.9Dpreotl.on 172.4 176.3 227.2 250.1 304.8 312.6 1402.4 41.1.8 45.3

Total lhtsl Sw2wess .5 79022 TM= 1,o r. iu. 1 13,103.brternul Soure..

Contribution fro Federal Owerort 50.0 50.0 50.0 40.0 - - - - - - 190.0Trigo 3wv-wo,~

kduti,g Ians-TE 2 1h9.2 114.8 140.0 21.5 13.8 - - - - - 439.3-joint Fi1naning 45.5 38.4 28.7 17.8 - 130.4-AID .43.0 8.6 - - - - - - - - 51.6

BD lSnk 63.2 229.8 369.4 71.7 .C- -_ _ _ 734.692opoud ,oanm-Tm - 18.5' 135.3 132. 11.4 187.3 67.6 40.3 10.6 .7 704.3

-Parallel FinmVu1g - 10.2 22.4 57.S 80.9 78Z 106.9 56.5 15 8 3 0 431.1-Otnr _ - 20.4 45.5 73.2 304.7 491.0 205.0 237.7 191.7 1,569.2

Loaml :MOIWbiat1ng 1o.m-MMMUS 49.9 218.8 161.4 73.7 27.3 - - - - - 528.1Propo.d sAor CAS - 9h.? 253. 502.1 447,.4 448.0 5.7.6 222.4 126.8 3 211F

Total kt.rvl Sourunw 505.3 99 2 .1 I1S5T.4 7 ,990.4WOTL SWIU or F 1.6649.5 1,732.6 2.402.3 1,949.4 2,023.0 2.372.0 2,515.1 2.069.4 2,205.4 2,180.0 21,099.0

OME Ntlo W(M=1,01m tntereft Chagedto Onstruction) 1,146.1 1,077.3 1,652.5 1,072.9 877.8 1,227.0 1,197.1 6E3.5 501.7 11.0 9.8.46.

Debt Servish tE1s-UIon 125.5 195.1 204.9 229.4 316.5 3C3.9 403.5 413.8 523.6 531.0 3,297.2Dnterest Nyte 217.3 297.7 321.7 373.5 488.0 44 7.7 459.3 462.6 606.4 788.6 _,463.7

Toal Debt Service TTc 002.r 27 Wl .0 --,1 87 T 760.9Dividend *zd Dozen P "ay L 181.4 226.0 241.6 276.0 314.4 364.9 413.6 418.3 429.6 445.6 3.324.4lirmt e Cbin laX Sri C Dil ( 20.8) ( 63.>) ( 26.4) ( 2.4) 25.4 ( 26.5) 41.9 01.2 144.1 3.8 166.8

TO0AL APPLIC*TM 0? B3 1.649.5 1732.6 2,402.3 1949.14 2,023.0 2,372.0 2.515.4 2o6.4 2.205.4 2.180.0 21.099.0

Tla_ 1A1 Debt Srvioe Corwd byInternal Cauh Omation 1.9 1.6 1.8 1.7 1.5 1.5 1.9 1.9 1.7 1.5 1.7

1q 25, 1973

-ts.l o i F-r-cut BhI.,. Sheet., 1971-1)82

(2Fi} oO Or Crzeiros)

T"r 2tding DL_e 31 1971 1972 1973 1974 157. 1976 1977 1978 1979 19B0 1981 1982

9imd uA'tsid .nit n Operation 3,069.6 4,558.0 5,919.7 6,052.7 7,801.7 8,585.6 10,465.7 11,733.2 13,816.8 14,138.7 16,661.3 17,443.0

A-r...tion Resere ( 368.4) ( 426.4) 4264) ( 426.4) 426.4) 0 426.4) ( 426.4) ( 426.4) ( 426.4) (426.4) ( 426.4) ( 426.4)Deproriation llbBfwa ( 373-7) ( 566.1) ( 73c 78.6) 91L.8) (I,420 ( 1>32.1) ( 1,696.7 ( 2.0195) 24 2,L.) t2 827 ( ,339) 1Lg6.9)Depro,ietion Reawv. ''66' 91.8 (142.0) ..... 23.7

1. 7it Ast -T;RT.5- 9 233.3 6,6-T 65: ` 1.92'7279tF Asta in Operation 2 66. 4,7511.

Fixel d AhEet 3ttP 5pT62 46,4 lo l7 U 277 1, 7CWrnt AtestSt

Cash arod Temporary leuatlant3 124.5 203.1 95.9 48.2 47.0 h7.6 52.8 43.6 44.7 132.2 51.8 59.97htiertals and SuWlise 20.0 20.5 26.6 27.2 35.1 38.7 47.1 45.3 62.2 63.6 75.0 78.5Accounte Receivable 4 9 85.8 118.2 116.8 140.2 150.4 172.3 175.2 216.4 218.3 251.8 263.8Other Current Aaeets 9.2 9.2 ?.2 9.2 9.2 9.2 ,.2 9.2 9.2 9.2 9.2 9.2

Total Cuorrent ARssta t 5 289.0 I; 231.5 7 427.3 3 3f7 Otise ISOMt 30. 30. ______ 3...:30.. 30-� 30..5 31o.5 30.

LIABna3III2

kurityMre Capital 905.0 1,300.0 1,765.7 1,768.0 2,146.0 2,396.0 3,045.0 3,0510. 3,D84.0 3,047.0 3,288.3 3,311.0

Earned, Suplus 112.8 222.5 222.4 324.2 416.3 515.1 604.6 675.7 782.5 871.0 1,013.0 1.216.114gS1 Reserve 32.7 48.8 60f.3 79.6 99.0 121.0 144.9 172.3 201.9 231.9 263.6 299.2Reserve Instereet on Equity rands Capitalised 55.4 169.1 31.1 46.1 35.9 33.1 63.6 94.5 9d.9 157.9 35.3 28.9

Total Equity 103. 6 3.6 2,022_14 2,7_5_8 3_ _16 3.997_1_170,9.e,1 Gooermnt Contributions - - C0.o 100.0 15(0.0 190.0 119.0 190.0 190.0 190.0 190.0

TolT IMongo-T.e Debt 2,320.8 3,5o6.9 4,239.2 5,084.2 6,146.8 6,812.3 6.839.4 7,903.2 8,724.4 9.123.8 8,9C2.4 8,S26.8C1rrent htiurDtlaa 76.1 125.4 195.1 204.9 229.4 36,4 5 14036 43 5360

Net lAr,-Tw Debt T 7~ L179.3 5317IZ ,. ,. '3N:, 6. , ].o -7 *MSurrentiib38*aFiA itiea of .ong-Tez Debt 76.1 125.4 195.1 204.9 229.4 316.5 353.9 403.6 413.8 523.6 531.0 704.1

Accounts Palable and Accruals 77.2 65.0 57.7 60.0 63.5 64.. 67.5 77. -16.0 79.0 82.2Peviio forT.s1.3z6Ss9 92XJ 63. 6.4. 674.5 1.6' 145,o 142.7 1RI.2Dividos anl Boma Payable 73.3 294.4 120.0 141.6 146.0 170s5 186.9 228.5 23f3.0 23577 g69 254.1

Raees. Reouration 45.9 38.6 -Total Current liabilitios 28. L M5. 6 6 723. 1 5 T 172 5054

TOTAL LtABITlTT 3.642.0 5.477.5 6,575.7 7,646.4 9,299.2 10,413.9 11,260.3 12,522.6 13,536.4 1.1.1 14,140.5 14,0871

Ratio ot long Term Debt to Total Fixed Asets(axeluding Amortisatioy. Reserve) 60.7 63.1 63.1 64.8 65.o 64.5 60.1 62.5 64.2 64.4 62.3 60.2

*y 25. 1973

U~ ~~~~~~~~~~ -

Actual and Forecast Lo7 -Tot Debt o ttemt.ts

(Milton. of Cruseiros)

------- * ACr ------- --- - ---- --- -- -- - ---- -- - ------ --- ----- -- - --- - ------ - --- - -- ------ C ^ .S T -- --- - - ---- - ---- - -------- - ---------- - --- -- -------- --- -- ------ -

Ihr d Do_r 31 17 1972 1973 1974 1975 1976 1977 1475 1980 1961 1962

as eroct, ZI loan la. 211-lE 263.0 297.5 277.5 256.2 233.1 210.0 184.9 156.3 130.1 100.3 68.7 35.3bireito Project, 7JZ oa ino. 403/474-0 355.0 514.0 536.7 517.0 495.7 473.3 449.5 L2:.'4 397.7 369.5 339.7 308.2Porto Colomia Project, 7 LOcn No. 565.. 20.8 75.9 116.2 130.4 132.4 128.3 124.0 .19.5 llh.5 109.3 103.8 97.8&r1*bon Plent o nTramodain ard Pura

Plnt ogtl 7 aid 8. M Lown No. 677-U 36.8 139.3 207.3 376.8 441.0 462.5 471.9 142.8 453.1 442.7 431.5 419.6YIrmbiodo Projoet (above), Joint Fimningt - 24.4 67.9 106.7 133.8 148.5 133.1 117.6 102.1 86.7 71.2 55.7Plarimido Project, bnn.ver Bank - 719.1 11Q.1 114.1 119.1 - 102.7 8c.o 68.0 51.0 34.0 17.0 -

br1abondo Project, kimak - 5.2 5.2 5.2 4.5 3.) 1. - - -!brioido Project, Ibgan OnGratt - 3.7 2.2 .8 - - -Santa Cr, Project-Stop I, AID 57.1 C9.8 54.1: 49.2 43.0 38.6 33.3 2°.0 22.7 17.3 12.0 6.7

te ni, AID 124.3 1V3.1 233.8 226.2 219.1 1'3.' 177.8 161.6 145.4 127.3 113.1 96.99ur.e-GMaRbara Trand.aaon. AID '1.7 77.7 73.2 68.8 6L.3 59.4 55.4 50.9 46.5 42.0 37.6 33.1SZPlies Credit. Spreeber and Schuh - - - - - -4Gas Turbin, 1HE .2 - - - - -Agam Nucler Plant-Part 1, hinkk - 43.0 106.2 336.0 667.0 738.7 73Q.2 689.9 640.6 591.4 542.1 492.8

-part 71, lnk - -k - 38 4 38.4 38.4 31.8 24.6 17.0 8.8 -~~~~~~~~~~~~~~~~~~~~~~~593.2. 2,4%: 7 ,.0 T. 7;7 SI;99 r In75; I;5w2;

nIMM M IlD Propomd Ln - - - 18. 153.t 286.4 397.9 085.2 652.8 686.9 684.6 671.3Itu1bra Project, Paralle lFinancirg - - - 10.2 32.7 90.e 170.5 218.Q 332.7 326.0 296.6 258.5Uani_m for A l Plant - 20.3 20.3 20.3 12.2 4.1 - - -Otb r onatio FProject. - .1 L.6 118.8 423.5 914.5 1,004.8 1,005.6 984.1Other Trania ion Projects _ 2.-7 2 b 1.6 4

Total Foreign Loam 932.3 1,552.7 1,801.0 2,151.1 2,790.6 3.040.0 3,201.5 3,5s2.6 4,012.4 4,071.9 4 085.9 3,957.8

IDCAL WA0StiLoan rf oe 1158

Fi Fot jett we n. 181.1 314.4 16.2 24.6 12.9 . . - - - -?un project 418.8 486.2 463.7 438.9 471.7 381.5 108.0 96.8 84.4 70.7 - -btr.ito Froject (riw loan) 217.6 241.2 59.6 53.7 26.5 - - - -Istreito and Punil Projects (one coon In.) 27.2 32.5 30.9 29.3 27.7 26.0 24.4 22.0 21.I 19.5 17.9 16.3Santa COm Projeat. Stap. I ad 1II (six loos) 116.4 175.2 11.0 10.3 9.6 8.9 8.2 7.6 6.9 6.3 5.5 4.9Forto Co1ila Project (fomr loanm) 170.2 319.5 359.5 323. - - -_- - -Porto Coleba azd Sonta CrSu (one comn lon) 36.0 48.1 54.1 48.7 b3.3 -

ou,imoio Project l114.7 3h3.7 386.' 536.2 603.3 437.2 - - _ _ _ogra Plat (three loan) 3-.' 91' 2.6 84.5 38.1 2.M 1.6 1._ .7 .3 .3 .2

Ninor Project (eight loans) 41.6 130.8 16 L 317.7 r2).1 673.8 682.6 634.7 e86.8 03.9 h43.1 W.7W f,73a 1:1;.f;7 Tr7J3. I5rT T^7M7 rm -ME -73 699.9 +"7 -

Proro.d utor. Loan f.m EEFSUSketreito Project aid idditiorml Tra,iaion - 7.9 60.4 54.4 48.4 42.3 36.2 30.1 24.1 18.0 5.8 5.88rait Tra..eion - 62.< 56.2 49.9 43.6 37.3 31.0 24.7 18.4 5.7 5.7

lletreito-Brasilia Tre0eeion - 49.5 49.4 44.2 39.0 33.8 28.5 23.3 18.1 12.9 2.4 2.4Santa Crun Plant-g II _ 25.2 62.1 58.0 53.8 49.7 45.6 41.4 37.3 33.1 21k.9 24.9Fuon. Plait Unit 7 amd 8 - - 14.4 15.9 14.8 13.6 12.5 11.3 10.2 9.1 6.8 6.8Forto Colomia Pant ai Tranoadion - o.c 70.1 76.6 73.8 68.2 62.4 56.8 51.1 45.3 33.9 34.0Ybrinbondo Plant ad Trandoin - - 301.0 436.1 637.5 801.9 775.2 715.4 655.7 595.9 476.3 476.3Ita1ara Plant ard Tranmiaaion - - 107.4 270.4 680.1 1,143.3 1,660.9 2,187.3 2,501.4 2,918.1 2,965.3 2,760.0otbs. Genwration Projecte - - - - - - 312.2 425.0 661.7 741.8 782.4 782.4OUtr Tranidoniom Projects - 7.8 26.3 25.7 22.8 20.0 17.2 14.4 11.5 8.? 3.1 3.1Otbw Inweeteents - 42a7 382 3 9 29.5 25.1 20.7 16. 3.1

_ ~~~~~~~~~~~79ff.3 1,075.T I S40IZ ;5 64,C11 : T~' 4-,1oTotal ,ocal loan. 1.38B.5 1,954.2 2,438.2 2,933.1 3,356.2 3,772.3 3,637.9 4.320.6 4,712.0 5.051.9 4,776.5 4,569.0

TorTAL 2L 3Wi OUT 2,320.8 3.506.9 4,239.2 5,064.2 6,146.8 6,812.3 6,839.4 7,903.2 8,724.4 9,123.8 8,862.4 8,526.8

bY 25, 1973

ctT7Ac - CE:TFAI6 EIOIflzAS. S.A.

Forecast A-crtic,tion Statemnto, 1973-1982

(Millio. of Cruzeiros)

Aowrtitation Totklperiod

Year edSing Decber 31 (years) i 197 5 1276 1977 1978 1979 1 980 1981 1982 1973-1982POlMIal tOAXB

Furs FroJect, IBRD Loan No. 211-BR 20 20.1 21.2 22.4 23.8 25.2 26.6 28.2 29,8 31.5 33.4 26 .2matreito Project, Tnd3 loans No. 403/474-BR 20 18.9 20,1 21.2 22.4 23.8 25.1 26,6 28.2 29.8 31. 6 27, 7Pbrto Colomia Project, IBRD loan llo. 565-nR 20 - - 3.8 4.0 4.3 4.6 4.9 5.2 5.6 6.0 38.4NariL.ondo Plant nd Transmission nd PunrsPlant Units 7 nd 8, IBRD ioan No. 677-BR 23 -- - - 4.3 9.1 9.7 10.4 fl.2 11.9 56.6Ybritondo Project, Joint Financing 10 - 1.5 i.6 3.1 15.4 i5.4 15.5 15.5 15.5 15.5 99.0NarxIbodo Project, Hanover Bank 7 _ _ 17.0 17.0 17.0 17.0 17.0 17.0 17.0 119.0tEritondo Project, tisbank - _ 7 1.5 1.5 1.5 _ _ _ 5.2ariondo Project, Morgan Guarantee 3s 1.5 1.5 .8 - - _ - - - - 3.8Santa Crz Project-Stage I, AID 17 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 5.3 53.0Santa Cruz Project-Stage II, AID 15 8.1 16.2 16.2 16.2 16.2 16.2 16.2 16.2 16, 16.1 153.7Purnas-uaunabara Tranasission, AID 22 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.5 4.4 44.9ngrsa Nuclear Plant-Part }, hibaak 15 - - - - - 49.3 49.3 49.3 49.3 49.3 246.5Angrn Nuclear Plant-Part II, Kxitbank 5 - - - - - 6.7 7.1 7.6 8.2 8.8pro- r 70._3 76 97M-5 .97.83 117 .5 1319.0 131. 3

ItjiiMIi9C68j IMtD Propoed Loan 23 -- - - 6.1 13.0 i4.o 33.1Ituiaira Project, Parallel Financing 10 - - - . _ - 43.1 43.1 43.1 43.1 172.4Uranium for AP Plant 3 - 8.1 8.1 4.i - - 20.3Otber Generation frojects 15 - - 67.0 6-cOtber Tranaieaioc Projects -

Total Anrtlzation on Foreign iLana 58.4 70.3 76.5 97.8 117.5 169.4 235.5 242.3 250.1 323.4 1,551.2CAL. LOAJ'SEXttj loans Piou ELETBSORAS

runas Plant, Unite 7 and d 10 - 1.6 1.6 1.6 - - - - - - h Pushl Project i5 22.5 24.8 27.3 30.1 33.2 11.2 12.4 13.7 15.1 1 19C.3NEtreito Project 10/15 13.9 5.9 6.o 3.1 - _ - - - - 23.9Nstreito and Funil Projects 20 1.6 1.6 i.6 1.6 1.6 1.6 1.6 1.6 1.6 1.7 1l.1Santa Crun Project 10/15/20 16.8 .7 .7 .7 .7 7 7 7 7 7 23.1Porto Cotoctie Project 10 - 36.o 36.0 - - _ _ _ _ _ 72.IPorto Colomia and Santa Cron Projects 10 - 5.4 5.4 5.4 * _ _ - - - 16.2Maribondo Project 15 _- - 40.2 31.3 - - - _ _ 71.5Angra Project 15 - - - 35.9 47.9 47.9 47.9 47.9 - 227.5Minor Projects lo/ni/155 10.4 10.4 6 .4 .4 .4 .4 - -

60.5T W&. 4 8 9 . 6 103.1 1" 635 0ProI, e sad Pature d oana from RIZf3K3BtASatoetto ProJect ad Adiiitional Transmission 10/15 1.2 6.o 6.0 6.1 6.i 6,1 6.1 6.1 6.1 - 49.6Brasilia Transmission 10 .6 6.3 6.3 6.3 6.3 6.3 6.3 6.3 6.3 _ 51.CRatreito-Brasilia Tranedsion 10 2.8 5.2 5.2 5.2 5.2 5.2 5.2 5.2 5.2 - 44.4Santa Crs Plat-Stage I1 15 - 4.1 4.i 4.1 4.1 4.2 4.2 4.2 4.2 _-:2FtUas Plant unit 7 and 8 15 - 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.2 9Porto Colobia Plant an Tranaialon 10/15 - 5.7 5.7 5.7 5.7 5.7 5.7 5.7 5.7 - 15.6Mtwcondo Plant nd Transmislion 10/15 - 3.7 3.8 6.3 59.8 59.8 59.8 59.8 59.8 - 312 8Ituobiare Plant and Trcauasiton 10/15 - - - 7.1 9,4 11.6 112.5 205.2 346.2Otber Generation Projects 4 1

Other Transalasion ProJects 10 .7 1.9 2.8 2.8 2.8 2.8 2.8 2.8 2,8 _ 22.2Other Inveetants 10 1 4.4 4.4 4.4 4.4 4.4 4,4 4.4 4.4 - 16.5- 34.-9 102.7 105.0 7 205.2 950 c

Total Amortization on local lon 67.1 124.8 128.4 131.6 199.0 164.5 168.0 171.5 273.5 207.6 1.636,7

TOTAL AcDrTIZmTIoNs 125.5 195.1 204.9 229.4 316.5 353.9 403.5 413.8 523.6 531.0 3,29-1

'rI 7PI AS -C t!'{oL'S tERLT--7A£ 1, 8 .A .

Foreeest r.terest Pnynots Stateents, 1973-1982

(Millions of Cru-eiron)

Rate of TotalYear Ending Decemer 31 Interest 1973 1974 1975 1976 1977 1978 l919 1980 1981 1982 1973-1982

FOR7GN IOANS.isting Lnan

Furms Project, I3RD Lsan Rn. 211-Bf 5 3/4 18.2 17.C 15.6 14.2 12.7 11.1 9.4 7.6 5.7 3.6 115.1Ratreito ProJect, M53D losns So. 403/474-BR arious 30.6 30.6 29.4 28.2 26.9 25.5 24.0 22.5 20,8 19.1 257.6Po'rto Colbia Project, IBRD Loan n.. 565-BR 6 1/2 6.5 8.1 8.6 8.s 8.3 8.0 7.7 7.4 7.0 6.7 76.8hri3sondo Plant asg Transmission and PuFa.

Plant Units 7 oai 8, IIRD loan It. 677-BR 7 14.4 19.6 27.0 31.8 32.9 32.Q 32.2 31.5 30.8 30.0 283.1Naritondo Project, Joint Financing 7 1/2 4.1 7.0 9.2 10.7 10.9 0., 8.5 7.4 6.2 5.1 78.8Maritbondo Project, Hamover Bank 7 1/4 8.6 8.6 8.6 7.7 6.5 5.2 4.o 2.8 1.5 .3 53.8taritondo Project, wiak 6 .3 .3 .3 .2 .1 .1 - - - - 1.3Marimb-ndo Project, Irg Guarantee 6 1/2 .2 .1 - - - - - - - .3Rants Cr ProJect-Stage I, AID 5 3/4 3.4 3.1 2.8 2.4 2.1 1.a 1.5 1.2 .9 .6 19.8Santa Cras Projeet-Stage I, AID 6 7.3 14.0 13.3 i2.4 11.4 io.4 9.5 8.5 7.5 6.5 100.8fatrna-G.uab&ma Trmaai-lso., AID 51/2 4.2 4.o 3.7 3.5 3.2 3.0 2.8 2.5 2.3 2.0 31.2Angia Nuclear Plaut-Part T, -taank 7 7.3 16.o 33.9 50.8 51.7 51.7 48.3 44.8 41.4 37.9 383.8AngW. Nhuclear Pant-PNt II, Rxti nk 7 - - 1.5 2.7 2.7 2.6 2.1 1.6 1.1 .5 i4.8

73371 * 37 53.9 772 IF 169. 4 lSO.O 7373 1515 1.33 ; 1,47

It V rs i6e t, IBIRD Proposed Loon 7 1/4 - 8.5 10.9 19.6 27.5 37.2 45.5 49.0 50.0 49.4 297.6It,biara P-r.jet, Parallel Firnacing 7 1/2 _ 2.5 3.7 6.5 11.3 16.8 22.5 25.0 24.3 21.7 134.3Uranina for Angra Plent 61/4 - 1.3 1.3 1.1 .7 .1 - - 4.5Other Generation Projects 7 - - 5.0 6.5 10.5 22.7 48.5 67.4 70.6 70.9 302.1Other Transmission Projects 7 1/4 -.- _ _ 5 0 . 7,5 18 11.13 5797

_ 11. 33.9 6 777g 1172 173. 790.f

Total Inter.t

Peanta on Foreign Loans 105.1 139.4 173.5 207.0 220.0 239.8 267.2 286.8 289.0 285.6 2,213.h

LOCAI1. LtllExisting Loa fr 7om

FamesuPlant, Units 7 Ma 5 11 - 1.7 1.5 1.4 - - - 4.6Funil Pnoject 10 1/2 50.6 48.2 45.5 42.6 39.4 12.3 10.2 8.9 7.4 - 264.1

streito Project 10 1/2 - 1 25.2 6.3 5.7 2.8 - - - - - - 40.0REareito and Pono Projects 8 2.6 2.4 2.3 2.' 2.0 1.9 1.8 1.6 1.5 1.4 19.7Santa CGra Project 8 - 11 17.7 .5 .5 .4 .4 .4 .4 .3 .3 .3 21.2Fort. Colombia ProJect 11 - 38.1 34.1 - _- - - - 72.2Psrto ulobia ad SRut. Crrs Projects 11 - 5.7 5.1 4.5 - _ _ _ _ _ 15.3Pbrid,ondo Project 11 - - - 64.7 46.8 - - - - 111.5Angre Project u1 - - - - 58.0 73.1 67.8 62.6 57.3 48.7 367.5iMnor Projects 6-7-10 1/2-11 3.9 7.5 7.7 3.5 .1 .1 .1 - _ - 22.9

Guarantee Charge - 3.5 2.7 2.5 2.2 2.0 1.8 1.5 L 1.0 .7 19.21037-75 T13-1 TX-.,-) 1247 -1497 -8 3.67.5 11.1 958.2

Proosed F^ture loans io EZTIRRASstreito Project nd Additional TransmIssion 11 1.2 6.4 5.7 5.1 4.4 3.7 3.1 2.4 1.7 .6 34.3

Brasilia Transmision 1U .6 6.6 5.9 5.2 4.5 3.9 3.1 2.4 1.8 .6 34.6Estreito-Brasilia Transmission 11 3.9 5.2 4.6 4.1 3.5 2.9 2.3 1.8 1.2 .3 29.8Santa Cra Plant-Stage II 11 - 6.7 6., 5.8 5.3 4.8 4.4 3.9 3.5 2.7 43.3Furnas Plant Units 7 and 8 11 - 1.7 1.7 i.6 1.4 1.3 1.2 1.1 1.0 .8 11.8PTrto Colombia Plant and Transmission 1 8.1 8.8 8.5 7.8 7.2 6.5 5.9 5.2 3.7 61.7Harimbondo Plant szd Transmission 1 - 3.9 3.5 5.9 87.6 83.5 76.9 70.3 63.8 52.4 447,8Ituhbira Plant nd Troenmision U - - - .4 7.5 9.1 10.5 169.7 304.0 501.2Other Generation Projects 11 - - - - - - - - - 86.1 86.1Other Trnstlssina Projects 11 1.0 2.1 2.9 2.5 2.2 1.9 1.6 1.2 .9 .3 16.6Other Investento U1 2.0 4. 4. 3 5 3.1 2.6 2.1 i.6 1.1 .4 24.9

45.2 42.2 120.2 119.3 110.3 101.1 451.91292.1

Total Interest Payments n Local Loans 112.2 158.3 148.2 166.5 268.9 207.9 192.1 175.8 317.4 503.0 2,250.3

TOTAL ntrftT PAYMOTS 217.3 297.7 321.7 373.5 488.9 447.7 459.3 462.6 606.4 788.6 4,463.7

ANNEX 20

ITUMBIARA HXDROELECTRIC POWER PROJECT


BRAZIL

CONVERSION OF FOREIGN COSTS INTO LOCAL CURRENCY

1. In Brazil, the financial performance of a power company dependsto a large extent on the mechanism prescribed by law for converting thecost of foreign inputs into local currency and, thereafter, for adjustingthe value of these - and of the local inputs - by monetary correction co-efficients which are meant to maintain the value of fixed assets on a realrather than on a current price basis.

2. For electric power companies, the law states that the conversionof the value of imported goods into local currency will be made as follows:

(a) during the grace period, if any, at the rate of exchange inforce for remittance abroad on the date of the contract; and

(b) after the grace period, at the rate of exchange in. force atthe time of the first payment abroad.

3. From the above it follows that FURNAS, Which has several projectsin progress, uses several different rates of exchange to record the valueof its assets. This is very important because the allowable rate of returnis calculated on the amount of fixed assets thus valued.

4. In the financial projections presented in annexes 10 to 15,foreign costs have been converted into the local currency at the followingrates of exchange:

(a) Fiscal year 1971 at Cr$4 95 per US$1;

(b) Fiscal years 1972 through 1982 for all transactions otherthan construction costs and related debt, depreciation, a-mortization and interest at Cr$5.635 per US$1; and

(c) Fiscal years 1972 through 1982 for construction costs andrelated debt, depreciation, amortization and interest, asfollows:

- Estreito generation and Brasilia transmission projectsat Cr$6.123 per US$1;

- Porto Colombia plant and transmission project atCr$6.106 per US$1;

- Furnas generation and Marimbondo plant and transmissionprojects at Cr$5.953 per US$1;

- Santa Cruz plant, stage II, the Angra plant, the Itum-biara plant and transmission, and other generation andtransmission projects at Cr$5.635 per US$1.

ITUYBIARA HuOrLSTPS C PNiER sJUCT

FURNAS - CENTRAIS ELETRICAS SA. (FURNAS)BRAZIL

ORGAN11ATION CHART

L STOCKHOLOER AADE ALY |L | YA CUa BO5ARO OF OIRECTONS

O DGAIH ST 'AIE OOIC MA

DEPA RTMENT ORGAIIZATION ANO E STAMENT RETONSS STANT ArTMEYDEPARTMENT DEPAIITMENT [D.EPPTAN

EASTCONSRUCIO N OPERACTRICALCT R DIRECTOR

WEST CONSTRUCTI~~~~~~~~PO DUTONLNJ~ DIN TAINcf AC

RINTENOENTUPRNTNEN TASPRATO

FIL RI a

RUEDPIO r -1 ruTF9S LETEINFFCE NT

= ooNS ~~~~~~CONSTRUCTIONPOEINURA

PRORAMNI , AM _INISTR

TECHICA REA ESTATEX CMN S 1L H

COERNTROL NT SUPERINTENOIrr RTEDENT_

BUILDINGS ~ ~ ~ ~~FEL

EAST _CIONSTRUCTII N ELECTRICAL HUMINA CIA

CENTRAL L ELLACTRICALIMBON L AIITR ATIONE GEEALCUTN

NUCEARENGINEERINARSUPPRTS PL A NUITNG

CENGITRANEERIN

MECHAHICAL ~ ~ ~ ~ EECRCA PRONE

PROGRAIAItlNG _ -~~~~~~~~~~~~~~~LAT ADMINISTRATION REA ESTATEN O

FTELD C F6CCH NIC A E IN EO UERING

CONTREADOS _I OPERATIONSD I REALCESTATETHIIGINEERMAL POWE

FIELD CONSTRUCTION ENGINEERING IW A I

SANTA CNUZ IESOURCES~~~~~~~~~~~~~~~~~~~~~~~AMNITATO 'PRII'lIII

LNECTHLNICAL

STUDIES F ECOSTNTRSO ENGINEERINGBAUDNEW PR S COAS T P

L ELECTRD-TECHNICALEHNICASTDED NUCESTMNT ENGINEERINGSUPRFIED CNETUnN FROECHANICAoLoB- b

54- 52' 5O'0°4 46- 0t 44t -/ , 42-

BRAZILPOWER SYSTEM B A HIA

Southeast Region and Bordering States B H

Power stotons, transm soion lhnes, and subStations FEDERAL Cin plonoing, under construction and in operation: Ilia DlSTRIC 16

Project

500 KV 500 KV r4600KV 345 KV

- 345 KV - … 138KV

AA Hydroelectric plonts CQ* Thermal plants/it Nuclear plont RAND

SubstationsRivers

. -5 Southeast Region boandary M I N A S G E R A I S1 0 State boundaries

International boundary

18' MILES yX >, §;E ARIAS 18,

5 50 lOS ISO 200 250 ITUMBIAR

/2|AU ERMFLHA \ _t

MATO ROSS SO . , sVOLT JAGUARA HORIZONTE A} , 0

20- I LHA SOLT EI RA0 N ,</<'ritoria

SAO CACH-D /~~~~~~~~~~~~~~~~~~~~~~~5 QiTAPAMIRIM

UTlINGA I AHD N RACAQUAK ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~CC.

2_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ (1-11--i s O> = S > \ 9 t S / °/ACODECALDAS f

22' S A 0 P A U t 0 l\ATO CtSMON22S-

ARA MP NA , / ' OCA LES'

MOtt Pt PARTI UANABARA

'~~BRAZIL

24-

i"'l g '| n 0X 7he ZAnhzr w whoXw Tw ehs msp da nw O . 5) ;& g

...... /t Ocean .0

52~~~~ oo~~~50 4e 44' 42'

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