Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 1317 3

PROJECT COMPLETION REPORT

BRAZILELETROBRAS I & II POWER DISTRIBUTION PROJECTS

LOANS 2138-BR & 2364-BR

JUNE 17, 1994

Energy and Industry Operations DivisionCountry Department ILatin America and the Caribbean Regional Office

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

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CURRENCY EOUIVALENTS

Currency Unit - Brazilian Cruzeiro (Cr$)Cr$1.00 - 100 centavos

US$1.00 = Cr$92.44 (December 1981)US$1.00 - Cr$328.47 (December 1982)

MEASURES AND EOUIVALENTS

kW (kilowatt) - 1,000 W (Watts)MW (Megawatt) - 1,000 kWkWh (kilowatt hour) - 1,000 Wh (Watt hour)

MWh (Megawatt hour) - 1,000 kilowatt hoursGWh (Gigawatt hour) - 1,000,000 kWhs

FISCAL YEAR

January 1 to December 31

GLOSSARY TO ACRONYMS

CAEEB - Companhia Auxiliar de Empresas Zletricao Brasiloira.CEAL - Companhia Eletrica do AlagoasCELPA - Companhia Eletrica de AlagoasCELPE - Companhia do Eletricidado do Pernaibuco

CEMAR - Centrais Eletricas do Maranhao

CEPISA - Contrais Eletricac do Piaui

CERON - Cntrais Eletricas de Rondonia

COELCE - Companhia de Eletricidade do Ceara

COSERN - Companhia do Sorvicos Iletricos do Rio Grande do NorteDFC - Development Finance CompanyDNAEE - Departamento Nacional do Aguas * Energia ZletricaELETROBRAS - Contrain Eletricas Brasileiras

ELETRONORTE - Centrais Eletricas do Norte do Brasil

ELETROPAULO - Eletricidade de Sao Paulo

ENERSUL - Empresa de Energia Zletrica de Mato Grosso do Sul

PSRP - Power Sector Rehabilitation Plan

LIGHT - LIGHT-Servicos de EletricidadeSEPLAN - Secretaria do Planejamento da Presidencia da Republica

SEST - Secretaria de Controle de Empresa. Estatais

FOR OFFICIAL USE ONLY

THE WORLD BANKWashington, D.C. 20433

U.S.A.

Office of Director-GeneralOperations Evaluation

June 17, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on BrazilEletrobras I & II Power Distribution Projects(Loans 2138-BR & 2364-BR)

Attached is the "Project Completion Report on Brazil - Eletrobras I& II Power Distribution Projects (Loans 2138-BR and 2364-BR)" prepared by theLatin America and the Caribbean Regional Office. No Part II was prepared by theBorrower.

The two loans were channelled through Eletrobras, the federal powerholding company, to twelve of Brazil's local utilities for the expansion andreinforcement of their sub-transmission and distribution systems. The physicalobjectives of the projects were essentially achieved, albeit with significantdelays (four and three years respectively) caused by insufficient counterpartfunds. However, the projects failed to achieve their two main institutional andpolicy objectives: (i) Eletrobras could not be transformed into a powerdevelopment finance company capable of appraising and supervising sub-projectsin accordance with Bank standards, as its role was weakened by the shift infederal-state relations provided under the new (1988) Constitution; and (ii)sector finances did not improve as expected and instead deteriorated sharplyduring project implementation, as tariffs were allowed by the Government todecrease in real terms, a trend which has not been reversed to this day. Indeed,this very issue led the Bank to gradually withdraw from the sector (the lastpower loan to be made effective was approved in 1986; another loan approved in1990 was subsequently withdrawn).

The project concept was innovative and reasonable given circumstancesat the time of appraisal. However, the Bank's performance during implementationwas inconsistent as it did not seek remedies and indeed continued to lend for atime to the sector in spite of the dramatic worsening of sector finances and ofthe Government's repeated unwillingness to meet a series of commitments on tariffpolicy.

Accordingly, the project is rated marginally unsatisfactory overall,its institutional impact negligible and its sustainability unlikely, given thecurrent persistence of the sector's serious problems. The Project CompletionReport is thorough and informative. An audit may be carried out in the future.

Robert Picciottoby H. Eberhard K6pp

Attachment

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

FOR OFFICIAL USE ONLYPROJECT COMPLETION REPORT

BRAZILCENTRAIS ELETRICAS BRASILEIRAS, S.A. (ELETROBRAS);

ELETROBRAS I & II POWER DISTRIBUTION PROJECTS

LOANS 2138-BR & 2364-BR

TABLE OF CONTENTS

PREFACE (i)

EVALUATION SUMMARY .(i)

PART I: MAIN FINDINGS & LESSONS (Prepared by the Bank) .1

1. Project Identity .1Concept .1

2. Sector Background. 2

Bank Power Lending. 2Bank Lending for Brazil Power in the 1980. 2

Organization. 3Regulation and Planning. 3

3. Preparation and Appraisal: ELETROBRAS I. 4Dovelopment Objectives. 4Timetable. 4Description, Objectives, and Coat .S

Appraisal: Project Issues. 5Appraisal: Sector Issues .8

Re-appraisal, Procurement, Risks, Etc. 9

4. Preparation and Appraisal: ELETROBRAS II .. 10

Development Objectives .. 10

Bank Objectives, Sector and Non-sector .10

Timetable .. 10Description, Objectives, and Cost .. 11Appraisal: Sector Issues .. 11

Procurement and Risks, Etc .. 12

5. Implementation: ELETROBRAS I & II .13

ELETROBRAS I: Cost, Changes, and Timetable .13

ELETROBRAS II: Cost, Changes, and Timetable .. 15

Procurement .. 16

Project Unit .. 17

6. Results of the Project. 18Physical and Institutional Objectives .. 18Zconomic Rate of Return .. 18

7. Financial Performance .19

Bank Approach to Financial Supervision .19

Sector Finances .19

Policy Context & Institutional Context .21

Justification for Bank Lending .21

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

Table of Contents (Continued)

ELETROBRAS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23ELETROBRAS I: Beneficiary Financial Performance . . . . . . . . 24ELETROBRAS II: Beneficiary Financial Performance . . . . . . . . 24

8. Performance of ELETROBRAS, the Bank, and the Government . . . . . 27ELETROBRAS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Bank ... . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Federal Government ... . . . . . . . . . . . . . . . . . . . . 28

9. Lessons to be Learned ... . . . . . . . . . . . . . . . . . . . 28Project Lessons . . . . . . . . . . . . . . . . . . . . . . . . 28Sector Lessons ... . . . . . . . ..... . . . . . . . . . . 28

Annex 1: Policy Context and Bank General Lending Policy, 1982-1991 30

Annex 2: Tariff Legislation and Regulation in the 1970s . . . . . . . 33

PART II. COMMENTS OF EXECUTING AGENCIES . . . . . . . . . . . . . . . . . 34

PART III. STATISTICAL TABLES

Table I : Bank Lending to ELETROBRAS . . . . . . . . . . . . . . . . 35Table 2.1: ELETROBRAS I: Project Timetable . . . . . . . . . . . . . 37Table 2.2: ELETROBRAS II: Project Timetable . . . . . . . . . . . . 38Table 3.1: ELETROBRAS I: Actual & Forecast Project Cost . . . . . . 39Table 3.2: ELETROBRAS II: Actual & Forecast Project Cost . . . . . . 40Table 4.1: ELETROBRAS I: Actual & Forecast Disbursement Timetable 41Table 4.2: ELETROBRAS II: Actual & Forecast Disbursement Timetable 42Table 5.1: ELETROBRAS I: Actual & Forecast Impelemtation Timetable . 43Table 5.2: ELETROBRAS II: Actual & Forecast Implementation Timetable 44

Table 6 : ELETROBRAS I: Actual & Forecast Expenditure by Category . 45Table 7 : Zconomic Rate of Return ... . . . . . . . ..... . . 46Table 8.1: Actual & Forecast Sector Results, 1981-1986 . . . . . . . 47Table 8.2: Actual & Forecast Sector Results, 1983-1987 . . . . . . . 49Table 8.3: Actual & Forecast Sector Results, 1986-1987 . . . . . . . 51Table 9.1: ELETROBRAS I: Beneficiary Financial Results . . . . . . . 53Table 9.2: ELETROBRAS II: Beneficiary Financial Results . . . . . . . 58Table 10.1: Loan 2138-BR: Compliance with Loan Conditions . . . . . . 64

Table 10.2: Loan 2364-BR: Compliance with Loan Conditions . . . . . . 66

Table 11: Use of Bank Resources . . . . . . . . . . . . . . . . . . . 68

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PROJECT COMPLETION REPORT

BRAZILCENTRAIS ELETRICAS BRASILEIRAS, S.A. (ELETROBRAS);

ELETROBRAS I & II POWER DISTRIBUTION PROJECTSLOANS 2138-BR & 2364-BR

PREFACE

This i the Project Completion Report (PCR) for the ELETROBRAS I &II Power Distribution Projects, for which Loans 2138-BR (US$182.7 million) and2364-BR (US$250.6 million) were approved on, respectively, May 11, 1982 andDecember 8, 1983. The borrower was Centrais Eletricas Braoileiras, SA (ELETRO-BRAS), the public-sector corporation which serves as holding company for theFederal power utilities and which performs sector-wide planning and financialfunctions. The beneficiaries were operating power utilities.

The loans helped to finance works and equipment to expand/reinforcethe sub-transmission/distribution systems of the beneficiaries. With the agree-ment of the Bank, the volume of works completed under the first project was sub-stantially increased and that of the second project marginally reduced. Loan2138-BR was closed on December 30, 1989 (two years late); and the last disburse-ment was on July 25, 1990. Loan 2364-BR was closed on December 31, 1991 (two andone half years late); and the last disbursement was on May 28, 1992.

The Energy and Industry Operations Division, Country Department I(Brazil, Venezuela, and Peru) prepared this PCR based on, inter Al": (i) finalproject reports prepared by ELETROBRAS; (ii) Bank sources, including the loandocuments, supervision reports, and Bank-borrower correspondence; and (iii)interviews with Bank and borrower staff. Preparation of this PCR began inOctober 1992.

Copies of the draft report (Parts I and III) were sent to theborrower, the Ministry of Mines and Energy, the Ministry of Planning, and theDepartmento Nacional de Aguas e Energia Eletrica; but no comments were received.If comments are received in the near future, they will be incorporated into thePCR as Part II.

PROJECT COMPLETION REPORT

BRAZILCENTRAIS ELETRICAS BRASILEIRAS, S .A. (ELETROBRAS)

ELETROBRAS I & II POWER DISTRIBUTION PROJECTSLOANS 2138-BR & 2364-BR

EVALUATION SUMMARY

Concept. Loans 2138-BR (US$182.7 million; 1982) and 2364-BR(US$250.6 million; 1983) helped to finance companion distribution projects,hereafter referred to as ELETROBRAS I and ELETROBRAS II. The project. consistedof sub-projects (sub-transmission and distribution works) of twelve operatingutilities. The projects were executed between 1983 and 1991.

The borrower was Centrais Eletricas Brasileiras, SA, the Federalholding company which has sector-wide planning and financial functions. Theborrower relent the proceeds of the loans to two groups of beneficiaries(numbering 5 and 7, respectively). All but two of the beneficiaries were state-owned.

The project objectives were to: (a) meet efficiently market needs ofthe beneficiaries; (b) remedy unsatisfactory system conditions; (c) strengthenthe organizations of the beneficiaries; and (d) equip ELETROBRAS with thecapability for appraising and supervising projects in accordance with standardBank procedures (para. 3.04). It was expected that ELZTROBRAS would play therole of a development finance company (DFC).

Under the projects, physical goals were met, albeit with lengthydelay; procurement procedures of the beneficiaries were improved; but ELZTROBRASwas not transformed into a DFC (para. 6.01). Based on actual tariffs and costs,the economic returns of the investment programs of the beneficiaries ranged fromzero to less than zero (para. 6.02).

Actual and Forecast Cost and Proiect Timetable. Actual expendituresof ELETROBRAS I amounted to US$572.2 million, 22.1% less than the appraisalforecast (US$736.6 million); ELETROBRAS II cost US$679.0 million, 13.5% less thanthe appraisal forecast (USS785.0 million). The reduced cost of ELETROBRAS I wasdue to lower-than-expected unit costs and the beneficial impact of internationalcompetitive bidding (ICB). ELETROBRAS did not provide unit cost data forZLETROBRAS II, but it in likely that unit costs were lower than expected. Thevolume of works completed under ELETROBRAS I were larger than anticipated; thevolume of works completed under ZLETROBRAS II was marginally lower thananticipated (paras. 5.05 and 5.11). The Bank agreed to these changes.ZLETROBRAS I was completed in 1990, four years late; ELETROBRAS II was complatedin 1991, three years late. Due to differences in the volumes of completed andexpected projects, longer implementation periods, and lower unit costs, theactual costs are not fully comparable with the costs anticipated at appraisal(paras. 5.02 and 5.09).

Project delay had several sources: (i) investment curtailmentsmandated by a Federal planning agency in the early years of implementation (para.5.06); (ii) incomplete understanding of ICB by the agency charged with theprocurement function and poor coordination of the procurement effort among the

different beneficiaries (paras. 5.13-5.14); and (iii) continuing financialconstraints on the part of the beneficiaries due to low tariffs, negative netinternal cash generation, and inadequate levels of funding from other sources,including equity contribution from state government (paras. 7.02-7.05 and 7.14-7.16). Of the sourceu of delay, financial constraint was the most important.

Prolect Issues. During the appraisal of ELETROBRAS I, the majorinstitutional goal of the Bank was to transform ELETROBRAS, with its sector-wideaccess to technical and human resources, from being another Governmentplanning/financial agency into a transmission belt for the diffusion of advice,managerial talent, and high technical/financial standards -- the primary object

being to improve the operations of the smaller, weaker utilities (para. 1.03).Inherent to the DFC concept was the power to discipline the operating companiesby, if necessary, withholding financial resources. The Bank devoted considerableeffort to training borrower staff in appraisal and supervision procedures; andunsuccessfully urged ELETROBRAS to create a formal project unit on its table of

organization (paras. 3.08-3.14). Given the paramount role of the FederalGovernment in sector decision-making and the abundance of able and experiencedstaff at ELETROBRAS, such transformation was a feasible objective prior to theadoption of the 1988 Constitution (para. 8.03).

Bank training efforts proved unavailing because, in the finalanalysis, the operating companies answered to the owners, the state governments,not ELETROBRAS, which lacked the means to discipline the power companies. For

ELETROBRAS to suspend disbursements to the state power companies was not

politically feasible, especially in circumstances of Constitutional change(increasing the autonomy of the states and decreasing the authority of theFederal Government and its agencies). The state companies were aware of theirpolitical advantage and were prepared to use it (para. 5.17). Also underminingthe authority of ELETROBRAS was the worsening state of sector finances -- theresult of poor Federal tariff regulation.

Sector Issues. During most of the 1970s, the revenue covenants of

loan agreements had relied successfully on fair interpretation of tarifflegislation to provide its power borrowers with adequate levels of revenue, i.e.,an annual return of 10-12% on annually revalued remunerable assets. A new, morerestrictive regulatory regime began to prevail at the end of the decade; and

thereafter, the state of sector finances became a constant source of worry to theBank (paras. 2.05-2.07; Annex II).

In 1981, 1983, and 1986, the Bank obtained agreement from the FederalGovernment to three successive plans for the rehabilitation of sector finances

based on inter alia, higher tariff levels. The plans called for small tariff

increases in their first years followed by progressively larger increases in thesubsequent years; hence, they deferred to the future the target date when thesector would earn the minimum legal rate of return: 10%. In connection with the1981 plan, the target date was 1986. When the Federal Government did notimplement adequately the first plan, the Bank agreed to a second plan (1983) witha target date of 1989 for earning 10%. When the Federal Government did notimplement adequately the second plan, the Bank agreed to a third plan (1986) witha target date for earning 10% after 1989. As long as the Government was makingprogress toward improving the financial situation of the sector, the Bank

promised not to enforce the revenue covenants of existing loan agreements. By

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agreeing to these plans, the Bank was making a considerable concession to helpthe Brazilians (paras. 7.02-7.05).

During the period 1981-1986, in addition to sector objectives, Banklending supported non-sector objectives. For example, in 1983, Loan 2364-BR waspart of a larger lending package demonstrating the Bank's faith in thecreditworthiness of Brazil. This demonstration was intended to calm the fearsof foreign lenders who were badly shaken by the debt payment crisis of Mexico in1982. In 1986, Loan 2720-BR (USS500 million), a sector adjustment loansupporting a plan for sector financial rehabilitation, was part of a largerlending package reinforcing the global economic strategy of the first civilianpresident in twenty years (Mr. Jose Sarney -- paras. 7.10-7.13 and Annex I).

Throughout the decade, the continuing justification for power lendingon sector grounds was that, given the importance of the electric power sector tothe development of Brazil, it would be more useful to help the Brazilians toformulate and implement a credible plan of tariff and financial recovery than tosuspend disbursements or to stop the processing and approval of new loans. In1987-1989, instead of restoring sector finances, the civilian Administration,like its military predecessors, focused on a shifting group of short-termpolitical/macroeconomic goals and other strategic objectives.

In these circumstances, a measure of caution, even ambivalence, beganto be reflected in Bank dealings with Brazil. For the sake of flexibility anddialogue with the Federal Government, the Bank continued to disburse fromexisting loans, notwithstanding the declining state of sector finances, but wouldnot complete the processing for additional power loans due to disagreement ontariff levels and deteriorating economic conditions. By not sending a clear andconsistent message to the Federal Government, the inherent contradictions of thisapproach tended to undermine Bank efforts to influence sector tariff policy. In1990, the Bank approved its last power loan to Brazil (3227-BR; US$365 million);and then withdrew the loan in 1992, as the agreement remained unsigned becausethe Government declined to raise sector tariffs to levels specified as acondition for effectiveness (para. 8.04).

Lessons to be Learned. This project has five lessons: (a) Thelower-than-expected unit costs for materials and equipment demonstrate theusefulness of ICB. (b) In the event of inexperience on the part of beneficiarieswith Bank-approved procurement procedures, the Bank should, as standard practice,seek appointment of an experienced procurement co-ordinator by the borrower,distribution of a procurement manual based on Bank-approved procurementprocedures, and appropriate training for beneficiary personnel. (c) The loanagreements should have included a mechanism to re-allocate loan proceeds from onebeneficiary to another, as their needs and performance merited (para. 9.01).(d) Zatablishing an autonomous regulatory agency is a necessary first step towardinsulating the power sector from short-run political or economic considerations(para. 9.02). (e) It seems clear that lending in circumstances of continuingfinancial deterioration, as occurred between 1981 and 1986, sends the borrowerthe wrong message and leads to a significant risk that agreements for financialrehabilitation will not be observed. The Bank withdrawal of Loan 3227-BR, afterwaiting almost two years for signature and the tariff increases required foreffectiveness, appears to be the right way to maintain the credibility of theBank (para. 9.05).

PROJECT COMPLETION REPORT

BRAZIL

CENTRAIS ELETRICAS BRASILEIRAS, SA (ELETROBRAS)ELETROBRAS I & II POWER DISTRIBUTION PROJECTS

LOANS 2138-BR & 2364-BR

PART I: MAIN FINDINGS AND LESSONS (PREPARED BY THE BANK)

1. Proiect Identity

Namaes ELETROBRAS I & II Power Distribution Projects

Borrower : Centrais Eletricas Branileiras, SA (ELETROBRAS)Loan Numbers 2138-BR & 2364-BR

Beneficiaries : (i) 2138-BR: CELPA, COELCE, CELPE, COSERN, ENERSULLI(ii) 2364-BR: CEAL, CEMAR, CEPISA, CERON, ELETROPAULO, LIGHT,

and ELETRONORTE (distribution system for city of

Manaus )/Loan Amounts e (i) 2138-BR: US$182.7 million (Disbursed% US$172.1 milliont

Canceled: US$10.6 million)

(ii) 2364-BR: US$250.6 million (Disbursed:US$237.0 million;

Cancelled: US$13.6 million)

Loan Dates : (i) 2138-BR: Approval, May 11, 1982; Effectiveness, October

25, 1982; Closing, December 31, 1989 (two years afteroriginal deadline of December 31, 1987); Last

Disbursement: July 25, 1990(ii) 2364-BR: Approval, December 8, 1983; Effectiveness, May

21, 1984; Closing, December 31, 1991, two & one-half yearsafter the original deadline of June 30, 1989); Last

Disbursement: May 28, 1992

RVP Unit : LAlEI

Country : Brazil

Sector s EnergySubsector : Zlectric Power

1.01 Conc-ct Between 1978 and 1991, Brazilian power officials, with thehelp of Bank staff and the financial support of Loans 2138-BR (US$182.7 million,

1982) and 2364-BR (US$250.6 million, 1983), prepared and executed the ELETROBRASPower I and II Distribution Projects (hereafter referred to as ILETROBRAS I &

II). These projects reflected features sufficiently innovative that they merithighlighting at the beginning of the report.

The bwneficisries of Loon 2138-BR were power utilities owued by the states of Pars, Ceara, Rio Cronda doMorts, Pern buco, and Mato Grosso do Sul -- respectively, Centrais Eletricas do Pars, SA (CELPA), Cmp- nhlod Eletricidade do Ceara (COELCE), CoWhanis do Servicos Eletricos do Rio Grande do Norte (COSERN), Com p nihdo Eletricidade do Pernambuco (CELPE), and Empresa do Energia Eletrica do Moto Grosso do Sut, SA (EVERSUL).

The beneficiaries of Loan 2364-BR included thb power utilities of five states (Narenhao, Piaul, Alagoa,londonia, and Sao Paulo) wnd two of the operating subsidiaries of ELETROBRAS. The five state-owned utilitieswere: Centrals Eletricas do Maranhao, SA (CEMAR); Contrals Eletricas do Piaul, SA (CEPISA); Coephania Eletriede Alageas CCEAL); and Electricideds do Sao Paulo CELETROPAULO). ELETROPAULO servoe the city of Sao Paulo only;the other state-osmed utilitios have state-wide responsibilities. The two ELETROBRAS *ubsidiario were LIGNT-Soevices do Elotricidade, SA (LIGHT), which serves the city of Rio do Jansiro, nd Centrais Eletriasc do Mortodo Srasil, SA CELETRONORTE), which has region-wide responsibilities for generation nd tranomission, nd uhichosto operatn the distribution systm for the city of NanUs.

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1.02 The borrower would be Centrais Eletricas Brasileiras, SA(ELETROBRAS), a majority Government owned corporation serving as a holdingcompany for Federally-owned power companies. The borrower would relend theproceeds of the loans to the beneficiaries, two groups of power utilities, bothFederally-owned and state-owned (see above) in need of investment funding andmanagement/institutional reinforcement.3/ The projects, ELETROBRAS I and II,would consist of time slices of the investment programs (sub-transmission anddistribution works) of the beneficiaries for the middle years of the 1980z.

1.03 What set these lending operations apart from prior power loansfeaturing ELETROBRAS as borrower/r-lender was the anticipated division ofresponsibilities between the borrower and the Bank -- that is, (i) ELETROBRAS,in addition to relending the proceeds of the Bank loans, would appraise the sub-projects and supervise the boneficiaries in the manner of a development financecompany (DFC); and (ii) the Bank would instruct ELETROBRAS as to its role andwould monitor its performance, but would otherwise limit its direct interactionwith the beneficiaries. Another distinguishing mark of these operations was theeffort to help the weaker utilities in the less developed states. Prior Bankloans had tended to aid the stronger utilities in the better developed states.

1.04 It was expected that full implementation of the DFC concept would:(i) transform ELETROBRAS, with its sector-wide access to technical and humanresources, from being another government planning/financial agency into a trans-mission belt for the diffusion of advice, managerial talent, and higher technicaland financial standards; and (ii) equip ELETROBRAS with the means to disciplinethe operating companies to enforce fulfillment of agreements. The primary objectof implementing the DFC concept was to improve the operational efficiency andreliability of the weaker utilities of the less developed states. An expectedbenefit of such implementation would be to release Bank resources for employmentelsewhere -- Bank resources being, in any event, inadequate to the task of pre-paring, appraising, and supervising the increasing numbers of small powerprojects in Brazil in the less developed states.

2. Sector Backoround

2.01 Bank Power Lendino. Since 1949, the Bank has made 41 power loansamounting to about US$3.7 billion, including nine loans to ZLETROBRAS for almostUS$2.1 billion (Part III, Table 1) -- excluding Loan 3227-BR (USS385 million),which was withdrawn in April 1992 (paras. 2.02 and 7.12). Through relendingagreements, almost all of the proceeds of the loans to ELETROBRAS were used tohelp finance the projects of state and Federal power utilities -- hydroelectricstations (before the mid-1970s) and transmission/distribution works (after themid-1970a). Among the beneficiaries of Loan 2138-BR, only CELPE was a partialbeneficiary of a prior Bank loan (1300-BR; US$50 million; 1976).

2.02 Bank Lendinag for Brazil Power in the 1980s. In 1983-1986, leavingaside Loan 2364-BR, the Bank approved three investment loans and one sectoradjustment loan (for a total of US$1,434.8 million), but thereafter, despite

The shortcomings of the benficferies inctuded: high levels of Losses, loading, wnd arrearage; inadequatesystm plaimng; low saLaries; large nibers of poorly qualified staff and politicized mwnagements; and poorfinancial adkinistration -- lack of budgets or other control mchanim. Also see pars. 3.03.

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major offorts to negotiate additional sector adjustment loans (paras. 7.11-7.12),the Bank did not approve another power loan to Brazil until 1990 (Loan 3227-BR).Under ordinary conditions, the pace and amount of Bank lending for power projectsin Brazil during the second half of the 1980s would probably have been similarto that in the first half of the decade because of the great need to reinforceand expand the transmission and distribution systems. But this did not happen.Instead, the processing of power loans to Brazil stalled during the late 1980zand then stopped altogether in 1992. The political, macroeconomic and sectoralfactors underlying this development are detailed in Annex 1. They constitutedthe context in which the projects were carried out.

2.03 oraanization. When the projects were prepared and implemented, thesector consisted of a relatively compact group of Federally-owned and state-ownedpower utilities with primary responsibilities for, respectively, generation/transmission and distribution. The authority of the Federal Government tosupervise sector decision-making, especially with respect to levels for tariffs,borrowing, and investment expenditure, was paramount. Further, the tariff-equalization and revenue-sharing regimes strongly connected the individualcompanies to each other and to the Federal Government. As discussed later (para.7.01), the impact of Federal policy in sector affairs, together with the strongsector financial connections (see Annex II), was so important that Bank stafftended to focus more on sector financial performance than on the financialperformance of individual utilities.

2.04 There has been growing criticism by state governments of Federalregulatory policies since 1987. In 1993, the Congress approved major changes tothe tariff regime and the elimination of the mechanism which transferredresources from the financially stronger companies to the financially weakercompanies. In the future, it is not certain that the Federal Government shallexercise the same degree of authority as used to be the case.

2.05 Reaulation and Planninc. Prior to appraisal of ELETROBRAS I (1980),the Government supervised the sector through two agencies under the jurisdictionof the Ministry of Mines and Energy: Departamento Nacional de Aquas e EnergiaEletrica (DNAEE), a regulatory body which approved, inter JLJa, tariff levels andprojects of particular companies; and ELETROBRAS, which besides performingholding-company functions (para. 1.02), carried out sector-wide financialfunctions and sector-wide planning based on least-cost criteria. These were notfully autonomous agencies. The decisions of DNAEE and ELETROBRAS were expectedto be consistont with the objectives and policies of the Administration. AnnexII details the power tariff legislation prevailing during the 1970. and theunsatisfactory regulatory performance of DNAEE after 1977.

2.06 The planning and regulatory regime began to change in 1979 when theFederal Government, to align sector policies more closely with its largermacroeconomic strategy, required the review of DNAEE-authorized tariff increasesby the Secr-taria de Empresas Estatais (SEST). SEST was an agency of theplanning secretariat, Secretaria de Planejamento da Presidencia da Republica(SEPLAN). Final approval of tariff increases was to be taken at a meeting ofministers. This limitation of the authority of DNAEE to set tariffs was followedby a qualification (and therefore limitation) of the authority of ELETROBRAS toundertake sector planning. In 1980, the Federal Government required review bythe Secretaria de Controle de Empresas Estatais/Secretaria de Planejamento

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(SEST/SEPLAN) for levels of investment expenditures by all state enterprises,including power utilities. Again, final approval wan to be taken at a meetingof ministers.

2.07 Given the poor regulatory performance by DNAEE, the Bank interpretedthe new regime as being a continuation of pant regulatory trends and did not seeka reversal of the limitation on the autonomy and authority of DNAEE. Instead,even though it recognized that the new regime lacked adequate provision for thelong-term view, the Bank accepted, even welcomed, the new regime, given itspotential for increasing dialogue between the utilities, ELETROBRAS, DNAEZ, andthe planning agencies. During the 1980s, the Bank earnestly sought and obtainedGovernment agreement to a series of programs which aimed at the financlalrestoration of the sector through tariff increases and other measures. As shownlater (paras. 7.02-7.13), the Government did not fully implement these programs,thereby seriously undermining the financial health of the sector.

3. Preparation and ADpraisal: ELETROBRAS I.

3.01 Develovment Obiectives. According to all versions of the ProjectBrief (PB)4/, the Government, in order to reduce dependence on importedpetroleum, had adopted a national energy policy emphasizing rational use ofenergy, conservation, and maximum exploitation of local primary sources,especially hydro. The Government also sought to expand the supply of electricpower to those areas having little or inadequate service. The 1978 CountryProgram Paper called for Bank support of the policy of the Government by: (a)providing a portion of the financial requirements of the sector; (b) acting asa catalyst for the mobilization of long-term funds from other external financingagencies; (c) promoting rational tariff policies enabling sufficient self-financing for the sector; and (d) helping to strengthen the management andplanning of power companies. The proposed loan would support all of the aboveobjectives; and would, in addition, .. provide ELETROBRAS an opportunity tocontinue developing its project appraisal/supervision capabilities... /

3.02 Timetable The processing of ELETROBRAS I -- from projectidentification (June 1978) to loan approval (May 1982) -- took almost four years.Between November 1978 and September 1980, the Bank dispatched seven preparationmissions (Part III, Table 2.1). Almost no progress toward preparing the projectwas achieved until late 1979 due to inadequate organization and staffing of theproject unit of ZLETROBRAS. After the organizational problems were solved andELETROBRAS had satisfactorily completed the appraisal of the COSERN sub-project,Bank staff appraised the project (October 1980; paras. 3.06-3.14). Thereafter,project processing stalled until the Bank and the Government negotiated(September 1981) an agr-ement to addregs the problem of sector finances (para.3.15-3.19). In November 1981 a preparation mission instructed the staff ofZLETROBRAS on how to update its appraisals of the sub-projects; and in January1982, the Bank dispatched a re-appraisal mission, after which Loan 2138-BR wasapproved (May 11, 1982).

*Betwen April 5, 1979 and October 30, 1980, Bank staff produced eight versions of the Project Brief forELETROBRAS 1; here fter referred to as P-El 1.

* Vorld Bank CWB): PS-EE 1, pars. 2.03, fourth through eighth versions, respectiveLy dated November 27. 1979,February 6, 1980, Ray 23, 1980, August 29, 1980, and October 30, 1980.

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3.03 Descriotion. Obiectives. and Cost. As finally defined, five sub-projects constituted the project, each of which was to consist of portions of the1983-1985 slice of the 1982-1986 investment programs of beneficiaries (page 1,footnote 1) selected by ELETROBRAS on the basis of need and willingness tocooperate in sub-project preparation using Bank-approved criteria. Theinvestment programs provided for the installation of sub-transmission lines,substations and associated transformer capacity, distribution lines (primaryfeeders), low voltage distribution lines (secondary circuits), consumerconnections, general service equipment, etc. The programs provided for planswhich emphasized the connection of rural and low-income consumers and includedthe use of consultants, as needed.

3.04 The basic objectives of the investment programs were to meetefficiently the needs of the respective markets and to remedy unsatisfactorysystem conditions arising from inadequate planning and lack of sufficientinvestment during preceding years. Strengthening the organizations of thebeneficiaries, including their technical and financial capabilities, was anotherimportant objective, as was the creation of the capability within ELETROBRAS forappraising and supervising projects in accordance with standard Bank proceduresand methods. As shown below (paran. 3.06-3.14), this was the central projectissue at appraisal and before.

3.05 Including physical and price contingencies, the project was expectedto cost US$736.6 million with a foreign cost of US$190.0 million. The Bank loan(US$182.7 million) would cover US1S8O million of the foreign costs of items tobe procured under international competitive bidding (ICB - para. 4.10) and afront-end fee of US$2.7 million. The remaining foreign costs of the project(US$10 million) would be covered by co-financers (foreign commercial banks).Such costs related to items to be procured on a reserved basis. It was alsoexpected that co-financers would loan the beneficiaries an additional US$70million for local-currency purchases. The balance of local-currency financingwould be provided by local development banks (US$47.9 million), state governments(US$97.2 million), ELETROBRAS (US$279.9 million), and the beneficiaries (US$51.6million).

3.06 Aoraisal: Prolect Issues, As already stated (para. 1.03), theinnovative aspect of this project was the substitution of =LETROBRAS for the Bank-- that in, ELETROBRAS would carry out the appraisal and supervision functionsnormally exercised by the Bank, thereby freeing Bank resources for employmentelsewhere.

3.07 The goal of the Bank was to transform ZLETROBRAS from anotherFederal planning/financial agency into a DFC A/ In the course of preparing theproject, Bank staff addressed two issues related to ELETROBRAS's future

Jde.: Intrnal Memo (IN) dated July 11, 1980, mkos clear that ELETROBRAS, besides helping thebeneficiaries design technically suitabLe, loast-cost sub-projects nd forulasto appropriate financing plne.would also holp tho beneficiaries to define and implement institution-building masures to improve theiroperatioe and to addres their *mnagement deficincies. ELETROBRAS had system-wide access to the resourcesfinancial and humn, ihich these companies urgently needed. It was expected the proposed project wouldfacilitate such accss.

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functioning as a DFCz (i) its authority and will to supervise the beneficiaries(paras 3.08-.11), and (ii) the organization of a project unit (para. 3.12).

3.08 Concerning the authority and will of ELETROBRAS to supervise thebeneficiaries, Bank thinking focused on the possibilities and opportunities forhelping ELETROBRAS evolve into a DFC. For example, the PB. stated: Overalldirection of the sector is provided by ELETROBRAS.. .".2/ This statementapplied to planning, not operational control of individual state utilities, whichwas the province of state governments; and it did not reflect Federal-statepolitical realities. Further, it did not take into account the growing role ofSEST, which by summer 1980 was displacing to some extent -- or infringing on --the roles of ELETROBRAS and DNAEE (parao. 2.05-2.06).8/

3.09 Bank staff recognized that under then current conditions it would bepolitically unfeasible for ELETROBRAS to condition or withhold loans and equitycontributions to state utilities to ensure compliance with technical/financial/operational targets. ELETROBRAS had planning and financial powers which wereimportant to the state utilities, but in the final analysis, the utilitiesanswered to their owners, not ELETROBRAS. Nevertheless, believing thatimplementation of the DFC concept would lead to improved operational performanceon the part of the smaller companies, the Bank decided to press for atransformation of ZLETROBRAS into a DFC and go forward with loan processing.

3.10 By June/July 1980, Bank staff noted that ELETROBRAS was taking a moreactive role in helping the beneficiaries to prepare satisfactory sub-projects.In one instance, it had even seconded personnel from an operating subsidiary tobecome the directors of COSERN's planning and operations departments. Thisaction was interpreted by the Bank as an example of a changed attitude. Bankstaff reported: "In the future, personnel of Eletrobras' [sic) Directoria deGestao Empr-marial (DGE) will participate in the execution of the proposedproject and in preparation, appraisal, and implementation of similar projectslDGE would propose solutions to distribution utilities' management problems,either by secondment of personnel from Eletrobras [sic), its subsidiaries, orutilities from more developed states or by engagement of consultants."2J Itappeared that ELETROBRAS was taking the first steps toward becoming a DFC.

3.11 Bank thinking did not take into account the growing role of SESTwhich was demonstrated in September 1980 by the discharge of the planning andfinancial directors of ZLETROBRAS and the resignation of its president. Thedirectors had opposed SEST's limiting to five percent the real growth of publicsector investment in 1981, as this limitation was expected to impact adverselyon the ability of the sector to meet demand. The Minister of Mines and Energydemanded that the president discharge the directors. When the president couldnot prevent this, he resigned. This action, which clearly demonstrated areduction in the authority of ELETROBRAS to plan and finance sector expansion,did not cause Bank staff to question their project strategy before appraisal

.z,, PS-El 1. para. 1.02, first and eighth versions, dated Aprit 5, 1979 to October 30, 1980.

* ~., gBack-to-Office (BTO) Report, dated October 1, 1980, p. 3, para. 10.

' j.~., IN, dated July 11, 1980.

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(September 1980) or later. In like manner, the staff relied on the successiveGovernment commitments to raise tariffs and take such actions as required torestore the financial health of the sector.

3.12 Since the organization of a project unit was a vitally importantissue for ELETROBRAS to function as a DFC, the Bank devoted considerable timeover a period of eighteen (18) months to instructing borrower staff on theappraisal methods and approaches used by the Bank; and helped to develop anacceptable appraisal manual. ELETROBRAS was very slow in organizing a properunit in 1979 with the result that project preparation lagged. In the early partof the year, the Bank recommended the recruitment of a senior engineer with ampleexperience in the management of distribution companies to head the unit;Wand later the Bank sent a number of documents to help ELETROBRAS prepare anappraisal manual.1 1/ By September 1979, ELETROBRAS had appointed two men fromits staff, one for finance and one for technical matters, to head the unit. Theappointees delegated most of their duties to assistants who in turn delegatedday-to-day work to a two-man working group12. (which later included a seniorengineer recruited by ELETROBRAS). In due course, the working group was assistedon an ad hoc basis by specialists from other directorates, such as marketstudies, transmission lines, and distribution design.

3.13 Given the delays in preparing the project in 1979, the Bank deferredappraisal from February 1980 to May 1980 and then to September 1980. To assureitself that the borrower would be able to carry out its new role, the Bankconditioned its appraisal to the satisfactory appraisal of one sub-project byZLETROBRAS. During the summer of 1980, ELETROBRAS fulfilled this condition(including a recommendation that COSERN engage a consultant to improve itsstructure and organization); and in September 1980 the Bank appraised theproject.

3.14 The appraisal experience caused Bank staff to doubt that existingarrangements within ELETROBRAS provided for adequate coordination amongdirectorates to handle the expected additional work load. "It seems clear thatthe CELPE work [appraisal), coming on top of... [other] ...appraisals, has shownup the weakness we feared right from the start, and we have concluded thatILETROBRAS has developed some ability for this work, but does not have adequatecapability. 42/ To remedy this situation, the Bank conditioned negotiationsto the submission by ELETROBRAS of an organizational scheme providing for: (a)adequate coordination/involvement of all its directorates in appraisal andsupervision work; and (b) adequate coordination with the Bank. The Bank alsoconditioned negotiations to the submission of: (i) a satisfactory project briefon the sub-project at CELPE; (ii) appraisal reports on two other sub-projects;and (iii) draft on-lending and shareholder agreements. By the end of February1981, all of the above project issues took second place to the Bank's growing

I* Bank Letters to ELETROSRAS, dated April 5, 1979 and Kay 31, 1979.

" .L,m.. Bank Letter to ELETROSRAS, dated July 16, 1979.

" 1,.* P-ELI, (third version), dated October 24, 1979, par&. 5.01.

" j1., IN, dated February 13, 1981.

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dissatisfaction with Government tariff policy; and thereafter project processingstalled.

3.15 Aporaisal: Sector Issues. For several years prior to appraisal, inconnection with sector tariff and revenue levels, the Bank had been concernedabout the: (i) methodology of asset revaluation which did not maintain values incircumstances of high, rising inflation, i.e., use of an unrepresentative priceindex; and (ii) low level of sector tariffs which did not permit Bank borrowersto generate revenues sufficient to earn the legal rates of return of 10-12% onremunerable assets.

3.16 The Government justified the low level of tariffs, which were popularpolitically, as part of its effort to combat inflation; and assured the Bank thatpast and current revenue shortfalls (below the legal rate of return) would berecovered through future tariff increases. The law permitted the incorporationof such shortfalls into the rate bases of the operating companies.

3.17 In March 1980, in connection with Loan 1824-BR and later with Loan1939-BR, the Bank accepted a proposal to raise tariff and revenue levels wherebythe Government committed itself to: (i) approximate the 10% rate of return forthe sector in 1980 by increasing tariffs 30% in June 1980; (ii) provide a 10%rate of return for the sector beginning in 1981 with future tariff increases; and(iii) allow for recovery of revenue shortfalls in 1980, if any, and accumulatedshortfall. for prior years over a three-year period beginning in 1981. This planexplicitly recognized the possibility of a return on remunerable assets below the10% legal minimum in 1980, but was acceptable because of the prospect ofcompliance in 1981 and subsequent years.

3.18 By the fall of 1980, it was clear that the Government had notimplemented the plan sufficiently to permit the sector to approximate the 10%rate of return in 1980;IA/ hence, the credibility of the Bank became theoverriding issue, (w .. it is obvious that we cannot continue to be satisfied withintentions and promises... ").1/ In these circumstances, the appraisalmission recommended the conditioning of negotiations to, inter alia, theGovernment's: enacting a program of tariff increases to permit the sector to earnthe minimum legal rate of return (10%) in 1981 and begin to recover past revenueshortfalls; and submitting an asset revaluation methodology based on actual costsof construction and equipment. More importantly, the Bank stopped processing theloan and informed the Government that it expected the Government to fulfill itsagreements.16/ During the summer of 1981, the Bank advised the Governmentthat it would stop lending to the sector and would consider suspendingdisbursements on all power loans unless the Government agreed to undertakeappropriate measures to improve the financial condition of the sector.,,/

Ide., INs, dated December 4, 1980 and December 17, 1980.

'f jgB. , IN, dated February 13, 1981, p. 2, para. 2.01.

d ., Bank Letter to ELETROBRAS, dated January 12, 1981. and IN, dated January 13, 1981.

'7 1j£R. IN, dated March 23, 1981; BTO, dated May 13, 1981; BTO, dated JuLy 29, 1981.

3.19 In September 1981, to address the financial problems of the powersector, the Government and the Bank agreed on a new recovery plan featuring"real" tariff increases of 3% in 1982 and of 5% annually thereafter until thesector earned a return of 10% on remunerable assets. The Bank confirmed thisagreement by its letter to the Government of December 23, 1981. The letter alsoprovided that the Bank would not enforce the revenue covenants of previous loansas long an the Government and the power companies complied with the plan forsector financial recovery. The new recovery plan represented a major concessionon the part of the Bank, as the sector would not earn a 10% return on remunerableassets until 1987. Further, it displaced the conditions for negotiations --namely, enactment of a program of tariff increases leading to a 10% return onremunerable assets in 1981 and submission of an asset revaluation system basedon actual costs of construction and equipment.

3.20 Later, it was realized that the language of recovery plan did notspecify the reference point for measuring the 3% increase in 1982 and 5%increases in later years. It was not clear whether the increase of 3% (or 5%)was measured by comparing tariff levels at the beginning and end of year (or oemintermediate point) or whether it was measured by comparing the annual averagetariff level of the current year against that of the prior year. Incircumstances of accelerating inflation, this was a major issue.

3.21 Re-aloraisal. Procurement. Risks. Etc. A preparation missioninstructed (November 1981) ELETROBRAS on how to update completed appraisals.Thereafter, loan processing moved quickly. The re-appraisal mission, whichcompleted its work in January 1982, more than a year after the initial appraisal,found that " ...the organization of ELETROBRAS for the.. project has substantiallyimproved" and waived the condition for submission of a coordination plan.iffThe appraisals of the COELCE and CELPE were satisfactorily completed. Thesubmission of project briefs for the sub-projects of two new beneficiaries (CZLPAand ENERSUL) continued as a condition of negotiations. The Staff AppraisalReport (SAR) reflected a enerally "up-beat" tone about the appraisalcapabilities of ELETROBRAS. /

3.22 Equipment and materials financed under the loan would be procured inaccordance with Bank guidelines through international competitive bidding (ICB),except for minor quantities where special reasons justified internationalshopping. Brazilian suppliers whose bids contained local components equal to atleast 50% of the value of the bid would be given a margin of preference of 15%or the applicable import duty, whichever was lowest. Given it. experience withICB, Companhia Auxiliar de Emprena. Eletricas Brasileiras (CAEEB) would handleprocurement for the beneficiaries, as they had little experience with ICB.

3.23 The SAR reflected an optimistic assessment of project risks.ZLETROBRAS, which had developed an appraisal capability using Bank-approvedprocedures, would offset the weaknesses of the beneficiaries through itssupervision efforts. There were no major technical problems. An optimistic

~ S~., TO, February 12. 1982, p. 2, pera.6

1. gii, ff AnCroifs ReLort SAR). ELETROBRAS I Distribution Proiect (Report No. 3338b-t), dated April19, 1982, pp. 25-6, p ras. 4.05-4.07. Hereafter referred to e SAR. ELETR08RAS I

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assessmont also prevailed with respect to counterpart funding. *Shortage ofcounterpart funding is a minor risk because consumer-based funds depend on tarifflevels regarding which the Bank has reached agreement with the Government;moreover, ELETROBRAS had adequate plans for and has agreed in assisting thebeneficiaries in obtaining required counterpart funding, involving local stategovernment resources and federal funding agencies in addition to its ownresources ....The federal government has provided assurances that thebeneficiaries' sub-projects will be supported by adequate counterpartfunding.. ".2Q.

3.24 No major issues delayed negotiations (March 1982). The loan wasapproved on May 11, 1982, war signed on May 12, 1982, and became effective onOctober 25, 1982, about a month late due to slow action by state legislatures inratifying their respective shareholder agreements.

4. Preparation and Appraisal: ELETROBRAS II

4.01 Develoonent Obiectives. ELETROBRAS II was a duplication/extensionof ZLETROBRAS I. From the point of view of the Federal Government, ELETROBRASI and II aimed at the same development objective: reducing dependence on importedoil by substituting local primary sources and conservation.2 1 / To this end,the project objectives duplicated those of ELETROBRAS I: expanding the supply ofelectric power to those areas having little or inadequate service; promotingbalanced sector development between generation, transmission, distribution, andrural electrification; and strengthening the institutional and professional staffof ELETROBRAS and the beneficiaries.

4.02 Bank Obiectives. Sector & Non-Sector. In August-September 1982, theDank and the world financial community were profoundly shaken by the news thatdeclining oil prices and revenues were undermining the capacity of Mexico toservice its foreign-currency obligations. The prospect of default by Mexico andother Latin American countries, including Brazil, posed a threat to the stabilityof the banking systems of the United States, Europe, and elsewhere. Calmingthese fears by demonstrating continued faith in the creditworthiness of Brazilthrough new loans became an explicit part of Bank lending strategy. Hence, theBank, in addition to fulfilling the role expected in connection with ELETROBRASI (para. 3.01) -- plus assisting the Government in its energy substitution andconservation efforts -- saw itself as a leading participant in a financial rescueeffort for Latin America and Brazil.

4 03 Timetable, After identification (June 1980), the time required toprepare and approve ELETROBRAS II (September 1982 to December 1983: 16 months)was much less than the time for ELETROBRAS I (almost 3.5 years) (Part III, Table2.2). During the processing of ELETROBRAS I, the shortcomings of the ELETROBRASproject unit had been a major source of delay (para. 3.12), but this was not the

ik. p. 29° psra. 4.20.

' I,: The three versions of the PB for ELETROBRAS 11 (dated July 23 1982 March 4, 1983, and March 25,1963) Lmd the s*m lanuage: ... The mIn probltm faced by the country Is Its heavy dependwnce on leported oll;thu the basic objective of the energy plan now under preparation is to reduce this deprndence throughsubstitution nd conservation." Hereafter, the PBs will be referred to as PB-EB 1

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case with respect to the processing of ELETROBRAS II.22/ The Bank dispatchedpreparation missions in September and November 1982 and appraised the project inJanuary-February 1983. Thereafter, project processing stalled due to the Bank'srenewed misgivings concerning the financial situation of the power sector. In May1983, the Bank dispatched a post-appraisal mission to examine the finances of thesector, the borrower, and the beneficiaries. During the summer, the Bank and theGovernment engaged in an extended dialogue on the problems of obtaining adequatecounterpart funding for all Bank-funded projects;23/ and in September-October1983, they negotiated a new agreement to improve sector finances, after whichLoan 2364-BR was approved (December 11, 1983).

4.04 Description. Oblectives & Cost. The description and objectives ofELETROBRAS II were virtually identical to those of ELETROBRAS I. ELETROBRAS IIwould consist of seven sub-projects, each of which was to consist of portions ofthe 1983-1988 slice of the 1984-1987 investment programs of seven beneficiaries(para. 1.01) selected on the same basis as those selected for ELETROBRAS I(paras. 1.02 and 3.03). The investment programs provided for the purchase andinstallation of the same categories of sub-transmission/distribution works andequipment contemplated under ELETROBRAS I. For two of the beneficiaries, theprograms included the rehabilitation of generating plant. The programs providedfor the uso of consultants, as needed.

4.05 The main objectives of the investment programs were the same as thoseunder ELETROBRAS I (para. 3.04). Strengthening the organizations of thebeneficiaries, including their technical and financial capabilities, was anotherimportant objective, as was consolidating the capability of ELETROBRAS forappraising and supervising projects in accordance with standard Bank proceduresand methods. As already stated (para. 4.03), the organization and appraisal/supervision capacity of the project unit were no longer issues, but sectorfinances continued to be a problem.

4.06 Including physical and price contingencies, the project was expectedto cost US$785.0 million with a foreign cost of US$316.1 million. The Bank loan(US$250.6 million) would cover US$250 million of the foreign costs and a front-end fee of USSO.6 million. The remaining foreign costs of the project (US$66.1million) would be covered by co-financers. Local development banks and thebeneficiaries would provide the resources to cover the remaining local costs --US$132 million and US$336.9 million respectively.

4.07 Appraisal: Sector Isues. While project issues did not delay theprocessing of ZLETROBRAS II, by the spring of 1983 it was clear that sectorfinances needed remedial measures additional to those agreed in September 1981.In 1982, the Government implemented properly the first and second quarterlytariff increases, but delayed carrying out the last two increases with the result

2 Id. Ims, dated October 19, 1992 and January 13, 1983. The Latter document indicates thit ELETROBRAS hadcreated a project unit which closeLy approximated what the Bank had been urging ELETROBRAS to do -- namely, asingle indifiduil -- the Financial Director assisted by an Executive Assistant from the Engineering Directorato-- was the chief and only coordinator of the project unit. Under the Executive Assistant were three workinggroups headed by a coordinator: a technicaL group, a financial anaLysis group, nd an institutionalinvestigation group.

LL aj. nd Goverrmnt: Aide N.ojir, dated July 22, 1983.

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that tariff gain. of late 1981 had been eroded by the end of 1982. Inthese circumstances, the appraisal mission recommended the conditioning ofnegotiations to the Government's agreeing on a plan " ...of electricity priceincreases that ensures an improving trend in sector finances .251

4.08 An extended discussion between the Bank and the Government during thesummer of 1983 resulted in an agreement to amend the 1981 plan by substitutinga graduated rate-of-return approach for the program of real, annual tariffincreases (5% p.a.). Just as negotiations for the ELETROBRAS II loan were aboutto begin, the Bank obtained commitment from the Government to a new sector-widefinancial agreement -- namely, that through tariff increases and other actions(mostly efficiency measures to reduce costs), the Government would raise thesector rate of return on remunerable aosets by 1% annually from the then currentlevel of 4% until the sector reached the legal minimum of 10% by 1 9 8 9.26/

4.09 The new recovery plan replaced that of September 1981; and as longam the Government and the sector were making progress with respect to itsimplementation, the Bank agreed not to seek enforcement of existing financialcovenants, which, based on power-tariff legislation, required an annual returnof 10% on remunerable assets. By agreeing to 1989 as the target year forcompliance with existing power tariff legislation -- as compared with the targetyears of 1986/1987 under the prior recovery program -- the Bank made a furthermajor concession to the Brazilians. Underlying this concession was a sympatheticattitude on the part of the Bank toward the restoring the international creditstanding of Brazil (para. 4.02; Annex 1).

4.10 Procurement and Risks. Etc. Procurement arrangements underELETROBRAS II would be the same an those under ELETROBRAS I (para. 3.22) -- thatis, adherence to Bank guidelines and procurement of Bank-financed items throughinternational competitive bidding (ICB), except for minor quantities wherespecial reasons justified limited international bidding; a margin of preferenceof 15% or the applicable import duty, whichever was lowest, for local suppliers;and reliance on CAEEB to handle procurement for the smaller beneficiaries.

4.11 Like the SAR for ELETROBRAS I, the SAR for ELETROBRAS II reflectedan optimistic assessment of risks due to organizational shortcomings of thebeneficiaries -- namely, that ELETROBRAS and consultants would offset theweaknesses of the beneficiaries through their respective supervision/advisoryefforts. There were no major technical problems. An optimistic assessment alsoprevailed with respect to counterpart funding. "ELETROBRAS has adequatearrangements for obtaining required counterpart funding, primarily from stategovernments and federal agencies. In addition, the federal government has

^' S: Bork Letter to Goverrfunt, dated March 18, 1983; also Staff Asoraiset Reoort (SAR). ELETROBRAS I!Distribution Prolect (Report No. 4660b-BR), p. 10, para. 10 (dated November 11, 1983). Hereafter referred toas SAR for ELETROSRAS II

jIa., "issues NMeorau", dated March 25, 1983.

ds I IN, dated lovwuor 2, 1983.

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provided assurances that the beneficiaries' sub-projects will be supported byadequate counterpart funding.127/

4.12 No issues delayed negotiations (October/November 1981). The loan wasapproved on December 8, 1982, was signed on December 14, 1982, and becameeffective on May 21, 1984.

5. ImDlementation: ELETROBRAS I & II

5.01 ELETROBRAS I: Cost. Chances. and Timetable. As origindlly conceived,ELETROBRAS I would consist of five sub-projects which were portions of the 1983-1985 time slice of the investment programs of the beneficiaries for 1982-1986 andwould be carried out between 1983 and June 30, 1986. For convenience, subsequentdiscussion of the five sub-projects and the five beneficiaries will treat bothas a single project and a single beneficiary. The same treatment will prevailin connection with ELETROBRAS II.

5.02 As shown in the Schedule 5.1 on the next page, the actual cost ofELETROBRAS I, US$573.65 million (reflecting current prices) was well below (-22%)the appraisal forecast, US$736.6 million (Part III, Table 3.1). These costs,actual and forecast, are not fully comparable, as: (i) the completed project waslarger than what was appraised, reflecting major rescheduling (1984) andreformulations (1988 & 1989); (ii) the project was completed in 1990, four yearslate; (iii) market developments (annual sales growth) were very different (lower)after 1986 from what they had been before 1986, (5.3% p.a. for the period 1986-1990 vs. 14.1% p.a. for the period 1982-1986); and (iv) unit costs were wellbelow appraisal forecasts. ELETROBRAS provided data on the sources of fundingfor the investment programs of the beneficiaries (see para. 7.16), but did notprovide details on sources of funding for ELETROBRAS I. This lack of detail alsoapplies to ELETROBRAS II.

5.03 The actual cost of the project does not include disbursements fromLoan 2138-BR for stock -- materials and equipment held in inventory (US$42.9million). Due to slow project execution, the pace of disbursement was alsodelayed. Total disbursements amounted to US$172.2 millions, including US$2.7million for finance charges; the balance, US$10.6 million, was cancelledfollowing the Bank's closing the Loan (December 31, 1989), two years late (PartIII, Table 4.1).

" IJM SAR. ELETROSRAS It, p. 27, pera. 4.20.

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Schedule 5.1: Actual and Forecast Project Costs *

(in millions of current USS)

Actual ForecastPercent

DifferenceStock Foreign from

IBRD Other Total IBRD Z Other Local Total Fore.

CELPA 18.5 69.2 87.7 6.3 26.4 1.5 79.7 107.6 -18.5COKLCZ 21.2 137.9 159.2 24.3 51.0 2.8 133.0 186.8 -14.8COSERN 11.6 49.2 60.7 3.2 16.2 0.9 57.0 74.1 -18.0CELPE 40.0 124.7 164.8 6.0 48.5 2.7 165.4 216.6 -23.9

ZNER5UL 35 3 65.9 101.2 3.1 37.9 2_1 111.5 151.5 -33,2Total 126.5 447.1 573.6 42.9 180.00 10.00 546.60 736.6 - 22.1

* May not add correctly due to rounding off.

5.04 During the period 1982-1986, financial and other constraints (para.5.06) substantially delayed implementation of the entire investment program, eventhough the beneficiaries' summarized electricity sales for 1982-1986 developedabout as expected (actual sales: 45,607 GWh; vs. forecast sales: 48,971 GWh, or -6.9%). During this period, actual summarized investment expenditure on the partof the beneficiaries was well below (-56.6%) the appraisal forecast (para. 7.15)As for ELETROBRAS I, by 1986, the actual volumes of finished works were below theforecast levels, representing a delay of about 24 months: km. of transmissionline, - 23.4%; MVA of transformer capacity, - 4.3%; and km. of distributionlines, -32.4. (Part III, Table 5.1).

5.05 By 1988, two years after the original project completion date, allof the physical goals of the project had been met or exceeded, and by 1990, whenthe loan was closed, the final project was much larger than the project expectedat appraisal: km. of transmission line: 3,477 vs. 2,343, or + 48%1 km. ofdistribution line: 19,448 vs. 13,164, or + 48%; and MVA of transformer capacityin substations, 1521 vs. 780, or + 95%. This larger project was carried out inthe face of declining market growth: by 1990, actual sales levels (13,500 GWh)just surpassed sales levels expected for 1987 (13,145 GWh). Contributing to thelower cost for the larger project were lower-than-expected average unit pricestkm.of transmission line, - 57%0; MVA of transformer capacity, - 75%; and km. ofdistribution lines, - 54% (Part III, Table 6).

5.06 The project was executed over a longer period than expected: eightyears (1983-1990) rather than four years (1983-1986). Financial constraints werea major cause of delayed project execution, including low levels of internal cashgeneration due to low tariffs and inadequate contributions and loans from othersources. Mounting arrearage was a constant problem. Other constraints included

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SEST-mandated investment limitations.2i/ The Bank advised ELETROBRAS and theFederal Government repeatedly and unsuccessfully that low tariff levels andincreasing levels of negative net internal cash generation were delaying theproject and that if the Federal Government did not take remedial measures, thebeneficiaries would later find themselves making both amortization andcommitment-fee payments before the loan was fully disbursed. In due course, thisproved to be the case, thereby adding to the financial distress of thebeneficiaries. As discussed later, the financial performance of the sector andof the beneficiaries seriously deteriorated during the later part of the 19803(paras. 7.03-7.05; and 7.15-7.16).

5.07 Also contributing to delayed project execution was a slowprocurement process (paras. 5.13-5.14). Slow procurement was less important asa source of delay than lack of adequate levels of local-currency funding.2 VAnother problem -- if not exactly a source of delay -- was the absence of amechanism in the Loan Agreement to reallocate loan proceeds easily from onebeneficiary to another, depending on their needs and performance. The presenceof such mechanism might have provided a means for more rapid disbursement of theloan proceeds. This comment applied equally to the Loan Agreement for ELETROBRASII.

5.08 ELETROBRAS II: Cost. Chances. and Timetable. ELETROBRAS II andELETROBRAS I were based on the same project concept (para. 1.01-.03). LikeZLETROBRAS I, ELETROBRAS II would consist of sub-projects (seven) which wereportions of the 1984-1987 time slice of the investment programs of thebeneficiaries for the period 1983-1988. The project was expected to be carriedout during the years 1984-1988. The implementation experience of ELETROBRAS IIbroadly paralleled that of ELETROBRAS 1.

5.09 As shown in Schedule 5.2, the actual cost of the project, US$679.0million (reflecting current prices) was below (-13.5%) what was expected atappraisal, US$785.0 million (Part III, Table 3.2). These costs, actual andforecast, are not fully comparable, as (i) the volume of finished works ismarginally smaller than what was appraised; (ii) the project was completed in1991, four years late; (iii) and market developments (annual sales growth)differed (were lower) after 1987 from what they had been before 1987 (0.5% p.a.for the period 1987-1991 vs. 6.0% p.a. for the period 1983-1987).Notwithstanding requests from the Bank, ELETROBRAS did not supply data on actualand forecast unit costs. The constraints -- financial, regulatory,institutional, and procurement -- which delayed implementation of ELETROBRAS Ialso delayed implementation of ELETROBRAS II (paras. 5.06 and 5.07).

5.10 The actual cost of the project does not include disbursements fromLoan 2364-BR for materials and equipment held in inventory (US$62.1 million).

- Source dociunts setting forth detaiLa on factors contributing to deLay include: Bank letter to ELETROBRAS,dated July 19, 1984; Supervision Report (SR), dated July 24, 1984; Aide maoire, dated March 21, 1985; SR, Annox7, pp. 1-2, dated ApriL 16, 1985; Loans 21328-BR and 2364-BR, Project ImpLementation File (PIF), Section II,pp, 1-4 and Section III, pp. 2-5, dated April 21, 1986; For. 590, Section 3 for Loan 2138-BR or 2364-BR, datedMarch 6, 1987, January 25, 1988, April 20, 1988, and May 19, 1988; Loan 2138-BR, PIF, Port IV, p. 1, pares. 2-3.dated June 20, 1988.

- Jg"., SR, dated April 11, 1985, Arnnx 7, pars. 8, p. 3

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Due to slow project execution, the pace of disbursement was also delayed. Totaldisbursements amounted to US$237. 0 millions, including US$0.6 million for financecharges; the balance, US$13.6 million, was cancelled following the loan closing(December 31, 1991), two and one half yeare late (Part III, Table 4.2).

Schedule 5.2: Actual and Forecast Project Costs*

(in millions of current US$)

Actual Forecast

Stock ForeignIBRD Other Total IBRD (IBRD) Other Local Total Fore

CEAL 9.5 30.4 39.9 14.7 28.5 0.0 41.0 69.4 -42.6CEMAR 20.2 77.0 97.2 13.5 40.4 0.0 59.6 99.9 - 2.7CEPISA 11.5 NA 11.5 12.4 23.8 0.0 34.7 58.4 -80.4CERON 19.7 NA 19.7 10.1 28.9 0.0 43.7 72.6 -72.9ELETRONORTE 16.6 102.4 119.0 9.0 28.3 0.0 41.4 69.6 71.0ELETROPAULO 55.9 193.6 249.5 0.0 57.3 34.5 139.7 231.5 8.1LIGHT 39.5 102.6 142.1 3.9 42.7 32.1 108.8 183.6 -22.9

Total 172.9 506.1 679.0 63.5 250. 0 66.1 468.9 785.0 -13.5

* May not add correctly due to rounding off.

5.11 During the period 1983-1987, financial and other constraints (para.5.06) substantially delayed implementation of the entire investment program, eventhough the market for electricity sales for 1983-1987 developed about as expected(actual summarized sales: 307,431 GWh; vs. forecast summarized sales: 315,552GWh, or -6.9%). During this period, actual summarized investment expenditure forfive of the beneficiaries was almost 18% below the appraisal forecast (para.7.16). Actual investment expenditure data for CEPISA is not available, but ifit had been, it is unlikely that it would have changed substantially thepercentage of expenditure shortfall by the group of five beneficiaries. Larger-than-expected expenditures (51.5%) by ELETRONORTE increased group expendituresby 30.7%. As for ELETROBRAS II, by 1987, the actual volumes of finished workswere well below the forecast levels: km. of transmission line, - 65%; MVA oftransformer capacity, - 20%; and km. of distribution lines, - 49%. (Part III,Table 5.2).

5.12 By 1991, when the loan was closed and three years after the originalproject completion date, the physical goals of the project had not been met:km. of transmission line: 1,265 vs. 1,816, or - 30%; km. of distribution line:4,467 vs. 4,896, or - 9%; and MVA of transformer capacity in substations, 1675vs. 1324, or + 27%. This marginally smaller project was consistent with marketdevelopments: by 1991, actual sales levels (73,719 GWh) had not yet reached thesales levels expected for 1988 (77,334 GWh).

5.13 Procurement. At appraisal, the Bank and ELETROBRAS expected thatCAEZB would carry out ICB-based procurement for the smaller beneficiaries.Unrecognized at the time was the deterioration of CAEEB due the departure ofexperienced personnel at the managerial level. During implementation, thisdevelopment, plus inadequate understanding of Bank-approved procurementprocedures by staff of CAEEB and the beneficiaries, led to confusion,

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misunderstanding, and delay. For example, in 1984, a Bank review of variousprocurement documentation revealed that CAEEB had: (i) requested approval forpurchases not in compliance with Schedule 4 of the Loan Agreements whichspecified ICB-based procurement procedures or which limited the maximum amountprocured using special procedures (i.e., direct purchase); and (ii) introducedchanges to purchase orders to modify quantities, prices, or the price escalationformula. From the point of view of the Bank, such modifications undermined thefairness of the bidding documents,30/ and were, therefore, unacceptable. Thebeneficiaries, CAEEB, and ELETROBRAS complained that Bank personnel wereexcessively rigid in their interpretation of procurement procedures. By 1986,after the Bank made a successful effort to acquaint all parties with ICB, mostof the misunderstandings which had contributed to this problem had beeneliminated.

5.14 Another problem delaying procurement were the numerous steps in theapproval sequence among the beneficiaries and CAEEB and later the Bank. Itrequired a long lead time -- up to 18 months if there were no problems -- between

the submission of specifications (by the beneficiaries), coordination ofquantities, issuing of bidding documents (by CAEEB), etc., and the delivery ofequipment and material. The Bank successfully recommended that ELETROBRAS co-ordinate the bidding programs of the smaller beneficiaries with CAEEB tofacilitate the inclusion of similar items from interested companies in singlebids, thereby reducing the number of bids, increasing their value, and raisingthe interest of foreign suppliers.31/

5.15 Proiect Unit. After appraioal of ELETROBRAS I and II, Bank effortsto transform ELETROBRAS into a DFC centered on improving the effectiveness of thesupervision operations of the project unit. In 1984, Bank supervision missionsfound that the project unit was a unit in name only -- that is, no specialorganization was created within ELETROBRAS to supervise Bank-funded projects.Instead, the Bank relied on the commitment of senior management to organize aneffective supervision effort outside the normal structure of the borrower,utilizing its abundant and capable staff on an informal basis.'/

5.16 Nominally in charge of the project unit, the Financial Directordelegated day-to-day operations to a part-time deputy who relied on the authorityof the Director to co-ordinate with other senior management for the release ofstaff from their respective departments to supervise the beneficiaries. Bankstaff noted that the resulting supervision effort of the project unit reflected:(i) poor coordination and inadequate definition of responsibilities among staffof the different departments; (ii) incomplete integration of findings into acoherent set of reports to the Bank and of recommendations for the beneficiaries;and (iii) no "follow-up" on actions taken by the beneficiaries.23/ In lateryears, although Bank staff devoted considerable time to explaining the objectives

' j., Letter to ELETROBRAS, dated April 25, 1984.

' ., Project lapLesentstion Index, Section IV, porn 8, p. 3, dated ApriL 21, 1988.

" j*., SR, Arnex 9, par". 9.5-.6, dated July 24, 1984: uAs Long as the Leadership and coordination of thepest continue, no mJor difficuLties should be expected."

s d"., Form 590 for Loas 2138/2364-BR, dated ApriL t1, 1985. Also, SR, Arnex 1-B, dated April 16, 1985.

and methods of supervision, the performance of the project unit continued to bedisappointing. In 1986, Bank staff reported: "Up to the present... very littleimplementation improvement is ...attributable to... supervisory ...efforts.... Asno... request is ...made in the covering letters to the beneficiaries to ...inform(ELETROBRAS] of the implementation of the plans of actions suggested by ZLZTRO-BRAS, very few of the beneficiaries are_providing the necessary feed-back...toestablish how it can further help.. .".1/ The Bank was direct and frank ininforming ELETROBRAS that it had "...fallen short of performing an effective anddynamic role in the execution of the project."a/

5.17 In 1987, as requested by the Bank, ELETROBRAS assigned a full-timecoordinator to the project unit. He contributed to coordinating/organizing theprocurement effort of the beneficiaries. However, in the final analysis, theefforts of the Bank to improve the supervisory performance of the project unitand to transform ELETROBRAS into an DFC were unavailing. This result reflectedthe fact that: (i) ZLETROBRAS had no effective enforcement mechanism to ensurethat the beneficiaries accepted its recommendations, except to suspenddisbursements under the sub-loan agreement; (ii) suspension was politicallyunfeasible, especially following the return of civilian government (1985) andgiven the deteriorated state of sector finances (a Federal responsibility); and(iii) the beneficiaries, which were instrumentalities of state governments, wereaware of their political advantages and were prepared to use them.2Vi By1991, when ELETROBRAS II was completed, the borrower had not become a DFC.

6.0 Results of the Proiects

6.01 Physical and Institutional Obiectives. Clearly, the trans-mission/distribution facilities completed under both projects were consistentwith the original goal. The same was not true with respect to the institutionaldevelopment of ELETROBRAS, which, in circumstances of unfavorable macroeconomicdevelopments, sector financial constraints, and increasing autonomy for stategovernments, did not evolve toward becoming a DFC. As for the beneficiaries, inthe opinion of ELETROBRAS staff, the projects led to lasting improvements in thefollowing procedures: system planning and project preparation, procurement,inventory control, insurance, warehouse conditions, and meter-reading, billing,customer services. All of the beneficiaries showed improving trends with respectto numbers of customers per employee.

6.02 Economic Rate of Return. Besides being least-cost solutions, thesub-projects were justified as being part of investment programs withsatisfactory economic rates of return. Under Loan 2138-BR, the investmentprograms were expected to generate economic rates of return ranging from about10% to 19%; under Loan 2364-BR, investment programs were expected to generatereturns ranging from about 10% to 32%. In both cases, the underlying assumptionwas the implementation of sector-wide plans for financial rehabilitation. PartIII, Table 7 sets forth the economic rates of return of seven of the twelve

" ., PIF, Sectlon IV, parr. 2, pp. 2-3, dated ApriL 21, 1986.

a Id"., SR, Amexes 1 * 2, dated March 28, 1986.

a ., PIF, Section IV, pera. I, p. 2, dated Jim 20, 1988.

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beneficiaries, based on actual investment costs, operating costs, and tarifflevels prevailing when the projects were completed (1990 and 1991, respectively).The return. ranged from zero (CERON) to about -18% (CEMAR) to negative beyondcalculation (ELETROPAULO). These calculations make no allowance for the conceptof consumer surplus; they only show the impact of adverse tariff regulation andpolicy.

7. Financial Performance

7.01 Bank ApDroach to Financial SuDervision. During the 1980s, theorganization of the sector and the importance of Federal regulation on theperformance of the individual utility were such (paras. 2.03-2.04) that the Bankconcentrated its efforts more on helping the Government to formulate sector-widefinancial rehabilitation plans and monitoring sector results than on supervisingthe financial performance of ELETROBRAS and the beneficiaries. Indeed, Bankstaff stopped supervising the financial performance of ELETROBRAS in 1986, as thecomparison of actual and forecast financial results had been rendered

.. meaningless, given the substantial differences between the SAR's assumptionsand the development of real events ...". 7/ As for financial supervision ofthe beneficiaries, the Bank monitored LIGHT and ELETROPAULO in connection withanother Bank loan (2565-BR), but devoted few resources to the other companies.This report will focus more on sector performance and the efforts of the Bank toinfluence Federal policy than on the financial performance of ELETROBRAS and thebeneficiaries.

7.02 Sector Finances. Schedule 7.1 compares actual and forecast sectorresults for the period 1982-1989. Forecast results reflect the financialrecovery plans agreed in 1981, 1983, and 1986. To facilitate comparisons, allfinancial data reflect price levels of mid 1981. Having been developed inconnection with ELETROBRAS I and II and the Power Sector Adjustment Loan (1986:2720-BR), the different forecasts are referred to, respectively, as EB I(covering 1982-1986), EB II (covering 1983-1987) and the Power Sector RecoveryPlan (PSRP, covering 1986-1989). Sector data after 1989 is not available.

7.03 ZB I. While actual and forecast levelo of summarized sector salesfor 1982-1986 were close (745 TWh vs. 757 TWh, or -1.6%), actual sector financialresults were well below what had been expected. For example, average revenue perkWh sold was expected to increase from CrS5.02 to Cr$6.38 (in December 1981prices) between 1982 and 1986; and 1987 was the deadline for sector financialrecovery. This development would be signaled by the sector's earning the minimumlegal rate of return on remunerable assets: 10%. Actual corresponding data weresCr$5.00/kWh, CrS3.36/kWh, and 5.2%; and actual summarized revenue for the period(CrS2,993 billions) was 32% below forecast levels (Cr$4,399 billions). Therewere similarly disappointing results with respect to actual and forecastsummarized debt-service coverage and consumer-financing ratios -- respectively,0.5 (times) vs. 0.8 (times) and -24% vs. 31% (Part III, Table 8.1a-8.1b).

7.04 3B I1. Sector financial performance in 1983-1987 paralleled thatunder EB I; actual and forecast levels of summarized sales were close: 804 TWhvs. 792 TWh, or + 1.6%, but actual financial results were below expected levels.

3' jM., PIF, Section III, pp. 1-2. pars. 3, dated April 21, 1986.

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Scehdule 7.1

Actuol & Forecast Sector Financisl Perforunce, 1982-1989

1982-1986 1983-1987 1986-1989

SueL SLWU- Su_-

arized A/F arized A/F arized A/F

1982 1983 198' 198 1986 1987 1988 1989 Data (X) Date X) Data (X)

Sales (TWh)Actul 1/ 123 132 148 162 180 182 187 189 745 -1.6 804 1.6 738 -8.0

Fore: El 1 2/ 121 132 146 170 189 -- -- -- 757 --

El 11 3/ -- 128 141 157 174 192 -- -- MA A 792 MA --

PSRP 1/-- -- -- -- 178 193 208 223 NA MA MA MA 802

Revenues (in billionr of CrS, reflecting prices of mid-1981) 4/Actust 615 565 580 629 604 783 1148 975 2994 -31.9 3161 -11.2 1991 -52.0Fore: ES 1 606 721 838 1029 1205 - -- - 4399 -- -

ES 11 -- 505 589 686 814 965 -- -- MA KA 3558 KA

PSRP -- -- -- -- 689 897 1137 1423 MA MA KA MA 4147

Ave. Revenue per kWh Sold (CrS, reflecting prices of mid-1981) 4/Actual 5.00 4.28 3.92 3.88 3.36 4.31 3.53 2.63 4.02 -30.8 3.93 -12.5 2.63 -48.2

Fore: El 1 5.02 5.47 5.75 6.06 6.38 -- -- -- 5.81 -- -- -

El 11 -- 3.95 4.17 4.38 4.67 5.03 -M -- 4A MA 4.50 4A --

PStP -- - -- -- 3.87 4.65 5.47 6.38 MA MA KA MA 5.17

5-year 5-year 4-yearlate of Pouneration CX) Ave. Ave. Ave.

Actual 6.1 4.9 5.8 3.4 4.1 5.2 4.2 -0.6 4.9 7.5 4.7 -24.5 3.2 -54.3Fore: EB 1 5.3 3.4 3.2 4.8 5.9 10.0 10.0 10.0 4.5 -- -- --

E1 11 -- 3.8 6.0 6.2 7.0 8.0 9.0 10.0 MA MA 6.2 MA --

PUP -- -- -- -- 5.0 6.4 7.7 9.1 MA MA MA MA 7.1

Summary Sumry Su ry

Debt Service Coveraeg (X) Ratio Ratio Ratio

Actual 0.6 0.5 0.4 0.4 0.5 0.6 0.2 0.1 0.5 -37.5 0.5 -37.5 0.3 -71.0

Fore: E1 1 0.8 0.7 0.7 0.9 0.9 -- -- -- 0. 8

ES11 -- 0.5 0.7 0.7 0.8 1.0 -- -- MA MA 0.8 MA --

Pup -- -- -- -- 0.5 0.8 1.0 1.3 MA MA MA A 0.9

Summry Summary Sumnmry

Coermeur Fin. Ratio CX) Ratio Ratio Ratio

Actual 2 -17 -35 -45 -32 -22 -2Z7 -345 -24 -177 -30 -184 -146 -738

Fore: El 1 21 24 24 35 49 -- -- -- 31 -- -- --

E It -- 10 28 33 37 A -- -- MA MA 35 MA --

PSAP -- *- -- -- -39 11 37 65 MA M MA MA 22.8

1/ Source: For 1982-198, Staff Approasal Report for Power Sector Loan, Arwnx 3.6.1-.2 (No. 6159a-dated

fay 27, 1966); for 1986-1989, ELETROURAS/ONAEE.

2/ Source: SAU for ELETUOSIAS 1, pp. 38 £ 41, Arnxoes 2-2/2 and 2/2-5 (Report No. 3338b-U), dated

April 19. 1962.

3/ Source: SAN for ELETROURAS It, pp. 37 & 40, Arnexes 2-2/2 w*d 2-2/5 (Report Mo. 4660-BR), dated

Noveber 11, 1983.

4/ late of Exchange: USS1.O0:CrS92.4U.S/ For 1988 and 1989. avregrg revenu per kth sold In derived from sources other than those shown in

above table -- a sries preparod by ELETROSRAS/DNAEE, uiAch is not fully cqeorable with data fromprfor yeers. However, In titutional chwnoge mwiated by Constitution of 1968 mko such values re-

presentative of tariff lveols in those years.

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Average revenue was expected to increase from Cr$3.95 to Cr$5.03 between 1983 and1987; and the deadline for earning 10% was 1989. Actual corresponding datawere:Cr$4.28, CrS4.31, and -0.6%; and actual summarized revenue (Cr53,161billions) was 11% below the forecast level (CrS3,558 billion). Actual ratios ofsummarized debt-service coverage and consumer financing were well below forecastlevels -- respectively, 0.5 (times) vs. 0.8 (times) and -30% vs.35% (Part III,Table 8.2a-8.2b).

7.05 PSRP. The financial performance of the sector deteriorated badlyafter 1987. Actual summarized sales for 1986-1989 (738 TWh) were 8% below fore-cast (802 TWh); and actual summarized revenue (Cr51,991 billion) was 52% belowforecast (CrS4,147 billion). Actual ratios of summarized debt-service coverage(0.3 X) and consumer financing (-146%) were well below forecast levels --respectively, 0.9 (times) and 23%. By 1989, average revenue amounted to onlyCrS2.63 as compared with the forecast level of CrS6.38; the actual rate of returnon remunerable assets was -0.6% as compared with the forecast level of 9.1% (PartIII, Table 8.3a-8.3b).

7.06 Policy & Institutional Context. The deteriorating financialperformance of the sector in the 1980. had its origins in the difficult policychoices and complex political/macroeconomic problems confronting the FederalGovernment (Annex 1). In such circumstances, both the military and civilianregimes, having chosen strategic objectives other than the financialrehabilitation of the power sector, allowed tariff levels to decline in realterms. This decline, which was politically popular, was justified on the groundsof fighting inflationary expectations.

7.07 Institutional factors also contributed to the deterioration of sectorfinances. For example, in 1983, the Central Bank inaugurated a process ofcentralizing in its hands the payment of so-called "regiotered" long-term debtowed to foreign creditors. In theory, once the borrower had made payment to theCentral Bank, the Government assumed the obligation to the foreign lender. Inthe case of the larger power companies, some of which had been active in worldcapital markets, the interposition of the Federal Government tended to attenuatethe link between borrowers and lenders -- that is, over time and incircumstances of financial constraints, the operating power companies came tofeel a reduced sense of obligation to make timely payments to the Central Bank.Instead, they tended to give priority to using their resources for other purposessuch as paying contractors and expanding their systems.

7.08 In like manner, the operating companies also became increasinglydelinquent in making timely payments to one another for electricity purchases orto the revenue-transfer mechanism (see Annex II). This delinquency acceleratedas the decade closed, given the poor example of the Federal Government, whichsuspended debt-service payments to foreign lenders in the second half of 1987.By 1990, there were major unpaid debts by the power companies to their foreigncommercial lenders and to the revenue-sharing mechanism and between the powercompanies for electricity purchases; and there were major elements of theremunerable rate base of the sector due to revenue shortfalls.

7.09 Justification for Bank Lendinc. In 1981 and 1983, the Bank obtainedFederal agreement to financial rehabilitation plans reflected in the sector f ore-casts, EB I and EB II (paras. 3.17-3.20; and 4.07-4.09). In 1983, part of the

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rationale for Bank lending was to help restore the international credit standingof Brazil (para. 4.02). When the sector again did not meet the new targets(1984), the Bank and the new civilian Administration agreed in 1985 on the PSRPwhich they reformulated in 1986 to achieve consistency with the a larger plan formacroeconomic stabilization, the "Cruzado" Plan. The macroeconomic strategyfeatured price controls, including a freeze on electricity prices in 1986. Thefreeze was to be followed by progressive tariff increases in later years plusequity contributions and other measures. The Bank supported the PSR? (and there-form the Cruzado plan) with a sector adjustment loan (2720-BR, US$500 million).

7.10 In addition to helping to restore the international credit standingof Brazil (1983) and supporting an anti-inflation macroeconomic plan of the newcivilian Administration (1986), Bank lending continued to be justified on sectorgrounds -- namely, that given the importance of the electric power sector to thedevelopment of Brazil, it would be more useful to help the Brazilians toformulate and implement a credible plan of tariff and financial recovery than tosuspend disbursement, or to stop the processing and approval of new loans.

7.11 These financial recovery plans incorporated substantial concessionson the part of the Bank -- that is, between 1981 and 1986, the Bank agreed topostpone the deadline for sector financial rehabilitation from 1986 to 1989 andthen to sometime after 1989. After 1986 and during the balance of the decade,Bank policy reflected both a sympathetic approach to the complex economicproblems of Brazil and a measure of caution toward the macroeconomic policies ofthe Administration (Annex 1). The Bank continued to disburse from existing powerloans, but did not successfully complete the processing of new power loansnotwithstanding substantial effort toward this end.

7.12 In August 1987, the Bank and the Government discontinued theirefforts to negotiate a second sector adjustment loan due to the re-introductionof a global macroeconomic policy featuring price controls, including a freeze onelectricity tariffs. At about the same time, the more important stategovernments of the South and South-east authorized their respective powercompanies to withhold payments to the sector revenue-sharing mechanism (para.7.01). This action eventually forced the Government, very much against its will,to raise sector tariffs. In due course, the revenue-sharing mechanism wasredesigned to address some of the complaints of state government; but without ahigher level of tariffs, the sector was starved of the financial resources neededfor expansion. Another factor reducing resources available to the sector was theredirection of the proceeds of the Sole Tax -- about 2% of sector revenues in1988 -- to state and municipal governments for disposition an they saw fit.Formerly about 60% of the revenues of this tax were returned to the sector.

7.13 The Bank and the Government renewed their efforts to negotiate asecond sector adjustment loan in 1988 and a loan promoting environmental reformand conservation in 1989 but these efforts again failed due to deterioratingeconomic conditions and the Government's choosing strategic objectives other thanthe financial rehabilitation of the sector. A full discussion of the results andexpectations for Loan 2720-BR appears in OED Report No. 9267 (dated December1990). In 1990, the Bank approved its last power loan to Brazil: 3227-BR: US$365million. Two years later, the loan agreement remained unsigned because thegovernment declined to raise sector tariffs to the levels specified as acondition for effectiveness. In these circumstances, the Bank withdrew the loan.

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7.14 IL ETOBRAS In the above circumstances of financial constraint,between 1982 and 1986, the financial performance of ELETROBRAS was below thatforecast in connection with ELETROBRAS I. Summarized consumer-based funding($Cr689.4 billion -- in constant mid-1981 price.) was 40.4% below the forecastlevel (Cr$1,157.7 billion)(see Schedule 7.2). The shortfall of consumer-basedfunding (CrS468.3 billion) was offset by surplus contributions and other sources(Cr$380.4 billions) and a short-fall with respect to summarized uses of funds(Cr$87.4 billions). Government contributions (Cr$350.4 millions) were far largerthan expected (Cr549.0 millions) and accounted for much of the increase of non-consumer-based funding. Debt-service coverage declined from 1.2 times to 1.0times; the debt-equity ratio rose only modestly: from 54% to 57%, well below therange expected at appraisal (60% and 74%). Between 1987 and 1989, total uses offunds declined from Cr$412.8 billions to CrS249.9 billions with Govornmentcontributions as a source of funds declining from CrS158.7 billions to Cr513.8billions.

Schedule 7.2:ELETROORAS: Sources & Uses of Funds. 1982-1959

Suworized Data. 1982-1956X % X Differ. Actualof Fore- of from

Actun L 1n1l cast Totrl Fore. 1987 1988 1989

(in bilLions of CrS9 refLecting prices of mid-1981) 1/

ources 2052.6 100.0 2140.4 100.0 -4.1 412.8 342.6 249.9Oross int. cash gen. 1073.4 52.3 728.3 34.0 47.4 279.0 306.2 948.2Les: Debt ser. 9 div. 943.7 46.0 865.0 40.4 9.1 296.7 254.4 301.4Met int. cash gen. 129.7 6.3 -136.7 -6.4 -194.9 -17.7 51.8 646.8

Sol* Tax 0.0 0.0 168.3 7.9 -100.0 0.0 0.0 0.0Rversion 346.2 16.9 715.1 33.4 -51.6 22.7 8.5 13.5Co pulsory Loan J21.6 10.4 411.0 j1.2 -48.0 i; 2. NA

Sub-totat 559.8 27.3 1294.4 60.5 -56.8 57.0 36.8 43.5

Totsl consu_r-baued 689.5 33.3 1,157.7 54.1 -40.4 39.3 88.6 690.3funding

Equity cant. 350.4 17.1 49.0 2.3 615.1 158.7 114.1 13.8Borrowings 898.2 43.8 933.7 43.6 -3.8 211.4 131.0 -454.3Other 1. S.6 0.0 t NA _ 3A _.9 0.0

gm 2052.6 10 2140.4 120. -4.1 412.8 B 249.Equity Invest's. 392.0 19.1 125.4 5.9 212.6 3.6 15.4 0.0Loans 4 Advances 1415.6 69.0 2005.2 93.7 -24.7 408.2 322.5 15.5Other 244.9 11.9 9.8 0.5 NA 1.0 4.6 234.3

1/Rate of Exchange: USS1.00:CrS92.44Key Financiat RatiosDebt-srnvice Cov. (X) 1.1 0.8 37.5 0.9 1.2 1.2Debt/LT Cap. Ratio MX) 58/23* 68/32* -14.7 56/44 44/66 39/61

* five-year average

- 24 -

7.15 ELETROBRAS I: Beneficiary Financial Performance, Exhibiting thetariff and other adverse factor. affecting the sector, the financial performanceof the beneficiaries was lower than what was expected at appraisal. Schedule 7.3compare. actual and forecast summarized levels of investment expenditure andsource. of financing of the beneficiaries for the years 1982 and 1986 and alsosets forth summarized investment expenditure and sources of financing for theyears 1982-1990 (see Part III, Tables 9.1a to 9.1b for details). All datareflect constant December 1981 prices. Actual summarized investment expenditure($Cr75,221 millions) was 56% below the forecast level (Cr$175,378 millions).Matching this shortfall of expenditures (Cr$98,157 millions) were correspondingreductions in financing from operations and sector contributions (Cr$61,505millions) and in financing from other sources (Cr$36,652 millions). For theperiod 1982-1990, when the project was executed, sunmiarized investmentexpenditures of the beneficiaries amounted to Cr$148,841 million. Financing fromnon-sector sources (CrS218,475 millions) covered such expenditure plus thedeficit of financing from operations and sector contributions (CrS69,634million.). Negative net internal cash generation due to low tariff levels,inadequate contributions from state governments, high levels of accountsreceivable, insufficient collections from the revenue-sharing mechanism, lack ofco-financing -- these were the factors underlying the poor performance of thebeneficiaries.

7.16 ELETROBRAS II: Beneficiary Financial Performance, Schedule 7.4compares actual and forecast summarized data of the beneficiaries for the years1983 and 1987 and also sets forth data for the years 1983-1991 (see Part III,Tables 9.2a to 9.2f for details). All data reflect constant December 1982prices. The financial performance of the beneficiaries under ELETROBRAS IIexhibited the same tariff and other factors which affected the beneficiariesunder ELETROBRAS I. However, during the period 1983-1987 the larger-than-expected investment expenditures of ELETRONORTE and ELZTROPAULO causedcorresponding increases with respect to the investment expenditures of thebeneficiaries as a group. Actual summarized investment expenditure for 1983-1987($Cr2,855 billions) was about 31% above the forecast level (CrS2,185 billions).Matching this expenditure increase (CrS670 billions) were increases in non-sectorfinancing (CrSl,728 billions) and decreases in sector financing (CrSl,058billions). For the period 1983-1991, when the project was executed, summarizedinvestment expenditures of the beneficiaries amounted to Cr$5,735 billions.Financing from other non-sector sources (Cr$7,078 billions) covered suchexpenditure plus the deficit of financing sector sources (Cr$1,343 billions).

-25.

Schedule 7.3: ELETROCIUS 1: Forecat wnd Actual Forecast Sources of Investmet_ Funding(In CrS willion, reftlecting prices of Decechr 1981) l/

Forecast Suiury Data, 1982-1986

enef fl- Not Int. Mon-Oper. Sector Non-Sec. Long-ters Invw tmntciary Cash Gen. Income Contrlbut. Contribut. Borrowing Other Expenditure

CELPA 7404 97 14708 2404 138U2 -1583 - 36872COELCE 1739 -924 13621 2500 17191 3987 - 38114CELPE 3997 -227 14781 1814 25587 797 a 4749ENERSUL 511 1s5 8925 3695 22472 -565 * 35196COSERN 911 -61 6578 1560 4M 2685 u 16417

Total 14565 -957 58613 11973 83863 5321 a 173378X Total 8.4 -0.6 33.8 6.9 48.4 3.1 100.0

Actual Sum_.ry Data, 1982-1986

CELPA -226 -195 12130 372 15103 3589 - 30773COELCE -7620 -16032 788 715 9776 17879 - 12586CELPE 2588 995 9714 54 4336 -6884 * 11293ENERSUL -3989 -1273 4279 1438 9016 3513 * 12984COSERN -83 -986 354 1970 2105 1033 * 7585

..... ..... . ----- ..... . . ----- ------. . ..... ................ ..... ..

Su-Total -9330 -17491 37537 5039 40336 19130 * 75221I Total -12.4 -23.3 49.9 6.7 53.6 25.4 100.0ftf. frm

Forecast -164.1 1727.7 -36.0 -57.9 -51.9 259.5 -56.6

Actual Sumory Data, 1987-1990.. . . . .,.. . . . . .. . . . .. . . . . . . . . . .. . . . . . .........

CELPA -11609 5932 4582 2533 758 12365 * 21391COELCE -40574 -2940 3474 2035 12457 35732 a 10184CELPE 2725 7468 7284 "18 14382 -1S985 u 20492EINESUL -16226 -5107 -19832 2924 8203 41522 * 11.44COSEmN -19941 2630 1787 2057 10766 9775 a 7069Sub-Total ----- ---- ..... ---

-85628 7983 -2705 14167 5394 86409 a 73620Z Total -116.3 10.8 -3.7 19.2 72.5 117.4 100.0

Actusl Su _ ry Data, 1962-1990...................................................................... ---------

CELPA -11835 5737 16712 2905 22691 15954 a 52166CtELCE -48194 -18972 11342 2750 2Z3 53611 * 22770CELPE 5313 863 16996 5162 1871 -22869 a 31785ENEJI.U -20215 -6380 -15553 4362 17219 48035 * 27468COSERm -20027 1614 53 4027 12869 1O80 - 14654

kubTot&l -94958 -9508 3832 19206 93730 105539 a 14841X Total -63.8 -6.4 23.4 12.9 63.0 70.9 100.0

1/ Rate of Exchange: USS1.00:CrS92.44

- 26 -

Schedule 7.4ELETROSUAS Il: Forsecst wnd Actusl Sources of Investmmnt Funding (in Cr$ bIllions of 12/82) 1/

Forecast Swumry Data, 1983-1987,.................................................................. .....

enaf tI- Net Int. Non-Oper. Sector Won-Sec. Long-term Invl t_ ntclary Cash Gan. Incom Contribut. Contribut. Norrowing Other a Expenditure

2/ Given unavaflability CERON 1.5 0.3 5.8 5.6 15.7 0.3 * 29.1of actual data, fore- ELETRONORTE -236.4 12.0 306.7 0.0 1557.1 -113.4 * 1526.0cast data was excluded CEAL 5.3 -1.1 12.3 1.4 16.1 0.0 * 33.9

to m_ke cowrarions CEMAR -0.2 0.1 20.9 4.3 15.8 -0.3 a 40.6of actual and fore- LIGHT 5.5 50.5 68.9 0.0 52.5 33.6 * 211.0cast siary date ELETROPAULO -3.6 0.0 97.6 0.0 216.1 34.6 * 344.7vaxld. CEPISA 2/ 0.0 0.0 0.0 0.0 0.0 0.0 * 0.0

..... -- -- -- -- -- -- -- - ..... ..........

Sub-Total -227.9 61.7 512.2 11.3 1873.2 -45.2 * 2185.4X Total -10.4 2.8 23.4 0.5 85.7 -2.1 100.0

Actual Suoaary Data, 1983-1987

CERON -7.4 -22.1 4.4 3.1 3.7 29.7 * 11.3ELETRONORTE -545.2 -162.5 85.6 2.0 1521.4 1411.1 * 2312.4

CEAL -3.2 -3.0 6.3 1.1 5.0 3.5 * 9.7CEMAR -7.0 2.2 12.8 6.7 8.9 3.8 * 27.4

LIGHT -2.7 108.6 7.8 3.3 258.2 -268.8 * 106.4ELETROPAULO -212.8 0.0 26.3 0.0 259.1 315.5 388.1

CEPIA 2/ 0.0 0.0 0.0 0.0 0.0 0.0 * 0.0

Sib-Total -778.3 -76.8 1U3.2 16.1 2056.3 1494.8 a 2855.3I Total -27.3 -2.7 5.0 0.6 72.0 52.4 100.0Z Dif. from 241.5 -224.4 -72.1 42.7 9.8 -3405.5 30.7Forecast

Actual Sumi_ry Data, 198-1991

cIRCE -1.6 4.3 0.0 0.0 5.2 1.9 * 9.8ELETROSIRTE -1156.1 746.8 106.3 0.0 396.3 2390.9 * 2484.2CEAL -49.8 5.6 1.1 0.5 9.9 45.6 a 13.0CEPAR -84.1 8.5 69.3 9.1 23.9 27.8 a 54.5

LIGHT -89.9 157.2 1.4 6.7 23.9 -11.9 a 87.4ELETROPAULO -362.4 0.0 12.3 0.0 375.2 206.0 a 231.1CEPISA 2/ 0.0 0.0 0.0 0.0 0.0 0.0 a 0.0umb-Total ---- .... ..... ..... ..... ..... -----

-1743.9 922.4 190.4 16.3 834.4 2660.3 * 2860.0S Total -60.6 32.0 6.6 0.6 29.0 92.4 100.0

Actual Summanry Data, 1983-1991

CEOSC -9.0 -17.8 4.4 3.1 8.8 31.6 * 21.1ELETRONCETE -1701.3 584.3 191.9 2.0 1917.7 3802.0 * 4796.6CEAL -52.9 2.6 7.4 1.6 14.9 49.1 * 22.7CEIAN -91.1 10.? 82.1 15.8 32.8 31.6 * 81.9LIChT -92.6 265.8 9.2 10.0 262.1 -280.7 a 193.8ELETROPAULO -575.2 0.0 38.6 0.0 634.3 521.5 * 619.2CEPIA 2/ 0.0 0.0 0.0 0.0 0.0 0.0 * 0.0

..... ..... ----- ..... ..... ..... ...._... . _

Sub-Total -2522.1 845.7 333.6 32.5 2890.7 4155.1 * 5735.3X Total -44.0 14.7 5.8 0.6 50.4 72.4 100.0

1/ Rate of Exchange: US#1.00:Cr125

- 27 -

8.0 Performance of the ELETROBRAS. the Bank. and the Government.

8.01 ELETRBRAS. It is not surprising that ELETROBRAS did not play therole of a DFC (para. 5.17) and that its compliance with certain financialcovenants war delayed or worse (Part III, Tables 10.1-.2), given that political,economic, and sector developments evolved in a manner totally different fromthose prevailing and expected when the projects were first conceived. Thosedifferences included: the advent of a civilian Administration (1985) which

adopted and/or continued macroeconomic and sector policies exacerbating inflationand undermining sector finances (1986-1989) (Annex 1); and the writing of a new

Constitution (1988) which altered the Federal-state relationship to provide formuch greater state autonomy (para. 7.11). In such circumstances, ELETROBRAS

lacked the support of the Administration to play the role of a DFC. Further it

lacked the mechanisms to discipline the beneficiaries, except for suspendingdisbursements under the sub-loan agreements. Such drastic action was politicallyunfeasible.

8.02 Bank At the time of the appraisals (1980-1982), the Bank did not

anticipate the need for mechanisms in the loan agreements providing for easyreallocation of loan proceeds among the beneficiaries in the event that theirimplementation performances and financial needs might vary from what had beenexpected (para. 5.07); and the Bank misjudged the capability of CAEEB to managethe procurement process (para. 5.13).

8.03 At the time of the appraisals and for a few years afterwards (up to

1986-7), the Bank's understanding of the position of ELETROBRAS within the sector

was correct, according to the staff of the borrower (paras. 3.07-3.11). Further,even after SEST partially displaced ELETROBRAS, the expectation of transformingELETROBRAS into a DFC was reasonable, given the primacy of Federal decision-making within the sector. Equally reasonable were the financing plans of thebeneficiaries, given the commitments of the Federal and state governments tosupport the project. What undermined these expectations was, first, a shift inthe support of both the Federal and state governments to objectives outside thesector and, second, a shift in Federal-state relations.

8.04 During the decade of the 1980s, the involvement of the Bank withELETROBRAS and the beneficiaries took place in the wider context of: (i) helpingto restore the international credit standing of Brazil (1983); (ii) supportingthe Cruzado Plan (1986); and (iii) the continuing dialogue with the FederalGovernment on restoring sector finances (parao. 7.09). Between 1981 and 1986,the Bank, taking account of the complex economic, financial, and politicalproblems of Brazil, made a series of investment loans and one sector adjustment

loan based on a series of understandings that the Government would implementthree credible plans negotiated in 1981, 1983, and 1986 for rehabilitating thefinances of the sector. The plans failed to achieve their objective because theGovernment, in its effort to combat inflation and due to political considerationsplus other factors (including short-comings inherent to the plans), did notsupport the sector with adequate tariff levels (paras. 7.03-7.05). Between 1987and 1989, for the sake of flexibility and continued dialogue with the FederalGovernment, the Bank continued to disburse from Loans 2138-BR, 2364-BR, and otherpower loan., but did not make new power loans due to macroeconomic, tariff andother conditions. Given the inherent contradiction of this approach, the Bank

- 28 -

did not send a clear and consistent message to the Federal Government; hence,this tended to undermine the Bank's effort to influence sector policy.

8.05 The level of supervision, including visits to the beneficiaries, wasadequate and the measures recommended appropriate (Part III, Table 11). The Bankwas correct to insist on strict adherence to ICB procurement procedures; and theappointment of a procurement coordinator at ELETROBRAS contributed to anexpediting of the procurement process (paras. 5.13-5.14)

8.06 Federal Government. In spite of the importance of the electric powersector to the development of Brazil, both the military and civilian regimessubordinated the financial rehabilitation of the sector to short-run political/macroeconomic goals, especially fighting inflation, or other strategicobjectives. Such subordination devastated sector finances and led to a patternof underinventment which may result in serious constraints on the economy. Italso caused the Bank to withhold its financial support from the sector; the Bankhas no active loans supporting the electric power sector. That the sector stillprovides a reasonable level of service to current customers has led politicaldecision makers, who must allocate scarce resources among other groups withlegitimate claims for support, to underestimate the risk of having electric powershortages. Lack of political consensus within Brazil is at the heart of thisunhappy situation.

9. Lessons to be Learned.

9.01 Proiect Lessons. The project lessons are three: (i) the loanagreements should have provided mechanisms to transfer loan proceeds from onebeneficiary to another, depending on performance and need (8.02); (ii) ICB provedits value in lower-than-expected unit costs (para. 8.06); and (iii) when dealingbeneficiaries who are inexperienced with Bank-approved procurement procedures,the Bank should, as a standard practice, seek the: (a) appointment of anprocurement specialist by the borrower to co-ordinate the activities of thebeneficiaries; (b) preparation and issuance of an acceptable procurement manualto the beneficiaries; and (c) the provision of appropriate training tobeneficiary staff (para. 8.06).

9.02 Sector Lessons. The sector lessons relate to the regulatory regimeand Bank lending. It seems clear that establishing the institutional autonomyof DNAZZ (or of a new regulatory agency) is a necessary first step towardinsulating sector policy from short-run political or macroeconomicconsiderations; and that the Government should begin to consider those stepsleading to its establishment. Further, in order to prevent future domination ofthe regulators by the regulated, DNAEE or the new regulatory agency whouldinclude, in addition to representatives of the Government, representatives of thevarious consumer groups.

9.03 The financial performance of the sector during the 1980s illustratesthe need for an autonomous regulatory agency to: (i) enforce power tarifflegislation mandating the level and structure of tariffs in line with themarginal cost of supply; and (ii) protect the sector from the impact of short-runpolicy shifts on the part of the Government. In the 1980s, the Governmentignored legislation relating to power tariffs and DNAEE in favor of review byplanning agencies. Furthermore, the Government agreed with the Bank on a series

- 29 -

of financial rehabilitation plane which took the place of existing financialcovenants based on the norms of tariff legislation. The substitution of theseplans for the tariff legislation started the sector on a downhill path whichcontinually allowed for the subordination of the long-term financial needs of thesector to the short-run political and macroeconomic objectives of the Government,including anti-inflation, price-control schemes, and other strategic objectives.

9.04 Notwithstanding its adverse impact on sector finances, this situationcontinues to prevail. For example, between 1987 and 1989, due to macroeconomic,tariffs and other issues, the Bank and the Government did not agree on the termsfor new loans to the power sector. In June 1990, after the Governmentimplemented major tariff increases to reach 90% of an agreed target level, theBank approved a new loan to support a power transmission and conservationproject. Effectiveness and continued disbursement were conditioned on achievingand maintaining the target tariff level; however, almost two years after loanapproval, with the target tariff level not reached and the loan agreementunsigned, the Bank withdrew the loan. The existence of an autonomous regulatoryagency with proper power might have avoided this situation.

9.05 There is another lesson to be learned about the proper circumatancesfor Bank lending: continuing to lend despite the record of unkept financialrehabilitation plans undermined the credibility of the Bank and led toexpectations on the part of the Government that the Bank would not insist onadherence to either covenants or plans. This message did not contribute towardimplementation of the plans. It seems clear that lending in circumstances ofcontinuing financial deterioration sends the borrower the wrong message and leadsto a significant risk that agreed plans for financial rehabilitation will not beobserved.

- 30 -

Annex I

Policy Context and Bank General Lendina Policy. 1982-1991

1. Political & Economic Factors. During 1982-1983, when Loans 2138-BRand 2364-BR were approved, the military Government faced complex political andeconomic problems. On the political side, the military successfully undertookthose steps leading to its withdrawal from direction of national political lifein 1985 (see below). On the economic side, to stimulate exports and to restorethe shaken confidence of foreign lenders following the debt crisis of 1982, theGovernment implemented stabilization policies aimed at reducing aggregatedomestic demand yvj restrictive monetary and fiscal policies, real exchange-ratedepreciation, and tightened import restrictions. On balance, these measuresachieved their objectives, thereby laying the basis for an export-led recoverystarting in mid-1984 (see Schedule 1 for key economic indicators).

2. In 1985, with the implementation of both projects underway, acivilian President (Mr. Jose Sarney) took office. That same year, led by boomingexports, the economy grew strongly with the result that Brazil continued toachieve the external adjustment required by the debt crisis and a resumption ofgrowth. However, inflation became more entrenched -- 235% in 1985 (after 211%in 1984). The causes of inflation were the: inability of Brazil to eff-ct thenecessary change in the domestic saving-investment balance required by thecontraction in foreign borrowing; continued recourse to borrowing from themonetary authorities to finance persistent public sector deficits; and pervasiveindexation of the economy.

3. Because Mr. Sarney succeeded to the presidency following the deathof his party's presidential candidate (Mr. Tancredo Neves), his political man-date, which was weak at the beginning of his Administration, became weaker underthe pressure of events.1 1 / To offset his weak mandate and strong oppositionin Congress, the President tried to muster support for anti-inflation programsentailing minimum or no sacrifices by any major political group. The CruzadoPlan (February-November 1986) and the Bresser Plan (June-September 1987) includedsome forms of price control and deindexation; but they included no significantfiscal/monetary measures. In 1989, there was one final attempt to control prices(the "Summer Plan), but this was not successful. These measures failed with theresult that the economy suffered from "stop-start" growth, high rates ofinflation, large public sector deficits, and problems servicing foreign debt.

Mhghy Crmg w ,s." do Cawddm bahvedi a cwhgmm &n X sd poidial paskim of P"idmM Uay. Duwr O yi. 197-198u .&

_ mdaa_X.pinhidm ddof bsfrmS y_n b 4. Th 19M Caustk ud=ssh.d u . powodll Camp... mlua.omU _ i _dXa_ryofgus &hiai.iud Xoiapw.o s Eosw UuhfudX lh o ras uo.

-31 -

Schedule 1: Key Economic Indicators, 1981-1989 *

1981 1982 1983 1954 1985 1906 1987 1988 ifl

Real GDP Growth Ras 1%) 14.4) 0.6 o3.5) 6.1 8.3 7.6 3.6 10.3) 3.0

PubUc d*flct/ODP %) 6.0 6.6 3.0 1.6 4.3 3.6 5.5 4.3 NA

Inflation Rate 1%) 96.1 99.7 210.9 223.8 235.1 55.0 416.7 1037.0 1783.9

(IOP/DI - Dec./D.c.)

Exp. Vol. Growth Rate 1%) 21.3 -9.2 14.3 22.1 -2.0 -23.6 14.5 17.6 2.3

Imp. Vol. Growth Rate M -12.3 -6.0 -17.3 -3.0 -1.1 15.0 -3.8 -0.8 15.8

fIn Bluon of US*l

Debt service 17.8 20.8 18.4 20.0 22.3 24.2 25.3 16.4 17.2

Total debt 73.9 85.4 93.6 102.0 106.1 111.0 121.3 114.0 115.3

Trede balence 1.2 0.8 6.5 13.1 12.5 8.3 11.2 19.1 16.0

Current eccount balance -11.7 -16.3 -6.8 0.1 -0.2 -6.3 -1.4 4.4 0.3

Source.: World Beak: BrazIl: A Macroeconomic Evaluation of the Cnrndo Plan, dated December 1987, p. 3. Table 1.1 nd p.

13. Table 1.6: end Brazil: Economic Stabilizgtion with Structural Refomis. Report No. 8371- BR. dated January 31. 1991. p. 47. Table

2.2 ard p. 80, Table 4.2.

4. Bank General Lendina Policy. The lending policy of the Bank changed

in response to changes in the Government's macroeconomic goals. For example, in

1984-1985, the Bank supported the objective of restoring creditworthiness not

only with conventional project loans, but also with its so-called "Special Action

Program" (SAP), consisting of quick-disbursing, policy-based loans for export

development and agriculture, and other SAP actions including loan increases and

supplements and special account operations. The SAP successfully raised

disbursements while supporting policy adjustments required by the crisis.

5. In 1986, with Loan 2720-BR (US$500 million, 1986), an adjustment loan

supporting a plan for sector financial rehabilitation, the Bank endorsed the

Cruzado Plan. The financial targets for sector financial rehabilitation were

designed to be consistent with the price-control approach of the Cruzado Plan

(para. 6.05), i.e., only modest tariff increases in late 1986 followed by higher

tariff levels in 1987 and later years, resulting in a return on remunerable

assets rising to 9.1% by 1989. (It was expected that a second power sector

adjustment loan would be processed in 1987, provided that sector performance in

1986 was satisfactory and provided that there was reason to believe that sector

performance would be consistent with the financial targets for that year.) The

subsequent efforts of the Bank and the Government in 1987 and 1988 to negotiate

two additional sector adjustment loans were unsuccessful primarily because the

Government pursued strategic objectives other than the financial rehabilitation

of the power sector.

6. In 1988 and 1989, following the failure of the Bresser plan in 1987,

the Bank saw the Government's major task to be, not GDP growth and improved

creditworthiness, but stabilizing the economy and controlling the growth of

fiscal deficits financed through money creation -- a task made infinitely more

- 32 -

difficult by the weak political position of the President and a host ofcomplicated economic constraints. Cognizant of the political and *conomicuncertainties facing Brazil and of the implications of different lending levelsfor the its risk exposure, the Bank designed a lending *trategy based on theconcept of "graduated response" to policy and institutional changes -- that is,the level of lending would depend on the comprehensiveness and credibility of theGovernment's stabilization and adjustment efforts. The Bank intended that itsESW work focus on providing the basis for dialogue with the Government on thefiscal side of its stabilization program. This approach continued to prevailwhen the projects were completed in 1990-1991.

- 33 -

Annex II

Tariff Legislation and Reculation in the 1970.

1. Before 1976, the power tariff legislation applied by DNAEZ providedfor: (i) nationally uniform tariffs set at levels to earn returns of 10-12% on"remunerable investment" (or rate base); (ii) the transfer of financial resourcesthrough the Global Guarantee Fund (GGF) from the stronger utilities to the weakerutilities until the weaker utilities earned 10% on their rate bases; and (iii)the addition of revenue shortfalls to the rate base (Compensation Account) forrecovery through future tariff increases. The revenue covenants of Bank loanagreements relied on power tariff legislation. In 1981, there was a fundamentalchange in the concept of the GGF: Decree-Law 1849 provided for the redistributionof the earnings of utilities with a rate of return in excess of the rate of re-turn of the sector. During the 1980s, liberal use of the Compensation Accountdeferred to the future tariff levels consistent with a rate of 10-12% on"remunerable investment"; Decree-Law 1849 provided the GGF with access to theearnings of the financially stronger companies, even if those companies wereearning less than the legal minimum rate of return.

2. Before 1976, DNAEE applied this legislation in a manner enabling thesector to earn the legal return (10%) on its rate base and finance a considerableshare of its investment expenditures from internal resources. In the opinion ofthe Bank, during the first half of the 1970., the application of this legislationproduced a financial environment satisfactory for sector development. In likemanner, the Bank felt that the planning and financial operations of ELETROBRAScontributed to sector development.

3. In the latter 1970s, the level of sector revenues began todeteriorate because DNAEE did not authorize adequate tariff increases. It tooka new approach to the application of power tariff legislation by: (i) redefining"remunerable investment' in a way which effectively lowered the rate base; (ii)adopting a methodology for asset revaluation which failed to maintain the valueof the rate base in circumstances of high, rising inflation; (iii) disapprovingsome utility operating expenses; and (iv) making more liberal use of the so-called Compensation Account, which provided for the addition of revenue shortfallto the remunerable rate base. Underlying this new approach was Government pres-sure on DNAEE to reduce electricity tariffs in real terms to contain inflationaryexpectations. The Bank maintained an active dialogue with DNAEE on the bases forits decisions; but it was understood that in the final analysis the rulings ofDNAEE reflected Government policy.

- 34 -

PART II. COMMENTS OF THE BORROWER

Copies of the draft report were sent to ELETROBRAS, the Ministry ofHines and Energy, the Ministry of Planning, and DNAEE but no comments have beenreceived.

35 -

PART IIIPage 1 of 2

Table 1: Eannk Lending to ELETROBRAS

Loan NuWmr (in US# Year of& Project Titte mllions) Purpose Approval Status

1300-BR: 50.0 To help finance reinforcement and expan- 06/24/76 Substantially completed inNortheast Power sion of distribution facilities of three 1982. about 3 years late; andDfstribution state-osned power utilities: CELPE, with many Bank-agred changes

COELBA & COELCE. to take account of patterns ofgrowth different from hat wasexpected at appr asal.

153S-UR: 130.0 Sam as above for three state power 03/28/78 Completed In 1964-1986, aboutSouth-southeast utilities: CENIG, CELESC A ESCELSA. 4.5 years late; and with manyPower Distribution Bank-agreed changes to project

to account for slow growth.

1939-BR: 54.0 To help finance construction of national 12/23/80 Substantitlly completed inPower System load dispatch center at grasilia (ELETRO- 1991, about five years lateCoordination ERAS) and a regional load dispatch cen- due to greater-than-expected

ter at Recife CCHESF). technical compLexity.

2138-R: 1U2 T To help finance a time-slice (1983-85) 05/11/82 CompLeted In 1989-90, about 4ELETROBRAS I of the inwestment progra_ (1982-86) years late due to lack ofPower Distribution for distribution expawsion of five state counterpart funding nd slow

power utilities: COSERN, ENERSUL, CELPE demnd growth. Loan closed onCELPA & COELCE. 12/31/89.

2364-1R: 250.6 To help finance a tim slice (1983-1988) 12/08/83 Project under construction AELETROBRAS II of the corresponding program for dis- substantlolly delayed. LoanPower Distribution tribution expansion of five stste-oimnd closed on 06/30/91.

power utilities and two ELETROBRAS sut-sidiarie -- respectively, CEAL, CEPISA,CENAR, CERON, and ELETROPAULO; & ELETRO-NORTE and LIGHT.

2365-BA: 22.8 To help finnce rurrl distribution 12/08/83 Project uccemfully completedRural Electrifica- faclitties of two state power utilities: without delay Fully disbursed,tion Project CENIC & COPEL. loan was closed on 06/30/90.

25o-U: 400.0 To help finance mjor transmission 06/04/85 Project substantially delayedCNESF-FURNAS Power facilities of two ELETROBRAS rub sdiar- due to counterpsrt fundingTrommission lea: CHESF and FURNAS. deficit. Loan closing set for

for 12/31/92.

2565-n: 312.0 To help finance portiors of the distri- 06/04/85 Sam _ s above. Loan closingSoutheast Power bution expansion program of three sat for 12/31/92Distribution state power utilities: CPFL. LIGHT,

ELETROPAULO.

-36-Pag 2 of 2

Table 1: Sank Lending to ELETROBRAS (Cont'd.)

AmouantLoan NLmber (in USS Year of& Project Title millions) Purpose Approval Status... .. ... .... ............. ............................ .... ...... ......... .................. ...................

2720-BR: 500.0 To help finance general imports procured 06/26/86 Loan was fully fisbursed inPower Sector Loan under ICB. Disbursement of this *quick- 1986. Except for envirornnt/

disbursing, policy-based" loan was con- resettlement objectives, loanditloned to tiplementation of a Least- fmiled to generate lasting i-cost sector expansion progrm, a corres- proveents in sector finnces,ponding tim-phased sector financial especially with respect toreabilitation plan, nd environmuntal/ tariff levels.resettlement measures. This operationwas also intended to support a m_cro-economic stabilization progrm ("CruzadoPltan) which depended pri_mrily onprice controls to achieve its objectives.

3227-BR: 35.0 To help finance a time-slice (1990-93) 06/14/90 After loan aWpoval (Juw 1990), theElectricity Trans- of the transmission investment & rehab. Government did not: (i) raise tariffsmission & Conserva- programs of several power utiLities, plus to the target level hich was a con-tion Project implementation of a conservation progrm dition for effectiveness; and (11)

(PROCEL). Proposed beneficiaries in- mintain tariffs in real term. Include seven state coqpanies nd two ELE- c1rcuastance of high, rising infle-TROBRAS subsidiaries. tin, the financial consequences for

the sector have ben advers. Alsothe Governmnt deferred signing theloan agreemnt in order to avoid pay-ing commltmnt fees since It did notanticipate effectiveness until December 1992 as per Its proposed tariff-improvent progrm. In circ_takncsof substantfal nd adverse changesince loan approval and If the loanagreement remains unslgned, It isSank policy to consider the option ofwithdrawing the ursigned loan. hor-

l ly, once the Government has takensubstantila corrective action, theBank and the borrower resume theirdialogu with positive results. Inthe case of this loan, the Sank haswithdrawn the loan nd is waIting forcorrective ction.

2487.1

- 37 -

Table 2.1: ELETROBRAS 1: Project Tunetblo

Daft Date Datehem Planned Rvnisd A

- Identification/PrcpLrtion 0o/t-09/80

- Apprisal 10/#;01/82

- Loan Negotitions 03182

- Board Approval 05/11/82

- Loan Signature 05/12182

- Loan Effectiveness 09/10182 10/25/82 10/25182

- Projet Completion 06/30/86 12/31/90 06/30/90

- Loan Closing Date 06/30/87 12/31189 12/31/89

- Las Disbusemnt 07/25/90

L L-T

III.0

t.1

p..'

0. I�JI.)

gI3�III3u*ir ma w

- m -

'-1

I

39 -

Table 3.1: ELETROBRAS 1: Actual & Forecast Cost

( In miLLions of current US S)

Actual Forcast

For- Net Percent*ign Stock For- Change from

8eneficieries (1RD) Other* Total (IBRD) eign Local Total Forecast (X)

CELPA 18.46 69.24 87.70 6.30 27.90 79.70 107.60 -18.49COELCE 21.21 137.98 159.19 24.25 53.80 133.00 186.80 -14.78COSERN 11.57 49.17 60.74 3.25 17.10 57.00 74.10 -18.03CELPE 39.99 124.78 164.77 6.05 51.20 165.40 216.60 -23.93EMERSUL 35.29 65.96 101.25 3.06 40.00 111.50 151.50 -33.17

0* 0**

Total 126.52 447.13 573.65 42.91 190.00 546.60 736.60 -22.12

* ELETROBRAS did not ' Of the foreign cost, the 8ank wasfurnish detailr on expected to furnish USSISO *. endthe local-currency foreign commercial banks the balance.cost of the projector on sources offinancing.

-- Includes freight& Insurance.

40-

Table 3.2: ActuaL and Forecast Project Cost, ELETROBRAS II

( in millions of current US S)

Actual Forecast… ......................................

For- Foreign Local Total Not Percenteign Stock ------------------------ Change from

Seneficiaries (IBRD) Other Total (IBRD) (tBRD)2/ (Other) Total 3/ Forecast MX)............. ----. ..... . ... .----- -----. .... ----- ..... . .... ----- ..... ..... ..... -----..... ......... .. .------...------... .. ........ .. ........ ......

CEAL 9.51 30.35 39.86 14.74 28.51 -0.11 28.40 41.00 69.40 -42.6CElAR 20.21 77.04 97.25 13.50 40.42 -0.12 40.30 59.60 99.90 -2.7CEPISA 11.6 NA 11.4 12.49 23.83 -0.13 23.70 34.70 58.40 -80.4CERON 19.65 MA 19.65 10.15 28.91 -0.01 28.90 43.70 72.60 -72.9ELETRONORTE 16.62 102.41 119.03 8.99 28.32 -0.12 28.20 41.40 69.60 71.0ELETROPAULO 55.86 193.64 249.50 0.00 57.30 34.50 91.80 139.70 231.50 7.8LIGHT 39.50 102.57 142.07 3.71 42.70 32.10 74.80 108.80 183.60 -22.6

1/ -

Total 172.81 506.01 678.82 63.58 249.98 66.12 316.10 468.90 785.00 -13.5

L/ Includes freight 2/ Source: Sch dule 1, Loan Agreoent for Loan 2364-SR.* insurance.

3/ Source: SAR for ELETROBRAS 11 p. 61, Arnnx 4-1. Valuesat forth in SAU for foreign cost of individual sub-projectsare not fully consistent with those appearing in LoanAgreoment for Loan 2364-BR; hnce the explanstion for nep-tive valus for forefgn-currency financing from othorm

(foreign co-fminncers).

- 41 -

Table 4.1: ELETROSAS 1: Actual and Forecast Disbursemant Tiatable for Loan 2136-U

Actualas X of

Actual Forecast Fore..................... ................ .......... ................... _............ ......

Dur1ng DuringS_nster Ending S_mnter Cumltative Semseter Cjlative

12.31.82 2.7 2.7 2.7 2.7 100.006.30.83 0.0 2.7 0.0 4.7 -42.3

12.31.83 15.1 17.8 16.0 20.7 -14.206.30.U4 7.7 25.5 31.0 51.7 -50.7

12.31.U 8.3 33.8 37.0 Y.7 -61.906.30.15 4.0 37.7 36.0 124.7 -69.7

12.31.85 1.4 39.2 25.0 149.7 -73.806.30.86 3.2 42.4 17.0 166.7 -74.6

12.31.56 11.9 54.2 10.0 176.7 -69.306.30.87 3.5 57.7 6.0 182.7 -68.4

12.31.87 3.6 61.2 -66.506.30.8a 9.5 70.8 -61.3

12.31.88 31.8 102.6 -43.906.30.39 19.6 122.2 -33.1

12.31.89 6.5 128.7 -29.506.30.90 43.4 172.1 -5.3

-42-

Table 4.2: ELETROfRAS II: Actual and Forecast Disburcsmnt Timtablt for Loan 2364-33

Actusta X of

Actual Forecast Forc..... ........................... ....................................... ......

Durfng DuringSemester Ending Semester Cumulatfve Semester Cumulative

06.30.84 22.7 22.7 5.6 5.6 404.5

12.31.84 0.0 22.7 20.0 25.6 -11.506.30.85 1.2 23.9 40.0 65.6 -63.6

12.31.85 0.2 24.1 55.0 120.6 -80.006.30.86 5.6 29.7 45.0 165.6 -82.1

12.31.86 8.6 38.3 35.0 200.6 -80.906.30.87 6.0 44.3 25.0 225.6 -80.4

12.31.87 10.0 54.4 15.0 240.6 -77.406.30.88 19.4 73.8 5.0 245.6 -70.0

12.31.8 25.7 99.5 5.0 250.6 -60.306.30.89 21.1 120.6 -51.9

12.31.89 16.4 137.1 -45.306.30.90 26.1 163.1 -34.9

12.31.90 16.6 179.8 -28.306.30.91 20.9 200.7 *19.9

12.31.91 30.9 231.6 -7.606.30.92 5.4 237.0 -5.4

-'3-

Table 5.1 ELETRO0RAS l: Actuol F Forecast Implementation Timetablt

Sumry, 1983-1986..... .... .... ......

Net simry, 1983-1990Percent -----------------------Chng. Net

genefi- from Chng.cieries Fore. frm& Works 1983 19U4 195 1986 Actual Fore. (x) 1987 198 1989 1990 Actuat Fore. Fore. (2).. .... .............. . ...... ..... ........ .... ...... .. ..... ----- ----.. ---- ----. ----. ......... .......... ........

CELPA

TL km. 163 37 50 279 529 310 70.6 0 53 289 0 871 310 181.0SS NVA 19 88 13 124 243 107 127.1 33 0 6 49 331 107 209.6DLs kaIlO 0 55 83 61 199 254 -21.7 66 101 101 U 555 254 118.5

CELPE

TL km. U 55 65 84 267 256 4.1 116 52 38 82 556 256 116.7SS NVA 25 40 40 65 170 169 0.6 0 20 60 83 333 169 96.8OLs k/1O 50 46 53 54 202 501 -59.6 29 41 60 39 372 501 -25.7

COELCE

TL km. 71 133 2 9 216 901 -76.0 68 51 51 37 424 901 -53.0SS NVA 81 25 10 0 116 182 -36.2 95 0 45 96 353 182 93.7DLs km10 61 39 49 44 193 245 -21.3 30 34 40 69 365 245 49.0

COSERN

TLkm. l 77 27 0 184 86 113.4 2 27 1 0 214 86 148.0SS INVA 10 43 27 125 141 -11.5 3 15 31 25 196 141 40.5DLs kI/10 38 21 55 41 154 172 -10.1 43 73 57 36 363 172 111.8

ENERSUL

TL km. 77 0 120 403 600 790 -24.1 143 304 220 133 1400 790 77.1SS NVA 82 0 0 30 112 201 -44.3 58 33 35 0 237 201 17.9DLs km/10 48 28 34 47 156 168 -6.9 26 49 39 19 289 168 7.2

TOTAL

TL lm. 455 302 264 77s 1796 2344 -23.4 329 488 599 252 3464 2344 47.8SS NVA 253 162 105 246 766 800 -4.3 1u8 6 177 253 1451 J00 81.5OLs ka/lO 197 189 273 247 905 1339 -32.4 193 296 296 251 1945 1339 45.2

Key: TL km.: kilometers of Trwnamission LinfeSS NVA: Sub-Station Trwonfor_er CapacityDLc ka/10: kilometers of Distribution Lines divided by 10.

Toble 5.2: ELETROBRAS Il: Actual & Forecast Irplemmntotion Timtable

Summry, 1983-1986

Net Sumry, 1983-1990Percent .......................Chng. oet

Senf f - from Chng.ci ar ies Fore. from& Works 1984 1985 1986 1987 Actual Fore. (X) 1988 1989 190 1991 Actual Fore. Fore. tX)

.. ... .. - - - - - - - - - - - -- - - - - - - - - - - - - ...... -- - -------

CEAL

TL km. 56 21 37 0 114 320 -64.4 0 0 26 80 220 320 -31.4SS NVA 40 6 2 0 49 50 -2.8 0 0 45 60 154 50 207.2DL. km/10 31 28 23 21 103 319 -67.6 39 20 26 53 240 319 -24.8

CEAU

TL km. 0 0 0 5 5 790 -99.4 133 55 52 97 342 790 -56.7SS NVA 0 0 0 27 27 229 -a8.2 0 4 74 0 105 229 -54.2DLr kImtO 58 65 106 241 469 400 17.4 55 116 90 79 809 400 102.4

CEPISA

TL km. 0 99 340 0 439 362 21.2 0 0 50 60 549 362 51.7SS NVA 34 22 6 0 61 42 44.0 0 2 13 4 79 42 8.1DLs km/10 48 35 35 13 131 114 14.9 49 11 0 0 191 114 68.1

CERON

TL km. 0 0 48 0 48 293 -83.6 0 0 43 12 103 293 -6.8SS NVA 0 0 5 0 5 51 -90.2 0 0 5 8 18 51 -64.?OLs kb10 6 11 18 14 49 83 -41.0 56 17 22 13 157 83 88.3

ELETROiORTE

TL km. 0 0 11 0 11 35 -68.5 20 0 0 5 36 35 2.0SS NVA 0 40 53 0 93 346 -73.1 40 80 0 67 279 346 -19.2DLa k/10 12 14 10 10 4 61 -23.8 11 9 10 15 91 61 50.2

ELETROPAULO

TL km. 4 1 2 8 14 15 -7.2 1 1 0 0 16 15 2.0SS NVA 175 250 160 240 825 606 36.1 40 140 35 0 1040 606 71.6OLc km/tO 171 256 248 226 900 1570 -42.7 194 121 66 51 1332 1570 -15.2

LIGHT

TL km. 0 0 0 0 0 0 KA 0 0 0 0 0 0 NASS NVA 0 0 0 0 0 0 MA 0 0 0 0 0 0 MAOLe k/10 166 208 247 193 814 2349 -65.3 182 213 217 220 164 2349 -29.9

TOTAL

TL km. 60 120 438 13 631 1816 -65.2 153 55 172 254 1265 1816 -30.3#S NVA 249 318 226 267 1059 1324 -20.0 80 225 172 139 1675 1324 26.5DLo ka/lO 492 617 687 718 2513 4896 -48.7 585 506 431 431 4467 96 -8.5

Key: TL km.: kiLamters of Tranmumsion Line.SS NVA: Sub-Station Tra_forer CpcityDLs km/10: kiLomters of Distribution Lines divided by 10.

-45 -

Table 6: ELETROBRAS I: Actual rd Forecast Expenditure by Category of Works

(in millions of USS reflecting current prices)

GwweralInetalla-

Transmissfon Substation Distribution tfon-- - - - -- - - - .. . . . . . . . .. . .. . . . . . . . . . . . .

Physical Physical Physical TotalExpen- Goal Expen- Goal Expen- Goal Expen- Expen-

Seneficlriro diture (In km.) diture CMVA) diture (1n km.) diture diture~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..... ....... ...... ......... .......... ......... ......... .......... ......... ---------...... .... .......

CELPAForecast (F) 17.49 310.0 17.46 107.5 66.63 253.0 6.02 107.60Actual (A) 7.59 871.0 8.50 331.3 68.76 5550.0 2.68 37.53Not I Chng. 43.4 181.0 48.7 208.2 103.2 118.7 -55.5 -18.7from Forecast

COELCEF 32.57 900.5 39.74 182.0 103.4 2225.3 11.05 186.80A 11.93 468.9 34.15 338.8 111.17 3362.5 1.37 158.62Not X Chn. 36.6 -47.9 85.9 86.2 107.5 51.1 12.4 84.9from Forecast

COSERNF 2.41 86.4 27.17 140.7 37.55 1715.1 6.96 74.10A 5.14 214.3 11.47 197.7 36.13 3632.7 7.75 60.49Not X Chnr. 113.2 148.0 -57.8 40.5 -3.8 111.8 11.3 81.6from Forecast

CELPEF 22.11 256.3 33.27 169.0 141.09 5006.5 20.13 216.60A 21.77 523.7 17.06 416.3 121.11 4012.1 2.87 162.81Not X Chng. -1.6 104.3 -48.7 146.3 -14.2 -19.9 -85.7 75.2from Forecast

ENESULF 48.54 790.3 29.12 181.0 41.36 1679.0 32.47 151.50A 32.07 1399.5 0.96 237.0 47.5 2890.8 20.25 100.75Not Chag. -33.9 77.1 -96.7 30.9 14.8 72.2 -37.6 66.5from Forocat

..............- ---------. ......... ......... ---------..... --------- ......... -- --- -- --- --- ......... ......................................................................_.

TOTALF 123.12 2343.5 146.77 780.2 390.07 13163.9 76.63 736.60A 75.5 3477.4 72.14 1521.1 384.67 19S44.1 34.92 570.23 I/Not X Chng. -36.2 48.4 -50.8 95.0 -1.4 47.7 -54.4 -22.6from Forecast

AVE. UNIT COST(in thou. of USSO)

F 52538 18119 29632A 22574 47426 19779Net X Chnr. -57.0 -74.8 -33.2from Forecast

1/ Does not include disbursmemnts frm Loan 213B-Pfor material and sipment held as Inventory.

Table 7: Ecnrmic late of Retun CEO)

1991-

Year 1962 19M 1984 1965 1966 1967 198 1969 190 2014

ELETROBRAS I (in ailliora of CrS, reflecting prices of December 1961)

CELPE ERR

aerginal Saet" CGh) 18 65 307 690 816 157 308 540 570 570 -2.0

MarginaL Cevwme 96 323 1303 2711 3260 832 1742 2458 2518 2518

Marginal Op. Expes 6 276 1073 2293 2625 58 1104 1517 1896 1896

Global Invest. Preg.' 3167 2028 2155 214 1915 2610 4041 3600 2800 0

Mrtginel Not Benfits -3155 -1961 -1930 -1726 -1280 2S62 -3403 -2929 -2180 620

COELCE

Margfril Sales (alA) 21 54 83 141 371 212 1423 1675 1667 1667 -8.3

Marginal keverus 123 282 416 734 1879 1230 5906 5592 5746 576

Marginal Op. Expwfes 126 266 382 697 1687 1172 5589 6852 5547 5547

Clebal Irwest. Prag.* 4179 2234 1777 1913 2057 1672 386 1471 3173 0

Marginal Not Benfits -4182 -2218 -1743 -1946 -1665 -1614 -3551 -2731 -2974 199

CELPA

Marginal sales (OA) 4 36 67 139 323 515 544 615 711 711 -3.0

Marginal Revuns 30 214 379 7M 1669 334 3514 3427 4338 438

Marginal Op. Expwes_ 35 238 416 925 1738 2972 3489 3m 3990 3990Global Irwnt. Prog.* 6338 3267 3151 7736 9475 456 6835 2258 7314 0

MargI,L Met enffIts -6343 -3291 -318 -793 -9594 -4282 -6810 -2604 -6916 396

192-

taar 1I 19u 1965 1966 1967 196 1989 1990 191 2015

ELETROSA 11 (in billifoe of Cr5, refIecting prifce of DaceNbar 19)

Marglnal Sales ( ) 162 36 517 1260 1383 1836 2463 2399 2279 2279 -10.9

Marginatl Ravwe 1569 3255 4592 10570 14U 1 19334 21703 20341 1924 1924

Marginal Op. Ep 965 2025 3120 8278 11001 15137 19405 16403 18413 18413

Global Invest. Proo.* 15051 16165 26327 21631 2M 28950 24745 14776 1 --

Marginal Not Benfita-1467 -14935 -24855 -19339 -23810 -24753 -22u7 -10838 -B002 831

ELETEOALILOMargfenl Sales (OA) 135 94 2483 4107 3747 5834 7081 6550 776 7796 eg.ftrginal leveme 1303 842 20805 34915 40541 6279 63089 5482 64006 64006

Margiral Op. Expef. 908 5938 15023 25792 29733 49srf 54081 50164 64362 6362

Clobal Invest. Prog* 39435 60172 95841 96408 94206 6M7 41603 67632 54782 --

Marginal Nt Benfits-39040 -57668 -90059 -892 -83400 -S4048 -32595 -62968 -55138 -356

rginl Saltes (GMt) a 3 12 35 63 90 130 151 151 151 0.0

Marginal *It 0 12 55 167 438 682 861 1053 1126 1126

Margiral Op. Expwess 0 20 76 191 331 427 466 1181 579 579Global Invest. Pro,'* 1349 2142 2636 2842 2327 3336 495 39 442 -

NargiNal Net Saf its -1349 -2150 -2657 -2866 -2220 -3061 -100 -167 105 s47

CEWJ'Margirl gates (OA) 9 16 34 115 166 Z2t 369 494 546 s - 18.9Margiral levwmes 105 175 348 196 191l 2594 3401 5409 54M 548Marginal Op. Expene 115 183 423 1330 2156 3132 4530 503o 5414 5414

Eaclidn fIn nci Globatl Irnt. Prog.' 2742 2003 3090 11930 m2 9505 2522 144e M796charges Marginal Not B n fits -2752 -2011 -3165 -12162 -7950 -o14 -361 -1467 -27846 70

FtblaxS 1s Ii Sector uIlnwe lot ultt: Actual and Forecxet Cost of Service 1962-U 19; ktual Cost of Service 196. 19tt -

(in bililon of crt. reflecting prices of mId-1981) -

sumarized Seutte1961 192 1 19" 1965 196 1962-.16S 1967 1966 19"

I Siff.tine Act. Prol. Act. foe. ct. fPo. Act. Fore. Act. Fore. Act. Fore. Act. Po. from Fore. Act. Act. Act.

I Amm lorte Inetuont 18U9 I922 206 2400 2I54 3206 2S71 3710 3122 4355 2956 4015 -- *- - 3314 2914 2709

2 Utillty Plant In service 2013 2165 2223 2414 2469 26 233 335 3154 386 2SU 4256 - -- U IA NA3 workint Capital 34 20 36 S6 16 52 IS 35 14 29 2 34 NA IIA NA4 Loe Depreciatiolt (ccu.) 317 420 37 46 44 *r 5 5U3 7O 540 43 6621001 N - K- I A A5 Ptu: Excees (def.) Iet t. -99 -156 -182 -395 -114 -661 -307 -t9t -494 -t2U -33 -1524 -A -- - A NA

6 lewule 631 594 615 604 565 721 S0 U 629 1029 404 120C 2994 439 -31.9 7 1140 975........ .... .... .... .... .... .... .... .... .... .... .... ..... ... ........ - . ... ....... .... . ., ....... .... .... ......... 7 flectricity bilingt 504 496 S0 543 4*O US 491 726 527 NO 526 1040 2528 3620 -33.6 701 NA NA Sole tax 63 52 4 4 54 33 50 37 53 43 ST 49 25 I66 53.1 48 NA NA t9 Cmueory loan 44 48 4 T 34 6S 39 75 49 9 42 116 209 411 49.Z 34 NA U tA C

10 Cost of SevIce 334 354 381 416 372 521 353 609 421 676 406 157 I92 2961 -3S.2 S30 1004 99, ,,, ....... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... .... 1 Operstine Efpxo 183 197 227 225 207 2t9 IT 333 256 3S6 23 406 1139 1611 -29.3 374 671 9 o

rt12 Depreciatien, etc. 73 74 A7 91 90 III 96 132 121 153 11 1eJ 515 655 -21.3 129 103 6 13 Iovrsien 79 63 67 100 74 121 6 144 U 167 24 163 277 75 -61.2 24 32 a -

14 _owratte (7-11) 176 143 125 127 106 102 138 117 106 210 120 26 594 an -26.9 172 142 -15 1t15 Let (tU a 1) 1U 192 207 240 215 301 237 3h 312 436 294 482 1267 169 -30.7 331 291 271 014 Exxce (da(.) (14-15) -13 -49 -82 -113 -109 -1t 99 -254 -206 -226 -176 19t -671 990 -32.2 -159 -150 -2s &

1T late of *_urarotlen (X) (14U1) 9.3 7. 6.1 5.3 4.9 3.4 5.6 3.2 3.4 4.8 4.1 5.9 4.7 4.4 2.5 5.2 4.9 -0.6 t16 Enerr Sales (T0h) 116 116 123 121 132 12 14t 16 162 170 10 169 745 nr7 -1.6 1t2 17 19 5n19 Ave. Neov par kiH (Cr) (6/18) S.4 5.15 5.00 5.02 4.28 S.47 3.92 5.75 3.68 6.06 3.36 6.38 4.02 5.61 -30.8 4.31 3.53 2.6320 per cent () Inc. Over Prlr Yr. NA NA -. 4 -2.5 -14.3 9.0 -6.4 5.0 -1.0 S.4 -13.4 5.3 26.5 -1t.2 -25.5 rt0pis mm-t or the y e 1961-1915, octuml date mi taken from AreLx 3.6.1. of the Staff Apreisl lIeort for the Poer Sector Loan (No. 4159.-N, detod 1y 27, 1966). sote for 196e wd 1967 wU s_4pli be r b LtETttUA In coew tlon with nuwscesafut ettots to proceee a aecel sector lan. the actmal date for 1962-1967 ue anthe se fewrt * that ued at awielt, en Is tbherfe corxble with oppreelt dota. Oats for 19-1969 we sppled bV DWU/ELETROSM wW refloctsInrtitutiomlt dhre (A therefor foer_t hehrl) mited bV the Conatitutien of 1966. Given thle chwwe. the data for 19-1969 Is not fully comparale rtwith that of prior we. fwr wre 19111969. overage revowe per I&. Is derived freo different Acee -- a series prared by ELtETrUM/Dl LE Web Is not 0fully caor_ bte with data of prior Verx.

Rate of Excdhsga US$1.00t Crn92.44. 01D

ELEIEOMAS 1: Secter Fir,weiet lowult.s Actuel eid Foreceet Flow of Fureb. 1962- 1966; Actmsi flow of Fwds. 196?-1909

(in billions of er5, reflecting prices of mid-1981) -*Summoritd ~seults

Line 1961 196 1963 196 l96w 1966 1962-1966 fercent 19617 1966 1969

I of of fromSMACaS Act. Prel. Act. Fore. Act. Fore. Act. Fwoe. Act. Feoe. Act. Fore. Act t. Ttal Fort. Total Fore. Act. Act. Act.

1IGross mnt. Cadh GMn. 222 166 I"2 210 17 217 212 267 260 366 229 687 1051 57.4 1IS6 52.5 -32.9 26 26 1062 Lees: Debt Service 261 364 360 262 3M 301 687 373 S51 447 452 559 2214 120.9 1941 65.0 14.1 470 1317 13693Nmet Int. took sen. -39 -in6 -147 -52 -207 -S. -275 -106 *311 -61 -223 -72 .1163 -63.5 -375 -12.6 209.9 -in6 -1035 -1241

6 Other CoWSinw Can. 313 M7 IS? 163 139 216 136 256 125 3so 102 369 659 36.0 1296 43.4 -49.1 a2 52 4

Snmet Cwrdfor Fun~ding 27 -6 IC III 601 134 -139 150 All7 247 -120 277 504 -27.5 919 30.6 -155 -106 -96 -lit?6 IqLalty Centribatiw 66 79 72 121 7M 77 6 66 it 96 124 103 3S7 19.5 143 16.2 -26.1 137 367 407 Ion-borrawed fuawJi,g 360 74 62 232 a 211 -73 236 -160 363 4 380 -147 -6.0 1402 47.0 -110 31 -597 -796.9

A Sorowirw 616 456 3261 322 264 326 632 369 556 362 397 204 1976 106.0 158 53.0 25. 0 505 101 163

9 Total Smwcee 77 530 410 554 272 537 360 605 389 ?0S 401 586 1631 100.0 296 100.0 -38.6 537 -495 -613.. *...fl~*s****e* a.. ... .. .. .... .. s* ... .. .. ..... . ....a....a... .. ..... ....

APPL ICAT ONS

10 irweetmnts 681 516 532 544 614 556 395 619 414 702 374 563 2129 116.3 2965 100.0 -26.7 489 433 347II met Cling in WiC. etc. 296 14 -123 10 -142 -20 -35 -15 -25 3 2? 21 -296 -16.3 -I -0.0 3117 47 -928 -960

12 Total ApplicatIons 77 530 410 554 272 537 360 605 389 15 401 564 1631 100.0 2966 100.0 38.6 537 -695 -613no am .*S. .. S .. a . . S... ** a. a. ...a ...a. a* . . . . .......... ** an 5Key Fiuwicail Ratit.

13 Debt service Cow. (X) 0.6 6.5 0.6 0.6 0.5 O.? 0.4 0.7 0.4 0.9 0.5 0.9 0.5 0.6 -41.2 0.6 0.2 0.1 c14 Seif-fin. Ratio (3) -6.1 -6.3 -27.7 -0.1 -50.0 -0.2 -69.1 -0.2 -75.2 -0.1 -59.5 -0.1 -54.6 -0.1 MA -0.4 -2.4 -3.6 09 0_IS Com.mrw Fin. (3) 57.0 -1.1 1.9 20.5 *16.5 24.0 -35.2 24.3 -45.1 35. 1 -32.1 49.1 -23.7 30.6 -1?77 -21.6 -227 -345 N016 lorrowirg/irwoet. (33 666 6.4 M 61.6 59.1 63.6 56.6 109.5 59.5 134.4 51.6 106.1 36.2 92.9 53.0 73.2 103.3 23.4 52.6 I-Saures: for the yeer 1961-195, actual dots mme taken from Aimes 3.6.1. of the staff AWreiial Report for the Power Sector Leon (No. 6159.-SI. deted mey 27, 1966). -Data for 1966 mid 19167 wee supplied by ELETROSAS In coeviection with wouscmofwl *ttote to precee. a secod sector ben. The ectiei dots for 1962-1967 moes 0the soe format an that used at srelest. and Is therefore coWerebbo with appreasal dote. Dets for 1968-1969 Lee setpplied by DWAE/ELETIOUIAS mi reflects P3 M.institutiml cinee6 therefore format cm,nee a nited by the Constitutien of IM6. given the"e diNig., the dete for 1966-1969 is not fully ceWereble OQ -with that of piro years.0Q

Wae of 6a'cue:w M"' a L,fi &A

EULPt AS Iti Sectr Firlist SesuAts: Actual UW Foecat Cst of Service. 162.1-9;

Actut Cast of Service, 191-1w

lin bitilw of CrS, reflectire price of id-w191) -

morisnd Results

1t3 19164 19S19 lw 196-1987 195 "SP

* ~~~~~~~~~~~~~~~~~~~~~~~~~~~X D1ff.

tle Act. foe. Act. Foe. Act. Fre. Act. Fre. Act. Foe. Act. For. f.m Fre Act. Act.

. ....... ....... ... .... ........ .. ........ ......... ...... ..... ...... ..... ...... ..... ...... ..... .... ..... ..... ...... ..... . ..... .....

I Irn.srlnvostm_ntmsnt 2153 203 2371 2226 3122 2N0T 2954 3119 3312 3482 - -- 292 27

2 UtIlity Plant In Service 24 2221 2 2405 3154 2770 2961 32 mA 3681 -- A-

3 Slr&iq nCapitot 14 is 15 10 14 l0 2 10 NA le NA NA

4 its ezhreeltimin (sccu.) ur 4*S 5U 541 540 24 "42 ?T IA 622 NA I-A

S Ptwu: xoes (def.) In mun. *116 -24 -307 -353 -494 -451 -432 545 IA -*15 -N - -- IA IA

4 riw.. 505 505 5OD 5 629 684 464 614 7M2 %5 3161 3556 -11.2 1147 975

........ .... ... ... ... ... ... .... .... .. ........... ............... .... ..... .... z

7 Eletricity billing 477 415 49 Al3 570 58 5S 25 le7 791 2722 2906 -4.4 IA NA I-A

a Sale ts 54 S1 50 ff 53 73 37 39 48 10 241 392 -38.5 IA A

9 CipsAwy tlm 34 39 42 49 49 42 5 34 69 1 259 -23.4 IA I

1o cst f Service 371 338 S5S3 344 421 396 405 4 524 S13 2074 2038 1.6 99 99

............... ...... ... ... ... ... ... ...... .... ...... .... ..... ..... .... .... .... .

11 Orsting a 207 1r0 167 174 254 196 243 234 371 274 1n 1042 20.9 "a 693

12 sepeciatinw. etc. 0 72 9 73 121 91 11 106 129 122 557 471 6.1 103 6

1S Seroron 74 85 4 92 44107 24 103 24 11 235 505 -53.5 32

14 _sm ratln ( I) 1041 77 139 133 106 163 120 218 177 279 "8 670 -2.5 15S3 -15

ISLgpts a( 1) 21524 237 223 312 21 m 312 331 348 1391 1347 3.3 291 m o

16 Imasem (dwi.1 (14-15) -10 -124 96 -09 -204 -96 -174 -94 -155 -70 743 -477 55.6 -136 -234 00

,,,,,,,,,,,,,.............,,,. ........ ................................................................... ..... ...... P

1 Ratse of imaunwtian CS) (11) 4.9 3.6 5.6 4.0 3.4 4.2 4.1 7.0 5.3 6.0 4.7 6.5 -27.6 5.2 -0.6 rt

Is lb rysales(nb) 132 123 148 141 162 157 180 174 182 9 604 72 1.5 l¶r 16

19Ave. new. pr L (Cr) (411) 4.23 39.5 3.92 4.7 3.86 4.36 33.5 4.67 4.31 5.03 3.93 4.s5 -12.S 3.5S3 2.4

26 Per cent (t) Inc. ro PrIor Yr. -14.3 -20.9 -4.4 5 -1.6 5.0 -13.6 6.6 26.5 7.7 -16.1 25.5

* es: fr, tse 1961-195* actual dt s taken frm Arm 3.61. of tho Staff Apprisat Report frw the Pour Sector Leon (i. 6159-M. dated 05.27.n6)

ets for 1964 ard 1967 wss%Wld by ELEIU0I In cuewtion with umhucceosfut atteta to process a secon tor lro. The ectuil dots for 1962-lS6 Uw

the e formt a 04et ued et oppira%sia.d tt therefore c*m 4le with appraisal date. Dots fo 1966-199 ws suppied by DUOWPLETSIAS trd refltes 0 C

inctittii l hFg (S tho"efe foivet cing as.*ted by the Ceutitutien f 196. Given those chenub, the date for 19-19-l69 Is net fully crnbloe rt

with that ef prior Voes. for as 19_6-19_9s mf_ revum per kW is dwriwed from diffrent sances -- a ses pr prd by ELEI AI3If sidc Is rat 0

directlty c_rhate with date of prior yor. u

Inte of Encins _ uS1.00: Cr992.4. '

01-'tQo GPAcoI

UIITI A Iis cIeor fi.wicat kNmutat Actual ad Foest rim of F 1p2-_I66:Actwml Plfu of Fuw 198-16(in bitlwe of C4. reflectimg prlube of old-1,0)-

ii.. urn urn 197 1,11-117 P1rcent 1a 19

Kof 1sf from11011142B bet. Fe. Act. fe. fct. Foe. Act. foe. Act. Fwe. Act.tetal foe. Total Fore. Act. Act.

I Gres. tt. Cub am. I" 1U 212 215 20 245 22 341 2 436 114 56.3 1374 75.9 .17.0 281 1n2 Low: Det s ervice 34 21 ur 21 5 337 452 45 47* 445 2343 119.0 17 97.6 32.6 1316 13493 Nt nt. Ca _ Om. -20r 124 -27S -5 -311 91 -22 5 4 -11 -9 -1203 .61.5 394 -21.7 205.6 -1035 -1243

4 otherC omur tn 139 155 136 176 1U263 162 216 2248 51429.6 96 .141.5 52 4

S Nt Cot_-r Fwdlu -6 31 -139 91 -184 112 -120 132 -106 239 -619 -31.6 404 33.4 -202 9 -11976 W ty Centributiw 7639 4 25 1 26 124 27 137 27 42221.6 144 0.0 192.5 37 407 buh d Fudlrm I 70 -73 116 -146 133 4 15 31 246 197 -10.1 749 41.3 126 595 97 M

111o oung MU 271 432 226 S 6 220 397 215 505 132 2154 110.1 1le s5.7 102.7 101 13 0

9 Tetal m.r. 2 341 36 342 36 3n7 "I 374 536 36 MY 16s.6 1611 166.0 o.e -494 -614

6 igweumnt 413 326 M 321 414 337 3714 353 49 377205106.5 1707 94.2 22.1 434 3471 MtC. In MC.*fte. -142 21 -35 21 -Z5 21 27 21 47 21 -12 -6.5 10 5.8 -223 -Z2 9 -960............. ......................... ..... ... ... ... ... ... ... ... ... ... ... ... ... .. ... .. ... .. ... .. ... .. .... ..... .... .. ....... .. .......

12 total Aicatim 2 341 340 342 3 n0 357 401 374 536 3 1Y 160.6 111 160.6 6.6 -494 -613

filelis ftlZf

..................... .... 13 D Servie Cow. (X) 6.5 6.5 6.4 6.7 6.4 6.7 6.5 6.6 0.6 1.6 6.5 0.6 -37.4 6.2 0.114 Self-fin. Rtlo 113 -560.0 -0.4 -9.7 -6.3 -7n.2 -6.3 -59.5 -0.2 -6.4 -6.6 -S7.7 -6.2 MA -2.4 -3.6 15 Cureu.w Fin. (13 -16. 9.6 -35.2 28.3 -45.1 33.2 -32.1 37.3 -21.6 3.5 -29.7 35.4 -168 -227 -345 Ob16 la,wieJlnat. (3) 63.8 84.6 109.5 73.4 134.4 48.3 114.1 40.6 163.3 34.9 103.3 62.2 6.6 23.4 52.6 O

SA : Fwr the yVas 1961-1915* act dol dts m taken frm Anae 3.6.1. of the Staff Appraeal Report fw tie FPoer ector Lom (No. 619.-N1 . dated 65.27.66). . ngete for 1 l et _d 97 wa Wlled by EL1T6564 In omactil with wamm feful attempts to press o snd etor loen. The actual dte for 1962-1967 wethe ama forwst * that oId at appraisal, *d is therefre ca wrle with appreast eta. bete for 1966-1969 ma supplied br SUAEUER1TRW endl reflect. 01 _Intitutiemt u - (A the lfer foet caga) _wAted by the Cautitutien of 19M. lvn thes dimwa. the dot for I9-16-m is net fully ct_parale * _with that of prior y

onte of t d u a 111 1.600CrIE.".

PU satee Flhwialt Ewlts Actual .. fwrst Cast of Srv1ce, 1966-1f"

(in till of CrS, rlectino pries of i d-d-1961)

UMrIald Eults

1906 "a iws 19i9 l9s-sse...... .......... ..... ...................... ................. ........... ................. ..............

X Sift.

Lin Act. Foa. Act. Fo. Act. Fae. Act. fre. Act. Foe. fra Fore

..... ...... ..... ....... ..... ....... ..... ..... .. ..... ....... ..... .... .. .... .. ...... .......... ..

I1 m ae _bl wt_ t 2M6 3060 3314 363 2914 4156 270 3119 - -*

2 Utility Pltnt In Servic 2963 3215 VA 3753 MA 4347 NA 322 -- -

3 Working Capital 2 5 11 9 MA 15 NA 10

4 Last Dprepl tien Ccu.) 62 762 MA $64 NA 1030 A 717

5 Plus: Exces (dof.) in Rom. -633 -602 NA -730 NA .824 MA -545

6 Ee,,.. 604 669 M 397 1148 1137 975 1423 1991 4147 -52.0

........ ........ .... .... ... .... ... .... ... .. ... .... ... .... .. ..... ........ .....

7 Electricity bililng 526 576 701 756 NA 95 S2s 119 1752 3486 -49.8

Sole tax 37 6 4871 NA 91 S3 113 121 333 -63.7

9 Ceapulsoryl tn 42 55 34 70 NA 69 42 111 1173 25 -63.9

10 Coot of Se"MO 406 422 530 52 1006 36 990 769 2l 2351 24.7 a

............... ........ ... ........ ... ... ... ... ... ... .... .... .......... .... .... L

11 operatins Eiupanse 263 266 376 310 67 374 393 446 2404 1396 71.9

12 bD reciatitn, etc. 119 129 129 144 103 167 89 1 440 632 30.5-

13 Reverlon 24 27 24 69 32 96 8129 68 321 -7Z.5

14 Remuneration (7-11) 120 1S4 170 233 140 321 -15 429 415 1137 -63.5

15 LegL (101 x l) 296 306 331 361 291 416 271 312 1169 1394 -14.7

16 Exces (def.) (14-15) -176 -152 -161 -125 -151 *94 -286 117 -774 -258 200.4 0

................................. ............ ................................................... ....... O

17 Eate of Emu.ration t() (14/1) 4.1 S.0 5.0 6.4 4.8 7.7 -0.6 9.1 3.2 7.1 -54.9 0

10 Enrysp *oles (TI) 130 178 162 193 18 20 195 223 744 602 -7.2 rt

19 Ave. Rev. par kWh (Crt) (6/18) 3.36 3.67 4.30 4.65 3.53 5.47 2.63 6.38 2.68 5.17 -48.2 1

20 Per Cant (C) Inc. Over Prior Yr. -13.6 -20.9 23.2 20.1 -17.9 17.6 -25.5 16.7 w C0I-*'

^ Sources - m

Data for 1966 ax 1967 _m supptied bV ELETEWEAS in ceematlen with wmnuesful attote to process a * c * oetor om. This data

theam formt a that used at appraslc. and Is therftore tcprwdAe with appraisal data. Date for 1966-1969 was supplied by DNAEE SAo

Inatitutional ehn neee. ( ther fore formt ehaiqas) *nwdated by the Constitution of 1968. Given the" chengs, the data for 1966-1989

with that of prior Vers. For ye r 1968-1909, aVer9 revenue per kWh is derived tfen ditferert eurces -- a sries prepared by

ELETEUEA -- Is not directly ceusrebtae with date for prior years.

R@ late of Euchutme: USS1.00i Cr92.44.

PPt : Sctor Financial Results: Actual & Forecast Flow of Funwd 1966-19e9

(in billions of CrS, reflecting prices of mid-1981) -*Suinmriged Results

Line 1966 1967 1968 1969 1963-1967 Percent........... ........... ........... ........... 1---------.__..----- - Diff.

X of X of fromSW CES Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act.Totel Fore.Total Fore.,........ . .. ..... ....... ..... ....... ..... ....... ..... ..... .. ..... ..... . . -- -- -- -----................. ... .. ....... ....

1 gross Int. Cesh Cbn. 229 277 282 382 282 538 108 684 900 -526 1881 73.5 -52.12 Less: Debt Service 452 593 470 500 131T 539 1349 537 358e -2096 2169 84.8 65.43 Net Int. Cesh Gen. -223 -316 -188 118 -1035 -1 -1241 147 -2687 1570 -288 -11.3 831.6

4 other Conrmur Con. 102 119 82 184 52 243 44 313 281 -164 859 33.6 -67.2

5 Net Ceou .mr Funding -120 -196 -106 6T -983 242 -1197 460 -2406 1406 571 22.3 -5226 Equfty Contributions 124 239 137 175 387 37 400 42 1048 -612 493 19.3 112.47 Non-borroued Funding 4 42 31 241 -597 278 -796 502 *1358 794 1064 41.6 -228

8 Borrowing 397 504 505 386 101 379 183 225 1187 -694 1494 58.4 -20.5

9 Total Sources 401 545 537 628 -495 658 -613 727 -171 100 2558 100.0 -106.7We maasmagamaaamaaaaa 3333 3333! name MU. 3333 Uaem maw.MMI a a 33 U3 3

APPLICATIONS

10 Inves tments 374 505 489 627 433 647 347 711 1643 -960 2490 97.4 -34.011 Net Chng. in MC. etc. 27 40 47 1 -928 11 -960 16 -1814 1060 67 2.6 -2808, .......................... ... .... ... .... ... .... ... ... . .... ... . ... ... . .... ... ---- ---- .... .... . .. ...................

12 Total Apptications 401 545 537 628 -495 657 -613 727 -171 100 2557 100 -106.T3 * 333333 m _ar _33 _33 3_3 mama.............. _am ma-.. mam am. *a m. *-3 ms. ... m.....m. .. ..... .a. ..

Key Fin nclal Ratios

13 Debt Service Cov. (X) 0.5 0.5 0.6 0.8 0.2 1.0 0.1 1.3 0.3 0.9 -71.1 0it14 Self-fin. Ratio (X) -59.5 -0.6 -38.4 -0.2 -239 -0.0 -358 0.2 -164 -0.1 NA b

15 Consumer Fin. CX) -32.1 -39.1 -21.6 10.6 -22T 37.4 -345 64.7 -146 22.9 -739 c16 Iorroming/Inveet. (X)106.1 99.6 103.3 61.7 23.4 58.6 52.8 31.6 72.2 60.0 20.4 La.......................................................... ............................................................................

0C Source:

gt'3 0Deta for 1966 and 1987 was supplied by ELETROSRAS In covnectfon with uneuccessful atteqwts to process a second sector loan. This date

the sme format as that used at appraesl, nd Is therefore copperable with appraisal data. Date for 1988-1989 was supptled by DNAEEinstitutional chans (0 therefore format changes) *nuidated by the Corntitution of 19S8. Given these changes, the date for 1988-1989 with that of prior yeers.

* Rate of Exchange: USl1.00: Cr$92.4U.

CiLPAS Actuat NW Foreat Retult Perct (ZIt_lIrzed If f erace

amulta* f roe1s6 11z3 1964 195 1986 1902-1986 Aprmlise 1961 193 1969 1990

Act. Fo. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Act. Act.

Oerating ldicater nrlized tesultts dFive-Tear AveraeI. ales (VA) 1039 113 1193 125 1275 144 13% 1629 1626 16 6534 7M -10.5 1813 263 1847 1935 2062. Ave. Nev. (Cr)e 7." 7.66 5." 7.5z 5.69 7.39 5.6 8..2 5.16 5.71 5.89 6.09 -27.2 6.50 9.15 6.46 5.58 6.17S. Sltes Rsv.(Cr_ m z* 73 32 1176 %40 r2s 11397 7899 134 3396 15993 384 59221 -35.1 1160 16870 11925 10790 129in primc of 12/81

Financisl Indicators

4. Returtn an W 5 6 4 r 5 7 0 7 3 a 3 7 -51.4 2 3 4 0 0Assets (5)S.OebtILTCap.(Z) 31 34 33 37 3 39 39 44 34 38 37 2.6 45 30 39 36 586. Debt Ser. Ccv. aX) 2.0 3.7 1.5 3.0 1.5 2.6 0.3 2.6 1.5 2.3 1.1 2.6 -56.5 0.7 2.5 0.8 -0.1 -0.37. op. Rtio () 92 91 9 U 91 85 103 62 9 1 5 85 12.1 95 s0 91 114 113

Insotmnt Level (CIt ., 1V3I priems)

3. Inntts t 6342 6548 3673 12 324 361 r96 6409 9517 6742 30M 3667 -16.5 4762 m6 M2 2261 7316Nan-lank 6342 652 3673 4182 3274 4635 7762 3455 9450 6742 30501 2546 19.8 3592 7056 7052 2261 7316Bank 0 96 0 4130 0 4226 205 2954 67 0 272 11406 -97.6 1170 0 0 0 0

sorces of Inw mnt Finwncing

9. Self ffn. (X) 2 12 9 12 15 16 -20 31 4 32 -1 20-103.7 -33 39 -20 *265 -3710. LT Sebt(1) 33 39 9 44 71 46 67 44 53 10 49 3 30.7 14 5 36 131 19 I11. other Cx) 6 4 81 43 15 36 53 25 43 58 52 42 21.9 119 56 83 234 117Total (i) 100 100 100 100 100 100 100 100 100 100 100 100 NA 100 100 100 100 100

service I,Idlcaters

12. N. of Cum. (th.) 237 299 320 37 3SO 3 378 386 412 419 349 357 -2.1 456 436 487 524 562 13. No. of Ewtl.Cth.) 2.2 2.4 2.4 2.6 2.6 2.8 2.3 3.0 3.0 3.2 2.6 2.6 -6.8 2.9 3.3 3.0 3.0 3.1 t14. custmrs per 130 125 134 127 137 128 136 130 136 131 135 128 5.1 15T 132 161 173 181

93w

n

.,

ee-

I.'C)1

CELPE: Actuit wnd Foreccst Results Sumr I ted PercentResults (X)

for 1962-1966 DIfferenceaNW fras196Z 1963 1964 ¶965 1966 5-Yr. Averges Appraisal 1967 1966 1969 1990

Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Act. Act.Oprmting Indilators

1. sgais (M) 3237 3449 3474 3778 4079 4122 4715 450S 4875 4903 20383 20757 -1.5 4216 S327 4367 4657 47072. Ave. Rev. (Cr)* S.53 S.94 4.97 6.25 4.24 6.59 3.93 6.92 3.99 7.27 4.44 6.6S -33.3 5.30 7.64 5.66 4.61 4.423. Sgte sev.(Crt u.)'17906 2049 1720 2327 17305 27173 16532 31165 19441 35650 90473 38120 -34.5 22348 40673 24727 21455 20794* In price of 1281V

Finwiclet Indictore

4. R.tumC () on 4 3 7 6 7r o a a a 6 7 -16.3 11 a 12 KEa. SRm. Assets5. Debt/LT Cap. X) 29 41 31 49 29 51 30 52 27 48 29 48 -39.S 2 45 28 22 406. Debt ter. Cov. CX) 1.2 1.9 1.3 1.7 2.0 1.7 1.9 1.5 1.7 1.7 1.6 1.3 -7.2 2.9 1.5 5.6 -6.3 0.4T. op. Retio (x) 97 91 9 90 92 B7 91 8s 91 e4 73 27.7 6 83 91 106 100Imuwstint Levelw (Cr6 a., 12/51 prices)

8. Iniestmmnts 3048 6494 2028 11127 2155 10193 2144 9252 1915 9682 11291 4749 -75.8 2810 10119 4041 3581 2752mon-Bank 3048 6494 2023 2945 2155 2990 214 3173 1915 9682 11291 25234 -55.3 2810 10119 4041 3581 2752OInk 1/ 0 0 0 8182 0 70 0 6060 0 0 0 1465 -100.0 0 0 0 0 01/ benficiwry did not furnmeh weal dte an project expenditwe.

Sources of IrwasteeR Firmcing t

9. s.tf-ffn. (X) 4 5 11 3 39 T 35 14 35 13 23 9 168.0 91 19 63 -31 -2410. LT Debt (Z) 53 50 1 70 35 61 55 46 22 42 38 55 -29.8 24 31 23 236 6911. othC (X) 43 44 27 27 31 10 40 43 45 39 37 5.4 -14 50 14 -105 55Total CZ) 100 100 100 tOO 100 100 100 100 100 100 100 100 NA 100 100 100 100 100sr vice Indicatort

12. No. of Cue. (tb.) 821 745 US 802 911 362 958 925 1014 910 912 649 7.4 1105 1059 1151 1218 126813. no of EF4. (tbJ) 4.S 4.5 4.5 4.7 4.5 4.9 4.7 5.1 4.9 S.4 4.6 4.9 -5.5 5.1 5.6 5.4 5.6 5.614. Cuctomr perEpF4ee e182 165 19 171 203 177 204 182 205 170 19T 173 13.7 216 169 214 216 225

a.

m oQ.

0 0

'3 "

SumerIzedResults Percent (Z)

COELCE: Actim and Forecast Resulte for 1982-1986 Differenceand/or from

1982 1963 1964 1965 1966 S-yr. Averages Appralial 1967 1968 1969 1990......... ........................ ........... ................. .............................................. -- -- -- -- --- --- --- ............ -- -- -- -- - -- -- -- -- -- -- -- - ............ ------ -------.. ....... ..

Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Act. Act.operating Indicators

1. Sals Gwh) 173 1664 1944 1873 2017 2156 2114 2459 2401 2738 10258 10090 -5.6 2242 2923 3458 3767 37532. Ave. Rev.in CrS) 5.76 6.62 5.26 6.97 5.03 7.15 4.95 7.42 4.55 7.76 5.07 7.25 -30.1 5.80 8.36 4.14 3.34 3.453. Sales R*v.(Cr$ .. )-10269 11022 10227 13064 10143 15418 10454 18257 10924 21241 52017 79002 -34.2 13011 24433 14303 12575 12939

* In prices of 12/81

Financiol Indicators

4. Return an Rm. 5 7 NEG. 7 7 7 -0 8 6 a 3 7 -53.0 1 8 6 NEC. 8Assets (X)

S Debt/ LT Cap. (X) 42 43 59 48 61 49 69 48 70 45 60 47 28.7 53 42 41 28 646. Debt Ser. Cow. (X) 0.4 1.5 0.3 1.5 0.8 1.4 0.0 1.5 0.3 1.5 0.3 1.5 -78.3 0.3 1.6 0.5 -0.4 0.4T. op. tioCt (%) 100 as 103 87 92 85 108 83 101 82 101 84 9.5 101 S1 91 lzo 100

Inver t_ nt Evels (stS n. reflecting 12/81 prices)

8. Investmnts 4237 4058 2320 10003 1875 o88 2093 8135 2060 7110 12585 38114 -67.0 1672 80 3868 1471 3173Mon-lank 4237 3946 1992 2591 1605 2838 872 3066 143 7110 10149 19551 -48.1 234 099 708 649 1662Isnk 0 112 328 7412 270 5970 1221 5069 617 0 2436 18563 -86.9 1438 0 3160 822 1511

souces of investment FinancingU'

9. self-Fln. Mx) -23 5 -58 3 -26 2 -140 6 -92 7 -61 5 -1427.0 -100 11 -244 -1740 -184 U

10. LT Debt (X) 62 47 83 45 170 52 5o 45 40 35 78 45 72.2 9 33 113 282 8o0

11. Other (X) 61 48 75 52 444 5 182 49 152 58 83 50 64.6 192 56 231 1558 104

Total (X) 100 100 100 100 100 100 100 100 100 100 100 100 MA 100 100 100 100 100

Service Indicators

12. o. Of Cm. (t.) 565 550 618 59 660 632 694 673 739 713 655 632 3.7 788 754 824 869 912

13. No. of Empl. (th.) 4.1 4.1 4.3 4.3 4.3 4.5 4.3 4.6 4.6 4.8 4.3 4.5 -2.7 4.8 4.9 4.9 5.1 5.2

14. cu.utmers per 13? 133 143 138 155 142 161 146 160 149 151 142 6.6 164 153 169 171 174

OQ m

LDI-CD

0

?-91

wD .

CD

COSERN: Actual nd Forecast Results

Sua_ rizedResutts Percent (S)

for 1982-1986 Differeneand from

1982 1983 1964 1985 1986 5-Yr. Averages ApprWisat 1987 1966 1989 1990

Act. Fore. Act. Fore. Act. For.. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Act. Act.Operating Indicators

1. Sales (GUh) 694 676 709r 7 783 786 839 866 1018 959 4045 4059 -0.4 1042 1061 1158 1284 14302. Ave. Rev.(CrO * 5.81 6.43 5.85 6.35 5.16 7.28 5.11 7.69 4.65 8.13 5.26 7.25 -27.5 5.50 8.57 5.69 4.48 4.883. Sates Rev.(CrS w.)* 4037 4346 4149 4907 4043 5716 4289 6657 4739 7716 21256 29421 -27.8 5732 9088 6593 5755 6972* In prices of 12/01

Flmncnial Ilndcators

4. Return on Im. 2 7 4 7 9 7 4 8 15 8 7 7 -4.8 6 5 10 E KESAssets (X)5. Debt/LT Cap. (2) 35 40 37 6 37 46 35 43 30 37 35 42 -17.8 36 33 25 39 646. Debt Ser. Cov.(X) -1.5 -2.5 -1.2 -2.4 -2.3 -2.5 -1.3 -2.4 -0.9 -2.2 -1.3 -2.4 -44.3 -0.4 -2.7 -0.1 0.5 -0.07. Op Ratio (S) 90 95 8T 87 84 93 83 94 82 94 73 28.0 103 81 97 173 102

Inve tment Levels (CrS a. reflecting 12/81 prices)

8. Investments 1981 3658 1038 3724 1187 3008 1465 3183 1915 2874 7586 16447 -53.9 1404 2926 1965 2166 1534Non-Bank 1340 3658 106 856 112 935 451 1321 201 2874 2710 9644 -71.9 567 2926 64 2088 1454*nk 140 0 932 2868 10T5 2073 1014 1862 1715 0 4876 6803 -28.3 837 0 1319 78 80

Sources of Invstment Financing

9. Setf-fin. (X) 4 -0 6 3 13 8 -11 9 -12 10 -1 6 -120 -23 18 -194 -568 -228 ai10. LT Debt (X) 22 42 28 47 62 21 18 19 20 8 28 29 -4 e8 3 229 210 31 111. Other (2) 73 58 66 50 25 70 94 72 92 82 73 65 12 35 79 65 459 297Total (2) 100 100 100 100 100 100 100 100 100 100 100 100 NA 100 100 100- 100 100

Service Indicators

12. No. of Cus.(th.) 242 239 272 273 292 311 310 332 343 392 m 309 -5.7 366 411 393 418 44013. No. of Eapt.(th.) 1.7 1.8 1.8 2.0 1.8 2.3 2.1 2.4 2.2 2.4 2 2 -11.3 2.9 3.3 3.0 3.0 3.114. Custemers per 139 131 147 136 160 133 146 140 158 164 150 141 6.8 126 124 130 138 143

OQ m

O n

0

0

00 o.O

ENREES Actimt eri Forecst ResuLts Sua rized PercentReul ts (1)

for 1962-1966 Differwieand from

1962 1963 1964 1965 1966 5-Yr. Averes Apprei"t 1967 1966 1969 1990

Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Act. Act.

Operating Indicetors

1. salts (VA) 677 55 7s T 976 859 1136 1004 1399 1061 15S 4367 5937 -26.1 1222 1m 134 1394 1514

2. Ave. Rev. (CrS)* 6.09 7.11 6.09 7.34 S.63 7.63 S.51 7.57 5.16 6.21 5.76 7.65 -24.7 6.25 6.61 6.59 5.22 5.05

3. Sales Nov.(Cr i)* 45 6076 464 7160 4836 o2 5536 10597 5573 12900 25273 45394 -. 3 763 15254 67 721 7641

* In prices of 12/1

Finmmial Indicators

4. Xeturn n Am. 6 7 4 7 1 7 2 a 1 a 3 7 -60.6 1 a a NEG. KEa.

Assets (2)5. Debt/LT Cop. (Z) 27 20 36 27 31 37 32 35 31 39 31 33 -5.2 43 25 36 64 111

6. Debt br. Cow. (X) 25 4.7 1.4 2.4 1.0 1.8 0.7 1.5 0.4 1.4 0.8 1.8 -52.3 0.5 1.8 0.5 nm. neg.

T. Op. Ratio (X) 6 54 92 82 94 73 93 77 97 76 92 4 40.0 96 76 62 143 144

Inrtnt LeDls (Cr5 m., reflecting prices of 12WM1)

S. lrwestints 4317 5732 2832 3953 1456 6955 1556 637 2822 5178 12962 35196 -63.1 4074 4000 3619 3372 3420

Ncn-Bk 4317U s732 2832 4122 12 3261 1335 2092 2327 5178 12077 20386 -40.8 3613 3517 3619 3108 3006

B"* 0 0 0 4131 109 5S694 221 4285 495 0 905 1489 -93.9 461 483 0 264 414

sources of Ivestnt Finrcming

9. Self-fin. (2) 2 9 -13 3 46 2 53 -2 77 -6 -31 1 -2218 -29 12 78 -195 -164

10. LT Debt (2) 33 61 51 73 25 71 100 61 150 42 69 t4 8.3 U 0 82 62 37

11. Other (Z) 65 30 63 24 122 2? 54 42 27 6 61 35 76.6 84 U 96 233 227

Totlt 2) 100 100 100 100 100 100 100 100 100 100 100 100 NA 100 100 100 100 100

Servic IrJicatore

12. No of C0.. (th.) 163 109 169 215 206 244 229 273 251 305 20 245 -15.3 276 339 294 320 351

13. No. of EVl. (t)..) 1.4 1.4 1.5 1.6 1.6 1.8 1.6 2.0 1.9 2.2 1.6 1.5 -8.4 2.0 2.5 2.1 2.2 2.2

14. Castemrs per 118 137 129 137 12 137 12 137 130 137 127 137 -O 137 137 139 147 160

0,.n 0't3Pt ot

10

P, 0'Urt

0-(S .

U

CtAL: Actuet ad Forecast leoultte krlsedRemitt P reent

for 1983-1967 (t)wid Difference

1963 1984 196s 1966 1967 S-Teer Averagee from 196 1969 1990 199

Act. Fore. Act. Fore. Act. fore. Act. Fore. Act. Fore. Act. fore. Apprelest Act. Fore. Act. Act. Act........ ................. .................... . ................. ...................... ................ ......................... ................ ..................... ... ... ..... ....... ...................... . ....

eratirg Indicetors

1. sates (a^) o 619 s33 891 933 l9 1013 1143 12 463 5230 -10.9 1034 1424 13 1394 13092. Ave. Stee Nev. (Cr1)' 8.89 9.78 9.36 10.4? 8.97 10.00 9.14 12.14 11.09 12.02 9.52 11.01 *13.6 11.54 12.62 9.66 9.85 8.873. totes Nov. (CrS b.* 7.9 8.0 7.8 9.3 8.4 10.9 9.3 13.9 11.1 1M.S 44.4 57.6 -23.0 11.9 16.0 11.4 13.7 11.6

In prices of 12182

Finenmlot indlcetors

4. Return an .em.Assets I) 0 7 -o0 0 7 S a NEG. a 0 7rA "EC. a UE. 13 KG.

5. Debt/Lt captsl 30 32 31 36 22 41 26 38 37 42 29 38 -22.4 32 39 S1 7n s6

6. Debt Ser. Cov. (N) o.7 1.6 0.6 1.6 0.3 2.0 1.1 2.2 -0.0 2.2 0.5 2.0 -??.1 -0.0 1.9 -0.2 0.1 -0.1T. cp. patio O t01 0 10 66 101 8 3 2 IDS o0 100 63 20.0 105 79 129 96 147

I-)

lnvestewnt Levels (Cr bitlione. reflecting price, of 12/82)

6. ivtnte 1.6 S.6 1.3 6.1 1.2 7.2 2.5 7.5 3.2 7.3 9. 33.9 -71.3 3.7 6.6 1.9 3.3 4.1

Senk 0.0 0.0 0.0 4.4 e.0 6.3 0.4 6.2 0.1 3.2 0.5 20.2 -97.4 0.6 0.0 0.2 1.2 0.6 1-n

Von-Iw* 1.6 5.6 1.3 1.6 1.2 0.9 2.1 1.3 3.1 4.1 9.2 13.6 -33.1 3.0 6.6 1.7 2.1 3.3 O.D

S .xces of Ivestment Fineming

9. Self-Fin (Z) .11 9 .48 9 -73 13 -3 20 -4S 24 -33 16 -306 -294 27 -11U -142 -402 tM10. L Debt CZ) 36 Al 49 5s 17 SS 63 47 49 37 51 4 7 .7 21 22 144 67 s?

11. Other () 74 s 9o 33 156 32 20 33 97 39 ST 3 116.8 265 So 1064 ss 1S

total (1) 100 100 100 100 100 100 100 100 100 100 100 100 -161 100 100 100 100 to0

Sevice Indieatore

12. 3. of Cwt. (t.1) z30 22 3U 248 2I9 24 280 279 302 29 263 263 -e.0 319 329 310 358 37913. so. Of ll p1. (5th. 1.5 1.6 1.5 1.6 1.6 1.7 1.6 1.6 1.7 1.9 1.6 1.7 -7.4 1.6 2.0 1. 1.9 1.9 14. Ceintemr pw 154 150 160 152 161 154 171 15S 162 156 16 154 6.0 173 162 173 19 200

Eepto5y-

US

god

lsb

lb 1-

Cs0%

100'lb )m

UQ

ClSt Actal ovd forecoet Results 1nr I-sod PercentReoults CI)

for 1M-1987 IIffere.oaM frm

1113 1981 1933 19 1m7 5-Tee Average Approieat Iv6 190 196 1991....... .......................... .................... ....... ......... .... ..... .................. ........ ........ .......... .. .... ... ... ... .............. ................... ............ ......... .......

Act. For. Act. reo. Act. *o. Act. fre. Act. For. Act. fore. Act. Fre. Act. Act. Act.

1. Soles (SM) lit 663 75 7o7 7n 9 " 1150 e 99 19 416 47m -12.2 1063 146 1204 1329 1392. AVI. 30,. (rs)' 11.30 11.59 11.31 12.21 10.4e 12.00 9.59 13.47 11.57 16.00 10.2 13.50 -19.9 1."3 15.21 9.22 16.95 10.003. Saem ftev.(CrS *.)* 0123 7666 a" 9610 a2m 12461 6917 154819 11516 19192 45305 64441 -29.7 12100 22294 202 1455 139

* In prices of 12182

Fitstel Indicators

4. letwH an te.Aoets aO) WC. 7 2 7 2 7 66. I r. e -2 r-123.S 1 a Ns. e. NEG.

S. Debt/l capital 27 30 23 2n 20 31 24 33 37 33 27 31 -12.5 34 29 2 51 4e6. Debt S.e. Cea. (1) 0.3 2.1 6.3 2.1 1.3 1.6 0.5 2.4 -0.2 1.9 0.4 2.0 -00.0 6.1 2.2 -0.1 -0.2 -0.1T. op. met I* (Z) 104 94 U* 96 I5 106 *1 116 3 104 s n 39.6 96 CT 125 124 14

Invet_nt etstr (Cr5 a., reflecting price. d 12/82)

S. Invetm_nts 2742 366 2w0 5715 30 99 11930 10724 m2 11201 274 AM *u *32.3 9505 923 252 140 22914301* 2742 36" 2003 2102 309 2004 11930 1445 76 2201 2715 1206 124.5 9505 9230 100 71 24491

eNot-Banit 0 6 0 3613 0 6602 09279 342 9000 342 28494 -96. 0 0 1433 7307 3425

Sureo s lof eItmant Fir .i nt

9. Sett-fin. (3) -49 4 -6e I -19 -10 .4 4 .44 0 -25 -1 4269.9 -142 10 -1172 *n7 -t?,10. ebt/lw.(%) 30 Is 20 31 23 4S 21 43 se 42 33 39 -16.6 n 14 28 2n 2411. Other( ) 119 e 139 96 6 2 52 C7 57 93 4250.? 169 17 1024 153 lei

Totat 100 100 100 100 100 100 100 100 100 100 100 100 UA 100 100 100 100 100

Key Service Indlettore10. II. Of o t. (tb.) 29 306 328 35 359 410 64 462 521 516 39 410 -3.8 546 52 577 597 61411. me. of [W. (ti.) 1.3 1.3 2.0 1.9 2.1 2.1 2.2 2.4 2.3 2.3 2.1 2.2 -4.2 2.5 2.3 2.6 2.4 312. Cutonrew 166 173 164 131 170 192 206 181 223 184 183 1U3 2.4 220 20 223 229 23

'-I

OQ m

0

0 0

0

Q~ 0

'~j rto-

OQ 0CD-

0

CEtR0: Actumi we forecast Rewuts

Siwrized Percent (3)

Reti te. Differnce1963 196S 1965 196 19" 1983-87; wd from 196 M96 19O 199

Act. Fore. Act. fo. Act. Fore. Act. Fore. Act. Fore. 5-.er Averagee Appraisal Act. Fore. Act. Act. Act.Iperetirn Indicators .............. ...... . . .- --

...................................... ................ ............. ... .... . ..

1. Utes (G11) 96 1" 112 169 135 19 172 221 206 247.4 723 97s -zs.a 23? 276 27 29 3232. Ave. Sate R*v.(Cr$ i)' 33.56 17.3 33.52 18.09 32.66 16.99 27.9 19.96 33.15 23.73 31.97 20.5s 59.6 32.13 Z1.99 24.3 23.47 20.433. Sates Rew. (CrS b.)* 3.2 2.5 3.8 3.1 6.4 S.? 4.6 6.4 6.9 5.9 23.1 19.6 16.2 7.6 6.1 6.7 7.o 6.6

i n prices of 12/62

Finnocw l !ndicators

6. Return (1) en

Remm. Assets KG. 0 1 7 NEG. 7 NEG. * NEG. e KG. 6 MA NEG. a NEG. NEG. GC.5. DebtAt cspitat 21 *? 36 5s 3 9 u 160 Si 16 39 *s.6 -31 69 -50 *19 -566. Debt Wr. Coy. (X) -3.0 3.2 0.6 2.3 0.5 2.0 -S.2 2.2 -6.2 1.5 .2.7 1.9 -242.2 -0. 1.S 0.0 -1.0 -0.1r. Op. R.te EC) 114 96 101 92 102 89 13S5 66 19 61 1Z2.2 86.5 38.9 109 7S w 316 162

Inweeta.tt Lets (CrS blitte., reflecting prices of 12/2)

B. OwetwIntJ 1.35 .75 2.14 4.S2 2.64 7.S Z.4 6..6f 2.33 6.96 11.30 29.16 -61.3 3.34 6.81 A95.3 39.6 42.6eank 1.35 1.7 2.16 2.06 1.76 3.11 2.79 6.0 1.7 1.68 9.79 6.65 13.2 3.34 6.61 4"9.3 2S.4 318.6

IIon-SIA 6.00 0.00 0.00 2.6 0.86 6.04 6.05 6.60 0.59 7.zz 1.50 20.53 -92.7 0.00 0.00 -0.0 14.3 123.9

Source of twehnt fim neing

9. Self-Fin () .49 1 s 2 -11 Z -8W a -142 6 -U 5 -1374 -133 9 -1S -e -120. LT Dbt S() 39 11 11 42 27 51 so 45 34 67 32 54 -3.r 1S 38 100 6 0it. OtIe IX) l11 71 95 36 U4 47 160 67 229 29 133 41 226.0 216 52 16 137 IIltoalt () 100 100 100 100 10e 100 100 100 100 1e 100 100 IA 100 100 100 100 100 0> b

service Indieators

012. e. of Cute_r s(th.) 41 6S 69 52 s 6 67 67 76 75 5o 60 -3.6 63 112 121 12913. e. of E . 7 736 961 750 1037 800 1139 *0 1162 CY, f9 rn 25.2 U11 660 156 1500 1 u 0014. Custwem pr 5WS 61 52 7e 56 75 s5 oe 5 a 5so n -22.5 66 96 71 76 S1

00 0.

ELETMILO: Actuot 1 Flereceet eowAtt gamriaed Percent it)

alite, Differwwe

1963 19t6 196 1966 197 1983-87; wd fre 196 "99 1990 1991

Act. lore. Act, lre. Act, loro. Act, fore. Act, Fore. S-Iee Average Appralt Act. For*. Act. Act. Act.

pwrtig Irdideterts .......... - - -.............. ..----

1. Raie (SA) 3424 35333 3642 40062 42326 43017 5 *so 4603 4450 49173.6 204e 213660 .4.1 4690 S262 4000 47 4920 493

2. Ave. 1eit" OV.(cU )e 9.67 11.05 I.90 11.0 6.36 2.17 6.50 12.73 16.2 11.3 9.25 11.63 -21.6 10.76 14.06 6.91 6.37 6.21

3. Sates New. (CrS b.) 332.9 390.4 342.7 464.6 354.7 523.6 32. sss.7 482.4 559.4 1895.6 2526.8 -25.0 50i.9 73.s 426.0 £01.1 403.1

* In priees of 12/32

FInuiciI Indicstor.

4. Return M3) an

xn.a. aet. 5 r 7 7 I 7 9 a 1s a I 7 16. 5 9 4 IaEK. "EC.

5. DbtLt cptteat 71 o 7 747e S 7n 6 7 S1 6 67 69 74 -7.1 47 49 21 2a

6. Debt S.r. Cow. (X) 0.5 1.0 0.4 1.6 0.3 1.1 1.0 1.1 0.3 1.2 0.5 1.1 -52.8 1.0 1.2 2.7 2.1 0.1

T. op. Ratio () 91 90 89 90 6? 90 90 85 110 a 95 -7.4 91 90 91 103 llI

Igweetunt Lewis (Cr1 bUtler., reflecting prices of 12/62)

6. Ivwetumnt 39.4 43.0 60.2 63.9 5.6 69. 96.4 79.3 94.2 88.6 38.1 344.7 12.6 Or.1 101.5 41.6 67 6 5 4.

S" 0.0 0.0 6.e 16.5 13.3 16.1 11. 19.4 0.6 13.2 34.7 67.2 -18.3 57 0.0 1.o 0.6 0.3

on-60 39.4 43.0 51.3 47.4 82.5 51.6 56.6 59.9 93.4 75.6 353.3 27.s 27.3 61.3 101.5 39.6 67.1 4. S

Sure of Inw"t lmufInlne

9. Self-fin (1) .90 .- .32 -6 - .3 e11 -2 -59 4 -55 -1 Sa9.1 .61 9 11 -102 *470

10. LT ebt () 34 113 56 55 104 53 7M 50 46 67 63 6.5 62 51 68 26 523 '4

1I. otheri ) 163 -13 127 51 56 so 41 4*5 113 3 a6 38 129.6 100 40 21 17 46

Total (S) 100 100 100 100 100 100 100 100 100 100 100 100 MA 100 100 100 100 100m(10

Seice Ildicators O

0

12. No. of citinr (M.) 3.6 3.6 4.6 4.6 4.2 4.2 4.9 4.4 4.5 4.6 4.3 4.2 1.1 4.7 4.6 4.6 5.0 5.1 "

13. go. ef Et. (ti.) 19.4 9.7 19.9 20.3 20.5 21.0 21.3 21.7 20.6 22.4 20.3 21.0 -3.4 21.1 23.1 21.7 21.4 21.3 0e

14. CLatomrs per 196 194 200 19 203 200 22 2 219 206 210 200 4.7 220 206 221 232 Z41 prt

MD.

ELETUO IE: Actumt uW Forec"t Reolt.

Siwirlzd Percent ()1963.67; end frm

1963 19"4 1916 1967 Flv-Tee Average Approlt Igo 1969 1990 199...................... ................ .................... ...... ......... ... .................. ................................. ...... ....... . ........ ........... ............ ...................... ................

Act. Fore. Act. Fr*. Act. Foe. Act. Fo. Act. For. Act. Fre. Act. For. Act. Act. Act.

opwatiflg Iindctors

1. Sol" (SI) 626 776 I5 ml 631 9 995 1048 1121 1136 4523 4607 -. 1211 122 967 1596 16582. Ave. Sales low. (Cr%)' 3.61 4.13 4.45 4.62 4.2 6.38 4.16 9.U0 8.27 12.16 5.40 7.82 -31.0 1l.n 14.42 7.4S 4.62 4.45S. sales RM.(rS b.) 29.3 32.1 33.4 40.7 40.0 61.5 48.3 103.5 92. 138.4 24.3 376.1 -35.1 141.9 1T7.1 72.0 73.7 73.8* I pries of 12/62

Flnwewla IndIcator.

6. Return on Am.Aseeto S) EC. 7 3 7 NEG. 7 608. a NEG. a NEG. 7 NA US. a Me. KE. SE.

5. ebt/L Csp.(2) 70 79 el 66 2 91 1 as 69 6 76 66 -11 63 U3 56 47 276. Debt br. Coe. (X) 0.0 0.4 0.1 6.5 0.5 0.5 6.9 0.o 0.1 0.9 0.2 0.r -76.6 0.1 1.2 *0.2 0.1 -0.1T. Op. 3 tI () 116 63 as ?a 123 59 Ill 53 106 48 109 47 133.9 63 40 245 123 237

Irnvetmnt Lovs. (Cr9 bitIon.. reflecting 12/62 prices)

B. lnve.tmnto 326.4 329.6 306. 44s.0 33S. 301.7 265.6 252.4 105.1 97.0 2312.3 1526.0 51.5 1055.4 218.0 465.5 46.2 439.7Son-sa 326.4 329.6 306.4 4O.4 33S5. 295.4 265.1 247.1 1057.1 197.0 2310.6 1509.7 53.1 6S.9 216.0 45.2 46.2 439.7

0.0 0.0 0.0 4.7 0.0 6.3 0.6 5.3 1.0 0.0 1.5 16.3 -90.6 169.5 0.0 0.4 0.0 0.0

souce of I,wot,t finwicinr

9. Iolf-fln. C) -48 -12 -S4 -12 -r -30 6 -17 -21 -6 -24 -IS 52.2 46 22 -89 -23 -3410. LT Debt ) s 91 16 115 62 149 2 34 48 66 102 -35.S 12 56 30 4 261. Other () 73 21 -10 -3 45 -19 22 37 66 so so 13 329.4 134 22 159 119 109

Total s) 100 100 100 100 100 100 100 100 100 100 100 100 NA 1o0 100 100 100 100

Sorvic. Indicators

12. 5.. Of Cu t. (tU.) 121 128 129 136 138 148 147 140 155 172 138 149 -?.s 166 136 l65 213 22313. no. of Ef . (tt.) 1.2 1.2 1.1 1.3 1.2 1.4 1.2 1.5 1.2 1.6 1.2 1.4 -17.1 1.2 1.6 1.4 1.3 1.314. Cut ws per 101 10? 113 106 119 105 13 105 131 105 ll IDS 113.5 136 los 136 167 173

Erpt

0 m

0 m%OQ'0

0%.

N)

Mb

C)e' 0,d rt0-

0 .o _

LISUT: Actmnt I Ftor eot Resultt iqiNtIad Pe, 't

Results (I)for 1963-1967 Differee

1903 am~~~~~~~~~~~~~- from1963 1964 19e5 1966 1967 5-TeAr Averege Awrieagl 196M 1969 1990 1991--.-.-.....-. ........ ................. ------------- --------------... .... ................ .................. .......... --------------- --- -- -- -- - -- - -

Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Fore. Act. Act. Act.Operating Inttleetere

1. Sales (Qwh 15556 14767 16565 15487 16949 16559 16186 17459 16342 15361 85600 82'3 3.3 1B795 19596 19422 19342 191412. Ave. Raw. (C*)* 9.72 11.96 8.95 12.55 6.89 13.17 6.39 13.2 10.44 14.51 9.28 13.27 -30.1 10.53 15.22 6.81 8.48 6.453. Slto. S v.(CCr m*.) 151174 16613 148230 196929 150681 218133 152583 241342 191509 26634 741? 1099441 -21.6 19790? 29830? 171132 163990 161660*(CrS n.. 12/62 prices)

Fina nclt indicators

4. Return an Re.Aseetes l) 9 7 e 7 7 e 5 a I I 8 4 7 12 8 3 12 75. DAbtLT capitol (8) 54 46 53 43 55 40 49 34 50 30 52 39 35.7 49 26 4? 32 296. Debt Sor. Cov. (N) 1.1 1.2 1.1 1.3 1.1 1.4 0.9 1.2 1.0 1.5 1.0 1.3 -20.3 1.0 1.5 0.9 1.0 10.47. op. etlio (I) 63 66 84 85 8? 64 91 84 85 63 66 73 1T.6 88 62 94 7r 43

lIreet_nt Letes (Cr1 m., reftectilng pricee of 12/82)

S. irntuanta 15051 26169 16165 32525 26327 41042 21631 50300 2mo 60580 106424 210616 -49.5 28950 T4145 24745 14T7? 183315051 26169 16165 23476 26327 26842 20999 37650 25687 52069 104229 166206 -37.3 25954 74145 21220 12727 16833Nan-sank 0 0 0 9049 0 14200 632 12650 1563 8511 2195 44410 -95.1 2996 0 3525 2050 0 I

Sources o Irrnvt_nt Firnanin a

9. St.f-fin. (1) 33 -27 33 3 23 1S -53 -8 -28 16 .3 3 -195.9 -87 12 -146 86 -6S10. Debt/lvt.(S) 412 2 459 35 2 28 301 28 207 25 243 25 679.4 51 34 21 14 10II. Other (I) -345 125 -392 62 75 58 -149 8o -78 59 -140 73 -292.9 13? 54 225 172 174Total () 100 100 100 100 100 100 100 100 100 100 100 100 MA 100 100 100 100 100

Service Indicators

1Z. U.. of Cust. to.) 2.LOS 2.250 2.168 2.394 2.253 2.555 2.326 2.706 2.373 2.86 2.242 2.548 e 12.0 2.390 2.959 2.457 2.494 2.54813. No. of E ptemwe 14203 14820 14317 15196 14233 15407 14061 15977 14069 16284 141 155?? -9.0 13837 16565 14330 14492 1341514. Cu tere par 147 152 151 157 158 16 165 169 169 1T4 1se 164 -3.3 173 179 171 172 190

Mm

0~

0

P

0 rtOQ _rd -

- 64 -

Table 10.1: LOAN 2138-BR: Comgliance with Loan Conditions

LegalDocuments Section Description Cow liince

Execution of the Project

L.A. 3.01 a) carur project conpanies to carry out the yesproject; provide funds; preventinterferences

b) (i) by June 3, 1984 satisfactory noarrangements for additionalfinancing;

fi) by Februory 28 each year nobeneficiaries financing plan for thefotloirng year.

ill) by February 28 each year nobeneficiaries final financing ptan;five plan

c) ltelnd proceeds of loan to beneficiaries ye

d) no a nd-ant to subeidfary loan U/Aarements (SA) without Bank agreemnt

W) SLA subject to presentation of appraisal yesreport

GA 2.01 Ensure stisfactory financing no

LA 3.02 Supervise and provide inform_tion no

LA 3.03 Came, beneficiaries to _ploy consultants yes

LA 3.04 Cauce bwneficiaries to insure and me of goods yesand srvices

LA 3.08 To acquire land and rights yes

LA 3.09 Reirnvst divid nds yes

Table 10.1 tCont d.APe" 2 of 2 Pae

poe:e ts lswtion Doecr1rzti0 Cowol In

Nne8engnt Wnd Operatfons

LA 4.01 O aintain corporate existece yes

LA 4.02 Precticers, _miaent end staff yes

LA 4.03 Naintain satisf0ctory insurance yes

FinAncial Covenants

LA 5.01 Appropriate *ceounting practices y"

LA 5.02 BY AprWi each year furnish certified financial yestatem_nto

LA 5.04 Lubcnge vieu with Sank on mior policies and yespirocsdu.aes change

GA 3.02 a) pir wnt lnterfernce ye

b) cause atons on electricity rates nogimrantse furnd nd 1 port permits

- 66 Table 10.2: LOAN 2364-UR: CouDlwince with Loun ConditiontPage 1 ef 2 Pages

LegalDocumentt 5tf eon cripti Cotnc

Execution of the Prolect

L.A. 3.01 C) ConSO project copanies to carry out the yesproject; provide funds; preventInterferences

b) 0i) by Jum 30, 1986 satisfactory N/Aarrangements for additionalfin ncing;

f1) by October 15 ech year nobeneficiaries preliminary pians forthe following year.

fi1) by February 23 each year nobeneficiaries final finncing plan;

iv) by Nay 31 each year furnish a 5-year nofinncing plan of beneficiaries

c) Island proceeds of loan to beneficiaries yesaccording to scheduels 1 and 5

d) no * endcnt to subsidiary loan V/Asgresmnts (SLA) mithout Bank agreemnt

e) UA subject to presentatfon of appreisl yesreport

f) Provide counterpart furds required by yesELETRONORTE and LIGHT

LA 3.02 Starting with sm_ster ending 6/30/84 Yessupervi e beneficior Is every 6 enthe ndproesnt report

LA 303 Cause ben ficiaries to employ conrultants yes

LA 3.04 Cause beneficiaries to Irsure con ultants ye

LA 3.04 Cause beneficiaries to Irmure goods end yessmrvices

LA 3.08 Lnd acquisition yes

U 3.09 leinvest dividends yes

CA 2.02 Ensure stisfactory financing no

Naaoement and Ocerations

a X 2 a 2

c S a -E - - t {

23 "e! l5 .4 8 S

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-686

TbLe 11: Use of Bank Peouwca

Page 1 of 2 pages

Staff

Nonth/ Days in Specialt- Project Tye of

Stage of Project CycLe Yrsr Field zation Status Probl_,,.,_,............................. ..... ....... ..... . ... .......... ------ ......................

Loan 2138-R

1. Idantfffcation 07/73 2 FA MA MA

Sub-Totrl 2

2. Prberation 12/78 4 FA; ENG MA MA

04/79 4 FA; ENG MA MA

09/79 2 FA MA MA

11/79 2 EMO MA MA

01/80 11 FA MA MA

03/80 7 ENI MA MA

06/80 a 2 FAr; ENO MA MA

3. Appraisal 09/60 21 FA; ENS; LO MA NA

11/61 3 NO6 MA MA

01/82 21 FA; ENO MA NA--- ........ ..... ............... .. .

Total 108

Lomn 236-N

1. IdentifIfation 06-07/80 2 * 2 FAs; ENO MA MA

2

2. Pr p ration 09-10/82 3 ENO MA MA

11/82 21 ENO MA MA

29

3. Appraisal 01-02/3 21 ENIs FA MA MA

21

4. Post-AppraisaL 07/63 21 3 FA. MA MA

21

* tm_ i"ion.

Total 73

- 69 -

Table 11: Use of Bank Resources (Cont'd.)

Page 2 of 2 pages

StaffNonth/ Days In Specialf- Project Type of

Stage of Project Cycte Year Field zatfon Status Problm

1. SupervisionLoan 2364-BR 02/84 28 FA;ENG ILoan 2138-BR 07/84 28 FA;ENG 2 F.MLoans 2138/2364-BR 03/85 34 FA;ENG 2 F,NLoans 2138/2364-BR 03/86 34 FA;ENG 3 F,MLoan 2364-BR 09/86 6 2/ FA;ENG 3 F,N

Loan 2138-BR 03/87 10 3/ 2 FAs;ENG 3 F,NLoan 234-NR 01/88 7 ENG 3 F,N

Loans 2138/2364-lt 03-04/88 45 2/ 2 FAm;ENG 3 F,M

Loan 234-NR 01-02V90 28 2/ FA;ENG 3 F.MLoans 2138/2364-BR 11/82 5 2/ FA MA

225

1/ Does not Include mission of economist t14 doys)and fitnncial analyst C2 days) to review, respec-tivelry planning _thodology of ELETROBEAS andshortcominghs of DMAEE regulatory ethods.

Z/ Mission also supervised Loan 2565-3.

3/ NIssion spnt about 45 days in Brazil, moat of

which tino a spent preparing a sector adjustmntloan.