World Bank Documentdocuments.worldbank.org/curated/en/524361468041952555/pdf/multi... · PLN - Perusahaan Umum Listrik Negara - National Power Authority PERTAMINA - National Oil Company

Document of F E,

The World Bank X Y

FOR OFFICIAL USE ONLY

Report No. 2694-IND

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

STAFF APPRAISAL

OF THE

NINTH POWER PROJECT

March 20, 1980

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

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CURRENCY EQUIVALENTS

US$1 = Indonesian Rupiah (Rp) 625Rp 100 = US$0.160Rp 1 million = US$1,600

UNITS AND EQUIVALENTS

1 metric ton = 1,000 kilograms (kg)1 liter (1) = 0.0063 barrels1 kilometer (km) = 0.6215 miles (mi)1 kilovolt (kV) = 1,000 volts (V)1 megavolt-ampere = 1,000 kilovolt-amperes (kVA)1 kilovolt-ampere = 1,000 volt-ampere (VA)1 megawatt (MW) = 1,000 kilowatts (kW)1 gigawatt hour (GWh) = I million kilowatt hours (kWh)

ABBREVIATIONS AND ACRONYMS

BAPPENAS - National Planning AgencyBATUBARA - National Coal EntityBKPM - Coordinating Board for Capital InvestmentBVI - Black and Veatch International (Engineering

Consultants)EHV - Extra High Voltage

LNG - Liquid Natural GasMM - Merz and lIcLellan of U.K.MONENCO - Montreal Engineering Company of CanadaNRECA - National Rural Electric Cooperative

Association of USPCR - Preece, Cardew and Rider of U.K. (Engineering

Consultants)PLN - Perusahaan Umum Listrik Negara - National Power

AuthorityPERTAMINA - National Oil CompanyREPELITA - Five Year Development PlanSOFRELEC - French Engineering and Management ConsultantsUSAID - US Agency for International DevelopmentWilayah - PLN's Operational Region

PLN's FISCAL YEAR (FY)

April 1 - March 31

FOR OFFICIAL USE ONLY

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

NINTH POWER PROJECT

TABLE OF CONTENTS

Page No.

1. THE ENERGY AND ELECTRICITY SECTORS . . . . . . . . . . . . . . 1

Energy Resources . . . . . . . . . . . . . . . . . . . . . . 1Petroleum . . . . . . . . . . . . . . . 1Natural Gas. . . . . . . . . . . . . . . . . . . . . . . . 2Coal . . . . . . . . . . ... . . . 3Hydroelectric Resources. . . . . . . . . . . . 3Geothermal Resources . . . . . . . . . . . . . . . . . . . 4Nuclear Power . . . . . . . . . . . . . . . . . . . . . . 4Firewood . . . . . . . . . . . . . . . . . . . . . . . . 4Agricultural Wastes and Other Noncommercial Fuels . . . . 5

Energy Sources . . . . . . . . . . . . . . . . . . . . . . . 6Organization of the Energy Sector. . . . . . . 6Energy Policy and Pricing . . . . . . . . . . . . . . . . . 7The Electricity Sector. 9Background . . . . . . . . . . . .. . 9Directorate-General of Electric Power - Ministry of Mining

and Energy . . . . . . . . . . . . . . . . . . . . . . . 9Perusahaan Umum Listrik Negara . . . . . . . . . . . . . . 9Captive Plant . . . . . . . . . . . . .. . 10Rural Electrification . .. . . . . . . . . . . . 10Tariff Structure . . .. ........... 11

2. THE BENEFICIARY . . . . . . . . . . . . . . . . . . . . . . . 11

Background . . . . . . . . . . . . . . . . 12Legal Status and Responsibilities . . . . . . . .. . . 12Organization . . . . . . . . . . . . . . . . . 12Management . . . . ..... . . 12Manpower and Training . . . . . . . . . . . . . . 13Research . . . . . . . . . . . . ... . . . .. . 13Accounting and Audit .... ..... 13Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 14Present Facilities . . . . . . . . . . . . . . . . . . . 14Performance under Earlier Bank Operations . . . . . . . . . 15

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

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Page No.

3. THE PROGRAM AND THE PROJECT . . . . . . . . . . . . . . . . . 15

The Power Market . . . . . . . . . . . . . . . . . . . . . . 15Load Growth and Consumer Connection program . . . . . . . . 16Access to Electricity. . . . . . . . . . . . . . . . . . . . 17Development Program . . . . . . . . . . . . . . . . . . . . 17Overview of the Plan . . . . . . . . . . . . . . . . . . . . 18

Project Description . . . . . . . . . . . . . . . . . . . . 20Suralaya Power Plant . . . . . . . . . . . . . . . . . . . . 20Associated EHV Transmission . . . . . . . . . . . . . . . . 20Control Center . . . . . . . . . . . . . . . . . . . . . . . 21Training Simulator . . . . . . . . . . . . . . . . . . . . . 22Cost Estimates .............. ........ 22Financing Plan . . . . . . . . . . . . . . . . . . . . . . . 23Loan Amount ............. ...... ... 24Procurement . . . .. . . . . . . . . . . . . . . . . . . . 24Disbursement . . . . . . . . . . . . . . . . . . . . . . . . 24Implementation, Engineering and Construction . . . . . . . . 25Contract Approval. . . . . . . . . . . . . . . . . . . . . . 26Land Acquisition for EHV . . . . . . . . . . . . . . . . . . 27Ecology. . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4. FINANCIAL ANALYSIS . . . . . . . . . . . . . . . . . . . . . . 27

Past Performance . . . . . . . . . . . . . . . . . . . . . . 27Future Position . . . . . . . . . . . . . . . . . . . . . . 30Future Operating Results .. 32Revaluation of Assets. . . . . . . . . . . . . . . . . . . . 32Debt Control . . . . . . . . . . . . . . . . . . . . . . . . 33Current Position .. 33Corporation Tax .. 33Subsidiary Loan . . . . . . . . . . . . . . . . . . . . . . 34

5. JUSTIFICATION .34

Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Least Cost Solution. . . . . . . . . . . . . . . . . . . . . 34Internal Economic Rate of Return . . . . . . . . . . . . . . 35Risks ... ... 36

6. AGREEMENTS TO BE REACHED AND RECOMIMENDATION . . . . . . . . 36

LIST OF ANNEXES

ANNEX

I Petroleum Products - Supply and Demand, 1969-762 Organization Chart of the Department of Mlines and Energy3 Growth of Captive Power in Indonesia4 PLN's Organization Chart5 Forecasts of Future Generation Requirements6 Growth of Generation Capacity, Sales and Peak Demand in Java.7 Suralaya Units 1 and 2 - Cost Estimate8 Suralaya Unit 2 - Cost Estimate9 Cost Estimate for EHV Lines10 Estimated Schedule of Disbursements11 Implementation Program for Suralaya Units I and 212 Implementation Program for EHV Lines13 Historical Income Statements, Funds Flow Statements and Balance

Sheets14 Financial Forecasts FY80-8715 Assumptions in the Financial Forecasts16 Peak Demand and Installed Capacity in Java17 Plant Utilization in Java18 Cost and Benefit Streams for IERR Calculations19 Selected Documents and Data Available in the Project File

MAPS

IBRD 12453 RIIBRD 12435 R3

This report was prepared by Messrs. J.M. Sneddon and V.P. Thakor and isbased on information obtained during an appraisal mission in July, 1979.

1. THE ENERGY AND ELECTRICITY SECTORS

Energy Resources

1.01 Indonesia is well endowed with abundant energy resources and hasas yet underdeveloped natural gas, coal, hydroelectric power and geothermalsources. Petroleum reserves have been exploited for some time and theavailability of indigenous oil caused Indonesia to develop a petroleum basedenergy sector rather than exploiting other available energy resources.Prior to independence the country relied on coal and hydroelectric energy toa large extent for its commercial energy; petroleum currently accounts for90% of total commercial energy consumption (para. 1.20).

Petroleum

1.02 Petroleum reserves are estimated at about 50 billion barrels butproven reserves are between 10-15 billion barrels, a figure that has remainedstatic since 1970. Production, currently about 1.6 million barrels per day,is expected to increase to about 1.8 million in five years; details are shownin Table 1 below:

Table 1: KEY OIL SECTOR PROJECTIONS AND ASSUMPTIONS, 1978-1990

1978 1979 1980 1981 1982 1983 1990

Crude oil production 615 616 594 621 651 660 732(million bbl)

of which secondary more thanrecovery and produc- 7% 11% 15% 23% 31% 34% 50%tion from new wells

Domestic consumption 109 122 134 147 160 174 298(million bbl crudeequivalent)

Exportable surplus 506 494 460 474 491 486 434(million bbl crudeequivalent)

Source: IBRD estimates based on information supplied by MIGAS.

Given the complexity of the oil sector, these projections are highly conjec-tural, especially since a rapidly growing share of total production will haveto come from new wells (mostly in new fields) and from secondary recovery.Possible market constraints have not been taken into account. Primary

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production from existing wells is expected to decline rapidly due to naturalexhaustion. The projected rate of secondary recovery (primarily from thelarge Migas field in Sumatra operated by Caltex) is a function of investmentdecisions that have yet to be made. The projected rate of production fromnew wells, rarticularly in the later years, is a function of the rate of newoil discoveries. More than half of Indonesia's oil is produced by amultitude of relatively small fields and all new discoveries during the pastseveral decades have been modest in size.

1.03 Therefore, continuous large-scale exploration is required to main-tain a minimum ratio between estimated recoverable reserves /1 and currentproduction. This ratio has declined in recent years as a result of a sharpdrop in exploration activities following a general weakening of the inter-national oil market in 1977 and 1978, uncertainties concerning the interpreta-tion of certain tax rulings by the US Internal Revenue Service affecting USoil companies operating abroad, and Indonesian oil tax increases in 1976. Thevarious tax problems have now been resolved and to revive the search for newoil reserves, the Government introduced an important new incentive packageeffective January 1, 1978. Subsequently, major new exploration plans havebeen announced by most concession holders. The crude oil production projec-tion for 1990 in Table 1 is based on the assumption that the level ofexploration will soon return to the 1973/74 level of around 200 new wellsdrilled per year and that the success ratio will continue to be around 25%.

1.04 The annual growth of domestic consumption of oil is projected todecelerate from 12% in 1979 to 8.5% in 1983 on the assumption that domesticoil prices will be drastically increased over the next several years and thatalternative sources of energy will be developed. If current investmentplans for the expansion of the Badak (KALIMANTAN) and Arun (Sumatra) plantsmaterialize, LNG and condensate exports are expected to increase rapidly andthis will partly compensate for the slowdown in oil exports. Government hastherefore adopted a policy of developing other indigenous energy sourcessuch as hydro-electricity, coal, natural gas and geothermal steam, forinternal consumption. See Annex 1 for details of production, exports,imports and consumption.

Natural Gas

1.05 Natural gas reserves are about 34 trillion cu ft, of which 5 tril-lion cu ft represents gas associated with oil production. Current internalconsumption is about 80 billion cu ft per year. Pipelines have recently beenlaid to steel and fertilizer factories and consumption is expected to increaseat about 15% per year during the next five years. Following agreement with

/1 Recoverable reserves are variously estimated by the oil industry between10-15 billion bbl. This is the equivalent of 16-24 years of production atcurrent levels of output.

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Japan a few years ago, exports of natural gas in liquid form (LNG) have begun.A study of natural gas utilization has been agreed under Credit 451-IND todetermine the potential usage of gas in Indonesia and the resources available.

Coal

1.06 Indonesia's coal reserves are conservatively estimated at 1.2 bil-lion tons - 86% of which are in Sumatra and the balance in Kalimantan. Someestimates place the total reserves at 15.0 billion tons. Actual productionwas as high as 2.0 million tons per year in 1940, but declined to 140,000tons in 1973. Rehabilitation measures increased production to 250,000 tonslast year; 150,000 tons came from Bukit Asam and 100,000 tons from Ombilin -both in Sumatra.

1.07 Government has encouraged private concessionaires to surveyreserves with a view to large scale exportation of coal. A large concessionin South Sumatra has been given up by Shell but other concessions inKalimantan are under discussion. Government has decided to encourage thedevelopment of coal for internal consumption wherever technically andeconomically feasible. The coal deposits at Bukit Asam with about 100 milliontons of recoverable reserves, are considered the best prospect for near termdevelopment; and as the power sector is the largest market, the coal to beproduced will be substantially used for power generation.

1.08 The Bank made an engineering loan (S-9) in 1978 of US$10.0 millionto finance the consultants' services needed to confirm the economic viabilityand determine the features of a coal mining and transportation project atBukit Asam. About 3 million tons of coal will be produced annually, most ofwhich will be required to fuel the first two 400 MW units to be constructed atSuralaya, the second unit forming part of the proposed project. The firstunit is being financed under Loan 1708-IND made in FY79.

Hydroelectric Resources

1.09 The hydroelectric potential of the country has been theoreticallyestimated at about 31,000 MW, distributed as follows: Irian Jaya 9,000 MW,Kalimantan 7,000 MW, Sumatra 6,750 MW, Sulawesi 5,600 MW and Java 2,500 MW.Reconnaissance and preliminary studies (mostly the former) have been carriedout for sites where an installed capacity of about 15,000 MW is believedfeasible but little is known about costs of development. Irian Jaya, wheredemand is negligible, has the largest potential, and Java, where demand islarge, has the smallest.

1.10 The total installed hydroelectric generating capacity in thecountry is 635 MW - of which 433 MW is in Java, 174 MW in Sulawesi, 20 MWin Kalimantan and 8 MW in Sumatra. Construction of a major hydroelectricproject has recently commenced at Asahan (600 MW) in Sumatra to supply power

to a large aluminum complex which will have a capacity of 225,000 tons ofaluminum per year. About 50 MW will be available for PLN's grid use. Thepossibility of increasing Asahan capability by about 300 MW will be studied.

1.11 Two hydroelectric sites, Saguling (700 MW) in West T -ra and Mrica(180 MW) in Central Java, are being studied by Japanese and Russian consul-tants respectively. Both projects are included in PLN's development programand are expected to be completed by 1986/87. A few small hydroelectricschemes, associated with irrigation projects, are also included in thisprogram. PLN has responsibility for power sector planning but the financingof projects and studies is decided by BAPPENAS on the basis of national pri-orities. PLN has made proposals to BAPPENAS to finance the detailed fieldinvestigation of schemes totalling about 4,000 MW and for reconnaissance ofsites with about 6,000 MW capacity during REPELITA Ill./l BAPPENAS givespriority to studies of coal, hydro and geothermal schemes that can rapidlyproceed to the implementation stage, consequently some time may elapse beforea comprehensive catalog of available coal, hydro and goethermal sites iscompiled for the country.

Geothermal Resources

1.12 Indonesia has substantial geothermal energy potential and about900 MW of generating capacity has already been proven. The fields are closeto the main population centers in Java and Sulawesi. A 30 MW plant is beingconstructed by PLN at Kamojung in West Java under assistance from theNew Zealand with a total planned capacity of 90 MW; another 90 MW (3 x 30 MW)at Dieng in Java is also scheduled for construction by PLN.

Nuclear Power

1.13 Studies carried out by the International Atomic Energy Authority(IAEA) in 1976 concluded that a nuclear power station would be justified inJava by the mid-eighties. Java system studies which were being carried out atthe same time by Preece, Cardew and Rider (PCR) of the UK using updated costs,indicated that a nuclear plant would not be justified until the mid-nineties.PCR's conclusion was confirmed by an independent Bank study in 1978, usingupdated construction and fuel costs. PLN's long-term plans provide for anuclear power station in the mid-nineties. Feasibility studies for the firstnuclear power plant are being conducted with Italian help.

Firewood

1.14 Firewood. Firewood is the most important source of energy in therural areas, but reliable and up-to-date figures on fuelwood and agricul-tural waste consumption in Indonesia are not readily available. A recentnational survey conducted by the Forestry Products Research Institute

/1 Five-Year Development Plan (FY80-84).

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indicated that per capita annual consumption of firewood in rural areas hasincreased to 1.7 cu m in 1977 from 0.6 cu m in 1971. The methodology andfindings of this survey are presently being reviewed. Consumption in urbanareas has been estimated at 0.03 cu m, a decrease of 27% in relation to theconsumption of 0.11 cu m per capita in 1971. Another estimate made by FAO,indicates an annual per capita consumption of 0.85 cu m in 1976, which isconsidered a better approximation of consumption when comparisons are madewith other countries.

1.15 Charcoal consumption estimates show a decline from about 650,000tons in 1968 to about 200,000 tons in 1976. The per capita consumption ofcharcoal in urban areas is calculated at 3.9 kg/year, about four times theper capita consumption in rural areas which is 1.0 kg/year. A majorobstacle in promoting an expansion in the use of charcoal is the subsidizedprice of kerosene, which sells at a much lower price relative to thecomparable heat value of these two fuels.1i

Agricultural Wastes and Other Noncommercial Fuels

1.16 A study /2 conducted in 1976 estimated that 17 million tons ofagricultural and forestry wastes are produced annually. About 33% of thisamount is rice husks (5.7 million tons), 18% is baggasse, 15% is loggingand sawmill wastes, and the balance comes from various other products.Most of these are not being utilized as energy sources.

1.17 Recognizing the need to develop alternative sources of energy, theGovernment has established in 1973 the Development Technology Center (DTC).Due to a relative lack of funds and of permanent staff DTC's efforts are beingconcentrated on some specific issues: rice husk utilization, bio-gas (basedon the global design), solar heaters and crop-driers and the pyrolysis ofrice-husks and sawdust. According to the institute's officials, the maindifficulty will be found at the implementing stage of a developed technology.The initiative is presently coming entirely from the institute with its smallresources, and therefore, the results can only be limited.

1.18 The Forestry Products Research Institute is also working on someissues related to the use of noncommercial fuels, such as the improvementof the efficiency of cooking stoves and the utilization of sawdust and otherwastes.

/1 The charcoal price in 1976 was Rp 1.6 to Rp 4.0 per thousand BTU, comparedwith the kerosene price of Rp 0.8/thousand BTU. This comparison takesinto account only the heating value of both fuels. Since the thermalefficiency of cooking with kerosene is higher than with charcoal, thecomparison is still more favorable for kerosene.

/2 Georgia Tech - Pyrolytic Feasibility Study, November 1976.

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1.19 It would be advisable that the Government give a broader and morecoordinated drive to the efforts of these two institutions in order to assignpriorities, eliminate potential work duplication and, at a later stage, setup a well-planned program for the diffusion and implementation of thedeveloped technologies. With a long term, coordinated and adequate approach,it might be expected that a reasonable part of rural energy needs could be metby local sources of supply, diminishing to some extent the burden on thedemand for firewood.

Energy Sources

1.20 Consumption of commercial forms of energy in Indonesia grew in therecent past at about 13.6% p.a., doubling in about five years. For REPELITAIII (FY80-84), growth is projected at 11% p.a., with the share of petroleumproducts falling from 90% in 1977 to 79% in 1984. Currently, electricityprovides only 7% of the country's energy, but is projected to grow at anannual rate of 22% to 11.3% by 1984. Table 1.1 below shows breakdown ofconsumption by energy sources:

Table 1.1: ENERGY SOURCES(in million tons of coal

equivalent - TCE)

1970 % 1977 % 1984 %

Petroleum ptroducts 8.656 87.9 21.670 90.0 41.202 79.1LPG - - 0.189 0.4Natural gas 0.880 8.9 2.017 8.4 8.339 16.0Coal 0.161 1.6 0.178 0.7 1.254 2.4Hydro 0.154 1.6 0.219 0.9 1.084 2.1Geothermal - - 0.015 0.0

Total 9.851 100.0 24.084 100.0 52.083 100.0

Organization of the Energy Sector

1.21 In May 1978, the Ministry of Mines and Energy was established aspart of a general reorganization of government departments to coordinate allactivities in the energy sector. The Ministry has overall responsibility formining, oil, natural gas and electricity. It controls the state enterprisesresponsible for the execution of Government policies in the energy subsectors- the national oil and gas entity (PERTAMINA), the coal agency (BATUBARA) andthe public power utility (PLN). The Ministry has been recruiting staff overthe past year and developing its organization and policies to fulfill its rolein the energy sector. A comprehensive energy plan does not yet exist (seepara. 1.22) but it is anticipated that such a plan will be developed in the

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course of the next two or three years; information and data arising fromstudies of coal and gas pricing, and energy demand will shortly be availablefrom studies agreed on or under discussion with the Bank and the USAID toenable such a plan to be prepared. The Ministry's organization chart is shownin Annex 2.

Energy Policy and Pricing

1.22 A detailed energy policy has not yet been formulated based ondetailed demand projections, examination of resources, costs of alternativedevelopment strategies and pricing. However, in 1977 GOI established aninterdepartmental energy policy and planning committee at the technicallevel, including private sector participation. The Chairman and Vice-Chairman are the Directors-General of Oil and Gas and Power, respectively,of the Ministry of Mines and Energy. The committee has drafted an energyconservation plan for GOI's consideration and proposed certain measures oncaptive power plants.

1.23 A permanent energy committee was formed several months ago by theMinister, with the task of assessing energy technologies, dealing with day-to-day energy problems and preparing long-term projections for demand andsupply. The Minister has also proposed the establishment of a NationalEnergy Board at ministerial level with the Minister of Mines and Energyas Chairman. The function of the Board will be to review the proposals ofthe technicians committee (para. 1.22), to establish the energy policy ofthe Government and to give policy implementation instructions to Ministries.

1.24 Serious subsidy related distortions in the economy and the energysector are caused by the underpricing of petroleum products. Budgetarysubsidies on domestic oil consumption are estimated at about US$1.3 billion inFY81 which are much below the economic subsidy calculated on the basis ofeconomic opportunity costs./l The budgetary subsidies arise from GOI payingPERTAMINA the difference between sales revenues from the domestic market andthe cost of crude oil imports, production, freight, refining and petroleumproducts sold. PERTAMINA recieves 20% of Indonesian crude oil production atthe oil companies' production cost plus USJ 20 per bbl; part is exportedbecause of its low sulphur content, part is refined locally; high sulpur crudeis purchased for local refining and some petroleum products are imported.

1.25 Bank staff have been urging GOI to reduce and ultimately to removesubsidies but doing so would not be without penalties. About US$800 millionout of the total of US$1.3 billion annual budget subsidy, is for keroseneconsumed for lighting and cooking. Apart from some financial hardship thatwould be caused by increased kerosene prices to poor people, any move to

/1 The estimated budgetary subsidies assumed that there will be a 40%increase in the domestic price of petroleum products.

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switch to wood fuel particularly in Java would rapidly denude the high landforest areas in Java which are already small. Java has the highest density ofpopulation per hectare in the world after Japan (1,000 per hectare). It isnot practicable to treat kerosene subsidies in isolation by removing subsidiesfrom other petroleum products only, because of kerosene's interchangeabilitywith other oil products.

1.26 PLN's share in the total oil consumption in Indonesia is only about6%, consisting mainly of high speed diesel for diesel generating sets and gasturbines and residual fuel oil in central power plants. The share of residualfuel which is currently about one-third of PLN's total oil consumption willincrease due to commissioning Muara Karang and Semarang generating stationsin Java. The current structure of domestic prices results in little pricedifference between diesel oil and residual fuel oil on an equivalent heatcontent basis, and encourages the installation of captive diesel generatingplants by industries. PLN has taken special measures through its tariff andconnection charges to counter the trend and has succeeded (para. 1.32).However, the distortions in domestic fuel pricing are also translated intothe power tariff structure as industrial tariffs have to be skewed tomaintain competition with captive generation.

1.27 In order to curtail the domestic oil consumption, government isaccelerating the development of other sources of energy, coal being one of themost important (paras. 1.06-1.08). The coal field at Bukit Asam in SouthSumatra will be developed to a production capacity of 3.0 million tons peryear by FY 1985, primarily to fuel the first coal burning plant of 800 MWcapacity being built by PLN. The cost of the coal is expected to be lowerthan the equivalent international price of oil. However, the price to PLNmay not be lower than the equivalent price of oil in the local market, ifthe present level of oil subsidy continues. Such an event could encourageuneconomic investment in captive generating plants using diesel oil, incompetition to supply from PLN.

1.28 Government took a major step towards removing oil subsidies inApril/May 1979 by increasing domestic oil prices (including those chargedthe power sector) by an average of 40%. However, the devaluation of therupiah in November 1978 and the OPEC price increases have resulted in theoverall level of domestic oil subsidies remaining substantially unchanged.The impact of the domestic oil subsidies on economic allocation of resourcesand the resultant distortion in demand for alternative fuels were discussedwith the Government during the negotiations. Consequently, the followingunderstandings were agreed with the Government:

(a) Government policy is to ultimately abolish subsidies on domestic

oil consumption depending, primarily on the ability of consumersto pay. Implications of subsidy removal and the best way ofachieving this objective will be analyzed in the energy pricingstudy agreed to be carried out and financed under Loan 1513-IND.

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Government will follow a selective and gradual approach inabolishing the subsidies on domestic oil consumption.

(b) the price of coal from the proposed Bukit Asam Coal Mining andits associated transport facilities project would be set so as toachieve a reasonable rate of return on revalued assets, or toreflect the opportunity cost of the coal. However, in the eventthat, by the commissioning date of the Suralaya power station,domestic oil prices are less than the equivalent level of theBukit Asam coal price, any excess in the equivalent price ofcoal over that of domestic oil, will be compensated.

The Electricity Sector

Background

1.29 The power sector comprises the Directorate General of Electric Power(PD) of the Ministry of Mines and Energy, PLN - the national power utility,some small municipal franchises and captive plants.

Directorate-General of Electric Power - Ministry of Mining and Energy (MOE)

1.30 The PD of the MOE has been responsible for power sector policysince 1978 (para. 1.21). Until recently it has been involved in establishingthe PD organization and gathering information on the sector. Until theestablishment of the PD, PLN was responsible for giving advice to theMinister on sector policy, and for planning and licensing. The Bank wasconcerned that PD might take over some of PLN's operational responsibilitiescausing PLN to revert to the Government departmental status that existed priorto 1972, thereby, losing its autonomy. Legislation has now been enactedthat clarifies PD's responsibilities which are in policy planning anddirection, franchise licensing and general policy supervision of the powersector. The act provides for private and cooperative franchise partici-pation in the sector but it states that such franchises will only belicensed in areas where PLN is-unable to provide supply in a reasonableperiod of time. The act also provides for licensing cooperatives forthe distribution of electricity with bulk purchase from PLN and permits theestablishment of private franchises for generation to sell in bulk to PLNwhich will continue to be the only public sector utility in the country. Noproblems have yet arisen in the delineation of MOE and PLN responsibilities.The Bank staff will monitor the situation to ensure that the existingautonomy of PLN is maintained.

Perusahaan Umum Listrik Negara (PLN)

1.31 PLN, the beneficiary of the proposed loan, is the national powerutility in Indonesia primarily responsible for all generation, transmissionand distribution in the country. It was first formed in 1961 but only began

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to grow into a national entity when it received a new charter in 1972. PLNhad about 1.8 million consumers at the end of FY79 and generated abouttwo-thirds of the electricity in the country for that year (seeSection 2- The Beneficiary).

Captive Plant /1

1.32 Until about 1972 when PLN received its new charter, the powersector was uneven in performance, lacking in coordination and financialstrength. Power demand was not met with any reliability and installationswere small and dispersed. Captive plants grew rapidly to fill the vacuumand the current aggregate installed capacity of such plants is 1,700 MWcompared to the 2,200 MW of PLN. Since 1976, public power supplies haveprogressively become more available, particularly in Java where the sectordevelopment effort has been concentrated. Growth of captive plants fellfrom about 15% p.a. in the mid-1970s to about 5% in FY77 and FY78 (seeAnnex 3 for details). Captive plants will continue to be installed as thedegree of PLN's development, even in Java, is not yet at a stage to meet alldemands at all locations in a timely manner. PLN's energy sales areprojected to grow at 21% p.a., compared to captive plant growth at 5% p.a.,based on current trends. Consequently, PLN's share of the market willprogressively improve. If the current trend continues the captive generatingcapacity will constitute only 25% of the total by 1986-87.

Rural Electrification (RE)

1.33 Rural electrification is being undertaken by PLN with consultancyassistance from among others, NRECA, financed by USAID, which has alsoprovided a loan for seven project areas (US$20 million). Financialassistance in the form of a loan has also been committed by Holland,Fl 15.5 million (US$7.7 million) and as a grant by Finland, FM 0.48 million(US$0.12 million).

1.34 Rural electrification as defined in Indonesia, covers all towns andvillages in the country except provincial capitals and second levelprovincial towns. PLN plans to electrify during Repelita III (end FY84),about 3,700 of the 64,000 villages that exist in Indonesia; currently 1,081villages are included in committed projects covering about 298,000consumers. Indonesia does not yet have a plan or time scale in which allvillages in the country will have access to electricity, but those villagesand areas in which electricity would have the greatest economic impact aregiven priority. Some time must elapse before a national RE plan is feasible;currently only 6% of the total population has electricity and a sector baseto support RE is required before the program is embarked on nationally.

/1 Non-PLN power generating plants.

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Tariff Structure

1.35 PLN's tariff schedule is based on a 1972 study carried out bySOFRELEC using estimated short-run marginal costs. It was introduced byGovernment decree in June 1973. Subsequently, surcharges were introducedwhich increased the average level by about 200% but for administrative reasonsthe surcharges were applied only to the energy (kWh) charges and not to thedemand (kW) thereby distorting the tariff structure by overcharging forenergy and undercharging for demand.

1.36 During negotiations for Loan 1513-IND (Seventh Power Project),agreement was reached that PLN would design a new tariff structure which wouldbecome effective not later than April 1, 1979 and that the Bank would assistPLN in this regard. The date was postponed to April 1, 1980 by agreementduring negotiations of Loan 1708-IND (Eighth Power Project). The studies havenow been completed. A covenant in the project agreement for the Eighth PowerProject (Loan 1708-IND) requires that the new tariff structure will reflectlong run marginal costs (LRMC) to the Indonesian economy of meeting the demandfor electricity as closely as possible. However, distortions in the price ofdiesel and fuel oil and the need for social tariffs preclude strict applica-tion of LRMC differentials among all consumer categories (see para. 1.27).The new tariff structure would be implemented at the same time as an increasein tariff levels of 38%.

1.37 Tariff structures require review frequently to reflect the chang-ing costs occasioned by changes in the policies, the development programsand the demand forecasts on which the costs are based. In order to maximizethe assistance already given to PLN by Bank staff, the Bank will continueits dialogue on tariffs with Government and PLN and provide assistance asrequired.

2. THE BENEFICIARY

Background

2.01 The beneficiary would be PLN, the Government-owned national powerutility, primarily responsible for the supply of electricity in Indonesiafrom generation to the retail level. PLN's history goes back to 1961 whenthree Dutch-owned power utilities in Java were nationalized by Government.Effective growth began in 1972 when Government decided to remedy pastneglect in power sector investment and provide PLN with the statutoryauthority to develop the power sector in a planned, coherent and efficientmanner. The current charter is Presidential Decree No. 18 of 1972 which wasaimed at changing the status of PLN from a department of the then Ministryof Public Works and Electric Power, to an autonomous entity. The standardof service of the public electricity supply changed and remarkable progressensued. PLN grew in stature and greatly improved its public image; it now

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promises to become an effective agency, developing into a strong service-oriented public utility.

Legal Status and Responsibilities

2.02 PLN is an autonomous public enterprise (Perum) and carries out itsobjectives within the national development program in accordance with Govern-ment policies. In practice, the Minister for Mining and Energy determinespolicy and exercises overall control of its activities. He is assisted inmaking decisions on policy matters by an advisory board consisting of theMinisters of Finance, Industry, the Chairman of the National Planning Agency(BAPPENAS) and by his Director General of Power.

2.03 PLN is statutorily responsible for the construction and operationof power facilities throughout the country, preparing power development plans,conducting research activities in the field of electric power and enteringinto contracts for the purchase and sale of electricity. PLN's investmentplans and tariffs are subject to Government approval as are bid evaluationsand contract awards.

Organization

2.04 PLN is organized and functions as a modern public utility. Theboard is statutorily bound to have a President Director and at least twoother directors. Government has agreed with the Bank that it will ensurethat the position of President Director of PLN is filled by someone withadequate qualifications and experience. Currently, the board comprises thePresident Director and five others; all are executive directors and each headsa department in the head office - planning, operations, construction, financeand administration. In the field, there are 15 regional (wilayah) officeswith a total of about 100 branches. Regions are responsible for minor, andthe construction department is responsible for major construction. PLN'sorganization chart is shown in Annex 4.

Management

2.05 PLN continues to develop into a well organized power utility pro-gressively improving its procedures and operations. Planning in Java is nowwell established for generation. Transmission and distribution planning inJava and overall planning outside Java, are also being improved; resultsshould become apparent during the next few years. In view of the size of thecountry and the utility, the Wilayahs (regions) should have greater involve-ment in long-term planning and responsibility for the achievement of PLN'soperational goals but the process will take time. PLN has initiated steps totrain regional staff in overall planning and financial management which whencompleted, will enable the regions to prepare long-term plans and financialforecasts and be responsible as entrepreneurial managers, for the operationalperformance of their regions and branches.

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Manpower and Training

2.06 PLN now has a total of about 29,000 staff of which about 19,000 areon the permanent payroll; 1,200 (4.2%) are university and college graduates;6,300 (22%) are high school graduates. A steady improvement in the proportionof graduate and high school staff has occurred in recent years. Difficulty isencountered in obtaining technical manpower in sufficient numbers; PLNsponsors 30-40 scholarships annually at technical universities and 70-80university graduates and 40/50 college graduates are recruited each year, toovercome the problem.

2.07 Six training schools are run by PLN throughout the country to pro-vide vocational courses for the staff; about 1,100 attend the various courseseach year. Staff members are sent abroad for advanced and other training notavailable in Indonesia. Project oriented training, particularly in foreignfinanced projects, is also provided. Numbers trained and the courses givenare not yet geared to provide adequate staff of all the categories required bycomprehensive manpower planning but PLN will move closer to this goal inconjunction with the overall development of regional planning during the nexttwo years.

2.08 PLN does not have adequate training facilities for the operation andmaintenance staff for steam power stations. About 40 people have been trainedin the USA with the assistance of Black and Veatch International (BVI), theProject Consultants for the Muara Karang steam station. A similar trainingprogram is also being arranged for the operation and maintenance staff forSuralaya and the EHV projects. As a long-term policy it is necessary to setup a thermal station training school with more sophisticated facilities suchas a training simulator. Provision is being made in the proposed project forsuch a training center (para. 3.21).

Research

2.09 PLN has established a power research institute which includes a highvoltage testing laboratory. The institute, which conducts applied research inpower associated areas, has a staff of 278, including 87 graduates.

Accounting and Audit

2.10 Accounting is based on a system introduced by consultants (SOFRELEC)in the early 1970s and is generally well operated. Because of the relativelyshort period of operating experience, certain areas (asset and inventoryaccounting) still require improvement. The system is based on two sets ofbooks - operations and construction, with separate annual accounts being madeup for each and then consolidated at head office.

2.11 The Directorate General of State Financial Supervision has beenaccepted by the Bank as PLN's auditors. PLN has also employed S.A Parman

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(the Indonesian associates of Cooper's and Lybrand, Australian InternationalAccountants) on a one time basis to carry out an audit for FY79 so that PLNand the Bank could benefit from the views of a private auditor. Auditreports produced by the Directorate have been accepted by the Bank in thepast.

Insurance

2.12 PLN takes out insurance only for assets and hazards such as motorvehicles, that it is statutorily obliged to cover and for transit and marineinsurance on equipment and materials being transported. Fire and otherhazards are self insured. In view of the geographical spread of PLN's assetsany loss would be insignificant compared to overall assets and operations;this procedure is therefore considered satisfactory.

Present Facilities

2.13 Until the early seventies, PLN's expansion was severely restrictedbecause of the lack of foreign exchange in the country. A crash program wasundertaken at that time which resulted in gas turbines being installed,currently about 34% of the total capacity. PLN suffered major breakdownsin generating plant and gas turbines were seen as the only means of pro-viding generating plant quickly. Installed capacity at end FY79 is shownbelow:

Type of plant MW _

Hydro 471 21.3Steam 550 24.9Gas turbines 749 33.9Diesel 439 19.9

Total 2,209 100.0

2.14 The imbalance in plant will be corrected with the commissioning of1,000 MW of new steam capacity L by 1982 and PLN's planning is now based onthe least cost program of system development for Java and similar programs arebeing developed for the grids located in the other islands.

2.15 PLN operates about 3,800 km of transmission lines at 70 and 150 kVand 40,000 km of distribution lines, the bulk of which are in Java. About2,000 km of 150 kV transmission under construction, are scheduled forcompletion by 1982. Java will have a fully interconnected grid at 150 kV by1981 and a 500 kV system is also proposed (see para. 3.17); demand in theother islands is not yet sufficient to justify island wide grids and some timemust elapse before such grids are feasible.

A1 See Annex 6.

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Performance Under Earlier Bank Operations

2.16 The Bank has provided US$636 million for power generation/distribu-tion facilities around Jakarta and in West and Central Java. Three distribu-tion projects (Credits 165 and 334, and Loan 1259-IND) for the rehabilitationand expansion of the distribution facilities in the greater Jakarta area andfive power generation projects (Credit 399, and Loans 1127-IND, 1365-IND,1513-IND and 1708-IND) for West Java and Central Java were undertaken to helpPLN expand the Java network. Past loans and credits also provided funds forvarious consulting services such as the large management consulting effort ofSOFRELEC, the Java System Development Study undertaken by PCR, and feasibilitystudies of thermal, hydroelectric, transmission and distribution projects.

2.17 PLN's performance in implementing these projects has been uneven butis now improving. The earlier distribution projects (Credits 165 and 334-IND)were completed about two years behind schedule. A completion report on thesetwo projects was issued in November 1979. Construction of the first three 100MW units at the Muara Karang thermal station (Credit 399 and Loan 1127-IND)has fallen behind schedule by about two years. Cost overruns resulting fromOPEC oil price increases and the consequent time consuming problems in raisingthe necessary additional funds, a prerequisite for PLN to be able to award theaffected supply contracts, were the main reasons for the delays in the firsttwo units. The first and second generating units were commissioned inJanuary/March 1979. The third unit was commissioned in August of 1979.Construction of the fourth and fifth units is 3/4 months behind schedule.Loan 1708-IND for Suralaya phase one became effective in November 1979.Tenders for major equipment were issued in April 1979.

3. THE PROGRAM AND THE PROJECT

The Power Market

3.01 Several attempts have been made in recent years to prepare ausable demand forecast for Indonesia. This has been difficult because oflow consumption levels and the background of public power supply whichcovered a fraction of the total market. Furthermore, the severe restrictionson PLN's ability to provide supply, including financial, management andtechnical constraints, made PLN's past record of sales an unreliable basefor future projections. In 1973, a consultant, Chas. T. Main of the USA,applied an indirect method of using growth probabilities in selectedsensitive economic sectors and their probable impact on other sectors. Amore direct detailed assessment of the underlying demand in Java was madeduring 1974-76 by PCR of the UK as a part of the Bank-financed comprehensiveJava System Development Study (Credit 399-IND). This study quantified theeffects of restrictions on supply during peak hours, low voltage, self-generation and PLN's waiting lists. There have been no similar comprehen-sive demand surveys for the other islands.

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3.02 Realizing that PLN's sales would not immediately rise to thelevels of the underlying demand estimated by PCR in Java and that a certainportion of this market will continue to be met by captive installations forsome time, PCR also determined what it considered realistic targets of saleson which PLN could base its future development program. These are substan-tially lower than the underlying high market forecast, but of the same orderof magnitude as independent macro estimates which used per capita GNPprojections./1 These studies show that PLN's future sales, in the shortand medium term, will depend entirely on the rate at which PLN is capable ofsatisfying an increasing proportion of the existing demand, whereas in thelong term, sales are expected to reflect more closely the growth of thepower market based on the overall level of economic development.

3.03 In 1976, PLN and the Bank accepted the PCR low forecast as areasonable basis for planning PLN's long-term development program. Based onthis, a comprehensive, optimized program of generation and transmissionexpansion was prepared by PCR. It was felt, however, that this program shouldbe jointly reviewed by PLN and the Bank and modified annually to ensure thatin the short- and medum-term, it is consistent with PLN's actual developmentof generation, transmission and distribution facilities, and with the growthof sales. The latest such forecast of PLN's sales is indicated in Annex 5.It is about 15% lower than PCR's low forecast for 1985, but catches up with itby about 1990. Accordingly, the average growth rate between FY79-85 isexpected to be about 21% per year while PLN increases its share of the totalmarket from about 60% in FY79 to about 80% in FY85; thereafter growth isexpected to gradually decline to about 15% per year. During FY79 PLN's salesin Java increased by about 22% over the preceding year, which is in line withthe forecasts.

Load Growth and Consumer Connection Program

3.04 PLN has recently developed and is now actively implementing aconnection program consistent with its improved capability as would be seenfrom the results given in Table 3.1 below. Figures in parenthesis indicategrowth over the previous year.

/1 By the International Atomic Energy Authority in 1976.

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Table 3.1: GROWTH OF PLN'S CONSUMIERS

Number of ConnectedYear consumers load MVA Sales in GWh

1975/76 1,140,745 1,426.4 2,804(5%) (13.0%) (14.7%)

1976/77 1,208,538 1,594.5 3,082(5.8%) (11.8%) (10.1%)

1977/78 1,413,068 1,933.5 3,527(16.9%) (21.3%) (14.6%)

1978/79 1,784,001 2,448.5 4,287(26.2%) (26.6%) (21.6%)

3.05 PLN exceeded the consumer connection program target in FY78 andFY79. The acceleration in the consumer connection program has beenreflected in the sales of FY78-79; sales in FY80 are expected to increase by24% over FY79.

Access to Electricity

3.06 The per capita consumption of electricity in Indonesia is stillextremely low at about 45 kWh (FY78) compared to 570 kWh in Malaysia, 250 kWhin the Philippines and 250 kWh in Thailand. Indonesia's population has lowaccess to electricity; only about 6% of the households are connected. Thedegree of electrification in different regions varies, being about 9.6% inJava, 4.3% in Sumatra, 5.0% in Kalimantan, 4.2% in Sulawesi, 4.6% in WestIrian, and 2 to 3% in Other Islands.

Development Program

3.07 PLN follows the practice of preparing a long-range developmentplan covering a time span of ten years embracing the projected requirements ofgeneration, transmission, distribution and other facilities. The latestplan finalized in July 1978, covered the development period FY78 to FY87.Investment requirements based on this plan were revised in 1979 to includethe effect of devaluation in November 1978. A time slice of the program forthe period FY80-84 has been incorporated in the country's Third Five-YearDevelopment Plan (Repelita III). In the past, least cost investmentprograms for generation, transmission and distribution were planned with thehelp of the consultants. PLN has recently developed in-house capability forcarrying out least cost generation planning studies with computer modelling(WASP program) which is utilized for review and updating the generation planin Java.

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3.08 Java accounts for 63% of the population of the country (85 millionout of 135 million) and 80% of electricity sales of PLN in FY79 (3,459 GWhout of 4,287 GWh). Of the total installed generating capacity of 2,209 MWin the country, 1,547 MW (70%) was in Java. In FY87, the proposed installedcapacity in Java would be 4,609 14W (62.7%) against the total of 7,349 MW andthe sales of electricity would be 16,157 GWh, about 82% out of the totalprojected sales of 19,740 GWh; Java continues to be the centerpiece of thepower development plan of Indonesia.

3.09 Detailed engineering studies have been carried out to devise theoptimal development strategy for the power system in Java and the least costpath has been identified. The plan has been formulated to achieve thefollowing objectives: (a) optimize resource utilization by substituting useof oil by coal, hydro and geothermal resources for power generation and byreducing the use of fuel inefficient installations; (b) realize economies ofscale by larger sized installations; (c) achieve operational economy bycoordinating the utilization of plants through interconnected operations;and (d) provide acceptable standards of reliability of supply. The develop-ment plan for areas outside Java requires further review as except in a fewareas (Sulawesi and Bali) the demand forecasts are not based on detailedsurveys and generation planning is not oriented to utilize indigenous energyresources optimally. Outside Java there appears to be an excessive relianceon diesel installations, and plant utilization targets are low. PLN hascommenced a review of the investment plan outside Java to incorporaterealistic load forecasts, introduce resource orientation and improvecapacity utilization.

Overview of the Plan

3.10 The energy sales forecasts and the generating capacity requirementsare summarized in the following tables:

Table 3.2: FORECAST OF ENERGY SALES

Energy in GWhYear Java Outside Java Total % growth

1978/79 3,459 828 4,287 21.61979/80 4,364 966 5,330 24.31980/81 5,324 1,178 6,502 22.01981/82 6,495 1,438 7,933 22.01982/83 7,924 1,754 9,678 22.01983/84 9,588 2,122 11,710 21.01984/85 11,506 2,547 14,053 20.01985/86 13,692 3,030 16,722 19.01986/87 16,157 3,576 19,740 18.0

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Table 3.3: INSTALLED CAPACITY (MW)

Java Outside JavaInstall-) capacity 1978/79 1986/87 1978/79 1986/87

Hydro 433 1,479 38 262Steam 500 2,500 50 1,245Gas 600 600 149 251Diesel 14 - 425 982Geothermal - 30 -

Total 1,547 4.609 662 2,740

3.11 The estimated investment at end 1978 constant prices for generation,transmission and distribution facilities to meet the development plan isequivalent to US$9.5 billion with a foreign component of US$6.10 billion.

3.12 In Repelita III covering the period FY80 to FY84, investmenttargets shown in Table 3.4 below are incorporated:

Table 3.4: INVESTMENT TARGETS IN REPELITA III (FY80-84)(In US$ million)

InvestmentItem Foreign Local Total

Generation 1,536 645 2,181Transmission 586 175 761Distribution 1,034 701 1,735Rural Electrification 123 87 210Administration - 8 8Management & Organization 5 5 10Research & development 21 20 41Facilities & buildings - 96 96Survey of Energy Resources 53 65 118

Total 3,358 1,802 5.160

3.13 The program for expansion of generating capacity, sales and peakdemand in Java is summarized in Annex 6.

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Project Description

3.14 The project comprises (a) the installation of the second 400 MWgenerating set (Unit No.2) at Suralaya in West Java and coal handling and ashdisposal facilities for both units, (b) construction of the 500 kV transmis-sion network from Suralaya to Semarang in Central Java with 500 kV substationsat Suralaya, Jakarta, Bandung and Semarang, (c) provision of a simulator forthe training of operating staff, (d) establishment of a Java integrated con-trol center at Jakarta, and (e) consulting services and training. It repre-sents the second phase of the first stage of the Suralaya power scheme plannedto utilize a coal production of about 2.5 million tons p.a. from Bukit Asam inSumatra; the first phase was covered by Loan 1708-IND of 1979.

Suralaya Power Plant

3.15 The Suralaya power plant will ultimately have an installed capacityof 3,100 MW consisting of four generating sets of 400 MW and three sets of 500MW, using coal as fuel. The scheme was identified by the comprehensive Javadevelopment study financed through Credit 399-IND and carried out by PCR ofUK. The site was chosen by PLN and fully investigated and confirmed by theconsultants, MONENCO of Canada, as part of the project feasibility studyfinanced by Loan 1127-IND.

3.16 The first stage of development consists of the installation oftwo 400 MW dual fired (coal and oil) thermal generating sets, facilities forcoal and oil reception, handling and storage, ash disposal, cooling seawaterintake and discharge facilities, fresh water supply and associated works.The implementation of the first phase, consisting of the first unit andinfrastructure such as site development, access roads, housing colony,construction facilities, has already commenced. The second phase nowproposed includes construction of the second 400 MWl unit, as well as thecomplete coal handling and ash disposal equipment for both generating sets.The basic cost of the Unit No. 2 extension is $215.9 million ($540 per kW)and the total cost including contingencies is $281.8 million ($702 per kW),including the foreign exchange cost of $205.8 million. The cost estimatefor Suralaya first stage development is given in Annex 7 and that for theUnit No. 2 extension (Phase II) is given in Annex 8.

Associated EHV Transmission

3.17 At present three major regional power systems exist in Java, servingthe Western, Central and Eastern regions. They are proposed to be inter-connected by the 150 kV transmission network by 1981 to provide limited powertransfer capability. The 150 kV system would be inadequate to integratelarge sized power stations now being implemented, including Suralaya. MM ofthe U.K. were commissioned to carry out detailed studies to establish theconcept, select the voltage and recommend the configuration of an Extra HighVoltage (EHV) network for phased development through FY95. Funds were

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provided under Loan 1365-IND for this purpose. An interim report was

submitted in April 1979 and the final report in August 1979. The mainconclusions of the study are that (a) the EHV network to Bandung should becommissioned at the same time as Suralaya Unit No. 1, in January 1984, (b)the voltage of the grid should be 500 kV and (c) the EHV network should

extend to Semarang in Central Java. Without the EHV network the Suralayapower cannot be utilized, hence the timely completion of the EHV project iscritical.

3.18 The scope of the EHV network envisaged in the first stage is asfollows (see map attached):

A. Overhead Lines

Section Circuits Circuit kms

Suralaya-Jakarta (Substation-X) 2 x S.C. 220Jakarta-Saguling 1 x S.C. 112Saguling-Bandung 1 x S.C. 41Bandung-Cirebon 1 x S.C. 102Cirebon-Semarang (Ungaran) I x S.C. 250

Total 725

B. Substations

Location 500 kV Capacity (MVA)

Suralaya 150 MVAJakarta (S/S-X) 500 MVABandung 500 MVASemarang (Ungaran) 250 MVA

3.19 The total cost of the first stage /1 including the control center(para. 3.20) is estimated to be US$419.0 million, of which the foreignexchange requirement would be US$239.0 million. The detailed cost estimateis given in Annex 9.

Control Center

3.20 It is proposed to establish a Java control center located inJakarta to permit integrated operation of the Java grid. The center will beprovided with communications, mimic displays, and an on-line data acquisitionsystem to monitor and control operation of power plants and the EHV network.The center will monitor and coordinate the operation of all major generatingfacilities and EHV in the West, Central and East Java regions to achieve

/1 Subsequent stages will extend the EHV network to Surabaya in East Java.

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significant reduction in operating costs and improvement in the reliabilityof supply. PLN is already implementing the establishment of regional controlcenters with French assistance - one each for the West, Central and East Javasystems. The basic cost of the control center is estimated at US$12.8million with a foreign exchange component of US$11.6 million.

Training Simulator

3.21 As a part of the Suralaya project, it is proposed to acquire a trai-ning simulator with which thermal plant operators can be trained. Thissimulator will duplicate the control panels and operating characteristics ofthe Suralaya units by computer. The training panels would appear andrespond in a manner identical to the control panels in the Suralaya ThermalStation. Attempts will be made to commission the simulator prior to thecommissioning of Unit No. 1 at Suralaya. A provision of $4.7 million hasbeen made in the cost estimate for Suralaya Unit No. 2. The facility isconsidered extremely important to train the operating staff for Suralaya andother thermal power plants in Indonesia where it is difficult to obtaintrained personnel.

Cost Estimates

3.22 A summary of the project cost is given in Table 3.5 (details inAnnexes 8 and 9).

Table 3.5: PROJECT COST ESTIMATE (SUMMARY)(US$ million)

Item Local/a Foreign/b Total

Suralaya Unit 2 52.2 163.7 215.9EHV lines, substations and

Control Center 124.0 175.5 299.5

Subtotal 176.2 339.2 515.4

Physical contingencies 8.3 19.8 28.1Price contingencies 71.5 85.8 157.3

Total Cost 256.0 444.8 700.8

/a Local costs include contract and sales taxes. Constructioncontracts are subject to a 10% tax and sales tax varies between5 and 7%.

/b PLN is exempt from custom duties for projects using funds fromexternal sources.

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3.23 The cost estimate for the Suralaya project was prepared for PLN byMONENCO - the consultant appointed in October 1978 for detailed engineeringand supervision of construction. It is based on (a) price quotations obtainedby MONENCO from a number of likely suppliers and (b) experience on similarprojects in I-'onesia and elsewhere. The estimate has been prepared on thebasis of contracts for goods and works with a detailed breakdown intoquantities and unit rates where applicable. Base prices are at end 1979levels and are net of customs duties. Physical contingencies are providedat 10% on civil works and about 3.5% on equipment, which are adequate. Pricecontingencies are calculated (a) for foreign exchange costs at 10% for 1979,9% for 1980, 8% for 1981 and at 7% p.a. thereafter, and (b) for local costs at25% in 1979, 15% in 1980 and 1981 and 10% p.a. thereafter.

3.24 The cost estimate for the EHV system was prepared for PLN by MM.It is based on prevailing international prices for equipment and the con-sultants' experience with similar projects elsewhere. The estimate pro-vides 7.5% for physical contingencies and for price contingencies on the samebasis as that given in para. 3.23.

Financing Plan

3.25 The project is expected to be financed as follows:

Suralaya Unit 2 500 KV Transmission and Control Center

Foreign costs (Million $) Foreign costs (Million $)

IBRD 169 IBRD 84Export credits ADB 139 /aor Govt. funds 37 Other 9

232 /bSubtotal 206

Local costs

Govt. contribution 76 180

Total 282 412

/a ADB approved a loan of US$83.6 million in November, 1979; the balanceis expected to be committed in FY80.

/b Excludes $6.8 million for consulting services provided in Loan 1365-IND.

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Loan Amount

3.26 The proposed loan of US$253 million will be used to finance theforeign exchange costs of the following:

(a) Suralaya Unit No. 2 - (i) Steam Generator & Auxiliairies(ii) Turbine Generator & Auxiliairies(iii) Coal Handling Equipment(iv) Simulator

(b) 500 KV Transmission Line Sections

(i) Bandung-Cirebon(ii) Cirebon-Semarang

(c) Java System Control Center

(d) Consulting Services and Training

The 500 kV transmission lines from Suralaya to Jakarta and Bandung and thefour 500 kV substations will be financed by ADB and Government funds.

Procurement

3.27 Procurement of equipment to be financed under the loan would beon the basis of international competitive bidding in accordance with theBank guidelines. Indonesian equipment manufacturers are unlikely to be ableto participate, but if they tender for some items, a 15% margin of preferenceon the cif bid price, or the prevailing duties, if lower, will be applicablefor purposes of bid evaluation. Procurement of equipment for the transmissionlines and substations financed by ADB will follow their guidelines. Nocontracts will be awarded before Board approval of the proposed loan.

Disbursement

3.28 The Bank loan will be disbursed against the following items:

(a) equipment - 100% of foreign expenditures for directly importedgoods, 95% /1 of the ex-factory cost for locally manufacturedgoods and 65% of the total expenditures for imported goodsprocured locally; and

(b) consultants' services and training - 100% of foreignexpenditures.

No disbursements will be made for expenditures prior to loan signing. Theestimated schedule of disbursement is given in Annex 10.

/1 All percentages represent prices net of taxes.

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Implementation, Engineering and Construction

3.29 PLN is responsible for implementing the project and has appointedproject managers for each of the Suralaya and EHV projects. Their Director(Planning) has overall responsibility for the implementation of S-!ralaya andthe associated transmission project in the head office. He will parti-cularly coordinate and secure action on financing, progress of engineeringand procurement.

3.30 MONENCO are responsible for engineering, design and construc-

tion supervision of the Suralaya power station. MONENCO was selected by PLNin consultation with the Bank. The contract was signed in October 1978 andthe first phase of work - preparation of designs, bidding documents andassistance to PLN in evaluating bids - is now in progress. Bids for the main

equipment which were issued in April 1979, were received in September 1979. Aletter of intent for the Turbine Generator Contract was issued in January1980; that for the Steam Generator is scheduled in March 1980.

3.31 Land required for the Suralaya project was acquired in 1978 andthe resettlement of displaced people has been completed; construction of thepreliminary civil works is in progress. A detailed program of constructionhas been prepared on the basis that the work would be divided into 15 maincontracts. The implementation program is summarized in Annex 11.

3.32 The cost of engineering services for Suralaya including design,procurement, construction supervision, commissioning and initial operationof the plant is expected to be about US$18.5 million, for a total input ofabout 3,150 man-months over the period FY79-85, consisting of 2,540expatraite man-months and 610 man months of local technicians and supportingstaff. The average man-month cost is $5,580 (including salaries, costs,fees, international and local travel and subsistence); the average expatriateman-month cost is $6,500 and the local man-month cost is $3,400. The man-month rates are subject to escalation to compensate for inflation, based onindices specified in the contract. In addition, the consultants will alsoorganize the training of PLN staff in design, construction, operation andmaintenance of thermal power plants. The cost of this training is estimatedto be US$380,000.

3.33 The design and construction supervision for the 500 kV lines and

substations will be carried out by MM. Although the contract for the firstphase of the work of feasibility and engineering was signed in February1979, MM had commenced work from October 1978; their interim feasibilityreport was submitted in April 1979. Detailed engineering was completedin January 1980; and bid documents are due to be issued in April 1980.

3.34 The consulting engineering contract with MM (para 3.33) has been

extended to include aerial survey, detailed design, specifications, procure-ment, construction supervision, testing and commissioning of lines at an

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estimated cost of US$5 million. They will provide a total of about 1,300man-months up to 1984, consisting of about 500 expatriate man-months and800 man-months of local technicians and support staff (from a local consultingcompany, ENCONA), particularly for survey and construction supervision. Theaverage man-month cost is $3,800 (including salary, costs, fees, internationaltravel and subsistence); the average local man-month cost is about $1,000 andthe average expatraite man-month cost is $8,400. The man-month rates aresubject to escalation to compensate for inflation, based on indices specifiedin the contract. In addition, the consultants will also organize the trainingof PLN staff in design, construction, operation and maintenance of EHV lines.The cost of training is estimated to be US$1.5 million; detailed proposals arebeing worked out.

3.35 The implementation schedule for the 500 kV lines and substations

is given in Annex 12. It is expected that the contract award for the trans-mission line construction will take place by December 1980, allowing threeyears to complete construction. To achieve this tight schedule, alertproject management will be necessary, including avoidance of proceduraldelays in government approvals (paras. 3.36 and 3.37).

Contract Approval

3.36 Approval of contracts and the issue of the relevant letters ofcredit have taken a long time on several critical occasions in the past. Evenafter approval, several months elapsed before letters of credit are issued.Bank review of these problems was held in Jakarta in June 1979. Simplifica-tion in the procedures has been introduced by a decree of the Minister ofFinance in September 1979 on which actual experience is still to be gained.There may be stil scope for further improvements and the issue will continueto be monitored.

3.37 Presidential Decree No. 14 of March 1979 introduced a new procedurefor the award of local contracts by all government agencies. In the case ofPLN, all contracts exceeding Rp 100 million (US$160,000) are approved by theDirector General Power of the Ministry of Mines and Energy and those exceedingRp 500 million (US$800,000) are approved by the Minister. The decree makes itmandatory for PLN to complete tender evaluation and recommendations within twoweeks from bid opening, otherwise rebidding is required. No time limit is setfor the approval procedure. The decree restricts the freedom earlier enjoyedby PLN to finalize local contracts without reference to the Government. Thematter was discussed with PLN and the Government officials at negotiationswho have indicated that they intend to ensure that the operation of the decreedoes not cause delays in project implementation. The Ministry will makeefforts to ensure that rebidding is not required in cases when evaluationcannot be completed in the stipulated time. Also the time for the approvalprocedure will normally be kept within two weeks. This issue will bemonitored and, if necessary, pursued with the Government during the Bankreview of the implementation problems.

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Land Acquisition for EHV

3.38 Acquisition of land for the construction of transmission lines inIndonesia takes long periods of time and construction cannot begin untilcompensation i ,ues are settled. Construction of over 600 km of 500 kV linescannot be completed in three years (para. 3.35) unless the land rights areacquired with greater speed than in the past. Assurances were obtainedduring negotiations that Government and PLN will take all steps necessary tocomplete land acquisition by March 1981. A high level committee under theChairmanship of the Minister of State for Administrative Reforms and theDeputy Chairman of BAPPENAS has been appointed by the Government to coordinatethe land acquisition problems in various projects.

Ecology

3.39 Environmental considerations have been carefully considered byMONENCO and PLN in choosing the Suralaya site for the first power station inJava which will utilize coal. The site is located in a remote corner of theWest Java coast, the nearest settled area being a small town (MERAK), some 10km away. The station location and design features to deal with stack emissionand ash disposal, reduce the environmental impact to a minimum. Indonesia hasnot laid down environmental standards but PLN is following United StatesEnvironmental Protection Agency (USEPA) standards for the design of thisthermal power station. The stack (200 m high) has been designed to keepemissions within these limits when the power station operates on Indonesiancoal which has a low sulphur content (0.5%). Ash from the station will beconveyed to an adjoining dump area, where the natural configuration permitsgood drainage. There will be no detrimental effect on the local ecological

system.

3.40 The construction of the 500 kV lines and substations would also be

carried out with due consideration for the ecological factors. The route willbe selected to cause minimum dislocation to existing developments. Also

substation sites have been located outside populated areas, particularly nearJakarta and Bandung. Internationally accepted safety practices will be usedin the design and construction of the lines. No serious ecological problemsare expected in the transmission line construction.

4. FINANCIAL ANALYSIS

Past Performance

4.01 PLN's energy sales rose from 1,893 GWh in 1972 /1 to 4,287 GWh forFY79 about 15% p.a. growth on average. Over the same period revenues rosefrom Rp 20 billion (US$32 million)/2 to Rp 118 billion (US$189 million), an

/1 Fiscal year-end changed from December 31, to March 31 in FY75.

/2 At post devaluation (November 1978) exchange rate of Rp 625 = US$1.00.

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annual growth rate of 35%; the average tariff per kWh sold increased fromRp 8.98 (USo1.4) in FY72 to Rp 27.4 (US¢4.4) in FY79 (a total of 205%).During the six years from 1972, operating costs rose from Rp 26 billion (US$42million) to Rp 114 billion (US$182 million), or at an average annual rate of28%. Operating income was negative until FY77 when the financial recoveryplan that had been agreed with the Bank in the early 1970s, that revenuesshould cover costs for FY79, was fulfilled.

4.02 It was agreed under Loan 1708-IND that for the three year periodending FY86 and each year thereafter, PLN would produce funds from internalsources equivalent to not less than 30% of the capital expenditures over thesame period. During the period before FY86 PLN is expected to exert its bestendeavors inter alia by reducing system losses, operating expenditures andincreasing tariff levels (see para. 4.03), to reach interim targets which arethe subject of an understanding between Government and the Bank after reviewof progress during the processing of each power project. The target agreedfor Loan 1708-IND for the periods ending in FY80 and FY81 is 12%. This figurewas in fact reached for the three-year period which ended in FY79 when a 21%contribution to construction was achieved. The targets are expected to be metfor FY80 and 81. PLN's financial position was sound at end FY79, the currentratio was 4.1 and the debt/equity ratio was 7/93. A summary of the FY79balance sheet is given below:

Table 4.1: SUMMARY BALANCE SHEET - FY79 (Rp billion)

Assets Rp %

Plant in service at cost 534 45Accumulated depreciation 138 12

Subtotal 396 33

Work in progress 672 57Net current assets 120 10

Total 1,188 100

Financed byEquity 992 83Debt 78 7Consumers contributions 118 10

Total 1,188 100

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4.03 The efficiency of PLN's operations requires further improvement.System losses averaged about 23% for the whole of Indonesia for FY79, downfrom 24% for FY78, varying from about 18% for Jakarta to about 30% in someareas. The high system losses arise from distribution systems that stillrequire rehabilitation, inadequate metering and billing systems and theftalso plays a role. PLN's management is aware of all these problems and isactively addressing them. A targeted loss reduction program is in operationand steps are being taken to reduce theft. PLN has also instituted trainingprograms for regional staff to put them in a position to prepare andsupervise plans to improve the operational efficiency of their regions.Under these plans the regions will forecast GWh sales and revenues,operating costs and the rehabilitation investments necessary to improve theearning power of the assets used for operations. These plans are expectedto culminate by FY82 in fixing performance targets for each region. Thetwo-year preparation period is required in view of the need for training,the placing of the required staff and the computer hardware and softwarethat may be required; future Bank operations should include funds to helpprovide the equipment and materials PLN will require to implement thesemeasures.

4.04 GOI has provided PLN with the funds required to finance the foreignand local cost of projects that have their foreign costs financed from abroad,mainly in the form of equity./l Funds for expenditures that do not enjoyassistance from abroad are funded from PLN's internal cash generation, asystem that tends to unbalance the development program. GOI policy is toraise the foreign funds for state enterprise projects and onlend or passthese funds as equity, bearing any exchange risk involved. Local funds arealso provided as equity. PLN's future funds have been assumed to be providedfrom GOI as 50% borrowing and 50% equity for foreign costs except for projectsfinanced from sources such as IBRD and ADB that require the loans passed toPLN to be on the same terms and conditions as received by Government; and 100%equity for local costs, for planned projects as described above; distribution,administration and other nonproject expenditures are assumed to come fromPLN's internal sources.

4.05 Funds required for capital expenditure projects that are notfinanced under the 'DIP" method (about 25% of total capital expenditures forFY79 - Rp 73 billion or US$117 million) and for increases in workingcapital, are found from PLN's internal cash generation. Availability ofadequate internal cash generation is subject to the timing and size ofincreases in tariff levels and to assure that funds available are adequate,PLN tends to be conservative in both financial planning and the magnitude ofrequested tariff increases. When such endeavors fail, PLN is forced to cutdistribution capital expenditures, and cannot pursue a development programthat balances the provision of generation, transmission and distributionfacilities. PLN may be short of funds over the next few years based on thecurrent financial forecasts. During negotiations Government stated that

/1 Commonly called the 'DIP" method.

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"DIP" would be increased to cover any funds shortages that might arise infuture.

4.06 Historical income statements, funds flow statements and balancesheets are shown in Annex 13, financial forecasts in Annex 14 and the assump-tions incorporated in them in Annex 15.

Future Position

4.07 The additional generation, transmission and distribution capacitythat PLN expects to provide through FY87 will cause the asset base to expand11 times at constant prices over the next nine years. Expenditures at currentprices required to meet the construction program are estimated at Rp 9,845billion (US$15.7 billion) including interest during construction. GOI plansto borrow about Rp 5,823 billion (US$9.3 billion) or 59% overseas to coverforeign costs; Rp 2,697 billion (US$4.3 billion), about 27%, would come fromPLN's internal cash generation; and the balance of Rp 1,325 billion (US$2.1billion), about 14%, would come from GOI's internal sources. The aboveassumes that tariffs would be so fixed and other necessary steps taken, toself-finance, on average 30% for FY86 and thereafter, of the average of thetest year and the preceeding two years' construction expenditures, withinterim targets based on the current review (see para. 4.02) of 12% for thethree year periods ending in FY80 through 82, 20% for the three year periodsending in FY83 and 84, and 25% for the three year period ending in FY85.PLN's financing plan, based on these assumptions and GOI/PLN financingdescribed in para. 4.04 is as follows:

Table 4.2: FINANCE PLAN FY80-87(Billions of Rupiah and US$)

Rp US$ %

Internal cash generation 3,575 5.7 36.3Less: Debt service and working

capital requirements 878 1.4 8.9Internal funds available for investment 2,697 4.3 27.4Borrowings 2,723 4.4 27.6Equity 4,427 7.1 45.0Cash increase -2 - -

Total Capital Expenditure 9,845 15.8 100.0

4.08 Currently, PLN's earnings covenant provides for self-generation of30% for the three-year period FY84-86 and thereafter, with targets of 12%

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for the three year periods ending in FY80 and FY81, 18% for the three year

periods ending FY82-83, and 25% for the periods ending in FY84 and FY85.

PLN has made some changes in phasing the development program, and the

forecast prenared immediately after the devaluation of November 15, 1978

included al±owances much higher than were required to offset the effect of

the devaluation and inflation. These two major factors enabled PLN togenerate larger internal funds than estimated. As a result in FY79, PLN

produced a 29.1% annual contribution to construction as against the 6%forecast. The major increase arose from improved cash generation rather

than reduced capital expenditure and the former contributed all but 3% of theincrease in the percentage self generation. Before the presentation of Loan1708-IND to the Executive Directors in May 1979, the Minister of Mines andEnergy informed the Bank that the Government had in principle approved an

increase in PLN's tariffs by 58% and that this increase would be implementednot later than March 31, 1980. A decree is expected to be signed shortly toimplement from April 1, 1980 a tariff increase of 38% which would give anaverage price per kWh to PLN's consumers of Rp 38.0 (US¢6.1) a high figure inview of the price of PLN's fuel being about 50% of international levels. GOIis of the view that it cannot increase publicly owned PLN's tariffs to agreater extent because of the antiinflationary campaign currently being wagedto achieve the objectives of the devaluation. In light of the improved FY79financial position, the 38% tariff increase would enable PLN to meet thepreviously agreed target of 12% for FY80 and 81, with no additonal tariff

increase for FY81 (begins April 1, 1980). However, target percentages forFY82 and after would change (para. 4.09).

4.09 Since PLN is to provide from internal resources the contributions

to investments proposed in para. 4.08, average tariff levels per kwh and the %

increases required to achieve them are as follows:

Current Prices Constant FY80 PricesFY Rp/kWh USl % inc. Rp/kWh USC % inc.

79 27.37 4.4 - 27.37 4.480 27.58 4.4 - 27.58 4.4 -

81 38.00 6.1 38.0 34.54 5.5 38.082 53.97 8.6 42.0 43.76 7.0 26.783 58.99 9.4 9.3 44.42 7.1 1.784 64.05 10.2 8.6 44.49 7.1 0.285 67.97 10.9 6.1 43.13 6.9 -3.186 71.97 11.5 5.9 42.80 6.8 -0.887 77.00 12.3 7.0 42.81 6.8 -

It was agreed during negotiations that the current covenant of 30% for thethree year period ending FY86 would continue, with interim targets of 12% for

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the three-year period ending in each year FY80 through 82, 20% for the three-year period ending in FY83 and 84, and 25% for the three-year period ending

in FY85.

Future Operating Results

4.10 The financial forecasts are based on overall figures that havebeen estimated: for Java, based on the energy and demands that the plantand facilities estimated to be available are capable of generating, trans-mitting and distributing to consumers; for outside Java, figures are roughestimates of likely demand, GWh sales and capital and operating expendituresfor each region. On that basis energy sales are estimated to increase from4,287 GWh in FY79 to 19,740 GWh in FY87, an average annual growth rate of21%. Based on the earnings targets detailed in para. 4.08, energy revenuesare forecast to increase from Rp 117 billion (US$187 million) in FY79 to Rp1,520 billion (US$2,432 million) in FY87, an average annual growth rate of38%. Operating expenses are forecast to grow from Rp 114 billion (US$182million) to Rp 1,161 billion (US$1,858 million) by FY87 after escalation atan annual average of 10%, for FY81 through FY83 and about 8% thereafter, withdepreciation based on assets revalued from FY79, giving an annual growth rateof 37.0%.

4.11 A downward trend in the operating ratio from 97% for FY79 to 74%by FY87 indicates the improved financial condition over the forecast period.PLN's high cost continues to be projected through FY87 as indicated by thefact that tariffs in 1980 constant prices revealed in para. 4.09 remainconstant over the forecast period after FY82. Over the next ten yearsdecreases in tariffs in real terms should be expected given the economies ofscale that will ensue and the improvement in the efficiency of PLN'soperations that management is expected to bring about.

4.12 Rates of return (ROR) on net fixed assets in operation revaluedfrom FY79 are estimated to vary from -14.0% for FY80 to 7.2% for FY87. Thehigh negative ROR for FY80 is caused by the tariff increase of 38% applyingonly from the beginning of FY81; for FY81 which includes the tariff increasefor the full year, the ROR is negative (-3.9%) largely because gross assetsare estimated to grow at about 40% before the asset revaluation at about 10%p.a. and because tariffs are lagging behind costs but catch up by FY82. ForFY82 and thereafter RORs are about 6%-7% but it is expected that these rateswill be exceeded in view of the expected improvement in operational efficiencymentioned in para. 4.11.

Revaluation of Assets

4.13 Agreement was reached during negotiations of Loan 1708-IND thatPLN revalue its net fixed assets, and consumers contributions, annually on thebasis of the Gross Domestic Investment Deflator as calculated by the Bureau of

- 33 -

Statistics, on the understanding that the revaluations need not beincorporated in PLN's books. It was agreed to continue this provision forthe proposed loan.

Debt Control

4.14 Government currently assumes the exchange risk on all foreign debtborrowed to finance state enterprises and this situation is assumed to con-tinue throughout the forecast period. PLN's current debt control testprovides: (a) for the Bank to be consulted on borrowing if net revenues of the12 month period or the fiscal year prior to the incurrence of debt, is lessthan 1.3 times maximum future debt service; and (b) a debt equity ratio of notmore than 60/40 to ensure reasonable borrowing levels. These tests arecontinued for the proposed loan.

Current Position

4.15 The current ratio has varied in the past from 17.7 to 4.1, and forFY79 it was 4.1, a healthy liquidity position; for FY80-87 it is expected toexceed 1.9 which is satisfactory. Consumers receivables, which were aboutthree months billing at end FY79, have been projected to reduce progressivelyto two months billing (para. 4.16).

4.16 In the past the total of unpaid GOI bills was not substantial but inthe last two years the position has deteriorated. Outstanding electricitybills for some Government departments and agencies were about 1.5 years inarrears at end FY79. Existing loan agreements include a provision that GOIbills will be paid promptly and that funds to pay such bills will be madeavailable to departments by the 15th day of the month in which the bill isdue. The existing provision was not being implemented effectively. ButPLN has made substantial progress in collecting the outstanding arrears sincethe appraisal mission, the worst offending department having reduced itsoverdue bills from 403 to 262 days outstanding and all government overdueaccounts had reduced from an average of 228 to 147 days of billing. Aninterdepartmental task force has been formed to improve matters further.During negotiations it was agreed that GOI outstanding accounts will bereduced to not more than two months billing by March 31, 1982.

4.17 Inventories of Rp 50 billion in current assets, and Rp 18 billionof spares in gross plant, were high at end FY79, aggregating to about 13% ofgross plant on a historical basis. Current asset inventories were about 9%of gross plant for FY79 and are forecast to reduce to 1.5% of revalued grossplant by FY87.

Corporation Tax

4.18 PLN is subject to income tax at the rate of 45% of net income but ithas applied for tax exemption to the Ministry of Finance which has indicatedthat the exemption is likely to be granted and PLN awaits formal notification.Consequently, the financial projections do not assume liability to income tax.

- 34 -

Subsidiary Loan

4.19 As in previous operations, the Government has agreed to relend theproceeds of the proposed Loan to PLN on terms equivalent to those of the Bankloan under a subsidiary loan agreement acceptable to the Bank. In addition,the Government will bear the foreign exchange risk and finance interest andcommitment charges during the grace period which is in line with financingpractices in the country. Signing of the Subsidiary Loan Agreement is acondition of Loan effectiveness.

5. JUSTIFICATION

Demand

5.01 Forecast of electricity demand in Java (Annex 6) indicates thatthe available generating capacity based on additions under implementationthrough 1984/85 would be inadequate to meet both the energy and the peakload requirements in 1985/86. The energy capability of the system in1984/85 would be only 15,700 GWH against a projected demand of 17,332 GWH in1985-86 (Annex 6). Also the installed capacity in 1984/85 would be 3329 MWagainst a peak generation requirement of 2910 MW in FY86, which provides acapacity reserve margin of only 14.4%. System operation with a reliabilityindex (loss of load probability) of one day in one year demands a reservemargin of about 25%. Therefore, augmentation of the generating capacity inthe Java system is required by adding baseload capacity by the beginning of1985 (Annex 16).

Least Cost Solution

5.02 A comprehensive Java System Development Study carried out for PLNby PCR of the United Kingdom with Bank assistance (Credit 399-IND),recommended a least cost development sequence of generation expansion fordiscount rates up to 15%, which is still valid with the currently acceptedload forecasts. These are about 15% lower than the PCR low forecasts for theyear 1985. Augmentation of the Suralaya thermal power station located in WestJava of which the first 400 NW unit is already committed for commissioning inJanuary 1984 (Loan 1708-IND), is the next step in the development program.Studies carried out by PCR and MONENCO have evaluated the implications ofemploying unit sizes ranging from 300 MW to 500 MW; these show negligibledifferences in economy. MONENCO recommended a unit size of 400 MW, which PLNhas accepted; the decision is appropriate.

5.03 The breakeven price of coal for the plant at Suralaya correspondingto the international price of oil at US$13.5 per bbl was at $37.0 per tonincluding the extra capital, operation and maintenance cost of the coal firedplant compared to an oil fired plant. With the current oil prices at aboutUS$24 per bbl, the breakeven cost of coal would be considerably higher

- 35 -

($65 per ton). The engineering work for the Bukit Asam Coal project is nowin progress. The indications are that the economic price of coal deliveredto Suralaya would work out in the range of $40 per metric ton, providingample justification of coal burning in this power plant.

5.04 A scheme which has about the same order of merit as the Suralayaproject is the 700 MW Saguling hydro electric project in West Java currentlyin an advanced stage of investigation. However, with a firm energy potentialof only 1,580 GWh, it is a peaking station. Its development period precludescommissioning earlier than FY86. PLN is currently carrying out detailedengineering of the project with the help of Japanese consultants and hasincluded it in its FY 1981 program.

5.05 The PCR studies (para 5.02) also recommended establishment of anisland wide EHV transmission system to permit (a) reliable and economicoperation of PLN's facilities in Java and (b) planning the future expansionof PLN's supply capacity in Java to take advantage of diversity of demandbetween regions and economies of scale. Further detailed studies werecarried out by MM of the U.K. (para 3.17) with Bank assistance (loan1365-IND). They have recommended selection of 500 kV as the optimal voltageof the grid, which PLN has accepted. The other feasible voltage fordevelopment is 400 kV, which could be lower in capital cost by about 2%, butis not favoured because of the many advantages of selecting the highervoltage including the extra flexibility for system operations, improvedreliability of operation and lower requirements of way leave, particularly inurban areas like Jakarta, where land is scarce. 500 kV becomes a cheaperalternative when transmission losses are taken into account. In view ofthese considerations, the decision to select 500 kV is appropriate.

5.06 tM recommended that the EHV network should be developed fromSuralaya to Semarang in central Java in the first stage to be completedby 1984 (para 3.17). This will result in full integration of the regionalpower systems of the West and the Central Java regions, permitting coor-dination of plant maintenance schedules, sharing of reserves, merit orderloading of thermal units and improved reliability. Without the EHV inter-connection between the West and the Central Java systems, the projecteddemand in the Western region cannot be met with acceptable reliabilitystandards. Substantial savings in fuel costs will be achieved in the period1984-86 by permitting baseload operation of the 800 14W Suralaya generatingcapacity using coal as fuel in preference to the use of petroleum fuels atpower stations in Central Java. These benefits provide sufficient justifi-cation for the interconnection of the West and the Central Java systems byan EHV line. PLN has accepted these recommendations. Annex 16 shows theanticipated pattern of the utilization of plants in Java in FY86.

Internal Economic Rate of Return (IERR)

5.07 The internal economic rate of return (IERR) is the discount ratewhich equalizes the economic costs and benefits attributable to the project.

- 36 -

The IERR has been calculated for units 1 and 2 of Suralaya and the associatedEHV transmission network as the entire project is essentially integral; theseparation being for financing reasons. The benefits are the incrementalrevenue from energy sales at an average tariff of Rp 38.0 per kWh which willbe the average PLN tariff in FY81. On this basis the IERR is 12%./l TheIERR was tested for sensitivity to changes in the capital and fuel costs. Ifthe project cost rises by 10%, the IERR would be 11.2%; if the fuel costs are10% above the assumed level of $40 per ton of coal, the IERR would be 11.6%(Annex 18). This is a minimum measure of benefits because in using tariffrevenue only for the benefits, the consumer surplus is ignored. As the IERRis above the opportunity cost of capital in Indonesia (10%), the project iseconomically justified.

Risks

5.08 There are no risks of an engineering nature as there are no inherentuncertainties in this type of work. The risk of delays in project implementa-tion may arise mainly due to possible delay in land acquisition forconstruction of the EHV lines. Assurances were received from PLN and theGovernment to avoid such delay (para. 3.38).

5.09 If coal from Bukit Asam is not available for the power plant byJanuary 1984, it will be necessary to use fuel oil in the plant temporarily.Such an eventuality would reduce the economic benefit from the plant.However, the project is justified on meeting power demand and would be sojustified based on the plant being oil burning also.

6. AGREEMENTS REACHED AT NEGOTIATIONS

6.01 The following agreements were reached during negotiations:

(a) Government will progressively phase out oil subsidies butcompensate for any excess of coal prices over fuel oil prices in1984, if necessary (para. 1.29);

(b) land for 500 KV lines will be acquired by March 1981 (para. 3.38);

(c) PLN will be provided with sufficient funds to carry out abalanced development program (para. 4.05);

(d) existing earnings covenant will continue at 30% for FY86 andthereafter, with interim targets of 12% for FY80 through 82, and20% for FY83 and 84 and 25% for FY85 (para. 4.08);

(e) assets will be revalued (para. 4.13);

(f) existing debt control tests will continue (para. 4.14);

/1 With the current coal cost of $23 per ton, the IERR would be 15%.

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(g) outstanding electricity bills of GOI will be brought withintwo months billing by March 31, 1982 (para. 4.16); and

(h) GOI will onlend the loan proceeds under a subsidiary loan agree-ment, satisfactory to the Bank, with signing as a condition ofeffectiveness of the proposed loan (para. 4.19).

6.02 The project forms a suitable basis for a Bank loan of US$253 millionfor a period of 20 years including 5 years of grace.

INDONESIA

NINTH POWER PROJECT

Petroleum Products - Supply and Demand, 1969-76

1969 1970 1971 1972 1973 1974 1975 1976

Production of crude 270.9 311.6 325.6 395.6 488.5 501.8 476.9 550.3Crude imports 0.2 0.8 2.8 2.7 1.9 2.7 2.6 7.7

Subtotal 271.1 312.4 328.4 398.3 490.4 504 5 479.5 558.0

Crude exports 195.7 228.1 239.6 299.1 369.5 378.9 363.1 449.1Crude available for refineries 75.4 84.3 88.8 96.2 120.9 125.6 116.4 108.9 1Changes in crude stocks X

(decrease = -) - 0.7 0.6 - 1.2 - 4.3 1.6 0.7 3.0 - 4.8

Refinery inputs 76.1 83.7 90.0 100.5 119.3 124.9 113.4 113.7

Refinery consumption 3.7 4.9 7.6 7.7 8.1 5.8 4.3 3.9

Refinery output 72.4 78.8 82.4 92.8 111.2 119.1 109.1 109.8

Export of refined products 19.0 25.3 34.0 41.2 58.3 67.4 62.2 60.6

Processing deals - - - - 3.4 26.4 29.7 28.9

Waxy residues 17.5 23.8 32.5 39.7 53.4 39.3 30.7 29.7Bunker fuel, avtur, etc. 1.5 1.5 1.5 1.5 1.5 1.7 1.8 2.0

Available for domestic consumption 53.4 53.5 48.4 51.6 52.9 51.7 46.9 49.2

Imports of products 3.0 2.1 4.2 8.6 12.8 12.6 15.0 26.4

Total supply 56.4 55.6 52.6 60.2 65.7 64.3 61.9 75.6

Domestic consumption 36.9 39.3 43.9 50.1 60.3 69.6 78.8 88.9

Change in refined stocks 19.5 16.3 8.7 10.1 5.4 - 5.3 -16.9 -13.3

INDONESIANINTH POWER PROJECT

ORGANIZATION CHART OF THE DEPARTMENT OF MINES AND ENERGY

minister of Mines antd Energy

lInspectorate G Ispectorate1Beau ue Be B Inspectorate Inspectorate of of

of of of of of of ~~~~~~~~~~~~~~~~~~~~of of Material General Affairs &

|Planning ||Personnel ||Finance ||Foreign Coupl Legal Affairsg General | | Personnel Finance ll Mtra ee8 far ann n or p Personnel Finance ~~~Afairs& Logistics Development Projects

Dire toaeGneral Dietrt GefOierl rat enPoera|t

Directorat | for the Directorat Directorae Directorte .Directorate of Drectorate Directorate Director8te

of | Developmnent of Volcano of Mineral of Environ- Directorate of of Power De- for the evelp

Mines ofav M nt og eore mental Oil end Gas Exploration ofOladonoe e o th evlpMnes | ot MnAlg'9 eore el9 n a and Production Gas Industries v810pment d. tr es~

Regional Offices of The Department of Mines and Energy

| M;an 1 l Palembang l a Sanjarmasin 1 Ujung Pandang 1 | Jayapure J

State Enterprises

P.N. fatubara P.T. Timah P.T. Aneka Tambasng Pertamina

(Coal) (Tin) (General Mining) (Oil and Gas)

World Bank - 19958

ANNEX 3

- 40 -

INDONESIA

NINTH POWER PROJECT

Growth of Captive Power in Indonesia

/aCaptive generation capacity (}VA)

Year Connected to PLN Not connected to PLN Total

1973 233.9 738.9 972.81974 262.6 843.8 1,106.41975 324.2 954.3 1,278.51976 384.2 1,083.3 1,467.51977 401.5 1,122.5 1,524.01978 417.1 1,196.2 1,613.3

/a The data excludes captive generating capacity in Jakarta estimated to beabout 242 MVA. (90 MVA connected to PLN and 152 MVA not connected to PLNsupply). No new installations are permitted in Jakarta since 1978.

- 41- ANNEX 4

INDONESIASCHEME OF THE ORGANIZATIONALSTRUCTURE OF PLN HEAD-OFFICE

President Director

Direct of rector of Construction Director Op Drector f Finance Director of Administration

r- … - r r--- ----- r… r -- …- -__

U Head of Administration \ Head of Administration I m Head of Administration I d Head of Administration ( W Head of Administration…_______ L__. _____… ,______ L. … j___ L________

Deputy Dirctor Deputy Director of Con. Deputy Dirctor Deputy Oirector Deputy Directorof Generai Planning struction Administration of Exploitation of Budget * of Personnel

Personn,el-| Surveyv Division | r| Construction Budget Oprtion Budget t anning Development

.rvey ~~~~ ~~~ivision D) oivision Division Division

El ~~~~~~~~~Finance Administratro Personnel

-| Planning Division | 8 Logistics Division | i Budgetatevision l _|Finance AdministratxoX Aoniin strationBudget Division ~~~Sapervuision Divison Div'ision

f Foreign Cooperation | l Reporting & Business Organization &

Administration Docuenrtison _ nDeveiopment D t Dirctor ManagementDivision Division Div~~~~~~~~~~~~oision Diviso

of Financing

|Electric PoYer Permmtinol L BuEvaiuation Division DeL nputy Director D L Oeputy Dircttor Deputv Director

of Thermai Tecfnique of Supply Capital, Credit & fo General Affaro

Financing Division

Deputy Directorof Technical Planning one SuPplY n A r ead f ice

p Thermal Division | Designto Division Geea L DSuppnly CoEanmstrucivson | Hea Ofiesoes n vision OeputyOireqDiisn I Apprf- Househo ld

a io Division Affairs DIvPs_onTheralL Deisgn Division Con Lo oNetwork Supply L usa, arifs&toad |f Di rectors

D EarningsDivision D A nitron_

|leacl POivisiowe D I eput 0 c oe ce

Techonir gs Maintenance of Accounting

L j~~~~~~~~~~ ~~Technical Oisoe sgn 0vision Ma.ntenance ugtAcntg

Division~~~~~~~~~~~~~~~~~ivsoE l i ~~~~~~~~~~~~~~~~~~~~~~~~~~Deputy Drco

Control Division ~~~maintenance Accounting

Division DivisionD ePuty Director I I

of Facilittes Planning Network & Stations Units & Areas Security & Order

D | Oeputy Director n iMaintenance Diniuion | 7 Accounting Division Divisionl l °~~~~~~~~f Network & Stations I DsePor I

Cs Faci ~~~~~~~~~~~~~~~Diesel PowerL Head Office Facilities Maintenance Work SafetY

Planning Oivision E - - -- ODvision Deputy Director

| , , _ ~~~~OesignOivsion of Auitn I Spri IonArea Offices Faciiities Publi Relations i

Planning Division | Deputy Dirietv o ol Protocol Divsion|

I r X 1~~~~~~~ Controi Divsion | - Auditing DivisionElecrfcto

I Data Processing i - -_ I

7 Division. t Divmon

Planning Division |Sunerision

p Construction Division B

L Operation Division

ANNEX 5

- 42 -

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PLN)

NINTH POWER PROJECT

Forecasts of Future Generation Requirements (GWh)

Year PCR (High) PCR (Low) IAEA (Low) PLN/IBRD /a (1977)(1) (2) (3) (4) (5)

1979 13,826 7,500 - 5,780

1980 16,078 9,728 9,165 7,005

1981 18,538 11,639 - 8,491

1982 21,513 13,285 12,926 10,291

1983 24,894 15,054 - 12,388

1984 27,212 16,999 - 14,771

1985 31,393 19,198 20,142 17,332

1986 36,187 21,646 - 19,810

1987 41,684 24,370 - 22,643

1988 47,986 27,393 - 26,039

1989 55,266 30,739 - 29,945

1990 53,669 34,439 43,400 34,437

/a The figures in this column are for PLN's fiscal year which ends inMarch of the succeeding year. To compare with the figures in thepreceding columns, they should be decreased by about 5% up to 1984,and 4% thereafter.

ANNEX 6

- 43 -

INDONESIA

NINTH POWER PROJECT

Growth of Generation Capacity, Sales, and Peak Demand in Java

Actual Forecast

1975/76 76/77 77/78 78/79 79/80 80/81 R1/82 82/83 83/84 84/85 85/86 86/87

Sales target (GWh) 2,286 2,506 2,840 3,459 4,364 5,324 6,495 7,924 9,588 11,5n6 13,692 16,157

Increase (%) - 9.6 13.3 21.8 26 22 22 22 21 20 19 18

Losses (GWh) 769 804 911 1,051 1,416 1,681 1,995 2,367 2,800 3,264 3,640 4,321

Gross generation (GWh) 3,055 3,310 3,751 4,510 5,780 7,005 8,491 10,291 12,388 14,771 17,332 20,478

System peak (MW) 491 556 630 766 970 1,176 1,425 1,728 2,080 2,480 2,910 3,438

System load factor 71 68 68 67 68 68 68 68 68 68 68 68

Installed capacity (MW)

llydro

Basis 406 406 406 406 406 406 406 406 406 406 406 406

Wlingi 1 & 2 - - - 27 54 54 54 54 54 54 54 54

Garung 1 & 2 - - - - - - 28 28 28 28 28 28

Saguling 1-4 - - - - - - - - - - 350 70n

Mrica 1-3 - - - - - - - - - - 6n 180

Sempor - - - - - 1 1 1 1 1 1 1

Wonogiri - - - - - - 13 13 13 13 13 13

Juanda 6 - - - - - 25 25 25 25 25 25 25

Lodoyo - - - - - - - 4.5 4.5 4.5 4.5 4.5Sengguruh - - - - - - - - 29 29 29 29

Kesamben - - - - - - - - - 32.8 32.8 32.8

Curug - - - - - - - 6 6 6 6 6

Total Hydro (MW) 406 406 406 433 460 486 527 537 566 599 10L09 1.479

SteamBasis 200 200 200 200 200 200 200 200 200 2on 200 200

Semarang 1 & 2 - - - 100 1o0 100 100 100 100 1OO 1o0 10o

Semarang 3 - - - - - - - 200 200 2on 200 200

Perak 3 & 4 - - - 100 100 1on 100 1on 1nO 100 100 Io1

Gresik I & 2 - - - - - - 200 200 200 200 20n 200

Maura Karang 1-3 - - - 100 300 300 300 300 300 300 300 300

iMaura Karang 4 & 5 - - - - - 200 400 400 400 400 400 400

Gresik 3 - - - - - - - - 200 200 200 200

Suralaya 1 & 2 - - - - - - - - 4n0 8o0 800

Total Steam (MW) 200 200 200 500 700 900 1,300 1,500 1,700 2,100 2,500 2,500

Gas TurbinesBasis 200 340 340 340 340 340 340 34n 340 340 340 340

Semarang - - 20 20 20 20 20 20 20 20 20 20

Tg. Priok - - 200 200 200 200 200 200 200 200 200 200

Gresik 1 & 2 40 40 40 40 40 40 40 40 40 40

Total Gas Turbines (MW) 200 340 600 600 600 600 600 600 600 600 600 600

Total Diesels (MW) 57 57 57 14 - - - - - - - -

Geothermal (MW) - - - - - - 30 30 30 30 30 30

Total Installed (MW) 863 1,003 1,263 1,547 1,760 1,986 2,457 2.667 2,896 3,32q 4.139 4,60q

Energy generatingcapability (GWh) /a - - - - 5,500 6,700 q,700 11,800 12,400 15,70n 15,700 15,700

/a Assuming (1) Suralaya lJnit No. 2, Saguling and Mrica power stations not constructed, (2) 6,000 operating hours for steam plant,

2,000 operating hours for gas turbines and full energy output of hydroelectric stations, based on average runoffs. Suralaya

Unit 2 will contribute about 2,400 GWh annually after its operation is stabilized.

- 44 - ANNEX 7

INDONESIA

NINTH POWER PROJECT

Suralaya Units 1 and 2 Cost Estimate (Stage I)

Item Contract Thousands of US$ /aNo. No. Contract Description Local Foreign Total1 2 3 4 5 6

1 01 Site preparation 9,094 - 9,0942 02 Piling 10,062 - 10,0623 03 Marine works 47,152 - 47,1524 04 Cooling Water Duct 5,922 - 5,9225 05 Civil Works 31,851 - 31,8516 06 Administration buildings 5,103 - 5,1037 07 Steelwork and cladding 14,891 12,150 27,0418 08 Stack 3,094 639 3,7339 09 Storage tanks 13,842 - 13,84210 10 Steam generator and ancillary lant 10,599 153,858 164,45711 11 Turbine generator and ancillaryplant 8,266 78,734 87,00012 12 Ash and dust plant 768 11,123 11,89113 13 Station electrical equipment 974 14,226 15,20014 14 Station coal handling 2,354 12,665 15,01915 15 Substation (150kV + 20kV) 630 11,885 12,51516 16 EHV switching station (500kV) 3,446 - 3,44617 17 Miscellaneous Works 3,746 829 4,575

18 Subtotal 171,794 296.110 467,904

19 Housing colony 5,433 - 5,43320 Operator training 2,003 5,650 7,653

21 Subtotal 7.436 5,650 13,086

22 Indirect Costs23 Engineering 2,645 17,711 20,35624 Construction building 500 - 50025 Construction expenses 4,296 - 4,29626 Owners administration 5,192 - 5,19227 Surveys 1,021 - 1,021

28 Subtotal 13.654 17.711 31,365

29 Price contingency /b 63,450 66,004 129,45430 Physical contingency 11,781 15,000 26,781

31 Total 268,115 400,475 668,590

/a Base prices at October 1979 level. Includes taxes on contracts and equipment but are net ofcustom duties.

/b Price contingencies as follows:

Year 1979 1980 1981 1982 and after… ___________ _ …(% )… _____________

Local costs 25 15 15 10Foreign costs 10 9 8 7

- 45- ANNEX 8

INDONESIA

NINTH POWER PROJECT

Suralaya Unit 2 Cost Estimate

Item Contract Thousands of US$ /aNo. No. Contract Description Local Foreign Total1 2 3 4 5 6

1 01 Site preparation 200 - 2002 02 Piling 1,307 - 1,307

3 03 Marine works 14,976 - 14,9764 04 Cooling Water Duct 1,080 - 1,0805 05 Civil Works 7,813 - 7,8136 06 Administration buildings /b - - -7 07 Steelwork and cladding 2,650 2,972 5,6228 08 Stack /b - - -9 09 Storage tanks 1,066 - 1,06610 10 Steam generator and ancillary plant 5,434 78,883 84,31611 11 Turbine generator and ancillary plant 3,741 35,631 39,37112 12 Ash and dust plant 768 11,123 11,89113 13 Station electrical equipment 456 6,591 7,04714 14 Station coal handling 2,354 12,665 15,01915 15 Substation (150kV + 20kV) 334 3,552 3,88616 16 EHV switching station (500kV) 1,924 - 1,92417 17 Miscellaneous Works 2,996 662 3,658

18 Subtotal 47,101 152,079 199,180

19 Housing colony /b - - -

20 Operator training 789 3,970 4,759

21 Subtotal 789 3,970 4,759

22 Indirect Costs23 Engineering 2,168 7,676 9,84424 Construction building /b - - -25 Construction expenses 860 - 86026 Owners administration 1,294 - 1,294

27 Subtotal 4,322 7,676 11,998

28 Price contingency /c 20,486 34,795 55,28129 Physical contingency 3,297 7,281 10,578

30 Total 75,995 205,800 281,795

/a Base prices at October 1979 level. Includes taxes on contracts and equipment butare net of custom duties.

/b Included in phase I of the Suralaya scheme./c Price contingencies on the same basis as Annex 7.

ANNEX 9

- 46 -

INDONESIA

NINTH POWER PROJECT

Cost Estimate for EHV Lines

Item Millions of US$ /aNo. Item Local Foreign Total

Overhead Lines1 Suralaya-Jakarta (x) 32.2 34.5 66.72 Jakarta-Cibinong 2.7 3.0 5.73 Cibinong-Saguling 10.9 12.7 23.64 Saguling-Bandung 5.8 6.8 12.65 Bandung-Cirebon 16.2 19.3 35.56 Cirebon-Semarang 29.4 34.0 63.4

7 Subtotal OH Lines 97.2 110.3 207.5

Substations8 Suralaya 3.3 9.3 12.69 Jakarta (S/S-x) 12.0 17.1 29.110 Bandung 5.2 12.6 17.811 Semarang 4.1 6.1 10.2

12 Subtotal Substations 24.6 45.1 69.7

13 Java Control Center 1.2 11.6 12.8

14 Engineering, construction supervision 1.0 8.5 9.5and training

15 Total Basic Cost 124.0 175.5 299.5

16 Physical contingencies 5.0 12.5 17.517 Price contingencies /b 51.0 51.0 102.0

18 Total Indirect Costs 57.0 72.0 129.0

19 Total Project Cost 180.0 239.0 419.0

/a Base prices at October 1979 level. Includes taxes on contracts andequipment but are net of custom duties.

/b -Price contingencies on the same basis as Annex 7.

ANNEX 10

- 47 -

INDONESIA

NINTH POWER PROJECT

Estimated Schedule of Disbursements(US$ million)

IBRD Quarter Disbursement Cumulative disbursementFiscal Year ending during quarter at the end of quarter

FY 81 Sept 30, 1980 5.0 5.0Dec 31, 1980 10.0 15.0Mar 31, 1981 10.0 25.0June 30, 1981 15.0 40.0

FY 82 Sept 30, 1981 15.0 55.0Dec 31, 1981 15.0 70.0Mar 31, 1982 15.0 85.0June 30, 1982 17.0 102.0

FY 83 Sept 30, 1982 17.0 119.0Dec 31, 1982 17.0 136.0Mar 31, 1983 20.0 156.0June 30, 1983 20.0 176.0

FY 84 Sept 30, 1983 18.0 194.0Dec 31, 1983 13.0 207.0Mar 31, 1984 9.0 216.0June 30, 1984 8.0 224.0

FY 85 Sept 30, 1984 8.0 232.0Dec 31, 1984 6.0 238.0Mar 31, 1985 6.0 244.0June 30, 1985 6.0 250.0

FY 86 Sept 30, 1985 3.0 253.0

SURALAYA STEAM POWER PLANTUNITS I AND 2

IMPLEMENTAION PROGRAM

1978 1979 1980 1981 1982 1983 1984 1985

N.. 1+ . 111 1U1+1+II11T JiAISOND40JIFM+11ASON ir-AMJ1 UIJ 7 UAY.1 O NT FUNCTION IT~EM 1 | M||t l'|AS||| |4MAM 13.IaaI IAlttNDJ| IMAIM9 ' SO|N| '|||||'||| ONO «M J1 A5 ONDJ| MAM J J|||11 J | F |M|A|M| ' J |J S |O|N|

Rev. Loan APplicationfEASIBILITY COST ESTIMATE 1

OUDGET COST ESTIMATE 2 _

__ - P 'r im FinalCONSTRUCTION SCHEDULE 3 V-F

OISaURSEMENT SCHEDULE 4 Final

LIST OF CONTRACTS 5

_Ifslw te LEGEND

MAHINE & HYDROGRAPHIC STUDIES 6 P r P.C. -PLACE CONTRACT

- _-__-_-- " StWY M-nthly Readingo -ACTIVITY COMPLETE

METEROLOGICAL STUDY 7 U - T

__________________________________ _ IlvestinaloHYDROGEOLOGICAL STUDYCU

Raped__ _ _ -_ _ _ _ _ _ _ - Aaevnq' eg o

TOPOGRAPHIC STUDY 9 J

GEOTECHNICAL STUDY 10 RF Pr inal Report &~~PORT -- Rev Pro or. ~~~~Arnhit.cwlra____ON __ ___ FeSts Rope Report RN ort UpdateDESIGN REPORT tl Pmp / 0 -_

Spc Ecal Site Conmtr-ctionSITE PREPARATION 12 I" N U 0

T.1d., T d. Site Co-u-ti..SigPILING 13 For, P.C. COO !on D

Tnder

Prop Spec Tender En1 P.C. Sigt Congroct ionMARINE WORK 14 Prep '3 s --.--

_ _ Specificagon Tnd r Eval P.C. Sit ConlgrootianCW DUCTS 15 _ _ _ _ ._.............. . _4

Prop Specet.cotion Tender E.1 P.C. Sitg C.onsroclion 0fCIVIL WORKS 16 - -- A

_______ ___ ___ _ _ -Prop Speoilfcotion Tender ESal PC Site ConetuctionADMINIST11ATIVE BUILDING 17 -0t - .......-. ;} 0

___ _ _ _ __ __ __ __ ____ Peep Spt-n ifiaion Tender Enal P C Molfctore & Delivr Equip Site Co.s.rct-ion

STEEI WORK & CLADDING 18 '__________________________ I D~~~~~~~~~~esign, M uotaler

Prep Spec Tander Enolcate P.C & Deliver Site CovetroctionSTACK 19 O- l O

STORAGE TANKS 20___ Perle Spec Tender Et ic P o M .. anof_etore & Deliver Eqip Sire Cerocrino ST S.. Unt 1 F.C.L. Unit 1 S.T S. Unit 2 F.C L Unit 2

STORAGE TANKS 20 Eaate)C Coe-mmiggion Compleg Ereelio Commiscion

P,.PSp-- T.d., E.I.te P C Deeign. Mnfet.ontr & Deliver Eqoiponet Egevt Unit 1 Unit I_ Unit 2 Unit2STEAM GENEHATOH & ANCILL IARY PLANI 21 EU p 1 C]

_ _- _ _ _ _ __ _ Pre Sp., Tender E-Wluat. PC. Design Monatactot- & Deliver Egoipnene Erect Unit 1 Comi i Unit I Complet Erection i 2

TUR81NE GENERATOR & ANCILLIARY PLANT 22 0-1_ OUe U

Prep Spec T.nder Emluate P.C Design Mantora & Deliver Erect Un t 1 Unit 1 Erect Unit 2 Unit 2

ASil & DUST PLANT 23 C,_ -C

S-ATIO LE UM & SER Pre-are Specili-otion Tender Enalaa P C. Design., Ma.electure & Deliver Erect Unit 1 8 Commision Erect Unit 2 Complete Erctice & Cone.ncisionS1 ATION t LECT EQUIPMENT & SERVICES 24 :- _ 4 0

Prep Spec Tnder Evlut P C Design. Manotature & Delivr Erect Plant CommissionCOAL UNLOADING. STORAGE & RECOVERY 25 0- Erect

Prepare Spedi icaions Tander Evluat. PC Dasign. Manulacture & Deliver Erect Unit 1 Commision Unit 2 CommitnionSUBSTATION EQUIP.. SERVICES & TRANSFOFIMERS 26 -0{} ------- 0

Start Piling Stan Main Str 81t. 1 Com-ence Turbo Steam to Set Fu11 Conemercial Steam to Set FoIl Commercial

Main Plant Ar-et Cl F...ndamnsn STWK E-ecion Erection Uti8 1 Load Unit 1 Unit 2 Load Unit 2

Comeen- StoatIErotecdn |

Avhve- 5. 1979 WolId Bank - 20710

^ ~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 7

JAVA EHV PROJECTIMPLEMENTATION SCHEDULE

1979 1980 1981 1982 1983 1984DESCRIPTION

OVERHEAD LINES:Primary Design - Draft. Specification. Print Discuss Issue.Tender.Adjudication*Contract Award *Survey. t stage 1Ground Clearance. saecomplete

Foundations -Tower Erection .Stringing tFinal Inspection ' J

SWITCHGEAR:Primary Design *Draft Specification. Print Discuss Issue. . tTender-Adjudication -Contract Award-Design Manufacture and Delivery. state 1 omplete

Erection and Testing-

TRANSFORMERS AND LINEAR REACTORS:Primary Design *Draft Specification Print Discuss Issue.Tender-Adjudication. Contract Award.Design Manufacture and Delivery * _.J stage 1 complete

Erection end Testing.

VARIABLE REACTIVE COMPENSATIONPrimary Design -Draft Specification- Print Discuss Issue.Tender. Adjudication -Contract AwardDesign Manufacture and Delivery.Erection and Testing-

SYSTEM CONTROL AND COMMUNICATIONS:Primary Design-Draft Specification-Print Discuss IssueTender.Adjudication*Contract Award.Design Manufacture and Delivery- t stage 1 complete

Erection and Testing.

CIVIL WORKS:Docuimentation- Bills of Quantities .Tender- :

.Adjudication-Contract Award ... complete

Construction. fSYSTEM TESTS AND COMMISSIONING j.71 t

World Bank - 20845

- 50 - ANNEX 13Page 1 of 3

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

FINANCIAL STATEMENTS 1972 - 1979

Income Statements(Rupiah, billions)

Actual Estimated1972 1973 1975/a 1976 1977 1978 1979

Sales increase % 5.99 14.90 12.37 14.73 9.91 14.44 21.55Energy sales (GWH) 1893 2175 2444 2804 3082 3527 4287Average price/kwh 8.9805 11.0345 16.3666 21.7546 27.2550 27.5021 27.37

Energy revenue 17 24 40 61 84 97 117Other revenues 3 7 1 0 0 0 1

Total Revenue 20 31 41 61 84 97 118

Operating expensesFuel/bulk power 5 7 9 15 23 29 31Operations 11 13 22 35 37 43 51Depreciations 10 11 12 13 16 23 32

Total Expenses 26 31 43 63 76 95 114

Operating income -6 0 -2 -2 8 2 4

Net income before interest -6 0 -2 -2 8 2 4

Interest 0 0 0 0 0 0 0

Net income -6 0 -2 -2 8 2 4

Retained earnings -6 0 -2 -2 8 2 4

Rate base 100 115 126 128 152 194 241Rate of return % -6.0 0.0 -1.6 -1.6 5.3 1.0 1.7Operating ratio 130.0 100.0 104.9 103.3 90.5 97.9 96.6

/a Fiscal year changed from December 31 to March 31: 1st quarter of 1974 omitted.

-51 - AWNEX 13Page 2 of 3

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

FINANCIAL STATEMENTS 1972 - 1979

Funds Flow Statement(Rupiah, billions)

Actual Estimated1972 1973 1975 1976 1977 1978 1979 Total

Internal Sources of FundsOperating income -6 0 -2 -2 8 2 4 4Depreciation 10 11 12 13 16 28 32 122Consumers contributions 2 5 15 17 13 26 38 116Other income -3 -3

Total Internal Funds 6 16 25 28 37 53 74 239

Operating RequirementsIncrease/decrease workingcapital 6 33 12 10 15 12 -9 79

Debt repayment 0 0 0 0 0 1 - 1

Total Operational Req. 6 33 12 10 15 13 -9 80

Internal FundsAvailable for investment 0 -17 13 18 22 40 83 159

Capital InvestmentTotal construction 19 22 78 187 161 258 285 1,010

Total Capital Investment 19 22 78 187 161 258 285 1,010

Balance to be financed 19 39 65 169 139 218 202 851

Financed by:Borrowings 0 0 0 8 3 31 36 78Equity 20 41 77 157 149 197 176 817

Total Capital Sources 20 41 77 165 152 228 212 895

Cash increase/decrease 1 2 12 -4 13 10 10 44Cash at beginning of year 5 6 8 20 16 29 39 -Cash at year end 6 8 20 16 29 39 49 -Annual contribution

- to construction 0.0 -77.3 16.7 9.6 13.7 15.5 29.1 15.7- 3-year average % /a 0.0 0.0 -3.4 4.9 12.4 13.2 20.6 -

/a Test year and two past years.

- 52 - ANNEX 13Page 3 of 3

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

FINANCIAL STATEMENTS 1972 - 1979

Balance Sheet(Rupiah, billions)

Actual Estimated1972 1973 1975 1976 1977 1978 1979

AssetsFixed AssetsPlant in service 134 167 199 229 306 390 534

Less depreciation 20 31 47 61 78 106 138

Operating plant 114 136 152 168 228 284 396Work in progress 33 23 117 274 358 531 672

Current AssetsCash 6 8 20 16 29 39 49Inventories 8 19 20 25 31 40 50Receivables 9 26 21 28 35 48 59

Total 23 53 61 69 95 127 158

Total Assets 170 212 330 511 681 942 1,226

Equity and LiabilitiesEquityPaid in capital 167 208 310 468 617 814 990Retained earnings -13 -13 -8 -10 -1 -2 2

Total Equity 154 195 302 458 616 812 992

Long Term DebtDebt due 0 0 0 8 11 42 78

Current LiabilitiesPayables 8 3 5 4 1 8 38

Total 8 3 5 4 1 8 38

Consumers Contributions 8 14 23 41 53 80 118

Total Equity & 170 212 330 511 681 942 1,22Liabilities

Increase in gross plant % 21.8 24.6 19.2 15.1 33.6 27.42 36.9Debt as % of debt & equity 0.0 0.0 0.0 1.7 1.8 4.9 7.3Current ratio 2.9 17.7 12.2 17.2 95.0 15.9 4.1

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

FINANCIAL FORECASTS 1980 - 1987

INCOME STATEMENTRUPIAH, BILLIONS)

1980 1981 1982 1983 1984 1985 1986 1987

SALES INCREASE Z 24.33 21.95 22.00 22.07 20.97 19.98 19.07 17.99

ENERGY SALES(GWH) 5330 6500 7930 9680 11710 14050 16730 19740

AVE PRICE/KWH 27.5797 35.8462 53.9723 58.9876 64.0478 67.9715 71.9665 77.0010

ENERGY REVENUE 147 233 428 571 750 955 1204 1520

OTHER REVENUE 1 2 2 3 3 4 5 6

OTHER REVENUE 2 5 5 7 10 15 21 28 36

TOTAL REVENL'ES 153 240 437 584 768 980 1237 1562

OPERATING EXPENSESFUEL/BULK POWER 63 78 109 152 212 266 322 427

OPERATIONS 94 112 138 162 191 221 263 312

DEPRECIATION 53 77 112 162 215 281 344 422

TOTAL EXPENSES 210 267 359 476 618 768 929 1161 @

w

OPERATING INCOME -57 -27 78 108 150 212 308 401

NET INCOME EEFORE- INTEREST -57 -27 78 108 150 212 308 401

INTEREST 11 24 43 66 95 128 162 200

IDC 11 21 28 43 62 67 70 78

- CHRGD OPERATIONS 0 3 15 23 33 61 92 122

NET INCOME -57 -30 63 85 117 151 216 279

RETAINED EARNINGS -57 -30 63 85 117 151 216 279

RATE BASE 408 685 1057 1614 2383 3284 4322 5585

RATE OF RETURN Y. -14.0 -3.9 7.4 6.7 6.3 6.5 7.1 7.2

OPERATING RATIO % 137.3 111.3 82.2 81.5 80.5 78.4 75.1 74.3

INDONESIA

PERUSAHAAN UMUM LISTRII NEGARA

FINANCIAL FORECASTS 1980 - 1987

FUNDS FLOW STATEMENT( RUPIAH, BILLIONS)

1980 1981 1982 1983 1984 1985 1986 1987 TOTAL

INTERNAL SO1RCES- OF FUNDSOPERATING INCOME -57 -13 78 108 150 212 305 401 t187DEPRECIATION 53 77 112 162 215 281 344 422 1666

CONSUMERS CONTBNS 33 45 61 8t 100 116 136 150 722

TOTAL INTERNAL- FUNDS 29 109 251 351 465 609 788 973 3575

OPERATIONAL- REQUIREMENTS

INCREASE/DECREASE- WORKING CAPITAL I 19 54 43- 34 33 21 48 253

INTEREST CHARGED- OPERATIONS 0 3 15 23 33 61 92 122 349

DEBT REPAYMENT 0 2 10 Is 24 47 75 103 276

TOTAL OPERATIONAL- REQUIREMENTS 1 24 79 81 91 141 188 273 878

INTERNAL FUNDS- AVAILABLE FOR-- INVESTMEtJT 28 85 172 270 374 468 600 700 2697

CAPITAL INVESTMENT

TOTAL CONSTRUCTION 503 676 879 1t34 1218 1331 1776 1948 9465 -n

INTEREST DURING 4I

- CONSrRUCTiON tt 21 28 43 62 67 70 78 380

TOTAL CAPITAL- INVESTMENY 514 697 907 1177 1280 1398 1846 2026 9845

BALANCE TO BE- FINANCED 486 612 735 907 906 930 1246 1326 7148

FINANCED BY

BORROWINGS 73 267 259 310 392 416 471 535 2723

EQUITY 376 308 464 61$ 531 522 801 810 4427

TOTAL CAPITAL

- SOURCES 449 575 723 925 923 938 1272 1345 7150

CASH INCREASE/- DECREASE -37 -37 -12 18 17 8 26 19 2

CASH AT BEGINNING- OF YEAR 49 12 -25 -37 -19 -2 6 32 49

CASH AT YEAR END 12 -25 -37 -19 -2 6 32 51 51 IANNUAL DEBT SERVICE

- COVERAGE 0.0 12.8 7.6 7.1 6.4 4.6 3.9 3.7 4.6ANNUAL CONTBN- TO CONSTRUCTION 5.4 12.2 19.0 22.9 29.2 33.5 32.5 34.6 27.4

- 3 YEAR AVERAGE % IP) 14.3 13.1 13.5 19.0 24.3 28.8 31.9 33.5

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA

FINANCIAL FORECASTS 1980 - 1987

BALANCE SHEETSRUPIAH, BILLIONS)

19H0 1981 1982 1983 1984 1985 1986 1987

ASSETS

FIXED ASSETS

PLANT IN SERVICE 969 1433 2114 3112 4395 5848 7651 9824

LESS: DEPRECIATION 239 342 488 702 974 1335 1789 2358

OPERATING PLANT 730 1091 t626 2410 3421 4513 5862 7466

WORK IN PROGRESS 938 1278 1646 2049 2299 2605 3129 3609

CURRENT ASSEtS

CASH 12 0 0 0 0 6 32 51

INVENTORIES 46 58 72 89 104 123 143 167

RECEIVABLES 41 53 90 119 150 179 197 243

CURRENT ASSET I 21 27 44 59 66 75 84 95

TOTAL 120 138 206 267 320 383 456 556

TOTAL ASSETS 1788 2507 3478 4726 6040 7501 9447 1t631

EQUITY AND- LIABILITIES

PAID IN CAPITAL 1366 1674 2138 2753 3284 3806 4607 5417

RETAINED EARNINGS -55 -71 -8 77 194 345 561 840 un

REVALUATION RESRVE 98 158 240 375 533 765 1073 1474 Ut

TOTAL EQUITY i409 1761 2370 3205 4011 4916 6241 7731

LONG TERM DEBT

DEBT OUE 151 416 665 960 1328 1697 2093 2525

CURRENT- LIABILITIES

PAYABLES 36 47 61 79 98 122 148 181

BANK OVERDRAFT 0 25 37 19 2 0 0 0

TOTAL 36 72 98 98 100 122 148 181

CONSUMERS CONTBNS 192 258 345 463 601 766 965 1194

TOTAL EOUIT. AND- LIABILITIES 1788 2507 3478 4726 6040 750t 9447 tl631

AVE GROSS PLANT o

=

-/GWH (TH RUPIA) 140900.0 184769.0 223581.0 269938.0 320495.0 3644e3.o 403407.0 442603.0

INCREASE IN- GROSS PLANT % 46.4 36.8 37.6 36.6 33.1 24.8 22 6 20.2

DEBT % OF- DEBT + EOUITY 9.7 19.1 21 9 23.0 24.9 25 7 25.1 24.6

CURRENT RATIO 3.3 1.9 2.1 2.7 3 2 3.1 3.1 3.1

ANNEX 15Page 1 of 2

- 56 -

INDONESIA

PERUSAHAAN UMUM LISTRIK NEGARA (PLN)

NINTH POWER PROJECT

Assumptions in the Financial Forecasts

Revenues

1. Revenues have been forecast assuming a 38% increase in tarifflevels on April 1, 1980. For the remainder of the period through FY87they are forecast at the levels required to generate over the test year andthe two preceding years 12% for FY80 through FY82, 20% for FY83 and FY84,25% for FY85 and 30% thereafter of the same three years' constructionexpenditures.

Fuel

2. Fuel has been priced as follows, escalated at 10% each year forFY81 onwards:

1979 Price Level _Rp

Coal (per kg) 14.4Residual oil (per liter) 33.0Industrial diesel (per liter) 33.0High speed diesel (per liter) 37.3Gas (per KWh) 11.0

Operating Expenses

3. Operating expenses are based on FY80 costs as estimated by PLNfor personnel, operating, maintenance, and administration and are escalatedat the following rates %:

Year 81 82 83 84 85 86 87

% 10.0 10.0 10.0 8.0 8.0 8.0 8.0

Depreciation

4. Depreciation is based on the straight-line method at the followingrates %:

ANNEX 15- 57 - Page 2 of 2

As revalued 1972 and1971 after

Hydro stations 5.26 2.50Steam stations 10.00 4.00Diesel stations 10.00 8.00Gas-Turbine stations 6.66 8.00Transmission 10.00 4.00Distribution 12.50 4.00Administration and buildings,telecoms, etc. 6.25 6.66

Capital Expenditures

5. Capital expenditures are based on the expenditures needed to meetthe least cost program of: generation and transmission development for Java;distribution expenditure for Java and generation, transmission and distri-bution for other areas as estimated at 1979 prices by PLN. Expendituresother than those for Java are not yet based on demand forecasts but will beso based in the near future. Escalation has been based on the rates inpara. 4.

Borrowings and Equity

6. Borrowings have been assumed at 50% of the foreign costs includedin construction expenditures except for loans which lending institutionssuch as IBRD and ADB require to be passed to PLN in their entirety. Theassumed average terms of the loans are 19 years including four years graceat 9% p.a.

58 ~~~~~~~~~ANNJEX 16- 58 -

JAVA SYSTEM(MWI PEAK DEMAND AND INSTALLED CAPACITY6000

INSTALLEDCAPACITY

5000 ~~~~~~~~~~~~~~~~~~~~~~~MAINTENANCE5000 _ OUTAGES

AVAILAB LECAPACITY

4002_ PEAK LOAO

SURA LA YA-2 J/

3000 FRE UAE

2000

1000

III I I I_ I I1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89

July 1979World Bank - 20708

- 59 -

ASN,EX 17

PLANT UTILIZATION IN JAVA

3994

\GAS TURRIN4E

' 585 MW ' 700 GWhs\J

\ \\g "YEAR OF 1985/86"

409 AVAILABLE CAPACITY = 3994 MW

3409 ::.- -.. :. 014 PEAK LOAD = 2910 MW

GROSS GENERATION = 17332 GWh

- '

3000 HYDRO

PEAK LOAD :2057 GWh:2910\ DIESEL 10 MW

275 : : - .- - . :. ........... -- 03641 GWh27552745 '04

2500

PLANT UTILIZATION CURVE

LOAD DURATION CURVE

1700 MW

.. GW

1500 / / / / y ./-/ // y .///,/ / / >, .,, ,<

1045 ~-I 000

500

245Y GEOTHERMAL 60 MW 4415GWh,' .,

77 </.'r '<,'/. ~// 185 MW 1556GVV '/77/' 'h7/-"/ 'E/ .''/ //

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0.96 1

oh TIME ( 1 Year 8760 hours I

World Bank - 20709

- 60 -ANNEX 18

INDONESIA

NINTH POWER PROJECT

Cost & Benefit Streams for the Calculationof the Internal Economic Rate of Return (IERR)

(In US$ millions)

Cost /aOperation & Benefit

Year Capital /b maintenance /c Fuel /d revenue /e

1979 21.0 - -1980 74.0 -1981 135.0 - -1982 200.0 - -1983 180.0 - - -1984 150.0 4.0 7.15 19.51985 80.0 10.0 50.24 139.61986 35.0 12.0 86.16 239.41987-2000 - 12.0 86.16 239.4

2001-2010 12.0 73.79 205.22011-2015 12.0 61.52 171.0

/a Includes full cost of Suralaya units 1 and 2, associated EHV and trans-mission and distribution costs.

lb Includes foreign and local costs./c At 2% of capital cost for the thermal plant and 1% of capital cost for

Transmission Lines./d At $40 per metric ton of coal with a calorfic value of 5,500 kcal/kg

(9,900 BTU/lb)./e Benefits are worked out with the following assumptions:

(i) Average tariff per KWH sold = Rp. 38.0 (US cents 6.1).(ii) Generation at 70% plant factor up to year 2000 (15 years), at 60%

plant factor for the next 10 years and at 50% plant factor for last 5years.

(iii) The energy sale is assumed as 80% of the gross generation.

The IERR is 12.25% for the base case detailed above. The sensitivity ofthe IERR for various factors is as below:

IERR (%)Capital cost + 10% 11.15

- 10% 13.45Fuel cost + 10% 11.55

- 10% 12.95Tariff + 10% 14.05

+ 20% 15.75

- 61 - ANNEX 19

INDONESIA

NINTH POWER PROJECT

Selected Documents and Data Available in the Project File

A. Report on the Sector

(1) IBRD Appraisal Reports PU - 18(a) of 1969PU - 95 of 197287a-IND of 1973766-IND of 19751054(b)-IND of 19761289(a)-IND of 19771638(a)-IND of 19782375-IND of 1979

(2) Java Power System Development Planby Preece Cardew and Rider December 1976

B. Reports on the Project

(1) West Java Steam Power Station Studyby Montreal Engineering Company ofCanada (MONENCO) February 1977

Vol. 1 - Selection of Unit SizeVol. 2 - Site SelectionVol. 3 - Environmental and Sociological

InvestigationVol. 4 - Geotechnical Investigations

(2) West Java Steam Power Station Studyby MONENCO September 1977

Vol. 5 - Suralaya Power Station - FirstPhase Development

- Conceptual Design and FeasibilityStage Cost Estimate

(3) Suralaya Project - Budget Cost Estimate,Implementation Program, etc., by MONENCO July 1979

(4) EHV Project - MM Feasibility ReportInterim Report April 1979Final Report August 1979

-I

IBRD 12453 RI

- MB ThAILAND ~ 1157 III' 12 6l, 604 Da~ ECEMBER 1978

-9HAILAND5 120' , INDONESIA ,.

PHILIPPINES PUBLIC GENERATING FACILITIES BY AREAS'Se0ndo 4ca h >t> ;> P HIANMIPPIN .- MARCH 31,1978

,;Soufh C/ ea S BRUNEI /

) SSN 5 . L.... !, INSTALLED MW INOLUB EE a RUSW LAA OTUSNUMBRIS

., ~~ ~5ot * .j,611;7Xati17A ii; y5/vlF. TJAASi,

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-w 5~~~~~~~~~~~~~~~~~~~~~~~~~~5~~~~p c f I 48

Dz c .\ ' \.< aniu a K A L I 244A

N I A N

~~~~~~~ m81 9, APDTEn l \* Sdrra I 11 4 . 1' j -a UoDwBr .

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SU U MATRA ajrpno 'i SULAWESI v 1-ioFx Y A E

Beg BuAoSINA POR Ifiry Lit 7 "1 BEuo,>TS , _ 4

e ar l 2VR HEAILAHM ,O ac ft t ''E O cean if

,, 5. TN lAl Pl4l .A, i X\\ _K k n u -i:

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F.fk'RINIAK

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SU pErLMATRA ,Upa P- r c- -j -k - - - - I/A JIsD

JAKAR1bD~ '> TMDJAIND448Nfl 7 n 0o ' a

oo' VO,s 110A? 12G 125' arrrcrwt~vvnsf 130' 13S' 140AUIAOI aOmON

100- Ilo. 140--

I . 4

115- 125~~~~~F AF - LU/T' -

IBRD 12435 R3

106012060 - AUGUST 1979.106° at8 1r

This map has been prepared by the Wor/d Bank s staff exclusively for the cofveniefCe I N DON ESI:of the readert of fhe repose to which It i attached The denomnation- used and thNE A

SUMA TRAkonrinnonanbisnpdnoipl,othpatothWodocadisSUMATRA ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~fflats bo any jedoo st no t himpe leal statrnorof anytyerpritory usattyetidoisexie it or J.AVjA PO WER SYSTE MI~a-oeptan-e nf such bosdesdV P E S

MAJOR POWER PLANTS AND MAIN TRANSMISSION LINES

Suralaya EXISTING AND PROPOSED

6o 1: * , ,. S--- -S N POWER SUBSTATIONS TRANSMISSION LINES SMKrakatausteel, .J-ARTA'- -STATIONS EHV 150KV EHV 15TKV

S.ra ~~~~~~~~~~~~~~~~~~~~~~~~~~*EXISTINGStshng - -i Kfjant- UNDER CONSTRUCTIONLCOMMITTED FOR

~~f( ombi . , _______ ~~~~~~~~~~~~~~~~~~~~COMPLETION BY 1080/81* * 0 FUTURE DEVELOPMENT BEYOND 1981

'"'-/ \ '\ ' PROJECT LOCATION

Jotiluhur PLN'SWILAYAH NUMBERS" '~o ,Jatiluhur WILAYAH OR DISTRIBUSI HEADGUASTERS

Suionio - - ,r Dago ,. nyara (Cirebon) ,m, PLN'SWILAYAH BOUNDARIES

' ' Bstdung'4Ui550bOlh50 Jatigedc 's '''rTh -_,_raI ' -,,TubPelongan, EMARANG Ksd,

jrun buCopers n

Cengkareng 'Muara l 10 n . ocG L \ / .- ngtnt+ w / 1 *Kaliboyo"-n t fSemak Tasikmalaya' Gam

(Y) umpano~~~~~~~~~~~~~~~~~~~~~Prwkro mag gnm

Caoiang~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~1 i

T. k~~~~~~~~~T

(Xl . K( ' s.HardostRrt 0 20 40 60 80 108

C'e ,m East Semarang MILES

';Cibisong Jolinq alel ° olO

aran gAncol, Ta-q(;n lo.8p ang~~~~~~~~~~~~~~oso 00lE

Tangera Kudus U n a,KILOMETERS

,' Bogorug kJlk 112° 1140