RESTRICTED

Report No. TO-380a

Thl: r:api wa-s preanrod for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

APPRAISAL OF THE TRANSMISSION PROJECT

THE ELECTRICITY CORPORATION OF NIGERIA

NIGERIA

January 22, 1964

Department of Technical Operations

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CURRENCY EQUIVALENTS

LN 1 = U.S. $2. 80EN 1 million = U. S. $2. 8 million

APPRAISAL OF THE TRANSMISSION PROJECTTHE ELECTRICITY CORPORATION OF NIGERIA

NIGERIA

TABLE OF CONTENTS

Page No.

SUMMARY i-ii

I. INTRODUCTION 1

II. THE KAINjiTT D_AMT PR(f.TFrT 1

III. THE ELECTRICITY CORPORATION OF NIGERIA (ECN) 2Power Facilities of ECN 2Organization, Management and Staff 3Consultants 4

IV. THE POHER MARKET 4Forecast of Demand and Energy Sales 5

V. THE ECN SIX-YEAR EXPANSION PROGRAM 6

VI. THE PROJECT 7Estimated Cost 8Construction Schedule 9Operations 9

VII. FINANCIAL ASPECTS 10Past Operating Results 11Financing the Expansion Program 14Tariffs and Future Operating Results 17Auditing 19Insurance 19

VIII. CONCLUSIONS 20

ANNEXES

1. Forecast of Demand2. Forecast of Energy Requirements3. Peak Loads and Capacity Curves4. Description of Program and Estimate of Capital

Expenditure 1963/64 through 1968/695. Resume of Financial Background6. Estimated Income Statements7. Forecast of Sources and Application of Funds8. Actual and Estimated Balance Sheets9. Schedule of Suppliers' Credits

Map

APPRAISAL OF THE TRANSHiISSION PROJECT

THE ELECTRICITY CORPORATION OF NIGERIA

SU'IVARY

i. The Eluetricity Corporation of MNge-a (ECN) haq asked the Bankto consider a loan of US$30.0 million to finance the foreign exchange re-quired for the construction of transmission lines and distribution facili-ties included in the first three and one-half years (January 1963 to mid-1966) of a six-year expansion program. The program would establish atransomission netw-ork and proid_e entrntAing plants to meet power require-ments in Nigeria until the proposed Kainji project on the Niger Rivercomes into operation in 1969. The total cost of the transmission ?rojectsubmitted to the Bank for financing is US$L12.3 million equivalsit'- thEc6stof ECN's program during the period of the Project is about US$101 millionand the total cost of the six-year program is approximately USI34 millionequivalent.

ii. The Government's decision to build a dam on the Niger River atKainji with an ultimate power generating capacity of 960 mW is the pre-dominant factor in planning future power development in Nigeria. The Dankhas followed, and in important respects participated in, the engineeringand economic studies carried out by competent consultants leading to thisdecision by the Government. The Bank, at the Governmentts request, hasmade an appraisal of the Kainji project and it is expected that the Pro-ject will qualify for the consideration of a Bank loan in the course ofthe next several nonths.

iii. The interim program, of which the proposed Bank loan would financea part, has been decided upon after a study of various alternatives by con-sultants. The Project is necessary, in any event, to help meet demand pend-ing the completion of the Kainji project. It would create three regionalsystems in Nigeria, which would serve as the basis of a national arid. Inthe unlikely possibility of the abandonment of Ka:inji, the present Projectwould provide the most feasible alternative means of enabling the country'sneed to be met by'the construction of large thermal plants.

iv. The Borrower would be ECN, the Government agency responsiblefor electric power generation and distribution in the country. ECN hasagreed with the Bank on the necessity of strengthening its organization andappropriate steps are being taken. By building and satisfactorily operat-.ing the proposed interim project, ECN should become quali'fied to operatethe grid which would come into operation on completion of the Xainji project.

v. Power sales in Nigeria have increased at an average annual rateof about 22% over the last six years. It is expected that this annual rateof increase will gradually decline to about one-half its present rate overthe next ten-year period. The proposed Bank Project will need to be inoperation by 1966 in order to meet this expected growth in demand.

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vi. ECN's operating results have improved over thelast five years, ex-cept for a set-back during last year due to expense incurred by a major equip-ment failure. Future operating results should continue to improve, reachingan estimated 8% return on net fixed assets in operation in 1963/64 and about9% by 1968/69.

vii. The financing plan submitted by ECN for the period of the proposedProject is satisfactory. The financing plan for the second period of theprogram is not yet firm. It is probable that ECN will approach the Bank foran additional loan in late 1965. It is expected that the Corporation willbe able to finance from earnings about 44 % of its fund requirements duringthe next six years.

viii. The 2roject is suitable for a Bank loan of US8P30.0 million equi-valent. A term of 20 years including a grace period of three years wouldbe appropriate fcr the Project.

APPRAISAL OF THE TRANSMISSION PROJECT

THE ELECTRICITY CORPORATION OF NIGERIA

NIGERIA

I. INTRODUCTION

1. This report covers the appraisal of the Project of the ElectricityCorporation of Nigeria (ECN) consisting of the construction of about 640 milesof high voltage transmission lines and the extension and reinforcement of itsdistribution systems. The Project is a part of the ECN six-year expansionprogram which is designed to establish a national grid and provide generatingplants to meet the power requirements of Nigeria until the Kainji Dam isscheduled to go into operation in 1969. During this six-year period from 1963to 1969 ECN's capital expenditures are expected to total approximately IN 47.9million (US!.134 million).

2. The Bank has been asked to finance the foreign currency cost of thetransmission lines and distribution facilities to be built during the threeand one-half year period of 1963 through mid-1966. The proposed loan of US$30million (IN 10.7 million) would also cover interest during construction. Theestimated cost of the Project is about US'h2.3 million (EN 15.1 million). Thetotal cost of the capital program during this period would be about USo101million (EN 36 million). This would ke the first Bank loan for polwer inNigeria and ECN would be the Borrower.

3. This report is based on information submitted to the Bank by ECN andits consulting engineers; on data obtained during a 1962 Bank mission in con-nection with the Kainji multipurpose project; and on the findings of a Bankmission which visited Nigeria in January and February 1963.

II. THE KAINJI DAI4 PROJECT

4. The Government of Nigeria has already commenced construction of thepreliminary works for a multipurpose dam on the Niger River at Kainji and forwhich the main civil works contract is expected to be awarded early in 1964.The hydroelectric station at the dam is scheduled for initial operation in1969. Vlhen the station is fully installed its capacity will total 960 t;i andshould be capable of meeting the interconnected power load in Nigeria until atleast 1982. Construction will be directed by the recently constituted NigerDams Authority.

5. The Government's decision to build the dam at Kainji was taken afterextensive investigations of the Niger River and its tributaries by experiencedconsultants. The series of studies were initiated in 1953, and were culminatedby a study, completed in 1961, financed by the U.N. Special Fund and for whichthe Bank was Executing Agency. This report recommended the multipurpose devel-opment at the Kainji site for the benefit of navigation, irrigation and elec-tric power. A Bank report on the "Economy of Nigeria," also completed in 1961,concluded from a preliminary analysis that the Kainji project was sufficientlyattractive to justify an appraisal if it were requested. A Nigerian Governmentdelegation to the Bank at that time formally requested assistance with thefinancing of the Project and in July 1962 a Bank mission visited Nigeria tomake the appraisal. A preliminary appraisal report TO-398a was issued onJanuary 10, 1964.

6. Power which is to become available from the Kainji project is thedominant factor in planning the countryls future supply. The present six-yearprogram of ECN is predicated upon the completion of the Kainji project in 1969and provides the necessary interim generating capacity and, very importantly,transmission lines that will later be required to utilize the output fromKainji. The size and character of the interim program was decided upon onlyafter extensive study by ECN and its consultants of various alternatives tobridge the gap until Kainji could be brought into production. The programselected has the added advantage that, if conditions should make it impossibleto proceed with or to complete Kainji, the interim facilities vwould provide abasic power svstem that could be expanded by adding thermal generation. Asdescribed below, the power facilities in the Eastern and WJestern Regions willbe lirked by March, 1967; and in 1969 interconnected with those of the NorthernRegion.

III. THE ELECTRICITY CORPORATION OF NIG-ERIA (ECN)

7. The Borrower would be lCN which was created by Ordinance No.15 of1950 and came into being on April 1, 1951 by taking over the then existingGovernment power undertakings. ECN is responsible for providing for the coun-tryts power needs and has initiated the six-year interim program which in-cludes the Project proposed for Bank financing. ECN is a statutory corporationand has unlimited life.

8. Prior to 1951, public electricity supplies in Nigeria were availablefrom 13 small Government undertakings and from four Native (local) Authorityundertakings. Most of the facilities were in a run-down condition and theundertakings had been operating at a loss. By the year ending 11arch 31, 1963,78 townships in Nigeria were receiving a public supply of electricity; the in-stalled capacity had increased from the 25.2 MW initially taken over to 216.7PR and the annual generation amounted to just over 645 million kwh. In addi-tion to its own generation, ECN purchased 14.5 million kwh in bulk from a smiallprivately owned hydro station on the Jos Plateau for retail distribution to itsown consumers.

Power Facilities of ECN

9. The Corporation's generating capacity is all thermal, with 54.9 14Wof diesel plant, 145.8 MW of steam plant, and 16 14W of gas turbine plant. Thelargest undertaking is at Lagos where 43,800 consumers are supplied, mainlyfrom 85 IMJ Ijora "B" steam plant; the smallest undertakings are rural schemeswhich have as few as 200 consumers supplied by 50 kw diesel plants. Until1962 operations were conducted entirely by isolated plants feeding local dis-tribution mains. In 1962, 132 kv transmission lines were completed betweenLagos and Ibadan, and between Port I-larcourt and Aba, thus initiating the tran--sition to an interconnected system type of operation.

10. Until the September 1961 plebiscite in the Cameroons, the Corporationalso operated 2.6 i'ili of capacity in that territory. The undertaking was takenover by the Cameroon Government on October 1, 1961, but so far a financialsettlement has not been reached. The estimated value of the assets of theCameroons' undertaking is about EN 425,000.

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Organization, Management and Staff

11. The Board of ECN consists of a chairman, under an indefinite appoint-ment, and from 11 to 16 members appointed for terms of three years by themviinister of Mines and Power. At present it is made up of a well-rounded groupof 15 engineers, lawyers, retired and active Government officials, and privatebusinessmen all but one of whom are Nigerians. The Board controls broad pol-icy, the engagement of new employees, salaries, and all expenditures overIN 5,OCO. The Chief Executive Officer is the General Manager who is appointedby the Board with the approval of the Minister. The General XIanager is res-ponsible for the day to day business of the Corporation and has the right tobe present at all Board meetings. In the past the Board met on an average ofonce every two months due to the difficulties of travel from the remote sec-tions of the country, but it is now meeting monthly.

12. From October 1957 until March 31, 1962, the post of General Managerhad been held by a capable and experienced expatriate engineer-administrator.Since April 1, 1962 the Corporation has had three different Acting GeneralManagers under tenporary arrangements. At the present time the Deputy GeneralManager is acting as the Chief Executive. The filling of the General Manager'sposition by means of short-term appointments is only a stop-gap arrangement.In view of the size and importance of ECN it is imperative that the best pos-sible man be engaged under a reasonably long-term contract to manage the Cor-poration. In June 1963 the Corporation advertised the position vacancy intechnical journals. Some 47 replies were received of which only one was fullyqualified but he accepted another position in the U.Kl. The Bank assisted inscreening applicants and is continuing its efforts to help the Corporationfill. the vacancy. ECN has agreed to appoint a competent General M4anager on acontract for a minimum period of three years. Before appointment the qualifi-cation and experience of the proposed candidate would have to be accepted bythe Bank.

13. The existing size and type of ECN's organization was adequate duringthe early years of the Corporation when all the undertakings were isolated.ECN currently has an estimated shortage of about 100 engineers, mostly as a re-sult of resignations of expatriates following independence. In view of thepolicy of "Nigerianization," expatriates can be engaged only on a contractbasis. By means of special contract alloTeances and gratuities, the Corporationhas been able to obtain about 10 engineers every two months through advertise-ments in foreign publications. ECN will intensify its recruitment program and,if necessary, increase the inducements in order to attract qualified person-nel. Now that ECN is changing to interconnected system operation, considera-tion will be given to the establishment of a new organization based on depart-ments responsible for, and adequately staffed to perform, the separate func-tions of planning, design, construction and operations. Just prior to theMission's visit, the Corporation had begun a preliminary organizational studyon its own, aimed primarily at decentralization through the creation of areaoffices to handle all personnel matters, maintenance and overhaul, and normalextensions of distribution. An impartial, objective organizational study wascarried out in May 1963 by Sir Josiah Eccles, the former Deputy Chairman ofthe British Electricity Authority. His report presented recommendations forreorganization which have been accepted in principle by the Corporation. Aspecial committee of ECN has been set up to implement the reorganization.

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Consultants

14. The design and supervision of construction of projects are beinghandled by consulting engineers. Preece, Cardewr & Rider (PC&R) is the elec-trical and mechanical consultant to LCN. A revised contract, subject to asix-months' notice of cancellation by either party, was signed in December1962 * Undcr the contract, upon the Cornnorntfions request. PC&R makes in-vestigations and prepares feasibility reports, prepares requests for tendersand analyzes the bids, and provides supervision of construction, includinginspection and issuance of certificates for payment. PC&R brings in civilengineers or other consultants as required. The consultants' typical feeqnehecb- s are based upon percentages of construction cost and are reasonable.A very useful feature of the contract calls for seconding of staff to workon special problems. Two of PC&R's electrical engineers are now stationedin Nigeria preparing detailed designs for expansion and rehabilitation ofdistribution systems. The consultants maintain an office in Lagos. ECN hasagreed to continue to employ engineering consultants for the Project.

IV. THE P011R MAR,ET

15. The country has an area of 357,000 square miles corprising mostlyrain forest in the south and relatively dry savannah in the north. It hasa population of about 50 million people, one-half of whom live in the North-ern Region. The economy of Nigeria is almost completely agricultural, withsome mining of tin and columbite in the north, and the production of about70,000 barrels of crude oil per day in the Niger delta. Industry is beginningto develop in the fields of textiles, cement, beer, and rubber products, butat the present time total production value represents less than two percentof the gross national product.

16. The retail sales of electricity by the Corporation increased at anaverage rate of 23.1% per annum over the five years prior to 1962/63. Totalsales for the fiscal year ending March 31, 1963, were 523.7 million kwh whichrepresented a 19.5% increase over the previous year. During the year thetotal number of consumers supplied rose from 127,L40 to 141,003, an increaseof 10e6%.

17. ECN sells power under several tariff groups but there are onlythree main categories: (a) residential, (b) commercial and industrial, and(c) special agreements. The special agreements include bulk supplies andare all with large consumers. The remaining consumers, including the streetlighting load, amount to less than 2% of the sales. A breakdown of the salesby category (excluding the Cameroons) is shown in the following table:

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Energy Sales of ECN

1962/63 Five YearTotal % of % Increase AverageSales Total over pre- Annual Increase

Consumer Group GWH Sales vious Year Prior to 1962/63

Residential 204.9 39.1 14.5 19.8Commercial and

industrial 191.2 36.5 18.3 21.2Special agreements

and bulk supply 120.2 23.0 36.3 37.7Street lighting

and miscellaneous 7.4 1.4 12.1 h.9

Total 523.7 100.0 19.5 23.1

18. The aggregate non-coincident maximum demand on all the undertakingsof the Corporation was 136.2 IX in 1962/63. This was an increase of only13.7% as compared to the previous year's increase of 27.6%. This lesser in-crease in demand was due mainly to boiler failures at Ijora which gave riseto load restriction and shedding over peak periods. In the five years priorto 1962/63 the growth in demand averaged about 19.3% annually. For ECN as awhole the load factor has been consistently rising and in 1962/63 it reached56%.

19. Distribution losses expressed as percentages of generated energyhavo gradually decreased from about 17% in 1955 to slightly less than 15% in1962/63. These figures include thefts and are estimated to be about 1% in thelarger load centers and probably higher in the smaller undertakings. Therelatively high distribution losses are due primarily to low load densitiesand are expected to continue at about the same level for some time.

Forecast of Demand and Energy Sales

20. The forecasts of demand and energy for the period 1963/64 through1971/72 are shown in Annexes I and 2. These values include the amounts con-sumed by power station auxiliaries as well as distribution losses. Theseforecasts were prepared for ECN by Merz and McLellan, consultants, in lTay 1962and are based on detailed studies they had performed in 1959 and early in1962 in connection with the Kainji Dam studies. The demands are estimatedseparately for each undertaking and are based on (a) estimates of the numberof future domestic consumers and the consumption per consumer, (b) extra-polations of previous industrial growth, and (c) known major new consumers.The rates of annual increase for the individual undertakings are "regressive"in that they are assumed to decrease regularly over the next 10 years toone-half of their present values or to 10% per annum, whichever is the higher.By the year 1968/69 the overall rate of load growth is expected to drop to11% per annum. The estirnates of energy generation were derived from the useof suitable load factors which were assumed to increase slightly above thepresent levels but were lirnited to a maximum value of 65% at the large in-dustrial undertakings.

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21. The fact that the 1959 projections made by Merz and McLellan havebeen closely verified by actual sales during three years supports the re-liability of their forecasts. It should be pointed out, however, that inorder to support load growths of the magnitude forecasted (about 120 millionkwh per year), a consideraube capiiLal ii-vsuient, perllaps in the order ofmagnitude of £N25 million per year, will be necessary in electrical consumeraomds qnd in machinery and plant for commerce and industry. This amount com-pares with the estimated average annual total public and private investmentof £N200 million forecasted by the National Economic Development Plan. Pro-vided that this required investment takes place, the estimated rates of growthare reasonable.

22. There are three possible major industrial developments which havebeen excluded from the load estimates. The first is the development of leadand zinc mining near Abakaliki; the second is an iron and steel industry nearOnitsha or Lokoja; and the third is an aluminum smelter. No definite deci-sions have been made about the size, location and timing of any of these pro-jects and it is unlikely that any smbstantial effect on the loads would, inany event, occur until at least 1967 and therefore they have been excludedfrom the forecast.

23. Estimates of peak loads and capacity for each of the three regionalsystems (the Northern, the Eastern and the Western) are shown in graph formin Annex 3. The criterion used to determine firm capacity is the assumptionthat the largest unit would be out of operation at the time of maximum demand.During 1964 and 1965 difficulties may arise in the Western system if the loadincreases as expected because sufficient stand-by plant will not be available.

V. THE ECN SIX-YEAR EXPANSION PROGRAM

24. The new generating capacity and transmission lines projected by ECNfor completion by the date of initial operation, in 1969, of the Kainji pro-ject would meet demand in this interim period and would also achieve inter-connection within the three Regions. As mentioned in paragraph 6, the trans-mission facilities, in the unlikely event of the Kainji project being abandoned,would be necessary to deliver the output from large new thermal generatingplants to load centers.

25. The six-year program (1963-69) contemplates the addition of about220 MW of generating capacity, 840 miles of high voltage transmission lines,distribution line extensions and other necessary equipment for the systems.A detailed description of the program is included in Annex 4 together withcost estimates, expenditures by years and dates of completion of the variouscomponent parts of the program. In summary, the total cost of ECN's expansionprogram from April 1, 1963, through March 31, 1969, is as follows:

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Estimated Capital Costs of 1963-69 Program(in thousands of £s Nigerian)

Classification of Expenditures 6 Year Total 1963/64-1968/69

Generation 12,265T r!n n C!s4 C Z n lh. 5U3Distribution 13,000Other 6,400

Interest during construction 1,663Total capital cost 47,871

26. The program until 1969 i rieasonablu y firm. During '163 and 1964three separate 132 kv systems will be constructed, one in each region. ByMarch 1967 the Eastern and Western Regions will be linked and in 1969 inter-connected with the Northern Region. The components of the transmissionlines in the Eastern and Western Regions will be designed and built for330 kv operation although the higher voltage will not be used until Kainjicommences operation. The interim program also provides for gas turbinegenerators in the Niger Delta area and diesel units in the North. In addi-tion, the program includes several lower voltage transmission lines, somesmall diesel installations, expansion and reinforcing of the distributionnetworks, "new towns developments" and miscellaneous investments. Whilethe program might only require some minor changes, an agreement has beenreached with ECN that no major modification would be instituted without theprior approval of the Bank.

27. ECN's program is designed to provide at the lowest cost thefacilities needed to meet the load growth between now and 1969. The gasturbine plants have an estimated cost per kw of about £N 65, which comparesfavorably with small steam turbine plant. Furthermore, in later years whenall thermal plant will be on stand-by or emergency status, the gas turbineswill require a smaller maintenance staff than steam units and will need amuch shorter time for start-up. With regard to the transmission lines, theincremental investment required to provide 330 kv components initially ismore economical than building 132 kv lines now and replacing them withhigher voltage lines long before they are obsolete, Whether the powrr isgenerated by the Kainji project or by large thermal plants, 330 kv lineswould be needed in any event by 1969.

VI. THE PROJECT

28. The Project proposed for Bank financing consists of:

(a) approximately 640 miles of the high voltage trans-mission facilities in the above nrogram which arescheduled for completion before 1966 (see map inappendix);

(b) the extension of the 33 kv systems at Port Harcourt,Lagos and Ibadan; and

(c) the equipment required for the expansion of distri-bution facilities.

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Estimated Cost

29. The estimated cost of the Bank Project is as follows:

Estimated Cost of Project(in thousands of I Nigerian)

Foreign Foreign CostTotal Local Exchange in '000 US'Cost Cost Cost Equivalent

Kaduna-Kano transmission systemi/ l,l62 - 265 897./ 2,512Aba-0ji River transmission 1

systemQ/ 2,362 497 1,865 5,222Ughelli-Lagos transmission

systemL/ 4,882 1,402 3,480 9,744Port Harcourt 33 kv system 252 39 213 596Lagos 33 kv system (stage 2) 790 158 632 1,769Ibadan 33 kv system (stage 1) 191 35 156 437

Sub-total, transmission 9,639 2,396 7,243 20,280

Distribution expansion _bt,09 2,009 2,400 6,720

Sub-total 14,048 4,h05 9,643 27,000

Interest during construction 1,071 - 1,071 3,000

Total 15,119 4,405 10,714 30,000

Equivalent in US dollars 42,334 12,334 30,000

30. The cost estimates of the Project are realistic and should be ade-quate. Following international competitive bidding, contracts have alreadybeen awarded for four of the transmission lines, and tenders have been re-ceived for much of the switchgear of the systems which indicate that theestimated amounts are satisfactory. In addition to 8% on plant and 10% ontransmission line estimates, there is included an overall allowance of 10%for miscellaneous and contingencies. This should be sufficient to coverpossible increases in the cost of labor and materials as well as to providea reasonable margin for overuns in quantities. Some preliminary constructionwork has been performed on the facilities included in the project and

1/ Includes cost of communications equipment7/ Includes IN 345,000 of expenditures prior to April 1, 1963

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such expenditures incurred for this work since October 1, 1962, and forengineering costs, would be financed by the proposed Bank loan.

31. As uentioned in paragraph 11 above, the planning end nreliminarydesign of the transmission and distribution systems are being carried outby ECN's consultants, Preece Cardew & Rider. The consultants have preparedall the contract documents for the transmission systems and will be respon-sible for the analysis of the tenders and supervision of construction.

32. International tenders have been invited for the various contractsfor the transmission systems in accordance with the Bankts requirements. Thecontracts include the transmission lines, transformers, owitehgear, s-ub-stations, civil works and power line carrier remote control. They providefor the design, fabrication or manufacture, shipping, erection and mainte-nance of the plant for a period of twelve months. The same type of biddingprocedure will be followed for obtaining the equipment required for the ex-pansion of the distribution facilities.

Construction Schedule

33. The schedule for the completion of the principal transmissionlines included in the Project is as follows:

Kaduna-Kano System:Kaduna-Zaria 132 kv 45[ miles March, 1964Zaria-Kano 132 kv 90 miles December, 1964

Aba-Oji River System:Aba-Onitsha 330 kv 85 miles October, 1965Onitsha-Oji 132 kv 38 miles October, 1965

Ughelli-Lagos System:Ughelli-Benin 132 kv 62 miles May, 1965Benin-Lagos 330 kv 320 February, 1966

Total 640 miles

All facilities to be constructed with the aid of the Bank loan are scheduledto be completed by mid-1966.

Operations

34. ECN's operations at its various undertakings have been subject tooutages varying from a few hours up to three days at a time and may be gener-ally attributed to a lack of competence of the operating organization to copewith the operating problems inherent in a utility business comprising a com-plex of central station and isolated generating plants. Although many of thesmaller load centers for some time will continue to be supplied by isolatedplants, the major load centers in each of the regions will soon be inter-connected. This type of high voltage system operation requires specializedskills which are not now available in Nigeria. Regardless of when and how

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the reorganization mentioned in paragraph 13 is implemented, ECN must shortlyengage the services of qualified electrical engineers with substantial ex-perience in transmission networks. A chief operating engineer to assume fulldirect responsibility for the operation of the new system will be employedIv CD as 6oonl as practic al.Uy Efljd L oiOi

35. The introduction of the new gas turbines will create an additionalstafIfng problem. By the time the new Afam and Ughelli units are ready to goon the line ECN will have had some practical experience with small gas tur-bines. However, there are only a limited number of Nigerians with the back-ground requlired for training on these turbines and the time is too short toadequately train sufficient personnel to staff the new plants. The most prac-tical solution would be to negotiate contracts with the turbine suppliers toprovide personnel to operate the units and simultaneously to train Nigeriansuntil they are competent to take over. The Corporation has agreed to makethese arrangements.

36. The organization and method of operation of the power sector after1969 when the Kainji Dam comes into operation has not as yet been determined.The legislation which established the Niger Dam Authority enables it to con-struct and maintain transmission lines for the distribution of electricitywhich it generates. The act provides that the Authority can acquire and oper-ate generating stations and transmission lines belonging to ECN and also thatit shall supply power in bulk to ECN under terms agreed to between the Au-thority and ECN. Agreement has been reached that ECN will not sell ort.ansfer any of its properties or assets required for carrying on its oper-ations without the consent of the Bank.

37. It is reasonable to assume that in 1969 ECN will still be operatingall the isolated undertakings in Nigeria and, by that time, could have a welltrained operating department competent to run the high voltage transmissiongrid. Because of ECNts probable size and prospective capaVilities six yearsfrom now, it would seem that the best solution after the completion of thedam would be for ECN to take bulk supplies at the dam and remain in completecontrol of the network. Indeed, it may be desirable to entrust to ECN theoperation of the hydroelectric station at the dam. Discussions were heldwith representatives of both EON and the Government in regard to the ultimateconsolidation of the power sector, but no decision was reached. The presentview of the Nigerian Government is that after the dam is constructed, ECNshould have a predominant voice on the Board of Authority. In lightof steps already taken to establish the Niger Dam Authority it would be prema-ture for the Bank to insist nn a solution until a commitment is being con-sidered to finance the Niger Dam.

VII. FINANCIAL ASPECTS

38. On April 1, 1951 the assets nf the former Nigerian Government Elec-tricity Board and those of some of the Native Authorities were transferred toECN in return for which ECN issued £N 900,000 of its debenture stock and as-sumed £N 600,000 indebtedness to the Government. During the next 12 years ECNborrowed about EN 13.5 million additional funds from the Federal Governmentand from the Regional Governments in part for expansion and in part to cover

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operating losses. Tariffs were set too low, at least during the first fiveyears. Because of the consequent financial difficulties encountered by ECN,various modifications were made to ease the original interest and repaymentterms of the Government loans. For a summary description of the financingchanges madG P'ro., th^c w4tinbg date th o-d th+e fisca1 yrnr 1962/63 refer toAnnex 5.

39. ECN's capital structure as indicated by the two latest annual bal-ance sheets is as follows:

(in thousands of £s Nigerian)March 31, 196/1 March 31, 1932Amount Amount

Capital, Reserve and Surplus

Federal Government variableinterest investment 9,350 9,350

Capital reserve 4oo 4ooGeneral reserve 1,750 2,250Surplus =_547 250

Total 12,0A7 46 12,250 43

Long-Term Debt

Federal Government fixedinterest loans 12,390 14,322

Regional Government loans,non-interest paying 2,o68 2,067

Total 14,458 16,390

Less debt due within one year 68 210

Net long-term debt 14,390 54 16,180 57

Total equity and long-term debt 26,437 100 28,430 100

40. The Federal Government variable interest investment has been con-sidered as equity in this report. It is redeemable only at the option ofEON, and interest is payable only if earned. As a condition for the pro-posed Bank loan it was agreed that ECN will not redeem any portion of thisinvestment or accelerate repayments of the long-term debt during the lifeof the Bank loan without prior approval by the Bank.

Past Operatir,g Results

41. During its early years ECN operated at a loss. Approximately £N 1.3million losses were incurred in the five-year period from 1951/52 through

/ Most recent audited balance sheetP/ Most recent unaudited balance sheet

- 12 -

1955/56. During this period very little interest on governmient loans waspaid. A 15% increase in tariffs became effective in May 1956 with the re-sult that ECN just about broke even for the year 1956/57. Since thentariffs have remained at the same levels. With a steady increase in salesECN had prl its in l95,/ 8 and all subsetuent years. The income tsterment.Annex 6, shows the gross revenues and net income as follows:

Gross Net IncomeYear Revenues from Operations

(in thousands of Zs Nigerian)

1959/60 4,676 6971960/61 5,739 1,2661961/62 6,863 8661962/63 8,o51 686

42. Gross revenues increased each year but net income from operationsdecreased significantly in the last two years. This decline was primarilyattributable to a change in ECNts depreciation policy and to a major ecuip-ment failure of the boilers in the Ijora plant at Lagos, ECNts largest sta-tion. In 1960/61 the average depreciation rate on the original cost oftotal fixed assats in operation was 4.0% and in 196]/62 individual rates inthe depreciation schedule were changed causing the average rate to increaseto 6.7%. The effect was to increase depreciation expense from EN 884,000 in1960/61 to EN 1,714,000 in 1961/62. It is estimated that in 1962/63 operatingexpenses increased by about EN 530,000 due to the Ijora boiler failures.

43. The percentage of increase in gross revenue for each year withreference to the previous year for this period was:

% of IncreaseYear in Gross Revenue

1960/61 231961/62 201962/63 17

From April 1, 1960 to March 31, 1963 the average revenue per kwh decreasedfrom 3.91 pence per kwh to 3.65 pence per kwh because of the effect ofspecial rate agreements and relatively greater consumption in thle lowertariff blocks.

44. The rate of return (net income from operations divided by theaverage net fixed assets in operation) was:

Year Rate of Return (%)

1959/60 4.51960/61 7.11961/62 4.31962/63 3.1

- 13 -

45. These rates were low. If the non-recurrent cost of the Ijoraboiler failures estimated at £N530,000, were eliminated, the 1962/63 rate ofreturn would have -been increased to 5.4%.

6.f T) sevi+ Cenl,- and inteest ^neragesc Aduring thi pre nriodnre mnile,ad-

ing and unrealistic. No interest or amortization was required on variousRegional and Federal Government loans during the four and five year graceperiods. Debt repayment began on a token basis in fiscal year 1959/60 andaggregated £N193,000 up through 1962/63. In this last year the debt amorti-zation totaled £N68,000. This was equivalent to only one-half of 1% on theoutstanding debt at the beginning of the year.

47. interest payments ceased entirely in fiscal years 1957/55 and1958/59. They were resumed in fiscal year 1959/60. During the past four yearsthe amounts paid on the fixed interest long-term debt represent between 1.9%and 2.3% per annum on the average debt outstanding each year. This is ex-clusive of the Regional Government long-term debt, which is interest free.In addition to the above interest payments, ECN during the past four fiscalyears has paid interest on the variable interest investment as follows:

Interest PaymentsAmount % on Variable

Year (£N) Interest Investment

1959/60 136,000 1.51960/61 268,000 2.91961/62 157,000 171962/63 67,000 0.7

48. From an operational point of view ECN has been a high cost enter-prise. The operating ratio (total expenses, excluding interest, to totaloperating revenue) for recent years has been:

Year Operating Ratio (%)

1959/60 851960/61 781961/62 871962/63 92

For 1962/63 the operating ratio was distorted because of the effect of theadded expenses due to the Ijora boiler failures. The increase in depre-ciation rates in 1961/62 also caused the ratios to increase during the pasttwo years. With the boilers again in operation and with the substantial in-crease in sales, operating results for the first half of 1963/64 show markedimprovements of both operating ratio and rate of return.

49. Although ECN is subject to income taxes it has never paid anysuch tax because of the carry-over privilege pertaining to prior yeardeficits, the carry-over initial allowances, and annual allowances in

- 14 -

regard to capital expenditures; all of which are applicable to all indus-tries!/. 'Jith ECN?s large unabsorbed capital allowance carry-over deduction,amounting to about IN 10.5 million as of March 31, 1961, and the additionalcapital allowances appic able to ECN's lare eymnnsion 7program no: tax liabilityis expeettd to occur within the nieot tehnyear period provided the present tatre-1.irnt.ns n6ntinue.

Financing the Expansion Program

50. For the six year period 1963/64 through 1968/69, LCN is planning anexpansion program with capital expenditures totaling approximately EN 48 mil-lion, which includes interest capitalized during construction. For the firsttime ECN will be relying on sources of funds outside of the Government.

51. The forecast summary below indicates ECN's total requirements andestimated cash resources for the six year period. (For details refer to theestimated income statements, Annex 6 and the sources and applications offunds statements, Annex 7.)

3 Years 3 Years 6 Year1963/64-1965/66 1966/67-1968/69 Total

(in millions of Es Nigerian)

Required FundsConstruction costs 32.1 14.1 46.2Interest capitalized during

construction 1.0 0.7 1.7Increase in working capital o.6 o.6 1.2Accumulated funds for future

construction 0.6 1.9 2.5

Total fund requirements 34.3 17.3 51.6

Available FundsInternal cash generation 15.4 25.1 40.5

Less: Debt ServiceAmortization 2.0 6.8 8.8Interest charged to expense 2.0 4.6 6.6

Total debt service 4.o 11.4 15.4

Return on Federal Governmentinvestment 1.2 1.2 2.4

Total deductions 5.2 12.6 17.8

Net internal cash generation 10.2 12.5 22.7

Borrowings 24.1 4.8 28.9

Total available funds 3-.3 17,3 51.6

Percenta-e of net internal cash gene-ration to total fund roquirement8 - 30i 72;' W

l7/ Acculat<d dcficits of orior 1rears nre prrmitted to be carried over to sub-sequent ycars ,?s an offset a ainst tnxzble carninr.s. Cepitan1',11o~:nccs aretnxablc dcductions in liuu of I d.Dr.ci-tion chir->s. h._ c'apitr1 alloT U pcr-

.-iittcd cs tax deductions g-r_at1y cxc. Ad nor. ,l dupr-ciation )char-es.

- 15 -

!~2. ECN would thus be supnlving 30% of the required funds during thethree years 1963/64 through 1965/66 when construction expenditures will beparticularly heavy. During the second three-year period it is estimated that72% of the required funds would be provided by EONis internal cash generatiOLa.This large percentage is primarily due to a combination of steadily increasing

*e- -L c- -a co.pital expend+it-res- Sinne the Kainli Dam

is expected to be commissioned in early 1969, ECN's construction program tapersoff considerably after 1966 because no new thermal plants will be added to thesystems. As ECN will be the most important, if not the sole customer forKainji power, financial projections on a combined or consolidated basis are beingprepared in co-n-nection with t±he appraisal of the Kainji project for the periodbeginning with its initial operation.

53. For the financing of the six-year capital expansion program ECN iscontemplating the following borrowings:

Contemplated ECN Borrowings(in thousands of Es Nigerian)

Amount %

A. Proposed IBRD loan 10,714 37B. Proposed Regional Government loans 2,102 7C. Proposed U.K. loan 1,600 5D. Local bank loan 48o 2E. Suppliers' credits 6,580 23F. Possible future long-term loan 3,950 14G. Proposed Federal Government long-term loans 3,5oo 12

Total 282926 100

Special comments relating to the above loans:

A. The terms of the proposed Bank loan of US$30.0 million (£N10.71 million),have been assumed as: 20 years with a three year grace period, interestat 5B% and 3/4%commitment charge on the undrawn balance. Interest duringthe construction period has been included in the assumed loan.

B. The proposed Regional Government loans are for small town development.Terms of these loans have been assumed to be the same as in the past,namely, interest free and repayable over 25 years commencing five yearsafter the final draw-down. The small town development costs have beenincluded in the construction program. Additional information concern-ing these loans is presented in the following Section C.

C. ECN is currently negotiating with the Export Credits Guarantee Depart-ment of the U.K. for a loan to cover the foreign exchange requirementsof about £NO.6 million for two 3 NW diesel units for Lagos and two 3 NWdiesel units for Sokoto plus £N1 million for new town development. Forthe purpose of this report, a loan of £N1.6 million has been assumed Twithterms of 25 years with a five year grace period and interest at 521%

- 16 m

The new town development projects are estimated to cost about EN 4.2million. The Regional Government loans are intended to cover 50%o Or tutotal costs and these funds will be matched by fNl million of the U.K.buail mentioneu above .- U .Tr-1-i Ii^ fr^m EGNTs ni^m fnin. In the eventthat the Regional Government loans are reduced or do not materialize,similar cut-backs will be made in the matching funds and correspondingreductions will be made in the construction program. In any case therewill be no material effect on the over-all financial planning nor on theestimated net operating revenue.

De The local bank loan for fNh8O,000 is expected to be signed soon. Termshave been assumed to be: five year maturity, interest at °-2% and annualpayments starting one year after date of the loan. This loan is neces-sary in order to cover a bank overdraft amounting to tN166,224 as ofMarch 31, 1963, and to provide current working capital.

E. The terms of the various suppliers' credits vary from 3 to 10 year matu.-rities with interest rates from 5%-2 to 7%. (For details refer to theSchedule of Suppliers' Credits, Annex 9.) The largest supplier creditamounting to VN2.9 for the Ughelli plant, is currently being negotiatedwith ASEA/Johnson Construction/Stal-Laval Consortium. The U.S. Export-Import Bank had previously approved a loan of US$9,5 million for theUghelli plant, which could only be used if American equipment were pur-chased, but ECN has decided to accept the ASEA proposal. The financialterms and conditions of this credit are awaiting Ministerial and Cabinetapproval. Arrangements for the financing of the Ughelli plant have beenmade a condition of effectiveness of the proposed Bank loan since theoperation of the plant is essential for the full utilization of the BankProject.

Fe The possible future long-term loan of fN3,950,000 in 1965/66 would coverthe foreign exchange requirements of the Benin-Onitsha transmission line,the third 17.5 MW unit at Afam, Delta bulk supplies, 2nd and 3rd stage33 kv expansion of Ibadan and Lagos respectively, and "other cities" sub-transmission. Terms of this proposed loan have been assumed as: 20 yearsthree year grace period, interest at 5$% and level payments. It islikely that the Bank would be approached for part of this loan.

G. To comnplete the financing of the program, it has been assumed that theFederal Government would make the following loans:

Year Amount(in thousands of fN)

1963/64 1,0001964/65 2,500

Terms of these loans have been assumed to be the same as the previouslong-term Federal Government fixed-interest loans, ioe., L5 years andinterest at 6% with a four-year grace period for both principal andinterest.

- 17 -

54. The above financing plan is reasonable. The forecast of the cashposition (see Annex 7) indicates that during the six year period a satis-factory cash level would be irtaintained. The PIlinistry of Finance has cnnfirmedthat in the event any cash deficiency develops the Federal Government wouldadvfance the necessnPqrlT fiinds. Furthermore the cash position has been con-servatively estimated in view of the substantial contingencies provided forand included in the capital expenditure estimate. Additional funds of ap-proximately EN l435POO may be forthcoming from CameEvuuu as a settlemmut forthe acquisition of former ECN properties located within that country.

Tariffs and Future Operating Results

55. There is rno tarLff corimission in Nigeria. Individual eleetri itytariffs are established by ECN with the approval of the l'inister of HMinesand Power. ECN often establishes special terms for a large consumer. Asmentioned above, since -Hay 1956 when a general 15% increase became effective,tariffs have remained unchanged.

56. Some inequities appear to exist in the present rate structure. For ex-ample, the small consumer does not pay his full related contribution towardthe fixed costs and in certain sectors where operating costs are about thesame there are differences in the rate schedules. UJith the construction ofnew generating plants in the Niger delta area and the interconnection ofmany of the presently isolated consumer areas, some revision of the tariffswith the objective of eliminating inequities where they are found to existwould be advisable.

57. A tariff study, which proposed new block schedules, was made in1962 by an expert from the U.K. The Poard did not implement these recom-mendations because gross revenues would be decreased. Further studies ofthe tariff structure are now being carried out by ECN?s cormercial engineer-ing department with particular emphasis on compiling basic consumer data in-cluding characteristics of demand and load duration curves. The Corporationis trying to obtain technical assistance from the English Central ElectricityCouncil to help with these studies.

58. The estimate of the future revenues, as shown in the annexed in-come statement, assumes that present tariffs will be retained. Because ofspecial terms and more consumption in the lower tariff blocks, the averagerevenue per kwh over the period 1963/64 through 1968/69 is expected to de-crease gradually from 3.65 pence to 3.42 pence.

59. ECN has agreed that the internal cash generated (ret income fromoperations plus depreciation) will be maintained at the projected levelsuntil 1969. Present levels of tariffs will be maintained although minoradjustments could be made to eliminate inequities provided revenues are notaffected. ECN further agreed that subsequent to 1969 it would take suchsteps as are necessary in order to assure a return of not less than 8/% (ascomputed under the present depreciation schedule and after payment of taxes,if any) on the net fixed assets in operation.

60. Future operating results and financial conditions during the in-terim period prior to the commissioning of the Kainji project in 1969 arepresented in Annexes 6 and 8. Consideration should be given to the fact

^ 18

that during this six-year period ECNTs investment and borrowings in the firsthalf are high due to the construction of the transmission lines which will be-come part of the national grid and in the latter half they are relatively lowbecause the Niger Dams Authority will be constructing the required new gener-ating capacity,

61. The balance sheet indicates a debt/equity ratio of 57/43 for the yearenuing March 31, 1,63. The rati would then increse to 69/31 in the fiscalyear ending in 1965 and thereafter decrease to 62/38 by March 31, 1969.

62. During this period from 1962/63 through 1968/69 gross revenues fromoperations are expected to rmore than double, increasing from about EN 8 millionto about EN 18 mlllion. This is almost 15% per year compounded.

63. The debt service coverage, exclusive of variable interest on Govern-ment investments, drops to a low of 1.8 times in 1967/68 and then substantiallyincreases to 2.6 times in the following year.

64. Primarily because of the lower fuel costs in connection with the newgenerating plants at Afam and Ughelli the operating ratio would decrease from79.6% in 1963/64 to 74.7% in 1968/69.

65. During the six year construction period the forecasted rate of returnon average net fixed assets in operation appears satisfactory. A 6.6% return,the low for the period, is shown in 1966/67 and thereafter it should increaseto 9,1% in 1968/69. In evaluating the rate of return it should be pointed outthat the present depreciation charges are somewhat high particularly in respectto transmission lines and steam power plant which have been assigned lives ofonly 20 years, thus understating the rate of return.

66. The following table is a summary of the more significant figures andratios as forecasted for the six year construction period 1963/6h through1968/69.

Year End Gross Debt % of Return on NetDebt/Equity Operating Service Operating Fixed Assets in

Year Ratio Revenue Coverage Ratio Operation* * - (t N M

1963/64 63/37 9,610 4.9 7906 8.01964/65 69/31 11,273 3.4 78.6 8.01965/66 69/31 12,880 2.4 77.8 7.21966/67 68/32 14,518 1.9 78.5 6061967/68 65/35 16,161 1.8 76.8 7.51968/69 62/38 17,796 2.6 74.7 901

67. During the period to April 1, 1966, ECN has agreed not to incur anyadditional long-term debt without the Bank's approval. After this date ECNcould borrow additional long-term funds provided that the net revenue for thefiscal year next preceding such borrowing or for a later twelve-month periodended prior to such borrowing, whichever is greater, shall be not less than1.5 times the maximum debt service requirement for any succeeding year on alldebt, including the debt to be incurred.

* 19 -

68. As a result of the rapid growth of ECNIs operations the need for awell qualified financial adviser or officer has become apparent. II Vlew UofI

the Corporationts large expansion program, sound financial planning has becomea preieq-uisite for successfu' futu+r operations As-sistrnc. is also requiredin regard to budgetary control, cost accounting, analysis of statements,modernizing the accounting system and standardizing accounting procedures.ECN has agreed to engage the services of a financial adviser for a period ofat least three years on a contract basis. It has also agreed to obtain theviews of the Bank on the proposed adviser's experience and qualificationsprior to his appointment.

Auditing

69. In accordance with its basic ordinance ECN has had its accountsaudited every year since its inception. For the first two fiscal years endingin 1952 and 1953 the audits were performed by the Federal Audit Department ofNigeria. Cooper Bros. & Company, U.K. chartered accountants, were engagedfor the next eight-year period which ended March 31, 1961. For the fiscalyear ending M4arch 31, 1962, the accounts were audited by a Nigerian publicaccounting firm, Akintola Williams & Company, chartered and incorporatedaccountants. The Bank has satisfied itself that this firm is professionallyqualified to render this service. It has also been appointed for the yearending March 31, 1963, and it is ECN's intention to engage this firm for futureaudits.

70. The subject of internal auditing presented a serious problem. In1961 an accountant from the U.K. was engaged under a one-year contract toorganize and establish an internal audit department. Two Nigerians wereassigned to him as the nucleus of a staff. The effort failed because theaccountant returned to the U.K. within the year and the staff members wereabsorbed in the general accounting department. A definite need existed forthis important function especially in view of ECN's widespread operationsthroughout Nigeria. ECN has now re-established the internal audit departmentby the appointment of an experienced chartered accountant as chief internalauditor and is presently in the process of employing qualified personnel forthis department.

Insurance

71. ECN's insurance coverage has been reviewed and discussed with rep-resentatives of the insurance broker, R.E. Wright & Co., which administersthe insurance program. In the past, R.E. Wright & Co. sent annually a rep-resentative to Nigeria in order to maintain the insurance program on a currentbasis. The annual review included an analysis of the fixed asset ledger,on-site inspections and verifications of assets, and a review of the con-struction and expansion plans for the next year. In this manner all insurancepolicies currently in effect were accordingly increased for the ensuing year,thus assuring adequate insurance protection on all additional assets, whetherpurchased or constructed. In the future, because of the magnitude of ECN'splanned expansion program, the broker's review of the fixed assets will be madesemi-annually.

- 20 -

VIII. CONCLUSIONS

72. ECN1s proposed prograin for the period 1963/64 through 1968/69 istechnically sound and reasonable to meet its service requirements until theKainji project comes into operation.

73. The foreign exchange costs of the high voltage transmission systemsscheduled for operation by mid-1966 and the foreign exchange costs of theequipment required for distribution expansion during the period 1963/64through 1965/66 would be suitable for Bank financing. The estimated costsaj-e reasoniable an'" the c onstruction -- hc Adu iee aree r0 nals4-c-t in-

74. The financial results of ECN operations have improved substantiallyin recent years, with the exception of 1962/63 when a setback was caused bythe failures of boilers in the Ijora plant. Financial forecasts show thatcontinued improvements can be expected. The return on net fixed assets inoperation should reach a level of about 9% by 1968/69. During the six yearperiod, 1962/63 - 1968/69 ECN should be able to finance about 44% of fundsrequired for expansion from internally generated cash.

75. ECN would be a suitable Borrower for a Bank loan of US$30.0 million.A term of 20 years including a grace period of three years would be appropriate.Agreement has been reached that:

(i) ECN will not undertake any major works other than those listedin the program except with the agreement of the Bank (paragraph 26);

(i) between the date of signing of the proposed Bank loan and April1, 1966 no long-term debt will be incurred without the Bank'sapproval. After April 1, 1966 new long-term debt will not beincurred unless the debt service coverage meets the requirementsas specified in paragraph 67;

(iii) the proposed Bank loan will only become effective after thefinancing for the Ughelli plant has been confirmed (paragraph 53 E);

(iv) the Government, in case of any cash deficiency, will make avail-able to ECN either through contributions or loans, the fundsnecessary to complete the six-year program (paragraph 54);

(v) no adjustments of the rate schedules will be made which woulddecrease the projected internal generation of cash during thesix year interim program. Thereafter, the rates should bemaintained at a level adequate to provide a return on theaverage net fixed assets in operation of at least 8%(paragraph 59);

- 21 -

(vi) the services of qualified consultants will be continued to planthe expansion of the distribution system to prepare and reviewthe tenders for the generating plants and transmission lines inthe program, and to supervise construction for the major works(paragraph l4);

(vii) the accounts of EV1 -will continue to bo audited by independentqualified public accountants acceptable to the Bank (paragraph 69).The Corporation will also maintain the reactivated internal auditdepartment (paragraph 70);

v- EC'M Twill n^otsell or transffer anv of its properties or assetsrequired for carrying on its operations, without the consent ofthe Bank (paragraph 36);

(ix) ECN will not redeem any portion of the Federal Government variableinterest investment or accelerate repayments of the long-termdebt during the life of the Bank loan without prior approval ofthe Bank (paragraph 40);

(x) ECN will, as soon as practical, engage the following personnel:(a) a competent General Manager on a contract for a minimum periodof three years. Before appointment, the qualifications and experienceof the proposed candidate would have to be accepted by the Bank;(b) a qualified financial adviser (paragraph 68); and (c) aqualified chief operating engineer (paragraph 34);

(xi) ECN will make suitable arrangements with the suppliers of gasturbine units to provide necessary operating and training personnel.

January 22, 1964

T R A N S M I S S I O N P R O J E C T

T H E E L E C T R I C I T Y C O R P O R A T I O N O F N I G E R r A

ESTIMATES OF YMAXIJUM DEIviAND

(MW Generated)

1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1571/72

Lagos & extensions 69.6 80.0 90.6 102.2 114.6 128.0 'L42.,4 157.7 ].74.1Ibadan 16.7 19.7 23.1 26.8 30.8 35.1 39,7 44.5 49.3Abeokuta 1.5 1.7 1.8 2.0 2.3 2.5 2.8 3.1 3.3Oshogbo 2.3 3.2 3.8 4.4 5.0 5.7 64 7.3 8.1Warri 1.7 1.9 2.2 2.6 2.9 3.3 3"7 4.1 4.6Sapele 1.3 1.5 1.7 1.9 2.1 2 3 2.6 2.9 3.1Benin 1.6 1,8 2.1 2.4 2.7 3.0 3.3 3.6 4.oAkure complex 1.0 1.1 1.3 1.4 1.6 1.8 1.9 2.2 2.4Oji River system 17.6 20.5 23.9 27.5 31.5 35.7 40.0 44.4 48.9Awka 0.1 0.2 0.2 0.2 0.2 0.3 0.3 0.4 0.4Aba 3.9 4.6 5.3 6.1 6.6 7.5 8.4 9.4 10.4Port Harcourt 13.4 18.4 22.3 26.6 31.5 36.7 42.4 48.4 54.4Ikot-Ekpene-Uyo 0.3 0.3 C.4 0.5 0.6 o.6 0.7 0.8 0.9Umuahia o.4 o.4 o.5 0.6 0.7 0.7 0.8 0.9 1.0Calabar o.8 0.9 1.0 1.1 1.2 1.3 1.5 1.6 1.8Kaduna 10.7 12.1 13.7 15.5 17.4 19.4 21.6 23.8 26.1Zaria 2.3 2.5 2.8 3.0 3.3 3.7 4.1 4.5 4.9Kano & extensions 9.1 10.4 11.5 12.7 14.0 15.5 17.1 18.7 20.6Amenity undertakings 1.7 1.9 4.1 4.4 4.8 5.3 5.8 6.3 6.8Plateau 3.0 3.3 3.7 4.0 4.4 4.9 5.4 6.o 6.5Other new towns 2.4 5.7 7.0 8.7 9.5 10.7 12.2 13.8 15.6

Total 161.4 192.1 223.0 254.6 287.7 324.0 363.1 404.4 447.2 w

6/20/63

TR AN S MISS IO N PRO J EC T

T HE EL EC TR IC IT Y CO R PO R AT IO N OF N I GE RI A

ESTIMATES OF REQUIRED GENE~RATION

(in millions of kwh)

1963/64 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 151/72

Lagos & extensions 362.6 421.4 480.8 548.7 619.3 701.3 '786,,3 870.5 963.0Ibadan 70.9 84.5 100.0 117.0 135.0 154.0 L74.,0 195.0 216.oAbeokuta 6.5 7.3 8.1 8.9 9.9 10.9 12.1 13.3 14.5Oshogbo 9.1 11.7 14.0 16.3 18.7 21.3 2403 27.5 30.9Warri 5.4 6.3 7.4 8.6 9.9 11.4 13.0 14.5 16.1Sapele 5.2 5.9 6.8 7.7 8.8 10.0 11.3 12.5 13.8Benin 5.9 6.9 8.0 9.3 10.5 11.7 13,0 14.3 15.6Akure complex 2.9 3.3 3.9 4.4 5.1 5.8 6.6 7.5 8.4Oji River system 100.0 117.0 136.0 158.0 180.0 204.0 228.0 253.0 279.0Awka 0.3 0.4 0.5 o.6 0.7 o.8 1.0 1.1 1.3Aba 15.0 17.6 20.6 23.9 26.0 29.6 33.1 37.1 41.0Port Harcourt 72.7 lC1.0 123.0 148.0 177.0 207.0 242.0 276.0 310.0Ikot-Ekpene-Uyo o.6 0.9 1.1 1.3 1.6 1.9 2.2 2.5 3.0Unuahia 1.4 1.6 1.9 2.2 2.5 2.8 3.2 3.6 4.0Calabar 3.5 3.9 4.3 4.8 5.3 5.8 6.5 7.1 7.8Kaduna 50.5 57.2 65.2 74.0 83.5 93.5 104.0 :15.0 126.0Zaria 10.5 11.7 13.0 14.4 16.0 17.8 19.6 21.5 23.7Kano & extensions 49.7 56.2 62.7 70.2 77.9 86.5 95.3 -04.3 115.6Amenity undertakings 6.1 7.0 15.5 17.0 19.0 20.9 22.9 24.8 26.8Plateau 15.8 17.4 19.5 21.0 23.2 25.8 28.4 31.6 34.2Other new towns 9.4 17.6 19.4 24.0 28.5 32.9 38.6 45.1 52.1

Total 804,0 956.8 1111.7 1280.3 1458.4 1655.7 1865.4 2077.8 2302.8

6/20/63

5C

4~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~

Iiiterconnectzon With KANO, 4MW 4

40 2

I tFIRM CAPA cITY

35 , _ 352 1 -- 1 | - -; i'~~~~~~~~~~~~~~~~~~~~5

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w9 Scrop 0 IMl t KADUNA

20 E __ _ _ __ 8 2 _ _ __________ _ __________ _ ______

o_lS -___ ____ . __ _ _ __ _

sP 12 4 1 ELECTRICITY CORPORATION OF NIGERIA

1O - 97_ 9 __ _ NORTHERN REGION SYSTEM

KADUNA - ZARIA- KANO

5 KADUN A- C XSEPTEMBERI96~

.1y~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(,

March'62 '63 '64 65 66 67 '68 69YEARS

NOVEMBER, 1963 IBRD- O57R

Interconnection with OJI,30Mw 108 1 = _and relocate 9.6MW from in

PORT HARCOURT a ABA H

100 g E- _ -

St ~~~~90.690 __6_ _ _ _.

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Interconnection with .6 cABA,4 .2MW I Probable interconnection with - Intercoinection Witt

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_ _ _ _ _ _ _ _ _~ ~ ~ _ _ 3H__ ._ .I60 _ _ _ _ _ _ _ S _ _ _ _ _

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< ciE

40 o_ e 3 F M/L r~~INSALLED CA PAC17 _._.____ -Y

30 29.6 __3 ___ ____

40~~~~~~~~~~~~~2.

30 ________ ________ 260__________ _____

ELECTRICITY CORPORATION OF NIGERIA20 r 196 20. 1 C / EASTERNJ REGION SYSTEM

PORT HARCOURT-AFAM-ABA-ONITSHA-OJI-ENUGU^//ZPORT HARCOURT only

10__ 9______________ SEPTEMBER 1963 D

o . 11 L (>JMarch .6 2 '63 64 65 66 67 68 69

YEARSDECEMBER 1963 IBRD-1058R

C c Z 213.4

200 -

~~~~~OSHOGBO, 2 4MW 1r owoII

160 sc I : E

1 8 C ~~ ~ ~ ~~ . ' oo - I q. . |~_ NIGRO

Interconnection withOS E; IBADAN r4 .i Probbln ioo Dt

105 GO,4M i O >E4EN YTM

//USTAL ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~- " EIR CAP C/A C I_T__

1404 ~ ~ ~ ~ ~ ~ 131 _m

4 /LAGOS 11 II n t e r c o n n e c t , o n owithCapacityoelocated

________ 75 _

~~~~~~~~~~~ELECTRICITY CORP'ORATION ()F NIGJERIA

60 __ _____--- ---- -- WESTERN FREGION SYSTE-M

40- 4 ~~~~~~~~~~~~~~~ ~~~~~~~~ LAGOS-B IBADAN-SO;-AKRBEINUG LI

20

/A'STAL.LED~f CAAIT _

March '62 '63 64 65 '66 '67 68 '69

YNE A ROSJANUARY 1964 6 BRD6 -I59R

ANNEX 4Page l6

TRANSIYSSION PROJECT

THE ELECTRICITY CORPORhTION OF NIGERIA

Description of Program and Estimate of

Capital acpcndltures 19A~63ft through 1968/69

A description of the major facilities in the expansion, programn iSlisted below by Regions. The costs of all the items in the program are shownin the Tables on pages 4 and 5 of this Annex.

WESTERN REGION

Ughelli Power Station (Contract 1033/140) will be a completely newinstallation in the Western part of the Niger delta near Warri. The first stepwill consist of two gas turbines each with a nominal rating of 36 HW. The fuelwill normally be gas but in an emergency the units will be capable of automati-cally operating on fuel oil. The turbines will be multi-stage compression,horizontal shaft type units with interstage coolers and a maximum inlet tempera-ture at the first stage nozzles of 139°F.

The alternators will be 3-phase, 11000 volts, 0.9 power factorlagging, 50 cycle per second frequency. The electrical equipment also comprise-11 kv, 3.3 kv, and 400 volt switchgear with protective equipment; a D.C. systemwith batteries and charging equipment; and lighting and ancillary equipment.

Separate tenders have been requested for the civil works) mechanicalequipment, and electrical plant although prospective bidders were required tosubrlit tenders for all three parts. The three parts of the contract will prow.vide for a complete plant including all the necessary auxiliary systems forproper operation. The complete contract was awarded by ECN to a consortiumcomposed of ASEA/Johnson Construction/Stal-Laval.

Ughelli-Benin-Lagos H.V. Transmission System

The Ughelli-Benin Line (Contract 1033/142) consists of 62 miles ofdouble circuit 132 kv 3-phase transmission line with 0.25 square inch copperequivalent steel-cored aluminum conductors and a single galvanized earth wire,from Ughelli to Benin via Sapele. Insulators will be of glass, cap and pintype. The towers will be self-supporting, broad-based, lattice steel. Thefoundations will be earth grillage, concrete block, or piles as required. Thecontract was awarded to Crompton Engineering Co. (Madras) Ltd. in March 1963.

The Benin-Lagos Line (Contract 1033/141) is divided into two parts:line No. 1 consists of 170 miles of single circuit 330 kv 3-phase transmissionline with duplex 0.35 square inch copper equivalent steel-cored aluminum con-ductors and galvanized steel earth wires from Benin to Erinle via Akure andOshogbo; line No. 2 consists of 150 miles of the same design from Erinle toLagos via Ibadan. Insulators will be of glass, cap and pin type. The waistedtowers will be of lattice steel design rectangular or square based. Towerfoundations will be of the concrete block type, or if necessary will be piled.The contract was awarded to Power Lines Ltd. in March 1963.

ANNE 4Page 2.

The switrehgear for the system (Contract 1033/143) covers breakers,busbars, conductors, insulators, isolating switches, bushings, current trans-formers, etc., for 132 kv and 33 kv outdoor substations. The contract includes400 V switchboards, Mcr nn -c IJ enilipment T:ne Hoardhas awarded the contract to Gruppo Industrie.

The transformers (Contract 1033/144) include 132/33 kv transformerswith ratings of 30 MVA, 7.5 MVA, and 5 MVA; 132/11 kv transformers with 22 INVAratings; 33 kv auxiliary transformers; 33 kv and 11 kv shunt reactors; and 33 kvarc supression coils. Tenders for the contract were due in December 1963.

Lagos 33 kv Sub-transmission System (Contract 1033/330) includes mainand auxiliary power cables and earthing connections, racks, fittings andtrenches, The award of the contract is awaiting a decision by EON.

EASTERN REGION

Afam Power Station Extension (Contract 1033/201 & 202). This secondstage of the Afam plant consists of the installation of two Brown-Boveri gasturboalternators at the existing plant. The turbines and generators have simi-lar characteristics to the Ughelli units except that they are rated at 175 MWand the power factor is 0.8. The contract for the generating plant andmechanical equipment was let in February 1963. It includes all auxiliary equip-ment except cables and civil works.

Aba-Onitsha-Oji H.V. Transmission System

The Aba-Onitsha Line (Contract 1033/203) consists of 85 miles of sii2gJbcircuit 330 kv 3-phase transmission line with duplex 0.35 square inch copperequivalent steel-cored aluminum conductors and galvanized steel earth wires

from Aba to Onitsha. The other details are the same as the Benin-Lagos line.The contract was awarded to Power Lines Ltd. in March 1963.

The Oji-Onitsha Line (Contract 1033/204) consists of 38 miles oaf singlecircuit 132 kv 3-phase transmission line with 015 square inch copper equivalentsteel-cored aluminum conductors and galvanized steel earth wire from Oji toOnitsha. The contract is now out for tenders. The insulators will be eitherporaelain or glass. The supports will be either lattice steel towers of "H" or"V" masts. Footings will be earth-grillage or concrete block as required. Theaward of the contract is awaiting decision by ECN.

The Switchgear and Transformer (Contracts 1033/324 & 325) are similarto the contracts for the Benin-Lagos line. The award of these contracts isawaiting decision by ECN.

NORTHERN REGION

Kaduna-Zaria-Kano H.V. Transmission System

The Kaduna-Zaria-Kano Line (Contracts 1033/102 & 1033/104) consists of25 miles of double circuit triangular construction and 110 miles of single

ANNEY 4page 3.

circuit horizontal construction 132 kv 3-phase lines with steel-cored aluminumconductors and a single earth wire, The insulators will be of glass. Thetowers will be self-supporting lattice steel with concrete or grillage founda-tions. The contracts were awarded to Power Lines Ltd. in 1962.

The Substation Plant (Contract 1033/103) includes equipment similar tothe trqnqfo-rmPvrq and switnhgear of the Benin-Ughelli contracts plus the sub-station civil works. The contract was awarded to Balfour Beatty & Co. Ltd, in1962.

General

A composite contract will be let for the Powerline Carrier CurrentRemote Control and Communication Equipment (Contract 1(33/l146). The contractcovers the requirements for the Ughelli-Lagos system, the Afam-Oji River system,and the Kaduna-Kano system, The equipment comprises capacitor couplers, highfrequency coupling transformers, automatic telephone exchanges, coded signallingand telemetering equipment, remote controls and instruments for the supervisionof system loading, and 50 volt battery chargers and emergency motor generatorsets. Tenders have been analyzed and the award is awaiting Ministerial approvalof ECN's decision.

T 1~ A : S kl I S I O il '- I J 'E C T

T " I' L 't r !I I T Y C O A 1 O. A CF :O I G £:r I

E S T I I' A T ? O F C A r I T A L P D I T U E 63/4-168/69

--------------------------- >-- T. thouscrds sf E irerizuDate of Total Spent 'iotaLInitial Frior to 1963-19

U"Si'E'.II LEGION fIncludino LAGOS) Size Operation 1963/64 1563/6.0 :6//65 1965/66 1966/67 1967/6f 168/69 0nl

GN2E;ATION PLANT

Ijora Gas Turbine 2L 7 ' 51 ')ec. '63/Dec.'64 55 370 370 7TDIbadan Gas Turbines 2 0 7 31 .r. 'l/iieo.'64 26 315 315 6-;oDiesel Sets at I,ora 2 C 3 >31 set. '65 350 350Ijora Do. 7 Boiler - Sop. -63 300 50 ';0Improvements to Ijora G.'. lorks 150 1'0Ughelli Power Station 2 . 36 :0/ Oct. '5. 1,730 2,500 350 4,550Diesel Plant 26 .'6

TIA2SM.ISSION LINES A SUBS' ATIONS

Ibadan-Oshogobo Line 1'32 kv Dec. 'C3 270 15 rSapele-Benin Line 33 kv IW'-. 'C3 1'0 8 cUghelli-Benin-Lagos 132 kv liay '25) 863 2,531 1,724 264 5,382

330 kv fob. '6 6)Shagamu-Abeokuta 33 kv ;.ar. 'b4 60 5Laros Sub-transmission 33 kv 127 659 38 250 300 50 1,424Ibadan Sub-transmission 33 kv 58 124 9 2D0 250 50 691New Towns Development 103 200 300 200 200 1,OCCDistribution (Lagos only) 300 250 250 300 300 350 1,75[Distribution (Western ILegion) 495 427 394 407 VS 489 2,70C1liseellaneous Expenditure 30 30 60 60 75 75 33CContingencies/ - 50 50 10O 200 200 6_(6

Total 4, 667 7,211 3,175 1,781 1,813 1,214 20,463ASTE2 I }',FGICN

G0;,EATTNG PLAN'T'

Port l'areourt Gas Turbine 1t 5 643 Dec. '63 40 230 2316Afam Power Station 2 ( 10 .3W Feb. '63/Se-t. '63 1,390 50 5C'Afam Extension (1st & 2nd unit) 2 C 17.5 li. ['eb.'65/JCot.'65 780 950 300 70 2,3I36Afam Extension (3rd Unit) 1 C 17.5 .r, se'rch '67 500 600 100 1,216'0ji River Extension 1 B 10 N5W oUne 162 660 30 3(0 Aj iver Itprovenent to C.W. System 30 8g 7 12'Diesel Plant 30 31

TIA'SMISSION LINoZS & SUBSTATIOiS

Port Narcourt-Aba 132 Xv Dec. '6 3 350 3D 31)Aba-Umualhia 33 kv Feb. '64 20 95 5 13DAba-Calabar 33 kv 1Lar. t'64 100 120 12 132(calassa- levelopment Istate 33 kv 50 50 lCoPort liarcourt Sub-transmission

(including Shell lefinery) 33 kv June '64 65 127 11 2030ji giver System (sub-stations) 66 kv 168 47 13 2413Aba-Onitsha-Oji line 330 kv Oct. '65) 13 1,648 352 101 2,114

132 kv Oct. '65)New Torios Developoent 100 200 3('0 300 3f0 1,200Distribution 313 524 367 331 365 384 2,26,Mriscellaneous Expenditure 30 30 30 30 40 40 203Oontingencies2/ - 50 5i 100 200 203 f

Total 2,10/. 3,731 1,930 1,532 L,005 624 10,070

/ In addition to 8f eontinfcncy allowance iscluied in cost of the U-helli Station and 10' incleded irn t'-e cost of ths Tihel3i-Bc.n'n-sLagos trensaiss or, lines.7 Tn addition to 8, continr-ency alloanee included in the cost of the 1fam: -o,cr Station and 104 included in the cost of the Abr.-Cji traesnission 3mnes.

1/ / 3

T R A l'T S M I S S I O N P R O J E C T

T H1 E F L E C T i. I C I T Y " O h } C IA i T 0 ' O F Nl I G E 1} I

E S T I Pi A T E O i C A P I T A L LX X P E N D I T U R E 1963/64-19 8/69

------- In thousands of E igS:rian-----------------------Date of Total Spent TotalInitial Prior to 1963-69

NORTETF:Rk I-EGIONT Size OCeration 1963/64 1963/64 1964/65 1965/66 1966/67 1967/68 2968/69_ Only

GENIORATING PLANhT

Kaduna 'B' Power Station 2 3 ;Q1 Sept. 164 350 122 472Eaduuna 'B' Extension 2 C 5 .i ;.arch'66/67 - 450 306 36 792Thano Miobile Diesels 2 1.5 MT Dec.'63/June'64 40 50 '°Sokoto Power Station 2 0 3 Cil Dec. '64 210 210 420Gusau Power Station 2 C- 1 ;Z Dec. '64 90 100 190Diesel Plant 40 Z4O

TRAINSCIISSION LIIES & SUDSTATIOPS

Kaduna-Zaria-Kano 132 kv iar. '64/Dec. '64 351 683 134 S17New Towns Development 20 400 600 600 380 2,0"0Distribution 367 272 450 299 343 335 2,0)66Mkiscellaneous 25 40 50 50 50 50 2W5ContingenciesV 50 50 50 100 200 202 6'0

Total 1,875 1,828 1,456 1,085 973 585 7,°)02

GE-E AL

Benin-Onitsha Transmission Line 330 kv Mar. '67 395 759 60 1 ,2L4Delta Area Bulk Suoplies 132 kv 370 580 50 1,000Other Cities Sub-transmission 33 kv 250 400 350 1,000Aliscellaneous Civil WIorks 30 40 40 40 40 40 230Transport (vehicles) 70 70 80 80 90 90 480Wiorkshops & Instruments 5 5 5 5 5 10 :35Office Miachinery 40 30 10 10 10 10 110Furniture &, Eauipment 25 25 25 25 25 25 1;01%ural Scheaosa/ 225 225 5 5 5 5 470Transfer of Generating Plant 15 20 10 10 10 15 :0,imiscellaneous Expenditures 250 250 250 250 250 250 1,500LaMos District Buildings 650 50 700

Total 1,310 715 1,440 2,164 895 4/5 6,969

.S T IX T E O0 ; A F I T A L EM i' E .! D I T U R E 9R6 3,/6/+-l68/69

Northern Region 1,875 1,828 1,456 1,085 973 585 7,802Eactern iegion 2,154 3,731 1,930 1,532 1,0C5 624 10,976IWestern e-ion 4,667 7,811 3,175 1,781 1,813 1,214 20,461 D i

Gcneral 1,310 15_ LJf 2A. l4. 8 __ b6 469+

Grand Total 10,006 14,085 8,001 6,562 4,686 2,868 46,208

/ Tn addition to 103 continagency allowance Included in cost of 'educna-Vano traoseii.s-slon lines/ .dditional cost included ir Regional "New Toens Developnentcs" after 1963-64

ANNEX 5

TRANSMISSION PROJECT

TnE~ ~ ~~ ICRIT5 COnO.ATO 0D 1,TTOV-PTIA

Resume of Financial Background

nhe rinancial arrangements in respect bv uiLh aseus ransfe duo vCon April 1, 1951, the vesting date, were as follows:

(a) ECN issued to the Federal Government EN 900,COO of its3% Debenture Stock in payment for assets wnich theGo.vermLentL had prviusly a^ e tro gh prnerlq ofGovernment loans,

(b) ECN assumed EN 600,000 of indebtedness due the Govern-ment in part for assets originally financed from thegeneral revenues of Nigeria, and in part for workingcapital taken over by the Corporation. During thefirst fiscal year this indebtedness was increased byEN 83,000 on the acquisition of additional assets.The total indebtedness of EN 683,000 was to bear 3%interest per annum after April 1, 1956, prior towhich nothing was paid or accrued.

(c) ECN created a capital reserve of EN 500,000 in res-pect of assets transferred which the Government ori-ginally acquired by Colonial Development an-d Welfarefmds.

Initially ECN had difficulty in financing the necessary rehabilitationof the acquired assets and the expansion program. Tariffs were set too lowand operating losses resulted through fiscal year 1955/56. Various sumswere borrowed from the Government on wqhich interest was not earned.

In March, 1951x, the House of ilepresentatives authorized the followingarrangements:

(a) The existing Government loans to ECN and additionalloans required under their construction program wouldce interest free during the related construction

period.

(b) At the end of each year agreements would be enteredinto between the Government and ECN providing forfixed interest and amortization payments in respectof such proportion of the loans as had been con-verted into operating assets in the course of theyear.

(c) The rate of interest was to be the rate at which theGovernment could borrow for long-term purposes, andthe amortization period was to be the estimated eco-nomic life of the project for which the loan hadbeen made.

ANNEX 5Page 2

io of 4nril 1. 1955. aggregate borrowing from the Government sub-sequent to the vesting date amounted to EN10,850,000, thus making a grandtotal indebtedness, including the debenture stock, of EN12,350,000.

During the next three years additional Government loans were rade:

Date of loan Amount.:

September 30, 1955 fN:1,265,000September 30, 1956 1,000,000September 30, 1957 1,500,000

In 1957, as a consequence of the lheavy financial burden on ECN, acomplete revision of interest and debt repayment schedules wtas effectedas follows:

I. Applicable to the L112,350,000 loans and borrowings madeprior to A.&pril 1, 1955:

(a) 1N9,350,000 was classified a perpetual debenture vari-able interest stoclk. This stock carries a maximumrate of 41% per annum if earned. The annual interestpavable, however, may not exceed 25, of ECN's net incomeafter depreciation and fixed interest charges.

(b) 1l13,000,000 was classified as 41 debenture stock.Repayment was to 'ee effected by an annual paymentto the Government of 1, of the orincipal amount fora period of 41 years.

(c) Annual Dayments, on both the fixed and varia'ble interestdebenture stocks -,ould not become payable until Marclh 31,1960, '>or the fiscal year then ending.

II. Applicable to the three loans made after April 1, 1955:

(a) The sam.e terms and conditions as I(b) above.

(b) Interest and orincipal payients on each loan wouldbegin after a four-year moratorium from the respectivedates of the loans.

From September 1958 through deptember 1961, four new Governmentloans A!ere made totaling 1N5, 750,000. The reoayjment arrangements finallyestaulished in 1961 rere ':ased on level debt service over forty-one yearsafter four years of grace, both on interest and principal. Interest wasset at 4-% for the first loan, 51•o for thne second and th,ird loans and6% for the fourth loan. In 4pril 1962, the Government converted allfixed interest loans made prior to 1958 to the same fixed annuity re-payment schedule. lIJo changes w>ere made to the oriLinAl rates of interestor maturity date.

ANNE( 5Page 3

In January 1963, a £N 2,000,000, 5%, five year Government loan wasmade. Interest is payable anuually and principal payirients are du, 25% or.December 31, 1965, 25% on December 31, 1966, and 50% on December 31, 1967.

In addition to the above discussed loans, ECN also received atvarious times funds totalling £N 422,500 in Government subsidies. Thesewere intended to cover operational losses of five remote undertakings, knownas amenity undertakings, which ECN was required to take over on the vesting

From July 1956 to LTarch 31, 1962, the Regional Governments alsomade loans to EON totalling £N 2,069,000 for rural developrmii:-z,.s These loanswill be amortized over periods of twenty and twenty-.five yea-s starting in1965/66. No interest has been or will be paid and ECN has agreed tao absorbany losses sustained in these local operations.

A recapitulation of the financing provided by the Federal Governmentas of March 31, 1963, is presented below:

Variable Interest Investment Terms

Amount

ZN 9,350,000 Entitled to receive up to 41%interest but not to exceed25% of EON'fs net income.

Fixed Interest LoansEffective Date Rate of Pri-ncipal Balance

Original Amount of Loan Interest Payments Outstanding

£N 3,000,000 4/1/53 4-:% £N 120,269 £N 2,879,7311,265,000 9/30/55 4j% 37,950 1,227,0501,000,000 9/30/56 47% 209000 980,0001,500,000 9/30/57 4 % 15,000 1,485,0001,500,000 9/3o/58 5-2-% - 1,500,003750,000 9/30/59 52% - '50,',0,0JO

2,000,000 9/30/60 6 % - 0J00,0001,500,000 9/30/61 6 % - 1,500,000

2, 000,000 1/1/63 5 % - 2,000,000

Total £N 14,515,000 £N 193,219 £N14,321,781

THANSIISIOM PROJECT

TEE ELECTRICITY CClR}UIATIOIF RISEPIA

ACTUAL AlD Wr, iATlD ICO E S?ATŽŽINS

(in thousands of Es Nigerian)

ACTUAL _ESTIVAT!S

Fiscal Year Ended March 31 1"60 196L 1962 1963 1964 1965 6 7 1968 1969

Units generated - million kwh 361 448 549 659 804 / 957 V 1,112 I./ 1,230 " 2,458 2/ 1,656

Units sold - million kwh 287 360 438 524 637 756 879 9'97 1,120 1,241

Average revenue per kwh (in pence) 3.85 3.77 j.71 3.6S 34359.3,5.4 3.42

RevenueSale of electricity 4,607 5,656 6,778 7,967 9,528 11,182 12,782 14,415 16,053 17,684

Other operating revenue 69 83 85 84 82 91 _ 98 _ 1D3 108 112

Total operating revenue 4X676 5,739 6.863 8El51 9,610 11,27 12.880 14.518 .L6;161 17.796

Cost of OperationsGeneration 2,039 2,140 2,503 3,197 3,060 3,528 3,559 3,876 i,213 4,727

Transmission and distribution 293 381 461 546 575 641 711 799 863 920

Administration 431 514 585 672 679 734 773 827 876 920

Travel and transport 105 111 151 174 169 190 207 228 242 254

Allocated central services expense 345 443 583 739 970 1,170 1,370 1,470 1-,520 1,570

Depreciation 766 884 1,714 2.037 2,200 2,600 3,.1400 4,Z 0 4.7D0 4.900

Total cost of operations 3.979 4,473 5.997 7,365 7,653 8,863 10,020 11. 00 1214 13,291

Net Income from Operations 697 1,266 866 686 1,957 2,410 2,860 3,118 3,747 4,505

Net Miscellaneous Income or (Expense) 42 58 85 (25(10)10 (10 l o) o10) (10) (lo

Net Income 739 1,324 951 661 1.947 2,4000 8t _3 ,lD8 3,737 4.495

Less Interest ExpenseOverdraft and extended credit facilities 26 16

Federal Government loans - fixed interest 163 214 271 365 378 416 532 617 611 605

Federal Government loan - 5 year maturity 100 100 100 75 50

Proposed IBRD loan 87 303 460 589 569 547

Less interest capitalized during construction (87) (3031 (460) (221)

Proposed UK loan 14 36 53 69 83 88

Less interest capitalized during construction (14) (36) (53) (69) (83)

Proposed future long-term loans 31 :15 191 217

Less interest capitalized during construction (31) (:15) (191)

Assumed local bank loan 31 25 19 12 6

Suppliers credits 38 79 172 240 294 212

Assumed Federal Government loans - fixed interest 60

Total inlterest expense 163 214 271 391 532 626 829 i~. 214 1,536 1 735

Net Income after Interest Expense 576 1,110 680 270 1,415 1,774 2,021 1,789 2,201 2,760

Payment on Federal Government Investment 136 268 157 67 354 421 421 ;21 1421

Balance to Surplus 440 842 523 203 1.061 1.353 -L.600 1.368 1,780 23

Operating Ratio (total cost of operations to totaloperating revenue) i5.1% 77.9% 87.4% 91.5% 79.6% 78.6% 77.8% 78.5% 76.8%/ 74.7%

2/ Based on Merz-McLellan'3 "Supplementary Report on ,arket for Electricity," May 1962. IC

1/13/64

ANNFX 7

TRANSNISSION PROJECT

THE ELECTRICITY CORPOPIATION OF NIGERIA

FORECAST OF SCURCES A'. APPLICATIONS OF FUGOS

tin thmsn-di of Bn Nigerian)

Forecast Forecast SumieryThree Year Toi sle SilmYear Total-

Yeer Ending March 31 64194 iv icec 1964-1966 1967-1969 16Y-r9t9

SOURCES OF FUNDS

Internal Cash GenerationNet income from operations 1,947 2,400 2,850 3,108 3,737 4,495 7,197 11,340 18,537Depreciation 2.200 - 2.600 3.400 4.200 4,700 4.900 8,200 13,800 22,000

Totel internal cash generation 4,147 5,000 6.250 7,308 8,437 9,395 15.397 25,140 40,537

Borrow ngsRegional Government loans - interest free 112 400 600 550 440 1,112 990 2,102Froposed IBRD loon 2,668 4,905 2,620 521 10,193 521 10,714Proposed UK loan 510 300 300 300 190 1,110 490 1,600Proposed futore foreign loan 1,115 1,957 802 76 1,115 2,835 3,950Assumed local bank loan 480 480 480Suppliers credits 2,533 3,427 610 10 6,570 10 6,580Assumed Federal Government loon - fixed interest 1.000 2.500 3.500 3,500

Total borrowings 7.303 11.532 5,245 3.338 1,432 76 24,080 4,846 28,926

TOTAL SOURCE3 OF FUNDS 11,450 16.532 11,495 10,646 9.869 9.471 39,477 29,986 69,463

APPLICATIONS OF FUNDS

Constroction Expenditures (excluding interest cepitalimeddring coonstr-ction) 10.006 14.035 8,001 6,562 4,686 2,863 32,092 34,116 46,208

Debt Serviceinterest

Federal Government loans - fixed interest 478 516 632 692 661 605 1,626 1,958 3,584Proposed IBRD loan - capitalized interest 87 303 460 221 850 221 1,071

- interest expeose 368 569 547 1,484 1,484Propo-sd UK loon - capitalised interest 14 36 53 69 83 103 152 255

- interest expense 88 88 88Proposed future long tern loan - capitali-ed interest 31 115 191 31 306 337

_ interest ex eone 217 217 217Assumed local bank loan 31 25 19 12 6 56 37 93Suppliers credits - interest expense 38 79 172 240 294 212 289 746 1,035Overdraft 16 16 16Assumed Federal Gcvernment lsons - fixed interest 60 60 60

Total Interest 633 965 1,373 1,724 1,810 1,735 2,971 5.269 8.240

AmortisatisnRiegi-csl Government loans - interest free 6 83 83 187 6 353 359Federal Government loans - fixed interest 78 87 103 117 123 129 268 369 637Federal Government loans _ 5 year matorit, 530 510 1,000 500 1,500 2,000Prop-oed I0RD loon 372 392 414 1,178 1,178Proposed UX loan 45 45 45Proposed future long tere loon 14bssued local bank Ioan 96 96 96 96 Yt 192 2e8 48S.ppli-rs credits 132 319 542 950 1,131 844 993 2,92 3,917Aissu:eq Pcdercl Gocernment loon - fixed intersct 6 _ 6

Total Aortisation 210 502 1.247 2,118 2.824 1.865 1,959 6,807 8,766

Total Debt Servioe 843 1.467 2.620 3.842 4.634 3.600 4,930 12.076 17,006

Paynent on Federal Governmment Inveotnent 354 421 421 421 431 421 1,196 1.263 2.459

Incresse in Working Capital 64 228 380 266 156 156 672 578 1.250

TOTAL APPLICATIONS CF FUNDS 11.267 16,201 11.422 11.091 9,897 7,045 38.890 28.033 66,923

Increase or (decrease) in funds 183 331 '73 (445) (28) 2,426 587 1,953 2,540

Balance at beginning of year 0 183 514 587 142 114

Balance at end of year 183 514 587 142 114 2,540

Times annual debt serice covered by internal cash generation 4.9 3.4 2.4 1.9 1.8 2.6

1/13/64

TRANSMISSION PROJECT

THE ELECTRICITY CORPORATICN OF NIGERIA

ACTUAL AND ESTIMATED BALANCE SHiEETS

(in thousands of Es Nigerian)

ACTUAL ESTIMATEMarch 31 1960 1961 1962 1963 1964 1965 19D6 1967 1968 1969

ASSETS

Fixed AssetsFixed assets in operation 20,046 24,254 27,623 32,604 36,115 48,329 61,045 70,508 74,965 79,615

Less allowance for depreciation 3.651 4,759 6.644 8,770 10.870 13.370 16.670 20.770 25.370 30.170Net fixed assets in operation 16,395 19,495 20,979 23,834 25,245 34,959 44,375 49,738 49,595 49,445

Work in progress 2,610 2.595 3,756 2,608 9,104 11.214 6,943 4.347 4.750 _ 2868Total fixed assets 19,005 22,090 24,735 26,442 34,349 46,173 51,318 54,085 54,345 52,313

Current Assets 3,445 3,733 3,588 4,182 4,460 5,012 5,935 6,581 6,961 7,339

Due from Cameroon for Assets Transferred 426 426 426 426 426 426 426

Additional Assets 183 514 587 142 114 2X540

Total Assets 22.450 25,823 28.323 31,050 39,418 52,125 58,266 61.234 61846 =62618

CAPITAL AND LIABILITIES

Capital. Reserves and SurplusFederal Government investment 9,350 9,350 9,350 9,350 9,350 9,350 9,350 9,350 9,350 9,350Capital reserve 400 400 400 400 400 600 400 400 400 400General reserve 490 900 1,750 2,250 2,500 2,500 2,500 2,500 2,500 2,500Surplus 442 874 547 250 1,061 2,414 4,014 5,382 7,162 9.5

Total capital, reserves and surplus 10.682 11524 12.047 12.250 13.311 14,664 16.264 17.632 19.412 21.751

Long-Term LiabilitiesFederal Government loans - fixed interest 8,943 10,889 12,322 12,112 12,157 12,054 11,937 11,814 11,685 11,54'Federal Government loan - 5 year maturity 2,000 2,000 1,500 1,000Regional Government loans - interest free:

Northern Region 200 596 596 596 606 806 1,082 1,358 1,474 1,400Eastern Region 158 171 171 221 315 458 601 715 67E8Western Region 852 1,102 1,301 1,301 1,353 1,453 1,551 1,599 1,622 1,545i

Proposed IBRD loan 2,668 7,573 9,821 9,950 9,536 9,099Proposed UX loan 510 810 1,110 1,410 1,555 1,508Proposed future foreign loan 1,115 3,072 3,730 3,652,Assumed local bank loan 384 288 192 96Suppliers credits 2,082 4,967 2,627 3,507 2,663 2,03ZAssumed Federal Governrament loans - fixed interest 1.000 3.500 ],500 3.500 3.494_ 3.47k

Total long-term liabilities 9.995 12.745 14.390 16,180 22,981 33.266 36.393 36,907 36.474 34.942

Current LiabilitiesCurrent creditors, accruals and provisions 1,731 1,501 1,818 2,410 2,624 2,948 1,491 3,871 4,095 4,317Long term debt due within one year 42 53 68 210 502 1.247 2.118 2.824 1.865_ 1.67Z

Total current liabilities 1.773 1.554 1,886 2.620 3.126 4,195 ;.609 6,695 5960_ 5.924

Total Capital and Liabilities 22,450 25,823 28 .323 31 050 39.418 52.125 58.266 61.234 61.846 62,61=

Debt/Equity Ratio 48/52 53/47 54/46 57/43 63/37 69/31 59/31 68/32 65/35 62/38

Net Income from Operations to Average Net FixedAssets in Operation 4.5% 7.1% 4.3% 3.1% 8.0% 8.0% 7.2% 6.6% 7. 5,, 9.1%

1/13/64

TRANSMISSION PROm T .;.

ELECTRICITY CORPORATION OF NIGRIA

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/5 T H 7 OF EEN/N IVI /V Pos, F R VER /ELECTRICITYf CORPORATION' UGHELLle5\ 8 \ ' UNDERTAKINGS

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GURLF OF 9IiD-A6ROCTOBOER 1963 tBURD - 16KURt

,To B1p CIRCULATED

STATUTORY LOAN COMiITTEE REPORT

To. Thle President, intcrnrat ona. rHn . cTnst ructio- an r v . Dev2el onmnt

Re-port-> o Wan Co.,ittee u-nder Section L(iii) of Article III of theArticles of Agreement on the Proposed Loan (Transmission Project) toElectricity Corporation of Nigeria to be guaranteed by FederalRepublic of Nigeria.

The undersigned Committee constituted under Section 7 of Article v

of the Articles of Agreement of International Bank for Reconstruction and

Development (the Bank) hereby submits its report pursuant to Section .(iii)

of Article III of said Articles in respect of the proposal that the Bank

Ogrant to Electricity Corporation of Nigeria a loan in an amount in various

currencies equivalent to U.S.$30,000,000 which loan is to be guaranteed by

Federal Republic of Nigeria. The purpose of said loan is to assist in

financing the expansion of transmission facilities of the Electricity

Corporation of Nigeria.

1. The Committee has carefully studied the merits of the proposal to

grant such a loan, and of the purposes to iwhich the proceeds of the loan

are to be applied.

2. The Cormittee is of the opinion that the project toward the

financing of which the proceeds olf such loan are to be applied comes within

the purposes of the Bank as set forth in Article I of said Articles of

Agreement, and that said project is designed to promote the development of

the productive facilities and resources of Nigeria and is in the interests of

Nigeria and of the members of the Bank as a whole.

- 2 -

3. Accordingly, the ComTittee finds that said project merits

financrial assistance from th'e Bark. ad ereaby rocor.ends said pronj rt

fOr SUCI assista.^Pe

COIiIITTEE

s/ J. Burke Knapp

Vice President

s/ C. O. Hollist

Expert selected by Governor for Republicof Nigeria

s/ P Nous,3a

Director, Department of Operations-Africa

s/ A. BrochesGeneral Counsel

s/ Simon AldewereldDirector, Department of Technical Operation

s/ Francis R. PooreAssistant Treasurer

Dated at Washington, D.C.January 23, 1964