Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 3892a-JM

STAFF APPRAISAL REPORT

JAMAICA

THIRD POWER PROJECT

May 28, 1982

Projects DepartmentLatin America and the Caribbean Regional Office

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

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CURRENCY EQUIVALENTS

(March 1982)

Currency unit = Jamaican Dollar (J$)J$1.00 = Cents (4) 100J$1.00 = US$0.56

US$1.00 = J$1.79

UNITS AND MEASURES

1 kilovolt (kV) = 1,000 volts (V)1 megawatt (MW) = 1,000 kilowatts (kW)1 megavolt ampere (MVA) = 1,000 kilovolt amperes (kVA)1 megavolt ampere reactive (MVAR) = 1,000 kilovolt amperes reactive

(kVAR)1 gigawatt hour (GWh) = 1 million kilowatt hours (kWh)1 mile (mi) = 1,609 meters (m)1 British Thermal Unit (BTU) = 3,969 calories (cal)1 barrel (bbl) = 42 US gallons = 159 liters1 imperial gallon = 4.546 liters1 US gallon 1.785 liters

ABBREVIATIONS AND ACRONYMS

BITU = Bustamante Industrial Trade UnionCAST = College of Arts, Science & TechnologyCIDA = Canadian International Development AgencyCPI = Consumer Price IndexEDF = European Development FundGDP = Gross Domestic ProductGNP = Gross National ProductIDB = Inter-American Development BankJPS = Jamaica Public Service CompanyMME = Ministry of Mining and EnergyNWC = National Water CommissionNWU = National Workers UnionO&M = Operations & MaintenancePCJ = Petroleum Corporation of JamaicaPUC = Public Utilities CommissionREP = Rural Electrification Programme Limiteds-m = Staff-monthsUNDP = United Nations Development ProgrammeUSAID = United States Agency for International DevelopmentUTASP = Union of Technical and Supervisory Personnel

FISCAL YEAR

January 1 to December 31

FOR OFFICIAL USE ONLY

JAMAICA

STAFF APPRAISAL REPORT ON THE THIRD POWER PROJECT

TABLE OF CONTENTS

Page No.

1. THE SECTOR. 1

Energy Resources .................................. 1Power Sector Organization and Regulation. 3Electricity Rate Setting.. 3Electricity Tariffs. 3Existing Facilities. 4Electricity Consumption. 4Access to Service. 4Rural Electrification. 5Constraints on Sector Development. 5History of Bank Group Involvement with Sector. 5

2. THE BORROWER. 7

Government Ownership and Organization Structure 7Management ... 7Staff Relations . .. 8Training... 8Management Information and Accounting System ... 8Audit... 9

Billing and Collections. . . 9Insurance... 9

Tmport duties ... 93. THE MARKET AND THE MEANS TO MEET IT . .10

Historical Market ... 10Load Forecasts .10Energy Losses . 10Energy and Capacity Balance .11

4. THE PROGRAM AND THE PROJECT .. 12

Background and Objectives .12Generation . 12Transmission and Substations .14Distribution .15General Property .15Program Costs . 16The Project .16

This report is based on the findings of an appraisal mission whichvisited Jamaica in January and in February 1982. The mission comprisedMessrs. Philip Owusu, John Callahan and Andrew Waldrop.

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

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Table of Contents (Continued)

Page No.

Project Cost Estimates and Financing ................. 17Implementation ....................... .. O... 18Consultant Services and Training ..................... 18Procurement .......................................... 19Retroactive Financing .............................. 20Disbursements. 20Environment ......... * .... 21Project Risks ........................................ 21Table 4.1 - Project Cost Estimate .... . .............. 23

5. FINANCIAL ANALYSIS ......................................... 24

Summary ................ 24Earnings History and Financial Position 1977-1981 .... 24Earnings Requirements and Financing Plan, 1982-1984.. 26Security ...... ... 27

6. ECONOMIC ANALYSIS...................................... . 28

Least Cost Solution ................................ 28Internal Economic Rate of Return ..................... 28Economic Benefits ....................................- 28Economic Costs .................--------- 30Return on Investment ................................. 30

7. PROPOSED AGREEMENT AND RECOMMENDATION ................. .... 31

Conditions of Effectiveness .-------. : 31.Loan Covenants .............................. 31Recommsndation ............ ........................... 32

ANNEXES

Annex 1.1 - Energy Consumption, 1975-81 .................... 33Annex 1.2 - Electricity Tariffs in Jamaica as of

February 28, 1982 ............................ 34Annex 1.3 - Electricity Supply, 1980.................... 40Annex 1.4 - Electricity Consumption, 1980................. 41Annex 2.1 - JPS Organizational Chart ....................... 42Annex 3.1 - Public Service Electricity Consumption and 43

Number of Customers ....................fiAnnex 3.2 - Forecast Power Market .......................... 44Annex 4.1 - Installed Generating Units, 1982............. 45Annex 4.2 - Project Implementation Schedules ............... 46Annex 5.1 - Actual, Estimated, and Forecast Key Performance 47

Indicators and Financial Ratios, 1977-1985...

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Table of Contents (Continued)

Page No.

Annex 5.2 - Actual, Estimated, and Forecast Income 48Statement, 1977-1985 ...........................

Annex 5.3 - Actual, Estimated, and Forecast S:urce and 49Applications of Funds, 1977-1985............

Annex 5.4 - Actual, Estimated, and Forecast Balance Sheets, 501977-1985.

Annex 5.5 - Forecast Amortization Schedule, 1982-1985 ....... 51Annex 5.6 - Forecast Interest Charges, 1982-1985 ............ 52Annex 5.7 - Forecast Disbursement, 1982-1985 . . 54Annex 5.8 - Forecast Construction Expenditures, 1982-1985 ... 55Annex 5.9 - Schedule of Existing and Proposed Long-term 56

Debt..Annex 5.10 - Fuel-clause Revenues .... 58Annex 6.1 - Cost and Benefit Streams Used to Determine

Internal Economic Rate of Return ............ 59Annex 7.1 - Documents and Data Available in the Project File 60

MAP IBRD 12602R1

CHAPTER 1

THE SECTOR

Energy Resources

1.01 Jamaica's indigenous energy resources are limited.Non-commercial energy - primarily in the form of charcoal and wood - isperhaps the most abundant domestic energy source presently in use. Theabsence of non-commercial energy statistics precludes a definitive assessmentof its utilization. However, recent surveys indicate that non-commercialenergy may account for about 9 percent of household energy use.

1.02 Because of the paucity of indigenous energy resources, Jamaicais dependent on imports to meet its energy needs. Of the total commercialenergy consumption in 1980 (see Annex 1.1) about 91% was provided by importedpetroleum. The remainder was provided by sugarcane bagasse (7%) and hydropower (2%). Petroleum imports in 1980 amounted to about 15.6 million barrelsequivalent to about US$450 million or nearly half of Jamaica's foreignexchange earnings for the year.

1.03 To reduce its dependence on petroleum imports, the Government,through the Petroleum Corporation of Jamaica (PCJ) and the Ministry of Miningand Energy (MME), is taking a number of initiatives to expand and developindigenous sources of energy. On-shore drilling for oil and gas financed byan Inter American Development Bank (IDB) loan began in November 1981 at threesites; off-shore drilling is expected to begin shortly with the assistance ofinternational oil companies as part of a Bank-financed project (Loan2017-JM).

1.04 In addition, the Government and the Jamaica Public ServiceCompany (JPS) are discussing with bilateral financing agencies funding for adevelopment program for six small hydropower sites. The Government, JPS, theNational Water Commission (NWC) and the Ministry of Agriculture are reviewinggrant-financed studies by consultants (SWECO/Sweden) for the Blue Mountainhydro project to provide water supply, irrigation, and electric power. Theconsultant's preliminary findings indicate that the cost of the multipurposeproject, including the construction of a 55 MW hydro power plant would beabout US$450 million (in 1980 prices).

1.05 In addition to these potential energy sources, peat reservesadequate to fuel an 80-100 MW power plant for 30 years have been located inNegril and Black River (Lower Morass). Feasibility studies on peat miningand on the use of peat as a fuel source are being carried out by PCJ. TheJamaica campus of the University of the West Indies is undertaking studies onthe ecological impact of peat mining.

1.06 Renewable sources of energy are receiving increased attention.Solar water heaters have been installed in public buildings. A variety ofother solar technologies are being studied by the Ministry of Mines andEnergy and the College of Arts, Science and Technology (CAST) with financialassistance from the United States Agency for International Development(USAID). Suitable sites for the utilization of wind energy for water pumping

and electricity generation have been identified with the assistance of fund-ing from the European Development Fund (EDF). Preliminary st-udies of coalutilization, including conversion of existing boilers, have been conducted.Studies of the potential for ocean thermal energy with financing from theCanadian International Development Agency (CIDA) are being executed by theMME. Studies of the use of garbage for electricity generation and the use ofother bio-degradable materials to produce natural gas are under execution bythe Ministry. Twenty-four kilns for the production of charcoal were con-structed in 1981 by the Ministry of Agriculture in cooperation with theMinistry of Mines and Energy and the Scientific Research Council. Thesekilns have a combined annual capacity equivalent to 4.6 million barrels offuel oil equivalent. At the Twickenham Park Sawmill, a 1.2 MW plant oper-ating on wood residue is planned to meet the power requirements of the saw-mill, with the surplus to be fed into the national electric grid. Finally,preliminary studies of the geothermal potential of hot springs in ninelocalities are being studied by the MME.

1.07 The development of non-petroleum energy sources holds the potentialof moderately easing the country's balance of payments constraint over themedium and longer term. Nevertheless, barring significant discoveries of oiland gas or unforeseen technological break throughs, Jamaica will continue torely on imported petroleum to meet most of its energy requirements during thenext two decades.

1.08 The MMlE is also promoting energy conservation. The Ministry hasinitiated work on an energy accounting system and energy fuel use surveys. AUSAID-financed energy audit scheme designed to identify energy waste andrecommend practical methods of increasing energy efficiency is underway: 43public sector industries were audited in 1980. Associated with the scheme isa proposed energy retrofitting program which would provide credit facilitiesand expertise for the replacement of inefficient parts and equipment forindustries. The economics of re-refining used lubricating oils will bestudies under the aegis of the Bank petroleum exploration loan. A publiceducation program aimed at increasing awareness of the energy crisis waslaunched in April 1979 and is still underway. The MME, which is the agencyspearheading the Government's energy initiatives, is supported by technicalassistance from UNDP, USAID, CIDA and other donors to strengthen its core oftrained staff. With this assistance, the MME should be able to carry out theenergy initiatives successfully.

1.09 Government has complemented the efforts above with fiscal measuresaimed at curtailing petroleum demand and promoting efficient energyutilization. In January 1980 overall subsidies on petroleum products wereremoved. The Government periodically reviews the price of all petroleumproducts, and has established a stabilization fund to cushion consumersagainst short-term fluctuations in world oil price. During the past year,the stabilization fund has also been used as a vehicle by which the prices ofgasoline and other fully refined products subsidize the price of fuel oil byapproximately 9% of the exrefinery price.

1.10 Under the provisions of an agreement (terminating in May 1982) withthe small, privately owned refinery which supplies most of the fuel oil usedin the nonbauxite economy, the ex-refinery price is set at a level whichprovides the refinery an operating margin. The price paid for fuel oil, even

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taking into account the cross subsidy element, is well above the Caribbeanposted price (US$32/bbl. compared to about US$23/bbl in January 1982).Discussious with the refinery concerning the present purchasing and pricingarrangements are under way. The Government will also review its present energypricing system as part of an ongoing energy assessment study. Under theprovisions of the Bank petroleum exploration loan, the Government has agreedto consult with the Bank concerning the fundings of the study.

Power Sector Organization and Regulation

1.11 The main institutions concerned with electric energy in Jamaicaare: JPS (electric power generation and distribution); the Ministry of PublicUtilities and Transport (rate regulation and financial supervision); theMinistry of Mining and Energy (energy policy, fuel pricing, conservation andstudies); and, the Petroleum Corporation of Jamaica (exploration, developmentand marketing of petroleum and other energy sources). The ElectricityAuthority, which holds the Government shares in JPS, has no other functions.The Rural Electricity Programme, established by the Government in 1975 toplan and construct rural electrification projects (see para 1.20) receivesfinancing through an IDB loan to the Government of Jamaica, and is managed bya JPS employee seconded to the program. There is the potential for conflictbetween two Ministries; but, to date, the organization of the sector has beensatisfactory.

1.12 Prior to 1975, regulation for the power sector was entrusted to thePublic Utilities Commission, a statutory body. Following its acquisition ofmajority shares of JPS, the Government transferred responsibility forregulating the utility to the Ministry of Public Utilities and Transport. Aclose relationship exists between the two entities. JPS provides monthlyfinancial reports to the Advisory and Monitoring Unit of the Ministry, whichis closely involved in financial and investment planning for the company.This arrangement for the regulation of the sector is satisfactory.

Electricity Rate Setting

1.13 While the JPS license (as amended in April 1977) vests authorityfor the setting of electricity rates in the Ministry of Public Utilities andTransport, the actual procedure has been that JPS files proposals for rateadjustments with 'the Ministry which then analyzes them and submits them tothe full cabinet for approval. This arrangement for rate setting is notuncommon in countries where the utilities are essentially government-owned.

Electricity Tariffs

1.14 In connection with the second Bank loan, JPS agreed to hire con-sultants to study its tariff structure in relation to the marginal cost ofsupplying electricity. After sending JPS sample terms of reference for sucha study, the Bank agreed to funding the study with an USAID grant. The re-sulting study did not reflect the sample terms of reference. There were re-commendations for restructuring tariffs but they were not based on the mar-ginal cost principle. A marginal cost based tariff study is important toprovide the proper framework for a rational tariff structure. However, therehabilitation of the JPS generating plant is essential. if the study is tobe based on actual (and optimum) operating conditions. Annex 1.2 show theJPS tariff schedule. It contains features which appear to discourage efficient

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energy utilization (such as declining block rates, an absence of regionaland/or peak and off-peak pricing, and a great difference betwen the unitprices charged industrial and residential customers).

Existing Facilities

1.15 Total installed generating capacity at the end of 1980 was about680MW, of which approximately 457MW (67%) were part of the JPS system. Theremainder were captive plants owned principally by the aluminum, sugar andcement industries (see Annex 1.3). Of the electric energy generated by JPS,approximately 83% was by steam plants, 6% by gas turbines and diesel plants,and only 11% by hydroplants. Fuel costs are accordingly a large component ofthe company's operating costs (approximately 68% in 1980).

1.16 The JPS transmission system consists of about 540 miles of 138 kVand 69 kV lines. There are about 5,000 miles of primary distribution linesat voltages of 24KV and below. The JPS transmission and distribution systemis inadequate to meet service requirements. The proposed program will assistin solving this problem (see para 4.17).

1.17 The high proportion of captive generation is caused by a historicdifference in frequency (most captive generating plants operate at 60HZ whilethe public system operates at 50HZ), as well as the need of certainindustries for process steam. The inability of the public supply system toprovide a consistently reliable service has undoubtedly also been a factor.It is expected that improvement in the reliability to be achieved by theproposed program will enable JPS to meet the incremental needs of thoseindustries which operate at 50 Hz, thus reducing the need for installation ofcostly captive generating plants in the future.

Electricity Consumption

1.18 In 1980, the mining, industrial and commercial sectors, consti-tuting approximately two thirds of GDP, accounted for about 75% of totalelectricity consumption. The public service system supplied about 56% oftotal electricity consumption for the year. Commercial and industrial con-sumers accounted for about 56% of the public service electricity consumption(or 73%, including captive generation) which reflects the importance of theproductive sector in the composition of electricity consumption; residentialconsumers accounted for 31% and others (street lighting, goverment, munici-palities, etc.) the remaining 13%. A summary of electricity consumption in1980 is shown in Annex 1.4.

Access to Service

1.19 Compared to countries at similar stages of development, access toelectriciy service in Jamaica as a whole is good. About 85% of all Jamaicanhouseholds have access to public electricity supply by virtue of being within100 meters of existing lines, while about 52% are connected to the electricpower system. By comparison access to electricity service in Panama and inPeru are about 65% and 36% respectively.

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Rural Electrification

1.20 Prior to the establishment of the Rural Electrification ProgramLimited (REP) in June 1975 only about half of Jamaica's rural population hadaccess to the public service electricity system. Since then, with financialassistance from the Government of Jamaica and three loans from the IDBtotalling about US$21.2 million, REP has constructed about 29,000 newconnections covering an area of about 1,560 miles in about 600 villages. Bythe end of the REP program period in June 1982 public service electricitysupply will be accessible to about 70% of Jamaica's rural population.

Constraints on Sector Development

1.21 The principal constraint faced by the power sector is the lack ofsufficient human resources at the principal sector entity - JPS - to allowfor an orderly development of the sector. The problem has been exacerbatedin the last years by the loss, through emigration, of experienced sectorpersonnel. The project includes technical assistance and training componentswhich should result in strengthening JPS and thus alleviate this constraint.

1.22 A second constraint relates to the ability of JPS to raisesufficient financial resources internally to contribute to the financing ofthe sector investment program. Revenue covenants included in the proposedloan agreements related to the project (para 5.09) are aimed at mitigatingthe effect of this constraint.

History of Bank Group Involvement with the Sector

1.23 JPS benefited from the first Bank loan to Jamaica's power sector(1966; 454-JM - US$22 million) which helped finance the foreign cost ofgenerating plant (121 MW) and associated transmission and distributionfacilities for the greater Kingston area. The project was completed in 1972,substantially within the original schedules and cost estimates.

1.24 JPS benefitted from the second Bank loan for power (1978; 1516-JM -

US$20 million) which helped to finance the foreign cost of a US$36.1 millionproject for the expansion of the transmission and distribution systems inurban centers, plus technical assistance for the improvement of operating andmaintenance practices and the preparation of contract documents. As of May1982, US$17.3 million of the loan had been disbursed. The project will becompleted substantially within original cost estimates but about nine monthslater than the appraisal schedule.

1.25 JPS' power plant operations and maintenance practices improvedsomewhat with the assistance of consultants engaged under the second powerproject to assist in developing operations and maintenance procedures. JPSbecause of financial constraints was unable to fully implement theconsultant's recommendations concerning repairs and overhaul of its boilersand turbine at Old Harbor station l/ The level of maintenance and opera-tions is still far from adequate resulting in the current unreliable state of

1/ OPEC funding (US$3.0 million), administered under Bank loan 1516-JM, wasutilized to finance emergency repair and critical spare parts mostly forOld Harbor station.

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electricity service (para 4.04). The proposed project will provide addi-tional financing for consultants to assist in restoring the security andreliability of the public service electric supply system to an adequatelevel.

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CRAPTER 2

THE BORROWER

Government Ownership and Organization Structure

2.01 The proposed borrower, JPS, is a government-owned power utilitycharged with exclusive responsibility for the generation, transmission, anddistribution of electric energy for public consumption in Jamaica. In 1971,the Government, through the Electricity Authority, acquired controllinginterest in JPS from foreign, private investors; and presently owns 99% ofJPS' ordinary shares. Except for certain features requiring furtherinvestigation (para. 2.07), the organizational structure of JPS, which isshown in Annex 2.1 is satisfactory; but there are many deficiencies ofmanagement, which are discussed below.

Management

2.02 Through immigration and resignation, there has been a dispersal ofthe competent group of managers who were operating JPS at appraisal (1978) ofthe Second Power Project (1516-JM). Lack of sufficient number of qualifiedmid-level managers has contributed to: (i) poor operational and maintenancepractices at the power plants, which have resulted in frequent power outages(para. 4.04); and (ii) delayed preparation of important financial,accounting, and managerial data. For example, preliminary financialstatements for 1981 were not available before March 15, 1982. Thesedeficiencies have prompted the Board to take unusual remedial action.

2.03 Vested with corporate powers, the Government-appointed Board hastraditionally limited itself to setting broad, overall policies, leavingdaily decision making to management. However, because of the deficienciesnoted above, the Board formed in October 1981 three subcommittees to reviewtechnical and financial planning and purchasing decisions; and in December,after the Managing Director resigned, the Board Chairman took o-ver the posi-tion of chief executive officer while JPS searched for a replacement. Giventhe current difficult circumstances, these arrangements are reasonable; butthey are not expected to continue after JPS takes measures to improve manage-ment, as described in the next paragraphs.

2.04 As the appointment of a permanent chief executive is indispensableas a first step toward rebuilding management, the proposed loan agreementsrequire that JPS and the Government appoint a qualified chief executiveofficer as a condition of loan effectiveness. In addition, the proposed loanagreement requires any chief executive officer appointed by JPS to havequalifications acceptable to the Bank.

2.05 JPS has begun the rebuilding of its financial administration byhiring a controller and a budget specialist. JPS is actively searching fora systems and methods manager to assist in the application of computers tothe solution of accounting and financial problems. The IDB is likely toprovide funding for the positions of controller and systems and methodsmanager.

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2.06 To continue implementation of the generation rehabilitation programat Old Harbor and Hunts Bay, JPS agreed to engage under satisfactory termsand conditions technical personnel who would assist in the supervision ofcontractors at each plant. To rebuild the managerial capability of theProduction Department, JPS agreed to engage consultants who would assist theproduction manager in the planning and maintenance functions (para. 4.20).

2.07 The current organization structure of JPS places system planning ata tertiary level and burdens the Managing Director with direct supervision often managers and directors. A consulting group, Overseas AdvisoryAssociates, Inc. (OAAI-USA), has made recommendations providing for reducedsupervisory burdens on the part of the Managing Director. These recommen-dations will serve as the basis for further discussions between JPS and Bankstaff.

Staff Relations

2.08 Of the 1850 staff employed by JPS all but the top 16 or so belongto one of four national labor unions. Clerical, hourly and technicalpersonnel belong to either the Bustamante Industrial Trade Union (BITU)affiliated with the governing Jamaica Labor Party or the National Workers.Union (NWU) affiliated with the opposition Peoples National Party (PNP) andsupervisory staff and engineers belong to the Union of Technical andSupervisory Personnel (UTASP), a national labor union founded at JPS in1974. The fourth union, the managers union, consists of about 19 JPS costcenter managers (i.e. staff at the third level of management).

2.09 Given the base of their support, the labor unions have had theupper hand in labor management negotiations. Frequent work stoppages andother industrial action by the labor unions have interfered with JPS' abilityto provide efficient service. The issue of labor relations is a major riskto the project, which can only be dealt with by the Government (para. 4.26).

Training

2.10 JPS carried out a training program emphasizing planning and mainte-nance with US$480,000 from the second power loan (1516-JM) to cover foreigncosts. On the whole, the program met its objectives. As training is a con-tinuing need of JPS, during negotiations, the Bank obtained-the agreement of JPS toprepare a detailed training program acceptable to the Bank by Decemer 1982with the assistance of suitable consultants and emphasizing general manage-ment as well as power plant operations and maintenance. The proposed loanincludes about US$0.9 million to cover the foreign cost of JPS training needsduring the project period.

Management Information and Accounting Systems

2.11 JPS accounting records are maintained in accordance with regula-tions prescribed by the Federal Power Commission of the United States in theUniform Systems of Accounts for Public Utilities, subject to the requirementsof the Companies Act of Jamaica and the All-Island Electric Licence underwhich it operates. The company's accounting records are deficient. Ascurrent accounting reports are prepared late, and as the JPS system offinancial planning, budgeting and cash flow forecasting also needs

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Improvement, the new accounting, budget, and computer specialists areexpected to strfngthen JPS in these areas (para. 2.05).

Audit

2.12 As required under the second power project, JPS repositionedsuccessfully the internal audit department to report to the chief executiveofficer rather than to tlbe chief financial officer so as to enhance itsautonomy. However, the internal control mechanisms of the audit departmentlack adequate documentation and are not based on a formal manual of proced-ures. JPS agreed to evaluate, with the assistance of its external auditors,its internal control systems and auditing procedures and to implement recom-mendations acceptable to the Bank not later than June 30, 1983.

2.13 JPS' financial accounts have been audited satisfactorily by PriceWaterhouse and Co. JPS agreed to a repetition of the existing covenantsrequiring JPS to appoint independent external auditors acceptable to the Bankand to send its audited financial statements to the Bank within four monthsof the end of each fiscal year. JPS' performance under the existing covenanthas been satisfactory.

Billings and Collections

2.14 Accounts receivable have been high in the past--up to theequivalent of about 88 days of sales revenue--due to ineffective collectionsprocedures and laxity in the enforcement of the disconnection policy. Priorto negotiaitons, JPS prepared a satisfactory program for speeding up itscollections and otherwise maintaining its outstanding accounts from customersat reasonable levels. Its implementation is included in the proposed loanagreements. It is expected that the target levels of accounts receivablewould be the equivalent to 70, 65, and 60 days of sales in, respectivel',1982, 1983 and 1984.

Insurance

2.15 The company continues to insure its assets on a replacement costbasis against most common risks such as boiler explosion and fire in accord-ance with common public utility practices. Major works under constructionare insured by contractors' all-risk policies and the proposed third powerproject would have similar coverage.

Import Duties

2.16 The Government does not impose import duties on JPS for its pro-curement of equipment used for generation, transmission or distribution ofelectricity. However, equipment which would be used for purposes other thanthe above, such as motor vehicles and computers, when procured by JPS, aresubject to normal import duties. Estimated expenditure for these itemsincluded of the total project cost is about US$2.5 million.

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CHAPTER 3

MARKET AND THE MEANS TO MEET IT

Historical Market

3.01 The trend in electric energy sales has paralleled the trend ineconomic activity in the country. Between 1970 and 1973 electric energysales increased at an annual rate of about 9.7% while the real GDP averageannual growth rate recorded for the period was 4.5%. The slowdown ineconomic growth in 1973-1974 was accompanied by a similar slowdown inelectric energy sales. Energy sales which reached a peak of 1,136 GWh in1977 declined thereafter; by 1980 the accumulated decline in sales was about10% while the GDP declined by about 6% in real terms, during the sameperiod.

3.02 While the trend in electricity sales has been negative since1977, the number of consumers supplied with electricity has increasedappreciably. Between 1978 and 1981 more than 30,000 new customers wereconnected to the JPS system, resulting in an average annual increase of about4%. This relatively high growth in consumers reflects the sucess of the IDB-financed rural electrification program (para 1.20) as well as the success ofthe JPS program to provide service to urban low income dwellers. The averageuse of electricity per residential customer declined at an average annualrate of about 8.1% during 1977-1981. This trend reflects energy conservationefforts as well as the fact that the majority of the new customers have beenmarginal consumers. The evolution since 1965 of the JPS energy sales, numberof customers and average electricity consumption is shown in Annex 3.1.

Load Forecasts

3.03 To prepare load forecasts JPS uses a multiple linear regressionmodel which takes into account economic activity, population trends and theprice of electricity. The load forecasts (Annex 3.2) upon which the proposedproject was developed have been prepared on this basis. In contrast to theannual decline experienced during the last four years, energy sales areforecast to increase at a modest annual rate of about 2.7% during the1982-1985 period. This reversal in the sales trend is consistent withanticipated developments in general performance. The load forecast for theproject period is reasonable. A long-range load forecast will be financedunder the proposed project (paragraph 4.20).

Energy Losses

3.04 Energy losses in the JPS system are excessive. Energy losses,expressed as a percentage of net generation, were at a level of about 15%in 1978. Since then, the level of losses has increased steadily to anestimated 21% in 1981. This is the result of inadequate maintenance of thetransmission and distribution network as well as increased unauthorized useof electricity. To ensure that losses are brought down to an acceptablelevel, JPS prepared a program of loss reduction acceptable to Bank. Thisprogram is designed to identify and reduce technical losses and lossesassociated with system theft or unaccounted for consumption. The program

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set;3 a target of not more than 15% losses by A984 and 12% by 1987. Theproposed loan agre, n:ts (side letter) include target loss ratios and datesagreed during negotiat;.ons for implementing th-e loss reduction program. JPSgeneration requirements have been prepared assuming this improvement in lossreduction.

Energy and Capacity Balance

3.05 JRS wi l continue to generate abckut 90 percent of its energyrequirements with conventional oil-fired power plants through 1985(para. 1.15). JPS peak load has been forecast to grow from 223 MW in 1981 to246 MW in 1985. System heat rates are expected to improve during the period1982-1985 (from 14,650 Btu/kwh to 13,500 Btu/kwh). It is expected that therehabilitation program to be implemented during the project period willenable JPS to meet both the capacity and energy requirements adequately withthe existing installations.

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CHAPTER 4

THE PROGRAM AND THE PROJECT

Background and Objectives

4.01 The electric power service furnished by JPS has for a number ofyears been highly unreliable due to an excessive number of outages in allparts of the system. Since JPS does not record outages, its associatedlosses to the system can only be estimated (para. 6.04). Load sheddingcaused by unavailability of generating units is the major problem. Althoughinstalled generating capacity is more than sufficient to meet system peakdemand, inadequate maintenance, negative labor attitudes and lack of capitalexpenditures for improvements have caused frequent and prolonged unavailabil-ity of the larger and more efficient generating units. As a result during1981 and early 1982 Jamaica experienced an almost daily series of power cutseach lasting several hours which not only caused customer inconvenience butalso seriously hampered the country's productivity. While generatingreliability remains a critical problem, JPS is improving its transmission anddistribution system reliability by implementing an ongoing program of neededimprovements and additions; however, progress is limited by financial con-straints for capital investment. JPS has prepared a program for recordingcustomer outages which was agreed upon during negotiations and its implemen-tation is included in the loan agreements. 2/

4.02 JPS's 1982 to 1985 construction program, estimated at US$86 million(para. 4.15), of which 62% is foreign exchange, is required to provide ade-quate service to existing and new customers, reduce system outages, improvegeneration thermal efficiency (heat rate), and reduce transmission and dis-tribution losses. The program's cost was estimated by JPS, its consultantsand the appraisal mission on the basis of prevailing prices during the lastquarter of 1981. Program and project financing are discussed in paragraphs5.09-5.11.

4.03 The proposed Third Power Project, described in para. 4.17, wasprepared by JPS and IBRD personnel and discussed with the Government during1981 and early 1982. Taking into account the poor financial position of JPSand the system's projected moderate load growth, the project is designed tokeep construction investment consistent with providing adequate serviceduring the project execution period.

Generation

4.04 JPS, with a reserve capacity of almost 100%, is unable to meet thesystem peak demand of about 223 MW. Annex 4.1 lists installed generatingunits and scheduled retirements. Assuming a 2.5% average annual load growth,the 'nstalled capacity, if rehabilitated to design conditions and taking intoaccount scheduled retirements, should be able to meet peak demand until about1988. A generation planning study is included in the proposed project

2/ The loan agreement (side letter) includes performance indicators forlosses, thermal heat rate, outages, and power-plant availability.

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(para. 4.20). Below are actual and projected installed generating capacity(net maximum continuous rating in MW), peak demand and reserve margins.

Actual ____ Projected1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Steam 336 336 336 326 326 317 317 317 303 303 290GTs 86 86 86 86 86 86 86 86 73 60 60DiEsels 17 17 12 - - - - - - - -

Total 439 439 434 412 412 403 403 403 376 363 350

Max.Demand 220 223 228 234 240 246 252 259 265 272 278

Reserve 219 216 206 178 172 157 151 144 111 91 72

Reserve %Max.Demand 100 97 90 76 72 64 60 56 42 33 26

4.05 The investment program includes rehabilitation of the four existingsteam units at Old Harbor (206 MW) and units 5 and 6 at Hunts Bay (84 MW) aswell as overhaul of the three 20 MW gas turbines. Rehabilitation of thesteam units includes repairs to the boiler air preheaters and gas ducting,replacement of defective boiler tubes, installation of low excess air burnersand major overhaul of the turbine generators. Also, improvements will bemade to the boiler feed water treatment systems by additions of reverseosmosis equipment and degasifiers at Old Harbor and Hunts Bay stations. Theprogram which commenced in mid 1979 is expected to be completed in late1983 3/. The target is to improve Old Harbor station performance from 40%to 80% availability and its heat rate (thermal efficiency) from 15,706 to13,200 BTU per kWh. At Hunts Bay, station unit No. 5 has a capability ofonly 10 MW, about one-half its design output because of defective boilertubes and gas ducting and deferred turbine maintenance. Unit No. 6, althoughstill operating at design conditions, has not had a major overhaul since itsinstallation in 1976. JPS's consultant BEI will provide engineering servicesincluding assistance in design, procurement, installation and training forthe above program.

4.06 JPS's installed hydropower capacity, 21.4 MW, furnishes an averageof 120 GWh/y which is about 9% of 1982 net generation. With the assistanceof consultants, the Government is carrying out feasibility studies of newhydro sites scheduled to be completed not before December 1982. The eightrun-of-river sites selected as most promising (see map) have a totalestimated capacity of 19.8 MW and 92 GWh/y average energy supply. Totalestimated construction cost for the eight sites (1981 price) is US$53.4

3/ A consulting firm (British Electricity International - BEI), commencedwork in 1979 with financing from Loan 1516-JM. Rehabilitation ofHB-5, OH-3 and OH-4 should be completed by mid 1982. Rehabilitationof OH-1, OH-2 and HB-6 should be completed under the proposed Bankproject by late 1983.

million. 4/ It is estimated by the appraisal mission that construction ofthe selected sites could commence in mid 1984 allowving about 18 months fordesign, preparation of biddin.g documents and contract award. IDB hasInformed the Bank that it plans to finance the foreign exchange costs for thetotal hydro program including completion of feasibility stu,dies, engineering,design, bid documents and constructzton=

4.07 JPS and the Government have given consideration to the procurementof about 40 MW of large diesel generation capacity to be andided to the systemfor the purpose of improving system thermal efficiency and thereby reducingfuel costs. These diesels have a desigri heat rate of about 99000 to 10,000BTU/kWh as compared to the JPS system standard or target heat rate of 13,500BTU. Motor Columbus, a Swiss consultant, completed an evaluation of dieselenigines for JPS elictric power generation in September 1981 with favorableconclusions for adding 40 MW of diesel capaoity. Bank review of theevaluation in December 1981 considered diesel heat rate, uinit availabilityand financing terms as presented by the consultant to be over optimistic.JPS is currently reanalyzing the economic feasibility of purchasing thediesels using more realistic data. The clause in the existing loan agreementrequiring JPS to conisult the Bank before undertaking any najor investmentprovides an opportunity for the Bank to scrutinize the t.n'hnical, economicand financial feasibility of the diesels. 5/

Transmission and Substations

4.08 The proposed expansion program for transmission lines andassociated substations, which includes about 25 miles of Lnew 69 kV lines and6.25 MVA of 69 kV transformer capacity, is a continuatior. of the master plandeveloped in 1978 as part of the Second Power Project. The objective of theplan is to improve reliability of service particularly to the north coast andto allow greater utilization of the most efficient generating units byimproving the tie line around the Kingston area and between, the majorgenerating stations.

4.09 The transmission system as now completed or under constructionconsists of about 170 circuit miles of 138 kV line and 370 circuit miles of69 kV line (see map). The lines and substations included in the program areas follows:

69 kV lines: Annotto Bay - Port Antonio (25 miles).Reconductoring of about 105 miles of existing 69 kV

wood pole line.

Substations: Port Antonio (new) 6.25 MVAAnnotto Bay (extensiorn)

4/ Costs associated with the Leasibility studies and construction ofhydro works have not been included in the defined expansion program asno final decisions have been taken concerning implementation andresponsible agencies.

5/ Costs for the diesel engines have not been includdec in the definedexpansion program as no final decision has been tuaken, pending theresults of a re-examination of the justification for purchasing thediesels.

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Distribution

4.10 The proposed distribution program for the period 1982 to 1985 isdesigned to improve service to existing customers and provide power to newcustomers.

4.11 The program includes the addition or rehabilitation of about 900circuit miles of 24 kV lines, representing about 17% of the 1985 totallistri-2tion circuit uiles; 68 MVA of distribution transformers; an increaseof 8%; 60,000 meters; about 55,000 distribution extensions; 30 MVAR ofcapacitors and 2,500 street lights.

General Property

4.12 The investment program for general property includes two major items,expansion of the existing supervisory control and automatic data acquisition(SCADA) system and procurement of about 75 maintenance and operatingvehicles.

4.13 The existing SCADA equipment, installed in 1974, requiressignificant additions and improvements in order to monitor properly andcontrol JPS's expanded generation capability and transmission network and,also, to perform additional computerized functions necessary for efficientsystem planning and operations. The proposed program would provideequipment, materials, services and training as required to expand theminicomputer, console display capability and peripherals, and to increase thenumber of remote terminals to serve the existing system and to provide for atleast 10 years expansion. Software would be supplied in the program toprovide for improved monitoring and control functions, energy management andpower system analysis.

4.14 As of December 1981, JPS had a fleet of 49 cars and 158commercial-type trucks or vans for a total of 207 vehicles. Given thephysical size of JPS's system and the number of employees and customersserved, there is a need for additional vehicles in the program period.During 1981 JPS utilized an average of 15 rental cars to supplement its fleetand provide transportation to construction sites and to contract employees.Considering an economic lfe of 8 to 10 years for vehicles, it would benecessary to provide about 20 vehicles per year for replacement only. Theprogram includes procurement of some 75 vehicles from 1982 to 1985. About80% will consist of commercial-type trucks and vans to be used by operationand maintenance crews and the remaining 20% will be cars or station-wagons toprovide necessary work related transportation. Procurement of these vehiclesis necessary for implementation of the program and operation and maintenanceof the system.

Program Costs

4.15 The estimated investment cost of the 1982-1985 expansion programappears below:

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---- J$million---- ------ IJS$million-----Foreign Tocal Total Foreign Local Total

Generation 133.7 8.1 21.8 7.6 4.6 12.2Transmission/Substations 19.3 15.1 34.4 10.8 8.4 19.2Distribution 22.3 15.6 37.9 12.5 8.7 21.2General Property 16.7 9.3 26.0 9.3 5.2 14.5Consulting Services

and Training 10.7 2.7 13.4 6.0 1.5 7.5

Total Direct Cost 6_/ 82.7 50.8 133.5 46.2 28.4 76.6

Price Contingencies 13.1 8.0 21.1 7.3 4.4 11.7

Total Project Cost 95.8 58.8 154.6 53.5 32.8 86.3

4.16 The base costs were estimated by JPS on the basis of pricesprevailing as of December 31, 1981 and found to be reasonable by the Bank.Engineering and administration costs are included in the base estimates. Thecost of consulting services has been estimated on the basis of aboutUS$10,800 per staff-month, including salary, costs, fees, internationaltravel and subsistence. Transmission and distribution costs are based onsimilar work now in progress. Allowances for foreign and local priceincreases have been made using the following annual percentages: 1982, 8.5%;1983 to 1985, 7.5% p.a. and 6% p.a. thereafter. As Jamaica has a compara-tively open economy, forecast foreign and local inflation rates are expectedto be the same.

The Project

4.17 The project proposed for Bank financing consists of the mid 1982-84part of the investment program, excluding ongoing works. The project thusincludes the following:

(a) Generation:

(i) rehabilitation of the boilers and turbine generators units 1and 2 at Old Harbor and Unit 6 at Hunts Bay; and

(ii) improvements to the boiler feed water treatment systems at OldHarbor and Hunts Bay.

(b) Transmission and Substations:

(i) Annotto Bay - Port Antonio, 69 kV (25 miles);

(ii) installation of a 6.25 MVA, 69/24 kV transformer at AnnottoBay and expansion of the Port Antonio substation; and

6/Includes 10% for physical continengicies.

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(iii) replacement, upgrading and reconductoring of about 53 miles of69 kV wood pole lines.

(c) Distribution

(i) 272 circuit - miles upgrading and extension of 24 kV primarylines;

(ii) 15 MVAR of capacitors;

(iii) 39,000 kWh meters;

(iv) 36,000 secondary distribution extension services;

(v) 47 MVA of distribution transformers; and

(vi) 1,300 street lights.

(d) General Property

(i) 50 operation and maintenance vehicles; and

(ii) SCADA equipment.

(e) Training

(i) training about 160 JPS personnel in the areas of generalmanagement, power plant operations, finance, transmission anddistribution, and data processing.

(f) Consultant services for:

(i) long range generation planning study (38 mm);

(ii) rehabilitation of thermal power plants (90 mm);

(iii) financial planning (36 mm);

(iv) transmission and distribution operation and monitoring(50 mm);

(v) improvement in power plant management (76 mm).

Project Cost Estimate and Financing

4.18 The project cost estimate is summarized in the table below;detailed estimate and annual expenditures appear in Table 4.1. The proposedloan amount of US$30.5 million would finance a front-end fee of about US$0.5million and foreign exchange costs of US$30.0 million.

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----- J$ million - ------US$ million----Foreign Local Total Foreign Local Total

Generation 10.7 7.3 18.0 6.0 4.0 10.0Transmission 7.1 5.7 12.8 3.9 3.2 7.1Substations 0.9 0.5 1.4 0.5 0.3 0.8Distribution 8.7 5.8 14.5 4.9 3.2 8.1General Property 9.0 5.9 14.9 5.0 3.4 8.4Consulting Services and

Training 7.2 1.9 9.1 4.1 1.0 5.1

Total Direct Costs 43.6 27.1 70.7 24.4 15.1 39.5Price Contingencies 5.7 3.6 9.3 3.2 2.0 5.2Physical Contingencies 4.4 2.7 7.1 2.4 1.5 3.9

Total Project 53.7 33.4 87.1 30.0 18.6 48.6

Interest during construction 2.3 1.5 3.8 1.3 0.8 2.1Front-end fee * 0.9 - 0.9 0.5 - 0.5

Total requirements 56.9 34.9 91.8 31.8 19.4 51.2

These costs have been calculated on the same basis as those for the completeprogram (para. 4.15). Local costs would be financed by JPS with Governmentfinancial assistance. JPS would finance interest during construction.

Implementation

4.19 Engineering, preparation of bidding documents and supervision ofconstruction for the project would be performed by JPS's staff. This isacceptable since JPS has experience in similar work either recently completedor under construction. Contractors would build the new 69 kV line andinstall the substations and SCADA equipment since JPS does not maintainin-house construction capability for these works. Also contractors would beemployed to assist in rehabilitation of the generating units at Hunts Bay andOld Harbor as JPS does not have sufficient specialized technical personnelsuch as certified welders for boiler repairs and turbine technicians toperform the work in a timely manner. JPS personnel would install thedistribution equipment and distribution extensions. JPS has agreed to engageconsultants acceptable to the Bank to assist in the supervision of the powerplant rehabilitation work. The project would commence in mid 1982 and becompleted by December 31, 1984. The project implementation schedule isdetailed in Annex 4.2. JPS has confirmed its intention to meet the schedule.

Consultant Services and Training

4.20 The proposed project includes the services of-consultants to beengaged by JPS under terms of reference acceptable to the Bank to assist inthe following:

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(a) Generation Planning Study: JPS with increasing energy costs needsto develop a long-range generation plan to assure least costdevelopment of the system. The consultant will render advice andrecommendations to JPS concerning the technical and economicaspects of load projections and generation scheme, includingconservation, utilization of peat, coal and bagasse, and develop a20 year generation expansion scheme. The consultant will beengaged by October 31, 1982;

(b) Financial Planning Study: JPS's system of financial planning,budgeting and cash flow forecasting does not provide timely infor-mation for the use of its management. JPS has hired consultants(Price Waterhouse Jamaica) to assist in computerizing its account-ing as a first step towards improving its capabilities in theseareas. Consultants would be engaged to analyze, evaluate andrecommend improvements and corrective actions necessary to improveJPS's financial administration 'Including financial planning,budgeting, purchasing and internal financial controls. The consul-tants would be engaged not later than April 1983. It is expectedthat the new financial team (para. 2.05) will assist in the prepar-ation of the terms of reference for the financial planning study;

(c) Power Plant Rehabilitation: a consultant will be selected tocontinue assisting JPS in implementing the generation rehabilita-tion program at Old Harbor and Hunts Bay generating plants. Theconsultant will provide experienced the technical personnel toassist in supervision of the contractors at each power plant and toassist JPS's production manager in implementing the rehabilitationprogram. The consultants will commence the assignmert by September30, 1982;

(d) Transmission and Distribution System Operation and Maintenance:consultants will be selected to assist JPS to implement improve-ments in the operation and maintenance of the transmission anddistribution system including planning, reliability, reduction oflosses and safety practices. The contract will be signed bySeptember 1982.

(e) Power Plant Management Assistance: JPS needs to improve itsproduction management capabilities (para. 2.06). JPS will engageconsultants to strengthen its managerial capacity and assist themanager of production in the development of planning andmaintenance functions. The consultants will be engaged byAugust 31, 1982.

Procurement

4.21 Procurement of goods and services for the project, except as shownbelow, will be through international competitive bidding (ICB) in accordancewith Bank guidelines for procurement and Bank guidelines for use of consul-tants. Local manufacturers are expected to supply materials with a totalcost not exceeding US$250,000. Jamaican manufacturers will receive a marginof preference of 15% or the applicable import duties, whichever is lower forbid evaluation. Local contractors are expected to be successful bidders for

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construction of the 69 kV wood pole lines, substations and primary distribu-tion lines. It is expected that a foreign firm will be selected by limitedinternational tendering for the generation rehabilitation work. SCADA equip-ment which must be compatible with the existing system would be procured bylimited international tendering from suppliers who would also furnish tech-nical assistance to local contractors during installation. JPS furnished animplementation plan acceptable to the Bank for installation of the SCADAequipment. Equipment for substations and turbine generators (estimated atabout US$450,000) may be procured only after justificaion to and priorapproval of the Bank from original suppliers where standardization ofspecific items is necessary for compatibility with existing equipment or isproprietary and obtainable from only one manufacturer.

4.22 In March 1982, JPS signed a letter of intent with Foster Wheeler(Canada) for rehabilitation of generating units 3 and 4 at Old Harbor Stationwhich is scheduled to be completed by June 30, 1982. Contracting proceduresshould be similar to that outlined above for the rehabilitation work to befinanced under the project. Since this work is complementary to the plantrehabilitation component of the Bank financed project, the Bank hasrequested a copy of the contract in order to ensure that the proposed projectis compatible with work being performed. These works will not be financedfrom the proposed loan.

Retroactive Financing

4.23 Because the more efficient thermal generating units are out ofservice, JPS is supplying electricity with inefficient and less reliableunits (4.05). This situation has resulted in increased fuel costs which areestimated by JPS's consultant (BEI) to be about US$1 million per month. Inorder to meet the schedule for rehabilitating the thermal units at Old Harborand Hunts Bay power plants, it will be necessary to order materials andservice prior to Board approval. It is recommended that a provision be madein the proposed loan to cover expenditures made after May 1, 1982 for a totalof US$200,000 of retroactive financing for initial orders for services andmaterials for the generation rehabilitation program.

Disbursement

4.24 Disbursements from the loan account would be made for 100% of theex-factory cost of locally produced items and for 100% of foreign expendi-tures for:

(a) equipment and materials;

(b) contracts for services, installation and erection of works;

(c) consultant's services, and

(d) the training program.

Disbursements would be fully documented. The closing date would beDecember 31, 1984, six months after estimated completion of the project.Because of the continuing nature of transmission and distribution work, anyundisbursed amount of the proposed loan would be applied to system improve-ments similar to those in the project, after consultation with the Bank. In

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estimating disbursements for the proposed project, the project implementationschedule and the general trend of the sector disbursement profiles for powerprojects were utilized to estimate percent disbursed in relation to time fromdate of expected Board approval. Recent record of actual disbursements underthe previous power loan to JPS was not used due to the short (2 year) timespan of the proposed loan. Assuming loan approval by June 30, 1982, thefollowing table shows estimated loan disbursements:

Estimated Loan Disbursements

US$ millionIBRD Fiscal Year Duringand Semester Ending: Semester Cumulative

1983

December 31, 1982 1.9 1.9June 30, 1983 4.2 6.1

1984

December 31, 1983 9.5 15.6June 30, 1984 8.7 24.3

1985

December 31, 1984 4.8 29.1June 30, 1984 1.0 30.1

1986

December 31, 1985 0.4 30.5

Environment

4.25 JPS has carried out previous projects as well as on-going workswhich are similar to the proposed project with due regard to environmentalprotection and would do so in this project. Line routes consist mostly ofconversion or upgrading of existing lines and will, in most cases, followestablished rights-of-way with land clearing and visual impact kept to aminimum.

Project Risks

4.26 The procurement and construction schedule assumed for the projectis reasonable and takes into account normal engineering, administrative andconstruction procedures but with no provision for unusual delays. Timelycompletion of the project by the borrower will depend to a large extent uponstrengthening JPS's managerial capacity, improving employee morale and theability of construction firms to maintain schedules. Provision has been madeto engage consultants to improve JPS's management capability and to assistJPS in implementation-of the generation rehabilitation program. Notwith-standing changes in JPS's upper level management and Government's recentappointment of a Minister of Public Utilities with extensive union experi-ence, it will be difficult to moderate long standing union practices that

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encourage labor unrest (strikes) which in the past have caused delays inimplementing the generation rehabilitation program and constructing the138 kV transmission lines. Delays in Government actions necessary to assistin improving JPS's poor financial position may affect project implementationbecause of lack of funds for local costs.

TABLE 4.1

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TABLE 4.1

Project Cost Estimate

------------------- JS Thousand ------------------- ----- …S Thousand ------ ------ USS I I llon

1982 1983 1984 1982-1984 1982-1984

Forelgn Local Foreign Local Forelgn Local Foreign Local Total Foreign Local Total

Generat ion

RehabIlitation Ther-ai Poaer Plants (160 MW) 3465 2810 5156 3961 - - 8621 6771 15392 4.81 3.79 8.60

Improvement Feed Water Treatment (Thermal Plantsl 1035 258 1035 259 - - 2070 517 2587 1.16 0.28 1.44

Subtotol 4500 3068 6191 4220 - - 10691 7288 17979 5.97 4.07 10.04

Transmission Lines 69kV

A-netrio 3y - Port Antonlo (25 ni) 319 261 1656 1355 1052 860 3027 2476 5503 1.69 1.39 3.08

UpLrade e.isting Wood Pole lines (53 mi) 1997 1633 2001 1637 - - 3998 3270 7268 2.23 1.83 4.Q6

Subtotal 3316 1894 3657 2992 1052 860 7025 5746 12771 3.92 3.22 7. '

Substations 69 kVPor+ Antonio (6.25 MVA) 76 41 393 210 249 133 718 384 1102 0.40 0.22 C.62

Ann-too Bay (eeoansion) - - 89 48 90 48 .179 96 275 0.10 0.05 0.15

SObtotfl 76 41 462 258 339 181 897 480 1377 0.50 0.27 0.77

Distribu+ion Systee

ilpqrade Prinary Distribution Lines (772 ei) 187 153 973 807 60E 486 1768 1446 3214 0.99 0.81 1.80

Gopac)toes (15 MVAP) 206 21 12 2 27 3 245 26 271 0.14 0.01 0.15

Metnrs (39,000) 594 396 644 430 693 462 1931 1288 3219 1.08 0.72 1.80

Distrlbutior E.tenslens (36,000) 378 310 758 620 758 620 1894 1550 3444 1.06 0.86 1.92

Tra-nforners and Devices (47 MVA) - - 1188 509 1188 509 2376 1018 3394 1.32 0.i9 1.90

Street Lighting (1300 each) - - 248 248 249 249 497 497 994 0.28 0.27 0.55

Subtotal 1365 880 3823 2616 3523 2329 8711 5825 14536 4.87 3.25 9.12

General Property

Expansion S0ADA Syste- 640 160 2829 710 566 139 4035 1029 5044 2.25 0.57 2.82

Maintenano- Vehicles (50 each) 1653 1652 1653 1651 1653 1652 4959 4955 9914 2.77 2.77 5.54

Subtotal 2293 1812 4482 2361 2219 1791 8994 5964 14958 5.02 3.74 8.36

Consulting Ser-ices (290 staff months) 1400 350 2800 700 1400 350 5600 1400 7000 3.13 0.78 3.91

Training Program (30months) 332 83 665 166 665 166 1662 415 2077 0.90 0.23 1 .16

Total Direct Costs 12282 8128 22100 13313 9198 5677 43580 27118 70698 24,35 15.15 39.50

Physical Contingencies 1228 81 3 2210 1331 920 568 4358 2712 7070 2.44 1 .51 3.95

price Contingencies 574 379 3064 1846 2124 1311 5762 3536 9298 3.21 1.99 5.19

TOTAL COSTS 14084 9320 27374 16490 12242 7556 53700 33366 87066 30.00 18.64 48.64

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CHAPTER 5

FINANCIAL ANALYSIS

Summary

5.01 During the years 1977-1981, the financial performance of JPSdeteriorated because tariff increases allowed by the Goverrnent were notsufficient to enable JPS to comply with earnings provisions contained inexisting loan agreements. The Loan Agreement for the Second Power Project(1516-JM) required JPS to earn rates of return rising from 8% in 1978 to 8½%in 1981. The operating inefficiencies of JPS also contributed to its poorfinancial performance. Because of the difficult economic problems of Jamaicaand the unreliable service of JPS, the Bank did not take action under theLoan Agreement, especially as tariff levels (US$0. 143/kwh in 1981) arealready among the highest in the Latin American and Caribbean region.

5.02 Recently, JPS has suffered frequent power outages due to poor oper-ating and maintenance practices and a lack of foreign exchange for thepurchase of spare parts to repair its generators (para. 4.01). Publicreaction to the frequent power outages has been very adverse. In thesecircumstances, the Government has been reluctant to amend the currentarrangement for raising tariffs, which consists of a fuel adjustment clauseand a monthly increase (1% compounded) of the basic tariff. However, furthertariff increases are necessary if the company is to be able to generatesufficient funds from its operations to maintain the supply of electricity atan acceptable level of reliability. Such increases must be implemented on aphased basis to ensure their acceptability. To this end, the proposed loanagreement includes revenue covenants which would allow for gradual restorationof JPS financial viability by the end of the project. The implementation ofsuch a program will require moderate increases of the base tariff(Annex 5.2), plus full recovery of fuel costs; and is expected to permit JPSto self finance, in 1982-1984, about 41% of its funding requirements, whichis satisfactory. These requirements include an investment program reduced tothe minimum level consistent with providing adequate service during theproject execution period (para. 4.03). The following paragraphs discuss JPS'past and expected financial performance.

Earnings History and Financial Position, 1977-1981

5.03 During the years 1977-1981 although the debt-equity ratio improvedfrom 44% to 32% as a result of the revaluation of assets, the rate of returnfell from 5.9% on net average revalued assets to negative 2.4%; coverage ofdebt service and dividends by internal cash generation fell from 1.3 to 0.6;and the self-financing ratio declined from from 16.0% to negative 102.6%(Annex 5.1). A major contributing factors to the declining financial perfor-mance of JPS has been the operation of the fuel-adjustment clause, whichlimited tariff increases to less than fuel-cost increases.

5.04 While the basic tariff provides for minor recovery of fuel costs --J,2.77 per kWh of net generation -- the balance of fuel costs are recoveredthrough operation of the fuel adjustment clause. This recovery is determined

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by the extent to which JPS meets standards for fuel efficiency (in the formof a target or standard heat rate) and distribution efficiency (in the formof losses as a percent of net generation). The fuel adjustment clausecurrently allows for a neat rate of 13,500 BTU/kWh and system distributionlosses up to 15% (of net generation). In 1980, the system heat rate achievedwas 14,502 BTU/kWh and the distribution loss ratio achieved was 20%. In1981, the corresponding data were 14,395 BTU/kWh and 21%. As JPS was notable to meet the fuel-consumption and distribution-loss standards, the fueladjustment clause did not provide for full recovery of fuel costs. In 1980,the fuel clause provided about J$12.6 million less than the full fuel expense-- about J$6.9 million due to the system heat rate and about J$5.7 milliondue to the loss factor. In 1981, the corresponding data were J$10.3 millionand J$9.2 million (Annex 5.10). Annexes 5.2-5.4 set forth details on theearnings history and financial performance of JPS during the period1977-1981.

5.05 The feature in JPS tariffs limiting the heat rate and system lossesis a desirable feature. It serves as a measure of managerial efficiency.The Bank supports retention of the 15% limitation on distribution losses.Because of the high level of consumption unaccounted for (estimated at about6% of net generation), there are measures such as enforcing disconnectionpolicies more stringently, devoting resources to the combat of theft andirregular consumption and correcting clerical errors which JPS management canand should take to reduce distribution losses to the 15% limit (para 3.04).

5.06 As the heat-rate standard (which was outside the control of JPSmanagement) has contributed to the declining state of JPS finances and effi-ciency, the Bank favors immediate adjustment of the heat rate to a levelwhich the system can reasonably be expected to achieve (about 14,500BTU/kWh). After such an adjustment, JPS would not expect to change this heatrate for billing purposes before 1986. This adjustment should help JPS toavoid in the future the financial problems of the past. To promoteefficiency, JPS agreed to heat-rate targets which have been incorporated intoa side letter to the proposed loan agreement.

5.07 Due to its revenue insufficiency, JPS' internal cash generation wasnegative for 1977-1981, requiring JPS to finance its requirements with loans(J$119.1 million) and Government contributions (J$37.6 million). Anotherfactor contributing to its funding problems has been the high level ofaccounts receivable, which have varied from 89 days to 75 days of sales. Ifduring this period, JPS had been able to hold accounts receivable to about 55days of sales, (which is considered reasonable for its system), it would havebeen able to reduce its funding requirements by J$42 million (includingfinancing charges). 6/

5.08 In April 1980, a refinancing agreement was reached between theGovernment of Jamaica, which was experiencing balance-of-payments problems,and certain foreign commercial banks. The agreement rescheduled the foreign

6/ At 55 days of actual sales revenue in 1977 and 1981, the levels ofaccounts receivable would have been J$15.0 and J$39.1 million,respectively. Avoided financing charges would have amounted to J$18.0million (J$24.0 million compounded at 15% p.a. for five years.

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debts of certain Government entities (including JPS) falling due betweenMarch 31, 1979 and April 1, 1980. JPS's debt repayment amounting to J$24million was rescheduled to the period 1983-1986. Nevertheless, JPS hascarried a heavy burden of debt service payments: the debt-service coverageratio was 0.9 in 1980 and 0.6 in 1981. At the end of 1981, the long-termdebt of iPS had a weighted average maturity of 10 years and three months anda weighted average interest rate of about 9.0%. These reflect JPS's heavyreliance, in recent years, on medium-term borrowing from commercial sources-- a reflection of JPS's revenue insufficiency and the prevailinginflation-distorted conditions in world financial markets. After 1982, thefinancial performance of JPS is expected to improve, as discussed below.

Earnings Requirements and Financing Plan, 1982-1984

5.09 The financial performance of JPS in 1982 will be unfavorable. Thecompany is expected to earn a negative 1.5% on average revalued net fixedassets. The proposed loan agreements replace the existing tariff convenantwith provisions requiring the Government to allow tariffs to be set at levelsenabling JPS to earn rates of return on its average revalued net fixed assetsof 5% in 1983, 8% in 1984, and 8.5% in 1985 and thereafter. They furthercondition effectiveness of the loan to the Government's taking specificaction to enable JPS to achieve a 5% return, as discussed duiringnegotiations.

5.10 A key element of the proposed financing plan is expected to beGovernment equity contributions of about J$5.0 million in 1982 and non--Bankfinancing under suitable terms of about J$ 15.0 million (from local insurancecompanies and pension funds). A definite commitment for these funds has beenreceived.

5.11 Under the financing plan summarized below, JPS would self-financeabout 41% of its total requirements and cover its debt-service requirementsby 1.5.

Summary Funds Statement, 1982-1984Amount % of

Total (in millions (in millionsof J$) of US$)*

Sources

Gross internal cash generation 244.0 136.3 123.2Less: debt service & dividends 163.4 91.3 82.5Net internal cash generation 80.6 45.0 40.7Proposed Bank Borrowing 52.2 29.2 26.4Other Borrowing (existing and proposed) 60.2 33.6 30.4Government funding 5.0 2.8 2.5

Total sources 198.0 110.6 100.0

Applications

Construction expenditures 155.8 87.0 78.7Net change in working capital 25.4 14.2 12.8Net reductions to demand loans 16.8 9.4 8.5

Total applications 198.0 110.6 100.0

* Rate of exchange: US$1.00: J$1.79.** Final disbursements (about US$1.3 million) from proposed Bank loan are

expected in 1985.

- 2 7 -

The financing plan reflects the assumption that JPS would retain all earningsother than those needed for operations and payment of debt service, taxes,and preference share dividends. However, JPS does not expect to pay incometaxes during the project period. Under the Loan Agreement for the SecondPower Project (1516-JM), JPS may not assume overdraft or demand debt exceed-ing one-sixth of its cash operating expenses during the preceding twelvemonths. Furthermore, the same loan agreement obligates JPS to seek Bankagreement for (i) additional long-term borrowing unless its gross internalcash generation exceeds its maximum future debt service by a ratio of 1.5;and (ii) the construction of works additional to the agreed program andexceeding the equivalent of one percent (1%) of the value of gross fixedassets. The proposed loan agreement for the proposed loan repeats thesecovenants. The performance of JPS under these covenants has beensatisfactory. Annexes 5.2 to 5.10 set forth details on the proposedfinancing plan.

Security

5.12 JPS has Sterling den minated debentures which are secured by aDebenture Trust Deed carrying a first floating charge. To ensure that theBank loan will have equivalent ranking with the debenture holders it isproposed that JPS agree to issue, should the Bank so request, additionaldebentures supplemental to the Debenture Trust Deed as security for theproposed loan.

- 28 -

CHAPTER 6

ECONOMIC ANALYSIS

Least-Cost Solution

6.01 Generation: There is no additional new generation capacityincluded in the proposed program since JPS has sufficient installed capacityto meet projected loads. The rehabilitation of existing thermal units isnecessary to improve efficiency and capability to near design conditions.During the program period about US$14.1 million will be used to financerehabilitation of Old Harbor and Hunts Bay, a total of 290 MW. Thisinvestment is the least-cost solution to improvement of generationcapability. Other technically feasible alternatives - the installationof readily available diesels or gas turbines - are not economically viablebecause they would require higher capital investment and operating costs.

6.02 Transmission and Distribution: The 138 kV lines and 24 kV primarydistribution feeders were selected by JPS and its consultants as early as1975 as the least cost solution for future expansion. JPS, during programpreparation in 1980 and 1981, conducted studies using updated load flows, andfuel and construction costs which confirmed the above voltages as least-costsolutions for present expansion and upgrading of the system. The AnnottoBay-Port Antonio 69 kV line when compared with viable alternatives was foundto be the least-cost solution for discount rates up to 20%. Because oflimited funds and construction capability, only feeders showing the highesteconomic return of those needed to serve new customers are included forupgrading and reconductoring in the proposed project.

Internal Economic Rate of Return

6.03 Because the Bank-financed project is intertwined with the remainderof the 1982-1985 investment program it is difficult to isolate its benefitsdistinctly from those of the rest of the program. The economic rate ofreturn has therefore been calculated for the entire 1982-1985 investmentprogram.

Economic Benefits

6.04 The economic benefits to be derived from the proposed 1982-1985investment program include: (i) allowing JPS to meet its incremental salesfor the period; (ii) achievement of fuel savings resulting from a reductionin the trangsmission and distribution losses and from an improvement in theefficiency of JPS generating plants; and (iii) reduced incidence of forcedelectrical outages with a corresponding decrease in productive outputforegone as a result of power cuts. The justification for each of the abovebenefits and the procedure for its quantification are indicated below:

(a) Incremental Sales: The state of the existing power network is suchthat JPS will be unable to meet any sales over and above the 1981level without the power plant rehabilitation program and theassociated investments in transmission and distribution facil-ities. All incremental sales during the 1982-1985 period are

- 29

assumed to be met as a result of the program. The program benefitshave been valued at the January 1, 1982 average tariff. Theprogram is assumed to yield benefits for a 20 year period.Incremental sales over the 1985 level (i.e., incremental salesafter the conclusion of the investment program) have been assumedto be met as a result of post 1985 investments;

(b) Loss Reduction: It is anticipated that by the end of the program in1985 the level of system losses would have declined from the 21%level 7/ to a more reasonable 15%. This improvement is expectedto result from a combination of technical improvemets in thetransmission and distribution system brought about by theinvestment program as well as from the enforcement of procedures toreduce unauthorized use of electricity. These procedures, whichare not directly related to the investment program, are estimatedto account for about half of the projected reduction in losses.The investment program will account for the other half. The lossesso avoided result in lower energy generation for any given level ofsales. The benefits were quantified as the associated cost of fuelat the January 1, 1982 price levels. 8t

(c) Improvement in Generating Plant Efficiency: Through theimplementation of the 1982-1985 investment program, the efficiencyof JPS generating plants is expected to improve significantly so asto reduce the amount of fuel required to generate each kWh ofelectricity. The associated benefits were derived as thedifference between the fuel costs (in constant January 1, 1982)prices valued at the existing heat rate of about 15,000 BTU/kWh andfuel costs valued at the projected heat rates that will result fromthe program (Annex 5.1).

(d) Reduction in Outages: The proposed program will enable JPS tosupply electricity more reliably. Forced electricity outages willbe reduced and consequently the associated losses in industrialoutput and in residential leasure time as well as wastage ofhousehold goods, normally induced by power outages, should bereduced. The valuation of the estimated benefits associated withthe reduction in outages was not included in the calculation of theprogram's economic return because the project is sufficientlyjustified without their additional benefit. 9/

7/ Expressed as a percentage of net generation.

8/ For incremental sales beyond 1981 the benefits from reduced losses (andimproved heat rates) were incorporated into the computation insubparagraph (a) above. Therefore, to avoid double counting, thebenefits in subparagraphs (b) and (c) were computed at the 1981 saleslevel.

9/ JPS has estimated that the cost to the economy of a kWh not supplied ata level of about J$0.46 (1978 prices). The Bank obtained the agreementof JPS to record outages starting in 1982 (para. 4.01).

- 30 -

Economic Costs

6.05 The cost of the capital investment program valued at constantJanuary 1, 1982 prices, has been included in the program's economic costs.Other economic costs are the fuel and non-fuel operating and maintenancecosts associated with the incremental energy sales.

Return on Investment

6.06 Annex 6.1 shows the costs and benefit streams associated with theprogram as described above. The discount rate which equates the two streamswas used as the program's internal economic rate of return. The rate ofreturn so obtained was about 23% which compares very favorably with theeconomic cost of capital in Jamaica estimated at about 11%.

6.07 Tests were performed to determine the sensitivity of the internaleconomic rate of return to various key parameters. The results were asfollows:

Scenario Rate of Return (%)

Base case 23Capital costs up 15% 18All benefits down 25% 12Sales down 20% 20Benefits from reducedlosses down 40% 20

Benefits from heat rateimprovement down 40% 14

The results above indicate that the economic raturn of the program,on which the project is based, is adequate and that the economic return isunlikely to be affected significantly by any errors in valuation of the basicparameters used to derive it. A high economic rate of return would beexpected from a long overdue system of rehabilitation expansion program.

- 31 -

CHAPTER 7

AGREEMENTS AND RECOMMENDATION

ConditioT of Effectiveness

7.01 Before loan effectiveness, the Bank should receive:

(a) notification that a satisfactory individual has been engaged tofill the position of chief executive officer at JPS (para. 2.04);

(b) evidence that appropriate actions (including tariff adjustments)have been taken to produce for the Borrower revenues yielding infiscal year 1983 an annual rate of return of not less than 5%.

Loan Covenants

7.02 During negotiations agreement was reached on the following:

(a) Government and JPS will appoint and maintain a chief executiveofficer at JPS acceptable to the Bank (para. 2.04);

(b) JPS will prepare a detailed program acceptable to the Bank coveringits 1983-1984 training needs by December 31, 1982 (para. 2.10);

(c) JPS, with the assistance of external auditors, will evaluate andstrengthen control systems and auditing procedures acceptable to theBank not later than June 30, 1983 (para. 2.12);

(d) JPS will implement a program satisfactory to the Bank to reduce accountsreceivable in accordance with a schedule agreed during negotiaitons(para. 2.14);

(e) JPS will implement a program acceptable to the Bank to reduce energylosses in accordance with a schedule agreed upon during negotiations(para. 3.04);

(f) JPS will engage consultants under terms of reference acceptable to theBank to assist in: (i) generation planning; (ii) financialplanning; (iii) power plant rehabilitation, and (iv) system operationand maintenance (para. 4.20);

(g) Government will permit JPS to implement specific tariff measuresdiscussed during negotiations enabling JPS to earn a return of 5% in1983. Government will permit JPS to increase tariffs sufficiently toearn a return of 8% in 1984 and 8.5% in 1985 and annually thereafter(para. 5.09);

(h) JPS will issue, if the Bank should so request, additional debenturessupplemental to the Debenture Trust Deed as security for the proposedloan (para. 5.12).

7.03 Agreements of the proposed loan repeat existing covenants withrespect to:

-. 32 -

(a) the submission of an audited financial statement to the Bank withinfour months of the end of each fiscal year (para. 2.13);

(b) limitation of short-term borrowing to one-sixth of cash operatingexpenses during the preceeding twelve months (para. 5.11); limita-tion of long-term borrowing unless gross internal cash generationexceeds maximum future debt service by a ratio of 1.5 (para. 5.11);and limitation of construction of works additional to those agreedwith the Bank to no more than 2% of gross fixed assets in operationuntil the project shall have been completed (para. 5.11).

Recommendation

7.04 With the above assurances the project would constitute a suitablebasis for a loan to JPS of US$30.5 million under applicable terms andconditions for Jamaica.

May 28, 1982

- 33 -

ANNEX 1.1 - ENFRrY CO'SUMPTION 1975-81(Millions of Barrels of Oil Equivalent)

Est ./1975 1976 1977 1978 1979 1980 1981

PetroleumAvgas 16.0 15.2 14.4 13.6 15.2 12.8 12.0Turbo Fuel 764.5 708.4 594.3 621.0 801.3 689.1 626.5Gasoline 1,647.3 1,703.2 1,587.1 1,532.1 1,429.1 1,261.5 1,305.1Automotive Diesel Oil 1,630.0 1,532.1 1,690.8 1,431.7 1,583.6 1,307.4 1,210.0Marine Diesel Oil 335.2 251.6 201.5 153.9 176.2 150.0 172.3Fuel Oil 11,894.0 10,139.0 11,136.0 11,734.0 11,385.0 11,210.0 11,315.0Liqufied Petroleum Gas 298.5 299.2 304.1 313.9 291.5 244.6 223.7Kerosene 400.2 397.4 414.0 402.0 351.9 259.4 235.5

Total 16,985.7 15,046.1 15,942.2 16,202.2 16.033.8 15,134.8 15,100.1

Hydropower 231.0 194.0 191.0 202.0 189.0 235.0 233.0

Total Commercial nergy 17,216.7 15,240.1 16,133.2 16,404.2 16,222.8 1V,369.8 15,333.1Percent Petroleum 98.7 98.7 98.8 98.8 98.8 98.5 98.5Per Capita 8.5 7.4 7.7 7.8 7.6 7.1 7.0

Bagasse .. .. 1,423 1,568 ' 1,299, 1,210

Total Energy .. .. 17,556.2 17,972.2 17,521.8 16,579.8Percent Petroleum .. .- 90.8 90.2 91.5 91.3Per Capita .. .. 8.4 8.5 8.2 7.7

a/ Based on first nine months.b/ Excludes charcoal and fuel woods which amounted to 84.6 and 40.9 MOE respectively in 1979.

not available.

Sourceat iniastry of Energy and Natural Resources.

- 34 -

ANNEX 1.2

Page 1 of 6

Flectricity Tariffs in Jamaica as of February 28, 1982

Residential (Rate 10)

Available: Throughout the island

Applicable: To residential consumers of all single phase domesticuses including single phase motors of 5 H.P. or less,individual capacity, when all service is taken throughone meter at a single point of delivery.

Rate: First 10 kWh or less per month - $2.55Next 20 kWh per month at p24.22 per kWhNext 70 kWh per month at 019.41 per kWhNext 200 kWh per month at 014.11 per kWhNext 200 kWh per month 08.98 per klWhOver 500 kWh per month at ¢8.02 per kr*hMinimum: $1.21 per month subject to application ofFuel Adjustment Clause and Cost of Service AdjustmentClause.

General Service (Rate 20)

Available: Throughout the island

Applicable: To any consumer for all purposes not specifically providedfor in other schedules, provided that consumer's equipmentdoes not cause undue voltage fluctuations as defined inthe Company's terms and conditions currently in effect,and all service is taken through one meter at a singlepoint of delivery. Commercial and industrial consumershaving air-conditioning, heating and motor loads withindividual or aggregate demands of 20 kW or over may electto operate this equipment from a separate circuit orcircuits in which case the company will permit a secondmeter at the location and will bill the consumptionregistered thereon under rate 40.

Rate: First 10 kWl or less per month - $2.55Next 90 kWh per month at ¢38.0l ner kWhNext 900 kWh per month at ¢17.32 per kWThNext 9,000 kWh per month at 013.63 per kWhOver 10,000 kWh per month at ¢10.26 Der kWh

- 35 -

ANNEX 1.2Page 2 of 2

Minimum: General Service $2.55 per month (subject toapplication of Fuel Clausp and Cost of Service AdjustmentClause) plus 75i per month per kW of connected power loadin excess of 1 kW.

Transformer Ownership and Primary Metering Discount:

The following discounts shall be applied prior tothe fuel clause adjustment.

(1) 5% of the energy charge only when service istaken and metered on the primary side of themain bank of consumer-owned transformers.

(2) 2.5% of the energy charge only when service istaken on the primary side of the main bank ofconsumer-owned transformers and metered at thesecondary voltage.

(3) 2.5% of the energy charge only when service ismetered on primary side of the main bank ofcompany-owned transformers.

Power Factor: The consumer shall be required to maintain a powerfactor of not less than 85%.

Small Commercial & Industrial (Rate 40)

Available: Throughout the island

Applicable: To consumers with demands at 20 kW or more for allpower purposes and incidental lighting where suchlighting does not exceed 10% of the connected powerload. Hotels are excluded from the lighting limitation.Service is to be taken through one meter at a singlepoint of delivery. Not applicable for standby breakdownor auxiliary service.

Where required conditions are met, this rate may alsobe applied to air conditioning, heating and motor loadsin conjunction with rate 20 for lighting through asecond meter at the same location.

Rate: Demand Charge.For each kW of maximum demand 92.15 per kW per month

- 36 -

ANNEX 1.?Page 3 of 6

Energy First 100 hours' use of maximum demand per monthCharge: at 08.18 per klvWh

Next 200 hours ' use of maximum demand per monthat 06.9 per kWhOver 300 hours' use of maximum demand per monthat ¢5.77 per kWhMinimum Charge: The Demand Charge

Power Factor When the actual power factor (%) is found to leAdjustment: less than 85% the demand charge shall be adjusted

as follows: Demand charge x 85 divided by actualpower factor (M).

Transformer Ownership and Primary Metering Discounts:

Same as for Rate 20

Large Commercial & Industrial (Rate 50)

Available: Throughout the island

Applicable: To consumers with demands of 1,000 kVA or more forgeneral power and lighting purposes.

Service is to be taken through one meter at a singlepoint of delivery. Not applicable for stand-by,breakdown or auxiliary service.

Rate: Demand ChargeFor each kVA of maximum kVA demand S1.83 per kVAper month.

Energy First 100 hours' use of maximum kW demand per monthCharge: at ¢5.10 per kwh

Next 200 hours' use of maximum kW demand per monthat 06.90 per kWhNext 200 hours' use of maximum kW demand per monthat 05.13 per kWhOver 500 hours' use of maximum kW demand per monthat 04.49 per kWh.

Minimum The Demand Charge.Charge:

- 37 -

ANNEX 1.2Page 4 of 6

Transfer Ownership and Primary Metering Discounts:

Same as for Rate 20

Street Lighting (Rate 60)

Available: Throughout the island by way of overhead fixturessupported on existing Company poles within theoverhead secondary distribution lines of the Company.Dusk to dawn service controlled by timing or otherdevice to provide for approximately 4,000 hours'service per lamp per year.

Minimum: For each metered circuit shall be a .75iper nominal wattage installed but in no case less than$5.65 per month.

Applicable: To public authorities and statutory organizations toprovide lightfng on public roadways, streets, parks,gardens and other public areas at the request of aPublic Authority or Statutory Organization.

Rates: Company Owned Facilities

The installation, operation and maintenance of thefixtures installed within the Company's secondarydistribution system are covered by the following rates:

Incandescent-lOO watts at 06.61 per lamp per month150 watts at 08.45 per lamp per month

Mercury Tungsten - 160 watts at $10.36 per lamD ner monthMercury Vapour - 80 watts at ¢10.84 per lamp per month

125 watts at 012.91 per lamp per month250 watts at 018.49 per lamp per month400 watts at 024.06 per lamp Der month

High pressure sodium - 100 watts at $11.92 per lamp per month150 watts at $14.19 per lamp per month250 watts at $18.49 per lamp per month400 watts at $24.n6 per lamp per month

Metered Where street light installations are installed,Circuits: owned and maintained by the consumer, the service

shall be metered and the following rates shallapply:

For each Kilowatt-hour supplied - S10.91 per kWhper month

- 38 -

ANNEX 1 .2Page- 5 of &

Traffic signals:Traffic signals and traffic control systems shall beincluded in the rate for metered circuits.

Minimum: For each metered circuit shall be a 0.87iper nominal wattage installed but in no case less than$6.56 per month.

Fuel Clause Surcharge

Rates as indicated herein are subject to a Fuel Clause Adjustmentwiich shall be as follows:

The Energy Charge per kilowatt-hour shall be increased or decreasedat the rate of 0.0145U for each One Cent (1) or fraction thereof by whichthe average cost of fuel used during the month preceding the billing monthexceeds or is less than 27.714 for that quantity of fuel used containing1,000,000 (One million) B.T.U. (British Thermal Units).

The fuel clause shall apply only to the portion of energy suppliedto the consumer that the net Kilowatt-hours generated by fuel by the companyand purchased from others bears to its system total net generation andpurchase and shall be adjusted to compensate for system losses determined bythe ratio that the sales of energy bears to the system total net generationand purchase provided that where the actual ratio falls below 85% the ratio of85% shall be used.

The variations in the Energy Charge per kilowatt-hour shall becalculated to the nearest one-hundredth of a cent (0.01). No monthlyamount of less than Eight Cents (84) shall be charged or credited under thefuel caluse.

Cost of Service

The energy rates as indicated in this Schedule are subject to a Costof Service Adjustment. Which shall be as follows:

The energy rates as shown in Rates No. 10, No. 20, No. 40, No. 50,and No. 60, excluding the fuel adjustment charge, shall be increased on1st July, 1978, by a cost of Service adjustment of 1% of the energy ratesin force at 1st June, 1978 and on the 1st day of each month thereafter shallbe increased by an additional 1% of the energv rates in effect at t-1,beginning of the prior month.

In the event it is determined by Lhe appropriate autlioriLy, dbuedon information filed by the company, that the company's annual rate of returnin the preceding twelve month period is appreciably greater than the approvedrate of return, the 1.5% increase which would otherwise next occur shall not beimplemented and reduction of 1.5% shall be applied if necessary.

- 39 -

ANNEX 1.2Page 6 of 6

Reconnection of Service

Reconnection Fees are as follows:

Rate 10 $ 5.00Other Rates $15.00

- 40 -

ANNEX 1,3 ELECTRICITY SUPPLY, 1980

InstalledCapacity (MW) Z Generated (Owh) %

Jamaica Public Service Company 454 67 1,274 61

Captive Plants 226.0 33 812.5 39

Bauxite/Alumina (185.7) (27) (777.5) (37)Cement (14.0) (2) (10.8) (1)Sugar (25.8) (4.) (24.1) (1)Goodyear (0.5) (-) (0.1) (-)

TOTAL 680 100 2,086.5 100

-41-

ANNEX 1.4 ELECTRICITY CONSUMPTION, 1980

Public Service Captivd Plaftts TotalGwh % Gwh Z Gwh %

Residential 317.5 31 - - 317.5 17

Commercial and Industrial 568.3 56 35.0 4 603.3 33

Mining - - 777.5 96 777.5 42

Other 136.7 13 - - 136.7 7

'TOTAL 1.022.5- 100 812.5 100 1,835.0 100

a/ Discrepancy with Table 2 reflects transmission losses and JPS use.

JAMAICA PUBLIC SERVICE COMPANY LIMITED (JPS)

ORGANIZATION CHART

BOARD OF DIRETRMAAGING lRTfDI

| EREAL MANAGER PUBLIC RELATIONS COMPANYSECRETARY

t DAIA AGENEE ENGINTERNAL

I .( } ~~~~~~~~~~~~~AUDITOR |

MAN RESOURCES ECTOR~~~~~~~~~~~~~~~~~~~T ADRWTRLAN

AND INDUSTRIALTR r EVELOPMENT 1 | PRODUCTION AND ECRA S| AIN ANID

LATIONS MANAA EN ST. M| 8UDGET _ _ OPER~ ~~~ATIONS E OTOL| MAIN TENANCE

MANAGER~~~~~~~~~~~~~~~~~~~~~~~~~~~N ST.NTHOMA

FINANCIAL _ _ REVENUE ELECTRICACCUTN OPERATIONS OEATIONS DISTRICT

[ < 1 |0+ 1 + 3 |SR * g GOUNNTIN10G METERING T CO STRUCTION |0S a1 RlN

l l RELATIOS I p PROCESIN | ALLNAO| PUCHAS]NG |ODHAH8HR| PRJCSBORRNPOT|P CLRNO t [ l l l RERCORDS I

r AFETY OFFICFR P| ANI E OLCT10 NS ENGINEERINGNCHESTER 2 EUITYER| MISVSTION<_ll[ .

I I OFFICER j j ANDIRRE I t t I PLAN~~~~~~~~~~~~~~~iNG 0 c HSPLLERVICE AND)HANOVERW TRAININ f f LOA h F BOGE 0 | EN INEEHIS KINGSTO ANO | TRELAWNYN

I INSURANCE k [ WORKSHOP Ll L] ~~~~~~ ~~~ELECTRIAL 1 T. ANN AND II I I | I MAI~~~~~~~~~~~~~~~~~~NjTE~N NE IC ST~ MARY I 1

World Bank-23777

ANNEX 3.1

PUBLIC SERVICE ELECTRICITY CONSUMPTION

AND NO. OF CUSTOMERS

1965 1970 1975 1976 1977 1978 1979 1980 1981

% GWH % GW GWH b GWH 7 GWH 7 GWH % GWH 7 OWN % GWH 7 GWH

Sales of Electricity

Residential 23.2 100.1 27.7 203.3 30.7 327.6 31.0 346.0 30.5 346.8 30.9 350.6 31.1 329.9 31.0 317.5 31.0 314.9

Small Commercial & Industrial 51.3 220.8 45.8 337.0 43.7 465.2 43.1 482.9 42.7 485.5 42.1 478.8 42.2 447.4 42.5 434.9 42.4 431.5

Large Commercial & Industrial 20.0 86.0 16.3 119.5 13.4 142.3 13.8 156.9 13.1 149.1 13.7 155.8 13.3 140.9 13.1 133.5 12.4 125.7

Other 5.5 23.7 10.2 75.3 12.2 130.4 12. 13•4.A -3.7 154.7 13.3 151.0 13.4 141.7 13.4 136.7 14.2 144.9

TOTL o100.0 430.6 100.0 735.1 100.0 1065.4 100.0 1120.2 100.0 1136.1 100.0 1136.2 100.0 1060.0 100.0 1022.6 100.0 1017.0

Growth over previous year % 15.4 9.1 7.6 5.1 1.4 0 -6.7 -3.5 -0.5

Averaze Number of Customers (000'!

Residential 64.9 97.3 142.1 153.6 163.8 177.7 189.8 199.5 208.4

Small Commercial & Industrial 15.3 17.9 22.0 22.6 23.3 23.6 23.9 23.8 23.9

Large Comsnercial & Industrial 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other - 0.2 1.4 2.0 2.1 2.2 2.2 2.2 .2

80.4 116.6 . 166.1 178.2 189.2 208.5 215.9 225.5 234.5

Growth over previous year Z 7.0 7.0 6.9 7.3 6.2 10.2 3.6 4.4 4.0

Averaee UsetKWH/Customer - vear)

Residential 1,541 2,090 2,306 2,254 2,116 1,972 1,738 1,591 1,511

Growth over previous yr.-% 6.0 4.4 2.3 -1.5 -6.1 -6.8 -11.9 -8.5 -5.0

All customers 5,345 6,304 6,414 6,287 6,004 5,446 4,910 4,535 4,337

Growth over previous yr.-% 7.8 2.0 0.7 -2.0 -4.5 -9.3 -9.9 -7.7 -4.4

February 22, 1982

ANNEX 3.2

FORECAST POWER MARKET

* -.---------- Actual > - Forecast1980 1981 1982 1983 1984 1985

Avg. No. of Customers

Residential 199.468 208,390 216,725 225,395 234,410 243,786Commercial and Industrial-Small 23,765 23,876 24,914 25,935 26,964 28,032Commercial and Industrial-Large 23 23 24 25 26 27Other 2,229 2,229 2,235 2,300 2.400 2,525

Total 225,485 234,518 243,898 253,655 263,800 274,370

Avg. Yearly Use (kW~hcust)

Residential 1,591 1,511 1,504 1,500 1,473 1,438 >

Commercial and Industrial-Small 18,300 18,070 17,612 17-444 17,216 17,006

Sales (GWh) GWh % GWh % Z GWh X GWh % GWh

Residential 31.0 317.5 31.0 314.9 31.0 326.0 31.8 338.0 31.5 345.3 31.2 350.5Commercial and Industrial-Small 42.5 434.9 42.4 431.5 42.2 438.8 42.2 454.4 42.4 464.2 42.3 476.7Commercial & Industrial-Large 13.0 133.5 12.4 125.7 12.5 130.4 12.4 133.1 12.4 136.0 12.3 138.8Other 13.5 136.7 14.2 144.9 14.3 144.8 13.6 145.5 13.7 150.5 14.2 160.0

Total 100.0 1,022.6 100.0 1.017.0 100.0 1,040.0 100.0 1,071.0 100.0 1.096.0 100.0 1,126.0

Losses-% Net Generation 19 20 18.5 17 15 15

Net Generation (GWh) 1,274 1,281 1,284 1,290 1,289 1,325

Generation by Hydro (GWh) 134 133 120 120 120 120Generation by Fuel (GWh) 1,140 1,148 1,164 1,170 1,169 1,205

Load Factor 0.70 0.70 0.68 0.66 0.64 0.64Peak Demand (MW) 220 223 226 236 242 251

- 45 -

ANNEX 4.1

JPSC Installed Generating Units (1982)

MaximumNameplate Continuous

Unit Rating Rating Net Year of ScheduledPower Station No. (MW) (MW) 3/ Commissioning Retirement 2/

Steam TurbineHunts Bay 1 12.5 9.5 1953 1983

2 12.5 9.5 1955 19853 15.0 13.5 1958 19884 15.0 13.5 1960 19905 20.0 19.0 1962 19926 68.5 65.0 1976 2006

143.5 130.0Steam Turbineold Harbour 1 33.0 27.0 1968 1998

2 60.0 54.0 1970 20003 68.5 60.0 1972 20024 68.5 65.0 1973 2003

230.0 206.0

Gas TurbineHunts Bay 1 16.5 13.0 1968 1988

2 16.5 13.0 1969 19894 22.8 20.0 1974 19745 22.8 20.0 1974 1995

78.6 66.0

Gas TurbineBogue 3 22.8 20.0 1973 1993

DieselBogue 12 units 20.1 17.0 1945-1965 1983

HydroMaggotty 6.4 4.0 1959 -Lower White River 4.8 4.0 1952 -Roaring River 4.1 4.0 1949 -Upper White River 3.6 3.0 1945 -Rio Bueno 2.5 3.0 1956 -

21.4 18.0

Total Capacity - 516.4 457.0 1/

1/ All the hydro plants are of the run-of-the-river type and output varies withavailable stream flow. Maximum continuous rating to meet peak demand does notinclude hydro capacity and so is only 439 MW.

2/ Retirement will depend upon availability of spare parts, reserve-demand ratio andeconomic cost of replacement.

3/ HB-6 and OH 3 and 4 should be derated about 11.6% to limit boiler furnace heatrelease rates (Management Audit Report of JPS by OAAI).

- 46 -

ANNEX 4.2

Project Implementation Schedule

Issue PlaceBidding Receive Complete Purchase Order Delivery of

Documents Bids Review or start Const. Materials Complete

A. GenerationRehabilitation Old Harbour

and Hunts Bay 7/82 9/82 10/82 11/82 2/83-6/83 8/83

Feed Water Treatment 1/83 3/83 5/83 7/83 1/84 4/84

B. Transmission Lines69 kV line

Towers (Poles) 10/82 1/83 3/83 4/83 10/83-2/84Hardware 11/82 2/83 4/83 4/83 6/83Conductor 9/82 1/83 3/83 4/83 7/83-5/84Construction 1/83 7/83 7/83 12/83 - 12/84

C. Substations69 kV substations

Transformers 9/82 12/82 2/83 3/83 4/84Other Material and

Construction 8/83 11/83 11/84 4/84 - 12/84

D. Distribution Equipment 8/82 12/82 2/83 3/83 6/83-12/83 12/84

E. General PropertySCADA 8/82 12/82 3/83 4/83 4/84 12/84Vehicles 7/82 11/82 1/83 2/83 3/83-1/84 4/84

Complete DiscussTerms of with Invite Sign

Ref. Bank Proposals Contract Complete

F. Consulting ServicesGeneration Planning Study 5/82 5/82 7/82 10/82 6/83Financial Planning Study 10/82 11/82 1/83 4/83 10/83Power Plant Rehabilitation 5/82 6/82 7/82 9/82 7/84System Operations/Maintenance 6/82 7/82 8/82 9/82 6/84Generation Managment Assistance 6/82 7/82 8/82 8/82 12/84

G. Training Program 5/82 6/82 - - 12/84

-47 -

JAMAICA PUBLIC SERVICE COMPANY (JPS) TABLE 5.1ACTUAL, ESTIMATED AND FORECAST KEY PERFORMANCE AND FINANCIAL RATIOS

1977-1985Actual Estimated Forecast

1. Market Penetration 1977 1978 1979 1980 1981 1982 1933 1984 1985GWh sold - total 1,13 6 1,136 1,060 1,022 1,017 1,040 1,071 1,096 1,126

- Commercial & Industrial 635 635 588 568 557 569 588 600 616- Residential 347 350 329 317 315 326 338 345 351

Average No.of Customers-Total(O0O) 189.3 203.6 215.9 225.6 234.5 243.9 253.7 263.8 274.4-Residential 163.8 177.7 189.9 199.5 208.4 216.7 225.4 234.4 243.8

2. EfficiencyNumber of employees 1,737 1,778 1,756 1,835 1,865 1,920 1,935 1,950 1,960Customers/employees 110 114 123 123 126 127 130 135 140GWh sold/employees .654 .639 .601 .557 .545 .562 .573 .573 .582Losses(% net generation) 12.3 14.8 18.0 19.8 20.6 19.0 17.0 15.0 15.0Power factor (at system peak) .88 .88 .76 .88 .90 .92 .94 .95 .95Average heat rate (BTU/kWh) 13,600 13,134 14,341 14,502 14,395 14,650 14,900 13,600 13,500

3. Ouality of ServiceOutages (minutes/customer) N/A N/A N/A N/A N/A 15,700 10,500 5,000 1,200

4. Financial IndicatorsRate of return (%) 1/ (on averagenet fixed assets revalued after 1977) 5.0(E) 5.9 2.5 (1.1) (2.4) (1.5) 5.0 8.0 8.5Annual debt-service coverage (x) 2/ 1.27 0.93 1.28 0.92 0.53 0.88 1.53 1.93 2.20Self-financing ratio (%) 3/ 16.0 (9.7) 33.5 (5.9) (102.6) (11.2) 49.0 7/ 70.1 7/ 96.7 7/Operating ratio-including fuel(%) 4/ 66.3 64.8 75.5 85.6 89.9 87.1 75.8 71.5 71.3

-excluding fuel(%) 30.2 27.0 24.7 27.1 25.9 25.5 23.2 23.5 23.6Fuel/Total cash operating expenses(%) 56.1 58.3 67.3 68.4 71.2 70.7 69.4 67.1 67.0Average revenue/kWh (in Jcents) 8.77 11.63 16.20 21.01 25.53 28.01 33.36 37.21 40.04Debt-equity ratio (%) 44.6 37.7 35.1 33.6 32.6 34.2 31.2 26.4 19.7Current ratio 5/ 1.81 2.23 2.00 2.23 1.58 1.55 1.95 1.92 4.15Receivables (in days of billing) 82 87 89 88 75 70 65. 60 55Depreciation as % of average gross 4.5(E) 4.5 4.2 4.2 4.0 4.2 4.2 4.2 4.2fixed assets (%)Accounts payable as 7 of operating 10.8 11.5 15.9 11.9 12.5 10.9 10.5 10.3 4.4costs (cash)& construction expendi-tures(excluding interest duringconstruction)Short-term debt ratio(%) 6/ 23.2 6.6 8.6 16.6 13.7 9.2 11.4 2.4

1/ Net operating income/average net operating assets2/ Times debt service (including dividend payments) covered by gross internal cash generation.3/ Net internal cash generation/total financing requirements.4/ Operating expenses (excluding depreciation) as a % of operating revenues.5/ Current assets as a % of the sum of curent liabilities plus customer deposits plus dividends and taxes payable.6/ Demand loans & overdraft = as a % of cash operating expenses.7/ Reflects reduction of construction expenditures to level consistent with expected low level of sales increase (about 2.6% annually and rehabi-

litation of the system.

- 48 -

A1NEX 5. 2JAMAICA PUBLIC SERVICE COMPANY (JPS)

ACTUAL, ESTIHATED. AND FORECAST INCOME STATEMENT, 1977-1985(in thousands of JS'6)

Actual Estimated Forecast1977 1978 1979 1980 1981 1/ 1982 1983 1984 1985

Annual Sales Increase(%) A/ T1* O 77) ) (0.5) 3. 0:T T7-Sales (CWh)a/ 1,136 1.136 1,060 1.022 1,017 1,040 1,071 1,096 1,126Unit Base Tariff (JWsnts/kWh) b/ 5.94 7,30 9.11 10.40 11.54 12.96 16.04 18,59 19.92Unit Fuel Clause (Jcents/kWh) b/ 2,83 4.33 7.09 10.61 13.99 15.05 17.32 18.62 20.12

Total (Jcsnts/kWh) 8,77 11,63 16,20 21 01 25.53 28.01 33.36 37 .21 40.04

Base rate revenues c/ 67,440 82,991 96,613 106,317 117,321 135,464 171,787 203,794 224,308Fuel clause revenueso d/ 32,129 49,151 75,165 108,463 142,364 163,393 185,519 204,043 226,546Total Revenues 99,569 132,142 171,778 214,780 259,685 298,857 357,306 407,837 450,854aer a-t in g Expenses

Fuel a 35,877 50,012 87,296 125,718 166,429 184,078 186,015 195,815 215,445Operations other than fuel f1/ 21,411 24,468 28,916 39,577 41,480 46,333 50,440 58,362 64,626Maintenance A/ 8 702 11 276 13,431 18.545 25 790 29 830 32,473 37,575 41,606

Sub-total 6ji; 129,643 183,840 233,699 260,241 270,928 291,752 321,677

Depreciation h/ 19,980 25,709 31,003 36,333 39,450 47,749 53,566 59 66,303Total Operating Expenses 85,970 111,465 160,656 220,173 273,149 307.990 324,494 351,265 387,980

Net Operating Incoae i/ 13,599 20,677 11,132 (5,393) (13,464) (9,133) 32,812 56,572 62,874

Interest charges 10,049 15,058 16,722 20,647 26,500 22,736 26,095 24,035 18,276Less: Interest charged to construction i/ (1,187) (1 004) (2,470) (3,118) (2,350) (3 178) (3,965) (3,659) (3,073)Net interest charged to operations 8,862 1,5 14,252 17,529 24,150 19,558 22,130 20,376 15,203

Net Income 4,737 6,623 (3,120) (22,922) (37,614) (28,691) 10,682 36,196 47,671Non-Operating Income (Expenses) (2,187) (1,050) (436) (474) - _ _ _ _Net Income before tax 2,550 5,573 (3,556) (23,396) (37,614) (28,691) 10,682 36,196 47,671Income tax k/ - 1 010Net Incone after tax 2,550 5,573 (234,6) ; (37,614) (28,691) 10,682 36,196 47,671

a/ See para 3.03 for basis of the forecast.b/ See poras. 5.02 and 5.05 for explanation of increases in bass tariffs and operation of the fuel adjustment clause.c/ Forecast assumes revenues from base tariffs will reflect an increase oft (i) 1% per m,onth compounded in 1982; (ii) about 10% in January 1983 over the

year-end 1982 base tariff leval (J cents 13.758/kWh), plus 1% per month compounded; (iii) about 2.25X in January 1984 over the year-end 1983 base tarifflevel (J cents 17 .053/kWh, plus 1% per wasnth compounded; and (iv) about 0.5% in January 1985 over the year-end 1984 base tariff level (J cents 19,648)plus 1% per nonth compounded.

d/ Forecast assumes fuel clause revenues will reflect: (i) adjustment of target or standard heat rate in fuel-adjustment clause to 14,500 BTU/kWh in1983-1985; and (ii) a reduction of distribution losasa to 15% of net generation by 1984. See Annex 5.10 for details.

- 49 -

JANKICA PUBUC SER7ICE MfPANY (JPS) EX 5.3XCI3IAL, ESrRM4W & Fa 4AST SctRC & AppLICATIN CF FumS, 1977-1985

(in tbosanis of J$'s)S- 12ary

ktual Estlimted Forecast Stataerit Forecasts5REJS CF FllDS 1977 1988 1979 1980 1981 1982 1983 1984 1982-1984 1985

Gross internal cash generation 34 286 46,950 42 983 31,775 26,972 39,602 - 7,364 117,071 244,037 130,163Net operatirg irem 13e59 20,677 11,132 (5,393) (13,464) (9,133) 32,812 56,572 80,251 62,374Depreciation 19,980 25,709 31.003 36,333 39,450 47,749 53,566 59,513 160,828 66,303Ostsr advances ard deposits 707 564 848 835 986 986 986 986 2,958 986

less: debt service & dividends 27,060 50,241 33,548 34, 50826 45,785 57,006 60,571 163,366 59,153Aartization a/ 18,029 6,018 19,127 16,870 26,507 26 34,707 40,026 100,795 43781Interest charge b/ 22,917 15,058 16,722 20,647 26,500 22,736 26,095 24,035 72,866 18,276Less: interest charged to cos-truction (1,187) (1,004) (2,470) (3,118) (2,350) (3,178) (3,965) (3,659) (10,802) (3,073)

Dividends 169 169 169 169 169 169 169 169 507 169

Net internal cesh generation 7,226 1 3,291) 9,435 (2,793) (23,854) (6,187) 30,358 56,500 80,671 71,010

lnrg-temu borronelgs ci ef 27,958 27,025 18,744 28,607 39,025 56,734 31,550 24,100 112,384 2,395

G(verrnent Equity 10,000 10,000 - 2,500 8,075 5,000 - - 5,000Tbtal Sources 45,184 373T 28,179 28,314 23,246 55,547 61,908 80,600 198,055 73,405

APPLICATIOS OF FUM)SOxstructien ex.ditures (irrluindg 21,2.94 14,148 21,065 29,652 41,374 55,395 56,549 43,811 155,755 32,078interest during comtrcrtion) d/

et charge in wrking capital 5,202 8,760 12,125 16,300 (17,54) 152 12,359 12970 25,481 34,327Cash 234 (240) 07 78 (809) 378 424 432 1,234 2,161Norr-cash 4,968 9,C00 11,918 14,922 (16,945) (226) 11,935 12,538 24,247 32,166

other (National Hbusing Trust, deferrederpeixditures) 344 1,128 468 1,697 - -

Net Reductions, (Aditions) to Dmand (18,344) (9,698) 5,479 19,335 (374) - (7,000) 23,b77 16,819 7,000l<ans (erclrling Govt. advances)

Tostal pplications 45,184 33,734 28,179 28,314 23,246 55,547 61,908 80,600 198,055 73,405

a/ For detAils on debt amortizstlon, ses Table 5,5.1/ For details on interest charges, ser- Table 5.6,C' For detailas an disburseernts, see 'fable 5.7.

For details on con5truction expenlitures, e Tale 5.8.e/ For details on terms and conditijns of og-term lebt, see Table 5.9.

- 50 -

AeIACA FUBLIC SdRVICE QPANYACTU1AL, MArINA7D, AliD FtEnSr BaA;C8E S9T, 1977-1985 ARM 5.4

(in ttouBards of JSs)

Actual Estim ForecastASSE1M 1977 1978 1979 1980 1981 1982 1983 1984 1985Utility Plant in Cperation a/ 466,769 647,390 790,482 941,915 1,070,682 1,204,209 1,351,857 1,505,424 1,651,058Less: Accnilated depreciation a/ 177,717 256,184 327,532 406,051 482,045 570,768 667,141 776,690 901,245Net Plant in operation 289,052 418,206 462,950 535,864 588,637 633,441 684,716 728,734 749,813Construction kork in progress b 24,748 24,679 35,709 21,241 18,620 31,496 30,712 22,330 21,666Net fixd assets 313,800 442,885 498,659 557,105 607,257 664,931 715,428 751,064 771,479

National HPouing Trust 845 1,431 1,748 1,748 1,748 1,748 1,748 1,748 1,748

Current Assets 29,161 43,443 6 90,216 85,059 8B,694 101,053 107,057 116,761Cash 976 736 943 2,321 1,512 l,8'O 2,314 2,746 4,907Accosts Receivable c/ 22,505 31,343 41,854 51,949 53,855 55,0531 63,140 65,884 67,943Inventories d/ 5,680 7,098 17,039 23,604 17,350 19,4(11 23,257 26,C85 31,569Deferred fLei costs - 4,266 8,847 12,342 12,342 12,342 12,342 12,342 12,342

Deferred aspenditures 3,835 1,243 1,800 3,024 3,024 3,024 3,024 3,024 3,024

Total assets 347,641 489,002 570,890 652,093 697,088 758,403 821,253 862,893 893,012

CAPITAL AN0 LLABTEEquity 174,604 258,491 340,698 315,639 410,114 444,363 502,384 589,749 691,891

Share capital 41,129 51,129 51,129 53,629 60,629 73,70 73,704 73,704 73,704Share premium 269 269 269 269 269 269 269 269 269Capital reserve a/ 114,043 199,582 240,576 286,443 334,671 334,705 432,213 483,551 538,191Retained earnirgs 19,163 37,511 48,724 45,298 14,545 (14,315) (3,802) 32,225 79,727

Gros lorg-tesi debt (including current 140,8D6 174,690 183,919 194,778 200,256 230,933 227,781 211,855 170,469maturities)

Dasse Loars 15,329 5,631 11,110 30,445 31,894 23,819 30,819 7,000

Customer advances 835 679 756 751 841 931 1,02). 1,111 1,201(3staner deposits 3,674 4,364 5,135 5,975 6,871 7,767 8,663 9,559 10,455Dividends ard tmas payable 42 42 1,052 1,052 1,052 1,052 1,052 1,0S2 1,052

Currert Liabilities 12,381 15,105 28,220 33,453 46,050 49,533 49,533 42,567 17,944Aroxasts payable 9,275 11,286 23,642 24,983 34,C97 34,C 97 34,C7 34,97 17,944

Interest payable 3,106 3,719 4,578 8,470 11,953 15,435 15,435 8,470 -

Total Capital & Liabilities 347,641 489,002 570,890 652,093 697,088 758,403 821,253 8S2,893 893,012

a/ The forecast reflects a revaluation of utility plant in operation and accumulated depreciation by -he following indeces,which are based on expected local and international inflation: 1981: 1.09; 1982: 1.085; 1983-198l5: 1.075. The followingshows the effect of annual revaluation on utility plant in operation, accumulatad depreciation, ank capital reserve (surplusfrom revaluation:

I. Utility Plant Balance,in service January 1 Capitalized Revaluation1981 941,915 43,995 84,7721982 1,070,682 42,519 91,0081983 1,204,209 57,333 90,3151984 1,351,857 52,193 101,3741985 1,505,424 32,792 112,892

II. Accumulated Balance, AnnualDepreciation January 1 Provision Revaluation1981 406,051 39,450 36,5441982 482,045 47,749 40,9741983 570,768 53,566 42,8071984. 667,141 59,513 50,0361985 776,690 66,303 58,252

III. Capital Balance, Annual Provision (Net effect of revaluingReserve January 1 utility plant and accumulated depreciation)1981 286,443 48,2281982 334,671 50,0341983 384,705 47,5081984 432,213 51,3381985 483,551 54,640

b/ The following sets forth forecast changes in the construction work in progress ac:otint:

Construction Balance, Add:Construction Less:work in progress January 1 Expenditures Capitalization

(including IDC)

1981 21 ,241 41,374 43,9951982 18,620 55,395 42,5191983 31,496 56,549 57,3331984 30,712 43,811 52,1931985 22,330 32,078 32,792

C/ Accounts receivables at the end of 1981 represented the equivalent of 75 days of sales.More strenuous collection efforts are expected to reduce accounts to the equival.ent of 55 daysof sales at the end of the period 1982-1985.

d/ The balance of materials and suppliea varies from 1.78 to 2.2Z of utility plant I n operation atthe end of each year during the period 1982-1985.

- 51 -

ANNEX 5.5

JAMAICAJAMAICA PUBLIC SERVICE COMPANY

FORECAST AMORTIZATION SCHEDULE, 1982-1985(in J$'s thousands)

Summary

Balance Afortiz.-PaymentsExisting Long-term Debt (12/31/81) 1982 1983 1984 1982-1984 1985

Debt Repayable in foreign currencies

Debentures".J". 1,566 75 1,491 - 1,566 -K" 2,502 129 64 2,309 2,502

"L" 3,390 - - - - 3,390

"M. 4,024 190 95 95 380 3,644"N" 1,012 - - - - -"P" 2,712 678 339 339 1,356 399

Sub-total 15,211 1,072 1,989 2,743 5,804 7,373

w'orld Bank Loans

454-JM 17,257 4,053 4,300 4,570 12,923 4,3341516-JM 26,487 1,376 2,752 2,752 6,880 2,752

Sub-total 43,744 5,429 7,052 7,322 19,803 7,086

Export-Import Bank Loans & Related

Commercial LoansNo. 2618 5,478 2,383 2,383 712 5,478 -

No. 3784 19,176 3,848 3,848 3,848 11,544 3,848

No. 4481 12,833 2,189 2,189 2,189 6,567 2,189Sub-total 37,487 8,420 8,420 6,749 23,589 6,037

Bank of Nova Scotia No.1 1,567 393 393 393 1,179 393

Bank of Nova Scotia No.2 878 250 250 250 750 128(repayable in J$s)

Jamaica America Merchants Bank 258 64 64 64 192 66Chase Manhattan No. 1 267 267 - - 267 -

Sub-total 2,970 974 707 707 2,388 587

Bank of Nova Scotia No. 1(rescheduled) 641 - 107 214 321 214Chase Manhattan No. 1(rescheduled) 6,943 - 1,157 2,314 3,471 2,314

Chase Manhattan (rescheduled) 1,734 - 290 579 869 579Chase Manhattan No. 3 (rescheduled) 1,034 - 172 345 517 345

Bank of America (rescheduled) 3,830 - 638 1,277 1,915 1,277Sub-total 14,185 - 2,364 4,729 7,093 4,729

Canadian Export Development,Loan No.114 22,715 4,714 2,483 2,357 9,554 2,357Term LoansFirst National City Bank 358 358 - - 358 -

Royal Bank of Canada 1,573 1,573 - - 1,573

Royal Bank of Jamaica 478 191 191 96 478 -OPEC 4,633 - 455 455 910 454

IDB No.444/SF-JA 16,450 529 531 529 1,589 531IDB No.512/SF-JA 4,470 143 145 143 431 145IDB No.581/SF-JA 3,010 - 265 531 796 529

Sub-total 30,972 2,794 1,587 1,754 6,135

Chase Manhattan No.4 (restructured) 845 - 126 252 378 252Chase Manhattan No.5 (restructured) 1,752 - 292 584 876 584

Wells Fargo (restructured) 2,645 - 441 882 1,323 882First Natl.Bank of Chicago(restructured) 2,790 - 465 930 1,395 930

Royal Bank of Canada (restructured) 2,166 - 361 722 1,083 722

Sub-total (restructured) 10,198 - 1,559 3,370 4,929 5,029

Total long-term foreign currency loans 177,482 23,403 26,161 29,731 79,295 33,198

Debt repayable in local currency

Debentures

Series "Q" 2,069 94 94 94 282 94Royal Bank Jamaica No.1 100 100 - - 100 -

Royal Bank Jamaica No.2 1,925 700 700 525 1,925 -

Bank of Nova Scotia No.2 10,000 1,000 2,000 2,000 5,000 2,000Bank of Nova Scotia No.3 6,000 - 428 856 1,284 857

National Commercial Bank No.1 65 65 - - 65 65

National Commercial Bank No.2 2,625 700 700 700. 2,100 700

Sub-total 22,784 2,659 3,922 4,175 10,756 3,716

Total Existing Long-term debt 200,266 26,062 30,083 33,906 90,051 36,914Proposed Chemical Loan - - 2,238 2,984 5,222 2,984

Proposed Bladex Loan - - 2,386 2,386 4,772 2,383Proposed JPS Debenture Issue - - - 750 750 1,500Proposeed IBRD Loan - - _ _ _ _

Sub-total - - 4,624 6,120 10,744 6,867

Total 200,266 26,062 34,707 40,026 100,795 43,781

- 52 -

JAMAICA ANNEX 5.6Page 1 of 2

JAMAICA PUBLIC SERVICE COMPANY (JPSC)

Forecast Interest Charges 1982-1985(in J$'s thousands)

SummaryInterest-Charges

1982 1983 1984 1982-1984 1985

Existing Long-Term Debt

1. Debts Repayable in ForeignCurrency"Letter" Debentures

"1 J.. 103 8 - 111"K" 158 152 12 322 -"L" 229 229 229 687 19I'M" 275 265 259 799 74"N" 71 71 71 213 71"P" 196 154 126 476 98

Sub-total 1,032 879 697 2,608 262

World Bank Loans454-JM 915 665 398 1,978 1231516-JM 2,255 2,434 2,235 6,924 2,029

Sub-total 3,170 3,099 2,633 8,902 2,152

Export-Import BankLoans & Related Commerical Loans

No. 2618 257 114 21 392 -No. 3784 1,035 804 573 2,412 343No. 4481 704 573 442 1,719 310

Sub-total 1,996 1,491 1,036 4,523 653

Bank of Nova Scotia No.1 199 199 85 483 14Bank of Nova Scotia No.2 94 63 32 189 8(repayable in J$'s)

Jamaica America MerchantsBank 31 22 14 67 3

Chase Manhattan No.1 19 - - 19 -

Sub-total 343 284 131 758 25

Bank of Nova Scotia No.1 93 86 62 241 31(rescheduled)

Chase Manhattan No.1 972 891 648 2,511 324(rescheduled)

Chase Manhattan No.2 252 231 166 .649 81(rescheduled)

Chase Manhattan No.3 150 137 99 386 49(rescheduled)

Bank of America 527 482 351 1,360 176(rescheduled) _ _ _

Sub-total 1,994 1,827 1,326 5,147 225

Canadian Export DevelopmentLoan No.114 2,165 1,969 1,743 5,877 1,518

Term LoansFirst Ntional City Bank 27 - - 27Royal Bank of Canada 114 - - 114Royal Bank of Jamaica 50 25 6 81 -OPEC 417 432 398 1,247 381IDB No.444/SF-JA 817 803 776 2,396 750IDB No.512/SF-JA 225 213 206 644 198IDB No.581/SF-JA 851 842 817 2,510 793

Sub-total 2,501 2,315 2,203 7,019 2,105

- 53 -

ANNEX 5.6Page 2 of 2

Sum aryInterest-Charges

1982 1983 1984 1982-1984 1985

Chase Manhattan No.4 105 102 76 283 46

(restructured)

Chase Manhattan No.5 254 233 170 657 85

(restructured)Wells Fargo (restructured) 397 363 264 1,024 132

First National Bank of Chicago 419 383 279 1,081 140

(restructured)

Royal Bank of Canada 314 288 210 812 105

(restructured) _ _ _ _

Sub-total 1,489 1,369 999 3,857 508

Total Long-term ForeignCurrency Loans 14,690 13,233 10,768 38,691 744

2. Debt Payable in TotalCurrencies"Letter" Debentures

'Q" 225 215 204 644 193

Royal Bank Jamaica No.1 16 - - 16 -

Royal Bank Jamaica No.2 214 114 34 362 -Bank of Nova Scotia No.3 1,425 1,200 900 3,525 600

Bank of Enova Scotia No.4 885 854 758 2,497 632

National Commercial Bank No.1 2 - - 2 -

National Commercial Bank No.2 284 196 109 589 16

Sub-total 3,051 2,579 2,005 7,635 1,441

Total Interest Charge, Existing

Long-term Debt 17,741 15,812 12,773 46,326 8,889

3. Proposed Loans

Chemical Bank 173 1,223 950 2,346 504

BLADEX 876 820 462 2,158 104

JPS Debenture 562 2,250 2,208 5,020 1,997

IBRD 59 2,14' 4,806 7,005 6,257

Sub-total 1,670 6,433 8,426 16,529 8,862

4. Existing Short-Term Debt 3,325 3,850 2,836 10,011 525

Total 22,736 26,095 24,035 72,866 18,276

- 54 -

ANNEX 5.7

JAMAICA

JAMAICA PUBLIC SERVICE COMPANY (JPS)

Forecasts Disbursements 1982-1984(in J$ thousands)

SummaryDisbursements

1982 1983 1984 1982-1984 1985

Existing Loans

1516-JM 7,613 - - 7,613 -OPEC 1,900 - - 1,900 -

IDB No. 481/SF-JA 1/ 9,513 - _ 9,513 -

Proposed Loans

BLADEX 7,155 - - 7,155 -

Chemical Bank 2,000 6,950 - 8,950 -

IBRD 3,500 24,600 24,100 52,200 2,395JPS Debenture issue 15,000 - - 15,000 -

(subscribed bylocal pensionfunds and insurancecompanies)

27,655 31,550 24,100 83,305 2,395

Total Disbursements 56,734 31,550 24,100 112,384 2,395

1/ Includes contributions from the Government for local-currency portion ofproject cost (see Annex 5.8).

- 55 -

ANNEX 5.8JAMAICA PUBLIC SERVICE COMPANY (JPS)

FORECAST ODNSTRUCTION EXPENDITURES, 1982-1985(in thousands of J$,s)

Summary1982 1983 1984 Statement 1985

Existing Projects2nd Power Project (IBRD) 11,333 - - 11,333 -

Foreign (1516-JM) 7,6i- - 7,613Local 3,720 _ - 3,720 -

Rehabilitation and Spare Parts 15,679 12,950 - 28,629 -

Foreign (OPEC,CHEMICAL & BLADEX) 11,055 6,950 - 18,005 -Local 4,624 6,000 - 10,624 -

Rural Electrification (IDB) 1/ 19,566 - - 19,566 -Foreign 13,984 -- 13,984 -

Local 5,582 - - 5,582 -

Sub-total, existing programs 46,578 12,950 - 59,528 -Foreign 32,652 6,950 - 39,602Local 13,926 6,000 - 19,926 -

Proposed Projects3rd Power Project 5,639 39,634 40,293 85,566 2,395

Foreign (IBRD) 3,500 24,600 24,100 52,200 2,395Local 2,139 15,034 16,193 33,366 -

Future Projects (JPS) - - - - 26,610

Foreign - - - 15,524Local - - - - 11,086

Total Construction 52,217 52,584 40,293 145,094 29,005Foreign 36,152 31,550 24,100 91,802 17,919Local 16,065 21,034 16,193 53,292 11,086

Interest During Construction 3,178 3,965 3,659 10,802 3,073

Total 55,395 56,549 43,952 155,896 32,078

1/ The Rural Electrification Programme, Ltd. is constructing works which JPS operates following their completion.As JPS is not responsible for their construction, they are not shown as part of the defined expansion program(para.4.15). However, they are shown above as they will become part of JPS assets.

- 56 -

JiI4AMICA ANNEX 5.9JAMAICA PBI$C SEICE CANY (JPSO Poge 1 of 2

S2E1 OF ES= A2 PAD OM M IK T: IEB

Loan Amunt Graa A!Drtiztion OutstanirzEloan (in applicable Period Period Thterent Dc.31,198

Purpose Date - y 106 t yry.& moo.) (yrsA mos.) Rsate (in thursd of J$'s)

FMMIGh LOWAN - E

Series J' 1958 0.750 # - 25-0 6-3/4% 1,566Series 'IC ) General 1959 1.250 # 12-0 13-0 6-1/2% 2,5C2Series L ) 1 rg 1960 1.000 1 23-0 2-0 6-3/4% 3,390Series ' ) 1961 1.900 1 1-0 23-0 7% 4,024Series N ) 1963 .300 # 25.0 1-0 7% 1,017Series P ) 1968 1.000 # 110 10-0 8-1/4% 2,712

IDR (454-34 Old Harbor 1966 22. 00 U$ 5-0 15-0 6% 17,257No. 1,2 (various)

(1516-J4 Second 1978 20.00 US$ 5-0 17-0 7.45X 26,487Powr (various)Proj et 58,955

EIM BANK LONo. 2618 Old Harbor Ib.3 1970 16.000 US$ 2-0 12-0 6X 5,478No. 3784 Old Harbor Ho4 1972 11.835 US$ 9-0 5-6 6X 19,176No. 4481 Hunts Bay B-6 1973 7.345 US$ 9-0 6-0 6-9% 12,833

FOREIGN 0IALM LOAN SI

Bank of America Hunts Bay B-6 1973 7.345 US$ 2-6 6-0 3/4% over prim 3,830Bark of Nova Scotia Hu.1 Old Harbor hb.4 1973 4.500 US$/J$ 2-6 10-0 1-1/2% owr 8Dro$ 3,C86Bank of Huva Scotia 1b.1 Old Hsrbor Nob4 1973hase Msnhattan (3784) No.I old Harbor No.4 1972 7.890 US$ 6-0 3-6 1% owr prime 7,210

CQsse Manhattan No.2 Old Harbor No.4 1972 3.945 US$ 3-0 5-0 1/4% over prim 1,737Chse Hadnbttan No.3 old Harbor Nb4 1972 6.500 135$ 3-0 5-0 1-1/2% over LIR 1,034Janaica Anerican Merchant Bank Hmts Bay B-6 1974 2.448 U3S$ 1-6 6-0 3/4% over prime 258

OIEhR Ft3IGN CIAL BANK LAMSCh-ae MArtiattan ?b.4 Refin.of E.A. loan 1972 7.900 US$ 0-6 7-0 1-3/8X over LDC 1,752chase Hanbottan No.5 Working Capital 1979 0.685 US$ 0-0 - V/ 13X 845RDyal Bank of Carad. Refin.of dema loan 1973 6.600 U1S$ 2-0 7-6 1-1/2% ovr LI1M 3,739First lbt.Bank of Qiicag Refin.of demard loan 1976 5.000 U$ 0-0 5-0 2% over LIB(R 2,790First National City Bank Ref in.of dem-ad lan 1976 2.258 US$ 0-0 5-0 2% aver LIM 358Royal Bark of Jasaica Reflnancin of demasd

loan 1976 1.000 US$ 0-0 5-0 2-1/4% aver LIB 478Wella Fargo Street lightirg 1975 4.000 US$ 2-0 3-6 2% ower LIBEO 2,645

I/ A deiard loan reclassified by auditors as a IE tern lo idwthout an agreed re-paymnt schalle.

ANEX 5.9Pag 2 oif 2

JAMAICAJAMAICA PU9lC SERVIMCE CIPY (JPSC)

SCIEL]E OF XISTI? AND Pr o1 S6F) im-miE. DEBE

lon Amount Grace Amortization OutstandiiE1XN FROM OTE2 IEVEI1RT Loan (in applicable Period Period Interst Dec .31,1981

NT CNS Purpose DEte currency 106) Currency (yrs.& mos.) (yrs.& mos.) Rate (in thaouds of J$'s)InterAmrican Developmeit BankNo.444/SF-JA Rur- Ft, - ricatlon 197) 8-6 26-6 57 16,4501b.512ISF-JA 2.5 US$ 8-6 25-6 5 4,470No.581/SF-JA 9.50 US$ 8-6 26-6 2% 3,010CPBC Special Find 109-P Power Plant Pehabilitation 1980 3.3 US$ 3-0 13-0 7.457 4,631Canaian Expart Deverlopment Traramission Expansion 1979 31.5 US$ 2-0 9-0 8.7% 22,715

(brp: Loan No. 114Sub-Total, Existing Foreig-rency Lns - - - - - - 177,480

LOCAL ILANS - EXSITDebenturesSeries '`0 Oeneral Funding 1978 2.351 J$ 0-0 25.0 11.132 2,069comeanrcial Bank iLarsRoyal Bank Jamaica R.I WorkLng Capital 1977 3.500 J$ 2-0 5-0 2 over prime 100Royal Bank Jamaica No.2 1978 6X5O J$ 2-0 5-0 13.01 1,925Bank of Reva Scotia RN.2 1979 10.000 J$ 2-0 4-0 2% over prime 10,000Bank of Nova Scotia ND.3 1980 6.000 J$ 3-0 7-0 1-3/4% oa&r 6,000

National Omaercial Bank No.1 1979 1.300 i$ 2-0 5-0 12-1/2% 65National Cbmmercial Bankc No.2 ' " 1978 2.300 J$ 2-0 5-0 12-3!2% 2,625

Sub-total,Bcisting local-Currency Ilans 22,7 84Total EKisting Iong-Term Debt 200,264

FOREIGN LOANS-PROPSIEDIBR Tnird Power Project 1982 30.00 tE$ 4-0 17-0 127%!ebentures sold to local

irsurarce ccapanies &pensicn funis WorkLng Capital 1982 15.00 J$ 4-0 6-0 127.BLAEX Rehabilitation ardi

Spare Parts 1982 4.00 US$ 1-0 4-3 12 -CEMICAL Rehabilitation and

Spare Parts 1982 5.00 US$ 1-0 4-6 15%

J*vAICA ANNE 5.10

n14.C 'mc gFVi fX8AY

FUEL CIAI RVEES

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)Year Net lydro Ceueration Systan 10 BlU Fuel Reveme Fuel Cost Balance of Tram & Dist. Heat Rate Fuel Clase Fuel Clause Fuel Clase uel Claue

Geeratie GCeneration by Fuel Heat Rate Used in in Base (J$8U0)d/ cost to Efficiey Effidency Revmis RevemP Revaes Revenues(GWh) a/ ((N6) (GWh) (IU/kWh) b/ Gieraticn Tariff Reover Factor Factor PRecoered Inzecvered Uhreowered UbeCDhred

(1)-(2) (3)x(4) (J$000) (J$000) -1- loses 14,500e/ (8)X(9)X(10) (8) - (11) due to do to________ ________ ________ ________ ________ (5)xO.2771 c/ ________ ________ 0.85 (4) __________x_27 1_____4 Heat Rate Losses

1982 1,284 120 1,164 14,650 17,053 4,725 184,078 179,342 0.953 0.956 163,393 15,949 8,230 7,719 1

1983 1,290 120 1,170 14,000 16,380 4,539 188,015 183,476 0.976 1.036 185,519 - - -

1984 1,289 120 1,169 13,600 15,898 4,405 195,815 191,410 1.00 1.066 204,043 - - -

1985 1,325 120 1,205 13,50D 16,267 4,508 215,445 210,937 1.00 1.074 226,546 - - -

a/ Col (1) and Col (2) are obtaled from Annex 3.2./ Taken from Annex 5.1.

c/ Base tariff contairs a fuel copnet of J$ 0.2771 per uilir M1U./ Ten frmm Annex 5.2.

e/ Expected beat rate efficien7y standard: 1982: 14,000 MlUJ/kWh; 1983-85: 14,500 BIU/kWh.

- 59 -ANNEX 6.1

JAMAICA PUBLIC SERVICE COMPANYCost and Benefit Streams Used to Determine Internal Economic Rate of Return

1982 1983 1984 1985-1991COST STREAMS (J$OOC)

Cl - Capital Cost - Foreign a/ 24,270 24,310 18,114 16,252C2 - Capital Cost - Local a/ 13,932 14,645 11,431 10,722

C3 - Operating Cost - Fuel b/ 3,649 4,676 3,591 4,315C4 - Operating Cost - Other c/ 1,541 2,077 1,675 2,010

BENEFIT STREAMS (J$0OO)

B1 - From Incremental Sales d/ 6,670 8,990 7,250 8,700B2 - From Loss Reduction e/ 1,649 3,298 5,377 5,37783 - From Plant Efficiency Improvement f/ 5,515 10,875 14,925 16,02084 - From Reduced Outages

MEMORANDUM ITEMS

1. GWh Sales 1,040 1,071 1,096 1,1262. GWh Incremental Sales over 1981 (1 ,017GWh) 23 31 25 303. Revenues from Incremental Sales g/ 6,670 8,990 7,250 8,7004. Estimated Losses (%) 18.5 17 15 155. Net Generation at Estimated Losses (at 1981 sales) 1,248 1 ,225 1,196 1,1966. Net Generatlon at 20% Losses (at 1981 sales) 1 ,271 1,271 1,271 1 ,2717. Savings in Generation (GWh) 23 46 75 758. Value of Savings In Generation (J$000) h/ 3,298 6,596 10,755 10,7559. Estimated Heat Rate (BTU/kWh) 14,500 14,000 13,600 13,500

10. Fuel Expenses at above Heat Rate k/ (J$000 ofJan. 1982) 162,200 153,185 144,909 144,321

11. Fuel Expenses at 15,000 BTU/kWh k/ 167,715 164,060 159,834 160,34112. Savings from Heat Rate Improvement (JSOOO) 5,515 10,875 14,925 16,02013. Ratio of Incremental Sales /Annual Sales I/ 0.022 0.029 0.023 0.02714. Fuel Expenses for Incremental Sales j/ 3,649 4,676 3,591 4,31 5

a/ For detaTis of Program Costs see Table 4-1. Costs shown here are In constant January 1982 prices.b/ Obtained on a pro-rated basis. See Memorandum Item 14.c/ Other operating expenses were obtained on the basis of estimates for 1982 i.e. approximately JS67.000/GWhd/ From Memorandum Item No.3.e/ This Is one half of Memorandum Item No.8 (see para. 6.04(b)).f/ From Memorandum Item No.12.g/ Valued at JC29.0/kWh - the average electricity charge (Including fuel surcharge) on January 1, 1982.h/ Valued at JC1 4.34/kWh belng the cost of fuel per kWh of energy generated on January 1, 1982.I/ Ratio of Memorandum Item No.2 to No.l.

J/ Product of Memorandum Item Nos. 10 and 13.k/ Assuming same sales as 1981 level.

- 60 -ANNEX 7,1Page 1 of 2

Documents and Data Available in the Project File

A. Related to the Energy Sector

1. Jamaica's National Energy Plan, Ministry of Mining and Energy,1981.

2. Jamaica Small-Scale Hydropower Development Program, Canadian EnergyDevelopment Systems International, October 1981.

3. Evaluation of Diesel Engines for Electric Power Development, Motor-Columbus, Consulting Engineers, September 1981.

4. Mid and Western Jamaica Hydroelectric Feasibility Study - SummaryReport riotor Qolumbus and Lahmeyer International, ConsultingEngineers, December 1978.

5. Rural Electrification Programme, Government of Jamaica/lnter'-AmericanDevelopment Bank, Periodical Report No. 10, July-December, 1980.

B. Related to the Project

1. Application to the IBRD for Third Power Project Loan, JPSC, March 27,1981.

2, JPS - I3RD III - Power Project Proposal, Project Descriptions andCosting, JPS, iMarch 1981.

3. JPS - 1980-1987 Investment Program (computer runs), JPS, February 26,1982.

4. Expansion Plan 1982-2000, Volume II, Load Forecast 1979-2000,.Preliminary Report, JPS, February 25, 1982.

5. Energy and Power Losses, JPS System Planning Department, October,1981.

6. Irregularities Programme, Project Proposal, JPS, January 4, 1982.

7. Speech to the Parliament by the Prime Minister, (concerning JPS), Rt.Hon. Edward Seaga, January 26, 1982.

- 61 -ANNEX 7.1Page 2 of 2

8. Report on the Financial Position of JPS, A. A. Casserly, JPS Directorof Finance, Nlovember 17, 1980.

9. Jamaica Public Service Company, Ltd. Annual Reports, 1979 and 1980.

10. JPS Submissions - Miscellaneous Financial Reports, January, 1982.

11. Jamaica Public Service - Review of Results Third Quarter EndedSeptember 30, 1981.

12. Debenture Issue for Jamaica Telephone Company - Prospectus.

¢.. Working Papers

1. IBRD Staff Working Papers related to the Project Appraisal Report,

Volume 1 - The Project

Volume 2 - Financial Analysis

Volume 3 - Economic Analysis

IBRD 12602R1

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